Edgar Filing: WELLS FARGO & CO/MN

QuickLinks -- Click here to rapidly navigate through this document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2002

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-2979

WELLS FARGO & COMPANY
(Exact name of registrant as specified in its charter)

Delaware		41-0449260
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

420 Montgomery Street, San Francisco, California 94163
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 1-800-411-4932

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ý No o

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

		Shares Outstanding April 30, 2002
Common stock, $1-2/3 par value		1,710,675,107

FORM 10-Q
TABLE OF CONTENTS

		Page
PART I	Financial Information
Item 1.	Financial Statements
	Consolidated Statement of Income	2
	Consolidated Balance Sheet	3
	Consolidated Statement of Changes in Stockholders' Equity and Comprehensive Income	4
	Consolidated Statement of Cash Flows	5
	Notes to Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
	Summary Financial Data	21
	Overview	22
	Factors that May Affect Future Results	24
	Earnings Performance	29
	Net Interest Income	29
	Noninterest Income	31
	Noninterest Expense	33
	Operating Segment Results	34
	Balance Sheet Analysis	35
	Securities Available for Sale	35
	Loan Portfolio	37
	Nonaccrual and Restructured Loans and Other Assets	38
	Loans 90 Days Past Due and Still Accruing	40
	Allowance for Loan Losses	41
	Interest Receivable and Other Assets	42
	Deposits	43
	Capital Adequacy/Ratios	43
	Off-Balance Sheet Transactions	44
	Asset/Liability and Market Risk Management	45
	Capital Management	48
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
PART II	Other Information
Item 6.	Exhibits and Reports on Form 8-K	49
Signature		51

The information furnished in these interim statements reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for such periods. Such adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for the full year. The interim financial information should be read in conjunction with Wells Fargo & Company's 2001 Annual Report on Form 10-K.

PART I—FINANCIAL INFORMATION

WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME

		Quarter ended March 31,

(in millions, except per share amounts)		2002			2001

INTEREST INCOME
Securities available for sale		$	656		$	604
Mortgages held for sale			591			257
Loans held for sale			69			93
Loans			3,292			3,843
Other interest income			73			84

	Total interest income		4,681			4,881

INTEREST EXPENSE
Deposits			494			1,121
Short-term borrowings			174			394
Long-term debt			331			529
Guaranteed preferred beneficial interests in Company's subordinated debentures			27			17

	Total interest expense		1,026			2,061

NET INTEREST INCOME			3,655			2,820
Provision for loan losses			490			361

Net interest income after provision for loan losses			3,165			2,459

NONINTEREST INCOME
Service charges on deposit accounts			505			428
Trust and investment fees			439			415
Credit card fees			201			181
Other fees			311			307
Mortgage banking			359			391
Insurance			263			118
Net gains on debt securities available for sale			37			88
Income (loss) from equity investments			(19	)		138
Other			205			348

	Total noninterest income		2,301			2,414

NONINTEREST EXPENSE
Salaries			1,076			977
Incentive compensation			357			204
Employee benefits			329			278
Equipment			236			237
Net occupancy			269			237
Goodwill			—			144
Core deposit intangibles			41			43
Net gains on dispositions of premises and equipment			(2	)		(19	)
Other			1,022			895

	Total noninterest expense		3,328			2,996

INCOME BEFORE INCOME TAX EXPENSE AND EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE			2,138			1,877
Income tax expense			759			712

NET INCOME BEFORE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE			1,379			1,165
Cumulative effect of change in accounting principle			(276	)		—

NET INCOME		$	1,103		$	1,165

NET INCOME APPLICABLE TO COMMON STOCK		$	1,102		$	1,161

EARNINGS PER COMMON SHARE BEFORE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
	Earnings per common share	$	.81		$	.68

	Diluted earnings per common share	$	.80		$	.67

EARNINGS PER COMMON SHARE
	Earnings per common share	$	.65		$	.68

	Diluted earnings per common share	$	.64		$	.67

DIVIDENDS DECLARED PER COMMON SHARE		$	.26		$	.24

Average common shares outstanding			1,703.0			1,715.9

Diluted average common shares outstanding			1,718.9			1,738.7

WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET

(in millions, except shares)		March 31, 2002			December 31, 2001			March 31, 2001


ASSETS
Cash and due from banks		$	14,559		$	16,968		$	15,523
Federal funds sold and securities purchased under resale agreements			2,788			2,530			2,869
Securities available for sale			40,085			40,308			38,144
Mortgages held for sale			26,266			30,405			18,677
Loans held for sale			5,315			4,745			4,875
Loans			178,447			172,499			161,876
Allowance for loan losses			3,842			3,761			3,759

	Net loans		174,605			168,738			158,117

Mortgage servicing rights			7,138			6,241			5,340
Premises and equipment, net			3,660			3,549			3,429
Core deposit intangibles			981			1,013			1,135
Goodwill			9,733			9,527			9,280
Interest receivable and other assets			26,379			23,545			22,281

	Total assets	$	311,509		$	307,569		$	279,670

LIABILITIES
Noninterest-bearing deposits		$	60,728		$	65,362		$	54,996
Interest-bearing deposits			128,840			121,904			116,325

	Total deposits		189,568			187,266			171,321
Short-term borrowings			33,408			37,782			29,352
Accrued expenses and other liabilities			16,482			16,777			16,597
Long-term debt			40,839			36,095			34,600
Guaranteed preferred beneficial interests in Company's subordinated debentures			2,885			2,435			935
STOCKHOLDERS' EQUITY
Preferred stock			389			218			525
Unearned ESOP shares			(338	)		(154	)		(269	)

	Total preferred stock		51			64			256
Common stock—$1-2/3 par value, authorized 6,000,000,000 shares; issued 1,736,381,025 shares			2,894			2,894			2,894
Additional paid-in capital			9,472			9,436			9,354
Retained earnings			16,609			16,005			15,176
Cumulative other comprehensive income			676			752			122
Treasury stock—27,844,043 shares, 40,886,028 shares and 17,838,827 shares			(1,375	)		(1,937	)		(937	)

	Total stockholders' equity		28,327			27,214			26,865

	Total liabilities and stockholders' equity	$	311,509		$	307,569		$	279,670

WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME

(in millions, except shares)			Number of shares	Preferred stock			Unearned ESOP shares			Common stock		Additional paid-in capital			Retained earnings			Treasury stock			Cumulative other comprehensive income			Total stockholders' equity


BALANCE DECEMBER 31, 2000				$	385		$	(118	)	$	2,894	$	9,337		$	14,541		$	(1,075	)	$	524		$	26,488

Comprehensive income
	Net income															1,165									1,165
	Other comprehensive income, net of tax:
		Translation adjustments																				(2	)		(2	)
		Net unrealized losses on securities available for sale, net of reclassification of $174 million of net gains included in net income																				(564	)		(564	)
		Cumulative effect of the change in accounting principle for derivatives and hedging activities																				71			71
		Net unrealized gains on derivatives and hedging activities, net of reclassification of $14 million of net losses on cash flow hedges included in net income																				93			93

Total comprehensive income																									763
Common stock issued			7,934,646										2			(114	)		348						236
Common stock issued for acquisitions			385,727																18						18
Common stock repurchased			5,480,399																(275	)					(275	)
Preferred stock (192,000) issued to ESOP					192			(207	)				15												—
Preferred stock released to ESOP								56					(4	)											52
Preferred stock (52,257) converted to common shares			1,056,381		(52	)							4						48						—
Preferred stock dividends																(4	)								(4	)
Common stock dividends																(412	)								(412	)
Change in Rabbi trust assets (classified as treasury stock)																			(1	)					(1	)

Net change					140			(151	)		—		17			635			138			(402	)		377

BALANCE MARCH 31, 2001				$	525		$	(269	)	$	2,894	$	9,354		$	15,176		$	(937	)	$	122		$	26,865

BALANCE DECEMBER 31, 2001				$	218		$	(154	)	$	2,894	$	9,436		$	16,005		$	(1,937	)	$	752		$	27,214

Comprehensive income
	Net income															1,103									1,103
	Other comprehensive income, net of tax:
		Net unrealized losses on securities available for sale, net of reclassification of $31 million of net gains included in net income																				(137	)		(137	)
		Net unrealized gains on derivatives and hedging activities, net of reclassification of $68 million of net losses on cash flow hedges included in net income																				61			61

Total comprehensive income																									1,027
Common stock issued			4,100,927										22			(54	)		175						143
Common stock issued for acquisitions			10,373,249										(5	)					458						453
Common stock repurchased			2,781,496																(131	)					(131	)
Preferred stock (238,000) issued to ESOP					238			(255	)				17												—
Preferred stock released to ESOP								71					(5	)											66
Preferred stock (66,611) converted to common shares			1,349,305		(67	)							7						60						—
Preferred stock dividends																(1	)								(1	)
Common stock dividends																(444	)								(444	)

Net change					171			(184	)		—		36			604			562			(76	)		1,113

BALANCE MARCH 31, 2002				$	389		$	(338	)	$	2,894	$	9,472		$	16,609		$	(1,375	)	$	676		$	28,327

WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS

			Quarter ended March 31,

(in millions)			2002			2001

Cash flows from operating activities:
	Net income		$	1,103		$	1,165
	Adjustments to reconcile net income to net cash provided by operating activities:
		Provision for loan losses		490			361
		Depreciation and amortization		536			481
		Net gains on securities available for sale		(50	)		(281	)
		Net gains on sales of mortgage loan origination/sale activities		(120	)		(40	)
		Net gains on sales of loans		(6	)		(13	)
		Net gains on dispositions of premises and equipment		(2	)		(19	)
		Net gains on dispositions of operations		(3	)		(101	)
		Release of preferred shares to ESOP		66			52
		Net (increase) decrease in trading assets		—			19
		Deferred income tax expense		420			141
		Net (increase) decrease in accrued interest receivable		(57	)		63
		Net increase (decrease) in accrued interest payable		3			(66	)
		Originations of mortgages held for sale		(60,314	)		(27,760	)
		Proceeds from sales of mortgages held for sale		65,811			20,066
		Principal collected on mortgages held for sale		276			267
		Net (increase) decrease in loans held for sale		(570	)		1,624
		Other assets, net		(446	)		(111	)
		Other accrued expenses and liabilities, net		(657	)		2,330

Net cash provided (used) by operating activities				6,480			(1,822	)

Cash flows from investing activities:
	Securities available for sale:
		Proceeds from sales		2,084			8,973
		Proceeds from prepayments and maturities		2,176			1,218
		Purchases		(3,050	)		(11,931	)
	Net cash paid for acquisitions			(553	)		(98	)
	Net increase in banking subsidiaries' loans resulting from originations and collections			(3,914	)		(1,963	)
	Proceeds from sales (including participations) of banking subsidiaries' loans			355			249
	Purchases (including participations) of banking subsidiaries' loans			(250	)		(159	)
	Principal collected on nonbank subsidiaries' loans			2,843			3,218
	Nonbank subsidiaries' loans originated			(3,175	)		(2,456	)
	Proceeds from dispositions of operations			3			1,182
	Proceeds from sales of foreclosed assets			145			52
	Net increase in federal funds sold and securities purchased under resale agreements			(116	)		(1,271	)
	Net (increase) decrease in mortgage servicing rights			(1,609	)		96
	Other, net			(902	)		(5,963	)

Net cash used by investing activities				(5,963	)		(3,845	)

Cash flows from financing activities:
	Net (decrease) increase in deposits			(2,013	)		1,762
	Net (decrease) increase in short-term borrowings			(5,261	)		363
	Proceeds from issuance of long-term debt			7,489			5,988
	Repayment of long-term debt			(3,092	)		(3,427	)
	Proceeds from issuance of guaranteed preferred beneficial interests in Company's subordinated debentures			450			—
	Proceeds from issuance of common stock			114			225
	Repurchase of common stock			(131	)		(275	)
	Payment of cash dividends on preferred and common stock			(445	)		(416	)
	Other, net			(37	)		(8	)

Net cash (used) provided by financing activities				(2,926	)		4,212

	Net change in cash and due from banks			(2,409	)		(1,455	)
Cash and due from banks at beginning of quarter				16,968			16,978

Cash and due from banks at end of quarter			$	14,559		$	15,523

Supplemental disclosures of cash flow information:
	Cash paid during the quarter for:
		Interest	$	1,029		$	1,995
		Income taxes		422			723
	Noncash investing and financing activities:
		Transfers from loans to foreclosed assets	$	162		$	54
		Transfers from loans to mortgages held for sale		1,232			—

WELLS FARGO & COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Descriptions of the significant accounting policies of Wells Fargo & Company and Subsidiaries (the Company) are included in Note 1 (Summary of Significant Accounting Policies) to the audited consolidated financial statements included in the Company's 2001 Annual Report to Stockholders on Form 10-K. There have been no significant changes to these policies with the exception of the policies for goodwill and identifiable intangible assets presented below.

Goodwill and Other Intangible Assets

Goodwill, which represents the excess of the purchase price over the fair value of net assets acquired, results from purchase method business combinations. On July 1, 2001, the Company adopted Financial Accounting Standards Board Statement No. 142 (FAS 142), Goodwill and Other Intangible Assets. FAS 142 eliminates amortization of goodwill associated with business combinations completed after June 30, 2001. During the transition period from July 1, 2001 through December 31, 2001, the Company's goodwill associated with business combinations completed prior to July 1, 2001 continued to be amortized over periods of up to 25 years. Effective January 1, 2002, all goodwill amortization was discontinued.

Effective January 1, 2002, goodwill will be assessed at least annually for impairment on a reporting unit level by applying a fair-value-based test using discounted estimated future net cash flows. In the first quarter of 2002, the Company completed its initial goodwill impairment assessment and recorded a transitional impairment charge as a cumulative effect of a change in accounting principle in the Consolidated Statement of Income. Impairment that may result from subsequent assessments will be recognized as a charge to noninterest expense unless related to discontinued operations.

Core deposit intangibles are amortized on an accelerated basis based on useful lives of up to 15 years. Certain identifiable intangible assets that are included in other assets are generally amortized using an accelerated method over useful lives of up to 15 years.

The Company reviews intangible assets (excluding mortgage servicing rights) annually for impairment, or whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For those intangible assets subject to amortization, impairment is indicated if the sum of undiscounted estimated future net cash flows is less than the carrying value of the asset. Impairment is recognized by writing down the asset to the extent that the carrying value exceeds its fair value.

2. Business Combinations

The Company regularly explores opportunities to acquire financial institutions and related financial services businesses. Generally, management of the Company does not make a public announcement about an acquisition opportunity until a definitive agreement has been signed.

Transactions completed in the three months ended March 31, 2002 include:

(in millions)	Date	Assets

Risk Management Services, Inc., Morristown, Tennessee	January 1	$	2
Alcalay, Cohen, Inc. d/b/a General Insurance Consultants, Tarzana, California	February 1		6
Texas Financial Bancorporation, Inc., Minneapolis, Minnesota	February 1		2,957
Five affiliated banks and related entities of Marquette Bancshares, Inc. located in Minnesota, Wisconsin, Illinois, Iowa and South Dakota	February 1		3,086
SIFE, Walnut Creek, California	February 22		25
Rediscount business of Washington Mutual Bank, FA, Philadelphia, Pennsylvania	March 28		281

		$	6,357

The Company had one pending business combination as of March 31, 2002, with approximately $350 million of total assets.

3. Preferred Stock

The Company is authorized to issue 20 million shares of preferred stock and 4 million shares of preference stock, both without par value. All preferred shares outstanding rank senior to common shares both as to dividends and liquidation preference but have no general voting rights. No preference shares have been issued under this authorization.

The table below is a summary of the Company's preferred stock. A detailed description of the Company's preferred stock is provided in Note 11 to the audited consolidated financial statements included in the Company's 2001 Annual Report on Form 10-K.

		Shares issued and outstanding			Carrying amount (in millions)

		Shares issued and outstanding			Carrying amount (in millions)									Adjustable dividends rate
		Mar. 31, 2002	Dec. 31, 2001	Mar. 31, 2001	Mar. 31, 2002			Dec. 31, 2001			Mar. 31, 2001			Adjustable dividends rate
		Mar. 31, 2002	Dec. 31, 2001	Mar. 31, 2001	Mar. 31, 2002			Dec. 31, 2001			Mar. 31, 2001			Minimum		Maximum

Adjustable-Rate Cumulative, Series B (1)		1,460,000	1,460,000	1,460,000	$	73		$	73		$	73		5.50	%	10.50	%
6.59%/Adjustable-Rate Noncumulative Preferred Stock, Series H (1)(2)		—	—	4,000,000		—			—			200		7.00		13.00
2002 ESOP Cumulative Convertible (3)		174,913	—	—		175			—			—		10.50		11.50
2001 ESOP Cumulative Convertible (3)		58,426	61,800	150,361		58			62			150		10.50		11.50
2000 ESOP Cumulative Convertible (3)		39,812	39,962	45,163		40			40			45		11.50		12.50
1999 ESOP Cumulative Convertible (3)		15,552	15,552	18,019		15			15			18		10.30		11.30
1998 ESOP Cumulative Convertible (3)		6,145	6,145	7,551		6			6			8		10.75		11.75
1997 ESOP Cumulative Convertible (3)		7,576	7,576	9,452		8			8			10		9.50		10.50
1996 ESOP Cumulative Convertible (3)		7,707	7,707	10,126		8			8			10		8.50		9.50
1995 ESOP Cumulative Convertible (3)		5,543	5,543	8,237		5			5			8		10.00		10.00
ESOP Cumulative Convertible (3)		1,002	1,002	2,638		1			1			3		9.00		9.00
Unearned ESOP shares (4)		—	—	—		(338	)		(154	)		(269	)	—		—

	Total	1,776,676	1,605,287	5,711,547	$	51		$	64		$	256

(1): Liquidation preference $50.
(2): Annualized dividend rate was 6.59% until October 1, 2001. On October 1, 2001 all shares were redeemed at the stated liquidation price plus accrued dividends.
(3): Liquidation preference $1,000.
(4): In accordance with the American Institute of Certified Public Accountants (AICPA) Statement of Position 93-6, Employers' Accounting for Employee Stock Ownership Plans, the Company recorded a corresponding charge to unearned ESOP shares in connection with the issuance of the ESOP Preferred Stock. The unearned ESOP shares are reduced as shares of the ESOP Preferred Stock are committed to be released.

4. Earnings Per Common Share

The table below shows dual presentation of earnings per common share and diluted earnings per common share and a reconciliation of the numerator and denominator of both earnings per common share calculations.

	Quarter ended March 31,

(in millions, except per share amounts)	2002			2001

Net income before effect of change in accounting principle	$	1,379		$	1,165
Less: Preferred stock dividends		1			4

Net income applicable to common stock before effect of change in accounting principle (numerator)		1,378			1,161
Cumulative effect of change in accounting principle (numerator)		(276	)		—

Net income applicable to common stock (numerator)	$	1,102		$	1,161

EARNINGS PER COMMON SHARE
Average common shares outstanding (denominator)		1,703.0			1,715.9

Per share before effect of change in accounting principle	$	.81		$	.68
Per share effect of change in accounting principle		(.16	)		—

Per share	$	.65		$	.68

DILUTED EARNINGS PER COMMON SHARE
Average common shares outstanding		1,703.0			1,715.9
Add: Stock options		15.6			22.0
Restricted share rights		.3			.8

Diluted average common shares outstanding (denominator)		1,718.9			1,738.7

Per share before effect of change in accounting principle	$	.80		$	.67
Per share effect of change in accounting principle		(.16	)		—

Per share	$	.64		$	.67

5. "Adjusted" Earnings—FAS 142 Transitional Disclosure

Effective January 1, 2002, under FAS 142, amortization of goodwill was discontinued. For comparability, the table below reconciles the Company's reported earnings for first quarter 2001 to "adjusted" earnings, which exclude goodwill amortization.

	Quarter ended March 31,

	2002			2001
(in millions, except per share amounts)	Reported earnings			Reported earnings		Goodwill amortization		"Adjusted" earnings

Income before income tax expense and effect of change in accounting principle	$	2,138		$	1,877	$	144	$	2,021
Income tax expense		759			712		9		721

Net income before effect of change in accounting principle		1,379			1,165		135		1,300
Less: Preferred stock dividends		1			4		—		4

Net income applicable to common stock before effect of change in accounting principle		1,378			1,161		135		1,296
Cumulative effect of change in accounting principle		(276	)		—		—		—

Net income applicable to common stock	$	1,102		$	1,161	$	135	$	1,296

Earnings per common share before effect of change in accounting principle	$	.81		$	.68	$	.08	$	.76

Earnings per common share	$	.65		$	.68	$	.08	$	.76

Diluted earnings per common share before effect of change in accounting principle	$	.80		$	.67	$	.08	$	.75

Diluted earnings per common share	$	.64		$	.67	$	.08	$	.75

6. Operating Segments

The Company has three lines of business for management reporting: Community Banking, Wholesale Banking and Wells Fargo Financial. The results are determined based on the Company's management accounting process, which assigns balance sheet and income statement items to each responsible operating segment. This process is dynamic and somewhat subjective. Unlike financial accounting, there is no comprehensive, authoritative guidance for management accounting equivalent to generally accepted accounting principles. The management accounting process measures the performance of the operating segments based on the Company's management structure and is not necessarily comparable with similar information for other financial services companies. The Company's operating segments are defined by product type and customer segments. Changes in management structure and/or the allocation process may result in changes in allocations, transfers and assignments. In that case, results for prior periods would be (and have been) restated to allow comparability. Results for 2001 have been restated to eliminate goodwill amortization from the operating segments and to reflect changes in transfer pricing methodology applied in first quarter 2002.

The Community Banking Group offers a complete line of diversified financial products and services to individual consumers and small businesses with annual sales up to $10 million in which the owner is also the principal financial decision maker. Community Banking also offers investment management and other services to retail customers and high net worth individuals, insurance and securities brokerage through affiliates and venture capital financing. These products and services include Wells Fargo Funds®, a family of mutual funds, as well as personal trust, employee benefit trust and agency assets. Loan products include lines of credit, equity lines and loans, equipment and transportation (auto, recreational vehicle and marine) loans, origination and purchase of residential mortgage loans for sale to investors and servicing of mortgage loans. Other credit products and financial services available to small businesses and their owners include receivables and inventory financing, equipment leases, real estate financing, Small Business Administration financing, cash management, payroll services, retirement plans, medical savings accounts and credit and debit card processing. Consumer and business deposit products include checking accounts, savings deposits, market rate accounts, Individual Retirement Accounts (IRAs) and time deposits.

Community Banking provides access to customers through a wide range of channels, which encompass a network of traditional banking stores, banking centers, in-store banking centers, business centers and ATMs. Additionally, 24-hour telephone service is provided by PhoneBank^SMcenters and the National Business Banking Center. Online banking services include the Wells Fargo Internet Services Group and Wells Fargo Business Gateway®, a personal computer banking service exclusively for the small business customer.

The Wholesale Banking Group serves businesses across the United States with annual sales in excess of $10 million. Wholesale Banking provides a complete line of commercial, corporate and real estate banking products and services. These include traditional commercial loans and lines of credit, letters of credit, asset-based lending, equipment leasing, mezzanine financing, high yield debt, international trade facilities, foreign exchange services, treasury management, investment management, institutional fixed income and equity sales, electronic products,

insurance and insurance brokerage services, and investment banking services. Wholesale Banking includes the majority ownership interest in the Wells Fargo HSBC Trade Bank, which provides trade financing, letters of credit and collection services and is sometimes supported by the Export-Import Bank of the United States (a public agency of the United States offering export finance support for American-made products). Wholesale Banking also supports the commercial real estate market with products and services such as construction loans for commercial and residential development, land acquisition and development loans, secured and unsecured lines of credit, interim financing arrangements for completed structures, rehabilitation loans, affordable housing loans and letters of credit, permanent loans for securitization, commercial real estate loan servicing and real estate and mortgage brokerage services.

Wells Fargo Financial includes consumer finance and auto finance operations. Consumer finance operations make direct loans to consumers and purchase sales finance contracts from retail merchants from offices throughout the United States and Canada and in the Caribbean and Latin America. Automobile finance operations specialize in purchasing sales finance contracts directly from automobile dealers and making loans secured by automobiles in the United States and Puerto Rico. Credit cards are offered to consumer finance customers through two credit card banks. Wells Fargo Financial also provides lease and other commercial financing.

The Reconciliation Column includes all amortization of goodwill for 2001, the net impact of transfer pricing loan and deposit balances, the cost of external debt, and any residual effects of unallocated systems and other support groups. It also includes the impact of asset/liability strategies the Company has put in place to manage interest rate sensitivity at the consolidated level.

The following table provides the results for the Company's three major operating segments.

(income/expense in millions, average balances in billions)	Community Banking				Wholesale Banking					Wells Fargo Financial					Reconciliation column (3)						Consolidated Company

Quarter ended March 31,	2002		2001		2002			2001		2002			2001		2002			2001			2002			2001

Net interest income (1)	$	2,680	$	1,907	$	558		$	539	$	441		$	392	$	(24	)	$	(18	)	$	3,655		$	2,820
Provision for loan losses		276		216		85			39		129			106		—			—			490			361
Noninterest income		1,541		1,784		651			506		91			85		18			39			2,301			2,414
Noninterest expense		2,403		2,073		654			531		270			242		1			150			3,328			2,996

Income (loss) before income tax expense (benefit) and effect of change in accounting principle		1,542		1,402		470			475		133			129		(7	)		(129	)		2,138			1,877
Income tax expense (benefit) (2)		562		497		167			173		49			48		(19	)		(6	)		759			712

Net income (loss) before effect of change in accounting principle		980		905		303			302		84			81		12			(123	)		1,379			1,165
Cumulative effect of change in accounting principle		—		—		(98	)		—		(178	)		—		—			—			(276	)		—

Net income (loss)	$	980	$	905	$	205		$	302	$	(94	)	$	81	$	12		$	(123	)	$	1,103		$	1,165

Average loans	$	109	$	98	$	49		$	50	$	14		$	12	$	—		$	—		$	172		$	160
Average assets		223		185		69			63		16			14		6			7			314			269
Average core deposits		161		142		17			15		—			—		—			—			178			157

(1): Net interest income is the difference between actual interest earned on assets (and interest paid on liabilities) owned by a group and a funding charge (and credit) based on the Company's cost of funds. Community Banking and Wholesale Banking are charged a cost to fund any assets (e.g., loans) and are paid a funding credit for any funds provided (e.g., deposits). The interest spread is the difference between the interest rate earned on an asset or paid on a liability and the Company's cost of funds rate.
(2): Taxes vary by geographic concentration of revenue generation. Taxes as presented may differ from the consolidated Company's effective tax rate as a result of taxable-equivalent adjustments that primarily relate to income on certain loans and securities that is exempt from federal and applicable state income taxes. The offsets for these adjustments are found in the reconciliation column.
(3): The material items in the reconciliation column related to revenue (i.e., net interest income plus noninterest income) and net income consist of Treasury activities and unallocated items. Revenue includes Treasury activities of $19 million and $41 million; and unallocated items of $(25) million and $(20) million for the first quarter of 2002 and 2001, respectively. Net income includes Treasury activities of $11 million and $25 million; and unallocated items of $1 million and $(148) million for the first quarter of 2002 and 2001, respectively. The material items in the reconciliation column related to noninterest expense include goodwill and nonqualifying CDI amortization of $148 million for the first quarter of 2001. The material items in the reconciliation column related to average assets include goodwill and nonqualifying CDI of $6 billion and $7 billion for the first quarter of 2002 and 2001, respectively. Results for 2001 have been restated to reclassify goodwill amortization from the three operating segments to the reconciliation column for comparability.

7. Mortgage Banking Activities

Mortgage banking activities, included in the Community Banking and Wholesale Banking operating segments, comprise residential and commercial mortgage originations and servicing.

The components of mortgage banking noninterest income are presented below:

		Quarter ended March 31,

(in millions)		2002			2001

Origination and other closing fees		$	220		$	121
Servicing fees, net of amortization and impairment			(73	)		18
Net gains on securities available for sale			—			136
Net gains on mortgage loan origination/sales activities			120			40
All other			92			76

	Total mortgage banking noninterest income	$	359		$	391

The managed servicing portfolio totaled $539 billion at March 31, 2002, $514 billion at December 31, 2001 and $472 billion at March 31, 2001, which included loans subserviced for others of $56 billion, $63 billion and $81 billion, respectively.

The following table summarizes the changes in capitalized mortgage loan servicing rights:

		Quarter ended March 31,

(in millions)		2002			2001

Balance, beginning of quarter		$	7,365		$	5,609
	Originations⁽¹⁾		662			324
	Purchases⁽¹⁾		402			160
	Amortization		(370	)		(166	)
	Other (includes changes in mortgage servicing rights due to hedging)		545			(418	)

			8,604			5,509
Less: Valuation allowance			1,466			169

Balance, end of quarter		$	7,138		$	5,340

(1): The weighted-average amortization period for mortgage servicing rights added during the first quarter of 2002 was 7.3 years.

The following table summarizes the changes in the valuation allowance for capitalized mortgage servicing rights:

		Quarter ended March 31,

(in millions)		2002		2001

Balance, beginning of quarter		$	1,124	$	—
	Provision for capitalized mortgage servicing rights in excess of fair value		342		169

Balance, end of quarter		$	1,466	$	169

8. Intangible Assets

The gross carrying amount of intangible assets and the associated accumulated amortization at March 31, 2002 is presented in the following table.

		March 31, 2002

(in millions)		Gross carrying amount		Accumulated amortization

Amortized intangible assets:
	Mortgage servicing rights	$	11,861	$	3,257
	Core deposit intangibles		2,414		1,433
	Other		294		191

	Total	$	14,569	$	4,881

Unamortized intangible asset (trademark)		$	14

The projections of amortization expense shown below for mortgage servicing rights are based on existing asset balances and the existing interest rate environment as of March 31, 2002. Future amortization expense may be significantly different depending upon changes in the mortgage servicing portfolio, mortgage interest rates and market conditions.

The following table shows the current period and estimated future amortization expense for amortized intangible assets:

(in millions)	Mortgage servicing rights		Core deposit intangibles		Other		Total


Quarter ended March 31, 2002 (actual)	$	370	$	41	$	10	$	421
Nine months ended December 31, 2002 (estimate)		1,207		115		15		1,337
Estimate for year ended December 31,
2003		1,227		142		18		1,387
2004		1,024		132		15		1,171
2005		855		120		12		987
2006		713		107		9		829
2007		595		98		8		701

9. Goodwill

The following table summarizes the changes in the first quarter of 2002 in the carrying amount of goodwill as allocated to the Company's operating segments for the purpose of goodwill impairment analysis.

(in millions)		Community Banking		Wholesale Banking			Wells Fargo Financial			Consolidated Company


Balance December 31, 2001		$	6,265	$	2,655		$	607		$	9,527
	Goodwill from business combinations		586		17			7			610
	Transitional goodwill impairment charge		—		(133	)		(271	)		(404	)

Balance March 31, 2002		$	6,851	$	2,539		$	343		$	9,733

During the first quarter of 2002, the Company completed its initial goodwill impairment testing. All reporting units were evaluated using discounted estimated future net cash flows. The process resulted in a $276 million (after tax), $404 million (before tax), transitional impairment charge reported as a cumulative effect of a change in accounting principle. The transitional impairment resulted from a change in the method of testing for goodwill impairment under FAS 142, as well as a change in business strategies, reflecting the current economic outlook, for certain reporting units in Wholesale Banking and Wells Fargo Financial, primarily Island Finance, a Puerto Rico based consumer finance company acquired in 1995.

Goodwill amounts allocated to the operating segments for goodwill impairment analysis differ from amounts allocated to the Company's operating segments for management reporting discussed in Note 6 (Operating Segments) to Financial Statements. At March 31, 2002, for management reporting, the balance of goodwill for Community Banking, Wholesale Banking and Wells Fargo Financial was $2.87 billion, $589 million and $343 million, respectively, with $5.93 billion recorded at the enterprise level.

10. Derivative Instruments and Hedging Activities

Fair Value Hedges

The Company enters into interest rate swaps to convert certain of its fixed-rate long-term debt to floating-rate debt. The Company recognized a net gain of $1 million for the first quarter of 2002, compared with $6 million for the first quarter of 2001, as an offset to interest expense, representing the ineffective portion of fair value hedges of long-term debt. For long-term debt, all components of each derivative instrument's gain or loss are included in the assessment of hedge effectiveness.

The Company also enters into derivative contracts to hedge its mortgage servicing rights and other retained interests. The ineffective portion of these fair value hedges amounted to a net gain of $297 million in the first quarter of 2002, compared with a net loss of $17 million in the first quarter of 2001. This gain primarily resulted from increased interest rate volatility. Also, in the first quarter of 2002, a net gain of $275 million related to the spread between spot and forward rates on these derivative contracts was excluded from the assessment of hedge ineffectiveness. These gains were more than offset by higher mortgage servicing rights impairment charges and amortization expenses amounting to $712 million. These gains, impairment charges and amortization expenses are included in "Servicing fees, net of impairment and amortization" in Note 7 (Mortgage Banking Activities) to Financial Statements. As of March 31, 2002, designated hedges continued to qualify as fair value hedges.

Cash Flow Hedges

In the first quarter of 2002, the Company recognized a net loss of $108 million, which represents the total ineffectiveness of cash flow hedges, compared with a net loss of $14 million in the first quarter of 2001. The change was due to growth in mortgages held for sale and increased interest rate volatility. Gains and losses on derivative contracts that are reclassified from cumulative other comprehensive income to current period earnings are included in the line item in which the hedged item's effect in earnings is recorded. All components of each derivative instrument's gain or loss are included in the assessment of hedge effectiveness, except for derivative instruments hedging commercial loans indexed to LIBOR, where only the benchmark interest rate is included in the assessment of hedge effectiveness. As of March 31, 2002, designated hedges continued to qualify as cash flow hedges.

At March 31, 2002, $191 million of deferred net gains on derivative instruments included in other comprehensive income are expected to be reclassified as earnings during the next twelve months, compared with $24 million at March 31, 2001. The maximum term the Company is hedging its exposure to the variability of future cash flows for all forecasted transactions is ten years for hedges converting floating-rate loans to fixed and one year for hedges of forecasted sales of mortgage loans.

Derivative Financial Instruments—Summary Information

The following table summarizes the credit risk amount and estimated net fair value for the Company's derivative financial instruments at March 31, 2002 and December 31, 2001.

	March 31, 2002					December 31, 2001

(in millions)	Credit risk amount (2)		Estimated net fair value			Credit risk amount (2)		Estimated net fair value

ASSET/LIABILITY MANAGEMENT HEDGES⁽¹⁾
Interest rate contracts	$	1,858	$	1,331		$	2,197	$	1,507
CUSTOMER ACCOMMODATIONS AND TRADING⁽¹⁾
Interest rate contracts		1,645		(30	)		2,363		232
Commodity contracts		18		1			18		1
Equity contracts		26		6			33		5
Credit contracts		25		(1	)		13		(2	)
Foreign exchange contracts		227		67			245		66

(1): The Company anticipates performance by substantially all of the counterparties for these contracts or the underlying financial instruments.
(2): Credit risk amounts reflect the replacement cost for those contracts in a gain position in the event of nonperformance by counterparties.

11. Guaranteed Preferred Beneficial Interest in Company's Subordinated Debentures

On March 27, 2002, Wells Fargo Capital VI (the "Trust"), a business trust established by the Company to issue trust preferred securities, issued to the public $450 million in trust preferred securities in the form of its 6.95% Capital Securities and issued to the Company $14 million of trust common securities. The Trust used the proceeds to purchase $464 million of the Company's 6.95% junior subordinated debentures due April 15, 2032 (the Debentures). The Debentures are the sole assets of the Trust and are subordinate to all of the Company's existing and future obligations for borrowed or purchased money, obligations under letters of credit and certain derivative contracts, and any guarantees by the Company of any of such obligations. Concurrent with the issuance of the Debentures and the trust preferred and common securities, the Company issued a guarantee related to the trust securities for the benefit of the holders.

The Company will treat the trust preferred securities as Tier 1 capital. The Debentures, the common securities issued by the Trust, and the related income effects are eliminated within the Company's consolidated financial statements. The Company's obligations under the Debentures, the related indenture, the trust agreement relating to the trust securities, and the guarantee constitute a full and unconditional guarantee by the Company of the obligations of the Trust under the trust preferred securities.

The stated maturity date of the Debentures is April 15, 2032, which may be accelerated under limited circumstances or extended to no later than April 15, 2052. In addition, the Debentures are subject to redemption at the option of the Company, subject to prior regulatory approval, in whole or in part on or after April 15, 2007 or in whole, but not in part, within 90 days after the occurrence of certain events that either would have a negative tax effect on the Trust or the Company, would cause the trust preferred securities to no longer qualify as Tier 1 capital, or would result in the Trust being treated as an investment company. Upon repayment of the Debentures at their stated maturity or following their earlier redemption, the Trust will use the proceeds of such repayment to redeem an equivalent amount of outstanding trust preferred securities and trust common securities.

FINANCIAL REVIEW

SUMMARY FINANCIAL DATA

			Quarter ended									% Change Mar. 31, 2002 from

(in millions, except per share amounts)			Mar. 31, 2002			Dec. 31, 2001			Mar. 31, 2001			Dec. 31, 2001		Mar. 31, 2001

For the Period
Before effect of change in accounting principle(1) and excluding goodwill amortization
Net income			$	1,379		$	1,328		$	1,300		4	%	6	%
Diluted earnings per common share				.80			.77			.75		4		7
Profitability ratios (annualized)
	Net income to average total assets (ROA)			1.78	%		1.73	%		1.96	%	3		(9	)
	Net income applicable to common stock to average common stockholders' equity (ROE)			20.01			19.47			20.04		3		—
		Efficiency ratio (2)		55.9			56.1			54.5		—		3
After effect of change in accounting principle
Net income			$	1,103		$	1,181		$	1,165		(7	)	(5	)
Diluted earnings per common share				.64			.69			.67		(7	)	(4	)
Profitability ratios (annualized)
	ROA			1.42	%		1.54	%		1.76	%	(8	)	(19	)
	ROE			16.00			17.31			17.95		(8	)	(11	)
		Efficiency ratio (2)		55.9			58.7			57.2		(5	)	(2	)
Dividends declared per common share				.26			.26			.24		—		8
Average common shares outstanding				1,703.0			1,696.7			1,715.9		—		(1	)
Diluted average common shares outstanding				1,718.9			1,709.2			1,738.7		1		(1	)
Total revenue			$	5,956		$	5,879		$	5,234		1		14
Average loans			$	172,128		$	167,203		$	159,888		3		8
Average assets				314,336			303,930			268,536		3		17
Average core deposits				177,646			175,752			156,898		1		13
Net interest margin				5.67	%		5.50	%		5.21	%	3		9
At Period End
Securities available for sale			$	40,085		$	40,308		$	38,144		(1	)	5
Loans				178,447			172,499			161,876		3		10
Allowance for loan losses				3,842			3,761			3,759		2		2
Goodwill				9,733			9,527			9,280		2		5
Assets				311,509			307,569			279,670		1		11
Core deposits				181,659			182,295			163,414		—		11
Common stockholders' equity				28,276			27,150			26,609		4		6
Stockholders' equity				28,327			27,214			26,865		4		5
Tier 1 capital (3)				19,652			18,247			16,575		8		19
Total capital (3)				28,489			27,253			25,255		5		13
Capital ratios
	Common stockholders' equity to assets			9.08	%		8.83	%		9.51	%	3		(5	)
	Stockholders' equity to assets			9.09			8.85			9.61		3		(5	)
	Risk-based capital (3)
		Tier 1 capital		7.68			6.99			7.18		10		7
		Total capital		11.13			10.45			10.94		7		2
	Leverage (3)			6.50			6.25			6.44		4		1
Book value per common share			$	16.55		$	16.01		$	15.48		3		7
Staff (active, full-time equivalent)				123,200			119,714			113,214		3		9
Common Stock Price
High			$	50.75		$	45.14		$	54.81		12		(7	)
Low				42.90			38.25			42.55		12		1
Period end				49.40			43.47			49.47		14		—

(1): Change in accounting principle relates to transitional goodwill impairment charge recorded in first quarter 2002 related to the adoption of FAS 142, Goodwill and Other Intangible Assets.
(2): The efficiency ratio is defined as noninterest expense divided by the total revenue (net interest income and noninterest income).
(3): See the Capital Adequacy/Ratios section for additional information.

OVERVIEW

Wells Fargo & Company is a $312 billion diversified financial services company providing banking, insurance, investments, mortgage banking and consumer finance through banking branches, the internet and other distribution channels to consumers, commercial businesses and financial institutions in all 50 states of the U.S. and in other countries. It ranked fifth in assets and third in market capitalization among U.S. bank holding companies at March 31, 2002. In this Form 10-Q, Wells Fargo & Company and Subsidiaries (consolidated) is referred to as the Company and Wells Fargo & Company alone is referred to as the Parent.

Certain amounts in the financial review for prior quarters have been reclassified to conform with the current financial statement presentation.

Net income for the first quarter of 2002, before the effect of an accounting change related to FAS 142, Goodwill and Other Intangible Assets, was $1.38 billion, compared with $1.30 billion (excluding goodwill amortization) for the first quarter of 2001. On the same basis, diluted earnings per common share for the first quarter of 2002 were $.80, compared with $.75 for the first quarter of 2001. On the same basis, return on average assets (ROA) and return on average common equity (ROE) for the first quarter of 2002 were 1.78% and 20.01%, respectively, compared with 1.96% and 20.04%, respectively, for the first quarter of 2001.

Net income for the first quarter of 2002 was $1.10 billion, compared with $1.17 billion for the first quarter of 2001. Diluted earnings per common share for the first quarter of 2002 were $.64, compared with $.67 for the first quarter of 2001. ROA was 1.42% and ROE was 16.00% for the first quarter of 2002, compared with 1.76% and 17.95%, respectively, for the first quarter of 2001.

Net interest income on a taxable-equivalent basis was $3.68 billion for the first quarter of 2002, compared with $2.83 billion for the first quarter of 2001. The Company's net interest margin was 5.67% for the first quarter of 2002, compared with 5.21% for the first quarter of 2001.

Noninterest income was $2.30 billion for the first quarter of 2002, compared with $2.41 billion for the first quarter of 2001. The decrease was due to a decrease in market-sensitive income of $208 million, lower net gains on dispositions of operations of $98 million and a decrease in mortgage banking noninterest income, predominantly offset by an increase in service charges on deposit accounts along with an increase in insurance income as a result of the acquisition of Acordia in the second quarter of 2001.

Revenue, the total of net interest income and noninterest income, increased to $5.96 billion in the first quarter of 2002 from $5.23 billion in the first quarter of 2001, an increase of 14%.

Noninterest expense totaled $3.33 billion for the first quarter of 2002, compared with $3.00 billion for the first quarter of 2001, an increase of 11%. The increase was due to acquisitions completed in 2001 and first quarter 2002, as well as substantial increases in mortgage originations relative to the prior period, the effect of which was to increase active, full-time equivalent staff and associated salaries, benefits and incentive compensation.

The provision for loan losses was $490 million in the first quarter of 2002, compared with $361 million in the first quarter of 2001. During the first quarter of 2002, net charge-offs were $487 million, or 1.15% of average total loans (annualized), compared with $361 million, or .92%, during the first quarter of 2001. The allowance for loan losses was $3.84 billion, or 2.15% of total loans, at March 31, 2002, compared with $3.76 billion, or 2.18%, at December 31, 2001 and $3.76 billion, or 2.32%, at March 31, 2001.

At March 31, 2002, total nonaccrual and restructured loans were $1.62 billion, or .9% of total loans, compared with $1.64 billion, or 1.0%, at December 31, 2001 and $1.36 billion, or .8%, at March 31, 2001. Foreclosed assets amounted to $187 million at March 31, 2002, $171 million at December 31, 2001 and $127 million at March 31, 2001.

The ratio of common stockholders' equity to total assets was 9.08% at March 31, 2002, compared with 8.83% at December 31, 2001 and 9.51% at March 31, 2001. The Company's total risk-based capital (RBC) ratio at March 31, 2002 was 11.13% and its Tier 1 RBC ratio was 7.68%, exceeding the minimum regulatory guidelines of 8% and 4%, respectively, for bank holding companies. The Company's RBC ratios at March 31, 2001 were 10.94% and 7.18%, respectively. The Company's leverage ratios were 6.50% and 6.44% at March 31, 2002 and March 31, 2001, respectively, exceeding the minimum regulatory guideline of 3% for bank holding companies.

Recent Accounting Standards

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 141 (FAS 141), Business Combinations, and Statement No. 142 (FAS 142), Goodwill and Other Intangible Assets. The significant changes to the Company's accounting policies related to these Statements are presented in Note 1 (Summary of Significant Accounting Policies) in this report.

The Company completed its initial goodwill impairment assessment and recorded a transitional impairment charge of $276 million (after tax) in first quarter 2002. At December 31, 2001, the Company had $9.53 billion of goodwill, $5.50 billion of which related to the 1996 purchase of First Interstate Bancorp. The Company has determined that recognition of impairment of the remaining First Interstate goodwill is not permitted under FAS 142 since the former First Interstate operations must be combined with other similar banking operations for impairment testing.

In June 2001, the FASB issued Statement No. 143 (FAS 143), Accounting for Asset Retirement Obligations, which addresses the recognition and measurement of obligations associated with the retirement of tangible long-lived assets. FAS 143 is effective January 1, 2003, with early adoption permitted. The Company plans to adopt FAS 143 effective January 1, 2003 and does not expect the adoption of the statement to have a material effect on the financial statements.

FACTORS THAT MAY AFFECT FUTURE RESULTS

We make forward-looking statements in this report and from time to time in other reports and proxy statements we file with the Securities and Exchange Commission (SEC). In addition, our senior management might make forward-looking statements orally to analysts, investors, the media and others. Broadly speaking, forward-looking statements include:

•: projections of our revenues, income, earnings per share, capital expenditures, dividends, capital structure or other financial items;
•: descriptions of plans or objectives of our management for future operations, products or services, including pending acquisitions;
•: forecasts of our future economic performance; and
•: descriptions of assumptions underlying or relating to any of the foregoing.

In this report, for example, we make forward-looking statements about:

•: future credit losses and non-performing assets;
•: future cash requirements relating to commitments to extend credit and to fund equity investments;
•: future amortization expense;
•: the impact of new accounting standards; and
•: the impact of interest rate changes on our net income and our securities available for sale portfolio.

Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements often include words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "project," "target," "can," "could," "may," "should," "will," "would" or similar expressions. Do not unduly rely on forward-looking statements. They give our expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made, and we might not update them to reflect changes that occur after the date they are made.

There are several factors—many beyond our control—that could cause results to differ significantly from our expectations. Some of these factors are described below. Other factors, such as credit, market, operational, liquidity, interest rate and other risks, are described elsewhere in this report (see, for example, "Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis"). Factors relating to the regulation and supervision of the Company are described in our Annual Report on Form 10-K for the year ended December 31, 2001. When we refer to our Form 10-K, we mean not only to the information included directly in that report but also to information incorporated by reference into that report from other documents including our 2001 Annual Report to Stockholders. Information incorporated into the Form 10-K from our 2001 Annual Report to Stockholders is filed as Exhibit 13 to the Form 10-K.

Any factor described in this report or in our 2001 Form 10-K could by itself, or together with one or more other factors, adversely affect our business, results of operations and/or financial

condition. There are factors not described in this report or in our Form 10-K that could cause results to differ from our expectations.

Industry Factors

As a financial services company, our earnings are significantly affected by business and economic conditions.

Our earnings are impacted by business and economic conditions in the United States and abroad. These conditions include short-term and long-term interest rates, inflation, monetary supply, fluctuations in both debt and equity capital markets, and the strength of the U.S. economy and the local economies in which we operate. Business and economic conditions that negatively impact household or corporate incomes could decrease the demand for the Company's products and increase the number of customers who fail to pay their loans.

Political conditions can also impact our earnings. Acts or threats of terrorism, and/or actions taken by the U.S. or other governments in response to acts or threats of terrorism, could impact business and economic conditions in the U.S. and abroad. Last year's terrorist attacks, for example, caused an immediate decrease in demand for air travel, which adversely affected not only the airline industry but also other travel-related and leisure industries, such as lodging, gaming and tourism.

We discuss other business and economic conditions in more detail elsewhere in this report.

Our earnings are significantly affected by the fiscal and monetary policies of the federal government and its agencies.

The Board of Governors of the Federal Reserve System regulates the supply of money and credit in the United States. Its policies determine in large part our cost of funds for lending and investing and the return we earn on those loans and investments, and can materially affect the value of financial instruments we hold, such as debt securities and mortgage servicing rights. Its policies also can affect our borrowers, potentially increasing the risk that they may fail to repay their loans. Changes in Federal Reserve Board policies are beyond our control and hard to predict or anticipate.

The financial services industry is highly competitive.

We operate in a highly competitive industry which could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can now merge by creating a new type of financial services company called a "financial holding company." Financial holding companies can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Recently, a number of foreign banks have acquired financial services companies in the United States, further increasing competition in the U.S. market. In addition, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and

automatic payment systems. Many of our competitors have fewer regulatory constraints and some have lower cost structures.

We are heavily regulated by federal and state agencies.

The holding company, its subsidiary banks and many of its non-bank subsidiaries are heavily regulated at the federal and state levels. This regulation is to protect depositors, federal deposit insurance funds and the banking system as a whole, not security holders. Congress and state legislatures and federal and state regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect us in substantial and unpredictable ways including limiting the types of financial services and products we may offer and increasing the ability of non-banks to offer competing financial services and products. Also, our failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies and damage to our reputation. For more information, refer to the "Regulation and Supervision" section of our Annual Report on Form 10-K for the year ended December 31, 2001 and to Notes 3 (Cash, Loan and Dividend Restrictions) and 22 (Risk-Based Capital) to Financial Statements included in the 2001 Annual Report to Stockholders and incorporated by reference into the Form 10-K.

Consumers may decide not to use banks to complete their financial transactions.

Technology and other changes are allowing parties to complete financial transactions that historically have involved banks. For example, consumers can now pay bills and transfer funds directly without banks. The process of eliminating banks as intermediaries, known as "disintermediation," could result in the loss of fee income, as well as the loss of customer deposits and income generated from those deposits.

Company Factors

Maintaining or increasing our market share depends on market acceptance and regulatory approval of new products and services.

Our success depends, in part, on our ability to adapt our products and services to evolving industry standards. There is increasing pressure on financial services companies to provide products and services at lower prices. This can reduce our net interest margin and revenues from our fee-based products and services. In addition, the widespread adoption of new technologies, including internet-based services, could require us to make substantial expenditures to modify or adapt our existing products and services. We might not successfully introduce new products and services, achieve market acceptance of our products and services, and/or develop and maintain loyal customers.

The holding company relies on dividends from its subsidiaries for most of its revenue.

The holding company is a separate and distinct legal entity from its subsidiaries. It receives substantially all of its revenue from dividends from its subsidiaries. These dividends are the principal source of funds to pay dividends on the holding company's common and preferred stock and interest

and principal on its debt. Various federal and/or state laws and regulations limit the amount of dividends that our bank and certain of our non-bank subsidiaries may pay to the holding company. Also, the holding company's right to participate in a distribution of assets upon a subsidiary's liquidation or reorganization is subject to the prior claims of the subsidiary's creditors. For more information, refer to "Regulation and Supervision—Dividend Restrictions" and "—Holding Company Structure" in our Annual Report on Form 10-K for the year ended December 31, 2001.

We have businesses other than banking.

We are a diversified financial services company. In addition to banking, we provide insurance, investments, mortgages and consumer finance. Although we believe our diversity helps mitigate the impact to the Company when downturns affect any one segment of our industry, it also means that our earnings could be subject to different risks and uncertainties. We discuss some examples below.

Merchant Banking. Our merchant banking activities including venture capital investments have a much greater risk of capital losses than our traditional banking activities. In addition, it is difficult to predict the timing of any gains from these activities. Realization of gains from our venture capital investments depends on a number of factors—many beyond our control—including general economic conditions, the prospects of the companies in which we invest, when these companies go public, the size of our position relative to the public float, and whether we are subject to any resale restrictions. Factors such as a slowdown in consumer demand or a deterioration in capital spending on technology and telecommunications equipment, could result in declines in the values of our publicly traded and private equity securities. If we determine that the declines are other-than-temporary, additional impairment charges would be recognized. In addition, we will realize losses to the extent we sell securities at less than book value. For more information, see in this report "Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Securities Available for Sale."

Mortgage Banking. The impact of interest rates on our mortgage banking business can be large and complex. Changes in interest rates can impact loan origination fees and loan servicing fees, which account for a significant portion of mortgage-related revenues. A decline in mortgage rates might be expected to increase the demand for mortgage loans as borrowers refinance, but could also lead to accelerated payoffs in our mortgage servicing portfolio. Conversely, in a constant or increasing rate environment, we would expect fewer loans to be refinanced and a decline in payoffs in our servicing portfolio. While the Company uses dynamic and sophisticated models to assess the impact of interest rates on mortgage fees, amortization of mortgage servicing rights, and the value of mortgage servicing assets, the estimates of net income and fair value produced by these models are dependent on estimates and assumptions of future loan demand, prepayment speeds and other factors which may overstate or understate actual subsequent experience. For more information, see in this report "Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations—Asset/Liability and Market Risk Management."

We have an active acquisition program.

We regularly explore opportunities to acquire financial institutions and other financial services providers. We cannot predict the number, size or timing of future acquisitions. As a matter of policy, we do not comment publicly on a possible acquisition or business combination until we have signed a definitive agreement for the transaction.

Our ability to successfully complete an acquisition generally is subject to regulatory approval, and we cannot be certain when or if, or on what terms and conditions, any required regulatory approvals will be granted. We might be required to divest banks or branches as a condition to receiving regulatory approval.

Difficulty in integrating an acquired company may cause us not to realize expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from the acquisition. Specifically, the integration process could result in higher than expected deposit attrition (run-off), loss of key employees, the disruption of our business or the business of the acquired company, or otherwise adversely affect our ability to maintain relationships with customers and employees or achieve the anticipated benefits of the acquisition. Also, the negative impact of any divestitures required by regulatory authorities in connection with acquisitions or business combinations may be greater than expected.

Our stock price can be volatile.

Our stock price can fluctuate widely in response to a variety of factors including:

•: actual or anticipated variations in our quarterly operating results;
•: new technology used, or services offered, by our competitors;
•: significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors;
•: failure to integrate our acquisitions or realize anticipated benefits from our acquisitions; and
•: changes in government regulations.

General market fluctuations, industry factors and general economic and political conditions and events, such as future terrorist attacks and activities, economic slowdowns or recessions, interest rate changes, credit loss trends or currency fluctuations, also could cause our stock price to decrease regardless of our operating results.

EARNINGS PERFORMANCE

NET INTEREST INCOME

Net interest income on a taxable-equivalent basis increased to $3.68 billion in first quarter 2002 from $2.83 billion in first quarter 2001, due to a 20% increase in earning assets and a 46 basis point wider net interest margin.

Individual components of net interest income and the net interest margin are presented in the rate/yield table on the following page.

Earning assets increased $42.9 billion due to increases in average loans, mortgages held for sale and debt securities available for sale. Loans averaged $172.1 billion in the first quarter of 2002, compared with $159.9 billion in the first quarter of 2001. The increase in average loans was due to increased consumer demand, particularly for home finance. Average mortgages held for sale increased to $37.1 billion from $14.1 billion due to increased originations, including significant refinancing activity. These increases were partially offset by a slowdown in commercial loan demand in line with the weakening U.S. economy. Debt securities averaged $39.2 billion during the first quarter of 2002, and $34.3 billion in the first quarter of 2001.

The net interest margin increased to 5.67% in first quarter 2002 from 5.21% in first quarter 2001, principally due to loan mix and a faster decline in deposit and borrowing costs than loan yields.

An important contributor to the growth in net interest income and net interest margin was a 13% increase in core deposits, which are one of the Company's lowest cost sources of funding. Average core deposits were $177.6 billion and $156.9 billion and funded 57% and 58% of the Company's average total assets in the first quarter of 2002 and 2001, respectively. Total average interest-bearing deposits increased to $129.6 billion in first quarter 2002 from $115.4 billion in the same period of 2001. For the same periods, total average noninterest-bearing deposits increased to $59.5 billion from $51.4 billion. While savings certificates of deposits declined on average to $25.7 billion in first quarter 2002 from $32.8 billion in first quarter 2001, noninterest-bearing checking accounts and other core deposit categories increased in first quarter 2002 reflecting the Company's success in growing customer accounts and balances and reflecting growth in mortgage escrow deposits associated with the increase in mortgage volume in first quarter 2002.

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1) (2)

					Quarter ended March 31,

					2002							2001
(in millions)					Average balance			Yields/ rates		Interest income/ expense		Average balance			Yields/ rates		Interest income/ expense

EARNING ASSETS
Federal funds sold and securities purchased under resale agreements					$	2,391		1.88	%	$	11	$	2,367		5.33	%	$	31
Debt securities available for sale (3):
	Securities of U.S. Treasury and federal agencies					2,044		5.85			29		2,409		7.06			41
	Securities of U.S. states and political subdivisions					2,080		8.31			41		1,996		7.67			37
	Mortgage-backed securities:
		Federal agencies				29,146		7.09			504		25,152		7.17			439
		Private collateralized mortgage obligations				2,692		6.91			46		1,550		8.83			34

			Total mortgage-backed securities			31,838		7.08			550		26,702		7.27			473
	Other debt securities (4)					3,198		7.69			58		3,236		7.85			65

				Total debt securities available for sale (4)		39,160		7.13			678		34,343		7.33			616
Mortgages held for sale (3)						37,149		6.34			591		14,146		7.24			257
Loans held for sale (3)						5,084		5.51			69		4,817		7.78			93
Loans:
	Commercial					46,667		7.04			810		49,093		9.07			1,098
	Real estate 1-4 family first mortgage					24,555		6.61			406		18,315		7.56			346
	Other real estate mortgage					25,286		6.40			400		23,904		8.80			520
	Real estate construction					8,032		5.73			113		7,916		9.60			187
	Consumer:
		Real estate 1-4 family junior lien mortgage				26,523		7.70			505		18,528		10.20			470
		Credit card				6,572		12.24			202		6,333		14.15			225
		Other revolving credit and monthly payment				23,548		10.49			611		23,942		11.94			712

			Total consumer			56,643		9.39			1,318		48,803		11.57			1,407
	Lease financing					9,362		7.27			170		10,273		7.98			204
	Foreign					1,583		19.76			78		1,584		21.17			84

			Total loans (5)			172,128		7.73			3,295		159,888		9.70			3,846
Other						6,104		4.17			62		3,539		5.98			52

				Total earning assets	$	262,016		7.26			4,706	$	219,100		9.02			4,895

FUNDING SOURCES
Deposits:
	Interest-bearing checking				$	2,399		1.09			7	$	2,469		3.67			22
	Market rate and other savings					90,091		.94			209		70,158		2.85			494
	Savings certificates					25,700		3.58			227		32,828		5.80			470
	Other time deposits					4,691		2.04			24		2,223		5.53			30
	Deposits in foreign offices					6,712		1.65			27		7,708		5.54			105

			Total interest-bearing deposits			129,593		1.54			494		115,386		3.94			1,121
Short-term borrowings						41,627		1.69			174		28,186		5.67			394
Long-term debt						37,661		3.53			331		33,571		6.31			529
Guaranteed preferred beneficial interests in Company's subordinated debentures						2,460		4.52			27		933		7.80			17

			Total interest-bearing liabilities			211,341		1.96			1,026		178,076		4.68			2,061
Portion of noninterest-bearing funding sources						50,675		—			—		41,024		—			—

				Total funding sources	$	262,016		1.59			1,026	$	219,100		3.81			2,061

Net interest margin and net interest income on a taxable-equivalent basis (6)								5.67	%	$	3,680				5.21	%	$	2,834

NONINTEREST-EARNING ASSETS
Cash and due from banks					$	14,559						$	14,813
Goodwill						9,732							9,266
Other						28,029							25,357

				Total noninterest-earning assets	$	52,320						$	49,436

NONINTEREST-BEARING FUNDING SOURCES
Deposits					$	59,456						$	51,443
Other liabilities						15,548							12,523
Preferred stockholders' equity						61							267
Common stockholders' equity						27,930							26,227
Noninterest-bearing funding sources used to fund earning assets						(50,675	)						(41,024	)

				Net noninterest-bearing funding sources	$	52,320						$	49,436

TOTAL ASSETS					$	314,336						$	268,536

(1): The average prime rate of the Company was 4.75% and 8.63% for the quarters ended March 31, 2002 and 2001, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 1.91% and 5.34% 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 that primarily relate to income on certain loans and securities that is exempt from federal and applicable state income taxes. The federal statutory tax rate was 35% for both quarters presented.

NONINTEREST INCOME

			Quarter ended March 31,

			Quarter ended March 31,					% Change
(in millions)			2002			2001		% Change

Service charges on deposit accounts			$	505		$	428	18	%
Trust and investment fees:
	Asset management and custody fees			179			189	(5	)
	Mutual fund and annuity sales fees			200			214	(7	)
	All other			60			12	400

		Total trust and investment fees		439			415	6
Credit card fees				201			181	11
Other fees:
	Cash network fees			48			46	4
	Charges and fees on loans			133			94	41
	All other			130			167	(22	)

		Total other fees		311			307	1
Mortgage banking:
	Origination and other closing fees			220			121	82
	Servicing fees, net of amortization and impairment			(73	)		18	—
	Net gains on securities available for sale			—			136	(100	)
	Net gains on mortgage loan origination/sales activities			120			40	200
	All other			92			76	21

		Total mortgage banking		359			391	(8	)
Insurance				263			118	123
Net gains on debt securities available for sale				37			88	(58	)
Income (loss) from equity investments				(19	)		138	—
Net gains on sales of loans				6			13	(54	)
Net gains on dispositions of operations				3			101	(97	)
All other				196			234	(16	)

	Total		$	2,301		$	2,414	(5	)%

Deposit service fees increased 18% due to growth in primary accounts and increased activity.

Trust and investment fees increased 6% in first quarter 2002 due to the acquisition of H. D. Vest, partially offset by a decrease in mutual fund fees reflecting a shift from equity funds to money market funds. The Company managed mutual funds with $78 billion of assets at March 31, 2002, compared with $72 billion at March 31, 2001. The Company also managed or maintained personal trust, employee benefit trust and agency assets of approximately $540 billion and $486 billion at March 31, 2002 and 2001, respectively.

Credit card fees increased 11% predominantly due to an increase in merchant fees on debit and credit cards.

Mortgage banking fee income declined 8%. In general, mortgage interest rates were somewhat lower in first quarter 2002 than in first quarter 2001 which resulted in increased volume and consequently origination fees increased from $121 million to $220 million. At the same time, lower rates resulted in increased amortization and impairment provisions from mortgage servicing rights.

Insurance income increased in first quarter 2002 due to Acordia, an insurance brokerage company acquired in second quarter 2001.

The result from equity related investments was a net loss of $19 million, largely due to writedowns of certain telecommunication investments, compared with a $138 million net gain in first quarter 2001.

Net gains on disposition of operations were negligible in first quarter 2002. The first quarter of last year included a $96 million gain from the divestiture of 39 stores in Idaho, New Mexico, Nevada and Utah as a condition to completing the First Security merger.

NONINTEREST EXPENSE

		Quarter ended March 31,

		Quarter ended March 31,						% Change
(in millions)		2002			2001			% Change

Salaries		$	1,076		$	977		10	%
Incentive compensation			357			204		75
Employee benefits			329			278		18
Equipment			236			237		—
Net occupancy			269			237		14
Goodwill			—			144		(100	)
Core deposit intangibles:
	Nonqualifying (1)		39			40		(3	)
	Qualifying		2			3		(33	)
Net gains on dispositions of premises and equipment			(2	)		(19	)	(89	)
Outside professional services			129			102		26
Contract services			82			116		(29	)
Telecommunications			92			79		16
Outside data processing			84			77		9
Travel and entertainment			75			73		3
Advertising and promotion			65			58		12
Postage			65			69		(6	)
Stationery and supplies			57			59		(3	)
Operating losses			45			56		(20	)
Insurance			52			47		11
Security			40			27		48
All other			236			132		79

	Total	$	3,328		$	2,996		11	%

(1): Represents amortization of core deposit intangibles acquired after February 1992 subtracted from stockholders' equity in computing regulatory capital for bank holding companies.

Salaries and employee benefits increased, resulting from additional active, full-time equivalent staff, primarily due to acquisitions. Incentive compensation increased predominantly due to commission expense resulting from higher mortgage origination volume.

Effective January 1, 2002, under FAS 142, all goodwill amortization was discontinued.

Operating losses decreased as a result of the Company's ongoing customer service quality initiatives.

The "all other" category increased partly due to additional temporary and contract employees due to higher mortgage origination volumes.

OPERATING SEGMENT RESULTS

Results for all segments for 2001 have been restated to eliminate goodwill from the operating segments and to reflect changes in transfer pricing methodology applied in first quarter 2002.

Community Banking's net income was $980 million in the first quarter, compared with $905 million for the same period in 2001, an increase of 8%. Net interest income increased by $773 million, or 41%, compared with first quarter 2001. The increase was primarily due to an increase in mortgages held for sale as well as lower borrowing costs. The provision for loan losses increased by $60 million from 2001 due to the decline in the credit environment relative to last year. Noninterest income was down $243 million in first quarter 2002 compared with 2001, mostly due to a decline in market-sensitive income (securities available for sale gains and losses and equity investment income) and last year's gain on the sale of First Security branches. Noninterest expense increased by $330 million over 2001 primarily due to higher mortgage origination volumes.

Wholesale Banking's net income before the effect of change in accounting principle was $303 million in the first quarter of 2002, compared with $302 million in the first quarter of 2001. Net interest income increased to $558 million, compared with $539 million in the first quarter of 2001. Average outstanding loan balances were $49 billion in the first quarter of 2002, down 2% from $50 billion in the first quarter of 2001. Deposit balances grew to $17 billion in the first quarter of 2002 from $15 billion in the first quarter of 2001, an increase of 13%. Noninterest income increased to $651 million in 2002 from $506 million in 2001. The increase was primarily due to higher insurance revenue predominantly from the acquisition of Acordia, higher service fees on deposits and lower losses on equity investments. Noninterest expense increased to $654 million in 2002 from $531 million for the same period in 2001. A majority of the increase was due to higher personnel costs attributed to the acquisition of Acordia and additional sales and service staff. The provision for loan losses increased by $46 million to $85 million for the first quarter of 2002 as compared with 2001.

Under FAS 142, a transitional goodwill impairment charge of $98 million (after tax) was recognized in certain reporting units. The remaining goodwill allocated to Wholesale Banking for management reporting was about $589 million.

Wells Fargo Financial's net income before the effect of change in accounting principle was $84 million in the first quarter of 2002, compared with $81 million in the first quarter of 2001, an increase of 4%. Net interest income increased $49 million, or 13%, due to lower interest costs combined with growth in average loans. The provision for loan losses increased $23 million, or 22%, predominantly due to growth in average loans and higher net write-offs in the loan portfolios.

Under FAS 142, a transitional goodwill impairment charge of $178 million (after tax) was recognized in certain international reporting units, substantially related to Island Finance, a Puerto Rico based consumer finance company acquired in 1995. Wells Fargo Financial's remaining goodwill for management reporting was $343 million.

BALANCE SHEET ANALYSIS

SECURITIES AVAILABLE FOR SALE

The following table provides the cost and fair value for the major components of securities available for sale carried at fair value. There were no securities classified as held to maturity at the end of the periods presented.

				March 31, 2002				December 31, 2001				March 31, 2001

(in millions)				Cost		Estimated fair value		Cost		Estimated fair value		Cost		Estimated fair value

Securities of U.S. Treasury and federal agencies				$	1,856	$	1,900	$	1,983	$	2,047	$	1,669	$	1,743
Securities of U.S. states and political subdivisions					2,391		2,454		2,146		2,223		2,260		2,348
Mortgage-backed securities:
	Federal agencies				29,161		29,578		29,280		29,721		27,329		28,001
	Private collateralized mortgage obligations (1)				2,817		2,824		2,628		2,658		1,582		1,624

		Total mortgage-backed securities			31,978		32,402		31,908		32,379		28,911		29,625
Other					2,558		2,588		2,625		2,668		2,773		2,808

	Total debt securities				38,783		39,344		38,662		39,317		35,613		36,524
Marketable equity securities					684		741		815		991		2,563		1,620

			Total	$	39,467	$	40,085	$	39,477	$	40,308	$	38,176	$	38,144

(1): Substantially all private collateralized mortgage obligations are AAA-rated bonds collateralized by 1-4 family residential first mortgages.

The decrease in marketable equity securities of $1.88 billion in cost between March 31, 2002 and March 31, 2001 was due to dispositions and non-cash impairment charges, primarily in the venture capital portfolio. During 2001, the Company experienced sustained declines in the market values of publicly traded securities, particularly in the technology and telecommunication industries. In the second quarter of 2001, the Company recognized non-cash charges of $1.18 billion (before tax) to reflect other-than-temporary impairment.

The following table provides the components of the estimated unrealized net gain (loss) on securities available for sale. The estimated unrealized net gain (loss) on securities available for sale is reported on an after-tax basis as a component of cumulative other comprehensive income.

(in millions)	March 31, 2002			Dec. 31, 2001			March 31, 2001


Estimated unrealized gross gains	$	1,020		$	1,004		$	1,328
Estimated unrealized gross losses		(402	)		(173	)		(1,360	)

Estimated unrealized net gain (loss)	$	618		$	831		$	(32	)

The following table provides the components of the total realized net gain on the sales of securities from the securities available for sale portfolio, composed of debt securities, including those related to mortgage banking, and marketable equity securities.

	Quarter ended March 31,

(in millions)	2002			2001

Realized gross gains	$	75		$	324
Realized gross losses		(25	)		(43	)

Realized net gain	$	50		$	281

The weighted average expected remaining maturity of the debt securities portion of the securities available for sale portfolio was 5 years and 2 months at March 31, 2002. Expected remaining maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without penalties.

The effect of a 200 basis point increase and a 200 basis point decrease on the fair value and the expected remaining maturity of the mortgage-backed securities available for sale portfolio is indicated below.

(in billions)		Fair value		Net unrealized gain (loss)			Remaining maturity


At March 31, 2002		$	32.4	$	.4		5 yrs., 1 mos.
At March 31, 2002, assuming a 200 basis point:
	Increase in interest rates		29.8		(2.2	)	6 yrs., 8 mos.
	Decrease in interest rates		34.2		2.3		2 yrs., 3 mos.

LOAN PORTFOLIO

									% Change Mar. 31, 2002 from

(in millions)			Mar. 31, 2002		Dec. 31, 2001		Mar. 31, 2001		Dec. 31, 2001		Mar. 31, 2001

Commercial (1)			$	47,388	$	47,547	$	49,380	—	%	(4	)%
Real estate 1-4 family first mortgage				28,513		25,588		18,940	11		51
Other real estate mortgage (2)				25,555		24,808		23,947	3		7
Real estate construction				7,999		7,806		8,201	2		(2	)
Consumer:
	Real estate 1-4 family junior lien mortgage			27,699		25,530		18,912	8		46
	Credit card			6,497		6,700		6,245	(3	)	4
	Other revolving credit and monthly payment			23,953		23,502		24,141	2		(1	)

		Total consumer		58,149		55,732		49,298	4		18
Lease financing				9,227		9,420		10,565	(2	)	(13	)
Foreign				1,616		1,598		1,545	1		5

		Total loans (net of unearned income, including net deferred loan fees, of $4,143, $4,143 and $4,319)	$	178,447	$	172,499	$	161,876	3	%	10	%

(1): Includes agricultural loans (loans to finance agricultural production and other loans to farmers) of $3,975 million, $4,345 million and $3,824 million at March 31, 2002, December 31, 2001 and March 31, 2001, respectively.
(2): Includes agricultural loans that are secured by real estate of $1,255 million, $1,254 million and $1,260 million at March 31, 2002, December 31, 2001 and March 31, 2001, respectively.

Nonaccrual and Restructured Loans and Other Assets

The table on the next page presents comparative data for nonaccrual and restructured loans and other assets. Management's classification of a loan as nonaccrual or restructured does not necessarily indicate that the principal of the loan is uncollectible in whole or in part. The table on the next page excludes loans that are contractually past due 90 days or more as to interest or principal, but are both well-secured and in the process of collection or are real estate 1-4 family first mortgage loans or consumer loans that are exempt under regulatory rules from being classified as nonaccrual. This information is presented in the table on page 40. Notwithstanding, real estate 1-4 family loans (first and junior liens) are placed on nonaccrual within 120 days of becoming past due and are shown in the table on the next page.

The Company anticipates changes in the amount of nonaccrual loans that result from increases in lending activity or from resolutions of loans in the nonaccrual portfolio. The performance of any individual loan can be affected by external factors, such as the interest rate environment or factors particular to a borrower such as actions taken by a borrower's management. In addition, from time to time, the Company purchases loans from other financial institutions and acquires loans from business combinations that may be classified as nonaccrual based on the Company's policies.

NONACCRUAL AND RESTRUCTURED LOANS AND OTHER ASSETS (1)

(in millions)				Mar. 31, 2002			Dec. 31, 2001			Mar. 31, 2001


Nonaccrual loans:
	Commercial (2)			$	804		$	827		$	835
	Real estate 1-4 family first mortgage				223			203			131
	Other real estate mortgage (3)				190			210			135
	Real estate construction				163			145			65
	Consumer:
		Real estate 1-4 family junior lien mortgage			27			24			16
		Other revolving credit and monthly payment			47			59			32

			Total consumer		74			83			48
	Lease financing				166			163			141
	Foreign				3			9			9

		Total nonaccrual loans (4)			1,623			1,640			1,364
Restructured loans					1			—			—

Nonaccrual and restructured loans					1,624			1,640			1,364
As a percentage of total loans					.9	%		1.0	%		.8	%
Foreclosed assets					187			171			127
Real estate investments (5)					2			2			27

Total nonaccrual and restructured loans and other assets				$	1,813		$	1,813		$	1,518

(1): Excludes loans that are contractually past due 90 days or more as to interest or principal, but are both well-secured and in the process of collection or are real estate 1-4 family first mortgage loans or consumer loans that are exempt under regulatory rules from being classified as nonaccrual.
(2): Includes commercial agricultural loans of $69 million, $68 million and $43 million at March 31, 2002, December 31, 2001 and March 31, 2001, respectively.
(3): Includes agricultural loans secured by real estate of $18 million, $43 million and $9 million at March 31, 2002, December 31, 2001 and March 31, 2001, respectively.
(4): Of the total nonaccrual loans, $967 million, $995 million and $875 million at March 31, 2002, December 31, 2001 and March 31, 2001, respectively, were considered impaired under FAS 114, Accounting by Creditors for Impairment of a Loan.
(5): Represents the amount of real estate investments (contingent interest loans accounted for as investments) that would be classified as nonaccrual if such assets were recorded as loans. Real estate investments totaled $23 million, $24 million and $50 million at March 31, 2002, December 31, 2001 and March 31, 2001, respectively.

The Company generally identifies loans to be evaluated for impairment under FASB Statement No. 114, Accounting by Creditors for Impairment of a Loan, when such loans are on nonaccrual or have been restructured. However, not all nonaccrual loans are impaired. Generally, a loan is placed on nonaccrual status upon becoming 90 days past due as to interest or principal (unless both well-secured and in the process of collection), when the full timely collection of interest or principal becomes uncertain or when a portion of the principal balance has been charged off. Real estate 1-4 family loans (both first liens and junior liens) are placed on nonaccrual status within 120 days of becoming past due as to interest or principal, regardless of security. In contrast, under FAS 114, loans are considered impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments. For a loan that has been restructured, the contractual terms of the loan agreement refer to the contractual terms specified by the original loan agreement, rather than the contractual terms specified by the restructuring agreement. Consequently, not all impaired loans are necessarily placed on nonaccrual status. That is, loans performing under restructured terms beyond a specified performance period are classified as accruing but may still be deemed impaired under FAS 114.

For loans covered under FAS 114, the Company makes an assessment for impairment when and while such loans are on nonaccrual, or when the loan has been restructured. When a loan with unique risk characteristics has been identified as being impaired, the Company will estimate the amount of impairment using discounted cash flows, except when the sole (remaining) source of

repayment for the loan is the operation or liquidation of the underlying collateral. In such cases, the current fair value of the collateral, reduced by costs to sell, will be used in place of discounted cash flows. Additionally, some impaired loans with commitments of less than $1 million are aggregated for the purpose of estimating impairment using historical loss factors as a means of measurement, which approximates the discounted cash flow method.

If the measurement of the impaired loan results in a value that is less than the recorded investment in the loan (including accrued interest, net deferred loan fees or costs and unamortized premium or discount), an impairment is recognized by creating or adjusting an existing allocation of the allowance for loan losses. FAS 114 does not change the timing of charge-offs of loans to reflect the amount ultimately expected to be collected.

In accordance with FAS 114, the table below shows the recorded investment in impaired loans and the related methodology used to measure impairment for the periods presented:

(in millions)			Mar. 31, 2002		Dec. 31, 2001		Mar. 31, 2001


Impairment measurement based on:
	Collateral value method		$	368	$	485	$	282
	Discounted cash flow method			375		338		324
	Historical loss factors			225		172		269

		Total (1)	$	968	$	995	$	875

(1): Includes $637 million, $529 million and $427 million of impaired loans with a related FAS 114 allowance of $87 million, $91 million and $75 million at March 31, 2002, December 31, 2001 and March 31, 2001, respectively.

The average recorded investment in impaired loans was $1,012 million and $789 million during the first quarter of 2002 and 2001, respectively. Total interest income recognized on impaired loans was $4 million for both the first quarter of 2002 and 2001, primarily all of which was recorded using the cash method.

The Company uses either the cash or cost recovery method to record cash receipts on impaired loans that are on nonaccrual. Under the cash method, contractual interest is credited to interest income when received. This method is used when the ultimate collectibility of the total principal is not in doubt. Under the cost recovery method, all payments received are applied to principal. This method is used when the ultimate collectibility of the total principal is in doubt. Loans on the cost recovery method may be changed to the cash method when the application of the cash payments has reduced the principal balance to a level where collection of the remaining recorded investment is no longer in doubt.

Loans 90 Days or More Past Due and Still Accruing

The following table shows loans contractually past due 90 days or more as to interest or principal, but not included in the nonaccrual or restructured categories. All loans in this category are both well-secured and in the process of collection or are real estate 1-4 family first mortgage loans or consumer loans that are exempt under regulatory rules from being classified as nonaccrual. Notwithstanding, real estate 1-4 family loans (first liens and junior liens) are placed on nonaccrual within 120 days of becoming past due and such nonaccrual loans are excluded from the following table.

(in millions)			Mar. 31, 2002		Dec. 31, 2001		Mar. 31, 2001


Commercial			$	46	$	60	$	93
Real estate 1-4 family first mortgage				168		152		55
Other real estate mortgage				25		22		25
Real estate construction				37		47		15
Consumer:
	Real estate 1-4 family junior lien mortgage			59		56		44
	Credit card			122		117		99
	Other revolving credit and monthly payment			297		289		261

		Total consumer		478		462		404

	Total		$	754	$	743	$	592

ALLOWANCE FOR LOAN LOSSES

						Quarter ended March 31,

(in millions)						2002			2001

Balance, beginning of period						$	3,761		$	3,719
Allowances related to business combinations/other							78			40
Provision for loan losses							490			361
Loan charge-offs:
	Commercial						(194	)		(109	)
	Real estate 1-4 family first mortgage						(7	)		(3	)
	Other real estate mortgage						(10	)		(3	)
	Real estate construction						(20	)		(1	)
	Consumer:
		Real estate 1-4 family junior lien mortgage					(12	)		(11	)
		Credit card					(103	)		(101	)
		Other revolving credit and monthly payment					(213	)		(187	)

			Total consumer				(328	)		(299	)
	Lease financing						(26	)		(24	)
	Foreign						(20	)		(18	)

				Total loan charge-offs			(605	)		(457	)

Loan recoveries:
	Commercial						31			16
	Real estate 1-4 family first mortgage						1			1
	Other real estate mortgage						4			2
	Real estate construction						2			1
	Consumer:
		Real estate 1-4 family junior lien mortgage					3			3
		Credit card					11			12
		Other revolving credit and monthly payment					56			49

			Total consumer				70			64
	Lease financing						7			7
	Foreign						3			5

				Total loan recoveries			118			96

					Total net loan charge-offs		(487	)		(361	)

Balance, end of period						$	3,842		$	3,759

Total net loan charge-offs as a percentage of average total loans (annualized)							1.15	%		.92	%

Allowance as a percentage of total loans							2.15	%		2.32	%

The Company considers the allowance for loan losses of $3.84 billion adequate to cover losses inherent in loans, loan commitments and standby and other letters of credit at March 31, 2002. The Company's determination of the level of the allowance for loan losses rests upon various judgments and assumptions, including general economic conditions, loan portfolio composition, prior loan loss experience, evaluation of credit risk related to certain individual borrowers and the Company's ongoing examination process and that of its regulators.

INTEREST RECEIVABLE AND OTHER ASSETS

(in millions)		March 31, 2002		December 31, 2001		March 31, 2001


Trading assets		$	6,308	$	4,996	$	3,758
Nonmarketable equity investments:
	Private equity investments		1,706		1,696		2,126
	Federal Reserve Bank stock		1,335		1,295		1,227
	All other		1,183		1,071		919

	Total nonmarketable equity investments		4,224		4,062		4,272
Government National Mortgage Association (GNMA) pool buy-outs			2,931		2,815		2,434
Interest receivable			1,341		1,284		1,453
Interest-earning deposits			1,262		206		141
Foreclosed assets			187		171		127
Certain identifiable intangible assets			117		119		221
Due from customers on acceptances			71		104		89
Other			9,938		9,788		9,786

	Total interest receivable and other assets	$	26,379	$	23,545	$	22,281

Trading assets consist primarily of securities, including corporate debt and U.S. government agency obligations, and derivative instruments held for customer accommodation purposes. Interest income from trading assets was $45 million and $32 million in the first quarter of 2002 and 2001, respectively. Noninterest income from trading assets was $94 million and $113 million in the first quarter of 2002 and 2001, respectively.

GNMA pool buy-outs are advances made to GNMA mortgage pools that are guaranteed by the Federal Housing Administration or by the Department of Veterans Affairs (collectively, "the guarantors"). These advances are made to buy out government agency-guaranteed delinquent loans, pursuant to the Company's servicing agreements. The Company undertakes the collection and foreclosure process on behalf of the guarantors. After the foreclosure process is complete, the Company is reimbursed by the guarantors for substantially all costs incurred, including the advances.

DEPOSITS

(in millions)			March 31, 2002		December 31, 2001		March 31, 2001

Noninterest-bearing			$	60,728	$	65,362	$	54,996
Interest-bearing checking				2,333		2,228		2,484
Market rate and other savings				93,073		89,251		74,128
Savings certificates				25,525		25,454		31,806

	Core deposits			181,659		182,295		163,414
Other time deposits				5,764		839		1,613
Deposits in foreign offices				2,145		4,132		6,294

		Total deposits	$	189,568	$	187,266	$	171,321

CAPITAL ADEQUACY/RATIOS

The Company and each of the subsidiary banks are subject to various regulatory capital adequacy requirements administered by the Federal Reserve Board and the Office of the Comptroller of the Currency. Risk-based capital (RBC) guidelines establish a risk-adjusted ratio relating capital to different categories of assets and off-balance sheet exposures.

				Actual				For capital adequacy purposes							To be well capitalized under the FDICIA prompt corrective action provisions

(in billions)				Amount		Ratio			Amount			Ratio				Amount			Ratio

As of March 31, 2002:
	Total capital (to risk-weighted assets)
			Wells Fargo & Company	$	28.5	11.13	%	>	$	20.5	>	8.00	%
			Wells Fargo Bank, N.A.		16.3	13.04		>		10.0	>	8.00			>	$	12.5	>	10.00	%
			Wells Fargo Bank Minnesota, N.A.		3.4	12.06		>		2.2	>	8.00			>		2.8	>	10.00
	Tier 1 capital (to risk-weighted assets)
			Wells Fargo & Company	$	19.7	7.68	%	>	$	10.2	>	4.00	%
			Wells Fargo Bank, N.A.		10.0	8.02		>		5.0	>	4.00			>	$	7.5	>	6.00	%
			Wells Fargo Bank Minnesota, N.A.		3.1	11.10		>		1.1	>	4.00			>		1.7	>	6.00
	Tier 1 capital (to average assets)
		(Leverage ratio)
			Wells Fargo & Company	$	19.7	6.50	%	>	$	12.1	>	4.00	%	(1)
			Wells Fargo Bank, N.A.		10.0	7.36		>		5.5	>	4.00		(1)	>	$	6.8	>	5.00	%
			Wells Fargo Bank Minnesota, N.A.		3.1	5.98		>		2.1	>	4.00		(1)	>		2.6	>	5.00

(1): The leverage ratio consists of Tier 1 capital divided by quarterly average total assets, excluding goodwill and certain other items. The minimum leverage ratio guideline is 3% for banking organizations that do not anticipate significant growth and that have well-diversified risk, excellent asset quality, high liquidity, good earnings, effective management and monitoring of market risk and, in general, are considered top-rated, strong banking organizations.

OFF-BALANCE SHEET TRANSACTIONS

OFF-BALANCE SHEET ARRANGEMENTS

The Company consolidates majority-owned subsidiaries that it controls. Other affiliates, including certain joint ventures, in which there is generally 20% ownership are accounted for by the equity method of accounting and not consolidated; those in which there is less than 20% ownership are generally carried at cost.

The Company routinely originates, securitizes and sells into the secondary market mortgage loans, and from time to time, other financial assets, including student loans, commercial mortgages and auto receivables. The Company also structures investment vehicles, typically in the form of collateralized debt obligations, to provide customers with specialized investments to meet their specific needs. These securitizations are usually structured without recourse to the Company and without restrictions on the retained interest. As a result of these activities, the Company typically retains servicing rights and may retain other beneficial interests from the sales. The Company does not dispose of troubled loans or problem assets by means of unconsolidated special purpose entities.

For more information, see "Off-Balance Sheet Transactions—Off-Balance Sheet Arrangements" in the Company's 2001 Annual Report on Form 10-K.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

Through the normal course of operations, the Company has entered into certain contractual obligations and other commitments. Such obligations generally relate to funding of operations through debt issuances as well as leases for premises and equipment. As a financial services provider, the Company routinely enters into commitments to extend credit, including loan commitments, standby letters of credit and financial guarantees. While contractual obligations represent future cash requirements of the Company, a significant portion of commitments to extend credit are likely to expire without being drawn upon. Such commitments are subject to the same credit policies and approval processes accorded to loans made by the Company. In the merchant banking business, the Company makes commitments to fund equity investments directly to investment funds and to specific private companies. The timing of future cash requirements to fund such commitments is generally dependent upon the venture capital investment cycle. This cycle, the period over which privately-held companies are funded by venture capitalists and ultimately taken public through an initial offering, can vary based on overall market conditions as well as the nature and type of industry in which the companies operate. It is anticipated that many private equity investments would become liquid or would become public before the balance of unfunded equity commitments is utilized. Other commitments include investments in low-income housing and other community development activities undertaken by the Company. For more information, see "Off-Balance Sheet Transactions—Contractual Obligations and Other Commitments" in the Company's 2001 Annual Report on Form 10-K.

ASSET/LIABILITY AND MARKET RISK MANAGEMENT

Asset/liability management comprises the evaluation, monitoring, and management of the Company's interest rate risk, market risk and liquidity and funding. The Corporate Asset/Liability Management Committee (Corporate ALCO) maintains oversight of these risks. The Committee is comprised of senior financial and senior business executives. Each of the Company's principal business groups—Community Banking, Mortgage Banking and Wholesale Banking—have individual asset/liability management committees and processes that are linked to the Corporate ALCO process.

INTEREST RATE RISK

Interest rate risk, one of the more prominent risks in terms of potential earnings impact, is an inevitable part of being a financial intermediary. For more information, see "Asset/Liability and Market Risk Management—Interest Rate Risk" in the Company's 2001 Annual Report on Form 10-K. The principal tool used to evaluate Company interest rate risk is a simulation of net income under various economic and interest rate scenarios.

As of March 31, 2002, approximately 1% of annual net income was exposed to a 200 basis point variation in interest rates by the end of 2002. The principal source of earnings at risk to higher interest rates is a modeled slowdown in mortgage origination activity and a flatter yield curve assumed in that higher rate scenario. Simulation estimates are highly assumption dependent and will change as the Company's loans, deposits and investment portfolios evolve from one period to the next.

The Company uses exchange-traded and over-the-counter interest rate derivatives to hedge its interest rate exposures. The credit risk amount and estimated net fair values of these derivatives as of March 31, 2002 and December 31, 2001 are indicated in Note 10 to Financial Statements. Derivatives are used for asset/liability management in three ways: (a) most of the Company's long-term fixed-rate debt is converted to floating-rate payments by entering into received-fixed swaps at issuance, (b) the cash flows from selected asset and/or liability instruments/portfolios are converted from fixed to floating payments or vice versa, and (c) the Mortgage Company actively uses swaptions, futures, forwards and rate options to hedge the Company's mortgage pipeline, funded mortgage loans, and mortgage servicing rights asset.

MORTGAGE BANKING INTEREST RATE RISK

The home mortgage industry is subject to complex risks. For more information, see "Asset/Liability and Market Risk Management—Mortgage Banking Interest Rate Risk" in the Company's 2001 Annual Report on Form 10-K. Because Mortgage Banking sells or securitizes most of the mortgage loans it originates, credit risk is contained. Changes in interest rates, however, may have a potentially large impact on Mortgage Banking earnings. Wells Fargo dynamically manages both the risk to net income over time from all sources as well as the risk to an immediate reduction in the fair value of its mortgage servicing rights. Both mortgage loans held on the Company's balance sheet and off-balance sheet derivative instruments are used to maintain these risks within parameters established by Corporate ALCO.

MARKET RISK—TRADING ACTIVITIES

The Company incurs interest rate risk, foreign exchange risk and commodity price risk in several trading businesses managed under limits set by Corporate ALCO. The purpose of these businesses is to accommodate customers in the management of their market price risks. All securities, loans, foreign exchange transactions, commodity transactions and derivatives transacted with customers or used to hedge capital market transactions done with customers are carried at fair value. Counterparty risk limits are established and monitored by the Institutional Risk Committee. Open, "at risk" positions for all trading business are monitored by Corporate ALCO.

MARKET RISK—EQUITY MARKETS

Equity markets impact the Company in both direct and indirect ways. For more information, see "Asset/Liability and Market Risk Management—Market Risk—Equity Markets" in the Company's 2001 Annual Report on Form 10-K. The Company makes and manages direct equity investments in start up businesses, emerging growth companies, management buy-outs, acquisitions and corporate recapitalizations. The Company also invests in non-affiliated funds that make similar private equity investments. These private equity investments are made within capital allocations approved by the Company's management and its Board of Directors. Management reviews these investments at least quarterly and assesses for possible other-than-temporary impairment. For nonmarketable investments, the analysis is based on facts and circumstances of each individual investment and the expectations for that investment's cash flows and capital needs, the viability of its business model and the Company's exit strategy.

The Company has marketable equity securities in its securities available for sale investment portfolio, including shares distributed from the Company's venture capital activities. These securities are managed within capital risk limits approved by management and the Board and monitored by Corporate ALCO. Gains and losses on these securities are recognized in net income when realized and, in addition, these securities are assessed for other-than-temporary impairment periodically.

LIQUIDITY AND FUNDING

The objective of effective liquidity management is to ensure that the Company can meet customer loan requests, customer deposit maturities/withdrawals and other cash commitments efficiently under both normal operating conditions as well as under unforeseen and unpredictable circumstances of industry or market stress. To achieve this objective, Corporate ALCO establishes and monitors liquidity guidelines requiring sufficient asset based liquidity to cover potential funding requirements and to avoid over-dependence on volatile, less reliable funding markets. The Company sets liquidity management guidelines for both the consolidated balance sheet as well as for the Parent specifically to ensure that the Parent is a source of strength for its regulated, deposit taking banking subsidiaries.

In addition to the immediately liquid resources of cash and due from banks and federal funds sold and securities purchased under resale agreements, asset liquidity is provided by the debt securities in the securities available for sale portfolio. Asset liquidity is further enhanced by the Company's ability to sell or securitize loans in secondary markets through whole-loan sales and securitizations.

Core customer deposits have historically provided the Company with a sizeable source of relatively stable and low-cost funds.

The remaining funding of assets is mostly provided by long-term debt, deposits in foreign offices, short-term borrowings (federal funds purchased and securities sold under repurchase agreements, commercial paper and other short-term borrowings) and trust preferred securities. Liquidity for the Company is also available through the Company's ability to raise funds in a variety of domestic and international money and capital markets.

At January 1, 2002, the Parent had authority to issue a total of $6.05 billion of senior debt and subordinated notes under an SEC registration statement filed in 2000. Under this registration statement, the Parent issued a total of $1.5 billion in senior debt and subordinated notes in first quarter 2002, leaving at March 31, 2002 a total of $4.55 billion available for issuance. In April 2002, the Parent issued $500 million in medium-term notes. In February 2002, the Parent registered for issuance an additional $10 billion in debt and equity securities, and certain other securities, including preferred and common securities to be issued by one or more trusts that are directly or indirectly owned by the Company and consolidated in the financial statements and securities obligating the holders to purchase or sell securities issued by third parties, currencies, or commodities. Under this registration statement, Wells Fargo Capital VI issued trust preferred securities of $450 million in first quarter 2002, leaving at March 31, 2002 a total of $9.55 billion of securities available for issuance. The Company used the proceeds from securities issued in 2002 for general corporate purposes and expects that it will use the proceeds from the issuance of any securities in the future for general corporate purposes as well. The Parent issues commercial paper and has two back-up credit facilities amounting to $2 billion.

At January 1, 2002, Wells Fargo Financial, Inc. (WFFI) had authority to issue a total of $3.7 billion of senior debt and subordinated notes under two previously filed SEC registration statements. During the first quarter of 2002, WFFI issued a total of $400 million in senior notes, leaving at March 31, 2002 a total of $3.3 billion available for issuance by WFFI. In April 2002, WFFI issued $500 million in senior notes. In addition, at January 1, 2002, a subsidiary of WFFI had authority to issue a total of $1.3 billion (Canadian) of debt securities under a registration statement previously filed with the Canadian provincial securities authorities. No securities were issued under this authority during the first quarter of 2002.

In February 2001, Wells Fargo Bank, N.A. established a $20 billion bank note program under which it may issue up to $10 billion in short-term senior notes outstanding at any time and up to an aggregate of $10 billion in long-term senior and subordinated notes. Securities are issued under this program as private placements in accordance with OCC regulations. Wells Fargo Bank, N.A. began issuing under the short-term portion of the program in 2001. At January 1, 2002, Wells Fargo Bank, N.A. had authority to issue $8.4 billion under the long-term portion. During first quarter 2002, Wells Fargo Bank, N. A. issued $3.0 billion in long-term notes,

leaving $5.4 billion of remaining issuance authority under the long-term portion at March 31, 2002.

CAPITAL MANAGEMENT

The Company has an active program for managing stockholder capital. The objective of effective capital management is to produce above market long term returns by opportunistically utilizing capital when returns are perceived to be high and issuing/accumulating capital when the costs of doing so is perceived to be low.

Uses of capital include investments for organic growth, acquisitions of banks and nonbank companies, dividends and share repurchases. During the first quarter of 2002, the Company's consolidated assets increased $3.94 billion, or 1%. During 2001, the Board of Directors authorized the repurchase of up to 85 million additional shares of the Company's outstanding common stock. During the first quarter of 2002, the Company repurchased 2.8 million shares of common stock for an aggregate of $131 million. At March 31, 2002 the total remaining common stock repurchase authority was approximately 48 million shares. In April 2002, the Board of Directors approved an increase in the Company's quarterly common stock dividend to 28 cents from 26 cents, representing an 8% increase in the quarterly dividend rate.

Sources of capital include retained earnings, common and preferred stock issuance and issuance of subordinated debt and the placement of trust preferred securities. In the first quarter of 2002, total net income was $1.10 billion and the change in retained earnings was $604 million after payment of $444 million in common stock dividends. In the first quarter of 2002, the Company issued a total of $143 million in common stock for various employee stock plans.

PART II—OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a): Exhibits

		3(a)		Restated Certificate of Incorporation, incorporated by reference to Exhibit 3(b) to the Company's Current Report on Form 8-K dated June 28, 1993. Certificates of Amendment of Certificate of Incorporation, incorporated by reference to Exhibit 3 to the Company's Current Report on Form 8-K dated July 3, 1995 (authorizing preference stock), Exhibits 3(b) and 3(c) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (changing the Company's name and increasing authorized common and preferred stock, respectively) and Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (increasing authorized common stock)
		(b)		Certificate of Change of Location of Registered Office and Change of Registered Agent, incorporated by reference to Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999
		(c)		Certificate of Designations for the Company's ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994
		(d)		Certificate of Designations for the Company's 1995 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995
		(e)		Certificate Eliminating the Certificate of Designations for the Company's Cumulative Convertible Preferred Stock, Series B, incorporated by reference to Exhibit 3(a) to the Company's Current Report on Form 8-K dated November 1, 1995
		(f)		Certificate Eliminating the Certificate of Designations for the Company's 10.24% Cumulative Preferred Stock, incorporated by reference to Exhibit 3 to the Company's Current Report on Form 8-K dated February 20, 1996
		(g)		Certificate of Designations for the Company's 1996 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the Company's Current Report on Form 8-K dated February 26, 1996
		(h)		Certificate of Designations for the Company's 1997 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the Company's Current Report on Form 8-K dated April 14, 1997
		(i)		Certificate of Designations for the Company's 1998 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the Company's Current Report on Form 8-K dated April 20, 1998

		3(j)		Certificate of Designations for the Company's Adjustable Cumulative Preferred Stock, Series B, incorporated by reference to Exhibit 3(j) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998
		(k)		Certificate of Designations for the Company's Series C Junior Participating Preferred Stock, incorporated by reference to Exhibit 3(l) to the Company's Annual Report on Form 10-K for the year ended December 31, 1998
		(l)		Certificate Eliminating the Certificate of Designations for the Company's Series A Junior Participating Preferred Stock, incorporated by reference to Exhibit 3(a) to the Company's Current Report on Form 8-K dated April 21, 1999
		(m)		Certificate of Designations for the Company's 1999 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3(b) to the Company's Current Report on Form 8-K dated April 21, 1999
		(n)		Certificate of Designations for the Company's 2000 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3(o) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000
		(o)		Certificate of Designations for the Company's 2001 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the Company's Current Report on Form 8-K dated April 17, 2001
		(p)		Certificate of Designations for the Company's 2002 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the Company's Current Report on Form 8-K dated April 16, 2002
		(q)		By-Laws, incorporated by reference to Exhibit 3(m) to the Company's Annual Report on Form 10-K for the year ended December 31, 1998
		4(a)		See Exhibits 3(a) through 3(q)
		(b)		Rights Agreement, dated as of October 21, 1998, between the Company and ChaseMellon Shareholder Services, LLC, as Rights Agent, incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form 8-A dated October 21, 1998
		(c)		The Company agrees to furnish upon request to the Commission a copy of each instrument defining the rights of holders of senior and subordinated debt of the Company.

		99(a)		Computation of Ratios of Earnings to Fixed Charges—the ratios of earnings to fixed charges, including interest on deposits, were 3.00 and 1.89 for the quarters ended March 31, 2002 and 2001, respectively. The ratios of earnings to fixed charges, excluding interest on deposits, were 4.71 and 2.92 for the quarters ended March 31, 2002 and 2001, respectively.
		(b)		Computation of Ratios of Earnings to Fixed Charges and Preferred Dividends—the ratios of earnings to fixed charges and preferred dividends, including interest on deposits, were 2.99 and 1.89 for the quarters ended March 31, 2002 and 2001, respectively. The ratios of earnings to fixed charges and preferred dividends, excluding interest on deposits, were 4.70 and 2.90 for the quarters ended March 31, 2002 and 2001, respectively.

(b): The Company filed the following report on Form 8-K during the first quarter of 2002:

January 15, 2002, under Item 5, containing the Company's financial results for the quarter ended December 31, 2001

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: May 10, 2002	WELLS FARGO & COMPANY
	By:	/s/ LES L. QUOCK
		Les L. Quock Senior Vice President and Controller (Principal Accounting Officer)

QuickLinks

FORM 10-Q TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION WELLS FARGO & COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME
WELLS FARGO & COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
WELLS FARGO & COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
WELLS FARGO & COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
WELLS FARGO & COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS
FINANCIAL REVIEW
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1) (2)
PART II—OTHER INFORMATION
SIGNATURE