One Wells Fargo Center, Charlotte, North Carolina. Image source: iStock/Thinkstock.

When Wells Fargo (NYSE:WFC) reported earnings last month, one point that caught the attention of both investors and analysts was its disclosure that it had $17 billion of exposure to the oil and gas industry. As we learned on Tuesday, however, that was only half of the story.

CFO John Shrewsberry said on Tuesday this week that its potential exposure is actually $42 billion. This includes $25 billion worth of unfunded commitments -- that is, lines of credit that Wells Fargo has made available to oil and gas companies but that haven't yet been utilized by the companies.

Unfunded commitments may seem less nefarious than funded loans from a risk perspective, but there are two things to keep in mind. The first is that a commitment is a commitment. This isn't a college relationship; there are legal documents backing Wells Fargo's obligation with respect to the additional $25 billion.

The second thing is that these lines "are often drawn down as distressed industry players reach for any capital lifeline they can get their hands on," as Mark Calvey of the San Francisco Business Times observed.

Wells Fargo provided additional insight into its oil and gas exposure in a presentation that Shrewsberry delivered at the 2016 Credit Suisse Financial Services Forum. Among other things:

  • It took $118 million of net charge-offs in the fourth quarter of last year, up from $90 million in the third quarter.
  • Nonaccrual loans (loans that no longer automatically accrue interest due to concerns about their repayment) in its energy portfolio are $843 million -- though over 90% of nonaccruals are current on interest.
  • It's set aside $1.2 billion to absorb credit losses from its oil and gas portfolio, which equates to 6.7% of the loans outstanding.

Shrewsberry's presentation also provided a more comprehensive view of its energy portfolio, broken down by the type of borrower. Of the $42 billion in both funded and unfunded liabilities, 25% related to oil-field services, 30% to midstream producers (wholesalers, refiners, and pipelines), and the remaining 45% for exploration and production.

Data source: Wells Fargo.

It's easy in a situation like this for investors to get bogged down in the details. But the reality is that, as with any bank, there's simply no way for an outside observer to get a handle on the magnitude of credit losses that may or may not ultimately materialize at Wells Fargo as a result of low energy prices.

This is why the experience and past performance of Wells Fargo in challenging credit environments are relevant. With respect to its energy team, in particular, its managers have "an average tenure of 13 years with Wells Fargo and an average 23 years of experience in the industry." And its credit and risk team have "an average tenure of 17 years with Wells Fargo and an average 22 years of experience in the industry."

On top of this, it's worth pointing out that Wells Fargo has survived and thrived through countless episodes like this in the past. This dates all the way back to its founding in 1852. Two years later, it survived the first financial panic to strike California while its two largest competitors didn't. And, of course, the same story repeated itself in the financial crisis of 2008-09, when Wells Fargo's prudent credit culture allowed it to more than double in size by exploiting the mistakes of its competitors.

If there is such a thing as a tried-and-true bank, then, Wells Fargo is at the top of the list. Given this, I encourage shareholders in the nation's third biggest bank by assets to ignore the noise around its energy portfolio. Yes, it may take additional losses, but Wells Fargo makes more than enough money and excess capital to absorb any that do materialize.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.