Wells Fargo Earns $1.8 Billion on Record Revenue; Increases Dividend 10%

Wells Fargo & Company (NYSE:WFC): -- Net income of $1.8 billion compared with $2.3 billion a year ago -- Diluted earnings per share of $0.53 compared with $0.67 a year ago -- Record revenue of $11.5 billion, up 16 percent from prior year and 34 percent (annualized) from prior quarter -- Record cross-sell for both retail and commercial customers -- Provision for credit losses of $3.0 billion (including reserve build of $1.5 billion) -- Positive operating leverage (revenue growth of 16 percent; expense growth of 2 percent from prior year) -- Average loans up 18 percent from prior year and 8 percent (annualized) from prior quarter -- Average earning assets up 20 percent from prior year and 15 percent (annualized) from prior quarter -- Net interest margin of 4.92 percent, up 23 basis points from prior quarter -- Tier 1 capital of 8.24 percent, up from 7.92 percent at March 31, 2008, and 7.59 percent at December 31, 2007 Selected Financial Information   Quarter ended June 30,   March 31,   June 30,   2008     2008     2007   Earnings Diluted earnings per share $ 0.53 $ 0.60 $ 0.67 Net income (in billions) 1.75 2.00 2.28   Asset Quality Net charge-offs as % of avg. total loans 1.55 % 1.60 % 0.87 % Nonperforming loans as % of total loans 1.02 0.84 0.51 Allowance as a % of total loans 1.88 1.56 1.17   Other Revenue (in billions) $ 11.46 $ 10.56 $ 9.89 Average loans (in billions) 391.5 383.9 332.0 Average core deposits (in billions) 318.4 317.3 300.5 Net interest margin 4.92 % 4.69 % 4.89 % Wells Fargo & Company (NYSE:WFC) reported diluted earnings per common share of $0.53 for second quarter 2008 compared with $0.60 in first quarter 2008 and $0.67 in second quarter 2007. Net income was $1.75 billion compared with $2.00 billion in first quarter 2008 and $2.28 billion in second quarter 2007. The Company also announced a quarterly common stock dividend of 34 cents per share, up 10 percent from the previous dividend of 31 cents per share. "Wells Fargo continued to strengthen its franchise during the second quarter,” said President and CEO John Stumpf. "Earnings per share were 14 cents below that of last year due to $2.3 billion of higher provision expense, including a credit reserve build of $1.5 billion (30 cents per share). We were able to lend more to current customers where we believed it was prudent and properly priced. We grew core deposits while reducing funding costs. We achieved record cross-sell results with our retail and commercial customers – a testament to our relationship-based strategy and our 160,000 team members who serve our customers. We are open for business and getting lots of it. We also continued to benefit from opportunities in this environment to gain new business and customers through selective acquisitions. We maintained a strong balance sheet and, for the 21st consecutive year, increased our dividend. We’re still affected by the weak economy, but we believe we’re one of the best positioned in financial services to grow through this adversity and to build an even stronger company for our team members, customers, communities and shareholders.” Financial Performance "Wells Fargo continued to profitably build its franchise this quarter, at a time when many in our industry are primarily focused on fixing rather than growing their companies,” said Chief Financial Officer Howard Atkins. "Despite a $3 billion provision for loan losses in the quarter – including a $1.5 billion credit reserve build – the Company earned a $1.8 billion quarterly profit, generated a return on equity of 14.6 percent, increased Tier 1 capital in the quarter by 32 basis points to 8.24 percent, and increased the combination of capital and loan loss allowance to 9.7 percent of average earning assets from 9.1 percent linked quarter. The continued profitable growth in our franchise is reflected in the growth of our pre-tax pre-provision income to $5.6 billion, up $1.4 billion, or 34 percent, from a year ago, driven by a 20 percent increase in earning assets, a 16 percent increase in revenue, a 10 percent increase in noninterest income, record cross-sell of 5.64 products in our retail business and 6.3 products in our commercial business, an increase in the net interest margin to 4.92 percent, up 23 basis points linked quarter, and an increase in operating leverage, with expenses up only 2 percent versus 16 percent revenue growth. "In broad terms, the credit crisis has created incremental earnings opportunities for Wells Fargo largely offsetting our incremental charge-offs from the crisis. Year-to-date total net interest income, for example, was up $1.8 billion from the first half of 2007, roughly equal to the increase in net charge-offs for the same period, even after adjusting charge-offs for the impact of our National Home Equity Group’s new charge-off policy. Few other large financial institutions have had the capacity to realize the opportunities generated by the credit crisis, and if opportunities to add attractive assets, add new customers and gain market share and wallet share continue, the long-term benefits could very well last beyond the peak in credit costs.” As a result of the Company’s performance and confidence in long-term growth, the Board of Directors increased the Company’s third quarter common stock dividend to $0.34 per share, an increase of 10 percent from the second quarter dividend of $0.31 per share. Revenue Revenue was a record $11.5 billion, up $1.6 billion, or 16 percent, from a year ago, on strong, double-digit growth in both net interest income and noninterest income. "Because of the opportunities to gain new business and new customers, gain more business from existing customers and add earning assets with better risk-adjusted spreads, our revenue growth through second quarter 2008 was higher in the midst of the credit crisis than it was before this crisis,” said Atkins. Businesses that achieved double-digit, year-over-year revenue growth were broad-based and included asset-based lending, credit cards, diversified products, mortgage banking, Small Business Administration lending, insurance, international, specialized financial services and wealth management. Loans Average loans of $391.5 billion increased $59.6 billion, or 18 percent, from a year ago. On a linked-quarter basis, average loans grew $7.6 billion, or 8 percent (annualized). Average commercial and commercial real estate loans increased $33.9 billion, or 27 percent, from second quarter 2007 and increased $7.3 billion, or 19 percent (annualized), from first quarter 2008, making this the 15th consecutive quarter of double-digit, year-over-year growth. Average consumer loans increased $25.5 billion, or 13 percent, from second quarter 2007, but were essentially flat linked quarter. "We’re lending to credit-worthy consumer and commercial customers, but continuing to exit, curtail or re-price higher risk and lower risk-adjusted return segments,” said Atkins. Deposits Average core deposits of $318.4 billion increased $17.8 billion, or 6 percent, from a year ago and $1.1 billion, or 1 percent (annualized), linked quarter. Average mortgage escrow deposits were $22.7 billion, down $680 million from second quarter 2007 and up $2.3 billion linked quarter. Average retail core deposits grew $10.3 billion, or 5 percent, from second quarter 2007 and increased $1.9 billion, or 3 percent (annualized), linked quarter. Average consumer checking accounts grew a net 5.5 percent from second quarter 2007. Wholesale deposits were up 14 percent year over year, but declined modestly linked quarter. Net Interest Income Net interest income increased $1.1 billion, or 21 percent, from last year and $518 million, or 36 percent (annualized), linked quarter. The increase was driven by double-digit earning asset growth (up 20 percent year over year and 15 percent (annualized) linked quarter) combined with an increase in the net interest margin to 4.92 percent, up 23 basis points from first quarter and 3 basis points from a year ago. "The improvement in net interest margin reflects our focus on higher risk-adjusted yields on new loans and securities, a decline in funding costs, our disciplined deposit pricing, and the high percentage of checking and transaction accounts in our core deposit mix,” said Atkins. "The effect of the industry-wide credit write-offs and the economic slowdown have been largely offset by earning asset growth and improved spreads across most asset classes and a steeper yield curve compared with a year ago.” Noninterest Income Noninterest income rose to $5.2 billion, up 10 percent from second quarter 2007, and increased $378 million linked quarter. Fee income was broad-based across the Company. Deposit service charges increased 8 percent on solid deposit growth. Despite the 15 percent decline in the S&P500® year over year, trust and investment fees declined only 9 percent and were flat linked quarter. Card fees were up 14 percent year over year and 22 percent (annualized) linked quarter due to continued growth in new accounts and greater card activity. Insurance fees were up 27 percent year over year due to customer growth, higher crop insurance revenues and the fourth quarter 2007 acquisition of ABD Insurance, and 37 percent (annualized) linked quarter due to seasonally higher revenues, primarily from crop insurance. Charges and fees on loans were relatively flat, reflecting an increase in commercial loan fees due to strong loan demand offset by lower home equity fees due to the Company’s efforts to curtail risk in that business. Net gains on mortgage loan origination/sales activities increased $609 million linked quarter due to wider margins, lower levels of additions to the repurchase reserve, lower write-downs of repurchased mortgage loans, an increase in the value of commercial mortgages held for sale, and an increase in the servicing value of the mortgage warehouse/pipeline. These improvements were largely driven by higher interest rates and more stable liquidity in the mortgage market during the second quarter. Second quarter results included a $65 million net reduction in the value of the mortgage servicing rights (MSRs) from market-related valuation changes, net of hedge results (reflected in net servicing income). On a linked-quarter basis, the value of interest-only investments associated with the Wells Fargo Home Mortgage (Home Mortgage) servicing portfolio increased $247 million (reflected in trading income) and gains on debt securities declined $414 million. Noninterest income also included $129 million of other-than-temporary impairment charges, which were largely recorded in net losses on debt securities. Equity investment gains were only $46 million in second quarter, down $196 million from last year and down $267 million linked quarter, which included our gain from the Visa initial public offering. Unrealized net losses on securities available for sale were $2.1 billion at June 30, 2008, compared with unrealized net losses of $598 million at March 31, 2008. The change in the value was largely due to the increase in market yields of mortgage-backed securities during the quarter. Noninterest Expense Noninterest expense increased $133 million, or 2 percent, from second quarter 2007 and increased $398 million linked quarter. Of the linked-quarter increase, $151 million was due to the reversal in the first quarter of previously accrued litigation expense for Visa and $108 million was due to an increase in deferred compensation plan-related expenses, which was offset by an equivalent increase in trading income related to plan asset returns. "During the quarter, we continued to build distribution – opening 19 banking stores and adding sales and service team members – while reducing most non-labor expenses, including year-over-year cost reductions in outside professional services, travel and entertainment, contract services and postage,” said Atkins. Credit Quality "Managing the challenges of the current credit cycle continues to be a top priority,” said Chief Credit Officer Mike Loughlin. Second quarter 2008 net charge-offs were $1.5 billion (1.55 percent of average loans, annualized) compared with $1.5 billion (1.60 percent) in first quarter 2008 and $720 million in second quarter 2007 (0.87 percent). The second quarter 2008 provision was $3.0 billion, which included second quarter 2008 net charge-offs of $1.5 billion and an additional $1.5 billion credit reserve build, primarily for expected higher losses in the National Home Equity Group (Home Equity) and the unsecured retail loan portfolios. As previously announced, the Home Equity charge-off policy changed in the second quarter from 120 days to no more than 180 days to provide more time to work with customers to solve their credit problems and keep them in their homes. The Company has helped nearly 900 customers, and approximately $90 million of Home Equity loans have been modified due to this change. The policy change had the effect of deferring an estimated $265 million of charge-offs from the second quarter, but did not reduce provision expense in the second quarter since this loss content was included in the $1.5 billion credit reserve build.     Quarter ended June 30, 2008     Quarter ended March 31, 2008     Net loan   As a % Net loan   As a % charge-offs of average charge-offs of average (in millions) loans (in millions) loans Commercial and commercial real estate: Commercial $ 301 1.27 % $ 228 1.01 % Other real estate mortgage 4 0.04 3 0.03 Real estate construction 27 0.58 28 0.60 Lease financing   10 0.56 9 0.53   Total commercial and commercial real estate 342 0.85 268 0.70   Consumer: Real estate 1-4 family first mortgage 96 0.53 75 0.41 Real estate 1-4 family junior lien (1) 334 1.79 438 2.34 Credit card 329 6.95 275 5.89 Other revolving credit and installment   367 2.68   418 3.01 Total consumer 1,126 2.04 1,206 2.18   Foreign   44 2.36   54 2.94   Total loans $ 1,512 1.55 $ 1,528 1.60   (1) Reflects the impact of the previously disclosed Home Equity charge-off policy change, effective April 1, 2008 Charge-offs in the real estate 1-4 family first mortgage portfolio increased $21 million linked quarter, including the $14 million increase from Wells Fargo Financial’s residential real estate portfolio. "The increase in mortgage loss levels was expected given the continued declines in home prices,” said Loughlin. "Credit card charge-offs increased $54 million in the second quarter, but continued to perform within an expected range. While the loss levels were higher than the historically low levels of recent years, many of our loan products continued to earn acceptable risk-adjusted returns. Losses in the Wells Fargo Financial auto portfolio declined $47 million from first quarter 2008. The process improvements and underwriting changes made in prior quarters continued to produce the desired results, however increased economic stress will place additional pressure on any portfolio closely tied to the consumer.” Net credit losses in the real estate 1-4 family junior lien category were down $104 million compared with first quarter 2008, primarily due to the change in the Home Equity charge-off policy. "Although losses declined, the portfolio continued to deteriorate as property values search for a bottom,” said Loughlin. "Given the continued decline in home prices, we had more accounts move into the higher combined loan-to-value segments, which directly impacts loss levels.” Approximately 38 percent of our $73 billion core Home Equity portfolio and 71 percent of our $11 billion liquidating Home Equity portfolio had combined loan-to-value ratios above 90 percent as of June 30, 2008. The property values are primarily based on a combination of March 2008 automated value models and May 2008 home price indices. More information about the Home Equity portfolio is available on table SELECTED NATIONAL HOME EQUITY GROUP PORTFOLIO DATA. Commercial and commercial real estate charge-offs increased $74 million linked quarter, including about $30 million from charge-offs on loans originated through Wells Fargo’s Business Direct small business lending group. "Although loss levels have increased, the majority of the wholesale businesses performed well and we continue to see good opportunities in this market,” said Loughlin. Nonperforming Assets Total nonperforming assets were $5.23 billion (1.31 percent of total loans) at June 30, 2008, and included $4.07 billion of nonperforming loans, $535 million of insured Government National Mortgage Association (GNMA) loan repurchases, and $619 million of foreclosed and repossessed real estate and vehicles. This compares with $4.50 billion (1.16 percent) at March 31, 2008, consisting of $3.26 billion of nonperforming loans, $578 million of GNMA loan repurchases and $658 million of foreclosed and repossessed assets. "The increases in nonperforming assets continued to be centered in portfolios affected by the residential real estate issues and the associated impact on the consumer,” said Loughlin. "The combination of higher foreclosure rates and less liquidity in the distressed loan sales market caused us to hold more assets on the balance sheet for a longer time. The increase in nonperforming loans was caused in part by our active loss mitigation strategies at Home Equity, Home Mortgage and Wells Fargo Financial. A primary goal of our loan servicing operation is to work with customers to keep them in their homes. We actively work to contact delinquent customers. We gather and analyze information regarding their financial circumstances and can frequently work with customers to modify their loan to improve affordability and allow them to remain in their home. However, accounting conventions require us to classify these restructured loans as nonperforming until the customer demonstrates the ability to make payments under the revised terms. We require six monthly payments before returning the loan to accrual status. We will continue to work with our delinquent customers even though it will cause a continued increase in nonperforming loans.” The Home Equity charge-off policy change also contributed to the increase in nonperforming loans as fewer loans were charged off in the quarter. Loans 90 days or more past due and still accruing totaled $7.26 billion, $6.92 billion and $4.99 billion at June 30, 2008, March 31, 2008, and June 30, 2007, respectively. For the same periods, the totals included $5.48 billion, $5.29 billion and $3.91 billion, respectively, in advances pursuant to our servicing agreement to GNMA mortgage pools and similar loans whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veteran Affairs. Loans 90 Days or More Past Due and Still Accruing (Excluding Insured/Guaranteed GNMA and Similar Loans)     June 30,   Mar. 31,   June 30, (in millions) 2008 2008 2007 Commercial and commercial real estate: Commercial $ 16 $ 29 $ 21 Other real estate mortgage 38 24 2 Real estate construction   81   15 4 Total commercial and commercial real estate 135 68 27 Consumer: Real estate 1-4 family first mortgage 370 314 179 Real estate 1-4 family junior lien mortgage 236 228 76 Credit card 441 449 253 Other revolving credit and installment   563   532   515 Total consumer 1,610 1,523 1,023 Foreign   35   40   36 Total $ 1,780 $ 1,631 $ 1,086 Allowance for Credit Losses The allowance for credit losses, including unfunded commitments, totaled $7.52 billion at June 30, 2008, compared with $6.01 billion at March 31, 2008, and $4.01 billion at June 30, 2007. Second quarter 2008 results included a credit reserve build of $1.5 billion primarily for expected higher credit losses in the loan portfolio. Since the beginning of fourth quarter 2007, the Company has provided $3.4 billion in excess of net charge-offs. "During the quarter, revised estimates for the reserve for unfunded commitments decreased from the prior quarter as our updated evaluation indicated lower loss content from open commitment exposures,” said Loughlin. "We believe the allowance was adequate for losses inherent in the portfolio at June 30, 2008.” Business Segment Performance Wells Fargo has three lines of business for management reporting: Community Banking, Wholesale Banking and Wells Fargo Financial. Net income (loss) for each of the three business segments was:   Second Quarter   % (in millions)   2008     2007 Change Community Banking $ 1,234 $ 1,502 (18) % Wholesale Banking 557 621 (10) Wells Fargo Financial (38) 156 NM NM - Not meaningful More financial information about the business segments is on tables OPERATING SEGMENT RESULTS and FIVE QUARTER OPERATING SEGMENT RESULTS. Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including investment, insurance and trust services primarily in 23 midwestern and western states, and mortgage and home equity loans in all 50 states. Selected Financial Information       Second Quarter % (in millions)   2008   2007 Change Total revenue $ 7,547 $ 6,171 22 % Provision for credit losses 1,996 353 465 Noninterest expense 3,737 3,590 4 Net income 1,234 1,502 (18)   (in billions) Average loans 215.9 186.6 16 Average assets 365.9 319.8 14 Average core deposits 252.6 243.0 4 Community Banking reported net income of $1.2 billion in second quarter 2008, down $268 million from a year ago, affected by the $1.1 billion credit reserve build. Pre-tax pre-provision income (i.e., revenue less operating expense) increased $1.2 billion, or 48 percent from a year ago. Revenue increased $1.4 billion, or 22 percent, driven by strong balance sheet growth and strong fee income growth in retail banking and mortgage. Average loans of $215.9 billion in second quarter 2008 grew 16 percent and average core deposits of $252.6 billion grew 4 percent, with a portion of the growth due to acquisitions. Noninterest income increased $465 million from second quarter 2007 driven by double-digit growth in cards and mortgage banking, and strong growth in deposit service charges. Noninterest expense increased $147 million, or 4 percent, driven by investments in technology, new stores and sales staff, partially offset by continued expense management. The provision for credit losses increased $1.6 billion (including a $1.1 billion credit reserve build) from second quarter 2007, with over half of the increase related to the Home Equity portfolio. Regional Banking -- Core product solutions (sales) of 5.67 million, up 18 percent from prior year -- Core sales per platform banker FTE (active, full-time equivalent) of 5.24 per day, up from 4.78 in prior year -- Record retail bank household cross-sell of 5.64 products per household; 23 percent of our retail bank households have 8 or more products, our long-term goal -- Sales of Wells Fargo Packages(R) (a checking account and at least three other products) up 33 percent from prior year, purchased by 72 percent of new checking account customers -- Consumer checking accounts up a net 5.5 percent from prior year -- Customer loyalty scores up 6 percent and welcoming and wait time scores up 7 percent from prior year (based on customers conducting transactions with tellers) -- Added 1,269 platform banker FTEs from prior year through hiring and acquisitions -- Opened 19 banking stores, bringing our total retail stores to 3,330 -- Added 26 webATM(R) machines bringing network total to 6,950 and converted 24 to Envelope-Free(SM) webATM machines, bringing network total to 1,474 -- Business Banking -- Store-based business solutions up 18 percent from prior year -- Loans to small businesses (loans primarily less than $100,000 on our Business Direct platform) up 10 percent from prior year -- Business checking accounts up a net 2.4 percent from prior year -- Business Banking household cross-sell of 3.6 products per household -- Sales of Wells Fargo Business Services Packages (a business checking account and at least three other business products) up 31 percent from prior year, purchased by 48 percent of new business checking account customers "Our amazing, hardworking, dedicated team continued to help our customers reach their financial goals by providing 5.67 million core product solutions in the second quarter, up 18 percent from the prior year,” said Carrie Tolstedt, senior EVP, Community Banking. "Of our 23 banking states, 19 had double-digit core product solutions growth from the prior year, and five of those, including California, Texas, and Arizona, had more than 20 percent growth. We focused on small business appreciation during the quarter through community celebrations and customized offers. Sales of store-based business solutions increased an impressive 18 percent from prior year, and sales of Wells Fargo Business Services Packages rose 31 percent. We continue our focus on the customer experience. For customers transacting at the teller line, welcoming and wait time survey scores were up 50 percent, and customer loyalty scores improved 41 percent, since we began surveying in January 2004. In addition, we’re proud and excited to welcome our new customers and team members from United Bancorporation of Wyoming, which we acquired on July 1, 2008. Wells Fargo is now the largest bank in Wyoming, number one in market share.” Home Mortgage -- Home Mortgage retail originations of $31 billion, flat from prior year -- Mortgage applications of $100 billion, down 12 percent from prior year -- Mortgage application pipeline of $47 billion, down 16 percent from prior year -- Record owned mortgage servicing portfolio of $1.55 trillion, up 7 percent from prior year and 3 percent (annualized) from prior quarter "Our mortgage team continued to manage very well through another challenging quarter, and again produced strong results,” said Mark Oman, senior EVP, Home and Consumer Finance Group. "Home Mortgage’s balanced business model positions us well in the current housing environment because its servicing portfolio is a ‘natural business hedge’ of the slowdown in home originations in the quarter. As mortgage rates have increased, and refinancing and purchase activity slowed, our prepayments decline, benefiting our servicing business. Despite the economic slowdown, our servicing portfolio continued to perform relatively well. For our largest product category, prime conventional first mortgages representing 5.6 million customers and over $1 trillion of servicing, 97.5 out of every 100 customers are current with their payments. "Home Mortgage results reflected our long-term commitment to responsible lending and responsible servicing principles. Our disciplined approach to the business and willingness to give up market share to aggressive competitors when the risks outweighed the returns allowed Home Mortgage to avoid many of the issues our competitors now face. The overall market shift towards a greater percentage of agency and government product has benefited Home Mortgage as we remained focused on these segments even when the industry was rapidly growing the Alt-A and nonprime volume in recent years. Government and agency products represented 95 percent of our second quarter originations.” Wealth Management Group -- Revenue up 13 percent from prior year -- Net income up 29 percent from prior year -- Private Bank revenue up 54 percent, net income up 85 percent from prior year -- Private Bank average core deposits up 64 percent, average loans up 28 percent from prior year -- WellsTrade(R) revenue up 42 percent from prior year Online Banking -- 10.6 million active online consumers, up 14 percent from prior year; 67 percent of all consumer checking accounts are online -- 5.2 million online money movement customers, up 17 percent from prior year -- 1.1 million active online small business customers, up 20 percent from prior year Wholesale Banking serves customers coast to coast, including middle market banking, corporate banking, commercial real estate, treasury management, asset-based lending, insurance brokerage, foreign exchange, trade services, specialized lending, equipment finance, corporate trust, capital markets activities and asset management. Selected Financial Information       Second Quarter % (in millions)   2008   2007 Change Total revenue $ 2,500 $ 2,309 8 % Provision for credit losses 245 1 NM Noninterest expense 1,420 1,346 5 Net income 557 621 (10)   (in billions) Average loans 107.6 81.4 32 Average assets 149.9 107.3 40 Average core deposits 65.8 57.5 14 NM - Not meaningful -- Record cross-sell of 6.3 products -- Acquired insurance brokerages in Indiana, California and Missouri -- Acquired premium finance company Flatiron Credit Company, Inc. -- Acquired Transcap Associates, Inc. - factoring and trade finance business "Current market conditions combined with our relationship banking model are giving us the opportunity to bring in new customers and do more business with our existing customers,” said Dave Hoyt, senior EVP, Wholesale Banking Group. "Our team continues to provide dependable, reliable and innovative financial products and services that businesses nationwide expect from Wells Fargo. We help our customers manage the risks in today’s environment. We now have 6.3 products per wholesale relationship. Our loan balances rose 32 percent and deposits rose 14 percent from the same period last year. "We’re constantly working to strengthen our electronic infrastructure to compete in the digital world. Based on customer feedback, we added wire transfer services and image positive pay functionality to our patent pending CEO MobileSM service, the only browser-based mobile banking service for commercial customers.” Wholesale Banking reported net income of $557 million in second quarter 2008, down $64 million from a year ago partly due to the $143 million credit reserve build. Revenue increased $191 million, driven by strong loan and deposit growth and higher fee income. Average loans grew to $107.6 billion, up 32 percent from a year ago, with double-digit increases across nearly all wholesale lending businesses. Average core deposits were $65.8 billion, up 14 percent from a year ago, all in interest-bearing balances. Noninterest income increased $59 million from second quarter 2007, including higher deposit service charges, foreign exchange, financial products and insurance revenue, offset by a lower level of commercial real estate brokerage and capital markets activity. Noninterest expense increased $74 million from a year ago, mainly due to higher personnel-related costs, including additional team members, as well as insurance commissions and expenses related to higher financial product sales. The provision for credit losses was $245 million, an increase of $244 million from second quarter 2007, and included $102 million from higher net charge-offs and $143 million of additional provision taken to build reserves for the wholesale portfolio. Wells Fargo Financial offers consumer loans primarily through real estate-secured debt consolidation products, automobile financing, consumer and private-label credit cards and commercial services to consumers and businesses throughout the United States, Canada, Puerto Rico and the Pacific Rim. Selected Financial Information       Second Quarter % (in millions)   2008   2007 Change Total revenue $ 1,412 $ 1,411 -- % Provision for credit losses 771 366 111 Noninterest expense 703 791 (11) Net income (loss) (38) 156 NM   (in billions) Average loans 68.0 64.0 6 Average assets 73.1 69.8 5 NM - Not meaningful -- Average loans of $68 billion, up 6 percent from second quarter 2007 -- Real estate-secured receivables up 16 percent to $28.7 billion -- Auto finance receivables/operating leases down 10 percent to $27.5 billion "Wells Fargo Financial lost $38 million this quarter reflecting higher credit costs, including a $265 million credit reserve build primarily driven by continued softening in the real estate market,” said Tom Shippee, Wells Fargo Financial CEO. "During the past 18 months, we’ve taken numerous actions to reduce credit risk and, in the process, right-size our expense base by curtailing higher-risk loan products and exiting certain higher-risk/lower-return businesses. "In the first half of this year, we continued to tighten underwriting standards in our real estate, auto and credit cards businesses to effectively manage risk in this difficult credit environment. Our second quarter U.S. real estate originations were down 36 percent from a year ago and auto originations declined 40 percent as we intentionally shrank the U.S. auto portfolio. Our auto group is focusing on its core business of nonprime and near-prime lending through both the indirect and direct channels. We’re particularly pleased with the growth and performance of our direct auto channel, which we integrated into our consumer store network two years ago and now comprises 30 percent of our new auto originations in the U.S. We’ve decided to stop originating new auto leases effective the end of July. Second quarter lease volumes were approximately 6 percent of our total auto volume. The prime auto lease business is no longer a strategic fit for us, partly because the returns are not acceptable. However, we will continue to service our existing lease contracts.” Second quarter revenue of $1.4 billion was flat from a year ago. Average loans increased 6 percent from second quarter 2007. The provision for credit losses increased $405 million from second quarter 2007, and included $265 million of additional provision taken to build reserves. Noninterest expense declined 11 percent from second quarter 2007. Recorded Message A recorded message reviewing Wells Fargo’s results is available at 5:30 a.m. Pacific Time through July 19, 2008. Dial 877-660-6853 (domestic) or 201-612-7415 (international). Enter account number 286 and conference ID 289469. The call is also available on the internet at www.wellsfargo.com/ir and http://www.investorcalendar.com/IC/CEPage.asp?ID=131297. The following appears in accordance with the Private Securities Litigation Reform Act of 1995: This news release contains forward-looking statements about the Company, including the statements that we believe we are one of the best positioned in financial services to grow through the current adversity and to build an even stronger company for our team members, customers, communities and shareholders, that the long-term benefits of the opportunities generated by the credit crisis to add attractive assets, add new customers and gain market share and wallet share could last beyond the peak in credit costs, and that we expect higher credit losses in the Home Equity and unsecured retail loan portfolios, as well as various statements of our beliefs and expectations for future credit quality and losses. 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 do not undertake any obligation to update them to reflect changes that occur after that date. There are a number of factors that could cause results to differ significantly from our expectations, including further deterioration in the credit quality of our home equity, real estate, auto or other loan portfolios, or in the value of the collateral securing those loans, due to higher interest rates, increased unemployment, declining home or auto values, economic recession or other economic factors. For a discussion of factors that may cause actual results to differ from expectations, refer to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, and our Annual Report on Form 10-K for the year ended December 31, 2007, including information incorporated into the 10-K from our 2007 Annual Report to Stockholders, filed with the Securities and Exchange Commission (SEC) and available on the SEC’s website at www.sec.gov. Any factor described in this news release or in any document referred to in this news release could, by itself or together with one or more other factors, adversely affect the Company’s business, earnings and/or financial condition. Wells Fargo & Company is a diversified financial services company with $609 billion in assets, providing banking, insurance, investments, mortgage and consumer finance through almost 6,000 stores and the internet (wellsfargo.com) across North America and elsewhere internationally. Wells Fargo Bank, N.A. is the only bank in the U.S., and one of only two banks worldwide, to have the highest possible credit rating from both Moody’s Investors Service, "Aaa,” and Standard & Poor’s Ratings Services, "AAA.” Wells Fargo & Company and SubsidiariesSUMMARY FINANCIAL DATA             Quarter endedJune 30, % Six months endedJune 30, % ($ in millions, except per share amounts)   2008     2007     Change   2008     2007     Change   For the Period Net income $ 1,753 $ 2,279 (23 ) % $ 3,752 $ 4,523 (17 ) % Diluted earnings per common share 0.53 0.67 (21 ) 1.13 1.33 (15 )   Profitability ratios (annualized): Net income to average total assets (ROA) 1.19 % 1.82 % (35 ) 1.29 % 1.85 % (30 ) Net income to average stockholders' equity (ROE) 14.58 19.57 (25 ) 15.71 19.63 (20 )   Efficiency ratio (1) 51.1 57.9 (12 ) 51.4 58.2 (12 )   Total revenue $ 11,459 $ 9,891 16 $ 22,022 $ 19,332 14   Dividends declared per common share 0.31 0.28 11 0.62 0.56 11   Average common shares outstanding 3,309.8 3,351.2 (1 ) 3,306.1 3,363.5 (2 ) Diluted average common shares outstanding 3,321.4 3,389.3 (2 ) 3,319.6 3,402.5 (2 )   Average loans $ 391,545 $ 331,970 18 $ 387,732 $ 326,729 19 Average assets 594,749 502,686 18 584,871 492,453 19 Average core deposits (2) 318,377 300,535 6 317,827 295,588 8 Average retail core deposits (3) 230,365 220,094 5 229,315 218,528 5   Net interest margin 4.92 % 4.89 % 1 4.81 % 4.92 % (2 )   At Period End Securities available for sale $ 91,331 $ 72,179 27 $ 91,331 $ 72,179 27 Loans 399,237 342,800 16 399,237 342,800 16 Allowance for loan losses 7,375 3,820 93 7,375 3,820 93 Goodwill 13,191 11,983 10 13,191 11,983 10 Assets 609,074 539,865 13 609,074 539,865 13 Core deposits (2) 310,410 300,602 3 310,410 300,602 3 Stockholders' equity 47,964 47,239 2 47,964 47,239 2   Capital ratios: Stockholders' equity to assets 7.87 % 8.75 % (10 ) 7.87 % 8.75 % (10 ) Risk-based capital (4) Tier 1 capital 8.24 8.55 (4 ) 8.24 8.55 (4 ) Total capital 11.23 11.71 (4 ) 11.23 11.71 (4 ) Tier 1 leverage (4) 7.35 7.89 (7 ) 7.35 7.89 (7 )   Book value per common share $ 14.48 $ 14.05 3 $ 14.48 $ 14.05 3   Team members (active, full-time equivalent) 160,500 158,700 1 160,500 158,700 1   Common Stock Price High $ 32.40 $ 36.49 (11 ) $ 34.56 $ 36.64 (6 ) Low 23.46 33.93 (31 ) 23.46 33.01 (29 ) Period end 23.75 35.17 (32 ) 23.75 35.17 (32 )                                       (1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income). (2) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). (3) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits. To reflect the realignment of our corporate trust business from Community Banking into Wholesale Banking in first quarter 2008, balances for prior periods have been revised. (4) The June 30, 2008, ratios are preliminary.   Wells Fargo & Company and SubsidiariesFIVE QUARTER SUMMARY FINANCIAL DATA   Quarter ended June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30, ($ in millions, except per share amounts)   2008     2008     2007     2007     2007   For the Quarter Net income $ 1,753 $ 1,999 $ 1,361 $ 2,173 $ 2,279 Diluted earnings per common share 0.53 0.60 0.41 0.64 0.67   Profitability ratios (annualized): Net income to average total assets (ROA) 1.19 % 1.40 % 0.97 % 1.59 % 1.82 % Net income to average stockholders' equity (ROE) 14.58 16.86 11.25 18.22 19.57   Efficiency ratio (1) 51.1 51.7 57.8 57.5 57.9   Total revenue $ 11,459 $ 10,563 $ 10,205 $ 9,853 $ 9,891   Dividends declared per common share 0.31 0.31 0.31 0.31 0.28   Average common shares outstanding 3,309.8 3,302.4 3,327.6 3,339.6 3,351.2 Diluted average common shares outstanding 3,321.4 3,317.9 3,352.2 3,374.0 3,389.3   Average loans $ 391,545 $ 383,919 $ 374,372 $ 350,683 $ 331,970 Average assets 594,749 574,994 555,647 541,533 502,686 Average core deposits (2) 318,377 317,278 314,808 306,135 300,535 Average retail core deposits (3) 230,365 228,448 226,180 220,984 220,094   Net interest margin 4.92 % 4.69 % 4.62 % 4.55 % 4.89 %   At Quarter End Securities available for sale $ 91,331 $ 81,787 $ 72,951 $ 57,440 $ 72,179 Loans 399,237 386,333 382,195 362,922 342,800 Allowance for loan losses 7,375 5,803 5,307 3,829 3,820 Goodwill 13,191 13,148 13,106 12,018 11,983 Assets 609,074 595,221 575,442 548,727 539,865 Core deposits (2) 310,410 327,360 311,731 303,853 300,602 Stockholders' equity 47,964 48,159 47,628 47,566 47,239   Capital ratios: Stockholders' equity to assets 7.87 % 8.09 % 8.28 % 8.67 % 8.75 % Risk-based capital (4) Tier 1 capital 8.24 7.92 7.59 8.17 8.55 Total capital 11.23 11.01 10.68 11.07 11.71 Tier 1 leverage (4) 7.35 7.04 6.83 7.26 7.89   Book value per common share $ 14.48 $ 14.58 $ 14.45 $ 14.30 $ 14.05   Team members (active, full-time equivalent) 160,500 160,900 159,800 158,800 158,700   Common Stock Price High $ 32.40 $ 34.56 $ 37.78 $ 37.99 $ 36.49 Low 23.46 24.38 29.29 32.66 33.93 Period end 23.75 29.10 30.19 35.62 35.17                                 (1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income). (2) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). (3) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits. To reflect the realignment of our corporate trust business from Community Banking into Wholesale Banking in first quarter 2008, balances for prior periods have been revised. (4) The June 30, 2008, ratios are preliminary.   Wells Fargo & Company and SubsidiariesCONSOLIDATED STATEMENT OF INCOME   Quarter ended June 30,   %   Six months ended June 30,   % (in millions, except per share amounts)   2008   2007   Change     2008   2007   Change     INTEREST INCOME Trading assets $ 38 $ 47 (19 ) % $ 85 $ 100 (15 ) % Securities available for sale 1,224 752 63 2,356 1,438 64 Mortgages held for sale 423 578 (27 ) 817 1,108 (26 ) Loans held for sale 10 17 (41 ) 22 32 (31 ) Loans 6,806 7,100 (4 ) 14,018 13,864 1 Other interest income   46     79   (42 )   98   170   (42 ) Total interest income   8,547     8,573   --   17,396   16,712   4   INTEREST EXPENSE Deposits 1,063 1,941 (45 ) 2,657 3,798 (30 ) Short-term borrowings 357 265 35 782 401 95 Long-term debt   849     1,171   (27 )   1,919   2,307   (17 ) Total interest expense   2,269     3,377   (33 )   5,358   6,506   (18 )   NET INTEREST INCOME 6,278 5,196 21 12,038 10,206 18 Provision for credit losses   3,012     720   318   5,040   1,435   251 Net interest income after provision for credit losses   3,266     4,476   (27 )   6,998   8,771   (20 )   NONINTEREST INCOME Service charges on deposit accounts 800 740 8 1,548 1,425 9 Trust and investment fees 762 839 (9 ) 1,525 1,570 (3 ) Card fees 588 517 14 1,146 987 16 Other fees 511 638 (20 ) 1,010 1,149 (12 ) Mortgage banking 1,197 689 74 1,828 1,479 24 Operating leases 120 187 (36 ) 263 379 (31 ) Insurance 550 432 27 1,054 831 27 Net gains (losses) on debt securities available for sale (91 ) (42 ) 117 232 (11 ) NM Net gains from equity investments 46 242 (81 ) 359 339 6 Other   698     453   54   1,019   978   4 Total noninterest income   5,181     4,695   10   9,984   9,126   9   NONINTEREST EXPENSE Salaries 2,030 1,907 6 4,014 3,774 6 Incentive compensation 806 900 (10 ) 1,450 1,642 (12 ) Employee benefits 593 581 2 1,180 1,246 (5 ) Equipment 305 292 4 653 629 4 Net occupancy 400 369 8 799 734 9 Operating leases 102 148 (31 ) 218 301 (28 ) Other   1,624     1,530   6   3,008   2,927   3 Total noninterest expense   5,860     5,727   2   11,322   11,253   1   INCOME BEFORE INCOME TAX EXPENSE 2,587 3,444 (25 ) 5,660 6,644 (15 ) Income tax expense   834     1,165   (28 )   1,908   2,121   (10 )   NET INCOME $ 1,753   $ 2,279   (23 ) $ 3,752 $ 4,523   (17 )   EARNINGS PER COMMON SHARE $ 0.53 $ 0.68 (22 ) $ 1.13 $ 1.34 (16 )   DILUTED EARNINGS PER COMMON SHARE $ 0.53 $ 0.67 (21 ) $ 1.13 $ 1.33 (15 )   DIVIDENDS DECLARED PER COMMON SHARE $ 0.31 $ 0.28 11 $ 0.62 $ 0.56 11   Average common shares outstanding 3,309.8 3,351.2 (1 ) 3,306.1 3,363.5 (2 ) Diluted average common shares outstanding 3,321.4 3,389.3 (2 ) 3,319.6 3,402.5 (2 )                               NM - Not meaningful   Wells Fargo & Company and SubsidiariesFIVE QUARTER CONSOLIDATED STATEMENT OF INCOME   Quarter ended June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30, (in millions, except per share amounts)   2008   2008   2007   2007   2007   INTEREST INCOME Trading assets $ 38 $ 47 $ 36 $ 37 $ 47 Securities available for sale 1,224 1,132 981 1,032 752 Mortgages held for sale 423 394 456 586 578 Loans held for sale 10 12 19 19 17 Loans 6,806 7,212 7,699 7,477 7,100 Other interest income   46     52   51   72   79   Total interest income   8,547     8,849   9,242   9,223   8,573     INTEREST EXPENSE Deposits 1,063 1,594 2,136 2,218 1,941 Short-term borrowings 357 425 380 464 265 Long-term debt   849     1,070   1,238   1,261   1,171   Total interest expense   2,269     3,089   3,754   3,943   3,377     NET INTEREST INCOME 6,278 5,760 5,488 5,280 5,196 Provision for credit losses   3,012     2,028   2,612   892   720   Net interest income after provision for credit losses   3,266     3,732   2,876   4,388   4,476     NONINTEREST INCOME Service charges on deposit accounts 800 748 788 837 740 Trust and investment fees 762 763 802 777 839 Card fees 588 558 588 561 517 Other fees 511 499 577 566 638 Mortgage banking 1,197 631 831 823 689 Operating leases 120 143 153 171 187 Insurance 550 504 370 329 432 Net gains (losses) on debt securities available for sale (91 ) 323 60 160 (42 ) Net gains from equity investments 46 313 222 173 242 Other   698     321   326   176   453   Total noninterest income   5,181     4,803   4,717   4,573   4,695     NONINTEREST EXPENSE Salaries 2,030 1,984 2,055 1,933 1,907 Incentive compensation 806 644 840 802 900 Employee benefits 593 587 558 518 581 Equipment 305 348 370 295 292 Net occupancy 400 399 413 398 369 Operating leases 102 116 124 136 148 Other   1,624     1,384   1,540   1,589   1,530   Total noninterest expense   5,860     5,462   5,900   5,671   5,727     INCOME BEFORE INCOME TAX EXPENSE 2,587 3,073 1,693 3,290 3,444 Income tax expense   834     1,074   332   1,117   1,165     NET INCOME $ 1,753   $ 1,999 $ 1,361 $ 2,173 $ 2,279     EARNINGS PER COMMON SHARE $ 0.53 $ 0.61 $ 0.41 $ 0.65 $ 0.68   DILUTED EARNINGS PER COMMON SHARE $ 0.53 $ 0.60 $ 0.41 $ 0.64 $ 0.67   DIVIDENDS DECLARED PER COMMON SHARE $ 0.31 $ 0.31 $ 0.31 $ 0.31 $ 0.28   Average common shares outstanding 3,309.8 3,302.4 3,327.6 3,339.6 3,351.2 Diluted average common shares outstanding     3,321.4       3,317.9     3,352.2     3,374.0     3,389.3     Wells Fargo & Company and SubsidiariesCONSOLIDATED BALANCE SHEET         % Change June 30, 2008 from June 30, Dec. 31, June 30, Dec. 31,   June 30, (in millions, except shares)   2008   2007   2007   2007     2007   ASSETS Cash and due from banks $ 13,610 $ 14,757 $ 12,714 (8 ) % 7 % Federal funds sold, securities purchased under resale agreements and other short-term investments 4,088 2,754 5,163 48 (21 ) Trading assets 9,681 7,727 7,289 25 33 Securities available for sale 91,331 72,951 72,179 25 27 Mortgages held for sale (includes $22,940, $24,998 and $30,175 carried at fair value) 25,234 26,815 34,580 (6 ) (27 ) Loans held for sale 680 948 887 (28 ) (23 )   Loans 399,237 382,195 342,800 4 16 Allowance for loan losses   (7,375 )   (5,307 )   (3,820 ) 39 93 Net loans   391,862     376,888     338,980   4 16   Mortgage servicing rights: Measured at fair value (residential MSRs) 19,333 16,763 18,733 15 3 Amortized 442 466 418 (5 ) 6 Premises and equipment, net 5,033 5,122 4,973 (2 ) 1 Goodwill 13,191 13,106 11,983 1 10 Other assets   34,589     37,145     31,966   (7 ) 8   Total assets $ 609,074   $ 575,442   $ 539,865   6 13   LIABILITIES Noninterest-bearing deposits $ 85,062 $ 84,348 $ 89,809 1 (5 ) Interest-bearing deposits   254,062     260,112     234,934   (2 ) 8 Total deposits 339,124 344,460 324,743 (2 ) 4 Short-term borrowings 86,139 53,255 40,838 62 111 Accrued expenses and other liabilities 31,919 30,706 33,215 4 (4 ) Long-term debt   103,928     99,393     93,830   5 11   Total liabilities   561,110     527,814     492,626   6 14   STOCKHOLDERS' EQUITY Preferred stock 723 450 637 61 14 Common stock - $1-2/3 par value, authorized 6,000,000,000 shares; issued 3,472,762,050 shares 5,788 5,788 5,788 -- -- Additional paid-in capital 8,266 8,212 8,027 1 3 Retained earnings 40,534 38,970 37,603 4 8 Cumulative other comprehensive income (loss) (1,060 ) 725 (236 ) NM 349 Treasury stock - 160,801,351 shares, 175,659,842 shares and 110,551,965 shares (5,516 ) (6,035 ) (3,898 ) (9 ) 42 Unearned ESOP shares   (771 )   (482 )   (682 ) 60 13   Total stockholders' equity   47,964     47,628     47,239   1 2   Total liabilities and stockholders' equity $ 609,074   $ 575,442   $ 539,865   6 13                           NM - Not meaningful   Wells Fargo & Company and SubsidiariesFIVE QUARTER CONSOLIDATED BALANCE SHEET   June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30, (in millions)   2008   2008   2007   2007   2007   ASSETS Cash and due from banks $ 13,610 $ 13,146 $ 14,757 $ 12,200 $ 12,714 Federal funds sold, securities purchased under resale agreements and other short-term investments 4,088 4,171 2,754 4,546 5,163 Trading assets 9,681 8,893 7,727 7,298 7,289 Securities available for sale 91,331 81,787 72,951 57,440 72,179 Mortgages held for sale 25,234 29,708 26,815 29,699 34,580 Loans held for sale 680 813 948 1,011 887   Loans 399,237 386,333 382,195 362,922 342,800 Allowance for loan losses   (7,375 )   (5,803 )   (5,307 )   (3,829 )   (3,820 ) Net loans   391,862     380,530     376,888     359,093     338,980     Mortgage servicing rights: Measured at fair value (residential MSRs) 19,333 14,956 16,763 18,223 18,733 Amortized 442 455 466 460 418 Premises and equipment, net 5,033 5,056 5,122 5,002 4,973 Goodwill 13,191 13,148 13,106 12,018 11,983 Other assets   34,589     42,558     37,145     41,737     31,966     Total assets $ 609,074   $ 595,221   $ 575,442   $ 548,727   $ 539,865     LIABILITIES Noninterest-bearing deposits $ 85,062 $ 90,793 $ 84,348 $ 82,365 $ 89,809 Interest-bearing deposits   254,062     267,351     260,112     252,591     234,934   Total deposits 339,124 358,144 344,460 334,956 324,743 Short-term borrowings 86,139 53,983 53,255 41,729 40,838 Accrued expenses and other liabilities 31,919 31,760 30,706 28,884 33,215 Long-term debt   103,928     103,175     99,393     95,592     93,830     Total liabilities   561,110     547,062     527,814     501,161     492,626     STOCKHOLDERS' EQUITY Preferred stock 723 837 450 545 637 Common stock 5,788 5,788 5,788 5,788 5,788 Additional paid-in capital 8,266 8,259 8,212 8,089 8,027 Retained earnings 40,534 39,896 38,970 38,645 37,603 Cumulative other comprehensive income (loss) (1,060 ) 120 725 291 (236 ) Treasury stock (5,516 ) (5,850 ) (6,035 ) (5,209 ) (3,898 ) Unearned ESOP shares   (771 )   (891 )   (482 )   (583 )   (682 )   Total stockholders' equity   47,964     48,159     47,628     47,566     47,239     Total liabilities and stockholders' equity $ 609,074   $ 595,221   $ 575,442   $ 548,727   $ 539,865                                               Wells Fargo & Company and SubsidiariesFIVE QUARTER AVERAGE BALANCES   Quarter ended June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30, (in millions)   2008   2008   2007   2007   2007   EARNING ASSETS Federal funds sold, securities purchased under resale agreements and other short-term investments $ 3,853 $ 3,888 $ 2,972 $ 4,219 $ 4,849 Trading assets 4,915 5,129 4,248 4,043 4,572 Debt securities available for sale: Securities of U.S. Treasury and federal agencies 1,050 975 926 871 839 Securities of U.S. states and political subdivisions 7,038 6,290 5,995 5,021 4,383 Mortgage-backed securities: Federal agencies 40,630 36,097 35,434 52,681 35,406 Private collateralized mortgage obligations   22,419     20,994     14,270     4,026     3,816   Total mortgage-backed securities 63,049 57,091 49,704 56,707 39,222 Other debt securities (1)   13,600     10,825     8,465     5,822     5,090   Total debt securities available for sale (1) 84,737 75,181 65,090 68,421 49,534 Mortgages held for sale (2) 28,004 26,273 28,327 35,552 36,060 Loans held for sale (2) 734 647 965 960 864 Loans: Commercial and commercial real estate: Commercial 95,263 91,085 86,958 79,713 73,932 Other real estate mortgage 39,977 37,426 35,863 32,641 31,736 Real estate construction 19,213 18,932 18,510 16,914 16,393 Lease financing   7,087     6,825     6,583     6,026     5,559   Total commercial and commercial real estate 161,540 154,268 147,914 135,294 127,620 Consumer: Real estate 1-4 family first mortgage 73,663 72,308 69,262 63,929 58,283 Real estate 1-4 family junior lien mortgage 75,018 75,263 75,272 73,476 70,390 Credit card 19,037 18,776 17,689 16,261 14,950 Other revolving credit and installment   54,842     55,910     56,546     54,165     53,464   Total consumer 222,560 222,257 218,769 207,831 197,087 Foreign   7,445     7,394     7,689     7,558     7,263   Total loans (2) 391,545 383,919 374,372 350,683 331,970 Other   2,033     1,825     1,552     1,396     1,329   Total earning assets $ 515,821   $ 496,862   $ 477,526   $ 465,274   $ 429,178     FUNDING SOURCES Deposits: Interest-bearing checking $ 5,487 $ 5,226 $ 5,254 $ 5,160 $ 5,193 Market rate and other savings 161,760 159,865 156,260 149,194 145,185 Savings certificates 37,634 41,915 42,560 41,080 39,729 Other time deposits 5,773 4,763 10,874 10,948 4,574 Deposits in foreign offices   51,884     46,641     44,991     41,326     32,841   Total interest-bearing deposits 262,538 258,410 259,939 247,708 227,522 Short-term borrowings 66,537 52,970 34,074 36,415 21,066 Long-term debt   100,552     100,686     98,012     94,686     90,931   Total interest-bearing liabilities 429,627 412,066 392,025 378,809 339,519 Portion of noninterest-bearing funding sources   86,194     84,796     85,501     86,465     89,659   Total funding sources $ 515,821   $ 496,862   $ 477,526   $ 465,274   $ 429,178     NONINTEREST-EARNING ASSETS Cash and due from banks $ 10,875 $ 11,648 $ 12,127 $ 11,579 $ 11,655 Goodwill 13,171 13,161 13,091 12,008 11,435 Other   54,882     53,323     52,903     52,672     50,418   Total noninterest-earning assets $ 78,928   $ 78,132   $ 78,121   $ 76,259   $ 73,508     NONINTEREST-BEARING FUNDING SOURCES Deposits $ 88,041 $ 84,886 $ 86,632 $ 88,991 $ 91,256 Other liabilities 28,723 30,348 29,019 26,413 25,221 Stockholders' equity 48,358 47,694 47,971 47,320 46,690 Noninterest-bearing funding sources used to fund earning assets   (86,194 )   (84,796 )   (85,501 )   (86,465 )   (89,659 ) Net noninterest-bearing funding sources $ 78,928   $ 78,132   $ 78,121   $ 76,259   $ 73,508     TOTAL ASSETS $ 594,749   $ 574,994   $ 555,647   $ 541,533   $ 502,686                           (1) Includes certain preferred securities. (2) Nonaccrual loans are included in their respective loan categories.   Wells Fargo & Company and SubsidiariesCONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY       Six months ended June 30,   (in millions)   2008     2007     Balance, beginning of period $ 47,628 $ 45,814 Cumulative effect from adoption of: FSP 13-2 (1) -- (71 ) EITF 06-4 and 06-10 (2) (20 ) -- FAS 158 change of measurement date (3) (8 ) -- Net income 3,752 4,523 Other comprehensive income (loss), net of tax, related to: Translation adjustments (6 ) 12 Investment securities and other interests held (1,732 ) (533 ) Derivative instruments and hedging activities (49 ) (29 ) Defined benefit pension plans 2 12 Common stock issued 608 995 Common stock issued for acquisitions -- 646 Common stock repurchased (520 ) (2,689 ) Preferred stock released to ESOP 248 231 Common stock dividends (2,050 ) (1,885 ) Other, net   111     213     Balance, end of period $ 47,964   $ 47,239                 (1) Financial Accounting Standards Board Staff Position 13-2, Accounting for a Change or Projected Change in the Timing of Cash Flows Related to Income Taxes Generated by a Leveraged Lease Transaction. (2) Emerging Issues Task Force (EITF) Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements, and Issue No. 06-10, Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements. (3) Statement of Financial Accounting Standards No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R).   Wells Fargo & Company and SubsidiariesFIVE QUARTER LOANS   June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30, (in millions)   2008   2008   2007   2007   2007   Commercial and commercial real estate: Commercial $ 99,188 $ 92,589 $ 90,468 $ 82,598 $ 77,560 Other real estate mortgage 41,753 38,415 36,747 33,227 32,336 Real estate construction 19,528 18,885 18,854 17,301 16,552 Lease financing   7,160   6,885   6,772   6,089   5,979 Total commercial and commercial real estate 167,629 156,774 152,841 139,215 132,427 Consumer: Real estate 1-4 family first mortgage 74,829 73,321 71,415 66,877 61,177 Real estate 1-4 family junior lien mortgage 75,261 74,840 75,565 74,632 72,398 Credit card 19,429 18,677 18,762 17,129 15,567 Other revolving credit and installment   54,575   55,505   56,171   57,180   53,701 Total consumer 224,094 222,343 221,913 215,818 202,843 Foreign   7,514   7,216   7,441   7,889   7,530   Total loans (net of unearned income) $ 399,237 $ 386,333 $ 382,195 $ 362,922 $ 342,800                         FIVE QUARTER NONACCRUAL LOANS AND OTHER ASSETS   June 30, Mar. 31, Dec. 31, Sept. 30, June 30, (in millions)   2008   2008   2007   2007   2007   Nonaccrual loans: Commercial and commercial real estate: Commercial $ 685 $ 588 $ 432 $ 399 $ 395 Other real estate mortgage 198 152 128 133 129 Real estate construction 563 438 293 188 81 Lease financing   59   57   45   38   29 Total commercial and commercial real estate 1,505 1,235 898 758 634 Consumer: Real estate 1-4 family first mortgage (1) 1,638 1,398 1,272 886 663 Real estate 1-4 family junior lien mortgage 668 381 280 238 228 Other revolving credit and installment   207   196   184   160   155 Total consumer 2,513 1,975 1,736 1,284 1,046 Foreign   55   49   45   46   53 Total nonaccrual loans 4,073 3,259 2,679 2,088 1,733 As a percentage of total loans 1.02 % 0.84 % 0.70 % 0.58 % 0.51 %   Foreclosed assets: GNMA loans (2) 535 578 535 487 423 Other 595 637 649 603 554 Real estate and other nonaccrual investments (3)   24   21   5   5   5   Total nonaccrual loans and other assets $ 5,227 $ 4,495 $ 3,868 $ 3,183 $ 2,715   As a percentage of total loans   1.31 %   1.16 %   1.01 %   0.88 %   0.79 %                         (1) Includes nonaccrual mortgages held for sale. (2) Consistent with regulatory reporting requirements, foreclosed real estate securing Government National Mortgage Association (GNMA) loans is classified as nonperforming. Both principal and interest for GNMA loans secured by the foreclosed real estate are collectible because the GNMA loans are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. (3) Includes real estate investments (contingent interest loans accounted for as investments) that would be classified as nonaccrual if these assets were recorded as loans.   Wells Fargo & Company and SubsidiariesCHANGES IN THE ALLOWANCE FOR CREDIT LOSSES   Quarter ended   Six months ended June 30,   Mar. 31,   June 30, June 30,   June 30, (in millions)   2008     2008     2007     2008     2007   Balance, beginning of period $ 6,013 $ 5,518 $ 3,965 $ 5,518 $ 3,964   Provision for credit losses 3,012 2,028 720 5,040 1,435   Loan charge-offs: Commercial and commercial real estate: Commercial (333 ) (259 ) (127 ) (592 ) (253 ) Other real estate mortgage (6 ) (4 ) (1 ) (10 ) (2 ) Real estate construction (28 ) (29 ) (2 ) (57 ) (2 ) Lease financing   (13 )   (12 )   (9 )   (25 )   (16 ) Total commercial and commercial real estate (380 ) (304 ) (139 ) (684 ) (273 ) Consumer: Real estate 1-4 family first mortgage (103 ) (81 ) (25 ) (184 ) (49 ) Real estate 1-4 family junior lien mortgage (352 ) (455 ) (107 ) (807 ) (190 ) Credit card (369 ) (313 ) (191 ) (682 ) (374 ) Other revolving credit and installment   (488 )   (543 )   (434 )   (1,031 )   (908 ) Total consumer (1,312 ) (1,392 ) (757 ) (2,704 ) (1,521 ) Foreign   (58 )   (68 )   (64 )   (126 )   (126 ) Total loan charge-offs   (1,750 )   (1,764 )   (960 )   (3,514 )   (1,920 )   Loan recoveries: Commercial and commercial real estate: Commercial 32 31 25 63 49 Other real estate mortgage 2 1 3 3 5 Real estate construction 1 1 -- 2 1 Lease financing   3     3     4     6     9   Total commercial and commercial real estate 38 36 32 74 64 Consumer: Real estate 1-4 family first mortgage 7 6 6 13 12 Real estate 1-4 family junior lien mortgage 18 17 16 35 25 Credit card 40 38 30 78 61 Other revolving credit and installment   121     125     139     246     288   Total consumer 186 186 191 372 386 Foreign   14     14     17     28     35   Total loan recoveries   238     236     240     474     485   Net loan charge-offs   (1,512 )   (1,528 )   (720 )   (3,040 )   (1,435 )   Allowances related to business combinations/other   4     (5 )   42     (1 )   43     Balance, end of period $ 7,517   $ 6,013   $ 4,007   $ 7,517   $ 4,007     Components: Allowance for loan losses $ 7,375 $ 5,803 $ 3,820 $ 7,375 $ 3,820 Reserve for unfunded credit commitments   142     210     187     142     187   Allowance for credit losses $ 7,517   $ 6,013   $ 4,007   $ 7,517   $ 4,007     Net loan charge-offs (annualized) as a percentage of average total loans   1.55   %   1.60   %   0.87   %   1.58   %   0.89   %                                                     Wells Fargo & Company and SubsidiariesFIVE QUARTER CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES   Quarter ended June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30, (in millions)   2008     2008     2007     2007     2007   Balance, beginning of quarter $ 6,013 $ 5,518 $ 4,018 $ 4,007 $ 3,965   Provision for credit losses 3,012 2,028 2,612 892 720   Loan charge-offs: Commercial and commercial real estate: Commercial (333 ) (259 ) (221 ) (155 ) (127 ) Other real estate mortgage (6 ) (4 ) (4 ) -- (1 ) Real estate construction (28 ) (29 ) (9 ) (3 ) (2 ) Lease financing   (13 )   (12 )   (9 )   (8 )   (9 ) Total commercial and commercial real estate (380 ) (304 ) (243 ) (166 ) (139 ) Consumer: Real estate 1-4 family first mortgage (103 ) (81 ) (38 ) (22 ) (25 ) Real estate 1-4 family junior lien mortgage (352 ) (455 ) (291 ) (167 ) (107 ) Credit card (369 ) (313 ) (253 ) (205 ) (191 ) Other revolving credit and installment   (488 )   (543 )   (532 )   (473 )   (434 ) Total consumer (1,312 ) (1,392 ) (1,114 ) (867 ) (757 ) Foreign   (58 )   (68 )   (70 )   (69 )   (64 ) Total loan charge-offs   (1,750 )   (1,764 )   (1,427 )   (1,102 )   (960 )   Loan recoveries: Commercial and commercial real estate: Commercial 32 31 35 35 25 Other real estate mortgage 2 1 1 2 3 Real estate construction 1 1 -- 1 -- Lease financing   3     3     5     3     4   Total commercial and commercial real estate 38 36 41 41 32 Consumer: Real estate 1-4 family first mortgage 7 6 4 6 6 Real estate 1-4 family junior lien mortgage 18 17 14 14 16 Credit card 40 38 30 29 30 Other revolving credit and installment   121     125     111     105     139   Total consumer 186 186 159 154 191 Foreign   14     14     15     15     17   Total loan recoveries   238     236     215     210     240   Net loan charge-offs   (1,512 )   (1,528 )   (1,212 )   (892 )   (720 )   Allowances related to business combinations/other   4     (5 )   100     11     42     Balance, end of quarter $ 7,517   $ 6,013   $ 5,518   $ 4,018   $ 4,007     Components: Allowance for loan losses $ 7,375 $ 5,803 $ 5,307 $ 3,829 $ 3,820 Reserve for unfunded credit commitments   142     210     211     189     187   Allowance for credit losses $ 7,517   $ 6,013   $ 5,518   $ 4,018   $ 4,007     Net loan charge-offs (annualized) as a percentage of average total loans 1.55 % 1.60 % 1.28 % 1.01 % 0.87 %   Allowance for loan losses as a percentage of: Total loans 1.85 % 1.50 % 1.39 % 1.06 % 1.11 % Nonaccrual loans 181 178 198 183 220 Nonaccrual loans and other assets 141 129 137 120 141   Allowance for credit losses as a percentage of: Total loans 1.88 % 1.56 % 1.44 % 1.11 % 1.17 % Nonaccrual loans 185 185 206 192 231 Nonaccrual loans and other assets     144         134         143         126         148     Wells Fargo & Company and SubsidiariesNONINTEREST INCOME             Quarter endedJune 30, % Six months endedJune 30, % (in millions)   2008   2007   Change     2008   2007   Change   Service charges on deposit accounts $ 800 $ 740 8 % $ 1,548 $ 1,425 9 %   Trust and investment fees: Trust, investment and IRA fees 566 610 (7 ) 1,125 1,147 (2 ) Commissions and all other fees   196     229   (14 )   400   423   (5 ) Total trust and investment fees 762 839 (9 ) 1,525 1,570 (3 )   Card fees 588 517 14 1,146 987 16   Other fees: Cash network fees 47 50 (6 ) 95 95 -- Charges and fees on loans 251 253 (1 ) 499 491 2 All other fees   213     335   (36 )   416   563   (26 ) Total other fees 511 638 (20 ) 1,010 1,149 (12 )   Mortgage banking: Servicing income, net 221 (45 ) NM 494 171 189 Net gains on mortgage loan origination/sales activities 876 635 38 1,143 1,130 1 All other   100     99   1   191   178   7 Total mortgage banking 1,197 689 74 1,828 1,479 24   Operating leases 120 187 (36 ) 263 379 (31 ) Insurance 550 432 27 1,054 831 27 Net gains from trading activities 516 260 98 619 525 18 Net gains (losses) on debt securities available for sale (91 ) (42 ) 117 232 (11 ) NM Net gains from equity investments 46 242 (81 ) 359 339 6 All other   182     193   (6 )   400   453   (12 )   Total $ 5,181   $ 4,695   10 $ 9,984 $ 9,126   9                                                 NONINTEREST EXPENSE                   Quarter endedJune 30, % Six months endedJune 30, % (in millions)   2008   2007   Change     2008   2007   Change   Salaries $ 2,030 $ 1,907 6 % $ 4,014 $ 3,774 6 % Incentive compensation 806 900 (10 ) 1,450 1,642 (12 ) Employee benefits 593 581 2 1,180 1,246 (5 ) Equipment 305 292 4 653 629 4 Net occupancy 400 369 8 799 734 9 Operating leases 102 148 (31 ) 218 301 (28 ) Outside professional services 212 235 (10 ) 383 427 (10 ) Outside data processing 122 121 1 231 232 -- Travel and entertainment 112 118 (5 ) 217 227 (4 ) Contract services 104 113 (8 ) 212 231 (8 ) Operating losses (reduction in losses) 56 57 (2 ) (17 ) 144 NM Insurance 206 148 39 367 276 33 Advertising and promotion 104 113 (8 ) 189 204 (7 ) Postage 84 85 (1 ) 173 172 1 Telecommunications 82 81 1 160 162 (1 ) Stationery and supplies 54 52 4 106 105 1 Security 45 44 2 89 87 2 Core deposit intangibles 31 27 15 62 53 17 All other   412   336 23   836     607 38   Total $ 5,860 $ 5,727 2 $ 11,322   $ 11,253 1                               NM - Not meaningful   Wells Fargo & Company and SubsidiariesFIVE QUARTER NONINTEREST INCOME   Quarter ended June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30, (in millions)   2008   2008   2007   2007   2007   Service charges on deposit accounts $ 800 $ 748 $ 788 $ 837 $ 740   Trust and investment fees: Trust, investment and IRA fees 566 559 585 573 610 Commissions and all other fees   196     204   217   204     229   Total trust and investment fees 762 763 802 777 839   Card fees 588 558 588 561 517   Other fees: Cash network fees 47 48 47 51 50 Charges and fees on loans 251 248 274 246 253 All other fees   213     203   256   269     335   Total other fees 511 499 577 566 638   Mortgage banking: Servicing income, net 221 273 543 797 (45 ) Net gains (losses) on mortgage loan origination/sales activities 876 267 220 (61 ) 635 All other   100     91   68   87     99   Total mortgage banking 1,197 631 831 823 689   Operating leases 120 143 153 171 187 Insurance 550 504 370 329 432 Net gains (losses) from trading activities 516 103 62 (43 ) 260 Net gains (losses) on debt securities available for sale (91 ) 323 60 160 (42 ) Net gains from equity investments 46 313 222 173 242 All other   182     218   264   219     193     Total $ 5,181   $ 4,803 $ 4,717 $ 4,573   $ 4,695                                           FIVE QUARTER NONINTEREST EXPENSE   Quarter ended June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30, (in millions)   2008   2008   2007   2007   2007   Salaries $ 2,030 $ 1,984 $ 2,055 $ 1,933 $ 1,907 Incentive compensation 806 644 840 802 900 Employee benefits 593 587 558 518 581 Equipment 305 348 370 295 292 Net occupancy 400 399 413 398 369 Operating leases 102 116 124 136 148 Outside professional services 212 171 250 222 235 Outside data processing 122 109 127 123 121 Travel and entertainment 112 105 134 113 118 Contract services 104 108 114 103 113 Operating losses (reduction in losses) 56 (73 ) 68 225 57 Insurance 206 161 59 81 148 Advertising and promotion 104 85 100 108 113 Postage 84 89 85 88 85 Telecommunications 82 78 80 79 81 Stationery and supplies 54 52 61 54 52 Security 45 44 47 42 44 Core deposit intangibles 31 31 32 28 27 All other   412   424     383   323   336   Total $ 5,860 $ 5,462   $ 5,900 $ 5,671 $ 5,727                                     Wells Fargo & Company and Subsidiaries AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2) Quarter ended June 30,     2008   2007       Interest       Interest Average Yields/ income/ Average Yields/ income/ (in millions)   balance     rates     expense   balance     rates     expense   EARNING ASSETS Federal funds sold, securities purchased under resale agreements and other short-term investments $ 3,853 2.32 % $ 22 $ 4,849 5.09 % $ 61 Trading assets 4,915 3.24 39 4,572 4.83 55 Debt securities available for sale (3): Securities of U.S. Treasury and federal agencies 1,050 3.77 10 839 4.28 9 Securities of U.S. states and political subdivisions 7,038 6.62 118 4,383 7.42 79 Mortgage-backed securities: Federal agencies 40,630 5.92 588 35,406 6.09 533 Private collateralized mortgage obligations 22,419 5.87 340 3,816 6.41 61 Total mortgage-backed securities 63,049 5.90 928 39,222 6.13 594 Other debt securities (4) 13,600 6.30 226 5,090 7.61 96 Total debt securities available for sale (4) 84,737 6.00 1,282 49,534 6.36 778 Mortgages held for sale (5) 28,004 6.04 423 36,060 6.42 578 Loans held for sale (5) 734 5.63 10 864 7.74 17 Loans: Commercial and commercial real estate: Commercial 95,263 6.09 1,444 73,932 8.31 1,531 Other real estate mortgage 39,977 5.77 573 31,736 7.48 592 Real estate construction 19,213 5.01 240 16,393 7.97 326 Lease financing 7,087 5.64 100 5,559 5.95 83 Total commercial and commercial real estate 161,540 5.86 2,357 127,620 7.96 2,532 Consumer: Real estate 1-4 family first mortgage 73,663 6.79 1,250 58,283 7.36 1,071 Real estate 1-4 family junior lien mortgage 75,018 6.68 1,246 70,390 8.20 1,440 Credit card 19,037 11.81 561 14,950 14.46 540 Other revolving credit and installment 54,842 8.78 1,198 53,464 9.78 1,303 Total consumer 222,560 7.67 4,255 197,087 8.85 4,354 Foreign 7,445 10.61 197 7,263 12.00 218 Total loans (5) 391,545 6.98 6,809 331,970 8.58 7,104 Other 2,033 4.47 24 1,329 5.23 18 Total earning assets $ 515,821 6.69 8,609 $ 429,178 8.05 8,611   FUNDING SOURCES Deposits: Interest-bearing checking $ 5,487 1.18 16 $ 5,193 3.24 42 Market rate and other savings 161,760 1.21 486 145,185 2.82 1,022 Savings certificates 37,634 3.06 287 39,729 4.38 433 Other time deposits 5,773 2.72 38 4,574 4.82 55 Deposits in foreign offices 51,884 1.83 236 32,841 4.75 389 Total interest-bearing deposits 262,538 1.63 1,063 227,522 3.42 1,941 Short-term borrowings 66,537 2.16 357 21,066 5.06 265 Long-term debt 100,552 3.41 856 90,931 5.17 1,174 Total interest-bearing liabilities 429,627 2.13 2,276 339,519 3.99 3,380 Portion of noninterest-bearing funding sources 86,194 -- -- 89,659 -- -- Total funding sources $ 515,821 1.77 2,276 $ 429,178 3.16 3,380 Net interest margin and net interest income on a taxable-equivalent basis (6) 4.92 % $ 6,333 4.89 % $ 5,231   NONINTEREST-EARNING ASSETS Cash and due from banks $ 10,875 $ 11,655 Goodwill 13,171 11,435 Other 54,882 50,418 Total noninterest-earning assets $ 78,928 $ 73,508   NONINTEREST-BEARING FUNDING SOURCES Deposits $ 88,041 $ 91,256 Other liabilities 28,723 25,221 Stockholders' equity 48,358 46,690 Noninterest-bearing funding sources used to fund earning assets (86,194) (89,659) Net noninterest-bearing funding sources $ 78,928 $ 73,508   TOTAL ASSETS $ 594,749 $ 502,686                                             (1) Our average prime rate was 5.08% and 8.25% for the quarters ended June 30, 2008 and 2007, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 2.75% and 5.36% for the same quarters, respectively. (2) Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories. (3) Yields are based on amortized cost balances computed on a settlement date basis. (4) Includes certain preferred securities. (5) Nonaccrual loans and related income are included in their respective loan categories. (6) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented. Wells Fargo & Company and Subsidiaries AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2) Six months ended June 30,     2008   2007       Interest       Interest Average Yields/ income/ Average Yields/ income/ (in millions)   balance     rates     expense   balance     rates     expense   EARNING ASSETS Federal funds sold, securities purchased under resale agreements and other short-term investments $ 3,870 2.81 % $ 54 $ 5,355 5.13 % $ 136 Trading assets 5,022 3.49 87 4,439 5.17 114 Debt securities available for sale (3): Securities of U.S. Treasury and federal agencies 1,012 3.81 19 796 4.29 17 Securities of U.S. states and political subdivisions 6,664 7.00 238 3,960 7.40 142 Mortgage-backed securities: Federal agencies 38,364 6.00 1,123 33,036 6.14 1,000 Private collateralized mortgage obligations 21,706 5.97 664 3,904 6.37 123 Total mortgage-backed securities 60,070 5.99 1,787 36,940 6.16 1,123 Other debt securities (4) 12,213 6.58 422 5,433 7.52 202 Total debt securities available for sale (4) 79,959 6.14 2,466 47,129 6.39 1,484 Mortgages held for sale (5) 27,138 6.02 817 34,212 6.48 1,108 Loans held for sale (5) 691 6.52 22 829 7.78 32 Loans: Commercial and commercial real estate: Commercial 93,174 6.50 3,013 72,505 8.30 2,986 Other real estate mortgage 38,701 6.09 1,173 31,166 7.45 1,152 Real estate construction 19,073 5.53 525 16,144 7.99 640 Lease financing 6,956 5.71 198 5,531 5.84 162 Total commercial and commercial real estate 157,904 6.25 4,909 125,346 7.94 4,940 Consumer: Real estate 1-4 family first mortgage 72,985 6.84 2,496 56,374 7.34 2,066 Real estate 1-4 family junior lien mortgage 75,140 6.99 2,614 69,738 8.19 2,833 Credit card 18,907 12.06 1,140 14,755 14.01 1,033 Other revolving credit and installment 55,376 8.94 2,462 53,501 9.76 2,590 Total consumer 222,408 7.86 8,712 194,368 8.82 8,522 Foreign 7,420 10.94 404 7,015 11.78 410 Total loans (5) 387,732 7.26 14,025 326,729 8.55 13,872 Other 1,930 4.50 44 1,327 5.17 34 Total earning assets $ 506,342 6.94 17,515 $ 420,020 8.05 16,780   FUNDING SOURCES Deposits: Interest-bearing checking $ 5,357 1.54 41 $ 4,905 3.24 79 Market rate and other savings 160,812 1.59 1,270 143,071 2.80 1,985 Savings certificates 39,774 3.54 700 39,125 4.40 854 Other time deposits 5,269 3.09 80 6,931 5.03 173 Deposits in foreign offices 49,262 2.31 566 30,258 4.71 707 Total interest-bearing deposits 260,474 2.05 2,657 224,290 3.41 3,798 Short-term borrowings 59,754 2.63 782 16,308 4.96 401 Long-term debt 100,619 3.85 1,933 89,984 5.16 2,312 Total interest-bearing liabilities 420,847 2.56 5,372 330,582 3.97 6,511 Portion of noninterest-bearing funding sources 85,495 -- -- 89,438 -- -- Total funding sources $ 506,342 2.13 5,372 $ 420,020 3.13 6,511 Net interest margin and net interest income on a taxable-equivalent basis (6) 4.81 % $ 12,143 4.92 % $ 10,269   NONINTEREST-EARNING ASSETS Cash and due from banks $ 11,262 $ 11,758 Goodwill 13,166 11,355 Other 54,101 49,320 Total noninterest-earning assets $ 78,529 $ 72,433   NONINTEREST-BEARING FUNDING SOURCES Deposits $ 86,464 $ 90,020 Other liabilities 29,534 25,378 Stockholders' equity 48,026 46,473 Noninterest-bearing funding sources used to fund earning assets (85,495) (89,438) Net noninterest-bearing funding sources $ 78,529 $ 72,433   TOTAL ASSETS $ 584,871 $ 492,453                                             (1) Our average prime rate was 5.65% and 8.25% for the six months ended June 30, 2008 and 2007, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 3.02% and 5.36% for the same periods, respectively. (2) Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories. (3) Yields are based on amortized cost balances computed on a settlement date basis. (4) Includes certain preferred securities. (5) Nonaccrual loans and related income are included in their respective loan categories. (6) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented. Wells Fargo & Company and Subsidiaries OPERATING SEGMENT RESULTS (1) (income/ expense in millions, average balances in billions)               Community Banking   Wholesale Banking   Wells Fargo Financial   Consolidated Company Quarter ended June 30, 2008   2007 2008   2007 2008   2007 2008   2007       Net interest income $ 4,136 $ 3,225 $ 1,020 $ 888 $ 1,122 $ 1,083 $ 6,278 $ 5,196 Provision for credit losses 1,996 353 245 1 771 366 3,012 720 Noninterest income 3,411 2,946 1,480 1,421 290 328 5,181 4,695 Noninterest expense 3,737 3,590 1,420 1,346 703 791 5,860 5,727 Income (loss) before income tax expense (benefit) 1,814 2,228 835 962 (62) 254 2,587 3,444 Income tax expense (benefit) 580 726 278 341 (24) 98 834 1,165 Net income (loss) $ 1,234 $ 1,502 $ 557 $ 621 $ (38) $ 156 $ 1,753 $ 2,279   Average loans $ 215.9 $ 186.6 $ 107.6 $ 81.4 $ 68.0 $ 64.0 $ 391.5 $ 332.0 Average assets (2) 365.9 319.8 149.9 107.3 73.1 69.8 594.7 502.7 Average core deposits 252.6 243.0 65.8 57.5 -- -- 318.4 300.5   Six months ended June 30,   Net interest income $ 7,772 $ 6,375 $ 2,052 $ 1,743 $ 2,214 $ 2,088 $ 12,038 $ 10,206 Provision for credit losses 3,309 659 406 14 1,325 762 5,040 1,435 Noninterest income 6,634 5,711 2,730 2,768 620 647 9,984 9,126 Noninterest expense 7,073 7,160 2,835 2,553 1,414 1,540 11,322 11,253 Income before income tax expense 4,024 4,267 1,541 1,944 95 433 5,660 6,644 Income tax expense 1,363 1,266 509 690 36 165 1,908 2,121 Net income $ 2,661 $ 3,001 $ 1,032 $ 1,254 $ 59 $ 268 $ 3,752 $ 4,523   Average loans $ 215.4 $ 183.7 $ 104.1 $ 79.7 $ 68.2 $ 63.3 $ 387.7 $ 326.7 Average assets (2) 361.4 313.4 144.2 104.3 73.5 69.0 584.9 492.5 Average core deposits 250.4 240.0 67.4 55.6 -- -- 317.8 295.6                                             (1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. If the management structure and/or the allocation process changes, allocations, transfers and assignments may change. To reflect the realignment of our corporate trust business into Wholesale Banking in first quarter 2008, results for prior periods have been revised. (2) The Consolidated Company balance includes unallocated goodwill held at the enterprise level of $5.8 billion for all periods presented. Wells Fargo & Company and Subsidiaries FIVE QUARTER OPERATING SEGMENT RESULTS (1)                           Quarter ended (income/expense in millions, average balances in billions)   June 30, 2008   Mar. 31, 2008   Dec. 31, 2007   Sept. 30, 2007   June 30, 2007         COMMUNITY BANKING Net interest income $ 4,136 $ 3,636 $ 3,421 $ 3,303 $ 3,225 Provision for credit losses 1,996 1,313 2,082 446 353 Noninterest income 3,411 3,223 3,101 3,020 2,946 Noninterest expense   3,737     3,336   3,822     3,713   3,590 Income before income tax expense (benefit) 1,814 2,210 618 2,164 2,228 Income tax expense (benefit)   580     783   (40 )   717   726 Net income $ 1,234   $ 1,427 $ 658   $ 1,447 $ 1,502   Average loans $ 215.9 $ 214.9 $ 210.9 $ 197.4 $ 186.6 Average assets 365.9 356.7 346.8 348.1 319.8 Average core deposits 252.6 248.4 245.3 243.0 243.0   WHOLESALE BANKING Net interest income $ 1,020 $ 1,032 $ 987 $ 918 $ 888 Provision for credit losses 245 161 36 19 1 Noninterest income 1,480 1,250 1,293 1,239 1,421 Noninterest expense   1,420     1,415   1,294     1,230   1,346 Income before income tax expense 835 706 950 908 962 Income tax expense   278     231   325     317   341 Net income $ 557   $ 475 $ 625   $ 591 $ 621   Average loans $ 107.6 $ 100.6 $ 95.1 $ 87.5 $ 81.4 Average assets 149.9 138.5 128.3 115.9 107.3 Average core deposits 65.8 68.9 69.5 63.1 57.5   WELLS FARGO FINANCIAL Net interest income $ 1,122 $ 1,092 $ 1,080 $ 1,059 $ 1,083 Provision for credit losses 771 554 494 427 366 Noninterest income 290 330 323 314 328 Noninterest expense   703     711   784     728   791 Income (loss) before income tax expense (benefit) (62 ) 157 125 218 254 Income tax expense (benefit)   (24 )   60   47     83   98 Net income (loss) $ (38 ) $ 97 $ 78   $ 135 $ 156   Average loans $ 68.0 $ 68.4 $ 68.4 $ 65.8 $ 64.0 Average assets 73.1 74.0 74.7 71.7 69.8   CONSOLIDATED COMPANY Net interest income $ 6,278 $ 5,760 $ 5,488 $ 5,280 $ 5,196 Provision for credit losses 3,012 2,028 2,612 892 720 Noninterest income 5,181 4,803 4,717 4,573 4,695 Noninterest expense   5,860     5,462   5,900     5,671   5,727 Income before income tax expense 2,587 3,073 1,693 3,290 3,444 Income tax expense   834     1,074   332     1,117   1,165 Net income $ 1,753   $ 1,999 $ 1,361   $ 2,173 $ 2,279   Average loans $ 391.5 $ 383.9 $ 374.4 $ 350.7 $ 332.0 Average assets (2) 594.7 575.0 555.6 541.5 502.7 Average core deposits 318.4 317.3 314.8 306.1 300.5                           (1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. If the management structure and/or the allocation process changes, allocations, transfers and assignments may change. To reflect the realignment of our corporate trust business into Wholesale Banking in first quarter 2008, results for prior periods have been revised. (2) The Consolidated Company balance includes unallocated goodwill held at the enterprise level of $5.8 billion for all periods presented. Wells Fargo & Company and Subsidiaries FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING                                                   Quarter ended   June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30, (in millions)     2008     2008     2007     2007     2007     Residential MSRs measured using the fair value method: Fair value, beginning of quarter $ 14,956 $ 16,763 $ 18,223 $ 18,733 $ 17,779 Purchases 82 52 314 188 142 Servicing from securitizations or asset transfers 994 797 872 951 1,029 Sales   (177 )   (92 )   --     (292 )   (1,422 ) Net additions (reductions) 899 757 1,186 847 (251 )   Changes in fair value: Due to changes in valuation model inputs or assumptions (1) 4,132 (1,798 ) (1,935 ) (638 ) 2,013 Other changes in fair value (2)   (654 )   (766 )   (711 )   (719 )   (808 ) Total changes in fair value 3,478 (2,564 ) (2,646 ) (1,357 ) 1,205   Fair value, end of quarter $ 19,333   $ 14,956   $ 16,763   $ 18,223   $ 18,733                                     (1) Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates. (2) Represents changes due to collection/realization of expected cash flows over time.                                     Quarter ended June 30, Mar. 31, Dec. 31, Sept. 30, June 30, (in millions)     2008     2008     2007     2007     2007     Amortized MSRs: Balance, beginning of quarter $ 455 $ 466 $ 460 $ 418 $ 400 Purchases 2 3 19 46 26 Servicing from securitizations or asset transfers 4 5 7 12 11 Amortization   (19 )   (19 )   (20 )   (16 )   (19 ) Balance, end of quarter (1) $ 442   $ 455   $ 466   $ 460   $ 418     Fair value of amortized MSRs: Beginning of quarter $ 601 $ 573 $ 602 $ 561 $ 484 End of quarter 595 601 573 602 561                                   (1) There was no valuation allowance recorded for the periods presented. Wells Fargo & Company and Subsidiaries FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)                                       Quarter ended June 30, Mar. 31, Dec. 31, Sept. 30, June 30, (in millions)     2008     2008     2007     2007     2007   Servicing income, net: Servicing fees (1) $ 959 $ 964 $ 994 $ 970 $ 1,007 Changes in fair value of residential MSRs: Due to changes in valuation model inputs or assumptions (2) 4,132 (1,798 ) (1,935 ) (638 ) 2,013 Other changes in fair value (3)   (654 )   (766 )   (711 )   (719 )   (808 ) Total changes in fair value of residential MSRs 3,478 (2,564 ) (2,646 ) (1,357 ) 1,205   Amortization (19 ) (19 ) (20 ) (16 ) (19 ) Net derivative gains (losses) from economic hedges (4)   (4,197 )   1,892     2,215     1,200     (2,238 ) Total servicing income, net $ 221   $ 273   $ 543   $ 797   $ (45 )   Market-related valuation changes to MSRs, net of hedge results (2) + (4) $ (65 ) $ 94   $ 280   $ 562   $ (225 )                               (1) Includes contractually specified servicing fees, late charges and other ancillary revenues. (2) Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates. (3) Represents changes due to collection/realization of expected cash flows over time. (4) Represents results from free-standing derivatives (economic hedges) used to hedge the risk of changes in fair value of MSRs.                             June 30, Mar. 31, Dec. 31, Sept. 30, June 30, (in billions)     2008     2008     2007     2007     2007   Managed servicing portfolio: Loans serviced for others (1) $ 1,446 $ 1,431 $ 1,430 $ 1,380 $ 1,347 Owned loans serviced (2)   100     103     98     97     96   Total owned servicing 1,546 1,534 1,528 1,477 1,443 Sub-servicing   20     21     23     22     24   Total managed servicing portfolio $ 1,566   $ 1,555   $ 1,551   $ 1,499   $ 1,467     Ratio of MSRs to related loans serviced for others 1.37 % 1.08 % 1.20 % 1.35 % 1.42 %   Weighted-average note rate (owned servicing only) 6.00 % 6.00 % 6.01 % 5.98 % 5.95 %                               (1) Consists of 1-4 family first mortgage and commercial mortgage loans. (2) Consists of mortgages held for sale and 1-4 family first mortgage loans. Wells Fargo & Company and Subsidiaries SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA                                                                             Quarter ended   June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30, (in billions)   2008     2008     2007     2007       2007     Application Data: Wells Fargo Home Mortgage first mortgage quarterly applications $ 100 $ 132 $ 91 $ 95 $ 114 Refinances as a percentage of applications 44 % 62 % 52 % 40 % 40 % Wells Fargo Home Mortgage first mortgage unclosed pipeline, at quarter end $ 47 $ 61 $ 43 $ 45 $ 56                                                                                                                               Quarter ended   June 30, Mar. 31, Dec. 31, Sept. 30, June 30, (in billions)   2008     2008     2007     2007     2007     Residential Real Estate Originations: (1) Quarter: Wells Fargo Home Mortgage first mortgage loans: Retail $ 31 $ 34 $ 28 $ 29 $ 32 Correspondent/Wholesale 27 27 22 29 36 Home equity loans and lines 3 3 4 7 9 Wells Fargo Financial   2   2   2   3   3 Total $ 63 $ 66 $ 56 $ 68 $ 80   Year-to-date $ 129 $ 66 $ 272 $ 216 $ 148                                                     (1) Consists of residential real estate originations from all Wells Fargo channels.               Wells Fargo & Company and Subsidiaries SELECTED NATIONAL HOME EQUITY GROUP PORTFOLIO DATA (1)                                         Annualized loss rate   Outstanding balances % of loans two payments or more past due Quarter ended   June 30, Mar. 31, June 30, Mar. 31, June 30, Mar. 31, (in millions)   2008     2008   2008     2008     2008     2008     Liquidating portfolio California $ 4,310 $ 4,417 4.85 % 3.32 % 4.64 % 8.52 % Florida 561 582 6.80 5.40 6.39 10.56 Arizona 266 275 4.08 3.43 5.38 5.57 Texas 208 219 1.11 0.65 1.02 1.93 Minnesota 135 139 3.15 3.10 3.24 7.91 Other   5,589   5,866 2.40 2.18 2.27 2.98 Total   11,069   11,498 3.60 2.79 3.46 5.58   Core portfolio California 27,114 26,331 2.32 1.96 1.92 2.21 Florida 2,572 2,595 4.42 3.80 3.84 4.35 Arizona 3,789 3,785 2.29 1.91 1.62 1.89 Texas 2,767 2,805 1.05 1.05 0.34 0.20 Minnesota 4,499 4,546 1.17 1.16 0.81 1.07 Other   32,016   31,994 1.43 1.44 0.83 0.95 Total   72,757   72,056 1.88 1.71 1.36 1.56   Combined totals $ 83,826 $ 83,554 2.11 1.86 1.65 2.12                                       (1) Reflects the impact of the previously disclosed change in the Home Equity charge-off policy from 120 days to no more than 180 days, effective April 1, 2008.