WELLS FARGO & CO/MN - 10-Q Quarterly Report

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003

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

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

420 Montgomery Street, San Francisco, California 94104
(Address of principal executive offices) (Zip Code)

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.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

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


PART I	Financial Information
Item 1.	Financial Statements	Page
	Consolidated Statement of Income		2
	Consolidated Balance Sheet		3
	Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income		4
	Consolidated Statement of Cash Flows		5
	Notes to Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
	Summary Financial Data		31
	Overview		32
	Critical Accounting Policies		35
	Earnings Performance		35
	Net Interest Income		35
	Noninterest Income		39
	Noninterest Expense		41
	Income Taxes		42
	Operating Segment Results		42
	Balance Sheet Analysis		43
	Securities Available for Sale		43
	Loan Portfolio		45
	Nonaccrual Loans and Other Assets		46
	Loans 90 Days Past Due and Still Accruing		47
	Allowance for Loan Losses		48
	Other Assets		49
	Deposits		50
	Regulatory and Agency Capital Requirements		51
	Off-Balance Sheet Arrangements and Contractual Obligations		51
	Asset/Liability and Market Risk Management		52
	Capital Management		56
	Factors that May Affect Future Results		57

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		52

Item 4.	Controls and Procedures
	Disclosure Controls and Procedures		63
	Internal Control Over Financial Reporting		63

PART II	Other Information
Item 6.	Exhibits and Reports on Form 8-K		64

Signature			67



	Quarter ended Sept. 30					,	Nine months ended Sept. 30					,
(in millions, except per share amounts)	2003			2002			2003			2002


INTEREST INCOME
Securities available for sale	$	470		$	582		$	1,358		$	1,893
Mortgages held for sale		906			591			2,585			1,622
Loans held for sale		57			52			191			194
Loans		3,548			3,400			10,440			10,072
Other interest income		64			74			205			225

Total interest income		5,045			4,699			14,779			14,006


INTEREST EXPENSE
Deposits		384			483			1,236			1,459
Short-term borrowings		72			124			254			429
Long-term debt		349			367			1,020			1,041
Guaranteed preferred beneficial interests in Company’s subordinated debentures		32			30			88			88

Total interest expense		837			1,004			2,598			3,017


NET INTEREST INCOME		4,208			3,695			12,181			10,989
Provision for loan losses		434			395			1,283			1,295

Net interest income after provision for loan losses		3,774			3,300			10,898			9,694


NONINTEREST INCOME
Service charges on deposit accounts		607			560			1,747			1,612
Trust and investment fees		504			462			1,433			1,395
Credit card fees		251			242			752			666
Other fees		422			372			1,161			1,009
Mortgage banking		773			426			1,877			1,198
Insurance		252			234			807			766
Net (losses) gains on debt securities available for sale		(23	)		121			16			202
Net gains (losses) from equity investments		58			(152	)		(87	)		(230	)
Other		114			80			543			406

Total noninterest income		2,958			2,345			8,249			7,024


NONINTEREST EXPENSE
Salaries		1,185			1,110			3,481			3,292
Incentive compensation		621			446			1,571			1,165
Employee benefits		374			304			1,143			997
Equipment		298			232			871			697
Net occupancy		283			278			867			821
Net losses on dispositions of premises and equipment		4			—			10			26
Other		1,635			1,037			4,206			3,141

Total noninterest expense		4,400			3,407			12,149			10,139


INCOME BEFORE INCOME TAX EXPENSE AND EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE		2,332			2,238			6,998			6,579
Income tax expense		771			794			2,420			2,335


NET INCOME BEFORE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE		1,561			1,444			4,578			4,244
Cumulative effect of change in accounting principle		—			—			—			(276	)


NET INCOME	$	1,561		$	1,444		$	4,578		$	3,968


NET INCOME APPLICABLE TO COMMON STOCK	$	1,560		$	1,443		$	4,575		$	3,965


EARNINGS PER COMMON SHARE BEFORE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
Earnings per common share	$	.93		$	.85		$	2.73		$	2.49


Diluted earnings per common share	$	.92		$	.84		$	2.70		$	2.46


EARNINGS PER COMMON SHARE
Earnings per common share	$	.93		$	.85		$	2.73		$	2.33


Diluted earnings per common share	$	.92		$	.84		$	2.70		$	2.30


DIVIDENDS DECLARED PER COMMON SHARE	$	.45		$	.28		$	1.05		$	.82


Average common shares outstanding		1,677.2			1,700.7			1,678.0			1,704.7


Diluted average common shares outstanding		1,693.9			1,717.8			1,692.6			1,722.6



	September 30		,	December 31		,	September 30		,
(in millions, except shares)	2003			2002			2002


ASSETS
Cash and due from banks	$	15,423		$	17,820		$	15,813
Federal funds sold and securities purchased under resale agreements		2,692			3,174			4,047
Securities available for sale		30,260			27,947			32,974
Mortgages held for sale		55,328			51,154			42,339
Loans held for sale		7,310			6,665			5,522

Loans		231,844			196,634			186,310
Allowance for loan losses		3,893			3,862			3,861

Net loans		227,951			192,772			182,449


Mortgage servicing rights, net		5,765			4,489			4,415
Premises and equipment, net		3,517			3,688			3,664
Goodwill		9,849			9,753			9,744
Other assets		32,718			31,797			33,283


Total assets	$	390,813		$	349,259		$	334,250


LIABILITIES
Noninterest-bearing deposits	$	77,175		$	74,094		$	69,382
Interest-bearing deposits		174,261			142,822			136,374

Total deposits		251,436			216,916			205,756
Short-term borrowings		25,589			33,446			30,370
Accrued expenses and other liabilities		18,839			18,334			19,341
Long-term debt		58,992			47,320			45,824
Guaranteed preferred beneficial interests in Company’s subordinated debentures		3,585			2,885			2,885


Total liabilities		358,441			318,901			304,176


STOCKHOLDERS’ EQUITY
Preferred stock		319			251			294
Unearned ESOP shares		(263	)		(190	)		(236	)

Total preferred stock		56			61			58
Common stock — $1-2/3 par value, authorized 6,000,000,000 shares; issued 1,736,381,025 shares		2,894			2,894			2,894
Additional paid-in capital		9,532			9,498			9,499
Retained earnings		22,103			19,394			18,441
Cumulative other comprehensive income		572			976			1,070
Treasury stock – 59,314,051 shares, 50,474,518 shares and 37,900,563 shares		(2,785	)		(2,465	)		(1,888	)


Total stockholders’ equity		32,372			30,358			30,074


Total liabilities and stockholders’ equity	$	390,813		$	349,259		$	334,250

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



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


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

Comprehensive income:
Net income															3,968									3,968
Other comprehensive income, net of tax:
Net unrealized gains on securities available for sale and other retained interests, net of reclassification of $72 million of net gains included in net income																					514			514
Net unrealized losses on derivatives and hedging activities, net of reclassification of $163 million of net losses on cash flow hedges included in net income																					(196	)		(196	)

Total comprehensive income																								4,286
Common stock issued		12,884,012										41			(130	)		570						481
Common stock issued for acquisitions		12,017,193										4						531						535
Common stock repurchased		25,217,058																(1,206	)					(1,206	)
Preferred stock (238,000) issued to ESOP				239			(256	)				17												—
Preferred stock released to ESOP							174					(11	)											163
Preferred stock (162,687) converted to common shares		3,301,318		(163	)							12						151						—
Preferred stock dividends															(3	)								(3	)
Common stock dividends															(1,399	)								(1,399	)
Change in Rabbi trust assets and similar arrangements (classified as treasury stock)																		3						3

Net change				76			(82	)		—		63			2,436			49			318			2,860


BALANCE SEPTEMBER 30, 2002			$	294		$	(236	)	$	2,894	$	9,499		$	18,441		$	(1,888	)	$	1,070		$	30,074


BALANCE DECEMBER 31, 2002			$	251		$	(190	)	$	2,894	$	9,498		$	19,394		$	(2,465	)	$	976		$	30,358

Comprehensive income:
Net income															4,578									4,578
Other comprehensive income net of tax:
Translation adjustments																					20			20
Net unrealized losses on securities available for sale and other retained interests net of reclassification of $22 million of net gains included in net income																					(77	)		(77	)
Net unrealized losses on derivatives and hedging activities net of reclassification of $51 million of net losses on cash flow hedges included in net income																					(347	)		(347	)

Total comprehensive income																								4,174
Common stock issued		14,383,099										22			(102	)		667						587
Common stock issued for acquisitions		129,475																6						6
Common stock repurchased		27,327,815																(1,289	)					(1,289	)
Preferred stock (260,200) issued to ESOP				260			(279	)				19												--
Preferred stock released to ESOP							206					(14	)											192
Preferred stock (191,774) converted to common shares		3,975,708		(192	)							7						185						--
Preferred stock dividends															(3	)								(3	)
Common stock dividends															(1,764	)								(1,764	)
Change in Rabbi trust assets and similar arrangements (classified as treasury stock)																		111						111

Net change				68			(73	)		—		34			2,709			(320	)		(404	)		2,014


BALANCE SEPTEMBER 30, 2003			$	319		$	(263	)	$	2,894	$	9,532		$	22,103		$	(2,785	)	$	572		$	32,372



	Nine months ended September 30					,
(in millions)	2003			2002


Cash flows from operating activities:
Net income	$	4,578		$	3,968
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Provision for loan losses		1,283			1,295
Net provision for mortgage servicing rights in excess of fair value		974			1,522
Depreciation and amortization		2,975			2,510
Net gains on securities available for sale		(36	)		(116	)
Net gains on mortgage loan originations / sales activities		(1,787	)		(519	)
Net gains on sales of loans		(23	)		(15	)
Net losses on dispositions of premises and equipment		10			26
Net (gains) losses on dispositions of operations		(27	)		6
Release of preferred shares to ESOP		192			163
Net increase in trading assets		(112	)		(1,598	)
Deferred income tax expense		718			155
Net (increase) decrease in accrued interest receivable		(70	)		49
Net (decrease) increase in accrued interest payable		(12	)		36
Originations of mortgages held for sale		(335,507	)		(190,320	)
Proceeds from sales of mortgages held for sale		329,484			176,988
Principal collected on mortgages held for sale		2,632			1,257
Net increase in loans held for sale		(645	)		(777	)
Other assets, net		(1,669	)		(3,958	)
Other accrued expenses and liabilities, net		295			2,922


Net cash provided (used) by operating activities		3,253			(6,406	)


Cash flows from investing activities:
Securities available for sale:
Proceeds from sales		6,057			14,566
Proceeds from prepayments and maturities		10,225			6,496
Purchases		(19,117	)		(11,459	)
Net cash paid for acquisitions		(816	)		(574	)
Increase in banking subsidiaries’ loans resulting from originations, net of collections		(17,972	)		(8,129	)
Proceeds from sales (including participations) of loans by banking subsidiaries		1,259			877
Purchases (including participations) of loans by banking subsidiaries		(13,468	)		(1,950	)
Principal collected on nonbank entities’ loans		13,754			8,441
Loans originated by nonbank entities		(15,410	)		(10,610	)
Purchases of loans by nonbank entities		(3,682	)		—
Proceeds from dispositions of operations		30			42
Proceeds from sales of foreclosed assets		206			339
Net decrease (increase) in federal funds sold and securities purchased under resale agreements		482			(1,348	)
Net increase in mortgage servicing rights		(3,601	)		(358	)
Other, net		(75	)		(4,272	)


Net cash used by investing activities		(42,128	)		(7,939	)


Cash flows from financing activities:
Net increase in deposits		34,520			13,890
Net decrease in short-term borrowings		(7,857	)		(8,300	)
Proceeds from issuance of long-term debt		25,677			16,792
Repayment of long-term debt		(14,688	)		(7,492	)
Proceeds from issuance of guaranteed preferred beneficial interests in Company’s subordinated debentures		700			450
Proceeds from issuance of common stock		544			412
Repurchase of common stock		(1,289	)		(1,206	)
Payment of cash dividends on preferred and common stock		(1,767	)		(1,402	)
Other, net		638			46


Net cash provided by financing activities		36,478			13,190


Net change in cash and due from banks		(2,397	)		(1,155	)

Cash and due from banks at beginning of period		17,820			16,968


Cash and due from banks at end of period	$	15,423		$	15,813


Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	2,586		$	3,053
Income taxes		2,429			1,881
Noncash investing and financing activities:
Transfers from loans to foreclosed assets	$	375		$	352
Net transfers from mortgages held for sale to loans		282			224

Wells Fargo & Company and Subsidiaries (consolidated) (the Company) is a diversified financial services company providing banking, insurance, investments, mortgage banking and consumer finance through banking stores, the internet and other distribution channels to consumers, businesses and financial institutions in all 50 states of the U.S. and in other countries. Wells Fargo & Company (the Parent) is a financial holding company and a bank holding company.

The accounting and reporting policies of the Company conform with generally accepted accounting principles (GAAP) and prevailing practices in the financial services industry. Preparing the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and income and expenses during the reporting period. Certain amounts in the financial statements for prior periods have been reclassified to conform with the current financial statement presentation.

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 the Company’s 2002 Annual Report on Form 10-K (2002 Form 10-K).

Descriptions of the significant accounting policies of the Company are included in Note 1 (Summary of Significant Accounting Policies) to Financial Statements in the Company’s 2002 Form 10-K. There have been no significant changes to these policies, except as noted below.

The consolidated financial statements of the Company include the accounts of the Parent, and its majority-owned subsidiaries, which are consolidated on a line-by-line basis. Significant intercompany accounts and transactions are eliminated in consolidation. Other affiliates in which there is at least 20% ownership are generally accounted for by the equity method; those in which there is less than 20% ownership are generally carried at cost, except for marketable equity securities, which are carried at fair value with changes in fair value included in other comprehensive income, and certain variable interest entities as described below. Assets that are accounted for by either the equity or cost method are included in other assets.

In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities, which clarifies consolidation requirements for certain entities in which the equity investors do not have a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. These entities are referred to as variable

interest entities (VIEs). An enterprise’s variable interest in a variable interest entity arises from either contractual, ownership, or other monetary interests in the entity, which change with the entity’s net asset value changes. Effective for VIEs formed after January 31, 2003, and effective for all existing VIEs on December 31, 2003, the Company must consolidate a VIE if it will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns, or both.

The Company has several stock-based employee compensation plans, which are described more fully in Note 14 (Common Stock and Stock Plans) to Financial Statements in the Company’s 2002 Form 10-K. As permitted by Statement of Financial Accounting Standards No. 123 (FAS 123), Accounting for Stock-Based Compensation, the Company uses the intrinsic value method of Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees, to account for its stock-based employee compensation plans. Pro forma net income and earnings per common share information is provided as if the Company accounted for its employee stock option plans under the fair value method of FAS 123.

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

The Company had three pending business combinations as of September 30, 2003, with approximately $3.0 billion in total assets, including the pending acquisition of Pacific Northwest Bancorp, with approximately $2.9 billion in assets. These transactions were subsequently completed on October 31, 2003.

The gross carrying amount and accumulated amortization for intangible assets are presented in the following table:

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

The projections of amortization expense shown above for mortgage servicing rights are based on existing asset balances and the existing interest rate environment as of September 30, 2003. Future amortization expense may be significantly different depending upon changes in the mortgage servicing portfolio, mortgage interest rates and market conditions. The projections of amortization expense shown above for core deposit intangibles are based on existing asset balances at September 30, 2003. Future amortization expense may vary based on additional core deposit intangibles acquired through business combinations.

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

Goodwill amounts allocated to the operating segments for goodwill impairment analysis differ from amounts allocated to the Company’s operating segments for management reporting discussed in Note 7 (Operating Segments). The balance of goodwill for management reporting is summarized below:

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

The table below is a summary of the Company’s preferred stock. A detailed description of the Company’s preferred stock is provided in Note 13 (Preferred Stock) to Financial Statements included in the Company’s 2002 Form 10-K.



	Shares issued and outstanding									Carrying amount (in millions)									Adjustable
	Sept. 30		,	Dec. 31		,	Sept. 30		,	Sept. 30		,	Dec. 31		,	Sept. 30		,	dividends rate
	2003			2002			2002			2003			2002			2002			Minimum			Maximum

Adjustable-Rate Cumulative, Series B (1)		1,460,000			1,460,000			1,460,000		$	73		$	73		$	73			5.50	%		10.50	%

2003 ESOP Cumulative Convertible (2)		85,324			—			—			85			—			—			8.50			9.50

2002 ESOP Cumulative Convertible (2)		56,741			64,049			85,727			57			64			86			10.50			11.50

2001 ESOP Cumulative Convertible (2)		42,606			46,126			56,826			43			46			57			10.50			11.50

2000 ESOP Cumulative Convertible (2)		32,092			34,742			38,242			32			35			38			11.50			12.50

1999 ESOP Cumulative Convertible (2)		12,532			13,222			14,722			13			13			14			10.30			11.30

1998 ESOP Cumulative Convertible (2)		4,875			5,095			5,745			5			5			6			10.75			11.75

1997 ESOP Cumulative Convertible (2)		5,481			5,876			7,076			5			6			7			9.50			10.50

1996 ESOP Cumulative Convertible (2)		4,327			5,407			6,907			4			6			7			8.50			9.50

1995 ESOP Cumulative Convertible (2)		2,008			3,043			4,743			2			3			5			10.00			10.00

ESOP Cumulative Convertible (2)		—			—			612			—			—			1			9.00			9.00

Unearned ESOP shares (3)		—			—			—			(263	)		(190	)		(236	)		—			—


Total		1,705,986			1,637,560			1,680,600		$	56		$	61		$	58

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



		Quarter					Nine months
		ended September 30				,	ended September 30				,
(in millions, except per share amounts)		2003		2002			2003		2002


Net income before effect of change in accounting principle		$	1,561	$	1,444		$	4,578	$	4,244
Less: Preferred stock dividends			1		1			3		3

Net income applicable to common stock before effect of change in accounting principle (numerator)			1,560		1,443			4,575		4,241

Cumulative effect of change in accounting principle (numerator)			—		—			—		(276	)
Net income applicable to common stock (numerator)		$	1,560	$	1,443		$	4,575	$	3,965


EARNINGS PER COMMON SHARE
Average common shares outstanding (denominator)			1,677.2		1,700.7			1,678.0		1,704.7


Per share before effect of change in accounting principle		$	.93	$	.85		$	2.73	$	2.49
Per share effect of change in accounting principle			—		—			—		(.16	)

Per share		$	.93	$	.85		$	2.73	$	2.33


DILUTED EARNINGS PER COMMON SHARE
Average common shares outstanding			1,677.2		1,700.7			1,678.0		1,704.7
Add:	Stock options		16.3		16.8			14.2		17.6
	Restricted share rights		.4		.3			.4		.3

Diluted average common shares outstanding (denominator)			1,693.9		1,717.8			1,692.6		1,722.6


Per share before effect of change in accounting principle		$	.92	$	.84		$	2.70	$	2.46
Per share effect of change in accounting principle			—		—			—		(.16	)

Per share		$	.92	$	.84		$	2.70	$	2.30

At September 30, 2003 and 2002, options to purchase 34.7 million and 36.5 million shares, respectively, were outstanding but not included in the computation of earnings per share. The exercise price was higher than the market price, and the options were therefore antidilutive.

The Company has three lines of business for management reporting: Community Banking, Wholesale Banking and Wells Fargo Financial. The results for these lines of business are based on the Company’s management accounting process, which assigns balance sheet and income statement items to each responsible operating segment. This process is dynamic and, unlike financial accounting, there is no comprehensive, authoritative guidance for management accounting equivalent to GAAP. The management accounting process measures the performance of the operating segments based on the Company’s management structure and is not necessarily comparable with similar information for other financial services companies. The Company’s operating segments are defined by product type and customer segments. Changes in management structure and/or the allocation process may result in changes in allocations, transfers and assignments. In that case, results for prior periods would be (and have been) restated for comparability.

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

Community Banking provides access to customers through a wide range of channels, which encompass a network of traditional banking stores, in-store banking centers, business centers and ATMs. Additionally, PhoneBank SM centers and the National Business Banking Center provide 24-hour telephone service. Online banking services include single sign-on to online banking, bill pay and brokerage, as well as online banking for small business.

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

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

Wells Fargo Financial includes consumer finance and auto finance operations. Consumer finance operations make direct consumer and real estate loans to individuals and purchase sales finance contracts from retail merchants from offices throughout the United States, Canada and in the Caribbean. Automobile finance operations specialize in purchasing sales finance contracts directly from automobile dealers and making loans secured by automobiles in the United States and Puerto Rico. Wells Fargo Financial also provides credit cards, and lease and other commercial financing.

The Reconciliation Column consists of Corporate level equity investment activities and balances and unallocated goodwill balances held at the enterprise level.

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



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

Quarter ended September 30,	2003		2002		2003		2002			2003		2002			2003			2002			2003		2002

Net interest income (1)	$	3,056	$	2,664	$	556	$	556		$	599	$	477		$	(3	)	$	(2	)	$	4,208	$	3,695
Provision for loan losses (2)		221		180		54		60			159		155			—			—			434		395
Noninterest income		2,146		1,744		707		512			97		95			8			(6	)		2,958		2,345
Noninterest expense		3,428		2,574		629		564			343		268			—			1			4,400		3,407

Income (loss) before income tax expense (benefit)		1,553		1,654		580		444			194		149			5			(9	)		2,332		2,238
Income tax expense (benefit)		488		581		208		159			73		57			2			(3	)		771		794

Net income (loss)	$	1,065	$	1,073	$	372	$	285		$	121	$	92		$	3		$	(6	)	$	1,561	$	1,444


Average loans	$	149.8	$	117.1	$	49.0	$	49.1		$	21.2	$	15.6		$	—		$	—		$	220.0	$	181.8
Average assets		290.3		226.4		75.7		71.3			22.9		17.4			6.2			6.1			395.1		321.2
Average core deposits		191.8		166.1		23.8		18.2			.1		.1			—			—			215.7		184.4

Nine months ended September 30,

Net interest income (1)	$	8,849	$	7,936	$	1,667	$	1,691		$	1,672	$	1,370		$	(7	)	$	(8	)	$	12,181	$	10,989
Provision for loan losses (2)		681		648		154		218			448		429			—			—			1,283		1,295
Noninterest income		5,942		5,013		2,015		1,728			283		273			9			10			8,249		7,024
Noninterest expense		9,289		7,579		1,885		1,747			973		810			2			3			12,149		10,139

Income (loss) before income tax expense (benefit) and effect of change in accounting principle		4,821		4,722		1,643		1,454			534		404			—			(1	)		6,998		6,579
Income tax expense (benefit)		1,638		1,662		580		521			202		153			—			(1	)		2,420		2,335

Net income before effect of change in accounting principle		3,183		3,060		1,063		933			332		251			—			—			4,578		4,244
Cumulative effect of change in accounting principle		—		—		—		(98	)		—		(178	)		—			—			—		(276	)

Net income	$	3,183	$	3,060	$	1,063	$	835		$	332	$	73		$	—		$	—		$	4,578	$	3,968


Average loans	$	140.8	$	113.4	$	49.4	$	49.5		$	19.3	$	14.8		$	—		$	—		$	209.5	$	177.7
Average assets		271.9		222.5		76.1		70.3			21.1		16.6			6.2			6.2			375.3		315.6
Average core deposits		184.1		162.5		21.8		17.9			.1		.1			—			—			206.0		180.5

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

Net of valuation allowance, mortgage servicing rights (MSRs) totaled $5.8 billion (1.03% of total mortgage loans serviced for others) at September 30, 2003, compared with $4.4 billion (.89%) at September 30, 2002.

Each quarter, the Company evaluates MSRs for possible impairment based on the difference between the carrying amount and current fair value of the MSRs, in accordance with FAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. If a temporary impairment exists, a valuation allowance is established for any excess of amortized cost, as adjusted for hedge accounting, over the current fair value through a charge to income. The Company has a policy of reviewing MSRs for other-than-temporary impairment each quarter and recognizes a direct write-down when the recoverability of a recorded valuation allowance is determined to be remote. Unlike a valuation allowance, a direct write-down permanently reduces the carrying value of the MSRs asset and the valuation allowance, precluding subsequent reversals. See Note 1 (Summary of Significant Accounting Policies - Transfer and Servicing of Financial Assets) to Financial Statements in the Company’s 2002 Form 10-K for additional discussion of the Company’s policy for valuation of MSRs. The Company determined that a portion of the asset was not recoverable and reduced both the asset and the previously designated valuation allowance by a write-down of $492 million and $1,338 million in the quarter and nine months ended September 30, 2003, respectively, and $887 million in the quarter ended September 30, 2002.



	Quarter ended Sept. 30					,	Nine months ended Sept. 30					,
(in millions)	2003			2002			2003			2002


Mortgage servicing rights:
Balance, beginning of period	$	6,375		$	7,865		$	6,677		$	7,365
Originations (1)		1,377			492			2,872			1,615
Purchases (1)		874			268			1,730			984
Amortization		(572	)		(534	)		(2,301	)		(1,271	)
Write-down		(492	)		(887	)		(1,338	)		(887	)
Other (includes changes in mortgage
servicing rights due to hedging)		27			(1,030	)		(51	)		(1,632	)

Balance, end of period	$	7,589		$	6,174		$	7,589		$	6,174


Valuation Allowance:
Balance, beginning of period	$	2,554		$	1,909		$	2,188		$	1,124
Provision for mortgage servicing rights in excess of fair value		—			737			1,212			1,522
Reversal of provision for mortgage servicing
rights in excess of fair value		(238	)		—			(238	)		—
Write-down of mortgage servicing rights		(492	)		(887	)		(1,338	)		(887	)

Balance, end of period	$	1,824		$	1,759		$	1,824		$	1,759


Mortgage servicing rights, net	$	5,765		$	4,415		$	5,765		$	4,415

The following table provides the components of the Company’s managed servicing portfolio:

Significant guarantees that the Company provides to third parties include standby letters of credit, various indemnification agreements, guarantees accounted for as derivatives, contingent consideration related to certain business combinations and contingent performance guarantees.

The Company issues standby letters of credit, which include performance and financial guarantees, on behalf of customers in connection with contracts between the customers and third parties whereby the Company assures that the third parties will receive specified funds if customers fail to meet their contractual obligations. Standby letters of credit totaled $7.8 billion at September 30, 2003, including financial guarantees of $4.0 billion that the Company had issued or purchased participations in. A major portion of fees received from the issuance of standby letters of credit are deferred and, at September 30, 2003, were immaterial to the Company’s financial statements.

The Company enters into indemnification agreements in the ordinary course of business under which the Company agrees to indemnify third parties against any damages, losses and expenses incurred in connection with legal and other proceedings arising from relationships or transactions with the Company. These relationships or transactions include those arising from service as a director or officer of the Company, underwriting agreements relating to the Company’s securities, securities lending, acquisition agreements, and various other business transactions or arrangements. Because the extent of the Company’s obligations under these indemnification agreements depends entirely upon the occurrence of future events, the Company’s potential future liability under these agreements is not determinable.

The Company writes options, floors and caps. Options are exercisable based on favorable market conditions. Periodic settlements occur on floors and caps based on market conditions. At September 30, 2003, the fair value reflected in the Company’s balance sheet of the written options liability was $316 million and the written floors and caps liability was $208 million. The Company’s ultimate obligation under written options, floors and caps is based on future market conditions and is only quantifiable at settlement. Options written to customers are predominantly offset with purchased options; other written options are entered into to mitigate balance sheet risk.

The Company also enters into credit default swaps under which it buys protection from or sells protection to a counterparty in the event of default of a reference obligation. At September 30, 2003, the gross carrying amount of the contracts sold was a $15 million liability. The maximum amount the Company would be required to pay under those swaps in which it sold protection, assuming all reference obligations default at a total loss, without recoveries, was $2.52 billion. The Company has bought protection of $2.51 billion of notional exposure. Almost all of the protection purchases offset (i.e., use the same reference obligation and maturity) the contracts in which the Company is providing protection to a counterparty.

In connection with certain brokerage, asset management and insurance agency acquisitions made by the Company, the terms of the acquisition agreement provide for deferred payments or additional consideration based on certain performance targets. At September 30, 2003, the amount of contingent consideration expected to be paid was not material to the Company’s financial statements.

The Company has entered into various contingent performance guarantees through credit risk participation arrangements with terms ranging from 1 to 30 years. The Company will be required to make payments under these guarantees if a customer defaults on its obligation to perform under certain credit agreements with third parties. Because the extent of the Company’s obligations under these contingent performance guarantees depends entirely upon future events, the Company’s potential future liability under these agreements is not determinable.

The Company uses derivative contracts to manage the risk associated with changes in the fair value of mortgage servicing rights and other retained interests. Derivative gains or losses caused by market conditions (volatility) and the spread between spot and forward rates priced into the derivative contracts (the passage of time) are excluded from the overall evaluation of hedge effectiveness, but are reflected in earnings. The change in value of derivatives excluded from the assessment of hedge effectiveness was a net gain of $267 million and $916 million in the third quarter and first nine months of 2003, respectively, compared with a net gain of $432 million and $910 million in the same periods of 2002. The ineffective portion of the change in value of these derivatives was a net loss of $473 million and $164 million in the third quarter and first nine months of 2003, respectively, compared with a net gain of $338 million and $934 million in the same periods of 2002. The net derivative loss of $206 million in the third quarter of 2003 was offset by a reversal of the valuation provision for impairment on mortgage servicing rights of $238 million in the third quarter of 2003. The net derivative gain of $752 million in the first nine months of 2003 was more than offset by higher valuation provision (net of reversal) for impairment on mortgage servicing rights of $974 million. The total gains on the mortgage-related derivative contracts and valuation provision for impairment are included in mortgage banking noninterest income. See Note 8 (Mortgage Banking Activities).

In fourth quarter 2002, the Company began using derivative contracts to hedge changes in fair value of certain commercial real estate mortgages and franchise loans due to changes in LIBOR interest rates. The Company originates these loans with the intent to sell them. The ineffective portion of these fair value hedges was a net loss of $6 million and $17 million for the third quarter and first nine months of 2003, respectively, recorded in mortgage banking noninterest income. All components of gain or loss on these derivative contracts are included in the assessment of hedge effectiveness.

The Company also enters into interest rate swaps to convert certain of its fixed-rate senior and subordinated debt to floating-rate debt. The ineffective portion of these fair value hedges was not material in the third quarter and first nine months of 2003 and 2002.

As of September 30, 2003, all designated fair value hedges continued to qualify as fair value hedges.

The Company uses derivative contracts to hedge forecasted sales of its mortgage loans and to convert commercial floating-rate loans and certain of its floating-rate senior debt to fixed rates. The Company recognized a net gain of $131 million and $77 million in the third quarter and first nine months of 2003, respectively, which represents the total ineffectiveness of cash flow hedges, compared with a net loss of $81 million and $250 million in the same periods of 2002. All components of gain or loss on these derivative contracts are included in the assessment of hedge effectiveness. As of September 30, 2003, all designated cash flow hedges continued to qualify as cash flow hedges.

At September 30, 2003, the Company expected that $389 million of deferred net losses on derivative instruments included in other comprehensive income will be reclassified to earnings during the next twelve months, compared with $102 million of deferred net losses at September 30, 2002. Gains and losses on derivative contracts that are reclassified from cumulative other comprehensive income to current period earnings are included in the same line item in which the hedged item’s effect in earnings is recorded. The Company is hedging its exposure to the variability of future cash flows for all forecasted transactions for a maximum of two years for hedges converting floating-rate loans to fixed, four years for hedges converting floating-rate senior debt to fixed, and one year for hedges of forecasted sales of mortgage loans.

The following table summarizes the credit risk amount and estimated net fair value for the Company’s derivative financial instruments.

11. Guaranteed Preferred Beneficial Interests in Company’s Subordinated Debentures

In February 2002, the Company formed Wells Fargo Capital VII and Wells Fargo Capital VIII (the Trusts), to issue trust preferred securities. In May 2003, Wells Fargo Capital VII issued to the public $500 million in trust preferred securities in the form of its 5.85% Capital Securities and issued to the Company $15 million of trust common securities. Wells Fargo Capital VII used the proceeds to purchase $515 million of the Company’s 5.85% junior subordinated debentures due May 2033 (the May Debentures). In July 2003, Wells Fargo Capital VIII issued to the public $200 million in trust preferred securities in the form of its 5.625% Capital Securities and issued to the Company $6 million of trust common securities. Wells Fargo Capital VIII used the proceeds to purchase $206 million of the Company’s 5.625% junior subordinated debentures due August 2033 (together with the May Debentures, the Debentures). The Debentures are the sole assets of the Trusts and are subordinate to all of the Company’s existing and future obligations for borrowed or purchased money, obligations under letters of credit and certain derivative contracts, and any guarantees by the Company of any of such obligations. Concurrent with the issuance of the Debentures and the trust preferred and common securities, the Company issued a guarantee related to the trust preferred securities for the benefit of the holders.

The Company treats the trust preferred securities as Tier 1 capital. The Debentures, the common securities issued by the Trusts, and the related income effects are eliminated within the Company’s consolidated financial statements. The Company’s obligations under the Debentures, the related indentures, the trust agreements relating to the trust securities, and the guarantee constitute a full and unconditional guarantee by the Company of the obligations of the Trusts under the trust preferred securities.

The Debentures are subject to redemption at the option of the Company, subject to prior regulatory approval, in whole or in part on or after May 2008 for Wells Fargo Capital VII and July 2008 for Wells Fargo Capital VIII, or in whole, but not in part, within 90 days after the occurrence of certain events that either would have a negative tax effect on the Trusts or the Company, would cause the trust preferred securities to no longer qualify as Tier 1 capital, or would result in the Trusts being treated as investment companies. Upon repayment of the Debentures at their stated maturity or following their earlier redemption, the Trusts will use the proceeds of such repayment to redeem an equivalent amount of outstanding trust preferred securities and trust common securities.

Following are the condensed consolidating financial statements of the Parent and Wells Fargo Financial, Inc. and its wholly-owned subsidiaries (WFFI). The Wells Fargo Financial business segment for management reporting (See Note 7 to Financial Statements) consists of WFFI and other affiliated consumer finance entities managed by WFFI but not included in WFFI reported below.



	Quarter ended September 30, 2003
						Other
						consolidating					Consolidated
(in millions)	Parent			WFFI		subsidiaries		Eliminations			Company


Dividends from subsidiaries:
Bank	$	1,041		$	—	$	—	$	(1,041	)	$	—
Nonbank		100			—		—		(100	)		—
Interest income from loans		—			731		2,817		—			3,548
Interest income from subsidiaries		155			—		—		(155	)		—
Other interest income		20			19		1,458		—			1,497

Total interest income		1,316			750		4,275		(1,296	)		5,045


Short-term borrowings		19			18		92		(57	)		72
Long-term debt		145			199		85		(80	)		349
Other interest expense		—			—		416		—			416

Total interest expense		164			217		593		(137	)		837


NET INTEREST INCOME		1,152			533		3,682		(1,159	)		4,208
Provision for loan losses		—			219		215		—			434

Net interest income after
provision for loan losses		1,152			314		3,467		(1,159	)		3,774


NONINTEREST INCOME
Fee income – nonaffiliates		—			55		1,729		—			1,784
Other		35			51		1,109		(21	)		1,174

Total noninterest income		35			106		2,838		(21	)		2,958


NONINTEREST EXPENSE
Salaries and benefits		37			188		1,955		—			2,180
Other		(45	)		139		2,165		(39	)		2,220

Total noninterest expense		(8	)		327		4,120		(39	)		4,400


INCOME BEFORE INCOME TAX
EXPENSE AND EQUITY
IN UNDISTRIBUTED INCOME OF
SUBSIDIARIES		1,195			93		2,185		(1,141	)		2,332
Income tax expense		30			35		706		—			771
Equity in undistributed income of subsidiaries		396			—		—		(396	)		—


NET INCOME	$	1,561		$	58	$	1,479	$	(1,537	)	$	1,561



	Quarter ended September 30, 2002
						Other
						consolidating					Consolidated
(in millions)	Parent			WFFI		subsidiaries		Eliminations			Company


Dividends from subsidiaries:
Bank	$	1,525		$	—	$	—	$	(1,525	)	$	—
Nonbank		144			—		—		(144	)		—
Interest income from loans		—			591		2,809		—			3,400
Interest income from subsidiaries		95			—		—		(95	)		—
Other interest income		18			20		1,261		—			1,299

Total interest income		1,782			611		4,070		(1,764	)		4,699


Short-term borrowings		31			26		134		(67	)		124
Long-term debt		113			141		123		(10	)		367
Other interest expense		—			—		513		—			513

Total interest expense		144			167		770		(77	)		1,004


NET INTEREST INCOME		1,638			444		3,300		(1,687	)		3,695
Provision for loan losses		—			152		243		—			395

Net interest income after
provision for loan losses		1,638			292		3,057		(1,687	)		3,300


NONINTEREST INCOME
Fee income – nonaffiliates		—			54		1,582		—			1,636
Other		26			58		641		(16	)		709

Total noninterest income		26			112		2,223		(16	)		2,345


NONINTEREST EXPENSE
Salaries and benefits		37			141		1,682		—			1,860
Other		11			107		1,464		(35	)		1,547

Total noninterest expense		48			248		3,146		(35	)		3,407


INCOME BEFORE INCOME TAX
(BENEFIT) EXPENSE AND EQUITY
IN UNDISTRIBUTED INCOME OF
SUBSIDIARIES		1,616			156		2,134		(1,668	)		2,238
Income tax (benefit) expense		(61	)		57		798		—			794
Equity in undistributed income of subsidiaries		(233	)		—		—		233			—


NET INCOME	$	1,444		$	99	$	1,336	$	(1,435	)	$	1,444



	Nine months ended September 30, 2003
						Other
						consolidating					Consolidated
(in millions)	Parent			WFFI		subsidiaries		Eliminations			Company


Dividends from subsidiaries:
Bank	$	2,831		$	—	$	—	$	(2,831	)	$	—
Nonbank		820			—		—		(820	)		—
Interest income from loans		2			2,038		8,400		—			10,440
Interest income from subsidiaries		390			—		—		(390	)		—
Other interest income		55			57		4,227		—			4,339

Total interest income		4,098			2,095		12,627		(4,041	)		14,779

Short-term borrowings		61			62		323		(192	)		254
Long-term debt		406			511		255		(152	)		1,020
Other interest expense		—			—		1,324		—			1,324

Total interest expense		467			573		1,902		(344	)		2,598


NET INTEREST INCOME		3,631			1,522		10,725		(3,697	)		12,181
Provision for loan losses		—			549		734		—			1,283

Net interest income after
provision for loan losses		3,631			973		9,991		(3,697	)		10,898


NONINTEREST INCOME
Fee income – nonaffiliates		—			155		4,938		—			5,093
Other		110			160		2,948		(62	)		3,156

Total noninterest income		110			315		7,886		(62	)		8,249


NONINTEREST EXPENSE
Salaries and benefits		104			527		5,564		—			6,195
Other		(1	)		398		5,665		(108	)		5,954

Total noninterest expense		103			925		11,229		(108	)		12,149


INCOME BEFORE INCOME TAX
(BENEFIT) EXPENSE AND EQUITY
IN UNDISTRIBUTED INCOME OF
SUBSIDIARIES		3,638			363		6,648		(3,651	)		6,998
Income tax (benefit) expense		(43	)		137		2,326		—			2,420
Equity in undistributed income of subsidiaries		897			—		—		(897	)		—


NET INCOME	$	4,578		$	226	$	4,322	$	(4,548	)	$	4,578



	Nine months ended September 30, 2002
						Other
						consolidating						Consolidated
(in millions)	Parent			WFFI		subsidiaries			Eliminations			Company


Dividends from subsidiaries:
Bank	$	3,004		$	—	$	—		$	(3,004	)	$	—
Nonbank		190			—		—			(190	)		—
Interest income from loans		—			1,688		8,384			—			10,072
Interest income from subsidiaries		264			—		—			(264	)		—
Other interest income		61			59		3,814			—			3,934

Total interest income		3,519			1,747		12,198			(3,458	)		14,006
Short-term borrowings		103			76		434			(184	)		429
Long-term debt		330			403		336			(28	)		1,041
Other interest expense		—			—		1,547			—			1,547

Total interest expense		433			479		2,317			(212	)		3,017


NET INTEREST INCOME		3,086			1,268		9,881			(3,246	)		10,989
Provision for loan losses		—			451		844			—			1,295

Net interest income after
provision for loan losses		3,086			817		9,037			(3,246	)		9,694


NONINTEREST INCOME
Fee income – nonaffiliates		—			151		4,531			—			4,682
Other		135			170		2,092			(55	)		2,342

Total noninterest income		135			321		6,623			(55	)		7,024


NONINTEREST EXPENSE
Salaries and benefits		128			422		4,904			—			5,454
Other		29			324		4,438			(106	)		4,685

Total noninterest expense		157			746		9,342			(106	)		10,139


INCOME BEFORE INCOME TAX
(BENEFIT) EXPENSE,
EQUITY IN UNDISTRIBUTED
INCOME OF SUBSIDIARIES
AND EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE		3,064			392		6,318			(3,195	)		6,579
Income tax (benefit) expense		(161	)		144		2,352			—			2,335
Equity in undistributed income of subsidiaries		762			—		—			(762	)		—


NET INCOME BEFORE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE		3,987			248		3,966			(3,957	)		4,244
Cumulative effect of change
in accounting principle		(19	)		—		(257	)		—			(276	)


NET INCOME	$	3,968		$	248	$	3,709		$	(3,957	)	$	3,968



	September 30, 2003
					Other
					consolidating					Consolidated
(in millions)	Parent		WFFI		subsidiaries		Eliminations			Company


ASSETS
Cash and cash equivalents due from:
Subsidiary banks	$	4,922	$	24	$	—	$	(4,946	)	$	—
Nonaffiliates		233		158		17,724		—			18,115
Securities available for sale		1,093		1,663		27,511		(7	)		30,260
Mortgages and loans held for sale		—		—		62,638		—			62,638

Loans		1		21,718		210,125		—			231,844
Loans to nonbank subsidiaries		23,856		802		—		(24,658	)		—
Allowance for loan losses		—		753		3,140		—			3,893

Net loans		23,857		21,767		206,985		(24,658	)		227,951

Investments in subsidiaries:
Bank		32,723		—		—		(32,723	)		—
Nonbank		3,777		—		—		(3,777	)		—
Other assets		2,831		737		48,991		(710	)		51,849


Total assets	$	69,436	$	24,349	$	363,849	$	(66,821	)	$	390,813

LIABILITIES AND
STOCKHOLDERS’ EQUITY
Deposits	$	—	$	107	$	256,288	$	(4,959	)	$	251,436
Short-term borrowings		786		4,597		31,702		(11,496	)		25,589
Accrued expenses and other liabilities		1,399		970		20,447		(3,977	)		18,839
Long-term debt		30,253		16,574		20,538		(8,373	)		58,992
Indebtedness to subsidiaries		1,976		—		—		(1,976	)		—
Guaranteed preferred beneficial interests in
Company’s subordinated debentures		2,650		—		935		—			3,585

Total liabilities		37,064		22,248		329,910		(30,781	)		358,441
Stockholders’ equity		32,372		2,101		33,939		(36,040	)		32,372


Total liabilities and stockholders’ equity	$	69,436	$	24,349	$	363,849	$	(66,821	)	$	390,813



	September 30, 2002
					Other
					consolidating					Consolidated
(in millions)	Parent		WFFI		subsidiaries		Eliminations			Company


ASSETS
Cash and cash equivalents due from:
Subsidiary banks	$	3,687	$	51	$	—	$	(3,738	)	$	—
Nonaffiliates		182		170		19,508		—			19,860
Securities available for sale		1,148		1,517		30,315		(6	)		32,974
Mortgages and loans held for sale		—		—		47,861		—			47,861

Loans		2		15,541		170,767		—			186,310
Loans to nonbank subsidiaries		11,252		601		—		(11,853	)		—
Allowance for loan losses		—		593		3,268		—			3,861

Net loans		11,254		15,549		167,499		(11,853	)		182,449

Investments in subsidiaries:
Bank		31,160		—		—		(31,160	)		—
Nonbank		4,418		—		—		(4,418	)		—
Other assets		2,487		690		48,709		(780	)		51,106


Total assets	$	54,336	$	17,977	$	313,892	$	(51,955	)	$	334,250

LIABILITIES AND
STOCKHOLDERS’ EQUITY
Deposits	$	—	$	86	$	209,415	$	(3,745	)	$	205,756
Short-term borrowings		3,090		4,480		30,983		(8,183	)		30,370
Accrued expenses and other liabilities		1,304		725		18,595		(1,283	)		19,341
Long-term debt		17,382		10,350		21,121		(3,029	)		45,824
Indebtedness to subsidiaries		536		—		—		(536	)		—
Guaranteed preferred beneficial interests in
Company’s subordinated debentures		1,950		—		935		—			2,885

Total liabilities		24,262		15,641		281,049		(16,776	)		304,176
Stockholders’ equity		30,074		2,336		32,843		(35,179	)		30,074


Total liabilities and stockholders’ equity	$	54,336	$	17,977	$	313,892	$	(51,955	)	$	334,250



	Nine months ended September 30, 2003
							Other
							consolidating
							subsidiaries/			Consolidated
(in millions)	Parent			WFFI			eliminations			Company


Cash flows from operating activities:
Net cash provided (used) by operating activities	$	3,866		$	1,057		$	(1,670	)	$	3,253


Cash flows from investing activities:
Securities available for sale:
Proceeds from sales		138			309			5,610			6,057
Proceeds from prepayments and maturities		128			178			9,919			10,225
Purchases		(333	)		(612	)		(18,172	)		(19,117	)
Net cash paid for acquisitions		(33	)		(600	)		(183	)		(816	)
Increase in banking subsidiaries’ loans
resulting from originations, net of collections		—			—			(17,972	)		(17,972	)
Proceeds from sales (including participations) of loans by banking subsidiaries		—			—			1,259			1,259
Purchases (including participations) of loans by
banking subsidiaries		—			—			(13,468	)		(13,468	)
Principal collected on nonbank entities’ loans		3,683			9,622			449			13,754
Loans originated by nonbank entities		—			(14,842	)		(568	)		(15,410	)
Purchases of loans by nonbank entities		(3,682	)		—			—			(3,682	)
Net advances to nonbank entities		(1,042	)		—			1,042			—
Capital notes and term loans made to subsidiaries		(11,225	)		—			11,225			—
Principal collected on notes/loans made to subsidiaries		3,583			—			(3,583	)		—
Net decrease (increase) in investment in subsidiaries		37			—			(37	)		—
Other, net		—			85			(3,043	)		(2,958	)

Net cash used by investing activities		(8,746	)		(5,860	)		(27,522	)		(42,128	)


Cash flows from financing activities:
Net increase in deposits		—			19			34,501			34,520
Net decrease in short-term borrowings		(1,502	)		(1,057	)		(5,298	)		(7,857	)
Proceeds from issuance of long-term debt		13,553			7,976			4,148			25,677
Repayment of long-term debt		(3,364	)		(1,648	)		(9,676	)		(14,688	)
Proceeds from issuance of guaranteed preferred beneficial
interests in Company’s subordinated debentures		700			—			—			700
Proceeds from issuance of common stock		544			—			—			544
Repurchase of common stock		(1,289	)		—			—			(1,289	)
Payment of cash dividends on preferred and common stock		(1,767	)		(600	)		600			(1,767	)
Other, net		—			—			638			638

Net cash provided by financing activities		6,875			4,690			24,913			36,478


Net change in cash and due from banks		1,995			(113	)		(4,279	)		(2,397	)
Cash and due from banks at beginning of period		3,160			295			14,365			17,820

Cash and due from banks at end of period	$	5,155		$	182		$	10,086		$	15,423



	Nine months ended September 30, 2002
							Other
							consolidating
							subsidiaries/			Consolidated
(in millions)	Parent			WFFI			eliminations			Company

Cash flows from operating activities:
Net cash provided (used) by operating activities	$	3,620		$	776		$	(10,802	)	$	(6,406	)


Cash flows from investing activities:
Securities available for sale:
Proceeds from sales		386			636			13,544			14,566
Proceeds from prepayments and maturities		96			98			6,302			6,496
Purchases		(131	)		(845	)		(10,483	)		(11,459	)
Net cash (paid for) acquired from acquisitions		(577	)		(281	)		284			(574	)
Increase in banking subsidiaries’ loans
resulting from originations, net of collections		—			—			(8,129	)		(8,129	)
Proceeds from sales (including participations) of loans
by banking subsidiaries		—			—			877			877
Purchases (including participations) of loans by
banking subsidiaries		—			—			(1,950	)		(1,950	)
Principal collected on nonbank entities’ loans		—			8,035			406			8,441
Loans originated by nonbank entities		—			(10,235	)		(375	)		(10,610	)
Net advances to nonbank entities		(844	)		—			844			—
Principal collected on notes/loans made to subsidiaries		231			—			(231	)		—
Net decrease (increase) in investment in subsidiaries		209			—			(209	)		—
Other, net		—			(14	)		(5,583	)		(5,597	)

Net cash used by investing activities		(630	)		(2,606	)		(4,703	)		(7,939	)


Cash flows from financing activities:
Net increase in deposits		—			9			13,881			13,890
Net (decrease) increase in short-term borrowings		(3,059	)		330			(5,571	)		(8,300	)
Proceeds from issuance of long-term debt		5,308			2,827			8,657			16,792
Repayment of long-term debt		(2,534	)		(1,325	)		(3,633	)		(7,492	)
Proceeds from issuance of guaranteed preferred beneficial
interests in Company’s subordinated debentures		450			—			—			450
Proceeds from issuance of common stock		412			—			—			412
Repurchase of common stock		(1,206	)		—			—			(1,206	)
Payment of cash dividends on preferred and common stock		(1,402	)		(45	)		45			(1,402	)
Other, net		—			—			46			46

Net cash (used) provided by financing activities		(2,031	)		1,796			13,425			13,190


Net change in cash and due from banks		959			(34	)		(2,080	)		(1,155	)
Cash and due from banks at beginning of period		2,910			255			13,803			16,968

Cash and due from banks at end of period	$	3,869		$	221		$	11,723		$	15,813



													% Change
	Quarter ended									Sept. 30, 2003 from						Nine months ended
	Sept. 30,			June 30,			Sept. 30,			June 30,			Sept. 30,			Sept. 30,			Sept. 30,			%
(in millions, except per share amounts)	2003			2003			2002			2003			2002			2003			2002			Change


For the Period

Before effect of change in accounting principle (1)
Net income	$	1,561		$	1,525		$	1,444			2	%		8	%	$	4,578		$	4,244			8	%
Diluted earnings per common share		.92			.90			.84			2			10			2.70			2.46			10

Profitability ratios (annualized)
Net income to average total assets (ROA)		1.57	%		1.63	%		1.78	%		(4	)		(12	)		1.63	%		1.80	%		(9	)
Net income applicable to common stock to
average common stockholders’ equity (ROE)		18.86			19.60			19.38			(4	)		(3	)		19.39			19.69			(2	)

After effect of change in accounting principle
Net income	$	1,561		$	1,525		$	1,444			2			8		$	4,578		$	3,968			15
Diluted earnings per common share		.92			.90			.84			2			10			2.70			2.30			17

Profitability ratios (annualized)
ROA		1.57	%		1.63	%		1.78	%		(4	)		(12	)		1.63	%		1.68	%		(3	)
ROE		18.86			19.60			19.38			(4	)		(3	)		19.39			18.41			5

Efficiency ratio (2)		61.4			58.9			56.4			4			9			59.5			56.3			6

Total revenue	$	7,166		$	6,755		$	6,040			6			19		$	20,430		$	18,013			13

Dividends declared per common share		.45			.30			.28			50			61			1.05			.82			28

Average common shares outstanding		1,677.2			1,675.7			1,700.7			—			(1	)		1,678.0			1,704.7			(2	)
Diluted average common shares outstanding		1,693.9			1,690.6			1,717.8			—			(1	)		1,692.6			1,722.6			(2	)

Average loans	$	220,027		$	208,912		$	181,782			5			21		$	209,453		$	177,749			18
Average assets		395,057			375,149			321,217			5			23			375,272			315,568			19
Average core deposits		215,685			205,428			184,448			5			17			206,041			180,521			14

Net interest margin		5.03	%		5.12	%		5.52	%		(2	)		(9	)		5.14	%		5.62	%		(9	)

At Period End
Securities available for sale	$	30,260		$	24,625		$	32,974			23			(8	)	$	30,260		$	32,974			(8	)
Loans		231,844			215,392			186,310			8			24			231,844			186,310			24
Allowance for loan losses		3,893			3,894			3,861			—			1			3,893			3,861			1
Goodwill		9,849			9,803			9,744			—			1			9,849			9,744			1
Assets		390,813			369,645			334,250			6			17			390,813			334,250			17
Core deposits		209,422			210,722			190,606			(1	)		10			209,422			190,606			10
Common stockholders’ equity		32,316			32,223			30,016			—			8			32,316			30,016			8
Stockholders’ equity		32,372			32,275			30,074			—			8			32,372			30,074			8
Tier 1 capital (3)		24,569			23,850			21,026			3			17			24,569			21,026			17
Total capital (3)		35,089			34,388			30,547			2			15			35,089			30,547			15

Capital ratios
Common stockholders’ equity to assets		8.27	%		8.72	%		8.98	%		(5	)		(8	)		8.27	%		8.98	%		(8	)
Stockholders’ equity to assets		8.28			8.73			9.00			(5	)		(8	)		8.28			9.00			(8	)
Risk-based capital (3)
Tier 1 capital		8.07			7.93			7.84			2			3			8.07			7.84			3
Total capital		11.53			11.43			11.39			1			1			11.53			11.39			1
Tier 1 leverage (3)		6.44			6.59			6.83			(2)			(6)			6.44			6.83			(6)

Book value per common share	$	19.27		$	19.20		$	17.67			—			9		$	19.27		$	17.67			9

Staff (active, full-time equivalent)		139,200			135,500			125,700			3			11			139,200			125,700			11

Common Stock Price
High	$	53.71		$	52.80		$	54.84			2			(2	)	$	53.71		$	54.84			(2	)
Low		48.90			45.01			38.10			9			28			43.27			38.10			14
Period end		51.50			50.40			48.16			2			7			51.50			48.16			7

This report, including the Financial Statements and related Notes and the information in response to Items 2, 3 and 4 of Form 10-Q, contains forward-looking statements about the Company. Broadly speaking, forward-looking statements include forecasts of future financial results and condition, expectations for future operations and business, and any assumptions underlying those forecasts and expectations. Do not unduly rely on forward-looking statements. Actual outcomes and results might differ significantly from forecasts and expectations. Please refer to “Factors that May Affect Future Results” beginning on page 57 of this report for a discussion of some of the factors that may cause results to differ.

Wells Fargo & Company is a $391 billion diversified financial services company providing banking, insurance, investments, mortgage banking and consumer finance through banking stores, the internet and other distribution channels to consumers, businesses and financial institutions in all 50 states of the U.S. and in other countries. It ranked fourth in assets and third in market capitalization among U.S. bank holding companies at September 30, 2003. In this Form 10-Q, Wells Fargo & Company and Subsidiaries (consolidated) is referred to as the Company and Wells Fargo & Company alone is referred to as the Parent.

Certain amounts in the Financial Review for prior periods have been reclassified to conform with the current financial statement presentation.

Net income for third quarter 2003 increased 8% to $1.56 billion, from $1.44 billion for third quarter 2002. Diluted earnings per common share for third quarter 2003 were $.92, up 10%, compared with $.84 for third quarter 2002. Return on average assets (ROA) was 1.57% and return of average common equity (ROE) was 18.86% for third quarter 2003, compared with 1.78% and 19.38%, respectively, for the same period of 2002.

In third quarter 2003, taking advantage of interest rates and equity markets, the Company took a number of strategic actions which will benefit future financial performance but which had the effect of reducing third quarter 2003 earnings by $171 million after-tax, or $.10 per share. These actions included repositioning the bond portfolio, retiring $1.8 billion of term debt previously issued at higher costs, contributing approximately 40% of the Company’s public stock portfolio to the Wells Fargo Foundation (a tax-efficient way of funding this expense), consolidating certain Company-owned facilities and operations to reduce future occupancy and operating costs, and renegotiating certain vendor contracts to reduce on-going equipment and software expenses. The $.10 per share reduction in earnings from these actions, which will benefit future financial performance, includes both revenue and expense impacts and is after the net tax benefits associated with the public stock donations.

Net income for the first nine months of 2003 was $4.58 billion, or $2.70 per share, compared with $4.24 billion, or $2.46 per share, before the effect of a first quarter accounting change related to FAS 142, Goodwill and Other Intangible Assets, for the first nine months of 2002. On the same basis, ROA was 1.63% in the first nine months of 2003, compared with 1.80% for the first nine months of 2002. ROE was 19.39% in the first nine months of 2003, compared with 19.69% for the first nine months of 2002.

Net interest income on a taxable-equivalent basis was $4.23 billion for third quarter 2003 and $12.24 billion for the first nine months of 2003, compared with $3.72 billion and $11.07 billion for the same periods of 2002. The Company’s net interest margin was 5.03% and 5.14% for the third quarter and first nine months of 2003, respectively, compared with 5.52% and 5.62% for the same periods of 2002.

Noninterest income was $2.96 billion and $8.25 billion for the third quarter and first nine months of 2003, respectively, compared with $2.35 billion and $7.02 billion for the same periods of 2002. The strategic actions taken in third quarter 2003 reduced noninterest income by $100 million.

Revenue, the sum of net interest income and noninterest income, increased 19% to $7.17 billion in third quarter 2003 from $6.04 billion in third quarter 2002. Revenue increased 13% to $20.43 billion in the first nine months of 2003 from $18.01 billion in the first nine months of 2002.

Noninterest expense was $4.40 billion and $12.15 billion for the third quarter and first nine months of 2003, respectively, compared with $3.41 billion and $10.14 billion for the same periods of 2002. The strategic actions taken in third quarter 2003 accounted for $233 million, or 23%, of the growth in expenses from third quarter 2002. These strategic actions were part of the Company’s on-going efforts to improve operating efficiency and will reduce future donations expense, occupancy costs and equipment and software costs.

During third quarter 2003, net charge-offs were $434 million, or .78% of average total loans (annualized), compared with $415 million, or .91%, in third quarter 2002. The provision for loan losses was $434 million and $1,283 million in the third quarter and first nine months of 2003, respectively, compared with $395 million and $1,295 million in the same periods of 2002. The allowance for loan losses was $3.89 billion, or 1.68% of total loans, at September 30, 2003, compared with $3.86 billion, or 1.96%, at December 31, 2002 and $3.86 billion, or 2.07%, at September 30, 2002.

At September 30, 2003, total nonaccrual loans were $1.52 billion, or .65% of total loans, compared with $1.49 billion, or .76%, at December 31, 2002 and $1.55 billion, or .83%, at September 30, 2002. Foreclosed assets were $200 million at September 30, 2003, $201 million at December 31, 2002 and $186 million at September 30, 2002.

The ratio of common stockholders’ equity to total assets was 8.27% at September 30, 2003, compared with 8.67% at December 31, 2002 and 8.98% at September 30, 2002. The Company’s total risk-based capital (RBC) ratio at September 30, 2003 was 11.53% and its Tier 1 RBC ratio was 8.07%, exceeding the minimum regulatory guidelines of 8% and 4%, respectively, for bank holding companies. The Company’s RBC ratios at September 30, 2002 were 11.39% and 7.84%, respectively. The Company’s Tier 1 leverage ratios were 6.44% and 6.83% at September 30, 2003 and 2002, respectively, exceeding the minimum regulatory guideline of 3% for bank holding companies.

In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. The recognition and measurement provisions of this Interpretation are effective for newly created variable interest entities (VIEs) formed after January 31, 2003. On October 9, 2003, the FASB issued FIN 46-6 which delayed the recognition and measurement provisions of FIN 46 for existing VIEs to the first interim or annual reporting period ending after December 15, 2003. The Company adopted the disclosure provisions of FIN 46 effective December 31, 2002. The Company adopted the recognition and measurement provisions of FIN 46 for newly formed VIEs effective February 1, 2003, which did not have a material effect on the Company’s financial statements. The Company intends to adopt the recognition and measurement provisions of FIN 46 for existing VIEs on December 31, 2003. The Company does not expect that the adoption of FIN 46 will have a material effect on the Company’s financial statements.

The Company is a majority variable interest holder in certain special purpose entities that are expected to be consolidated effective December 31, 2003, and that were formed to invest in securities and to securitize high-yield corporate debt and real estate investment trust securities. These entities had approximately $800 million in total assets at September 30, 2003. The maximum estimated exposure to loss for these entities was approximately $300 million. Also, the Company holds variable interests generally greater than 20% but less than 50% in certain special purpose entities formed to provide affordable housing and to securitize high-yield corporate debt that had approximately $1.7 billion in total assets at September 30, 2003, and a maximum estimated exposure to loss of approximately $400 million. These entities are not expected to be required to be consolidated.

Historically, issuer trusts that issued trust preferred securities have been consolidated by their parent companies and trust preferred securities have been treated as eligible for Tier 1 capital treatment by bank holding companies under Federal Reserve rules and regulations relating to minority interests in equity accounts of consolidated subsidiaries. Applying the provisions of FIN 46, the Company may no longer be permitted to consolidate the issuer trusts, beginning on December 31, 2003, in preparing its financial statements. Although the Federal Reserve has stated in its July 2, 2003 Supervisory Letter that trust preferred securities will be treated as Tier 1 capital until notice is given to the contrary, the Supervisory Letter also indicates that the Federal Reserve will review the regulatory implications of any accounting treatment changes and will provide further guidance if necessary or warranted.

In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149 (FAS 149), Amendment of Statement 133 on Derivative Instruments and Hedging Activities, to provide additional clarification of certain terms and investment characteristics. This statement will be applied prospectively and is effective for contracts entered into or modified after June 30, 2003. The Company does not expect that the adoption of FAS 149 will have a material effect on the Company’s financial statements.

In May 2003, the FASB issued Statement No. 150 (FAS 150) Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. FAS 150 establishes standards

for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify these financial instruments as liabilities (or an asset in some circumstances). Many of those instruments, including mandatorily redeemable preferred securities, were previously classified as equity or as mezzanine debt. The Company adopted FAS 150 effective July 1, 2003 and the adoption of the standard did not have a material effect on the Company’s financial statements.

In May 2003, the Emerging Issues Task Force published Topic D-107, Lessor Consideration of Third-Party Residual Value Guarantees, which specifies accounting guidance for certain lease transactions with residual value guarantees. The Company anticipates reclassifying auto leases impacted by the announcements as operating leases. The Company does not expect that adoption of this guidance will have a material effect on its results of operations for any period in which such leasing activities were present (1998 through the current period). The Company plans on implementing this guidance not later than January 1, 2004.

The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition. The Company has identified three policies that it believes are critical because they require management to make particularly difficult, subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies relate to the allowance for loan losses, the valuation of mortgage servicing rights and pension accounting. The Company, in consultation with the Audit and Examination Committee of the Board of Directors, has reviewed and approved these critical accounting policies, which are further described in “Financial Review - Critical Accounting Policies” and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in the Company’s 2002 Form 10-K.

Net interest income is the difference between interest income (which includes yield-related loan fees) and interest expense. Net interest income on a taxable equivalent basis increased to $4.23 billion in third quarter 2003, from $3.72 billion in third quarter 2002, an increase of 14%.

Net interest income on a taxable-equivalent basis expressed as a percentage of average total earning assets is referred to as the net interest margin, which represents the average net effective yield on earning assets. The net interest margin decreased to 5.03% in third quarter 2003 from 5.52% in third quarter 2002. While loan growth had a positive impact on net interest income, the net interest margin was impacted by the low interest rate environment primarily because the new loans were made at yields below the existing portfolio of loans.



	Quarter ended September 30																	,
	2003									2002
							Interest									Interest
	Average			Yields		/	income		/	Average			Yields		/	income		/
(in millions)	balance			rates			expense			balance			rates			expense


EARNING ASSETS
Federal funds sold and securities purchased under resale agreements	$	2,514			.88	%	$	6		$	2,641			1.72	%	$	11
Debt securities available for sale (3):
Securities of U.S. Treasury and federal agencies		1,283			4.59			14			1,719			5.48			23
Securities of U.S. states and political subdivisions		2,442			8.92			51			2,123			8.21			41
Mortgage-backed securities:
Federal agencies		18,538			7.50			334			26,037			7.20			445
Private collateralized mortgage obligations		1,972			5.25			25			2,119			7.20			37

Total mortgage-backed securities		20,510			7.28			359			28,156			7.20			482
Other debt securities (4)		3,540			7.89			64			2,883			7.87			58

Total debt securities available for sale (4)		27,775			7.37			488			34,881			7.23			604
Mortgages held for sale (3)		69,786			5.18			906			38,384			6.15			591
Loans held for sale (3)		7,124			3.17			57			5,302			3.92			52
Loans:
Commercial		46,947			6.04			714			46,323			6.76			789
Real estate 1-4 family first mortgage		51,936			4.62			601			31,366			5.94			466
Other real estate mortgage		25,635			5.33			343			25,389			6.09			389
Real estate construction		7,775			4.98			98			7,843			5.74			114
Consumer:
Real estate 1-4 family junior lien mortgage		38,393			6.56			635			29,192			7.71			567
Credit card		7,683			12.11			233			6,898			12.35			213
Other revolving credit and installment		31,053			8.81			689			24,251			10.24			625

Total consumer		77,129			8.02			1,557			60,341			9.26			1,405
Lease financing		8,343			6.52			136			8,678			7.03			153
Foreign		2,262			18.01			102			1,842			18.79			87

Total loans (5)		220,027			6.42			3,551			181,782			7.44			3,403
Other		8,905			2.60			58			6,814			3.65			63

Total earning assets	$	336,131			6.02			5,066		$	269,804			7.01			4,724


FUNDING SOURCES
Deposits:
Interest-bearing checking	$	2,592			.20			1		$	2,464			.44			3
Market rate and other savings		108,969			.61			166			94,768			1.00			238
Savings certificates		20,429			2.43			125			23,813			3.05			183
Other time deposits		27,633			1.11			78			9,068			1.88			43
Deposits in foreign offices		5,643			1.00			14			3,949			1.62			16

Total interest-bearing deposits		165,266			.92			384			134,062			1.43			483
Short-term borrowings		29,572			.96			72			29,558			1.66			124
Long-term debt		57,960			2.40			349			43,568			3.36			367
Guaranteed preferred beneficial interests in Company’s subordinated debentures		3,525			3.64			32			2,885			4.17			30

Total interest-bearing liabilities		256,323			1.30			837			210,073			1.90			1,004
Portion of noninterest-bearing funding sources		79,808			—			—			59,731			—			—

Total funding sources	$	336,131			.99			837		$	269,804			1.49			1,004

Net interest margin and net interest income on a taxable-equivalent basis (6)					5.03	%	$	4,229						5.52	%	$	3,720


NONINTEREST-EARNING ASSETS
Cash and due from banks	$	13,642								$	13,128
Goodwill		9,817									9,741
Other		35,467									28,544

Total noninterest-earning assets	$	58,926								$	51,413


NONINTEREST-BEARING FUNDING SOURCES
Deposits	$	83,695								$	63,403
Other liabilities		22,163									18,137
Preferred stockholders’ equity		50									54
Common stockholders’ equity		32,826									29,550
Noninterest-bearing funding sources used to fund earning assets		(79,808	)								(59,731	)

Net noninterest-bearing funding sources	$	58,926								$	51,413


TOTAL ASSETS	$	395,057								$	321,217



	Nine months ended September 30																	,
	2003									2002
							Interest									Interest
	Average			Yields		/	income		/	Average			Yields		/	income		/
	balance			rates			expense			balance			rates			expense


EARNING ASSETS
Federal funds sold and securities purchased under resale agreements	$	4,005			1.16	%	$	35		$	2,615			1.72	%	$	34
Debt securities available for sale (3):
Securities of U.S. Treasury and federal agencies		1,288			4.85			45			1,852			5.67			76
Securities of U.S. states and political subdivisions		2,183			8.92			136			2,117			8.27			125
Mortgage-backed securities:
Federal agencies		17,317			7.84			957			28,338			7.10			1,460
Private collateralized mortgage obligations		1,997			6.48			93			2,456			7.13			128

Total mortgage-backed securities		19,314			7.70			1,050			30,794			7.10			1,588
Other debt securities (4)		3,243			7.77			179			3,020			7.73			172

Total debt securities available for sale (4)		26,028			7.67			1,410			37,783			7.15			1,961
Mortgages held for sale (3)		64,609			5.33			2,585			34,036			6.34			1,622
Loans held for sale (3)		7,064			3.62			191			5,236			4.96			194
Loans:
Commercial		47,146			6.13			2,164			46,539			6.91			2,406
Real estate 1-4 family first mortgage		46,512			4.99			1,740			29,722			6.16			1,372
Other real estate mortgage		25,561			5.50			1,052			25,462			6.25			1,191
Real estate construction		7,888			5.16			305			7,936			5.76			342
Consumer:
Real estate 1-4 family junior lien mortgage		35,132			6.82			1,792			26,817			7.82			1,568
Credit card		7,514			12.14			684			6,696			12.32			619
Other revolving credit and installment		29,117			9.17			1,997			23,818			10.37			1,848

Total consumer		71,763			8.33			4,473			57,331			9.40			4,035
Lease financing		8,457			6.70			425			9,034			7.17			485
Foreign		2,126			18.10			289			1,725			19.19			248

Total loans (5)		209,453			6.66			10,448			177,749			7.57			10,079
Other		7,918			2.87			170			6,529			3.94			193

Total earning assets	$	319,077			6.23			14,839		$	263,948			7.15			14,083


FUNDING SOURCES
Deposits:
Interest-bearing checking	$	2,512			.29			5		$	2,519			.60			11
Market rate and other savings		104,826			.68			533			92,545			.97			672
Savings certificates		21,257			2.60			413			24,785			3.32			615
Other time deposits		25,052			1.24			233			6,672			1.95			97
Deposits in foreign offices		6,083			1.15			52			5,204			1.65			64

Total interest-bearing deposits		159,730			1.03			1,236			131,725			1.48			1,459
Short-term borrowings		30,414			1.12			254			34,324			1.67			429
Long-term debt		52,141			2.61			1,020			40,843			3.40			1,041
Guaranteed preferred beneficial interests in Company’s subordinated debentures		3,210			3.69			88			2,745			4.29			88

Total interest-bearing liabilities		245,495			1.41			2,598			209,637			1.92			3,017
Portion of noninterest-bearing funding sources		73,582			—			—			54,311			—			—

Total funding sources	$	319,077			1.09			2,598		$	263,948			1.53			3,017

Net interest margin and net interest income on a taxable-equivalent basis (6)					5.14	%	$	12,241						5.62	%	$	11,066


NONINTEREST-EARNING ASSETS
Cash and due from banks	$	13,551								$	13,696
Goodwill		9,803									9,731
Other		32,841									28,193

Total noninterest-earning assets	$	56,195								$	51,620


NONINTEREST-BEARING FUNDING SOURCES
Deposits	$	77,446								$	60,672
Other liabilities		20,739									16,418
Preferred stockholders’ equity		52									55
Common stockholders’ equity		31,540									28,786
Noninterest-bearing funding sources used to fund earning assets		(73,582	)								(54,311	)

Net noninterest-bearing funding sources	$	56,195								$	51,620


TOTAL ASSETS	$	375,272								$	315,568

The pace of the decline in the margin slowed in third quarter 2003 from prior quarters. While the margin stabilized somewhat toward the end of third quarter 2003 and the strategic actions taken in third quarter 2003 may help further stabilize the margin, the net interest margin may be impacted by a variety of factors, primarily the mix of assets and liabilities, some of which could benefit and some of which could adversely impact the margin.

Individual components of net interest income and the net interest margin are presented in the rate/yield table on page 36.

Earning assets increased $66.3 billion in third quarter 2003 from the same period last year due to an increase in average loans and mortgages held for sale. Loans averaged $220.0 billion in third quarter 2003 compared with $181.8 billion in third quarter 2002. Average mortgages held for sale increased to $69.8 billion in third quarter 2003 from $38.4 billion in third quarter 2002 and increased to $64.6 billion in the first nine months of 2003 from $34.0 billion in the first nine months of 2002. The increase for both periods was due to increased originations including refinancing activity. Debt securities available for sale averaged $27.8 billion in third quarter 2003 compared with $34.9 billion in third quarter 2002.

An important contributor to the growth in net interest income from third quarter 2002 was a 17% increase in core deposits, the Company’s low-cost source of funding. Average core deposits were $215.7 billion and $184.4 billion and funded 54.6% and 57.4% of the Company’s average total assets in third quarter 2003 and 2002, respectively. While savings certificates of deposit declined on average from $23.8 billion in third quarter 2002 to $20.4 billion in third quarter 2003, noninterest-bearing checking accounts and other core deposit categories increased on average from $160.6 billion in third quarter 2002 to $195.3 billion in third quarter 2003 reflecting a combination of growth in mortgage escrow deposits, resulting from higher origination volume, and growth in primary account relationships. Total average interest-bearing deposits increased to $165.3 billion in third quarter 2003 from $134.1 billion a year ago. For the same periods, total average noninterest-bearing deposits increased to $83.7 billion from $63.4 billion.



	Quarter ended Sept. 30					,	%			Nine months ended Sept. 30					,	%
(in millions)	2003			2002			Change			2003			2002			Change


Service charges on deposit accounts	$	607		$	560			8	%	$	1,747		$	1,612			8	%
Trust and investment fees:
Trust, investment and IRA fees		348			327			6			995			1,004			(1	)
Commissions and all other fees		156			135			16			438			391			12

Total trust and investment fees		504			462			9			1,433			1,395			3

Credit card fees		251			242			4			752			666			13

Other fees:
Cash network fees		48			47			2			136			139			(2	)
Charges and fees on loans		199			160			24			565			432			31
All other		175			165			6			460			438			5

Total other fees		422			372			13			1,161			1,009			15

Mortgage banking:
Origination and other closing fees		393			271			45			1,003			696			44
Servicing fees, net of amortization and provision for impairment		(82	)		(158	)		(48	)		(1,266	)		(279	)		354
Net gains on mortgage loan origination/ sales activities		319			226			41			1,787			519			244
All other		143			87			64			353			262			35

Total mortgage banking		773			426			81			1,877			1,198			57

Insurance		252			234			8			807			766			5
Net (losses) gains on debt securities available for sale		(23	)		121			—			16			202			(92	)
Net gains (losses) from equity investments		58			(152	)		—			(87	)		(230	)		(62	)
Net gains on sales of loans		19			7			171			23			15			53
Net (losses) gains on dispositions of operations		—			(9	)		(100	)		27			(6	)		—
All other		95			82			16			493			397			24


Total	$	2,958		$	2,345			26	%	$	8,249		$	7,024			17	%

Service charges on deposit accounts increased 8% due to growth in primary accounts and increased activity.

The Company earns trust, investment and IRA fees from managing and administering assets, which include mutual funds, corporate trust, personal trust, employee benefit trust and agency assets. At September 30, 2003 and 2002, these assets totaled approximately $544 billion and $492 billion, respectively. Generally, these fees are based on the market value of the assets that are managed, administered, or both. The increase in trust, investment and IRA fees of 6% for third quarter 2003 compared with third quarter 2002 was predominantly due to increased sales and customer relationships, the acquisition of small asset portfolios and the beneficial impact of the strong equity markets. Additionally, the Company receives commission and other fees for providing services for retail and discount brokerage customers. At September 30, 2003 and 2002, brokerage balances were approximately $75 billion and $68 billion, respectively. Generally, these fees are based on the number of transactions executed at the direction of the customer. The increase in commissions and all other fees of 16% and 12% for the third quarter and first nine months of 2003, respectively, compared with the same periods of 2002 was largely due to a higher number of brokerage transactions, the strong equity markets and increased sales of commission-driven products.

Credit card fees increased 4% and 13% for the third quarter and first nine months of 2003, respectively, due to an increase in credit card accounts and credit and debit card transaction volume. In second quarter 2003, VISA USA Inc. (VISA) reached an agreement to settle merchant litigation, which included reducing some interchange fees to retailers. Absent any effort to increase volume or reprice these transactions the settlement is expected to reduce fee income by approximately $30 million per quarter. In October 2003, the Company renewed its contract with VISA as its primary brand for debit and credit card transactions and expanded its commitment to include VISA’s Interlink network for retail transactions with merchants.

Mortgage banking noninterest income was $773 million in the third quarter and $1,877 million for the first nine months of 2003, an increase of 81% and 57%, respectively, from the same periods of 2002. Origination and other closing fees increased to $393 million and net gains on mortgage loan origination/sales activities increased to $319 million in third quarter 2003, compared with third quarter 2002. For the first nine months of 2003, origination and other closing fees increased to $1,003 million and net gains on mortgage loan origination/sales activities increased to $1,787 million. These increases were primarily due to increased mortgage origination volume and gains on loan sales. Originations for third quarter 2003 grew to $161 billion from $89 billion for the same period of 2002. Mortgages held for sale increased to $55.3 billion at September 30, 2003 from $51.2 billion at December 31, 2002 and $42.3 billion at September 30, 2002.

Net servicing fees were a loss of $82 million and $1,266 million in the third quarter and first nine months of 2003, respectively, and a loss of $158 million and $279 million in the same periods of 2002. Servicing fees are presented net of amortization and impairment of mortgage servicing rights (MSRs) and gains and losses from hedge ineffectiveness, which are all influenced by both the level and direction of mortgage interest rates. The reduction in net losses from servicing fees from $158 million in third quarter 2002 to $82 million in third quarter 2003 was due to the growth in the servicing portfolio and the net impact of changes in interest rates. The increase in net losses from servicing fees in the first nine months of 2003 compared with the same period of the prior year was primarily due to lower average interest rates, which resulted in higher MSR amortization. Gross servicing fees increased in both the third quarter and first nine months of 2003 compared with the same periods of the prior year due to the growth in the MSR portfolio resulting from originations and purchases.

The Company recognized a direct write-down of MSRs of $492 million and $1,338 million during the third quarter and first nine months of 2003, respectively, compared with $887 million for third quarter 2002. See “Financial Review - Critical Accounting Policies — Mortgage Servicing Rights Valuation” in the Company’s 2002 Form 10-K for the method used to evaluate MSRs for impairment and to determine if such impairment is other-than-temporary. Key assumptions, including the sensitivity of those assumptions, used to determine the value of MSRs are disclosed in Notes 1 and 21 (Securitizations) to Financial Statements in the Company’s 2002 Form 10-K.

Net gains (losses) from equity investments in the third quarter were $58 million and $(87) million for the first nine months of 2003, compared with $(152) million and $(230) million

for the same periods of 2002. Of the $58 million gain in third quarter 2003, $48 million was due to the gain on the public equity securities donated to the Wells Fargo Foundation.

The Company routinely reviews its investment portfolios for impairment. Such write-downs are based primarily on issuer-specific factors and results. General economic and market conditions, including industries in which venture capital investments are made, and adverse changes impacting the availability of venture capital financing are also taken into account. While the determination of impairment is based on all of the information available at the time of the assessment, new information or economic developments in the future could lead to additional impairment.

Included in “all other” noninterest income for third quarter 2003 is a $125 million loss on the early retirement of $1.8 billion of term debt that was previously issued at higher costs, which was predominantly offset by gains on trading securities.



	Quarter ended Sept. 30				,	%			Nine months ended Sept. 30				,	%
(in millions)	2003		2002			Change			2003		2002			Change


Salaries	$	1,185	$	1,110			7	%	$	3,481	$	3,292			6	%
Incentive compensation		621		446			39			1,571		1,165			35
Employee benefits		374		304			23			1,143		997			15
Equipment		298		232			28			871		697			25
Net occupancy		283		278			2			867		821			6
Net losses on dispositions of premises and equipment		4		—			—			10		26			(62	)
Outside professional services		122		108			13			345		309			12
Contract services		270		129			109			675		353			91
Outside data processing		105		91			15			306		262			17
Telecommunications		92		94			(2	)		256		263			(3	)
Travel and entertainment		98		85			15			275		243			13
Advertising and promotion		98		85			15			274		229			20
Postage		94		65			45			265		189			40
Stationery and supplies		62		51			22			173		164			5
Insurance		48		29			66			166		141			18
Operating losses		29		40			(28	)		149		115			30
Security		41		41			—			125		121			3
Core deposit intangibles		35		38			(8	)		107		118			(9	)
All other		541		181			199			1,090		634			72


Total	$	4,400	$	3,407			29	%	$	12,149	$	10,139			20	%

The increase in noninterest expense, including increases in salaries, incentive compensation and contract services, was partly due to the growth in the mortgage and home equity businesses, which accounted for approximately 50% of the increase from third quarter 2002.

In third quarter 2003 the Company took a number of strategic actions that accounted for $233 million, or 23%, of the increase in third quarter 2003 expenses, compared with third quarter 2002. These strategic actions included charges to equipment expense related to renegotiating certain vendor contracts, net occupancy expense related to consolidating certain Company-

owned facilities and operations, and “all other” expense related to the contribution of appreciated public equity securities to the Wells Fargo Foundation.

The effective tax rate for third quarter 2003 was 33.0%, compared with 35.5% in the third quarter 2002, bringing the 2003 year-to-date effective tax rate down to 34.6%, compared with 35.5% for the same period of 2002. This reduction for the quarter and year-to-date compared with the same periods of a year ago was primarily due to the tax benefit derived from the Company’s third quarter 2003 donations of appreciated public equity securities to the Wells Fargo Foundation.

Community Banking’s net income was $1,065 million in third quarter 2003, compared with $1,073 million in third quarter 2002. Net income increased 4% to $3,183 million for the first nine months of 2003 from $3,060 million for the first nine months of 2002. The strategic actions taken in the third quarter reduced Community Banking’s third quarter 2003 net income by $170 million. Net income in third quarter 2003 also reflected an increase in year-over-year earnings of $108 million from residential home mortgages. Net interest income increased to $3,056 million in third quarter 2003 from $2,664 million in third quarter 2002, mostly due to growth in consumer loans, mortgages held for sale and deposits, partially offset by net interest margin compression. Average loans in Community Banking grew 28% and average core deposits grew 15% from third quarter 2002. The provision for loan losses increased by $41 million for third quarter 2003 due to growth in average loans. Noninterest income for third quarter 2003 increased by $402 million over the same period in 2002 due to increases in mortgage banking fees, consumer loan fees, deposit service charges and credit card fees partially offset by strategic actions taken in the quarter. Noninterest expense increased by $854 million in third quarter 2003 over the same period in 2002 due primarily to increased mortgage and home equity originations. The strategic actions taken during the third quarter accounted for $231 million, or 7%, of noninterest expense.

Wholesale Banking’s net income was $372 million in third quarter 2003, compared with $285 million in third quarter 2002. Net income was $1,063 million for the first nine months of 2003, compared with $933 million, before the effect of change in accounting principle, in the first nine months of 2002, an increase of 14%. The provision for loan losses decreased by $6 million to $54 million in third quarter 2003 and by $64 million to $154 million for the first nine months of 2003 due to lower net charge-offs. Noninterest income increased 38% to $707 million and 17% to $2,015 million in the third quarter and first nine months of 2003, respectively, from $512 million and $1,728 million in the same periods of 2002 primarily due to higher asset-based lending income, insurance brokerage, commercial mortgage originations, investment income and fees and commissions. Noninterest expense increased 12% to $629 million and 8% to $1,885 million in the third quarter and first nine months of 2003, respectively, from $564 million and $1,747 million in the same periods of 2002, largely due to higher personnel expense resulting from increased benefit costs and full-time employees and higher minority interest expense in partnership earnings within asset based lending.

Wells Fargo Financial’s net income was $121 million in third quarter 2003 compared with $92 million for the same period in 2002, an increase of 32%. Net income was $332 million for the first nine months of 2003 and $251 million, before the effect of change in accounting principle, for the same period in 2002. Net interest income increased 26% to $599 million for third quarter 2003 from $477 million for third quarter 2002 due to lower funding rates combined with growth in average loans. Average loans grew 36% to $21.2 billion at September 30, 2003. Net interest income increased 22% for the first nine months of 2003 compared with the same period in 2002. The provision for loan losses increased by $4 million and $19 million in the third quarter and first nine months of 2003, respectively. Noninterest expense was $343 million and $268 million for the quarters ended September 30, 2003 and 2002, respectively, an increase of 28%, and $973 million and $810 million for the nine months ended September 30, 2003 and 2002, respectively, an increase of 20%. The increase was primarily due to increases in full-time equivalent employees and salaries and incentive compensation resulting from increases in loan volume and an acquisition.

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



	Sept. 30, 2003				Dec. 31, 2002				Sept. 30, 2002
			Estimated				Estimated				Estimated
			fair				fair				fair
(in millions)	Cost		value		Cost		value		Cost		value


Securities of U.S. Treasury and federal agencies	$	1,190	$	1,244	$	1,315	$	1,381	$	1,592	$	1,665
Securities of U.S. states and political subdivisions		2,601		2,757		2,232		2,382		2,291		2,458
Mortgage-backed securities:
Federal agencies		20,006		20,892		17,766		19,090		21,958		23,380
Private collateralized mortgage obligations (1)		1,827		1,908		1,775		1,880		2,057		2,187

Total mortgage-backed securities		21,833		22,800		19,541		20,970		24,015		25,567
Other		2,837		3,004		2,608		2,658		2,786		2,805

Total debt securities		28,461		29,805		25,696		27,391		30,684		32,495
Marketable equity securities		333		455		598		556		578		479


Total	$	28,794	$	30,260	$	26,294	$	27,947	$	31,262	$	32,974

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

The following table provides the components of the total realized net gains on the sales of securities from the securities available for sale portfolio, including those related to marketable equity securities.

The weighted average expected remaining maturity of the debt securities portion of the securities available for sale portfolio was 6 years at September 30, 2003. Remaining maturities will differ from contractual maturities because mortgage debt issuers have the right to prepay obligation prior to contractual maturity.

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 mortgage-backed securities available for sale portfolio is indicated below.



										% Change
										Sept. 30, 2003 from
	Sept. 30		,	Dec. 31		,	Sept. 30		,	Dec. 31		,	Sept. 30		,
(in millions)	2003			2002			2002			2002			2002


Commercial (1)	$	47,720		$	47,292		$	46,827			1	%		2	%
Real estate 1-4 family first mortgage		59,680			40,976			33,773			46			77
Other real estate mortgage (2)		25,723			25,312			25,233			2			2
Real estate construction		7,777			7,804			7,887			—			(1	)
Consumer:
Real estate 1-4 family junior lien mortgage		40,681			31,290			30,193			30			35
Credit card		7,836			7,455			7,033			5			11
Other revolving credit and installment		31,919			26,353			24,912			21			28

Total consumer		80,436			65,098			62,138			24			29
Lease financing		8,185			8,241			8,593			(1	)		(5	)
Foreign		2,323			1,911			1,859			22			25


Total loans (net of unearned income, including net deferred loan fees, of $4,057, $4,276 and $4,308)	$	231,844		$	196,634		$	186,310			18	%		24	%

The table below presents comparative data for nonaccrual loans and other assets. A loan is placed on nonaccrual status (a) upon becoming 90 days past due as to interest or principal (unless both well-secured and in the process of collection), (b) when the full timely collection of interest or principal becomes uncertain or (c) when a portion of the principal balance has been charged off. Real estate 1-4 family loans (first and junior liens) are placed on nonaccrual status within 120 days of becoming past due as to interest or principal, regardless of security. Management’s classification of a loan as nonaccrual does not necessarily indicate that the principal of the loan is uncollectible in whole or in part. The table below excludes certain loans that are 90 days or more past due and still accruing that are presented in the table on page 47.

The Company generally identifies loans to be evaluated for impairment when such loans are over $1 million and on nonaccrual. However, not all nonaccrual loans are impaired. Loans are considered impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments. See Note 1 to Financial Statements in the Company’s 2002 Form 10-K for further discussion of impaired loans.

The table below shows the recorded investment in impaired loans and the method used to measure impairment for the periods presented:

The average recorded investment in impaired loans was $696 million and $682 million during third quarter 2003 and 2002, respectively, and $676 million and $733 million during the first nine months of 2003 and 2002, respectively. Predominantly all payments received on impaired loans are recorded using the cost recovery method. Under the cost recovery method, all payments received are applied to principal. This method is used when the ultimate collectibility of the total principal is in doubt. For payments received on impaired loans recorded using the cash basis method, total interest income recognized for the third quarter and first nine months of 2003 was $3 million and $8 million, respectively, and $5 million and $12 million during the same periods of 2002. Under the cash method, contractual interest is credited to interest income when received. This method is used when the ultimate collectibility of the total principal is not in doubt.

The following table shows loans contractually past due 90 days or more as to interest or principal, but still accruing. All loans in this category are (a) both well-secured and in the process of collection or (b) real estate 1-4 family first mortgage loans or consumer loans that are exempt under regulatory rules from being classified as nonaccrual. Real estate 1-4 family loans (first and junior liens) are placed on nonaccrual within 120 days of becoming past due and are excluded from the following table.



	Quarter						Nine months
	ended September 30					,	ended September 30					,
(in millions)	2003			2002			2003			2002


Balance, beginning of period	$	3,894		$	3,883		$	3,862		$	3,761

Allowances related to business combinations/other		(1	)		(2	)		31			93

Provision for loan losses		434			395			1,283			1,295

Loan charge-offs:
Commercial		(136	)		(159	)		(437	)		(534	)
Real estate 1-4 family first mortgage		(8	)		(3	)		(22	)		(18	)
Other real estate mortgage		(12	)		(2	)		(23	)		(14	)
Real estate construction		(2	)		(9	)		(8	)		(34	)
Consumer:
Real estate 1-4 family junior lien mortgage		(19	)		(14	)		(63	)		(43	)
Credit card		(109	)		(99	)		(337	)		(307	)
Other revolving credit and installment		(206	)		(212	)		(602	)		(595	)

Total consumer		(334	)		(325	)		(1,002	)		(945	)
Lease financing		(26	)		(21	)		(76	)		(68	)
Foreign		(29	)		(19	)		(74	)		(63	)

Total loan charge-offs		(547	)		(538	)		(1,642	)		(1,676	)


Loan recoveries:
Commercial		31			36			106			120
Real estate 1-4 family first mortgage		1			1			2			4
Other real estate mortgage		2			3			7			12
Real estate construction		2			10			11			19
Consumer:
Real estate 1-4 family junior lien mortgage		7			4			18			12
Credit card		13			12			38			36
Other revolving credit and installment		46			49			145			158

Total consumer		66			65			201			206
Lease financing		6			4			19			16
Foreign		5			4			13			11

Total loan recoveries		113			123			359			388

Net loan charge-offs		(434	)		(415	)		(1,283	)		(1,288	)


Balance, end of period	$	3,893		$	3,861		$	3,893		$	3,861


Net loan charge-offs (annualized) as a percentage of average total loans		.78	%		.91	%		.82	%		.97	%


Allowance as a percentage of total loans		1.68	%		2.07	%		1.68	%		2.07	%

The Company considers the allowance for loan losses of $3.89 billion adequate to cover probable losses inherent in loans, loan commitments and standby and other letters of credit at September 30, 2003. The Company’s determination of the level of the allowance for loan losses rests upon various judgments and assumptions, including (1) general economic conditions, (2) loan portfolio composition, (3) prior loan loss experience, (4) the evaluation of credit risk related to both individual borrowers and pools of homogenous loans, (5) periodic use of sensitivity analysis and expected loss simulation modeling and (6) the Company’s ongoing examination process and that of its regulators. The allowance for loan losses consists of a component for

individual loan impairment and multiple components of collective loan impairment. The Company considers relevant observable data in the recognition and measurement of the components of collective loan impairment.



	September 30		,	December 31		,	September 30		,
(in millions)	2003			2002			2002


Trading assets	$	10,279		$	10,167		$	7,906
Accounts receivable		3,709			5,219			5,860
Nonmarketable equity investments:
Private equity investments		1,713			1,657			1,651
Federal bank stock		1,691			1,591			1,511
All other		1,600			1,473			1,387

Total nonmarketable equity investments		5,004			4,721			4,549

Government National Mortgage Association (GNMA) pool buy-outs		2,326			2,336			2,378
Interest receivable		1,209			1,139			1,235
Core deposit intangibles		761			868			905
Interest-earning deposits		608			352			2,006
Foreclosed assets		200			201			186
Due from customers on acceptances		161			110			102
Other		8,461			6,684			8,156


Total other assets	$	32,718		$	31,797		$	33,283

Trading assets consist largely of securities, including corporate debt, U.S. government agency obligations, and the fair value of derivative instruments held for customer accommodation purposes. Interest income from trading assets was $37 million and $43 million in third quarter 2003 and 2002, respectively, and $109 million and $135 million in the first nine months of 2003 and 2002, respectively. Noninterest income from trading assets was $104 million and $10 million in third quarter 2003 and 2002, respectively, and $346 million and $212 million in the first nine months of 2003 and 2002, respectively, and is included in the “all other” category of noninterest income.

Net gains (losses) from nonmarketable equity investments were $26 million and $(103) million for the third quarter and first nine months of 2003, respectively, compared with $(68) million and $(112) million for the same periods of 2002. Net gains (losses) from nonmarketable investments included net gains (losses) from private equity investments of $8 million and $(107) million for the third quarter and first nine months of 2003, respectively, compared with $(72) million and $(144) million for the same periods of 2002.

GNMA pool buy-outs are advances made to GNMA mortgage pools that are insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). These advances are made to buy out delinquent loans under the Company’s servicing agreements. The Company undertakes the collection and foreclosure process for the FHA and VA. After the foreclosure process is complete, the Company is reimbursed for substantially all costs incurred, including the advances.

The increase in other time deposits was predominantly due to an increase in certificates of deposit greater than $100,000 sold to institutional customers.

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



												To be well
												capitalized under
												the FDICIA
						For capital						prompt corrective
	Actual					adequacy purposes						action provisions
(in billions)	Amount		Ratio			Amount			Ratio			Amount			Ratio

As of September 30, 2003:
Total capital (to risk-weighted assets)
Wells Fargo & Company	$	35.1		11.53	%	>=	$	24.3	>=	8.00	%
Wells Fargo Bank, N.A.		20.9		11.88		>=		14.0	>=	8.00		>=	$	17.6	>=	10.00	%
Wells Fargo Bank Minnesota, N.A.		3.6		12.91		>=		2.3	>=	8.00		>=		2.8	>=	10.00

Tier 1 capital (to risk-weighted assets)
Wells Fargo & Company	$	24.6		8.07	%	>=	$	12.2	>=	4.00	%
Wells Fargo Bank, N.A.		13.3		7.60		>=		7.0	>=	4.00		>=	$	10.5	>=	6.00	%
Wells Fargo Bank Minnesota, N.A.		3.4		11.91		>=		1.1	>=	4.00		>=		1.7	>=	6.00

Tier 1 capital (to average assets)
(Leverage ratio)
Wells Fargo & Company	$	24.6		6.44	%	>=	$	15.3	>=	4.00	%(1)
Wells Fargo Bank, N.A.		13.3		6.12		>=		8.7	>=	4.00	(1)	>=	$	10.9	>=	5.00	%
Wells Fargo Bank Minnesota, N.A.		3.4		5.62		>=		2.4	>=	4.00	(1)	>=		3.0	>=	5.00

As an approved seller/servicer, one of the Company’s mortgage banking subsidiaries is required to maintain minimum levels of shareholder’s equity, as specified by various agencies, including the United States Department of Housing and Urban Development, Government National Mortgage Association, Federal Home Loan Mortgage Corporation and Federal National Mortgage Association. This mortgage banking subsidiary’s equity at September 30, 2003 was below the required levels. The subsidiary received a capital infusion from Wells Fargo Bank, N.A. in October 2003 to restore its equity to the required levels.

In the ordinary course of business, the Company engages in financial transactions, in accordance with generally accepted accounting principles (GAAP), that are not recorded on the Company’s balance sheet or may be recorded on the Company’s balance sheet in amounts that are different than the full contract or notional amount of the transaction. (See Note 1 to Financial Statements for the Company’s accounting policy relating to consolidation.) Such transactions are structured to meet the financial needs of customers, manage the Company’s credit, market or liquidity risks, diversify funding sources or optimize capital.

Off-balance sheet arrangements include (1) securitization activities in the ordinary course of business, including mortgage loans and other financial assets (student loans, commercial mortgages and automobile receivables), (2) investment vehicles, typically in the form of certain collateralized debt obligations and (3) unconsolidated joint ventures, used to support origination activities of the Company’s mortgage banking affiliate or formed with third parties for economies of scale.

In the ordinary course of operations, the Company enters into certain contractual obligations. Such obligations include (1) the acceptance of deposits, (2) the funding of operations through debt issuances, (3) leases for premises and equipment, (4) purchase obligations and (5) certain derivative instrument contracts.

For additional information on off-balance sheet arrangements and other contractual obligations see Note 9 (Guarantees) to Financial Statements and “Financial Review — Overview — Recent Accounting Standards” in this report and “Financial Review — Off-Balance Sheet Arrangements and Other Contractual Obligations” in the Company’s 2002 Form 10-K.

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

Interest rate risk, one of the more prominent risks in terms of potential earnings impact, is an inevitable part of being a financial intermediary. For more information, see “Financial Review — Asset/Liability and Market Risk Management — Interest Rate Risk” in the Company’s 2002 Form 10-K. The principal tool used to evaluate the Company’s interest rate risk is a simulation of net income under various economic and interest rate scenarios.

The Company assesses its interest rate risk by comparing its most likely earnings to various earnings simulations performed under multiple 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. As of September 30, 2003, the Company’s simulated earnings at risk to a higher interest rate scenario were 3.7% of its estimated most likely earnings. The higher interest rate scenario assumed that the Federal Funds rate would increase to 4.75% by the end of 2004, and that the 10 year Constant Maturity Treasury (CMT) bond yield would reach a rate of 6.50%. Simulation estimates are highly dependent on and will change with the size and mix of the Company’s actual and projected balance sheet at the time each simulation is done.

The Company uses exchange-traded and over-the-counter interest rate derivatives to hedge certain of its interest rate exposures. The credit risk amount and estimated net fair values of these derivatives as of September 30, 2003 and December 31, 2002 are indicated in Note 10 to Financial Statements. Derivatives are used for asset/liability management in three ways: (a) a major portion of the Company’s long-term fixed-rate debt is converted to floating-rate payments by entering into received-fixed swaps at issuance; (b) the cash flows from selected asset and/or liability instruments/portfolios are converted from fixed to floating payments or vice versa; and (c) the Company’s mortgage operation actively uses swaptions, futures, forwards and rate options to hedge interest rate lock commitments, mortgages held for sale and mortgage servicing rights.

The Company originates, funds and services mortgage loans. These activities subject the Company to a number of risks, including credit, liquidity and interest rate risks. The Company manages credit and liquidity risk by selling or securitizing most of the loans it originates. Changes in interest rates, however, may have a potentially large impact on mortgage banking income in any calendar quarter and over time. The Company manages both the risk to net income over time from all sources as well as the risk to an immediate reduction in the fair value of its mortgage servicing rights. The Company relies on mortgage loans held on its balance sheet and derivative instruments to maintain these risks within Corporate ALCO parameters.

At September 30, 2003, the Company had mortgage servicing rights (MSRs) of $5.8 billion, net of a valuation allowance of $1.8 billion. The Company’s MSRs were valued at 1.03% of mortgage loans serviced for others at September 30, 2003, up from .92% at December 31, 2002 and .89% at September 30, 2002. The increase in MSRs was predominantly due to the growth in the servicing portfolio resulting from originations and purchases.

The value of the MSRs is influenced by prepayment speed assumptions affecting the duration of the mortgage loans to which the MSRs relate. Changes in long-term interest rates affect these prepayment speed assumptions. For example, a decrease in long-term rates would accelerate prepayment speed assumptions as borrowers refinance their existing mortgage loans and decrease the value of the MSRs. In contrast, prepayment speed assumptions would tend to slow in a rising interest rate environment and increase the value of the MSRs.

The Company mitigates mortgage banking interest rate risk in two ways. First, a significant portion of the MSRs are hedged against a change in interest rates with derivative contracts. The principal source of risk in this hedging process is the risk that changes in the value of the hedging contracts may not match changes in the value of the hedged portion of the MSRs for any given change in long-term interest rates.

Second, a portion of the potential reduction in the value of the MSRs for a given decline in interest rates is offset by estimated increases in origination and servicing fees over time from new mortgage activity or refinancing associated with that decline in interest rates. In a scenario of much lower long-term interest rates, the decline in the value of the MSRs and its impact on net income would be immediate whereas the additional fee income accrues over time. Under

GAAP, impairment of the MSRs, due to a decrease in long-term rates or other reasons, is reflected as a charge to earnings through an increase to the valuation allowance.

In scenarios of sustained increases in long-term interest rates, origination fees may eventually decline as refinancing activity slows. In such higher interest rate scenarios the duration of the servicing portfolio may extend. In such circumstances, periodic amortization of servicing costs may be reduced, and some or all of the valuation allowance may be released.

The Company incurs interest rate risk, foreign exchange risk, equity price risk and commodity price risk in several trading businesses managed under limits set by Corporate ALCO. The primary purpose of these businesses is to accommodate customers in the management of their market price risks. Additionally, the Company takes positions based on market expectations or to benefit from price differentials between financial instruments and markets. All securities, loans, foreign exchange transactions, commodity transactions and derivatives transacted with customers or used to hedge capital market transactions done with customers are carried at fair value. Counterparty risk limits are established and monitored by the Institutional Risk Committee. Open, “at risk” positions for all trading business are monitored by Corporate ALCO.

Equity markets impact the Company in both direct and indirect ways. For more information, see “Financial Review – Asset/Liability and Market Risk Management - - Market Risk — Equity Markets” in the Company’s 2002 Form 10-K. The Company makes and manages direct equity investments in start up businesses, emerging growth companies, management buy-outs, acquisitions and corporate recapitalizations. The Company also invests in non-affiliated funds that make similar private equity investments. These private equity investments are made within capital allocations approved by the Company’s management or its Board of Directors. Management reviews these investments at least quarterly and assesses them for possible other-than-temporary impairment. At September 30, 2003, private equity investments totaled $1,713 million, compared with $1,657 million at December 31, 2002.

The Company has marketable equity securities in its securities available for sale investment portfolio, including shares distributed from the Company’s venture capital activities. These securities are managed within capital risk limits approved by management. Gains and losses on these securities are recognized in net income when realized and, in addition, other-than-temporary impairment may be periodically recorded. At September 30, 2003, the fair value of marketable equity securities was $455 million and cost was $333 million, compared with $556 million and $598 million, respectively, at December 31, 2002.

The objective of effective liquidity management is to ensure that the Company can efficiently meet customer loan requests, customer deposit maturities/withdrawals and other cash commitments under both normal operating conditions and under unforeseen and 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. To ensure that the Parent is a source of strength for its regulated, deposit-taking subsidiary banks, the Company sets liquidity management guidelines for both the consolidated and Parent balance sheets.

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

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

The remaining funding of assets is mostly provided by long-term debt, deposits in foreign offices, short-term borrowings (federal funds purchased and securities sold under repurchase agreements, commercial paper and other short-term borrowings) and trust preferred securities. Liquidity for the Company is also available through the Company’s ability to raise funds in a variety of domestic and international money and capital markets. The Company accesses the capital markets for long-term funding through the issuance of registered debt, private placements and asset-based secured funding. In September 2003, Moody’s Investors Service raised Wells Fargo Bank, N.A.’s rating to “Aaa”, its highest investment grade, from “Aa1” and raised the Company’s senior debt rating to “Aa1” from “Aa2”. The rating agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, level and quality of earnings. In October 2003, Standard & Poor’s Ratings Service raised the counterparty ratings on the Company to ‘AA-minus/A-1-plus’ from ‘A-plus/A-1’ and the revised outlook for the Company to stable from positive.

Parent. The Parent has registered with the Securities and Exchange Commission (SEC) to issue a variety of securities, including senior and subordinated notes and preferred and common securities to be issued by one or more trusts that are directly or indirectly owned by the Company and consolidated in the financial statements. In March 2003, the Parent registered for issuance an additional $15.3 billion in senior and subordinated notes and preferred and common securities. During the third quarter and first nine months of 2003, the Parent issued $3.5 billion and $10.5 billion, respectively, of senior notes. Also, during third quarter 2003, Wells Fargo Capital VIII issued a total of $200 million of trust preferred securities. At September 30, 2003, the Parent’s remaining issuance capacity under effective registration statements was $11.1 billion. In October 2003, the Parent issued $1.0 billion in senior and subordinated notes. The Company used the proceeds from securities issued in the first nine months of 2003 for general corporate purposes and expects that it will use the proceeds from the future issuance of any securities for

general corporate purposes as well. The Parent also issues commercial paper and has two back-up credit facilities amounting to $2 billion.

On April 15, 2003, the Company issued $3 billion of convertible senior debentures as a private placement. As described in Item 2 of Part II of the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2003, the convertible debentures are convertible into shares of the Company’s common stock under certain circumstances. While the Company has the ability to settle the entire amount of the conversion rights granted in this convertible debt offering in cash, common stock or a combination, the Company intends to settle the principal amount in cash and to settle the conversion spread (the excess conversion value over the principal) in either cash or stock. The Company can also redeem all or some of the convertible debt securities for cash at any time on or after May 5, 2008, at their principal amount plus accrued interest, if any.

Bank Note Program. In March 2003, Wells Fargo Bank, N.A. established a $50 billion bank note program under which it may issue up to $20 billion in short-term senior notes outstanding at any time and up to a total of $30 billion in long-term senior and subordinated notes. This program updates and supercedes the bank note program established in February 2001. Securities are issued under this program as private placements in accordance with the Office of the Comptroller of the Currency’s regulations. During the third quarter and first nine months of 2003, Wells Fargo Bank, N.A. issued $555 million and $9.2 billion, respectively, in senior long-term notes. At September 30, 2003, the remaining issuance authority under the long-term portion was $15.1 billion. In October 2003, Wells Fargo Bank, N.A. issued $105 million in senior bank notes.

Wells Fargo Financial. During third quarter 2003, Wells Fargo Financial, Inc. issued as private placements $500 million and $400 million (Canadian) in senior notes. During the first nine months of 2003, Wells Fargo Financial Canada Corporation issued $400 million (Canadian) in senior notes, leaving at September 30, 2003 a total of $550 million (Canadian) available for issuance.

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

The Company uses capital to fund organic growth, acquire banks and other financial services companies, pay dividends and repurchase its shares. During the first nine months of 2003, the Company’s consolidated assets increased by $42 billion, or 12%. During 2002, the Board of Directors authorized the repurchase of up to 50 million additional shares of the Company’s outstanding common stock. During the first nine months of 2003, the Company repurchased approximately 27 million shares of its common stock for a total of $1.3 billion. At September 30, 2003, the total remaining common stock repurchase authority was approximately 31 million shares. In July 2003, the Board of Directors approved an increase in the Company’s quarterly common stock dividend to 45 cents per share from 30 cents per share, representing a 50% increase in the quarterly dividend.

The Company’s potential sources of capital include retained earnings, issuance of common and preferred stock and issuance of subordinated debt and trust preferred securities. In the first nine months of 2003, retained earnings increased $2.7 billion, predominantly as a result of net income of $4.6 billion less dividends of $1.8 billion. In the first nine months of 2003, the Company issued a total of $779 million in common stock for various employee stock plans, which included $192 million related to the conversion of preferred stock to common stock under the Employee Stock Ownership Plan. On October 13, 2003, the Company called all shares of its Adjustable-Rate Cumulative, Series B preferred stock. The shares will be redeemed on November 15, 2003 at the stated liquidation price plus accrued dividends.

We make forward-looking statements in this report and in other reports and proxy statements we file with the SEC. In addition, our senior management might make forward-looking statements orally to analysts, investors, the media and others. You should consider forward-looking statements in light of the following discussion.

•

projections of our revenues, income, earnings per share, capital expenditures, dividends, capital structure or other financial items;

•

descriptions of plans or objectives of our management for future operations, products or services, including pending acquisitions;

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

•

the future value of equity securities, including those in our venture capital portfolios;

•

future short-term and long-term interest rate levels and their impact on our net interest margin, net income, liquidity and capital; and

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

There are several factors—many beyond our control—that could cause results to differ significantly from our expectations. We describe some of these factors below. We describe other factors, such as credit, market, operational, liquidity, interest rate and other risks, elsewhere in this report (see, for example, “Balance Sheet Analysis”). We describe factors relating to the regulation and supervision of the Company in our 2002 Form 10-K. Any factor described in this report or in our 2002 Form 10-K could by itself, or together with one or more other factors, adversely affect our business, results of operations and/or financial condition. There are factors not described in this report or in our 2002 Form 10-K that could cause results to differ from our expectations.

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

Our business and earnings are impacted by general business and economic conditions in the United States and abroad. These conditions include short-term and long-term interest rates, inflation, monetary supply, fluctuations in both debt and equity capital markets, and the strength of the U.S. economy and the local economies in which we operate. For example, an economic downturn, increase in unemployment, or other events that negatively impact household and/or corporate incomes could decrease the demand for the Company’s loan and non-loan products and services and increase the number of customers who fail to pay interest or principal on their loans.

Geopolitical conditions can also impact our earnings. Acts or threats of terrorism, actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts including the aftermath of the war with Iraq, could impact business and economic conditions in the U.S. and abroad. The terrorist attacks in 2001, for example, caused an immediate decrease in demand for air travel, which adversely affected not only the airline industry but also other travel-related and leisure industries, such as lodging, gaming and tourism.

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

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

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

We operate in a highly competitive industry which could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can now merge by creating a new type of financial services company called a “financial holding company,” which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and

underwriting) and merchant banking. Recently, a number of foreign banks have acquired financial services companies in the United States, further increasing competition in the U.S. market. Also, technology has lowered barriers to entry and made it possible for nonbanks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and some have lower cost structures.

The holding company, its subsidiary banks and many of its nonbank subsidiaries are heavily regulated at the federal and state levels. This regulation is to protect depositors, federal deposit insurance funds and the banking system as a whole, not security holders. Congress and state legislatures and federal and state regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect us in substantial and unpredictable ways including limiting the types of financial services and products we may offer and/or increasing the ability of nonbanks to offer competing financial services and products. Also, our failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies and damage to our reputation. For more information, refer to the “Regulation and Supervision” section and to Notes 3 (Cash, Loan and Dividend Restrictions) and 25 (Regulatory and Agency Capital Requirements) to Financial Statements in the Company’s 2002 Form 10-K.

Various legislation, including proposals to substantially change the financial institution regulatory system and to expand or contract the powers of banking institutions and bank holding companies, is from time to time introduced in the Congress. This legislation may change banking statutes and the operating environment of the Company and its subsidiaries in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. We cannot predict whether any of this potential legislation will be enacted, and if enacted, the effect that it, or any implementing regulations, would have on the financial condition or results of operations of the Company or any of its subsidiaries.

We depend on the accuracy and completeness of information about customers and counterparties.

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information furnished to us by or on behalf of customers and counterparties, including financial statements and other financial information. We also may rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit, we may assume that a customer’s audited financial statements conform with GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. We also may rely on the audit report covering those financial statements. Our financial condition and results of operations

could be negatively impacted to the extent we rely on financial statements that do not comply with GAAP or that are materially misleading.

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

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

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

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

Negative public opinion could damage our reputation and adversely impact our earnings.

Reputation risk, or the risk to our earnings and capital from negative public opinion, is inherent in our business. Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions, and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely affect our ability to keep and attract customers and can expose us to litigation and regulatory action. Because virtually all our businesses operate under the “Wells Fargo” brand, actual or alleged conduct by one business can result in negative public opinion about other Wells Fargo businesses. Although we take steps to minimize reputation risk in dealing with our customers and communities, as a large diversified financial services company with a relatively high industry profile, the risk will always be present in our organization.

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

The holding company is a separate and distinct legal entity from its subsidiaries. It receives substantially all of its revenue from dividends from its subsidiaries. These dividends are the principal source of funds to pay dividends on the holding company’s common and preferred stock and interest and principal on its debt. Various federal and/or state laws and regulations limit the amount of dividends that our bank and certain of our nonbank subsidiaries may pay to the holding company. Also, the holding company’s right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s

creditors. For more information, refer to “Regulation and Supervision—Dividend Restrictions” and “—Holding Company Structure” in the Company’s 2002 Form 10-K.

Our accounting policies and methods are key to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain.

Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Our management must exercise judgment in selecting and applying many of these accounting policies and methods so that not only do they comply with generally accepted accounting principles but also that they reflect management’s judgment as to the most appropriate manner in which to record and report our financial condition and results of operations. In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which might be reasonable under the circumstances yet might result in our reporting materially different amounts than would have been reported under a different alternative. Note 1 to Financial Statements and “Financial Review – Critical Accounting Policies” in the Company’s 2002 Form 10-K describes our significant accounting policies.

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

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

Mortgage Banking. The impact of interest rates on our mortgage banking business can be large and complex. Changes in interest rates can impact loan origination fees and loan servicing fees, which account for a significant portion of mortgage-related revenues. A decline in mortgage rates generally increases the demand for mortgage loans as borrowers refinance, but also generally leads to accelerated payoffs in our mortgage servicing portfolio. Conversely, in a constant or increasing rate environment, we would expect fewer loans to be refinanced and a decline in payoffs in our servicing portfolio. Although the Company uses dynamic and sophisticated models to assess the impact of interest rates on mortgage fees, amortization of mortgage servicing rights, and the value of mortgage servicing assets, the estimates of net income and fair value produced by these models are

dependent on estimates and assumptions of future loan demand, prepayment speeds and other factors which may overstate or understate actual subsequent experience. In addition, although the Company uses derivative instruments to hedge the value of its servicing portfolio, the hedges do not cover the full value of the portfolio and the Company can provide no assurances that the hedges will be effective to offset significant decreases in the value of the portfolio. For more information, see “Financial Review—Critical Accounting Policies—Mortgage Servicing Rights Valuation and Risk Management—Asset /Liability and Market Risk Management” in the Company’s 2002 Form 10-K.

We rely on other companies to provide key components of our business infrastructure.

Third parties provide key components of our business infrastructure such as internet connections and network access. Any disruption in internet, network access or other voice or data communication services provided by these third parties or any failure of these third parties to handle current or higher volumes of use could adversely affect our ability to deliver products and services to our customers and otherwise to conduct our business. Technological or financial difficulties of a third party service provider could adversely affect our business to the extent those difficulties result in the interruption or discontinuation of services provided by that party.

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

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

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

Our business model is dependent on sharing information between the family of companies owned by Wells Fargo to better satisfy our customers’ needs. Laws that restrict the ability of our companies to share information about customers could negatively impact our revenue and profit.

Our success depends, in large part, on our ability to attract and retain key people. Competition for the best people in most activities engaged in by the Company can be intense. We may not be able to hire people or to keep them.

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

•

significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors;

•

failure to integrate our acquisitions or realize anticipated benefits from our acquisitions;

•

operating and stock price performance of other companies that investors deem comparable to us;

•

news reports relating to trends, concerns and other issues in the financial services industry;

•

geopolitical conditions such as acts or threats of terrorism or military conflicts.

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

As required by SEC rules, the Company’s management evaluated the effectiveness, as of September 30, 2003, 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 September 30, 2003.

No change occurred during the third quarter of 2003 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company’s SEC file number is 001-2979. On and before November 2, 1998, the Company filed documents with the SEC under the name Norwest Corporation. The former Wells Fargo & Company filed documents under SEC file number 001-6214.

3(a)

Restated Certificate of Incorporation, incorporated by reference to Exhibit 3(b) to the Company’s Current Report on Form 8-K dated June 28, 1993. Certificates of Amendment of Certificate of Incorporation, incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K dated July 3, 1995 (authorizing preference stock), Exhibits 3(b) and 3(c) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (changing the Company’s name and increasing authorized common and preferred stock, respectively) and Exhibit 3(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (increasing authorized common stock)

(b)

Certificate of Change of Location of Registered Office and Change of Registered Agent, incorporated by reference to Exhibit 3(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999

(c)

Certificate of Designations for the Company’s 1995 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1995

(d)

Certificate Eliminating the Certificate of Designations for the Company’s Cumulative Convertible Preferred Stock, Series B, incorporated by reference to Exhibit 3(a) to the Company’s Current Report on Form 8-K dated November 1, 1995

(e)

Certificate Eliminating the Certificate of Designations for the Company’s 10.24% Cumulative Preferred Stock, incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K dated February 20, 1996

(f)

Certificate of Designations for the Company’s 1996 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K dated February 26, 1996

3(g)

Certificate of Designations for the Company’s 1997 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K dated April 14, 1997

(h)

Certificate of Designations for the Company’s 1998 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K dated April 20, 1998

(i)

Certificate of Designations for the Company’s Adjustable Cumulative Preferred Stock, Series B, incorporated by reference to Exhibit 3(j) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998

(j)

Certificate Eliminating the Certificate of Designations for the Company’s Series A Junior Participating Preferred Stock, incorporated by reference to Exhibit 3(a) to the Company’s Current Report on Form 8-K dated April 21, 1999

(k)

Certificate of Designations for the Company’s 1999 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3(b) to the Company’s Current Report on Form 8-K dated April 21, 1999

(l)

Certificate of Designations for the Company’s 2000 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3(o) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000

(m)

Certificate of Designations for the Company’s 2001 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K dated April 17, 2001

(n)

Certificate of Designations for the Company’s 2002 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K dated April 16, 2002

(o)

Certificate of Designations for the Company’s 2003 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated April 15, 2003

(p)

By-Laws, incorporated by reference to Exhibit 3(m) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998

(b)

The Company agrees to furnish upon request to the Commission a copy of each instrument defining the rights of holders of senior and subordinated debt of the Company.

10(a)

Amendment effective January 1, 2004 to the Deferred Compensation Plan for Non-Employee Directors of the former Norwest, filed herewith

(b)

Amendment effective January 1, 2004 to the Directors’ Formula Stock Award Plan for directors of the former Norwest, filed herewith

(c)

Amendment effective January 1, 2004 to the Directors’ Stock Deferral Plan for directors of the former Norwest, filed herewith

(d)

Amendment effective January 1, 2004 to the Deferral Plan for Directors of the former Wells Fargo, filed herewith

(e)

Amendment effective January 1, 2004 to the Directors Stock Compensation and Deferral Plan, filed herewith

(f)

Deferred Compensation Plan as amended and restated effective January 1, 2004, filed herewith

31(a)

Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith

(b)

Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith

32(a)

Certification of Periodic Financial Report by Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. § 1350, furnished herewith

(b)

Certification of Periodic Financial Report by Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. § 1350, furnished herewith

99(a)

Computation of Ratios of Earnings to Fixed Charges, filed herewith. The ratios of earnings to fixed charges, including interest on deposits, were 3.62 and 3.14 for the quarters ended September 30, 2003 and 2002, respectively, and 3.55 and 3.09 for the nine months ended September 30, 2003 and 2002, respectively. The ratios of earnings to fixed charges, excluding interest on deposits, were 5.62 and 4.97 for the quarters ended September 30, 2003 and 2002, respectively, and 5.64 and 4.89 for the nine months ended September 30, 2003 and 2002, respectively.

99(b)

Computation of Ratios of Earnings to Fixed Charges and Preferred Dividends, filed herewith. The ratios of earnings to fixed charges and preferred dividends, including interest on deposits, were 3.62 and 3.13 for the quarters ended September 30, 2003 and 2002, respectively, and 3.54 and 3.08 for the nine months ended September 30, 2003 and 2002, respectively. The ratios of earnings to fixed charges and preferred dividends, excluding interest on deposits, were 5.61 and 4.95 for the quarters ended September 30, 2003 and 2002, respectively, and 5.62 and 4.88 for the nine months ended September 30, 2003 and 2002, respectively.

(b)

The Company filed the following reports on Form 8-K during the third quarter of 2003:

(1)

July 3, 2003, under Item 7, filing as exhibits documents regarding the Company’s medium-term note program, Series E, and subordinated medium-term note program Series F

(2)

July 8, 2003, under Item 7, filing as an exhibit the form of note for the Company’s Basket Linked Notes due October 9, 2008

(3)

July 15, 2003, under Item 12, regarding the Company’s financial results for the quarter ended June 30, 2003

(4)

July 30, 2003, under Item 7, filing as exhibits documents regarding the issuance by Wells Fargo Capital VIII of its 5.625% Capital Securities and the issuance by the Company of its 5.625% Junior Subordinated Debentures due August 1, 2033

(5)

August 29, 2003, under Item 7, filing as an exhibit the form of note for the Company’s Callable Notes Linked to the S&P 500 Index due August 25, 2009

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


Dated: November 7, 2003	WELLS FARGO & COMPANY
	By:	/s/ Richard D. Levy
		Richard D. Levy
		Senior Vice President and Controller (Principal Accounting Officer)


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


		Shares Outstanding
		October 31, 2003
Common stock, $1-2/3 par value		1,692,029,166


PART I — FINANCIAL INFORMATION
		CONSOLIDATED STATEMENT OF INCOME
		CONSOLIDATED BALANCE SHEET
		CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
		CONSOLIDATED STATEMENT OF CASH FLOWS
		NOTES TO FINANCIAL STATEMENTS
	SUMMARY FINANCIAL DATA
	OVERVIEW
		CRITICAL ACCOUNTING POLICIES
		EARNINGS PERFORMANCE
		NET INTEREST INCOME
		NONINTEREST INCOME
		NONINTEREST EXPENSE
		INCOME TAXES
		OPERATING SEGMENT RESULTS
		BALANCE SHEET ANALYSIS
		SECURITIES AVAILABLE FOR SALE
		LOAN PORTFOLIO
		NONACCRUAL LOANS AND OTHER ASSETS
		Loans 90 Days or More Past Due and Still Accruing
		ALLOWANCE FOR LOAN LOSSES
		OTHER ASSETS
		DEPOSITS
		REGULATORY AND AGENCY CAPITAL REQUIREMENTS
		OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
		ASSET/LIABILITY AND MARKET RISK MANAGEMENT
PART II — OTHER INFORMATION
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
Exhibit 10(a)
Exhibit 10(b)
Exhibit 10(c)
Exhibit 10(d)
Exhibit 10(e)
Exhibit 10(f)
Exhibit 31(a)
Exhibit 31(b)
Exhibit 32(a)
Exhibit 32(a)
Exhibit 99(a)
Exhibit 99(b)



	September 30, 2003				September 30, 2002
	Gross		Accumulated		Gross		Accumulated
(in millions)	carrying amount		amortization		carrying amount		amortization


Amortized intangible assets:
Mortgage servicing rights, before valuation allowance (1)	$	14,756	$	7,167	$	10,342	$	4,168
Core deposit intangibles		2,415		1,654		2,415		1,510
Other		387		273		373		249

Total amortized intangible assets	$	17,558	$	9,094	$	13,130	$	5,927


Unamortized intangible asset (trademark)	$	14			$	14



(in millions)	Sept. 30, 2003			Dec. 31, 2002			Sept. 30, 2002


Estimated unrealized gross gains	$	1,542		$	1,851		$	1,974
Estimated unrealized gross losses		(76	)		(198	)		(262	)

Estimated unrealized net gains	$	1,466		$	1,653		$	1,712




(in millions)	Date	Assets


Certain assets of Telmark, LLC, Syracuse, New York	February 28	$	660
Other (1)	Various		112


		$	772



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


Nine months ended September 30, 2003 (actual)	$	2,301	$	107	$	22	$	2,430


Three months ended December 31, 2003 (estimate)	$	499	$	34	$	7	$	540


Estimate for year ended December 31,
2004	$	1,601	$	131	$	23	$	1,755
2005		1,091		120		16		1,227
2006		838		108		13		959
2007		679		99		12		790
2008		549		91		11		651

(1)		Liquidation preference $50. On October 13, 2003, the Company called all of the shares. The shares will be redeemed on November 15, 2003 at the stated liquidation price plus accrued dividends.
(2)		Liquidation preference $1,000.
(3)		In accordance with the American Institute of Certified Public Accountants (AICPA) Statement of Position 93-6, Employers’ Accounting for Employee Stock Ownership Plans, the Company recorded a corresponding charge to unearned ESOP shares in connection with the issuance of the ESOP Preferred Stock. The unearned ESOP shares are reduced as shares of the ESOP Preferred Stock are committed to be released.

(1)		Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes actual interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment. In general, Community Banking has excess liabilities and receives interest credits for the funding it provides the other segments.
(2)		Generally, the provision for loan losses represents actual net charge-offs for each operating segment.
(3)		The reconciling items for net interest income, noninterest income and net income are from Corporate level equity investment activities. The material item in the reconciliation column for average assets is unallocated goodwill held at the enterprise level.



	September 30, 2003					December 31, 2002
	Credit		Estimated			Credit		Estimated
	risk		net fair			risk		net fair
(in millions)	amount (1)		value			amount (1)		value


ASSET/LIABILITY MANAGEMENT HEDGES
Interest rate contracts	$	2,975	$	1,854		$	3,438	$	2,631

CUSTOMER ACCOMMODATIONS AND TRADING
Interest rate contracts		2,932		(115	)		3,343		31
Commodity contracts		70		—			28		4
Equity contracts		89		(6	)		29		(20	)
Foreign exchange contracts		381		44			271		30
Credit contracts		32		(16	)		52		(11	)

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

(1)		The average prime rate of the Company was 4.00% and 4.75% for the quarters ended September 30, 2003 and 2002, respectively, and 4.16% and 4.75% for the nine months ended September 30, 2003 and 2002, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 1.13% and 1.81% for the quarters ended September 30, 2003 and 2002, respectively, and 1.23% and 1.88% for the nine months ended September 30, 2003 and 2002, 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 all periods presented.



	Quarter						Nine months
	ended Sept. 30					,	ended Sept. 30					,
(in millions)	2003			2002			2003			2002


Realized gross gains	$	60		$	196		$	141		$	478
Realized gross losses (1)		(33	)		(155	)		(105	)		(362	)

Realized net gains	$	27		$	41		$	36		$	116

(1)		Includes agricultural loans (loans to finance agricultural production and other loans to farmers) of $3,750 million, $4,473 million and $3,973 million at September 30, 2003, December 31, 2002 and September 30, 2002, respectively.
(2)		Includes agricultural loans that are secured by real estate of $1,083 million, $1,111 million and $1,179 million at September 30, 2003, December 31, 2002 and September 30, 2002, respectively.

(1)		Includes commercial agricultural loans of $65 million, $48 million and $55 million at September 30, 2003, December 31, 2002 and September 30, 2002, respectively.
(2)		Includes agricultural loans secured by real estate of $26 million, $30 million and $24 million at September 30, 2003, December 31, 2002 and September 30, 2002, respectively.
(3)		Includes impaired loans of $681 million, $612 million and $624 million at September 30, 2003, December 31, 2002 and September 30, 2002, respectively.
(4)		Represents the amount of real estate investments (contingent interest loans accounted for as investments) that would be classified as nonaccrual if such assets were recorded as loans. Real estate investments totaled $9 million, $9 million and $11 million at September 30, 2003, December 31, 2002 and September 30, 2002, respectively.