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Wells Fargo & Company
Basel III Pillar 3 Regulatory Capital Disclosures
For the quarter ended March 31, 2015
Table of Contents�
Disclosure Map........................................................................................................................................... 3�Introduction ............................................................................................................................................... 4�
Executive Summary ................................................................................................................................ 4�
Company Overview................................................................................................................................. 4�
Basel III Overview .................................................................................................................................. 5�
Capital Requirements and Management .................................................................................................... 9�Capital Summary....................................................................................................................................... 11�Credit Risk.................................................................................................................................................13�
Overview ................................................................................................................................................13�
Wholesale Credit Risk............................................................................................................................14�
Retail Credit Risk...................................................................................................................................15�
Counterparty Credit Risk ......................................................................................................................15�
Securitization Credit Risk......................................................................................................................17�
Equity Investment Credit Risk...............................................................................................................21�
Market Risk .............................................................................................................................................. 24�Supplementary Leverage Ratio ................................................................................................................ 24�Glossary of Acronyms............................................................................................................................... 26�Forward-Looking Statements....................................................................................................................27�
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Disclosure Map
The tables below illustrate where disclosures related to topics addressed in this Pillar 3 disclosure report can be found in our first
quarter 2015 Form 10-Q and our 2014 Form 10-K.
Pillar 3
Requirement
Pillar 3
Report
page
Description First Quarter 2015
Form 10-Q
reference
2014
Form 10-K
reference
4-8 Overview Capital Management and Note 1 Capital Management,
Risk Management Framework and Culture, Notes 1 and 3
9-10 Capital Management and Structure Capital Management, Risk Management Framework and Culture,
Capital Planning and Stress Testing, Notes 18 and 19
Scope of Application/
Capital Structure
& Capital Adequacy
11-12 Measurement of Capital
13-15 Credit Risk Management Overview Credit Risk Management and Note 1 Credit Risk Management and Asset/Liability Management and Note 1 Credit Risk:
General Disclosures
13-14 Exposure types/ Impaired Loans and ALLL Notes 4, 5 and 12
13-14 Industry and Geographic distribution Notes 4, Tables 1, 8, 13,
14, 16, 22 and 28
12 Risk Weighted Assets
Counterparty Credit Risk 15 Overview
15-17 Counterparty Credit Risk Management/Collateral Note 12
Credit Risk Mitigation Guarantees and Credit Derivatives Note 10 Off-Balance Sheet Arrangements and Note 14
Securitization 17-18 Objectives and Roles
18-20 Risk Management and Methodology
19-21 Accounting, Valuation and Current Period
Activity
Note 7
20 Assets Securitized and Re-securitized Note 7
21-22 Policies and Practices Note 1 Note 1 Equity Investments -
23 Nonmarketable and Marketable Equity Non-covered
23 Realized and Unrealized Gains/(Losses)
Market Risk 24 Market risk Market Risk-Trading Activities,
and Market Risk Governance
Risk Management Framework and Culture
- Overview Interest Rate Risk Interest Rate Risk
for Non-Trading Activities
- Earnings Sensitivity Asset/Liability Management and Table 33
Supplementary Leverage
Ratio
24-25 Supplementary Leverage Ratio Capital Management
Page
reference
Page
reference References to Wells Fargo & Company's First Quarter 2015 Form 10-Q References to Wells Fargo & Company's 2014 Form 10-K
Management's Discussion and Analysis (Form 10-Q) Management's Discussion and Analysis (Form 10-K)
Credit Risk Management 19-41 Off-Balance Sheet Arrangements 52-53
Asset/Liability Management 42-55 Credit Risk Management 58-86
Interest Rate Risk 42 Risk Management Framework and Culture 54-56
Market Risk-Trading Activities 43-52 Asset/Liability Management 86-99
Market Risk Governance 50 Capital Management 100-105
Capital Management 56-61 Capital Planning and Stress Testing 101
Table 1 Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) 6
Table 8 Maturities for Selected Commercial Loan Categories 15
Table 13 Commercial and Industrial Loans and Lease Financing by Industry 22
Table 14 CRE Loans by State and Property Type 23
Table 17 Real Estate 1-4 Family First and Junior Lien Mortgage Loans by State 26
Table 22 Junior Lien Mortgage Line and Loan and Senior Lien Mortgage Line Portfolios Payment Schedule 31
Table 28 Loans 90 Days or More Past Due and Still Accruing 37�
Table 33 Earnings Sensitivity Over 24 Month Horizon Relative to Most Likely Earnings Plan 43�
Notes to Consolidated Financial Statements (Form 10-Q) Notes to Consolidated Financial Statements (Form 10-K)
Note 1 Summary of Significant Accounting Polic ies 73-74 Note 1 Summary of Significant Accounting Policies 139-148
Note 4 Investment Securities 76-82 Note 3 Cash, Loan and Dividend Restrictions 150
Note 5 Loans and Allowance for Credit Losses 83-99 Note 14 Guarantees, Pledged Assets and Collateral 199-202
Note 7 Securitizations and Variable Interest Entities 101-108 Note 18 Preferred Stock 235-237
Note 10 Guarantees, Pledged Assets and Collateral 113-115 Note 19 Common Stock and Stock Plans 238-241
Note 12 Derivatives 117-123
3
Any reference to “Wells Fargo,” “the Company,” “we,” “our” or “us” in this Report, means Wells Fargo & Company and Subsidiaries
(consolidated). When we refer to the “Parent,” we mean Wells Fargo & Company. See the Glossary of Acronyms and Other Terms for
the definition of terms used throughout this Report. This Report contains forward-looking statements, which may include our current
expectations and assumptions regarding our business, the economy and other future conditions. Please see the “Forward-Looking
Statements” section for more information, including factors that could cause our actual results to differ materially from our forward-
looking statements.
Introduction
Executive Summary
The Pillar 3 disclosures included within this Report are required by the regulatory capital rules issued by the Office of the Comptroller of
the Currency (OCC) the Board of Governors of the Federal Reserve System (FRB) (collectively, the Agencies), and the Federal Deposit
Insurance Corporation (FDIC), and are designed to comply with the rules and regulations associated with the capital adequacy
framework, known as Basel III, which prescribed these disclosures under its Pillar 3 - Market Discipline rules. These disclosures should
be read in conjunction with our Quarterly Report on Form 10-Q for the period ended March 31, 2015 (first quarter 2015 Form 10-Q) and
our Annual Report on Form 10-K for the year ended December 31, 2014 (2014 Form 10-K). The Pillar 3 disclosures provide qualitative
and quantitative information about regulatory capital calculated in conformity with the transition provisions under the Standardized
Approach for first quarter 2015. In March 2015, the Agencies announced that the Company and its national subsidiary banks may exit
the parallel run phase and begin using and reporting under the Advanced Approach capital framework to determine risk-based capital
requirements starting in second quarter 2015.
At March 31, 2015, the Company and each of its insured depository institutions were well-capitalized under applicable regulatory capital
adequacy guidelines. Based on the Standardized Approach (with required transitional adjustments), the Company’s Common Equity
Tier 1 (CET 1) capital ratio was 10.69% at March 31, 2015, and its Tier 1 and total risk-based capital ratios were 12.20% and 15.08%,
respectively. These ratios exceed minimum fully phased-in ratios, inclusive of a buffer applicable to us given our designation as a
global systemically important bank (G-SIB), of 8.0%, 9.5% and 11.5%, respectively.
In addition, under supplementary leverage ratio (SLR) requirements, which require disclosure beginning in 2015, the Company’s
estimated SLR was 8.0% at March 31, 2015, assuming full phase-in of the Advanced Approach capital framework. The SLR rule, which
becomes effective on January 1, 2018, will require a covered bank holding company to maintain a minimum SLR of at least 5% to avoid
restrictions on capital distributions and discretionary bonus payments. The rule will also require that all of our insured depository
institutions maintain a SLR of at least 6% in order to be considered well capitalized. Based on our review, our current leverage levels
would exceed the applicable requirements for each of our insured institutions as well.
Company Overview
Wells Fargo & Company is a nationwide, diversified, community-based financial services company with $1.7 trillion in assets. Founded
in 1852 and headquartered in San Francisco, we provide banking, insurance, investments, mortgage, and consumer and commercial
finance through more than 8,700 locations, 12,500 ATMs and the internet (wellsfargo.com) and mobile banking, and we have offices in
36 countries to support customers who conduct business in the global economy. With approximately 266,000 active, full-time
equivalent team members, we serve one in three households in the United States and are ranked No. 29 on Fortune’s 2014 rankings of
America’s largest corporations. We ranked fourth in assets and first in the market value of our common stock among all U.S. banks at
March 31. 2015.
4
As a financial institution, Wells Fargo must manage a variety of business risks that can significantly affect our financial performance.
Among the key risks that we manage are credit, operational, and asset/liability management risks, which include interest rate, market,
liquidity and funding risks. Our risk culture is strongly rooted in our Vision and Values, and in order to achieve our vision of satisfying
all our customers’ financial needs and helping them succeed financially, our business practices and operating model must support
prudent risk management practices. A discussion of our risk management framework and culture is provided in the “Risk Management
Framework and Culture” section in Management’s Discussion and Analysis to our 2014 Form 10-K and is applicable to our management
of the credit, operational, and asset/liability management risks as discussed in this Report.
Basel III Overview
In July 2013, the Agencies and FDIC adopted the Basel III Final Rule for U.S. Bank Holding Companies and Banks (Final Rule) with an
effective date of January 1, 2014. Basel III establishes a capital adequacy framework, which provides for measuring required capital
under various approaches applied in a phased manner encouraging market discipline. These approaches include the Advanced
Approach and Standardized Approach. Also see the “Capital Management” section in Management’s Discussion and Analysis to our
2014 Form 10-K and our first quarter 2015 Form 10-Q for additional background and history of the various regulatory capital adequacy
rules we follow.
In July 2012, prior to the finalization of the Basel III capital rules, we entered the “parallel run phase” of Basel II, during which banking
organizations must successfully complete an evaluation of specific risk measurement and management criteria for the period under
supervision of regulatory agencies in order to receive approval to calculate risk-based capital requirements under the Advanced
Approach methodology. On March 31, 2015, the FRB and OCC announced that the Company and its national subsidiary banks may exit
the parallel run phase and begin using the Advanced Approach capital framework to determine risk-based capital requirements starting
in second quarter 2015. The approval did not include stipulations requiring Wells Fargo to increase its current Advanced Approach
risk-weighted assets (RWAs). Consistent with the Collins Amendment to the Dodd-Frank Act, banking organizations that have
completed their parallel run process and have been approved by the FRB to use the Advanced Approach methodology to determine
applicable minimum risk-weighted capital ratios and additional buffers must use the higher of their RWAs as calculated under the
Advanced Approach and the Standardized Approach. Currently, the CET1 ratio is lower using management’s estimate of RWAs
determined under the Advanced Approach but the amount of RWAs determined under the Standardized and Advanced Approaches has
been converging. Wells Fargo will become subject to the requirements of the Advanced Approach rules for its second quarter 2015
reporting. As such, the tables within this report include RWA information under the Standardized Approach.
The Final Rule is part of a comprehensive set of reform measures and regulations intended to improve the banking sector’s ability to
absorb shocks arising from financial and economic stress, improve risk management and governance, and strengthen banks’
transparency and disclosures. To achieve these objectives, the Final Rule, among other things:
• Implements in the United States the Basel III regulatory capital reforms, including those that revise the definition of capital,
increases minimum capital ratios, and introduces a minimum CET1 ratio of 4.5%, a capital conservation buffer of 2.5% (for a
total minimum CET1 ratio of 7.0%), and a potential countercyclical buffer of up to 2.5% which would be imposed by regulators
at their discretion if it is determined that a period of excessive credit growth is contributing to an increase in systemic risk;
• Revises Basel I rules for calculating RWAs to enhance risk sensitivity under the Standardized Approach; and
• Modifies the existing Basel II Advanced Approach rules for calculating RWAs to implement Basel III;
• Requires a ratio of Tier 1 capital to average total consolidated assets of 4.0% and introduces, for large and internationally
active bank holding companies (BHCs) supplementary leverage ratio (SLR) of 3% that incorporates off-balance sheet
exposures;
• Introduces additional SLR requirements effective January 1, 2018, which will require a covered bank holding company to
maintain a SLR of 5.0% and insured depository institutions to maintain a SLR of 6.0% to be considered well capitalized.
5
In addition, the Financial Stability Board (FSB) implemented a CET1 capital surcharge on those U.S. banking organizations that have
been designated by the Financial Stability Board (FSB) as global systemically important banks (G-SIBs). The G-SIB buffer is expected to
be phased in beginning January 1, 2016 and become fully effective on January 1, 2019.
The Standardized Approach is applicable to all banking organizations for which the Final Rules apply. The Advanced Approach is only
applicable to banking organizations with consolidated assets greater than $250 billion or with foreign exposures exceeding $10 billion
on their balance sheet.
The Final Rule is structured around three Pillars as follows:
• Pillar 1 – Minimum Capital Adequacy Standards: Relative to Basel I, Basel III requires banks to develop more refined
approaches to quantifying the capital requirements for credit risk, and also introduces a capital charge for operational risk
under the Advanced Approach, which was not included in Basel I.
• Pillar 2 – Internal Capital Adequacy Assessment Process: Pillar 2 modifies Pillar 1 capital requirements to include
idiosyncratic risk in addition to risks banks face that are not included in Pillar 1 (e.g. interest rate risk on the banking book).
Pillar 2 is principle-based and places significant emphasis not just on the calculations of capital, but also the calculation
processes and the mechanisms management uses to assure itself that Wells Fargo is adequately capitalized. In accordance
with Pillar 2, Wells Fargo is required to develop and maintain an Internal Capital Adequacy Assessment Process (ICAAP) to
support the assessment of its capital adequacy. Furthermore, Pillar 2 outlines principles of supervisory review to monitor the
banks’ capital and evaluate the banks’ management of risks through the use of internal control processes.
• Pillar 3 – Market Discipline: The objective of Pillar 3 is to improve risk disclosure in order to permit market forces to
exert pressure on insufficiently capitalized banks. This results in the establishment of new minimum requirements for
qualitative and quantitative disclosures to be made available to the public that contain the outcome of capital calculations and
risk estimates, as well the methods and assumptions used in performing those calculations. Wells Fargo was required to
comply with the Final Rule beginning January 1, 2014, with certain provisions subject to phase-in periods. On January 28,
2015, the Basel Committee on Banking Supervision (BCBS) issued the final standard for the revised Pillar 3 disclosure
requirements. These revisions will enable market participants to compare banks’ disclosures of risk-weighted assets and
improve transparency of the internal model-based approaches that banks use to calculate minimum regulatory capital
requirements. The proposed effective date for the revised Pillar 3 requirements is December 31, 2016, and is currently pending
action by U.S. regulators.
Scope of Application of Basel III
The Basel III framework applies to Wells Fargo & Company and its banking subsidiaries. Wells Fargo & Company’s bank subsidiaries
are Wells Fargo Bank, National Association (Wells Fargo Bank, N.A.), Wells Fargo Bank South Central, National Association (Wells
Fargo Bank South Central, N.A.), Wells Fargo Bank Northwest, National Association (Wells Fargo Bank Northwest, N.A.), Wells Fargo
Financial National Bank, Wells Fargo Delaware Trust Company, National Association (Wells Fargo Delaware Trust Company, N.A.),
and Wells Fargo Bank Ltd.
The basis of consolidation used for regulatory reporting is the same as that used under U.S. Generally Accepted Accounting Principles
(GAAP). There are no entities within Wells Fargo that are deconsolidated for Basel III purposes, or whose capital is deducted except for
certain excludable insurance subsidiaries. At March 31, 2015, the capital of insurance subsidiaries deducted from total capital was $591
million. For additional information on our basis for consolidating entities for accounting purposes, see Note 1 (Summary of Significant
Accounting Policies) to Financial Statements in our 2014 Form 10-K and our first quarter 2015 Form 10-Q. For information regarding
6
restrictions or other major impediments on the transfer of funds and capital distributions, see Note 3 (Cash, Loan and Dividend
Restrictions) to Financial Statements in our 2014 Form 10-K.
Capital under Basel III
Basel III modified earlier rules by narrowly defining qualifying capital and increasing capital requirements for certain exposures. CET1
capital primarily includes common stockholder’s equity, accumulated other comprehensive income (AOCI), and retained earnings less
deductions for certain items such as goodwill, intangibles and minority interest, as well as setting thresholds for items including:
mortgage servicing rights (MSRs) and deferred tax assets (DTAs) and investments in financial institutions as defined by the Final Rule.
Tier 1 capital consists of CET1 capital in addition to capital instruments that qualify as Tier 1 capital such as preferred stock. Tier 2
capital includes qualifying allowance for credit losses and subordinated debt. The new requirements of CET1 capital, Tier 1 capital and
Total capital are subject to a phase-in period that began on January 1, 2014 and concludes on December 31, 2018.
Credit risk exposure types (i.e., wholesale exposure and retail exposure) can significantly affect RWA and thus the capital adequacy
determination under Basel III and as presented in this Report are based upon the definitions provided in the Final Rule and may differ
from substantially similar terminology used in the Company’s financial reporting for operating segments and U.S. GAAP based loan
classifications.
Risk-Weighted Assets under Basel III
The Final Rule enhanced the methodologies for calculating RWAs established by Basel I and Basel II; these enhanced methodologies are
referred to as Standardized and Advanced Approaches. The significant differences in the two approaches consist of the following:
• Credit Risk: under the Advanced Approach, credit risk RWA is calculated using risk-sensitive calculations that rely upon the
use of internal credit models based upon the Company’s experience with internal rating grades, whereas under the
Standardized Approach, RWA is calculated using risk-weightings prescribed in the Final Rule that vary by exposure type;
• Operational Risk: the Advanced Approach includes a separate operational risk component within the calculation of RWA,
while the Standardized Approach does not;
• Credit Valuation Adjustment (CVA): the Advanced Approach for counterparty credit risk includes a charge for CVA and the
Standardized Approach does not.
The primary components of RWAs under the Standardized Approach include:
• Credit risk RWA, which reflects the risk of loss associated with a borrower or counterparty default (failure to meet obligations
in accordance with agreed upon terms) and is presented by exposure type including wholesale credit risk, retail credit risk,
counterparty credit risk, securitization exposure, equity investments, and other assets;
• Market risk RWA, which reflects the risk of losses due to adverse changes in the financial instruments held by the Company
due to market risk factors such as interest rates, credit spreads, foreign exchange rates, equity and commodity prices.
7
Transitional Period for Basel III
The Final Rule has provided for a transitional period for certain elements of the rule calculations extending through the end of 2021, at
which point the capital requirements become fully phased-in, as demonstrated in the diagram below. The risk-weighted assets
disclosed within this report are based upon the transitional capital provisions, unless otherwise expressly stated.
Transitional Period Fully Phased-in
2014 2015 - 2018 2019 & beyond
Capital (Numerator) Basel III Transitional Capital Basel III Capital(1)
Standardized Approach Basel I with 2.5(2) Basel III Standardized Risk-WeightedAssets (Denominator)
Advanced Approach (3) Basel III Advanced
(1) Non-qualifying Capital instruments to be phased-out by December 31,2021
(2) Refers to the Final Market risk rule issued August 30,2012. Collectively, this approach is referred to as the “General Approach”
(3) Only those firms that have exited parallel are allowed to use Advanced Approach.
8
Capital Requirements and Management
Wells Fargo’s objective in managing its capital is to maintain sufficient and adequate capital resources appropriate for our risk profile
including current and future requirements to meet business and customer needs, regulatory requirements, economic volatility demands
while maintaining strong protection for depositors and creditors, and to provide a meaningful return on capital via dividends and net
share repurchases for maximum shareholder benefit. Our potential sources of capital primarily include retention of earnings net of
dividends, as well as issuances of common and preferred stock. We manage requirements for capital, ensuring that sufficient capital
reserves remain in excess of regulatory requirements and internal targets (set in excess of minimum regulatory requirements by the
Company’s Board of Directors). There are operational and governance processes in place to manage, forecast, monitor and report to
management and the Company’s Board of Directors capital levels in relation to regulatory requirements and capital plans.
The Company and each of its insured depository institutions are subject to various regulatory capital adequacy requirements
administered by the Agencies. Risk-based capital guidelines establish a risk-adjusted ratio relating capital to different categories of
assets and off-balance sheet exposures. Our capital adequacy assessment process contemplates a wide range of risks that the Company
is exposed to and also takes into consideration our performance under a variety of stressed economic conditions, as well as regulatory
expectations and guidance.
The following chart presents the regulatory minimum ratios which the Company and each of its insured depository institutions are
subject to as of March 31, 2015.
Minimum Fully Phased in
Minimum Fully Phased in Capital Ratios
Capital Ratios with G-SIB Buffer (1)
Capital Ratios
CET 1 7.0% 8.0%
Tier 1 8.5% 9.5%
Total 10.5% 11.5%
U.S. Supplementary Leverage Ratio (effective January 1, 2018)
Bank Holding Company 5.0%
Insured Depository Institution 6.0%
(1) Applicable only to Wells Fargo & Company�and not each of its individual insured depository institutions.�
Capital Management
Wells Fargo actively manages regulatory capital through a comprehensive process for assessing its overall capital adequacy. Refer to
Note 18 (Preferred Stock) and Note 19 (Common Stock and Stock Plans) to Financial Statements in our 2014 Form 10-K for information
on the terms and conditions of our regulatory capital instruments. Our Corporate Asset/Liability Committee (ALCO), overseen by the
Finance Committee of our Board of Directors (Board), determines the Company’s capital management objectives to ensure alignment
with the expectations and guidance offered by regulatory agencies and our Board. ALCO reviews the actual and forecasted capital
requirements every month, and economic and stress test results semiannually. Our Board’s Risk Committee, Finance Committee, and
Credit Committee meet multiple times throughout the year to establish the risk appetite and review the results of stress testing, in order
to evaluate and manage the Company’s projected capital adequacy. For a complete discussion on our Risk Management Framework, see
the “Risk Management Framework and Culture” section in Management’s Discussion and Analysis to our 2014 Form 10-K.
9
Additionally, the Company’s Capital Reporting Committee (CRC) provides oversight of the regulatory capital calculation results and
capital calculation disclosures. The CRC reports directly to the Regulatory Reporting Oversight Committee (RROC), a management
governance committee overseen by the Audit and Examination Committee of the Company’s Board. The RROC provides oversight of
Wells Fargo’s regulatory reporting and disclosures, and assists executive management in fulfilling their responsibilities for oversight of
the regulatory financial reports and disclosures made by the Company.
Wells Fargo & Company is the “source of strength” and the primary provider of capital to its subsidiaries. However, each of the
Company’s insured depository institutions manages its own capital to support planned business growth and meet regulatory
requirements within the context of the Company’s annual capital plan. Capital generated by the insured depository institutions in excess
of regulatory requirements is returned to Wells Fargo & Company, normally through dividends. For additional information on our
capital management framework and culture, see the “Capital Management” section in Management’s Discussion and Analysis to our
2014 Form 10-K.
Internal Capital Adequacy Assessment Process (ICAAP)
Our internal capital adequacy assessment process, referred to as ICAAP, is designed to ensure long-term bank stability and better
evaluate our exposure to material risks and the capital resources available to absorb potential losses arising from those risks.
Semiannually, we execute company-wide capital stress tests as a key analytical tool to assess our capital adequacy relative to our risk
profile and risk appetite. Company-wide capital stress testing is a forward-looking assessment of the potential impact of adverse events
and circumstances on Wells Fargo’s capital adequacy. The key outputs from stress testing are pro forma balance sheets and income
statements prepared consistent with U.S. GAAP, which are then used to evaluate capital adequacy for ensuring long-term stability.
Comprehensive Capital Analysis and Review
In addition to its use in Wells Fargo’s ongoing ICAAP processes, company-wide capital stress testing also supports the FRB’s annual
Comprehensive Capital Analysis and Review (CCAR), the FRB’s ‘Mid-Cycle Stress Test’ as required by the Dodd-Frank Act for BHC with
assets in excess of $50 billion and the OCC Annual Stress Test, including related regulatory reporting requirements and disclosure by
Wells Fargo of stress testing methodologies and certain adverse scenario results.
CCAR is a supervisory assessment by the FRB of the capital planning processes and capital adequacy of large, complex BHCs. As part of
the CCAR, the FRB assesses our overall financial condition, risk profile, and capital adequacy on a forward-looking basis and also
assesses the strength of our BHC’s capital adequacy planning process, including its capital policy, for periods of adverse economic and
financial conditions. The FRB uses CCAR to ensure that all large BHCs have thorough and robust processes for managing their capital
resources, and that the processes are supported by effective firm-wide risk-identification, risk-measurement, and risk-management
practices capable of handling adverse and severely adverse stressed economic scenarios. The FRB expects that a BHC’s capital planning
adequately accounts for the potential for stressful outcomes and is supported by strong internal control practices accompanied by close
and effective oversight by the Company’s Board of Directors and senior management.
The Company’s CCAR process follows the same methodologies as utilized in our ICAAP process, see the “Capital Planning and Stress
Testing” section in Management’s Discussion and Analysis to our 2014 Form 10-K.
10
Capital Summary
Table 1 shows the adequacy of risk-based capital for Wells Fargo & Company and its banking subsidiaries under the Standardized
Approach with transition requirements.
T able 1: Capital Adequacy of Bank Holding Company and Insured Depository Subsidiaries March 31 , 2015
Basel III Standardized Approach
(in millions)
CET 1 capital
(1)
Tier 1 capital
(2)
Total capital
(3)
Standardized
RWA (4)
CET1 capital
ratio (5)
Tier 1 capital
ratio (6)
Total capital
ratio (7)
Wells Fargo & Company 139,191 $ 158,787 $ $
Wells Fargo Bank, N.A. 121,061 121,061
Wells Fargo Bank South Central, N.A. 1,156 1,156
Wells Fargo Bank Northwest, N.A. 1,228 1,228
Wells Fargo Financial National Bank 1,050 1,050
Wells Fargo Delaware Trust Company, N.A. 353 353
Wells Fargo Bank, Ltd. 333 333
196,205 1,301,489 $
144,929 1,177,677
1,231 5,768
1,229 4,035
1,128 6,113
353 76
333 156
10.7%
10.3%
20.0%
30.4%
17.2%
465.1%
213.0%
12.2%
10.3%
20.0%
30.4%
17.2%
465.1%
213.0%
15.1%
12.3%
21.3%
30.5%
18.4%
465.1%
213.0%
(1)� Common Equity Tier 1 capital (CET 1 capital) consists of common shares issued and additional paid-in capital, retained earnings, and other reserves excluding�
cash flow hedging reserves, less specified regulatory adjustments�
(2) Tier 1 capital is the sum of CET1 capital and additional Tier 1 capital
(3) Total capital is defined as Tier 1 capital plus Tier 2 capital
(4) Total Risk Weighted Assets (RWA) under Basel III Standardized Approach
(5) CET 1 capital ratio = CET 1 capital / RWA
(6) Tier 1 capital ratio = Tier 1 capital / RWA
(7) Total capital ratio = Total capital / RWA
The table below provides information regarding the components of capital used in calculating CET1 capital, Tier 1 capital, Tier 2 capital
and Total capital under Basel III transitional requirements for Wells Fargo & Company at March 31, 2015.
T able 2: Total Regulatory Capital Base March 31 , 2015
(in m illions)
Common stock plus related surplus, net of treasury stock $ 54,381
Retained earnings 110,676
Accumulated other comprehensive income (AOCI) 1,911
Common Equity Tier 1 capital (CET1) before regulatory adjustments and deductions 166,968
Less: Goodwill (net of associated deferred tax liabilities) 25,638
Other (includes intangibles, net gain/loss on cash flow hedges) 2,139
Total adjustments and deductions for Common Equity Tier 1 capital 27,777
CET 1 capital 139,191
Additional Tier 1 capital instruments plus related surplus 19,962
Less: Total additional Tier 1 capital deductions 366
Additional Tier 1 capital 19,596
Tier 1 capital 158,787
Tier 2 capital before regulatory adjustments and deductions 37,737
Less: Total Tier 2 capital deductions 319
Tier 2 capital 37,418
Total capital $ 196,205
11
Table 3 presents information on the transitional RWA components included within our regulatory capital ratios under the Standardized
Approach with transition requirements for Wells Fargo & Company at March 31, 2015.
Table 3: Risk Weighted Assets by Risk Ty pe March 31,2015
Standardized Approach
(in millions)
Credit
Wholesale exposures:
Loans and leases held for sale $ 2,215
Loans and leases, net of unearned income 364,765
Original maturity exceeding one year 137,150
All other (1) 88,170
Debt securities 54,611
Total Wholesale exposures 646,911
Retail exposures:
Loans and leases held for sale 11,397
Loans and leases, net of unearned income 340,363
All other 4,953
Total Retail exposures 356,713
Counterparty exposures:
OTC Derivatives 26,220
Margin loans and repo style transactions 20,878
Cleared transactions (2) 4,565
Unsettled Trades 137
Total Counterparty exposures 51,800
Securitization exposures 98,895
Equity investment exposures 40,281
Other exposures (3) 59,300
Total Credit Risk Weighted Assets $ 1,253,900
Market risk 47,589
Total Risk Weighted Assets (Basel III Standardized Approach) $ 1,301,489
(1) Off-balance sheet commitments, letters of credit.
(2) Exposures to Central Counterparties.
(3) Other exposures include other assets and transition items (non-deducted Intangibles
and Mortgage Servicing Rights).
12
Credit Risk
Overview
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 assets and exposures such as debt security holdings, derivatives, and loans. Our
loan portfolios represent the largest source of credit risk to the Company. A critical component of our loan credit risk management is a
well-controlled underwriting process that is appropriate for the needs of customers, as well as investors who purchase loans or
securities collateralized by the loans we underwrite. We only approve applications and make loans if we believe the customer has the
ability to repay the loan or line of credit in accordance with all of its contractual terms. Our ongoing methods for monitoring and
measuring various forms of credit risks are discussed by respective credit risk type in subsequent sections.
The Company’s credit risk management process is governed centrally, but provides for decentralized management and accountability by
each of our lines of business. The overall credit process includes comprehensive credit policies, extensive credit training programs,
judgmental credit underwriting, frequent and detailed risk assessment, and a continual independent loan review and audit process. In
addition, regulatory examiners review and perform detailed tests of our credit underwriting and loan administration processes. Refer to
the “Credit Risk Management” section in Management’s Discussion and Analysis to our 2014 Form 10-K.
Our Risk Management Framework employs first, second and third lines of defense with our lines of business as the first line of defense.
We believe that managing risk closest to the customer is critical to strong risk management for accountability, culture, early issue
identification and remediation. Our independent corporate risk group functions as our second line of defense providing oversight of
policies, processes, and compliance with regulatory standards. Our internal audit team operates as our third line of defense.
Information about our credit risk management and practices, accounting policies and current exposures as reported under U.S. GAAP is
provided in our first quarter 2015 Form 10-Q and 2014 Form 10-K. The following provides specific references:
Accounting Policies
• Refer to Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2014 Form 10-K and our first
quarter 2015 Form 10-Q for a summary of our significant accounting policies, including policy discussion on nonaccrual and
past due loans, as well as returning nonaccrual loans to accrual status, impaired loans, and loan charge-off policies.
Total Credit Risk Exposures, Impaired Loans and Allowance for Credit Losses
• Investment Securities– refer to Note 4 (Investment Securities) to Financial Statements in our first quarter 2015 Form 10-Q;
• Credit Exposure and Impaired Loans – refer to Note 5 (Loans and Allowance for Credit Losses) to Financial Statements in our
first quarter 2015 Form 10-Q;
• Derivatives – refer to Note 12 (Derivatives) to Financial Statements in our first quarter 2015 Form 10-Q.
Distribution by Geography, Industry or Counterparty Type and Contractual Maturity
• Investment Securities – refer to Note 4 (Investment Securities) to Financial Statements in our first quarter 2015 Form 10-Q for
details on counterparty type and contractual maturity ;
• Loans – refer to Table 8 (Maturities for Selected Commercial Loan Categories), Table 13 (Commercial and Industrial Loans
and Lease Financing by Industry), Table 14 (CRE Loans by State and Property Type), Table 17 (Real Estate 1-4 Family First and
Junior Lien Mortgage Loans by State), and Table 22 (Junior Lien Mortgage Line and Loan and Senior Lien Mortgage Line
Portfolios Payment Schedule), Table 28 (Loans 90 Days or More Past Due and Still Accruing) in Management’s Discussion and
Analysis to our first quarter 2015 Form 10-Q;
13
• Derivatives – refer to Note 12 (Derivatives) to Financial Statements in our first quarter 2015 Form 10-Q.
Average Balances – refer to Table 1, (Average Balances, Yields and Rates Paid (Taxable Equivalent Basis)) in Management’s
Discussion and Analysis to our first quarter 2015 Form 10-Q.
Following is a discussion of how we assess, manage and measure credit risk by Basel exposure type.
Wholesale Credit Risk
Overview / Management approach
Wholesale exposures include the following:
• All risk-rated loans and commitments, excluding certain wholesale loans under $1 million which receive retail regulatory
capital treatment and other wholesale loans which meet the definition of securitization exposures;
• Deposits with and money due from banks, excluding cash items in the process of collection;
• Debt securities, excluding those asset-backed securities which meet the definition of a securitization exposure;
• Certain exposures recorded as trading assets that do not qualify as covered positions, but meet the definition of a wholesale
exposure;
• Reverse repurchase transactions that do not meet the definition of a securitization exposure or a repo-style transactions due to
the nature of the collateral or contractual terms;
• Non-derivative financial guarantees that obligate the bank to make payment if another party fails to perform; and
• Other non-derivative exposures where the failure of a party to meet their obligation to pay the bank would result in a loss.
At origination, and throughout the life of a wholesale loan credit exposure, our underwriters and loan officers use a risk rating
methodology to indicate the credit quality of certain exposures in the wholesale credit portfolio. Risk rating is essential to wholesale
credit approval, risk management monitoring and reporting, loan pricing, determination of an appropriate allowance for loan and lease
losses, minimum regulatory capital assignments under the Advanced Approach and sound corporate governance processes. Risk ratings
are individually evaluated, incorporate quantitative, qualitative and third party factors which include both point-in-time and through-
the-cycle elements, and are ultimately assigned using seasoned judgment.
Credit Officers certify risk ratings quarterly and are accountable for their accuracy. Our corporate credit group and line of business
credit functions continually evaluate and modify credit policies, including risk ratings, to address unacceptable levels of risk as they are
identified. Further oversight is provided by our Corporate Risk Asset Review group.
RWA Measurement
As prescribed by the Final Rule, Wells Fargo applies the Standardized risk weighting of 150% to defaulted exposures and high-volatility
commercial real estate (HVCRE) loans which include acquisition, development and construction loans. Zero percent risk weight is
applied to exposures that are directly and unconditionally guaranteed by the U.S. government, its Agencies and the Federal Reserve.
The Final Rule also recognizes the guarantees provided by eligible guarantors, allowing Wells Fargo to substitute the risk weight of the
guarantor for the risk weight applicable to the exposure. This is most commonly used when credit risk has been conveyed to another
bank through syndication or participation. The default risk weight for all corporate exposures is 100%, and the default risk weight for
U.S banks is 20%. Risk weights for non-U.S. sovereign, bank and public sector entity (PSE) exposures are assigned under the Final Rule
14
using the combination of Organization for Economic Co-operation and Development (OECD) membership status and Country Risk
Classification.
Retail Credit Risk
Overview / Management approach
The credit quality of retail exposures is indicated through loan scoring or other statistical approaches appropriate for homogenous types
of credits. Lines of business with retail portfolios are responsible for developing valid, statistically based, automated models for credit
decisions, collateral valuation and risk management. Our corporate risk group is responsible for model pre-implementation validation
approval and ongoing oversight. All credit scoring, risk rating, loss forecasting, valuation, and other risk management models are
subject to the Wells Fargo Model Risk Management Policy. See “Asset/Liability Management” section in Management’s Discussion and
Analysis to our 2014 Form 10-K for discussion on our model risk management.
In accordance with Basel III, the retail population for regulatory capital includes all loans in the consumer loan segment for U.S. GAAP
and certain small business banking loans.
RWA Measurement
As prescribed by the Final Rule, Wells Fargo applies the Standardized risk weighting of 50% to the first-lien residential mortgages,
which are prudently underwritten and are performing according to their original terms and a 100% risk weight for all other residential
mortgage exposures. A 20% risk weight is applied to all sovereign exposures that are conditionally guaranteed by the U.S. government,
its agencies and the Federal Reserve and a 150% risk weight to all non-sovereign and non-residential mortgage exposures that are 90
days or more past due or on non-accrual. Retail exposures that do not fall within the categories described above receive a default risk
weight of 100% per the Final Rule.
Counterparty Credit Risk
Overview / Management Approach
Counterparty Credit Risk (CCR) arises when a customer or trading counterparty fails to fulfill contractual obligations, and such failure
results in the termination or replacement of the transaction at a loss to Wells Fargo. Such exposures arise primarily in relation to over-
the-counter (OTC) derivatives, repo-style transactions, margin loans, transactions cleared through a central counterparty or exchange
and unsettled trades. The majority of CCR exposure is incurred in transactions designed to help Wells Fargo’s clients manage their
interest rate, currency, and other risks, and in the associated hedging of those transactions.
Wells Fargo uses a range of models and methodologies to estimate the potential size of counterparty exposures and establish limits and
controls around activities incurring these risks. Counterparty exposure is typically mitigated using collateral. Collateral arrangements
supporting Wells Fargo’s counterparty credit risk exposures can be grouped into two broad categories:
• Many of Wells Fargo’s counterparty risks arise out of its derivatives activities undertaken with corporate clients. In many cases,
the counterparty credit risk is managed by relationship/Credit Officers close to the client and is cross-collateralized with
securities supporting loan and other exposures to the same counterparty (e.g. receivables and inventory). Any benefit deemed
to accrue from this type of cross-collateralization is reflected in the credit grades applied to the exposure, which in turn
impacts the regulatory capital required.
15
• Exposures for many counterparty relationships are covered by stand-alone collateral arrangements, which require the posting
of liquid financial collateral. Collateral arrangements are managed by a dedicated collateral management function, which
handles the posting and receipt of collateral on a daily basis. The majority of the absolute value of collateral received and
posted typically comprises cash with the remainder primarily in the form of instruments issued or backed by the U.S.
Government or Government Sponsored Entities (GSE) (i.e., treasuries, agencies, or agency mortgage-backed securities). The
total exposure amount covered by eligible collateral as of March 31, 2015 for OTC derivatives was $9.9 billion and centrally
cleared counterparties was $796 million. For disclosure of the impact on the amount of collateral we would be required to post
in the event of a significant deterioration in our credit, see Note 12 (Derivatives) to Financial Statements in our first quarter
2015 Form 10-Q.
RWA Measurement
Wells Fargo uses the Current Exposure Method (CEM) to calculate Exposure-At-Default (EAD) for RWA purposes. Mitigants are
recognized using the Collateral Haircut approach with Standardized regulatory haircuts. Under the CEM approach, EAD is the sum of
the net positive fair value (also known as current credit exposure (CCE)) plus an added amount called potential future exposure (PFE),
which is based on the derivative notional amount and a credit conversion factor (CCF) prescribed by the Final Rule. The CCF is based
on the contract type, underlying and remaining maturity. The netting benefits of master netting agreements (e.g. International Swap
and Derivative Association) and collateral arrangements (e.g. Credit Support Annex) are reflected in the EAD. For complete
descriptions of counterparty credit risk, see Note 12 (Derivatives) to Financial Statements in our first quarter 2015 Form 10-Q.
Table 4 shows derivative metrics by underlying exposure type and segregates our derivative activity between contracts traded on over-
the-counter (OTC) markets from those cleared through a central counterparty or exchange. OTC derivatives are those traded between
two parties directly without the use of an exchange and result in counterparty credit exposure to the OTC counterparty. Derivatives
cleared through a central counterparty or an exchange, limit counterparty risk because the central clearing party or exchange serves as
the counterparty to both parties to the derivative. In addition to distinguishing between OTC and centrally cleared or exchange traded
derivatives.
March 31,2015 Table 4: Counterparty Credit Risk Deriv ativ es Exposure Ty pes
Product
(in millions) Notional (1)
Gross positive
fair value (2)
Netting
benefit
Post mitigant
exposure at
default
Standardized
RWA (3)
OTC derivatives:
Interest rate contracts
Foreign exchange contracts
Equity contracts
Credit derivatives contracts
Commodities and Other
Total OTC derivative contracts (principal+agent)
$ 2,323,343
278,639
95,289
16,570
51,693
2,765,534
37,669
9,641
4,435
755
3,257
55,757
17,657
7,822
3,824
1,001
1,174
31,478
19,938
4,794
4,497
620
4,846
34,695
14,844
2,988
3,769
424
4,195
26,220
Central counterparty (CCPs)
& Exchange traded derivatives:
Interest rate contracts
Foreign exchange contracts
Equity contracts
Credit derivatives contracts
Commodities and Other
$ 3,763,960
5
11,950
1,366
27,330
53,926
-
4,247
50
4,961
53,512
-
1,061
-
1,288
12,267
-
4,887
375
7,131
243
-
98
15
143
Total CCP & Exchange traded
derivatives contracts $ 3,804,611 63,184 55,861 24,660 499
(1) Excluding sold derivatives and written options.
(2) Revised from our March 31, 2015 Pillar 3 report, as originally posted on the Investor Relations portion of our website on May 13, 2015, to include all derivative
contracts used in the underlying RWA calculation, some of which had been omitted in the prior report. The revisions made to the amount of gross positive fair value
data presented in the table do not impact reported RWA or the resulting capital ratios.
16
(3)� In addition to the amounts included in the table, we have $ 3.9 billion in RWA for default fund contributions,
which relate to our role as a clearing member for qualifying central counterparties.
• Notional is used in the calculation of the PFE add-on which is the product of the notional amount of a derivative contract and
prescribed conversion factors and is a component of EAD irrespective of the fair value of the derivative contract;
• Gross Positive fair value, which is the amount of credit exposure attributed to derivatives before the mitigating effects of
counterparty netting and collateral;
• Netting Benefit, which represents the amount of credit exposure and PFE that is reduced due to the netting of offsetting
positive and negative exposures where a valid qualifying master netting arrangement exists;
• Post Mitigant Exposure at Default, which is the amount of credit exposure and PFE attributed to derivatives after counterparty
netting and the reduction of exposure due to eligible collateral;
• Standardized RWA, which is calculated using the Standardized Approach to determine RWA using EAD from the CEM
Methodology.
Table 5 displays a breakout of collateral by type which has been received by the Company as part of derivatives, repo-style transactions
and margin loans.
T able 5: Collateral Ty pe March 31,2015
(in millions)
Derivatives
Collateral
Repo & Margin
Loan Collateral
Cleared Transaction
Collateral
Cash
Treasuries
Agencies
Corporate Bonds
Main Index Equities
Other Public Equities
Mutual Funds
Other
$ 8,369
420
892
7
-
392
-
-
47,468
-
-
-
13,039
6,847
4,663
22,028
21,671
58
-
-
-
19
892
13,597
Total Collateral $ 10,080 94,045 36,237
Securitization Credit Risk
Overview / Management Approach
As defined by the Final Rule, securitization exposures are those which arise from traditional securitization, synthetic securitization, or
re-securitization transactions where credit risk has been separated into at least two tranches, performance of the exposure is dependent
on the performance of the underlying assets, and substantially all of the underlying assets are financial assets. The Final Rule defines a
re-securitization as a securitization which has more than one underlying exposure and in which one or more of the underlying
exposures is a securitization exposure. In addition, the Final Rule distinguishes between traditional and synthetic securitizations. In a
traditional securitization, assets, which are typically loans or debt securities, are transferred from an originator or sponsor to a special
purpose entity (SPE), which receives funds to purchase the assets by issuing debt and equity securities to investors. A synthetic
securitization achieves the transfer of credit risk to the investor through the use of credit derivatives or guarantees.
Conforming residential mortgage loan securitizations are those guaranteed by the GSEs, including the Government National Mortgage
Association (GNMA). Due to the additional credit protection provided by the government guarantee, these positions usually do not
include credit tranching. Since the presence of tranches is the key determinant of whether a given exposure would be subject to the
securitization capital rules, such exposures do not meet the definition of a securitization per the Final Rule. As a result, our investments
17
in conforming residential mortgage loan securitizations have been excluded from our disclosure of securitization exposure and activity
in this report.
On-balance sheet securitization exposures include a portion of the assets classified on our balance sheet as loans for U.S. GAAP
purposes, securities, and servicer cash advances. Off-balance sheet securitization exposures include commitments, guarantees, and
derivatives to special purpose entities (SPEs).
Wells Fargo's objectives in relation to securitization activity are as follows:
• Provide proactive and prudent management of our balance sheet and multiple, diverse sources of funding;
• Earn fee income by providing credit facilities to clients via securitization related activities;
• Earn fee income from structuring securitizations for internally and third-party originated assets;
• Earn fee income as servicer and/or trustee for asset securitizations;
In connection with our securitization activities, the Company also has various forms of ongoing involvement with SPEs which
may include:
• Making markets in asset backed securities;
• Providing OTC derivatives to Securitization SPEs that require securitization treatment;
• Providing credit enhancement on securities issued by SPEs or market value guarantees of assets held by SPEs through the use
of letters of credit, (on a limited basis) financial guarantees, credit default swaps and total return swaps; or entering into other
derivative contracts with SPEs.
Wells Fargo’s roles in the securitization process are multi-faceted and include the following:
• Originator: where a bank, through the extension or credit or otherwise, creates a financial asset that collateralizes an
asset back security, and sells that asset directly or indirectly to a sponsor. The originator may be a sole originator or
affiliated with the sponsor (including for legacy positions);
• Sponsor: where the bank organizes and initiates an asset-backed securities transaction by selling or transferring
assets, either directly or through an affiliate, to the issuing entity. This includes approving positions or managing a
securitization program that retains residual tranches (providing excess spread or over collateralization), with
sponsors having first loss exposure;
• Investor: where a bank assumes the credit risk of a securitization exposure (other than through acting as originator or
sponsor);
• Trustee: where the bank considers the interests of investors who own the securities issued via the securitization and
which retains primary responsibility for administering the SPE or trust that maintains the securitized assets; and,
• Servicer: where the bank engages in direct interaction with borrowers by collecting payments, providing customer
service, administrating escrow accounts and managing the delinquency process (including loan modifications, short
sales, and foreclosures).
Our due diligence process provides us with an understanding of the features that would materially affect the performance of a
securitization or re-securitization. Based on the requirements of the Market Risk Capital Rule and the Final Rule, for all
securitization and re-securitization positions, Wells Fargo conducts initial due diligence prior to acquiring the position and
documents the due diligence within three business days after the acquisition. We also evaluate, review and update our ongoing
18
understanding of each securitization position at least quarterly, as appropriate. The level of detail is commensurate with the
complexity of the position and materiality of the position in relation to capital.
As part of the initial and ongoing due diligence process, we review the following items in accordance with the Final Rule:
• Structural features of the securitization that would materially impact the performance of the position;
• Relevant information regarding the performance of the underlying credit exposure(s);
• Relevant market data on the securitization; and
• For any re-securitization position, performance information on the underlying securitization exposures.
When applicable, individual business lines must review quarterly the accuracy of any assigned internal risk ratings within their
portfolios. Minimum credit exposure thresholds for this certification may be established by the businesses with approval from
the Corporate Credit group. Initial reviews may include collateral quality, credit subordination levels, and structural
characteristics of the securitization transaction. Ongoing regular performance reviews may include checks of periodic servicer
reports against any performance triggers/covenants in the loan documentation, as well as overall performance trends in the
context of economic, sector and servicer developments.
The Company manages the risks associated with securitization and re-securitization positions through the use of offsetting positions
and portfolio diversification. The monitoring of re-securitization positions takes into consideration the performance of the securitized
tranches' underlying assets, to the extent available, as it relates to the re-securitized position. For the Standardized Approach, there are
re-securitization exposures totaling $2.9 billion which applied credit risk mitigation and $5.3 billion which did not.
RWA Measurement
Based on regulatory guidance, Wells Fargo uses the Simplified Supervised Formula Approach (SSFA or Standardized Approach) in
assessing its regulatory capital requirements for securitization exposures. The SSFA Approach requires the use of inputs and
assumptions which consider the credit quality of the underlying assets, the point in the SPE’s capitalization at which our exposure
begins to absorb losses, and likewise, the point in the SPE’s capitalization that would result in a total loss of principal.
Table 6 presents the aggregate EAD amount of the Company’s outstanding on-balance sheet and off-balance sheet securitizations
positions and RWA by exposure type:
T able 6: Aggregate Amount of On- and Off- Balance Sheet Securitization Exposures March 31,2015
(in millions)
On-balance sheet
exposures
Off-balance sheet
exposures (1)
Total Exposure
Amount
Total
RWA
Commercial mortgage-backed securities
Residential mortgage-backed securities
Collateralized loan and other debt obligations
Other ABS
$ 25,245
18,237
39,405
29,575
3,320
3,351
4,945
10,469
28,599
21,506
45,965
40,164
35,258
32,879
15,773
14,985
Total $ 112,462 22,085 136,234 98,895
(1) Only includes commitments.
19
Table 7 presents the aggregate EAD amount of securitization exposures retained or purchased and their associated risk approaches and
RWAs, categorized between securitization and re-securitization exposures.
T able 7 Aggregate Amount of Securitized and Resecuritized Exposures by Risk Weights and Approach March 31,2015
SSFA 1250% Risk Weight T otal
(in millions)
Exposure
Amount
Standardized
RWA
Exposure
Amount
Standardized
RWA
Exposure
Amount
Standardized
RWA
Risk Weight
0% to <20%
20% to <50%
50% to <100%
100% to <1250%
Equal to 1250%
Securitizations
Total Securitizations
$
$
-
111,819
2,817
13,072
332
128,040
-
23,224
1,802
42,157
4,146
71,329
-
-
-
-
98
98
-
-
-
-
1,227
1,227
-
111,819
2,817
13,072
430
128,138
-
23,224
1,802
42,157
5,373
72,556
Risk Weight
0% to <20%
20% to <50%
50% to <100%
100% to <1250%
Equal to 1250%
Re-securitizations
Total Re-securitizations
$
$
-
2,506
739
4,831
6
8,082
-
582
506
25,010
70
26,168
-
-
-
-
14
14
-
-
-
-
171
171
-
2,506
739
4,831
20
8,096
-
582
506
25,010
241
26,339
Total Securitization $ 136,122 97,497 112 1,398 136,234 98,895
Securitization Activity
For information on our 2015 activity and realized gains or loss on sales of financial assets in securitizations, see Note 7 (Securitizations
and Variable Interest Entities) to Financial Statements in our first quarter 2015 Form 10-Q.
In addition to the assets already securitized, we currently have $1.4 billion of commercial mortgage loans we intend to securitize that are
currently risk-weighted as wholesale exposures. Exposures we intend to securitize include those loans currently classified on our
balance sheet as either mortgages held for sale or loans held for sale and are saleable in an active securitization market.
We periodically securitize consumer and CRE loans. For a detailed discussion on this topic refer to loans sales and securitization
activity in Note 7 (Securitizations and Variable Interest Entities) to Financial Statements in our first quarter 2015 Form 10-Q.
20
Table 8 provides information on the principal amount of past due or impaired assets and losses recognized on our balance sheet related
to interests held in securitization transactions we transferred assets to and/or sponsored.
Table 8: Impaired / Past-Due Assets and Current Quarter Recognized Losses on Securitized Assets by Counterparty Ty pes March 31 , 201 5
(in millions)
Total Impaired
or Past Due Amount
on Securitized Assets (1)
Total Current
Period Losses (2)
Commercial mortgages
Residential mortgages
Commercial loans and debt obligations
Other loans
Total
$
$
-
582
-
-
582
-
9
-
-
9
(1)� The total impaired amount on securitized assets represents the carrying value of investment securities held by us that were issued from securitization
transactions we sponsored and for which we have recognized other-than-temporary impairment (OTTI) for accounting purposes. This column also
includes the total past due amount on securitized assets, which represents loans recorded on our balance sheet that are 90 days or more past due
or in nonaccrual status that are held in securitization transactions we sponsored.
(2)� Total Current Period Losses represents year-to-date other-than-temporary impairment recognized on investment securities and charge-offs and
allowances recognized on loans held on our balance sheet related to securitization transactions we sponsored.
Equity Investment Credit Risk
Overview / Management Approach
Certain equity investments are excluded from market risk regulatory capital treatment (non-covered equity investments), but are
subject to credit risk capital rules. Non-covered equity investments include exposures classified in other short-term investments,
trading assets, available-for-sale investment securities, or other assets in our financial statements. Trading assets are measured at fair
value through net income. Available-for-sale investment securities are measured at fair value through other comprehensive income.
Non-marketable equity securities are measured at fair value through earnings, amortized cost less impairment or accounted for under
the equity method of accounting. Investments subject to equity method of accounting are adjusted for our proportionate share of the
investees’ earnings and other changes in shareholders’ equity, less impairment. All equity investments, other than those reported at fair
value through earnings, are assessed at least quarterly for other-than-temporary impairment (OTTI). For information on accounting
policies related to equity investments refer to Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2014
Form 10-K and our first quarter 2015 Form 10-Q.
Equity investments made with a strategic objective or to maintain strategic relationships include investments in support of the
Community Development Reinvestment Act, statutory and/or financing investments required for membership in the Federal Reserve or
Federal Home Loan Bank, and separate account bank owned life insurance (BOLI) invested in various asset strategies. Non-covered
equity investments are also held to generate capital gains and include discretionary private equity and venture capital transactions.
Under the Final Rules, equity exposures also include investment funds (including separate accounts) and investments made in
connection with certain employee deferred compensation plans.
Equity investment activities are conducted in accordance with corporate policy and regulatory requirements. Discretionary
equity investments are reviewed at both the individual investment and portfolio level. Individual lines of business are
responsible for conducting a periodic review of all individual investments which may include recent financial performance, exit
strategy, current outlook, and expected returns. We monitor non-marketable equity investments through portfolio reviews,
which include monitoring portfolio objectives, current assessments of portfolio performance and internal ratings, historical
returns, risk profiles, current strategies, and unfunded commitments. The Corporate Market Risk group provides independent
oversight over equity investments.
21
Investments in separate account BOLI portfolios, which are classified as equity exposures, make up a significant percentage of
our portfolio of equity investments and are monitored centrally within Corporate Treasury and reported on a monthly basis to
senior management and annually to the Board. The investments in separate accounts are exclusive of balances attributable to
stable value protection, which are considered wholesale credit exposures to the underlying insurance company. Separate
account exposures are assigned risk weights using a look-through approach, whereas, general account exposures are
considered general obligations of the issuing insurance company and are risk weighted as wholesale exposures to the issuing
insurance company. General and separate account BOLI exposures are reported as an aggregate amount in our first quarter
2015 Form 10-Q. Only our separate account BOLI exposure is separately disclosed in this report in Table 9.
Acquisitions and/or dispositions of equity investments are approved by individuals with delegated authority under the
Company’s Risk Management framework. Investments exceeding pre-approved line of business thresholds require Board
approval. In addition, the Board oversees discretionary non-marketable equity investment activity to monitor performance and
to ensure portfolio objectives and investment strategies are consistent with Wells Fargo’s risk profile and risk tolerance.
RWA Measurement
For equity investments, the Company applies the Full Look-Through Approach (FLTA), the Simple Risk-Weight Approach (SRWA) or
the Alternative Modified-Look through Approach (AMLTA) to determine RWA. Under the FLTA, risk weights are applied on a
proportional ownership share basis to each equity exposure held by an investment fund, as if Wells Fargo held the exposure directly.
Under the SRWA, the RWA for each equity exposure is calculated by multiplying the adjusted carrying value of the equity exposure by
the applicable regulatory prescribed risk weight. Under the AMLTA, the adjusted carrying value of the equity exposure to an investment
fund is assigned on a pro rata basis to different risk weight categories based on investment limits in the fund’s prospectus or other legal
document. Wells Fargo’s non-significant equity exposure is the sum of publicly and non-publicly traded equity investments that are 10%
or less of total capital, and is risk weighted at 100%.
22
Table 9 details the balance sheet values of the Company’s equity investment positions in the banking book in addition to those in the
trading non-covered portfolio as of March 31, 2015.
T able 9: Equity Exposures March 31,2015
(in millions) Balance Fair Value
Unrealized
gain/(loss) (4)
Nonmarketable equity investments:
Cost method:
Private equity investments
Federal bank stock
Total cost method
Equity method:
Low income housing tax credit investments
Private equity and other
Total equity method
Fair value method
Total nonmarketable equity investments (1)
$ 2,187
4,725
6,912
7,464
5,121
12,585
2,549
22,046
3,874
4,725
8,599
7,464
6,278
13,742
2,549
24,890
1,687
-
1,687
-
1,157
1,157
-
2,844
Marketable equity investments:
Total marketable equity investments in AFS (3) 318 1,812 1,494
Other marketable equities (2)
Total marketable equity investments
3,433
3,751
3,433
5,245
-
1,494
Separate Account BOLI
Total Equities $
11,498
37,295
11,498
41,633
-
4,338
(1) Nonmarketable equities consists of non publicly-traded investments, including equity investments that are measured at
fair value.
(2) Primarily includes trading non-covered portfolio positions.
(3) Marketable equities are publicly-traded. Equity exposures that are considered securitization and wholesale under Basel III are
not included in Table 9.
(4) The amount of unrealized gain (post-tax) on marketable equity investments in Table 9 recorded in AOCI, which is included in
Tier 1 and Tier 2 capital is $ 298 million and $ 201 million, respectively. $2,844 million of unrealized gain relates to equity investments
recorded on the cost or equity method of accounting and therefore is not recorded on our balance sheet.
Table 10 includes the RWA capital measure for equity investments broken down by risk weight bands between Investment and Non-
Investment Funds as of March 31, 2015.
T able 10: Capital Requirements by Risk Weight for Equity Investments March 31,2015
Exposure Standardized (in millions)
Amount RWA
Simple Risk Weight Approach (SRWA)
Federal Reserve stock and Sovereign exposures $ 3,301 -
Federal Home Loan Bank exposures 1,467 293
Community development equity exposures 8,167 8,167
Effective portion of hedge pairs 49 49
Non-signficant equity exposures (1) 12,673 12,673
Significant investments in unconsolidated 1,563 1,563
financial institutions
600% risk-weight equity exposures 47 283
Equity Exposures to Investment Funds
Full look-through approach 13,314 15,794
Alternative modified look-through approach 271 1,459
Total Equity Exposures $ 40,852 40,281
(1) Publicly and non-publicly traded equity investments do not exceed 10% of the Company's total capital.
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Market Risk
Market risk is the risk of changes in the value of the Company’s assets and liabilities resulting from movements in market variables such
as interest rates, foreign exchange rates, equity prices, commodity prices, and/or credit spreads.
For a discussion of market risk oversight, see the “Risk Management Framework and Culture” section in Management’s Discussion and
Analysis to our 2014 Form 10-K and the “Market Risk Governance” section in Management’s Discussion and Analysis to our first
quarter 2015 Form 10-Q. For a discussion of the Company’s market risk monitoring and controls, please refer to the “Market Risk –
Trading Activities” section in the Management’s Discussion and Analysis to our first quarter 2015 Form 10-Q.
Supplementary Leverage Ratio
In April 2014, federal banking regulators finalized a rule that enhances the supplementary leverage ratio (SLR) requirements for large
BHCs, like Wells Fargo, and their insured depository institutions. The SLR is defined as Tier 1 capital under Basel III divided by the
Company’s total leverage exposure. Total leverage exposure is the total average on-balance sheet assets, plus off-balance sheet
exposures, such as undrawn commitments and derivatives potential future exposures, less amounts permitted to be deducted for Tier 1
capital. The SLR requires public disclosure beginning in 2015, but does not become effective until January 1, 2018. Once effective, the
final SLR rules will require a covered BHC to maintain a supplementary leverage ratio of at least 5.0% to avoid restrictions on capital
distributions and discretionary bonus payments. The Final Rule will also require that all of our insured depository institutions maintain
a supplementary leverage ratio of 6.0% in order to be considered well capitalized. In September 2014, Federal banking regulators
finalized additional changes to the supplementary leverage ratio requirements to implement revisions to the Basel III leverage
framework finalized by the BCBS in January 2014. These additional changes, among other things, modify the methodology for including
off-balance sheet items, including credit derivatives, repo-style transactions and lines of credit, in the denominator of the
supplementary leverage ratio, and will become effective on January 1, 2018. For additional details on SLR, refer to the “Capital
Management” section in Management’s Discussion and Analysis to our first quarter 2015 Form 10-Q.
The following table sets forth our Basel III Supplementary Leverage ratio and related components, under the Revised Final Basel III
Rules, for the quarter ended March 31, 2015.
Table 11a: Basel III Supplementary Lev erage Ratio - summary comparison March 31 , 2015
(in millions) Transitional Fully phased-in
Tier 1 capital $ 158,787 158,662
Total average assets $ 1,707,798 1,707,798
Less: amounts deducted from Tier 1 capital 27,350 29,341
Total adjusted average assets 1,680,448 1,678,457
Adjustment for derivative exposures 41,931 41,931
Adjustment for repo-style transactions 4,240 4,240
Adjustment for other off-balance sheet exposures 268,878 268,878
Total adjustments 315,049 315,049
Total leverage exposure $ 1,995,497 1,993,506
Supplementary leverage ratio 8.0% 8.0%
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The table below presents the components of the total leverage exposure for derivatives, repo-style transaction and other off-balance
sheet exposures. The other off-balance sheet exposures consist of wholesale and retail commitments after the application of credit
conversion factors.
Table 11b: Components of Total Lev erage Exposure March 31 , 2015
(in millions) Transitional Fully Phased-in
On-balance sheet exposures
Total average assets, as reported $ 1,707,798 1,707,798
Less: amounts deducted from Tier 1 capital 27,350 29,341
Total on-balance sheet exposures $ 1,680,448 1,678,457
Derivative exposures
Replacement cost for derivative exposures (that is, net of cash variation margin) 23,087 23,087
Add-on amounts for potential future exposure (PFE) for derivative exposures 39,502 39,502
Gross-up for cash collateral posted if deducted from the on-balance sheet assets, 641 641
except for cash variation margin
LESS: Deductions of receivable assets for cash variation margin posted in
derivative transactions, if included in on-balance sheet assets 3,985 3,985
LESS: Exempted CCP leg of client-cleared transactions 2,335 2,335
Effective notional principal amount of sold credit protection 15,745 15,745
LESS: Effective notional principal amount offsets and PFE adjustments for sold
credit protection 5,745 5,745
LESS: on-balance sheet assets for derivative exposures 24,979 24,979
Total off-balance sheet derivative exposures $ 41,931 41,931
Repo-style transactions
On-balance sheet assets for repo-style transactions, except include the gross
value of receivables for reverse repurchase transactions. 50,931 50,931
LESS: Reduction of the gross value of receivables in reverse repurchase
transactions by cash payables in repurchase transactions under netting 13,174 13,174
agreements
Counterparty credit risk for all repo-style transactions 1,385 1,385
LESS: on-balance sheet assets for repo-style transactions 34,902 34,902
Total off-balance sheet exposures for repo-style transactions $ 4,240 4,240
Other off-balance sheet exposures
Off-balance sheet exposures at gross notional amounts 642,879 642,879
LESS: Adjustments for conversion to credit equivalent amounts 374,001 374,001
Total Other Off-balance sheet exposures $ 268,878 268,878
Total leverage exposure $ 1,995,497 1,993,506
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Glossary of Acronyms
Acronym Description
AFS Available For Sale
ALCO Asset/Liability Management Committee
AMLTA Alternative Modified-Look Through Approach
AOCI Accumulated Other Comprehensive Income
BCBS Basel Committee on Banking Supervision
BHCs Bank Holding Companies
Board Wells Fargo Board of Directors
BOLI Bank-Owned Life Insurance
CCAR Comprehensive Capital Analysis and Review
CCF Credit Conversion Factor
CCP Central Counterparties
CCR Counterparty Credit Risk
CEM Current Exposure Method
CET1 Common Equity Tier 1
CRC Capital Reporting Committee
CRE Commercial Real Estate
CVA Credit Valuation Adjustment
EAD Exposure at Default
FDIC Federal Deposit Insurance Corporation
Final Rule Basel III Final Rule for U.S. Bank Holding Companies and Banks
FLTA Full Look-Through Approach
FRB Board of Governors of the Federal Reserve System
FSB Financial Stability Board
G-SIB Global Systemically Important Banks
GAAP Generally Accepted Accounting Principles
GNMA Government National Mortgage Association
GSE Government Sponsored Entity
HVCRE High Volatility Commercial Real Estate
ICAAP Internal Capital Adequacy Assessment Process
MSR Mortgage Servicing Rights
OCC Office of the Comptroller of the Currency
OECD Organization for Economic Co-operation and Development
OTC Over-the-counter
OTTI Other-Than-Temporary Impairment
PD Probability of Default
PSE Public Sector Entity
RROC Regulatory Reporting Oversight Committee
RWA Risk-Weighted Assets
SLR Supplementary Leverage Ratio
SPE Special Purpose Entity
SRWA Simple Risk-Weight Approach
SSFA Simplified Supervisory Formula Approach
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Forward-Looking Statements
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In
addition, we may make forward-looking statements in our other documents filed or furnished with the SEC, and our management may
make forward-looking statements orally to analysts, investors, representatives of the media and others. Forward-looking statements can
be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “target,” “projects,” “outlook,”
“forecast,” “will,” “may,” “could,” “should,” “can” and similar 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 the Company, including
our outlook for future growth; (ii) our noninterest expense and efficiency ratio; (iii) future credit quality and performance, including our
expectations regarding future loan losses and allowance levels; (iv) the appropriateness of the allowance for credit losses; (v) our
expectations regarding net interest income and net interest margin; (vi) loan growth or the reduction or mitigation of risk in our loan
portfolios; (vii) future capital levels or targets and our estimated Common Equity Tier 1 ratio under Basel III capital standards; (viii) the
performance of our mortgage business and any related exposures; (ix) the expected outcome and impact of legal, regulatory and
legislative developments, as well as our expectations regarding compliance therewith; (x) future common stock dividends, common
share repurchases and other uses of capital; (xi) our targeted range for return on assets and return on equity; (xii) the outcome of
contingencies, such as legal proceedings; and (xiii) 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. Investors are urged to 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 more information about factors that could cause actual results to differ materially from expectations, refer to the “Forward Looking
Statement” discussion in our first quarter 2015 Form 10-Q, as well as our other reports filed with the Securities and Exchange
Commission available on its website at www.sec.gov, including the discussion under “Risk Factors” in our Annual Report on Form 10-K
for the year ended December 31, 2014.
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