Edgar Filing: WELLS FARGO & CO/MN

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e10vq

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

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2010

Commission file number 001-2979

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


Delaware		No. 41-0449260
(State of incorporation)		(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: 1-866-249-3302

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 þ		No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


Yes þ		No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes o		No þ

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


	Shares Outstanding
	July 30, 2010
Common stock, $1-2/3 par value		5,233,424,661

FORM 10-Q
CROSS-REFERENCE INDEX



PART I	Financial Information
Item 1.	Financial Statements	Page
	Consolidated Statement of Income		56
	Consolidated Balance Sheet		57
	Consolidated Statement of Changes in Equity and Comprehensive Income		58
	Consolidated Statement of Cash Flows		60
	Notes to Financial Statements
	1 - Summary of Significant Accounting Policies		61
	2 - Business Combinations		64
	3 - Federal Funds Sold, Securities Purchased under Resale Agreements and Other Short-Term Investments		64
	4 - Securities Available for Sale		65
	5 - Loans and Allowance for Credit Losses		75
	6 - Other Assets		80
	7 - Securitizations and Variable Interest Entities		81
	8 - Mortgage Banking Activities		93
	9 - Intangible Assets		95
	10 - Guarantees and Legal Actions		97
	11 - Derivatives		100
	12 - Fair Values of Assets and Liabilities		108
	13 - Preferred Stock		124
	14 - Employee Benefits		126
	15 - Earnings Per Common Share		127
	16 - Operating Segments		128
	17 - Condensed Consolidating Financial Statements		131
	18 - Regulatory and Agency Capital Requirements		139

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations (Financial Review)
	Summary Financial Data		2
	Overview		3
	Earnings Performance		6
	Balance Sheet Analysis		15
	Off-Balance Sheet Arrangements		20
	Risk Management		21
	Capital Management		45
	Critical Accounting Policies		48
	Current Accounting Developments		50
	Forward-Looking Statements		51
	Risk Factors		52
	Glossary of Acronyms		140

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		41

Item 4.	Controls and Procedures		55

PART II	Other Information

Item 1.	Legal Proceedings		142

Item 1A.	Risk Factors		142

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		142

Item 6.	Exhibits		143

Signature			143

Exhibit Index			144

EX-10.B
EX-12.(a)
EX-12.(b)
EX-31.A
EX-31.B
EX-32.A
EX-32.B
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I – FINANCIAL INFORMATION

FINANCIAL REVIEW

SUMMARY FINANCIAL DATA



													% Change
	Quarter ended									June 30, 2010 from						Six months ended
	June 30		,	Mar. 31		,	June 30		,	Mar. 31		,	June 30		,	June 30		,	June 30		,	%
($ in millions, except per share amounts)	2010			2010			2009			2010			2009			2010			2009			Change

For the Period
Wells Fargo net income	$	3,062			2,547			3,172			20	%		(3	)		5,609			6,217			(10	)
Wells Fargo net income applicable to common stock		2,878			2,372			2,575			21			12			5,250			4,959			6
Diluted earnings per common share		0.55			0.45			0.57			22			(4	)		1.00			1.13			(12	)
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA)		1.00	%		0.84			1.00			19			—			0.92			0.98			(6	)
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE)		10.40			8.96			13.70			16			(24	)		9.69			14.07			(31	)
Efficiency ratio (1)		59.6			56.5			56.4			5			6			58.0			56.3			3
Total revenue	$	21,394			21,448			22,507			—			(5	)		42,842			43,524			(2	)
Pre-tax pre-provision profit (PTPP) (2)		8,648			9,331			9,810			(7	)		(12	)		17,979			19,009			(5	)
Dividends declared per common share		0.05			0.05			0.05			—			—			0.10			0.39			(74	)
Average common shares outstanding		5,219.7			5,190.4			4,483.1			1			16			5,205.1			4,365.9			19
Diluted average common shares outstanding		5,260.8			5,225.2			4,501.6			1			17			5,243.0			4,375.1			20
Average loans	$	772,460			797,389			833,945			(3	)		(7	)		784,856			844,708			(7	)
Average assets		1,224,180			1,226,120			1,274,926			—			(4	)		1,225,145			1,282,280			(4	)
Average core deposits (3)		761,767			759,169			765,697			—			(1	)		760,475			759,845			—
Average retail core deposits (4)		574,436			573,653			596,648			—			(4	)		574,059			593,592			(3	)
Net interest margin		4.38	%		4.27			4.30			3			2			4.33			4.23			2
At Period End
Securities available for sale	$	157,927			162,487			206,795			(3	)		(24	)		157,927			206,795			(24	)
Loans		766,265			781,430			821,614			(2	)		(7	)		766,265			821,614			(7	)
Allowance for loan losses		24,584			25,123			23,035			(2	)		7			24,584			23,035			7
Goodwill		24,820			24,819			24,619			—			1			24,820			24,619			1
Assets		1,225,862			1,223,630			1,284,176			—			(5	)		1,225,862			1,284,176			(5	)
Core deposits (3)		758,680			756,050			761,122			—			—			758,680			761,122			—
Wells Fargo stockholders’ equity		119,772			116,142			114,623			3			4			119,772			114,623			4
Total equity		121,398			118,154			121,382			3			—			121,398			121,382			—
Tier 1 capital (5)		101,992			98,329			102,721			4			(1	)		101,992			102,721			(1	)
Total capital (5)		141,088			137,600			144,984			3			(3	)		141,088			144,984			(3	)
Capital ratios:
Total equity to assets		9.90	%		9.66			9.45			2			5			9.90			9.45			5
Risk-based capital (5)
Tier 1 capital		10.51			9.93			9.80			6			7			10.51			9.80			7
Total capital		14.53			13.90			13.84			5			5			14.53			13.84			5
Tier 1 leverage (5)		8.66			8.34			8.32			4			4			8.66			8.32			4
Tier 1 common equity (6)		7.61			7.09			4.49			7			69			7.61			4.49			69
Book value per common share	$	21.35			20.76			17.91			3			19			21.35			17.91			19
Team members (active, full-time equivalent)		267,600			267,400			269,900			—			(1	)		267,600			269,900			(1	)
Common stock price:
High	$	34.25			31.99			28.45			7			20			34.25			30.47			12
Low		25.52			26.37			13.65			(3	)		87			25.52			7.80			227
Period end		25.60			31.12			24.26			(18	)		6			25.60			24.26			6


(1)		The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(2)		Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
(3)		Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).
(4)		Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(5)		See Note 18 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information.
(6)		See the “Capital Management” section in this Report for additional information.

This Report on Form 10-Q for the quarter ended June 30, 2010, including the Financial Review and the Financial Statements and related Notes, contains forward-looking statements, which may include forecasts of our financial results and condition, expectations for our operations and business, and our assumptions for those forecasts and expectations. Do not unduly rely on forward-looking statements. Actual results may differ materially from our forward-looking statements due to several factors. Some of these factors are described in the Financial Review and in the Financial Statements and related Notes. For a discussion of other factors, refer to the “Forward-Looking Statements” and “Risk Factors” sections in this Report and to the “Risk Factors” and “Regulation and Supervision” sections of our Annual Report on Form 10-K for the year ended December 31, 2009 (2009 Form 10-K) and the “Risk Factors” section of our Quarterly Report on Form 10-Q for the period ended March 31, 2010 (First Quarter Form 10-Q), filed with the Securities and Exchange Commission (SEC) and available on the SEC’s website at www.sec.gov.

See the Glossary of Acronyms at the end of this Report for terms used throughout the Financial Review, and Financial Statements and related Notes of this Report.

FINANCIAL REVIEW

OVERVIEW

Wells Fargo & Company is a nationwide, diversified, community-based financial services company, with $1.2 trillion in assets, providing banking, insurance, trust and investments, mortgage banking, investment banking, retail banking, brokerage and consumer finance through banking stores, the internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia (D.C.) and in other countries. We ranked fourth in assets and third in the market value of our common stock among our peers at June 30, 2010. When we refer to “Wells Fargo,” “the Company,” “we,” “our” or “us” in this Report, we mean Wells Fargo & Company and Subsidiaries (consolidated). When we refer to the “Parent,” we mean Wells Fargo & Company. When we refer to “legacy Wells Fargo,” we mean Wells Fargo excluding Wachovia Corporation (Wachovia), which was acquired by Wells Fargo on December 31, 2008.

Our vision is to satisfy all our customers’ financial needs, help them succeed financially, be recognized as the premier financial services company in our markets and be one of America’s great companies. Our primary strategy to achieve this vision is to increase the number of products our customers buy from us and to provide them all the financial products that will help them fulfill their needs. Our cross-sell strategy, diversified business model and the breadth of our geographic reach facilitate growth in both strong and weak economic cycles, as we can grow by expanding the number of products our current customers have with us, gain new customers in our extended markets, and increase market share in many businesses. All of our business segments contributed to earnings in second quarter 2010.

Our company earned $3.1 billion ($0.55 diluted earnings per common share) in second quarter 2010, compared with $3.2 billion ($0.57 diluted earnings per common share) in second quarter 2009. This is the fourth time since the Wachovia merger that quarterly net income was greater than $3.0 billion. Net income for the first half of 2010 was $5.6 billion ($1.00 diluted earnings per common share), compared with $6.2 billion ($1.13 diluted earnings per common share) for the first half of 2009. Despite declining loan demand since early last year and lower mortgage hedging results in second quarter, total revenue and pre-tax pre-provision profit remained strong at $21.4 billion and $8.6 billion, respectively. Year-over-year growth in the franchise was driven by our diverse businesses including commercial real estate (CRE) brokerage, wealth management, asset-based lending, merchant services, debit card and global remittance.

Significant items in second quarter 2010 included:

•		$500 million release of loan loss reserves, reflecting improved loan portfolio performance;
•		$506 million of commercial purchased credit-impaired (PCI) loan resolutions, due to success in selling or settling commercial PCI loans;
•		$627 million of operating losses, up $468 million from a year ago, predominantly due to additional litigation accruals;
•		$498 million of merger integration expenses, up from $380 million in first quarter 2010; and
•		$137 million of severance costs for the Well Fargo Financial restructuring.

In the six quarters since our merger with Wachovia, we have earned cumulative profits of $17.9 billion reflecting the breadth of our business model and the power of the consolidation with Wachovia. Merger integration activities are proceeding on track and the combined company continued to produce financial results including revenue synergies better than our original expectations. We currently expect aggregate merger costs of approximately $5.7 billion ($3.0 billion in aggregate through June 30, 2010). Integration costs were $498 million in second quarter 2010. We currently project $600 million to $650 million in merger costs per quarter in the third and fourth quarters of 2010, before these costs decline in 2011. We continue to expect to achieve $5.0 billion in annual cost savings upon completing the merger integration. We have achieved approximately 80% of run-rate cost savings by the end of second quarter 2010, and expect to achieve 90% by year-end 2010.

Our cross-sell at legacy Wells Fargo set a record in second quarter 2010 with 6.06 Wells Fargo products for retail banking households. Our goal is eight products per customer, which is approximately half of our estimate of potential demand. One of every four of our legacy Wells Fargo retail banking households has eight or more products and our average middle-market commercial banking customer has almost eight products. Wachovia retail bank households had an average of 4.88 Wachovia products. We believe there is potentially significant opportunity for growth from an increase in cross-sell to Wachovia retail bank households. For legacy Wells Fargo, our average middle-market commercial banking customer had an average of 7.7 products and an average of 6.4 products for Wholesale Banking customers. Business banking cross-sell offers another potential opportunity for growth, with cross-sell of 3.88 products at legacy Wells Fargo.

We continued taking actions to build capital and further strengthen our balance sheet, including reducing previously identified non-strategic and liquidating loan portfolios (including the Wells Fargo Financial liquidating portfolio), which declined by $6.9 billion in second quarter 2010 and $40.6 billion cumulatively since the Wachovia acquisition. We significantly built capital in second quarter 2010, driven by strong earnings. Our capital ratios at June 30, 2010, were higher than they were prior to the Wachovia acquisition. Our capital ratios continued to build rapidly, with Tier 1 common reaching 7.61%, up 52 basis points from first quarter 2010, and Tier 1 capital at 10.51%, even with the May 20, 2010, purchase of $540 million of Wells Fargo warrants auctioned by the U.S. Treasury. The Tier 1 leverage ratio increased to 8.66%. See the “Capital Management” section in this Report for more information regarding Tier 1 common equity.

As we have stated in the past, successful companies must invest in their core businesses and maintain strong balance sheets to consistently grow over the long term. In second quarter 2010, we opened 13 retail banking stores for a retail network total of 6,445 stores. We converted 87 Wachovia banking stores in California in second quarter 2010 and Texas and Kansas store conversions took place in July 2010.

In July 2010, we announced that we will be restructuring the operations of Wells Fargo Financial and closing its store network in the U.S. Due to the restructuring of this business, we recorded $137 million in severance costs in second quarter 2010. The business will largely be realigned into existing retail,

mortgage banking and commercial business lines. The legacy Wells Fargo Financial debt consolidation portfolio is now considered to be a liquidating or non-strategic portfolio as we are exiting the business of originating non-prime portfolio mortgage loans. Wells Fargo Financial’s other consumer loans, such as Federal Housing Administration (FHA) home loans, auto loans and credit cards, will be consolidated with similar products within Community Banking.

Wells Fargo remained one of the largest providers of credit to the U.S. economy in second quarter 2010. We continued to lend to creditworthy customers and, during second quarter 2010, made $150 billion in new loans and commitments to consumer, small business and commercial customers, including $81 billion of residential mortgage originations. We have been an industry leader in loan modifications for homeowners, with more than half a million active and completed trial modifications between January 2009 and June 30, 2010, including 75,577 Home Affordability Modification Program (HAMP) active trial and completed modifications, and 429,466 proprietary trial and completed modifications. On March 17, 2010, we announced our participation in the government’s Second-Lien Modification Program under HAMP to help struggling homeowners with a reduction in their home equity loan payments.

We believe credit quality has turned the corner, with net charge-offs declining to $4.5 billion, down 16% from first quarter 2010 and down 17% from last year’s peak quarter. The significant reduction in credit losses in second quarter 2010 confirmed our prior outlook that credit losses peaked in fourth quarter 2009 and provision expense peaked in third quarter 2009. Based on declining losses and across-the-board improved credit quality trends, we released $500 million in loan loss reserves in second quarter 2010. Absent significant deterioration in the economy, we currently expect the positive trend in charge-offs will continue over the coming year and expect future reductions in the allowance for loan losses.

Nonaccrual loan growth in second quarter 2010 decelerated to 2% from first quarter 2010, down significantly from prior quarters. The growth in second quarter 2010 occurred in the real estate portfolios (commercial and residential), which consist of secured loans. Nonaccrual loans in all other loan portfolios were essentially flat or down. New inflows to nonaccrual loans continued to decline (down 18% linked quarter). For additional information, see “Balance Sheet Analysis — Loan Portfolio” and Note 5 (Loans and Allowance for Credit Losses) in this Report.

The improvement in credit quality was also evident in the portfolio of PCI loans, which have continued to perform in line with or better than original expectations at the time of the Wachovia merger. In particular, the Pick-a-Pay portfolio continued to have positive performance trends, resulting in a $1.8 billion transfer from nonaccretable difference to accretable yield in second quarter 2010. This increase in the accretable yield for the Pick-a-Pay portfolio is expected to be recognized as a yield adjustment to income over the remaining life of these loans, which is estimated to have a weighted-average life of eight years. In addition, for commercial PCI loans, due to increased payoffs and dispositions, we reduced the associated nonaccretable difference by $506 million (reflected in income in the second quarter).

The continued improvement in credit performance is a result of a slowly improving economy coupled with actions taken by us over the past several years to improve underwriting standards, mitigate losses and exit portfolios with unattractive credit metrics. We have seen the positive impact of these actions in the current quarter and in projected losses for future quarters.

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) became law. The Dodd-Frank Act reshapes and restructures the supervision and regulation of the financial services industry. Although the Dodd-Frank Act became generally effective in July, many of its provisions have extended implementation periods and delayed effective dates and will require extensive

rulemaking by regulatory authorities. The ultimate impact of the Dodd-Frank Act cannot be determined. See the “Risk Factors” section of this Report for additional information regarding the Dodd-Frank Act.

EARNINGS PERFORMANCE

Revenue was $21.4 billion in second quarter 2010, essentially flat from first quarter 2010, and down 5% from second quarter 2009. Revenue for the first half of 2010 was $42.8 billion, down 2% from the same period a year ago. Reflecting the breadth and growth potential of the Company’s business model, many businesses had double-digit revenue growth from second quarter 2009, including commercial real estate brokerage (deal flow), asset-based lending (loan volume and syndications), merchant services (processing volume), debit cards (increased account activity) and wealth management. Mortgage banking revenues in second quarter 2010 were down 34% from the prior year due to lower origination volumes and a net increase in the mortgage loan repurchase reserve. Net interest income of $11.4 billion declined only 3% from a year ago despite the 7% decline in average loans.

Noninterest expense of $12.7 billion in second quarter 2010 was flat from a year ago. Second quarter 2010 expenses included $498 million of merger integration costs, compared with $244 million a year ago, and $137 million of severance costs related to the Wells Fargo Financial restructuring. Operating losses were $627 million in second quarter 2010, up $468 million from the prior year, predominantly due to additional litigation accruals. Our expenses reflect, in addition to merger integration and credit resolution expenses, our continued investment for long-term growth, hiring in regional and commercial banking as we apply the Wells Fargo business model throughout legacy Wachovia markets, and investing in technology to improve service across the franchise. As of second quarter 2010, we have already realized approximately 80% of our targeted projected run-rate savings from the Wachovia merger. The efficiency ratio was 59.6% in second quarter 2010 compared with 56.5% in first quarter 2010 and 56.4% in second quarter 2009, with the increase largely due to additional merger expenses, litigation accruals and Wells Fargo Financial’s restructuring costs.

NET INTEREST INCOME

Net interest income is the interest earned on debt securities, loans (including yield-related loan fees) and other interest-earning assets minus the interest paid for deposits, short-term borrowings and long-term debt. The net interest margin is the average yield on earning assets minus the average interest rate paid for deposits and our other sources of funding. Net interest income and the net interest margin are presented on a taxable-equivalent basis to consistently reflect income from taxable and tax-exempt loans and securities based on a 35% federal statutory tax rate.

Net interest income on a taxable-equivalent basis was $11.6 billion in second quarter 2010 and $11.9 billion in second quarter 2009, reflecting a decline in average loans, including a reduction in loans in the liquidating portfolios. Continued strong growth in consumer and commercial checking and savings accounts partially offset the impact on income from the decline in loans. The net interest margin was 4.38% in second quarter 2010 up from 4.30% a year ago, due to additional PCI loan resolution income and the benefit of lower deposit and market funding costs. Average earning assets were $1.1 trillion in second quarter 2010, flat compared with second quarter 2009. Average loans decreased to $772.5 billion in second quarter 2010 from $833.9 billion a year ago. We continued to supply significant amounts of credit to consumers and businesses in second quarter 2010, although loan demand remained soft. We continued to reduce high-risk/non-strategic loans (including Pick-a-Pay mortgage, legacy Wells Fargo Financial debt consolidation, and commercial and commercial real estate PCI loans), which were down $26.1 billion in second quarter 2010 from a year ago. Average mortgages held for sale (MHFS) were $32.2 billion in second quarter 2010, down from $43.2 billion a year ago. Average debt securities available for sale were $157.6 billion in second quarter 2010, down from $179.0 billion a year ago.

Core deposits are a low-cost source of funding and thus an important contributor to net interest income and the net interest margin. Core deposits include noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). Average core deposits declined to $761.8 billion in second quarter 2010 from $765.7 billion in second quarter 2009, and funded 99% and 92% of average loans in the same periods, respectively. Average checking and savings deposits, typically the lowest cost deposits, represented about 88% of our average core deposits, one of the highest percentages in the industry. Average certificates of deposit (CDs) declined $63 billion from second quarter 2009, predominantly the result of $57 billion of higher-cost Wachovia CDs maturing, yet total average core deposits were down only $3.9 billion from a year ago. Of average core deposits, $672.0 billion represent transaction accounts or low-cost savings accounts from consumer and commercial customers, which increased 10% from $613.3 billion in second quarter 2009. Total average retail core deposits, which exclude Wholesale Banking core deposits and retail mortgage escrow deposits, decreased to $574.4 billion for second quarter 2010 from $596.6 billion a year ago. Average mortgage escrow deposits were $25.7 billion in second quarter 2010, compared with $32.0 billion a year ago. Average certificates of deposits decreased to $89.8 billion in second quarter 2010 from $152.4 billion a year ago. Total average interest-bearing deposits decreased to $635.4 billion in second quarter 2010 from $638.0 billion a year ago.

The following table presents the individual components of net interest income and the net interest margin.

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



	Quarter ended June 30																,
	2010								2009
							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	$	67,712			0.33	%	$	56		20,889			0.66	%	$	34
Trading assets		28,760			3.79			272		18,464			4.61			213
Debt securities available for sale (3):
Securities of U.S. Treasury and federal agencies		2,094			3.50			18		2,102			3.45			17
Securities of U.S. states and political subdivisions		16,192			6.48			255		12,189			6.47			206
Mortgage-backed securities:
Federal agencies		72,876			5.39			930		92,550			5.36			1,203
Residential and commercial		33,197			9.59			769		41,257			9.03			1,044

Total mortgage-backed securities		106,073			6.72			1,699		133,807			6.60			2,247
Other debt securities (4)		33,270			7.21			562		30,901			7.23			572

Total debt securities available for sale (4)		157,629			6.75			2,534		178,999			6.67			3,042
Mortgages held for sale (5)		32,196			5.04			405		43,177			5.05			545
Loans held for sale (5)		4,386			2.73			30		7,188			2.83			50
Loans:
Commercial and commercial real estate:
Commercial		147,965			5.44			2,009		187,501			4.11			1,922
Real estate mortgage		97,731			3.89			949		96,131			3.52			843
Real estate construction		33,060			3.44			284		42,023			2.71			284
Lease financing		13,622			9.54			325		14,750			9.22			340

Total commercial and commercial real estate		292,378			4.89			3,567		340,405			3.99			3,389

Consumer:
Real estate 1-4 family first mortgage		237,500			5.24			3,108		240,798			5.53			3,328
Real estate 1-4 family junior lien mortgage		102,678			4.53			1,162		108,422			4.77			1,290
Credit card		22,239			13.24			736		22,963			12.74			731
Other revolving credit and installment		88,617			6.57			1,452		90,729			6.64			1,502

Total consumer		451,034			5.74			6,458		462,912			5.93			6,851

Foreign		29,048			3.62			262		30,628			4.06			310

Total loans (5)		772,460			5.34			10,287		833,945			5.07			10,550
Other		6,082			3.44			53		6,079			2.91			45

Total earning assets	$	1,069,225			5.14	%	$	13,637		1,108,741			5.21	%	$	14,479

Funding sources
Deposits:
Interest-bearing checking	$	61,212			0.13	%	$	19		79,955			0.13	%	$	26
Market rate and other savings		412,062			0.26			267		334,067			0.40			336
Savings certificates		89,773			1.44			323		152,444			1.19			451
Other time deposits		14,936			1.90			72		21,660			2.00			108
Deposits in foreign offices		57,461			0.23			33		49,885			0.29			36

Total interest-bearing deposits		635,444			0.45			714		638,011			0.60			957
Short-term borrowings		45,082			0.22			25		59,844			0.39			58
Long-term debt		195,440			2.52			1,233		235,590			2.52			1,484
Other liabilities		6,737			3.33			55		4,604			3.45			40

Total interest-bearing liabilities		882,703			0.92			2,027		938,049			1.08			2,539
Portion of noninterest-bearing funding sources		186,522			—			—		170,692			—			—

Total funding sources	$	1,069,225			0.76			2,027		1,108,741			0.91			2,539

Net interest margin and net interest income on a taxable-equivalent basis (6)					4.38	%	$	11,610					4.30	%	$	11,940

Noninterest-earning assets
Cash and due from banks	$	17,415								19,340
Goodwill		24,820								24,261
Other		112,720								122,584

Total noninterest-earning assets	$	154,955								166,185

Noninterest-bearing funding sources
Deposits	$	176,908								174,529
Other liabilities		43,713								49,570
Total equity		120,856								112,778
Noninterest-bearing funding sources used to fund earning assets		(186,522	)							(170,692	)

Net noninterest-bearing funding sources	$	154,955								166,185

Total assets	$	1,224,180								1,274,926


(1)		Our average prime rate was 3.25% for the quarters ended June 30, 2010 and 2009, and 3.25% for the first half of 2010 and 2009. The average three-month London Interbank Offered Rate (LIBOR) was 0.44% and 0.84% for the quarters ended June 30, 2010 and 2009, respectively, and 0.35% and 1.04% for the first half of 2010 and 2009, 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 and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts include the effects of any unrealized gain or loss marks but those marks carried in other comprehensive income are not included in yield determination of affected earning assets. Thus 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.



	Six months ended June 30																,
	2010								2009
							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	$	54,347			0.33	%	$	89		22,472			0.75	%	$	84
Trading assets		28,338			3.85			544		20,323			4.81			488
Debt securities available for sale (3):
Securities of U.S. Treasury and federal agencies		2,186			3.56			38		2,498			2.00			24
Securities of U.S. states and political subdivisions		14,951			6.53			476		12,201			6.45			419
Mortgage-backed securities:
Federal agencies		76,284			5.39			1,953		84,592			5.51			2,271
Residential and commercial		32,984			9.63			1,559		39,980			8.80			2,061

Total mortgage-backed securities		109,268			6.70			3,512		124,572			6.71			4,332
Other debt securities (4)		32,810			6.86			1,054		30,493			7.02			1,123

Total debt securities available for sale (4)		159,215			6.67			5,080		169,764			6.68			5,898
Mortgages held for sale (5)		31,784			4.99			792		37,151			5.17			960
Loans held for sale (5)		5,390			2.39			64		7,567			3.13			117
Loans:
Commercial and commercial real estate:
Commercial		152,192			4.97			3,752		192,186			3.99			3,806
Real estate mortgage		97,848			3.79			1,839		96,087			3.52			1,678
Real estate construction		34,448			3.25			555		42,370			2.86			601
Lease financing		13,814			9.38			648		15,277			8.99			687

Total commercial and commercial real estate		298,302			4.59			6,794		345,920			3.94			6,772

Consumer:
Real estate 1-4 family first mortgage		241,241			5.25			6,318		243,133			5.59			6,772
Real estate 1-4 family junior lien mortgage		104,151			4.50			2,330		109,270			4.91			2,665
Credit card		22,789			13.20			1,503		23,128			12.42			1,435
Other revolving credit and installment		89,566			6.49			2,879		91,770			6.66			3,029

Total consumer		457,747			5.72			13,030		467,301			5.98			13,901

Foreign		28,807			3.62			518		31,487			4.22			659

Total loans (5)		784,856			5.21			20,342		844,708			5.08			21,332
Other		6,075			3.40			103		6,110			2.89			88

Total earning assets	$	1,070,005			5.10	%	$	27,014		1,108,095			5.22	%	$	28,967

Funding sources
Deposits:
Interest-bearing checking	$	61,614			0.14	%	$	42		80,173			0.14	%	$	56
Market rate and other savings		408,026			0.27			553		323,813			0.47			755
Savings certificates		92,254			1.40			640		161,234			1.05			838
Other time deposits		15,405			1.97			152		23,597			1.98			232
Deposits in foreign offices		56,453			0.22			62		47,901			0.32			75

Total interest-bearing deposits		633,752			0.46			1,449		636,718			0.62			1,956
Short-term borrowings		45,082			0.20			44		67,911			0.54			181
Long-term debt		202,186			2.48			2,509		247,209			2.65			3,267
Other liabilities		6,203			3.38			104		4,194			3.64			76

Total interest-bearing liabilities		887,223			0.93			4,106		956,032			1.15			5,480
Portion of noninterest-bearing funding sources		182,782			—			—		152,063			—			—

Total funding sources	$	1,070,005			0.77			4,106		1,108,095			0.99			5,480

Net interest margin and net interest income on a taxable-equivalent basis (6)					4.33	%	$	22,908					4.23	%	$	23,487

Noninterest-earning assets
Cash and due from banks	$	17,730								19,795
Goodwill		24,818								23,725
Other		112,592								130,665

Total noninterest-earning assets	$	155,140								174,185

Noninterest-bearing funding sources
Deposits	$	174,487								167,458
Other liabilities		44,224								50,064
Total equity		119,211								108,726
Noninterest-bearing funding sources used to fund earning assets		(182,782	)							(152,063	)

Net noninterest-bearing funding sources	$	155,140								174,185

Total assets	$	1,225,145								1,282,280

NONINTEREST INCOME



	Quarter ended June 30				,	%			Six months ended June 30				,	%
(in millions)	2010		2009			Change			2010		2009			Change

Service charges on deposit accounts	$	1,417		1,448			(2	)%	$	2,749		2,842			(3	)%
Trust and investment fees:
Trust, investment and IRA fees		1,035		839			23			2,084		1,561			34
Commissions and all other fees		1,708		1,574			9			3,328		3,067			9

Total trust and investment fees		2,743		2,413			14			5,412		4,628			17

Card fees		911		923			(1	)		1,776		1,776			—
Other fees:
Cash network fees		58		58			—			113		116			(3	)
Charges and fees on loans		401		440			(9	)		820		873			(6	)
Processing and all other fees		523		465			12			990		875			13

Total other fees		982		963			2			1,923		1,864			3

Mortgage banking (1):
Servicing income, net		1,218		816			49			2,584		1,722			50
Net gains on mortgage loan origination/sales activities		793		2,230			(64	)		1,897		3,828			(50	)

Total mortgage banking		2,011		3,046			(34	)		4,481		5,550			(19	)

Insurance		544		595			(9	)		1,165		1,176			(1	)
Net gains from trading activities		109		749			(85	)		646		1,536			(58	)
Net gains (losses) on debt securities available for sale		30		(78	)	NM				58		(197	)	NM
Net gains (losses) from equity investments		288		40			620			331		(117	)	NM
Operating leases		329		168			96			514		298			72
All other		581		476			22			1,191		1,028			16

Total	$	9,945		10,743			(7	)	$	20,246		20,384			(1	)

NM — Not meaningful


(1)		2009 categories have been revised to conform to current presentation.

Noninterest income represented 46% and 47% of total revenues for the second quarter and first half of 2010, respectively, compared with 48% and 47%, respectively, for the same periods a year ago. Noninterest income was down 7% year over year, predominantly due to lower mortgage banking hedge results.

The Federal Reserve Board (FRB) announced regulatory changes to debit card and ATM overdraft practices in fourth quarter 2009. In third quarter 2009, we also announced policy changes that should help customers limit overdraft and returned item fees. We currently estimate that the combination of these changes will reduce our 2010 fee revenue by approximately $225 million (after tax) in third quarter 2010 and $275 million in fourth quarter 2010. The actual impact in 2010 and future periods could vary due to a variety of factors, including changes in customer behavior, economic conditions and other potential offsetting factors.

We earn fees on trust, investment and IRA (Individual Retirement Account) accounts from managing and administering assets, including mutual funds, corporate trust, personal trust, employee benefit trust and agency assets. At June 30, 2010, these assets totaled $1.9 trillion, up 12% from $1.7 trillion a year ago, primarily reflecting a 12% increase in the S&P 500 over the same period. Trust, investment and IRA fees are primarily based on a tiered scale relative to the market value of the assets under management or administration. These fees increased to $1.0 billion in second quarter 2010 from $839 million a year ago.

We received commissions and other fees for providing services to full-service and discount brokerage customers of $1.7 billion in second quarter 2010 and $1.6 billion a year ago. These fees include transactional commissions, which are based on the number of transactions executed at the customer’s direction, and asset-based fees, which are based on the market value of the customer’s assets. Client assets totaled $1.1 trillion at June 30, 2010, up from $1.0 trillion a year ago. Commissions and other fees also include fees from investment banking activities including equity and bond underwriting.

Card fees were $911 million in second quarter 2010, down from $923 million a year ago. Recent legislative and regulatory changes limit our ability to increase interest rates and assess certain fees on card accounts. The anticipated net impact in third quarter 2010 related to these changes is estimated to be $30 million (after tax). The actual impact in 2010 and future periods could vary due to a variety of factors, including changes in customer behavior, economic conditions and other potential offsetting factors.

Mortgage banking noninterest income was $2.0 billion in second quarter 2010, down from $3.0 billion a year ago. The reduction in mortgage banking noninterest income is primarily driven by the decline in net gains on mortgage loan origination/sales activities of $1.4 billion to $793 million for second quarter 2010 from $2.2 billion for second quarter 2009, primarily due to lower origination volumes and a net increase in the mortgage loan repurchase reserve. Residential real estate originations were $81 billion in second quarter 2010, down 37% from $129 billion a year ago. The 1-4 family first mortgage unclosed pipeline was $68 billion at June 30, 2010, and $57 billion at December 31, 2009. For additional information, see the “Risk Management — Mortgage Banking Interest Rate and Market Risk” section and Note 1 (Summary of Significant Accounting Policies), Note 8 (Mortgage Banking Activities) and Note 12 (Fair Values of Assets and Liabilities) to Financial Statements in this Report.

Net gains on mortgage loan origination/sales activities include the cost of any additions to the mortgage repurchase reserve as well as adjustments of loans in the warehouse/pipeline for changes in market conditions that affect their value. Mortgage loans are repurchased based on standard representations and warranties and early payment default clauses in mortgage sale contracts. Additions to the mortgage repurchase reserve that were charged against net gains on mortgage loan origination/sales activities during second quarter 2010 were $382 million and $784 million for the first half of 2010. For additional information about mortgage loan repurchases, see the “Risk Management — Credit Risk Management Process — Reserve for Mortgage Loan Repurchase Losses” section and Note 7 (Securitizations and Variable Interest Entities) to Financial Statements in this Report.

The reduction in net gains on mortgage loan origination/sales activities was partially offset by an increase in net servicing income. Net servicing income increased $402 million from a year ago primarily due to growth in the servicing portfolio, reduced mortgage servicing rights (MSR) amortization due to lower payoffs, and lower servicing foreclosure costs due to more loan modifications and loss mitigation activities in addition to stabilization in the delinquencies in our servicing portfolio. In addition to servicing fees, net servicing income includes both changes in the fair value of MSRs during the period as well as changes in the value of derivatives (economic hedges) used to hedge the MSRs. Net servicing income for second quarter 2010 included a $626 million net MSRs valuation gain ($2.7 billion decrease in the fair value of the MSRs offsetting a $3.3 billion hedge gain) and for second quarter 2009 included a $1.0 billion net MSRs valuation gain ($2.3 billion increase in the fair value of MSRs partially offsetting a $1.3 billion hedge loss). See the “Risk Management — Mortgage Banking Interest Rate and Market Risk” section of this Report for additional information regarding our MSRs risks and hedging approach. At June 30, 2010, the ratio of MSRs to related loans serviced for others was 0.76% compared with 0.91% at December 31, 2009. The average note rate was 5.53%, the lowest since we reentered the servicing business.

Income from trading activities was a $109 million gain in second quarter 2010, down from a $749 million gain a year ago. This decrease was driven by challenging market conditions and continued reductions in risk positions in this business, since the merger with Wachovia, while continuing to support customer-related activities.

Aggregate net gains on debt securities available for sale and equity securities totaled $318 million in second quarter 2010, compared with net losses of $38 million a year ago. The year-over-year

improvement was due to lower impairment write-downs of $168 million in second quarter 2010, down from $463 million a year ago. For additional information, see the “Balance Sheet Analysis — Securities Available for Sale” section and Note 4 (Securities Available for Sale) to Financial Statements in this Report.

Operating lease income was $329 million in second quarter 2010, up $161 million from a year ago primarily due to gains on early lease terminations.

The increase in “All other” noninterest income to $581 million in second quarter 2010 from $476 million a year ago was due to gains on loan sales.

NONINTEREST EXPENSE



	Quarter ended June 30				,	%			Six months ended June 30				,	%
(in millions)	2010		2009			Change			2010		2009			Change

Salaries	$	3,564		3,438			4	%	$	6,878		6,824			1	%
Commission and incentive compensation		2,225		2,060			8			4,217		3,884			9
Employee benefits		1,063		1,227			(13	)		2,385		2,511			(5	)
Equipment		588		575			2			1,266		1,262			—
Net occupancy		742		783			(5	)		1,538		1,579			(3	)
Core deposit and other intangibles		553		646			(14	)		1,102		1,293			(15	)
FDIC and other deposit assessments		295		981			(70	)		596		1,319			(55	)
Outside professional services		572		451			27			1,056		861			23
Contract services		384		256			50			731		472			55
Foreclosed assets		333		187			78			719		435			65
Outside data processing		276		282			(2	)		548		494			11
Postage, stationery and supplies		230		240			(4	)		472		490			(4	)
Operating losses		627		159			294			835		331			152
Insurance		164		259			(37	)		312		526			(41	)
Telecommunications		156		164			(5	)		299		322			(7	)
Travel and entertainment		196		131			50			367		236			56
Advertising and promotion		156		111			41			268		236			14
Operating leases		27		61			(56	)		64		131			(51	)
All other		595		686			(13	)		1,210		1,309			(8	)

Total	$	12,746		12,697			—		$	24,863		24,515			1

Noninterest expense was $12.7 billion in second quarter 2010, flat compared with $12.7 billion in second quarter 2009, and included $498 million and $244 million of merger integration costs for the same periods, respectively. Noninterest expense in second quarter 2010 also included $137 million of severance costs related to the Wells Fargo Financial restructuring. Foreclosed assets expense was $333 million in second quarter 2010, up 78% from a year ago due to a $2.5 billion increase in foreclosed assets year over year, including $1.6 billion of foreclosed loans in the PCI portfolio that are now recorded as foreclosed assets. Operating losses were $627 million, up $468 million from a year ago, predominantly due to additional litigation accruals. The $128 million increase in contract services from a year ago was merger related. Of our approximately $5.7 billion of estimated total Wachovia merger integration costs ($3.0 billion in aggregate through June 30, 2010), we expect to incur approximately $2.1 billion in 2010, of which $878 million was recorded in the first half of 2010, as we convert banking stores and lines of business, and continue to build infrastructure.

Federal Deposit Insurance Corporation (FDIC) and other deposit assessments were $295 million in second quarter 2010, down from $981 million a year ago, which included additional assessments related to the FDIC Transaction Account Guarantee Program and the FDIC special assessment of $565 million. The $95 million decline in insurance expense from second quarter 2009 was predominantly due to lower insurance reserves at our captive mortgage reinsurance operation for second quarter 2009.

In addition to merger integration, we continued to invest for long-term growth throughout the Company, hiring in regional banking and commercial banking as we apply Wells Fargo’s model to the eastern markets, and investing in technology to improve service across our franchise. We converted 87 Wachovia

banking stores in California in second quarter 2010 and opened 13 banking stores in the quarter for a retail network total of 6,445 stores.

INCOME TAX EXPENSE

Our effective income tax rate was 33.1% in second quarter 2010, up from 31.8% in second quarter 2009, and was 34.2% for the first half of 2010, up from 32.8% for the first half of 2009. The increase for the first half of 2010 was partly due to additional tax expense in 2010 related to the new health care legislation and fewer favorable settlements with tax authorities.

OPERATING SEGMENT RESULTS

We have three lines of business for management reporting: Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement. We define our operating segments by product and customer. Our management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with similar information for other financial services companies.

The table below and the following discussion present our results by operating segment. For a more complete description of our operating segments, including additional financial information and the underlying management accounting process, see Note 16 (Operating Segments) to Financial Statements in this Report.

OPERATING SEGMENT RESULTS — HIGHLIGHTS



									Wealth, Brokerage
	Community Banking				Wholesale Banking				and Retirement
(in billions)	2010		2009		2010		2009		2010		2009

Quarter ended June 30,
Revenue	$	13.7		15.2		5.7		5.2		2.9		2.8
Net income		1.8		2.1		1.4		1.1		0.3		0.3

Average loans		539.1		565.8		223.4		258.4		42.6		46.0
Average core deposits		533.4		565.6		161.5		137.4		121.5		113.5

Six months ended June 30,
Revenue	$	27.8		29.6		11.0		10.1		5.8		5.3
Net income		3.2		4.0		2.6		2.2		0.6		0.4

Average loans		547.1		566.8		227.8		268.3		43.2		46.3
Average core deposits		532.8		560.3		161.2		138.5		121.3		108.2

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

Community Banking’s net income decreased 14% to $1.8 billion in second quarter 2010 from $2.1 billion a year ago. Revenue decreased to $13.7 billion and $27.8 billion in the second quarter and first half of 2010, respectively, from $15.2 billion and $29.6 billion for the same periods a year ago. Net interest income decreased $840 million, or 9%, in second quarter 2010 from a year ago driven by the planned reduction in certain liquidating loan portfolios. Average loans decreased $26.7 billion, or 5%, in second quarter 2010 from a year ago, due to the run-off of liquidating loan portfolios and low demand. Average core deposits decreased $32.2 billion in second quarter 2010 from a year ago, primarily due to

$57 billion of higher cost Wachovia CDs maturing, partially offset by $31 billion of largely lower-cost CDs retained, and growth in customer deposits. Noninterest income decreased $671 million, or 11%, driven primarily by lower mortgage banking income. The provision for loan losses decreased $946 million, or 22%, due to lower net charge-offs and a $389 million credit reserve release in second quarter 2010 compared with a $479 million credit reserve build a year ago. Noninterest expense decreased $211 million, or 3%, due to the FDIC special assessment in second quarter 2009 and Wachovia merger-related cost savings.

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

Wholesale Banking’s net income of $1.4 billion in second quarter 2010 was up 32% from second quarter 2009. Net income increased to $2.6 billion for the first half of 2010 from $2.2 billion a year ago. Wholesale banking results for second quarter 2010 included $495 million in commercial PCI loan resolutions, substantially all of which was recognized in net interest income, due to success in selling or settling commercial PCI loans. Net interest income of $3.0 billion in second quarter 2010 increased 21% from $2.5 billion a year ago, due to the commercial PCI loan resolutions, offset by lower average loans. Average loans of $223.4 billion declined 14% from second quarter 2009 driven by declines across most lending areas. Average core deposits of $161.5 billion in second quarter 2010 increased 18% from $137.4 billion a year ago driven by growth in both interest-bearing and non-interest bearing deposits primarily in global financial institutions, government and institutional banking and commercial banking. The provision for credit losses declined $112 million from second quarter 2009. The decrease included a $111 million reserve release in the second quarter 2010 compared with a $162 million credit reserve build a year ago. Noninterest income of $2.7 billion in second quarter 2010 decreased 4% from $2.8 billion a year ago. The decline was driven primarily by lower capital markets related trading results as well as lower investment banking revenues. Noninterest expense of $2.8 billion in second quarter 2010 increased 1% from a year ago as higher legal and foreclosed asset expenses were partially offset by lower personnel expense and FDIC assessments.

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

Wealth, Brokerage and Retirement’s net income increased 5% to $270 million in second quarter 2010 from $258 million a year ago. Net income increased to $552 million in the first half of 2010, up from $434 million a year ago. Revenue increased to $2.9 billion and $5.8 billion in the second quarter and first half of 2010, respectively, from $2.8 billion and $5.3 billion a year ago. Net interest income increased 7% to $684 million from $637 million a year ago, predominantly due to higher corporate investment allocation. Average loans decreased 7% to $42.6 billion in second quarter 2010 from $46.0 billion a year ago. The provision for credit losses decreased $30 million to $81 million in second quarter 2010 from $111 million a year ago, primarily due to second quarter 2009 reserve build. Noninterest expense

increased $50 million, 2%, to $2.4 billion in second quarter 2010 from $2.3 billion a year ago predominantly due to higher broker commissions on increased production.

BALANCE SHEET ANALYSIS

During second quarter 2010, our total assets, loans and core deposits each decreased slightly from December 31, 2009, but the strength of our business model continued to produce high rates of internal capital generation as reflected in our improved capital ratios. As a percentage of total risk-weighted assets, Tier 1 capital increased to 10.5%, total capital to 14.5%, Tier 1 leverage to 8.7% and Tier 1 common equity to 7.6% at June 30, 2010, up from 9.3%, 13.3%, 7.9% and 6.5%, respectively, at December 31, 2009. The Company purchased $540 million of warrants from the U.S. Treasury during second quarter 2010, which reduced the Tier 1 common ratio by approximately 5 basis points. The loan portfolio is now predominantly funded with core deposits and we have significant capacity to add higher yielding long-term mortgage-backed securities (MBS) for future revenue and earnings growth.

The following sections provide additional information about the major components of our balance sheet. Capital is discussed in the “Capital Management” section of this Report.

SECURITIES AVAILABLE FOR SALE

June 30, 2010

December 31, 2009

Net

Net

unrealized

Fair

unrealized

Fair

(in billions)

Cost

gain

value

Cost

gain

value

Debt securities available for sale

144.8

8.0

152.8

162.3

4.8

167.1

Marketable equity securities

4.5

0.6

5.1

4.8

0.8

5.6

Total securities available for sale

149.3

8.6

157.9

167.1

5.6

172.7

Securities available for sale consist of both debt and marketable equity securities. We hold debt securities available for sale primarily for liquidity, interest rate risk management and long-term yield enhancement. Accordingly, this portfolio consists primarily of very liquid, high-quality federal agency debt and privately issued MBS. The total net unrealized gains on securities available for sale of $8.6 billion at June 30, 2010, were up from $5.6 billion at December 31, 2009, due to a general decline in long-term yields and narrowing of credit spreads.

Comparative detail of average balances of securities available for sale is provided in the table under “Earnings Performance — Net Interest Income” earlier in this Report.

We analyze securities for other-than-temporary impairment (OTTI) on a quarterly basis, or more often if a potential loss-triggering event occurs. The initial indication of OTTI for both debt and equity securities is a decline in the market value below the amount recorded for an investment, and the severity and duration of the decline. In determining whether an impairment is other than temporary, we consider the length of time and the extent to which the market value has been below cost, recent events specific to the issuer, including investment downgrades by rating agencies and economic conditions within its industry, and whether it is more likely than not that we will be required to sell the security before a recovery in value.

At June 30, 2010, we had approximately $6 billion of investments in securities, primarily municipal bonds, which are guaranteed against loss by bond insurers. These securities are predominantly investment grade and were generally underwritten in accordance with our own investment standards prior to the determination to purchase, without relying on the bond insurer’s guarantee in making the investment

decision. These securities will continue to be monitored as part of our on-going impairment analysis of our securities available for sale, but are expected to perform, even if the rating agencies reduce the credit rating of the bond insurers.

The weighted-average expected maturity of debt securities available for sale was 5.0 years at June 30, 2010. Since 69% of this portfolio is MBS, the expected remaining maturity may differ from contractual maturity because borrowers generally have the right to prepay obligations before the underlying mortgages mature. The estimated effect of a 200 basis point increase or decrease in interest rates on the fair value and the expected remaining maturity of the MBS available for sale are shown in the following table.

MORTGAGE-BACKED SECURITIES — INTEREST RATE SENSITIVITY ANALYSIS



						Expected
						remaining
	Fair		Net unrealized			maturity
(in billions)	value		gains (losses)			(in years)

At June 30, 2010	$	105.1		6.2			3.7
At June 30, 2010, assuming a 200 basis point:
Increase in interest rates		97.3		(1.6	)		5.6
Decrease in interest rates		109.3		10.4			2.9

See Note 4 (Securities Available for Sale) to Financial Statements in this Report for securities available for sale by security type.

LOAN PORTFOLIO

June 30, 2010

December 31, 2009

All

All

PCI

other

PCI

other

(in millions)

loans

Total

loans

Total

Commercial and commercial real estate:

Commercial

1,113

144,971

146,084

1,911

156,441

158,352

Real estate mortgage

3,487

96,139

99,626

4,137

93,390

97,527

Real estate construction

4,194

26,685

30,879

5,207

31,771

36,978

Lease financing

—

13,492

—

14,210

Total commercial and commercial real estate

8,794

281,287

290,081

11,255

295,812

307,067

Consumer:

Real estate 1-4 family first mortgage

35,972

197,840

233,812

38,386

191,150

229,536

Real estate 1-4 family junior lien mortgage

290

101,037

101,327

331

103,377

103,708

Credit card

—

22,086

—

24,003

Other revolving credit and installment

—

88,485

—

89,058

Total consumer

36,262

409,448

445,710

38,717

407,588

446,305

Foreign

1,457

29,017

30,474

1,733

27,665

29,398

Total loans

46,513

719,752

766,265

51,705

731,065

782,770

A discussion of average loan balances and a comparative detail of average loan balances is included in “Earnings Performance — Net Interest Income” earlier in this Report; period-end balances and other loan related information are in Note 5 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

As of December 31, 2008, certain of the loans acquired from Wachovia had evidence of credit deterioration since their origination, and it was probable that we would not collect all contractually required principal and interest payments. Such loans identified at the time of the acquisition were accounted for using the measurement provisions for PCI loans. PCI loans were recorded at fair value at the date of acquisition, and any related allowance for loan losses was not permitted to be carried over.

PCI loans were written down to an amount estimated to be collectible. Accordingly, such loans are not classified as nonaccrual, even though they may be contractually past due, because we expect to fully collect the new carrying values of such loans (that is, the new cost basis arising out of our purchase accounting).

A nonaccretable difference was established in purchase accounting for PCI loans to absorb losses expected at that time on those loans. Amounts absorbed by the nonaccretable difference do not affect the income statement or the allowance for credit losses. Substantially all of our commercial, CRE and foreign PCI loans are accounted for as individual loans. Conversely, Pick-a-Pay and other consumer PCI loans have been aggregated into several pools based on common risk characteristics. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Resolutions of loans may include sales of loans to third parties, receipt of payments in settlement with the borrower, or foreclosure of the collateral. Our policy is to remove an individual loan from a pool based on comparing the amount received from its resolution with its contractual amount. Any difference between these amounts is absorbed by the nonaccretable difference. This removal method assumes that the amount received from resolution approximates pool performance expectations. The remaining accretable yield balance is unaffected and any material change in remaining effective yield caused by this removal method is addressed by our quarterly cash flow evaluation process for each pool. For loans in pools that are resolved by payment in full, there is no release of the nonaccretable difference since there is no difference between the amount received at resolution and the contractual amount of the loan. In second quarter 2010, we recognized in income $506 million of nonaccretable difference related to commercial PCI loans due to payoffs and dispositions of these loans, compared with $182 million in first quarter 2010. We also transferred $1.9 billion from the nonaccretable difference to the accretable yield, of which $1.8 billion was due to sustained positive performance in the Pick-a-Pay portfolio. The increase in the accretable yield for the Pick-a-Pay portfolio had no impact on second quarter 2010 net income and is expected to be recognized as a yield adjustment to income over the remaining life of the loans, which is estimated to have a weighted-average life of eight years.

The following table provides an analysis of changes in the nonaccretable difference related to principal that is not expected to be collected for the second quarter and first half of 2010.

CHANGES IN NONACCRETABLE DIFFERENCE FOR PCI LOANS



	Commercial		,
	CRE and						Other
(in millions)	foreign			Pick-a-Pay			consumer			Total

Balance, December 31, 2008	$	10,410			26,485			4,069			40,964
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1)		(330	)		—			—			(330	)
Loans resolved by sales to third parties (2)		(86	)		—			(85	)		(171	)
Reclassification to accretable yield for loans with improving cash flows (3)		(138	)		(27	)		(276	)		(441	)
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)		(4,853	)		(10,218	)		(2,086	)		(17,157	)

Balance, December 31, 2009		5,003			16,240			1,622			22,865
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1)		(586	)		—			—			(586	)
Loans resolved by sales to third parties (2)		(102	)		—			—			(102	)
Reclassification to accretable yield for loans with improving cash flows (3)		(169	)		(2,356	)		(70	)		(2,595	)
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)		(1,223	)		(1,892	)		(263	)		(3,378	)

Balance, June 30, 2010	$	2,923			11,992			1,289			16,204



Balance, March 31, 2010	$	4,001			14,514			1,412			19,927
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1)		(440	)		—			—			(440	)
Loans resolved by sales to third parties (2)		(66	)		—			—			(66	)
Reclassification to accretable yield for loans with improving cash flows (3)		(77	)		(1,807	)		(43	)		(1,927	)
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)		(495	)		(715	)		(80	)		(1,290	)

Balance, June 30, 2010	$	2,923			11,992			1,289			16,204


(1)		Release of the nonaccretable difference for settlement with borrower, on individually accounted PCI loans, increases interest income in the period of settlement. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations.
(2)		Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale.
(3)		Reclassification of nonaccretable difference for increased cash flow estimates to the accretable yield will result in increasing income and thus the rate of return realized. Amounts reclassified to accretable yield are expected to be probable of realization over the estimated remaining life of the loan.
(4)		Write-downs to net realizable value of PCI loans are charged to the nonaccretable difference when severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.

Since the Wachovia acquisition, we have released $4.2 billion in nonaccretable difference, including $3.0 billion transferred from the nonaccretable difference to the accretable yield and $1.2 billion released through loan resolutions. We provided $1.2 billion in the allowance for credit losses in excess of the initial expected levels on certain PCI loans; the net result is a $3.0 billion improvement in our initial projected losses on PCI loans. At June 30, 2010, the allowance for credit losses in excess of initial expected levels on certain PCI loans was $225 million. The following table analyzes the actual and projected loss results on PCI loans since the acquisition of Wachovia on December 31, 2008, through June 30, 2010.



	Commercial		,
	CRE and					Other
(in millions)	foreign			Pick-a-Pay		consumer			Total

Release of unneeded nonaccretable difference due to:
Loans resolved by settlement with borrower (1)	$	916			—		—			916
Loans resolved by sales to third parties (2)		188			—		85			273
Reclassification to accretable yield for loans with improving cash flows (3)		307			2,383		346			3,036

Total releases of nonaccretable difference due to better than expected losses		1,411			2,383		431			4,225
Provision for worse than originally expected losses (4)		(1,226	)		—		(29	)		(1,255	)

Actual and projected losses on PCI loans better (worse) than originally expected	$	185			2,383		402			2,970


(1)		Release of the nonaccretable difference for settlement with borrower, on individually accounted PCI loans, increases interest income in the period of settlement. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations.
(2)		Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale.
(3)		Reclassification of nonaccretable difference for increased cash flow estimates to the accretable yield will result in increasing income and thus the rate of return realized. Amounts reclassified to accretable yield are expected to be probable of realization over the estimated remaining life of the loan.
(4)		Provision for additional losses recorded as a charge to income, when it is estimated that the expected cash flows for a PCI loan or pool of loans have decreased subsequent to the acquisition.

For further information on PCI loans, see Note 1 (Summary of Significant Accounting Policies — Loans) to Financial Statements in the 2009 Form 10-K and Note 5 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

DEPOSITS

Deposits totaled $815.6 billion at June 30, 2010, compared with $824.0 billion at December 31, 2009. Comparative detail of average deposit balances is provided in the table under “Earnings Performance — Net Interest Income” earlier in this Report. Total core deposits were $758.7 billion at June 30, 2010, down from $780.7 billion at December 31, 2009.



	June 30		,	Dec. 31		,
(in millions)	2010			2009			% Change

Noninterest-bearing	$	175,013			181,356			(3	)%
Interest-bearing checking		61,195			63,225			(3	)
Market rate and other savings		405,412			402,448			1
Savings certificates		88,117			100,857			(13	)
Foreign deposits (1)		28,943			32,851			(12	)

Core deposits		758,680			780,737			(3	)
Other time and savings deposits		20,861			16,142			29
Other foreign deposits		36,082			27,139			33

Total deposits	$	815,623			824,018			(1	)


(1)		Reflects Eurodollar sweep balances included in core deposits.

OFF-BALANCE SHEET ARRANGEMENTS

In the ordinary course of business, we engage in financial transactions that are not recorded in the balance sheet, or may be recorded in the balance sheet in amounts that are different from the full contract or notional amount of the transaction. These transactions are designed to (1) meet the financial needs of customers, (2) manage our credit, market or liquidity risks, (3) diversify our funding sources, and/or (4) optimize capital.

OFF-BALANCE SHEET TRANSACTIONS WITH UNCONSOLIDATED ENTITIES

In the normal course of business, we enter into various types of on- and off-balance sheet transactions with special purpose entities (SPEs), which are corporations, trusts or partnerships that are established for a limited purpose. Historically, the majority of SPEs were formed in connection with securitization transactions. For more information on securitizations, including sales proceeds and cash flows from securitizations, see Note 7 (Securitizations and Variable Interest Entities) to Financial Statements in this Report.

NEWLY CONSOLIDATED VIE ASSETS AND LIABILITIES

Effective January 1, 2010, we adopted new consolidation accounting guidance and, accordingly, consolidated certain VIEs that were not included in our consolidated financial statements at December 31, 2009. On January 1, 2010, we recorded the assets and liabilities of the newly consolidated variable interest entities (VIEs) and derecognized our existing interests in those VIEs. We also recorded a $183 million increase to beginning retained earnings as a cumulative effect adjustment and recorded a $173 million increase to other comprehensive income (OCI).

The following table presents the net incremental assets recorded on our balance sheet by structure type upon adoption of new consolidation accounting guidance.



	Incremental
	assets as of
(in millions)	Jan. 1, 2010

Structure type:
Residential mortgage loans — nonconforming (1)	$	11,479
Commercial paper conduit		5,088
Other		2,002

Total	$	18,569


(1)		Represents certain of our residential mortgage loans that are not guaranteed by GSEs (“nonconforming”).

In accordance with the transition provisions of the new consolidation accounting guidance, we initially recorded newly consolidated VIE assets and liabilities at a basis consistent with our accounting for respective assets at their amortized cost basis, except for those VIEs for which the fair value option was elected. The carrying amount for loans approximate the outstanding unpaid principal balance, adjusted for allowance for loan losses. Short-term borrowings and long-term debt approximate the outstanding par amount due to creditors.

Upon adoption of new consolidation accounting guidance on January 1, 2010, we elected fair value option accounting for certain nonconforming residential mortgage loan securitization VIEs. This election requires us to recognize the VIE’s eligible assets and liabilities on the balance sheet at fair value with changes in fair value recognized in earnings. Such eligible assets and liabilities consisted primarily of loans and long-term debt, respectively. The fair value option was elected for those newly consolidated

VIEs for which our interests, prior to January 1, 2010, were predominantly carried at fair value with changes in fair value recorded to earnings. Accordingly, the fair value option was elected to effectively continue fair value accounting through earnings for those interests. Conversely, fair value option was not elected for those newly consolidated VIEs that did not share these characteristics. At January 1, 2010, the fair value of loans and long-term debt for which the fair value option was elected was $1.0 billion and $1.0 billion, respectively. The incremental impact of electing fair value option (compared to not electing) on the cumulative effect adjustment to retained earnings was an increase of $15 million.

RISK MANAGEMENT

All financial institutions must manage and control a variety of business risks that can significantly affect their financial performance. Key among these are credit, asset/liability and market risk.

For further discussion about how we manage these risks, see pages 54—71 of our 2009 Form 10-K. The discussion that follows is intended to provide an update on these risks.

CREDIT RISK MANAGEMENT

Our credit risk management process is governed centrally, but provides for decentralized credit management and accountability by our lines of business. Our overall credit process includes comprehensive credit policies, judgmental or statistical credit underwriting, frequent and detailed risk measurement and modeling, extensive credit training programs, and a continual loan review and audit process. In addition, regulatory examiners review and perform detailed tests of our credit underwriting, loan administration and allowance processes. For more information on our credit risk management process, please refer to page 54 in our 2009 Form 10-K.

Credit Quality Overview

In connection with first quarter 2010 results, we said we believed quarterly credit losses peaked in fourth quarter 2009 and provision expense peaked in third quarter 2009. The significant reduction in credit losses in second quarter 2010 confirmed our prior outlook and we have seen credit quality improve earlier and to a greater extent than we had previously expected. The continued improvement in credit performance is a result of a slowly improving economy coupled with actions taken by the Company over the past several years to improve underwriting standards, mitigate losses and exit portfolios with unattractive credit metrics.

•		Quarterly credit losses declined 16% to $4.5 billion in second quarter 2010 from $5.3 billion in first quarter 2010. This improvement in losses was broad based across the consumer portfolios, with reduced losses in the home equity, Wells Fargo Financial, Pick-a-Pay, consumer lines and loans, auto dealer services and credit card portfolios.
•		Losses in the commercial portfolio continued to improve from the higher levels experienced last year, including a 10% linked-quarter reduction in commercial real estate losses.
•		We also saw improvement in early indicators of credit quality, with improved 30 day delinquencies in many portfolios, including Business Direct, credit card, home equity, student lending and Wells Fargo Home Mortgage.
•		Based on declining losses and improved credit quality trends, the provision for credit losses of $4.0 billion was $500 million less than net charge-offs in second quarter 2010. Absent significant deterioration in the economy, we currently expect future reductions in the allowance for loan losses.

Measuring and monitoring our credit risk is an ongoing process that tracks delinquencies, collateral values, economic trends by geographic areas, loan-level risk grading for certain portfolios (typically commercial) and other indications of risk to loss. Our credit risk monitoring process is designed to enable early identification of developing risk to loss and to support our determination of an adequate allowance for loan losses. During the current economic cycle our monitoring and resolution efforts have focused on loan portfolios exhibiting the highest levels of risk including mortgage loans supported by real estate (both consumer and commercial), junior lien, commercial, credit card and subprime portfolios. The following sections include additional information regarding each of these loan portfolios and their relevant concentrations and credit quality performance metrics.

The following table identifies our non-strategic and liquidating loan portfolios as of June 30, 2010, and December 31, 2009.

NON-STRATEGIC AND LIQUIDATING LOAN PORTFOLIOS



	Outstanding balances
	June 30		,	Dec. 31		,
(in billions)	2010			2009

Commercial and commercial real estate PCI loans (1)	$	8.8			11.3
Pick-a-Pay mortgage (1)		80.2			85.2
Liquidating home equity		7.6			8.4
Legacy Wells Fargo Financial indirect auto		8.3			11.3
Legacy Wells Fargo Financial debt consolidation (2)		20.4			22.4

Total non-strategic and liquidating loan portfolios	$	125.3			138.6


(1)		Net of purchase accounting adjustments related to PCI loans.
(2)		In July 2010, we announced the restructuring of our Wells Fargo Financial division and exiting the origination of non-prime portfolio mortgage loans.

Commercial Real Estate (CRE)

The CRE portfolio consists of both CRE mortgages and CRE construction loans. The combined CRE loans outstanding totaled $130.5 billion at June 30, 2010, or 17% of total loans. CRE construction loans totaled $30.9 billion at June 30, 2010, or 4% of total loans. Permanent CRE loans totaled $99.6 billion at June 30, 2010, or 13% of total loans. The portfolio is diversified both geographically and by property type. The largest geographic concentrations are found in California and Florida, which represented 22% and 11% of the total CRE portfolio, respectively. By property type, the largest concentrations are office buildings at 23% and industrial/warehouse at 12% of the portfolio.

The underwriting of CRE loans primarily focuses on cash flows and creditworthiness, and not solely collateral valuations. To identify and manage newly emerging problem CRE loans, we employ a high level of surveillance and regular customer interaction to understand and manage the risks associated with these assets, including regular loan reviews and appraisal updates. As issues are identified, management is engaged and dedicated workout groups are in place to manage problem assets. At June 30, 2010, the remaining balance of PCI CRE loans totaled $7.7 billion, down from a balance of $19.3 billion at December 31, 2008, reflecting the reduction resulting from loan resolutions and write-downs.

The following table summarizes CRE loans by state and property type with the related nonaccrual totals. At June 30, 2010, the highest concentration of non-PCI CRE loans by state was $27.3 billion in California, more than double the next largest state concentration, and the related nonaccrual loans totaled about $1.7 billion, or 6.2% of CRE loans in California. Office buildings, at $27.9 billion of non-PCI loans, were the largest property type concentration, almost double the next largest, and the related nonaccrual loans totaled $1.5 billion, or 5.3% of CRE loans for office buildings. Of CRE mortgage loans (excluding CRE construction loans), 42% related to owner-occupied properties at June 30, 2010. Nonaccrual loans totaled 6.6% of the non-PCI outstanding balance at June 30, 2010.

CRE LOANS BY STATE AND PROPERTY TYPE

June 30, 2010

Real estate mortgage

Real estate construction

Total

% of

Nonaccrual

Outstanding

Nonaccrual

Outstanding

Nonaccrual

Outstanding

total

(in millions)

loans

balance (1)

loans

balance (1)

loans

balance (1)

loans

By state:

PCI loans:

Florida

—

561

—

886

—

1,447

California

—

731

—

258

—

989

North Carolina

—

199

—

481

—

680

Georgia

—

260

—

382

—

642

Virginia

—

227

—

391

—

618

Other

—

1,509

—

1,796

—

3,305

(2)

Total PCI loans

—

3,487

—

4,194

—

7,681

All other loans:

California

1,109

22,987

593

4,311

1,702

27,298

Florida

853

9,667

475

2,754

1,328

12,421

Texas

284

6,549

311

2,650

595

9,199

North Carolina

226

4,891

255

1,669

481

6,560

Georgia

303

3,850

111

1,149

414

4,999

Virginia

3,075

184

1,791

241

4,866

Arizona

195

3,744

342

937

537

4,681

New York

3,940

1,221

5,161

New Jersey

2,814

702

144

3,516

Colorado

3,031

777

181

3,808

Other

1,428

31,591

975

8,724

2,403

40,315

(3)

Total all other loans

4,689

96,139

3,429

26,685

8,118

122,824

Total

4,689

99,626

3,429

30,879

8,118

130,505

By property:

PCI loans:

Apartments

—

709

—

1,004

—

1,713

Office buildings

—

1,148

—

376

—

1,524

1-4 family land

—

242

—

852

—

1,094

Retail (excluding shopping center)

—

437

—

167

—

604

Land (excluding 1-4 family)

—

576

—

597

Other

—

930

—

1,219

—

2,149

Total PCI loans

—

3,487

—

4,194

—

7,681

All other loans:

Office buildings

1,179

24,545

309

3,357

1,488

27,902

Industrial/warehouse

674

13,519

1,129

767

14,648

Real estate — other

601

13,215

114

904

715

14,119

Apartments

283

7,770

330

4,482

613

12,252

Retail (excluding shopping center)

599

10,210

158

1,192

757

11,402

Land (excluding 1-4 family)

343

778

7,931

799

8,274

Shopping center

308

6,312

241

1,959

549

8,271

Hotel/motel

375

5,553

105

904

480

6,457

1-4 family land

114

314

685

2,695

799

3,009

Institutional

2,721

229

124

2,950

Other

450

11,637

577

1,903

1,027

13,540

Total all other loans

4,689

96,139

3,429

26,685

8,118

122,824

Total

4,689

99,626

(4)

3,429

30,879

8,118

130,505


*		Less than 1%
(1)		For PCI loans amounts represent carrying value.
(2)		Includes 37 states; no state had loans in excess of $570 million.
(3)		Includes 40 states; no state had loans in excess of $3.1 billion.
(4)		Includes $41.8 billion of loans to owner-occupants where 51% or more of the property is used in the conduct of their business.

(continued on following page)

(continued from previous page)



	December 31, 2009
	Real estate mortgage					Real estate construction				Total					% of
	Nonaccrual		Outstanding			Nonaccrual		Outstanding		Nonaccrual		Outstanding			total
(in millions)	loans		balance (1)			loans		balance (1)		loans		balance (1)			loans

By state:
PCI loans:
Florida	$	—		629			—		1,115		—		1,744			*	%
California		—		995			—		271		—		1,266			*
North Carolina		—		150			—		618		—		768			*
Georgia		—		226			—		523		—		749			*
Virginia		—		219			—		480		—		699			*
Other		—		1,918			—		2,200		—		4,118	(5)		*

Total PCI loans		—		4,137			—		5,207		—		9,344			1

All other loans:
California		1,132		22,739			874		5,024		2,006		27,763			4
Florida		563		9,899			374		3,227		937		13,126			2
Texas		225		6,098			256		3,054		481		9,152			1
North Carolina		179		4,983			161		2,079		340		7,062			*
Georgia		207		3,809			127		1,507		334		5,316			*
Virginia		53		3,080			117		1,974		170		5,054			*
New York		53		3,591			49		1,456		102		5,047			*
Arizona		158		3,810			200		1,193		358		5,003			*
New Jersey		66		2,904			23		768		89		3,672			*
Colorado		78		2,252			110		875		188		3,127			*
Other		982		30,225			1,022		10,614		2,004		40,839	(6)		5

Total all other loans		3,696		93,390			3,313		31,771		7,009		125,161			16

Total	$	3,696		97,527			3,313		36,978		7,009		134,505			17	%

By property:
PCI loans:
Apartments	$	—		810			—		1,300		—		2,110			*	%
Office buildings		—		1,443			—		399		—		1,842			*
1-4 family land		—		270			—		1,076		—		1,346			*
1-4 family structure		—		96			—		693		—		789			*
Land (excluding 1-4 family)		—		—			—		759		—		759			*
Other		—		1,518			—		980		—		2,498			*

Total PCI loans		—		4,137			—		5,207		—		9,344			1

All other loans:
Office buildings		887		24,688			188		4,005		1,075		28,693			4
Industrial/warehouse		508		13,643			36		1,281		544		14,924			2
Real estate — other		550		13,563			102		1,105		652		14,668			2
Apartments		267		7,102			254		5,138		521		12,240			2
Retail (excluding shopping center)		597		10,457			108		1,327		705		11,784			2
Land (excluding 1-4 family)		9		262			778		8,943		787		9,205			1
Shopping center		204		5,912			210		2,398		414		8,310			1
Hotel/motel		208		5,216			123		1,160		331		6,376			*
1-4 family land		77		232			764		3,156		841		3,388			*
1-4 family structure		60		1,065			689		2,199		749		3,264			*
Other		329		11,250			61		1,059		390		12,309			2

Total all other loans		3,696		93,390			3,313		31,771		7,009		125,161			16

Total	$	3,696		97,527	(7)		3,313		36,978		7,009		134,505			17	%


(5)		Includes 38 states; no state had loans in excess of $605 million.
(6)		Includes 40 states; no state had loans in excess of $3.0 billion.
(7)		Includes $42.1 billion of loans to owner-occupants where 51% or more of the property is used in the conduct of their business.

Commercial Loans and Lease Financing

For purposes of portfolio risk management, we aggregate commercial loans and lease financing according to market segmentation and standard industry codes. The following table summarizes commercial loans and lease financing by industry with the related nonaccrual totals. This portfolio has experienced less credit deterioration than our CRE portfolio as evidenced by its lower nonaccrual rate of 2.5% compared with 6.2% for the CRE portfolios. We believe this portfolio is well underwritten and is diverse in its risk with relatively similar concentrations across several industries. A majority of our commercial loans and lease financing portfolio is secured by short-term assets, such as accounts receivable, inventory and securities, as well as long-lived assets, such as equipment and other business assets. Our credit risk management process for this portfolio primarily focuses on a customer’s ability to repay the loan through their cash flow. Generally, collateral securing this portfolio represents a secondary source of repayment.

COMMERCIAL LOANS AND LEASE FINANCING BY INDUSTRY



	June 30, 2010								December 31, 2009
						% of								% of
	Nonaccrual		Outstanding			total			Nonaccrual		Outstanding			total
(in millions)	loans		balance (1)			loans			loans		balance (1)			loans

PCI loans:
Media	$	—		159			*	%	$	—		314			*	%
Real estate investment trust		—		92			*			—		351			*
Insurance		—		108			*			—		118			*
Investors		—		113			*			—		140			*
Airlines		—		73			*			—		87			*
Technology		—		69			*			—		72			*
Other		—		499	(2)		*			—		829	(2)		*

Total PCI loans		—		1,113			*			—		1,911			*

All other loans:
Financial institutions		141		11,529			2			496		11,111			1
Cyclical retailers		82		8,374			1			71		8,188			1
Healthcare		112		8,125			1			88		8,397			1
Food and beverage		78		7,859			1			77		8,316			1
Oil and gas		219		7,863			1			202		8,464			1
Industrial equipment		96		6,503			*			119		7,524			*
Business services		138		5,341			*			99		6,722			*
Transportation		61		6,177			*			31		6,469			*
Utilities		10		5,216			*			15		5,752			*
Real estate other		141		5,767			*			167		6,570			*
Technology		42		5,486			*			72		5,489			*
Hotel/restaurant		224		4,693			*			195		5,050			*
Other		2,662		75,530	(3)		10			2,936		82,599	(3)		11

Total all other loans		4,006		158,463			21			4,568		170,651			22

Total	$	4,006		159,576			21	%	$	4,568		172,562			22	%


*		Less than 1%
(1)		For PCI loans amounts represent carrying value.
(2)		No other single category had loans in excess of $66 million at June 30, 2010, or $110 million (leisure) at December 31, 2009.
(3)		No other single category had loans in excess of $4.7 billion at June 30, 2010, or $5.8 billion (public administration) at December 31, 2009. The next largest categories included public administration, investors, media, non-residential construction and leisure.

During the recent credit cycle, we have experienced an increase in requests for extensions of construction and commercial loans which have repayment guarantees. All extensions are granted based on a re-underwriting of the loan and our assessment of the borrower’s ability to perform under the agreed-upon terms. At the time of extension, borrowers are generally performing in accordance with the contractual loan terms. Extension terms generally range from six to thirty-six months and may require that the borrower provide additional economic support in the form of partial repayment, amortization or additional collateral or guarantees. In cases where the value of collateral or financial condition of the

borrower is insufficient to repay our loan, we may rely upon the support of an outside repayment guarantee in providing the extensions. In considering the impairment status of the loan, we evaluate the collateral and future cash flows as well as the anticipated support of any repayment guarantor. When performance under a loan is not reasonably assured, including the performance of the guarantor, we charge-off all or a portion of a loan based on the fair value of the collateral securing the loan.

Our ability to seek performance under the guarantee is directly related to the guarantor’s creditworthiness, capacity and willingness to perform. We evaluate a guarantor’s capacity and willingness to perform on an annual basis, or more frequently as warranted. Our evaluation is based on the most current financial information available and is focused on various key financial metrics, including net worth, leverage, and current and future liquidity. We consider the guarantor’s reputation, creditworthiness, and willingness to work with us based on our analysis as well as other lenders’ experience with the guarantor. Our assessment of the guarantor’s credit strength is reflected in our loan risk ratings for such loans. The loan risk rating is an important factor in our allowance methodology for commercial and commercial real estate loans.

Pick-a-Pay Portfolio

As part of the Wachovia acquisition, we acquired residential first mortgage and home equity loans that are very similar to the Wells Fargo core originated portfolio. We also acquired the Pick-a-Pay portfolio, which describes one of the consumer mortgage portfolios. Under purchase accounting for the Wachovia acquisition, we made purchase accounting adjustments to the Pick-a-Pay loans considered to be impaired under accounting guidance for PCI loans.

Our Pick-a-Pay portfolio had an unpaid principal balance of $97.1 billion and a carrying value of $80.2 billion at June 30, 2010. The Pick-a-Pay portfolio is a liquidating portfolio, as Wachovia ceased originating new Pick-a-Pay loans in 2008. Equity lines of credit and closed-end second liens associated with Pick-a-Pay loans are reported in the Home Equity core portfolio. The Pick-a-Pay portfolio includes loans that offer payment options (Pick-a-Pay option payment loans), loans that were originated without the option payment feature, loans that no longer offer the option feature as a result of our modification efforts since the acquisition, and loans where the customer voluntarily converted to a fixed-rate product. The following table provides balances over time related to the types of loans included in the portfolio.



	June 30, 2010					December 31, 2009					December 31, 2008
(in millions)	Outstandings		% of total			Outstandings		% of total			Outstandings		% of total

Option payment loans	$	63,974		66	%	$	73,060		70	%	$	101,297		86	%
Non-option payment ARMs and fixed-rate loans		13,286		14			14,178		14			15,978		14
Loan modifications — Pick-a-Pay		19,851		20			16,420		16			—		—

Total unpaid principal balance	$	97,111		100	%	$	103,658		100	%	$	117,275		100	%

Total carrying value	$	80,208				$	85,238				$	95,315

PCI loans in the Pick-a-Pay portfolio had an unpaid principal balance of $51.0 billion and a carrying value of $34.9 billion at June 30, 2010. The carrying value of the PCI loans is net of purchase accounting write-downs to reflect their fair value at acquisition. Upon acquisition, we recorded a $22.4 billion write-down in purchase accounting on Pick-a-Pay loans that were impaired. Due to the sustained positive performance observed on the Pick-a-Pay portfolio compared to the original acquisition estimates, we reclassified $1.8 billion from the nonaccretable difference to the accretable yield in second quarter 2010 for a total of $2.4 billion that has been reclassified since the Wachovia merger. This improvement in the lifetime credit outlook for this portfolio is primarily attributable to the significant modification efforts and the observed emergence of performance on these modifications as well as the portfolio’s delinquency

stabilization over the last several months. This improvement in the credit outlook will be realized over the remaining life of the portfolio, which is estimated to have a weighted average life of approximately eight years.

Pick-a-Pay option payment loans may be adjustable or fixed rate. They are home mortgages on which the customer has the option each month to select from among four payment options: (1) a minimum payment as described below, (2) an interest-only payment, (3) a fully amortizing 15-year payment, or (4) a fully amortizing 30-year payment. The minimum monthly payment for substantially all of our Pick-a-Pay loans is reset annually. The new minimum monthly payment amount generally increases by no more than 7.5% of the prior minimum monthly payment. The minimum payment may not be sufficient to pay the monthly interest due and in those situations a loan on which the customer has made a minimum payment is subject to “negative amortization,” where unpaid interest is added to the principal balance of the loan. The amount of interest that has been added to a loan balance is referred to as “deferred interest.” Total deferred interest was $3.2 billion at June 30, 2010, down from $3.7 billion at December 31, 2009, due to loan modification efforts as well as falling interest rates resulting in the minimum payment option covering the interest and some principal on many loans. At June 30, 2010, approximately 64% of customers choosing the minimum payment option did not defer interest. In situations where the minimum payment is greater than the interest-only option, the customer has only three payment options available: (1) a minimum required payment, (2) a fully amortizing 15-year payment, or (3) a fully amortizing 30-year payment.

Deferral of interest on a Pick-a-Pay loan may continue as long as the loan balance remains below a pre-defined principal cap, which is based on the percentage that the current loan balance represents to the original loan balance. Loans with an original loan-to-value (LTV) ratio equal to or below 85% have a cap of 125% of the original loan balance, and these loans represent substantially all the Pick-a-Pay portfolio. Loans with an original LTV ratio above 85% have a cap of 110% of the original loan balance. Most of the Pick-a-Pay loans on which there is a deferred interest balance re-amortize (the monthly payment amount is “recast”) on the earlier of the date when the loan balance reaches its principal cap, or the 10-year anniversary of the loan. For a small population of Pick-a-Pay loans, the recast occurs at the five-year anniversary. After a recast, the customers’ new payment terms are reset to the amount necessary to repay the balance over the remainder of the original loan term.

Due to the terms of this Pick-a-Pay portfolio, we believe there is minimal recast risk over the next three years. Based on assumptions of a flat rate environment, if all eligible customers elect the minimum payment option 100% of the time and no balances prepay, we would expect the following balances of option payment loans to recast based on reaching the principal cap: $2 million in the remaining half of 2010, $1 million in 2011 and $3 million in 2012. In second quarter 2010, no option payment loans recast based on reaching the principal cap. In addition, we would expect the following balances of option payment loans to start fully amortizing due to reaching their recast anniversary date and also having a payment change at the recast date greater than the annual 7.5% reset: $12 million in the remaining half of 2010, $37 million in 2011 and $41 million in 2012. In second quarter 2010, the amount of option payment loans reaching their recast anniversary date and also having a payment change over the annual 7.5% reset was $12 million.

The following table reflects the geographic distribution of the Pick-a-Pay portfolio broken out between PCI loans and all other loans. In stressed housing markets with declining home prices and increasing delinquencies, the LTV ratio is a useful metric in predicting future real estate 1-4 family first mortgage loan performance, including potential charge-offs. Because PCI loans were initially recorded at fair value written down for expected credit losses, the ratio of the carrying value to the current collateral value for

acquired loans with credit impairment will be lower as compared with the LTV based on the unpaid principal. For informational purposes, we have included both ratios in the following table.

PICK-A-PAY PORTFOLIO (1)



	PCI loans										All other loans
								Ratio of
								carrying
	Unpaid		Current					value to			Unpaid		Current
	principal		LTV			Carrying		current			principal		LTV			Carrying
(in millions)	balance		ratio (2)			value (3)		value			balance		ratio (2)			value (3)

June 30, 2010
California	$	34,458		137	%	$	23,505		93	%	$	22,653		90	%	$	22,283
Florida		5,375		146			3,098		84			4,817		109			4,621
New Jersey		1,590		100			1,241		77			2,747		81			2,729
Texas		412		80			366		71			1,842		65			1,846
Washington		601		101			519		86			1,380		84			1,366
Other states		8,582		117			6,170		83			12,654		88			12,464

Total Pick-a-Pay loans	$	51,018				$	34,899				$	46,093				$	45,309


December 31, 2009
California	$	37,341		141	%	$	25,022		94	%	$	23,795		93	%	$	23,626
Florida		5,751		139			3,199		77			5,046		104			4,942
New Jersey		1,646		101			1,269		77			2,914		82			2,912
Texas		442		82			399		74			1,967		66			1,973
Washington		633		103			543		88			1,439		84			1,435
Other states		9,283		116			6,597		82			13,401		87			13,321

Total Pick-a-Pay loans	$	55,096				$	37,029				$	48,562				$	48,209


(1)		The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2010. The December 31, 2009 table has been revised to conform to the 2010 presentation of top five states.
(2)		The current LTV ratio is calculated as the unpaid principal balance plus the unpaid principal balance of any equity lines of credit that share common collateral divided by the collateral value. Collateral values are generally determined using automated valuation models (AVM) and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing large volumes of market data including market comparables and price trends for local market areas.
(3)		Carrying value, which does not reflect the allowance for loan losses, includes purchase accounting adjustments, which, for PCI loans are the nonaccretable difference and the accretable yield, and for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs.

To maximize return and allow flexibility for customers to avoid foreclosure, we have in place several loss mitigation strategies for our Pick-a-Pay loan portfolio. We contact customers who are experiencing difficulty and may in certain cases modify the terms of a loan based on a customer’s documented income and other circumstances.

We also have taken steps to work with customers to refinance or restructure their Pick-a-Pay loans into other loan products. For customers at risk, we offer combinations of term extensions of up to 40 years (from 30 years), interest rate reductions, forbearance of principal, interest only payments for a period of time and, in geographies with substantial property value declines, we will even offer permanent principal reductions.

In fourth quarter 2009, we rolled out the U.S. Treasury Department’s HAMP to the customers in this portfolio. As of June 30, 2010, over 15,000 HAMP applications were being reviewed by our loan servicing department and an additional 13,500 loans have been approved for the HAMP trial modification. We believe a key factor to successful loss mitigation is tailoring the revised loan payment to the customer’s sustainable income. We continually reassess our loss mitigation strategies and may adopt additional or different strategies in the future.

In second quarter 2010, we completed 7,052 proprietary and HAMP loan modifications and have completed over 64,000 modifications since acquisition. The majority of the loan modifications were

concentrated in our PCI Pick-a-Pay loan portfolio. Approximately 5,400 modification offers were proactively sent to customers in second quarter 2010. As part of the modification process, the loans are re-underwritten, income is documented and the negative amortization feature is eliminated. Most of the modifications result in material payment reduction to the customer. Because of the write-down of the PCI loans in purchase accounting, our post merger modifications to PCI Pick-a-Pay loans have not resulted in any modification-related provision for credit losses. To the extent we modify loans not in the PCI Pick-a-Pay portfolio, we establish an impairment reserve in accordance with the applicable accounting requirements for loan restructurings.

Home Equity Portfolios

The deterioration in specific segments of the legacy Wells Fargo Home Equity portfolios, which began almost three years ago, required a targeted approach to managing these assets. In fourth quarter 2007, a liquidating portfolio was identified, consisting of home equity loans generated through the wholesale channel not behind a Wells Fargo first mortgage, and home equity loans acquired through correspondents. The liquidating portion of the Home Equity portfolio was $7.6 billion at June 30, 2010, compared with $8.4 billion at December 31, 2009. The loans in this liquidating portfolio represent about 1% of total loans outstanding at June 30, 2010, and contain some of the highest risk in our $123.0 billion Home Equity portfolio, with a loss rate of 10.90% compared with 3.54% for the core portfolio. The loans in the liquidating portfolio are largely concentrated in geographic markets that have experienced the most abrupt and steepest declines in housing prices. The core portfolio was $115.3 billion at June 30, 2010, of which 97% was originated through the retail channel and approximately 19% of the outstanding balance was in a first lien position. The following table includes the credit attributes of these two portfolios. California loans represent the largest state concentration in each of these portfolios and have experienced among the highest early-term delinquency and loss rates.

HOME EQUITY PORTFOLIOS (1)



							% of loans									Loss rate
							two payments						(annualized)
	Outstanding balances						or more past due						Quarter ended
	June 30		,	Dec. 31		,	June 30		,	Dec. 31		,	June 30		,	Dec. 31		,
(in millions)	2010			2009			2010			2009			2010			2009

Core portfolio
California	$	28,819			30,264			3.67	%		4.12			4.70			6.12
Florida		12,616			12,038			4.95			5.48			6.02			6.98
New Jersey		8,416			8,379			2.45			2.50			1.84			1.51
Virginia		5,802			5,855			1.86			1.91			2.00			1.13
Pennsylvania		5,240			5,051			1.86			2.03			1.22			1.81
Other		54,439			53,811			2.73			2.85			2.96			3.04

Total (2)		115,332			115,398			3.11			3.35			3.54			3.90

Liquidating portfolio
California		2,860			3,205			7.50			8.78			15.36			17.94
Florida		366			408			8.40			9.45			14.84			19.53
Arizona		169			193			8.78			10.46			22.31			19.29
Texas		141			154			2.24			1.94			2.57			2.40
Minnesota		100			108			5.70			4.15			7.59			7.53
Other		4,003			4,361			4.35			5.06			7.22			7.33

Total		7,639			8,429			5.80			6.74			10.90			12.16

Total core and liquidating portfolios	$	122,971			123,827			3.28			3.58			4.00			4.48


(1)		Consists of real estate 1-4 family junior lien mortgages and lines of credit secured by real estate, excluding PCI loans.
(2)		Includes equity lines of credit and closed-end second liens associated with the Pick-a-Pay portfolio totaling $1.7 billion at June 30, 2010, and $1.8 billion at December 31, 2009.

Wells Fargo Financial

Wells Fargo Financial’s portfolio consists of real estate loans, substantially all of which are secured debt consolidation loans, and both prime and non-prime auto secured loans, unsecured loans and credit cards. In July 2010, we announced the restructuring of our Wells Fargo Financial division and that we are exiting the origination of non-prime portfolio mortgage loans. The remaining consumer and commercial loan products offered through Wells Fargo Financial will be realigned with those offered by our other business units and will be available through our expanded network of community banking and home mortgage stores.

Wells Fargo Financial had $23.5 billion in real estate secured loans at June 30, 2010, and $25.8 billion at December 31, 2009. Of this portfolio, $1.4 billion and $1.6 billion, respectively, was considered prime based on secondary market standards and has been priced to the customer accordingly. The remaining portfolio is non-prime but was originated with standards to reduce credit risk. These loans were originated through our retail channel with documented income, LTV limits based on credit quality and property characteristics, and risk-based pricing. In addition, the loans were originated without teaser rates, interest-only or negative amortization features. Credit losses in the portfolio have increased in the current economic environment compared with historical levels, but performance remained similar to prime portfolios in the industry with overall loss rates of 4.20% (annualized) in the first half of 2010 on the entire portfolio. At June 30, 2010, $7.8 billion of the portfolio was originated with customer FICO scores below 620, but these loans have further restrictions on LTV and debt-to-income ratios intended to limit the credit risk.

Wells Fargo Financial also had $13.4 billion in auto secured loans and leases at June 30, 2010, and $16.5 billion at December 31, 2009, of which $4.0 billion and $4.4 billion, respectively, were originated with customer FICO scores below 620. Loss rates in this portfolio were 2.76% (annualized) in the second quarter and 3.57% (annualized) in the first half of 2010 for FICO scores of 620 and above, and 3.59% (annualized) and 4.75% (annualized), respectively, for FICO scores below 620. These loans were priced based on relative risk. Of this portfolio, $8.3 billion represented loans and leases originated through its indirect auto business, a channel Wells Fargo Financial ceased using near the end of 2008.

Wells Fargo Financial had $7.2 billion in unsecured loans and credit card receivables at June 30, 2010, and $8.1 billion at December 31, 2009, of which $0.8 billion and $1.0 billion, respectively, was originated with customer FICO scores below 620. Net loss rates in this portfolio were 11.51% (annualized) in the second quarter and 11.41% (annualized) in the first half of 2010 for FICO scores of 620 and above, and 15.51% (annualized) and 15.08% (annualized), respectively, for FICO scores below 620. Wells Fargo Financial has tightened credit policies and managed credit lines to reduce exposure during the recent economic environment.

Credit Cards

Our credit card portfolio, a portion of which is included in the Wells Fargo Financial discussion above, totaled $22.1 billion at June 30, 2010, which represented 3% of our total outstanding loans and was smaller than the credit card portfolios of each of our large bank peers. Delinquencies of 30 days or more were 5.3% of credit card outstandings at June 30, 2010, down from 5.5% at December 31, 2009. Net charge-offs were 10.45% (annualized) for second quarter 2010, down from 11.17% (annualized) in first quarter 2010, reflecting previous risk mitigation efforts that included tightened underwriting and line management changes. Enhanced underwriting criteria and line management initiatives instituted in previous quarters continued to have positive effects on loss performance.

Nonaccrual Loans and Other Nonperforming Assets

The following table shows the comparative data for nonaccrual loans and other nonperforming assets (NPAs). We generally place loans on nonaccrual status when:

•		the full and timely collection of interest or principal becomes uncertain;
•		they are 90 days (120 days with respect to real estate 1-4 family first and junior lien mortgages and auto loans) past due for interest or principal (unless both well-secured and in the process of collection); or
•		part of the principal balance has been charged off and no restructuring has occurred.

Note 1 (Summary of Significant Accounting Policies — Loans) to Financial Statements in our 2009 Form 10-K describes our accounting policy for nonaccrual and impaired loans.

NONACCRUAL LOANS AND OTHER NONPERFORMING ASSETS



	June 30		,	Mar. 31		,	Dec. 31		,
(in millions)	2010			2010			2009

Nonaccrual loans:
Commercial and commercial real estate:
Commercial (includes LHFS of $12, $0 and $19)	$	3,843			4,273			4,397
Real estate mortgage		4,689			4,345			3,696
Real estate construction (includes LHFS of $7, $7 and $8)		3,429			3,327			3,313
Lease financing		163			185			171

Total commercial and commercial real estate		12,124			12,130			11,577

Consumer:
Real estate 1-4 family first mortgage (includes MHFS of $450, $412 and $339)		12,865			12,347			10,100
Real estate 1-4 family junior lien mortgage		2,391			2,355			2,263
Other revolving credit and installment		316			334			332

Total consumer		15,572			15,036			12,695

Foreign		115			135			146

Total nonaccrual loans (1)(2)		27,811			27,301			24,418

As a percentage of total loans		3.63	%		3.49			3.12
Foreclosed assets:
GNMA loans (3)	$	1,344			1,111			960
Other		3,650			2,970			2,199
Real estate and other nonaccrual investments (4)		131			118			62

Total nonaccrual loans and other nonperforming assets	$	32,936			31,500			27,639

As a percentage of total loans		4.30	%		4.03			3.53


(1)		Excludes loans acquired from Wachovia that are accounted for as PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.
(2)		See Note 5 to Financial Statements in this Report and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in our 2009 Form 10-K for further information on impaired loans.
(3)		Consistent with regulatory reporting requirements, foreclosed real estate securing Government National Mortgage Association (GNMA) loans is classified as nonperforming. Both principal and interest for GNMA loans secured by the foreclosed real estate are collectible because the GNMA loans are insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).
(4)		Includes real estate investments (contingent interest loans accounted for as investments) that would be classified as nonaccrual if these assets were recorded as loans, and nonaccrual debt securities.

Total NPAs were $32.9 billion (4.30% of total loans) at June 30, 2010, and included $27.8 billion of nonaccrual loans and $5.1 billion of foreclosed assets, real estate, and other nonaccrual investments. The growth rate in nonaccrual loans slowed in second quarter 2010, while the balance still increased from first quarter 2010 by $510 million. The growth in second quarter occurred in the real estate portfolios (commercial and residential) which consist of secured loans. Nonaccruals in all other loan portfolios were essentially flat or down. New inflows to nonaccrual loans continued to decline (down 18% linked quarter). The amount of disposed nonaccruals increased (up 12% linked quarter), but was below the level of inflows.

Typically, changes to nonaccrual loans period-over-period represent inflows for loans that reach a specified past due status, offset by reductions for loans that are charged off, sold, transferred to foreclosed properties, or are no longer classified as nonaccrual because they return to accrual status. During 2009, due to purchase accounting, the rate of growth in nonaccrual loans was higher than it would have been without PCI loan accounting because the balance of nonaccrual loans in Wachovia’s loan portfolio was approximately zero at the beginning of 2009, due to purchase accounting write-downs taken at the close of acquisition. The impact of purchase accounting on our credit data will diminish over time. In addition, we have also increased loan modifications and restructurings to assist homeowners and other borrowers in the current difficult economic cycle. This increase is expected to result in elevated nonaccrual loan levels in those portfolios which are being actively modified for longer periods because consumer nonaccrual loans that have been modified remain in nonaccrual status generally until a borrower has made six consecutive months of payments, or equivalent, inclusive of consecutive payments made prior to the modification. Loans are re-underwritten at the time of the modification in accordance with underwriting guidelines established for governmental and proprietary loan modification programs. For an accruing loan that has been modified, if the borrower has demonstrated performance under the previous terms and shows the capacity to continue to perform under the restructured terms, the loan will remain in accruing status. Otherwise, the loan will be placed in a nonaccrual status generally until the borrower has made six consecutive months of payments, or equivalent.

Loss expectations for nonaccrual loans are driven by delinquency rates, default probabilities and severities. While nonaccrual loans are not free of loss content, we believe the estimated loss exposure remaining in these balances is significantly mitigated by four factors. First, 98% of nonaccrual loans are secured. Second, losses have already been recognized on 39% of the consumer nonaccruals and 33% of commercial nonaccruals. Residential nonaccrual loans are written down to net realizable value at 180 days past due, except for loans that go into trial modification prior to going 180 days past due, which are not written down in the trial period (3 months) as long as trial payments are being made timely. Third, as of June 30, 2010, 54% of commercial nonaccrual loans were current on interest. Fourth, there are certain nonaccruals for which there are loan level reserves in the allowance, while others are covered by pool level reserves.

Commercial and CRE nonaccrual loans, net of write-downs, amounted to $12.1 billion at both June 30 and March 31, 2010. Consumer nonaccrual loans (including nonaccrual troubled debt restructurings (TDRs)) amounted to $15.6 billion at June 30, 2010, compared with $15.0 billion at March 31, 2010. The $536 million increase in nonaccrual consumer loans from March 31, 2010, represented an increase of $518 million in 1-4 family first mortgage loans and an increase of $36 million in 1-4 family junior liens. Residential mortgage nonaccrual loans increased largely due to slower disposition as quarterly inflow has remained relatively stable. Federal government programs, such as HAMP, and Wells Fargo proprietary programs, such as the Company’s Pick-a-Pay Mortgage Assistance program, require customers to provide updated documentation and complete trial repayment periods, to evidence sustained performance, before the loan can be removed from nonaccrual status. In addition, for loans in foreclosure, many states, including California and Florida where Wells Fargo has significant exposures, have enacted legislation that significantly increases the time frames to complete the foreclosure process,

meaning that loans will remain in nonaccrual status for longer periods. At the conclusion of the foreclosure process, we continue to sell real estate owned in a very timely fashion.

When a consumer real estate loan is 120 days past due, we move it to nonaccrual status and when the loan reaches 180 days past due it is our policy to write these loans down to net realizable value, except for trial modifications. Thereafter, we revalue each loan in nonaccrual status regularly and recognize additional charges if needed. Our quarterly market classification process, employed since late 2007, indicates as of June 30, 2010, that home values in most metropolitan statistical areas have stabilized. We anticipate manageable additional write-downs while properties work through the foreclosure process.

Of the $15.6 billion of consumer nonaccrual loans:

•		99% are secured, substantially all by real estate; and
•		21% have a combined LTV ratio of 80% or below.

In addition to the $15.6 billion of consumer nonaccrual loans, there were also accruing consumer TDRs of $8.2 billion at June 30, 2010. In total, there were $23.8 billion of consumer nonaccrual loans and accruing TDRs at June 30, 2010.

NPAs at June 30, 2010, included $1.3 billion of loans that are FHA insured or VA guaranteed, which are expected to have little to no loss content, and $3.7 billion of foreclosed assets, which have been written down to the value of the underlying collateral. Foreclosed assets increased $913 million, or 22%, in second quarter 2010 from the prior quarter. Of this increase, $427 million were foreclosed loans from the PCI portfolio that are now recorded as foreclosed assets. The majority of the inherent loss content in these assets has already been accounted for, and increases to this population of assets should have minimal additional impact to expected loss levels.

Given our real estate-secured loan concentrations and current economic conditions, we anticipate continuing to hold a high level of NPAs on our balance sheet. We believe the loss content in the nonaccrual loans has either already been realized or provided for in the allowance for credit losses at June 30, 2010. We remain focused on proactively identifying problem credits, moving them to nonperforming status and recording the loss content in a timely manner. We’ve increased staffing in our workout and collection organizations to ensure troubled borrowers receive the attention and help they need. See the “Risk Management — Allowance for Credit Losses” section in this Report for additional information. The performance of any one loan can be affected by external factors, such as economic or market conditions, or factors affecting a particular borrower.

Troubled Debt Restructurings (TDRs)

The following table provides information regarding the recorded investment in loans modified in TDRs.



	June 30		,	Mar. 31		,	Dec. 31		,
(in millions)	2010			2010			2009

Consumer TDRs:
Real estate 1-4 family first mortgage	$	9,525			7,972			6,685
Real estate 1-4 family junior lien mortgage		1,469			1,563			1,566
Other revolving credit and installment		502			310			17

Total consumer TDRs		11,496			9,845			8,268

Commercial and commercial real estate TDRs		656			386			265

Total TDRs	$	12,152			10,231			8,533

TDRs on nonaccrual status	$	3,877			2,738			2,289
TDRs on accrual status		8,275			7,493			6,244

Total TDRs	$	12,152			10,231			8,533

We establish an impairment reserve when a loan is restructured in a TDR. The impairment reserve for TDRs was $2.9 billion at June 30, 2010, and $1.8 billion at December 31, 2009. Total charge-offs related to loans modified in a TDR were $486 million and $163 million for the six months ended 2010 and 2009, respectively.

Our nonaccrual policies are generally the same for all loan types when a restructuring is involved. We underwrite consumer loans at the time of restructuring to determine if there is sufficient evidence of sustained repayment capacity based on the borrower’s documented income, debt to income ratios, and other factors. Any loans lacking sufficient evidence of sustained repayment capacity at the time of modification are charged down to the fair value of the collateral. If the borrower has demonstrated performance under the previous terms and the underwriting process shows capacity to continue to perform under the restructured terms, the loan will remain in accruing status. Otherwise, the loan will be placed in nonaccrual status until the borrower demonstrates a sustained period of performance which we generally believe to be six consecutive months of payments, or equivalent. Loans will also be placed on nonaccrual, and a corresponding charge-off recorded to the loan balance, if we believe that principal and interest contractually due under the modified agreement will not be collectible.

We do not forgive principal for a majority of our TDRs, but in those situations where principal is forgiven, the entire amount of such principal forgiveness is immediately charged off. When a TDR performs in accordance with its modified terms, the loan either continues to accrue interest (for performing loans), or will return to accrual status after the borrower demonstrates a sustained period of performance.

Loans 90 Days or More Past Due and Still Accruing

Loans included in this category are 90 days or more past due as to interest or principal and still accruing, because they are (1) well-secured and in the process of collection or (2) real estate 1-4 family mortgage loans or consumer loans exempt under regulatory rules from being classified as nonaccrual. PCI loans are excluded from the disclosure of loans 90 days or more past due and still accruing interest. Even though certain of them are 90 days or more contractually past due, they are considered to be accruing because the interest income on these loans relates to the accretable yield under the accounting for PCI loans and not to contractual interest payments.

Loans 90 days or more past due and still accruing totaled $19.4 billion at June 30, 2010, and $22.2 billion at December 31, 2009. The totals included $14.4 billion and $15.3 billion, respectively, in advances pursuant to our servicing agreements to GNMA mortgage pools and similar loans whose repayments are insured by the FHA or guaranteed by the VA.

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING (EXCLUDING INSURED/GUARANTEED GNMA AND SIMILAR LOANS) (1)



	June 30		,	Dec. 31		,
(in millions)	2010			2009

Commercial and commercial real estate:
Commercial	$	540			590
Real estate mortgage		654			1,014
Real estate construction		471			909

Total commercial and commercial real estate		1,665			2,513

Consumer:
Real estate 1-4 family first mortgage (2)		1,049			1,623
Real estate 1-4 family junior lien mortgage (2)		352			515
Credit card		610			795
Other revolving credit and installment		1,300			1,333

Total consumer		3,311			4,266

Foreign		21			73

Total	$	4,997			6,852


(1)		The carrying value of PCI loans contractually 90 days or more past due was $15.1 billion at June 30, 2010, and $16.1 billion at December 31, 2009. These amounts are excluded from the above table as PCI loan accretable yield interest recognition is independent from the underlying contractual loan delinquency status. See table on page 17 for detail of PCI loans.
(2)		Includes mortgage loans held for sale 90 days or more past due and still accruing.

Net Charge-offs

NET CHARGE-OFFS



	Quarter ended June 30									,	Six months ended June 30									,
	2010					2009					2010					2009
			As a					As a					As a					As a
	Net loan		% of			Net loan		% of			Net loan		% of			Net loan		% of
	charge-		average			charge-		average			charge-		average			charge-		average
($ in millions)	offs		loans (1)			offs		loans (1)			offs		loans (1)			offs		loans (1)

Commercial and commercial real estate:
Commercial	$	689		1.87	%	$	704		1.51	%	$	1,339		1.77	%	$	1,260		1.32	%
Real estate mortgage		360		1.47			119		0.49			631		1.30			138		0.29
Real estate construction		238		2.90			259		2.48			632		3.70			364		1.73
Lease financing		27		0.78			61		1.68			56		0.82			78		1.04

Total commercial and commercial real estate		1,314		1.80			1,143		1.35			2,658		1.80			1,840		1.07

Consumer:
Real estate 1-4 family first mortgage		1,009		1.70			758		1.26			2,320		1.94			1,149		0.95
Real estate 1-4 family junior lien mortgage		1,184		4.62			1,171		4.33			2,633		5.10			2,018		3.72
Credit card		579		10.45			664		11.59			1,222		10.82			1,246		10.86
Other revolving credit and installment		361		1.64			604		2.66			908		2.05			1,300		2.86

Total consumer		3,133		2.79			3,197		2.77			7,083		3.12			5,713		2.47

Foreign		42		0.57			46		0.61			78		0.54			91		0.58

Total	$	4,489		2.33	%	$	4,386		2.11	%	$	9,819		2.52	%	$	7,644		1.82	%


(1)		Net charge-offs as a percentage of average loans are annualized.

Net charge-offs in second quarter 2010 were $4.5 billion (2.33% of average total loans outstanding, annualized) compared with $5.3 billion (2.71%) in first quarter 2010, and $4.4 billion (2.11%) a year ago. This quarter’s significant reduction in credit losses confirms our prior outlook that credit losses peaked in fourth quarter 2009 and credit quality appears to have improved earlier and to a greater extent than we had previously expected. Total credit losses included $1.3 billion of commercial and commercial real estate loans (1.80%) and $3.1 billion of consumer loans (2.79%) in second quarter 2010 as shown in the table above.

Allowance for Credit Losses

The allowance for credit losses, which consists of the allowance for loan losses and the reserve for unfunded credit commitments, is management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date and excludes loans carried at fair value. The detail of the changes in the allowance for credit losses, including charge-offs and recoveries by loan category, is in Note 5 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

We employ a disciplined process and methodology to establish our allowance for loan losses each quarter. This process takes into consideration many factors, including historical and forecasted loss trends, loan-level credit quality ratings and loan grade specific loss factors. The process involves subjective as well as complex judgments. In addition, we review a variety of credit metrics and trends. However, these trends are not determinative of the adequacy of the allowance as we use several analytical tools in determining the adequacy of the allowance.

For individually graded (typically commercial) portfolios, we generally use loan-level credit quality ratings, which are based on borrower information and strength of collateral, combined with historically based grade specific loss factors. The allowance for individually rated nonaccruing commercial loans with an outstanding exposure of $10 million or greater is determined through an individual impairment analysis. Those individually rated nonaccruing commercial loans with exposures below $10 million are evaluated using a loss factor assumption. For statistically evaluated portfolios (typically consumer), we

generally leverage models that use credit-related characteristics such as credit rating scores, delinquency migration rates, vintages, and portfolio concentrations to estimate loss content. Additionally, the allowance for TDRs is based on the risk characteristics of the modified loans and the resultant estimated cash flows discounted at the pre-modification effective yield of the loan. While the allowance is determined using product and business segment estimates, it is available to absorb losses in the entire loan portfolio.

At June 30, 2010, the allowance for loan losses totaled $24.6 billion (3.21% of total loans), compared with $25.1 billion (3.22%), at March 31, 2010. The allowance for credit losses was $25.1 billion (3.27% of total loans) at June 30, 2010, and $25.7 billion (3.28%) at March 31, 2010. The allowance for credit losses included $225 million at June 30, 2010, and $247 million at March 31, 2010, related to PCI loans acquired from Wachovia. Loans acquired from Wachovia are included in total loans net of related purchase accounting net write-downs. The reserve for unfunded credit commitments was $501 million at June 30, 2010, and $533 million at March 31, 2010. In addition to the allowance for credit losses there was $16.2 billion of nonaccretable difference at June 30, 2010, and $19.9 billion at March 31, 2010, to absorb losses for PCI loans. For additional information on PCI loans, see the “Balance Sheet Analysis — Loan Portfolio” section and Note 5 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

The ratio of the allowance for credit losses to total nonaccrual loans was 90% at June 30, 2010, and 94% at March 31, 2010. In general, this ratio may fluctuate significantly from period to period due to such factors as the mix of loan types in the portfolio, borrower credit strength and the value and marketability of collateral. Over half of nonaccrual loans were home mortgages, auto and other consumer loans at June 30, 2010.

Total provision for credit losses was $4.0 billion in second quarter 2010, down from the peak of $6.1 billion in third quarter 2009 and from $5.3 billion in first quarter 2010. The second quarter 2010 provision included a $500 million reserve release, compared with a $700 million reserve build a year ago. Total provision for credit losses was $9.3 billion for the first half of 2010, including the $500 million second quarter reserve release, compared with $9.6 billion for the first half of 2009, which included a $2.0 billion reserve build.

We believe the allowance for credit losses of $25.1 billion was adequate to cover credit losses inherent in the loan portfolio, including unfunded credit commitments, at June 30, 2010. The allowance for credit losses is subject to change and we consider existing factors at the time, including economic and market conditions and ongoing internal and external examination processes. Due to the sensitivity of the allowance for credit losses to changes in the economic environment, it is possible that unanticipated economic deterioration would create incremental credit losses not anticipated as of the balance sheet date. Our process for determining the adequacy of the allowance for credit losses is discussed in the “Financial Review — Critical Accounting Policies — Allowance for Credit Losses” section and Note 5 (Loans and Allowance for Credit Losses) to Financial Statements in our 2009 Form 10-K.

Reserve for Mortgage Loan Repurchase Losses

We sell mortgage loans to various parties, including government sponsored entities (GSEs), under contractual provisions that include various representations and warranties which typically cover ownership of the loan, compliance with loan criteria set forth in the applicable agreement, validity of the lien securing the loan, absence of delinquent taxes or liens against the property securing the loan, and similar matters. We may be required to repurchase the mortgage loans with identified defects, indemnify the investor or insurer, or reimburse the investor for credit loss incurred on the loan (collectively “repurchase”) in the event of a material breach of such contractual representations or warranties. The time periods specified in our mortgage loan sales contracts to respond to repurchase requests vary, but are generally 90 days or less and generally include no specific remedies if the repurchase time period is not met. Upon receipt of a repurchase request, we work with our investors to arrive at a mutually agreeable resolution. Repurchase demands are typically reviewed on an individual loan by loan basis to validate the claims made by the investor and determine if a contractually required repurchase event occurred. Occasionally, in lieu of conducting the loan level evaluation, we may negotiate global settlements in order to resolve a pipeline of demands in lieu of repurchasing the loans. We manage the risk associated with potential repurchases or other forms of settlement through our underwriting and quality assurance practices and by servicing mortgage loans to meet investor and secondary market standards.

We establish mortgage repurchase reserves related to various representations and warranties that reflect management’s estimate of losses based on a combination of factors. Such factors incorporate estimated levels of defects based on internal quality assurance sampling, default expectations, historical investor repurchase demand and appeals success rates (where the investor rescinds the demand based on a cure of the defect or acknowledges that the loan satisfies the investor’s applicable representations and warranties), reimbursement by correspondent and other third party originators, and projected loss severity. We establish a reserve at the time loans are sold and continually update our reserve estimate during their life. Although investors may demand repurchase at any time, the majority of repurchase demands occurs in the first 24 to 36 months following origination of the mortgage loan and can vary by investor. Currently, repurchase demands primarily relate to 2006 through 2008 vintages. For additional information on our repurchase liability, including an adverse impact analysis, see Note 7 (Securitizations and Variable Interest Entities) to Financial Statements in this Report.

During second quarter 2010, we continued to experience elevated levels of repurchase activity measured by number of loans, investor repurchase demands and our level of repurchases. In the second quarter and first half of 2010 we repurchased or otherwise settled mortgage loans with balances of $530 million and $1.1 billion, respectively, and incurred net losses on repurchased or settled loans of $270 million and $442 million, respectively. Most repurchases under our representation and warranty provisions are attributable to borrower misrepresentations and appraisals obtained at origination that investors believe do not fully comply with applicable industry standards. A majority of our repurchases continued to be government agency conforming loans from Freddie Mac and Fannie Mae and predominantly from 2006 through 2008 originations.

Adjustments made to our mortgage repurchase reserve in recent periods have incorporated the increase in repurchase demands and mortgage insurance rescissions that we have experienced. The table below provides the number of unresolved repurchase demands and mortgage insurance rescissions as of June 30, 2010, and December 31, 2009.

June 30, 2010

Dec. 31, 2009

Original

Original

Number of

loan

Number of

loan

($ in millions)

loans

balance (1)

loans

balance (1)

Government sponsored entities (2)

12,536

2,840

8,354

1,911

Private

3,160

707

2,929

886

Mortgage insurance rescissions (3)

2,979

760

2,965

859

Total

18,675

4,307

14,248

3,656


(1)		While original loan balance related to these demands is presented above, the establishment of the repurchase reserve is based on a combination of factors, such as our appeals success rates, reimbursement by correspondent and other third party originators, and projected loss severity, which is driven by the difference between the current loan balance and the estimated collateral value less costs to sell the property.
(2)		Includes repurchase demands of 2,141 and $417 million and 1,536 and $322 million for June 30, 2010, and December 31, 2009, respectively, received from investors on mortgage servicing rights acquired from other originators. We have the right of recourse against the seller for these repurchase demands and would only incur a loss on these demands for counterparty risk associated with the seller.
(3)		As part of our representations and warranties in our loan sales contracts, we represent that certain loans have mortgage insurance. To the extent the mortgage insurance is rescinded by the mortgage insurer, the lack of insurance may result in a repurchase demand from an investor.

Customary with industry practice, Wells Fargo has the right of recourse against correspondent lenders with respect to representations and warranties. Of the repurchase demands presented in the table above, approximately 20% relate to loans purchased from correspondent lenders. Due primarily to the financial difficulties of some correspondent lenders, we typically recover on average approximately 50% from these lenders, and this estimate of their performance is incorporated in the establishment of our mortgage repurchase reserve.

Our reserve for repurchases, included in “Accrued expenses and other liabilities” in our consolidated financial statements, was $1.4 billion at June 30, 2010, and $1.0 billion at December 31, 2009. In the second quarter and first half of 2010, $382 million and $784 million, respectively, of additions to the reserve were recorded, which reduced net gains on mortgage loan origination/sales. Our additions to the repurchase reserve this quarter reflect updated assumptions about the losses we expect on repurchases as well as the recent increase in repurchase demands and mortgage insurance rescissions as noted above. Also, based on current uncertainty about the economic recovery and the loss severity we continue to experience on repurchased loans, we extended our assumptions about the time period over which we will incur the current elevated level of loss severity.

The following table summarizes the changes in our mortgage repurchase reserve.



							Six months
	Quarter ended						ended			Year ended
	June 30		,	March 31		,	June 30		,	Dec. 31		,
(in millions)	2010			2010			2010			2009

Balance, beginning of period	$	1,263			1,033			1,033			620
Provision for repurchase losses:
Loan sales		36			44			80			302
Change in estimate — primarily due to credit deterioration		346			358			704			625

Total additions		382			402			784			927
Losses		(270	)		(172	)		(442	)		(514	)

Balance, end of period	$	1,375			1,263			1,375			1,033

The mortgage repurchase reserve of $1.4 billion at June 30, 2010, represents our best estimate of the probable loss that we may incur for various representations and warranties in the contractual provisions of our sales of mortgage loans. There may be a wide range of reasonably possible losses in excess of the estimated liability that cannot be estimated with confidence. Because the level of mortgage loan repurchase losses are dependent on economic factors, investor demand strategies and other external conditions that may change over the life of the underlying loans, the level of the reserve for mortgage loan repurchase losses is difficult to estimate and requires considerable management judgment. We maintain regular contact with the GSEs and other significant investors to monitor and address their repurchase demand practices and concerns.

To the extent that economic conditions and the housing market do not recover or future investor repurchase demand and appeals success rates differ from past experience, we could continue to have increased demands and increased loss severity on repurchases, causing future additions to the repurchase reserve. However, some of the underwriting standards that were permitted by the GSEs for conforming loans in the 2006 through 2008 vintages, which significantly contributed to recent levels of repurchase demands, were tightened starting in mid to late 2008. Accordingly, we do not expect a similar rate of repurchase requests from the 2009 and prospective vintages, absent deterioration in economic conditions or changes in investor behavior.

ASSET/LIABILITY MANAGEMENT

Asset/liability management involves the evaluation, monitoring and management of interest rate risk, market risk, liquidity and funding. The Corporate Asset/Liability Management Committee (Corporate ALCO) — which oversees these risks and reports periodically to the Finance Committee of the Board of Directors — consists of senior financial and business executives. Each of our principal business groups has its own asset/liability management committee and process linked to the Corporate ALCO process.

Interest Rate Risk

Interest rate risk, which potentially can have a significant earnings impact, is an integral part of being a financial intermediary. We assess interest rate risk by comparing our most likely earnings plan with various earnings simulations using many interest rate scenarios that differ in the direction of interest rate changes, the degree of change over time, the speed of change and the projected shape of the yield curve. For example, as of June 30, 2010, our most recent simulation indicated estimated earnings at risk of approximately 1.5% of our most likely earnings plan over the next 12 months using a scenario in which the federal funds rate rises to 4.25% and the 10-year Constant Maturity Treasury bond yield rises to 5.00%. Simulation estimates depend on, and will change with, the size and mix of our actual and projected balance sheet at the time of each simulation. Due to timing differences between the quarterly valuation of MSRs and the eventual impact of interest rates on mortgage banking volumes, earnings at risk in any particular quarter could be higher than the average earnings at risk over the 12-month simulation period, depending on the path of interest rates and on our hedging strategies for MSRs. See the “Risk Management — Mortgage Banking Interest Rate and Market Risk” section in this Report for more information.

We use exchange-traded and over-the-counter (OTC) interest rate derivatives to hedge our interest rate exposures. The notional or contractual amount, credit risk amount and estimated net fair value of these derivatives as of June 30, 2010, and December 31, 2009, are presented in Note 11 (Derivatives) to Financial Statements in this Report.

For additional information regarding interest rate risk, see pages 66-67 of our 2009 Form 10-K.

Mortgage Banking Interest Rate and Market Risk

We originate, fund and service mortgage loans, which subjects us to various risks, including credit, liquidity and interest rate risks. For a discussion of mortgage banking interest rate and market risk, see pages 67-69 of our 2009 Form 10-K.

In second quarter 2010, a $2.7 billion decrease in the fair value of our MSRs and $3.3 billion gain on free-standing derivatives used to hedge the MSRs resulted in a net gain of $626 million. This net gain was largely due to hedge-carry income which reflected the low short-term interest rate environment. The net gain on the MSR of $626 million in second quarter 2010 was down from $989 million in first quarter 2010 and $1.0 billion a year ago, due to a change in the composition of the hedge and a hedge position that considered natural business offsets.

While our hedging activities are designed to balance our mortgage banking interest rate risks, the financial instruments we use may not perfectly correlate with the values and income being hedged. For example, the change in the value of adjustable-rate mortgages (ARMs) production held for sale from changes in mortgage interest rates may or may not be fully offset by Treasury and LIBOR index-based financial instruments used as economic hedges for such ARMs. Additionally, the hedge-carry income we earn on our economic hedges for the MSRs may not continue if the spread between short-term and long-term rates decreases, we shift the composition of the hedge to more interest rate swaps, or there are other changes in the market for mortgage forwards that impact the implied carry.

For additional information regarding other risk factors related to the mortgage business, see pages 67-69 of our 2009 Form 10-K.

The total carrying value of our residential and commercial MSRs was $14.3 billion at June 30, 2010, and $17.1 billion at December 31, 2009. The weighted-average note rate on our portfolio of loans serviced for others was 5.53% at June 30, 2010, and 5.66% at December 31, 2009. Our total MSRs were 0.76% of mortgage loans serviced for others at June 30, 2010, compared with 0.91% at December 31, 2009.

Market Risk — Trading Activities

From a market risk perspective, our net income is exposed to changes in interest rates, credit spreads, foreign exchange rates, equity and commodity prices and their implied volatilities. The credit risk amount and estimated net fair value of all customer accommodation derivatives are included in Note 11 (Derivatives) to Financial Statements in this Report. Open, “at risk” positions for all trading businesses are monitored by Corporate ALCO.

The standardized approach for monitoring and reporting market risk for the trading activities consists of value-at-risk (VaR) metrics complemented with factor analysis and stress testing. VaR measures the worst expected loss over a given time interval and within a given confidence interval. We measure and report daily VaR at a 99% confidence interval based on actual changes in rates and prices over the past 250 trading days. The analysis captures all financial instruments that are considered trading positions. The average one-day VaR throughout second quarter 2010 was $30 million, with a lower bound of $24 million and an upper bound of $40 million. For additional information regarding market risk related to trading activities, see page 69 of our 2009 Form 10-K.

Market Risk — Equity Markets

We are directly and indirectly affected by changes in the equity markets. For additional information regarding market risk related to equity markets, see page 69 of our 2009 Form 10-K.

The following table provides information regarding our marketable and nonmarketable equity investments.



	June 30		,	Dec. 31		,
(in millions)	2010			2009

Nonmarketable equity investments:
Private equity investments:
Cost method	$	3,769			3,808
Equity method		6,144			5,138
Federal bank stock		6,024			5,985
Principal investments		360			1,423

Total nonmarketable equity investments (1)	$	16,297			16,354

Marketable equity securities:
Cost	$	4,571			4,749
Net unrealized gains		592			843
Total marketable equity securities (2)	$	5,163			5,592


(1)		Included in other assets on the balance sheet. See Note 6 (Other Assets) to Financial Statements in this Report for additional information.
(2)		Included in securities available for sale. See Note 4 (Securities Available for Sale) to Financial Statements in this Report for additional information.

Liquidity and Funding

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

Debt securities in the securities available-for-sale portfolio provide asset liquidity, in addition to the immediately liquid resources of cash and due from banks and federal funds sold, securities purchased under resale agreements and other short-term investments. Asset liquidity is further enhanced by our ability to sell or securitize loans in secondary markets and to pledge loans to access secured borrowing facilities through the Federal Home Loan Banks, the FRB, or the U.S. Treasury.

Core customer deposits have historically provided a sizeable source of relatively stable and low-cost funds. At June 30, 2010, core deposits funded 99% of the Company’s loan portfolio. Additional funding is provided by long-term debt (including trust preferred securities), other foreign deposits and short-term borrowings (federal funds purchased, securities sold under repurchase agreements, commercial paper and other short-term borrowings).

Liquidity is also available through our ability to raise funds in a variety of domestic and international money and capital markets. We access capital markets for long-term funding through issuances of registered debt securities, private placements and asset-backed secured funding. Investors in the long-term capital markets generally will consider, among other factors, a company’s credit rating in making investment decisions. Rating agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, the level and quality of earnings, and rating agency assumptions regarding the probability and extent of Federal financial assistance or support for certain large financial institutions. Adverse changes in these factors could result in a reduction of our credit ratings; however, a reduction in our credit ratings would not cause us to violate any of our debt covenants. See the “Risk Factors” section of this Report and our First Quarter Form 10-Q for additional information regarding recent legislative developments and our credit ratings.

Parent. Under SEC rules, the Parent is classified as a “well-known seasoned issuer,” which allows it to file a registration statement that does not have a limit on issuance capacity. “Well-known seasoned issuers” generally include those companies with a public float of common equity of at least $700 million or those companies that have issued at least $1 billion in aggregate principal amount of non-convertible securities, other than common equity, in the last three years. In June 2009, the Parent filed a registration statement with the SEC for the issuance of senior and subordinated notes, preferred stock and other securities. The Parent’s ability to issue debt and other securities under this registration statement is limited by the debt issuance authority granted by the Board. The Parent is currently authorized by the Board to issue $60 billion in outstanding short-term debt and $170 billion in outstanding long-term debt.

At June 30, 2010, the Parent had outstanding short-term debt of $10.2 billion and long-term debt of $110.2 billion under these authorities. During the first half of 2010, the Parent issued a total of $1.3 billion in non-guaranteed registered senior notes. Effective August 2009, the Parent established an SEC registered $25 billion medium-term note program series I and J (MTN — I&J), under which it may issue senior and subordinated debt securities. Also, effective April 2010, the Parent established an SEC registered $25 billion medium-term note program series K (MTN — K), under which it may issue senior

debt securities linked to one or more indices. In December 2009, the Parent established a $25 billion European medium-term note programme (EMTN), under which it may issue senior and subordinated debt securities. In March 2010, the Parent increased its Australian medium-term note programme (AMTN) from A$5 billion to A$10 billion, under which it may issue senior and subordinated debt securities. The EMTN and AMTN securities are not registered with the SEC and may not be offered in the United States without applicable exemptions from registration. The Parent has $21.8 billion, $25.0 billion, $25.0 billion, and A$6.8 billion available for issuance under the MTN - I&J, MTN - K, EMTN and AMTN, respectively. The proceeds from securities issued in the first half of 2010 were used for general corporate purposes, and we expect the proceeds from securities issued in the future will also be used for general corporate purposes. The Parent also issues commercial paper from time to time, subject to its short-term debt limit.

Wells Fargo Bank, N.A. Wells Fargo Bank, N.A. is authorized by its board of directors to issue $100 billion in outstanding short-term debt and $125 billion in outstanding long-term debt. In December 2007, Wells Fargo Bank, N.A. established a $100 billion bank note program under which, subject to any other debt outstanding under the limits described above, it may issue $50 billion in outstanding short-term senior notes and $50 billion in long-term senior or subordinated notes. At June 30, 2010, Wells Fargo Bank, N.A. had remaining issuance capacity on the bank note program of $50 billion in short-term senior notes and $50 billion in long-term senior or subordinated notes. Securities are issued under this program as private placements in accordance with Office of the Comptroller of the Currency (OCC) regulations. Effective March 20, 2010, Wachovia Bank, N.A. merged with and into Wells Fargo Bank, N.A.

Wells Fargo Financial. In January 2010, Wells Fargo Financial Canada Corporation (WFFCC), an indirect wholly owned Canadian subsidiary of the Parent, qualified with the Canadian provincial securities commissions CAD$7.0 billion in medium-term notes for distribution from time to time in Canada. At June 30, 2010, CAD$7.0 billion remained available for future issuance. All medium-term notes issued by WFFCC are unconditionally guaranteed by the Parent.

Federal Home Loan Bank Membership

We are a member of the Federal Home Loan Banks based in Dallas, Des Moines and San Francisco (collectively, the FHLBs). Each member of each of the FHLBs is required to maintain a minimum investment in capital stock of the applicable FHLB. The board of directors of each FHLB can increase the minimum investment requirements in the event it has concluded that additional capital is required to allow it to meet its own regulatory capital requirements. Any increase in the minimum investment requirements outside of specified ranges requires the approval of the Federal Housing Finance Board. Because the extent of any obligation to increase our investment in any of the FHLBs depends entirely upon the occurrence of a future event, potential future payments to the FHLBs are not determinable.

CAPITAL MANAGEMENT

We have an active program for managing stockholders’ equity and regulatory capital and we maintain a comprehensive process for assessing the Company’s overall capital adequacy. We generate capital internally primarily through the retention of earnings net of dividends. Our objective is to maintain capital levels at the Company and its bank subsidiaries above the regulatory “well-capitalized” thresholds by an amount commensurate with our risk profile. Our potential sources of stockholders’ equity include retained earnings and issuances of common and preferred stock. Retained earnings increased $4.6 billion from December 31, 2009, predominantly from Wells Fargo net income of $5.6 billion, less common and preferred dividends of $889 million. During the first half of 2010, we issued approximately 55 million shares of common stock, with net proceeds of $865 million, including 18 million shares during the period

under various employee benefit (including our employee stock option plan) and director plans, as well as under our dividend reinvestment and direct stock purchase programs.

On April 29, 2010, following stockholder approval, the Company amended its certificate of incorporation to provide for an increase in the number of shares of the Company’s common stock authorized for issuance from 6 billion to 9 billion.

From time to time the Board authorizes the Company to repurchase shares of our common stock. Although we announce when the Board authorizes share repurchases, we typically do not give any public notice before we repurchase our shares. Various factors determine the amount and timing of our share repurchases, including our capital requirements, the number of shares we expect to issue for acquisitions and employee benefit plans, market conditions (including the trading price of our stock), and regulatory and legal considerations. The FRB published clarifying supervisory guidance in first quarter 2009, SR 09-4 Applying Supervisory Guidance and Regulations on the Payment of Dividends, Stock Redemptions, and Stock Repurchases at Bank Holding Companies, pertaining to the FRB’s criteria, assessment and approval process for reductions in capital. As with all 19 participants in the FRB’s Supervisory Capital Assessment Program, under this supervisory letter, before repurchasing our common shares, we must consult with the FRB staff and demonstrate that the proposed actions are consistent with the existing supervisory guidance, including demonstrating that our internal capital assessment process is consistent with the complexity of our activities and risk profile. In 2008, the Board authorized the repurchase of up to 25 million additional shares of our outstanding common stock. During second quarter 2010, we repurchased 1 million shares of our common stock, all from our employee benefit plans. At June 30, 2010, the total remaining common stock repurchase authority was approximately 4 million shares.

Historically, our policy has been to repurchase shares under the “safe harbor” conditions of Rule 10b-18 of the Securities Exchange Act of 1934 including a limitation on the daily volume of repurchases. Rule 10b-18 imposes an additional daily volume limitation on share repurchases during a pending merger or acquisition in which shares of our stock will constitute some or all of the consideration. Our management may determine that during a pending stock merger or acquisition when the safe harbor would otherwise be available, it is in our best interest to repurchase shares in excess of this additional daily volume limitation. In such cases, we intend to repurchase shares in compliance with the other conditions of the safe harbor, including the standing daily volume limitation that applies whether or not there is a pending stock merger or acquisition.

In connection with our participation in the Troubled Asset Relief Program Capital Purchase Program, we issued to the U.S. Treasury Department warrants to purchase 110,261,688 shares of our common stock with an exercise price of $34.01 per share. On May 26, 2010, in an auction by the U.S. Treasury, we purchased 70,165,963 of the warrants at a price of $7.70 per warrant. The Board has authorized the repurchase of up to $1 billion of the warrants, including the warrants purchased in the auction. As of June 30, 2010, $460 million of that authority remained. Depending on market conditions, we may repurchase from time to time additional warrants and/or our outstanding debt securities in privately negotiated or open market transactions, by tender offer or otherwise.

The Company and each of our subsidiary banks are subject to various regulatory capital adequacy requirements administered by the FRB and the OCC. Risk-based capital (RBC) guidelines establish a risk-adjusted ratio relating capital to different categories of assets and off-balance sheet exposures. At June 30, 2010, the Company and each of our subsidiary banks were “well capitalized” under applicable regulatory capital adequacy guidelines. See Note 18 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information.

Current regulatory RBC rules are based primarily on broad credit-risk considerations and limited market-related risks, but do not take into account other types of risk a financial company may be exposed to. Our capital adequacy assessment process contemplates a wide range of risks that the Company is exposed to and also takes into consideration our performance under a variety of economic conditions, as well as regulatory expectations and guidance, rating agency viewpoints and the view of capital market participants.

At June 30, 2010, stockholders’ equity and Tier 1 common equity levels were higher than the quarter ending prior to the Wachovia acquisition. During 2009, as regulators and the market focused on the composition of regulatory capital, the Tier 1 common equity ratio gained significant prominence as a metric of capital strength. There is no mandated minimum or “well capitalized” standard for Tier 1 common equity; instead the RBC rules state voting common stockholders’ equity should be the dominant element within Tier 1 common equity. Tier 1 common equity was $73.9 billion at June 30, 2010, or 7.61% of risk-weighted assets, an increase of $8.4 billion from December 31, 2009. The following table provides the details of the Tier 1 common equity calculation.

TIER 1 COMMON EQUITY (1)



			June 30		,	Dec. 31		,
(in billions)			2010			2009

Total equity			$	121.4			114.4
Less:	Noncontrolling interests			(1.6	)		(2.6	)

Total Wells Fargo stockholders’ equity				119.8			111.8

Less:	Preferred equity			(8.1	)		(8.1	)
	Goodwill and intangible assets (other than MSRs)			(36.7	)		(37.7	)
	Applicable deferred taxes			5.0			5.3
	Deferred tax asset limitation			—			(1.0	)
	MSRs over specified limitations			(1.0	)		(1.6	)
	Cumulative other comprehensive income			(4.8	)		(3.0	)
	Other			(0.3	)		(0.2	)

	Tier 1 common equity	(A)	$	73.9			65.5

Total risk-weighted assets (2)		(B)	$	970.8			1,013.6

Tier 1 common equity to total risk-weighted assets		(A)/(B)		7.61	%		6.46


(1)		Tier 1 common equity is a non-generally accepted accounting principle (GAAP) financial measure that is used by investors, analysts and bank regulatory agencies, to assess the capital position of financial services companies. Tier 1 common equity includes total Wells Fargo stockholders’ equity, less preferred equity, goodwill and intangible assets (excluding MSRs), net of related deferred taxes, adjusted for specified Tier 1 regulatory capital limitations covering deferred taxes, MSRs, and cumulative other comprehensive income. Management reviews Tier 1 common equity along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants.
(2)		Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets.

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies (see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in this Report) are fundamental to understanding our results of operations and financial condition, because they require that we use estimates and assumptions that may affect the value of our assets or liabilities and financial results. Six of these policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. These policies govern:

•		the allowance for credit losses;
•		purchased credit-impaired (PCI) loans;
•		the valuation of residential mortgage servicing rights (MSRs);
•		the fair valuation of financial instruments;
•		pension accounting; and
•		income taxes.

Management has reviewed and approved these critical accounting policies and has discussed these policies with the Audit and Examination Committee of the Company’s Board. These policies are described in the “Financial Review — Critical Accounting Policies” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2009 Form 10-K.

FAIR VALUATION OF FINANCIAL INSTRUMENTS

We use fair value measurements to record fair value adjustments to certain financial instruments and to determine fair value disclosures. See our 2009 Form 10-K for the complete critical accounting policy related to fair valuation of financial instruments.

For the securities available-for-sale portfolio, we typically use independent pricing services and brokers to obtain fair value based upon quoted prices. We determine the most appropriate and relevant pricing service for each security class and generally obtain one quoted price for each security. For securities in our trading portfolio, we typically use prices developed internally by our traders to measure the security at fair value. Internal traders base their prices upon their knowledge of current market information for the particular security class being valued. Current market information includes recent transaction prices for the same or similar securities, liquidity conditions, relevant benchmark indices and other market data. For both trading and available-for-sale securities, we validate prices using a variety of methods, including but not limited to, comparison to pricing services, corroboration of pricing by reference to other independent market data such as secondary broker quotes and relevant benchmark indices and, for securities valued using external pricing services or brokers, review of pricing by Company personnel familiar with market liquidity and other market-related conditions. We believe the determination of fair value for our securities is consistent with the accounting guidance on fair value measurements.

The table below presents the summary of the fair value of financial instruments recorded at fair value on a recurring basis, and the amounts measured using significant Level 3 inputs (before derivative netting adjustments). The fair value of the remaining assets and liabilities were measured using valuation methodologies involving market-based or market-derived information, collectively Level 1 and 2 measurements.



	June 30, 2010					December 31, 2009
	Total					Total
($ in billions)	balance			Level 3 (1)		balance		Level 3 (1)

Assets carried at fair value	$	260.4			47.2		277.4		52.0
As a percentage of total assets		21	%		4		22		4
Liabilities carried at fair value	$	21.8			8.2		22.8		7.9
As a percentage of total liabilities		2	%		1		2		1


(1)		Before derivative netting adjustments.

See Note 12 (Fair Values of Assets and Liabilities) to Financial Statements in this Report for a complete discussion on our use of fair valuation of financial instruments, our related measurement techniques and its impact to our financial statements.

Current Accounting Developments

The following accounting pronouncements have been issued by the Financial Accounting Standards Board, but are not yet effective:

•		Accounting Standards Update (ASU or Update) 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses;
•		ASU 2010-18, Effect of a Loan Modification When the Loan is Part of a Pool That is Accounted for as a Single Asset; and
•		ASU 2010-11, Scope Exception Related to Embedded Credit Derivatives.

ASU 2010-20 requires enhanced disclosures for the allowance for credit losses and financing receivables, which include certain loans and long-term accounts receivable. Companies will be required to disaggregate credit quality information, including receivables on nonaccrual status, aging of past due receivables, and the roll forward of the allowance for credit losses, by portfolio segment or class of financing receivable. Portfolio segment is the level at which an entity evaluates credit risk and determines its allowance for credit losses, and class of financing receivable is generally a lower level of portfolio segment. Companies must also provide more granular information on the nature and extent of TDRs and their effect on the allowance for credit losses. This guidance is effective for us in fourth quarter 2010 with prospective application. Our adoption of the Update will not affect our consolidated financial statement results since it amends only the disclosure requirements for financing receivables and the allowance for credit losses.

ASU 2010-18 provides guidance for modified PCI loans that are accounted for within a pool. Under the new guidance, modified PCI loans should not be removed from a pool even if those loans would otherwise be deemed troubled debt restructurings. The Update also clarifies that entities should consider the impact of modifications on a pool of PCI loans when evaluating that pool for impairment. These accounting changes are effective for us in third quarter 2010 with early adoption permitted. Our adoption of the Update will not affect our consolidated financial statement results, as the new guidance is consistent with our current accounting practice.

ASU 2010-11 provides guidance clarifying when entities should evaluate embedded credit derivative features in financial instruments issued from structures such as collateralized debt obligations (CDOs) and synthetic CDOs. The Update clarifies that bifurcation and separate accounting is not required for embedded credit derivative features that are only related to the transfer of credit risk that occurs when one financial instrument is subordinate to another. Embedded derivatives related to other types of credit risk must be analyzed to determine the appropriate accounting treatment. The guidance also allows companies to elect fair value option upon adoption for any investment in a beneficial interest in securitized financial assets. By making this election, companies would not be required to evaluate whether embedded credit derivative features exist for those interests. This guidance is effective for us in third quarter 2010. Our adoption of this standard is not expected to have a material impact on our financial statements.

FORWARD-LOOKING STATEMENTS

This Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “projects,” “outlook,” “forecast,” “will,” “may,” “could,” “should,” “can” and similar references to future periods. Examples of forward-looking statements in this Report include, but are not limited to, statements we make about: (i) future results of the Company; (ii) future credit quality and expectations regarding future loan losses in our loan portfolios and life-of-loan estimates, including our belief that credit quality has turned the corner and quarterly provision expense and quarterly total credit losses have peaked, and that the positive trend in credit quality is expected to continue over the coming year; the level and loss content of nonperforming assets and nonaccrual loans; the adequacy of the allowance for loan losses, including our current expectation of future reductions in the allowance for loan losses; and the reduction or mitigation of risk in our loan portfolios and the effects of loan modification programs; (iii) the merger integration of the Company and Wachovia, including expense savings, merger costs and revenue synergies; (iv) the expected outcome and impact of legal, regulatory and legislative developments; and (v) the Company’s plans, objectives and strategies.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:

•		current and future economic and market conditions, including the effects of further declines in housing prices and high unemployment rates;
•		the terms of capital investments or other financial assistance provided by the U.S. government;
•		our capital requirements and the ability to raise capital on favorable terms, including regulatory capital standards as determined by applicable regulatory authorities;
•		financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and legislation and regulation relating to overdraft fees (and changes to our overdraft practices as a result thereof), credit cards, and other bank services;
•		legislative proposals to allow mortgage cram-downs in bankruptcy or require other loan modifications;
•		the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications or changes in such requirements or guidance;
•		our ability to successfully integrate the Wachovia merger and realize the expected cost savings and other benefits and the effects of any delays or disruptions in systems conversions relating to the Wachovia integration;
•		our ability to realize the efficiency initiatives to lower expenses when and in the amount expected;
•		recognition of OTTI on securities held in our available-for-sale portfolio;
•		the effect of changes in interest rates on our net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale;
•		hedging gains or losses;
•		disruptions in the capital markets and reduced investor demand for mortgage loans;

•		our ability to sell more products to our customers;
•		the effect of the economic recession on the demand for our products and services;
•		the effect of the fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;
•		our election to provide support to our mutual funds for structured credit products they may hold;
•		changes in the value of our venture capital investments;
•		changes in our accounting policies or in accounting standards or in how accounting standards are to be applied or interpreted;
•		mergers, acquisitions and divestitures;
•		changes in the Company’s credit ratings and changes in the credit quality of the Company’s customers or counterparties;
•		reputational damage from negative publicity, fines, penalties and other negative consequences from regulatory violations and legal actions;
•		the loss of checking and saving account deposits to other investments such as the stock market, and the resulting increase in our funding costs and impact on our net interest margin;
•		fiscal and monetary policies of the Federal Reserve Board; and
•		the other risk factors and uncertainties described under “Risk Factors” in our 2009 Form 10-K and First Quarter Form 10-Q, and under “Risk Factors” in this Report.

In addition to the above factors, we also caution that there is no assurance that our allowance for credit losses will be adequate to cover future credit losses, especially if credit markets, housing prices and unemployment do not continue to stabilize or improve. Increases in loan charge-offs or in the allowance for credit losses and related provision expense could materially adversely affect our financial results and condition.

Any forward-looking statement made by us in this Report speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

RISK FACTORS

An investment in the Company involves risk, including the possibility that the value of the investment could fall substantially and that dividends or other distributions on the investment could be reduced or eliminated. We discuss above under “Forward-Looking Statements” and elsewhere in this Report, as well as in other documents we file with the SEC, risk factors that could adversely affect our financial results and condition and the value of, and return on, an investment in the Company. We refer you to the Financial Review section and Financial Statements (and related Notes) in this Report for more information about credit, interest rate, market and litigation risks, the “Risk Factors” and “Regulation and Supervision” sections in our 2009 Form 10-K, the “Risk Factors” section in our First Quarter Form 10-Q, and the “Forward-Looking Statements” section of this Report for a discussion of risk factors.

The following risk factor supplements the risk factors set forth in our 2009 Form 10-K and First Quarter Form 10-Q and should be read in conjunction with the other risk factors described in those reports and in this Report.

Enacted legislation and regulation, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, could require us to change certain of our business practices, reduce our revenue, impose additional costs on us or otherwise adversely affect our business operations and/or competitive position.

Economic, financial, market and political conditions during the past few years have led to new legislation and regulation in the United States and in other jurisdictions outside of the United States where we conduct business. These laws and regulations may affect the manner in which we do business and the products and services that we provide, affect or restrict our ability to compete in our current businesses or our ability to enter into or acquire new businesses, reduce or limit our revenue in businesses or impose additional fees, assessments or taxes on us, intensify the regulatory supervision of us and the financial services industry, and adversely affect our business operations or have other negative consequences.

For example, in 2009 several legislative and regulatory initiatives were adopted that will have an impact on our businesses and financial results, including FRB amendments to Regulation E, which, among other things, affect the way we may charge overdraft fees beginning on July 1, 2010, and the enactment of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the Card Act), which, among other things, affects our ability to change interest rates and assess certain fees on card accounts. We currently estimate that the Regulation E amendments, including our implementation of certain policy changes to our overdraft practices, will reduce our 2010 fee revenue by approximately $225 million (after-tax) in third quarter 2010 and $275 million (after-tax) in fourth quarter 2010. We currently estimate that implementation of the Card Act regulations will have a net impact of $30 million (after-tax) in third quarter 2010. The actual impact of the Regulation E amendments and the Card Act in 2010 and future periods could vary due to a variety of factors, including changes in customer behavior, economic conditions and other potential offsetting factors.

On July 21, 2010, the Dodd-Frank Act became law. The Dodd-Frank Act, among other things, (i) establishes a new Financial Stability Oversight Council to monitor systemic risk posed by financial firms and imposes additional and enhanced FRB regulations on certain large, interconnected bank holding companies and systemically significant nonbanking firms intended to promote financial stability; (ii) creates a liquidation framework for the resolution of covered financial companies, the costs of which would be paid through assessments on surviving covered financial companies; (iii) makes significant changes to the structure of bank and bank holding company regulation and activities in a variety of areas, including prohibiting proprietary trading and private fund investment activities, subject to certain exceptions; (iv) creates a new framework for the regulation of over-the-counter derivatives and new regulations for the securitization market and strengthens the regulatory oversight of securities and capital markets by the SEC; (v) establishes the Bureau of Consumer Financial Protection within the FRB, which will have sweeping powers to administer and enforce a new federal regulatory framework of consumer financial regulation and, to a certain extent, may limit the existing preemption of state laws with respect to the application of such laws to national banks; (vi) provides for increased regulation of residential mortgage activities; (vii) revises the FDIC’s assessment base for deposit insurance by changing from an assessment base defined by deposit liabilities to a risk-based system based on total assets; (viii) authorizes the FRB to issue regulations regarding the amount of any interchange transaction fee that an issuer may charge to ensure that it is reasonable and proportional to the cost incurred; and (ix) includes several corporate governance and executive compensation provisions and requirements, including mandating an advisory stockholder vote on executive compensation.

Although the Dodd-Frank Act became generally effective in July, many of its provisions have extended implementation periods and delayed effective dates and will require extensive rulemaking by regulatory authorities as well as require more than 60 studies to be conducted over the next one to two years. Accordingly, in many respects the ultimate impact of the Dodd-Frank Act and its effects on the U.S.

financial system and the Company will not be known for an extended period of time. Nevertheless, the Dodd-Frank Act, including future rules implementing its provisions and the interpretation of those rules, could result in a loss of revenue, require us to change certain of our business practices, limit our ability to pursue certain business opportunities, increase our capital requirements and impose additional assessments and costs on us, and otherwise adversely affect our business operations and have other negative consequences, including a reduction of our credit ratings.

Any factor described in this Report or in our 2009 Form 10-K or First Quarter Form 10-Q could by itself, or together with other factors, adversely affect our financial results and condition. There are factors not discussed above or elsewhere in this Report that could adversely affect our financial results and condition.

CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

As required by SEC rules, the Company’s management evaluated the effectiveness, as of June 30, 2010, of the Company’s disclosure controls and procedures. The Company’s chief executive officer and chief financial officer participated in the evaluation. Based on this evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2010.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (GAAP) and includes those policies and procedures that:

•		pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the Company;
•		provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
•		provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. No change occurred during second quarter in 2010 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)



	Quarter ended June 30				,	Six months ended June 30				,
(in millions, except per share amounts)	2010		2009			2010		2009

Interest income
Trading assets	$	266		206			533		472
Securities available for sale		2,385		2,887			4,800		5,596
Mortgages held for sale		405		545			792		960
Loans held for sale		30		50			64		117
Loans		10,277		10,532			20,315		21,297
Other interest income		109		81			193		172

Total interest income		13,472		14,301			26,697		28,614

Interest expense
Deposits		714		957			1,449		1,956
Short-term borrowings		21		55			39		178
Long-term debt		1,233		1,485			2,509		3,264
Other interest expense		55		40			104		76

Total interest expense		2,023		2,537			4,101		5,474

Net interest income		11,449		11,764			22,596		23,140
Provision for credit losses		3,989		5,086			9,319		9,644

Net interest income after provision for credit losses		7,460		6,678			13,277		13,496

Noninterest income
Service charges on deposit accounts		1,417		1,448			2,749		2,842
Trust and investment fees		2,743		2,413			5,412		4,628
Card fees		911		923			1,776		1,776
Other fees		982		963			1,923		1,864
Mortgage banking		2,011		3,046			4,481		5,550
Insurance		544		595			1,165		1,176
Net gains from trading activities		109		749			646		1,536
Net gains (losses) on debt securities available for sale (1)		30		(78	)		58		(197	)
Net gains (losses) from equity investments (2)		288		40			331		(117	)
Operating leases		329		168			514		298
Other		581		476			1,191		1,028

Total noninterest income		9,945		10,743			20,246		20,384

Noninterest expense
Salaries		3,564		3,438			6,878		6,824
Commission and incentive compensation		2,225		2,060			4,217		3,884
Employee benefits		1,063		1,227			2,385		2,511
Equipment		588		575			1,266		1,262
Net occupancy		742		783			1,538		1,579
Core deposit and other intangibles		553		646			1,102		1,293
FDIC and other deposit assessments		295		981			596		1,319
Other		3,716		2,987			6,881		5,843

Total noninterest expense		12,746		12,697			24,863		24,515

Income before income tax expense		4,659		4,724			8,660		9,365
Income tax expense		1,514		1,475			2,915		3,027

Net income before noncontrolling interests		3,145		3,249			5,745		6,338
Less: Net income from noncontrolling interests		83		77			136		121

Wells Fargo net income	$	3,062		3,172			5,609		6,217

Wells Fargo net income applicable to common stock	$	2,878		2,575			5,250		4,959

Per share information
Earnings per common share	$	0.55		0.58			1.01		1.14
Diluted earnings per common share		0.55		0.57			1.00		1.13
Dividends declared per common share		0.05		0.05			0.10		0.39
Average common shares outstanding		5,219.7		4,483.1			5,205.1		4,365.9
Diluted average common shares outstanding		5,260.8		4,501.6			5,243.0		4,375.1


(1)		Includes other-than-temporary impairment losses of $106 million and $308 million recognized in earnings, consisting of $49 million and $972 million of total other-than-temporary impairment losses, net of $(57) million and $664 million recognized in other comprehensive income, for the quarters ended June 30, 2010 and 2009, respectively, and other-than-temporary impairment losses of $198 million and $577 million recognized in earnings, consisting of $203 million and $1,575 million of total other-than-temporary impairment losses, net of $5 million and $998 million recognized in other comprehensive income, for the six months ended June 30, 2010 and 2009, respectively.
(2)		Includes other-than-temporary impairment losses of $62 million and $155 million for the quarters ended June 30, 2010 and 2009, respectively, and $167 million and $402 million for the six months ended June 30, 2010 and 2009, respectively.

The accompanying notes are an integral part of these statements.

WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)



	June 30		,	Dec. 31		,
(in millions, except shares)	2010			2009

Assets
Cash and due from banks	$	17,571			27,080
Federal funds sold, securities purchased under resale agreements and other short-term investments		73,898			40,885
Trading assets		47,132			43,039
Securities available for sale		157,927			172,710
Mortgages held for sale (includes $34,877 and $36,962 carried at fair value)		38,581			39,094
Loans held for sale (includes $238 and $149 carried at fair value)		3,999			5,733
Loans (includes $367 carried at fair value at June 30, 2010)		766,265			782,770
Allowance for loan losses		(24,584	)		(24,516	)

Net loans		741,681			758,254

Mortgage servicing rights:
Measured at fair value (residential MSRs)		13,251			16,004
Amortized		1,037			1,119
Premises and equipment, net		10,508			10,736
Goodwill		24,820			24,812
Other assets		95,457			104,180

Total assets (1)	$	1,225,862			1,243,646

Liabilities
Noninterest-bearing deposits	$	175,015			181,356
Interest-bearing deposits		640,608			642,662

Total deposits		815,623			824,018
Short-term borrowings		45,187			38,966
Accrued expenses and other liabilities		58,582			62,442
Long-term debt (includes $361 carried at fair value at June 30, 2010)		185,072			203,861

Total liabilities (2)		1,104,464			1,129,287

Equity
Wells Fargo stockholders’ equity:
Preferred stock		8,980			8,485
Common stock — $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,245,971,422 shares and 5,245,971,422 shares		8,743			8,743
Additional paid-in capital		52,687			52,878
Retained earnings		46,126			41,563
Cumulative other comprehensive income		4,844			3,009
Treasury stock — 14,575,741 shares and 67,346,829 shares		(631	)		(2,450	)
Unearned ESOP shares		(977	)		(442	)

Total Wells Fargo stockholders’ equity		119,772			111,786
Noncontrolling interests		1,626			2,573

Total equity		121,398			114,359

Total liabilities and equity	$	1,225,862			1,243,646


(1)		Our consolidated assets at June 30, 2010, include the following assets of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs: Cash and due from banks, $379 million; Trading assets, $93 million; Securities available for sale, $2.6 billion; Net loans, $20.5 billion; Other assets, $2.4 billion, and Total assets, $26.0 billion.
(2)		Our consolidated liabilities at June 30, 2010, include the following VIE liabilities for which the VIE creditors do not have recourse to Wells Fargo: Short-term borrowings, $346 million; Accrued expenses and other liabilities, $771 million; Long-term debt, $10.3 billion; and Total liabilities, $11.4 billion.

The accompanying notes are an integral part of these statements.

WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
AND COMPREHENSIVE INCOME (UNAUDITED)

Preferred stock

Common stock

(in millions, except shares)

Shares

Amount

Shares

Amount

Balance, December 31, 2008

10,111,821

31,332

4,228,630,889

7,273

Cumulative effect from change in accounting for other-than-temporary impairment on debt securities

Effect of change in accounting for noncontrolling interests

Balance, January 1, 2009

10,111,821

31,332

4,228,630,889

7,273

Comprehensive income:

Net income

Other comprehensive income, net of tax:

Translation adjustments

Net unrealized gains on securities available for sale, net of reclassification of $5 million of net losses included in net income

Net unrealized losses on derivatives and hedging activities, net of reclassification of $175 million of net gains on cash flow hedges included in net income

Unamortized gains under defined benefit plans, net of amortization

Total comprehensive income

Noncontrolling interests

Common stock issued

439,968,781

654

Common stock repurchased

(2,731,755

)

Preferred stock released to ESOP

Preferred stock converted to common shares

(32,703

)

(33

)

2,280,480

Common stock dividends

Preferred stock dividends and accretion

198

Tax benefit upon exercise of stock options

Stock option compensation expense

Net change in deferred compensation and related plans

Net change

(32,703

)

165

439,517,506

654

Balance, June 30, 2009

10,079,118

31,497

4,668,148,395

7,927

Balance, January 1, 2010

9,980,940

8,485

5,178,624,593

8,743

Cumulative effect from change in accounting for VIEs

Comprehensive income:

Net income

Other comprehensive income, net of tax:

Translation adjustments

Net unrealized gains on securities available for sale, net of
reclassification of $134 million of net gains included in net income

Net unrealized gains on derivatives and hedging activities, net of
reclassification of $204 million of net gains on cash flow hedges included in net income

Unamortized gains under defined benefit plans, net of amortization

Total comprehensive income

Noncontrolling interests

Common stock issued

37,142,817

Common stock repurchased

(2,206,165

)

Preferred stock issued to ESOP

1,000,000

1,000

Preferred stock released to ESOP

Preferred stock converted to common shares

(504,847

)

(505

)

17,834,436

Common stock warrants repurchased

Common stock dividends

Preferred stock dividends

Tax benefit upon exercise of stock options

Stock option compensation expense

Net change in deferred compensation and related plans

Net change

495,153

495

52,771,088

—

Balance, June 30, 2010

10,476,093

8,980

5,231,395,681

8,743

The accompanying notes are an integral part of these statements.



Wells Fargo stockholders’ equity
							Cumulative									Total
	Additional						other						Unearned			Wells Fargo
	paid-in			Retained			comprehensive			Treasury			ESOP			stockholders’			Noncontrolling			Total
	capital			earnings			income			stock			shares			equity			interests			equity

		36,026			36,543			(6,869	)		(4,666	)		(555	)		99,084			3,232		$	102,316

					53			(53	)								—						—
		(3,716	)														(3,716	)		3,716			—

		32,310			36,596			(6,922	)		(4,666	)		(555	)		95,368			6,948			102,316


					6,217												6,217			121			6,338

								35									35			(4	)		31
								6,039									6,039			34			6,073
								(300	)								(300	)					(300	)
								558									558						558

																	12,549			151			12,700
		(5	)														(5	)		(340	)		(345	)
		7,845			(733	)					1,542						9,308						9,308
											(63	)					(63	)					(63	)
		(2	)											35			33						33
		(40	)								73						—						—
					(1,657	)											(1,657	)					(1,657	)
					(1,258	)											(1,060	)					(1,060	)
		3															3						3
		138															138						138
		21									(12	)					9						9

		7,960			2,569			6,332			1,540			35			19,255			(189	)		19,066

		40,270			39,165			(590	)		(3,126	)		(520	)		114,623			6,759		$	121,382

		52,878			41,563			3,009			(2,450	)		(442	)		111,786			2,573		$	114,359

					183												183						183

					5,609												5,609			136			5,745

								(13	)								(13	)		(1	)		(14	)
								1,672									1,672			11			1,683
								144									144						144
								32									32						32

																	7,444			146			7,590
		17															17			(1,093	)		(1,076	)
		21			(338	)					1,182						865						865
											(68	)					(68	)					(68	)
		80												(1,080	)		—						—
		(40	)											545			505						505
		(62	)								567						—						—
		(540	)														(540	)					(540	)
		2			(522	)											(520	)					(520	)
					(369	)											(369	)					(369	)
		76															76						76
		67															67						67
		188									138						326						326

		(191	)		4,563			1,835			1,819			(535	)		7,986			(947	)		7,039

		52,687			46,126			4,844			(631	)		(977	)		119,772			1,626		$	121,398

WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)



	Six months ended June 30					,
(in millions)	2010			2009

Cash flows from operating activities:
Net income before noncontrolling interests	$	5,745			6,338
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		9,319			9,644
Changes in fair value of MSRs (residential), MHFS and LHFS carried at fair value		1,384			201
Changes in fair value related to adoption of consolidation accounting guidance		424			—
Depreciation and amortization		1,335			1,540
Other net losses (gains)		1,927			(4,028	)
Preferred shares released to ESOP		505			33
Stock option compensation expense		67			138
Excess tax benefits related to stock option payments		(75	)		(3	)
Originations of MHFS		(153,453	)		(226,452	)
Proceeds from sales of and principal collected on mortgages originated for sale		161,908			207,006
Originations of LHFS		(4,206	)		(5,403	)
Proceeds from sales of and principal collected on LHFS		10,555			10,723
Purchases of LHFS		(4,673	)		(3,947	)
Net change in:
Trading assets		(3,938	)		14,592
Deferred income taxes		2,416			3,289
Accrued interest receivable		727			284
Accrued interest payable		(56	)		(631	)
Other assets, net		(4,595	)		(326	)
Other accrued expenses and liabilities, net		(8,462	)		4,851

Net cash provided by operating activities		16,854			17,849

Cash flows from investing activities:
Net change in:
Federal funds sold, securities purchased under resale agreements and other short-term investments		(33,013	)		33,457
Securities available for sale:
Sales proceeds		3,981			18,871
Prepayments and maturities		22,741			18,484
Purchases		(11,095	)		(80,923	)
Loans:
Decrease in banking subsidiaries’ loan originations, net of collections		20,904			28,470
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries		3,556			3,179
Purchases (including participations) of loans by banking subsidiaries		(1,201	)		(1,563	)
Principal collected on nonbank entities’ loans		8,006			6,471
Loans originated by nonbank entities		(5,309	)		(4,319	)
Net cash paid for acquisitions		(11	)		(132	)
Proceeds from sales of foreclosed assets		2,346			1,813
Changes in MSRs from purchases and sales		(15	)		(9	)
Other, net		830			683

Net cash provided by investing activities		11,720			24,482

Cash flows from financing activities:
Net change in:
Deposits		(8,395	)		32,192
Short-term borrowings		1,094			(52,591	)
Long-term debt:
Proceeds from issuance		2,165			3,876
Repayment		(31,925	)		(35,162	)
Preferred stock:
Cash dividends paid		(369	)		(1,053	)
Common stock:
Proceeds from issuance		865			9,308
Repurchased		(68	)		(63	)
Cash dividends paid		(520	)		(1,657	)
Common stock warrants repurchased		(540	)		—
Excess tax benefits related to stock option payments		75			3
Net change in noncontrolling interests		(465	)		(315	)

Net cash used by financing activities		(38,083	)		(45,462	)

Net change in cash and due from banks		(9,509	)		(3,131	)
Cash and due from banks at beginning of period		27,080			23,763

Cash and due from banks at end of period	$	17,571			20,632

Supplemental cash flow disclosures:
Cash paid for interest	$	4,157			6,105
Cash paid for income taxes		625			1,062

The accompanying notes are an integral part of these statements. See Note 1 for noncash activities.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

See the Glossary of Acronyms at the end of this Report for terms used throughout the Financial Statements and related Notes of this Form 10-Q.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Wells Fargo & Company is a nation-wide diversified, community-based financial services company. We provide banking, insurance, investments, mortgage banking, investment banking, retail banking, brokerage, and consumer finance through banking stores, the internet and other distribution channels to consumers, businesses and institutions in all 50 states, the District of Columbia, and in other countries. When we refer to “Wells Fargo,” “the Company,” “we,” “our” or “us” in this Form 10-Q, we mean Wells Fargo & Company and Subsidiaries (consolidated). Wells Fargo & Company (the Parent) is a financial holding company and a bank holding company. We also hold a majority interest in a real estate investment trust, which has publicly traded preferred stock outstanding.

Our accounting and reporting policies conform with U.S. generally accepted accounting principles (GAAP) and practices in the financial services industry. To prepare the financial statements in conformity with GAAP, management must make estimates based on assumptions about future economic and market conditions (for example, unemployment, market liquidity, real estate prices, etc.) that affect the reported amounts of assets and liabilities at the date of the financial statements and income and expenses during the reporting period and the related disclosures. Although our estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that in 2010 actual conditions could be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Management has made significant estimates in several areas, including the evaluation of other-than-temporary impairment (OTTI) on investment securities (Note 4), allowance for credit losses and purchased credit-impaired (PCI) loans (Note 5), valuing residential mortgage servicing rights (MSRs) (Notes 7 and 8) and financial instruments (Note 12), pension accounting (Note 14) and income taxes. Actual results could differ from those estimates. Among other effects, such changes could result in future impairments of investment securities, increases to the allowance for loan losses, as well as increased future pension expense.

The information furnished in these unaudited interim statements reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the periods presented. These adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q. The results of operations in the interim statements do not necessarily indicate the results that may be expected for the full year. The interim financial information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2009 (2009 Form 10-K). Certain amounts in the financial statements for prior years have been revised to conform with current financial statement presentation.

Accounting Developments

In first quarter 2010, we adopted the following accounting updates to the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC or Codification):

•		Accounting Standards Update (ASU or Update) 2010-6, Improving Disclosures about Fair Value Measurements;
•		ASU 2009-16, Accounting for Transfers of Financial Assets (Statement of Financial Accounting Standards (FAS) 166, Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140);
•		ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (FAS 167, Amendments to FASB Interpretation No. 46(R)); and
•		ASU 2010-10, Amendments for Certain Investment Funds.

Information about these accounting updates is further described in more detail below.

ASU 2010-6 amends the disclosure requirements for fair value measurements. Companies are now required to disclose significant transfers in and out of Levels 1 and 2 of the fair value hierarchy, whereas the previous rules only required the disclosure of transfers in and out of Level 3. Additionally, in the rollforward of Level 3 activity, companies must present information on purchases, sales, issuances, and settlements on a gross basis rather than on a net basis. The Update also clarifies that fair value measurement disclosures should be presented for each class of assets and liabilities. A class is typically a subset of a line item in the statement of financial position. Companies should also provide information about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring instruments classified as either Level 2 or Level 3. We adopted this guidance in first quarter 2010 with prospective application, except for the new requirement related to the Level 3 rollforward. Gross presentation in the Level 3 rollforward is effective for us in first quarter 2011 with prospective application. Our adoption of the Update did not affect our consolidated financial statement results since it amends only the disclosure requirements for fair value measurements.

ASU 2009-16 (FAS 166) modifies certain guidance contained in ASC 860, Transfers and Servicing. This pronouncement eliminates the concept of qualifying special purpose entities (QSPEs) and provides additional criteria transferors must use to evaluate transfers of financial assets. The Update also requires that any assets or liabilities retained from a transfer accounted for as a sale must be initially recognized at fair value. We adopted this guidance in first quarter 2010 with prospective application for transfers that occurred on and after January 1, 2010.

ASU 2009-17 (FAS 167) amends several key consolidation provisions related to variable interest entities (VIEs), which are included in ASC 810, Consolidation. The scope of the new guidance includes entities that were previously designated as QSPEs. The Update also changes the approach companies must use to identify VIEs for which they are deemed to be the primary beneficiary and are required to consolidate. Under the new guidance, a VIE’s primary beneficiary is the entity that has the power to direct the VIE’s significant activities, and has an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. The Update also requires companies to continually reassess whether they are the primary beneficiary of a VIE, whereas the previous rules only required reconsideration upon the occurrence of certain triggering events. We adopted this guidance in first quarter 2010, which resulted in the consolidation of $18.6 billion of incremental assets onto our consolidated balance sheet and a $183 million increase to beginning retained earnings as a cumulative effect adjustment.

We also elected the fair value option for those newly consolidated VIEs for which our interests, prior to January 1, 2010, were predominantly carried at fair value with changes in fair value recorded to earnings. Accordingly, the fair value option was elected to effectively continue fair value accounting through earnings for those interests. Conversely, we did not elect the fair value option for those newly consolidated VIEs that did not share these characteristics. At January 1, 2010, the fair value of loans and long-term debt for which we elected the fair value option was $1.0 billion and $1.0 billion, respectively. The incremental impact of electing the fair value option (compared to not electing) on the cumulative effect adjustment to retained earnings was an increase of $15 million. See Notes 7 and 12 in this Report for additional information.

ASU 2010-10 amends consolidation accounting guidance to defer indefinitely the application of ASU 2009-17 to certain investment funds. The amendment was effective for us in first quarter 2010. As a result, we did not consolidate any investment funds upon adoption of ASU 2009-17.

Supplemental Cash Flow Information

Noncash activities are presented below, including information on transfers affecting mortgages held for sale (MHFS), loans held for sale (LHFS), and MSRs.



	Six months ended June 30					,
(in millions)	2010			2009


Transfers from trading assets to securities available for sale	$	—			845
Transfers from loans to securities available for sale		3,468			—
Transfers from MHFS to trading assets		—			663
Transfers from MHFS to MSRs		2,025			3,550
Transfers from MHFS to foreclosed assets		102			87
Transfers from (to) loans to (from) MHFS		99			45
Transfers from (to) loans to (from) LHFS		(77	)		16
Transfers from loans to foreclosed assets		5,481			3,307
Adoption of consolidation accounting guidance:
Trading assets		155			—
Securities available for sale		(7,590	)		—
Loans		25,657			—
Other assets		193			—
Short-term borrowings		5,127			—
Long-term debt		13,134			—
Accrued expenses and other liabilities		(32	)		—
Decrease in noncontrolling interests due to deconsolidation of subsidiaries		240			—
Transfer from noncontrolling interests to long-term debt		345			—

Subsequent Events

We have evaluated the effects of subsequent events that have occurred subsequent to period end June 30, 2010. There have been no material events that would require recognition in our second quarter 2010 consolidated financial statements or disclosure in the Notes to the financial statements.

2. BUSINESS COMBINATIONS

We regularly explore opportunities to acquire financial services companies and businesses. Generally, we do not make a public announcement about an acquisition opportunity until a definitive agreement has been signed. For information on additional consideration related to acquisitions, which is considered to be a guarantee, see Note 10 in this Report.

In the first half of 2010, we completed two acquisitions with combined total assets of $431 million consisting of a factoring business and an insurance brokerage business. At June 30, 2010, we had one small insurance brokerage business acquisition pending and expect to complete this transaction during third quarter 2010.

On December 31, 2008, Wells Fargo acquired Wachovia Corporation (Wachovia). The purchase accounting for the Wachovia acquisition was finalized as of December 31, 2009. Costs associated with involuntary employee termination, contract terminations and closing duplicate facilities were recorded throughout 2009 and allocated to the purchase price. The following table summarizes the first half of 2010 usage of the exit reserves associated with the Wachovia acquisition.

Employee

Contract

Facilities

(in millions)

termination

Total

Balance, December 31, 2009

355

344

757

Cash payments / utilization

(121

)

(16

)

(92

)

(229

)

Balance, June 30, 2010

234

252

528

3. FEDERAL FUNDS SOLD, SECURITIES PURCHASED UNDER RESALE AGREEMENTS AND OTHER SHORT-TERM INVESTMENTS

The following table provides the detail of federal funds sold, securities purchased under resale agreements and other short-term investments.



	June 30		,	Dec. 31		,
(in millions)	2010			2009


Federal funds sold and securities purchased under resale agreements	$	16,302			8,042
Interest-earning deposits		55,550			31,668
Other short-term investments		2,046			1,175

Total	$	73,898			40,885

We pledge certain financial instruments that we own to collateralize repurchase agreements and other securities financings. The types of collateral we pledge include securities issued by federal agencies, government-sponsored entities (GSEs), and domestic and foreign companies. We pledged $18.3 billion at June 30, 2010, and $14.8 billion at December 31, 2009, under agreements that permit the secured parties to sell or repledge the collateral. Pledged collateral where the secured party cannot sell or repledge was $782 million at June 30, 2010, and $434 million at December 31, 2009.

We receive collateral from other entities under resale agreements and securities borrowings. We received $136.3 billion at June 30, 2010, and $31.4 billion at December 31, 2009, for which we have the right to sell or repledge the collateral. These amounts include securities we have sold or repledged to others with a fair value of $134.7 billion at June 30, 2010, and $29.7 billion at December 31, 2009.

4. SECURITIES AVAILABLE FOR SALE

The following table provides the cost and fair value for the major categories of securities available for sale carried at fair value. The net unrealized gains (losses) are reported on an after-tax basis as a component of cumulative other comprehensive income (OCI). There were no securities classified as held to maturity as of the periods presented.



			Gross		Gross
			unrealized		unrealized			Fair
(in millions)	Cost		gains		losses			value

June 30, 2010
Securities of U.S. Treasury and federal agencies	$	1,621		64		—			1,685
Securities of U.S. states and political subdivisions		16,205		764		(545	)		16,424
Mortgage-backed securities:
Federal agencies		66,915		4,489		(9	)		71,395
Residential		19,425		2,501		(780	)		21,146
Commercial		12,513		1,293		(1,276	)		12,530

Total mortgage-backed securities		98,853		8,283		(2,065	)		105,071

Corporate debt securities		8,848		1,159		(64	)		9,943
Collateralized debt obligations		4,020		340		(329	)		4,031
Other (1)		15,219		754		(363	)		15,610

Total debt securities		144,766		11,364		(3,366	)		152,764

Marketable equity securities:
Perpetual preferred securities		3,999		237		(150	)		4,086
Other marketable equity securities		572		509		(4	)		1,077

Total marketable equity securities		4,571		746		(154	)		5,163

Total	$	149,337		12,110		(3,520	)		157,927

December 31, 2009
Securities of U.S. Treasury and federal agencies	$	2,256		38		(14	)		2,280
Securities of U.S. states and political subdivisions		13,212		683		(365	)		13,530
Mortgage-backed securities:
Federal agencies		79,542		3,285		(9	)		82,818
Residential		28,153		2,480		(2,043	)		28,590
Commercial		12,221		602		(1,862	)		10,961

Total mortgage-backed securities		119,916		6,367		(3,914	)		122,369

Corporate debt securities		8,245		1,167		(77	)		9,335
Collateralized debt obligations		3,660		432		(367	)		3,725
Other (1)		15,025		1,099		(245	)		15,879

Total debt securities		162,314		9,786		(4,982	)		167,118

Marketable equity securities:
Perpetual preferred securities		3,677		263		(65	)		3,875
Other marketable equity securities		1,072		654		(9	)		1,717

Total marketable equity securities		4,749		917		(74	)		5,592

Total	$	167,063		10,703		(5,056	)		172,710


(1)		Included in the “Other” category are asset-backed securities collateralized by auto leases or loans and cash reserves with a cost basis and fair value of $6.7 billion and $6.9 billion, respectively, at June 30, 2010, and $8.2 billion and $8.5 billion, respectively, at December 31, 2009. Also included in the “Other” category are asset-backed securities collateralized by home equity loans with a cost basis and fair value of $1.0 billion and $1.2 billion, respectively, at June 30, 2010, and $2.3 billion and $2.5 billion, respectively, at December 31, 2009. The remaining balances primarily include asset-backed securities collateralized by credit cards and student loans.

As part of our liquidity management strategy, we pledge securities to secure borrowings from the Federal Home Loan Bank (FHLB) and the Federal Reserve Bank. We also pledge securities to secure trust and public deposits and for other purposes as required or permitted by law. Securities pledged where the secured party does not have the right to sell or repledge totaled $91.7 billion at June 30, 2010, and $98.9 billion at December 31, 2009. We did not pledge any securities where the secured party has the right to sell or repledge the collateral as of the same periods, respectively.

Gross Unrealized Losses and Fair Value

The following table shows the gross unrealized losses and fair value of securities in the securities available-for-sale portfolio by length of time that individual securities in each category had been in a continuous loss position. Debt securities on which we have taken credit-related OTTI write-downs are categorized as being “less than 12 months” or “12 months or more” in a continuous loss position based on the point in time that the fair value declined to below the cost basis and not the period of time since the credit-related OTTI write-down.



	Less than 12 months					12 months or more					Total
	Gross					Gross					Gross
	unrealized			Fair		unrealized			Fair		unrealized			Fair
(in millions)	losses			value		losses			value		losses			value

June 30, 2010
Securities of U.S. states and political subdivisions	$	(93	)		2,653		(452	)		2,715		(545	)		5,368
Mortgage-backed securities:
Federal agencies		(9	)		1,010		—			—		(9	)		1,010
Residential		(19	)		788		(761	)		5,316		(780	)		6,104
Commercial		(10	)		366		(1,266	)		5,589		(1,276	)		5,955

Total mortgage-backed securities		(38	)		2,164		(2,027	)		10,905		(2,065	)		13,069

Corporate debt securities		(18	)		731		(46	)		290		(64	)		1,021
Collateralized debt obligations		(18	)		687		(311	)		519		(329	)		1,206
Other		(70	)		1,432		(293	)		812		(363	)		2,244

Total debt securities		(237	)		7,667		(3,129	)		15,241		(3,366	)		22,908

Marketable equity securities:
Perpetual preferred securities		(139	)		1,349		(11	)		74		(150	)		1,423
Other marketable equity securities		(4	)		65		—			—		(4	)		65

Total marketable equity securities		(143	)		1,414		(11	)		74		(154	)		1,488

Total	$	(380	)		9,081		(3,140	)		15,315		(3,520	)		24,396

December 31, 2009
Securities of U.S. Treasury and federal agencies	$	(14	)		530		—			—		(14	)		530
Securities of U.S. states and political subdivisions		(55	)		1,120		(310	)		2,826		(365	)		3,946
Mortgage-backed securities:
Federal agencies		(9	)		767		—			—		(9	)		767
Residential		(243	)		2,991		(1,800	)		9,697		(2,043	)		12,688
Commercial		(37	)		816		(1,825	)		6,370		(1,862	)		7,186

Total mortgage-backed securities		(289	)		4,574		(3,625	)		16,067		(3,914	)		20,641

Corporate debt securities		(7	)		281		(70	)		442		(77	)		723
Collateralized debt obligations		(55	)		398		(312	)		512		(367	)		910
Other		(73	)		746		(172	)		286		(245	)		1,032

Total debt securities		(493	)		7,649		(4,489	)		20,133		(4,982	)		27,782

Marketable equity securities:
Perpetual preferred securities		(1	)		93		(64	)		527		(65	)		620
Other marketable equity securities		(9	)		175		—			—		(9	)		175

Total marketable equity securities		(10	)		268		(64	)		527		(74	)		795

Total	$	(503	)		7,917		(4,553	)		20,660		(5,056	)		28,577

We do not have the intent to sell any securities included in the table above. For debt securities included in the table above, we have concluded it is more likely than not that we will not be required to sell prior to recovery of the amortized cost basis. We have assessed each security for credit impairment. For debt securities, we evaluate, where necessary, whether credit impairment exists by comparing the present value of the expected cash flows to the securities amortized cost basis. For equity securities, we consider

numerous factors in determining whether impairment exists, including our intent and ability to hold the securities for a period of time sufficient to recover the cost basis of the securities.

For complete descriptions of the factors we consider when analyzing debt securities for impairment, see Note 5 of the 2009 10-K. There have been no material changes to our methodologies for assessing impairment in second quarter 2010.

Securities of U.S. Treasury and federal agencies
The unrealized losses associated with U.S. Treasury and federal agency securities do not have any credit losses due to the guarantees provided by the United States government.

Securities of U.S. states and political subdivisions
The unrealized losses associated with securities of U.S. states and political subdivisions are primarily driven by changes in interest rates and not due to the credit quality of the securities. Substantially all of these investments are investment grade. The securities were generally underwritten in accordance with our own investment standards prior to the decision to purchase, without relying on a bond insurer’s guarantee in making the investment decision. These investments will continue to be monitored as part of our ongoing impairment analysis, but are expected to perform, even if the rating agencies reduce the credit rating of the bond insurers. As a result, we expect to recover the entire amortized cost basis of these securities.

Federal Agency Mortgage-Backed Securities (MBS)
The unrealized losses associated with federal agency MBS are primarily driven by changes in interest rates and not due to credit losses. These securities are issued by U.S. government or GSEs and do not have any credit losses given the explicit or implicit government guarantee.

Residential Mortgage-Backed Securities
The unrealized losses associated with private residential MBS are primarily driven by higher projected collateral losses, wider credit spreads and changes in interest rates. We assess for credit impairment using a cash flow model. The key assumptions include default rates, severities and prepayment rates. We estimate losses to a security by forecasting the underlying mortgage loans in each transaction. The forecasted loan performance is used to project cash flows to the various tranches in the structure. Cash flow forecasts also considered, as applicable, independent industry analyst reports and forecasts, sector credit ratings, and other independent market data. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared with our credit enhancement, we expect to recover the entire amortized cost basis of these securities.

Commercial Mortgage-Backed Securities
The unrealized losses associated with commercial MBS are primarily driven by higher projected collateral losses and wider credit spreads. These investments are predominantly investment grade. We assess for credit impairment using a cash flow model. The key assumptions include default rates and severities. We estimate losses to a security by forecasting the underlying loans in each transaction. The forecasted loan performance is used to project cash flows to the various tranches in the structure. Cash flow forecasts are also considered, as applicable, and independent industry analyst reports and forecasts, sector credit ratings, and other independent market data. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared with our credit enhancement, we expect to recover the entire amortized cost basis of these securities.

Corporate Debt Securities
The unrealized losses associated with corporate debt securities are primarily related to securities backed by commercial loans and individual issuer companies. For securities with commercial loans as the underlying collateral, we have evaluated the expected credit losses in the security and concluded that we have sufficient credit enhancement when compared with our estimate of credit losses for the individual security. For individual issuers, we evaluate the financial performance of the issuer on a quarterly basis to determine that the issuer can make all contractual principal and interest payments. Based upon this assessment, we expect to recover the entire cost basis of these securities.

Collateralized Debt Obligations (CDOs)
The unrealized losses associated with CDOs relate to securities primarily backed by commercial, residential or other consumer collateral. The losses are primarily driven by higher projected collateral losses and wider credit spreads. We assess for credit impairment using a cash flow model. The key assumptions include default rates, severities and prepayment rates. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared with our credit enhancement, we expect to recover the entire amortized cost basis of these securities.

Other Debt Securities
The unrealized losses associated with other debt securities primarily relate to other asset-backed securities, which are primarily backed by auto, home equity and student loans. The losses are primarily driven by higher projected collateral losses, wider credit spreads and changes in interest rates. We assess for credit impairment using a cash flow model. The key assumptions include default rates, severities and prepayment rates. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared with our credit enhancement, we expect to recover the entire amortized cost basis of these securities.

Marketable Equity Securities
Our marketable equity securities include investments in perpetual preferred securities, which provide very attractive tax-equivalent yields. We evaluated these hybrid financial instruments with investment-grade ratings for impairment using an evaluation methodology similar to that used for debt securities. Perpetual preferred securities were not other-than-temporarily impaired at June 30, 2010, if there was no evidence of credit deterioration or investment rating downgrades of any issuers to below investment grade, and we expected to continue to receive full contractual payments. We will continue to evaluate the prospects for these securities for recovery in their market value in accordance with our policy for estimating OTTI. We have recorded impairment write-downs on perpetual preferred securities where there was evidence of credit deterioration.

The fair values of our investment securities could decline in the future if the underlying performance of the collateral for the residential and commercial MBS or other securities deteriorate and our credit enhancement levels do not provide sufficient protection to our contractual principal and interest. As a result, there is a risk that significant OTTI may occur in the future given the current economic environment.

The following table shows the gross unrealized losses and fair value of debt and perpetual preferred securities available for sale by those rated investment grade and those rated less than investment grade, according to their lowest credit rating by Standard & Poor’s Rating Services (S&P) or Moody’s Investors Service (Moody’s). Credit ratings express opinions about the credit quality of a security. Securities rated investment grade, that is those rated BBB- or higher by S&P or Baa3 or higher by Moody’s, are generally considered by the rating agencies and market participants to be low credit risk. Conversely, securities rated below investment grade, labeled as “speculative grade” by the rating agencies, are considered to be distinctively higher credit risk than investment grade securities. We have also included securities not rated by S&P or Moody’s in the table below based on the internal credit grade of the securities (used for credit risk management purposes) equivalent to the credit rating assigned by major credit agencies. The unrealized losses and fair value of unrated securities categorized as investment grade were $55 million and $1.1 billion, respectively, at June 30, 2010. There were no unrated securities in a loss position categorized as investment grade as of December 31, 2009. If an internal credit grade was not assigned, we categorized the security as non-investment grade.



	Investment grade					Non-investment grade
	Gross					Gross
	unrealized			Fair		unrealized			Fair
(in millions)	losses			value		losses			value

June 30, 2010
Securities of U.S. states and political subdivisions	$	(453	)		4,991		(92	)		377
Mortgage-backed securities:
Federal agencies		(9	)		1,010		—			—
Residential		(19	)		773		(761	)		5,331
Commercial		(736	)		5,227		(540	)		728

Total mortgage-backed securities		(764	)		7,010		(1,301	)		6,059

Corporate debt securities		(31	)		129		(33	)		892
Collateralized debt obligations		(89	)		731		(240	)		475
Other		(210	)		1,842		(153	)		402

Total debt securities		(1,547	)		14,703		(1,819	)		8,205
Perpetual preferred securities		(131	)		1,314		(19	)		109

Total	$	(1,678	)		16,017		(1,838	)		8,314

December 31, 2009
Securities of U.S. Treasury and federal agencies	$	(14	)		530		—			—
Securities of U.S. states and political subdivisions		(275	)		3,621		(90	)		325
Mortgage-backed securities:
Federal agencies		(9	)		767		—			—
Residential		(480	)		5,661		(1,563	)		7,027
Commercial		(1,247	)		6,543		(615	)		643

Total mortgage-backed securities		(1,736	)		12,971		(2,178	)		7,670

Corporate debt securities		(31	)		260		(46	)		463
Collateralized debt obligations		(104	)		471		(263	)		439
Other		(85	)		644		(160	)		388

Total debt securities		(2,245	)		18,497		(2,737	)		9,285
Perpetual preferred securities		(65	)		620		—			—

Total	$	(2,310	)		19,117		(2,737	)		9,285

Contractual Maturities

The following table shows the remaining contractual principal maturities and contractual yields of debt securities available for sale. The remaining contractual principal maturities for MBS were determined assuming no prepayments. Remaining expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations before the underlying mortgages mature.



						Remaining contractual principal maturity
			Weighted-								After one year					After five years
	Total		average			Within one year					through five years					through ten years					After ten years
(in millions)	amount		yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield

June 30, 2010
Securities of U.S. Treasury and federal agencies	$	1,685		3.17	%	$	12		3.49	%	$	748		3.14	%	$	919		3.19	%	$	6		4.05	%
Securities of U.S. states and political subdivisions		16,424		6.37			402		2.81			1,371		4.59			1,509		6.19			13,142		6.68
Mortgage-backed securities:
Federal agencies		71,395		5.47			2		5.89			43		6.28			548		5.23			70,802		5.47
Residential		21,146		5.27			—		—			113		0.54			302		5.53			20,731		5.29
Commercial		12,530		5.35			—		—			84		5.62			603		3.59			11,843		5.43

Total mortgage-backed securities		105,071		5.41			2		5.89			240		3.35			1,453		4.61			103,376		5.43

Corporate debt securities		9,943		5.53			612		4.94			3,846		5.89			4,507		5.36			978		5.33
Collateralized debt obligations		4,031		1.29			2		5.20			456		1.71			1,868		1.36			1,705		1.09
Other		15,610		3.57			3,719		4.96			6,217		4.09			1,372		1.74			4,302		2.21

Total debt securities at fair value (1)	$	152,764		5.20	%	$	4,749		4.77	%	$	12,878		4.53	%	$	11,628		4.13	%	$	123,509		5.39	%

December 31, 2009
Securities of U.S. Treasury and federal agencies	$	2,280		2.80	%	$	413		0.79	%	$	669		2.14	%	$	1,192		3.87	%	$	6		4.03	%
Securities of U.S. states and political subdivisions		13,530		6.75			77		7.48			703		6.88			1,055		6.56			11,695		6.76
Mortgage-backed securities:
Federal agencies		82,818		5.50			12		4.68			50		5.91			271		5.56			82,485		5.50
Residential		28,590		5.40			51		4.80			115		0.45			283		5.69			28,141		5.41
Commercial		10,961		5.29			85		0.68			71		5.55			169		5.66			10,636		5.32

Total mortgage-backed securities		122,369		5.46			148		2.44			236		3.14			723		5.63			121,262		5.46

Corporate debt securities		9,335		5.53			684		4.00			3,937		5.68			3,959		5.68			755		5.32
Collateralized debt obligations		3,725		1.70			2		5.53			492		4.48			1,837		1.56			1,394		0.90
Other		15,879		4.22			2,128		5.62			7,762		5.96			697		2.46			5,292		1.33
																&nbs