Wells Fargo Reports Record Quarterly EPS, Revenue

Wells Fargo & Company (NYSE:WFC):

Third Quarter 2006 Highlights

  • Record diluted earnings per share of $0.64, up 10 percent from prior years $0.58, up 20 percent (annualized) from second quarter 2006
  • Record net income of $2.19 billion, up 11 percent from prior years $1.98 billion, up 20 percent (annualized) from second quarter 2006
  • Return on equity of 20 percent
  • Record revenue of $8.93 billion, up 5 percent from prior year; 13 percent revenue growth in businesses other than Wells Fargo Home Mortgage (Home Mortgage)
  • Average commercial and commercial real estate loans up 10 percent from prior year, up 8 percent (annualized) from second quarter 2006
  • Average consumer loans (excluding real estate 1-4 family first mortgages) up 16 percent from prior year, up 19 percent (annualized) from second quarter 2006
  • Average core deposits up 5 percent from prior year, up 4 percent (annualized) from second quarter 2006

Selected Financial Information

Third Quarter

Nine months ended Sept. 30

Earnings

2006  2005  %
Change 

2006 

2005  %
Change 
Diluted earnings per share $ 0.64  $ 0.58  10% $ 1.85  $ 1.68  10%
Net income (in billions) 2.19  1.98  11  6.30  5.74  10 

Other

Revenue (in billions) $ 8.93  $ 8.50  $ 26.28  $ 24.46 
Average loans (in billions) 304.0  295.6  305.1  292.9 
Average core deposits (in billions) 260.4  247.2  257.4  239.2 
Net charge-offs as % of avg. total loans

0.86%

0.73%

18  0.67% 0.72% (7)

All common share and per share disclosures reflect the two-for-one stock split in the form of a 100 percent stock dividend distributed August 11, 2006.

Wells Fargo & Company (NYSE:WFC) reported record diluted earnings per common share of $0.64 for third quarter 2006, up 10 percent from $0.58 in third quarter 2005. All common share and per share disclosures reflect the two-for-one stock split in the form of a 100 percent stock dividend distributed August 11, 2006. Net income was a record $2.19 billion, up 11 percent from $1.98 billion in third quarter 2005. For the first nine months of 2006, diluted earnings per share were a record $1.85 and net income was a record $6.30 billion, both up 10 percent from the first nine months of 2005.

The stagecoach was running on the full horsepower of our diversified business model this quarter as our talented team once again achieved double-digit EPS and net income growth, said Chairman and CEO Dick Kovacevich. The marketplace continues to recognize the value of our teams ability to satisfy all our customers financial needs and help them succeed financially. Our stock price reached a record high during the quarter. For the twelve months ended September 30, 2006, our stocks total return was 28 percent, more than double the S&P500s11 percent. Our market cap at quarter end was $122 billion, up 24 percent from the same time last year. An annual survey in Barrons ranked us the worlds 12th most respected company of any kind, up six places from last year. Wells Fargo Bank, N.A. was upgraded by Standard and Poors to AA+, their highest rating among all U.S. banks, while maintaining the highest-possible credit rating, Aaa, from Moodys Investors Service. We also recently became the largest corporate purchaser of renewable energy in the U.S., just part of our commitment to be an outstanding leader in environmental responsibility and stewardship.

Financial Performance

Diluted earnings per share were $0.64, up 10 percent from $0.58 in third quarter 2005 and up 20 percent (annualized) from $0.61 in second quarter 2006, driven by solid revenue growth and positive operating leverage. Third quarter results included $28 million of stock option expense that was not in past years results. The results this quarter once again demonstrated the advantage of our diversified business model, said Senior EVP and Chief Financial Officer Howard Atkins. Despite the uncertain economic and interest rate environment, our diverse group of more than 80 businesses once again produced double-digit earnings growth, led by particular strength in regional banking and wholesale/commercial banking. The Company had continued strong performance on numerous financial measures, including a wider net interest margin, improved operating efficiency and, at 20 percent, the highest return on equity since first quarter 2004.

Revenue

Revenue of $8.9 billion grew $431 million, or 5 percent, from a year ago and was up $145 million, or 7 percent (annualized), on a linked-quarter basis. Wells Fargo Home Mortgage (Home Mortgage) revenue declined $502 million to $923 million from $1.4 billion in third quarter 2005, largely due to the $356 million mortgage servicing rights valuation reserve release (income) recorded in third quarter 2005, a quarter in which long-term mortgage interest rates increased 51 basis points. Combined revenue of businesses other than Home Mortgage grew 13 percent from third quarter 2005. Businesses with double-digit, year-over-year revenue growth included business direct, regional banking, merchant card services, credit cards, debit cards, corporate trust, asset-based lending, Eastdil Secured, commercial banking, insurance, international, commercial real estate, specialized financial services and consumer finance.

Loans

Average loans of $304.0 billion increased $8.4 billion, or 3 percent, from third quarter 2005 and increased $3.6 billion, or 5 percent (annualized), on a linked-quarter basis. Excluding real estate 1-4 family first mortgages -- the loan category affected by the sale of adjustable rate mortgages (ARMs) completed in second quarter 2006 -- total average loans grew by $30.7 billion, or 14 percent, from third quarter 2005 and 14 percent (annualized) on a linked-quarter basis. Average commercial and commercial real estate loans increased $11.0 billion, or 10 percent, from third quarter 2005 and $2.2 billion, or 8 percent (annualized), from second quarter 2006.

Average consumer loans decreased $4.2 billion from third quarter 2005 due to the previous sale of ARMs and increased $1.1 billion on a linked-quarter basis. Excluding real estate 1-4 family first mortgages, average consumer loans increased $18.1 billion, or 16 percent, from a year ago and increased $6 billion, or 19 percent (annualized), on a linked-quarter basis. Real estate 1-4 family junior lien mortgage, credit card, and other revolving credit and installment loans grew at double-digit rates from third quarter 2005.

Deposits

Average core deposits of $260.4 billion grew $13.2 billion, or 5 percent, from third quarter 2005, and increased $2.7 billion, or 4 percent (annualized), on a linked-quarter basis. Average mortgage escrow deposits were $19.4 billion, up $367 million from third quarter 2005 and up $1.8 billion on a linked-quarter basis. Excluding mortgage escrow balances, total average core deposits grew 6 percent from third quarter 2005 and 2 percent (annualized) on a linked-quarter basis. Average retail core deposits grew $7.4 billion, or 4 percent, from third quarter 2005 and decreased $1.1 billion on a linked-quarter basis. Average consumer checking account balances grew $4.4 billion, or 5 percent, from third quarter 2005 and declined $660 million, or 3 percent (annualized), on a linked-quarter basis. However, we continued to achieve strong net growth in consumer checking accounts, up 4.6 percent in third quarter, including 5.4 percent in California, said Atkins.

Net Interest Income

Net interest income increased 8 percent from a year ago and 5 percent (annualized) on a linked-quarter basis. Despite the flat to inverted yield curve throughout the quarter, our net interest margin increased 3 basis points to 4.79 percent from second quarter 2006, reflecting our ability to grow core deposits, as well as the benefit of balance sheet repositioning completed in the second quarter, said Atkins.

Noninterest Income

Noninterest income increased $60 million, or 2 percent, from third quarter 2005 and 9 percent (annualized) on a linked-quarter basis. Excluding mortgage banking, noninterest income increased 10 percent from third quarter 2005, reflecting strong year-over-year growth in deposit service charges (up 8 percent), trust and investment fees (up 8 percent), debit and credit card fees (up 23 percent) and insurance fees (up 26 percent).

Mortgage banking noninterest income declined $259 million from a year ago, largely due to the change in mortgage servicing rights (MSRs) valuation. In third quarter 2005 -- a quarter in which long-term mortgage interest rates increased 51 basis points -- the difference between MSRs impairment reserve release (income) and hedging losses was a net gain of $296 million. In third quarter 2006 -- a quarter in which mortgage rates declined 48 basis points -- the reduction in the value of MSRs net of hedging gains was a net loss of $86 million. Consolidated noninterest income in third quarter 2006 included several items related to the hedging of interest rate and spread changes in the Companys mortgage business:

    -- ($86) million       Net loss on the market-related valuation
                           changes to MSRs

    -- $106 million        Gains included in net gains on debt
                           securities related to securities held on
                           the balance sheet as economic hedges of
                           mortgage banking activities

    -- ($38) million       Loss on certain forward securities sales
                           contracts included in other noninterest
                           income

    -- ($48) million       Loss included in net gains on mortgage loan
                           origination/sales activities due to the
                           impact of interest rate volatility on ARMs
                           spreads, reflecting changes in the value of
                           ARMs production held for sale not fully
                           offset by Treasury and LIBOR index-based
                           economic hedging activity

At September 30, 2006, the unrealized net gains on securities available for sale were $965 million, up from a $49 million net loss at June 30, 2006.

Noninterest Expense

Noninterest expense was up $192 million, or 4 percent, from third quarter 2005 and down $95 million, or 7 percent (annualized), from second quarter 2006, resulting in positive operating leverage on both a year-over-year and linked-quarter basis. Noninterest expense included $28 million in stock option expense. We continued to invest in our businesses during the quarter, said Atkins. In the last 12 months, weve opened 119 new regional banking stores, including 27 stores this quarter. Weve grown our sales and service force by adding 5,100 team members (full-time equivalents), including 667 retail bankers in third quarter 2006. As a result of continued positive operating leverage, our efficiency ratio improved to 56.9 percent, the lowest since first quarter 2004.

Credit Quality

Our overall credit quality remained acceptable in third quarter, said Chief Credit Officer Mike Loughlin. Our wholesale businesses continued to show little or no loss and historically low levels of nonperforming assets. However, as shown in the following table, we saw an increase in loss rates in consumer loans from 0.91 percent (annualized) in third quarter 2005 to 1.17 percent (annualized) in third quarter 2006 due primarily to higher losses in other revolving credit and installment loans. Losses in this category increased $176 million on a linked-quarter basis primarily due to losses in the consumer auto loan portfolio. Third quarter loan losses in other consumer loan categories were comparable to, or better than, loss rates in third quarter 2005, and were well within a range of acceptable expected losses. Third quarter net credit losses were $663 million (0.86 percent of average loans outstanding, annualized) compared with $541 million (0.73 percent) during third quarter 2005 and $432 million (0.58 percent) in second quarter 2006. Year-to-date 2006 net credit losses totaled $1.53 billion (0.67 percent) compared with year-to-date 2005 net losses of $1.58 billion (0.72 percent).

Third Quarter

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

2006  2005 

Total commercial and commercial real estate

0.25%

0.23%

Consumer:

Real estate 1-4 family (1)

0.17  0.15 
Credit card 3.38  3.89 
Other revolving credit and installment 2.86  2.37 

Total consumer

1.17

0.91

Foreign

3.27

4.35

Total loans

0.86%

0.73%

(1) First and junior lien mortgages

Consumer auto loan losses increased $150 million from second quarter 2006, accounting for 65 percent of the total increase in consolidated net charge-offs in the quarter of $231 million, said Loughlin. The increase in consumer auto loan losses in part was due to growth and expected seasoning in the portfolio. In addition, loss rates in this portfolio increased in third quarter in large part due to collection capacity constraints experienced by Wells Fargo Financial and restrictive payment extension practices in the spring of 2006 while Wells Fargo Financial began integrating the prime and non-prime auto loan businesses. During third quarter, Wells Fargo Financial adopted collection practices and standards appropriate for the combined portfolio, began reducing higher risk new auto loans and hired additional collectors and managers, which have now been increased by almost 1,000, or 60 percent, since the beginning of the year. We believe we will see improvement in collections by early 2007, but losses will remain above normal through at least the fourth quarter given the limits to how fast the increased collection capability produces effective results. Loans 90 days or more past due and still accruing for other revolving credit and installment consumer loans increased $85 million, or 20 percent, from $431 million in second quarter 2006 to $516 million in third quarter 2006, with about half of the increase due to the auto portfolio.

In third quarter 2005, we provided $100 million for estimated credit losses related to Hurricane Katrina. Since that time, we have identified and recorded approximately $50 million of Katrina-related losses. Because we do not anticipate any further credit losses attributable to Katrina, we released the remaining $50 million balance in third quarter 2006. We consider the allowance for credit losses of $3.98 billion adequate to cover losses inherent in the loan portfolio at September 30, 2006, said Loughlin.

Total nonperforming assets were $2.10 billion (0.68 percent of loans) at September 30, 2006, compared with $1.92 billion (0.64 percent) at June 30, 2006, and $1.49 billion (0.50 percent) at September 30, 2005. Foreclosed assets, a component of total nonperforming assets, included an additional $266 million and $238 million at September 30 and June 30, 2006, respectively, for fully insured repurchased Government National Mortgage Association mortgage loans.

Business Segment Performance

Wells Fargo has three lines of business for management reporting: Community Banking, Wholesale Banking and Wells Fargo Financial.

Net Income

Third Quarter Nine months ended Sept. 30
(in millions) 2006  2005  %
Change 
2006  2005 

%
Change 

Community Banking $ 1,473  $ 1,493  (1) $ 4,019  $ 4,086  (2)
Wholesale Banking 527  403  31  1,578  1,344  17 
Wells Fargo Financial 194  79  146  704  311  126 

Were very pleased with our performance this quarter, particularly with the continued improvement in the customer experience, said President and Chief Operating Officer John Stumpf. Our teams relentless focus on satisfying all our customers financial needs has resulted in improved customer satisfaction and loyalty scores. According to a recent nationally syndicated customer satisfaction study, Wells Fargo was the only mortgage lender to rank in the top five of both sales volume and service satisfaction. Home Mortgage also earned Freddie Macs prestigious designation as a Tier One Platinum servicer for its outstanding performance in 2005. In Wholesale Banking, according to a leading research firm, Wells Fargo stands apart from the competition with excellent satisfaction scores in the commercial middle market because of our above-average relationship management model.

More financial information about the business segments is on tables "OPERATING SEGMENT RESULTS" and "FIVE QUARTER OPERATING SEGMENT RESULTS."

Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including investment, insurance and trust services primarily in 23 midwestern and western states, and mortgage and home equity loans in all 50 states.

Selected Financial Information

Third Quarter

Nine months ended Sept. 30
(in millions) 2006  2005  %
Change 
2006  2005  %
Change 
Total revenue $ 5,784  $ 5,828  (1) $ 16,902  $ 16,407 
Provision for credit losses 236  226  612  610  -- 
Noninterest expense 3,392  3,350  10,264  9,636 
Net income 1,473  1,493  (1) 4,019  4,086  (2)
Average loans (in billions) 172.5  184.4  (6) 178.8  186.0  (4)
Average assets (in billions) 326.7  298.8  322.9  292.7  10 
-- Average core deposits up 3 percent from prior year
-- Private Client Services
      -- Private Banking average loans up 11 percent from prior year
      -- Brokerage assets under administration of $91 billion, up 16
         percent from prior year
      -- WellsTrade® assets of $11 billion, up 21 percent from prior
         year
      -- 3,800 PCS professionals, up 8 percent from prior year
      -- SmartMoney.com named WellsTrade one of "Top Premium Brokers"
         (July 2006)
-- Internet highlights
      -- 8.3 million active online customers, up 17 percent from prior
         year, serving 60 percent of consumer checking accounts      -- 4.4 million bill payment and presentment customers, up 46
         percent from prior year
      -- 800,000 active online small business customers, up 24 percent
         from prior year
      -- Best consumer website design (Global Finance magazine)

Community Banking reported net income of $1.47 billion, down 1 percent from third quarter 2005. Net interest income increased $83 million, or 3 percent, compared with third quarter 2005, primarily due to growth in earning assets and deposits. Growth in earning assets continued despite the sales of low-yielding ARMs and debt securities. Noninterest income decreased $127 million, or 5 percent, compared with third quarter 2005, predominately due to lower mortgage banking noninterest income, offset by related gains on the sale of debt securities in third quarter 2006. Noninterest expense was $3.39 billion, up $42 million from third quarter 2005, primarily due to an increase in the number of platform bankers.

Regional Banking Highlights

-- Record core product sales of 5.02 million, up 17 percent from
   prior year
-- Core sales per platform sales banker FTE (active, full-time
   equivalent) of 5.25 per day, up from 5.11 in prior year
-- Record retail bank household cross-sell of 5.1 products per
   consumer household
-- Wells Fargo PackageSM sales up 37 percent from prior year, and
   were purchased by 63 percent of new checking account customers
-- Net consumer checking accounts up 4.6 percent from prior year
-- Added 2,066 platform banker FTEs from prior year
-- Increased the number of licensed bankers by 23 percent over the
   prior year
-- Store-based customer loyalty scores continued to improve with
   September 2006 up 23 percent over January 2004
-- Business Banking
      -- Store-based business solutions up 21 percent from prior year
      -- Loans to small businesses (loans primarily less than $100,000
         on our Business Direct platform) grew 18 percent from prior
         year
      -- Net business checking accounts up 4.2 percent from prior year
      -- Business Banking household cross-sell at 3.2, up from 2.9 in
         prior year

Our regional banking team continued their strong performance, providing a record 5 million core product solutions (sales) to customers during third quarter, a 17 percent increase over the same period last year, said Carrie Tolstedt, group EVP, Regional Banking. Day in, day out, our engaged and talented team members work hard to achieve our vision of earning all of our customers business and helping them succeed financially. Our retail bank household cross-sell continued to rise to a record high of 5.1. Nearly 63 percent of new checking account customers purchased Wells Fargo PackagesSM -- a checking account and at least three other products. Our focus on the customer experience includes 50,000 store-based customer surveys per month. We began surveying customers following transactions at the teller line in January 2004. Since that time, welcoming and wait time survey scores have improved 36 percent, and customer loyalty scores have improved 23 percent. During this same time frame, retail bank household profitability has improved 23 percent. We began surveying customers following interactions with our platform bankers in July 2005. Weve seen a 13 percent improvement in the overall banker customer experience scores during that period. In third quarter 2006, to better serve our customers and meet all their financial needs, we added 667 platform banker FTEs, opened 27 banking stores, and added 82 net new webATM® machines."

Home Mortgage and Home Equity Highlights

-- Mortgage originations of $104 billion, compared with $116 billion
   in prior quarter and $103 billion in third quarter 2005
-- Mortgage applications of $95 billion, compared with $108 billion
   in prior quarter and $116 billion in third quarter 2005
-- Mortgage application pipeline of $55 billion, compared with
   $63 billion at June 30, 2006 and $66 billion at September 30, 2005
-- Owned mortgage servicing portfolio of $1.33 trillion, up 42 percent
   from September 30, 2005
-- National Home Equity Group portfolio of $78 billion, up 9 percent
   from September 30, 2005

Our owned real estate servicing portfolio grew to $1.33 trillion, up $215 billion for the quarter, said Mark Oman, senior EVP, Home and Consumer Finance Group. This growth included $172 billion of servicing acquired during the quarter. Our economies of skill and scale in servicing and our ability to cross sell and retain our servicing customers has made us a leader in a consolidating industry. Our servicing business benefits from a slower housing market as lower prepayments result in a lower rate of MSRs amortization. Reflecting the industry-wide slow down, residential loan originations of $104 billion for the quarter were down $12 billion from the prior quarter.

Wholesale Banking serves customers coast to coast, including middle market banking, corporate banking, commercial real estate, treasury management, asset-based lending, insurance brokerage, foreign exchange, trade services, specialized lending, equipment finance, capital markets activities, and institutional investments.

Selected Financial Information

Third Quarter Nine months ended Sept. 30
(in millions) 2006  2005  %
Change 
2006  2005  %
Change 
Total revenue $ 1,784  $ 1,491  20  $ 5,351  $ 4,604  16 
Reversal of provision for credit losses --  --  --  (9) (6) 50 
Noninterest expense 999  895  12  3,009  2,611  15 
Net income 527  403  31  1,578  1,344  17 
Average loans (in billions) 72.3  63.3  14  70.1  61.3  14 
Average assets (in billions) 97.5  90.1  96.9  88.1  10 
-- Net income up 31 percent year-over-year
-- Acquired multi-family real estate finance firm Reilly Mortgage
-- Agreed to acquire Los Angeles-based investment banking firm
   Barrington Associates
-- Acquired Indiana-based Bodenhafer Insurance & Investment Group
-- Global Finance magazine cited Wells Fargo's Commercial Electronic
   Office® (CEO®) portal as "Best Corporate Website Design"

We achieved another quarter of strong growth by maintaining our focus on our customers, said Dave Hoyt, senior EVP, Wholesale Banking Group. Our customer feedback programs, both internal and in partnership with customer research firms, confirm continuing industry leadership in satisfaction with our relationship model.

We continue to develop our business to meet our customers financial needs. We expanded on our existing investment banking capabilities by agreeing to acquire Barrington Associates to provide merger and acquisition advisory services for our middle-market and private equity clients. We also expanded our business insurance brokerage company with Acordia Inc.s acquisition of Bodenhafer Insurance & Investment Group. As we grow, well continue to add skilled and experienced team members to help us serve our customers better.

Wholesale Banking reported net income of $527 million, up 31 percent from a year ago. Revenue was $1.78 billion, up 20 percent from third quarter 2005, driven by 9 percent earning asset growth coupled with a wider net interest margin and strong insurance, asset management, and capital markets revenue, along with the acquisition of Secured Capital in January 2006 and Reilly Mortgage in July 2006. Noninterest expense was up 12 percent from the prior year, primarily due to higher personnel-related expenses driven by higher staffing levels, along with expenses related to the Secured Capital and Reilly Mortgage acquisitions. Average loans increased 14 percent to $72.3 billion from third quarter 2005, with strength in our real estate and asset-based lending businesses. Core deposits increased 23 percent to $29.1 billion with a significant portion of the growth from new customers.

Wells Fargo Financial offers consumer loans primarily through real estate-secured debt consolidation products, automobile financing, consumer and private-label credit cards and commercial services to consumers and businesses throughout the United States, Canada, Latin America, the Caribbean and the Pacific Rim.

Selected Financial Information

Third Quarter Nine months ended Sept. 30
(in millions) 2006  2005  %
Change 
2006  2005  %
Change 
Total revenue $ 1,366  $ 1,184  15  $ 4,025  $ 3,446  17 
Provision for credit losses 377  415  (9) 875  1,076  (19)
Noninterest expense 690  644  2,058  1,888 
Net income 194  79  146  704  311  126 
Average loans (in billions) 59.2  47.9  24  56.2  45.6  23 
Average assets (in billions) 64.7  53.5  21  61.6  51.5  20 
-- Average loans up 24 percent from third quarter 2005
      -- Real estate-secured receivables up 21 percent to $21.0
         billion
      -- Auto finance receivables up 34 percent to $26.4 billion

Earnings were driven by continued measured growth in receivables and positive operating leverage, said Tom Shippee, Wells Fargo Financial president and CEO. Excluding the $100 million provision for Hurricane Katrina in third quarter 2005, credit losses increased from a year ago. The majority of the increase related to our auto segment, reflecting some normal seasoning of the portfolio and higher delinquencies as a whole, which the entire auto industry is experiencing. Additionally, the integration of collection platforms and policies for the prime and non-prime auto portfolios contributed to higher losses. In the short term, this integration has impacted delinquency levels, but in the long term we believe it should provide cost savings through more effective and consistent processes.

Wells Fargo Financial reported net income of $194 million, compared with $79 million in third quarter 2005. In third quarter 2006, $50 million of the Katrina-related provision was reversed. Revenue was $1.37 billion, up 15 percent from $1.18 billion in third quarter 2005. Average loans increased 24 percent to $59.2 billion from $47.9 billion a year ago.

Recorded Message

A recorded message reviewing Wells Fargos results is available at 5:30 a.m. Pacific Time through October 20, 2006. Dial 877-660-6853 (domestic) or 201-612-7415 (international). Enter account number 286 and conference ID 215651. The call is also available on the internet at www.wellsfargo.com/ir and http://www.vcall.com/IC/CEPage.asp?ID=106337.

The following appears in accordance with the Private Securities Litigation Reform Act of 1995:

This news release contains forward-looking statements about the Company, including statements about future credit losses and credit quality generally and more specifically about our belief that we will see an improvement in early 2007 in collections relating to our consumer auto loans and that the integration of the collection practices for the prime and non-prime auto loan portfolios will provide cost savings in the long term, and our expectation that we will not incur additional Hurricane Katrina-related losses. Do not unduly rely on forward-looking statements. They give our expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them to reflect changes that occur after that date.

There are a number of factors that could cause results to differ significantly from our expectations, including how fast the increased collection capability for our consumer auto loans produces effective results. For factors that may cause actual results to differ from expectations, refer to our Annual Report on Form 10-K for the year ended December 31, 2005, and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, including Risk Factors in each report.

Any factor described in this news release or in any document referred to in this news release could, by itself or together with one or more other factors, adversely affect the Companys business, earnings and/or financial condition.

Wells Fargo & Company is a diversified financial services company with $483 billion in assets, providing banking, insurance, investments, mortgage and consumer finance to more than 23 million customers from more than 6,100 stores and the internet (wellsfargo.com) across North America and elsewhere internationally. Wells Fargo Bank, N.A. has the highest possible credit rating, "Aaa," from Moody's Investors Service and the highest credit rating given to a U.S. bank, "AA+," from Standard & Poor's Ratings Services.

Wells Fargo & Company and Subsidiaries
SUMMARY FINANCIAL DATA

($ in millions,
except per share amounts)

Quarter ended
Sept. 30,

%

Nine months ended
Sept. 30,

%
2006 2005  Change 2006 2005  Change
For the Period
Net income $ 2,194 $ 1,975  11% $ 6,301 $ 5,741  10%
Diluted earnings per common share 0.64 0.58  10  1.85 1.68  10 
Profitability ratios (annualized)
Net income to average total assets (ROA) 1.76% 1.75% 1.73% 1.75% (1)
Net income to average stockholders' equity (ROE) 20.00 19.72  19.89 19.70 

Efficiency ratio (1)

56.9 57.5  (1) 58.3 57.8 
Total revenue $ 8,934 $ 8,503  $ 26,278 $ 24,457 
Dividends declared per common share -- 0.26  (100) 0.80 0.74 
Average common shares outstanding 3,371.9 3,373.5  --  3,364.6 3,379.8  -- 
Diluted average common shares outstanding 3,416.0 3,410.6  --  3,405.5 3,418.7  -- 
Average loans $ 303,980 $ 295,611  $ 305,141 $ 292,874 
Average assets 494,679 448,159  10  487,182 438,143  11 
Average core deposits (2) 260,430 247,187  257,402 239,171 

Average retail core deposits (3)

212,440 205,078  212,980 198,881 
Net interest margin 4.79% 4.86% (1) 4.80% 4.87% (1)
At Period End
Securities available for sale $ 52,635 $ 34,480  53  $ 52,635 $ 34,480  53 
Loans 307,491 296,189  307,491 296,189 
Allowance for loan losses 3,799 3,886  (2) 3,799 3,886  (2)
Goodwill 11,192 10,776  11,192 10,776 
Assets 483,441 453,494  483,441 453,494 
Core deposits (2) 260,793 248,384  260,793 248,384 
Stockholders' equity 44,862 39,835  13  44,862 39,835  13 
Capital ratios
Stockholders' equity to assets 9.28% 8.78% 9.28% 8.78%
Risk-based capital (4)
Tier 1 capital 8.76 8.35  8.76 8.35 
Total capital 12.37 11.84  12.37 11.84 
Tier 1 leverage (4) 7.41 7.16  7.41 7.16 
Book value per common share $ 13.30 $ 11.86  12  $ 13.30 $ 11.86  12 
Team members (active, full-time equivalent) 156,400 151,300  156,400 151,300 
Common Stock Price
High $ 36.89 $ 31.44  17  $ 36.89 $ 31.44  17 
Low 33.36 29.00  15  30.31 28.89 
Period end 36.18 29.29  24  36.18 29.29  24 
(1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(2) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates and market rate and other savings.
(3) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(4) The September 30, 2006, ratios are preliminary.
Wells Fargo & Company and Subsidiaries
FIVE QUARTER SUMMARY FINANCIAL DATA

($ in millions,
except per share amounts)

Quarter ended
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
2006 2006  2006  2005  2005 
For the Quarter
Net income $ 2,194 $ 2,089  $ 2,018  $ 1,930  $ 1,975 
Diluted earnings per common share 0.64 0.61  0.60  0.57  0.58 
Profitability ratios (annualized)
Net income to average total assets (ROA) 1.76% 1.71% 1.72% 1.63% 1.75%
Net income to average stockholders' equity (ROE) 20.00 19.76  19.89  19.22  19.72 
Efficiency ratio (1) 56.9 58.9  59.3  57.5  57.5 
Total revenue $ 8,934 $ 8,789  $ 8,555  $ 8,492  $ 8,503 
Dividends declared per common share -- 0.54  0.26  0.26  0.26 
Average common shares outstanding 3,371.9 3,363.8  3,358.3  3,350.8  3,373.5 
Diluted average common shares outstanding 3,416.0 3,404.4  3,395.7  3,387.8  3,410.6 
Average loans $ 303,980 $ 300,388  $ 311,132  $ 305,696  $ 295,611 
Average assets 494,679 491,456  475,195  468,481  448,159 
Average core deposits (2) 260,430 257,695  254,012  253,386  247,187 
Average retail core deposits (3) 212,440 213,588  212,921  210,729  205,078 
Net interest margin 4.79% 4.76% 4.85% 4.84% 4.86%
At Quarter End
Securities available for sale $ 52,635 $ 71,420  $ 51,195  $ 41,834  $ 34,480 
Loans 307,491 300,622  306,676  310,837  296,189 
Allowance for loan losses 3,799 3,851  3,845  3,871  3,886 
Goodwill 11,192 11,091  11,050  10,787  10,776 
Assets 483,441 499,516  492,428  481,741  453,494 
Core deposits (2) 260,793 260,427  258,142  253,341  248,384 
Stockholders' equity 44,862 41,894  41,961  40,660  39,835 
Capital ratios
Stockholders' equity to assets 9.28% 8.39% 8.52% 8.44% 8.78%
Risk-based capital (4)
Tier 1 capital 8.76 8.35  8.30  8.26  8.35 
Total capital 12.37 11.82  11.49  11.64  11.84 
Tier 1 leverage (4) 7.41 6.99  7.13  6.99  7.16 
Book value per common share $ 13.30 $ 12.46  $ 12.50  $ 12.12  $ 11.86 
Team members (active, full-time equivalent) 156,400 154,300  152,000  153,500  151,300 
Common Stock Price
High $ 36.89 $ 34.86  $ 32.76  $ 32.35  $ 31.44 
Low 33.36 31.90  30.31  28.81  29.00 
Period end 36.18 33.54  31.94  31.42  29.29 
(1) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(2) Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates and market rate and other savings.
(3) Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.
(4) The September 30, 2006, ratios are preliminary.
Wells Fargo & Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME

Quarter ended
Sept. 30,

Nine months ended
Sept. 30,

(in millions, except per share amounts) 2006 2005 

%
Change 

2006 2005 

%
Change 

INTEREST INCOME
Trading assets $ 45 $ 44  2% $ 179 $ 142  26%
Securities available for sale 1,014 442  129  2,552 1,327  92 
Mortgages held for sale 702 674  2,119 1,585  34 
Loans held for sale 12 33  34 136  (75)
Loans 6,555 5,416  21  18,910 15,359  23 
Other interest income 71 60  18  214 169  27 
Total interest income 8,399 6,645  26  24,008 18,718  28 
INTEREST EXPENSE
Deposits 1,997 1,000  100  5,273 2,517  109 
Short-term borrowings 271 189  43  830 502  65 
Long-term debt 1,084 780  39  3,004 2,034  48 
Total interest expense 3,352 1,969  70  9,107 5,053  80 
NET INTEREST INCOME5,047 4,676  14,901 13,665 
Provision for credit losses 613 641  (4) 1,478 1,680  (12)
Net interest income after provision for credit losses 4,434 4,035  10  13,423 11,985  12 
NONINTEREST INCOME
Service charges on deposit accounts 707 654  1,995 1,857 
Trust and investment fees 664 614  2,002 1,813  10 
Card fees 464 377  23  1,266 1,064  19 
Other fees 509 520  (2) 1,507 1,451 
Mortgage banking 484 743  (35) 1,634 1,794  (9)
Operating leases 192 202  (5) 593 612  (3)
Insurance 313 248  26  1,041 943  10 
Net gains (losses) on debt securities available for sale 121 (31) --  (70) -- 
Net gains from equity investments 159 146  482 418  15 
Other 274 354  (23) 927 836  11 
Total noninterest income 3,887 3,827  11,377 10,792 
NONINTEREST EXPENSE
Salaries 1,769 1,571  13  5,195 4,602  13 
Incentive compensation 710 676  2,092 1,703  23 
Employee benefits 458 467  (2) 1,534 1,446 
Equipment 294 306  (4) 913 939  (3)
Net occupancy 357 354  1,038 1,068  (3)
Operating leases 155 159  (3) 473 474  -- 
Other 1,338 1,356  (1) 4,086 3,903 
Total noninterest expense 5,081 4,889  15,331 14,135 
INCOME BEFORE INCOME TAX EXPENSE3,240 2,973  9,469 8,642  10 
Income tax expense 1,046 998  3,168 2,901 
NET INCOME$ 2,194 $ 1,975  11  $ 6,301 $ 5,741  10 
EARNINGS PER COMMON SHARE$ 0.65 $ 0.59  10  $ 1.87 $ 1.70  10 
DILUTED EARNINGS PER COMMON SHARE$ 0.64 $ 0.58  10  $ 1.85 $ 1.68  10 
DIVIDENDS DECLARED PER COMMON SHARE$ -- $ 0.26  (100) $ 0.80 $ 0.74 
Average common shares outstanding 3,371.9 3,373.5  --  3,364.6 3,379.8  -- 
Diluted average common shares outstanding 3,416.0 3,410.6  --  3,405.5 3,418.7  -- 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED STATEMENT OF INCOME
Quarter ended
(in millions, except per share amounts) Sept. 30,
2006
June 30,
2006
Mar. 31,
2006
Dec. 31,
2005
Sept. 30,
2005
INTEREST INCOME
Trading assets $ 45 $ 65  $ 69  $ 48  $ 44 
Securities available for sale 1,014 875  663  594  442 
Mortgages held for sale 702 808  609  628  674 
Loans held for sale 12 11  11  10 
Loans 6,555 6,245  6,110  5,901  5,416 
Other interest income 71 73  70  63  60 
Total interest income 8,399 8,077  7,532  7,244  6,645 
INTEREST EXPENSE
Deposits 1,997 1,794  1,482  1,331  1,000 
Short-term borrowings 271 289  270  242  189 
Long-term debt 1,084 1,010  910  832  780 
Total interest expense 3,352 3,093  2,662  2,405  1,969 
NET INTEREST INCOME5,047 4,984  4,870  4,839  4,676 
Provision for credit losses 613 432  433  703  641 
Net interest income after provision for credit losses 4,434 4,552  4,437  4,136  4,035 
NONINTEREST INCOME
Service charges on deposit accounts 707 665  623  655  654 
Trust and investment fees 664 675  663  623  614 
Card fees 464 418  384  394  377 
Other fees 509 510  488  478  520 
Mortgage banking 484 735  415  628  743 
Operating leases 192 200  201  200  202 
Insurance 313 364  364  272  248 
Net gains (losses) on debt securities available for sale 121 (156) (35) (124) (31)
Net gains from equity investments 159 133  190  93  146 
Other 274 261  392  434  354 
Total noninterest income 3,887 3,805  3,685  3,653  3,827 
NONINTEREST EXPENSE
Salaries 1,769 1,754  1,672  1,613  1,571 
Incentive compensation 710 714  668  663  676 
Employee benefits 458 487  589  428  467 
Equipment 294 284  335  328  306 
Net occupancy 357 345  336  344  354 
Operating leases 155 157  161  161  159 
Other 1,338 1,435  1,313  1,346  1,356 
Total noninterest expense 5,081 5,176  5,074  4,883  4,889 
INCOME BEFORE INCOME TAX EXPENSE3,240 3,181  3,048  2,906  2,973 
Income tax expense 1,046 1,092  1,030  976  998 
NET INCOME$ 2,194 $ 2,089  $ 2,018  $ 1,930  $ 1,975 
EARNINGS PER COMMON SHARE$ 0.65 $ 0.62  $ 0.60  $ 0.57  $ 0.59 
DILUTED EARNINGS PER COMMON SHARE$ 0.64 $ 0.61  $ 0.60  $ 0.57  $ 0.58 
DIVIDENDS DECLARED PER COMMON SHARE$ -- $ 0.54  $ 0.26  $ 0.26  $ 0.26 
Average common shares outstanding 3,371.9 3,363.8  3,358.3  3,350.8  3,373.5 
Diluted average common shares outstanding 3,416.0 3,404.4  3,395.7  3,387.8  3,410.6 
Wells Fargo & Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
% Change 
Sept. 30, 2006 from

(in millions,
except shares)

Sept. 30,
2006
Dec. 31,
2005
Sept. 30,
2005
Dec. 31,
2005
Sept. 30,
2005
ASSETS
Cash and due from banks $ 12,591 $ 15,397  $ 13,931  (18)% (10)%
Federal funds sold, securities purchased under resale agreements and other short-term investments
4,079 5,306  5,861  (23) (30)
Trading assets 5,300 10,905  8,477  (51) (37)
Securities available for sale 52,635 41,834  34,480  26  53 
Mortgages held for sale 39,913 40,534  46,119  (2) (13)
Loans held for sale 617 612  629  (2)
Loans 307,491 310,837  296,189  (1)
Allowance for loan losses (3,799) (3,871) (3,886) (2) (2)
Net loans 303,692 306,966  292,303  (1)
Mortgage servicing rights:
Measured at fair value (residential MSRs beginning 2006) 17,712 --  --  --  -- 
Amortized 328 12,511  10,711  (97) (97)
Premises and equipment, net 4,645 4,417  4,223  10 
Goodwill 11,192 10,787  10,776 
Other assets 30,737 32,472  25,984  (5) 18 
Total assets $ 483,441 $ 481,741  $ 453,494  -- 
LIABILITIES
Noninterest-bearing deposits $ 86,849 $ 87,712  $ 89,304  (1) (3)
Interest-bearing deposits 227,470 226,738  199,725  --  14 
Total deposits 314,319 314,450  289,029  -- 
Short-term borrowings 13,800 23,892  23,243  (42) (41)
Accrued expenses and other liabilities 26,369 23,071  22,795  14  16 
Long-term debt 84,091 79,668  78,592 
Total liabilities 438,579 441,081  413,659  (1)
STOCKHOLDERS' EQUITY
Preferred stock 465 325  389  43  20 
Common stock $1-2/3 par value, authorized 6,000,000,000 shares; issued 3,472,762,050 shares
5,788 5,788  5,788  --  -- 
Additional paid-in capital 7,667 7,040  6,984  10 
Retained earnings 34,080 30,580  29,636  11  15 
Cumulative other comprehensive income 633 665  721  (5) (12)
Treasury stock 100,057,636 shares, 117,595,986 shares and 114,421,240 shares
(3,273) (3,390) (3,267) (3) -- 
Unearned ESOP shares (498) (348) (416) 43  20 
Total stockholders' equity 44,862 40,660  39,835  10  13 
Total liabilities and stockholders' equity $ 483,441 $ 481,741  $ 453,494  -- 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED BALANCE SHEET
(in millions) Sept. 30,
2006
June 30,
2006
Mar. 31,
2006
Dec. 31,
2005
Sept. 30,
2005
ASSETS
Cash and due from banks $ 12,591 $ 14,069  $ 13,224  $ 15,397  $ 13,931 
Federal funds sold, securities purchased under resale agreements and other short-term investments
4,079 5,367  4,954  5,306  5,861 
Trading assets 5,300 7,344  9,930  10,905  8,477 
Securities available for sale 52,635 71,420  51,195  41,834  34,480 
Mortgages held for sale 39,913 39,714  43,521  40,534  46,119 
Loans held for sale 617 594  629  612  629 
Loans 307,491 300,622  306,676  310,837  296,189 
Allowance for loan losses (3,799) (3,851) (3,845) (3,871) (3,886)
Net loans 303,692 296,771  302,831  306,966  292,303 
Mortgage servicing rights:
Measured at fair value (residential MSRs beginning 2006) 17,712 15,650  13,800  --  -- 
Amortized 328 175  142  12,511  10,711 
Premises and equipment, net 4,645 4,529  4,493  4,417  4,223 
Goodwill 11,192 11,091  11,050  10,787  10,776 
Other assets 30,737 32,792  36,659  32,472  25,984 
Total assets $ 483,441 $ 499,516  $ 492,428  $ 481,741  $ 453,494 
LIABILITIES
Noninterest-bearing deposits $ 86,849 $ 89,448  $ 88,701  $ 87,712  $ 89,304 
Interest-bearing deposits 227,470 237,004  219,604  226,738  199,725 
Total deposits 314,319 326,452  308,305  314,450  289,029 
Short-term borrowings 13,800 13,619  21,350  23,892  23,243 
Accrued expenses and other liabilities 26,369 33,794  36,312  23,071  22,795 
Long-term debt 84,091 83,757  84,500  79,668  78,592 
Total liabilities 438,579 457,622  450,467  441,081  413,659 
STOCKHOLDERS' EQUITY
Preferred stock 465 548  634  325  389 
Common stock 5,788 5,788  5,788  5,788  5,788 
Additional paid-in capital 7,667 7,562  7,479  7,040  6,984 
Retained earnings 34,080 31,964  31,750  30,580  29,636 
Cumulative other comprehensive income 633 155  576  665  721 
Treasury stock (3,273) (3,537) (3,587) (3,390) (3,267)
Unearned ESOP shares (498) (586) (679) (348) (416)
Total stockholders' equity 44,862 41,894  41,961  40,660  39,835 
Total liabilities and stockholders' equity $ 483,441 $ 499,516  $ 492,428  $ 481,741  $ 453,494 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER AVERAGE BALANCES
Quarter ended
(in millions) Sept. 30,
2006
June 30,
2006
Mar. 31,
2006
Dec. 31,
2005
Sept. 30,
2005
EARNING ASSETS
Federal funds sold, securities purchased under resale agreements and other short-term investments
$ 4,247 $ 4,855  $ 5,192  $ 5,158  $ 5,647 
Trading assets 3,880 5,938  6,099  5,061  4,782 
Debt securities available for sale:
Securities of U.S. Treasury and federal agencies 912 935  866  1,051  1,042 
Securities of U.S. states and political subdivisions 3,240 3,013  3,106  3,256  3,321 
Mortgage-backed securities:
Federal agencies 47,009 40,160  27,718  23,545  17,815 
Private collateralized mortgage obligations 7,696 7,176  6,562  8,060  4,245 
Total mortgage-backed securities 54,705 47,336  34,280  31,605  22,060 
Other debt securities (1) 6,865 6,246  5,280  4,843  3,888 
Total debt securities available for sale (1) 65,722 57,530  43,532  40,755  30,311 
Mortgages held for sale 42,369 51,675  39,523  42,036  47,510 
Loans held for sale 622 585  651  603  626 
Loans:
Commercial and commercial real estate:
Commercial 66,216 65,424  62,769  61,297  59,434 
Other real estate mortgage 29,851 28,938  28,686  28,425  28,614 
Real estate construction 15,073 14,517  13,850  13,040  12,259 
Lease financing 5,385 5,429  5,436  5,347  5,252 
Total commercial and commercial real estate 116,525 114,308  110,741  108,109  105,559 
Consumer:
Real estate 1-4 family first mortgage 50,138 55,019  74,383  76,233  72,479 
Real estate 1-4 family junior lien mortgage 65,991 62,740  59,972  58,157  56,412 
Credit card 12,810 11,947  11,765  11,326  10,867 
Other revolving credit and installment 51,988 50,098  48,329  46,593  45,380 
Total consumer 180,927 179,804  194,449  192,309  185,138 
Foreign 6,528 6,276  5,942  5,278  4,914 
Total loans (2) 303,980 300,388  311,132  305,696  295,611 
Other 1,348 1,363  1,389  1,415  1,511 
Total earning assets $ 422,168 $ 422,334  $ 407,518  $ 400,724  $ 385,998 
FUNDING SOURCES
Deposits:
Interest-bearing checking $ 4,370 $ 4,288  $ 4,069  $ 3,797  $ 3,698 
Market rate and other savings 132,906 134,182  134,228  132,042  129,390 
Savings certificates 33,909 30,308  28,718  26,610  23,434 
Other time deposits 36,920 38,288  33,726  33,321  22,204 
Deposits in foreign offices 22,303 20,898  15,152  14,347  12,359 
Total interest-bearing deposits 230,408 227,964  215,893  210,117  191,085 
Short-term borrowings 21,539 24,836  26,180  25,395  22,797 
Long-term debt 84,112 84,486  81,686  79,169  82,840 
Total interest-bearing liabilities 336,059 337,286  323,759  314,681  296,722 
Portion of noninterest-bearing funding sources 86,109 85,048  83,759  86,043  89,276 
Total funding sources $ 422,168 $ 422,334  $ 407,518  $ 400,724  $ 385,998 
NONINTEREST-EARNING ASSETS
Cash and due from banks $ 12,159 $ 12,437  $ 12,897  $ 13,508  $ 13,100 
Goodwill 11,156 11,075  10,963  10,780  10,736 
Other 49,196 45,610  43,817  43,469  38,325 
Total noninterest-earning assets $ 72,511 $ 69,122  $ 67,677  $ 67,757  $ 62,161 
NONINTEREST-BEARING FUNDING SOURCES
Deposits $ 89,245 $ 88,917  $ 86,997  $ 90,937  $ 90,665 
Other liabilities 25,839 22,835  23,320  23,049  21,074 
Stockholders' equity 43,536 42,418  41,119  39,814  39,698 
Noninterest-bearing funding sources used to fund earning assets
(86,109) (85,048) (83,759) (86,043) (89,276)
Net noninterest-bearing funding sources $ 72,511 $ 69,122  $ 67,677  $ 67,757  $ 62,161 
TOTAL ASSETS$ 494,679 $ 491,456  $ 475,195  $ 468,481  $ 448,159 
(1) Includes certain preferred securities.
(2) Nonaccrual loans are included in their respective loan categories.
Wells Fargo & Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Nine months ended Sept. 30,
(in millions) 2006 2005 
Balance, beginning of period$ 40,660 $ 37,866 
Cumulative effect from adoption of FAS 156 101 -- 
Net income 6,301 5,741 
Other comprehensive income (loss), net of tax:
Change in foreign currency translation adjustments 4
Minimum pension liability adjustment (3) -- 
Change in valuation allowance related to:
Investment securities and other interests held (6) (316)
Derivative instruments and hedging activities (27) 81 
Common stock issued 1,419 938 
Common stock issued for acquisitions -- 122 
Common stock repurchased (1,566) (2,343)
Preferred stock released to ESOP 274 244 
Common stock dividends (2,695) (2,505)
Other, net 400
Balance, end of period$ 44,862 $ 39,835 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER LOANS
(in millions) Sept. 30,
2006
June 30,
2006
Mar. 31,
2006
Dec. 31,
2005
Sept. 30,
2005
Commercial and commercial real estate:
Commercial $ 66,797 $ 66,014  $ 63,836  $ 61,552  $ 60,588 
Other real estate mortgage 29,914 29,281  28,754  28,545  28,571 
Real estate construction 15,397 14,764  14,308  13,406  12,587 
Lease financing 5,443 5,301  5,402  5,400  5,244 
Total commercial and commercial real estate 117,551 115,360  112,300  108,903  106,990 
Consumer:
Real estate 1-4 family first mortgage 49,765 50,491  66,106  77,768  69,259 
Real estate 1-4 family junior lien mortgage 67,185 64,727  61,115  59,143  57,491 
Credit card 13,343 12,387  11,618  12,009  11,060 
Other revolving credit and installment 53,080 51,236  49,295  47,462  46,201 
Total consumer 183,373 178,841  188,134  196,382  184,011 
Foreign 6,567 6,421  6,242  5,552  5,188 
Total loans (net of unearned income) $ 307,491 $ 300,622  $ 306,676  $ 310,837  $ 296,189 
FIVE QUARTER NONACCRUAL LOANS AND OTHER ASSETS
(in millions) Sept. 30,
2006
June 30,
2006
Mar. 31,
2006
Dec. 31,
2005
Sept. 30,
2005
Nonaccrual loans:
Commercial and commercial real estate:
Commercial $ 256 $ 253  $ 256  $ 286  $ 293 
Other real estate mortgage 116 137  163  165  197 
Real estate construction 90 31  21  31  43 
Lease financing 27 26  31  45  68 
Total commercial and commercial real estate 489 447  471  527  601 
Consumer:
Real estate 1-4 family first mortgage 595 585  508  471  409 
Real estate 1-4 family junior lien mortgage 200 179  190  144  119 
Other revolving credit and installment 167 139  188  171  149 
Total consumer 962 903  886  786  677 
Foreign 38 45  37  25  23 
Total nonaccrual loans 1,489 1,395  1,394  1,338  1,301 
As a percentage of total loans 0.48% 0.46% 0.45% 0.43% 0.44%
Foreclosed assets:
GNMA loans (1) 266 238  227  --  -- 
Other 342 275  228  191  187 
Real estate and other nonaccrual investments 3 -- 
Total nonaccrual loans and other assets $ 2,100 $ 1,917  $ 1,849  $ 1,531  $ 1,490 
As a percentage of total loans 0.68% 0.64% 0.60% 0.49% 0.50%

(1) As a result of a change in regulatory reporting requirements effective January 1, 2006, foreclosed real estate securing Government National Mortgage Association (GNMA) loans has been classified as nonperforming. These assets are fully collectible because the corresponding GNMA loans are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs.

Wells Fargo & Company and Subsidiaries
CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES
Quarter ended Nine months ended
(in millions) Sept. 30,
2006
June 30,
2006
Sept. 30,
2005
Sept. 30,
2006
Sept. 30,
2005
Balance, beginning of period$ 4,035 $ 4,025  $ 3,944  $ 4,057 $ 3,950 
Provision for credit losses 613 432  641  1,478 1,680 
Loan charge-offs:
Commercial and commercial real estate:
Commercial (103) (93) (95) (275) (271)
Other real estate mortgage (1) (1) (1) (3) (6)
Real estate construction (1) --  (1) (1) (6)
Lease financing (6) (7) (7) (22) (27)
Total commercial and commercial real estate (111) (101) (104) (301) (310)
Consumer:
Real estate 1-4 family first mortgage (30) (22) (24) (81) (83)
Real estate 1-4 family junior lien mortgage (36) (28) (37) (98) (100)
Credit card (133) (113) (128) (351) (389)
Other revolving credit and installment (501) (349) (369) (1,172) (1,015)
Total consumer (700) (512) (558) (1,702) (1,587)
Foreign (74) (74) (72) (222) (216)
Total loan charge-offs (885) (687) (734) (2,225) (2,113)
Loan recoveries:
Commercial and commercial real estate:
Commercial 26 31  35  84 102 
Other real estate mortgage 814 13 
Real estate construction -- --  2
Lease financing 416 16 
Total commercial and commercial real estate 38 43  44  116 138 
Consumer:
Real estate 1-4 family first mortgage 820 15 
Real estate 1-4 family junior lien mortgage 9 10  27 22 
Credit card 23 25  20  72 64 
Other revolving credit and installment 124 148  97  401 250 
Total consumer 164 192  131  520 351 
Foreign 20 20  18  61 44 
Total loan recoveries 222 255  193  697 533 
Net loan charge-offs (663) (432) (541) (1,528) (1,580)
Other (7) 10  13  (29)
Balance, end of period$ 3,978 $ 4,035  $ 4,057  $ 3,978 $ 4,057 
Components:
Allowance for loan losses $ 3,799 $ 3,851  $ 3,886  $ 3,799 $ 3,886 
Reserve for unfunded credit commitments 179 184  171  179 171 
Allowance for credit losses $ 3,978 $ 4,035  $ 4,057  $ 3,978 $ 4,057 
Net loan charge-offs (annualized) as a percentage of average total loans
0.86% 0.58% 0.73% 0.67% 0.72%
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES
Quarter ended
(in millions) Sept. 30,
2006
June 30,
2006
Mar. 31,
2006
Dec. 31,
2005
Sept. 30,
2005
Balance, beginning of quarter$ 4,035 $ 4,025  $ 4,057  $ 4,057  $ 3,944 
Provision for credit losses 613 432  433  703  641 
Loan charge-offs:
Commercial and commercial real estate:
Commercial (103) (93) (79) (135) (95)
Other real estate mortgage (1) (1) (1) (1) (1)
Real estate construction (1) --  --  --  (1)
Lease financing (6) (7) (9) (8) (7)
Total commercial and commercial real estate (111) (101) (89) (144) (104)
Consumer:
Real estate 1-4 family first mortgage (30) (22) (29) (28) (24)
Real estate 1-4 family junior lien mortgage (36) (28) (34) (36) (37)
Credit card (133) (113) (105) (164) (128)
Other revolving credit and installment (501) (349) (322) (465) (369)
Total consumer (700) (512) (490) (693) (558)
Foreign (74) (74) (74) (82) (72)
Total loan charge-offs (885) (687) (653) (919) (734)
Loan recoveries:
Commercial and commercial real estate:
Commercial 26 31  27  31  35 
Other real estate mortgage 8
Real estate construction -- -- 
Lease financing 4
Total commercial and commercial real estate 38 43  35  45  44 
Consumer:
Real estate 1-4 family first mortgage 8
Real estate 1-4 family junior lien mortgage 9 10 
Credit card 23 25  24  22  20 
Other revolving credit and installment 124 148  129  115  97 
Total consumer 164 192  164  152  131 
Foreign 20 20  21  19  18 
Total loan recoveries 222 255  220  216  193 
Net loan charge-offs (663) (432) (433) (703) (541)
Other (7) 10  (32) --  13 
Balance, end of quarter$ 3,978 $ 4,035  $ 4,025  $ 4,057  $ 4,057 
Components:
Allowance for loan losses $ 3,799 $ 3,851  $ 3,845  $ 3,871  $ 3,886 
Reserve for unfunded credit commitments 179 184  180  186  171 
Allowance for credit losses $ 3,978 $ 4,035  $ 4,025  $ 4,057  $ 4,057 
Net loan charge-offs (annualized) as a percentage of average total loans
0.86% 0.58% 0.56% 0.91% 0.73%
Allowance for loan losses as a percentage of:
Total loans 1.24% 1.28% 1.25% 1.25% 1.31%
Nonaccrual loans 255 276  276  289  299 
Nonaccrual loans and other assets 181 201  208  253  261 
Allowance for credit losses as a percentage of:
Total loans 1.29% 1.34% 1.31% 1.31% 1.37%
Nonaccrual loans 267 289  289  303  312 
Nonaccrual loans and other assets 189 210  218  265  272 
Wells Fargo & Company and Subsidiaries
NONINTEREST INCOME

Quarter ended
Sept. 30,

Nine months ended
Sept. 30,

(in millions) 2006 2005 

%
Change 

2006 2005 

%
Change 

Service charges on deposit accounts $ 707 $ 654  8% $ 1,995 $ 1,857  7%
Trust and investment fees:
Trust, investment and IRA fees 508 473  1,508 1,374  10 
Commissions and all other fees 156 141  11  494 439  13 
Total trust and investment fees 664 614  2,002 1,813  10 
Card fees 464 377  23  1,266 1,064  19 
Other fees:
Cash network fees 48 45  140 135 
Charges and fees on loans 244 280  (13) 735 785  (6)
All other 217 195  11  632 531  19 
Total other fees 509 520  (2) 1,507 1,451 
Mortgage banking:
Servicing income, net 188 373  (50) 579 730  (21)
Net gains on mortgage loan origination/sales activities
179 273  (34) 811 816  (1)
All other 117 97  21  244 248  (2)
Total mortgage banking 484 743  (35) 1,634 1,794  (9)
Operating leases 192 202  (5) 593 612  (3)
Insurance 313 248  26  1,041 943  10 
Trading assets 106 184  (42) 331 391  (15)
Net gains (losses) on debt securities available for sale
121 (31) --  (70) -- 
Net gains from equity investments 159 146  482 418  15 
Net gains on sales of loans 2 (33) 7 133 
All other 166 167  (1) 589 442  33 
Total $ 3,887 $ 3,827  $ 11,377 $ 10,792 
NONINTEREST EXPENSE

Quarter ended
Sept. 30,

Nine months ended
Sept. 30,

(in millions) 2006 2005 

%
Change 

2006 2005 

%
Change 

Salaries $ 1,769 $ 1,571  13% $ 5,195 $ 4,602  13%
Incentive compensation 710 676  2,092 1,703  23 
Employee benefits 458 467  (2) 1,534 1,446 
Equipment 294 306  (4) 913 939  (3)
Net occupancy 357 354  1,038 1,068  (3)
Operating leases 155 159  (3) 473 474  -- 
Outside professional services 240 230  669 582  15 
Contract services 143 163  (12) 414 443  (7)
Travel and entertainment 132 120  10  401 347  16 
Outside data processing 111 114  (3) 324 341  (5)
Advertising and promotion 123 128  (4) 354 334 
Postage 75 72  235 212  11 
Telecommunications 70 74  (5) 213 213  -- 
Insurance 43 17  153  218 196  11 
Stationery and supplies 57 48  19  163 148  10 
Operating losses 33 52  (37) 140 156  (10)
Security 43 42  130 125 
Core deposit intangibles 28 30  (7) 85 93  (9)
Charitable donations 15 88  51 48 
Net gains from debt extinguishment (2) (1) 100  (6) (1) 500 
All other 227 259  (12) 695 666 
Total $ 5,081 $ 4,889  $ 15,331 $ 14,135 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER NONINTEREST INCOME
Quarter ended
(in millions) Sept. 30,
2006
June 30,
2006
Mar. 31,
2006
Dec. 31,
2005
Sept. 30,
2005
Service charges on deposit accounts $ 707 $ 665  $ 623  $ 655  $ 654 
Trust and investment fees:
Trust, investment and IRA fees 508 509  491  481  473 
Commissions and all other fees 156 166  172  142  141 
Total trust and investment fees 664 675  663  623  614 
Card fees 464 418  384  394  377 
Other fees:
Cash network fees 48 48  44  45  45 
Charges and fees on loans 244 249  242  237  280 
All other 217 213  202  196  195 
Total other fees 509 510  488  478  520 
Mortgage banking:
Servicing income, net 188 310  81  257  373 
Net gains on mortgage loan origination/sales activities 179 359  273  269  273 
All other 117 66  61  102  97 
Total mortgage banking 484 735  415  628  743 
Operating leases 192 200  201  200  202 
Insurance 313 364  364  272  248 
Trading assets 106 91  134  180  184 
Net gains (losses) on debt securities available for sale 121 (156) (35) (124) (31)
Net gains from equity investments 159 133  190  93  146 
Net gains on sales of loans 2
All other 166 168  255  252  167 
Total $ 3,887 $ 3,805  $ 3,685  $ 3,653  $ 3,827 
FIVE QUARTER NONINTEREST EXPENSE
Quarter ended
(in millions) Sept. 30,
2006
June 30,
2006
Mar. 31,
2006
Dec. 31,
2005
Sept. 30,
2005
Salaries $ 1,769 $ 1,754  $ 1,672  $ 1,613  $ 1,571 
Incentive compensation 710 714  668  663  676 
Employee benefits 458 487  589  428  467 
Equipment 294 284  335  328  306 
Net occupancy 357 345  336  344  354 
Operating leases 155 157  161  161  159 
Outside professional services 240 236  193  253  230 
Contract services 143 139  132  153  163 
Travel and entertainment 132 139  130  134  120 
Outside data processing 111 109  104  108  114 
Advertising and promotion 123 125  106  109  128 
Postage 75 79  81  69  72 
Telecommunications 70 73  70  65  74 
Insurance 43 99  76  28  17 
Stationery and supplies 57 55  51  57  48 
Operating losses 33 45  62  38  52 
Security 43 44  43  42  42 
Core deposit intangibles 28 28  29  30  30 
Charitable donations 15 19  17  13 
Net losses (gains) from debt extinguishment (2) (2) (2) 12  (1)
All other 227 247  221  235  259 
Total $ 5,081 $ 5,176  $ 5,074  $ 4,883  $ 4,889 
Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)
Quarter ended September 30,
2006 2005 
(in millions) Average
balance
Yields/
rates
Interest
income/
expense
Average
balance
Yields/
rates
Interest
income/
expense
EARNING ASSETS
Federal funds sold, securities purchased under resale agreements and other short-term investments
$ 4,2475.00%$ 53 $ 5,647  3.17% $ 45 
Trading assets 3,8805.1951 4,782  3.68  44 
Debt securities available for sale (3):
Securities of U.S. Treasury and federal agencies 9124.4210 1,042  3.70  10 
Securities of U.S. states and political subdivisions 3,2407.9963 3,321  8.12  63 
Mortgage-backed securities:
Federal agencies 47,0096.09716 17,815  6.08  264 
Private collateralized mortgage obligations 7,6966.78129 4,245  5.63  59 
Total mortgage-backed securities 54,7056.19845 22,060  5.99  323 
Other debt securities (4) 6,8656.80116 3,888  7.21  68 
Total debt securities available for sale (4) 65,7226.311,034 30,311  6.29  464 
Mortgages held for sale (3) 42,3696.63702 47,510  5.68  674 
Loans held for sale (3) 6227.7312 626  5.86 
Loans:
Commercial and commercial real estate:
Commercial 66,2168.361,395 59,434  6.83  1,023 
Other real estate mortgage 29,8517.47562 28,614  6.42  464 
Real estate construction 15,0738.13309 12,259  6.64  204 
Lease financing 5,3855.6576 5,252  5.74  75 
Total commercial and commercial real estate 116,5257.982,342 105,559  6.64  1,766 
Consumer:
Real estate 1-4 family first mortgage 50,1387.54951 72,479  6.60  1,201 
Real estate 1-4 family junior lien mortgage 65,9918.141,353 56,412  6.71  954 
Credit card 12,81013.45431 10,867  12.38  336 
Other revolving credit and installment 51,9889.751,278 45,380  8.72  998 
Total consumer 180,9278.814,013 185,138  7.49  3,489 
Foreign 6,52812.42204 4,914  13.35  164 
Total loans (5) 303,9808.576,559 295,611  7.29  5,419 
Other 1,3485.1218 1,511  3.83  16 
Total earning assets $ 422,1687.958,429 $ 385,998  6.89  6,671 
FUNDING SOURCES
Deposits:

Interest-bearing checking

$ 4,3703.2436 $ 3,698  1.50  13 
Market rate and other savings 132,9062.55854 129,390  1.57  513 
Savings certificates 33,9094.03344 23,434  2.98  176 
Other time deposits 36,9205.27491 22,204  3.48  196 
Deposits in foreign offices 22,3034.84272 12,359  3.28  102 
Total interest-bearing deposits 230,4083.441,997 191,085  2.08  1,000 
Short-term borrowings 21,5394.99271 22,797  3.28  189 
Long-term debt 84,1125.131,084 82,840  3.75  780 
Total interest-bearing liabilities 336,0593.963,352 296,722  2.64  1,969 
Portion of noninterest-bearing funding sources 86,109---- 89,276  --  -- 
Total funding sources $ 422,1683.163,352 $ 385,998  2.03  1,969 

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

4.79%$ 5,077 4.86% $ 4,702 
NONINTEREST-EARNING ASSETS
Cash and due from banks $ 12,159 $ 13,100 
Goodwill 11,156 10,736 
Other 49,196 38,325 
Total noninterest-earning assets $ 72,511 $ 62,161 
NONINTEREST-BEARING FUNDING SOURCES
Deposits $ 89,245 $ 90,665 
Other liabilities 25,839 21,074 
Stockholders' equity 43,536 39,698 
Noninterest-bearing funding sources used to fund earning assets
(86,109) (89,276)
Net noninterest-bearing funding sources $ 72,511 $ 62,161 

TOTAL ASSETS

$ 494,679 $ 448,159 

(1) Our average prime rate was 8.25% and 6.42% for the quarters ended September 30, 2006 and 2005, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 5.43% and 3.77% for the same quarters, respectively.

(2) Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.

(3) Yields are based on amortized cost balances computed on a settlement date basis.

(4) Includes certain preferred securities.

(5) Nonaccrual loans and related income are included in their respective loan categories.

(6) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

Wells Fargo & Company and Subsidiaries
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1)(2)

Nine months ended September 30,

2006 2005 
(in millions) Average
balance
Yields/
rates
Interest
income/
expense
Average
balance
Yields/
rates
Interest
income/
expense
EARNING ASSETS
Federal funds sold, securities purchased under resale agreements and other short-term investments
$ 4,7614.58%$ 163 $ 5,546  2.81% $ 117 
Trading assets 5,2984.91195 5,529  3.43  142 
Debt securities available for sale (3):
Securities of U.S. Treasury and federal agencies 9054.3830 979  3.78  28 
Securities of U.S. states and political subdivisions 3,1208.11183 3,441  8.28  202 
Mortgage-backed securities:
Federal agencies 38,3665.991,723 18,495  6.06  815 
Private collateralized mortgage obligations 7,1496.65352 4,140  5.55  169 
Total mortgage-backed securities 45,5156.102,075 22,635  5.97  984 
Other debt securities (4) 6,1367.06324 3,511  7.25  184 
Total debt securities available for sale (4) 55,6766.282,612 30,566  6.30  1,398 
Mortgages held for sale (3) 44,5336.342,119 37,958  5.57  1,585 
Loans held for sale (3) 6197.3334 3,617  5.02  136 
Loans:
Commercial and commercial real estate:
Commercial 64,8168.073,914 57,469  6.55  2,816 
Other real estate mortgage 29,1627.261,585 29,325  6.14  1,347 
Real estate construction 14,4857.89854 10,428  6.43  501 
Lease financing 5,4165.74233 5,185  5.97  232 
Total commercial and commercial real estate 113,8797.736,586 102,407  6.39  4,896 
Consumer:
Real estate 1-4 family first mortgage 59,7587.203,221 78,822  6.31  3,725 
Real estate 1-4 family junior lien mortgage 62,9237.913,723 54,760  6.38  2,612 
Credit card 12,17813.291,213 10,439  12.16  952 
Other revolving credit and installment 50,1529.573,592 41,926  8.68  2,723 
Total consumer 185,0118.4911,749 185,947  7.19  10,012 
Foreign 6,25112.53587 4,520  13.66  462 
Total loans (5) 305,1418.2918,922 292,874  7.01  15,370 
Other 1,3664.9050 1,637  4.30  52 
Total earning assets $ 417,3947.7224,095 $ 377,727  6.66  18,800 
FUNDING SOURCES
Deposits:
Interest-bearing checking $ 4,2432.7788 $ 3,543  1.29  34 
Market rate and other savings 133,7672.312,307 128,364  1.31  1,255 
Savings certificates 30,9973.75868 21,299  2.74  437 
Other time deposits 36,3244.941,343 25,775  2.95  569 
Deposits in foreign offices 19,4774.58667 10,450  2.85  222 
Total interest-bearing deposits 224,8083.145,273 189,431  1.78  2,517 
Short-term borrowings 24,1684.59830 23,629  2.84  502 
Long-term debt 83,4374.813,004 79,126  3.43  2,034 
Total interest-bearing liabilities 332,4133.669,107 292,186  2.31  5,053 
Portion of noninterest-bearing funding sources 84,981---- 85,541  --  -- 
Total funding sources $ 417,3942.929,107 $ 377,727  1.79  5,053 
Net interest margin and net interest income on a taxable-equivalent basis (6)
4.80%$ 14,988 4.87% $ 13,747 
NONINTEREST-EARNING ASSETS
Cash and due from banks $ 12,495 $ 13,060 
Goodwill 11,066 10,680 
Other 46,227 36,676 
Total noninterest-earning assets $ 69,788 $ 60,416 
NONINTEREST-BEARING FUNDING SOURCES
Deposits $ 88,395 $ 85,965 
Other liabilities 24,007 21,055 
Stockholders' equity 42,367 38,937 
Noninterest-bearing funding sources used to fund earning assets
(84,981) (85,541)
Net noninterest-bearing funding sources $ 69,788 $ 60,416 
TOTAL ASSETS$ 487,182 $ 438,143 

(1) Our average prime rate was 7.86% and 5.93% for the nine months ended September 30, 2006 and 2005, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 5.14% and 3.30% for the same periods, respectively.

(2) Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.

(3) Yields are based on amortized cost balances computed on a settlement date basis.

(4) Includes certain preferred securities.

(5) Nonaccrual loans and related income are included in their respective loan categories.

(6) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for the periods presented.

Wells Fargo & Company and Subsidiaries
OPERATING SEGMENT RESULTS (1)
(income/expense in millions,
average balances in billions)
Community
Banking
Wholesale
Banking
Wells Fargo
Financial
Consolidated
Company
Quarter ended September 30,2006 2005  2006 2005  2006 2005  2006 2005 
Net interest income $ 3,292 $ 3,209  $ 751 $ 598  $ 1,004 $ 869  $ 5,047 $ 4,676 
Provision for credit losses 236 226  -- --  377 415  613 641 
Noninterest income 2,492 2,619  1,033 893  362 315  3,887 3,827 
Noninterest expense 3,392 3,350  999 895  690 644  5,081 4,889 
Income before income tax expense 2,156 2,252  785 596  299 125  3,240 2,973 
Income tax expense 683 759  258 193  105 46  1,046 998 
Net income $ 1,473 $ 1,493  $ 527 $ 403  $ 194 $ 79  $ 2,194 $ 1,975 
Average loans $ 172.5 $ 184.4  $ 72.3 $ 63.3  $ 59.2 $ 47.9  $ 304.0 $ 295.6 
Average assets (2) 326.7 298.8  97.5 90.1  64.7 53.5  494.7 448.2 
Average core deposits 231.2 223.5  29.1 23.6  0.1 0.1  260.4 247.2 
Nine months ended September 30,
Net interest income $ 9,869 $ 9,421  $ 2,137 $ 1,755  $ 2,895 $ 2,489  $ 14,901 $ 13,665 
Provision (reversal of provision) for credit losses
612 610  (9) (6) 875 1,076  1,478 1,680 
Noninterest income 7,033 6,986  3,214 2,849  1,130 957  11,377 10,792 
Noninterest expense 10,264 9,636  3,009 2,611  2,058 1,888  15,331 14,135 
Income before income tax expense 6,026 6,161  2,351 1,999  1,092 482  9,469 8,642 
Income tax expense 2,007 2,075  773 655  388 171  3,168 2,901 
Net income $ 4,019 $ 4,086  $ 1,578 $ 1,344  $ 704 $ 311  $ 6,301 $ 5,741 
Average loans $ 178.8 $ 186.0  $ 70.1 $ 61.3  $ 56.2 $ 45.6  $ 305.1 $ 292.9 
Average assets (2) 322.9 292.7  96.9 88.1  61.6 51.5  487.2 438.1 
Average core deposits 230.0 214.9  27.3 24.3  0.1 --  257.4 239.2 

(1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. If the management structure and/or the allocation process changes, allocations, transfers and assignments may change. To reflect the realignment of the insurance business into Wholesale Banking in first quarter 2006, results for prior periods have been revised.

(2) The Consolidated Company balance includes unallocated goodwill held at the enterprise level of $5.8 billion for all periods presented.

Wells Fargo & Company and Subsidiaries
FIVE QUARTER OPERATING SEGMENT RESULTS (1)
Quarter ended
(income/expense in millions, average balances in billions) Sept. 30,
2006
June 30,
2006
Mar. 31,
2006
Dec. 31,
2005
Sept. 30,
2005
COMMUNITY BANKING
Net interest income $ 3,292 $ 3,321  $ 3,256  $ 3,281  $ 3,209 
Provision for credit losses 236 187  189  285  226 
Noninterest income 2,492 2,398  2,143  2,432  2,619 
Noninterest expense 3,392 3,485  3,387  3,336  3,350 
Income before income tax expense 2,156 2,047  1,823  2,092  2,252 
Income tax expense 683 711  613  705  759 
Net income $ 1,473 $ 1,336  $ 1,210  $ 1,387  $ 1,493 
Average loans $ 172.5 $ 173.9  $ 190.4  $ 190.5  $ 184.4 
Average assets 326.7 327.2  314.8  313.8  298.8 
Average core deposits 231.2 230.7  228.0  228.1  223.5 
WHOLESALE BANKING
Net interest income $ 751 $ 706  $ 680  $ 638  $ 598 
Provision (reversal of provision) for credit losses -- (7) (2)
Noninterest income 1,033 1,085  1,096  907  893 
Noninterest expense 999 1,018  992  876  895 
Income before income tax expense 785 780  786  662  596 
Income tax expense 258 257  258  217  193 
Net income $ 527 $ 523  $ 528  $ 445  $ 403 
Average loans $ 72.3 $ 70.4  $ 67.6  $ 64.7  $ 63.3 
Average assets 97.5 97.2  95.9  92.8  90.1 
Average core deposits 29.1 26.9  25.9  25.3  23.6 
WELLS FARGO FINANCIAL
Net interest income $ 1,004 $ 957  $ 934  $ 920  $ 869 
Provision for credit losses 377 252  246  411  415 
Noninterest income 362 322  446  314  315 
Noninterest expense 690 673  695  671  644 
Income before income tax expense 299 354  439  152  125 
Income tax expense 105 124  159  54  46 
Net income $ 194 $ 230  $ 280  $ 98  $ 79 
Average loans $ 59.2 $ 56.1  $ 53.1  $ 50.5  $ 47.9 
Average assets 64.7 61.3  58.7  56.1  53.5 
Average core deposits 0.1 0.1  0.1  --  0.1 
CONSOLIDATED COMPANY
Net interest income $ 5,047 $ 4,984  $ 4,870  $ 4,839  $ 4,676 
Provision for credit losses 613 432  433  703  641 
Noninterest income 3,887 3,805  3,685  3,653  3,827 
Noninterest expense 5,081 5,176  5,074  4,883  4,889 
Income before income tax expense 3,240 3,181  3,048  2,906  2,973 
Income tax expense 1,046 1,092  1,030  976  998 
Net income $ 2,194 $ 2,089  $ 2,018  $ 1,930  $ 1,975 
Average loans $ 304.0 $ 300.4  $ 311.1  $ 305.7  $ 295.6 
Average assets (2) 494.7 491.5  475.2  468.5  448.2 
Average core deposits 260.4 257.7  254.0  253.4  247.2 

(1) The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with other similar information for other financial services companies. We define our operating segments by product type and customer segment. If the management structure and/or the allocation process changes, allocations, transfers and assignments may change. To reflect the realignment of the insurance business into Wholesale Banking in first quarter 2006, results for prior periods have been revised.

(2) The Consolidated Company includes unallocated goodwill held at the enterprise level of $5.8 billion for all periods presented.

Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING
Effective January 1, 2006, upon adoption of FAS 156, we remeasured our residential mortgage servicing rights (MSRs) at fair value and recognized a pre-tax adjustment of $158 million to residential MSRs and recorded a corresponding cumulative effect adjustment of $101 million (after-tax) to the 2006 beginning balance of retained earnings in our Statement of Changes in Stockholders' Equity. The table below reconciles the December 31, 2005, and the January 1, 2006, balance of MSRs.
(in millions) Residential
MSRs
Commercial
MSRs
Total
MSRs
Balance at December 31, 2005 $ 12,389  $ 122  $ 12,511 
Remeasurement upon adoption of FAS 156 158  --  158 
Balance at January 1, 2006 $ 12,547  $ 122  $ 12,669 
Quarter ended
(in millions) Sept. 30,
2006
June 30,
2006
Mar. 31,
2006
Residential MSRs measured using the fair value method:
Fair value, beginning of quarter $ 15,650 $ 13,800  $ 12,547 
Purchases 2,907 511  219 
Servicing from securitizations or asset transfers 965 1,310  989 
Changes in fair value:
Due to changes in valuation model inputs or assumptions (1)
(1,147) 550  522 
Other changes in fair value (2) (663) (521) (477)
Fair value, end of quarter $ 17,712 $ 15,650  $ 13,800 

(1) Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates.

(2) Represents changes due to collection/realization of expected cash flows over time.

Quarter ended
(in millions) Sept. 30,
2006
June 30,
2006
Mar. 31,
2006
Dec. 31,
2005
Sept. 30,
2005
Amortized MSRs:
Balance, beginning of quarter $ 175 $ 142  $ 122  $ 11,953  $ 10,096 
Purchases 161 39  25  912  783 
Servicing from securitizations or asset transfers 2 --  --  888  850 
Amortization (10) (6) (5) (486) (542)
Other (includes changes due to hedging) -- --  --  431  766 
Balance, end of quarter $ 328 $ 175  $ 142  $ 13,698  $ 11,953 
Valuation allowance:
Balance, beginning of quarter $ -- $ --  $ --  $ 1,242  $ 1,598 
Reversal of provision for MSRs in excess of fair value -- --  --  (55) (356)
Balance, end of quarter $ -- $ --  $ --  $ 1,187  $ 1,242 
Amortized MSRs, net $ 328 $ 175  $ 142  $ 12,511  $ 10,711 
Fair value of amortized MSRs:
Beginning of quarter $ 252 $ 205  $ 146  $ 10,845  $ 8,517 
End of quarter 440 252  205  12,693  10,845 
Wells Fargo & Company and Subsidiaries
FIVE QUARTER CONSOLIDATED MORTGAGE SERVICING (CONTINUED)
Quarter ended
(in millions) Sept. 30,
2006
June 30,
2006
Mar. 31,
2006
Dec. 31,
2005
Sept. 30,
2005
Servicing income, net:
Servicing fees (1) $ 947 $ 820  $ 747  $ 675  $ 619 
Changes in fair value of residential MSRs:
Due to changes in valuation model inputs or assumptions (2) (1,147) 550  522  --  -- 
Other changes in fair value (3) (663) (521) (477) --  -- 
Amortization (10) (6) (5) (486) (542)
Reversal of provision for MSRs in excess of fair value -- --  --  55  356 
Net derivative gains (losses):
Fair value accounting hedges (4) -- --  --  (176) (60)
Economic hedges (5) 1,061 (533) (706) 189  -- 
Total servicing income, net $ 188 $ 310  $ 81  $ 257  $ 373 
Market-related valuation changes to MSRs, net of hedge results (2) + (5)
$ (86) $ 17  $ (184)

(1) Includes contractually specified servicing fees, late charges and other ancillary revenues.

(2) Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates.

(3) Represents changes due to collection/realization of expected cash flows over time.

(4) Results related to MSRs fair value hedging activities under FAS 133, Accounting for Derivative Instruments and Hedging Activities (as amended), consist of gains and losses excluded from the evaluation of hedge effectiveness and the ineffective portion of the change in the value of these derivatives. Gains and losses excluded from the evaluation of hedge effectiveness are those caused by market conditions (volatility) and the spread between spot and forward rates priced into the derivative contracts (the passage of time).

(5) Represents results from free-standing derivatives (economic hedges) used to hedge the risk of changes in fair value of MSRs.

(in billions) Sept. 30,
2006
June 30,
2006
Mar. 31,
2006
Dec. 31,
2005
Sept. 30,
2005
Managed servicing portfolio:
Loans serviced for others (1) $ 1,235 $ 1,020  $ 931  $ 871  $ 815 
Owned loans serviced (2) 90 90  110  118  115 
Total owned servicing 1,325 1,110  1,041  989  930 
Sub-servicing 20 23  25  27  29 
Total managed servicing portfolio $ 1,345 $ 1,133  $ 1,066  $ 1,016  $ 959 
Ratio of MSRs to related loans serviced for others 1.46% 1.55% 1.50% 1.44% 1.31%
Weighted-average note rate (owned servicing only) 5.86% 5.80% 5.75% 5.72% 5.71%

(1) Consists of 1-4 family first mortgage and commercial mortgage loans.

(2) Consists of mortgages held for sale and 1-4 family first mortgage loans.

Wells Fargo & Company and Subsidiaries
SELECTED FIVE QUARTER RESIDENTIAL MORTGAGE PRODUCTION DATA
Quarter ended
(in billions) Sept. 30,
2006
June 30,
2006
Mar. 31,
2006
Dec. 31,
2005
Sept. 30,
2005
Application Data:
Wells Fargo Home Mortgage first mortgage quarterly applications $ 95 $ 108  $ 95  $ 89  $ 116 
Refinances as a percentage of applications 41% 34% 39% 43% 43%
Wells Fargo Home Mortgage first mortgage unclosed pipeline, at quarter end $ 55 $ 63  $ 59  $ 50  $ 66 
Quarter ended
(in billions) Sept. 30,
2006
June 30,
2006
Mar. 31,
2006
Dec. 31,
2005
Sept. 30,
2005
Residential Real Estate Originations: (1)
Quarter:
Wells Fargo Home Mortgage first mortgage loans:
Retail $ 29 $ 33  $ 26  $ 34  $ 42 
Correspondent/Wholesale (2) 63 70  53  64  48 
Home equity loans and lines 10 11  12  10 
Wells Fargo Financial 2
Total $ 104 $ 116  $ 91  $ 113  $ 103 
Year-to-date $ 311 $ 207  $ 91  $ 366  $ 253 

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

(2) Includes $27 billion, $35 billion, $25 billion, $25 billion and $11 billion of co-issue volume, respectively. Under co-issue arrangements, Wells Fargo becomes the servicer when the correspondent securitizes the related loans.

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