Our Commitment WELLS FARGO & COMPANY ANNUAL REPORT 2016 2016 ANNUAL REPORT Contents 2 | Letter from Chairman of the Board 4 | Letter from Chief Executive Officer and President 14 | Demonstrating Our Commitment 14 | Homeownership: More than a dream 16 | Journey through retirement 18 | A prescription for caring 20 | Bringing bankers to the kitchen table 22 | A home for hope 24 | Building with smart technology 26 | Helping create affordable housing 28 | A future of efficient freight 30 | A bank for life 32 | Operating Committee and Other Corporate Officers 33 | Board of Directors 34 | 2016 Corporate Social Responsibility Performance 35 | 2016 Financial Report - Financial review - Controls and procedures - Financial statements - Report of independent registered public accounting firm 273 | Stock Performance 2 2016 ANNUAL REPORT Dear Fellow Shareholders, Since 1852, Wells Fargo has worked to earn customers’ trust We have enforced senior management accountability by meeting their financial needs and helping them succeed for the damage to Wells Fargo’s reputation through very financially, while maintaining the highest standards of significant compensation actions. The Board accepted integrity. That is why my fellow Board members and I were John Stumpf’s recommendation to forfeit all of his unvested deeply troubled that Wells Fargo violated that trust by equity of approximately $41 million prior to his retirement opening accounts for certain retail banking customers that as Chairman and CEO. The Board required Carrie Tolstedt, they did not request or in some cases even know about. the departed head of Community Banking, to forfeit all This behavior is unacceptable, not only to the Board but of her approximately $19 million of unvested equity. also to the overwhelming majority of our people who are hard-working and highly ethical. In addition, given the overall impact on Wells Fargo’s stakeholders in 2016, the eight current members of our We have taken aggressive action to root out these practices 11-person Operating Committee who were in place and to compensate our customers who were harmed by before it was reconstituted in November 2016, including them. We recognize that these events signaled a need for our new CEO Tim Sloan, received no cash bonuses for 2016 fundamental changes in Wells Fargo’s culture, management and forfeited up to 50% of the amounts they would have systems, and executive leadership. Most significant otherwise received under their 2014 performance share among the many changes we have made is naming Tim awards that vested following 2016. Combined, these amounts Sloan CEO and Mary Mack head of the Community Bank. represent lost compensation of approximately $32 million, Together, Tim and Mary are leading a wave of change in based on 2016 target bonuses and our share price on the Community Bank’s culture, performance management, February 28, 2017, when the Board took these actions. compensation systems, and risk reporting structure -- all designed to ensure these problems never recur. These While the Board and management have made significant changes, as well as our actions to make things right with changes in the wake of the sales practices issue, I want our customers, are detailed in Tim’s letter which follows. to assure our shareholders that important aspects of Wells Fargo will not change. We serve the financial Wells Fargo’s Board of Directors has been actively involved needs of one in three U.S. households, and we remain in these management actions and has taken additional committed to generating long-term shareholder value steps to strengthen our oversight and governance by delivering superior returns across a variety of market capabilities. We have changed the company’s bylaws to conditions due to our diverse business model. However, specify that the Board Chair be an independent Director, there is no question that the impact of improper sales and we have bolstered Board leadership by naming practices has damaged our company’s reputation and the Betsy Duke Vice Chair. We have accelerated our ongoing bond of trust with our customers. The Board, management process of Board refreshment by electing two talented and Wells Fargo’s 269,000 team members are determined new Directors to succeed long-serving Board members. to restore that reputation and re-establish that bond We have also modified Board committee charters to of trust. I am confident that we will use this moment of strengthen oversight of such aspects as team member testing to make Wells Fargo stronger in the years ahead. culture, ethics line reports and consumer complaints. The independent Directors are conducting our own Sincerely, investigation to ensure we understand the root causes of the sales practices problem and have learned the lessons that will prevent any future recurrence. We expect to make findings of the investigation public before our 2017 Annual Meeting of Shareholders. Stephen W. Sanger Chairman of the Board 3 We are fully committed to making things right for our stakeholders and rebuilding trust. This is a long-term effort — one requiring commitment, patience, and resolve. Timothy J. Sloan Chief Executive Officer and President Wells Fargo & Company 4 2016 ANNUAL REPORT To Our Owners: This is my first annual report to shareholders, and I am We are conducting thorough reviews and investigations pleased to have this opportunity to share my thoughts to fully understand where things broke down and where on Wells Fargo — our accomplishments, challenges, and we failed. We are committed to learning from our mistakes decisive steps to rebuild trust — as part of our regular, because we recognize the inappropriate sales practices in ongoing conversation about our company. our retail bank did not serve the interests of our customers, our team members, or our company. And despite efforts In October 2016, I was honored to be chosen by our board to set things right, we did not move quickly enough to of directors to succeed John Stumpf as CEO and to lead address these issues. Wells Fargo into the future. John successfully navigated the company through the financial crisis of 2008–2009 All of this was unacceptable, and the lessons we learned must and the largest merger in banking; now, I am fully never be forgotten as we make changes necessary to regain dedicated to guiding our company forward at this our status as one of the world’s best financial institutions. critical moment in our 165-year history. I want to start by stating clearly that the foundation of our company is strong. Despite our current challenges, REBUILDING TRUST I believe that our underlying business strengths and our focus on managing for the long term will continue MAKING IT RIGHT FOR CUSTOMERS to benefit us as we move forward. We have meaningful AND TEAM MEMBERS opportunities, as you will read later in this letter, and we will be prepared to deliver for all of our stakeholders. As always, we take our commitment to our team members, We are fully committed to making things right for our customers, shareholders, and communities very seriously, stakeholders and rebuilding trust. This is a long-term effort and we manage with those constituents in mind. — one requiring commitment, patience, and resolve. Our challenges in 2016 were among the toughest At the outset, we employed a third-party consultant to in our company’s history. Unacceptable sales practices review accounts and identify impacted customers. We in our retail bank resulted in accounts being opened reviewed more than 94 million checking, credit card, and for customers that they were unaware of and neither line of credit accounts, dating from 2011 to 2016. Based on needed nor wanted. This exposed behaviors that needed that review, we refunded more than $3.2 million in charges to be addressed. These behaviors were contrary to our and fees on approximately 130,000 accounts that we values, raised questions about our culture, and damaged could not rule out as being initiated without a customer’s our reputation and the trust of many of our stakeholders. authorization. We also reached out to approximately I want to assure you that we are facing these problems 40 million retail customers and 3 million small businesses head on, and I am confident that Wells Fargo will through email, statement messaging, and postcards to emerge a stronger company. ensure those affected by the unacceptable sales practices could reach us. We are researching how customers’ credit Our top priority is rebuilding trust through a scores were impacted as a result of potentially unauthorized comprehensive plan that includes making things right credit cards, with the goal of aiding customers whose credit for our customers and team members, ensuring we fix scores might have been affected. And we decided to go problems at their root cause, and building a better bank beyond the requirements of our sales practices consent for the future. We are committed to transparency as we orders to expand our account reviews to include the years connect with all stakeholders more frequently through 2009 and 2010. increased communications. 5 We also want to rebuild trust with our team members. Finally, we have increased the information we disclose to A cornerstone of this effort is communicating more our investors, so you can more readily see the impact the frequently and with greater transparency. Between sales practices matters have had on our business and the September 2016 and January 2017, members of the actions we have taken in response. For example, in October, Operating Committee held 50 in-person sessions with we began providing monthly updates detailing trends in team members in more than 40 cities. These sessions our retail bank’s customer activity. In May 2017, we will host reached thousands of team members in person, an off-cycle Investor Day to provide more details, including and tens of thousands participated through satellite the changes we are making across the company to better broadcasts, streaming to desktops, and other serve our customers and build a stronger Wells Fargo.