WELLS FARGO & COMPANY/MN (WFC) FY 2024 MD&A

Overview

Wells Fargo & Company is a leading financial services company that has approximately $1.9 trillion in assets. We provide a diversified set of banking, investment and mortgage products and services, as well as consumer and commercial finance, through our four reportable operating segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management. Wells Fargo ranked No. 34 on Fortune’s 2024 rankings of America’s largest corporations. We ranked fourth in assets and third in the market value of our common stock among all U.S. banks at December 31, 2024.

Wells Fargo’s top priority remains building a risk and control infrastructure appropriate for its size and complexity. The Company is subject to a number of consent orders and other regulatory actions, some of which are described below. These regulatory actions may require the Company, among other things, to undertake certain changes to its business, operations, products and services, and risk management practices. While we still have work to do and have not yet satisfied certain aspects of these regulatory actions, the Company is committed to devoting the resources necessary to operate with strong business practices and controls, maintain the highest level of integrity, and have an appropriate culture in place. For additional information regarding the risks related to regulatory actions, see the “Risk Factors” section in this Report.

Federal Reserve Board Consent Order Regarding Governance Oversight and Compliance and Operational Risk Management

On February 2, 2018, the Company entered into a consent order with the Board of Governors of the Federal Reserve System (FRB). As required by the consent order, the Company’s Board of Directors (Board) submitted to the FRB a plan to further enhance the Board’s governance and oversight of the Company, and the Company submitted to the FRB a plan to further improve the Company’s compliance and operational risk management program. The Company continues to engage with the FRB as the Company works to address the consent order provisions. The consent order also requires the Company, following the FRB’s acceptance and approval of the plans and the Company’s adoption and implementation of the plans, to complete an initial third-party review of the enhancements and improvements provided for in the plans. Until this third-party review is complete and the plans are adopted and implemented to the satisfaction of the FRB, the Company’s total consolidated assets as defined under the consent order will be limited to the level as of December 31, 2017. Compliance with this asset cap is measured on a two-quarter daily average basis to allow for management of temporary fluctuations. After removal of the asset cap, a second

third-party review must also be conducted to assess the efficacy and sustainability of the enhancements and improvements.

Consent Orders with the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency Regarding Compliance Risk Management Program

On April 20, 2018, the Company entered into consent orders with the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) requiring the Company to enhance its compliance risk management program and its management of customer remediation activities. On February 13, 2025, the Company announced the OCC had terminated its consent order.

Consent Order with the OCC Regarding Loss Mitigation Activities

On September 9, 2021, the Company entered into a consent order with the OCC requiring the Company to improve the execution, risk management, and oversight of loss mitigation activities in its Home Lending business.

Consent Order with the CFPB Regarding Automobile Lending, Consumer Deposit Accounts, and Mortgage Lending

On December 20, 2022, the Company entered into a consent order with the CFPB that the Company announced was terminated on January 28, 2025.

Formal Agreement with the OCC Regarding Anti-Money Laundering and Sanctions Risk Management Practices

On September 12, 2024, the Company announced that Wells Fargo Bank, N.A. entered into a formal agreement with the OCC requiring the bank to enhance its anti-money laundering and sanctions risk management practices.

Customer Remediation Activities

Customer remediation activities are associated with our efforts to identify areas or instances where customers may have experienced financial harm and provide remediation as appropriate. We have accrued for the probable and estimable costs related to our customer remediation activities, which amounts may change based on additional facts and information, as well as ongoing reviews and communications with our regulators. We had $236 million and $819 million of accrued liabilities for customer remediation activities as of December 31, 2024 and 2023, respectively.

Recent Developments

Federal Deposit Insurance Corporation Special Assessment

In November 2023, the Federal Deposit Insurance Corporation (FDIC) finalized a rule to recover losses to the FDIC deposit insurance fund as a result of bank failures in the first half of 2023. Under the rule, the FDIC will collect a special assessment based on an insured depository institution’s estimated amount of uninsured deposits. Upon the FDIC’s finalization of the rule, we expensed an estimated amount of our special assessment of $1.9 billion (pre-tax) in fourth quarter 2023. During 2024, the FDIC provided updates on losses to the deposit insurance fund, which resulted in an additional expense of $243 million (pre-tax) for the year ended December 31, 2024, for the estimated amount of the special assessment. We expect the ultimate amount of the special assessment may continue to change as the FDIC determines the actual net losses to the deposit insurance fund.

Overdraft Fees Rule

In December 2024, the CFPB issued a final rule addressing overdraft fees that provides the following three options for banks with more than $10 billion in assets when charging an overdraft fee: charge no more than a five-dollar fee, charge a fee that covers no more than a bank’s costs or losses related to an overdraft, or treat the overdraft as a loan. The rule becomes effective October 1, 2025, but is pending third-party litigation challenging the rule. Additionally, the status of certain proposed and enacted rules and regulations is uncertain based on directions given to the CFPB and other agencies. If the rule becomes effective in its current form, we would expect a significant reduction to our fees for overdraft services, which are included in deposit-related fees.

Debit Card Interchange Fees Proposal

On October 25, 2023, the FRB issued a proposed rule that would reduce the amount of debit card interchange fees received by debit card issuers. In addition, the proposed rule would allow for an update to the debit card interchange fee cap every other year based on an analysis of certain costs incurred by debit card issuers. We expect a significant reduction to our debit card interchange fees, which are included in card fees, if the rule is adopted as currently proposed.

Financial Performance

In 2024, we generated $19.7 billion of net income and diluted EPS of $5.37, compared with $19.1 billion of net income and diluted EPS of $4.83 in 2023. Financial performance for 2024, compared with 2023, included the following:

•total revenue decreased due to lower net interest income, partially offset by higher noninterest income;

•noninterest expense decreased due to lower expense for the FDIC special assessment, and lower professional and outside services expense, partially offset by higher technology, telecommunications and equipment expense and higher operating losses;

•average loans decreased driven by declines in our commercial and consumer loan portfolios; and

•average deposits decreased driven by a decline in our noninterest-bearing deposits, partially offset by an increase in our interest-bearing deposits.

Capital and Liquidity

We maintained a strong capital and liquidity position in 2024, which included the following:

•our Common Equity Tier 1 (CET1) ratio was 11.07% under the Standardized Approach (our binding ratio), which continued to exceed the regulatory minimum and buffers of 9.80%;

•our total loss absorbing capacity (TLAC) as a percentage of total risk-weighted assets was 24.83%, compared with the regulatory minimum of 21.50%; and

•our liquidity coverage ratio (LCR) was 125%, which continued to exceed the regulatory minimum of 100%.

See the “Capital Management” and the “Risk Management – Asset/Liability Management – Liquidity Risk and Funding” sections in this Report for additional information regarding our capital and liquidity, including the calculation of our regulatory capital and liquidity amounts.

Credit Quality

Credit quality reflected the following:

•The allowance for credit losses (ACL) for loans of $14.6 billion at December 31, 2024, decreased $452 million from December 31, 2023.

•Our provision for credit losses for loans was $4.3 billion in 2024, compared with $5.4 billion in 2023, reflecting an increase in net loan charge-offs which was more than offset by the change in allowance for credit losses for loans driven by decreases across most loan portfolios, partially offset by increases for credit card loans.

•The allowance coverage for total loans was 1.60% at December 31, 2024, compared with 1.61% at December 31, 2023.

•Commercial portfolio net loan charge-offs were $1.5 billion, or 29 basis points of average commercial loans, in 2024, compared with net loan charge-offs of $923 million, or 17 basis points, in 2023, due to higher losses, primarily in our commercial real estate portfolio driven by the office property type.

•Consumer portfolio net loan charge-offs were $3.2 billion, or 85 basis points of average consumer loans, in 2024, compared with net loan charge-offs of $2.5 billion, or 65 basis points, in 2023, due to higher losses in our credit card portfolio driven by higher loan balances, partially offset by lower losses in our auto portfolio.

•Nonperforming assets (NPAs) of $7.9 billion at December 31, 2024, decreased $507 million, or 6%, from December 31, 2023, driven by a decrease in commercial real estate and residential mortgage nonaccrual loans, partially offset by an increase in commercial and industrial nonaccrual loans. NPAs represented 0.87% of total loans at December 31, 2024.

•Criticized loans in the commercial portfolio were $35.7 billion at December 31, 2024, compared with $33.0 billion at December 31, 2023, primarily driven by increases in criticized commercial and industrial loans.

Overview (continued)

Table 1 presents a three-year summary of selected financial data and Table 2 presents selected ratios and per common share data.

Table 1: Summary of Selected Financial Data

NM – Not meaningful

(1)Includes provision for credit losses for loans, debt securities, and other financial assets.

Table 2: Ratios and Per Common Share Data

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

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

(3)Tangible common equity is a non-GAAP financial measure and represents total equity less preferred equity, noncontrolling interests, goodwill, certain identifiable intangible assets (other than mortgage servicing rights) and goodwill and other intangibles on investments in consolidated portfolio companies, net of applicable deferred taxes. The methodology of determining tangible common equity may differ among companies. Management believes that return on average tangible common equity, which utilizes tangible common equity, is a useful financial measure because it enables management, investors, and others to assess the Company’s use of equity. For additional information, including a corresponding reconciliation to generally accepted accounting principles (GAAP) financial measures, see the “Capital Management – Tangible Common Equity” section in this Report.

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

(5)See the “Capital Management” section and Note 26 (Regulatory Capital Requirements and Other Restrictions) to Financial Statements in this Report for additional information.

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

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

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

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

Earnings Performance

Wells Fargo net income for 2024 was $19.7 billion ($5.37 diluted EPS), compared with $19.1 billion ($4.83 diluted EPS) in 2023. Net income increased in 2024, compared with 2023, predominantly due to a $4.4 billion increase in noninterest income, a $1.1 billion decrease in provision for credit losses, and a $1.0 billion decrease in noninterest expense, partially offset by a $4.7 billion decrease in net interest income and a $792 million increase in income tax expense.

For a discussion of our 2023 financial results, compared with 2022, see the “Earnings Performance” section of our Annual Report on Form 10-K for the year ended December 31, 2023.

Net Interest Income

Net interest income is the interest earned on debt securities, loans (including yield-related loan fees) and other interest-earning assets minus the interest paid on deposits, short-term borrowings and long-term debt. The net interest margin is the average yield on earning assets minus the average interest rate paid for deposits and our other sources of funding.

Net interest income and the net interest margin in any one period can be significantly affected by a variety of factors including the mix and overall size of our earning assets portfolio and the cost of funding those assets. In addition, variable sources of interest income, such as loan fees, periodic dividends, and collection of interest on nonaccrual loans, can fluctuate from period to period.

Net interest income and net interest margin decreased in 2024, compared with 2023, driven by the impact of higher interest rates on interest-bearing liabilities, including a deposit mix shift to interest-bearing deposits, as well as lower loan balances, partially offset by higher interest rates on interest-earning assets.

Table 3 presents the individual components of net interest income and net interest margin. Net interest income and net interest margin are presented on a taxable-equivalent basis in Table 3 to consistently reflect income from taxable and tax-exempt loans and debt and equity securities. The calculation for taxable-equivalent basis was based on a federal statutory tax rate of 21%.

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

(1)The average balance amounts represent amortized costs, except for certain held-to-maturity (HTM) debt securities, which exclude unamortized basis adjustments related to the transfer of those securities from available-for-sale (AFS) debt securities. Amortized cost amounts exclude any valuation allowances and unrealized gains or losses, which are included in other noninterest-earning assets and other noninterest-bearing liabilities. The average interest rates are based on interest income or expense amounts for the period and are annualized. Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.

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

(3)Includes taxable-equivalent adjustments of $340 million, $420 million, and $436 million for the years ended December 31, 2024, 2023 and 2022, respectively, predominantly related to tax-exempt income on certain loans and securities.

Earnings Performance (continued)

Table 4 allocates the changes in net interest income on a taxable-equivalent basis to changes in either average balances or average rates for both interest-earning assets and interest-bearing liabilities. Because of the numerous simultaneous volume and rate changes during any period, it is not possible to precisely

allocate such changes between volume and rate. For this table, changes that are not solely due to either volume or rate are allocated to these categories on a pro-rata basis based on the absolute value of the change due to average volume and average rate.

Table 4: Analysis of Changes in Net Interest Income

Noninterest Income

Table 5: Noninterest Income

NM – Not meaningful

Full year 2024 vs. full year 2023

Deposit-related fees increased reflecting higher treasury management fees on commercial accounts driven by increased transaction service volumes and repricing.

Investment advisory and other asset-based fees increased driven by higher asset-based fees reflecting higher market valuations.

Fees from the majority of Wealth and Investment Management (WIM) advisory assets are based on a percentage of the market value of the assets at the beginning of the quarter. For additional information on certain client investment assets, see the “Earnings Performance – Operating Segment Results – Wealth and Investment Management – WIM Advisory Assets” section in this Report.

Commissions and brokerage services fees increased driven by higher brokerage transaction activity, partially offset by lower other brokerage service fees.

Investment banking fees increased due to higher debt and equity underwriting fees and higher advisory fees driven by increased activity.

Mortgage banking increased due to:

•higher net gains on mortgage loan originations/sales related to increased commercial mortgage loan securitization sales volumes; and

•higher income from net hedge results related to mortgage servicing rights (MSR) valuations.

Net gains from trading activities increased driven by higher revenue in foreign exchange and structured products, partially offset by losses related to our implementation of a change to incorporate funding valuation adjustments (FVA) for our derivatives.

Net gains (losses) from debt securities decreased driven by losses related to a repositioning of our investment portfolio.

Net gains (losses) from equity securities increased driven by:

•higher realized and unrealized gains on equity securities from our venture capital investments; and

•lower impairment of equity securities from our venture capital investments.

Other income increased driven by impacts related to the expanded use of the proportional amortization method of accounting for renewable energy tax credit investments, which reclassified the amortization of the investment cost from other noninterest income to income tax expense. For additional information on our adoption in first quarter 2024 of Accounting Standards Update (ASU) 2023-02 – Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

Earnings Performance (continued)

Noninterest Expense

Table 6: Noninterest Expense

(1)Includes expenses for legal actions of $290 million, $179 million, and $3.3 billion for the years ended December 31, 2024, 2023, and 2022, respectively, and expenses for customer remediation activities of $722 million, $207 million, and $2.7 billion for the years ended December 31, 2024, 2023, and 2022, respectively.

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

Full year 2024 vs. full year 2023

Personnel expense decreased slightly due to lower severance expense and the impact of efficiency initiatives, partially offset by higher revenue-related compensation expense driven by higher fees in our Wealth and Investment Management business.

For additional information on personnel expense, see

Note 21 (Revenue and Expenses) to Financial Statements in this Report.

Technology, telecommunications and equipment expense increased due to higher expense for the amortization of internally developed software and higher expense for software maintenance and licenses.

Operating losses increased driven by higher expense for customer remediation activities related to the further refinement of the remediation costs for historical mortgage lending and other consumer products matters, and higher expense for legal actions.

For additional information on customer remediation activities, see the “Overview” section above. For additional information on operating losses, see Note 21 (Revenue and Expenses) to Financial Statements in this Report.

Professional and outside services expense decreased driven by lower expense for consulting projects related to our risk and control work, as well as efficiency initiatives to reduce our spending on consultants and contractors.

Other expense decreased reflecting lower expense for the FDIC special assessment. For additional information on the FDIC’s special assessment, see Note 21 (Revenue and Expenses) to Financial Statements in this Report.

Income Tax Expense

Table 7: Income Tax Expense

(1)Represents (i) Income tax expense (benefit) divided by (ii) Income (loss) before income tax expense (benefit) less Net income (loss) from noncontrolling interests.

The increase in the effective income tax rate for 2024, compared with 2023, was driven by higher pre-tax income and the impacts related to the adoption of ASU 2023-02 in first quarter 2024 for our renewable energy tax credit investments, which reclassified the amortization of the investment cost from other noninterest income to income tax expense. For additional information on our adoption of ASU 2023-02 – Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

For additional information on income taxes, see Note 23 (Income Taxes) to Financial Statements in this Report.

Operating Segment Results

Our management reporting is organized into four reportable operating segments: Consumer Banking and Lending; Commercial Banking; Corporate and Investment Banking; and Wealth and Investment Management. All other business activities that are not included in the reportable operating segments have been included in Corporate. For additional information, see Table 8 below. We define our reportable operating segments by type of product and customer segment, and their results are based on our management reporting process. The management reporting process measures the performance of the reportable operating segments based on the Company’s management structure, and the results are regularly reviewed with our Chief Executive Officer and relevant senior management. The management reporting process is based on U.S. GAAP and includes specific adjustments, such as funds transfer pricing for asset/liability management, shared revenue and expenses, and taxable-equivalent adjustments to consistently reflect income from taxable and tax-exempt sources, which allows management to assess performance consistently across the operating segments.

Funds Transfer Pricing. Corporate treasury manages a funds transfer pricing methodology that considers interest rate risk, liquidity risk, and other product characteristics. Operating segments pay a funding charge for their assets and receive a funding credit for their deposits, both of which are included in net interest income. The net impact of the funding charges or credits is recognized in corporate treasury.

Revenue Sharing and Expense Allocations. When lines of business jointly serve customers, the line of business that is responsible for providing the product or service recognizes revenue or expense with a referral fee paid or an allocation of cost to the other line of business based on established internal revenue-sharing agreements.

When a line of business uses a service provided by another line of business, expense is generally allocated based on the cost

and use of the service provided. Enterprise functions, such as operations, technology, and risk management, are included in Corporate with an allocation of their applicable costs to the reportable operating segments based on the level of support provided by the enterprise function. We periodically assess and update our revenue sharing and expense allocation methodologies.

Taxable-Equivalent Adjustments. Taxable-equivalent adjustments related to tax-exempt income on certain loans and debt securities are included in net interest income, while taxable-equivalent adjustments related to income tax credits for affordable housing and renewable energy investments are included in noninterest income, in each case with corresponding impacts to income tax expense (benefit). Adjustments are included in Corporate, Commercial Banking, and Corporate and Investment Banking and are eliminated to reconcile to the Company’s consolidated financial results.

Allocated Capital. Reportable operating segments are allocated capital under a risk-sensitive framework that is primarily based on aspects of our regulatory capital requirements, and the assumptions and methodologies used to allocate capital are periodically assessed and updated. Management believes that return on allocated capital is a useful financial measure because it enables management, investors, and others to assess a reportable operating segment’s use of capital.

Selected Metrics. We present certain financial and nonfinancial metrics that management uses when evaluating reportable operating segment results. Management believes that these metrics are useful to investors and others to assess the performance, customer growth, and trends of reportable operating segments or lines of business.

Table 8: Management Reporting Structure

Earnings Performance (continued)

Table 9 and the following discussion present our results by reportable operating segment. For additional information, see Note 20 (Operating Segments) to Financial Statements in this Report.

Table 9: Operating Segment Results – Highlights

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

(2)Taxable-equivalent adjustments related to tax-exempt income on certain loans and debt securities are included in net interest income, while taxable-equivalent adjustments related to income tax credits for affordable housing and renewable energy investments are included in noninterest income, in each case with corresponding impacts to income tax expense (benefit). Adjustments are included in Corporate, Commercial Banking, and Corporate and Investment Banking and are eliminated to reconcile to the Company’s consolidated financial results.

Consumer Banking and Lending offers diversified financial products and services for consumers and small businesses with annual sales generally up to $10 million. These financial products and services include checking and savings accounts, credit and

debit cards, as well as home, auto, personal, and small business lending. Table 9a and Table 9b provide additional information for Consumer Banking and Lending.

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

(continued on following page)

Earnings Performance (continued)

(continued from previous page)

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

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

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

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

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

(6)Excludes residential mortgage loans subserviced for others.

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

(8)Excludes loans held for sale.

(9)Delinquency balances exclude nonaccrual loans.

Full year 2024 vs. full year 2023

Revenue decreased driven by lower net interest income due to lower deposit balances and lower loan balances.

Provision for credit losses reflected an increase in net charge-offs driven by credit card loans.

Noninterest expense decreased due to:

•lower personnel expense driven by lower severance expense and the impact of efficiency initiatives;

•lower professional and outside services expense driven by the impact of efficiency initiatives; and

•lower operating costs;

partially offset by:

•higher operating losses.

Table 9b: Consumer Banking and Lending – Balance Sheet