Wells Fargo Reports Record Q3 and Year-to-Date Net Income

October 21, 2009 | By Molly Bernhart Walker

SAN FRANCISCO--(BUSINESS WIRE)--Wells Fargo & Company (NYSE:WFC):

  • 3rd consecutive quarter of record earnings
    • Record Wells Fargo net income of $3.2 billion, up 98 percent from last year; $9.5 billion year to date, up 75 percent from last year
    • Diluted earnings per common share of $0.56, up 14 percent from last year; $1.69 per share year to date
    • Results driven by record $10.8 billion pre-tax, pre-provision profit (PTPP); PTPP has been more than two times quarterly net charge-offs each quarter this year, despite cyclically elevated net charge-offs. (See footnote 4 on page 20 for information on PTPP)
  • Continued strong revenue
    • Revenue of $22.5 billion, flat with record revenue in second quarter 2009
    • $169 billion of credit extended to customers in the quarter
    • Average checking and savings deposits up 11 percent (annualized) from prior quarter
    • Net interest margin of 4.36 percent, up 6 basis points from prior quarter
    • Cross-sell for legacy Wells Fargo a record 5.90 for retail bank households
    • Broad-based revenue contribution from diverse businesses, including double-digit linked-quarter growth in asset management, auto lending, consumer finance, debit cards, retirement services, SBA lending and wealth management, along with continued strong performance from regional banking and mortgage banking
  • Significant increases in capital, reduction in risk
    • Wells Fargo stockholders' equity increased to $122 billion (10 percent of total assets), up $23 billion from year end
    • Generated $20 billion during the past six months toward the $13.7 billion Supervisory Capital Assessment Program (SCAP) buffer requirement; PTPP tracking above Company's internal SCAP estimates and 35 percent above supervisory adverse scenario estimate
    • Credit reserves built by $1.0 billion ($3.0 billion year to date), reaching $24.5 billion, or 3.07 percent of total loans and 118 percent of nonaccrual loans
    • Substantial increases in capital ratios driven by record retained earnings and other sources of internal capital generation
              Sept. 30,   June 30,   Dec. 31,    
(as a percent of total risk-weighted assets)   2009 (1 )   2009   2008    
                           
Tier 1 capital       10.6   % 9.8   7.8    
Tier 1 common equity (2)     5.2     4.5   3.1    
Tier 1 leverage     9.0     8.3   14.5   (3 )
Total capital       14.7     13.8   11.8    
                           

(1) September 30, 2009, ratios are preliminary.

(2) See table on page 38 for more information on Tier 1 common equity.

(3) Based on average Q4 2008 Wells Fargo assets only, excludes Wachovia.
  • Reduced non-strategic/liquidating loans by $5.7 billion in the quarter
  • FAS 166/167 expected to add approximately $28 billion to risk-weighted assets upon adoption in 2010
  • Current projections show credit losses peaking in 2010, with consumer losses potentially peaking in first half of the year and gradually declining, absent further economic deterioration
    • Growth in nonperforming loans and net charge-offs slowing as of third quarter, for consumer and commercial portfolios
    • Credit performance of recent vintage legacy Wells Fargo consumer portfolios improving, largely the result of proactive credit management over past two years
    • 90 days past due and still accruing levels flat with second quarter; consumer 90 days past due and still accruing declined from prior quarter
    • Significantly smaller credit card portfolio than large bank peers
    • Pick-a-Pay portfolio currently estimated to have lower life-of-loan losses than originally estimated, driven in part by extensive and successful loan modification efforts
    • Collateral values improving in auto market and housing prices stabilizing in many regions
    • Legacy Wells Fargo commercial and commercial real estate portfolio well underwritten and diversified; Wachovia commercial and commercial real estate portfolio marked down at merger close at end of last year
    • Legacy Wells Fargo loss rate of 3.37 percent, below large bank peers; overall loss rate of 2.50 percent reflected benefit of purchase accounting on Wachovia loan portfolio; combined losses less than half of Company's quarterly PTPP
  • Wachovia integration on track and on schedule
    • Estimated cumulative merger expenses reduced to approximately $5.5 billion from $7.9 billion; on track to achieve $5.0 billion annual run-rate cost savings by completion of integration in 2011
    • Cross-sell revenues already being realized
    • Credit overall performing in line with original expectations
    • First state community bank conversion (Colorado) scheduled for November; conversion of remaining overlapping markets expected in 2010
  • Increased loan modifications
    • Provided 62,989 trial and completed modifications through the Home Affordable Modification Program (HAMP) and 292,005 through Company's proprietary programs, bringing total this year through September 30, 2009, to 354,994
    • Refinanced 987,000 customers' mortgages using the Home Affordable Refinance Program (HARP) and other standard refinance programs
    • Over 20 percent of PCI Pick-a-Pay portfolio modified through September 30, 2009, with positive early performance
Selected Financial Information               Nine
                        months
              Quarter ended   ended
              Sept. 30,     June 30,   Sept. 30,
                2009     2009   2009
Earnings                  
Diluted earnings per share     $ 0.56     0.57   1.69
Wells Fargo net income (in billions)     3.24     3.17   9.45
                         
Asset Quality                
Net charge-offs as % of avg. total loans     2.50   % 2.11   2.05
Nonperforming loans as % of total loans     2.61     1.92   2.61
Allowance as a % of total loans       3.07     2.86   3.07
                         
Other                      
Revenue (in billions)     $ 22.47     22.51   65.99
Average loans (in billions)       810.2     833.9   833.1
Average core deposits (in billions)     759.3     765.7   759.7
Net interest margin       4.36   % 4.30   4.27

Wells Fargo & Company (NYSE:WFC) reported diluted earnings per common share of $0.56 for third quarter 2009 compared with $0.57 for second quarter 2009 and $0.49 for third quarter 2008. (Results prior to January 1, 2009, do not include Wachovia.) Wells Fargo net income was a record $3.24 billion for third quarter 2009, up 98 percent from last year, and a record $9.45 billion for the first nine months of 2009, up 75 percent from last year.

"Doing what's right for our customers again proved to be right for our stockholders as our talented team members earned even more of our customers' business, enabling us to achieve our third consecutive quarter of record earnings," said President and CEO John Stumpf. "The Wells Fargo-Wachovia merger, agreed to a year ago, is exceeding our expectations and already adding value for many of our 70 million customers across North America. Merger costs have been significantly less than originally expected. With our 80-plus businesses pulling the stagecoach, the diversity of our business model again showed significant power to generate capital internally. We had solid performance across our company - especially among counter-cyclical businesses such as deposits, residential mortgages, debit card and asset-based lending. We're also doing what's right for our mortgage customers having difficulty making their payments on time. We've offered home payment relief to 1.3 million customers so far this year, including 355,000 loan modifications. We now have 13,000 team members working on helping customers stay in their homes and our delinquency and foreclosure rates continue to be well below the industry average. As we've already announced, Dick Kovacevich will step down as chairman and a director at the end of 2009 and retire from the Company in early 2010. I am grateful to Dick and to Wells Fargo's leadership team and believe we have the strongest, most experienced team of senior leaders in all of financial services. They've led our businesses to a strong third quarter, following two consecutive quarters of record earnings, despite the economic recession. This is something that few, if any, financial services companies have achieved - and during the most challenging credit cycle in recent memory and while we continue to build reserves.

Wells Fargo has always been committed to providing clear, complete, and transparent communication about the Company's results to all of its stakeholders. As we enter the second year of the merger with Wachovia, we will be expanding our quarterly communications to include a live quarterly earnings conference call - starting in January for our fourth quarter and full year 2009 results - and we will also host an investor day in 2010."

Financial Performance

"Third quarter results again illustrated the Company's ability to profitably grow, even through the downward cycle despite elevated credit losses," said Chief Financial Officer Howard Atkins. "Since the merger with Wachovia at year-end 2008, we've earned a record $9.45 billion, even after building credit reserves by $3.0 billion and recording $1.4 billion of other-than-temporary impairment (OTTI) charges. Pre-tax pre-provision profit has grown every quarter this year, reaching a record $10.8 billion in the third quarter, more than double quarterly net charge-offs. While mortgage origination and hedging results contributed to our performance, collectively all of our other businesses have also grown PTPP each quarter this year reflecting the breadth of our diversified business model, record levels of sales and cross-sell, the realization of revenue synergies from the combination with Wachovia, and further improvements in our net interest margin to 4.36 percent and efficiency ratio to 52.0 percent. We continued to maintain what we believe is one of the strongest balance sheets in banking, building credit reserves by $1.0 billion in the quarter to $24.5 billion, or 3.07 percent of total loans, reducing previously identified non-strategic and liquidating loan portfolios to $152.7 billion, down over $14 billion from year end, and reducing the value of our debt and equity investment portfolios through $396 million of OTTI. Also, in line with lower mortgage rates, the ratio of mortgage servicing rights (MSRs) as a percentage of loans serviced for others was 83 basis points, the third lowest ratio in our Company's history and a level considerably lower than our mortgage peers.

"We have significantly built capital, increasing common stockholders' equity to $123 billion, up $23 billion so far in 2009 and increasing Tier 1 common to 5.2 percent, nearly two times our capital position at year-end 2008. Nonperforming loans and net charge-offs increased in the quarter, but the rate of growth of nonperforming loans has declined each quarter so far this year. While the level of nonperforming assets and losses is expected to remain elevated for a period of time, we currently expect total credit losses to peak in 2010, with consumer losses potentially peaking in the first half of the year and gradually declining as the year progresses, absent any further deterioration in the U.S. economy. Our credit reserves as of September 30, 2009, reflect an improvement in consumer loss emergence with almost all of the current quarter reserve build covering higher commercial loss emergence.

"Operationally and financially, the Wachovia merger is exceeding our expectations. Structurally, the merger leaves us with an even more diversified business than legacy Wells Fargo alone - less geographic concentration, an even wider array of products and services, better balance between consumer and commercial businesses, and an equal split between spread income and fee income. We are currently on track to realize our objective of $5.0 billion in annual run-rate savings when we complete the integration in 2011, with about 30-40 percent of those savings now beginning to be realized in our expense run-rate. We now expect to spend about $2.4 billion less in merger and integration costs than previously expected to achieve the run-rate savings, largely because proportionately more of the labor savings are being realized through attrition instead of severance and because we're spending less than planned on building disposition, as we fill unoccupied space with third party tenants. We are ahead of plan in shedding asset risk from businesses that do not meet our financial and strategic criteria and in retaining deposits and customers. We're already realizing meaningful revenue synergies, an important driver of our earnings this year. Because Wachovia's credit-impaired loan portfolios were written down at the close of the merger at the end of last year, Wachovia is now contributing to the Company's rapid internal capital growth."

Revenue

Revenue of $22.5 billion remained at near-record levels following strong first and second quarters. Relative to the pre-Wachovia third quarter a year ago, the Company's assets almost doubled, while total revenue has substantially more than doubled, despite the weak economy and despite the reduction in non-strategic/liquidating loan and asset portfolios. The high levels of revenue generated in the third quarter related to several factors:

  • Continued strong core deposits reflecting 11 percent (annualized) growth in checking and savings, 25 percent (annualized) growth in wholesale banking core deposits and 10 percent (annualized) growth in wealth management core deposits. Wachovia's deposit pricing has been conformed to that of Wells Fargo, with continued better-than-planned retention of Wachovia's maturing higher-rate CDs (57 percent retained in third quarter). The average cost of all core deposits declined to 41 basis points in the quarter, the principal reason for the Company's 4.36 net interest margin, highest among large bank peers.
  • The Company remained an industry leader in making credit available to U.S. consumers and businesses. Total credit supplied in the quarter through mortgage originations and new/increased credit facilities was $169 billion, one of the main drivers of continued strong loan fees, even though loan demand remained soft in the quarter.
  • Record core product solutions (sales) and record cross-sell in regional banking for legacy Wells Fargo
  • Broad-based revenue growth across multiple businesses, including double-digit (annualized) linked-quarter growth in asset management, auto lending, consumer finance, debit card, retirement services, SBA lending and wealth management. Linked-quarter growth in these businesses was partially offset by more modest mortgage revenue, lower investment banking revenue and seasonal decline in insurance revenue.
  • While mortgage originations and servicing revenue remained high, total mortgage banking noninterest income represented less than 15 percent of consolidated company revenue, reflecting the breadth and depth of the Company's business model.

Net Interest Income

Net interest income was $11.7 billion, compared with $11.8 billion in second quarter 2009. While the net interest margin improved to 4.36 percent, average earning assets were down $23.7 billion linked quarter, reflecting soft loan demand and reductions in non-strategic/liquidating assets. While average investment securities were up $7.3 billion, this largely reflected the averaging effect in the quarter of mortgage-backed securities (MBS) purchased late in the second quarter at yields more than 1 percent above current market. During the third quarter, $23 billion of the lowest-yielding MBS were sold to reduce exposure to higher long-term interest rates.

Loans

Average total loans were $810.2 billion compared with $833.9 billion in second quarter 2009, as consumer and commercial demand for credit remained moderate and the Company continued to reduce certain higher-risk loan portfolios. The decline in average loans included a reduction of $5.7 billion linked quarter in the non-strategic and liquidating loan portfolios that the Company has been exiting, such as indirect home equity and indirect auto from legacy Wells Fargo, and Wachovia's Pick-a-Pay and commercial real estate portfolios.

Deposits

Average total core deposits were $759.3 billion compared with $765.7 billion in second quarter 2009. During the quarter, $38 billion of Wachovia's higher-rate certificates of deposit matured, with $22 billion of those balances retained. "We continued to gain new deposit customers and deepen our relationship with existing customers," said Atkins. Average checking and savings deposits increased 11 percent (annualized) to $629.6 billion from $613.3 billion in second quarter 2009. Average mortgage escrow deposits were $28.7 billion compared with $32.0 billion in second quarter 2009. Average consumer checking accounts at legacy Wells Fargo grew a net 6.4 percent from third quarter 2008 and, for Wells Fargo and Wachovia combined, grew a net 5.2 percent in California for the same period.

Noninterest Income

Noninterest income of $10.8 billion was flat compared with $10.7 billion in second quarter 2009 and included:

  • Mortgage banking income of $3.1 billion, including:
    • $1.1 billion in revenue from mortgage loan originations/sales activities on $96 billion of residential mortgage originations
    • $1.5 billion combined market-related valuation changes to mortgage servicing rights (MSRs) and economic hedges (consisting of a $2.1 billion decrease in the fair value of the MSRs more than offset by a $3.6 billion economic hedge gain in the quarter), largely due to hedge-carry income reflecting the current low short-term interest rate environment, which is expected to continue into the fourth quarter; MSRs as a percentage of loans serviced for others reduced to 0.83 percent; average servicing portfolio note rate was only 5.72 percent.
  • Trust and investment fees of $2.5 billion, up 15 percent (annualized) linked quarter primarily reflecting an increase in client assets, bond origination fees, and higher brokerage revenue as the Company further builds its retail securities brokerage business
  • Service charges on deposit accounts of $1.5 billion, up 8 percent (annualized) linked quarter driven by continued strong checking account growth
  • Card fees of $946 million, up 10 percent (annualized) linked quarter reflecting seasonally higher purchase volumes and higher customer penetration rates
  • Net losses on debt and equity securities totaling $11 million, including $396 million of OTTI write-downs and $120 million of realized gains on the sale of MBS in the third quarter. After having purchased over $34 billion of agency MBS in the second quarter of 2009 at yields more than 1 percent above the current market, the Company sold $23 billion of its lowest-yielding MBS after long-term interest rates declined in the third quarter.

Due to the general decline in long-term yields and narrowing of credit spreads in the quarter, the Company's net unrealized securities gains, reflected in equity, increased to $6.6 billion at September 30, 2009, from net losses of $400 million at June 30, 2009.

Noninterest Expense

Noninterest expense declined to $11.7 billion from $12.7 billion in the second quarter, which included $565 million of FDIC deposit insurance assessments. The balance of the decline in third quarter expense was due to merger consolidation savings and ongoing expense management initiatives. "We currently expect cumulative merger integration costs of approximately $5.5 billion, down from our previous $7.9 billion estimate," said Atkins. "The revised estimate reflects lower owned real estate write-downs and lower estimated severance costs since a greater proportion of labor savings is being realized through attrition. Of this $5.5 billion, we've spent $1.0 billion merger to date, including $200 million in the third quarter. Of the amount spent thus far, $444 million has been recorded through the income statement and $559 million has been recorded through purchase accounting adjustments to goodwill. A portion of the remaining integration costs will be charged to goodwill in the fourth quarter under purchase accounting. The balance of the cumulative estimated integration costs are expected to be expensed over the next two years, and are likely to be offset by merger-related savings during this period. We remain on track to achieve $5.0 billion in annual run-rate savings upon completion of the integration in 2011. To date, we have achieved approximately 30-40 percent of these savings." Noninterest expense also included $100 million of additional insurance reserve at the Company's captive mortgage reinsurance operation and $49 million of non-Wachovia-related integration costs. "As we reduce expenses through consolidation and other expense initiatives, we continue to reinvest in our businesses for long-term revenue growth," said Atkins. "During 2009, we've opened 41 banking stores and converted 1,274 ATMs to Envelope-FreeSM webATM machines. We have also continued to increase the level and productivity of our sales force in community banking, commercial banking and wealth management. We continue to manage to a variable expense base in the mortgage company. Part-time staff was reduced in third quarter as application volume declined, and increased again in September and early in the fourth quarter as applications increased." The Company's efficiency ratio improved to 52.0 percent from 56.4 percent in second quarter and 56.2 percent in first quarter.

Capital

"We have rebuilt capital significantly this year," said Atkins, "with most of our capital ratios now higher - in some cases substantially so - than they were just before the Wachovia merger a year ago."

              Sept. 30,   Sept. 30,
(as a percent of total risk-weighted assets)   2009 (1 )   2008 (2 )
                   
Tier 1 common equity     5.2   % 6.4  
Tier 1 capital       10.6     8.6  
Tier 1 leverage     9.0     7.5  
Total capital       14.7     11.5  
                   

(1) September 30, 2009, ratios are preliminary

(2) Wells Fargo only, excludes Wachovia

Stockholders' equity now stands at $122 billion, up $50 billion from a year ago (excluding the U.S. Treasury's $25 billion Capital Purchase Program investment), up $23 billion from post-merger closing year-end equity and up $8 billion just in the third quarter of this year alone. "In the past year, we have more than doubled stockholders' equity while significantly reducing risk and increasing internal capital momentum," said Atkins. Tier 1 common equity grew from second quarter 2009 entirely from internally generated sources - record retained earnings, realization of deferred tax assets and stock issued to the Company's benefit plans. Through September 30, 2009, the Company generated $20 billion, including the $8.6 billion equity raise in the second quarter, toward the $13.7 billion regulatory capital buffer under SCAP, exceeding the requirement by $6 billion. "A major contributor to our strong results compared with the regulatory SCAP requirement has been our consistent outperformance on pre-tax pre-provision profit year to date, which confirmed the confidence we've had from the beginning of this process in the underlying revenue strength of our company and the consistency of our revenue generation even in adverse scenarios," said Atkins. See footnote (4) on page 20 and the table on page 38 for more information.

In January, the Company will adopt FAS 166/167, which will result in the consolidation of certain off-balance sheet assets not currently included in its financial statements. The Company's current estimate is that FAS 166/167 is expected to add approximately $28 billion in risk-weighted assets. This latest analysis is lower than originally projected primarily due to a reduction in the amount of securitized residential mortgages expected to be consolidated. In addition, the Company continues to explore the sale of certain interests held in securitized residential mortgage loans, which would be expected to reduce further the amount of incremental GAAP assets and incremental risk-weighted assets.

Credit Quality

"While the challenging credit cycle continues and losses remain elevated, we have begun to see early indications of consumer credit stability," said Chief Credit and Risk Officer Mike Loughlin. "In the third quarter, this stabilization was evident in several consumer loan portfolios, while the consumer real estate portfolio continued to vary across geography. Some real estate markets, such as California, have had increased home sales and home price stabilization and, as these conditions improve in more markets, we expect to see improvement in credit results. Third quarter commercial and commercial real estate losses remained at manageable levels, reflecting the high-quality of Wells Fargo's commercial loan portfolio and the fact that Wachovia's commercial and commercial real estate loan portfolios were already written down at the end of last year.

"Nonperforming assets and credit losses increased during the quarter, and once again we increased reserve levels to provide for the additional risk. We expect credit losses and nonperforming assets to continue to increase in the near term, but at a slower rate as we have seen the pace of deterioration slow. Based on our current economic outlook, we expect losses to peak in 2010, with consumer losses expected to peak in the first half of 2010 and commercial and commercial real estate losses expected to peak in the second half of 2010. The recovery may take some time to gain momentum and changes in the economic outlook could affect this time horizon."

Credit Losses

Third quarter net charge-offs were $5.1 billion, or 2.50 percent of average loans, compared with second quarter net charge-offs of $4.4 billion, or 2.11 percent of average loans. While losses were up in the quarter, the increase in terms of both dollars and percentages moderated from prior quarter growth. The overall quarterly loss rate in the third quarter, 2.50 percent, is substantially lower than reported large peer loss rates partly because Wells Fargo had already written down Wachovia's higher-risk loan portfolios at year end. Reflecting, in part, stabilizing credit performance, legacy Wells Fargo net charge-offs were $3.4 billion, or 3.37 percent of average loans. Wachovia's net charge-offs increased to $1.7 billion, or 1.66 percent of average loans, compared with $984 million in second quarter 2009, due to some deterioration in its portfolios and the lagging effect of purchase accounting.

Total credit losses of $5.1 billion included $1.5 billion of commercial and commercial real estate loans (1.78 percent of average loans) and $3.6 billion in consumer loans (3.13 percent of average loans), as shown in the following table.

Net Loan Charge-Offs (1)

  

Quarter ended

    
          September 30, 2009       June 30, 2009       March 31, 2009    
              As a           As a           As a    
              % of           % of           % of    
          Net loan   average       Net loan   average       Net loan   average    
          charge-   loans       charge-   loans       charge-   loans    
($ in millions)   offs   (annualized)       offs   (annualized)       offs   (annualized)    
                                           
Commercial and                                    
  commercial real estate:                                    
  Legacy Wells Fargo   $ 862   1.96   %   $ 897   2.01   %   $ 667   1.48   %
  Wachovia     602   1.57         246   0.61         30   0.07    
Total commercial and                                    
  commercial real estate     1,464   1.78         1,143   1.35         697   0.80    
                                           
Consumer:                                      
  Legacy Wells Fargo     2,480   4.50         2,462   4.44         2,175   3.90    
  Wachovia     1,107   1.87         735   1.22         341   0.56    
Total consumer     3,587   3.13         3,197   2.77         2,516   2.16    
                                           
Foreign                                        
  Legacy Wells Fargo     43   3.00         43   3.05         45   3.13    
  Wachovia     17   0.28         3   0.05         -   -    
Total foreign     60   0.79         46   0.61         45   0.56    
                                           
Total Legacy Wells Fargo     3,385   3.37         3,402   3.35         2,887   2.82    
Total Wachovia     1,726   1.66         984   0.92         371   0.34    
  Total   $ 5,111   2.50   %   $ 4,386   2.11   %   $ 3,258   1.54   %
                                           
(1)See explanation on page 40 of the accounting for purchased credit-impaired (PCI) loans from Wachovia and the impact on selected financial ratios.

"Commercial and commercial real estate charge-offs remained manageable in the third quarter," said Loughlin. "In fact, legacy Wells Fargo's commercial and commercial real estate losses declined $35 million, or 4 percent, in the quarter. The increase in commercial and commercial real estate losses was entirely in the Wachovia non-impaired portfolio, in part reflecting the fact that charge-offs are just now coming through Wachovia's portfolio after having eliminated nonaccruals through purchase accounting at the end of last year. The overall loss rate in third quarter for Wachovia's commercial and commercial real estate portfolio was roughly comparable to Wells Fargo's higher-quality commercial portfolio. While the industry is likely to experience elevated commercial and commercial real estate losses, we continue to believe we have one of the best commercial and commercial real estate loan portfolios among large bank peers given our long-standing underwriting discipline and because we wrote down Wachovia's commercial and commercial real estate portfolio when we closed the acquisition at year end."

Consumer losses were up 12 percent in the third quarter, with virtually all of the increase in Wachovia's consumer portfolios. Over 40 percent of the increase in Wachovia consumer loan losses came from the non-impaired Pick-a-Pay portfolio, in large part reflecting the lagging effect of purchase accounting. "We are currently expecting lower life-of-loan losses on the non-impaired Pick-a-Pay portfolio than originally assumed at the time of the merger," said Loughlin. Overall losses on legacy Wells Fargo's consumer portfolio were essentially flat linked quarter. "Given the actions we've previously taken to reduce higher-risk portfolios, given the life-of-loan loss write-downs we have taken through purchase accounting and given the substantially smaller exposure to credit cards and sub-prime loans, we are expecting consumer losses to potentially peak in the first half of 2010 and gradually decline as the year progresses.

"We remain comfortable with our original loss estimates for the impaired portfolio from Wachovia, and currently expect life-of-loan losses on the purchased credit-impaired (PCI) Pick-a-Pay portfolio to be lower than original estimates. Also, while increasing this year, losses in the non-impaired Pick-a-Pay portion of the Wachovia portfolio are tracking below our original estimates at the time we acquired Wachovia. We continue to expect the non-impaired portfolios to perform significantly better than the impaired portfolios that have already been written down through purchase accounting, and the Pick-a-Pay portfolio to perform better than other companies' option adjustable-rate mortgage portfolios."

Nonperforming assets

Total nonperforming assets (NPAs) were $23.5 billion (2.93 percent of total loans) at September 30, 2009, and included $20.9 billion of nonaccrual loans and $2.5 billion of foreclosed assets (repossessed real estate and vehicles).

     
                                           

Nonaccrual Loans and Other Nonperforming Assets

                            
          September 30, 2009       June 30, 2009       March 31, 2009    
              As a           As a           As a    
              % of           % of           % of    
              total           total           total    
($ in millions) Balances   loans       Balances   loans       Balances   loans    
                                           
Commercial and                                  
  commercial real estate:                                  
  Legacy Wells Fargo $ 6,037   3.53   %   $ 5,260   3.02   %   $ 3,860   2.13   %
  Wachovia   4,227   2.86         2,333   1.46         645   0.39    
Total commercial and                                  
  commercial real estate   10,264   3.22         7,593   2.28         4,505   1.30    
                                           
Consumer:                                  
  Legacy Wells Fargo   6,293   2.90         5,687   2.59         4,970   2.22    
  Wachovia   4,168   1.78         2,292   0.96         966   0.40    
Total consumer   10,461   2.32         7,979   1.74         5,936   1.27    
                                           
Foreign       144   0.48         226   0.75         75   0.24    
    Total nonaccrual loans   20,869   2.61         15,798   1.92         10,516   1.25    
                                           
Foreclosed assets:                                  
  Legacy Wells Fargo   1,756             1,741             1,421        
  Wachovia   771             783             641        
Total foreclosed assets   2,527             2,524             2,062        
                                           
Real estate and other                                  
  nonaccrual investments   55             20             34        
      Total nonaccrual loans and                                  
        other nonperforming assets $ 23,451   2.93   %   $ 18,342   2.23   %   $ 12,612   1.50   %
                                           
Change from prior quarter $ 5,109           $ 5,730           $ 3,603        

While commercial and commercial real estate nonaccrual loans were up in the quarter, the dollar amount of the increase declined in the quarter and the rate of growth slowed considerably. Legacy Wells Fargo's commercial and commercial real estate nonaccrual loans increased $777 million. The rate of growth in Wachovia's commercial and commercial real estate nonaccrual loans reflected some deterioration but was in line with management's expectations. Similarly, the growth rate in consumer nonaccrual loans also slowed in the quarter. Legacy Wells Fargo's consumer nonaccrual loans increased $606 million, about 11 percent, reflecting the more moderate deterioration the Company has experienced in consumer loans. Wachovia's Pick-a-Pay portfolio represents the largest portion of consumer nonaccrual loans. While up $1.2 billion in the third quarter, the increase in nonaccrual loans in the non-impaired Pick-a-Pay portfolio reflected the inflows to nonaccruals expected in the first few quarters after purchase accounting write-downs. The Company continued to actively modify non-PCI Pick-a-Pay loans through the use of troubled debt restructurings (TDRs), which temporarily keeps NPA levels elevated until the modified loans can demonstrate performance. To the extent these nonperforming loans return to accrual status, NPA growth should moderate.

The loss exposure expected in the nonperforming assets is significantly mitigated by three factors. First, 96 percent of our nonperforming loans (NPLs) are secured. Second, losses have already been recognized on 36 percent of the total. Residential real estate NPLs greater than 180 days old, or 41 percent of the total NPLs balance, have been written down to net realizable value. Third, there is a segment of NPLs for which there are specific reserves in the allowance, while other NPLs are covered by general reserves. "We believe that the allowance as of September 30, 2009, fully covers loss content embedded in the September 30, 2009 nonaccrual balances," said Loughlin.

           

Loans 90 Days or More Past Due and Still Accruing (1)

        
(Excluding Insured/Guaranteed GNMA and Similar Loans)        
Includes Wells Fargo and Wachovia        
      Sept. 30,   June 30,
(in millions)   2009   2009
           
Commercial and commercial real estate:        
Commercial   $ 458   415
Real estate mortgage     693   702
Real estate construction     930   860
Total commercial and commercial real estate     2,081   1,977
           
Consumer:        
Real estate 1-4 family first mortgage     1,552   1,497
Real estate 1-4 family junior lien mortgage     484   660
Credit card     683   680
Other revolving credit and installment     1,138   1,160
Total consumer     3,857   3,997
Foreign       76   32

Total loans

   $ 6,014   6,006

 

(1) The table above does not include PCI loans that were contractually 90 days past due and still accruing. These loans have a related nonaccretable difference that will absorb future losses; therefore charge-offs on these loans are not expected to reduce income in future periods to the extent that actual future loan performance is consistent with original estimates.

Loans 90 days or more past due and still accruing totaled $18.9 billion at September 30, 2009, and $16.7 billion at June 30, 2009. For the same periods, the totals included $12.9 billion and $10.7 billion, respectively, in advances pursuant to the Company's servicing agreement to Government National Mortgage Association (GNMA) mortgage pools and similar loans whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs.

Allowance for Credit Losses

(Includes Wells Fargo and, beginning December 31, 2008, Wachovia)

The allowance for credit losses, including the reserve for unfunded commitments, totaled $24.5 billion at September 30, 2009, compared with $23.5 billion at June 30, 2009. The credit reserve is driven by management's estimate of inherent losses in the loan portfolio at September 30, 2009. Of the $1.0 billion reserve increase in the third quarter, approximately $900 million reflected continued deterioration in the commercial portfolios. "We continued to see a decline in the quality of our performing commercial and commercial real estate portfolio as well as an increase in the amount of life-of-loan reserves taken on large commercial loans where we believe it is probable that we will not collect all amounts due," said Loughlin.

The remaining $100 million increase in the reserve relates mostly to the consumer loan portfolio and is principally due to the increasing level of residential real estate loan modifications classified as TDRs. The increased modifications this quarter resulted in an increase in the allowance of approximately $400 million compared with approximately $265 million last quarter. This increase was offset by approximately $345 million release in reserves related to performing consumer loans. "Based on our expectation that consumer related losses will peak in the first half of 2010 and then begin to gradually decline, the allowance required for performing consumer loans has decreased when compared to the allowance at the end of the second quarter 2009," said Loughlin.

The allowance coverage to total loans increased to 3.07 percent compared with 2.86 percent at June 30, 2009. The allowance coverage to NPLs was 118 percent as of September 30, 2009. "We believe the allowance was adequate for losses inherent in the loan portfolio at September 30, 2009, including both performing and nonperforming loans," said Loughlin.

Credit Summary

"We are two years into the most difficult credit cycle in recent memory," said Loughlin. "Economic challenges continue and we expect that credit costs will remain elevated in the fourth quarter. However, based on portfolio trends and our current economic outlook, and assuming no unexpected further deterioration in the economy, we believe consumer loan losses will peak in the first half of 2010 then gradually decline, while commercial and commercial real estate loan losses will peak in the second half of 2010 and then gradually decline. We expect nonperforming assets to continue to increase in the near term, but at a slower pace as credit deterioration slows. NPAs are expected to remain elevated through 2010. We are working closely with customers who are having difficulties to understand their challenges, identify possible solutions and minimize loss. We believe our experienced and stable management team is well equipped to navigate through the end of this cycle."

For additional detail on credit quality and trends, please refer to the quarterly supplement.

Business Segment Performance

Wells Fargo defines its operating segments by product type and customer segment. Segment net income for each of the three business segments was:

            Quarter ended
            Sept. 30,   June 30,
(in millions)     2009   2009
Community Banking   $ 2,667   2,008
Wholesale Banking     598   1,067
Wealth, Brokerage and Retirement     244   363

More financial information about the business segments is on pages 39 and 40.

Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including investment, insurance and trust services in 39 states and D.C., and mortgage and home equity loans in all 50 states and D.C.

Selected Financial Information
            Quarter ended
            Sept. 30,   June 30,
(in millions)     2009   2009
Total revenue   $ 15,143   14,807
Provision for credit losses     4,572   4,264
Noninterest expense     6,802   7,665
Segment net income     2,667   2,008
                 
(in billions)        
Average loans     534.7   540.7
Average assets     785.2   799.2
Average core deposits     530.3   543.9

Community Banking reported net income of $2.7 billion, up $659 million, or 131 percent (annualized), from second quarter. Revenue increased $336 million, or 9 percent (annualized), driven by strong regional banking and mortgage fee income partially offset by a decrease in net interest margin. Noninterest income increased $420 million, or 28 percent (annualized), from prior quarter driven by continued strength in mortgage banking and strong growth in deposit service charges and card fees. Noninterest expense decreased $863 million, or 45 percent (annualized), driven by higher second quarter FDIC deposit insurance assessments as well as expense reductions due to Wachovia merger-related cost saves. The provision for credit losses increased $308 million, and included a $236 million credit reserve build compared with a $479 million credit reserve build in the prior quarter.

Regional Banking Highlights for Legacy Wells Fargo

  • Record core product solutions (sales) of 6.84 million, up 10 percent from prior year on a comparable basis
  • Core sales per platform banker FTE (active, full-time equivalent) of 5.88 per day, up from 5.65 in prior year on a comparable basis
  • Record retail bank household cross-sell of Wells Fargo products of 5.90 products per household; 25 percent of retail bank households had 8 or more products, the Company's long-term goal
  • Sales of Wells Fargo Packages® (a checking account and at least three other products) up 14 percent from prior year, purchased by 78 percent of new checking account customers
  • Customer loyalty scores up 3 percent, and welcoming and wait time scores improved 7 percent from prior year (based on customers conducting transactions with tellers)
  • Business Banking
    • Store-based business solutions up 11 percent from prior year
    • Business Banking household cross-sell of 3.72 products per household
    • Sales of Wells Fargo Business Services Packages (business checking account and at least three other business products) up 18 percent from prior year, purchased by 55 percent of new business checking account customers

Regional Banking Highlights for Wachovia

  • Retail bank household cross-sell of Wachovia products of 4.65 products per household
  • Wachovia maintained its very high customer experience levels; scores continued to surpass prior year

Combined Regional Banking

  • Consumer checking accounts up a net 5.2 percent from prior year
  • Business checking accounts up a net 4.1 percent from prior year
  • Opened 15 banking stores for retail network total of 6,653 stores
  • 12,352 ATMs across our network, including 3,260 Envelope-FreeSM webATM machines
  • America's #1 small business lender for 7th consecutive year (in loans under $100,000), according to 2008 Community Reinvestment Act (CRA) data

Online Banking

  • 16.2 million combined active online customers
  • 3.9 million combined active Bill Pay customers
  • Global Finance Magazine ranked Wells Fargo the Best Consumer Internet Bank in the U.S. (July 2009)
  • Wells Fargo launched customer-to-customer mobile banking money transfers, a simple and secure way to send funds to family and friends

Wells Fargo Home Mortgage (Home Mortgage)

  • Home Mortgage applications of $123 billion, compared with $194 billion in prior quarter
  • Home Mortgage application pipeline of $62 billion at quarter end, compared with $90 billion at June 30, 2009
  • Home Mortgage originations of $96 billion, down from $129 billion in prior quarter
  • Owned residential mortgage servicing portfolio of $1.7 trillion

Wholesale Banking provides financial solutions to businesses across the United States with annual sales generally in excess of $10 million and financial institutions globally. Products include middle market banking, corporate banking, commercial real estate, treasury management, asset-based lending, insurance brokerage, foreign exchange, correspondent banking, trade services, specialized lending, equipment finance, corporate trust, investment banking, capital markets and asset management.

Selected Financial Information
            Quarter ended
            Sept. 30,   June 30,
(in millions)     2009   2009
Total revenue   $ 4,916   5,238
Provision for credit losses     1,361   738
Noninterest expense     2,630   2,807
Segment net income     598   1,067
                 
(in billions)        
Average loans     247.0   263.5
Average assets     369.3   381.7
Average core deposits     146.9   138.1

Wholesale Banking reported net income of $598 million compared with $1.07 billion in second quarter 2009. Revenue decreased $322 million, primarily due to strength in investment banking and capital markets revenue in the prior quarter, as well as insurance revenue seasonality. Average core deposits were $147 billion up 25 percent (annualized) from the prior quarter. Noninterest expense decreased $177 million, primarily due to lower FDIC deposit insurance assessments. The provision for credit losses was $1.36 billion, an increase of $623 million from the prior quarter, and included $627 million of additional provision recorded to build reserves for the wholesale portfolio, compared with a credit reserve build of $162 million in the prior quarter.

  • Government and Institutional Banking core deposits up 3 percent and noninterest income up 9 percent, driven by creation of integrated national platform of Wachovia and Wells Fargo capabilities, continued support of client credit needs and expansion in Public Finance
  • Total core deposits up 13 percent and noninterest income up 2 percent in Global Financial Institutions and Trade Services, as international bank liquidity continued to improve and trade and payment volumes increased
  • For 7th time in 8 years, Wells Fargo Shareowner ServicesSM received the TALON award as transfer agent ranked highest in Overall Satisfaction
  • Treasury Management introduced enhanced version of CEO Workstation®, an easy-to-use online cash management tool
  • Merger of Wachovia wholesale businesses on track to meet or exceed expected cost saves and is producing significant new growth opportunities from acquired businesses such as Government and Institutional Banking, Global Finance and Institutional Trade, and Investment Banking and Capital Markets

Wealth, Brokerage and Retirement provides a full range of financial advisory services to clients using a comprehensive planning approach to meet each client's needs. Wealth Management provides affluent and high net worth clients with a complete range of wealth management solutions including financial planning, private banking, credit, investment management and trust. Family Wealth meets the unique needs of the ultra high net worth customers. Retail Brokerage's financial advisors serve customers' advisory, brokerage and financial needs as part of one of the largest full-service brokerage firms in the U.S. Retirement provides retirement services for individual investors and is a national leader in 401(k) and pension record keeping.

Selected Financial Information
                 
            Quarter ended
            Sept. 30,   June 30,
(in millions)     2009   2009
Total revenue   $ 2,966   2,986
Provision for credit losses     234   115
Noninterest expense     2,314   2,289
Segment net income     244   363
                 
(in billions)        
Average loans     45.4   45.9
Average assets     108.6   110.2
Average core deposits     116.4   113.5

Wealth, Brokerage and Retirement reported net income of $244 million, compared with $363 million in the prior quarter. Revenue was $3.0 billion consistent with the prior quarter's levels as the strong equity market recovery led to increases in client assets across the brokerage, wealth and retirement businesses, driving solid revenue growth, partially offset by lower realized gains on sales of securities available for sale in the brokerage business. Total provision for credit losses increased $119 million from the prior quarter, largely reflecting a credit reserve build of $137 million in third quarter due to higher loss rates. Average core deposits increased $2.9 billion, or 10 percent (annualized), from second quarter, reflecting continued success in attracting client assets, including deposits.

Retail Brokerage

  • Client assets increased 8 percent to $1.1 trillion from prior quarter
  • Managed account assets increased $23 billion, or 14 percent, from prior quarter, including net inflows of $8 billion
  • Brokerage transactional revenue increased 2 percent from prior quarter

Wealth Management

  • Continued strong deposit growth, with average balances up 8 percent from prior quarter
  • Trust assets of $119 billion, up 7 percent from prior quarter

Retirement

  • Retirement plan assets of $271 billion increased $22 billion, or 9 percent, from prior quarter
  • IRA assets of $231 billion increased $20 billion, or 9 percent, from prior quarter
  • Integrated sales approach, firm stability and scale in the business, drove key new business wins in institutional retirement

Recorded Message

A recorded message reviewing Wells Fargo's results is available at 5:30 a.m. Pacific Time through October 24, 2009. Dial 866-416-0522 (domestic) or 706-902-3479 (international). No password is required. The call is also available online at wellsfargo.com/invest_relations/earnings.

Cautionary Statement About Forward-Looking Information

In accordance with the Private Securities Litigation Reform Act of 1995, we caution you that this news release contains forward-looking statements about our future financial performance and business. We make forward-looking statements when we use words such as "believe," "expect," "anticipate," "estimate," "should," "may," "can," "will," "outlook," "project" or similar expressions. Forward-looking statements in this news release include, among others, statements about: (i) future credit quality, the adequacy of the allowance for loan losses, the level of nonperforming assets and nonaccrual loans, expected or estimated future losses in our loan portfolios and life-of-loan loss estimates, including that we currently expect that credit losses will peak in 2010, absent further deterioration in the economy, with consumer loan losses expected to peak in the first half of 2010 and commercial and commercial real estate loan losses expected to peak later in 2010, and that the pick-a-pay portfolios, both purchased credit-impaired and non-impaired, will perform better than management's expectations at the time of the Wachovia merger; (ii) reduction or mitigation of risk in our loan portfolios and the effects of loan modification programs; (iii) the amount and timing of expected integration activities, expenses and cost savings relating to the Wachovia merger, as well as the expected synergies and benefits of the merger, including that we currently estimate merger expenses of approximately $5.5 billion and that we currently are on track to achieve $5.0 billion annual run rate cost savings by the expected completion of the integration in 2011; (iv) the status of our capital requirements under the Supervisory Capital Assessment Program; and (v) our preliminary estimates to add assets to our consolidated financial statements upon the implementation of FAS 166 and FAS 167.

Do not unduly rely on forward-looking statements as actual results could differ materially from expectations. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date. Several factors could cause actual results to differ materially from expectations including: current and future economic and market conditions, including the effects of further declines in housing prices and high unemployment rates; our capital requirements and our ability to generate capital internally or raise capital on favorable terms; the terms of capital investments or other financial assistance provided by the U.S. government; legislative proposals to allow mortgage cram-downs in bankruptcy or force other loan modifications; the extent of success in our loan modification efforts; our ability to successfully and timely integrate the Wachovia merger and realize the expected cost savings and other benefits, including delays or disruptions in system conversions and higher severance costs; our ability to realize efficiency initiatives to lower expenses when and in the amount expected; recognition of other-than-temporary impairment on securities held in our available-for-sale portfolio; the effect of changes in interest rates on our net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale; hedging gains or losses; disruptions in the capital markets and reduced investor demand for mortgage loans; our ability to sell more products to our customers; the effect of the economic recession on the demand for our products and services; the effect of fluctuations in stock market prices on fee income from our brokerage, asset and wealth management businesses; our election to provide support to our mutual funds for structured credit products they may hold; changes in the value of our venture capital investments; changes in our accounting policies or in accounting standards or in how accounting standards are to be applied, including the implementation of FAS 166 and FAS 167 and its effects on the consolidation of additional assets on our balance sheet; mergers and acquisitions; federal and state regulations; reputational damage from negative publicity, fines, penalties and other negative consequences from regulatory violations, the loss of checking and saving account deposits to other investments such as the stock market, and fiscal and monetary policies of the Federal Reserve Board. There is no assurance that our allowance for credit losses will be adequate to cover future credit losses, especially if credit markets, housing prices, and unemployment do not stabilize or improve. Increases in loan charge-offs or in the allowance for credit losses and related provision expense could materially adversely affect our financial results and condition. There is no assurance that we will meet the SCAP capital requirement on the November 9, 2009, deadline established by the Federal Reserve Board. Although we exceeded the requirement at September 30, 2009, our common equity capital could fall between now and the deadline, causing us not to meet the requirement. Failure to meet the requirement could result in the issuance of equity securities or the conversion of preferred securities into common stock, resulting in substantial dilution to existing stockholders. There is no assurance as to when or how we will repay the government's investment or that we will be able to repay the investment in a manner that does not require the issuance of equity securities resulting in substantial dilution to existing stockholders. For more information about factors that could cause actual results to differ materially from our expectations, refer to our reports filed with the Securities and Exchange Commission, including our Quarterly Reports on Form 10-Q for the periods ended March 31, 2009, and June 30, 2009, and our Annual Report on Form 10-K for the year ended December 31, 2008, including the discussions under "Risk Factors" in each of those reports, as filed with the SEC and available on the SEC's website at www.sec.gov. Any factor described above or in our SEC reports could, by itself or together with one or more other factors, adversely affect our financial results and condition.

About Wells Fargo

Wells Fargo & Company is a diversified financial services company with $1.2 trillion in assets, providing banking, insurance, investments, mortgage and consumer finance through more than 10,000 stores, over 12,000 ATMs and the internet (wellsfargo.com) across North America and internationally.

Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA (1) (2)
                       
                       
        Quarter ended Sept. 30,   Nine months ended Sept. 30,
($ in millions, except per share amounts)     2009     2008   2009   2008
For the Period                  
Wells Fargo net income   $ 3,235     1,637   9,452   5,389
Wells Fargo net income applicable to common stock     2,637     1,637   7,596   5,389
Diluted earnings per common share     0.56     0.49   1.69   1.62
Profitability ratios (annualized):                  
  Wells Fargo net income to average assets (ROA)     1.03 %   1.06   1.00   1.21
  Net income to average assets     1.06     1.07   1.02   1.22
 

Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders' equity (ROE)

     12.04     13.63   13.29   15.02
  Net income to average total equity     10.57     13.66   11.32   15.06
Efficiency ratio (3)     52.0     53.0   54.9   51.8
Total revenue   $ 22,466     10,377   65,990   32,400
Pre-tax pre-provision profit (PTPP) (4)     10,782     4,876   29,791   15,612
Dividends declared per common share     0.05     0.34   0.44   0.96
Average common shares outstanding     4,678.3     3,316.4   4,471.2   3,309.6
Diluted average common shares outstanding     4,706.4     3,331.0   4,485.3   3,323.4
Average loans   $ 810,191     404,203   833,076   393,262
Average assets     1,246,051     614,194   1,270,071   594,717
Average core deposits (5)     759,319     320,074   759,668   318,582
Average retail core deposits (6)     584,414     234,140   590,499   230,935
Net interest margin     4.36 %   4.79   4.27   4.80
At Period End                  
Securities available for sale   $ 183,814     86,882   183,814   86,882
Loans     799,952     411,049   799,952   411,049
Allowance for loan losses     24,028     7,865   24,028   7,865
Goodwill     24,052     13,520   24,052   13,520
Assets     1,228,625     622,361   1,228,625   622,361
Core deposits (5)     747,913     334,076   747,913   334,076
Wells Fargo stockholders' equity     122,150     46,957   122,150   46,957
Total equity     128,924     47,259   128,924   47,259
Capital ratios:                  
  Wells Fargo common stockholders' equity to assets     7.41 %   7.54   7.41   7.54
  Total equity to assets     10.49     7.59   10.49   7.59
  Average Wells Fargo common stockholders' equity to average assets     6.98     7.78   6.02   8.06
  Average total equity to average assets     9.99     7.83   8.98   8.11
  Risk-based capital (7)                  
    Tier 1 capital     10.63     8.59   10.63   8.59
    Total capital     14.66     11.51   14.66   11.51
  Tier 1 leverage (7)     9.03     7.54   9.03   7.54
Book value per common share   $ 19.46     14.14   19.46   14.14
Team members (active, full-time equivalent)     265,100     159,000   265,100   159,000
Common stock price:                  
  High   $ 29.56     44.68   30.47   44.68
  Low     22.08     20.46   7.80   20.46
  Period end     28.18     37.53   28.18   37.53
                       
                       
(1) Wells Fargo & Company (Wells Fargo) acquired Wachovia Corporation (Wachovia) on December 31, 2008. Because the acquisition was completed on December 31, 2008, Wachovia's results are included in the income statement, average balances and related metrics beginning in 2009. Wachovia's assets and liabilities are included in the consolidated balance sheet beginning on December 31, 2008.
(2) On January 1, 2009, we adopted new accounting guidance on noncontrolling interests contained in FASB ASC 810-10, Consolidation (Statement of Financial Accounting Standards (FAS) No. 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51), on a retrospective basis for disclosure and, accordingly, prior period information reflects the adoption. The guidance requires that noncontrolling interests be reported as a component of total equity.
(3) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(4) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company's ability to generate capital to cover credit losses through a credit cycle.
(5) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(6) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(7) The September 30, 2009, ratios are preliminary.
Wells Fargo & Company and Subsidiaries

FIVE QUARTER SUMMARY FINANCIAL DATA (1) (2)
                         
                         
        Quarter ended
        Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,
($ in millions, except per share amounts)     2009   2009   2009   2008     2008
For the Quarter                    
Wells Fargo net income (loss)   $ 3,235   3,172   3,045   (2,734 )   1,637
Wells Fargo net income (loss) applicable to common stock     2,637   2,575   2,384   (3,020 )   1,637
Diluted earnings (loss) per common share     0.56   0.57   0.56   (0.84 )   0.49
Profitability ratios (annualized):                    
  Wells Fargo net income (loss) to average assets (ROA)     1.03 % 1.00   0.96   (1.72 )   1.06
  Net income (loss) to average assets     1.06   1.02   0.97   (1.72 )   1.07
 

Wells Fargo net income (loss) applicable to common stock to average Wells Fargo common stockholders' equity (ROE)

     12.04   13.70   14.49   (22.32 )   13.63
  Net income (loss) to average total equity     10.57   11.56   11.97   (15.53 )   13.66
Efficiency ratio (3)     52.0   56.4   56.2   61.3     53.0
Total revenue   $ 22,466   22,507   21,017   9,477     10,377
Pre-tax pre-provision profit (PTPP) (4)     10,782   9,810   9,199   3,667     4,876
Dividends declared per common share     0.05   0.05   0.34   0.34     0.34
Average common shares outstanding     4,678.3   4,483.1   4,247.4   3,582.4     3,316.4
Diluted average common shares outstanding     4,706.4   4,501.6   4,249.3   3,593.6     3,331.0
Average loans   $ 810,191   833,945   855,591   413,940     404,203
Average assets     1,246,051   1,274,926   1,289,716   633,223     614,194
Average core deposits (5)     759,319   765,697   753,928   344,957     320,074
Average retail core deposits (6)     584,414   596,648   590,502   243,464     234,140
Net interest margin     4.36 % 4.30   4.16   4.90     4.79
At Quarter End                    
Securities available for sale   $ 183,814   206,795   178,468   151,569     86,882
Loans     799,952   821,614   843,579   864,830     411,049
Allowance for loan losses     24,028   23,035   22,281   21,013     7,865
Goodwill     24,052   24,619   23,825   22,627     13,520
Assets     1,228,625   1,284,176   1,285,891   1,309,639     622,361
Core deposits (5)     747,913   761,122   756,183   745,432     334,076
Wells Fargo stockholders' equity     122,150   114,623   100,295   99,084     46,957
Total equity     128,924   121,382   107,057   102,316     47,259
Capital ratios:                    
  Wells Fargo common stockholders' equity to assets     7.41 % 6.51   5.40   5.21     7.54
  Total equity to assets     10.49   9.45   8.33   7.81     7.59
  Average Wells Fargo common stockholders' equity to average assets     6.98   5.92   5.17   8.50     7.78
  Average total equity to average assets     9.99   8.85   8.11   11.09     7.83
  Risk-based capital (7)                    
    Tier 1 capital     10.63   9.80   8.30   7.84     8.59
    Total capital     14.66   13.84   12.30   11.83     11.51
  Tier 1 leverage (7)     9.03   8.32   7.09   14.52     7.54
Book value per common share   $ 19.46   17.91   16.28   16.15     14.14
Team members (active, full-time equivalent)     265,100   269,900   272,800   270,800     159,000
Common stock price:                    
  High   $ 29.56   28.45   30.47   38.95     44.68
  Low     22.08   13.65   7.80   19.89     20.46
  Period end     28.18   24.26   14.24   29.48     37.53
                         
                         
(1) Wells Fargo & Company (Wells Fargo) acquired Wachovia Corporation (Wachovia) on December 31, 2008. Because the acquisition was completed on December 31, 2008, Wachovia's results are included in the income statement, average balances and related metrics beginning in 2009. Wachovia's assets and liabilities are included in the consolidated balance sheet beginning on December 31, 2008.
(2) On January 1, 2009, we adopted new accounting guidance on noncontrolling interests contained in FASB ASC 810-10, Consolidation (Statement of Financial Accounting Standards (FAS) No. 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51), on a retrospective basis for disclosure and, accordingly, prior period information reflects the adoption. The guidance requires that noncontrolling interests be reported as a component of total equity.
(3) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(4) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company's ability to generate capital to cover credit losses through a credit cycle.
(5) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(6) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(7) The September 30, 2009, ratios are preliminary. Because the Wachovia acquisition was completed on December 31, 2008, the Tier 1 leverage ratio at December 31, 2008, which considers period-end Tier 1 capital and quarterly average assets in the computation of the ratio, does not reflect average assets of Wachovia for 2008.
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
                     
                     
        Quarter ended Sept. 30,   Nine months ended Sept. 30,
(in millions, except per share amounts)   2009   2008   2009   2008
Interest income                
Trading assets   $ 216     41     688     126  
Securities available for sale     2,947     1,397     8,543     3,753  
Mortgages held for sale     524     394     1,484     1,211  
Loans held for sale     34     12     151     34  
Loans     10,170     6,888     31,467     20,906  
Other interest income     77     42     249     140  
  Total interest income     13,968     8,774     42,582     26,170  
Interest expense                
Deposits     905     1,019     2,861     3,676  
Short-term borrowings     32     492     210     1,274  
Long-term debt     1,301     882     4,565     2,801  
Other interest expense     46     -     122     -  
  Total interest expense     2,284     2,393     7,758     7,751  
Net interest income     11,684     6,381     34,824     18,419  
Provision for credit losses     6,111     2,495     15,755     7,535  
Net interest income after provision for credit losses     5,573     3,886     19,069     10,884  
Noninterest income                
Service charges on deposit accounts     1,478     839     4,320     2,387  
Trust and investment fees     2,502     738     7,130     2,263  
Card fees     946     601     2,722     1,747  
Other fees     950     552     2,814     1,562  
Mortgage banking     3,067     892     8,617     2,720  
Insurance     468     439     1,644     1,493  

Net gains (losses) on debt securities available for sale (includes impairment losses of $273 and $850, consisting of $314 and $1,889 of total other-than-temporary impairment losses, net of $41 and $1,039 recognized in other comprehensive income, for the quarter and nine months ended September 30, 2009, respectively)

     (40 )   84     (237 )   316  
Net gains (losses) from equity investments     29     (509 )   (88 )   (149 )
Other     1,382     360     4,244     1,642  
  Total noninterest income     10,782     3,996     31,166     13,981  
Noninterest expense                
Salaries     3,428     2,078     10,252     6,092  
Commission and incentive compensation     2,051     555     5,935     2,005  
Employee benefits     1,034     486     3,545     1,666  
Equipment     563     302     1,825     955  
Net occupancy     778     402     2,357     1,201  
Core deposit and other intangibles     642     47     1,935     139  
FDIC and other deposit assessments     228     37     1,547     63  
Other     2,960     1,594     8,803     4,667  
  Total noninterest expense     11,684     5,501     36,199     16,788  
Income before income tax expense     4,671     2,381     14,036     8,077  
Income tax expense     1,355     730     4,382     2,638  
Net income before noncontrolling interests     3,316     1,651     9,654     5,439  
Less: Net income from noncontrolling interests     81     14     202     50  
Wells Fargo net income   $ 3,235     1,637     9,452     5,389  
Wells Fargo net income applicable to common stock   $ 2,637     1,637     7,596     5,389  
Per share information                
Earnings per common share   $ 0.56     0.49     1.70     1.63  
Diluted earnings per common share     0.56     0.49     1.69     1.62  
Dividends declared per common share     0.05     0.34     0.44     0.96  
Average common shares outstanding     4,678.3     3,316.4     4,471.2     3,309.6  
Diluted average common shares outstanding     4,706.4     3,331.0     4,485.3     3,323.4  
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
                         
                         
        Quarter ended
        Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,
(in millions, except per share amounts)   2009   2009   2009   2008   2008
Interest income                    
Trading assets   $ 216     206     266     51     41  
Securities available for sale     2,947     2,887     2,709     1,534     1,397  
Mortgages held for sale     524     545     415     362     394  
Loans held for sale     34     50     67     14     12  
Loans     10,170     10,532     10,765     6,726     6,888  
Other interest income     77     81     91     41     42  
  Total interest income     13,968     14,301     14,313     8,728     8,774  
Interest expense                    
Deposits     905     957     999     845     1,019  
Short-term borrowings     32     55     123     204     492  
Long-term debt     1,301     1,485     1,779     955     882  
Other interest expense     46     40     36     -     -  
  Total interest expense     2,284     2,537     2,937     2,004     2,393  
Net interest income     11,684     11,764     11,376     6,724     6,381  
Provision for credit losses     6,111     5,086     4,558     8,444     2,495  
Net interest income after provision for credit losses     5,573     6,678     6,818     (1,720 )   3,886  
Noninterest income                    
Service charges on deposit accounts     1,478     1,448     1,394     803     839  
Trust and investment fees     2,502     2,413     2,215     661     738  
Card fees     946     923     853     589     601  
Other fees     950     963     901     535     552  
Mortgage banking     3,067     3,046     2,504     (195 )   892  
Insurance     468     595     581     337     439  
Net gains (losses) on debt securities available for sale     (40 )   (78 )   (119 )   721     84  
Net gains (losses) from equity investments     29     40     (157 )   (608 )   (509 )
Other     1,382     1,393     1,469     (90 )   360  
  Total noninterest income     10,782     10,743     9,641     2,753     3,996  
Noninterest expense                    
Salaries     3,428     3,438     3,386     2,168     2,078  
Commission and incentive compensation     2,051     2,060     1,824     671     555  
Employee benefits     1,034     1,227     1,284     338     486  
Equipment     563     575     687     402     302  
Net occupancy     778     783     796     418     402  
Core deposit and other intangibles     642     646     647     47     47  
FDIC and other deposit assessments     228     981     338     57     37  
Other     2,960     2,987     2,856     1,709     1,594  
  Total noninterest expense     11,684     12,697     11,818     5,810     5,501  
Income (loss) before income tax expense (benefit)     4,671     4,724     4,641     (4,777 )   2,381  
Income tax expense (benefit)     1,355     1,475     1,552     (2,036 )   730  
Net income (loss) before noncontrolling interests     3,316     3,249     3,089     (2,741 )   1,651  
Less: Net income (loss) from noncontrolling interests     81     77     44     (7 )   14  
Wells Fargo net income (loss)   $ 3,235     3,172     3,045     (2,734 )   1,637  
Wells Fargo net income (loss) applicable to common stock   $ 2,637     2,575     2,384     (3,020 )   1,637  
Per share information                    
Earnings (loss) per common share   $ 0.56     0.58     0.56     (0.84 )   0.49  
Diluted earnings (loss) per common share     0.56     0.57     0.56     (0.84 )   0.49  
Dividends declared per common share     0.05     0.05     0.34     0.34     0.34  
Average common shares outstanding     4,678.3     4,483.1     4,247.4     3,582.4     3,316.4  
Diluted average common shares outstanding     4,706.4     4,501.6     4,249.3     3,593.6     3,331.0  
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
                                           
                                           
                  Quarter ended September 30,
                  2009   2008
                            Interest             Interest
                  Average   Yields/     income/   Average   Yields/     income/
(in millions)   balance   rates     expense   balance   rates     expense
Earning assets                              

Federal funds sold, securities purchased under resale agreements and other short-term investments

   $ 16,356     0.66 %   $ 27   3,463     2.09 %   $ 18
Trading assets       20,518     4.29       221   4,838     3.72       46
Debt securities available for sale (3):                              
  Securities of U.S. Treasury and federal agencies     2,545     3.79       24   1,141     3.99       11
  Securities of U.S. states and political subdivisions     12,818     6.28       204   7,211     6.65       124
  Mortgage-backed securities:                            
    Federal agencies     94,457     5.34       1,221   50,528     5.83       731
    Residential and commercial     43,214     9.56       1,089   21,358     5.82       346
      Total mortgage-backed securities     137,671     6.75       2,310   71,886     5.83       1,077
  Other debt securities (4)     33,294     7.00       568   12,622     7.17       248
        Total debt securities available for sale (4)     186,328     6.72       3,106   92,860     6.06       1,460
Mortgages held for sale (5)     40,604     5.16       524   24,990     6.31       394
Loans held for sale (5)     4,975     2.67       34   677     6.95       12
Loans:                            
  Commercial and commercial real estate:                            
    Commercial     175,642     4.34       1,919   100,688     5.92       1,496
    Real estate mortgage     103,450     3.39       883   43,616     5.60       615
    Real estate construction     32,649     3.02       249   19,715     4.82       238
    Lease financing     14,360     9.14       328   7,250     5.48       100
      Total commercial and commercial real estate     326,101     4.12       3,379   171,269     5.69       2,449
  Consumer:                            
    Real estate 1-4 family first mortgage     235,051     5.35       3,154   76,197     6.64       1,265
    Real estate 1-4 family junior lien mortgage     105,779     4.62       1,229   75,379     6.36       1,206
    Credit card     23,448     11.65       683   19,948     12.19       609
    Other revolving credit and installment     90,199     6.48       1,473   54,104     8.64       1,175
      Total consumer     454,477     5.73       6,539   225,628     7.52       4,255
  Foreign     29,613     3.61       270   7,306     10.28       188
        Total loans (5)     810,191     5.00       10,188   404,203     6.79       6,892
Other     6,088     3.29       49   2,126     4.64       24
          Total earning assets   $ 1,085,060     5.20 %   $ 14,149   533,157     6.57 %   $ 8,846
Funding sources                            
Deposits:                            
  Interest-bearing checking   $ 59,467     0.15 %   $ 21   5,483     0.87 %   $ 12
  Market rate and other savings     369,120     0.34       317   166,710     1.18       495
  Savings certificates     129,698     1.35       442   37,192     2.57       240
  Other time deposits     18,248     1.93       89   7,930     2.59       53
  Deposits in foreign offices     56,820     0.25       36   49,054     1.78       219
      Total interest-bearing deposits     633,353     0.57       905   266,369     1.52       1,019
Short-term borrowings     39,828     0.35       36   83,458     2.35       492
Long-term debt     222,580     2.33       1,301   103,745     3.43       892
Other liabilities     5,620     3.30       46   -     -       -
      Total interest-bearing liabilities     901,381     1.01       2,288   453,572     2.11       2,403
Portion of noninterest-bearing funding sources     183,679     -       -   79,585     -       -
          Total funding sources   $ 1,085,060     0.84       2,288   533,157     1.78       2,403

Net interest margin and net interest income on a taxable-equivalent basis (6)

       4.36 %   $ 11,861       4.79 %   $ 6,443
Noninterest-earning assets                            
Cash and due from banks   $ 18,084               11,024            
Goodwill     24,435               13,531            
Other     118,472               56,482            
          Total noninterest-earning assets   $ 160,991               81,037            
Noninterest-bearing funding sources                            
Deposits   $ 172,588               87,095            
Other liabilities     47,646               25,452            
Total equity     124,436               48,075            

Noninterest-bearing funding sources used to fund earning assets

     (183,679 )             (79,585 )          
          Net noninterest-bearing funding sources   $ 160,991               81,037            
            Total assets   $ 1,246,051               614,194            
                                           
                                           
(1) Our average prime rate was 3.25% and 5.00% for the quarters ended September 30, 2009 and 2008, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.41% and 2.91% for the same quarters, respectively.
(2) Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Yields are based on amortized cost balances computed on a settlement date basis.
(4) Includes certain preferred securities.
(5) Nonaccrual loans and related income are included in their respective loan categories.
(6) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.
Wells Fargo & Company and Subsidiaries  
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)  
                                         
                                         
                Nine months ended September 30,
                2009   2008
                          Interest             Interest
                Average   Yields/     income/   Average   Yields/     income/
(in millions)   balance   rates     expense   balance   rates     expense
Earning assets                            

Federal funds sold, securities purchased under resale agreements and other short-term investments

   $ 20,411     0.73 %   $ 111   3,734     2.59 %   $ 72
Trading assets     20,389     4.64       709   4,960     3.57       133
Debt securities available for sale (3):                            
  Securities of U.S. Treasury and federal agencies     2,514     2.61       48   1,055     3.88       30
  Securities of U.S. states and political subdivisions     12,409     6.39       623   6,848     6.88       362
  Mortgage-backed securities:                            
    Federal agencies     87,916     5.45       3,492   42,448     5.93       1,854
    Residential and commercial     41,070     9.05       3,150   21,589     5.92       1,010
      Total mortgage-backed securities     128,986     6.72       6,642   64,037     5.92       2,864
  Other debt securities (4)     31,437     7.01       1,691   12,351     6.78       670
        Total debt securities available for sale (4)     175,346     6.69       9,004   84,291     6.11       3,926
Mortgages held for sale (5)     38,315     5.16       1,484   26,417     6.11       1,211
Loans held for sale (5)     6,693     3.01       151   686     6.66       34
Loans:                            
  Commercial and commercial real estate:                            
    Commercial     186,610     4.10       5,725   95,697     6.29       4,509
    Real estate mortgage     104,003     3.44       2,677   40,351     5.91       1,788
    Real estate construction     33,660     2.92       734   19,288     5.29       763
    Lease financing     14,968     9.04       1,015   7,055     5.63       298
      Total commercial and commercial real estate     339,241     4.00       10,151   162,391     6.05       7,358
  Consumer:                            
    Real estate 1-4 family first mortgage     240,409     5.51       9,926   74,064     6.77       3,761
    Real estate 1-4 family junior lien mortgage     108,094     4.81       3,894   75,220     6.78       3,820
    Credit card     23,236     12.16       2,118   19,256     12.11       1,749
    Other revolving credit and installment     91,240     6.60       4,502   54,949     8.84       3,637
      Total consumer     462,979     5.90       20,440   223,489     7.74       12,967
  Foreign     30,856     4.02       929   7,382     10.72       592
        Total loans (5)     833,076     5.05       31,520   393,262     7.10       20,917
Other     6,102     3.02       137   1,995     4.55       68
          Total earning assets   $ 1,100,332     5.21 %   $ 43,116   515,345     6.81 %   $ 26,361
Funding sources                            
Deposits:                            
  Interest-bearing checking   $ 73,195     0.14 %   $ 77   5,399     1.31 %   $ 53
  Market rate and other savings     339,081     0.42       1,072   162,792     1.45       1,765
  Savings certificates     150,607     1.14       1,280   38,907     3.23       940
  Other time deposits     21,794     1.97       321   6,163     2.87       133
  Deposits in foreign offices     50,907     0.29       111   49,192     2.13       785
      Total interest-bearing deposits     635,584     0.60       2,861   262,453     1.87       3,676
Short-term borrowings     58,447     0.50       217   67,714     2.51       1,274
Long-term debt     238,909     2.55       4,568   101,668     3.71       2,825
Other liabilities     4,675     3.50       122   -     -       -
      Total interest-bearing liabilities     937,615     1.11       7,768   431,835     2.40       7,775
Portion of noninterest-bearing funding sources     162,717     -       -   83,510     -       -
          Total funding sources   $ 1,100,332     0.94       7,768   515,345     2.01       7,775

 

                            

Net interest margin and net interest income on a taxable-equivalent basis (6)

       4.27 %   $ 35,348       4.80 %   $ 18,586
Noninterest-earning assets                            
Cash and due from banks   $ 19,218               11,182            
Goodwill     23,964               13,289            
Other     126,557               54,901            
          Total noninterest-earning assets   $ 169,739               79,372            
Noninterest-bearing funding sources                            
Deposits   $ 169,187               86,676            
Other liabilities     49,249               27,973            
Total equity     114,020               48,233            

Noninterest-bearing funding sources used to fund earning assets

     (162,717 )             (83,510 )          
          Net noninterest-bearing funding sources   $ 169,739               79,372            
            Total assets   $ 1,270,071               594,717            
                                         
                                         
(1) Our average prime rate was 3.25% and 5.43% for the nine months ended September 30, 2009 and 2008, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.83% and 2.98% for the same periods, respectively.
(2) Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3) Yields are based on amortized cost balances computed on a settlement date basis.
(4) Includes certain preferred securities.
(5) Nonaccrual loans and related income are included in their respective loan categories.
(6) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.
Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME
                       
                       
          Quarter ended Sept. 30,   Nine months ended Sept. 30,
(in millions)     2009     2008     2009     2008  
Service charges on deposit accounts   $ 1,478     839     4,320     2,387  
Trust and investment fees:                
  Trust, investment and IRA fees     989     549     2,550     1,674  
  Commissions and all other fees     1,513     189     4,580     589  
    Total trust and investment fees     2,502     738     7,130     2,263  
Card fees     946     601     2,722     1,747  
Other fees:                
  Cash network fees     60     48     176     143  
  Charges and fees on loans     453     266     1,326     765  
  All other fees     437     238     1,312     654  
    Total other fees     950     552     2,814     1,562  
Mortgage banking:                
  Servicing income, net     1,873     525     3,469     1,019  
  Net gains on mortgage loan origination/sales activities     1,125     276     4,910     1,419  
  All other     69     91     238     282  
    Total mortgage banking     3,067     892     8,617     2,720  
Insurance     468     439     1,644     1,493  
Net gains from trading activities     622     65     2,158     684  
Net gains (losses) on debt securities available for sale     (40 )   84     (237 )   316  
Net gains (losses) from equity investments     29     (509 )   (88 )   (149 )
Operating leases     224     102     522     365  
All other     536     193     1,564     593  
      Total   $ 10,782     3,996     31,166     13,981  
                       
NONINTEREST EXPENSE                
                       
                       
          Quarter ended Sept. 30,   Nine months ended Sept. 30,
(in millions)     2009     2008     2009     2008  
Salaries   $ 3,428     2,078     10,252     6,092  
Commission and incentive compensation     2,051     555     5,935     2,005  
Employee benefits     1,034     486     3,545     1,666  
Equipment     563     302     1,825     955  
Net occupancy     778     402     2,357     1,201  
Core deposit and other intangibles     642     47     1,935     139  
FDIC and other deposit assessments     228     37     1,547     63  
Outside professional services     489     206     1,350     589  
Insurance     208     144     734     511  
Postage, stationery and supplies     211     136     701     415  
Outside data processing     251     122     745     353  
Travel and entertainment     151     113     387     330  
Foreclosed assets     243     99     678     298  
Contract services     254     88     726     300  
Operating leases     52     90     183     308  
Advertising and promotion     160     96     396     285  
Telecommunications     142     78     464     238  
Operating losses     117     63     448     46  
All other     682     359     1,991     994  
  Total   $ 11,684     5,501     36,199     16,788  
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
                           
                           
          Quarter ended
          Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,
(in millions)   2009   2009   2009   2008   2008
Service charges on deposit accounts   $ 1,478     1,448     1,394     803     839  
Trust and investment fees:                    
  Trust, investment and IRA fees     989     839     722     487     549  
  Commissions and all other fees     1,513     1,574     1,493     174     189  
    Total trust and investment fees     2,502     2,413     2,215     661     738  
Card fees     946     923     853     589     601  
Other fees:                    
  Cash network fees     60     58     58     45     48  
  Charges and fees on loans     453     440     433     272     266  
  All other fees     437     465     410     218     238  
    Total other fees     950     963     901     535     552  
Mortgage banking:                    
  Servicing income, net     1,873     753     843     (40 )   525  
 

Net gains (losses) on mortgage loan origination/sales activities

     1,125     2,203     1,582     (236 )   276  
  All other     69     90     79     81     91  
    Total mortgage banking     3,067     3,046     2,504     (195 )   892  
Insurance     468     595     581     337     439  
Net gains (losses) from trading activities     622     749     787     (409 )   65  
Net gains (losses) on debt securities available for sale     (40 )   (78 )   (119 )   721     84  
Net gains (losses) from equity investments     29     40     (157 )   (608 )   (509 )
Operating leases     224     168     130     62     102  
All other     536     476     552     257     193  
      Total   $ 10,782     10,743     9,641     2,753     3,996  
                           
FIVE QUARTER NONINTEREST EXPENSE                    
                           
                           
          Quarter ended
          Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,
(in millions)   2009   2009   2009   2008   2008
Salaries   $ 3,428     3,438     3,386     2,168     2,078  
Commission and incentive compensation     2,051     2,060     1,824     671     555  
Employee benefits     1,034     1,227     1,284     338     486  
Equipment     563     575     687     402     302  
Net occupancy     778     783     796     418     402  
Core deposit and other intangibles     642     646     647     47     47  
FDIC and other deposit assessments     228     981     338     57     37  
Outside professional services     489     451     410     258     206  
Insurance     208     259     267     214     144  
Postage, stationery and supplies     211     240     250     141     136  
Outside data processing     251     282     212     127     122  
Travel and entertainment     151     131     105     117     113  
Foreclosed assets     243     187     248     116     99  
Contract services     254     256     216     107     88  
Operating leases     52     61     70     81     90  
Advertising and promotion     160     111     125     93     96  
Telecommunications     142     164     158     83     78  
Operating losses     117     159     172     96     63  
All other     682     686     623     276     359  
  Total   $ 11,684     12,697     11,818     5,810     5,501  
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET		  
(in millions, except shares)   Sept. 30,
2009		     Dec. 31,
2008		  
Assets            
Cash and due from banks   $ 17,233     23,763  

Federal funds sold, securities purchased under resale agreements and other short-term investments

     17,491     49,433  
Trading assets     43,198     54,884  
Securities available for sale     183,814     151,569  
Mortgages held for sale (includes $33,435 and $18,754 carried at fair value)     35,538     20,088  
Loans held for sale (includes $201 and $398 carried at fair value)     5,846     6,228  
             
Loans     799,952     864,830  
Allowance for loan losses     (24,028 )   (21,013 )
Net loans     775,924     843,817  
Mortgage servicing rights:            
Measured at fair value (residential MSRs)     14,500     14,714  
Amortized     1,162     1,446  
Premises and equipment, net     11,040     11,269  
Goodwill     24,052     22,627  
Other assets     98,827     109,801  
Total assets   $ 1,228,625     1,309,639  
Liabilities            
Noninterest-bearing deposits   $ 165,260     150,837  
Interest-bearing deposits     631,488     630,565  
Total deposits     796,748     781,402  
Short-term borrowings     30,800     108,074  
Accrued expenses and other liabilities     57,861     50,689  
Long-term debt     214,292     267,158  
Total liabilities     1,099,701     1,207,323  
Equity            
Wells Fargo stockholders' equity:            
Preferred stock     31,589     31,332  

Common stock - $1-2/3 par value, authorized 6,000,000,000 shares; issued 4,756,071,429 shares and 4,363,921,429 shares

     7,927     7,273  
Additional paid-in capital     40,343     36,026  
Retained earnings     41,485     36,543  
Cumulative other comprehensive income (loss)     4,088     (6,869 )
Treasury stock - 76,876,271 shares and 135,290,540 shares     (2,771 )   (4,666 )
Unearned ESOP shares     (511 )   (555 )
Total Wells Fargo stockholders' equity     122,150     99,084  
Noncontrolling interests     6,774     3,232  
Total equity     128,924     102,316  
Total liabilities and equity   $ 1,228,625     1,309,639  
             
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET		  
(in millions)   Sept. 30,
2009		     June 30,
2009		     Mar. 31,
2009		     Dec. 31,
2008		     Sept. 30,
2008		  
Assets                              
Cash and due from banks   $ 17,233     20,632     22,186     23,763     12,861  

Federal funds sold, securities purchased under resale agreements and other short-term investments

     17,491     15,976     18,625     49,433     8,093  
Trading assets     43,198     40,110     46,497     54,884     9,097  
Securities available for sale     183,814     206,795     178,468     151,569     86,882  
Mortgages held for sale     35,538     41,991     36,807     20,088     18,739  
Loans held for sale     5,846     5,413     8,306     6,228     635  
                               
Loans     799,952     821,614     843,579     864,830     411,049  
Allowance for loan losses     (24,028 )   (23,035 )   (22,281 )   (21,013 )   (7,865 )
Net loans     775,924     798,579     821,298     843,817     403,184  
Mortgage servicing rights:                              
Measured at fair value (residential MSRs)     14,500     15,690     12,391     14,714     19,184  
Amortized     1,162     1,205     1,257     1,446     433  
Premises and equipment, net     11,040     11,151     11,215     11,269     5,054  
Goodwill     24,052     24,619     23,825     22,627     13,520  
Other assets     98,827     102,015     105,016     109,801     44,679  
Total assets   $ 1,228,625     1,284,176     1,285,891     1,309,639     622,361  
Liabilities                              
Noninterest-bearing deposits   $ 165,260     173,149     166,497     150,837     89,446  
Interest-bearing deposits     631,488     640,586     630,772     630,565     264,128  
Total deposits     796,748     813,735     797,269     781,402     353,574  
Short-term borrowings     30,800     55,483     72,084     108,074     85,187  
Accrued expenses and other liabilities     57,861     64,160     58,831     50,689     28,991  
Long-term debt     214,292     229,416     250,650     267,158     107,350  
Total liabilities     1,099,701     1,162,794     1,178,834     1,207,323     575,102  
Equity                              
Wells Fargo stockholders' equity:                              
Preferred stock     31,589     31,497     31,411     31,332     625  
Common stock     7,927     7,927     7,273     7,273     5,788  
Additional paid-in capital     40,343     40,270     32,414     36,026     8,348  
Retained earnings     41,485     39,165     36,949     36,543     40,853  
Cumulative other comprehensive income (loss)     4,088     (590 )   (3,624 )   (6,869 )   (2,783 )
Treasury stock     (2,771 )   (3,126 )   (3,593 )   (4,666 )   (5,207 )
Unearned ESOP shares     (511 )   (520 )   (535 )   (555 )   (667 )
Total Wells Fargo stockholders' equity     122,150     114,623     100,295     99,084     46,957  
Noncontrolling interests     6,774     6,759     6,762     3,232     302  
Total equity     128,924     121,382     107,057     102,316     47,259  
Total liabilities and equity   $ 1,228,625     1,284,176     1,285,891     1,309,639     622,361  
                               
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES		  
    Quarter ended  
(in millions)   Sept. 30,
2009		     June 30,
2009		     Mar. 31,
2009		     Dec. 31,
2008		     Sept. 30,
2008		  
Earning assets                              

Federal funds sold, securities purchased under resale agreements and other short-term investments

   $ 16,356     20,889     24,074     9,938     3,463  
Trading assets     20,518     18,464     22,203     5,004     4,838  
Debt securities available for sale:                              
Securities of U.S. Treasury and federal agencies     2,545     2,102     2,899     1,165     1,141  
Securities of U.S. states and political subdivisions     12,818     12,189     12,213     7,124     7,211  
Mortgage-backed securities:                              
Federal agencies     94,457     92,550     76,545     51,714     50,528  
Residential and commercial     43,214     41,257     38,690     18,245     21,358  
Total mortgage-backed securities     137,671     133,807     115,235     69,959     71,886  
Other debt securities (1)     33,294     30,901     30,080     14,217     12,622  
Total debt securities available for sale (1)     186,328     178,999     160,427     92,465     92,860  
Mortgages held for sale (2)     40,604     43,177     31,058     23,390     24,990  
Loans held for sale (2)     4,975     7,188     7,949     1,287     677  
Loans:                              
Commercial and commercial real estate:                              
Commercial     175,642     187,501     196,923     107,325     100,688  
Real estate mortgage     103,450     104,297     104,271     45,555     43,616  
Real estate construction     32,649     33,857     34,493     19,943     19,715  
Lease financing     14,360     14,750     15,810     7,397     7,250  
Total commercial and commercial real estate     326,101     340,405     351,497     180,220     171,269  
Consumer:                              
Real estate 1-4 family first mortgage     235,051     240,798     245,494     78,251     76,197  
Real estate 1-4 family junior lien mortgage     105,779     108,422     110,128     75,838     75,379  
Credit card     23,448     22,963     23,295     20,626     19,948  
Other revolving credit and installment     90,199     90,729     92,820     52,638     54,104  
Total consumer     454,477     462,912     471,737     227,353     225,628  
Foreign     29,613     30,628     32,357     6,367     7,306  
Total loans (2)     810,191     833,945     855,591     413,940     404,203  
Other     6,088     6,079     6,140     1,690     2,126  
Total earning assets   $ 1,085,060     1,108,741     1,107,442     547,714     533,157  
Funding sources                              
Deposits:                              
Interest-bearing checking   $ 59,467     79,955     80,393     6,396     5,483  
Market rate and other savings     369,120     334,067     313,445     178,301     166,710  
Savings certificates     129,698     152,444     170,122     41,189     37,192  
Other time deposits     18,248     21,660     25,555     8,128     7,930  
Deposits in foreign offices     56,820     49,885     45,896     42,771     49,054  
Total interest-bearing deposits     633,353     638,011     635,411     276,785     266,369  
Short-term borrowings     39,828     59,844     76,068     60,210     83,458  
Long-term debt     222,580     235,590     258,957     104,112     103,745  
Other liabilities     5,620     4,604     3,778     -     -  
Total interest-bearing liabilities     901,381     938,049     974,214     441,107     453,572  
Portion of noninterest-bearing funding sources     183,679     170,692     133,228     106,607     79,585  
Total funding sources   $ 1,085,060     1,108,741     1,107,442     547,714     533,157  
Noninterest-earning assets                              
Cash and due from banks   $ 18,084     19,340     20,255     11,155     11,024  
Goodwill     24,435     24,261     23,183     13,544     13,531  
Other     118,472     122,584     138,836     60,810     56,482  
Total noninterest-earning assets   $ 160,991     166,185     182,274     85,509     81,037  
Noninterest-bearing funding sources                              
Deposits   $ 172,588     174,529     160,308     91,229     87,095  
Other liabilities     47,646     49,570     50,566     30,651     25,452  
Total equity     124,436     112,778     104,628     70,236     48,075  

Noninterest-bearing funding sources used to fund earning assets

     (183,679 )   (170,692 )   (133,228 )   (106,607 )   (79,585 )
Net noninterest-bearing funding sources   $ 160,991     166,185     182,274     85,509     81,037  
Total assets   $ 1,246,051     1,274,926     1,289,716     633,223     614,194  
                               
(1) Includes certain preferred securities.  
(2) Nonaccrual loans are included in their respective loan categories.  
   
Wells Fargo & Company and Subsidiaries
FIVE QUARTER LOANS
(in millions)   Sept. 30,
2009		   June 30,
2009		   Mar. 31,
2009		   Dec. 31,
2008		   Sept. 30,
2008
Commercial and commercial real estate:                    
Commercial   $ 169,610   182,037   191,711   202,469   104,281
Real estate mortgage     103,442   103,654   104,934   103,108   44,741
Real estate construction     31,719   33,238   33,912   34,676   19,681
Lease financing     14,115   14,555   14,792   15,829   7,271
Total commercial and commercial real estate     318,886   333,484   345,349   356,082   175,974
Consumer:                    
Real estate 1-4 family first mortgage     232,622   237,289   242,947   247,894   77,870
Real estate 1-4 family junior lien mortgage     104,538   107,024   109,748   110,164   75,617
Credit card     23,597   23,069   22,815   23,555   20,358
Other revolving credit and installment     90,027   90,654   91,252   93,253   54,327
Total consumer     450,784   458,036   466,762   474,866   228,172
Foreign     30,282   30,094   31,468   33,882   6,903
Total loans (net of unearned income) (1)   $ 799,952   821,614   843,579   864,830   411,049
                     
(1) Includes $54.3 billion, $55.2 billion, $58.2 billion and $58.8 billion of purchased credit-impaired (PCI) loans at September 30, June 30 and March 31, 2009, and December 31, 2008, respectively. See table on page 32 for detail of PCI loans.
                     
                     
FIVE QUARTER NONACCRUAL LOANS AND OTHER NONPERFORMING ASSETS
(in millions)   Sept. 30,
2009		   June 30,
2009		   Mar. 31,
2009		   Dec. 31,
2008		   Sept. 30,
2008
Nonaccrual loans:                    
Commercial and commercial real estate:                    
Commercial   $ 4,540   2,910   1,696   1,253   846
Real estate mortgage     2,856   2,343   1,324   594   296
Real estate construction     2,711   2,210   1,371   989   736
Lease financing     157   130   114   92   69
Total commercial and commercial real estate     10,264   7,593   4,505   2,928   1,947
Consumer:                    
Real estate 1-4 family first mortgage     8,132   6,000   4,218   2,648   1,975
Real estate 1-4 family junior lien mortgage     1,985   1,652   1,418   894   780
Other revolving credit and installment     344   327   300   273   232
Total consumer     10,461   7,979   5,936   3,815   2,987
Foreign     144   226   75   57   61
Total nonaccrual loans (1) (2)     20,869   15,798   10,516   6,800   4,995
As a percentage of total loans     2.61

 % 

 1.92   1.25   0.79   1.22
Foreclosed assets:                    
GNMA loans (3)   $ 840   932   768   667   596
Other     1,687   1,592   1,294   1,526   644
Real estate and other nonaccrual investments (4)     55   20   34   16   56

Total nonaccrual loans and other nonperforming assets

   $ 23,451   18,342   12,612   9,009   6,291
As a percentage of total loans     2.93

 % 

 2.23   1.50   1.04   1.53
                     
(1) Includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.
(2) Excludes PCI loans from Wachovia.
(3) Consistent with regulatory reporting requirements, foreclosed real estate securing Government National Mortgage Association (GNMA) loans is classified as nonperforming. Both principal and interest for GNMA loans secured by the foreclosed real estate are collectible because the GNMA loans are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs.
(4) Includes real estate investments (contingent interest loans accounted for as investments) that would be classified as nonaccrual if these assets were recorded as loans, and nonaccrual debt securities.
 
Wells Fargo & Company and Subsidiaries
PURCHASED CREDIT-IMPAIRED (PCI) LOANS		  
   
Certain loans acquired from Wachovia have evidence of credit deterioration since origination and it is probable that we will not collect all contractually required principal and interest payments (referred to as "purchased credit-impaired"(PCI) loans). Such loans are accounted for under ASC 310-30, Receivables (American Institute of Certified Public Accountants Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer). The accounting provisions contained in ASC 310-30 require acquired loans be recorded at fair value at the acquisition date and prohibits carryover of the related allowance for loan losses. The difference between contractually required payments and cash flows expected to be collected is referred to as the nonaccretable difference. The difference between the cash flows expected to be collected and the fair value is referred to as the accretable yield.  
   
Because PCI loans have been written down in purchase accounting to an amount estimated to be collectible, such loans are not classified as nonaccrual even though they may be contractually past due. Also, losses on such loans are charged against the nonaccretable difference established in purchase accounting and, as such, are not reported as charge-offs.  
   
As a result of the application of ASC 310-30 to credit-impaired Wachovia loans, certain ratios of the combined company cannot be used to compare a portfolio that includes PCI loans against one that does not, or to compare ratios across quarters or years. The ratios particularly affected by the accounting under ASC 310-30 include the allowance for loan losses and allowance for credit losses as percentages of loans, of nonaccrual loans and of nonperforming assets; nonaccrual loans and nonperforming assets as a percentage of total loans; and net charge-offs as a percentage of loans.  
   
    September 30, 2009 (1)     December 31, 2008  
(in millions)   PCI
loans		     All
other
loans		   Total     PCI
loans		     All
other
loans		   Total  
Commercial and commercial real estate:                                
Commercial   $ 2,407     167,203   169,610     4,580     197,889   202,469  
Real estate mortgage     5,950     97,492   103,442     7,762     95,346   103,108  
Real estate construction     4,250     27,469   31,719     4,503     30,173   34,676  
Lease financing     -     14,115   14,115     -     15,829   15,829  

Total commercial and commercial real estate (CRE)

     12,607     306,279   318,886     16,845     339,237   356,082  
Consumer:                                
Real estate 1-4 family first mortgage     39,538     193,084   232,622     39,214     208,680   247,894  
Real estate 1-4 family junior lien mortgage     425     104,113   104,538     728     109,436   110,164  
Credit card     -     23,597   23,597     -     23,555   23,555  
Other revolving credit and installment     -     90,027   90,027     151     93,102   93,253  
Total consumer     39,963     410,821   450,784     40,093     434,773   474,866  
Foreign     1,768     28,514   30,282     1,859     32,023   33,882  
Total loans   $ 54,338     745,614   799,952     58,797     806,033   864,830  
                                 
(1) In the first three quarters of 2009, we refined certain of our preliminary purchase accounting adjustments based on additional information as of December 31, 2008. These refinements include a net increase to the nonaccretable difference of $3.8 billion ($2.2 billion of which related to Pick-a-Pay loans), and a net increase to the accretable yield of $1.9 billion ($2.0 billion of which related to Pick-a-Pay loans and reflects changes in the amount and timing of cash flows). The effect on goodwill of these adjustments amounted to a net increase to goodwill of $1.9 billion.  
   
CHANGES IN NONACCRETABLE DIFFERENCE FOR PCI LOANS  
   
The nonaccretable difference was established in purchase accounting for PCI loans to absorb losses expected at that time on those loans. Amounts absorbed by the nonaccretable difference do not affect the income statement or the allowance for credit losses.  
   
   
(in millions)   Pick-a-Pay         Other
consumer		     Commercial,
CRE and
foreign		         Total  
Balance at December 31, 2008, with refinements   $ (26,485 )       (4,082 )   (10,378 )       (40,945 )
Release of nonaccretable difference due to:                                
Loans resolved by payment in full     -         -     194         194  
Loans resolved by sales to third parties     -         85     28         113  
Loans with improving cash flows reclassified to accretable yield     -         -     21         21  
Use of nonaccretable difference due to:                                
Losses from loan resolutions and write-downs (1)     8,320         1,796     3,552         13,668  
Balance at September 30, 2009   $ (18,165 )       (2,201 )   (6,583 )       (26,949 )
   
(1) Use of nonaccretable difference through June 30, 2009, was $8.5 billion (including $5.1 billion for Pick-a-Pay loans); revised from second quarter to include all losses due to resolution of loans and write-downs.  
   
CHANGES IN ALLOWANCE FOR LOAN LOSSES FOR PCI LOANS  
   
Deterioration in expected credit losses for PCI loans subsequent to the acquisition on December 31, 2008, results the establishment of an allowance, provided for through a charge to income. Losses and improvements in expected losses will reduce the allowance.  
   
   
(in millions)   Pick-a-Pay         Other
consumer		     Commercial,
CRE and
foreign		         Total  
Balance at December 31, 2008   $ -         -     -         -  
Provision for losses due to credit deterioration     -         -     458         458  
Charge-offs     -         -     (225 )       (225 )
Balance at September 30, 2009   $ -         -     233         233  
   
Wells Fargo & Company and Subsidiaries
PICK-A-PAY PORTFOLIO
    PCI loans   All other loans
(in millions)   Unpaid
principal
balance		   Current
LTV
ratio (1)		   Carrying
value (2)		   Ratio of
carrying
value to
current
value		   Unpaid
principal
balance		   Current
LTV
ratio (1)		   Carrying
value
                             
Sept. 30, 2009                            
                             
California   $ 39,034   150

 % 

 $ 25,492   98

 % 

 $ 24,447   95

 % 

 $ 24,395
Florida     5,929   144     3,532   85     5,166   108     5,117
New Jersey     1,676   101     1,309   78     3,017   82     3,021
Texas     452   81     395   71     2,031   66     2,039
Arizona     1,481   155     742   78     1,160   105     1,152
Other states     8,738   110     6,520   82     14,128   85     14,120
Total Pick-a-Pay loans   $ 57,310       $ 37,990       $ 49,949       $ 49,844
                             
                             
June 30, 2009                            
                             
California   $ 40,657   146

 % 

 $ 26,177   95

 % 

 $ 25,117   90

 % 

 $ 25,170
Florida     6,117   130     3,903   84     5,276   96     5,287
New Jersey     1,717   99     1,226   71     3,162   80     3,169
Texas     466   80     341   59     2,108   66     2,112
Arizona     1,553   148     1,001   96     1,195   99     1,197
Other states     9,041   108     6,227   75     14,607   83     14,640
Total Pick-a-Pay loans   $ 59,551       $ 38,875       $ 51,465       $ 51,575
                             
                             

(1) The current LTV ratio is calculated as the unpaid principal balance plus the unpaid principal balance of any equity lines of credit that share common collateral divided by the collateral value. Collateral values are generally determined using automated valuation models (AVM) and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing large volumes of market data including market comparables and price trends for local market areas.          

(2) Carrying value, which does not reflect the allowance for loan losses, includes purchase accounting adjustments, which, for PCI loans, are the nonaccretable difference and the accretable yield, and for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs.
 
Wells Fargo & Company and Subsidiaries
HOME EQUITY PORTFOLIOS (1)
    Outstanding balances   % of loans
two payments
or more past due		   Annualized
loss rate
(in millions)   Sept. 30,
2009		   June 30,
2009		   Sept. 30,
2009		   June 30,
2009		   Sept. 30,
2009		   June 30,
2009
Core portfolio (2)                        
California   $ 30,841   31,479   3.97 % 3.63   6.52   5.36
Florida     11,496   11,697   5.08   3.91   4.82   4.55
New Jersey     8,119   8,224   2.22   1.70   1.41   1.37
Virginia     5,736   5,805   1.60   1.26   1.22   0.99
Pennsylvania     4,971   5,048   1.95   1.46   1.51   1.29
Other     54,152   55,248   2.64   2.22   2.65   2.46
Total     115,315   117,501   3.13   2.65   3.69   3.25
Liquidating portfolio                        
California     3,406   3,616   8.75   8.16   18.22   17.13
Florida     435   460   9.83   9.14   16.97   18.11
Arizona     206   219   8.25   8.16   22.33   18.13
Texas     161   169   1.68   1.13   2.15   2.96
Minnesota     112   117   3.39   3.88   8.52   7.41
Other     4,546   4,764   4.68   4.00   7.14   6.25
Total     8,866   9,345   6.51   5.91   12.17   11.29
Total core and liquidating portfolios   $ 124,181   126,846   3.37   2.89   4.31   3.85
                         
                         
(1) Consists of real estate 1-4 family junior lien mortgages and lines of credit secured by real estate from all groups, excluding PCI loans.
(2) Includes equity lines of credit and closed-end second liens associated with the Pick-a-Pay portfolio totaling $1.9 billion and $2.0 billion at September 30 and June 30, 2009, respectively.
 
Wells Fargo & Company and Subsidiaries
CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES (1)		  
      Quarter ended Sept. 30,     Nine months ended Sept. 30,  
(in millions)       2009     2008     2009     2008  
Balance, beginning of period     $ 23,530     7,517     21,711     5,518  
Provision for credit losses       6,111     2,495     15,755     7,535  
Loan charge-offs:                      
Commercial and commercial real estate:                      
Commercial       (986 )   (305 )   (2,337 )   (897 )
Real estate mortgage       (215 )   (9 )   (398 )   (19 )
Real estate construction       (254 )   (36 )   (595 )   (93 )
Lease financing       (88 )   (19 )   (173 )   (44 )
Total commercial and commercial real estate       (1,543 )   (369 )   (3,503 )   (1,053 )
Consumer:                      
Real estate 1-4 family first mortgage       (1,015 )   (146 )   (2,229 )   (330 )
Real estate 1-4 family junior lien mortgage       (1,340 )   (669 )   (3,428 )   (1,476 )
Credit card       (691 )   (396 )   (2,025 )   (1,078 )
Other revolving credit and installment       (860 )   (586 )   (2,562 )   (1,617 )
Total consumer       (3,906 )   (1,797 )   (10,244 )   (4,501 )
Foreign       (71 )   (59 )   (181 )   (185 )
Total loan charge-offs       (5,520 )   (2,225 )   (13,928 )   (5,739 )
Loan recoveries:                      
Commercial and commercial real estate:                      
Commercial       62     27     153     90  
Real estate mortgage       6     1     22     4  
Real estate construction       5     -     11     2  
Lease financing       6     3     13     9  
Total commercial and commercial real estate       79     31     199     105  
Consumer:                      
Real estate 1-4 family first mortgage       49     7     114     20  
Real estate 1-4 family junior lien mortgage       49     28     119     63  
Credit card       43     35     131     113  
Other revolving credit and installment       178     117     580     363  
Total consumer       319     187     944     559  
Foreign       11     12     30     40  
Total loan recoveries       409     230     1,173     704  
Net loan charge-offs       (5,111 )   (1,995 )   (12,755 )   (5,035 )
Allowances related to business combinations/other       (2 )   10     (183 )   9  
Balance, end of period     $ 24,528     8,027     24,528     8,027  
Components:                      
Allowance for loan losses     $ 24,028     7,865     24,028     7,865  
Reserve for unfunded credit commitments       500     162     500     162  
Allowance for credit losses     $ 24,528     8,027     24,528     8,027  

Net loan charge-offs (annualized) as a percentage of average total loans

       2.50   % 1.96     2.05     1.71  
                       
(1) Because the Wachovia acquisition was completed on December 31, 2008, charge-offs and recoveries for 2008 include only those of Wells Fargo, and exclude those of Wachovia for that period. Purchased credit-impaired loans (PCI) loans from Wachovia are included in total loans net of related purchase accounting adjustments. For PCI loans, charge-offs are only recorded to the extent that losses exceed the purchase accounting adjustments. The Wachovia merger and the accounting for PCI loans both affect the comparability of certain ratios as described on page 32.  
   
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES (1)		  
    Quarter ended  
(in millions)   Sept. 30,
2009		     June 30,
2009		     Mar. 31,
2009		     Dec. 31,
2008		     Sept. 30,
2008		  
Balance, beginning of quarter   $ 23,530     22,846     21,711     8,027     7,517  
Provision for credit losses (2)     6,111     5,086     4,558     8,444     2,495  
Loan charge-offs:                              
Commercial and commercial real estate:                              
Commercial     (986 )   (755 )   (596 )   (756 )   (305 )
Real estate mortgage     (215 )   (152 )   (31 )   (10 )   (9 )
Real estate construction     (254 )   (236 )   (105 )   (85 )   (36 )
Lease financing     (88 )   (65 )   (20 )   (21 )   (19 )
Total commercial and commercial real estate     (1,543 )   (1,208 )   (752 )   (872 )   (369 )
Consumer:                              
Real estate 1-4 family first mortgage     (1,015 )   (790 )   (424 )   (210 )   (146 )
Real estate 1-4 family junior lien mortgage     (1,340 )   (1,215 )   (873 )   (728 )   (669 )
Credit card     (691 )   (712 )   (622 )   (485 )   (396 )
Other revolving credit and installment     (860 )   (802 )   (900 )   (683 )   (586 )
Total consumer     (3,906 )   (3,519 )   (2,819 )   (2,106 )   (1,797 )
Foreign     (71 )   (56 )   (54 )   (60 )   (59 )
Total loan charge-offs     (5,520 )   (4,783 )   (3,625 )   (3,038 )   (2,225 )
Loan recoveries:                              
Commercial and commercial real estate:                              
Commercial     62     51     40     24     27  
Real estate mortgage     6     6     10     1     1  
Real estate construction     5     4     2     1     -  
Lease financing     6     4     3     4     3  
Total commercial and commercial real estate     79     65     55     30     31  
Consumer:                              
Real estate 1-4 family first mortgage     49     32     33     17     7  
Real estate 1-4 family junior lien mortgage     49     44     26     26     28  
Credit card     43     48     40     34     35  
Other revolving credit and installment     178     198     204     118     117  
Total consumer     319     322     303     195     187  
Foreign     11     10     9     9     12  
Total loan recoveries     409     397     367     234     230  
Net loan charge-offs     (5,111 )   (4,386 )   (3,258 )   (2,804 )   (1,995 )
Allowances related to business combinations/other     (2 )   (16 )   (165 )   8,044     10  
Balance, end of quarter   $ 24,528     23,530     22,846     21,711     8,027  
Components:                              
Allowance for loan losses   $ 24,028     23,035     22,281     21,013     7,865  
Reserve for unfunded credit commitments     500     495     565     698     162  
Allowance for credit losses   $ 24,528     23,530     22,846     21,711     8,027  

Net loan charge-offs (annualized) as a percentage of average total loans

     2.50

  %  

 

 2.11     1.54     2.69     1.96  
Allowance for loan losses as a percentage of:                            
Total loans     3.00     2.80     2.64     2.43     1.91  
Nonaccrual loans     115     146     212     309     157  
Nonaccrual loans and other nonperforming assets     102     126     177     233     125  
Allowance for credit losses as a percentage of:                          
Total loans     3.07     2.86     2.71     2.51     1.95  
Nonaccrual loans     118     149     217     319     161  
Nonaccrual loans and other nonperforming assets     105     128     181     241     128  
                               
                               
(1) Because the Wachovia acquisition was completed on December 31, 2008, charge-offs and recoveries for 2008 include only those of Wells Fargo, and exclude those of Wachovia for that period. Purchased credit-impaired loans (PCI) loans from Wachovia are included in total loans net of related purchase accounting adjustments. For PCI loans, charge-offs are only recorded to the extent that losses exceed the purchase accounting adjustments. The Wachovia merger and the accounting for PCI loans both affect the comparability of certain ratios as described on page 32.  
(2) Provision for credit losses for the quarter ended December 31, 2008, included $3.9 billion to conform reserve practices of Wells Fargo and Wachovia.  
   
Wells Fargo & Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY (1)		  
    Nine months ended September 30,  
(in millions)     2009     2008  
Balance, beginning of period (2)   $ 102,316     47,914  
Cumulative effect from change in accounting for postretirement benefits (3)     -     (20 )
Adjustment for change of measurement date related to pension and other postretirement benefits (4)     -     (8 )
Net income before noncontrolling interests     9,654     5,439  
Wells Fargo other comprehensive income (loss), net of tax, related to:          
Translation adjustments     63     (20 )
Investment securities (5):          
Unrealized losses related to factors other than credit (2)     (654 )   -  
All other     11,220     (3,485 )
Derivative instruments and hedging activities     (189 )   (6 )
Defined benefit pension plans     570     3  
Common stock issued     9,590     1,269  
Common stock repurchased     (80 )   (1,162 )
Preferred stock released to ESOP     41     346  
Common stock dividends     (1,891 )   (3,178 )
Preferred stock dividends     (1,558 )   -  
Other, net     (158 )   167  
Balance, end of period   $ 128,924     47,259  
           
(1) On January 1, 2009, we adopted new accounting guidance on noncontrolling interests contained in Financial Accounting Standards Board (FASB) Accounting Standards Codification 810-10 (ASC 810-10), Consolidation (Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51), on a retrospective basis for disclosure and, accordingly, prior period information reflects the adoption. ASC 810-10 requires that noncontrolling interests be reported as a component of total equity.  
(2) The impact on prior periods of adopting new accounting provisions for recording other-than-temporary impairment on debt securities as prescribed in ASC 320-10, Investments - Debt and Equity Securities (FASB Staff Position (FSP) FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments), was to increase the beginning balance of retained earnings and reduce the beginning balance of other comprehensive income by $85 million ($53 million after tax). The unrealized losses in Wells Fargo other comprehensive income in the first nine months of 2009 that related to factors other than credit, where the credit portion was recorded as other-than-temporary impairment in earnings, amounted to $1.04 billion ($654 million after tax).  
(3) On January 1, 2008, we adopted new accounting guidance for postretirement benefits in accordance with ASC 715, Compensation - Retirement Benefits(Emerging Issues Task Force (EITF) Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements,and Issue No. 06-10, Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements).  
(4) We adjusted the 2008 beginning balance of retained earnings to reflect the change in the measurement date for our pension and postretirement plan assets and benefit obligations as required by ASC 715, Compensation - Retirement Benefits (FAS 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R)).  
(5) On March 31, 2009, we early adopted new fair value measurement provisions contained in ASC 820-10, Fair Value Measurements and Disclosures (FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly). This guidance addresses determining fair values for securities in circumstances where the market for such securities is illiquid and transactions involve distressed sales. In such circumstances, ASC 820-10 permits use of other inputs in estimating fair value that may include pricing models.  
   
Wells Fargo & Company and Subsidiaries
TIER 1 COMMON EQUITY (1)		      
      Quarter ended  
(in billions)   Sept. 30,
2009		     June 30,
2009		     Dec. 31,
2008		  
Total equity   $ 128.9     121.4     102.3  

Less:  

 Noncontrolling interests     (6.8 )   (6.8 )   (3.2 )
Total Wells Fargo stockholders' equity     122.1     114.6     99.1  

Less:  

 Preferred equity     (31.1 )   (31.0 )   (30.8 )
  Goodwill and intangible assets (other than MSRs)     (37.5 )   (38.7 )   (38.1 )
  Applicable deferred assets     5.3     5.5     5.6  
  Deferred tax asset limitation     -     (2.0 )   (6.0 )
  MSRs over specified limitations     (1.5 )   (1.6 )   (1.5 )
  Cumulative other comprehensive income     (4.0 )   0.6     6.9  
  Other     (0.3 )   (0.3 )   (0.8 )
  Tier 1 common equity

 (A)

 $ 53.0     47.1     34.4  
Total risk-weighted assets (2)

 (B)

 $ 1,022.9     1,047.7     1,101.3  
Tier 1 common equity to total risk-weighted assets

 (A)/(B)

   5.18  

% 

 4.49     3.13  
                     
(1) Tier 1 common equity is a non-GAAP financial measure that is used by investors, analysts and bank regulatory agencies, including the Federal Reserve in the Supervisory Capital Assessment Program, to assess the capital position of financial services companies. Tier 1 common equity includes total Wells Fargo stockholders' equity, less preferred equity, goodwill and intangible assets (excluding MSRs), net of related deferred taxes, adjusted for specified Tier 1 regulatory capital limitations covering deferred taxes, MSRs, and cumulative other comprehensive income. Management reviews Tier 1 common equity along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants.  
(2) Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets. The Company's September 30, 2009, preliminary risk-weighted assets reflect estimated on-balance sheet risk-weighted assets of $848.5 billion and derivative and off-balance sheet risk-weighted assets of $174.4 billion.  
   
Wells Fargo & Company and Subsidiaries
OPERATING SEGMENT RESULTS (1)		      

 

(income/expense in millions, average balances in billions)

   Community
Banking		   Wholesale
Banking		     Wealth, Brokerage
and Retirement		   Other (2)     Consolidated
Company
  2009   2008   2009   2008     2009     2008   2009     2008     2009   2008
Quarter ended Sept. 30,                                              
Net interest income (3)   $ 8,700   5,293   2,535   1,065     743     223   (294 )   (200 )   11,684   6,381
Provision for credit losses     4,572   2,202   1,361   294     234     3   (56 )   (4 )   6,111   2,495
Noninterest income     6,443   3,209   2,381   631     2,223     458   (265 )   (302 )   10,782   3,996
Noninterest expense     6,802   3,982   2,630   1,329     2,314     498   (62 )   (308 )   11,684   5,501

Income (loss) before income tax expense (benefit)

 

   3,769   2,318   925   73     418     180   (441 )   (190 )   4,671   2,381
Income tax expense (benefit)     1,046   764   325   (30 )   151     68   (167 )   (72 )   1,355   730

Net income (loss) before noncontrolling interests

     2,723   1,554   600   103     267     112   (274 )   (118 )   3,316   1,651

Less: Net income from noncontrolling interests

     56   14   2   -     23     -   -     -     81   14
Net income (loss) (4)   $ 2,667   1,540   598   103     244     112   (274 )   (118 )   3,235   1,637
Average loans   $ 534.7   287.1   247.0   116.3     45.4     15.9   (16.9 )   (15.1 )   810.2   404.2
Average assets     785.2   452.3   369.3   158.1     108.6     19.1   (17.0 )   (15.3 )   1,246.1   614.2
Average core deposits     530.3   252.8   146.9   64.4     116.4     23.5   (34.3 )   (20.6 )   759.3   320.1
                                               
                                               
Nine months ended Sept. 30,                                              
Net interest income (3)   $ 25,981   15,246   7,381   3,116     2,244     576   (782 )   (519 )   34,824   18,419
Provision for credit losses     12,840   6,833   2,644   701     374     9   (103 )   (8 )   15,755   7,535
Noninterest income     17,922   10,328   7,680   3,170     6,347     1,422   (783 )   (939 )   31,166   13,981
Noninterest expense     21,625   12,187   7,968   4,031     6,822     1,480   (216 )   (910 )   36,199   16,788

Income (loss) before income tax expense (benefit)

 

   9,438   6,554   4,449   1,554     1,395     509   (1,246 )   (540 )   14,036   8,077
Income tax expense (benefit)     2,734   2,265   1,590   385     531     193   (473 )   (205 )   4,382   2,638

Net income (loss) before noncontrolling interests

     6,704   4,289   2,859   1,169     864     316   (773 )   (335 )   9,654   5,439

Less: Net income (loss) from noncontrolling interests

     190   43   14   7     (2 )   -   -     -     202   50
Net income (loss) (4)   $ 6,514   4,246   2,845   1,162     866     316   (773 )   (335 )   9,452   5,389
Average loans   $ 542.7   284.4   260.7   108.3     46.0     14.8   (16.3 )   (14.2 )   833.1   393.3
Average assets     794.1   441.3   384.8   149.9     107.6     17.9   (16.4 )   (14.4 )   1,270.1   594.7
Average core deposits     537.4   250.2   141.2   65.8     110.9     22.3   (29.8 )   (19.7 )   759.7   318.6
                                               
                                               
(1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. As a result of the combination of Wells Fargo and Wachovia, management realigned its segments into the following three lines of business: Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement. We revised prior period information to reflect this realignment; however, segment information for periods prior to first quarter 2009 does not include Wachovia information.
(2) "Other" includes integration expenses and the elimination of items that are included in both Community Banking and Wealth, Brokerage and Retirement, largely representing wealth management customers serviced and products sold in the stores.
(3) Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment.
(4) Represents segment net income (loss) for Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement segments and Wells Fargo net income for the Consolidated Company.
       
Wells Fargo & Company and Subsidiaries
FIVE QUARTER OPERATING SEGMENT RESULTS (1)		  
    Quarter ended  
(income/expense in millions, average balances in billions)   Sept. 30,
2009		     June 30,
2009		     Mar. 31,
2009		     Dec. 31,
2008		     Sept. 30,
2008		  
COMMUNITY BANKING                              
Net interest income (2)   $ 8,700     8,784     8,497     5,296     5,293  
Provision for credit losses     4,572     4,264     4,004     6,789     2,202  
Noninterest income     6,443     6,023     5,456     2,096     3,209  
Noninterest expense     6,802     7,665     7,158     4,320     3,982  
Income (loss) before income tax expense (benefit)     3,769     2,878     2,791     (3,717 )   2,318  
Income tax expense (benefit)     1,046     798     890     (1,606 )   764  
Net income (loss) before noncontrolling interests     2,723     2,080     1,901     (2,111 )   1,554  
Less: Net income (loss) from noncontrolling interests     56     72     62     (11 )   14  
Segment net income (loss)   $ 2,667     2,008     1,839     (2,100 )   1,540  
Average loans     534.7     540.7     552.8     288.9     287.1  
Average assets     785.2     799.2     797.9     466.0     452.3  
Average core deposits     530.3     543.9     538.0     260.6     252.8  
                               
WHOLESALE BANKING                              
Net interest income (2)   $ 2,535     2,479     2,367     1,400     1,065  
Provision for credit losses     1,361     738     545     414     294  
Noninterest income     2,381     2,759     2,540     515     631  
Noninterest expense     2,630     2,807     2,531     1,251     1,329  
Income before income tax expense (benefit)     925     1,693     1,831     250     73  
Income tax expense (benefit)     325     618     647     31     (30 )
Net income before noncontrolling interests     600     1,075     1,184     219     103  
Less: Net income from noncontrolling interests     2     8     4     4     -  
Segment net income   $ 598     1,067     1,180     215     103  
Average loans     247.0     263.5     271.9     124.2     116.3  
Average assets     369.3     381.7     403.8     163.2     158.1  
Average core deposits     146.9     138.1     138.5     81.0     64.4  
                               
WEALTH, BROKERAGE AND RETIREMENT                              
Net interest income (2)   $ 743     764     737     251     223  
Provision for credit losses     234     115     25     293     3  
Noninterest income     2,223     2,222     1,902     417     458  
Noninterest expense     2,314     2,289     2,219     512     498  
Income (loss) before income tax expense (benefit)     418     582     395     (137 )   180  
Income tax expense (benefit)     151     222     158     (52 )   68  
Net income (loss) before noncontrolling interests     267     360     237     (85 )   112  
Less: Net income (loss) from noncontrolling interests     23     (3 )   (22 )   -     -  
Segment net income (loss)   $ 244     363     259     (85 )   112  
Average loans     45.4     45.9     46.7     16.5     15.9  
Average assets     108.6     110.2     104.0     20.0     19.1  
Average core deposits     116.4     113.5     102.6     25.6     23.5  
                               
OTHER (3)                              
Net interest income (2)   $ (294 )   (263 )   (225 )   (223 )   (200 )
Provision for credit losses     (56 )   (31 )   (16 )   948     (4 )
Noninterest income     (265 )   (261 )   (257 )   (275 )   (302 )
Noninterest expense     (62 )   (64 )   (90 )   (273 )   (308 )
Loss before income tax benefit     (441 )   (429 )   (376 )   (1,173 )   (190 )
Income tax benefit     (167 )   (163 )   (143 )   (409 )   (72 )
Net loss before noncontrolling interests     (274 )   (266 )   (233 )   (764 )   (118 )
Less: Net income from noncontrolling interests     -     -     -     -     -  
Other net loss   $ (274 )   (266 )   (233 )   (764 )   (118 )
Average loans     (16.9 )   (16.2 )   (15.8 )   (15.7 )   (15.1 )
Average assets     (17.0 )   (16.2 )   (16.0 )   (16.0 )   (15.3 )
Average core deposits     (34.3 )   (29.8 )   (25.2 )   (22.2 )   (20.6 )
                               
CONSOLIDATED COMPANY                              
Net interest income (2)   $ 11,684     11,764     11,376     6,724     6,381  
Provision for credit losses     6,111     5,086     4,558     8,444     2,495  
Noninterest income     10,782     10,743     9,641     2,753     3,996  
Noninterest expense     11,684     12,697     11,818     5,810     5,501  
Income (loss) before income tax expense (benefit)     4,671     4,724     4,641     (4,777 )   2,381  
Income tax expense (benefit)     1,355     1,475     1,552     (2,036 )   730  
Net income (loss) before noncontrolling interests     3,316     3,249     3,089     (2,741 )   1,651  
Less: Net income (loss) from noncontrolling interests     81     77     44     (7 )   14  
Wells Fargo net income (loss)   $ 3,235     3,172     3,045     (2,734 )   1,637  
Average loans     810.2     833.9     855.6     413.9     404.2  
Average assets     1,246.1     1,274.9     1,289.7     633.2     614.2  
Average core deposits     759.3     765.7     753.9     345.0     320.1  
                               
                               
(1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. As a result of the combination of Wells Fargo and Wachovia, management realigned its segments into the following three lines of business: Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement. We revised prior period information to reflect this realignment; however, segment information for periods prior to first quarter 2009 does not include Wachovia information.  
(2) Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment.  
(3) "Other" includes integration expenses and the elimination of items that are included in both Community Banking and Wealth, Brokerage and Retirement, largely representing wealth management customers serviced and products sold in the stores. "Other" also includes the $1.2 billion provision for credit losses recorded at the enterprise level in fourth quarter 2008 to conform Wachovia estimated loss emergence coverage periods to Wells Fargo policies.  
           
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING		  
    Quarter ended  
(in millions)   Sept. 30,
2009		     June 30,
2009		     Mar. 31,
2009		     Dec. 31,
2008		     Sept. 30,
2008		  
Residential MSRs measured using the fair value method:                              
Fair value, beginning of quarter   $ 15,690     12,391     14,714     19,184     19,333  
Purchases     -     -     -     -     57  
Acquired from Wachovia (1)     -     -     34     479     -  
Servicing from securitizations or asset transfers     1,517     2,081     1,447     808     851  
Net additions     1,517     2,081     1,481     1,287     908  
Changes in fair value:                              

Due to changes in valuation model inputs or assumptions (2)

     (2,078 )   2,316     (2,824 )   (5,129 )   (546 )
Other changes in fair value (3)     (629 )   (1,098 )   (980 )   (628 )   (511 )
Total changes in fair value     (2,707 )   1,218     (3,804 )   (5,757 )   (1,057 )
Fair value, end of quarter   $ 14,500     15,690     12,391     14,714     19,184  
                               
(1) First quarter 2009 results reflect refinements to initial purchase accounting adjustments.
(2) Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates.
(3) Represents changes due to collection/realization of expected cash flows over time.
                               
    Quarter ended  
(in millions)   Sept. 30,
2009		     June 30,
2009		     Mar. 31,
2009		     Dec. 31,
2008		     Sept. 30,
2008		  
Amortized MSRs:                              
Balance, beginning of quarter   $ 1,205     1,257     1,446     433     442  
Purchases     -     6     4     3     2  
Acquired from Wachovia (1)     -     (8 )   (127 )   1,021     -  
Servicing from securitizations or asset transfers     21     18     4     7     8  
Amortization     (64 )   (68 )   (70 )   (18 )   (19 )
Balance, end of quarter (2)   $ 1,162     1,205     1,257     1,446     433  
Fair value of amortized MSRs:                              
Beginning of quarter   $ 1,311     1,392     1,555     622     595  
End of quarter     1,277     1,311     1,392     1,555     622  
                               
                               
(1) 2009 periods reflect refinements to initial purchase accounting adjustments.
(2) There was no valuation allowance recorded for the periods presented.
           
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)		  
    Quarter ended  

(in millions)

   Sept. 30,
2009		     June 30,
2009		     Mar. 31,
2009		     Dec. 31,
2008		     Sept. 30,
2008		  
Servicing income, net:                              
Servicing fees (1)   $ 1,039     888     1,018     952     980  
Changes in fair value of residential MSRs:                              

Due to changes in valuation model inputs or assumptions (2)

     (2,078 )   2,316     (2,824 )   (5,129 )   (546 )
Other changes in fair value (3)     (629 )   (1,098 )   (980 )   (628 )   (511 )
Total changes in fair value of residential MSRs     (2,707 )   1,218     (3,804 )   (5,757 )   (1,057 )
Amortization     (64 )   (68 )   (70 )   (18 )   (19 )
Net derivative gains (losses) from economic hedges (4)     3,605     (1,285 )   3,699     4,783     621  
Total servicing income, net   $ 1,873     753     843     (40 )   525  

Market-related valuation changes to MSRs and economic hedges (2)+(4)

   $ 1,527     1,031     875     (346 )   75  
                               
                               
(1) Includes contractually specified servicing fees, late charges and other ancillary revenues.
(2) Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates.
(3) Represents changes due to collection/realization of expected cash flows over time.
(4) Represents results from free-standing derivatives (economic hedges) used to hedge the risk of changes in fair value of MSRs.
                               
                               
(in billions)   Sept. 30,
2009		     June 30,
2009		     Mar. 31,
2009		     Dec. 31,
2008		     Sept. 30,
2008		  
Managed servicing portfolio:                              
Residential mortgage loans serviced for others (1)   $ 1,419     1,394     1,379     1,388     1,323  
Owned loans serviced (2)     260     270     267     268     96  
Total owned servicing of residential mortgage loans     1,679     1,664     1,646     1,656     1,419  
Commercial mortgage loans serviced for others     458     470     474     472     142  
Total owned servicing of loans     2,137     2,134     2,120     2,128     1,561  
Sub-servicing     21     22     23     26     19  
Total managed servicing portfolio   $ 2,158     2,156     2,143     2,154     1,580  
Ratio of MSRs to related loans serviced for others     0.83  

 % 

 0.91     0.74     0.87     1.34  
Weighted-average note rate (mortgage loans serviced for others)     5.72     5.74     5.83     5.92     5.98  
                               
                               
(1) Consists of 1-4 family first mortgage loans.  
(2) Consists of residential mortgages held for sale and 1-4 family first mortgage loans.  
           
Wells Fargo & Company and Subsidiaries
SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA
    Quarter ended
(in billions)   Sept. 30,
2009		   June 30,
2009		   Mar. 31,
2009		   Dec. 31,
2008		   Sept. 30,
2008
Application data:                    

Wells Fargo Home Mortgage first mortgage quarterly applications

   $ 123   194   190   116   83
Refinances as a percentage of applications     62

 % 

 73   82   68   39

Wells Fargo Home Mortgage first mortgage unclosed pipeline, at quarter end

   $ 62   90   100   71   41
                     
                     
    Quarter ended
(in billions)   Sept. 30,
2009		   June 30,
2009		   Mar. 31,
2009		   Dec. 31,
2008		   Sept. 30,
2008
Residential Real Estate Originations: (1)                    
Wells Fargo Home Mortgage first mortgage loans:                    
Retail   $ 50   71   51   20   23
Correspondent/Wholesale     45   57   49   28   25
Home equity loans and lines     1   1   1   1   2
Wells Fargo Financial     -   -   -   1   1
Total quarter-to-date   $ 96   129   101   50   51
Total year-to-date   $ 326   230   101   230   180
                     

(1) Consists of residential real estate originations from all Wells Fargo channels.