Wells Fargo 2014 Annual Report Download - page 84

Risk Management - Credit Risk Management (continued)
loans were real estate 1-4 family first and junior lien mortgage
loans at December 31, 2014.
The allowance for credit losses again declined in 2014,
which reflected continued credit improvement, particularly in
residential real estate and primarily associated with continued
improvement in the housing market. The total provision for
credit losses was $1.4 billion in 2014, $2.3 billion in 2013 and
$7.2 billion in 2012.
The 2014 provision for credit losses was $1.4 billion,
$1.6 billion less than net charge-offs, due to strong underlying
credit, and improvement in the housing market.
The 2013 provision was $2.3 billion, $2.2 billion less than
net charge-offs, and the 2012 provision was $7.2 billion,
$1.8 billion less than net charge-offs. In each of 2013 and 2012
the provision was influenced by continually improving credit
performance.
We believe the allowance for credit losses of $13.2 billion at
December 31, 2014, was appropriate to cover credit losses
inherent in the loan portfolio, including unfunded credit
commitments, at that date. 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.
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