Wells Fargo & Company Annual Report 2013—The right people ...

Wells Fargo & Company Annual Report 2013

The right people. The right markets. The right model. Serving customers in the real economy.

3 To Our Owners 10 Relationships, Not Transactions 22 Educating Communities

in New Ways 27 Board of Directors, Senior Leaders

29 2013 Financial Report

267 Stock Performance

? Financial Review

? Controls and Procedures

? Financial Statements

? Report of Independent Registered Public Accounting Firm

Serving customers

in the real economy.

What is the real economy? It's the first-time homebuyer looking to buy a home. It's the bookkeeper who needs to make a deposit quickly. It's the veterinarian who sees her business growing. And it's large companies, too--like a family business that is one of the largest growers and suppliers of produce in the U.S. Wells Fargo's Mindi Weber, who has a background in agriculture, works side by side with customers like Fowler Packing Co. every day on products and services, from its line of credit to treasury management. Co-owner Dennis Parnagian--whose father founded Fowler Packing in 1950--said, "Wells Fargo `gets it.' They understand our world and our specific needs and challenges. Wells Fargo has shown me it is committed to agriculture and has the personnel and capabilities to do the job right." To Weber, and all Wells Fargo team members, that means developing deep relationships, understanding and serving customers' needs, and helping them succeed financially.

Wells Fargo's Mindi Weber with the Parnagian brothers, Randy, Philip, Dennis, and Kenny | Fresno, California

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John G. Stumpf Chairman, President and Chief Executive Officer, Wells Fargo & Company

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To Our Owners,

2013 was another great year thanks to the dedication of our more than 264,000 team members working together toward our common vision: To satisfy all our customers' financial needs and help them succeed financially.

Our focus on serving customers drove outstanding results. In 2013, Wells Fargo generated record earnings for the fifth consecutive year--in fact, we were the most profitable U.S. bank--and ranked as the world's most valuable bank by market capitalization.

Accomplishments like these are no accident. They are a result of: ? Having the right people--team members who work

together to fulfill our customers' financial needs. ? Doing business in the right markets--both domestically

and internationally. ? Operating the right business model--businesses

diversified by opportunity, size, and geography that can perform well across a variety of economic and interest rate environments.

We also understand and embrace the critical role we play in our customers' lives and communities. Although the U.S. economy is rebounding, it has been a slow and uneven recovery with many people continuing to struggle to find jobs, start businesses, or save for the future.

We believe banking--and Wells Fargo--is at its best when supporting the "real economy" by creating new jobs, helping businesses grow, and promoting the financial well-being of individuals. For us, this means keeping deposits safe, lending responsibly and fairly, helping students pay for college and customers plan for their financial futures, supplying needed capital to businesses of all sizes, and investing in communities. It also means instilling confidence in our customers as their financial partner--from providing checking accounts and automobile loans to treasury management and investment banking services.

As we have grown over the years, we have never lost our focus on the basics of banking--providing our customers products and services when, where, and how they need them--and we've never lost touch with our roots as a "Main Street" financial provider, even as we've developed a global reach to support our business customers. These roots and our vision provide the foundation for Wells Fargo's continued success.

Financial results In 2013, we enjoyed another strong year. Our net income for the year was $21.9 billion, up 16 percent from 2012. Diluted earnings per common share rose 16 percent to $3.89. Our 2013 revenue of $83.8 billion was balanced between net interest income and noninterest income, reflecting the strength of our diversified business model. Each primary business segment grew net income year over year: Community Banking by 21 percent, Wholesale Banking by 5 percent, and Wealth, Brokerage and Retirement by 29 percent.

We increased loans and deposits, a good sign for the overall economy. Total loans finished 2013 at $825.8 billion, up 3 percent from 2012. Loan growth occurred across multiple portfolios, including commercial loans, mortgages, credit cards, and automobile lending. Total deposits reached a record $1.1 trillion, up 8 percent from the prior year.

Credit quality continued to improve as 2013 credit losses fell to $4.5 billion, a 50 percent improvement over $9.0 billion in 2012. Net charge-offs dropped to their lowest levels in recent history--0.47 percent of average loans in fourth quarter 2013, compared with 1.05 percent in fourth quarter 2012.

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Our capital also grew and remained well above regulatory minimum levels. Our Tier 1 common equity at the end of 2013 was $123.5 billion, up 13 percent from 2012, resulting in a Tier 1 common equity ratio of 10.82 percent under Basel I. Under Basel III capital rules, our estimated Common Equity Tier 1 ratio was 9.76 percent.1

We also increased returns for our shareholders. Our full-year return on assets rose to 1.51 percent, up 10 basis points from 2012, and our full-year return on equity was 13.87 percent, up 92 basis points from 2012. In 2013, we returned $11.4 billion to shareholders through dividends and share repurchases. We increased our regular quarterly dividend by 36 percent, to 30 cents per share, and purchased 124 million shares of our common stock in 2013. We are further pleased that the market rewarded our shareholders, as our common stock price increased 33 percent in 2013.

We are proud of what we accomplished in 2013 because the results reflect how we are helping our customers. And we know the road ahead will continue to require a strong commitment to our customers and the communities we serve.

Helping individuals and businesses in the real economy We recognize the struggles many are experiencing in this economy and remain committed to doing all that we can to help individuals and businesses prosper and succeed. We support the real economy in many ways, including enabling people to buy new homes, providing needed capital for business investment and expansion, and helping consumers plan for retirement.

Creating new homeowners and helping keep people in their homes Housing is a cornerstone of the economy, and homeownership is the foundation of neighborhoods large and small. For most people, their home is their largest and most important asset. We are proud to be the nation's largest home lender, and every day get to see the difference that a home can make in people's lives and in their communities.

In 2013, we provided financing to 1.5 million consumers to purchase homes or refinance existing mortgages. Buying a home typically fuels additional spending-- new furniture, appliances, or renovations--that benefits local businesses and creates jobs. Because of this multiplier effect, a housing recovery has led every economic recovery in recent history.

Just as important, we are helping people stay in their homes. Wells Fargo is a leader in preventing foreclosures-- since 2009, we have completed more than 904,000 home loan modifications and provided $7.7 billion in principal

1 For more information regarding our regulatory capital and related ratios determined under Basel I and Basel III, please see the "Financial Review ? Capital Management" section in this Report.

forgiveness. We also have participated in nearly 1,200 home preservation events, including hosting 107 of our own workshops where we have met one-on-one with nearly 45,000 customers facing financial hardships.

In addition, through Wells Fargo LIFT programs, we offer down payment assistance and education to potential homeowners in communities most deeply impacted by the recession. We have committed $190 million to our LIFT programs, and since early 2012, we have provided down payment assistance to help more than 5,000 people buy homes in 24 markets. In 2013, we expanded our assistance through UrbanLIFT,SM a program that awarded $11.4 million in grants to local nonprofits to accelerate economic recovery and neighborhood improvement projects in 25 communities across the U.S.

Meeting the needs of businesses ? small and large We know for our economy to fully recover, we need businesses to grow and add jobs. Small businesses are the growth engines in every community, and as the nation's largest lender to small businesses, we are helping business owners every day get the capital and financial services they need.

In 2013, Wells Fargo extended $18.9 billion in new loan commitments to small businesses (primarily those with annual revenues of less than $20 million), up 18 percent from 2012. We were the nation's largest provider of Small Business Administration (SBA) loans based on dollar volume for the fifth consecutive year. Wells Fargo approved a record $1.47 billion in SBA 7(a) loans during federal fiscal year 2013 (October 2012 ? September 2013), up 18 percent from the prior year.

We also fund mid-sized and large companies, helping them grow both domestically and internationally. In 2013, our average commercial and industrial loans rose to $188 billion, up 8 percent from 2012. We work side by side with these businesses through our extensive network of commercial banking offices in all 50 states, providing our commercial customers with financial services like treasury management, insurance, capital finance, asset-based lending, commercial real estate, and foreign exchange. We also operate offices in international locations--including Hong Kong, London, Sydney, and Toronto--to meet the global needs of our corporate customers and provide services to financial institutions around the world.

Helping people plan and prepare for retirement As a leading retirement services provider--we administer about $341 billion in IRA assets and $298 billion in 401(k) and institutional retirement plan assets--Wells Fargo understands the importance of investing and saving for the future.

About 10,000 people retire every day, and most are expected to live longer in retirement than their parents and grandparents. Yet study after study shows that too many Americans are not adequately prepared for retirement and

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$18.9 billion

face the possibility of outliving their savings, which could severely impact our economy. In fact, the Wells Fargo Middle Class Retirement Survey released last fall revealed that nearly one-half of Americans are not confident they will be able to save enough for a comfortable retirement. One-third say they will have to work until at least age 80.

We believe the best way to fill that gap is with planning. Wells Fargo is a leader in offering guidance and individualized plans for all customers. Our research shows that customers with written plans are more confident in their ability to live comfortably in their retirement years. That is why we continue to promote the benefits of planning and offer free online services such as My Retirement Plan?, which we introduced in late 2012.

We also help people understand the importance of saving through financial education programs like Hands on Banking? and workplace seminars at companies for which we manage 401(k) and employee retirement plans.

Road to economic recovery While the economic recovery continues to move at a slow pace, we believe there are many reasons to be bullish in 2014. U.S. companies are known for their innovation-- a key driver of business competitiveness and long-term economic growth--in everything from biotechnology and medical devices to wireless technology, social networking, and cloud computing.

The U.S. also has become a world leader in energy production and the use of clean energy sources, which is creating new jobs and decreasing our reliance on imports. The manufacturing sector continues to improve and show signs of sustainable growth. And let's not forget agriculture, which I hold close to my heart as one of 11 children who grew up on a small family farm in Minnesota.

In 2013, Wells Fargo extended

$18.9 billion in new loan

commitments to small businesses,

up 18 percent from 2012.

We are proud to be the nation's largest agricultural business lender. Agricultural production has rebounded in America: Today, we export more food than we import, and Americans enjoy an affordable and safe food supply.

The U.S. housing market also is better positioned than it was a year ago. Though mortgage rates have risen, they remain very low from a historical perspective. Traditional buyers are coming back into the market, which should allow for more trade-up activity. Demand should improve further if labor markets continue to stabilize. Demographic factors also should help, as retiring baby boomers boost demand for homes in active adult communities and retiree markets.

Full economic recovery will take time, but we can look into the future with confidence and a deep appreciation of the tremendous opportunities ahead of us.

Our strategic priorities To meet the needs of our customers and help grow the overall economy, we will continue to focus on our strategic priorities, which create a shared sense of purpose across our approximately 90 businesses. Guided by our common vision and values, these priorities provide a clear path for team members to collaborate across organizational borders and focus on serving our customers as one team, something we call One Wells Fargo.

The six priorities are: ? Putting customers first ? Growing revenue ? Managing expenses ? Living our vision and values ? Connecting with communities and stakeholders ? Managing risk

Putting customers first At Wells Fargo we put customers first, in everything that we do. Helping customers succeed financially by serving all of their financial needs is the very foundation of our success. We do that through building long-lasting relationships, one customer at a time. That's why I say we are in the relationship business: We start with what customers need, not with what we want to provide them.

We proudly serve the financial needs of more than 70 million customers and one in three U.S. households. Each quarter, we provide about 357,000 new or refinanced automobile loans to customers. Each month, we provide financing to about 125,000 customers so they can purchase homes or refinance existing mortgages.

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Our Performance

$ in millions, except per share amounts

FOR THE YEAR Wells Fargo net income Wells Fargo net income applicable to common stock Diluted earnings per common share Profitability ratios:

Wells Fargo net income to average total assets (ROA) Wells Fargo net income applicable to common stock to average

Wells Fargo common stockholders' equity (ROE) Efficiency ratio 1

Total revenue Pre-tax pre-provision profit 2

Dividends declared per common share Average common shares outstanding Diluted average common shares outstanding

Average loans Average assets Average core deposits 3 Average retail core deposits 4

Net interest margin

AT YEAR-END Investment securities Loans Allowance for loan losses Goodwill Assets Core deposits 3 Wells Fargo stockholders' equity Total equity Tier 1 capital 5 Total capital 5

Capital ratios: Total equity to assets Risk-based capital: 5 Tier 1 capital Total capital Tier 1 leverage 5 Tier 1 common equity 6

Common shares outstanding Book value per common share Team members (active, full-time equivalent)

2013

$ 21,878 20,889 3.89

1.51%

13.87 58.3

$ 83,780 34,938

1.15 5,287.3 5,371.2

$ 804,992 1,448,305 942,120 669,657

3.39%

$ 264,353 825,799 14,502 25,637

1,527,015 980,063 170,142 171,008 140,735 176,177

11.20%

12.33 15.43

9.60 10.82 5,257.2 $ 29.48 264,900

2012

18,897 17,999

3.36

1.41

12.95 58.5

86,086 35,688

0.88 5,287.6 5,351.5

775,224 1,341,635

893,937 629,320

3.76

235,199 799,574

17,060 25,637 1,422,968 945,749 157,554 158,911 126,607 157,588

11.17

11.75 14.63

9.47 10.12 5,266.3 27.64 269,200

% Change

16 16 16

7

7 --

(3) (2)

31 -- --

4 8 5 6

(10)

12 3

(15) -- 7 4 8 8 11 12

--

5 5 1 7 -- 7 (2)

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 Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). 4 Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits. 5 See Note 26 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information. 6 See the "Financial Review ? Capital Management" section in this Report for additional information.

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