Wells Fargo 2015 Annual Report

Apr 28, 2016 | Publisher: edocr | Category: Business & Economics |  | Collection: Finance | Views: 42 | Likes: 2

Earning lifelong relationships We l l s Fa r g o & C o m p a n y A n n u a l R e p o r t 2 0 1 5 ‘‘ Earning lifelong relationships, one customer at a time, is fundamental to achieving our vision. ‘‘ - John G. Stumpf Chairman and Chief Executive Officer 2015 Annual Report | 1 Contents 2 | To Our Owners 10 | Earning relationships, helping customers succeed financially 10 | It isn’t easy to talk about money 12 | From seed to sparkling success 14 | Paving the road to savings 16 | Banking and business growing in tandem 18 | House hunters find the one 20 | Retirement-plan transition goes down easy 22 | Bringing affordable solar power to the people 24 | Adopting a neighborhood 26 | Corporate Social Responsibility Highlights 27 | Board of Directors, Executive Officers, and Corporate Staff 28 | Senior Business Leaders 29 | 2015 Financial Report - Financial Review - Controls and Procedures - Financial Statements - Report of Independent Registered Public Accounting Firm 267 | Stock Performance 2 | 2015 Annual Report To Our Owners, One of the many things that make Wells Fargo unique is our company’s rich 164-year history. Wells Fargo is one of a handful of U.S. companies dating to the mid-1800s that is still in the same business and operates under the same name. In fact, our headquarters building at 420 Montgomery St. in San Francisco stands on the same spot where Wells Fargo first opened for business in 1852. You can learn more about our past by visiting one of Wells Fargo’s 11 history museums across the U.S. However, the most powerful expression of our heritage isn’t in documents or artifacts or even our stagecoach. It is in any of the millions of relationships we have formed over generations with customers, team members, communities, and shareholders. “Relationships” define Wells Fargo. JOHN G. STUMPF Chairman and Chief Executive Officer Wells Fargo & Company 2015 Annual Report | 3 Earning lifelong relationships, one customer at a time, is fundamental to achieving our vision, which is to “satisfy our customers’ financial needs and help them succeed financially.” Whether we’re helping a student open a first checking account, a young family purchase a home, a business owner expand, or a retiree manage investments, we are on our customers’ side, offering them the products and services they want and need. We believe the best way we can earn our customers’ business is to listen and understand their needs. Consider Biltmore, one of America’s most beautiful historic estates and a popular tourist attraction, built by George Vanderbilt in 1895 in the Blue Ridge Mountains of North Carolina. At the turn of the 20th century, the Vanderbilt family used Wells Fargo for transport along the East Coast, and they later formed a banking relationship with us. Through listening to and working with The Biltmore Company, we have provided loans and financial services to help the business grow. Today, Biltmore draws more than 1.4 million visitors annually and includes not only an inn and hotel, but also a village with restaurants and retail shops, a winery, branded retail products, and a solar farm. Earning relationships and helping customers like The Biltmore Company are the core of our business. We are honored to have relationships with one in three U.S. households. We lend more money to help individuals and families buy homes than any other American company. We are the nation’s top lender to small businesses, based on Community Reinvestment Act data. We are the largest lender to mid-sized companies, and we help large companies with their domestic and global needs through our offices in 36 countries. Our leading position across many of our businesses is important because it reflects how well we are serving our customers — individuals, households, businesses, and corporations — who make up the “real economy.” We never take for granted the trust our customers have placed in us, and we understand the important role we play in helping grow the U.S. economy. If we serve our customers well and manage our business effectively and efficiently, we also will grow and succeed as a company. As we like to say, we never put the stagecoach ahead of the horses! We never take for granted the trust our customers have placed in us, and we understand the important role we play in helping grow the U.S. economy. Financial results Our focus on customers, as well as our diversified business model and strong risk discipline, helped us to produce another solid year of financial performance in 2015, even as we navigated the pressures of low interest rates and global economic volatility. Wells Fargo generated $86.1 billion in revenue in 2015, up 2 percent from 2014. Our time-tested business model — which produced a balanced mix of net interest income and noninterest income across more than 90 businesses — allowed us to deliver consistent performance despite the challenging environment. Our 2015 net income was $22.9 billion, and our diluted earnings per common share of $4.12 represented a $0.02 increase from 2014. Our 2015 return on assets was 1.31 percent, and our return on equity was 12.60 percent. At year-end, our total deposits reached a record $1.2 trillion, up 5 percent from the prior year, driven by both consumer and commercial growth. Total loans finished 2015 at $916.6 billion, up 6 percent from 2014, making our loan portfolio the largest among U.S. banks. We saw growth in commercial loans, residential mortgages, credit cards, and automobile lending while maintaining our strong credit and pricing discipline. In fact, the credit quality of our portfolio proved to be about as good as I’ve seen in my 34 years at Wells Fargo. Credit losses of $2.9 billion improved 2 percent from 2014. Net charge-offs as a percentage of average loans remained near historic lows — 0.33 percent in 2015, compared with 0.35 percent in 2014. We also continued to strengthen our balance sheet in 2015 and ended the year with our highest-ever levels of capital and liquidity. We finished 2015 with total equity of $193.9 billion, Common Equity Tier 1 capital of $142.4 billion, and a Common Equity Tier 1 ratio (fully phased-in) of 10.77 percent.1 1 For more information on our regulatory capital and related ratios, please see the “Financial Review — Capital Management” section in this Report. 4 | 2015 Annual Report Our financial performance and balance sheet strength allowed us to return more capital to shareholders. In 2015, we returned $12.6 billion to our shareholders through common stock dividends and net share repurchases, reflecting the fifth consecutive year in which we returned more capital to shareholders than in the previous year. We increased our quarterly common stock dividend rate by 7 percent to $0.375 per share, and we repurchased 78.2 million shares of our common stock on a net basis. And we again ended the year as the world’s most valuable bank by market capitalization. We also continued to make strides in improving our company’s efficiency and reinvesting for the future. In addition to simplifying our operations, we reduced our travel costs by 23 percent in 2015, and we have eliminated more than 20 million square feet of occupied real estate since 2009. We’re investing those savings in areas such as innovation, risk management, and cybersecurity. Another benefit of our company’s consistent performance is the ability to be well positioned for strategic acquisitions to support growth. We were pleased to announce an agreement to acquire GE Capital’s Commercial Distribution Finance and Vendor Finance platforms, as well as a portion of its Corporate Finance business. We anticipate adding approximately $31 billion in assets and welcoming about 2,900 GE Capital team members to Wells Fargo when the transaction closes. We also acquired GE Railcar Services, a railcar finance, leasing, and fleet management business, on Jan. 1, 2016, and in the second quarter of 2015 we completed a GE Capital commercial real estate loan portfolio transaction, which included approximately $11.5 billion in loan purchases and related financing. These additions should grow our business and provide greater opportunities for us to expand our relationships with customers. Our financial performance and customer focus earned us external recognition in many ways in 2015. For example, we ranked No. 7 on Barron’s 2015 ranking of the world’s “100 Most Respected Companies” — the fourth year in a row we ranked highest among all banks on the list. Euromoney magazine named Wells Fargo the “Best Bank in the U.S.” in its 2015 Awards for Excellence. And The Banker magazine named Wells Fargo the Best Global and U.S. Bank of the Year. Wells Fargo is one of the most valuable companies in the world By market value as of Dec. 31, 2015 (in billions) Apple $ 587 Alphabet 528 Microsoft 443 Berkshire Hathaway 325 ExxonMobil 325 Amazon.com 317 Facebook 296 General Electric 294 Johnson & Johnson 284 Wells Fargo 277 JPMorgan Chase 243 Ind. & Comm. Bank (China) 243 U.S. companies except where stated Source: Bloomberg Relationships are at the core of our culture While accolades are rewarding, our highest honor is the trust that customers place in us. And trust is best built through relationships. No document better captures our relationship-based culture and focus on customers than The Vision & Values of Wells Fargo, which was first published more than 20 years ago. (I invite you to read our Vision & Values at wellsfargo.com.) We bring the Vision & Values to life each day through delivering on our six priorities: putting customers first, growing revenue, managing expenses, living our vision and values, connecting with communities and stakeholders, and managing risk. These priorities also support our focus on the relationships with customers, team members, communities, and shareholders that are at the heart of our culture. Earning relationships with our customers We work to make every relationship — new and old — a lasting one by following a few simple principles. We put our customers first and treat them as our valued guests. We are committed to our customers’ satisfaction and financial success and to work in their best interest. In short, we are on our customers’ side. You will read stories about how we do that in the following pages, including how we eased an older couple’s budgeting concerns and helped a customer navigate the used-car buying process. When we follow these principles, we gain trust and earn relationships that reach across decades and generations. Just as our customers trusted Wells Fargo and our Abbot Downing-built stagecoaches to transport their valuables in the 1800s, they trust us today with their financial needs. One example is the Hearst family. We’ve nurtured a relationship with the Hearsts for more than 100 years. George Hearst, an entrepreneur and mining developer, used Wells Fargo stagecoaches and express services to transport gold and silver to U.S. Mints, starting in the 1860s. His wife, Phoebe, an active investor and philanthropist, was a Wells Fargo investment services and trust customer. Over the years, our relationship with the Hearsts broadened as their business grew from its origins as a mining company and a single newspaper to become one of the world’s top private media and information companies encompassing more than 360 businesses in 150 countries. We are honored to help the Hearst family and business grow through a broad assortment of products and services, and today our ties are as 2015 Annual Report | 5 strong and deep as ever. Wealth and Investment Management serves the family’s personal financial needs, and Wholesale Banking provides corporate services such as credit, treasury management, debt capital markets, trust, and investment banking to the Hearst Corporation. The key to earning deep and long-lasting relationships is not only knowing our customers, but also understanding how they define financial success. We have a sincere desire to help them succeed, and we do so by working across our many businesses to provide them with the products and services they need. That certainly is the case in our work with small business customers. We appreciate the important role that small businesses play in local communities and the overall economy. We have relationships with approximately 3 million U.S. small business owners, and in 2015, we were the top lender of U.S. Small Business Administration 7(a) loans in both number of loans and dollars. Our Wells Fargo Works for Small Business® initiative, launched in 2014, provides resources, guidance, and services for small business owners, and we are making strong progress on our goal to extend $100 billion in new lending to small businesses by 2018. One of the most rewarding aspects of our small business relationships is helping our customers grow and contributing to their long-term success. One such relationship is with Deschutes Brewery. We provided entrepreneur Gary Fish with an initial loan to help open a brewpub in Bend, Oregon, in 1998. His craft beer quickly caught on, and today Gary’s company employs 472 workers and is 7.9 percent employee-owned. As Deschutes Brewery grew, we were with the company every step of the way, providing capital, cash management, and a variety of advice and ancillary services. Now one of our Wholesale Banking customers, the company distributes beer — with the tagline “Born in Bend, Oregon” — in 28 states, and today is one of the top 10 craft brewers in the U.S. “We have been with Wells Fargo from the very beginning,” Gary says. “They were the ones who gave us a loan to get started.” We are a relationship company, but our relationships with customers are only as strong as our relationships with each other. Earning relationships with our team members We are a relationship company, but our relationships with customers are only as strong as our relationships with each other. Products and technology don’t fulfill the promises we make to our customers, our people do — people who are talented, motivated, and, I believe, more energized than our competitors. Take Terri Steup as an example. Terri is a bank store manager in Fort Wayne, Indiana, who has been with our company for more than 40 years. Terri is a talented relationship builder with her team, and her enthusiasm is infectious. “We are having fun; we are a family!” she says about her team. Terri also recognizes the importance of earning relationships with customers. Understanding the community’s diversity, Terri’s team greets customers in three languages — English, Burmese, and Spanish — and Terri actively recruits new team members from among the Burmese, Vietnamese, and Hispanic immigrant population that her store serves. We have always believed that our team members are our most valuable resource, and we want them to be with us for the long term. We invest in them by offering competitive salaries, professional training and development, leadership opportunities, and benefits that include affordable health care options, work-life balance programs, 401(k) matching contributions, tuition reimbursement, and a discretionary profit sharing plan. We want all our team members to lead by bringing our vision and values to life. That is a shared responsibility — no matter a person’s position in the company. As we say in our Vision & Values, we define leadership as the act of establishing, sharing, and communicating our vision, and as the art of motivating others to understand and embrace our vision. Since our success depends on our team members, we survey them each year to hear what they think. This is important because the more connected team members feel to the company, the more likely they are to form lasting relationships with our customers. In 2015, our overall team member “engagement” score continued to increase, measuring 4.25 out of a possible 5, an increase over our 2014 score of 4.22. The Gallup Organization, which conducts our annual surveys, named Wells Fargo a “Gallup Great Workplace Award” winner in 2014 and 2015, which distinguishes the world’s most engaged and productive companies. This recognition is rewarding in that it reflects our Culture of CaringSM approach in the relationships our team members build with our customers and with each other. A key part of that approach is working together, using what’s in our hearts, not just in our heads, to care for and earn relationships with our customers. A recent letter from a customer brought home to me the power of relationships to change lives. Five years ago, this customer would regularly come into one of our Portland, Oregon, bank stores to cash his paychecks. He gradually formed a relationship with Store Manager Ruvim Kruzhkov. Our Performance $ in millions, except per share amounts 2015 2014 % Change FOR THE YEAR Wells Fargo net income $ 22,894 23,057 (1) Wells Fargo net income applicable to common stock 21,470 21,821 (2) Diluted earnings per common share 4.12 4.10 - Profitability ratios: Wells Fargo net income to average assets (ROA) 1.31% 1.45% (10) Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE) 12.60 13.41 (6) Efficiency ratio 1 58.1 58.1 - Total revenue $ 86,057 84,347 2 Pre-tax pre-provision profit 2 36,083 35,310 2 Dividends declared per common share 1.475 1.350 9 Average common shares outstanding 5,136.5 5,237.2 (2) Diluted average common shares outstanding 5,209.8 5,324.4 (2) Average loans $ 885,432 834,432 6 Average assets 1,742,919 1,593,349 9 Average total deposits 1,194,073 1,114,144 7 Average consumer and small business banking deposits 3 680,221 639,196 6 Net interest margin 2.95% 3.11% (5) AT YEAR-END Investment securities $ 347,555 312,925 11 Loans 916,559 862,551 6 Allowance for loan losses 11,545 12,319 (6) Goodwill 25,529 25,705 (1) Assets 1,787,632 1,687,155 6 Deposits 1,223,312 1,168,310 5 Common stockholders’ equity 172,036 166,433 3 Wells Fargo stockholders’ equity 192,998 184,394 5 Total equity 193,891 185,262 5 Capital ratios 4: Total equity to assets 10.85% 10.98% (1) Risk-based capital: Common Equity Tier 1 11.07 11.04 - Tier 1 capital 12.63 12.45 1 Total capital 15.45 15.53 (1) Tier 1 leverage 9.37 9.45 (1) Common shares outstanding 5,092.1 5,170.3 (2) Book value per common share 5 $ 33.78 32.19 5 Team members (active, full-time equivalent) 264,700 264,500 - 1 The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income). 2 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. 3 Consumer and small business banking deposits are total deposits excluding mortgage escrow and wholesale deposits. 4 See the “Financial Review — Capital Management” section and Note 26 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information. 5 Book value per common share is common stockholders’ equity divided by common shares outstanding. 6 | 2015 Annual Report 2015 Annual Report | 7 Ruvim realized that the customer needed the security of a bank account despite challenges with his credit history. He worked with the customer to open an Opportunity Checking Account, a type of account we created especially for customers with credit challenges. Over the years, the customer has improved his credit to qualify for a regular account, a credit card, and later a home mortgage and a line of credit for his growing business. He wrote to tell me, “I attribute much of that growth to Ruvim's support over the years… . All I can say is that there is a true feeling of care at Wells Fargo.” We also are on our customers’ side when emergencies occur. For example, after the Memorial Day 2015 floods in the Houston area, our company donated $275,000 for relief efforts, and our team members staffed a specially designed mobile response unit six days a week, up to 10 hours a day, for customers. That allowed us to provide cash and mortgage assistance, insurance claim check processing, and help in starting the recovery process. We also provided grants and services to support disaster-relief efforts in other areas affected by devastating events such as wildfires in the West and in Alaska, the earthquake in Nepal, and flooding in South Carolina. Earning relationships with our communities At Wells Fargo, we earn long-term relationships with our communities by creating a positive, lasting connection. We are a Main Street bank, and we are committed to strengthening our communities through our operations, business practices, employment opportunities, philanthropy, and community engagement. Our team members volunteer their time and donate to nonprofits and causes important to them. In 2015, Wells Fargo team members volunteered 1.8 million hours and contributed $98.8 million to nonprofits and schools. United Way Worldwide has ranked our workplace-giving campaign the largest in the U.S. each of the past seven years. In addition to the generous donations from our team members, Wells Fargo is one of the top corporate cash donors among U.S. companies. Over the past five years (2011 – 2015), Wells Fargo has donated $1.4 billion to support and revitalize communities, help charitable organizations, and grow local economies. In our communities we particularly focus on social, economic, and environmental programs and activities. Here are some examples: Social: We are focused on supporting the varied needs of our global customer base. One of our most important commitments as a company is to support those in the military who have served or continue to serve our country. Since 2012, we have donated more than $66 million in the form of assistance to nonprofits, education, job training, and property, including more than 300 mortgage-free houses to wounded veterans and their families. We employ more than 8,000 self-identified veterans and are committed to hiring more. Our long-term community relationship with the Metropolitan Economic Development Association (MEDA) is a terrific example of how we work with nonprofit partners to strengthen our communities. Wells Fargo co-founded MEDA with other business leaders in 1971 in Minneapolis to support the development of minority-owned businesses, break down barriers, and provide equal economic opportunities. Since its start, MEDA has helped more than 19,000 entrepreneurs and assisted in the start-up of nearly 500 businesses. One of its clients, H&B Elevators, is a subcontractor for the construction of our new Minneapolis office buildings. H&B Elevators, which is African- American owned, is providing design and manufacturing services for the buildings’ elevator cab interiors. We are delighted to work with diverse suppliers such as H&B Elevators and, in 2015, surpassed our goal of spending at least 10 percent of our annual procurement budget with diverse vendors. Economic: We are focused on strengthening individuals’ financial knowledge and opportunities for underserved communities. We continue to provide free financial education courses to thousands of military members, seniors, small business owners, and youth each year through Hands on Banking®, now in its 13th year. Homeownership and access to safe, sustainable housing continue to be critical community needs. Our team members have volunteered more than 4.7 million hours through the Wells Fargo Housing Foundation since 1993, mobilizing to build and rehabilitate nearly 5,600 homes. We also have long-term relationships with Habitat for Humanity affiliates across the U.S. Additionally, our LIFT programs have helped create more than 10,725 homeowners in 39 communities since 2012, through more than $278 million of down payment and other financial assistance. We’re also working to create more Hispanic homebuyers through our support of the National Association of Hispanic Real Estate Professionals’ Hispanic Wealth Project. In support of this project, Wells Fargo Home Mortgage has a goal of originating $125 billion in mortgages to our Hispanic homebuying customers during the next 10 years by increasing our presence in diverse communities, working with referral sources, and providing products and programs that support diverse homeownership. Environmental: We also work to accelerate the transition to a lower-carbon economy and reduce the impact of climate change. Our Environmental Solutions for Communities five-year grant program, begun in 2012, has funded more than $9.8 million in grants to more than 250 nonprofits to date that promote conservation and environmental sustainability in communities across the U.S. We work hard to make our internal operations more efficient by minimizing waste and using renewable sources of energy. Today, more than 20 million square feet of office space across 418 bank stores and other locations is Leadership in Energy and Environmental Design (LEED) certified. The U.S. Green Building Council recognized our leadership, naming us the “green” building leader among financial institutions in 2015. More information about our community efforts is available in our Corporate Social Responsibility Report at wellsfargo.com under “About Wells Fargo.” Earning relationships with our shareholders We also work to build long-term relationships with our shareholders and earn their confidence through our performance over time. We believe that we attract shareholders and sustain relationships through the many long-term advantages that we offer investors, including our leading market share in cornerstone products; diversified and balanced revenue sources; strong risk discipline; experienced management team; and consistent culture. These advantages and our financial performance have enabled us to continue to return more capital to our shareholders than in the previous year. I noted earlier that in 2015 we returned $12.6 billion through common stock dividends and net share repurchases. Further reinforcing the long-term nature of our commitment, Wells Fargo leads in total shareholder return among our bank peer group over the past five- and 10-year periods (ended Dec. 31, 2015). Actively preparing for the future While we take great pride in the relationships we are earning today, and those we’ve earned over our history, we are hardly anchored to the past. The world is changing rapidly, and one of the ways we keep the customer at the center of all we do is by innovating. In addition to the six priorities I mentioned earlier, which we concentrate on daily, we have identified four drivers that we believe are critical to our future success: Creating exceptional customer experiences Customer experience is at the core of our Culture of Caring focus, in how we treat our customers and each other. As our team members do their jobs, they demonstrate a positive and caring attitude for customers every day. This mindset is so important to our success that I like to say we hire for attitude and train for aptitude. Exceptional customer experiences also stem from a can-do mindset. If there’s a better way, we’ll work hard to find it for our customers. For example, we enhanced the account-opening process for our retail banking customers in 2015 through our “Steps to Better Banking” program. The program provides information about how to avoid service fees, explains choosing and setting up numerous types of text alerts, and offers other key resources — all within an hour of opening an account. A third mindset of caring for our customers is realizing that at Wells Fargo, we are better together. That means communicating clearly with our customers, such as sending timely alerts on account transactions. And we provide free retirement assessments and online educational resources such as our Smarter Credit™ center and My Money MapSM, Total Shareholder Return (annualized) Ended Dec. 31, 2015 5yr Rank 10yr Rank Wells Fargo 14.7% 1 8.5% 1 Bank of America 5.4% 11 -7.6% 10 BB&T 10.5% 6 2.7% 5 Capital One 12.4% 2 -0.4% 6 Citigroup 2.0% 12 -18.6% 12 Fifth Third Bancorp 9.2% 8 -3.5% 8 JPMorgan Chase 12.1% 4 7.9% 2 KeyCorp 10.3% 7 -6.3% 9 PNC Financial 11.9% 5 7.1% 3 Services Regions 7.9% 10 -9.5% 11 Financial SunTrust 9.1% 9 -3.0% 7 U.S. Bancorp 12.1% 3 6.6% 4 S&P 500 (SPX) 12.5% 7.3% KBW 9.1% -1.0% Nasdaq bank index (BKX) Source: Bloomberg, includes share price appreciation and reinvested dividends an online tool that enables customers to track spending, budgeting, and savings in easy-to-understand charts. We care deeply for our customers and want to do all we can to help them achieve financial success. Digitizing the enterprise We continue to make new technology offerings and channels available throughout our businesses. Our customers have responded enthusiastically to text and email alerts, payment solutions like Apple Pay™ and Android Pay™, and pilots of biometric customer authentication for both business and retail customers that we expect to roll out later this year. We introduced the yourLoanTrackerSM service in 2015 to allow our customers to monitor the status of their loans throughout the home-financing process using their computer, smartphone, or tablet. We are careful not to create new technologies in isolation; the value of innovation is when technology is aligned. This means that all of our distribution channels — locations, phone banks, ATMs, 8 | 2015 Annual Report 2015 Annual Report | 9 online, and mobile banking — work together, integrated with our products, to benefit customers. In 2015, we brought together team members from existing Wells Fargo teams to form a new Innovation Group, a cross-functional organization to help keep us at the leading edge of technological innovation in financial services. Key focuses of the Innovation Group include research and development, payment strategies, design and delivery, and analytics. Making diversity and inclusion part of our DNA As a Main Street bank, it’s critical that our team members reflect the makeup of our communities so we can better understand and serve the different needs of our customers. Our company is characterized by diversity — from our board of directors to customer-facing team members. Overall, 57 percent of U.S.-based team members are women, and 41 percent are ethnically/racially diverse. Women head two of our four major businesses, and our board is among the most diverse in the industry (44 percent women and 31 percent ethnically/racially diverse). Our goals of recognizing and serving all customers include those customers with disabilities, and we are especially focused on using technology to eliminate accessibility barriers. We were the first bank to offer voice-enabled ATMs to assist our visually impaired customers, and these ATMs now speak in English and Spanish. We also offer credit and debit cards in Braille. I am delighted by the recognition we’ve received by outside organizations that monitor diversity and inclusion. For example, in 2015 we were recognized by DiversityInc as the No. 1 Company for LGBT Employees, 7th Top Company for Veterans, and as the 11th Top Company for Diversity; and by LATINA Style as the 8th Best Company for Latinas. Additionally, we received a perfect score of 100 percent on the 2016 Corporate Equality Index, a national benchmarking survey and report on corporate policies and practices related to LGBT workplace equality. This is the 13th consecutive year that Wells Fargo has earned a 100 percent score. At Wells Fargo, every team member is responsible for managing risk. Leading the way in risk management and operational excellence Effective risk management practices help us better serve our customers, maintain and improve our position in the market, and protect the long-term safety, soundness, and reputation of Wells Fargo. We understand that trust is the core of any meaningful relationship. At Wells Fargo, every team member is responsible for managing risk. Protecting our customers’ assets and providing financial security are key principles in our risk-focused culture. We continue to invest heavily in risk management and information security to meet our goals of protecting our customers’ information and assets, safeguarding our infrastructure and systems, and setting the global standard for risk management excellence among financial institutions. Operational excellence is part of our Vision & Values and is a key driver in the value we provide shareholders. We apply it at every level of the company, focusing on creating sustainable improvement for our business, enhancing the customer experience, mitigating risk, and increasing efficiency. In closing Our Annual Report would not be complete without recognizing the hard work of our board of directors. Their knowledge, experience, and leadership are integral to Wells Fargo’s success. I want to acknowledge Judy Runstad, who will be retiring from the board at our annual meeting of stockholders in April. Judy joined our board in 1998, and she has been an outstanding director. We will miss her many contributions, and I thank her for her service. As our company moves forward, we will continue to focus on earning and building lifelong relationships. That is how we have done business for the past 164 years, and that focus is at the heart of our culture. I am thankful for the leadership of 265,000 team members who are focused on creating and sustaining relationships with our customers and on putting our customers’ interests first. And I thank customers for allowing us to help them with their financial needs. I am grateful to our community partners that work with us to improve our communities. And I appreciate our shareholders, who show their trust by investing in our company. Thanks for your part in allowing us to earn and nurture the relationships that are core to both our past and future successes. John G. Stumpf Chairman and Chief Executive Officer Wells Fargo & Company February 1, 2016 10 | 2015 Annual Report Julian Salazar and Paulette Drake Portland, Oregon 2015 Annual Report | 11 Building confidence when ‘it isn’t easy to talk about money’ Paulette and Chris Drake Retirees Paulette and Chris Drake live on a fixed income and realized they needed help budgeting. They knew online tools were an option, but entering their financial information on a website they weren’t familiar with was a concern. Enter Personal Banker Julian Salazar, who met with Paulette and Chris at their local Wells Fargo in Portland, Oregon. He introduced them to a Wells Fargo online tool to help the couple track their spending. “Julian took the time on that first visit — and subsequent visits — to answer my questions,” Paulette said. “I loved that he really listened to me and made me feel comfortable. That’s so important, because it isn’t easy to talk about money.” Julian found it easy to connect with the Drakes because he, too, uses Budget Watch, part of Wells Fargo’s free online tool My Money MapSM. Having moved to Portland for better Paulette Drake medical care for his young son, Julian said the tool has helped his family manage its money more effectively. Once they gained confidence using Budget Watch, the Drakes set budgeting goals and said they found it easier to manage transactions online. A year later, Paulette said, “It’s taken a lot of pressure off of me because I don’t have to manually calculate our budget and save every receipt. Along with Julian’s guidance, it’s helped ease our financial concerns.” Because they’re now tracking their spending online, they say they’re more confident about the future. Julian checks in with the Drakes each quarter to discuss their financial goals and how they’re doing. He said, “I’m just glad the Drakes benefit from our guidance and online tools.” Learn more at wellsfargo.com/stories. 2015 Annual Report 12 | John Martinelli Watsonville, California 2015 Annual Report | 13 Fruits of family’s labor: From seed to sparkling success John Martinelli In 1859, Stephen G. Martinelli moved from Switzerland to California’s fertile Central Coast, where his brother had started farming apples a few years earlier. Because they didn’t have a way to preserve apple juice, Stephen started to experiment with hard apple cider and developed an effervescent version. Today, Stephen’s great-grandson, John, runs S. Martinelli & Company, a Wells Fargo customer best known for Martinelli’s Gold Medal apple juice and nonalcoholic sparkling ciders. “My grandfather, Stephen G. Martinelli Jr., also was a pioneer. A couple years before Prohibition would have rendered our primary product illegal, he developed a pasteurization process to preserve apple juice products,” said John. “If it wasn’t for his work, we wouldn’t have been able to transition to a nonalcoholic sparkling cider, which is now our No. 1 product.” Wells Fargo has worked with S. Martinelli & Company for more than 100 years — from when it was a small, regional producer to today as a major national brand with export markets in Mexico, South Korea, Canada, Japan, and elsewhere. “The Wells Fargo team has served us really well — even internationally — as we prepare to directly manage potential currency risks,” said CFO Gun Ruder. John said, “Wells Fargo has helped fund every one of our major projects, including property purchases, buildings, bottling equipment, and apple presses, as well as working capital needs.” As S. Martinelli & Company looks to vertically integrate and expand its operations, Wells Fargo has been a valuable consultant. Relationship Manager Ryan Pacheco said, “We’ve been talking with Martinelli’s about agriculture lending and lines of credit for crops, which can be essential as the company integrates its growing operations to secure its apple supply.” Gun concluded, “Wells Fargo is flexible and responsive and has developed an excellent understanding of our business.” Learn more at wellsfargo.com/stories. Gun Ruder, Ryan Pacheco, and John Martinelli 14 | 2015 Annual Report Shyam A. Maharaj Fort Lauderdale, Florida 2015 Annual Report | 15 Refinancing paves the road to more savings — and a second car Shyam Maharaj As a physical therapist who sees patients in their homes, Shyam A. Maharaj had put a good deal of wear and tear on his sport utility vehicle while making house calls. As a result, he thought it was time to get a second car to avoid wearing out the SUV. In his quest to find the best used vehicle, Shyam credits Wells Fargo’s Kyle Fleeger, an auto-loan sales consultant, who helped at every step along the way. Shyam said he even called Kyle while he was on the road, shopping for a car, to check on pricing and the vehicle’s value, and ultimately to make sure his preapproval would cover the car he was considering. “It was very convenient for me, given that I work long hours and have to travel all over for my job. It was great working with Kyle on the phone,” said Shyam. Shyam’s first priority was to find a way to afford a second vehicle. So Kyle helped him refinance his SUV loan and save enough money to make another vehicle possible. Shyam, who lives in Fort Lauderdale, Florida, said at first he didn’t even realize that Kyle worked 2,300 miles away in Chandler, Arizona. A telephone sales specialist for an inbound and outbound sales team, Kyle said more of his customers are using phone sales and support in the car-buying process. “We put them in a position to have some fun in their shopping,” he said. “Kyle went above and beyond what I could have hoped for in dealing with my situation,” said Shyam, a long-time Wells Fargo customer. “He took the time to research everything, and I knew he was really working hard on what I needed.” Learn more at wellsfargo.com/stories. 16 | 2015 Annual Report Larry Chavez Albuquerque, New Mexico 2015 Annual Report | 17 Banking relationship and business grow in tandem over the years Larry Chavez and Laurie Cini-Donovan Larry Chavez’s relationship with his bank is as old as his business, Dreamstyle Remodeling of Albuquerque, New Mexico. And since 1989, both his business and his relationship with Wells Fargo have flourished. “The day I started this company, I opened an account at Wells Fargo,” Larry said. “We’ve had pretty dramatic growth since, and Wells Fargo has been an important collaborator throughout.” In the past five years, the home- remodeling company has expanded from 110 employees to 360, and annual sales have increased substantially. Wells Fargo helped finance the company's recent expansion into Southern California, Arizona, Idaho, and west Texas, which included three new facilities. Just like the customers who want to enhance their homes for the future, Larry is intent on securing Dreamstyle Remodeling’s future. “We’re very focused on the company’s succession, and we have the best people in place to lead us,” Larry said. Wells Fargo plays a big role in the company’s future, he said, noting that bankers Katrina Tracy and Laurie Cini-Donovan “know my business inside and out, and they’re responsive to all my business needs.” Dreamstyle Remodeling’s relationship with Wells Fargo stretches from multiple commercial accounts to financing, merchant services, personal accounts, and investments. The company also relies on Wells Fargo to provide consumer finance options to its customers. “It goes beyond the bank accounts and financing,” Larry said. “Everything we’ve done with Wells Fargo has increased our efficiency.” Laurie said, “Knowing his business so well has deepened our relationship. Larry sees the potential and benefits in thinking of us as if we were true business consultants.” Learn more at wellsfargo.com/stories. Larry Chavez 18 | 2015 Annual Report Jaejung and Gary Cohen Livingston, New Jersey 2015 Annual Report | 19 House hunters find the one, with an assist from halfway across the U.S. Gary Cohen and daughter Jyetta Gary and Jaejung Cohen of Livingston, New Jersey, hunted relentlessly for the right house with just the right features in the school district they wanted for their two young daughters. Twice they canceled contracts for houses they decided ultimately didn’t quite measure up to their expectations. The third time was a charm, however, thanks, in part, to Wells Fargo’s Shane Parker and Brittany Taylor — both halfway across the U.S. in Des Moines, Iowa. “We had worked with Shane as our mortgage consultant six years ago when we refinanced our home,” said Gary, a lawyer in metro New York. “It went so well then that we called him again this time for a preapproval — even before we started house shopping. He helped it go smoothly.” Once the Cohens had made an offer on a home, Brittany, a loan processor, helped them streamline their paperwork using an online tool Jaejung Cohen and daughter Rayel called yourLoanTracker℠. The tool lets customers check the status of their mortgage on their computers or mobile devices. The Cohens also used the tool to electronically file select documents and received email and text alerts about important milestones. Jaejung, a risk manager for an insurance company, said, “Shane and Brittany did a great job of working with us throughout the process.” Shane said, “As phone-based mortgage consultants, we find that our role is growing every day as we preserve the human touch with customers while also using technology to shorten the distance between us. We have the ability not only to help customers walk through the process, but also to put more time into building relationships with them, which is just as important.” Learn more at wellsfargo.com/stories. 20 | 2015 Annual Report Paul Hartman and Cheryl Beckman Louisville, Kentucky 2015 Annual Report | 21 Smooth transition of retirement plan goes down easy Andrew Simon and Cheryl Beckman When a company is helping its employees plan for a comfortable retirement, establishing trust is essential. That’s one reason Brown-Forman ��� an American-owned spirits and wine company in Louisville, Kentucky — chose Wells Fargo Institutional Retirement and Trust as its 401(k) plan provider. “Wells Fargo made our more than 4,100 employees feel at ease,” said Cheryl Beckman, director of Global Benefits at Brown-Forman, “tailoring transition communications based on where they are in their careers.” Wells Fargo’s Paul Hartman said there are a lot of synergies between the two companies “in terms of how we view our relationships with customers, vendors, and team members.” Brown-Forman, founded in 1870, is the maker of many spirit brands, such as Jack Daniel’s, Old Forester, Woodford Reserve, Finlandia Vodka, Sonoma–Cutrer wines, and others. The company started working with Institutional Retirement and Trust in 2014 after more than a decade of working with the Corporate Banking team on lines of credit and foreign exchange. Together, Brown-Forman and Wells Fargo devised detailed communication plans, including informational sessions for employees at all the company’s major locations, from corporate offices to barrel-making facilities to vineyards. Some sessions were conducted in both English and Spanish. Andrew Simon, Brown-Forman’s director of People Development and Rewards, said, “We’re a growing company but have a small-company feel and strive to provide a premium experience for our employees. So giving them multiple ways to learn about retirement planning was important.” That, plus enhanced plan options such as the addition of a Roth feature and an employer-matching contribution, led to success: Brown-Forman has seen an 11 percent increase in employees raising their contribution percentage to take advantage of the full company match. “When Wells Fargo commits something to us, it’s going to happen,” Andrew said. Learn more at wellsfargo.com/stories. Paul Hartman, Cheryl Beckman and Andrew Simon 22 | 2015 Annual Report Karen Spotted Tail Rosebud, South Dakota 2015 Annual Report | 23 Teaming up to bring affordable solar power Karen Spotted Tail to the people In a six-year period, members of the Rosebud Sioux Tribe in South Dakota saw their electricity costs increase by 50 percent. As a result, Karen Spotted Tail, a member of the tribe, struggled to pay her bills. In October 2015, GRID Alternatives — a nonprofit that makes renewable energy accessible to low-income communities — donated and installed solar panels on Karen’s roof. After two months, the cost of her utilities had dropped significantly. Such success has helped create awareness of solar energy across the tribal community, accordi

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