Exhibit



		Financial Review
30		Overview	152	3	Cash, Loan and Dividend Restrictions
34		Earnings Performance	153	4	Federal Funds Sold, Securities Purchased under Resale Agreements and Other Short-Term Investments
53		Balance Sheet Analysis	154	5	Investment Securities
56		Off-Balance Sheet Arrangements	162	6	Loans and Allowance for Credit Losses
58		Risk Management	180	7	Premises, Equipment, Lease Commitments and Other Assets
102		Capital Management	182	8	Securitizations and Variable Interest Entities
108		Regulatory Reform	193	9	Mortgage Banking Activities
110		Critical Accounting Policies	196	10	Intangible Assets
114		Current Accounting Developments	197	11	Deposits
115		Forward-Looking Statements	198	12	Short-Term Borrowings
117		Risk Factors	199	13	Long-Term Debt
			201	14	Guarantees, Pledged Assets and Collateral
		Controls and Procedures	206	15	Legal Actions
131		Disclosure Controls and Procedures	208	16	Derivatives
131		Internal Control Over Financial Reporting	216	17	Fair Values of Assets and Liabilities
131		Management's Report on Internal Control over Financial Reporting	239	18	Preferred Stock
132		Report of Independent Registered Public Accounting Firm	242	19	Common Stock and Stock Plans
			246	20	Employee Benefits and Other Expenses
		Financial Statements	252	21	Income Taxes
133		Consolidated Statement of Income	254	22	Earnings Per Common Share
134		Consolidated Statement of Comprehensive Income	255	23	Other Comprehensive Income
135		Consolidated Balance Sheet	257	24	Operating Segments
136		Consolidated Statement of Changes in Equity	259	25	Parent-Only Financial Statements
140		Consolidated Statement of Cash Flows	262	26	Regulatory and Agency Capital Requirements

		Notes to Financial Statements	263		Report of Independent Registered Public Accounting Firm
141	1	Summary of Significant Accounting Policies	264		Quarterly Financial Data
151	2	Business Combinations	266		Glossary of Acronyms

Wells Fargo & Company is a diversified, community-based financial services company with $1.8 trillion in assets. Founded in 1852 and headquartered in San Francisco, we provide banking, insurance, investments, mortgage, and consumer and commercial finance through 8,700 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and we have offices in 36 countries to support our customers who conduct business in the global economy. With approximately 265,000 active, full-time equivalent team members, we serve one in three households in the United States and ranked No. 30 on Fortune’s 2015 rankings of America’s largest corporations. We ranked third in assets and first in the market value of our common stock among all U.S. banks at December 31, 2015.

We use our Vision and Values to guide us toward growth and success. Our vision is to satisfy our customers’ financial needs, help them succeed financially, be recognized as the premier financial services company in our markets and be one of America’s great companies. We aspire to create deep and enduring relationships with our customers by providing them with an exceptional experience and by discovering their needs and delivering the most relevant products, services, advice, and guidance.

We have five primary values, which are based on our vision and provide the foundation for everything we do. First, we value and support our people as a competitive advantage and strive to attract, develop, retain and motivate the most talented people we can find. Second, we strive for the highest ethical standards with our team members, our customers, our communities and our shareholders. Third, with respect to our customers, we strive to base our decisions and actions on what is right for them in everything we do. Fourth, for team members we strive to build and sustain a diverse and inclusive culture – one where they feel valued and respected for who they are as well as for the skills and experiences they bring to our company. Fifth, we also look to each of our team members to be leaders in establishing, sharing and communicating our vision. In addition to our five primary values, one of our key day-to-day priorities is to make risk

management a competitive advantage by working hard to ensure

appropriate controls are in place to reduce risks to our customers, maintain and increase our competitive market position, and protect Wells Fargo’s long-term safety, soundness and reputation.

Financial Performance

In 2015, we generated $22.9 billion of net income and record diluted earnings per common share (EPS) of $4.12 and ended

the year as the world's most valuable bank by market capitalization. We produced strong loan and deposit growth, grew the number of customers we serve, improved credit quality, enhanced our risk management practices, increased our capital and liquidity levels and rewarded our shareholders by increasing our dividend and continuing to repurchase shares of our common stock. Our achievements during 2015 continued to demonstrate the benefit of our diversified business model and our continued focus on the real economy. Our contribution to the real economy in 2015 was broad based and included originating $213.2 billion in residential mortgage loans, $31.1 billion of auto loans, $18.8 billion in new loan commitments to our small business customers, who primarily have less than $20 million in annual revenue, and $34.4 billion of middle market loans.

Noteworthy items included:


•	revenue of $86.1 billion, up 2% from 2014;


•	pre-tax pre-provision profit (PTPP) of $36.1 billion, up 2%;


•	an increase in loans of $54.0 billion, up 6%, even with the planned runoff in our non-strategic/liquidating portfolios, and growth in our core loan portfolio of $62.8 billion, up 8%;


•	strong customer deposit growth generated by our deposit franchise, with total deposits up $55.0 billion, or 5%;


•	strong credit performance as our net charge-off ratio declined to 33 basis points of average loans;


•	loan loss allowance releases declined from $1.6 billion in 2014 to $450 million in 2015;


•	strengthening our capital levels as our Common Equity Tier I ratio (fully phased-in) was 10.77%; and


•	returning $12.6 billion in capital to our shareholders, our 5th consecutive year of increased returns, through increased common stock dividends and additional net share repurchases.

Balance Sheet and Liquidity

Our balance sheet grew 6% in 2015 to $1.8 trillion, as we increased our liquidity position, improved the quality of our assets and held more capital. We grew deposits by 5% while reducing our deposit costs by two basis points. We also grew our loans each quarter on a year-over-year basis to end 2015 with our 18th consecutive quarter of growth (for the past 15 quarters year-over-year loan growth has been 3% or greater) despite the planned runoff from our non-strategic/liquidating portfolios. Our non-strategic/liquidating loan portfolios decreased $8.8 billion during the year (to less than 6% of total loans) and

our core loan portfolios increased $62.8 billion from the prior year. Our core loan portfolio growth included $11.5 billion from the GE Capital commercial real estate loan purchase and related financing transaction announced in first quarter 2015. We grew our investment securities portfolio by $34.6 billion in 2015 and our federal funds sold, securities purchased under resale agreements and other short-term investments (collectively referred to as federal funds sold and other short-term investments elsewhere in this Report) increased by $11.7 billion, or 5%, during the year. While we believe our liquidity position continued to remain strong with increased regulatory expectations, we have added to our position over the past year.

The strength of our balance sheet during 2015 positioned us for the agreement we announced in third quarter 2015 to purchase GE Capital's Commercial Distribution Finance and Vendor Finance businesses as well as a portion of its Corporate Finance business – an acquisition that will help us serve more markets and meet more of our customers' financial needs. The acquisition is expected to include total assets of approximately $31 billion and is expected to close in two phases. The North American portion, which represents approximately 90% of total assets to be acquired, is expected to close late in first quarter 2016. The international portion is expected to close in second quarter 2016. Also, in January 2016 we closed our purchase of GE Railcar Services, which included $4.0 billion of operating and capital leases, comprised of 77,000 railcars and just over 1,000 locomotives that were added to our existing First Union Rail business. During fourth quarter 2015 we issued long-term debt to partially fund the anticipated closing of these GE Capital acquisitions.

Deposit growth remained strong with period-end deposits up $55.0 billion from 2014. This increase reflected solid growth across both our commercial and consumer businesses. We grew our primary consumer checking customers by 5.6% and primary small business and business banking checking customers by 4.8% from a year ago (November 2015 compared with November 2014). Our ability to grow primary customers is important to our results because these customers have more interactions with us and are significantly more profitable than non-primary customers.

Credit Quality

Credit quality remained strong in 2015, demonstrating the benefit of our diversified loan portfolio. Solid performance in several of our commercial and consumer loan portfolios was evidenced by losses remaining near historically low levels, reflecting our long-term risk focus. Net charge-offs of $2.9 billion were 0.33% of average loans, down 2 basis points from a year ago. Net losses in our commercial portfolio were $387 million, or 9 basis points of average loans. Net consumer losses declined to 55 basis points in 2015 from 65 basis points in 2014. Our commercial real estate portfolios were in a net recovery position for each quarter of the last three years, reflecting our conservative risk discipline and improved market conditions. Losses on our consumer real estate portfolios declined $497 million, or 44%, from a year ago. The consumer loss levels reflected the benefit of the improving housing market and our continued focus on originating high quality loans. Approximately 67% of the consumer first mortgage portfolio was originated after 2008, when new underwriting standards were implemented.

Our provision for credit losses in 2015 was $2.4 billion compared with $1.4 billion a year ago reflecting a release of

$450 million from the allowance for credit losses, compared with a release of $1.6 billion a year ago. We did not release or build our allowance in the last half of 2015 as the credit improvement in our residential real estate portfolios was offset by higher commercial allowance reflecting deterioration in our oil and gas portfolio. Total loans in the oil and gas portfolio were down 6% from a year ago and are now less than 2% of our total loans outstanding. Approximately $1.2 billion of the allowance at December 31, 2015 was allocated to our oil and gas portfolio; however the entire allowance is available to absorb credit losses inherent in the total loan portfolio. If oil prices remain low for a prolonged period of time, there could be additional performance deterioration in our oil and gas portfolio resulting in higher criticized assets, nonperforming loans, allowance levels and ultimately credit losses. Deteriorated performance can take the form of increased downgrades, borrower defaults, potentially higher commitment drawdowns prior to default, and downgraded borrowers being unable to fully access the capital markets. Furthermore, our loan exposure in communities where the employment base has a concentration in the oil and gas sector may experience some credit challenges.

Future allowance levels may increase or decrease based on a variety of factors, including loan growth, portfolio performance and general economic conditions.

In addition to lower net charge-offs, nonperforming assets (NPAs) through the end of 2015 have declined for 13 consecutive quarters and were down $2.7 billion, or 17%, from 2014. Nonaccrual loans declined $1.5 billion from the prior year while foreclosed assets were down $1.2 billion from 2014.

Capital

Our capital levels remained strong in 2015, even as we returned more capital to our shareholders, with total equity increasing to $193.9 billion at December 31, 2015, up $8.6 billion from the prior year. We returned $12.6 billion to shareholders in 2015 ($12.5 billion in 2014) through common stock dividends and net share repurchases and our net payout ratio (which is the ratio of (i) common stock dividends and share repurchases less issuances and stock compensation-related items, divided by (ii) net income applicable to common stock) was 59%. During 2015 we increased our quarterly common stock dividend by 7% to $0.375 per share. In 2015, our common shares outstanding declined by 78.2 million shares as we continued to reduce our common share count through the repurchase of 163.4 million common shares during the year. We also entered into a $500 million forward repurchase contract with an unrelated third party in December 2015 that settled in January 2016 for 9.2 million shares. In addition, we entered into a $750 million forward repurchase contract with an unrelated third party in January 2016 that settled in first quarter 2016 for 15.9 million shares. We expect our share count to continue to decline in 2016 as a result of anticipated net share repurchases.

We believe an important measure of our capital strength is the Common Equity Tier 1 ratio on a fully phased-in basis, which increased to 10.77% in 2015 from 10.43% a year ago. Likewise, our other regulatory capital ratios remained strong. See the “Capital Management” section in this Report for more information regarding our capital, including the calculation of our regulatory capital amounts.



(in millions, except per share amounts)	2015		2014	2013	2012	2011	2010	% Change 2015/ 2014		Five-year compound growth rate
Income statement
Net interest income	$	45,301	43,527	42,800	43,230	42,763	44,757	4	%	—
Noninterest income	40,756		40,820	40,980	42,856	38,185	40,453	—		—
Revenue	86,057		84,347	83,780	86,086	80,948	85,210	2		—
Provision for credit losses	2,442		1,395	2,309	7,217	7,899	15,753	75		(31	)
Noninterest expense	49,974		49,037	48,842	50,398	49,393	50,456	2		—
Net income before noncontrolling interests	23,276		23,608	22,224	19,368	16,211	12,663	(1	)	13
Less: Net income from noncontrolling interests	382		551	346	471	342	301	(31	)	5
Wells Fargo net income	22,894		23,057	21,878	18,897	15,869	12,362	(1	)	13
Earnings per common share	4.18		4.17	3.95	3.40	2.85	2.23	—		13
Diluted earnings per common share	4.12		4.10	3.89	3.36	2.82	2.21	—		13
Dividends declared per common share	1.475		1.350	1.150	0.880	0.480	0.200	9		49
Balance sheet (at year end)
Investment securities	$	347,555	312,925	264,353	235,199	222,613	172,654	11	%	15
Loans	916,559		862,551	822,286	798,351	769,631	757,267	6		4
Allowance for loan losses	11,545		12,319	14,502	17,060	19,372	23,022	(6	)	(13	)
Goodwill	25,529		25,705	25,637	25,637	25,115	24,770	(1	)	1
Assets	1,787,632		1,687,155	1,523,502	1,421,746	1,313,867	1,258,128	6		7
Deposits	1,223,312		1,168,310	1,079,177	1,002,835	920,070	847,942	5		8
Long-term debt	199,536		183,943	152,998	127,379	125,354	156,983	8		5
Wells Fargo stockholders' equity	192,998		184,394	170,142	157,554	140,241	126,408	5		9
Noncontrolling interests	893		868	866	1,357	1,446	1,481	3		(10	)
Total equity	193,891		185,262	171,008	158,911	141,687	127,889	5		9

Wells Fargo net income for 2015 was $22.9 billion ($4.12 diluted earnings per common share), compared with $23.1 billion ($4.10 diluted per share) for 2014 and $21.9 billion ($3.89 diluted per share) for 2013. Our 2015 earnings reflected continued strong execution of our business strategy as well as growth in many of our businesses. Our financial performance in 2015 benefited from a $1.8 billion increase in net interest income, which was offset by a $1.0 billion increase in our provision for credit losses and a $937 million increase in noninterest expense.

Revenue, the sum of net interest income and noninterest income, was $86.1 billion in 2015, compared with $84.3 billion in 2014 and $83.8 billion in 2013. The increase in revenue for 2015 compared with 2014 was predominantly due to an increase in net interest income, reflecting increases in income from trading assets, investment securities, and loans. Our diversified sources of revenue generated by our businesses continued to be balanced between net interest income and noninterest income. In 2015, net interest income of $45.3 billion represented 53% of revenue, compared with $43.5 billion (52%) in 2014 and $42.8 billion (51%) in 2013.

Noninterest income was $40.8 billion in 2015, representing 47% of revenue, compared with $40.8 billion (48%) in 2014 and $41.0 billion (49%) in 2013. Noninterest income was relatively stable in 2015 compared with a year ago, reflecting our continued ability to generate fee income despite fluctuations in market sensitive revenue.

Noninterest expense was $50.0 billion in 2015, compared with $49.0 billion in 2014 and $48.8 billion in 2013. The increase in noninterest expense in 2015, compared with 2014, reflected higher compensation expense and operating losses. Noninterest expense as a percentage of revenue (efficiency ratio) was 58.1% in 2015, 58.1% in 2014 and 58.3% in 2013, reflecting our expense management efforts.

Table 3 presents the components of revenue and noninterest expense as a percentage of revenue for year-over-year results.



	Year ended December 31,
(in millions)	2015			% of revenue		2014			% of revenue		2013			% of revenue
Interest income (on a taxable equivalent basis)
Trading assets	$	2,010		2	%	$	1,712		2	%	$	1,406		2	%
Investment securities	9,906			12		9,253			11		8,841			11
Mortgages held for sale (MHFS)	785			1		767			1		1,290			2
Loans held for sale (LHFS)	19			—		78			—		13			—
Loans	36,663			43		35,715			42		35,618			43
Other interest income	990			1		932			1		724			1
Total interest income (on a taxable equivalent basis)	50,373			59		48,457			57		47,892			57
Interest expense
Deposits	963			1		1,096			1		1,337			2
Short-term borrowings	64			—		62			—		71			—
Long-term debt	2,592			4		2,488			3		2,585			3
Other interest expense	357			—		382			—		307			—
Total interest expense	3,976			5		4,028			4		4,300			5
Net interest income (on a taxable-equivalent basis)	46,397			54		44,429			53		43,592			52
Taxable-equivalent adjustment	(1,096		)	(1	)	(902		)	(1	)	(792		)	(1	)
Net interest income (A)	45,301			53		43,527			52		42,800			51
Noninterest income
Service charges on deposit accounts	5,168			6		5,050			6		5,023			6
Trust and investment fees (1)	14,468			16		14,280			17		13,430			16
Card fees	3,720			4		3,431			4		3,191			4
Other fees (1)	4,324			5		4,349			5		4,340			5
Mortgage banking (1)	6,501			7		6,381			8		8,774			10
Insurance	1,694			2		1,655			2		1,814			2
Net gains from trading activities	614			1		1,161			1		1,623			2
Net gains (losses) on debt securities	952			1		593			1		(29		)	—
Net gains from equity investments	2,230			3		2,380			3		1,472			2
Lease income	621			1		526			1		663			1
Other	464			1		1,014			1		679			1
Total noninterest income (B)	40,756			47		40,820			48		40,980			49
Noninterest expense
Salaries	15,883			19		15,375			18		15,152			18
Commission and incentive compensation	10,352			12		9,970			12		9,951			12
Employee benefits	4,446			5		4,597			5		5,033			6
Equipment	2,063			2		1,973			2		1,984			2
Net occupancy	2,886			3		2,925			3		2,895			3
Core deposit and other intangibles	1,246			1		1,370			2		1,504			2
FDIC and other deposit assessments	973			1		928			1		961			1
Other (2)	12,125			15		11,899			14		11,362			14
Total noninterest expense	49,974			58		49,037			58		48,842			58
Revenue (A) + (B)	$	86,057				$	84,347				$	83,780

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 for 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 are presented on a taxable-equivalent basis in Table 5 to consistently reflect income from taxable and tax-exempt loans and securities based on a 35% federal statutory tax rate.

While the Company believes that it has the ability to increase net interest income over time, 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, some variable sources of interest income, such as resolutions from purchased credit-impaired (PCI) loans, loan prepayment fees and collection of interest on nonaccrual loans, can vary from period to period. Net interest income growth has been challenged during the prolonged low interest rate environment as higher yielding loans and securities runoff have been replaced with lower yielding assets.

Net interest income on a taxable-equivalent basis was $46.4 billion in 2015, compared with $44.4 billion in 2014, and $43.6 billion in 2013. The net interest margin was 2.95% in 2015, down 16 basis points from 3.11% in 2014, which was down 29 basis points from 3.40% in 2013. The increase in net interest income for 2015, compared with 2014, was primarily driven by loan growth, the benefit of swapping a portion of our variable rate commercial loans to fixed rate, securities purchases, higher trading balances, and reduced deposit costs. Strong growth in commercial loans, retained first lien real estate loans and credit cards contributed to higher net interest income as originations more than replaced runoff in the non-strategic/liquidating portfolios. This increase was partially offset by the impact of increased interest expense on higher long-term debt balances and reduced interest income from loans held for sale (LHFS) following the sale of substantially all of the government guaranteed student loan portfolio in 2014. Funding costs in 2015 remained relatively flat compared with 2014 due to lower deposit costs as a result of disciplined pricing, partially offset by increased long-term debt interest expense. The decline in net interest margin in 2015, compared with 2014, was primarily due to customer-driven deposit growth and higher long-term debt balances, partially offset by growth in loans and securities. The growth in customer-driven deposits and funding balances during 2015 kept cash, federal funds sold, and other short-term investments elevated, which diluted net interest margin but was essentially neutral to net interest income. During fourth quarter 2015, we issued long-term debt to partially fund the previously announced acquisition of certain commercial lending businesses and assets from GE Capital, with the majority of assets anticipated to close in first quarter 2016.

Table 4 presents the components of earning assets and funding sources as a percentage of earning assets to provide a more meaningful analysis of year-over-year changes that influenced net interest income.

Average earning assets increased $142.4 billion in 2015 from a year ago, as average investment securities increased $55.1 billion and average federal funds sold and other short-term investments increased $25.6 billion for the same period, respectively. In addition, average loans increased $51.0 billion in 2015, compared with a year ago.

Deposits are an important low-cost source of funding and affect both net interest income and the net interest margin. Deposits include noninterest-bearing deposits, interest-bearing checking, market rate and other savings, savings certificates, other time deposits, and deposits in foreign offices. Average deposits rose to $1.2 trillion in 2015, compared with $1.1 trillion in 2014, and funded 135% of average loans compared with 134% a year ago. Average deposits decreased to 76% of average earning assets in 2015, compared with 78% a year ago. The cost of these deposits has continued to decline due to a sustained low interest rate environment and a shift in our deposit mix from higher cost certificates of deposit to lower yielding checking and savings products.

Table 5 presents the individual components of net interest income and the net interest margin. The effect on interest income and costs of earning asset and funding mix changes described above, combined with rate changes during 2015, are analyzed in Table 6.



	Year ended December 31,
	2015					2014
(in millions)	Average balance			% of earning assets		Average balance			% of earning assets
Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments	$	266,832		17	%	$	241,282		17	%
Trading assets	66,679			4		55,140			4
Investment securities:
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies	32,093			2		10,400			1
Securities of U.S. states and political subdivisions	47,404			3		43,138			3
Mortgage-backed securities:
Federal agencies	100,218			6		114,076			8
Residential and commercial	22,490			2		26,475			2
Total mortgage-backed securities	122,708			8		140,551			10
Other debt and equity securities	49,752			3		47,488			3
Total available-for-sale securities	251,957			16		241,577			17
Held-to-maturity securities	74,048			5		29,319			2
Mortgages held for sale (1)	21,603			2		19,018			2
Loans held for sale (1)	573			—		4,226			—
Loans:
Commercial:
Commercial and industrial - U.S.	237,844			15		204,819			14
Commercial and industrial - Non U.S.	46,028			3		42,661			3
Real estate mortgage	116,893			7		112,710			8
Real estate construction	20,979			1		17,676			1
Lease financing	12,301			1		12,257			1
Total commercial	434,045			27		390,123			27
Consumer:
Real estate 1-4 family first mortgage	268,560			17		261,620			18
Real estate 1-4 family junior lien mortgage	56,242			4		62,510			4
Credit card	31,307			2		27,491			2
Automobile	57,766			4		53,854			4
Other revolving credit and installment	37,512			2		38,834			3
Total consumer	451,387			29		444,309			31
Total loans (1)	885,432			56		834,432			58
Other	4,947			—		4,673			—
Total earning assets	$	1,572,071		100	%	$	1,429,667		100	%
Funding sources
Deposits:
Interest-bearing checking	$	38,640		2	%	$	39,729		3	%
Market rate and other savings	625,549			40		585,854			41
Savings certificates	31,887			2		38,111			3
Other time deposits	51,790			3		51,434			3
Deposits in foreign offices	107,138			7		95,889			7
Total interest-bearing deposits	855,004			54		811,017			57
Short-term borrowings	87,465			6		60,111			4
Long-term debt	185,078			12		167,420			12
Other liabilities	16,545			1		14,401			1
Total interest-bearing liabilities	1,144,092			73		1,052,949			74
Portion of noninterest-bearing funding sources	427,979			27		376,718			26
Total funding sources	$	1,572,071		100	%	$	1,429,667		100	%
Noninterest-earning assets
Cash and due from banks	$	17,327				16,361
Goodwill	25,673					25,687
Other	127,848					121,634
Total noninterest-earning assets	$	170,848				163,682
Noninterest-bearing funding sources
Deposits	$	339,069				303,127
Other liabilities	68,174					56,985
Total equity	191,584					180,288
Noninterest-bearing funding sources used to fund earning assets	(427,979		)			(376,718		)
Net noninterest-bearing funding sources	$	170,848				163,682
Total assets	$	1,742,919				1,593,349



						2015						2014
(in millions)	Average balance			Yields/ rates		Interest income/ expense		Average balance		Yields/ rates		Interest income/ expense
Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments	$	266,832		0.28	%	$	738	241,282		0.28	%	$	673
Trading assets	66,679			3.01		2,010		55,140		3.10		1,712
Investment securities (3):
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies	32,093			1.58		505		10,400		1.64		171
Securities of U.S. states and political subdivisions	47,404			4.23		2,007		43,138		4.29		1,852
Mortgage-backed securities:
Federal agencies	100,218			2.73		2,733		114,076		2.84		3,235
Residential and commercial	22,490			5.73		1,289		26,475		6.03		1,597
Total mortgage-backed securities	122,708			3.28		4,022		140,551		3.44		4,832
Other debt and equity securities	49,752			3.42		1,701		47,488		3.66		1,741
Total available-for-sale securities	251,957			3.27		8,235		241,577		3.56		8,596
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies	44,173			2.19		968		17,239		2.23		385
Securities of U.S. states and political subdivisions	2,087			5.40		113		246		4.93		12
Federal agency mortgage-backed securities	21,967			2.23		489		5,921		2.55		151
Other debt securities	5,821			1.73		101		5,913		1.85		109
Held-to-maturity securities	74,048			2.26		1,671		29,319		2.24		657
Total investment securities	326,005			3.04		9,906		270,896		3.42		9,253
Mortgages held for sale (4)	21,603			3.63		785		19,018		4.03		767
Loans held for sale (4)	573			3.25		19		4,226		1.85		78
Loans:
Commercial:
Commercial and industrial - U.S.	237,844			3.29		7,836		204,819		3.35		6,869
Commercial and industrial - non U.S.	46,028			1.90		877		42,661		2.03		867
Real estate mortgage	116,893			3.41		3,984		112,710		3.64		4,100
Real estate construction	20,979			3.57		749		17,676		4.21		744
Lease financing	12,301			4.70		577		12,257		5.63		690
Total commercial	434,045			3.23		14,023		390,123		3.40		13,270
Consumer:
Real estate 1-4 family first mortgage	268,560			4.10		11,002		261,620		4.19		10,961
Real estate 1-4 family junior lien mortgage	56,242			4.25		2,391		62,510		4.30		2,686
Credit card	31,307			11.70		3,664		27,491		11.98		3,294
Automobile	57,766			5.84		3,374		53,854		6.27		3,377
Other revolving credit and installment	37,512			5.89		2,209		38,834		5.48		2,127
Total consumer	451,387			5.02		22,640		444,309		5.05		22,445
Total loans (4)	885,432			4.14		36,663		834,432		4.28		35,715
Other	4,947			5.11		252		4,673		5.54		259
Total earning assets	$	1,572,071		3.20	%	$	50,373	1,429,667		3.39	%	$	48,457
Funding sources
Deposits:
Interest-bearing checking	$	38,640		0.05	%	$	20	39,729		0.07	%	$	26
Market rate and other savings	625,549			0.06		367		585,854		0.07		403
Savings certificates	31,887			0.63		201		38,111		0.85		323
Other time deposits	51,790			0.45		232		51,434		0.40		207
Deposits in foreign offices	107,138			0.13		143		95,889		0.14		137
Total interest-bearing deposits	855,004			0.11		963		811,017		0.14		1,096
Short-term borrowings	87,465			0.07		64		60,111		0.10		62
Long-term debt	185,078			1.40		2,592		167,420		1.49		2,488
Other liabilities	16,545			2.15		357		14,401		2.65		382
Total interest-bearing liabilities	1,144,092			0.35		3,976		1,052,949		0.38		4,028
Portion of noninterest-bearing funding sources	427,979			—		—		376,718		—		—
Total funding sources	$	1,572,071		0.25		3,976		1,429,667		0.28		4,028
Net interest margin and net interest income on a taxable-equivalent basis (5)				2.95	%	$	46,397			3.11	%	$	44,429
Noninterest-earning assets
Cash and due from banks	$	17,327						16,361
Goodwill	25,673							25,687
Other	127,848							121,634
Total noninterest-earning assets	$	170,848						163,682
Noninterest-bearing funding sources
Deposits	$	339,069						303,127
Other liabilities	68,174							56,985
Total equity	191,584							180,288
Noninterest-bearing funding sources used to fund earning assets	(427,979		)					(376,718	)
Net noninterest-bearing funding sources	$	170,848						163,682
Total assets	$	1,742,919						1,593,349



					2013						2012						2011
Average balance			Yields/ rates		Interest income/ expense		Average balance		Yields/ rates		Interest income/ expense		Average balance		Yields/ rates		Interest income/ expense

$	154,902		0.32	%	$	489	84,081		0.45	%	$	378	87,186		0.40	%	$	345
44,745			3.14		1,406		41,950		3.29		1,380		39,737		3.68		1,463


6,750			1.66		112		3,604		1.31		47		5,503		1.25		69
39,922			4.38		1,748		34,875		4.48		1,561		24,035		5.09		1,223

107,148			2.83		3,031		92,887		3.12		2,893		74,665		4.36		3,257
30,717			6.47		1,988		33,545		6.75		2,264		31,902		8.20		2,617
137,865			3.64		5,019		126,432		4.08		5,157		106,567		5.51		5,874
55,002			3.53		1,940		49,245		4.04		1,992		38,625		5.03		1,941
239,539			3.68		8,819		214,156		4.09		8,757		174,730		5.21		9,107

—			—		—		—		—		—		—		—		—
—			—		—		—		—		—		—		—		—
701			3.09		22		—		—		—		—		—		—
16			1.99		—		—		—		—		—		—		—
717			3.06		22		—		—		—		—		—		—
240,256			3.68		8,841		214,156		4.09		8,757		174,730		5.21		9,107
35,273			3.66		1,290		48,955		3.73		1,825		37,232		4.42		1,644
163			7.95		13		661		6.22		41		1,104		5.25		58


185,813			3.66		6,807		173,913		4.01		6,981		157,608		4.37		6,894
40,987			2.03		832		38,838		2.34		910		35,042		2.13		745
107,316			3.94		4,233		105,492		4.19		4,416		102,320		4.07		4,167
16,537			4.76		787		18,047		4.97		897		21,672		4.88		1,057
12,373			6.10		755		13,067		7.18		939		13,223		7.52		994
363,026			3.70		13,414		349,357		4.05		14,143		329,865		4.20		13,857

254,012			4.22		10,717		235,011		4.55		10,704		227,676		4.90		11,156
70,264			4.29		3,014		80,887		4.28		3,460		90,755		4.33		3,930
24,757			12.46		3,084		22,809		12.68		2,892		21,556		13.04		2,811
48,476			6.94		3,365		44,986		7.54		3,390		43,834		8.14		3,568
42,135			4.80		2,024		42,174		4.57		1,928		43,458		4.56		1,980
439,644			5.05		22,204		425,867		5.25		22,374		427,279		5.49		23,445
802,670			4.44		35,618		775,224		4.71		36,517		757,144		4.93		37,302
4,354			5.39		235		4,438		4.70		209		4,929		4.12		203
$	1,282,363		3.73	%	$	47,892	1,169,465		4.20	%	$	49,107	1,102,062		4.55	%	$	50,122


$	35,570		0.06	%	$	22	30,564		0.06	%	$	19	47,705		0.08	%	$	40
550,394			0.08		450		505,310		0.12		592		464,450		0.18		836
49,510			1.13		559		59,484		1.31		782		69,711		1.43		995
28,090			0.69		194		13,363		1.68		225		13,126		2.04		268
76,894			0.15		112		67,920		0.16		109		61,566		0.22		136
740,458			0.18		1,337		676,641		0.26		1,727		656,558		0.35		2,275
54,716			0.13		71		51,196		0.18		94		51,781		0.18		94
134,937			1.92		2,585		127,547		2.44		3,110		141,079		2.82		3,978
12,471			2.46		307		10,032		2.44		245		10,955		2.88		316
942,582			0.46		4,300		865,416		0.60		5,176		860,373		0.77		6,663
339,781			—		—		304,049		—		—		241,689		—		—
$	1,282,363		0.33		4,300		1,169,465		0.44		5,176		1,102,062		0.61		6,663
			3.40	%	$	43,592			3.76	%	$	43,931			3.94	%	$	43,459

$	16,272						16,303						17,388
25,637							25,417						24,904
121,711							130,450						125,911
$	163,620						172,170						168,203

$	280,229						263,863						215,242
58,178							61,214						57,399
164,994							151,142						137,251
(339,781		)					(304,049	)					(241,689	)
$	163,620						172,170						168,203
$	1,445,983						1,341,635						1,270,265



	Year ended December 31,
	2015 over 2014							2014 over 2013
(in millions)	Volume			Rate		Total		Volume		Rate		Total
Increase (decrease) in interest income:
Federal funds sold, securities purchased under resale agreements and other short-term investments	$	65		—		65		252		(68	)	184
Trading assets	349			(51	)	298		324		(18	)	306
Investment securities:
Available-for-sale securities:
Securities of U.S. Treasury and federal agencies	340			(6	)	334		60		(1	)	59
Securities of U.S. states and political subdivisions	181			(26	)	155		140		(36	)	104
Mortgage-backed securities:
Federal agencies	(381		)	(121	)	(502	)	193		11		204
Residential and commercial	(232		)	(76	)	(308	)	(262	)	(129	)	(391	)
Total mortgage-backed securities	(613		)	(197	)	(810	)	(69	)	(118	)	(187	)
Other debt and equity securities	79			(119	)	(40	)	(270	)	71		(199	)
Total available-for-sale securities	(13		)	(348	)	(361	)	(139	)	(84	)	(223	)
Held-to-maturity securities:
Securities of U.S. Treasury and federal agencies	590			(7	)	583		385		—		385
Securities of U.S. states and political subdivisions	100			1		101		12		—		12
Federal agency mortgage-backed securities	359			(21	)	338		137		(8	)	129
Other debt securities	(2		)	(6	)	(8	)	109		—		109
Total held-to-maturity securities	1,047			(33	)	1,014		643		(8	)	635
Mortgages held for sale	98			(80	)	18		(643	)	120		(523	)
Loans held for sale	(95		)	36		(59	)	82		(17	)	65
Loans:
Commercial:
Commercial and industrial - U.S.	1,092			(125	)	967		664		(602	)	62
Commercial and industrial - non U.S.	66			(56	)	10		35		—		35
Real estate mortgage	149			(265	)	(116	)	203		(336	)	(133	)
Real estate construction	127			(122	)	5		52		(95	)	(43	)
Lease financing	2			(115	)	(113	)	(7	)	(58	)	(65	)
Total commercial	1,436			(683	)	753		947		(1,091	)	(144	)
Consumer:
Real estate 1-4 family first mortgage	283			(242	)	41		320		(76	)	244
Real estate 1-4 family junior lien mortgage	(265		)	(30	)	(295	)	(335	)	7		(328	)
Credit card	448			(78	)	370		332		(122	)	210
Automobile	237			(240	)	(3	)	354		(342	)	12
Other revolving credit and installment	(74		)	156		82		(167	)	270		103
Total consumer	629			(434	)	195		504		(263	)	241
Total loans	2,065			(1,117	)	948		1,451		(1,354	)	97
Other	14			(21	)	(7	)	17		7		24
Total increase (decrease) in interest income	3,530			(1,614	)	1,916		1,987		(1,422	)	565
Increase (decrease) in interest expense:
Deposits:
Interest-bearing checking	(1		)	(5	)	(6	)	2		2		4
Market rate and other savings	26			(62	)	(36	)	21		(68	)	(47	)
Savings certificates	(47		)	(75	)	(122	)	(114	)	(122	)	(236	)
Other time deposits	1			24		25		117		(104	)	13
Deposits in foreign offices	16			(10	)	6		32		(7	)	25
Total interest-bearing deposits	(5		)	(128	)	(133	)	58		(299	)	(241	)
Short-term borrowings	23			(21	)	2		7		(16	)	(9	)
Long-term debt	258			(154	)	104		551		(648	)	(97	)
Other liabilities	52			(77	)	(25	)	50		25		75
Total increase (decrease) in interest expense	328			(380	)	(52	)	666		(938	)	(272	)
Increase (decrease) in net interest income on a taxable-equivalent basis	$	3,202		(1,234	)	1,968		1,321		(484	)	837

Noninterest Income

Table 7: Noninterest Income



	Year ended December 31,
(in millions)	2015			2014	2013
Service charges on deposit accounts	$	5,168		5,050	5,023
Trust and investment fees:
Brokerage advisory, commissions and other fees	9,435			9,183	8,395
Trust and investment management	3,394			3,387	3,289
Investment banking	1,639			1,710	1,746
Total trust and investment fees	14,468			14,280	13,430
Card fees	3,720			3,431	3,191
Other fees:
Charges and fees on loans	1,228			1,316	1,540
Merchant processing fees (1)	607			726	669
Cash network fees	522			507	493
Commercial real estate brokerage commissions	618			469	338
Letters of credit fees	353			390	410
All other fees	996			941	890
Total other fees	4,324			4,349	4,340
Mortgage banking:
Servicing income, net	2,441			3,337	1,920
Net gains on mortgage loan origination/sales activities	4,060			3,044	6,854
Total mortgage banking	6,501			6,381	8,774
Insurance	1,694			1,655	1,814
Net gains from trading activities	614			1,161	1,623
Net gains (losses) on debt securities	952			593	(29	)
Net gains from equity investments	2,230			2,380	1,472
Lease income	621			526	663
Life insurance investment income	579			558	566
All other (1)	(115		)	456	113
Total	$	40,756		40,820	40,980


(1)	Reflects deconsolidation of the Company's merchant services joint venture in fourth quarter 2015. The Company's proportionate share of earnings is now reflected in all other income.

Noninterest income of $40.8 billion represented 47% of revenue for 2015, compared with $40.8 billion, or 48%, for 2014 and $41.0 billion, or 49%, for 2013. The small decline in noninterest income in 2015 was primarily driven by lower gains from trading activity and all other income, mostly offset by growth in many of our businesses, including credit and debit cards, mortgage, commercial banking, commercial real estate brokerage, multi-family capital, reinsurance, municipal products, and retail brokerage. The decrease in noninterest income in 2014 compared with 2013 was primarily due to a decline in mortgage banking, partially offset by growth in many of our other businesses.

Service charges on deposit accounts were $5.2 billion in 2015, up from $5.1 billion in 2014 due to account growth, higher commercial deposit product sales and commercial deposit product re-pricing, partially offset by lower overdraft fees driven by changes we implemented in early October 2014. Service charges on deposits increased $27 million in 2014 from 2013 due to account growth, new commercial deposit product sales and commercial deposit product re-pricing, partially offset by lower overdraft fees driven by changes we implemented in early October 2014 designed to provide customers with more real time information to manage their deposit accounts and avoid overdrafts.

Brokerage advisory, commissions and other fees are received for providing full-service and discount brokerage services predominantly to retail brokerage clients. Income from these brokerage-related activities include asset-based fees for advisory accounts, which are based on the market value of the client’s assets, and transactional commissions based on the

number and size of transactions executed at the client’s direction. These fees increased to $9.4 billion in 2015, from $9.2 billion and $8.4 billion in 2014 and 2013, respectively. The increase in these fees for 2015 was primarily due to growth in asset-based fees driven by higher average advisory account assets in 2015 than 2014. The increase for 2014 was predominantly due to higher asset-based fees as a result of higher market values and growth in advisory account assets. Retail brokerage client assets totaled $1.39 trillion at December 31, 2015, compared with $1.42 trillion and $1.36 trillion at December 31, 2014 and 2013, respectively, with all retail brokerage services provided by our Wealth and Investment Management (WIM) operating segment. For additional information on retail brokerage client assets, see the discussion and Tables 9d and 9e in the "Operating Segment Results – Wealth and Investment Management – Retail Brokerage Client Assets" section in this Report.

We earn trust and investment management fees from managing and administering assets, including mutual funds, institutional separate accounts, corporate trust, personal trust, employee benefit trust and agency assets. Trust and investment management fee income is predominantly from client assets under management (AUM) for which the fees are determined based on a tiered scale relative to the market value of the AUM. AUM consists of assets for which we have investment management discretion. Our AUM totaled $653.4 billion at December 31, 2015, compared with $661.6 billion and $647.2 billion at December 31, 2014 and 2013, respectively, with substantially all of our AUM managed by our WIM operating segment. Additional information regarding our WIM operating segment AUM is provided in Table 9f and the related discussion in the "Operating Segment Results – Wealth and Investment Management – Trust and Investment Client Assets Under Management" section in this Report. In addition to AUM we have client assets under administration (AUA) that earn various administrative fees which are generally based on the extent of the services provided to administer the account. Our AUA totaled $1.4 trillion at December 31, 2015, compared with $1.5 trillion and $1.4 trillion at December 31, 2014 and 2013, respectively. Trust and investment management fees of $3.4 billion in 2015 remained stable compared with 2014, but increased $98 million in 2014 compared with 2013, substantially due to growth in AUM reflecting higher market values.

We earn investment banking fees from underwriting debt and equity securities, arranging loan syndications, and performing other related advisory services. Investment banking fees decreased to $1.6 billion in 2015 from $1.7 billion in 2014, driven by reductions in equity capital markets and loan syndications partially offset by increased fees in advisory services and investment-grade debt origination. Investment banking fees remained unchanged at $1.7 billion in 2014 compared with 2013 as higher advisory services results were offset by lower loan syndication and origination fees.

Card fees were $3.7 billion in 2015, compared with $3.4 billion in 2014 and $3.2 billion in 2013. Card fees increased in 2015 and 2014 primarily due to account growth and increased purchase activity.

Other fees of $4.3 billion in 2015 were unchanged compared with 2014 as increases in commercial real estate brokerage commissions were offset by lower charges and fees on loans primarily due to the phase out of the direct deposit advance product during the first half of 2014, and lower merchant processing fees. The decrease in merchant processing fees reflected deconsolidation of our merchant services joint venture in fourth quarter 2015, which resulted in our proportionate

share of that income now being reported in all other income. Other fees in 2014 were unchanged compared with 2013 as a decline in charges and fees on loans was offset by an increase in commercial real estate brokerage commissions. Commercial real estate brokerage commissions increased to $618 million in 2015 compared with $469 million in 2014 and $338 million in 2013, driven by increased sales and other property-related activities including financing and advisory services.

Mortgage banking income, consisting of net servicing income and net gains on loan origination/sales activities, totaled $6.5 billion in 2015, compared with $6.4 billion in 2014 and $8.8 billion in 2013.

In addition to servicing fees, net mortgage loan servicing income includes amortization of commercial mortgage servicing rights (MSRs), changes in the fair value of residential MSRs during the period, as well as changes in the value of derivatives (economic hedges) used to hedge the residential MSRs. Net servicing income of $2.4 billion for 2015 included a $885 million net MSR valuation gain ($214 million increase in the fair value of the MSRs and a $671 million hedge gain). Net servicing income of $3.3 billion for 2014 included a $1.4 billion net MSR valuation gain ($2.1 billion decrease in the fair value of the MSRs offset by a $3.5 billion hedge gain), and net servicing income of $1.9 billion for 2013 included a $489 million net MSR valuation gain ($3.4 billion increase in the fair value of MSRs offset by a $2.9 billion hedge loss). The decrease in net MSR valuation gains in 2015, compared with 2014, was primarily attributable to lower hedge gains. The lower net MSR valuation gain in 2013, compared with 2014, was attributable to MSR valuation adjustments associated with higher prepayments and increases in servicing and foreclosure costs.

Our portfolio of loans serviced for others was $1.78 trillion at December 31, 2015, $1.86 trillion at December 31, 2014, and $1.90 trillion at December 31, 2013. At December 31, 2015, the ratio of MSRs to related loans serviced for others was 0.77%, compared with 0.75% at December 31, 2014 and 0.88% at December 31, 2013. See the “Risk Management – Asset/Liability Management – Mortgage Banking Interest Rate and Market Risk” section in this Report for additional information regarding our MSRs risks and hedging approach.

Net gains on mortgage loan origination/sale activities were $4.1 billion in 2015, compared with $3.0 billion in 2014 and $6.9 billion in 2013. The increase in 2015 compared to 2014 was primarily driven by increased origination volumes and margins. The decrease in 2014 from 2013 was primarily driven by lower origination volume and margins. Mortgage loan originations were $213 billion in 2015, compared with $175 billion for 2014 and $351 billion for 2013. The production margin on residential held-for-sale mortgage originations, which represents net gains on residential mortgage loan origination/sales activities divided by total residential held-for-sale mortgage originations, provides a measure of the profitability of our residential mortgage origination activity. Table 7a presents the information used in determining the production margin.

Table 7a: Selected Residential Mortgage Production Data



		Year ended December 31,
		2015			2014	2013
Net gains on mortgage loan origination/sales activities (in millions):
Residential	(A)	$	2,861		2,217	6,227
Commercial		362			285	356
Residential pipeline and unsold/repurchased loan management (1)		837			542	271
Total		$	4,060		3,044	6,854
Residential real estate originations (in billions):
Held-for-sale	(B)	$	155		129	300
Held-for-investment		58			46	51
Total		$	213		175	351
Production margin on residential held-for-sale mortgage originations	(A)/(B)	1.84		%	1.72	2.08


(1)	Primarily includes the results of GNMA loss mitigation activities, interest rate management activities and changes in estimate to the liability for mortgage loan repurchase losses.

The production margin was 1.84% for 2015, compared with 1.72% for 2014 and 2.08% for 2013. Mortgage applications were $311 billion in 2015, compared with $262 billion in 2014 and $438 billion in 2013. The 1-4 family first mortgage unclosed pipeline was $29 billion at December 31, 2015, compared with $26 billion at December 31, 2014 and $25 billion at December 31, 2013. For additional information about our mortgage banking activities and results, see the “Risk Management – Asset/Liability Management – Mortgage Banking Interest Rate and Market Risk” section and Note 9 (Mortgage Banking Activities) and Note 17 (Fair Values of Assets and Liabilities) to Financial Statements in this Report.

Net gains on mortgage loan origination/sales activities include adjustments to the mortgage repurchase liability. Mortgage loans are repurchased from third parties based on standard representations and warranties, and early payment default clauses in mortgage sale contracts. For 2015, we released a net $159 million from the repurchase liability, compared with a net release of $140 million for 2014 and a provision of $428 million for 2013. For additional information about mortgage loan repurchases, see the “Risk Management – Credit Risk Management – Liability for Mortgage Loan Repurchase Losses” section and Note 9 (Mortgage Banking Activities) to Financial Statements in this Report.

We engage in trading activities primarily to accommodate the investment activities of our customers, and to execute economic hedging to manage certain components of our balance sheet risks. Net gains (losses) from trading activities, which reflect unrealized changes in fair value of our trading positions and realized gains and losses, were $614 million in 2015, $1.2 billion in 2014 and $1.6 billion in 2013. The decrease in 2015 was driven by lower economic hedge income, lower trading from customer accommodation activity, and lower deferred compensation gains (offset in employee benefits expense). The decrease in 2014 from 2013 was driven by lower trading from customer accommodation activity within our capital markets business and lower deferred compensation gains (offset in employee benefits expense). Net gains from trading activities do not include interest and dividend income and expense on trading securities. Those amounts are reported within interest income from trading assets and other interest expense from trading liabilities. For additional information about trading activities, see the “Risk Management – Asset/Liability Management – Market Risk – Trading Activities” section in this Report.

Net gains on debt and equity securities totaled $3.2 billion for 2015 and $3.0 billion and $1.4 billion for 2014 and 2013, respectively after other-than-temporary impairment (OTTI) write-downs of $559 million, $322 million and $344 million, respectively, for the same periods. The increase in OTTI write-downs in 2015 mainly reflected deterioration in energy sector corporate debt and nonmarketable equity investments. The increase in net gains on debt and equity securities in 2015 compared with 2014 was due to higher net gains on debt securities combined with continued strong equity markets throughout the majority of 2015. The increase in net gains on debt and equity securities in 2014 compared with 2013 reflected the benefit of strong public and private equity markets.

All other income was $(115) million for 2015 compared with $456 million in 2014 and $113 million in 2013. All other income includes ineffectiveness recognized on derivatives that qualify for hedge accounting, the results of certain economic hedges, losses on low-income housing tax credit investments, foreign currency adjustments and income from investments accounted for under the equity method, any of which can cause decreases and net losses in other income. The decrease in other income in 2015 compared with 2014 primarily reflected changes in ineffectiveness recognized on interest rate swaps used to hedge our exposure to interest rate risk on long-term debt and cross-currency swaps, cross-currency interest rate swaps and forward contracts used to hedge our exposure to foreign currency risk and interest rate risk involving non-U.S. dollar denominated long-term debt. The decline in other income in 2015 resulting from these changes in ineffectiveness was partially offset by our proportionate share of earnings from a merchant services joint venture that we deconsolidated in 2015. Higher other income for 2014 compared with 2013 primarily reflected larger hedge ineffectiveness gains on derivatives that qualify for hedge accounting, a gain on sale of government-guaranteed student loans in fourth quarter 2014, and a gain on sale of 40 insurance offices in second quarter 2014 partially offset by lower income from equity method investments.

Noninterest Expense

Table 8: Noninterest Expense



	Year ended December 31,
(in millions)	2015		2014	2013
Salaries	$	15,883	15,375	15,152
Commission and incentive compensation	10,352		9,970	9,951
Employee benefits	4,446		4,597	5,033
Equipment	2,063		1,973	1,984
Net occupancy	2,886		2,925	2,895
Core deposit and other intangibles	1,246		1,370	1,504
FDIC and other deposit assessments	973		928	961
Outside professional services	2,665		2,689	2,519
Operating losses	1,871		1,249	821
Outside data processing	985		1,034	983
Contract services	978		975	935
Postage, stationery and supplies	702		733	756
Travel and entertainment	692		904	885
Advertising and promotion	606		653	610
Insurance	448		422	437
Telecommunications	439		453	482
Foreclosed assets	381		583	605
Operating leases	278		220	204
All other	2,080		1,984	2,125
Total	$	49,974	49,037	48,842

Noninterest expense was $50.0 billion in 2015, up 2% from $49.0 billion in 2014, which was up slightly from $48.8 billion in 2013. The increase in 2015 was driven predominantly by higher personnel expenses ($30.7 billion, up from $29.9 billion in 2014) and higher operating losses ($1.9 billion, up from $1.2 billion in 2014), partially offset by lower travel and entertainment expense ($692 million, down from $904 million in 2014) and lower foreclosed assets expense ($381 million, down from $583 million in 2014). The increase in 2014 from 2013 was driven by higher operating losses and higher outside professional services, partially offset by lower personnel expenses.

Personnel expenses, which include salaries, commissions, incentive compensation and employee benefits, were up $739 million, or 2%, compared with 2014, due to annual salary increases, staffing growth across various businesses, and higher revenue-related incentive compensation. Lower employee benefits expense was predominantly due to lower deferred compensation expense (offset in trading revenue), partially offset by increases in other employee benefits. Personnel expenses were down 1% in 2014, compared with 2013, due to lower employee benefits expense, reduced staffing and lower volume-related compensation in our mortgage business, partially offset by increased personnel expenses in our non-mortgage businesses.

Outside professional services in 2015 were flat compared with 2014, which was up 7% compared with 2013. Many noninterest expense categories in 2015, including outside professional services, reflected continued investments in our products, technology and service delivery, as well as costs for the heightened industry focus on regulatory compliance and evolving cybersecurity risk.

Operating losses were up $622 million, or 50%, in 2015 compared with 2014, and up $428 million, or 52%, in 2014 compared with 2013, predominantly due to litigation expense in each year for various legal matters.

Travel and entertainment expense was down $212 million, or 23%, in 2015 compared with 2014, primarily driven by travel expense reduction initiatives. Travel and entertainment expense remained relatively stable in 2014 compared with 2013.

Foreclosed assets expense was down $202 million, or 35%, compared with 2014, primarily driven by higher gains on sales of foreclosed properties, lower write-downs and lower operating expenses.

All other noninterest expense in 2015 included a $126 million contribution to the Wells Fargo Foundation.

Our full year 2015 efficiency ratio was 58.1%, compared with 58.1% in 2014 and 58.3% in 2013. The Company expects to operate at the higher end of its targeted efficiency ratio range of 55-59% for full year 2016.

Income Tax Expense

The 2015 annual effective tax rate was 31.2% compared with 30.9% in 2014 and 32.2% in 2013. The effective tax rate for 2015 included net reductions in reserves for uncertain tax positions primarily due to audit resolutions of prior period matters with U.S. federal and state taxing authorities. The effective tax rate for 2014 included a net reduction in the reserve for uncertain tax positions primarily due to the resolution of prior period matters with state taxing authorities. The effective tax rate for 2013 included a net reduction in the reserve for uncertain tax positions primarily due to settlements with authorities regarding certain cross border transactions and tax benefits recognized from the realization for tax purposes of a previously written down investment. See Note 21 (Income Taxes) to Financial Statements in this Report for additional information about our income taxes.

Cross-sell We aspire to create deep and enduring relationships with our customers by providing them with an exceptional experience and by discovering their needs and delivering the most relevant products, services, advice, and guidance. An outcome of offering customers the products and services they need, want and value is that we earn more opportunities to serve them, or what we call cross-sell. Cross-sell is the result of serving our customers well, understanding their financial needs and goals over their lifetimes, and ensuring we innovate our products, services and channels so that we earn more of their business and help them succeed financially. Our approach to cross-sell is needs-based as some customers will benefit from more products, and some may need fewer. We believe there is continued opportunity to meet our customers' financial needs as we build lifelong relationships with them. One way we track the degree to which we are satisfying our customers' financial needs is through our cross-sell metrics, which are based on whether the customer is a retail banking household or has a wholesale banking relationship. A retail banking household is a household that uses at least one of the following retail products – a demand deposit account, savings account, savings certificate, individual retirement account (IRA) certificate of deposit, IRA savings account, personal line of credit, personal loan, home equity line of credit or home equity loan. A household is determined based on aggregating all accounts with the same address. For our wholesale banking relationships, we aggregate all related entities under common ownership or control.

We report cross-sell metrics for Community Banking and WIM based on the average number of retail products used per retail banking household. For Community Banking the cross-sell metric represents the relationship of all retail products used by customers in retail banking households. For WIM the cross-sell metric represents the relationship of all retail products used by customers in retail banking households who are also WIM customers.

Products included in our retail banking household cross-sell metrics must be retail products and have the potential for revenue generation and long-term viability. Products and services that generally do not meet these criteria – such as ATM cards, online banking and direct deposit – are not included. In addition, multiple holdings by a WIM customer within an investment category, such as common stock, mutual funds or bonds, are counted as a single product. We may periodically update the products included in our cross-sell metrics to account for changes in our product offerings.

For Wholesale Banking, the cross-sell metric represents the average number of Wholesale Banking (non-retail) products used per Wholesale Banking customer relationship. What we include as products in the cross-sell metric comes from a defined set of revenue generating products within the following product families: credit, treasury management, deposits, risk management, foreign exchange, capital markets and advisory, investments, insurance, trade financing, and trust and servicing. The number of customer relationships is based on tax identification numbers adjusted to combine those entities under common ownership or another structure indicative of a single relationship and includes only relationships that produced revenue for the period of measurement.

Operating Segment Results

The following discussion provides a description of each of our operating segments, including cross-sell metrics and financial results.

COMMUNITY BANKING offers a complete line of diversified financial products and services for consumers and small businesses including checking and savings accounts, credit and debit cards, and auto, student, and small business lending. These products also include investment, insurance and trust services in 39 states and D.C., and mortgage and home equity loans in all 50 states and D.C. The Community Banking segment also includes the results of our Corporate Treasury activities net of allocations in support of the other operating segments and results of investments in our affiliated venture capital partnerships. Our retail banking household cross-sell

was 6.11 products per household in November 2015, compared with 6.17 in November 2014 and 6.16 in November 2013. The November 2015 retail banking household cross-sell ratio reflects the impact of the sale of government guaranteed student loans in fourth quarter 2014. The November 2014 cross-sell ratio included the acquisition of an existing private label and co-branded credit card loan portfolio in connection with a new program agreement with Dillard's, Inc., a major retail department store. Table 9a provides additional financial information for Community Banking, with prior periods revised to reflect the realignment of our strategic auto investments, business banking and merchant payment services businesses from Community Banking to Wholesale Banking in 2015.



	Year ended December 31,
(in millions, except average balances which are in billions)	2015			2014		% Change		2013			% Change
Net interest income	$	29,242		27,999		4	%	$	27,123		3	%
Noninterest income:
Service charges on deposit accounts	3,014			3,071		(2	)	3,155			(3	)
Trust and investment fees:
Brokerage advisory, commissions and other fees (1)	2,044			1,796		14		1,604			12
Trust and investment management (1)	855			817		5		754			8
Investment banking (2)	(123		)	(80	)	(54	)	(77		)	(4	)
Total trust and investment fees	2,776			2,533		10		2,281			11
Card fees	3,381			3,119		8		2,918			7
Other fees	1,446			1,545		(6	)	1,735			(11	)
Mortgage banking	6,056			6,011		1		8,336			(28	)
Insurance	96			127		(24	)	130			(2	)
Net gains (losses) from trading activities	(146		)	136		(207	)	246			(45	)
Net gains (losses) on debt securities	556			255		118		(78		)	427
Net gains from equity investments (3)	1,714			1,731		(1	)	1,033			68
Other income of the segment	1,206			1,631		(26	)	800			104
Total noninterest income	20,099			20,159		—		20,556			(2	)

Total revenue	49,341			48,158		2		47,679			1

Provision for credit losses	2,427			1,796		35		2,841			(37	)
Noninterest expense:
Personnel expense	17,574			16,979		4		17,549			(3	)
Equipment	1,914			1,809		6		1,795			1
Net occupancy	2,104			2,154		(2	)	2,105			2
Core deposit and other intangibles	573			620		(8	)	689			(10	)
FDIC and other deposit assessments	549			526		4		561			(6	)
Outside professional services	1,012			1,011		—		1,011			—
Operating losses	1,503			1,052		43		706			49
Other expense of the segment	1,752			2,139		(18	)	2,674			(20	)
Total noninterest expense	26,981			26,290		3		27,090			(3	)
Income before income tax expense and noncontrolling interests	19,933			20,072		(1	)	17,748			13
Income tax expense	6,202			6,049		3		5,442			11
Net income from noncontrolling interests (4)	240			337		(29	)	159			112
Net income	$	13,491		13,686		(1	)%	$	12,147		13	%
Average loans	$	475.9		468.8		2	%	$	465.1		1	%
Average deposits	654.4			614.3		7		494.7			24

Community Banking reported net income of $13.5 billion in 2015, down $195 million, or 1%, from $13.7 billion in 2014, which was up 13% from $12.1 billion in 2013. Revenue was $49.3 billion in 2015, an increase of $1.2 billion, or 2%, compared with $48.2 billion in 2014, which was up 1% compared with $47.7 billion in 2013. The increase in revenue for 2015 was primarily driven by higher net interest income, gains on sale of debt securities, debit and credit card fees, and trust and investment fees, partially offset by lower gains from trading activities, deferred compensation plan investment gains (offset in employee benefits expense) and other income. Lower other income in 2015, compared with 2014, reflected a gain on sale of government guaranteed student loans in 2014 and lower ineffectiveness gains in 2015 on derivatives that qualify for hedge accounting. The increase in revenue for 2014, compared with 2013, was primarily driven by higher net interest income, gains on sale of equity investments and debt securities, higher trust and investment fees, and higher card fees, partially offset by lower mortgage banking revenue, the phase out of the direct deposit advance product during the first half of 2014, and lower deferred compensation plan investment gains (offset in employee benefits expense). Higher other income for 2014 compared with 2013 reflected larger ineffectiveness gains on derivatives that qualify for hedge accounting and a gain on sale of government guaranteed student loans in fourth quarter 2014. Average deposits increased $40.1 billion in 2015, or 7%, from 2014, which increased $119.6 billion, or 24%, from 2013. Noninterest expense increased $691 million in 2015, or 3%, from 2014, which declined $800 million, or 3%, from 2013. The increase in noninterest expense for 2015 largely reflected higher personnel expense, operating losses, equipment expense, and a $126 million donation to the Wells Fargo Foundation, partially offset by lower deferred compensation expense (offset in revenue), foreclosed assets, travel, data processing, occupancy and various other expenses. The decrease in noninterest expense for 2014 largely reflected lower mortgage volume-related expenses and deferred compensation expense (offset in

revenue), partially offset by higher operating losses. The provision for credit losses of $2.4 billion in 2015 was $631 million, or 35%, higher than 2014, which was $1.0 billion, or 37%, lower than 2013. The increase in provision in 2015 was due to $1.1 billion lower allowance release, partially offset by $403 million lower net charge-offs related to improvement in the consumer real estate portfolio. The decrease in provision in 2014 was due to $1.5 billion lower net charge-offs related to the consumer real estate portfoli0, partially offset by $454 million lower allowance release.

WHOLESALE BANKING provides financial solutions to businesses across the United States and globally with annual sales generally in excess of $5 million. Products and businesses include Business Banking, Middle Market Commercial Banking, Government and Institutional Banking, Corporate Banking, Commercial Real Estate, Treasury Management, Wells Fargo Capital Finance, Insurance, International, Real Estate Capital Markets, Commercial Mortgage Servicing, Corporate Trust, Equipment Finance, Wells Fargo Securities, Principal Investments, and Asset Backed Finance. Wholesale Banking cross-sell is reported on a one-quarter lag and for fourth quarter 2015 was 7.3 products per relationship, up from 7.2 for fourth quarter 2014 and 7.1 for fourth quarter 2013. Wholesale Banking cross-sell does not reflect Business Banking relationships, which were realigned from Community Banking to Wholesale Banking effective fourth quarter 2015. Table 9b provides additional financial information for Wholesale Banking, with prior periods revised to reflect the realignment of our asset management business from Wholesale Banking to WIM; our reinsurance business from WIM to Wholesale Banking; and our strategic auto investments, business banking and merchant payment services businesses from Community Banking to Wholesale Banking in 2015.



	Year ended December 31,
(in millions, except average balances which are in billions)	2015		2014		% Change		2013			% Change
Net interest income	$	14,350	14,073		2	%	$	14,353		(2	)%
Noninterest income:
Service charges on deposit accounts	2,153		1,978		9		1,867			6
Trust and investment fees:
Brokerage advisory, commissions and other fees	285		255		12		195			31
Trust and investment management	407		374		9		411			(9	)
Investment banking	1,762		1,803		(2	)	1,839			(2	)
Total trust and investment fees	2,454		2,432		1		2,445			(1	)
Card fees	337		310		9		271			14
Other fees	2,872		2,798		3		2,599			8
Mortgage banking	447		370		21		425			(13	)
Insurance	1,598		1,528		5		1,684			(9	)
Net gains from trading activities	719		886		(19	)	1,092			(19	)
Net gains (losses) on debt securities	396		334		19		48			596
Net gains from equity investments	511		624		(18	)	420			49
Other income of the segment	67		65		3		643			(90	)
Total noninterest income	11,554		11,325		2		11,494			(1	)

Total revenue	25,904		25,398		2		25,847			(2	)

Provision (reversal of provision) for credit losses	27		(382	)	107		(521		)	27
Noninterest expense:
Personnel expense	6,936		6,660		4		6,398			4
Equipment	97		106		(8	)	123			(14	)
Net occupancy	452		446		1		455			(2	)
Core deposit and other intangibles	347		391		(11	)	423			(8	)
FDIC and other deposit assessments	352		328		7		320			3
Outside professional services	837		834		—		759			10
Operating losses	152		70		117		26			169
Other expense of the segment	4,943		4,996		(1	)	4,573			9
Total noninterest expense	14,116		13,831		2		13,077			6
Income before income tax expense and noncontrolling interest	11,761		11,949		(2	)	13,291			(10	)
Income tax expense	3,424		3,540		(3	)	4,364			(19	)
Net income from noncontrolling interest	143		210		(32	)	175			20
Net income	$	8,194	8,199		—	%	$	8,752		(6	)%
Average loans	$	397.3	355.6		12	%	$	329.0		8	%
Average deposits	438.9		404.0		9		353.8			14

Wholesale Banking reported net income of $8.2 billion in 2015, down $5 million from 2014, which was down 6% from $8.8 billion in 2013. The year over year decrease in net income for 2015 was the result of increased revenues being more than offset by increased noninterest expense and higher loan loss provision. The year over year decrease in net income during 2014 compared with 2013 was the result of lower revenues, increased noninterest expense and higher provision for credit losses. Revenue in 2015 of $25.9 billion increased $506 million, or 2%, from $25.4 billion in 2014, on growth in Wells Fargo Securities' markets division, treasury management, asset backed finance, principal investing, commercial real estate brokerage, multi-family capital, reinsurance, and municipal products. Revenue in 2014 of $25.4 billion decreased $449 million, or 2%, from $25.8 billion in 2013, as growth in asset backed finance, commercial real estate brokerage, corporate banking, equipment finance, international, principal investing and treasury management was more than offset by lower PCI resolution income as well as lower crop insurance fee income. Net interest

income of $14.4 billion in 2015 increased $277 million, or 2%, from 2014, which was down 2% from 2013. The increase in 2015 was due to strong loan and other earning asset growth. The decrease in 2014 was due to lower PCI resolution income and net interest margin compression due to declining loan yields and fees that was partially offset by increased interest income primarily from strong loan growth. Average loans of $397.3 billion in 2015 increased $41.7 billion, or 12%, from $355.6 billion in 2014, which was up 8% from $329.0 billion in 2013. Loan growth in 2015 and 2014 was broad based across many Wholesale Banking businesses. Average deposits of $438.9 billion in 2015 increased $34.9 billion, or 9%, from 2014 which was up 14% from 2013, reflecting continued strong customer liquidity for both years. Noninterest income of $11.6 billion in 2015 increased $229 million, or 2%, from 2014 driven by growth in treasury management, reinsurance, commercial real estate brokerage fees, multi-family capital, municipal products, principal investing, corporate trust and business banking, partially offset by lower customer

accommodation-related gains on trading assets and lower gains on equity investments. Noninterest income of $11.3 billion in 2014 decreased $169 million, or 1%, from 2013 as business growth in commercial real estate brokerage, corporate banking, equipment finance, international, principal investing and treasury management was more than offset by lower customer accommodation related gains on trading assets, lower insurance income related to a decline in crop insurance fee income, the 2014 divestiture of 40 insurance offices, and lower other income. Noninterest expense in 2015 increased $285 million, or 2%, compared with 2014, which was up 6%, or $754 million, from 2013. The increase in both 2015 and 2014 was due to higher personnel and non-personnel expenses related to growth initiatives and compliance and regulatory requirements as well as increased operating losses. The provision for credit losses increased $409 million from 2014 due primarily to increased losses in the oil and gas portfolio as well as lower recoveries. The provision for credit losses increased $139 million from 2013 due primarily to strong commercial loan growth in 2014.

WEALTH AND INVESTMENT MANAGEMENT (WIM) (formerly Wealth, Brokerage and Retirement) provides a full range of personalized wealth management, investment and retirement products and services to clients across U.S. based businesses including Wells Fargo Advisors, The Private Bank, Abbot Downing, Wells Fargo Institutional Retirement and Trust, and Wells Fargo Asset Management. We deliver financial planning, private banking, credit, investment management and fiduciary services to high-net worth and ultra-high-net worth individuals and families. We also serve clients’ brokerage needs, supply retirement and trust services to institutional clients and provide investment management capabilities delivered to global institutional clients through separate accounts and the Wells Fargo Funds. WIM cross-sell was 10.55 products per retail banking household in November 2015, up from 10.49 in November 2014 and 10.42 in November 2013. Table 9c provides additional financial information for WIM, with prior periods revised to reflect the realignment of our asset management business from Wholesale Banking to WIM and our reinsurance business from WIM to Wholesale Banking in 2015.



	Year ended December 31,
(in millions, except average balances which are in billions)	2015			2014		% Change		2013			% Change
Net interest income	$	3,478		3,032		15	%	$	2,797		8	%
Noninterest income:
Service charges on deposit accounts	19			18		6		17			6
Trust and investment fees:
Brokerage advisory, commissions and other fees	9,154			8,933		2		8,207			9
Trust and investment management	3,017			3,045		(1	)	2,911			5
Investment banking (1)	—			(13	)	100		(16		)	19
Total trust and investment fees	12,171			11,965		2		11,102			8
Card fees	5			4		25		4			—
Other fees	17			17		—		20			(15	)
Mortgage banking	(7		)	1		(800	)	(24		)	104
Insurance	—			—		NM		—			NM
Net gains from trading activities	41			139		(71	)	288			(52	)
Net gains on debt securities	—			4		(100	)	1			300
Net gains from equity investments	5			25		(80	)	19			32
Other income of the segment	48			64		(25	)	106			(40	)
Total noninterest income	12,299			12,237		1		11,533			6

Total revenue	15,777			15,269		3		14,330			7

Reversal of provision for credit losses	(25		)	(50	)	50		(16		)	(213	)
Noninterest expense:
Personnel expense	7,820			7,851		—		7,602			3
Equipment	57			62		(8	)	72			(14	)
Net occupancy	447			435		3		426			2
Core deposit and other intangibles	326			359		(9	)	392			(8	)
FDIC and other deposit assessments	123			126		(2	)	135			(7	)
Outside professional services	846			877		(4	)	782			12
Operating losses	229			134		71		99			35
Other expense of the segment	2,219			2,149		3		1,978			9
Total noninterest expense	12,067			11,993		1		11,486			4
Income before income tax expense and noncontrolling interest	3,735			3,326		12		2,860			16
Income tax expense	1,420			1,262		13		1,082			17
Net income (loss) from noncontrolling interest	(1		)	4		(125	)	12			(67	)
Net income	$	2,316		2,060		12	%	$	1,766		17	%
Average loans	$	60.1		52.1		15	%	$	46.2		13	%
Average deposits	172.3			163.5		5		158.9			3

WIM reported net income of $2.3 billion in 2015, up $256 million, or 12%, from 2014, which was up 17% from $1.8 billion in 2013. Net income growth in 2015 and 2014 was primarily driven by growth in net interest income, as well as noninterest income. Revenue of $15.8 billion in 2015 increased $508 million from 2014, which was up 7% from $14.3 billion in 2013. The increase in revenue for both 2015 and 2014 was due to growth in both net interest income and noninterest income. Net interest income increased 15% in 2015 and 8% in 2014 due to growth in investment portfolios and loan balances. Average loan balances of $60.1 billion in 2015 increased 15% from $52.1 billion in 2014, which was up 13% from $46.2 billion in 2013. Average deposits in 2015 of $172.3 billion increased 5% from $163.5 billion in 2014, which was up 3% from $158.9 billion in 2013. Noninterest income increased 1% in 2015 from 2014, primarily due to growth in asset-based fees driven by higher average client assets in 2015 than 2014, partially offset by lower gains on deferred compensation plan investments (offset in employee benefits expense). Noninterest income increased 6% in 2014 from 2013, largely due to strong growth in asset-based fees from higher client assets driven by net client asset inflows and favorable market performance, partially offset by lower brokerage transaction revenue. Noninterest expense of $12.1 billion for 2015 was up 1% from $12.0 billion in 2014, which was up 4% from $11.5 billion in 2013. The increase in 2015 was predominantly due to higher non-personnel expenses and increased broker commissions, partially offset by lower deferred compensation plan expense (offset in trading revenue). The increase in 2014 was predominantly due to increased broker

commissions and higher non-personnel expenses. The provision for credit losses increased $25 million in 2015, driven primarily by lower allowance releases. The provision for credit losses decreased $34 million in 2014, driven by lower net charge-offs and continued improvement in credit quality.

The following discussions provide additional information for client assets we oversee in our retail brokerage advisory and trust and investment management business lines.

Retail Brokerage Client Assets Brokerage advisory, commissions and other fees are received for providing full-service and discount brokerage services predominantly to retail brokerage clients. Offering advisory account relationships to our brokerage clients is an important component of our broader strategy of meeting their financial needs. Although most of our retail brokerage client assets are in accounts that earn brokerage commissions, the fees from those accounts generally represent transactional commissions based on the number and size of transactions executed at the client’s direction. Fees earned from advisory accounts are asset-based and depend on changes in the value of the client’s assets as well as the level of assets resulting from inflows and outflows. A major portion of our brokerage advisory, commissions and other fee income is earned from advisory accounts. Table 9d shows advisory account client assets as a percentage of total retail brokerage client assets at December 31, 2015, 2014 and 2013.

Table 10 presents a summary of our investment securities portfolio, which increased $34.6 billion from December 31, 2014, primarily due to purchases of U.S. Treasury securities and federal agency mortgage-backed securities. The total net unrealized gains on available-for-sale securities were $3.0 billion at December 31, 2015, down from $7.8 billion at December 31, 2014, primarily due to higher long-term interest rates, widening credit spreads, and realized securities gains.

The size and composition of the investment securities portfolio is largely dependent upon the Company’s liquidity and interest rate risk management objectives. Our business generates assets and liabilities, such as loans, deposits and long-term debt, which have different maturities, yields, re-pricing, prepayment characteristics and other provisions that expose us to interest rate and liquidity risk. The available-for-sale securities portfolio predominantly consists of liquid, high quality U.S. Treasury and federal agency debt, agency mortgage-backed securities (MBS), privately-issued residential and commercial MBS, securities issued by U.S. states and political subdivisions, corporate debt securities, and highly rated collateralized loan obligations. Due to its highly liquid nature, the available-for-sale portfolio can be used to meet funding needs that arise in the normal course of business or due to market stress. Changes in our interest rate risk profile may occur due to changes in overall economic or market conditions, which could influence loan origination demand, prepayment speeds, or deposit balances and mix. In response, the available-for-sale securities portfolio can be rebalanced to meet the Company’s interest rate risk management objectives. In addition to meeting liquidity and interest rate risk management objectives, the available-for-sale securities portfolio may provide yield enhancement over other short-term assets. See the “Risk Management – Asset/Liability Management” section in this Report for more information on liquidity and interest rate risk. The held-to-maturity securities

portfolio consists of high quality U.S. Treasury debt, securities issued by U.S. states and political subdivisions, agency MBS, asset-backed securities (ABS) primarily collateralized by auto loans and leases, and collateralized loan obligations where our intent is to hold these securities to maturity and collect the contractual cash flows. The held-to-maturity portfolio may also provide yield enhancement over short-term assets.

We analyze securities for other-than-temporary impairment (OTTI) quarterly or more often if a potential loss-triggering event occurs. Of the $559 million in OTTI write-downs recognized in earnings in 2015, $183 million related to debt securities and $2 million related to marketable equity securities, which are each included in available-for-sale securities. Another $374 million in OTTI write-downs were related to nonmarketable equity investments, which are included in other assets. OTTI write-downs recognized in earnings related to energy investments totaled $287 million in 2015, of which $104 million related to corporate debt investment securities, and $183 million related to nonmarketable equity investments. For a discussion of our OTTI accounting policies and underlying considerations and analysis, see Note 1 (Summary of Significant Accounting Policies) and Note 5 (Investment Securities) to Financial Statements in this Report.

At December 31, 2015, investment securities included $52.2 billion of municipal bonds, of which 93.9% were rated “A-” or better based predominantly on external and, in some cases, internal ratings. Additionally, some of the securities in our total municipal bond portfolio are guaranteed against loss by bond insurers. These guaranteed bonds are substantially all investment grade and were generally underwritten in accordance with our own investment standards prior to the determination to purchase, without relying on the bond insurer’s guarantee in making the investment decision. The credit quality of our municipal bond holdings are monitored as part of our ongoing impairment analysis.

The weighted-average expected maturity of debt securities available-for-sale was 6.1 years at December 31, 2015. Because 47.9% of this portfolio is MBS, the expected remaining maturity is shorter than the remaining contractual maturity because borrowers generally have the right to prepay obligations before the underlying mortgages mature. The estimated effects of a 200 basis point increase or decrease in interest rates on the fair value and the expected remaining maturity of the MBS available-for-sale portfolio are shown in Table 11.

Table 11: Mortgage-Backed Securities Available for Sale



(in billions)	Fair value	Net unrealized gain (loss)		Expected remaining maturity (in years)
At December 31, 2015
Actual	127.2	2.0		5.6
Assuming a 200 basis point:
Increase in interest rates	115.5	(9.7	)	7.1
Decrease in interest rates	132.0	6.8		2.7

The weighted-average expected maturity of debt securities held-to-maturity was 6.5 years at December 31, 2015. See Note 5 (Investment Securities) to Financial Statements in this Report for a summary of investment securities by security type.

In the ordinary course of business, we engage in financial transactions that are not recorded on the balance sheet, or may be recorded on the balance sheet in amounts that are different from the full contract or notional amount of the transaction. Our off-balance sheet arrangements include commitments to lend and purchase securities, transactions with unconsolidated entities, guarantees, derivatives, and other commitments. These transactions are designed to (1) meet the financial needs of customers, (2) manage our credit, market or liquidity risks, and/or (3) diversify our funding sources.

Commitments to Lend and Purchase Securities

We enter into commitments to lend funds to customers, which are usually at a stated interest rate, if funded, and for specific purposes and time periods. When we make commitments, we are exposed to credit risk. However, the maximum credit risk for these commitments will generally be lower than the contractual amount because a significant portion of these commitments are not expected to be fully used or will expire without being used by the customer. For more information on lending commitments, see Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report. We also enter into commitments to purchase securities under resale agreements. For more information on these commitments, see Note 4 (Federal Funds Sold, Securities Purchased under Resale Agreements and Other Short-Term Investments) to Financial Statements in this Report.

Transactions with Unconsolidated Entities

We routinely enter into various types of on- and off-balance sheet transactions with special purpose entities (SPEs), which are corporations, trusts or partnerships that are established for a limited purpose. Generally, SPEs are formed in connection with securitization transactions. For more information on securitizations, including sales proceeds and cash flows from securitizations, see Note 8 (Securitizations and Variable Interest Entities) to Financial Statements in this Report.

Guarantees and Certain Contingent Arrangements

Guarantees are contracts that contingently require us to make payments to a guaranteed party based on an event or a change in an underlying asset, liability, rate or index. Guarantees are generally in the form of standby letters of credit, securities lending and other indemnifications, written put options, recourse obligations for loans and mortgages sold, and other types of arrangements.

For more information on guarantees and certain contingent arrangements, see Note 14 (Guarantees, Pledged Assets and Collateral) to Financial Statements in this Report.

Derivatives

We primarily use derivatives to manage exposure to market risk, including interest rate risk, credit risk and foreign currency risk, and to assist customers with their risk management objectives. Derivatives are recorded on the balance sheet at fair value and volumes can be measured in terms of the notional amount, which is generally not exchanged, but is used only as the basis on which interest and other payments are determined. The notional amount is not recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments.

For more information on derivatives, see Note 16 (Derivatives) to Financial Statements in this Report.

Wells Fargo manages a variety of risks that can significantly affect our financial performance and our ability to meet the expectations of our customers, stockholders, regulators and other stakeholders. Among the risks that we manage are operational risk, credit risk, and asset/liability management risk, which includes interest rate risk, market risk, and liquidity and funding risks. Our risk culture is strongly rooted in our Vision and Values, and in order to succeed in our mission of satisfying our customers’ financial needs and helping them succeed financially, our business practices and operating model must support prudent risk management practices.

Risk Culture

Wells Fargo's risk culture is designed to promote understanding of our risk profile, transparency of risks across the Company, effective transfer of information (including the escalation of important risk issues), and more informed decision-making. Our risk culture also seeks to foster an environment that encourages and promotes robust communication and cooperation among the Company’s three lines of defense – (1) Wells Fargo’s lines of business and certain other corporate functions, (2) Corporate Risk, our Company’s primary second-line of defense led by our Chief Risk Officer who reports to the Board’s Risk Committee, and (3) Wells Fargo Audit Services, our internal audit function which is led by our Chief Auditor who reports to the Board’s Audit and Examination Committee (A&E Committee). Our risk culture begins with our Vision and Values and is demonstrated by setting the appropriate tone at the top, fostering credible challenge within and among each of our lines of defense, and developing and maintaining sound incentive compensation risk management practices.

•

Our Vision and Values outlines our vision and our Company’s six priorities, including putting customers first and managing risk. Our focus is on earning our customers’ trust, establishing and maintaining deep and enduring customer relationships, and providing exceptional Wells Fargo customer experiences, which also means that we must proactively protect our customers’ financial security through a risk-focused culture.

•

A strong risk culture starts with the tone at the top, which is set by the Company’s Board of Directors, CEO, Operating Committee (which consists of our Chief Risk Officer and other senior executives) and other members of senior management, and emphasizes a prudent approach to taking and managing risk. In addition, our business and risk leaders work with Wells Fargo’s lines of business and other corporate functions to understand the risks inherent in our businesses and to consider those risks when making business and strategic planning decisions.

•

We believe a key component of an effective risk management function is the degree to which all team members are accountable for risk management and have the ability to provide credible challenge to business and risk management decisions, such as communicating an alternative view, opinion, or strategy, or offering ideas or alternative approaches that may be equally or more effective in mitigating risk.


•	Wells Fargo’s incentive-based compensation practices are designed to balance risk and financial reward in a manner that does not provide team members

with an incentive to take inappropriate risk or act in a way that is not in the best interest of customers.

Our risk culture is further supported by our Code of Ethics and Business Conduct. We require all team members to adhere to the highest standards of ethics and business conduct and comply with all applicable laws and regulations.

Risk Framework

The Company’s primary risk management objectives are: (a) to support the Board as it carries out its risk oversight responsibilities; (b) to support members of senior management in achieving the Company's strategic objectives and priorities by maintaining and enhancing our risk framework; and (c) to maintain and continually promote Wells Fargo’s strong risk culture, which emphasizes each team member’s accountability for appropriate risk management. Key elements of our risk program include:


•	Cultivating a strong risk culture, which emphasizes each team member’s accountability for appropriate risk management and the Company’s bias for conservatism through which we strive to maintain a conservative financial position measured by satisfactory asset quality, capital levels, funding sources, and diversity of revenues.


•	Defining and communicating across the Company an enterprise-wide statement of risk appetite which serves to guide business and risk leaders as they manage risk on a daily basis. The enterprise-wide statement of risk appetite describes the nature and magnitude of risk that Wells Fargo is willing to assume in pursuit of its strategic and business objectives.


•	Maintaining a risk management governance structure, including escalation protocols and a management-level committee structure, that enables the comprehensive oversight of the Company’s risk program and the effective and efficient escalation of risk issues to the appropriate level of the Company for information and decision-making.


•	Designing risk frameworks, policies, standards, procedures, controls, processes, and practices that are effective and aligned, and facilitate the active and timely management of current and emerging risks across the Company.

•

Structuring an effective and independent Corporate Risk function whose primary responsibilities include: (a) establishing and maintaining an effective risk framework, (b) maintaining a comprehensive perspective on the Company’s current and emerging risks, (c) credibly challenging the intended business and risk management actions of Wells Fargo’s first-line of defense, and (d) reviewing risk management programs and practices across the Company to confirm appropriate coordination and consistency in the application of effective risk management approaches.


•	Maintaining an independent internal audit function that is primarily responsible for adopting a systematic, disciplined approach to evaluating the effectiveness of risk management, control and governance processes and activities as well as evaluating risk framework adherence to relevant regulatory guidelines and appropriateness for Wells Fargo’s size and risk profile.

The Board and the Operating Committee have overall and ultimate responsibility to provide oversight for our three lines of defense and the risks we take, and carry out their oversight through governance committees with specific risk management responsibilities described below.

Board Oversight of Risk

The business and affairs of the Company are managed under the direction of the Board, whose responsibilities include overseeing the Company’s risk management structure. The Board carries out its risk oversight responsibilities directly and through the work of its seven standing committees, which all report to the full Board.

Each Board Committee has defined authorities and responsibilities for considering a specific set of risk issues, as outlined in each of their charters and as summarized in Table 16, and works closely with management to understand and oversee the Company’s key risk exposures. Allocating risk responsibilities among each Board committee increases the overall amount of attention devoted to risk management.

The Risk Committee serves as a focal point for enterprise-wide risk issues, overseeing all key risks facing the Company. In this role, the Risk Committee supports and assists the Board's other standing committees as they consider their specific risk issues. The Risk Committee includes the chairs of each of the Board’s other standing committees so that it does not duplicate the risk oversight efforts of other Board committees and to provide it with a comprehensive perspective on risk across the Company and across all individual risk types.

In addition to providing a forum for risk issues at the Board level, the Risk Committee provides oversight of the Company's Corporate Risk function and plays an active role in approving and overseeing the Company’s enterprise-wide risk management framework established by management to manage risk, and the functional framework and oversight policies established by management for each key risk type. The Risk Committee and the full Board review and approve the enterprise statement of risk appetite annually, and the Risk Committee also actively monitors the risk profile relative to the approved risk appetite.

The full Board receives reports at each of its meetings from the Board committee chairs about committee activities, including risk oversight matters, and receives a quarterly report from the management-level Enterprise Risk Management Committee regarding current or emerging risk issues.

Board of Directors

Annually approves overall enterprise risk appetite statement

Board Committees

Risk Committee

Oversight includes:

•

Enterprise-wide risk management framework and structure, including through approval of the risk management framework which outlines the Company’s approach to risk management and the policies, processes and governance structures necessary to execute the risk management program

•

Risk functional framework and oversight policies, which outline roles and responsibilities for managing key risk types and the most significant cross-functional risk areas, including counterparty credit risk

•

Corporate Risk function, including performance of the Chief Risk Officer

•

Risk coverage statement

•

Aggregate enterprise-wide risk profile and alignment of risk profile with Company strategy, objectives, and risk appetite

•

Risk appetite statement, including changes in risk appetite, and adherence to risk limits

•

Risks associated with acquisitions and significant new business or strategic initiatives

•

Liquidity and funding risks, emerging risk, strategic risk, and other selected risk topics and enterprise-wide risk issues, including model risk

•

Volcker compliance program

•

Through joint meetings with the Audit & Examination Committee, information security risk (including cyber) and technology risk

Audit & Examination Committee

Oversight includes:

•

Internal control over financial reporting

•

Disclosure framework for financial and risk reports prepared for the Board, management and bank regulatory agencies

•

External auditor performance

•

Internal audit function, including performance of the Chief Auditor

•

Operational risk, compliance with legal and regulatory requirements, financial crimes risk(BSA/AML), information security risk (including cyber), and technology risk, including through approval (and recommendation to the Risk Committee) of the relevant functional framework and oversight policies

•

Ethics, business conduct, and conflicts of interest program

•

Resolution planning

Credit Committee

Oversight includes:

•

Credit risk, including through approval (and recommendation to the Risk Committee) of the credit risk functional framework and oversight policy

•

Allowance for credit losses, including governance and methodology

•

Adherence to enterprise credit risk appetite metrics and concentration limits

•

Credit quality plan

•

Compliance with credit risk framework, policies and underwriting standards

•

Credit stress testing framework and results (including credit modeling issues)

•

Risk Asset Review organization, resources, and structure, and its examinations of credit portfolios, processes, and practices

Corporate Responsibility Committee

Oversight includes:

•

Reputation risk, including through approval (and recommendation to the Risk Committee) of the reputational risk functional framework and oversight policy

•

Customer service and complaint matters, including related to the Company’s culture and its team members’ focus on serving customers

•

Fair and responsible mortgage and other consumer lending reputational risks

•

Social responsibility risks, including political and environmental risks

Human Resources Committee

Oversight includes:

•

Overall incentive compensation strategy and incentive compensation practices

•

Compensation risk management

•

Talent management and succession planning

Governance & Nominating Committee

Oversight includes:

•

Corporate governance compliance

•

Board and committee performance

Finance Committee

Oversight includes:

•

Interest rate risk, including the MSR

•

Market risk, including trading and derivative activities

•

Approval (and recommendation to the Risk Committee) of the interest rate risk and market risk functional framework and oversight policies

•

Investment risk, including fixed-income and equity portfolios

•

Capital position and planning, including capital levels relative to budgets and forecasts and the Company’s risk profile, capital adequacy assessment and planning, and stress testing activities

•

Financial risk management policies used to assess and manage market, interest rate, liquidity and investment risks

•

Annual financial plan

•

Recovery planning

Management Oversight of Risk

In addition to the Board committees that oversee the Company's risk management framework, the Company has established several management-level governance committees to support Wells Fargo leaders in carrying out their risk management responsibilities. Each risk-focused governance committee has a defined set of authorities and responsibilities specific to one or more risk types. The risk governance committee structure is designed so that significant risk issues are considered and, if necessary, decided upon at the appropriate level of the Company and by the appropriate leaders.

The Enterprise Risk Management Committee, chaired by the Wells Fargo Chief Risk Officer, oversees the management of all risk types across the Company, and additionally provides primary oversight for reputation risk and strategic risk. The Enterprise Risk Management Committee reports to the Board's Risk Committee, and serves as the focal point for risk governance and oversight at the management level. The Enterprise Risk Management Committee is responsible for: monitoring and evaluating the Company’s risk profile relative to its risk appetite across risk types, businesses, and activities; providing active oversight of risk mitigation and the adequacy of risk management resources, skills, and capabilities across the enterprise; reporting periodically to senior management and the Board on the most significant current and emerging risks, risk management issues, initiatives, and concerns; and addressing key risk issues which are escalated to it by its members or its reporting committees. The Enterprise Risk Management Committee annually reviews the Company’s Strategic Plan, with a primary view toward ensuring alignment with the Company’s risk appetite.

Our CEO and Operating Committee develop our enterprise statement of risk appetite in the context of our risk management framework and culture described above. As part of Wells Fargo’s risk appetite, we maintain metrics along with associated objectives to measure and monitor the amount of risk that the Company is prepared to take. Actual results of these metrics are reported to the Enterprise Risk Management Committee on a quarterly basis as well as to the Risk Committee. Our operating segments also have business-specific risk appetite statements based on the enterprise statement of risk appetite. The metrics included in the operating segment statements are harmonized with the enterprise level metrics to ensure consistency where appropriate. Business lines also maintain metrics and qualitative statements that are unique to their line of business. This allows for monitoring of risk and definition of risk appetite deeper within the organization.

A number of management-level governance committees that are responsible for issues specific to an individual risk type report into the Enterprise Risk Management Committee. These governance committees include the:


•	Counterparty Credit Risk Committee


•	Credit Risk Management Committee


•	Enterprise Technology Governance Committee


•	Fiduciary & Investment Risk Oversight Committee


•	Financial Crimes Risk Committee


•	International Oversight Committee


•	Legal Entity Governance Committee


•	Liquidity Risk Management Oversight Committee


•	Market Risk Committee


•	Model Risk Committee


•	Operational Risk Management Committee, and


•	Regulatory Compliance Risk Management Committee

Certain of these governance committees have dual escalation and/or informational reporting paths to the Board committee primarily responsible for the oversight of the specific risk type. In addition, certain management-level risk committees, including those that oversee risk for Community Banking, Consumer Lending, WIM, and Wholesale Banking, report into the Enterprise Risk Management Committee.

While the Enterprise Risk Management Committee and the committees that report to it serve as the focal point for the management of enterprise-wide risk issues, the management of specific risk types is supported by additional management-level governance committees. These committees include the:


•	Ethics & Integrity Oversight Committee, Regulatory and Risk Reporting Oversight Committee, Capital Reporting Committee, and SOX Disclosure Committee, which all report to the Board’s A&E Committee


•	Corporate Asset and Liability Committee, Economic Scenario Approval Committee, and Stress Testing Oversight Committee, which all report to the Board’s Finance Committee


•	Allowance for Credit Losses Approval Committee, which reports to the Board’s Credit Committee


•	Incentive Compensation Committee, which reports to the Board’s Human Resources Committee

The Company’s management-level governance committees collectively help management facilitate enterprise-wide understanding and monitoring of risks and challenges faced by the Company.

Management’s Corporate Risk organization, which is the Company’s primary second-line of defense, is headed by the Company's Chief Risk Officer who, among other things, is responsible for setting the strategic direction and driving the execution of Wells Fargo’s risk management activities.

The Chief Risk Officer, as well as the Chief Risk Officer’s direct reports, work closely with the Board’s committees and frequently provide reports and updates to the committees and the committee chairs on risk issues during and outside of regular committee meetings, as appropriate.

Operational Risk Management

Operational risk is the risk of loss resulting from inadequate or failed internal controls and processes, people and systems, or resulting from external events. These losses may be caused by events such as fraud, breaches of customer privacy, business disruptions, inappropriate employee behavior, vendors that do not perform their responsibilities and regulatory fines and penalties.

To address these risks, Wells Fargo maintains an operational risk management framework that includes the following objectives:


•	Provide a structured approach for identifying, measuring, managing, reporting, and monitoring current and emerging operational risks across all areas of Wells Fargo;


•	Understand operational risk across the Company by establishing and maintaining an effective operational risk management program;


•	Adequately control operational risk-related losses;


•	Establish an appropriate level of capital for such losses in accordance with regulatory guidance; and


•	Support the Board as it carries out its oversight duties and responsibilities relating to management’s establishment of an effective operational risk management program.

Wells Fargo’s operational risk management program seeks to accomplish these objectives by managing operational risk across the Company in a comprehensive, interconnected manner, in line with the enterprise statement of risk appetite and relevant regulatory requirements.

The A&E Committee of the Board has primary responsibility for oversight of all aspects of operational risk. In this capacity it reviews and approves the operational risk management framework and significant supporting operational risk policies and programs, including the Company’s financial crimes, business continuity, information security, privacy, technology and third party risk management policies and programs. To further enhance Board-level oversight and avoid duplication, the A&E Committee meets periodically with the Risk Committee to discuss, among other things, information security risk (including cyber) and technology risk. In addition, the A&E Committee periodically reviews updates from management on the state of operational risk and the general condition of operational risk management in the Company.

At the management level, the Operational Risk Management Committee has primary responsibility for overseeing operational risk management across the Company and informs and advises the Chief Operational Risk Officer on matters that affect the Company's operational risk profile.

Information security is a significant operational risk for financial institutions such as Wells Fargo, and includes the risk of losses resulting from cyber attacks. Wells Fargo and other financial institutions continue to be the target of various evolving and adaptive cyber attacks, including malware and denial-of-service, as part of an effort to disrupt the operations of financial institutions, potentially test their cybersecurity capabilities, or obtain confidential, proprietary or other information. Wells Fargo has not experienced any material losses relating to these or other cyber attacks. Addressing cybersecurity risks is a priority for Wells Fargo, and we continue to develop and enhance our controls, processes and systems in order to protect our networks, computers, software and data from attack, damage or unauthorized access. We are also proactively involved in industry cybersecurity efforts and working with other parties, including our third-party service providers and governmental agencies, to continue to enhance defenses and improve resiliency to cybersecurity threats. See the “Risk Factors” section in this Report for additional information regarding the risks associated with a failure or breach of our operational or security systems or infrastructure, including as a result of cyber attacks.

Credit Risk Management

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 of our assets and exposures such as debt security holdings, certain derivatives, and loans. The following discussion focuses on our loan portfolios, which represent the largest component of assets on our balance sheet for which we have credit risk. Table 17 presents our total loans outstanding by portfolio segment and class of financing receivable.

Table 17: Total Loans Outstanding by Portfolio Segment and Class of Financing Receivable



(in millions)	Dec 31, 2015		Dec 31, 2014
Commercial:
Commercial and industrial	$	299,892	271,795
Real estate mortgage	122,160		111,996
Real estate construction	22,164		18,728
Lease financing	12,367		12,307
Total commercial	456,583		414,826
Consumer:
Real estate 1-4 family first mortgage	273,869		265,386
Real estate 1-4 family junior lien mortgage	53,004		59,717
Credit card	34,039		31,119
Automobile	59,966		55,740
Other revolving credit and installment	39,098		35,763
Total consumer	459,976		447,725
Total loans	$	916,559	862,551

We manage our credit risk by establishing what we believe are sound credit policies for underwriting new business, while monitoring and reviewing the performance of our existing loan portfolios. We employ various credit risk management and monitoring activities to mitigate risks associated with multiple risk factors affecting loans we hold, could acquire or originate including:

•Loan concentrations and related credit quality

•Counterparty credit risk

•Economic and market conditions

•Legislative or regulatory mandates

•Changes in interest rates

•Merger and acquisition activities

•Reputation risk

Our credit risk management oversight process is governed centrally, but provides for decentralized management and accountability by our lines of business. Our overall credit process includes comprehensive credit policies, disciplined credit underwriting, frequent and detailed risk measurement and modeling, extensive credit training programs, and a continual loan review and audit process.

A key to our credit risk management is adherence to a well-controlled underwriting process, which we believe is appropriate for the needs of our customers as well as investors who purchase the loans or securities collateralized by the loans.

Credit Quality Overview Credit quality remained solid in 2015 due in part to an improving housing market, as well as our proactive credit risk management activities. We continued to benefit from improvements in the performance of our residential real estate portfolio, offset by an increase in our commercial allowance to reflect continued deterioration in the oil and gas portfolio. In particular:

•

Although commercial nonaccrual loans increased to $2.4 billion at December 31, 2015, compared with $2.2 billion at December 31, 2014, consumer nonaccrual loans declined to $9.0 billion at December 31, 2015, compared with $10.6 billion at December 31, 2014. The increase in commercial nonaccrual loans was primarily driven by continued deterioration in the oil and gas portfolio, and the decline in consumer nonaccrual loans was primarily driven by credit improvement in real estate 1-4 family first mortgage loans. Nonaccrual loans represented 1.24% of total loans at December 31, 2015, compared with 1.49% at December 31, 2014.


•	Net charge-offs as a percentage of average total loans improved to 0.33% in 2015, compared with 0.35% in 2014. Net charge-offs as a percentage of our average commercial and consumer portfolios were 0.09% and 0.55% in 2015, respectively, compared with 0.01% and 0.65%, respectively, in 2014.


•	Loans that are not government insured/guaranteed and 90 days or more past due and still accruing were $114 million and $867 million in our commercial and consumer portfolios, respectively, at December 31, 2015, compared with $47 million and $873 million at December 31, 2014.


•	Our provision for credit losses was $2.4 billion during 2015, compared with $1.4 billion for the same period a year ago.


•	The allowance for credit losses decreased to $12.5 billion, or 1.37% of total loans, at December 31, 2015, from $13.2 billion or 1.53%, at December 31, 2014.

Additional information on our loan portfolios and our credit quality trends follows.

Non-Strategic and Liquidating Loan Portfolios We continually evaluate and, when appropriate, modify our credit policies to address appropriate levels of risk. We may designate certain portfolios and loan products as non-strategic or liquidating after which we cease their continued origination and actively work to limit losses and reduce our exposures.

Table 18 identifies our non-strategic and liquidating loan portfolios. They consist primarily of the Pick-a-Pay mortgage portfolio and PCI loans acquired from Wachovia, certain portfolios from legacy Wells Fargo Home Equity and Wells Fargo Financial, and, through the first half of 2014, our education finance government guaranteed loan portfolio. We transferred the government guaranteed student loan portfolio to loans held for sale at the end of second quarter 2014, and substantially all of the portfolio was sold as of December 31, 2014. The total balance of our non-strategic and liquidating loan portfolios has decreased 73% since the merger with Wachovia at December 31, 2008, and decreased 15% from the end of 2014.

Additional information regarding the liquidating PCI and Pick-a-Pay loan portfolios is provided in the discussion of loan portfolios that follows.

PURCHASED CREDIT-IMPAIRED (PCI) LOANS Loans acquired with evidence of credit deterioration since their origination and where it is probable that we will not collect all contractually required principal and interest payments are PCI loans. Substantially all of our PCI loans were acquired in the Wachovia acquisition on December 31, 2008. PCI loans are recorded at fair value at the date of acquisition, and the historical allowance for credit losses related to these loans is not

carried over. The carrying value of PCI loans totaled $20.0 billion at December 31, 2015, down from $23.3 billion and $58.8 billion at December 31, 2014 and 2008, respectively. Such loans are considered to be accruing due to the existence of the accretable yield and not based on consideration given to contractual interest payments. The accretable yield at December 31, 2015, was $16.3 billion.

A nonaccretable difference is established for PCI loans to absorb losses expected on the contractual amounts of those loans in excess of the fair value recorded at the date of acquisition. Amounts absorbed by the nonaccretable difference do not affect the income statement or the allowance for credit losses. Since December 31, 2008, we have released $11.7 billion in nonaccretable difference, including $9.7 billion ($1.2 billion in 2015) transferred from the nonaccretable difference to the accretable yield and $2.0 billion released to income through loan resolutions. Also, we have provided $1.7 billion for losses on certain PCI loans or pools of PCI loans that have had credit-related decreases to cash flows expected to be collected. The net result is a $10.0 billion reduction from December 31, 2008, through December 31, 2015, in our initial projected losses of $41.0 billion on all PCI loans. At December 31, 2015, $1.9 billion of nonaccretable difference remained to absorb losses on PCI loans.

For additional information on PCI loans, see Note 1 (Summary of Significant Accounting Policies – Loans) and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Significant Loan Portfolio Reviews Measuring and monitoring our credit risk is an ongoing process that tracks delinquencies, collateral values, FICO scores, economic trends by geographic areas, loan-level risk grading for certain portfolios (typically commercial) and other indications of credit risk. Our

credit risk monitoring process is designed to enable early identification of developing risk and to support our determination of an appropriate allowance for credit losses. The following discussion provides additional characteristics and analysis of our significant portfolios. See Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report for more analysis and credit metric information for each of the following portfolios.

COMMERCIAL AND INDUSTRIAL LOANS AND LEASE FINANCING For purposes of portfolio risk management, we aggregate commercial and industrial loans and lease financing according to market segmentation and standard industry codes. We generally subject commercial and industrial loans and lease financing to individual risk assessment using our internal borrower and collateral quality ratings. Our ratings are aligned to regulatory definitions of pass and criticized categories with criticized divided between special mention, substandard, doubtful and loss categories.

The commercial and industrial loans and lease financing portfolio totaled $312.3 billion, or 34% of total loans, at December 31, 2015. The net charge-off rate for this portfolio was 0.16% in 2015 compared with 0.10% in 2014. At December 31, 2015, 0.44% of this portfolio was nonaccruing, compared with 0.20% at December 31, 2014. In addition, $19.1 billion of this portfolio was rated as criticized in accordance with regulatory guidance at December 31, 2015, compared with $16.7 billion at December 31, 2014. The increase in nonaccrual and criticized loans in this portfolio was predominantly in the oil and gas portfolio.

A majority of our commercial and industrial loans and lease financing portfolio is secured by short-term assets, such as accounts receivable, inventory and securities, as well as long-lived assets, such as equipment and other business assets. Generally, the collateral securing this portfolio represents a secondary source of repayment.

Table 19 provides a breakout of commercial and industrial loans and lease financing by industry, and includes $49.3 billion of foreign loans at December 31, 2015. Foreign loans totaled $14.9 billion within the investors category, $18.1 billion within the financial institutions category and $1.7 billion within the oil and gas category.

The investors category includes loans to special purpose vehicles (SPVs) formed by sponsoring entities to invest in financial assets backed predominantly by commercial and residential real estate or corporate cash flow, and are repaid from the asset cash flows or the sale of assets by the SPV. We limit loan amounts to a percentage of the value of the underlying assets, as determined by us, based primarily on analysis of underlying credit risk and other factors such as asset duration and ongoing performance.

We provide financial institutions with a variety of relationship focused products and services, including loans supporting short-term trade finance and working capital needs. The $18.1 billion of foreign loans in the financial institutions category were predominantly originated by our Global Financial Institutions (GFI) business.

Slightly more than half of our oil and gas loans were to businesses in the exploration and production (E&P) sector. Most of these E&P loans are secured by oil and/or gas reserves and have underlying borrowing base arrangements which include regular (typically semi-annual) “redeterminations” that consider refinements to borrowing structure and prices used to determine borrowing limits. All other oil and gas loans were to midstream and services and equipment companies. Driven by a drop in energy prices and the results of our spring and fall redeterminations, our oil and gas nonaccrual loans increased to $844 million at December 31, 2015, compared with $76 million at December 31, 2014.

Table 19: Commercial and Industrial Loans and Lease Financing by Industry (1)



	December 31, 2015
(in millions)	Nonaccrual loans		Total portfolio	(2)	% of total loans
Investors	$	23	52,261		6	%
Financial institutions	38		39,544		4
Oil and gas	844		17,367		2
Real estate lessor	2		15,315		2
Healthcare	41		15,189		2
Cyclical retailers	20		15,135		2
Food and beverage	10		13,923		1
Industrial equipment	18		13,478		1
Technology	27		9,922		1
Business services	28		8,581		1
Transportation	40		8,506		1
Public administration	7		8,340		1
Other	291		94,698	(3)	10
Total	$	1,389	312,259		34	%


(1)	Industry categories are based on the North American Industry Classification System and the amounts reported include foreign loans. See Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report for a breakout of commercial foreign loans.


(2)	Includes $78 million PCI loans, which are considered to be accruing due to the existence of the accretable yield and not based on consideration given to contractual interest payments.


(3)	No other single industry had total loans in excess of $6.4 billion.

Risk mitigation actions, including the restructuring of repayment terms, securing collateral or guarantees, and entering into extensions, are based on a re-underwriting of the loan and our assessment of the borrower’s ability to perform under the agreed-upon terms. Extension terms generally range from six to thirty-six months and may require that the borrower provide additional economic support in the form of partial repayment, or additional collateral or guarantees. In cases where the value of collateral or financial condition of the borrower is insufficient to repay our loan, we may rely upon the support of an outside repayment guarantee in providing the extension.

Our ability to seek performance under a guarantee is directly related to the guarantor’s creditworthiness, capacity and willingness to perform, which is evaluated on an annual basis, or more frequently as warranted. Our evaluation is based on the most current financial information available and is focused on various key financial metrics, including net worth, leverage, and current and future liquidity. We consider the guarantor’s reputation, creditworthiness, and willingness to work with us based on our analysis as well as other lenders’ experience with the guarantor. Our assessment of the guarantor’s credit strength is reflected in our loan risk ratings for such loans. The loan risk rating and accruing status are important factors in our allowance methodology.

In considering the accrual status of the loan, we evaluate the collateral and future cash flows as well as the anticipated support of any repayment guarantor. In many cases the strength of the guarantor provides sufficient assurance that full repayment of the loan is expected. When full and timely collection of the loan becomes uncertain, including the performance of the guarantor, we place the loan on nonaccrual status. As appropriate, we also charge the loan down in accordance with our charge-off policies, generally to the net realizable value of the collateral securing the loan, if any.

COMMERCIAL REAL ESTATE (CRE) We generally subject CRE loans to individual risk assessment using our internal borrower and collateral quality ratings. Our ratings are aligned to regulatory definitions of pass and criticized categories with criticized divided between special mention, substandard, doubtful and loss categories. The CRE portfolio, which included $8.8 billion of foreign CRE loans, totaled $144.3 billion, or 16% of total loans, at December 31, 2015, and consisted of $122.1 billion of mortgage loans and $22.2 billion of construction loans.

Table 20 summarizes CRE loans by state and property type with the related nonaccrual totals. The portfolio is diversified both geographically and by property type. The largest geographic concentrations of combined CRE loans are in California, Texas, New York and Florida, which combined represented 48% of the

total CRE portfolio. By property type, the largest concentrations are office buildings at 28% and apartments at 15% of the portfolio. CRE nonaccrual loans totaled 0.7% of the CRE outstanding balance at December 31, 2015, compared with 1.3% at December 31, 2014. At December 31, 2015, we had $6.8 billion of criticized CRE mortgage loans, down from $7.9 billion at December 31, 2014, and $549 million of criticized CRE construction loans, down from $949 million at December 31, 2014.

At December 31, 2015, the recorded investment in PCI CRE loans totaled $634 million, down from $12.3 billion when acquired at December 31, 2008, reflecting principal payments, loan resolutions and write-downs.

FOREIGN LOANS AND COUNTRY RISK EXPOSURE We classify loans for financial statement and certain regulatory purposes as foreign primarily based on whether the borrower’s primary address is outside of the United States. At December 31, 2015, foreign loans totaled $58.6 billion, representing approximately 6% of our total consolidated loans outstanding, compared with $50.6 billion, or approximately 6% of total consolidated loans outstanding, at December 31, 2014. Foreign loans were approximately 3% of our consolidated total assets at December 31, 2015 and at December 31, 2014.

Our foreign country risk monitoring process incorporates frequent dialogue with our financial institution customers, counterparties and regulatory agencies, enhanced by centralized monitoring of macroeconomic and capital markets conditions in the respective countries. We establish exposure limits for each country through a centralized oversight process based on customer needs, and in consideration of relevant economic, political, social, legal, and transfer risks. We monitor exposures closely and adjust our country limits in response to changing conditions.

We evaluate our individual country risk exposure on an ultimate country of risk basis, which is normally based on the country of residence of the guarantor or collateral location, and is different from the reporting based on the borrower’s primary address. Our largest single foreign country exposure on an

ultimate risk basis at December 31, 2015, was the United Kingdom, which totaled $27.4 billion, or approximately 2% of our total assets, and included $4.9 billion of sovereign claims. Our United Kingdom sovereign claims arise primarily from deposits we have placed with the Bank of England pursuant to regulatory requirements in support of our London branch.

We conduct periodic stress tests of our significant country risk exposures, analyzing the direct and indirect impacts on the risk of loss from various macroeconomic and capital markets scenarios. We do not have significant exposure to foreign country risks because our foreign portfolio is relatively small. However, we have identified exposure to increased loss from U.S. borrowers associated with the potential impact of a regional or worldwide economic downturn on the U.S. economy. We mitigate these potential impacts on the risk of loss through our normal risk management processes which include active monitoring and, if necessary, the application of aggressive loss mitigation strategies.

Table 21 provides information regarding our top 20 exposures by country (excluding the U.S.) and our Eurozone exposure, on an ultimate risk basis. Our exposure to Puerto Rico (considered part of U.S. exposure) is primarily through automobile lending and was not material to our consolidated country risk exposure.



	December 31, 2015
	Lending (1)			Securities (2)			Derivatives and other (3)		Total exposure
(in millions)	Sovereign		Non-sovereign	Sovereign	Non-sovereign		Sovereign	Non-sovereign	Sovereign	Non- sovereign (4)	Total
Top 20 country exposures:
United Kingdom	$	4,939	17,716	—	3,246		—	1,507	4,939	22,469	27,408
Canada	2		13,437	—	1,007		—	571	2	15,015	15,017
Ireland	22		3,190	—	210		—	88	22	3,488	3,510
Germany	1,279		1,340	—	474		—	330	1,279	2,144	3,423
Cayman Islands	—		3,177	—	—		—	231	—	3,408	3,408
Bermuda	—		2,840	—	77		—	101	—	3,018	3,018
India	—		2,105	—	123		—	2	—	2,230	2,230
China	—		1,907	—	181		70	1	70	2,089	2,159
Brazil	—		2,143	—	(2	)	—	5	—	2,146	2,146
Netherlands	—		1,535	—	358		—	39	—	1,932	1,932
Australia	—		938	—	922		—	38	—	1,898	1,898
France	—		558	—	1,039		—	293	—	1,890	1,890
Switzerland	—		1,755	—	48		—	10	—	1,813	1,813
Mexico	—		1,482	—	43		—	2	—	1,527	1,527
Turkey	—		1,479	—	—		—	1	—	1,480	1,480
South Korea	—		1,367	—	—		—	—	—	1,367	1,367
Jersey, C.I.	—		1,046	—	278		—	5	—	1,329	1,329
Chile	—		1,270	—	20		4	32	4	1,322	1,326
Luxembourg	—		807	—	202		—	42	—	1,051	1,051
Colombia	—		1,004	—	(2	)	—	4	—	1,006	1,006
Total top 20 country exposures	$	6,242	61,096	—	8,224		74	3,302	6,316	72,622	78,938
Eurozone exposure:
Eurozone countries included in Top 20 above (5)	$	1,301	7,430	—	2,283		—	792	1,301	10,505	11,806
Austria	—		618	—	3		—	1	—	622	622
Spain	—		324	—	46		—	8	—	378	378
Belgium	—		245	—	23		—	1	—	269	269
Italy	—		105	—	66		—	—	—	171	171
Other Eurozone countries (6)	21		26	—	4		—	10	21	40	61
Total Eurozone exposure	$	1,322	8,748	—	2,425		—	812	1,322	11,985	13,307

The real estate 1-4 family mortgage loan portfolio includes some loans with adjustable-rate features and some with an interest-only feature as part of the loan terms. Interest-only loans were approximately 9% and 12% of total loans at December 31, 2015 and 2014, respectively. We believe we have manageable adjustable-rate mortgage (ARM) reset risk across our owned mortgage loan portfolios. We do not offer option ARM products, nor do we offer variable-rate mortgage products with fixed payment amounts, commonly referred to within the financial services industry as negative amortizing mortgage loans. The option ARMs we do have are included in the Pick-a-Pay portfolio which was acquired from Wachovia and are part of our liquidating loan portfolios. Since our acquisition of the Pick-a-Pay loan portfolio at the end of 2008, the option payment portion of the portfolio has reduced from 86% to 38% at December 31, 2015, as a result of our modification activities and customers exercising their option to convert to fixed payments. For more information, see the “Pick-a-Pay Portfolio” section in this Report.

We continue to modify real estate 1-4 family mortgage loans to assist homeowners and other borrowers experiencing financial difficulties. Loans are underwritten at the time of the modification in accordance with underwriting guidelines established for governmental and proprietary loan modification programs. As a participant in the U.S. Treasury’s Making Home Affordable (MHA) programs, we are focused on helping customers stay in their homes. The MHA programs create a standardization of modification terms including incentives paid to borrowers, servicers, and investors. MHA includes the Home Affordable Modification Program (HAMP) for first lien loans and the Second Lien Modification Program (2MP) for junior lien loans. Under both our proprietary programs and the MHA programs, we may provide concessions such as interest rate reductions, forbearance of principal, and in some cases, principal forgiveness. These programs generally include trial payment periods of three to four months, and after successful completion and compliance with terms during this period, the loan is permanently modified. Once the loan is modified either

through a permanent modification or a trial period, it is accounted for as a TDR. See the “Critical Accounting Policies – Allowance for Credit Losses” section in this Report for discussion on how we determine the allowance attributable to our modified residential real estate portfolios.

Part of our credit monitoring includes tracking delinquency, FICO scores and loan/combined loan to collateral values (LTV/CLTV) on the entire real estate 1-4 family mortgage loan portfolio. These credit risk indicators, which exclude government insured/guaranteed loans, continued to improve in 2015 on the non-PCI mortgage portfolio. Loans 30 days or more delinquent at December 31, 2015, totaled $8.3 billion, or 3%, of total non-PCI mortgages, compared with $10.2 billion, or 3%, at December 31, 2014. Loans with FICO scores lower than 640 totaled $21.1 billion at December 31, 2015, or 7% of total non-PCI mortgages, compared with $25.8 billion, or 9%, at December 31, 2014. Mortgages with a LTV/CLTV greater than 100% totaled $15.1 billion at December 31, 2015, or 5% of total non-PCI mortgages, compared with $20.3 billion, or 7%, at December 31, 2014. Information regarding credit quality indicators, including PCI credit quality indicators, can be found in Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Real estate 1-4 family first and junior lien mortgage loans by state are presented in Table 23. Our real estate 1-4 family mortgage loans to borrowers in California represented approximately 13% of total loans at December 31, 2015, located mostly within the larger metropolitan areas, with no single California metropolitan area consisting of more than 5% of total loans. We monitor changes in real estate values and underlying economic or market conditions for all geographic areas of our real estate 1-4 family mortgage portfolio as part of our credit risk management process. Our underwriting and periodic review of loans secured by residential real estate collateral includes appraisals or estimates from automated valuation models (AVMs) to support property values. AVMs are computer-based tools used to estimate the market value of homes. AVMs are a lower-cost alternative to appraisals and support valuations of

large numbers of properties in a short period of time using market comparables and price trends for local market areas. The primary risk associated with the use of AVMs is that the value of an individual property may vary significantly from the average for the market area. We have processes to periodically validate AVMs and specific risk management guidelines addressing the circumstances when AVMs may be used. AVMs are generally used in underwriting to support property values on loan originations only where the loan amount is under $250,000. We generally require property visitation appraisals by a qualified independent appraiser for larger residential property loans. Additional information about AVMs and our policy for their use can be found in Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Table 23: Real Estate 1-4 Family First and Junior Lien Mortgage Loans by State



	December 31, 2015
(in millions)	Real estate 1-4 family first mortgage		Real estate 1-4 family junior lien mortgage	Total real estate 1-4 family mortgage	% of total loans
Real estate 1-4 family loans (excluding PCI):
California	$	88,367	14,554	102,921	11	%
New York	20,962		2,416	23,378	3
Florida	14,068		4,823	18,891	2
New Jersey	11,825		4,462	16,287	2
Virginia	7,209		2,991	10,200	1
Texas	8,153		827	8,980	1
Pennsylvania	5,755		2,748	8,503	1
North Carolina	5,977		2,397	8,374	1
Washington	6,747		1,245	7,992	1
Other (1)	63,263		16,472	79,735	9
Government insured/guaranteed loans (2)	22,353		—	22,353	2
Real estate 1-4 family loans (excluding PCI)	254,679		52,935	307,614	34
Real estate 1-4 family PCI loans (3)	19,190		69	19,259	2
Total	$	273,869	53,004	326,873	36	%


(1)	Consists of 41 states; no state had loans in excess of $7.2 billion.


(2)	Represents loans whose repayments are predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).


(3)	Includes $13.4 billion in real estate 1-4 family mortgage PCI loans in California.

First Lien Mortgage Portfolio Our total real estate 1-4 family first lien mortgage portfolio increased $8.5 billion in 2015. Growth in this portfolio has been largely offset by runoff in our real estate 1-4 family first lien mortgage non-strategic and liquidating portfolios. Excluding this runoff, our core real estate 1-4 family first lien mortgage portfolio increased $15.9 billion in 2015, as we retained $53.1 billion in non-conforming originations, primarily consisting of loans that exceed conventional conforming loan amount limits established by federal government-sponsored entities (GSEs).

The credit performance associated with our real estate 1-4 family first lien mortgage portfolio continued to improve in 2015, as measured through net charge-offs and nonaccrual loans. Net charge-offs as a percentage of average real estate 1-4 family first lien mortgage loans improved to 0.10% in 2015,

compared with 0.19% in 2014. Nonaccrual loans were $7.3 billion at December 31, 2015, compared with $8.6 billion at December 31, 2014. Improvement in the credit performance was driven by an improving housing environment and declining balances in non-strategic and liquidating loans, which have been replaced with higher quality assets originated after 2008 generally utilizing tighter underwriting standards. Real estate 1-4 family first lien mortgage loans originated after 2008 have resulted in minimal losses to date and were approximately 67% of our total real estate 1-4 family first lien mortgage portfolio as of December 31, 2015. Table 24 shows the credit attributes of the core, non-strategic and liquidating first lien mortgage portfolios and lists the top five states by outstanding balance for the core portfolio.

Pick-a-Pay loans may have fixed or adjustable rates with payment options that include a minimum payment, an interest-only payment or fully amortizing payment (both 15 and 30 year options). Total interest deferred due to negative amortization on Pick-a-Pay loans was $431 million at December 31, 2015, and $606 million at December 31, 2014. Approximately 97% of the Pick-a-Pay customers making a minimum payment in December 2015 did not defer interest, compared with 95% in December 2014.

Deferral of interest on a Pick-a-Pay loan may continue as long as the loan balance remains below a pre-defined principal cap, which is based on the percentage that the current loan balance represents to the original loan balance. A significant portion of the Pick-a-Pay portfolio has a cap of 125% of the original loan balance. Most of the Pick-a-Pay loans on which there is a deferred interest balance re-amortize (the monthly payment amount is reset or “recast”) on the earlier of the date when the loan balance reaches its principal cap, or generally the 10-year anniversary of the loan. After a recast, the customers’ new payment terms are reset to the amount necessary to repay the balance over the remainder of the original loan term.

Generally, Pick-a-Pay option payment loans have an annual 7.5% maximum payment increase reset unless a recast event occurs. If a recast occurs it may cause the payment reset to exceed 7.5% and result in a significant payment increase, which can affect some borrowers' ability to repay the outstanding balance. The amount of Pick-a-Pay option payment loans we would expect to recast and exceed the 7.5% payment increase through 2020 is $1.8 billion ($1.2 billion for 2017) assuming a flat rate environment. Recast risk associated with our Pick-a-Pay PCI portfolio is covered through our nonaccretable difference.

As a result of our modification efforts, Pick-a-Pay option payment loans have been reduced to $16.8 billion at December 31, 2015, from $99.9 billion at acquisition.

To maximize return and allow flexibility for customers to avoid foreclosure, we have in place several loss mitigation strategies for our Pick-a-Pay loan portfolio. We contact customers who are experiencing financial difficulty and may in certain cases modify the terms of a loan based on a customer’s documented income and other circumstances.

We also have taken steps to work with customers to refinance or restructure their Pick-a-Pay loans into other loan products. For customers at risk, we offer combinations of term extensions of up to 40 years (from 30 years), interest rate reductions, forbearance of principal, and, in certain cases we may offer principal forgiveness to customers with substantial property value declines based on affordability needs.

In 2015, we completed more than 3,600 proprietary and Home Affordability Modification Program (HAMP) Pick-a-Pay loan modifications. We have completed nearly 133,000 modifications since the Wachovia acquisition, resulting in over $6.1 billion of principal forgiveness to our Pick-a-Pay customers. There remains $10.6 million of conditional forgiveness that can be earned by borrowers through performance over a three year period.

Due to better than expected performance observed on the Pick-a-Pay PCI portfolio compared with the original acquisition estimates, we have reclassified $7.1 billion from the nonaccretable difference to the accretable yield since acquisition. Our cash flows expected to be collected have been favorably affected by lower expected defaults and losses as a result of observed and forecasted economic strengthening, particularly in housing prices, and our loan modification efforts. These factors are expected to reduce the frequency and severity of defaults and keep these loans performing for a longer period, thus increasing future principal and interest cash flows. The resulting increase in

the accretable yield will be realized over the remaining life of the portfolio, which is estimated to have a weighted-average remaining life of approximately 12.0 years at December 31, 2015, up from 11.7 years at December 31, 2014, due to changes in composition of cash flows due to improving credit performance. The accretable yield percentage at December 31, 2015 was 6.21%, up from 6.15% at the end of 2014 due to favorable changes in the expected timing and composition of cash flows resulting from improving credit and prepayment expectations. Fluctuations in the accretable yield are driven by changes in interest rate indices for variable rate PCI loans, prepayment assumptions, and expected principal and interest payments over the estimated life of the portfolio, which will be affected by the pace and degree of improvements in the U.S. economy and housing markets and projected lifetime performance resulting from loan modification activity. Changes in the projected timing of cash flow events, including loan prepayments, liquidations, modifications and short sales, can also affect the accretable yield rate and the estimated weighted-average life of the portfolio.

The predominant portion of our PCI loans is included in the Pick-a-Pay portfolio. For further information on the judgment involved in estimating expected cash flows for PCI loans, see the “Critical Accounting Policies – Purchased Credit-Impaired Loans” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

Junior Lien Mortgage Portfolio The junior lien mortgage portfolio consists of residential mortgage lines and loans that are subordinate in rights to an existing lien on the same property. It is not unusual for these lines and loans to have draw periods, interest only payments, balloon payments, adjustable rates and similar features. The majority of our junior lien loan products are amortizing payment loans with fixed interest rates and repayment periods between five to 30 years.

We continuously monitor the credit performance of our junior lien mortgage portfolio for trends and factors that influence the frequency and severity of loss. We have observed that the severity of loss for junior lien mortgages is high and generally not affected by whether we or a third party own or service the related first lien mortgage, but the frequency of delinquency is typically lower when we own or service the first lien mortgage. In general, we have limited information available on the delinquency status of the third party owned or serviced senior lien where we also hold a junior lien. To capture this inherent loss content, we use the experience of our junior lien mortgages behind delinquent first liens that are owned or serviced by us adjusted for any observed differences in delinquency and loss rates associated with junior lien mortgages behind third party first lien mortgages. We incorporate this inherent loss content into our allowance for loan losses. Our allowance process for junior liens considers the relative difference in loss experience for junior liens behind first lien

mortgage loans we own or service, compared with those behind first lien mortgage loans owned or serviced by third parties. In addition, our allowance process for junior liens that are current, but are in their revolving period, considers the inherent loss where the borrower is delinquent on the corresponding first lien mortgage loans.

Table 27 shows the credit attributes of the core, non-strategic and liquidating junior lien mortgage portfolios and lists the top five states by outstanding balance for the core portfolio. Loans to California borrowers represent the largest state concentration in each of these portfolios. The decrease in outstanding balances since December 31, 2014, predominantly reflects loan paydowns. As of December 31, 2015, 17% of the outstanding balance of the junior lien mortgage portfolio was associated with loans that had a combined loan to value (CLTV) ratio in excess of 100%. Of those junior liens with a CLTV ratio in excess of 100%, 2.77% were two payments or more past due. CLTV means the ratio of the total loan balance of first mortgages and junior lien mortgages (including unused line amounts for credit line products) to property collateral value. The unsecured portion (the outstanding amount that was in excess of the most recent property collateral value) of the outstanding balances of these loans totaled 7% of the junior lien mortgage portfolio at December 31, 2015.

Our junior lien, as well as first lien, lines of credit products generally have a draw period of 10 years (with some up to 15 or 20 years) with variable interest rate and payment options during the draw period of (1) interest only or (2) 1.5% of outstanding principal balance plus accrued interest. During the draw period, the borrower has the option of converting all or a portion of the line from a variable interest rate to a fixed rate with terms including interest-only payments for a fixed period between three to seven years or a fully amortizing payment with a fixed period between five to 30 years. At the end of the draw period, a line of credit generally converts to an amortizing payment schedule with repayment terms of up to 30 years based on the balance at time of conversion. Certain lines and loans have been structured with a balloon payment, which requires full repayment of the outstanding balance at the end of the term period. The conversion of lines or loans to fully amortizing or balloon payoff may result in a significant payment increase, which can affect some borrowers’ ability to repay the outstanding balance.

On a monthly basis, we monitor the payment characteristics of borrowers in our junior lien portfolio. In December 2015, approximately 47% of these borrowers paid only the minimum amount due and approximately 48% paid more than the minimum amount due. The rest were either delinquent or paid less than the minimum amount due. For the borrowers with an

interest only payment feature, approximately 36% paid only the minimum amount due and approximately 60% paid more than the minimum amount due.

The lines that enter their amortization period may experience higher delinquencies and higher loss rates than the ones in their draw or term period. We have considered this increased inherent risk in our allowance for credit loss estimate.

In anticipation of our borrowers reaching the end of their contractual commitment, we have created a program to inform, educate and help these borrowers transition from interest-only to fully-amortizing payments or full repayment. We monitor the performance of the borrowers moving through the program in an effort to refine our ongoing program strategy.

Table 28 reflects the outstanding balance of our portfolio of junior lien mortgages, including lines and loans, and senior lien lines segregated into scheduled end of draw or end of term periods and products that are currently amortizing, or in balloon repayment status. It excludes real estate 1-4 family first lien line reverse mortgages, which total $2.1 billion, because they are predominantly insured by the FHA, and it excludes PCI loans, which total $96 million, because their losses were generally reflected in our nonaccretable difference established at the date of acquisition.

Typically, changes to nonaccrual loans period-over-period represent inflows for loans that are placed on nonaccrual status in accordance with our policy, offset by reductions for loans that are paid down, charged off, sold, foreclosed, or are no longer classified as nonaccrual as a result of continued performance and an improvement in the borrower’s financial condition and loan repayment capabilities. Also, reductions can come from borrower repayments even if the loan remains on nonaccrual.

While nonaccrual loans are not free of loss content, we believe exposure to loss is significantly mitigated by the following factors at December 31, 2015:


•	98% of total commercial nonaccrual loans and over 99% of total consumer nonaccrual loans are secured. Of the consumer nonaccrual loans, 98% are secured by real estate and 75% have a combined LTV (CLTV) ratio of 80% or less.

•

losses of $483 million and $3.1 billion have already been recognized on 28% of commercial nonaccrual loans and 52% of consumer nonaccrual loans, respectively. Generally, when a consumer real estate loan is 120 days past due (except when required earlier by guidance issued by bank regulatory agencies), we transfer it to nonaccrual status. When the loan reaches 180 days past due, or is discharged in bankruptcy, it is our policy to write these loans down to net realizable value (fair value of collateral less estimated costs to sell), except for modifications in their trial period that are not written down as long as trial payments are made on time. Thereafter, we reevaluate each loan regularly and record additional write-downs if needed.


•	79% of commercial nonaccrual loans were current on interest, but were on nonaccrual status because the full or

timely collection of interest or principal had become uncertain.


•	the risk of loss of all nonaccrual loans has been considered and we believe is adequately covered by the allowance for loan losses.


•	$1.9 billion of consumer loans discharged in bankruptcy and classified as nonaccrual were 60 days or less past due, of which $1.7 billion were current.

We continue to work with our customers experiencing financial difficulty to determine if they can qualify for a loan modification so that they can stay in their homes. Under both our proprietary modification programs and the MHA programs, customers may be required to provide updated documentation, and some programs require completion of payment during trial periods to demonstrate sustained performance before the loan can be removed from nonaccrual status. In addition, for loans in foreclosure in certain states, including New York and New Jersey, the foreclosure timeline has significantly increased due to backlogs in an already complex process. Therefore, some loans may remain on nonaccrual status for a long period.

If interest due on all nonaccrual loans (including loans that were, but are no longer on nonaccrual at year end) had been accrued under the original terms, approximately $700 million of interest would have been recorded as income on these loans, compared with $569 million actually recorded as interest income in 2015, versus $741 million and $598 million, respectively, in 2014.

Table 32 provides a summary of foreclosed assets and an analysis of changes in foreclosed assets.

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING Loans 90 days or more past due as to interest or principal are still accruing if they are (1) well-secured and in the process of collection or (2) real estate 1‑4 family mortgage loans or consumer loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due. PCI loans are not included in past due and still accruing loans even though they are 90 days or more contractually past due. These PCI loans are considered to be accruing because they continue to earn interest from accretable yield, independent of performance in accordance with their contractual terms.

Excluding insured/guaranteed loans, loans 90 days or more past due and still accruing at December 31, 2015, were up $61 million, or 7%, from December 31, 2014, primarily due to increases in our credit card and dealer floorplan lending

businesses, partially offset by improvement in consumer real estate lending.

Loans 90 days or more past due and still accruing whose repayments are predominantly insured by the FHA or guaranteed by the VA for mortgages and the U.S. Department of Education for student loans under the Federal Family Education Loan Program (FFELP) were $13.4 billion at December 31, 2015, down from $16.9 billion at December 31, 2014, due to improving credit trends.

Table 36 reflects non-PCI loans 90 days or more past due and still accruing by class for loans not government insured/guaranteed. For additional information on delinquencies by loan class, see Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.



		Year ended																				Quarter ended
		December 31,					December 31,					September 30,					June 30,					March 31,
		Net loan			% of		Net loan			% of		Net loan			% of		Net loan			% of		Net loan			% of
		charge-			avg.		charge-			avg.		charge-			avg.		charge-			avg.		charge-			avg.
($ in millions)		offs			loans		offs			loans (1)		offs			loans (1)		offs			loans (1)		offs			loans (1)
2015
Commercial:
	Commercial and industrial	$	482		0.17	%	$	215		0.29	%	$	122		0.17	%	$	81		0.12	%	$	64		0.10	%
	Real estate mortgage	(68		)	(0.06	)	(19		)	(0.06	)	(23		)	(0.08	)	(15		)	(0.05	)	(11		)	(0.04	)
	Real estate construction	(33		)	(0.16	)	(10		)	(0.18	)	(8		)	(0.15	)	(6		)	(0.11	)	(9		)	(0.19	)
	Lease financing	6			0.05		1			0.01		3			0.11		2			0.06		—			—
Total commercial		387			0.09		187			0.16		94			0.08		62			0.06		44			0.04
Consumer:
	Real estate 1-4 family first mortgage	262			0.10		50			0.07		62			0.09		67			0.10		83			0.13
	Real estate 1-4 family junior lien mortgage	376			0.67		70			0.52		89			0.64		94			0.66		123			0.85
	Credit card	941			3.00		243			2.93		216			2.71		243			3.21		239			3.19
	Automobile	417			0.72		135			0.90		113			0.76		68			0.48		101			0.73
	Other revolving credit and installment	509			1.36		146			1.49		129			1.35		116			1.26		118			1.32
Total consumer		2,505			0.55		644			0.56		609			0.53		588			0.53		664			0.60
	Total	$	2,892		0.33	%	$	831		0.36	%	$	703		0.31	%	$	650		0.30	%	$	708		0.33	%

2014
Commercial:
	Commercial and industrial	$	258		0.10	%	$	82		0.12	%	$	67		0.11	%	$	60		0.10	%	$	49		0.08	%
	Real estate mortgage	(94		)	(0.08	)	(25		)	(0.09	)	(37		)	(0.13	)	(10		)	(0.04	)	(22		)	(0.08	)
	Real estate construction	(127		)	(0.72	)	(26		)	(0.56	)	(58		)	(1.27	)	(20		)	(0.47	)	(23		)	(0.54	)
	Lease financing	7			0.06		1			0.05		4			0.10		1			0.05		1			0.03
Total commercial		44			0.01		32			0.03		(24		)	0.02		31			0.03		5			0.01
Consumer:
	Real estate 1-4 family first mortgage	509			0.19		88			0.13		114			0.17		137			0.21		170			0.27
	Real estate 1-4 family junior lien mortgage	626			1.00		134			0.88		140			0.90		160			1.02		192			1.19
	Credit card	864			3.14		221			2.97		201			2.87		211			3.20		231			3.57
	Automobile	380			0.70		132			0.94		112			0.81		46			0.35		90			0.70
	Other revolving credit and installment	522			1.35		128			1.45		125			1.46		132			1.22		137			1.29
Total consumer		2,901			0.65		703			0.63		692			0.62		686			0.62		820			0.75
	Total	$	2,945		0.35	%	$	735		0.34	%	$	668		0.32	%	$	717		0.35	%	$	825		0.41	%

ALLOWANCE FOR CREDIT LOSSES The allowance for credit losses, which consists of the allowance for loan losses and the allowance for unfunded credit commitments, is management’s estimate of credit losses inherent in the loan portfolio and unfunded credit commitments at the balance sheet date, excluding loans carried at fair value. The detail of the changes in the allowance for credit losses by portfolio segment (including charge-offs and recoveries by loan class) is in Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

We apply a disciplined process and methodology to establish our allowance for credit losses each quarter. This process takes into consideration many factors, including historical and forecasted loss trends, loan-level credit quality ratings and loan grade-specific characteristics. The process involves subjective and complex judgments. In addition, we review a variety of credit metrics and trends. These credit metrics and trends, however, do not solely determine the amount of the allowance as we use several analytical tools. Our

estimation approach for the commercial portfolio reflects the estimated probability of default in accordance with the borrower's financial strength, and the severity of loss in the event of default, considering the quality of any underlying collateral. Probability of default and severity at the time of default are statistically derived through historical observations of defaults and losses after default within each credit risk rating. Our estimation approach for the consumer portfolio uses forecasted losses that represent our best estimate of inherent loss based on historical experience, quantitative and other mathematical techniques over the loss emergence period. For additional information on our allowance for credit losses, see the “Critical Accounting Policies – Allowance for Credit Losses” section and Note 1 (Summary of Significant Accounting Policies) and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Table 38 presents the allocation of the allowance for credit losses by loan segment and class for the last five years.



	Dec 31, 2015					Dec 31, 2014					Dec 31, 2013					Dec 31, 2012					Dec 31, 2011
	Loans					Loans					Loans					Loans					Loans
				as %					as %					as %					as %					as %
			of total					of total					of total					of total					of total
(in millions)	ACL			loans		ACL			loans		ACL			loans		ACL			loans		ACL			loans
Commercial:
Commercial and industrial	$	4,231		33	%	$	3,506		32	%	$	3,040		29	%	$	2,789		28	%	$	2,810		27	%
Real estate mortgage	1,264			13		1,576			13		2,157			14		2,284			13		2,570			14
Real estate construction	1,210			3		1,097			2		775			2		552			2		893			2
Lease financing	167			1		198			1		131			1		89			2		85			2
Total commercial	6,872			50		6,377			48		6,103			46		5,714			45		6,358			45
Consumer:
Real estate 1-4 family first mortgage	1,895			30		2,878			31		4,087			32		6,100			31		6,934			30
Real estate 1-4 family junior lien mortgage	1,223			6		1,566			7		2,534			8		3,462			10		3,897			11
Credit card	1,412			4		1,271			4		1,224			3		1,234			3		1,294			3
Automobile	529			6		516			6		475			6		417			6		555			6
Other revolving credit and installment	581			4		561			4		548			5		550			5		630			5
Total consumer	5,640			50		6,792			52		8,868			54		11,763			55		13,310			55
Total	$	12,512		100	%	$	13,169		100	%	$	14,971		100	%	$	17,477		100	%	$	19,668		100	%

	Dec 31, 2015					Dec 31, 2014					Dec 31, 2013					Dec 31, 2012					Dec 31, 2011
Components:
Allowance for loan losses	$	11,545				12,319					14,502					17,060					19,372
Allowance for unfunded credit commitments	967					850					469					417					296
Allowance for credit losses	$	12,512				13,169					14,971					17,477					19,668
Allowance for loan losses as a percentage of total loans				1.26	%				1.43					1.76					2.13					2.52
Allowance for loan losses as a percentage of total net charge-offs				399					418					322					189					171
Allowance for credit losses as a percentage of total loans				1.37					1.53					1.82					2.19					2.56
Allowance for credit losses as a percentage of total nonaccrual loans				110					103					96					85					92

In addition to the allowance for credit losses, there was $1.9 billion at December 31, 2015, and $2.9 billion at December 31, 2014, of nonaccretable difference to absorb losses for PCI loans. The allowance for credit losses is lower than otherwise would have been required without PCI loan accounting. As a result of PCI loans, certain ratios of the Company may not be directly comparable with credit-related metrics for other financial institutions. Additionally, loans purchased at fair value generally reflect a lifetime credit loss adjustment and therefore do not initially require additions to the allowance as is typically associated with loan growth. For additional information on PCI loans, see the “Risk Management – Credit Risk Management – Purchased Credit-Impaired Loans” section, Note 1 (Summary of Significant Accounting Policies) and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

The ratio of the allowance for credit losses to total nonaccrual loans may fluctuate significantly from period to period due to such factors as the mix of loan types in the portfolio, borrower credit strength and the value and marketability of collateral. Over one-half of our nonaccrual loans were real estate 1-4 family first and junior lien mortgage loans at December 31, 2015.

The allowance for credit losses declined in 2015, which reflected continued credit improvement, particularly in our residential real estate portfolios and primarily associated with continued improvement in the housing market, partially offset by an increase in our commercial allowance to reflect deterioration in the oil and gas portfolio. The total provision for credit losses was $2.4 billion in 2015, $1.4 billion in 2014 and $2.3 billion in 2013. The 2015 provision for credit losses was $450 million less than net charge-offs, due to strong underlying credit, and improvement in the housing market. The 2014 provision was $1.6 billion less than net charge-offs, and the 2013 provision was $2.2 billion less than net charge-offs. For each of 2014 and 2013, the provision was influenced by continually improving credit performance.

We believe the allowance for credit losses of $12.5 billion at December 31, 2015, was appropriate to cover credit losses inherent in the loan portfolio, including unfunded credit commitments, at that date. Approximately $1.2 billion of the allowance at December 31, 2015 was allocated to our oil and gas portfolio, however the entire allowance is available to absorb credit losses inherent in the total loan portfolio. The allowance for credit losses is subject to change and reflects existing factors as of the date of determination, including economic or market conditions and ongoing internal and external examination processes. Due to the sensitivity of the allowance for credit losses to changes in the economic and business environment, it is possible that we will incur incremental credit losses not anticipated as of the balance sheet date. Future allowance levels may increase or decrease based on a variety of factors, including loan growth, portfolio performance and general economic conditions. Our process for determining the allowance for credit losses is discussed in the “Critical Accounting Policies – Allowance for Credit Losses” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report.

LIABILITY FOR MORTGAGE LOAN REPURCHASE LOSSES

We sell residential mortgage loans to various parties, including (1) government-sponsored entities (GSEs) Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA) who include the mortgage loans in GSE-guaranteed mortgage securitizations, (2) SPEs that issue private label MBS, and (3) other financial institutions that purchase mortgage loans for investment or private label securitization. In addition, we pool FHA-insured and VA-guaranteed mortgage loans that are then used to back securities guaranteed by the Government National Mortgage Association (GNMA). We may be required to repurchase these mortgage loans, indemnify the securitization trust, investor or insurer, or reimburse the securitization trust, investor or insurer for credit losses incurred on loans (collectively, repurchase) in the event of a breach of contractual representations or warranties that is not remedied within a period (usually 90 days or less) after we receive notice of the breach. The majority of repurchase demands are on loans that default in the first 24 to 36 months following origination of the mortgage loan.

In connection with our sales and securitization of residential mortgage loans to various parties, we have established a mortgage repurchase liability, initially at fair value, related to various representations and warranties that reflect management’s estimate of losses for loans for which we could have a repurchase obligation, whether or not we currently service those loans, based on a combination of factors. Our mortgage repurchase liability estimation process also incorporates a forecast of repurchase demands associated with mortgage insurance rescission activity.

Because we retain the servicing for most of the mortgage loans we sell or securitize, we believe the quality of our residential mortgage loan servicing portfolio provides helpful information in evaluating our repurchase liability. Of the $1.6 trillion in the residential mortgage loan servicing portfolio at December 31, 2015, 95% was current and less than 2% was subprime at origination. Our combined delinquency and foreclosure rate on this portfolio was 5.18% at December 31, 2015, compared with 5.79% at December 31, 2014. Three percent

of this portfolio is private label securitizations for which we originated the loans and, therefore, have some repurchase risk.

The overall level of unresolved repurchase demands and mortgage insurance rescissions outstanding at December 31, 2015, was $62 million, representing 280 loans, down from $183 million, or 839 loans, a year ago, as we observed a decline in new demands and continued to work through the outstanding demands and mortgage insurance rescissions.

Customary with industry practice, we have the right of recourse against correspondent lenders from whom we have purchased loans with respect to representations and warranties. Historical recovery rates as well as projected lender performance are incorporated in the establishment of our mortgage repurchase liability.

We do not typically receive repurchase requests from GNMA, FHA and the Department of Housing and Urban Development (HUD) or VA. As an originator of an FHA-insured or VA-guaranteed loan, we are responsible for obtaining the insurance with the FHA or the guarantee with the VA. To the extent we are not able to obtain the insurance or the guarantee we must request permission to repurchase the loan from the GNMA pool. Such repurchases from GNMA pools typically represent a self-initiated process upon discovery of the uninsurable loan (usually within 180 days from funding of the loan). Alternatively, in lieu of repurchasing loans from GNMA pools, we may be asked by FHA/HUD or the VA to indemnify them (as applicable) for defects found in the Post Endorsement Technical Review process or audits performed by FHA/HUD or the VA. The Post Endorsement Technical Review is a process whereby HUD performs underwriting audits of closed/insured FHA loans for potential deficiencies. Our liability for mortgage loan repurchase losses incorporates probable losses associated with such indemnification.

Table 39 summarizes the changes in our mortgage repurchase liability. We incurred net losses on repurchased loans and investor reimbursements totaling $78 million in 2015, compared with $144 million in 2014.

Our liability for mortgage repurchases, included in “Accrued expenses and other liabilities” in our consolidated balance sheet, represents our best estimate of the probable loss that we expect to incur for various representations and warranties in the contractual provisions of our sales of mortgage loans. The mortgage repurchase liability estimation process requires management to make difficult, subjective and complex judgments about matters that are inherently uncertain, including demand expectations, economic factors, and the specific characteristics of the loans subject to repurchase. Our evaluation considers all vintages and the collective actions of the GSEs and their regulator, the Federal Housing Finance Agency (FHFA), mortgage insurers and our correspondent lenders. We maintain regular contact with the GSEs, the FHFA, and other significant investors to monitor their repurchase demand practices and issues as part of our process to update our repurchase liability estimate as new information becomes available. The liability was $378 million at December 31, 2015, and $615 million at December 31, 2014. In 2015, we released $159 million, which increased net gains on mortgage loan origination/sales activities, compared with a release of $140 million in 2014. The release in 2015 was primarily due to resolving certain exposures and a re-estimation of our liability based on recently observed trends.

Because of the uncertainty in the various estimates underlying the mortgage repurchase liability, there is a range of losses in excess of the recorded mortgage repurchase liability that are reasonably possible. The estimate of the range of possible loss for representations and warranties does not represent a probable loss, and is based on currently available information, significant judgment, and a number of assumptions that are subject to change. The high end of this range of reasonably possible losses exceeded our recorded liability by $293 million at December 31, 2015, and was determined based upon modifying the assumptions (particularly to assume significant changes in investor repurchase demand practices) used in our best estimate of probable loss to reflect what we believe to be the high end of reasonably possible adverse assumptions. Our estimate of reasonably possible losses decreased in 2015 as court rulings during the year provided a better understanding of our exposure to repurchase risk. For additional information on our repurchase liability, see Note 9 (Mortgage Banking Activities) to Financial Statements in this Report.

RISKS RELATING TO SERVICING ACTIVITIES In addition to servicing loans in our portfolio, we act as servicer and/or master servicer of residential mortgage loans included in GSE-guaranteed mortgage securitizations, GNMA-guaranteed mortgage securitizations of FHA-insured/VA-guaranteed mortgages and private label mortgage securitizations, as well as for unsecuritized loans owned by institutional investors. The following discussion summarizes the primary duties and requirements of servicing and related industry developments.

General Servicing Duties and Requirements

The loans we service were originated by us or by other mortgage loan originators. As servicer, our primary duties are typically to (1) collect payments due from borrowers, (2) advance certain delinquent payments of principal and interest on the mortgage loans, (3) maintain and administer any hazard, title or primary mortgage insurance policies relating to the mortgage loans, (4) maintain any required escrow accounts for payment of taxes and insurance and administer escrow payments, (5) foreclose on defaulted mortgage loans or, to the extent consistent with the

related servicing agreement, consider alternatives to foreclosure, such as loan modifications or short sales, and (6) for loans sold into private label securitizations, manage the foreclosed property through liquidation. As master servicer, our primary duties are typically to (1) supervise, monitor and oversee the servicing of the mortgage loans by the servicer, (2) consult with each servicer and use reasonable efforts to cause the servicer to observe its servicing obligations, (3) prepare monthly distribution statements to security holders and, if required by the securitization documents, certain periodic reports required to be filed with the SEC, (4) if required by the securitization documents, calculate distributions and loss allocations on the mortgage-backed securities, (5) prepare tax and information returns of the securitization trust, and (6) advance amounts required by non-affiliated servicers who fail to perform their advancing obligations.

Each agreement under which we act as servicer or master servicer generally specifies a standard of responsibility for actions we take in such capacity and provides protection against expenses and liabilities we incur when acting in compliance with the specified standard. For example, most private label securitization agreements under which we act as servicer or master servicer typically provide that the servicer and the master servicer are entitled to indemnification by the securitization trust for taking action or refraining from taking action in good faith or for errors in judgment. However, we are not indemnified, but rather are required to indemnify the securitization trustee, against any failure by us, as servicer or master servicer, to perform our servicing obligations or against any of our acts or omissions that involve willful misfeasance, bad faith or gross negligence in the performance of, or reckless disregard of, our duties. In addition, if we commit a material breach of our obligations as servicer or master servicer, we may be subject to termination if the breach is not cured within a specified period following notice, which can generally be given by the securitization trustee or a specified percentage of security holders. Whole loan sale contracts under which we act as servicer generally include similar provisions with respect to our actions as servicer. The standards governing servicing in GSE-guaranteed securitizations, and the possible remedies for violations of such standards, vary, and those standards and remedies are determined by servicing guides maintained by the GSEs, contracts between the GSEs and individual servicers and topical guides published by the GSEs from time to time. Such remedies could include indemnification or repurchase of an affected mortgage loan.

Consent Orders and Settlement Agreements for Mortgage Servicing and Foreclosure Practices

In connection with our servicing activities we have entered into various settlements with federal and state regulators to resolve certain alleged servicing issues and practices. In general, these settlements required us to provide customers with loan modification relief, refinancing relief, and foreclosure prevention and assistance, as well as imposed certain monetary penalties on us.

In particular, on February 28, 2013, we entered into amendments to an April 2011 Consent Order with both the Office of the Comptroller of the Currency (OCC) and the FRB, which effectively ceased the Independent Foreclosure Review program created by such Consent Order and replaced it with an accelerated remediation commitment to provide foreclosure prevention actions on $1.2 billion of residential mortgage loans, subject to a process to be administered by the OCC and the FRB.

During 2014, we reported sufficient foreclosure prevention actions to satisfy the $1.2 billion financial commitment.

In June 2015, we entered into an additional amendment to the April 2011 Consent Order with the OCC to address 15 of the 98 actionable items contained in the April 2011 Consent Order that were still considered open. This amendment requires that we remediate certain activities associated with our mortgage loan servicing practices and allows for the OCC to take additional supervisory action, including possible civil money penalties, if we do not comply with the terms of this amended Consent Order. In addition, this amendment prohibits us from acquiring new mortgage servicing rights or entering into new mortgage servicing contracts, other than mortgage servicing associated with originating mortgage loans or purchasing loans from correspondent clients in our normal course of business. Additionally, this amendment prohibits any new off-shoring of new mortgage servicing activities and requires OCC approval to outsource or sub-service any new mortgage servicing activities.

Asset/Liability Management

Asset/liability management involves evaluating, monitoring and managing interest rate risk, market risk, liquidity and funding. Primary oversight of interest rate risk and market risk resides with the Finance Committee of our Board of Directors (Board), which oversees the administration and effectiveness of financial risk management policies and processes used to assess and manage these risks. Primary oversight of liquidity and funding resides with the Risk Committee of the Board. At the management level we utilize a Corporate Asset/Liability Management Committee (Corporate ALCO), which consists of senior financial, risk, and business executives, to oversee these risks and report on them periodically to the Board’s Finance Committee and Risk Committee as appropriate. Each of our principal lines of business has its own asset/liability management committee and process linked to the Corporate ALCO process. As discussed in more detail for trading activities below, we employ separate management level oversight specific to market risk. Market risk, in its broadest sense, refers to the possibility that losses will result from the impact of adverse changes in market rates and prices on our trading and non-trading portfolios and financial instruments.

INTEREST RATE RISK Interest rate risk, which potentially can have a significant earnings impact, is an integral part of being a financial intermediary. We are subject to interest rate risk because:


•	assets and liabilities may mature or reprice at different times (for example, if assets reprice faster than liabilities and interest rates are generally falling, earnings will initially decline);


•	assets and liabilities may reprice at the same time but by different amounts (for example, when the general level of interest rates is falling, we may reduce rates paid on checking and savings deposit accounts by an amount that is less than the general decline in market interest rates);


•	short-term and long-term market interest rates may change by different amounts (for example, the shape of the yield curve may affect new loan yields and funding costs differently);


•	the remaining maturity of various assets or liabilities may shorten or lengthen as interest rates change (for example, if long-term mortgage interest rates decline sharply, MBS held in the investment securities portfolio may prepay significantly earlier than anticipated, which could reduce portfolio income); or


•	interest rates may also have a direct or indirect effect on loan demand, collateral values, credit losses, mortgage origination volume, the fair value of MSRs and other financial instruments, the value of the pension liability and other items affecting earnings.

We assess interest rate risk by comparing outcomes under various earnings simulations using many interest rate scenarios that differ in the direction of interest rate changes, the degree of change over time, the speed of change and the projected shape of the yield curve. These simulations require assumptions regarding how changes in interest rates and related market conditions could influence drivers of earnings and balance sheet composition such as loan origination demand, prepayment speeds, deposit balances and mix, as well as pricing strategies.

Our risk measures include both net interest income sensitivity and interest rate sensitive noninterest income and expense impacts. We refer to the combination of these exposures as interest rate sensitive earnings. In general, the Company is positioned to benefit from higher interest rates. Currently, our profile is such that net interest income will benefit from higher interest rates as our assets reprice faster and to a greater degree than our liabilities, and, in response to lower market rates, our assets will reprice downward and to a greater degree than our liabilities. Our interest rate sensitive noninterest income and expense is largely driven by mortgage activity, and tends to move in the opposite direction of our net interest income. So, in response to higher interest rates, mortgage activity, primarily refinancing activity, generally declines. And in response to lower rates, mortgage activity generally increases. Mortgage results in our simulations are also impacted by the valuation of MSRs and related hedge positions. See the “Risk Management – Mortgage Banking Interest Rate and Market Risk” section in this Report for more information.

The degree to which these sensitivities offset each other is dependent upon the timing and magnitude of changes in interest rates, and the slope of the yield curve. During a transition to a higher or lower interest rate environment, a reduction or increase in interest-sensitive earnings from the mortgage banking business could occur quickly, while the benefit or detriment from balance sheet repricing could take more time to develop. For example, our lower rate scenarios (scenario 1 and scenario 2) in the following table initially measure a decline in interest rates versus our most likely scenario. Although the performance in these rate scenarios contain initial benefit from increased mortgage banking activity, the result is lower earnings relative to the most likely scenario over time given pressure on net interest income. The higher rate scenarios (scenario 3 and scenario 4) measure the impact of varying degrees of rising short-term and long-term interest rates over the course of the forecast horizon relative to the most likely scenario, both resulting in positive earnings sensitivity.

As of December 31, 2015, our most recent simulations estimate earnings at risk over the next 24 months under a range of both lower and higher interest rates. The results of the simulations are summarized in Table 40, indicating cumulative net income after tax earnings sensitivity relative to the most likely earnings plan over the 24 month horizon (a positive range indicates a beneficial earnings sensitivity measurement relative to the most likely earnings plan and a negative range indicates a detrimental earnings sensitivity relative to the most likely earnings plan).

Table 40: Earnings Sensitivity Over 24 Month Horizon Relative to Most Likely Earnings Plan



	Most		Lower rates			Higher rates
	likely		Scenario 1		Scenario 2	Scenario 3	Scenario 4
Ending rates:
Federal funds	2.12	%	0.25		1.86	2.35	5.25
10-year treasury (1)	3.49		1.80		2.99	3.99	6.30
Earnings relative to most likely	N/A		(3)-(4)	%	(1)-(2)	0-5	0-5


(1)	U.S. Constant Maturity Treasury Rate

We use the investment securities portfolio and exchange-traded and over-the-counter (OTC) interest rate derivatives to hedge our interest rate exposures. See the “Balance Sheet Analysis – Investment Securities” section in this Report for more information on the use of the available-for-sale and held-to-maturity securities portfolios. The notional or contractual amount, credit risk amount and fair value of the derivatives used to hedge our interest rate risk exposures as of December 31, 2015, and 2014, are presented in Note 16 (Derivatives) to Financial Statements in this Report. We use derivatives for asset/liability management in two main ways:


•	to convert the cash flows from selected asset and/or liability instruments/portfolios, including investments, commercial loans and long-term debt, from fixed-rate payments to floating-rate payments, or vice versa; and


•	to economically hedge our mortgage origination pipeline, funded mortgage loans and MSRs using interest rate swaps, swaptions, futures, forwards and options.

MORTGAGE BANKING INTEREST RATE AND MARKET RISK We originate, fund and service mortgage loans, which subjects us to various risks, including credit, liquidity and interest rate risks. Based on market conditions and other factors, we reduce credit and liquidity risks by selling or securitizing a majority of the long-term fixed-rate mortgage and ARM loans we originate. On the other hand, we may hold originated ARMs and fixed-rate mortgage loans in our loan portfolio as an investment for our growing base of deposits. We determine whether the loans will be held for investment or held for sale at the time of commitment. We may subsequently change our intent to hold loans for investment and sell some or all of our ARMs or fixed-rate mortgages as part of our corporate asset/liability management. We may also acquire and add to our securities available for sale a portion of the securities issued at the time we securitize MHFS.

With the decrease in average mortgage interest rates in 2015, our mortgage banking revenue increased as the level of mortgage loan refinance activity increased compared with 2014. The increase in mortgage loan origination income (primarily driven by the increase in mortgage loan volume) more than offset the decrease in net servicing income. Despite the continued slow recovery in the housing sector, and the continued lack of liquidity in the nonconforming secondary markets, our mortgage banking revenue was strong in 2015, reflecting the complementary origination and servicing strengths of the business. The secondary market for agency-conforming mortgages functioned well during 2015.

Interest rate and market risk can be substantial in the mortgage business. Changes in interest rates may potentially reduce total origination and servicing fees, the value of our residential MSRs measured at fair value, the value of MHFS and the associated income and loss reflected in mortgage banking noninterest income, the income and expense associated with

instruments (economic hedges) used to hedge changes in the fair value of MSRs and MHFS, and the value of derivative loan commitments (interest rate “locks”) extended to mortgage applicants.

Interest rates affect the amount and timing of origination and servicing fees because consumer demand for new mortgages and the level of refinancing activity are sensitive to changes in mortgage interest rates. Typically, a decline in mortgage interest rates will lead to an increase in mortgage originations and fees and may also lead to an increase in servicing fee income, depending on the level of new loans added to the servicing portfolio and prepayments. Given the time it takes for consumer behavior to fully react to interest rate changes, as well as the time required for processing a new application, providing the commitment, and securitizing and selling the loan, interest rate changes will affect origination and servicing fees with a lag. The amount and timing of the impact on origination and servicing fees will depend on the magnitude, speed and duration of the change in interest rates.

We measure originations of MHFS at fair value where an active secondary market and readily available market prices exist to reliably support fair value pricing models used for these loans. Loan origination fees on these loans are recorded when earned, and related direct loan origination costs are recognized when incurred. We also measure at fair value certain of our other interests held related to residential loan sales and securitizations. We believe fair value measurement for MHFS and other interests held, which we hedge with free-standing derivatives (economic hedges) along with our MSRs measured at fair value, reduces certain timing differences and better matches changes in the value of these assets with changes in the value of derivatives used as economic hedges for these assets. During 2015 and 2014, in response to continued secondary market illiquidity, we continued to originate certain prime non-agency loans to be held for investment for the foreseeable future rather than to be held for sale.

We initially measure all of our MSRs at fair value and carry substantially all of them at fair value depending on our strategy for managing interest rate risk. Under this method, the MSRs are recorded at fair value at the time we sell or securitize the related mortgage loans. The carrying value of MSRs carried at fair value reflects changes in fair value at the end of each quarter and changes are included in net servicing income, a component of mortgage banking noninterest income. If the fair value of the MSRs increases, income is recognized; if the fair value of the MSRs decreases, a loss is recognized. We use a dynamic and sophisticated model to estimate the fair value of our MSRs and periodically benchmark our estimates to independent appraisals. The valuation of MSRs can be highly subjective and involve complex judgments by management about matters that are inherently unpredictable. See “Critical Accounting Policies – Valuation of Residential Mortgage Servicing Rights” section in this Report for additional information. Changes in interest rates influence a variety of significant assumptions included in the periodic valuation of MSRs, including prepayment speeds, expected returns and potential risks on the servicing asset portfolio, the value of escrow balances and other servicing valuation elements.

A decline in interest rates generally increases the propensity for refinancing, reduces the expected duration of the servicing portfolio and therefore reduces the estimated fair value of MSRs. This reduction in fair value causes a charge to income for MSRs carried at fair value, net of any gains on free-standing derivatives (economic hedges) used to hedge MSRs. We may choose not to fully hedge the entire potential decline in the value of our MSRs

resulting from a decline in interest rates because the potential increase in origination/servicing fees in that scenario provides a partial “natural business hedge.” An increase in interest rates generally reduces the propensity for refinancing, extends the expected duration of the servicing portfolio and, therefore, increases the estimated fair value of the MSRs. However, an increase in interest rates can also reduce mortgage loan demand and, therefore, reduce origination income.

The price risk associated with our MSRs is economically hedged with a combination of highly liquid interest rate forward instruments including mortgage forward contracts, interest rate swaps and interest rate options. All of the instruments included in the hedge are marked to market daily. Because the hedging instruments are traded in highly liquid markets, their prices are readily observable and are fully reflected in each quarter’s mark to market. Quarterly MSR hedging results include a combination of directional gain or loss due to market changes as well as any carry income generated. If the economic hedge is effective, its overall directional hedge gain or loss will offset the change in the valuation of the underlying MSR asset. Gains or losses associated with these economic hedges are included in mortgage banking noninterest income. Consistent with our longstanding approach to hedging interest rate risk in the mortgage business, the size of the hedge and the particular combination of forward hedging instruments at any point in time is designed to reduce the volatility of the mortgage business’s earnings over various time frames within a range of mortgage interest rates. Because market factors, the composition of the mortgage servicing portfolio and the relationship between the origination and servicing sides of our mortgage business change continually, the types of instruments used in our hedging are reviewed daily and rebalanced based on our evaluation of current market factors and the interest rate risk inherent in our MSRs portfolio. Throughout 2015, our economic hedging strategy generally used forward mortgage purchase contracts that were effective at offsetting the impact of interest rates on the value of the MSR asset.

Mortgage forward contracts are designed to pass the full economics of the underlying reference mortgage securities to the holder of the contract, including both the directional gain and loss from the forward delivery of the reference securities and the corresponding carry income. Carry income represents the contract’s price accretion from the forward delivery price to the spot price including both the yield earned on the reference securities and the market implied cost of financing during the period. The actual amount of carry income earned on the hedge each quarter will depend on the amount of the underlying asset that is hedged and the particular instruments included in the hedge. The level of carry income is driven by the slope of the yield curve and other market driven supply and demand factors affecting the specific reference securities. A steep yield curve generally produces higher carry income while a flat or inverted yield curve can result in lower or potentially negative carry income. The level of carry income is also affected by the type of instrument used. In general, mortgage forward contracts tend to produce higher carry income than interest rate swap contracts. Carry income is recognized over the life of the mortgage forward as a component of the contract’s mark to market gain or loss.

Hedging the various sources of interest rate risk in mortgage banking is a complex process that requires sophisticated modeling and constant monitoring. While we attempt to balance these various aspects of the mortgage business, there are several potential risks to earnings:


•	Valuation changes for MSRs associated with interest rate changes are recorded in earnings immediately within the

accounting period in which those interest rate changes occur, whereas the impact of those same changes in interest rates on origination and servicing fees occur with a lag and over time. Thus, the mortgage business could be protected from adverse changes in interest rates over a period of time on a cumulative basis but still display large variations in income from one accounting period to the next.


•	The degree to which our net gains on loan originations offsets valuation changes for MSRs is imperfect, varies at different points in the interest rate cycle, and depends not just on the direction of interest rates but on the pattern of quarterly interest rate changes.

•

Origination volumes, the valuation of MSRs and hedging results and associated costs are also affected by many factors. Such factors include the mix of new business between ARMs and fixed-rate mortgages, the relationship between short-term and long-term interest rates, the degree of volatility in interest rates, the relationship between mortgage interest rates and other interest rate markets, and other interest rate factors. Additional factors that can impact the valuation of the MSRs include changes in servicing and foreclosure costs due to changes in investor or regulatory guidelines, as well as individual state foreclosure legislation, and changes in discount rates due to market participants requiring a higher return due to updated market expectations on costs and risks associated with investing in MSRs. Many of these factors are hard to predict and we may not be able to directly or perfectly hedge their effect.

•

While our hedging activities are designed to balance our mortgage banking interest rate risks, the financial instruments we use may not perfectly correlate with the values and income being hedged. For example, the change in the value of ARM production held for sale from changes in mortgage interest rates may or may not be fully offset by Treasury and LIBOR index-based financial instruments used as economic hedges for such ARMs. Additionally, hedge-carry income we earn on our economic hedges for the MSRs may not continue if the spread between short-term and long-term rates decreases, or there are other changes in the market for mortgage forwards that affect the implied carry.

The total carrying value of our residential and commercial MSRs was $13.7 billion and $14.0 billion at December 31, 2015 and 2014, respectively. The weighted-average note rate on our portfolio of loans serviced for others was 4.37% and 4.45% at December 31, 2015 and 2014, respectively. The carrying value of our total MSRs represented 0.77% and 0.75% of mortgage loans serviced for others at December 31, 2015 and 2014, respectively.

As part of our mortgage banking activities, we enter into commitments to fund residential mortgage loans at specified times in the future. A mortgage loan commitment is an interest rate lock that binds us to lend funds to a potential borrower at a specified interest rate and within a specified period of time, generally up to 60 days after inception of the rate lock. These loan commitments are derivative loan commitments if the loans that will result from the exercise of the commitments will be held for sale. These derivative loan commitments are recognized at fair value on the balance sheet with changes in their fair values recorded as part of mortgage banking noninterest income. The fair value of these commitments include, at inception and during the life of the loan commitment, the expected net future cash flows related to the associated servicing of the loan as part of the fair value measurement of derivative loan commitments.

Changes subsequent to inception are based on changes in fair value of the underlying loan resulting from the exercise of the commitment and changes in the probability that the loan will not fund within the terms of the commitment, referred to as a fall-out factor. The value of the underlying loan commitment is affected primarily by changes in interest rates and the passage of time.

Outstanding derivative loan commitments expose us to the risk that the price of the mortgage loans underlying the commitments might decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. To minimize this risk, we employ mortgage forwards and options, Eurodollar futures and options, and Treasury futures, forwards and options contracts as economic hedges against the potential decreases in the values of the loans. We expect that these derivative financial instruments will experience changes in fair value that will either fully or partially offset the changes in fair value of the derivative loan commitments. However, changes in investor demand, such as concerns about credit risk, can also cause changes in the spread relationships between underlying loan value and the derivative financial instruments that cannot be hedged.

MARKET RISK – TRADING ACTIVITIES The Finance Committee of our Board of Directors reviews the acceptable market risk appetite for our trading activities. We engage in trading activities primarily to accommodate the investment and risk management activities of our customers (which involves transactions that are recorded as trading assets and liabilities on our balance sheet), to execute economic hedging to manage certain balance sheet risks and, to a very limited degree, for proprietary trading for our own account. These activities primarily occur within our Wholesale Banking businesses and to a lesser extent other divisions of the Company. All of our trading assets and liabilities, including securities, foreign exchange transactions, commodity transactions, and derivatives are carried at fair value. Income earned related to these trading activities include net interest income and changes in fair value related to trading assets and liabilities. Net interest income earned on trading assets and liabilities is reflected in the interest income and interest expense components of our income statement. Changes in fair value of trading assets and liabilities are reflected in net gains on trading activities, a component of noninterest income in our income statement.

Table 41 presents total revenue from trading activities.

Table 41: Net gains (losses) from Trading Activities



	Year ended December 31,
(in millions)	2015		2014	2013
Interest income (1)	1,971		1,685	1,376
Less: Interest expense (2)	357		382	307
Net interest income	1,614		1,303	1,069
Noninterest income:
Net gains (losses) from trading activities (3):
Customer accommodation	806		924	1,278
Economic hedges and other (4)	(192	)	233	332
Proprietary trading	—		4	13
Total net gains from trading activities	614		1,161	1,623
Total trading-related net interest and noninterest income	2,228		2,464	2,692


(1)	Represents interest and dividend income earned on trading securities.


(2)	Represents interest and dividend expense incurred on trading securities we have sold but have not yet purchased.


(3)	Represents realized gains (losses) from our trading activity and unrealized gains (losses) due to changes in fair value of our trading positions, attributable to the type of business activity.


(4)	Excludes economic hedging of mortgage banking and asset/liability management activities, for which hedge results (realized and unrealized) are reported with the respective hedged activities.

Customer accommodation Customer accommodation activities are conducted to help customers manage their investment and risk management needs. We engage in market-making activities or act as an intermediary to purchase or sell financial instruments in anticipation of or in response to customer needs. This category also includes positions we use to manage our exposure to customer transactions.

For the majority of our customer accommodation trading, we serve as intermediary between buyer and seller. For example, we may purchase or sell a derivative to a customer who wants to manage interest rate risk exposure. We typically enter into offsetting derivative or security positions with a separate counterparty or exchange to manage our exposure to the derivative with our customer. We earn income on this activity based on the transaction price difference between the customer and offsetting derivative or security positions, which is reflected in the fair value changes of the positions recorded in net gains on trading activities.

Customer accommodation trading also includes net gains related to market-making activities in which we take positions to facilitate customer order flow. For example, we may own securities recorded as trading assets (long positions) or sold securities we have not yet purchased, recorded as trading liabilities (short positions), typically on a short-term basis, to facilitate support of buying and selling demand from our customers. As a market maker in these securities, we earn income due to: (1) the difference between the price paid or received for the purchase and sale of the security (bid-ask spread), (2) the net interest income, and (3) the change in fair value of the long or short positions during the short-term period held on our balance sheet. Additionally, we may enter into separate derivative or security positions to manage our exposure related to our long or short security positions. Income earned on this type of market-making activity is reflected in the fair value changes of these positions recorded in net gains on trading activities.

Economic hedges and other Economic hedges in trading are not designated in a hedge accounting relationship and exclude economic hedging related to our asset/liability risk management and substantially all mortgage banking risk management activities. Economic hedging activities include the use of trading securities to economically hedge risk exposures related to non-trading activities or derivatives to hedge risk exposures related to trading assets or trading liabilities. Economic hedges are unrelated to our customer accommodation activities. Other activities include financial assets held for investment purposes that we elected to carry at fair value with changes in fair value recorded to earnings in order to mitigate accounting measurement mismatches or avoid embedded derivative accounting complexities.

Proprietary trading Proprietary trading consists of security or derivative positions executed for our own account based upon market expectations or to benefit from price differences between financial instruments and markets. Proprietary trading activity has been substantially restricted by the Dodd-Frank Act

provisions known as the “Volcker Rule.” Accordingly, we reduced and have exited certain business activities as a result of the rule. As discussed within this section and the noninterest income section of our financial results, proprietary trading activity is insignificant to our business and financial results. For more details on the Volcker Rule, see the “Regulatory Reform” section in this Report.

Daily Trading-Related Revenue Table 42 provides information on the distribution of daily trading-related revenues for the Company’s trading portfolio. This trading-related revenue is defined as the change in value of the trading assets and trading liabilities, trading-related net interest income, and trading-related intra-day gains and losses. Net trading-related revenue does not include activity related to long-term positions held for economic hedging purposes, period-end adjustments, and other activity not representative of daily price changes driven by market factors.

VaR is a statistical risk measure used to estimate the potential loss from adverse moves in the financial markets. The VaR measures assume that historical changes in market values (historical simulation analysis) are representative of the potential future outcomes and measure the expected loss over a given time interval (for example, 1 day or 10 days) at a given confidence level. Our historical simulation analysis approach uses historical observations of daily changes in each of the market risk factors from each trading day in the previous 12 months. The risk drivers of each market risk exposure are updated on a daily basis. We measure and report VaR for 1-day and 10-day holding periods at a 99% confidence level. This means we would expect to incur single day losses greater than predicted by VaR estimates for the measured positions one time in every 100 trading days. We treat data from all historical periods as equally relevant and consider using data for the previous 12 months as appropriate for determining VaR. We believe using a 12-month look back period helps ensure the Company’s VaR is responsive to current market conditions.

VaR measurement between different financial institutions is not readily comparable due to modeling and assumption differences from company to company. VaR measures are more useful when interpreted as an indication of trends rather than an absolute measure to be compared across financial institutions.

VaR models are subject to limitations which include, but are not limited to, the use of historical changes in market factors that may not accurately reflect future changes in market factors, and the inability to predict market liquidity in extreme market conditions. All limitations such as model inputs, model assumptions, and calculation methodology risk are monitored by the Corporate Market Risk Group and the Corporate Model Risk

Group.

The VaR models measure exposure to the following categories:


•	credit risk – exposures from corporate credit spreads, asset-backed security spreads, and mortgage prepayments.


•	interest rate risk – exposures from changes in the level, slope, and curvature of interest rate curves and the volatility of interest rates.


•	equity risk – exposures to changes in equity prices and volatilities of single name, index, and basket exposures.


•	commodity risk – exposures to changes in commodity prices and volatilities.


•	foreign exchange risk – exposures to changes in foreign exchange rates and volatilities.

VaR is a primary market risk management measure for assets and liabilities classified as trading positions and is used as a supplemental analysis tool to monitor exposures classified as available for sale (AFS) and other exposures that we carry at fair value.

Trading VaR is the measure used to provide insight into the market risk exhibited by the Company’s trading positions. The Company calculates Trading VaR for risk management purposes to establish line of business and Company-wide risk limits. Trading VaR is calculated based on all trading positions classified as trading assets or trading liabilities on our balance sheet.

Table 43 shows the results of the Company’s Trading General VaR by risk category. As presented in the table, average Trading General VaR was $19 million for the quarter ended December 31, 2015, compared with $21 million for the quarter ended September 30, 2015. The decrease was primarily driven by risk reducing changes in portfolio composition which offset

the market volatility experienced during the quarter.

Table 43: Trading 1-Day 99% General VaR by Risk Category



	Quarter ended
	December 31, 2015							September 30, 2015
(in millions)	Period end			Average		Low	High	Period end		Average		Low	High
Company Trading General VaR Risk Categories
Credit	$	14		18		14	25	20		20		16	24
Interest rate	8			9		5	13	18		14		6	22
Equity	13			14		12	16	16		14		12	16
Commodity	1			1		1	1	1		1		1	2
Foreign exchange	2			1		1	2	1		1		—	2
Diversification benefit (1)	(20		)	(24	)			(38	)	(29	)
Company Trading General VaR	18			19				18		21

(1)

The period-end VaR was less than the sum of the VaR components described above, which is due to portfolio diversification. The diversification effect arises because the risks are not perfectly correlated causing a portfolio of positions to usually be less risky than the sum of the risks of the positions alone. The diversification benefit is not meaningful for low and high metrics since they may occur on different days.

Sensitivity Analysis Given the inherent limitations of the VaR models, the Company uses other measures, including sensitivity analysis, to measure and monitor risk. Sensitivity analysis is the measure of exposure to a single risk factor, such as a 0.01% increase in interest rates or a 1% increase in equity prices. We conduct and monitor sensitivity on interest rates, credit spreads, volatility, equity, commodity, and foreign exchange exposure. Sensitivity analysis complements VaR as it provides an indication of risk relative to each factor irrespective of historical

market moves.

Stress Testing While VaR captures the risk of loss due to adverse changes in markets using recent historical market data, stress testing captures the Company’s exposure to extreme but low probability market movements. Stress scenarios estimate the risk of losses based on management’s assumptions of abnormal but severe market movements such as severe credit spread widening or a large decline in equity prices. These scenarios assume that the market moves happen instantaneously and no repositioning or hedging activity takes place to mitigate losses as events unfold (a conservative approach since experience demonstrates otherwise).

An inventory of scenarios is maintained representing both historical and hypothetical stress events that affect a broad range of market risk factors with varying degrees of correlation and differing time horizons. Hypothetical scenarios assess the impact of large movements in financial variables on portfolio values. Typical examples include a 1% (100 basis point) increase across the yield curve or a 10% decline in equity market indexes. Historical scenarios utilize an event-driven approach: the stress scenarios are based on plausible but rare events, and the analysis addresses how these events might affect the risk factors relevant to a portfolio.

The Company’s stress testing framework is also used in calculating results in support of the Federal Reserve Board’s Comprehensive Capital Analysis and Review (CCAR) and internal stress tests. Stress scenarios are regularly reviewed and updated to address potential market events or concerns. For more detail on the CCAR process, see the “Capital Management” section in this Report.

Regulatory Market Risk Capital is based on U.S. regulatory agency risk-based capital regulations that are based on the Basel Committee Capital Accord of the Basel Committee on Banking Supervision. The Company must calculate regulatory capital based on the Basel III market risk capital rule, which requires banking organizations with significant trading activities to adjust their capital requirements to better account for the market risks of those activities based on comprehensive and risk sensitive methods and models. The market risk capital rule is intended to cover the risk of loss in value of covered positions due to changes in market conditions.

Composition of Material Portfolio of Covered Positions The positions that are “covered” by the market risk capital rule are generally a subset of our trading assets and trading liabilities, specifically those held by the Company for the purpose of short-term resale or with the intent of benefiting from actual or expected short-term price movements, or to lock in arbitrage profits. Positions excluded from market risk regulatory capital treatment are subject to the credit risk capital rules applicable to the “non-covered” trading positions.

The material portfolio of the Company’s “covered” positions

is predominantly concentrated in the trading assets and trading liabilities managed within Wholesale Banking where the substantial portion of market risk capital resides. Wholesale Banking engages in the fixed income, traded credit, foreign exchange, equities, and commodities markets businesses. Other business segments also hold small trading positions covered under the market risk capital rule.

Regulatory Market Risk Capital Components The capital required for market risk on the Company’s “covered” positions is determined by internally developed models or standardized specific risk charges. The market risk regulatory capital models are subject to internal model risk management and validation. The models are continuously monitored and enhanced in response to changes in market conditions, improvements in system capabilities, and changes in the Company’s market risk exposure. The Company is required to obtain and has received prior written approval from its regulators before using its internally developed models to calculate the market risk capital charge.

Basel III prescribes various VaR measures in the determination of regulatory capital and risk-weighted assets (RWAs). The Company uses the same VaR models for both market risk management purposes as well as regulatory capital calculations. For regulatory purposes, we use the following metrics to determine the Company’s market risk capital requirements:

General VaR measures the risk of broad market movements such as changes in the level of credit spreads, interest rates, equity prices, commodity prices, and foreign exchange rates. General VaR uses historical simulation analysis based on 99% confidence level and a 10-day time horizon.

Table 44 shows the General VaR measure by major risk categories for Wholesale Banking. Average 10-day Company Regulatory General VaR was $40 million for the quarter ended December 31, 2015, compared with $35 million for the quarter ended September 30, 2015. The increase was primarily driven by changes in portfolio composition.

Table 44: Regulatory 10-Day 99% General VaR by Risk Category



				Quarter ended
				December 31, 2015				September 30, 2015
(in millions)	Period end			Average		Low	High	Period end		Average		Low	High
Wholesale Regulatory General VaR Risk Categories
Credit	$	29		38		26	54	45		46		30	61
Interest rate	25			29		21	40	38		45		27	77
Equity	9			7		4	11	7		6		3	13
Commodity	2			3		1	5	1		3		1	5
Foreign exchange	2			2		1	5	2		4		1	6
Diversification benefit (1)	(22		)	(41	)			(64	)	(72	)
Wholesale Regulatory General VaR	$	45		38		26	54	29		32		21	56
Company Regulatory General VaR	47			40		28	56	31		35		23	58

(1)

The period-end VaR was less than the sum of the VaR components described above, which is due to portfolio diversification. The diversification benefit arises because the risks are not perfectly correlated causing a portfolio of positions to usually be less risky than the sum of the risks of the positions alone. The diversification benefit is not meaningful for low and high metrics since they may occur on different days.

Specific Risk measures the risk of loss that could result from factors other than broad market movements, or name-specific market risk. Specific Risk uses Monte Carlo simulation analysis based on a 99% confidence level and a 10-day time horizon.

Total VaR (as presented in Table 45) is composed of General VaR and Specific Risk and uses the previous 12 months of historical market data in accordance with regulatory requirements.

Total Stressed VaR (as presented in Table 45) uses a historical period of significant financial stress over a continuous 12 month period using historically available market data and is composed of Stressed General VaR and Stressed Specific Risk. Total Stressed VaR uses the same methodology and models as Total VaR.

Incremental Risk Charge (as presented in Table 45) captures losses due to both issuer default and migration risk at the 99.9% confidence level over the one-year capital horizon under the assumption of constant level of risk or a constant position assumption. The model covers all non-securitized credit-

sensitive products.

The Company calculates Incremental Risk by generating a portfolio loss distribution using Monte Carlo simulation, which assumes numerous scenarios, where an assumption is made that the portfolio’s composition remains constant for a one-year time horizon. Individual issuer credit grade migration and issuer default risk is modeled through generation of the issuer’s credit rating transition based upon statistical modeling. Correlation between credit grade migration and default is captured by a multifactor proprietary model which takes into account industry classifications as well as regional effects. Additionally, the impact of market and issuer specific concentrations is reflected in the modeling framework by assignment of a higher charge for portfolios that have increasing concentrations in particular issuers or sectors. Lastly, the model captures product basis risk; that is, it reflects the material disparity between a position and its hedge.

Table 45 provides information on Total VaR, Total Stressed VaR and the Incremental Risk Charge results for the quarter ended December 31, 2015. For the Incremental Risk Charge, the required capital for market risk at quarter end equals the average for the quarter.

Table 45: Market Risk Regulatory Capital Modeled Components



	Quarter ended December 31, 2015				December 31, 2015
(in millions)	Average	Low	High	Quarter end	Risk- based capital (1)	Risk- weighted assets (1)
Total VaR	63	51	75	67	188	2,350
Total Stressed VaR	258	185	316	285	773	9,661
Incremental Risk Charge	309	270	393	305	309	3,864


(1)	Results represent the risk-based capital and RWAs based on the VaR and Incremental Risk Charge models.

Securitized Products Charge Basel III requires a separate market risk capital charge for positions classified as a securitization or re-securitization. The primary criteria for classification as a securitization are whether there is a transfer of risk and whether the credit risk associated with the underlying exposures has been separated into at least two tranches reflecting different levels of seniority. Covered trading securitizations positions include consumer and commercial asset-backed securities (ABS), commercial mortgage-backed securities (CMBS), residential mortgage-backed securities (RMBS), and collateralized loan and other debt obligations (CLO/CDO) positions. The securitization capital requirements are the greater of the capital requirements of the net long or short exposure, and are capped at the maximum loss that could

be incurred on any given transaction.

Table 46 shows the aggregate net fair market value of securities and derivative securitization positions by exposure type that meet the regulatory definition of a covered trading securitization position at December 31, 2015 and 2014.

Table 46: Covered Securitization Positions by Exposure Type (Net Market Value)



(in millions)	ABS			CMBS	RMBS	CLO/CDO
December 31, 2015

Securitization exposure:
Securities	$	962		402	571	667
Derivatives	15			6	2	(21	)
Total	977			408	573	646
December 31, 2014

Securitization Exposure:
Securities	$	752		709	689	553
Derivatives	(1		)	5	23	(31	)
Total	$	751		714	712	522

SECURITIZATION DUE DILIGENCE AND RISK MONITORING The market risk capital rule requires that the Company conduct due diligence on the risk of each position within three days of the purchase of a securitization position. The Company's due diligence seeks to provide an understanding of the features that would materially affect the performance of a securitization or re-securitization. The due diligence analysis is re-performed on a quarterly basis for each securitization and re-securitization position. The Company uses an automated solution to track the due diligence associated with securitization activity. The Company aims to manage the risks associated with securitization and re-securitization positions through the use of offsetting positions and portfolio diversification.

Standardized Specific Risk Charge For debt and equity positions that are not evaluated by the approved internal specific risk models, a regulatory prescribed standard specific risk charge is applied. The standard specific risk add-on for sovereign entities, public sector entities, and depository institutions is based on the

Organization for Economic Co-operation and Development (OECD) country risk classifications (CRC) and the remaining contractual maturity of the position. These risk add-ons for debt positions range from 0.25% to 12%. The add-on for corporate debt is based on creditworthiness and the remaining contractual maturity of the position. All other types of debt positions are subject to an 8% add-on. The standard specific risk add-on for equity positions is generally 8%.

Comprehensive Risk Charge/Correlation Trading The market risk capital rule requires capital for correlation trading positions. The Company's remaining correlation trading exposure covered under the market risk capital rule matured in fourth quarter 2014.

Table 47 summarizes the market risk-based capital requirements charge and market RWAs in accordance with the Basel III market risk capital rule as of December 31, 2015 and 2014. The market RWAs are calculated as the sum of the

components in the table below.

Table 47: Market Risk Regulatory Capital and RWAs



	December 31, 2015			December 31, 2014
(in millions)	Risk- based capital		Risk- weighted assets	Risk- based capital	Risk- weighted assets
Total VaR	$	188	2,350	146	1,822
Total Stressed VaR	773		9,661	1,469	18,359
Incremental Risk Charge	309		3,864	345	4,317
Securitized Products Charge	616		7,695	766	9,577
Standardized Specific Risk Charge	1,048		13,097	1,177	14,709
De minimis Charges (positions not included in models)	19		243	66	829
Total	$	2,953	36,910	3,969	49,613

RWA Rollforward Table 48 depicts the changes in market risk regulatory capital and RWAs under Basel III for the full year and fourth quarter of 2015.

Table 48: Analysis of Changes in Market Risk Regulatory Capital and RWAs



(in millions)		Risk-based capital			Risk-weighted assets
Balance, December 31, 2014		$	3,969		49,613
	Total VaR	42			528
	Total Stressed VaR	(696		)	(8,698	)
	Incremental Risk Charge	(36		)	(453	)
	Securitized Products Charge	(151		)	(1,882	)
	Standardized Specific Risk Charge	(129		)	(1,612	)
	De minimis Charges	(46		)	(586	)
Balance, December 31, 2015		$	2,953		36,910

Balance, September 30, 2015		$	3,275		40,934
	Total VaR	5			58
	Total Stressed VaR	(73		)	(910	)
	Incremental Risk Charge	(69		)	(857	)
	Securitized Products Charge	(79		)	(984	)
	Standardized Specific Risk Charge	(99		)	(1,243	)
	De minimis Charges	(7		)	(88	)
Balance, December 31, 2015		$	2,953		36,910

All changes to market risk regulatory capital and RWAs for the full year and fourth quarter of 2015 were associated with changes in positions due to normal trading activity in addition to market volatility over the last year.

VaR Backtesting The market risk capital rule requires backtesting as one form of validation of the VaR model. Backtesting is a comparison of the daily VaR estimate with the actual clean profit and loss (clean P&L) as defined by the market risk capital rule. Clean P&L is the change in the value of the Company’s covered trading positions that would have occurred had previous end-of-day covered trading positions remained unchanged (therefore, excluding fees, commissions, net interest income, and intraday trading gains and losses). The backtesting analysis compares the daily Total VaR for each of the trading days in the preceding 12 months with the net clean P&L. Clean P&L does not include credit adjustments and other activity not representative of daily price changes driven by market risk factors. The clean P&L measure of revenue is used to evaluate the performance of the Total VaR and is not comparable to our actual daily trading net revenues, as reported elsewhere in this Report.

Any observed clean P&L loss in excess of the Total VaR is considered a market risk regulatory capital backtesting exception. The actual number of exceptions (that is, the number of business days for which the clean P&L losses exceed the corresponding 1-day, 99% Total VaR measure) over the preceding 12 months is used to determine the capital multiplier for the market risk capital calculation. The number of actual backtesting exceptions is dependent on current market

performance relative to historic market volatility in addition to model performance and assumptions. This capital multiplier increases from a minimum of three to a maximum of four, depending on the number of exceptions. No backtesting exceptions occurred over the preceding 12 months. Backtesting

is also performed at more granular levels within the Company.

Table 49 shows daily Total VaR (1-day, 99%) used for market risk regulatory capital backtesting for the 12 months ended December 31, 2015. The Company’s average Total VaR for fourth quarter 2015 was $22 million with a low of $18 million

and a high of $25 million.

Table 49: Daily Total 1-Day 99% VaR Measure (Rolling 12 Months)

Market Risk Governance The Finance Committee of our Board has primary oversight over market risk-taking activities of the Company and reviews the acceptable market risk appetite. The Corporate Risk Group’s Market Risk Committee, which reports to the Finance Committee of the Board, is responsible for governance and oversight of market risk-taking activities across the Company as well as the establishment of market risk appetite and associated limits. The Corporate Market Risk Group, which is part of the Corporate Risk Group, administers and monitors compliance with the requirements established by the Market Risk Committee. The Corporate Market Risk Group has oversight responsibilities in identifying, measuring and monitoring the Company’s market risk. The group is responsible for developing corporate market risk policy, creating quantitative market risk models, establishing independent risk limits, calculating and analyzing market risk capital, and reporting aggregated and line-of-business market risk information. Limits are regularly reviewed to ensure they remain relevant and within the market risk appetite for the Company. An automated limits-monitoring system enables a daily comprehensive review of multiple limits mandated across businesses. Limits are set with inner boundaries that will be periodically breached to promote an ongoing dialogue of risk exposure within the Company. Each line of business that exposes the Company to market risk has direct responsibility for managing market risk in accordance with defined risk tolerances and approved market risk mandates and hedging strategies. We measure and monitor market risk for both management and

regulatory capital purposes.

Model Risk Management The market risk capital models are governed by our Corporate Model Risk Committee policies and procedures, which include model validation. The purpose of model validation includes ensuring models are appropriate for their intended use and that appropriate controls exist to help mitigate the risk of invalid results. Model validation assesses the adequacy and appropriateness of the model, including reviewing its key components such as inputs, processing components, logic or theory, output results and supporting model documentation. Validation also includes ensuring significant unobservable model inputs are appropriate given observable market transactions or other market data within the same or similar asset classes. This ensures modeled approaches are appropriate given similar product valuation techniques and are in line with their intended purpose.

The Corporate Model Risk Group (CMoR) provides oversight of model validation and assessment processes. Corporate oversight responsibilities include evaluating the adequacy of business unit model risk management programs, maintaining company-wide model validation policies and standards, and reporting the results of these activities to management. In addition to the corporate-level review, all internal valuation models are subject to ongoing review by business-unit-level management.

MARKET RISK – EQUITY INVESTMENTS We are directly and indirectly affected by changes in the equity markets. We make and manage direct equity investments in start-up businesses, emerging growth companies, management buy-outs, acquisitions and corporate recapitalizations. We also invest in non-affiliated funds that make similar private equity investments. These private equity investments are made within capital allocations approved by management and the Board. The Board’s policy is to review business developments, key risks and historical returns for the private equity investment portfolio at least annually. Management reviews these investments at least quarterly and assesses them for possible OTTI. For nonmarketable investments, the analysis is based on facts and circumstances of each individual investment and the expectations for that investment’s cash flows and capital needs, the viability of its business model and our exit strategy. Nonmarketable investments include private equity investments accounted for under the cost method, equity method and fair value option.

In conjunction with the March 2008 initial public offering (IPO) of Visa, Inc. (Visa), we received approximately 20.7 million shares of Visa Class B common stock, which was apportioned to member banks of Visa at the time of the IPO. To manage our exposure to Visa and realize the value of the appreciated Visa shares, we incrementally sold these shares through a series of sales over the past few years, thereby eliminating this position as of September 30, 2015. As part of these sales, we agreed to compensate the buyer for any additional contributions to a litigation settlement fund for the litigation matters associated with the Class B shares we sold. Our exposure to this retained litigation risk has been reflected on our balance sheet.

As part of our business to support our customers, we trade public equities, listed/OTC equity derivatives and convertible bonds. We have parameters that govern these activities. We also have marketable equity securities in the available-for-sale securities portfolio, including securities relating to our venture capital activities. We manage these investments within capital risk limits approved by management and the Board and monitored by Corporate ALCO and the Corporate Market Risk Committee. Gains and losses on these securities are recognized in net income when realized and periodically include OTTI charges.

Changes in equity market prices may also indirectly affect our net income by (1) the value of third party assets under management and, hence, fee income, (2) borrowers whose ability to repay principal and/or interest may be affected by the stock market, or (3) brokerage activity, related commission income and other business activities. Each business line monitors and manages these indirect risks.

Table 50 provides information regarding our nonmarketable and marketable equity investments as of December 31, 2015 and

2014.

Table 50: Nonmarketable and Marketable Equity Investments



	Dec 31,		Dec 31,
(in millions)	2015		2014
Nonmarketable equity investments:
Cost method:
Federal bank stock	$	4,814	4,733
Private equity	1,626		2,300
Auction rate securities (1)	595		—
Total cost method	7,035		7,033
Equity method:
LIHTC (2)	8,314		7,278
Private equity	3,300		3,043
Tax-advantaged renewable energy	1,625		1,710
New market tax credit and other	408		379
Total equity method	13,647		12,410
Fair value (3)	3,065		2,512
Total nonmarketable equity investments (4)	$	23,747	21,955
Marketable equity securities:
Cost	$	1,058	1,906
Net unrealized gains	579		1,770
Total marketable equity securities (5)	$	1,637	3,676


(1)	Reflects auction rate perpetual preferred equity securities that were reclassified during 2015 with a cost basis of $689 million (fair value of $640 million) from available-for-sale securities because they do not trade on a qualified exchange.


(2)	Represents low income housing tax credit investments.


(3)	Represents nonmarketable equity investments for which we have elected the fair value option. See Note 7 (Premises, Equipment, Lease Commitments and Other Assets) and Note 17 (Fair Values of Assets and Liabilities) to Financial Statements in this Report for additional information.


(4)	Included in other assets on the balance sheet. See Note 7 (Premises, Equipment, Lease Commitments and Other Assets) to Financial Statements in this Report for additional information.


(5)	Included in available-for-sale securities. See Note 5 (Investment Securities) to Financial Statements in this Report for additional information.

LIQUIDITY AND FUNDING The objective of effective liquidity management is to ensure that we can meet customer loan requests, customer deposit maturities/withdrawals and other cash commitments efficiently under both normal operating conditions and under periods of Wells Fargo-specific and/or market stress. To achieve this objective, the Board of Directors establishes liquidity guidelines that require sufficient asset-based liquidity to cover potential funding requirements and to avoid over-dependence on volatile, less reliable funding markets. These guidelines are monitored on a monthly basis by the Corporate ALCO and on a quarterly basis by the Board of Directors. These guidelines are established and monitored for both the consolidated company and for the Parent on a stand-alone basis to ensure that the Parent is a source of strength for its regulated, deposit-taking banking subsidiaries.

Liquidity Standards On September 3, 2014, the FRB, OCC and FDIC issued a final rule that implements a quantitative liquidity requirement consistent with the liquidity coverage ratio (LCR) established by the Basel Committee on Banking Supervision (BCBS). The rule requires banking institutions, such as Wells Fargo, to hold high-quality liquid assets, such as central bank reserves and government and corporate debt that can be converted easily and quickly into cash, in an amount equal to or greater than its projected net cash outflows during a 30-day stress period. The final LCR rule began its phase-in period on January 1, 2015, and requires full compliance with a minimum 100% LCR by January 1, 2017. The FRB also finalized rules imposing enhanced liquidity management standards on large bank holding companies (BHC) such as Wells Fargo. In addition,

the FRB recently proposed a rule that would require large bank holding companies, such as Wells Fargo, to publicly disclose on a quarterly basis certain quantitative and qualitative information regarding their LCR calculations. We continue to analyze these rules and other regulatory proposals that may affect liquidity risk management to determine the level of operational or compliance impact to Wells Fargo. For additional information see the “Capital Management” and “Regulatory Reform” sections in this Report.

Liquidity Sources We maintain liquidity in the form of cash, cash equivalents and unencumbered high-quality, liquid securities. These assets make up our primary sources of liquidity which are presented in Table 51. Our cash is primarily on deposit with the Federal Reserve. Securities included as part of our primary sources of liquidity are comprised of U.S. Treasury and federal agency debt, and mortgage-backed securities issued by federal agencies within our investment securities portfolio. We believe these securities provide quick sources of liquidity through sales or by pledging to obtain financing, regardless of market conditions. Some of these securities are within the held-to-maturity portion of our investment securities portfolio and as such are not intended for sale but may be pledged to obtain financing. Some of the legal entities within our consolidated group of companies are subject to various regulatory, tax, legal and other restrictions that can limit the transferability of their funds. We believe we maintain adequate liquidity for these entities in consideration of such funds transfer restrictions.



	Year ended December 31,
	2015			2014	2013
Profitability ratios
Wells Fargo net income to average assets (ROA)	1.31		%	1.45	1.51
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders' equity (ROE)	12.60			13.41	13.87
Efficiency ratio (1)	58.1			58.1	58.3
Capital ratios (2)(3)
At year end:
Wells Fargo common stockholders' equity to assets	9.62			9.86	10.17
Total equity to assets	10.85			10.98	11.22
Risk-based capital:
Common Equity Tier 1	11.07			11.04	10.82
Tier 1 capital	12.63			12.45	12.33
Total capital	15.45			15.53	15.43
Tier 1 leverage	9.37			9.45	9.60
Average balances:
Average Wells Fargo common stockholders' equity to average assets	9.78			10.22	10.41
Average total equity to average assets	10.99			11.32	11.41
Per common share data
Dividend payout (4)	35.8			32.9	29.6
Book value	$	33.78		32.19	29.48
Market price (5)
High	58.77			55.95	45.64
Low	47.75			44.17	34.43
Year end	54.36			54.82	45.40



(in billions)	Client directed (1)			Financial advisor directed (2)		Separate accounts (3)		Mutual fund advisory (4)		Total advisory client assets
Balance, December 31, 2012	$	119.3		54.5		77.1		46.8		297.7
Inflows (5)	42.8			16.8		24.0		13.3		96.9
Outflows (6)	(31.2		)	(11.7	)	(15.7	)	(8.7	)	(67.3	)
Market impact (7)	13.6			12.0		14.5		7.4		47.5
Balance, December 31, 2013	$	144.5		71.6		99.9		58.8		374.8
Inflows (5)	41.6			18.4		23.1		14.6		97.7
Outflows (6)	(31.8		)	(13.4	)	(18.3	)	(9.7	)	(73.2	)
Market impact (7)	5.5			8.8		6.0		3.2		23.5
Balance, December 31, 2014	$	159.8		85.4		110.7		66.9		422.8
Inflows (5)	38.7			20.7		21.6		10.4		91.4
Outflows (6)	(37.3		)	(17.5	)	(20.5	)	(12.2	)	(87.5	)
Market impact (7)	(6.5		)	3.3		(1.4	)	(2.2	)	(6.8	)
Balance, December 31, 2015	$	154.7		91.9		110.4		62.9		419.9



	Assets Managed by WFAM (1)
(in billions)	Money Market Funds (2)			Other Assets Managed		Assets Managed by Wealth and Retirement (3)		Total Assets Under Management
Balance, December 31, 2012	$	120.6		331.5		147.6		599.7
Inflows (4)	5.4			104.0		31.4		140.8
Outflows (5)	—			(101.0	)	(31.5	)	(132.5	)
Market impact (6)	0.2			26.4		11.9		38.5
Balance, December 31, 2013	$	126.2		360.9		159.4		646.5
Inflows (4)	—			100.6		34.2		134.8
Outflows (5)	(3.1		)	(99.3	)	(31.2	)	(133.6	)
Market impact (6)	—			10.4		2.9		13.3
Balance, December 31, 2014	$	123.1		372.6		165.3		661.0
Inflows (4)	0.5			93.5		36.2		130.2
Outflows (5)	—			(97.0	)	(34.1	)	(131.1	)
Market impact (6)	—			(3.0	)	(5.3	)	(8.3	)
Balance, December 31, 2015	$	123.6		366.1		162.1		651.8



	December 31, 2015				December 31, 2014
(in millions)	Amortized Cost		Net unrealized gain	Fair value	Amortized Cost	Net unrealized gain	Fair value
Available-for-sale securities:
Debt securities	$	263,318	2,403	265,721	247,747	6,019	253,766
Marketable equity securities	1,058		579	1,637	1,906	1,770	3,676
Total available-for-sale securities	264,376		2,982	267,358	249,653	7,789	257,442
Held-to-maturity debt securities	80,197		370	80,567	55,483	876	56,359
Total investment securities (1)	$	344,573	3,352	347,925	305,136	8,665	313,801



	December 31, 2015					December 31, 2014
(in millions)	Core		Non-strategic and liquidating		Total	Core	Non-strategic and liquidating		Total
Commercial	$	456,115	468		456,583	413,701	1,125		414,826
Consumer	408,489		51,487		459,976	388,062	59,663		447,725
Total loans	864,604		51,955		916,559	801,763	60,788		862,551
Change from prior year	$	62,841	(8,833	)	54,008	60,343	(20,078	)	40,265


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


(3)	See the "Capital Management" section and Note 26 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information.


(4)	Dividends declared per common share as a percentage of diluted earnings per common share.


(5)	Based on daily prices reported on the New York Stock Exchange Composite Transaction Reporting System.


(1)	See Table 7 – Noninterest Income in this Report for additional detail.


(2)	See Table 8 – Noninterest Expense in this Report for additional detail.


(1)	Nonaccrual loans are included in their respective loan categories.


(1)	Our average prime rate was 3.26% for the year ended December 31, 2015, and 3.25% for the years ended December 31, 2014, 2013, 2012, and 2011, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.32%, 0.23%, 0.27%, 0.43%, and 0.34% for the same years, respectively.


(2)	Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.


(3)	The average balance amounts represent amortized cost for the periods presented.


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


(5)	Includes taxable-equivalent adjustments of $1.1 billion, $902 million, $792 million, $701 million and $696 million for 2015, 2014, 2013, 2012 and 2011, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate utilized was 35% for the periods presented.



	Year ended December 31,
(in millions, except average balances which are in billions)	Community Banking		Wholesale Banking		Wealth and Investment Management		Other (1)		Consolidated Company
2015
Revenue	$	49,341	25,904		15,777		(4,965	)	86,057
Provision (reversal of provision) for credit losses	2,427		27		(25	)	13		2,442
Net income (loss)	13,491		8,194		2,316		(1,107	)	22,894
Average loans	$	475.9	397.3		60.1		(47.9	)	885.4
Average deposits	654.4		438.9		172.3		(71.5	)	1,194.1
2014
Revenue	$	48,158	25,398		15,269		(4,478	)	84,347
Provision (reversal of provision) for credit losses	1,796		(382	)	(50	)	31		1,395
Net income (loss)	13,686		8,199		2,060		(888	)	23,057
Average loans	$	468.8	355.6		52.1		(42.1	)	834.4
Average deposits	614.3		404.0		163.5		(67.7	)	1,114.1
2013
Revenue	$	47,679	25,847		14,330		(4,076	)	83,780
Provision (reversal of provision) for credit losses	2,841		(521	)	(16	)	5		2,309
Net income (loss)	12,147		8,752		1,766		(787	)	21,878
Average loans	$	465.1	329.0		46.2		(37.6	)	802.7
Average deposits	494.7		353.8		158.9		(65.3	)	942.1


(1)	Includes items not assigned to a specific business segment and elimination of certain items that are included in more than one business segment, substantially all of which represents products and services for WIM customers served through Community Banking distribution channels.


(1)	Represents income on products and services for Wealth and Investment Management customers served through Community Banking distribution channels and is eliminated in consolidation.


(2)	Includes syndication and underwriting fees paid to Wells Fargo Securities which are offset in our Wholesale Banking segment.


(3)	Predominantly represents gains resulting from venture capital investments.


(4)	Reflects results attributable to noncontrolling interests primarily associated with the Company’s consolidated venture capital investments.


(1)	Investment advice and other services are provided to client, but decisions are made by the client and the fees earned are based on a percentage of the advisory account assets, not the number and size of transactions executed by the client.


(2)	Professionally managed portfolios with fees earned based on respective strategies and as a percentage of certain client assets.


(3)	Professional advisory portfolios managed by Wells Fargo asset management advisors or third-party asset managers. Fees are earned based on a percentage of certain client assets.


(4)	Program with portfolios constructed of load-waived, no-load and institutional share class mutual funds. Fees are earned based on a percentage of certain client assets.


(5)	Inflows include new advisory account assets, contributions, dividends and interest.


(6)	Outflows include withdrawals, closed accounts’ assets and client management fees.


(7)	Market impact reflects gains and losses on portfolio investments.


(1)	Assets managed by Wells Fargo Asset Management consist of equity, alternative, balanced, fixed income, money market, and stable value, and include client assets that are managed or sub-advised on behalf of other Wells Fargo lines of business.


(2)	Money Market fund activity is presented on a net inflow or net outflow basis, because the gross flows are not meaningful nor used by management as an indicator of performance.


(3)	Includes $8.2 billion, $8.9 billion and $8.7 billion as of December 31, 2015, 2014 and 2013, respectively, of client assets invested in proprietary funds managed by WFAM.


(4)	Inflows include new managed account assets, contributions, dividends and interest.


(1)	Available-for-sale securities are carried on the balance sheet at fair value. Held-to-maturity securities are carried on the balance sheet at amortized cost.