2022 Annual Report

2022

Annual Report

Wells Fargo & Company

CEO Letter

Dear Shareholders,

I’m proud to report that Wells Fargo continued to make

progress on our priorities in 2022. Our underlying financial

performance is improving, we are moving forward on our risk,

control and regulatory agenda, we are focusing on businesses

where we can generate appropriate risk-adjusted returns, we

continue to strengthen the leadership team, and we are

executing on our strategic objectives. While we have made

progress, our work is not complete and we remain focused on

successful and timely execution of our multi-year journey to

complete our risk and control work and to move forward with

our businesses.

Stronger financial performance

Our financial performance benefitted as we continued to drive

improved efficiency, and it was positively impacted by both

rising rates and a benign credit environment.

In 2022, Wells Fargo generated $13.2 billion in net income, or

$3.17 per common share. Our results were significantly

impacted by $7 billion of operating losses, primarily related to

putting historical issues behind us, including litigation,

regulatory matters, and customer remediations. However, our

performance excluding those items was solid and demonstrates

the continued progress we are making to improve returns.

Our revenue decreased 6% from the previous year. The higher

rate environment and good loan growth drove strong growth in

net interest income, which was up 26% from a year ago.

However, this growth was more than offset by lower net gains

from equity securities, mortgage banking, and investment

advisory and other asset-based fees reflecting market

conditions, as well as the lost revenue related to businesses we

sold in 2021.

Expenses increased 6% from a year ago, reflecting higher

operating losses primarily related to putting historical matters

behind us, as noted above. Excluding operating losses,

noninterest expense declined from a year ago, reflecting

continued progress on our efficiency initiatives and the impact

from business sales. We achieved these efficiency gains while we

made continued investments in our risk and control

infrastructure and in strategic initiatives across our businesses,

and in the face of continued inflationary pressures.

Credit quality remained strong, but, as expected, losses started

to slowly increase in the second half of the year off their

historical lows. Our net charge-off rate declined from 18 basis

points in 2021 to 17 basis points in 2022, and our allowance for

credit losses declined by $75 million in 2022, as our reserve

release in the first quarter was slightly larger than the reserve

builds we had in the last three quarters of the year.

Loans outstanding increased by 7% from one year ago, with

growth in both our consumer and commercial portfolios.

Consumer Banking and Lending grew 4%, driven by growth in

residential mortgage and credit card, which offset a decline in

auto loans. Both Commercial Banking and Corporate and

Investment Banking had strong loan growth, with commercial

loans up 9% from a year ago, driven by growth across all asset

classes. Average deposits in 2022 decreased 1% to $1.42 trillion,

as higher market rates spurred customers to look for higher

yielding alternatives, and consumers continued to spend savings

that built up during the pandemic.

Our capital levels remained well above our required regulatory

minimums plus buffers. We increased our quarterly common

stock dividend in the first quarter of 2022 from $0.20 per share

to $0.25 per share and then to $0.30 in the third quarter of

2022. While we did not repurchase any common stock in the last

three quarters of 2022, we have repurchased shares in the first

quarter of 2023.

Our return on equity was 7.5% and our return on tangible

common equity (ROTCE) was 9.0%

1

. Both of these ratios were

impacted by the operating losses I highlighted earlier.

In my shareholder letter over the past two years, I have

discussed our path to higher returns. Since 2020, we have

executed on a number of important items to improve our

returns, including returning $16 billion to shareholders through

net common stock repurchases, increasing our common stock

dividend from $0.10 per share to $0.30 per share, and delivering

approximately $7.5 billion of gross expense saves. Based on

these actions and others that are in flight, we believe we have a

clear line of sight to a sustainable ROTCE of approximately 15%

in the medium term. In order to achieve that, we need to

continue to optimize our capital, including returning capital to

shareholders and redeploying capital to higher returning

businesses; execute on efficiency initiatives; and benefit from

the investments we are making in our businesses.

1

Return on tangible common equity (ROTCE) is a non-GAAP

financial measure. For additional information, including a

corresponding reconciliation to GAAP financial measures, see

the “Financial Review – Capital Management – Tangible

Common Equity” section in this Report.

2022 Annual Report i

We are actively watching the

economy

Consumers

After a period of strong economic growth and low

unemployment, the Federal Reserve has been increasing

interest rates aggressively with a goal of combatting high

inflation. Increasing interest rates and a slowing economy have

caused headwinds for some of our customers, but our

customers have largely remained resilient over the past year,

with deposit balances, consumer spending and credit quality still

stronger than pre-pandemic levels.

Consumer credit card spend continued to be strong in 2022,

with spending up 25% compared with 2021, which reflects the

benefit of new Wells Fargo product launches. Almost all

spending categories had double-digit spend growth year over

year. Consumer debit card spend slowed to 3% growth in 2022

compared to 2021. Growth was driven by ticket size since

transaction volume was flat year-over-year, and discretionary

spend outpaced non-discretionary spend.

At the same time, we are carefully watching the impact of higher

rates and we expect to see deposit balances continue to

decrease and credit quality to continue to weaken. For certain

cohorts of customers, average deposit balances are below

pre-pandemic levels, and we are closely monitoring activity for

signs of potential stress. For our borrowers, we are working to

limit the risk – both to them and to us – of overextension. We

have taken selective actions across our consumer lending

businesses to mitigate risks associated with inflation and

increased debt leverage. In our auto business, we have adjusted

policies to address risk associated with collateral value declines

and inflationary pressures on consumers’ ability to pay. In home

lending, we have tightened loan-to-value policies nationally and

even more so in local markets that have elevated home value

risk. Additionally, in our card business, we have tightened our

lending policy to focus on applicants who may be exhibiting

debt-seeking behavior.

Businesses

Commercial loans grew 9% in 2022, with most of the growth in

the first half of the year. Higher inventory levels contributed to

increased working capital needs, which drove higher utilization

rates. However, utilization rates stabilized in the second half of

the year, and current data is not pointing to additional inventory

builds, which indicates most businesses are carefully managing

inventory levels amid slowing demand.

We continue to closely monitor the most pandemic-impacted

sectors and inflation-sensitive industries in our commercial

portfolio. This includes:

• Updating underwriting guidelines to include interest-rate

sensitivity to leveraged loans

• Analyzing supply chain issues, inflationary pressures, and the

impact of a potential recession

• Making timely updates to our watchlist

The Commercial Real Estate office market is showing signs of

weakness due to lower demand, driving higher vacancy rates and

deteriorating operating performance. Challenging economic and

capital market conditions are also buffeting the office market,

and while we haven’t seen this translate to significant loss

content yet, we do expect to see stress over time and are

proactively working with borrowers to manage our exposure.

Specifically, we have issued underwriting guidance for navigating

current conditions, including limited tolerance for new credit

policy exceptions, increasing minimum debt yield thresholds,

and stress testing and expansion of the watchlist process,

including additional emphasis on the office market.

Looking ahead to the remainder of 2023, we are prepared for a

range of scenarios. As a large lender to both consumers and

businesses in the United States, we have significant credit

exposure across our businesses, and as the Federal Reserve

continues to take action to reduce inflation, we will continue to

monitor both the markets and our own customer data and will

react accordingly. If our view of economic stress deteriorates

from our view at the end of 2022, we will likely add to credit loss

reserves during 2023.

Moving forward on our risk, control,

and regulatory agenda

We continue to move forward with the foundational work of

building out a risk and control framework appropriate for our

company. This multi-year journey continues to be about setting

clear priorities, cultural change, and operational execution. I have

been clear and consistently reinforce that this foundational work

is our top priority. This should always be the case for a bank such

as ours, but this has not always been the case, so reinforcement

is necessary. We remain confident in our ability to complete this

work and build appropriate risk, control, and operational

excellence into our culture.

The Acting Comptroller of the Currency gave an important

speech in January addressing the potential difficulties of

managing a large bank. Given that the OCC is a key supervisor of

ours, we take the speech seriously and are focused on its key

messages.

The speech focused on the view that there are limits to an

organization’s manageability based on size and, if so, that the most

efficient and effective way to fix this is to compel its simplification.

I am not in a position to agree or disagree with this premise, but I

am in a position to have the strong point of view that Wells Fargo

is not too big or complex to manage. Our shortcomings are not

structural, but they are the result of historically ineffective

management and the lack of proper prioritization of building out

an appropriate risk and control environment that will ultimately

take multiple years to correct.

ii

We are large but are far less complex than many with whom we

compete. In fact, we have more similarities with regional banks

than other global systemically important banks (GSIBs), and

strong and effective risk management processes should scale to

a company of our size. In addition, we have acted and will

continue to act on our own to simplify our company and reduce

operational complexity and risk, as I detail in the section later in

this letter entitled “Executing on Strategic Objectives.”

Operating at a broad scale but with less complexity than peers

1. We are primarily a US domestic bank and we do not have

the many complexities that running large-scale

international businesses bring. Our legal entity structure,

extent of international regulatory oversight and physical

footprint are far simpler than many of our competitors.

Approximately 90% of our revenues come from U.S. clients

or activities of non-U.S. clients in the U.S. Our businesses

outside the U.S. primarily support our U.S. customer base.

We are very happy with our existing footprint and are not

looking beyond for growth opportunities.

2. Our products are not complex compared with those offered

by other banks and are similar to those offered by smaller

institutions. We predominantly provide the same products

and services as regional and smaller, more local banks. We

take deposits, provide financing, move money, and provide

financial advice for our customers. Our trading activities

and the size of our market risk are relatively small compared

to other large GSIBs.

3. Scale in each of our businesses should not make us more

complex. Our distribution methods are similar to smaller

institutions. We manage a branch network, have

relationship managers across our markets, market through

the internet, traditional advertising, direct mail, and word of

mouth, and we rely on our local reputation. The controls

necessary to manage a network of 4,000+ branches are

similar to those necessary to manage a smaller branch

network. The same is true for managing relationship

managers, marketing, and protecting our reputation. Senior

management should be involved at a detailed level, but all

institutions should have and rely on defined control

frameworks in place that are effective at risk management,

regardless of individuals in a seat. These frameworks can

effectively scale to a bank of our size.

4. Our customers benefit from our size and reach. Wells Fargo

has nearly 4,600 retail bank branches, with a presence in 25

of the largest 30 markets in the U.S. A Wells Fargo branch

or ATM is within 2 miles of over half of U.S. Census

households and small businesses in our footprint. The range

of banking services we provide helps us build full

relationships with individuals and companies, allowing us to

see a full picture of their personal, family, and/or business

financial needs, and to meet these needs. We have the

ability to invest in technology to make it faster, safer, and

more transparent for our customers to handle their banking

needs. In addition, our resources allow us to innovate

quickly, developing new products, services, and digitized

experiences to meet constantly changing consumer and

business expectations. These capabilities, along with our

size and reach, are of tangible benefit to consumers across

the country, whether they live in large cities or more rural

areas, and also to the U.S. economy as a whole.

Managing the company with significantly heightened discipline

We agree that there are also traits that management should

avoid as they grow. These signs are familiar to us, as we

identified them as historical behaviors at Wells Fargo when I

arrived. We viewed them then – as we do now – as unacceptable.

Our approach today is dramatically different than it was at Wells

Fargo in the past and we will continue to work so it becomes

part of our culture at all levels in the organization.

1.

Don’t hide behind materiality – As a large institution we

know we cannot let our size hide potential issues. We must

think about raw numbers, not just percentages which are

indexed to a large customer base, asset base, or capital

base. We have built functions and processes to review

customer complaints, employee allegations, and issues

raised from outside the company, and aim to use them to

identify issues and themes so we can address them and

make changes as required.

2. Don’t assume incidents are isolated – One of the

advantages large institutions have is the amount of data

and information we see and have, but we must use it

expeditiously. Individual incidents provide data points which

can help us learn and react, and we should treat each as

such. We strive to make data-driven decisions and to

explore whether incidents that can appear isolated can in

fact have broader application elsewhere in the company.

3. Identify weaknesses ourselves and address them quickly –

The Acting Comptroller stated that “the business of

banking is operationally intensive. Even at banks with

strong teams and robust risk management systems and

controls, mistakes and problems can arise. Well-managed

banks identify such problems early and often, address them

quickly, and take steps to prevent their recurrence.” We

agree completely. Many of the historical issues we continue

to work through were identified by regulators, not by us.

We are changing this, emphasizing our responsibility to

self-identify more issues and address them with a

heightened sense of urgency. As we implement our risk and

control framework, we will likely identify more issues and

move with haste to implement compensating and

ultimately permanent controls. Our risk and control

framework is not a project, but an ongoing set of actions,

and it will be part of our culture.

4.

Hubris, contempt, and indifference are unacceptable and

dangerous traits – We cannot believe that we know better

2022 Annual Report iii

than others and need to react with seriousness and urgency

when issues are raised – whether from employees,

customers, regulators, or others outside the company.

Every issue raised has the opportunity to be a learning

moment and we should also proactively look at our

competitors to learn as well.

5. Integration of mergers is more than a short-term

technology conversion – While we have not had a merger-

related systems integration in my time at Wells Fargo, we

agree that “simply stitch[ing]…systems together” can

cause a proliferation of issues. It is critical to merge and

simplify platforms, whether merger-related or as part of a

customer service strategy, as the reduced complexity in the

number of platforms should make it easier to properly serve

customers. For example, asking customer-service

representatives to learn multiple systems to provide the

same information creates more operational risk and the

possibility of a poor customer experience.

But these platform mergers should be the beginning of

integration, not the end. This is true looking both from our

perspective and the customer perspective. Customers think

of us as one company, not as separate relationships with

individual lines of business. They want to see their

information seamlessly and be able to transact with us

easily across all of their products. Unless we integrate our

platforms, we will either not appear as one company to the

customer, or we will create workarounds to try and

accomplish this, which creates unneeded operational risk. A

major competitive advantage of Wells Fargo is serving our

customers across a broad range of products, but we can

only do so effectively with common platforms.

The same is true of data platforms. Pulling customer data

from multiple platforms is operationally complex and

expensive. Common data platforms across our company are

critical. We rely on this for financial reporting, regulatory

reporting, risk reporting, and the ability to assess a

customer relationship holistically.

And finally, it is a mistake to lose sight of aged platforms, to

not invest in improving them and to not move to new ones.

New software and hardware solutions make it easier to

reduce complexity and properly serve customers, and when

these solutions are part of a program with a clear target

state, they should significantly reduce operational

complexity.

Recognizing this, Wells Fargo is implementing a modern

technology stack that is cloud-native and therefore more

elastic and resilient. We are applying this stack for the

various product domains that we are modernizing across

our businesses. Examples include a more modern digital

desktop for our financial advisors in Wealth and Investment

Management, our value-at-risk models in Corporate and

Investment Banking, and our payment platforms across

businesses. These modernization initiatives are guided

top-down by a product and platform architecture that sets

clear boundaries and expectations for teams. In addition to

this, the hosting of our platforms is more and more

migrating to a combination of private and public cloud,

powered by our partnerships with Google and Microsoft.

This also is leading to faster innovation by plugging in

innovative services provided by these cloud providers into

our platforms.

In parallel to these modernization efforts, we are also

enhancing the way we deliver software and the developer

experience. We are implementing new cloud-native tool-

chains that allow our developers to have the experience that

they deserve: on-demand, instant, elastic and with

embedded automated controls.

Further taking stock of where we stand – why haven’t we

completed our risk and regulatory work

I am frequently asked why our risk and regulatory work is not

complete though we have been publicly reprimanded, have a

growth constraint, and I have been leading the company for over

3 years. I wish my job was merely to complete work that was well

underway, but unfortunately this was not the case. Simply said,

the work to build the appropriate risk and control infrastructure

and close consent orders takes years when managed effectively,

and we were not as far along as I had expected when I arrived.

Much work was needed to build what is necessary to properly

accomplish the work.

When I arrived, we did not have the culture, effective processes,

or appropriate management oversight in place to remediate

weaknesses on a timely basis. Today, we approach these issues

differently. This management team (the broad team – not just

me) has the skills and experience and is now responsible for

closing our consent orders. We have changed and implemented

much to put ourselves in a position to have the confidence that

we can accomplish this. The specifics of our regulatory

remediation plans are confidential, and while we are not where

we need to be, I believe that our position is significantly

improved and that we will reach our goals. We are committed to

making all necessary resources available to meet our obligations.

I have said we are a different company today, and in this

sub-section, I provide some examples.

1. When I arrived at the company in 2019, we had 12 open,

public enforcement actions. Given this and the other

control issues we needed to assess, it took many months to

understand the depth and breadth of the weaknesses and

what was required to complete the work.

2. We then went about recruiting a mostly new management

team with the experience and skills that we did not

sufficiently have at the company. A large portion of the

Operating Committee was recruited during 2020 and they

then needed to do their own assessments and develop

plans. They then needed several years to build out their

teams.

iv

3. For each consent order Matters Requiring Attention

(MRAs), and other control gaps identified, we needed to

build detailed plans that satisfied both us and our

regulators. Our plans are now detailed and have hundreds of

deliverables with designated delivery dates. Many of our

consent orders have work that relies on work from another

order, so any slippage on one plan can impact another. Our

ability to assess all of this accurately for work to be done

over multiple years has not been perfect, and we have

missed some deliverables, but we have learned, adjusted,

and continue to move forward.

4. We needed to build processes to manage these across the

company. Building reporting and setting up management

review structures for these activities has been critical to

moving the work forward. Most of these did not exist or

were ineffective, and we now believe we have much more

effective reporting and processes in place to provide

appropriate oversight and allow us to identify issues early

so we can course-correct.

5. We did not have the resources necessary to accomplish this

work when I arrived. We have added close to 10,000 people

across numerous risk- and control-related groups and have

spent approximately $2 billion more in 2022 than in 2018 in

these areas. We are committed to make the investments

needed to complete the work.

6. And we had to build the management disciplines and

culture to govern and execute such a large body of work.

Our Operating Committee reviews risk and regulatory

progress and escalations on a weekly basis. We provide

detailed reporting to the full board and appropriate

committees so they can provide oversight. These reviews

are systematic and detailed, and they are helping us provide

the appropriate oversight and involvement to accomplish

the work.

I should add that we had to do all of this during the very worst of

the COVID-19 pandemic. While we were not alone in dealing

with the complexities of work from home, social distancing and

meeting the needs of customers during a pandemic, we were

alone in what we had to build, and doing so in a remote working

environment increased the difficulty level significantly.

Some have suggested that banks view enforcement actions and

fines as a cost of doing business, but I can tell you that today,

nothing is further from the truth at Wells Fargo. We view any

such action by our regulators as something that requires

immediate management attention. We aim both to avoid the

necessity of such action by doing the work ourselves and, when

regulators do take enforcement action against us, we follow a

disciplined process to work towards closure, again with all

necessary resources available for the effort.

The negative impact on our reputation of having not fulfilled our

obligations is clear. Simply put, failure to satisfy our regulatory

requirements carries significant consequences for our company.

On the other hand, fulfilling our obligations and building an

appropriate risk and control framework will allow us to build a

strong reputation amongst a broad set of stakeholders. So why

do we have so many consent orders that have been open for

extended periods? Again, our historical practices were

inadequate, and it has taken time to build what is necessary to

change our historical inadequacies.

So as I look at our situation today, the failure of Wells Fargo to

complete its work appropriately has resulted in multiple consent

orders, fines, and an asset cap. But I can say confidently that we

have taken significant actions including focusing and simplifying

the company, refreshing the board, replacing most of the senior

management team, and are now moving forward to correct past

deficiencies. We have the willingness and the ability to complete

the work.

And to be clear, we are committed to prioritizing this work

above all else by devoting all necessary resources to the effort.

Our planning is designed to ensure other activities do not

interfere with this top priority. If we have a conflict, our risk and

control work comes first.

I have said our progress will likely not be a straight line. We

continue to resolve issues that were found years ago or are the

result of the inadequate control environment that existed when

we arrived at the company. This means that resolution of

outstanding issues such as litigation, customer remediations or

regulatory investigations have and could continue to have

financial impacts. Additionally, until our work is complete, we will

likely find new issues that need to be remediated, and these may

result in additional regulatory actions.

Finally, as we continue to execute on our detailed plans, given

the scope and complexity of our work, we may miss some

interim milestones. We recognize the importance of meeting

milestones that we ourselves set, but perfection is unlikely.

When we discover an issue, we act quickly to course-correct and

do what we can to get back on schedule. This is frustrating for us

and others outside the company but is not indicative of our

willingness or ability to complete our work. Rather, it is an

obstacle that presents itself in nearly any large-scale, multi-year

transformation.

When Wells Fargo faces criticism about where we stand, I

understand the sentiment. I hope this section has provided

detailed context and is helpful in providing an understanding of

what we are doing to close our gaps. This team is taking decisive

action to move our company past these issues.

Leadership Team

Key to transforming the company, changing our culture, and

realizing the full strength of our franchise is having the best

management team in place. Since I joined the company in 2019,

12 of our 17 Operating Committee members are new to Wells

Fargo and 15 are new to their roles. In 2022, we put in place a

new Chief Auditor, a new Chief Risk Officer, a new head of

Consumer Lending, and a new head of Diverse Segments,

Representation and Inclusion.

2022 Annual Report v

We continue to refresh our management ranks more broadly.

Over 80% of our senior executive leaders – a group of

approximately 150 people, most of whom report to Operating

Committee members – are new to their roles since 2019, and

nearly 60% are new to the company over the same time period.

Over 30% of the individuals in this senior executive cohort began

in new roles in 2022 or 2023. New leaders who have joined over

the past several years bring important experience that is

necessary for our journey.

Executing on Strategic Objectives

Simplifying our business

We continue to review the strategic positioning of the company

and are focusing our efforts on building products and services

that are core to serving our clients. This focus has led us to

decisions to sell, downsize, or curtail multiple businesses. These

decisions simplify the company, reduce operational complexity

and risk, and allow us to focus on both our core risk and control

buildout and ways to serve our customers in our core franchises.

There are several examples since I joined the company in 2019.

In January 2023, we announced plans to simplify our Home

Lending business and will primarily serve bank and wealth

management customers as well as borrowers in minority

communities. As part of this shift, we announced our plans to

exit the Correspondent business, reduce the size of our Servicing

portfolio, and optimize our Retail team so it aligns with our

narrower customer focus. These actions will allow us to reduce

risk in the Home Lending business while continuing making

homeownership possible to thousands of Americans.

Over the past year, we have taken several additional steps to

simplify the way we operate. For instance, we have:

• Implemented a cloud-native operating model which will

enable us to reduce reliance on older, less stable platforms

and allows us to innovate faster

• Centrally organized our Control Management teams, to

enable better coordination across our businesses

• Streamlined our divisional leadership in Wells Fargo Advisors,

moving from eight regional divisions to four

• Combined Treasury Services platforms across Commercial

Banking and Corporate and Investment Banking

Looking further back to 2021, 2020, and 2019, we have:

• Sold Wells Fargo Asset Management

• Sold our Corporate Trust Services business

• Sold our student lending portfolio and stopped the

origination of new student loans

• Exited our international wealth management segment

• Sold our Canadian direct equipment finance business

• Stopped offering new home equity lines and loans

• Exited the direct Auto business

• Stopped originating personal lines of credit

• Sold our Institutional Retirement and Trust business

• In addition, over the past several years, we have closed over a

dozen representative offices globally to better focus our

international business, including offices in Asia, Europe, South

America, the Middle East, and elsewhere.

Going forward, we will continue to evaluate our businesses with

an eye toward reducing complexity, increasing risk-adjusted

returns, and focusing our resources on the most important

products and services our customers require. Market dynamics

change, the competitive environment changes, regulatory

expectations evolve and we must adjust our business

accordingly.

Focusing on customer needs and expectations

Each of our businesses is working to transform how we serve our

customers by offering focused, innovative products and

solutions. Many of the initiatives underway reduce risk in the

company and we evaluate new initiatives to consider the

potential impact on our control environment. Some examples

are below.

Our Consumer Businesses: Consumer and Small Business

Banking, Consumer Lending, and Wealth and Investment

Management

• We rolled out our new consumer mobile app with a simpler,

more intuitive user experience which has improved customer

satisfaction. We also completed the development of Fargo,

our new AI-powered virtual assistant, which provides a more

personalized, convenient, and simple consumer banking

experience. Fargo is currently live for eligible employees and is

set to begin rolling out to customers during the first half of

this year. Providing such digitized services directly to our

customers reduces operational complexity in our service

centers and increases customer satisfaction.

• We continued to improve our credit card offerings including

launching two new cards – Wells Fargo Autograph and BILT.

While we describe these as new products, these are actually

updated products in a business we have been in for many

years.

• We launched Wells Fargo Premier, our new offering dedicated

to the financial needs of affluent clients by bringing together

our branch-based and wealth-based businesses to provide a

more comprehensive, relevant, and integrated offering for

our clients.

• We also relaunched Intuitive Investor in our Wealth and

Investment Management segment, making it easier for

customers to invest with a streamlined account opening

process and a lower minimum investment.

vi

Our Wholesale Businesses: Commercial Banking and Corporate

and Investment Banking

• We have made several hires in Corporate and Investment

Banking that have received some press. These hires are in

industries we currently serve and products we currently offer,

but the individuals bring new expertise to Wells Fargo.

• We continued to enhance the partnership within our

commercial businesses to bring Corporate and Investment

Banking products such as foreign exchange and M&A advisory

services to our middle-market corporate clients.

• In December we announced Vantage, an enhanced digital

experience for our commercial and corporate clients. Vantage

uses artificial intelligence and machine learning to provide a

tailored and intuitive platform based on our clients’ specific

needs.

• Over the past year our industry-leading API platform team

continued the development of payment APIs for commercial

and corporate clients, invested in solutions to support our

financial institution clients, ramped-up and grew product

offerings in consumer lending, and began developing

commercial lending solutions.

Evolving our approach to technology

Technology is helping us better serve our consumer and

corporate clients. Our technology talent is modernizing

platforms for our customers, clients and colleagues. Specific

areas of focus are:

• A cross-product pricing platform

• Digitization of our lending origination platforms across Small

Business, Commercial and Corporate Banking

• Continued modernization of our Treasury Services and

Payments platforms

• Strengthening our technological capabilities in fraud

prevention

• Modernizing key corporate risk platforms

• Refreshing our Auto loans platform

These enhanced digital capabilities are just the start of the

initiatives we have planned as part of our multi-year digital

transformation.

Seeing early returns from this work

Our work to build better, more customer-focused products and

a more technology-enabled company is generating measurable

returns. For instance:

• In Consumer and Small Business Banking, mobile active

customers grew 4% from a year ago.

• The new credit cards I mentioned above helped drive a 31%

increase in new credit card accounts in 2022, and we’ve

continued to maintain strong credit profiles. The average

FICO score of our new accounts in 2022 was 773, compared

to 761 for the 2019 vintage.

• In Wealth and Investment Management, total active Intuitive

Investor accounts increased 56% from a year ago.

• Our U.S. investment banking market share was 3.2% in 2022,

up 61 basis points versus 2021. We had the #7 ranking in this

year’s U.S. investment banking league tables, up two spots

from 2021.

• As a company, we deliver many solutions nowadays in sprints,

reducing our through-put time by as much as 60% compared

to 2020.

ESG, communities and customer

centricity

As I look back at 2022, I’m enthusiastic about the progress we’ve

made in serving our communities and our customers, and I feel

even better about the opportunities ahead.

Let me start with the changes we made during the year to help

millions of customers avoid overdraft fees and meet short-term

cash needs. These efforts included:

• The elimination of non-sufficient funds fees and transfer fees

for customers enrolled in Overdraft Protection.

• Early Pay Day, making eligible direct deposits available up to

two days early.

• Extra Day Grace, giving eligible customers an extra business

day to make deposits to avoid overdraft fees.

• And in the fourth quarter we launched Flex Loan, a new

digital-only, small-dollar loan that provides eligible customers

convenient and affordable access to funds. Teams from

across the company came together to roll out this new

product in just a few months. Though it’s still early, customer

response is exceeding our expectations.

The above actions build on services we’ve introduced over the

past several years, including Clear Access Banking, a consumer

banking account with no overdraft fees. We now have

over 1.7 million of those accounts, up 48% from a year ago.

Beyond our customers, we have an important responsibility to

strengthen the communities we serve. We continued that work

in 2022. This was true on several fronts.

Supporting homeownership

• We launched a Special Purpose Credit Program in 2022,

committing $150 million to advance racial equity in

homeownership, with an additional $100 million investment

towards this racial equity effort announced in 2023.

• We established Wealth Opportunities Restored through

Homeownership, or WORTH, a $60 million national effort to

address systematic barriers to homeownership for people of

color. Nationally, WORTH aims to help create 40,000 new

homeowners of color in eight markets by the end of 2025

2022 Annual Report vii

• We announced an expansion of our Dream.Plan.Home closing

cost credit, which provides borrowers with an income at or

below 80% of the area median income where the property is

located up to $5,000 to use toward closing costs. The credit is

available in 16 states and in Washington, DC.

• We announced Growing Diverse Housing Developers, a

$40 million grant initiative focused on expanding the growth

and success of real estate developers of color, including Black-

and Latino-owned firms.

Banking inclusion

• As part of our Banking Inclusion Initiative, we launched our

first Community Connections Branch outside Atlanta, with

more to come. These branches offer spaces for financial

health seminars and individual consultations.

• Also as part of our Banking Inclusion Initiative, we announced

plans with Operation HOPE to introduce HOPE Inside centers

in 20 markets. HOPE Inside Centers feature financial coaches

who will help empower community members to achieve their

financial goals through financial education and free

one-on-one coaching. To date, we’ve launched these centers

in the Atlanta, Houston, Los Angeles, Oakland and Phoenix

metro regions.

• Since its launch in 2022, our Small Business Resource

Navigator has connected nearly 1,300 small businesses to

potential credit opportunities and technical assistance

services provided by CDFIs.

Climate initiatives

• We announced interim greenhouse gas reduction targets for

the Oil & Gas and Power sectors.

• We issued our second Inclusive Communities and Climate

Bond, a $2 billion bond that will finance projects and

programs supporting housing affordability, economic

opportunity, renewable energy and clean transportation.

In addition, we have made significant progress on our Diversity,

Equity and Inclusion initiatives. These are detailed in our first

Diversity, Equity, and Inclusion annual report, which we

published last summer. We continue to push forward on our

commitment to integrating DE&I across the company, and, as

part of this commitment, we have commissioned an external,

third-party Racial Equity Assessment. We plan to publish the

results of the assessment by the end of this year.

I’m proud of all this work. We are balanced in our approach to

environmental, social and governance issues, and, as I wrote a

year ago, we believe that for us to be successful as a company,

we must consider a broad set of stakeholders in our decisions

and actions, beyond shareholders. This is not in lieu of

shareholders – in fact we believe it will enhance our returns to

shareholders over time. Our history has shown this to be true.

Consumers and businesses want to do business with a company

that has a strong reputation. A strong reputation is achieved not

just from strong financial performance, but from actively

supporting employees, customers, and communities – especially

those most in need.

As we look forward

I remain confident in our company. The franchise we have is

enviable and will become increasingly more so as we transform

the company. We have done much and we must finish the risk

and control work I’ve described in a timeframe and with the

quality to satisfy our regulators to take advantage of the

opportunities in front of us, so this will remain our top priority.

We will do this while we navigate what will likely be a tricky

economic environment. 2022 was a turning point in the cycle

and the impact of the Federal Reserve’s interest rate increases

have not been fully seen in the economy yet. Though we are

starting to see the impact on consumer spend, credit, housing,

and demands for goods and services, it is still early. Thus far, the

impact to consumers and businesses has been manageable.

Though there will certainly be some industries and segments of

consumers that are more impacted than others, the rate of

impact we see in our customer base is not materially

accelerating. This plus the strength with which consumers and

businesses went into this slowing economy is a helpful set of

facts as we look forward.

While we are not predicting a severe downturn, we must be

prepared for one and we are a stronger company today than 1

and 2 years ago. We have actively managed our capital position

and focused on efficiency. Our margins are wider, our returns are

higher, we are better managed, and our capital position is

strong. While we will be impacted by a downturn in the

economic cycle, we feel prepared for a downside scenario if

we see broader deterioration than we currently see or predict.

We still have clear opportunities to improve our performance as

we make progress on our efficiency initiatives. We will invest as

necessary in our risk and control infrastructure, we will

modernize our existing platforms, and we will continue to make

the investments necessary serve our customers through service,

technology and product enhancements.

I want to conclude by thanking our employees across the

company who are working hard each day to continue to make

progress on our transformation. The pressure they feel to

accomplish our work is immense and the dedication that I see is

unmatched. I’m thankful for all that they do and remain

committed to leading us towards the goal of being the most

respected financial institution in the country.

I’m excited about all that we will accomplish in the year ahead.

Charles W. Scharf

Chief Executive Officer

Wells Fargo & Company

March 3, 2023

viii

Our Performance

$ and shares outstanding in millions, except per share amounts 2022 2021 2020

SELECTED INCOME STATEMENT DATA

Total revenue $ 73,785 78,492 74,264

Noninterest expense 57,282 53,831 57,630

Pre-tax pre-provision profit (PTPP)

1

16,503 24,661 16,634

Provision for credit losses 1,534 (4,155) 14,129

Wells Fargo net income 13,182 21,548 3,377

Wells Fargo net income applicable to common stock 12,067 20,256 1,786

COMMON SHARE DATA

Diluted earnings per common share 3.14 4.95 0.43

Dividends declared per common share 1.10 0.60 1.22

Common shares outstanding 3,833.8 3,885.8 4,144.0

Average common shares outstanding 3,805.2 4,061.9 4,118.0

Diluted average common shares outstanding 3,837.0 4,096.2 4,134.2

Book value per common share

2

$ 41.89 43.32 39.71

Tangible book value

per common share

2, 3

34.89 36.35 32.99

SELECTED EQUITY DATA (PERIOD-END)

Total equity 181

,875 190,110 185,712

Common stockholders’ equity 160,614 168,331 164,570

Tangible common equity

3

133,752 141,254 136,727

PERFORMANCE RATIOS

Return on average assets

(ROA)

4

0.70% 1.11 0.17

Return on average equity (ROE)

5

7.5 12.0 1.1

Return on average tangible common equity (ROTCE)

3

9.0 14.3 1.3

Efficiency ratio

6

78 69 78

SELECTED BALANCE SHEET DATA (AVERAGE)

Loans $ 929,820 864,288 941,788

Assets 1,894,309 1,941,905 1,941,709

Deposits 1,424,269 1,437,812 1,376,011

SELECTED BALANCE SHEET DATA (PERIOD-END)

Debt securities 496,808 537,531 501,207

Loans 955,871 895,394 887,637

Allowance for loan losses 12,985 12,490 18,516

Assets 1,881,016 1,948,068 1,952,911

Deposits 1,383,985 1,482,479 1,404,381

OTHER METRICS

Common Equity Tier 1 (CET1) ratio

7

10.60% 11.35 11.59

Market capitalization $ 158

,298 186,441 125,066

Headcount (#) (period-end) 238,698

249,435 268,531

1. 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.

2. Book value per common share is common stockholders’ equity divided by common shares outstanding. Tangible book value per common share is tangible common equity divided by common shares outstanding.

3. Tangible common equity, tangible book value per common share, and return on average tangible common equity are non-GAAP financial measures. For additional information, including a corresponding reconciliation to

GAAP financial measures, see the “Financial Review – Capital Management – Tangible Common Equity” section in this Report.

4. Represents Wells Fargo net income divided by average assets.

5. Represents Wells Fargo net income applicable to common stock divided by average common stockholders’ equity.

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

7. Represents our Common Equity Tier 1 (CET1) ratio calculated under the Standardized Approach, which is our binding CET1 ratio. For additional information, see the “Financial Review – Capital Management” section and

Note 25 (Regulatory Capital Requirements and Other Restrictions) to Financial Statements in this Report.

Wells Fargo & Company 2022 Financial Report

Financial Review

2

Overview

7

Earnings Performance

25

Balance Sheet Analysis

27

Off-Balance Sheet Arrangements

28

Risk Management

52

Capital Management

58

Regulatory Matters

61

Critical Accounting Policies

65

Current Accounting Developments

67

Forward-Looking Statements

69

Risk Factors

Controls and Procedures

83

Disclosure Controls and Procedures

83

Internal Control Over Financial Reporting

83

Management’s Report on Internal Control over

Financial Reporting

84

Report of Independent Registered Public

Accounting Firm (KPMG LLP, Charlotte, NC,

Auditor Firm ID: 185)

Financial Statements

85

Consolidated Statement of Income

86

Consolidated Statement of Comprehensive

Income

87

Consolidated Balance Sheet

88

Consolidated Statement of Changes in Equity

90

Consolidated Statement of Cash Flows

Notes to Financial Statements

91 1

Summary of Significant Accounting Policies

103 2

Trading Activities

104

3

Available-for-Sale and Held-to-Maturity Debt Securities

110

4

Equity Securities

112

5

Loans and Related Allowance for Credit Losses

125

6

Mortgage Banking Activities

127

7

Intangible Assets and Other Assets

128

8

Leasing Activity

130

9

Deposits

131

10

Long-Term Debt

133

11

Preferred Stock

135

12

Common Stock and Stock Plans

137

13

Legal Actions

140

14

Derivatives

148

15

Fair Values of Assets and Liabilities

158

16

Securitizations and Variable Interest Entities

163

17

Guarantees and Other Commitments

166

18

Pledged Assets and Collateral

169

19

Operating Segments

171

20

Revenue and Expenses

174

21

Employee Benefits

179

22

Income Taxes

181

23

Earnings and Dividends Per Common Share

182

24

Other Comprehensive Income

184

25

Regulatory Capital Requirements and Other Restrictions

186

26

Parent-Only Financial Statements

188 Report of Independent Registered Public

Accounting Firm

191 Quarterly Financial Data

192 Glossary of Acronyms

Wells Fargo & Company 1

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This Annual 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 in the “Risk Factors” and “Regulation and Supervision”

sections of our Annual Report on Form 10-K for the year ended December 31, 2022 (2022 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 definitions of terms used

throughout this Report.

Financial Review

Overview

Wells Fargo & Company is a leading financial services company 

that has approximately $1.9 trillion in assets, proudly serves one

in three U.S. households and more than 10% of small businesses

in the U.S., and is a leading middle market banking provider i n the

U.S. We provide a diversified set of banking, investment and

mortgage products and services, as well as consumer and

commercial finance, through our four reportable operating

segments: Consumer Banking and Lending, Commercial Banking,

Corporate and Investment Banking, and Wealth and Investment

Management. Wells Fargo ranked No. 41 on Fortune’s 2022

rankings of America’s largest corporations. We ranked fourth i n

assets and third in the market value of our common stock among

all U.S. banks at December 31, 2022 . 

Wells Fargo’s top priority remains building a risk and control

infrastructure appropriate for its size and complexity. The

Company is subject to a number of consent orders and other

regulatory actions, which may require the Company, among

other things, to undertake certain changes to its business,

operations, products and services, and risk management

practices. Addressing these regulatory actions is expected to

take multiple years, and we are likely to experience issues or

delays along the way in satisfying their requirements. Issues o r

delays with one regulatory action could affect our progress on

others, and failure to satisfy the requirements of a regulator y

action on a timely basis could result in additional penalties,

business restrictions, enforcement actions, and other negative

consequences, which could be significant. While we still have

significant work to do and have not yet satisfied certain aspec ts

of these regulatory actions, the Company is committed to

devoting the resources necessary to operate with strong

business practices and controls, maintain the highest level of

integrity, and have an appropriate culture in place.

Federal Reserve Board Consent Order Regarding

Governance Oversight and Compliance and Operational

Risk Management

On February 2, 2018, the Company entered into a consent order

with the Board of Governors of the Federal Reserve System

(FRB). As required by the consent order, the Company’s Board of

Directors (Board) submitted to the FRB a plan to further enhance

the Board’s governance and oversight of the Company, and the

Company submitted to the FRB a plan to further improve the

Company’s compliance and operational risk management

program. The Company continues to engage with the FRB as the

Company works to address the consent order provisions. The

consent order also requires the Company, following the FRB’s

acceptance and approval of the plans and the Company’s

adoption and implementation of the plans, to complete an initial

third-party review of the enhancements and improvements

provided for in the plans. Until this third-party review is complete

and the plans are approved and implemented to the satisfaction

of the FRB, the Company’s total consolidated assets as defined

under the consent order will be limited to the level as of

December 31, 2017. Compliance with this asset cap is measured

on a two-quarter daily average basis to allow for management of

temporary fluctuations. After removal of the asset cap, a second

third-party review must also be conducted to assess the efficacy

and sustainability of the enhancements and improvements.

Consent Orders with the Consumer Financial Protection

Bureau and Office of the Comptroller of the Currency

Regarding Compliance Risk Management Program,

Automobile Collateral Protection Insurance Policies, and

Mortgage Interest Rate Lock Extensions

On April 20, 2018, the Company entered into consent orders

with the Consumer Financial Protection Bureau (CFPB) and the

Office of the Comptroller of the Currency (OCC) to pay an

aggregate of $1 billion in civil money penalties to resolve matters

regarding the Company’s compliance risk management program

and past practices involving certain automobile collateral

protection insurance (CPI) policies and certain mortgage interest

rate lock extensions. As required by the consent orders, the

Company submitted to the CFPB and OCC an enterprise-wide

compliance risk management plan and a plan to enhance the

Company’s internal audit program with respect to federal

consumer financial law and the terms of the consent orders. In

addition, as required by the consent orders, the Company

submitted for non-objection plans to remediate customers

affected by the automobile collateral protection insurance and

mortgage interest rate lock matters, as well as a plan for the

management of remediation activities conducted by the

Company. The Company continues to work to address the

provisions of the consent orders. On September 9, 2021, the

OCC assessed a $250 million civil money penalty against the

Company related to insufficient progress in addressing

requirements under the OCC’s April 2018 consent order and loss

mitigation activities in the Company’s Home Lending business.

On December 20, 2022, the CFPB modified its consent order to

clarify how it would terminate.

Consent Order with the OCC Regarding Loss Mitigation

Activities

On September 9, 2021, the Company entered into a consent

order with the OCC requiring the Company to improve the

execution, risk management, and oversight of loss mitigation

activities in its Home Lending business. In addition, the consent

order restricts the Company from acquiring certain third-party

Wells Fargo & Company 2

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residential mortgage servicing and limits transfers of certain

mortgage loans requiring customer remediation out of the

Company’s mortgage servicing portfolio until remediation is

provided.

Consent Order with the CFPB Regarding Automobile

Lending, Consumer Deposit Accounts, and Mortgage

Lending

On December 20, 2022, the Company entered into a consent

order with the CFPB requiring the Company to provide customer

remediation for multiple matters related to automobile lending,

consumer deposit accounts, and mortgage lending; maintain

practices designed to ensure auto lending customers receive

refunds for the unused portion of certain guaranteed automobile

protection agreements; comply with certain business practice

requirements related to consumer deposit accounts; and pay a

$1.7 billion civil penalty to the CFPB. The required actions related

to many of these matters were already substantially complete at

the time we entered into the consent order, and the consent

order lays out a path to termination after the Company

completes the remainder of the required actions.

Retail Sales Practices Matters

In September 2016, we announced settlements with the CFPB,

the OCC, and the Office of the Los Angeles City Attorney, and

entered into related consent orders with the CFPB and the OCC,

in connection with allegations that some of our retail customers

received products and services they did not request. As a result, it

remains a priority to rebuild trust through a comprehensive

action plan that includes making things right for our customers,

employees, and other stakeholders, and building a better

Company for the future. On September 8, 2021, the CFPB

consent order regarding retail sales practices expired.

For additional information regarding retail sales practices

matters, including related legal and regulatory risk, see the “Risk

Factors” section and Note 13 (Legal Actions) to Financial

Statements in this Report.

Customer Remediation Activities

Our priority of rebuilding trust has included an effort to identify

areas or instances where customers may have experienced

financial harm, provide remediation as appropriate, and

implement additional operational and control procedures. We are

working with our regulatory agencies in this effort.

We have accrued for the probable and estimable costs

related to our customer remediation activities, which amounts

may change based on additional facts and information, as well as

ongoing reviews and communications with our regulators. As our

ongoing reviews continue and as we continue to strengthen our

risk and control infrastructure, we have identified and may in the

future identify additional items or areas of potential concern. To

the extent issues are identified, we will continue to assess any

customer harm and provide remediation as appropriate. We have

previously disclosed key areas of focus as part of these activities.

For additional information regarding accruals for customer

remediation, see the “Expenses” section in Note 20 (Revenue and

Expenses) to Financial Statements in this Report, and for

additional information regarding these activities, including

related legal and regulatory risk, see the “Risk Factors” section

and Note 13 (Legal Actions) to Financial Statements in this

Report.

Recent Developments

LIBOR Transition

The London Interbank Offered Rate (LIBOR) is a widely

referenced benchmark rate that seeks to estimate the cost at

which banks can borrow on an unsecured basis from other banks.

On March 5, 2021, the United Kingdom’s Financial Conduct

Authority and ICE Benchmark Administration, the administrator

of LIBOR, announced that certain settings of LIBOR would no

longer be published on a representative basis after December 31,

2021, and the most commonly used U.S. dollar (USD) LIBOR

settings would no longer be published on a representative basis

after June 30, 2023. Central banks in various jurisdictions

convened committees to identify replacement rates to facilitate

the transition away from LIBOR. The committee convened by the

Federal Reserve in the United States, the Alternative Reference

Rates Committee (ARRC), recommended the Secured Overnight

Financing Rate (SOFR) as the replacement rate for USD LIBOR.

In first quarter 2022, the Adjustable Interest Rate (LIBOR)

Act (the LIBOR Act) was enacted into U.S. federal law to provide

a statutory framework to replace LIBOR with a benchmark rate

based on SOFR in U.S. law contracts that do not have fallback

provisions or that have fallback provisions resulting in a

replacement rate based on LIBOR. The FRB adopted a final rule

implementing the LIBOR Act on December 16, 2022, which will

become effective on February 27, 2023. We expect that the

LIBOR Act will transition certain of our legacy USD LIBOR

contracts that do not have appropriate fallback provisions to the

applicable SOFR-based replacement rates specified in the FRB’s

final rule.

We no longer offer new contracts referencing LIBOR, subject

to limited exceptions based on regulatory guidance. During 2022,

we executed certain LIBOR transition activities to enhance our

operational readiness such as the development of new

alternative reference rate products, model and system updates,

and employee training.

For certain contracts, including commercial credit facilities

and related derivatives, we continue to proactively engage with

our clients and contract parties to replace LIBOR with SOFR-

based rates or other alternative reference rates in advance of the

June 30, 2023 cessation date.

Following June 30, 2023, we expect substantially all of our

consumer loans, commercial credit facilities, debt securities,

derivatives, and long-term debt indexed to USD LIBOR to

transition to SOFR-based or other alternative reference rates in

accordance with existing fallback provisions or the LIBOR Act.

For additional information regarding the risks and potential

impact of LIBOR or any other referenced financial metric being

significantly changed, replaced or discontinued, see the “Risk

Factors” section in this Report.

Wells Fargo & Company 3

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Overview (continued)

Financial Performance

In 2022, we generated $13.2 billion of net income and diluted

earnings per common share (EPS) of $3.14, compared with

$21.5 billion  of net income and diluted EPS of $4.95 in 2021.

Financial performance for 2022, compared with 2021, included

the following:

Credit quality reflected the following:

• total revenue decreased due to lower net gains from equity

securities, mortgage banking, and investment advisory and

other asset-based fee income, partially offset by higher net

interest income;

• provision for credit losses increased reflecting loan growth

and a less favorable economic environment;

• noninterest expense increased due to higher operating

losses, partially offset by lower personnel expense, and

professional and outside services expense;

• average loans increased driven by loan growth across both

our commercial and consumer loan portfolios; and

• average deposits decreased driven by reductions in

Corporate and Investment Banking, Commercial Banking,

Wealth and Investment Management, and Corporate,

partially offset by growth in Consumer Banking and Lending.

Capital and Liquidity

We maintained a strong capital position in 2022. Total equity of

$181.9 billion at December 31, 2022, decreased compared with

$190.1 billion at December 31, 2021, driven by a decrease in

accumulated other comprehensive income due to net unrealized

losses on available-for-sale (AFS) debt securities. Our liquidity

and regulatory capital ratios remained strong at December 31,

2022, including:

• our Common Equity Tier 1 (CET1) ratio was 10.60% under

the Standardized Approach (our binding ratio), which

continued to exceed the regulatory minimum and buffers of

9.20%;

• our total loss absorbing capacity (TLAC) as a percentage of

total risk-weighted assets was 23.27%, compared with the

regulatory minimum of 21.50%; and

• our liquidity coverage ratio (LCR) was 122%, which

continued to exceed the regulatory minimum of 100%.

See the “Capital Management” and the “Risk Management –

Asset/Liability Management – Liquidity Risk and Funding”

sections in this Report for additional information regarding our

capital and liquidity, including the calculation of our regulatory

capital and liquidity amounts.

Credit Quality

• The allowance for credit losses (ACL) for loans of

$13.6 billion at December 31, 2022, decreased $179 million

from December 31, 2021, reflecting reduced uncertainty

around the economic impact of the COVID-19 pandemic on

our loan portfolio. This decrease was partially offset by loan

growth and a less favorable economic environment.

• Our provision for credit losses for loans was $1.5 billion in

2022, compared with $(4.2) billion in 2021, reflecting loan

growth and a less favorable economic environment.

• The allowance coverage for total loans was 1.42% at

December 31, 2022, compared with 1.54% at December 31,

2021.

• Commercial portfolio net loan charge-offs were $79 million,

or 1 basis point of average commercial loans, in 2022,

compared with net loan charge-offs of $295 million, or

6 basis points, in 2021, driven by lower losses in our

commercial and industrial and commercial real estate

mortgage portfolios.

• Consumer portfolio net loan charge-offs were $1.5 billion, or

39 basis points of average consumer loans, in 2022,

compared with net loan charge-offs of $1.3 billion, or

33 basis points, in 2021, predominantly due to higher losses

in our auto portfolio.

• Nonperforming assets (NPAs) of

$5.8 billion



at

December 31, 2022



, decreased

$1.6 billion

, or

21%, from

December 31, 2021



, driven by improved credit quality across

our commercial loan portfolios, and a decrease in residential

mortgage nonaccrual loans

primarily

due to sustained

payment performance of borrowers after exiting COVID-19

-

related accommodation programs. NPAs represented

0.60%

of total loans at

December 31, 2022



.

Wells Fargo & Company 4

Table 1 presents a three-year summary of selected financial

data and Table 2 presents selected ratios and per common share

data.

Table 1: Summary of Selected Financial Data

Year ended December 31,

(in millions, except per share amounts) 2022 2021

$ Change

2022/

2021

% Change

2022/

2021 2020

$ Change

2021/

2020

% Change

2021/

2020

Income statement

Net interest income $ 44,950 35,779 9,171 26 % $ 39,956 (4,177) (10)%

Noninterest income 28,835 42,713 (13,878) (32) 34,308 8,405 24

Total revenue 73,785 78,492 (4,707) (6) 74,264 4,228 6

Net charge-offs 1,609 1,582 27 2 3,370 (1,788) (53)

Change in the allowance for credit losses (75) (5,737) 5,662 99 10,759 (16,496) NM

Provision for credit losses 1,534 (4,155) 5,689 137 14,129 (18,284) NM

Noninterest expense 57,282 53,831 3,451 6 57,630 (3,799) (7)

Net income before noncontrolling interests 12,882 23,238 (10,356) (45) 3,662 19,576 535

Less: Net income from noncontrolling interests (300) 1,690 (1,990) NM 285 1,405 493

Wells Fargo net income 13,182 21,548 (8,366) (39) 3,377 18,171 538

Earnings per common share 3.17 4.99 (1.82) (36) 0.43 4.56 NM

Diluted earnings per common share 3.14 4.95 (1.81) (37) 0.43 4.52 NM

Dividends declared per common share 1.10 0.60 0.50 83 1.22 (0.62) (51)

Balance sheet (at year end)

Debt securities 496,808 537,531 (40,723) (8) 501,207 36,324 7

Loans 955,871 895,394 60,477 7 887,637 7,757 1

Allowance for loan losses

12,985 12,490 495 4 18,516 (6,026) (33)

Equity securities 64,414 72,886 (8,472) (12) 60,008 12,878 21

Assets 1,881,016 1,948,068 (67,052) (3) 1,952,911 (4,843) —

Deposits 1,383,985 1,482,479 (98,494) (7) 1,404,381 78,098 6

Long-term debt 174,870 160,689 14,181 9 212,950 (52,261) (25)

Common stockholders’ equity 160,614 168,331 (7,717) (5) 164,570 3,761 2

Wells Fargo stockholders’ equity 179,889 187,606 (7,717) (4) 184,680 2,926 2

Total equity 181,875 190,110 (8,235) (4) 185,712 4,398 2

NM – Not meaningful

Wells Fargo & Company 5

Table 2: Ratios and Per Common Share Data

Year ended December 31,

2022 2021 2020

Performance ratios

Return on average assets (ROA) (1)

0.70%

1.11

0.17

Return on average equity (ROE) (2)

7.5

12.0

1.1

(3) Return on average tangible common equity (ROTCE)

9.0

14.3

1.3

(4) Efficiency ratio

78

69

78

(5) Capital and other metrics

At year end:

Wells Fargo common stockholders’ equity to assets

8.54

8.64

8.43

Total equity to assets

9.67

9.76

9.51

Risk-based capital ratios and components:

Standardized Approach:

Common Equity Tier 1 (CET1)

10.60

11.35

11.59

Tier 1 capital

12.11

12.89

13.25

Total capital

14.82

15.84

16.47

Risk-weighted assets (RWAs) (in billions)

$

1,259.9

1,239.0

1,193.7

Advanced Approach:

Common Equity Tier 1 (CET1)

12.00%

12.60

11.94

Tier 1 capital

13.72

14.31

13.66

Total capital

15.94

16.72

16.14

Risk-weighted assets (RWAs) (in billions)

$

1,112.3

1,116.1

1,158.4

Tier 1 leverage ratio

8.26%

8.34

8.32

Supplementary Leverage Ratio (SLR)

6.86

6.89

8.05

Total Loss Absorbing Capacity (TLAC) Ratio (6)

23.27

23.03

25.74

Liquidity Coverage Ratio (LCR) (7)

122

118

133

Average balances:

Average Wells Fargo common stockholders’ equity to average assets

8.51

8.73

8.43

Average total equity to average assets

9.67

9.85

9.51

Per common share data

Dividend payout ratio (8)

35.0

12.1

283.7

Book value (9)

$

41.89

43.32

39.71

Overview (continued)

(1) Represents Wells Fargo net income divided by average assets.

(2) Represents Wells Fargo net income applicable to common stock divided by average common stockholders’ equity.

(3) Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, goodwill, certain identifiable intangible assets (other than

mortgage servicing rights) and goodwill and other intangibles on investments in consolidated portfolio companies, 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 management, investors, and others to assess the Company’s use of equity. For additional information, including a corresponding reconciliation to generally accepted accounting principles

(GAAP) financial measures, see the “Capital Management – Tangible Common Equity” section in this Report.

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

(5) See the “Capital Management” section and Note 25 (Regulatory Capital Requirements and Other Restrictions) to Financial Statements in this Report for additional information.

(6) Represents TLAC divided by risk-weighted assets (RWAs), which is our binding TLAC ratio, determined by using the greater of RWAs under the Standardized and Advanced Approaches.

(7) Represents average high-quality liquid assets divided by average projected net cash outflows, as each is defined under the LCR rule.

(8) Dividend payout ratio is dividends declared per common share as a percentage of diluted earnings per common share.

(9) Book value per common share is common stockholders’ equity divided by common shares outstanding.

Wells Fargo & Company 6

 



Earnings Performance

Wells Fargo net income for 2022 was $13.2 billion ($3.14 diluted

EPS), compared with $21.5 billion ($4.95 diluted EPS) in 2021.

Net income decreased in 2022, compared with 2021, due to a

$13.9 billion decrease in noninterest income, a $5.7 billion

increase in provision for credit losses, and a $3.5 billion increase

in noninterest expense, partially offset by a $9.2 billion increase

in net interest income, a $3.5 billion decrease in income tax

expense, and a $2.0 billion decrease in net income from

noncontrolling interests.

For a discussion of our 2021 financial results, compared with

2020, see the “Earnings Performance” section of our Annual

Report on Form 10-K for the year ended December 31, 2021.

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 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, variable sources

of interest income, such as loan fees, periodic dividends, and

collection of interest on nonaccrual loans, can fluctuate from

period to period.

Net interest income and net interest margin increased in

2022, compared with 2021, due to the impact of higher interest

rates on earning assets, higher loan balances, and lower

mortgage-backed securities (MBS) premium amortization,

partially offset by lower interest income from Paycheck

Protection Program (PPP) loans and loans purchased from

Government National Mortgage Association (GNMA) loan

securitization pools, and higher expenses for interest-bearing

deposits and long-term debt.

Table 3 presents the individual components of net interest

income and net interest margin. Net interest income and net

interest margin are presented on a taxable-equivalent basis in

Table 3 to consistently reflect income from taxable and tax-

exempt loans and debt and equity securities based on a 21%

federal statutory tax rate for the periods ended December 31,

2022, 2021 and 2020.

Wells Fargo & Company 7

Table 3: Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) (1)

Year ended December 31,

2022 2021 2020

(in millions)

Average

balance

Interest 

income/

expense 

Interest

rates

Average

balance

Interest 

income/ 

expense 

Interest

rates

Average 

balance 

Interest 

income/ 

expense 

Interest

rates

Assets

Interest-earning deposits with banks $ 145,802 2,245 1.54 % $ 236,281 314 0.13 % $ 186,386 547 0.29 %

Federal funds sold and securities purchased under resale agreements 62,137 859 1.38 69,720 14 0.02 82,798 393 0.47

Debt securities:

Trading debt securities 91,515 2,490 2.72 88,282 2,107 2.39 94,731 2,544 2.69

Available-for-sale debt securities 141,404 3,167 2.24 189,237 2,924 1.55 229,077 5,248 2.29

Held-to-maturity debt securities 296,540 6,480 2.19 245,304 4,589 1.87 173,505 3,841 2.21

Total debt securities

529,459 12,137

2.29

522,823 9,620

1.84

497,313 11,633

2.34

Loans held for sale (2)

13,900 513

3.69

27,554 865

3.14

27,493 947

3.45

Loans:

Commercial and industrial – U.S. 291,996 11,293 3.87 252,025 6,526 2.59 281,080 7,912 2.82

Commercial and industrial – Non-U.S. 80,033 2,681 3.35 71,114 1,448 2.04 66,915 1,673 2.50

Commercial real estate mortgage 131,304 4,974 3.79 121,638 3,276 2.69 122,482 3,842 3.14

Commercial real estate construction 21,510 991 4.61 21,589 667 3.09 21,608 760 3.52

Lease financing 14,555 607 4.17 15,519 692 4.46 17,801 877 4.93

Total commercial loans 539,398 20,546 3.81 481,885 12,609 2.62 509,886 15,064 2.95

Residential mortgage – first lien 249,985 7,912 3.17 249,862 7,903 3.16 288,105 9,661 3.35

Residential mortgage – junior lien 14,703 729 4.95 19,710 818 4.15 26,700 1,185 4.44

Credit card 41,275 4,752 11.51 35,471 4,086 11.52 37,093 4,315 11.63

Auto 55,429 2,366 4.27 51,576 2,317 4.49 48,362 2,379 4.92

Other consumer 29,030 1,489 5.13 25,784 962 3.73 31,642 1,719 5.43

Total consumer loans 390,422 17,248 4.42 382,403 16,086 4.21 431,902 19,259 4.46

Total loans (2) 929,820 37,794 4.06 864,288 28,695 3.32 941,788 34,323 3.64

Equity securities 30,575 708 2.31 31,946 608 1.91 28,950 557 1.92

Other 13,275 204 1.54 10,052 6 0.06 7,505 14 0.18

Total interest-earning assets $ 1,724,968 54,460 3.16 % $ 1,762,664 40,122 2.28 % $ 1,772,233 48,414 2.73 %

Cash and due from banks 25,817 — 24,562 — 21,676 —

Goodwill 25,177 — 26,087 — 26,387 —

Other 118,347 — 128,592 — 121,413 —

Total noninterest-earning assets $ 169,341 — 179,241 — 169,476 —

Total assets $ 1,894,309 54,460 1,941,905 40,122 1,941,709 48,414

Liabilities

Deposits:

Demand deposits $ 432,745 1,356 0.31 % $ 450,131 127 0.03 % $ 98,182 184 0.19 %

Savings deposits 433,415 406 0.09 423,221 124 0.03 744,226 1,492 0.20

Time deposits 33,148 449 1.36 36,519 122 0.33 81,674 892 1.09

Deposits in non-U.S. offices 19,191 138 0.72 28,297 15 0.05 39,260 236 0.60

Total interest-bearing deposits 918,499 2,349 0.26 938,168 388 0.04 963,342 2,804 0.29

Short-term borrowings:

Federal fu nds p urchased and securities sold under agreements t o

repurchase 24,553 407 1.66 35,245 8 0.02 58,971 276 0.47

Other short-term borrowings 15,257 175 1.15 12,020 (48) (0.41) 11,235 (25) (0.22)

Total short-term borrowings 39,810 582 1.46 47,265 (40) (0.09) 70,206 251 0.36

Long-term debt 157,742 5,505 3.49 178,742 3,173 1.78 224,587 4,471 1.99

Other liabilities 34,126 638 1.87 28,809 395 1.37 28,435 438 1.54

Total interest-bearing liabilities $ 1,150,177 9,074 0.79 % $ 1,192,984 3,916 0.33 % $ 1,286,570 7,964 0.62 %

Noninterest-bearing demand deposits 505,770 — 499,644 — 412,669 —

Other noninterest-bearing liabilities 55,138 — 58,058 — 57,781 —

Total noninterest-bearing liabilities $ 560,908 — 557,702 — 470,450 —

Total liabilities $ 1,711,085 9,074 1,750,686 3,916 1,757,020 7,964

Total equity 183,224 — 191,219 — 184,689 —

Total liabilities and equity $ 1,894,309 9,074 1,941,905 3,916 1,941,709 7,964

(3) Interest rate spread on a taxable-equivalent basis 2.37 % 1.95 % 2.11 %

Net interest margin and net interest income on a taxable-equivalent

basis (3) $ 45,386 2.63 % $ 36,206 2.05 % $ 40,450 2.28 %

Earnings Performance (continued)

(1) The a verage b alance a mounts r epresent amortized costs, except for certain h eld-to-maturity debt securities, which exclude u namortized basis a djustments r elated to t he t ransfer of t hose secu rities

from available-for-sale d ebt securities. The int erest rates a re b ased on int erest income or expense a mounts for the p eriod and are a nnualized. Interest rates a nd amounts inclu de t he effect s of h edge

and risk management activities a ssociated with the r espective a sset and liability categories.

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

(3) Includes taxable-equivalent adjustments of $436 million, $427 million and $494 million for the years ended December 31, 2022, 2021 and 2020, respectively, predominantly related to tax-exempt

income on certain loans and securities.

Wells Fargo & Company 8



  

Table 4 allocates the changes in net interest income on a

taxable-equivalent basis to changes in either average balances or

average rates for both interest-earning assets and interest-

bearing liabilities. Because of the numerous simultaneous volume

and rate changes during any period, it is not possible to precisely

Table 4: Analysis of Changes in Net Interest Income

allocate such changes between volume and rate. For this table,

changes that are not solely due to either volume or rate are

allocated to these categories on a pro-rata basis based on the

absolute value of the change due to average volume and average

rate.

Year ended December 31,

2022 vs. 2021 2021 vs. 2020

(in millions) Volume Rate Total Volume Rate Total

Increase (decrease) in interest income:

Interest-earning deposits with banks $ (162) 2,093 1,931 119 (352) (233)

Federal funds sold and securities purchased under resale agreements (2) 847 845 (53) (326) (379)

Debt securities:

Trading debt securities 80 303 383 (165) (272) (437)

Available-for-sale debt securities (858) 1,101 243 (813) (1,511) (2,324)

Held-to-maturity debt securities 1,039 852 1,891 1,405 (657) 748

Total debt securities 261 2,256 2,517 427 (2,440) (2,013)

Loans held for sale (484) 132 (352) 2 (84) (82)

Loans:

Commercial and industrial – U.S. 1,158 3,609 4,767 (775) (611) (1,386)

Commercial and industrial – Non-U.S. 201 1,032 1,233 99 (324) (225)

Commercial real estate mortgage 276 1,422 1,698 (26) (540) (566)

Commercial real estate construction (2) 326 324 (1) (92) (93)

Lease financing (42) (43) (85) (106) (79) (185)

Total commercial loans 1,591 6,346 7,937 (809) (1,646) (2,455)

Residential mortgage – first lien 1 8 9 (1,232) (526) (1,758)

Residential mortgage – junior lien (230) 141 (89) (294) (73) (367)

Credit card 670 (4) 666 (188) (41) (229)

Auto 166 (117) 49 153 (215) (62)

Other consumer 132 395 527 (281) (476) (757)

Total consumer loans 739 423 1,162 (1,842) (1,331) (3,173)

Total loans 2,330 6,769 9,099 (2,651) (2,977) (5,628)

Equity securities (26) 126 100 54 (3) 51

Other 3 195 198 4 (12) (8)

Total increase (decrease) in interest income 1,920 12,418 14,338 (2,098) (6,194) (8,292)

Increase (decrease) in interest expense:

Deposits:

Demand deposits $ (5) 1,234 1,229 208 (265) (57)

Savings deposits 3 279 282 (461) (907) (1,368)

Time deposits (12) 339 327 (340) (430) (770)

Deposits in non-U.S. offices (7) 130 123 (52) (169) (221)

Total interest-bearing deposits (21) 1,982 1,961 (645) (1,771) (2,416)

Short-term borrowings:

Federal funds purchased and securities sold under agreements to repurchase (3) 402 399 (80) (188) (268)

Other short-term borrowings (10) 233 223 (2) (21) (23)

Total short-term borrowings (13) 635 622 (82) (209) (291)

Long-term debt (412) 2,744 2,332 (855) (443) (1,298)

Other liabilities 82 161 243 6 (49) (43)

Total increase (decrease) in interest expense (364) 5,522 5,158 (1,576) (2,472) (4,048)

Increase (decrease) in net interest income on a taxable-equivalent basis $ 2,284 6,896 9,180 (522) (3,722) (4,244)

Wells Fargo & Company 9

Noninterest Income

Table 5: Noninterest Income

Year ended December 31,

(in millions) 2022 2021

$ Change

2022/

2021

% Change

2022/

2021 2020

$ Change

2021/

2020

% Change

2021/

2020

Deposit-related fees

$

5,316

5,475

(159)

(3)%

$

5,221

254

5 %

Lending-related fees

1,397

1,445

(48)

(3)

1,381

64

5

Investment advisory and other asset-based fees

9,004

11,011

(2,007)

(18)

9,863

1,148

12

Commissions and brokerage services fees

2,242

2,299

(57)

(2)

2,384

(85)

(4)

Investment banking fees

1,439

2,354

(915)

(39)

1,865

489

26

Card fees

4,355

4,175

180

4

3,544

631

18

Net servicing income

533

194

339

175

(139)

333

240

Net gains on mortgage loan originations/sales

850

4,762

(3,912)

(82)

3,632

1,130

31

Mortgage banking

1,383

4,956

(3,573)

(72)

3,493

1,463

42

Net gains from trading activities

2,116

284

1,832

645

1,172

(888)

(76)

Net gains from debt securities

151

553

(402)

(73)

873

(320)

(37)

Net gains (losses) from equity securities

(806)

6,427

(7,233)

NM

665

5,762

866

Lease income

1,269

996

273

27

1,245

(249)

(20)

Other

969

2,738

(1,769)

(65)

2,602

136

5

Total

$

28,835 42,713

(13,878)

(32) $

34,308

8,405

24

Earnings Performance (continued)

NM – Not meaningful

Full year 2022 vs. full year 2021

Deposit-related fees decreased reflecting:

• lower treasury management fees on commercial accounts

driven by a higher earnings credit rate due to an increase in

interest rates; and

• the elimination of non-sufficient funds and other fees as well

as efforts to help customers avoid overdraft fees ;

partially offset by:

• lower fee waivers as 2021 included additional

accommodations to support customers.

Lending-related fees decreased reflecting lower commercial

loan commitment fees.

Investment advisory and other asset-based fees decreased

reflecting:

• lower asset-based and trust fees due to divestitures in 2021;

and

• lower average market valuations.

For additional information on certain client investment

assets, see the “Earnings Performance – Operating Segment

Results – Wealth and Investment Management – WIM Advisory

Assets” section in this Report.

Commissions and brokerage services fees decreased driven by

lower transactional revenue.

Investment banking fees decreased due to lower market

activity.

Card fees increased reflecting higher network revenue as well as

higher interchange fees, net of rewards, driven by increased

purchase and transaction volumes.

Net servicing income increased driven by a lower decline in

residential mortgage servicing rights (MSRs) as a result of

reduced prepayment rates, partially offset by net unfavorable

hedge results due to interest rate volatility.

Net gains on mortgage loan originations/sales decreased

driven by:

• lower residential mortgage origination volumes and lower

gain on sale margins; and

• lower gains related to the resecuritization of loans we

purchased from GNMA loan securitization pools.

For additional information on servicing income and net gains

on mortgage loan originations/sales, see Note 6 (Mortgage

Banking Activities) to Financial Statements in this Report.

Net gains from trading activities increased driven by higher

commodities, foreign exchange, rates, and equities trading

revenue.

Net gains from debt securities decreased due to lower gains on

sales of corporate debt securities and agency MBS.

Net gains (losses) from equity securities decreased reflecting:

• lower unrealized gains on nonmarketable equity securities

driven by our affiliated venture capital and private equity

businesses;

• a $2.5 billion impairment of equity securities (before the

impact of noncontrolling interests) in 2022 predominantly in

our affiliated venture capital business driven by market

conditions; and

• lower realized gains on the sales of equity securities.

Lease income increased driven by a $268 million impairment in

2021 of certain rail cars in our rail car leasing business that are

used for the transportation of coal products.

Wells Fargo & Company 10

Other income decreased driven by:

• gains in 2021 on the sales of

our Corporate Trust Services

business, our student loan portfolio, and Wells Fargo Asset

Management (WFAM); and

• higher amortization due to growth in wind energy

investments (offset by benefits and credits in income tax

expense);

partially offset by:

• lower valuation losses related to the retained litigation risk

associated with shares of Visa Class B common stock that

we sold.

Noninterest Expense

Table 6: Noninterest Expense

Year ended December 31,

(in millions) 2022 2021

$ Change

2022/

2021

% Change

2022/

2021 2020

$ Change

2021/

2020

% Change

2021/

2020

Personnel

$

34,340

35,541

(1,201)

(3)%

$

34,811

730

2 %

Technology, telecommunications and equipment

3,375

3,227

148

5

3,099

128

4

Occupancy

2,881

2,968

(87)

(3)

3,263

(295)

(9)

Operating losses

6,984

1,568

5,416

345

3,523

(1,955)

(55)

Professional and outside services

5,188

5,723

(535)

(9)

6,706

(983)

(15)

(1) Leases

750

867

(117)

(13)

1,022

(155)

(15)

Advertising and promotion

505

600

(95)

(16)

600

—

Restructuring charges

5

76

(71)

(93)

1,499

(1,423)

(95)

Other

3,254

3,261

(7)

—

3,107

154

5

Total

$

57,282

53,831

3,451

6

$

57,630

(3,799)

(7)

(1) Represents expenses for assets we lease to customers.

Full year 2022 vs. full year 2021

Personnel expense decreased driven by:

• lower revenue-related compensation expense; and

• the impact of divestitures and efficiency initiatives;

partially offset by:

• higher severance expense primarily in Home Lending.

Technology, telecommunications and equipment expense

increased due to higher expense for technology contracts.

Occupancy expense decreased driven by lower cleaning fees,

supplies, and equipment expense.

Operating losses increased reflecting a $5.1 billion increase in

expenses for litigation, regulatory, and customer remediation

matters primarily related to a variety of historical matters.

As previously disclosed, we have outstanding litigatio n,

regulatory, and customer remediation matters that could impact

operating losses in the coming quarters.

Professional and outside services expense decreased driven by

efficiency initiatives to reduce our spending on consultants and

contractors.

Leases expense decreased driven by lower depreciation expense

from a reduction in the size of our operating lease asset portfolio.

Advertising and promotion expense decreased due to lower

marketing and brand campaign volumes.

Income Tax Expense

Table 7: Income Tax Expense

Year ended December 31,

(in millions) 2022 2021

$ Change

2022/

2021

% Change

2022/

2021 2020

$ Change

2021/

2020

% Change

2021/

2020

Income before income tax expense (benefit) $ 14,969 28,816 (13,847) (48)% $ 2,505 26,311 NM

Income tax expense (benefit) 2,087 5,578 (3,491) (63) (1,157) 6,735 582 %

Effective Income tax rate 13.7% 20.6 (52.1)%

NM – Not meaningful

Income tax expense for 2022, compared with 2021,

decreased primarily due to lower pre-tax income. The effective

income tax rate for 2022, compared with 2021, decreased

reflecting the impact of income tax benefits, including tax

credits, on lower pre-tax income and discrete tax benefits related

to interest on overpayments in prior years.

For additional information on income taxes, see Note 22

(Income Taxes) to Financial Statements in this Report.

Wells Fargo & Company 11

Earnings Performance (continued)

Operating Segment Results

Our management reporting is organized into four reportable

operating segments: Consumer Banking and Lending;

Commercial Banking; Corporate and Investment Banking; and

Wealth and Investment Management. All other business

activities that are not included in the reportable operating

segments have been included in Corporate. For additional

information, see Table 8 . We define our reportable operating

segments by type of product and customer segment, and their

results are based on our management reporting process. The

management reporting process measures the performance of

the reportable operating segments based on the Company’s

management structure, and the results are regularly reviewed

with our Chief Executive Officer and relevant senior

management. The management reporting process is based on

U.S. GAAP and includes specific adjustments, such as funds

transfer pricing for asset/liability management, shared revenu e

and expenses, and taxable-equivalent adjustments to

consistently reflect income from taxable and tax-exempt

sources, which allows management to assess performance

consistently across the operating segments.

Funds Transfer Pricing Corporate treasury manages a funds

transfer pricing methodology that considers interest rate risk,

liquidity risk, and other product characteristics. Operating

segments pay a funding charge for their assets and receive a

funding credit for their deposits, both of which are included in

net interest income. The net impact of the funding charges or

credits is recognized in corporate treasury.

Revenue and Expense Sharing When lines of business jointly

serve customers, the line of business that is responsible for

providing the product or service recognizes revenue or expense

with a referral fee paid or an allocation of cost to the other line of

business based on established internal revenue-sharing

agreements.

When a line of business uses a service provided by another

line of business or enterprise function (included in Corporate),

expense is generally allocated based on the cost and use of the

service provided.

Taxable-Equivalent Adjustments Taxable-equivalent

adjustments related to tax-exempt income on certain loans and

debt securities are included in net interest income, while taxable-

equivalent adjustments related to income tax credits for low-

income housing and renewable energy investments are included

in noninterest income, in each case with corresponding impacts

to income tax expense (benefit). Adjustments are included in

Corporate, Commercial Banking, and Corporate and Investment

Banking and are eliminated to reconcile to the Company’s

consolidated financial results.

Allocated Capital Reportable operating segments are allocated

capital under a risk-sensitive framework that is primarily based

on aspects of our regulatory capital requirements, and the

assumptions and methodologies used to allocate capital are

periodically assessed and revised.

Management believes that

return on allocated capital is a useful financial measure because it

enables management, investors, and others to assess a

reportable operating segment’s use of capital.

Selected Metrics We present certain financial and nonfinancial

metrics that management uses when evaluating reportable

operating segment results. Management believes that these

metrics are useful to investors and others to assess the

performance, customer growth, and trends of reportable

operating segments or lines of business.

Table 8: Management Reporting Structure

Wells Fargo & Company

Consumer

Banking a nd

Lending

• Consumer and

Small Business

Banking

• Home Lending

• Credit Card

• Auto

• Personal Lending

Commercial

Banking

• Middle Market

Banking

• Asset-Based

Lending and Leasing

Corporate a nd

Investment

Banking

• Banking

• Commercial Real

Estate

• Markets

Wealth a nd

Investment

Management

• Wells Fargo

Advisors

• The Private

Bank

Corporate

• Corporate

Treasury

• Enterprise

Functions

• Investment

Portfolio

• Affiliated venture

capital and private

equity businesses

• Non-strategic

businesses

Wells Fargo & Company 12

Table 9 and the following discussion present our results by

reportable operating segment. For additional information, see

Note 19 (Operating Segments) to Financial Statements in this

Report.

Table 9: Operating Segment Results – Highlights

(in millions)

Consumer

Banking and

Lending

Commercial

Banking

Corporate and

Investment

Banking

Wealth and

Investment

Management Corporate (1)

Reconciling

Items (2)

Consolidated

Company

Year ended December 31, 2022

Net interest income $ 27,044 7,289 8,733 3,927 (1,607) (436) 44,950

Noninterest income 8,766 3,631 6,509 10,895 609 (1,575) 28,835

Total revenue 35,810 10,920 15,242 14,822 (998) (2,011) 73,785

Provision for credit losses 2,276 (534) (185) (25) 2 — 1,534

Noninterest expense 26,277 6,058 7,560 11,613 5,774 — 57,282

Income (loss) before income tax expense (benefit) 7,257 5,396 7,867 3,234 (6,774) (2,011) 14,969

Income tax expense (benefit)

Net income (loss) before noncontrolling interests

5,441 4,030 5,878 2,422 (4,889) — 12,882

1,816 1,366 1,989 812 (1,885) (2,011) 2,087

Less: Net income (loss) from noncontrolling

interests

Net income (loss) $ 5,441 4,018 5,878 2,422 (4,577) — 13,182

— 12 — — (312) — (300)

Year ended December 31, 2021

Net interest income $ 22,807 4,960 7,410 2,570 (1,541) (427) 35,779

Noninterest income 12,070 3,589 6,429 11,776 10,036 (1,187) 42,713

Total revenue 34,877 8,549 13,839 14,346 8,495 (1,614) 78,492

Provision for credit losses (1,178) (1,500) (1,439) (95) 57 — (4,155)

Noninterest expense 24,648 5,862 7,200 11,734 4,387 — 53,831

Income (loss) before income tax expense (benefit) 11,407 4,187 8,078 2,707 4,051 (1,614) 28,816

Income tax expense (benefit)

Net income before noncontrolling interests 8,555 3,142 6,059 2,027 3,455

— 23,238

2,852 1,045 2,019 680 596 (1,614) 5,578

Less: Net income (loss) from noncontrolling

interests — 8 (3) — 1,685 — 1,690

Net income $ 8,555

3,134 6,062 2,027 1,770 — 21,548

Year ended December 31, 2020

Net interest income $ 23,378 6,134 7,509 2,988 441 (494) 39,956

Noninterest income 10,638 3,041 6,419 10,225 4,916 (931) 34,308

Total revenue 34,016 9,175 13,928 13,213 5,357 (1,425) 74,264

Provision for credit losses 5,662 3,744 4,946

249 (472) — 14,129

Noninterest expense 26,976 6,323 7,703 10,912 5,716 — 57,630

Income (loss) before income tax expense (benefit) 1,378 (892) 1,279 2,052 113 (1,425) 2,505

Income tax expense (benefit)

Net income (loss) before noncontrolling interests 1,076 (684) 949 1,538 783

— 3,662

302 (208) 330 514 (670) (1,425) (1,157)

Less: Net income (loss) from noncontrolling

interests — 5 (1) — 281 — 285

Net income (loss) $ 1,076 (689) 950 1,538 502 — 3,377

(1) All other business activities that are not included in the reportable operating segments have been included in Corporate. For additional information, see the “Corporate” section below.

(2) Taxable-equivalent adjustments related to tax-exempt income on certain loans and debt securities are included in net interest income, while taxable-equivalent adjustments related to income tax

credits for low-income housing and renewable energy investments are included in noninterest income, in each case with corresponding impacts to income tax expense (benefit). Adjustments are

included in Corporate, Commercial Banking, and Corporate and Investment Banking and are eliminated to reconcile to the Company’s consolidated financial results.

Wells Fargo & Company 13

Consumer Banking and Lending offers diversified financial

products and services for consumers and small businesses with

annual sales generally up to $10 million. These financial products

and services include checking and savings accounts, credit and

debit cards as well as home, auto, personal, and small business

lending. Table 9a and Table 9b provide additional information for

Consumer Banking and Lending.

Table 9a: Consumer Banking and Lending – Income Statement and Selected Metrics

Year ended December 31,

($ in millions, unless otherwise noted) 2022 2021

$ Change

2022/

2021

% Change

2022/

2021 2020

$ Change

2021/

2020

% Change

2021/

2020

Income Statement

Net interest income $ 27,044 22,807 4,237 19 % $ 23,378 (571) (2) %

Noninterest income:

Deposit-related fees 3,093 3,045 48 2 2,904 141 5

Card fees 4,067 3,930 137 3 3,318 612 18

Mortgage banking 1,100 4,490 (3,390) (76) 3,224 1,266 39

Other 506 605 (99) (16) 1,192 (587) (49)

Total noninterest income 8,766 12,070 (3,304) (27) 10,638 1,432 13

Total revenue 35,810 34,877 933 3 34,016 861 3

Net charge-offs 1,693 1,439 254 18 1,875 (436) (23)

Change in the allowance for credit losses 583 (2

,617)

3,200 122 3,787 (6,404) NM

Provision for credit losses 2,276 (1

,178) 3,454 293 5,662 (6,840) NM

Noninterest expense 26,277 24,648 1,629 7 26,976 (2,328) (9)

Income before income tax expense 7,257 11,407 (4,150) (36) 1,378 10,029 728

Income tax expense 1,816 2,852 (1,036) (36) 302 2,550 844

Net income $ 5,441 8,555 (3,114) (36) $ 1,076 7,479 695

Revenue by Line of Business

Consumer and Small Business Banking $ 23,421 18,958 4,463 24 $ 18,684 274 1

Consumer Lending:

Home Lending 4,221

8,154 (3,933) (48) 7,875 279 4

Credit Card 5,271 4,928 343 7 4,685 243

5

Auto 1,716 1,733 (17) (1) 1,575 158 10

Personal Lending 1,181 1,104 77 7 1,197 (93) (8)

Total revenue

$ 35,810

34,877

933 3 $ 34,016 861 3

Selected Metrics

Consumer Banking and Lending:

Return on allocated capital (1) 10.8% 17.2 1.6 %

Efficiency ratio (2) 73 71 79

Retail bank branches (#) 4,598 4,777 (4) 5,032 (5)

Digital active customers (# in millions) (3) 33.5 33.0 2 32.0 3

Mobile active customers (# in millions) (3) 28.3 27.3 4 26.0 5

Consumer and Small Business Banking:

Deposit spread (4) 2.0% 1.5 1.8 %

Debit card purchase volume ($ in billions) (5) $ 486.6 471.5 15.1 3 $ 391.9 79.6 20

Debit card purchase transactions (# in millions) (5) 9,852 9,808 — 8,792 12

(continued on following page)

Earnings Performance (continued)

14 Wells Fargo & Company

(continued from previous page)

Year ended December 31,

($ in millions, unless otherwise noted) 2022 2021

$ Change

2022/

2021

% Change

2022/

2021 2020

$ Change

2021/

2020

% Change

2021/

2020

Home Lending:

Mortgage banking:

Net servicing income $ 368 35 333 951 % $ (160) 195 122 %

Net gains on mortgage loan originations/sales 732 4,455 (3,723) (84) 3,384 1,071 32

Total mortgage banking $ 1,100 4,490 (3,390) (76) $ 3,224 1,266 39

Originations ($ in billions):

Retail $ 64.3 138.5 (74.2) (54) $ 118.7 19.8 17

Correspondent 43.8 66.5 (22.7) (34) 104.0 (37.5) (36)

Total originations $ 108.1 205.0 (96.9) (47) $ 222.7 (17.7) (8)

% of originations held for sale (HFS) 52.5 % 64.6 73.9 %

Third-party mortgage loans serviced (period-end)

($ in billions) (6)

$ 679.2 716.8 (37.6) (5) $ 856.7 (139.9) (16)

Mortgage servicing rights (MSR) carrying value

(period-end) 9,310 6,920 2,390 35 6,125 795 13

Ratio of MSR carrying value (period-end) to third-

party mortgage loans serviced (period-end) (6)

1.37 % 0.97 0.71 %

Home lending loans 30+ days delinquency rate

(7)(8)(9)

0.31 0.39 0.64

Credit Card:

Point of sale (POS) volume ($ in billions) $ 119.1 95.3 23.8 25 $ 75.3 20.0 27

New accounts (# in thousands) 2,153 1,640 31 1,022 60

Credit card loans 30+ days delinquency rate 2.08 % 1.52 2.26 %

Credit card loans 90+ days delinquency rate 1.01 0.72 1.04

Auto:

Auto originations ($ in billions) $ 23.1

33.9 (10.8) (32) $ 22.8 11.1 49

Auto loans

30+ days delinquency rate (8) 2.64 % 1.84 1.77 %

Personal Lending:

New volume ($ in billions) $ 12.6 9.8 2.8 29 $ 7.9 1.9 24

NM – Not meaningful

(1) Return on allocated capital is segment net income (loss) applicable to common stock divided by segment average allocated capital. Segment net income (loss) applicable to common stock is segment

net income (loss) less allocated preferred stock dividends.

(2) Efficiency ratio is segment noninterest expense divided by segment total revenue (net interest income and noninterest income).

(3) Digital and mobile active customers is the number of consumer and small business customers who have logged on via a digital or mobile device, respectively, in the prior 90 days. Digital active

customers includes both online and mobile customers.

(4) Deposit spread is (i) the internal funds transfer pricing credit on segment deposits minus interest paid to customers for segment deposits, divided by (ii) average segment deposits.

(5) Debit card purchase volume and transactions reflect combined activity for both consumer and business debit card purchases.

(6) Excludes residential mortgage loans subserviced for others.

(7) Excludes residential mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) and loans held for sale.

(8) Excludes nonaccrual loans.

(9) Beginning in second quarter 2020, customer payment deferral activities instituted in response to the COVID-19 pandemic may have delayed the recognition of delinquencies for those customers

who would have otherwise moved into past due or nonaccrual status.

Full year 2022 vs. full year 2021

Revenue increased driven by:

• higher net interest income reflecting higher interest rates

and higher average deposit balances and deposit spreads;

• higher card fees reflecting higher network revenue as well as

higher interchange fees, net of rewards, driven by increased

purchase and transaction volumes; and

• higher deposit-related fees reflecting lower fee waivers as

2021 included additional accommodations to support

customers, and a higher volume of monthly account service

fees in 2022, partially offset by the elimination of non-

sufficient funds and other fees in 2022 as well as initiatives

to help customers avoid overdraft fees;

partially offset by:

• lower mortgage banking noninterest income due to lower

origination volumes and gain on sale margins, and lower

revenue related to the resecuritization of loans we

purchased from GNMA loan securitization pools.

Provision for credit losses increased reflecting loan growth, a

less favorable economic environment, and higher net charge-

offs.

Noninterest expense increased driven by:

• higher operating losses reflecting higher expenses primarily

related to a variety of historical matters, including litigation,

regulatory, and customer remediation matters; and

• higher operating costs;

partially offset by:

• lower personnel expense driven by lower revenue-related

incentive compensation in Home Lending due to lower

production and the impact of efficiency initiatives, partially

offset by higher severance expense;

Wells Fargo & Company 15

• lower occupancy expense as well as lower professional and

outside services expense related to efficiency initiatives; and

• lower donation expense due to higher donations of PPP

processing fees in 2021.

Table 9b: Consumer Banking and Lending – Balance Sheet

Year ended December 31,

(in millions) 2022 2021

$ Change

2022/

2021

% Change

2022/

2021 2020

$ Change

2021/

2020

% Change

2021/

2020

Selected Balance Sheet Data (average)

Loans by Line of Business:

Consumer and Small Business Banking $ 10,132 16,625 (6,493) (39) % $ 15,173 1,452 10 %

Consumer Lending:

Home Lending 219,157 224,446 (5,289) (2) 268,586 (44,140) (16)

Credit Card 34,151 29,052 5,099 18 30,861 (1,809) (6)

Auto 55,994 52,293 3,701 7 49,460 2,833 6

Personal Lending 12,999 11,469 1,530 13 12,383 (914) (7)

Total loans $ 332,433 333,885 (1,452) — $ 376,463 (42,578) (11)

Total deposits 883,130 834,739 48,391 6 722,085 112,654 16

Allocated capital 48,000 48,000 — — 48,000 — —

Selected Balance Sheet Data (period-end)

Loans by Line of Business:

Consumer and Small Business Banking $ 9,704 11,270 (1,566) (14) $ 17,743 (6,473) (36)

Consumer Lending:

Home Lending 223,525 214,407 9,118 4 253,942 (39,535) (16)

Credit Card 38,475 31,671 6,804 21 30,178 1,493 5

Auto 54,281 57,260 (2,979) (5) 49,072 8,188 17

Personal Lending 14,544 11,966 2,578 22 11,861 105 1

Total loans $ 340,529 326,574 13,955 4

$ 362,796 (36,222) (10)

Total deposits 859,695 883,674

(

23,979) (3) 784,565 99,109 13

Full year 2022 vs. full year 2021

Total loans (average) decreased driven by:

• a decline in PPP loans in Consumer and Small Business

Banking; and

• a decline in Home Lending loan balances due to the

resecuritization of loans we purchased from GNMA loan

securitization pools and the continued pause in originating

home equity loans;

partially offset by:

• higher customer purchase volume and the impact of new

products in our Credit Card business; and

• higher loan balances in our Auto business.

Total loans (period-end) increased driven by:

• originations exceeding paydowns in Home Lending;

• higher customer purchase volume and the impact of new

products in our Credit Card business; and

• growth in our Personal Lending business;

partially offset by:

• a decline in our Auto business due to lower origination

volumes reflecting credit tightening actions and rising

interest rates; and

• a decline in PPP loans in Consumer and Small Business

Banking.

Total deposits (average) increased driven by higher levels of

customer liquidity and savings in the first half of 2022, partially

offset by increased consumer spending in the second half of

2022, customers continuing to allocate more cash into higher

yielding liquid alternatives, and lower servicing escrow deposits.

Total deposits (period-end) decreased driven by increased

consumer spending, customers continuing to allocate more cash

into higher yielding liquid alternatives, and lower servicing escrow

deposits.

Earnings Performance (continued)

16 Wells Fargo & Company

Commercial Banking provides financial solutions to private,

family owned and certain public companies. Products and

services include banking and credit products across multiple

industry sectors and municipalities, secured lending and lease

products, and treasury management. Table 9c and Table 9d

provide additional information for Commercial Banking.

Table 9c: Commercial Banking – Income Statement and Selected Metrics

Year ended December 31,

($ in millions) 2022 2021

$ Change

2022/

2021

% Change

2022/

2021 2020

$ Change

2021/

2020

% Change

2021/

2020

Income Statement

Net interest income $ 7,289 4,960 2,329 47 % $ 6,134 (1,174) (19) %

Noninterest income:

Deposit-related fees 1,131 1,285 (154) (12) 1,219 66 5

Lending-related fees 491 532 (41) (8) 531 1 —

Lease income 710 682 28 4 646 36 6

Other 1,299 1,090 209 19 645 445 69

Total noninterest income 3,631 3,589 42 1 3,041 548 18

Total revenue 10,920 8,549 2,371 28 9,175 (626) (7)

Net charge-offs 4 101 (97) (96) 590 (489) (83)

Change in the allowance for credit losses (538) (1,601) 1,063 66 3,154 (4,755) NM

Provision for credit losses (534) (1,500) 966 64 3,744 (5,244) NM

Noninterest expense 6,058 5,862 196 3 6,323 (461) (7)

Income (loss) before income tax expense (benefit) 5,396 4,187 1,209 29 (892) 5,079 569

Income tax expense (benefit) 1,366 1,045 321 31 (208) 1,253 602

Less: Net income from noncontrolling interests 12 8 4 50 5 3 60

Net income (loss) $ 4,018 3,134 884 28 $ (689) 3,823 555

Revenue by Line of Business

Middle Market Banking $ 6,574 4,642 1,932 42

$ 5,067 (425) (8)

Asset-Based Lending and Leasing 4,346 3,907 439 11 4,108 (201) (5)

Total revenue $ 10,920 8,549 2,371 28 $ 9,175 (626) (7)

Revenue by Product

Lending and leasing $ 5,253 4,835 418 9 $ 5,432 (597) (11)

Treasury management and payments 4,483 2,825 1,658 59 3,205 (380) (12)

Other 1,184 889 295 33 538 351 65

Total revenue $ 10,920 8,549 2,371 28 $ 9,175 (626) (7)

Selected Metrics

Return on allocated capital 19.7 % 15.1 (4.5) %

Efficiency ratio 55 69 69

NM – Not meaningful

Full year 2022 vs. full year 2021

Revenue increased driven by:

• higher net interest income reflecting higher interest rates

and deposit spreads as well as higher loan balances; and

• higher other noninterest income driven by higher net gains

from equity securities and higher income from renewable

energy investments;

partially offset by:

• lower deposit-related fees driven by the impact of higher

earnings credit rates, which result in lower fees for

commercial customers.

Provision for credit losses reflected loan growth and a less

favorable economic environment, partially offset by lower net

charge-offs.

Noninterest expense increased driven by higher operating costs

and operating losses, partially offset by the impact of efficiency

initiatives.

Wells Fargo & Company 17

Table 9d: Commercial Banking – Balance Sheet

Year ended December 31,

(in millions) 2022 2021

$ Change

2022/

2021

% Change

2022/

2021 2020

$ Change

2021/

2020

% Change

2021/

2020

Selected Balance Sheet Data (average)

Loans:

Commercial and industrial $ 147,379 120,396 26,983 22 % $ 143,263 (22,867) (16) %

Commercial real estate 45,130 47,018 (1,888) (4) 52,220 (5,202) (10)

Lease financing and other

13,523

13,823

(300) (2) 15,953 (2,130) (13)

Total loans $ 206,032 181,237 24,795 14 $ 211,436 (30,199) (14)

Loans by Line of Business:

Middle Market Banking $ 114,634 102,882 11,752 11 $ 112,848 (9,966) (9)

Asset-Based Lending and Leasing 91,398 78,355 13,043 17 98,588 (20,233) (21)

Total loans $ 206,032 181,237 24,795 14 $ 211,436 (30,199) (14)

Total deposits 186,079 197,269 (11,190) (6) 178,946 18,323 10

Allocated capital 19,500 19,500 — — 19,500 — —

Selected Balance Sheet Data (period-end)

Loans:

Commercial and industrial $ 163,797 131,078 32,719 25 $ 124,253 6,825 5

Commercial real estate 45,816 45,467 349 1 49,903 (4,436) (9)

Lease financing and other 13,916 13,803 113 1 14,821 (1,018) (7)

Total loans $ 223,529 190,348 33,181 17 $ 188,977 1,371 1

Loans by Line of Business:

Middle Market Banking $ 121,192 106,834 14,358 13 $ 101,193 5,641 6

Asset-Based Lending and Leasing 102,337 83,514 18,823 23 87,784 (4,270) (5)

Total loans

$ 223,529 190,348 33,181 17 $ 188,977 1,371 1

Total

deposits 173,942 205,428 (31,486) (15) 188,292 17,136 9

Full year 2022 vs. full year 2021

Total loans (average and period-end) increased driven by

growth in new commitments with existing and new customers as

well as higher line utilization and increased originations.

Total deposits (average and period-end) decreased reflecting:

• customers continuing to allocate more cash into higher

yielding liquid alternatives;

• the transfer of certain customer accounts to the Consumer

Banking and Lending operating segment in first quarter

2022; and

• actions taken in 2021 and early 2022 to manage under the

asset cap.

Earnings Performance (continued)

18 Wells Fargo & Company

Corporate and Investment Banking delivers a suite of capital

markets, banking, and financial products and services to

corporate, commercial real estate, government and institutional

clients globally. Products and services include corporate banking,

investment banking, treasury management, commercial real

estate lending and servicing, equity and fixed income solutions as

well as sales, trading, and research capabilities. Table 9e and

Table 9f provide additional information for Corporate and

Investment Banking.

Table 9e: Corporate and Investment Banking – Income Statement and Selected Metrics

Year ended December 31,

($ in millions) 2022 2021

$ Change

2022/

2021

% Change

2022/

2021 2020

$ Change

2021/

2020

% Change

2021/

2020

Income Statement

Net interest income $ 8,733 7,410 1,323 18 % $ 7,509 (99) (1) %

Noninterest income:

Deposit-related fees 1,068 1,112 (44) (4) 1,062 50 5

Lending-related fees 769 761 8 1 684 77 11

Investment banking fees 1,492 2,405 (913) (38) 1,952 453 23

Net gains from trading activities 1,886 272 1,614 593 1,190 (918) (77)

Other 1,294 1,879 (585) (31) 1,531 348 23

Total noninterest income 6,509 6,429 80 1 6,419 10 —

Total revenue 15,242 13,839 1,403 10 13,928 (89) (1)

Net charge-offs (48) (22) (26) NM 742 (764) NM

Change in the allowance for credit losses (137) (1,417) 1,280 90 4,204 (5,621) NM

Provision for credit losses (185) (1,439) 1,254 87 4,946 (6,385) NM

Noninterest expense 7,560 7,200 360 5 7,703 (503) (7)

Income before income tax expense 7,867 8,078 (211) (3) 1,279 6,799 532

Income tax expense 1,989 2,019 (30) (1) 330 1,689 512

Less: Net loss from noncontrolling interests — (3) 3 100 (1) (2) NM

Net income $ 5,878 6,062

(184) (3) $ 950 5,112 538

Revenu

e by Line of Business

Banking:

Lending $ 2,222 1,948 274 14 $ 1,767 181 10

Treasury Management and Payments 2,369 1,468 901 61 1,680 (212) (13)

Investment Banking 1,206 1,654 (448) (27) 1,448 206 14

Total Banking 5,797 5,070 727 14 4,895 175 4

Commercial Real Estate 4,534 3,963 571 14 3,607 356 10

Markets:

Fixed Income, Currencies, and Commodities (FICC) 3,660 3,710 (50) (1) 4,314 (604) (14)

Equities 1,115 897 218 24 1,204 (307) (25)

Credit Adjustment (CVA/DVA) and Other 20 91 (71) (78) 26 65 250

Total Markets 4,795 4,698 97 2 5,544 (846) (15)

Other 116 108 8 7 (118) 226 192

Total revenue $ 15,242 13,839 1,403 10 $ 13,928 (89) (1)

Selected Metrics

Return on allocated capital 15.3 % 16.9 1.8 %

Efficiency ratio 50 52 55

NM – Not meaningful

Full year 2022 vs. full year 2021

Revenue increased driven by:

• higher net interest income reflecting higher interest rates as

well as higher loan balances; and

• higher net gains from trading activities driven by higher

commodities, foreign exchange, rates, and equities trading

revenue;

partially offset by:

• lower investment banking fees due to lower market activity;

and

• lower other noninterest income driven by lower mortgage

banking income due to lower commercial MBS gain on sale

margins and volumes.

Provision for credit losses reflected loan growth and a less

favorable economic environment.

Noninterest expense increased driven by higher operating costs

and operating losses, partially offset by the impact of efficiency

initiatives.

Wells Fargo & Company 19

Table 9f: Corporate and Investment Banking – Balance Sheet

Year ended December 31,

(in millions) 2022 2021

$ Change

2022/

2021

% Change

2022/

2021 2020

$ Change

2021/

2020

% Change

2021/

2020

Selected Balance Sheet Data (average)

Loans:

Commercial and industrial $ 198,424 170,713 27,711 16 % $ 172,492 (1,779) (1) %

Commercial real estate 98,560 86,323 12,237 14 82,832 3,491 4

Total loans $ 296,984 257,036 39,948 16 $ 255,324 1,712 1

Loans by Line of Business:

Banking $ 106,440 93,766 12,674 14 $ 93,501 265 —

Commercial Real Estate 133,719 110,978 22,741 20 108,279 2,699 2

Markets 56,825 52,292 4,533 9 53,544 (1,252) (2)

Total loans $ 296,984 257,036 39,948 16 $ 255,324 1,712 1

Trading-related assets:

Trading account securities $ 112,213 110,386 1,827 2 $ 109,803 583 1

Reverse repurchase agreements/securities borrowed 50,491 59,044 (8,553) (14) 71,485 (12,441) (17)

Derivative assets 27,421 25,315 2,106 8 21,986 3,329 15

Total trading-related assets $ 190,125 194,745 (4,620) (2) $ 203,274 (8,529) (4)

Total assets 557,396 523,344 34,052 7 521,514 1,830 —

Total deposits 161,720 189,176 (27,456) (15) 234,332 (45,156) (19)

Allocated capital 36,000 34,000 2,000 6 34,000 — —

Selected Balance Sheet Data (period-end)

Loans:

Commercial and industrial $ 196,529

191,391 5,138 3 $ 160,000 31,391 20

Commercial real estate 101,848 92,983 8,865 10 84,456 8,527 10

Total loans $ 298,377 284,374 14,003 5 $ 244,456 39,918 16

Loans by Line of Business:

Banking $ 101,183 101,926 (743) (1) $ 84,640 17,286 20

Commercial Real Estate 137,495 125,926 11,569 9 107,207 18,719 17

Markets 59,699 56,522 3,177 6 52,609 3,913 7

Total loans $ 298,377 284,374 14,003 5 $ 244,456 39,918 16

Trading-related assets:

Trading account securities $ 111,801 108,697 3,104 3 $ 109,311 (614) (1)

Reverse repurchase agreements/securities borrowed 55,407 55,973 (566) (1) 57,248 (1,275) (2)

Derivative assets 22,218 21,398 820 4 25,916 (4,518) (17)

Total trading-related assets $ 189,426 186,068 3,358 2 $ 192,475 (6,407) (3)

Total assets 550,177 546,549 3,628 1 508,518 38,031 7

Total deposits 157,217 168,609 (11,392) (7) 203,004 (34,395) (17)

Full year 2022 vs. full year 2021

Total assets (average and period-end) increased driven by

higher loan balances reflecting broad-based loan demand driven

by a modest increase in utilization rates due to increased client

working capital needs.

Total deposits (average) decreased driven by customers

continuing to allocate more cash into higher yielding liquid

alternatives as well as actions taken in 2021 and early 2022 to

manage under the asset cap.

Total deposits (period-end) decreased driven by customers

continuing to allocate more cash into higher yielding liquid

alternatives.

Earnings Performance (continued)

20 Wells Fargo & Company

Wealth and Investment Management provides personalized

wealth management, brokerage, financial planning, lending,

private banking, trust and fiduciary products and services to

affluent, high-net worth and ultra-high-net worth clients. We

operate through financial advisors in our brokerage and wealth

offices, consumer bank branches, independent offices, and

digitally through WellsTrade® and Intuitive Investor®. Table 9g

and Table 9h provide additional information for Wealth and

Investment Management (WIM).

Table 9g: Wealth and Investment Management

Year ended December 31,

($ in millions, unless otherwise noted) 2022 2021

$ Change

2022/

2021

% Change

2022/

2021 2020

$ Change

2021/

2020

% Change

2021/

2020

Income Statement

Net interest income $ 3,927 2,570 1,357 53 % $ 2,988 (418) (14) %

Noninterest income:

Investment advisory and other asset-based fees 8,847 9,574 (727) (8) 8,085 1,489 18

Commissions and brokerage services fees 1,931 2,010 (79) (4) 2,078 (68) (3)

Other 117 192 (75) (39) 62 130 210

Total noninterest income 10,895 11,776 (881) (7) 10,225 1,551 15

Total revenue 14,822 14,346 476 3 13,213 1,133 9

Net charge-offs (7) 10 (17) NM (3) 13 433

Change in the allowance for credit losses (18) (105) 87 83 252 (357) NM

Provision for credit losses (25) (95) 70 74 249 (344) NM

Noninterest expense 11,613 11,734 (121) (1) 10,912 822 8

Income before income tax expense 3,234 2,707 527 19 2,052 655 32

Income tax expense 812 680 132 19 514 166 32

Net income $ 2,422 2,027 395 19 $ 1,538 489 32

Selected Metrics

Return on allocated capital 27.1 % 22.6 17.0 %

Efficiency ratio 78 82 83

Advisory assets ($ in billions) $ 797 964 (167) (17) $ 853 111

13

Other brokerage assets and deposits ($ in billions) 1,064 1,219 (155) (13) 1,152 67 6

Total client assets ($ in billions) $ 1,861 2,183 (322) (15) $ 2,005 178 9

Annualized revenue per advisor ($ in thousands) (1) 1,219 1,114 105 9 939 175 19

Total financial and wealth advisors (#) (period-end) 12,027 12,367 (3) 13,513 (8)

Selected Balance Sheet Data (average)

Total loans $ 85,228 82,364 2,864 3 $ 78,775 3,589 5

Total deposits 164,883 176,562 (11,679) (7) 162,476 14,086 9

Allocated capital 8,750 8,750 — — 8,750 — —

Selected Balance Sheet Data (period-end)

Total loans $ 84,273 84,101 172 — $ 80,785 3,316 4

Total deposits 138,760 192,548 (53,788) (28) 175,483 17,065 10

NM – Not meaningful

(1) Represents annualized segment total revenue divided by average total financial and wealth advisors for the period.

Full year 2022 vs. full year 2021

Revenue increased driven by:

• higher net interest income driven by higher interest rates,

partially offset by lower deposit balances;

partially offset by:

• lower investment advisory and other asset-based fees due

to lower average market valuations and net outflows of

advisory assets; and

• lower commissions and brokerage services fees driven by

lower transactional revenue.

Provision for credit losses reflected loan growth and a less

favorable economic environment.

Noninterest expense decreased driven by:

• lower personnel expense driven by lower revenue-related

compensation; and

• the impact of efficiency initiatives.

Total deposits (period-end) decreased as customers continued

to allocate more cash into higher yielding liquid alternatives.

Wells Fargo & Company 21



WIM Advisory Assets In addition to transactional accounts,

WIM offers advisory account relationships to brokerage

customers. Fees from advisory accounts are based on a

percentage of the market value of the assets as of the beginning

of the quarter, which vary across the account types based on the

distinct services provided, and are affected by investment

performance as well as asset inflows and outflows. Advisory

accounts include assets that are financial advisor-directed and

separately managed by third-party managers as well as certain

client-directed brokerage assets where we earn a fee for advisory

and other services, but do not have investment discretion.

WIM also manages personal trust and other assets for high

net worth clients, with fee income earned based on a percentage

of the market value of these assets. Table 9h presents advisory

assets activity by WIM line of business. Management believes

that advisory assets is a useful metric because it allows

management, investors, and others to assess how changes in

asset amounts may impact the generation of certain asset-based

fees.

For the years ended December 31, 2022, 2021 and 2020,

the average fee rate by account type ranged from 50 to 120

basis points.

Table 9h: WIM Advisory Assets

Year ended

(in billions)

Balance, beginning

of period Inflows (1) Outflows (2) Market impact (3)

Balance, end of

period

December 31, 2022

Client-directed (4) $ 205.6 31.8 (39.0) (33.2) 165.2

Financial advisor-directed (5) 255.5 41.6 (44.2) (30.0) 222.9

Separate accounts (6) 203.3 24.6 (26.5) (24.9) 176.5

Mutual fund advisory (7) 102.1 8.7 (15.0) (17.2) 78.6

Total Wells Fargo Advisors $ 766.5 106.7 (124.7) (105.3)

643.2

The Private Bank (8) 198.0 27.4 (47.1) (24.7) 153.6

Total WIM advisory assets $ 964.5 134.1 (171.8) (130.0)

796.8

December 31, 2021

Client-directed (4) $ 186.3 41.5 (45.0) 22.8 205.6

Financial advisor-directed (5) 211.0 48.7 (41.1) 36.9 255.5

Separate accounts (6) 174.6 31.8 (30.7) 27.6 203.3

Mutual fund advisory (7) 91.4 15.6 (15.0) 10.1 102.1

Total Wells Fargo Advisors $ 663.3 137.6 (131.8) 97.4

766.5

The Private Bank (8) 189.4 40.0 (51.1) 19.7 198.0

Total WIM advisory assets $ 852.7 177.6 (182.9) 117.1

964.5

December 31, 2020

Client directed (4) $ 169.4 36.4 (38.2) 18.7 186.3

Financial advisor directed (5) 176.3 40.6 (33.6) 27.7 211.0

Separate accounts (6) 160.1 24.6 (27.4) 17.3 174.6

Mutual fund advisory (7) 83.7 11.3 (13.9) 10.3 91.4

Total Wells Fargo Advisors $ 589.5 112.9 (113.1) 74.0

663.3

The Private Bank (8) 188.0 34.0 (45.8) 13.2 189.4

Total WIM advisory assets $ 777.5 146.9 (158.9) 87.2

852.7

(1)

Inflows include new advisory account assets, contributions, dividends and interest.

(2) Outflows include closed advisory account assets, withdrawals and client management fees.

(3) Market impact reflects gains and losses on portfolio investments.

(4) Investment advice and other services are provided to client, but decisions are made by the client and the fees earned are based on a percentage of the advisory account assets, not the number and

size of transactions executed by the client.

(5) Professionally managed portfolios with fees earned based on respective strategies and as a percentage of certain client assets.

(6) Professional advisory portfolios managed by third-party asset managers. Fees are earned based on a percentage of certain client assets.

(7) Program with portfolios constructed of load-waived, no-load and institutional share class mutual funds. Fees are earned based on a percentage of certain client assets.

(8) Discretionary and non-discretionary portfolios held in personal trusts, investment agency, or custody accounts with fees earned based on a percentage of client assets.

Earnings Performance (continued)

Wells Fargo & Company

22

  



Corporate includes corporate treasury and enterprise functions,

net of allocations (including funds transfer pricing, capital,

liquidity and certain expenses), in support of the reportable

operating segments as well as our investment portfolio and

affiliated venture capital and private equity businesses. In

addition, Corporate includes all restructuring charges related to

our efficiency initiatives. See Note 20 (Revenue and Expenses) to

Financial Statements in this Report for additional information on

restructuring charges. Corporate also includes certain lines of

business that management has determined are no longer

consistent with the long-term strategic goals of the Company as

well as results for previously divested businesses. In fourth

quarter 2021, we completed the sales of Wells Fargo Asset

Management (WFAM) and our Corporate Trust Services

business; however, we continue to provide certain services

related to these businesses pursuant to transition services

agreements. The transition services agreement related to the

sale of our Institutional Retirement and Trust business

terminated in June 2022. Table 9i and Table 9j provide additional

information for Corporate.

Table 9i: Corporate – Income Statement

Year ended December 31,

(in millions) 2022 2021

$ Change

2022/

2021

% Change

2022/

2021 2020

$ Change

2021/

2020

% Change

2021/

2020

Income Statement

Net interest income $ (1,607) (1,541) (66) (4)% $ 441 (1,982) NM

Noninterest income 609 10,036 (9,427) (94) 4,916 5,120 104 %

Total revenue (998) 8,495 (9,493) NM 5,357 3,138 59

Net charge-offs (33) 54 (87) NM 166 (112) (67)

Change in the allowance for credit losses 35 3 32 NM (638) 641 100

Provision for credit losses 2 57 (55) (96) (472) 529 112

Noninterest expense 5,774 4,387 1,387 32 5,716 (1,329) (23)

Income (loss) before income tax expense (benefit) (6,774) 4,051 (10,825) NM 113 3,938 NM

Income tax expense (benefit) (1,885) 596 (2,481) NM (670) 1,266 189

Less: Net income (loss) from noncontrolling interests (1) (312) 1,685 (1,997) NM 281 1,404 500

Net income (loss) $ (4,577) 1,770 (6,347) NM $ 502 1,268 253

NM – Not meaningful

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

Full year 2022 vs. full year 2021

Revenue decreased driven by:

• lower net gains from equity securities due to lower

unrealized and realized gains on nonmarketable equity

securities from our affiliated venture capital and private

equity businesses, and higher impairment driven by market

conditions;

• lower investment advisory and other asset-based fees

reflecting divestitures in 2021;

• lower gains on sales of corporate debt securities; and

• gains in 2021 on the sales of our Corporate Trust Services

business, our student loan portfolio, and WFAM;

partially offset by:

• higher net gains from trading activities;

• lower valuation losses related to the retained litigation risk

associated with shares of Visa Class B common stock that

we sold; and

• higher lease income driven by a $268 million impairment in

2021 of certain rail cars in our rail car leasing business that

are used for the transportation of coal products.

Provision for credit losses decreased due to lower net charge-

offs driven by the sale of our student loan portfolio in 2021.

Noninterest expense increased due to:

• higher operating losses reflecting higher expenses primarily

related to a variety of historical matters, including litigation

and regulatory matters;

partially offset by:

• the impact of divestitures;

• a write-down of goodwill in 2021 related to the sale of our

student loan portfolio;

• lower lease expense driven by lower depreciation expense

from a reduction in the size of our rail car leasing business;

and

• lower restructuring charges.

Corporate includes our rail car leasing business, which had

long-lived operating lease assets, net of accumulated

depreciation, of $4.7 billion and $5.1 billion as of December 31,

2022, and December 31, 2021, respectively. The average age of

our rail cars is 22 years and the rail cars are typically leased to

customers under short-term leases of 3 to 5 years. Our three

largest concentrations, which represented 55% of our rail car

fleet as of December 31, 2022, were rail cars used for the

transportation of agricultural grain, coal, and cement/sand

products. Impairment may result in the future based on changing

economic and market conditions affecting the long-term

demand and utility of specific types of rail cars. Our assumptions

for impairment are sensitive to estimated utilization and rental

rates as well as the estimated economic life of the leased asset.

For additional information on the accounting for impairment of

operating lease assets, see Note 1 (Summary of Significant

Accounting Policies) and Note 8 (Leasing Activity) to Financial

Statements in this Report.

Wells Fargo & Company 23

Earnings Performance (continued)

Table 9j: Corporate – Balance Sheet

Year ended December 31,

(in millions) 2022 2021

$ Change

2022/

2021

% Change

2022/

2021 2020

$ Change

2021/

2020

% Change

2021/

2020

Selected Balance Sheet Data (average)

Cash, cash equivalents, and restricted cash $ 147,192 236,124 (88,932) (38)% $ 183,420 52,704 29 %

Available-for-sale debt securities 124,308 181,841 (57,533) (32) 221,493 (39,652) (18)

Held-to-maturity debt securities 290,087 244,735 45,352 19 172,755 71,980 42

Equity securities 15,695 12,720 2,975 23 12,445 275 2

Total loans 9,143 9,766 (623) (6) 19,790 (10,024) (51)

Total assets 638,017 743,089 (105,072) (14) 675,250 67,839 10

Total deposits 28,457 40,066 (11,609) (29) 78,172 (38,106) (49)

Selected Balance Sheet Data (period-end)

Cash, cash equivalents, and restricted cash $ 127,106 209,696 (82,590) (39) $ 235,262 (25,566) (11)

Available-for-sale debt securities 102,669 165,926 (63,257) (38) 208,694 (42,768) (20)

Held-to-maturity debt securities 294,141 269,285 24,856 9 204,858 64,427 31

Equity securities 15,508 16,549 (1,041) (6) 10,305 6,244 61

Total loans 9,163 9,997 (834) (8) 10,623 (626) (6)

Total assets 601,214 721,335 (120,121) (17) 728,667 (7,332) (1)

Total deposits 54,371 32,220 22,151 69 53,037 (20,817) (39)

Full year 2022 vs. full year 2021

Total assets (average and period-end) decreased reflecting:

• a decrease in cash, cash equivalents, and restricted cash

managed by corporate treasury as a result of payments on

long-term debt and an increase in loans originated in the

operating segments; and

• lower available-for-sale debt securities due to sales and net

unrealized losses as well as a transfer from available-for-sale

debt securities to held-to-maturity debt securities related

to portfolio rebalancing to manage liquidity and interest rate

risk.

Total deposits (average) decreased driven by the transition of

deposits related to divested businesses.

Total deposits (period-end) increased driven by issuances of

certificates of deposit (CDs), partially offset by the transition of

deposits related to divested businesses.

Wells Fargo & Company 24

 

  



Balance Sheet Analysis

At December 31, 2022, our assets totaled $1.88 trillion, down

$67.1 billion from December 31, 2021.

The following discussion provides additional information

about the major components of our consolidated balance sheet.

See the “Capital Management” section in this Report for

information on changes in our equity.

Available-for-Sale and Held-to-Maturity Debt Securities

Table 10: Available-for-Sale and Held-to-Maturity Debt Securities

December 31, 2022 December 31, 2021

($ in millions)

Amortized

cost, net (1)

Net

unrealized gains

(losses) Fair value

Weighted

average

expected

maturity (yrs)

Amortized

cost, net (1)

Net

unrealized gains

(losses) Fair value

Weighted

average

expected

maturity (yrs)

Available-for-sale (2) $ 121,725 (8,131) 113,594 5.4 $ 175,463 1,781 177,244 5.2

Held-to-maturity (3) 297,059 (41,538) 255,521 8.1 272,022 364 272,386 6.3

Total $ 418,784 (49,669) 369,115 n/a $ 447,485 2,145 449,630 n/a

(1) Represents amortized cost of the securities, net of the allowance for credit losses of $6 million and $8 million related to available-for-sale debt securities and $85 million and $96 million related to

held-to-maturity debt securities at December 31, 2022 and 2021, respectively.

(2) Available-for-sale debt securities are carried on our consolidated balance sheet at fair value.

(3) Held-to-maturity debt securities are carried on our consolidated balance sheet at amortized cost, net of the allowance for credit losses.

Table 10 presents a summary of our portfolio of

investments in available-for-sale (AFS) and held-to-maturity

(HTM) debt securities. The size and composition of our AFS and

HTM debt securities is dependent upon the Company’s liquidity

and interest rate risk management objectives. The AFS debt

securities portfolio can be used to meet funding needs that arise

in the normal course of business or due to market stress.

Changes in our interest rate risk profile may occur due to changes

in overall economic or market conditions, which could influence

loan origination demand, prepayment rates, or deposit balances

and mix. In response, the AFS debt securities portfolio can be

rebalanced to meet the Company’s interest rate risk

management objectives. In addition to meeting liquidity and

interest rate risk management objectives, the AFS and HTM debt

securities portfolios may provide yield enhancement over other

short-term assets. See the “Risk Management – Asset/Liability

Management” section in this Report for additional information

on liquidity and interest rate risk.

The AFS debt securities portfolio predominantly consists of

liquid, high-quality U.S. Treasury and federal agency debt, and

agency MBS. The portfolio also includes securities issued by U.S.

states and political subdivisions and highly rated collateralized

loan obligations (CLOs).

The HTM debt securities portfolio predominantly consists of

liquid, high-quality U.S. Treasury and federal agency debt, and

agency MBS. The portfolio also includes securities issued by U.S.

states and political subdivisions and highly rated CLOs. Debt

securities are classified as HTM at the time of purchase or when

transferred from the AFS debt securities portfolio. Our intent is

to hold these securities to maturity and collect the contractual

cash flows. In January 2023, we changed our intent with respect

to HTM debt securities with an amortized cost of $23.9 billion

and reclassified them to AFS in connection with the adoption of a

new accounting standard. For additional information, see the

“Current Accounting Developments” section in this Report.

The amortized cost, net of the allowance for credit losses, of

AFS and HTM debt securities decreased from December 31,

2021. Purchases of AFS and HTM debt securities were more than

offset by portfolio runoff and AFS debt security sales. In addition,

we transferred AFS debt securities with a fair value of

$50.1 billion to HTM debt securities in 2022 due to actions taken

to reposition the overall portfolio for capital management

purposes. Debt securities transferred from AFS to HTM in 2022

had $4.5 billion of pre-tax unrealized losses at the time of the

transfers.

The total net unrealized losses on AFS and HTM debt

securities at December 31, 2022, were driven by higher interest

rates and wider credit spreads.

At December 31, 2022 , 99% of the combined AFS and HTM

debt securities portfolio was rated AA- or above. Ratings are

based on external ratings where available and, where not

available, based on internal credit grades. See Note 3 (Available-

for-Sale and Held-to-Maturity Debt Securities ) to Financial

Statements in this Report for additional information on AFS an d

HTM debt securities, including a summary of debt securities by

security type.

Wells Fargo & Company 25



 



Balance Sheet Analysis (continued)

Loan Portfolios

Table 11 provides a summary of total outstanding loans by

portfolio segment. Commercial loans increased from

December 31, 2021, predominantly due to an increase in the

commercial and industrial loan portfolio, driven by higher loan

demand resulting in increased originations and loan draws,

partially offset by paydowns. Consumer loans increased from

December 31, 2021, primarily driven by an increase in the

residential mortgage portfolio due to loan originations,

partially

offset by loan paydowns and the transfer of first lien mortgage

loans to loans held for sale (LHFS), which predominantly related

to loans purchased from GNMA loan securitization pools in prior

periods.

Table 11: Loan Portfolios

($ in millions) December 31, 2022 December 31, 2021 $ Change % Change

Commercial $ 557,516 513,120 44,396 9 %

Consumer 398,355 382,274 16,081 4

Total loans $ 955,871 895,394 60,477 7

Average loan balances and a comparative detail of average

loan balances is included in Table 3 under “Earnings Performance

– Net Interest Income” earlier in this Report. Additional

information on total loans outstanding by portfolio segment and

class of financing receivable is included in the “Risk Management

– Credit Risk Management” section in this Report. Period-end

balances and other loan related information are in Note 5 (Loans

and Related Allowance for Credit Losses) to Financial Statements

in this Report.

Table 12 shows loan maturities based on contractually

scheduled repayment timing and the distribution by changes in

interest rates for loans with a contractual maturity greater than

one year. Nonaccrual loans and loans with indeterminate

maturities have been classified as maturing within one year.

Table 12: Loan Maturities

December 31, 2022

Loan maturities

Loans maturing

after one year

(in millions)

Within

one

year

After

one year

through

five years

After five

years

through

fifteen

years

After

fifteen

years Total

Fixed

interest

rates

Floating/

variable

interest

rates

Commercial and industrial $ 134,858 229,197 21,255 1,496 386,806 21,507 230,441

Commercial real estate 43,307 88,576 22,431 1,488 155,802 19,679 92,816

Lease financing 3,283 10,159 1,400 66 14,908 11,625 —

Total commercial 181,448 327,932 45,086 3,050 557,516 52,811 323,257

Residential mortgage 10,666 30,464 87,675 140,312 269,117 179,246 79,205

Credit card 46,293 — — — 46,293 — —

Auto 12,672 38,812 2,185 — 53,669 40,997 —

Other consumer 24,995 3,775 483 23 29,276 3,851 430

Total consumer 94,626 73,051 90,343 140,335 398,355 224,094 79,635

Total loans $ 276,074 400,983 135,429 143,385 955,871 276,905 402,892

Deposits

Deposits decreased from December 31, 2021, reflecting:

• customers continuing to allocate more cash into higher

yielding liquid alternatives;

• increased consumer spending; and

• the transition of deposits related to divested businesses;

partially offset by:

• higher time deposits driven by issuances of certificates of

deposit (CDs).

Table 13 provides additional information regarding deposit

balances. Information regarding the impact of deposits on net

interest income and a comparison of average deposit balances i

s

provided in the “Earnings Performance – Net Interest Income”

section and Table 3 earlier in this Report. In response to rising

interest rates in 2022, our average deposit cost in fourth quarter

2022 increased to 0.46%, compared with 0.02% in fourth quarter

2021.

Table 13: Deposits

($ in millions)

Dec 31,

2022

% of

total

deposits

Dec 31,

2021

% of

total

deposits

$ Change

% Change

Noninterest-bearing demand deposits

$ 458,010

33 %

$ 527,748

36 %

$ (69,738)

(13)%

Interest-bearing demand deposits

428,877

31

465,887

31

(37,010)

(8)

Savings deposits

410,139

30

439,600

30

(29,461)

(7)

Time deposits

66,197

5

29,461

2

36,736

125

Interest-bearing deposits in non-U.S. offices

20,762

1

19,783

1

979

5

Total deposits $

1,383,985

100 % $

1,482,479

100 % $

(98,494)

(7)

26 Wells Fargo & Company



As of December 31, 2022 and 2021, total deposits that

exceed Federal Deposit Insurance Corporation (FDIC) insurance

limits, or are otherwise uninsured, were estimated to be $510

billion and $590 billion, respectively. Estimated uninsured

domestic deposits reflect amounts disclosed in the U.S.

regulatory reports of our subsidiary banks, with adjustments for

amounts related to consolidated subsidiaries. All non-U.S.

deposits are treated for these purposes as uninsured.

Table 14 presents the contractual maturities of estimated

time deposits that exceed FDIC insurance limits, or are otherwise

uninsured. All non-U.S. time deposits are uninsured.

Table 14: Uninsured Time Deposits by Maturity

(in millions)

Three months

or less

After three

months

through six

months

After six

months

through

twelve months

After twelve

months Total

December 31, 2022

Domestic time deposits $ 4,514 826 857 906 7,103

Non-U.S. time deposits 499 176 — 15 690

Total $ 5,013 1,002 857 921 7,793

Off-Balance Sheet Arrangements

In the ordinary course of business, we engage in financial

transactions that are not recorded on our consolidated balance

sheet, or may be recorded on our consolidated balance sheet in

amounts that are different from the full contract or notional

amount of the transaction. Our off-balance sheet arrangements

include unfunded credit commitments, transactions with

unconsolidated entities, guarantees, commitments to purchase

debt and equity securities, derivatives, and other commitments.

These transactions are designed to (1) meet the financial needs

of customers, (2) manage our credit, market or liquidity risks,

and/or (3) diversify our funding sources.

Unfunded Credit Commitments

Unfunded credit commitments are legally binding agreements to

lend to customers with terms covering usage of funds,

contractual interest rates, expiration dates, and any required

collateral. The maximum credit risk for these commitments will

generally be lower than the contractual amount because these

commitments may expire without being used or may be

cancelled at the customer’s request. Our credit risk monitoring

activities include managing the amount of commitments, both to

individual customers and in total, and the size and maturity

structure of these commitments. For additional information, see

Note 5 (Loans and Related Allowance for Credit Losses) to

Financial Statements in this Report.

Transactions with Unconsolidated Entities

In the normal course of business, we enter into various types of

on- and off-balance sheet transactions with special purpose

entities (SPEs), which are corporations, trusts, limited liability

companies or partnerships that are established for a limited

purpose. Generally, SPEs are formed in connection with

securitization transactions and are considered variable interest

entities (VIEs). For additional information, see Note 16

(Securitizations and Variable Interest Entities) to Financial

Statements in this Report.

Guarantees and Other Arrangements

Guarantees are contracts that contingently require us to make

payments to a guaranteed party based on an event or a change in

an underlying asset, liability, rate or index. Guarantees are

generally in the form of standby and direct pay letters of credit,

written options, recourse obligations, exchange and clearing

house guarantees, indemnifications, and other types of similar

arrangements. For additional information, see Note 17

(Guarantees and Other Commitments) to Financial Statements

in this Report.

Commitments to Purchase Debt and Equity Securities

We enter into commitments to purchase securities under resale

agreements. We also may enter into commitments to purchase

debt and equity securities to provide capital for customers’

funding, liquidity or other future needs. For additional

information, see Note 17 (Guarantees and Other Commitments)

to Financial Statements in this Report.

Derivatives

We use derivatives to manage exposure to market risk, including

interest rate risk, credit risk and foreign currency risk, and to

assist customers with their risk management objectives.

Derivatives are recorded on our consolidated balance sheet at

fair value, and volume can be measured in terms of the notional

amount, which is generally not exchanged, but is used only as the

basis on which interest and other payments are determined. The

notional amount is not recorded on our consolidated balance

sheet and is not, when viewed in isolation, a meaningful measure

of the risk profile of the instruments. For additional information,

see Note 14 (Derivatives) to Financial Statements in this Report.

Wells Fargo & Company 27

Risk Management

Wells Fargo manages a variety of risks that can significantly

affect our financial performance and our ability to meet the

expectations of our customers, shareholders, regulators and

other stakeholders.

Risk is Part of our Business Model. Risk is the possibility of an

event occurring that could adversely affect the Company’s ability

to achieve its strategic or business objectives. The Company

routinely takes risks to achieve its business goals and to serve its

customers. These risks include financial risks, such as interest

rate, credit, liquidity, and market risks, and non-financial risks,

such as operational risk, which includes compliance and model

risks, and strategic and reputation risks.

Risk Profile. The Company’s risk profile is an assessment of the

aggregate risks associated with the Company’s exposures and

business activities after taking into consideration risk

management effectiveness. The Company monitors its risk

profile, and the Board reviews risk profile reports and analysis.

Risk Capacity. Risk capacity is the maximum level of risk that

the Company could assume given its current level of resources

before triggering regulatory and other constraints on its capital

and liquidity needs.

Risk Appetite. Risk appetite is the amount of risk, within its risk

capacity, the Company is comfortable taking given its current

level of resources. Risk appetite is articulated in our Statement of

Risk Appetite, which establishes acceptable risks and at what

level and includes risk appetite principles. The Company’s

Statement of Risk Appetite is defined by senior management,

approved at least annually by the Board, and helps guide the

Company’s business and risk leaders. The Company continuously

monitors its risk appetite, and the Board reviews reports which

include risk appetite information and analysis.

Risk and Strategy. The Chief Executive Officer (CEO) drives the

Company’s strategic planning process, which identifies the

Company’s most significant opportunities and challenges,

develops options to address them, and evaluates the risks and

trade-offs of each. The Company’s risk profile, risk capacity, risk

appetite, and risk management effectiveness are considered in

the strategic planning process, which is linked with the

Company’s capital planning process. The Company’s Independent

Risk Management (IRM) organization participates in strategic

planning, providing challenge to and independent assessment of

the risks associated with strategic initiatives. IRM also

independently assesses and challenges the impact of the

strategic plan on risk capacity, risk appetite, and risk

management effectiveness at the principal lines of business,

enterprise functions, and aggregate Company level. After review,

the strategic plan is presented to the Board each year with IRM’s

evaluation.

Risk and Climate Change. The Company is committed to helping

mitigate the impacts of climate change related to its activities

and to partner with key stakeholders, including communities and

customers, to do the same. The Company expects that climate

change will increasingly impact the risk types it manages, and the

Company will continue to integrate climate considerations into

its risk management framework as its understanding of climate

change and risks driven by it evolve.

Risk is Managed by Everyone. Every employee, in the course of

their daily activities, creates risk and is responsible for managing

risk. Every employee has a role to play in risk management,

including establishing and maintaining the Company’s control

environment. Every employee must comply with applicable laws,

regulations, and Company policies.

Risk and Culture. Senior management sets the tone at the top

by supporting a strong culture, defined by the Company’s

expectations, that guides how employees conduct themselves

and make decisions. The Board oversees senior management in

establishing and maintaining this culture and effectively

managing risk. Senior management expects employees to speak

up when they see something that could cause harm to the

Company’s customers, communities, employees, shareholders,

or reputation. Because risk management is everyone’s

responsibility, all employees are empowered to and expected to

challenge risk decisions when appropriate and to escalate their

concerns when they have not been addressed. The Company’s

performance management and incentive compensation

programs are designed to establish a balanced framework for risk

and reward under core principles that employees are expected to

know and practice. The Board, through its Human Resources

Committee, plays an important role in overseeing and providing

credible challenge to the Company’s performance management

and incentive compensation programs. Effective risk

management is a central component of employee performance

evaluations.

Risk Management Framework. The Company’s risk

management framework sets forth the Company’s core

principles for managing and governing its risk. It is approved by

the Board’s Risk Committee and reviewed and updated annually.

Many other documents and policies flow from its core principles.

Wells Fargo’s top priority is to strengthen our company by

building an appropriate risk and control infrastructure. We

continue to enhance and mature our risk management programs,

including operational and compliance risk management programs

as required by the FRB’s February 2, 2018, and the CFPB/OCC’s

April 20, 2018, consent orders.

Risk Governance

Role of the Board. The Board oversees the Company’s business,

including its risk management. It assesses senior management’s

performance and holds senior management accountable for

maintaining and adhering to an effective risk management

program.

Board Committee Structure. The Board carries out its risk

oversight responsibilities directly and through its committees.

The Risk Committee reviews and approves the Company’s risk

management framework and oversees management’s

implementation of the framework, including how the Company

manages and governs risk. The Risk Committee also oversees the

Company’s adherence to its risk appetite. In addition, the Risk

Committee supports the stature, authority and independence of

IRM and oversees and receives reports on its operation. The Chief

Risk Officer (CRO) reports functionally to the Risk Committee

and administratively to the CEO.

Wells Fargo & Company 28



Management Committee Structure. The Company has

established management committees, including those focused

on risk, that support management in carrying out its governance

and risk management responsibilities. One type of management

committee is a governance committee, which is a decision-

making body that operates for a particular purpose and may

report to a Board committee.

Each management governance committee, in accordance

with its charter, is expected to discuss, document, and make

decisions regarding high priority and significant risks, emerging

risks, risk acceptances, and risks and issues escalated to it; review

and monitor progress related to critical and high-risk issues and

remediation efforts, including lessons learned; and report key

challenges, decisions, escalations, other actions, and open issues

as appropriate.

Table 15 presents, as of December 31, 2022, the structure

of the Company’s Board committees and escalation paths of

relevant management governance committees reporting to a

Board committee.

Table 15: Board and Relevant Management-level Governance Committee Structure

Wells Fargo & Company

Audit

Committee (1)

Disclosure

Committee

Regulatory

Reporting

Oversight

Committee

Finance

Committee

Capital

Management

Committee

Corporate

Asset/Liability

Committee

Recovery &

Resolution

Committee

Corporate

Responsibility

Committee

Risk

Committee

Management G overnance Committees

Allowance for Credit

Losses Approval

Governance

Committee

Governance &

Nominating

Committee

Enterprise Risk &

Control C ommittee

Risk & Control

Committees

Risk Type

Committees

Risk Topic

Committees

Human

Resources

Committee

Incentive

Compensation

& Performance

Management

Committee

(1) The Audit Committee assists the Board in its oversight of the Company’s financial statements and disclosures to shareholders and regulatory agencies; oversees the internal audit function and

external auditor independence, activities, and performance; and assists the Board and the Risk Committee in the oversight of the Company’s compliance with legal and regulatory requirements.

Management Governance Committees Reporting to the Risk

Committee of the Board. The Enterprise Risk & Control

Committee (ERCC) is a decision-making and escalation body that

governs the management of all risk types. The ERCC receives

information about risk and control issues, addresses escalated

risks and issues, and actively oversees risk controls. The ERCC

also makes decisions related to significant risks and changes to

the Company’s risk appetite. The Risk Committee receives

regular updates from the ERCC chairs and senior management

regarding current and emerging risks and senior management’s

assessment of the effectiveness of the Company’s risk

management program.

The ERCC is co-chaired by the CEO and CRO, and its

membership is comprised of principal line of business and certain

enterprise function heads. The Chief Auditor or a designee

attends all meetings of the ERCC. The ERCC has a direct

escalation path to the Risk Committee. The ERCC also has an

escalation path for certain human capital risks and issues to the

Human Resources Committee. In addition, the CRO may escalate

anything directly to the Board. Risks and issues are escalated to

the ERCC in accordance with the Company’s escalation

management policy.

Each principal line of business and enterprise function has a

risk and control committee, which is a management governance

committee with a mandate that aligns with the ERCC but with its

scope limited to the respective principal line of business or

enterprise function. These committees focus on and consider

risks that the respective principal line of business or enterprise

function generate and manage, and the controls the principal line

of business or enterprise function are expected to have in place.

As a complement to these risk and control committees,

management governance committees dedicated to specific risk

types and risk topics also report to the ERCC to enable more

comprehensive governance of risks.

Risk Operating Model – Roles and Responsibilities

The Company has three lines of defense for managing risk: the

Front Line, Independent Risk Management, and Internal Audit.

• Front Line The Front Line, which comprises principal line of

business and certain enterprise function activities, is the first

line of defense. The Front Line is responsible for

understanding the risks generated by its activities, applying

adequate controls, and managing risk in the course of its

business activities. The Front Line identifies, measures and

assesses, controls, monitors, and reports on risk generated

by or associated with its business activities and balances risk

and reward in decision making while operating within the

Company’s risk appetite.

• Independent Risk Management IRM is the second line of

defense. It establishes and maintains the Company’s risk

management program and provides oversight, including

Wells Fargo & Company 29

Risk Management (continued)

challenge to and independent assessment of, the Front

Line’s execution of its risk management responsibilities.

• Internal Audit Internal Audit is the third line of defense. It is

responsible for acting as an independent assurance function

and validates that the risk management program is

adequately designed and functioning effectively.

Risk Type Classifications

The Company uses common classifications, hierarchies, and

ratings to enable consistency across risk management programs

and aggregation of information. Risk type classifications permit

the Company to identify and prioritize its risk exposures,

including emerging risk exposures.

Operational Risk Management

Operational risk, which in addition to those discussed in this

section, includes compliance risk and model risk, is the risk

resulting from inadequate or failed internal processes, people

and systems, or from external events.

The Board’s Risk Committee has primary oversight

responsibility for all aspects of operational risk, including

significant supporting programs and/or policies regarding the

Company’s business resiliency and disaster recovery, change

management, data management, information security,

technology, and third-party risk management. As part of its

oversight responsibilities, the Board’s Risk Committee reviews

and approves significant operational risk policies and oversees

the Company’s operational risk management program.

At the management level, Operational Risk Management,

which is part of IRM, has oversight responsibility for operational

risk. Operational Risk Management reports to the CRO and

provides periodic reports related to operational risk to the

Board’s Risk Committee. Operational Risk Management’s

oversight responsibilities include change management risk, data

management risk, fraud risk, human capital risk, information

management risk, information security risk, technology risk, and

third-party risk.

Information security is a significant operational risk for

financial institutions such as Wells Fargo and includes the risk

arising from unauthorized access, use, disclosure, disruption,

modification, or destruction of information or information

systems. The Board is actively engaged in the oversight of the

Company’s information security risk management and cyber

defense programs. The Board’s Risk Committee has primary

oversight responsibility for information security risk and

approves the Company’s information security program, which

includes the information security policy and the cyber defense

program.

Wells Fargo and other financial institutions, as well as our

third-party service providers, continue to be the target of various

evolving and adaptive information security threats, including

cyber attacks, malware, ransomware, other malicious software

intended to exploit hardware or software vulnerabilities,

phishing, credential validation, and distributed denial-of-service,

in an effort to disrupt the operations of financial institutions, test

their cybersecurity capabilities, commit fraud, or obtain

confidential, proprietary or other information. Cyber attacks

have also focused on targeting online applications and services,

such as online banking, as well as cloud-based and other products

and services provided by third parties, and have targeted the

infrastructure of the internet causing the widespread

unavailability of websites and degrading website performance. As

a result, information security and the continued development

and enhancement of our controls, processes and systems

designed to protect our networks, computers, software and data

from attack, damage or unauthorized access remain a priority for

Wells Fargo. Wells Fargo is also proactively involved in industry

cybersecurity efforts and working with other parties, including

our third-party service providers and governmental agencies, to

continue to enhance defenses and improve resiliency to

information security threats. See the “Risk Factors” section in

this Report for additional information regarding the risks

associated with a failure or breach of our operational or security

systems or infrastructure, including as a result of cyber attacks.

Compliance Risk Management

Compliance risk (a type of operational risk) is the risk resulting

from the failure to comply with laws (legislation, regulations and

rules) and regulatory guidance, and the failure to appropriately

address associated impact, including to customers. Compliance

risk encompasses violations of applicable internal policies,

program requirements, procedures, and standards related to

ethical principles applicable to the Company.

The Board’s Risk Committee has primary oversight

responsibility for all aspects of compliance risk, including financial

crimes risk. As part of its oversight responsibilities, the Board’s

Risk Committee reviews and approves significant supporting

compliance risk and financial crimes risk policies and programs

and oversees the Company’s compliance risk management and

financial crimes risk management programs.

Conduct risk, a sub-category of compliance risk, is the risk of

inappropriate, unethical, or unlawful behavior on the part of

employees or individuals acting on behalf of the Company,

caused by deliberate or unintentional actions or business

practices. In connection with its oversight of conduct risk, the

Board oversees the alignment of employee conduct to the

Company’s risk appetite (which the Board approves annually).

The Board’s Risk Committee has primary oversight responsibility

for conduct risk and risk management components of the

Company’s culture, while the responsibilities of the Board’s

Human Resources Committee include oversight of the

Company’s culture, Code of Ethics and Business Conduct,

human capital management (including talent management and

succession planning), performance management program, and

incentive compensation risk management program.

At the management level, the Compliance function, which is

part of IRM, monitors the implementation of the Company’s

compliance and conduct risk programs. Financial Crimes Risk

Management, which is part of the Compliance function, oversees

and monitors financial crimes risk. The Compliance function

reports to the CRO and provides periodic reports related to

compliance risk to the Board’s Risk Committee.

Model Risk Management

Model risk (a type of operational risk) is the risk arising from the

potential for adverse consequences of decisions made based on

model output that may be incorrect or used inappropriately.

The Board’s Risk Committee has primary oversight

responsibility for model risk. As part of its oversight

responsibilities, the Board’s Risk Committee oversees the

Company’s model risk management policy, model governance,

model performance, model issue remediation status, and

adherence to model risk appetite metrics.

At the management level, the Model Risk function, which is

part of IRM, has oversight responsibility for model risk and is

responsible for governance, validation and monitoring of model

risk across the Company. The Model Risk function reports to the

CRO and provides periodic reports related to model risk to the

Board’s Risk Committee.

Wells Fargo & Company 30

Strategic Risk Management

Strategic risk is the risk to earnings, capital, or liquidity arising

from adverse business decisions, improper implementation of

strategic initiatives, or inadequate responses to changes in the

external operating environment.

The Board has primary oversight responsibility for strategic

planning and oversees management’s development and

implementation of and approves the Company’s strategic plan,

and considers whether it is aligned with the Company’s risk

appetite and risk management effectiveness. Management

develops, executes and recommends significant strategic

corporate transactions and the Board evaluates management’s

proposals, including their impact on the Company’s risk profile

and financial position. The Board’s Risk Committee has primary

oversight responsibility for the Company’s strategic risk and the

adequacy of the Company’s strategic risk management program,

including associated risk management practices, processes and

controls. The Board’s Risk Committee also receives updates from

management regarding new business initiatives activity and risks

related to new or changing products, as appropriate.

At the management level, the Strategic Risk Oversight

function, which is part of IRM, has oversight responsibility for

strategic risk. The Strategic Risk Oversight function reports into

the CRO and supports periodic reports related to strategic risk

provided to the Board’s Risk Committee.

Reputation Risk Management

Reputation risk is the risk arising from the potential that

negative stakeholder opinion or negative publicity regarding the

Company’s business practices, whether true or not, will adversely

impact current or projected financial conditions and resilience,

cause a decline in the customer base, or result in costly litigation.

Key stakeholders include customers, employees, communities,

shareholders, regulators, elected officials, advocacy groups, and

media organizations.

The Board’s Risk Committee has primary oversight

responsibility for reputation risk, while each Board committee

has reputation risk oversight responsibilities related to their

primary oversight responsibilities. As part of its oversight

responsibilities, the Board’s Risk Committee receives reports

from management that help it monitor how effectively the

Company is managing reputation risk. As part of its oversight

responsibilities for social and public responsibility matters, the

Board’s Corporate Responsibility Committee receives reports

from management relating to stakeholder perceptions of the

Company.

At the management level, the Reputation Risk Oversight

function, which is part of IRM, has oversight responsibility for

reputation risk. The Reputation Risk Oversight function reports

into the CRO and supports periodic reports related to reputation

risk provided to the Board’s Risk Committee.

Credit Risk Management

We define credit risk as the risk of loss associated with a

borrower or counterparty default (failure to meet obligations in

accordance with agreed upon terms). Credit risk exists with many

of the Company’s assets and exposures such as debt security

holdings, certain derivatives, and loans.

The Board’s Risk Committee has primary oversight

responsibility for credit risk. A Credit Subcommittee of the Risk

Committee assists the Risk Committee in providing oversight of

credit risk. At the management level, Corporate Credit Risk,

which is part of Independent Risk Management, has oversight

responsibility for credit risk. Corporate Credit Risk reports to the

CRO and supports periodic reports related to credit risk provided

to the Board’s Risk Committee or its Credit Subcommittee.

Loan Portfolio Our loan portfolios represent the largest

component of assets on our consolidated balance sheet for which

we have credit risk. Table 16 presents our total loans outstanding

by portfolio segment and class of financing receivable.

Table 16: Total Loans Outstanding by Portfolio Segment and Class of

Financing Receivable

(in millions) Dec 31, 2022 Dec 31, 2021

Commercial and industrial $ 386,806 350,436

Commercial real estate 155,802 147,825

Lease financing 14,908 14,859

Total commercial 557,516 513,120

Residential mortgage 269,117 258,888

Credit card 46,293 38,453

Auto 53,669 56,659

Other consumer 29,276 28,274

Total consumer 398,355 382,274

Total loans $ 955,871 895,394

We manage our credit risk by establishing what we believe

are sound credit policies for underwriting new business, while

monitoring and reviewing the performance of our existing loan

portfolios. We employ various credit risk management and

monitoring activities to mitigate risks associated with multiple

risk factors affecting loans we hold including:

• Loan concentrations and related credit quality;

• Counterparty credit risk;

• Economic and market conditions;

• Legislative or regulatory mandates;

• Changes in interest rates;

• Merger and acquisition activities; and

• Reputation risk.

In addition, the Company will continue to integrate climate

considerations into its credit risk management activities.

Our credit risk management oversight process is governed

centrally, but provides for direct management and accountability

by our lines of business. Our overall credit process includes

comprehensive credit policies, disciplined credit underwriting,

frequent and detailed risk measurement and modeling, extensive

credit training programs, and a continual loan review and audit

process.

A key to our credit risk management is adherence to a well-

controlled underwriting process, which we believe is appropriate

for the needs of our customers as well as investors who purchase

the loans or securities collateralized by the loans.

Wells Fargo & Company 31



  



 



Risk Management – Credit Risk Management (continued)

Credit Quality Overview Table 17 provides credit quality trends .

Table 17: Credit Quality Overview

(in millions) Dec 31, 2022 Dec 31, 2021

Nonaccrual loans

Commercial loans $ 1,823 2,376

Consumer loans 3,803 4,836

Total nonaccrual loans $ 5,626 7,212

Nonaccrual loans as a % of total loans 0.59% 0.81

Net loan charge-offs as a % of:

Average commercial loans 0.01% 0.06

Average consumer loans 0.39 0.33

Allowance for credit losses (ACL) for loans $ 13,609 13,788

ACL for loans as a % of total loans 1.42% 1.54

Additional information on our loan portfolios and our credit

quality trends follows.

Significant Loan Portfolio Reviews Measuring and monitoring

our credit risk is an ongoing process that tracks delinquencies,

collateral values, Fair Isaac Corporation (FICO) scores, economic

trends by geographic areas, loan-level risk grading for certain

portfolios (typically commercial) and other indications of credit

risk. Our credit risk monitoring process is designed to enable

early identification of developing risk and to support our

determination of an appropriate allowance for credit losses. The

following discussion provides additional characteristics and

analysis of our significant portfolios. See Note 5 (Loans and

Related Allowance for Credit Losses ) to Financial Statements in

this Report for more analysis and credit metric information for

each of the following portfolios.

COMMERCIAL AND INDUSTRIAL LOANS AND LEASE FINANCING

For purposes of portfolio risk management, we aggregate

commercial and industrial loans and lease financing according

to market segmentation and standard industry codes. We

generally subject commercial and industrial loans and lease

financing to individual risk assessment using our internal

borrower and collateral quality ratings. Our ratings are aligned to

regulatory definitions of pass and criticized categories with

criticized segmented among special mention, substandard,

doubtful and loss categories.

We had $12.6 billion of the commercial and industrial loans

and lease financing portfolio internally classified as criticized in

accordance with regulatory guidance at December 31, 2022,

compared with $13.0 billion at December 31, 2021. The decline

was driven by decreases in the technology, telecom and media,

real estate and construction, and oil, gas and pipelines industries,

as these industries continued to recover from the economic

impacts of the COVID-19 pandemic, partially offset by an

increase in the materials and commodities, and equipment,

machinery and parts manufacturing industries.

The majority of our commercial and industrial loans and

lease financing portfolio is secured by short-term assets, such as

accounts receivable, inventory and debt securities, as well as

long-lived assets, such as equipment and other business assets.

Generally, the primary source of repayment for this portfolio is

the operating cash flows of customers, with the collateral

securing this portfolio representing a secondary source of

repayment.

The portfolio increased at December 31, 2022, compared

with December 31, 2021, driven by higher loan demand resulting

in increased originations and loan draws, partially offset by

paydowns. Table 18 provides our commercial and industrial loans

and lease financing by industry. The industry categories are based

on the North American Industry Classification System.

Wells Fargo & Company 32

Table 18: Commercial a nd Industrial Lo ans a nd Lease Fina ncing by Ind ustry

December 31, 2022 December 31, 2021

($ in millions)

Nonaccrual

loans 

Loans

outstanding

balance

% of

total

loans 

Total

commitments (1)

Nonaccrual

loans 

Loans

outstanding

balance

% of

total

loans 

Total

commitments (1)

Financials except banks $ 44 147,171 15% $ 247,936 104 142,283 16% $ 236,133

Technology, telecom and media 31 27,767 3 78,230 64 23,345 3 62,984

Real estate and construction 73 24,478 3 57,138 78 25,035 3 55,304

Equipment, machinery and parts manufacturing 83 23,675 2 54,807 24 18,130 2 43,729

Retail 47 19,487 2 54,260 27 17,645 2 41,344

Materials and commodities 86 16,610 2 41,707 32 14,684 2 36,660

Oil, gas and pipelines 55 9,991 1 39,329 197 8,828 * 28,978

Food and beverage manufacturing 17 17,393 2 35,094 7 13,242 1 30,882

Health care and pharmaceuticals 21 14,861 2 30,463 24 12,847 1 28,808

Auto related 10 13,168 1 28,545 31 10,629 1 25,735

Commercial services 50 11,418 1 27,989 78 10,492 1 24,617

Utilities 18 9,457 * 26,918 77 6,982 * 22,406

Entertainment and recreation 28 13,085 1 24,535 23 9,907 1 17,893

Diversified or miscellaneous

2 8,161 * 22,432 3 7,493 * 18,317

Banks — 14,403 2 16,733 — 16,178 2 16,612

Transportation services 237 8,389 * 16,342 288 8,162 * 14,710

Insurance and fiduciaries 1 4,691 * 15,741 1 3,387 * 13,993

Agribusiness 24 6,180 * 14,063 35 6,086 * 11,576

Government and education 25 6,482 * 12,590 5 5,863 * 11,193

Other (2) 13 4,847 * 14,325 30 4,077 * 11,583

Total $ 865 401,714 42% $ 859,177 1,128 365,295 41% $ 753,457

* Less t han 1%.

(1) Total com mitments consist of loa ns ou tstanding plus u nfunded credit commitments, excluding issued letters of cr edit. For additional infor mation on issu ed letters of cr edit, see Note 17 (Guarantees

and Other Commitments) t o F inancial S tatements in t his Rep ort.

(2) No ot her single ind ustry had total loa ns in excess of $3.4 b illion and $3.1 b illion at December 31, 2022 and 2021, respectively.

Asset managers and funds (2) 52,254 5 % 1 60,518 7 %

Commercial finance (3) 31 53,269 5 76,334 82 46,043 5 69,923

Real estate finance (4) 8 24,620 3 41,589 9 23,231 3 37,997

Consumer finance (5) 4 17,028 2 29,476 12 12,491 1 27,178

Total 147,171 15% 104 142,283 16%

  



 



Table 18a provides further loan segmentation for our largest

industry category, financials except banks. This category inclu des

loans to investment firms, financial vehicles, nonbank creditor s,

rental and leasing companies, securities firms, and investment

banks. These loans are generally secured and have features to

help manage credit risk, such as structural credit enhancements ,

collateral eligibility requirements, contractual re-margining o f

collateral supporting the loans, and loan amounts limited to a

percentage of the value of the underlying assets considering

underlying credit risk, asset duration, and ongoing performance .

Table 18a : Financials Except Ba nks Ind ustry C ategory

December 31, 2022 December 31, 2021

Loans

outstanding

balance

% of

total

loans 

Loans

outstanding

balance

% of

total

loans

Nonaccrual

loans 

Total

commitments (1)

Nonaccrual

loans

Total

commitments (1) ($ in millions)

$ 1 $ 100,537 $ 101,035

$ 44 $ 247,936 $ 236,133

(1)

Total commitments consist of loans outstanding plus unfunded credit commitments, excluding issued letters of credit. For additional information on issued letters of credit, see Note 17 (Guarantees

and Other Commitments) to Financial Statements in this Report.

(2) Includes loans for subscription or capital calls and loans to prime brokerage customers and securities firms.

(3) Includes asset-based lending and leasing, including loans to special purpose entities, loans to commercial leasing entities, structured lending facilities to commercial loan managers, and also includes

collateralized loan obligations (CLOs) in loan form, all of which were rated AA or above, of $7.8 billion and $8.1 billion at December 31, 2022 and 2021, respectively.

(4) Includes originators or servicers of financial assets collateralized by commercial or residential real estate loans.

(5) Includes originators or servicers of financial assets collateralized by consumer loans such as auto loans and leases, and credit cards.

Our commercial and industrial loans and lease financing

portfolio also included non-U.S. loans of $79.7 billion and

$78.0 billion at December 31, 2022 and 2021, respectively.

Significant industry concentrations of non-U.S. loans at

December 31, 2022 and 2021, respectively, included:

•

$45.7 billion and $46.7 billion in the financials except banks

industry;

• $14.1 billion and $15.9 billion in the banks industry; and

• $1.2 billion and $1.7 billion in the oil, gas and pipelines

industry.

Risk mitigation actions, including the restructuring of

repayment terms, securing collateral or guarantees, and entering

into extensions, are based on a re-underwriting of the loan and

our assessment of the borrower’s ability to perform under the

agreed-upon terms. Extension terms generally range from six to

thirty-six months and may require that the borrower provide

additional economic support in the form of partial repayment, or

additional collateral or guarantees. In cases where the value of

collateral or financial condition of the borrower is insufficient to

Wells Fargo & Company 33



 



 

Risk Management – Credit Risk Management (continued)

repay our loan, we may rely upon the support of an outside

repayment guarantee in providing the extension.

Our ability to seek performance under a guarantee is directly

related to the guarantor’s creditworthiness, capacity and

willingness to perform, which is evaluated on an annual basis, or

more frequently as warranted. Our evaluation is based on the

most current financial information available and is focused on

various key financial metrics, including net worth, leverage, and

current and future liquidity. We consider the guarantor’s

reputation, creditworthiness, and willingness to work with us

based on our analysis as well as other lenders’ experience with

the guarantor. Our assessment of the guarantor’s credit strength

is reflected in our loan risk ratings for such loans. The loan risk

rating and accruing status are important factors in our allowance

for credit losses methodology.

In considering the accrual status of the loan, we evaluate

the collateral and future cash flows as well as the anticipated

support of any repayment guarantor. In many cases, the

strength of the guarantor provides sufficient assurance that full

repayment of the loan is expected. When full and timely

collection of the loan becomes uncertain, including the

performance of the guarantor, we place the loan on nonaccrual

status. As appropriate, we also charge the loan down in

accordance with our charge-off policies, generally to the net

realizable value of the collateral securing the loan, if any.

COMMERCIAL REAL ESTATE (CRE) Our CRE loan portfolio is

comprised of CRE mortgage and CRE construction loans. We

generally subject CRE loans to individual risk assessment using

our internal borrower and collateral quality ratings. We had

$11.3 billion of CRE mortgage loans classified as criticized at

December 31, 2022, compared with $13.1 billion at

December 31, 2021, and $1.1 billion of CRE construction loans

classified as criticized at December 31, 2022, compared with

$1.7 billion at December 31, 2021. The decrease in criticized CRE

loans was driven by the hotel/motel and shopping center

property types, as these property types continued to recover

from the economic impacts of the COVID-19 pandemic, partially

offset by an increase in the office buildings and apartment

property types. Criticized CRE loans at December 31, 2022,

increased compared with September 30, 2022, primarily due to

an increase in the office buildings property type. The credit

quality of the office buildings property type could continue to be

adversely affected if weakened demand for office space

continues to drive higher vacancy rates and deteriorating

operating performance. At December 31, 2022, nearly one-third

of the CRE loans in the office buildings property type had

recourse to a guarantor, typically through a repayment

guarantee, in addition to the related collateral.

The total CRE loan portfolio increased $8.0 billion from

December 31, 2021, predominantly driven by an increase in loans

for apartments and industrial/warehouse property types,

partially offset by a decrease in loans for the shopping center

property type. The CRE loan portfolio included $7.6 billion of

non-U.S. CRE loans at December 31, 2022, down from

$8.7 billion at December 31, 2021. The portfolio is diversified

both geographically and by property type. The largest geographic

concentrations of CRE loans are in California, New York, Texas,

and Florida, which represented a combined 49% of the total CRE

portfolio. The largest property type concentrations are

apartments at 26% and office buildings at 23% of the portfolio.

The unfunded credit commitments were $8.8 billion and

$11.5 billion at December 31, 2022 and 2021, respectively, for

CRE mortgage loans and $20.7 billion and $20.0 billion,

respectively, for CRE construction loans.

Wells Fargo & Company 34

Table 19 provides our CRE loans by state and property type.

Table 19: CRE Lo ans by S tate a nd Property Type

Dec 31, 2022 Dec 31, 2021

Real estate mortgage Real estate construction  Total commercial real estate Total commercial real estate

($ in millions)

Nonaccrual

loans

Loans

outstanding

balance

Nonaccrual

loans

Loans

outstanding

balance

Nonaccrual

loans

Loans

outstanding

balance

Loans

as % of

total

loans

Total

commitments

(1)

Loans

outstanding

balance

Total

commitments

(1)

By state:

California $ 121 29,531 1 4,754 122 34,285 4% $ 39,594 34,668 40,241

New York 106 15,009 — 2,285 106 17,294 2 19,360 15,636 17,967

Texas 23 11,564 — 1,243 23 12,807 1 14,941 10,605 12,263

Florida 10 9,833 — 1,585 10 11,418 1 14,690 10,435 13,219

Washington 80 4,253 — 1,350 80 5,603 * 6,868 5,301 7,013

Georgia 69 4,661 — 767 69 5,428 * 6,651 4,662 5,857

North Carolina 4 4,345 — 882 4 5,227 * 6,650 4,755 6,160

Arizona 14 4,761 — 541 14 5,302 * 6,288 5,046 5,975

New Jersey 7 2,738 — 1,381 7 4,119 * 5,660 3,625 4,793

Illinois 11 3,988 — 603 11 4,591 * 5,394 4,042 4,560

Other (2) 511 41,546 1 8,182 512 49,728 5 59,224 49,050 61,235

Total 132,229 2 23,573 958 155,802 16% 147,825 179,283

By property:

Apartments 31,205 — 8,538 8 39,743 4% 31,901 42,119

Office buildings 186 32,478 — 3,666 186 36,144 4 40,827 36,736 42,781

Industrial/warehouse 42 17,244 — 3,390 42 20,634 2 24,546 17,714 20,967

Hotel/motel 153 11,212 — 1,539 153 12,751 1 13,758 12,764 13,179

Retail (excl shopping center) 197 11,621 2 132 199 11,753 1 12,486 12,450 13,014

Shopping center 259 9,014 — 520 259 9,534 * 10,131 10,448 11,082

Institutional 33 5,201 — 2,524 33 7,725 * 9,178 7,743 9,588

Mixed use properties 54 4,906 — 981 54 5,887 * 7,139 6,303 10,718

Collateral pool — 3,031 — 31 — 3,062 * 3,662 3,509 4,106

Storage facility — 2,772 — 157 — 2,929 * 3,201 2,257 2,742

Other 24 3,545 — 2,095 24 5,640 * 8,825 6,000 8,987

Total 132,229 2 23,573 958 155,802 16 % $ 185,320 147,825 179,283



$ 956 $ 185,320

$ 8 $ 51,567

$ 956

* Less than 1%.

(1)

Total commitments consist of loans outstanding plus unfunded credit commitments, excluding issued letters of credit. For additional information on issued letters of credit, see

Note 17 (Guarantees and Other Commitments) to Financial Statements in this Report.

(2) Includes 40 states; no state in Other had loans in excess of $4.1 billion and $3.7 billion at December 31, 2022 and 2021, respectively.

NON-U.S. LOANS Our classification of non-U.S. loans is based on

whether the borrower’s primary address is outside of the United

States. At December 31, 2022, non-U.S. loans totaled

$87.5 billion, representing approximately 9% of our total

consolidated loans outstanding, compared with $86.9 billion, or

approximately 10% of our total consolidated loans outstanding,

at December 31, 2021. Non-U.S. loans were approximately 5%

and 4% of our total consolidated assets at December 31, 2022

and 2021, respectively.

COUNTRY RISK EXPOSURE Our country risk monitoring process

incorporates centralized monitoring of economic, political, social,

legal, and transfer risks in countries where we do or plan to do

business, along with frequent dialogue with our customers,

counterparties and regulatory agencies. We establish exposure

limits for each country through a centralized oversight process

based on customer needs, and through consideration of the

relevant and distinct risk of each country. We monitor exposures

closely and adjust our country limits in response to changing

conditions. We evaluate our individual country risk exposure

based on our assessment of the borrower’s ability to repay,

which gives consideration for allowable transfers of risk, such as

guarantees and collateral, and may be different from the

reporting based on the borrower’s primary address.

Our largest single country exposure outside the U.S. at

December 31, 2022, was the United Kingdom, which totaled

$33.2 billion, or approximately 2% of our total assets, and

included $5.5 billion of sovereign claims. Our United Kingdom

sovereign claims arise from deposits we have placed with the

Bank of England pursuant to regulatory requirements in support

of our London branch.

Table 20 provides information regarding our top 20

exposures by country (excluding the U.S.), based on our

assessment of risk, which gives consideration to the country of

any guarantors and/or underlying collateral. With respect to

Table 20:

• Lending and deposits exposure includes outstanding loans,

unfunded credit commitments, and deposits with non-U.S.

banks. These balances are presented prior to the deduction

of allowance for credit losses or collateral received under the

terms of the credit agreements, if any.

Wells Fargo & Company 35

• Securities exposure represents debt and equity securities of

non-U.S. issuers. Long and short positions are netted, and

net short positions are reflected as negative exposure.

• Derivatives and other exposure represents foreign exchange

contracts, derivative contracts, securities resale agreements,

and securities lending agreements.

Table 20: Select C ountry Expo sures

December 31, 2022

Lending and deposits Securities Derivatives and other Total exposure

($ in millions) Sovereign

Non-

sovereign Sovereign

Non-

sovereign Sovereign

Non-

sovereign Sovereign

Non-

sovereign (1) Total

Top 20 country exposures:

United Kingdom $ 5,513 24,291 — 1,102 2 2,299 5,515 27,692 33,207

Canada 1 18,051 1 582 69 294 71 18,927 18,998

Cayman Islands — 8,464 — — — 179 — 8,643 8,643

Luxembourg — 6,719 — 32 — 177 — 6,928 6,928

Japan 5,658 700 — 365 — 46 5,658 1,111 6,769

Ireland 6 4,888 — 223 — 107 6 5,218 5,224

France 57 4,138 — 108 175 72 232 4,318 4,550

Germany — 3,910 — 29 — 202 — 4,141 4,141

Bermuda — 3,600 — 35 — 30 — 3,665 3,665

Guernsey — 3,375 — — — 12 — 3,387 3,387

South Korea — 2,983 (1) 381 1 15 — 3,379 3,379

China 17 2,966 1 259 17 35 35 3,260 3,295

Netherlands — 3,165 — (6) — 124 — 3,283 3,283

Chile — 1,939 — 212 — — — 2,151 2,151

Australia — 1,969 — 5 — 30 — 2,004 2,004

Brazil — 1,499 — 1 9 — 9 1,500 1,509

United Arab Emirates — 1,477 — 11 — — — 1,488 1,488

Switzerland — 1,202 — (4) — 170 — 1,368 1,368

India 250 1,072 (64) (5) — 1 186 1,068 1,254

Belgium — 1,103 — 1 — 4 — 1,108 1,108

Total top 20 country exposures 97,511 (63) 3,331 273 3,797 11,712 104,639 116,351



Risk Management – Credit Risk Management (continued)

$ 11,502

(1) Total non-sovereign exposure comprised $51.2 billion exposure to financial institutions and $53.4 billion to non-financial corporations at December 31, 2022.

RESIDENTIAL MORTGAGE LOANS Our residential mortgage loan

portfolio is comprised of 1–4 family first and junior lien mortgage

loans. Residential mortgage – first lien loans comprised 95% of

the total residential mortgage loan portfolio at December 31,

2022, compared with 94% at December 31, 2021.

The residential mortgage loan portfolio includes loans with

adjustable-rate features. We monitor the risk of default as a

result of interest rate increases on adjustable-rate mortgage

(ARM) loans, which may be mitigated by product features that

limit the amount of the increase in the contractual interest rate.

The default risk of these loans is considered in our ACL for loans.

ARM loans were 7% of total loans at both December 31, 2022

and 2021, with an initial reset date in 2025 or later for the

majority of this portfolio at December 31, 2022. We do not offer

option ARM products, nor do we offer variable-rate mortgage

products with fixed payment amounts, commonly referred to

within the financial services industry as negative amortizing

mortgage loans.

The residential mortgage – junior lien portfolio consists of

residential mortgage lines of credit and loans that are

subordinate in rights to an existing lien on the same property.

These lines and loans may have draw periods, interest-only

payments, balloon payments, adjustable rates and similar

features. Junior lien loan products are primarily amortizing

payment loans with fixed interest rates and repayment periods

between five to 30 years. We continuously monitor the credit

performance of our residential mortgage – junior lien portfolio

for trends and factors that influence the frequency and severity

of losses, such as junior lien performance when the first lien loan

is delinquent.

The outstanding balance of residential mortgage lines of

credit was $18.3 billion at December 31, 2022. The unfunded

credit commitments for these lines of credit totaled $35.5 billion

at December 31, 2022. Our residential mortgage lines of credit

(both first and junior lien) generally have draw periods of 10, 15

or 20 years with variable interest rate and payment options

available during the draw period of (1) interest-only or (2) 1.5%

of outstanding principal balance plus accrued interest. As of

December 31, 2022, a significant portion of the lines of credit in

a draw period used the interest-only option. The lines that enter

their amortization period may experience higher delinquencies

and higher loss rates than the ones in their draw or term period.

We have considered this increased risk in our ACL for loans

estimate. Interest-only lines and loans were approximately 2%

and 3% of total loans at December 31, 2022 and 2021,

respectively.

During the draw period, the borrower has the option of

converting all or a portion of the line from a variable interest rate

to a fixed rate with terms including interest-only payments for a

fixed period between three to seven years or a fully amortizing

payment with a fixed period between five to 30 years. At the end

of the draw period, a line of credit generally converts to an

amortizing payment schedule with repayment terms of up to

30 years based on the balance at time of conversion. Certain lines

and loans have been structured with a balloon payment, which

requires full repayment of the outstanding balance at the end of

the term period. The conversion of lines or loans to fully

amortizing or balloon payoff may result in a significant payment

increase, which can affect some borrowers’ ability to repay the

outstanding balance.

In anticipation of our residential mortgage line of credit

borrowers reaching the end of their draw period, we have created

a program to inform, educate and help these borrowers

transition from interest-only to fully-amortizing payments or full

repayment. We monitor the performance of the borrowers

moving through the program in an effort to refine our ongoing

program strategy.

Wells Fargo & Company 36



We monitor changes in real estate values and underlying

economic or market conditions for all geographic areas of our

residential mortgage portfolio as part of our credit risk

management process. Our periodic review of this portfolio

includes original appraisals adjusted for the change in Home Price

Index (HPI) or estimates from automated valuation models

(AVMs) to support property values. AVMs are computer-based

tools used to estimate the market value of homes. We have

processes to periodically validate AVMs and specific risk

management guidelines addressing the circumstances when

AVMs may be used. For additional information about our use of

appraisals and AVMs, see Note 5 (Loans and Related Allowance

for Credit Losses) to Financial Statements in this Report.

Part of our credit monitoring includes tracking delinquency,

current FICO scores and loan/combined loan to collateral values

(LTV/CLTV) on the entire residential mortgage loan portfolio.

CLTV represents the ratio of the total loan balance of first and

junior lien mortgages (including unused line amounts for credit

line products) to property collateral value. For additional

information regarding credit quality indicators, see Note 5 (Loans

and Related Allowance for Credit Losses) to Financial Statements

in this Report.

We continue to modify residential mortgage loans to assist

homeowners and other borrowers experiencing financial

difficulties. Under these programs, we may provide concessions

such as interest rate reductions, forbearance of principal, and in

some cases, principal forgiveness. These programs generally

include trial payment periods of three to four months, and after

successful completion and compliance with terms during this

period, the loan is permanently modified. Loans included under

these programs are accounted for as troubled debt

restructurings (TDRs) at the start of the trial period or at the

time of permanent modification, if no trial period is used.

Customer payment deferral activities instituted in response to

the COVID-19 pandemic could continue to delay the recognition

of delinquencies. For additional information on customer

accommodations, including loan modifications, in response to

the COVID-19 pandemic, see Note 1 (Summary of Significant

Accounting Policies) to Financial Statements in this Report.

Residential Mortgage – First Lien Portfolio Our residential

mortgage – first lien portfolio increased $13.5 billion from

December 31, 2021, driven by originations, partially offset by

loan paydowns and the transfer of first lien mortgage loans to

loans held for sale (LHFS), which predominantly related to loans

purchased from GNMA loan securitization pools in prior periods.

Table 21 shows certain delinquency and loss information for

the residential mortgage – first lien portfolio and lists the top

five states by outstanding balance.

Table 21: Residential Mortgage – First Lien Portfolio Performance

Outstanding balance % of total loans

% of loans 30 days

or more past due Net loan charge-off rate (1)

December 31, December 31, December 31, Year ended December 31,

($ in millions) 2022 2021 2022 2021 2022 2021 2022 2021

California (2) $ 110,877 100,933 11.60% 11.27 0.45 0.95 — (0.01)

New York 31,753 30,039 3.32 3.35 0.80 1.34 (0.02) 0.12

Florida 10,535 9,978 1.10 1.11 1.13 1.93 (0.08) 0.09

Washington 10,523 8,636 1.10 0.96 0.30 0.47 — —

New Jersey 10,416 10,205 1.09 1.14 1.24 1.95 0.01 0.08

Other (3) 72,843 69,321 7.62 7.74 0.93 1.48 0.01 0.01

Total 246,947 229,112 25.83 25.57 0.69 1.23 — 0.02

Government insured/guaranteed loans (4) 8,860 13,158 0.93 1.47

Total first lien mortgage portfolio 242,270 26.76% 27.04



$ 255,807

(1)

The net loan charge-off rate for the year ended December 31, 2021, includes $120 million of loan charge-offs related to a change in practice to fully charge-off certain delinquent legacy residential

mortgage loans.

(2) Our residential mortgage loans to borrowers in California are located predominantly within the larger metropolitan areas, with no single California metropolitan area consisting of more than 4% of

total loans.

(3) Consists of 45 states; no state in Other had loans in excess of $7.7 billion and $7.2 billion at December 31, 2022, and 2021, respectively.

(4) Represents loans, substantially all of which were purchased from GNMA loan securitization pools, where the repayment of the loans is predominantly insured by the Federal Housing Administration

(FHA) or guaranteed by the Department of Veterans Affairs (VA). For additional information on GNMA loan securitization pools, see the “Risk Management – Credit Risk Management – Mortgage

Banking Activities” section in this Report.

Wells Fargo & Company 37



Residential Mortgage – Junior Lien Portfolio Our residential

mortgage – junior lien portfolio decreased $3.3 billion from

December 31, 2021, driven by loan paydowns.

Table 22 shows certain delinquency and loss information for

the residential mortgage – junior lien portfolio and lists the top

five states by outstanding balance.

Table 22: Residential Mo rtgage – Junio r Lien Po rtfolio Performance

Outstanding balance % of total loans

% of loans 30 days

or more past due Net loan charge-off rate (1)

December 31, December 31, December 31, Year ended December 31,

($ in millions) 2022 2021 2022 2021 2022 2021 2022

2021

California $ 3,550 4,310 0.37 % 0.48 2.02 3.52 (0.26) (0.59)

New Jersey 1,383 1,728 0.14 0.19 2.76 2.98 0.10 0.04

Florida 1,165 1,533 0.12 0.17 2.69 2.54 (0.71) (0.13)

Pennsylvania 832 1,039 0.09 0.12 2.76 2.19 (0.17) (0.12)

New York 794 975 0.08 0.11 2.86 4.05 (0.09) 0.57

(2)Other 5,586 7,033 0.58 0.79 2.05 2.25 (0.53) (0.51)

Total junior lien mortgage portfolio $ 13,310 16,618 1.38 % 1.86 2.27 2.91 (0.36) (0.36)



December 31, 2022 December 31, 2021

% of

total

loans

% of

total

loans ($ in millions)

Outstanding

balance

Outstanding

balance

Credit card $ 46,293 4.84% $ 38,453 4.29%

Auto 53,669 5.61 56,659 6.33

(1)Other consumer 29,276 3.06 28,274 3.16

Total $ 129,238 13.51% $ 123,386 13.78%

Risk Management – Credit Risk Management (continued)

(1)

The net loan charge-off rate for the year ended December 31, 2021, includes $32 million of loan charge-offs related to a change in practice to fully charge-off certain delinquent legacy residential

mortgage loans.

(2) Consists of 45 states; no state in Other had loans in excess of $790 million and $980 million at December 31, 2022, and 2021, respectively.

CREDIT C ARD, AUTO, AND OTHER C ONSUMER LOANS Table 23

shows the outstanding balance of our credit card, auto, and oth er

consumer loan portfolios. For information regarding credit

quality indicators for these portfolios, see Note 5 (Loans and

Related Allowance for Credit Losses ) to Financial Statements in

this Report.

Credit Card  The increase in the outstanding balance at

December 31, 2022 , compared with December 31, 2021 , was

due to higher purchase volume and the launch of new products.

Auto  The decrease in the outstanding balance at December 31, 

2022, compared with December 31, 2021 , was due to lower

origination volumes reflecting credit tightening actions and

continued price competition due to rising interest rates.

Other Consumer  The increase in the outstanding balance at

December 31, 2022 , compared with December 31, 2021 , was

primarily due to originations of personal lines and loans.

Table 23: Credit C ard, Auto, and Other C onsumer Lo ans

(1) Includes $19.4 billion and $18.6 billion at December 31, 2022 and 2021, respectively, of

commercial and consumer securities-based loans originated by the WIM operating

segment.

Wells Fargo & Company 38

NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED

ASSETS) We generally place loans on nonaccrual status when:

• the full and timely collection of interest or principal becomes

uncertain (generally based on an assessment of the

borrower’s financial condition and the adequacy of collateral,

if any), such as in bankruptcy or other circumstances;

• they are 90 days (120 days with respect to residential

mortgage loans) past due for interest or principal, unless the

loan is both well-secured and in the process of collection;

• part of the principal balance has been charged off; or

• for junior lien mortgage loans, we have evidence that the

related first lien mortgage may be 120 days past due or in

the process of foreclosure regardless of the junior lien

delinquency status.

Certain nonaccrual loans may be returned to accrual status

after they perform for a period of time. Consumer credit card

loans are not placed on nonaccrual status, but are generally fu lly

charged off when the loan reaches 180 days past due.

Customer payment deferral activities in the residential

mortgage portfolio instituted in response to the COVID-19

pandemic could continue to delay the recognition of nonaccrual

loans for those residential mortgage customers who would have

otherwise moved into nonaccrual status.

For additional

information on customer accommodations, including loan

modifications, in response to the COVID-19 pandemic, see

Note 1 (Summary of Significant Accounting Policies) to Financial

Statements in this Report.

Table 24 summarizes nonperforming assets (NPAs).

Table 24: Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

December 31,

($ in millions) 2022 2021

Nonaccrual loans:

Commercial and industrial $ 746 980

Commercial real estate 958 1,248

Lease financing 119 148

Total commercial 1,823 2,376

Residential mortgage (1) 3,611 4,604

Auto 153 198

Other consumer 39 34

Total consumer 3,803 4,836

Total nonaccrual loans $ 5,626 7,212

As a percentage of total loans

Foreclosed assets:

0.59 % 0.81

Government insured/guaranteed (2)

Non-government insured/guaranteed

$ 22

115

16

96

Total foreclosed assets 137

112

Total nonperforming assets $ 5,763 7,324

As a percentage of total loans 0.60 %

0.82



(1) Residential mortgage loans predominantly insured by the FHA or guaranteed by the VA are not placed on nonaccrual status because they are insured or guaranteed.

(2) Consistent with regulatory reporting requirements, foreclosed real estate resulting from government insured/guaranteed loans are classified as nonperforming. Both principal and interest related to

these foreclosed real estate assets are collectible because the loans were predominantly insured by the FHA or guaranteed by the VA. Receivables related to the foreclosure of certain government

guaranteed real estate mortgage loans are excluded from this table and included in Accounts Receivable in Other Assets. For additional information on the classification of certain government-

guaranteed mortgage loans upon foreclosure, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

Commercial nonaccrual loans decreased $553 million from

December 31, 2021, due to improved credit quality across our

commercial loan portfolios. For additional information on

commercial nonaccrual loans, see the “Risk Management – Credit

Risk Management – Commercial and Industrial Loans and Lease

Financing” and “Risk Management – Credit Risk Management –

Commercial Real Estate” sections in this Report.

Consumer nonaccrual loans decreased $1.0 billion from

December 31, 2021, driven by a decrease in residential mortgage

nonaccrual loans primarily due to sustained payment

performance of borrowers after exiting COVID-19-related

accommodation programs.

Wells Fargo & Company

39



Table 25 provides an analysis of the changes in nonaccrual

loans. Typically, changes to nonaccrual loans period-over-perio d

represent inflows for loans that are placed on nonaccrual statu s

in accordance with our policies, offset by reductions for loan s

that are paid down, charged off, sold, foreclosed, or are no lo nger

classified as nonaccrual as a result of continued performance a nd

an improvement in the borrower’s financial condition and loan

repayment capabilities.

Table 25: Analysis o f C hanges in No naccrual Lo ans

Year ended December 31,

(in millions) 2022 2021

Commercial nonaccrual loans

Balance, beginning of period $ 2,376 4,779

Inflows 1,391 2,113

Outflows:

Returned to accruing (451) (1,003)

Foreclosures (20) (13)

Charge-offs (247) (533)

Payments, sales and other (1,226) (2,967)

Total outflows (1,944) (4,516)

Balance, end of period 1,823 2,376

Consumer nonaccrual loans

Balance, beginning of period 4,836 3,949

Inflows 1,728 3,281

Outflows:

Returned to accruing (1,599) (828)

Foreclosures (85) (69)

Charge-offs (245) (252)

Payments, sales and other (832) (1,245)

Total outflows (2,761) (2,394)

Balance, end of period 3,803 4,836

Total nonaccrual loans $ 5,626 7,212

Year ended December 31,

(in

millions) 2022 2021

Analysis of changes in foreclosed assets

Balance, beginning of period

$ 112 159

Net change in government insured/guaranteed (1) 6 (2)

Additions to foreclosed assets (2) 420 370

Reductions from sales and write-downs (401) (415)

Balance, end of period

$ 137 112

Risk Management – Credit Risk Management (continued)

We considered the risk of losses on nonaccrual loans in

developing our allowance for loan losses. We believe exposure to

losses on nonaccrual loans is mitigated by the following factors

at December 31, 2022:

•

97% of total commercial nonaccrual loans are secured, the

majority of which are secured by real estate.

• 81% of commercial nonaccrual loans were current on

interest and 77% of commercial nonaccrual loans were

current on both principal and interest, but were on

nonaccrual status because the full or timely collection of

interest or principal had become uncertain.

Table 26: Foreclosed Assets

• 99% of total consumer nonaccrual loans are secured, of

which 95% are secured by real estate and 98% have a

combined LTV (CLTV) ratio of 80% or less.

• $588 million of the $743 million of consumer loans in

bankruptcy or discharged in bankruptcy, and classified as

nonaccrual, were current.

Table 26 provides a summary of foreclosed assets and an

analysis of changes in foreclosed assets.

December 31,

(in millions) 2022 2021

Summary by loan segment

Government insured/guaranteed $

22

16

Commercial 65 54

Consumer 50 42

Total foreclosed assets $

137

112

(1)

Foreclosed government insured/guaranteed loans are temporarily transferred to and held by us as servicer, until reimbursement is received from FHA or VA.

(2) Includes loans moved into foreclosed assets from nonaccrual status and repossessed autos.

Wells Fargo & Company 40



As part of our actions to support customers during the

COVID-19 pandemic, we temporarily suspended certain

residential mortgage foreclosure activities through

December 31, 2021. Beginning January 1, 2022, we resumed

these mortgage foreclosure activities. For additional information

on loans in process of foreclosure, see Note 5 (Loans and Related

Allowance for Credit Losses) to Financial Statements in this

Report.

TROUBLED DEBT RESTRUCTURINGS (TDRs) Table 27 provides

information regarding the recorded investment of loans

modified in TDRs. TDRs decreased from December 31, 2021,

predominantly driven by a decrease in residential mortgage

loans, partially offset by an increase in trial modifications. The

decrease in residential mortgage loans was due to paydowns and

transfers to LHFS, which related to loans purchased from GNMA

loan securitization pools. In January 2023, we adopted a new

accounting standard that eliminates the accounting and

reporting guidance for TDRs. For additional information, see the

“Current Accounting Developments” section in this Report.

The amount of our TDRs at December 31, 2022, would have

otherwise been higher without the TDR relief provided by the

Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

and the Interagency Statement on Loan Modifications and

Reporting for Financial Institutions Working with Customers

Affected by the Coronavirus (Revised) (Interagency Statement).

Customers who are unable to resume making their contractual

loan payments upon exiting from these deferral programs may

require further assistance and may receive or be eligible to

receive modifications, which may be classified as TDRs. For

additional information on customer accommodations, including

loan modifications, in response to the COVID-19 pandemic, see

Note 1 (Summary of Significant Accounting Policies) to Financial

Statements in this Report.

Table 27: TDR Balances

December 31,

(in millions) 2022 2021

Commercial and industrial $ 543 793

Commercial real estate 431 545

Lease financing 5 10

Total commercial TDRs 979 1,348

Residential mortgage 7,429 8,228

Credit card 407 309

Auto 118 169

Other consumer 58 57

Trial modifications 242 71

Total consumer TDRs 8,254 8,834

Total TDRs $ 9,233 10,182

TDRs on nonaccrual status $ 3,223 3,142

TDRs on accrual status:

Government insured/guaranteed 1,870 2,462

Non-government insured/guaranteed 4,140 4,578

Total TDRs $ 9,233 10,182

Our nonaccrual policies are generally the same for all loan

types when a restructuring is involved. We may re-underwrite

loans at the time of restructuring to determine whether there is

sufficient evidence of sustained repayment capacity based on the

borrower’s documented income, debt to income ratios, and other

factors. Loans that are not re-underwritten or loans that lack

sufficient evidence of sustained repayment capacity at the time

of modification are charged down to the fair value of the

collateral, if applicable. For an accruing loan that has been

modified, if the borrower has demonstrated performance under

the previous terms and the underwriting process shows the

capacity to continue to perform under the restructured terms,

the loan will generally remain in accruing status. Otherwise, the

loan will be placed in nonaccrual status and may be returned to

accruing status when the borrower demonstrates a sustained

period of performance, generally six consecutive months of

payments, or equivalent, inclusive of consecutive payments made

prior to modification. Loans will also be placed on nonaccrual

status, and a corresponding charge-off is recorded to the loan

balance, when we believe that principal and interest contractually

due under the modified agreement will not be collectible. See

Note 5 (Loans and Related Allowance for Credit Losses) to

Financial Statements in this Report for additional information

regarding TDRs.

Wells Fargo & Company 41

Table 28 provides an analysis of the changes in TDRs. Loans

modified more than once as a TDR are reported as inflows only i n

the period they are first modified. In addition to foreclosures ,

sales and transfers to held for sale, we may remove loans from

TDR classification, but only if they have been refinanced or

restructured at market terms and qualify as a new loan.

Table 28: Analysis of Changes in TDRs

Year ended December 31,

(in millions)

2022 2021

Commercial TDRs

Balance, beginning of period $ 1,348 2,731

Inflows (1) 544

746

Outflows

Charge-offs (10) (141)

Foreclosure — (5)

Payments, sales and other (2) (903) (1,983)

Balance, end of period 979 1,348

Consumer TDRs

Balance, beginning of period 8,834 11,792

Inflows (1) 1,892 1,665

Outflows

Charge-offs (150) (185)

Foreclosure (54) (56)

Payments, sales and other (2) (2,439) (4,363)

(3)Net change in trial modifications 171 (19)

Balance, end of period 8,254 8,834

Total TDRs

$ 9,233

Risk Management – Credit Risk Management (continued)

10,182

(1) Inflows include loans that modify, even if they resolve within the period, as well as gross advances on term loans that modified in a prior period and net advances on revolving TDRs that modified in a

prior period.

(2) Other outflows include normal amortization/accretion of loan basis adjustments and loans transferred to LHFS. Occasionally, loans that have been refinanced or restructured at market terms qualify

as new loans, which are also included as other outflows.

(3) Net change in trial modifications includes: inflows of new TDRs entering the trial payment period, net of outflows for modifications that either (i) successfully perform and enter into a permanent

modification or (ii) did not successfully perform according to the terms of the trial period plan and are subsequently charged-off, foreclosed upon, or otherwise resolved.

Wells Fargo & Company 42

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NET C HARGE-OFFS Table 29 presents net loan charge-offs.

Table 29: Net Loan Charge-offs

Quarter ended December 31, Year ended December 31,

2022 2021 2022 2021

($ in millions)

Net loan

charge-

offs

% of

avg.

loans (1)

Net loan

charge-

offs

% of

avg.

loans (1)

Net loan

charge-

offs

% of

avg.

loans

Net loan

charge-

offs

% of

avg.

loans

Commercial and industrial $ 66 0.07 % $ 3 — % $ 83 0.02 % $ 218 0.07 %

Commercial real estate 10 0.03 22 0.06 (11) (0.01) 53 0.04

Lease financing 3 0.06 3 0.09 7 0.04 24 0.15

Total commercial 79 0.06 28 0.02 79 0.01 295 0.06

Residential mortgage (12) (0.02) 118 0.18 (63) (0.02) (17) (0.01)

Credit card 274 2.42 150 1.61 851 2.06 800 2.26

Auto 137 1.00 58 0.41 422 0.76 181 0.35

Other consumer 82 1.13 67 0.96 319 1.11 315 1.22

Total consumer 481 0.48 393 0.41 1,529 0.39 1,279 0.33

Total $ 560 0.23 % $ 421 0.19 % $ 1,608 0.17 % $ 1,574 0.18 %

(1) Net loan charge-offs as a percentage of average respective loans are annualized.

The decrease in commercial net loan charge-offs in 2022,

compared with 2021, was driven by lower losses in our

commercial and industrial and commercial real estate mortgage

portfolios.

The increase in consumer net loan charge-offs in 2022,

compared with 2021, was predominantly due to higher losses in

our auto portfolio, driven by loans originated in 2021.

The COVID-19 pandemic may continue to impact the credit

quality of our loan portfolio. Although the potential impacts were

considered in our allowance for credit losses for loans, payment

deferral activities in our residential mortgage portfolio instituted

in response to the COVID-19 pandemic could continue to delay

the recognition of residential mortgage loan charge-offs. For

additional information on customer accommodations in

response to the COVID-19 pandemic, see Note 1 (Summary of

Significant Accounting Policies) to Financial Statements in this

Report.

ALLOWANCE FOR CREDIT LOSSES We maintain an allowance for

credit losses (ACL) for loans, which is management’s estimate of

the expected life-time credit losses in the loan portfolio and

unfunded credit commitments, at the balance sheet date,

excluding loans and unfunded credit commitments carried at fair

value or held for sale. Additionally, we maintain an ACL for debt

securities classified as either AFS or HTM, other financial assets

measured at amortized cost, net investments in leases, and other

off-balance sheet credit exposures.

We apply a disciplined process and methodology to establish

our ACL each quarter. The process for establishing the ACL for

loans takes into consideration many factors, including historic al

and forecasted loss trends, loan-level credit quality ratings a nd

loan grade-specific characteristics. The process involves

subjective and complex judgments. In addition, we review a

variety of credit metrics and trends. These credit metrics and

trends, however, do not solely determine the amount of the

allowance as we use several analytical tools. For additional

information on our ACL, see the “Critical Accounting Policies –

Allowance for Credit Losses” section and Note 1 (Summary of

Significant Accounting Policies ) to Financial Statements in this

Report. For additional information on our ACL for loans, see

Note 5 (Loans and Related Allowance for Credit Losses ) to

Financial Statements in this Report, and for additional

information on our ACL for debt securities, see Note 3 (Available-

for-Sale and Held-to-Maturity Debt Securities ) to Financial

Statements in this Report.

Table 30 presents the allocation of the ACL for loans by loan

portfolio segment and class.

Wells Fargo & Company 43

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Risk Management – Credit Risk Management (continued)

Table 30: Allocation o f the AC L fo r Lo ans

Dec 31, 2022 Dec 31, 2021

($ in millions) ACL

ACL

as %

of loan

class

Loans

as %

of total

loans ACL

ACL

as %

of loan

class

Loans

as %

of total

loans

Commercial and industrial $ 4,507 1.17 % 40 $ 4,873 1.39 % 39

Commercial real estate 2,231 1.43 16 2,516 1.70 17

Lease financing 218 1.46 2 402 2.71 2

Total commercial 6,956 1.25 58 7,791 1.52 58

Residential mortgage (1) 1,096 0.41 28 1,286 0.50 29

Credit card 3,567 7.71 5 3,290 8.56 4

Auto 1,380 2.57 6 928 1.64 6

Other consumer 610 2.08 3 493 1.74 3

Total consumer 6,653 1.67 42 5,997 1.57 42

Total $ 13,609 1.42 % 100 $ 13,788 1.54 % 100

Components:

Allowance for loan losses $ 12,985 12,490

Allowance for unfunded credit commitments 624 1,298

Allowance for credit losses $ 13,609 13,788

Ratio of allowance for loan losses to total net loan charge-offs 8.08x 7.94

Ratio of allowance for loan losses to total nonaccrual loans 2.31 1.73

Allowance for loan losses as a percentage of total loans 1.36 % 1.39

(1) Includes negative allowance for expected recoveries of amounts previously charged off.

The ratios for the allowance for loan losses and the ACL for

loans presented in Table 30 may fluctuate from period to period

due to such factors as the mix of loan types in the portfolio,

borrower credit strength, and the value and marketability of

collateral.

The ACL for loans decreased $179 million, or 1%, from

December 31, 2021, reflecting reduced uncertainty around the

economic impact of the COVID-19 pandemic on our loan

portfolio. This decrease was partially offset by loan growth and a

less favorable economic environment. The detail of the changes

in the ACL for loans by portfolio segment (including charge-offs

and recoveries by loan class) is included in Note 5 (Loans and

Related Allowance for Credit Losses) to Financial Statements in

this Report.

We consider multiple economic scenarios to develop our

estimate of the ACL for loans, which generally include a base

scenario, along with an optimistic (upside) and one or more

pessimistic (downside) scenarios. We weighted the base scenario

and the downside scenarios in our estimate of the ACL for loans

at December 31, 2022. The base scenario assumed elevated

inflation and economic contraction in the near term, reflecting

increased unemployment rates from historically low levels. The

downside scenarios assumed a more substantial economic

contraction due to high inflation, declining property values, and

lower business and consumer confidence.

Additionally, we consider qualitative factors that represent

the risk of limitations inherent in our processes and assumptions

such as economic environmental factors, modeling assumptions

and performance, and other subjective factors, including industry

trends and emerging risk assessments.

The forecasted key economic variables used in our estimate

of the ACL for loans at December 31 and September 30, 2022,

are presented in Table 31.

Table 31: Forecasted Key Economic Variables

2Q

2023

4Q

2023

2Q

2024

Weighted blend of economic scenarios:

U.S. unemployment rate (1):

December 31, 2022 4.3 % 5.5 6.2

September 30, 2022 5.4 6.1 6.4

U.S. real GDP (2):

December 31, 2022 (2.5) (1.0) 1.1

September 30, 2022 (1.1) 1.0 1.9

Home price index (3):

December 31, 2022 (4.7) (7.0) (6.2)

September 30, 2022

(2.2) (3.7) (3.7)

Commercial real estate asset prices (3):

December 31, 2022 (3.8) (6.7) (5.8)

September 30, 2022 (1.7) (4.7) (4.2)

(1) Quarterly average.

(2) Percent change fr om the p receding period, seasonally adjusted annualized rate.

(3) Percent change y ear over year of na tional a verage; outlook differs b y geography and

property type.

Future amounts of the ACL for loans will be based on a

variety of factors, including loan balance changes, portfolio c redit

quality and mix changes, and changes in general economic

conditions and expectations (including for unemployment and

real GDP), among other factors.

Wells Fargo & Company 44

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We believe the ACL for loans of $13.6 billion at

December 31, 2022, was appropriate to cover expected credit

losses, including unfunded credit commitments, at that date. The

entire allowance is available to absorb credit losses from the total

loan portfolio. The ACL for loans is subject to change and reflects

existing factors as of the date of determination, including

economic or market conditions and ongoing internal and external

examination processes. Due to the sensitivity of the ACL for

loans to changes in the economic and business environment,

it is possible that we will incur incremental credit losses not

anticipated as of the balance sheet date. Our process for

determining the ACL is discussed in the “Critical Accounting

Policies – Allowance for Credit Losses” section and Note 1

(Summary of Significant Accounting Policies) to Financial

Statements in this Report.

MORTGAGE BANKING ACTIVITIES We sell residential and

commercial mortgage loans to various parties, including (1)

government-sponsored entities (GSEs), Federal Home Loan

Mortgage Corporation (FHLMC) and Federal National Mortgage

Association (FNMA), who include the mortgage loans in GSE-

guaranteed mortgage securitizations, (2) SPEs that issue private

label MBS, and (3) other financial institutions that purchase

mortgage loans for investment or private label securitization. In

addition, we pool FHA-insured and VA-guaranteed residential

mortgage loans that are then used to back securities guaranteed

by the Government National Mortgage Association (GNMA). We

may be required to repurchase these mortgage loans, indemnify

the securitization trust, investor or insurer, or reimburse the

securitization trust, investor or insurer for credit losses incurred

on loans (collectively, repurchase) in the event of a breach of

contractual representations or warranties that is not remedied

within a period (usually 90 days or less) after we receive notice of

the breach.

In connection with our sales and securitization of residential

mortgage loans, we have established a mortgage repurchase

liability, initially at fair value, related to various representations

and warranties that reflect management’s estimate of losses for

loans for which we could have a repurchase obligation, whether or

not we currently service those loans, based on a combination of

factors. See Note 16 (Securitizations and Variable Interest

Entities) to Financial Statements in this Report for additional

information about our liability for mortgage loan repurchase

losses.

We provide recourse to GSEs for commercial mortgage

loans sold under various programs and arrangements. The terms

of these programs require that we incur a pro-rata share of actual

losses in the event of borrower default. See Note 17 (Guarantees

and Other Commitments) to Financial Statements in this Report

for additional information about our exposure to loss related to

these programs.

In addition to servicing loans in our portfolio, we act as

servicer and/or master servicer of residential and commercial

mortgage loans included in GSE-guaranteed mortgage

securitizations, GNMA-guaranteed mortgage securitizations of

FHA-insured/VA-guaranteed mortgages and private label

mortgage securitizations, as well as for unsecuritized loans

owned by institutional investors.

The loans we service were originated by us or by other

mortgage loan originators. As servicer, our primary duties are

typically to (1) collect payments due from borrowers, (2) advance

certain delinquent payments of principal and interest on the

mortgage loans, (3) maintain and administer any hazard, title or

primary mortgage insurance policies relating to the mortgage

loans, (4) maintain any required escrow accounts for payment of

taxes and insurance and administer escrow payments, and (5)

foreclose on defaulted mortgage loans or, to the extent

consistent with the related servicing agreement, consider

alternatives to foreclosure, such as loan modifications or short

sales, and for certain investors, manage the foreclosed property

through liquidation. As master servicer, our primary duties are

typically to (1) supervise, monitor and oversee the servicing of

the mortgage loans by the servicer, and (2) advance delinquent

amounts required by non-affiliated servicers who fail to perform

their advancing obligations. The amount and timing of

reimbursement for advances of delinquent payments vary by

investor and the applicable servicing agreements. See Note 6

(Mortgage Banking Activities) to Financial Statements in this

Report for additional information about residential and

commercial servicing rights, servicer advances and servicing fees.

In accordance with applicable servicing guidelines, upon

transfer as servicer, we retain the option to repurchase loans

from GNMA loan securitization pools, which generally becomes

exercisable when three scheduled loan payments remain unpaid

by the borrower. We generally repurchase these loans for cash

and as a result, our total consolidated assets do not change. At

December 31, 2022 and 2021, these repurchased loan balances

were $9.8 billion and $17.3 billion, respectively, which included

$8.6 billion and $12.9 billion, respectively, in loans held for

investment, with the remainder in loans held for sale.

Repurchased loans that regain current status or are

otherwise modified in accordance with applicable servicing

guidelines may be included in future GNMA loan securitization

pools. However, in accordance with guidance issued by GNMA,

certain loans repurchased after June 30, 2020, are ineligible for

inclusion in future GNMA loan securitization pools until the

borrower has timely made six consecutive payments. This

requirement may delay our ability to transfer loans into the

securitization market. See Note 16 (Securitizations and Variable

Interest Entities) to Financial Statements in this Report for

additional information about our involvement with mortgage

loan securitizations.

Each agreement under which we act as servicer or master

servicer generally specifies a standard of responsibility for

actions we take in such capacity. We are required to indemnify

the securitization trustee against any failure by us, as servicer or

master servicer, to perform our servicing obligations. In addition,

if we commit a breach of our obligations as servicer or master

servicer, we may be subject to termination if the breach is not

cured within a specified period. The standards governing

servicing in GSE-guaranteed securitizations, and the possible

remedies for violations of such standards, vary, and those

standards and remedies are determined by servicing guides

maintained by the GSEs, contracts between the GSEs and

individual servicers and topical guides published by the GSEs

from time to time. Such remedies could include indemnification

or repurchase of an affected mortgage loan. In addition, in

connection with our servicing activities, we could become subject

to consent orders and settlement agreements with federal and

state regulators for alleged servicing issues and practices. In

general, these can require us to provide customers with loan

modification relief, refinancing relief, and foreclosure prevention

and assistance, and can result in business restrictions or the

imposition of certain monetary penalties on us. For example, on

September 9, 2021, the Company entered into a consent order

with the OCC requiring the Company to improve the execution,

risk management, and oversight of loss mitigation activities in its

Home Lending business. For additional information on certain

consent orders applicable to the Company, see the “Overview”

section in this Report.

Wells Fargo & Company 45

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Asset/Liability Management

Asset/liability management involves evaluating, monitoring and

managing interest rate risk, market risk, liquidity and funding.

Primary oversight of interest rate risk and market risk resides

with the Finance Committee of the Board, which oversees the

administration and effectiveness of financial risk management

policies and processes used to assess and manage these risks.

Primary oversight of liquidity and funding resides with the Risk

Committee of the Board.

At the management level, the Corporate Asset/Liability

Committee (Corporate ALCO), which consists of management

from finance, risk and business groups, oversees these risks and

supports periodic reports provided to the Board’s Finance

Committee and Risk Committee as appropriate. As discussed in

more detail for market risk activities below, we employ separate

management level oversight specific to market risk.

INTEREST RATE RISK Interest rate risk is the risk that market

fluctuations in interest rates, credit spreads, or foreign exchange

can cause a loss of the Company’s earnings and capital stemming

from mismatches in the Company’s asset and liability cash flows

primarily arising from customer-related activities such as lending

and deposit-taking. We are subject to interest rate risk because:

•

assets and liabilities may mature or reprice at different

times. If assets reprice faster than liabilities and interest

rates are generally rising, earnings will initially increase;

• assets and liabilities may reprice at the same time but by

different amounts;

• short-term and long-term market interest rates may change

by different amounts. For example, the shape of the yield

curve may affect yield for new loans and funding costs

differently;

• the remaining maturity for various assets or liabilities may

shorten or lengthen as interest rates change. For example, if

long-term mortgage interest rates increase sharply,

mortgage-related products may pay down at a slower rate

than anticipated, which could impact portfolio income; or

• interest rates may have a direct or indirect effect on loan

demand, collateral values, credit losses, mortgage

origination volume, and the fair value of MSRs and other

financial instruments.

We assess interest rate risk by comparing outcomes under

various net interest income simulations using many interest rate

scenarios that differ in the direction of interest rate changes, the

degree of change over time, the speed of change and the

projected shape of the yield curve. These simulations require

assumptions regarding drivers of earnings and balance sheet

composition such as loan originations, prepayment rates on loans

and debt securities, deposit flows and mix, as well as pricing

strategies.

Our most recent simulations, as presented in Table 32,

estimate net interest income sensitivity over the next 12 months

using instantaneous movements across the yield curve with both

lower and higher interest rates relative to our base scenario.

Steeper and flatter scenarios measure non-parallel changes in

the yield curve, with long-term interest rates defined as all tenors

three years and longer and short-term interest rates defined as

all tenors less than three years. Where applicable, U.S. dollar

interest rates are floored at 0.00%. The following describes the

simulation assumptions for the scenarios presented in Table 32:

•

Simulations are dynamic and reflect anticipated changes to

our assets and liabilities.

• Other macroeconomic variables that could be correlated

with the changes in interest rates are held constant.

•

Mortgage prepayment and origination assumptions vary

across scenarios and reflect only the impact of the higher or

lower interest rates.

• Our base scenario deposit forecast incorporates mix changes

consistent with the base interest rate trajectory. Deposit

mix is modeled to be the same in the base scenario and the

alternative scenarios. In higher interest rate scenarios,

customer deposit activity that shifts balances into higher

yielding products could impact expected net interest

income.

• The interest rate sensitivity of deposits is modeled using the

historical behavior of our deposits portfolio and reflects the

expectations of deposit products repricing as market

interest rates change (referred to as deposit betas). Our

actual experience in base and alternative scenarios may

differ from expectations due to the lag or acceleration of

deposit repricing, changes in consumer behavior, and other

factors.

• We hold the size of the projected debt and equity securities

portfolios constant across scenarios.

Table 32: Net Interest Inco me S ensitivity Over the Next 12 Mo nths

Using Insta ntaneous Mo vements

($ in billions) Dec 31, 2022 Dec 31, 2021

Parallel shift:

+100 bps shift in interest rates $ 2.3 7.1

-100 bps shift in interest rates (1.7) (3.3)

Steeper yield curve: (1)

+100 bps shift in long-term interest rates 0.8 n/a

-100 bps shift in short-term interest rates (1.0) n/a

+50 bps shift in long-term interest rates 0.4 1.2

-50 bps shift in short-term interest rates (0.5) (0.9)

(1) Flatter yield curve:

+100 bps shift in short-term interest rates 1.5 n/a

-100 bps shift in long-term interest rates (0.7) n/a

+50 bps shift in short-term interest rates 0.7 2.6

-50 bps shift in long-term interest rates (0.4) (1.0)

(1) In fourth quarter 2022, given the higher levels of interest rates and volatility, we presented

100 bps shifts in our steeper and flatter scenarios.

The changes in our interest rate sensitivity from

December 31, 2021, to December 31, 2022, in Table 32 reflected

updates to our base scenario, including expectations for balance

sheet composition and interest rates. Our interest rate

sensitivity indicates that we would expect to benefit from higher

interest rates as our assets would reprice faster and to a greater

degree than our liabilities, while in the case of lower interest

rates, our assets would reprice downward and to a greater degree

than our liabilities resulting in lower net interest income. For the

December 31, 2021, simulations with downward shifts in interest

rates, the 0.00% interest rate floor limited the amount of the

decline in net interest income.

The sensitivity results above do not capture noninterest

income or expense impacts. Our interest rate sensitive

noninterest income and expense are impacted by mortgage

banking activities that may have sensitivity impacts that move in

the opposite direction of our net interest income. See the “Risk

Management – Asset/Liability Management – Mortgage Banking

Interest Rate and Market Risk” section in this Report for

additional information.

Interest rate sensitive noninterest income is also impacted

by changes in earnings credit for noninterest-bearing deposits

that reduce treasury management deposit-related service fees

Wells Fargo & Company 46



on commercial accounts, and by trading assets. In addition, the

impact to net interest income does not include the fair value

changes of trading securities, which, along with the effects of

related economic hedges, are recorded in noninterest income. In

addition to changes in interest rates, net interest income and

noninterest income from trading securities may be impacted by

the actual composition of the trading portfolio. For additional

information on our trading assets and liabilities, see Note 2

(Trading Activities) to Financial Statements in this Report.

We use the debt securities portfolio and exchange-traded

and over-the-counter (OTC) interest rate derivatives to manage

our interest rate exposures. As interest rates increase, changes in

the fair value of AFS debt securities may negatively affect

accumulated other comprehensive income (AOCI), which lowers

the amount of our regulatory capital. AOCI also includes

unrealized gains or losses related to the transfer of debt

securities from AFS to HTM, which are subsequently amortized

into earnings over the life of the security with no further impact

from interest rate changes. See Note 1 (Summary of Significant

Accounting Policies) and Note 3 (Available-for-Sale and Held-to-

Maturity Debt Securities) to Financial Statements in this Report

for additional information on the debt securities portfolios. We

use derivatives for asset/liability management in two main ways:

•

to convert the cash flows from selected asset and/or liability

instruments/portfolios including investments, commercial

loans and long-term debt, from floating-rate payments to

fixed-rate payments, or vice versa; and

• to economically hedge our mortgage origination pipeline,

funded mortgage loans, and MSRs.

In 2022, we entered into interest rate swap hedges to

reduce AOCI sensitivity of our AFS debt securities portfolio.

Additionally, we entered into interest rate swaps to convert the

interest cash flows of some floating-rate assets, such as

commercial loans and certain interest-earning deposits with

banks, to fixed-rates. Derivatives used to hedge our interest rate

risk exposures are presented in Note 14 (Derivatives) to Financial

Statements in this Report.

MORTGAGE BANKING INTEREST RATE AND MARKET RISK We

originate, fund and service mortgage loans, which subjects us to

various risks, including market, interest rate, credit, and liquidity

risks that can be substantial. Based on market conditions and

other factors, we reduce credit and liquidity risks by selling or

securitizing mortgage loans. We determine whether mortgage

loans will be held for investment or held for sale at the time of

commitment, but may change our intent to hold loans for

investment or sale as part of our corporate asset/liability

management activities. We may also retain securities in our

investment portfolio at the time we securitize mortgage loans.

Changes in interest rates may impact mortgage banking

noninterest income, including origination and servicing fees, and

the fair value of our residential MSRs, LHFS, and derivative loan

commitments (interest rate “locks”) extended to mortgage

applicants. Interest rate changes will generally impact our

mortgage banking noninterest income on a lagging basis due to

the time it takes for the market to reflect a shift in customer

demand, as well as the time required for processing a new

application, providing the commitment, and securitizing and

selling the loan. The amount and timing of the impact will depend

on the magnitude, speed and duration of the changes in interest

rates.

The valuation of our residential MSRs can be highly

subjective and involve complex judgments by management

about matters that are inherently unpredictable. Changes in

interest rates influence a variety of significant assumptions

captured in the periodic valuation of residential MSRs, including

prepayment rates, expected returns and potential risks on the

servicing asset portfolio, costs to service, the value of escrow

balances and other servicing valuation elements. See the “Critical

Accounting Policies – Valuation of Residential Mortgage

Servicing Rights” section in this Report for additional

information on the valuation of our residential MSRs.

An increase in interest rates generally reduces the

propensity for refinancing, extends the expected duration of the

servicing portfolio, and therefore increases the estimated fair

value of the MSRs. However, an increase in interest rates can also

reduce mortgage loan demand, including refinancing activity,

which reduces noninterest income from origination activities. A

decline in interest rates would generally have an opposite impact.

To reduce our exposure to changes in interest rates, our

residential MSRs are economically hedged with a combination of

derivative instruments, including interest rate swaps, Eurodollar

futures, highly liquid mortgage forward contracts and interest

rate options. Hedging the various sources of interest rate risk in

mortgage banking is a complex process that requires

sophisticated modeling and constant monitoring. There are

several potential risks to earnings from mortgage banking

related to origination volumes and mix, valuation of MSRs and

associated hedging results, the relationship and degree of

volatility between short-term and long-term interest rates, and

changes in servicing and foreclosures costs. While we attempt to

balance our mortgage banking interest rate and market risks, the

financial instruments we use may not perfectly correlate with the

values and income being hedged.

The size of the hedge and the particular combination of

hedging instruments at any point in time is designed to reduce

the volatility of our earnings over various time frames within a

range of mortgage interest rates. Market factors, the

composition of the mortgage servicing portfolio, and the

relationship between the origination and servicing sides of our

mortgage businesses change continually, and therefore the types

of instruments used in our hedging are reviewed daily and

rebalanced based on our evaluation of current market factors and

the interest rate risk inherent in our portfolio.

For additional information on mortgage banking, including

key assumptions and the sensitivity of the fair value of MSRs, see

Note 6 (Mortgage Banking Activities), Note 14 (Derivatives), and

Note 15 (Fair Values of Assets and Liabilities) to Financial

Statements in this Report.

MARKET RISK Market risk is the risk of possible economic loss

from adverse changes in market risk factors such as interest

rates, credit spreads, foreign exchange rates, equity and

commodity prices, and the risk of possible loss due to

counterparty exposure. This applies to implied volatility risk,

basis risk, and market liquidity risk. It includes price risk in the

trading book, mortgage servicing rights and the hedge

effectiveness risk associated with mortgage loans held at fair

value, and impairment of private equity investments.

The Board’s Finance Committee has primary oversight

responsibility for market risk and oversees the Company’s

market risk exposure and market risk management strategies.

In addition, the Board’s Risk Committee has certain oversight

responsibilities with respect to market risk, including

counterparty risk. The Finance Committee reports key market

risk matters to the Risk Committee.

At the management level, the Market and Counterparty Risk

Management function, which is part of IRM, has oversight

responsibility for market risk across the enterprise. The Market

Wells Fargo & Company 47

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Risk Management – Asset/Liability Management (continued)

and Counterparty Risk Management function reports into

Corporate and Investment Banking Risk and provides periodic

reports related to market risk to the Board’s Finance Committee.

MARKET RISK – TRADING ACTIVITIES We engage in trading

activities to accommodate the investment and risk management

activities of our customers and to execute economic hedging to

manage certain balance sheet risks. These trading activities

predominantly occur within our CIB businesses and, to a lesser

extent, other businesses of the Company. Debt securities held

for trading, equity securities held for trading, trading loans and

trading derivatives are financial instruments used in our trading

activities, and all are carried at fair value. Income earned on the

financial instruments used in our trading activities include net

interest income, changes in fair value and realized gains and

losses. Net interest income earned from our trading activities is

reflected in the interest income and interest expense

components of our consolidated statement of income. Changes

in fair value of the financial instruments used in our trading

activities are reflected in net gains from trading activities. For

additional information on the financial instruments used in our

trading activities and the income from these trading activities,

see Note 2 (Trading Activities) to Financial Statements in this

Report.

Value-at-risk (VaR) is a statistical risk measure used to

estimate the potential loss from adverse moves in the financial

markets. The Company uses VaR metrics complemented with

sensitivity analysis and stress testing in measuring and

monitoring market risk. These market risk measures are

monitored at both the business unit level and at aggregated

levels on a daily basis. Our corporate market risk management

function aggregates and monitors exposures against our

established risk appetite. Changes to the market risk profile are

analyzed and reported on a daily basis. The Company monitors

various market risk exposure measures from a variety of

perspectives, including line of business, product, risk type, and

legal entity.

Trading VaR is the measure used to provide insight into the

market risk exhibited by the Company’s trading positions. The

Company calculates Trading VaR for risk management purposes

to establish line of business and Company-wide risk limits.

Trading VaR is calculated based on all trading positions on our

consolidated balance sheet.

Table 33 shows the Company’s Trading General VaR by risk

category. Our Trading General VaR uses a historical simulation

model which assumes that historical changes in market values

are representative of the potential future outcomes and

measures the expected earnings loss of the Company over a

1-day time interval at a 99% confidence level. Our historical

simulation model is based on equally weighted data from a

12-month historical look-back period. We believe using a

12-month look-back period helps ensure the Company’s VaR is

responsive to current market conditions. The 99% confidence

level equates to an expectation that the Company would incur

single-day trading losses in excess of the VaR estimate on

average once every 100 trading days.

Average Company Trading General VaR was $35 million for

the year ended December 31, 2022, compared with $49 million

for the year ended December 31, 2021. The decrease in average

Company Trading General VaR for the year ended December 31,

2022, compared with the year ended December 31, 2021, was

primarily driven by changes in portfolio composition.

Table 33: Trading 1-Day 99% General VaR by Risk Category

Year ended December 31,

2022 2021

(in millions)

Period

end Average Low High

Period

end Average Low High

Company Trading General VaR Risk Categories

Credit $ 29 32 19 85 19 38 12 112

Interest rate 25 25 9 88 15 25 4 120

Equity 27 23 13 38 15 30 13 72

Commodity 4 6 2 20 10 7 2 28

Foreign exchange 1 1 0 2 1 1 0 1

Diversification benefit (1) (47) (52) (40) (52)

Company Trading General VaR $ 39 35 20 49

(1) The p eriod-end VaR wa s less t han t he su m of t he Va R com ponents d escribed above, which is d ue t o p ortfolio d iversification. The d iversification effect arises b ecause t he r isks a re not perfectly

correlated causing a portfolio of p ositions t o u sually be less r isky than t he su m of t he r isks of t he p ositions a lone. The d iversification b enefit is not meaningful for low a nd high metrics since t hey may

occur on d ifferent days.

Sensitivity Analysis Given the inherent limitations of the VaR

models, the Company uses other measures, including sensitivity

analysis, to measure and monitor risk. Sensitivity analysis is the

measure of exposure to a single risk factor, such as a 0.01%

increase in interest rates or a 1% increase in equity prices. We

conduct and monitor sensitivity on interest rates, credit spreads,

volatility, equity, commodity, and foreign exchange exposure.

Sensitivity analysis complements VaR as it provides an indication

of risk relative to each factor irrespective of historical market

moves.

Stress Testing While VaR captures the risk of loss due to

adverse changes in markets using recent historical market data,

stress testing is designed to capture the Company’s exposure to

extreme but low probability market movements. Stress scenarios

estimate the risk of losses based on management’s assumptions

of abnormal but severe market movements such as severe credit

spread widening or a large decline in equity prices. These

scenarios assume that the market moves happen

instantaneously and no repositioning or hedging activity takes

place to mitigate losses as events unfold (a conservative

approach since experience demonstrates otherwise).

An inventory of scenarios is maintained representing both

historical and hypothetical stress events that affect a broad

range of market risk factors with varying degrees of correlation

and differing time horizons. Hypothetical scenarios assess the

impact of large movements in financial variables on portfolio

values. Typical examples include a 1% (100 basis point) increase

across the yield curve or a 10% decline in equity market indexes.

Historical scenarios utilize an event-driven approach: the stress

Wells Fargo & Company 48

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scenarios are based on plausible but rare events, and the analysis

addresses how these events might affect the risk factors

relevant to a portfolio.

The Company’s stress testing framework is also used in

calculating results in support of the Federal Reserve Board’s

Comprehensive Capital Analysis and Review (CCAR) and internal

stress tests. Stress scenarios are regularly reviewed and updated

to address potential market events or concerns. For more detail

on the CCAR process, see the “Capital Management” section in

this Report.

MARKET RISK – EQUITY SECURITIES We are directly and indirectly

affected by changes in the equity markets. We make and manage

direct investments in start-up businesses, emerging growth

companies, management buy-outs, acquisitions and corporate

recapitalizations. We also invest in non-affiliated funds that

make similar private equity investments. These private equity

investments are made within capital allocations approved by

management and the Board. The Board reviews business

developments, key risks and historical returns for the private

equity investment portfolio at least annually. Management

reviews these investments at least quarterly to assess them for

impairment and observable price changes. For nonmarketable

equity securities, the analysis is based on facts and circumstances

of each individual investment and the expectations for that

investment’s cash flows, capital needs, the viability of its business

model, our exit strategy, and observable price changes that are

similar to the investments held. Investments in nonmarketable

equity securities include private equity investments accounted

for under the equity method, fair value through net income, and

the measurement alternative.

As part of our business to support our customers, we trade

public equities, listed/OTC equity derivatives and convertible

bonds. We have parameters that govern these activities. We also

have marketable equity securities that include investments

relating to our venture capital activities. We manage these

marketable equity securities within capital risk limits approved by

management and the Board and monitored by Corporate ALCO

and the Market Risk Committee. The fair value changes in these

marketable equity securities are recognized in net income. For

additional information, see Note 4 (Equity Securities) to Financial

Statements in this Report.

Changes in equity market prices may also indirectly affect

our net income by (1) the value of third-party assets under

management and, hence, fee income, (2) borrowers whose ability

to repay principal and/or interest may be affected by the stock

market, or (3) brokerage activity, related commission income and

other business activities. Each business line monitors and

manages these indirect risks.

LIQUIDITY RISK AND FUNDING Liquidity risk is the risk arising from

the inability of the Company to meet obligations when they

come due, or roll over funds at a reasonable cost, without

incurring heightened costs. In the ordinary course of business, we

enter into contractual obligations that may require future cash

payments, including funding for customer loan requests,

customer deposit maturities and withdrawals, debt service,

leases for premises and equipment, and other cash

commitments. The objective of effective liquidity management is

to ensure that we can meet our contractual obligations and other

cash commitments efficiently under both normal operating

conditions and under periods of Wells Fargo-specific and/or

market stress. For additional information on these obligations,

see the following sections and Notes to Financial Statements in

this Report:

• “Unfunded Credit Commitments” section within Loans and

Related Allowance for Credit Losses (Note 5)

• Leasing Activity (Note 8)

• Deposits (Note 9)

• Long-Term Debt (Note 10)

• Guarantees and Other Commitments (Note 17)

• Employee Benefits (Note 21)

• Income Taxes (Note 22)

To help achieve this objective, the Board establishes liquidit y

guidelines that require sufficient asset-based liquidity to cov er

potential funding requirements and to avoid over-dependence

on volatile, less reliable funding markets. These guidelines ar e

monitored on a monthly basis by the Corporate ALCO and on a

quarterly basis by the Board. These guidelines are established and

monitored for both the Company and the Parent on a stand -

alone basis so that the Parent is a source of strength for its

banking subsidiaries.

Liquidity Stress Tests Liquidity stress tests are performed to

help ensure that the Company has sufficient liquidity to meet

contractual and contingent outflows modeled under a variety of

stress scenarios. Our scenarios utilize market-wide as well as

corporate-specific events, including a range of stress conditions

and time horizons. Stress testing results facilitate evaluation of

the Company’s projected liquidity position during stress and

inform future needs in the Company’s funding plan.

Contingency Funding Plan Our contingency funding plan (CFP),

which is approved by Corporate ALCO and the Board’s Risk

Committee, sets out the Company’s strategies and action plans

to address potential liquidity needs during market-wide or

idiosyncratic liquidity events. The CFP establishes measures for

monitoring emerging liquidity events and describes the

processes for communicating and managing stress events should

they occur. The CFP also identifies alternate funding and liquidity

strategies available to the Company in a period of stress.

Liquidity Standards We are subject to a rule issued by the FRB,

OCC and FDIC that establishes a quantitative minimum liquidity

requirement consistent with the liquidity coverage ratio (LCR)

established by the Basel Committee on Banking Supervision

(BCBS). The rule requires a covered banking organization to hold

high-quality liquid assets (HQLA) in an amount equal to or

greater than its projected net cash outflows during a 30-day

stress period. Our HQLA under the rule predominantly consists

of central bank deposits, government debt securities, and

mortgage-backed securities of federal agencies. The LCR applies

to the Company and to our insured depository institutions (IDIs)

with total assets of $10 billion or more. In addition, rules issued

by the FRB impose enhanced liquidity risk management

standards on large bank holding companies (BHCs), such as

Wells Fargo.

The FRB, OCC and FDIC have also issued a rule implementing

a stable funding requirement, known as the net stable funding

ratio (NSFR), which requires a covered banking organization, such

as Wells Fargo, to maintain a minimum amount of stable funding,

including common equity, long-term debt and most types of

deposits, in relation to its assets, derivative exposures and

commitments over a one-year horizon period. The NSFR applies

to the Company and to our IDIs with total assets of $10 billion or

more. As of December 31, 2022, we were compliant with the

NSFR requirement.

Wells Fargo & Company 49

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Risk Management – Asset/Liability Management (continued)

Liquidity Coverage Ratio As of December 31, 2022 , the

Company, Wells Fargo Bank, N.A., and Wells Fargo National Bank

West exceeded the minimum LCR requirement of 100%.

Table 34 presents the Company’s quarterly average values for

the daily-calculated LCR and its components calculated pursuan t

to the LCR rule requirements. The LCR represents average HQLA

divided by average projected net cash outflows, as each is

defined under the LCR rule.

Table 34: Liquidity Coverage Ratio

Average for quarter ended

(in millions, except ratio) Dec 31, 2022 Sep 30, 2022 Dec 31, 2021

HQLA (1):

Eligible cash $ 123,446 125,576 210,527

(2)Eligible securities 231,337 238,678 172,761

Total HQLA 354,783 364,254 383,288

Projected net cash outflows (3) 292,001 296,495 325,015

LCR 122% 123 118

(1) Excludes excess HQLA at certain subsidiaries that are not transferable to other Wells Fargo entities.

(2) Net of applicable haircuts required under the LCR rule.

(3) Projected net cash outflows are calculated by applying a standardized set of outflow and inflow assumptions, defined by the LCR rule, to various exposures and liability types, such as deposits and

unfunded loan commitments, which are prescribed based on a number of factors including the type of customer and the nature of the account.

Liquidity Sources We maintain liquidity in the form of cash,

interest-earning deposits with banks, and unencumbered high-

quality, liquid debt securities. These assets make up our primary

sources of liquidity. Our primary sources of liquidity are

substantially the same in composition as HQLA under the LCR

rule; however, our primary sources of liquidity will generally

exceed HQLA calculated under the LCR rule due to the applicable

haircuts to HQLA and the exclusion of excess HQLA at our

subsidiary IDIs required under the LCR rule. Our primary sources

of liquidity are presented in Table 35 at fair value, which also

includes encumbered securities that are not included as available

HQLA in the calculation of the LCR.

Our cash is predominantly on deposit with the Federal

Reserve. Debt securities included as part of our primary source s

of liquidity are comprised of U.S. Treasury and federal agency

debt, and MBS issued by federal agencies within our debt

securities portfolio. We believe these debt securities provide

quick sources of liquidity through sales or by pledging to obta in

financing, regardless of market conditions. Some of these debt

securities are within our HTM portfolio and, as such, are not

intended for sale but may be pledged to obtain financing.

Table 35: Primary Sources of Liquidity

December 31, 2022 December 31, 2021

(in millions)

Total

Encumbered

Unencumbered

Total

Encumbered

Unencumbered

Interest-earning deposits with banks

$

124,561

—

124,561

209,614

—

209,614

Debt securities of U.S. Treasury and federal agencies

59,570

12,080

47,490

56,486

4,066

52,420

Federal agency mortgage-backed securities

230,881

34,151

196,730

293,870

58,955

234,915

Total $

415,012

46,231

368,781

559,970

63,021

496,949

In addition to our primary sources of liquidity shown in

Table 35, liquidity is also available through the sale or financing of

other debt securities including trading and/or AFS debt securities

as well as through the sale, securitization or financing of loans, to

the extent such debt securities and loans are not encumbered.

Funding Sources The Parent acts as a source of funding for the

Company through the issuance of long-term debt and equity.

WFC Holdings, LLC (the “IHC”) is an intermediate holding

company and subsidiary of the Parent, which provides funding

support for the ongoing operational requirements of the Parent

and certain of its direct and indirect subsidiaries. For additional

information on the IHC, see the “Regulatory Matters – ‘Living

Will’ Requirements and Related Matters” section in this Report.

Additional subsidiary funding is provided by deposits, short-term

borrowings and long-term debt.

Deposits have historically provided a sizable source of

relatively low-cost funds. Deposits were 145% and 166% of total

loans at December 31, 2022 and 2021, respectively.

As of December 31, 2022, we had approximately

$209.0 billion of available borrowing capacity at various Federal

Home Loan Banks and the Federal Reserve Discount Window.

Although available, we do not view the borrowing capacity at the

Federal Reserve Discount Window as a primary source of

liquidity. Table 36 presents a summary of our short-term

borrowings, which generally mature in less than 30 days. For

additional information on the classification of our short-term

borrowings, see Note 1 (Summary of Significant Accounting

Policies) to Financial Statements in this Report. We pledge

certain financial instruments that we own to collateralize

repurchase agreements and other securities financings. For

additional information, see the “Pledged Assets” section of Note

18 (Pledged Assets and Collateral) to Financial Statements in this

Report.

Wells Fargo & Company 50

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Table 36: Short-Term Bo rrowings

(in millions) December 31, 2022 December 31, 2021

Federal funds purchased and securities sold under agreements to repurchase $ 30,623 21,191

Other short-term borrowings (1) 20,522 13,218

Total $ 51,145 34,409

(1) Includes $7.0 billion and $0 of Federal Home Loan Bank (FHLB) advances at December 31, 2022 and 2021, respectively.

We access domestic and international capital markets for

long-term funding through issuances of registered debt

securities, private placements and asset-backed secured funding .

We issue long-term debt in a variety of maturities and currenci es

to achieve cost-efficient funding and to maintain an appropriat e

maturity profile. Proceeds from securities issued were used fo r

general corporate purposes unless otherwise specified in the

applicable prospectus or prospectus supplement, and we expect

the proceeds from securities issued in the future will be used for

the same purposes. Depending on market conditions and our

liquidity position, we may redeem or repurchase, and

subsequently retire, our outstanding debt securities in privately

negotiated or open market transactions, by tender offer, or

otherwise.

Table 37 presents a summary of our long-term debt. For

additional information on our long-term debt, including

contractual maturities, see Note 10 (Long-Term Debt ), and for

information on the classification of our long-term debt, see Note

1 ( Summary of Significant Accounting Policies ) to Financial

Statements in this Report .

Table 37: Long-Term Debt

(in millions) December 31, 2022 December 31, 2021

Wells Fargo & Company (Parent Only) $ 134,401 146,286

Wells Fargo Bank, N.A., and other bank entities (Bank) (1) 39,189 12,858

Other consolidated subsidiaries 1,280 1,545

Total $ 174,870 160,689

(1) Includes $27.0 billion and $0 of FHLB advances at December 31, 2022 and 2021, respectively. For additional information, see Note 10 (Long-Term Debt) to Financial Statements in this Report.

Credit Ratings Investors in the long-term capital markets, as

well as other market participants, generally will consider, among

other factors, a company’s debt rating in making investment

decisions. Rating agencies base their ratings on many

quantitative and qualitative factors, including capital adequacy,

liquidity, asset quality, business mix, the level and quality of

earnings, and rating agency assumptions regarding the

probability and extent of federal financial assistance or support

for certain large financial institutions. Adverse changes in these

factors could result in a reduction of our credit rating; however,

our debt securities do not contain credit rating covenants.

There were no actions undertaken by the rating agencies

with regard to our credit ratings during fourth quarter 2022.

See the “Risk Factors” section in this Report for additional

information regarding our credit ratings and the potential impact

a credit rating downgrade would have on our liquidity and

operations as well as Note 14 (Derivatives) to Financial

Statements in this Report for information regarding additional

collateral and funding obligations required for certain derivative

instruments in the event our credit ratings were to fall below

investment grade.

The credit ratings of the Parent and Wells Fargo Bank, N.A.,

as of December 31, 2022, are presented in Table 38.

Table 38: Credit Ratings as of December 31, 2022

Wells Fargo & Company Wells Fargo Bank, N.A.

Senior debt

Short-term

borrowings

Long-term

deposits

Short-term

borrowings

Moody’s A1 P-1 Aa1 P-1

S&P Global Ratings BBB+ A-2 A+ A-1

Fitch Ratings A+ F1 AA F1+

DBRS Morningstar AA (low) R-1 (middle) AA R-1 (high)

Wells Fargo & Company 51

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Capital Management

We have an active program for managing capital through a

comprehensive process for assessing the Company’s overall

capital adequacy. Our objective is to maintain capital at an

amount commensurate with our risk profile and risk tolerance

objectives, and to meet both regulatory and market

expectations. We primarily fund our capital needs through the

retention of earnings net of both dividends and share

repurchases, as well as through the issuance of preferred stock

and long- and short-term debt. Retained earnings at

December 31, 2022, increased $7.3 billion from December 31,

2021, predominantly as a result of $13.2 billion of Wells Fargo

net income, partially offset by $5.4 billion of common and

preferred stock dividends. During 2022, we issued $1.8 billion of

common stock, substantially all of which was issued in

connection with employee compensation and benefits. In 2022,

we repurchased 110 million shares of common stock at a cost of

$6 billion. In 2022, our AOCI decreased $11.7 billion,

predominantly due to net unrealized losses on AFS debt

securities. As interest rates increase, changes in the fair value of

AFS debt securities may negatively affect AOCI, which lowers the

amount of our risk-based capital. For additional information

about capital planning, see the “Capital Planning and Stress

Testing” section below.

In 2022, we redeemed $609 million of preferred stock. For

additional information, see Note 11 (Preferred Stock) to

Financial Statements in this Report.

Regulatory Capital Requirements

The Company and each of our IDIs are subject to various

regulatory capital adequacy requirements administered by the

FRB and the OCC. Risk-based capital rules establish risk-adjusted

ratios relating regulatory capital to different categories of assets

and off-balance sheet exposures as discussed below.

RISK-BASED CAPITAL AND RISK-WEIGHTED ASSETS The Company

is subject to rules issued by federal banking regulators to

implement Basel III capital requirements for U.S. banking

organizations. The rules contain two frameworks for calculating

capital requirements, a Standardized Approach and an Advanced

Approach applicable to certain institutions, including Wells Fargo,

and we must calculate our risk-based capital ratios under both

approaches. The Company is required to satisfy the risk-based

capital ratio requirements to avoid restrictions on capital

distributions and discretionary bonus payments. Table 39 and

Table 40 present the risk-based capital requirements applicable

to the Company under the Standardized Approach and Advanced

Approach, respectively, as of December 31, 2022.

Table 39: Risk-Based Capital Requirements – Standardized Approach

as of December 31, 2022

Standardized Approach

9.20%

10.70%

12.70%

4.50%

6.00%

8.00%

3.20%

1.50%

Minimum requirement Stress capital buffer

G-SIB capital surcharge

Common Equity Tier 1

(CET1) ratio

Tier 1 capital ratio

Total capital ratio

Table 40: Risk-Based Capital Requirements – Advanced Approach as of

December 31, 2022

Advanced Approach

8.50%

10.00%

12.00%

4.50%

6.00%

8.00%

2.50%

1.50%

Minimum requirement Capital conservation buffer

G-SIB capital surcharge

Common Equity Tier 1

(CET1) ratio

Tier 1 capital ratio

Total capital ratio

In addition to the risk-based capital requirements described

in Table 39 and Table 40, if the FRB determines that a period of

excessive credit growth is contributing to an increase in systemic

risk, a countercyclical buffer of up to 2.50% could be added to the

risk-based capital ratio requirements under federal banking

regulations. The countercyclical buffer in effect at December 31,

2022, was 0.00%.

The capital conservation buffer is applicable to certain

institutions, including Wells Fargo, under the Advanced Approach

and is intended to absorb losses during times of economic or

financial stress.

Wells Fargo & Company 52

The stress capital buffer is calculated based on the decrease

in a BHC’s risk-based capital ratios under the severely adverse

scenario in the FRB’s annual supervisory stress test and related

Comprehensive Capital Analysis and Review (CCAR), plus four

quarters of planned common stock dividends. Because the stress

capital buffer is calculated annually based on data that can differ

over time, our stress capital buffer, and thus our risk-based

capital ratio requirements under the Standardized Approach, are

subject to change in future periods. Our stress capital buffer for

the period October 1, 2022, through September 30, 2023, is

3.20%.

As a global systemically important bank (G-SIB), we are also

subject to the FRB’s rule implementing an additional capital

surcharge between 1.00-4.50% on the risk-based capital ratio

requirements of G-SIBs. Under the rule, we must annually

calculate our surcharge under two methods and use the higher

of the two surcharges. The first method (method one) considers

our size, interconnectedness, cross-jurisdictional activity,

substitutability, and complexity, consistent with the

methodology developed by the BCBS and the Financial Stability

Board (FSB). The second method (method two) uses similar

inputs, but replaces substitutability with use of short-term

wholesale funding and will generally result in higher surcharges

than under method one. Because the G-SIB capital surcharge is

calculated annually based on data that can differ over time, the

amount of the surcharge is subject to change in future years. If

our annual calculation results in a decrease to our G-SIB capital

surcharge, the decrease takes effect the next calendar year. If our

annual calculation results in an increase to our G-SIB capital

surcharge, the increase takes effect in two calendar years. Our

G-SIB capital surcharge will continue to be 1.50% in 2023.

Under the risk-based capital rules, on-balance sheet assets

and credit equivalent amounts of derivatives and off-balance

sheet items are assigned to one of several broad risk categories

according to the obligor, or, if relevant, the guarantor or the

nature of any collateral. The aggregate dollar amount in each risk

category is then multiplied by the risk weight associated with

that category. The resulting weighted values from each of the

risk categories are aggregated for determining total risk-

weighted assets (RWAs).

The tables that follow provide information about our risk-

based capital and related ratios as calculated under Basel III

capital rules. Table 41 summarizes our CET1, Tier 1 capital, total

capital, RWAs and capital ratios.

Table 41: Capital Components and Ratios

Standardized Approach Advanced Approach

($ in millions)

Required

Capital

Ratios (1)

Dec 31,

2022

Dec 31,

2021

Required

Capital

Ratios (1)

Dec 31,

2022

Dec 31,

2021

Common Equity Tier 1 (A) $ 133,527 140,643 133,527 140,643

Tier 1 capital (B) 152,567 159,671 152,567 159,671

Total capital (C) 186,747 196,281 177,258 186,553

Risk-weighted assets (D) 1,259,889 1,239,026 1,112,307 1,116,068

Common Equity Tier 1 capital ratio (A)/(D) 9.20 % 10.60 * 11.35 8.50 12.00 12.60

Tier 1 capital ratio (B)/(D) 10.70 12.11 * 12.89 10.00 13.72 14.31

Total capital ratio (C)/(D) 12.70 14.82 * 15.84 12.00 15.94 16.72

* Denotes t he b inding ratio u nder the S tandardized and Advanced Approaches a t December 31, 2022.

(1) Represents t he m inimum ratios r equired to a void restrictions on ca pital d istributions a nd discretionary bonus p ayments a t December 31, 2022.

Wells Fargo & Company 53

Capital Management (continued)

Table 42 provides information regarding the calculation and

composition of our risk-based capital under the Standardized an d

Advanced Approaches .

Table 42: Risk-Based Capital C alculation a nd Components

(in millions)

Dec 31,

2022

Dec 31,

2021

Total equity $ 181,875 190,110

Adjustments:

Preferred stock (1) (19,448) (20,057)

Additional paid-in capital on preferred stock (1) 173 136

Unearned Employee Stock Ownership Plan (ESOP) shares (1) — 646

Noncontrolling interests (1,986) (2,504)

Total common stockholders’ equity $ 160,614 168,331

Adjustments:

Goodwill (25,173) (25,180)

Certain identifiable intangible assets (other than MSRs) (152) (225)

Goodwill and other intangibles on investments in consolidated portfolio companies (included in other assets) (2,427) (2,437)

Applicable deferred taxes related to goodwill and other intangible assets (2) 890 765

CECL transition provision (3) 180 241

Other (405) (852)

Common Equity Tier 1 under the Standardized and Advanced Approaches $ 133,527 140,643

Preferred stock (1) 19,448 20,057

Additional paid-in capital on preferred stock (1) (173) (136)

Unearned ESOP shares (1) — (646)

Other (235) (247)

Total Tier 1 capital under the Standardized and Advanced Approaches (A) $ 152,567 159,671

Long-term debt and other instruments qualifying as Tier 2 20,503 22,740

Qualifying allowance for credit losses (4) 13,959 14,149

Other (282) (279)

Total Tier 2 capital under the Standardized Approach (B) $ 34,180 36,610

Total qualifying capital under the Standardized Approach (A)+(B) $ 186,747 196,281

Long-term debt and other instruments qualifying as Tier 2 20,503 22,740

Qualifying allowance for credit losses (4) 4,470 4,421

Other (282) (279)

Total Tier 2 capital under the Advanced Approach (C) $ 24,691 26,882

Total qualifying capital under the Advanced Approach (A)+(C) $ 177,258 186,553

(1) In fou rth quarter 2022, we r edeemed all ou tstanding shares of ou r ESOP Cumulative C onvertible Pr eferred Stock in exch ange for shares of t he C ompany’s com mon st ock. For additional infor mation,

see Note 11 (Preferred Stock) t o F inancial S tatements in t his Rep ort.

(2) Determined by applying the com bined federal st atutory rate a nd composite st ate incom e t ax r ates t o t he d ifference b etween b ook and tax b asis of t he r espective g oodwill a nd intangible a ssets a t

period-end.

(3) In second quarter 2020, the C ompany elected to a pply a modified transition p rovision issu ed by federal b anking regulators r elated to t he im pact of t he cu rrent expected credit loss a ccounting

standard (CECL) on r egulatory capital. The r ule p ermits cer tain b anking organizations t o exclu de fr om regulatory capital t he init ial a doption im pact of C ECL, plus 25% of t he cu mulative ch anges in t he

allowance for credit losses (AC L) u nder CECL for each period until D ecember 31, 2021, followed by a three-year phase-out period in wh ich the b enefit is r educed by 25% in y ear one, 50% in y ear two

and 75% in y ear three.

(4) Differences b etween t he a pproaches a re d riven b y the q ualifying amounts of AC L includable in Tier 2 ca pital. Under the Ad vanced Approach, eligible cr edit reserves r epresented by the a mount of

qualifying ACL in excess of exp ected credit losses (u sing regulatory definitions) is lim ited to 0. 60% of Ad vanced credit RWAs, whereas t he S tandardized Approach includes AC L in Tier 2 ca pital u p to

1.25% of S tandardized credit RWAs. Under both approaches, any excess AC L is d educted from the r espective t otal RWAs.

Table 43 provides the composition of our RWAs under the

Standardized and Advanced Approaches.

Table 43: Risk-Weighted Assets

Standardized Approach Advanced Approach (1)

Dec 31,

2022

Dec 31,

2021

Dec 31,

2022

Dec 31,

2021 (in millions)

Risk-weighted assets (RWAs):

Credit risk 1,186,810 757,436 747,714

Market risk 41,883 52,216 41,883 52,216

Operational risk — — 312,988 316,138

Total RWAs $ 1,259,889 1,239,026 1,112,307 1,116,068

$ 1,218,006

(1) RWAs ca lculated under the Ad vanced Approach utilize a risk-sensitive m ethodology, which relies u pon t he u se of int ernal cr edit models b ased upon ou r experience wit h internal r ating grades.

Advanced Approach also inclu des a n op erational r isk component, which reflects t he r isk of loss r esulting from inadequate or failed internal p rocesses, people a nd systems, or from external ev ents.

Wells Fargo & Company 54



Table 44 provides an analysis of the changes in CET1.

Table 44: Analysis o f C hanges in C ommon Equity Tier 1

(in millions)

Common Equity Tier 1 at December 31, 2021 $ 140,643

Net income applicable to common stock 12,067

Common stock dividends (4,184)

Common stock issued, repurchased, and stock compensation-related items (3,930)

Changes in accumulated other comprehensive income (11,677)

Goodwill 7

Certain identifiable intangible assets (other than MSRs) 73

Goodwill and other intangibles on investments in consolidated portfolio companies (included in other assets) 10

Applicable deferred taxes related to goodwill and other intangible assets (1) 125

CECL transition provision (2) (61)

Other 454

Change in Common Equity Tier 1 (7,116)

Common Equity Tier 1 at December 31, 2022 $ 133,527

(1) Determined by applying the com bined federal st atutory rate a nd composite st ate incom e t ax r ates t o t he d ifference b etween b ook and tax b asis of t he r espective g oodwill a nd intangible a ssets a t

period-end.

(2) In second quarter 2020, the C ompany elected to a pply a modified transition p rovision issu ed by federal b anking regulators r elated to t he im pact of C ECL on r egulatory capital. The r ule p ermits

certain b anking organizations t o exclu de fr om regulatory capital t he init ial a doption im pact of C ECL, plus 25% of t he cu mulative ch anges in t he a llowance for credit losses (AC L) u nder CECL for each

period until D ecember 31, 2021, followed by a three-year phase-out period in wh ich the b enefit is r educed by 25% in y ear one, 50% in y ear two a nd 75% in y ear three.

Table 45 presents net changes in the components of RWAs

under the Standardized and Advanced Approaches.

Table 45: Analysis o f C hanges in RWAs

(in millions) Standardized Approach Advanced Approach

Risk-weighted assets (RWAs) at December 31, 2021 $ 1,239,026 1,116,068

Net change in credit risk RWAs 31,196 9,722

Net change in market risk RWAs (10,333) (10,333)

Net change in operational risk RWAs — (3,150)

Total change in RWAs 20,863 (3,761)

RWAs at December 31, 2022 $ 1,259,889 1,112,307

Wells Fargo & Company 55

TANGIBLE COMMON EQUITY We also evaluate our business based

on certain ratios that utilize tangible common equity. Tangible

common equity is a non-GAAP financial measure and represents

total equity less preferred equity, noncontrolling interests,

goodwill, certain identifiable intangible assets (other than MSRs)

and goodwill and other intangibles on investments in

consolidated portfolio companies, net of applicable deferred

taxes. The ratios are (i) tangible book value per common share,

which represents tangible common equity divided by common

shares outstanding; and (ii) return on average tangible common

equity (ROTCE), which represents our annualized earnings as a

percentage of tangible common equity. The methodology of

determining tangible common equity may differ among

companies. Management believes that tangible book value per

common share and return on average tangible common equity,

which utilize tangible common equity, are useful financial

measures because they enable management, investors, and

others to assess the Company’s use of equity.

Table 46 provides a reconciliation of these non-GAAP

financial measures to GAAP financial measures.

Table 46: Tangible Common Equity

Balance at period-end Average balance

Quarter ended Year ended

(in millions, except ratios)

Dec 31,

2022

Dec 31,

2021

Dec 31,

2020

Dec 31,

2022

Dec 31,

2021

Dec 31,

2020

Total equity

$

181,875

190,110

185,712

183,224

191,219

184,689

Adjustments:

Preferred stock (1)

(19,448)

(20,057)

(21,136)

(19,930)

(21,151)

(21,364)

Additional paid-in capital on preferred stock (1)

173

136

152

143

137

148

Unearned ESOP shares (1)

—

646

875

512

874

1,007

Noncontrolling interests

(1,986)

(2,504)

(1,033)

(2,323)

(1,601)

(769)

Total common stockholders’ equity (A)

160,614

168,331

164,570

161,626

169,478

163,711

Adjustments:

Goodwill

(25,173)

(25,180)

(26,392)

(25,177)

(26,087)

(26,387)

Certain identifiable intangible assets (other than MSRs)

(152)

(225)

(342)

(190)

(294)

(389)

Goodwill and other intangibles on investments in consolidated

portfolio companies (included in other assets)

(2,427) (2,437) (1,965)

(2,359)

(2,226) (2,002)

Applicable deferred taxes related to goodwill and other intangible

assets (2)

890

765

856

864

867

834

Tangible common equity

(B)

141,254

136,727

134,764

141,738

135,767

Common shares outstanding

(C)

3,833.8

3,885.8

4,144.0

N/A

Net income applicable to common stock

(D)

N/A

20,256

1,786

Book value per common share

(A)/(C)

43.32

39.71

N/A

Tangible book value per common share

(B)/(C)

34.89

36.35

32.99

N/A

Return on average common stockholders’ equity (ROE)

(D)/(A)

N/A

7.47 %

11.95

1.09

Return on average tangible common equity (ROTCE)

(D)/(B)

N/A

8.95

14.29

1.32

Capital Management (continued)

$

133,752

$

41.89

$

12,067

(1) In fou rth quarter 2022, we r edeemed all ou tstanding shares of ou r ESOP C umulative C onvertible Pr eferred Stock in exch ange for shares of t he C ompany’s com mon st ock. For additional infor mation,

see Note 11 (Preferred Stock) t o F inancial S tatements in t his Rep ort.

(2) Determined by applying the com bined federal st atutory rate a nd composite st ate incom e t ax r ates t o t he d ifference b etween b ook and tax b asis of t he r espective g oodwill a nd intangible a ssets a t

period-end.

LEVERAGE REQUIREMENTS As a BHC, we are required to maintain

a supplementary leverage ratio (SLR) to avoid restrictions on

capital distributions and discretionary bonus payments and

maintain a minimum Tier 1 leverage ratio. Table 47 presents the

leverage requirements applicable to the Company as of

December 31, 2022 .

In addition, our IDIs are required to maintain an SLR of at

least 6.00% to be considered well capitalized under applicable

regulatory capital adequacy rules and maintain a minimum Tier 1

leverage ratio of 4.00%.

The FRB and OCC have proposed amendments to the SLR

rules (Proposed SLR rules) that would replace the 2.00%

supplementary leverage buffer with a buffer equal to one-half o f

our G-SIB capital surcharge. The Proposed SLR rules would

similarly tailor the current 6.00% SLR requirement for our IDIs .

Table 47: Leverage Requirements Applica ble to the C ompany

4.00%

5.00%

3.00%

4.00%

2.00%

Minimum requirement

Supplementary leverage buffer

Supplementary leverage

ratio

Tier 1 leverage ratio

Wells Fargo & Company 56



At December 31, 2022, the Company’s SLR was 6.86%, and

each of our IDIs exceeded their applicable SLR requirements.

Table 48 presents information regarding the calculation and

components of the Company’s SLR and Tier 1 leverage ratio.

Table 48: Leverage Ratios for the Company

($ in millions)

Quarter

ended

December

31,

2022

Tier 1 capital

(A)

$

152,567

Total average assets

1,875,396

Less: Goodwill and other permitted Tier 1 capital

deductions (net of deferred tax liabilities)

28,442

Total adjusted average assets

1,846,954

Plus adjustments for off-balance sheet exposures:

Derivatives (1)

63,277

Repo-style transactions (2)

3,250

Other (3)

311,308

Total off-balance sheet exposures

377,835

Total leverage exposure

(B)

$

2,224,789

Supplementary leverage ratio

(A)/(B)

6.86%

Tier 1 leverage ratio (4)

8.26%



(1)

(3)



(1) Adjustment represents d erivatives a nd collateral net ting exposures a s d efined for

supplementary leverage r atio d etermination p urposes.

(2) Adjustment represents cou nterparty credit risk for repo-style t ransactions wh ere

Wells F argo & Company is t he p rincipal cou nterparty facing the client .

(3) Adjustment represents cr edit equivalent amounts of ot her off-balance sh eet exposures

not already included as d erivatives a nd repo-style t ransactions exp osures.

(4) The Tier 1 lev erage r atio consist s of Tier 1 ca pital d ivided by total a verage a ssets, excluding

goodwill a nd certain ot her items a s d etermined under the r ule.

TOTAL LOSS ABSORBING CAPACITY As a G-SIB, we are required to

have a minimum amount of equity and unsecured long-term

debt for purposes of resolvability and resiliency, often referred to

as Total Loss Absorbing Capacity (TLAC). U.S. G-SIBs are required

to have a minimum amount of TLAC (consisting of CET1 capital

and additional Tier 1 capital issued directly by the top-tier or

covered BHC plus eligible external long-term debt) to avoid

restrictions on capital distributions and discretionary bonus

payments as well as a minimum amount of eligible unsecured

long-term debt. The components used to calculate our minimum

TLAC and eligible unsecured long-term debt requirements as of

December 31, 2022, are presented in Table 49.

Table 49: Components Used to Calculate TLAC and Eligible Unsecured

Long-Term Debt Requirements

TLAC requirement

Greater of:

7.50% of total leverage exposure

(the denominator of the SLR

calculation)

+

External TLAC leverage buffer

(equal to 2.00% of total leverage

exposure)

18.00% of RWAs

+

TLAC buffer (equal to 2.50% of RWAs

+ method one G-SIB capital surcharge

+ any countercyclical buffer)

Minimum amount of eligible unsecured long-term debt

Greater of:

6.00% of RWAs

+

Greater of method one and method

two G-SIB capital surcharge

4.50% of total leverage exposure

Under the Proposed SLR rules, the 2.00% external TLAC

leverage buffer would be replaced with a buffer equal to one-half

of our applicable G-SIB capital surcharge, and the leverage

component for calculating the minimum amount of eligible

unsecured long-term debt would be modified from 4.50% of

total leverage exposure to 2.50% of total leverage exposure plus

one-half of our applicable G-SIB capital surcharge.

Table 50 provides our TLAC and eligible unsecured long -

term debt and related ratios.

Table 50: TLAC and Eligible Unsecured Long-Term Debt

December 31, 2022

($ in millions) TLAC

Regulatory

Minimum

(2)

Eligible

Unsecured

Long-term

Debt

Regulatory

Minimum

Total eligible amount $ 293,152 134,521

Percentage of RWAs 23.27 % 21.50 10.68 7.50

Percentage of total

leverage exposure 13.18 9.50 6.05 4.50

(1) TLAC ratios a re ca lculated using the C ECL transition p rovision issu ed by federal b anking

regulators.

(2) Represents t he m inimum required to a void restrictions on ca pital d istributions a nd

discretionary bonus p ayments.

(3) Our minimum TLAC and eligible u nsecured long-term debt requirements a re ca lculated

based on t he g reater of RWAs d etermined under the S tandardized and Advanced

Approaches.

OTHER REGULATORY CAPITAL AND LIQUIDITY MATTERS For

information regarding the U.S. implementation of the Basel III

LCR and NSFR, see the “Risk Management – Asset/ Liability

Management – Liquidity Risk and Funding – Liquidity Standards”

section in this Report.

Our principal U.S. broker-dealer subsidiaries, Wells Fargo

Securities, LLC, and Wells Fargo Clearing Services, LLC, are

subject to regulations to maintain minimum net capital

requirements. As of December 31, 2022, these broker-dealer

subsidiaries were in compliance with their respective regulatory

minimum net capital requirements.

Capital Planning and Stress Testing

Our planned long-term capital structure is designed to meet

regulatory and market expectations. We believe that our long -

term targeted capital structure enables us to invest in and gro w

our business, satisfy our customers’ financial needs in varyin g

environments, access markets, and maintain flexibility to retur n

capital to our shareholders. Our long-term targeted capital

structure also considers capital levels sufficient to exceed ca pital

requirements, including the G-SIB capital surcharge and the

stress capital buffer, as well as potential changes to regulato ry

requirements for our capital ratios, planned capital actions,

changes in our risk profile and other factors . Accordingly, our

long-term target capital levels are set above their respective

regulatory minimums plus buffers.

The FRB capital plan rule establishes capital planning and

other requirements that govern capital distributions, including

dividends and share repurchases, by certain BHCs, including

Wells Fargo. The FRB assesses, among other things, the overall

financial condition, risk profile, and capital adequacy of BHCs

when evaluating their capital plans.

As part of the annual Comprehensive Capital Analysis and

Review, the FRB generates a supervisory stress test. The FRB

reviews the supervisory stress test results as required under the

Dodd-Frank Act using a common set of capital actions for all

large BHCs and also reviews the Company’s proposed capital

actions.

Federal banking regulators also require large BHCs and

banks to conduct their own stress tests to evaluate whether the

institution has sufficient capital to continue to operate during

periods of adverse economic and financial conditions.

Wells Fargo & Company 57



Capital Management (continued)

Securities Repurchases

From time to time the Board authorizes the Company to

repurchase shares of our common stock. Although we announce

when the Board authorizes share repurchases, we typically do not

give any public notice before we repurchase our shares. Various

factors determine the amount of our share repurchases,

including our capital requirements, the number of shares we

expect to issue for employee benefit plans and any acquisitions,

market conditions (including the trading price of our stock), and

regulatory and legal considerations, including under the FRB’s

capital plan rule. Due to the various factors that may impact the

amount of our share repurchases and the fact that we tend to be

in the market regularly to satisfy repurchase considerations

under our capital plan, our share repurchases occur at various

price levels. We may suspend share repurchase activity at any

time.

At December 31, 2022, we had remaining Board authority to

repurchase approximately 250 million shares, subject to

regulatory and legal conditions. For additional information about

share repurchases during fourth quarter 2022, see Part II, Item 5

in our 2022 Form 10-K.

Regulatory Matters

The U.S. financial services industry is subject to significant

regulation and regulatory oversight initiatives. This regulation

and oversight may continue to impact how U.S. financial services

companies conduct business and may continue to result in

increased regulatory compliance costs. The following highlights

the more significant regulations and regulatory oversight

initiatives that have affected or may affect our business. For

additional information about the regulatory matters discussed

below and other regulations and regulatory oversight matters,

see Part I, Item 1 “Regulation and Supervision” of our 2022 Form

10-K, and the “Overview,” “Capital Management,” “Forward-

Looking Statements” and “Risk Factors” sections and Note 25

(Regulatory Capital Requirements and Other Restrictions) to

Financial Statements in this Report.

Dodd-Frank Act

The Dodd-Frank Act is the most significant financial reform

legislation since the 1930s. The following provides additional

information on the Dodd-Frank Act, including certain of its

rulemaking initiatives.

• Enhanced supervision and regulation of systemically important

firms. The Dodd-Frank Act grants broad authority to federal

banking regulators to establish enhanced supervisory and

regulatory requirements for systemically important firms.

The FRB has finalized a number of regulations implementing

enhanced prudential requirements for large bank holding

companies (BHCs) like Wells Fargo regarding risk-based

capital and leverage, risk and liquidity management, single

counterparty credit limits, and imposing debt-to-equity

limits on any BHC that regulators determine poses a grave

threat to the financial stability of the United States. The FRB

and OCC have also finalized rules implementing stress

testing requirements for large BHCs and national banks. In

addition, the FRB has proposed a rule to establish

remediation requirements for large BHCs experiencing

financial distress. Furthermore, to promote a BHC’s safety

and soundness and the financial and operational resilience of

its operations, the FRB has finalized guidance regarding

effective boards of directors of large BHCs and has proposed

related guidance identifying core principles for effective

senior management. The OCC, under separate authority, has

finalized guidelines establishing heightened governance and

risk management standards for large national banks such as

Wells Fargo Bank, N.A. The OCC guidelines require covered

banks to establish and adhere to a written risk governance

framework to manage and control their risk-taking

activities. The guidelines also formalize roles and

responsibilities for risk management practices within

covered banks and create certain risk oversight

responsibilities for their boards of directors. In addition to

the authorization of enhanced supervisory and regulatory

requirements for systemically important firms, the Dodd-

Frank Act also established the Financial Stability Oversight

Council and the Office of Financial Research, which may

recommend new systemic risk management requirements

and require new reporting of systemic risks.

• Regulation of consumer financial products. The Dodd-Frank

Act established the Consumer Financial Protection Bureau

(CFPB) to ensure that consumers receive clear and accurate

disclosures regarding financial products and are protected

from unfair, deceptive or abusive practices. The CFPB has

issued a number of rules impacting consumer financial

products, including rules regarding the origination, servicing,

notification, disclosure and other requirements with respect

to residential mortgage lending, as well as rules impacting

prepaid cards, credit cards, and other financial products and

banking-related activities. In addition to these rulemaking

activities, the CFPB is continuing its ongoing supervisory

examination activities of the financial services industry with

respect to a number of consumer businesses and products,

including mortgage lending and servicing, fair lending

requirements, and auto finance.

• Regulation of swaps and other derivatives activities. The

Dodd-Frank Act established a comprehensive framework for

regulating over-the-counter derivatives, and, pursuant to

authority granted by the Dodd-Frank Act, the Commodity

Futures Trading Commission (CFTC) and the Securities and

Exchange Commission (SEC) have adopted comprehensive

sets of rules regulating swaps and security-based swaps,

respectively, and the OCC and other federal regulatory

agencies have adopted margin requirements for uncleared

swaps and security-based swaps. As a provisionally-

registered swap dealer and a conditionally-registered

security-based swap dealer, Wells Fargo Bank, N.A., is

subject to these rules. These rules, as well as others adopted

or under consideration by regulators in the United States

and other jurisdictions, may negatively impact customer

demand for over-the-counter derivatives, impact our ability

to offer customers new derivatives or amendments to

existing derivatives, and may increase our costs for engaging

in swaps, security-based swaps, and other derivatives

activities.

Regulatory Capital, Leverage, and Liquidity Requirements

The Company and each of our IDIs are subject to various

regulatory capital adequacy requirements administered by the

FRB and the OCC. For example, the Company is subject to rules

issued by federal banking regulators to implement Basel III risk-

based capital requirements for U.S. banking organizations. The

Company and its IDIs are also required to maintain specified

Wells Fargo & Company 58

leverage and supplementary leverage ratios. In addition, the

Company is required to have a minimum amount of total loss

absorbing capacity for purposes of resolvability and resiliency.

Federal banking regulators have also issued final rules requiring a

liquidity coverage ratio and a net stable funding ratio. For

additional information on the final risk-based capital, leverage

and liquidity rules, and additional capital requirements applicable

to us, see the “Capital Management” and “Risk Management –

Asset/Liability Management – Liquidity Risk and Funding –

Liquidity Standards” sections in this Report.

“Living Will” Requirements and Related Matters

Rules adopted by the FRB and the FDIC under the Dodd-Frank

Act require large financial institutions, including Wells Fargo , to

prepare and periodically submit resolution plans, also known a s

“living wills,” that would facilitate their rapid and orderly

resolution in the event of material financial distress or failu re.

Under the rules, rapid and orderly resolution means a

reorganization or liquidation of the covered company under the

U.S. Bankruptcy Code that can be accomplished in a reasonable

period of time and in a manner that substantially mitigates th e

risk that failure would have serious adverse effects on the

financial stability of the United States. In addition to the

Company’s resolution plan, our national bank subsidiary,

Wells Fargo Bank, N.A. (the “Bank”), is also required to prepar e

and periodically submit a resolution plan. If the FRB and/or FD IC

determine that our resolution plan has deficiencies, they may

impose more stringent capital, leverage or liquidity requiremen ts

on us or restrict our growth, activities or operations until w e

adequately remedy the deficiencies. If the FRB and/or FDIC

ultimately determine that we have been unable to remedy any

deficiencies, they could require us to divest certain assets o r

operations. On November 23, 2022, the FRB and FDIC

announced that the Company’s most recent resolution plan did

not have any shortcomings or deficiencies.

If Wells Fargo were to fail, it may be resolved in a bankruptcy

proceeding or, if certain conditions are met, under the resolution

regime created by the Dodd-Frank Act known as the “orderly

liquidation authority.” The orderly liquidation authority allows for

the appointment of the FDIC as receiver for a systemically

important financial institution that is in default or in danger of

default if, among other things, the resolution of the institution

under the U.S. Bankruptcy Code would have serious adverse

effects on financial stability in the United States. If the FDIC is

appointed as receiver for the Parent, then the orderly liquidation

authority, rather than the U.S. Bankruptcy Code, would

determine the powers of the receiver and the rights and

obligations of our security holders. The FDIC’s orderly liquidation

authority requires that security holders of a company in

receivership bear all losses before U.S. taxpayers are exposed to

any losses. There are substantial differences in the rights of

creditors between the orderly liquidation authority and the U.S.

Bankruptcy Code, including the right of the FDIC to disregard the

strict priority of creditor claims under the U.S. Bankruptcy Code

in certain circumstances and the use of an administrative claims

procedure instead of a judicial procedure to determine creditors’

claims.

The strategy described in our most recent resolution plan is

a single point of entry strategy, in which the Parent would be the

only material legal entity to enter resolution proceedings.

However, the strategy described in our resolution plan is not

binding in the event of an actual resolution of Wells Fargo,

whether conducted under the U.S. Bankruptcy Code or by the

FDIC under the orderly liquidation authority. The FDIC has

announced that a single point of entry strategy may be a

desirable strategy under its implementation of the orderly

liquidation authority, but not all aspects of how the FDIC might

exercise this authority are known and additional rulemaking is

possible.

To facilitate the orderly resolution of systemically important

financial institutions in case of material distress or failure, federal

banking regulations require that institutions, such as Wells Fargo,

maintain a minimum amount of equity and unsecured debt to

absorb losses and recapitalize operating subsidiaries. Federal

banking regulators have also required measures to facilitate the

continued operation of operating subsidiaries notwithstanding

the failure of their parent companies, such as limitations on

parent guarantees, and have issued guidance encouraging

institutions to take legally binding measures to provide capital

and liquidity resources to certain subsidiaries to facilitate an

orderly resolution. In response to the regulators’ guidance and to

facilitate the orderly resolution of the Company, on June 28,

2017, the Parent entered into a support agreement, as amended

and restated on June 26, 2019 (the “Support Agreement”), with

WFC Holdings, LLC, an intermediate holding company and

subsidiary of the Parent (the “IHC”), the Bank, Wells Fargo

Securities, LLC (“WFS”), Wells Fargo Clearing Services, LLC

(“WFCS”), and certain other subsidiaries of the Parent designated

from time to time as material entities for resolution planning

purposes (the “Covered Entities”) or identified from time to time

as related support entities in our resolution plan (the “Related

Support Entities”). Pursuant to the Support Agreement, the

Parent transferred a significant amount of its assets, including

the majority of its cash, deposits, liquid securities and

intercompany loans (but excluding its equity interests in its

subsidiaries and certain other assets), to the IHC and will

continue to transfer those types of assets to the IHC from time

to time. In the event of our material financial distress or failure,

the IHC will be obligated to use the transferred assets to provide

capital and/or liquidity to the Bank, WFS, WFCS, and the Covered

Entities pursuant to the Support Agreement. Under the Support

Agreement, the IHC will also provide funding and liquidity to the

Parent through subordinated notes and a committed line of

credit, which, together with the issuance of dividends, is expected

to provide the Parent, during business as usual operating

conditions, with the same access to cash necessary to service its

debts, pay dividends, repurchase its shares, and perform its other

obligations as it would have had if it had not entered into these

arrangements and transferred any assets. If certain liquidity and/

or capital metrics fall below defined triggers, or if the Parent’s

board of directors authorizes it to file a case under the U.S.

Bankruptcy Code, the subordinated notes would be forgiven, the

committed line of credit would terminate, and the IHC’s ability to

pay dividends to the Parent would be restricted, any of which

could materially and adversely impact the Parent’s liquidity and

its ability to satisfy its debts and other obligations, and could

result in the commencement of bankruptcy proceedings by the

Parent at an earlier time than might have otherwise occurred if

the Support Agreement were not implemented. The respective

obligations under the Support Agreement of the Parent, the IHC,

the Bank, and the Related Support Entities are secured pursuant

to a related security agreement.

In addition to our resolution plans, we must also prepare and

periodically submit to the FRB a recovery plan that identifies a

range of options that we may consider during times of

idiosyncratic or systemic economic stress to remedy any financial

weaknesses and restore market confidence without

extraordinary government support. Recovery options include the

possible sale, transfer or disposal of assets, securities, loan

portfolios or businesses. The Bank must also prepare and

Wells Fargo & Company 59

Regulatory Matters (continued)

periodically submit to the OCC a recovery plan that sets forth the

Bank’s plan to remain a going concern when the Bank is

experiencing considerable financial or operational stress, but has

not yet deteriorated to the point where liquidation or resoluti on

is imminent. If either the FRB or the OCC determines that our

recovery plan is deficient, they may impose fines, restriction s on

our business or ultimately require us to divest assets.

Other Regulatory Related Matters

• Regulatory actions. The Company is subject to a number of

consent orders and other regulatory actions, which may

require the Company, among other things, to undertake

certain changes to its business, operations, products and

services, and risk management practices, and include the

following:

◦ Consent Orders Discussed in the “Overview” Section in this

Report. For a discussion of certain consent orders

applicable to the Company, see the “Overview” section

in this Report.

◦ OCC approval of director and senior executive officer

appointments and certain post-termination payments.

Under the April 2018 consent order with the OCC,

Wells Fargo Bank, N.A., remains subject to requirements 

that were originally imposed in November 2016 to

provide prior written notice to, and obtain non-

objection from, the OCC with respect to changes in

directors and senior executive officers, and remains

subject to certain regulatory limitations on post-

termination payments to certain individuals and

employees.

• Regulatory Developments Related to COVID-19. In response

to the COVID-19 pandemic and related events, federal

banking regulators undertook a number of measures to help

stabilize the banking sector, support the broader economy,

and facilitate the ability of banking organizations like

Wells Fargo to continue lending to consumers and 

businesses. In addition, the OCC and the FRB issued

guidelines for banks and BHCs related to working with

customers affected by the COVID-19 pandemic, including

guidance with respect to waiving fees, offering repayment

accommodations, and providing payment deferrals. Any

current or future rules, regulations, and guidance related to

the COVID-19 pandemic and its impacts could require us to

change certain of our business practices, reduce our revenue

and earnings, impose additional costs on us, or otherwise

adversely affect our business operations and/or competitive

position.

• Regulatory Developments in Response to Climate Change.

Federal and state governments and government agencies

have demonstrated increased attention to the impacts and

potential risks associated with climate change. For example,

federal banking regulators are reviewing the implications of

climate change on the financial stability of the United States

and the identification and management by large banks of

climate-related financial risks. In addition, the SEC has

proposed rules that would require public companies to

disclose certain climate-related information, including

greenhouse gas emissions, climate-related targets and

goals, and governance of climate-related risks and relevant

risk management processes. The approaches taken by

various governments and government agencies can vary

significantly, evolve over time, and sometimes conflict. Any

current or future rules, regulations, and guidance related to

climate change and its impacts could require us to change

certain of our business practices, reduce our revenue and

earnings, impose additional costs on us, or otherwise

adversely affect our business operations and/or competitive

position.

Wells Fargo & Company 60

Critical Accounting Policies 

Our significant accounting policies (see Note 1 (Summary of

Significant Accounting Policies) to Financial Statements in this

Report) are fundamental to understanding our results of

operations and financial condition because they require that we

use estimates and assumptions that may affect the value of our

assets or liabilities and financial results. Six of these policies are

critical because they require management to make difficult,

subjective and complex judgments about matters that are

inherently uncertain and because it is likely that materially

different amounts would be reported under different conditions

or using different assumptions. These policies govern:

• the allowance for credit losses;

• the valuation of residential MSRs;

• the fair value of financial instruments;

• income taxes;

• liability for contingent litigation losses; and

• goodwill impairment.

Management has discussed these critical accounting policies

and the related estimates and judgments with the Board’s Audit

Committee.

Allowance for Credit Losses

We maintain an allowance for credit losses (ACL) for loans, which

is management’s estimate of the expected credit losses in the

loan portfolio and unfunded credit commitments, at the balance

sheet date, excluding loans and unfunded credit commitments

carried at fair value or held for sale. Additionally, we maintain an

ACL for debt securities classified as either HTM or AFS, other

financial assets measured at amortized cost, net investments in

leases, and other off-balance sheet credit exposures. For

additional information, see Note 1 (Summary of Significant

Accounting Policies) and Note 5 (Loans and Related Allowance

for Credit Losses) to Financial Statements in this Report.

For loans and HTM debt securities, the ACL is measured

based on the remaining contractual term of the financial asset

(including off-balance sheet credit exposures) adjusted, as

appropriate, for prepayments and permitted extension options

using historical experience, current conditions, and forecasted

information. For AFS debt securities, the ACL is measured using a

discounted cash flow approach and is limited to the difference

between the fair value of the security and its amortized cost.

Changes in the ACL and, therefore, in the related provision

for credit losses can materially affect net income. In applying the

judgment and review required to determine the ACL,

management considerations include the evaluation of past

events, historical experience, changes in economic forecasts and

conditions, customer behavior, collateral values, the length of the

initial loss forecast period, and other influences. From time to

time, changes in economic factors or assumptions, business

strategy, products or product mix, or debt security investment

strategy, may result in a corresponding increase or decrease in

our ACL. While our methodology attributes portions of the ACL

to specific financial asset classes (loan and debt security

portfolios) or loan portfolio segments (commercial and

consumer), the entire ACL is available to absorb credit losses of

the Company.

Judgment is specifically applied in:

• Economic assumptions and the length of the initial loss forecast

period. We forecast a wide range of economic variables to

estimate expected credit losses. Our key economic variables

include gross domestic product (GDP), unemployment rate,

and collateral asset prices. While many of these economic

variables are evaluated at the macro-economy level, some

economic variables are forecasted at more granular levels,

for example, using the metro statistical area (MSA) level for

unemployment rates, home prices and commercial real

estate prices. At least annually, we assess the length of the

initial loss forecast period and have currently set the period

to two years. For the initial loss forecast period, we forecast

multiple economic scenarios that generally include a base

scenario with an optimistic (upside) and one or more

pessimistic (downside) scenarios. Management exercises

judgment when assigning weight to the economic scenarios

that are used to estimate future credit losses.

• Reversion to historical loss expectations. Our long-term

average loss expectations are estimated by reverting to the

long-term average, on a linear basis, for each of the

forecasted economic variables. These long-term averages

are based on observations over multiple economic cycles.

The reversion period, which may be up to two years, is

assessed on a quarterly basis.

• Credit risk ratings applied to individual commercial loans,

unfunded credit commitments, and debt securities. Individually

assessed credit risk ratings are considered key credit

variables in our modeled approaches to help assess

probability of default and loss given default. Borrower

quality ratings are aligned to the borrower’s financial

strength and contribute to forecasted probability of default

curves. Collateral quality ratings combined with forecasted

collateral prices (as applicable) contribute to the forecasted

severity of loss in the event of default. These credit risk

ratings are reviewed by experienced senior credit officers

and subjected to reviews by an internal team of credit risk

specialists.

• Usage of credit loss estimation models. We use internally

developed models that incorporate credit attributes and

economic variables to generate credit loss estimates.

Management uses judgment and quantitative analytics in

the determination of segmentation, modeling approach, and

variables that are leveraged in the models. These models are

independently validated in accordance with the Company’s

policies. We routinely assess our model performance and

apply adjustments when necessary to improve the accuracy

of loss estimation. We also assess our models for limitations

against the company-wide risk inventory to help

appropriately capture known and emerging risks in our

estimate of expected credit losses and apply overlays as

needed.

• Valuation of collateral. The current fair value of collateral is

utilized to assess the expected credit losses when a financial

asset is considered to be collateral dependent. We apply

judgment when valuing the collateral either through

appraisals, evaluation of the cash flows of the property, or

other quantitative techniques. Decreases in collateral

valuations support incremental charge-downs and increases

in collateral valuation are included in the ACL as a negative

allowance when the financial asset has been previously

written-down below current recovery value.

• Contractual term considerations. The remaining contractual

term of a loan is adjusted for expected prepayments and

certain expected extensions, renewals, or modifications. We

extend the contractual term when we are not able to

unconditionally cancel contractual renewals or extension

Wells Fargo & Company 61

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Critical Accounting Policies (continued)

options. We also incorporate any scenarios where we

reasonably expect to provide an extension through a

troubled debt restructuring (TDR). Credit card loans have

indeterminate maturities, which requires that we determine

a contractual life by estimating the application of future

payments to the outstanding loan amount.

• Qualitative factors which may not be adequately captured in

the loss models. These amounts represent management’s

judgment of risks inherent in the processes and assumptions

used in establishing the ACL. We also consider economic

environmental factors, modeling assumptions and

performance, process risk, and other subjective factors,

including industry trends and emerging risk assessments.

Sensitivity The ACL for loans is sensitive to changes in key

assumptions which requires significant management judgment.

Future amounts of the ACL for loans will be based on a variety of

factors, including loan balance changes, portfolio credit quali ty,

and general forecasted economic conditions. The forecasted

economic variables used could have varying impacts on differen t

financial assets or portfolios. Additionally, throughout numero us

credit cycles, there are observed changes in economic variable s

such as the unemployment rate, GDP and real estate prices whic h

may not move in a correlated manner as variables may move in

opposite directions or differ across portfolios or geography.

Our sensitivity analysis does not represent management’s

view of expected credit losses at the balance sheet date. We

applied a 100% weight to a more severe downside scenario in our

sensitivity analysis to reflect the potential for further economic

deterioration. The outcome of the scenario was influenced by the

duration, severity, and timing of changes in economic variables

within the scenario. The sensitivity analysis resulted in a

hypothetical increase in the ACL for loans of approximately

$7.0 billion at December 31, 2022. The hypothetical increase in

our ACL for loans does not incorporate the impact of

management judgment for qualitative factors applied in the

current ACL for loans, which may have a positive or negative

effect on the results. It is possible that others performing similar

sensitivity analyses could reach different conclusions or results.

The sensitivity analysis excludes the ACL for debt securities

and other financial assets given its size relative to the overall

ACL. Management believes that the estimate for the ACL for

loans was appropriate at the balance sheet date.

Valuation of Residential Mortgage Servicing Rights

(MSRs)

MSRs are assets that represent the rights to service mortgage

loans for others. We recognize MSRs when we retain servicing

rights in connection with the sale or securitization of loans we

originate (asset transfers), or purchase servicing rights from

third parties. We also have acquired MSRs in the past under co-

issuer agreements that provide for us to service loans that were

originated and securitized by third-party correspondents.

We carry our MSRs related to residential mortgage loans

at fair value. Periodic changes in our residential MSRs and the

economic hedges used to hedge our residential MSRs are

reflected in earnings.

We use a model to estimate the fair value of our

residential MSRs. The model is validated in accordance with

Company policies by an internal model validation group. The

model calculates the present value of estimated future net

servicing income and incorporates inputs and assumptions

that market participants use in estimating fair value. Certain

significant inputs and assumptions generally are not

observable in the market and require judgment to determine.

If observable market indications do become available, these

are factored into the estimates as appropriate:

• The mortgage loan prepayment rate used to estimate future

net servicing income. The prepayment rate is the annual rate

at which borrowers are forecasted to repay their mortgage

loan principal; this rate also includes estimated borrower

defaults. We use models to estimate prepayment rate and

borrower defaults which are influenced by changes in

mortgage interest rates and borrower behavior.

• The discount rate used to present value estimated future net

servicing income. The discount rate is the required rate of

return investors in the market would expect for an asset

with similar risk. To determine the discount rate, we consider

the risk premium for uncertainties in the cash flow estimates

such as from servicing operations (e.g., possible changes in

future servicing costs, ancillary income and earnings on

escrow accounts). In 2022, we enhanced our approach for

estimating the discount rate to a more dynamic

methodology for market curves and volatility.

• The expected cost to service loans used to estimate future net

servicing income. The cost to service loans includes

estimates for unreimbursed expenses, such as delinquency

and foreclosure costs, which considers the number of

defaulted loans as well as the incremental cost to service

loans in default and foreclosure. We use a market

participant’s view for our estimated cost to service and our

actual costs may vary from that estimate.

Both prepayment rate and discount rate assumptions can,

and generally will, change quarterly as market conditions and

mortgage interest rates change. For example, an increase in

either the prepayment rate or discount rate assumption results

in a decrease in the fair value of the MSRs, while a decrease in

either assumption would result in an increase in the fair value of

the MSRs. In recent years, there have been significant market-

driven fluctuations in loan prepayment rate and the discount

rate. These fluctuations can be rapid and may be significant in the

future. Additionally, future regulatory or investor changes in

servicing standards as well as changes in individual state

foreclosure legislation or changes in market participant

information regarding servicing cost assumptions, may have an

impact on our servicing cost assumption and our MSR valuation

in future periods. We periodically benchmark our MSR fair value

estimate to independent appraisals.

For a description of our valuation and sensitivity of MSRs,

see Note 1 (Summary of Significant Accounting Policies), Note 6

(Mortgage Banking Activities), Note 15 (Fair Values of Assets

and Liabilities) and Note 16 (Securitizations and Variable Interest

Entities) to Financial Statements in this Report.

Fair Value of Financial Instruments

Fair value represents the price that would be received to sell a

financial asset or paid to transfer a financial liability in an orderly

transaction between market participants at the measurement

date.

We use fair value measurements to record fair value

adjustments to certain financial instruments and to fulfill fair

value disclosure requirements. For example, assets and liabilities

held for trading purposes, marketable equity securities, AFS

debt securities, derivatives and a majority of our LHFS are

carried at fair value each period. Other financial instruments,

such as certain LHFS, substantially all nonmarketable equity

securities, and loans held for investment, are not carried at fair

value each period but may require nonrecurring fair value

adjustments through the application of an accounting method

Wells Fargo & Company 62

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such as lower-of-cost-or-fair value (LOCOM), write-downs of

individual assets, or application of the measurement alternative

for certain nonmarketable equity securities. We also disclose our

estimate of fair value for financial instruments not carried at fair

value, such as HTM debt securities, loans held for investment,

and long-term debt.

The accounting requirements for fair value measurements

include a three-level hierarchy for disclosure of assets and

liabilities recorded at fair value. The classification of assets and

liabilities within the hierarchy is based on whether the inputs to

the valuation methodology used for measurement are

observable or unobservable. Observable inputs reflect market-

derived or market-based information obtained from

independent sources, while unobservable inputs reflect our

estimates about market data.

When developing fair value measurements, we maximize the

use of observable inputs and minimize the use of unobservable

inputs. When available, we use quoted prices in active markets to

measure fair value. If quoted prices in active markets are not

available, fair value measurement is based upon models that

generally use market-based or independently sourced market

parameters, including interest rate yield curves, prepayment

rates, option volatilities and currency rates. However, when

observable market data is limited or not available, fair value

estimates are typically determined using internal models based

on unobservable inputs. Internal models used to determine fair

value are validated in accordance with Company policies by an

internal model validation group. Additionally, we use third-party

pricing services to obtain fair values, which are used to either

record the price of an instrument or to corroborate internal

prices. Third-party price validation procedures are performed

over the reasonableness of the fair value measurements.

When using internal models based on unobservable inputs,

management judgment is necessary as we make judgments

about significant assumptions that market participants would

use to estimate fair value. Determination of these assumptions

includes consideration of many factors, including market

conditions and liquidity levels. Changes in the market conditions,

such as reduced liquidity in the capital markets or changes in

secondary market activities, may reduce the availability and

reliability of quoted prices or observable data used to determine

fair value. In such cases, it may be appropriate to adjust available

quoted prices or observable market data. For example, we may

adjust a price received from a third-party pricing service using

internal models based on discounted cash flows when the impact

of illiquid markets has not already been incorporated in the fair

value measurement. Additionally, for certain residential LHFS and

certain debt and equity securities where the significant inputs

have become unobservable due to illiquid markets and a third-

party pricing service is not used, our discounted cash flow model

uses a discount rate that reflects what we believe a market

participant would require in light of the illiquid market.

We continually assess the level and volume of market

activity in our debt and equity security classes in determining

adjustments, if any, to quoted prices. Given market conditions

can change over time, our determination of which securities

markets are considered active or inactive can change. If we

determine a market to be inactive, the degree to which quoted

prices require adjustment, can also change.

Significant judgment is also applied in the determination of

whether certain assets measured at fair value are classified as

Level 2 or Level 3 of the fair value hierarchy. When making this

judgment, we consider available information, including

observable market data, indications of market liquidity and

orderliness, and our understanding of the valuation techniques

and significant inputs used to estimate fair value. The

classification as Level 2 or Level 3 is based upon the specific facts

and circumstances of each instrument or instrument category

and judgments are made regarding the significance of

unobservable inputs to each instrument’s fair value

measurement in its entirety. If unobservable inputs are

considered significant to the fair value measurement, the

instrument is classified as Level 3.

Table 51 presents our (1) assets and liabilities recorded at

fair value on a recurring basis and (2) Level 3 assets and liabilities

recorded at fair value on a recurring basis, both presented as a

percentage of our total assets and total liabilities.

Table 51: Fair Va lue Level 3 S ummary

December 31, 2022 December 31, 2021

($ in billions)

Total

balance Level 3 (1)

Total

balance Level 3 (1)

Assets recorded at fair

value on a recurring

basis

$ 264.4 11.5 348.9 19.6

As a percentage

of total assets

14 % * 18 1

Liabilities recorded at fair

value on a recurring

basis

$ 41.7 4.7 30.1 2.6

As a percentage of

total liabilities

2 % * 2 *

* Less t han 1%.

(1) Before d erivative net ting adjustments.

See Note 15 (Fair Values of Assets and Liabilities ) to

Financial Statements in this Report for a complete discussion o n

our fair value of financial instruments, our related measuremen t

techniques and the impact to our financial statements.

Income Taxes

We file income tax returns in the jurisdictions in which we

operate and evaluate income tax expense in two components:

current and deferred income tax expense. Current income tax

expense represents our estimated taxes to be paid or refunded

for the current period and includes income tax expense related to

uncertain tax positions. Uncertain tax positions that meet the

more likely than not recognition threshold are measured to

determine the amount of benefit to recognize. An uncertain tax

position is measured at the largest amount of benefit that

management believes has a greater than 50% likelihood of

realization upon settlement. Tax benefits not meeting our

realization criteria represent unrecognized tax benefits.

Deferred income taxes are based on the balance sheet

method and deferred income tax expense results from changes

in deferred tax assets and liabilities between periods. Under the

balance sheet method, the net deferred tax asset or liability is

based on the tax effects of the differences between the book and

tax basis of assets and liabilities, and recognizes enacted changes

in tax rates and laws in the period in which they occur. Deferred

tax assets are recognized subject to management’s judgment

that realization is more likely than not. A valuation allowance

reduces deferred tax assets to the realizable amount.

The income tax laws of the jurisdictions in which we operate

are complex and subject to different interpretations by

management and the relevant government taxing authorities. In

establishing a provision for income tax expense, we must make

judgments about the application of these inherently complex tax

laws. We must also make estimates about when in the future

certain items will affect taxable income in the various tax

jurisdictions. Our interpretations may be subjected to review

during examination by taxing authorities and disputes may arise

Wells Fargo & Company 63

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Critical Accounting Policies (continued)

over the respective tax positions. We attempt to resolve these

disputes during the tax examination and audit process and

ultimately through the court systems when applicable.

We monitor relevant tax authorities and revise our estimate

of accrued income taxes due to changes in income tax laws and

their interpretation by the courts and regulatory authorities on a

quarterly basis. Revisions of our estimate of accrued income

taxes also may result from our own income tax planning and from

the resolution of income tax controversies. Such revisions in our

estimates may be material to our operating results for any given

quarter.

See Note 22 (Income Taxes) to Financial Statements in this

Report for a further description of our provision for income taxes

and related income tax assets and liabilities.

Liability for Contingent Litigation Losses

The Company is involved in a number of judicial, regulatory,

governmental, arbitration and other proceedings or

investigations concerning matters arising from the conduct of its

business activities, and many of those proceedings and

investigations expose the Company to potential financial loss or

other adverse consequences. We establish accruals for legal

actions when potential losses associated with the actions

become probable and the costs can be reasonably estimated. For

such accruals, we record the amount we consider to be the best

estimate within a range of potential losses that are both

probable and estimable; however, if we cannot determine a best

estimate, then we record the low end of the range of those

potential losses. The actual costs of resolving legal actions may

be substantially higher or lower than the amounts accrued for

those actions.

We apply judgment when establishing an accrual for

potential losses associated with legal actions and in establishing

the range of reasonably possible losses in excess of the accrual.

Our judgment in establishing accruals and the range of

reasonably possible losses in excess of the Company’s accrual for

probable and estimable losses is influenced by our understanding

of information currently available related to the legal evaluation

and potential outcome of actions, including input and advice on

these matters from our internal counsel, external counsel and

senior management. These matters may be in various stages of

investigation, discovery or proceedings. They may also involve a

wide variety of claims across our businesses, legal entities and

jurisdictions. The eventual outcome may be a scenario that was

not considered or was considered remote in anticipated

occurrence. Accordingly, our estimate of potential losses will

change over time and the actual losses may vary significantly.

The outcomes of legal actions are unpredictable and subject

to significant uncertainties, and it is inherently difficult to

determine whether any loss is probable or even possible. It is also

inherently difficult to estimate the amount of any loss and there

may be matters for which a loss is probable or reasonably

possible but not currently estimable. Accordingly, actual losses

may be in excess of the established accrual or the range of

reasonably possible loss.

See Note 13 (Legal Actions) to Financial Statements in this

Report for additional information.

Goodwill Impairment

We test goodwill for impairment annually in the fourth quarter or

more frequently as macroeconomic and other business factors

warrant. These factors may include trends in short-term or long -

term interest rates, negative trends from reduced revenue

generating activities or increased costs, adverse actions by

regulators, or company specific factors such as a decline in

market capitalization.

We identify reporting units to be assessed for goodwill

impairment at the reportable operating segment level or one

level below. We calculate reporting unit carrying amounts as

allocated capital plus assigned goodwill and other intangible

assets. We allocate capital to the reporting units under a risk-

sensitive framework driven by our regulatory capital

requirements. We estimate fair value of the reporting units

based on a balanced weighting of fair values estimated using

both an income approach and a market approach which are

intended to reflect Company performance and expectations as

well as external market conditions. The methodologies for

calculating carrying amounts and estimating fair values are

periodically assessed by senior management and revised as

necessary.

The income approach is a discounted cash flow (DCF)

analysis, which estimates the present value of future cash flows

associated with each reporting unit. A DCF analysis requires

significant judgment to model financial forecasts for our

reporting units, which includes future expectations of economic

conditions and balance sheet changes, as well as considerations

related to future business activities. The forecasts are reviewed

by senior management. For periods after our financial forecasts,

we incorporate a terminal value estimate based on an assumed

long-term growth rate. We discount these forecasted cash flows

using a consistent rate derived from the capital asset pricing

model which produces an estimated cost of equity for our

reporting units, which reflects risks and uncertainties in the

financial markets and in our internally generated business

projections.

The market approach utilizes observable market data from

comparable publicly traded companies, such as price-to-earnings

or price-to-tangible book value ratios, to estimate a reporting

unit’s fair value. The results of the market approach include a

control premium to represent our expectation of a hypothetical

acquisition of the reporting unit. Management uses judgment in

the selection of comparable companies and includes those with

the most similar business activities.

The aggregate fair value of our reporting units exceeded our

market capitalization for our fourth quarter 2022 assessment.

Factors that we considered in our assessment and contributed to

this difference included: (i) an overall premium that would be paid

to gain control of the operating and financial decisions of the

Company, (ii) synergies that we believe may not be reflected in

the price of the Company’s common stock, and (iii) risks or

benefits at the Company level that may not be reflected in the

aggregated fair value of the individual reporting units, such as

the impacts of a variety of historical matters, including litigation,

regulatory, and customer remediation matters.

Based on our fourth quarter 2022 assessment, there was no

impairment of goodwill at December 31, 2022. The fair values of

each reporting unit exceeded their carrying amounts by

substantial amounts, with the exception of our Consumer

Lending reporting unit. Although the fair value of our Consumer

Lending reporting unit exceeded its carrying amount by more

than 10%, it was the most sensitive to changes in valuation

assumptions, particularly related to the financial forecasts of

the supporting businesses. The home lending business may

experience uncertainty related to the current mortgage

origination market and the outcome of planned changes to the

business model. The credit card business has forecasted higher

loan balances driven by growth from new products. Adverse

changes to these forecasts may result in an impairment. Using

our fourth quarter 2022 assessment, we would need to

Wells Fargo & Company 64

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experience a substantial decrease in forecasted earnings of the

Consumer Lending reporting unit or have a significant increase

in the discount rate used for the DCF analysis to result in an

impairment. The amount of goodwill assigned to the Consumer

Lending reporting unit was $7.1 billion at December 31, 2022.

Declines in our ability to generate revenue, significant

increases in credit losses or other expenses, or adverse actions

from regulators are factors that could result in material goodwill

impairment of any reporting unit in a future period.

For additional information on goodwill and our reportable

operating segments, see Note 1 (Summary of Significant

Accounting Policies), Note 7 (Intangible Assets and Other

Assets), and Note 19 (Operating Segments) to Financial

Statements in this Report.

Current Accounting Developments

Table 52 provides the significant accounting updates applicable

to us that have been issued by the Financial Accounting

Standards Board (FASB) but are not yet effective.

Table 52: Current Accounting Developments – Issued Standards

Description a nd Effective Da te Financial statement impact

Accounting Standards Update (ASU) 2018-12 – Financial Services – Insurance (Topic 944):

Targeted Improvements to the Accounting for Long-Duration Contracts and subsequent related updates

The Update, effective January 1, 2023,

requires market risk benefits (features

of insurance contracts that protect the

policyholder from other-than-nominal

capital market risk and expose the

insurer to that risk) to be measured at

fair value through earnings with changes

in fair value attributable to our own

credit risk recognized in other

comprehensive income. The Update also

requires more frequent updates for

insurance assumptions, mandates the

use of a standardized discount rate for

traditional long-duration contracts, and

simplifies the amortization of deferred

acquisition costs.

We adopted the Update on January 1, 2023, with retroactive application to prior periods. The most

significant impact of adoption relates to reinsurance of variable annuity products for a limited number of

our insurance clients. Our reinsurance business is no longer entering into new contracts. These variable

annuity products contain guaranteed minimum benefits that require us to make benefit payments for

the remainder of the policyholder’s life once the account values are exhausted. These guaranteed

minimum benefits meet the definition of market risk benefits and are measured at fair value.

At adoption, the effect of the difference between fair value and the carrying value of our market risk

benefits, net of income tax adjustments and excluding the impact of our own credit risk, was

approximately $325 million as of January 1, 2023. The adjustment increased our retained earnings and

regulatory capital amounts and ratios. The adjustment for the impact of our own credit risk recorded as

an increase to other comprehensive income was approximately $15 million, net of tax, as of January 1,

2023. We expect future earnings volatility from changes in the fair value of market risk benefits, which

are sensitive to changes in equity and fixed income markets, as well as policyholder behavior and changes

in mortality assumptions. We economically hedge the market volatility, where feasible.

Changes in the accounting for the liability of future policy benefits for traditional long-duration contracts

and deferred acquisition costs did not have a material impact upon adoption.

ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method

The Update, effective January 1, 2023

(with early adoption permitted),

establishes the portfolio layer method,

which expands an entity’s ability to

achieve fair value hedge accounting for

interest rate risk hedges of closed

portfolios of financial assets. The Update

also provides guidance on the

accounting for hedged item basis

adjustments under the portfolio layer

method.

We adopted the Update on January 1, 2023 on a prospective basis. No cumulative effect adjustment to

the opening balance of stockholders’ equity was required upon adoption, as impacts to us were reflected

prospectively. The Update improves our ability to use derivatives to hedge interest rate risk exposures

associated with portfolios of financial assets, such as fixed-rate available-for-sale debt securities and

loans. The Update allows us to hedge a larger proportion of these portfolios by expanding the number

and type of derivatives permitted as eligible hedges, as well as by increasing the scope of eligible hedged

items to include both prepayable and nonprepayable assets.

Upon adoption, any election to designate portfolio layer method hedges is applied prospectively.

Additionally, the Update permits a one-time reclassification of debt securities from held-to-maturity to

available-for-sale classification as long as the securities are designated in a portfolio layer method hedge

no later than 30 days after the adoption date.

In January 2023, we reclassified fixed-rate debt securities with an aggregate fair value of $23.2 billion

and amortized cost of $23.9 billion from held-to-maturity to available-for-sale and designated interest

rate swaps with notional amounts of $20.1 billion as fair value hedges using the portfolio layer method.

The transfer of debt securities was recorded at fair value and resulted in approximately $566 million of

unrealized losses associated with available-for-sale debt securities being recorded to other

comprehensive income, net of deferred taxes.

(continued on following page)

Wells Fargo & Company 65

Current Accounting Developments (continued)

(continued from previous page)

Description a nd Effective Da te Financial statement impact

ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

The Update, effective January 1, 2023

(with early adoption permitted),

eliminates the accounting and reporting

for TDRs by creditors and introduces

new required disclosures for loan

modifications made to borrowers

experiencing financial difficulty. The

Update also amends the guidance for

vintage disclosures to require disclosure

of current period gross charge-offs by

year of origination.

We adopted the Update on January 1, 2023. The Update will impact the measurement of the ACL for

loans and require new enhanced disclosures related to loan modifications and credit quality, specifically

the Update:

• Eliminates the requirement to use a discounted cash flow (DCF) approach to measure the ACL for

TDRs and instead allows for the use of an expected loss approach for all loans. On January 1, 2023,

we removed the interest concession component recognized in the ACL for TDRs using a DCF

approach. The cumulative effect adjustment reflected the difference between the pre-modification

and post-modification effective interest rates, which would have been recognized over the

remaining life of the loans as interest income. The adjustment was a reduction to the ACL for loans

of approximately $430 million, and an increase to retained earnings of approximately $320 million,

after-tax. This adjustment to retained earnings impacts regulatory capital amounts and ratios.

• Eliminates TDR disclosures and requires new disclosures for modifications made to borrowers

experiencing financial difficulty in the form of principal forgiveness, interest rate reduction, other

than insignificant payment delay, term extension, or a combination of these modifications.

• Requires us to provide current period gross charge-offs by origination date (vintage) in our credit

quality disclosures on a prospective basis beginning as of the adoption date.

Other Accounting Developments

The following Updates are applicable to us but are not expected

to have a material impact on our consolidated financial

statements:

• ASU 2021-08 – Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from

Contracts with Customers

• ASU 2022-03 – Fair Value Measurement (Topic 820): Fair

Value Measurement of Equity Securities Subject to Contractual

Sale Restrictions

Wells Fargo & Company 66

Forward-Looking Statements

This document contains forward-looking statements. In addition ,

we may make forward-looking statements in our other

documents filed or furnished with the Securities and Exchange

Commission, and our management may make forward-looking

statements orally to analysts, investors, representatives of th e

media and others. Forward-looking statements can be identified

by words such as “anticipates,” “intends,” “plans,” “seeks,”

“believes,” “estimates,” “expects,” “target,” “projects,” “outl ook,”

“forecast,” “will,” “may,” “could,” “should,” “can” and simila r

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 th e

Company, including our outlook for future growth; (ii) our

noninterest expense and efficiency ratio; (iii) future credit q uality

and performance, including our expectations regarding future

loan losses, our allowance for credit losses, and the economic

scenarios considered to develop the allowance; (iv) our

expectations regarding net interest income and net interest

margin; (v) loan growth or the reduction or mitigation of risk in

our loan portfolios; (vi) future capital or liquidity levels, r atios or

targets; (vii) the performance of our mortgage business and an y

related exposures; (viii) the expected outcome and impact of

legal, regulatory and legislative developments, as well as our

expectations regarding compliance therewith; (ix) future

common stock dividends, common share repurchases and other

uses of capital; (x) our targeted range for return on assets, r eturn

on equity, and return on tangible common equity; (xi)

expectations regarding our effective income tax rate; (xii) th e

outcome of contingencies, such as legal proceedings; (xiii)

environmental, social and governance related goals or

commitments; and (xiv) 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 t o

the future, they are subject to inherent uncertainties, risks a nd

changes in circumstances that are difficult to predict. Our act ual

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 com plete,

important factors that could cause actual results to differ

materially from those in the forward-looking statements includ e

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, geopolitical matters (including the conflict in

Ukraine), and any slowdown in global economic growth;

• the effect of the COVID-19 pandemic, including on our

credit quality and business operations, as well as its impact

on general economic and financial market conditions;

• 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;

• current, pending or future legislation or regulation that

could have a negative effect on our revenue and businesses,

including rules and regulations relating to bank products and

financial services;

• developments in our mortgage banking business, including

the extent of the success of our mortgage loan modification

efforts, the amount of mortgage loan repurchase demands

that we receive, any negative effects relating to our

mortgage servicing, loan modification or foreclosure

practices, and the effects of regulatory or judicial

requirements or guidance impacting our mortgage banking

business and any changes in industry standards or our

strategic plans for the business;

• our ability to realize any efficiency ratio or expense target a s

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 or in the level or composition of ou r

assets or liabilities 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 impairments of

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

and wealth management businesses;

• negative effects from the retail banking sales practices

matter and from 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 employees, 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 activitie s,

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;

• changes to U.S. tax guidance and regulations as well as the

effect of discrete items on our effective income tax rate;

• our ability to develop and execute effective business plans

and strategies; and

• the other risk factors and uncertainties described under

“Risk Factors” in this Report.

Wells Fargo & Company 67

Forward-Looking Statements (continued)

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,

and may be subject to regulatory approval or conditions.

For additional information about factors that could cause

actual results to differ materially from our expectations, refe r to

our reports filed with the Securities and Exchange Commission,

including the discussion under “Risk Factors” in this Report, a s

filed with the Securities and Exchange Commission and availabl e

on its website at www.sec.gov.

1

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 target s

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 i n

forecasting and quantifying future amounts or when they may

occur. Such unavailable information could be significant to fut ure

results.

1

We do not control this website. Wells Fargo has provided this link for

your convenience, but does not endorse and is not responsible for the

content, links, privacy policy, or security policy of this website.

Wells Fargo & Company 68



Risk Factors

An investment in the Company involves risk, including the

possibility that the value of the investment could fall

substantially and that dividends or other distributions on the

investment could be reduced or eliminated. We discuss below

risk factors that could adversely affect our financial results and

condition, and the value of, and return on, an investment in the

Company.

ECONOMIC, FINANCIAL MARKETS, INTEREST RATES, AND

LIQUIDITY RISKS

Our financial results have been, and will continue to be,

materially affected by general economic conditions, and a 

deterioration in economic conditions or in the financial

markets may materially adversely affect our lending and other

businesses and our financial results and condition.  We

generate revenue from the interest and fees we charge on the

loans and other products and services we sell, and a substantia l

amount of our revenue and earnings comes from the net interest

income and fee income that we earn from our consumer and

commercial lending and banking businesses. These businesses

have been, and will continue to be, materially affected by the

state of the U.S. economy, particularly unemployment levels an d

home prices. The negative effects and continued uncertainty

stemming from U.S. fiscal, monetary and political matters,

including concerns about deficit and debt levels, inflation, ta xes

and U.S. debt ratings, have impacted and may continue to impac t

the global economy. Moreover, geopolitical matters, including

international political unrest or disturbances, such as the con flict

in Ukraine, as well as continued concerns over commodity prices ,

restrictions on international trade and corresponding retaliato ry

measures, and global economic difficulties, may impact the

stability of financial markets and the global economy. Any

impacts to the global economy could have a similar impact to th e

U.S. economy. A prolonged period of slow growth in the global

economy or any deterioration in general economic conditions

and/or the financial markets resulting from the above matters o r

any other events or factors that may disrupt or weaken the U.S .

or global economy , could materially adversely affect our

financial results and condition.  

A weakening in business or economic conditions, including

higher unemployment levels or declines in home prices, as well as

higher interest rates, can also adversely affect our customers’

ability to repay their loans or other obligations, which can

negatively impact our credit performance. If unemployment

levels worsen or if home prices fall we would expect to incur

elevated charge-offs and provision expense from increases in our

allowance for credit losses. These conditions may adversely

affect not only consumer loan performance but also commercial

and CRE loans, especially for those business borrowers that rely

on the health of industries that may experience deteriorating

economic conditions. The ability of these and other borrowers to

repay their loans may deteriorate, causing us, as one of the

largest commercial and CRE lenders in the U.S., to incur

significantly higher credit losses. In addition, weak or

deteriorating economic conditions make it more challenging for

us to increase our consumer and commercial loan portfolios by

making loans to creditworthy borrowers at attractive yields.

Furthermore, weak economic conditions, as well as competition

and/or increases in interest rates, could soften demand for our

loans resulting in our retaining a much higher amount of lower

yielding liquid assets on our consolidated balance sheet. If

economic conditions do not continue to improve or if the

economy worsens and unemployment rises, which also would

likely result in a decrease in consumer and business confidence

and spending, the demand for our products, including our

consumer and commercial loans, may fall, reducing our interest

and noninterest income and our earnings.

A deterioration in business and economic conditions, which

may erode consumer and investor confidence levels, and/or

increased volatility of financial markets, also could adversely

affect financial results for our fee-based businesses, including our

investment advisory, securities brokerage, wealth management,

markets and investment banking businesses. For example,

because investment advisory fees are often based on the value of

assets under management, a fall in the market prices of those

assets could reduce our fee income. Changes in stock market

prices could affect the trading activity of investors, reducing

commissions and other fees we earn from our brokerage

business. In addition, adverse market conditions may negatively

affect the performance of products we have provided to

customers, which may expose us to legal actions or additional

costs. Poor economic conditions and volatile or unstable financial

markets also can negatively affect our debt and equity

underwriting and advisory businesses, as well as our venture

capital business and trading activities, including through

heightened counterparty credit risk. Any deterioration in global

financial markets and economies, including as a result of any

international political unrest or disturbances, may adversely

affect the revenue and earnings of our international operations,

particularly our global financial institution and correspondent

banking services.

For additional information, see the “Risk Management –

Asset/Liability Management” and “– Credit Risk Management”

sections in this Report.

The COVID-19 pandemic has adversely impacted our business

and financial results and any further impact will depend on

future developments, which are highly uncertain and cannot be

predicted. The COVID-19 pandemic has negatively impacted the

global economy; disrupted global supply chains; affected equity

market valuations; and created significant volatility and

disruption in financial markets and unemployment levels. As a

result of the pandemic, the demand for our products and services

has, at times, been significantly impacted, which adversely

affected our revenue. The pandemic also resulted in the

recognition of credit losses in our loan portfolios and increases in

our allowance for credit losses, particularly for industries most

directly and adversely affected by the pandemic, such as travel

and entertainment.

Moreover, the pandemic created additional operational and

compliance risks, including the need to quickly implement and

execute new pandemic-related programs and procedures,

comply with rapidly changing regulatory requirements, address

any increased risk of fraudulent activity, and protect the integrity

and functionality of our systems, networks, and operations while

a larger number of our employees and those of our third-party

service providers may spend more time working remotely than

prior to the pandemic. In response to the pandemic, we

previously suspended certain mortgage foreclosure activities and

provided fee waivers, payment deferrals, and other assistance for

certain consumer and commercial lending customers.

Furthermore, our participation in governmental measures taken

to address the economic impact from the pandemic could

Wells Fargo & Company 69



Risk Factors (continued)

continue to result in litigation and government investigations

and proceedings. In addition, we previously reduced our common

stock dividend and temporarily suspended share repurchases.

The pandemic also increased the likelihood and/or magnitude of

the other risks described herein, including credit, market and

operational related risks.

The extent to which the COVID-19 pandemic further

impacts our business, results of operations, and financial

condition, as well as our regulatory capital and liquidity ratios,

depends on future developments, which are highly uncertain and

cannot be predicted, including the scope and duration of the

pandemic and actions taken by governmental authorities and

other third parties in response to the pandemic. Depending on

future developments, the COVID-19 pandemic or any new

pandemic could result in the occurrence of new, unanticipated

adverse effects on us or the recurrence of adverse effects similar

to those already experienced.

Changes in interest rates and financial market values could

reduce our net interest income and earnings, as well as our

other comprehensive income, including as a result of

recognizing losses on the debt and equity securities that we

hold in our portfolio or trade for our customers. Changes in

either our net interest margin or the amount or mix of earning

assets we hold, including as a result of the asset cap under the

February 2018 consent order with the FRB, could affect our net

interest income and our earnings. Changes in interest rates can

affect our net interest margin. Although the yield we earn on our

assets and our funding costs tend to move in the same direction

in response to changes in interest rates, one can rise or fall faster

than the other, causing our net interest margin to expand or

contract. If our funding costs rise faster than the yield we earn on

our assets or if the yield we earn on our assets falls faster than

our funding costs, our net interest margin could contract.

The amount and type of earning assets we hold can affect

our yield and net interest income. We hold earning assets in the

form of loans and debt and equity securities, among other assets.

As noted above, if the economy worsens we may see lower

demand for loans by creditworthy customers, reducing our yield

and net interest income. In addition, our net interest income and

net interest margin can be negatively affected by a prolonged

period of low interest rates as it may result in us holding lower

yielding loans and securities on our consolidated balance sheet,

particularly if we are unable to replace the maturing higher

yielding assets with similar higher yielding assets. Increases in

interest rates, however, may continue to negatively affect loan

demand and could result in higher credit losses as borrowers may

have more difficulty making higher interest payments. As

described below, changes in interest rates also affect our

mortgage business, including the value of our MSRs. In an effort

to address high inflation, the FRB significantly raised its target

range for the federal funds rate and has indicated it may continue

to raise it in 2023.

Changes in the slope of the yield curve – or the spread

between short-term and long-term interest rates – could also

reduce our net interest income and net interest margin.

Normally, the yield curve is upward sloping, meaning short-term

rates are lower than long-term rates. When the yield curve

flattens or inverts, our net interest income and net interest

margin could decrease if the cost of our short-term funding

increases relative to the yield we can earn on our long-term

assets. Moreover, a negative interest rate environment, in which

interest rates drop below zero, could reduce our net interest

income and net interest margin due to a likely decline in the

interest we could earn on loans and other earning assets, while

also likely requiring us to pay to maintain our deposits with

the FRB.

We assess our interest rate risk by estimating the effect on

our earnings under various scenarios that differ based on

assumptions about the direction, magnitude and speed of

interest rate changes and the slope of the yield curve. We may

hedge some of that interest rate risk with interest rate

derivatives. We also rely on the “natural hedge” that our

mortgage loan originations and servicing rights can provide as

their revenue impact tends to move in opposite directions based

on changes in interest rates.

We generally do not hedge all of our interest rate risk. There

is always the risk that changes in interest rates, credit spreads or

option volatility could reduce our net interest income and

earnings, as well as our other comprehensive income, in material

amounts, especially if actual conditions turn out to be materially

different than what we assumed. For example, if interest rates

rise or fall faster than we assumed or the slope of the yield curve

changes, we may incur significant losses on debt securities we

hold as investments. To reduce our interest rate risk, we may

rebalance our portfolios of debt securities, equity securities and

loans, refinance our debt and take other strategic actions. We

may incur losses when we take such actions. In addition, changes

in interest rates can result in increased basis risk, which could

limit the effectiveness of our hedging activities.

Because of changing economic and market conditions, as

well as credit ratings, affecting issuers and the performance o f

any underlying collateral, we may be required to recognize othe r-

than-temporary impairment (OTTI) in future periods on the

securities we hold. Furthermore, the value of the debt securiti es

we hold can fluctuate due to changes in interest rates, issuer

creditworthiness, and other factors. Our net income also is

exposed to changes in interest rates, credit spreads, foreign

exchange rates, and equity and commodity prices in connection

with our trading activities, which are conducted primarily to

accommodate the investment and risk management activities of

our customers, as well as when we execute economic hedging to

manage certain balance sheet risks. Trading debt securities an d

equity securities held for trading are carried at fair value wi th

realized and unrealized gains and losses recorded in noninteres t

income. As part of our business to support our customers, we

trade public debt and equity securities and other financial

instruments that are subject to market fluctuations with gains

and losses recognized in net income. In addition, although hig h

market volatility can increase our exposure to trading-related

losses, periods of low volatility may have an adverse effect o n our

businesses as a result of reduced customer activity levels.

Although we have processes in place to measure and monitor the

risks associated with our trading activities, including stress

testing and hedging strategies, there can be no assurance that

our processes and strategies will be effective in avoiding loss es

that could have a material adverse effect on our financial resu lts.

The value of our marketable and nonmarketable equity

securities can fluctuate from quarter to quarter. Marketable

equity securities are carried at fair value with unrealized gains and

losses reflected in earnings. Nonmarketable equity securities are

carried under the cost method, equity method, or measurement

alternative, while others are carried at fair value with unrealized

gains and losses reflected in earnings. Earnings from our equity

securities portfolio may be volatile and hard to predict, and may

have a significant effect on our earnings from period to period.

When, and if, we recognize gains may depend on a number of

factors, including general economic and market conditions, the

prospects of the companies in which we invest, when a company

Wells Fargo & Company 70



goes public, the size of our position relative to the public float,

and whether we are subject to any resale restrictions.

Nonmarketable equity securities include our private equity

and venture capital investments that could result in significant

OTTI losses for those investments carried under the

measurement alternative or equity method. If we determine

there is OTTI for an investment, we write-down the carrying

value of the investment, resulting in a charge to earnings, which

could be significant.

For additional information, see the “Risk Management –

Asset/Liability Management – Interest Rate Risk”, “– Mortgage

Banking Interest Rate and Market Risk”, “– Market Risk – Trading

Activities”, and “– Market Risk – Equity Securities” and the

“Balance Sheet Analysis – Available-for-Sale and Held-to-

Maturity Debt Securities” sections in this Report and Note 2

(Trading Activities), Note 3 (Available-for-Sale and Held-to-

Maturity Debt Securities) and Note 4 (Equity Securities) to

Financial Statements in this Report.

The transition away from the London Interbank Offered Rate

(LIBOR) may adversely affect our business, results of

operations, and financial condition. The administrator of LIBOR

ceased publication of LIBOR settings on a representative basis on

December 31, 2021, with the exception of the most commonly

used U.S. dollar (USD) LIBOR settings, which will no longer be

published on a representative basis after June 30, 2023.

Additionally, federal banking regulators issued guidance strongly

encouraging banking organizations to cease using USD LIBOR in

new contracts. We have a significant number of assets and

liabilities, such as legacy commercial loans, adjustable-rate

mortgage loans, derivatives, debt securities, and long-term debt,

referenced to LIBOR and other interbank offered rates. When

any such benchmark rate or other referenced financial metric is

significantly changed, replaced or discontinued, or ceases to be

recognized as an acceptable market benchmark rate or financial

metric, there may be uncertainty or differences in the calculation

of the applicable interest rate or payment amount depending on

the terms of the governing instrument.

This could impact the financial performance of previously

booked transactions, result in losses on financial instruments we

hold, require different hedging strategies or result in ineffective

or increased basis risk on existing hedges, impact the overall

interest rate environment and the availability or cost of floating-

rate funding, affect our capital and liquidity planning and

management, or have other adverse financial consequences.

There can be no assurance that any new benchmark rate, such as

the Secured Overnight Financing Rate (SOFR), or other financial

metric will be an adequate alternative to LIBOR or produce the

economic equivalent of LIBOR. In addition, the transition away

from LIBOR will continue to require changes to existing

transaction data, products, systems, models, operations, and

pricing processes, as well as the modification or renegotiation of

contracts that reference USD LIBOR. It may also continue to

result in significant operational, systems, or other practical

challenges, increased compliance and operational costs, and

heightened expectations and scrutiny from regulators, and could

result in litigation, reputational harm, or other adverse

consequences. Furthermore, the transition away from widely

used benchmark rates like LIBOR could result in customers or

other market participants challenging the determination of their

interest payments, disputing the interpretation or

implementation of fallback provisions and other transition

related changes, or entering into fewer transactions or

postponing their financing needs, which could reduce our

revenue and adversely affect our business. Moreover, to the

extent borrowers with loans referenced to LIBOR, such as

adjustable-rate mortgage loans, experience higher interest

payments as a result of the transition to a new benchmark rate,

our customers’ ability to repay their loans may be adversely

affected, which can negatively impact our credit performance.

For additional information on the discontinuation of LIBOR

and the steps we are taking to address and mitigate the risks we

have identified, see the “Overview – Recent Developments –

LIBOR Transition” section in this Report.

Effective liquidity management is essential for the operation

of our business, and our financial results and condition could be

materially adversely affected if we do not effectively manage

our liquidity. We primarily rely on customer deposits to be a

low-cost and stable source of funding for the loans we make and

the operation of our business. In addition to customer deposits,

our sources of liquidity include certain debt and equity securities,

our ability to sell or securitize loans in secondary markets and to

pledge loans to access secured borrowing facilities through the

FHLB and the FRB, and our ability to raise funds in domestic and

international money through capital markets.

Our liquidity and our ability to fund and run our business

could be materially adversely affected by a variety of conditions

and factors, including financial and credit market disruption and

volatility or a lack of market or customer confidence in financial

markets in general similar to what occurred during the financial

crisis in 2008 and early 2009, which may result in a loss of

customer deposits or outflows of cash or collateral and/or our

inability to access capital markets on favorable terms. Market

disruption and volatility could impact our credit spreads, which

are the amount in excess of the interest rate of U.S. Treasury

securities, or other benchmark securities, of the same maturity

that we need to pay to our funding providers. Increases in

interest rates and our credit spreads could significantly increase

our funding costs. Other conditions and factors that could

materially adversely affect our liquidity and funding include a lack

of market or customer confidence in the Company or negative

news about the Company or the financial services industry

generally which also may result in a loss of deposits and/or

negatively affect our ability to access the capital markets; our

inability to sell or securitize loans or other assets; disruptions or

volatility in the repurchase market which also may increase our

short-term funding costs; regulatory requirements or

restrictions; unexpectedly high or accelerated customer draws on

lines of credit; and, as described below, reductions in one or more

of our credit ratings. Many of the above conditions and factors

may be caused by events over which we have little or no control.

There can be no assurance that significant disruption and

volatility in the financial markets will not occur in the future. For

example, concerns over geopolitical issues, commodity and

currency prices, as well as global economic conditions, may cause

financial market volatility.

In addition, concerns regarding U.S. government debt levels,

including any potential failure to raise the debt limit, and any

associated downgrade of U.S. government debt ratings may

cause uncertainty and volatility as well. A downgrade of the

sovereign debt ratings of the U.S. government or the debt

ratings of related institutions, agencies or instrumentalities, as

well as other fiscal or political events could, in addition to causing

economic and financial market disruptions, materially adversely

affect the market value of the U.S. government securities that

we hold, the availability of those securities as collateral for

borrowing, and our ability to access capital markets on favorable

terms, as well as have other material adverse effects on the

operation of our business and our financial results and condition.

Wells Fargo & Company 71

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Risk Factors (continued)

As noted above, we rely heavily on customer deposits for our

funding and liquidity. We compete with banks and other financial

services companies for deposits. If our competitors raise the

rates they pay on deposits our funding costs may increase, either

because we raise our rates to avoid losing deposits or because we

lose deposits and must rely on more expensive sources of

funding. Checking and savings account balances and other forms

of customer deposits may decrease when customers perceive

other investment opportunities, such as stocks, bonds, or money

market mutual funds, as providing a better risk/return tradeoff.

When customers move money out of bank deposits and into

other investments, we may lose a relatively low-cost source of

funds, increasing our funding costs and negatively affecting our

liquidity. In addition, we may continue to reduce certain deposit

balances in order to manage under the asset cap.

If we are unable to continue to fund our assets through

customer deposits or access capital markets on favorable terms

or if we suffer an increase in our borrowing costs or otherwis e fail

to manage our liquidity effectively (including on an intra-day or

intra-affiliate basis), our liquidity, net interest margin, fin ancial

results and condition may be materially adversely affected. As we

did during the financial crisis, we may also need, or be requir ed by

our regulators, to raise additional capital through the issuanc  e of

common stock, which could dilute the ownership of existing

stockholders, or reduce or even eliminate our common stock

dividend to preserve capital or to raise additional capital. 

For additional information, see the “Risk Management –

Asset/Liability Management” section in this Report.

Adverse changes in our credit ratings could have a material

adverse effect on our liquidity, cash flows, financial results and

condition. Our borrowing costs and ability to obtain funding are

influenced by our credit ratings. Reductions in one or more of our

credit ratings could adversely affect our ability to borrow funds

and raise the costs of our borrowings substantially and could

cause creditors and business counterparties to raise collateral

requirements or take other actions that could adversely affect

our ability to raise funding. Credit ratings and credit ratings

agencies’ outlooks are based on the ratings agencies’ analysis of

many quantitative and qualitative factors, such as our capital

adequacy, liquidity, asset quality, business mix, the level and

quality of our earnings, rating agency assumptions regarding the

probability and extent of federal financial assistance or support,

and other rating agency specific criteria. In addition to credit

ratings, our borrowing costs are affected by various other

external factors, including market volatility and concerns or

perceptions about the financial services industry generally. There

can be no assurance that we will maintain our credit ratings and

outlooks and that credit ratings downgrades in the future would

not materially affect our ability to borrow funds and borrowing

costs. Downgrades in our credit ratings also may trigger

additional collateral or funding obligations which, depending on

the severity of the downgrade, could have a material adverse

effect on our liquidity, including as a result of credit-related

contingent features in certain of our derivative contracts.

For information on our credit ratings, see the “Risk

Management – Asset/Liability Management – Liquidity Risk and

Funding – Credit Ratings” section and for information regarding

additional collateral and funding obligations required of certain

derivative instruments in the event our credit ratings were to fall

below investment grade, see Note 14 (Derivatives) to Financial

Statements in this Report.

We rely on dividends from our subsidiaries for liquidity, and

federal and state law, as well as certain contractual

arrangements, can limit those dividends. Wells Fargo &

Company, the parent holding company (the “Parent”), is a

separate and distinct legal entity from its subsidiaries. It receives

substantially all of its funding and liquidity from dividends and

other distributions from its subsidiaries. We generally use these

dividends and distributions, among other things, to pay dividends

on our common and preferred stock and interest and principal on

our debt. Federal and state laws limit the amount of dividends

and distributions that our bank and some of our nonbank

subsidiaries, including our broker-dealer subsidiaries, may pay to

the Parent. In addition, under a Support Agreement dated

June 28, 2017, as amended and restated on June 26, 2019,

among the Parent, WFC Holdings, LLC, an intermediate holding

company and subsidiary of the Parent (the “IHC”), Wells Fargo

Bank, N.A. (the “Bank”), Wells Fargo Securities, LLC, Wells Fargo

Clearing Services, LLC, and certain other subsidiaries of the

Parent designated from time to time as material entities for

resolution planning purposes or identified from time to time as

related support entities in our resolution plan, the IHC may be

restricted from making dividend payments to the Parent if

certain liquidity and/or capital metrics fall below defined triggers

or if the Parent’s board of directors authorizes it to file a case

under the U.S. Bankruptcy Code. Also, our right to participate in a

distribution of assets upon a subsidiary’s liquidation or

reorganization is subject to the prior claims of the subsidiary’s

creditors.

For additional information, see the “Regulation and

Supervision – Dividend Restrictions” and “– Holding Company

Structure” sections in our 2022 Form 10-K and to Note 25

(Regulatory Capital Requirements and Other Restrictions) to

Financial Statements in this Report.

REGULATORY RISKS

Current and future legislation and/or regulation could require

us to change certain of our business practices, reduce our

revenue and earnings, impose additional costs on us or

otherwise adversely affect our business operations and/or

competitive position. Our parent company, our subsidiary

banks and many of our nonbank subsidiaries such as those

related to our brokerage business, are subject to significant and

extensive regulation under state and federal laws in the U.S., as

well as the applicable laws of the various jurisdictions outside of

the U.S. where they conduct business. These regulations

generally protect depositors, federal deposit insurance funds,

consumers, investors, employees, or the banking and financial

system as a whole, not necessarily our security holders.

Economic, market and political conditions during the past few

years have led to a significant amount of legislation and

regulation in the U.S. and abroad affecting the financial services

industry, as well as heightened expectations and scrutiny of

financial services companies from banking regulators. These laws

and regulations may continue to affect the manner in which we

do business and the products and services that we provide, affect

or restrict our ability to compete in our current businesses or our

ability to enter into or acquire new businesses, reduce or limit our

revenue, affect our compliance and risk management activities,

increase our capital requirements, impose additional fees,

assessments or taxes on us, intensify the regulatory supervision

of us and the financial services industry, and adversely affect our

business operations or have other negative consequences. Our

businesses and revenue in non-U.S. jurisdictions are also subject

to risks from political, economic and social developments in

Wells Fargo & Company 72

those jurisdictions, including sanctions or business restrictions,

asset freezes or confiscation, unfavorable political or diplomatic

developments, or financial or social instability. In addition,

greater government oversight and scrutiny of Wells Fargo, as

well as financial services companies generally, has increased our

operational and compliance costs as we must continue to devote

substantial resources to enhancing our procedures and controls

and meeting heightened regulatory standards and expectations.

Any failure to meet regulatory requirements, standards or

expectations, either in the U.S. or in non-U.S. jurisdictions, could

continue to result in significant fees, penalties, restrictions on our

ability to engage in certain business activities, or other adverse

consequences.

Our consumer businesses, including our mortgage, auto,

credit card and other consumer lending and non-lending

businesses, are subject to numerous and, in many cases, highly

complex consumer protection laws and regulations, as well as

enhanced regulatory scrutiny and more and expanded regulatory

examinations and/or investigations. In particular, the CFPB’s

rules may continue to increase our compliance costs and require

changes in our business practices, which could limit or negatively

affect the products and services that we offer our customers. If

we fail to meet enhanced regulatory requirements and

expectations with respect to our consumer businesses, we may

be subject to increased costs, fines, penalties, restrictions on our

business activities including the products and services we can

provide, and/or harm to our reputation.

In addition, the Dodd-Frank Act established a

comprehensive framework for regulating over-the-counter

derivatives, and the CFTC, SEC, and other federal regulatory

agencies have adopted rules regulating swaps, security-based

swaps, and derivatives activities. These rules may continue to

negatively impact customer demand for over-the-counter

derivatives, impact our ability to offer customers new derivatives

or amendments to existing derivatives, and increase our costs for

engaging in swaps, security-based swaps, and other derivatives

activities.

We are also subject to various rules and regulations related

to the prevention of financial crimes and combating terrorism,

including the USA PATRIOT Act of 2001. These rules and

regulations require us to, among other things, implement policies

and procedures related to anti-money laundering, anti-bribery

and corruption, economic sanctions, suspicious activities,

currency transaction reporting and due diligence on customers.

Although we have policies and procedures designed to comply

with these rules and regulations, to the extent they are not fully

effective or do not meet heightened regulatory standards or

expectations, we may be subject to fines, penalties, restrictions

on certain activities, reputational harm, or other adverse

consequences.

Our businesses are also subject to laws and regulations

enacted by U.S. and non-U.S. regulators and governmental

authorities relating to the privacy of the information of

customers, employees and others. These laws and regulations,

among other things, increase our compliance obligations; have a

significant impact on our businesses’ collection, processing,

sharing, use, and retention of personal data and reporting of data

breaches; and provide for significantly increased penalties for

non-compliance.

In addition, we are subject to a number of consent orders

and other regulatory actions, including a February 2018 consent

order with the FRB regarding the Board’s governance and

oversight of the Company, and the Company’s compliance and

operational risk management program. This consent order limits

the Company’s total consolidated assets as defined under the

consent order to the level as of December 31, 2017, until certain

conditions are met. This limitation could continue to adversely

affect our results of operations or financial condition. We are also

subject to April 2018 consent orders with the CFPB and OCC

regarding the Company’s compliance risk management program

and past practices involving certain automobile collateral

protection insurance policies and certain mortgage interest rate

lock extensions. In addition, we are subject to a September 2021

consent order with the OCC regarding loss mitigation activities in

the Company’s Home Lending business. Similarly, we are subject

to a December 2022 consent order with the CFPB regarding

multiple matters related to automobile lending, consumer

deposit accounts, and mortgage lending.

Under the April 2018 consent order with the OCC, the Bank

remains subject to requirements that were originally imposed in

November 2016 to provide prior written notice to, and obtain

non-objection from, the OCC with respect to changes in directors

and senior executive officers, and remains subject to certain

regulatory limitations on post-termination payments to certain

individuals and employees.

The Company may be subject to further actions, including

the imposition of additional consent orders, regulatory

agreements or civil money penalties, by federal regulators

regarding similar or other issues. Furthermore, issues or delays in

satisfying the requirements of a regulatory action could affect

our progress on others, and failure to satisfy the requirements of

a regulatory action on a timely basis could result in additional

penalties, enforcement actions, and other negative

consequences, which could be significant. For example, in

September 2021, the OCC assessed a $250 million civil money

penalty against the Company related to insufficient progress in

addressing requirements under the OCC’s April 2018 consent

order and loss mitigation activities in the Company’s Home

Lending business. Compliance with the February 2018 FRB

consent order, the April 2018 CFPB and OCC consent orders, the

September 2021 OCC consent order, the December 2022 CFPB

consent order, and any other consent orders or regulatory

actions, as well as the implementation of their requirements, may

continue to increase the Company’s costs, require the Company

to reallocate resources away from growing its existing

businesses, subject the Company to business restrictions,

negatively impact the Company’s capital and liquidity, and

require the Company to undergo significant changes to its

business, operations, products and services, and risk

management practices. For additional information on the

Company’s consent orders, see the “Overview” section in this

Report.

Other future regulatory initiatives that could significantly

affect our business include proposals to reform the housing

finance market in the United States. These proposals, among

other things, consider ending the conservatorships of the GSEs

and reducing or eliminating over time the role of the GSEs in

buying mortgage loans or guaranteeing mortgage-backed

securities (MBS), as well as the implementation of reforms

relating to borrowers, lenders, and investors in the mortgage

market. The extent and timing of any regulatory reform or the

adoption of any legislation regarding the GSEs and/or the home

mortgage market, as well as any effect on the Company’s

business and financial results, are uncertain.

Any other future legislation and/or regulation, if adopted,

also could significantly change our regulatory environment and

increase our cost of doing business, limit the activities we may

pursue or affect the competitive balance among banks, savings

associations, credit unions, and other financial services

Wells Fargo & Company 73

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Risk Factors (continued)

companies, and have a material adverse effect on our financial

results and condition.

For additional information on the significant regulations and

regulatory oversight initiatives that have affected or may affect

our business, see the “Regulatory Matters” section in this Report

and the “Regulation and Supervision” section in our 2022 Form

10-K.

We could be subject to more stringent capital, leverage or

liquidity requirements or restrictions on our growth, activities

or operations if regulators determine that our resolution or

recovery plan is deficient. Pursuant to rules adopted by the FRB

and the FDIC, Wells Fargo prepares and periodically submits

resolution plans, also known as “living wills,” designed to facilitate

our rapid and orderly resolution in the event of material financial

distress or failure. There can be no assurance that the FRB or

FDIC will respond favorably to the Company’s resolution plans.

If the FRB and/or FDIC determine that a resolution plan has

deficiencies, they may impose more stringent capital, leverage or

liquidity requirements on us or restrict our growth, activities or

operations until we adequately remedy the deficiencies. If the

FRB and/or FDIC ultimately determine that we have been unable

to remedy any deficiencies, they could require us to divest certain

assets or operations.

In addition to our resolution plans, we must also prepare and

periodically submit to the FRB a recovery plan that identifies a

range of options that we may consider during times of

idiosyncratic or systemic economic stress to remedy any

financial weaknesses and restore market confidence without

extraordinary government support. The Bank must also prepare

and periodically submit to the OCC a recovery plan. If either the

FRB or the OCC determines that our recovery plan is deficient,

they may impose fines, restrictions on our business or ultimately

require us to divest assets.

Our security holders may suffer losses in a resolution of

Wells Fargo even if creditors of our subsidiaries are paid in full.

If Wells Fargo were to fail, it may be resolved in a bankruptcy

proceeding or, if certain conditions are met, under the resolution

regime created by the Dodd-Frank Act known as the “orderly

liquidation authority,” which allows for the appointment of the

FDIC as receiver. The FDIC’s orderly liquidation authority requires

that security holders of a company in receivership bear all losses

before U.S. taxpayers are exposed to any losses. There are

substantial differences in the rights of creditors between the

orderly liquidation authority and the U.S. Bankruptcy Code,

including the right of the FDIC to disregard the strict priority of

creditor claims under the U.S. Bankruptcy Code in certain

circumstances and the use of an administrative claims procedure

instead of a judicial procedure to determine creditors’ claims.

The strategy described in our most recent resolution plan is

a single point of entry strategy, in which the Parent would be the

only material legal entity to enter resolution proceedings.

However, the strategy described in our resolution plan is not

binding in the event of an actual resolution of Wells Fargo.

To facilitate the orderly resolution of the Company, we

entered into the Support Agreement, pursuant to which the

Parent transferred a significant amount of its assets to the IHC

and will continue to transfer assets to the IHC from time to time.

In the event of our material financial distress or failure, the IHC

will be obligated to use the transferred assets to provide capital

and/or liquidity to the Bank and certain other direct and indirect

subsidiaries of the Parent. Under the Support Agreement, the

IHC will provide funding and liquidity to the Parent through

subordinated notes and a committed line of credit. If certain

liquidity and/or capital metrics fall below defined triggers, or if

the Parent’s board of directors authorizes it to file a case under

the U.S. Bankruptcy Code, the subordinated notes would be

forgiven, the committed line of credit would terminate, and the

IHC’s ability to pay dividends to the Parent would be restricted,

any of which could materially and adversely impact the Parent’s

liquidity and its ability to satisfy its debts and other obligations,

and could result in the commencement of bankruptcy

proceedings by the Parent at an earlier time than might have

otherwise occurred if the Support Agreement were not

implemented.

Any resolution of the Company will likely impose losses on

shareholders, unsecured debt holders and other creditors of th e

Parent, while the Parent’s subsidiaries may continue to operate .

Creditors of some or all of our subsidiaries may receive

significant or full recoveries on their claims, while the Paren t’s

security holders could face significant or complete losses. Thi s

outcome may arise whether the Company is resolved under the

U.S. Bankruptcy Code or by the FDIC under the orderly

liquidation authority, and whether the resolution is conducted

using a single point of entry strategy or using a multiple poin t of

entry strategy, in which the Parent and one or more of its

subsidiaries would each undergo separate resolution

proceedings. Furthermore, in a single point of entry or multipl e

point of entry strategy, losses at some or all of our subsidiar ies

could be transferred to the Parent and borne by the Parent’s

security holders. Moreover, if either resolution strategy prove d

to be unsuccessful, our security holders could face greater los ses

than if the strategy had not been implemented.

For additional information, see the “Regulatory Matters –

‘Living Will’ Requirements and Related Matters” section in this

Report.

Bank regulations and rules may require higher capital and

liquidity levels, limiting our ability to pay common stock

dividends, repurchase our common stock, invest in our

business, or provide loans or other products and services to our

customers. The Company and each of our insured depository

institutions are subject to various regulatory capital adequacy

requirements administered by federal banking regulators. In

particular, the Company is subject to rules issued by federal

banking regulators to implement Basel III risk-based capital

requirements for U.S. banking organizations. These capital rules,

among other things, establish required minimum ratios relating

capital to different categories of assets and exposures. Federal

banking regulators have also imposed a leverage ratio and a

supplementary leverage ratio on large BHCs like Wells Fargo and

our insured depository institutions. The FRB has also finalized

rules to address the amount of equity and unsecured long-term

debt a U.S. G-SIB must hold to improve its resolvability and

resiliency, often referred to as total loss absorbing capacity

(TLAC). Similarly, federal banking regulators have issued final

rules that implement a liquidity coverage ratio and a net stable

funding ratio.

In addition, as part of its obligation to impose enhanced

capital and risk-management standards on large financial firms

pursuant to the Dodd-Frank Act, the FRB has issued a capital

plan rule that establishes capital planning and other

requirements that govern capital distributions, including

dividends and share repurchases, by certain BHCs, including

Wells Fargo. The FRB has also finalized a number of regulations

implementing enhanced prudential requirements for large BHCs

like Wells Fargo regarding risk-based capital and leverage, risk

and liquidity management, single counterparty credit limits, and

Wells Fargo & Company 74

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imposing debt-to-equity limits on any BHC that regulators

determine poses a grave threat to the financial stability of the

United States. The FRB and OCC have also finalized rules

implementing stress testing requirements for large BHCs and

national banks. In addition, the FRB has proposed a rule to

establish remediation requirements for large BHCs experiencing

financial distress and has proposed additional requirements

regarding effective risk management practices at large BHCs,

including its expectations for boards of directors and senior

management. The OCC, under separate authority, has also

established heightened governance and risk management

standards for large national banks, such as the Bank.

The Basel standards and federal regulatory capital, leverage,

liquidity, TLAC, capital planning, and other requirements may

limit or otherwise restrict how we utilize our capital, including

common stock dividends and stock repurchases, and may require

us to increase our capital and/or liquidity. Any requirement that

we increase our regulatory capital, regulatory capital ratios or

liquidity, including due to changes in regulatory requirements,

such as through the adoption or implementation of new or

revised Basel standards, or as a result of business growth,

acquisitions or a change in our risk profile, could require us to

liquidate assets or otherwise change our business, product

offerings and/or investment plans, which may negatively affect

our financial results. Although not currently anticipated, new

capital requirements and/or our regulators may require us to

raise additional capital in the future. Issuing additional common

stock may dilute the ownership of existing stockholders. In

addition, federal banking regulations may continue to increase

our compliance costs as well as limit our ability to invest in our

business or provide loans or other products and services to our

customers.

For additional information, see the “Capital Management,”

“Risk Management – Asset/Liability Management – Liquidity Risk

and Funding – Liquidity Standards,” and “Regulatory Matters”

sections in this Report and the “Regulation and Supervision”

section in our 2022 Form 10-K.

FRB policies, including policies on interest rates, can

significantly affect business and economic conditions and our

financial results and condition. The FRB regulates the supply of

money in the United States. Its policies determine in large part

our cost of funds for lending and investing and the return we

earn on those loans and investments, both of which affect our

net interest income and net interest margin. The FRB’s interest

rate policies also can materially affect the value of financial

instruments we hold, such as debt securities and MSRs. In

addition, its policies can affect our borrowers, potentially

increasing the risk that they may fail to repay their loans.

Changes in FRB policies, including its target range for the federal

funds rate or actions taken to increase or decrease the size of its

balance sheet, are beyond our control and can be hard to predict.

The FRB significantly raised its target range for the federal funds

rate and has indicated it may continue to raise it in 2023 to

address high inflation. As noted above, changes in the interest

rate environment and yield curve which may result from the

FRB’s actions could negatively affect our net interest income and

net interest margin.

CREDIT RISKS

Increased credit risk, including as a result of a deterioration in

economic conditions or changes in market conditions, could

require us to increase our provision for credit losses and

allowance for credit losses and could have a material adverse

effect on our results of operations and financial condition.

When we loan money or commit to loan money we incur credit

risk, or the risk of losses if our borrowers do not repay their loans.

As one of the largest lenders in the U.S., the credit performance

of our loan portfolios significantly affects our financial results

and condition. We also incur credit risk in connection with trading

and other activities. As noted above, if the current economic

environment were to deteriorate, more of our customers and

counterparties may have difficulty in repaying their loans or

other obligations which could result in a higher level of credit

losses and provision for credit losses. We reserve for credit losses

by establishing an allowance through a charge to earnings. The

amount of this allowance is based on our assessment of credit

losses inherent in our loan portfolio (including unfunded credit

commitments). The process for determining the amount of the

allowance is critical to our financial results and condition. It

requires difficult, subjective and complex judgments about the

future, including forecasts of economic or market conditions that

might impair the ability of our borrowers to repay their loans. We

might increase the allowance because of changing economic

conditions, including falling home prices, higher unemployment

or inflation, significant loan growth, changes in consumer

behavior, or other market conditions that adversely affect

borrowers, or other factors. Additionally, the regulatory

environment or external factors, such as natural disasters,

disease pandemics, political or social matters, or trade policies,

also can influence recognition of credit losses in our loan

portfolios and impact our allowance for credit losses.

Future allowance levels may increase or decrease based on a

variety of factors, including loan balance changes, portfolio credit

quality and mix changes, and changes in general economic

conditions. While we believe that our allowance for credit losses

was appropriate at December 31, 2022, there is no assurance

that it will be sufficient to cover future credit losses. In the event

of significant deterioration in economic conditions or if we

experience significant loan growth, we may be required to build

reserves in future periods, which would reduce our earnings.

For additional information, see the “Risk Management –

Credit Risk Management” and “Critical Accounting Policies –

Allowance for Credit Losses” sections in this Report.

We may have more credit risk and higher credit losses to the

extent our loans are concentrated by loan type, industry

segment, borrower type, or location of the borrower or

collateral. Our credit risk and credit losses can increase if our

loans are concentrated to borrowers engaged in the same or

similar activities or to borrowers who individually or as a group

may be uniquely or disproportionately affected by economic or

market conditions. Similarly, challenging economic or market

conditions, or trade policies, affecting a particular industry or

geography may also impact related or dependent industries or

the ability of borrowers living in such affected areas or working in

such industries to meet their financial obligations. We

experienced the effect of concentration risk in 2009 and 2010

when we incurred greater than expected losses in our residential

real estate loan portfolio due to a housing slowdown and greater

than expected deterioration in residential real estate values in

many markets, including the Central Valley California market and

several Southern California metropolitan statistical areas. As

California is our largest banking state in terms of loans and

deposits, deterioration in real estate values and underlying

economic conditions in those markets or elsewhere in California

could result in materially higher credit losses. In addition, changes

in consumer behavior or other market conditions may adversely

affect borrowers in certain industries or sectors, which may

Wells Fargo & Company 75

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Risk Factors (continued)

increase our credit risk and reduce the demand by these

borrowers for our products and services. Moreover, deterioration

in macro-economic conditions generally across the country could

result in materially higher credit losses, including for our

residential real estate loan portfolio, which includes

nonconforming mortgage loans we retain on our balance sheet.

We may experience higher delinquencies and higher loss rates as

our consumer real estate secured lines of credit reach their

contractual end of draw period and begin to amortize.

We are currently one of the largest CRE lenders in the U.S.

A deterioration in economic conditions that negatively affects

the business performance of our CRE borrowers, including

increases in interest rates, declines in commercial property

values, and/or changes in consumer behavior or other market

conditions, such as a continued decrease in the demand for office

space, could result in materially higher credit losses and have a

material adverse effect on our financial results and condition.

Challenges and/or changes in non-U.S. economic conditions

may increase our non-U.S. credit risk. Economic difficulties in

non-U.S. jurisdictions could also indirectly have a material

adverse effect on our credit performance and results of

operations and financial condition to the extent they negatively

affect the U.S. economy and/or our borrowers who have non-U.S.

operations.

Due to regulatory requirements, we must clear certain

derivative transactions through central counterparty

clearinghouses (CCPs), which results in credit exposure to thes e

CCPs. Similarly, because we are a member of various CCPs, we

may be required to pay a portion of any losses incurred by the

CCP in the event that one or more members of the CCP defaults

on its obligations. In addition, we are exposed to the risk of non-

performance by our clients for which we clear transactions

through CCPs to the extent such non-performance is not

sufficiently covered by available collateral.

For additional information regarding credit risk, see the

“Risk Management – Credit Risk Management” section and

Note 5 (Loans and Related Allowance for Credit Losses) to

Financial Statements in this Report.

OPERATIONAL, STRATEGIC AND LEGAL RISKS

A failure in or breach of our operational or security systems,

controls or infrastructure, or those of our third-party vendors

and other service providers, could disrupt our businesses,

damage our reputation, increase our costs and cause losses.

As a large financial institution that serves customers through

numerous physical locations, ATMs, the internet, mobile banking

and other distribution channels across the U.S. and

internationally, we depend on our ability to process, record and

monitor a large number of customer transactions on a

continuous basis. As our customer base and locations have

expanded throughout the U.S. and internationally, as we have

increasingly used the internet and mobile banking to provide

products and services to our customers, as customer, public,

legislative and regulatory expectations regarding operational and

information security have increased, and as cyber and other

information security attacks have become more prevalent and

complex, our operational systems, controls and infrastructure

must continue to be safeguarded and monitored for potential

failures, disruptions and breakdowns. Our business, financial,

accounting, data processing systems or other operating systems

and facilities may stop operating properly, become insufficient

based on our evolving business needs, or become disabled or

damaged as a result of a number of factors including events that

are wholly or partially beyond our control. For example, there

have been and could in the future be sudden increases in

customer transaction volume; electrical or telecommunications

outages; degradation or loss of internet, website or mobile

banking availability; natural disasters such as earthquakes,

tornados, and hurricanes; disease pandemics; events arising from

local or larger scale political or social matters, including terrorist

acts; and, as described below, cyber attacks or other information

security incidents. Furthermore, enhancements and upgrades to

our infrastructure or operating systems may be time-consuming,

entail significant costs, and create risks associated with

implementing new systems and integrating them with existing

ones. Due to the complexity and interconnectedness of our

systems, the process of enhancing our infrastructure and

operating systems, including their security measures and

controls, can itself create a risk of system disruptions and

security issues. Similarly, we may not be able to timely recover

critical business processes or operations that have been

disrupted, which may further increase any associated costs and

consequences of such disruptions. Although we have business

continuity plans and other safeguards in place to help provide

operational resiliency, our business operations may be adversely

affected by significant and widespread disruption to our physical

infrastructure or operating systems that support our businesses

and customers. For example, on February 7, 2019, we

experienced system issues caused by an automatic power

shutdown at one of our main data center facilities. Although

applications and related workloads were systematically re-routed

to back-up data centers throughout the day, certain of our

services, including our online and mobile banking systems,

certain mortgage origination systems, and certain ATM

functions, experienced disruptions that delayed service to our

customers.

As a result of financial institutions and technology systems

becoming more interconnected and complex, any operational

incident at a third party may increase the risk of loss or material

impact to us or the financial industry as a whole. Furthermore,

third parties on which we rely, including those that facilitate our

business activities or to which we outsource operations, such as

exchanges, clearing houses, financial intermediaries or vendors

that provide services or security solutions for our operations,

could continue to be sources of operational risk to us, including

from information breaches or loss, breakdowns, disruptions or

failures of their own systems or infrastructure, or any deficiencies

in the performance of their responsibilities. These risks are

heightened to the extent we rely on a single third party or on

third parties in a single geographic area. We are also exposed to

the risk that a disruption or other operational incident at a

common service provider to our third parties could impede their

ability to provide services or perform their responsibilities for us.

In addition, we must meet regulatory requirements and

expectations regarding our use of third-party service providers,

and any failure by our third-party service providers to meet their

obligations to us or to comply with applicable laws, rules,

regulations, or Wells Fargo policies could result in fines, penalties,

restrictions on our business, or other negative consequences.

Disruptions or failures in the physical infrastructure, controls

or operating systems that support our businesses and

customers, failures of the third parties on which we rely to

adequately or appropriately provide their services or perform

their responsibilities, or our failure to effectively manage or

oversee our third-party relationships, could result in business

disruptions, loss of revenue or customers, legal or regulatory

proceedings, compliance and other costs, violations of applicable

privacy and other laws, reputational damage, or other adverse

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consequences, any of which could materially adversely affect our

results of operations or financial condition.

A cyber attack or other information security incident could

have a material adverse effect on our results of operations,

financial condition, or reputation. Information security risks for

large financial institutions such as Wells Fargo have generally

increased in recent years in part because of the proliferation of

new technologies, the use of the internet, mobile devices, and

cloud technologies to conduct financial transactions, the increase

in remote work arrangements, and the increased sophistication

and activities of organized crime, hackers, terrorists, activists,

and other external parties, including foreign state-sponsored

parties. Those parties also may continue to attempt to

misrepresent personal or financial information to commit fraud,

obtain loans or other financial products from us, or attempt to

fraudulently induce employees, customers, or other users of our

systems to disclose confidential, proprietary, or other

information to gain access to our data or that of our customers.

Geopolitical matters, such as the conflict in Ukraine, may also

elevate the risk of an information security threat, particularly by

foreign state-sponsored parties or their supporters. As noted

above, our operations rely on the secure processing, transmission

and storage of confidential, proprietary, and other information in

our computer systems and networks. Our banking, brokerage,

investment advisory, and capital markets businesses rely on our

digital technologies, computer and email systems, software,

hardware, and networks to conduct their operations. In addition,

to access our products and services, our customers may use

personal smartphones, tablets, and other mobile devices that are

beyond our control systems. Our technologies, systems,

software, networks, and our customers’ devices continue to be

the target of cyber attacks or other information security threats,

which could materially adversely affect us, including as a result of

fraudulent activity, the unauthorized release, gathering,

monitoring, misuse, loss or destruction of Wells Fargo’s or our

customers’ confidential, proprietary and other information, or

the disruption of Wells Fargo’s or our customers’ or other third

parties’ business operations. For example, various retailers have

reported they were victims of cyber attacks in which large

amounts of their customers’ data, including debit and credit card

information, was obtained. In these situations, we generally incur

costs to replace compromised cards and address fraudulent

transaction activity affecting our customers. We are also exposed

to the risk that an employee or other person acting on behalf of

the Company fails to comply with applicable policies and

procedures and inappropriately circumvents information security

controls for personal gain or other improper purposes.

Due to the increasing interconnectedness and complexity of

financial institutions and technology systems, an information

security incident at a third party or a third party’s downstream

service providers may increase the risk of loss or material impact

to us or the financial industry as a whole. In addition, third parties

(including their downstream service providers) on which we rely,

including those that facilitate our business activities or to which

we outsource operations, such as internet, mobile technology,

hardware, software, and cloud service providers, continue to be

sources of information security risk to us. We could suffer

material harm, including business disruptions, losses or

remediation costs, reputational damage, legal or regulatory

proceedings, or other adverse consequences as a result of the

failure of those third parties to adequately or appropriately

safeguard their technologies, systems, networks, hardware, and

software, or as a result of our or our customers’ data being

compromised due to information security incidents affecting

those third parties.

Our risk and exposure to information security threats

remains heightened because of, among other things, the

persistent and evolving nature of these threats, the prominent

size and scale of Wells Fargo and its role in the financial services

industry, our plans to continue to implement our digital and

mobile banking channel strategies and develop additional remote

connectivity solutions to serve our customers when and how

they want to be served, our geographic footprint and

international presence, the outsourcing of some of our business

operations, and the current global economic and political

environment. For example, Wells Fargo and other financial

institutions, as well as our third-party service providers, continue

to be the target of various evolving and adaptive information

security threats, including cyber attacks, malware, ransomware,

other malicious software intended to exploit hardware or

software vulnerabilities, phishing, credential validation, and

distributed denial-of-service, in an effort to disrupt the

operations of financial institutions, test their cybersecurity

capabilities, commit fraud, or obtain confidential, proprietary or

other information. Cyber attacks have also focused on targeting

online applications and services, such as online banking, as well as

cloud-based and other products and services provided by third

parties, and have targeted the infrastructure of the internet,

causing the widespread unavailability of websites and degrading

website performance. As a result, information security and the

continued development and enhancement of our controls,

processes and systems designed to protect our networks,

computers, software and data from attack, damage or

unauthorized access remain a priority for Wells Fargo. We are

also proactively involved in industry cybersecurity efforts and

working with other parties, including our third-party service

providers and governmental agencies, to continue to enhance

defenses and improve resiliency to information security threats.

As these threats continue to evolve, we expect to continue to be

required to expend significant resources to develop and enhance

our protective measures or to investigate and remediate any

information security vulnerabilities or incidents. Because the

investigation of any information security breach is inherently

unpredictable and would require time to complete, we may not

be able to immediately address the consequences of a breach,

which may further increase any associated costs and

consequences. Moreover, to the extent our insurance covers

aspects of information security risk, such insurance may not be

sufficient to cover all liabilities or losses associated with an

information security breach.

Cyber attacks or other information security incidents

affecting us or third parties (including their downstream service

providers) on which we rely, including those that facilitate our

business activities or to which we outsource operations, or

affecting the networks, systems or devices that our customers

use to access our products and services, could result in business

disruptions, loss of revenue or customers, legal or regulatory

proceedings, compliance, remediation and other costs, violations

of applicable privacy and other laws, reputational damage, or

other adverse consequences, any of which could materially

adversely affect our results of operations or financial condition.

Our framework for managing risks may not be fully effective in

mitigating risk and loss to us. Our risk management framework

seeks to mitigate risk and loss to us. We have established

processes and procedures intended to identify, measure,

monitor, report and analyze the types of risk to which we are

subject, including liquidity risk, credit risk, market risk, interest

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Risk Factors (continued)

rate risk, operational risk, legal and compliance risk, and

reputational risk, among others. However, as with any risk

management framework, there are inherent limitations to our

risk management strategies as there may exist, or develop in the

future, risks that we have not appropriately anticipated,

identified or managed. Our risk management framework is also

dependent on ensuring that effective operational controls and a

sound culture exist throughout the Company. The inability to

develop effective operational controls or to foster the

appropriate culture in each of our lines of business, including the

inability to align performance management and compensation to

achieve the desired culture, could adversely impact the

effectiveness of our risk management framework. Similarly, if we

are unable to effectively manage our business or operations, we

may be exposed to increased risks or unexpected losses. We

process a large number of transactions each day and are exposed

to risks or losses if we do not accurately or completely execute a

process or transaction, whether due to human error or otherwise;

if we are unable to detect and prevent fraudulent activity; or if an

employee or third-party service provider fails to comply with

applicable policies and procedures, inappropriately circumvents

controls, or engages in other misconduct.

In certain instances, we rely on models to measure, monitor

and predict risks, such as market, interest rate, liquidity and

credit risks, as well as to help inform business decisions; however,

there is no assurance that these models will appropriately or

sufficiently capture all relevant risks or accurately predict future

events or exposures. Furthermore, certain of our models are

subject to regulatory review and approval, and any failure to

meet regulatory standards or expectations could result in fines,

penalties, restrictions on our ability to engage in certain business

activities, or other adverse consequences, and any required

modifications or changes to these models can impact our capital

ratios and requirements and result in increased operational and

compliance costs. In addition, we rely on data to aggregate and

assess our various risk exposures and business activities, and any

issues with the quality or effectiveness of our data, including our

aggregation, management, and validation procedures, could

result in ineffective risk management practices, business

decisions or customer service, inefficient use of resources, or

inaccurate regulatory or other risk reporting. We also use

artificial intelligence to help further inform or automate our

business decisions and risk management practices, but there is

no assurance that artificial intelligence will appropriately or

sufficiently replicate certain outcomes or human assessment or

accurately predict future events or exposures. Previous financial

and credit crises and resulting regulatory reforms highlighted

both the importance and some of the limitations of managing

unanticipated risks, and our regulators remain focused on

ensuring that financial institutions, and Wells Fargo in particular,

build and maintain robust risk management policies and

practices. If our risk management framework proves ineffective,

we could suffer unexpected losses which could materially

adversely affect our results of operations or financial condition.

We may be exposed to additional legal or regulatory

proceedings, costs, and other adverse consequences related to

retail sales practices and instances where customers may have

experienced financial harm. Various government entities and

offices have undertaken formal or informal inquiries or

investigations arising out of certain retail sales practices of the

Company that were the subject of settlements with the CFPB,

the OCC, and the Office of the Los Angeles City Attorney

announced by the Company on September 8, 2016, and various

non-governmental parties filed lawsuits against us seeking

damages or other remedies related to these retail sales practices.

The Company has entered into various settlements to resolve

these investigations and proceedings, as a result of which we

have incurred monetary penalties, costs, and business

restrictions. If we are unable to meet any ongoing obligations

under these settlements, we may incur additional monetary or

other penalties or be required to make admissions of wrongdoing

and comply with other conditions, which can lead to restrictions

on our ability to engage in certain business activities or offer

certain products or services, limitations on our ability to access

capital markets, limitations on capital distributions, the loss of

customers, and/or other adverse consequences. Any inability to

meet our ongoing obligations under these settlements,

depending on the sanctions and remedy sought and granted,

could materially adversely affect our results of operations and

financial condition. In addition, negative publicity or public

opinion resulting from these matters may increase the risk of

reputational harm to our business, which can impact our ability to

keep and attract customers, affect our ability to attract and

retain qualified employees, result in the loss of revenue, or have

other material adverse effects on our results of operations and

financial condition.

Furthermore, we have identified and may in the future

identify areas or instances where customers may have

experienced financial harm, including as a result of our continuing

efforts to strengthen our risk and control infrastructure. For

example, we have identified certain issues related to past

practices involving certain automobile collateral protection

insurance policies and certain issues related to the unused

portion of guaranteed automobile protection waiver or insurance

agreements. The identification of such areas or instances where

customers may have experienced financial harm could lead to,

and in some cases has already resulted in, additional remediation

costs, loss of revenue or customers, legal or regulatory

proceedings, compliance and other costs, reputational damage,

or other adverse consequences.

For additional information, see the “Overview – Retail Sales

Practices Matters” and “Overview – Customer Remediation

Activities” sections and Note 13 (Legal Actions) to Financial

Statements in this Report.

We may incur fines, penalties and other negative

consequences from regulatory violations or from any failure to

meet regulatory standards or expectations. We maintain

systems and procedures designed to ensure that we comply with

applicable laws and regulations. However, we are subject to

heightened compliance and regulatory oversight and

expectations, particularly due to the evolving and increasingly

complex regulatory landscape we operate in. We are also subject

to consent orders and other regulatory actions that subject us to

various conditions and restrictions. In addition, a single event or

issue may give rise to numerous and overlapping investigations

and proceedings, either by multiple federal and state agencies in

the U.S. or by multiple regulators and other governmental

entities in different jurisdictions. Similarly, regulators may be

more likely to pursue investigations or proceedings against us to

the extent that we are or have previously been subject to other

regulatory actions. Also, the laws and regulations in jurisdictions

in which we operate may be different or even conflict with each

other, such as differences between U.S. federal and state law or

differences between U.S. and non-U.S. laws as to the products

and services we may offer or other business activities we may

engage in, which can lead to compliance difficulties or issues.

Furthermore, many legal and regulatory regimes require us to

report transactions and other information to regulators and

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other governmental authorities, self-regulatory organizations,

exchanges, clearing houses and customers. We may be subject to

fines, penalties, restrictions on our business, or other negative

consequences if we do not timely, completely, or accurately

provide regulatory reports, customer notices or disclosures.

Moreover, some legal/regulatory frameworks provide for the

imposition of fines or penalties for noncompliance even though

the noncompliance was inadvertent or unintentional and even

though there were systems and procedures in place at the time

designed to ensure compliance. For example, we are subject to

regulations issued by the Office of Foreign Assets Control

(OFAC) that prohibit financial institutions from participating in

the transfer of property belonging to the governments of certain

non-U.S. countries and designated nationals of those countries.

OFAC may impose penalties or restrictions on certain activities

for inadvertent or unintentional violations even if reasonable

processes are in place to prevent the violations. Any violation of

these or other applicable laws or regulatory requirements, even if

inadvertent or unintentional, or any failure to meet regulatory

standards or expectations, including any failure to satisfy the

conditions of any consent orders or other regulatory actions,

could result in significant fees, penalties, restrictions on our

ability to engage in certain business activities, reputational harm,

loss of customers, or other negative consequences.

Reputational harm, including as a result of our actual or alleged

conduct or public opinion of the financial services industry

generally, could adversely affect our business, results of

operations, and financial condition. Reputation risk, or the risk

to our business, earnings and capital from negative public

opinion, is inherent in our business and has increased

substantially because of our size and profile in the financial

services industry, sales practices related matters, and instances

where customers may have experienced financial harm. Negative

public opinion about the financial services industry generally or

Wells Fargo specifically could adversely affect our reputation and

our ability to keep and attract customers. Negative public opinion

could result from our actual or alleged conduct in any number of

activities, including sales practices; mortgage, auto or other

consumer lending practices; loan origination or servicing

activities; mortgage foreclosure actions; management of client

accounts or investments; lending, investing or other business

relationships; identification and management of potential

conflicts of interest from transactions, obligations and interests

with and among our customers; environmental, social and

governance practices; regulatory compliance; risk management;

incentive compensation practices; and disclosure, sharing or

inadequate protection or improper use of customer information,

and from actions taken by government regulators and

community or other organizations in response to that conduct.

Although we have policies and procedures in place intended to

detect and prevent conduct by employees and third-party

service providers that could potentially harm customers or our

reputation, there is no assurance that such policies and

procedures will be fully effective in preventing such conduct.

Furthermore, our actual or perceived failure to address or

prevent any such conduct or otherwise to effectively manage our

business or operations could result in significant reputational

harm. In addition, because we conduct most of our businesses

under the “Wells Fargo” brand, negative public opinion about one

business also could affect our other businesses. Moreover,

actions by the financial services industry generally or by certain

members or individuals in the industry also can adversely affect

our reputation. The proliferation of social media websites utilized

by Wells Fargo and other third parties, as well as the personal use

of social media by our employees and others, including personal

blogs and social network profiles, also may increase the risk that

negative, inappropriate or unauthorized information may be

posted or released publicly that could harm our reputation or

have other negative consequences, including as a result of our

employees interacting with our customers in an unauthorized

manner in various social media outlets.

Wells Fargo and other financial institutions have been

targeted from time to time by protests and demonstrations,

which have included disrupting the operation of our retail

banking locations, and have been subject to negative public

commentary, including with respect to the fees charged for

various products and services. Wells Fargo and other financial

institutions have also been subject to negative publicity as a

result of providing or reducing financial services to or making

investments in industries or organizations subject to stakeholder

concerns. There can be no assurance that continued protests or

negative public opinion of the Company specifically or large

financial institutions generally will not harm our reputation and

adversely affect our business, results of operations, and financial

condition.

If we are unable to develop and execute effective business

plans or strategies or manage change effectively, our

competitive standing and results of operations could suffer. In

order to advance our business goals, we may undertake business

plans or strategies related to, among other things, our

organizational structure, our compliance and risk management

framework, our expenses and efficiency, the types of products

and services we offer, the types of businesses we engage in, the

geographies in which we operate, the manner in which we serve

our clients and customers, the third parties with which we do

business, and the methods and distribution channels by which we

offer our products and services. Accomplishing these business

plans or strategies may be complex, time intensive, require

significant financial, technological, management and other

resources, may divert management attention and resources away

from other areas of the Company, and may impact our expenses

and ability to generate revenue. There is no guarantee that any

business plans or strategies, including our current efficiency

initiatives, will ultimately be successful. To the extent we are

unable to develop or execute effective business plans or

strategies or manage change effectively, our competitive

position, reputation, prospects for growth, and results of

operations may be adversely affected.

In addition, from time to time, we may decide to divest

certain businesses or assets. Difficulties in executing a divestiture

may cause us not to realize any expected cost savings or other

benefits from the divestiture, or may result in higher than

expected losses of employees or harm our ability to retain

customers. The divestiture or winding down of certain businesses

or assets may also result in the impairment of goodwill or other

long-lived assets related to those businesses or assets.

Similarly, we may explore opportunities to expand our

products, services, and assets through strategic acquisitions of

companies or businesses in the financial services industry. We

generally must receive federal regulatory approvals before we

can acquire a bank, bank holding company, or certain other

financial services businesses. We cannot be certain when or if, or

on what terms and conditions, any required regulatory approvals

will be granted. We might be required to sell banks, branches

and/or business units or assets or issue additional equity as a

condition to receiving regulatory approval for an acquisition.

When we do announce an acquisition, our stock price may fall

depending on the size of the acquisition, the type of business to

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Risk Factors (continued)

be acquired, the purchase price, and the potential dilution to

existing stockholders or our earnings per share if we issue

common stock in connection with the acquisition. Furthermore,

difficulty in integrating an acquired company or business may

cause us not to realize expected revenue increases, cost savings,

increases in geographic or product presence, and other projected

benefits from the acquisition. The integration could result in

higher than expected deposit attrition, loss of key employees, an

increase in our compliance costs or risk profile, disruption of our

business or the acquired business, or otherwise harm our ability

to retain customers and employees or achieve the anticipated

benefits of the acquisition. Time and resources spent on

integration may also impair our ability to grow our existing

businesses. Many of the foregoing risks may be increased if the

acquired company or business operates internationally or in a

geographic location where we do not already have significant

business operations and/or employees.

Our operations and business could be adversely affected by the

impacts of climate change. The physical effects of climate

change, including the increased prevalence and severity of

extreme weather events and natural disasters, such as

hurricanes, droughts, and wildfires, could damage or interfere

with our operations or those of our third-party service providers,

which could disrupt our business, increase our costs, or cause

losses. Climate change related impacts could also negatively

affect the financial condition of our customers, increase the

credit risk associated with those customers, or result in the

deterioration of the value of the collateral we hold. In addition,

changes in consumer behavior or other market conditions on

account of climate considerations or due to the transition to a

low carbon economy may adversely affect customers in certain

industries, sectors or geographies, which may increase our credit

risk and reduce the demand by these customers for our products

and services. Furthermore, the transition to a low carbon

economy could affect our business practices or result in

additional costs or other adverse consequences to our business

operations. Legislation and/or regulation in connection with

climate change, as well as stakeholder perceptions and

expectations related to climate change and its impacts, could

require us to change certain of our business and/or risk

management practices, impose additional costs on us, or

otherwise adversely affect our operations and business.

Moreover, our reputation may be damaged as a result of our

response to climate change or our strategy for the transition to a

low carbon economy, including if we are unable or perceived to be

unable to achieve our objectives or if our response is disliked,

disfavored, or perceived to be ineffective or insufficient. For

additional information on regulatory developments in response

to climate change, see the “Regulatory Matters” section in this

Report.

We are exposed to potential financial loss or other adverse

consequences from legal actions. Wells Fargo and some of its

subsidiaries are involved in judicial, regulatory, governmental,

arbitration, and other proceedings or investigations concerning

matters arising from the conduct of our business activities, and

many of those proceedings and investigations expose

Wells Fargo to potential financial loss or other adverse

consequences. There can be no assurance as to the ultimate

outcome of any of these legal actions. We establish accruals for

legal actions when potential losses associated with the actions

become probable and the costs can be reasonably estimated. We

may still incur costs for a legal action even if we have not

established an accrual. In addition, the actual cost of resolving a

legal action may be substantially higher than any amounts

accrued for that action. The ultimate resolution of a pending legal

proceeding or investigation, depending on the remedy sought

and granted, could materially adversely affect our results of

operations and financial condition.

As noted above, we are subject to heightened regulatory

oversight and scrutiny, which may lead to regulatory

investigations, proceedings or enforcement actions. In addition

to imposing potentially significant monetary penalties, business

restrictions, and other sanctions, regulatory authorities may

require criminal pleas or other admissions of wrongdoing and

compliance with other conditions in connection with settling

such matters, which can lead to reputational harm, loss of

customers, restrictions on the ability to access capital markets,

limitations on capital distributions, the inability to engage in

certain business activities or offer certain products or services,

and/or other direct and indirect adverse effects.

For additional information, see Note 13 (Legal Actions) to

Financial Statements in this Report.

MORTGAGE BUSINESS RISKS

Our mortgage banking revenue can be volatile from quarter to

quarter, including from the impact of changes in interest rates,

and we rely on the GSEs to purchase our conforming loans to

reduce our credit risk and provide liquidity to fund new

mortgage loans. We earn revenue from fees we receive for

originating mortgage loans and for servicing mortgage loans.

Changes in interest rates can affect these fees, as well as the fair

value of our MSRs. When rates rise, the demand for mortgage

loans usually tends to fall, reducing the revenue we receive from

loan originations. Under the same conditions, revenue from our

MSRs can increase due to a decline in the likelihood of

prepayments, which increases the fair value of our MSRs. When

rates fall, mortgage originations usually tend to increase and the

value of our MSRs usually tends to decline, also with some

offsetting revenue effect. Even though they can act as a “natural

hedge,” the hedge is not perfect, either in amount or timing.

We typically use derivatives and other instruments to hedge

our mortgage banking interest rate risk. We may not hedge all of

our risk, and we may not be successful in hedging any of the risk.

Hedging is not a perfect science, and we could incur significant

losses from our hedging activities.

We rely on the GSEs to purchase mortgage loans that meet

their conforming loan requirements and on government insuring

agencies, such as the Federal Housing Administration (FHA) and

the Department of Veterans Affairs (VA), to insure or guarantee

loans that meet their policy requirements. If the GSEs or

government insuring agencies were to limit or reduce their

purchasing, insuring or guaranteeing of loans, our ability to fund,

and thus originate, new mortgage loans, could be reduced. We

cannot assure that the GSEs or government insuring agencies will

not materially limit their purchases, insuring or guaranteeing of

conforming loans or change their criteria for what constitutes a

conforming loan (e.g., maximum loan amount or borrower

eligibility). As noted above, there are various proposals to reform

the housing finance market in the U.S., including the role of the

GSEs in the housing finance market. The impact of any such

regulatory reform regarding the housing finance market and the

GSEs, as well as any effect on the Company’s business and

financial results, are uncertain. In addition, to meet customer

needs, we also originate loans that do not conform to either the

GSEs’ or government insuring agencies’ standards, which are

generally retained on our balance sheet and therefore do not

generate sale proceeds that could be used to originate new loans.

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For additional information, see the “Risk Management –

Asset/Liability Management – Mortgage Banking Interest Rate

and Market Risk,” “Critical Accounting Policies – Valuation of

Residential Mortgage Servicing Rights (MSRs)” and “Critical

Accounting Policies – Fair Value of Financial Instruments”

sections in this Report.

We may suffer losses, penalties, or other adverse

consequences if we fail to satisfy our obligations with respect

to the residential mortgage loans we originate or service. For

residential mortgage loans that we originate, we could become

subject to monetary damages and other civil penalties, including

the loss of certain contractual payments or the inability to

exercise certain remedies under the loans such as foreclosure

proceedings, if it is alleged or determined that the loans were not

originated in accordance with applicable laws or regulations.

Additionally, for residential mortgage loans that we

originate and sell, we may be required to repurchase the loans or

indemnify or reimburse the securitization trust, investor or

insurer for credit losses incurred on loans in the event of a breach

of contractual representations or warranties in the agreements

under which we sell the loans or in the insurance or guaranty

agreements that we enter into with the FHA and VA. We

establish a mortgage repurchase liability that reflects

management’s estimate of losses for loans for which we have a

repurchase obligation. Because the level of the liability depends

on economic factors and other external conditions, the level of

the liability is difficult to estimate, requires considerable

management judgment, and is subject to change. If economic

conditions or the housing market worsen, we could have

increased repurchase obligations and increased loss severity on

repurchases, requiring significant additions to the repurchase

liability.

Furthermore, if we fail to satisfy our servicing obligations for

the mortgage loans we service, we may be terminated as servicer

or master servicer, required to indemnify the securitization

trustee against losses, and/or contractually obligated to

repurchase a mortgage loan or reimburse investors for credit

losses, any of which could significantly reduce our net servicing

income.

We may also incur costs, liabilities to borrowers and/or

securitization investors, legal proceedings, or other adverse

consequences if we fail to meet our servicing obligations,

including with respect to mortgage foreclosure actions or if we

experience delays in the foreclosure process. Our net servicing

income and the fair value of our MSRs may be negatively

affected to the extent our servicing costs increase because of

higher foreclosure or other servicing related costs. In addition, we

may continue to be subject to fines, business restrictions, and

other sanctions imposed by federal or state regulators as a result

of actual or perceived deficiencies in our mortgage servicing

practices, including with respect to our foreclosure practices, our

loss mitigation activities such as loan modifications or

forbearances, or our servicing of flood zone properties. Any of

these actions may harm our reputation, negatively affect our

residential mortgage origination or servicing business, or result in

material fines, penalties, equitable remedies, or other

enforcement actions. We may also face risks, including

regulatory, compliance, and market risks, as we pursue our

previously announced plans to reduce the amount of residential

mortgage loans we service.

For additional information, see the “Overview,” “Risk

Management – Credit Risk Management – Mortgage Banking

Activities,” and “Critical Accounting Policies – Valuation of

Residential Mortgage Servicing Rights” sections and Note 13

(Legal Actions) and Note 18 (Pledged Assets and Collateral) to

Financial Statements in this Report.

COMPETITIVE RISKS

We face significant and increasing competition in the rapidly

evolving financial services industry. We compete with other

financial institutions in a highly competitive industry that is

undergoing significant changes as a result of financial regulatory

reform, technological advances, increased public scrutiny, and

current economic conditions. Our success depends on, among

other things, our ability to develop and maintain deep and

enduring relationships with our customers based on the quality

of our customer service, the wide variety of products and

services that we can offer our customers and the ability of those

products and services to satisfy our customers’ needs and

preferences, the pricing of our products and services, the

extensive distribution channels available for our customers, our

innovation, and our reputation. Continued or increased

competition in any one or all of these areas may negatively affect

our customer relationships, market share and results of

operations and/or cause us to increase our capital investment in

our businesses in order to remain competitive. In addition, our

ability to reposition or reprice our products and services from

time to time may be limited and could be influenced significantly

by the current economic, regulatory and political environment for

large financial institutions as well as by the actions of our

competitors. Furthermore, any changes in the types of products

and services that we offer our customers and/or the pricing for

those products and services could result in a loss of customer

relationships and market share and could materially adversely

affect our results of operations.

Continued technological advances and the growth of

e-commerce have made it possible for non-depository

institutions to offer products and services that traditionally were

banking products, and for financial institutions and other

companies to provide electronic and internet-based financial

solutions, including electronic securities trading, lending and

payment solutions. In addition, technological advances, including

digital currencies and alternative payment methods, may

diminish the importance of depository institutions and other

financial intermediaries in the transfer of funds between parties.

We may not respond effectively to these and other competitive

threats from existing and new competitors and may be forced to

sell products at lower prices, increase our investment in our

business to modify or adapt our existing products and services,

and/or develop new products and services to respond to our

customers’ needs and preferences. To the extent we are not

successful in developing and introducing new products and

services or responding or adapting to the competitive landscape

or to changes in customer preferences, we may lose customer

relationships and our revenue growth and results of operations

may be materially adversely affected.

Our ability to attract and retain qualified employees is critical

to the success of our business and failure to do so could

adversely affect our business performance, competitive

position and future prospects. The success of Wells Fargo is

heavily dependent on the talents and efforts of our employees,

including our senior leaders, and in many areas of our business,

including commercial banking, brokerage, investment advisory,

capital markets, risk management and technology, the

competition for highly qualified personnel is intense. We also

seek to retain a pipeline of employees to provide continuity of

succession for our senior leadership positions. In order to attract

Wells Fargo & Company 81



 



Risk Factors (continued)

and retain highly qualified employees, we must provide

competitive compensation, benefits and work arrangements,

effectively manage employee performance and development,

and foster a diverse and inclusive environment. As a large

financial institution and additionally to the extent we remain

subject to consent orders we may be subject to limitations on

compensation by our regulators that may adversely affect our

ability to attract and retain these qualified employees, especially

if some of our competitors may not be subject to these same

compensation limitations. If we are unable to continue to attract

and retain qualified employees, including successors for senior

leadership positions, our business performance, competitive

position and future prospects may be adversely affected.

FINANCIAL REPORTING RISKS

Changes in accounting standards, and changes in how

accounting standards are interpreted or applied, could

materially affect our financial results and condition. From time

to time the FASB and the SEC update the financial accounting

and reporting standards that govern the preparation of our

external financial statements. In addition, accounting standard

setters and those who interpret the accounting standards (such

as the FASB, SEC, and banking regulators) may update their

previous interpretations or positions on how these standards

should be applied. Changes in financial accounting and reporting

standards and changes in current interpretations may be beyond

our control, can be hard to predict, and could materially affect

our financial results and condition, including requiring a

retrospective restatement of prior period financial statements.

Similarly, any change in our accounting policies could also

materially affect our financial statements. For additional

information, see the “Current Accounting Developments” section

in this Report.

Our financial statements require certain assumptions and

estimates and rely on the effectiveness of our internal control

over financial reporting. Pursuant to U.S. GAAP, we are required

to use certain assumptions and estimates in preparing our

financial statements, including, among other items, in

determining the allowance for credit losses, the liability for

contingent litigation losses, and the fair value of certain assets

and liabilities such as debt securities, loans held for sale, MSRs,

derivative assets and liabilities, and equity securities. Several of

our accounting policies are critical because they require

management to make difficult, subjective and complex

judgments about matters that are inherently uncertain and

because it is likely that materially different amounts would be

reported under different conditions or using different

assumptions. If the assumptions or estimates underlying our

financial results are incorrect or different from actual results, we

could experience unexpected losses or other adverse impacts,

some of which could be significant. For a description of our

critical accounting policies, see the “Critical Accounting Policies”

section in this Report.

The Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) requires

our management to evaluate the Company’s disclosure controls

and procedures and its internal control over financial reporting

and requires our auditors to issue a report on our internal control

over financial reporting. We are required to disclose, in our annual

report on Form 10-K, the existence of any “material weaknesses”

in our internal controls. We cannot assure that we will not

identify one or more material weaknesses as of the end of any

given quarter or year, nor can we predict the effect on our

reputation or stock price of disclosure of a material weakness.

We could also be required to devote significant resources to

remediate any material weakness. In addition, our customers may

rely on the effectiveness of certain of our operational and

internal controls as a service provider, and any deficiency in those

controls could affect our customers and damage our reputation

or business. Sarbanes-Oxley also limits the types of non-audit

services our outside auditors may provide to us in order to

preserve their independence from us. If our auditors were found

not to be independent of us, we could be required to engage new

auditors and re-file financial statements and audit reports with

the SEC. We could be out of compliance with SEC rules until new

financial statements and audit reports were filed, limiting our

ability to raise capital and resulting in other adverse

consequences.

* * *

Any factor described in this Report or in any of our other SEC

filings could by itself, or together with other factors, adversely

affect our financial results and condition. Refer to our quarterly

reports on Form 10-Q filed with the SEC in 2023 for material

changes to the above discussion of risk factors. There are factors

not discussed above or elsewhere in this Report that could

adversely affect our financial results and condition.

Wells Fargo & Company 82



Controls and Procedures

Disclosure Controls and Procedures

The Company’s management evaluated the effectiveness, as of December 31, 2022, of the Company’s disclosure controls and

procedures. The Company’s chief executive officer and chief financial officer participated in the evaluation. Based on this evaluation, the

Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were

effective as of December 31, 2022.

Internal Control Over Financial Reporting

Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934 as a process

designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the

Company’s Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and

the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (GAAP)

and includes those policies and procedures that:

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of

assets of the Company;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in

accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations

of management and directors of the Company; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the

Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections

of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in

conditions, or that the degree of compliance with the policies or procedures may deteriorate. No change occurred during fourth quarter

2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s report on internal control over financial reporting is set forth below and should be read with these limitations

in mind.

Management’s Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the

Company. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022,

using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control –

Integrated Framework (2013). Based on this assessment, management concluded that as of December 31, 2022, the Company’s internal

control over financial reporting was effective.

KPMG LLP, the independent registered public accounting firm that audited the Company’s financial statements included in this

Annual Report, issued an audit report on the Company’s internal control over financial reporting. KPMG’s audit report appears on the

following page.

Wells Fargo & Company 83

FF

Report of Independent Registered Public Accounting Firm

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2023

Wells Fargo & Company

84

2,968

Financial Statements

Wells Fargo & Company and Subsidiaries

Consolidated Statement of Income

Year ended December 31,

(in millions, except per share amounts) 2022 2021 2020

Interest income

Debt securities $ 11,781 9,253 11,234

Loans held for sale 513 865 947

Loans 37,715 28,634 34,230

Equity securities 707 608 554

Other interest income 3,308 334 954

Total interest income 54,024 39,694 47,919

Interest expense

Deposits 2,349 388 2,804

Short-term borrowings 582 (41) 250

Long-term debt 5,505 3,173 4,471

Other interest expense 638 395 438

Total interest expense 9,074 3,915 7,963

Net interest income 44,950 35,779 39,956

Noninterest income

Deposit and lending-related fees 6,713 6,920 6,602

Investment advisory and other asset-based fees 9,004 11,011 9,863

Commissions and brokerage services fees 2,242 2,299 2,384

Investment banking fees 1,439 2,354 1,865

Card fees 4,355 4,175 3,544

Mortgage banking 1,383 4,956 3,493

Net gains from trading and securities 1,461 7,264 2,710

Other 2,238 3,734 3,847

Total noninterest income 28,835 42,713 34,308

Total revenue 73,785 78,492 74,264

Provision for credit losses 1,534 (4,155) 14,129

Noninterest expense

Personnel 34,340 35,541 34,811

Technology, telecommunications and equipment 3,375 3,227 3,099

Occupancy 2,881 3,263

Operating losses 6,984 1,568 3,523

Professional and outside services 5,188 5,723 6,706

Advertising and promotion 505 600 600

Restructuring charges 5 76 1,499

Other 4,004 4,128 4,129

Total noninterest expense 57,282 53,831 57,630

Income before income tax expense 14,969 28,816 2,505

Income tax expense (benefit) 2,087 5,578 (1,157)

Net income before noncontrolling interests 12,882 23,238 3,662

Less: Net income (loss) from noncontrolling interests (300) 1,690 285

Wells Fargo net income $ 13,182 21,548 3,377

Less: Preferred stock dividends and other 1,115 1,292 1,591

Wells Fargo net income applicable to common stock $ 12,067 20,256 1,786

Per share information

Earnings per common share $

3.17

4.99

0.43

Diluted earnings per common

share 3.14 4.95

0.43

Average common shares outstanding 3,805.2 4,061.9

4,118.0

Diluted average common shares outstanding 3,837.0 4,096.2

4,134.2

The accompanying notes are an integral part of these statements.

Wells Fargo & Company 85

Wells Fargo & Company and Subsidiaries

Consolidated Statement of Comprehensive Income

Year ended December 31,

(in millions) 2022 2021 2020

Net income before noncontrolling interests $ 12,882 23,238 3,662

Other comprehensive income (loss), after tax:

Net change in debt securities (10,500) (2,375) 1,487

Net change in derivatives and hedging activities (1,090) 159 149

Defined benefit plans adjustments 154 349 (181)

Other (241) (30) 50

Other comprehensive income (loss), after tax (11,677) (1,897) 1,505

Total comprehensive income before noncontrolling interests 1,205 21,341 5,167

Less: Other comprehensive income (loss) from noncontrolling interests 2 (1) —

Less: Net income (loss) from noncontrolling interests (300) 1,690 285

Wells Fargo comprehensive income $ 1,503 19,652 4,882

The accompanying notes are an integral part of these statements.

Wells Fargo & Company 86



  



Wells Fargo & Company and Subsidiaries

Consolidated Balance Sheet

(in millions, except shares)

Dec 31,

2022

Dec 31,

2021

Assets

Cash and due from banks $ 34,596 24,616

Interest-earning deposits with banks 124,561 209,614

Total cash, cash equivalents, and restricted cash 159,157 234,230

Federal funds sold and securities purchased under resale agreements 68,036 66,223

Debt securities:

Trading, at fair value (includes assets pledged as collateral of $26,932 and $13,304) 86,155 88,265

Available-for-sale, at fair value (amortized cost of $121,725 and $175,463, net of allowance for credit losses) 113,594 177,244

Held-to-maturity, at amortized cost, net of allowance for credit losses (fair value $255,521 and $272,386) 297,059 272,022

Loans held for sale (includes $4,220 and $15,895 carried at fair value) 7,104 23,617

Loans 955,871 895,394

Allowance for loan losses (12,985) (12,490)

Net loans 942,886 882,904

Mortgage servicing rights (includes $9,310 and $6,920 carried at fair value) 10,480 8,189

Premises and equipment, net 8,350 8,571

Goodwill 25,173 25,180

Derivative assets 22,774 21,478

Equity securities (includes $28,383 and $39,098 carried at fair value; and assets pledged as collateral of $747 and $984) 64,414 72,886

Other assets 75,834 67,259

Total assets (1) $ 1,881,016 1,948,068

Liabilities

Noninterest-bearing deposits $

458,010

527,748

Interest-bearing deposits 925,975 954,731

Total deposits 1,383,985 1,482,479

Short-term borrowings (includes $181 and $0 carried at fair value) 51,145 34,409

Derivative liabilities 20,085 9,424

Accrued expenses and other liabilities (includes $20,123 and $20,685 carried at fair value) 69,056 70,957

Long-term debt (includes $1,346 and $0 carried at fair value) 174,870 160,689

Total liabilities (2) 1,699,141 1,757,958

Equity

Wells Fargo stockholders’ equity:

Preferred stock – aggregate liquidation preference of $20,216 and $20,825 19,448 20,057

Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,481,811,474 shares 9,136 9,136

Additional paid-in capital 60,319 60,196

Retained earnings 187,649 180,322

Accumulated other comprehensive loss (13,381) (1,702)

Treasury stock, at cost – 1,648,007,022 shares and 1,596,009,977 shares (82,853) (79,757)

Unearned ESOP shares (429) (646)

Total Wells Fargo stockholders’ equity 179,889 187,606

Noncontrolling interests 1,986 2,504

Total equity 181,875 190,110

Total liabilities and equity $

1,881,016

1,948,068

(1) Our consolidated assets at December 31, 2022 and 2021, include the following assets of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs: Debt

securities, $71 million and $71 million; Loans, $4.8 billion and $4.5 billion; All other assets, $191 million and $234 million; and Total assets, $5.1 billion and $4.8 billion, respectively.

(2) Our consolidated liabilities at December 31, 2022 and 2021, include the following VIE liabilities for which the VIE creditors do not have recourse to Wells Fargo: Long-term debt, $0 million and

$149 million; All other liabilities, $201 million and $259 million; and Total liabilities, $201 million and $408 million, respectively.

The accompanying notes are an integral part of these statements.

Wells Fargo & Company 87



Wells Fargo & Company and Subsidiaries

Consolidated Statement of Changes in Equity

Wells Fargo stockholders’ equity

Preferred stock Common stock

Accumulated

other

comprehensive

income (loss)

Additional

paid-in

capital

Unearned

ESOP

shares ($ and shares in millions) Shares Amount Shares Amount

Retained

earnings

Treasury

stock

Noncontrolling

interests

Total

equity

Balance December 31, 2019 7.5 $ 21,549 4,134.4 $ 9,136 61,049 166,415 (1,311) (68,831) (1,143) 838 187,702

Cumulative effect from change in

accounting policies (1) 990 990

Balance January 1, 2020 7.5 21,549 4,134.4 9,136 61,049 167,405 (1,311) (68,831) (1,143) 838 188,692

Net income 3,377 285 3,662

Other comprehensive income,

net of tax 1,505 — 1,505

Noncontrolling interests (91) (91)

Common stock issued 75.6 207 (1,449) 3,961 2,719

Common stock repurchased (75.7) (3,415) (3,415)

Preferred stock issued 0.1 3,183 (67) 3,116

Preferred stock redeemed (2) (1.9) (3,347) 46 (301) — (3,602)

Preferred stock issued to ESOP — — — — —

Preferred stock released by ESOP (19) 268 249

Preferred stock converted to

common sh ares (0.2) (249) 9.7 (243) 492 —

Common stock dividends 44 (5,059) (5,015)

Preferred stock dividends (1,290) (1,290)

Stock-based compensation 643 643

Net change in deferred compensation

and related plans (1,463) 2 (1,461)

Net change (2.0) (413) 9.6 — (852) (4,722) 1,505 1,040 268 194 (2,980)

Balance December 31, 2020 5.5 $ 21,136 4,144.0 $ 9,136 60,197 162,683 194 (67,791) (875) 1,032 185,712

Net income 21,548 1,690 23,238

Other comprehensive loss,

net of tax (1,896) (1) (1,897)

Noncontrolling interests (217) (217)

Common stock issued 43.8 (8) (162) 2,265 2,095

Common stock repurchased (306.4) (14,464) (14,464)

Preferred stock issued 0.2 5,810 (54) 5,756

Preferred stock redeemed (3) (0.2) (6,676) 87 (87) — (6,676)

Preferred stock issued to ESOP — — — — —

Preferred stock released by ESOP (16) 229 213

Preferred stock converted to

common sh ares (0.2) (213) 4.4 (8) 221 —

Common stock dividends 29 (2,455) (2,426)

Preferred stock dividends (1,205) (1,205)

Stock-based compensation 1,043 1,043

Net change in deferred compensation

and related plans (1,074) 12 (1,062)

Net change (0.2) (1,079) (258.2) — (1) 17,639 (1,896) (11,966) 229 1,472 4,398

Balance December 31, 2021 5.3 $ 20,057 3,885.8 $ 9,136 60,196 180,322 (1,702) (79,757) (646) 2,504 190,110

(1) Effective Ja nuary 1, 2020, we a dopted ASU 2016-13 – F inancial Inst ruments – C redit Losses (Top ic 326): Measurement of Credit Losses on Financial Instruments (CECL). For additional infor mation, see

Note 1 (Summary of S ignificant Accounting Policies) in ou r Annual Rep ort on F orm 10-K for the y ear ended December 31, 2020.

(2) Represents t he im pact of t he r edemption of t he r emaining preferred stock, Series K , in fir st quarter 2020, and Series T a nd Series V in fou rth quarter 2020.

(3) Represents t he im pact of t he r edemption of Pr eferred Stock, Series I, Series P a nd Series W, in fir st quarter 2021; Preferred Stock, Series N, in second quarter 2021; and Preferred Stock, Series O a nd

Series X , in t hird quarter 2021.

The accompanying notes are an integral part of these statements.

Wells Fargo & Company 88



Wells Fargo & Company and Subsidiaries

Consolidated Statement of Changes in Equity

Wells Fargo stockholders’ equity

Preferred stock Common stock

Accumulated

other

comprehensive

income (loss)

Additional

paid-in

capital

Unearned

ESOP

shares ($ and shares in millions) Shares Amount Shares Amount

Retained

earnings

Treasury

stock

Noncontrolling

interests

Total

equity

Balance December 31, 2021 5.3 $ 20,057 3,885.8 $ 9,136 60,196 180,322 (1,702) (79,757) (646) 2,504 190,110

Net income (loss) 13,182 (300) 12,882

Other comprehensive income (loss),

net of tax (11,679) 2 (11,677)

Noncontrolling interests (220) (220)

Common stock issued 43.5 129 (497) 2,181 1,813

Common stock repurchased (110.4) (6,033) (6,033)

Preferred stock issued — — — —

Preferred stock redeemed (1) (0.6) (609) (37) — 646 —

Common stock issued to ESOP (1) 14.9 (129) 747 (618) —

Common stock released by ESOP (2) (1) 189 188

Preferred stock converted to

common shares — — — — — —

Common stock dividends 59 (4,243) (4,184)

Preferred stock dividends (1,115) (1,115)

Stock-based compensation 1,002 1,002

Net change in deferred

compensation and related plans (900) 9 (891)

Net change (0.6) (609) (52.0) — 123 7,327 (11,679) (3,096) 217 (518) (8,235)

Balance December 31, 2022 4.7 $ 19,448 3,833.8 $ 9,136 60,319 187,649 (13,381) (82,853) (429) 1,986 181,875

(1) See Note 11 (Preferred Stock) for additional information.

(2) For additional information on our ESOP Plan, see the “Employee Stock Ownership Plan” section of Note 12 (Common Stock and Stock Plans).

The accompanying notes are an integral part of these statements.

Wells Fargo & Company 89

Cash flows from financing activities:

Net change in:

Deposits (98,494) 78,582 81,755

Short-term borrowings 16,564 (24,590) (45,513)

Long-term debt:

Proceeds from issuance 53,737 1,275 38,136

Repayment (19,587) (47,134) (65,347)

Preferred stock:

Proceeds from issuance — 5,756 3,116

Redeemed — (6,675) (3,602)

Cash dividends paid (1,115) (1,205) (1,290)

Common stock:

Repurchased (6,033) (14,464) (3,415)

Cash dividends paid (4,178) (2,422) (4,852)

Other, net (539) (361) (231)

Net cash used by financing activities (59,645) (11,238) (1,243)

Net change in cash, cash equivalents, and restricted cash (75,073) (30,382) 123,362

Cash, cash equivalents, and restricted cash at beginning of period 234,230 264,612 141,250

Cash, cash equivalents, and restricted cash at end of period $ 159,157 234,230 264,612

Supplemental cash flow disclosures:

Cash paid for interest $ 8,289 4,384 8,414

Cash paid for income taxes, net 3,376 3,166 1,175

Wells Fargo & Company and Subsidiaries

Consolidated Statement of Cash Flows

Year ended December 31,

(in millions) 2022 2021 2020

Cash flows from operating activities:

Net income before noncontrolling interests $ 12,882 23,238 3,662

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses 1,534 (4,155) 14,129

Changes in fair value of MSRs and LHFS carried at fair value (1,326) (1,188) 4,321

Depreciation, amortization and accretion 6,832 7,890 8,219

Deferred income tax expense (benefit) 1,075 (1,292) (3,289)

Other, net (14,524) (12,194) 7,024

Originations and purchases of loans held for sale (74,910) (158,923) (181,961)

Proceeds from sales of and paydowns on loans originally classified as held for sale 65,418 101,293 122,592

Net change in:

Debt and equity securities, held for trading 31,579 19,334 43,214

Derivative assets and liabilities 7,856 (2,472) (5,492)

Other assets (9,137) 15,477 (12,304)

Other accrued expenses and liabilities (231) 1,467 1,936

Net cash provided (used) by operating activities 27,048 (11,525) 2,051

Cash flows from investing activities:

Net change in:

Federal funds sold and securities purchased under resale agreements (704) (551) 36,468

Available-for-sale debt securities:

Proceeds from sales 16,895 17,958 48,638

Paydowns and maturities 19,791 75,701 78,174

Purchases (40,104) (110,431) (91,545)

Held-to-maturity debt securities:

Paydowns and maturities 27,666 79,517 36,641

Purchases (2,360) (71,245) (46,755)

Equity securities, not held for trading:

Proceeds from sales and capital returns 4,326 4,933 12,187

Purchases (6,984) (7,680) (8,677)

Loans:

Loans originated by banking subsidiaries, net of principal collected (74,861) (28,809) 53,718

Proceeds from sales of loans originally classified as held for investment 12,446 31,847 9,359

Purchases of loans (741) (389) (1,313)

Principal collected on nonbank entities’ loans 5,173 8,985 7,927

Loans originated by nonbank entities (3,824) (11,237) (13,052)

Other, net 805 3,782 784

Net cash provided (used) by investing activities (42,476) (7,619) 122,554

The accompanying notes are an integral part of these statements. See Note 1 (Summary of Significant Accounting Policies) for noncash activities.

Wells Fargo & Company 90



Notes to Financial Statements

-See the “Glossary of Acronyms“ at the end of this Report for terms used throughout the Financial Statements and related Notes.

Note 1: Summary of Significant Accounting Policies

Wells Fargo & Company is a diversified financial services

company. We provide banking, investment and mortgage

products and services, as well as consumer and commercial

finance, through banking locations and offices, the internet and

other distribution channels to individuals, businesses and

institutions in all 50 states, the District of Columbia, and in

countries outside the U.S. When we refer to “Wells Fargo,” “the

Company,” “we,” “our” or “us,” we mean Wells Fargo & Company

and Subsidiaries (consolidated). Wells Fargo & Company (the

Parent) is a financial holding company and a bank holding

company. We also hold a majority interest in a real estate

investment trust, which has publicly traded preferred stock

outstanding.

Our accounting and reporting policies conform with U.S.

generally accepted accounting principles (GAAP) and practices in

the financial services industry. To prepare the financial

statements in conformity with GAAP, management must make

estimates based on assumptions about future economic and

market conditions (for example, unemployment, market liquidity,

real estate prices, etc.) that affect the reported amounts of

assets and liabilities at the date of the financial statements,

income and expenses during the reporting period and the related

disclosures. Although our estimates contemplate current

conditions and how we expect them to change in the future, it is

reasonably possible that actual conditions could be worse than

anticipated in those estimates, which could materially affect our

results of operations and financial condition. Management has

made significant estimates in several areas, including:

• allowance for credit losses (Note 5 (Loans and Related

Allowance for Credit Losses));

• valuations of residential mortgage servicing rights (MSRs)

(Note 6 (Mortgage Banking Activities) and Note 16

(Securitizations and Variable Interest Entities));

• valuations of financial instruments (Note 15 (Fair Values of

Assets and Liabilities));

• liabilities for contingent litigation losses (Note 13 (Legal

Actions));

• income taxes (Note 22 (Income Taxes)); and

• goodwill impairment (Note 7 (Intangible Assets and Other

Assets)).

Actual results could differ from those estimates.

Accounting Standards Adopted in 2022

In 2022, we adopted the following new accounting guidance:

• Accounting Standards Update (ASU or Update) 2020-06 –

Debt – Debt with Conversion and Other Options (Subtopic

470-20) and Derivatives and Hedging – Contracts in Entity’s

Own Equity (Subtopic 815-40): Accounting for Convertible

Instruments and Contracts in an Entity’s Own Equity

• ASU 2021-05 – Leases (Topic 842): Lessors – Certain Leases

with Variable Lease Payments

• ASU 2021-10 – Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance

• ASU 2022-06 – Reference Rate Reform (Topic 848): Deferral

of the Sunset Date of Topic 848

ASU 2020-06 simplifies the accounting for convertible financial

instruments that embody characteristics of debt and equity by

(1) eliminating accounting models for convertible financial

instruments with cash conversion and beneficial conversion

features within Accounting Standards Codification (ASC)

Subtopic 470-20, (2) removing three equity classification

requirements for a contract in an entity’s own equity to qualif y

for the derivative scope exception in ASC Subtopic 815-40, and

(3) prescribing the method used for computing earnings per

share. We adopted this Update prospectively in first quarter

2022. This Update did not have a material impact to our

consolidated financial statements.

ASU 2021-05 amends ASC Topic 842 – Leases and provides

specific guidance for lessors whose leases include variable lease

payments that are not dependent on a reference index or rate

and otherwise would have resulted in the recognition of a loss at

lease commencement (a day 1 loss). Prior to ASU 2016-02,

variable lease payments were excluded from the definition of

lease payments for lessors measuring their net investment loss in

a sales-type lease or direct financing lease. This often resulted in

a day 1 loss, even if the lessor expected the arrangement to be

profitable overall. We adopted this Update prospectively in first

quarter 2022. This Update did not have a material impact to our

consolidated financial statements.

ASU 2021-1 0 created a new topic in the codification, ASC Topic

832. The ASU requires annual disclosures for a business entity

that has received government assistance and uses a grant or

contribution accounting model by analogy to other accounting

guidance. We adopted this Update in fourth quarter 2022 on a

prospective basis. This Update did not have a material impact t o

our consolidated financial statements.

ASU 2022-06 defers the sunset date of ASC Topic 848 –

Reference Rate Reform from December 31, 2022, to

December 31, 2024, to extend the ability to apply the guidance

in Topic 848, which provides temporary optional guidance to

ease the burden in accounting for reference rate reform on

financial reporting. We adopted this Update prospectively in

fourth quarter 2022. This Update did not have a material impact

to our consolidated financial statements.

Consolidation

Our consolidated financial statements include the accounts of

the Parent and our subsidiaries in which we have a controlling

financial interest. When our consolidated subsidiaries follow

specialized industry accounting, that accounting is retained in

consolidation.

We are also a variable interest holder in certain entities in

which equity investors do not have the characteristics of a

controlling financial interest or where the entity does not have

enough equity at risk to finance its activities without additional

subordinated financial support from other parties (collectively

referred to as variable interest entities (VIEs)). Our variable

interest arises from contractual, ownership or other monetary

interests in the entity, which change with fluctuations in the fair

value of the entity’s net assets. We consolidate a VIE if we are the

primary beneficiary, which is when we have both the power to

direct the activities that most significantly impact the VIE and a

variable interest that could potentially be significant to the VIE.

To determine whether or not a variable interest we hold could

potentially be significant to the VIE, we consider both qualitative

and quantitative factors regarding the nature, size and form of

Wells Fargo & Company 91

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Note 1: Summary of Significant Accounting Policies (continued)

our involvement with the VIE. We assess whether or not we are

the primary beneficiary of a VIE on an ongoing basis.

Significant intercompany accounts and transactions are

eliminated in consolidation. When we have significant influence

over operating and financing decisions for a company but do not

own a majority of the voting equity interests, we account for the

investment using the equity method of accounting, which

requires us to recognize our proportionate share of the

company’s earnings. If we do not have significant influence, we

account for the equity security under the fair value method, cost

method or measurement alternative.

Noncontrolling interests represent the portion of net

income and equity attributable to third-party owners of

consolidated subsidiaries that are not wholly-owned by

Wells Fargo. Substantially all of our noncontrolling interests

relate to our affiliated venture capital and private equity

businesses.

Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents and restricted cash are recorded at

amortized cost and include cash on hand, cash items in transit,

and amounts due from or held with other depository institutions.

See Note 25 (Regulatory Capital Requirements and Other

Restrictions) for additional information on the restrictions on

cash and cash equivalents.

Trading Activities

We engage in trading activities to accommodate the investment

and risk management activities of our customers. These

activities predominantly occur in our Corporate and Investment

Banking reportable operating segment. Trading assets and

liabilities include debt securities, equity securities, loans held

for sale, derivatives and short sales, which are reported within

our consolidated balance sheet based on the accounting

classification of the instrument. In addition, debt securities that

are held for investment purposes that we have elected to

account for under the fair value method, are classified as trading.

Our trading assets and liabilities are carried on our

consolidated balance sheet at fair value with changes in fair

value recognized in net gains from trading and securities within

noninterest income. Interest income and interest expense are

recognized in net interest income.

Customer accommodation trading activities include our

actions as an intermediary to buy and sell financial instruments

and market-making activities. We also take positions to manage

our exposure to customer accommodation activities. We hold

financial instruments for trading in long positions, as well as short

positions, to facilitate our trading activities. As an intermediary,

we interact with market buyers and sellers to facilitate the

purchase and sale of financial instruments to meet the

anticipated or current needs of our customers. For example, we

may purchase or sell a derivative to a customer who wants to

manage interest rate risk exposure. We typically enter into an

offsetting derivative or security position to manage our exposure

to the customer transaction. We earn income based on the

transaction price difference between the customer transaction

and the offsetting position, which is reflected in earnings where

the fair value changes and related interest income and expense of

the positions are recorded.

Our market-making activities include taking long and short

trading positions to facilitate customer order flow. These

activities are typically executed on a short-term basis. As a

market-maker we earn income due to: (1) the difference

between the price paid or received for the purchase and sale of

the security (bid-ask spread), (2) the net interest income of the

positions, and (3) the changes in fair value of the trading

positions held on our consolidated balance sheet. Additionally, we

may enter into separate derivative or security positions to

manage our exposure related to our long and short trading

positions taken in our market-making activities. Income earned

on these market-making activities are reflected in earnings

where the fair value changes and related interest income and

expense of the positions are recorded.

Available-for-Sale and Held-to-Maturity Debt Securities

Our investments in debt securities that are not held for tradin g

purposes are classified as either available-for-sale (AFS) or held -

to-maturity (HTM).

Investments in debt securities for which the Company does

not have the positive intent and ability to hold to maturity are

classified as AFS. AFS debt securities are measured at fair value,

with unrealized gains and losses reported in accumulated other

comprehensive income (AOCI). The amount reported in other

comprehensive income (OCI) is net of the allowance for credit

losses (ACL) and applicable income taxes. Investments in debt

securities for which the Company has the positive intent and

ability to hold to maturity are classified as HTM. HTM debt

securities are measured at amortized cost, net of ACL. See Note

3 (Available-for-Sale and Held-to-Maturity Debt Securities) for

additional information.

INTEREST INCOME AND GAIN/LOSS RECOGNITION Unamortized

premiums and discounts are recognized in interest income over

the contractual life of the security using the effective interest

method, except for purchased callable debt securities carried at a

premium. For purchased callable debt securities carried at a

premium, the premium is amortized into interest income to the

next call date using the effective interest method. As principal

repayments are received on securities (e.g., mortgage-backed

securities (MBS)), a proportionate amount of the related

premium or discount is recognized in income so that the

effective interest rate on the remaining portion of the security

continues unchanged.

We recognize realized gains and losses on the sale of debt

securities in net gains from trading and securities within

noninterest income using the specific identification method.

IMPAIRMENT AND CREDIT LOSSES Unrealized losses on AFS debt

securities are driven by a number of factors, including changes in

interest rates and credit spreads which impact most types of

debt securities, and prepayment rates which impact MBS and

collateralized loan obligations (CLO). Additional considerations

for certain types of AFS debt securities include:

• Debt securities of U.S. Treasury and federal agencies,

including federal agency MBS, are not impacted by credit

movements given the explicit or implicit guarantees

provided by the U.S. government.

• Debt securities of U.S. states and political subdivisions are

most impacted by changes in the relationship between

municipal and term funding credit curves rather than by

changes in the credit quality of the underlying securities.

• Structured securities, such as MBS and CLO, are also

impacted by changes in projected collateral losses of assets

underlying the security.

For AFS debt securities where fair value is less than

amortized cost basis, we recognize impairment in earnings if we

have the intent to sell the security or if it is more likely than not

that we will be required to sell the security before recovery of its

amortized cost basis. Impairment is recognized in net gains on

Wells Fargo & Company 92

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trading and securities within noninterest income equal to the

difference between the amortized cost basis, net of ACL, and the

fair value of the AFS debt security. Following the recognition of

this impairment, the AFS debt security’s new amortized cost

basis is fair value.

For AFS debt securities where fair value is less than

amortized cost basis where we did not recognize impairment in

earnings, we record an ACL as of the balance sheet date to the

extent unrealized loss is due to credit losses. See the “Allowance

for Credit Losses” section in this Note for our accounting policies

relating to the ACL for debt securities, which also includes debt

securities classified as HTM.

TRANSFERS BETWEEN C ATEGORIES OF DEBT S ECURITIES Transfers

of debt securities from the AFS to HTM classification are

recorded at fair value, and accordingly the amortized cost of t he

security transferred to HTM is adjusted to fair value . Unrealized

gains or losses reported in AOCI at the transfer date are

amortized into earnings over the same period as the unamortize d

premiums and discounts using the effective interest method.

Any ACL previously recorded under the AFS debt security model

is reversed and an ACL under the HTM debt security model is re -

established. The reversal and re-establishment of the ACL are

recorded in provision for credit losses.

Transfers of debt securities from the HTM to AFS

classification are recorded at fair value. The HTM amortized co st

(excluding any ACL previously recorded under the HTM debt

security model) becomes the AFS amortized cost, and the debt

security is remeasured at fair value with the unrealized gains and

losses reported in OCI. Any ACL previously recorded under the

HTM debt security model is reversed and an ACL under the AFS

debt security model is re-established. The reversal and re -

establishment of the ACL are recorded in provision expense .

Transfers from HTM to AFS are only expected to occur under

limited circumstances.

NONACCRUAL AND PAST DUE, AND CHARGE-OFF POLICIES We

generally place debt securities on nonaccrual status using factors

similar to those described for loans. When we place a debt

security on nonaccrual status, we reverse the accrued unpaid

interest receivable against interest income and suspend the

amortization of premiums and accretion of discounts. If the

ultimate collectability of the principal is in doubt on a nonaccrual

debt security, any cash collected is first applied to reduce the

security’s amortized cost basis to zero, followed by recovery of

amounts previously charged off, and subsequently to interest

income. Generally, we return a debt security to accrual status

when all delinquent interest and principal become current under

the contractual terms of the security and collectability of

remaining principal and interest is no longer doubtful.

Our debt securities are considered past due when

contractually required principal or interest payments have not

been made on the due dates.

Our charge-off policy for debt securities are similar to those

described for loans. Subsequent to charge-off, the debt security

will be designated as nonaccrual and follow the process described

above for any cash received.

Securities and Other Collateralized Financing

Agreements

Resale and repurchase agreements, as well as securities

borrowing and lending agreements, are accounted for as

collateralized financing transactions and are recorded at the

acquisition or sale price plus accrued interest. We monitor the

fair value of securities or other assets purchased and sold as well

as the collateral pledged and received. Additional collateral is

pledged or returned to maintain the appropriate collateral

position for the transactions. These financing transactions do not

create material credit risk given the collateral provided and the

related monitoring process.

We include securities purchased under securities financing

agreements in federal funds sold and securities purchased under

resale agreements on our consolidated balance sheet. We include

collateral other than securities purchased under resale

agreements in Loans on our consolidated balance sheet. We

include securities sold under securities financing agreements in

short-term borrowings on our consolidated balance sheet. At

December 31, 2022 and 2021, short-term borrowings were

primarily comprised of federal funds purchased and securities

sold under agreements to repurchase.

Assets and liabilities arising from securities and other

collateralized financing transactions with a single counterparty

are presented net on the balance sheet provided they meet

certain criteria that permit balance sheet netting. See Note 18

(Pledged Assets and Collateral) for additional information on our

offsetting policy.

Loans Held for Sale

Loans held for sale (LHFS) generally includes commercial and

residential mortgage loans originated or purchased for sale in the

securitization or whole loan market. We have elected the fair

value option for a majority of residential LHFS (see Note 15 (Fair

Values of Assets and Liabilities)). The remaining residential LHFS

are held at the lower of cost or fair value (LOCOM) and are

measured on a pool level basis.

Commercial LHFS are generally held at LOCOM and are

measured on an individual loan basis. We have elected the fair

value option for certain commercial loans included in LHFS that

are used in market-making activities for our trading business.

Gains and losses on residential and commercial mortgage

LHFS are generally recorded in mortgage banking noninterest

income. Gains and losses on trading LHFS are recognized in net

gains from trading activities. Gains and losses on other LHFS are

recognized in other noninterest income. Direct loan origination

costs and fees for LHFS under the fair value option are

recognized in earnings at origination. For LHFS recorded at

LOCOM, direct loan origination costs and fees are deferred at

origination and are recognized in earnings at time of sale.

Interest income on LHFS is calculated based upon the note rate

of the loan and is recorded in interest income.

Commitments to originate mortgage LHFS are accounted

for as derivatives and are measured at fair value. When a

determination is made at the time of commitment to originate

loans as held for investment, it is our intent to hold these loans to

maturity or for the foreseeable future, subject to periodic review

under our management evaluation processes, including

corporate asset/liability management. If subsequent changes

occur, including changes in interest rates, our business strategy,

or other market conditions, we may change our

intent to hold these loans. When management makes this

determination, we immediately transfer these loans to the LHFS

portfolio at LOCOM.

Loans

Loans are reported at their outstanding principal balances net of

any unearned income, cumulative charge-offs, unamortized

deferred fees and costs on originated loans and unamortized

premiums or discounts on purchased loans.

Unearned income, deferred fees and costs, and discounts

and premiums are amortized to interest income generally over

Wells Fargo & Company 93

Note 1: Summary of Significant Accounting Policies (continued)

the contractual life of the loan using the effective interest

method. Loan commitment fees collected at closing are deferred

and amortized to noninterest income on a straight-line basis

over the commitment period if loan funding is unlikely. Upon

funding, deferred loan commitment fees are amortized to

interest income over the contractual life of the loan.

Loans also include financing leases where we are the lessor

(see the “Leasing Activity” section in this Note for our accounting

policy for leases) and resale agreements involving collateral other

than securities (see “Securities and Other Collateralized

Financing Agreements” section in this Note for our accounting

policy for other collateralized financing agreements).

See Note 5 (Loans and Related Allowance for Credit Losses)

for additional information regarding our accounting for loans.

NONACCRUAL AND PAST DUE LOANS We generally place loans on

nonaccrual status when:

• the full and timely collection of interest or principal becomes

uncertain (generally based on an assessment of the

borrower’s financial condition and the adequacy of collateral,

if any), such as in bankruptcy or other circumstances;

• they are 90 days (120 days with respect to residential

mortgage loans) past due for interest or principal, unless the

loan is both well-secured and in the process of collection;

• part of the principal balance has been charged off; or

• for junior lien mortgage loans, we have evidence that the

related first lien mortgage may be 120 days past due or in

the process of foreclosure regardless of the junior lien

delinquency status.

Credit card loans are not placed on nonaccrual status, but are

generally fully charged off when the loan reaches 180 days past

due.

When we place a loan on nonaccrual status, we reverse the

accrued unpaid interest receivable against interest income and

suspend amortization of any net deferred fees. If the ultimate

collectability of the recorded loan balance is in doubt on a

nonaccrual loan, the cost recovery method is used and cash

collected is applied to first reduce the carrying value of the loan

to zero and then as a recovery of prior charge-offs. Otherwise,

interest income may be recognized to the extent cash is received.

Generally, we return a loan to accrual status when all delinquent

interest and principal become current under the terms of the

loan agreement and collectability of remaining principal and

interest is no longer doubtful.

We may re-underwrite modified loans at the time of a

restructuring to determine if there is sufficient evidence of

sustained repayment capacity based on the borrower’s financial

strength, including documented income, debt to income ratios

and other factors. If the borrower has demonstrated

performance under the previous terms and the underwriting

process shows the capacity to continue to perform under the

restructured terms, the loan will generally remain in accruing

status. When a loan classified as a troubled debt restructuring

(TDR) performs in accordance with its modified terms, the loan

either continues to accrue interest (for performing loans) or will

return to accrual status after the borrower demonstrates a

sustained period of performance (generally six consecutive

months of payments, or equivalent, inclusive of consecutive

payments made prior to the modification). Loans will be placed

on nonaccrual status and a corresponding charge-off is recorded

if the re-underwriting did not include an evaluation of the

borrower’s ability to repay or we believe it is probable that

principal and interest contractually due under the modified terms

of the agreement will not be collectible.

Our loans are considered past due when contractually

required principal or interest payments have not been made on

the due dates.

LOAN CHARGE-OFF POLICIES For commercial loans, we generally

fully charge off or charge down to net realizable value (fair value

of collateral, less estimated costs to sell) for loans secured by

collateral when:

• management judges the loan to be uncollectible;

• repayment is deemed to be protracted beyond reasonable

time frames;

• the loan has been classified as a loss by either our internal

loan review process or our banking regulatory agencies;

• the customer has filed bankruptcy and the loss becomes

evident owing to a lack of assets;

• the loan is 180 days past due unless both well-secured and in

the process of collection; or

• the loan is probable of foreclosure, and we have received an

appraisal of less than the recorded loan balance.

For consumer loans, we fully charge off or charge down to

net realizable value when deemed uncollectible due to

bankruptcy or other factors, or no later than reaching a defined

number of days past due, as follows:

• Residential mortgage loans – We generally charge down to

net realizable value when the loan is 180 days past due and

fully charge-off when the loan exceeds extended

delinquency dates.

• Auto loans – We generally fully charge off when the loan is

120 days past due.

• Credit card loans – We generally fully charge off when the

loan is 180 days past due.

• Unsecured loans – We generally fully charge off when the

loan is 120 days past due.

• Unsecured lines – We generally fully charge off when the

loan is 180 days past due.

• Other secured loans – We generally fully or partially charge

down to net realizable value when the loan is 120 days past

due.

TROUBLED DEBT RESTRUCTURINGS In situations where, for

economic or legal reasons related to a borrower’s financial

difficulties, we grant a concession for other than an insignificant

period of time to the borrower that we would not otherwise

consider, the related loan is classified as a troubled debt

restructuring (TDR). These modified terms may include interest

rate reductions, principal forgiveness, term extensions, payment

forbearance and other actions intended to minimize our

economic loss and to avoid foreclosure or repossession of the

collateral, if applicable. For modifications where we forgive

principal, the entire amount of such principal forgiveness is

immediately charged off. If the underwriting for a TDR

modification did not include an evaluation of the borrower’s

ability to repay, the loan is deemed collateral dependent. Other

than resolutions such as foreclosures, sales and transfers to held-

for-sale, we may remove loans held for investment from TDR

classification, but only if they have been refinanced or

restructured at market terms and qualify as a new loan.

TROUBLED DEBT RESTRUCTURINGS AND OTHER RELIEF RELATED

TO COVID-19 The Coronavirus, Aid, Relief, and Economic Security

Act (the CARES Act) and the Interagency Statement on Loan

Modifications and Reporting for Financial Institutions Working with

Customers Affected by the Coronavirus (Revised) issued by federal

regulators in April 2020 (the Interagency Statement) provide

Wells Fargo & Company 94

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optional, temporary relief from accounting for certain loan

modifications as TDRs. Based on guidance in the CARES Act and

Interagency Statement, modifications related to the adverse

effects of Coronavirus Disease 2019 (COVID-19) that meet

certain criteria are exempt from TDR classification. We ceased

applying TDR relief provided by the CARES Act upon the

expiration of the CARES Act on January 1, 2022. During 2022, we

continued to apply the TDR relief provided by the Interagency

Statement for eligible COVID-related residential mortgage loan

modifications.

For COVID-19-related modifications in the form of payment

deferrals or payment forbearance, delinquency status will not

advance and loans that were accruing at the time the relief is

provided will generally not be placed on nonaccrual status during

the deferral period. Interest accrued during payment deferrals or

payment forbearance may be included in the principal balance of

the loans and charge-offs will generally be based on delinquency

status after the loan exits the deferral or forbearance period.

Loans that exit COVID-related deferrals or payment forbearance

are placed on nonaccrual status if there is no evidence that the

borrower can resume making payments or if the borrower

requests additional modifications.

FORECLOSED ASSETS Foreclosed assets obtained through our

lending activities primarily include real estate. Generally, loans

have been written down to their net realizable value prior to

foreclosure. Any further reduction to their net realizable value is

recorded with a charge to the ACL at foreclosure. We allow up to

90 days after foreclosure to finalize determination of net

realizable value. Thereafter, changes in net realizable value are

recorded to noninterest expense. The net realizable value of

these assets is reviewed and updated periodically depending on

the type of property. Certain government-guaranteed mortgage

loans upon foreclosure are included in accounts receivable, not

foreclosed assets. These receivables were loans insured by the

Federal Housing Administration (FHA) or guaranteed by the

Department of Veterans Affairs (VA) and are measured based on

the balance expected to be recovered from the FHA or VA.

Allowance for Credit Losses

The ACL is management’s estimate of the current expected life -

time credit losses in the loan portfolio and unfunded credit

commitments, at the balance sheet date, excluding loans and

unfunded credit commitments carried at fair value or held for

sale. Additionally, we maintain an ACL for AFS and HTM debt

securities, other financing receivables measured at amortized

cost, and other off-balance sheet credit exposures. While we

attribute portions of the allowance to specific financial asse t

classes (loan and debt security portfolios), loan portfolio

segments (commercial and consumer) or major security type, the

entire ACL is available to absorb credit losses of the Company .

Our ACL process involves procedures to appropriately

consider the unique risk characteristics of our financial asset

classes, portfolio segments, and major security types. For each

loan portfolio segment and each major HTM debt security type,

losses are estimated collectively for groups of loans or securities

with similar risk characteristics. For loans and securities that do

not share similar risk characteristics with other financial assets,

the losses are estimated individually, which generally includes our

nonperforming large commercial loans and non-accruing HTM

debt securities. For AFS debt securities, losses are estimated at

the individual security level.

Our ACL amounts are influenced by a variety of factors,

including changes in loan and debt security volumes, portfolio

credit quality, and general economic conditions. General

economic conditions are forecasted using economic variables

which will create volatility as those variables change over time.

See Table 1.1 for key economic variables used for our loan

portfolios.

Table 1.1: Key Economic Variables

Loan Portfolio Key economic variables

Total commercial • Gross domestic product

• Commercial real estate asset prices, where applicable

• Unemployment rate

Residential mortgage • Home price index

• Unemployment rate

Other consumer (including credit card, auto, and other consumer) • Unemployment rate

Our approach for estimating expected life-time credit losses

for loans and debt securities includes the following key

components:

• An initial loss forecast period of two years for all portfolio

segments and classes of financing receivables and off-

balance-sheet credit exposures. This period reflects

management’s expectation of losses based on forward-

looking economic scenarios over that time. We forecast

multiple economic scenarios that generally include a base

scenario with an optimistic (upside) and one or more

pessimistic (downside) scenarios, which are weighted by

management to estimate future credit losses.

• Long-term average loss expectations estimated by reverting

to the long-term average, on a linear basis, for each of the

economic variables forecasted during the initial loss forecast

period. These long-term averages are based on observations

over multiple economic cycles. The reversion period, which

may be up to two years, is assessed on a quarterly basis.

• The remaining contractual term of a loan is adjusted for

expected prepayments and certain expected extensions,

renewals, or modifications. We extend the contractual term

when we are not able to unconditionally cancel contractual

renewals or extension options. We also incorporate any

scenarios where we reasonably expect to provide an

extension through a TDR. Credit card loans have

indeterminate maturities, which requires that we determine

a contractual life by estimating the application of future

payments to the outstanding loan amount.

• Utilization of discounted cash flow (DCF) methods to

measure credit impairment for loans modified in a troubled

debt restructuring, unless they are collateral dependent and

measured at the fair value of the collateral. The DCF

methods obtain estimated life-time credit losses using the

initial and historical mean loss forecast periods described

above.

• For AFS debt securities and certain beneficial interests

classified as HTM, we utilize DCF methods to measure the

Wells Fargo & Company 95

Note 1: Summary of Significant Accounting Policies (continued)

ACL, which incorporate expected credit losses using the

conceptual components described above. For most HTM

debt securities, the ACL is measured using an expected loss

model, similar to the methodology used for loans.

The ACL for financial assets held at amortized cost is a

valuation account that is deducted from, or added to, the

amortized cost basis of the financial assets to present the net

amount expected to be collected. When credit expectations

change, the valuation account is adjusted with changes reported

in provision for credit losses. If amounts previously charged off

are subsequently expected to be collected, we may recognize a

negative allowance, which is limited to the amount that was

previously charged off. For financial assets with an ACL

estimated using DCF methods, changes in the ACL due to the

passage of time are recorded in interest income. The ACL for AFS

debt securities reflects the amount of unrealized loss related to

expected credit losses, limited by the amount that fair value is

less than the amortized cost basis (fair value floor) and cannot

have an associated negative allowance.

For certain financial assets, such as residential real estate

loans guaranteed by the Government National Mortgage

Association (GNMA), an agency of the federal government, U. S.

Treasury and Agency mortgage-backed debt securities and

certain sovereign debt securities, the Company has not

recognized an ACL as our expectation of loss is zero, based on

historical losses and consideration of current and forecasted

conditions.

For financial assets that are collateral-dependent, we will

measure the ACL based on the fair value of the collateral. If we

intend to sell the underlying collateral, we will measure the ACL

based on the collateral’s net realizable value. In most situations,

based on our charge-off policies, we will immediately write-down

the financial asset to the fair value of the collateral or net

realizable value. For consumer loans, collateral-dependent

financial assets may have collateral in the form of residential real

estate, autos or other personal assets. For commercial loans,

collateral-dependent financial assets may have collateral in the

form of commercial real estate or other business assets.

We do not generally record an ACL for accrued interest

receivables because uncollectible accrued interest is reversed

through interest income in a timely manner in line with our non-

accrual and past due policies for loans and debt securities. For

consumer credit card and certain consumer lines of credit, we

include an ACL for accrued interest and fees since these loans are

neither placed on nonaccrual status nor written off until the loan

is 180 days past due. Accrued interest receivables are included in

other assets, except for certain revolving loans, such as credit

card loans.

COMMERCIAL LOAN PORTFOLIO S EGMENT AC L METHODOLOGY

Generally, commercial loans, which include net investments in

lease financing, are assessed for estimated losses by grading each

loan using various risk factors as identified through periodic

reviews. Our estimation approach for the commercial portfolio

reflects the estimated probability of default in accordance with

the borrower’s financial strength and the severity of loss in the

event of default, considering the quality of any underlying

collateral. Probability of default, loss severity at the time of

default, and exposure at default are statistically derived through

historical observations of default and losses after default within

each credit risk rating. These estimates are adjusted as

appropriate for risks identified from current and forecasted

economic conditions and credit quality trends. Unfunded credit

commitments are evaluated based on a conversion factor to

derive a funded loan equivalent amount. The estimated

probability of default and loss severity at the time of default are

applied to the funded loan equivalent amount to estimate losses

for unfunded credit commitments.

CONSUMER LOAN PORTFOLIO SEGMENT ACL METHODOLOGY For

consumer loans, we determine the allowance using a pooled

approach based on the individual risk characteristics of the loans

within those pools. Quantitative modeling methodologies that

estimate probability of default, loss severity at the time of

default and exposure at default are typically leveraged to

estimate expected loss. These methodologies pool loans,

generally by product types with similar risk characteristics, such

as residential real estate mortgages, auto loans and credit cards.

As appropriate and to achieve greater accuracy, we may further

stratify selected portfolios by sub-product, risk pool, loss type,

geographic location and other predictive characteristics. We use

attributes such as delinquency status, Fair Isaac Corporation

(FICO) scores, and loan-to-value ratios (where applicable) in the

development of our consumer loan models, in addition to home

price trends, unemployment trends, and other economic

variables that may influence the frequency and severity of losses

in the consumer portfolio.

OTHER QUALITATIVE FACTORS The ACL includes amounts for

qualitative factors which may not be adequately reflected in our

loss models. These amounts represent management’s judgment

of risks in the processes and assumptions used in establishing the

ACL. Generally, these amounts are established at a granular level

below our loan portfolio segments. We also consider economic

environmental factors, modeling assumptions and performance,

process risk, and other subjective factors, including industry

trends and emerging risk assessments.

OFF-BALANCE SHEET CREDIT EXPOSURES Our off-balance sheet

credit exposures include unfunded loan commitments (generally

in the form of revolving lines of credit), financial guarantees not

accounted for as insurance contracts or derivatives, including

standby letters of credit, and other similar instruments. For off-

balance sheet credit exposures, we recognize an ACL associated

with the unfunded amounts. We do not recognize an ACL for

commitments that are unconditionally cancelable at our

discretion. Additionally, we recognize an ACL for financial

guarantees that create off-balance sheet credit exposure, such as

loans sold with credit recourse and factoring guarantees. ACL for

off-balance sheet credit exposures are reported as a liability in

accrued expenses and other liabilities on our consolidated

balance sheet.

OTHER FINANCIAL ASSETS Other financial assets are evaluated

for expected credit losses. These other financial assets include

accounts receivable for fees, receivables from government-

sponsored entities, such as Federal National Mortgage

Association (FNMA) and Federal Home Loan Mortgage

Corporation (FHLMC), and GNMA, and other accounts

receivables from high-credit quality counterparties, such as

central clearing counterparties. Many of these financial assets are

generally not expected to have an ACL as there is a zero loss

expectation (e.g., government guarantee) based on no historical

credit losses and consideration of current and forecasted

conditions. Some financial assets, such as loans to employees,

maintain an ACL that is presented on a net basis with the related

amortized cost amounts in other assets on our consolidated

balance sheet. A provision for credit losses is not recognized

Wells Fargo & Company 96

separately from the regular income or expense associated with

these financial assets.

Securities purchased under resale agreements are generally

over-collateralized by securities or cash and are generally short-

term in nature. We have elected the practical expedient for these

financial assets given collateral maintenance provisions. These

provisions require that we monitor the collateral value and

customers are required to replenish collateral, if needed.

Accordingly, we generally do not maintain an ACL for these

financial assets.

See Note 5 (Loans and Related Allowance for Credit Losses)

for additional information.

Purchased Credit Deteriorated Financial Assets

Financial assets acquired that are of poor credit quality and with

more than an insignificant evidence of credit deterioration since

their origination or issuance are purchased credit deteriorated

(PCD) assets. PCD assets include HTM and AFS debt securities

and loans. PCD assets are recorded at their purchase price plus an

ACL estimated at the time of acquisition. Under this approach,

there is no provision for credit losses recognized at acquisition;

rather, there is a gross-up of the purchase price of the financial

asset for the estimate of expected credit losses and a

corresponding ACL recorded. Changes in estimates of expected

credit losses after acquisition are recognized as provision for

credit losses in subsequent periods. In general, interest income

recognition for PCD financial assets is consistent with interest

income recognition for the similar non-PCD financial asset.

Leasing Activity

AS LESSOR We lease equipment to our customers under

financing or operating leases. Financing leases, which includes

both direct financing and sales-type leases, are presented in

loans and are recorded at the discounted amounts of lease

payments receivable plus the estimated residual value of the

leased asset. Leveraged leases, which are a form of financing

leases, are reduced by related non-recourse debt from third-

party investors. Lease payments receivable reflect contractual

lease payments adjusted for renewal or termination options that

we believe the customer is reasonably certain to exercise. The

residual value reflects our best estimate of the expected sales

price for the equipment at lease termination based on sales

history adjusted for recent trends in the expected exit markets.

Many of our leases allow the customer to extend the lease at

prevailing market terms or purchase the asset for fair value at

lease termination.

Our allowance for loan losses for financing leases considers

both the collectability of the lease payments receivable as well as

the estimated residual value of the leased asset. We typically

purchase residual value insurance on our financing leases to

reduce the risk of loss at lease termination.

In connection with a lease, we may finance the customer’s

purchase of other products or services from the equipment

vendor and allocate the contract consideration between the use

of the asset and the purchase of those products or services.

Amounts allocated are reported in loans as commercial and

industrial loans, rather than as lease financing.

Our primary income from financing leases is interest income

recognized using the effective interest method. Variable lease

revenue, such as reimbursement for property taxes, are included

in lease income within noninterest income.

Operating lease assets are presented in other assets, net of

accumulated depreciation. Periodic depreciation expense is

recorded on a straight-line basis over the estimated useful life of

the leased asset and are included in other noninterest expense.

Operating lease assets are reviewed periodically for impairment

and an impairment loss is recognized if the carrying amount of

operating lease assets exceeds fair value and is not recoverable.

Recoverability is evaluated by comparing the carrying amount of

the leased assets to undiscounted cash flows expected through

the operation or sale of the asset. Impairment charges for

operating lease assets are included in other noninterest income.

Operating lease rental income for leased assets is recognized

in lease income within noninterest income on a straight-line basis

over the lease term. Variable revenue on operating leases include

reimbursements of costs, including property taxes, which

fluctuate over time, as well as rental revenue based on usage. For

leases of railcars, revenue for maintenance services provided

under the lease is recognized in lease income.

We elected to exclude from revenue and expenses any sales

tax incurred on lease payments which are reimbursed by the

lessee. Substantially all of our leased assets are protected against

casualty loss through third-party insurance.

AS LESSEE We enter into lease agreements to obtain the right to

use assets for our business operations, substantially all of which

are real estate. Lease liabilities and right-of-use (ROU) assets are

recognized when we enter into operating or financing leases and

represent our obligations and rights to use these assets over the

period of the leases and may be re-measured for certain

modifications.

Operating lease liabilities include fixed and in-substance

fixed payments for the contractual duration of the lease,

adjusted for renewals or terminations which were considered

probable of exercise when measured. The lease payments are

discounted using a rate that approximates a collateralized

borrowing rate for the estimated duration of the lease as the

implicit discount rate is typically not known. The discount rate is

updated when re-measurement events occur. The related

operating lease ROU assets may differ from operating lease

liabilities due to initial direct costs, deferred or prepaid lease

payments and lease incentives.

We present operating lease liabilities in accrued expenses

and other liabilities and the related operating lease ROU assets in

other assets. The amortization of operating lease ROU assets

and the accretion of operating lease liabilities are reported

together as fixed lease expense and are included in occupancy

expense within noninterest expense. The fixed lease expense is

recognized on a straight-line basis over the life of the lease.

Some operating leases include variable lease payments and

are recognized as incurred in net occupancy expense within

noninterest expense.

For substantially all of our leased assets, we account for

consideration paid under the contract for maintenance or other

services as lease payments. We exclude certain asset classes, with

original terms of less than one year from the operating lease

ROU assets and lease liabilities. The related short-term lease

expense is included in net occupancy expense.

Finance lease liabilities are presented in long-term debt and

the associated finance ROU assets are presented in premises and

equipment.

See Note 8 (Leasing Activity) for additional information.

Deposits, Short-term Borrowings and Long-term Debt

Customer deposits, short-term borrowings, and long-term debt

are recorded at amortized cost, unless we have elected the fair

value option for these items. For example, we may elect the fair

value option for certain structured notes. We generally report

borrowings with original maturities of one year or less as short-

term borrowings and borrowings with original maturities of

Wells Fargo & Company 97

Note 1: Summary of Significant Accounting Policies (continued)

greater than one year as long-term debt on our consolidated

balance sheet. We do not reclassify long-term debt to short-

term borrowings within a year of maturity.

Refer to Note 9 (Deposits) for further information on

deposits, Note 10 (Long-Term Debt) for further information on

long-term debt, and Note 15 (Fair Values of Assets and

Liabilities) for additional information on fair value, including fair

value option elections.

Securitizations and Beneficial Interests

Securitizations are transactions in which financial assets are sold

to a Special Purpose Entity (SPE), which then issues beneficial

interests collateralized by the transferred financial assets.

Beneficial interests are generally issued in the form of senior and

subordinated interests, and in some cases, we may obtain

beneficial interests issued by the SPE. Additionally, from time to

time, we may re-securitize certain financial assets in a new

securitization transaction. See Note 16 (Securitizations and

Variable Interest Entities) for additional information about our

involvement with SPEs.

The assets and liabilities transferred to a SPE are excluded

from our consolidated balance sheet if the transfer qualifies

as a sale and we are not required to consolidate the SPE.

For transfers of financial assets recorded as sales, we

recognize and initially measure at fair value all assets obtained

(including beneficial interests or mortgage servicing rights) and

all liabilities incurred. We record a gain or loss in noninterest

income for the difference between assets obtained (net of

liabilities incurred) and the carrying amount of the assets sold.

Beneficial interests obtained from, and liabilities incurred in,

securitizations with off-balance sheet entities may include debt

and equity securities, loans, MSRs, derivative assets and

liabilities, other assets, and other obligations such as liabilities

for mortgage repurchase losses or long-term debt and are

accounted for as described within this Note.

Mortgage Servicing Rights

We recognize MSRs resulting from a sale or securitization of

mortgage loans that we originate (asset transfers) or through a

direct purchase of such rights. We initially record all of our MSRs

at fair value. Subsequently, residential loan MSRs are carried at

fair value. Commercial MSRs are subsequently measured at

LOCOM. The valuation and sensitivity of MSRs is discussed

further in Note 6 (Mortgage Banking Activities), Note 15 (Fair

Values of Assets and Liabilities) and Note 16 (Securitizations and

Variable Interest Entities).

For MSRs carried at fair value, changes in fair value are

reported in mortgage banking noninterest income in the period

in which the change occurs. MSRs subsequently measured at

LOCOM are amortized in proportion to, and over the period of,

estimated net servicing income. The amortization of MSRs is

reported in mortgage banking noninterest income, analyzed

monthly and adjusted to reflect changes in prepayment rates, as

well as other factors.

MSRs accounted for at LOCOM are periodically evaluated

for impairment based on the fair value of those assets. For

purposes of impairment evaluation and measurement, we

stratify MSRs based on the predominant risk characteristics of

the underlying loans, including investor and product type. If, by

individual stratum, the carrying amount of these MSRs exceeds

fair value, a valuation allowance is established. The valuation

allowance is adjusted as the fair value changes.

Premises and Equipment

Premises and equipment are carried at cost less accumulated

depreciation and amortization. We use the straight-line method

of depreciation and amortization. Depreciation and amortization

expense for premises and equipment was $1.2 billion in 2022 and

$1.4 billion in both 2021 and 2020. Estimated useful lives range

up to 40 years for buildings and improvements, up to 10 years

for furniture and equipment, and the shorter of the estimated

useful life (up to 8 years) or the lease term for leasehold

improvements.

Goodwill and Identifiable Intangible Assets

Goodwill is recorded for business combinations when the

purchase price is higher than the fair value of the acquired net

assets, including identifiable intangible assets.

We assess goodwill for impairment at a reporting unit level

on an annual basis or more frequently in certain circumstances.

We have determined that our reporting units are at the

reportable operating segment level or one level below. We

identify the reporting units based on how the segments and

reporting units are managed, taking into consideration the

economic characteristics, nature of the products and services,

and customers of the segments and reporting units. We allocate

goodwill to applicable reporting units based on their relative fair

value at the time we acquire a business and when we have a

significant business reorganization. If we sell a business, a portion

of goodwill is included with the carrying amount of the divested

business.

We have the option of performing a qualitative assessment

of goodwill. We may also elect to bypass the qualitative test and

proceed directly to a quantitative test. If we perform a qualitative

assessment of goodwill to test for impairment and conclude it is

more likely than not that a reporting unit’s fair value is greater

than its carrying amount, quantitative tests are not required.

However, if we determine it is more likely than not that a

reporting unit’s fair value is less than its carrying amount, we

complete a quantitative assessment to determine if there is

goodwill impairment. We apply various quantitative valuation

methodologies, including discounted cash flow and earnings

multiple approaches, to determine the estimated fair value,

which is compared with the carrying value of each reporting unit.

A goodwill impairment loss is recognized if the fair value is less

than the carrying amount, including goodwill. The goodwill

impairment loss is limited to the amount of goodwill allocated to

the reporting unit. We recognize impairment losses as a charge

to other noninterest expense and a reduction to the carrying

value of goodwill. Subsequent reversals of goodwill impairment

are prohibited.

We amortize customer relationship intangible assets on an

accelerated basis over useful lives not exceeding 10 years. We

review intangible assets for impairment whenever events or

changes in circumstances indicate that their carrying amounts

may not be recoverable. Impairment is indicated if the sum of

undiscounted estimated future net cash flows is less than the

carrying value of the asset. Impairment is permanently

recognized by writing down the asset to the extent that the

carrying value exceeds the estimated fair value.

Derivatives and Hedging Activities

DERIVATIVES We recognize all derivatives on our consolidated

balance sheet at fair value. On the date we enter into a derivative

contract, we categorize the derivative as either an accounting

hedge, economic hedge or part of our customer accommodation

trading and other portfolio.

Wells Fargo & Company 98

Accounting hedges are either fair value or cash flow hedges.

Fair value hedges represent the hedge of the fair value of a

recognized asset or liability or an unrecognized firm

commitment, including hedges of foreign currency exposure.

Cash flow hedges represent the hedge of a forecasted

transaction or the variability of cash flows to be paid or received

related to a recognized asset or liability.

Economic hedges and customer accommodation trading and

other derivatives do not qualify for, or we have elected not to

apply, hedge accounting. Economic hedges are derivatives we

use to manage interest rate, foreign currency and certain other

risks associated with our non-trading activities. Customer

accommodation trading and other derivatives predominantly

represents derivatives related to our trading business activities.

We report changes in the fair values of these derivatives in

noninterest income or noninterest expense.

FAIR VALUE HEDGES We record changes in the fair value of the

derivative in income, except for certain derivatives in which a

portion is recorded to OCI. We record basis adjustments to the

amortized cost of the hedged asset or liability due to the changes

in fair value related to the hedged risk with the offset recorded in

earnings. We present derivative gains or losses in the same

income statement category as the hedged asset or liability, as

follows:

• For fair value hedges of interest rate risk, amounts are

reflected in net interest income;

• For hedges of foreign currency risk, amounts representing

the fair value changes less the accrual for periodic cash flow

settlements are reflected in noninterest income. The

periodic cash flow settlements are reflected in net interest

income;

• For hedges of both interest rate risk and foreign currency

risk, amounts representing the fair value change less the

accrual for periodic cash flow settlements is attributed to

both net interest income and noninterest income. The

periodic cash flow settlements are reflected in net interest

income.

The entire derivative gain or loss is included in the

assessment of hedge effectiveness for all fair value hedge

relationships, except for hedges of foreign-currency

denominated AFS debt securities and long-term debt liabilities

hedged with cross-currency swaps. The change in fair value of

these swaps attributable to cross-currency basis spread changes

is excluded from the assessment of hedge effectiveness. The

initial fair value of the excluded component is amortized to net

interest income and the difference between changes in fair value

of the excluded component and the amount recorded in earnings

is recorded in OCI.

CASH FLOW HEDGES We record changes in the fair value of the

derivative in OCI. We subsequently reclassify gains and losses

from these changes in fair value from OCI to earnings in the same

period(s) that the hedged transaction affects earnings and in the

same income statement category as the hedged item. The entire

gain or loss on these derivatives is included in the assessment of

hedge effectiveness.

DOCUMENTATION AND EFFECTIVENESS ASSESSMENT FOR

ACCOUNTING HEDGES For fair value and cash flow hedges

qualifying for hedge accounting, we formally document at

inception the relationship between hedging instruments and

hedged items, our risk management objective, strategy and our

evaluation of effectiveness for our hedge transactions. This

process includes linking all derivatives designated as fair value or

cash flow hedges to specific assets and liabilities on our

consolidated balance sheet or to specific forecasted transactions.

We assess hedge effectiveness using regression analysis, both at

inception of the hedging relationship and on an ongoing basis.

For fair value hedges, the regression analysis involves regressing

the periodic change in fair value of the hedging instrument

against the periodic changes in fair value of the asset or liability

being hedged due to changes in the hedged risk(s). For cash flow

hedges, the regression analysis involves regressing the periodic

changes in fair value of the hedging instrument against the

periodic changes in fair value of a hypothetical derivative. The

hypothetical derivative has terms that identically match and

offset the cash flows of the forecasted transaction being hedged

due to changes in the hedged risk(s). The initial assessment for

fair value and cash flow hedges includes an evaluation of the

quantitative measures of the regression results used to validate

the conclusion of high effectiveness. Periodically, as required, we

also formally assess whether the derivative we designated in

each hedging relationship is expected to be and has been highly

effective in offsetting changes in fair values or cash flows of the

hedged item using the regression analysis method.

DISCONTINUING HEDGE ACCOUNTING We discontinue hedge

accounting prospectively when (1) a derivative is no longer highly

effective in offsetting changes in the fair value or cash flows of a

hedged item, (2) a derivative expires or is sold, terminated or

exercised, (3) we elect to discontinue hedge accounting, or (4)

when the forecasted transaction is no longer probable of

occurring in a cash flow hedge.

When we discontinue fair value hedge accounting, we no

longer adjust the previously hedged asset or liability for changes

in fair value. The remaining cumulative adjustments to the

hedged item and accumulated amounts reported in OCI are

accounted for in the same manner as other components of the

carrying amount of the asset or liability. For example, for financial

debt instruments such as AFS debt securities, loans or long-term

debt, these amounts are amortized into net interest income over

the remaining life of the asset or liability similar to other

amortized cost basis adjustments. If the hedged item is

derecognized, the accumulated amounts reported in OCI are

immediately reclassified to net interest income. If the derivative

continues to be held after fair value hedge accounting ceases, we

carry the derivative on the consolidated balance sheet at its fair

value with changes in fair value included in noninterest income.

When we discontinue cash flow hedge accounting and it is

probable that the forecasted transaction will occur, the

accumulated amount reported in OCI at the de-designation date

continues to be reported in OCI until the forecasted transaction

affects earnings at which point the related OCI amount is

reclassified to net interest income. If cash flow hedge accounting

is discontinued and it is probable the forecasted transaction will

no longer occur, the accumulated gains and losses reported in

OCI at the de-designation date is immediately reclassified to

noninterest income. If the derivative continues to be held after

cash flow hedge accounting ceases, we carry the derivative on our

consolidated balance sheet at its fair value with changes in fair

value included in noninterest income.

EMBEDDED DERIVATIVES We may purchase or originate financial

instruments that contain an embedded derivative. At inception

of the financial instrument, we assess (1) if the economic

characteristics of the embedded derivative are not clearly and

closely related to the economic characteristics of the host

contract, (2) if the financial instrument that embodies both the

Wells Fargo & Company 99

Note 1: Summary of Significant Accounting Policies (continued)

embedded derivative and the host contract is not measured at

fair value with changes in fair value reported in earnings, and (3) if

a separate instrument with the same terms as the embedded

instrument would meet the definition of a derivative. If the

embedded derivative meets all of these conditions, we separate

it from the hybrid contract by recording the bifurcated derivative

at fair value and the remaining host contract at the difference

between the basis of the hybrid instrument and the fair value of

the bifurcated derivative. The bifurcated derivative is carried at

fair value with changes recorded in noninterest income and

reported on our consolidated balance sheet as a derivative asset

or liability. The accounting for the remaining host contract is the

same as other assets and liabilities of a similar type and reported

on our consolidated balance sheet based upon the accounting

classification of the instrument.

COUNTERPARTY CREDIT RISK AND NETTING By using derivatives,

we are exposed to counterparty credit risk, which is the risk that

counterparties to the derivative contracts do not perform as

expected. If a counterparty fails to perform, our counterparty

credit risk is equal to the amount reported as a derivative asset

on our consolidated balance sheet. The amounts reported as a

derivative asset are derivative contracts in a gain position, and to

the extent subject to legally enforceable master netting

arrangements, net of derivatives in a loss position with the same

counterparty and cash collateral received. We minimize

counterparty credit risk through credit approvals, limits,

monitoring procedures, executing master netting arrangements

and obtaining collateral, where appropriate. Counterparty credit

risk related to derivatives is considered in determining fair value

and our assessment of hedge effectiveness. To the extent

derivatives subject to master netting arrangements meet the

applicable requirements, including determining the legal

enforceability of the arrangement, it is our policy to present

derivative balances and related cash collateral amounts net on

our consolidated balance sheet. We incorporate adjustments to

reflect counterparty credit risk (credit valuation adjustments

(CVA)) in determining the fair value of our derivatives. CVA,

which considers the effects of enforceable master netting

agreements and collateral arrangements, reflects market-based

views of the credit quality of each counterparty. We estimate

CVA based on observed credit spreads in the credit default swap

market and indices indicative of the credit quality of the

counterparties to our derivatives.

Cash collateral exchanged related to our interest rate

derivatives, and certain commodity and equity derivatives, with

centrally cleared counterparties is recorded as a reduction of the

derivative fair value asset and liability balances, as opposed to

separate non-derivative receivables or payables. This cash

collateral, also referred to as variation margin, is exchanged

based upon derivative fair value changes, typically on a one-day

lag. For additional information on our derivatives and hedging

activities, see Note 14 (Derivatives).

Equity Securities

Equity securities exclude investments that represent a

controlling interest in the investee. Marketable equity securities

have readily determinable fair values and are predominantly used

in our trading activities. Marketable equity securities are

recorded at fair value with realized and unrealized gains and

losses recognized in net gains from trading and securities in

noninterest income. Dividend income from marketable equity

securities is recognized in interest income.

Nonmarketable equity securities do not have readily

determinable fair values. These securities are accounted for

under one of the following accounting methods:

• Fair value through net income: This method is an election.

The securities are recorded at fair value with unrealized gains

or losses recognized in net gains from trading and securities

in noninterest income;

• Equity method: This method is applied when we have the

ability to exert significant influence over the investee. The

securities are recorded at cost and adjusted for our share of

the investee’s earnings or losses, less any dividends received

and/or impairments. Equity method adjustments for our

share of the investee’s earnings or losses are recognized in

other noninterest income and dividends are recognized as a

reduction of the investment carrying value;

• Proportional amortization method: This method is applied to

certain low-income housing tax credit (LIHTC) investments.

The investments are initially recorded at cost and amortized

in proportion to the tax credits received. The amortization of

the investments and the related tax impacts are recognized

in income tax expense;

• Cost method: This method is required for specific securities,

such as Federal Reserve Bank stock and Federal Home Loan

Bank stock. These securities are held at cost less any

impairments;

• Measurement alternative: This method is followed by all

remaining nonmarketable equity securities. These securities

are initially recorded at cost and are remeasured to fair value

as of the date of an orderly observable transaction of the

same or similar security of the same issuer. These securities

are also adjusted for impairments.

All realized and unrealized gains and losses, including

impairment losses, from nonmarketable equity securities are

recognized in net gains from trading and securities in noninterest

income. Dividend income from all nonmarketable equity

securities, other than equity method securities, is recognized in

interest income.

Our review for impairment for nonmarketable equity

securities not carried at fair value includes an analysis of the facts

and circumstances of each security, the intent or requirement to

sell the security, the expectations of cash flows, capital needs and

the viability of its business model. When the fair value of an

equity method or cost method investment is less than its

carrying value, we write-down the asset to fair value when we

consider declines in value to be other than temporary. When

the fair value of an investment accounted for using the

measurement alternative is less than its carrying value, we write-

down the asset to fair value, without the consideration of

anticipated recovery.

See Note 4 (Equity Securities) for additional information.

Pension Accounting

We sponsor a frozen noncontributory qualified defined benefit

retirement plan, the Wells Fargo & Company Cash Balance Plan

(Cash Balance Plan), which covers eligible employees of

WellsFargo. We also sponsor nonqualified defined benefit plans

that provide supplemental defined benefit pension benefits to

certain eligible employees. We account for our defined benefit

pension plans using an actuarial model. Principal assumptions

used in determining the net periodic pension cost and the

pension obligation include the discount rate, the expected long-

term rate of return on plan assets and projected mortality rates.

A single weighted-average discount rate is used to estimate

the present value of our future pension benefit obligations. We

Wells Fargo & Company 100

determine the discount rate using a yield curve derived from a

broad-based population of high-quality corporate bonds with

maturity dates that closely match the estimated timing of the

expected benefit payments.

On December 31, 2021, we changed the method used to

estimate the interest cost component of pension expense for our

principal defined benefit and postretirement plans to the full

yield curve approach. The full yield curve approach aligns specific

spot rates along the yield curve to the projected benefit payment

cash flows. This change does not affect the measurement of our

pension obligation as the change in interest cost is offset in the

actuarial gain (loss). We accounted for this change prospectively

as a change in estimate to our pension expense. Previously, we

estimated the interest cost component utilizing a single

weighted-average discount rate. We made this change to

improve the correlation between the yield curve and the

projected benefit payment cash flows.

The determination of our expected long-term rate of return

on plan assets is highly quantitative by nature. We evaluate the

current asset allocations and expected returns using forward-

looking capital market assumptions. We use the resulting

projections to derive a baseline expected rate of return for the

Cash Balance Plan’s prescribed asset mix.

Mortality rate assumptions are based on mortality tables

published by the Society of Actuaries adjusted to reflect our

specific experience.

At year end, we re-measure our defined benefit plan

liabilities and related plan assets and recognize any resulting

actuarial gain or loss in OCI. We generally amortize net actuarial

gain or loss in excess of a 5% corridor from AOCI into net periodic

pension cost over the estimated average remaining participation

period, which at December31, 2022, is 18 years. See Note 21

(Employee Benefits) for additional information on our pension

accounting.

Income Taxes

We file income tax returns in the jurisdictions in which we

operate and evaluate income tax expense in two components:

current and deferred income tax expense. Current income tax

expense represents our estimated taxes to be paid or refunded

for the current period and includes income tax expense related to

uncertain tax positions. Uncertain tax positions that meet the

more likely than not recognition threshold are measured to

determine the amount of benefit to recognize.An uncertain tax

position is measured at the largest amount of benefit that

management believes has a greater than 50% likelihood of

realization upon settlement.Tax benefits not meeting our

realization criteria represent unrecognized tax benefits.

Deferred income taxes are based on the balance sheet

method and deferred income tax expense results from changes

in deferred tax assets and liabilities between periods. Under the

balance sheet method, the net deferred tax asset or liability is

based on the tax effects of the differences between the book and

tax basis of assets and liabilities, and enacted changes in tax rates

and laws are recognized in the period in which they occur.

Deferred tax assets are recognized subject to management’s

judgment that realization is more likely than not. A valuation

allowance reduces deferred tax assets to the realizable amount.

See Note 22 (Income Taxes) to Financial Statements in this

Report for a further description of our provision for income taxes

and related income tax assets and liabilities.

Stock-Based Compensation

Our long-term incentive plans provide awards for employee

services in various forms, such as restricted share rights (RSRs)

and performance share awards (PSAs).

Stock-based awards are measured at fair value on the grant

date. The cost is recognized in personnel expense, net of actual

forfeitures, in our consolidated statement of income normally

over the vesting period of the award; awards with graded vesting

are expensed on a straight-line method. Awards to employees

who are retirement eligible at the grant date are subject to

immediate expensing upon grant. Awards to employees who

become retirement eligible before the final vesting date are

expensed between the grant date and the date the employee

becomes retirement eligible. Except for retirement and other

limited circumstances, RSRs are canceled when employment

ends.

PSAs and certain RSRs granted in 2020 included

discretionary conditions that can result in forfeiture and are

measured at fair value initially and subsequently until the

discretionary conditions end. For these awards, the associated

compensation expense fluctuates with changes in our stock

price. Awards granted in 2022 and 2021 no longer included these

discretionary conditions and are not adjusted for subsequent

changes in stock price. For PSAs, compensation expense also

fluctuates based on the estimated outcome of meeting the

performance conditions.The total expense that will be

recognized on these awards is finalized upon the completion of

the performance period.

For additional information on our stock-based employee

compensation plans, see Note 12 (Common Stock and Stock

Plans).

Earnings Per Common Share

We compute earnings per common share by dividing net income

applicable to common stock (net income less dividends on

preferred stock and the excess of consideration transferred over

carrying value of preferred stock redeemed, if any) by the

average number of common shares outstanding during the

period. We compute diluted earnings per common share using

net income applicable to common stock and adding the effect of

common stock equivalents (e.g., restricted share rights) that are

dilutive to the average number of common shares outstanding

during the period.

Fair Value of Assets and Liabilities

Fair value represents the price that would be received to sell an

asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date. Fair

value is based on an exit price notion that maximizes the use of

observable inputs and minimizes the use of unobservable inputs.

We measure our assets and liabilities at fair value when we

are required to record them at fair value, when we have elected

the fair value option, and to fulfill fair value disclosure

requirements. Assets and liabilities are recorded at fair value on a

recurring or nonrecurring basis. Assets and liabilities that are

recorded at fair value on a recurring basis require a fair value

measurement at each reporting period. Assets and liabilities that

are recorded at fair value on a nonrecurring basis are adjusted to

fair value only as required through the application of an

accounting method such as LOCOM, write-downs of individual

assets, or application of the measurement alternative for certain

nonmarketable equity securities.

Wells Fargo & Company 101

Note 1: Summary of Significant Accounting Policies (continued)

We classify our assets and liabilities measured at fair value

based upon a three-level hierarchy that assigns the highest

priority to unadjusted quoted prices in active markets and the

lowest priority to unobservable inputs. The three levels are as

follows:

• Level 1 – Valuation is based upon quoted prices for identical

instruments traded in active markets.

• Level 2 – Valuation is based upon quoted prices for similar

instruments in active markets, quoted prices for identical or

similar instruments in markets that are not active, and

model-based valuation techniques for which all significant

assumptions are observable in the market.

• Level 3 – Valuation is generated from techniques that use

significant assumptions that are not observable in the

market. These unobservable assumptions reflect our

estimates of assumptions that market participants would

use in pricing the asset or liability. Valuation techniques

include use of discounted cash flow models, market

comparable pricing, option pricing models, and similar

techniques.

We monitor the availability of observable market data to

assess the appropriate classification of financial instruments

within the fair value hierarchy and transfers between Level 1,

Level 2, and Level 3 accordingly. Observable market data includes

but is not limited to quoted prices and market transactions.

Changes in economic conditions or market liquidity generally will

drive changes in availability of observable market data. Changes

in availability of observable market data, which also may result in

changing the valuation technique used, are generally the cause of

transfers between Level 1, Level 2, and Level 3. The amounts

reported as transfers represent the fair value as of the beginning

of the quarter in which the transfer occurred.

See Note 15 (Fair Values of Assets and Liabilities) for a more

detailed discussion of the valuation methodologies that we apply

to our assets and liabilities.

Supplemental Cash Flow Information

Significant noncash activities are presented in Table 1.2.

Table 1.2: Supplemental Cash Flow Information

Year ended December 31,

(in millions) 2022 2021 2020

Available-for-sale debt securities purchased from securitization of LHFS (1)

$ 1,506

3,096

21,768

Held-to-maturity debt securities purchased from securitization of LHFS (1)

745

20,265

9,912

Transfers from loans to LHFS

6,586

19,297

19,975

Transfers from available-for-sale debt securities to held-to-maturity debt securities

50,132

55,993

31,815

(1) Predominantly represents agency mortgage-backed securities purchased upon settlement of the sale and securitization of our conforming residential mortgage loans. See Note 16 (Securitizations

and Variable Interest Entities) for additional information.

Subsequent Events

We have evaluated the effects of events that have occurred

subsequent to December31, 2022 as follows:

In January 2023, we reclassified fixed-rate debt securities with an

aggregate fair value of $23.2 billion and amortized cost of

$23.9billion from held-to-maturity to available-for-sale and

designated $20.1 billion in notional amounts of interest rate

swaps as fair value hedges using the portfolio layer method, in

connection with the adoption of ASU 2022-01, Derivatives and

Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method.

The transfer of debt securities was recorded at fair value and

resulted in $566 million of unrealized losses associated with

available-for-sale debt securities being recorded to other

comprehensive income, net of deferred taxes.

Except as discussed above, there have been no material events

that would require recognition in our 2022 consolidated financial

statements or disclosure in the Notes to the consolidated

financial statements.

Wells Fargo & Company 102



Note 2: Trading Activities

Table 2.1 presents a summary of our trading assets and liabilities

measured at fair value through earnings.

Table 2.1: Trading Assets and Liabilities

(in millions)

Dec 31,

2022

Dec 31,

2021

Trading assets:

Debt securities $ 86,155 88,265

Equity securities (1) 26,910 27,476

Loans held for sale 1,466 3,242

Gross trading derivative assets (1) 77,148 48,325

Netting (2) (54,922) (28,146)

Total trading derivative assets 22,226 20,179

Total trading assets 136,757 139,162

Trading liabilities:

Short sale and other liabilities 20,304 20,685

Long-term debt 1,346 —

Gross trading derivative liabilities (1) 77,698 42,449

Netting (2) (59,232) (33,978)

Total trading derivative liabilities 18,466 8,471

Total trading liabilities $ 40,116 29,156

(1) In first quarter 2022, we prospectively reclassified certain equity securities and related economic hedge derivatives from “not held for trading activities” to “held for trading activities” to better

reflect the business activity of those financial instruments. For additional information on Trading Activities, see Note 1 (Summary of Significant Accounting Policies).

(2) Represents balance sheet netting for trading derivative asset and liability balances, and trading portfolio level counterparty valuation adjustments.

Table 2.2 provides a summary of the net interest income

earned from trading securities, and net gains and losses due to

the realized and unrealized gains and losses from trading

activities.

Net interest income also includes dividend income on

trading securities and dividend expense on trading securities we

have sold, but not yet purchased.

Table 2.2: Net Interest Income and Net Gains (Losses) from Trading Activities

Year ended December 31,

(in millions) 2022 2021 2020

Interest income:

Debt securities $ 2,466 2,086 2,530

Equity securities (1) 497 441 366

Loans held for sale 48 40 30

Total interest income 3,011 2,567 2,926

Less: Interest expense 592 405 442

Net interest income 2,419 2,162 2,484

Net gains (losses) from trading activities (2):

Debt securities (10,053) (1,796) 2,697

Equity securities (1) (3,823) 4,491 (630)

Loans held for sale 6 54 28

Long-term debt 52 — —

Derivatives (1)(3) 15,934 (2,465) (923)

Total net gains from trading activities 2,116 284 1,172

Total trading-related net interest and noninterest income $ 4,535 2,446 3,656

(1) In first quarter 2022, we prospectively reclassified certain equity securities and related economic hedge derivatives from “not held for trading activities” to “held for trading activities” to better

reflect the business activity of those financial instruments. For additional information on Trading Activities, see Note 1 (Summary of Significant Accounting Policies).

(2) Represents realized gains (losses) from our trading activities and unrealized gains (losses) due to changes in fair value of our trading positions.

(3) Excludes economic hedging of mortgage banking and asset/liability management activities, for which hedge results (realized and unrealized) are reported with the respective hedged activities.

Wells Fargo & Company 103

Note 3: Available-for-Sale and Held-to-Maturity Debt Securities

Table 3.1 provides the amortized cost, net of the allowance for

credit losses (ACL) for debt securities, and fair value by major

categories of available-for-sale (AFS) debt securities, which are

carried at fair value, and held-to-maturity (HTM) debt securities,

which are carried at amortized cost, net of the ACL. The net

unrealized gains (losses) for AFS debt securities are reported as a

component of accumulated other comprehensive income (AOCI),

net of the ACL and applicable income taxes. Information on debt

securities held for trading is included in Note 2 (Trading

Activities).

Outstanding balances exclude accrued interest receivable on

AFS and HTM debt securities, which are included in other assets.

See Note 7 (Intangible Assets and Other Assets) for additional

information on accrued interest receivable. Amounts considered

to be uncollectible are reversed through interest income. The

interest income reversed for the years ended 2022 and 2021 was

insignificant.

Table 3.1: Available-for-Sale and Held-to-Maturity Debt Securities Outstanding

(in millions)

Amortized

cost, net (1)

Gross

unrealized gains

Gross

unrealized losses Fair value

December 31, 2022

Available-for-sale debt securities:

Securities of U.S. Treasury and federal agencies $ 47,536 9 (2,260) 45,285

Non-U.S. government securities 162 — — 162

Securities of U.S. states and political subdivisions (2) 10,958 20 (533) 10,445

Federal agency mortgage-backed securities 53,302 2 (5,167) 48,137

Non-agency mortgage-backed securities (3) 3,423 1 (140) 3,284

Collateralized loan obligations 4,071 — (90) 3,981

Other debt securities 2,273 75 (48) 2,300

Total available-for-sale debt securities 121,725 107 (8,238) 113,594

Held-to-maturity debt securities:

Securities of U.S. Treasury and federal agencies 16,202 — (1,917) 14,285

Securities of U.S. states and political subdivisions 30,985 8 (4,385) 26,608

Federal agency mortgage-backed securities 216,966 30 (34,252) 182,744

Non-agency mortgage-backed securities (3) 1,253 — (147) 1,106

Collateralized loan obligations 29,926 1 (727) 29,200

Other debt securities 1,727 — (149) 1,578

Total held-to-maturity debt securities 297,059 39 (41,577) 255,521

Total $ 418,784 146 (49,815) 369,115

December 31, 2021

Available-for-sale debt securities:

Securities of U.S. Treasury and federal agencies $ 39,668 185 (192) 39,661

Non-U.S. government securities 71 — — 71

Securities of U.S. states and political subdivisions (2) 16,618 350 (51) 16,917

Federal agency mortgage-backed securities 104,661 1,807 (582) 105,886

Non-agency mortgage-backed securities (3) 4,515 32 (15) 4,532

Collateralized loan obligations 5,713 2 (7) 5,708

Other debt securities 4,217 259 (7) 4,469

Total available-for-sale debt securities 175,463 2,635 (854) 177,244

Held-to-maturity debt securities:

Securities of U.S. Treasury

and federal agencies 16,544 599 (318) 16,825

Securities of U.S. states and political subdivisions 32,689 847 (61) 33,475

Federal agency mortgage-backed securities 188,909 1,882 (2,807) 187,984

Non-agency mortgage-backed securities (3) 1,082 31 (18) 1,095

Collateralized loan obligations 31,067 194 (2) 31,259

Other debt securities 1,731 17 — 1,748

Total held-to-maturity debt securities 272,022 3,570 (3,206) 272,386

Total $ 447,485 6,205 (4,060) 449,630

(1) Represents amortized cost of the securities, net of the ACL of $6 million and $8million related to AFS debt securities and $85 million and $96 million related to HTM debt securities at December31,

2022 and 2021, respectively.

(2) Includes investments in tax-exempt preferred debt securities issued by investment funds or trusts that predominantly invest in tax-exempt municipal securities. The amortized cost, net of the ACL,

and fair value of these types of securities, was $5.1 billion at December31, 2022, and $5.2 billion at December31, 2021.

(3) Predominantly consists of commercial mortgage-backed securities at both December31, 2022 and 2021.

Wells Fargo & Company 104



Table 3.2 details the breakout of purchases of and transfers

to HTM debt securities by major category of security.

Table 3.2: Held-to-Maturity Debt Securities Purchases and Transfers

Year ended December 31,

(in millions) 2022 2021 2020

Purchases of held-to-maturity debt securities (1):

Securities of U.S. Treasury and federal agencies $ — — 3,016

Securities of U.S. states and political subdivisions 843 5,198 1,906

Federal agency mortgage-backed securities 2,051 76,010 51,320

Non-agency mortgage-backed securities 211 235 126

Collateralized loan obligations — 9,379 688

Total purchases of held-to-maturity debt securities 3,105 90,822 57,056

Transfers from available-for-sale debt securities to held-to-maturity debt securities (2):

Securities of U.S. states and political subdivisions — 2,954 10,721

Federal agency mortgage-backed securities 50,132 41,298 5,522

Collateralized loan obligations — 10,003 15,572

Other debt securities — 1,738 —

Total transfers from available-for-sale debt securities to held-to-maturity debt securities $ 50,132 55,993 31,815

(1) Inclusive of securities purchased but not yet settled and noncash purchases from securitization of loans held for sale (LHFS).

(2) Represents fair value as of the date of the transfers. Debt securities transferred from available-for-sale to held-to-maturity had pre-tax unrealized losses recorded in AOCI of $4.5 billion for the year

ended 2022 and $529 million for the year ended 2021, respectively, at the time of the transfers.

Table 3.3 shows the composition of interest income,

provision for credit losses, and gross realized gains and losses

from sales and impairment write-downs included in earnings

related to AFS and HTM debt securities (pre-tax).

Table 3.3: Income Statement Impacts for Available-for-Sale and Held-to-Maturity Debt Securities

Year ended December 31,

(in millions) 2022 2021 2020

Interest income (1):

Available-for-sale $ 3,095 2,808 4,992

Held-to-maturity 6,220 4,359 3,712

Total interest income 9,315 7,167 8,704

Provision for credit losses:

Available-for-sale 1 (2) 89

Held-to-maturity (11) 54 35

Total provision for credit losses (10) 52 124

Realized gains and losses (2):

Gross realized gains 276 571 931

Gross realized losses (125) (10) (43)

Impairment write-downs — (8) (15)

Net realized gains $ 151 553 873

(1) Excludes interest income from trading debt securities, which is disclosed in Note 2 (Trading Activities).

(2) Realized gains and losses relate to AFS debt securities. There were no realized gains or losses from HTM debt securities in all periods presented.

Credit Quality

We monitor credit quality of debt securities by evaluating various

attributes and utilize such information in our evaluation of the

appropriateness of the ACL for debt securities. The credit quality

indicators that we most closely monitor include credit ratings

and delinquency status and are based on information as of our

financial statement date.

CREDIT RATINGS Credit ratings express opinions about the credit

quality of a debt security. We determine the credit rating of a

security according to the lowest credit rating made available by

national recognized statistical rating organizations (NRSROs).

Debt securities rated investment grade, that is those with ratings

similar to BBB-/Baa3 or above, as defined by NRSROs, are

generally considered by the rating agencies and market

participants to be low credit risk. Conversely, debt securities

rated below investment grade, labeled as “speculative grade” by

the rating agencies, are considered to be distinctively higher

credit risk than investment grade debt securities. For debt

securities not rated by NRSROs, we determine an internal credit

grade of the debt securities (used for credit risk management

purposes) equivalent to the credit ratings assigned by major

credit agencies. Substantially all of our debt securities were rated

by NRSROs at December 31, 2022 and 2021.

Table 3.4 shows the percentage of fair value of AFS debt

securities and amortized cost of HTM debt securities determined

to be rated investment grade, inclusive of securities rated based

on internal credit grades.

Wells Fargo & Company 105

Table 3.4: Investment Grade Debt Securities

Available-for-Sale Held-to-Maturity

($ in millions)

Fair

value

% investment grade

Amortized cost % investment grade

December 31, 2022

Total portfolio (1)

$

113,594 99% $

297,144

99%

Breakdown by category:

Securities of U.S. Treasury and federal agencies (2) $

93,422

100% $

233,169

100%

Securities of U.S. states and political subdivisions

10,445

99

31,000

100

Collateralized loan obligations (3)

3,981

100

29,972

100

All other debt securities (4)

5,746

89

3,003

63

December 31, 2021

Total portfolio (1) $

177,244

99% $

272,118

99%

Breakdown by category:

Securities of U.S. Treasury and federal agencies

(2) $

145,547

100% $

205,453

100%

Securities of U.S. states and political subdivisions

16,917

99

32,704

100

Collateralized loan obligations

(3)

5,708

100

31,128

100

All other debt securities

(4)

9,072

88

2,833

64



 Note 3: Available-for-Sale and Held-to-Maturity Debt Securities (continued)

(1) 99% and 98% were rated AA- and above at December 31, 2022 and 2021, respectively.

(2) Includes federal agency mortgage-backed securities.

(3) 100% were rated AA- and above at both December 31, 2022 and 2021.

(4) Includes non-U.S. government, non-agency mortgage-backed, and all other debt securities.

DELINQUENCY S TATUS AND NONAC CRUAL DEBT S ECURITIES Debt

security issuers that are delinquent in payment of amounts due

under contractual debt agreements have a higher probability of

recognition of credit losses. As such, as part of our monitorin g of

the credit quality of the debt security portfolio, we consider

whether debt securities we own are past due in payment of

principal or interest payments and whether any securities have

been placed into nonaccrual status.

Debt securities that are past due and still accruing or in

nonaccrual status were insignificant at both December 31, 2022 

and 2021. Charge-offs on debt securities were insignificant for

the years ended December 31, 2022  and 2021.

Purchased debt securities with credit deterioration (PCD)

are not considered to be in nonaccrual status, as payments fro m

issuers of these securities remain current. PCD securities wer e

insignificant for the years ended December 31, 2022  and 2021.

Wells Fargo & Company 106

  



Unrealized Losses of Available-for-Sale Debt Securities

Table 3.5 shows the gross unrealized losses and fair value of AFS

debt securities by length of time those individual securities in

each category have been in a continuous loss position. Debt

securities on which we have recorded credit impairment are

categorized as being “less than 12 months” or “12 months or 

more” in a continuous loss position based on the point in time

that the fair value declined to below the amortized cost basis , net

of allowance for credit losses.

Table 3.5: Gross Unrealized Losses and Fair Value – Available-for-Sale Debt Securities

Less than 12 months 12 months or more Total

(in millions)

Gross

unrealized

losses Fair value

Gross

unrealized

losses Fair value

Gross

unrealized

losses Fair value

December 31, 2022

Available-for-sale debt securities:

Securities of U.S. Treasury and federal agencies $ (291) 9,870 (1,969) 27,899 (2,260) 37,769

Securities of U.S. states and political subdivisions (72) 2,154 (461) 2,382 (533) 4,536

Federal agency mortgage-backed securities (3,580) 39,563 (1,587) 8,481 (5,167) 48,044

Non-agency mortgage-backed securities (43) 1,194 (97) 2,068 (140) 3,262

Collateralized loan obligations (65) 3,195 (25) 786 (90) 3,981

Other debt securities (31) 1,591 (17) 471 (48) 2,062

Total available-for-sale debt securities $ (4,082) 57,567 (4,156) 42,087 (8,238) 99,654

December 31, 2021

Available-for-sale debt securities:

Securities of U.S. Treasury and federal agencies $ (192) 24,418 — — (192) 24,418

Securities of U.S. states and political subdivisions (36) 2,308 (15) 532 (51) 2,840

Federal agency mortgage-backed securities (334) 40,695 (248) 9,464 (582) 50,159

Non-agency mortgage-backed securities (4) 1,966 (11) 543 (15) 2,509

Collateralized loan obligations (3) 1,619 (4) 1,242 (7) 2,861

Other debt securities — — (7) 624 (7) 624

Total available-for-sale debt securities $ (569) 71,006 (285) 12,405 (854) 83,411

We have assessed each debt security with gross unrealized

losses included in the previous table for credit impairment. A s

part of that assessment we evaluated and concluded that we do

not intend to sell any of the debt securities, and that it is m ore

likely than not that we will not be required to sell, prior to

recovery of the amortized cost basis. We evaluate, where

necessary, whether credit impairment exists by comparing the

present value of the expected cash flows to the debt securities ’

amortized cost basis. Credit impairment is recorded as an ACL f or

debt securities.

For descriptions of the factors we consider when analyzing

debt securities for impairment as well as methodology and

significant inputs used to measure credit losses, see Note 1

(Summary of Significant Accounting Policies ) in this Report .

Wells Fargo & Company 107

Contractual Maturities

Table 3.6 and Table 3.7 show the remaining contractual

maturities, amortized cost, net of the ACL, fair value and

weighted average effective yields of AFS and HTM debt

securities, respectively. The remaining contractual principal

maturities for mortgage-backed securities (MBS) do not

consider prepayments. Remaining expected maturities will diffe  r

from contractual maturities because borrowers may have the

right to prepay obligations before the underlying mortgages

mature.

Table 3.6: Contractual Maturities – Available-for-Sale Debt Securities

By remaining contractual maturity ($ in millions) Total

Within

one year

After

one year

through

five years

After

five years

through

ten years

After

ten years

December 31, 2022

Available-for-sale debt securities (1): 

Securities of U.S. Treasury and federal agencies

Amortized cost, net $ 47,536 4,046 21,094 20,884 1,512

Fair value 45,285 3,945 20,576 19,326 1,438

Weighted average yield 1.09% 1.19 0.55 1.59 1.44

Non-U.S. government securities

Amortized cost, net $ 162 1 137 24 —

Fair value 162 1 137 24 —

Weighted average yield 3.49% 5.10 3.62 2.71 —

Securities of U.S. states and political subdivisions

Amortized cost, net $ 10,958 1,139 2,471 4,866 2,482

Fair value 10,445 1,138 2,455 4,513 2,339

Weighted average yield 3.46% 4.06 3.43 3.16 3.80

Federal agency mortgage-backed securities

Amortized cost, net $ 53,302 1 277 856 52,168

Fair value 48,137 1 264 799 47,073

Weighted average yield 3.26% 3.33 1.90 2.48 3.28

Non-agency mortgage-backed securities

Amortized cost, net $ 3,423 — — 71 3,352

Fair value 3,284 — — 65 3,219

Weighted average yield 4.58% — — 3.31 4.61

Collateralized loan obligations

Amortized cost, net $ 4,071 — — 3,668 403

Fair value 3,981 — — 3,592 389

Weighted average yield 5.53% — — 5.53 5.54

Other debt securities

Amortized cost, net $ 2,273 81 203 866 1,123

Fair value 2,300 79 199 866 1,156

Weighted average yield 5.13% 5.16 5.73 4.47 5.52

Total available-for-sale debt securities

Amortized cost, net $ 121,725 5,268 24,182 31,235 61,040

Fair value 113,594 5,164 23,631 29,185 55,614

Weighted average yield 2.57% 1.87 0.90 2.41 3.38

 Note 3: Available-for-Sale and Held-to-Maturity Debt Securities (continued)

(1) Weighted average yields displayed by maturity bucket are weighted based on amortized cost without effect for any related hedging derivatives and are shown pre-tax.

Wells Fargo & Company 108

Table 3.7: Contractual Maturities – Held-to-Maturity Debt Securities

By remaining contractual maturity ($ in millions) Total

Within

one year

After

one year

through

five years

After

five years

through

ten years

After

ten years

December 31, 2022

Held-to-maturity debt securities (1):

Securities of U.S. Treasury and federal agencies

Amortized cost, net $ 16,202 — 12,415 — 3,787

Fair value 14,285 — 11,972 — 2,313

Weighted average yield 2.18% — 2.37 — 1.58

Securities of U.S. states and political subdivisions

Amortized cost, net $ 30,985 1,677 1,959 2,052 25,297

Fair value 26,608 1,664 1,912 2,018 21,014

Weighted average yield 2.12% 1.26 1.58 2.28 2.20

Federal agency mortgage-backed securities

Amortized cost, net $ 216,966 — — — 216,966

Fair value 182,744 — — — 182,744

Weighted average yield 2.27% — — — 2.27

Non-agency mortgage-backed securities

Amortized cost, net $ 1,253 — 18 65 1,170

Fair value 1,106 — 17 61 1,028

Weighted average yield 3.11% — 2.93 3.88 3.07

Collateralized loan obligations

Amortized cost, net $ 29,926 — — 13,264 16,662

Fair value 29,200 — — 13,085 16,115

Weighted average yield 5.62% — — 5.71 5.55

Other debt securities

Amortized cost, net $ 1,727 — 758 969 —

Fair value 1,578 — 713 865 —

Weighted average yield 4.47% — 4.10 4.75 —

Total held-to-maturity debt securities

Amortized cost, net $ 297,059 1,677 15,150 16,350 263,882

Fair value 255,521 1,664 14,614 16,029 223,214

Weighted average yield 2.61% 1.26 2.35 5.21 2.47

(1) Weighted average yields displayed by maturity bucket are weighted based on amortized cost, excluding unamortized basis adjustments related to the transfer of certain debt securities from AFS to

HTM, and are shown pre-tax.

Wells Fargo & Company 109



Note 4 : Equity Securities

Table 4.1 provides a summary of our equity securities by business

purpose and accounting method.

Table 4.1: Equity Securities

(in millions)

Dec 31,

2022

Dec 31,

2021

Held for trading at fair value:

Marketable equity securities (1) $ 17,180 27,476

Nonmarketable equity securities (2)(3) 9,730 —

Total equity securities held for trading 26,910 27,476

Not held for trading:

Fair value:

Marketable equity securities 1,436 2,578

Nonmarketable equity securities (2) 37 9,044

Total equity securities not held for trading at fair value 1,473 11,622

Equity method:

Private equity 2,836 3,077

Tax-advantaged renewable energy (4) 6,535 4,740

New market tax credit and other 298 379

Total equity method 9,669 8,196

Other methods:

Low-income housing tax credit investments (LIHTC) (4) 12,186 12,314

Private equity (5) 9,276 9,694

Federal Reserve Bank stock and other at cost (6) 4,900 3,584

Total equity securities not held for trading 37,504 45,410

Total equity securities $ 64,414 72,886

(1) Represents securities held as part of our customer accommodation trading activities. For additional information on these activities, see Note 2 (Trading Activities).

(2) In first quarter 2022, we prospectively reclassified certain equity securities and related economic hedge derivatives from “not held for trading activities” to “held for trading activities” to better

reflect the business activity of those financial instruments. For additional information on Trading Activities, see Note 1 (Summary of Significant Accounting Policies).

(3) Represents securities economically hedged with equity derivatives.

(4) See Note 16 (Securitizations and Variable Interest Entities) for information about tax credit investments.

(5) Represents nonmarketable equity securities accounted for under the measurement alternative, which were predominantly securities associated with our affiliated venture capital business.

(6) Includes $3.5 billion of investments in Federal Reserve Bank stock at both December 31, 2022 and 2021, and $1.4 billion and $39 million of investments in Federal Home Loan Bank stock at

December 31, 2022 and 2021, respectively.

Net Gains and Losses Not Held for Trading

Table 4.2 provides a summary of the net gains and losses from

equity securities not held for trading, which excludes equity

method adjustments for our share of the investee’s earnings or

losses that are recognized in other noninterest income. Gains a nd

losses for securities hel d for trading are reported in net gains

from trading and securities.

Table 4.2: Net Ga ins (Lo sses) fro m Equity S ecurities No t Held for Tra ding

Year ended December 31,

(in millions) 2022 2021 2020

Net gains (losses) from equity securities carried at fair value:

Marketable equity securities $ (225) (202) 63

Nonmarketable equity securities (1) (82) (188) 1,414

Total equity securities carried at fair value (307) (390) 1,477

Net gains (losses) from nonmarketable equity securities not carried at fair value (2):

Impairment write-downs (2,452) (121) (1,655)

Net unrealized gains (3)(4) 1,101 4,862 1,651

Net realized gains from sale (4) 852 1,581 359

Total nonmarketable equity securities not carried at fair value (499) 6,322 355

Net gains (losses) from economic hedge derivatives (1) — 495 (1,167)

Total net gains (losses) from equity securities not held for trading $ (806) 6,427 665

(1) In first quarter 2022, we prospectively reclassified certain equity securities and related economic hedge derivatives from “not held for trading activities” to “held for trading activities” to better

reflect the business activity of those financial instruments. For additional information on Trading Activities, see Note 1 (Summary of Significant Accounting Policies).

(2) Includes amounts related to private equity and venture capital investments in consolidated portfolio companies, which are not reported in equity securities on our consolidated balance sheet.

(3) Includes unrealized gains (losses) due to observable price changes from equity securities accounted for under the measurement alternative.

(4) During the year ended December 31, 2021, we recognized $442 million of gains (including $293 million of unrealized gains) related to the partial sale of a nonmarketable equity investment to an

unrelated third-party that resulted in the deconsolidation of a consolidated portfolio company. Our retained investment in nonmarketable equity securities of the formerly consolidated portfolio

company was remeasured to fair value.

Wells Fargo & Company 110

Measurement Alternative

Table 4.3 provides additional information about the impairment

write-downs and observable price changes from nonmarketable

equity securities accounted for under the measurement

alternative. Gains and losses related to these adjustments are

also included in Table 4.2 .

Table 4.3: Net Gains (Losses) from Measurement Alternative Equity Securities

Year ended December 31,

(in millions) 2022 2021 2020

Net gains (losses) recognized in earnings during the period:

Gross unrealized gains from observable price changes

$

1,115

4,569

1,651

Gross unrealized losses from observable price changes

(14)

—

Impairment write-downs

(2,263)

(109)

(954)

Net realized gains from sale

98

456

38

Total

net

gains

(losses)

recognized

during

the

period $

(1,064)

4,916

735

Table 4.4 presents cumulative carrying value adjustments to

nonmarketable equity securities accounted for under the

measurement alternative that were still held at the end of eac h

reporting period presented.

Table 4.4: Measurement Alterna tive C umulative Ga ins (Lo sses)

Year ended December 31,

(in millions) 2022 2021 2020

Cumulative gains (losses):

Gross unrealized gains from observable price changes

$

7,141

6,278

2,356

Gross unrealized losses from observable price changes

(14)

(3)

(25)

Impairment write-downs

(2,896)

(821)

(969)

Wells Fargo & Company 111



Note 5 :  Loans and Related Allowance for Credit Losses

Table 5.1 presents total loans outstanding by portfolio segment

and class of financing receivable. Outstanding balances include

unearned income, net deferred loan fees or costs, and

unamortized discounts and premiums. These amounts were less

than 1% of our total loans outstanding at December 31, 2022

and 2021.

Outstanding balances exclude accrued interest receivable on

loans, except for certain revolving loans, such as credit card loans.

See Note 7 (Intangible Assets and Other Assets ) for additional

information on accrued interest receivable. Amounts considered

to be uncollectible are reversed through interest income. Durin g

2022, we reversed accrued interest receivable of $29 million  for

our commercial portfolio segment and $143 million  for our

consumer portfolio segment, compared with $44 million and

$175 million , respectively, for 2021.

Table 5.1: Loans Outsta nding

(in millions)

Dec 31,

2022

Dec 31,

2021

Commercial and industrial $ 386,806 350,436

Commercial real estate 155,802 147,825

Lease financing 14,908 14,859

Total commercial 557,516 513,120

Residential mortgage 269,117 258,888

Credit card 46,293 38,453

Auto 53,669 56,659

Other consumer 29,276 28,274

Total consumer 398,355 382,274

Total loans $ 955,871 895,394

Our non-U.S. loan s are reported by respective class of

financing receivable in the table above. Substantially all of our

non-U.S. loan portfolio is commercial loans. Table 5.2 presents

total non-U.S. commercial loans outstanding by class of financi ng

receivable.

Table 5.2: Non-U.S. C ommercial Lo ans Outsta nding

(in millions)

Dec 31,

2022

Dec 31,

2021

Commercial and industrial $ 78,981 77,365

Commercial real estate 7,619 8,652

Lease financing 670

680

Total non-U.S. commercial loans $ 87,270 86,697

Loan Concentrations

Loan concentrations may exist when there are amounts loaned to

borrowers engaged in similar activities or similar types of loans

extended to a diverse group of borrowers that would cause them

to be similarly impacted by economic or other conditions.

Commercial and industrial loans and lease financing to borrowers

in the financials except banks industry represented 15% and 16%

of total loans at December 31, 2022 and

2021, respectively. At

December 31, 2022 and 2021, we did not have concentrations

representing 10% or more of our total loan portfolio in the

commercial real estate (CRE) portfolios (real estate mortgage

and real estate construction) by state or property type.

Residential mortgage loans to borrowers in the state of

California represented 12% of total loans at both December 31,

2022 and 2021. These California loans are generally diversified

among the larger metropolitan areas in California, with no single

area consisting of more than 4% of total loans at both

December 31, 2022 and 2021. We continuously monitor changes

in real estate values and underlying economic or market

conditions for all geographic areas of our residential mortgage

portfolio as part of our credit risk management process.

Some of our residential mortgage loans include an interest-

only feature as part of the loan terms. These interest-only loans

were approximately 2% and 3% of total loans at December 31,

2022 and 2021, respectively. Substantially all of these interest-

only loans at origination were considered to be prime or near

prime. We do not offer option adjustable-rate mortgage (ARM)

products, nor do we offer variable-rate mortgage products with

fixed payment amounts, commonly referred to within the

financial services industry as negative amortizing mortgage

loans.

Wells Fargo & Company 112



  

Loan Purchases, Sales, and Transfers

Table 5.3 presents the proceeds paid or received for purchases

and sales of loans and transfers from loans held for investmen t

to mortgages/loans held for sale. The table excludes loans for

which we have elected the fair value option and government

insured/guaranteed residential mortgage – first lien loans

because their loan activity normally does not impact the ACL.

Table 5.3: Loan Purchases, Sales, and Transfers

Year ended December 31,

2022 2021

(in

millions) Commercial

Consumer Total Commercial Consumer Total

Purchases $

740

5

745

380

6

386

Sales

and

net

transfers

(to)/from

LHFS (3,182)

(1,135)

(4,317)

(4,084)

(243)

(4,327)

Unfunded Credit Commitments

Unfunded credit commitments are legally binding agreements to

lend to customers with terms covering usage of funds,

contractual interest rates, expiration dates, and any required

collateral. Our commercial lending commitments include, but are

not limited to, (i) commitments for working capital and general

corporate purposes, (ii) financing to customers who warehouse

financial assets secured by real estate, consumer, or corporate

loans, (iii) financing that is expected to be syndicated or replaced

with other forms of long-term financing, and (iv) commercial real

estate lending. We also originate multipurpose lending

commitments under which commercial customers have the

option to draw on the facility in one of several forms, including

the issuance of letters of credit, which reduces the unfunded

commitment amounts of the facility.

The maximum credit risk for these commitments will

generally be lower than the contractual amount because these

commitments may expire without being used or may be

cancelled at the customer’s request. We may reduce or cancel

lines of credit in accordance with the contracts and applicable

law. Certain commitments either provide us with funding

discretion or are subject to loan agreements with covenants

regarding the financial performance of the customer or

borrowing base formulas that must be met before we are

required to fund the commitment. Our credit risk monitoring

activities include managing the amount of commitments, both to

individual customers and in total, and the size and maturity

structure of these commitments. We do not recognize an ACL

for commitments that are unconditionally cancellable at our

discretion.

We issue commercial letters of credit to assist customers in

purchasing goods or services, typically for international trade. At

December 31, 2022 and 2021, we had $1.8 billion and

$1.5 billion, respectively, of outstanding issued commercial

letters of credit. See Note 17 (Guarantees and Other

Commitments) for additional information on issued standby

letters of credit.

We may be a fronting bank, whereby we act as a

representative for other lenders, and advance funds or provide

for the issuance of letters of credit under syndicated loan or

letter of credit agreements. Any advances are generally repaid in

less than a week and would normally require default of both the

customer and another lender to expose us to loss.

The contractual amount of our unfunded credit

commitments, including unissued letters of credit, is summarized

in Table 5.4. The table excludes issued letters of credit and is

presented net of commitments syndicated to others, including

the fronting arrangements described above.

Table 5.4: Unfunded Credit C ommitments

(in millions)

Dec 31,

2022

Dec 31,

2021

Commercial and industrial $ 457,473 388,162

Commercial real estate 29,518 31,458

Total commercial 486,991 419,620

Residential mortgage (1) 39,155 60,439

Credit card 145,526 130,743

Other consumer (2) 69,244 75,919

Total consumer 253,925 267,101

Total unfunded credit commitments $ 740,916 686,721

(1) Includes lines of credit totaling $35.5 billion and $45.6 billion as of December 31, 2022 and

2021, respectively.

(2) Primarily includes securities-based lines of credit.

Wells Fargo & Company 113

Note 5: Loans and Related Allowance for Credit Losses (continued)

Allowance for Credit Losses

Table 5.5 presents the allowance for credit losses (ACL) for loans,

which consists of the allowance for loan losses and the allowan ce

for unfunded credit commitments. The ACL for loans decreased

$179 million  from December 31, 2021 , reflecting reduced

uncertainty around the economic impact of the COVID-19

pandemic on our loan portfolio. This decrease was partially off set

by loan growth and a less favorable economic environment.

Table 5.5: Allowance fo r C redit Lo sses fo r Lo ans

Year ended December 31,

($ in millions) 2022 2021

Balance, beginning of period $ 13,788 19,713

Provision for credit losses 1,544 (4,207)

Interest income on certain loans (1) (108) (145)

Loan charge-offs:

Commercial and industrial (307) (517)

Commercial real estate (21) (99)

Lease financing (27) (46)

Total commercial (355) (662)

Residential mortgage (175) (260)

Credit card (1,195) (1,189)

Auto (734) (497)

Other consumer (407) (423)

Total consumer (2,511) (2,369)

Total loan charge-offs (2,866) (3,031)

Loan recoveries:

Commercial and industrial 224 299

Commercial real estate 32 46

Lease financing 20 22

Total commercial 276

367

Residential mortgage 238 277

Credit card 344 389

Auto 312 316

Other consumer 88 108

Total consumer 982 1,090

Total loan recoveries 1,258 1,457

Net loan charge-offs (1,608) (1,574)

Other (7)

1

Balance, end of period $ 13,609 13,788

Components:

Allowance

for

loan

losses $

12,985

12,490

Allowance

for

unfunded

credit

commitments 624

1,298

Allowance

for

credit

losses $

13,609

13,788

Net

loan

charge-offs

as

a

percentage

of

average

total

loans

0.17

% 0.18

Allowance

for

loan

losses

as

a

percentage

of

total

loans

1.36

1.39

Allowance

for

credit

losses

for

loans

as

a

percentage

of

total

loans

1.42

1.54

(1) Loans with an allowance measured by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize changes in allowance attributable to the

passage of time as interest income.

Wells Fargo & Company

114



Table 5.6 summarizes the activity in the ACL by our

commercial and consumer portfolio segments.

Table 5.6: Allowance fo r C redit Lo sses fo r Lo ans Activity by Po rtfolio Segment

Year ended December 31,

2022 2021

(in millions)

Commercial



Consumer

Total



Commercial



Consumer

Total

Balance, beginning of period

$

7,791

5,997

13,788

11,516

8,197

19,713

Provision for credit losses

(721)

2,265

1,544

(3,373)

(834)

(4,207)

Interest

income

on

certain

loans

(1)

(29)

(79)

(108)

(58)

(87)

(145)

Loan charge-offs

(355)

(2,511)

(2,866)

(662)

(2,369)

(3,031)

Loan recoveries

276

982

1,258

367

1,090

1,457

Net loan charge-offs

(79)

(1,529)

(1,608)

(295)

(1,279)

(1,574)

Other

(6)

(1)

(7)

1

—

1

Balance, end of period $

6,956

6,653

13,609

7,791

5,997

13,788



(1) Loans with an allowance measured by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize changes in allowance attributable to the

passage of time as interest income.

Credit Quality

We monitor credit quality by evaluating various attributes and

utilize such information in our evaluation of the appropriateness

of the ACL for loans. The following sections provide the credit

quality indicators we most closely monitor. The credit quality

indicators are generally based on information as of our financial

statement date.

COMMERCIAL CREDIT QUALITY INDICATORS We manage a

consistent process for assessing commercial loan credit quality.

Commercial loans are generally subject to individual risk

assessment using our internal borrower and collateral quality

ratings, which is our primary credit quality indicator. Our ratings

are aligned to regulatory definitions of pass and criticized

categories with the criticized segmented among special mention,

substandard, doubtful and loss categories.

Table 5.7 provides the outstanding balances of our

commercial loan portfolio by risk category and credit quality

information by origination year for term loans. Revolving loans

may convert to term loans as a result of a contractual provision in

the original loan agreement or if modified in a troubled

debt restructuring (TDR). At December 31, 2022, we had

$532.4 billion and $25.1 billion of pass and criticized commercial

loans, respectively.

Wells Fargo & Company 115

Note 5: Loans and Related Allowance for Credit Losses (continued)

Table 5.7: Commercial Lo an C ategories by Risk C ategories a nd Vintage

(in millions)

Term loans by origination year

Revolving

loans

Revolving

loans

converted to

term loans Total 2022 2021 2020 2019 2018 Prior

December 31, 2022

Commercial and industrial

Pass $ 61,646 31,376 11,128 13,656 3,285 5,739 247,594 842 375,266

Criticized 872 1,244 478 505 665 532 7,244 — 11,540

Total commercial and industrial 62,518 32,620 11,606 14,161 3,950 6,271 254,838 842 386,806

Commercial real estate

Pass 38,022 38,709 16,564 16,409 10,587 16,159 6,765 150 143,365

Criticized 2,785 2,794 965 2,958 1,088 1,688 159 — 12,437

Total commercial real estate 40,807 41,503 17,529 19,367 11,675 17,847 6,924 150 155,802

Lease financing

Pass 4,543 3,336 1,990 1,427 765 1,752 — — 13,813

Criticized 330 275 190 169 94 37 — — 1,095

Total lease financing 4,873 3,611 2,180 1,596 859 1,789 — — 14,908

Total commercial loans $ 108,198 77,734 31,315 35,124 16,484 25,907 261,762 992 557,516

Term loans by origination year

Revolving

loans

Revolving

loans

converted to

term loans Total 2021 2020 2019 2018 2017 Prior

December 31, 2021

Commercial and industrial

Pass $ 65,562 15,193 20,553 7,400 3,797 13,985 211,452 679

338,621

Criticized 1,657 884 1,237 1,256 685 551 5,528 17 11,815

Total commercial and industrial 67,219 16,077 21,790 8,656 4,482 14,536 216,980 696 350,436

Commercial

real estate

Pass 44,091 19,987 23,562 14,785 7,830 16,355 6,453 5 133,068

Criticized 3,972 1,385 3,561 2,068 943 2,428 400 — 14,757

Total commercial real estate 48,063 21,372 27,123 16,853 8,773 18,783 6,853 5 147,825

Lease financing

Pass 4,100 3,012 2,547 1,373 838 1,805 — — 13,675

Criticized 284 246 282 184 86 102 — — 1,184

Total lease financing 4,384 3,258 2,829 1,557 924 1,907 — — 14,859

Total commercial loans $

119,666

40,707 51,742 27,066 14,179 35,226 223,833 701 513,120

Wells Fargo & Company 116

Table 5.8 provides days past due (DPD) information for

commercial loans, which we monitor as part of our credit risk

management practices; however, delinquency is not a primary

credit quality indicator for commercial loans.

Table 5.8: Commercial Loan Categories by Delinquency Status

(in millions)

Still accruing

Nonaccrual loans

Total

commercial loans Current-29 DPD 30-89 DPD 90+ DPD

December 31, 2022

Commercial and industrial $ 384,164 1,313 583 746 386,806

Commercial real estate 153,877 833 134 958 155,802

Lease financing 14,623 166 — 119 14,908

Total commercial loans $ 552,664 2,312 717 1,823 557,516

December 31, 2021

Commercial and industrial $ 348,033 1,217 206 980 350,436

Commercial real estate 146,084 464 29 1,248 147,825

Lease financing 14,568 143 — 148 14,859

Total commercial loans $ 508,685 1,824 235 2,376 513,120

CONSUMER C REDIT QUALITY INDIC ATORS  We have various classes

of consumer loans that present unique credit risks. Loan

delinquency, Fair Isaac Corporation (FICO) credit scores and lo an-

to-value (LTV) for residential mortgage loans are the primary

credit quality indicators that we monitor and utilize in our

evaluation of the appropriateness of the ACL for the consumer

loan portfolio segment.

Many of our loss estimation techniques used for the ACL for

loans rely on delinquency-based models; therefore, delinquency

is an important indicator of credit quality in the establishmen t of

our ACL for consumer loans. Credit quality information is

provided with the year of origination for term loans. Revolvin g

loans may convert to term loans as a result of a contractual

provision in the original loan agreement or if modified in a TD R.

We obtain FICO scores at loan origination and the scores

are generally updated at least quarterly, except in limited

circumstances, including compliance with the Fair Credit

Reporting Act (FCRA). FICO scores are not available for certai n

loan types or may not be required if we deem it unnecessary du e

to strong collateral and other borrower attributes.

Table 5.9 provides the outstanding balances of our

residential mortgage loans by our primary credit quality

indicators.

Payment deferral activities in the residential mortgage

portfolio instituted in response to the COVID-19 pandemic coul d

continue to delay the recognition of delinquencies for resident ial

mortgage customers who otherwise would have moved into

past due status. For additional information on customer

accommodations in response to the COVID-19 pandemic, see

Note 1 (Summary of Significant Accounting Policies ) to Financial

Statements in this Report.

LTV refers to the ratio comparing the loan’s outstanding

balance to the property’s collateral value. Combined LTV (CLTV)

refers to the combination of first lien mortgage and junior lien

mortgage (including unused line amounts for credit line

products) ratios. We obtain LTVs and CLTVs using a cascade

approach which first uses values provided by automated

valuation models (AVMs) for the property. If an AVM is not

available, then the value is estimated using the original appraised

value adjusted by the change in Home Price Index (HPI) for the

property location. If an HPI is not available, the original appraised

value is used. The HPI value is normally the only method

considered for high value properties, generally with an original

value of $1 million or more, as the AVM values have proven less

accurate for these properties. Generally, we obtain available LTVs

and CLTVs on a quarterly basis. Certain loans do not have an LTV

or CLTV due to a lack of industry data availability and portfolios

acquired from or serviced by other institutions.

Wells Fargo & Company 117



Note 5: Loans and Related Allowance for Credit Losses (continued)

Table 5.9: Credit Qua lity Ind icators fo r Resid ential Mo rtgage Lo ans by Vinta ge

(in millions)

Term loans by origination year

Revolving

loans

Revolving

loans

converted

to term

loans Total 2022 2021 2020 2019 2018 Prior

December 31, 2022

By delinquency status:

Current-29 DPD $ 48,581 65,705 37,289 20,851 6,190 61,680 11,031 6,913 258,240

30-89 DPD 65 66 32 33 21 683 58 159 1,117

90+ DPD 6 17 15 25 15 530 32 260 900

Government insured/guaranteed loans (1) 9 59 133 148 200 8,311 — — 8,860

Total residential mortgage $ 48,661 65,847 37,469 21,057 6,426 71,204 11,121 7,332 269,117

By FICO:

740+ $ 43,976 61,450 35,221 19,437 5,610 51,551 8,664 4,139 230,048

700-739 3,245 2,999 1,419 941 314 4,740 1,159 1,021 15,838

660-699 1,060 851 438 306 169 2,388 567 656 6,435

620-659 211 248 106 82 50 1,225 223 349 2,494

<620 59 81 44 46 28 1,323 227 466 2,274

No FICO available 101 159 108 97 55 1,666 281 701 3,168

Government insured/guaranteed loans (1) 9 59 133 148 200 8,311 — —

8,860

Total residential mortgage $

48,661

65,847 37,469 21,057 6,426 71,204 11,121 7,332 269,117

By LTV/CLTV

:

0-80% $

40,869

64,613 37,145 20,744 6,155 62,593 10,923 7,188 250,230

80.01-100% 7,670 1,058 112 97 30 107 109 97 9,280

>100% (2)

48 20 13 6 3 23 28 16 157

No LTV available 65 97 66 62 38 170 61 31 590

Government insured/guaranteed loans (1)

9 59 133 148 200 8,311 — — 8,860

Total residential mortgage $

48,661

65,847 37,469 21,057 6,426 71,204 11,121 7,332 269,117

(in millions)

Term

loans

by

origination

year

Revolving

loans

Revolving

loans

converted

to term

loans 2021 2020 2019 2018 2017 Prior

December 31, 2021

By delinquency status:

Current-29 DPD $

70,022

41,547 24,917 7,686 13,755 62,276 16,131 6,099 242,433

30-89 DPD 139 34 32 12 28 558 60 111 974

90+ DPD 1 79 76 75 98 1,458 114 422 2,323

Government insured/guaranteed loans

(1) 14 134 209 349 364 12,088 — — 13,158

Total residential mortgage $

70,176

41,794 25,234 8,122 14,245 76,380 16,305

6,632 258,888

By FICO:

740+ $

64,616

39,168 23,259 7,009 12,584 51,881 12,448 3,568 214,533

700-739 4,129 1,671 1,127 399 766 5,007 1,684 972 15,755

660-699 980 489 358 193 301 2,720 853 653 6,547

620-659 187 122 93 50 55 1,420 352 370 2,649

<620 61 28 40 30 58 1,597 391 467 2,672

No FICO available 189 182 148 92 117 1,667 577 602 3,574

Government insured/guaranteed loans

(1) 14 134 209 349 364 12,088 — — 13,158

Total

residential mortgage $

70,176

41,794 25,234 8,122 14,245 76,380 16,305 6,632 258,888

By LTV/CLTV:

0-80% $

69,511

41,070 24,419 7,544 13,677 63,544 15,300 6,243 241,308

80.01-100% 486 437 474 147 134 394 711 283 3,066

>100%

(2) 15 41 34 15 10 99 186 66 466

No LTV available 150 112 98 67 60 255 108 40 890

Government insured/guaranteed loans (1) 14 134 209 349 364 12,088

— — 13,158

Total residential mortgage $

70,176

41,794 25,234 8,122 14,245 76,380 16,305 6,632 258,888

(1) Government insured or guaranteed loans represent loans whose repayments are predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans

Affairs (VA). Loans insured/guaranteed by the FHA/VA and 90+ DPD totaled $3.2 billion and $5.7 billion at December 31, 2022 and 2021, respectively.

(2) Reflects total loan balances with LTV/CLTV amounts in excess of 100%. In the event of default, the loss content would generally be limited to only the amount in excess of 100% LTV/CLTV.

Wells Fargo & Company 118

Table 5.10 provides the outstanding balances of our credit

card loan portfolio by primary credit quality indicators.

The revolving loans converted to term loans in the credit

card loan category represent credit card loans with modified

terms that require payment over a specific term.

Table 5.10: Credit Quality Indicators for Credit Card

(in millions)

December 31, 2022 December 31, 2021

Revolving

loans

Revolving

loans

converted to

term loans Total Revolving loans

Revolving loans

converted to

term loans Total

By delinquency status:

Current-29 DPD $ 45,131 223 45,354 37,686 192 37,878

30-89 DPD 457 27 484 294 12 306

90+ DPD 441 14 455 263 6 269

Total credit cards $ 46,029 264 46,293 38,243 210 38,453

By FICO:

740+ $ 16,681 19 16,700 14,240 19 14,259

700-739 10,640 37 10,677 9,254 39 9,293

660-699 9,573 55 9,628 7,934 52 7,986

620-659 4,885 45 4,930 3,753 38 3,791

<620 4,071 107 4,178 2,945 61 3,006

No FICO available 179 1 180 117 1

118

Total credit cards $ 46,029 264 46,293 38,243 210 38,453

Wells Fargo & Company 119

Table 5.11 provides the outstanding balances of our Auto

and Other consumer loan portfolios by primary credit quality

indicators.

Table 5.11: Credit Quality Indicators for Auto and Other Consumer by Vintage

(in millions)

Term loans by origination year

Revolving

loans

Revolving

loans

converted

to term

loans Total 2022 2021 2020 2019 2018 Prior

December 31, 2022

By delinquency status:

Auto

Current-29 DPD $ 19,101 19,126 7,507 4,610 1,445 421 — — 52,210

30-89 DPD 218 585 253 167 69 45 — — 1,337

90+ DPD 23 56 22 13 4 4 — — 122

Total auto $ 19,342 19,767 7,782 4,790 1,518 470 — — 53,669

Other consumer

Current-29 DPD $ 3,718 1,184 341 240 63 83 23,431 117 29,177

30-89 DPD 17 12 2 3 1 2 14 8 59

90+ DPD 5 5 1 1 — 1 13 14 40

Total other consumer $ 3,740 1,201 344 244 64 86 23,458 139 29,276

By FICO:

Auto

740+ $ 9,361 8,233 3,193 2,146 664 166 — — 23,763

700-739 3,090 3,033 1,287 788 238 64 — — 8,500

660-699 2,789 2,926 1,163 641 192

58 — — 7,769

620-659 2,021 2,156 796 421 130 47 — — 5,571

<620 2,062 3,389 1,316 756 263 126 — — 7,912

No FICO available 19 30 27 38 31 9 — — 154

Total auto $

19,342

19,767 7,782 4,790 1,518 470 — — 53,669

Other consu

mer

740+ $

1,908

546 174 112 21 50 1,660 43 4,514

700-739 726 216 62 44 10 13 568 18 1,657

660-699 527 177 34 33 9 8 449 19 1,256

620-659 204 81 13 14 4 5 181 11 513

<620 89 64 14 16 5 5 154 18 365

No FICO available 286 117 47 25 15 5 920 30 1,445

FICO not required

(1) — — — — — — 19,526 — 19,526

Total other consumer $

3,740

1,201 344 244 64 86 23,458 139 29,276

(continued on following page)

Note 5: Loans and Related Allowance for Credit Losses (continued)

(continued from prev ious pa ge)

(in millions)

Term loans by origination year

Revolving

loans

Revolving

loans

converted

to term

loans Total 2021 2020 2019 2018

2017

Prior

December 31, 2021

By delinquency status:

Auto

Current-29 DPD $ 29,246 12,412 8,476 3,271 1,424 714 — — 55,543

30-89 DPD 289 260 218 106 60 78 — — 1,011

90+ DPD 31 28 23 9 6 8 — — 105

Total auto $ 29,566 12,700 8,717 3,386 1,490 800 — — 56,659

Other consumer

Current-29 DPD $ 2,221 716 703 203 107 125 23,988 143 28,206

30-89 DPD 5 3 5 2 — 3 15 5 38

90+ DPD 1 1 2 1 — 1 13 11 30

Total other consumer $ 2,227 720 710 206 107 129 24,016 159 28,274

By FICO:

Auto

740+ $ 12,029 5,127 4,009 1,566 672 245 — — 23,648

700-739 4,899 2,233 1,519 572 237 112 — — 9,572

660-699 4,953 2,137 1,251 451 190 106 — — 9,088

620-659 3,991 1,453 800 298 135 95

— — 6,772

<620 3,678 1,716 1,126 486 247 232 — — 7,485

No FICO available 16 34 12 13 9 10 — — 94

Total auto $ 29,566 12,700 8,717 3,386 1,490 800 — — 56,659

Other consumer

740+ $ 1,197 382 303 85 19 77 2,509 49 4,621

700-739 412 116 110 39 9 18 713 25 1,442

660-699 261 68 79 31 8 12 490 20 969

620-659 91 24 34 14 4 5 193 13 378

<620 31 17 29 14 5 7 160 16 279

No FICO available 235 113 155 23 62 10 1,236 36 1,870

FICO not required

(1) — — — — — — 18,715 — 18,715

Total other consumer $ 2,227 720 710 206 107 129 24,016 159 28,274

(1) Substantially all loans not requiring a FICO score are securities-based loans originated by the Wealth and Investment Management operating segment.

Wells Fargo & Company 120

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NONACCRUAL LOANS Table 5.12 provides loans on nonaccrual

status. Nonaccrual loans may have an ACL or a negative

allowance for credit losses from expected recoveries of amount s

previously written off. Customer payment deferral activities i n

the residential mortgage portfolio instituted in response to th e

COVID-19 pandemic could continue to delay the recognition of

nonaccrual loans for those residential mortgage customers who

would have otherwise moved into nonaccrual status.

Table 5.12: Nonaccrual Lo ans

Amortized cost Recognized interest income

Nonaccrual loans

Nonaccrual loans without related

allowance for credit losses (1) Year ended December 31,

(in millions)

Dec 31,

2022

Dec 31,

2021

Dec 31,

2022

Dec 31,

2021 2022 2021

Commercial and industrial $ 746 980 174 190 63 97

Commercial real estate

958 1,248 134 71 54 69

Lease financing 119 148 5 9 — —

Total commercial

1,823

2,376

313

270

117

166

Residential mortgage

3,611

4,604

2,316

3,219

211

175

Auto

153

198

—

26

34

Other consumer 39 34 — — 4 3

Total consumer 3,803 4,836 2,316 3,219 241 212

Total nonaccrual loans $ 5,626 7,212 2,629 3,489 358 378

(1) Nonaccrual loa ns m ay not have a n a llowance for credit losses if t he loss exp ectations a re zer o g iven t he r elated collateral v alue.

LOANS IN PROCESS OF FORECLOSURE Our recorded investment in

consumer mortgage loans collateralized by residential real estate

property that are in process of foreclosure was $1.0 billion and

$694 million at December 31, 2022 and 2021, respectively,

which included $771 million and $583 million, respectively, of

loans that are government insured/guaranteed. Under the

Consumer Financial Protection Bureau guidelines, we do not

commence the foreclosure process on residential mortgage loans

until after the loan is 120 days delinquent. Foreclosure

procedures and timelines vary depending on whether the

property address resides in a judicial or non-judicial state. Judicial

states require the foreclosure to be processed through the

state’s courts while non-judicial states are processed without

court intervention. Foreclosure timelines vary according to

state law.

Wells Fargo & Company 121



LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING Certain

loans 90 days or more past due are still accruing, because they

are (1) well-secured and in the process of collection or (2)

residential mortgage or consumer loans exempt under regulatory

rules from being classified as nonaccrual until later delinquency,

usually 120 days past due.

Table 5.13 shows loans 90 days or more past due and still

accruing by class for loans not government insured/guaranteed.

Table 5.13: Loans 90 Days or More Past Due and Still Accruing

($ in millions)

Dec 31,

2022

Dec 31,

2021

Total: $ 4,340 5,358

Less: FHA insured/VA guaranteed (1) 3,005 4,699

Total, not government insured/guaranteed $ 1,335 659

By segment and class, not government insured/

guaranteed:

Commercial and industrial $ 583 206

Commercial real estate 134 29

Total commercial 717 235

Residential mortgage 28 49

Credit card 455 269

Auto 111 88

Other consumer 24 18

Total consumer 618 424

Total, not government insured/guaranteed $ 1,335 659

 

Note 5: Loans and Related Allowance for Credit Losses (continued)

(1) Represents loans whose repayments are predominantly insured by the FHA or guaranteed

by the VA.

TROUBLED DEBT RES TRUCTURINGS (TDRs) When, for economic or

legal reasons related to a borrower’s financial difficulties, w e

grant a concession for other than an insignificant period of ti me

to a borrower that we would not otherwise consider, the related

loan is classified as a TDR, the balance of which totaled

$9.2 billion  and $10.2 billion at December 31, 2022  and 2021,

respectively. We do not consider loan resolutions such as

foreclosure or short sale to be a TDR. In addition, COVID-19 -

related modifications are generally not classified as TDRs due to

the relief under the CARES Act and the Interagency Statement.

For additional information on the TDR relief, see Note 1

(Summary of Significant Accounting Policies) in this Report .

We may require some consumer borrowers experiencing

financial difficulty to make trial payments generally for a period

of three to four months, according to the terms of a planned

permanent modification, to determine if they can perform

according to those terms. These arrangements represent trial

modifications, which we classify and account for as TDRs. While

loans are in trial payment programs, their original terms are not

considered modified and they continue to advance through

delinquency status and accrue interest according to their original

terms.

Commitments to lend additional funds on loans whose

terms have been modified in a TDR amounted to $434 million

and $431 million at December 31, 2022 and 2021, respectively.

Table 5.14 summarizes our TDR modifications for the

periods presented by primary modification type and includes the

financial effects of these modifications. For those loans that

modify more than once, the table reflects each modification that

occurred during the period. Loans that both modify and are paid

off or written-off within the period, as well as changes in

recorded investment during the period for loans modified in prior

periods, are not included in the table.

Wells Fargo & Company 122

Table 5.14: TDR Modifications

Primary modification type (1) Financial effects of modifications

($ in millions)

Principal

forgiveness

Interest

rate

reduction

Other

concessions (2) Total

Charge-

offs (3)

Weighted

average

interest

rate

reduction

Recorded

investment

related to

interest rate

reduction (4)

Year Ended December 31, 2022

Commercial and industrial $ 24 24 349 397 — 10.69% $ 24

Commercial real estate — 12 112 124 — 0.92 12

Lease financing — — 2 2 — — —

Total commercial 24 36 463 523 — 7.51 36

Residential mortgage 1 369 1,357 1,727 6 1.61 369

Credit card — 311 — 311 — 20.33 311

Auto 2 7 63 72 16 4.33 7

Other consumer — 19 3 22 1 11.48 19

Trial modifications (5) — — 228 228 — — —

Total consumer 3 706 1,651 2,360 23 10.14 706

Total $ 27 742 2,114 2,883 23 10.02% $ 742

Year Ended December 31, 2021

Commercial and industrial $ 2 9 879 890 20 0.81% $ 9

Commercial real estate 41 15 259 315 — 1.28 14

Lease financing — — 7 7 — — —

Total commercial 43 24 1,145 1,212 20 1.11 23

Residential mortgage — 70 1,324 1,394 3 1.80 70

Credit card — 106 — 106 — 19.12 106

Auto 1 4 131 136 54 3.82 4

Other consumer — 18 1 19 — 11.83 18

Trial modifications (5) — — (3) (3) — — —

Total consumer 1 198 1,453 1,652 57 12.01 198

Total $ 44 222 2,598 2,864 77 10.84% $ 221

Year Ended December 31, 2020

Commercial and industrial $ 24 47 2,971 3,042 162 0.74% $ 48

Commercial real estate 10 35 684 729 5 1.11 35

Lease financing — — 1 1 — — —

Total commercial 34 82 3,656 3,772 167 0.90 83

Residential mortgage — 25 4,277 4,302 7 1.93 51

Credit card — 272 — 272 — 14.12 272

Auto 4 6 166 176 93 4.65 6

Other consumer — 23 34 57 1 8.28 23

Trial modifications (5) — — 3 3 — — —

Total consumer 4 326 4,480 4,810 101 11.80 352

Total $ 38 408 8,136 8,582 268 9.73% $ 435

(1) Amounts r epresent the r ecorded investment in loa ns a fter recognizing the effect s of t he TD R, if a ny. TDRs m ay have m ultiple t ypes of concessions, but are p resented only once in t he fir st

modification t ype b ased on t he or der presented in t he t able a bove. The r eported amounts inclu de loa ns r emodified of $445 m illion, $737 m illion, and $1.5 b illion for the y ears end ed December 31,

2022, 2021 a nd 2020, respectively.

(2) Other concessions inclu de loa ns wit h payment (principal a nd/or interest) d eferral, loans d ischarged in b ankruptcy, loan r enewals, term extensions a nd other interest and noninterest adjustments, but

exclude m odifications t hat also for give p rincipal a nd/or reduce t he cont ractual int erest rate. The r eported amounts inclu de loa ns t hat are new TD Rs t hat may have C OVID-19-related payment

deferrals a nd exclude C OVID-19-related payment deferrals on loa ns p reviously reported as TD Rs g iven lim ited current financial effect s ot her than p ayment deferral.

(3) Charge-offs inclu de wr ite-downs of t he inv estment in t he loa n in t he p eriod it is cont ractually modified. The a mount of ch arge-off will d iffer from the m odification t erms if t he loa n h as b een ch arged

down p rior to t he m odification b ased on ou r policies. In a ddition, there m ay be ca ses wh ere we h ave a charge-off/down wit h no leg al p rincipal m odification.

(4) Recorded investment related to int erest rate r eduction r eflects t he effect of r educed interest rates on loa ns wit h an int erest rate concession a s one of t heir concession t ypes, which includes loa ns

reported as a principal p rimary modification t ype t hat also h ave a n int erest rate concession.

(5) Trial m odifications a re g ranted a delay in p ayments d ue u nder the or iginal t erms d uring the t rial p ayment period. However, these loa ns cont inue t o a dvance t hrough delinquency status a nd accrue

interest according to t heir original t erms. Any subsequent permanent modification g enerally includes int erest rate r elated concessions; however, the exa ct concession t ype a nd resulting financial

effect are u sually not known u ntil t he loa n is p ermanently modified. Trial m odifications for the p eriod are p resented net of p reviously reported trial m odifications t hat became p ermanent in t he

current period.

Wells Fargo & Company 123



Note 5: Loans and Related Allowance for Credit Losses (continued)

Table 5.15 summarizes permanent modification TDRs that

have defaulted in the current period within 12 months of their

permanent modification date. We are reporting these defaulted

TDRs based on a payment default definition of 90 days past due

for the commercial portfolio segment and 60 days past due for

the consumer portfolio segment.

Table 5.15: Defaulted TDRs

Recorded investment of defaults

Year ended December 31,

(in millions) 2022 2021 2020

Commercial and industrial $ 55 132 677

Commercial real estate 14 34 128

Lease financing — 1 1

Total commercial 69 167 806

Residential mortgage 142 13 46

Credit card 43 25 72

Auto 21 43 32

Other consumer 2 3 5

Total consumer 208 84 155

Total $ 277 251 961

Wells Fargo & Company 124

 



 



Note 6: Mortgage Banking Activities

Mortgage banking activities consist of residential and

commercial mortgage originations, sales and servicing.

We apply the amortization method to commercial MSRs and

apply the fair value method to residential MSRs. The amortized

cost of commercial MSRs was $1.2 billion, $1.3 billion and

$1.3 billion, with an estimated fair value of $2.1 billion,

$1.5 billion, and $1.4 billion, at December 31, 2022, 2021 and

2020, respectively. Table 6.1 presents the changes in MSRs

measured using the fair value method.

Table 6.1: Analysis of Changes in Fair Value MSRs

Year ended December 31,

(in millions) 2022 2021 2020

Fair value, beginning of period $ 6,920 6,125 11,517

Servicing from securitizations or asset transfers (1) 1,003 1,645 1,708

Sales and other (2) (614) (8) (32)

Net additions 389 1,637 1,676

Changes in fair value:

Due to valuation inputs or assumptions:

Mortgage interest rates (3) 3,417 1,625 (3,946)

Servicing and foreclosure costs (4) (17) (9) (175)

Discount rates (5) 42 (56) 27

Prepayment estimates and other (6) (188) (390) (599)

Net changes in valuation inputs or assumptions 3,254 1,170 (4,693)

Changes due to collection/realization of expected cash flows (7) (1,253) (2,012) (2,375)

Total changes in fair value 2,001 (842) (7,068)

Fair value, end of period $ 9,310 6,920 6,125

(1) Includes impacts associated with exercising cleanup calls on securitizations and our right to repurchase delinquent loans from GNMA loan securitization pools. MSRs may increase upon repurchase

due to servicing liabilities associated with these delinquent GNMA loans.

(2) Includes sales and transfers of MSRs, which can result in an increase in MSRs if related to portfolios with servicing liabilities. For the year ended December 31, 2022, MSRs decreased $611 million due

to the sale of interest-only strips related to excess servicing cash flows from agency residential mortgage-backed securitizations.

(3) Includes prepayment rate changes as well as other valuation changes due to changes in mortgage interest rates. To reduce exposure to changes in interest rates, MSRs are economically hedged with

derivative instruments.

(4) Includes costs to service and unreimbursed foreclosure costs.

(5) In 2022, we enhanced our approach for estimating the discount rates to a more dynamic methodology for market curves and volatility, which had a nominal impact.

(6) Represents other changes in valuation model inputs or assumptions including prepayment rate estimation changes that are independent of mortgage interest rate changes.

(7) Represents the reduction in the MSR fair value for the cash flows expected to be collected during the period, net of income accreted due to the passage of time.

Table 6.2 provides key weighted-average assumptions used

in the valuation of residential MSRs and sensitivity of the cur rent

fair value of residential MSRs to immediate adverse changes in

those assumptions. Amounts for residential MSRs include

purchased servicing rights as well as servicing rights resulting

from the transfer of loans. See Note 15 (Fair Values of Assets

and Liabilities) for additional information on key assumptions for

residential MSRs.

Table 6.2: Assumptions and Sensitivity of Residential MSRs

($ in millions, except cost to service amounts)

Dec 31,

2022

Dec 31,

2021

Fair value of interests held $ 9,310 6,920

Expected weighted-average life (in years) 6.3 4.7

Key assumptions:

Prepayment rate assumption (1) 9.4 % 14.7

Impact on fair value from 10% adverse change $ 288 356

Impact on fair value from 25% adverse change 688 834

Discount rate assumption 9.1 % 6.4

Impact on fair value from 100 basis point increase $ 368 276

Impact on fair value from 200 basis point increase 707 529

Cost to service assumption ($ per loan) 102 106

Impact on fair value from 10% adverse change 171 165

Impact on fair value from 25% adverse change 427 411

(1) Includes a blend of prepayment speeds and expected defaults. Prepayment speeds are influenced by mortgage interest rates as well as our estimation of drivers of borrower behavior.

The sensitivities in the preceding table are hypothetical and

caution should be exercised when relying on this data. Changes in

value based on variations in assumptions generally cannot be

extrapolated because the relationship of the change in the

assumption to the change in value may not be linear. Also, the

effect of a variation in a particular assumption on the value of the

other interests held is calculated independently without changing

any other assumptions. In reality, changes in one factor may

result in changes in others, which might magnify or counteract

the sensitivities.

Wells Fargo & Company 125



 

Note 6: Mortgage Banking Activities (continued)

We present the components of our managed servicing

portfolio in Table 6.3 at unpaid principal balance for loans

serviced and subserviced for others and at carrying value for

owned loans serviced.

Table 6.3: Managed Servicing Portfolio

(in billions)

Dec 31,

2022

Dec 31,

2021

Residential mortgage servicing:

Serviced and subserviced for others $ 681 718

Owned loans serviced 273 276

Total residential servicing 954 994

Commercial mortgage servicing:

Serviced and subserviced for others 577 597

Owned loans serviced 133 130

Total commercial servicing 710 727

Total managed servicing portfolio $ 1,664 1,721

Total serviced for others, excluding subserviced for others $ 1,246 1,304

MSRs as a percentage of loans serviced for others

0.84 % 0.63

Weighted average note rate (mortgage loans serviced for others)

4.30 3.82

At December 31, 2022 and 2021, we had servicer advances,

net of an allowance for uncollectible amounts, of $2.5 billion and

$3.2 billion, respectively. As the servicer of loans for others, we

advance certain payments of principal, interest, taxes, insurance,

and default-related expenses which are generally reimbursed

within a short timeframe from cash flows from the trust,

government-sponsored entities (GSEs), insurer or borrower.

The credit risk related to these advances is limited since the

reimbursement is generally senior to cash payments to investors.

We also advance payments of taxes and insurance for our owned

loans which are collectible from the borrower. We maintain an

allowance for uncollectible amounts for advances on loans

serviced for others that may not be reimbursed if the payments

were not made in accordance with applicable servicing

agreements or if the insurance or servicing agreements contain

limitations on reimbursements. Servicing advances on owned

loans are charged-off when deemed uncollectible.

Table 6.4 presents the components of mortgage banking

noninterest income.

Table 6.4: Mortgage Banking Noninterest Income

Year ended December 31,

(in millions) 2022 2021 2020

Servicing fees:

Contractually specified servicing fees, late charges and ancillary fees $ 2,475 2,801 3,250

Unreimbursed direct servicing costs (1) (189) (332) (620)

Servicing fees 2,286 2,469 2,630

Amortization (2) (247) (225) (308)

Changes due to collection/realization of expected cash flows (3) (A) (1,253) (2,012) (2,375)

Net servicing fees 786 232 (53)

Changes in fair value of MSRs due to valuation inputs or assumptions (4) (B) 3,254 1,170 (4,693)

Net derivative gains (losses) from economic hedges (5) (3,507) (1,208) 4,607

Market-related valuation changes to MSRs, net of hedge results (253) (38) (86)

Total net servicing income 533 194 (139)

Net gains on mortgage loan originations/sales (6) 850 4,762 3,632

Total mortgage banking noninterest income $ 1,383 4,956 3,493

Total changes in fair value of MSRs carried at fair value (A)+(B) $ 2,001 (842) (7,068)

(1) Includes costs associated with foreclosures, unreimbursed interest advances to investors, and other interest costs.

(2) Includes a $4 million and $41 million reversal of impairment on the commercial amortized MSRs in 2022 and 2021, respectively, and a $37 million impairment on the commercial amortized MSRs in

2020.

(3) Represents the reduction in the MSR fair value for the cash flows expected to be collected during the period, net of income accreted due to the passage of time.

(4) Refer to the analysis of changes in fair value MSRs presented in Table 6.1 in this Note for more detail.

(5) See Note 14 (Derivatives) for additional discussion and detail on economic hedges.

(6) Includes net gains (losses) of $2.5 billion, $1.2 billion and $(1.8) billion at December 31, 2022, 2021 and 2020, respectively, related to derivatives used as economic hedges of mortgage loans held for

sale and derivative loan commitments.

Wells Fargo & Company 126



Note 7: Intangible Assets and Other Assets

Table 7.1 presents the gross carrying value of intangible assets

and accumulated amortization.

Table 7.1: Intangible Assets

December 31, 2022 December 31, 2021

(in millions)

Gross carrying

value

Accumulated

amortization

Net carrying

value

Gross carrying

value

Accumulated

amortization

Net carrying

value

Amortized intangible assets (1):

MSRs (2) $ 4,942 (3,772) 1,170 4,794 (3,525) 1,269

Customer relationship and other intangibles 754 (602) 152 842 (631) 211

Total amortized intangible assets $ 5,696 (4,374) 1,322 5,636 (4,156) 1,480

Unamortized intangible assets:

MSRs (carried at fair value) $ 9,310 6,920

Goodwill 25,173 25,180

(1) Balances are excluded commencing in the period following full amortization.

(2) There was no valuation allowance recorded for amortized MSRs at December 31, 2022, and a $4 million valuation allowance recorded at December 31, 2021. See Note 6 (Mortgage Banking

Activities) for additional information on MSRs.

Table 7.2 provides the current year and estimated future

amortization expense for amortized intangible assets. We based

our projections of amortization expense shown below on existin g

asset balances at December 31, 2022. Future amortization

expense may vary from these projections.

Table 7.2: Amortization Expense for Intangible Assets

(in millions) Amortized MSRs

Customer relationship

and other intangibles Total

Year ended December 31, 2022 (actual) $ 247 59 306

Estimate for year ended December 31,

2023 $ 238 51 289

2024 201 41 242

2025 176 33 209

2026 141 27 168

2027

111 — 111

Table 7.3 shows the allocation of goodwill to our reportable

operating segments.

Table 7.3: Goodwill

(in millions)

Consumer

Banking and

Lending

Commercial

Banking

Corporate and

Investment

Banking

Wealth and

Investment

Management Corporate

Consolidated

Company

December 31, 2020 $ 16,418 3,018 5,375 1,276 305 26,392

Foreign currency translation — — — — — —

Transfers of goodwill — (80) — (932) 1,012 —

Divestitures — — — — (1,212) (1,212)

December 31, 2021 $ 16,418 2,938 5,375 344 105 25,180

Foreign currency translation — (7) — — — (7)

December 31, 2022 $ 16,418

2,931 5,375 344 105 25,173

Table 7.4 presents the components of other assets.

Table 7.4: Other Assets

(in millions) Dec 31, 2022 Dec 31, 2021

Corporate/bank-owned life insurance (1) $ 20,807 20,619

Accounts receivable (2) 23,646 20,831

Interest receivable:

AFS and HTM debt securities 1,572 1,360

Loans 3,470 1,950

Trading and other 767 305

Operating lease assets (lessor) 5,790 6,182

Operating lease ROU assets (lessee) 3,837 3,805

Other (3) 15,945 12,207

Total other assets $ 75,834 67,259

(1) Corporate/bank-owned life insurance is recorded at cash surrender value.

(2) Primarily includes derivatives clearinghouse receivables, trade date receivables, and servicer advances, which are recorded at amortized cost.

(3) Primarily includes income tax receivables, prepaid expenses, foreclosed assets, and private equity and venture capital investments in consolidated portfolio companies.

Wells Fargo & Company 127



Note 8: Leasing Activity

The information below provides a summary of our leasing

activities as a lessor and lessee.

As a Lessor

Table 8.1 presents the composition of our leasing revenue and

Table 8.2 provides the components of our investment in lease

financing. Noninterest income on leases, included in Table 8.1 is

included in other noninterest income on our consolidated

statement of income. Lease expense, included in other

noninterest expense on our consolidated statement of income,

was $750 million, $867 million, and $1.0 billion for the years

ended December 31, 2022, 2021 and 2020, respectively.

In 2021, we recognized an impairment charge of

$268 million due to weakening demand for certain rail cars used

for transportation of coal products. There were no impairments

of rail cars as of December 31, 2022. Our rail car leasing business

is in Corporate for our operating segment disclosures. For

additional information on the accounting for impairment of

operating lease assets, see Note 1 (Summary of Significant

Accounting Policies).

Table 8.1: Leasing Revenue

Year ended December 31,

(in millions) 2022 2021 2020

Interest income on lease financing $ 600 683 853

Other lease revenue:

Variable revenue on lease financing 114 101 107

Fixed revenue on operating leases 972 995 1,169

Variable revenue on operating leases 58 64 47

Other lease-related revenue (1) 125 (164) (78)

Noninterest income on leases 1,269 996 1,245

Total leasing revenue $ 1,869 1,679 2,098



(1) Includes net gains (losses) on disposition of assets leased under operating leases or lease

financings, and impairment charges.

Table 8.2: Investment in Lease Financing

(in millions) Dec 31, 2022 Dec 31, 2021

Lease receivables $ 13,139 12,756

Residual asset values 3,554 3,721

Unearned income (1,785) (1,618)

Lease financing $

14,908

14,859

Our net investment in financing and sales-type leases

included $789 million and $1.0 billion of leveraged leases at

December 31, 2022 and 2021, respectively.

As shown in Table 7.4, included in Note 7 (Intangible Assets

and Other Assets), we had $5.8 billion and $6.2 billion in

operating lease assets at December 31, 2022 and 2021,

respectively, which was net of $3.1 billion of accumulated

depreciation for both periods. Depreciation expense for the

operating lease assets was $477 million, $604 million and

$755 million in 2022, 2021 and 2020, respectively.

Table 8.3 presents future lease payments owed by our

lessees.

Table 8.3: Maturities of Lease Receivables

December 31, 2022

(in millions)

Direct financing and

sales- type leases Operating leases

2023 $ 4,260 571

2024 3,265 437

2025 2,221 320

2026 1,260 193

2027 649 120

Thereafter 1,484 164

Total lease receivables $ 13,139 1,805

As a Lessee

Substantially all of our leases are operating leases. Table 8.4

presents balances for our operating leases.

Table 8.4: Operating Lease Right-of-Use (ROU) Assets and Lease

Liabilities

(in millions) Dec 31, 2022 Dec 31, 2021

ROU assets $ 3,837 3,805

Lease liabilities 4,465 4,476

Table 8.5 provides the composition of our lease costs, which

are predominantly included in net occupancy expense.

Table 8.5: Lease Costs

Year ended December 31,

(in millions) 2022 2021 2020

Fixed lease expense – operating leases

$

1,022

1,048

1,149

Variable lease expense

277

289

299

Other

(1)

(37)

(93)

(77)

Total lease costs

$

1,262

1,244

1,371

(1) Predominantly includes gains recognized from sale leaseback transactions and sublease

rental income.

Wells Fargo & Company 128



Table 8.6 provides the future lease payments under

operating leases as well as information on the remaining average

lease term and discount rate as of December 31, 2022.

Table 8.6: Lease Payments on Operating Leases

(in millions, except for weighted averages) Dec 31, 2022

2023 $ 883

2024 947

2025 772

2026 633

2027 488

Thereafter 1,142

Total lease payments 4,865

Less: imputed interest 400

Total operating lease liabilities $ 4,465

Weighted average remaining lease term (in years) 6.5

Weighted average discount rate 2.6 %

Our operating leases predominantly expire within the next

15 years, with the longest lease expiring in 2105. We do not

include renewal or termination options in the establishment of

the lease term when we are not reasonably certain that we will

exercise them. As of December 31, 2022, we had additional

operating leases commitments of $654 million, predominantly

for real estate, which leases had not yet commenced. These

leases are expected to commence during 2024 and have lease

terms of 3 years to 20 years.

Wells Fargo & Company 129



Note 9: Deposits

Table 9.1 presents a summary of both time certificates of

deposit (CDs) and other time deposits issued by domestic and

non-U.S. offices.

Table 9.1: Time Deposits

December 31,

(in millions) 2022 2021

Total domestic and Non-U.S. $ 66,887 30,012

Time deposits in excess of $250,000 9,133 5,527

The contractual maturities of time deposits are presented in

Table 9.2.

Table 9.2: Contractual Maturities of Time Deposits

(in millions) December 31, 2022

2023

$

52,445

2024

12,654

2025

693

2026 255

2027 474

Thereafter 366

Total $

66,887

Demand deposit overdrafts of $339 million and $153 million

were included as loan balances at December 31, 2022 and 2021,

respectively.

Wells Fargo & Company 130



Note 10: Long-Term Debt

We issue long-term debt denominated in multiple currencies,

predominantly in U.S. dollars. Our issuances , which are generally

unsecured, have both fixed and floating interest rates. Princip al is

repaid upon contractual maturity, unless redeemed at our optio n

at an earlier date. Interest is paid primarily on either a semi -

annual or annual basis.

As a part of our overall interest rate risk management

strategy, we often use derivatives to manage our exposure to

interest rate risk. We also use derivatives to manage our

exposure to foreign currency risk. As a result, a majority of the

long-term debt presented below is hedged in a fair value or cash

flow hedge relationship.

Table 10.1 presents a summary of our long-term debt

carrying values, reflecting unamortized debt discounts and

premiums, and hedge basis adjustments; unless we have elected

the fair value option. See Note 14 (Derivatives) for additional

information on qualifying hedge contracts and Note 15 (Fair

Values of Assets and Liabilities) for additional information on fair

value option elections. The interest rates displayed represent the

range of contractual rates in effect at December 31, 2022. These

interest rates do not include the effects of any associated

derivatives designated in a hedge accounting relationship.

Table 10.1: Long-Term Debt

December 31,

2022 2021

(in

millions)

Maturity

date(s)

Stated

interest

rate(s)

Wells Fargo & Company (Parent only)

Senior

Fixed-rate notes

2023-2045

0.50-6.75%

$

43,749

62,525

Floating-rate notes

2026-2048

3.49-4.74%

1,046

5,535

FixFloat notes

2024-2053

0.81-5.01%

60,752

43,010

Structured notes

(1)

6,305

5,874

Total senior debt – Parent

111,852

116,944

Subordinated

Fixed-rate notes



(2)

2023-2046

3.45-7.57%

21,379

27,970

Total subordinated debt – Parent

21,379

27,970

Junior subordinated

Fixed-rate notes

2029-2036

5.95-7.95%

827

1,041

Floating-rate notes

2027

4.58-5.08%

343

331

Total

junior

subordinated

debt

–

Parent

(3)

1,170

1,372

Total long-term debt – Parent

(2)

134,401

146,286

Wells Fargo Bank

, N.A., and other bank

entities (Bank

)

Senior

Floating-rate notes

2038-2053

4.21-4.54%

117

116

Floating-rate advances – Federal Home Loan Bank (FHLB)

(4)

2023-2024

3.71-4.93%

27,000

—

Structured notes

(1)

262

307

Finance leases

2023-2029

1.13-17.78%

22

26

Total senior debt – Bank

27,401

449

Subordinated

Fixed-rate notes

2023-2038

5.25-7.74%

4,305

5,387

Total subordinated debt – Bank

4,305

5,387

Junior subordinated

Floating-rate notes

2027

4.73-5.18%

401

388

Total junior subordinated debt – Bank

(3)

401

388

Other bank debt

(5)

2023-2062

0.24-9.50%

7,082

6,634

Total long-term debt – Bank

$

39,189

12,858

(continued on following page)

Wells Fargo & Company 131

Note 10: Long-Term Debt (continued)

(continued from previous page)

 



December 31,

2022 2021

(in millions) Maturity date(s) Stated interest rate(s)

Other consolidated su bsidiaries

Senior

Fixed-rate

notes 2023 3.46% $

369

398

Structured

notes

(1) 911

1,147

Total

long-term

debt

–

Other

consolidated

subsidiaries 1,280

1,545

Total

long-term

debt

(6) $

174,870

160,689

(1) Includes certain structured notes that have coupon or repayment terms linked to the performance of debt or equity securities, an embedded equity, commodity, or currency index, or basket of

indices, for which the maturity may be accelerated based on the value of a referenced index or security. In addition, a major portion consists of zero coupon notes where interest is paid as part of the

final redemption amount.

(2) Includes fixed-rate subordinated notes issued by the Parent at a discount of $121 million and $123 million at December 31, 2022 and 2021, respectively, and debt issuance costs of $2 million at both

December 31, 2022 and 2021, to effect a modification of Wells Fargo Bank, N.A., notes. These subordinated notes are carried at their par amount on the consolidated balance sheet of the Parent

presented in Note 26 (Parent-Only Financial Statements). In addition, Parent long-term debt presented in Note 26 also includes affiliate related issuance costs of $365 million and $329 million at

December 31, 2022 and 2021, respectively.

(3) Includes $401 million and $388 million of junior subordinated debentures held by unconsolidated wholly-owned trust preferred security VIEs at December 31, 2022 and 2021, respectively. In 2021,

we liquidated certain of our trust preferred security VIEs. As part of these liquidations, junior subordinated debentures that were held by the trusts with a total carrying value of $332 million, were

distributed to third-party investors. See Note 16 (Securitizations and Variable Interest Entities) for additional information about trust preferred security VIEs.

(4) We pledge certain assets as collateral to secure advances from the FHLB. For additional information, see Note 18 (Pledged Assets and Collateral).

(5) Primarily relates to unfunded commitments for LIHTC investments. For additional information, see Note 16 (Securitizations and Variable Interest Entities).

(6) A major portion of long-term debt is redeemable at our option at one or more dates prior to contractual maturity.

The aggregate carrying value of long-term debt that

matures (based on contractual payment dates) as of

December 31, 2022, in each of the following five years and

thereafter is presented in Table 10.2.

Table 10.2: Maturity of Long-Term Debt

December 31, 2022

(in millions) 2023 2024 2025 2026 2027 Thereafter Total

Wells Fargo & Company (Parent Only)

Senior debt $ 3,712 11,116 14,030 23,189 7,392 52,413 111,852

Subordinated debt 2,620 702 951 2,631 2,343 12,132 21,379

Junior subordinated debt — — — — 343 827 1,170

Total long-term debt – Parent 6,332 11,818 14,981 25,820 10,078 65,372 134,401

Wells Fargo Bank, N.A., and other bank entities (Bank)

Senior debt 10,003 17,003 176 82 3 134 27,401

Subordinated debt 894 — 149 — 27 3,235 4,305

Junior subordinated debt — — — — 401 — 401

Other bank debt 2,815 1,613 488 163 54 1,949 7,082

Total long-term debt – Bank 13,712 18,616 813 245 485 5,318 39,189

Other consolidated subsidiaries

Senior debt 463 86 413 222 — 96 1,280

Total long-term debt – Other consolidated subsidiaries 463 86 413 222 — 96 1,280

Total long-term debt $ 20,507 30,520 16,207 26,287 10,563 70,786 174,870

As part of our long-term and short-term borrowing

arrangements, we are subject to various financial and operational

covenants. Some of the agreements under which debt has been

issued have provisions that may limit the merger or sale of

certain subsidiary banks and the issuance of capital stock or

convertible securities by certain subsidiary banks. At

December 31, 2022, we were in compliance with all the

covenants.

Wells Fargo & Company 132



Note 11: Preferred Stock

We are authorized to issue 20 million shares of preferred stock,

without par value. Outstanding preferred shares rank senior to

common shares both as to the payment of dividends and

liquidation preferences but have no general voting rights. All

outstanding preferred stock with a liquidation preference value,

except for Series L Preferred Stock, may be redeemed for the

liquidation preference value, plus any accrued but unpaid

dividends, on any dividend payment date on or after the earliest

redemption date for that series. Additionally, these same series

of preferred stock may be redeemed following a “regulatory

capital treatment event”, as described in the terms of each series.

Capital actions, including redemptions of our preferred stock,

may be subject to regulatory approval or conditions.

In addition, we are authorized to issue 4 million shares of

preference stock, without par value. We have not issued any

preference shares under this authorization. If issued, preference

shares would be limited to one vote per share.

Table 11.1 summarizes information about our preferred

stock.

Table 11.1: Preferred Stock

December 31, 2022 December 31, 2021

(in m illions, except shares)

Earliest

redemption

date

Shares

authorized

and

designated

Shares

issued and

outstanding

Liquidation

preference

value

Carrying

value 

Shares

authorized

and

designated

Shares

issued and

outstanding

Liquidation

preference

value

Carrying

value

DEP Shares

Dividend Equalization Preferred Shares (DEP) Currently

redeemable

97,000 96,546 $ — — 97,000 96,546 $ — —

Preferred Stock:

Series L (1)

7.50% Non-Cumulative Per petual C onvertible C lass A — 4,025,000

3,967,986

3,968 3,200 4,025,000

3,967,995 3,968 3,200

Series Q

5.85% Fixed-to-Floating Non-Cumulative Per petual C lass A 9/15/2023 69,000 69,000 1,725 1,725 69,000 69,000 1,725 1,725

Series R

6.625% Fixed-to-Floating Non-Cumulative Per petual C lass A 3/15/2024 34,500 33,600 840 840 34,500 33,600 840 840

Series S

5.90% Fixed-to-Floating Non-Cumulative Perpetual Class A 6/15/2024 80,000 80,000 2,000 2,000 80,000 80,000 2,000 2,000

Series U

5.875% Fixed-to-Floating Non-Cumulative Per petual C lass A 6/15/2025 80,000 80,000 2,000 2,000 80,000 80,000 2,000 2,000

Series Y

5.625% Non-Cumulative Perpetual Class A Currently

redeemable

27,600 27,600 690 690 27,600 27,600 690 690

Series Z

4.75% Non-Cumulative Perpetual Class A 3/15/2025 80,500 80,500 2,013 2,013 80,500 80,500 2,013 2,013

Series AA

4.70% Non-Cumulative Perpetual Class A 12/15/2025 46,800 46,800 1,170 1,170 46,800 46,800 1,170 1,170

Series BB

3.90% Fixed-Reset Non-Cumulative Perpetual Class A 3/15/2026 140,400 140,400 3,510 3,510 140,400 140,400 3,510 3,510

Series CC

4.375% Non-Cumulative Perpetual Class A 3/15/2026 46,000 42,000 1,050 1,050 46,000 42,000 1,050 1,050

Series DD

4.25% Non-Cumulative Perpetual Class A 9/15/2026 50,000 50,000 1,250 1,250 50,000 50,000 1,250 1,250

ESOP (2)

Cumulative Convertible — — — — 609,434 609,434 609 609

Total 4,776,800 4,714,432 $ 20,216 19,448 5,386,234 5,323,875 $ 20,825 20,057

(1) At the option of the holder, each share of Series L Preferred Stock may be converted at any time into 6.3814 shares of common stock, plus cash in lieu of fractional shares, subject to anti-dilution

adjustments. If converted within 30 days of certain liquidation or change of control events, the holder may receive up to 16.5916 additional shares, or, at our option, receive an equivalent amount of

cash in lieu of common stock. We may convert some or all of the Series L Preferred Stock into shares of common stock if the closing price of our common stock exceeds 130 percent of the

conversion price of the Series L Preferred Stock for 20 trading days during any period of 30 consecutive trading days. We declared dividends of $298 million on Series L Preferred Stock in each of the

years 2022, 2021 and 2020.

(2) See the “ESOP Cumulative Convertible Preferred Stock” section in this Note for additional information.

Wells Fargo & Company 133



 



Note 11: Preferred Stock (continued)

ESOP C UMULATIVE C ONVERTIBLE PREFERRED S TOCK All shares

of our ESOP Cumulative Convertible Preferred Stock (ESOP

Preferred Stock) were issued to a trustee acting on behalf of

the Wells Fargo & Company 401(k) Plan (the 401(k) Plan). In 

October 2022, we redeemed all outstanding shares of our ESOP 

Preferred Stock in exchange for shares of the Company’s

common stock. The redemption price was based on a fair market

value of $618 million .

Dividends on the ESOP Preferred Stock were cumulative

from the date of initial issuance and were payable quarterly a t

annual rates based upon the year of issuance. Each share of ESO P

Preferred Stock released from the unallocated reserve of the

401(k) Plan was converted into shares of our common stock

based on the stated value of the ESOP Preferred Stock and the

then current market price of our common stock. The ESOP

Preferred Stock was also convertible at the option of the holde r

at any time, unless previously redeemed. We had the option to

redeem the ESOP Preferred Stock at any time, in whole or in

part, at a redemption price per share equal to the higher of (a )

$1,000 per share plus accrued and unpaid dividends or (b) the fair

market value, as defined in the Certificates of Designation fo r the

ESOP Preferred Stock.

Table 11.2: ESOP Preferred Stock

Shares issued and outstanding Carrying value Adjustable dividend rate

(in millions, except shares)

Dec 31,

2022

Dec 31,

2021

Dec 31,

2022

Dec 31,

2021 Minimum Maximum

ESOP Preferred Stock

$1,000 liqu idation preference per share

2018 — 189,225 $ — 189 7.00 % 8.00 %

2017 — 135,135 — 135 7.00 8.00

2016 — 128,380 — 128 9.30 10.30

2015 — 68,106 — 68 8.90 9.90

2014 — 62,420 — 63 8.70 9.70

2013 — 26,168 — 26 8.50 9.50

Total ESOP Preferred Stock (1) — 609,434 $ — 609

Unearned ESOP shares (2) $ — (646)

(1) At December 31, 2021, additional paid-in capital included $37 million related to ESOP Preferred Stock.

(2) We recorded a corresponding charge to unearned ESOP shares in connection with the issuance of the ESOP Preferred Stock. See Note 12 (Common Stock and Stock Plans) for additional information.

Wells Fargo & Company 134



Note 12: Common Stock and Stock Plans

Common Stock

Table 12.1 presents our reserved, issued and authorized shares of

common stock at December 31, 2022.

Table 12.1: Common Stock Shares

Number of shares

Shares reserved (1) 303,203,184

Shares issued 5,481,811,474

Shares not reserved or issued 3,214,985,342

Total shares authorized 9,000,000,000

(1) Shares reserved for employee stock plans (employee restricted share rights, performance

share awards, 401(k), and deferred compensation plans), convertible securities, dividend

reinvestment and common stock purchase plans, and director plans.

We repurchase shares to meet common stock issuance

requirements for our benefit plans, share awards, conversion of

our convertible securities, acquisitions and other corporate

purposes. Various factors determine the amount and timing of

our share repurchases, including our capital requirements, the

number of shares we expect to issue for acquisitions and

employee benefit plans, market conditions (including the trading

price of our stock), and regulatory and legal considerations.

These factors can change at any time, and there can be no

assurance as to the number of shares we will repurchase or when

we will repurchase them.

Dividend Reinvestment and Common Stock

Purchase Plans

Participants in our dividend reinvestment and common stock

direct purchase plans may purchase shares of our common stock

at fair market value by reinvesting dividends and/or making

optional cash payments under the plan’s terms.

Employee Stock Plans

We offer stock-based employee compensation plans as

described below. For additional information on our accounting

for stock-based compensation plans, see Note 1 (Summary of

Significant Accounting Policies).

LONG-TERM INCENTIVE PLANS We have granted restricted share

rights (RSRs) and performance share awards (PSAs) as our

primary long-term incentive awards.

Holders of RSRs and PSAs may be entitled to receive

additional RSRs and PSAs (dividend equivalents) or cash

payments equal to the cash dividends that would have been paid

had the RSRs or PSAs been issued and outstanding shares of

common stock. RSRs and PSAs granted as dividend equivalents

are subject to the same vesting schedule and conditions as the

underlying award.

Table 12.2 summarizes the major components of stock

compensation expense and the related recognized tax benefit.

Table 12.2: Stock Compensation Expense

Year ended December 31,

(in millions)

2022

2021 2020

RSRs $ 947 931 732

Performance shares (1) 31 74 (110)

Total stock compensation expense $ 978 1,005 622

Related recognized tax benefit

$ 242 248 154

(1) Compensation expense fluctuates with the estimated outcome of satisfying performance

conditions and, for certain awards, changes in our stock price.

The total number of shares of common stock available for

grant under the plans at December 31, 2022, was 129 million.

Restricted Share Rights

Holders of RSRs are entitled to the related shares of common

stock at no cost generally vesting over three to five years after

the RSRs are granted. A summary of the status of our RSRs at

December 31, 2022, and changes during 2022 is presented in

Table 12.3.

Table 12.3: Restricted Share Rights

Number

Weighted-

average

grant-date

fair value

Nonvested at January 1, 2022 51,604,179 $ 37.98

Granted 24,793,104 51.80

Vested (20,380,394) 42.30

Canceled or forfeited (2,779,746) 44.18

Nonvested at December 31, 2022 53,237,143 42.44

The weighted-average grant date fair value of RSRs granted

during 2021 and 2020 was $32.99 and $42.53, respectively.

At December 31, 2022, there was $986 million of total

unrecognized compensation cost related to nonvested RSRs. The

cost is expected to be recognized over a weighted-average

period of 2.4 years. The total fair value of RSRs that vested

during 2022, 2021 and 2020 was $1.0 billion, $902 million and

$981 million, respectively.

Performance Share Awards

Holders of PSAs are entitled to the related shares of common

stock at no cost subject to the Company’s achievement of

specified performance criteria over a three-year period. PSAs

are granted at a target number based on the Company’s

performance. The number of awards that vest can be adjusted

downward to zero and upward to a maximum of either 125% or

150% of target. The awards vest in the quarter after the end of

the performance period. For PSAs whose performance period

ended December 31, 2022, the determination of the number of

performance shares that will vest will occur in first quarter 2023

after review of the Company’s performance by the Human

Resources Committee of the Board.

Wells Fargo & Company 135



Note 12: Common Stock and Stock Plans (continued)

A summary of the status of our PSAs at December 31, 2022,

and changes during 2022 is in Table 12.4, based on the

performance adjustments recognized as of December 2022.

Table 12.4: Performance Share Awards

Number

Weighted-average 

grant-date fair value (1)

Nonvested at January 1, 2022 4,682,969 $ 36.63

Granted 1,011,080 $ 52.80

Vested (392,241) $ 50.50

Canceled or forfeited (793,471) $ 49.36

Nonvested at December 31, 2022 4,508,337 $ 36.81

(1) Reflects approval date fair value for grants subject to variable accounting.

The weighted-average grant date fair value of performance

awards granted during 2021 and 2020 was $32.76 and $40.39,

respectively.

At December 31, 2022, there was $33 million of total

unrecognized compensation cost related to nonvested

performance awards. The cost is expected to be recognized over

a weighted-average period of 1.9 years. The total fair value of

PSAs that vested during 2022, 2021 and 2020 was $19 million,

$31 million and $35 million, respectively.

Stock Options

Stock options have not been issued in the last three years and no

stock options were outstanding at December 31, 2022, 2021 and

2020.

Director Awards

We granted common stock awards to non-employee directors

elected or re-elected at the annual meeting of stockholders on

April 26, 2022. These stock awards vest immediately.

Employee Stock Ownership Plan

The Wells Fargo & Company 401(k) Plan (401(k) Plan) is a

defined contribution plan with an Employee Stock Ownership

Plan (ESOP) feature. We have previously loaned money to the

401(k) Plan to purchase ESOP Preferred Stock that was

convertible into common stock over time as the loans were

repaid. The Company’s annual contribution to the 401(k) Plan, as

well as dividends received on unreleased shares, are used to make

payments on the loans. As the loans are repaid, shares are

released from the unallocated reserve of the 401(k) Plan.

In October 2022, we redeemed all outstanding shares of our

ESOP Preferred Stock in exchange for shares of the Company’s

common stock. For additional information see Note 11

(Preferred Stock).

Shares that are not yet released are reflected on our

consolidated balance sheet as unearned ESOP shares. Released

common stock is allocated to the 401(k) Plan participants and

invested in the Wells Fargo ESOP Fund within the 401(k) Plan.

Dividends on the allocated common shares reduce retained

earnings, and the shares are considered outstanding for

computing earnings per share. Dividends on the unreleased

common stock or ESOP Preferred Stock do not reduce retained

earnings, and the unreleased shares are not considered to be

common stock equivalents for computing earnings per share.

Table 12.5 presents the information related to the

Wells Fargo ESOP Fund and the dividends paid to the 401(k)

Plan.

Table 12.5: Wells Fargo ESOP Fund

December 31,

(in millions, except shares)

2022

2021 2020

Allocated shares outstanding (common) 152,438,152 149,638,081 155,810,091

Unreleased shares outstanding (common) 10,329,650 — —

Fair value of unreleased shares outstanding (common)

$ 427 — —

Unreleased shares outstanding (preferred) — 609,434 822,242

Conversion value of unreleased ESOP preferred shares

$ — 609 822

Fair value of unreleased ESOP preferred shares based on redemption

— 700 990

Year ended December 31,

Dividends paid on (in millions):

2022

2021 2020

Allocated shares (common) $ 134 74 155

Unreleased shares (common)

4 — —

Unreleased shares (preferred)

36 66 77

Wells Fargo & Company 136



Note 13: Legal Actions

Wells Fargo and certain of our subsidiaries are involved in a

number of judicial, regulatory, governmental, arbitration, and

other proceedings or investigations concerning matters arising

from the conduct of our business activities, and many of those

proceedings and investigations expose Wells Fargo to potential

financial loss or other adverse consequences. These proceedings

and investigations include actions brought against Wells Fargo

and/or our subsidiaries with respect to corporate-related

matters and transactions in which Wells Fargo and/or our

subsidiaries were involved. In addition, Wells Fargo and our

subsidiaries may be requested to provide information to or

otherwise cooperate with government authorities in the conduct

of investigations of other persons or industry groups. We

establish accruals for legal actions when potential losses

associated with the actions become probable and the costs can

be reasonably estimated. For such accruals, we record the

amount we consider to be the best estimate within a range of

potential losses that are both probable and estimable; however, if

we cannot determine a best estimate, then we record the low

end of the range of those potential losses. There can be no

assurance as to the ultimate outcome of legal actions, including

the matters described below, and the actual costs of resolving

legal actions may be substantially higher or lower than the

amounts accrued for those actions.

AUTOMOBILE LENDING MATTERS On April 20, 2018, the Company

entered into consent orders with the Office of the Comptroller of

the Currency (OCC) and the Consumer Financial Protection

Bureau (CFPB) to resolve, among other things, investigations by

the agencies into the Company’s compliance risk management

program and its past practices involving certain automobile

collateral protection insurance (CPI) policies and certain

mortgage interest rate lock extensions. The consent orders

require remediation to customers and the payment of a total of

$1.0 billion in civil money penalties to the agencies. In July 2017,

the Company announced a plan to remediate customers who

may have been financially harmed due to issues related to

automobile CPI policies purchased through a third-party vendor

on their behalf. Multiple putative class actions alleging, among

other things, unfair and deceptive practices relating to these CPI

policies, were filed against the Company and consolidated into

one multi-district litigation in the United States District Court

for the Central District of California. As previously disclosed, the

Company entered into a settlement to resolve the multi-district

litigation. Shareholders also filed a putative securities fraud class

action against the Company and its executive officers alleging

material misstatements and omissions of CPI-related

information in the Company’s public disclosures. In January 2020,

the court dismissed this action as to all defendants except the

Company and a former executive officer and limited the action to

two alleged misstatements. Subject to court approval, the

parties have entered into an agreement pursuant to which the

Company will pay $300 million to resolve this action. In addition,

the Company was subject to a class action in the United States

District Court for the Central District of California alleging that

customers were entitled to refunds related to the unused portion

of guaranteed automobile protection (GAP) waiver or insurance

agreements between the customer and dealer and, by

assignment, the lender. As previously disclosed, the Company

entered into a settlement to resolve the class action. Allegations

related to the CPI and GAP programs were among the subjects of

a shareholder derivative lawsuit in the United States District

Court for the Northern District of California, which has been

dismissed. In addition, federal and state government agencies,

including the CFPB, have undertaken formal or informal inquiries,

investigations, or examinations regarding these and other issues

related to the origination, servicing, and collection of consumer

auto loans, including related insurance products. On

December 20, 2022, the Company entered into a consent order

with the CFPB to resolve the CFPB’s investigations related to

automobile lending, consumer deposit accounts, and mortgage

lending. The consent order requires, among other things,

remediation to customers and the payment of a $1.7 billion civil

penalty to the CFPB. As previously disclosed, the Company

entered into an agreement to resolve investigations by state

attorneys general.

COMMERCIAL LENDING SHAREHOLDER LITIGATION In October and

November 2020, plaintiffs filed two putative securities fraud

class actions, which were consolidated into one lawsuit pending in

the United States District Court for the Northern District of

California alleging that the Company and certain of its current

and former officers made false and misleading statements or

omissions regarding, among other things, the Company’s

commercial lending underwriting practices, the credit quality of

its commercial credit portfolios, and the value of its commercial

loans, collateralized loan obligations and commercial mortgage-

backed securities. In May 2022, the district court granted

defendants’ motion to dismiss the lawsuit, which was appealed to

the United States Court of Appeals for the Ninth Circuit. In

January 2023, the parties voluntarily dismissed the appeal.

COMPANY 401(K) PLAN MATTERS Federal government agencies,

including the United States Department of Labor (Department

of Labor), have undertaken reviews of certain transactions

associated with the Employee Stock Ownership Plan feature of

the Company’s 401(k) plan, including the manner in which the

401(k) plan purchased certain securities used in connection with

the Company’s contributions to the 401(k) plan. As previously

disclosed, the Company entered into an agreement to resolve

the Department of Labor’s review. On September 26, 2022,

participants in the Company’s 401(k) plan filed a putative class

action in the United States District Court for the District of

Minnesota alleging that the Company violated the Employee

Retirement Income Security Act of 1974 in connection with

certain of these transactions.

CONSENT ORDER DISCLOSURE LITIGATION Wells Fargo

shareholders have brought a putative securities fraud class action

in the United States District Court for the Southern District of

New York alleging that the Company and certain of its current

and former executive officers and directors made false or

misleading statements regarding the Company’s efforts to

comply with the February 2018 consent order with the Federal

Reserve Board and the April 2018 consent orders with the CFPB

and OCC. Allegations related to the Company’s efforts to comply

with these three consent orders are also among the subjects of a

shareholder derivative lawsuit filed in California state court.

CONSUMER DEPOSIT ACCOUNT RELATED REGULATORY

INVESTIGATIONS The CFPB has undertaken an investigation into

whether customers were unduly harmed by the Company’s

historical practices associated with the freezing (and, in many

cases, closing) of consumer deposit accounts after the Company

Wells Fargo & Company 137

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 



Note 13: Legal Actions (continued)

detected suspected fraudulent activity (by third parties or

account holders) that affected those accounts. The CFPB has also

undertaken an investigation into certain of the Company’s past

disclosures to customers regarding the minimum qualifying debit

card usage required for customers to receive a waiver of monthly

service fees on certain consumer deposit accounts. As described

above, on December 20, 2022, the Company entered into a

consent order with the CFPB to resolve the CFPB’s investigations

related to automobile lending, consumer deposit accounts, and

mortgage lending.

HIRING PRACTICES MATTERS Government agencies, including the

United States Department of Justice and the United States

Securities and Exchange Commission, have undertaken formal or

informal inquiries or investigations regarding the Company’s

hiring practices related to diversity. A putative securities fraud

class action has also been filed in the United States District Court

for the Northern District of California alleging that the Company

and certain of its executive officers made false or misleading

statements about the Company’s hiring practices related to

diversity. Allegations related to the Company’s hiring practices

related to diversity are also among the subjects of shareholder

derivative lawsuits filed in the United States District Court for

the Northern District of California.

INTERCHANGE LITIGATION Plaintiffs representing a class of

merchants have filed putative class actions, and individual

merchants have filed individual actions, against Wells Fargo Bank,

N.A., Wells Fargo & Company, Wachovia Bank, N.A., and

Wachovia Corporation regarding the interchange fees associated

with Visa and MasterCard payment card transactions. Visa,

MasterCard, and several other banks and bank holding

companies are also named as defendants in these actions. These

actions have been consolidated in the United States District

Court for the Eastern District of New York. The amended and

consolidated complaint asserts claims against defendants based

on alleged violations of federal and state antitrust laws and seeks

damages as well as injunctive relief. Plaintiff merchants allege

that Visa, MasterCard, and payment card issuing banks unlawfully

colluded to set interchange rates. Plaintiffs also allege that

enforcement of certain Visa and MasterCard rules and alleged

tying and bundling of services offered to merchants are

anticompetitive. Wells Fargo and Wachovia, along with other

defendants and entities, are parties to Loss and Judgment

Sharing Agreements, which provide that they, along with other

entities, will share, based on a formula, in any losses from the

Interchange Litigation. On July 13, 2012, Visa, MasterCard, and

the financial institution defendants, including Wells Fargo, signed

a memorandum of understanding with plaintiff merchants to

resolve the consolidated class action and reached a separate

settlement in principle of the consolidated individual actions. The

settlement payments to be made by all defendants in the

consolidated class and individual actions totaled approximately

$6.6 billion before reductions applicable to certain merchants

opting out of the settlement. The class settlement also provided

for the distribution to class merchants of 10 basis points of

default interchange across all credit rate categories for a period

of eight consecutive months. The district court granted final

approval of the settlement, which was appealed to the United

States Court of Appeals for the Second Circuit by settlement

objector merchants. Other merchants opted out of the

settlement and are pursuing several individual actions. On

June 30, 2016, the Second Circuit vacated the settlement

agreement and reversed and remanded the consolidated action

to the United States District Court for the Eastern District of

New York for further proceedings. On November 23, 2016, prior

class counsel filed a petition to the United States Supreme Court,

seeking review of the reversal of the settlement by the Second

Circuit, and the Supreme Court denied the petition on March 27,

2017. On November 30, 2016, the district court appointed lead

class counsel for a damages class and an equitable relief class.

The parties have entered into a settlement agreement to resolve

the money damages class claims pursuant to which defendants

will pay a total of approximately $6.2 billion, which includes

approximately $5.3 billion of funds remaining from the 2012

settlement and $900 million in additional funding. The

Company’s allocated responsibility for the additional funding is

approximately $94.5 million. The court granted final approval of

the settlement on December 13, 2019, which was appealed to

the United States Court of Appeals for the Second Circuit by

settlement objector merchants. On September 27, 2021, the

district court granted the plaintiffs’ motion for class certification

in the equitable relief case. Several of the opt-out and direct

action litigations have been settled while others remain pending.

MORTGAGE LENDING MATTERS Plaintiffs representing a class of

mortgage borrowers filed separate putative class actions alleging

that Wells Fargo improperly denied mortgage loan modifications

or repayment plans to customers in the foreclosure process due

to the overstatement of foreclosure attorneys’ fees that were

included for purposes of determining whether a customer in the

foreclosure process qualified for a mortgage loan modification or

repayment plan. As previously disclosed, the Company entered

into settlements to resolve the class actions, while the others

were voluntarily dismissed. In addition, federal and state

government agencies, including the CFPB, have undertaken

formal or informal inquiries or investigations regarding these and

other mortgage servicing matters. On September 9, 2021, the

OCC assessed a $250 million civil money penalty against the

Company regarding loss mitigation activities in the Company’s

Home Lending business and insufficient progress in addressing

requirements under the OCC’s April 2018 consent order. In

addition, on September 9, 2021, the Company entered into a

consent order with the OCC requiring the Company to improve

the execution, risk management, and oversight of loss mitigation

activities in its Home Lending business. As described above, on

December 20, 2022, the Company entered into a consent order

with the CFPB to resolve the CFPB’s investigations related to

automobile lending, consumer deposit accounts, and mortgage

lending.

NOMURA/NATIXIS MORTGAGE-RELATED LITIGATION In August

2014 and August 2015, Nomura Credit & Capital Inc. (Nomura)

and Natixis Real Estate Holdings, LLC (Natixis) filed a total of

seven third-party complaints against Wells Fargo Bank, N.A., in

New York state court. In the underlying first-party actions,

Nomura and Natixis have been sued for alleged breaches of

representations and warranties made in connection with

residential mortgage-backed securities sponsored by them. In

the third-party actions, Nomura and Natixis allege that

Wells Fargo, as master servicer, primary servicer or securities

administrator, failed to notify Nomura and Natixis of their own

breaches, failed to properly oversee the primary servicers, and

failed to adhere to accepted servicing practices. Natixis

additionally alleges that Wells Fargo failed to perform default

oversight duties. In March 2022, Wells Fargo entered into an

agreement to settle the six actions filed by Nomura, and the

actions have been voluntarily dismissed. In the remaining action

filed by Natixis, Wells Fargo has asserted counterclaims alleging

that Natixis failed to provide Wells Fargo notice of its

Wells Fargo & Company 138



representation and warranty breaches. In January 2023, Natixis

and Wells Fargo reached an agreement in principle to settle their

respective claims.

OFAC RELATED INVESTIGATION The Company has self-identified

an issue whereby certain foreign banks utilized a Wells Fargo

software-based solution to conduct import/export trade-related

financing transactions with countries and entities prohibited by

the Office of Foreign Assets Control (OFAC) of the United States

Department of the Treasury. We do not believe any funds related

to these transactions flowed through accounts at Wells Fargo as

a result of the aforementioned conduct. The Company has made

voluntary self-disclosures to OFAC and has been cooperating

with investigations or inquiries arising out of this matter by

federal government agencies. The Company is in resolution

discussions with certain of these agencies, although there can be

no assurance as to the outcome of these discussions.

RECORD-KEEPING INVESTIGATIONS The United States Securities

and Exchange Commission and the United States Commodity

Futures Trading Commission have undertaken investigations

regarding the Company’s compliance with records retention

requirements relating to business communications sent over

unapproved electronic messaging channels.

RETAIL SALES PRACTICES MATTERS Federal and state government

agencies, including the United States Department of Justice

(Department of Justice) and the United States Securities and

Exchange Commission (SEC), have undertaken formal or informal

inquiries or investigations arising out of certain retail sales

practices of the Company that were the subject of settlements

with the CFPB, the OCC, and the Office of the Los Angeles City

Attorney announced by the Company on September 8, 2016. On

February 21, 2020, the Company entered into an agreement with

the Department of Justice to resolve the Department of Justice’s

criminal investigation into the Company’s retail sales practices as

well as a separate agreement to resolve the Department of

Justice’s civil investigation. As part of the Department of Justice

criminal settlement, no charges will be filed against the Company

provided the Company abides by all the terms of the agreement.

The Department of Justice criminal settlement also includes the

Company’s agreement that the facts set forth in the settlement

document constitute sufficient facts for the finding of criminal

violations of statutes regarding bank records and personal

information. On February 21, 2020, the Company also entered

into an order to resolve the SEC’s investigation arising out of the

Company’s retail sales practices. The SEC order contains a

finding, to which the Company consented, that the facts set

forth include violations of Section 10(b) of the Securities

Exchange Act of 1934 and Rule 10b-5 thereunder. As part of the

resolution of the Department of Justice and SEC investigations,

the Company made payments totaling $3.0 billion. The Company

has also entered into agreements to resolve other government

agency investigations, including investigations by the state

attorneys general. In addition, a number of lawsuits were filed by

non-governmental parties seeking damages or other remedies

related to these retail sales practices. As previously disclosed, the

Company entered into various settlements to resolve these

lawsuits.

RMBS TRUSTEE LITIGATION In December 2014, Phoenix Light SF

Limited (Phoenix Light) and certain related entities filed a

complaint in the United States District Court for the Southern

District of New York alleging claims against Wells Fargo Bank,

N.A., in its capacity as trustee for a number of residential

mortgage-backed securities (RMBS) trusts. Complaints raising

similar allegations have been filed by Commerzbank AG in the

Southern District of New York and by IKB International and IKB

Deutsche Industriebank in New York state court. In each case, the

plaintiffs allege that Wells Fargo Bank, N.A., as trustee, caused

losses to investors, and plaintiffs assert causes of action based

upon, among other things, the trustee’s alleged failure to notify

and enforce repurchase obligations of mortgage loan sellers for

purported breaches of representations and warranties, notify

investors of alleged events of default, and abide by appropriate

standards of care following alleged events of default. In

July 2022, the district court dismissed Phoenix Light’s claims and

certain of the claims asserted by Commerzbank AG, and

subsequently entered judgment in each case in favor of Wells

Fargo Bank, N.A. In August 2022, Phoenix Light and

Commerzbank AG appealed the district court’s decision to the

United States Court of Appeals for the Second Circuit. The

Company previously settled two class actions filed by

institutional investors and an action filed by the National Credit

Union Administration with similar allegations. In addition, Park

Royal I LLC and Park Royal II LLC have filed substantially similar

lawsuits in New York state court alleging Wells Fargo Bank, N.A.,

as trustee, failed to take appropriate actions upon learning of

defective mortgage loan documentation.

SEMINOLE TRIBE TRUSTEE LITIGATION The Seminole Tribe of

Florida filed a complaint in Florida state court alleging that

Wells Fargo, as trustee, charged excess fees in connection with

the administration of a minor’s trust and failed to invest the

assets of the trust prudently. The complaint was later amended

to include three individual current and former beneficiaries as

plaintiffs and to remove the Tribe as a party to the case.

Wells Fargo filed a petition to remove the case to federal court,

but the case was remanded back to state court.

OUTLOOK As described above, the Company establishes accruals

for legal actions when potential losses associated with the

actions become probable and the costs can be reasonably

estimated. The high end of the range of reasonably possible

losses in excess of the Company’s accrual for probable and

estimable losses was approximately $1.4 billion as of

December 31, 2022. The outcomes of legal actions are

unpredictable and subject to significant uncertainties, and it is

inherently difficult to determine whether any loss is probable or

even possible. It is also inherently difficult to estimate the

amount of any loss and there may be matters for which a loss is

probable or reasonably possible but not currently estimable.

Accordingly, actual losses may be in excess of the established

accrual or the range of reasonably possible loss. Based on

information currently available, advice of counsel, available

insurance coverage, and established reserves, Wells Fargo

believes that the eventual outcome of the actions against Wells

Fargo and/or its subsidiaries will not, individually or in the

aggregate, have a material adverse effect on Wells Fargo’s

consolidated financial condition. However, it is possible that the

ultimate resolution of a matter, if unfavorable, may be material

to Wells Fargo’s results of operations for any particular period.

Wells Fargo & Company 139

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Note 14: Derivatives

We use derivatives to manage exposure to market risk, including

interest rate risk, credit risk and foreign currency risk, and to

assist customers with their risk management objectives. We

designate certain derivatives as hedging instruments in

qualifying hedge accounting relationships (fair value or cash flow

hedges). Our remaining derivatives consist of economic hedges

that do not qualify for hedge accounting and derivatives held for

customer accommodation trading or other purposes.

Risk Management Derivatives

Our asset/liability management approach to interest rate,

foreign currency and certain other risks includes the use of

derivatives, which are typically designated as fair value or cash

flow hedges, or economic hedges. We use derivatives to help

minimize significant, unplanned fluctuations in earnings, fair

values of assets and liabilities, and cash flows caused by interest

rate, foreign currency and other market risk volatility. This

approach involves modifying the repricing characteristics of

certain assets and liabilities so that changes in interest rates,

foreign currency and other exposures, which may cause the

hedged assets and liabilities to gain or lose fair value, do not have

a significant adverse effect on the net interest margin, cash flows

and earnings. In a fair value or economic hedge, the effect of

change in fair value will generally be offset by the unrealized gain

or loss on the derivatives linked to the hedged assets and

liabilities. In a cash flow hedge, where we manage the variability

of cash payments due to interest rate or foreign currency

fluctuations by the effective use of derivatives linked to hedged

assets and liabilities, the hedged asset or liability is not adjusted

and the unrealized gain or loss on the derivative is recorded in

other comprehensive income.

Customer Accommodation Trading

We also use various derivatives, including interest rate,

commodity, equity, credit and foreign exchange contracts,

as an accommodation to our customers as part of our trading

businesses. These derivative transactions, which involve

engaging in market-making activities or acting as an

intermediary, are conducted in an effort to help customers

manage their market risks. We usually offset our exposure from

such derivatives by entering into other financial contracts, such

as separate derivative or security transactions. These customer

accommodations and any offsetting derivatives are treated as

customer accommodation trading and other derivatives in our

disclosures. Additionally, embedded derivatives that are required

to be accounted for separately from their host contracts are

included in the customer accommodation trading and other

derivatives disclosures, as applicable.

Wells Fargo & Company 140

Table 14.1 presents the total notional or contractual

amounts and fair values for our derivatives. Derivative

transactions can be measured in terms of the notional amount,

but this amount is not recorded on our consolidated balance

sheet and is not, when viewed in isolation, a meaningful measur e

of the risk profile of the instruments. The notional amount is

generally not exchanged, but is used only as the basis on whic h

derivative cash flows are determined.

Table 14.1: Notional or Contractual Amounts and Fair Values of Derivatives

December 31, 2022 December 31, 2021

(in millions)

Notional

or contractu al

amount

Fair valu e 

Notional

or contractual

amount

Fair value 

Derivative

assets

Derivative

liabilities

Derivative

assets

Derivative

liabilities

Derivatives designated as hedging instru ments

Interest rate contracts $ 263,876 670 579 153,993 2,212 327

Commodity contracts 1,681 9 25 1,739 26 3

Foreign exchange contracts 15,544 161 1,015 24,949 281 669

Total derivatives designated as qualifying hedging instruments 840 1,619 2,519 999

Derivatives not designated as hedging instru ments

Economic hedges:

Interest rate contracts 65,727 410 253 142,234 40 41

Equity contracts (1) 3,884 — 260 26,263 1,493 1,194

Foreign exchange contracts 38,139 490 968 28,192 395 88

Credit contracts 290 14 — 290 7 —

Subtotal 914 1,481 1,935 1,323

Customer accommodation trading and other derivatives:

Interest rate contracts 10,156,300 40,006 42,641 7,976,534 20,286 17,435

Commodity contracts 96,001 5,991 3,420 74,903 5,939 2,414

Equity contracts (1) 390,427 9,573 8,012 321,863 16,278 17,827

Foreign exchange contracts 1,475,224 21,562 24,703 560,049 5,912 5,915

Credit contracts 45,359 52 36 38,318 39 43

Subtotal 77,184 78,812 48,454 43,634

Total derivatives not designated as hedging instruments 78,098 80,293 50,389 44,957

Total derivatives before netting 78,938 81,912 52,908 45,956

Netting (56,164) (61,827) (31,430) (36,532)

Total $ 22,774 20,085 21,478 9,424

(1) In first quarter 2022, we prospectively reclassified certain equity securities and related economic hedge derivatives from “not held for trading activities” to “held for trading activities” to better

reflect the business activity of those financial instruments. For additional information on Trading Activities, see Note 1 (Summary of Significant Accounting Policies).

Balance Sheet Offsetting

We execute substantially all of our derivative transactions under

master netting arrangements. Where legally enforceable, these

master netting arrangements give the ability, in the event of

default by the counterparty, to liquidate securities held as

collateral and to offset receivables and payables with the same

counterparty. We reflect all derivative balances and related cash

collateral subject to enforceable master netting arrangements on

a net basis on our consolidated balance sheet. We do not net

non-cash collateral that we receive or pledge against derivative

balances on our consolidated balance sheet.

For disclosure purposes, we present “Total Derivatives, net”

which represents the aggregate of our net exposure to each

counterparty after considering the balance sheet netting

adjustments and any non-cash collateral. We manage derivative

exposure by monitoring the credit risk associated with each

counterparty using counterparty-specific credit risk limits, using

master netting arrangements and obtaining collateral.

Table 14.2 provides information on the fair values of

derivative assets and liabilities subject to enforceable master

netting arrangements, the balance sheet netting adjustments

and the resulting net fair value amount recorded on our

consolidated balance sheet, as well as the non-cash collateral

associated with such arrangements. In addition to the netting

amounts included in the table, we also have balance sheet netting

related to resale and repurchase agreements that are disclosed

within Note 18 (Pledged Assets and Collateral).

Wells Fargo & Company 141

Table 14.2: Fair Values of Derivative Assets and Liabilities

December 31, 2022 December 31, 2021

(in millions) Derivative Assets Derivative Liabilities Derivative Assets Derivative Liabilities

Interest rate contracts

Over-the-counter (OTC) $ 37,000 37,598 20,067 16,654

OTC cleared 649 845 168 192

Exchange traded 262 193 52 28

Total interest rate contracts 37,911 38,636 20,287 16,874

Commodity contracts

OTC 4,833 2,010 5,040 1,249

Exchange traded 876 1,134 557 1,047

Total commodity contracts 5,709 3,144 5,597 2,296

Equity contracts

OTC 4,269 4,475 6,132 9,730

Exchange traded 3,742 2,409 7,493 6,086

Total equity contracts 8,011 6,884 13,625 15,816

Foreign exchange contracts

OTC 21,537 26,127 6,335 6,221

Total foreign exchange contracts 21,537 26,127 6,335 6,221

Credit contracts

OTC 39 22 32 31

Total credit contracts 39 22 32 31

Total derivatives subject to enforceable master netting arrangements,

gross 73,207 74,813 45,876 41,238

Less: Gross amounts offset

Counterparty netting (1) (49,115) (49,073) (27,172) (27,046)

Cash collateral netting (7,049) (12,754) (4,258) (9,486)

Total derivatives subject to enforceable master netting arrangements,

net 17,043 12,986 14,446 4,706

Derivatives not subject to enforceable master netting arrangements 5,731 7,099 7,032 4,718

Total derivatives recognized in consolidated balance sheet, net 22,774 20,085 21,478 9,424

Non-cash collateral (3,517) (582) (1,432) (412)

Total Derivatives, net $ 19,257 19,503 20,046 9,012



Note 14: Derivatives (continued)

(1) Represents amounts with counterparties subject to enforceable master netting arrangements that have been offset in our consolidated balance sheet, including portfolio level counterparty valuation

adjustments related to customer accommodation and other trading derivatives. Counterparty valuation adjustments related to derivative assets were $372 million and $284 million and debit

valuation adjustments related to derivative liabilities were $331 million and $158 million as of December 31, 2022 and 2021, respectively, and were primarily related to interest rate contracts.

Fair Value and Cash Flow Hedges

For fair value hedges, we use interest rate swaps to convert

certain of our fixed-rate long-term debt and time certificates of

deposit to floating rates to hedge our exposure to interest rate

risk. We also enter into cross-currency swaps, cross-currency

interest rate swaps and forward contracts to hedge our exposure

to foreign currency risk and interest rate risk associated with the

issuance of non-U.S. dollar denominated long-term debt. We also

enter into futures contracts, forward contracts, and swap

contracts to hedge our exposure to the price risk of physical

commodities included in Other Assets. In addition, we use

interest rate swaps, cross-currency swaps, cross-currency

interest rate swaps and forward contracts to hedge against

changes in fair value of certain investments in available-for-sale

debt securities due to changes in interest rates, foreign currency

rates, or both. For certain fair value hedges of foreign currency

risk, changes in fair value of cross-currency swaps attributable to

changes in cross-currency basis spreads are excluded from the

assessment of hedge effectiveness and recorded in other

comprehensive income (OCI). See Note 24 (Other

Comprehensive Income) for the amounts recognized in other

comprehensive income.

For cash flow hedges, we use interest rate swaps to hedge

the variability in interest payments received on certain interest-

earning deposits with banks and certain floating-rate commercial

loans, and interest paid on certain floating-rate debt due to

changes in the contractually specified interest rate. We also use

cross-currency swaps to hedge variability in interest payments

on fixed-rate foreign currency-denominated long-term debt due

to changes in foreign exchange rates.

We estimate $695 million pre-tax of deferred net losses

related to cash flow hedges in OCI at December 31, 2022, will be

reclassified into net interest income during the next twelve

months. For cash flow hedges as of December 31, 2022, we are

hedging our interest rate and foreign currency exposure to the

variability of future cash flows for all forecasted transactions for

a maximum of 10 years. For additional information on our

accounting hedges, see Note 1 (Summary of Significant

Accounting Policies).

Wells Fargo & Company 142

Table 14.3 and Table 14.4 show the net gains (losses) related

to derivatives in cash flow and fair value hedging relationships,

respectively.

Table 14.3: Gains (Losses) Recognized on Cash Flow Hedging Relationships

Net interest income

Total

recorded

in net

income

Total

recorded

in OCI

(in millions) Loans

Other

interest

income

Long-

term debt

Derivative

gains

(losses)

Derivative

gains

(losses)

Year Ended December 31, 2022

Total amounts presented in the consolidated statement of income and other comprehensive income $ 37,715 3,308 (5,505) N/A (1,448)

Interest rate contracts:

Realized gains (losses) (pre-tax) reclassified from OCI into net income (20) 24 — 4 (4)

Net unrealized gains (losses) (pre-tax) recognized in OCI N/A N/A N/A N/A (1,524)

Total gains (losses) (pre-tax) on interest rate contracts (20) 24 — 4 (1,528)

Foreign exchange contracts:

Realized gains (losses) (pre-tax) reclassified from OCI into net income — — (10) (10) 10

Net unrealized gains (losses) (pre-tax) recognized in OCI N/A N/A N/A N/A (17)

Total gains (losses) (pre-tax) on foreign exchange contracts — — (10) (10) (7)

Total gains (losses) (pre-tax) recognized on cash flow hedges $ (20) 24 (10) (6) (1,535)

Year Ended December 31, 2021

Total amounts presented in the consolidated statement of income and other comprehensive income $ 28,634 334 (3,173) N/A 212

Interest rate contracts:

Realized gains (losses) (pre-tax) reclassified from OCI into net income (137) — — (137) 137

Net unrealized gains (losses) (pre-tax) recognized in OCI N/A N/A N/A N/A 7

Total gains (losses) (pre-tax) on interest rate contracts (137) — — (137) 144

Foreign exchange contracts:

Realized gains (losses) (pre-tax) reclassified from OCI into net income — — (6) (6) 6

Net unrealized gains (losses) (pre-tax) recognized in OCI N/A N/A N/A N/A (19)

Total gains (losses) (pre-tax) on foreign exchange contracts — — (6) (6) (13)

Total gains (losses) (pre-tax) recognized on cash flow hedges $ (137) — (6) (143) 131

Year ended December 31, 2020

Total amounts presented in the consolidated statement of income and other comprehensive income $ 34,230 954 (4,471) N/A

198

Interest rate contracts:

Realized

gains (losses) (pre-tax) reclassified from OCI into net income (215) — 4 (211) 211

Net unrealized gains (losses) (pre-tax) recognized in OCI N/A N/A N/A N/A —

Total gains (losses) (pre-tax) on interest rate contracts (215) — 4 (211) 211

Foreign exchange contracts:

Realized gains (losses) (pre-tax) reclassified from OCI into net income — — (8) (8) 8

Net unrealized gains (losses) (pre-tax) recognized in OCI N/A N/A N/A N/A 10

Total gains (losses) (pre-tax) on foreign exchange contracts — — (8) (8) 18

Total gains (losses) (pre-tax) recognized on cash flow hedges $

(215) — (4) (219) 229

Wells Fargo & Company 143

Note 14: Derivatives (continued)

Table 14.4: Gains (Losses) Recognized on Fair Value Hedging Relationships

Net interest income

Noninterest

income

Total

recorded in

net income

Total

recorded in

OCI

(in millions)

Debt

securities Deposits

Long-term

debt Other

Derivative

gains

(losses)

Derivative

gains

(losses)

Year Ended December 31, 2022

Total amounts presented in the consolidated statement of income and other

comprehensive income $ 11,781 (2,349) (5,505) 2,238 N/A (1,448)

Interest contracts

Amounts related to cash flows on derivatives 143 65 313 — 521 N/A

Recognized on derivatives 3,616 (345) (18,056) — (14,785) —

Recognized on hedged items (3,576) 350 17,919 — 14,693 N/A

Total gains (losses) (pre-tax) on interest rate contracts 183 70 176 — 429 —

Foreign exchange contracts

Amounts related to cash flows on derivatives — — (189) — (189) N/A

Recognized on derivatives — — (1,120) (1,021) (2,141) 87

Recognized on hedged items — — 1,097 1,005 2,102 N/A

Total gains (losses) (pre-tax) on foreign exchange contracts — — (212) (16) (228) 87

Commodity contracts

Recognized on derivatives — — — 57 57 —

Recognized on hedged items — — — (43) (43) N/A

Total gains (losses) (pre-tax) on commodity contracts — — — 14 14 —

Total gains (losses) (pre-tax) recognized on fair value hedges $ 183 70 (36) (2) 215 87

Year Ended December 31, 2021

Total amounts presented in the consolidated statement of income and other

comprehensive income $ 9,253 (388) (3,173) 3,734 N/A 212

Interest contracts

Amounts related to cash flows on derivatives (253) 289 2,136 — 2,172 N/A

Recognized on derivatives 1,129 (336) (6,351) — (5,558) —

Recognized on hedged items (1,117) 333 6,288 — 5,504 N/A

Total gains (losses) (pre-tax) on interest rate contracts (241) 286 2,073 — 2,118 —

Foreign exchange contracts

Amounts related to cash flows on derivatives 57 — 10 — 67 N/A

Recognized on derivatives 4 — (516) (99) (611)

81

Recognized on hedged items (3) — 438 82 517 N/A

Total gains (losses) (pre-tax) on foreign exchange contracts 58 — (68) (17) (27) 81

Commodity contracts

Recognized on derivatives

—

— —

113 113

—

Recognized on hedged items

—

— (124)

(124) N/A

Total gains (losses) (pre-tax) on commodity contracts — — — (11) (11) —

Total gains (losses) (pre-tax) recognized on fair value hedges $

(183) 286 2,005 (28) 2,080 81

Year

ended

December

31,

2020

Total amounts presented in the consolidated statement of income and other

comprehensive income $

11,234

(2,804) (4,471) 3,847 N/A 198

Interest contracts

Amounts related to cash flows on derivatives (338) 503 1,704 — 1,869 N/A

Recognized on derivatives (1,261) 161 6,691 — 5,591 —

Recognized on hedged items 1,317 (151) (6,543) — (5,377) N/A

Total gains (losses) (pre-tax) on interest rate contracts (282) 513 1,852 — 2,083 —

Foreign exchange contracts

Amounts related to cash flows on derivatives

52 —

(139)

—

(87) N/A

Recognized on derivatives

(1) —

261

1,591

1,851

(31)

Recognized on hedged items

2 —

(201)

(1,575)

(1,774) N/A

Total gains (losses) (pre-tax) on foreign exchange contracts

53 —

(79)

16

(10)

(31)

Commodity contracts

Recognized on derivatives

— —

—

(11)

—

Recognized on hedged items

—

27

27 N/A

Total gains (losses) (pre-tax) on commodity contracts

—

16

—

Total gains (losses) (pre-tax) recognized on fair value hedges $

(229)

513

1,773

32

2,089

(31)

Wells Fargo & Company 144

Table 14.5 shows the carrying amount and associated

cumulative basis adjustment related to the application of hedge

accounting that is included in the carrying amount of hedged

assets and liabilities in fair value hedging relationships.

Table 14.5: Hedged Items in Fair Value Hedging Relationships

Hedged items currently designated Hedged items no longer designated

(in millions)

Carrying amount of assets/

(liabilities) (1)(2)

Hedge accounting

basis adjustment

assets/(liabilities) (3)

Carrying amount of assets/

(liabilities) (2)

Hedge accounting basis

adjustment

assets/(liabilities)

December 31, 2022

Available-for-sale debt securities (4) $ 39,423 (3,859) 16,100 722

Other assets 1,663 38 — —

Deposits (41,687) 205 (10) —

Long-term debt (130,997) 13,862 (5) —

December 31, 2021

Available-for-sale debt securities (4) $ 24,144 (559) 17,962 965

Other assets 1,156 (58) — —

Deposits (10,187) (144) — —

Long-term debt (138,801) (5,192) — —

(1) Does not include t he ca rrying amount of h edged items wh ere only foreign cu rrency risk is t he d esignated hedged risk. The ca rrying amount excluded for debt securities is $739 m illion and for long-

term debt is $0 m illion as of December 31, 2022, and $873 m illion for debt securities a nd $(2.7) b illion for long-term debt as of December 31, 2021.

(2) Represents the full carrying amount of the hedged asset or liability item as of the balance sheet date, except for circumstances in which only a portion of the asset or liability was designated as the

hedged item in which case only the portion designated is presented.

(3) The b alance inclu des $39 m illion and $334 m illion of d ebt securities a nd long-term debt cumulative b asis a djustments a s of December 31, 2022, respectively, and $136 m illion and $188 m illion of

debt securities a nd long-term debt cumulative b asis a djustments a s of December 31, 2021, respectively, on t erminated hedges wh ereby the h edged items h ave su bsequently been r e-designated

into exist ing hedges.

(4) Carrying amount represents the amortized cost.

Derivatives Not Designated as Hedging Instruments

Derivatives not designated as hedging instruments include

economic hedges and derivatives entered into for customer

accommodation trading purposes.

We use economic hedge derivatives to manage our exposure

to interest rate risk, equity price risk, foreign currency risk, and

credit risk. We also use economic hedge derivatives to mitigate

the periodic earnings volatility caused by mismatches between

the changes in fair value of the hedged item and hedging

instrument recognized on our fair value accounting hedges.

Changes in the fair values of derivatives used to economically

hedge the deferred compensation plan are reported in personnel

expense.

Mortgage Banking Activities

We use economic hedge derivatives in our mortgage banking

business to hedge the risk of changes in the fair value of

(1) certain residential MSRs measured at fair value, (2) residentia l

mortgage LHFS, (3) derivative loan commitments, and (4) other

interests held. The types of derivatives used include swaps,

swaptions, constant maturity mortgages, forwards, Eurodollar

and Treasury futures and options contracts. Loan commitments

for mortgage loans that we intend to sell are considered

derivatives. Residential MSRs, derivative loan commitments,

certain residential mortgage LHFS, and our economic hedge

derivatives are carried at fair value with changes in fair valu e

included in mortgage banking noninterest income. See Note 6

(Mortgage Banking Activities ) for additional information on this

economic hedging activity and mortgage banking income.

Customer Accommodation Trading and Other

For customer accommodation trading purposes, we use swaps,

futures, forwards, spots and options to assist our customers in

managing their own risks, including interest rate, commodity,

equity, foreign exchange, and credit contracts. These derivatives

are not linked to specific assets and liabilities on our consolidated

balance sheet or to forecasted transactions in an accounting

hedge relationship and, therefore, do not qualify for hedge

accounting. We also enter into derivatives for risk management

that do not otherwise qualify for hedge accounting. They are

carried at fair value with changes in fair value recorded in

noninterest income.

Customer accommodation trading and other derivatives also

include embedded derivatives that are required to be accounted

for separately from their host contract. We periodically issue

hybrid long-term notes and certificates of deposit (CDs) where

the performance of the hybrid instrument note is linked to an

equity, commodity or currency index, or basket of such indices.

These notes contain explicit terms that affect some or all of the

cash flows or the value of the note in a manner similar to a

derivative instrument and therefore are considered to contain an

“embedded” derivative instrument. The indices on which the

performance of the hybrid instrument is calculated are not

clearly and closely related to the host debt instrument. The

“embedded” derivative is separated from the host contract and

accounted for as a derivative. Additionally, we may invest in

hybrid instruments that contain embedded derivatives, such as

credit derivatives, that are not clearly and closely related to the

host contract. In such instances, we either elect fair value option

for the hybrid instrument or separate the embedded derivative

from the host contract and account for the host contract and

derivative separately.

Wells Fargo & Company 145

Note 14: Derivatives (continued)

Table 14.6 shows the net gains (losses), recognized by

income statement lines, related to derivatives not designated a s

hedging instruments.

Table 14.6: Gains (Losses) on Derivatives Not Designated as Hedging Instruments

Noninterest income

Noninterest

expense

(in millions)

Mortgage

banking

Net gains from

trading and

securities Other Total Personnel expense

Year Ended December 31, 2022

Net gains (losses) recognized on economic hedges derivatives:

Interest contracts (1) $ (1,040) — (83) (1,123) —

Equity contracts (2) — — 10 10 877

Foreign exchange contracts — — 547 547 —

Credit contracts — — 6 6 —

Subtotal (1,040) — 480 (560) 877

Net gains (losses) recognized on customer accommodation trading

and other derivatives:

Interest contracts (1,079) 9,742 — 8,663 —

Commodity contracts — 390 — 390 —

Equity contracts (2) — 4,652 (286) 4,366 —

Foreign exchange contracts — 1,177 — 1,177 —

Credit contracts — (27) — (27) —

Subtotal (1,079) 15,934 (286) 14,569 —

Net gains (losses) recognized related to derivatives not designated

as hedging instruments $ (2,119) 15,934 194 14,009 877

Year Ended December 31, 2021

Net gains (losses) recognized on economic hedges derivatives:

Interest contracts (1) $ (51) — (11) (62) —

Equity contracts — 495 (1) 494 (611)

Foreign exchange contracts — — 335 335 —

Credit contracts — — (12) (12) —

Subtotal (51) 495 311 755 (611)

Net gains (losses) recognized on customer accommodation trading

and other derivatives:

Interest contracts 62 1,217 — 1,279 —

Commodity contracts — 133 — 133 —

Equity contracts — (4,549) (444) (4,993) —

Foreign exchange contracts — 827 — 827 —

Credit contracts — (93) — (93) —

Subtotal 62 (2,465) (444) (2,847) —

Net gains (losses) recognized related to derivatives not designated as

hedging instruments $ 11 (1,970) (133) (2,092) (611)

Year ended December 31, 2020

Net gains (losses) recognized on economic hedges derivatives:

Interest contracts (1) $ 2,787 — (93) 2,694 —

Equity contracts — (1,167) (25) (1,192) (778)

Foreign exchange contracts — — (455) (455) —

Credit contracts — — 14 14 —

Subtotal 2,787 (1,167) (559) 1,061 (778)

Net gains (losses) recognized on customer accommodation trading

and other derivatives:

Interest contracts 1,964 (1,021) — 943 —

Commodity contracts — 446 — 446 —

Equity contracts — (436) (334) (770) —

Foreign exchange contracts — 89 — 89 —

Credit contracts — (1) — (1) —

Subtotal 1,964 (923) (334) 707 —

Net gains (losses) recognized related to derivatives not designated as

hedging instruments $ 4,751 (2,090) (893) 1,768 (778)

(1) Mortgage banking amounts for the years ended 2022, 2021 and 2020 are comprised of gains (losses) of $(3.5) billion, $(1.2) billion and $4.6 billion, respectively, related to derivatives used as

economic hedges of MSRs measured at fair value offset by gains (losses) of $2.5 billion, $1.2 billion and $(1.8) billion, respectively, related to derivatives used as economic hedges of mortgage loans

held for sale and derivative loan commitments.

(2) In first quarter 2022, we prospectively reclassified certain equity securities and related economic hedge derivatives from “not held for trading activities” to “held for trading activities” to better

reflect the business activity of those financial instruments. For additional information on Trading Activities, see Note 1 (Summary of Significant Accounting Policies).

Wells Fargo & Company 146

Credit Derivatives

Credit derivative contracts are arrangements whose value is

derived from the transfer of credit risk of a reference asset or

entity from one party (the purchaser of credit protection) to

another party (the seller of credit protection). We generally use

credit derivatives to assist customers with their risk

management objectives by purchasing and selling credit

protection on corporate debt obligations through the use of

credit default swaps or through risk participation swaps to help

manage counterparty exposure. We would be required to

perform under the credit derivatives we sold in the event of

default by the referenced obligors. Events of default include

events such as bankruptcy, capital restructuring or lack of

principal and/or interest payment.

Table 14.7 provides details of sold credit derivatives.

Table 14.7: Sold Credit Derivatives

Notional amount

(in millions) Protection sold

Protection sold –

non-investment

grade

December 31, 2022

Credit default swaps $ 12,733 1,860

Risk participation swaps 6,728 6,518

Total credit derivatives $ 19,461 8,378

December 31, 2021

Credit default swaps $ 8,033 1,982

Risk participation swaps 6,756 6,012

Total credit derivatives $ 14,789 7,994

Protection sold represents the estimated maximum

exposure to loss that would be incurred if, upon an event of

default, the value of our interests and any associated collateral

declined to zero, and does not take into consideration any of

recovery value from the referenced obligation or offset from

collateral held or any economic hedges.

The amounts under non-investment grade represent the

notional amounts of those credit derivatives on which we have a

higher risk of being required to perform under the terms of the

credit derivative and are a function of the underlying assets.

We consider the credit risk to be low if the underlying assets

under the credit derivative have an external rating that is

investment grade. If an external rating is not available, we classify

the credit derivative as non-investment grade.

Our maximum exposure to sold credit derivatives is

managed through posted collateral and purchased credit

derivatives with identical or similar reference positions in order

to achieve our desired credit risk profile. The credit risk

management is designed to provide an ability to recover a

significant portion of any amounts that would be paid under sold

credit derivatives.

Credit-Risk Contingent Features

Certain of our derivative contracts contain provisions whereby if

the credit rating of our debt were to be downgraded by certain

major credit rating agencies, the counterparty could demand

additional collateral or require termination or replacement of

derivative instruments in a net liability position. Table 14.8

illustrates our exposure to OTC bilateral derivative contracts with

credit-risk contingent features, collateral we have posted, and

the additional collateral we would be required to post if the credit

rating of our debt was downgraded below investment grade.

Table 14.8: Credit-Risk Contingent Features

(in billions)

Dec 31,

2022

Dec 31,

2021

Net derivative liabilities with credit-risk

contingent features $ 20.7 12.2

Collateral posted 17.4 11.0

Additional collateral to be posted upon a below

investment grade credit rating (1) 3.3 1.2

(1) Any credit rating below investment grade requires us to post the maximum amount of

collateral.

Wells Fargo & Company 147







Note 15: Fair Values of Assets and Liabilities

We use fair value measurements to record fair value adjustments

to certain assets and liabilities and to fulfill fair value disclosure

requirements. Assets and liabilities recorded at fair value on a

recurring basis, such as derivatives, residential MSRs, and trading

or AFS debt securities, are presented in Table 15.1 in this Note.

Additionally, from time to time, we record fair value adjustments

on a nonrecurring basis. These nonrecurring adjustments

typically involve application of lower of cost or fair value

(LOCOM) accounting, write-downs of individual assets or

application of the measurement alternative for nonmarketable

equity securities. Assets recorded at fair value on a nonrecurring

basis are presented in Table 15.4 in this Note. We provide in

Table 15.9 estimates of fair value for financial instruments that

are not recorded at fair value, such as loans and debt liabilities

carried at amortized cost.

FAIR VALUE HIERARCHY We classify our assets and liabilities

recorded at fair value as either Level 1, 2, or 3 in the fair value

hierarchy. The highest priority (Level 1) is assigned to valuations

based on unadjusted quoted prices in active markets and the

lowest priority (Level 3) is assigned to valuations based on

significant unobservable inputs. See Note 1 (Summary of

Significant Accounting Policies) in this Report for a detailed

description of the fair value hierarchy.

In the determination of the classification of financial

instruments in Level 2 or Level 3 of the fair value hierarchy, we

consider all available information, including observable market

data, indications of market liquidity and orderliness, and our

understanding of the valuation techniques and significant inputs

used. This determination is ultimately based upon the specific

facts and circumstances of each instrument or instrument

category and judgments are made regarding the significance of

the unobservable inputs to the instruments’ fair value

measurement in its entirety. If unobservable inputs are

considered significant, the instrument is classified as Level 3.

We do not classify nonmarketable equity securities in the

fair value hierarchy if we use the non-published net asset value

(NAV) per share (or its equivalent) as a practical expedient to

measure fair value. Marketable equity securities with published

NAVs are classified in the fair value hierarchy.

Assets

TRADING DEBT SECURITIES Trading debt securities are recorded

at fair value on a recurring basis. These securities are valued using

internal trader prices that are subject to independent price

verification procedures, which includes comparing internal trader

prices against multiple independent pricing sources, such as

prices obtained from third-party pricing services, observed

trades, and other approved market data. These pricing services

compile prices from various sources and may apply matrix pricing

for similar securities when no price is observable. We review

pricing methodologies provided by pricing services to determine

if observable market information is being used versus

unobservable inputs. When evaluating the appropriateness of an

internal trader price, compared with other independent pricing

sources, considerations include the range and quality of available

information and observability of trade data. These sources are

used to evaluate the reasonableness of a trader price; however,

valuing financial instruments involves judgments acquired from

knowledge of a particular market. Substantially all of our trading

debt securities are recorded using internal trader prices.

AVAILABLE-FOR-SALE DEBT SECURITIES AFS debt securities are

recorded at fair value on a recurring basis. Fair value

measurement for AFS debt securities is based upon various

sources of market pricing. Where available, we use quoted prices

in active markets. When instruments are traded in secondary

markets and quoted prices in active markets do not exist for such

securities, we use prices obtained from third-party pricing

services and, to a lesser extent, may use prices obtained from

independent broker-dealers (brokers), collectively vendor prices.

Substantially all of our AFS debt securities are recorded using

vendor prices. See the “Level 3 Asset and Liability Valuation

Processes – Vendor Developed Valuations” section in this Note

for additional discussion of our processes when using vendor

prices to record fair value of AFS debt securities, which includes

those classified as Level 2 or Level 3 within the fair value

hierarchy.

When vendor prices are deemed inappropriate, they may be

adjusted based on other market data or internal models. We also

use internal models when no vendor prices are available. Internal

models use discounted cash flow techniques or market

comparable pricing techniques.

LOANS HELD FOR SALE (LHFS) LHFS generally includes

commercial and residential mortgage loans originated for sale in

the securitization or whole loan market. A majority of residential

LHFS, and our portfolio of commercial LHFS in our trading

business, are recorded at fair value on a recurring basis. The

remaining LHFS are held at LOCOM which may be written down

to fair value on a nonrecurring basis. Fair value for LHFS that are

not part of our trading business is based on quoted market

prices, where available, or the prices for other mortgage whole

loans with similar characteristics. We may use securitization

prices that are adjusted for typical securitization activities

including servicing value, portfolio composition, market

conditions and liquidity. Fair value for LHFS in our trading

business is based on pending transactions when available. Where

market pricing data or pending transactions are not available, we

use a discounted cash flow model to estimate fair value.

LOANS Although loans are recorded at amortized cost, we record

nonrecurring fair value adjustments to reflect write-downs that

are based on the observable market price of the loan or current

appraised value of the collateral less costs to sell.

MORTGAGE SERVICING RIGHTS (MSRs) Residential MSRs are

carried at fair value on a recurring basis. Commercial MSRs are

carried at LOCOM and may be written down to fair value on a

nonrecurring basis. MSRs do not trade in an active market with

readily observable prices. We determine the fair value of MSRs

using a valuation model that estimates the present value of

expected future net servicing income. The model incorporates

assumptions that market participants may use in estimating

future net servicing income cash flows, including estimates of

prepayment speeds (including housing price volatility for

residential MSRs), discount rates, default rates, cost to service

(including delinquency and foreclosure costs), escrow account

earnings, contractual servicing fee income, ancillary income and

late fees.

DERIVATIVES Derivatives are recorded at fair value on a recurring

basis. The fair value of exchange-traded derivatives that are

actively traded and valued using quoted market prices are

Wells Fargo & Company 148



classified as Level 1 of the fair value hierarchy. The fair val ue of

other derivatives, which predominantly relate to derivatives

traded in over-the-counter (OTC) markets, are measured using

internal valuation techniques, as quoted market prices are not

readily available. These instruments are classified as Level 2 or

Level 3 of the fair value hierarchy, depending on the significa nce

of unobservable inputs in the valuation. Valuation techniques a nd

inputs to internal models depend on the type of derivative and

nature of the underlying rate, price or index upon which the va lue

of the derivative is based. Key inputs can include yield curves ,

credit curves, foreign exchange rates, prepayment rates,

volatility measurements and correlation of certain of these

inputs.

EQUITY SECURITIES Marketable equity securities and certain

nonmarketable equity securities that we have elected to account

for at fair value are recorded at fair value on a recurring basis. Our

remaining nonmarketable equity securities are accounted for

using the equity method, cost method or measurement

alternative and can be subject to nonrecurring fair value

adjustments to record impairment. Additionally, the carrying

value of equity securities accounted for under the measurement

alternative is also remeasured to fair value upon the occurrence

of orderly observable transactions of the same or similar

securities of the same issuer.

We use quoted prices to determine the fair value of

marketable equity securities, as the securities are publicly traded.

Quoted prices are typically not available for nonmarketable

equity securities. We therefore use other methods, generally

market comparable pricing techniques, to determine fair value

for such securities. We use all available information in making this

determination, which includes observable transaction prices for

the same or similar security, prices from third-party pricing

services, broker quotes, trading multiples of comparable public

companies, and discounted cash flow models. Where

appropriate, we make adjustments to observed market data to

reflect the comparative differences between the market data

and the attributes of our equity security, such as differences with

public companies and other investment-specific considerations

like liquidity, marketability or differences in terms of the

instruments.

OTHER ASSETS Although other assets are generally recorded at

amortized cost, we record nonrecurring fair value adjustments to

reflect impairments or the impact of certain lease modifications.

Other assets subject to nonrecurring fair value measurements

include operating lease ROU assets, foreclosed assets and

physical commodities. Fair value is generally based upon

independent market prices or appraised values less costs to sell,

or the use of a discounted cash flow model.

Liabilities

SHORT-SALE TRADING LIABILITIES Short-sale trading liabilities in

our trading business are recorded at fair value on a recurring

basis and are measured using quoted prices in active markets,

where available. When quoted prices for the same instruments

are not available or markets are not active, fair values are

estimated using recent trades of similar securities.

LONG-TERM DEBT Although long-term debt is generally recorded

at amortized cost, we have elected the fair value option for

certain structured notes issued by our trading business. Fair

values for these instruments are estimated using a discounted

cash flow model that includes both the embedded derivative and

debt portions of the notes. The discount rate used in these

discounted cash flow models also incorporates the impact of our

credit spread, which is based on observable spreads in the

secondary bond market.

Level 3 Asset and Liability Valuation Processes

We generally determine fair value of our Level 3 assets and

liabilities by using internal models and, to a lesser extent, prices

obtained from vendors. Our valuation processes vary depending

on which approach is utilized.

INTERNAL MODEL VALUATIONS Certain Level 3 fair value

estimates are based on internal models, such as discounted cash

flow or market comparable pricing techniques. Some of the

inputs used in these valuations are unobservable. Unobservable

inputs are generally derived from or can be correlated to historic

performance of similar portfolios or previous market trades in

similar instruments where particular unobservable inputs may be

implied. We attempt to correlate each unobservable input to

historical experience and other third-party data where available.

Internal models are subject to review prescribed within our

model risk management policies and procedures, which include

model validation. Model validation helps ensure our models are

appropriate for their intended use and appropriate controls exist

to help mitigate risk of invalid valuations. Model validation

assesses the adequacy and appropriateness of our models,

including reviewing its key components, such as inputs,

processing components, logic or theory, output results and

supporting model documentation. Validation also includes

ensuring significant unobservable model inputs are appropriate

given observable market transactions or other market data

within the same or similar asset classes. We also have ongoing

monitoring procedures in place for our Level 3 assets and

liabilities that use internal valuation models. These procedures,

which are designed to provide reasonable assurance that models

continue to perform as expected, include:

• ongoing analysis and benchmarking to market transactions

and other independent market data (including pricing

vendors, if available);

• back-testing of modeled fair values to actual realized

transactions; and

• review of modeled valuation results against expectations,

including review of significant or unusual fluctuations in

value.

We update model inputs and methodologies periodically to

reflect these monitoring procedures. Additionally, existing

models are subject to periodic reviews and we perform full model

revalidations as necessary.

Internal valuation models are subject to ongoing review by

the appropriate principal line of business or enterprise function

and monitoring oversight by Independent Risk Management.

Independent Risk Management, through its Model Risk function,

provides independent oversight of model risk management, and

its responsibilities include governance, validation, periodic review,

and monitoring of model risk across the Company and providing

periodic reports to management and the Board’s Risk

Committee.

VENDOR-DEVELOPED VALUATIONS We routinely obtain pricing

from third-party vendors to value our assets or liabilities. In

certain limited circumstances, this includes assets and liabilities

that we classify as Level 3. We have processes in place to approve

and periodically review third-party vendors to assess whether

information obtained and valuation techniques used are

appropriate. This review may consist of, among other things,

Wells Fargo & Company 149



Note 15: Fair Values of Assets and Liabilities (continued)

obtaining and evaluating control reports issued and pricing

methodology materials distributed. We monitor and review

vendor prices on an ongoing basis to evaluate whether the fair

values are reasonable and in line with market experience in

similar asset classes. While the inputs used to determine fair

value are not provided by the pricing vendors, and therefore

unavailable for our review, we perform one or more of the

following procedures to validate the pricing information and

determine appropriate classification within the fair value

hierarchy:

• comparison to other pricing vendors (if available);

• variance analysis of prices;

• corroboration of pricing by reference to other independent

market data, such as market transactions and relevant

benchmark indices;

• review of pricing by Company personnel familiar with market

liquidity and other market-related conditions; and

• investigation of prices on a specific instrument-by -

instrument basis.

Assets and Liabilities Recorded at Fair Value on a

Recurring Basis

Table 15.1 presents the balances of assets and liabilities recorded

at fair value on a recurring basis.

Table 15.1: Fair Va lue o n a Recurring Ba sis

December 31, 2022 December 31, 2021

(in millions) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Trading debt securities:

Securities of U.S. Treasury and federal agencies $ 28,844 4,530 — 33,374 27,607 2,249 — 29,856

Collateralized loan obligations — 540 150 690 — 655 211 866

Corporate debt securities — 10,344 23 10,367 — 9,987 18 10,005

Federal agency mortgage-backed securities — 34,447 — 34,447 — 40,350 — 40,350

Non-agency mortgage-backed securities — 1,243 12 1,255 — 1,531 11 1,542

Other debt securities — 6,022 — 6,022 — 5,645 1 5,646

Total trading debt securities 28,844 57,126 185 86,155 27,607 60,417 241 88,265

Available-for-sale debt securities:

Securities of U.S. Treasury and federal agencies 45,285 — — 45,285 39,661 — — 39,661

Non-U.S. government securities — 162 — 162 — 71 — 71

Securities of U.S. states and political subdivisions — 10,332 113 10,445 — 16,832 85 16,917

Federal agency mortgage-backed securities — 48,137 — 48,137 — 105,886 — 105,886

Non-agency mortgage-backed securities — 3,284 — 3,284 — 4,522 10 4,532

Collateralized loan obligations — 3,981 — 3,981 — 5,708 — 5,708

Other debt securities — 2,137 163 2,300 — 4,378 91 4,469

Total available-for-sale debt securities 45,285 68,033 276 113,594 39,661 137,397 186 177,244

Loans held for sale — 3,427 793 4,220 — 14,862 1,033 15,895

Mortgage servicing rights (residential) — — 9,310 9,310 — — 6,920 6,920

Derivative assets (gross):

Interest rate contracts 262 40,503 321 41,086 52 22,296 190 22,538

Commodity contracts — 5,866 134 6,000 — 5,902 63 5,965

Equity contracts (1) 112 9,051 410 9,573 6,402 9,350 2,019 17,771

Foreign exchange contracts 27 22,175 11 22,213 8 6,573 7 6,588

Credit contracts — 44 22 66 — 32 14 46

Total derivative assets (gross) 401 77,639 898 78,938 6,462 44,153 2,293 52,908

Equity securities:

Marketable 18,527 86 3 18,616 29,968 82 4 30,054

Nonmarketable (2) — 9,750 17 9,767 — 57 8,906 8,963

Total equity securities 18,527 9,836 20 28,383 29,968 139 8,910 39,017

Total assets prior to derivative netting $ 93,057 216,061 11,482 320,600 103,698 256,968 19,583 380,249

Derivative netting (3) (56,164) (31,430)

Total assets after derivative netting $ 264,436 348,819

Derivative liabilities (gross):

Interest rate contracts $ (193) (40,377) (2,903) (43,473) (28) (17,712) (63) (17,803)

Commodity contracts — (3,325) (120) (3,445) — (2,351) (66) (2,417)

Equity contracts (1) (118) (6,502) (1,652) (8,272) (5,820) (10,753) (2,448) (19,021)

Foreign exchange contracts (29) (26,622) (35) (26,686) (8) (6,654) (10) (6,672)

Credit contracts — (33) (3) (36) — (40) (3) (43)

Total derivative liabilities (gross) (340) (76,859) (4,713) (81,912) (5,856) (37,510) (2,590) (45,956)

Short-sale and other trading liabilities (14,791) (5,513) — (20,304) (15,436) (5,249) — (20,685)

Long-term debt — (1,346) — (1,346) — — — —

Total liabilities prior to derivative netting $ (15,131) $ (83,718) (4,713) (103,562) (21,292) (42,759) (2,590) (66,641)

Derivative netting (3) 61,827 36,532

Total liabilities after derivative netting $ (41,735) (30,109)

(1) During fourth quarter 2022, we changed the technique used to value certain exchanged-traded equity contracts from prices received from exchanges to an internal model. As a result of this change,

these instruments are now classified as Level 2.

(2) Excludes $81 million of nonmarketable equity securities as of December 31, 2021, that are measured at fair value using non-published NAV per share (or its equivalent) as a practical expedient that

are not classified in the fair value hierarchy.

(3) Represents balance sheet netting of derivative asset and liability balances, related cash collateral and portfolio level counterparty valuation adjustments. See Note 14 (Derivatives) for additional

information.

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Level 3 Assets and Liabilities Recorded at Fair Value

on a Recurring Basis

Table 15.2 presents the changes in Level 3 assets and

liabilities measured at fair value on a recurring basis.

Table 15.2: Changes in Level 3 Fa ir Va lue Assets a nd Liabilities o n a Recurring Ba sis

(in millions)

Balance,

beginning

of period

Net gains/

(losses) (1) Purchases (2) Sales Settlements

Transfers 

into 

Level 3 (3)

Transfers

out of

Level 3 (4)

Balance, 

end of 

period

Net unrealized

gains (losses)

related to

assets and

liabilities held

at period end (5)

Year ended December 31, 2022

Trading debt securities

$ 241 (72) 218 (186) (6) 22 (32) 185 (73) (6)

Available-for-sale debt securities 186 (36) 327 (26) (25) 460 (610) 276 (10) (6)

Loans held for sale 1,033 (252) 389 (391) (207) 237 (16) 793 (170) (7)

Mortgage servicing rights (residential) (8) 6,920 2,001 1,003 (614) — — — 9,310 3,254 (7)

Net derivative assets and liabilities:

Interest rate contracts 127 (3,280) — — 994 (435) 12 (2,582) (2,073)

Equity contracts (429) 28 — (9) 721 (584) (969) (1,242) 271

Other derivative contracts 5 (68) 19 (9) 118 (16) (40) 9 (16)

Total derivative contracts (297) (3,320) 19 (18) 1,833 (1,035) (997) (3,815) (1,818) (9)

Equity securities 8,910 4 1 (2) — 3 (8,896) 20 (2) (6)

Year ended December 31, 2021

Trading debt securities

$ 173 7 518 (448) (12) 34 (31) 241 (8) (6)

Available-for-sale d ebt securities 2,994 21 809 (112) (278) 353 (3,601) 186 (4) (6)

Loans h eld for sale 1,234 (25) 477 (534) (377) 394 (136) 1,033 (26) (7)

Mortgage ser vicing rights (r esidential) (8) 6,125 (842) 1,645 (8) — — — 6,920 1,170 (7)

Net derivative a ssets a nd liabilities:

Interest rate cont racts 446 27 — — (340) (5) (1) 127 (75)

Equity contracts (314) (468) — — 379 (228) 202 (429) (266)

Other derivative cont racts 39 (114) 3 (3) 77 — 3 5 (36)

Total d erivative cont racts 171 (555) 3 (3) 116 (233) 204 (297) (377) (9)

Equity securities 9,233 (267) 1 (68) — 11 — 8,910 (316) (6)

Year ended December 31, 2020

Trading debt securities

$ 223 (53) 600 (589) (12) 115 (111) 173 (36) (6)

Available-for-sale d ebt securities 1,565 (34) 43 (68) (263) 2,255 (504) 2,994 1 (6)

Loans h eld for sale 1,214 (96) 1,312 (586) (323) 1,927 (2,214) 1,234 (38) (7)

Mortgage ser vicing rights (r esidential) (8) 11,517 (7,068) 1,707 (32) 1 — — 6,125 (4,693) (7)

Net derivative a ssets a nd liabilities:

Interest rate cont racts 214 2,074 — — (1,842) — — 446 334

Equity contracts (269) (316) — — 298 (22) (5) (314) (19)

Other derivative cont racts (5) (63) 8 3 73 22 1 39 11

Total d erivative cont racts (60) 1,695 8 3 (1,471) — (4) 171 326 (9)

Equity securities 7,850 1,369 2 — — 23 (11) 9,233 1,370 (6)

(1) Includes net gains (losses) included in both net income and other comprehensive income. All amounts represent net gains (losses) included in net income except for $(37) million, $41 million and

$0 million included in other comprehensive income from AFS debt securities for the years ended December 31, 2022, 2021 and 2020, respectively.

(2) Includes originations of mortgage servicing rights and loans held for sale.

(3) All assets and liabilities transferred into Level 3 were previously classified within Level 2.

(4) All assets and liabilities transferred out of Level 3 are classified as Level 2. During first quarter 2022, we transferred $8.9 billion of non-marketable equity securities and $1.4 billion of related

economic hedging derivative assets (equity contracts) out of Level 3 due to our election to measure fair value of these instruments as a portfolio. Under this election, the unit of valuation is the

portfolio-level, rather than each individual instrument. The unobservable inputs previously significant to the valuation of the instruments individually are no longer significant, as those unobservable

inputs offset under the portfolio election.

(5) Includes net unrealized gains (losses) related to assets and liabilities held at period end included in both net income and other comprehensive income. All amounts represent net unrealized gains

(losses) included in net income except for $(9) million, $(1) million and $57 million included in other comprehensive income from AFS debt securities for the years ended December 31, 2022, 2021

and 2020, respectively.

(6) Included in net gains from trading and securities on our consolidated statement of income.

(7) Included in mortgage banking income on our consolidated statement of income.

(8) For additional information on the changes in mortgage servicing rights, see Note 6 (Mortgage Banking Activities).

(9) Included in mortgage banking income, net gains from trading and securities, and other noninterest income on our consolidated statement of income.

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Note 15: Fair Values of Assets and Liabilities (continued)

Table 15.3 provides quantitative information about the

valuation techniques and significant unobservable inputs used in

the valuation of our Level 3 assets and liabilities measured at fair

value on a recurring basis.

The significant unobservable inputs for Level 3 assets

inherent in the fair values obtained from third-party vendors are

not included in the table, as the specific inputs applied are not

provided by the vendor (see discussion in the “Level 3 Asset and

Liability Valuation Processes” section within this Note regarding

vendor-developed valuations).

Weighted averages of inputs are calculated using

outstanding unpaid principal balance for cash instruments, such

as loans and securities, and notional amounts for derivative

instruments.

Table 15.3: Valuation Techniques – Recurring Ba sis

($ in millions, except cost to service amounts)

Fair Value

Level 3 Valuation Technique

Significant

Unobservable Input Range of Inputs

Weighted

Average

December 31, 2022

Trading and available-for-sale debt securities $ 157 Discounted cash flow Discount rate 2.7 - 12.5 % 6.4

185 Market comparable pricing Comparability adjustment (33.6) - 14.1 (4.8)

119 Market comparable pricing Multiples 1.1x - 7.4x 4.0x

Loans held for sale 793 Discounted cash flow Default rate 0.0 - 25.0 % 0.7

Discount rate 2.9 - 13.4 9.5

Loss severity 0.0 - 53.6 15.7

Prepayment rate 3.5 - 14.2 10.7

Mortgage servicing rights (residential) 9,310 Discounted cash flow Cost to service per loan (1) $ 52 - 550 102

Discount rate 8.7 - 14.1 % 9.1

Prepayment rate (2) 8.1 - 21.9 9.4

Net derivative assets and (liabilities):

Interest rate contracts (2,411) Discounted cash flow Discount rate 3.2 - 4.9 4.2

(63) Discounted cash flow Default rate 0.4 - 5.0 2.3

Loss severity 50.0 - 50.0 50.0

Prepayment rate 2.8 - 22.0 18.7

Interest rate contracts: derivative loan

commitments (108) Discounted cash flow Fall-out factor 1.0 - 99.0 41.0

Initial-value servicing (9.3) - 141.0 bps 11.5

Equity contracts (1,000) Discounted cash flow Conversion factor (12.2) - 0.0 % (9.9)

Weighted average life 0.5 - 1.5 yrs 0.8

(242) Option model Correlation factor (77.0) - 99.0 % 49.5

Volatility factor 6.5 - 96.5 37.3

Insignificant Level 3 assets, net of liabilities 29

Total Level 3 assets, net of liabilities $ 6,769 (3)

December 31, 2021

Trading and available-for-sale debt securities $ 136 Discounted cash flow Discount rate 0.4 - 12.5 % 5.5

11 Vendor priced

280 Market comparable pricing Comparability adjustment (30.2) - 19. 2 (4.6)

Loans held for sale 1,033 Discounted cash flow Default rate 0.0 - 29.2 % 1.2

Discount rate 1.6 - 11.9 5.1

Loss severity 0.0 - 46.9 15.4

Prepayment rate 7. 5 - 18. 2 13.1

Mortgage servicing rights (residential) 6,920 Discounted cash flow Cost to service per loan (1) $ 54 - 585 106

Discount rate 5. 8 - 8. 8 % 6.4

Prepayment rate (2) 12. 5 - 21. 1 14.7

Net derivative assets and (liabilities):

Interest rate contracts 87 Discounted cash flow Default rate 0. 0 - 5. 0 2.1

Loss severity 50. 0 - 50. 0 50.0

Prepayment rate 2. 8 - 22. 0 18.7

Interest rate contracts: derivative loan

commitments 40 Discounted cash flow Fall-out factor 1. 0 - 99. 0 16.8

Initial-value servicing (74.8) - 146.0 bps 50.9

Equity contracts 253 Discounted cash flow Conversion factor (10. 2) - 0. 0 % (9.7)

Weighted average life 0.5 - 2.0 yrs 1.1

(682) Option model Correlation factor (77. 0) - 99. 0 % 23.2

Volatility factor 6. 5 - 72. 0 29.1

Nonmarketable equity securities 8,906 Market comparable pricing Comparability adjustment (21. 6) - (7. 7) (15.5)

Insignificant Level 3 assets, net of liabilities 9

Total Level 3 assets, net of liabilities $ 16,993 (3)

(1) The high end of the range of inputs is for servicing modified loans. For non-modified loans the range is $52 - $178 at December 31, 2022, and $54 - $199 at December 31, 2021.

(2) Includes a blend of prepayment speeds and expected defaults. Prepayment speeds are influenced by mortgage interest rates as well as our estimation of drivers of borrower behavior.

(3) Consists of total Level 3 assets of $11.5 billion and $19.6 billion and total Level 3 liabilities of $4.7 billion and $2.6 billion, before netting of derivative balances, at December 31, 2022 and 2021,

respectively.

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The internal valuation techniques used for our Level 3 assets

and liabilities, as presented in Table 15.3, are described as

follows:

• Discounted cash flow – Discounted cash flow valuation

techniques generally consist of developing an estimate of

future cash flows that are expected to occur over the life of

an instrument and then discounting those cash flows at a

rate of return that results in the fair value amount.

• Market comparable pricing – Market comparable pricing

valuation techniques are used to determine the fair value of

certain instruments by incorporating known inputs, such as

recent transaction prices, pending transactions, financial

metrics of comparable companies, or prices of other similar

investments that require significant adjustment to reflect

differences in instrument characteristics.

• Option model – Option model valuation techniques are

generally used for instruments in which the holder has a

contingent right or obligation based on the occurrence of a

future event, such as the price of a referenced asset going

above or below a predetermined strike price. Option models

estimate the likelihood of the specified event occurring by

incorporating assumptions such as volatility estimates, price

of the underlying instrument and expected rate of return.

The unobservable inputs presented in the previous tables are

those we consider significant to the fair value of the Level 3 asset

or liability. We consider unobservable inputs to be significant if

by their exclusion the fair value of the Level 3 asset or liability

would be impacted by a predetermined percentage change. We

also consider qualitative factors, such as nature of the

instrument, type of valuation technique used, and the

significance of the unobservable inputs relative to other inputs

used within the valuation. Following is a description of the

significant unobservable inputs provided in the table.

• Comparability adjustment – is an adjustment made to

observed market data, such as a transaction price to reflect

dissimilarities in underlying collateral, issuer, rating, or ot her

factors used within a market valuation approach, expressed

as a percentage of an observed price.

• Conversion factor – is the risk-adjusted rate in which a

particular instrument may be exchanged for another

instrument upon settlement, expressed as a percentage

change from a specified rate.

• Correlation factor – is the likelihood of one instrument

changing in price relative to another based on an established

relationship expressed as a percentage of relative change in

price over a period over time.

• Cost to service – is the expected cost per loan of servicing a

portfolio of loans, which includes estimates for

unreimbursed expenses (including delinquency and

foreclosure costs) that may occur as a result of servicing

such loan portfolios.

• Default rate – is an estimate of the likelihood of not

collecting contractual amounts owed expressed as a

constant default rate (CDR).

• Discount rate – is a rate of return used to calculate the

present value of the future expected cash flow to arrive at

the fair value of an instrument. The discount rate consists

of a benchmark rate component and a risk premium

component. The benchmark rate component, for example,

OIS, London Interbank Offered Rate (LIBOR), Secured

Overnight Financing Rate (SOFR) or U.S. Treasury rates, is

generally observable within the market and is necessary to

appropriately reflect the time value of money. The risk

premium component reflects the amount

of compensation market participants require due to the

uncertainty inherent in the instruments’ cash flows resulting

from risks such as credit and liquidity.

• Fall-out factor – is the expected percentage of loans

associated with our interest rate lock commitment portfolio

that are likely of not funding.

• Initial-value servicing – is the estimated value of the

underlying loan, including the value attributable to the

embedded servicing right, expressed in basis points of

outstanding unpaid principal balance.

• Loss severity – is the estimated percentage of contractual

cash flows lost in the event of a default.

• Multiples – are financial ratios of comparable public

companies, such as ratios of enterprise value or market value

of equity to earnings before interest, depreciation, and

amortization (EBITDA), revenue, net income or book value,

adjusted to reflect dissimilarities in operational, financial, or

marketability to the comparable public company used in a

market valuation approach.

• Prepayment rate – is the estimated rate at which forecasted

prepayments of principal of the related loan or debt

instrument are expected to occur, expressed as a constant

prepayment rate (CPR).

• Volatility factor – is the extent of change in price an item is

estimated to fluctuate over a specified period of time

expressed as a percentage of relative change in price over a

period over time.

• Weighted average life – is the weighted average number of

years an investment is expected to remain outstanding

based on its expected cash flows reflecting the estimated

date the issuer will call or extend the maturity of the

instrument or otherwise reflecting an estimate of the timing

of an instrument’s cash flows whose timing is not

contractually fixed.

Interrelationships and Uncertainty of Inputs Used in

Recurring Level 3 Fair Value Measurements

Usage of the valuation techniques presented in Table 15.3

requires determination of relevant inputs and assumptions, some

of which represent significant unobservable inputs. Accordingly,

changes in these unobservable inputs may have a significant

impact on fair value.

Certain of these unobservable inputs will (in isolation) have a

directionally consistent impact on the fair value of the

instrument for a given change in that input. Alternatively, the fair

value of the instrument may move in an opposite direction for a

given change in another input. Where multiple inputs are used

within the valuation technique of an asset or liability, a change in

one input in a certain direction may be offset by an opposite

change in another input having a potentially muted impact to the

overall fair value of that particular instrument. Additionally, a

change in one unobservable input may result in a change to

another unobservable input (that is, changes in certain inputs are

interrelated to one another), which may counteract or magnify

the fair value impact.

DEBT SECURITIES AND LOANS HELD FOR SALE The internal models

used to determine fair value for these Level 3 instruments use

certain significant unobservable inputs within a discounted cash

flow or market comparable pricing valuation technique. Such

inputs include discount rate, prepayment rate, default rate, loss

severity, multiples, and comparability adjustment.

These Level 3 assets would decrease (increase) in value

based upon an increase (decrease) in discount rate, default rate

or loss severity inputs and would generally decrease (increase) in

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Note 15: Fair Values of Assets and Liabilities (continued)

value based upon an increase (decrease) in prepayment rate.

Conversely, these Level 3 assets would increase (decrease) in

value based upon an increase (decrease) in multiples. The

comparability adjustment input may have a positive or negative

impact on fair value depending on the change in fair value of the

item the comparability adjustment references.

Generally, a change in the assumption used for the default

rate is accompanied by a directionally similar change in the risk

premium component of the discount rate (specifically, the

portion related to credit risk) and a directionally opposite change

in the assumption used for prepayment rates. Unobservable

inputs for comparability adjustment, multiples, and loss severity

do not increase or decrease based on movements in the other

significant unobservable inputs for these Level 3 assets.

MORTGAGE SERVICING RIGHTS The discounted cash flow models

used to determine fair value of Level 3 MSRs utilize certain

significant unobservable inputs including prepayment rate,

discount rate and costs to service. An increase in any of these

unobservable inputs will reduce the fair value of the MSRs and

alternatively, a decrease in any one of these inputs would result in

the MSRs increasing in value. Generally, a decrease in discount

rates increases the value of MSRs, unless accompanied by a

related update to our prepayment rates. The cost to service

assumption generally does not increase or decrease based on

movements in the discount rate or the prepayment rate. The

sensitivity of our residential MSRs is discussed further in Note 6

(Mortgage Banking Activities).

DERIVATIVE INSTRUMENTS Level 3 derivative instruments are

valued using market comparable pricing, option pricing and

discounted cash flow valuation techniques which use certain

unobservable inputs to determine fair value. Such inputs consist

of prepayment rate, default rate, loss severity, initial-value

servicing, fall-out factor, volatility factor, weighted average life,

conversion factor, and correlation factor.

Level 3 derivative assets (liabilities) where we are long the

underlying would decrease (increase) in value upon an increase

(decrease) in default rate, fall-out factor, conversion factor, or

loss severity inputs. Conversely, Level 3 derivative assets

(liabilities) would generally increase (decrease) in value upon an

increase (decrease) in prepayment rate, initial-value servicing,

weighted average life or volatility factor inputs. The inverse of

the above relationships would occur for instruments when we are

short the underlying. The correlation factor input may have a

positive or negative impact on the fair value of derivative

instruments depending on the change in fair value of the item

the correlation factor references.

Generally, for derivative instruments for which we are

subject to changes in the value of the underlying referenced

instrument, a change in the assumption used for default rate is

accompanied by directionally similar change in the risk premium

component of the discount rate (specifically, the portion related

to credit risk) and a directionally opposite change in the

assumption used for prepayment rates. Unobservable inputs for

loss severity, initial-value servicing, fall-out factor, volatility

factor, weighted average life, conversion factor, and correlation

factor do not increase or decrease based on movements in other

significant unobservable inputs for these Level 3 instruments.

NONMARKETABLE EQUITY SECURITIES Level 3 nonmarketable

equity securities are valued using a market comparable pricing

valuation technique, with a comparability adjustment as the

single significant unobservable input. The comparability

adjustment input may have a positive or negative impact on fair

value depending on the change in fair value of the item the

comparability adjustment references.

Assets and Liabilities Recorded at Fair Value on a

Nonrecurring Basis

We may be required, from time to time, to measure certain

assets at fair value on a nonrecurring basis in accordance with

GAAP. These adjustments to fair value usually result from

application of LOCOM accounting, write-downs of individual

assets, or application of the measurement alternative for certain

nonmarketable equity securities.

Table 15.4 provides the fair value hierarchy and fair value at

the date of the nonrecurring fair value adjustment for all assets

that were still held as of December 31, 2022 and 2021, and for

which a nonrecurring fair value adjustment was recorded during

the years then ended.

Table 15.4: Fair Va lue o n a Nonrecurring Ba sis

December 31, 2022

December 31, 2021

(in millions) Level 2 

Level 3



Total



Level 2



Level 3



Total

Loans held for sale (1) $ 838

554

1,392

3,911

1,407

5,318

Loans:

Commercial 285 — 285 476 — 476

Consumer 512 — 512 380 — 380

Total loans 797 — 797 856 — 856

Mortgage servicing rights (commercial)

—

75

—

567

Nonmarketable equity securities

1,926

2,818

4,744

6,262

765

7,027

Other assets

1,862

296

2,158

1,373

175

1,548

Total assets at fair value on a nonrecurring basis $

5,423

3,743

9,166

12,402

2,914

15,316

(1) Predominantly consists of commercial mortgages and residential mortgage – first lien loans.

Table 15.5 presents the gains (losses) on certain assets held

at the end of the reporting periods presented for which a

nonrecurring fair value adjustment was recognized in earnings

during the respective periods.

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Table 15.5: Gains (Losses) on Assets with Nonrecurring Fair Value

Adjustment

Year ended December 31,

(in millions) 2022 2021 2020

Loans held for sale $ (120) 33 12

Loans:

Commercial (96) (230) (754)

Consumer (739) (564) (260)

Total loans (835) (794) (1,014)

Mortgage servicing rights

(commercial) 4 33 (37)

Nonmarketable equity securities (1) (1,191) 4,407 435

Other assets (2) (275) (388) (469)

Total $ (2,417) 3,291 (1,073)

(1) Includes impairment of nonmarketable equity securities and observable price changes

related to nonmarketable equity securities accounted for under the measurement

alternative.

(2) Includes impairment of operating lease ROU assets, valuation of physical commodities,

valuation losses on foreclosed real estate and other collateral owned, and impairment of

private equity and venture capital investments in consolidated portfolio companies.

Table 15.6 provides quantitative information about the

valuation techniques and significant unobservable inputs used in

the valuation of our Level 3 assets that are measured at fair value

on a nonrecurring basis and determined using an internal model.

The table is limited to financial instruments that had

nonrecurring fair value adjustments during the periods

presented. Weighted averages of inputs are calculated using

outstanding unpaid principal balance for cash instruments, such

as loans, and carrying value prior to the nonrecurring fair value

measurement for nonmarketable equity securities and private

equity and venture capital investments in consolidated portfolio

companies.

Table 15.6: Valuation Techniques – Nonrecurring Basis

($ in millions)

Fair Value

Level 3

Valuation

Technique (1)

Significant

Unobservable Input (1)

Range of Inputs

Positive (Negative)

Weighted

Average

December 31, 2022

Loans held for sale (2) $ 143 Discounted cash flow Default rate (3) 0.1 - 86.1 % 13.8

Discount rate 3.8 - 13.8 9.0

Loss severity 8.1 - 43.8 18.6

Prepayment rate (4) 2.3 - 23.4 18.6

411 Market comparable pricing Comparability adjustment (8.2) - (0.9) (4.3)

Mortgage servicing rights (commercial) 75 Discounted cash flow Cost to service per loan $ 3,775 - 3,775 3,775

Discount rate 5.2 - 5.2 % 5.2

Prepayment rate 0.0 - 20.6 6.7

Nonmarketable equity securities 1,461 Market comparable pricing Comparability adjustment (100.0) - (4.0) (30.1)

1,352 Market comparable pricing Multiples 0.8x - 18.7x 9.9x

Other assets (5) 234 Market comparable pricing Multiples 6.4 - 8.0 7.1

Insignificant Level 3 assets 67

Total $ 3,743

December 31, 2021

Loans h eld for sale (2) $ 1,407 Discounted cash flow Default rate (3) 0.2 - 78. 3 % 25.6

Discount rate 0.6 - 12.0 3.3

Loss sev erity 0. 4 - 45.6 4.8

Prepayment rate (4) 5. 4 - 100. 0 38. 9

Mortgage ser vicing rights (com mercial) 567 Discounted cash flow Cost to ser vice p er loan $ 150 - 3,381 2,771

Discount rate 4. 0 - 4. 5 % 4. 0

Prepayment rate 0. 0 - 20. 6 5. 5

Nonmarketable eq uity securities 745 Market comparable p ricing Comparability adjustment (100. 0) - (33. 0) (59. 0)

15 Market comparable p ricing Multiples 2.0x - 3.3x 2.8x

5 Discounted cash flow Discount rate 10. 5 - 10. 5 % 10. 5

Other assets 175 Discounted cash flow Discount rate 0. 2 - 4. 4 2. 9

Total $ 2,914

(1) Refer to the narrative following Table 15.3 for a definition of the valuation technique(s) and significant unobservable inputs used in the valuation of loans held for sale, mortgage servicing rights,

certain nonmarketable equity securities, and other assets.

(2) Consists of approximately $400 million and $1.2 billion of government insured/guaranteed loans purchased from GNMA-guaranteed mortgage securitizations at December 31, 2022 and 2021,

respectively, and approximately $150 million and $200 million of other mortgage loans that are not government insured/guaranteed at December 31, 2022 and 2021, respectively.

(3) Applies only to non-government insured/guaranteed loans.

(4) Includes the impact on prepayment rate of expected defaults for government insured/guaranteed loans, which impact the frequency and timing of early resolution of loans.

(5) Represents private equity and venture capital investments in consolidated portfolio companies.

Wells Fargo & Company 155

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Note 15: Fair Values of Assets and Liabilities (continued)

Fair Value Option

The fair value option is an irrevocable election, generally only

permitted upon initial recognition of financial assets or liabilities,

to measure eligible financial instruments at fair value with

changes in fair value reflected in earnings. We may elect the fair

value option to align the measurement model with how the

financial assets or liabilities are managed or to reduce complexity

or accounting asymmetry. Following is a discussion of the

portfolios for which we elected the fair value option.

LOANS HELD FOR SALE (LHFS) LHFS measured at fair value include

residential mortgage loan originations for which an active

secondary market and readily available market prices exist to

reliably support our valuations. Loan origination fees on these

loans are recorded when earned, and related direct loan

origination costs are recognized when incurred. We believe fair

value measurement for LHFS reduces certain timing differences

and better matches changes in the value of these assets with

changes in the value of derivatives used as economic hedges for

these assets.

Additionally we purchase loans for market-making purposes

to support the buying and selling demands of our customers in

our trading business. These loans are generally held for a short

period of time and managed within parameters of internally

approved market risk limits. Fair value measurement best aligns

with our risk management practices. Fair value for these loans is

generally determined using readily available market data based

on recent transaction prices for similar loans.

LONG-TERM DEBT We have elected to account for certain

structured debt liabilities under the fair value option. These

exposures relate to our trading activities and fair value

accounting better aligns with our risk management practices and

reduces complexity.

For long-term debt carried at fair value, the change in fair

value attributable to instrument-specific credit risk is recorded in

OCI and all other changes in fair value are recorded in earnings.

Table 15.7 reflects differences between the fair value

carrying amount of the assets and liabilities for which we have

elected the fair value option and the contractual aggregate

unpaid principal amount at maturity.

Table 15.7: Fair Value Option

December 31, 2022 December 31, 2021

(in millions)

Fair valu e

carrying

amount

Aggregate

unpaid

principal

Fair valu e

carrying

amount less 

aggregate

unpaid

principal

Fair value

carrying

amount

Aggregate

unpaid

principal

Fair value

carrying

amount less

aggregate

unpaid

principal

Loans held for sale (1) $ 4,220 4,614 (394) 15,895 15,750 145

Long-term debt (1,346) (1,775) 429 — — —

(1) Nonaccrual loans and loans 90 days or more past due and still accruing included in LHFS for which we have elected the fair value option were insignificant at December 31, 2022 and 2021.

Table 15.8 reflects amounts included in earnings related to

initial measurement and subsequent changes in fair value, by

income statement line item, for assets and liabilities for whic h

the fair value option was elected . Amounts recorded in net

interest income are excluded from the table below.

Table 15.8: Gains (Lo sses) o n C hanges in Fa ir Va lue Includ ed in Ea rnings

Year ended December 31,

2022 2021 2020

(in millions)

Mortgage

banking

noninterest

income

Net gains

from trading

and

securities

Other

noninterest

income

Mortgage

banking

noninterest

income

Net gains

from trading

and

securities

Other

noninterest

income

Mortgage

banking

noninterest

income

Net gains

from trading

and

securities

Other

noninterest

income

Loans held for sale $

(681)

6

—

1,972

54

2

2,719

28

1

Long-term debt

—

52

—

For performing loans, instrument-specific credit risk gains or

losses are derived principally by determining the change in fair

value of the loans due to changes in the observable or implied

credit spread. Credit spread is the market yield on the loans less

the relevant risk-free benchmark interest rate. For

nonperforming loans, we attribute all changes in fair value to

instrument-specific credit risk. For LHFS accounted for under the

fair value option, instrument-specific credit gains or losses for

the years ended December 31, 2022, 2021 and 2020 were

insignificant.

For long-term debt, instrument-specific credit risk gains or

losses represent the impact of changes in fair value due to

changes in our credit spread and are derived using observable

secondary bond market information. These impacts are recorded

in OCI. See amounts relating to debit valuation adjustments

(DVA) within Note 24 (Other Comprehensive Income) for

additional information.

Wells Fargo & Company 156

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Disclosures about Fair Value of Financial Instruments

Table 15.9 presents a summary of fair value estimates for

financial instruments that are not carried at fair value on a

recurring basis. Some financial instruments are excluded from

the scope of this table, such as certain insurance contracts,

certain nonmarketable equity securities, and leases. This table

also excludes assets and liabilities that are not financial

instruments such as the value of the long-term relationships with

our deposit, credit card and trust customers, MSRs, premises and

equipment, goodwill and deferred taxes.

Loan commitments, standby letters of credit and

commercial and similar letters of credit are not included in

Table 15.9. A reasonable estimate of the fair value of these

instruments is the carrying value of deferred fees plus the

allowance for unfunded credit commitments, which totaled

$737 million and $1.4 billion at December 31, 2022 and 2021,

respectively.

The total of the fair value calculations presented does not

represent, and should not be construed to represent, the

underlying fair value of the Company.

Table 15.9: Fair Value Estimates for Financial Instruments

Estimated fair value

(in millions)

Carrying

amount Level 1 Level 2 Level 3 Total

December 31, 2022

Financial assets

Cash and due from banks (1) $ 34,596 34,596 — — 34,596

Interest-earning deposits with banks (1) 124,561 124,338 223 — 124,561

Federal funds sold and securities purchased under resale agreements (1) 68,036 — 68,036 — 68,036

Held-to-maturity debt securities 297,059 14,285 238,552 2,684 255,521

Loans held for sale 2,884 — 2,208 719 2,927

Loans, net (2) 928,049 — 57,532 836,831 894,363

Nonmarketable equity securities (cost method) 4,900 — — 4,961 4,961

Total financial assets $ 1,460,085 173,219 366,551 845,195 1,384,965

Financial liabilities

Deposits (3) $ 66,887 — 46,745 18,719 65,464

Short-term borrowings 50,964 — 50,970 — 50,970

Long-term debt (4) 173,502 — 172,783 999 173,782

Total financial liabilities $ 291,353 — 270,498 19,718 290,216

December 31, 2021

Financial assets

Cash and due from banks (1) $ 24,616 24,616 — — 24,616

Interest-earning deposits with banks (1) 209,614 209,452 162 — 209,614

Federal funds sold and securities purchased under resale agreements (1) 66,223 — 66,223 — 66,223

Held-to-maturity debt securities 272,022 16,825 252,717 2,844 272,386

Loans held for sale 7,722 — 6,300 1,629 7,929

Loans, net (2) 868,278 — 63,404 820,559 883,963

Nonmarketable equity securities (cost method) 3,584 — — 3,646 3,646

Total financial assets $ 1,452,059 250,893

388,806 828,678 1,468,377

Financial liabilities

Deposits (3) $ 30,012 — 14,401 15,601 30,002

Short-term borrowings 34,409 — 34,409 — 34,409

Long-term debt (4) 160,660 — 166,682 1,402 168,084

Total financial liabilities $ 225,081 — 215,492 17,003 232,495

(1) Amounts consist of financial instruments for which carrying value approximates fair value.

(2) Excludes lease financing with a carrying amount of $14.7 billion and $14.5 billion at December 31, 2022 and 2021, respectively.

(3) Excludes deposit liabilities with no defined or contractual maturity of $1.3 trillion and $1.5 trillion at December 31, 2022 and 2021, respectively.

(4) Excludes obligations under finance leases of $22 million and $26 million at December 31, 2022 and 2021, respectively.

Wells Fargo & Company 157

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Note 16: Securitizations and Variable Interest Entities

Involvement with Variable Interest Entities (VIEs)

In the normal course of business, we enter into various types of

on- and off-balance sheet transactions with special purpose

entities (SPEs), which are corporations, trusts, limited liability

companies or partnerships that are established for a limited

purpose. SPEs are often formed in connection with securitization

transactions whereby financial assets are transferred to an SPE.

SPEs formed in connection with securitization transactions are

generally considered variable interest entities (VIEs). The VIE

may alter the risk profile of the asset by entering into derivative

transactions or obtaining credit support, and issues various

forms of interests in those assets to investors. When we transfer

financial assets from our consolidated balance sheet to a VIE in

connection with a securitization, we typically receive cash and

sometimes other interests in the VIE as proceeds for the assets

we transfer. In certain transactions with VIEs, we may retain the

right to service the transferred assets and repurchase the

transferred assets if the outstanding balance of the assets falls

below the level at which the cost to service the assets exceed the

benefits. In addition, we may purchase the right to service loans

transferred to a VIE by a third party.

In connection with our securitization or other VIE activities,

we have various forms of ongoing involvement with VIEs, which

may include:

• underwriting securities issued by VIEs and subsequently

making markets in those securities;

• providing credit enhancement on securities issued by VIEs

through the use of letters of credit or financial guarantees;

• entering into other derivative contracts with VIEs;

• holding senior or subordinated interests in VIEs;

• acting as servicer or investment manager for VIEs;

• providing administrative or trustee services to VIEs; and

• providing seller financing to VIEs.

Loan Sales and Securitization Activity

We periodically transfer consumer and commercial loans and

other types of financial assets in securitization and whole loan

sale transactions.

MORTGAGE LOANS SOLD TO U.S. GOVERNMENT SPONSORED

ENTITIES AND TRANSACTIONS WITH GINNIE MAE In the normal

course of business we sell originated and purchased residential

and commercial mortgage loans to government-sponsored

entities (GSEs). These loans are generally transferred into

securitizations sponsored by the GSEs, which provide certain

credit guarantees to investors and servicers. We also transfer

mortgage loans into securitization pools pursuant to

Government National Mortgage Association (GNMA) guidelines

which are insured by the Federal Housing Administration (FHA)

or guaranteed by the Department of Veterans Affairs (VA).

Mortgage loans eligible for securitization with the GSEs or

GNMA are considered conforming loans. The GSEs or GNMA

design the structure of these securitizations, sponsor the

involved VIEs, and have power over the activities most significant

to the VIE.

We account for loans transferred in conforming mortgage

loan securitization transactions as sales and do not consolidate

the VIEs as we are not the primary beneficiary. In exchange for

the transfer of loans, we typically receive securities issued by the

VIEs which we sell to third parties for cash or hold for investment

purposes as HTM or AFS securities. We also retain servicing

rights on the transferred loans. As a servicer, we retain the option

to repurchase loans from GNMA loan securitization pools, which

becomes exercisable when three scheduled loan payments

remain unpaid by the borrower. During the years ended

December 31, 2022, 2021 and 2020, we repurchased loans of

$2.2 billion, $4.6 billion, and $30.3 billion, respectively, which

predominantly represented repurchases of government insured

loans. We recorded assets and related liabilities of $743 million

and $107 million at December 31, 2022 and 2021, respectively,

where we did not exercise our option to repurchase eligible loans.

Upon transfers of loans, we also provide indemnification for

losses incurred due to material breaches of contractual

representations and warranties as well as other recourse

arrangements. At December 31, 2022 and 2021, our liability for

these repurchase and recourse arrangements was $167 million

and $173 million, respectively, and the maximum exposure to

loss was $13.8 billion and $13.3 billion at December 31, 2022 and

2021, respectively.

Substantially all residential servicing activity is related to

assets transferred to GSE and GNMA securitizations. See Note 6

(Mortgage Banking Activities) for additional information about

residential and commercial servicing rights, advances and

servicing fees.

NONCONFORMING MORTGAGE LOAN SECURITIZATIONS In the

normal course of business, we sell nonconforming residential and

commercial mortgage loans in securitization transactions that

we design and sponsor. Nonconforming mortgage loan

securitizations do not involve a government credit guarantee,

and accordingly, beneficial interest holders are subject to credit

risk of the underlying assets held by the securitization VIE. We

typically originate the transferred loans, account for the transfers

as sales and do not consolidate the VIE. We also typically retain

the right to service the loans and may hold other beneficial

interests issued by the VIEs, such as debt securities held for

investment purposes. Our servicing role related to

nonconforming commercial mortgage loan securitizations is

limited to primary or master servicer and the most significant

decisions impacting the performance of the VIE are generally

made by the special servicer or the controlling class security

holder. For our residential nonconforming mortgage loan

securitizations accounted for as sales, we either do not hold

variable interests that we consider potentially significant or are

not the primary servicer for a majority of the VIE assets.

WHOLE LOAN SALE TRANSACTIONS We also sell whole loans to

VIEs where we have continuing involvement in the form of

financing. We account for these transfers as sales, and do not

consolidate the VIEs as we do not have the power to direct the

most significant activities of the VIEs.

Table 16.1 presents information about transfers of assets during

the periods presented for which we recorded the transfers as

sales and have continuing involvement with the transferred

assets. In connection with these transfers, we received proceeds

and recorded servicing assets, securities, and loans. Each of these

interests are initially measured at fair value. Servicing rights are

classified as Level 3 measurements, and generally securities are

classified as Level 2. Substantially all transfers were related to

residential mortgage securitizations with the GSEs or GNMA and

resulted in no gain or loss because the loans are measured at fair

value on a recurring basis. Additionally, we may transfer certain

government insured loans that we previously repurchased. These

Wells Fargo & Company 158

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loans are carried at the lower of cost or market, and we recognize

gains on such transfers when the market value is greater than the

carrying value of the loan when it is sold.

Table 16.1: Transfers with Continuing Involvement

Year ended December 31,

2022 2021 2020

(in millions)

Residential

mortgages

Commercial

mortgages

Residential

mortgages

Commercial

mortgages

Residential

mortgages

Commercial

mortgages

Assets sold $ 75,582 13,735 157,063 18,247 177,441 11,744

Proceeds from transfer (1) 75,634 13,963 157,852 18,563 177,478 12,034

Net gains (losses) on sale 52 228 789 316 37

290

Continuing involvement (2):

Servicing rights recognized $ 966 128 1,636 166 1,808 161

Securities recognized (3) 2,062 189 23,188 173 31,567 112

Loans recognized — — 926 — — —

(1) Represents cash proceeds and the fair value of non-cash beneficial interests recognized at securitization settlement.

(2) Represents assets or liabilities recognized at securitization settlement date related to our continuing involvement in the transferred assets.

(3) Represents d ebt securities ob tained at securitization set tlement held for investment purposes t hat are cla ssified as a vailable-for-sale or held-to-maturity, which predominantly relate t o a gency

securities. Excludes t rading debt securities h eld temporarily for market-marking purposes, which are sold to t hird parties a t or shortly after securitization set tlement, of $19.0 b illion, $40.7 b illion,

and $37.6 b illion, during the y ears end ed December 31, 2022, 2021 a nd 2020, respectively.

In the normal course of business, we purchase certain

non-agency securities at initial securitization or subsequently in

the secondary market, which we hold for investment. We also

provide seller financing in the form of loans. During the years

ended December 31, 2022, 2021 and 2020, we received

cash flows of $456 million, $686 million, and $198 million,

respectively, related to principal and interest payments on these

securities and loans, which exclude cash flows related to trading

activities and to the sale of our student loan portfolio.

Table 16.2 presents the key weighted-average assumptions

we used to initially measure residential MSRs recognized during

the periods presented.

Table 16.2: Residential MSRs – Assumptions at Securitization Date

Year ended December 31,

2022 2021 2020

Prepayment rate

(1) 12.4 % 13.7 15.4

Discount rate 8.0 5.9 6.5

Cost to service ($ per loan) $ 110 91 96

(1) Includes a blend of prepayment speeds and expected defaults. Prepayment speeds are

influenced by mortgage interest rates as well as our estimation of drivers of borrower

behavior.

See Note 15 (Fair Values of Assets and Liabilities) and

Note 6 (Mortgage Banking Activities) for additional information

on key assumptions for residential MSRs.

SALE OF STUDENT LOAN PORTFOLIO In the year ended

December 31, 2021, we sold $9.5 billion of student loans,

servicing-released. For the same period, we received $9.9 billion

in proceeds from the sales and recognized $355 million of gains,

which are included in other noninterest income on our

consolidated statement of income. In connection with the sales,

we provided $3.8 billion of collateralized loan financing to a third-

party sponsored VIE, and received cash flows of $3.8 billion which

fully repaid these loans. We do not consolidate the VIE as we do

not have power over the significant activities of the entity.

RESECURITIZATION ACTIVITIES We enter into resecuritization

transactions as part of our trading activities to accommodate the

investment and risk management activities of our customers. In

resecuritization transactions, we transfer trading debt securities

to VIEs in exchange for new beneficial interests that are sold to

third parties at or shortly after securitization settlement. This

activity is performed for customers seeking a specific return or

risk profile. Substantially all of our transactions involve the

resecuritization of conforming mortgage-backed securities

issued by the GSEs or guaranteed by GNMA. We do not

consolidate the resecuritization VIEs as we share in the decision-

making power with third parties and do not hold significant

economic interests in the VIEs other than for market-making

activities. We transferred $17.0 billion, $39.6 billion, and

$77.2 billion of securities to resecuritization VIEs during the

years ended December 31, 2022, 2021 and 2020, respectively.

These amounts are not included in Table 16.1. Related total VIE

assets were $112.0 billion and $117.7 billion at December 31,

2022 and 2021, respectively. As of December 31, 2022 and

2021, we held $793 million and $817 million of securities,

respectively, of which $428 million and $607 million related to

resecuritizations transacted during the years ended

December 31, 2022 and 2021, respectively.

Wells Fargo & Company 159

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Note 16: Securitizations and Variable Interest Entities (continued)

Sold or Securitized Loans Serviced for Others

Table 16.3 presents information about loans that we sold or

securitized in which we have ongoing involvement as servicer.

Delinquent loans include loans 90 days or more past due and

loans in bankruptcy, regardless of delinquency status. For loans

sold or securitized where servicing is our only form of continuing

involvement, we generally experience a loss only if we were

required to repurchase a delinquent loan or foreclosed asset due

to a breach in representations and warranties associated with our

loan sale or servicing contracts. Table 16.3 excludes mortgage

loans in GSE or GNMA securitizations of $704.5 billion and

$736.8 billion at December 31, 2022 and 2021, respectively.

Delinquent loans and foreclosed assets related to GSEs and

GNMA were $4.6 billion and $10.3 billion at December 31, 2022

and 2021, respectively.

Table 16.3: Sold or Securitized Loans Serviced for Others

Net charge-offs

Total loans

Delinquent loans

and foreclosed assets (1) Year ended December 31,

(in millions) Dec 31, 2022 Dec 31, 2021 Dec 31, 2022 Dec 31, 2021 2022 2021

Commercial $ 67,029 65,655 912 1,617 49 143

Residential 9,201 9,288 501 764 14 22

Total off-balance sheet sold or securitized loans $ 76,230 74,943 1,413 2,381 63 165

(1) Includes $274 million and $403 million of commercial foreclosed assets and $25 million and $29 million of residential foreclosed assets at December 31, 2022 and 2021, respectively.

Transactions with Unconsolidated VIEs

MORTGAGE LOAN SECURITIZATIONS Table 16.4 includes

nonconforming mortgage loan securitizations where we

originate and transfer the loans to the unconsolidated

securitization VIEs that we sponsor. For additional information

about these VIEs, see the “Loan Sales and Securitization Activity”

section within this Note. Nonconforming mortgage loan

securitizations also include commercial mortgage loan

securitizations sponsored by third parties where we did not

originate or transfer the loans but serve as master servicer and

invest in securities that could be potentially significant to the

VIE.

Conforming loan securitization and resecuritization

transactions involving the GSEs and GNMA are excluded from

Table 16.4 because we are not the sponsor or we do not have

power over the activities most significant to the VIEs.

Additionally, due to the nature of the guarantees provided by the

GSEs and the FHA and VA, our credit risk associated with these

VIEs is limited. For additional information about conforming

mortgage loan securitizations and resecuritizations, see the

“Loan Sales and Securitization Activity” and “Resecuritization

Activities” sections within this Note.

COMMERCIAL REAL ESTATE LOANS We may transfer purchased

industrial development bonds and GSE credit enhancements to

VIEs in exchange for beneficial interests. We may also acquire

such beneficial interests in transactions where we do not act as a

transferor. We own all of the beneficial interests and may also

service the underlying mortgages that serve as collateral to the

bonds. The GSEs have the power to direct the servicing and

workout activities of the VIE in the event of a default, therefore

we do not have control over the key decisions of the VIEs.

OTHER VIE STRUCTURES We engage in various forms of

structured finance arrangements with other VIEs, including

asset-backed finance structures and other securitizations

collateralized by asset classes other than mortgages. Collateral

may include rental properties, asset-backed securities, student

loans and mortgage loans. We may participate in structuring or

marketing the arrangements as well as provide financing, service

one or more of the underlying assets, or enter into derivatives

with the VIEs. We may also receive fees for those services. We

are not the primary beneficiary of these structures because we

do not have power to direct the most significant activities of the

VIEs.

Table 16.4 provides a summary of our exposure to the

unconsolidated VIEs described above, which includes

investments in securities, loans, guarantees, liquidity

agreements, commitments and certain derivatives. We exclude

certain transactions with unconsolidated VIEs when our

continuing involvement is temporary or administrative in nature

or insignificant in size.

In Table 16.4, “Total VIE assets” represents the remaining

principal balance of assets held by unconsolidated VIEs using the

most current information available. “Carrying value” is the

amount in our consolidated balance sheet related to our

involvement with the unconsolidated VIEs. “Maximum exposure

to loss” is determined as the carrying value of our investment in

the VIEs excluding the unconditional repurchase options that

have not been exercised, plus the remaining undrawn liquidity

and lending commitments, the notional amount of net written

derivative contracts, and generally the notional amount of, or

stressed loss estimate for, other commitments and guarantees.

Debt, guarantees and other commitments include amounts

related to lending arrangements, liquidity agreements, and

certain loss sharing obligations associated with loans originated,

sold, and serviced under certain GSE programs.

“Maximum exposure to loss” represents estimated loss that

would be incurred under severe, hypothetical circumstances, for

which we believe the possibility is extremely remote, such as

where the value of our interests and any associated collateral

declines to zero, without any consideration of recovery or offset

from any economic hedges. Accordingly, this disclosure is not an

indication of expected loss.

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Table 16.4: Unconsolidated VIEs

Carrying value – asset (liability)

(in millions)

Total

VIE assets Loans

Debt

securities (1)

Equity

securities

All other

assets (2)

Debt and other

liabilities Net assets

December 31, 2022

Nonconforming mortgage loan securitizations

$ 154,464 — 2,420 — 617 (13) 3,024

Commercial real estate loans 5,627 5,611 — — 16 — 5,627

Other 2,174 292 1 43 21 — 357

Total $ 162,265 5,903 2,421 43 654 (13) 9,008

Maximum exposure to loss

Loans

Debt

securities (1)

Equity

securities

All other

assets (2)

Debt,

guarantees,

and other

commitments

Total

exposure

Nonconforming mortgage loan securitizations

$ — 2,420 — 617 13 3,050

Commercial real estate loans 5,611 — — 16 705 6,332

Other 292 1 43 21 228 585

Total $ 5,903 2,421 43 654 946 9,967

Carrying value – asset (liability)

(in millions)

Total

VIE assets Loans

Debt

securities (1)

Equity

securities

All other

assets (2)

Debt and other

liabilities Net assets

December 31, 2021

Nonconforming mortgage loan securitizations $ 146,482 — 2,620 — 694 — 3,314

Commercial real estate loans 5,489 5,481 — — 8 — 5,489

Other 3,196 531 3 62 49 (1) 644

Total $ 155,167 6,012 2,623 62 751 (1) 9,447

Maximum exposure to loss

Loans

Debt

securities (1)

Equity

securities

All other

assets (2)

Debt,

guarantees,

and other

commitments

Total

exposure

Nonconforming mortgage loan securitizations $ — 2,620

— 694 27 3,341

Commercial real estate loans 5,481 — — 8 710 6,199

Other 531 3 62 49 229 874

T

otal $ 6,012 2,623 62 751 966 10,414

(1) Includes $172 million and $352 million of securities classified as trading at December 31, 2022 and 2021, respectively.

(2) All other assets includes mortgage servicing rights, derivative assets, and other assets (predominantly servicing advances).

INVOLVEMENT WITH TAX CREDIT VIES In addition to the

unconsolidated VIEs in Table 16.4, we may invest in or provide

funding to affordable housing, renewable energy or similar

projects that are designed to generate a return primarily through

the realization of federal tax credits and other tax benefits. The

projects are typically managed by third-party sponsors who have

the power over the VIE’s assets, therefore, we do not consolidate

the VIEs. The carrying value of our equity investments in tax

credit VIEs was $18.7 billion and $17.0 billion at December 31,

2022 and 2021, respectively. We also had loans to tax credit VIEs

with a carrying value of $2.0 billion and $1.9 billion at

December 31, 2022 and 2021, respectively.

Our maximum exposure to loss for tax credit VIEs at

December 31, 2022 and 2021, was $28.0 billion and $24.7 billion,

respectively. Our maximum exposure to loss included total

unfunded equity and lending commitments of $7.3 billion and

$5.6 billion at December 31, 2022 and 2021, respectively. See

Note 17 (Guarantees and Other Commitments) for additional

information about unfunded capital commitments.

Our affordable housing equity investments qualify for the

low-income housing tax credit (LIHTC). For these investments

we are periodically required to provide additional financial

support during the investment period, or at the discretion of

project sponsors. A liability is recognized for unfunded

commitments that are both legally binding and probable of

funding. These commitments are predominantly funded within

three years of initial investment. Our liability for affordable

housing equity investment unfunded commitments was

$4.8 billion at December 31, 2022, and $4.9 billion at

December 31, 2021, and was included in long-term debt on our

consolidated balance sheet.

Table 16.5 summarizes the amortization of our LIHTC

investments and the related tax credits and other tax benefits

that are recognized in income tax expense/(benefit) on our

consolidated statement of income.

Table 16.5: LIHTC Investments

Year

ended

December

31,

(in millions) 2022

2021 2020

Proportional

amortization of investments $ 1,549

1,545

1,407

Tax credits and other tax benefits (1,834)

(1,783) (1,639)

Net expense/(benefit) recognized within income tax expense $ (285)

(238) (232)

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Note 16: Securitizations and Variable Interest Entities (continued)

Consolidated VIEs

We consolidate VIEs where we are the primary beneficiary. We

are the primary beneficiary of the following structure types:

COMMERCIAL AND INDUSTRIAL LOANS AND LEASES We may

securitize dealer floor plan loans in a revolving master trust

entity. As servicer and residual interest holder, we control the key

decisions of the trust and consolidate the entity. The total VIE

assets held by the master trust represent a majority of the total

VIE assets presented for this category in Table 16.6. In a separate

transaction structure, we may provide the majority of debt and

equity financing to an SPE that engages in lending and leasing to

specific vendors and service the underlying collateral.

OTHER VIE STRUCTURES Other VIEs are predominantly related to

municipal tender option bond (MTOB) transactions. MTOBs are

vehicles to finance the purchase of municipal bonds through the

issuance of short-term debt to investors. Our involvement with

MTOBs includes serving as the residual interest holder, which

provides control over the key decisions of the VIE, as well as the

remarketing agent or liquidity provider related to the debt issued

to investors. We may also securitize nonconforming mortgage

loans, in which our involvement includes servicer of the

underlying assets and holder of subordinate or senior securitie

s

issued by the VIE. During second quarter 2022, we purchased the

outstanding mortgage loans from the VIEs and extinguished the

related debt associated with such securitizations.

Table 16.6 presents a summary of financial assets and liabilities

of our consolidated VIEs. The carrying value represents assets

and liabilities recorded on our consolidated balance sheet. “Total

VIE assets” includes affiliate balances that are eliminated upon

consolidation, and therefore in some instances will differ from

the carrying value of assets.

On our consolidated balance sheet, we separately disclose

(1) the consolidated assets of certain VIEs that can only be used

to settle the liabilities of those VIEs, and (2) the consolidated

liabilities of certain VIEs for which the VIE creditors do not have

recourse to Wells Fargo.

Table 16.6: Transactions with Consolidated VIEs

Carrying value – asset (liability)

(in millions)

Total

VIE assets Loans

Debt

securities

All other

assets (1)

Long-term

debt

All other

liabilities (2)

December 31, 2022

Commercial and industrial loans and leases $ 7,148 4,802 — 190 — (129)

Other 72 — 71 1 — (72)

Total consolidated VIEs $ 7,220 4,802 71 191 — (201)

December 31, 2021

Commercial and industrial loans and leases $ 7,013 4,099 — 231 — (188)

Other 516 377 71 3 (149) (71)

Total consolidated VIEs $ 7,529 4,476 71 234 (149) (259)

(1) All other assets includes cash and due from banks, and other assets.

(2) All other liabilities includes short-term borrowings, and accrued expenses and other liabilities.

Other Transactions

In addition to the transactions included in the previous tables, we

have used wholly-owned trust preferred security VIEs to issue

debt securities or preferred equity exclusively to third-party

investors. As the sole assets of the VIEs are receivables from us,

we do not consolidate the VIEs even though we own all of the

voting equity shares of the VIEs, have fully guaranteed the

obligations of the VIEs, and may have the right to redeem the

third-party securities under certain circumstances. On our

consolidated balance sheet, we reported the debt securities

issued to the VIEs as long-term junior subordinated debt. See

Note 10 (Long-Term Debt) for additional information about the

trust preferred securities.

Wells Fargo & Company 162



Note 17: Guarantees and Other Commitments

Guarantees are contracts that contingently require us to make

payments to a guaranteed party based on an event or a change i n

an underlying asset, liability, rate or index. Table 17.1 shows

carrying value and maximum exposure to loss on our guarantees.

Table 17.1: Guarantees – C arrying Va lue a nd Maximum Expo sure to Loss

Maximum exposure to loss

(in millions)

Carrying

value of

obligation

Expires in one

year or less

Expires after

one year

through three

years

Expires after

three years

through five

years

Expires after

five years Total 

Non-

investment

grade

December 31, 2022

Standby letters of credit (1) $ 112 14,014 4,694 3,058 53 21,819 7,071

Direct pay letters of credit (1) 13 1,593 2,734 465 5 4,797 1,283

Loans and LHFS sold with recourse (2) 16 322 1,078 3,408 8,906 13,714 11,399

Exchange and clearing house guarantees (3) — 4,623 — — — 4,623 —

Other guarantees and indemnifications (4) — 548 1 10 201 760 515

Total guarantees $ 141 21,100 8,507 6,941 9,165 45,713 20,268

December 31, 2021

Standby letters of credit (1) $ 119 13,816 5,260 1,572 460 21,108 6,939

Direct pay letters of credit (1) 6 1,597 2,137 1,283 4 5,021 1,373

Loans and LHFS sold with recourse (2) 20 71 943 3,610 8,650 13,274 11,268

Exchange and clearing house guarantees (3) — — — — 8,100 8,100 —

Other guarantees and indemnifications (4) — 797 2 12 263 1,074 756

Total guarantees $ 145 16,281 8,342 6,477 17,477 48,577 20,336



(1) Standby and direct pay letters of credit are reported net of syndications and participations.

(2) Represents recourse provided, predominantly to the GSEs, on loans sold under various programs and arrangements.

(3) In 2022, we changed our presentation for maximum exposure to loss for these guarantees. As the agreements that include these guarantees automatically renew annually, we believe presentation of

these amounts within the expires in one year or less category better aligns with the committed term.

(4) Includes indemnifications provided to certain third-party clearing agents. Estimated maximum exposure to loss was $157 million and $216 million with related collateral of $1.3 billion and $2.3 billion

as of December 31, 2022 and 2021, respectively.

Maximum exposure to loss represents the estimated loss

that would be incurred under an assumed hypothetical

circumstance, despite what we believe is a remote possibility,

where the value of our interests and any associated collateral

declines to zero. Maximum exposure to loss estimates in

Table 17.1 do not reflect economic hedges or collateral we could

use to offset or recover losses we may incur under our guarantee

agreements. Accordingly, these amounts are not an indication of

expected loss. We believe the carrying value is more

representative of our current exposure to loss than maximum

exposure to loss. The carrying value represents the fair value of

the guarantee, if any, and also includes an ACL for guarantees, if

applicable. In determining the ACL for guarantees, we consider

the credit risk of the related contingent obligation.

For our guarantees in Table 17.1, non-investment grade

represents those guarantees on which we have a higher risk of

performance under the terms of the guarantee, which is

determined based on an external rating or an internal credit

grade that is below investment grade.

STANDBY LETTERS OF CREDIT We issue standby letters of credit,

which include performance and financial guarantees, for

customers in connection with contracts between our customers

and third parties. Standby letters of credit are conditional lending

commitments where we are obligated to make payment to a

third party on behalf of a customer if the customer fails to meet

their contractual obligations. Total maximum exposure to loss

includes the portion of multipurpose lending facilities for which

we have issued standby letters of credit under the commitments.

DIRECT PAY LETTERS OF CREDIT We issue direct pay letters of

credit to serve as credit enhancements for certain bond

issuances. Beneficiaries (bond trustees) may draw upon these

instruments to make scheduled principal and interest payments,

redeem all outstanding bonds because a default event has

occurred, or for other reasons as permitted by the agreement.

WRITTEN OPTIONS We enter into written foreign currency

options and over-the-counter written equity put options that are

derivative contracts that have the characteristics of a guarantee.

Written put options give the counterparty the right to sell to us

an underlying instrument held by the counterparty at a specified

price by a specified date. While these derivative transactions

expose us to risk if the option is exercised, we manage this risk by

entering into offsetting trades or by taking short positions in the

underlying instrument. We offset market risk related to options

written to customers with cash securities or other offsetting

derivative transactions. Additionally, for certain of these

contracts, we require the counterparty to pledge the underlying

instrument as collateral for the transaction. Our ultimate

obligation under written options is based on future market

conditions and is only quantifiable at settlement. The fair value of

written options represents our view of the probability that we

will be required to perform under the contract. The fair value of

these written options was a liability of $15 million, and an asset

of $280 million at December 31, 2022 and 2021, respectively.

The fair value may be an asset as a result of deferred premiums

on certain option trades. The maximum exposure to loss

represents the notional value of these derivative contracts. At

December 31, 2022, the maximum exposure to loss was

$23.4 billion, with $21.3 billion expiring in three years or less

compared with $17.2 billion and $16.7 billion, respectively, at

December 31, 2021. See Note 14 (Derivatives) for additional

information regarding written derivative contracts.

Wells Fargo & Company 163



Note 17: Guarantees and Other Commitments (continued)

LOANS AND LHFS SOLD WITH RECOURSE In certain sales and

securitizations of loans, including mortgage loans, we provide

recourse to the buyer whereby we are required to indemnify the

buyer for any loss on the loan up to par value plus accrued

interest. We provide recourse, predominantly to GSEs, on loans

sold under various programs and arrangements. Substantially all

of these programs and arrangements require that we share in the

loans’ credit exposure for their remaining life by providing

recourse to the GSE, up to 33.33% of actual losses incurred on a

pro-rata basis in the event of borrower default. Under the

remaining recourse programs and arrangements, if certain

events occur within a specified period of time from transfer date,

we have to provide limited recourse to the buyer to indemnify

them for losses incurred for the remaining life of the loans. The

maximum exposure to loss reported in Table 17.1 represents the

outstanding principal balance of the loans sold or securitized that

are subject to recourse provisions or the maximum losses per the

contractual agreements. However, we believe the likelihood of

loss of the entire balance due to these recourse agreements is

remote, and amounts paid can be recovered in whole or in part

from the sale of collateral. We also provide representation and

warranty guarantees on loans sold under the various recourse

programs and arrangements. Our loss exposure relative to these

guarantees is separately considered and provided for, as

necessary, in determination of our liability for loan repurchases

due to breaches of representation and warranties.

EXCHANGE AND CLEARING HOUSE GUARANTEES We are members

of several securities and derivatives exchanges and clearing

houses, both in the U.S. and in countries outside the U.S., that we

use to clear our trades and those of our customers. It is common

that all members in these organizations are required to

collectively guarantee the performance of other members and of

the organization. Our obligations under the guarantees are

generally a pro-rata share based on either a fixed amount or a

multiple of the guarantee fund we are required to maintain with

these organizations. Some membership rules require members

to assume a pro-rata share of losses resulting from another

member’s default or from non-member default losses after

applying the guarantee fund. We have not recorded a liability for

these arrangements as of the dates presented in Table 17.1

because we believe the likelihood of loss is remote.

OTHER GUARANTEES AND INDEMNIFICATIONS We have

contingent performance arrangements related to various

customer relationships and lease transactions. We are required

to pay the counterparties to these agreements if third parties

default on certain obligations.

Under certain factoring arrangements, we may be required

to purchase trade receivables from third parties, if receivable

debtors default on their payment obligations.

We use certain third-party clearing agents to clear and settle

transactions on behalf of some of our institutional brokerage

customers. We indemnify the clearing agents against loss that

could occur for non-performance by our customers on

transactions that are not sufficiently collateralized. Transactions

subject to the indemnifications may include customer obligations

related to the settlement of margin accounts and short

positions, such as written call options and securities borrowing

transactions.

We enter into other types of indemnification agreements in

the ordinary course of business under which we agree to

indemnify third parties against any damages, losses and

expenses incurred in connection with legal and other proceedings

arising from relationships or transactions with us. These

relationships or transactions include those arising from service as

a director or officer of the Company, underwriting agreements

relating to our securities, acquisition agreements and various

other business transactions or arrangements. Because the extent

of our obligations under these agreements depends entirely

upon the occurrence of future events, we are unable to

determine our potential future liability under these agreements.

We do, however, record a liability for residential mortgage loans

that we expect to repurchase pursuant to various

representations and warranties.

MERCHANT PROCESSING SERVICES We provide debit and credit

card transaction processing services through payment networks

directly for merchants and as a sponsor for merchant processing

servicers, including our joint venture with a third party that is

accounted for as an equity method investment. In our role as the

merchant acquiring bank, we have a potential obligation in

connection with payment and delivery disputes between the

merchant and the cardholder that are resolved in favor of the

cardholder, referred to as a charge-back transaction. If we are

unable to collect the amounts from the merchant, we incur a loss

for the refund to the cardholder. We are secondarily obligated to

make a refund for transactions involving sponsored merchant

processing servicers. We generally have a low likelihood of loss in

connection with our merchant processing services because most

products and services are delivered when purchased and

amounts are generally refunded when items are returned to the

merchant. In addition, we may reduce our risk in connection with

these transactions by withholding future payments and requiring

cash or other collateral. We estimate our potential maximum

exposure to be the total merchant transaction volume processed

in the preceding four months, which is generally the lifecycle for a

charge-back transaction. As of December 31, 2022, our potential

maximum exposure was approximately $759.6 billion, and

related losses, including those from our joint venture entity, were

insignificant.

GUARANTEES OF SUBSIDIARIES In the normal course of business,

the Parent may provide counterparties with guarantees related

to its subsidiaries’ obligations. These obligations are included in

the Company’s consolidated balance sheet or are reflected as

off-balance sheet commitments, and therefore, the Parent has

not recognized a separate liability for these guarantees. The

Parent fully and unconditionally guarantees the payment of

principal, interest, and any other amounts that may be due on

securities that its 100% owned finance subsidiary, Wells Fargo

Finance LLC, may issue. These securities are not guaranteed by

any other subsidiary of the Parent. The guaranteed liabilities

were $948 million and $1.2 billion at December 31, 2022 and

2021, respectively. These guarantees rank on parity with all of

the Parent’s other unsecured and unsubordinated indebtedness.

The assets of the Parent consist primarily of equity in its

subsidiaries, and the Parent is a separate and distinct legal entity

from its subsidiaries. As a result, the Parent’s ability to address

claims of holders of these debt securities against the Parent

under the guarantee depends on the Parent’s receipt of

dividends, loan payments and other funds from its subsidiaries. If

any of the Parent’s subsidiaries becomes insolvent, the direct

creditors of that subsidiary will have a prior claim on that

subsidiary’s assets. The rights of the Parent and the rights of the

Parent’s creditors will be subject to that prior claim unless the

Parent is also a direct creditor of that subsidiary. For additional

information regarding other restrictions on the Parent’s ability to

receive dividends, loan payments and other funds from its

Wells Fargo & Company 164



 

subsidiaries, see Note 25 (Regulatory Capital Requirements and

Other Restrictions.

OTHER COMMITMENTS To meet the financing needs of our

customers, we may enter into commitments to purchase debt

and equity securities to provide capital for their funding, liquidity

or other future needs. As of December 31, 2022 and 2021, we

had commitments to purchase debt securities of $100 million

and $18 million and commitments to purchase equity securities

of $3.8 billion and $2.4 billion, respectively.

As part of maintaining our memberships in certain clearing

organizations, we are required to stand ready to provide liquidity

to sustain market clearing activity in the event unforeseen

events occur or are deemed likely to occur. Certain of these

obligations are guarantees of other members’ performance and

accordingly are included in Table 17.1 in Other guarantees and

indemnifications.

We have commitments to enter into resale and securities

borrowing agreements as well as repurchase and securities

lending agreements with certain counterparties, including central

clearing organizations. The amount of our unfunded contractual

commitments for resale and securities borrowing agreements

was $19.9 billion and $11.0 billion as of December 31, 2022 and

2021, respectively. The amount of our unfunded contractual

commitments for repurchase and securities lending agreements

was $1.6 billion and $1.3 billion as of December 31, 2022 and

2021, respectively.

Given the nature of these commitments, they are excluded

from Table 5.4 (Unfunded Credit Commitments) in Note 5

(Loans and Related Allowance for Credit Losses).

Wells Fargo & Company 165



Note 18: Pledged Assets and Collateral

Pledged Assets

Table 18.1 provides the carrying amount of on-balance sheet

pledged assets as well as the fair value of other pledged collateral

not recognized on our consolidated balance sheet, which we have

received from third parties, have the right to repledge and have

repledged. These amounts include assets pledged in transactions

accounted for as secured borrowings, which are presented

parenthetically on our consolidated balance sheet.

TRADING RELATED ACTIVITY Our trading businesses may pledge

debt and equity securities in connection with securities sold

under agreements to repurchase (repurchase agreements) and

securities lending arrangements. The collateral that we pledge

related to our trading activities may include our own collateral as

well as collateral that we have received from third parties and

have the right to repledge. All of the collateral we pledge related

to trading activity is eligible to be repledged or sold by the

secured party.

NON-TRADING RELATED ACTIVITY As part of our liquidity

management strategy, we may pledge loans, debt securities, and

other financial assets to secure trust and public deposits,

borrowings and letters of credit from Federal Home Loan Banks

(FHLBs) and the Board of Governors of the Federal Reserve

System (FRB) and for other purposes as required or permitted by

law or insurance statutory requirements. Substantially all of the

non-trading activity pledged collateral is not eligible to be

repledged or sold by the secured party.

VIE RELATED We pledge assets in connection with various types

of transactions entered into with VIEs. These pledged assets can

only be used to settle the liabilities of those entities.

We also have loans recorded on our consolidated balance

sheet which represent certain delinquent loans that are eligible

for repurchase from GNMA loan securitizations. See Note 16

(Securitizations and Variable Interest Entities) for additional

information on consolidated VIE assets.

Table 18.1: Pledged Assets

(in millions)

Dec 31,

2022

Dec 31,

2021

Related to trading activities:

Off-balance sheet repledged third-party owned debt and equity securities $ 38,191 31,087

Trading debt securities and other 28,284 14,216

Equity securities 1,477 984

Total pledged assets related to trading activities 67,952 46,287

Related to non-trading activities:

Loans 344,000 288,698

Debt securities:

Available-for-sale 50,538 65,198

Held-to-maturity 17,477 13,843

Equity securities 141 1,600

Total pledged assets related to non-trading activities 412,156 369,339

Related to VIEs:

Consolidated VIE assets 5,064 4,781

Loans eligible for repurchase from GNMA securitizations 749 109

Total pledged assets related to VIEs 5,813 4,890

Total pledged assets $ 485,921 420,516

Securities and Other Collateralized Financing Activities

We enter into resale and repurchase agreements and securities

borrowing and lending agreements (collectively, “securities

financing activities”) typically to finance trading positions

(including securities and derivatives), acquire securities to c over

short trading positions, accommodate customers’ financing

needs, and settle other securities obligations. These activitie s are

conducted through our broker-dealer subsidiaries and, to a less er

extent, through other bank entities. Our securities financing

activities primarily involve high-quality, liquid securities such as

U.S. Treasury securities and government agency securities and,

to a lesser extent, less liquid securities, including equity

securities, corporate bonds and asset-backed securities. We

account for these transactions as collateralized financings in

which we typically receive or pledge securities as collateral. We

believe these financing transactions generally do not have

material credit risk given the collateral provided and the rela ted

monitoring processes. We also enter into resale agreements

involving collateral other than securities, such as loans, as part of

our commercial lending business activities.

OFFSETTING OF SECURITIES AND OTHER COLLATERALIZED

FINANCING ACTIVITIES Table 18.2 presents resale and repurchase

agreements subject to master repurchase agreements (MRA)

and securities borrowing and lending agreements subject to

master securities lending agreements (MSLA). Where legally

enforceable, these master netting arrangements give the ability,

in the event of default by the counterparty, to liquidate securities

held as collateral and to offset receivables and payables with the

same counterparty. Collateralized financings, and those with a

single counterparty, are presented net on our consolidated

balance sheet, provided certain criteria are met that permit

balance sheet netting. The majority of transactions subject to

these agreements do not meet those criteria and thus are not

eligible for balance sheet netting.

Collateral we pledged consists of non-cash instruments,

such as securities or loans, and is not netted on our consolidated

Wells Fargo & Company 166



balance sheet against the related liability. Collateral we rece ived

includes securities or loans and is not recognized on our

consolidated balance sheet. Collateral pledged or received may

be increased or decreased over time to maintain certain

contractual thresholds, as the assets underlying each

arrangement fluctuate in value. Generally, these agreements

require collateral to exceed the asset or liability recognized on

the balance sheet. The following table includes the amount of

collateral pledged or received related to exposures subject to

enforceable MRAs or MSLAs. While these agreements are

typically over-collateralized, U.S. GAAP requires disclosure i n this

table to limit the reported amount of such collateral to the

amount of the related recognized asset or liability for each 

counterparty.

In addition to the amounts included in Table 18.2 , we also

have balance sheet netting related to derivatives that is discl osed

in Note 14 (Derivatives).

Table 18.2: Offsetting – Securities and Other Collateralized Financing Activities

(in millions)

Dec 31,

2022

Dec 31,

2021

Assets:

Resale and securities borrowing agreements

Gross amounts recognized $

114,729

103,140

Gross amounts offset in consolidated balance sheet (1) (24,464) (14,074)

Net amounts in consolidated balance sheet (2) 90,265 89,066

Collateral not recognized in consolidated balance sheet

(3) (89,592) (88,330)

Net amount (4) $

673

736

Liabilities:

Repurchase and securities lending agreements

Gross amounts recognized $

55,054

35,043

Gross amounts offset in consolidated balance sheet

(1) (24,464) (14,074)

Net amounts in consolidated balance sheet

(5) 30,590 20,969

Collateral pledged but not netted in consolidated balance sheet (6) (30,383) (20,820)

Net amount (4) $

207

149

(1) Represents recognized amount of resale and repurchase agreements with counterparties subject to enforceable MRAs that have been offset in our consolidated balance sheet.

(2) Includes $68.0 billion and $66.2 billion classified on our consolidated balance sheet in federal funds sold and securities purchased under resale agreements at December 31, 2022 and 2021,

respectively. Also includes $22.3 billion and $22.9 billion classified on our consolidated balance sheet in loans at December 31, 2022 and 2021, respectively.

(3) Represents the fair value of collateral we have received under enforceable MRAs or MSLAs, limited in the table above to the amount of the recognized asset due from each counterparty. At

December 31, 2022 and 2021, we have received total collateral with a fair value of $136.6 billion and $124.4 billion, respectively, all of which we have the right to sell or repledge. These amounts

include securities we have sold or repledged to others with a fair value of $59.1 billion and $28.8 billion at December 31, 2022 and 2021, respectively.

(4) Represents the amount of our exposure (assets) or obligation (liabilities) that is not collateralized and/or is not subject to an enforceable MRA or MSLA.

(5) Amount is classified in short-term borrowings on our consolidated balance sheet.

(6) Represents the fair value of collateral we have pledged, related to enforceable MRAs or MSLAs, limited in the table above to the amount of the recognized liability owed to each counterparty. At

December 31, 2022 and 2021, we have pledged total collateral with a fair value of $56.3 billion and $35.9 billion, respectively, substantially all of which may be sold or repledged by the counterparty.

REPURCHASE AND S ECURITIES LENDING AGREEMENTS Securities

sold under repurchase agreements and securities lending

arrangements are effectively short-term collateralized

borrowings. In these transactions, we receive cash in exchange

for transferring securities as collateral and recognize an

obligation to reacquire the securities for cash at the transact ion’s

maturity. These types of transactions create risks, including

(1) the counterparty may fail to return the securities at maturity ,

(2) the fair value of the securities transferred may decline below

the amount of our obligation to reacquire the securities, and

therefore create an obligation for us to pledge additional

amounts, and (3) the counterparty may accelerate the maturity

on demand, requiring us to reacquire the security prior to

contractual maturity. We attempt to mitigate these risks in

various ways. Our collateral primarily consists of highly liquid

securities. In addition, we underwrite and monitor the financia l

strength of our counterparties, monitor the fair value of

collateral pledged relative to contractually required repurchas e

amounts, and monitor that our collateral is properly returned

through the clearing and settlement process in advance of our

cash repayment. Table 18.3 provides the gross amounts

recognized on our consolidated balance sheet (before the effect s

of offsetting) of our liabilities for repurchase and securitie s

lending agreements disaggregated by underlying collateral type .

Wells Fargo & Company 167

 Note 18: Pledged Assets and Collateral (continued)

Table 18.3: Gross Obligations by Underlying Collateral Type

(in millions)

Dec 31,

2022

Dec 31,

2021

Repurchase agreements:

Securities of U.S. Treasury and federal agencies $ 27,857 14,956

Securities of U.S. States and political subdivisions 83 1

Federal agency mortgage-backed securities 8,386 3,432

Non-agency mortgage-backed securities 682 809

Corporate debt securities 6,541 8,899

Asset-backed securities 1,529 358

Equity securities 711 919

Other 300 409

Total repurchases 46,089 29,783

Securities lending arrangements:

Securities of U.S. Treasury and federal agencies 278 33

Federal agency mortgage-backed securities 58 17

Corporate debt securities 206 80

Equity securities (1) 8,356 5,050

Other 67 80

Total securities lending 8,965 5,260

Total repurchases and securities lending $ 55,054 35,043

(1) Equity securities are generally exchange traded and represent collateral received from third parties that has been repledged. We received the collateral through either margin lending agreements or

contemporaneous securities borrowing transactions with other counterparties.

Table 18.4 provides the contractual maturities of our gross

obligations under repurchase and securities lending agreements.

Table 18.4: Contractual Maturities of Gross Obligations

(in millions)

Overnight/

continuous Up to 30 days 30-90 days >90 days

Total gross

obligation

December 31, 2022

Repurchase agreements $ 36,251 734 2,884 6,220 46,089

Securities lending arrangements 8,965 — — — 8,965

Total repu rchases and secu rities lending (1) $ 45,216 734 2,884 6,220 55,054

December 31, 2021

Repurchase agreements $ 16,452 3,570 4,276 5,485 29,783

Securities lending arrangements 4,810 — — 450 5,260

Total repurchases and securities lending (1) $ 21,262 3,570 4,276 5,935 35,043

(1) Securities lending is executed under agreements that allow either party to terminate the transaction without notice, while repurchase agreements have a term structure to them that technically

matures at a point in time. The overnight/continuous repurchase agreements require election of both parties to roll the trade rather than the election to terminate the arrangement as in securities

lending.

Wells Fargo & Company 168



Note 19: Operating Segments

Our management reporting is organized into four reportable

operating segments: Consumer Banking and Lending;

Commercial Banking; Corporate and Investment Banking; and

Wealth and Investment Management. All other business

activities that are not included in the reportable operating

segments have been included in Corporate. We define our

reportable operating segments by type of product and customer

segment, and their results are based on our management

reporting process. The management reporting process measures

the performance of the reportable operating segments based on

the Company’s management structure, and the results are

regularly reviewed with our Chief Executive Officer and relevant

senior management. The management reporting process is

based on U.S. GAAP and includes specific adjustments, such as

funds transfer pricing for asset/liability management, shared

revenue and expenses, and taxable-equivalent adjustments to

consistently reflect income from taxable and tax-exempt

sources, which allows management to assess performance

consistently across the operating segments.

Consumer Banking and Lending offers diversified financial

products and services for consumers and small businesses with

annual sales generally up to $10 million. These financial products

and services include checking and savings accounts, credit and

debit cards as well as home, auto, personal, and small business

lending.

Commercial Banking provides financial solutions to private,

family owned and certain public companies. Products and

services include banking and credit products across multiple

industry sectors and municipalities, secured lending and lease

products, and treasury management.

Corporate and Investment Banking delivers a suite of capital

markets, banking, and financial products and services to

corporate, commercial real estate, government and institutional

clients globally. Products and services include corporate banking,

investment banking, treasury management, commercial real

estate lending and servicing, equity and fixed income solutions as

well as sales, trading, and research capabilities.

Wealth and Investment Management provides personalized

wealth management, brokerage, financial planning, lending,

private banking, trust and fiduciary products and services to

affluent, high-net worth and ultra-high-net worth clients. We

operate through financial advisors in our brokerage and wealth

offices, consumer bank branches, independent offices, and

digitally through WellsTrade® and Intuitive Investor®.

Corporate includes corporate treasury and enterprise functions,

net of allocations (including funds transfer pricing, capital,

liquidity and certain expenses), in support of the reportable

operating segments as well as our investment portfolio and

affiliated venture capital and private equity businesses. In

addition, Corporate includes all restructuring charges related to

our efficiency initiatives. See Note 20 (Revenue and Expenses)

for additional information on restructuring charges. Corporate

also includes certain lines of business that management has

determined are no longer consistent with the long-term

strategic goals of the Company as well as results for previously

divested businesses.

Basis of Presentation

FUNDS TRANSFER PRICING Corporate treasury manages a funds

transfer pricing methodology that considers interest rate risk,

liquidity risk, and other product characteristics. Operating

segments pay a funding charge for their assets and receive a

funding credit for their deposits, both of which are included in

net interest income. The net impact of the funding charges or

credits is recognized in corporate treasury.

REVENUE AND EXPENSE SHARING When lines of business jointly

serve customers, the line of business that is responsible for

providing the product or service recognizes revenue or expense

with a referral fee paid or an allocation of cost to the other line of

business based on established internal revenue-sharing

agreements.

When a line of business uses a service provided by another

line of business or enterprise function (included in Corporate),

expense is generally allocated based on the cost and use of the

service provided.

TAXABLE-EQUIVALENT ADJUSTMENTS Taxable-equivalent

adjustments related to tax-exempt income on certain loans and

debt securities are included in net interest income, while taxable-

equivalent adjustments related to income tax credits for low-

income housing and renewable energy investments are included

in noninterest income, in each case with corresponding impacts

to income tax expense (benefit). Adjustments are included in

Corporate, Commercial Banking, and Corporate and Investment

Banking and are eliminated to reconcile to the Company’s

consolidated financial results.

Wells Fargo & Company 169

Note 19: Operating Segments (continued)

Table 19.1 presents our results by operating segment.

Table 19.1: Operating Segments

(in millions)

Consumer

Banking and

Lending

Commercial

Banking

Corporate and

Investment

Banking

Wealth and

Investment

Management Corporate

Reconciling

Items (1)

Consolidated

Company

Year ended December 31, 2022

Net interest income (2)  $ 27,044 7,289 8,733 3,927 (1,607) (436) 44,950

Noninterest income 8,766 3,631 6,509 10,895 609 (1,575) 28,835

Total revenue 35,810 10,920 15,242 14,822 (998) (2,011) 73,785

Provision for credit losses 2,276 (534) (185) (25) 2 — 1,534

Noninterest expense 26,277 6,058 7,560 11,613 5,774 — 57,282

Income (loss) before income tax expense

(benefit) 7,257 5,396 7,867 3,234 (6,774) (2,011) 14,969

Income tax expense (benefit) 1,816 1,366 1,989 812 (1,885) (2,011) 2,087

Net income (loss) before noncontrolling interests 5,441 4,030 5,878 2,422 (4,889) — 12,882

Less: Net income (loss) from noncontrolling

interests — 12 — — (312) — (300)

Net income (loss) $ 5,441 4,018 5,878 2,422 (4,577) — 13,182

Year ended December 31, 2021

Net interest income (2) $ 22,807 4,960 7,410 2,570 (1,541) (427) 35,779

Noninterest income 12,070 3,589 6,429 11,776 10,036 (1,187) 42,713

Total revenue 34,877 8,549 13,839 14,346 8,495 (1,614) 78,492

Provision for credit losses (1,178) (1,500) (1,439) (95) 57 — (4,155)

Noninterest expense 24,648 5,862 7,200 11,734 4,387 — 53,831

Income (loss) before income tax expense (benefit)

11,407 4,187 8,078 2,707 4,051 (1,614) 28,816

Income tax expense (benefit) 2,852 1,045 2,019 680 596 (1,614) 5,578

Net income before noncontrolling interests 8,555 3,142 6,059 2,027 3,455 — 23,238

Less: Net income (loss) from noncontrolling

interests — 8 (3) — 1,685 — 1,690

Net income $ 8,555 3,134 6,062 2,027 1,770 — 21,548

Year ended December 31, 2020

Net interest income

(2) $ 23,378 6,134 7,509 2,988 441 (494) 39,956

Noninterest income 10,638 3,041 6,419 10,225 4,916 (931) 34,308

Total revenue 34,016 9,175 13,928 13,213 5,357 (1,425) 74,264

Provision for credit losses 5,662 3,744 4,946 249 (472) — 14,129

Noninterest expense 26,976 6,323 7,703 10,912 5,716 — 57,630

Income (loss) before income tax expense (benefit) 1,378 (892) 1,279 2,052 113 (1,425) 2,505

Income tax expense (benefit) 302 (208) 330 514 (670) (1,425) (1,157)

Net income (loss) before noncontrolling interests 1,076 (684) 949 1,538 783 — 3,662

Less: Net income (loss) from noncontrolling

interests — 5 (1) — 281 — 285

Net income (loss) $ 1,076 (689) 950 1,538 502 — 3,377

Year ended December 31, 2022

Loans (average) $ 332,433 206,032 296,984 85,228 9,143 — 929,820

Assets (average) 379,213 227,935 557,396 91,748

638,017 — 1,894,309

Deposits (average) 883,130 186,079 161,720 164,883 28,457 — 1,424,269

Loans (period-end) 340,529 223,529 298,377 84,273 9,163 — 955,871

Assets (period-end) 387,710 250,198 550,177 91,717 601,214 — 1,881,016

Deposits (period-end) 859,695 173,942 157,217 138,760 54,371 — 1,383,985

Year ended December 31, 2021

Loans (average) $ 333,885 181,237 257,036 82,364 9,766 — 864,288

Assets (average) 388,208 198,761 523,344 88,503 743,089 — 1,941,905

Deposits (average) 834,739 197,269 189,176 176,562 40,066 — 1,437,812

Loans (period-end) 326,574 190,348 284,374 84,101 9,997 — 895,394

Assets (period-end) 378,620 210,810 546,549 90,754 721,335 — 1,948,068

Deposits (period-end) 883,674 205,428 168,609 192,548 32,220 — 1,482,479

(1) Taxable-equivalent adjustments related to tax-exempt income on certain loans and debt securities are included in net interest income, while taxable-equivalent adjustments related to income tax

credits for low-income housing and renewable energy investments are included in noninterest income, in each case with corresponding impacts to income tax expense (benefit). Adjustments are

included in Corporate, Commercial Banking, and Corporate and Investment Banking and are eliminated to reconcile to the Company’s consolidated financial results.

(2) Net interest income is interest earned on assets minus the interest paid on liabilities to fund those assets. Segment interest earned includes actual interest income on segment assets as well as a

funding credit for their deposits. Segment interest paid on liabilities includes actual interest expense on segment liabilities as well as a funding charge for their assets.

Wells Fargo & Company 170

Note 20: Revenue and Expenses

Revenue

Our revenue includes net interest income on financial

instruments and noninterest income. Table 20.1 presents our

revenue by operating segment. For additional description of ou r

operating segments, including additional financial information

and the underlying management accounting process, see

Note 19 (Operating Segments ).

Table 20.1: Revenue by Opera ting S egment

(in millions)

Consumer

Banking and

Lending

Commercial

Banking

Corporate and

Investment

Banking

Wealth and

Investment

Management Corporate

Reconciling

Items (1)

Consolidated

Company

Year ended December 31, 2022

Net interest income (2) $ 27,044 7,289 8,733 3,927 (1,607) (436) 44,950

Noninterest income:

Deposit-related fees 3,093 1,131 1,068 24 — — 5,316

Lending-related fees (2) 129 491 769 8 — — 1,397

Investment advisory and other asset-based fees (3) — 42 107 8,847 8 — 9,004

Commissions and brokerage services fees — — 311 1,931 — — 2,242

Investment banking fees (3) 60 1,492 — (110) — 1,439

Card fees:

Card interchange and network revenue (4) 3,590 224 60 4 — — 3,878

Other card fees (2) 477 — — — — — 477

Total card fees 4,067 224 60 4 — — 4,355

Mortgage banking (2) 1,100 — 296 (12) (1) — 1,383

Net gains (losses) from trading activities (2) — (6) 1,886 58 178 — 2,116

Net gains from debt securities (2) — 5 — — 146 — 151

Net gains (losses) from equity securities (2) (5) 64 (5) (2) (858) — (806)

Lease income (2) — 710 15 — 544 — 1,269

Other (2) 385 910 510 37 702 (1,575) 969

Total noninterest income 8,766 3,631 6,509 10,895 609 (1,575) 28,835

Total revenue $ 35,810 10,920 15,242 14,822 (998) (2,011) 73,785

Year ended December 31, 2021

Net interest income (2) $ 22,807 4,960 7,410 2,570 (1,541) (427) 35,779

Noninterest income:

Deposit-related fees 3,045 1,285 1,112 28 5 — 5,475

Lending-related fees (2) 145 532 761 8 (1) — 1,445

Investment advisory and other asset-based fees (3) — 10 52 9,574 1,375 — 11,011

Commissions and brokerage services fees — — 290 2,010 (1) — 2,299

Investment banking fees (11) 53 2,405 1 (94) — 2,354

Card fees:

Card interchange and network revenue (4) 3,426 196 45 4 — — 3,671

Other card fees (2) 504 — — — — — 504

Total card fees 3,930 196 45 4 — — 4,175

Mortgage banking (2) 4,490 — 480 (12) (2) — 4,956

Net gains (losses) from trading activities (2) — — 272 21 (9) — 284

Net gains from debt securities (2) — 44 — — 509 — 553

Net gains (losses) from equity securities (2) (2) 132 289 79 5,929 — 6,427

Lease income (2) — 682 33 — 281 — 996

Other (2) 473 655 690 63 2,044 (1,187) 2,738

Total noninterest income 12,070 3,589 6,429 11,776 10,036 (1,187) 42,713

Total revenue $ 34,877 8,549 13,839 14,346 8,495 (1,614) 78,492

Year ended December 31, 2020

Net interest income (2) $ 23,378 6,134 7,509 2,988 441 (494) 39,956

Noninterest income:

Deposit-related fees 2,904 1,219 1,062 27 9 — 5,221

Lending-related fees (2) 158 531 684 9 (1) — 1,381

Investment advisory and other asset-based fees (3) — 32 95 8,085 1,651 — 9,863

Commissions and brokerage services fees — — 315 2,078 (9) — 2,384

Investment banking fees (8) 76 1,952 14 (169) — 1,865

Card fees:

Card interchange and network revenue (4) 2,805 170 51 3 1 — 3,030

Other card fees (2) 513 — — — 1 — 514

Total card fees 3,318 170 51 3 2 — 3,544

Mortgage banking (2) 3,224 — 282 (13) — — 3,493

Net gains (losses) from trading activities (2) 1 (4) 1,190 25 (40) — 1,172

Net gains from debt securities (2) 6 — — — 867 — 873

Net gains (losses) from equity securities (2) 10 (147) 212 (101) 691 — 665

Lease income (2) — 646 20 — 579 — 1,245

Other (2) 1,025 518 556 98 1,336 (931) 2,602

Total noninterest income 10,638 3,041 6,419 10,225 4,916 (931) 34,308

Total revenue $ 34,016 9,175 13,928 13,213 5,357 (1,425) 74,264



(1) Taxable-equivalent adjustments related to tax-exempt income on certain loans and debt securities are included in net interest income, while taxable-equivalent adjustments related to income tax

credits for low-income housing and renewable energy investments are included in noninterest income, in each case with corresponding impacts to income tax expense (benefit). Adjustments are

included in Corporate, Commercial Banking, and Corporate and Investment Banking and are eliminated to reconcile to the Company’s consolidated financial results.

(2) These revenue types are related to financial assets and liabilities, including loans, leases, securities and derivatives, with additional details included in other footnotes to our financial statements.

(3) We earned trailing commissions of $989 million, $1.2 billion, and $1.1 billion for the years ended December 31, 2022, 2021 and 2020, respectively.

(4) The cost of credit card rewards and rebates of $2.2 billion, $1.6 billion and $1.3 billion for the years ended December 31, 2022, 2021 and 2020, respectively, are presented net against the related

revenue.

Wells Fargo & Company 171



Note 20: Revenue and Expenses (continued)

We provide services to customers which have related

performance obligations that we complete to recognize revenue.

Our revenue is generally recognized either immediately upon the

completion of our service or over time as we perform services.

Any services performed over time generally require that we

render services each period and therefore we measure our

progress in completing these services based upon the passage of

time.

DEPOSIT-RELATED FEES are earned in connection with depository

accounts for commercial and consumer customers and include

fees for account charges, overdraft services, cash network fees,

wire transfer and other remittance fees, and safe deposit box

fees. Account charges include fees for periodic account

maintenance activities and event-driven services such as stop

payment fees. Our obligation for event-driven services is

satisfied at the time of the event when the service is delivered,

while our obligation for maintenance services is satisfied over the

course of each month. Our obligation for overdraft services is

satisfied at the time of the overdraft. Cash network fees are

earned for processing ATM transactions, and our obligation is

completed upon settlement of ATM transactions. Wire transfer

and other remittance fees consist of fees earned for providing

funds transfer services and issuing cashier’s checks and money

orders. Our obligation is satisfied at the time of the performance

of the funds transfer service or upon issuance of the cashier’s

check or money order. Safe deposit box fees are generally

recognized over time as we provide the services.

INVESTMENT ADVISORY AND OTHER ASSET-BASED FEES are earned

for providing brokerage advisory, asset management and trust

services. These fees were impacted by the sales of our Corporate

Trust Services business and Wells Fargo Asset Management,

which closed in fourth quarter 2021.

Fees from advisory account relationships with brokerage

customers are charged based on a percentage of the market

value of the client’s assets. Services and obligations related to

providing investment advice, active management of client assets,

and assistance with selecting and engaging a third-party advisory

manager are generally satisfied over a month or quarter. Trailing

commissions are earned for selling shares to investors and our

obligation is satisfied at the time shares are sold. However, these

fees are received and recognized over time during the period the

customer owns the shares and we remain the broker of record.

The amount of trailing commissions is variable based on the

length of time the customer holds the shares and on changes in

the value of the underlying assets.

Asset management services include managing and

administering assets, including mutual funds, and institutional

separate accounts. Fees for these services are generally

determined based on a tiered scale relative to the market value

of assets under management (AUM). 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. Services with

AUM and AUA-based fees are generally satisfied over time.

Trust services include acting as a trustee or agent for

personal trust and agency assets. Obligations for trust services

are generally satisfied over time; however, obligations for

activities that are transitional in nature are satisfied at the time

of the transaction.

COMMISSIONS AND BROKERAGE SERVICES FEES are earned for

providing brokerage services.

Commissions from transactional accounts with brokerage

customers are earned for executing transactions at the client’s

direction. Our obligation is generally satisfied upon the execution

of the transaction and the fees are based on the size and number

of transactions executed.

Fees earned from other brokerage services include securities

clearance, omnibus and networking fees received from mutual

fund companies in return for providing record keeping and other

administrative services, and annual account maintenance fees

charged to customers. Our obligation is satisfied at the time we

provide the service which is generally at the time of the

transaction.

INVESTMENT BANKING FEES are earned for underwriting debt and

equity securities, arranging syndicated loan transactions and

performing other advisory services. Our obligation for these

services is generally satisfied at closing of the transaction.

CARD FEES include credit and debit card interchange and network

revenue and various card-related fees. Credit and debit card

interchange and network revenue is earned on credit and debit

card transactions conducted through payment networks such as

Visa, MasterCard, and American Express. Our obligation is

satisfied concurrently with the delivery of services on a daily

basis. Other card fees represent late fees, cash advance fees,

balance transfer fees, and annual fees.

Expenses

OPERATING LOSSES We may incur expenses related to various

loss contingencies, such as customer remediation activities. We

establish an accrued liability when a loss event is probable and

the amount of the loss can be reasonably estimated. Our

operating losses of $7.0 billion, $1.6 billion, and $3.5 billion in

2022, 2021 and 2020, respectively, included expenses primarily

related to a variety of historical matters, including litigation,

regulatory, and customer remediation matters. See Note 13

(Legal Actions) for additional information on accruals for legal

actions.

RESTRUCTURING CHARGES The Company began pursuing various

initiatives to reduce expenses and create a more efficient and

streamlined organization in third quarter 2020. Actions from

these initiatives included (i) reorganizing and simplifying business

processes and structures to improve internal operations and the

customer experience, (ii) reducing headcount, (iii) optimizing

third-party spending, including for our technology infrastructure,

and (iv) rationalizing our branch and administrative locations,

which may include consolidations and closures. Substantially all

of the restructuring charges were personnel expenses related to

severance costs associated with headcount reductions with

payments made over time in accordance with our severance plan

as well as payments for other employee benefit costs such as

incentive compensation.

Restructuring charges are recorded as a component of

noninterest expense on our consolidated statement of income.

Changes in estimates represent adjustments to noninterest

expense based on refinements to previously estimated amounts,

which may reflect trends such as higher voluntary employee

attrition as well as changes in business activities.

Table 20.2 provides details on our restructuring charges.

Wells Fargo & Company 172

Table 20.2: Accruals for Restructuring Charges

Year ended December 31,

(in millions) 2022 2021 2020

Balance, beginning of period $ 565 1,214 —

Restructuring charges — 726 1,595

Changes in estimates 5 (650) (96)

Payments and utilization (404) (725) (285)

Balance, end of period $ 166 565 1,214

OTHER EXPENSES Regulatory Charges and Assessments expense,

which is included in other noninterest expense, was $860 million,

$842 million, and $834 million in 2022, 2021 and 2020,

respectively, and primarily consisted of Federal Deposit

Insurance Corporation (FDIC) deposit assessment expense.

Wells Fargo & Company 173



Note 21: Employee Benefits

Pension and Postretirement Plans

We sponsor a frozen noncontributory qualified defined benefit

retirement plan, the Wells Fargo & Company Cash Balance Plan

(Cash Balance Plan), which covers eligible employees of

Wells Fargo. The Cash Balance Plan was frozen on July 1, 2009,

and no new benefits accrue after that date.

Prior to July 1, 2009, eligible employees’ Cash Balance Plan

accounts were allocated a compensation credit based on a

percentage of their certified compensation; the freeze

discontinued the allocation of compensation credits after

June 30, 2009. Investment credits continue to be allocated to

participants’ accounts based on their accumulated balances.

We did not make a contribution to our Cash Balance Plan in

2022. We do not expect that we will be required to make a

contribution to the Cash Balance Plan in 2023. For the

nonqualified pension plans and postretirement benefit plans,

there is no minimum required contribution beyond the amount

needed to fund benefit payments.

We recognize settlement losses for our Cash Balance Plan

based on an assessment of whether lump sum benefit payments

will, in aggregate for the year, exceed the sum of its annual

service and interest cost (threshold). Settlement losses of $221

million and $133 million were recognized during 2022 and 2021,

respectively, representing the pro rata portion of the net loss in

accumulated other comprehensive income (AOCI) based on the

percentage reduction in the Cash Balance Plan’s projected

benefit obligation attributable to 2022 and 2021 lump sum

payments (included in the “Benefits paid” line in Table 21.1).

Additionally, we sponsored the Wells Fargo Canada

Corporation Pension Plan to employees in Canada (Canada

Pension Plan),

a defined benefit retirement plan. In June 2022, an

annuity contract was entered into that effected a full settlement

of this Canada Pension Plan, resulting in a plan settlement of

$29 million and a settlement loss of $5 million.

Our nonqualified defined benefit plans are unfunded and

provide supplemental defined benefit pension benefits to certain

eligible employees. The benefits under these plans were frozen in

prior years.

Other benefits include health care and life insurance benefits

provided to certain retired employees. We reserve the right to

amend, modify or terminate any of these benefits at any time.

The information set forth in the following tables is based on

current actuarial reports using the measurement date of

December 31 for our pension and postretirement benefit plans.

Table 21.1 presents the changes in the benefit obligation

and the fair value of plan assets, the funded status, and the

amounts recognized on our consolidated balance sheet. Changes

in the benefit obligation for the qualified plans were driven by the

amounts of benefits paid and changes in the actuarial loss (gain)

amounts, which are driven by changes in the discount rates at

December 31, 2022 and 2021, respectively.

Table 21.1: Changes in Benefit Obligation and Fair Value of Plan Assets

December 31, 2022 December 31, 2021

Pension benefits Pension benefits

(in millions) 

Qualified



Non-

qualified



Other



benefits



Qualified



Non-



qualified



Other



benefits

Change in benefit obligation:

Benefit obligation at beginning of period $ 11,032 501 439 11,956 556 491

Service cost 19 — — 17 — —

Interest cost 348 12 9 296 12 11

Plan participants’ contributions

—

39

—

40

Actuarial loss (gain)

(2,256)

(76)

(103)

(414)

(18)

(34)

Benefits paid

(966)

(46)

(75)

(818)

(49)

(69)

Settlements, Curtailments, and Amendments

(29)

—

(2)

—

Foreign exchange impact

(7)

—

(3)

—

Benefit obligation at end of period

8,141

391

309

11,032

501

439

Change in plan assets:

Fair value of plan assets at beginning of period

11,581

—

550

12,061

—

549

Actual return on plan assets

(1,998)

—

(45)

324

—

25

Employer contribution

16

46

7

15

49

5

Plan participants’ contributions

—

39

—

40

Benefits paid

(966)

(46)

(75)

(818)

(49)

(69)

Settlement

(29)

—

Foreign exchange impact

(4)

—

(1)

—

Fair value of plan assets at end of period

8,600

—

476

11,581

—

550

Funded status at end of period

$

459

(391)

167

549

(501)

111

Amounts recognized on the consolidated balance sheet at end of period:

Assets $

522

—

181

620

—

133

Liabilities

(63)

(391) (14)

(71)

(501)

(22)

Wells Fargo & Company 174



Table 21.2 provides information for pension and

postretirement plans with benefit obligations in excess of plan

assets.

Table 21.2: Plans with Benefit Obligations in Excess of Plan Assets

December 31, 2022 December 31, 2021

(in millions) Pension Benefits Other Benefits Pension Benefits Other Benefits

Projected benefit obligation $ 539 N/A 664 N/A

Accumulated benefit obligation 509 14 631 22

Fair value of plan assets 86 — 91 —

Table 21.3 presents the components of net periodic benefit

cost and OCI. Service cost is reported in personnel expense an d

all other components of net periodic benefit cost are reported in

other noninterest expense on our consolidated statement of

income.

Table 21.3: Net Perio dic Benefit C ost a nd Other C omprehensive Inco me

December 31, 2022 December 31, 2021 December 31, 2020

Pension benefits Pension benefits  Pension benefits 

(in millions) Qualified 

Non-

qualified

Other 

benefits  Qualified 

Non-

qualified 

Other 

benefits  Qualified 

Non-

qualified 

Other 

benefits 

Service cost $ 19 — — 17 — — 14 — —

Interest cost 348 12 9 296 12 11 325 16 16

Expected return on plan assets (511) — (22) (598) — (19) (603) — (21)

Amortization of net actuarial loss (gain) 136 11 (22) 140 15 (20) 157 14 (19)

Amortization of prior service cost (credit) 1 — (10) — — (10) — — (10)

Settlement loss 226 1 — 134 2 — 121 3 —

Net periodic benefit cost 219 24 (45) (11) 29 (38) 14 33 (34)

Other changes in plan assets and benefit

obligations recognized in other comprehensive

income:

Net actuarial loss (gain) 253 (76) (36) (142) (18) (40) 517 25 (32)

Amortization of net actuarial gain (loss) (136) (11) 22 (140) (15) 20 (157) (14) 19

Amortization of prior service credit (cost) (1) — 10 — — 10 — — 10

Settlement (loss) (226) (1) — (134) (2) — (121) (3) —

Total recognized in other comprehensive income (110) (88) (4) (416) (35) (10) 239 8 (3)

Total recognized in net periodic benefit cost and

other comprehensive income $ 109 (64) (49) (427) (6) (48) 253 41 (37)

Table 21.4 provides the a mounts recognized in AOCI

(pre-tax).

Table 21.4: Benefits Reco gnized in Accumula ted OCI

December 31, 2022 December 31, 2021

Pension benefits  Pension benefits 

(in millions)

Qualified



Non-



qualified



Other



benefits



Qualified



Non-



qualified



Other



benefits



Net actuarial loss (gain)

$

2,940

71

(404)

3,049

159

(390)

Net prior service cost (credit)

—

(116)

1

—

(126)

Total $

2,940

71

(520)

3,050

159

(516)

Wells Fargo & Company 175

  



 



 



Note 21: Employee Benefits (continued)

Plan Assumptions

For additional information on our pension accounting

assumptions, see Note 1 (Summary of Significant Accounting

Policies). Table 21.5 presents the weighted-average assumptions

used to estimate the projected benefit obligation.

Table 21.5: Weighted-Average Assumptio ns Used to Estimate Pro jected Benefit Ob ligation

December 31, 2022 December 31, 2021

Pension benefits  Pension benefits 

Qualified



Non-



qualified



Other

benefits Qualified



Non-



qualified



Other

benefits

Discount

rate

5.18

%

5.08

5.12

2.85

2.60

2.71

Interest crediting rate

4.10 3.58 N/A 2.69 1.25 N/A

Table 21.6 presents the weighted-average assumptions

used to determine the net periodic benefit cost, including the

impact of interim re-measurements as applicable.

Table 21.6: Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost

December 31, 2022 December 31, 2021 December 31, 2020

Pension benefits Pension benefits Pension benefits

Qualified

Non-

qualified

Other

benefits Qualified

Non-

qualified

Other

benefits Qualified

Non-

qualified

Other

benefits

Discount rate 3.93 % 2.34 2.11 2.63 2.32 2.31 2.95 3.12 3.10

Interest crediting rate 3.37 1.51 N/A 2.68 1.08 N/A 2.68 1.46 N/A

Expected return on plan assets 5.35 N/A 4.00 5.17 N/A 3.50 5.74 N/A 4.00

To account for postretirement health care plans, we used

health care cost trend rates to recognize the effect of expecte d

changes in future health care costs due to medical inflation,

utilization changes, new technology, regulatory requirements

and Medicare cost shifting. In determining the end of year

benefit obligation, we assumed an average annual increase of

approximately 13.90% for health care costs in 2023. This rate is

assumed to trend down 0.60%-1.50% per year until the trend

rate reaches an ultimate rate of 4.50% in 2032. The 2022

periodic benefit cost was determined using an initial annual tr end

rate of 7.50%. This rate was assumed to decrease 0.30%-0.40%

per year until the trend rate reached an ultimate rate of 4.50% in

2030.

Investment Strategy and Asset Allocation

We seek to achieve the expected long-term rate of return with a

prudent level of risk, given the benefit obligations of the pension

plans and their funded status. Our overall investment strategy is

designed to provide our Cash Balance Plan with a moderate

amount of long-term growth opportunities while ensuring that

risk is mitigated through diversification across numerous asset

classes and various investment strategies, coupled with an

investment strategy for the fixed income assets that is generally

designed to approximate the interest rate sensitivity of the Cash

Balance Plan’s benefit obligations. The Cash Balance Plan

currently has a target asset allocation mix comprised of the

following ranges: 75%-85% fixed income, 10%-20% equities, and

0%-10% in real estate, private equity and other investments. The

Employee Benefit Review Committee (EBRC), which includes

several members of senior management, formally reviews the

investment risk and performance of our Cash Balance Plan on a

quarterly basis. Annual Plan liability analysis and periodic asset/

liability evaluations are also conducted.

Other benefit plan assets include (1) assets held in a 401(h)

trust, which are invested with a target mix of 50%-60% equities

and 40%-50% fixed income, and (2) assets held in the Retiree

Medical Plan Voluntary Employees’ Beneficiary Association

(VEBA) trust, which are predominantly invested in fixed income

securities and cash. Members of the EBRC formally review the

investment risk and performance of these assets on a quarterly

basis.

Projected Benefit Payments

Future benefits that we expect to pay under the pension and

other benefit plans are presented in Table 21.7.

Table 21.7: Projected Benefit Payments

Pension benefits

(in millions) Qualified

Non-

qualified

Other

benefits

Period ended December 31,

2023 $ 690 43 31

2024 654 42 30

2025 646 40 30

2026 643 38 28

2027 640 37 27

2028-2032 3,052 155 119

Wells Fargo & Company 176



Fair Value of Plan Assets

Table 21.8 presents the classification of the fair value of the

pension plan and other benefit plan assets in the fair value

hierarchy. See Note 15 (Fair Values of Assets and Liabilities) for a

description of the fair value hierarchy.

Table 21.8: Pension and Other Benefit Plan Assets

Carrying value at year end

Pension plan assets Other benefits plan assets

(in millions) Level 1  Level 2  Level 3  Total  Level 1  Level 2 Level 3  Total 

December 31, 2022

Cash and cash equ ivalents $ 214 4 — 218 41 135 — 176

Long du ration fixed income (1)  1,398 4,919 — 6,317 — — — —

Intermediate (core) fixed income — 227 — 227 — 154 — 154

High-yield fixed income — 91 — 91 — — — —

International fixed income — 84 — 84 — — — —

Domestic large-cap stock s 232 35 — 267 — 60 — 60

Domestic mid-cap stock s 74 40 — 114 — 16 — 16

Domestic small-cap stock s 64 4 — 68 — 9 — 9

Global stocks — 152 — 152 — — — —

International stock s 105 141 — 246 9 19 — 28

Emerging mark et stock s 29 57 — 86 — — — —

Real estate 46 — — 46 — — — —

Hedge fu nds/absolute retu rn — 42 — 42 — — — —

Other 90 23 10 123 6 — 24 30

Plan investments – exclu ding investments at NAV $ 2,252 5,819 10 8,081 56 393 24 473

Investments at NAV (2) 415 —

Net receivables 104

3

Total plan assets $ 8,600 476

December 31, 2021

Cash and cash equivalents $ 2 242 — 244 40 143 — 183

Long duration fixed income (1) 1,562 6,827 1 8,390 — — — —

Intermediate (core) fixed income — 429 — 429 — 193 — 193

High-yield fixed income — 134 — 134 — — — —

International fixed income — 83 — 83 — — — —

Domestic large-cap stocks 378 57 — 435 11 67 — 78

Domestic mid-cap stocks 104 60 — 164 — 20 — 20

Domestic small-cap stocks 94 6 — 100 — 11 — 11

Global stocks — 204 — 204 — — — —

International stocks 139 216 — 355 11 24 — 35

Emerging market stocks 30 96 — 126 — — — —

Real estate 87 28 1 116 — — — —

Hedge funds/absolute return — 54 — 54 — — — —

Other 111 45 9 165 6 — 24 30

Plan investments – excluding investments at NAV $ 2,507 8,481 11 10,999 68 458 24 550

Investments at NAV (2) 533 —

Net receivables 49 —

Total plan assets $ 11,581 550

(1) This category includes a diversified mix of assets, which are being managed in accordance with a duration target of approximately 9 years and 11 years for December 31, 2022 and 2021, respectively,

and an emphasis on corporate credit bonds combined with investments in U.S. Treasury securities and other U.S. agency and non-agency bonds.

(2) Consists of certain investments that are measured at fair value using NAV per share (or its equivalent) as a practical expedient and are excluded from the fair value hierarchy.

Wells Fargo & Company 177



Note 21: Employee Benefits (continued)

Table 21.9 presents the changes in Level 3 pension plan and

other benefit plan assets measured at fair value.

Table 21.9: Fair Value Level 3 Pension and Other Benefit Plan Assets

(in millions)

Balance

beginning

of year

Gains

(losses) (1)

Purchases,

sales and

settlements

(net)

Transfer into/

(out of) Level 3

Balance 

end of 

year 

Period ended December 31, 2022

Pension plan assets $ 11 — — (1) 10

Other benefits plan assets 24 — — — 24

Period ended December 31, 2021

Pension plan assets $ 12 6 (8) 1 11

Other benefits plan assets 24 — — — 24

(1) Represents unrealized and realized gains (losses).

VALUATION METHODOLOGIES Following is a description of the

valuation methodologies used for assets measured at fair value.

Cash and Cash Equivalents – includes investments in

collective investment funds valued at fair value based upon the

fund’s NAV per share held at year-end. The NAV per share is

quoted on a private market that is not active; however, the NAV

per share is based on underlying investments traded on an active

market. This group of assets also includes investments in

registered investment companies valued at the NAV per share

held at year-end and in interest-bearing bank accounts.

Long Duration, Intermediate (Core), High-Yield, and

International Fixed Income – includes investments traded on the

secondary markets; prices are measured by using quoted market

prices for similar securities, pricing models, and discounted cash

flow analyses using significant inputs observable in the market

where available, or a combination of multiple valuation

techniques. This group of assets also includes highly liquid

government securities such as U.S. Treasuries, limited

partnerships valued at the NAV, registered investment

companies, and collective investment funds described above.

Domestic, Global, International and Emerging Market Stocks –

investments in exchange-traded equity securities are valued at

quoted market values. This group of assets also includes

investments in registered investment companies and collective

investment funds described above.

Real Estate –includes investments in exchange-traded equity

securities, registered investment companies, and collective

investment funds described above.

Hedge Funds / Absolute Return – includes investments in

collective investment funds as described above.

Other – insurance contracts that are stated at cash surrender

value. This group of assets also includes investments in

registered investment companies and collective investment

funds described above.

The methods described above may produce a fair value

calculation that may not be indicative of net realizable value or

reflective of future fair values. While we believe our valuation

methods are appropriate and consistent with other market

participants, the use of different methodologies or assumptions

to determine the fair value of certain financial instruments could

result in a different fair value measurement at the reporting date.

Defined Contribution Retirement Plans

We sponsor a qualified defined contribution retirement plan, the

Wells Fargo & Company 401(k) Plan (401(k) Plan). Under the

401(k) Plan, after 1 month of service, eligible employees may

contribute up to 50% of their certified compensation, subject to

statutory limits.

Effective January 2021, we implemented the following

changes to the 401(k) Plan employer contributions: (1) with

some exceptions, employees with one year of service must be

employed in a benefit-eligible position on December 15; (2)

added a new non-discretionary base contribution of 1% of

certified compensation for employees with annual compensation

of less than $75,000; (3) replaced the discretionary profit sha ring

contribution with a discretionary contribution for eligible

employees with annual compensation of less than $150,000; and

(4) revised the matching contribution vesting and timing. Eligible

employees are 100% vested in their base and discretionary

contributions after three years of service. A three-year service

vesting requirement for matching contributions applies to

employees hired after December 31, 2020. Base and matching

contributions are made annually at year-end, and the

discretionary contribution, if awarded, is made no later than t he

due date for the Company’s federal income tax return (includin g

extensions) for the plan year. Additionally, we added installme nt

payment options to the existing lump sum and partial lump sum

distribution options and added optional advisory services.

Prior to January 2021, eligible employees who completed

one year of service were eligible to receive the matching

contributions quarterly, which are dollar for dollar up to 6% of

certified compensation, and a discretionary profit sharing

contribution up to 4% of certified compensation, if awarded, paid

following the plan year. Matching contributions were 100%

vested, and the discretionary profit sharing contributions

required three years of vesting service (no change).

Total defined contribution retirement plan expenses were

$1.0 billion in 2022, and $1.1 billion in both 2021 and 2020.

Wells Fargo & Company 178



Wells Fargo & Company

Note 22: Income Taxes

Table 22.1 presents the components of income tax expense

(benefit).

Table 22.1: Income Tax Expense (Benefit)

Year ended December 31, 

(in millions) 2022 2021 2020

Current:

U.S.

Federal $

888

5,850

2,231

U.S.

State

and

local (45)

849

(310)

Non-U.S. 169

171

211

Total

current 1,012

6,870

2,132

Deferred:

U.S.

Federal 636

(1,446)

(2,440)

U.S.

State

and

local 448

200

(789)

Non-U.S. (9)

(46)

(60)

Total

deferred 1,075

(1,292)

(3,289)

Total $

2,087

5,578

(1,157)

Table 22.2 reconciles the statutory federal income tax rate

to the effective income tax rate. Our effective tax rate is

calculated by dividing income tax expense (benefit) by income

before income tax expense (benefit) less the net income from

noncontrolling interests.

Table 22.2: Effective Income Tax Expense (Benefit) and Rate

December 31,

2022 2021

2020

(in

millions) Amount



Rate



Amount



Rate



Amount



Rate



Statutory

federal

income

tax

expense

and

rate $

3,206

21.0

% $

5,697

21.0

% $

466

21.0

%

Change

in

tax

rate

resulting

from:

State

and

local

taxes

on

income,

net

of

federal

income

tax

benefit 556

3.7

1,046

3.9

65

2.8

Tax-exempt

interest (321)

(2.1)

(316)

(1.2)

(358)

(16.1)

Tax

credits,

net

of

amortization

(1) (1,264)

(8.3)

(1,001)

(3.7)

(626)

(28.2)

Nondeductible

expenses

(2) 560

3.7

368

1.4

199

9.0

Changes

in

prior

year

unrecognized

tax

benefits,

inclusive

of

interest (503)

(3.3)

(122)

(0.4)

(938)

(42.2)

Other (147)

(1.0)

(94)

(0.4)

35

1.6

Effective

income

tax

expense

(benefit)

and

rate $

2,087

13.7

% $

5,578

20.6

% $

(1,157)

(52.1)%

(1) Includes LIHTC proportional amortization expense, net of tax of $1.2 billion at both 2022 and 2021, and $1.1 billion in 2020.

(2) Includes amounts related to nondeductible litigation and regulatory accruals in all years presented as well as a nondeductible goodwill impairment in 2021.

179

Note 22: Income Taxes(continued)

The tax effects of our temporary differences that gave rise

to significant portions of our deferred tax assets and liabilities

are presented in Table 22.3.

Table 22.3: Net Deferred Taxes

(in millions)

Dec 31,

2022

Dec 31,

2021

Deferred tax assets

Net operating loss and tax credit carry

forwards $ 5,513 382

Allowance for credit losses 3,393 3,415

Net unrealized losses on debt securities 3,193 —

Deferred compensation and employee

benefits 2,799 3,124

Accrued expenses 1,843 1,300

Lease liabilities 1,132 1,142

Other 2,044 1,048

Total deferred tax assets 19,917 10,411

Deferred tax assets valuation allowance (232) (267)

Deferred tax liabilities

Mark to market, net (11,081) (3,631)

Leasing and fixed assets (2,792) (3,523)

Mortgage servicing rights (2,153) (2,414)

Basis difference in investments (1,095) (496)

Right-of-use assets (935) (948)

Intangible assets (753) (559)

Net unrealized gains from debt securities — (278)

Other (1,006) (1,082)

Total deferred tax liabilities (19,815) (12,931)

Net deferred tax liability (1) $ (130) (2,787)

(1) The net deferred tax liability is included in accrued expenses and other liabilities.

Deferred taxes related to net unrealized gains (losses) on

debt securities, net unrealized gains (losses) on derivatives,

foreign currency translation, and employee benefit plan

adjustments are recorded in accumulated OCI. See Note 24

(Other Comprehensive Income) for additional information.

We have determined that a valuation allowance is required

for 2022 in the amount of $232 million, attributable to deferred

tax assets in various state and non-U.S. jurisdictions where we

believe it is more likely than not that these deferred tax assets

will not be realized due to lack of sources of taxable income,

limitations on carry back of losses or credits and the inability to

implement tax planning to realize these deferred tax assets. We

have concluded that it is more likely than not that the remaining

deferred tax assets will be realized based on our history of

earnings, sources of taxable income in carry back periods, and our

ability to implement tax planning strategies.

Table 22.4 presents the components of the deferred tax

assets related to net operating loss (NOL) and tax credit carry

forwards at December31, 2022.

Table 22.4: Deferred Tax Assets Related To Net Operating Loss and

Tax Credit Carry Forwards (1)

(in millions)

Dec 31,

2022

U.S. Federal NOLs $ 3,244

U.S. Federal tax credits 1,221

U.S. State NOLs and credits 974

Non-U.S. NOLs and credits 74

Total net operating loss and tax credit carryforwards $ 5,513

(1) U.S. Federal NOLs have no expiration date. The remaining balances, if not utilized, mostly

expire in varying amounts through December31, 2042.

We do not intend to distribute earnings of certain non-U.S.

subsidiaries in a taxable manner, and therefore intend to limit

distributions to non-U.S. earnings previously taxed in the U.S.,

that would qualify for the 100% dividends received deduction,

and that would not result in any significant state or non-U.S.

taxes. All other undistributed non-U.S. earnings will continue to

be permanently reinvested outside the U.S. and the related tax

liability on these earnings is insignificant.

Table 22.5 presents the change in unrecognized tax benefits.

Table 22.5: Change in Unrecognized Tax Benefits

Year ended

December 31,

(in millions) 2022 2021

Balance, beginning of period $ 5,218 4,826

Additions:

For tax positions related to the current year 695 441

For tax positions related to prior years 358 259

Reductions:

For tax positions related to prior years (514) (124)

Lapse of statute of limitations (13) (164)

Settlements with tax authorities (307) (20)

Balance, end of period $ 5,437 5,218

Of the $5.4 billion of unrecognized tax benefits at

December31, 2022, approximately $3.6 billion would, if

recognized, affect the effective tax rate. The remaining

$1.8billion of unrecognized tax benefits relates to income tax

positions on temporary differences.

We account for interest and penalties related to income tax

liabilities as a component of income tax expense. As of

December31, 2022 and 2021, we have accrued expenses of

approximately $436 million and $914 million, respectively, for

interest and penalties. In 2022 and 2021, we recognized income

tax benefit, net of tax, of $385million and $33 million,

respectively, related to interest and penalties.

We are subject to U.S. federal income tax as well as income

tax in numerous state and non-U.S. jurisdictions. We are routinely

examined by tax authorities in these various jurisdictions. With

few exceptions, Wells Fargo and its subsidiaries are not subject to

federal, state, local and non-U.S. income tax examinations for

taxable years prior to 2011. It is reasonably possible that one or

more of the examinations or appeals may be resolved within the

next twelve months resulting in a decrease of up to $1.4 billion of

our gross unrecognized tax benefits. Table 22.6 summarizes our

major tax jurisdiction examination status as of December31,

2022.

Table 22.6: Tax Examination Status

Jurisdiction Tax Year(s) Status

United States 2011-2014 Administrative appeals

United States 2015-2020 Field examination

California 2015-2016 Field examination

New York 2015-2019 Field examination

Wells Fargo & Company 180

Note 23: Earnings and Dividends Per Common Share

Table 23.1 shows earnings per common share and diluted

earnings per common share and reconciles the numerator and

denominator of both earnings per common share calculations.

See the Consolidated Statement of Changes in Equity and Note

12 (Common Stock and Stock Plans) for information about stock

and options activity.

Table 23.1: Earnings Per Common Share Calculations

Year ended December 31,

(in millions, except per share amounts) 2022 2021 2020

Wells Fargo net income $ 13,182 21,548 3,377

Less: Preferred stock dividends and other (1) 1,115 1,292 1,591

Wells Fargo net income applicable to common stock (numerator) $ 12,067 20,256 1,786

Earnings per common share

Average common shares outstanding (denominator) 3,805.2 4,061.9 4,118.0

Per share $ 3.17 4.99 0.43

Diluted earnings per common share

Average common shares outstanding 3,805.2 4,061.9 4,118.0

Add: Restricted share rights (2) 31.8 34.3 16.2

Diluted average common shares outstanding (denominator) 3,837.0 4,096.2 4,134.2

Per share $ 3.14 4.95 0.43

(1) The balance for the years ended December 31, 2022, 2021 and 2020 includes $0 million, $87 million and $301 million, respectively, from the elimination of discounts or issuance costs associated

with redemptions of preferred stock.

(2) Calculated using the treasury stock method.

Table 23.2 presents the outstanding securities that were

anti-dilutive and therefore not included in the calculation of

diluted earnings per common share.

Table 23.2: Outstanding Anti-Dilutive Securities

Weighted-average shares

Year ended Dec ember 31,

(in millions) 2022

2021 2020

Convertible Preferred Stock, Series L (1) 25.3 25.3 25.3

Restricted share rights (2) 0.2 0.2 1.1

(1) Calculated using the if-converted method.

(2) Calculated using the treasury stock method.

Table 23.3 presents dividends declared per common share.

Table 23.3: Dividends Declared Per Common Share

Year ended December 31,

2022 2021 2020

Per common share $

1.10 0.60 1.22

Wells Fargo & Company 181



Note 24: Other Comprehensive Income

Table 24.1 provides the components of other comprehensive

income (OCI), reclassifications to net income by income

statement line item, and the related tax effects.

Table 24.1: Summary of Other Comprehensive Income

Twelve months ended December 31,

2022 2021 2020

(in millions)

Before

tax

Tax

effect

Net of

tax

Before

tax

Tax

effect

Net of

tax

Before

tax

Tax

effect

Net of

tax

Debt securities:

Net unrealized gains (losses) arising during the period $(14,320) 3,526 (10,794) (3,070) 759 (2,311) 2,317 (570) 1,747

Reclassification of net (gains) losses to net income 391 (97) 294 (82) 18 (64) (341) 81 (260)

Net change (13,929) 3,429 (10,500) (3,152) 777 (2,375) 1,976 (489) 1,487

Derivatives and hedging activities:

Fair Value Hedges:

Change in fair value of excluded components on fair value hedges (1) 87 (21) 66 81 (20) 61 (31) 7 (24)

Cash Flow Hedges:

Net unrealized gains (losses) arising during the period on cash flow

hedges (1,541) 381 (1,160) (12) 3 (9) 10 (2) 8

Reclassification of net (gains) losses to net income 6 (2) 4 143 (36) 107 219 (54) 165

Net change (1,448) 358 (1,090) 212 (53) 159 198 (49) 149

Defined benefit plans adjustments:

Net actuarial and prior service gains (losses) arising during the period (141) 35 (106) 200 (50) 150 (510) 126 (384)

Reclassification of amounts to noninterest expense (2) 343 (83) 260 261 (62) 199 266 (63) 203

Net change 202 (48) 154 461 (112) 349 (244) 63 (181)

Debit valuation adjustments (DVA):

Net unrealized gains (losses) arising during the period (8) 2 (6) — — — — — —

Reclassification of net (gains) losses to net income — — — — — — — — —

Net change (8) 2 (6) — — — — — —

Foreign currency translation adjustments:

Net unrealized gains (losses) arising during the period (232) (3) (235) (30) 1 (29) 52 (2) 50

Reclassification of net (gains) losses to net income — — — (1) — (1) — — —

Net

change

(232)

(3)

(235) (31) 1 (30) 52 (2) 50

Other

comprehensive

income

(loss)

$(15,415) 3,738

(11,677) (2,510) 613 (1,897) 1,982 (477) 1,505

Less:

Other

comprehensive

income

(loss)

from

noncontrolling

interests,

net

of

tax 2

(1) —

Wells

Fargo

other

comprehensive

income

(loss),

net

of

tax

$(11,679) (1,896) 1,505

(1) Represents changes in fair value of cross-currency swaps attributable to changes in cross-currency basis spreads, which are excluded from the assessment of hedge effectiveness and recorded in

other comprehensive income.

(2) These items are included in the computation of net periodic benefit cost (see Note 21 (Employee Benefits) for additional information).

Wells Fargo & Company 182

Table 24.2 provides the accumulated OCI (AOCI) balance

activity on an after-tax basis.

Table 24.2: Accumulated OCI Balances

(in millions)

Debt

securities

Fair value

hedges (1)

Cash flow

hedges (2)

Defined

benefit

plans

adjustments

Debit

valuation

adjustments

(DVA)

Foreign

currency

translation

adjustments

Accumulated

other

comprehensive

 income (loss)

Balance, December 31, 2019 $ 1,552 (180) (298) (2,223) — (162) (1,311)

Net unrealized gains (losses) arising during the period 1,747 (24) 8 (384) — 50 1,397

Amounts reclassified from accumulated other

comprehensive income (260) — 165 203 — — 108

Net change 1,487 (24) 173 (181) — 50 1,505

Less: Other comprehensive income from noncontrolling

interests — — — — — — —

Balance, December 31, 2020 3,039 (204) (125) (2,404) — (112) 194

Net unrealized gains (losses) arising during the period (2,311) 61 (9) 150 — (29) (2,138)

Amounts reclassified from accumulated other

comprehensive income (64) — 107 199 — (1) 241

Net change (2,375) 61 98 349 — (30) (1,897)

Less: Other comprehensive loss from noncontrolling

interests (1) — — — — — (1)

Balance, December 31, 2021 (3) 665 (143) (27) (2,055) — (142) (1,702)

Net u nrealized gains (losses) arising du ring the period (10,794) 66 (1,160) (106) (6) (235) (12,235)

Amounts reclassified from accu mulated other

comprehensive income 294 — 4 260 — — 558

Net change (10,500) 66 (1,156) 154 (6) (235) (11,677)

Less: Other comprehensive income from

noncontrolling interests — — — — — 2 2

Balance, December 31, 2022 (3) $ (9,835) (77) (1,183) (1,901) (6) (379) (13,381)



(1) Substantially all of the amounts for fair value hedges are foreign exchange contracts.

(2) Substantially all of the amounts for cash flow hedges are interest rate contracts.

(3) AOCI related to debt securities includes after-tax unrealized gains or losses associated with the transfer of securities from AFS to HTM of $3.7 billion and $680 million at December 31, 2022 and

2021, respectively. These amounts are subsequently amortized from AOCI into earnings over the same period as the related unamortized premiums and discounts.

Wells Fargo & Company 183



Note 25: Regulatory Capital Requirements and Other Restrictions

Regulatory Capital Requirements

The Company and each of its subsidiary banks are subject to

regulatory capital adequacy requirements promulgated by

federal banking regulators. The FRB establishes capital

requirements for the consolidated financial holding company,

and the Office of the Comptroller of the Currency (OCC) has

similar requirements for the Company’s national banks, including

Wells Fargo Bank, N.A. (the Bank).

Table 25.1 presents regulatory capital information for the

Company and the Bank in accordance with Basel III capital

requirements. We must calculate our risk-based capital ratios

Table 25.1: Regulatory Capital Information

under both the Standardized and Advanced Approaches. The

Standardized Approach applies assigned risk weights to broad

risk categories, while the calculation of risk-weighted assets

(RWAs) under the Advanced Approach differs by requiring

applicable banks to utilize a risk-sensitive methodology, which

relies upon the use of internal credit models, and includes an

operational risk component.

At December 31, 2022, the Bank and our other insured

depository institutions were considered well-capitalized under

the requirements of the Federal Deposit Insurance Act.

Wells Fargo & Company Wells Fargo Bank, N.A.

Standardized Approach Advanced Approach Standardized Approach Advanced Approach

(in millions, except ratios)

December 31,

2022

December 31,

2021

December 31,

2022

December 31,

2021

December 31,

2022

December 31,

2021

December 31,

2022

December 31,

2021

Regulatory capital:

Common Equity Tier 1 $ 133,527 140,643 133,527 140,643 140,644 149,318 140,644 149,318

Tier 1 152,567 159,671 152,567 159,671 140,644 149,318 140,644 149,318

Total 186,747 196,308 177,258 186,580 163,885 173,044 154,292 163,213

Assets:

Risk-weighted assets 1,259,889 1,239,026 1,112,307 1,116,068 1,177,300 1,137,839 977,713 965,511

Adjusted average assets 1,846,954 1,915,585 1,846,954 1,915,585 1,685,401 1,758,479 1,685,401 1,758,479

Regulatory capital ratios:

Common Equity Tier 1 capital 10.60 % * 11.35 12.00 12.60 11.95 * 13.12 14.39 15.47

Tier 1 capital 12.11 * 12.89 13.72 14.31 11.95 * 13.12 14.39 15.47

Total capital 14.82 * 15.84 15.94 16.72 13.92 * 15.21 15.78 16.90

Required minimum capital ratios:

Common Equity Tier 1 capital 9.20 9.60 8.50 9.00 7.00 7.00 7.00 7.00

Tier 1 capital 10.70 11.10 10.00 10.50 8.50 8.50 8.50 8.50

Total capital 12.70 13.10 12.00 12.50 10.50 10.50 10.50 10.50

Wells Fargo & Company Wells Fargo Bank, N.A

December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021

Regulatory leverage:

Total leverage exposure (1) $ 2,224,789 2,316,079 2,058,568 2,133,798

Supplementary leverage ratio (SLR) (1) 6.86 % 6.89 6.83 7.00

Tier 1 leverage ratio (2) 8.26 8.34 8.34 8.49

Required minimum leverage:

Supplementary leverage ratio 5.00 5.00 6.00 6.00

Tier 1 leverage ratio 4.00 4.00 4.00 4.00



.

* Denotes the binding ratio under the Standardized and Advanced Approaches at December 31, 2022.

(1) The SLR consists of Tier 1 capital divided by total leverage exposure. Total leverage exposure consists of total average assets, less goodwill and other permitted Tier 1 capital deductions (net of

deferred tax liabilities), plus certain off-balance sheet exposures.

(2) The Tier 1 leverage ratio consists of Tier 1 capital divided by total average assets, excluding goodwill and certain other items as determined under the rule.

At December 31, 2022, the Common Equity Tier 1 (CET1),

Tier 1 and total capital ratio requirements for the Company

included a global systemically important bank (G-SIB) surcharge

of 1.50%. The G-SIB surcharge is not applicable to the Bank. In

addition, the CET1, Tier 1 and total capital ratio requirements for

the Company included a stress capital buffer of 3.20% under the

Standardized Approach and a capital conservation buffer of

2.50% under the Advanced Approach. The capital ratio

requirements for the Bank included a capital conservation buffer

of 2.50% under both the Standardized and Advanced

Approaches. The Company is required to maintain these risk-

based capital ratios and to maintain an SLR of at least 5.00%

(composed of a 3.00% minimum requirement plus a

supplementary leverage buffer of 2.00%) to avoid restrictions on

capital distributions and discretionary bonus payments. The Bank

is required to maintain an SLR of at least 6.00% to be considered

well-capitalized under applicable regulatory capital adequacy

rules.

Capital Planning Requirements

The FRB’s capital plan rule establishes capital planning and other

requirements that govern capital distributions, including

dividends and share repurchases, by certain large bank holding

companies (BHCs), including Wells Fargo. The FRB conducts an

annual Comprehensive Capital Analysis and Review exercise and

has also published guidance regarding its supervisory

expectations for capital planning, including capital policies

regarding the process relating to common stock dividend and

repurchase decisions in the FRB’s SR Letter 15-18. The Parent’s

ability to make certain capital distributions is subject to the

requirements of the capital plan rule and is also subject to the

Parent meeting or exceeding certain regulatory capital

minimums.

Wells Fargo & Company 184

 



Loan and Dividend Restrictions

Federal law restricts the amount and the terms of both credit

and non-credit transactions between a bank and its nonbank

affiliates. These covered transactions may not exceed 10% of

the bank’s capital and surplus (which for this purpose

represents Tier 1 and Tier 2 capital, as calculated under the risk-

based capital rules, plus the balance of the ACL excluded from

Tier 2 capital) with any single nonbank affiliate and 20% of the

bank’s capital and surplus with all its nonbank affiliates.

Covered transactions that are extensions of credit may require

collateral to be pledged to provide added security to the bank.

Additionally, federal laws and regulations limit the

dividends that a national bank may pay. Dividends that may be

paid by a national bank without the express approval of the

OCC are generally limited to that bank’s retained net income

for the preceding two calendar years plus net income up to the

date of any dividend declaration in the current calendar year.

Retained net income, as defined by the OCC, consists of net

income less dividends declared during the period. Our national

bank subsidiaries could have declared additional dividends of

$6.4 billion at December 31, 2022, without obtaining prior

regulatory approval. We have elected to retain higher capital at

our national bank subsidiaries to meet internal capital targets,

which are set above regulatory requirements.

Our nonbank subsidiaries are also limited by certain federal

and state statutory provisions and regulations covering the

amount of dividends that may be paid in any given year. In

addition, under a Support Agreement dated June 28, 2017, as

amended and restated on June 26, 2019, among Wells Fargo &

Company, the parent holding company (Parent), WFC Holdings,

LLC, an intermediate holding company and subsidiary of the

Parent (IHC), the Bank, Wells Fargo Securities, LLC, Wells Fargo

Clearing Services, LLC, and certain other subsidiaries of the

Parent designated from time to time as material entities for

resolution planning purposes or identified from time to time as

related support entities in our resolution plan, the IHC may be

restricted from making dividend payments to the Parent if

certain liquidity and/or capital metrics fall below defined triggers

or if the Parent’s board of directors authorizes it to file a case

under the U.S. Bankruptcy Code. Based on retained earnings at

December 31, 2022, our nonbank subsidiaries could have

declared additional dividends of $26.9 billion at December 31,

2022, without obtaining prior regulatory approval.

Cash Restrictions

Cash and cash equivalents may be restricted as to usage or

withdrawal. Table 25.2 provides a summary of restrictions on

cash and cash equivalents.

Table 25.2: Nature of Restrictions on Cash and Cash Equivalents

(in millions)

Dec 31,

2022

Dec 31,

2021

Reserve balance for non-U.S. central banks $ 238 382

Segregated for benefit of brokerage customers

under federal and other brokerage regulations 898 830

Wells Fargo & Company 185

Note 26: Parent-Only Financial Statements

The following tables present Parent-only condensed financial

statements.

Table 26.1: Parent-Only Statement of Income

Year ended December 31,

(in millions) 2022 2021 2020

Income

Dividends from subsidiaries

(1) $ 14,590 17,895 42,578

Interest income from subsidiaries 4,759 3,934 1,295

Other interest income 2 1 3

Other income (53) (418) (231)

Total income 19,298 21,412 43,645

Expense

Interest expense:

Indebtedness to nonbank subsidiaries 1,124 89 155

Long-term debt 4,994 2,823 3,591

Noninterest expense 2,043 309 794

Total expense 8,161 3,221 4,540

Income before income tax benefit and equity in undistributed income of subsidiaries 11,137 18,191 39,105

Income tax benefit (1,503) (819) (1,694)

Equity in undistributed income of subsidiaries 542 2,538 (37,422)

Net income $ 13,182 21,548 3,377

(1) Includes dividends paid from indirect bank subsidiaries of $14.5 billion, $15.2 billion and $1.8 billion in 2022, 2021 and 2020, respectively.

Table 26.2: Parent-Only Statement of Comprehensive Income

Year ended December 31,

(in millions) 2022 2021 2020

Net income $ 13,182 21,548 3,377

Other comprehensive income (loss), after tax:

Debt securities 34 5 (10)

Derivatives and hedging activities 57 49 (2)

Defined benefit plans adjustments 145 347 (178)

Debit valuation adjustments (DVA) (6) — —

Equity in other comprehensive income (loss) of subsidiaries (11,909) (2,297) 1,695

Other comprehensive income (loss), after tax: (11,679) (1,896) 1,505

Total comprehensive income $ 1,503 19,652 4,882

Wells Fargo & Company 186



Table 26.3: Parent-Only Balance Sheet

(in millions)

Dec 31,

2022

Dec 31,

2021

Assets

Cash, cash equivalents, and restricted cash due from subsidiary banks $ 16,171 15,134

Loans to nonbank subsidiaries 182,656 185,050

Investments in subsidiaries

(1) 161,627 172,926

Equity securities 143 140

Other assets 9,408 7,341

Total assets $ 370,005 380,591

Liabilities and equity

Accrued expenses and other liabilities $ 8,258 7,333

Long-term debt 134,159 146,082

Indebtedness to nonbank subsidiaries 47,699 39,570

Total liabilities 190,116 192,985

Stockholders’ equity 179,889 187,606

Total liabilities and equity $ 370,005 380,591

(1) The years ended December 31, 2022 and 2021, include indirect ownership of bank subsidiaries with equity of $163.9 billion and $173.7 billion, respectively.

Table 26.4: Parent-Only Statement of Cash Flows

Year ended December 31,

(in millions) 2022 2021 2020

Cash flows from operating activities:

Net cash provided (used) by operating activities $ (4,575) 11,938 50,193

Cash flow s from investing activities:

Equity securities, not held for trading:

Proceeds from sales and capital returns 3 11 2,333

Purchases (8) (18) (1,479)

Loans:

Net

repayments

from

subsidiaries —

—

10

Capital

notes

and

term

loans

made

to

subsidiaries (3,567)

(3,500)

(38,547)

Principal

collected

on

notes/loans

made

to

subsidiaries 4,062

2,618

558

Net

decrease

in

investment

in

subsidiaries —

—

425

Other,

net (263)

14

16

Net

cash

provided

(used)

by

investing

activities 227

(875)

(36,684)

Cash flow

s from financing activities:

Net

increase

(decrease)

in

short-term

borrowings

and

indebtedness

to

subsidiaries 8,153

35,958

(22,613)

Long-term

debt:

Proceeds

from

issuance 26,520

1,001

34,918

Repayment (17,618)

(28,331)

(15,803)

Preferred

stock:

Proceeds

from

issuance —

5,756

3,116

Redeemed —

(6,675)

(3,602)

Cash

dividends

paid (1,115)

(1,205)

(1,290)

Common

stock:

Repurchased (6,033)

(14,464)

(3,415)

Cash

dividends

paid (4,178)

(2,422)

(4,852)

Other,

net (344)

(364)

(100)

Net

cash

provided

(used)

by

financing

activities 5,385

(10,746)

(13,641)

Net change in cash, cash equ

ivalents, and restricted cash

1,037

317

(132)

Cash,

cash

equivalents,

and

restricted

cash

at

beginning

of

period 15,134

14,817

14,949

Cash, cash equ

ivalents, and restricted cash at end of period

$

16,171

15,134

14,817

Wells Fargo & Company 187



Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Wells Fargo & Company:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Wells Fargo & Company and subsidiaries (the Company) as of

December 31, 2022 and 2021, the related consolidated statement of income, comprehensive income, changes in equity, and cash flows

for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial

statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the

Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year

period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),

the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated

February 21, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an

opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and

are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules

and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to

obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to

error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial

statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining,

on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included

evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation

of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial

statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or

disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex

judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements,

taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit

matters or on the accounts or disclosures to which they relate.

Assessment of the allowance for credit losses for loans (ACL)

As discussed in Notes 1 and 5 to the consolidated financial statements, the Company’s ACL as of December 31, 2022 was

$13.6 billion. The ACL includes the measurement of expected credit losses on a collective basis for those loans that share similar risk

characteristics utilizing multiple credit loss models. The Company estimated the ACL for commercial loans by applying probability of

default and severity of loss estimates to an expected exposure at default. The probability of default and severity of loss estimates

are statistically derived through historical observations of default and losses after default for each credit risk rating. The Company

estimated the ACL for consumer loans utilizing credit loss models which estimate expected credit losses in the portfolio based on

individual risk characteristics of the loans and historical experience of probability of default and severity of loss estimates. The

Company’s credit loss models utilize economic variables, including economic assumptions forecast over a reasonable and

supportable forecast period. The Company forecasts multiple economic scenarios and applies weighting to the scenarios that are

used to estimate expected credit losses. After the reasonable and supportable forecast period, the Company reverts over the

reversion period to the long-term average for the forecasted economic variables based on historical observations over multiple

economic cycles. A portion of the ACL is comprised of adjustments for qualitative factors which may not be adequately captured in

the loss models.

We identified the assessment of the ACL as a critical audit matter. A high degree of audit effort, including specialized skills and

knowledge, and subjective and complex auditor judgment was involved in the assessment of the ACL. Specifically, the assessment

encompassed the evaluation of the ACL methodology for collectively evaluated loans, including the methods and models used to

estimate (1) probability of default and severity of loss estimates, significant economic assumptions, the reasonable and supportable

forecast period, the historical observation period, and credit risk ratings for commercial loans, and (2) the adjustments for

qualitative factors that may not be adequately captured in the loss models. The assessment also included an evaluation of the

conceptual soundness and performance of certain credit loss models. In addition, auditor judgment was required to evaluate the

sufficiency of audit evidence obtained.

Wells Fargo & Company 188



The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the measurement of the ACL

estimate, including controls over the:

• development of certain credit loss and economic forecasting models

• continued use and appropriateness of changes made to certain credit loss and economic forecasting models

• performance monitoring of certain credit loss and economic forecasting models

• identification and determination of the significant assumptions used in certain credit loss and economic forecasting models

• development of the qualitative factors, including significant assumptions used in the measurement of certain qualitative

factors

• analysis of the ACL results, trends, and ratios.

We evaluated the Company’s process to develop the estimate by testing certain sources of data and assumptions that the Company

used and considered the relevance and reliability of such data and assumptions. In addition, we involved credit risk professionals

with specialized skills and knowledge, who assisted in:

• evaluating the Company’s ACL methodology for compliance with U.S. generally accepted accounting principles

• evaluating judgments made by the Company relative to the development, assessment and performance testing of certain

credit loss models by comparing them to relevant Company-specific metrics and trends and the applicable industry and

regulatory practices

• assessing the conceptual soundness of the credit loss models, including the selection of certain assumptions, by inspecting the

model documentation to determine whether the models are suitable for their intended use

• evaluating the methodology used to develop the forecasted economic scenarios, the selection of underlying assumptions and

the weighting of scenarios by comparing it to the Company’s business environment

• assessing the forecasted economic scenarios through comparison to publicly available forecasts

• testing the historical observation period and reasonable and supportable forecast periods to evaluate the length of each period

• testing individual credit risk ratings for a selection of commercial loans by evaluating the financial performance of the borrower,

sources of repayment, and any relevant guarantees or underlying collateral

• evaluating the methods and assumptions used to develop certain qualitative factors and the effect of those factors on the ACL

compared with relevant credit risk factors and consistency with credit trends and identified limitations of the underlying

quantitative models.

We also assessed the sufficiency of the audit evidence obtained related to the ACL estimates by evaluating the:

• cumulative results of the audit procedures

• qualitative aspects of the Company’s accounting practices

• potential bias in the accounting estimates.

Assessment of the residential mortgage servicing rights (MSRs)

As discussed in Notes 1, 6, 15, and 16 to the consolidated financial statements, the Company’s residential MSR asset as of

December 31, 2022 was $9.3 billion on an underlying loan servicing portfolio of $681 billion. The Company recognizes MSRs when it

retains servicing rights in connection with the sale or securitization of loans it originated or purchases servicing rights from third

parties and has elected to carry its residential MSRs at fair value with periodic changes reflected in earnings. The Company uses a

valuation model for determining fair value that calculates the present value of estimated future net servicing income cash flows,

which incorporates assumptions that market participants use in estimating future net servicing income cash flows. These

assumptions include estimates of prepayment rates (including estimated borrower defaults), discount rates, cost to service

(including delinquency and foreclosure costs), escrow account earnings, contractual servicing fee income, ancillary income and late

fees. The estimated fair value of MSRs is periodically benchmarked to independent appraisals.

We identified the assessment of the valuation of residential MSRs as a critical audit matter. A high degree of audit effort, including

specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the MSRs.

Specifically, there was a high degree of subjectivity used to evaluate the following assumptions because they are unobservable and

the sensitivity of changes to those assumptions had a significant effect on the valuation (1) prepayment rates, (2) discount rates,

and (3) cost to service. There was also a high degree of subjectivity and potential for management bias related to updates made to

significant assumptions due to changes in market conditions, mortgage interest rates, or servicing standards.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested

the operating effectiveness of certain internal controls related to the assessment of residential MSRs, including controls over the:

• assessment of the valuation model

• evaluation of the significant assumptions (prepayment rates, discount rates, and cost to service) used in determining the MSR

fair value

• comparison of the MSR fair value to independent appraisals.

Wells Fargo & Company 189

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190

Quarterly Financial Data

Condensed Consolidated Statement o f Inco me – Qua rterly (Una udited)

2022

Quarter ended 

2021

Quarter ended 

(in millions, except per share amounts) Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,

Interest income $ 17,793 14,494 11,556 10,181 10,121 9,834 9,693 10,046

Interest expense 4,360 2,396 1,358 960 859 925 893 1,238

Net interest income 13,433 12,098 10,198 9,221 9,262 8,909 8,800 8,808

Noninterest income

Deposit and lending-related fees 1,522 1,647 1,729 1,815 1,819 1,781 1,704 1,616

Investment advisory and other asset-based fees 2,049 2,111 2,346 2,498 2,579 2,882 2,794 2,756

Commissions and brokerage services fees 601 562 542 537 558 525 580 636

Investment banking fees 331 375 286 447 669 547 570 568

Card fees 1,095 1,119 1,112 1,029 1,071 1,078 1,077 949

Mortgage banking 79 324 287 693 1,035 1,259 1,336 1,326

Net gains (losses) from trading and securities (181) 872 (26) 796 2,412 1,244 2,717 891

Other 731 397 554 556 1,451 609 692 982

Total noninterest income 6,227 7,407 6,830 8,371 11,594 9,925 11,470 9,724

Total revenue 19,660 19,505 17,028 17,592 20,856 18,834 20,270 18,532

Provision for credit losses 957 784

580 (787) (452) (1,395) (1,260) (1,048)

Noninterest expense

Personnel 8,415 8,212 8,442 9,271 8,475 8,690 8,818 9,558

Technology, telecommunications and equipment 902 798 799 876 827 741 815 844

Occupancy 722 732 705 722 725 738 735 770

Operating losses 3,517 2,218 576 673 512 540 303 213

Professional and outside services 1,357 1,235 1,310 1,286 1,468 1,417 1,450 1,388

Advertising and promotion 178 126 102 99 225 153 132 90

Restructuring charges — — — 5 66 1 (4) 13

Other 1,111 1,006 949 938 900 1,023 1,092 1,113

Total noninterest expense 16,202 14,327 12,883 13,870 13,198 13,303 13,341 13,989

Income before income tax expense (benefit) 2,501 4,394 3,565 4,509 8,110 6,926 8,189 5,591

Income tax expense (benefit) (127) 894 613 707 1,711 1,521 1,445 901

Net income before noncontrolling interests 2,628 3,500 2,952 3,802 6,399 5,405 6,744 4,690

Less: Net income (loss) from noncontrolling interests (236) (28) (167) 131 649 283 704 54

Wells Fargo net income $

2,864

3,528 3,119 3,671 5,750

5,122 6,040 4,636

Less: Preferred stock dividends and other

279 278 280 278 280 335 297 380

Wells Fargo net income applicable to common stock $

2,585

3,250 2,839 3,393 5,470 4,787 5,743 4,256

Per share information

Earnings per common share $

0.68

0.86 0.75 0.89 1.39 1.18 1.39 1.03

Diluted earnings per common share 0.67 0.85 0.74 0.88 1.38 1.17 1.38 1.02

Average common shares outstanding 3,799.9 3,796.5 3,793.8 3,831.1 3,927.6 4,056.3 4,124.6 4,141.3

Diluted average common shares outstanding 3,832.7 3,825.1 3,819.6 3,868.9 3,964.7 4,090.4 4,156.1 4,171.0

Wells Fargo & Company 191

Glossary of Acronyms

ACL Allowance for credit losses

AFS Available-for-sale

AOCI Accumulated ot her comprehensive income

ARM Adjustable-rate mort gage

ASC Accounting S tandards C odification

ASU Accounting S tandards Upda te

AVM Automated va luation model

BCBS Basel C ommittee on Ba nking S upervision

BHC Bank holding compa ny

CCAR Comprehensive C apital Ana lysis a nd Review

CD Certificate of deposit

CECL Current expected credit loss

CET1 Common Equit y Tier 1

CFPB Consumer F inancial Prot ection Burea u

CLO Collateralized loa n obliga tion

CLTV Combined loa n-to-value

CPI Collateral prot ection insura nce

CRE Commercial rea l est ate

DPD Days pa st due

ESOP Employee S tock Ownership Pla n

FASB Financial Account ing S tandards Boa rd

FDIC Federal Deposit Insurance C orporation

FHA Federal Housing Administ ration

FHLB Federal Home Loa n Ba nk

FHLMC Federal Home Loa n Mort gage C orporation

FICO Fair Isa ac C orporation (credit rating)

FNMA Federal Na tional Mort gage Associa tion

FRB Board of Governors of t he F ederal Reserve S ystem

GAAP Generally a ccepted a ccounting principles

GNMA Government National Mort gage Associa tion

GSE Government-sponsored ent ity

G-SIB Global syst emically import ant bank

HQLA High-quality liquid a ssets

HTM

Held-to-maturity

LCR

Liquidity covera

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LHFS

Loans held for sa

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LIBOR

London Int

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MSR

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urrency

OCI

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Pre-tax pre-provision profit

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ROA

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ROTCE

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RWAs

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SEC

Securities a

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SLR

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Secured Overnight

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SPE

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TDR

Troubled debt

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TLAC

Total Loss Absorbing C

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VaR

Value-at-Risk

VIE

Variable int

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entity

WIM

Wealth a

nd Invest

ment

Management

Wells Fargo & Company 192

Operating Committee

William M. Daley

Vice Chair of Public Affairs

Kristy Fercho

Senior EVP

Head of Diverse Segments,

Representation and Inclusion

Derek A. Flowers

Senior EVP

Chief Risk Officer

Kyle G. Hranicky

Senior EVP

CEO of Commercial Banking

Bei Ling

Senior EVP

Head of Human Resources

Mary T. Mack

Senior EVP

CEO of Consumer & Small

Business Banking

Lester J. Owens

Senior EVP

Head of Operations

Ellen R. Patterson

Senior EVP

General Counsel

Scott E. Powell

Senior EVP

Chief Operating Officer

Paul Ricci

Senior EVP

Chief Auditor

Michael P. Santomassimo

Senior EVP

Chief Financial Officer

Kleber R. Santos

Senior EVP

CEO of Consumer Lending

Charles W. Scharf

Chief Executive Officer

and President

Barry Sommers

Senior EVP

CEO of Wealth &

Investment Management

Saul Van Beurden

Senior EVP

Head of Technology

Jonathan G. Weiss

Senior EVP

CEO of Corporate

&

Investment Banking

Ather Williams III

Senior EVP

Head of Strategy, Digital,

and Innovation

As of February 24, 2023

Except for Paul Ricci, all members of the

Operating Committee are executive officers

according to Securities and Exchange

Commission rules. Muneera S. Carr, EVP, Chief

Accounting Officer and Controller, also is an

executive officer.

Board of Directors

Steven D. Black (Chair)

Former Co-CEO

Bregal Investments, Inc., an international

private equity firm

Mark A. Chancy

Former Vice Chair and Co-COO

SunTrust Banks, Inc., a bank holding

company

Celeste A. Clark

Principal, Abraham Clark

Consulting, LLC,

a health and regulatory policy

consulting firm

Theodore F. Craver, Jr.

Former Chair,

President and CEO

Edison International, an electric utility

holding company

Richard K. Davis

Former President and CEO

Make-A-Wish America, a non-profit

organization

Wayne M. Hewett

Senior Advisor

Permira, a global private equity firm

CeCelia “CeCe” G. Morken

Former CEO

Headspace, an online wellness company

Maria R. Morris

Former EVP and Head,

Global Employee Benefits business

MetLife, a global financial services

company

Felicia F. Norwood

EVP and President,

Government Business Division

Elevance Health, Inc.,

a health company

Richard B. Payne, Jr.

Former Vice Chair

Wholesale Banking

U.S. Bancorp, a U.S. bank holding

company

Juan A. Pujadas*

Former Vice Chair

Global Advisory Services,

PwC

, a global professional

services firm

Ronald L. Sargent

Former CEO and Chair

Staples, Inc., a workplace products

retailer

Charles W. Scharf

Chief Executive Officer and

President

Wells Fargo & Company

Suzanne M. Vautrinot

President

Kilovolt Consulting, Inc.,

a cybersecurity strategy and

technology consulting firm

As of February 24, 2023

*Juan A. Pujadas is not standing for re-election

and will retire as a director at the 2023 annual

meeting.

Stock Performance

This graph compares the cumulative total stockholder return and total compound annual growth rate (CAGR) for our common

stock (NYSE: WFC) for the five-year period ended December 31, 2022, with the cumulative total stockholder return for the same

period for the Keefe, Bruyette and Woods (KBW) Total Return Bank Index (KBW Nasdaq Bank Index (BKX)) and the S&P 500

Index.

The cumulative total stockholder returns (including reinvested dividends) in the graph assume the investment of $100 in Wells

Fargo’s common stock, the KBW Nasdaq Bank Index, and the S&P 500 Index.

FIVE YEAR PERFORMANCE GRAPH

$220

$200

$180

$160

$140

$120

$100

$ 80

$ 60

$ 40

$ 20

Wells Fargo

(WFC)

S&P 500

KBW Nasdaq

Bank Index

2017

2018

2019

2020

2021

2022

5-year

CAGR

$100

$78

$95

$55

$89

$79

-5%

Wells Fa

rgo

100

96

126

149

192

157

9%

S&P 500

100

82

112

100

139

109

2%

KBW Nasdaq

Bank Index

General Information

Common Stock

Wells Fargo & Company is listed and trades on the New York

Stock Exchange: WFC. At February 10, 2023, there were

231,886 holders of record of the Company’s common stock and

the closing price reported on the New York Stock Exchange for

the common stock was $47.51 per share.

3,833,804,452 common shares outstanding (12/31/22)

Stock Purchase and Dividend Reinvestment

You can buy Wells Fargo stock directly from Wells Fargo, even if

you’re not a Wells Fargo shareholder, through optional cash

payments or automatic monthly deductions from a bank

account. You can also have your dividends reinvested

automatically. It’s a convenient, economical way to increase your

Wells Fargo investment.

Call 1-877-840-0492 for an enrollment kit, which includes a

plan prospectus.

Form 10-K

We will send Wells Fargo’s 2022 Annual Report on Form 10-K

(including the financial statements filed with the U.S.

Securities and Exchange Commission) free to any shareholder

who asks for a copy in writing.

Shareholders also can ask for copies of any exhibit to the Form

10-K. We will charge a fee to cover expenses to prepare and

send any exhibits.

Please send requests to: Corporate Secretary, Wells Fargo &

Company, MAC J0193-610, 30 Hudson Yards, New York, NY

10001-2170

SEC Filings

Our annual reports on Form 10-K, quarterly reports on Form

10-Q, current reports on Form 8-K, and amendments to those

reports are available free of charge on our website

(www.wellsfargo.com) as soon as practical after they are

electronically filed with or furnished to the SEC. Those reports

and amendments are also available free of charge on the SEC’s

website at www.sec.gov¹.

Forward-Looking Statements

This Annual Report contains forward-looking statements about

our future financial performance and business. Because forward-

looking statements are based on our current expectations and

assumptions regarding the future, they are subject to inherent

risks and uncertainties. Do not unduly rely on forward-looking

statements, as actual results could differ materially from

expectations. Forward-looking statements speak only as of the

date made, and we do not undertake to update them to reflect

changes or events that occur after that date. For information

about factors that could cause actual results to differ materially

from our expectations, refer to the discussion under “Forward-

Looking Statements” and “Risk Factors” in the Financial Review

portion of this Annual Report.

Investor Relations

1-415-371-2921

[email protected]

Shareowner Services

and Transfer Agent

EQ Shareowner Services

P.O. Box 64874

St. Paul, Minnesota

55164-0874

1-877-840-0492

www.shareowneronline.com¹

Annual Shareholders’ Meeting

10:00 a.m. Eastern Daylight Time

Tuesday, April 25, 2023

See Wells Fargo’s 2023 Proxy Statement

for more information about the annual

shareholders’ meeting.

1. We do not control this website. Wells Fargo has provided this link for your convenience, but does not endorse and is not responsible for the content, links, privacy policy, or security policy of this website.

Wells Fargo & Company

420 Montgomery Street

San Francisco, CA 94104

wellsfargo.com

CCM7565 (Rev 00, 1/each)