WELLS FARGO & COMPANY/MN

WELLS FARGO & COMPANY/MN: Court Grants Preliminary Approval for Shareholder Settlement

Wells Fargo & Company has secured preliminary court approval for a proposed settlement that resolves a series of shareholder derivative lawsuits. These lawsuits, filed by shareholders on the company's behalf, alleged past issues concerning Wells Fargo's fair lending and hiring practices. This settlement aims to bring significant legal disputes to a close and reduce future litigation risks for the company.

Key Settlement Details:

• Nature of Lawsuits: The lawsuits, specifically titled "In re Wells Fargo & Company Hiring Practices Derivative Litigation," claimed that certain current and former directors failed to properly oversee the company's fair lending practices and made false or misleading statements about hiring. These actions, the lawsuits alleged, led the company to repurchase stock at inflated prices.
• Financial Components:
  • $100 Million from Wells Fargo: Wells Fargo will commit $100 million to mortgage assistance programs. These programs will support low- and moderate-income borrowers in specific geographic areas for at least three years.
  • $10 Million to Wells Fargo: An insurer, representing the sued current and former directors (the "Director Defendants"), will pay $10 million directly to Wells Fargo.
• Net Financial Impact: The settlement results in a net financial cost of $90 million for Wells Fargo, which the company will bear.
• No Direct Shareholder Payout: Investors should note that individual Wells Fargo shareholders will not receive any direct payment from this settlement. The financial benefits—the $10 million payment from the insurer and the resolution of legal risk—flow directly to Wells Fargo & Company.

Timeline of Events:

• October 13, 2025: The parties reached the settlement agreement.
• January 13, 2026: The court granted preliminary approval for the proposed settlement.
• January 22, 2026: Wells Fargo reported this development to the public and regulators via an SEC 8-K filing.

Why Wells Fargo Settled:

Wells Fargo views this settlement as a strategic move to resolve ongoing legal battles, avoid the substantial costs and distractions of a lengthy trial (originally scheduled for April 2026), and address specific past problems. While the Director Defendants deny any wrongdoing, they agreed to settle to prevent further litigation and its associated uncertainties. This resolution allows the company to move past these particular allegations.

Impact and Implications for Investors:

• Financial Impact: The $90 million net cost, though significant, is manageable for a company of Wells Fargo's size. This expense is now a known quantity, rather than an uncertain liability, and will appear in the company's earnings.
• Risk Mitigation: The settlement significantly reduces legal uncertainty and removes the risk of potentially larger, unpredictable financial judgments or prolonged litigation. This generally signals a positive development for the company's stability.
• Strategic Benefits: Resolving these lawsuits frees Wells Fargo's management to focus more resources on core business operations and strategic initiatives, rather than diverting them to litigation. It also marks a step toward improving the company's reputation by actively addressing past criticisms of its practices.
• Affected Parties:
  • Low- and Moderate-Income Borrowers: These individuals will directly benefit from the $100 million mortgage assistance programs.
  • Wells Fargo & Company: The company incurs a net financial cost of $90 million but gains legal closure, reduced uncertainty, and the ability to focus on future strategies.
  • Shareholders: Shareholders benefit indirectly from the reduction of legal risks and uncertainties for the company, and from the $10 million payment the company receives. Shareholders who held Wells Fargo stock as of October 13, 2025, and continue to hold it as of May 5, 2026, generally agree to the terms of this settlement and the release of claims it entails.
  • Current and Former Directors: The Director Defendants will be released from these specific claims, with their insurer covering the $10 million payment to Wells Fargo.

What Happens Next:

• Final Approval Hearing: The next crucial step is the final approval hearing, set for May 5, 2026, at 2:00 p.m. in San Francisco. At this hearing, the court will make a final decision on whether the settlement is fair, reasonable, and adequate.
• Implementation: If the court grants final approval, Wells Fargo will implement the settlement terms:
  • Wells Fargo will fund the $100 million mortgage assistance programs within 90 days of the settlement becoming final.
  • Wells Fargo will receive the $10 million payment from the insurer within 30 days of the settlement becoming final.
• Legal Closure: Upon final approval, the court will dismiss the lawsuit "with prejudice." This means shareholders cannot bring these specific claims against the company or the involved directors again.

Key Investor Takeaways:

• Known Financial Impact: The specific net cost of $90 million is now clear, providing certainty about a past potential liability.
• Reduced Legal Overhang: This settlement significantly lessens a source of legal uncertainty, which typically signals a positive development for investors.
• No Direct Payout: Remember, this is a derivative settlement that benefits the company, not individual shareholders directly.
• Monitor Final Approval: Keep an eye on news regarding the May 5, 2026, hearing, as final approval is essential to finalize the agreement.
• Long-Term Context: While this resolves specific past issues, it highlights Wells Fargo's ongoing efforts to address its history of regulatory and legal challenges and improve its operational integrity and reputation. Investors should consider this event within the broader context of the company's long-term strategy and performance.
• Conduct Your Own Research: Understand the full implications of this settlement before making any investment decisions.