WELLS FARGO & CO/MN (Form: 10-K, Received: 02/26/2010 13:27:11)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2009 Commission File Number 001-2979

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


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

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

Registrant’s telephone number, including area code: 1-866-878-5865

Securities registered pursuant to Section 12(b) of the Act:


		Name of Each Exchange
Title of Each Class		on Which Registered
Common Stock, par value $1-2/3		New York Stock Exchange (“NYSE”)
Depositary Shares, each representing a 1/40 ^th interest in a shares of 8.00% Non- Cumulative Perpetual Class A Preferred Stock, Series J		NYSE
7.5% Non-Cumulative Perpetual Convertible Class A Preferred Stock, Series L		NYSE

See list of additional securities listed on the NYSE and the NYSE Alternext U.S. on the page directly following this cover page.

Securities registered pursuant to Section 12(g) of the Act:

Dividend Equalization Preferred Shares, no par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Ö No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Ö

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, and (2) has been subject to such filing requirements for the past 90 days. Yes Ö No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes Ö No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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


Large accelerated filer þ		Accelerated filer o
Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)

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

Yes No Ö

At June 30, 2009, the aggregate market value of common stock held by non-affiliates was approximately $111.9 billion, based on a closing price of $24.26. At January 31, 2010, 5,180,727,661 shares of common stock were outstanding.

Documents Incorporated by Reference in Form 10-K


Incorporated Documents		Where incorporated in Form 10-K

1. Portions of the Company’s Annual Report to Stockholders for the year ended December 31, 2009 (“2009 Annual Report to Stockholders”)		Part I – Items 1, 1A, 2 and 3; Part II – Items 5, 6, 7, 7A, 8 and 9A; and Part IV– Item 15.

2. Portions of the Company’s Proxy Statement for the Annual Meeting of Stockholders to be held April 27, 2010 (“2010 Proxy Statement”)		Part III – Items 10, 11, 12, 13 and 14

TABLE OF CONTENTS


	PART I.
	ITEM 1. BUSINESS
	ITEM 1A. RISK FACTORS
	ITEM 1B. UNRESOLVED STAFF COMMENTS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	PART II
	ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
	ITEM 6. SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	ITEM 9A. CONTROLS AND PROCEDURES
	ITEM 9B. OTHER INFORMATION
	PART III
	ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
	ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
	PART IV
	ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
SIGNATURES
EXHIBIT INDEX
EX-10.A
EX-10.C
EX-10.F
EX-10.W
EX-10.AA
EX-12.A
EX-12.B
EX-13
EX-21
EX-23
EX-24
EX-31.A
EX-31.B
EX-32.A
EX-32.B
EX-99.A
EX-99.B
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

Additional securities registered pursuant to Section 12(b) of the Exchange Act:


		Name of Each Exchange
Title of Each Class		on Which Registered

Notes Linked to the Dow Jones Industrial Average ^SM due May 5, 2010		NYSE Alternext U.S.

ASTROS (ASseT Return Obligation Securities) Linked to the Nikkei 225(R) Index Due March 2, 2010		NYSE Alternext U.S.

ASTROS (ASseT Return Obligation Securities) Linked to the Dow Jones Global Titans 50 Index due March 3, 2010		NYSE Alternext U.S.

ASTROS (ASseT Return Obligation Securities) Linked to the Global Equity Basket (Series 2005-2) due May 5, 2010		NYSE Alternext U.S.

Exchangeable Notes Linked to the Common Stock of Three Oil Industry Companies due December 15, 2010		NYSE Alternext U.S.

Guarantee of 7.0% Capital Securities of Wells Fargo Capital IV		NYSE

Guarantee of 5.85% Trust Preferred Securities (TRUPS ^® ) of Wells Fargo Capital VII		NYSE

Guarantee of 5.625% Trust Preferred Securities of Wells Fargo Capital VIII		NYSE

Guarantee of 5.625% Trust Originated Preferred Securities (TOPrS ^SM ) of Wells Fargo Capital IX		NYSE

Guarantee of 6.25% Enhanced Trust Preferred Securities (Enhanced TruPS ^® ) of Wells Fargo Capital XI		NYSE

Guarantee of 7.875% Enhanced Trust Preferred Securities (Enhanced TruPS ^® ) of Wells Fargo Capital XII		NYSE

Guarantee of 7.70% Fixed-to-Floating Rate Normal Preferred Purchase Securities of Wells Fargo Capital XIII		NYSE

Remarketable 7.50% Junior Subordinated Notes due 2044		NYSE

Guarantee of 8.625% Enhanced Trust Preferred Securities (Enhanced TruPS ^® ) of Wells Fargo Capital XIV		NYSE

Guarantee of 9.75% Fixed-to-Floating Rate Normal Preferred Purchase Securities of Wells Fargo Capital XV		NYSE

Remarketable 9.25% Junior Subordinated Notes due 2044		NYSE

Guarantee of 5.80% Fixed-to-Floating Rate Normal Wachovia Income Trust Securities of Wachovia Capital Trust III		NYSE

Guarantee of 6.375% Trust Preferred Securities of Wachovia Capital Trust IV		NYSE

Guarantee of 6.375% Trust Preferred Securities of Wachovia Capital Trust IX		NYSE

Guarantee of 7.85% Trust Preferred Securities of Wachovia Capital Trust X		NYSE

PART I.

ITEM 1. BUSINESS

Wells Fargo & Company is a corporation organized under the laws of Delaware and a financial holding company and a bank holding company registered under the Bank Holding Company Act of 1956, as amended (BHC Act). Its principal business is to act as a holding company for its subsidiaries. References in this report to “the Parent” mean the holding company. References to “we,” “our,” “us” or “the Company” mean the holding company and its subsidiaries that are consolidated for financial reporting purposes.

We are the product of two significant mergers, the first occurring on November 2, 1998, between Norwest Corporation (Norwest) and the former Wells Fargo & Company, in which Norwest survived the merger and assumed the Wells Fargo & Company name, and the second occurring on December 31, 2008, between the Company and Wachovia Corporation (Wachovia) in which the Company survived the merger. We acquired Wachovia in a transaction valued at $12.5 billion to Wachovia common stockholders. Wachovia, based in Charlotte, North Carolina, was one of the nation’s largest diversified financial services companies, providing a broad range of retail banking and brokerage, asset and wealth management, and corporate and investment banking products and services to customers through 3,300 financial centers in 21 states from Connecticut to Florida and west to Texas and California, and nationwide retail brokerage, mortgage lending and auto finance businesses.

At December 31, 2009, we had assets of $1.2 trillion, loans of $783 billion, deposits of $824 billion and stockholders’ equity of $112 billion. Based on assets, we were the fourth largest bank holding company in the United States. At December 31, 2009, Wells Fargo Bank, N.A. was the Company’s principal subsidiary with assets of $609 billion, or 49% of the Company’s assets. As a result of our acquisition with Wachovia, we also owned Wachovia Bank, N.A., with assets of $510 billion at December 31, 2009.

At December 31, 2009, we had 267,300 active, full-time equivalent team members.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available free at www.wellsfargo.com (select “About Us,” then “Investor Relations – More,” then “More SEC Filings”) as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (SEC). They are also available free on the SEC’s website at www.sec.gov.

DESCRIPTION OF BUSINESS

General

We are a diversified financial services company. We provide retail, commercial and corporate banking services through banking stores located in 39 states and the District of Columbia:


Alabama	Iowa	North Dakota
Alaska	Kansas	Ohio
Arizona	Maryland	Oregon
Arkansas	Michigan	Pennsylvania
California	Minnesota	South Carolina
Colorado	Mississippi	South Dakota
Connecticut	Montana	Tennessee
Delaware	Nebraska	Texas
Florida	Nevada	Utah
Georgia	New Jersey	Virginia
Idaho	New Mexico	Washington
Illinois	New York	Wisconsin
Indiana	North Carolina	Wyoming

We provide other financial services through subsidiaries engaged in various businesses, principally: wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, insurance agency and brokerage services, computer and data processing services, trust services, investment advisory services, mortgage-backed securities servicing and venture capital investment.

We have three operating segments for management reporting purposes: Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement. The 2009 Annual Report to Stockholders includes financial information and descriptions of these operating segments.

Competition

The financial services industry is highly competitive. Our subsidiaries compete with financial services providers, such as banks, savings and loan associations, credit unions, finance companies, mortgage banking companies, insurance companies, and mutual fund companies. They also face increased competition from nonbank institutions such as brokerage houses, as well as from financial services subsidiaries of commercial and manufacturing companies. Many of these competitors enjoy fewer regulatory constraints and some may have lower cost structures.

Securities firms and insurance companies that elect to become financial holding companies may acquire banks and other financial institutions. Combinations of this type could significantly change the competitive environment in which we conduct business. The financial services industry is also likely to become more competitive as further technological advances enable more companies to provide financial services. These technological advances may diminish the

importance of depository institutions and other financial intermediaries in the transfer of funds between parties.

REGULATION AND SUPERVISION

We describe below, and in Notes 3 (Cash, Loan and Dividend Restrictions) and 25 (Regulatory and Agency Capital Requirements) to Financial Statements included in the 2009 Annual Report to Stockholders, the material elements of the regulatory framework applicable to us. The description is qualified in its entirety by reference to the full text of the statutes, regulations and policies that are described. Banking statutes, regulations and policies are continually under review by Congress and state legislatures and federal and state regulatory agencies, and a change in them, including changes in how they are interpreted or implemented, could have a material effect on our business. The regulatory framework applicable to bank holding companies is intended to protect depositors, federal deposit insurance funds, consumers and the banking system as a whole, and not necessarily investors in bank holding companies such as the Company.

Statutes, regulations and policies could restrict our ability to diversify into other areas of financial services, acquire depository institutions, and pay dividends on our capital stock. They may also require us to provide financial support to one or more of our subsidiary banks, maintain capital balances in excess of those desired by management, and pay higher deposit insurance premiums as a result of a general deterioration in the financial condition of depository institutions. See the “Risk Factors” section in the 2009 Annual Report to Stockholders for additional information.

General

Parent Bank Holding Company. As a bank holding company, the Parent is subject to regulation under the BHC Act and to inspection, examination and supervision by its primary regulator, the Board of Governors of the Federal Reserve System (Federal Reserve Board or FRB). The Parent is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, both as administered by the SEC. As a listed company on the New York Stock Exchange (NYSE), the Parent is subject to the rules of the NYSE for listed companies.

Subsidiary Banks. Our subsidiary national banks are subject to regulation and examination primarily by the Office of the Comptroller of the Currency (OCC) and also by the Federal Deposit Insurance Corporation (FDIC) and the FRB. The foreign branches and representative offices of our subsidiary national banks are subject to regulation and examination by their respective foreign financial regulators as well as by the OCC and the FRB. Our state-chartered banks are subject to primary federal regulation and examination by the FDIC and, in addition, are regulated and examined by their respective state banking departments.

Nonbank Subsidiaries. Many of our nonbank subsidiaries are also subject to regulation by the FRB and other applicable federal and state agencies. Our insurance subsidiaries are subject to regulation by applicable state insurance regulatory agencies, as well as the FRB. Our brokerage subsidiaries are regulated by the SEC, the Financial Industry Regulatory Authority (FINRA) and, in some cases, the Municipal Securities Rulemaking Board, and state securities regulators. Our other nonbank subsidiaries may be subject to the laws and regulations of the federal government and/or the various states as well as foreign countries in which they conduct business.

Parent Bank Holding Company Activities

“Financial in Nature” Requirement. We became a financial holding company effective March 13, 2000. We continue to maintain our status as a bank holding company for purposes of other FRB regulations. As a bank holding company that has elected to become a financial holding company pursuant to the BHC Act, we may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or incidental or complementary to activities that are financial in nature. “Financial in nature” activities include securities underwriting, dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; merchant banking; and activities that the FRB, in consultation with the Secretary of the U.S. Treasury, determines to be financial in nature or incidental to such financial activity. “Complimentary activities” are activities that the FRB determines upon application to be complementary to a financial activity and do not pose a safety and soundness risk.

FRB approval is not required for us to acquire a company (other than a bank holding company, bank or savings association) engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the FRB. Prior FRB approval is required before we may acquire the beneficial ownership or control of more than 5% of the voting shares or substantially all of the assets of a bank holding company, bank or savings association. Because we are a financial holding company, if any of our subsidiary banks receives a rating under the Community Reinvestment Act of 1977, as amended (CRA), of less than satisfactory, we will be prohibited, until the rating is raised to satisfactory or better, from engaging in new activities or acquiring companies other than bank holding companies, banks or savings associations, except that we could engage in new activities, or acquire companies engaged in activities, that are closely related to banking under the BHC Act. In addition, if the FRB finds that any of our subsidiary banks is not well capitalized or well managed, we would be required to enter into an agreement with the FRB to comply with all applicable capital and management requirements and which may contain additional limitations or conditions. Until corrected, we could be prohibited from engaging in any new activity or acquiring companies engaged in activities that are not closely related to banking under the BHC Act without prior FRB approval. If we fail to correct any such condition within a prescribed period, the FRB could order us to divest our banking subsidiaries or, in the alternative, to cease engaging in activities other than those closely related to banking under the BHC Act.

Interstate Banking . Under the Riegle-Neal Interstate Banking and Branching Act (Riegle-Neal Act), a bank holding company may acquire banks in states other than its home state, subject to any state requirement that the bank has been organized and operating for a minimum period of

time, not to exceed five years, and the requirement that the bank holding company not control, prior to or following the proposed acquisition, more than 10% of the total amount of deposits of insured depository institutions nationwide or, unless the acquisition is the bank holding company’s initial entry into the state, more than 30% of such deposits in the state (or such lesser or greater amount set by the state).

The Riegle-Neal Act also authorizes banks to merge across state lines, thereby creating interstate branches. Banks are also permitted to acquire and to establish new branches in other states where authorized under the laws of those states.

Regulatory Approval. In determining whether to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on competition, financial condition, and future prospects including current and projected capital ratios and levels, the competence, experience, and integrity of management and record of compliance with laws and regulations, the convenience and needs of the communities to be served, including the acquiring institution’s record of compliance under the CRA, and the effectiveness of the acquiring institution in combating money laundering activities.

Dividend Restrictions

The Parent is a legal entity separate and distinct from its subsidiary banks and other subsidiaries. A significant source of funds to pay dividends on our common and preferred stock and principal and interest on our debt is dividends from the Parent’s subsidiaries. Various federal and state statutory provisions and regulations limit the amount of dividends the Parent’s subsidiary banks and certain other subsidiaries may pay without regulatory approval. Federal bank regulatory agencies have the authority to prohibit the Parent’s subsidiary banks from engaging in unsafe or unsound practices in conducting their businesses. The payment of dividends, depending on the financial condition of the bank in question, could be deemed an unsafe or unsound practice. The ability of the Parent’s subsidiary banks to pay dividends in the future is currently, and could be further, influenced by bank regulatory policies and capital guidelines. For information about the restrictions applicable to the Parent’s subsidiary banks, see Note 3 (Cash, Loan and Dividend Restrictions) to Financial Statements included in the 2009 Annual Report to Stockholders.

The Parent’s Board reduced its quarterly common stock dividend to $0.05 per share in second quarter 2009 to retain current period earnings and build common equity. As a participant in the Supervisory Capital Assessment Program (SCAP) the Parent must consult with the Federal Reserve staff before increasing the level of dividends. The FRB published clarifying supervisory guidance in first quarter 2009, SR 09-4 Applying Supervisory Guidance and Regulations on the Payment of Dividends, Stock Redemptions, and Stock Repurchases at Bank Holding Companies, pertaining to the FRB’s criteria, assessment and approval process for reductions in capital. As with all 19 participants in the SCAP, under this supervisory letter, before raising our common dividend, the Parent must consult with the Federal Reserve staff and demonstrate that its actions are consistent with the existing supervisory guidance, including demonstrating that its internal capital assessment process is consistent with the complexity of its activities and risk profile.

Holding Company Structure

Transfer of Funds from Subsidiary Banks. The Parent’s subsidiary banks are subject to restrictions under federal law that limit the transfer of funds or other items of value from such subsidiaries to the Parent and its nonbank subsidiaries (including affiliates) in so-called “covered transactions.” In general, covered transactions include loans and other extensions of credit, investments and asset purchases, as well as certain other transactions involving the transfer of value from a subsidiary bank to an affiliate or for the benefit of an affiliate. Unless an exemption applies, covered transactions by a subsidiary bank with a single affiliate are limited to 10% of the subsidiary bank’s capital and surplus and, with respect to all covered transactions with affiliates in the aggregate, to 20% of the subsidiary bank’s capital and surplus. Also, loans and extensions of credit to affiliates generally are required to be secured by qualifying collateral. A bank’s transactions with its nonbank affiliates are also generally required to be on arm’s length terms.

Source of Strength. The FRB has a policy that a bank holding company is expected to act as a source of financial and managerial strength to each of its subsidiary banks and, under appropriate circumstances, to commit resources to support each such subsidiary bank. This support may be required at times when the bank holding company may not have the resources to provide the support.

The OCC may order an assessment of the Parent if the capital of one of its national bank subsidiaries were to become impaired. If the Parent failed to pay the assessment within three months, the OCC could order the sale of the Parent’s stock in the national bank to cover the deficiency.

Capital loans by the Parent to any of its subsidiary banks are subordinate in right of payment to deposits and certain other indebtedness of the subsidiary bank. In addition, in the event of the Parent’s bankruptcy, any commitment by the Parent to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

Depositor Preference. The Federal Deposit Insurance Act (FDI Act) provides that, in the event of the “liquidation or other resolution” of an insured depository institution, the claims of depositors of the institution (including the claims of the FDIC as subrogee of insured depositors) and certain claims for administrative expenses of the FDIC as a receiver will have priority over other general unsecured claims against the institution. If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, nondeposit creditors, including the Parent, with respect to any extensions of credit they have made to such insured depository institution.

Liability of Commonly Controlled Institutions. All of the Company’s subsidiary banks are insured by the FDIC. FDIC-insured depository institutions can be held liable for any loss incurred, or reasonably expected to be incurred, by the FDIC due to the default of an FDIC-insured depository institution controlled by the same bank holding company, and for any assistance provided by the FDIC to an FDIC-insured depository institution that is in danger of default and that is controlled by the same bank holding company. “Default” means generally the

appointment of a conservator or receiver. “In danger of default” means generally the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance.

Capital Requirements

We are subject to regulatory capital requirements and guidelines imposed by the FRB, which are substantially similar to those imposed by the OCC and the FDIC on depository institutions within their jurisdictions. Under these guidelines, a depository institution’s or a holding company’s assets and certain specified off-balance sheet commitments and obligations are assigned to various risk categories. A depository institution’s or holding company’s capital, in turn, is classified into one of three tiers. Tier 1 capital includes common equity, noncumulative perpetual preferred stock, a limited amount of cumulative perpetual preferred stock at the holding company level, and minority interests in equity accounts of consolidated subsidiaries, less goodwill and certain other deductions. Tier 2 capital includes, among other things, perpetual preferred stock not qualified as Tier 1 capital, subordinated debt, and allowances for loan and lease losses, subject to certain limitations. Tier 3 capital includes qualifying unsecured subordinated debt. At least one-half of a bank’s total capital must qualify as Tier 1 capital.

National banks and bank holding companies currently are required to maintain Tier 1 capital and the sum of Tier 1 and Tier 2 capital equal to at least 4% and 8%, respectively, of their total risk-weighted assets (including certain off-balance sheet items, such as standby letters of credit). The risk-based capital rules state that the capital requirements are minimum standards based primarily on broad credit-risk considerations and do not take into account the other types of risk a banking organization may be exposed to (e.g., interest rate, market, liquidity and operational risks). The FRB may, therefore, set higher capital requirements for categories of banks (e.g. systematically important firms), or for an individual bank as situations warrant. For example, holding companies experiencing internal growth or making acquisitions are expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. For these reasons, we are expected to operate with a capital position well above the minimum ratios, with the amount of capital held to be determined by us though an internal capital assessment that corresponds to our broad risk exposure.

The regulatory capital rules state that voting common stockholders’ equity should be the dominant element within Tier 1 capital and that banking organizations should avoid overreliance on non-common equity elements. During 2009, in conjunction with the FRB’s SCAP stress test process, the ratio of Tier 1 common equity to risk weighted assets became significant as a measurement of the predominance of common equity in Tier 1 capital. There is currently no mandated minimum ratio.

In June 2004, the Basel Committee on Bank Supervision published new international guidelines for determining regulatory capital that are designed to be more risk sensitive than the existing framework and to promote enhanced risk management practices among large, internationally active banking organizations. The United States federal bank regulatory agencies each approved a final rule similar to the international guidelines in November 2007. This new advance capital adequacy framework is known as “Basel II,” and is intended to more closely align regulatory

capital requirements with actual risks. Basel II incorporates three pillars that address (a) capital adequacy, (b) supervisory review, which relates to the computation of capital and internal assessment processes, and (c) market discipline, through increased disclosure requirements. Embodied within these pillars are aspects of risk strategy, measurement and management that relate to credit risk, market risk, and operational risk. Banking organizations are required to enhance the measurement and management of those risks through the use of advanced approaches for calculating risk-based capital requirements. Basel II includes safeguards that include a requirement that banking organizations conduct a parallel run over a period of four consecutive calendar quarters for measuring regulatory capital under the new regulatory capital rules and the existing general risk-based capital rules before solely operating under the Basel II framework; a requirement that an institution satisfactorily complete a series of transitional periods before operating under Basel II without floors; and a commitment by the federal bank regulatory agencies to conduct ongoing analysis of the framework to ensure Basel II is working as intended. Following a successful parallel run period, a banking organization would have to progress through three transitional periods (each lasting at least one year), during which there would be floors on potential declines in risk-based capital requirements as calculated under the current rules. Those transitional floors provide for maximum cumulative reductions of required risk-based capital of 5% during the first year of implementation, 10% in the second year and 15% in the third year. A banking organization will need approval from its primary Federal regulator to move into each of the transitional floor periods, and at the end of the third transitional floor period to move to full implementation. Wells Fargo is implementing the advanced approach under Basel II, and has established a project management infrastructure to implement the regulations.

In addition, the federal bank regulatory agencies have established minimum leverage (Tier 1 capital to adjusted average total assets) guidelines for banks within their regulatory jurisdiction. These guidelines provide for a minimum leverage ratio of 3% for banks that meet certain specified criteria, including excellent asset quality, high liquidity, low interest rate exposure and the highest regulatory rating. Institutions not meeting these criteria are required to maintain a leverage ratio of 4%. Our Tier 1 and total risk-based capital ratios and leverage ratio as of December 31, 2009, are included in Note 25 (Regulatory and Agency Capital Requirements) to Financial Statements included in the 2009 Annual Report to Stockholders. At December 31, 2009, the Company and each of its subsidiary banks were “well capitalized” under the applicable regulatory capital adequacy guidelines.

In addition, in 2009, the FRB conducted a test under the SCAP to forecast capital levels for financial institutions in an adverse economic scenario. Following the results of that stress test, the FRB required the Company to generate a $13.7 billion regulatory capital buffer by November 9, 2009. The Company exceeded this requirement through an $8.6 billion (gross proceeds) common stock offering, strong revenue performance, realization of deferred tax assets, and other internally generated sources, including core deposit intangible amortization.

From time to time, the FRB and the Federal Financial Institutions Examination Council (FFIEC) propose changes and amendments to, and issue interpretations of, risk-based capital guidelines and related reporting instructions. In addition, the FRB has closely monitored capital levels of the institutions it supervises during the ongoing financial disruption, and may require such

institutions to modify capital levels based on FRB determinations. Such determinations, proposals or interpretations could, if implemented in the future, affect our reported capital ratios and net risk-adjusted assets.

As an additional means to identify problems in the financial management of depository institutions, the FDI Act requires federal bank regulatory agencies to establish certain non-capital safety and soundness standards for institutions for which they are the primary federal regulator. The standards relate generally to operations and management, asset quality, interest rate exposure, executive compensation and risk management. The agencies are authorized to take action against institutions that fail to meet such standards.

The FDI Act requires federal bank regulatory agencies to take “prompt corrective action” with respect to FDIC-insured depository institutions that do not meet minimum capital requirements. A depository institution’s treatment for purposes of the prompt corrective action provisions will depend upon how its capital levels compare to various capital measures and certain other factors, as established by regulation.

Deposit Insurance Assessments

Our bank subsidiaries, including Wells Fargo Bank, N.A. and Wachovia Bank, N.A., are members of the Deposit Insurance Fund (DIF) maintained by the FDIC. Through the DIF, the FDIC insures the deposits of our banks up to prescribed limits for each depositor. The DIF was formed March 31, 2006, upon the merger of the Bank Insurance Fund and the Savings Insurance Fund in accordance with the Federal Deposit Insurance Reform Act of 2005 (the Act). The Act established a range of 1.15% to 1.50% within which the FDIC board of directors may set the Designated Reserve Ratio (reserve ratio or DRR). The current target DRR is 1.25%. However, the Act has eliminated restrictions on premium rates based on the DRR and granted the FDIC Board the discretion to price deposit insurance according to risk for all insured institutions regardless of the level of the reserve ratio.

To maintain the DIF, member institutions are assessed an insurance premium based on their deposits and their institutional risk category. The FDIC determines an institution’s risk category by combining its supervisory ratings with its financial ratios and other risk measures. For large institutions (assets of $10 billion or more), the FDIC generally determines risk by combining supervisory ratings, the institution’s long-term debt issuer ratings and, beginning April 1, 2009, certain financial ratios.

Recent depository institutional failures have resulted in a decline in the DIF reserve ratio to below 1.15%. Under the Act, in October 2008 the FDIC Board adopted a Restoration Plan to return the DIF to its statutorily mandated minimum reserve ratio of 1.15% within five years. In February 2009, given the extraordinary circumstances facing the banking industry, the Board amended its Restoration Plan to allow the Fund seven years to return to the ratio of 1.15%. In May 2009, Congress amended the statute governing establishment of the Plan to allow the FDIC up to eight years to return the DIF reserve ratio back to 1.15%, absent extraordinary circumstances.

In 2009, the FDIC undertook several measures in an effort to replenish the DIF. On February 27, 2009, the FDIC adopted a final rule modifying the risk-based assessment system and set new initial base assessment rates beginning April 1, 2009. Rates range from a minimum of 12 cents per $100 of domestic deposits for well-managed, well-capitalized institutions with the highest credit ratings, to 45 cents per $100 for those institutions posing the most risk to the DIF. Risk-based adjustments to the initial assessment rate may lower the rate to 7 cents per $100 of domestic deposits for well-managed, well-capitalized banks with the highest credit ratings or raise the rate to 77.5 cents per $100 for depository institutions posing the most risk to the DIF.

On May 22, 2009, the FDIC adopted a final rule imposing a 5 basis point special assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009. The amount of the special assessment for any institution was limited to 10 basis points times the institution’s assessment base for the second quarter 2009. On September 29, 2009, the FDIC increased the annual assessment rates uniformly by 3 basis points beginning in 2011. On November 17, 2009, the FDIC amended its regulations to require insured institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009, and for all of 2010, 2011, and 2012. For purposes of determining the prepayment, the FDIC used the institution’s assessment rate in effect on September 30, 2009. The combined prepayment amount for our banking subsidiaries was $3.9 billion.

On January 12, 2010, the FDIC issued an advance notice of proposed rulemaking seeking comment on ways the FDIC’s risk-based assessment system could be changed to account for the risks posed by certain employee compensation programs. The FDIC is concerned with adjusting risk-based assessment rates to adequately compensate the DIF for risks inherent in the design of certain compensation programs. Any change to the risk-based assessment system would be intended to improve the way risk is differentiated among institutions rather than generate revenue for the DIF.

All FDIC-insured depository institutions must also pay an annual assessment towards interest payments on bonds issued by the Financing Corporation, a federal corporation chartered under the authority of the Federal Housing Finance Board. The bonds (commonly referred to as FICO bonds) were issued to capitalize the Federal Savings and Loan Insurance Corporation. FDIC-insured depository institutions paid approximately 1.02 to 1.14 cents per $100 of assessable deposits in 2009. The FDIC established the FICO assessment rate effective for first quarter 2010 at 1.06 cents annually per $100 of assessable deposits.

In 2009, under the FDIC’s Temporary Liquidity Guarantee Program, participating institutions paid a premium of 10 cents per $100 to fully insure domestic noninterest-bearing transaction accounts. The assessment was paid on account balances in excess of the insurance limits. Our bank subsidiaries will not participate in this program beginning January 1, 2010.

The FDIC may terminate a depository institution’s deposit insurance upon a finding that the institution’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition enacted or imposed by the institution’s regulatory agency. The termination of deposit insurance for one or more of our bank subsidiaries could have a material adverse effect on our earnings, depending on the collective size of the particular banks involved.

Fiscal and Monetary Policies

Our business and earnings are affected significantly by the fiscal and monetary policies of the federal government and its agencies. We are particularly affected by the policies of the FRB, which regulates the supply of money and credit in the United States. Among the instruments of monetary policy available to the FRB are (a) conducting open market operations in United States government securities, (b) changing the discount rates of borrowings of depository institutions, (c) imposing or changing reserve requirements against depository institutions’ deposits, and (d) imposing or changing reserve requirements against certain borrowings by banks and their affiliates. These methods are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. The policies of the FRB may have a material effect on our business, results of operations and financial condition.

Privacy Provisions of the Gramm-Leach-Bliley Act and Restrictions on Cross-Selling

Federal banking regulators, as required under the Gramm-Leach-Bliley Act (the GLB Act), have adopted rules limiting the ability of banks and other financial institutions to disclose nonpublic information about consumers to nonaffiliated third parties. The rules require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to nonaffiliated third parties. The privacy provisions of the GLB Act affect how consumer information is transmitted through diversified financial services companies and conveyed to outside vendors.

Federal financial regulators have issued regulations under the Fair and Accurate Credit Transactions Act, which have the effect of increasing the length of the waiting period, after privacy disclosures are provided to new customers, before information can be shared among different affiliated companies for the purpose of cross-selling products and services between those affiliated companies. This may result in certain cross-sell programs being less effective than they have been in the past.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) implemented a broad range of corporate governance and accounting measures to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies, and to protect investors by improving the accuracy and reliability of disclosures under federal securities laws. We are subject to Sarbanes-Oxley because we are required to file periodic reports with the SEC under the Securities and Exchange Act of 1934. Among other things, Sarbanes-Oxley and/or its implementing regulations have established new membership requirements and additional responsibilities for our audit committee, imposed restrictions on the relationship between us and our outside auditors (including restrictions on the types of non-audit services our auditors may provide to us), imposed additional responsibilities for our external financial statements on our chief executive officer and chief financial officer, expanded the disclosure requirements for our corporate insiders, required our management to evaluate our disclosure controls and procedures and our internal control over financial reporting, and required our auditors to issue a report on our internal control over financial reporting. The NYSE has imposed a number of new corporate governance requirements as well.

Patriot Act

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Patriot Act) is intended to strengthen the ability of U.S. law enforcement agencies and intelligence communities to work together to combat terrorism on a variety of fronts. The Patriot Act has significant implications for depository institutions, brokers, dealers and other businesses involved in the transfer of money. The Patriot Act requires us to implement new or revised policies and procedures relating to anti-money laundering, compliance, suspicious activities, and currency transaction reporting and due diligence on customers. The Patriot Act also requires federal bank regulators to evaluate the effectiveness of an applicant in combating money laundering in determining whether to approve a proposed bank acquisition.

U.S. Treasury’s TARP Capital Purchase Program

On October 28, 2008, we issued preferred stock and a warrant to purchase our common stock to the U.S. Treasury as a participant in the TARP Capital Purchase Program. On December 23, 2009, we redeemed all of the preferred stock issued to the U.S. Treasury and repaid the entire $25 billion investment plus accrued dividends. The U.S. Treasury continues to hold the warrant. During the period that the U.S. Treasury owned the preferred stock, we were subject to numerous additional regulations, including restrictions on our ability to increase our common stock dividend, limitations on the compensation arrangements for our senior executive officers and the next 20 most highly compensated employees, and additional corporate governance standards. Following the redemption of the preferred stock, we are no longer subject to these regulations other than certain reporting and certification obligations related to activities during 2009.

FDIC Temporary Liquidity Guarantee Program

We participated in the FDIC’s Temporary Liquidity Guarantee Program (TLGP). The TLGP had two components: the Debt Guarantee Program, which provided a temporary guarantee of newly issued senior unsecured debt issued by eligible entities; and the Transaction Account Guarantee Program, which provided a temporary unlimited guarantee of funds in noninterest-bearing transaction accounts at FDIC-insured institutions. The Debt Guarantee Program expired on October 31, 2009, and Wells Fargo opted out of the Transaction Account Guarantee Program effective December 31, 2009.

Future Legislation

In light of current conditions in the U.S. and global financial markets and the U.S. and global economy, legislators, the presidential administration and regulators have increased their focus on the regulation of the financial services industry. Proposals that could substantially intensify the regulation of the financial services industry have been and are expected to continue to be introduced in the U.S. Congress, in state legislatures and from applicable regulatory authorities. These proposals may change banking statutes and regulation and our operating environment in substantial and unpredictable ways. If enacted, these proposals could increase or decrease our cost of doing business, impact our compensation structure, 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 these proposals will be enacted and, if enacted, the effect that it, or any implementing regulations, would have on our business, results of operations or financial condition.

ADDITIONAL INFORMATION

Additional information in response to this Item 1 can be found in the 2009 Annual Report to Stockholders under “Financial Review” on pages 34-87 and under “Financial Statements” on pages 90-186. That information is incorporated into this report by reference.

ITEM 1A. RISK FACTORS

Information in response to this Item 1A can be found in this report on pages 2-13 and in the 2009 Annual Report to Stockholders under “Financial Review – Risk Factors” on pages 81-87. That information is incorporated into this report by reference.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

We own our corporate headquarters building in San Francisco, California. We also own administrative facilities in Anchorage, Alaska; Chandler, Phoenix, and Tempe, Arizona; El Monte and San Francisco, California; Minneapolis and Shoreview, Minnesota; Billings, Montana; Omaha, Nebraska; Albuquerque, New Mexico; Portland, Oregon; Sioux Falls, South Dakota; and Salt Lake City, Utah. In addition, we lease office space for various administrative departments in major locations in Arizona, California, Colorado, Minnesota, Nevada, Oregon, Texas and Utah. As a result of the acquisition of Wachovia, we lease a multi-office building complex in Charlotte, North Carolina, and are completing a high rise complex in close proximity. We also own administrative facilities in Irvine, California; St. Louis, Missouri; Charlotte and Raleigh, North Carolina; Summit, New Jersey; and Glen Allen, Virginia. In addition, we lease office space for various administrative departments in major locations in California, Florida, Georgia, Massachusetts, Missouri, New Jersey, New York, North Carolina, Pennsylvania, Texas, and Virginia.

As of December 31, 2009, we provided banking, insurance, investments, mortgage and consumer finance from more than 10,000 stores under various types of ownership and leasehold agreements. We own the Wells Fargo Home Mortgage (Home Mortgage) headquarters in Des Moines, Iowa, and operations/servicing centers in Springfield, Illinois; West Des Moines, Iowa; and Minneapolis, Minnesota. We lease administrative space for Home Mortgage in Tempe, Arizona; San Bernardino, California; Des Moines, Iowa; Frederick, Maryland; Minneapolis, Minnesota; St. Louis, Missouri; Fort Mill, South Carolina; Milwaukee, Wisconsin; and all mortgage production offices nationwide. We own the Wells Fargo Financial, Inc. (WFFI) headquarters and four administrative buildings in Des Moines, Iowa, and an operations center in

Sioux Falls, South Dakota. We lease administrative space for WFFI in Tempe, Arizona; Lake Mary, Florida; Des Moines, Iowa; Kansas City, Kansas; Minneapolis, Minnesota; Mississauga, Ontario; Philadelphia, Pennsylvania; San Juan, Puerto Rico; Aberdeen, South Dakota; Vancouver, Washington; and all store locations. As a result of the acquisition of Wachovia, we own the Wells Fargo Advisors headquarters in St. Louis, Missouri, and operations/servicing centers in Birmingham and Homewood, Alabama; San Leandro, California; St. Louis, Missouri; Charlotte and Winston-Salem, North Carolina; and San Antonio, Texas. We also lease operations/servicing centers in Oakland, California; Jacksonville and Orlando, Florida; Atlanta, Georgia; Winston-Salem, North Carolina; Salem, Oregon; Philadelphia, Pennsylvania; and Roanoke, Virginia.

We are also a joint venture partner in an office building in downtown Minneapolis, Minnesota.

ADDITIONAL INFORMATION

Additional information in response to this Item 2 can be found in the 2009 Annual Report to Stockholders under “Financial Statements – Notes to Financial Statements – Note 7 (Premises, Equipment, Lease Commitments and Other Assets)” on page 123. That information is incorporated into this report by reference.

ITEM 3. LEGAL PROCEEDINGS

Information in response to this Item 3 can be found in the 2009 Annual Report to Stockholders under “Financial Statements – Notes to Financial Statements – Note 14 (Guarantees and Legal Actions)” on pages 141-146. That information is incorporated into this report by reference.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

EXECUTIVE OFFICERS OF THE RESIGSTRANT

Information relating to the Company’s executive officers is included in Item 10 of this report.

PART II


ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

The Company’s common stock is listed on the NYSE (symbol “WFC”). The Quarterly Financial Data table on page 187 of the 2009 Annual Report to Stockholders provides the quarterly prices of, and quarterly dividends paid on, the Company’s common stock for the two-year period ended December 31, 2009, and is incorporated herein by reference. Prices shown represent the daily high and low, and the quarter-end sale prices of the Company’s common stock as reported on the NYSE Composite Transaction Reporting System for the periods indicated. At January 29, 2010, there were 207,047 holders of record of the Company’s common stock.

DIVIDENDS

The dividend restrictions discussions on page 5 of this report and in the 2009 Annual Report to Stockholders under “Financial Statements – Notes to Financial Statements – Note 3 (Cash, Loan and Dividend Restrictions)” on page 111 are incorporated into this report by reference.

REPURCHASES OF COMMON STOCK

In September 2008, our Board of Directors authorized the repurchase of 25 million shares of our common stock. The authorization covered shares repurchased to meet team member benefit plan requirements. The Company maintains a variety of retirement plans for its team members and typically is a net issuer of shares of common stock to these plans. From time to time, it also purchases shares of common stock from these plans to accommodate team member preferences. Share repurchases are subtracted from the Company’s repurchase authority without offset for share issuances. Shares may be repurchased as part of employee stock option exercises, from the different benefit plans or in the open market.

The amount and timing of stock repurchases will be based on various factors, such as management’s assessment of our capital structure and liquidity, the market price of our common stock compared to management’s assessment of the stock’s underlying value, and applicable regulatory, legal and accounting factors. In addition, repurchases in connection with employees surrendering shares to exercise employee stock options will depend upon the amount and timing of those option exercises. See the “Capital Management” section in the 2009 Annual Report to Stockholders for additional information about our share repurchases.

The following table shows the Company’s repurchases of its common stock for each calendar month in the quarter ended December 31, 2009.



					Maximum number of
	Total number				shares that may yet
	of shares		Weighted-average		be repurchased under
Calendar month	repurchased (1)		price paid per share		the authorizations

October		466,713		$ 30.18		10,536,410
November		43,298		28.27		10,493,112
December		4,410,407		28.03		6,082,705

Total		4,920,418


(1)		All shares were repurchased under the authorization to repurchase 25 million shares of common stock approved by the Board of Directors and publicly announced on September 23, 2008. Unless modified or revoked by the Board, this authorization does not expire except upon completion of repurchases totaling the amount authorized for repurchase. Repurchase information based on trade date, not settlement date. Pursuant to the Company’s employee stock option plans, participants may exercise stock options by surrendering shares of Company common stock the participants already own as payment of the option exercise price. Repurchases in the table include shares so surrendered which are valued based on the closing price on the business day they were surrendered.


ITEM 6.		SELECTED FINANCIAL DATA

Information in response to this Item 6 can be found in the 2009 Annual Report to Stockholders under “Financial Review” in Table 1 on page 35. That information is incorporated into this report by reference.


ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information in response to this Item 7 can be found in the 2009 Annual Report to Stockholders under “Financial Review” on pages 34-87. That information is incorporated into this report by reference.


ITEM 7A.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information in response to this Item 7A can be found in the 2009 Annual Report to Stockholders under “Financial Review – Risk Management – Asset/Liability Management” on pages 66-70. That information is incorporated into this report by reference.


ITEM 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information in response to this Item 8 can be found in the 2009 Annual Report to Stockholders under “Financial Statements” on pages 90-186 and under “Quarterly Financial Data” on page 187. That information is incorporated into this report by reference.


ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.


ITEM 9A.		CONTROLS AND PROCEDURES

Information in response to this Item 9A can be found in the 2009 Annual Report to Stockholders under “Controls and Procedures” on pages 88-89. That information is incorporated into this report by reference.


ITEM 9B.		OTHER INFORMATION

Not applicable.

PART III


ITEM 10.		DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

EXECUTIVE OFFICERS OF THE REGISTRANT

Howard I. Atkins (age 59)

Senior Executive Vice President and Chief Financial Officer since August 2005;

Executive Vice President and Chief Financial Officer from August 2001 to August 2005.

Mr. Atkins has served with the Company for 8 years.

Patricia R. Callahan (age 56)

Executive Vice President (Office of Transition) since January 2009;

Executive Vice President (Social Responsibility Group) from June 2008 to December 2008;

Executive Vice President (Compliance and Risk) from June 2005 to September 2007;

Executive Vice President (Human Resources) from November 1998 to June 2005.

Ms. Callahan has served with the Company or its predecessors for 32 years.

David M. Carroll (age 52)

Senior Executive Vice President (Wealth Management, Brokerage and Retirement) since January 2009;

Senior Executive Vice President of Wachovia Corporation from September 2001 to January 2009.

Mr. Carroll has served with the Company or its predecessors for 28 years.

David A. Hoyt (age 54)

Senior Executive Vice President (Wholesale Banking) since August 2005;

Group Executive Vice President (Wholesale Banking) from November 1998 to August 2005.

Mr. Hoyt has served with the Company or its predecessors for 28 years.

Richard D. Levy (age 52)

Executive Vice President and Controller since February 2007;

Senior Vice President and Controller from September 2002 to February 2007.

Mr. Levy has served with the Company for 7 years.

Michael J. Loughlin (age 54)

Executive Vice President and Chief Credit and Risk Officer since April 2006;

Deputy Chief Credit Officer from January 2006 to April 2006;

Executive Vice President of Wells Fargo Bank, N.A. from May 2000 to April 2006.

Mr. Loughlin has served with the Company or its predecessors for 28 years.

Avid Modjtabai (age 48)

Executive Vice President and Chief Information Officer since April 2007;

Executive Vice President (Human Resources) from June 2005 to April 2007;

Executive Vice President (Internet Services) of Wells Fargo Bank, N.A. from March 2001 to June 2005.

Ms. Modjtabai has served with the Company or its predecessors for 16 years.

Mark C. Oman (age 55)

Senior Executive Vice President (Home and Consumer Finance) since August 2005;

Group Executive Vice President (Home and Consumer Finance) from September 2002 to August 2005.

Mr. Oman has served with the Company or its predecessors for 30 years.

Kevin A. Rhein (age 56)

Executive Vice President (Card Services and Consumer Lending) since January 2009;

Executive Vice President of Wells Fargo Bank, N.A. since February 2004.

Mr. Rhein has served with the Company or its predecessors for 31 years.

James M. Strother (age 58)

Executive Vice President and General Counsel since January 2004.

Mr. Strother has served with the Company or its predecessors for 23 years.

John G. Stumpf (age 56)

Chairman, President and Chief Executive Officer since January 2010;

President and Chief Executive Officer from June 2007 to January 2010;

President and Chief Operating Officer from August 2005 to June 2007;

Group Executive Vice President (Community Banking) from July 2002 to August 2005.

Mr. Stumpf has served with the Company or its predecessors for 28 years.

Carrie L. Tolstedt (age 50)

Senior Executive Vice President (Community Banking) since June 2007;

Group Executive Vice President (Regional Banking) from July 2002 to June 2007.

Ms. Tolstedt has served with the Company or its predecessors for 20 years.

Julie M. White (age 55)

Executive Vice President (Human Resources) from June 2007 to January 2010;

Executive Vice President (Human Resources – Home and Consumer Finance) from March 1998 to June 2007.

Ms. White served with the Company or its predecessors for 23 years and, following her retirement in January 2010, is no longer an executive officer.

There is no family relationship between any of the Company’s executive officers or directors. All executive officers serve at the pleasure of the Board of Directors.

AUDIT COMMITTEE INFORMATION

The Audit and Examination Committee is a standing audit committee of the Board of Directors established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Committee has seven members: John D. Baker II, Lloyd H. Dean, Enrique Hernandez, Jr., Cynthia H. Milligan, Nicholas G. Moore, Philip J. Quigley and Susan G. Swenson. Each member is independent, as independence for audit committee members is defined by NYSE rules. The Board of Directors has determined, in its business judgment, that each member of the Audit and Examination Committee is financially literate, as required by NYSE rules, and that each qualifies as an “audit committee financial expert” as defined by SEC regulations.

CODE OF ETHICS AND BUSINESS CONDUCT

The Company’s Code of Ethics and Business Conduct for team members (including executive officers), Director Code of Ethics, the Company’s corporate governance guidelines, and the charters for the Audit and Examination, Governance and Nominating, Human Resources, Credit, and Finance Committees are available at www.wellsfargo.com (select “About Us,” then “Corporate Governance”). This information is also available in print to any stockholder upon written request to the Office of the Secretary, Wells Fargo & Company, MAC N9305-173, Wells Fargo Center, Sixth and Marquette, Minneapolis, Minnesota 55479.

ADDITIONAL INFORMATION

Additional information in response to this Item 10 can be found in the Company’s 2010 Proxy Statement under “Ownership of Our Common Stock – Section 16(a) Beneficial Ownership Reporting Compliance” and “Item 1 – Election of Directors – Director Nominees for Election” and “–Other Matters Relating to Directors.” That information is incorporated into this report by reference.


ITEM 11.		EXECUTIVE COMPENSATION

Information in response to this Item 11 can be found in the Company’s 2010 Proxy Statement under “Item 1– Election of Directors – Compensation Committee Interlocks and Insider Participation” and “–Director Compensation,” under “Executive Compensation” and under “Information About Related Persons – Related Person Transactions.” That information is incorporated into this report by reference.


ITEM 12.		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information in response to this Item 12 can be found in the Company’s 2010 Proxy Statement under “Ownership of Our Common Stock” and under “Equity Compensation Plan Information.” That information is incorporated into this report by reference.


ITEM 13.		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information in response to this Item 13 can be found in the Company’s 2010 Proxy Statement under “Corporate Governance – Director Independence” and under “Information About Related Persons.” That information is incorporated into this report by reference.


ITEM 14.		PRINCIPAL ACCOUNTING FEES AND SERVICES

Information in response to this Item 14 can be found in the Company’s 2010 Proxy Statement under “Item 4 – Appointment of Independent Auditors – KPMG Fees” and “–Audit and Examination Committee Pre-Approval Policies and Procedures.” That information is incorporated into this report by reference.

PART IV


ITEM 15.		EXHIBITS, FINANCIAL STATEMENT SCHEDULES

1. FINANCIAL STATEMENTS

The Company’s consolidated financial statements, including the notes thereto, and the report of the independent registered public accounting firm thereon, are set forth on pages 90 through 186 of the 2009 Annual Report to Stockholders, and are incorporated into this report by reference.

2. FINANCIAL STATEMENT SCHEDULES

All financial statement schedules for the Company have been included in the consolidated financial statements or the related footnotes, or are either inapplicable or not required.

3. EXHIBITS

A list of exhibits to this Form 10-K is set forth on the Exhibit Index immediately preceding such exhibits and is incorporated into this report by reference.

Stockholders may obtain a copy of any of the following exhibits, upon payment of a reasonable fee, by writing to Wells Fargo & Company, Office of the Secretary, Wells Fargo Center, N9305-173, Sixth and Marquette, Minneapolis, Minnesota 55479.

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. The former Wachovia Corporation filed documents under SEC file number 001-10000.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on February 26, 2010.


	WELLS FARGO & COMPANY
	By:	/s/ JOHN G. STUMPF
		John G. Stumpf
		Chairman, President and Chief Executive Officer (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


	By:	/s/ HOWARD I. ATKINS
		Howard I. Atkins
		Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer) February 26, 2010

	By:	/s/ RICHARD D. LEVY
		Richard D. Levy
		Executive Vice President and Controller (Principal Accounting Officer) February 26, 2010

The Directors of Wells Fargo & Company listed below have duly executed powers of attorney empowering Nicholas G. Moore to sign this document on their behalf.


John D. Baker II		Nicholas G. Moore
John S. Chen		Philip J. Quigley
Lloyd H. Dean		Donald B. Rice
Susan E. Engel		Judith M. Runstad
Enrique Hernandez, Jr.		Stephen W. Sanger
Donald M. James		Robert K. Steel
Richard D. McCormick		John G. Stumpf
Mackey J. McDonald		Susan G. Swenson
Cynthia H. Milligan



	By:	/s/ NICHOLAS G. MOORE
		Nicholas G. Moore
		Director and Attorney-in-fact February 26, 2010

EXHIBIT INDEX


Exhibit
Number	Description	Location

3(a)	Restated Certificate of Incorporation.	Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed September 28, 2006.

3(b)	Certificate of Designations for the Company’s 2007 ESOP Cumulative Convertible Preferred Stock.	Incorporated by reference to Exhibit 3(a) to the Company’s Current Report on Form 8-K filed March 19, 2007.

3(c)	Certificate Eliminating the Certificate of Designations for the Company’s 1997 ESOP Cumulative Convertible Preferred Stock.	Incorporated by reference to Exhibit 3(b) to the Company’s Current Report on Form 8-K filed March 19, 2007.

3(d)	Certificate of Designations for the Company’s 2008 ESOP Cumulative Convertible Preferred Stock.	Incorporated by reference to Exhibit 3(a) to the Company’s Current Report on Form 8-K filed March 18, 2008.

3(e)	Certificate Eliminating the Certificate of Designations for the Company’s 1998 ESOP Cumulative Convertible Preferred Stock.	Incorporated by reference to Exhibit 3(b) to the Company’s Current Report on Form 8-K filed March 18, 2008.

3(f)	Certificate Eliminating the Certificate of Designations for the Company’s 1999 ESOP Cumulative Convertible Preferred Stock.	Incorporated by reference to Exhibit 3(a) to the Company’s Current Report on Form 8-K filed April 13, 2009.

3(g)	Certificate of Designations for the Company’s Non-Cumulative Perpetual Preferred Stock, Series A.	Incorporated by reference to Exhibit 4.8 to the Company’s Current Report on Form 8-K filed May 19, 2008.

3(h)	Certificate of Designations for the Company’s Non-Cumulative Perpetual Preferred Stock, Series B.	Incorporated by reference to Exhibit 4.8 to the Company’s Current Report on Form 8-K filed September 10, 2008.

3(i)	Certificate of Designations for the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series D.	Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed October 30, 2008.

3(j)	Certificate of Designations for the Company’s Dividend Equalization Preferred Shares.	Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed December 30, 2008.

3(k)	Certificate of Designations for the Company’s Class A Preferred Stock, Series G.	Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed December 30, 2008.

3(l)	Certificate of Designations for the Company’s Class A Preferred Stock, Series H.	Incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed December 30, 2008.

3(m)	Certificate of Designations for the Company’s Class A Preferred Stock, Series I.	Incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed December 30, 2008.

3(n)	Certificate of Designations for the Company’s 8.00% Non-Cumulative Perpetual Class A Preferred Stock, Series J.	Incorporated by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed December 30, 2008.


Exhibit
Number	Description	Location

3(o)	Certificate of Designations for the Company’s Fixed-to-Floating Rate Non-Cumulative Perpetual Class A Preferred Stock, Series K.	Incorporated by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K filed December 30, 2008.

3(p)	Certificate of Designations for the Company’s 7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock, Series L.	Incorporated by reference to Exhibit 4.7 to the Company’s Current Report on Form 8-K filed December 30, 2008.

3(q)	By-Laws.	Incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K filed December 4, 2006.

4(a)	See Exhibits 3(a) through 3(q).

4(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) ^*	Long-Term Incentive Compensation Plan.	Incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.

	Form of Performance Share Award Agreement.	Filed herewith.

	Form of Retention Performance Share Award Agreement for grants to John G. Stumpf, Howard I. Atkins, David A. Hoyt and Mark C. Oman on December 24, 2009.	Incorporated by reference to Exhibit 10(a) to the Company’s Current Report on Form 8-K filed December 31, 2009.

	Forms of Award Agreement for grants of stock awards to John G. Stumpf, Howard I. Atkins, David A. Hoyt and Mark C. Oman.	Incorporated by reference to Exhibits 10(a), 10(b), 10(c) and 10(d) to the Company’s Current Report on Form 8-K filed August 6, 2009.

	Form of Restricted Share Rights Award Agreement.	Filed herewith.

	Forms of Award Agreement for grants of restricted share rights:

	For grant to David M. Carroll on December 24, 2009;	Filed herewith.

	For grant to John G. Stumpf on August 3, 2009; and	Incorporated by reference to Exhibit 10(e) to the Company’s Current Report on Form 8-K filed August 6, 2009.

	For grants to Howard I. Atkins, David A. Hoyt and Mark C. Oman on February 24, 2009.	Incorporated by reference to Exhibit 10(a) to the Company’s Current Report on Form 8-K filed February 27, 2009.

	Form of Non-Qualified Stock Option Agreement.	Filed herewith.

10(b)*	Long-Term Incentive Plan.	Incorporated by reference to Exhibit A to the former Wells Fargo’s Proxy Statement filed March 14, 1994.


^*		Management contract or compensatory plan or arrangement.


Exhibit
Number	Description	Location


10(c)*	Wells Fargo Bonus Plan, as amended effective January 1, 2009.	Filed herewith.

10(d)*	Performance-Based Compensation Policy.	Incorporated by reference to Exhibit 10(b) to the Company’s Current Report on Form 8-K filed May 5, 2008.

10(e)	Executive Officer Performance Plan.	Incorporated by reference to Exhibit 10(a) to the Company’s Current Report on Form 8-K filed November 23, 2009.

10(f)*	Deferred Compensation Plan, as amended effective January 1, 2008.	Filed herewith.

	Amendment to Deferred Compensation Plan, effective December 1, 2009.	Filed herewith.

10(g)*	Directors Stock Compensation and Deferral Plan.	Incorporated by reference to Exhibit 10(f) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

	Amendment to Directors Stock Compensation and Deferral Plan, effective February 24, 2009.	Incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.

	Amendments to Directors Stock Compensation and Deferral Plan, effective September 23, 2008.	Incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.

	Amendment to Directors Stock Compensation and Deferral Plan, effective January 22, 2008.	Incorporated by reference to Exhibit 10(f) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

	Action of Governance and Nominating Committee Increasing Amount of Formula Stock and Option Awards Under Directors Stock Compensation and Deferral Plan, effective January 1, 2007.	Incorporated by reference to Exhibit 10(f) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

10(h)*	1990 Director Option Plan for directors of the former Wells Fargo.	Incorporated by reference to Exhibit 10(c) to the former Wells Fargo’s Annual Report on Form 10-K for the year ended December 31, 1997.

10(i)*	1987 Director Option Plan for directors of the former Wells Fargo.	Incorporated by reference to Exhibit A to the former Wells Fargo’s Proxy Statement filed March 10, 1995.

	Amendment to 1987 Director Option Plan, effective September 16, 1997.	Incorporated by reference to Exhibit 10 to the former Wells Fargo’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.


Exhibit
Number	Description	Location

10(j)*	Deferred Compensation Plan for Non-Employee Directors of the former Norwest.	Incorporated by reference to Exhibit 10(c) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.

	Amendment to Deferred Compensation Plan for Non-Employee Directors, effective November 1, 2000.	Filed as paragraph (4) of Exhibit 10(ff) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000.

	Amendment to Deferred Compensation Plan for Non-Employee Directors, effective January 1, 2004.	Incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

10(k)*	Directors’ Stock Deferral Plan for directors of the former Norwest.	Incorporated by reference to Exhibit 10(d) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.

	Amendment to Directors’ Stock Deferral Plan, effective November 1, 2000.	Filed as paragraph (5) of Exhibit 10(ff) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000.

	Amendment to Directors’ Stock Deferral Plan, effective January 1, 2004.	Incorporated by reference to Exhibit 10(c) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

10(l)*	Directors’ Formula Stock Award Plan for directors of the former Norwest.	Incorporated by reference to Exhibit 10(e) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.

	Amendment to Directors’ Formula Stock Award Plan, effective November 1, 2000.	Filed as paragraph (6) of Exhibit 10(ff) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000.

	Amendment to Directors’ Formula Stock Award Plan, effective January 1, 2004.	Incorporated by reference to Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

10(m)*	Deferral Plan for Directors of the former Wells Fargo.	Incorporated by reference to Exhibit 10(b) to the former Wells Fargo’s Annual Report on Form 10-K for the year ended December 31, 1997.

	Amendment to Deferral Plan, effective January 1, 2004.	Incorporated by reference to Exhibit 10(d) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

10(n)*	Supplemental 401(k) Plan.	Incorporated by reference to Exhibit 10(c) to the Company’s Current Report on Form 8-K filed May 4, 2009.

10(o)*	Supplemental Cash Balance Plan.	Incorporated by reference to Exhibit 10(b) to the Company’s Current Report on Form 8-K filed May 4, 2009.


Exhibit
Number	Description	Location

10(p)*	Supplemental Long-Term Disability Plan.	Incorporated by reference to Exhibit 10(f) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1990.

	Amendment to Supplemental Long-Term Disability Plan.	Incorporated by reference to Exhibit 10(g) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1992.

10(q)*	Agreement, dated July 11, 2001, between the Company and Howard I. Atkins.	Incorporated by reference to Exhibit 10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.

10(r)*	Agreement between the Company and Mark C. Oman, dated May 7, 1999.	Incorporated by reference to Exhibit 10(y) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999.

	Amendment No. 1 to Agreement between the Company and Mark C. Oman, effective December 29, 2008.	Incorporated by reference to Exhibit 10(q) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

10(s)*	Description of Relocation Program.	Incorporated by reference to Exhibit 10(y) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

10(t)*	Description of Executive Financial Planning Program.	Incorporated by reference to Exhibit 10(w) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

10(u)	PartnerShares Stock Option Plan.	Incorporated by reference to Exhibit 10(x) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

	Amendment to PartnerShares Stock Option Plan, effective August 1, 2005.	Incorporated by reference to Exhibit 10(c) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.

	Amendment to PartnerShares Stock Option Plan, effective August 4, 2006.	Incorporated by reference to Exhibit 10(c) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

	Amendment to PartnerShares Stock Option Plan, effective January 1, 2007.	Incorporated by reference to Exhibit 10(g) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.

	Amendment to PartnerShares Stock Option Plan, effective January 22, 2008.	Incorporated by reference to Exhibit 10(v) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

10(v)*	Agreement, dated July 26, 2002, between the Company and Richard D. Levy, including a description of his executive transfer bonus.	Incorporated by reference to Exhibit 10(d) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002.

10(w)	Non-Qualified Deferred Compensation Plan for Independent Contractors.	Incorporated by reference to Exhibit 10(x) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.


Exhibit
Number	Description	Location

10(w)	Amendment to Non-Qualified Deferred Compensation Plan for Independent Contractors, effective January 1, 2009.	Filed herewith.

10(x)*	Description of Chairman/CEO Post-Retirement Policy.	Incorporated by reference to Exhibit 10(w) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

10(y)*	Description of Non-Employee Director Equity Compensation Program.	Incorporated by reference to Exhibit 10(x) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

10(z)*	Employment Agreement, dated December 30, 2008, between the Company and David M. Carroll.	Incorporated by reference to Exhibit 10(y) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

10(aa)*	Amended and Restated Wachovia Corporation Deferred Compensation Plan for Non-Employee Directors.	Incorporated by reference to Exhibit (10)(f) to Wachovia Corporation’s Current Report on Form 8-K filed December 29, 2008.

	Amendment to Amended and Restated Wachovia Corporation Deferred Compensation Plan for Non-Employee Directors, effective June 1, 2009.	Filed herewith.

10(bb)*	Wachovia Corporation Executive Deferred Compensation Plan.	Incorporated by reference to Exhibit (10)(d) to Wachovia Corporation’s Annual Report on Form 10-K for the year ended December 31, 1997.

10(cc)*	Wachovia Corporation Supplemental Executive Long-Term Disability Plan, as amended and restated.	Incorporated by reference to Exhibit (99) to Wachovia Corporation’s Current Report on Form 8-K filed January 5, 2005.

10(dd)*	Amended and Restated Wachovia Corporation Elective Deferral Plan (as amended and restated effective January 1, 2009).	Incorporated by reference to Exhibit (10)(a) to Wachovia Corporation’s Current Report on Form 8-K filed December 29, 2008.

10(ee)*	Wachovia Corporation 1998 Stock Incentive Plan, as amended.	Incorporated by reference to Exhibit (10)(j) to Wachovia Corporation’s Annual Report on Form 10-K for the year ended December 31, 2001.

10(ff)*	Employment Agreement between Wachovia Corporation and David M. Carroll.	Incorporated by reference to Exhibit (10)(m) to Wachovia Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004.

	Amendment No. 1 to Employment Agreement between Wachovia Corporation and David M. Carroll.	Incorporated by reference to Exhibit (10)(a) to Wachovia Corporation’s Current Report on Form 8-K filed December 22, 2005.

	Amendment No. 2 to Employment Agreement between Wachovia Corporation and David M. Carroll.	Incorporated by reference to Exhibit (10)(h) to Wachovia Corporation’s Current Report on Form 8-K filed December 29, 2008.


Exhibit
Number	Description	Location

10(gg)*	Wachovia Corporation 2001 Stock Incentive Plan.	Incorporated by reference to Exhibit (10)(v) to Wachovia Corporation’s Annual Report on Form 10-K for the year ended December 31, 2001.

10(hh)*	Wachovia Corporation Savings Restoration Plan.	Incorporated by reference to Exhibit (10)(gg) to Wachovia Corporation’s Annual Report on Form 10-K for the year ended December 31, 2002.

10(ii)*	Amendment 2007-1 to Wachovia Corporation Savings Restoration Plan.	Incorporated by reference to Exhibit (10)(b) to Wachovia Corporation’s Current Report on Form 8-K filed December 20, 2007.

	Amendment 2008-1 to Wachovia Corporation Savings Restoration Plan.	Incorporated by reference to Exhibit (10)(c) to Wachovia Corporation’s Current Report on Form 8-K filed December 29, 2008.

10(jj)*	Amended and Restated Wachovia Corporation Savings Restoration Plan.	Incorporated by reference to Exhibit (10)(b) to Wachovia Corporation’s Current Report on Form 8-K filed December 29, 2008.

10(kk)*	Wachovia Corporation 2003 Stock Incentive Plan.	Incorporated by reference to Exhibit (10) to Wachovia Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.

10(ll)*	Form of stock award agreement for Executive Officers of Wachovia Corporation, including David M. Carroll.	Incorporated by reference to Exhibit (10)(ss) to Wachovia Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004.

10(mm)*	Amended and Restated Wachovia Corporation 2003 Stock Incentive Plan.	Incorporated by reference to Appendix E to Wachovia Corporation’s Registration Statement on Form S-4 (Reg. No. 333-134656) filed on July 24, 2006.

	Amendment to Amended and Restated Wachovia Corporation 2003 Stock Incentive Plan, effective February 24, 2009.	Incorporated by reference to Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.

10(nn)*	Form of Split-Dollar Life Insurance Termination Agreement between Wachovia Corporation and David M. Carroll.	Incorporated by reference to Exhibit (10)(hh) to Wachovia Corporation’s Annual Report on Form 10-K for the year ended December 31, 2003.

10(oo)*	Agreement between Wachovia Corporation and Robert K. Steel.	Incorporated by reference to Exhibit (10) to Wachovia Corporation’s Current Report on Form 8-K filed July 10, 2008.

10(pp)*	Stock Award Letter between Wachovia Corporation and Robert K. Steel.	Incorporated by reference to Exhibit (10)(a) to Wachovia Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.


Exhibit
Number	Description	Location

12(a)	Computation of Ratios of Earnings to Fixed Charges:	Filed herewith.


	Year ended December 31,
	2009		2008		2007		2006		2005

Including interest on deposits		2.68		1.33		1.81		2.01		2.51
Excluding interest on deposits		3.64		1.60		2.85		3.38		4.03


12(b)		Computation of Ratios of Earnings to Fixed Charges and Preferred Dividends:		Filed herewith.


	Year ended December 31,
	2009		2008		2007		2006		2005

Including interest on deposits		1.69		1.28		1.81		2.01		2.51
Excluding interest on deposits		1.90		1.50		2.85		3.38		4.03


13	2009 Annual Report to Stockholders, pages 33 through 186.	Filed herewith.

21	Subsidiaries of the Company.	Filed herewith.

23	Consent of Independent Registered Public Accounting Firm.	Filed herewith.

24	Powers of Attorney.	Filed herewith.

31(a)	Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith.

31(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.

32(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)	Certification of principal executive officer pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008.	Furnished herewith.

99(b)	Certification of principal financial officer pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008.	Furnished herewith.


Exhibit
Number	Description	Location

101**	Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Annual Report on Form 10-K for the period ended December 31, 2009, is formatted in XBRL interactive data files: (i) Consolidated Statement of Income for each of the years in the three-year period ended December 31, 2009; (ii) Consolidated Balance Sheet at December 31, 2009, and December 31, 2008; (iii) Consolidated Statement of Changes in Equity and Comprehensive Income for each of the years in the three-year period ended December 31, 2009; (iv) Consolidated Statement of Cash Flows for each of the years in the three-year period ended December 31, 2009; and (v) Notes to Financial Statements, tagged as blocks of text.	Furnished herewith.


^**		As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

Exhibit 10(a)

FORM OF PERFORMANCE SHARE AWARD AGREEMENT
WELLS FARGO & COMPANY
LONG-TERM INCENTIVE COMPENSATION PLAN


Name:		Grant Date:

I.D. Number:		Target Award Number
		of Performance Shares:

1.		Award. Wells Fargo & Company (the “Company”) has awarded you Performance Shares to provide an incentive for you to remain in the Company’s employment and provide valuable services to the Company. The target number of Performance Shares (“Target Award Number”) awarded you is set forth above. The Target Award Number shall be adjusted upward or downward based on Company performance as set forth on Exhibit A. The number of Performance Shares that you will receive under this Award Agreement, after giving effect to such adjustment, is referred to herein as the “Final Award Number.” Each Performance Share entitles you to receive one share of Wells Fargo & Company common stock (“Common Stock”) contingent upon earning such Performance Share based on Company performance set forth on Exhibit A, vesting as set forth in paragraph 2 and subject to the other terms and conditions set forth in the Company’s Long-Term Incentive Compensation Plan (the “Plan”) and this Award Agreement.

2.		Vesting. Except as otherwise provided in this Award Agreement, the Final Award Number of Performance Shares will vest in full on the Determination Date as set forth on Exhibit A. Shares of Common Stock will be issued to you or, in case of your death, your Beneficiary determined in accordance with the Plan. You will have no rights as a stockholder of the Company with respect to your Performance Shares until settlement. However, you may be entitled to dividend equivalents as set forth in paragraph 4. Upon vesting, Performance Shares will be settled and distributed in shares of Common Stock except as otherwise provided in the Plan or this Award Agreement.

3.		Termination.

(a)		If prior to [insert end of Performance Cycle or other applicable date] you cease to be an Employee due to your death or [your involuntary Separation from Service under the Company’s Extended Absence Policy in connection with a Disability as defined in paragraph 12 below (“Separation from Service in connection with a Disability”)] [you incur a Disability], the Target Award Number of Performance Shares awarded hereby (and any Performance Shares with respect to dividend equivalents as provided below) will immediately vest upon your date of death or such [involuntary Separation from Service in connection with a Disability] [Disability]. If you cease to be an Employee due to your death or [your involuntary Separation from Service in connection with a Disability] [you incur a Disability] on or after [end of Performance Cycle or other applicable date] and prior to the Determination Date, the Final Award Number of Performance Shares under this Award Agreement (and any Performance Shares granted with respect to dividend equivalents as provided below) will vest as of the Determination Date as set forth on Exhibit A. Notwithstanding the foregoing, the accelerated vesting set forth in this paragraph 3(a) shall occur only if you at all times since the Grant Date comply with the terms of the attached Wells Fargo Agreement Regarding Trade Secrets, Confidential Information, and Non-Solicitation.

(b)		[If you cease to be an Employee due to your Retirement any time prior to the vesting date indicated above, the Final Award Number of Performance Shares awarded hereby (and any Performance Shares with respect to dividend equivalents as provided below) will vest upon the scheduled vesting date as set forth in paragraph 2 above provided that beginning immediately after you cease to be an Employee and continuing until the vesting date you satisfy each of the following conditions (“vesting conditions”): (i) you comply with the terms of the attached Wells Fargo Agreement Regarding Trade Secrets, Confidential Information, and Non-Solicitation, (ii) you do not express any derogatory or damaging statements about the Company or any Affiliate, the management or the board of directors of the Company or any Affiliate, the products, services or the business condition of the Company or any Affiliate in any public way or to anyone who could make those statements public, and (iii) you do not perform services as an officer, director, employee, consultant or otherwise for any business which is in competition with any line of business of the Company or any Affiliate for which you had executive responsibilities while you were employed by the Company or any Affiliate (including predecessors thereof) and which does business in any location in the geographic footprint of the Company or any Affiliate in which you had executive responsibilities. Notwithstanding the foregoing, if you die following

		your Retirement and have satisfied the vesting conditions set forth above through your date of death, any Performance Shares will vest in accordance with paragraph 3(a) as of the date of your death.]

(c)		If you cease to be an Employee other than due to your death, [your involuntary Separation from Service in connection with a Disability] [your Disability], or your Retirement or you fail to satisfy any vesting condition in accordance with paragraph 3(b), any then unvested Performance Shares awarded hereby (including any Performance Shares granted with respect to dividend equivalents as provided below) will immediately terminate without notice to you and will be forfeited.

4.		Dividend Equivalents. [During the period beginning on the Grant Date and ending on the date the Performance Shares vest or terminate, whichever occurs first, if the Company pays a dividend on the Common Stock, you will automatically receive, as of the payment date for such dividend, dividend equivalents in the form of additional Performance Shares based on the amount or number of shares that would have been paid on the Final Award Number of Performance Shares (or Target Award Number of Performance Shares as applicable under paragraph 3(a)) had they been issued and outstanding shares of Common Stock as of the record date and, if a cash dividend, the closing price of the Common Stock on the New York Stock Exchange as of the dividend payment date. You will also automatically receive dividend equivalents with respect to the additional Performance Shares, to be granted in the same manner. Performance Shares granted with respect to dividend equivalents will be subject to the same vesting schedule and conditions as the underlying Performance Shares and will be distributed in shares of Common Stock when, and if, the underlying Performance Shares are settled and distributed.] [During the period beginning on the Grant Date and ending on the date the Performance Shares vest or terminate, whichever occurs first, if the Company pays a cash dividend on the Common Stock, you will receive cash payments based on and payable at approximately the same time as the cash dividend that would have been paid on the [Target Award Number of Performance Shares] had they been issued and outstanding shares of Common Stock as of the record date for the dividend. Cash payments will be net of federal, state and local withholding taxes.] [During the period beginning on the Grant Date and ending on the date the Performance Shares vest or terminate, whichever occurs first, if the Company pays a cash dividend on the Common Stock, you will not be entitled to receive any dividend equivalents or cash payments in respect of such dividend.]

5.		Tax Withholding. The Company will withhold from the number of shares of Common Stock otherwise issuable hereunder (including with respect to dividend equivalents) a number of shares necessary to satisfy any and all applicable federal, state, local and foreign tax withholding obligations and employment-related tax requirements. Shares will be valued at their Fair Market Value as of the date of vesting.

6.		Nontransferable. Unless the Committee provides otherwise, (i) no rights under this Award will be assignable or transferable, and neither you nor your Beneficiary will have any power to anticipate, alienate, dispose of, pledge or encumber any rights under this Award, and (ii) the rights and the benefits of this Award may be exercised and received during your lifetime only by you or your legal representative.

7.		Other Restrictions; Amendment. The issuance of Common Stock hereunder is subject to compliance by the Company and you with all applicable legal requirements applicable thereto, including tax withholding obligations, and with all applicable regulations of any stock exchange on which the Common Stock may be listed at the time of issuance. Subject to paragraph 12 below, the Committee may, in its sole discretion and without your consent, reduce, delay vesting, modify, revoke, cancel, impose additional conditions and restrictions on or recover all or a portion of this Award if the Committee deems it necessary or advisable to comply with applicable laws, rules and regulations. This Award is subject to any applicable recoupment or “clawback” policies of the Company, as amended from time to time, and any applicable recoupment or clawback requirements imposed under laws, rules and regulations.

8.		[Hold Through Retirement Provision. As a condition to receiving this Award, you agree to hold, while employed by the Company or any Affiliate and for a period of one year after your Retirement, shares of Common Stock equal to at least 50% of the after-tax shares of Common Stock (assuming a 50% tax rate) acquired upon vesting and settlement of this Award.]

9.		Additional Provisions. This Award Agreement is subject to the provisions of the Plan. Capitalized terms not defined in this Award Agreement or by reference to another document are used as defined in the Plan. If the Plan and this Award Agreement are inconsistent, the provisions of the Plan will govern. Interpretations of the Plan and this Award Agreement by the Committee are binding on you and the Company.

10.		No Employment Agreement. Neither the award to you of the Performance Shares nor the delivery to you of this Award Agreement or any other document relating to the Performance Shares will confer on you the right to continued employment with the Company or any Affiliate.

	11.		Six-month Delay . Notwithstanding any provision of the Plan or this Award Agreement to the contrary, if, upon your Separation from Service (as defined in paragraph 12 below) with the Company for any reason, the Company determines that you are a “specified employee” as defined in Section 409A of the Internal Revenue Code of 1986, as amended, and the applicable Treasury regulations or other binding guidance thereunder (“Section 409A”) and in accordance with the definition contained in the Wells Fargo & Company Supplemental 401(k) Plan, as in effect on the Grant Date of this Award, your Performance Shares, if subject to settlement upon your Separation from Service and if required pursuant to Section 409A, will not settle before the date that is the first business day following the six-month anniversary of such termination, or, if earlier, upon your death.

	12.		Section 409A . This Award is intended to comply with the requirements of Section 409A. Accordingly, all provisions included in this Award, or incorporated by reference, will be interpreted and administered in accordance with that intent. If any provision of the Plan would otherwise conflict with or frustrate this intent, that provision will be interpreted and deemed amended or limited so as to avoid the conflict; provided, however, that the Company makes no representation that the Award is exempt from or complies with Section 409A and makes no undertaking to preclude Section 409A from applying to the Award. For purposes of this Award, the term “Separation from Service” is determined by the Company in accordance with Section 409A and in accordance with the definition contained in the Wells Fargo & Company Supplemental 401(k) Plan, as in effect on the Grant Date of this Award. For purposes of this Award, you will be considered to have a “Disability” if [you are receiving income replacement benefits for a period of not less than three months under the Company’s long term disability plan as a result of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months] [alternative definition].

The Company has awarded you the Performance Shares in accordance with the foregoing terms and conditions and in accordance with the provisions of the Plan. By signing below, you hereby agree to the foregoing terms and conditions of this Award and acknowledge that you have read, understand and received a copy of this Award Agreement (including Exhibit A attached hereto) and that you will abide by the terms of this Award Agreement and the Plan.


		[Name of Executive]

WELLS FARGO & COMPANY
LONG-TERM INCENTIVE COMPENSATION PLAN
FORM OF PERFORMANCE SHARE AWARD AGREEMENT

Exhibit A to Performance Share Award Agreement

This Exhibit A sets forth the manner in which the Final Award Number will be determined.

[Definitions

Capitalized terms used but not defined herein (including, but not limited to, Return on Realized Common Equity) shall have the same meanings assigned to them in the Plan and the Award Agreement. In addition, the following terms used in the text of this Exhibit A shall have the meanings set forth below:

			“Average Return on Realized Common Equity” means for each of the Financial Performance Peer Group Companies the sum of such company’s Return on Realized Common Equity for each of the fiscal years corresponding with or ending in calendar year [insert applicable years], which sum is then divided by [applicable number].

			“Company Return on Realized Common Equity Ranking” means the rank of the Company’s Average Return on Realized Common Equity relative to the Average Return on Realized Common Equity achieved by each of the other Financial Performance Peer Group Companies.

			“Final Award Number Percentage” means the “Final Award Number Percentage” determined in accordance with the Determination of Final Award Number Section of this Exhibit A.

			“Financial Performance Peer Group Companies” means those companies which comprise the [KBW Bank Sector Index] as of [insert applicable date].

Determination of Final Award Number

Your Target Award Number will be adjusted upward or downward depending on the Company Return on Realized Common Equity Ranking in accordance with the chart below to arrive at your Final Award Number of Performance Shares. The Final Award Number of Performance Shares will be determined by multiplying (i) the Final Award Number Percentage by (ii) your Target Award Number and then adding to such product additional Performance Shares granted with respect to dividend equivalents as provided in paragraph 4. In the event the Final Award Number is not a whole number, then the Final Award Number shall be rounded down to the nearest whole number.


Company Return on Realized	Final Award Number	Final Award Number of
Common Equity Ranking	Percentage	Performance Shares
[insert applicable % or % range]	[insert applicable %]	[insert applicable %] x Target Award Number
[insert applicable % or % range]	[insert applicable %]	[insert applicable %] x Target Award Number
[insert applicable % or % range]	[insert applicable %]	[insert applicable %] x Target Award Number

If the Company Return on Realized Common Equity Ranking is between [insert applicable range], the Final Award Number Percentage shall be interpolated on a straight-line basis between [insert applicable range] and the Final Award Number of Performance Shares shall be interpolated on a corresponding straight-line basis between [insert applicable range] of the Target Award Number.

[If the Company does not have the lowest Average Return on Realized Common Equity among the Performance Group Companies and the Company Return on Realized Common Equity Ranking is less than [insert applicable percentage], the Final Award Percentage shall be interpolated on a straight-line basis between [insert applicable range] and the Final Award Number of Performance Shares Earned shall be interpolated on a corresponding straight-line basis between [insert applicable range] of the Target Award Number.] [If the Company Return on Realized Common Equity Ranking is less than [insert applicable percentage], the Final Award Number Percentage and the

Final Award Number of Performance Shares shall be [insert applicable number.]

[In no event shall the Final Award Number Percentage be greater than [insert applicable percentage] nor shall the Final Award Number of Performance Shares be greater than [insert applicable percentage] of the Target Award Number (plus dividend equivalents pursuant to paragraph 4 of the Award Agreement).]

[insert alternative method(s) for determining the Final Award Number, including additional or alternative Qualifying Performance Criteria as defined in the Plan]

Committee Determination

The Committee shall determine the Final Award Number of Performance Shares in calendar year [insert applicable year] no later than [insert applicable date] and the date the Committee makes such determination is referred to in this Award as the “Determination Date.” The Committee shall make all determinations in calculating the Final Award Number of Performance Shares and the Committee’s determination shall be binding.

Wells Fargo Agreement
Regarding Trade Secrets, Confidential Information, and Non-Solicitation

I. Introduction

In consideration for the Performance Share Award granted to me by Wells Fargo & Company on [insert grant date], on the terms and conditions contained in the Performance Share Award Agreement (“Performance Share Award Agreement”), I acknowledge that the nature of my employment with and performance of services for Wells Fargo & Company and its affiliates (the “Company”) permits me to have access to certain of its trade secrets and confidential and proprietary information and that such information is, and shall always remain, the sole property of the Company. Any unauthorized disclosure or use of this information would be wrongful and would cause the Company irreparable harm. Therefore, I agree as follows:

II. Trade Secrets and Confidential Information

During the course of my employment I have acquired knowledge of the Company’s Trade Secrets and other proprietary information relating to its business, business methods, personnel, and customers (collectively referenced as “Confidential Information”). “Trade Secrets” are defined as information, including but not limited to, a formula, pattern, compilation, program, device, method, technique, or process, that: (1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. The Company’s Trade Secrets include, but are not limited to, the following:

	•		the names, address, and contact information of the Company’s customers and prospective customers, as well any other personal or financial information relating to any customer or prospect, including, without limitation, account numbers, balances, portfolios, maturity dates, loans, policies, investment activities and objectives;

	•		any information concerning the Company’s operations, including without limitation, information related to its methods, services, pricing, finances, practices, strategies, business plans, agreements, decision-making, systems, technology, policies, procedures, marketing, sales, techniques and processes;

	•		any other proprietary and/or confidential information relating to the Company’s customers, employees, products, services, sales, technologies, or business affairs.

I understand that Records of the Company also constitute Confidential Information and that my obligation to maintain the confidentiality thereof continues at all times during and after my employment. “Records” include, but are not limited to, original, duplicated, computerized, memorized, handwritten or any other form of information, whether contained in materials provided to me by the Company, or by any institution acquired by the Company, or compiled by me in any form or manner including information in documents or electronic devices, such as software, flowcharts, graphs, spreadsheets, resource manuals, videotapes, calendars, day timers, planners, rolodexes, or telephone directories maintained in personal computers, laptop computers, personal digital assistants or any other device. These records do not become any less confidential or proprietary to the Company because I may commit some of them to memory or because I may otherwise maintain them outside of the Company’s offices.

that purpose. Upon my retirement, I agree to immediately return to the Company all Records and Confidential Information, including information maintained by me in my office, personal electronic devices, and/or at home.

III. Non-Solicitation of Company’s Employees and Customers

I agree that for the period beginning on my retirement date with Company through the Determination Date as defined in the Performance Share Award Agreement (“the Non-Solicitation Period”), I will not do any of the following, either directly or indirectly or through associates, agents, or employees:

	a.		solicit, recruit or promote the solicitation or recruitment of any employee or consultant of the Company for the purpose of encouraging that employee or consultant to leave the Company’s employ or sever an agreement for services; or

	b.		solicit, participate in or promote the solicitation of any of the Company’s clients, customers, or prospective customers whose identity became known to me during my employment with the Company and/or regarding whom I received Confidential Information, for the purpose of providing products or services that are in competition with the Company’s products or services.

This limitation is not intended to limit the Company’s right to prevent misappropriation of its Confidential Information beyond the Non-Solicitation Period.

IV. Partial Invalidity

If any provision of this Agreement is held to be unenforceable by a court of competent jurisdiction, such provision shall be enforced to the greatest extent permitted and the remainder of this Agreement shall remain in full force and effect.

V. Choice of Law/Integration/Survival

This Agreement and any dispute, controversy or claim which arises under or relates in any way to it shall be governed by the law of the state where the incident(s) giving rise to the dispute or claim arose. This Agreement supersedes any prior written or verbal agreements pertaining to the subject matter herein, and is intended to be a final expression of our Agreement with respect only to the terms contained herein. There may be no modification of this Agreement except in writing signed by me and an executive officer of the Company. This Agreement shall survive my employment by the Company, inure to the benefit of successors and assigns of the Company, and is binding upon my heirs and legal representatives.

Acknowledgment

I acknowledge that I have read, understand, and received a copy of this Agreement and will abide by its terms.


[Name of Executive]		Date

FORM OF RESTRICTED SHARE RIGHTS AWARD AGREEMENT
WELLS FARGO & COMPANY
LONG-TERM INCENTIVE COMPENSATION PLAN


Name:	Grant Date:	[insert grant date]
I.D. Number:	Number of RSRs:	[insert no. of RSRs]

	1.		Award. To encourage your continued employment with the Company or any Affiliate and to motivate you to help the Company increase stockholder value over the long term, Wells Fargo & Company (the “Company”) has awarded you the number of Restricted Share Rights indicated above (the “Award”). Each Restricted Share Right entitles you to receive one share of Wells Fargo & Company common stock (“Common Stock”) contingent upon vesting and subject to the other terms and conditions set forth in the Company’s Long-Term Incentive Compensation Plan (the “Plan”) and this Award Agreement.

	2.		Vesting. Except as otherwise provided in this Award Agreement, and subject to the Company’s right to recoup this Award as provided in this Award Agreement, the Restricted Share Rights will vest according to the following schedule:

[insert vesting schedule]

Shares of Common Stock will be issued to you or, in case of your death, your Beneficiary determined in accordance with the Plan. Except for dividend equivalents as provided below, you will have no rights as a stockholder of the Company with respect to your Restricted Share Rights until settlement. Upon the vesting date, Restricted Share Rights will be settled and distributed in shares of Common Stock except as otherwise provided in the Plan or this Award Agreement.

Termination.

(b)

If you cease to be an Employee due to your death any then unvested Restricted Share Right awarded hereby (including any Restricted Share Right granted with respect to dividend equivalents as provided below) will immediately vest upon your date of death and will be settled and distributed to your Beneficiary in shares of Common Stock on [insert date of distribution]. If [insert date of distribution] is not a business day, the first business day following that date.

[ For Retirement-eligible executives ]

(b)

If you satisfy the definition of Retirement in the Plan on the Grant Date of the Award or thereafter during the term of the Award and then have a Separation from Service as defined in paragraph [11] below, any then unvested Restricted Share Right awarded hereby (including any Restricted Share Right granted with respect to dividend equivalents as provided below) will vest upon the scheduled vesting date as set forth in paragraph 2 above[; provided, however, if you die following Retirement or have an involuntary Separation from Service as described in paragraph 3(c) below, any then unvested Restricted Share Right will vest

immediately].

	(c)		If you have an involuntary Separation from Service under the Company’s Extended Absence Policy in connection with a Disability as defined in paragraph [11] below, any then unvested Restricted Share Right awarded hereby (including any Restricted Share Right granted with respect to dividend equivalents as provided below) will immediately vest and will be settled and distributed to you in shares of Common Stock within 90 days of your Separation from Service.

	(d)		If you incur a Separation from Service other than due to your death, Retirement or involuntary Separation from Service under the Company’s Extended Absence Policy in connection with your Disability, any then unvested Restricted Share Right awarded hereby (including any Restricted Share Right granted with respect to dividend equivalents as provided below) will immediately terminate without notice to you and will be forfeited.

[ For executives not Retirement-eligible ]

(c)

If you have an involuntary termination of employment under the Company’s Extended Absence Policy in connection with a Disability as defined below, any then unvested Restricted Share Right awarded hereby (including any Restricted Share Right granted with respect to dividend equivalents as provided below) will immediately vest and will be settled and distributed to you in shares of Common Stock no later than March 1 of the year immediately following the year in which your employment has been terminated. For purposes of this Award, you will be considered to a have a “Disability” if you are receiving income replacement benefits for a period of not less than three months under the Company’s long term disability plan as a result of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

(d)

If you cease to be an Employee other than due to your death or involuntary termination under the Company’s Extended Absence Policy in connection with a Disability, any then unvested Restricted Share Right awarded hereby (including any Restricted Share Right granted with respect to dividend equivalents as provided below) will immediately terminate without notice to you and will be forfeited.

[ Alternative provision for certain Restricted Share Rights Awards to Retirement-eligible executives ]

(c)

If you incur a Separation from Service other than due to your death or Retirement, any then unvested Restricted Share Right awarded hereby (including any Restricted Share Right granted with respect to dividend equivalents as provided below) will immediately terminate without notice to you and will be forfeited.

[ Alternative provision for certain Restricted Share Rights Awards to executives not Retirement-eligible ]

(b)

If you cease to be an Employee other than due to your death, any then unvested Restricted Share Right awarded hereby (including any Restricted Share Right granted with respect to dividend equivalents as provided below) will immediately terminate without notice to you and will be forfeited.

	4.		Dividend Equivalents. During the period beginning on the Grant Date and ending on the date the Restricted Share Rights vest or terminate, whichever occurs first, if the Company pays a dividend on the Common Stock, [you will automatically receive, as of the payment date for such dividend, dividend equivalents in the form of additional Restricted Share Rights based on the amount or number of shares that would have been paid on the Restricted Share Rights had they been issued and outstanding shares of Common Stock as of the record date and, if a cash dividend, the closing price of the Common Stock on the New York Stock Exchange as of the dividend payment date. You will also automatically receive dividend equivalents with respect to the additional Restricted Share Rights, to be granted in the same manner. Restricted Share Rights granted with respect to dividend equivalents will be subject to the same vesting schedule and conditions as the underlying Restricted Share Rights, including the Company’s right of recoupment, and will be distributed in shares of Common Stock when, and if, the underlying Restricted Share Rights are settled and distributed.][you will not receive dividend equivalents in the form of additional Restricted Share Rights.][if such dividend is a cash dividend, you will automatically receive, as of the payment date for such dividend, a cash payment based on the amount or number of shares that would have been paid on the Restricted Share Rights had they been issued and outstanding shares of Common Stock as of the record date, subject to applicable tax withholding requirements.]

	5.		Tax Withholding. The Company will withhold from the number of shares of Common Stock otherwise issuable hereunder (including with respect to dividend equivalents) a number of shares necessary to satisfy any and all applicable federal, state, local and foreign tax withholding obligations and employment-related tax requirements. Shares will be valued at their Fair Market Value as of the date of vesting. [In addition, the Company may withhold from your other compensation any and all applicable federal, state, local, foreign and employment-related taxes in the event all or a portion of the Restricted Share Rights are treated as taxable prior to or other than on the vesting dates set forth in paragraph 2 above and the number of shares of Common Stock otherwise issuable is insufficient to satisfy such tax withholding obligations and employment-related tax requirements.]

	6.		Nontransferable. Unless the Committee provides otherwise, (i) no rights under this Award will be assignable or transferable, and neither you nor your Beneficiary will have any power to anticipate, alienate, dispose of, pledge or encumber any rights under this Award, and (ii) the rights and the benefits of this Award may be exercised and received during your lifetime only by you or your legal representative.

	7.		Other Restrictions; Amendment. The issuance of Common Stock hereunder is subject to compliance by the Company and you with all applicable legal requirements applicable thereto, including tax withholding obligations, and with all applicable regulations of any stock exchange on which the Common Stock may be listed at the time of issuance. Subject to paragraph [___] below, the Committee may, in its sole discretion and without your consent, reduce, delay vesting, modify, revoke, cancel, impose additional conditions and restrictions on or recover all or a portion of this Award if the Committee deems it necessary

			or advisable to comply with applicable laws, rules and regulations. This Award is subject to any applicable recoupment or “clawback” policies of the Company, as amended from time to time, and any applicable recoupment or clawback requirements imposed under laws, rules and regulations.

	8.		[Restrictive Covenants. In consideration of the terms of this Award and your access to Confidential Information, you agree to the restrictive covenants and associated remedies as set forth below, which exist independently of and in addition to any obligation to which you are subject under the terms of the Wells Fargo Agreement Regarding Trade Secrets, Confidential Information, Non-Solicitation, And Assignment Of Inventions (the “TSA”):

(a)		Trade Secrets and Confidential Information. During the course of your employment, you will acquire knowledge of the Company’s and/or any Affiliate’s (collectively “WFC”) Trade Secrets and other proprietary information relating to its business, business methods, personnel, and customers (collectively, “Confidential Information”). “Trade Secrets” means WFC’s confidential information, which has an economic value in being secret and which WFC has taken steps to keep secret and you understand and agree that Trade Secrets include, but are not limited to confidentially maintained client and customer lists and information, and confidentially maintained prospective client and customer lists and information. You agree that Confidential Information of WFC is to be used solely and exclusively for the purpose of conducting business on behalf of WFC. You agree to keep such Confidential Information confidential and will not divulge, use or disclose this information except for that purpose. In addition, you agree that, both during and after your employment, you will not remove, share, disseminate or otherwise use WFC’s Trade Secrets to directly or indirectly solicit, participate in or promote the solicitation of any of WFC’s clients, customers, or prospective customers for the purpose of providing products or services that are in competition with WFC’s products or services.

(b)		Assignment of Inventions. You acknowledge and agree that all inventions and all worldwide intellectual property rights that you make, conceive or first reduce to practice (alone or in conjunction with others) during your employment with WFC are owned by WFC that (1) relate at the time of conception or reduction to practice of the invention to WFC’s business, or actual or demonstrably anticipated research or development of WFC whether or not you made, conceived or first reduced the inventions to practice during normal working hours; and (2) involve the use of any time, material, information, or facility of WFC.

(c)		Non-solicitation. If you are currently subject to a TSA, you shall continue to be bound by the terms of the TSA. If you are not currently subject to a TSA, you agree to the following:

		For a period of one (1) year immediately following termination of your employment for any reason, you will not do any of the following, either directly or indirectly or through associates, agents, or employees:

solicit, recruit or promote the solicitation or recruitment of any employee or consultant of WFC for the purpose of encouraging that employee or consultant to leave WFC’s employ or sever an agreement for

services; or

ii.

to the fullest extent enforceable under the applicable state law, solicit, participate in or promote the solicitation of any of WFC’s clients, customers, or prospective customers with whom you had Material Contact and/or regarding whom you received Confidential Information, for the purpose of providing products or services that are in competition with WFC’s products or services. “Material Contact” means interaction between you and the customer, client or prospective customer within one (1) year prior to your last day as a team member which takes place to manage, service or further the business relationship.

The one-year limitation is not intended to limit WFC’s right to prevent misappropriation of its Confidential Information beyond the one-year period.

(d)

Violation of TSA or Restrictive Covenants. If you breach any of the terms of a TSA and/or the restrictive covenants above, all unvested Restricted Share Rights shall be immediately and irrevocably forfeited. For any Restricted Share Rights that vested within one (1) year prior to the termination of your employment with WFC or at any time after your termination, you shall be required to repay or otherwise reimburse WFC an amount having a value equal to the aggregate fair market value (determined as of the date of vesting) of such vested shares. This paragraph does not constitute the Company’s exclusive remedy for violation of your restrictive covenant obligations, and WFC may seek any additional legal or equitable remedy, including injunctive relief, for any such violation.]

[ Note: Award Agreements may not contain Restrictive Covenants paragraph ]

No Employment Agreement. Neither the award to you of the Restricted Share Rights nor the delivery to you of this Award Agreement or any other document relating to the Restricted Share Rights will confer on you the right to continued employment with the Company or any Affiliate. You understand that your employment with the Company or any Affiliate is “at will” and nothing in this document changes, alters or modifies your “at will” status or your obligation to comply with all policies, procedures and rules of the Company, as they may be adopted or amended from time to time.

[ For Retirement-eligible executives ]

10.

Six-month Delay . Notwithstanding any provision of the Plan or this Award Agreement to the contrary, if, upon your Separation from Service with the Company for any reason, the Company determines that you are a “specified employee” as defined in Section 409A of the Internal Revenue Code of 1986 as amended and the applicable Treasury regulations or other binding guidance thereunder (“Section 409A”) and in accordance with the definition contained in the Wells Fargo & Company Supplemental 401(k) Plan as in effect on the Grant Date of this Award, your Restricted Share Rights, if subject to settlement upon your Separation from Service and if required pursuant to Section 409A, will not settle before the date that is the first business day following the six-month anniversary of such termination, or, if earlier, upon your death.

[ For Retirement-eligible executives ]

11.

Section 409A . This Award is intended to comply with the requirements of Section 409A. Accordingly, all provisions included in this Award, or incorporated by reference, will be interpreted and administered in accordance with that intent. If any provision of the Plan would otherwise conflict with or frustrate this intent, that provision will be interpreted and deemed amended or limited so as to avoid the conflict; provided, however, that the Company makes no representation that the Award is exempt from or complies with Section 409A and makes no undertaking to preclude Section 409A from applying to the Award. For purposes of this Award, the term “Separation from Service” is determined by the Company in accordance with Section 409A and the regulations thereunder and in accordance with the definition contained in the Wells Fargo & Company Supplemental 401(k) Plan, as in effect on the Grant Date of this Award. [For purposes of this Award, you will be considered to have a “Disability” if you are receiving income replacement benefits for a period of not less than three months under the Company’s long term disability plan as a result of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.]

[ For executives not Retirement-eligible ]

Section 409A . This Award is intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended and applicable Treasury Regulations or other binding guidance thereunder (“Section 409A”). Accordingly, all provisions included in this Award, or incorporated by reference, will be interpreted and administered in accordance with that intent. Therefore, all Restricted Share Rights will be settled and distributed no later than March 1 of the year following the year when such Restricted Share Rights vest. If any provision of the Plan would otherwise conflict with or frustrate this intent, that provision will be interpreted and deemed amended or limited so as to avoid the conflict; provided, however, that the Company makes no representation that the Award is exempt from or complies with Section 409A and makes no undertaking to preclude Section 409A from applying to the Award. Notwithstanding any provision of the Plan or this Award Agreement to the contrary, if, upon the termination of your service with the Company for any reason, the Company determines that you are a “specified employee” (as defined in Section 409A and in accordance with such definition and elections contained in the Wells Fargo & Company Supplemental 401(k) Plan as in effect on the Grant Date of this Award), your Restricted Share Rights, if subject to settlement upon such termination and only if required pursuant to Section 409A (which is not intended), will not settle before the date that is the first business day following the six-month anniversary of such termination or, if earlier, upon your death.

	12.		Hold Through Retirement Provision. As a condition to receiving this Award, you agree to hold, while employed by the Company or any Affiliate and for a period of one year after your Retirement, shares of Common Stock equal to at least 50% of the after-tax shares of Common Stock (assuming a 50% tax rate) acquired upon vesting and settlement of this Award.

	13.		Severability and Judicial Modification. If any provision of this Award Agreement is held to be invalid or unenforceable under pertinent state law or otherwise or Wells Fargo elects not to enforce such restriction,

			[including but not limited to paragraph 8(c)ii], the remaining provisions shall remain in full force and effect and the invalid or unenforceable provision shall be modified only to the extent necessary to render that provision valid and enforceable to the fullest extent permitted by law. If the invalid or unenforceable provision cannot be, or is not, modified, that provision shall be severed from the Award Agreement and all other provisions shall remain valid and enforceable.

	14.		Additional Provisions. This Award Agreement is subject to the provisions of the Plan. Capitalized terms not defined in this Award Agreement are used as defined in the Plan. If the Plan and this Award Agreement are inconsistent, the provisions of the Plan will govern. Interpretations of the Plan and this Award Agreement by the Committee are binding on you and the Company.

	15.		Electronic Delivery and Acceptance. The Company is electronically delivering documents related to current or future participation in the Plan and is requesting your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through the current plan administrator’s on-line system, or any other on-line system or electronic means that the Company may decide, in its sole discretion, to use in the future.

PLEASE NOTE: Receipt of this Award is subject to your electronic signature on the current plan administrator’s website acknowledging and accepting all the terms and conditions of this Award Agreement and the Plan. You must accept the terms and conditions of this Award Agreement on or before [date]. Failure to do so within this time period will result in forfeiture of this Award.

FORM OF RESTRICTED SHARE RIGHTS AGREEMENT FOR DAVID M. CARROLL
WELLS FARGO & COMPANY
LONG-TERM INCENTIVE COMPENSATION PLAN


Name:	David M. Carroll	Grant Date:	12/24/2009
I.D. Number:		Number of RSRs:	108,528

	1.		Award. Wells Fargo & Company (the “Company”) has awarded you the number of Restricted Share Rights indicated above. Each Restricted Share Right entitles you to receive one share of Wells Fargo & Company common stock (“Common Stock”) contingent upon vesting and subject to the other terms and conditions set forth in the Company’s Long-Term Incentive Compensation Plan (the “Plan”) and this Award Agreement.

	2.		Vesting. Except as otherwise provided in this Award Agreement, the Restricted Share Rights will vest according to the following schedule:


72,352	of RSRs on	12/24/2011
36,176	of RSRs on	12/24/2012

Shares of Common Stock will be issued to you or, in case of your death, your Beneficiary determined in accordance with the Plan. Except for dividend equivalents as provided below, you will have no rights as a stockholder of the Company with respect to your Restricted Share Rights until settlement. Upon vesting, Restricted Share Rights will be settled and distributed in shares of Common Stock except as otherwise provided in the Plan or this Award Agreement.

	3.		Termination.

	(e)		If you cease to be an Employee due to your death or permanent disability (as determined by the Company), any then unvested Restricted Share Right awarded hereby (including any Restricted Share Right granted with respect to dividend equivalents as provided below) will immediately vest upon your date of death or termination of employment due to permanent disability.

	(f)		If you cease to be an Employee due to your Retirement any time after the second anniversary of the date of grant, any then unvested Restricted Share Right awarded hereby (including any Restricted Share Right granted with respect to dividend equivalents as provided below) will vest upon the scheduled vesting date as set forth in paragraph 2 above; provided, however, if you die following Retirement, any then unvested Restricted Share Right will vest immediately.

	(g)		If you cease to be an Employee other than due to your death or permanent disability, or your Retirement after the second anniversary of the date of grant, any then unvested Restricted Share Right awarded hereby (including any Restricted Share Right granted with respect to dividend equivalents as provided below) will immediately terminate without notice to you and will be forfeited.

	4.		Dividend Equivalents. During the period beginning on the Grant Date and ending on the date the Restricted Share Rights vest or terminate, whichever occurs first, if the Company pays a dividend on the Common Stock, you will automatically receive, as of the payment date for such dividend, dividend equivalents in the form of additional Restricted Share Rights based on the amount or number of shares that would have been paid on the Restricted Share Rights had they been issued and outstanding shares of Common Stock as of the record date and, if a cash dividend, the closing price of the Common Stock on the New York Stock Exchange as of the dividend payment date. You will also automatically receive dividend equivalents with respect to the additional Restricted Share Rights, to be granted in the same manner. Restricted Share Rights granted with respect to dividend equivalents will be subject to the same vesting schedule and conditions as the underlying Restricted Share Rights and will be distributed in shares of Common Stock when, and if, the underlying Restricted Share Rights are settled and distributed.

	5.		Tax Withholding. The Company will withhold from the number of shares of Common Stock otherwise issuable hereunder (including with respect to dividend equivalents) a number of shares necessary to satisfy any and all applicable federal, state, local and foreign tax withholding obligations and employment-related tax requirements. Shares will be valued at their Fair Market Value as of the date of vesting.

	6.		Nontransferable. Unless the Committee provides otherwise, (i) no rights under this Award will be assignable or transferable, and neither you nor your Beneficiary will have any power to anticipate, alienate, dispose of, pledge or encumber any rights under this Award, and (ii) the rights and the benefits of this Award may be exercised and received during your lifetime only by you or your legal representative.

	7.		Other Restrictions; Amendment. The issuance of Common Stock hereunder is subject to compliance by the Company and you with all applicable legal requirements applicable thereto, including tax withholding obligations, and with all applicable regulations of any stock exchange on which the Common Stock may be listed at the time of issuance. The Company may delay the issuance of shares of Common Stock hereunder to ensure at the time of issuance there is a registration statement for the shares in effect under the Securities Act of 1933. The Committee may, in its sole discretion and without your consent, reduce, delay vesting, modify, revoke, cancel, impose additional conditions and restrictions on or recover all or a portion of this Award if the Committee deems it necessary or advisable to comply with the Emergency Economic Stabilization Act of 2008, as amended from time to time, its implementing regulations and guidance, or other applicable law or regulation. This Award is subject to any applicable recoupment or “clawback” policy maintained by the Company from time to time or requirement imposed under applicable laws, rules and regulations.

	8.		Hold Through Retirement Provision. As a condition to receiving this Award, you agree to hold, while employed by the Company or any Affiliate and for a period of one year after your Retirement, shares of Common Stock equal to at least 50% of the after-tax shares of Common Stock (assuming a 50% tax rate) acquired upon vesting and settlement of this Award.

	9.		Additional Provisions. This Award Agreement is subject to the provisions of the Plan. Capitalized terms not defined in this Award Agreement are used as defined in the Plan. If the Plan and this Award Agreement are inconsistent, the provisions of the Plan will govern. Interpretations of the Plan and this Award Agreement by the Committee are binding on you and the Company.

	10.		No Employment Agreement. Neither the award to you of the Restricted Share Rights nor the delivery to you of this Award Agreement or any other document relating to the Restricted Share Rights will confer on you the right to continued employment with the Company or any Affiliate.

	11.		Six-month Delay . Notwithstanding any provision of the Plan or this Award Agreement to the contrary, if, upon the termination of your service with the Company for any reason, the Company determines that you are a “specified employee” as defined in Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), your Restricted Share Rights, if subject to settlement upon such termination, will not settle before the date that is the first business day following the six-month anniversary of such termination, or, if earlier, upon your death. This provision only applies if required pursuant to Section 409A.

	12.		Section 409A . This Award is intended to comply with the requirements of Section 409A and applicable Treasury Regulations or other binding guidance thereunder. Accordingly, all provisions included in this Award, or incorporated by reference, will be interpreted and administered in accordance with that intent. If any provision of the Plan would otherwise conflict with or frustrate this intent, that provision will be interpreted and deemed amended or limited so as to avoid the conflict.

The Company has awarded you the Restricted Share Rights in accordance with the foregoing terms and conditions and in accordance with the provisions of the Plan. By signing below, you hereby agree to the foregoing terms and conditions of this Award.



		David M. Carroll

FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
WELLS FARGO & COMPANY
LONG-TERM INCENTIVE COMPENSATION PLAN

1. Grant of Option. Wells Fargo & Company (the “Company”) has granted to you an option (“Option”) to purchase shares (the “Shares”) of Wells Fargo & Company common stock (“Common Stock”) in the number set forth on the acknowledgement screen for your grant, accessible through Stock Options Management. The Option is granted subject in all respects to the terms of the Company’s Long-Term Incentive Compensation Plan (the “Plan”).

2. Term, Vesting and Exercise of Option. [The term of this Option commences on [insert grant date] and, except as provided in paragraph 3 below, ends on [insert expiration date], provided you are continuously employed by the Company or an Affiliate (“Wells Fargo”). If your employment with Wells Fargo is terminated, the Option may be exercised only as described in paragraph 3 below.

Except as provided in paragraph 3 below, this Option becomes exercisable (“vests”) according to the following table provided it has not been terminated before such date in accordance with the provisions of this Option:

[insert vesting schedule]

To exercise all or part of the Option you must complete the exercise in a manner authorized by the Company and deliver payment as described herein of the exercise price and all applicable withholding taxes. You must pay the exercise price on the day you exercise the Option (a) in cash, (b) in whole shares of Common Stock valued at their Fair Market Value, or (c) by delivering irrevocable instructions to a broker to promptly deliver to the Company the amount of the exercise price and all applicable withholding taxes (a “cashless exercise”), unless you are an executive officer of the Company and such cashless exercise is prohibited by the Sarbanes-Oxley Act of 2002. If Common Stock is used to pay the exercise price (“swap transaction”), the Common Stock used (i) must have been owned by you for at least six months prior to the date of exercise or purchased by you in the open market; and (ii) must not have been used in a stock-for-stock swap transaction within the preceding six months. You shall not have any rights as a stockholder with respect to the Shares of Common Stock subject to the Option until you have exercised the Option for such Shares.]

[For grant recipients who sign Trade Secrets Agreement (see below): The term of this Option commences on [insert date of grant] and, except as provided in paragraph 3 below, ends on [insert expiration date]. Except as provided in paragraph 3 below, this Option becomes exercisable (“vests”) in full on [insert vesting date] (“vesting date”) provided that you satisfy each of the following conditions (“vesting conditions”): (i) you sign the attached Wells Fargo Agreement Regarding Trade Secrets, Confidential Information, And Non-Solicitation (“Trade Secrets Agreement”); and (ii) after you cease to be an Employee and continuing through the vesting date (A) you are available on a reasonable basis for consultation with management and to represent the Company with customers, the community and team members, (B) you comply with terms of the Trade Secrets Agreement, and (C) you do not perform services as an employee, consultant or otherwise for a company or firm that is included in the Company’s “Peer Group” as such term is defined in the Company’s proxy statement for its 2007 annual stockholders’ meeting filed under the Securities Exchange Act of 1934 (“Exchange Act”) and as such term may be updated in the proxy statement for a subsequent annual stockholders’ meeting filed under the Exchange Act. To exercise all or part of the Option you must complete the exercise in a manner authorized by the Company and deliver payment as described herein of the exercise price and all applicable withholding taxes. You must pay the exercise price on the day you exercise the Option (a) in cash, (b) in whole shares of Common Stock valued at their Fair Market Value, or (c) by delivering irrevocable instructions to a broker to promptly deliver to the Company the amount of the exercise price and all applicable withholding taxes (a “cashless exercise”), unless you are an executive officer of the Company and such cashless exercise is prohibited by the Sarbanes-Oxley Act of 2002. If Stock is used to pay the exercise price (“swap transaction”), the Stock used (i) must have been owned by you for at least six months prior to the date of exercise or purchased by you in the open market; and (ii) must not have been used in a stock-for-stock swap transaction within the preceding six months. You shall not have any rights as a stockholder with respect to the Shares of Common Stock subject to the Option until you have exercised the Option for such Shares.]

3. Retirement, Disability, Death or Other Termination of Employment. [If your termination of employment is due to Retirement, your Option will become exercisable according to the table set forth in paragraph 2 above (unless immediately vested and exercisable as a result of your death following Retirement as provided below) and will remain exercisable until the expiration date or until one year after your date of death, whichever occurs first. If you become permanently disabled (as determined by Wells Fargo) while you are employed by Wells Fargo, then your entire Option is immediately vested and exercisable and will remain exercisable until one year after your date of death or until the Option expires, whichever occurs first. If you die while you are employed by Wells Fargo or following your Retirement, the entire Option is immediately vested and exercisable, and your Beneficiary as determined in accordance with the Plan may exercise the Option until one year after the date of your death or until the Option expires, whichever occurs first. If you leave Wells Fargo’s employment for any reason other than death, permanent disability, Retirement, or discharge for cause, you may exercise that part of the Option which was exercisable on the date of termination (as determined by Wells Fargo) at any time within three (3) months after such date of termination or until the expiration date of the Option, whichever occurs first. If you are discharged for cause, the Option will expire upon receipt by you of oral or written notice of termination.]

[For acceleration of grant on Retirement: If your termination of employment is due to Retirement, your Option will immediately vest and become exercisable until the expiration date or until one year after your date of death, whichever occurs first. If you become permanently disabled while you are employed by Wells Fargo, then your entire Option is immediately vested and exercisable and will remain exercisable until one year after your date of death or until the Option expires, whichever occurs first. If you die while you are employed by Wells Fargo, the entire Option is immediately vested and exercisable, and your Beneficiary as determined in accordance with the Plan may exercise the Option until one year after the date of your death or until the Option expires, whichever occurs first. If you leave Wells Fargo’s employment for any reason other than death, permanent disability, Retirement, or discharge for cause, you may exercise that part of the Option which was exercisable on the date of termination (as determined by Wells Fargo) at any time within three (3) months after such date of termination or until the expiration date of the Option, whichever occurs first. If you are discharged for cause, the Option will expire upon receipt by you of oral or written notice of termination.]

[For executive officers who sign Trade Secrets Agreement (see below): If you cease to be an Employee before the vesting date due to your permanent disability, the Option is immediately vested and exercisable and will remain exercisable until one year after your date of death or until the Option expires, whichever occurs first. If you die before the vesting date, the Option is immediately vested and exercisable, and your Beneficiary as determined in accordance with the Plan may exercise the Option until one year after the date of your death or until the Option expires, whichever occurs first. If you are discharged as an Employee for cause before the vesting date, the Option will expire immediately. If you cease to be an Employee before the vesting date due to Retirement or any other reason other than permanent disability, death or discharge for cause, then (i) if you satisfy the vesting conditions the Option will vest and become exercisable on the vesting date, or (ii) if you fail to satisfy the vesting conditions the Option will expire immediately. Following vesting of the Option on the vesting date, the Option will remain exercisable until it expires except in the event of your death in which case your Beneficiary as determined in accordance with the Plan may exercise the Option until one year after the date of your death or until the Option expires, whichever occurs first, or in the event of your discharge for cause in which case the Option will expire immediately.]

[For Directors: Death or Other Termination. the event you leave the Board of Directors of the Company for any reason other than your death or for cause, the Option will remain outstanding and exercisable in accordance with the original terms until the expiration date or until one year after your date of death, whichever occurs first. If you die, the entire Option is immediately vested and exercisable, and your Beneficiary as determined in accordance with the Plan may exercise the Option until one year after the date of your death or until the Option expires, whichever occurs first. In the event you leave the Board of Directors for cause, the Option will terminate and be cancelled as of the date you cease to be a Director.]

4. Compliance and Withholding Taxes. The issuance of Shares upon the exercise of the Option shall be subject to compliance by the Company and you with all applicable requirements of law relating thereto, including withholding tax obligations, and with all applicable regulations of any stock exchange on which the Common Stock may be listed at the time of such issuance. You agree to satisfy all withholding tax obligations applicable to the acquisition of Shares under the Option or the disposition of such Shares that the Company deems necessary. Income taxes are computed based on the difference between the Fair Market Value of the Shares acquired as of the date of exercise and the exercise price for those Shares. Taxes may be paid either in cash or, if you elect, by having the Company withhold from the Shares to be issued a number of Shares (valued at their Fair Market Value as of the date of exercise) necessary to satisfy the taxes. The Company is not obligated to exercise the Option and/or deliver the Shares until all payment obligations are met.

5. Nontransferability of Option. Unless the Committee provides otherwise, (i) no rights under the Option will be assignable or transferable, and neither you nor your Beneficiary will have any power to anticipate, alienate, dispose of, pledge or encumber any rights under the Option, and (ii) the rights and the benefits of the Option may be exercised and received during your lifetime only by you or your legal representative.

6. No Agreement for Wells Fargo to Continue Your Employment. Nothing in this Agreement gives you any right to continued employment and Wells Fargo may terminate you at any time for any reason.

7. General Restrictions. The Company may delay the exercise of the Option if it determines that (a) the Shares subject to the Option should be listed, registered or qualified on any securities exchange or under any law, or (b) the consent of a regulatory body is desirable.

8. Hold Through Retirement Provision. As a condition to receiving this Award, you agree to hold, while employed by the Company or any Affiliate and for a period of one year after your Retirement, shares of Common Stock equal to at least 50% of the after-tax shares of Common Stock (assuming a 50% tax rate) acquired upon exercise of this Award

9. Additional Provisions and Interpretation of this Agreement. This Agreement is subject to the provisions of the Plan. Capitalized terms not defined in this Agreement are used as defined in the Plan. If the Plan and this Agreement are inconsistent, provisions of the Plan will govern. Interpretations of the Plan and this Agreement by the Committee are binding on you and the Company.

[Additional provision for options granted before 2004: Reload Option. If you exercise this Option while you are employed by Wells Fargo and pay the exercise price in Stock as described herein, you are hereby granted a non-qualified reload stock option (“Reload Option”) at the Fair Market Value as of the date of such exercise. The Reload Option will be for the number of whole Shares used in the swap exercise to pay the exercise price plus a number of Shares with respect to the tax liability related to the exercise. Subject to the provisions of paragraph 3, the Reload Option may be exercised between the date of grant and the date of expiration of this Option. The Reload Option shall be subject to the terms and conditions of this Agreement, as modified by this paragraph 5. No Reload Option is granted if this Option is exercised after your Retirement, permanent disability, death or other termination of employment. No Reload Option is granted upon exercise of the Reload Option.]

Wells Fargo Agreement Regarding Trade Secrets, Confidential Information, And Non-Solicitation

I. Introduction

In consideration for the stock option grant awarded to me on [insert applicable date] by Wells Fargo & Company (“the Company”), I acknowledge that the nature of my employment with the Company permits me to have access to certain of its trade secrets and confidential and proprietary information and that such information is, and shall always remain, the sole property of the Company. Any unauthorized disclosure or use of this information would be wrongful and would cause the Company irreparable harm. Therefore, I agree as follows:

II. Trade Secrets And Confidential Information

	•		the names, address, and contact information of the Company’s customers and prospective customers, as well any other personal or financial information relating to any customer or prospect, including, without limitation, account numbers, balances, portfolios, maturity dates, loans, policies, investment activities and objectives;

	•		any information concerning the Company’s operations, including without limitation, information related to its methods, services, pricing, finances, practices, strategies, business plans, agreements, decision-making, systems, technology, policies, procedures, marketing, sales, techniques and processes;

	•		any other proprietary and/or confidential information relating to the Company’s customers, employees, products, services, sales, technologies, or business affairs.

I agree that Confidential Information of the Company is to be used by me solely and exclusively for the purpose of conducting business on behalf of the Company. I am expected to keep such Confidential Information confidential and not to divulge or disclose this information except for that purpose. Upon my retirement, I agree to immediately return to the Company all Records and Confidential Information, including information maintained by me in my office, personal electronic devices, and/or at home.

III. Non-Solicitation Of Company’s Customers And Employees

I agree that for the period beginning on my retirement date with Company through [insert applicable date] (“the Non-Solicitation Period”), I will not interfere with the Company’s business by directly or indirectly soliciting an employee to leave the Company’s employ, by inducing a consultant to sever the consultant’s relationship with Company, or by directly or indirectly soliciting business from any of the Company’s clients, customers, or prospective customers whose identity became known to me during my employment with the Company. This limitation is not intended to limit the Company’s right to prevent misappropriation of its Confidential Information beyond the Non-Solicitation Period.

IV. Partial Invalidity

V. Choice Of Law/Integration/Survival

employment by the Company; inure to the benefit of successors and assigns of the Company, and is binding upon my heirs and legal representatives.

Acknowledgment

I acknowledge that I have read, understand, and received a copy of this Agreement and will abide by its terms.



[Name of Grant Recipient]		Date

Exhibit 10(c)


		WELLS FARGO BONUS PLAN

The Plan is amended effective January 1, 2009 and supersedes the Wells Fargo Bonus Plan originally effective January 1, 2000, subsequently clarified effective January 1, 2004 and January 1, 2006, and amended and restated effective January 1, 2008. Participants, incentive opportunities and Performance Measures shall be identified annually.

PURPOSE OF THE PLAN

The purpose of the Wells Fargo Bonus Plan (the “Plan”) is to motivate a select group of management, supervisory and individual contributors to achieve superior results for Wells Fargo & Company and its subsidiaries (“Wells Fargo”). The Plan is designed to provide Participants with incentive compensation opportunities that focus on individual accountability for appropriate risk management and full compliance with applicable laws and regulations, as well as individual and team contributions through the measurement of meaningful performance goals that are consistent with Wells Fargo’s corporate and business unit objectives.

The terms of the Plan are intended to comply with the requirements under any applicable law, including the Emergency Economic Stabilization Act of 2008, as amended (“EESA”). In the event the terms of the Plan are impacted by the provisions of EESA and the rules, regulations and guidance issued thereunder or any other applicable law, a Participant’s rights to or receipt of compensation under the Plan may be modified, recovered or limited to ensure compliance.

This document is comprised of three sections:

	1.		Plan Eligibility

	2.		Plan Components

	3.		Plan Administration

For questions related to this document, policies or the administration of the Plan, please contact your Human Resources representative.

PLAN ELIGIBILITY

A.		Plan Eligibility

		Subject to the following proviso, a select group of Wells Fargo management, supervisors and individual contributors who are in a position to control or influence business results are eligible to participate in the Plan (“Participants”); provided, however, that any individual who on the last day of a Plan Year is an “officer” as determined by Wells & Company’s Board of Directors for purposes of Section 16 of the Securities Exchange Act of 1934, as amended, shall not be eligible to participate in the Plan for that Plan Year even if he or she was previously identified for participation for that Plan Year. Eligibility for participation is determined on a case-by-case basis. Business unit managers are responsible for identifying Participants within their business units prior to the beginning of the Plan Year.

		The intent of the Plan is to provide incentive awards to those Participants who are not eligible for a bonus or cash incentive compensation under any other plan or written agreement with Wells Fargo. Therefore, Plan Participants who participate in any other Wells Fargo-sponsored cash incentive compensation plan are not eligible to receive an award under this Plan.

B.		Plan Qualifiers.

Page 2 of 9 Pages

For purposes of this Plan, a “Disqualifying Factor” is an event, the occurrence of which immediately invalidates a Participant’s opportunity for an incentive award. If a Participant’s incentive opportunity is subject to a Disqualifying Factor and the event occurs, the Participant shall have no incentive opportunity for that particular Plan Year.

	1.		A Plan Participant must be employed by Wells Fargo as of the last day of the Plan Year in order to be eligible for an incentive award under the Plan, unless otherwise noted below or in the Plan Administration section. There will be no incentive opportunity for the Plan Year for those Participants who experience a voluntary or involuntary termination before the last day of the Plan Year. Exceptions may be made if the termination is a result of the Participant’s retirement, death or a qualifying event under the Wells Fargo & Company Salary Continuation Pay Plan as set forth in the leave of absence or death or retirement policies in the Plan Administration section.

	2.		A Plan Participant must receive a performance rating of 3 or greater for the applicable Plan Year to be considered for an incentive award, unless approved for consideration by the Operating Committee member and Senior Human Resources Leader for the team member’s business group.

	3.		The Corporate EPS (Earnings Per Share) threshold must be met for payout to occur under this Plan. If the threshold Corporate EPS is not met, no bonuses will be earned unless specifically authorized by the Human Resources Committee of the Wells Fargo Board of Directors (HRC). In addition, if Wells Fargo achieves or exceeds the Corporate EPS threshold, the HRC reserves the authority to adjust bonuses, up or down, in its discretion.

		Business unit managers should work with their HR representative to identify any other Disqualifying Factors that may impact a Participant’s eligibility under the Plan.

		In addition to the Disqualifying Factors described above, a Participant’s incentive opportunity under the Plan may be adjusted or denied, regardless of meeting individual Performance Measures or the Corporate EPS threshold, for unsatisfactory performance or non-compliance with or violation of Wells Fargo’s:

	1.		Code of Ethics and Business Conduct;

	2.		Information Security Policy, and/or

	3.		Compliance and Risk Management Accountability Policy.

PLAN COMPONENTS


Award Opportunity		Business unit managers, working with Human Resources, shall establish an incentive target for each Participant’s position.

		The incentive opportunity should be a range around the target:

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		• Threshold - 50% of the target award - Satisfactory performance that falls short of target.

		• Target -100% of the target award - Good, commendable on plan performance.

		• Maximum - 150% of target award - Performance that exceeds expectations.

Performance Measures		A Performance Measure defines the action or resultant performance expected of a Participant in a given Plan Year. Performance Measures may vary from year to year, from position to position or from one Participant to another. Typically each Participant should have three to five measures set by their business unit manager. The Performance Measures should be indicators of the expected:

		1. Overall financial success at the Participant’s level or of the Participant’s business unit

		2. Tactical, operation achievements which will contribute to the overall success at the Participant’s level or business unit

		and/or

		3. Major strategic milestones achieve by or on behalf of the Participant, the Participant’s business unit or Wells Fargo

Performance Measures (continued)		The business unit manager is responsible for defining the Performance Measures within the Plan. The business unit manager is encouraged to consult with the Participant and Human Resources in identifying the Performance Measures. Performance Measures should be established for each Participant to be effective as of the beginning of the Plan Year. All Performance Measures and Award recommendations are subject to review and modification at higher levels of the organization.

		Some characteristics of Performance Measures:

		• The Performance Measures should include identifiable activities and/or results for each level of achievement. Most Performance Measures (commonly referred to as “MBOs” or Management Business Objectives) should have at least three defined Performance Levels: Threshold, Target and Maximum.

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		• At least one Performance Measure should have a financial objective that is linked to business group objectives.

		• One Performance Measure may be based on Corporate EPS. The appropriate weighting will be determined by the business unit manager.

		• Where possible, Participants should have at least one Performance Measure linked to either P&L or expense management. These measures can be set up as distinct MBOs or an additional Plan Qualifier.

		• For Compliance Professionals

		1. The financial goal must be tied to the financial performance of the manager who is at least one level above the Compliance Professional’s immediate supervisor.

		2. The Compliance Professional’s direct manager will evaluate the Compliance Professional’s performance measures with input from the Compliance Professional’s dotted-line manager(s). The final award recommendation under this Plan will be jointly approved by the direct manager and the dotted-line manager.

		More suggestions on writing good MBOs can be obtained from HR or can be found in the Wells Fargo Bonus Plan calculator.

Measure Weighting and Scoring		While Performance Levels are designated as target, threshold and maximum, individual measures can be scored as either an all-or-nothing goal or on a scale. Performance Measures may be weighted equally or weighted individually to correspond with the Participant’s accountability, strategic and tactical priorities, and/or the difficulty of achieving the goal.

		The scores for multiple Performance Measures are aggregated to determine the final award level. The business unit manager is responsible for identifying the target, threshold and maximum Performance Levels and the scoring guides that will be used to calculate the Participant’s incentive award.

Award Calculation and Payment		Performance shall be evaluated as soon as practicable following completion of the Plan Year by the Participant’s business unit manager and/or any other manager responsible for reviewing incentive compensation awards in the Participant’s business unit. All awards under the Plan are subject to the following guidelines:

Page 5 of 9 Pages


		• Each Performance Measure is evaluated individually following the end of the Plan Year. Provided the Plan Qualifiers have been met, the Participant’s incentive award for a Plan Year is determined by adding the values determined for each Performance Measure taking into consideration any assigned weighting. The incentive award should be consistent with the overall Target Bonus opportunity identified for the Participant’s position.

		• A Participant’s award may be increased or decreased by up to 15% of its value, on a discretionary basis by the manager of the Participant’s business unit.

		• Incentive awards are generally calculated as a percentage of a Participant’s base salary and will be awarded no later than 75 days following the end of the Plan Year.

		• With approval from the Plan Administrator, an incentive award may be reduced in any amount or denied for unsatisfactory performance. An incentive award may also be denied if a Participant is involuntarily terminated before the date that the Participant’s incentive award is paid.

		• Awards may be paid in the form of cash or equity, or a combination thereof, in the HRC’s discretion. To the extent the HRC directs the Company to pay all or a portion of an award in the form of an equity award under the Wells Fargo & Company Long-Term Incentive Compensation Plan (the “LTICP”), the equity award will in all cases be conditioned upon and subject to the approval of the HRC and be subject to such terms and conditions as approved by the HRC in accordance with the provisions of the LTICP and reflected in the applicable award agreement.

PLAN ADMINISTRATION

	A.		Plan Administrator

			The Plan Administrator is the Executive Vice President and Director of Human Resources. The Plan Administrator has full discretionary authority to administer and interpret the Plan and may, at any time, delegate to personnel of Wells Fargo such responsibilities as he or she considers appropriate to facilitate the day-to-day administration of the Plan. The Plan Administrator also has the full discretionary authority to adjust or amend a Participant’s incentive opportunity under the Plan at any time subject to the authority of the HRC to adjust bonuses as described herein.

Page 6 of 9 Pages

			Plan commitments or interpretations (oral or written) by anyone other than the Plan Administrator or one of his/her delegates are invalid and will have no force upon the policies and procedures set forth in this Plan.

	B.		Plan Year

			Participant performance is measured and financial records are kept on a “Plan Year” basis. The Plan Year is the 12-month period beginning each January 1 and ending on the following December 31, unless the Plan is modified, suspended or terminated.

	C.		Disputes

			If a Participant has a dispute regarding his/her incentive award under the Plan, the Participant should attempt to resolve the dispute with the manager of his/her business unit. If this is not successful, the Participant should prepare a written request for review addressed to the Participant’s Human Resources representative. The request for review should include any facts supporting the Participant’s request as well as any issues or comments the Participant deems pertinent. The Human Resources representative will send the Participant a written response documenting the outcome of this review in writing no later than 60 days following the date of the Participant’s written request. (If additional time is necessary, the Participant shall be notified in writing.) The determination of this request shall be final and conclusive upon all persons.

	D.		Amendment or Termination

			The Board of Directors of Wells Fargo & Company (the “Company”), and the Human Resources Committee of the Board of Directors, the Company’s President, any Vice Chairman, or the Director of Human Resources may amend, suspend or terminate the Plan at any time, for any reason. No amendment, suspension or termination of the Plan shall adversely affect a Participant’s incentive award earned under the Plan prior to the effective date of the amendment, suspension or termination, unless otherwise agreed to by the Participant.

	E.		Leaves of Absence

			Incentive awards payable under the Plan may be pro-rated for Participants who go on a leave of absence provided the terms and conditions of the Plan have been satisfied, Participant actively worked at least three months during the Plan Year and the Participant’s performance contributed towards the achievement of some or all of the Participant’s Performance Measures. If a Participant satisfies all of the Participant’s Performance Measures, the Participant’s award should not be pro-rated. Business units should apply these criteria consistently to all Participants.

			For Participants who receive notice of a qualifying event under the Wells Fargo & Company Salary Continuation Pay Plan, the Notice Period (as defined by that plan) should be considered in determining whether the Participant satisfies the three-month “actively at work” requirement. Incentive awards will be determined following the end of the Plan Year and are subject to the other terms and conditions of the Plan.

Page 7 of 9 Pages

Changes in Employment Status

	1.		Employees hired after the beginning of the Plan Year may be eligible to participate in the Plan. Incentive Opportunity Percentages and Performance Measures should be designed accordingly. Where Performance Measures are impractical to develop for a partial Plan Year, eligibility should be delayed until the next Plan Year.

	2.		If, during the Plan Year, a Participant transfers to another business unit or receives a promotion to a new position within Wells Fargo, the Participant’s incentive award should be pro-rated provided the Participant met some or all of the Performance Measures prior to the transfer or promotion. Incentive awards will be determined following the end of the Plan Year.

	G.		Death or Retirement

			In the event of a Participant’s death or retirement during the Plan Year, the Participant’s incentive award may be pro-rated provided the Participant actively worked for at least three months during the Plan Year and met some or all of the Participant’s Performance Measures.

	H.		Withholding Taxes

			Wells Fargo shall deduct from all payments under the Plan an amount necessary to satisfy federal, state or local tax withholding requirements.

	I.		Not an Employment Contract

			The Plan is not an employment contract and participation in the Plan does not alter a Participant’s at-will employment relationship with Wells Fargo. Both the Participant and Wells Fargo are free to terminate their employment relationship at any time for any reason. No rights in the Plan may be claimed by any person whether or not he/she is selected to participate in the Plan. No person shall acquire any right to an accounting or to examine the books or the affairs of Wells Fargo.

	J.		Assignment

			No Participant shall have any right or power to pledge or assign any rights, privileges, or incentive awards provided for under the Plan.

	K.		Unsecured Obligations

			Incentive awards under the Plan are unsecured obligations of the Company.

	L.		Pro-Rated Awards

In the event that an award needs to be pro-rated the following methodology should be used.

Page 8 of 9 Pages



			The annual salary should be multiplied by the ratio of months worked during the year by the target bonus percentage.

			The ratio of months worked is equal to the number of full months worked in the qualifying position divided by 12.

			For example, a Participant is transfers to another position on November 1st. Their salary was $100,000 per year at the time of transfer, and they had a 10% bonus target. They achieved all their goals at target level. Their bonus would be:

	M.		Code of Conduct

			Violation of the terms or the spirit of the Plan and/or Wells Fargo’s Code of Ethics and Business Conduct by the Participant and/or the Participant’s supervisor, or other serious misconduct (including, but not limited to, gaming which is more fully discussed below), are grounds for disciplinary action, including disqualification from further participation in the Plan (including awards payable under the terms of the Plan) and/or immediate termination of employment.

			Participants are expected to adhere to ethical and honest business practices. A Participant who violates the spirit of the Plan by “gaming” the system becomes immediately ineligible to participate in the Plan. “Gaming” is the manipulation and/or misrepresentation of sales or sales reporting in order to receive or attempt to receive compensation, or to meet or attempt to meet goals.

	N.		Internal Revenue Code Section 409A

			To the extent that an award is paid in cash under the Plan, Wells Fargo intends such award to qualify as a short-term deferral exempt from the requirements of Internal Revenue Code Section 409A. In the event an award payable under the Plan does not qualify for treatment as an exempt short-term deferral, such amount will be paid in a manner that will satisfy the requirements of Internal Revenue Code Section 409A and applicable guidance thereunder.

Page 9 of 9 Pages

Exhibit 10(f)

Amended and Restated Deferred Compensation Plan

WELLS FARGO & COMPANY

DEFERRED COMPENSATION PLAN

(As Amended and Restated Effective as of January 1, 2008)

1. Purpose, History and Effective Dates . On July 27, 1993, the Board of Directors of Norwest Corporation, a Delaware corporation now known as “Wells Fargo & Company” (the “Company”), authorized the creation of a nonqualified, unfunded, elective deferral plan known as the “Norwest Corporation Employees’ Deferred Compensation Plan” (the “Plan”) for the purpose of allowing a select group of management and highly compensated employees of the Company and its Affiliates to defer the receipt of compensation which would otherwise be paid to those employees. Effective July 1, 1999, the name of the Plan was changed to the “Wells Fargo & Company Deferred Compensation Plan.” The Company reserved the power to amend and terminate the Plan by action of the Human Resources Committee of the Company’s Board of Directors. The Human Resources Committee exercised that reserved power of amendment by the adoption of an amended and restated Plan document effective January 1, 2004, and by the adoption of this amended and restated Plan document (the “Restatement”) effective January 1, 2008 (the “Restatement Effective Date”).

The terms of this Restatement are intended to comply with Internal Revenue Code §409A, as added by the American Jobs Creation Act of 2004 and applicable guidance thereunder. The terms of this Restatement shall apply to: (i) deferred compensation that relates all or in part to services performed on or after January 1, 2005, and (ii) deferred compensation that relates entirely to services performed on or before December 31, 2004 is such amounts were not earned or vested prior to January 1, 2005. This Restatement is not intended to materially modify the Plan with respect to any other amounts payable pursuant to the Plan. This Restatement shall be construed and administered accordingly.

2. Definitions . When the following terms are used herein with initial capital letters, they shall have the following meanings:

	(A)		Affiliate. Any entity other than the Company that is part of a “single employer” within the meaning of subsection (b) or (c) of Code §414 that includes the Company; subject, however, to such aggregation rules as may be provided in applicable guidance under Code §409A.

	(B)		CD Option . An earnings option based on a certificate of deposit in such denomination and for such duration as is determined from time to time by the Plan Administrator.

	(C)		Code . The Internal Revenue Code of 1986, as from time to time amended.

	(D)		Common Stock . Shares of Wells Fargo & Company common stock.

	(E)		Common Stock Earnings Option . An earnings option based on shares of Common Stock.

	(F)		Compensation . The following amounts earned by an Eligible Employee during a Deferral Year for services rendered to the Company or its Affiliates and payable (if not deferred) no

later than March 15 of the Plan Year following the Deferral Year: base salary, incentives, commissions, and bonuses; provided, however, that Compensation shall not include:

	(1)		any award under the Company’s Long-Term Incentive Compensation Plan, or any successor to that plan;

	(2)		any amount if the right to receive that amount is conditioned on the Eligible Employee’s Separation from Service;

	(3)		compensation for a period of salary continuation leave; and

	(4)		bonus amounts payable after March 1 of the Plan Year following the Deferral Year in which the Employee’s Separation from Service occurs, unless the Eligible Employee elected payment in annual installments and Section 9(I) does not apply.

	(G)		Deferral Account . A bookkeeping account maintained for a Participant to which is credited the amounts deferred under a Deferral Election or a Stock Option Gain Deferral Election, together with any increase or decrease thereon based on the earnings option(s) selected by the Participant or mandated by the Plan.

	(H)		Deferral Election . An irrevocable election made by an Eligible Employee during an enrollment period specified by the Plan Administrator or the Plan to defer the receipt of Compensation for a given Deferral Year. The term Deferral Election does not include a Stock Option Gain Deferral Election.

	(I)		Deferral Year . The Plan Year for which a Deferral Election is made.

	(J)		Eligible Employee . Each employee of the Company or any of its Affiliates who has been selected for participation in this Plan for a given Plan Year pursuant to Section 3 of the Plan.

	(K)		ERISA . The Employee Retirement Income Security Act of 1974, as from time to time amended.

	(L)		Fund Option . An earnings option based on a selection of registered investment companies, collective investment funds, private portfolios, or other comparable investment media chosen from time to time by the Company’s Employee Benefits Review Committee.

	(M)		Initial Deferral Election . The special Deferral Election described in Section 6(C) that is available only to certain Eligible Employees who have not previously participated in an account balance nonqualified deferred compensation plan maintained by the Company or an Affiliate.

	(N)		Key Employee . If the Plan Administrator determines that the Participant is a “Key Employee” for purposes of Code section 409A, no lump sum or monthly annuity payment shall be paid to the Participant prior to the date that is six months after the date the Participant’s Separation from Service occurred.

(1)

For purposes of this Plan, a Key Employee means:

(a)

any Participant who is a “key employee” under Code section 416(i)(1)(A)(i), (ii) or (iii) (applied in accordance with the regulations thereunder and disregarding Code section 416(i)(5)) at any time during the 12-month period ending on the key employee identification date. For purposes of determining “key employee”

			status under Code section 416(i)(1)(A)(i), except as required under such provision and the regulations thereunder, the term “officer” shall refer to an employee of the Company or an Affiliate with the title Senior Vice President or above, and

	(b)		any Participant who served as a member of the Company’s Management Committee at any time during the 12-month period ending on the key employee identification date.

	(2)		For purposes of applying Code section 409A, the “key employee identification date” is each December 31 ^st . Any person described in paragraph (A) on a key employee effective date shall be treated as a Key Employee for the entire 12-month period beginning on the following April 1 ^st .

	(3)		Notwithstanding paragraphs (1) and (2) of this Section 2(N), in the event of a corporate transaction to which the Company or an Affiliate is a party, the Plan Administrator may, in his her or discretion, establish a method for determining Specified Employees pursuant to Treasury Regulation Section 1.409A-1(i)(6).

	(O)		Participant . Each Eligible Employee who enters into a Deferral Election, who prior to 2004 entered into a Stock Option Gain Deferral Election, or who has a Transferred Account set up under the Plan. An employee who has become a Participant shall remain a Participant in the Plan until the date of the Participant’s death or, if earlier, the date the Participant no longer has any accounts under the Plan.

	(P)		Plan Administrator . For purposes of Section 3(16)(A) of ERISA, the Human Resources Committee of the Company’s Board of Directors has designated that the Plan Administrator shall be the Company’s Director of Human Resources.

	(Q)		Plan Year . The twelve-month period beginning on any January 1 and ending the following December 31.

	(R)		Separation from Service . For purposes of this Plan, a participant’s “Separation from Service” occurs upon his or her death, retirement or other termination of employment or other event that qualifies as a “separation from service” under Code section 409A and the applicable regulations thereunder as in effect from time to time. The Plan Administrator shall determine in each case when a participant’s Separation from Service has occurred, which determination shall be made in a manner consistent with Treasury Regulation Section 1.409A-1(h). The Plan Administrator shall determine that a Separation from Service has occurred as of a certain date when the facts and circumstances indicate that the Company (or an Affiliate, if applicable) and the participant reasonably anticipate that, after that date, the participant will render no further services, or the participant’s level of bona fide services (either as an employee or independent contractor) will permanently decrease to a level that is 20% or less than the average level of the participant’s bona fide services (either as an employee or independent contractor) previously in effect for such participant over the immediately preceding 36-month period (or the participant’s entire period of service, if the participant has been providing services for less than 36 months). If the Participant incurs a Separation from Service as determined by the Plan Administrator, a subsequent rehire will not impact the prior Separation from Service determination and distribution will commence pursuant to Section 9.

			The following presumptions shall also apply to all such determinations:

	(1)		Transfers . A Separation from Service has not occurred upon the participant’s transfer of employment from the Company to an Affiliate or vice versa, or from an Affiliate to another Affiliate.

	(2)		Medical leave of absence . Where the participant has a medical leave of absence due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, and he or she has not returned to employment with the Company or an Affiliate, a Separation from Service has occurred on the earlier of: (A) the first day on which the participant would not be considered “disabled” under any disability policy of the Company or Affiliate under which the participant is then receiving a benefit; or (B) the first day on which the participant’s medical leave of absence period exceeds 29 months.

	(3)		Military leave of absence . Where the participant has a military leave of absence, and he or she has not returned to employment with the Company or an Affiliate, a Separation from Service has occurred on the day next following the last day on which the participant is entitled to reemployment rights under USERRA.

	(4)		Salary continuation leave . A Separation from Service has occurred on the first day of the Participant’s salary continuation leave taken under the Company’s salary continuation leave program.

	(5)		Other leaves of absence . In the event that the participant is on a bona fide leave of absence, not otherwise described in this Sec. 2(R), from which he or she has not returned to employment with the Company or an Affiliate, the participant’s Separation from Service has occurred on the first day on which the participant’s leave of absence period exceeds six months or, if earlier, upon the participant’s termination of employment (provided that such termination of employment constitutes a Separation from Service in accordance with the last sentence of the first paragraph of this section):

	(6)		Asset purchase transaction . If, in connection with the sale or other disposition of substantial assets (such as a division or substantially all assets of a trade or business) of the Company or an Affiliate to an unrelated buyer, the participant becomes an employee of the buyer or an affiliate of the buyer upon the closing of or in connection with such transaction, a Separation from Service has not occurred if the Company and the buyer have specified that such transaction will not, with respect to any individual affected by such transaction who becomes an employee of the buyer or an affiliate, be considered a “separation from service” under Treasury Regulation Section 1.409A-1(h), and such specification meets the requirements of Treasury Regulation Section 1.409A-1(h)(4).

	(S)		Stock Option Gain Compensation . Gain realized from the exercise of specified Common Stock option grants under the Company’s Long-Term Incentive Compensation Plan, or any other stock option plan approved by the Plan Administrator, using the stock-for-stock swap (“stock swap”) method of exercise. Stock option gains derived from either a cash exercise or a same day sale are not Stock Option Gain Compensation.

	(T)		Stock Option Gain Deferral Election . An irrevocable election to defer the receipt of Stock Option Gain Compensation made by an Eligible Employee prior to January 1, 2004.

	(U)		Transferred Account . A bookkeeping account maintained for a Participant to which is credited the Participant’s interest in any nonqualified deferred compensation plan transferred

to this Plan, together with any increase or decrease thereon based on the earnings option(s) selected by the Participant or mandated by the Plan.

3. Eligibility . Each employee of the Company or an Affiliate who has been selected for participation in this Plan by the Plan Administrator, or by such officers of the Company to whom the Plan Administrator has delegated its authority, shall be considered an Eligible Employee and shall be eligible to make Deferral Elections under the Plan until such time as the employee’s selection is revoked. Selection of an employee for participation in this Plan shall be deemed to occur on the date notice of the employee’s selection is sent to the employee in accordance with the notice procedures established by the Plan Administrator. In the event an employee’s selection is revoked and the employee ceases to be an Eligible Employee, such revocation shall have no effect on any outstanding deferral elections.

4. Transferred Accounts . Transferred Accounts created following a merger or transfer described in Appendix A shall be subject to the terms and conditions described in Appendix A. To the extent, if any, Appendix A makes distribution of a Transferred Account subject to the rules of this Plan without specifying whether the distribution rules of Section 8 or Section 9 will apply, the rules of this Plan applicable to distribution of the Transferred Account shall be (a) the rules in Section 8, if the Transferred Accounts are attributable to amounts earned and vested prior to January 1, 2005, and (b) the rules in Section 9, if the Transferred Accounts are attributable to amounts not earned and vested prior to January 1, 2005. Individuals for whom a Transferred Account is maintained shall be considered Participants in this Plan with respect to their Transferred Accounts from the date indicated in Appendix A through the date their Transferred Accounts are fully distributed. Such Participants shall not, however, be entitled to enter into Deferral Elections unless they are also Eligible Employees within the meaning of the Plan. The right of such Participants to make Deferral Elections shall be subject to any additional limitations described in Appendix A.

5. Deferral of Compensation .

	(A)		Deferral Elections for Deferral Years Beginning On or After January 1, 2008 . An Eligible Employee may elect to defer all or any part of his or her Compensation for a Deferral Year beginning on or after January 1, 2008, by making a Deferral Election in accordance with Section 6 below.

	(B)		Deferral Elections for Deferral Years Beginning Prior to January 1, 2008 . Deferral Elections for Deferral Years beginning prior to January 1, 2008, were made pursuant to the terms of the Plan in effect at the time of the Deferral Election.

	(C)		Stock Option Gain Deferral Elections . Effective January 1, 2004, the Plan no longer permits Eligible Employees to enter into Stock Option Gain Deferral Elections. Stock Option Gain Deferral Elections made prior to that date were made pursuant to the terms of the Plan in effect at the time of the Stock Option Gain Deferral Election. Notwithstanding anything in those terms or in this Plan to the contrary, Stock Option Gain Deferral Elections with respect to options that were not earned and vested as of December 31, 2004, and Stock Option Gain Deferral Elections with respect to options that have not been exercised before the Participant’s employment termination, shall be void and have no effect.

6. Deferral Elections . Deferral Elections made with respect to Deferral Years beginning on or after January 1, 2008 shall be subject to the following:

	(A)		Time . Except as otherwise provided in (C) below, an Eligible Employee who wishes to defer Compensation for a Deferral Year must file an irrevocable Deferral Election with respect to that Compensation during the enrollment period specified by the Plan Administrator for that Deferral Year, but no later than December 31 of the Plan Year preceding that Deferral Year. A Deferral Election shall be effective only for the Deferral Year specified in the Deferral Election. A new Deferral Election must be filed for each Deferral Year.

	(B)		Content . An Eligible Employee’s Deferral Election shall indicate the amount of Compensation deferred, the earnings option(s) that will determine earnings on the deferred Compensation (see Section 7(A)), and the time and form of distribution (see Section 9). The Eligible Employee shall specify for each Compensation category the amount to be deferred per pay period, expressed either as a percentage or a dollar amount.

	(C)		Initial Deferral Elections . An employee who:

	(1)		has not previously been eligible to participate in any “account balance plan” (as defined in Treas. Reg. §31.3121(v)(2)-1(c)(1)(ii)(A)) maintained by the Company or any Affiliate, other than a plan described in paragraph (c)(2)(i)(D), (E), (F), (G) or (H) of Treas. Reg. §1.409A-1, including any arrangement that would have been such an account balance plan if the person had been an employee at the time of his or her participation, and

	(2)		becomes an Eligible Employee on or before the one-month anniversary of the employee’s date of hire,

			may make a special Deferral Election (“Initial Deferral Election”) within thirty (30) days after the date on which he or she became an Eligible Employee. An Initial Deferral Election shall apply only to Compensation earned from the beginning of the first full payroll period that starts after the Eligible Employee’s Initial Deferral Election is received by the Plan Administrator or the person designated by the Plan Administrator to receive such elections. (For example, if a person is hired on April 2nd, becomes an Eligible Employee on April 10th, and files a Deferral Election on May 3rd, the Compensation deferred by that election will be the Eligible Employee’s Compensation for the period beginning with the first full payroll period starting after May 3rd and ending on December 31st of that same year.) The portion of bonus or incentive Compensation deferred by an Initial Deferral Election will be determined by multiplying the total amount earned during the Deferral Year by a fraction, the numerator of which is the number of days in the Deferral Year during and after such first full payroll period over which the bonus or incentive was earned and the denominator of which is the total number of days in the Deferral Year over which the bonus or incentive was earned, but disregarding any days prior to the Eligible Employee’s date of hire. If an Eligible Employee is eligible to make an Initial Deferral Election during an enrollment period described in Section 6(A), any election made during the enrollment period will be treated as an election pursuant to Section 6(A), and not as an election pursuant to this Section 6(C), unless the election form clearly indicates that it is intended to be an Initial Deferral Election pursuant to this Section 6(C) or the Eligible Employee has previously filed an election pursuant to Section 6(A) during that enrollment period.

	(D)		Reduced by Payroll Deductions . The amount of Compensation actually deferred shall be reduced to the extent necessary (1) to pay the Federal Insurance Contributions Act (“FICA”) taxes imposed under §3101 and §3111 of the Code and any other payroll deductions determined by the

Plan Administrator prior to the beginning of the Deferral Year, or (2) to satisfy any limitations established by the Plan Administrator prior to the beginning of the Deferral Year.

	7.		Deferral Account Valuation .

	(A)		Earnings Options . At the time of his or her Deferral Election, a Participant must choose to allocate the amounts that will be credited to the Participant’s Deferral Account among the following earnings options in increments of one (1) percent:

	(1)		Common Stock Earnings Option

	(2)		CD Option

	(3)		Fund Options

			A minimum of twenty (20) percent of the amounts credited pursuant to each Deferral Election must be allocated to the Common Stock Earnings Option. All deferred Stock Option Gain Compensation will automatically be allocated to the Common Stock Earnings Option. Except with respect to amounts allocated to the Common Stock Earnings Option, a Participant shall be entitled to change the earnings options for the Participant’s Deferral Accounts with such frequency (but no more than twice each year), and effective as of such dates, as determined by the Plan Administrator by making a reallocation election with the Plan Administrator pursuant to a procedure established by the Plan Administrator. A reallocation election will not change the allocation of future deferrals. (For example, if the Plan Administrator allowed a reallocation election effective July 1, all of a Participant’s Deferral Account balances as of that date would be changed, including amounts credited earlier in the same Deferral Year. Amounts deferred later in that Deferral Year, however, would still be allocated in the manner elected in the Participant’s Deferral Election for that Deferral Year, subject to reallocation if the Participant files a later reallocation election.)

	(B)		Periodic Credits of Deferral Amounts . Deferred Compensation shall be credited to a Participant’s Deferral Account as of the day it would otherwise have been paid to the Participant. Stock Option Gain Compensation will be credited to a Participant’s Deferral Account as of the stock option exercise date. All periodic credits to a Participant’s Deferral Account under the Fund Options shall be in share equivalents of the Fund Options. All periodic credits to a Participant’s Deferral Account under the Common Stock Earnings Option shall be in share equivalents of Common Stock. The number of share equivalents of Common Stock credited to a Deferral Account for Compensation or Stock Option Gain Compensation allocated to the Common Stock Earnings Option shall be determined by dividing the amount so allocated by the New York Stock Exchange-only closing price per share of Common Stock on the day as of which the amount is credited (or, if the New York Stock Exchange is closed on that date, on the next preceding date on which it is open).

	(C)		Increase or Decrease to Deferral Accounts . The value of a Participant’s Deferral Account will increase or decrease as follows:

(1)

CD Option . The amount of the increase or decrease for the CD Option for a particular calendar month is calculated based on the interest rate as of the first business day of that month for a certificate of deposit in such denomination and for such duration as is determined by the Plan Administrator.

	(2)		Fund Options . The amount of the increase or decrease for a Fund Option is based on the performance for the selected Fund Option.

	(3)		Common Stock Earnings Option . The amount of the increase or decrease for the Common Stock Earnings Option is based on the performance of the Common Stock including dividends. Common Stock dividend equivalents will be credited under the Common Stock Earnings Option at the same time and same rate as dividends are paid on shares of Common Stock. Cash dividend equivalents shall be converted to share equivalents based on the New York Stock Exchange-only closing price per share of Common Stock on the last business day prior to the dividend payment date (or, if the New York Stock Exchange is closed on that date, on the next preceding date on which it is open).

8. Distribution of Accounts Earned and Vested Prior to January 1, 2005 . Deferral Accounts earned and vested prior to January 1, 2005 (including all Deferral Accounts attributable to Stock Option Gain Deferral Elections), shall be distributed in accordance with the applicable Deferral Election or Stock Option Gain Deferral Election, subject to the following:

	(A)		Lump Sum or Installment Distributions . The Participant must elect to receive the balance of each Deferral Account in either a lump sum or in annual installments over a period of years up to ten.

	(B)		Timing of Distribution . The Participant must designate on his or her Deferral Election the year that distribution from the resulting Deferral Account shall commence. For purposes of Stock Option Gain Deferral Elections, the Participant may not elect to receive the distribution earlier than twelve (12) months after the date on which the option is exercised. In all events, however, distribution shall commence as soon as practicable after the March 1 immediately following the date the Participant ceases to be employed by the Company and its Affiliates. A Participant who is actively employed by the Company or an Affiliate shall be permitted to make a one-time redeferral election to push back the timing of distribution of a particular Deferral Year by selecting a new distribution year that is at least three (3) years beyond the originally elected distribution year and by completing an election form in a form provided by the Plan Administrator at least twelve (12) months prior to the originally elected distribution year. If a Participant redefers by electing a new distribution year for a particular Deferral Year, that Deferral Account shall become subject to the terms of the Plan in effect for Deferral Accounts earned and vested prior to January 1, 2005 at the time of the new distribution election including the early withdrawal provisions. An election of a new distribution year shall not change the form of distribution (lump sum or installments) originally selected on the Participant’s Deferral Election.

	(C)		Upon Death . If a Participant dies before receiving all payments under the Plan, payment of the balance in the Participant’s Deferral Accounts shall be made to the Participant’s designated beneficiary in the forms of distribution elected by the Participant on the Participant’s Deferral Elections as soon as practicable after the March 1 following the date of the Participant’s death. To be valid, a beneficiary designation must be in writing and the written designation must have been delivered to and accepted by the Plan Administrator prior to the Participant’s death.

			If at the time of the Participant’s death the Company is not in possession of a fully effective beneficiary designation form, or if the designated beneficiary does not survive the Participant, the

Participant’s beneficiary shall be the person or persons surviving the Participant in the first of the following classes in which there is a survivor. If a person in the class surviving dies before receiving the balance of the Participant’s Deferral Accounts (or the person’s share of such Participant’s Deferral Account balance in the case of more than one person in the class), that person’s right to receive the Participant’s Deferral Account balance will lapse and the determination of who will be entitled to receive the Participant’s Deferral Account balance will be made as if that person predeceased the Participant.

	(1)		Participant’s surviving spouse.

	(2)		Participant’s surviving same-sex spouse.

	(3)		Participant’s surviving domestic partner.

	(4)		Equally to the Participant’s children, except that if any of the Participant’s children predeceases the Participant but leave descendants surviving, such descendants shall take by right of representation the share their parent would have taken if living.

	(5)		Participant’s surviving parents equally.

	(6)		Participant’s surviving brothers and sisters equally.

	(7)		Participant’s estate.

(D)

Transitional Rule . Notwithstanding the foregoing distribution rules contained in this Section 8, a Participant who was employed by the Company on January 1, 2000 and who entered into a Deferral Election for a Deferral Year prior to January 1, 2000 or had a Transferred Account (collectively “Prior Deferral Elections”) and who had not commenced distribution of such Prior Deferral Election prior to January 1, 2000, was given a one-time opportunity effective January 1, 2000 to elect to change the method of distribution (lump sum versus installments) or to postpone the distribution commencement date for a Prior Deferral Election for a period of at least one year from the original distribution commencement date selected on the Prior Deferral Election. To be effective, such change had to be submitted to the Plan Administrator on a form provided by the Plan Administrator by December 31, 1999, or if earlier, a date required by the Plan Administrator. If the change was not submitted by December 31, 1999, the method and timing of distribution elected on the Prior Deferral Election remained in effect. If the Participant elected to make a change to a Prior Deferral Election, the amount deferred under the Prior Deferral Election and all earnings attributable to that Prior Deferral Election became subject to the distribution rules contained in this Section 8 and the timing and form of distribution selected on the Prior Deferral Election was no longer applicable with respect to distributions on account of termination of employment, retirement or disability. For purposes of a Prior Deferral Election made under this Plan, “retirement” means the Participant’s termination of employment with the Company after the Participant’s attainment of regular or early retirement as defined in Section 6.1 or 6.2 of the Norwest Corporation Pension Plan in effect on June 30, 1999. Also, for purposes of Prior Deferral Elections made under this Plan, “disability” means the Participant’s total disability as described in the Wells Fargo & Company Long-Term Disability Plan, as amended from time to time.

(E)

Form of Distributions . All distributions from Deferral Accounts shall be payable as follows:

	(1)		in cash, for all Deferral Accounts in an earnings option other than the Common Stock Earnings Option; or

	(2)		in shares of Common Stock (and cash for any fractional share), for the portion of the Deferral Accounts in the Common Stock Earnings Option.

(F)

Valuation of Deferral Accounts for Distribution .

	(1)		The amount of the distribution in cash and/or Common Stock shall be determined based on the Participant’s Deferral Account balance (and, if applicable, the price of Common Stock) as of the close of business on March 1 of the year of distribution (or the next following business day if March 1 is not a business day). The amount of the distribution in cash and/or Common Stock as of any other date on which a distribution is made shall be determined based on the Participant’s Deferral Account balance (and, if applicable, the price of Common Stock) as of the close of business on the last business day of the month in which the event which triggers distribution occurs. Earnings adjustments to amounts that have been valued for distribution shall cease as of the date used to value such amounts.

	(2)		The amount of each installment payment will be based on the value of the Participant’s Deferral Account as of the close of business on March 1 of the year of the installment payment (or the next following business day if March 1 is not a business day) and the number of the installments remaining. The balance remaining in the Deferral Account shall continue to be adjusted based on the earnings option(s) among which the Deferral Account is allocated until the valuation date used to determine the amount of the last payment. All installment payments will be made by pro rata distributions from each earnings option.

(G)

Early Withdrawal . Effective January 1, 2004, the Plan will not allow early withdrawals for any reason from Deferral Accounts attributable to Deferral Years commencing on or after January 1, 2004 and to Deferral Accounts attributable to Deferral Years commencing prior to January 1, 2004 that were subject to a change in the time of distribution election made pursuant to Section 8(B). A Participant or beneficiary who wishes to receive payment of all or part of the Participant’s other Deferral Accounts for Deferral Years prior to 2004 on a date earlier than that specified in the Deferral Election or in the case of a beneficiary in accordance with Section 8(C), may do so by filing with the Plan Administrator a request for early withdrawal. Such payment will be made from the earliest Deferral Year(s) in which the Participant has participated in the Plan. Partial withdrawals of a given Deferral Year’s deferral are not permitted. Deferral Accounts will be distributed in the order in which the accounts were established. Stock Option Gain Compensation deferrals will be distributed in the order in which the accounts were established following the distribution of all funds from the Compensation Deferrals. For the appropriate Deferral Year(s), account accruals to date shall be disbursed completely, less a 10% early withdrawal penalty on the amount distributed. The 10% penalty assessed for early withdrawal will be permanently forfeited by the Participant and will be credited to the account of the Company. Further, the Participant shall forfeit eligibility to defer Compensation under this Plan during the two Deferral Years following the year in which the early withdrawal is made, but in no case shall an early withdrawal cause a current Deferral Election (either of Compensation or Stock Option Gain Compensation) to be suspended or canceled. In no case may a Participant or beneficiary make more than one early withdrawal per calendar year.

	(H)		Accounts Less Than $25,000 . Notwithstanding the foregoing provisions of this Section 8, if the aggregate value of the Participant’s Deferral Accounts attributable to (a) Deferral Elections made for Deferral Years commencing on or after January 1, 2000, (b) Deferral Elections made on July 1, 1999 by transferred BRP Participants, and (c) any Prior Deferral Elections that became subject to the terms of this Plan in accordance with Section 8 (D), is less than $25,000 at the end of the month in which the Participant’s employment terminates, then the portion of such Deferral Accounts subject to the distribution rules in this Section 8 shall be paid in a lump sum as soon as practicable after the March 1 immediately following the Participant’s termination date.

	(I)		Definitions Relating to Marital Status. For all purposes under this Plan, the following terms have the meanings assigned to them below:

	(1)		The term “spouse” means a person of the opposite gender from the Participant who is legally married to the Participant at the relevant time under the laws of the state in which they reside and who satisfies the requirements under 1 U.S. Code Section 7 for being treated as a spouse for purposes of federal law.

	(2)		The term “same-sex spouse” means a person of the same gender as the Participant who at the relevant time either (i) is recognized as being legally married to the Participant under the laws of the state or country in which the relationship was created, or (ii) is a person who has joined with the Participant in a civil union that is recognized as creating some or all of the rights of marriage under the laws of the state or country in which the relationship was created.

	(3)		The term “domestic partner” means a person who is not the spouse or same-sex spouse of the Participant as defined in subsections (1) and (2) above, but who at the relevant time is the Participant’s significant other (together referred to as “partners”) with whom the Participant lives and shares financial responsibility. A domestic partner may be the same gender or opposite gender. A person will be considered a domestic partner of the Participant if the Participant or other person can provide a domestic partnership certificate to the Company from a city, county or state which offers the ability to register a domestic partnership. If the Participant and domestic partner reside in an area where such a certificate is not available or if the Participant and domestic partner elect not to register their domestic partnership, a person will not be considered a domestic partner unless the Participant and/or domestic partner provides sufficient evidence to the Company that all of the following requirements are satisfied:

	(a)		The partners have had a single, dedicated relationship for at least six months and intend to remain in the relationship indefinitely.

	(b)		The partners share the same permanent residence and have done so for at least six months.

	(c)		The partners are not related by blood or a degree of closeness which would prohibit marriage under the law of the state in which they reside.

	(d)		Neither partner is married to another person under either statutory or common law, and neither has a same-sex spouse or is a member of another domestic partnership.

	(e)		Each partner is mentally competent to consent or contract.

	(f)		Both partners are at least 18 years of age.

	(g)		The partners are financially interdependent, are jointly responsible for each other’s basic living expenses, and are able to provide documents proving at least three of the following situations to demonstrate such financial interdependence:

	(i)		Joint ownership of real property or a common leasehold interest in real property.

	(ii)		Common ownership of an automobile.

	(iii)		Joint bank or credit accounts.

	(iv)		A will which designates the other as primary beneficiary.

	(v)		A beneficiary designation form for a retirement plan or life insurance policy signed and completed to the effect that one partner is a beneficiary of the other.

	(vi)		Designation of one partner as holding power of attorney for health care needs of the other.

9. Distribution of Accounts Not Earned and Vested Prior to January 1, 2005 . Deferral Accounts not earned and vested prior to January 1, 2005 shall be distributed in accordance with the applicable Deferral Election, subject to the following:

	(A)		Lump Sum or Installment Distributions . The Participant must elect to receive the balance of each Deferral Account in either a lump sum or in annual installments over a period of years up to ten.

	(B)		Timing of Distribution . The Participant must designate on his or her Deferral Election the year that distribution from the resulting Deferral Account shall commence. Distribution will commence on or as soon as practicable after March 1 of the distribution commencement year, but not later than December 31 of that year. If the Participant elected to receive installments, distribution of each subsequent annual installment shall occur on or as soon as practicable after March 1 of the installment year, but not later than December 31 of that year. If distribution does not commence earlier pursuant to the preceding provisions of this Section 9(B) or due to Section 9(C) or Section 9(D) below, distribution shall commence on or as soon as practicable after the March 1 immediately following, the Participant’s Separation from Service if the Participant is not a Key Employee but not later than December 31 of that year.

			If the Participant is a Key Employee, distribution shall commence on or as soon as practicable after the later of the March 1 immediately following the Participant’s

			Separation from Service or six months after the Participant’s Separation from Service. (For example, if a Key Employee had a Separation from Service on October 1, 2008, a distribution attributable to that Key Employee’s Separation from Service would commence on or as soon as practicable after April 1, 2009, which is a date six months immediately following the Participant’s Separation from Service.)

	(C)		Redeferral . A Participant who has not had a Separation from Service may elect to delay the distribution of any one or more of such Participant’s Deferral Accounts, subject to the provisions of Section 9(B) above regarding payment following Separation from Service, by electing a new distribution commencement year that is at least five (5) years beyond the originally elected distribution commencement year. Any such redeferral election shall be made by filing an election on a form and in the manner provided by the Plan Administrator at least twelve (12) months prior to the originally elected distribution year and shall not take effect until at least 12 months after the date on which it is filed. A redeferral election shall not change the form of distribution (lump sum or installments) originally selected on the Participant’s Deferral Election for the relevant Deferral Account. Only one redeferral election shall be permitted for any Deferral Account.

	(D)		Upon Death . If a Participant dies before receiving all payments under the Plan, payment of the balance in the Participant’s Deferral Accounts shall be made to the Participant’s designated beneficiary in the forms of distribution elected by the Participant on the Participant’s Deferral Elections. If payment of a Deferral Account commenced prior to the Participant’s death, payments from that Deferral Account after the Participant’s death shall be made to the Participant’s designated beneficiary when they would have been made to the Participant if the Participant had survived. If payment of a Deferral Account did not commence prior to the Participant’s death, payments from that Deferral Account after the Participant’s death shall commence as soon as practicable after the March 1 following the date of the Participant’s death. To be valid, a beneficiary designation must be in writing and the written designation must have been delivered to and accepted by the Plan Administrator prior to the Participant’s death.

			If at the time of the Participant’s death the Plan Administrator is not in possession of a fully effective beneficiary designation form, or if the designated beneficiary does not survive the Participant, the Participant’s beneficiary shall be the person or persons surviving the Participant in the first of the following classes in which there is a survivor. Except as provided in (d) below, if any such surviving person dies before receiving the balance of the Participant’s Deferral Accounts (or the person’s share of such Participant’s Deferral Account balance in the case of more than one person in the class), that person’s right to receive the Participant’s Deferral Account balance will lapse and the determination of who will be entitled to receive the Participant’s remaining (undistributed) Deferral Account balance will be made as if that person predeceased the Participant.

	(1)		Participant’s surviving spouse.

	(2)		Participant’s surviving same-sex spouse.

	(3)		Participant’s surviving domestic partner.

	(4)		Equally to the Participant’s children, except that if any of the Participant’s children predeceases the Participant but leave descendants surviving, such descendants shall

			take by right of representation the share their parent would have taken if living.

	(5)		Participant’s surviving parents equally.

	(6)		Participant’s surviving brothers and sisters equally.

	(7)		Participant’s estate.

(E)

Form of Distributions . All distributions from Deferral Accounts shall be payable as follows:

	(1)		in cash, for all Deferral Accounts in an earnings option other than the Common Stock Earnings Option; or

	(2)		in shares of Common Stock (and cash for any fractional share), for the portion of the Deferral Accounts in the Common Stock Earnings Option.

(F)

Valuation of Deferral Accounts for Distribution .

	(1)		The amount of the distribution in cash and/or Common Stock shall be determined based on the Participant’s Deferral Account balance as of the close of business on March 1 of the year of distribution (or the next following business day if March 1 is not a business day). Earnings adjustments to amounts that have been valued for distribution shall cease as of the date used to value such amounts.

	(2)		The amount of each installment payment will be based on the value of the Participant’s Deferral Account as of the close of business on March 1 of the year of the installment payment (or the next following business day if March 1 is not a business day) and the number of the installments remaining. The balance remaining in the Deferral Account shall continue to be adjusted based on the earnings option(s) among which the Deferral Account is allocated until the valuation date used to determine the amount of the last payment. All installment payments will be made by pro rata distributions from each earnings option.

	(G)		Early Withdrawal . Early withdrawals are not permitted for any reason.

	(H)		Definitions Relating to Marital Status . For purposes of this Section 9, the following terms have the meanings assigned to them below:

	(1)		The term “spouse” means a person of the opposite gender from the Participant who is legally married to the Participant at the relevant time under the laws of the state in which they reside and who satisfies the requirements under 1 U.S. Code §7 for being treated as a spouse for purposes of federal law.

	(2)		The term “same-sex spouse” means a person of the same gender as the Participant who at the relevant time either (i) is recognized as being legally married to the Participant under the laws of the state or country in which the relationship was created, or (ii) is a person who has joined with the Participant in a civil union that is recognized as creating some or all of the rights of marriage under the laws of the state or country in which the relationship was created.

(3)

The term “domestic partner” means a person who is not the spouse or same-sex spouse of the Participant as defined in subsections (1) and (2) above, but who at the relevant time is the Participant’s significant other (together referred to as “partners”) with whom the Participant lives and shares financial responsibility. A domestic partner may be the same gender or opposite gender. A person will be considered a domestic partner of the Participant if the Participant or other person can provide a domestic partnership certificate to the Company from a city, county or state which offers the ability to register a domestic partnership. If the Participant and domestic partner reside in an area where such a certificate is not available, a person will not be considered a domestic partner unless the Participant and/or domestic partner provides sufficient evidence to the Company that all of the following requirements are satisfied:

	(a)		The partners have had a single, dedicated relationship for at least six months and intend to remain in the relationship indefinitely.

	(b)		The partners share the same permanent residence and have done so for at least six months.

	(c)		The partners are not related by blood or a degree of closeness which would prohibit marriage under the law of the state in which they reside.

	(d)		Neither partner is married to another person under either statutory or common law, and neither has a same-sex spouse or is a member of another domestic partnership.

	(e)		Each partner is mentally competent to consent or contract.

	(f)		Both partners are at least 18 years of age.

	(g)		The partners are financially interdependent, are jointly responsible for each other’s basic living expenses, and are able to provide documents proving at least three of the following situations to demonstrate such financial interdependence:

	(i)		Joint ownership of real property or a common leasehold interest in real property.

	(ii)		Common ownership of an automobile.

	(iii)		Joint bank or credit accounts.

	(iv)		A will which designates the other as primary beneficiary.

	(v)		A beneficiary designation form for a retirement plan or life insurance policy signed and completed to the effect that one partner is a beneficiary of the other.

	(vi)		Designation of one partner as holding a power of attorney for health care needs of the other.

(I)

Accounts Less Than Code § 402(g) Threshold . Notwithstanding the foregoing provisions of this Section 9, if

	(1)		the aggregate value of the Participant’s Deferral Accounts that are subject to the distribution rules in this Section 9 due to Separation from Service or death is less than the applicable dollar amount under Code §402(g)(1)(B) as of the end of the month following the Participant’s Separation from Service or death, and

	(2)		a lump sum payment of the value referred to in (1) above would result in the termination and liquidation of the entirety of the Participant’s interest under the Plan and any other agreements, methods, programs or other arrangements with respect to which deferrals of compensation are treated as having been deferred under a single nonqualified deferred compensation plan under Treas. Reg. §1.409A-1(c)(2), taking into account only such interests as are subject to Code §409A,

then the value referred to in (1) above shall be distributed in a single lump sum on the date that the first payment would occur pursuant to the foregoing provisions of this Section 9.

10. Nonassignability . No Participant or beneficiary shall have any interest in any accounts under this Plan that can be transferred, nor shall any Participant or beneficiary have any power to anticipate, alienate, dispose of, pledge or encumber the same while in the possession or control of the Company, nor shall the Company recognize any assignment thereof, either in whole or in part, nor shall any account be subject to attachment, garnishment, execution following judgment or other legal process while in the possession or control of the Company. The designation of a beneficiary by a Participant does not constitute a transfer.

11. Withholding of Taxes . Distributions under this Plan shall be subject to the deduction of the amount of any federal, state, or local income taxes, Social Security tax, Medicare tax, or other taxes required to be withheld from such payments by applicable laws and regulations.

12. Unsecured Obligation . The obligation of the Company to make payments under this Plan constitutes only the unsecured (but legally enforceable) promise of the Company to make such payments. The Participant shall have no lien, prior claim or other security interest in any property of the Company. The Company is not required to establish or maintain any fund, trust or account (other than a bookkeeping account or reserve) for the purpose of funding or paying the benefits promised under this Plan. If such a fund is established, the property therein shall remain the sole and exclusive property of the Company. The Company will pay the cost of this Plan out of its general assets. All references to accounts, accruals, gains, losses, income, expenses, payments, custodial funds and the like are included merely for the purpose of measuring the Company’s obligation to Participants in this Plan and shall not be construed to impose on the Company the obligation to create any separate fund for purposes of this Plan.

13. Trust Fund . If the Company chooses to fund credits to Participants’ accounts, all cash contributed for such funding shall be held and administered in trust in accordance with the terms and provisions of a trust agreement between the Company and the appointed trustee or any duly appointed successor trustee. All Common Stock or other funds in the trust shall be held on a commingled basis and shall be subject to the claims of the general creditors of the Company. Plan accounts shall be for bookkeeping purposes only, and the establishment of Plan accounts shall not require segregation of trust assets.

14. No Guarantee of Employment . Participation in this Plan does not constitute a guarantee or contract of employment with the Company or any of the Company’s Affiliates. Such participation shall in no way interfere with any right of the Company or any Affiliate to determine the duration of a Participant’s employment or the terms and conditions of such employment.

15. Administration . The Plan Administrator or its delegate shall have the exclusive authority and responsibility for all matters in connection with the operation and administration of the Plan. The Plan Administrator’s powers and duties shall include, but shall not be limited to, the following: (a) responsibility for the compilation and maintenance of all records necessary in connection with the Plan; (b) discretionary authority to interpret the terms of the Plan; (c) authorizing the payment of all benefits and expenses of the Plan as they become payable under the Plan; (d) authority to engage such legal, accounting and other professional services as it may deem necessary; (e) authority to adopt rules and procedures for implementing the Plan; (f) discretionary authority to determine Participants’ eligibility for benefits under the Plan; (g) set limits on the percentage or amount of Compensation that may be deferred in a Deferral Year; and (h) to resolve all issues of fact and law in connection with such determinations. The decision of the Plan Administrator on any matter affecting the Plan or the rights and obligations arising under the Plan shall be final and binding upon all persons.

16. Common Stock . Subject to adjustment as provided in this Section 16, the maximum number of shares of Common Stock that may be credited under the Plan is 16,000,000. If the Company shall at any time increase or decrease the number of its outstanding shares of Common Stock or change in any way the rights and privileges of such shares by means of the payment of a stock dividend or any other distribution upon such shares payable in Common Stock, or through a stock split, subdivision, consolidation, combination, reclassification, or recapitalization involving the Common Stock, then the numbers, rights, and privileges of the shares issuable under the Plan shall be increased, decreased, or changed in like manner as if such shares had been issued and outstanding, fully paid, and non-assessable at the time of such occurrence.

17. Claims Procedure . The Company shall establish a claims procedure consistent with the requirements of ERISA. Such claims procedure shall provide adequate notice in writing to any Participant or beneficiary whose claim for benefits under the Plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the claimant and shall afford a reasonable opportunity to a claimant whose claim for benefits has been denied for a full and fair review by the Company of the decision denying the claim. Claims must be submitted in writing within one year after the claimant first knew or should have known the facts essential to the claim. A person claiming a benefit under the Plan may not initiate a civil action regarding the claim unless: (a) a claim was timely submitted; (b) all steps under the claims procedure (including appeals) were completed; and (c) the civil action is commenced within one year after completion of the claims procedure.

18. Construction and Applicable Law . This Plan is intended to be construed and administered as an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees as provided under ERISA. The Plan shall be construed and administered according to the laws of the State of Minnesota (other than its laws regarding choice of law) to the extent that such laws are not preempted by ERISA.

19. Agent for Legal Process . The Company shall be agent for service of legal process with respect to any matter concerning the Plan, unless and until the Company designates some other person as such agent.

20. Amendment . The Board of Directors of the Company or the Human Resources Committee of the Company’s Board of Directors may at any time amend this Plan in any manner; provided, however, that if necessary to maintain the availability of the exemption contained in Rule 16b-3, or any successor regulation, under the Securities Exchange Act of 1934, as amended, for transactions pursuant to this Plan, the provisions of this Plan relating to the amount, price and timing of awards pursuant to this Plan may not be amended more than once in every six months other than to comport with changes in the Internal Revenue Code or ERISA, or the rules thereunder. Notwithstanding the foregoing, the Chief Executive Officer, Director of Human Resources or the Senior Vice President of Compensation and Benefits, acting singly, shall have the authority to execute a written action to amend the Plan to authorize the merger of any nonqualified deferred compensation plan maintained by any acquired entity into this Plan.

21. Termination or Suspension . The Board of Directors of the Company or the Human Resources Committee of the Company’s Board of Directors may at any time suspend or terminate this Plan. In the event that the Plan is terminated, the Deferral Accounts of all Participants (whether or not currently in distribution status) shall be paid in the form originally elected by the Participant to commence as soon as practicable after the March 1 following the date the Plan is terminated or shall be paid under some other method as determined by the Plan Administrator; provided, however, that accelerated distribution of Deferral Accounts subject to Section 9 shall only be permitted on account of Plan termination in accordance with Treas. Reg. §1.409A-3(j)(4)(ix), which generally permits:

	(A)		accelerated payment pursuant to a termination and liquidation of the Plan if that occurs within 12 months of a corporate dissolution or bankruptcy;

	(B)		termination and liquidation of the Plan pursuant to irrevocable action taken during the period commencing 30 days before and ending 12 months after a change in control event within the meaning of Treas. Reg. §1.409A-3(i)(5), but only if all deferred compensation arrangements sponsored by the Company and its Affiliates that are treated as a single plan under Treas. Reg. §1.409A-1(c)(2) that includes this Plan are terminated and liquidated with respect to every participant who experienced such change in control event, and all amounts payable under such single plan for such participants are paid within 12 months after the irrevocable action is taken; or

	(C)		termination and liquidation of the Plan, provided:

	(1)		the termination and liquidation is not proximate to a downturn in the financial health of the Company and its Affiliates,

	(2)		the Company and its Affiliates also terminate and liquidate all other deferral arrangements that would be aggregated with the Plan under Treas. Reg. §1.409A-1(c)(2);

	(3)		no accelerated payments are made within 12 months after irrevocable action is taken to terminate and liquidate the Plan,

	(4)		all payments are made within 24 months after all necessary action is taken to irrevocably terminate and liquidate the Plan, and

	(5)		during the three years after such irrevocable action is taken the Company and its Affiliates do not adopt a new plan that would be aggregated with the Plan under Treas. Reg. §1.409A-1(c)(2) if the Plan still existed.

The foregoing provisions of this Section 21 shall not prohibit the earlier distribution of any Deferral Account in accordance with the provisions of Section 8.

22. Severability. If any provision of the Plan is determined to be illegal or invalid (in whole or in part) for any reason, or if legislative, Internal Revenue Service, Department of Labor, court or other action is at risk of causing a provision to be interpreted so as to cause Participants in the Plan to be in constructive receipt of amounts in their Deferral Accounts for U.S. federal income tax purposes, the Plan shall be construed and enforced as if the provision had not been included in the Plan.

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APPENDIX A

Transferred Accounts

Section 1. The Wells Fargo & Company Benefit Restoration Program . The Wells Fargo & Company Benefit Restoration Program (“BRP”) merged into this Plan effective July 1, 1999. The transferred BRP accounts are held in a “Transferred Account” set up under this Plan for each participant in BRP who had a BRP account as of June 30, 1999. Each BRP participant who has a Transferred Account set up under this Plan is considered a Participant in this Plan effective July 1, 1999 but will not be able to enter into Deferral Elections unless the Participant is also an Eligible Employee as provided in this Plan. If the Participant is not an employee of the Company on January 1, 2000, the Participant’s Transferred Account as of the first day of a quarter (less any distributions made from the Transferred Account during the quarter) shall be adjusted with interest for that quarter. Interest on the Transferred Account will be calculated quarterly at an annual rate equal to the sum of the average annual rate for 3-year Treasury Notes for the immediately preceding calendar year plus two percent. If the Participant is an employee of the Company on January 1, 2000, the Participant must elect earnings options for the Transferred Account in accordance with Section 7 of the Plan. If the Participant does not elect earnings options, the Participant’s Transferred Account shall be treated as having been allocated to the “Balanced Fund” Fund Option. Distribution of the Participant’s Transferred Account will be made in either a lump sum or in ten annual installments as elected by the Participant under BRP. If the Participant elected a lump sum payment, payment will be made as soon as feasible after the Participant terminates employment. If the Participant elected installments, installments will begin in January following the calendar year in which the Participant terminates employment. If, however, the Transferred Account balance is less than $5,000 at the time of the Participant terminates employment, distribution will be made in a lump sum as soon as administratively feasible after the Participant terminates employment. The transitional rules under Section 8(D) of the Plan apply to the Transferred Account. In the event the Participant dies before distribution of his or her entire Transferred Account, the remaining balance shall be paid pursuant to Section 8(C) of the Plan.

Section 2. Mortgage Plans . The Norwest Corporation Elective Deferred Compensation Plan for Mortgage Banking Executives, the Norwest Mortgage Banking Incentive Compensation and Deferral Plan and the Norwest Mortgage Banking Deferral Plan (collectively the “Mortgage Plans”) are merged into this Plan effective as of January 1, 2000. The transferred Mortgage Plans accounts shall be held in a “Transferred Account” set up under this Plan for each participant in the Mortgage Plans who had an account as of December 31, 1999. Each Mortgage Plans participant who has a Transferred Account set up under this Plan shall be considered a Participant in this Plan effective January 1, 2000 but will not be able to enter into Deferral Elections unless the Participant is also an Eligible Employee as provided in this Plan . A Participant’s Transferred Account shall be subject to the rules of this Plan including the transitional rules in Section 8(D) of this Plan. In the event the Participant dies before distribution of his or her entire Transferred Account, the remaining balance shall be paid pursuant to Section 8(C) of this Plan.

Section 3. The Wells Fargo & Company 1997 Bonus Deferral Plan . The Wells Fargo & Company 1997 Bonus Deferral Plan (“Bonus Deferral Plan”) is merged into this Plan effective as of January 1, 2000 with respect to participants in the Bonus Deferral Plan who are employed by the Company on January 1, 2000. The transferred Bonus Deferral Plan accounts shall be held in a “Transferred Account” set up under this Plan for each participant in the Bonus Deferral Plan who had an account as of December 31, 1999 and was employed by the Company on January 1, 2000. Each Bonus Deferral Plan participant who has a Transferred Account set up under this Plan shall be considered a Participant in this Plan effective January 1, 2000 but will not be able to enter into Deferral Elections unless the Participant is also an Eligible Employee as provided in this Plan . A Participant’s Transferred Account shall be subject to the rules of this Plan including the transitional rules in Section 8(D) of this Plan. In the event the

Participant dies before distribution of his or her entire Transferred Account, the remaining balance shall be paid pursuant to Section 8(C) of this Plan.

Section 4. Ragen MacKenzie Group Incorporated Deferred Compensation Plan . The Ragen MacKenzie Group Incorporated Deferred Compensation Plan (the “Ragen Plan”) is merged into this Plan effective July 1, 2000. The transferred Ragen Plan accounts shall be held in a “Transferred Account” set up under this Plan for each participant in the Ragen Plan who had an account as of June 30, 2000. Each Ragen Plan participant who has a Transferred Account set up under this Plan shall be considered a Participant in this Plan effective July 1, 2000, but will not be able to enter into Deferral Elections unless the Participant is also an Eligible Employee as provided in this Plan. A Participant’s Transferred Account shall be subject to the rules of this Plan. In the event the Participant dies before distribution of his or her entire Transferred Account, the remaining balance shall be paid pursuant to Section 8(C) of this Plan.

Section 5. National Bank of Alaska Deferred Compensation Plan . The National Bank of Alaska Deferred Compensation Plan (the “Alaska Plan”) is merged into this Plan effective August 1, 2000. The transferred Alaska Plan accounts shall be held in a “Transferred Account” set up under this Plan for each participant in the Alaska Plan who had an account as of July 31, 2000. Each Alaska Plan participant who has a Transferred Account set up under this Plan shall be considered a Participant in this Plan effective August 1, 2000, but will not be able to enter into Deferral Elections unless the Participant is also an Eligible Employee as provided in this Plan. A Participant’s Transferred Account shall be subject to the rules of this Plan. In the event the Participant dies before distribution of his or her entire Transferred Account, the remaining balance shall be paid pursuant to Section 8(C) of this Plan.

Section 6. First Commerce Supplemental Executive Retirement and Deferred Compensation Plan and Trust Agreement . The First Commerce Supplemental Executive Retirement and Deferred Compensation Plan and Trust Agreement (the “First Commerce Plan”) is merged into the Plan effective January 1, 2001. The transferred First Commerce Plan accounts shall be held in a “Transferred Account” set up under the Plan for each participant in the First Commerce Plan who had an account as of December 31, 2000. Each First Commerce Plan participant who has a Transferred Account set up under the Plan shall be considered a Participant in the Plan effective January 1, 2001, but will not be able to enter into Deferral Elections unless the Participant is also an Eligible Employee as provided in the Plan. A Participant’s Transferred Account shall be subject to the rules of the Plan. In the event the Participant dies before distribution of his or her entire Transferred Account, the remaining balance shall be paid pursuant to Section 8(C) of the Plan.

Section 7. Brenton Banks, Inc. Executive Savings Plan . The Brenton Banks, Inc. Executive Savings Plan (the “Brenton Plan”) is merged into the Plan effective January 1, 2001. The transferred Brenton Plan accounts shall be held in a “Transferred Account” set up under the Plan for each participant in the Brenton Plan who had an account as of December 31, 2000. Each Brenton Plan participant who has a Transferred Account set up under the Plan shall be considered a Participant in the Plan effective January 1, 2001, but will not be able to enter into Deferral Elections unless the Participant is also an Eligible Employee as provided in the Plan. A Participant’s Transferred Account shall be subject to the rules of the Plan. In the event the Participant dies before distribution of his or her entire Transferred Account, the remaining balance shall be paid pursuant to Section 8(C) of the Plan.

Section 8. First Security Corporation Executive Deferred Compensation Plan . The First Security Corporation Executive Deferred Compensation Plan (the “First Security Plan”) was terminated effective October 30, 2000. The account balances of participants in the First Security Plan who elected to defer distribution of their First Security Plan accounts as a result of the First Security Plan termination shall be transferred to the Plan and held in Transferred Accounts set up under the Plan as soon as administratively practical after October 30, 2000. The

transferred First Security Plan accounts shall be held in a “Transferred Account” set up under this Plan for each participant in the First Security Plan who made a special deferral election. Each First Security Plan participant who has a Transferred Account set up under the Plan shall be considered a Participant in the Plan effective as of the date the Transferred Account is established, but not be able to enter into a Deferral Election until January 1, 2001 if the Participant is also an Eligible Employee as provided in the Plan as of January 1, 2001. A Participant’s Transferred Account shall be subject to the rules of this Plan. In the event the Participant dies before distribution of his or her entire Transferred Account, the remaining balance shall be paid pursuant to Section 8(C) of the Plan.

Section 9. Norwest Financial, Inc. Employees’ Deferred Compensation Plan . All accounts under the Norwest Financial, Inc. Employees’ Deferred Compensation Plan (the “NFI Plan”) for actively employed NFI Plan participants are transferred to the Plan effective January 1, 2001. The transferred NFI Plan accounts shall be held in a “Transferred Account” set up under the Plan for each active participant in the NFI Plan who had an account as of December 31, 2000. Each NFI Plan participant who has a Transferred Account set up under the Plan shall be considered a Participant in the Plan effective January 1, 2001, but will not be able to enter into Deferral Elections unless the Participant is also an Eligible Employee as provided in the Plan. A Participant’s Transferred Account shall be subject to the rules of the Plan. In the event the Participant dies before distribution of his or her entire Transferred Account, the remaining balance shall be paid pursuant to Section 8(C) of the Plan.

Section 10. Norwest Corporation Executive Incentive Compensation Plan . The Norwest Corporation Executive Incentive Compensation Plan (the “EICP”) is merged into the Plan effective January 1, 2002. The transferred EICP accounts shall be held in a “Transferred Account” set up under the Plan for each participant in the EICP who had an account as of December 31, 2001. Each EICP participant who has a Transferred Account set up under the Plan shall be considered a Participant in the Plan. A Participant’s Transferred Account shall be subject to the rules of the Plan except that (i) distribution to the Participant of the Transferred Account (valued as of December 31 of the calendar year in which the Participant terminates employment or becomes disabled) attributable to the EICP shall be made in a lump sum in whole shares of Common Stock (with cash in lieu of a fractional share) as soon as practicable after the calendar year in which the Participant terminates employment or becomes disabled (“disabled” means the Participant is unable to perform his or her job for a continuous period of six months), and (ii) the Transferred Account shall only be allocated to the Common Stock Earnings Option. In the event the Participant dies before distribution of his or her entire Transferred Account, the remaining balance shall be paid pursuant to Section 8(C) of the Plan.

Section 11. Norwest Corporation Employees’ Stock Deferral Plan . The Norwest Corporation Employees’ Stock Deferral Plan (the “ESDP”) is merged into the Plan effective January 1, 2002. The transferred ESDP accounts shall be held in a “Transferred Account” set up under the Plan for each participant in the ESDP who had an account as of December 31, 2001. Each ESDP participant who has a Transferred Account set up under the Plan shall be considered a Participant in the Plan. A Participant’s Transferred Account shall be subject to the rules of the Plan except that (i) distribution to the Participant of the Transferred Account attributable to the ESDP (valued as of December 31 of the calendar year in which the Participant terminates employment) shall be made in accordance with the type of distribution (i.e., lump sum or installments) elected by the Participant under the ESDP and shall be made (or commence in the case of installments) on or as soon as practicable after the February 28 following the calendar year in which the Participant terminates employment, (ii) in the event of a change in control as defined in the ESDP, distribution to the Participant of the Transferred Account attributable to the ESDP shall be made in accordance with the terms of the ESDP as those terms existed on December 31, 2001, and (iii) the Transferred Account shall only be allocated to the Common Stock Earnings Option. In the event the Participant dies before distribution of his or her entire Transferred Account, the remaining balance shall be paid pursuant to Section 8(C) of the Plan.

Section 12. Acordia, Inc. Deferral Plan . The Acordia, Inc. Deferral Plan (the “Deferral Plan”) is merged into the Plan effective January 1, 2002. The transferred Deferral Plan accounts shall be held in a “Transferred Account” set up under the Plan for each participant in the Deferral Plan who had an account as of December 31, 2001. Each Deferral Plan participant who has a Transferred Account set up under the Plan shall be considered a Participant in the Plan. A Participant’s Transferred Account shall be subject to the rules of the Plan. In the event the Participant dies before distribution of his or her entire Transferred Account, the remaining balance shall be paid pursuant to Section 8(C) of the Plan.

Section 13. Acordia Services Frozen Producers’ Deferred Compensation Plan . The Acordia Services Frozen Producers’ Deferred Compensation Plan (the “Producers’ Deferred Plan”) is merged into the Plan effective January 1, 2002. The transferred Producers’ Deferred Plan accounts shall be held in a “Transferred Account” set up under the Plan for each participant in the Producers’ Deferred Plan who had an account as of December 31, 2001. Each Producers’ Deferred Plan participant who has a Transferred Account set up under the Plan shall be considered a Participant in the Plan. A Participant’s Transferred Account shall be subject to the rules of the Plan. In the event the Participant dies before distribution of his or her entire Transferred Account, the remaining balance shall be paid pursuant to Section 8(C) of the Plan.

Section 14. Acordia Services Frozen Deferred Compensation Plan . The Acordia Services Frozen Deferred Compensation Plan (the “Deferred Plan”) is merged into the Plan effective January 1, 2002. The transferred Deferred Plan accounts shall be held in a “Transferred Account” set up under the Plan for each participant in the Deferred Plan who had an account as of December 31, 2001. Each Deferred Plan participant who has a Transferred Account set up under the Plan shall be considered a Participant in the Plan. A Participant’s Transferred Account shall be subject to the rules of the Plan. In the event the Participant dies before distribution of his or her entire Transferred Account, the remaining balance shall be paid pursuant to Section 8(C) of the Plan.

Section 15. MBI and Affiliates Deferred Compensation Plan . A portion of the MBI and Affiliates Deferred Compensation Plan (the “MBI Deferred Plan”) comprising accounts for certain employees of the Texas Financial Bancorporation acquisition is merged into the Plan effective February 2, 2002. The transferred MBI Deferred Plan accounts shall be held in a “Transferred Account” set up under the Plan. Each MBI Deferred Plan participant who has a Transferred Account set up under the Plan shall be considered a Participant in the Plan. A Participant’s Transferred Account shall be subject to the rules of the Plan. In the event the Participant dies before distribution of his or her entire Transferred Account, the remaining balance shall be paid pursuant to Section 8(C) of the Plan.

Amendment to Deferred Compensation Plan

Effective January 1, 2010 unless otherwise indicated below, the Wells Fargo & Company Deferred Compensation Plan (the “Plan”) was amended as follows:

1. The second sentence of the second paragraph of Section 1 of the Plan is amended to read in full as follows:

“The terms of this Restatement shall apply to: (i) deferred compensation that relates all or in part to services performed on or after January 1, 2005, and (ii) deferred compensation that relates entirely to services performed on or before December 31, 2004 if such amounts were not earned or vested prior to January 1, 2005.”

2. Section 2(G) of the Plan is amended in its entirety to read in full as follows:

(G) Deferral Accounts . Bookkeeping accounts maintained for a Participant to which are credited the amounts deferred under Deferral Elections, Stock Option Gain Deferral Elections and amounts credited pursuant to Appendix B, together with any increase or decrease thereon, based on the earnings option(s) selected by the Participant or mandated by the Plan.

3. Section 2(H) of the Plan is amended in its entirety to read in full as follows:

(H) Deferral Election . An irrevocable election made by an Eligible Employee during an enrollment period specified by the Plan Administrator or the Plan to defer the receipt of Compensation for a given Deferral Year. The term Deferral Election does not include a Stock Option Gain Deferral Election or the automatic deferral of Company matching allocations credited pursuant to Appendix B of the Plan.

4. Section 2(J) of the Plan is amended in its entirety to read in full as follows:

(J) Eligible Employee . Each employee of the Company or any of its Affiliates who has been selected for participation in the Plan for a given Plan Year pursuant to Section 3 of the Plan and/or who receives an allocation pursuant to Appendix B of the Plan for a given Plan Year.

5. The first paragraph of Section 2(N) of the Plan is amended in its entirety to read in full as follows:

(N) Key Employee . If the Plan Administrator determines that the Participant is a “Key Employee” for purposes of Code section 409A, no lump sum or installment payment shall be paid to the Participant prior to the date that is six months after the date the Participant’s Separation from Service occurred.

6. Section 2(O) of the Plan is amended in its entirety to read in full as follows:

(O) Participant . Each Eligible Employee who enters into a Deferral Election, who receives an allocation pursuant to Appendix B, who prior to 2004 entered into a Stock Option

Gain Deferral Election, or who has a Transferred Account set up under the Plan. An employee who has become a Participant shall remain a Participant in the Plan until the date of the Participant’s death, or if earlier, the date the Participant no longer has any accounts under the Plan.

7. Section 3 of the Plan is amended to add the following sentence immediately after the first sentence in the paragraph to read in full as follows:

“In addition, each employee of the Company or an Affiliate who receives an allocation pursuant to Appendix B of the Plan for a given Plan Year shall be considered an Eligible Employee but only with respect to the allocation under Appendix B, unless the employee has also been selected for participation pursuant to the previous sentence.”

8. Section 6(B) of the Plan is amended in its entirety to read in full as follows:

(B) Content . An Eligible Employee’s Deferral Election shall indicate the percentage of Compensation to be deferred, the earnings option(s) that will determine earnings on the deferred Compensation (see Section 7(A)), and the time and form of distribution (see Section 9). The Eligible Employee shall specify for each Compensation category the percentage to be deferred per pay period.

9. Section 6 of the Plan is amended to add the following new subsections (D) and (E) to the end of that section:

(D) Charges Against Accounts . The Plan Administrator may allocate a portion of any administrative expenses of the Plan to each Participant’s Deferral Accounts and/or Transferred Accounts, as applicable.

(E) Cancellation of Deferral Election . Notwithstanding any other provision in the Plan to the contrary, an Eligible Employee’s Deferral Election for a Deferral Year will be cancelled for the remainder of the Deferral Year following the date the Eligible Employee receives a hardship distribution from any Code section 401(k) plan maintained by the Company or an Affiliate of the Company in accordance with Treas. Reg. section 1.409A-3(j)(4)(viii). In the event that the end of a six month period following the date that an Eligible Employee receives a hardship distribution from any Code section 401(k) plan maintained by the Company or an Affiliate of the Company spans two Deferral Years, the Eligible Employee’s Deferral Election for the second Deferral Year shall not become effective until after the end of the six month period.

10. Effective December 1, 2009, Section 7(A) of the Plan is amended in its entirety to read in full as follows:

(A) Earnings Options . At the time of the Participant’s Deferral Election, a Participant must choose to allocate the amounts that will be credited to the Participant’s Deferral Account among the following earnings options in increments of one (1) percent:

	(1)		Common Stock Earnings Option

	(2)		CD Option

	(3)		Fund Options

All deferred Stock Option Gain Compensation will automatically be allocated to the Common Stock Earnings Option. All Company matching allocations credited pursuant to Appendix B shall be automatically allocated to one or more Fund Options (other than the Common Stock Earnings Option) as selected by the Plan Administrator from time to time until the Participant makes a subsequent investment elections applicable to those allocations. The amounts allocated to the Common Stock Earnings Option may not be subsequently reallocated to another earnings options unless otherwise determined by the Plan Administrator and communicated to the Participants. Effective January 1, 2010, except with respect to amounts allocated to the Common Stock Earnings Option, which may not subsequently be reallocated to another earnings option unless otherwise determined by the Plan Administrator and communicated to Participants, a Participant may change the earnings options as of each business day or less frequently if and as determined by the Plan Administrator.

11. Section 9(A) of the Plan is amended in its entirety to read in full as follows:

(A) Lump Sum or Installment Distributions . The Participant must elect to receive the balance of each Deferral Account in either a lump sum or in annual installments over a period of years up to ten (10), except that the total amount accumulated pursuant to Appendix B shall automatically be paid in a lump sum.

12. The first paragraph of Section 9(B) of the Plan is amended to read in full as follows:

(B) Timing of Distribution . Except with respect to the total amount accumulated pursuant to Appendix B, the Participant must designate on his or her Deferral Election the year that distribution from the resulting Deferral Account shall commence. Distribution will commence on or as soon as practicable after March 1 of the distribution commencement year, but not later than December 31 of that year. If the Participant elected to receive installments, distribution of each subsequent annual installment shall occur on or as soon as practicable after the March 1 of the installment year, but not later than December 31 of that year. If distribution does not commence earlier pursuant to the preceding provisions of this Section 9(B) or due to Sections 9(C) or (D) below, distribution shall commence on or as soon as practicable after the March 1 immediately following the Participant’s Separation from Service if the Participant is not a Key Employee but not later than December 31 of that year. Notwithstanding the foregoing, distribution to any Participant subject to the requirements of Section 23 shall not commence earlier than provided for in Section 23.

13. The first sentence of Section 9(C) of the Plan is amended to read in full as follows:

“A Participant who has not had a Separation from Service may elect to delay the distribution of any one or more of such Participant’s Deferral Accounts except any amounts accumulated under Appendix B, subject to the provisions of Section 9(B) above regarding payment following Separation from Service, by electing a new distribution commencement year that is at least five (5) years beyond the originally elected distribution commencement year.”

14. The first sentence of Section 9(D) of the Plan is amended to read in full as follows:

“If a Participant dies before receiving all payments under the Plan, payment of the balance of the Participant’s Deferral Accounts, excluding the amounts accumulated under Appendix B, shall be made to the Participant’s designated beneficiary in the forms of distribution elected by the Participant on the Participant’s Deferral Elections. Payment of the amounts accumulated under Appendix B amounts shall be paid in a lump sum to the Participant’s designated beneficiary.”

15. The Plan is amended to add a new Section 23 to read in full as follows:

23. TARP Compliance. To the extent required by the Emergency Economic Stabilization Act of 2008, as amended from time to time, and implementing regulations (“EESA”), if the Plan Administrator determines that the Participant is a “Senior Executive Officer” (SEO) or a “Most Highly Compensated” employee (MHCE) of the Company (both terms as defined under EESA), no lump sum or installment payment in respect of any bonus or incentive previously deferred under the Plan and any earnings credits associated with such amounts and that would otherwise be distributable in accordance with the terms of the Plan and the Participant’s applicable Deferral Election will be paid to such SEO or MHCE until the earlier of (1) the end of the period during which any obligation arising from financial assistance provided to the Company under the Troubled Asset Relief Program (“TARP”) remains outstanding (the “TARP Restriction Period”), or (2) the date after which the Participant ceases to be a SEO or MHCE. If delayed payment is required by EESA as provided above, such delayed distribution payment shall be paid to the Participant promptly following the first date upon which payment could be made under EESA.

16. The Plan is amended effective January 1, 2010 by adding an Appendix B to read as set forth in the attached Exhibit A.

Exhibit A

APPENDIX B

Supplemental Company Matching Contribution Allocations

Effective for Plan Years beginning on or after January 1, 2010, the Wells Fargo & Company Deferred Compensation Plan (the “Plan”) is amended to provide credits for supplemental Company matching contributions pursuant to the rules in this Appendix B.

Sec. 1 Eligibility. Employees who have satisfied one year of service as defined under the Wells Fargo & Company 401(k) Plan (the “401(k) Plan”) and are eligible to receive Company matching contributions under the 401(k) Plan and who have entered into an agreement to defer Compensation under this Plan (“deferred compensation”) which would otherwise have been recognized as “Certified Compensation” under the 401(k) Plan for a Plan Year shall be eligible to receive the supplemental Company matching contribution credits (the “Credits”) as provided under this Appendix B for that Plan Year. Credits under this Appendix shall be reflected in the Participant’s Deferral Account attributable to the allocations under this Appendix B as soon as administratively feasible after the end of the Plan Year in which a Company matching contribution would have been allocated to the Participant’s 401(k) Plan account if deferred compensation had been recognized as Certified Compensation in the 401(k) Plan for the Plan Year.

Sec. 2 Credits. For each Plan Year, the Deferral Account attributable to the allocations under this Appendix B for each eligible Participant shall receive a Credit equal to the sum of the amounts determined for each quarter of the Plan Year as follows:

(a) To be eligible to receive a credit with respect to a particular calendar quarter, the Participant must have been eligible to receive Employer Matching Contributions under and as defined in the 401(k) Plan for that quarter.

(b) The amount of the Participant’s Credit under this Appendix B for a calendar quarter will be equal to the Participant’s “applicable percent” for the Plan Year as defined below, multiplied by the deferred compensation deducted from the Participant’s Compensation during that calendar quarter; provided, however, that such Credit shall be made only to the extent that such deferred compensation for the calendar quarter and any previous calendar quarters in the Plan Year plus the Participant’s Certified Compensation for such Plan Year does not exceed the Code Section 401(a)(17) compensation limit in effect for such Plan Year.

(c) For purposes of this Sec. 2, a Participant’s “applicable percent” for a Plan Year is equal to the smaller of (i) six percent, or (ii) the percent by which the Participant has elected to have his or her Certified Compensation reduced for the purpose of making salary deferral contributions under the 401(k) Plan in the election that is in effect on January 1 of that Plan Year. The percent determined under the preceding sentence shall apply to the Participant for the entire

Plan Year without regard to any changes the Participant may subsequently make in his or her deferral election for purposes of contributions to the 401(k) Plan.

Sec. 3 Investment Election . The amount of the Credit pursuant to this Appendix shall be automatically allocated to one or more Fund Options (other than the Common Stock Earnings Option) as selected by the Plan Administrator from time to time as of the date the amount is actually allocated to the Participant’s Deferral Account. The Participant then can make a subsequent investment election pursuant to Section 7 of the Plan.

Sec. 4 Distribution Upon Separation from Service . Distribution of the amounts accumulated pursuant to this Appendix B (Credits and associated earnings credits) shall be automatically paid in a lump sum as soon as practicable after the March 1 immediately following the Participant’s Separation from Service if the Participant is not a Key Employee, but not later than December 31 of that year. If the Participant is a Key Employee, distribution shall commence as provided in Section 9(B) of the Plan.

Exhibit 10(w)

Amendment to Nonqualified Deferred Compensation Plan for Independent Contractors

Effective January 1, 2009, Section 8.11 of the WF Deferred Compensation Holdings, Inc. Nonqualified Deferred Compensation Plan for Independent Contractors (as Amended and Restated Effective as of January 1, 2008) was amended in its entirety to read in full as follows:

Section 8.11 Distribution of Small Aggregate Balances Due to Separation from Service, Death or Plan Termination . Notwithstanding anything in this Plan to the contrary, if the aggregate value of the Participant’s Accounts on the first date as of which benefit payments commence due to Separation from Service, Death or Plan Termination is not greater than the applicable dollar amount under Code §402(g)(1)(B), the Participant’s benefit shall be paid in an immediate single lump sum. Payment shall not be permitted pursuant to this Section 8.11 unless the payment results in the termination and liquidation of the Participant’s entire interest under the Plan and all other arrangements that, together with the Plan, are treated as a single plan within the meaning of Treas. Reg. §1.409A-1(c)(2), taking into account only such interests as are subject to Code §409A.

Exhibit 10(aa)

Amendment to Deferred Compensation Plan for Non-Employee Directors of Wachovia Corporation

Effective as of June 1, 2009, the Deferred Compensation Plan for Non-Employee Directors of Wachovia Corporation was amended to add a new Section 4(e) to read as follows:

4(e). Notwithstanding any language in Sections 4 and 5 to the contrary, those Directors who were in service as a Director of Wachovia Corporation as of December 31, 2008 but who were not elected to serve as a member of the Board of Directors of Wells Fargo & Company effective January 1, 2009 (collectively the “Non-Continuing Directors”) may make a one-time irrevocable election to have all or any part of the balance credited to such Non-Continuing Director’s Interest Account or Stock Account, as applicable, transferred to a Stock Account or Interest Account, as applicable. Such election shall not alter in any way the deferral election made by the Non- Continuing Director under Section 3(a), the distribution election made by such Non- Continuing Director under Section 5(a) or the deemed distribution election described in Section 5(b) in the event that the Non- Continuing Director failed to make a distribution election pursuant to Section 5(a). Such election shall be made in the time and manner prescribed by the Executive Compensation division of Human Resources and shall be effective June 1, 2009.

EXHIBIT 12(a)
WELLS FARGO & COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES


	Year ended December 31,

(in millions)	2009		2008		2007		2006		2005


Earnings including interest on deposits (1):
Income before income tax expense	$	17,998		3,300		11,835		12,797		11,769
Less: Net income from noncontrolling interests		392		43		208		147		221

Income before income tax expense and noncontrolling interests		17,606		3,257		11,627		12,650		11,548
Fixed charges		10,455		9,991		14,428		12,498		7,656

		28,061		13,248		26,055		25,148		19,204


Fixed charges (1):
Interest expense		9,950		9,755		14,203		12,288		7,458
Estimated interest component of net rental expense		505		236		225		210		198

		10,455		9,991		14,428		12,498		7,656


Ratio of earnings to fixed charges (2)		2.68		1.33		1.81		2.01		2.51


Earnings excluding interest on deposits:
Income before income tax expense and noncontrolling interests		17,606		3,257		11,627		12,650		11,548
Fixed charges		6,681		5,470		6,276		5,324		3,808

		24,287		8,727		17,903		17,974		15,356


Fixed charges:
Interest expense		9,950		9,755		14,203		12,288		7,458
Less: Interest on deposits		3,774		4,521		8,152		7,174		3,848
Estimated interest component of net rental expense		505		236		225		210		198

	$	6,681		5,470		6,276		5,324		3,808


Ratio of earnings to fixed charges (2)		3.64		1.60		2.85		3.38		4.03


(1)		As defined in Item 503(d) of Regulation S-K.

(2)		These computations are included herein in compliance with Securities and Exchange Commission regulations. However, management believes that fixed charge ratios are not meaningful measures for the business of the Company because of two factors. First, even if there was no change in net income, the ratios would decline with an increase in the proportion of income which is tax-exempt or, conversely, they would increase with a decrease in the proportion of income which is tax-exempt. Second, even if there was no change in net income, the ratios would decline if interest income and interest expense increase by the same amount due to an increase in the level of interest rates or, conversely, they would increase if interest income and interest expense decrease by the same amount due to a decrease in the level of interest rates.

EXHIBIT 12(b)
WELLS FARGO & COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
AND PREFERRED DIVIDENDS


	Year ended December 31,

(in millions)	2009		2008		2007		2006		2005


Earnings including interest on deposits (1):
Income before income tax expense	$	17,998		3,300		11,835		12,797		11,769
Less: Net income from noncontrolling interests		392		43		208		147		221

Income before income tax expense and noncontrolling interests		17,606		3,257		11,627		12,650		11,548
Fixed charges		10,455		9,991		14,428		12,498		7,656

		28,061		13,248		26,055		25,148		19,204


Preferred dividend requirement		4,285		286		--		--		--
Tax factor (based on effective tax rate)		1.43		1.23		1.44		1.50		1.51


Preferred dividends (2)		6,128		351		--		--		--

Fixed charges (1):
Interest expense		9,950		9,755		14,203		12,288		7,458
Estimated interest component of net rental expense		505		236		225		210		198

		10,455		9,991		14,428		12,498		7,656

Fixed charges and preferred dividends		16,583		10,342		14,428		12,498		7,656


Ratio of earnings to fixed charges and preferred dividends (3)		1.69		1.28		1.81		2.01		2.51


Earnings excluding interest on deposits:
Income before income tax expense and noncontrolling interests		17,606		3,257		11,627		12,650		11,548
Fixed charges		6,681		5,470		6,276		5,324		3,808

		24,287		8,727		17,903		17,974		15,356


Preferred dividends (2)		6,128		351		--		--		--

Fixed charges:
Interest expense		9,950		9,755		14,203		12,288		7,458
Less: Interest on deposits		3,774		4,521		8,152		7,174		3,848
Estimated interest component of net rental expense		505		236		225		210		198

		6,681		5,470		6,276		5,324		3,808

Fixed charges and preferred dividends	$	12,809		5,821		6,276		5,324		3,808


Ratio of earnings to fixed charges and preferred dividends (3)		1.90		1.50		2.85		3.38		4.03


(1)		As defined in Item 503(d) of Regulation S-K.

(2)		The preferred dividends, including accretion, were increased to amounts representing the pretax earnings that would be required to cover such dividend and accretion requirements.

(3)		These computations are included herein in compliance with Securities and Exchange Commission regulations. However, management believes that fixed charge ratios are not meaningful measures for the business of the Company because of two factors. First, even if there was no change in net income, the ratios would decline with an increase in the proportion of income which is tax-exempt or, conversely, they would increase with a decrease in the proportion of income which is tax-exempt. Second, even if there was no change in net income, the ratios would decline if interest income and interest expense increase by the same amount due to an increase in the level of interest rates or, conversely, they would increase if interest income and interest expense decrease by the same amount due to a decrease in the level of interest rates.


		Financial Review

34		Overview

37		Earnings Performance

47		Balance Sheet Analysis

50		Off-Balance Sheet Arrangements

54		Risk Management

71		Capital Management

73		Critical Accounting Policies

79		Current Accounting
		Developments

80		Forward-Looking Statements

81		Risk Factors

		Controls and Procedures

88		Disclosure Controls and
		Procedures

88		Internal Control over Financial
		Reporting

88		Management’s Report on Internal
		Control over Financial Reporting

89		Report of Independent Registered
		Public Accounting Firm

		Financial Statements

90		Consolidated Statement of Income

91		Consolidated Balance Sheet

92		Consolidated Statement of Changes in Equity and Comprehensive Income

96		Consolidated Statement of
		Cash Flows

		Notes to Financial Statements


111	3	Cash, Loan and Dividend Restrictions

111	4	Federal Funds Sold, Securities Purchased under Resale Agreements and Other Short-Term Investments

112	5	Securities Available for Sale

119	6	Loans and Allowance for Credit Losses

123	7	Premises, Equipment, Lease
		Commitments and Other Assets

124	8	Securitizations and Variable
		Interest Entities

134	9	Mortgage Banking Activities

136	10	Intangible Assets

137	11	Deposits

137	12	Short-Term Borrowings

138	13	Long-Term Debt

141	14	Guarantees and Legal Actions

146	15	Derivatives

151	16	Fair Values of Assets and Liabilities

161	17	Preferred Stock

163	18	Common Stock and Stock Plans

167	19	Employee Benefits and Other Expenses

174	20	Income Taxes

176	21	Earnings Per Common Share

177	22	Other Comprehensive Income

178	23	Operating Segments

180	24	Condensed Consolidating Financial
		Statements

184	25	Regulatory and Agency Capital
		Requirements


186		Report of Independent Registered
		Public Accounting Firm

187		Quarterly Financial Data

188		Glossary of Acronyms

189		Codification Cross Reference

This Annual Report, including the Financial Review and the Financial Statements and related Notes, has forward-looking statements, which may include forecasts of our financial results and condition, expectations for our operations and business, and our assumptions for those forecasts and expectations. Do not unduly rely on forward-looking statements. Actual results may differ materially from our forward-looking statements due to several factors. Some of these factors are described in the Financial Review and in the Financial Statements and related Notes. For a discussion of other factors, refer to the “Risk Factors” section in this Report. A Glossary of Acronyms for terms used throughout this Report and a Codification Cross Reference for cross references from accounting standards under the recently adopted Financial Accounting Standards Board (FASB) Accounting Standards Codification (Codification) to pre-Codification accounting standards can be found at the end of this Report.

Financial Review

Overview

Wells Fargo & Company is a $1.2 trillion diversified financial services company providing banking, insurance, trust and investments, mortgage banking, investment banking, retail banking, brokerage and consumer finance through banking stores, the internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia (D.C.) and in other countries. We ranked fourth in assets and second in the market value of our common stock among our peers at December 31, 2009. When we refer to “Wells Fargo,” “the Company,” “we,” “our” or “us” in this Report, we mean Wells Fargo & Company and Subsidiaries (consolidated). When we refer to the “Parent,” we mean Wells Fargo & Company. When we refer to “legacy Wells Fargo,” we mean Wells Fargo excluding Wachovia Corporation (Wachovia).

Our vision is to satisfy all our customers’ financial needs, help them succeed financially, be recognized as the premier financial services company in our markets and be one of America’s great companies. Our primary strategy to achieve this vision is to increase the number of products our customers buy from us and to give them all of the financial products that fulfill their needs. Our cross-sell strategy, diversified business model and the breadth of our geographic reach facilitate growth in both strong and weak economic cycles, as we can grow by expanding the number of products our current customers have with us, gain new customers in our extended markets, and increase market share in many businesses. We continued to earn more of our customers’ business in 2009 in both our retail and commercial banking businesses and in our equally customer-centric securities brokerage and investment banking businesses.

On December 31, 2008, Wells Fargo acquired Wachovia. Because the acquisition was completed at the end of 2008, Wachovia’s results are included in the income statement, average balances and related financial information beginning in 2009. Wachovia’s assets and liabilities are included, at fair value, in the consolidated balance sheet beginning on December 31, 2008, but not in 2008 averages.

On January 1, 2009, we adopted new FASB guidance on noncontrolling interests on a retrospective basis for disclosure and, accordingly, prior period information reflects the adoption. The guidance requires that noncontrolling interests be reported as a component of total equity. In addition, our consolidated income statement must disclose amounts attributable to both Wells Fargo interests and the noncontrolling interests.

We generated record revenue and built capital at a record rate in 2009 despite elevated credit costs. Wells Fargo net income was a record $12.3 billion in 2009, with net income applicable to common stock of $8.0 billion. Diluted earnings per common share were $1.75. In fourth quarter 2009, we fully repaid the U.S. Treasury’s $25 billion Troubled Asset Relief Program (TARP) Capital Purchase Program (CPP) preferred stock investment, including related preferred dividends, which reduced 2009 diluted earnings per share by $0.76 per share. Pre-tax pre-provision profit (PTPP) was $39.7 billion in 2009, which covered more than 2.1 times annual net charge-offs. PTPP is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.

Our cross-sell at legacy Wells Fargo set records for the 11th consecutive year with a record of 5.95 Wells Fargo products for retail banking households. Our goal is eight products per customer, which is approximately half of our estimate of potential demand. One of every four of our legacy Wells Fargo retail banking households has eight or more products and our average middle-market commercial banking customer has almost eight products. Wachovia retail bank households had an average of 4.65 Wachovia products. We believe there is potentially significant opportunity for growth as we increase the Wachovia retail bank household cross-sell. For legacy Wells Fargo, our average middle-market commercial banking customer reached an average of 7.8 products and an average of 6.4 products for Wholesale Banking customers. Business banking cross-sell offers another potential opportunity for growth, with a record cross-sell of 3.77 products at legacy Wells Fargo.

Wells Fargo remained one of the largest providers of credit to the U.S. economy. We continued to lend to credit-worthy customers and, during 2009, made $711 billion in new loan commitments to consumer, small business and commercial customers, including $420 billion of residential mortgage originations. We are an industry leader in loan modifications for homeowners. As of December 31, 2009, nearly half a million Wells Fargo mortgage customers were in active trial or had completed loan modifications started in the prior 12 months. We have helped reduce mortgage payments for 1.7 million homeowners through refinancing.

Our core deposits grew 5% from December 31, 2008, even though $109 billion in higher-priced Wachovia certificates of deposit (CDs) matured. Average core deposits funded 93% of total average loans in 2009, up from 82% in 2008. Checking and savings deposits grew 21% to $679.9 billion at December 31, 2009, from $563.4 billion a year ago as we continued to gain new customers and deepen our relationships with existing customers.

As we have stated in the past, to consistently grow over the long term, successful companies must invest in their core businesses and maintain strong balance sheets. In 2009, we opened 70 retail banking stores for a retail network total of 6,629 stores. We converted 19 Wachovia Banking stores in Colorado to the Wells Fargo platform, as part of the Wachovia integration, with the conversion of our remaining overlapping markets scheduled to occur in 2010.

The Wachovia integration remains on track and on schedule, with business and revenue synergies exceeding our expectations at the time the merger was announced. Cross-sell revenues are being realized. We are on track to realize annual run-rate savings of $5 billion upon completion of the Wachovia integration in 2011, with over 50% of this annual run rate already achieved in 2009. We currently expect cumulative merger integration costs of approximately $5 billion, down from our $7.9 billion estimate at the time of merger. The revised estimate reflects lower owned real estate write-downs and lower employee-related expenses than anticipated at the time of the merger. In 2009, we spent a total of $1.9 billion in

merger expenses, $1.0 billion through goodwill under purchase accounting and $895 million expensed through earnings.

We continued taking actions to further strengthen our balance sheet, including building credit reserves by $3.5 billion during the year to $25.0 billion at December 31, 2009, reducing previously identified non-strategic and liquidating loan portfolios by $18.9 billion to $104.9 billion, and reducing the value of our debt and equity investment portfolios through $1.7 billion of other-than-temporary impairment (OTTI) write-downs. We significantly built capital in 2009 and in the last 15 months since announcing our merger with Wachovia, driven by record retained earnings and other sources of internal capital generation, as well as three common stock offerings totaling over $33 billion, including the $12.2 billion offering in fourth quarter 2009, which allowed us to repay in full the U.S. Treasury’s TARP preferred stock investment. We substantially increased the size of the Company with the Wachovia merger, and experienced cyclically elevated credit costs; however, our capital ratios at December 31, 2009, were higher than they were prior to the Wachovia acquisition, even after redeeming the TARP preferred stock in full and purchasing Prudential Financial Inc.’s noncontrolling interest in our retail securities brokerage joint venture. Tier 1 common equity increased to $65.5 billion, 6.46% of risk-weighted assets. The Tier 1 capital ratio increased to 9.25% and Tier 1 leverage ratio declined to 7.87%. See the “Capital Management” section in this Report for more information regarding Tier 1 common equity.

Table 1: Six-Year Summary of Selected Financial Data


													% Change			Five-year
(in millions, except													2009/			compound
per share amounts)	2009		2008		2007		2006		2005		2004		2008			growth rate


Income statement
Net interest income	$	46,324		25,143		20,974		19,951		18,504		17,150		84	%		22
Noninterest income		42,362		16,734		18,546		15,817		14,591		12,930		153			27


Revenue		88,686		41,877		39,520		35,768		33,095		30,080		112			24
Provision for credit losses		21,668		15,979		4,939		2,204		2,383		1,717		36			66
Noninterest expense		49,020		22,598		22,746		20,767		18,943		17,504		117			23
Net income before noncontrolling interests		12,667		2,698		8,265		8,567		7,892		7,104		369			12
Less: Net income from noncontrolling interests		392		43		208		147		221		90		812			34


Wells Fargo net income		12,275		2,655		8,057		8,420		7,671		7,014		362			12
Earnings per common share		1.76		0.70		2.41		2.50		2.27		2.07		151			(3	)
Diluted earnings per common share		1.75		0.70		2.38		2.47		2.25		2.05		150			(3	)
Dividends declared per common share		0.49		1.30		1.18		1.08		1.00		0.93		(62	)		(12	)


Balance sheet (at year end)
Securities available for sale	$	172,710		151,569		72,951		42,629		41,834		33,717		14	%		39
Loans		782,770		864,830		382,195		319,116		310,837		287,586		(9	)		22
Allowance for loan losses		24,516		21,013		5,307		3,764		3,871		3,762		17			45
Goodwill		24,812		22,627		13,106		11,275		10,787		10,681		10			18
Assets		1,243,646		1,309,639		575,442		481,996		481,741		427,849		(5	)		24
Core deposits ⁽¹⁾		780,737		745,432		311,731		288,068		253,341		229,703		5			28
Long-term debt		203,861		267,158		99,393		87,145		79,668		73,580		(24	)		23
Wells Fargo stockholders’ equity		111,786		99,084		47,628		45,814		40,660		37,866		13			24
Noncontrolling interests		2,573		3,232		286		254		239		247		(20	)		60
Total equity		114,359		102,316		47,914		46,068		40,899		38,113		12			25


(1)		Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).

Table 2: Ratios and Per Common Share Data


	Year ended December 31,
	2009			2008		2007


Profitability ratios
Wells Fargo net income to average assets (ROA)		0.97	%		0.44		1.55
Net income to average assets		1.00			0.45		1.59
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE)		9.88			4.79		17.12
Net income to average total equity		10.75			5.02		17.46
Efficiency ratio ⁽¹⁾		55.3			54.0		57.6
Capital ratios
At year end:
Wells Fargo common stockholders’ equity to assets		8.34			5.21		8.28
Total equity to assets		9.20			7.81		8.33
Risk-based capital ⁽²⁾
Tier 1 capital		9.25			7.84		7.59
Total capital		13.26			11.83		10.68
Tier 1 leverage ⁽²⁾⁽³⁾		7.87			14.52		6.83
Tier 1 common equity ⁽⁴⁾		6.46			3.13		6.56
Average balances:
Average Wells Fargo common stockholders’ equity to average assets		6.41			8.18		9.04
Average total equity to average assets		9.34			8.89		9.09
Per common share data
Dividend payout ⁽⁵⁾		27.9			185.4		49.0
Book value	$	20.03			16.15		14.45
Market price ⁽⁶⁾
High		31.53			44.68		37.99
Low		7.80			19.89		29.29
Year end		26.99			29.48		30.19


(1)		The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).

(2)		See Note 25 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information.

(3)		Due to the Wachovia acquisition that closed on December 31, 2008, the Tier 1 leverage ratio, which considers period-end Tier 1 capital and quarterly averages in the computation of the ratio, does not reflect average assets of Wachovia for the full period ended December 31, 2008.

(4)		See the “Capital Management” section in this Report for additional information.

(5)		Dividends declared per common share as a percentage of earnings per common share.

(6)		Based on daily prices reported on the New York Stock Exchange Composite Transaction Reporting System.

We saw signs of stability emerging in our credit portfolio, as the rate of growth in credit losses slowed during 2009. While losses remained elevated as expected, a more favorable economic outlook and improved credit statistics in several portfolios further increase our confidence that our credit cycle is turning, provided economic conditions do not deteriorate. In the commercial portfolios, we saw some signs that credit quality may be improving, as the pace of commercial and commercial real estate (CRE) nonaccrual growth slowed toward the end of 2009, reflecting our historically strong underwriting and the purchase accounting adjustments taken on the Wachovia portfolio at the time of the merger. We expect credit losses to remain elevated in the near term, but, assuming no further economic deterioration, current projections show credit losses peaking in the first half of 2010 in our consumer portfolios and later in 2010 in our commercial and CRE portfolios. Based on the portfolio performance data we saw in fourth quarter 2009, and assuming the same economic outlook, we are tracking somewhat better than these expectations.

We believe it is important to maintain a well controlled operating environment as we complete the integration of the Wachovia businesses and grow the combined company. We manage our credit risk by setting what we believe are sound credit policies for underwriting new business, while monitoring and reviewing the performance of our loan portfolio. We manage the interest rate and market risks inherent in our asset and liability balances within established ranges, while ensuring adequate liquidity and funding. We maintain strong capital levels to facilitate future growth.

WACHOVIA MERGER On December 31, 2008, Wells Fargo acquired Wachovia, one of the nation’s largest diversified financial services companies. Wachovia’s assets and liabilities were included in the December 31, 2008, consolidated balance sheet at their respective fair values on the acquisition date. Because the acquisition was completed on December 31, 2008, Wachovia’s results of operations were not included in our 2008 income statement. Beginning in 2009, our consolidated results and associated financial information, as well as our consolidated average balances, include Wachovia. The Wachovia acquisition was material to us, and the inclusion of results from Wachovia’s businesses in our 2009 financial statements is a material factor in the changes in our results compared with prior year periods.

Because the transaction closed on the last day of the 2008 annual reporting period, certain fair value purchase accounting adjustments were based on preliminary data as of an interim period with estimates through year end. We have validated and, where necessary, refined our December 31, 2008, fair value estimates and other purchase accounting adjustments. The impact of these refinements was recorded as an adjustment to goodwill in 2009. Based on the purchase price of $23.1 billion and the $12.2 billion fair value of net assets acquired, inclusive of final refinements identified during 2009, the transaction resulted in goodwill of $10.9 billion.

The more significant fair value adjustments in our purchase accounting for the Wachovia acquisition were to loans. As of December 31, 2008, certain of the loans acquired from Wachovia had evidence of credit deterioration since origination, and it was probable that we would not collect all contractually required principal and interest payments. Such loans identified at the time of the acquisition were accounted for using the measurement provisions for purchased credit-impaired (PCI) loans, which are contained in the Receivables topic (FASB Accounting Standards Codification (ASC) 310) of the Codification. PCI loans were recorded at fair value at the date of acquisition, and any related allowance for loan losses was not permitted to be carried over.

PCI loans were written down to an amount estimated to be collectible. Accordingly, such loans are not classified as nonaccrual, even though they may be contractually past due, because we expect to fully collect the new carrying values of such loans (that is, the new cost basis arising out of our purchase accounting). PCI loans are also not included in the disclosure of loans 90 days or more past due and still accruing interest even though a portion of them are 90 days or more contractually past due.

As a result of PCI loan accounting, certain credit-related ratios of the Company, including the growth rate in nonperforming assets (NPAs) since December 31, 2008, may not be directly comparable with periods prior to the merger or with credit-related ratios of other financial institutions. In particular:

•

Wachovia’s high risk loans were written down pursuant to PCI accounting at the time of merger. Therefore, the allowance for credit losses is lower than otherwise would have been required without PCI loan accounting; and

•

Because we virtually eliminated Wachovia’s nonaccrual loans at December 31, 2008, quarterly growth in our nonaccrual loans during 2009 was higher than it would have been without PCI loan accounting. Similarly, our net charge-offs rate was lower than it otherwise would have been.

For further detail on the merger see the “Balance Sheet Analysis – Loan Portfolio” section and Note 2 (Business Combinations) to Financial Statements in this Report.

Earnings Performance

The earnings performance in 2009 was impacted by the acquisition of Wachovia on December 31, 2008, which significantly increased both asset size and the earnings potential of the Company. Net income for 2009 was $12.3 billion ($1.75 diluted per share) with $8.0 billion applicable to common stock, compared with net income of $2.7 billion ($0.70 diluted per share) with $2.4 billion applicable to common stock for 2008. Our 2009 earnings were influenced by factors including:

•		a low mortgage rate environment combined with synergies from the addition of complementary Wachovia business lines , which resulted in a more even split in revenue between net interest income and noninterest income, primarily mortgage banking and trust and investment fees;

•		the integration of Wachovia , which increased our expenses to align staffing models with those of Wells Fargo in our service and product distribution channels, as well as to align or enhance our various systems, business line support and other infrastructures;

•		consumer and commercial borrower financial distress , which increased credit losses and foreclosed asset preservation costs, as well as increased staffing expenses to manage loan modification programs, loan collection, and various other loss mitigation activities; and

•		significant distress in the financial services industry , which caused, among other items, increased Federal Deposit Insurance Corporation (FDIC) and other deposit assessments.

Revenue, the sum of net interest income and noninterest income, grew to $88.7 billion in 2009 from $41.9 billion in 2008, primarily due to the acquisition of Wachovia. In 2009, net interest income of $46.3 billion represented 52% of revenue, compared with $25.1 billion (60%) in 2008. Noninterest income of $42.4 billion in 2009 represented 48% of revenue, up from $16.7 billion (40%) in 2008. The increase in noninterest income as a percentage of revenue was due to a higher percentage of trust and investment fees (11% in 2009, up from 7% in 2008) with the addition of Wells Fargo Advisors (formerly Wachovia Securities) retail brokerage business, legacy Wachovia wealth management and retirement, and reinsurance businesses, and to very strong mortgage banking results (14% in 2009, up from 6% in 2008, predominantly from legacy Wells Fargo).

Noninterest expense as a percentage of revenue was 55% in 2009 and 54% in 2008, with amortization of core deposits (3% of revenue in 2009 and less than 1% in 2008) and additional

FDIC and other deposit assessments (2% of revenue in 2009 and less than 1% in 2008) in 2009 driving the slightly weaker ratio. Noninterest expense for 2009 also included $895 million of Wachovia merger-related integration expense.

Table 3 presents the components of revenue and noninterest expense as a percentage of revenue for year-over-year results, comparing the combined Wells Fargo and Wachovia results for 2009 with legacy Wells Fargo results for 2008.

Net Interest Income

Net interest income is the interest earned on debt securities, loans (including yield-related loan fees) and other interest-earning assets minus the interest paid for deposits, short-term borrowings and long-term debt. The net interest margin is the average yield on earning assets minus the average interest rate paid for deposits and our other sources of funding. Net interest income and the net interest margin are presented on a taxable-equivalent basis in Table 5 to consistently reflect income from taxable and tax-exempt loans and securities based on a 35% federal statutory tax rate.

Net interest income on a taxable-equivalent basis increased to $47.0 billion in 2009, from $25.4 billion in 2008, and the net interest margin was 4.28% in 2009, down 55 basis points from 4.83% in 2008. These changes are primarily due to the impact of acquiring Wachovia. Although the addition of Wachovia increased earning assets and net interest income, it decreased the net interest margin since Wachovia’s net interest margin was much lower than that of legacy Wells Fargo.

Table 4 presents the components of earning assets and funding sources as a percentage of earning assets to provide a more meaningful analysis of year-over-year average balances, comparing the combined Wells Fargo and Wachovia balances for 2009 with legacy Wells Fargo balances for 2008.

The mix of earning assets and their yields are important drivers of net interest income. During 2009, there were slight shifts in our earning asset mix from loans to more liquid assets. Due to weaker loan demand in 2009 and the impact of liquidating certain loan portfolios, average loans for 2009 decreased to 75% of average earning assets from 76% for 2008, average mortgage-backed securities (MBS) dropped to 12% in 2009, from 13% in 2008, and average short-term investments and trading account assets increased to 2% in 2009 from 1% a year ago.

Average interest-bearing core deposits increased to 58% of average earning assets for 2009, from 51% for 2008, and average short-term borrowings decreased to 5% of average earning assets, from 13% for 2008. Core deposits are a low-cost source of funding and thus an important contributor to growth in net interest income and the net interest margin. Core deposits include noninterest-bearing deposits, interest-bearing checking, savings certificates, market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). Average core deposits rose to $762.5 billion in 2009 from $325.2 billion in 2008 and funded 93% and 82% of average loans, respectively. About 87% of our core deposits are now in checking and savings deposits, one of the highest percentages

in the industry. Total average retail core deposits, which exclude Wholesale Banking core deposits and retail mortgage escrow deposits, grew to $588.1 billion for 2009 from $234.1 billion a year ago. Average mortgage escrow deposits were $28.3 billion for 2009, compared with $21.0 billion a year ago. Average savings certificates increased to $140.2 billion in 2009 from $39.5 billion a year ago and average checking and savings deposits increased to $622.4 billion in 2009 from $285.7 billion a year ago. Total average interest-bearing deposits increased to $635.9 billion in 2009 from $266.1 billion a year ago.

Table 5 presents the individual components of net interest income and the net interest margin.

Table 3: Net Interest Income, Noninterest Income and Noninterest Expense as a Percentage of Revenue




	Year ended December 31,
				% of						% of
(in millions, except per share amounts)	2009			revenue			2008			revenue


Interest income
Trading assets	$	944			1	%	$	189			—	%
Securities available for sale		11,941			13			5,577			13
Mortgages held for sale		1,930			2			1,573			4
Loans held for sale		183			—			48			—
Loans		41,659			47			27,651			66
Other interest income		336			—			181			—


Total interest income		56,993			64			35,219			84


Interest expense
Deposits		3,774			4			4,521			11
Short-term borrowings		231			—			1,478			4
Long-term debt		5,786			7			3,789			9
Other interest expense		172			—			—			—


Total interest expense		9,963			11			9,788			23


Net interest income (on a taxable-equivalent basis)		47,030			53			25,431			61


Taxable-equivalent adjustment		(706	)		(1	)		(288	)		(1	)


Net interest income		46,324			52			25,143			60
Noninterest income
Service charges on deposit accounts		5,741			6			3,190			8
Trust and investment fees		9,735			11			2,924			7
Card fees		3,683			4			2,336			6
Other fees		3,804			4			2,097			5
Mortgage banking		12,028			14			2,525			6
Insurance		2,126			2			1,830			4
Net gains from trading activities		2,674			3			275			1
Net gains (losses) on debt securities available for sale		(127	)		—			1,037			2
Net gains (losses) from equity investments		185			—			(757	)		(2	)
Operating leases		685			1			427			1
Other		1,828			2			850			2


Total noninterest income		42,362			48			16,734			40


Noninterest expense
Salaries		13,757			16			8,260			20
Commission and incentive compensation		8,021			9			2,676			6
Employee benefits		4,689			5			2,004			5
Equipment		2,506			3			1,357			3
Net occupancy		3,127			4			1,619			4
Core deposit and other intangibles		2,577			3			186			—
FDIC and other deposit assessments		1,849			2			120			—
Other ⁽¹⁾		12,494			14			6,376			15


Total noninterest expense		49,020			55			22,598			54


Revenue	$	88,686						41,877


(1)		See Table 8 – Noninterest Expense in this Report for additional detail.

Table 4: Average Earning Assets and Funding Sources as a Percentage of Average Earning Assets




	Year ended December 31,
	2009						2008
				% of						% of
	Average			earning			Average			earning
(in millions)	balance			assets			balance			assets


Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments	$	26,869			2	%	$	5,293			1	%
Trading assets		21,092			2			4,971			1
Debt securities available for sale:
Securities of U.S. Treasury and federal agencies		2,480			—			1,083			—
Securities of U.S. states and political subdivisions		12,702			1			6,918			1
Mortgage-backed securities:
Federal agencies		87,197			8			44,777			9
Residential and commercial		41,618			4			20,749			4


Total mortgage-backed securities		128,815			12			65,526			13
Other debt securities ⁽¹⁾		32,011			3			12,818			2


Total debt securities available for sale ⁽¹⁾		176,008			16			86,345			16
Mortgages held for sale ⁽²⁾		37,416			3			25,656			5
Loans held for sale ⁽²⁾		6,293			1			837			—
Loans:
Commercial and commercial real estate:
Commercial		180,924			16			98,620			19
Real estate mortgage		104,197			10			41,659			8
Real estate construction		32,961			3			19,453			4
Lease financing		14,751			1			7,141			1


Total commercial and commercial real estate		332,833			30			166,873			32


Consumer:
Real estate 1-4 family first mortgage		238,359			22			75,116			14
Real estate 1-4 family junior lien mortgage		106,957			10			75,375			14
Credit card		23,357			2			19,601			4
Other revolving credit and installment		90,666			8			54,368			10


Total consumer		459,339			42			224,460			43


Foreign		30,661			3			7,127			1


Total loans ⁽²⁾		822,833			75			398,460			76
Other		6,113			1			1,920			—


Total earning assets	$	1,096,624			100	%	$	523,482			100	%


Funding sources
Deposits:
Interest-bearing checking	$	70,179			6	%	$	5,650			1	%
Market rate and other savings		351,892			32			166,691			32
Savings certificates		140,197			13			39,481			8
Other time deposits		20,459			2			6,656			1
Deposits in foreign offices		53,166			5			47,578			9


Total interest-bearing deposits		635,893			58			266,056			51
Short-term borrowings		51,972			5			65,826			13
Long-term debt		231,801			21			102,283			20
Other liabilities		4,904			—			—			—


Total interest-bearing liabilities		924,570			84			434,165			83
Portion of noninterest-bearing funding sources		172,054			16			89,317			17


Total funding sources	$	1,096,624			100	%	$	523,482			100	%


Noninterest-earning assets
Cash and due from banks	$	19,218						11,175
Goodwill		23,997						13,353
Other		122,515						56,386


Total noninterest-earning assets	$	165,730						80,914


Noninterest-bearing funding sources
Deposits	$	171,712						87,820
Other liabilities		48,193						28,658
Total equity		117,879						53,753
Noninterest-bearing funding sources used to fund earning assets		(172,054	)					(89,317	)


Net noninterest-bearing funding sources	$	165,730						80,914


Total assets	$	1,262,354						604,396


(1)		Includes certain preferred securities.

(2)		Nonaccrual loans are included in their respective loan categories.

Table 5: Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) ^(1)(2)(3)


	2009								2008
							Interest								Interest
	Average			Yields/			income/		Average			Yields/			income/
(in millions)	balance			rates			expense		balance			rates			expense


Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments	$	26,869			0.56	%	$	150		5,293			1.71	%	$	90
Trading assets		21,092			4.48			944		4,971			3.80			189
Debt securities available for sale ⁽⁴⁾ :
Securities of U.S. Treasury and federal agencies		2,480			2.83			69		1,083			3.84			41
Securities of U.S. states and political subdivisions		12,702			6.42			840		6,918			6.83			501
Mortgage-backed securities:
Federal agencies		87,197			5.45			4,591		44,777			5.97			2,623
Residential and commercial		41,618			9.09			4,150		20,749			6.04			1,412


Total mortgage-backed securities		128,815			6.73			8,741		65,526			5.99			4,035
Other debt securities ⁽⁵⁾		32,011			7.16			2,291		12,818			7.17			1,000


Total debt securities available for sale ⁽⁵⁾		176,008			6.73			11,941		86,345			6.22			5,577
Mortgages held for sale ⁽⁶⁾		37,416			5.16			1,930		25,656			6.13			1,573
Loans held for sale ⁽⁶⁾		6,293			2.90			183		837			5.69			48
Loans:
Commercial and commercial real estate:
Commercial		180,924			4.22			7,643		98,620			6.12			6,034
Real estate mortgage		104,197			3.44			3,585		41,659			5.80			2,416
Real estate construction		32,961			2.94			970		19,453			5.08			988
Lease financing		14,751			9.32			1,375		7,141			5.62			401


Total commercial and commercial real estate		332,833			4.08			13,573		166,873			5.90			9,839


Consumer:
Real estate 1-4 family first mortgage		238,359			5.45			12,992		75,116			6.67			5,008
Real estate 1-4 family junior lien mortgage		106,957			4.76			5,089		75,375			6.55			4,934
Credit card		23,357			12.16			2,841		19,601			12.13			2,378
Other revolving credit and installment		90,666			6.56			5,952		54,368			8.72			4,744


Total consumer		459,339			5.85			26,874		224,460			7.60			17,064


Foreign		30,661			3.95			1,212		7,127			10.50			748


Total loans ⁽⁶⁾		822,833			5.06			41,659		398,460			6.94			27,651
Other		6,113			3.05			186		1,920			4.73			91


Total earning assets	$	1,096,624			5.19	%	$	56,993		523,482			6.69	%	$	35,219


Funding sources
Deposits:
Interest-bearing checking	$	70,179			0.14	%	$	100		5,650			1.12	%	$	64
Market rate and other savings		351,892			0.39			1,375		166,691			1.32			2,195
Savings certificates		140,197			1.24			1,738		39,481			3.08			1,215
Other time deposits		20,459			2.03			415		6,656			2.83			187
Deposits in foreign offices		53,166			0.27			146		47,578			1.81			860


Total interest-bearing deposits		635,893			0.59			3,774		266,056			1.70			4,521
Short-term borrowings		51,972			0.44			231		65,826			2.25			1,478
Long-term debt		231,801			2.50			5,786		102,283			3.70			3,789
Other liabilities		4,904			3.50			172		—			—			—


Total interest-bearing liabilities		924,570			1.08			9,963		434,165			2.25			9,788
Portion of noninterest-bearing funding sources		172,054			—			—		89,317			—			—


Total funding sources	$	1,096,624			0.91			9,963		523,482			1.86			9,788


Net interest margin and net interest income on a taxable-equivalent basis ⁽⁷⁾					4.28	%	$	47,030					4.83	%	$	25,431



Noninterest-earning assets
Cash and due from banks	$	19,218								11,175
Goodwill		23,997								13,353
Other ⁽⁸⁾		122,515								56,386


Total noninterest-earning assets	$	165,730								80,914


Noninterest-bearing funding sources
Deposits	$	171,712								87,820
Other liabilities		48,193								28,658
Total equity		117,879								53,753
Noninterest-bearing funding sources used to fund earning assets		(172,054	)							(89,317	)


Net noninterest-bearing funding sources	$	165,730								80,914


Total assets	$	1,262,354								604,396


(1)		Because the Wachovia acquisition was completed at the end of 2008, Wachovia’s assets and liabilities are included in average balances, and Wachovia’s results are reflected in interest income/expense beginning in 2009.

(2)		Our average prime rate was 3.25%, 5.09%, 8.05%, 7.96% and 6.19% for 2009, 2008, 2007, 2006 and 2005, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 0.69%, 2.93%, 5.30%, 5.20% and 3.56% for the same years, respectively.

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

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


2007								2006								2005
						Interest								Interest								Interest
Average			Yields/			income/		Average			Yields/			income/		Average			Yields/			income/
balance			rates			expense		balance			rates			expense		balance			rates			expense



$	4,468			4.99	%	$	223		5,515			4.80	%	$	265		5,448			3.01	%	$	164
	4,291			4.37			188		4,958			4.95			245		5,411			3.52			190

	848			4.26			36		875			4.36			39		997			3.81			38
	4,740			7.37			342		3,192			7.98			245		3,395			8.27			266

	38,592			6.10			2,328		36,691			6.04			2,206		19,768			6.02			1,162
	6,548			6.12			399		6,640			6.57			430		5,128			5.60			283


	45,140			6.10			2,727		43,331			6.12			2,636		24,896			5.94			1,445
	6,295			7.52			477		6,204			7.10			439		3,846			7.10			266


	57,023			6.34			3,582		53,602			6.31			3,359		33,134			6.24			2,015
	33,066			6.50			2,150		42,855			6.41			2,746		38,986			5.67			2,213
	896			7.76			70		630			7.40			47		2,857			5.10			146


	77,965			8.17			6,367		65,720			8.13			5,340		58,434			6.76			3,951
	32,722			7.38			2,414		29,344			7.32			2,148		29,098			6.31			1,836
	16,934			7.80			1,321		14,810			7.94			1,175		11,086			6.67			740
	5,921			5.84			346		5,437			5.72			311		5,226			5.91			309


	133,542			7.82			10,448		115,311			7.78			8,974		103,844			6.58			6,836


	61,527			7.25			4,463		57,509			7.27			4,182		78,170			6.42			5,016
	72,075			8.12			5,851		64,255			7.98			5,126		55,616			6.61			3,679
	15,874			13.58			2,155		12,571			13.29			1,670		10,663			12.33			1,315
	54,436			9.71			5,285		50,922			9.60			4,889		43,102			8.80			3,794


	203,912			8.71			17,754		185,257			8.57			15,867		187,551			7.36			13,804


	7,321			11.68			855		6,343			12.39			786		4,711			13.49			636


	344,775			8.43			29,057		306,911			8.35			25,627		296,106			7.19			21,276
	1,402			5.07			71		1,357			4.97			68		1,581			4.34			68


$	445,921			7.93	%	$	35,341		415,828			7.79	%	$	32,357		383,523			6.81	%	$	26,072




$	5,057			3.16	%	$	160		4,302			2.86	%	$	123		3,607			1.43	%	$	51
	147,939			2.78			4,105		134,248			2.40			3,225		129,291			1.45			1,874
	40,484			4.38			1,773		32,355			3.91			1,266		22,638			2.90			656
	8,937			4.87			435		32,168			4.99			1,607		27,676			3.29			910
	36,761			4.57			1,679		20,724			4.60			953		11,432			3.12			357


	239,178			3.41			8,152		223,797			3.21			7,174		194,644			1.98			3,848
	25,854			4.81			1,245		21,471			4.62			992		24,074			3.09			744
	93,193			5.18			4,824		84,035			4.91			4,124		79,137			3.62			2,866
	—			—			—		—			—			—		—			—			—


	358,225			3.97			14,221		329,303			3.73			12,290		297,855			2.50			7,458
	87,696			—			—		86,525			—			—		85,668			—			—


$	445,921			3.19			14,221		415,828			2.96			12,290		383,523			1.95			7,458


				4.74	%	$	21,120					4.83	%	$	20,067					4.86	%	$	18,614



$	11,806								12,466								13,173
	11,957								11,114								10,705
	51,068								46,615								38,389


$	74,831								70,195								62,267



$	88,907								89,117								87,218
	26,287								24,221								21,316
	47,333								43,382								39,401
	(87,696	)							(86,525	)							(85,668	)


$	74,831								70,195								62,267


$	520,752								486,023								445,790


(5)		Includes certain preferred securities.

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

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

(8)		See Note 7 (Premises, Equipment, Lease Commitments and Other Assets) to Financial Statements in this Report for detail of balances of other noninterest-earning assets at December 31, 2009 and 2008.

Table 6 allocates the changes in net interest income on a taxable-equivalent basis to changes in either average balances or average rates for both interest-earning assets and interest-bearing liabilities. Because of the numerous simultaneous volume and rate changes during any period, it is not possible

to precisely allocate such changes between volume and rate. For this table, changes that are not solely due to either volume or rate are allocated to these categories in proportion to the percentage changes in average volume and average rate.

Table 6: Analysis of Changes in Net Interest Income


	Year ended December 31,
	2009 over 2008									2008 over 2007
(in millions)	Volume			Rate			Total			Volume			Rate			Total

Increase (decrease) in net interest income:
Federal funds sold, securities purchased under resale agreements and other short-term investments	$	156			(96	)		60			35			(168	)		(133	)
Trading assets		715			40			755			26			(25	)		1
Debt securities available for sale:
Securities of U.S. Treasury and federal agencies		41			(13	)		28			9			(4	)		5
Securities of U.S. states and political subdivisions		369			(30	)		339			181			(22	)		159
Mortgage-backed securities:
Federal agencies		2,229			(261	)		1,968			349			(54	)		295
Residential and commercial		1,823			915			2,738			1,017			(4	)		1,013

Total mortgage-backed securities		4,052			654			4,706			1,366			(58	)		1,308
Other debt securities		1,292			(1	)		1,291			543			(20	)		523

Total debt securities available for sale		5,754			610			6,364			2,099			(104	)		1,995
Mortgages held for sale		635			(278	)		357			(460	)		(117	)		(577	)
Loans held for sale		169			(34	)		135			(4	)		(18	)		(22	)
Loans:
Commercial and commercial real estate:
Commercial		3,904			(2,295	)		1,609			1,471			(1,804	)		(333	)
Real estate mortgage		2,467			(1,298	)		1,169			581			(579	)		2
Real estate construction		507			(525	)		(18	)		176			(509	)		(333	)
Lease financing		602			372			974			69			(14	)		55

Total commercial and commercial real estate		7,480			(3,746	)		3,734			2,297			(2,906	)		(609	)

Consumer:
Real estate 1-4 family first mortgage		9,055			(1,071	)		7,984			924			(379	)		545
Real estate 1-4 family junior lien mortgage		1,727			(1,572	)		155			258			(1,175	)		(917	)
Credit card		457			6			463			470			(247	)		223
Other revolving credit and installment		2,594			(1,386	)		1,208			(7	)		(534	)		(541	)

Total consumer		13,833			(4,023	)		9,810			1,645			(2,335	)		(690	)

Foreign		1,176			(712	)		464			(22	)		(85	)		(107	)

Total loans		22,489			(8,481	)		14,008			3,920			(5,326	)		(1,406	)

Other		137			(42	)		95			25			(5	)		20

Total increase (decrease) in interest income		30,055			(8,281	)		21,774			5,641			(5,763	)		(122	)

Increase (decrease) in interest expense:
Deposits:
Interest-bearing checking		136			(100	)		36			17			(113	)		(96	)
Market rate and other savings		1,396			(2,216	)		(820	)		469			(2,379	)		(1,910	)
Savings certificates		1,601			(1,078	)		523			(43	)		(515	)		(558	)
Other time deposits		294			(66	)		228			(94	)		(154	)		(248	)
Deposits in foreign offices		91			(805	)		(714	)		396			(1,215	)		(819	)

Total interest-bearing deposits		3,518			(4,265	)		(747	)		745			(4,376	)		(3,631	)
Short-term borrowings		(259	)		(988	)		(1,247	)		1,158			(925	)		233
Long-term debt		3,544			(1,547	)		1,997			439			(1,474	)		(1,035	)
Other liabilities		172			—			172			—			—			—

Total increase (decrease) in interest expense		6,975			(6,800	)		175			2,342			(6,775	)		(4,433	)

Increase (decrease) in net interest income on a taxable-equivalent basis	$	23,080			(1,481	)		21,599			3,299			1,012			4,311

Noninterest Income

Noninterest income represented 48% of revenue for 2009 compared with 40% for 2008. The increase from 2008 was primarily due to strong trust and investment fee income, aided primarily by the Wachovia acquisition. Also, mortgage

banking income increased significantly during 2009 driven by the low rate environment, strong loan origination volume and strong market-related valuation changes, net of economic hedge results.

Table 7: Noninterest Income


	Year ended December 31,
(in millions)	2009			2008			2007

Service charges on deposit accounts	$	5,741			3,190			3,050
Trust and investment fees:
Trust, investment and IRA fees		3,588			2,161			2,305
Commissions and all other fees		6,147			763			844

Total trust and investment fees		9,735			2,924			3,149

Card fees		3,683			2,336			2,136
Other fees:
Cash network fees		231			188			193
Charges and fees on loans		1,801			1,037			1,011
All other fees		1,772			872			1,088

Total other fees		3,804			2,097			2,292

Mortgage banking:
Servicing income, net		5,557			979			1,511
Net gains on mortgage loan origination/sales activities		6,152			1,183			1,289
All other		319			363			333

Total mortgage banking		12,028			2,525			3,133

Insurance		2,126			1,830			1,530
Net gains from trading activities		2,674			275			544
Net gains (losses) on debt securities available for sale		(127	)		1,037			209
Net gains (losses) from equity investments		185			(757	)		864
Operating leases		685			427			703
All other		1,828			850			936

Total	$	42,362			16,734			18,546

The Federal Reserve Board (FRB) announced regulatory changes to debit card and ATM overdraft practices in fourth quarter 2009. In third quarter 2009, we had also announced policy changes that will help customers limit overdraft and returned item fees. We currently estimate that the combination of these changes will reduce our 2010 fee revenue by approximately $500 million (after tax). The actual impact could vary due to a variety of factors including changes in customer behavior. There is no assurance that the actual impact on our 2010 fee revenue from pending changes to our overdraft practices will not materially vary from our estimate.

We earn trust, investment and IRA (Individual Retirement Account) fees from managing and administering assets, including mutual funds, corporate trust, personal trust, employee benefit trust and agency assets. At December 31, 2009, these assets totaled $1.9 trillion, up 19% from $1.6 trillion (including $510 billion from Wachovia) at December 31, 2008. Trust, investment and IRA fees are primarily based on a tiered scale relative to the market value of the assets under management or administration. The fees increased to $3.6 billion in 2009 from $2.2 billion a year ago.

We receive commissions and other fees for providing services to full-service and discount brokerage customers. These fees increased to $6.1 billion in 2009 from $763 million a year ago, primarily due to Wachovia. These fees include transactional commissions, which are based on the number of transactions executed at the customer’s direction, and asset-based fees, which are based on the market value of the customer’s assets. Client assets totaled $1.1 trillion at December 31, 2009, up from $970 billion (including $859 billion from Wachovia) a year ago. Commissions and other fees also include fees from investment banking activities including equity and bond underwriting.

Card fees increased 58% to $3.7 billion in 2009 from $2.3 billion in 2008, predominantly due to additional card fees from the Wachovia portfolio. Recent legislative and regulatory changes limit our ability to increase interest rates and assess certain fees on card accounts. We currently estimate that these changes will reduce our 2010 fee revenue by approximately $235 million (after tax) before accounting for potential offsets in performance, the economy, revenue mitigation impacts and other factors. The actual impact could vary due to a variety of factors, and there is no assurance that the actual impact on our 2010 fee revenue from these changes will not materially vary from our estimate.

Mortgage banking noninterest income was $12.0 billion in 2009, compared with $2.5 billion a year ago. In addition to servicing fees, net servicing income includes both changes in the fair value of mortgage servicing rights (MSRs) during the period as well as changes in the value of derivatives (economic hedges) used to hedge the MSRs. Net servicing income for 2009 included a $5.3 billion net MSRs valuation gain that was recorded to earnings ($1.5 billion decrease in the fair value of the MSRs offset by a $6.8 billion hedge gain) and for 2008 included a $242 million net MSRs valuation loss ($3.3 billion decrease in the fair value of MSRs offset by a $3.1 billion hedge gain). See the “Risk Management – Mortgage Banking Interest Rate and Market Risk” section of this Report for a detailed discussion of our MSRs risks and hedging approach. Our portfolio of loans serviced for others was $1.88 trillion at December 31, 2009, and $1.86 trillion (including $379 billion acquired from Wachovia) at December 31, 2008. At December 31, 2009, the ratio of MSRs to related loans serviced for others was 0.91%.

Net gains on mortgage loan origination/sales activities of $6.2 billion for 2009 were up from $1.2 billion a year ago, due to strong business performance during the year as the low interest-rate environment produced higher levels of refinance activity. Residential real estate originations were $420 billion in 2009, compared with $230 billion a year ago. The 1-4 family first mortgage unclosed pipeline was $57 billion at December 31, 2009, and $71 billion at December 31, 2008. For additional detail, see the “Risk Management – Mortgage Banking Interest Rate and Market Risk” section and Note 1 (Summary of Significant Accounting Policies), Note 9 (Mortgage Banking Activities) and Note 16 (Fair Values of Assets and Liabilities) to Financial Statements in this Report.

Net gains on mortgage loan origination/sales activities include the cost of any additions to the mortgage repurchase reserve as well as adjustments of loans in the warehouse/pipeline for changes in market conditions that affect their value. Mortgage loans are repurchased based on standard representations and warranties and early payment default clauses in mortgage sale contracts. Additions to the mortgage repurchase reserve that were charged against net gains on mortgage loan origination/sales activities during 2009 totaled $927 million ($399 million for 2008), of which $302 million ($165 million for 2008) was related to our estimate of loss content associated with loan sales during the year and $625 million ($234 million for 2008) was for subsequent increases in estimated losses, primarily due to

increased delinquencies and heightened investor repurchase demands on prior years loan sales within the current environment. To the extent that economic conditions and the housing market do not recover or future investor repurchase demand and appeals success rates differ from past experience, we could continue to have increased demands and increased loss severity on repurchases, causing future additions to the repurchase reserve. For additional information about mortgage loan repurchases, see the “Risk Management – Credit Risk Management Process – Reserve for Mortgage Loan Repurchase Losses” section in this Report. Net write-downs for mortgage loans while they were in the warehouse/pipeline totaled $164 million during 2009 and $584 million during 2008, due to the deterioration in the overall credit market and related secondary market liquidity challenges. Similar losses on the warehouse/pipeline could be possible in the future if housing market values do not recover.

Income from trading activities was $2.7 billion in 2009, up from $275 million a year ago. This increase was driven by $1.8 billion in investment banking activities in our fixed income, financial products, equities and municipal businesses in large part due to Wachovia’s investment banking business. The majority of the remaining 2009 trading gains were driven by various hedging activities of interest rate and credit exposures using cash and derivative trading instruments.

Net losses on debt securities available for sale were $127 million in 2009, compared with net gains of $1.0 billion a year ago. Net gains from equity investments were $185 million in 2009, compared with net losses of $757 million in 2008, which included a $334 million gain from our ownership interest in Visa, which completed its initial public offering in March 2008. Net gains and losses on debt and equity securities totaled $58 million, after OTTI write-downs of $1.7 billion, in 2009 and $280 million, after OTTI write-downs of $2.0 billion, in 2008. The 2008 OTTI write-downs included $646 million for securities of Fannie Mae, Freddie Mac and Lehman Brothers.

Noninterest Expense

The increase in noninterest expense to $49.0 billion in 2009 from a year ago was predominantly due to the acquisition of Wachovia, increased staffing and other costs related to problem loan modifications and workouts, special deposit assessments and operating losses. The acquisition of Wachovia resulted in an expanded geographic platform and capabilities in businesses such as retail brokerage, asset management and investment banking. As part of our integration investment to enhance both the short- and long-term benefits to our customers, we added sales and service team members to align Wachovia’s banking stores and other distribution channels with Wells Fargo’s model. Commission and incentive compensation expense increased proportionately more than salaries due to higher 2009 revenues generated by businesses with revenue-based compensation, including the retail securities brokerage business acquired from Wachovia and our mortgage business.

Table 8: Noninterest Expense


	Year ended December 31,
(in millions)	2009		2008		2007

Salaries	$	13,757		8,260		7,762
Commission and incentive compensation		8,021		2,676		3,284
Employee benefits		4,689		2,004		2,322
Equipment		2,506		1,357		1,294
Net occupancy		3,127		1,619		1,545
Core deposit and other intangibles		2,577		186		158
FDIC and other deposit assessments		1,849		120		34
Outside professional services		1,982		847		899
Contract services		1,088		407		448
Foreclosed assets		1,071		414		256
Outside data processing		1,027		480		482
Postage, stationery and supplies		933		556		565
Operating losses		875		142		437
Insurance		845		725		416
Telecommunications		610		321		321
Travel and entertainment		575		447		474
Advertising and promotion		572		378		412
Operating leases		227		389		561
All other		2,689		1,270		1,076

Total	$	49,020		22,598		22,746

Noninterest expense included $895 million of Wachovia merger-related integration expense for 2009. Employee benefit expense in 2009 reflected actions related to freezing the Wells Fargo and Wachovia Cash Balance pension plans, which lowered pension cost by approximately $500 million for 2009, and reflected $150 million of additional expense for a 401(k) profit sharing contribution to all eligible team members. See Note 19 (Employee Benefits and Other Expenses) to Financial Statements in this Report for additional information. Salaries and employee benefits also reflected increased staffing levels to handle the higher volume of mortgage loan modifications, which continued to increase throughout 2009, driven by both federal and our own proprietary loan modification programs to help customers stay in their homes. FDIC and other deposit assessments, which included additional assessments related to the FDIC Transaction Account Guarantee Program in 2009, were $1.8 billion in 2009, including a mid-year 2009 FDIC special assessment of $565 million. See the “Risk Management – Liquidity and Funding” section in this Report for additional information. Operating losses included a $261 million reserve for an auction rate securities (ARS) settlement. See Note 8 (Securitizations and Variable Interest Entities) to Financial Statements in this Report for more information.

Income Tax Expense

Our effective income tax rate was 30.3% in 2009, up from 18.5% in 2008. The increase is primarily attributable to higher pre-tax earnings and increased tax expense (with a comparable increase in interest income) associated with purchase accounting for leveraged leases, partially offset by higher levels of tax exempt income, tax credits and the impact of changes in our liability for uncertain tax positions. We recognized a net tax benefit of approximately $150 million and $200 million during the fourth quarter and year-ended December 31, 2009, respectively, primarily related to changes in our uncertain tax positions, due to federal and state income tax settlements.

Effective January 1, 2009, we adopted new accounting guidance that changed the way noncontrolling interests are presented in the income statement such that the consolidated income statement includes amounts from both Wells Fargo interests and the noncontrolling interests. As a result, our effective tax rate is calculated by dividing income tax expense by income before income tax expense less the net income from noncontrolling interests.

Operating Segment Results

We define our operating segments by product and customer. As a result of the combination of Wells Fargo and Wachovia, in 2009 management realigned our business segments into three lines of business: Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement. Our management accounting process measures the performance of the operating segments based on our management structure and

is not necessarily comparable with similar information for other financial services companies. We revised prior period information to reflect the 2009 realignment of our operating segments; however, because the acquisition was completed on December 31, 2008, Wachovia’s results are not included in the income statement or in average balances for periods prior to 2009. The Wachovia acquisition was material to us, and the inclusion of results from Wachovia’s businesses in our 2009 financial statements is a material factor in the changes in our results compared with prior year results. The significant matters affecting our financial results for 2009 have been discussed previously. Table 9 and the following discussion present our results by operating segment. For a more complete description of our operating segments, including additional financial information and the underlying management accounting process, see Note 23 (Operating Segments) to Financial Statements in this Report.

Table 9: Operating Segment Results – Highlights


									Wealth, Brokerage
	Community Banking				Wholesale Banking				and Retirement
(in billions)	2009		2008		2009		2008		2009		2008

Revenue	$	59.0		33.0		20.3		8.2		11.5		2.7
Net income		8.6		2.1		3.9		1.4		1.0		0.2

Average loans		538.0		285.6		255.4		112.3		45.7		15.2
Average core deposits		533.0		252.8		146.6		69.6		114.3		23.1

Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including investment, insurance and trust services in 39 states and D.C., and mortgage and home equity loans in all 50 states and D.C. Wachovia added expanded product capability as well as expanded channels to better serve our customers. Community Banking includes Wells Fargo Financial.

Revenue growth for 2009 was driven primarily by significant growth in mortgage originations ($420 billion in 2009 compared with $230 billion in prior year) and strong mortgage servicing hedge results (primarily due to hedge carry income arising from the low short-term interest rates) as well as continued success in the cross-sell of Wells Fargo products. Double-digit growth in legacy Wells Fargo core deposits and the ability to retain approximately 60% of Wachovia’s matured higher-cost CDs portfolio in lower-rate CDs and liquid deposits at lower than expected yields also contributed to the growth, mitigated by lower loan interest rates. Noninterest expense increased from 2008 due to the addition of Wachovia, increases in FDIC and other deposit assessments, and credit related expenses, including the addition of resources to handle a higher volume of mortgage loan modifications. To benefit our customers we continued to invest in adding sales and service team members in regional banking as we aligned Wachovia banking stores with the Wells Fargo model. The increases in noninterest expense were mitigated by continued revenue growth and expense management as we stayed on track to meet our merger synergy goals.

Wholesale Banking provides financial solutions to businesses across the United States with annual sales generally in excess of $10 million and to financial institutions globally. Products include middle market banking, corporate banking, CRE, treasury management, asset-based lending, insurance brokerage, foreign exchange, correspondent banking, trade services, specialized lending, equipment finance, corporate trust, investment banking, capital markets, and asset management. Wachovia added expanded product capabilities across the segment, including investment banking, mergers and acquisitions, equity trading, equity structured products, fixed-income sales and trading, and equity and fixed-income research.

Wholesale Banking earned net income of $3.9 billion and revenue of $20.3 billion in 2009. Results were driven by the performance of our many diverse businesses, such as commercial banking, corporate banking, asset-based lending, asset management, investment banking and international. With over 750 offices nationwide and globally, plus expanded product and distribution capabilities, Wholesale Banking saw gains in 2009 in the number of new middle market companies we lent money to and in the positive experiences those companies had with our bank. Revenue performance also benefited from the recovery of the capital markets. We saw the effect of customers deleveraging, accessing capital markets and delaying investment decisions as loan balances declined throughout the year; however, we continued to originate loans at improved spreads and terms. The provision for loan losses was $3.6 billion, including $1.2 billion of additional provision to build reserves for the wholesale portfolio.

Key merger achievements included the conversion of Wachovia offices to the commercial banking model, revenue synergies through our government banking and global financial institutions and trade services businesses and enhancement of our investment banking business across the franchise by combining the best of the two companies’ advisory, financing and securities distribution capabilities.

Wealth, Brokerage and Retirement provides a full range of financial advisory services to clients. Wealth Management provides affluent and high-net-worth clients with a complete range of wealth management solutions including financial planning, private banking, credit, investment management, trust and estate services, business succession planning and charitable services along with bank-based brokerage services through Wells Fargo Advisors and Wells Fargo Investments, LLC. Family Wealth provides family-office services to ultra-high-net-worth clients and is one of the largest multi-family financial office practices in the United States. Retail Brokerage’s financial advisors serve customers’ advisory, brokerage and financial needs as part of one of the largest full-service brokerage firms in the United States. Retirement provides retirement services for individual investors and is a national leader in 401(k) and pension record keeping. The addition of Wachovia in first quarter 2009 added the following businesses to this operating segment: Wells Fargo Advisors (retail brokerage), wealth management, including its family wealth business, and retirement and reinsurance business.

Wealth, Brokerage and Retirement earned net income of $1.0 billion in 2009. Revenue of $11.5 billion included a mix of brokerage commissions, asset-based fees and net interest income. The equity market recovery helped drive growth in fee income. Deposit balances grew 33% during the year. Net interest income growth was dampened by the exceptionally low short-term interest rate environment. Expenses increased from the prior year due to the addition of Wachovia and the loss reserve for the ARS legal settlement. Expense growth was mitigated by the realization of merger synergies during the year. The wealth, brokerage and retirement businesses have solidified partnerships throughout Wells Fargo, working with Community Banking and Wholesale Banking to provide financial solutions for clients.

Earnings Performance – Comparison of 2008 with 2007

Wells Fargo net income in 2008 was $2.7 billion ($0.70 per common share), compared with $8.1 billion ($2.38 per common share) in 2007. Results for 2008 included the impact of our $8.1 billion (pre tax) credit reserve build, $2.0 billion (pre tax) of OTTI and $124 million (pre tax) of merger-related expenses. Results for 2007 included the impact of our $1.4 billion (pre tax) credit reserve build and $203 million (pre tax) of Visa litigation expenses. Despite the challenging environment in 2008, we achieved both top line revenue growth and positive operating leverage (revenue growth of 6%; expense decline of 1%).

Revenue, the sum of net interest income and noninterest income, grew 6% to $41.9 billion in 2008 from $39.5 billion in 2007. The breadth and depth of our business model resulted in very strong and balanced growth in loans, deposits and fee-based products. We achieved positive operating leverage (revenue growth of 6%; expense decline of 1%), the best among large bank peers. Wells Fargo net income for 2008 of $2.7 billion included an $8.1 billion (pre tax) credit reserve build, $2.0 billion (pre tax) of OTTI and $124 million (pre tax) of merger-related expenses. Diluted earnings per share of $0.70 for 2008 included credit reserve build ($1.51 per share) and OTTI ($0.37 per share). Industry-leading annual results included the highest growth in pre-tax pre-provision earnings (up 15%), highest net interest margin (4.83%), return on average common stockholders’ equity (ROE), return on average total assets (ROA) and highest total shareholder return among large bank peers (up 2%).

Net interest income on a taxable-equivalent basis was $25.4 billion in 2008, up from $21.1 billion in 2007, reflecting strong loan growth, disciplined deposit pricing and lower market funding costs. Average earning assets grew 17% from 2007. Our net interest margin was 4.83% for 2008, up from 4.74% in 2007, primarily due to the benefit of lower funding costs as market rates declined.

Noninterest income decreased 10% to $16.7 billion in 2008 from $18.5 billion in 2007. Card fees were up 9% from 2007, due to continued growth in new accounts and higher credit and debit card transaction volume. Insurance revenue was up 20%, due to customer growth, higher crop insurance revenue and the fourth quarter 2007 acquisition of ABD Insurance. However, trust and investment fees decreased 7% and other fees decreased 9%, due to depressed market conditions. Operating lease income decreased 39% from 2007, due to continued softening in the auto market, reflecting tightened credit standards. Noninterest income included $280 million in net gains on debt and equity securities, including $2.0 billion of OTTI write-downs.

Noninterest expense was $22.6 billion in 2008, down 1% from $22.7 billion in 2007. We continued to invest in new stores and additional sales and service-related team members. Operating lease expense decreased 31% to $389 million in 2008 from $561 million in 2007, as we stopped originating new indirect auto leases in third quarter 2008. Insurance expense increased to $725 million in 2008 from $416 million in 2007 due to the fourth quarter 2007 acquisition of ABD Insurance, additional insurance reserves at our captive mortgage reinsurance operation as well as higher commissions on increased sales volume.

Balance Sheet Analysis

During 2009, we continued to grow core deposits even though loan demand remained soft. Deposits increased $42.6 billion in 2009 from a year ago, with $35.3 billion of the increase in core deposits. Growth in deposits was due to the increase in the U.S. money supply, a preference on the part of consumers and businesses to maintain liquidity, and the Company’s successful efforts to attract and retain deposits from new and existing customers. Loans decreased $82.1 billion from a year ago, before considering the impact of the $3.5 billion increase in the allowance for loan losses. Commercial loan demand was soft during 2009 as businesses reduced investing in inventory, plant and equipment. Likewise, retail customer borrowing declined as consumers limited their spending. Excess deposits were therefore invested in liquid assets, particularly in the latter half of 2009. Our rate mix of core deposits improved with noninterest-bearing, interest-bearing checking, and market rate and other lower cost savings deposits increasing to 83% of total core deposits at December 31, 2009, from 71% a year ago.

See the following sections for more discussion and details about the major components of our balance sheet. Capital is discussed in the “Capital Management” section of this Report.

Securities Available for Sale

Securities available for sale consist of both debt and marketable equity securities. We hold debt securities available for sale primarily for liquidity, interest rate risk management and long-term yield enhancement. Accordingly, this portfolio consists primarily of very liquid, high-quality federal agency debt and privately issued MBS. We held $167.1 billion of debt securities available for sale, with net unrealized gains of $4.8 billion, at December 31, 2009, compared with $145.4 billion, with net unrealized losses of $9.8 billion a year ago. We also held $5.6 billion of marketable equity securities available for sale, with net unrealized gains of $843 million, at December 31, 2009, compared with $6.1 billion, with net unrealized losses of $160 million a year ago. The total net unrealized gains on securities available for sale were $5.6 billion at December 31, 2009, up from net unrealized losses of $9.9 billion at December 31, 2008, due to general decline in long-term yields and narrowing of credit spreads. With the application of purchase accounting at December 31, 2008, for the Wachovia portfolio, the net unrealized losses in cumulative other comprehensive income (OCI), a component of common equity, related entirely to the legacy Wells Fargo portfolio at that date.

We analyze securities for OTTI on a quarterly basis, or more often if a potential loss-triggering event occurs. Of the $1.7 billion OTTI write-downs in 2009, $1.0 billion related to debt securities and $655 million to equity securities. For a discussion of our OTTI accounting policies and underlying considerations and analysis see Note 1 (Summary of Significant Accounting Policies – Accounting Standards Adopted in 2009 – FASB ASC 320-10 and – Securities) and Note 5 (Securities Available for Sale) to Financial Statements in this Report.

At December 31, 2009, we had approximately $8 billion of investments in securities, primarily municipal bonds, which are guaranteed against loss by bond insurers. These securities are almost exclusively investment grade and were generally underwritten in accordance with our own investment standards prior to the determination to purchase, without relying on the bond insurer’s guarantee in making the investment decision. These securities will continue to be monitored as part of our on-going impairment analysis of our securities available for sale, but are expected to perform, even if the rating agencies reduce the credit rating of the bond insurers.

The weighted-average expected maturity of debt securities available for sale was 5.6 years at December 31, 2009. Since 73% of this portfolio is MBS, the expected remaining maturity may differ from contractual maturity because borrowers generally have the right to prepay obligations before the underlying mortgages mature. The estimated effect of a 200 basis point increase or decrease in interest rates on the fair value and the expected remaining maturity of the MBS available for sale are shown in Table 10.

Table 10: Mortgage-Backed Securities


			Net			Expected
	Fair		unrealized			remaining
(in billions)	value		gain (loss)			maturity

At December 31, 2009	$	122.4		2.5			4.0
At December 31, 2009, assuming a 200 basis point:
Increase in interest rates		113.0		(6.9	)		5.4
Decrease in interest rates		128.8		8.9			2.6

See Note 5 (Securities Available for Sale) to Financial Statements in this Report for securities available for sale by security type.

Loan Portfolio

Loans decreased during 2009 for nearly all loan types as loan demand softened in response to economic conditions.

Table 11 provides detail by loan product, and by PCI and all other loans.

Table 11: Loan Portfolios



	December 31,
	2009						2008
			All						All
	PCI		other				PCI		other
(in millions)	loans		loans		Total		loans ⁽¹⁾		loans		Total

Commercial and commercial real estate:
Commercial	$	1,911		156,441		158,352		4,580		197,889		202,469
Real estate mortgage		5,631		99,167		104,798		7,762		95,346		103,108
Real estate construction		3,713		25,994		29,707		4,503		30,173		34,676
Lease financing		—		14,210		14,210		—		15,829		15,829

Total commercial and commercial real estate		11,255		295,812		307,067		16,845		339,237		356,082

Consumer:
Real estate 1-4 family first mortgage		38,386		191,150		229,536		39,214		208,680		247,894
Real estate 1-4 family junior lien mortgage		331		103,377		103,708		728		109,436		110,164
Credit card		—		24,003		24,003		—		23,555		23,555
Other revolving credit and installment		—		89,058		89,058		151		93,102		93,253

Total consumer		38,717		407,588		446,305		40,093		434,773		474,866

Foreign		1,733		27,665		29,398		1,859		32,023		33,882

Total loans	$	51,705		731,065		782,770		58,797		806,033		864,830


(1)	In 2009, we refined certain of our preliminary purchase accounting adjustments based on additional information as of December 31, 2008. These refinements resulted in increasing the PCI loans carrying value at December 31, 2008, to $59.2 billion. The table above has not been updated as of December 31, 2008, to reflect these refinements.

A discussion of average loan balances and a comparative detail of average loan balances is included in Table 5 under “Earnings Performance – Net Interest Income” earlier in this Report; year-end balances and other loan related information are in Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

During 2009, we further refined our preliminary purchase accounting adjustments related to loans from the Wachovia acquisition. These refinements, which increased the December 31, 2008, balance of PCI loans to $59.2 billion, were based on additional information as of December 31, 2008, that became available after the merger date, as permitted under purchase accounting.

The most significant refinements for the PCI loans were as follows:

•

Net increase to the unpaid principal balance of $2.3 billion based on additional loans considered in the scope of PCI loans, consisting of a $1.9 billion decrease in commercial, CRE, and foreign loans and a $4.2 billion increase in consumer loans ($2.7 billion of which related to Pick-a-Pay loans).

•		Net increase to the nonaccretable difference of $3.7 billion, due to the addition of more loans and further refinement of the loss estimates. The net increase was created by a $299 million increase in commercial, CRE, and foreign loans and a $3.4 billion increase in consumer loans ($2.2 billion of which related to Pick-a-Pay loans).

•		Net increase to the accretable yield of a $1.8 billion interest rate mark premium, primarily for consumer loans.

The nonaccretable difference was established in purchase accounting for PCI loans to absorb losses expected at that time on those loans. Amounts absorbed by the nonaccretable difference do not affect the income statement or the allowance for credit losses. Table 12 provides an analysis of 2009 changes in the nonaccretable difference related to principal that is not expected to be collected.

Table 12: Changes in Nonaccretable Difference for PCI Loans



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

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

Balance at December 31, 2009	$	(5,003	)		(16,240	)		(1,622	)		(22,865	)


(1)	Release of the nonaccretable difference for payments in full increases interest income in the period of payment. Pick-a-Pay and other consumer PCI loans do not reflect nonaccretable difference releases due to accounting for those loans on a pooled basis.
(2)	Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale.
(3)	Reclassification of nonaccretable difference for probable and significant increased cash flow estimates to the accretable yield will result in increasing income and thus the rate of return over the remaining life of the PCI loan or pool of loans.
(4)	Write-downs to net realizable value of PCI loans are charged to the nonaccretable difference when severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss upon final resolution of the loan.

For further detail on PCI loans, see Note 1 (Summary of Significant Accounting Policies – Loans) and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Table 13 shows contractual loan maturities for selected loan categories and sensitivities of those loans to changes in interest rates.

Table 13: Maturities for Selected Loan Categories

December 31,

2009

2008

After

After

Within

one year

After

Within

one year

After

one

through

five

one

through

five

(in millions)

year

five years

years

Total

year

five years

years

Total

Selected loan maturities:

Commercial

44,919

91,951

21,482

158,352

59,246

109,764

33,459

202,469

Real estate mortgage

29,982

44,312

30,504

104,798

23,880

45,565

33,663

103,108

Real estate construction

18,719

10,055

933

29,707

19,270

13,942

1,464

34,676

Foreign

21,266

5,715

2,417

29,398

23,605

7,288

2,989

33,882

Total selected loans

114,886

152,033

55,336

322,255

126,001

176,559

71,575

374,135

Distribution of loans due after one year to changes in interest rates:

Loans at fixed interest rates

26,373

18,921

24,766

23,628

Loans at floating/variable interest rates

125,660

36,415

151,793

47,947

Total selected loans

152,033

55,336

176,559

71,575

Deposits

Deposits totaled $824.0 billion at December 31, 2009, compared with $781.4 billion at December 31, 2008. Table 14 provides additional detail. Comparative detail of average deposit balances is provided in Table 5 under “Earnings Performance – Net Interest Income” earlier in this Report.

Total core deposits were $780.7 billion at December 31, 2009, up $35.3 billion from $745.4 billion at December 31, 2008. High-rate CDs of $109 billion at Wachovia matured in 2009 and were replaced by $62 billion in checking, savings or lower-cost CDs. We continued to gain new deposit customers and deepen our relationships with existing customers.

Table 14: Deposits



	December 31,
			% of					% of
			total					total			%
(in millions)	2009		deposits			2008		deposits			Change

Noninterest-bearing	$	181,356		22	%	$	150,837		19	%		20
Interest-bearing checking		63,225		8			72,828		10			(13	)
Market rate and other savings		402,448		49			306,255		39			31
Savings certificates		100,857		12			182,043		23			(45	)
Foreign deposits ⁽¹⁾		32,851		4			33,469		4			(2	)

Core deposits		780,737		95			745,432		95			5
Other time deposits		16,142		2			28,498		4			(43	)
Other foreign deposits		27,139		3			7,472		1			263

Total deposits	$	824,018		100	%	$	781,402		100	%		5


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

Off-Balance Sheet Arrangements

In the ordinary course of business, we engage in financial transactions that are not recorded in the balance sheet, or may be recorded in the balance sheet in amounts that are different from the full contract or notional amount of the transaction. These transactions are designed to (1) meet the financial needs of customers, (2) manage our credit, market or liquidity risks, (3) diversify our funding sources, and/or (4) optimize capital. These are described below as off-balance sheet transactions with unconsolidated entities, and guarantees and certain contingent arrangements. Beginning in 2010, the accounting rules for off-balance sheet transactions with unconsolidated entities changed. We discuss the impact of those changes in this section and in the “Current Accounting Developments” section in this Report.

Off-Balance Sheet Transactions with Unconsolidated Entities

Table 15 presents our significant continuing involvement with qualifying special purpose entities (QSPEs) and unconsolidated variable interest entities (VIEs) as of December 31, 2009 and 2008.

Table 15 does not include SPEs and unconsolidated VIEs where our only involvement is in the form of (1) investments in trading securities, (2) investments in securities available for sale or loans issued by entities sponsored by third parties, (3) derivative counterparty for certain derivatives such as interest rate swaps or cross currency swaps that have customary terms or (4) administrative or trustee services. Also not included are investments accounted for in accordance with the American Institute of Certified Public Accountants (AICPA) Investment Company Audit Guide, investments accounted for under the cost method and investments accounted for under the equity method.

In Table 15, “Total entity assets” represents the total assets of unconsolidated SPEs. “Carrying value” is the amount in our consolidated balance sheet related to our involvement with the unconsolidated SPEs. “Maximum exposure to loss” from our involvement with off-balance sheet entities, which is a required disclosure under generally accepted accounting principles (GAAP), is determined as the carrying value of our involvement with off-balance sheet (unconsolidated) VIEs plus the remaining undrawn liquidity and lending commitments, the notional amount of net written derivative contracts, and generally the notional amount of, or stressed loss estimate for, other commitments and guarantees. It represents estimated loss that would be incurred under severe, hypothetical circumstances, for which we believe the possibility is extremely remote, such as where the value of our interests and any associated collateral declines to zero, without any consideration of recovery or offset from any economic hedges. Accordingly, this required disclosure is not an indication of expected loss.

Table 15: Qualifying Special Purpose Entities and Unconsolidated Variable Interest Entities



	December 31,
	2009						2008
	Total				Maximum		Total				Maximum
	entity		Carrying		exposure		entity		Carrying		exposure
(in millions)	assets		value		to loss		assets		value		to loss

QSPEs
Residential mortgage loan securitizations ⁽¹⁾ :
Conforming and GNMA ⁽²⁾	$	1,150,515		18,926		24,362		1,008,824		21,496		24,619
Other/nonconforming		251,850		13,222		13,469		313,447		9,483		9,909
Commercial mortgage securitizations ⁽¹⁾		345,561		4,945		5,222		320,299		2,894		2,894
Auto loan securitizations		2,285		158		158		4,133		115		115
Student loan securitizations		2,637		173		173		2,765		133		133
Other		8,391		61		135		11,877		71		1,576

Total QSPEs	$	1,761,239		37,485		43,519		1,661,345		34,192		39,246

Unconsolidated VIEs
Collateralized debt obligations ⁽¹⁾	$	55,899		14,734		16,607		54,294		15,133		20,443
Wachovia administered ABCP ⁽³⁾ conduit		5,160		—		5,263		10,767		—		15,824
Asset-based finance structures		17,467		9,867		11,227		11,614		9,096		9,482
Tax credit structures		27,537		4,006		4,663		22,882		3,850		4,926
Collateralized loan obligations		23,830		3,666		4,239		23,339		3,326		3,881
Investment funds		84,642		1,702		2,920		105,808		3,543		3,690
Credit-linked note structures		1,755		1,025		1,754		12,993		1,522		2,303
Money market funds ⁽⁴⁾		—		—		—		13,307		10		51
Other		8,470		2,981		5,048		1,832		3,806		4,699

Total unconsolidated VIEs	$	224,760		37,981		51,721		256,836		40,286		65,299


(1)	Certain December 31, 2008, balances have been revised to reflect additionally identified residential mortgage QSPEs and collateralized debt obligation VIEs, as well as to reflect removal of commercial mortgage asset transfers that were subsequently determined not to be transfers to QSPEs.
(2)	Conforming residential mortgage loan securitizations are those that are guaranteed by government-sponsored entities (GSEs), including Government National Mortgage Association (GNMA). We have concluded that conforming mortgages are not subject to consolidation under Accounting Standards Update (ASU) 2009-16 (FAS 166) and ASU 2009-17 (FAS 167). See the “Current Accounting Developments” section in this Report for our estimate of the nonconforming mortgages that may potentially be consolidated under this guidance. The maximum exposure to loss as of December 31, 2008, has been revised to conform with the year-end 2009 basis of determination.
(3)	Asset-backed commercial paper.
(4)	Includes only those money market mutual funds to which the Company had outstanding contractual support agreements in place. The December 31, 2008, balance has been revised to exclude certain funds because the support arrangements had lapsed or settled and we were not obligated to support such funds.

The FASB issued new guidance for accounting for off-balance sheet transactions with QSPEs and VIEs effective January 1, 2010, that replaces the current consolidation model for VIEs. For further information and the impact of the application of this guidance, see the “Current Accounting Developments” section in this Report.

Table 16 presents our involvement with QSPEs and unconsolidated VIEs as of December 31, 2009, segregated between those entities we sponsored or to which we transferred assets and those sponsored by third parties. Additionally, we have further segregated the QSPEs and unconsolidated VIEs over which we have power in accordance with the consolidated accounting guidance in ASU 2009-17 (FAS 167) and those we do not.

We consider sponsorship to include transactions with QSPEs and unconsolidated VIEs where we solely or materially participated in the initial design or structuring of the entity or the marketing of the transaction to investors. If we sold assets, typically securities or loans, to a QSPE or unconsolidated VIE we are considered the transferor. Third party transactions are those transactions where we have ongoing involvement, but did not sponsor or transfer assets to a QSPE or unconsolidated VIE.

We expect to consolidate the VIEs or former QSPEs where we have power, regardless of whether or not we transferred assets to or sponsored the VIE or QSPE. Based upon the transfers accounting guidance in ASU 2009-16 (FAS 166) and the consolidated accounting guidance in ASU 2009-17 (FAS 167) regarding the nature and type of continuing involvement that could potentially be significant and our related assessment of whether or not we have power, it may be necessary to make changes in our future disclosures. See additional detail regarding the expected impact to the Company’s balance sheet in the “Current Accounting Developments” section of this Report.

Table 16: Qualifying Special Purpose Entities and Unconsolidated Variable Interest Entities Total Entity Assets by Type of Involvement


	December 31, 2009
	Wells Fargo as sponsor or transferor						Third party sponsor
	Without		With				Without		With
(in millions)	power		power		Subtotal		power		power		Subtotal		Total

QSPEs
Residential mortgage loan securitizations:
Conforming and GNMA ⁽¹⁾	$	1,012,312		—		1,012,312		138,203		—		138,203		1,150,515
Other/nonconforming		91,789		19,721		111,510		138,262		2,078		140,340		251,850
Commercial mortgage securitizations		199,847		—		199,847		145,714		—		145,714		345,561
Other		10,946		2,367		13,313		—		—		—		13,313

Total QSPEs	$	1,314,894		22,088		1,336,982		422,179		2,078		424,257		1,761,239

Unconsolidated VIEs
Collateralized debt obligations	$	48,350		—		48,350		7,549		—		7,549		55,899
Wachovia administered ABCP conduit		—		5,160		5,160		—		—		—		5,160
Asset-based lending structures		2,121		—		2,121		15,346		—		15,346		17,467
Tax credit structures		27,533		4		27,537		—		—		—		27,537
Collateralized loan obligations		23,830		—		23,830		—		—		—		23,830
Investment funds ⁽²⁾		22,479		—		22,479		62,163		—		62,163		84,642
Other		10,225		—		10,225		—		—		—		10,225

Total unconsolidated VIEs	$	134,538		5,164		139,702		85,058		—		85,058		224,760


(1)		We have concluded that conforming mortgages are not subject to consolidation under ASU 2009-16 (FAS 166) and ASU 2009-17 (FAS 167). See the “Current Accounting Developments” section in this Report for our estimate of the nonconforming mortgages that may potentially be consolidated under this guidance.
(2)		Includes investment funds that are subject to deferral from application of ASU 2009-17 (FAS 167).

Guarantees and Certain Contingent Arrangements

Guarantees are contracts that contingently require us to make payments to a guaranteed party based on an event or a change in an underlying asset, liability, rate or index. Guarantees are generally in the form of standby letters of credit, securities lending and other indemnifications, liquidity agreements, written put options, recourse obligations, residual

value guarantees and contingent consideration. Table 17 presents the carrying value, maximum exposure to loss on our guarantees and the amount with a higher risk of performance.

For more information on guarantees and certain contingent arrangements, see Note 14 (Guarantees and Legal Actions) to Financial Statements in this Report.

Table 17: Guarantees and Certain Contingent Arrangements


	December 31,
	2009						2008
			Maximum		Non-				Maximum		Non-
	Carrying		exposure		investment		Carrying		exposure		investment
(in millions)	value		to loss		grade		value		to loss		grade

Standby letters of credit	$	148		49,997		21,112		130		47,191		17,293
Securities lending and other indemnifications		51		20,002		2,512		—		30,120		1,907
Liquidity agreements ⁽¹⁾		66		7,744		—		30		17,602		—
Written put options ⁽¹⁾⁽²⁾		803		8,392		3,674		1,376		10,182		5,314
Loans sold with recourse		96		5,049		2,400		53		6,126		2,038
Residual value guarantees		8		197		—		—		1,121		—
Contingent consideration		11		145		102		11		187		—
Other guarantees		—		55		2		—		38		—

Total guarantees	$	1,183		91,581		29,802		1,600		112,567		26,552


(1)		Certain of these agreements included in this table are related to off-balance sheet entities and, accordingly, are also disclosed in Note 8 (Securitizations and Variable Interest Entities) to Financial Statements in this Report.
(2)		Written put options, which are in the form of derivatives, are also included in the derivative disclosures in Note 15 (Derivatives) to Financial Statements in this Report.

Contractual Obligations

In addition to the contractual commitments and arrangements previously described, which, depending on the nature of the obligation, may or may not require use of our resources, we enter into other contractual obligations in the ordinary course of business, including debt issuances for the funding of operations and leases for premises and equipment.

Table 18 summarizes these contractual obligations as of December 31, 2009, excluding obligations for short-term borrowing arrangements and pension and postretirement benefit plans. More information on those obligations is in Note 12 (Short-Term Borrowings) and Note 19 (Employee Benefits and Other Expenses) to Financial Statements in this Report.

Table 18: Contractual Obligations


	Note(s) to
	Financial		Less than		1-3		3-5		More than		Indeterminate
(in millions)	Statements		1 year		years		years		5 years		maturity		⁽¹⁾	Total

Contractual payments by period:
Deposits		11	$	126,061		30,303		17,579		3,006		647,069			824,018
Long-term debt ⁽²⁾		7,13		40,495		64,726		30,779		67,861		—			203,861
Operating leases		7		1,217		2,055		1,588		3,503		—			8,363
Unrecognized tax obligations		20		49		—		—		—		2,253			2,302
Purchase obligations ⁽³⁾				400		364		56		6		—			826

Total contractual obligations			$	168,222		97,448		50,002		74,376		649,322			1,039,370


(1)		Includes interest-bearing and noninterest-bearing checking, and market rate and other savings accounts.
(2)		Includes obligations under capital leases of $77 million.
(3)		Represents agreements to purchase goods or services.

We are subject to the income tax laws of the U.S., its states and municipalities, and those of the foreign jurisdictions in which we operate. We have various unrecognized tax obligations related to these operations that may require future cash tax payments to various taxing authorities. Because of their uncertain nature, the expected timing and amounts of these payments generally are not reasonably estimable or determinable. We attempt to estimate the amount payable in the next 12 months based on the status of our tax examinations and settlement discussions. See Note 20 (Income Taxes) to Financial Statements in this Report for more information.

We enter into derivatives, which create contractual obligations, as part of our interest rate risk management process for our customers or for other trading activities. See the “Risk Management – Asset/Liability and Market Risk Management” section and Note 15 (Derivatives) to Financial Statements in this Report for more information.

Transactions with Related Parties

The Related Party Disclosures topic of the Codification requires disclosure of material related party transactions, other than compensation arrangements, expense allowances and other similar items in the ordinary course of business. We had no related party transactions required to be reported for the years ended December 31, 2009, 2008 and 2007.

Risk Management

Credit Risk Management Process

Our credit risk management process is governed centrally, but provides for decentralized management and accountability by our lines of business. Our overall credit process includes comprehensive credit policies, judgmental or statistical credit underwriting, frequent and detailed risk measurement and modeling, extensive credit training programs, and a continual loan review and audit process. In addition, regulatory examiners review and perform detailed tests of our credit underwriting, loan administration and allowance processes.

We continually evaluate and modify our credit policies to address unacceptable levels of risk as they are identified. Accordingly, from time to time, we designate certain portfolios and loan products as non-strategic or high risk to limit or cease their continued origination and to specially monitor their loss potential. As an example, during the current weak economic cycle we have significantly tightened bank-selected reduced documentation requirements as a precautionary measure and to substantially reduce third party originations due to the negative loss trends experienced in these channels.

A key to our credit risk management is utilizing a well controlled underwriting process, which we believe is appropriate for the needs of our customers as well as investors who purchase the loans or securities collateralized by the loans. We only approve applications and make loans if we believe the customer has the ability to repay the loan or line of credit according to all its terms. Our underwriting of loans collateralized by residential real property utilizes appraisals or automated valuation models (AVMs) to support property values. AVMs are computer-based tools used to estimate the market value of homes. AVMs are a lower-cost alternative to appraisals and support valuations of large numbers of properties in a short period of time. AVMs estimate property values based on processing large volumes of market data including market comparables and price trends for local market areas. The primary risk associated with the use of AVMs is that the value of an individual property may vary significantly from the average for the market area. We have processes to periodically validate AVMs and specific risk management guidelines addressing the circumstances when AVMs may be used. Generally, AVMs are only used in underwriting to support property values on loan originations where the loan amount is under $250,000. For underwriting residential property loans of $250,000 or more we require property visitation appraisals by qualified independent appraisers.

Measuring and monitoring our credit risk is an ongoing process that tracks delinquencies, collateral values, economic trends by geographic areas, loan-level risk grading for certain portfolios (typically commercial) and other indications of risk to loss. Our credit risk monitoring process is designed to enable early identification of developing risk to loss and to support our determination of an adequate allowance for loan losses. During the current economic cycle our monitoring and

resolution efforts have focused on loan portfolios exhibiting the highest levels of risk including mortgage loans supported by real estate (both consumer and commercial), junior lien, commercial, credit card and subprime portfolios. The following analysis reviews each of these loan portfolios and their relevant concentrations and credit quality performance metrics in greater detail.

Table 19 identifies our non-strategic and liquidating consumer portfolios as of December 31, 2009 and 2008.

Table 19: Non-Strategic and Liquidating Consumer Portfolios


	Outstanding balance
	December 31,
(in billions)	2009		2008

Pick-a-Pay mortgage	$	85.2		95.3
Liquidating home equity		8.4		10.3
Legacy Wells Fargo Financial indirect auto		11.3		18.2

Total non-strategic and liquidating consumer portfolios	$	104.9		123.8

COMMERCIAL REAL ESTATE (CRE) The CRE portfolio consists of both real estate mortgages and construction loans. The combined loans outstanding totaled $134.5 billion at December 31, 2009, which represented 17% of total loans. Construction loans totaled $29.7 billion at December 31, 2009, or 4% of total loans. Permanent CRE loans totaled $104.8 billion at December 31, 2009, or 13% of total loans. The portfolio is diversified both geographically and by product type. The largest geographic concentrations are found in California and Florida, which represented 22% and 11% of the total CRE portfolio, respectively. By product type, the largest concentrations are office buildings and industrial/warehouse, which represented 23% and 11% of the portfolio, respectively.

At legacy Wells Fargo our underwriting of CRE loans has been focused primarily on cash flows and creditworthiness, not solely collateral valuations. Our legacy Wells Fargo management team is overseeing and managing the CRE loans acquired from Wachovia. At merger closing, we determined that $19.3 billion of Wachovia CRE loans needed to be accounted for as PCI loans and we recorded an impairment write-down of $7.0 billion in our purchase accounting, which represented a 37% write-down of the PCI loans included in the Wachovia CRE loan portfolio. To identify and manage newly emerging problem CRE loans we employ a high level of surveillance and regular customer interaction to understand and manage the risks associated with these assets, including regular loan reviews and appraisal updates. As issues are identified, management is engaged and dedicated workout groups are in place to manage problem assets. At year-end 2009 the remaining balance of PCI CRE loans totaled $9.3 billion. This balance reflects the refinement of the impairment analysis and reduction from loan resolutions and write-downs.

Table 20 summarizes CRE loans by state and product type with the related nonaccrual totals. At December 31, 2009, the highest concentration of non-PCI CRE loans by state was $27.8 billion in California, about double the next largest state concentration, and the related nonaccrual loans totaled about $2.0 billion, or 7.2%. Office buildings, at $28.7 billion of non-PCI

loans, were the largest property type concentration, nearly double the next largest, and the related nonaccrual loans totaled $1.1 billion, or 3.7%. Of CRE mortgage loans (excluding construction loans), 43% related to owner-occupied properties at December 31, 2009. In aggregate, nonaccrual loans totaled 5.6% of the non-PCI outstanding balance at December 31, 2009.

Table 20: CRE Loans by State and Property Type


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

By state:
PCI loans:
Florida		$	—		1,022			—		722			—		1,744			*	%
California			—		1,116			—		150			—		1,266			*
North Carolina			—		283			—		485			—		768			*
Georgia			—		385			—		364			—		749			*
Virginia			—		396			—		303			—		699			*
Other			—		2,429			—		1,689			—		4,118	⁽²⁾		1

Total PCI loans		$	—		5,631			—		3,713			—		9,344			1	%

All other loans:
California		$	1,141		23,214			865		4,549			2,006		27,763			4	%
Florida			626		10,999			311		2,127			937		13,126			2
Texas			231		6,643			250		2,509			481		9,152			1
North Carolina			205		5,468			135		1,594			340		7,062			1
Georgia			225		4,364			109		952			334		5,316			1
Virginia			65		3,499			105		1,555			170		5,054			1
New York			54		3,860			48		1,187			102		5,047			1
Arizona			187		3,958			171		1,045			358		5,003			1
New Jersey			66		3,028			23		644			89		3,672			*
Colorado			78		2,248			110		879			188		3,127			*
Other			1,106		31,886			898		8,953			2,004		40,839	⁽³⁾		5

Total all other loans		$	3,984		99,167			3,025		25,994			7,009		125,161			16	%

Total		$	3,984		104,798			3,025		29,707			7,009		134,505			17	%

By property:
PCI loans:
Apartments		$	—		1,141			—		969			—		2,110			*	%
Office buildings			—		1,650			—		192			—		1,842			*
1-4 family land			—		531			—		815			—		1,346			*
1-4 family structure			—		154			—		635			—		789			*
Land (excluding 1-4 family)			—		553			—		206			—		759			*
Other			—		1,602			—		896			—		2,498			*

Total PCI loans		$	—		5,631			—		3,713			—		9,344			1	%

All other loans:
Office buildings		$	904		25,542			171		3,151			1,075		28,693			4	%
Industrial/warehouse			527		13,925			17		999			544		14,924			2
Real estate – other			564		13,791			88		877			652		14,668			2
Apartments			259		7,670			262		4,570			521		12,240			2
Retail (excluding shopping center)			620		10,788			85		996			705		11,784			2
Land (excluding 1-4 family)			148		2,941			639		6,264			787		9,205			1
Shopping center			172		6,070			242		2,240			414		8,310			1
Hotel/motel			208		5,214			123		1,162			331		6,376			1
1-4 family land			164		718			677		2,670			841		3,388			*
1-4 family structure			90		1,191			659		2,073			749		3,264			*
Other			328		11,317			62		992			390		12,309			2

Total all other loans		$	3,984		99,167			3,025		25,994			7,009		125,161	⁽⁴⁾		16	%

Total		$	3,984		104,798			3,025		29,707			7,009		134,505			17	%


*		Less than 1%.
(1)		For PCI loans amounts represent carrying value.
(2)		Includes 38 states; no state had loans in excess of $605 million at December 31, 2009.
(3)		Includes 40 states; no state had loans in excess of $3.0 billion at December 31, 2009.
(4)		Includes $46.6 billion of loans to owner-occupants where 51% or more of the property is used in the conduct of their business.

COMMERCIAL LOANS AND LEASE FINANCING For purposes of portfolio risk management, we aggregate commercial loans and lease financing according to market segmentation and standard industry codes. Table 21 summarizes commercial loans and lease financing by industry with the related nonaccrual totals. This portfolio has experienced less credit deterioration than our CRE portfolio as evidenced by its lower nonaccrual rate of 2.6% compared with 5.2% for the CRE portfolios. We believe this portfolio is well underwritten and is diverse in its risk with relatively even concentrations across several industries.

Table 21: Commercial Loans and Lease Financing by Industry


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

PCI loans:
Real estate investment trust		$	—		351			*	%
Media			—		314			*
Investors			—		140			*
Residential construction			—		122			*
Insurance			—		118			*
Leisure			—		110			*
Other			—		756	⁽²⁾		*

Total PCI loans		$	—		1,911			*	%

All other loans:
Financial institutions		$	496		11,111			1	%
Oil and gas			202		8,464			1
Healthcare			88		8,397			1
Cyclical retailers			77		8,316			1
Industrial equipment			71		8,188			1
Food and beverage			119		7,524			1
Real estate – other			99		6,722			1
Business services			167		6,570			1
Transportation			31		6,469			1
Public administration			17		5,785			1
Technology			15		5,752			1
Utilities			72		5,489			1
Other			3,114		81,864	⁽³⁾		10

Total all other loans		$	4,568		170,651			22	%

Total		$	4,568		172,562			22	%


*		Less than 1%.
(1)		For PCI loans amounts represent carrying value.
(2)		No other single category had loans in excess of $87 million.
(3)		No other single category had loans in excess of $5.3 billion. The next largest categories included investors, hotel/restaurant, media, securities firms, non-residential construction, leisure, trucking, dairy, gaming and contractors.

REAL ESTATE 1-4 FAMILY FIRST MORTGAGE LOANS As part of the Wachovia acquisition, we acquired residential first and home equity loans that are very similar to the Wells Fargo core originated portfolio. We also acquired the Pick-a-Pay portfolio, which is composed primarily of option payment adjustable-rate mortgage and fixed-rate mortgage products. Under purchase accounting for the Wachovia acquisition, we made purchase accounting adjustments to the Pick-a-Pay loans considered to be impaired under accounting guidance for PCI loans. See the “Risk Management – Pick-a-Pay Portfolio” section in this Report for additional detail.

The concentrations of real estate 1-4 family mortgage loans by state are presented in Table 22. Our real estate 1-4 family mortgage loans to borrowers in the state of California represented approximately 14% of total loans at both December 31, 2009 and 2008, mostly within the larger metropolitan areas, with no single area consisting of more than 3% of total loans. Of this amount, 3% of total loans were PCI loans from Wachovia. Changes in real estate values and underlying economic or market conditions for these areas are monitored continuously within the credit risk management process. Beginning in 2007, the residential real estate markets began to experience significant declines in property values and several markets in California, specifically in Southern California and the Central Valley, experienced declines that turned out to be more significant than the national decline.

Some of our real estate 1-4 family mortgage loans, including first mortgage and home equity products, include an interest-only feature as part of the loan terms. At December 31, 2009, these loans were approximately 15% of total loans, compared with 11% at the end of 2008. Most of these loans are considered to be prime or near prime. We have manageable adjustable-rate mortgage (ARM) reset risk across our Wells Fargo originated and owned mortgage loan portfolios.

Table 22: Real Estate 1-4 Family Mortgage Loans by State


	December 31, 2009
	Real estate		Real estate		Total real
	1-4 family		1-4 family		estate 1-4%		% of
	first		junior lien		family		total
(in millions)	mortgage		mortgage		mortgage		loans

PCI loans:
California	$	25,265		82		25,347		3	%
Florida		4,288		67		4,355		1
New Jersey		1,196		34		1,230		*
Other ⁽¹⁾		7,637		148		7,785		1

Total PCI loans	$	38,386		331		38,717		5	%

All other loans:
California	$	52,229		29,731		81,960		11	%
Florida		19,284		9,210		28,494		4
New Jersey		9,230		6,801		16,031		2
Virginia		5,915		4,995		10,910		1
New York		6,769		4,071		10,840		1
Pennsylvania		6,396		4,343		10,739		1
North Carolina		6,464		4,043		10,507		1
Georgia		5,003		3,816		8,819		1
Texas		6,900		1,769		8,669		1
Other ⁽²⁾		72,960		34,598		107,558		14

Total all other loans	$	191,150		103,377		294,527		37	%

Total	$	229,536		103,708		333,244		42	%


*		Less than 1%.
(1)		Consists of 47 states; no state had loans in excess of $975 million.
(2)		Consists of 41 states; no state had loans in excess of $7.8 billion. Includes $15.2 billion in GNMA pool buyouts.

The deterioration in specific segments of the Home Equity portfolios required a targeted approach to managing these assets. In fourth quarter 2007, a liquidating portfolio was identified, consisting of home equity loans generated through the wholesale channel not behind a Wells Fargo first mortgage, and home equity loans acquired through correspondents. The liquidating portion of the Home Equity portfolio was $8.4 billion at December 31, 2009, compared with $10.3 billion a year ago. The loans in this liquidating portfolio represent about 1% of total loans outstanding at December 31, 2009, and contain some of the highest risk in our $123.8 billion Home Equity portfolios, with a loss rate of 11.17% compared with

3.28% for the core portfolio. The loans in the liquidating portfolio are largely concentrated in geographic markets that have experienced the most abrupt and steepest declines in housing prices. The core portfolio was $115.4 billion at December 31, 2009, of which 97% was originated through the retail channel and approximately 17% of the outstanding balance was in a first lien position. Table 23 includes the credit attributes of these two portfolios. California loans represent the largest state concentration in each of these portfolios and have experienced among the highest early-term delinquency and loss rates.

Table 23: Home Equity Portfolios ⁽¹⁾


					% of loans
					two payments
	Outstanding balance				or more past due					Loss rate
	December 31,				December 31,					December 31,
(in millions)	2009		2008		2009			2008		2009		2008

Core portfolio ⁽²⁾
California	$	30,264		31,544		4.12	%		2.95		5.42		2.93
Florida		12,038		11,781		5.48			3.36		4.73		2.79
New Jersey		8,379		7,888		2.50			1.41		1.30		0.66
Virginia		5,855		5,688		1.91			1.50		1.06		1.08
Pennsylvania		5,051		5,043		2.03			1.10		1.49		0.38
Other		53,811		56,415		2.85			1.97		2.44		1.14

Total		115,398		118,359		3.35			2.27		3.28		1.70

Liquidating portfolio
California		3,205		4,008		8.78			6.69		16.74		9.26
Florida		408		513		9.45			8.41		16.90		11.24
Arizona		193		244		10.46			7.40		18.57		8.58
Texas		154		191		1.94			1.27		2.56		1.56
Minnesota		108		127		4.15			3.79		7.58		5.74
Other		4,361		5,226		5.06			3.28		6.46		3.40

Total		8,429		10,309		6.74			4.93		11.17		6.18

Total core and liquidating portfolios	$	123,827		128,668		3.58			2.48		3.88		2.10


(1)		Consists of real estate 1-4 family junior lien mortgages and lines of credit secured by real estate from all groups, excluding PCI loans.

(2)		Includes equity lines of credit and closed-end second liens associated with the Pick-a-Pay portfolio totaling $1.8 billion at December 31, 2009, and $2.1 billion at December 31, 2008.

PICK-A-PAY PORTFOLIO Our Pick-a-Pay portfolio, which we acquired in the Wachovia merger, had an unpaid principal balance of $103.7 billion and a carrying value of $85.2 billion at December 31, 2009. This portfolio includes loans that offer payment options (Pick-a-Pay option payment loans), loans that were originated without the option payment feature and loans that no longer offer the option feature as a result of our modification efforts since the acquisition. At December 31, 2009, the unpaid principal balance of Pick-a-Pay option payment loans totaled $73.1 billion, or 70% of the total Pick-a-Pay portfolio, down significantly from $101.3 billion, or 86%, at December 31, 2008, primarily due to loan modifications, paid-in full loans and net charge-offs. The Pick-a-Pay portfolio is a liquidating portfolio as Wachovia ceased originating new Pick-a-Pay loans in 2008. Equity lines of credit and closed-end second liens associated with Pick-a-Pay loans are reported in the Home Equity core portfolio.

PCI loans in the Pick-a-Pay portfolio had an unpaid principal balance of $55.1 billion and a carrying value of $37.0 billion at December 31, 2009. The carrying value of the PCI loans is net of purchase accounting write-downs to reflect their fair value at acquisition. Upon acquisition, we recorded a $22.4 billion write-down in purchase accounting on Pick-a-Pay loans that were impaired. Losses to date on this portfolio are reasonably in line with management’s original expectations. Our most recent life-of-loan loss projections show an improvement driven in part by extensive and currently successful modification efforts as well as improving delinquency roll rate trends and further stabilization in the housing market.

Pick-a-Pay option payment loans may be adjustable or fixed rate. They are home mortgages on which the customer has the option each month to select from among four payment options: (1) a minimum payment as described below, (2) an interest-only payment, (3) a fully amortizing 15-year payment, or (4) a fully amortizing 30-year payment.

The minimum monthly payment for substantially all of our Pick-a-Pay loans is reset annually. The new minimum monthly payment amount usually cannot increase by more than 7.5% of the then-existing principal and interest payment amount. The minimum payment may not be sufficient to pay the monthly interest due and in those situations a loan on which the customer has made a minimum payment is subject to “negative amortization,” where unpaid interest is added to the principal balance of the loan. The amount of interest that has been added to a loan balance is referred to as “deferred interest.” Total deferred interest of $3.7 billion at December 31, 2009, was down from $4.3 billion at December 31, 2008, due to loan modification efforts as well as falling interest rates resulting in the minimum payment option covering the interest and some principal on many loans. At December 31, 2009, approximately 47% of customers choosing the minimum payment option did not defer interest.

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

five-year anniversary. After a recast, the customers’ new payment terms are reset to the amount necessary to repay the balance over the remainder of the original loan term.

Due to the terms of the Pick-a-Pay portfolio, there is little recast risk over the next three years. Based on assumptions of a flat rate environment, if all eligible customers elect the minimum payment option 100% of the time and no balances prepay, we would expect the following balances of loans to recast based on reaching the principal cap: $2 million in 2010, $1 million in 2011 and $4 million in 2012. In 2009, the amount of loans recast based on reaching the principal cap was $1 million. In addition, we would expect the following balances of loans to start fully amortizing due to reaching their recast anniversary date and also having a payment change at the recast date greater than the annual 7.5% reset: $44 million in 2010, $52 million in 2011 and $58 million in 2012. In 2009, the amount of loans reaching their recast anniversary date and also having a payment change over the annual 7.5% reset was $25 million.

Table 24 reflects the geographic distribution of the Pick-a-Pay portfolio broken out between PCI loans and all other loans. In stressed housing markets with declining home prices and increasing delinquencies, the LTV ratio is a useful metric in predicting future real estate 1-4 family first mortgage loan performance, including potential charge-offs. Because PCI loans were initially recorded at fair value written down for expected credit losses, the ratio of the carrying value to the current collateral value for acquired loans with credit impairment will be lower as compared with the LTV based on the unpaid principal. For informational purposes, we have included both ratios in the following table.

Table 24: Pick-a-Pay Portfolio


	December 31, 2009
	PCI loans																All other loans
									Ratio of
									carrying
	Unpaid		Current						value to			Unpaid		Current
	principal		LTV			Carrying			current			principal		LTV				Carrying
(in millions)	balance		ratio		⁽¹⁾	value		⁽²⁾	value			balance		ratio		⁽¹⁾		value		⁽²⁾

California	$	37,341		141	%	$	25,022			94	%	$	23,795		93	%		$	23,626
Florida		5,751		139			3,199			77			5,046		104				4,942
New Jersey		1,646		101			1,269			77			2,914		82				2,912
Texas		442		82			399			74			1,967		66				1,973
Arizona		1,410		143			712			72			1,124		101				1,106
Other states		8,506		110			6,428			82			13,716		86				13,650

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


(1)		The current LTV ratio is calculated as the unpaid principal balance plus the unpaid principal balance of any equity lines of credit that share common collateral divided by the collateral value. Collateral values are determined using AVMs and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing large volumes of market data including market comparables and price trends for local market areas.

(2)		Carrying value, which does not reflect the allowance for loan losses, includes purchase accounting adjustments, which, for PCI loans, are the nonaccretable difference and the accretable yield, and for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs.

To maximize return and allow flexibility for customers to avoid foreclosure, we have in place several loss mitigation strategies for our Pick-a-Pay loan portfolio. We contact customers who are experiencing difficulty and may in certain cases modify the terms of a loan based on a customer’s documented income and other circumstances. We also are actively modifying the Pick-a-Pay portfolio. Because of the write-down of the PCI loans in purchase accounting, which have been aggregated in pools, our post merger modifications to PCI Pick-a-Pay loans have not resulted in any modification-related provision for credit losses. To the extent we modify loans not in the PCI Pick-a-Pay portfolio, we establish an impairment reserve in accordance with the applicable accounting requirements for loan restructurings.

We also have taken steps to work with customers to refinance or restructure their Pick-a-Pay loans into other loan products. For customers at risk, we offer combinations of term extensions of up to 40 years (from 30 years), interest rate reductions, to charge no interest on a portion of the principal for some period of time and, in geographies with substantial property value declines, we will even offer permanent principal reductions. In 2009, we completed over 52,000 Pick-a-Pay loan modifications. The majority of the loan modifications were concentrated in our PCI Pick-a-Pay loan portfolio. Approximately 31% of the PCI portfolio was modified in 2009. Nearly 70,000 modification offers were proactively sent to customers during 2009. As part of the modification process, the loans are re-underwritten, income is documented and the negative amortization feature is eliminated. Most of the modifications result in material payment reduction to the customer. We continually reassess our loss mitigation strategies and may adopt additional or different strategies in the future. In fourth quarter 2009, the U.S. Treasury Department’s Home Affordable Modification Program (HAMP) was rolled out to the customers in this portfolio. As of December 31, 2009, over 45,000 HAMP applications were being reviewed by our loan servicing department. We believe a key factor to successful loss mitigation is tailoring the revised loan payment to the customer’s sustainable income.

CREDIT CARDS Our credit card portfolio, a portion of which is included in the Wells Fargo Financial discussion below, totaled $24.0 billion at December 31, 2009, which represents only 3% of our total outstanding loans and is smaller than the credit card portfolios of each of our large bank peers. Delinquencies of 30 days or more were 5.5% of credit card outstandings at December 31, 2009, up from 5.0% a year ago. Net charge-offs were 10.8% for 2009, up from 7.2% in 2008, reflecting high bankruptcy filings and the current economic environment. We have tightened underwriting criteria and imposed credit line management changes to minimize balance transfers and line increases.

WELLS FARGO FINANCIAL Wells Fargo Financial’s portfolio consists of real estate loans, substantially all of which are secured debt consolidation loans, and both prime and non-prime auto secured loans, unsecured loans and credit cards.

Wells Fargo Financial had $25.8 billion and $29.1 billion in real estate secured loans at December 31, 2009 and 2008, respectively. Of this portfolio, $1.6 billion and $1.8 billion, respectively, was considered prime based on secondary market standards and has been priced to the customer accordingly. The remaining portfolio is non-prime but has been originated with standards to reduce credit risk. These loans were originated through our retail channel with documented income, LTV limits based on credit quality and property characteristics, and risk-based pricing. In addition, the loans were originated without teaser rates, interest-only or negative amortization features. Credit losses in the portfolio have increased in the current economic environment compared with historical levels, but performance remained similar to prime portfolios in the industry with overall loss rates of 3.13% in 2009 on the entire portfolio. At December 31, 2009, $8.4 billion of the portfolio was originated with customer FICO scores below 620, but these loans have further restrictions on LTV and debt-to-income ratios intended to limit the credit risk.

Wells Fargo Financial also had $16.5 billion and $23.6 billion in auto secured loans and leases at December 31, 2009 and 2008, respectively, of which $4.4 billion and $6.3 billion, respectively, were originated with customer FICO scores below 620. Loss rates in this portfolio in 2009 were 5.12% for FICO scores of 620 and above, and 7.00% for FICO scores below 620. These loans were priced based on relative risk. Of this portfolio, $11.3 billion represented loans and leases originated through its indirect auto business, a channel Wells Fargo Financial ceased using near the end of 2008.

Wells Fargo Financial had $8.1 billion and $8.4 billion in unsecured loans and credit card receivables at December 31, 2009 and 2008, respectively, of which $1.0 billion and $1.3 billion, respectively, was originated with customer FICO scores below 620. Net loss rates in this portfolio were 13.35% in 2009 for FICO scores of 620 and above, and 19.78% for FICO scores below 620. Wells Fargo Financial has been actively tightening credit policies and managing credit lines to reduce exposure given current economic conditions.

NONACCRUAL LOANS AND OTHER NONPERFORMING ASSETS

Table 25 shows the five-year trend for nonaccrual loans and other NPAs. We generally place loans on nonaccrual status when:

•		the full and timely collection of interest or principal becomes uncertain;

•		they are 90 days (120 days with respect to real estate 1-4 family first and junior lien mortgages and auto loans) past due for interest or principal (unless both well-secured and in the process of collection); or

•		part of the principal balance has been charged off and no restructuring has occurred.

Note 1 (Summary of Significant Accounting Policies –Loans) to Financial Statements in this Report describes our accounting policy for nonaccrual loans.

Table 25: Nonaccrual Loans and Other Nonperforming Assets


	December 31,
(in millions)	2009			2008		2007		2006		2005

Nonaccrual loans:
Commercial and commercial real estate:
Commercial	$	4,397			1,253		432		331		286
Real estate mortgage		3,984			594		128		105		165
Real estate construction		3,025			989		293		78		31
Lease financing		171			92		45		29		45

Total commercial and commercial real estate		11,577			2,928		898		543		527

Consumer:
Real estate 1-4 family first mortgage		10,100			2,648		1,272		688		471
Real estate 1-4 family junior lien mortgage		2,263			894		280		212		144
Other revolving credit and installment		332			273		184		180		171

Total consumer		12,695			3,815		1,736		1,080		786

Foreign		146			57		45		43		25

Total nonaccrual loans ^(1)(2)(3)		24,418			6,800		2,679		1,666		1,338

As a percentage of total loans		3.12	%		0.79		0.70		0.52		0.43
Foreclosed assets:
GNMA loans ⁽⁴⁾	$	960			667		535		322		—
Other		2,199			1,526		649		423		191
Real estate and other nonaccrual investments ⁽⁵⁾		62			16		5		5		2

Total nonaccrual loans and other nonperforming assets	$	27,639			9,009		3,868		2,416		1,531

As a percentage of total loans		3.53	%		1.04		1.01		0.76		0.49


(1)		Includes nonaccrual mortgages held for sale and loans held for sale in their respective loan categories.
(2)		Excludes loans acquired from Wachovia that are accounted for as PCI loans.
(3)		Includes $9.5 billion and $3.6 billion at December 31, 2009, and December 31, 2008, respectively, of loans classified as impaired. See Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report for further information on impaired loans.
(4)		Consistent with regulatory reporting requirements, foreclosed real estate securing Government National Mortgage Association (GNMA) loans is classified as nonperforming. Both principal and interest for GNMA loans secured by the foreclosed real estate are collectible because the GNMA loans are insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).
(5)		Includes real estate investments (contingent interest loans accounted for as investments) that would be classified as nonaccrual if these assets were recorded as loans, and nonaccrual debt securities.

Total NPAs were $27.6 billion (3.53% of total loans) at December 31, 2009, and included $24.4 billion of nonaccrual loans and $3.2 billion of foreclosed assets, real estate, and other nonaccrual investments. Nonaccrual loans increased $17.6 billion from December 31, 2008. The rate of nonaccrual growth in 2009 was somewhat increased by the effect of purchase accounting applicable to substantially all of Wachovia’s nonaccrual loans as PCI loans at year-end 2008. This purchase accounting resulted in reclassifying all but $97 million of Wachovia’s nonaccruing loans to accruing status, virtually eliminating all nonaccrual loans as of our merger date, and limiting comparability of this metric and related credit ratios with prior periods and our peers. Typically, changes to nonaccrual loans period-over-period represent inflows for loans that reach a specified past due status, offset by reductions for loans that are charged off, sold, transferred to foreclosed properties, or are no longer classified as nonaccrual because they return to accrual status. During 2009, because of purchase accounting, the rate of growth in nonaccrual loans was higher than it would have been without PCI loan accounting. The impact of purchase accounting on our credit data should diminish over time. In addition, we have also increased loan modifications and restructurings to assist homeowners and other borrowers in the current difficult economic cycle.

This increase is expected to result in elevated nonaccrual loan levels for longer periods because consumer nonaccrual loans that have been modified remain in nonaccrual status until a borrower has made six consecutive contractual payments, inclusive of consecutive payments made prior to the modification. For a consumer accruing loan that has been modified, if the borrower has demonstrated performance under the previous terms and shows the capacity to continue to perform under the restructured terms, the loan will remain in accruing status. Otherwise, the loan will be placed in a nonaccrual status until the borrower has made six consecutive contractual payments.

As explained in more detail below, we believe the loss exposure expected in our NPAs is mitigated by three factors. First, 96% of our nonaccrual loans are secured. Second, losses have already been recognized on 36% of total nonaccrual loans. Third, there is a segment of nonaccrual loans for which specific impairment reserves have been established in the allowance, while the remaining NPAs are covered by general reserves. We are seeing signs of stability in our credit portfolio, as growth in credit losses slowed during 2009. While losses are expected to remain elevated, a more favorable economic outlook and improved credit statistics in several portfolios further increase our confidence that our credit cycle is turning, provided economic conditions do not deteriorate further.

Commercial and CRE nonaccrual loans amounted to $11.6 billion at December 31, 2009, compared with $2.9 billion at December 31, 2008. Of the $11.6 billion total commercial and CRE nonaccrual loans at December 31, 2009:

•		$7.4 billion have had $1.0 billion of loan impairments recorded for expected life-of-loan losses in accordance with impairment accounting standards;

•		the remaining $4.2 billion have reserves as part of the allowance for loan losses;

•		$10.7 billion (93%) are secured, of which $7.0 billion (61%) are secured by real estate, and the remainder secured by other assets such as receivables, inventory and equipment;
•		over one-third of these nonaccrual loans are paying interest that is being applied to principal; and

•		31% have been written down by approximately 52%.

Consumer nonaccrual loans (including nonaccrual troubled debt restructurings (TDRs)) amounted to $12.7 billion at December 31, 2009, compared with $3.8 billion at December 31, 2008. The $8.9 billion increase in nonaccrual consumer loans from December 31, 2008, represented an increase of $7.5 billion in 1-4 family first mortgage loans and an increase of $1.4 billion in 1-4 family junior liens. In addition, there were accruing consumer TDRs of $6.2 billion at December 31, 2009. Of the $18.9 billion of consumer nonaccrual loans and accruing TDRs:

•		$6.1 billion have had charge-offs totaling $2.6 billion; consumer loans secured by real estate are charged-off to the appraised value, less cost to sell, of the underlying collateral when these loans reach 180 days delinquent;

•		$8.3 billion have $1.8 billion in life-of-loan TDR loss impairment reserves in addition to any charge-offs; and

•		the remaining $10.6 billion have reserves as part of the allowance for loan losses.

Of the $12.7 billion of consumer nonaccrual loans:

•		$12.6 billion (99%) are secured, substantially all by real estate; and

•		21% have a combined LTV ratio of 80% or below.

NPAs at December 31, 2009, included $960 million of loans that are FHA insured or VA guaranteed, which have little to no loss content, and $2.2 billion of foreclosed assets, which have been written down to the value of the underlying collateral. Foreclosed assets included $852 million that resulted from PCI loans.

Table 26 summarizes NPAs for each of the four quarters of 2009. It shows a trend of declining increase in NPAs after the first quarter of 2009.

Table 26: Nonaccrual Loans and Other Nonperforming Assets During 2009


	December 31, 2009					September 30, 2009					June 30, 2009					March 31, 2009
			As a					As a					As a					As a
			% of					% of					% of					% of
			total					total					total					total
($ in millions)	Balances		loans			Balances		loans			Balances		loans			Balances		loans

Commercial and commercial real estate:
Commercial	$	4,397		2.78	%	$	4,540		2.68	%	$	2,910		1.60	%	$	1,696		0.88	%
Real estate mortgage		3,984		3.80			2,856		2.76			2,343		2.26			1,324		1.26
Real estate construction		3,025		10.18			2,711		8.55			2,210		6.65			1,371		4.04
Lease financing		171		1.20			157		1.11			130		0.89			114		0.77

Total commercial and commercial real estate		11,577		3.77			10,264		3.22			7,593		2.28			4,505		1.30
Consumer:
Real estate 1-4 family first mortgage		10,100		4.40			8,132		3.50			6,000		2.53			4,218		1.74
Real estate 1-4 family junior lien mortgage		2,263		2.18			1,985		1.90			1,652		1.54			1,418		1.29
Other revolving credit and installment		332		0.37			344		0.38			327		0.36			300		0.33

Total consumer		12,695		2.84			10,461		2.32			7,979		1.74			5,936		1.27
Foreign		146		0.50			144		0.48			226		0.75			75		0.24

Total nonaccrual loans		24,418		3.12			20,869		2.61			15,798		1.92			10,516		1.25

Foreclosed assets:
GNMA loans		960					840					932					768
All other		2,199					1,687					1,592					1,294

Total foreclosed assets		3,159					2,527					2,524					2,062

Real estate and other nonaccrual investments		62					55					20					34

Total nonaccrual loans and other nonperforming assets	$	27,639		3.53	%	$	23,451		2.93	%	$	18,342		2.23	%	$	12,612		1.50	%

Change from prior quarter	$	4,188					5,109					5,730					3,603

While commercial and CRE nonaccrual loans were up in 2009, the dollar amount of the increase declined between quarters and the rate of growth slowed considerably throughout the year. Commercial and CRE nonaccrual loans increased $8.6 billion, or 295%, from December 31, 2008. Similarly, the growth rate in consumer nonaccrual loans also slowed in 2009. Wells Fargo’s consumer nonaccrual loans increased $8.9 billion, or 233%, from December 31, 2008. Wachovia’s Pick-a-Pay portfolio represents the largest portion of consumer nonaccrual loans and was up $3.3 billion in 2009.

Total consumer TDRs amounted to $8.3 billion at December 31, 2009, compared with $1.6 billion at December 31, 2008. Of the TDRs, $2.1 billion at December 31, 2009, and $409 million at December 31, 2008, were classified as nonaccrual. Consumer loans that enter into a TDR before they reach nonaccrual status (normally 120 days past due) remain in accrual status as long as they continue to perform according to the terms of the TDR. We strive to identify troubled loans and work with the customer to modify to more affordable terms before their loan reaches nonaccrual status. Accordingly, during 2009 most consumer loans were in accrual status at the time of TDR and therefore most of our consumer TDR loans are in accrual status at the end of the year. We establish an impairment reserve when a loan is restructured in a TDR.

At December 31, 2008, total nonaccrual loans were $6.8 billion (0.79% of total loans) up from $2.7 billion (0.70%) at December 31, 2007. A significant portion of the $4.1 billion increase in nonaccrual loans was in the real estate 1-4 family first mortgage portfolio, including $742 million in Wells Fargo Financial real estate and $424 million in Wells Fargo Home Mortgage, and was due to the national rise in mortgage default rates. Total NPAs were $9.0 billion (1.04% of total loans) at December 31, 2008, compared with $3.9 billion (1.01%) at December 31, 2007. Total NPAs at December 31, 2008, excluded $20.0 billion of PCI loans that were previously reflected as nonperforming by Wachovia.

We expect NPAs to continue to grow, in part reflecting our efforts to modify more real estate loans to reduce foreclosures and keep customers in their homes. We remain focused on proactively identifying problem credits, moving them to non-performing status and recording the loss content in a timely manner. We have increased and will continue to increase staffing in our workout and collection organizations to ensure these troubled borrowers receive the attention and help they need. See the “Risk Management — Allowance for Credit Losses” section in this Report for additional discussion. The performance of any one loan can be affected by external factors, such as economic or market conditions, or factors affecting a particular borrower.

If interest due on the book balances of all nonaccrual loans (including loans that were, but are no longer on nonaccrual at year end) had been accrued under the original terms, approximately $815 million of interest would have been recorded as income in 2009, compared with $71 million recorded as interest income.

At December 31, 2009, substantially all of our foreclosed assets of $3.2 billion have been in the portfolio one year or less.

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

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

Loans 90 days or more past due and still accruing totaled $22.2 billion, $11.8 billion, $6.4 billion, $5.1 billion and $3.6 billion at December 31, 2009, 2008, 2007, 2006 and 2005, respectively. The total included $15.3 billion, $8.2 billion, $4.8 billion, $3.9 billion and $2.9 billion for the same dates, respectively, in advances pursuant to our servicing agreements to GNMA mortgage pools and similar loans whose repayments are insured by the FHA or guaranteed by the VA.

Table 27 reflects loans 90 days or more past due and still accruing excluding the insured/guaranteed GNMA and similar loans.

Table 27:

Loans 90 Days or More Past Due and Still Accruing (Excluding Insured/Guaranteed GNMA and Similar Loans)


							December 31,
(in millions)	2009		2008		2007		2006		2005

Commercial and commercial real estate:
Commercial	$	590		218		32		15		18
Real estate mortgage		1,183		88		10		3		13
Real estate construction		740		232		24		3		9

Total commercial and commercial real estate		2,513		538		66		21		40

Consumer:
Real estate
1-4 family first mortgage ⁽¹⁾		1,623		883		286		154		103
Real estate
1-4 family junior lien mortgage		515		457		201		63		50
Credit card		795		687		402		262		159
Other revolving credit and installment		1,333		1,047		552		616		290

Total consumer		4,266		3,074		1,441		1,095		602

Foreign		73		34		52		44		41

Total	$	6,852		3,646		1,559		1,160		683


(1)		Includes mortgage loans held for sale 90 days or more past due and still accruing.

NET CHARGE-OFFS Table 28 presents net charge-offs for the four quarters and full year of 2009.

Table 28: Net Charge-offs


	Year ended					Quarter ended
	December 31, 2009					December 31, 2009					September 30, 2009					June 30, 2009					March 31, 2009
			As a					As a					As a					As a					As a
	Net loan		% of			Net loan		% of			Net loan		% of			Net loan		% of			Net loan		% of
	charge-		average			charge-		average			charge-		average			charge-		average			charge-		average
($ in millions)	offs		loans			offs		loans		⁽¹⁾	offs		loans		⁽¹⁾	offs		loans		⁽¹⁾	offs		loans		⁽¹⁾

Commercial and commercial real estate:
Commercial	$	3,111		1.72	%	$	927		2.24	%	$	924		2.09	%	$	704		1.51	%	$	556		1.15	%
Real estate mortgage		725		0.70			349		1.32			209		0.80			146		0.56			21		0.08
Real estate construction		959		2.91			375		4.82			249		3.01			232		2.76			103		1.21
Lease financing		209		1.42			49		1.37			82		2.26			61		1.68			17		0.43

Total commercial and commercial real estate		5,004		1.50			1,700		2.15			1,464		1.78			1,143		1.35			697		0.80
Consumer:
Real estate 1-4 family first mortgage		3,133		1.31			1,018		1.74			966		1.63			758		1.26			391		0.65
Real estate 1-4 family junior lien mortgage		4,638		4.34			1,329		5.09			1,291		4.85			1,171		4.33			847		3.12
Credit card		2,528		10.82			634		10.61			648		10.96			664		11.59			582		10.13
Other revolving credit and installment		2,668		2.94			686		3.06			682		3.00			604		2.66			696		3.05

Total consumer		12,967		2.82			3,667		3.24			3,587		3.13			3,197		2.77			2,516		2.16
Foreign		197		0.64			46		0.62			60		0.79			46		0.61			45		0.56

Total	$	18,168		2.21	%	$	5,413		2.71	%	$	5,111		2.50	%	$	4,386		2.11	%	$	3,258		1.54	%


(1)		Annualized

Net charge-offs in 2009 were $18.2 billion (2.21% of average total loans outstanding) compared with $7.8 billion (1.97%) in 2008. The year over year increase in net charge-offs is significantly impacted by the merger as the 2008 totals reflect only Wells Fargo loss results. Approximately half of the increase in net charge-offs from 2008 came from deterioration in the non-PCI Wachovia portfolio; charge-offs from these portfolios took two to three quarters to emerge as a result of purchase accounting at the end of 2008. The increases in losses during the year were anticipated given the economic conditions in the marketplace affecting our customers. The pace of loss increases decelerated quarter to quarter throughout the year as the loss levels in several portfolios have seen some level of stabilization. While increases in losses were distributed across the portfolio, the majority of the increase was concentrated in commercial, CRE and consumer real estate. The increases in the commercial and CRE portfolios were influenced by the impact on those businesses providing consumer cyclical goods and services or those related to the residential real estate industry. For the consumer real estate portfolios, continued property value disruption combined with rising unemployment affected loss levels.

Net charge-offs in the 1-4 family first mortgage portfolio totaled $3.1 billion in 2009. Our relatively high-quality 1-4 family first mortgage portfolio continued to reflect relatively low loss rates, although until housing prices fully stabilize, these credit losses will continue to remain elevated. Credit card charge-offs increased $1.1 billion to $2.5 billion in 2009. We continued to see increases in delinquency and loss levels in the consumer unsecured loan portfolios as a result of higher unemployment.

Net charge-offs in the real estate 1-4 family junior lien portfolio were $4.6 billion in 2009. The rise in unemployment levels is also increasing the frequency of loss. More information about the Home Equity portfolio is available in Table 23 in this Report and related discussion.

Commercial and CRE net charge-offs were $5.0 billion in 2009 compared with $1.8 billion a year ago. Wholesale credit results continued to deteriorate. Commercial lending requests slowed during 2009 as borrowers continued to reduce their receivable and inventory levels to conserve cash.

In 2008, net charge-offs were $7.8 billion (1.97% of average total loans), up $4.3 billion from $3.5 billion (1.03%) in 2007. Commercial and CRE net charge-offs increased $1.3 billion in 2008 from 2007, of which $379 million was from loans originated through our Business Direct channel. Business Direct consists primarily of unsecured lines of credit to small firms and sole proprietors that tend to perform in a manner similar to credit cards. Total wholesale net charge-offs (excluding Business Direct) were $967 million (0.11% of average loans). The remaining balance of commercial and CRE loans (real estate mortgage, real estate construction and lease financing) experienced some deterioration from 2007 with loss levels increasing, reflecting the credit environment in 2008.

Home Equity net charge-offs were $2.2 billion (2.59% of average Home Equity loans) in 2008, compared with $595 million (0.73%) in 2007. Since our loss experience through third party channels was significantly worse than other retail channels, in 2007 we segregated these indirect loans into a liquidating portfolio. We also experienced increased net charge-offs in our unsecured consumer portfolios, such as credit cards and lines of credit, in part due to growth and in part due to increased economic stress in households.

Wells Fargo Financial auto portfolio net charge-offs for 2008 were $1.2 billion (4.50% of average auto loans), compared with $1.0 billion (3.45%) in 2007. While we continued to reduce the size of this portfolio and limited additional growth, the economic environment adversely affected portfolio results. We remained focused on our loss mitigation strategies; however, credit performance deteriorated as a result of increased unemployment and depressed used car values, resulting in higher than expected losses for 2008.

ALLOWANCE FOR CREDIT LOSSES The allowance for credit losses, which consists of the allowance for loan losses and the reserve for unfunded credit commitments, is management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date and excludes PCI loans which have a nonaccretable difference to absorb losses and loans carried at fair value. The detail of the changes in the allowance for credit losses, including charge-offs and recoveries by loan category, is in Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

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

For individually graded (typically commercial) portfolios, we generally use loan-level credit quality ratings, which are based on borrower information and strength of collateral, combined with historically based grade specific loss factors. The allowance for individually rated nonaccruing commercial loans with an outstanding exposure of $5 million or greater is determined through an individual impairment analysis. For statistically evaluated portfolios (typically consumer), we generally leverage models which use credit-related characteristics such as credit rating scores, delinquency migration rates, vintages, and portfolio concentrations to estimate loss content. Additionally, the allowance for consumer TDRs is based on the risk characteristics of the modified loans and the resultant estimated cash flows discounted at the pre-modification effective yield of the loan. While the allowance is determined using product and business segment estimates, it is available to absorb losses in the entire loan portfolio.

At December 31, 2009, the allowance for loan losses totaled $24.5 billion (3.13% of total loans), compared with $21.0 billion (2.43%), at December 31, 2008. The allowance for credit losses was $25.0 billion (3.20% of total loans) at December 31, 2009, and $21.7 billion (2.51%) at December 31, 2008. The allowance

for credit losses included $333 million related to PCI loans acquired from Wachovia. Loans acquired from Wachovia are included in total loans net of related purchase accounting write-downs. The reserve for unfunded credit commitments was $515 million at December 31, 2009, and $698 million at December 31, 2008. In addition to the allowance for credit losses there was $22.9 billion of nonaccretable difference at December 31, 2009, to absorb losses for PCI loans.

The ratio of the allowance for credit losses to total nonaccrual loans was 103% and 319% at December 31, 2009 and 2008, respectively. The decrease in this ratio reflects some deterioration in the underlying loan portfolio. However, the trend in the ratio is also profoundly affected by the impact of purchase accounting eliminating virtually all legacy Wachovia nonaccrual loans at December 31, 2008. In general, this ratio may fluctuate significantly from period to period due to such factors as the mix of loan types in the portfolio, borrower credit strength and the value and marketability of collateral. Over half of nonaccrual loans were home mortgages, auto and other consumer loans at December 31, 2009.

The ratio of the allowance for loan losses to annual net charge-offs was 135%, 268% and 150% at December 31, 2009, 2008 and 2007, respectively. The decline in this ratio from 2008 is largely due to the fact that only legacy Wells Fargo losses were included in 2008, but the allowance anticipated emerging losses from the combined portfolios. The allowance as of December 31, 2008, anticipated the increased charge-offs that occurred over 2009, while the allowance for December 31, 2009, anticipates inherent losses that will be recognized as charge-offs in future periods. When anticipated charge-offs are projected to decline from current levels, this ratio will shrink. As more of the portfolio experiences charge-offs, charge-off levels continue to increase and the remaining portfolio is anticipated to consist of higher quality vintage loans subjected to tightened underwriting standards administered during the downturn in the credit cycle. As charge-off levels peak, we anticipate coverage levels will shrink until charge-off levels return to more normalized levels. This ratio may fluctuate significantly from period to period due to many factors, including general economic conditions, customer credit strength and the marketability of collateral. The allowance for loan losses reflects management’s estimate of credit losses inherent in the loan portfolio based on loss emergence periods of the respective loans, underlying economic and market conditions, among other factors. See the “Critical Accounting Policies – Allowance for Credit Losses” section in this Report for additional information. The allowance for loan losses at December 31, 2008, also includes the allowance acquired from the Wachovia acquisition (except for PCI loans), while 2008 net charge-offs do not include activity related to Wachovia.

The provision for credit losses totaled $21.7 billion in 2009, $16.0 billion in 2008 and $4.9 billion in 2007. In 2009, the provision of $21.7 billion included a credit reserve build of $3.5 billion, which was primarily driven by three factors: (1) deterioration in economic conditions that increased the projected losses in our commercial portfolios, (2) additional reserves associated with loan modification programs

designed to keep qualifying borrowers in their homes, and (3) the establishment of additional reserves for PCI loans.

In 2008, the provision of $16.0 billion included a credit reserve build of $8.1 billion in excess of net charge-offs, which included $3.9 billion to conform loss emergence coverage periods to the most conservative of each company within FFIEC guidelines. The remainder of the reserve build was attributable to higher projected loss rates across the majority of the consumer credit businesses, and some credit deterioration and growth in the wholesale portfolios.

In 2007, the provision of $4.9 billion included a credit reserve build of $1.4 billion in excess of net charge-offs, which was our estimate of the increase in incurred losses in our loan portfolio at year-end 2007, primarily related to the Home Equity portfolio.

Table 29 presents the allocation of the allowance for credit losses by type of loans. The $3.3 billion increase in the allowance for credit losses from year-end 2008 to year-end 2009 largely reflects continued stress in both the commercial and residential real estate sectors, and includes reserve builds reflecting the significant increase in modified residential real

estate loans that result in TDRs. In determining the appropriate allowance attributable to our residential real estate portfolios, the loss rates used in our analysis include the impacts of our established loan modification programs. When modifications occur or are probable to occur, our allowance reflects the impact of these modifications, taking into consideration the associated credit cost, including re-defaults of modified loans and projected loss severity. The loss content associated with existing and probable loan modifications has been considered in our allowance reserving methodology.

Changes in the allowance reflect changes in statistically derived loss estimates, historical loss experience, current trends in borrower risk and/or general economic activity on portfolio performance, and management’s estimate for imprecision and uncertainty. Effective December 31, 2006, the entire allowance was assigned to individual portfolio types to better reflect our view of risk in these portfolios. The allowance for credit losses includes a combination of baseline loss estimates and a range of imprecision or uncertainty specific to each portfolio segment previously categorized as unallocated in prior years.

Table 29: Allocation of the Allowance for Credit Losses (ACL)


	December 31,
	2009					2008					2007					2006					2005
			Loans					Loans					Loans					Loans					Loans
			as %					as %					as %					as %					as %
			of total					of total					of total					of total					of total
(in millions)	ACL		loans			ACL		loans			ACL		loans			ACL		loans			ACL		loans

Commercial and commercial real estate:
Commercial	$	4,175		20	%	$	4,129		23	%	$	1,137		24	%	$	1,051		22	%	$	926		20	%
Real estate mortgage		2,577		13			1,011		12			288		9			225		9			253		9
Real estate construction		1,063		4			1,023		4			156		5			109		5			115		4
Lease financing		181		2			135		2			51		2			40		2			51		2

Total commercial and commercial real estate		7,996		39			6,298		41			1,632		40			1,425		38			1,345		35

Consumer:
Real estate 1-4 family first mortgage		6,407		29			4,938		28			415		19			186		17			229		25
Real estate 1-4 family junior lien mortgage		5,311		13			4,496		13			1,329		20			168		21			118		19
Credit card		2,745		3			2,463		3			834		5			606		5			508		4
Other revolving credit and installment		2,266		12			3,251		11			1,164		14			1,434		17			1,060		15

Total consumer		16,729		57			15,148		55			3,742		58			2,394		60			1,915		63

Foreign		306		4			265		4			144		2			145		2			149		2

Total allocated		25,031		100	%		21,711		100	%		5,518		100	%		3,964		100	%		3,409		100	%

Unallocated component of allowance		—					—					—					—					648

Total	$	25,031				$	21,711				$	5,518				$	3,964				$	4,057

We believe the allowance for credit losses of $25.0 billion was adequate to cover credit losses inherent in the loan portfolio, including unfunded credit commitments, at December 31, 2009. The allowance for credit losses is subject to change and considers existing factors at the time, including economic or market conditions and ongoing internal and external examination processes. Due to the sensitivity of the allowance for credit losses to changes in the economic environment, it is

possible that unanticipated economic deterioration would create incremental credit losses not anticipated as of the balance sheet date. Our process for determining the adequacy of the allowance for credit losses is discussed in the “Critical Accounting Policies – Allowance for Credit Losses” section and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

RESERVE FOR MORTGAGE LOAN REPURCHASE LOSSES We sell mortgage loans to various parties, including government-sponsored entities (GSEs), under contractual provisions that include various representations and warranties which typically cover ownership of the loan, compliance with loan criteria set forth in the applicable agreement, validity of the lien securing the loan, absence of delinquent taxes or liens against the property securing the loan, and similar matters. We may be required to repurchase the mortgage loans with identified defects, indemnify the investor or insurer, or reimburse the investor for credit loss incurred on the loan (collectively “repurchase”) in the event of a material breach of such contractual representations or warranties. On occasion, we may negotiate global settlements in order to resolve a pipeline of demands in lieu of repurchasing the loans. We manage the risk associated with potential repurchases or other forms of settlement through our underwriting and quality assurance practices and by servicing mortgage loans to meet investor and secondary market standards.

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

During 2009 we experienced elevated levels of repurchase activity measured by number of loans, investor repurchase demands and our level of repurchases. These trends accelerated in the fourth quarter. We repurchased or otherwise settled mortgage loans with balances of $1.3 billion in 2009, compared with $426 million in 2008. We incurred losses on repurchase activity of $514 million in 2009, compared with $251 million in 2008. Our reserve for repurchases, included in “Accrued expenses and other liabilities” in our consolidated financial statements, was $1.0 billion at December 31, 2009, and $589 million at December 31, 2008. To the extent that repurchased loans are nonperforming, the loans are classified as nonaccrual. Nonperforming loans included $275 million of repurchased loans at December 31, 2009, and $193 million at December 31, 2008.

Approximately three-fourths of our repurchases were government agency conforming loans from Freddie Mac and Fannie Mae. The increase in repurchase and settlement activity during 2009 primarily related to weaker economic conditions as investors, predominantly GSEs, made increased demands associated with higher levels of defaulted loans. Our appeals success rate improved from 2008 to 2009 reflecting our enhanced and more timely loss mitigation efforts.

However, the annual loss increased year over year due to higher volumes. The appeals success rate is one indicator of our future repurchase losses and may also be affected by factors such as the quality of repurchase demands, the mix of reasons for the demands, and investor repurchase demand strategies.

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

Asset/Liability Management

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

INTEREST RATE RISK Interest rate risk, which potentially can have a significant earnings impact, is an integral part of being a financial intermediary. We are subject to interest rate risk because:

•		assets and liabilities may mature or reprice at different times (for example, if assets reprice faster than liabilities and interest rates are generally falling, earnings will initially decline);

•		assets and liabilities may reprice at the same time but by different amounts (for example, when the general level of interest rates is falling, we may reduce rates paid on checking and savings deposit accounts by an amount that is less than the general decline in market interest rates);

•		short-term and long-term market interest rates may change by different amounts (for example, the shape of the yield curve may affect new loan yields and funding costs differently); or

•		the remaining maturity of various assets or liabilities may shorten or lengthen as interest rates change (for example, if long-term mortgage interest rates decline sharply, MBS held in the securities available-for-sale portfolio may prepay significantly earlier than anticipated, which could reduce portfolio income).

Interest rates may also have a direct or indirect effect on loan demand, credit losses, mortgage origination volume, the fair value of MSRs and other financial instruments, the value of the pension liability and other items affecting earnings.

We assess interest rate risk by comparing our most likely earnings plan with various earnings simulations using many interest rate scenarios that differ in the direction of interest rate changes, the degree of change over time, the speed of change and the projected shape of the yield curve. For example, as of December 31, 2009, our most recent simulation indicated estimated earnings at risk of approximately 5% of our most likely earnings plan over the next 12 months using a scenario in which the federal funds rate rises to 4.25% and the 10-year Constant Maturity Treasury bond yield rises to 5.50%. Simulation estimates depend on, and will change with, the size and mix of our actual and projected balance sheet at the time of each simulation. Due to timing differences between the quarterly valuation of MSRs and the eventual impact of interest rates on mortgage banking volumes, earnings at risk in any particular quarter could be higher than the average earnings at risk over the 12-month simulation period, depending on the path of interest rates and on our hedging strategies for MSRs. See the “Risk Management – Mortgage Banking Interest Rate and Market Risk” section in this Report for more information.

We use exchange-traded and over-the-counter (OTC) interest rate derivatives to hedge our interest rate exposures. The notional or contractual amount, credit risk amount and estimated net fair value of these derivatives as of December 31, 2009 and 2008, are presented in Note 15 (Derivatives) to Financial Statements in this Report. We use derivatives for asset/liability management in three main ways:

•		to convert a major portion of our long-term fixed-rate debt, which we issue to finance the Company, from fixed-rate payments to floating-rate payments by entering into receive-fixed swaps;

•		to convert the cash flows from selected asset and/or liability instruments/portfolios from fixed-rate payments to floating-rate payments or vice versa; and

•		to hedge our mortgage origination pipeline, funded mortgage loans and MSRs using interest rate swaps, swaptions, futures, forwards and options.

MORTGAGE BANKING INTEREST RATE AND MARKET RISK We originate, fund and service mortgage loans, which subjects us to various risks, including credit, liquidity and interest rate risks. Based on market conditions and other factors, we reduce credit and liquidity risks by selling or securitizing some or all of the long-term fixed-rate mortgage loans we originate and most of the ARMs we originate. On the other hand, we may hold originated ARMs and fixed-rate mortgage loans in our loan portfolio as an investment for our growing base of core deposits. We determine whether the loans will be held for investment or held for sale at the time of commitment. We may subsequently change our intent to hold loans for investment and sell some or all of our ARMs or fixed-rate mortgages as part of our corporate asset/liability management. We may also acquire and add to our securities available for sale a portion of the securities issued at the time we securitize mortgages held for sale (MHFS).

Notwithstanding the continued downturn in the housing sector, and the continued lack of liquidity in the nonconforming secondary markets, our mortgage banking revenue growth

continued to be positive, reflecting the complementary origination and servicing strengths of the business. The secondary market for agency-conforming mortgages functioned well during the year.

Interest rate and market risk can be substantial in the mortgage business. Changes in interest rates may potentially reduce total origination and servicing fees, the value of our residential MSRs measured at fair value, the value of MHFS and the associated income and loss reflected in mortgage banking noninterest income, the income and expense associated with instruments (economic hedges) used to hedge changes in the fair value of MSRs and MHFS, and the value of derivative loan commitments (interest rate “locks”) extended to mortgage applicants.

Interest rates affect the amount and timing of origination and servicing fees because consumer demand for new mortgages and the level of refinancing activity are sensitive to changes in mortgage interest rates. Typically, a decline in mortgage interest rates will lead to an increase in mortgage originations and fees and may also lead to an increase in servicing fee income, depending on the level of new loans added to the servicing portfolio and prepayments. Given the time it takes for consumer behavior to fully react to interest rate changes, as well as the time required for processing a new application, providing the commitment, and securitizing and selling the loan, interest rate changes will affect origination and servicing fees with a lag. The amount and timing of the impact on origination and servicing fees will depend on the magnitude, speed and duration of the change in interest rates.

We elected to measure MHFS at fair value prospectively for new prime MHFS originations for which an active secondary market and readily available market prices existed to reliably support fair value pricing models used for these loans. At December 31, 2008, we measured at fair value similar MHFS acquired from Wachovia. Loan origination fees on these loans are recorded when earned, and related direct loan origination costs and fees are recognized when incurred. We also elected to measure at fair value certain of our other interests held related to residential loan sales and securitizations. We believe that the election for new prime MHFS and other interests held, which are now hedged with free-standing derivatives (economic hedges) along with our MSRs, reduces certain timing differences and better matches changes in the value of these assets with changes in the value of derivatives used as economic hedges for these assets. During 2008 and 2009, in response to continued secondary market illiquidity, we continued to originate certain prime non-agency loans to be held for investment for the foreseeable future rather than to be held for sale.

We initially measure and carry our residential MSRs at fair value, which represent substantially all of our MSRs. Under this method, the MSRs are recorded at fair value at the time we sell or securitize the related mortgage loans. The carrying value of MSRs reflects changes in fair value at the end of each quarter and changes are included in net servicing income, a component of mortgage banking noninterest income. If the fair value of the MSRs increases, income is recognized; if the fair value of the MSRs decreases, a loss is recognized.

We use a dynamic and sophisticated model to estimate the fair value of our MSRs and periodically benchmark our estimates to independent appraisals. The valuation of MSRs can be highly subjective and involve complex judgments by management about matters that are inherently unpredictable. Changes in interest rates influence a variety of significant assumptions included in the periodic valuation of MSRs, including prepayment speeds, expected returns and potential risks on the servicing asset portfolio, the value of escrow balances and other servicing valuation elements.

A decline in interest rates generally increases the propensity for refinancing, reduces the expected duration of the servicing portfolio and therefore reduces the estimated fair value of MSRs. This reduction in fair value causes a charge to income, net of any gains on free-standing derivatives (economic hedges) used to hedge MSRs. We may choose not to fully hedge all of the potential decline in the value of our MSRs resulting from a decline in interest rates because the potential increase in origination/servicing fees in that scenario provides a partial “natural business hedge.” An increase in interest rates generally reduces the propensity for refinancing, extends the expected duration of the servicing portfolio and therefore increases the estimated fair value of the MSRs. However, an increase in interest rates can also reduce mortgage loan demand and therefore reduce origination income. In 2009, a $1.5 billion decrease in the fair value of our MSRs and $6.8 billion of gains on free-standing derivatives used to hedge the MSRs resulted in a net gain of $5.3 billion. This net gain was largely due to hedge-carry income reflecting the current low short-term interest rate environment.

The price risk associated with our MSRs is economically hedged with a combination of highly liquid interest rate forward instruments including mortgage forward contracts, interest rate swaps and interest rate options. All of the instruments comprising the hedge are marked to market daily. Because the hedging instruments are traded in highly liquid markets, their prices are readily observable and are fully reflected in each quarter’s mark to market. Quarterly MSR hedging results include a combination of directional gain or loss due to market changes as well as any carry income generated. If the economic hedge is effective, its overall directional hedge gain or loss will offset the change in the valuation of the underlying MSR asset. Consistent with our longstanding approach to hedging interest rate risk in the mortgage business, the size of the hedge and the particular combination of forward hedging instruments at any point in time is designed to reduce the volatility of the mortgage business’s earnings over various time frames within a range of mortgage interest rates. Since market factors, the composition of the mortgage servicing portfolio and the relationship between the origination and servicing sides of our mortgage business change continually, the types of instruments used in our hedging are reviewed daily and rebalanced based on our evaluation of current market factors and the interest rate risk inherent in our MSRs portfolio. Throughout 2009, our economic hedging strategy generally used forward mortgage purchase contracts that were effective at offsetting the impact of interest rates on the value of the MSR asset.

Mortgage forward contracts are designed to pass the full economics of the underlying reference mortgage securities to the holder of the contract including both the directional gain or loss from the forward delivery of the reference securities and the corresponding carry income. Carry income represents the contract’s price accretion from the forward delivery price to the current spot price including both the yield earned on the reference securities and the market implied cost of financing during the period. The actual amount of carry income earned on the hedge each quarter will depend on the amount of the underlying asset that is hedged and the particular instruments comprising the hedge. The level of carry income is driven by the slope of the yield curve and other market driven supply and demand factors impacting the specific reference securities. A steep yield curve generally produces higher carry income

while a flat or inverted yield curve can result in lower or potentially negative carry income. The level of carry income is also impacted by the type of instrument used. In general, mortgage forward contracts tend to produce higher carry income than interest rate swap contracts. Carry income is recognized over the life of the mortgage forward as a component of the contract’s mark to market gain or loss. We expect hedge carry income to remain strong as long as the yield curve remains at historically steep levels and, in particular, as long as market implied financing costs remain low.

During fourth quarter 2009, mortgage interest rates increased, resulting in a valuation increase in the MSRs asset due to slower prepayment speed assumptions and the corresponding extension of the expected life of the MSRs asset, and a directional valuation decline on the hedge position due to the decrease in the price of the mortgage securities underlying the mortgage forward purchase contract. However, because the increase in mortgage rates during that quarter was relatively small, and the yield on our mortgage forward purchase contracts was relatively high compared with implied financing costs, the carry income component of the hedge valuation change exceeded the directional loss embedded in that valuation and as a result, the total hedge result was positive even though the value of the underlying MSR asset increased in the quarter.

Hedging the various sources of interest rate risk in mortgage banking is a complex process that requires sophisticated modeling and constant monitoring. While we attempt to balance these various aspects of the mortgage business, there are several potential risks to earnings:

•		MSRs valuation changes associated with interest rate changes are recorded in earnings immediately within the accounting period in which those interest rate changes occur, whereas the impact of those same changes in interest rates on origination and servicing fees occur with a lag and over time. Thus, the mortgage business could be protected from adverse changes in interest rates over a period of time on a cumulative basis but still display large variations in income from one accounting period to the next.

•		The degree to which the “natural business hedge” offsets changes in MSRs valuations is imperfect, varies at different points in the interest rate cycle, and depends not just on the direction of interest rates but on the pattern of quarterly interest rate changes.

•		Origination volumes, the valuation of MSRs and hedging results and associated costs are also affected by many factors. Such factors include the mix of new business between ARMs and fixed-rate mortgages, the relationship between short-term and long-term interest rates, the degree of volatility in interest rates, the relationship between mortgage interest rates and other interest rate markets, and other interest rate factors. Many of these factors are hard to predict and we may not be able to directly or perfectly hedge their effect.

•		While our hedging activities are designed to balance our mortgage banking interest rate risks, the financial instruments we use may not perfectly correlate with the values and income being hedged. For example, the change in the value of ARMs production held for sale from changes in mortgage interest rates may or may not

be fully offset by Treasury and LIBOR index-based financial instruments used as economic hedges for such ARMs. Additionally, the hedge-carry income we earn on our economic hedges for the MSRs may not continue if the spread between short-term and long-term rates decreases.

The total carrying value of our residential and commercial MSRs was $17.1 billion at December 31, 2009, and $16.2 billion at December 31, 2008. The weighted-average note rate on the owned servicing portfolio was 5.66% at December 31, 2009, and 5.92% at December 31, 2008. Our total MSRs were 0.91% of mortgage loans serviced for others at December 31, 2009, compared with 0.87% at December 31, 2008.

As part of our mortgage banking activities, we enter into commitments to fund residential mortgage loans at specified times in the future. A mortgage loan commitment is an interest rate lock that binds us to lend funds to a potential borrower at a specified interest rate and within a specified period of time, generally up to 60 days after inception of the rate lock. These loan commitments are derivative loan commitments if the loans that will result from the exercise of the commitments will be held for sale. These derivative loan commitments are recognized at fair value in the balance sheet with changes in their fair values recorded as part of mortgage banking noninterest income. The fair value of these commitments include, at inception and during the life of the loan commitment, the expected net future cash flows related to the associated servicing of the loan as part of the fair value measurement of derivative loan commitments. Changes subsequent to inception are based on changes in fair value of the underlying loan resulting from the exercise of the commitment and changes in the probability that the loan will not fund within the terms of the commitment, referred to as a fall-out factor. The value of the underlying loan commitment is affected primarily by changes in interest rates and the passage of time.

Outstanding derivative loan commitments expose us to the risk that the price of the mortgage loans underlying the commitments might decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. To minimize this risk, we utilize forwards and options, Eurodollar futures, and options, and Treasury futures, forwards and options contracts as economic hedges against the potential decreases in the values of the loans. We expect that these derivative financial instruments will experience changes in fair value that will either fully or partially offset the changes in fair value of the derivative loan commitments. However, changes in investor demand, such as concerns about credit risk, can also cause changes in the spread relationships between underlying loan value and the derivative financial instruments that cannot be hedged.

MARKET RISK – TRADING ACTIVITIES From a market risk perspective, our net income is exposed to changes in interest rates, credit spreads, foreign exchange rates, equity and commodity prices and their implied volatilities. The primary purpose of our trading businesses is to accommodate customers in the management of their market price risks. Also, we take positions based on market expectations or to benefit from price differences between financial instruments and markets,

subject to risk limits established and monitored by Corporate ALCO. All securities, foreign exchange transactions, commodity transactions and derivatives used in our trading businesses are carried at fair value. The Institutional Risk Committee establishes and monitors counterparty risk limits. The credit risk amount and estimated net fair value of all customer accommodation derivatives at December 31, 2009 and 2008, are included in Note 15 (Derivatives) to Financial Statements in this Report. Open, “at risk” positions for all trading businesses are monitored by Corporate ALCO.

The standardized approach for monitoring and reporting market risk for the trading activities consists of value-at-risk (VaR) metrics complemented with factor analysis and stress testing. VaR measures the worst expected loss over a given time interval and within a given confidence interval. We measure and report daily VaR at a 99% confidence interval based on actual changes in rates and prices over the past 250 trading days. The analysis captures all financial instruments that are considered trading positions. The average one-day VaR throughout 2009 was $62 million, with a lower bound of $25 million and an upper bound of $130 million. The average VaR for fourth quarter 2009 was $45 million with the decline from the annual average primarily reflecting risk-reduction strategies.

MARKET RISK – EQUITY MARKETS We are directly and indirectly affected by changes in the equity markets. We make and manage direct equity investments in start-up businesses, emerging growth companies, management buy-outs, acquisitions and corporate recapitalizations. We also invest in non-affiliated funds that make similar private equity investments. These private equity investments are made within capital allocations approved by management and the Board of Directors (Board). The Board’s policy is to review business developments, key risks and historical returns for the private equity investment portfolio at least annually. Management reviews the valuations of these investments at least quarterly and assesses them for possible OTTI. For nonmarketable investments, the analysis is based on facts and circumstances of each individual investment and the expectations for that investment’s cash flows and capital needs, the viability of its business model and our exit strategy. Nonmarketable investments included private equity investments of $3.8 billion and $3.0 billion accounted for under the cost method at December 31, 2009 and 2008, respectively, and $5.1 billion and $6.4 billion, respectively, accounted for under the equity method. Private equity investments are subject to OTTI. Principal investments totaled $1.4 billion and $1.3 billion at December 31, 2009 and 2008, respectively. Principal investments are carried at fair value with net unrealized gains and losses reported in noninterest income.

As part of our business to support our customers, we trade public equities, listed/OTC equity derivatives and convertible bonds. We have risk mandates that govern these activities. We also have marketable equity securities in the securities available-for-sale portfolio, including securities relating to our venture capital activities. We manage these investments within capital risk limits approved by management and the Board and monitored by Corporate ALCO. Gains and losses on

these securities are recognized in net income when realized and periodically include OTTI charges. The fair value and cost of marketable equity securities was $5.6 billion and $4.7 billion at December 31, 2009, and $6.1 billion and $6.3 billion, respectively, at December 31, 2008.

Changes in equity market prices may also indirectly affect our net income by affecting (1) the value of third party assets under management and, hence, fee income, (2) particular borrowers, whose ability to repay principal and/or interest may be affected by the stock market, or (3) brokerage activity, related commission income and other business activities. Each business line monitors and manages these indirect risks.

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

Debt securities in the securities available-for-sale portfolio provide asset liquidity, in addition to the immediately liquid resources of cash and due from banks and federal funds sold, securities purchased under resale agreements and other short-term investments. The weighted-average expected remaining maturity of the debt securities within this portfolio was 5.6 years at December 31, 2009. Of the $162.3 billion (cost basis) of debt securities in this portfolio at December 31, 2009, $48.1 billion (30%) is expected to mature or be prepaid in 2010 and an additional $25.1 billion (15%) in 2011. Asset liquidity is further enhanced by our ability to sell or securitize loans in secondary markets and to pledge loans to access secured borrowing facilities through the Federal Home Loan Banks, the FRB, or the U.S. Treasury. In 2009, we sold mortgage loans of $394 billion. The amount of mortgage loans and other

consumer loans available to be sold, securitized or pledged was approximately $240 billion at December 31, 2009.

Core customer deposits have historically provided a sizeable source of relatively stable and low-cost funds. Average core deposits funded 60.4% and 53.8% of average total assets in 2009 and 2008, respectively.

Additional funding is provided by long-term debt (including trust preferred securities), other foreign deposits, and short-term borrowings (federal funds purchased, securities sold under repurchase agreements, commercial paper and other short-term borrowings). Long-term debt averaged $231.8 billion in 2009 and $102.3 billion in 2008. Short-term borrowings averaged $52.0 billion in 2009 and $65.8 billion in 2008. We reduced short-term borrowings due to the continued liquidation of previously identified non-strategic and liquidating loan portfolios, soft loan demand and strong deposit growth.

We anticipate making capital expenditures of approximately $1.1 billion in 2010 for our stores, relocation and remodeling of our facilities, and routine replacement of furniture, equipment and servers. We fund expenditures from various sources, including cash flows from operations and borrowings.

Liquidity is also available through our ability to raise funds in a variety of domestic and international money and capital markets. We access capital markets for long-term funding through issuances of registered debt securities, private placements and asset-backed secured funding. Investors in the long-term capital markets generally will consider, among other factors, a company’s debt rating in making investment decisions. Wells Fargo Bank, N.A. is rated “Aa2,” by Moody’s Investors Service, and “AA,” by Standard & Poor’s (S&P) Rating Services. Rating agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, and level and quality of earnings. Material changes in these factors could result in a different debt rating; however, a change in debt rating would not cause us to violate any of our debt covenants.

Table 30 provides the credit ratings of the Company, Wells Fargo Bank, N.A. and Wachovia Bank, N.A. as of February 26, 2010.

Table 30: Credit Ratings

Wells Fargo & Company

Wells Fargo Bank, N.A.

Wachovia Bank, N.A.

Senior

Subordinated

Commercial

Long-term

Short-term

Long-term

Short-term

debt

paper

deposits

borrowings

deposits

borrowings

Moody’s

P-1

Aa2

P-1

Aa2

P-1

S&P

AA-

A-1

Fitch, Inc.

AA-

DBRS

R-1

AA***

R-1

***

AA***

R-1

***


low * middle *** high

Wells Fargo participated in the FDIC’s Temporary Liquidity Guarantee Program (TLGP) during 2009. The TLGP had two components: the Debt Guarantee Program, which provided a temporary guarantee of newly issued senior unsecured debt issued by eligible entities; and the Transaction Account Guarantee Program, which provided a temporary unlimited

guarantee of funds in noninterest bearing transaction accounts at FDIC insured institutions. The Debt Guarantee Program expired on October 31, 2009, and Wells Fargo opted out of the temporary unlimited guarantee of funds effective December 31, 2009.

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

At December 31, 2009, the Parent had outstanding short-term and long-term debt under these authorities of $10.2 billion and $119.5 billion, respectively. During 2009, the Parent issued a total of $3.5 billion in registered senior notes guaranteed by the FDIC under the TLGP and an additional $2.0 billion in non-guaranteed registered senior notes. Effective August 2009, the Parent established an SEC registered $25 billion medium-term note program (MTN), under which it may issue senior and subordinated debt securities. In December 2009, the Parent established a $25 billion European medium-term note programme (EMTN), under which it may issue senior and subordinated debt securities. In addition, the Parent has an A$5.0 billion Australian medium-term note programme (AMTN), under which it may issue senior and subordinated debt securities. The EMTN and AMTN securities are not registered with the SEC and may not be offered in the United States without applicable exemptions from registration. The Parent has $23.0 billion, $25.0 billion and A$1.75 billion available for issuance under the MTN, EMTN and AMTN, respectively. The proceeds from securities issued in 2009 were used for general corporate purposes, and we expect that the proceeds from securities issued in the future will also be used for general corporate purposes. The Parent also issues commercial paper from time to time, subject to its short-term debt limit.

Wells Fargo Bank, N.A. Wells Fargo Bank, N.A. is authorized by its board of directors to issue $100 billion in outstanding short-term debt and $50 billion in outstanding long-term debt. In December 2007, Wells Fargo Bank, N.A. established a $100 billion bank note program under which, subject to any other debt outstanding under the limits described above, it may issue $50 billion in outstanding short-term senior notes and $50 billion in long-term senior or subordinated notes. During 2009, Wells Fargo Bank, N.A. issued $14.5 billion in short-term notes. At December 31, 2009, Wells Fargo Bank, N.A. had remaining issuance capacity on the bank note program of $50 billion in short-term senior notes and $50 billion in long-term senior or subordinated notes. Securities are issued under this program as private placements in accordance with Office of the Comptroller of the Currency (OCC) regulations.

Wells Fargo Financial. In February 2008, Wells Fargo Financial Canada Corporation (WFFCC), an indirect wholly-owned Canadian subsidiary of the Parent, qualified with the Canadian provincial securities commissions CAD$7.0 billion in medium-term notes for distribution from time to time in Canada. At December 31, 2009, CAD$5.5 billion remained available for future issuance. In January 2010, WFFCC filed a new short form base shelf prospectus, replacing the February 2008 base shelf prospectus and qualifying a total of CAD$7.0 billion of issuance authority. All medium-term notes issued by WFFCC are unconditionally guaranteed by the Parent.

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

Capital Management

We have an active program for managing stockholders’ equity and regulatory capital and we maintain a comprehensive process for assessing the Company’s overall capital adequacy. We generate capital internally primarily through the retention of earnings net of dividends, and through the issuance of common stock to certain benefit plans. Our objective is to maintain capital levels at the Company and its bank subsidiaries above the regulatory “well-capitalized” thresholds by an amount commensurate with our risk profile. Our potential sources of stockholders’ equity include retained earnings and issuances

of common and preferred stock. Retained earnings increased $5.0 billion from December 31, 2008, predominantly from Wells Fargo net income of $12.3 billion, less common and preferred dividends and accretion of $6.4 billion. On March 6, 2009, the Board reduced the common stock dividend to $0.05 to retain current period earnings and build common equity. During 2009, we issued approximately 958 million shares, with net proceeds of $22.0 billion of common stock, including 882 million shares ($20.5 billion) in two common stock offerings and 76 million shares from time to time during the period

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

In October 2008, we issued to the Treasury Department under its CPP 25,000 shares of our Fixed Rate Cumulative Perpetual Preferred Stock, Series D without par value, having a liquidation amount per share equal to $1,000,000, for a total price of $25 billion. We paid cumulative dividends on the preferred securities at a rate of 5% per year. The preferred securities are generally non-voting. As part of its purchase of the preferred securities, the Treasury Department also received a warrant to purchase 110,261,688 shares of our common stock at an initial per share exercise price of $34.01, subject to customary anti-dilution provisions. The warrant expires 10 years from the issuance date. Both the preferred securities and warrant were treated as Tier 1 capital.

Wells Fargo was a participant in the FRB’s Supervisory Capital Assessment Program (SCAP) in 2009. On May 7, 2009, the FRB confirmed that under its adverse stress test scenario the Company’s Tier 1 capital exceeded the minimum level required for well-capitalized institutions. In conjunction with the stress test, the Company agreed with the FRB to generate a $13.7 billion regulatory capital buffer by November 9, 2009. To fulfill this requirement, on May 13, 2009, we issued 392 million shares of common stock in an offering to the public valued at $8.6 billion. The Company exceeded the $13.7 billion capital buffer requirement by $6.0 billion through the common stock offering, strong revenue performance, realization of deferred tax assets and other internally generated sources, including core deposit intangible amortization.

On December 23, 2009, we redeemed all of the Series D preferred stock and repaid the Treasury Department the entire $25 billion investment, plus accrued dividends, pursuant to terms approved by the U.S. banking regulators and the U.S. Treasury. As a precondition to redeeming the preferred stock, we issued 490 million shares in an offering to the public valued at $12.2 billion on December 18, 2009. The Treasury Department continues to hold the warrant issued in conjunction with the Series D preferred stock in October 2008.

In total, we issued $20.8 billion (gross proceeds) in public common stock offerings in 2009, and $33 billion since October 2008 when we announced our plans to acquire Wachovia.

From time to time the Board authorizes the Company to repurchase shares of our common stock. Although we announce when the Board authorizes share repurchases, we typically do not give any public notice before we repurchase our shares. Various factors determine the amount and timing of our share repurchases, including our capital requirements, the number of shares we expect to issue for acquisitions and employee benefit plans, market conditions (including the trading price of our stock), and regulatory and legal considerations. The FRB published clarifying supervisory guidance in first quarter 2009, SR 09-4 Applying Supervisory Guidance and Regulations on the Payment of Dividends, Stock Redemptions, and Stock Repurchases at Bank Holding Companies , pertaining to the FRB’s criteria, assessment and approval process for reductions in capital. As with all 19 participants in the SCAP, under this supervisory letter, before repurchasing our com-

mon shares, the Parent must consult with the Federal Reserve staff and demonstrate that its actions are consistent with the existing supervisory guidance, including demonstrating that its internal capital assessment process is consistent with the complexity of its activities and risk profile. In 2008, the Board authorized the repurchase of up to 25 million additional shares of our outstanding common stock. During 2009, we repurchased 8 million shares of our common stock, all from our employee benefit plans. At December 31, 2009, the total remaining common stock repurchase authority was approximately 6 million shares.

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

The Company and each of our subsidiary banks are subject to various regulatory capital adequacy requirements administered by the FRB and the OCC. Risk-based capital (RBC) guidelines establish a risk-adjusted ratio relating capital to different categories of assets and off-balance sheet exposures. At December 31, 2009, the Company and each of our subsidiary banks were “well capitalized” under applicable regulatory capital adequacy guidelines. See Note 25 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information.

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

At December 31, 2009, stockholders’ equity and Tier 1 common equity levels were higher than prior to the Wachovia acquisition. During 2009, as regulators and the market focused on the composition of regulatory capital, the Tier 1 common equity ratio gained significant prominence as a metric of capital strength. There is no mandated minimum or “well capitalized” standard for Tier 1 common equity; instead the RBC rules state voting common stockholders’ equity should be the dominant element within Tier 1 common equity. Tier 1 common equity was $65.5 billion at December 31, 2009, or 6.46% of risk-weighted assets, an increase of $31.1 billion from a year ago. Table 31 provides the details of the Tier 1 common equity calculation.

PRUDENTIAL JOINT VENTURE As described in the “Contractual Obligations” section in our 2008 Form 10-K, during 2009 we owned a controlling interest in a retail securities brokerage joint venture, which Wachovia entered into with Prudential Financial, Inc. (Prudential) in 2003. See also Note 1 (Summary of Significant Accounting Policies – Accounting Standards Adopted in 2009) to Financial Statements in this Report for additional information. In 2009, Prudential’s noncontrolling interest was 23% of the joint venture. On December 31, 2009, we purchased Prudential’s noncontrolling interest for $4.5 billion in cash. We now own 100% of the retail securities brokerage business.

Table 31: Tier 1 Common Equity ⁽¹⁾


			December 31,
(in billions)			2009			2008

Total equity			$	114.4			102.3
Less: Noncontrolling interests				(2.6	)		(3.2	)

Total Wells Fargo stockholders’ equity				111.8			99.1

Less: Preferred equity				(8.1	)		(30.8	)
Goodwill and intangible assets (other than MSRs)				(37.7	)		(38.1	)
Applicable deferred tax assets				5.3			5.6
Deferred tax asset limitation				(1.0	)		(6.0	)
MSRs over specified limitations				(1.6	)		(1.5	)
Cumulative other comprehensive income				(3.0	)		6.9
Other				(0.2	)		(0.8	)

Tier 1 common equity	(A)		$	65.5			34.4

Total risk-weighted assets ⁽²⁾	(B)		$	1,013.6			1,101.3

Tier 1 common equity to total risk-weighted assets	(A)/	(B)		6.46	%		3.13


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

Critical Accounting Policies

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

•		the allowance for credit losses;

•		purchased credit-impaired (PCI) loans;

•		the valuation of residential mortgage servicing rights (MSRs);

•		the fair valuation of financial instruments;

•		pension accounting; and

•		income taxes.

Management has reviewed and approved these critical accounting policies and has discussed these policies with the Audit and Examination Committee of the Company’s Board.

Allowance for Credit Losses

The allowance for credit losses, which consists of the allowance for loan losses and the reserve for unfunded credit commitments, reflects management’s judgment of probable credit losses inherent in the portfolio and unfunded lending commitments at the balance sheet date.

We use a disciplined process and methodology to establish our allowance for credit each quarter. While our methodology attributes portions of the allowance to specific portfolios as part of our analytical process, the entire allowance for credit losses is available to absorb credit losses in the total loan portfolio. Additionally, while the allowance is built by portfolio, it is allocated by loan type for external reporting purposes.

To determine the total allowance for loan losses, we estimate the reserves needed for each component of the portfolio, including loans analyzed individually and loans analyzed on a pooled basis.

The allowance for loan losses consists of amounts applicable to: (i) the consumer portfolio; (ii) the commercial, CRE and lease financing portfolio (including reserve for unfunded credit commitments); and (iii) the PCI portfolio.

To determine the consumer portfolio component of the allowance, loans are pooled by portfolio and losses are modeled using historical experience, quantitative and other mathematical techniques over the loss emergence period. Each business group exercises significant judgment in the determination of the model type and/or segmentation method that fits the credit risk characteristics of its portfolio. We use both internally developed and vendor supplied models in this process. We often use roll rate/net flow models for near-term loss projections, and vintage-based models, behavior score models, and time series/statistical trend models for longer-term projections. Management must use judgment in establishing additional input metrics for the modeling processes, such as portfolio segmentation by sub-product, origination channel, vintage, loss type, geographic, loan to collateral value, FICO score, and other predictive characteristics.

The models we use to determine the allowance are independently validated and reviewed to ensure that their theoretical foundation, assumptions, data integrity, computational processes, reporting practices, and end-user controls are appropriate and properly documented.

We estimate consumer credit losses under multiple economic scenarios to establish a range of potential outcomes. Management applies judgment to develop its own view of loss probability within that range, using external and internal parameters with the objective of establishing an allowance for the losses inherent within these portfolios as of the reporting date.

In addition to the allowance for the pooled consumer portfolios, we develop a separate allowance for loans that are identified as impaired through a TDR. These loans are excluded from pooled loss forecasts and a separate reserve is provided under the accounting guidance for loan impairment.

We estimate the component of the allowance for loan losses for the non-impaired commercial and CRE portfolios through the application of loss factors to loans grouped by their individual credit risk rating specialists. These ratings reflect the estimated default probability and quality of underlying collateral. The loss factors used are statistically derived through the observation of losses incurred for loans within each credit risk rating over a specified period of time. In addition, we apply a loan equivalent factor, which is also statistically derived, to unfunded loan commitments and letters of credit by credit risk grade to determine the reserve for unfunded credit commitments. As appropriate, we adjust or supplement these allowance factors and estimates to reflect other risks that may be identified from current conditions and developments in selected portfolios.

The commercial component of the allowance also includes an amount for the estimated impairment in nonaccrual commercial and CRE loans with a credit exposure of $5 million or greater. Commercial and CRE loans whose terms have been modified in a TDR are also individually analyzed for estimated impairment.

PCI loans may require an allowance subsequent to their acquisition. This allowance requirement generally results from decreases in expected cash flows.

Reflected in all of the components of the allowance for credit losses, including the reserve for unfunded commit-

ments, is an amount for imprecision or uncertainty, which represents management’s judgment of risks inherent in the processes and assumptions used in establishing the allowance. This imprecision considers economic environmental factors, modeling assumptions and performance, process risk, and other subjective factors. No single statistic or measurement determines the adequacy of the allowance for credit losses.

Changes in the allowance for credit losses and the related provision expense can materially affect net income. The establishment of the allowance for credit losses relies on a consistent quarterly process that requires multiple layers of management review and judgment and responds to changes in economic conditions, customer behavior, and collateral value, among other influences. From time to time, events or economic factors may affect the loan portfolio, causing management to provide additional amounts to or release balances from the allowance for credit losses.

Our allowance for loan losses is sensitive to risk ratings assigned to individually rated loans and economic assumptions and delinquency trends driving statistically modeled reserves. Individual loan risk ratings are evaluated based on each situation by experienced senior credit officers. Forecasted losses are modeled using economic scenarios ranging from strong recovery to slow recovery.

Assuming a one risk grade downgrade throughout our individually rated portfolio, a slow recovery (adverse) economic scenario for modeled losses and incremental deterioration in our PCI cash flows could imply an additional reserve requirement of approximately $10 billion.

Assuming a one risk grade upgrade throughout our individually rated portfolio and a strong recovery economic scenario for modeled losses could imply a reduced reserve requirement of approximately $3.3 billion.

These sensitivity analyses provided are hypothetical scenarios and are not considered probable. They do not represent management’s view of inherent losses in the portfolio as of the balance sheet date. Because significant judgment is used, it is possible that others performing similar analyses could reach different conclusions.

See the “Risk Management – Credit Risk Management Process” section and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report for further discussion of our allowance.

Purchased Credit-Impaired (PCI) Loans

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. PCI loans represent loans acquired from Wachovia that were deemed to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include statistics such as past due and nonaccrual status, recent borrower credit scores and recent LTV percentages. PCI loans are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, the associated allowance for credit losses related to these loans is not carried over at the acquisition date. We estimated the cash flows expected to be

collected at acquisition using our internal credit risk, interest rate risk and prepayment risk models, which incorporate our best estimate of current key assumptions, such as property values, default rates, loss severity and prepayment speeds.

Under the accounting guidance for PCI loans, the excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan, or pool of loans, in situations where there is a reasonable expectation about the timing and amount of cash flows expected to be collected. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference.

In addition, subsequent to acquisition, we are required to periodically evaluate our estimate of cash flows expected to be collected. These evaluations, performed quarterly, require the continued usage of key assumptions and estimates, similar to the initial estimate of fair value. Given the current economic environment, we must apply judgment to develop our estimates of cash flows for PCI loans given the impact of home price and property value changes, changing loss severities and prepayment speeds. Decreases in the expected cash flows will generally result in a charge to the provision for credit losses resulting in an increase to the allowance for loan losses. Increases in the expected cash flows will generally result in an increase in interest income over the remaining life of the loan, or pool of loans. Disposals of loans, which may include sales of loans to third parties, receipt of payments in full or part by the borrower, and foreclosure of the collateral, result in removal of the loan from the PCI loan portfolio at its carrying amount. The amount of cash flows expected to be collected and, accordingly, the adequacy of the allowance for loan loss due to certain decreases in expected cash flow, is particularly sensitive to changes in loan credit quality. The sensitivity of the overall allowance for loan losses, including PCI loans, to a one risk downgrade is presented in the preceding section, “Critical Accounting Policies – Allowance for Credit Losses.”

We aggregated loans acquired in the same fiscal quarter into one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. We aggregated all of the consumer loans and commercial and CRE loans with balances of $3 million or less into pools with common risk characteristics. We accounted for commercial and CRE loans with balances in excess of $3 million individually.

PCI loans that were classified as nonperforming loans by Wachovia are no longer classified as nonperforming because, at acquisition, we believe we will fully collect the new carrying value of these loans. It is important to note that judgment is required to classify PCI loans as performing, and is dependent on having a reasonable expectation about the timing and amount of cash flows expected to be collected, even if the loan is contractually past due.

See the “Risk Management – Credit Risk Management Process” section and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report for further discussion of PCI loans.

Valuation of Residential Mortgage Servicing Rights

We recognize as assets the rights to service mortgage loans for others, or mortgage servicing rights (MSRs), whether we purchase the servicing rights, or the servicing rights result from the sale or securitization of loans we originate (asset transfers). We also acquire MSRs under co-issuer agreements that provide for us to service loans that are originated and securitized by third-party correspondents. We initially measure and carry our MSRs related to residential mortgage loans (residential MSRs) using the fair value measurement method, under which purchased MSRs and MSRs from asset transfers are capitalized and carried at fair value.

At the end of each quarter, we determine the fair value of MSRs using a valuation model that calculates the present value of estimated future net servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds (including housing price volatility), discount rate, default rates, cost to service (including delinquency and foreclosure costs), escrow account earnings, contractual servicing fee income, ancillary income and late fees. The valuation of MSRs is discussed further in this section and in Note 1 (Summary of Significant Accounting Policies), Note 8 (Securitizations and Variable Interest Entities), Note 9 (Mortgage Banking Activities) and Note 16 (Fair Values of Assets and Liabilities) to Financial Statements in this Report.

To reduce the sensitivity of earnings to interest rate and market value fluctuations, we may use securities available for sale and free-standing derivatives (economic hedges) to hedge the risk of changes in the fair value of MSRs, with the resulting gains or losses reflected in income. Changes in the fair value of the MSRs from changing mortgage interest rates are generally offset by gains or losses in the fair value of the derivatives depending on the amount of MSRs we hedge and the particular instruments used to hedge the MSRs. We may choose not to fully hedge MSRs, partly because origination volume tends to act as a “natural hedge.” For example, as interest rates decline, servicing values generally decrease and fees from origination volume tend to increase. Conversely, as interest rates increase, the fair value of the MSRs generally increases, while fees from origination volume tend to decline. See the “Risk Management – Mortgage Banking Interest Rate and Market Risk” section in this Report for discussion of the timing of the effect of changes in mortgage interest rates.

Net servicing income, a component of mortgage banking noninterest income, includes the changes from period to period in fair value of both our residential MSRs and the free-standing derivatives (economic hedges) used to hedge our residential MSRs. Changes in the fair value of residential MSRs from period to period result from (1) changes in the valuation model inputs or assumptions (principally reflecting changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates) and (2) other changes, representing changes due to collection/realization of expected cash flows.

We use a dynamic and sophisticated model to estimate the value of our MSRs. The model is validated by an independent internal model validation group operating in accordance with Company policies. Senior management reviews all significant assumptions quarterly. Mortgage loan prepayment speed—a key assumption in the model—is the annual rate at which borrowers are forecasted to repay their mortgage loan principal. The discount rate used to determine the present value of estimated future net servicing income—another key assumption in the model—is the required rate of return investors in the market would expect for an asset with similar risk. To determine the discount rate, we consider the risk premium for uncertainties from servicing operations (e.g., possible changes in future servicing costs, ancillary income and earnings on escrow accounts). Both assumptions can, and generally will, change quarterly as market conditions and interest rates change. For example, an increase in either the prepayment speed or discount rate assumption results in a decrease in the fair value of the MSRs, while a decrease in either assumption would result in an increase in the fair value of the MSRs. In recent years, there have been significant market-driven fluctuations in loan prepayment speeds and the discount rate. These fluctuations can be rapid and may be significant in the future. Therefore, estimating prepayment speeds within a range that market participants would use in determining the fair value of MSRs requires significant management judgment.

These key economic assumptions and the sensitivity of the fair value of MSRs to an immediate adverse change in those assumptions are shown in Note 8 (Securitizations and Variable Interest Entities) to Financial Statements in this Report.

Fair Valuation of Financial Instruments

We use fair value measurements to record fair value adjustments to certain financial instruments and to determine fair value disclosures. Trading assets, securities available for sale, derivatives, prime residential MHFS, certain commercial loans held for sale (LHFS), principal investments and securities sold but not yet purchased (short sale liabilities) are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other assets on a nonrecurring basis, such as certain MHFS and LHFS, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or write-downs of individual assets. Further, we include in the Notes to Financial Statements in this Report, information about the extent to which fair value is used to measure assets and liabilities, the valuation methodologies used and its effect on earnings. Additionally, for financial instruments not recorded at fair value we disclose the estimate of their fair value.

Fair value represents the price that would be received to sell the financial asset or paid to transfer the financial liability in an orderly transaction between market participants at the measurement date.

The accounting provisions for fair value measurements include a three-level hierarchy for disclosure of assets and liabilities recorded at fair value. The classification of assets

and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable. Observable inputs reflect market-derived or market-based information obtained from independent sources, while unobservable inputs reflect our estimates about market data.

•		Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets. Level 1 instruments include securities traded on active exchange markets, such as the New York Stock Exchange, as well as U.S. Treasury and other U.S. government securities that are traded by dealers or brokers in active OTC markets.

•		Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques, such as matrix pricing, for which all significant assumptions are observable in the market. Level 2 instruments include securities traded in functioning dealer or broker markets, plain-vanilla interest rate derivatives and MHFS that are valued based on prices for other mortgage whole loans with similar characteristics.

•		Level 3 – Valuation is generated primarily from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

When developing fair value measurements, we maximize the use of observable inputs and minimize the use of unobservable inputs. When available, we use quoted prices in active markets to measure fair value. If quoted prices in active markets are not available, fair value measurement is based upon models that use primarily market-based or independently sourced market parameters, including interest rate yield curves, prepayment speeds, option volatilities and currency rates. However, in certain cases, when market observable inputs for model-based valuation techniques may not be readily available, we are required to make judgments about assumptions market participants would use in estimating the fair value of the financial instrument.

The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted prices in active markets or observable market parameters. For financial instruments with quoted market prices or observable market parameters in active markets, there is minimal subjectivity involved in measuring fair value. When quoted prices and observable data in active markets are not fully available, management judgment is necessary to estimate fair value. Changes in the market conditions, such as reduced liquidity in the capital markets or changes in secondary market activities, may reduce the availability and reliability of quoted prices or observable data used to determine fair value. When significant adjustments are required to price quotes or inputs, it may be appropriate to utilize an estimate based primarily on unobservable inputs. When an active market for a financial instrument does not

exist, the use of management estimates that incorporate current market participant expectations of future cash flows, adjusted for an appropriate risk premium, is acceptable.

In connection with the first quarter 2009 adoption of the new fair value measurement guidance included in FASB ASC 820, Fair Value Measurements and Disclosures , we developed policies and procedures to determine when markets for our financial assets and liabilities are inactive if the level and volume of activity has declined significantly relative to normal conditions. If markets are determined to be inactive, it may be appropriate to adjust price quotes received. The methodology we use to adjust the quotes generally involves weighting the price quotes and results of internal pricing techniques, such as the net present value of future expected cash flows (with observable inputs, where available) discounted at a rate of return market participants require to arrive at the fair value. The more active and orderly markets for particular security classes are determined to be, the more weighting we assign to price quotes. The less active and orderly markets are determined to be, the less weighting we assign to price quotes.

We may use independent pricing services and brokers to obtain fair values based on quoted prices. We determine the most appropriate and relevant pricing service for each security class and generally obtain one quoted price for each security. For certain securities, we may use internal traders to obtain quoted prices. Quoted prices are subject to our internal price verification procedures. We validate prices received using a variety of methods, including, but not limited to, comparison to pricing services, corroboration of pricing by reference to other independent market data such as secondary broker quotes and relevant benchmark indices, and review of pricing by Company personnel familiar with market liquidity and other market-related conditions. We believe the determination of fair value for our securities is consistent with the accounting guidance on fair value measurements.

Significant judgment may be required to determine whether certain assets measured at fair value are included in Level 2 or Level 3. When making this judgment, we consider all available information, including observable market data, indications of market liquidity and orderliness, and our understanding of the valuation techniques and significant inputs used. For securities in inactive markets, we use a predetermined percentage to evaluate the impact of fair value adjustments derived from weighting both external and internal indications of value to determine if the instrument is classified as Level 2 or Level 3. Otherwise, the classification of Level 2 or Level 3 is based upon the specific facts and circumstances of each instrument or instrument category and judgments are made regarding the significance of the Level 3 inputs to the instruments’ fair value measurement in its entirety. If Level 3 inputs are considered significant, the instrument is classified as Level 3.

Our financial assets valued using Level 3 measurements consisted of certain asset-backed securities, including those collateralized by auto leases or loans and cash reserves, private collateralized mortgage obligations (CMOs), collateralized debt obligations (CDOs), collateralized loan obligations

(CLOs), auction-rate securities, certain derivative contracts such as credit default swaps related to CMO, CDO and CLO exposures and certain MHFS and MSRs.

Approximately 22% of total assets ($277.4 billion) at December 31, 2009, and 19% of total assets ($247.5 billion) at December 31, 2008, consisted of financial instruments recorded at fair value on a recurring basis. The fair value of assets measured using significant Level 3 inputs (before derivative netting adjustments) represented approximately 19% of these financial instruments (4% of total assets) at December 31, 2009, and approximately 22% (4% of total assets) at December 31, 2008. The fair value of the remaining assets was measured using valuation methodologies involving market-based or market-derived information, collectively Level 1 and 2 measurements.

Approximately 2% of total liabilities ($22.8 billion) at December 31, 2009, and 2% ($18.8 billion) at December 31, 2008, consisted of financial instruments recorded at fair value on a recurring basis. The fair value of liabilities measured using Level 3 inputs (before derivative netting adjustments) was $7.9 billion and $9.3 billion at December 31, 2009 and 2008, respectively.

See Note 16 (Fair Values of Assets and Liabilities) to Financial Statements in this Report for a complete discussion on our use of fair valuation of financial instruments, our related measurement techniques and its impact to our financial statements.

Pension Accounting

We account for our defined benefit pension plans using an actuarial model. The funded status of our pension and postretirement benefit plans is recognized in our balance sheet. In 2008, we began measuring our plan assets and benefit obligations using a year-end measurement date.

On April 28, 2009, the Board approved amendments to freeze the benefits earned under the Wells Fargo qualified and supplemental Cash Balance Plans and the Wachovia Corporation Pension Plan, and to merge the Pension Plan into the qualified Cash Balance Plan. These actions became effective on July 1, 2009.

We use four key variables to calculate our annual pension cost: size and characteristics of the employee population, actuarial assumptions, expected long-term rate of return on plan assets, and discount rate. We describe below the effect of each of these variables on our pension expense.

SIZE AND CHARACTERISTICS OF THE EMPLOYEE POPULATION

Pension expense is directly related to the number of employees covered by the plans, and other factors including salary, age and years of employment. As of July 1, 2009, pension expense will no longer be dependent on salaries earned and service cost will no longer be recognized for the plans that were frozen in 2009. In 2009, pension expense for the qualified and unqualified Cash Balance plans was about $317 million, which includes one-time curtailment gains of $59 million resulting from the freezing of these plans. In 2010, pension expense for these plans is estimated to be a credit of approximately $44 million; the decrease in pension expense in 2010 is primarily due to no longer incurring service cost.

ACTUARIAL ASSUMPTIONS To estimate the projected benefit obligation, actuarial assumptions are required about factors such as the rates of mortality, turnover, retirement, disability and compensation increases for our participant population. These demographic assumptions are reviewed periodically. In general, the range of assumptions is narrow. The compensation increase assumption does not apply to the plans that were frozen in 2009.

EXPECTED LONG-TERM RATE OF RETURN ON PLAN ASSETS We determine the expected return on plan assets each year based on the composition of assets and the expected long-term rate of return on that portfolio. The expected long-term rate of return assumption is a long-term assumption and is not anticipated to change significantly from year to year.

To determine if the expected rate of return is reasonable, we consider such factors as (1) long-term historical return experience for major asset class categories (for example, large cap and small cap domestic equities, international equities and domestic fixed income), and (2) forward-looking return expectations for these major asset classes. Our expected rate of return for 2010 is 8.25%, a decrease from 8.75%, the expected rate of return for 2009 and 2008. The decrease reflects our decision to de-emphasize the use of the Tactical Asset Allocation model. Differences in each year, if any, between expected and actual returns are included in our net actuarial gain or loss amount, which is recognized in OCI. We generally amortize any net actuarial gain or loss in excess of a 5% corridor (as defined in accounting guidance for retirement benefits) in net periodic pension expense calculations over our estimated average remaining participation period of 13 years. See Note 19 (Employee Benefits and Other Expenses) to Financial Statements in this Report for information on funding, changes in the pension benefit obligation, and plan assets (including the investment categories, asset allocation and the fair value).

If we were to assume a 1% increase/decrease in the expected long-term rate of return, holding the discount rate and other actuarial assumptions constant, 2010 pension expense would decrease/increase by approximately $91 million.

DISCOUNT RATE We use a discount rate to determine the present value of our future benefit obligations. The discount rate reflects the current rates available on long-term high-quality fixed-income debt instruments, and is reset annually on the measurement date. To determine the discount rate, we review, with our independent actuary, spot interest rate yield curves based upon yields from a broad population of high-quality bonds, adjusted to match the timing and amounts of the Cash Balance Plan’s expected benefit payments. We used a discount rate of 5.75% in 2009 and 6.75% in 2008.

If we were to assume a 1% increase in the discount rate, and keep the expected long-term rate of return and other actuarial assumptions constant, 2010 pension expense would decrease by approximately $33 million. If we were to assume a 1% decrease in the discount rate, and keep other assumptions

constant, 2010 pension expense would increase by approximately $36 million. The decrease in pension expense due to a 1% increase in discount rate differs slightly from the increase in pension expense due to a 1% decrease in discount rate due to the impact of the 5% gain/loss corridor.

Income Taxes

We are subject to the income tax laws of the U.S., its states and municipalities and those of the foreign jurisdictions in which we operate. Our income tax expense consists of two components: current and deferred. Current income tax expense approximates taxes to be paid or refunded for the current period and includes income tax expense related to our uncertain tax positions. We determine deferred income taxes using the balance sheet method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and recognized enacted changes in tax rates and laws in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized subject to management’s judgment that realization is “more likely than not.” Uncertain tax positions that meet the more likely than not recognition threshold are measured to determine the amount of benefit to recognize. An uncertain tax position is measured at the largest amount of benefit that management believes has a greater than 50% likelihood of realization upon settlement. Foreign taxes paid are generally applied as credits to reduce federal income taxes payable. We account for interest and penalties as a component of income tax expense.

The income tax laws of the jurisdictions in which we operate are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities. In establishing a provision for income tax expense, we must make judgments and interpretations about the application of these inherently complex tax laws. We must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions by the government taxing authorities, both domestic and foreign. Our interpretations may be subjected to review during examination by taxing authorities and disputes may arise over the respective tax positions. We attempt to resolve these disputes during the tax examination and audit process and ultimately through the court systems when applicable.

We monitor relevant tax authorities and revise our estimate of accrued income taxes due to changes in income tax laws and their interpretation by the courts and regulatory authorities on a quarterly basis. Revisions of our estimate of accrued income taxes also may result from our own income tax planning and from the resolution of income tax controversies. Such revisions in our estimates may be material to our operating results for any given quarter.

See Note 20 (Income Taxes) to Financial Statements in this Report for a further description of our provision for income taxes and related income tax assets and liabilities.

Current Accounting Developments

The following accounting pronouncements were issued by the FASB, but are not yet effective:

•		ASU 2010-6, Improving Disclosures about Fair Value Measurements ;

•		ASU 2009-16, Accounting for Transfers of Financial Assets (FAS 166, Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140 ); and

•		ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (FAS 167, Amendments to FASB Interpretation No. 46(R) ).

Information about these pronouncements is further described in more detail below.

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

ASU 2009-16 (FAS 166) modifies certain guidance contained in FASB ASC 860, Transfers and Servicing . This pronouncement eliminates the concept of QSPEs and provides additional criteria transferors must use to evaluate transfers of financial assets. To determine if a transfer is to be accounted for as a sale, the transferor must assess whether it and all of the entities included in its consolidated financial statements have surrendered control of the assets. A transferor must consider all arrangements or agreements made or contemplated at the time of transfer before reaching a conclusion on whether control has been relinquished. The new guidance addresses situations in which a portion of a financial asset is transferred. In such instances the transfer can only be accounted for as a sale when the transferred portion is considered to be a participating interest. The Update also requires that any assets or liabilities retained from a transfer accounted for as a sale be initially recognized at fair value. This pronouncement is effective for us as of January 1, 2010, with adoption applied prospectively for transfers that occur on and after the effective date.

ASU 2009-17 (FAS 167) amends several key consolidation provisions related to VIEs, which are included in FASB ASC 810, Consolidation . First, the scope of the new guidance includes entities that are currently designated as QSPEs. Second, companies are to use a different approach to identify the VIEs for which they are deemed to be the primary beneficiary and are required to consolidate. Under existing rules, the primary beneficiary is the entity that absorbs the majority of a VIE’s losses and receives the majority of the VIE’s returns. The new guidance identifies a VIE’s primary beneficiary as the entity that has the power to direct the VIE’s significant activities, and has an obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. Third, companies will be required to continually reassess whether they are the primary beneficiary of a VIE. Existing rules only require companies to reconsider primary beneficiary conclusions when certain triggering events have occurred. The Update is effective for us as of January 1, 2010, and applies to all existing QSPEs and VIEs, and VIEs created after the effective date.

We have performed an analysis of these accounting pronouncements with respect to QSPE and VIE structures currently applicable to us. Application of these new accounting pronouncements will result in the January 1, 2010, consolidation of certain QSPEs and VIEs that were not included in our consolidated financial statements at December 31, 2009. Tables 32 and 33 present the estimated impacts to our financial statements of those newly consolidated QSPEs and VIE structures.

Implementation of ASU 2009-17 (FAS 167) has been deferred for certain investment funds and accordingly, will not be consolidated under ASU 2009-17 (FAS 167).

Table 32:

Estimated Impact of Initial 2010 Application of ASU 2009-16 (FAS 166) and ASU 2009-17 (FAS 167) by Structure Type


	Incremental			Incremental		Retained
(in billions, except		GAAP		risk-weighted		earnings
retained earnings in millions)		assets		assets		impact		⁽²⁾

Residential mortgage loans – nonconforming ⁽¹⁾		$	13		5		240
Commercial paper conduit			5		3		(4	)
Other			2		2		27

Total		$	20		10		263


(1)		Represents certain of our residential mortgage loans that are not guaranteed by GSEs (“nonconforming”).
(2)		Represents cumulative effect (after tax) of adopting ASU 2009-17 (FAS 167) recorded to retained earnings on January 1, 2010.

Table 33:

Estimated Impact of Initial 2010 Application of ASU 2009-16 (FAS 166) and ASU 2009-17 (FAS 167) by Balance Sheet Classification


(in billions)	Assets			Liabilities		Equity

Net increase (decrease)
Trading assets	$	0.1			—		—
Securities available for sale		(7.2	)		—		—
Loans, net ⁽¹⁾		26.3			—		—
Short-term borrowings		—			5.2		—
Long-term debt		—			13.8		—
Other		0.4			0.1		—
Cumulative other comprehensive income		—			—		0.2
Retained earnings		—			—		0.3

Total	$	19.6			19.1		0.5


(1)		Includes $1.3 billion of nonaccrual loans, substantially all of which are real estate 1-4 family first mortgage loans.

We have refined our estimate disclosed in our third quarter 2009 Form 10-Q due largely to the sale of residential MBS and the proposed amendment to ASU 2009-17 (FAS 167), which defers application to certain investment funds. The cumulative effect of adopting these statements will be recorded as an adjustment to retained earnings on January 1, 2010.

Forward-Looking Statements

This Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “projects,” “outlook,” “forecast,” “will,” “may,” “could,” “should,” “can” and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements we make about: future results of the Company; expectations for consumer and commercial credit losses, life-of-loan losses, and the sufficiency of our credit loss allowance to cover future credit losses; the merger integration of the Company and Wachovia, including expense savings, merger costs and revenue synergies; the expected outcome and impact of legal, regulatory and legislative developments; and the Company’s plans, objectives and strategies.

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

•		the effect of political and economic conditions and geopolitical events;

•		economic conditions that affect the general economy, housing prices, the job market, consumer confidence and spending habits;

•		the level and volatility of the capital markets, interest rates, currency values and other market indices that affect the value of our assets and liabilities;

•		the availability and cost of both credit and capital as well as the credit ratings assigned to our debt instruments;

•		investor sentiment and confidence in the financial markets;

•		our reputation;

•		the impact of current, pending and future legislation, regulation and legal actions;

•		changes in accounting standards, rules and interpretations;

•		mergers and acquisitions, and our ability to integrate them;

•		various monetary and fiscal policies and regulations of the U.S. and foreign governments; and

•		the other factors described in “Risk Factors” below.

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

Risk Factors

An investment in the Company involves risk, including the possibility that the value of the investment could fall substantially and that dividends or other distributions on the investment could be reduced or eliminated. We discuss below and elsewhere in this Report, as well as in other documents we file with the SEC, risk factors that could adversely affect our financial results and condition and the value of, and return on, an investment in the Company. We refer you to the Financial Review section and Financial Statements (and related Notes) in this Report for more information about credit, interest rate, market and litigation risks and to the “Regulation and Supervision” section of our 2009 Form 10-K for more information about legislative and regulatory risks. Any factor described below or elsewhere in this Report or in our 2009 Form 10-K could by itself, or together with other factors, adversely affect our financial results and condition. Refer to our quarterly reports on Form 10-Q filed with the SEC in 2010 for material changes to the discussion of risk factors. There are factors not discussed below or elsewhere in this Report that could adversely affect our financial results and condition.

RISKS RELATING TO CURRENT ECONOMIC AND MARKET CONDITIONS

Our financial results and condition may be adversely affected if home prices continue to fall or unemployment continues to increase. Significant declines in home prices over the last two years and recent increases in unemployment have resulted in higher loan charge-offs and increases in our allowance for credit losses and related provision expense. The economic environment and related conditions will directly affect credit performance. For example, if home prices continue to fall or unemployment continues to rise we would expect to incur higher than normal charge-offs and provision expense from increases in our allowance for credit losses. These conditions may adversely affect not only consumer loan performance but also commercial and CRE loans, especially those business borrowers that rely on the health of industries or properties that may experience deteriorating economic conditions.

Current financial and credit market conditions may persist or worsen, making it more difficult to access capital markets on favorable terms. Financial and credit markets may continue to experience unprecedented disruption and volatility. These conditions may continue or even worsen, affecting our ability to access capital markets on favorable terms. We may raise additional capital through the issuance of common stock, which could dilute existing stockholders, or further reduce or even eliminate our common stock dividend to preserve capital or in order to raise additional capital.

Bank regulators may require higher capital levels, limiting our ability to pay common stock dividends or repurchase our common stock. On December 23, 2009, we repaid the U.S. Treasury’s investment in us under the TARP CPP program. While we are no longer a participant in the TARP CPP program, federal banking regulators continue to monitor the capital position of banks and bank holding companies. Although not currently anticipated, our regulators may require us to raise additional capital or otherwise restrict how we utilize our capital, including common stock dividends and stock repurchases. Issuing additional common stock may dilute existing stockholders.

In addition, the U.S. Treasury continues to hold a warrant to purchase approximately 110.3 million shares of our common stock at $34.01 per share. If the warrant is exercised, the ownership of existing stockholders may be diluted.

Compensation restrictions could adversely affect our ability to recruit and retain key employees. Following repayment of the U.S. Treasury’s TARP CPP investment in December 2009, we are no longer subject to the compensation restrictions applicable to participants in the TARP CPP program. However, legislators and regulators may impose compensation restrictions on financial institutions, which could adversely affect our ability to compete for executive talent.

We may be required to repurchase mortgage loans or reimburse investors as a result of breaches in contractual representations and warranties. We sell mortgage loans to various parties, including GSEs, under contractual provisions that include various representations and warranties which typically cover ownership of the loan, compliance with loan criteria set forth in the applicable agreement, validity of the lien securing the loan, absence of delinquent taxes or liens against the property securing the loan, and similar matters. We may be required to repurchase the mortgage loans with identified defects, indemnify the investor or insurer, or reimburse the investor for credit loss incurred on the loan (collectively, “repurchase obligations”) in the event of a material breach of such contractual representations or warranties. In addition, we may negotiate global settlements in order to resolve repurchase obligations in lieu of repurchasing loans. If economic conditions and the housing market do not recover or future investor repurchase demand and our success at appealing repurchase requests differ from past experience, we could continue to have increased repurchase obligations and increased loss severity on repurchases, requiring material additions to the repurchase reserve.

For more information, refer to the “Risk Management – Reserve for Mortgage Loan Repurchase Losses” section in this Report.

Legislative and regulatory proposals may restrict or limit our ability to engage in our current businesses or in businesses that we desire to enter into. Many legislative and regulatory proposals directed at the financial services industry are being proposed or are pending in the U.S. Congress to address perceived weaknesses in the financial system and regulatory oversight thereof that may have contributed to the financial disruption over the last two years and to provide additional protection for consumers and investors. These proposals, if adopted, may restrict our ability to compete in our current businesses or restrict our ability to enter into new businesses that we otherwise may desire to enter into. In addition, the proposals may limit our revenues in businesses, impose fees or taxes on us, restrict compensation we may pay to key employees, restrict acquisition opportunities, and/or intensify the regulatory supervision of us and the financial services industry. These proposals, if adopted, may have a material adverse effect on our business operations, income, and/or competitive position.

Bankruptcy laws may be changed to allow mortgage “cram-downs,” or court-ordered modifications to our mortgage loans including the reduction of principal balances. Under current bankruptcy laws, courts cannot force a modification of mortgage and home equity loans secured by primary residences. In response to the current financial crisis, legislation has been proposed to allow mortgage loan “cram-downs,” which would empower courts to modify the terms of mortgage and home equity loans including a reduction in the principal amount to reflect lower underlying property values. This could result in writing down the balance of our mortgage and home equity loans to reflect their lower loan values. There is also risk that home equity loans in a second lien position (i.e., behind a mortgage) could experience significantly higher losses to the extent they become unsecured as a result of a cram-down. The availability of principal reductions or other modifications to mortgage loan terms could make bankruptcy a more attractive option for troubled borrowers, leading to increased bankruptcy filings and accelerated defaults.

RISKS RELATING TO THE WACHOVIA MERGER

Our financial results and condition could be adversely affected if we fail to realize the expected benefits of the Wachovia merger or it takes longer than expected to realize those benefits. The merger with Wachovia Corporation requires the integration of the businesses of Wachovia and Wells Fargo. The integration process may result in the loss of key employees, the disruption of ongoing businesses and the loss of customers and their business and deposits. It may also divert management attention and resources from other operations and limit the Company’s ability to pursue other acquisitions. There is no assurance that we will realize the cost savings and other financial benefits of the merger when and in the amounts expected.

We may incur losses on loans, securities and other acquired assets of Wachovia that are materially greater than reflected in our preliminary fair value adjustments. We accounted for the Wachovia merger under the purchase method of accounting, recording the acquired assets and liabilities of Wachovia at fair value based on preliminary purchase accounting adjustments. Under purchase accounting, we had until one year after the merger date to finalize the fair value adjustments, meaning we could adjust the preliminary fair value estimates of Wachovia’s assets and liabilities based on new or updated information that provided a better estimate of the fair value at merger date.

We recorded at fair value all PCI loans acquired in the merger based on the present value of their expected cash flows. We estimated cash flows using internal credit, interest rate and prepayment risk models using assumptions about matters that are inherently uncertain. We may not realize the estimated cash flows or fair value of these loans. In addition, although the difference between the pre-merger carrying value of the credit-impaired loans and their expected cash flows – the “nonaccretable difference” – is available to absorb future charge-offs, we may be required to increase our allowance for credit losses and related provision expense because of subsequent additional credit deterioration in these loans.

For more information, refer to the “Overview” and “Critical Accounting Policies – Purchased Credit-Impaired Loans” sections in this Report.

GENERAL RISKS RELATING TO OUR BUSINESS

Higher charge-offs and worsening credit conditions could require us to increase our allowance for credit losses through a charge to earnings. When we loan money or commit to loan money we incur credit risk, or the risk of losses if our borrowers do not repay their loans. We reserve for credit losses by establishing an allowance through a charge to earnings. The amount of this allowance is based on our assessment of credit losses inherent in our loan portfolio (including unfunded credit commitments). The process for determining the amount of the allowance is critical to our financial results and condition. It requires difficult, subjective and complex judgments about the future, including forecasts of economic or market conditions that might impair the ability of our borrowers to repay their loans.

We might underestimate the credit losses inherent in our loan portfolio and have credit losses in excess of the amount reserved. We might increase the allowance because of changing economic conditions, including falling home prices and higher unemployment, or other factors such as changes in borrower behavior. As an example, borrowers may be less likely to continue making payments on their real estate-secured loans if the value of the real estate is less than what they owe, even if they are still financially able to make the payments.

While we believe that our allowance for credit losses was adequate at December 31, 2009, there is no assurance that it will be sufficient to cover future credit losses, especially if housing and employment conditions worsen. We may be required to build reserves in 2010, thus reducing earnings.

For more information, refer to the “Risk Management – Credit Risk Management Process” and “Critical Accounting Policies –Allowance for Credit Losses” sections in this Report.

We may have more credit risk and higher credit losses to the extent our loans are concentrated by loan type, industry segment, borrower type, or location of the borrower or collateral. Our credit risk and credit losses can increase if our loans are concentrated to borrowers engaged in the same or similar activities or to borrowers who as a group may be uniquely or disproportionately affected by economic or market conditions. We experienced the effect of concentration risk in 2008 and 2009 when we incurred greater than expected losses in our Home Equity loan portfolio due to a housing slowdown and greater than expected deterioration in residential real estate values in many markets, including the Central Valley California market and several Southern California metropolitan statistical areas. As California is our largest banking state in terms of loans and deposits, continued deterioration in real estate values and underlying economic conditions in those markets or elsewhere in California could result in materially higher credit losses. As a result of the Wachovia merger, we have increased our exposure to California, as well as to Arizona and Florida, two states that have also suffered significant declines in home values. Continued deterioration in housing conditions and real estate values in these states and generally across the country could result in materially higher credit losses.

For more information, refer to the “Risk Management – Credit Risk Management Process” section and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Loss of customer deposits and market illiquidity could increase our funding costs. We rely on bank deposits to be a low cost and stable source of funding for the loans we make. We compete with banks and other financial services companies for deposits. If our competitors raise the rates they pay on deposits our funding costs may increase, either because we raise our rates to avoid losing deposits or because we lose deposits and must rely on more expensive sources of funding. Higher funding costs reduce our net interest margin and net interest income. As discussed above, the integration of Wells Fargo and Wachovia may result in the loss of customer deposits.

We sell most of the mortgage loans we originate in order to reduce our credit risk and provide funding for additional loans. We rely on Fannie Mae and Freddie Mac to purchase loans that meet their conforming loan requirements and on other capital markets investors to purchase loans that do not meet those requirements—referred to as “nonconforming” loans. Since 2007, investor demand for nonconforming loans has fallen sharply, increasing credit spreads and reducing the liquidity for those loans. In response to the reduced liquidity in the capital markets, we may retain more nonconforming loans. When we retain a loan not only do we keep the credit risk of the loan but we also do not receive any sale proceeds that could be used to generate new loans. Continued lack of liquidity could limit our ability to fund—and thus originate—new mortgage loans, reducing the fees we earn from originating and servicing loans. In addition, we cannot assure that Fannie Mae and Freddie Mac will not materially limit their purchases of conforming loans due to capital constraints or change their criteria for conforming loans (e.g., maximum loan amount or borrower eligibility).

Changes in interest rates could reduce our net interest income and earnings. Our net interest income is the interest we earn on loans, debt securities and other assets we hold less the interest we pay on our deposits, long-term and short-term debt, and other liabilities. Net interest income is a measure of both our net interest margin—the difference between the yield we earn on our assets and the interest rate we pay for deposits and our other sources of funding—and the amount of earning assets we hold. Changes in either our net interest margin or the amount of earning assets we hold could affect our net interest income and our earnings. Changes in interest rates can affect our net interest margin. Although the yield we earn on our assets and our funding costs tend to move in the same direction in response to changes in interest rates, one can rise or fall faster than the other, causing our net interest margin to expand or contract. Our liabilities tend to be shorter in duration than our assets, so they may adjust faster in response to changes in interest rates. When interest rates rise, our funding costs may rise faster than the yield we earn on our assets, causing our net interest margin to contract until the yield catches up.

The amount and type of earning assets we hold can affect our yield and net interest margin. We hold earning assets in the form of loans and investment securities, among other assets. If current economic conditions persist, we may continue to see lower demand for loans by credit worthy customers, reducing our yield. In addition, we may invest in lower yielding investment securities for a variety of reasons, including in anticipation that interest rates are likely to increase.

Changes in the slope of the “yield curve”–or the spread between short-term and long-term interest rates—could also reduce our net interest margin. Normally, the yield curve is upward sloping, meaning short-term rates are lower than long-term rates. Because our liabilities tend to be shorter in duration

than our assets, when the yield curve flattens or even inverts, our net interest margin could decrease as our cost of funds increases relative to the yield we can earn on our assets.

The interest we earn on our loans may be tied to U.S.-denominated interest rates such as the federal funds rate while the interest we pay on our debt may be based on international rates such as LIBOR. If the federal funds rate were to fall without a corresponding decrease in LIBOR, we might earn less on our loans without any offsetting decrease in our funding costs. This could lower our net interest margin and our net interest income.

We assess our interest rate risk by estimating the effect on our earnings under various scenarios that differ based on assumptions about the direction, magnitude and speed of interest rate changes and the slope of the yield curve. We hedge some of that interest rate risk with interest rate derivatives. We also rely on the “natural hedge” that our mortgage loan originations and servicing rights can provide.

We do not hedge all of our interest rate risk. There is always the risk that changes in interest rates could reduce our net interest income and our earnings in material amounts, especially if actual conditions turn out to be materially different than what we assumed. For example, if interest rates rise or fall faster than we assumed or the slope of the yield curve changes, we may incur significant losses on debt securities we hold as investments. To reduce our interest rate risk, we may rebalance our investment and loan portfolios, refinance our debt and take other strategic actions. We may incur losses when we take such actions.

For more information, refer to the “Risk Management – Asset/ Liability Management – Interest Rate Risk” section in this Report.

Changes in interest rates could also reduce the value of our mortgage servicing rights and mortgages held for sale, reducing our earnings. We have a sizeable portfolio of mortgage servicing rights. A mortgage servicing right (MSR) is the right to service a mortgage loan—collect principal, interest and escrow amounts—for a fee. We acquire MSRs when we keep the servicing rights after we sell or securitize the loans we have originated or when we purchase the servicing rights to mortgage loans originated by other lenders. We initially measure and carry our residential MSRs using the fair value measurement method. Fair value is the present value of estimated future net servicing income, calculated based on a number of variables, including assumptions about the likelihood of prepayment by borrowers.

Changes in interest rates can affect prepayment assumptions and thus fair value. When interest rates fall, borrowers are usually more likely to prepay their mortgage loans by refinancing them at a lower rate. As the likelihood of prepayment increases, the fair value of our MSRs can decrease. Each quarter we evaluate the fair value of our MSRs, and any decrease in fair value reduces earnings in the period in which the decrease occurs.

We measure at fair value new prime MHFS for which an active secondary market and readily available market prices exist. We also measure at fair value certain other interests we hold related to residential loan sales and securitizations. Similar to other interest-bearing securities, the value of these MHFS and other interests may be negatively affected by changes in interest rates. For example, if market interest rates increase relative to the yield on these MHFS and other interests, their fair value may fall. We may not hedge this risk, and even if we do hedge the risk with derivatives and other instruments we may still incur significant losses from changes in the value of these MHFS and other interests or from changes in the value of the hedging instruments.

For more information, refer to the “Risk Management – Asset/ Liability Management – Mortgage Banking Interest Rate and Market Risk” and “Critical Accounting Policies” sections in this Report.

Our mortgage banking revenue can be volatile from quarter to quarter. We earn revenue from fees we receive for originating mortgage loans and for servicing mortgage loans. When rates rise, the demand for mortgage loans usually tends to fall, reducing the revenue we receive from loan originations. Under the same conditions, revenue from our MSRs can increase through increases in fair value. When rates fall, mortgage originations usually tend to increase and the value of our MSRs usually tends to decline, also with some offsetting revenue effect. Even though they can act as a “natural hedge,” the hedge is not perfect, either in amount or timing. For example, the negative effect on revenue from a decrease in the fair value of residential MSRs is generally immediate, but any offsetting revenue benefit from more originations and the MSRs relating to the new loans would generally accrue over time. It is also possible that, because of the recession and deteriorating housing market, even if interest rates were to fall, mortgage originations may also fall or any increase in mortgage originations may not be enough to offset the decrease in the MSRs value caused by the lower rates.

We typically use derivatives and other instruments to hedge our mortgage banking interest rate risk. We generally do not hedge all of our risk, and we may not be successful in hedging any of the risk. Hedging is a complex process, requiring sophisticated models and constant monitoring, and is not a perfect science. We may use hedging instruments tied to U.S. Treasury rates, LIBOR or Eurodollars that may not perfectly correlate with the value or income being hedged. We could incur significant losses from our hedging activities. There may be periods where we elect not to use derivatives and other instruments to hedge mortgage banking interest rate risk.

For more information, refer to the “Risk Management – Asset/ Liability Management – Mortgage Banking Interest Rate and Market Risk” section in this Report.

We could recognize OTTI on securities held in our available-for-sale portfolio if economic and market conditions do not improve.

Our securities available-for-sale portfolio had gross unrealized losses of $5.1 billion at December 31, 2009. We analyze securities held in our available-for-sale portfolio for OTTI on a quarterly basis. The process for determining whether impairment is other than temporary usually requires difficult, subjective judgments about the future financial performance of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security. Because of changing economic and market conditions affecting issuers and the performance of the underlying collateral, we may be required to recognize OTTI in future periods, thus reducing earnings.

For more information, refer to the “Balance Sheet Analysis –Securities Available for Sale” and “Current Accounting Developments” sections and Note 5 (Securities Available for Sale) to Financial Statements in this Report.

We rely on our systems and certain counterparties, and certain failures could materially adversely affect our operations. Our businesses are dependent on our ability to process, record and monitor a large number of complex transactions. If any of our financial, accounting, or other data processing systems fail or have other significant shortcomings, we could be materially adversely affected. Third parties with which we do business

could also be sources of operational risk to us, including relating to breakdowns or failures of such parties’ own systems. Any of these occurrences could diminish our ability to operate one or more of our businesses, or result in potential liability to clients, reputational damage and regulatory intervention, any of which could materially adversely affect us.

If personal, confidential or proprietary information of customers or clients in our possession were to be mishandled or misused, we could suffer significant regulatory consequences, reputational damage and financial loss. Such mishandling or misuse could include, for example, if such information were erroneously provided to parties who are not permitted to have the information, either by fault of our systems, employees, or counterparties, or where such information is intercepted or otherwise inappropriately taken by third parties.

We may be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control, which may include, for example, computer viruses or electrical or telecommunications outages, natural disasters, disease pandemics or other damage to property or physical assets, or events arising from local or larger scale politics, including terrorist acts. Such disruptions may give rise to losses in service to customers and loss or liability to us.

Our framework for managing risks may not be effective in mitigating risk and loss to us. Our risk management framework seeks to mitigate risk and loss to us. We have established processes and procedures intended to identify, measure, monitor, report and analyze the types of risk to which we are subject, including liquidity risk, credit risk, market risk, interest rate risk, operational risk, legal and compliance risk, and reputational risk, among others. However, as with any risk management framework, there are inherent limitations to our risk management strategies as there may exist, or develop in the future, risks that we have not appropriately anticipated or identified. If our risk management framework proves ineffective, we could suffer unexpected losses and could be materially adversely affected.

Financial difficulties or credit downgrades of mortgage and bond insurers may negatively affect our servicing and investment portfolios. Our servicing portfolio includes certain mortgage loans that carry some level of insurance from one or more mortgage insurance companies. To the extent that any of these companies experience financial difficulties or credit downgrades, we may be required, as servicer of the insured loan on behalf of the investor, to obtain replacement coverage with another provider, possibly at a higher cost than the coverage we would replace. We may be responsible for some or all of the incremental cost of the new coverage for certain loans depending on the terms of our servicing agreement with the investor and other circumstances. Similarly, some of the mortgage loans we hold for investment or for sale carry mortgage insurance. If a mortgage insurer is unable to meet its credit obligations with respect to an insured loan, we might incur higher credit losses if replacement coverage is not obtained. We also have investments in municipal bonds that are guaranteed against loss by bond insurers. The value of these bonds and the payment of principal and interest on them may be negatively affected by financial difficulties or credit downgrades experienced by the bond insurers.

For more information, refer to the “Earnings Performance – Balance Sheet Analysis – Securities Available for Sale” and “Risk Management – Credit Risk Management Process” sections in this Report.

Our ability to grow revenue and earnings will suffer if we are unable to sell more products to customers. Selling more products to our customers–“cross-selling”–is very important to our business model and key to our ability to grow revenue and earnings. Many of our competitors also focus on cross-selling, especially in retail banking and mortgage lending. This can limit our ability to sell more products to our customers or influence us to sell our products at lower prices, reducing our net interest income and revenue from our fee-based products. It could also affect our ability to keep existing customers. New technologies could require us to spend more to modify or adapt our products to attract and retain customers. Increasing our cross-sell ratio–or the average number of products sold to existing customers–may become more challenging and we might not attain our goal of selling an average of eight products to each customer.

The economic recession could reduce demand for our products and services and lead to lower revenue and lower earnings. We earn revenue from the interest and fees we charge on the loans and other products and services we sell. If the economy worsens and consumer and business spending decreases and unemployment rises, the demand for those products and services may fall, reducing our interest and fee income and our earnings. These same conditions may also hurt the ability of our borrowers to repay their loans, causing us to incur higher credit losses.

Changes in stock market prices could reduce fee income from our brokerage and asset management businesses. We earn fee income from managing assets for others and providing brokerage services. Because investment management fees are often based on the value of assets under management, a fall in the market prices of those assets could reduce our fee income. Changes in stock market prices could affect the trading activity of investors, reducing commissions and other fees we earn from our brokerage business. As a result of the Wachovia merger, a greater percentage of our revenue depends on our brokerage services business.

For more information, refer to the “Risk Management – Asset/ Liability Management – Market Risk – Equity Markets” section in this Report.

We may elect to provide capital support to our mutual funds relating to investments in structured credit products. The money market mutual funds we advise are allowed to hold investments in structured investment vehicles (SIVs) in accordance with approved investment parameters for the respective funds and, therefore, we may have indirect exposure to CDOs. Although we generally are not responsible for investment losses incurred by our mutual funds, we may from time to time elect to provide support to a fund even though we are not contractually obligated to do so. For example, in February 2008, to maintain an investment rating of AAA for certain money market mutual funds, we elected to enter into a capital support agreement for up to $130 million related to one SIV held by those funds. If we provide capital support to a mutual fund we advise, and the fund’s investment losses require the capital to be utilized, we may incur losses, thus reducing earnings.

For more information, refer to Note 8 (Securitizations and Variable Interest Entities) to Financial Statements in this Report.

Our bank customers could take their money out of the bank and put it in alternative investments, causing us to lose a lower cost source of funding. Checking and savings account balances and other forms of customer deposits may decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return tradeoff. When customers move

money out of bank deposits and into other investments, we may lose a relatively low cost source of funds, increasing our funding costs and reducing our net interest income.

Our venture capital business can also be volatile from quarter to quarter. Certain of our venture capital businesses are carried under the cost or equity method, and others (e.g., principal investments) are carried at fair value with unrealized gains and losses reflected in earnings. Our venture capital investments tend to be in technology and other volatile industries so the value of our public and private equity portfolios may fluctuate widely. Earnings from our venture capital investments may be volatile and hard to predict and may have a significant effect on our earnings from period to period. When, and if, we recognize gains may depend on a number of factors, 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.

Our venture capital investments could result in significant losses, either OTTI losses for those investments carried under the cost or equity method or mark-to-market losses for principal investments. Our assessment for OTTI is based on a number of factors, including the then current market value of each investment compared with its carrying value. If we determine there is OTTI for an investment, we write-down the carrying value of the investment, resulting in a charge to earnings. The amount of this charge could be significant. Further, our principal investing portfolio could incur significant mark-to-market losses especially if these investments have been written up because of higher market prices.

For more information, refer to the “Risk Management – Asset/ Liability Management – Market Risk – Equity Markets” section in this Report.

We rely on dividends from our subsidiaries for revenue, and federal and state law can limit those dividends. Wells Fargo & Company, the parent holding company, is a separate and distinct legal entity from its subsidiaries. It receives a significant portion of its revenue from dividends from its subsidiaries. We generally use these dividends, among other things, to pay dividends on our common and preferred stock and interest and principal on our debt. Federal and state laws limit the amount of dividends that our bank and some of our nonbank subsidiaries may pay to us. Also, our 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 the “Regulation and Supervision – Dividend Restrictions” and “–Holding Company Structure” sections in our 2009 Form 10-K and to Notes 3 (Cash, Loan and Dividend Restrictions) and 25 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report.

Changes in accounting policies or accounting standards, and changes in how accounting standards are interpreted or applied, could materially affect how we report our financial results and condition. Our accounting policies are fundamental to determining and understanding our financial results and condition. Some of these policies require use of estimates and assumptions that may affect the value of our assets or liabilities and financial results. Several of our accounting policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. For a description of

these policies, refer to the “Critical Accounting Policies” section in this Report.

From time to time the FASB and the SEC change the financial accounting and reporting standards that govern the preparation of our external financial statements. In addition, accounting standard setters and those who interpret the accounting standards (such as the FASB, SEC, banking regulators and our outside auditors) may change or even reverse their previous interpretations or positions on how these standards should be applied. Changes in financial accounting and reporting standards and changes in current interpretations may be beyond our control, can be hard to predict and could materially affect how we report our financial results and condition. We may be required to apply a new or revised standard retroactively or apply an existing standard differently, also retroactively, in each case resulting in our potentially restating prior period financial statements in material amounts.

Our financial statements are based in part on assumptions and estimates which, if wrong, could cause unexpected losses in the future. Pursuant to U.S. GAAP, we are required to use certain assumptions and estimates in preparing our financial statements, including in determining credit loss reserves, reserves related to litigation and the fair value of certain assets and liabilities, among other items. If assumptions or estimates underlying our financial statements are incorrect, we may experience material losses.

Certain of our financial instruments, including trading assets and liabilities, available-for-sale securities, certain loans, MSRs, private equity investments, structured notes and certain repurchase and resale agreements, among other items, require a determination of their fair value in order to prepare our financial statements. Where quoted market prices are not available, we may make fair value determinations based on internally developed models or other means which ultimately rely to some degree on management judgment. Some of these and other assets and liabilities may have no direct observable price levels, making their valuation particularly subjective, being based on significant estimation and judgment. In addition, sudden illiquidity in markets or declines in prices of certain loans and securities may make it more difficult to value certain balance sheet items, which may lead to the possibility that such valuations will be subject to further change or adjustment and could lead to declines in our earnings.

Acquisitions could reduce our stock price upon announcement and reduce our earnings if we overpay or have difficulty integrating them. We regularly explore opportunities to acquire companies in the financial services industry. We cannot predict the frequency, size or timing of our acquisitions, and we typically do not comment publicly on a possible acquisition until we have signed a definitive agreement. When we do announce an acquisition, our stock price may fall depending on the size of the acquisition, the purchase price and the potential dilution to existing stockholders. It is also possible that an acquisition could dilute earnings per share.

We generally must receive federal regulatory approvals before we can acquire a bank or bank holding company. In deciding whether to approve a proposed acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on competition, financial condition, and future prospects including current and projected capital ratios and levels, the competence, experience, and integrity of management and record of compliance with laws and regulations, the convenience and needs of the communities to be served, including our record of compliance under the Community Reinvestment Act, and our effectiveness in combating money laundering. Also, 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 sell banks, branches and/or business units 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 other projected benefits from the acquisition. The integration could result in higher than expected deposit attrition (run-off), loss of key employees, disruption of our business or the business of the acquired company, or otherwise harm our ability to retain customers and employees or achieve the anticipated benefits of the acquisition. Time and resources spent on integration may also impair our ability to grow our existing businesses. Also, the negative effect of any divestitures required by regulatory authorities in acquisitions or business combinations may be greater than expected.

Federal and state regulations can restrict our business, and non-compliance could result in penalties, litigation and damage to our reputation. Our parent company, our subsidiary banks and many of our nonbank subsidiaries are heavily regulated at the federal and/or state levels. This regulation is to protect depositors, federal deposit insurance funds, consumers and the banking system as a whole, not necessarily our stockholders. Federal and state regulations can significantly restrict our businesses, and we could be fined or otherwise penalized if we are found to be out of compliance.

The Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) limits the types of non-audit services our outside auditors may provide to us in order to preserve their independence from us. If our auditors were found not to be “independent” of us under SEC rules, we could be required to engage new auditors and file new financial statements and audit reports with the SEC. We could be out of compliance with SEC rules until new financial statements and audit reports were filed, limiting our ability to raise capital and resulting in other adverse consequences.

Sarbanes-Oxley also requires our management to evaluate the Company’s disclosure controls and procedures and its internal control over financial reporting and requires our auditors to issue a report on our internal control over financial reporting. We are required to disclose, in our annual report on Form 10-K, the existence of any “material weaknesses” in our internal control. We cannot assure that we will not find one or more material weaknesses as of the end of any given year, nor can we predict the effect on our stock price of disclosure of a material weakness.

A number of states have recently challenged the position of the OCC as the sole regulator of national banks and their subsidiaries. In addition, legislation has been proposed in Congress to permit additional state regulation of national banks and their subsidiaries. If these challenges are successful or if Congress acts to give greater effect to state regulation, the impact on us could be significant, not only because of the potential additional restrictions on our businesses but also from having to comply with potentially 50 different sets of regulations.

From time to time Congress considers legislation that could significantly change our regulatory environment, potentially increasing our cost of doing business, limiting the activities we may pursue or affecting the competitive balance among banks, savings associations, credit unions, and other financial institutions.

For more information, refer to the “Regulation and Supervision” section in our 2009 Form 10-K and to “Report of Independent Registered Public Accounting Firm” in this Report.

We may incur fines, penalties and other negative consequences from regulatory violations, possibly even inadvertent or unintentional violations. We maintain systems and procedures designed to ensure that we comply with applicable laws and regulations. However, some legal/regulatory frameworks provide for the imposition of fines or penalties for noncompliance even though the noncompliance was inadvertent or unintentional and even though there was in place at the time systems and procedures designed to ensure compliance. For example, we are subject to regulations issued by the Office of Foreign Assets Control (OFAC) that prohibit financial institutions from participating in the transfer of property belonging to the governments of certain foreign countries and designated nationals of those countries. OFAC may impose penalties for inadvertent or unintentional violations even if reasonable processes are in place to prevent the violations. There may be other negative consequences resulting from a finding of noncompliance, including restrictions on certain activities. Such a finding may also damage our reputation (see below) and could restrict the ability of institutional investment managers to invest in our securities.

Negative publicity could damage our reputation. Reputation risk, or the risk to our earnings and capital from negative public opinion, is inherent in our business. Negative public opinion could adversely affect our ability to keep and attract customers and expose us to adverse legal and regulatory consequences. Negative public opinion could result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance, regulatory compliance, mergers and acquisitions, and disclosure, sharing or inadequate protection of customer information, and from actions taken by government regulators and community organizations in response to that conduct. Because we conduct most of our businesses under the “Wells Fargo” brand, negative public opinion about one business could affect our other businesses.

Federal Reserve Board policies can significantly affect business and economic conditions and our financial results and condition. The Federal Reserve Board (FRB) 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 affect our net interest margin. They also can materially affect the value of financial instruments we hold, such as debt securities and MSRs. Its policies also can affect our borrowers, potentially increasing the risk that they may fail to repay their loans. Changes in FRB policies are beyond our control and can be hard to predict.

Risks Relating to Legal Proceedings Wells Fargo and some of its subsidiaries are involved in judicial, regulatory and arbitration proceedings concerning matters arising from our business activities. Although we believe we have a meritorious defense in all material significant litigation pending against us, there can be no assurance as to the ultimate outcome. We establish reserves for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. We may still incur legal costs for a matter even if we have not established a reserve. In addition, the actual cost of resolving a legal claim may be substantially higher than any amounts reserved for that matter. The ultimate resolution of a pending legal proceeding, depending on the remedy sought and granted, could materially adversely affect our results of operations and financial condition.

For more information, refer to Note 14 (Guarantees and Legal Actions) to Financial Statements in this Report.

Risks Affecting Our Stock Price Our stock price can fluctuate widely in response to a variety of factors, in addition to those described above, including:

•		general business and economic conditions;

•		recommendations by securities analysts;

•		new technology used, or services offered, by our competitors;

•		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;

•		changes in government regulations;

•		natural disasters; and

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

Controls and Procedures

Disclosure Controls and Procedures

As required by SEC rules, the Company’s management evaluated the effectiveness, as of December 31, 2009, 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 December 31, 2009.

Internal Control over Financial Reporting

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

•		pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the Company;

•		provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

•		provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. No change occurred during any quarter in 2009 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Management’s report on internal control over financial reporting is set forth below, and should be read with these limitations in mind.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework . Based on this assessment, management concluded that as of December 31, 2009, the Company’s internal control over financial reporting was effective.

KPMG LLP, the independent registered public accounting firm that audited the Company’s financial statements included in this Annual Report, issued an audit report on the Company’s internal control over financial reporting. KPMG’s audit report appears on the following page.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Wells Fargo & Company:

We have audited Wells Fargo & Company and Subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control – Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2009, and our report dated February 26, 2010, expressed an unqualified opinion on those consolidated financial statements.

San Francisco, California
February 26, 2010

Financial Statements

Wells Fargo & Company and Subsidiaries

Consolidated Statement of Income



	Year ended December 31,
(in millions, except per share amounts)	2009			2008			2007

Interest income
Trading assets	$	918			177			173
Securities available for sale		11,319			5,287			3,451
Mortgages held for sale		1,930			1,573			2,150
Loans held for sale		183			48			70
Loans		41,589			27,632			29,040
Other interest income		335			181			293

Total interest income		56,274			34,898			35,177

Interest expense
Deposits		3,774			4,521			8,152
Short-term borrowings		222			1,478			1,245
Long-term debt		5,782			3,756			4,806
Other interest expense		172			—			—

Total interest expense		9,950			9,755			14,203

Net interest income		46,324			25,143			20,974
Provision for credit losses		21,668			15,979			4,939

Net interest income after provision for credit losses		24,656			9,164			16,035

Noninterest income
Service charges on deposit accounts		5,741			3,190			3,050
Trust and investment fees		9,735			2,924			3,149
Card fees		3,683			2,336			2,136
Other fees		3,804			2,097			2,292
Mortgage banking		12,028			2,525			3,133
Insurance		2,126			1,830			1,530
Net gains from trading activities		2,674			275			544
Net gains (losses) on debt securities available for sale (includes impairment losses of $1,012, consisting of $2,352 of total other-than-temporary impairment losses, net of $1,340 recognized in other comprehensive income, for the year ended December 31, 2009)		(127	)		1,037			209
Net gains (losses) from equity investments (includes impairment losses of $655 for the year ended December 31, 2009)		185			(757	)		864
Operating leases		685			427			703
Other		1,828			850			936

Total noninterest income		42,362			16,734			18,546

Noninterest expense
Salaries		13,757			8,260			7,762
Commission and incentive compensation		8,021			2,676			3,284
Employee benefits		4,689			2,004			2,322
Equipment		2,506			1,357			1,294
Net occupancy		3,127			1,619			1,545
Core deposit and other intangibles		2,577			186			158
FDIC and other deposit assessments		1,849			120			34
Other		12,494			6,376			6,347

Total noninterest expense		49,020			22,598			22,746

Income before income tax expense		17,998			3,300			11,835
Income tax expense		5,331			602			3,570

Net income before noncontrolling interests		12,667			2,698			8,265
Less: Net income from noncontrolling interests		392			43			208

Wells Fargo net income	$	12,275			2,655			8,057

Wells Fargo net income applicable to common stock	$	7,990			2,369			8,057

Per share information
Earnings per common share	$	1.76			0.70			2.41
Diluted earnings per common share		1.75			0.70			2.38
Dividends declared per common share		0.49			1.30			1.18
Average common shares outstanding		4,545.2			3,378.1			3,348.5
Diluted average common shares outstanding		4,562.7			3,391.3			3,382.8

The accompanying notes are an integral part of these statements.

Wells Fargo & Company and Subsidiaries

Consolidated Balance Sheet



	December 31,
(in millions, except shares)	2009			2008

Assets
Cash and due from banks	$	27,080			23,763
Federal funds sold, securities purchased under resale agreements and other short-term investments		40,885			49,433
Trading assets		43,039			54,884
Securities available for sale		172,710			151,569
Mortgages held for sale (includes $36,962 and $18,754 carried at fair value)		39,094			20,088
Loans held for sale (includes $149 and $398 carried at fair value)		5,733			6,228
Loans		782,770			864,830
Allowance for loan losses		(24,516	)		(21,013	)

Net loans		758,254			843,817

Mortgage servicing rights:
Measured at fair value (residential MSRs)		16,004			14,714
Amortized		1,119			1,446
Premises and equipment, net		10,736			11,269
Goodwill		24,812			22,627
Other assets		104,180			109,801

Total assets	$	1,243,646			1,309,639

Liabilities
Noninterest-bearing deposits	$	181,356			150,837
Interest-bearing deposits		642,662			630,565

Total deposits		824,018			781,402
Short-term borrowings		38,966			108,074
Accrued expenses and other liabilities		62,442			50,689
Long-term debt		203,861			267,158

Total liabilities		1,129,287			1,207,323

Equity
Wells Fargo stockholders’ equity:
Preferred stock		8,485			31,332
Common stock – $1 ² / ₃ par value, authorized 6,000,000,000 shares; issued 5,245,971,422 shares and 4,363,921,429 shares		8,743			7,273
Additional paid-in capital		52,878			36,026
Retained earnings		41,563			36,543
Cumulative other comprehensive income (loss)		3,009			(6,869	)
Treasury stock – 67,346,829 shares and 135,290,540 shares		(2,450	)		(4,666	)
Unearned ESOP shares		(442	)		(555	)

Total Wells Fargo stockholders’ equity		111,786			99,084
Noncontrolling interests		2,573			3,232

Total equity		114,359			102,316

Total liabilities and equity	$	1,243,646			1,309,639

The accompanying notes are an integral part of these statements.

Wells Fargo & Company and Subsidiaries

Consolidated Statement of Changes in Equity and Comprehensive Income

Preferred stock

Common stock

(in millions, except shares)

Shares

Amount

Shares

Amount

Balance December 31, 2006

383,804

384

3,377,149,861

5,788

Cumulative effect from change in accounting for leveraged leases

Balance January 1, 2007

383,804

384

3,377,149,861

5,788

Comprehensive income:

Net income

Other comprehensive income, net of tax:

Translation adjustments

Net unrealized losses on securities available for sale

Net unrealized gains on derivatives and hedging activities

Unamortized gains under defined benefit plans, net of amortization

Total comprehensive income

Noncontrolling interests

Common stock issued

69,894,448

Common stock issued for acquisitions

58,058,813

Common stock repurchased

(220,327,473

)

Preferred stock issued to ESOP

484,000

484

Preferred stock released to ESOP

Preferred stock converted to common shares

(418,000

)

(418

)

12,326,559

Common stock dividends

Tax benefit upon exercise of stock options

Stock option compensation expense

Net change in deferred compensation and related plans

Net change

66,000

(80,047,653

)

—

Balance December 31, 2007

449,804

450

3,297,102,208

5,788

Cumulative effect from change in accounting for postretirement benefits

Adjustment for change of measurement date related to pension and other postretirement benefits

Balance January 1, 2008

449,804

450

3,297,102,208

5,788

Comprehensive income:

Net income

Other comprehensive income, net of tax:

Translation adjustments

Net unrealized losses on securities available for sale

Net unrealized gains on derivatives and hedging activities

Unamortized losses under defined benefit plans, net of amortization

Total comprehensive income

Noncontrolling interests

Common stock issued

538,877,525

781

Common stock issued for acquisitions

429,084,786

704

Common stock repurchased

(52,154,513

)

Preferred stock issued

25,000

22,674

Preferred stock discount accretion

Preferred stock issued for acquisitions

9,566,921

8,071

Preferred stock issued to ESOP

520,500

521

Preferred stock released to ESOP

Preferred stock converted to common shares

(450,404

)

(451

)

15,720,883

Stock warrants issued

Common stock dividends

Preferred stock dividends and accretion

Tax benefit upon exercise of stock options

Stock option compensation expense

Net change in deferred compensation and related plans

Other

Net change

9,662,017

30,882

931,528,681

1,485

Balance December 31, 2008

10,111,821

31,332

4,228,630,889

7,273

The accompanying notes are an integral part of these statements.



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

		7,739			35,215			302			(3,203	)		(411	)		45,814			254		$	46,068

					(71	)											(71	)					(71	)
		7,739			35,144			302			(3,203	)		(411	)		45,743			254			45,997


					8,057												8,057			208			8,265

								23									23						23
								(164	)								(164	)					(164	)
								322									322						322
								242									242						242

																	8,480			208			8,688
																				(176	)		(176	)
		(132	)		(276	)					2,284						1,876						1,876
		190									1,935						2,125						2,125
											(7,418	)					(7,418	)					(7,418	)
		34												(518	)		—						—
		(29	)											447			418						418
		13									405						—						—
					(3,955	)											(3,955	)					(3,955	)
		210															210						210
		129															129						129
		58									(38	)					20						20

		473			3,826			423			(2,832	)		(71	)		1,885			32			1,917

		8,212			38,970			725			(6,035	)		(482	)		47,628			286		$	47,914

					(20	)											(20	)					(20	)

					(8	)											(8	)					(8	)

		8,212			38,942			725			(6,035	)		(482	)		47,600			286			47,886


					2,655												2,655			43			2,698

								(58	)								(58	)					(58	)
								(6,610	)								(6,610	)					(6,610	)
								436									436						436
								(1,362	)								(1,362	)					(1,362	)

																	(4,939	)		43			(4,896	)
																	—			2,903			2,903
		11,555			(456	)					2,291						14,171						14,171
		13,689									208						14,601						14,601
											(1,623	)					(1,623	)					(1,623	)
																	22,674						22,674
																	67						67
																	8,071						8,071
		30												(551	)		—						—
		(27	)											478			451						451
		(61	)								512						—						—
		2,326															2,326						2,326
					(4,312	)											(4,312	)					(4,312	)
					(286	)											(286	)					(286	)
		123															123						123
		174															174						174
		46									(19	)					27						27
		(41	)														(41	)					(41	)

		27,814			(2,399	)		(7,594	)		1,369			(73	)		51,484			2,946			54,430

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

Wells Fargo & Company and Subsidiaries

Consolidated Statement of Changes in Equity and Comprehensive Income (continued from previous page)

Preferred stock

Common stock

(in millions, except shares)

Shares

Amount

Shares

Amount

Balance December 31, 2008

10,111,821

31,332

4,228,630,889

7,273

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

Effect of change in accounting for noncontrolling interests

Balance January 1, 2009

10,111,821

31,332

4,228,630,889

7,273

Comprehensive income:

Net income

Other comprehensive income, net of tax:

Translation adjustments

Securities available for sale:

Unrealized losses related to factors other than credit

All other net unrealized gains

Net unrealized losses on derivatives and hedging activities

Unamortized gains under defined benefit plans, net of amortization

Total comprehensive income

Noncontrolling interests:

Purchase of Prudential’s noncontrolling interest

All other

Common stock issued

953,285,636

1,470

Common stock repurchased

(8,274,015

)

Preferred stock redeemed

(25,000

)

(25,000

)

Preferred stock released to ESOP

Preferred stock converted to common shares

(105,881

)

(106

)

4,982,083

Common stock dividends

Preferred stock dividends and accretion

2,259

Tax benefit upon exercise of stock options

Stock option compensation expense

Net change in deferred compensation and related plans

Net change

(130,881

)

(22,847

)

949,993,704

1,470

Balance December 31, 2009

9,980,940

8,485

5,178,624,593

8,743

The accompanying notes are an integral part of these statements.

Wells Fargo stockholders’ equity

Additional

Cumulative other

Unearned

Total Wells Fargo

paid-in

Retained

comprehensive

Treasury

ESOP

stockholders’

Noncontrolling

Total

capital

earnings

income

stock

equity

interests

equity

36,026

36,543

(6,869

)

(4,666

)

(555

)

99,084

3,232

102,316

(53

)

(3,716

)

(3,716

)

3,716

—

32,310

36,596

(6,922

)

(4,666

)

(555

)

95,368

6,948

102,316

12,275

392

12,667

)

(843

)

(843

)

(843

)

10,649

10,654

(221

)

(221

)

(221

)

273

22,206

390

22,596

1,440

(4,500

)

(3,060

)

(79

)

(79

)

(265

)

(344

)

19,111

(898

)

2,293

21,976

(220

)

(220

)

(220

)

(25,000

)

(25,000

)

113

106

(54

)

160

—

(2,125

)

(2,125

)

(2,125

)

(4,285

)

(2,026

)

(2,026

)

221

(82

)

(17

)

(99

)

(99

)

20,568

4,967

9,931

2,216

113

16,418

(4,375

)

12,043

52,878

41,563

3,009

(2,450

)

(442

)

111,786

2,573

114,359

Wells Fargo & Company and Subsidiaries

Consolidated Statement of Cash Flows



	Year ended December 31,
(in millions)	2009			2008			2007

Cash flows from operating activities:
Net income before noncontrolling interests	$	12,667			2,698			8,265
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		21,668			15,979			4,939
Changes in fair value of MSRs (residential), MHFS and LHFS carried at fair value		(20	)		3,789			2,611
Depreciation and amortization		2,841			1,669			1,532
Other net losses (gains)		(3,867	)		2,065			(1,407	)
Preferred shares released to ESOP		106			451			418
Stock option compensation expense		221			174			129
Excess tax benefits related to stock option payments		(18	)		(121	)		(196	)
Originations of MHFS		(414,299	)		(213,498	)		(223,266	)
Proceeds from sales of and principal collected on mortgages originated for sale		399,261			220,254			216,270
Originations of LHFS		(10,800	)		—			—
Proceeds from sales of and principal collected on LHFS		20,276			—			—
Purchases of LHFS		(8,614	)		—			—
Net change in:
Trading assets		13,983			(3,045	)		(3,388	)
Deferred income taxes		9,453			(1,642	)		(31	)
Accrued interest receivable		(293	)		(2,676	)		(407	)
Accrued interest payable		(1,028	)		1,634			(87	)
Other assets, net		(15,018	)		(21,578	)		(587	)
Other accrued expenses and liabilities, net		2,094			(10,941	)		4,491

Net cash provided (used) by operating activities		28,613			(4,788	)		9,286

Cash flows from investing activities:
Net change in:
Federal funds sold, securities purchased under resale agreements and other short-term investments		8,548			51,049			3,331
Securities available for sale:
Sales proceeds		53,038			60,806			47,990
Prepayments and maturities		38,811			24,317			8,505
Purchases		(95,285	)		(105,341	)		(75,129	)
Loans:
Decrease (increase) in banking subsidiaries’ loan originations, net of collections		52,240			(54,815	)		(48,615	)
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries		6,162			1,988			3,369
Purchases (including participations) of loans by banking subsidiaries		(3,363	)		(5,513	)		(8,244	)
Principal collected on nonbank entities’ loans		14,428			21,846			21,476
Loans originated by nonbank entities		(9,961	)		(19,973	)		(25,284	)
Net cash acquired from (paid for) acquisitions		(138	)		11,203			(2,811	)
Proceeds from sales of foreclosed assets		3,759			1,746			1,405
Changes in MSRs from purchases and sales		(10	)		92			791
Other, net		3,556			(5,566	)		(4,131	)

Net cash provided (used) by investing activities		71,785			(18,161	)		(77,347	)

Cash flows from financing activities:
Net change in:
Deposits		42,473			7,697			27,058
Short-term borrowings		(69,108	)		(14,888	)		39,827
Long-term debt:
Proceeds from issuance		8,396			35,701			29,360
Repayment		(66,260	)		(29,859	)		(18,250	)
Preferred stock:
Proceeds from issuance		—			22,674			—
Redeemed		(25,000	)		—			—
Cash dividends paid		(2,178	)		—			—
Proceeds from issuance of stock warrant		—			2,326			—
Common stock:
Proceeds from issuance		21,976			14,171			1,876
Repurchased		(220	)		(1,623	)		(7,418	)
Cash dividends paid		(2,125	)		(4,312	)		(3,955	)
Excess tax benefits related to stock option payments		18			121			196
Change in noncontrolling interests:
Purchase of Prudential’s noncontrolling interest		(4,500	)		—			—
Other, net		(553	)		(53	)		(176	)
Other, net		—			—			(728	)

Net cash provided (used) by financing activities		(97,081	)		31,955			67,790

Net change in cash and due from banks		3,317			9,006			(271	)
Cash and due from banks at beginning of year		23,763			14,757			15,028

Cash and due from banks at end of year	$	27,080			23,763			14,757

Supplemental cash flow disclosures:
Cash paid for interest	$	10,978			8,121			14,290
Cash paid for income taxes		3,042			2,554			3,719

The accompanying notes are an integral part of these statements. See Note 1 in this Report for noncash investing and financing activities.

Notes to Financial Statements

See the Glossary of Acronyms at the end of this Report for terms used throughout the Financial Statements and related Notes of this Form 10-K and the Codification Cross Reference at the end of this Report for cross references from accounting standards under the recently adopted Financial Accounting Standards Board (FASB) Accounting Standards Codification (Codification) to pre-Codification accounting standards.

Note 1: Summary of Significant Accounting Policies

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

Our accounting and reporting policies conform with U.S. generally accepted accounting principles (GAAP) and practices in the financial services industry. To prepare the financial statements in conformity with GAAP, management must make estimates based on assumptions about future economic and market conditions (for example, unemployment, market liquidity, real estate prices, etc.) that affect the reported amounts of assets and liabilities at the date of the financial statements and income and expenses during the reporting period and the related disclosures. Although our estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that in 2010 actual conditions could be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Management has made significant estimates in several areas, including the evaluation of other-than-temporary impairment (OTTI) on investment securities (Note 5), allowance for credit losses and purchased credit-impaired (PCI) loans (Note 6), valuing residential mortgage servicing rights (MSRs) (Notes 8 and 9) and financial instruments (Note 16), pension accounting (Note 19) and

income taxes (Note 20). Actual results could differ from those estimates. Among other effects, such changes could result in future impairments of investment securities, increases to the allowance for loan losses, as well as increased future pension expense.

On December 31, 2008, Wells Fargo acquired Wachovia Corporation (Wachovia). Because the acquisition was completed at the end of 2008, Wachovia’s results of operations are included in the income statement and average balances beginning in 2009. Wachovia’s assets and liabilities are included in the consolidated balance sheet beginning on December 31, 2008. The accounting policies of Wachovia have been conformed to those of Wells Fargo as described herein.

On January 1, 2009, the Company adopted new accounting guidance on noncontrolling interests on a retrospective basis for disclosure as required in FASB Accounting Standards Codification (ASC) 810, Consolidation . Accordingly, prior period information reflects the adoption. The guidance requires that noncontrolling interests be reported as a component of total equity. In addition, the consolidated income statement must disclose amounts attributable to both Wells Fargo interests and the noncontrolling interests.

Effective July 1, 2009, the FASB established the Codification as the source of authoritative GAAP for companies to use in the preparation of financial statements. Securities and Exchange Commission (SEC) rules and interpretive releases are also authoritative GAAP for SEC registrants. The guidance contained in the Codification supersedes all existing non-SEC accounting and reporting standards. We adopted the Codification, as required, in third quarter 2009. As a result, references to accounting literature contained in our financial statement disclosures have been updated to reflect the new ASC structure. References to superseded authoritative literature are shown parenthetically below, and cross-references to pre-Codification accounting standards are included at the end of this Report.

Note 1: Summary of Significant Accounting Policies (continued)

Accounting Standards Adopted in 2009

In first quarter 2009, we adopted new guidance related to the following Codification topics:

•		FASB ASC 815-10, Derivatives and Hedging (FAS 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133 );

•		FASB ASC 810-10, Consolidation (FAS 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51 );

•		FASB ASC 805-10, Business Combinations (FAS 141R (revised 2007), Business Combinations );

•		FASB ASC 820-10, Fair Value Measurements and Disclosures (FASB Staff Position (FSP) FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly );

•		FASB ASC 320-10, Investments – Debt and Equity Securities (FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments ); and

•		FASB ASC 260-10, Earnings Per Share (FSP Emerging Issues Task Force (EITF) 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities ).

In second quarter 2009, we adopted new guidance related to the following Codification topics:

•		FASB ASC 855-10, Subsequent Events (FAS 165, Subsequent Events ); and

•		FASB ASC 825-10, Financial Instruments (FSP FAS 107-1 and APB Opinion 28-1, Interim Disclosures about Fair Value of Financial Instruments ).

In third quarter 2009, we adopted new guidance related to the following Codification topic:

•

FASB ASC 105-10, Generally Accepted Accounting Principles (FAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162 ).

In fourth quarter 2009, we adopted the following new accounting guidance:

•

Accounting Standards Update (ASU or Update) 2009-12,

Investments in Certain Entities That Calculate Net Asset Value
per Share (or Its Equivalent) ;

•		ASU 2009-5, Measuring Liabilities at Fair Value ; and

•		FASB ASC 715-20, Compensation – Retirement Benefits (FSP FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets ).

Information about these pronouncements is described in more detail below.

FASB ASC 815-10 (FAS 161) changes the disclosure requirements for derivative instruments and hedging activities. It requires enhanced disclosures about how and why an entity uses derivatives, how derivatives and related hedged items are accounted for, and how derivatives and hedged items affect an entity’s financial position, performance and cash flows. We adopted this pronouncement for first quarter 2009 reporting. See Note 15 in this Report for complete disclosures on derivatives and hedging activities. This standard does not affect our consolidated financial statements since it amends only the disclosure requirements for derivative instruments and hedged items.

FASB ASC 810-10 (FAS 160) requires that noncontrolling interests (previously referred to as minority interests) be reported as a component of equity in the balance sheet. Prior to our adoption of this standard, noncontrolling interests were classified outside of equity. This new guidance also changes the way a noncontrolling interest is presented in the income statement such that a parent’s consolidated income statement includes amounts attributable to both the parent’s interest and the noncontrolling interest. When a subsidiary is deconsolidated, a parent is required to recognize a gain or loss with any remaining interest initially recorded at fair value. Other changes in ownership interest where the parent continues to have a majority ownership interest in the subsidiary are accounted for as equity transactions. This new guidance was effective on January 1, 2009, with prospective application to all noncontrolling interests including those that arose prior to the adoption. Retrospective adoption was required for disclosure of noncontrolling interests held as of the adoption date.

During 2009, we held a controlling interest in a joint venture with Prudential Financial, Inc. (Prudential). On January 1, 2009, we reclassified Prudential’s noncontrolling interest to equity. Under the terms of the original agreement under which the joint venture was established between Wachovia and Prudential, each party had certain rights such that changes in our ownership interest could occur. On December 4, 2008, Prudential publicly announced its intention to exercise its option to put its noncontrolling interest to us at the end of the lookback period, as defined (January 1, 2010). As a result of the issuance of new accounting guidance for noncon-trolling interests, related interpretive guidance, and Prudential’s stated intention, on January 1, 2009, we increased the carrying value of Prudential’s noncontrolling interest in the joint venture to the estimated maximum redemption amount, with the offset recorded to additional paid-in capital. On December 31, 2009, we purchased Prudential’s noncontrolling interest for $4.5 billion in cash. We now own 100% of the retail securities brokerage business in the joint venture.

FASB ASC 805-10 (FAS 141R) requires an acquirer in a business combination to recognize the assets acquired (including loan receivables), the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, at their fair values as of that date, with limited exceptions. The acquirer is not permitted to recognize a separate valuation

allowance as of the acquisition date for loans and other assets acquired in a business combination. The revised statement requires acquisition-related costs to be expensed separately from the acquisition. It also requires restructuring costs that the acquirer expected but was not obligated to incur, to be expensed separately from the business combination. FASB ASC 805-10 was applicable prospectively to business combinations completed on or after January 1, 2009.

FASB ASC 820-10 (FSP FAS 157-4) addresses measuring fair value in situations where markets are inactive and transactions are not orderly. The guidance acknowledges that in these circumstances quoted prices may not be determinative of fair value; however, even if there has been a significant decrease in the volume and level of activity for an asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement has not changed. Prior to issuance of this pronouncement, many companies, including Wells Fargo, interpreted accounting guidance on fair value measurements to emphasize that fair value must be measured based on the most recently available quoted market prices, even for markets that have experienced a significant decline in the volume and level of activity relative to normal conditions and therefore could have increased frequency of transactions that are not orderly. Under the provisions of this pronouncement, price quotes for assets or liabilities in inactive markets may require adjustment due to uncertainty as to whether the underlying transactions are orderly.

For inactive markets, there is little information, if any, to evaluate if individual transactions are orderly. Accordingly, we are required to estimate, based upon all available facts and circumstances, the degree to which orderly transactions are occurring. The Fair Value Measurements and Disclosures topic in the Codification does not prescribe a specific method for adjusting transaction or quoted prices; however, it does provide guidance for determining how much weight to give transaction or quoted prices. Price quotes based upon transactions that are not orderly are not considered to be determinative of fair value and should be given little, if any, weight in measuring fair value. Price quotes based upon transactions that are orderly shall be considered in determining fair value, with the weight given based upon the facts and circumstances. If sufficient information is not available to determine if price quotes are based upon orderly transactions, less weight should be given to the price quote relative to other transactions that are known to be orderly.

The new measurement provisions of FASB ASC 820-10 were effective for second quarter 2009; however, as permitted under the pronouncement, we early adopted in first quarter 2009. Our adoption of this pronouncement resulted in an increase in the valuation of securities available for sale in first quarter 2009 of $4.5 billion ($2.8 billion after tax), which was included in other comprehensive income (OCI), and trading assets of $18 million, which was reflected in earnings. See Note 5 for more information.

FASB ASC 320-10 (FSP FAS 115-2 and FAS 124-2) states that an OTTI write-down of debt securities, where fair value is below amortized cost, is triggered in circumstances where (1) an entity has the intent to sell a security, (2) it is more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, or (3) the entity does not expect to recover the entire amortized cost basis of the security. If an entity intends to sell a security or if it is more likely than not the entity will be required to sell the security before recovery, an OTTI write-down is recognized in earnings equal to the entire difference between the security’s amortized cost basis and its fair value. For debt securities that are considered to be other-than-temporarily impaired that an entity does not intend to sell or it is more likely than not that it will not be required to sell before recovery, the OTTI write-down is separated into an amount representing the credit loss, which is recognized in earnings, and the amount related to all other factors, which is recognized in OCI. The new accounting prescribed for recording OTTI on debt securities was effective for second quarter 2009; however, as permitted under the pronouncement, we early adopted on January 1, 2009, and increased the beginning balance of retained earnings by $85 million ($53 million after tax) with a corresponding adjustment to cumulative OCI for OTTI recorded in earnings in previous periods on securities in our portfolio at January 1, 2009, that would not have been required had this accounting guidance been effective for those periods. Additionally, the new accounting prescribed for recording OTTI on debt securities increased net income by $843 million (after tax) and diluted earnings per share by $0.18 in 2009.

FASB ASC 260-10 (FSP EITF 03-6-1) requires that unvested share-based payment awards that have nonforfeitable rights to dividends or dividend equivalents be treated as participating securities and, therefore, included in the computation of earnings per share under the two-class method described in the Earnings per Share topic of the Codification. This pronouncement was effective on January 1, 2009, with retrospective adoption required. Our adoption of this standard did not have a material effect on our consolidated financial statements.

FASB ASC 855-10 (FAS 165) describes two types of subsequent events that previously were addressed in the auditing literature, one that requires post-period end adjustment to the financial statements being issued, and one that requires footnote disclosure only. The requirements for disclosing subsequent events were effective in second quarter 2009 with prospective application. Our adoption of this standard did not have a material impact on our consolidated financial statements.

Note 1: Summary of Significant Accounting Policies (continued)

FASB ASC 825-10 (FSP FAS 107-1 and APB 28-1) states that entities must disclose the fair value of financial instruments in interim reporting periods as well as in annual financial statements. Entities must also disclose the methods and assumptions used to estimate fair value as well as any changes in methods and assumptions that occurred during the reporting period. We adopted this pronouncement in second quarter 2009. See Note 16 in this Report for additional information. Because the new provisions in FASB ASC 825-10 amend only the disclosure requirements related to the fair value of financial instruments, our adoption of this pronouncement did not affect our consolidated financial statements.

ASU 2009-12 provides guidance for determining the fair value of certain alternative investments, which include hedge funds, private equity funds, and real estate funds. When alternative investments do not have readily determinable fair values, companies are permitted to use unadjusted net asset values or an equivalent measure to estimate fair value. This provision is only allowable for investments in entities that calculate net asset value (NAV) per share or its equivalent in accordance with accounting guidance for investment companies. This Update also requires a company to consider its ability to redeem an investment at NAV when determining the appropriate classification of the related fair value measurement within the fair value hierarchy. ASU 2009-12 was effective for us in fourth quarter 2009 with prospective application. Our adoption of this new guidance did not have a material impact on our consolidated financial statements. See Note 16 in this Report for disclosures related to certain alternative investments.

ASU 2009-5 describes the valuation techniques companies should use to measure the fair value of liabilities for which there is limited observable market data. If a quoted price in an active market is not available for an identical liability, an entity should use one of the following approaches: (1) the quoted price of the identical liability when traded as an asset, (2) quoted prices for similar liabilities or similar liabilities when traded as an asset, or (3) another valuation technique that is consistent with the principles of FASB ASC 820, Fair Value Measurements and Disclosures . When measuring the fair value of liabilities, this Update reiterates that companies should apply valuation techniques that maximize the use of relevant observable inputs, which is consistent with existing accounting provisions for fair value measurement. In addition, this Update clarifies when an entity should adjust quoted prices of identical or similar assets that are used to estimate the fair value of liabilities. For example, an entity should not include separate adjustments for contractual restrictions that prevent the transfer of the liability because the restriction would be factored into other inputs used in the fair value measurement of the liability. However, separate adjustments are needed in situations where the unit of account for the asset is not the same as for the liability. This guidance was effective for us in fourth quarter 2009 with adoption applied prospectively. Our adoption of this standard did not have a material impact on our consolidated financial statements.

FASB ASC 715-20 (FSP FAS 132 (R)-1) requires new disclosures that are applicable to the plan assets of our Cash Balance Plan and other postretirement benefit plans. The objectives of the new disclosures are to provide an understanding of how investment allocation decisions are made, the major categories of plan assets, the inputs and valuation techniques used to measure fair value, the effect of fair value measurements using significant unobservable inputs on the changes in plan assets and significant concentrations of risk within plan assets. We adopted this pronouncement prospectively for year-end 2009 reporting. The guidance does not affect the results of our consolidated financial statements since it only amends the disclosure requirements for postretirement benefits.

Consolidation

Our consolidated financial statements include the accounts of the Parent and our majority-owned subsidiaries and variable interest entities (VIEs) (defined below) in which we are the primary beneficiary. Significant intercompany accounts and transactions are eliminated in consolidation. If we own at least 20% of an entity, we generally account for the investment using the equity method. If we own less than 20% of an entity, we generally carry the investment at cost, except marketable equity securities, which we carry at fair value with changes in fair value included in OCI. Investments accounted for under the equity or cost method are included in other assets.

We are a variable interest holder in certain special-purpose entities (SPEs) in which equity investors do not have the characteristics of a controlling financial interest or where the entity does not have enough equity at risk to finance its activities without additional subordinated financial support from other parties (referred to as VIEs). Our variable interest arises from contractual, ownership or other monetary interests in the entity, which change with fluctuations in the entity’s NAV. We consolidate a VIE if we are the primary beneficiary, defined as the entity that will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns, or both.

Trading Assets

Trading assets are primarily securities, including corporate debt, U.S. government agency obligations and other securities that we acquire for short-term appreciation or other trading purposes, and the fair value of derivatives held for customer accommodation purposes or proprietary trading. Interest-only strips and other retained interests in securitizations that can be contractually prepaid or otherwise settled in a way that the holder would not recover substantially all of its recorded investment are classified as trading assets. Trading assets are carried at fair value, with realized and unrealized gains and losses recorded in noninterest income.

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Securities

SECURITIES AVAILABLE FOR SALE Debt securities that we might not hold until maturity and marketable equity securities are classified as securities available for sale and reported at fair value. Unrealized gains and losses, after applicable taxes, are reported in cumulative OCI. Fair value measurement is based upon quoted prices in active markets, if available. If quoted prices in active markets are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions and market liquidity. See Note 16 in this Report for more information on fair value measurement of our securities.

We conduct OTTI analysis on a quarterly basis or more often if a potential loss-triggering event occurs. The initial indicator of OTTI for both debt and equity securities is a decline in market value below the amount recorded for an investment and the severity and duration of the decline.

For a debt security for which there has been a decline in the fair value below amortized cost basis, we recognize OTTI if we (1) have the intent to sell the security, (2) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, or (3) we do not expect to recover the entire amortized cost basis of the security.

Estimating recovery of the amortized cost basis of a debt security is based upon an assessment of the cash flows expected to be collected. If the present value of the cash flows expected to be collected is less than amortized cost, OTTI is considered to have occurred. In performing an assessment of the cash flows expected to be collected, we consider all relevant information including:

•		the length of time and the extent to which the fair value has been less than the amortized cost basis;

•		the historical and implied volatility of the fair value of the security;

•		the cause of the price decline such as the general level of interest rates or adverse conditions specifically related to the security, an industry or a geographic area;

•		the issuer’s financial condition, near-term prospects and ability to service the debt;

•		the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future;

•		for asset-backed securities, the credit performance of the underlying collateral, including delinquency rates, level of non-performing assets, cumulative losses to date, collateral value and the remaining credit enhancement compared with expected credit losses;

•		any change in rating agencies’ credit ratings at evaluation date from acquisition date and any likely imminent action;

•		independent analyst reports and forecasts, sector credit ratings and other independent market data; and

•		recoveries or additional declines in fair value subsequent to the balance sheet date.

If we intend to sell the security, or if it is more likely than not we will be required to sell the security before recovery, an OTTI write-down is recognized in earnings equal to the entire difference between the amortized cost basis and fair value of the security. For debt securities that are considered other-than-temporarily impaired that we do not intend to sell or it is more likely than not that we will not be required to sell before recovery, the OTTI write-down is separated into an amount representing the credit loss, which is recognized in earnings, and the amount related to all other factors, which is recognized in OCI. The measurement of the credit loss component is equal to the difference between the debt security’s cost basis and the present value of its expected future cash flows discounted at the security’s effective yield.

We hold investments in perpetual preferred securities (PPS) that are structured in equity form, but have many of the characteristics of debt instruments, including periodic cash flows in the form of dividends, call features, ratings that are similar to debt securities and pricing like long-term callable bonds.

Because of the hybrid nature of these securities, we evaluate PPS for OTTI using a model similar to the model we use for debt securities as described above. Among the factors we consider in our evaluation of PPS are whether there is any evidence of deterioration in the credit of the issuer as indicated by a decline in cash flows or a rating agency downgrade to below investment grade and the estimated recovery period. Additionally, in determining if there was evidence of credit deterioration, we evaluate: (1) the severity of decline in market value below cost, (2) the period of time for which the decline in fair value has existed, and (3) the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer. We consider PPS to be other-than-temporarily impaired if cash flows expected to be collected are insufficient to recover our investment or if we no longer believe the security will recover within the estimated recovery period. None of our investments in PPS that have not been impaired have been downgraded below investment grade subsequent to purchase, and we believe that there are no factors to suggest that we will not fully realize our investment in these instruments over a reasonable recovery period. OTTI write-downs of PPS are recognized in earnings equal to the difference between the cost basis and fair value of the security.

For marketable equity securities other than PPS, OTTI evaluations focus on whether evidence exists that supports recovery of the unrealized loss within a timeframe consistent with temporary impairment. This evaluation considers the severity of and length of time fair value is below cost, our intent and ability to hold the security until forecasted recovery of the fair value of the security, and the investee’s financial condition, capital strength, and near-term prospects.

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Note 1: Summary of Significant Accounting Policies (continued)

The securities portfolio is an integral part of our asset/liability management process. We manage these investments to provide liquidity, manage interest rate risk and maximize portfolio yield within capital risk limits approved by management and the Board of Directors and monitored by the Corporate Asset/Liability Management Committee (Corporate ALCO). We recognize realized gains and losses on the sale of these securities in noninterest income using the specific identification method.

Unamortized premiums and discounts are recognized in interest income over the contractual life of the security using the interest method. As principal repayments are received on securities (i.e., primarily mortgage-backed securities (MBS)) a pro-rata portion of the unamortized premium or discount is recognized in interest income.

NONMARKETABLE EQUITY SECURITIES Nonmarketable equity securities include venture capital equity securities that are not publicly traded and securities acquired for various purposes, such as to meet regulatory requirements (for example, Federal Reserve Bank and Federal Home Loan Bank stock). These securities are accounted for under the cost or equity method or are carried at fair value and are included in other assets. We review those assets accounted for under the cost or equity method at least quarterly for possible OTTI. Our review typically includes an analysis of the facts and circumstances of each investment, the expectations for the investment’s cash flows and capital needs, the viability of its business model and our exit strategy. We reduce the asset value when we consider declines in value to be other than temporary. We recognize the estimated loss as a loss from equity investments in noninterest income.

Nonmarketable equity securities held by investment company subsidiaries that fall within the scope of the American Institute of Certified Public Accountants (AICPA) Investment Company Audit Guide are carried at fair value (principal investments). An investment company is a separate legal entity that pools shareholders’ funds and has a business purpose of investing in multiple substantive investments for current income, capital appreciation, or both, with investment plans that include exit strategies. Principal investments, including certain public equity and non-public securities and certain investments in private equity funds, are recorded at fair value with realized and unrealized gains and losses included in gains and losses on equity investments in the income statement, and are included in other assets in the balance sheet. Public equity investments are valued using quoted market prices and discounts are only applied when there are trading restrictions that are an attribute of the investment.

Private direct investments are valued using metrics such as security prices of comparable public companies, acquisition prices for similar companies and original investment purchase price multiples, while also incorporating a portfolio company’s financial performance and specific factors. For certain fund investments, where the best estimates of fair value were primarily determined based upon fund sponsor data, we use the NAV provided by the fund sponsor as a practical expedient to measure fair value. In some cases, such NAVs require adjustments based on certain unobservable inputs. In situations where a portion of an investment in a non-public security or fund is sold, we recognize a realized gain or loss on the portion sold and an unrealized gain or loss on the portion retained.

Securities Purchased and Sold Agreements

Securities purchased under resale agreements and securities sold under repurchase agreements are generally accounted for as collateralized financing transactions and are recorded at the acquisition or sale price plus accrued interest. It is our policy to take possession of securities purchased under resale agreements, which are primarily U.S. Government and Government agency securities. We monitor the market value of securities purchased and sold, and obtain collateral from or return it to counterparties when appropriate.

Mortgages Held for Sale

Mortgages held for sale (MHFS) include commercial and residential mortgages originated for sale and securitization in the secondary market, which is our principal market, or for sale as whole loans. We elected the fair value option for our new prime residential MHFS portfolio (see Note 16 in this Report). Nonprime residential and commercial MHFS continue to be held at the lower of cost or market value, and are valued on an aggregate portfolio basis.

Gains and losses on nonprime loan sales (sales proceeds minus carrying value) are recorded in noninterest income. Direct loan origination costs and fees are deferred at origination of the loans and are recognized in mortgage banking noninterest income upon sale of the loan.

Our lines of business are authorized to originate held-for-investment loans that meet or exceed established loan product profitability criteria, including minimum positive net interest margin spreads in excess of funding costs. When a determination is made at the time of commitment to originate loans as held for investment, it is our intent to hold these loans to maturity or for the “foreseeable future,” subject to periodic review under our corporate asset/liability management process. In determining the “foreseeable future” for these loans, management considers (1) the current economic environment and market conditions, (2) our business strategy and current business plans, (3) the nature and type of the loan receivable, including its expected life, and (4) our current financial condition and liquidity demands. Consistent with our core banking business of managing the spread between the yield on our assets and the cost of our funds, loans are periodically reevaluated to determine if our minimum net interest margin spreads continue to meet our profitability objectives. If subsequent changes in interest rates significantly impact the ongoing profitability of certain loan products, we may subsequently change our intent to hold these loans and we would take actions to sell such loans in response to the Corporate ALCO directives to reposition our balance sheet because of the changes in interest rates. Such Corporate ALCO directives identify both the type of loans (for example 3/1, 5/1, 10/1 and relationship adjustable-rate mortgages (ARMs), as well as specific fixed-rate loans) to be sold and the weighted-average coupon rate of such loans no longer meeting our ongoing investment criteria. Upon the issuance of such directives, we immediately transfer these loans to the MHFS portfolio at the lower of cost or market value.

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Loans Held for Sale

Loans held for sale (LHFS) are carried at the lower of cost or market value (LOCOM) or at fair value for certain portfolios that we intend to hold for trading purposes, and are generally valued on an aggregate portfolio basis. For loans carried at LOCOM, gains and losses on loan sales (sales proceeds minus carrying value) are recorded in noninterest income, and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan. The fair value of LHFS is based on what secondary markets are currently offering for portfolios with similar characteristics.

Loans

Loans are reported at their outstanding principal balances net of any unearned income, charge-offs, unamortized deferred fees and costs on originated loans and premiums or discounts on purchased loans, except for certain PCI loans which are recorded at fair value on their purchase date. See the “Purchased Credit-Impaired Loans” section in this Note for our accounting policy for PCI loans. Unearned income, deferred fees and costs, and discounts and premiums are amortized to interest income over the contractual life of the loan using the interest method.

We offer a portfolio product known as relationship ARMs that provides interest rate reductions to reward eligible banking customers who have an existing relationship or establish a new relationship with Wells Fargo. Accordingly, this product offering is generally underwritten to certain Company guidelines rather than secondary market standards and is typically originated for investment. At December 31, 2009 and 2008, we had $12.5 billion and $15.6 billion, respectively, of relationship ARMs held for investment. Originations, net of collections and proceeds from the sale of these loans are reflected as investing cash flows consistent with their original classification.

Loans also include direct financing leases that are recorded at the aggregate of minimum lease payments receivable plus the estimated residual value of the leased property, less unearned income. Leveraged leases, which are a form of direct financing leases, are recorded net of related nonrecourse debt. Leasing income is recognized as a constant percentage of outstanding lease financing balances over the lease terms.

Loan commitment fees are generally deferred and amortized into noninterest income on a straight-line basis over the commitment period.

NONACCRUAL LOANS We generally place loans on nonaccrual status when:

•		the full and timely collection of interest or principal becomes uncertain;

•		they are 90 days (120 days with respect to real estate 1-4 family first and junior lien mortgages and auto loans) past due for interest or principal (unless both well-secured and in the process of collection); or

•		part of the principal balance has been charged off and no restructuring has occurred.

PCI loans are written down at acquisition to an amount estimated to be collectible. Accordingly, such loans are no longer classified as nonaccrual even though they may be contractually past due, because we expect to fully collect the new carrying values of such loans (that is, the new cost basis arising out of purchase accounting).

Generally, consumer loans not secured by real estate or autos are placed on nonaccrual status only when part of the principal has been charged off. These loans are charged off or charged down to the net realizable value of the collateral when deemed uncollectible, due to bankruptcy or other factors, or when they reach a defined number of days past due based on loan product, industry practice, country, terms and other factors.

When we place a loan on nonaccrual status, we reverse the accrued unpaid interest receivable against interest income and account for the loan on the cash or cost recovery method, until it qualifies for return to accrual status. Generally, we return a loan to accrual status when (a) all delinquent interest and principal become current under the terms of the loan agreement or (b) the loan is both well-secured and in the process of collection and collectibility is no longer doubtful.

Loan Charge-Off Policies

For commercial loans, we generally fully or partially charge down to the fair value of collateral securing the asset when:

•		management judges the asset to be uncollectible;

•		repayment is deemed to be protracted beyond reasonable time frames;

•		the asset has been classified as a loss by either our internal loan review process or external examiners;

•		the customer has filed bankruptcy and the loss becomes evident owing to a lack of assets; or

•		the loan is 180 days past due unless both well secured and in the process of collection.

		For consumer loans, our charge-off policies are as follows:

1-4 FAMILY FIRST AND JUNIOR LIEN MORTGAGES We generally charge down to the net realizable value when the loan is 180 days past due.

AUTO LOANS We generally fully or partially charge down to the net realizable value when the loan is 120 days past due.

UNSECURED LOANS (CLOSED END) We generally charge-off when the loan is 120 days past due.

UNSECURED LOANS (OPEN END) We generally charge-off when the loan is 180 days past due.

CREDIT CARD LOANS We generally fully charge-off when the loan is 180 days past due.

OTHER SECURED LOANS We generally fully or partially charge down to the net realizable value when the loan is 120 days past due.

IMPAIRED LOANS We consider a loan to be impaired when, based on current information and events, we determine that we will not be able to collect all amounts due according to the loan contract, including scheduled interest payments. We

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Note 1: Summary of Significant Accounting Policies (continued)

assess and account for as impaired certain nonaccrual commercial, commercial real estate (CRE), and foreign loan exposures that are over $5 million and certain consumer, commercial, CRE, and foreign loans whose terms have been modified in a troubled debt restructuring (TDR).

When we identify a loan as impaired, we measure the impairment based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral. In these cases we use the current fair value of the collateral, less selling costs when foreclosure is probable, instead of discounted cash flows.

If we determine that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), we recognize impairment through an allowance estimate or a charge-off to the allowance.

TROUBLED DEBT RESTRUCTURINGS In situations where, for economic or legal reasons related to a borrower’s financial difficulties, we grant a concession for other than an insignificant period of time to the borrower that we would not otherwise consider, the related loan is classified as a TDR. We strive to identify borrowers in financial difficulty early and work with them to modify to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral.

In cases where we grant the borrower new terms that provide for a reduction of either interest or principal, we measure any impairment on the restructuring as noted above for impaired loans.

PURCHASED CREDIT-IMPAIRED (PCI) LOANS Loans acquired in a transfer, including business combinations where there is evidence of credit deterioration since origination and it is probable at the date of acquisition that we will not collect all contractually required principal and interest payments are accounted for using the guidance for PCI loans, which is contained in the Receivables topic of the Codification. PCI loans are initially recorded at fair value, and any related allowance for loan losses cannot be carried over. Some loans that otherwise meet the definition as credit impaired are specifically excluded from the PCI loan portfolios, such as revolving loans where the borrower still has revolving privileges.

Evidence of credit quality deterioration as of the purchase date may include statistics such as past due and nonaccrual status, recent borrower credit scores and recent loan-to-value percentages. Generally, acquired loans that meet our defini-

tion for nonaccrual status are considered to be credit-impaired.

Accounting for PCI loans at acquisition involves estimating fair value using the principal and interest cash flows expected to be collected on the credit impaired loans and discounting those cash flows at a market rate of interest. The excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan, or pool of loans, in situations where there is a reasonable expectation about the timing and amount of cash flows to be collected. The difference between contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference.

Subsequent to acquisition, we complete quarterly evaluations of expected cash flows. Decreases in the expected cash flows will generally result in a charge to the provision for credit losses resulting in an increase to the allowance for loan losses. Increases in the expected cash flows will generally result in an increase in interest income over the remaining life of the loan, or pool of loans. Disposals of loans, which may include sales of loans to third parties, receipt of payments in full or part by the borrower, and foreclosure of the collateral result in removal of the loan from the PCI loan portfolio at its carrying amount.

Because PCI loans are written down at acquisition to an amount estimated to be collectible, such loans are not classified as nonaccrual even though they may be contractually past due. We expect to fully collect the new carrying values of such loans (that is, the new cost basis arising out of purchase accounting). PCI loans are also excluded from the disclosure of loans 90 days or more past due and still accruing interest. Even though substantially all of them are 90 days or more contractually past due, they are considered to be accruing because the interest income on these loans relates to the establishment of an accretable yield that is accreted into interest income over the estimated life of the PCI loans using the effective yield method.

Securitizations and Beneficial Interests

In certain asset securitization transactions that meet the applicable criteria to be accounted for as a sale, assets are sold to an entity referred to as a qualifying special purpose entity (QSPE), which then issues beneficial interests in the form of senior and subordinated interests collateralized by the assets. In some cases, we may retain up to 90% of the beneficial interests. Additionally, from time to time, we may also resecuritize certain assets in a new securitization transaction.

The assets and liabilities sold to a QSPE are excluded from our consolidated balance sheet, subject to a quarterly evaluation to ensure the entity continues to meet the requirements to be a QSPE. If our portion of the beneficial interests equals or exceeds 90%, a QSPE would no longer qualify for off-balance sheet treatment and we may be required to consolidate the SPE, subject to determining whether the entity is a VIE and to determining who is the primary beneficiary. In these cases, any beneficial interests that we previously held are

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derecognized from the balance sheet and we record the underlying assets and liabilities of the SPE at fair value to the extent interests were previously held by outside parties.

The carrying amount of the assets transferred to a QSPE, excluding servicing rights, is allocated between the assets sold and the retained interests based on their relative fair values at the date of transfer. We record a gain or loss in other fee income for the difference between the carrying amount and the fair value of the assets sold. Fair values are based on quoted market prices, quoted market prices for similar assets, or if market prices are not available, then the fair value is estimated using discounted cash flow analyses with assumptions for credit losses, prepayments and discount rates that are corroborated by and independently verified against market observable data, where possible. Retained interests from securitizations with off-balance sheet entities, including QSPEs and VIEs where we are the primary beneficiary, are classified as either available-for-sale securities, trading account assets or loans, and are accounted for as described herein.

Mortgage Servicing Rights

Under the Transfers and Servicing topic of the Codification, servicing rights resulting from the sale or securitization of loans we originate (asset transfers) are initially measured at fair value at the date of transfer. We recognize the rights to service mortgage loans for others, or mortgage servicing rights (MSRs), as assets whether we purchase the MSRs or the MSRs result from an asset transfer. We determine the fair value of servicing rights at the date of transfer using the present value of estimated future net servicing income, using assumptions that market participants use in their estimates of values. We use quoted market prices when available to determine the value of other interests held. Gain or loss on sale of loans depends on (1) proceeds received and (2) the previous carrying amount of the financial assets transferred and any interests we continue to hold (such as interest-only strips) based on relative fair value at the date of transfer.

To determine the fair value of MSRs, we use a valuation model that calculates the present value of estimated future net servicing income. We use assumptions in the valuation model that market participants use in estimating future net servicing income, including estimates of prepayment speeds (including housing price volatility), discount rate, default rates, cost to service (including delinquency and foreclosure costs), escrow account earnings, contractual servicing fee income, ancillary income and late fees. This model is validated by an independent internal model validation group operating in accordance with a model validation policy approved by Corporate ALCO.

MSRs MEASURED AT FAIR VALUE We have elected to initially measure and carry our MSRs related to residential mortgage loans (residential MSRs) using the fair value method. Under the fair value method, these residential MSRs are carried in the balance sheet at fair value and the changes in fair value, primarily due to changes in valuation inputs and assumptions and to the collection/realization of expected cash flows, are reported in noninterest income in the period in which the

change occurs.

AMORTIZED MSRs Amortized MSRs, which include commercial MSRs, are carried at the lower of cost or market value. These MSRs are amortized in proportion to, and over the period of, estimated net servicing income. The amortization of MSRs is analyzed monthly and is adjusted to reflect changes in prepayment speeds, as well as other factors. Amortized MSRs are periodically evaluated for impairment based on the fair value of those assets. If, by individual stratum, the carrying amount of these MSRs exceeds fair value, a valuation reserve is established. The valuation reserve is adjusted as the fair value changes. For purposes of impairment evaluation and measurement, we stratify servicing assets based on the predominant risk characteristics of the underlying loans, including the category of the investor (e.g., governmental agency securitization, non-agency securitization or purchased loan servicing).

Premises and Equipment

Premises and equipment are carried at cost less accumulated depreciation and amortization. Capital leases are included in premises and equipment at the capitalized amount less accumulated amortization.

We primarily use the straight-line method of depreciation and amortization. Estimated useful lives range up to 40 years for buildings, up to 10 years for furniture and equipment, and the shorter of the estimated useful life or lease term for leasehold improvements. We amortize capitalized leased assets on a straight-line basis over the lives of the respective leases.

Goodwill and Identifiable Intangible Assets

Goodwill is recorded in business combinations under the purchase method of accounting when the purchase price is higher than the fair value of net assets, including identifiable intangible assets.

We assess goodwill for impairment annually, and more frequently in certain circumstances. We have determined that our reporting units are one level below the operating segments. We assess goodwill for impairment on a reporting unit level and apply various valuation methodologies as appropriate to compare the estimated fair value to the carrying value of each reporting unit. Valuation methodologies include discounted cash flow and earnings multiple approaches. If the fair value is less than the carrying amount, a second test is required to measure the amount of impairment. We recognize impairment losses as a charge to noninterest expense (unless related to discontinued operations) and an adjustment to the carrying value of the goodwill asset. Subsequent reversals of goodwill impairment are prohibited.

We amortize core deposit and other customer relationship intangibles on an accelerated basis based on useful lives not exceeding 10 years. We review such intangibles for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Impairment is indicated if the sum of undiscounted estimated future net cash flows is less than the carrying value of the asset. Impairment is permanently recognized by writing down the asset to the extent that the carrying value exceeds the estimated fair value.

Operating Lease Assets

Operating lease rental income for leased assets is recognized in other income on a straight-line basis over the lease term. Related depreciation expense is recorded on a straight-line basis over the life of the lease, taking into account the estimated residual value of the leased asset. On a periodic basis, leased assets are reviewed for impairment. Impairment loss is

105

Note 1: Summary of Significant Accounting Policies (continued)

recognized if the carrying amount of leased assets exceeds fair value and is not recoverable. The carrying amount of leased assets is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the lease payments and the estimated residual value upon the eventual disposition of the equipment. Leased assets are written down to the fair value of the collateral less cost to sell when 120 days past due.

Pension Accounting

We account for our defined benefit pension plans using an actuarial model required by accounting guidance on retirement benefits. This model allocates pension costs over the service period of employees in the plan. The underlying principle is that employees render service ratably over this period and, therefore, the income statement effects of pensions should follow a similar pattern.

In 2008, we began measuring our plan assets and benefit obligations using a year-end measurement date. The change in the accounting provisions for retirement benefits did not change the amount of net periodic benefit expense recognized in our income statement.

One of the principal components of the net periodic pension expense calculation is the expected long-term rate of return on plan assets. The use of an expected long-term rate of return on plan assets may cause us to recognize pension income returns that are greater or less than the actual returns of plan assets in any given year.

The expected long-term rate of return is designed to approximate the actual long-term rate of return over time and is not expected to change significantly. Therefore, the pattern of income/expense recognition should closely match the stable pattern of services provided by our employees over the life of our pension obligation. To ensure that the expected rate of return is reasonable, we consider such factors as (1) long-term historical return experience for major asset class categories (for example, large cap and small cap domestic equities, international equities and domestic fixed income), and (2) forward-looking return expectations for these major asset classes. Differences between expected and actual returns in each year, if any, are included in our net actuarial gain or loss amount, which is recognized in OCI. We generally amortize any net actuarial gain or loss in excess of a 5% corridor in net periodic pension expense calculations over the next 13 years.

We use a discount rate to determine the present value of our future benefit obligations. The discount rate reflects the rates available at the measurement date on long-term high-quality fixed-income debt instruments and is reset annually on the measurement date. In 2008, we changed our measurement date from November 30 to December 31 as required by accounting guidance on retirement benefits.

Income Taxes

We file consolidated and separate company federal income tax returns, foreign tax returns and various combined and separate company state tax returns.

We account for income taxes in accordance with the Income Taxes topic of the Codification, which requires two components of income tax expense: current and deferred. Current income tax expense approximates taxes to be paid or refunded for the current period and includes income tax expense related to our uncertain tax positions. We determine deferred income taxes using the balance sheet method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and recognizes enacted changes in tax rates and laws in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. A tax position that meets the “more likely than not” recognition threshold is measured to determine the amount of benefit to recognize. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. Foreign taxes paid are generally applied as credits to reduce federal income taxes payable. Interest and penalties are recognized as a component of income tax expense.

Stock-Based Compensation

We have stock-based employee compensation plans as more fully discussed in Note 18 in this Report. Under accounting guidance for stock compensation, compensation cost recognized includes cost for all share-based awards.

Earnings Per Common Share

We compute earnings per common share by dividing net income (after deducting dividends on preferred stock) by the average number of common shares outstanding during the year. We compute diluted earnings per common share by dividing net income (after deducting dividends and related accretion on preferred stock) by the average number of common shares outstanding during the year, plus the effect of common stock equivalents (for example, stock options, restricted share rights, convertible debentures and warrants) that are dilutive.

106

Derivatives and Hedging Activities

We recognize all derivatives in the balance sheet at fair value. On the date we enter into a derivative contract, we designate the derivative as (1) a hedge of the fair value of a recognized asset or liability, including hedges of foreign currency exposure (“fair value” hedge), (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge), or (3) held for trading, customer accommodation or asset/liability risk management purposes, including economic hedges not qualifying for hedge accounting. For a fair value hedge, we record changes in the fair value of the derivative and, to the extent that it is effective, changes in the fair value of the hedged asset or liability attributable to the hedged risk, in current period earnings in the same financial statement category as the hedged item. For a cash flow hedge, we record changes in the fair value of the derivative to the extent that it is effective in OCI, with any ineffectiveness recorded in current period earnings. We subsequently reclassify these changes in fair value to net income in the same period(s) that the hedged transaction affects net income in the same financial statement category as the hedged item. For free-standing derivatives, we report changes in the fair values in current period noninterest income.

For fair value and cash flow hedges qualifying for hedge accounting, we formally document at inception the relationship between hedging instruments and hedged items, our risk management objective, strategy and our evaluation of effectiveness for our hedge transactions. This includes linking all derivatives designated as fair value or cash flow hedges to specific assets and liabilities in the balance sheet or to specific forecasted transactions. Periodically, as required, we also formally assess whether the derivative we designated in each hedging relationship is expected to be and has been highly effective in offsetting changes in fair values or cash flows of the hedged item using the regression analysis method or, in limited cases, the dollar offset method.

We discontinue hedge accounting prospectively when (1) a derivative is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item, (2) a derivative expires or is sold, terminated or exercised, (3) a derivative is de-designated as a hedge, because it is unlikely that a forecasted transaction will occur, or (4) we determine that designation of a derivative as a hedge is no longer appropriate.

When we discontinue hedge accounting because a derivative no longer qualifies as an effective fair value hedge, we continue to carry the derivative in the balance sheet at its fair value with changes in fair value included in earnings, and no longer adjust the previously hedged asset or liability for changes in fair value. Previous adjustments to the hedged item are accounted for in the same manner as other components of the carrying amount of the asset or liability.

When we discontinue cash flow hedge accounting because the hedging instrument is sold, terminated or no longer designated (de-designated), the amount reported in OCI up to the date of sale, termination or de-designation continues to be reported in OCI until the forecasted transaction affects earnings.

When we discontinue cash flow hedge accounting because it is probable that a forecasted transaction will not occur, we continue to carry the derivative in the balance sheet at its fair value with changes in fair value included in earnings, and immediately recognize gains and losses that were accumulated in OCI in earnings.

In all other situations in which we discontinue hedge accounting, the derivative will be carried at its fair value in the balance sheet, with changes in its fair value recognized in current period earnings.

We occasionally purchase or originate financial instruments that contain an embedded derivative. At inception of the financial instrument, we assess (1) if the economic characteristics of the embedded derivative are not clearly and closely related to the economic characteristics of the financial instrument (host contract), (2) if the financial instrument that embodies both the embedded derivative and the host contract is not measured at fair value with changes in fair value reported in earnings, and (3) if a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative. If the embedded derivative meets all of these conditions, we separate it from the host contract by recording the bifurcated derivative at fair value and the remaining host contract at the difference between the basis of the hybrid instrument and the fair value of the bifurcated derivative. The bifurcated derivative is carried as a free-standing derivative at fair value with changes recorded in current period earnings.

107

Note 1: Summary of Significant Accounting Policies (continued)

SUPPLEMENTAL CASH FLOW INFORMATION Noncash investing and financing activities are presented below, including information on transfers affecting MHFS, LHFS, and MSRs.


	Year ended December 31,
(in millions)	2009		2008			2007

Transfers from trading assets to securities available for sale	$	854		—			1,268
Transfers from securities available for sale to loans		258		283			—
Transfers from MHFS to trading assets		2,993		—			—
Transfers from MHFS to securities available for sale		—		544			7,949
Transfers from MHFS to MSRs		6,287		3,498			3,720
Transfers from MHFS to foreclosed assets		162		136			—
Transfers from (to) loans (from) to MHFS		144		(1,195	)		(2,133	)
Transfers from (to) LHFS (from) to loans		111		(1,640	)		—
Transfers from loans to foreclosed assets		7,604		3,031			2,666
Net transfer from additional paid-in capital to noncontrolling interests		2,299		—			—
Issuance of common and preferred stock for purchase accounting		—		22,672			2,125

SUBSEQUENT EVENTS We have evaluated the effects of subsequent events that have occurred subsequent to period end

December 31, 2009, and through February 26, 2010, which is the date we issued our financial statements. During this period, there have been no material events that would require recognition in our 2009 consolidated financial statements or disclosure in the Notes to the financial statements.

108

Note 2: Business Combinations

On December 31, 2008, we acquired all outstanding shares of Wachovia common stock in a stock-for-stock transaction. Wachovia, based in Charlotte, North Carolina, was one of the nation’s largest diversified financial services companies, providing a broad range of retail banking and brokerage, asset and wealth management, and corporate and investment banking products and services to customers through 3,300 financial centers in 21 states from Connecticut to Florida and west to Texas and California, and nationwide retail brokerage, mortgage lending and auto finance businesses. In the merger, we exchanged 0.1991 shares of our common stock for each outstanding share of Wachovia common stock, issuing a total of 422.7 million shares of our common stock with a December 31, 2008, value of $12.5 billion to Wachovia shareholders. Shares of each outstanding series of Wachovia preferred stock were converted into shares (or fractional shares) of a corresponding series of our preferred stock having substantially the same rights and preferences. Because the acquisition was completed at the end of 2008, Wachovia’s results of operations for 2008 are not included in our income statement.

The assets and liabilities of Wachovia were recorded at their respective acquisition date fair values, and identifiable intangible assets were recorded at fair value. Because the transaction closed on the last day of the annual reporting period, certain fair value purchase accounting adjustments were based on data as of an interim period with estimates through year end. Accordingly, we have re-validated, and, where necessary, have finalized our purchase accounting adjustments. The impact of all finalized purchase accounting adjustments were recorded to goodwill and increased goodwill by $2.1 billion in 2009. This acquisition was nontaxable and, as a result, there is no tax basis in goodwill. Accordingly, none of the goodwill associated with the Wachovia acquisition is deductible for tax purposes. Additional exit reserves related to costs associated with involuntary employee termination, contract termination penalties and closing duplicate facilities were recorded during 2009 as part of the further integration of Wachovia’s employees, locations and operations.

The final allocation of purchase price at December 31, 2008, is presented in the following table.


	December 31,
		2008						December 31,
(in millions)		(final)			Refinements			2008

Purchase price:
Value of common shares		$	14,621			—			14,621
Value of preferred shares			8,409			—			8,409
Other (value of share-based awards and direct acquisition costs)			62			—			62

Total purchase price			23,092			—			23,092
Allocation of the purchase price:
Wachovia tangible stockholders’ equity, less prior purchase accounting
adjustments and other basis adjustments eliminated in purchase accounting			19,387			(7	)		19,394
Adjustments to reflect assets acquired and liabilities assumed at fair value:
Loans and leases, net			(18,033	)		(1,636	)		(16,397	)
Premises and equipment, net			(972	)		(516	)		(456	)
Intangible assets			14,675			(65	)		14,740
Other assets			(2,972	)		472			(3,444	)
Deposits			(4,577	)		(143	)		(4,434	)
Accrued expenses and other liabilities (exit, termination and other liabilities)			(4,466	)		(2,867	)		(1,599	)
Long-term debt			(227	)		(37	)		(190	)
Deferred taxes			9,365			2,689			6,676

Fair value of net assets acquired			12,180			(2,110	)		14,290

Goodwill resulting from the merger		$	10,912			2,110			8,802

109

Note 2: Business Combinations (continued)

The increase in goodwill includes the recognition of additional types of costs associated with involuntary employee termination, contract terminations and closing duplicate facilities and have been allocated to the purchase price. These costs were recorded throughout 2009 as part of the

further integration of Wachovia’s employees, locations and operations as management finalized integration plans. The following table summarizes exit reserves associated with the Wachovia acquisition.


	Employee				Contract			Facilities
(in millions)	termination				termination			related			Total

Balance, December 31, 2008		$	57			13			129			199
Purchase accounting adjustments ⁽¹⁾			596			61			354			1,011
Cash payments/utilization			(298	)		(16	)		(139	)		(453	)

Balance, December 31, 2009		$	355			58			344			757


(1) Certain purchase accounting adjustments have been refined during 2009 as additional information became available.

We regularly explore opportunities to acquire financial services companies and businesses. Generally, we do not make a public announcement about an acquisition opportunity until a definitive agreement has been signed.

In addition to the 2008 Wachovia acquisition, business combinations completed in 2009, 2008 and 2007 are presented below.

For information on additional consideration related to acquisitions, which is considered to be a guarantee, see Note 14 in this Report.


(in millions)	Date	Assets

2009
Capital TempFunds, Fort Lauderdale, Florida	March 2	$	74
Other ⁽¹⁾	Various		39

		$	113

2008
Flatiron Credit Company, Inc., Denver, Colorado	April 30	$	332
Transcap Associates, Inc., Chicago, Illinois	June 27		22
United Bancorporation of Wyoming, Inc., Jackson, Wyoming ⁽²⁾	July 1		2,110
Farmers State Bank of Fort Morgan Colorado, Fort Morgan, Colorado	December 6		186
Century Bancshares, Inc., Dallas, Texas	December 31		1,604
Wells Fargo Merchant Services, LLC ⁽³⁾	December 31		1,251
Other ⁽⁴⁾	Various		52

		$	5,557

2007
Placer Sierra Bancshares, Sacramento, California	June 1	$	2,644
Certain assets of The CIT Group/Equipment Financing, Inc., Tempe, Arizona	June 29		2,888
Greater Bay Bancorp, East Palo Alto, California	October 1		8,204
Certain Illinois branches of National City Bank, Cleveland, Ohio	December 7		61
Other ⁽⁵⁾	Various		61

		$	13,858


(1)		Consists of eight acquisitions of insurance brokerage businesses.
(2)		Consists of five affiliated banks of United Bancorporation of Wyoming, Inc., located in Wyoming and Idaho, and certain assets and liabilities of United Bancorporation of Wyoming, Inc.
(3)		Represents a step acquisition resulting from the increase in Wells Fargo’s ownership from a 47.5% interest to a 60% interest in the Wells Fargo Merchant Services, LLC joint venture.
(4)		Consists of 12 acquisitions of insurance brokerage businesses.
(5)		Consists of six acquisitions of insurance brokerage and third party health care payment processing businesses.

110

Note 3: Cash, Loan and Dividend Restrictions

Federal Reserve Board (FRB) regulations require that each of our subsidiary banks maintain reserve balances on deposit with the Federal Reserve Banks. The average required reserve balance was $2.4 billion in 2009 and $2.6 billion in 2008.

Federal law restricts the amount and the terms of both credit and non-credit transactions between a bank and its nonbank affiliates. They may not exceed 10% of the bank’s capital and surplus (which for this purpose represents Tier 1 and Tier 2 capital, as calculated under the risk-based capital (RBC) guidelines, plus the balance of the allowance for credit losses excluded from Tier 2 capital) with any single nonbank affiliate and 20% of the bank’s capital and surplus with all its nonbank affiliates. Transactions that are extensions of credit may require collateral to be held to provide added security to the bank. For further discussion of RBC, see Note 25 in this Report.

Dividends paid by our subsidiary banks are subject to various federal and state regulatory limitations. Dividends that may be paid by a national bank without the express approval of the Office of the Comptroller of the Currency (OCC) are limited to that bank’s retained net profits for the preceding two calendar years plus retained net profits up to the date of any

dividend declaration in the current calendar year. Retained net profits, as defined by the OCC, consist of net income less dividends declared during the period. We also have state-chartered subsidiary banks that are subject to state regulations that limit dividends. Under those provisions, our national and state-chartered subsidiary banks could have declared additional dividends of $5.3 billion at December 31, 2009, without obtaining prior regulatory approval. Our nonbank subsidiaries are also limited by certain federal and state statutory provisions and regulations covering the amount of dividends that may be paid in any given year. Based on retained earnings at December 31, 2009, our nonbank subsidiaries could have declared additional dividends of $2.5 billion at December 31, 2009, without obtaining prior approval.

The FRB published clarifying supervisory guidance in first quarter 2009, SR 09-4 Applying Supervisory Guidance and Regulations on the Payment of Dividends, Stock Redemptions, and Stock Repurchases at Bank Holding Companies , pertaining to FRB’s criteria, assessment and approval process for reductions in capital including the redemption of Troubled Asset Relief Program (TARP) and the payment of dividends. The effect of this guidance is to require the approval of the FRB for the Company to repurchase or redeem common or perpetual preferred stock as well as to raise the per share dividend from its current level of $0.05 per share.

Note 4: Federal Funds Sold, Securities Purchased under Resale Agreements and Other Short-Term Investments

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


	December 31,
(in millions)	2009		2008

Federal funds sold and securities
purchased under resale agreements	$	8,042		8,439
Interest-earning deposits		31,668		39,890
Other short-term investments		1,175		1,104


Total	$	40,885		49,433

We pledge certain financial instruments that we own to collateralize repurchase agreements and other securities financings. The types of collateral we pledge include securities issued by federal agencies, government-sponsored

entities (GSEs), and domestic and foreign companies. At December 31, 2009 and 2008, we pledged $14.8 billion and $7.9 billion, respectively, under agreements that permit the secured parties to sell or repledge the collateral. Pledged collateral where the secured party cannot sell or repledge was $434 million and $10 million, at December 31, 2009 and 2008, respectively.

We receive collateral from other entities under resale agreements and securities borrowings. At December 31, 2009 and 2008, we received $31.4 billion and $7.9 billion, respectively, for which we have the right to sell or repledge the collateral. These amounts include securities we have sold or repledged to others with a fair value of $29.7 billion at December 31, 2009, and $5.4 billion at December 31, 2008.

111

Note 5: Securities Available for Sale

The following table provides the cost and fair value for the major categories of securities available for sale carried at fair value. The net unrealized gains (losses) are reported on an

after tax basis as a component of cumulative OCI. There were no securities classified as held to maturity as of the periods presented.


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

December 31, 2008
Securities of U.S. Treasury and federal agencies	$	3,187		62		—			3,249
Securities of U.S. states and political subdivisions		14,062		116		(1,520	)		12,658
Mortgage-backed securities:
Federal agencies		64,726		1,711		(3	)		66,434
Residential		29,536		11		(4,717	)		24,830
Commercial		12,305		51		(3,878	)		8,478


Total mortgage-backed securities		106,567		1,773		(8,598	)		99,742


Corporate debt securities		7,382		81		(539	)		6,924
Collateralized debt obligations		2,634		21		(570	)		2,085
Other ⁽¹⁾⁽²⁾		21,363		14		(602	)		20,775


Total debt securities		155,195		2,067		(11,829	)		145,433


Marketable equity securities:
Perpetual preferred securities		5,040		13		(327	)		4,726
Other marketable equity securities		1,256		181		(27	)		1,410


Total marketable equity securities		6,296		194		(354	)		6,136


Total	$	161,491		2,261		(12,183	)		151,569


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


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


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


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


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


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


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

(1)		The “Other” category includes certain asset-backed securities collateralized by auto leases or loans and cash reserves with a cost basis and fair value of $8.2 billion and $8.5 billion, respectively, at December 31, 2009, and $8.3 billion and $7.9 billion, respectively, at December 31, 2008. Also included in the “Other” category are asset-backed securities collateralized by home equity loans with a cost basis and fair value of $2.3 billion and $2.5 billion, respectively, at December 31, 2009, and $3.2 billion and $3.2 billion, respectively, at December 31, 2008. The remaining balances primarily include asset-backed securities collateralized by credit cards and student loans.
(2)		Foreign residential mortgage-backed securities with a cost basis and fair value of $51 million are included in residential mortgage-backed securities at December 31, 2009. These instruments were included in other debt securities at December 31, 2008, and had a cost basis and fair value of $6.3 billion.

As part of our liquidity management strategy, we pledge securities to secure borrowings from the Federal Home Loan Bank (FHLB) and the Federal Reserve Bank. We also pledge securities to secure trust and public deposits and for other purposes as required or permitted by law. The carrying value of pledged securities where the secured party has the right

to sell or repledge totaled $5.0 billion at December 31, 2009, and $4.5 billion at December 31, 2008. Securities pledged where the secured party does not have the right to sell or repledge totaled $93.9 billion at December 31, 2009, and $71.6 billion at December 31, 2008.

112

Gross Unrealized Losses and Fair Value

The following table shows the gross unrealized losses and fair value of securities in the securities available for sale portfolio by length of time that individual securities in each category had been in a continuous loss position. Debt securities on which we have taken only credit-related OTTI write-downs

are categorized as being “less than 12 months” or “12 months or more” in a continuous loss position based on the point in time that the fair value declined to below the cost basis and not the period of time since the credit-related OTTI write-down.


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


December 31, 2008
Securities of U.S. Treasury and federal agencies	$	—			—		—			—		—			—
Securities of U.S. states and political subdivisions		(745	)		3,483		(775	)		1,702		(1,520	)		5,185
Mortgage-backed securities:
Federal agencies		(3	)		83		—			—		(3	)		83
Residential		(4,471	)		9,960		(246	)		238		(4,717	)		10,198
Commercial		(1,726	)		4,152		(2,152	)		2,302		(3,878	)		6,454


Total mortgage-backed securities		(6,200	)		14,195		(2,398	)		2,540		(8,598	)		16,735


Corporate debt securities		(285	)		1,056		(254	)		469		(539	)		1,525
Collateralized debt obligations		(113	)		215		(457	)		180		(570	)		395
Other		(554	)		8,638		(48	)		38		(602	)		8,676


Total debt securities		(7,897	)		27,587		(3,932	)		4,929		(11,829	)		32,516


Marketable equity securities:
Perpetual preferred securities		(75	)		265		(252	)		360		(327	)		625
Other marketable equity securities		(23	)		72		(4	)		9		(27	)		81


Total marketable equity securities		(98	)		337		(256	)		369		(354	)		706


Total	$	(7,995	)		27,924		(4,188	)		5,298		(12,183	)		33,222


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


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


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


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


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


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


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

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

See Note 1 – “Securities” in this Report for the factors that we consider in our analysis of OTTI for debt and equity securities available for sale.

SECURITIES OF U.S. TREASURY AND FEDERAL AGENCIES The unrealized losses associated with U.S. Treasury and federal agency securities do not have any credit losses due to the guarantees provided by the United States government.

SECURITIES OF U.S. STATES AND POLITICAL SUBDIVISIONS The unrealized losses associated with securities of U.S. states and political subdivisions are primarily driven by changes in interest rates and not due to the credit quality of the securities. The fair value of these investments is almost exclusively investment grade. The securities were generally underwritten in accordance with our own investment standards prior to the decision to purchase, without relying on a bond insurer’s guarantee in making the investment decision. These investments will continue to be monitored as part of our ongoing

113

Note 5: Securities Available for Sale ( continued)

impairment analysis, but are expected to perform, even if the rating agencies reduce the credit rating of the bond insurers. As a result, we expect to recover the entire amortized cost basis of these securities.

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

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

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

CORPORATE DEBT SECURITIES The unrealized losses associated with corporate debt securities are primarily related to securities backed by commercial loans and individual issuer companies. For securities with commercial loans as the underlying collateral, we have evaluated the expected credit losses in

the security and concluded that we have sufficient credit enhancement when compared with our estimate of credit losses for the individual security. For individual issuers, we evaluate the financial performance of the issuer on a quarterly basis to determine that the issuer can make all contractual principal and interest payments. Based upon this assessment, we expect to recover the entire cost basis of these securities.

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

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

MARKETABLE EQUITY SECURITIES Our marketable equity securities include investments in perpetual preferred securities, which provide very attractive tax-equivalent yields. We evaluated these hybrid financial instruments with investment-grade ratings for impairment using an evaluation methodology similar to that used for debt securities. Perpetual preferred securities were not other-than-temporarily impaired at December 31, 2009, if there was no evidence of credit deterioration or investment rating downgrades of any issuers to below investment grade, and we expected to continue to receive full contractual payments. We will continue to evaluate the prospects for these securities for recovery in their market value in accordance with our policy for estimating OTTI. We have recorded impairment write-downs on perpetual preferred securities where there was evidence of credit deterioration.

114

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

The following table shows the gross unrealized losses and fair value of debt and perpetual preferred securities available for sale by those rated investment grade and those rated less than investment grade, according to their lowest credit rating by Standard & Poor’s Rating Services (S&P) or Moody’s Investors Service (Moody’s). Credit ratings express opinions about the credit quality of a security. Securities rated investment grade, that is those rated BBB- or higher by S&P or Baa3 or higher by Moody’s, are generally considered by the rating agencies and market participants to be low credit risk. Conversely, securities rated below investment grade, labeled

as “speculative grade” by the rating agencies, are considered to be distinctively higher credit risk than investment grade securities. We have also included securities not rated by S&P or Moody’s in the table below based on the internal credit grade of the securities (used for credit risk management purposes) equivalent to the credit rating assigned by major credit agencies. There were no unrated securities included in investment grade in a loss position as of December 31, 2009. The unrealized losses and fair value of unrated securities categorized as investment grade were $543 million and $8.1 billion as of December 31, 2008. Substantially all of the unrealized losses on unrated securities classified as investment grade as of December 31, 2008, were related to investments in asset-backed securities collateralized by auto leases and cash reserves that appreciated to an unrealized gain position at December 31, 2009, due to spread tightening. If an internal credit grade was not assigned, we categorized the security as non-investment grade.


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

December 31, 2008
Securities of U.S. Treasury and federal agencies	$	—			—		—			—
Securities of U.S. states and political subdivisions		(1,464	)		5,028		(56	)		157
Mortgage-backed securities:
Federal agencies		(3	)		83		—			—
Residential		(4,574	)		10,045		(143	)		153
Commercial		(3,863	)		6,427		(15	)		27


Total mortgage-backed securities		(8,440	)		16,555		(158	)		180
Corporate debt securities		(36	)		579		(503	)		946
Collateralized debt obligations		(478	)		373		(92	)		22
Other		(549	)		8,612		(53	)		64


Total debt securities		(10,967	)		31,147		(862	)		1,369
Perpetual preferred securities		(311	)		604		(16	)		21


Total	$	(11,278	)		31,751		(878	)		1,390


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


Total mortgage-backed securities		(1,736	)		12,971		(2,178	)		7,670
Corporate debt securities		(31	)		260		(46	)		463
Collateralized debt obligations		(104	)		471		(263	)		439
Other		(85	)		644		(160	)		388


Total debt securities		(2,245	)		18,497		(2,737	)		9,285


Perpetual preferred securities		(65	)		620		—			—


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

115

Note 5: Securities Available for Sale ( continued)

Realized Gains and Losses
The following table shows the gross realized gains and losses on sales from the securities available-for-sale portfolio, including marketable equity securities. Realized losses included OTTI write-downs of $1.1 billion, $1.8 billion and $50 million for 2009, 2008 and 2007, respectively.


	Year ended December 31,
(in millions)	2009			2008			2007

Gross realized gains	$	1,601			1,920			479
Gross realized losses		(1,254	)		(1,891	)		(129	)


Net realized gains	$	347			29			350

Other-Than-Temporary Impairment

The following table shows the detail of total OTTI related to debt and equity securities available for sale, and nonmarketable equity securities.


(in millions)	Year ended December 31, 2009

OTTI write-downs
(included in earnings)
Debt securities		$	1,012
Equity securities:
Marketable equity securities			82
Nonmarketable equity securities			573


Total equity securities			655


Total OTTI write-downs		$	1,667


OTTI on debt securities
Recorded as part of gross realized losses:
Credit-related OTTI		$	982
Securities we intend to sell			30
Recorded directly to other comprehensive income for non-credit-related impairment ⁽¹⁾			1,340


Total OTTI on debt securities		$	2,352

(1)

Represents amounts recorded to OCI on debt securities in periods OTTI write-downs have occurred, which included $1.1 billion related to residential MBS and $179 million related to commercial MBS. Changes in fair value in subsequent periods on such securities, to the extent not subsequently impaired in those periods, are not reflected in this balance.

The following table provides detail of OTTI recognized in earnings for debt and equity securities available for sale by major security type.


	Year ended December 31,
(in millions)	2009		2008


Debt securities
U.S. states and political subdivisions	$	7		14
Residential mortgage-backed securities		595		183
Commercial mortgage-backed securities		137		23
Corporate debt securities		69		176
Collateralized debt obligations		125		147
Other debt securities		79		3


Total debt securities		1,012		546


Marketable equity securities
Perpetual preferred securities		50		1,057
Other marketable equity securities		32		187


Total marketable equity securities		82		1,244


Total OTTI losses recognized in earnings	$	1,094		1,790

Securities that were determined to be credit impaired during the current year as opposed to prior years, in general have experienced further degradation in expected cash flows primarily due to higher loss forecasts.

Other-Than-Temporarily Impaired Debt Securities

We recognize OTTI for debt securities classified as available for sale in accordance with FASB ASC 320, Investments – Debt and Equity Securities , which requires that we assess whether we intend to sell or it is more likely than not that we will be required to sell a security before recovery of its amortized cost basis less any current-period credit losses. For debt securities that are considered other-than-temporarily impaired and that we do not intend to sell and will not be required to sell prior to recovery of our amortized cost basis, we separate the amount of the impairment into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings and is the difference between the security’s amortized cost basis and the present value of its expected future cash flows discounted at the security’s effective yield. The remaining difference between the security’s fair value and the present value of future expected cash flows is due to factors that are not credit related and, therefore, is not required to be recognized as losses in the income statement, but is recognized in OCI. We believe that we will fully collect the carrying value of securities on which we have recorded a non-credit-related impairment in OCI.

116

The table below presents a roll-forward of the credit loss component recognized in earnings (referred to as “credit-impaired” debt securities). The credit loss component of the amortized cost represents the difference between the present value of expected future cash flows and the amortized cost basis of the security prior to considering credit losses. The beginning balance represents the credit loss component for debt securities for which OTTI occurred prior to January 1, 2009. OTTI recognized in earnings in 2009 for credit-impaired debt securities is presented as additions in two components based upon whether the current period is the first time the debt security was credit-impaired (initial credit impairment) or is not the first time the debt security was credit impaired (subsequent credit impairments). The credit loss component is reduced if we sell, intend to sell or believe we will be required to sell previously credit-impaired debt securities. Additionally, the credit loss component is reduced if we receive or expect to receive cash flows in excess of what we previously expected to receive over the remaining life of the credit-impaired debt security, the security matures or is fully written down. Changes in the credit loss component of credit-impaired debt securities were:



(in millions)	Year ended December 31, 2009


Balance, beginning of year		$	471
Additions ⁽¹⁾ :
Initial credit impairments			625
Subsequent credit impairments			357
Reductions:
For securities sold			(255	)
Due to change in intent to sell or requirement to sell			(1	)
For increases in expected cash flows			(10	)


Balance, end of year		$	1,187


(1)		Excludes $30 million of OTTI on debt securities we intend to sell.

For asset-backed securities (e.g., residential MBS), we estimated expected future cash flows of the security by estimating the expected future cash flows of the underlying collateral and applying those collateral cash flows, together with any credit enhancements such as subordinated interests owned by third parties, to the security. The expected future cash flows of the underlying collateral are determined using the remaining contractual cash flows adjusted for future expected credit losses (which considers current delinquencies and nonperforming assets, future expected default rates and collateral value by vintage and geographic region) and prepayments. The expected cash flows of the security are then discounted at the interest rate used to recognize interest income on the security to arrive at a present value amount. The table below presents a summary of the significant inputs considered in determining the measurement of the credit loss component recognized in earnings for residential MBS.



	Non-agency residential MBS –
	non-investment grade		⁽¹⁾
	Year ended December 31, 2009

Expected remaining life of loan losses ⁽²⁾ :
Range ⁽³⁾		0-58	%
Credit impairment distribution ⁽⁴⁾ :
0-10% range		56
10-20% range		27
20-30% range		12
Greater than 30%		5
Weighted average ⁽⁵⁾		11
Current subordination levels ⁽⁶⁾ :
Range ⁽³⁾		0-44
Weighted average ⁽⁵⁾		8
Prepayment speed (annual CPR ⁽⁷⁾ ):
Range ⁽³⁾		5-25
Weighted average ⁽⁵⁾		11


(1)		Total credit impairment losses were $591 million, of which 96% were recorded on non-investment grade securities for the year ended December 31, 2009. This does not include OTTI recorded on those securities that we intend to sell.

(2)		Represents future expected credit losses on underlying pool of loans expressed as a percentage of total current outstanding loan balance.

(3)		Represents the range of inputs/assumptions based upon the individual securities within each category.

(4)		Represents distribution of credit impairment losses recognized in earnings categorized based on range of expected remaining life of loan losses.

		For example, 56% of credit impairment losses recognized in earnings for the year ended December 31, 2009, had expected remaining life of loan loss assumptions of 0 to 10%.

(5)		Calculated by weighting the relevant input/assumption for each individual security by current outstanding amortized cost basis of the security.

(6)		Represents current level of credit protection (subordination) for the securities, expressed as a percentage of total current underlying loan balance.

(7)		Constant prepayment rate.

117

Note 5: Securities Available for Sale ( continued)

Contractual Maturities

The following table shows the remaining contractual principal maturities and contractual yields of debt securities available for sale. The remaining contractual principal maturities for

MBS were determined assuming no prepayments. Remaining expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations before the underlying mortgages mature.



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


December 31, 2008
Securities of U.S. Treasury and federal agencies	$	3,249		1.63	%	$	1,720		0.02	%	$	1,120		3.36	%	$	395		3.54	%	$	14		5.05	%
Securities of U.S. states and political subdivisions		12,658		6.80			189		5.77			672		6.84			1,040		6.74			10,757		6.82
Mortgage-backed securities:
Federal agencies		66,434		5.87			42		4.24			129		5.03			322		5.73			65,941		5.88
Residential		24,830		5.57			—		—			—		—			47		4.95			24,783		5.57
Commercial		8,478		5.32			—		—			5		1.57			135		6.13			8,338		5.31


Total mortgage-backed securities		99,742		5.75			42		4.24			134		4.91			504		5.76			99,062		5.75


Corporate debt securities		6,924		5.15			492		5.00			3,683		4.31			2,231		6.71			518		4.49
Collateralized debt obligations		2,085		4.17			—		—			90		5.68			1,081		4.81			914		3.26
Other		20,775		4.76			53		4.71			7,880		6.75			1,691		3.71			11,151		3.52


Total debt securities at fair value ⁽¹⁾⁽²⁾	$	145,433		5.56	%	$	2,496		1.61	%	$	13,579		5.79	%	$	6,942		5.44	%	$	122,416		5.62	%


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


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

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


Total debt securities at fair value ⁽¹⁾	$	167,118		5.33	%	$	3,452		4.63	%	$	13,799		5.64	%	$	9,463		4.51	%	$	140,404		5.37	%


(1)	The weighted-average yield is computed using the contractual coupon of each security weighted based on the fair value of each security.

(2)	Information for December 31, 2008, has been revised to conform the determination of remaining contractual principal maturities and weighted-average yields to the current period methodology.

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Note 6: Loans and Allowance for Credit Losses

The following table presents the major categories of loans outstanding including those subject to accounting guidance for PCI loans. Certain loans acquired in the Wachovia acquisition are accounted for as PCI loans and are included below, net of any remaining purchase accounting adjustments.

Outstanding balances of all other loans are presented net of unearned income, net deferred loan fees, and unamortized discount and premium totaling $14.6 billion at December 31, 2009, and $16.9 billion, at December 31, 2008.



	December 31,
	2009						2008						⁽¹⁾	2007		2006		2005
			All						All
	PCI		other				PCI		other
(in millions)	loans		loans		Total		loans		loans		Total


Commercial and commercial real estate:
Commercial	$	1,911		156,441		158,352		4,580		197,889		202,469			90,468		70,404		61,552
Real estate mortgage		5,631		99,167		104,798		7,762		95,346		103,108			36,747		30,112		28,545
Real estate construction		3,713		25,994		29,707		4,503		30,173		34,676			18,854		15,935		13,406
Lease financing		—		14,210		14,210		—		15,829		15,829			6,772		5,614		5,400

Total commercial and commercial real estate		11,255		295,812		307,067		16,845		339,237		356,082			152,841		122,065		108,903

Consumer:
Real estate 1-4 family first mortgage		38,386		191,150		229,536		39,214		208,680		247,894			71,415		53,228		77,768
Real estate 1-4 family junior lien mortgage		331		103,377		103,708		728		109,436		110,164			75,565		68,926		59,143
Credit card		—		24,003		24,003		—		23,555		23,555			18,762		14,697		12,009
Other revolving credit and installment		—		89,058		89,058		151		93,102		93,253			56,171		53,534		47,462

Total consumer		38,717		407,588		446,305		40,093		434,773		474,866			221,913		190,385		196,382

Foreign		1,733		27,665		29,398		1,859		32,023		33,882			7,441		6,666		5,552

Total loans	$	51,705		731,065		782,770		58,797		806,033		864,830			382,195		319,116		310,837


(1)	In 2009, we refined certain of our preliminary purchase accounting adjustments based on additional information as of December 31, 2008. These refinements resulted in increasing the PCI loans carrying value at December 31, 2008, to $59.2 billion. The table above has not been updated as of December 31, 2008, to reflect these refinements.

We pledge loans to secure borrowings from the FHLB and the Federal Reserve Bank as part of our liquidity management strategy. Loans pledged where the secured party does not have the right to sell or repledge totaled $312.6 billion and $337.5 billion at December 31, 2009 and 2008, respectively. We did not have any pledged loans where the secured party has the right to sell or repledge at December 31, 2009 or 2008.

Loan concentrations may exist when there are amounts loaned to borrowers engaged in similar activities or similar types of loans extended to a diverse group of borrowers that would cause them to be similarly impacted by economic or other conditions. At December 31, 2009 and 2008, we did not have concentrations representing 10% or more of our total loan portfolio in commercial loans and lease financing by industry or CRE loans (real estate mortgage and real estate construction) by state or property type. Our real estate 1-4 family mortgage loans to borrowers in the state of California represented approximately 14% of total loans at both December 31, 2009 and 2008. Of this amount, 3% of total loans were PCI loans at December 31, 2009. These loans are generally diversified among the larger metropolitan areas in California, with no single area consisting of more than 3% of total loans. Changes in real estate values and underlying

economic or market conditions for these areas are monitored continuously within our credit risk management process. Beginning in 2007, the residential real estate markets experienced significant declines in property values, and several markets in California, specifically the Central Valley and several Southern California metropolitan statistical areas, experienced more severe value adjustments.

Some of our real estate 1-4 family mortgage loans, including first mortgage and home equity products, include an interest-only feature as part of the loan terms. At December 31, 2009, these loans were approximately 15% of total loans, compared with 11% at December 31, 2008. Most of these loans are considered to be prime or near prime.

For certain extensions of credit, we may require collateral, based on our assessment of a customer’s credit risk. We hold various types of collateral, including accounts receivable, inventory, land, buildings, equipment, autos, financial instruments, income-producing commercial properties and residential real estate. Collateral requirements for each customer may vary according to the specific credit underwriting, terms and structure of loans funded immediately or under a commitment to fund at a later date.

119

Note 6: Loans and Allowance for Credit Losses ( continued)

A commitment to extend credit is a legally binding agreement to lend funds to a customer, usually at a stated interest rate and for a specified purpose. These commitments have fixed expiration dates and generally require a fee. When we make such a commitment, we have credit risk. The liquidity requirements or credit risk will be lower than the contractual amount of commitments to extend credit because a significant portion of these commitments are expected to expire without being used. Certain commitments are subject to loan agreements with covenants regarding the financial performance of the customer or borrowing base formulas that must be met before we are required to fund the commitment. We use the same credit policies in extending credit for unfunded commitments and letters of credit that we use in making loans. See Note 14 in this Report for information on standby letters of credit.

In addition, we manage the potential risk in credit commitments by limiting the total amount of arrangements, both by individual customer and in total, by monitoring the size and maturity structure of these portfolios and by applying the same credit standards for all of our credit activities.

The total of our unfunded loan commitments, net of all funds lent and all standby and commercial letters of credit issued under the terms of these commitments, is summarized by loan category in the following table:



	December 31,
(in millions)	2009		2008


Commercial and commercial real estate:
Commercial	$	187,319		195,507
Real estate mortgage		5,138		6,536
Real estate construction		9,385		19,063


Total commercial and commercial real estate		201,842		221,106


Consumer:
Real estate 1-4 family first mortgage		33,460		36,964
Real estate 1-4 family junior lien mortgage		63,338		78,417
Credit card		65,952		75,776
Other revolving credit and installment		20,778		22,231


Total consumer		183,528		213,388


Foreign		4,468		4,817


Total unfunded loan commitments	$	389,838		439,311

We have an established process to determine the adequacy of the allowance for credit losses that assesses the risks and losses inherent in our portfolio. While we attribute portions of the allowance to specific loan categories as part of our analytical process, the entire allowance is used to absorb credit losses inherent in the total loan portfolio.

At December 31, 2009, the portion of the allowance for credit losses estimated at a pooled level for consumer loans and some segments of commercial small business loans was $16.7 billion. For purposes of determining the allowance for credit losses, we pool certain loans in our portfolio by product type, primarily for the auto, credit card and real estate mortgage portfolios. To achieve greater accuracy, we further segment selected portfolios. As appropriate, the business groups may attempt to achieve greater accuracy through segmentation by sub-product, origination channel, vintage, loss type, geography and other predictive characteristics. For example, credit cards

are segmented by origination channel and the Home Equity portfolios into liquidating and nonliquidating portfolios. In the case of residential mortgages, we segment the liquidating Pick-a-Pay portfolio, and further segment the remainder of the residential mortgage portfolio based on origination channel.

To measure losses inherent in consumer loans and some commercial small business loans, we use loss models and other quantitative, mathematical techniques. Each business group estimates losses for loans as of the balance sheet date over the loss emergence period. During fourth quarter 2008, we conformed our loss emergence period for these portfolios to cover 12 months of estimated losses, which is within Federal Financial Institutions Examination Council (FFIEC) guidelines and resulted in a $2.7 billion increase to the allowance for credit losses in 2008.

In determining the appropriate allowance attributable to our residential real estate portfolios, the loss rates used in our analysis include the impacts of our established loan modification programs. When modifications occur or are probable to occur, our allowance considers the impact of these modifications, taking into consideration the associated credit cost, including re-defaults of modified loans and projected loss severity. The loss content associated with existing and probable loan modifications has been considered in our allowance reserving methodology.

The portion of the allowance for commercial, CRE, and foreign loans and lease financing was $8.3 billion at December 31, 2009. We initially estimate this portion of the allowance by applying historical loss factors statistically derived from tracking losses associated with actual portfolio movements over a specified period of time, for each specific loan grade. Based on this process, we assign loss factors to each pool of graded loans and a loan equivalent amount for unfunded loan commitments and letters of credit. These estimates are then adjusted or supplemented where necessary from additional analysis of long-term average loss experience, external loss data or other risks identified from current conditions and trends in selected portfolios, including management’s judgment for imprecision and uncertainty.

We also assess and account for certain nonaccrual commercial, CRE, and foreign loan exposures that are over $5 million and certain consumer, commercial, CRE, and foreign loans whose terms have been modified in a TDR as impaired. We include the impairment on these nonperforming loans in the allowance unless it has already been recognized as a loss. At December 31, 2009, we included $2.8 billion in the allowance related to these impaired loans, which is included in other components of the allowance described above.

Reflected in the portions of the allowance previously described is an amount for imprecision or uncertainty that incorporates the range of probable outcomes inherent in estimates used for the allowance, which may change from period to period. This amount is the result of our judgment of risks inherent in the portfolios, economic uncertainties, historical loss experience and other subjective factors, including industry trends, calculated to better reflect our view of risk in each loan portfolio.

120

In addition, the allowance for credit losses included a reserve for unfunded credit commitments of $515 million at December 31, 2009.

The total allowance reflects management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. We consider the allowance for credit losses of

$25.0 billion adequate to cover credit losses inherent in the loan portfolio, including unfunded credit commitments, at December 31, 2009.

The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded credit commitments. Changes in the allowance for credit losses were:



	Year ended December 31,
(in millions)	2009			2008			2007			2006			2005


Balance, beginning of year	$	21,711			5,518			3,964			4,057			3,950
Provision for credit losses		21,668			15,979			4,939			2,204			2,383
Loan charge-offs:
Commercial and commercial real estate:
Commercial		(3,365	)		(1,653	)		(629	)		(414	)		(406	)
Real estate mortgage		(758	)		(29	)		(6	)		(5	)		(7	)
Real estate construction		(975	)		(178	)		(14	)		(2	)		(6	)
Lease financing		(229	)		(65	)		(33	)		(30	)		(35	)


Total commercial and commercial real estate		(5,327	)		(1,925	)		(682	)		(451	)		(454	)


Consumer:
Real estate 1-4 family first mortgage		(3,318	)		(540	)		(109	)		(103	)		(111	)
Real estate 1-4 family junior lien mortgage		(4,812	)		(2,204	)		(648	)		(154	)		(136	)
Credit card		(2,708	)		(1,563	)		(832	)		(505	)		(553	)
Other revolving credit and installment		(3,423	)		(2,300	)		(1,913	)		(1,685	)		(1,480	)


Total consumer		(14,261	)		(6,607	)		(3,502	)		(2,447	)		(2,280	)


Foreign		(237	)		(245	)		(265	)		(281	)		(298	)

Total loan charge-offs		(19,825	)		(8,777	)		(4,449	)		(3,179	)		(3,032	)

Loan recoveries:
Commercial and commercial real estate:
Commercial		254			114			119			111			133
Real estate mortgage		33			5			8			19			16
Real estate construction		16			3			2			3			13
Lease financing		20			13			17			21			21


Total commercial and commercial real estate		323			135			146			154			183

Consumer:
Real estate 1-4 family first mortgage		185			37			22			26			21
Real estate 1-4 family junior lien mortgage		174			89			53			36			31
Credit card		180			147			120			96			86
Other revolving credit and installment		755			481			504			537			365


Total consumer		1,294			754			699			695			503


Foreign		40			49			65			76			63


Total loan recoveries		1,657			938			910			925			749


Net loan charge-offs ⁽¹⁾		(18,168	)		(7,839	)		(3,539	)		(2,254	)		(2,283	)


Allowances related to business combinations/other		(180	)		8,053			154			(43	)		7


Balance, end of year	$	25,031			21,711			5,518			3,964			4,057


Components:
Allowance for loan losses	$	24,516			21,013			5,307			3,764			3,871
Reserve for unfunded credit commitments		515			698			211			200			186


Allowance for credit losses	$	25,031			21,711			5,518			3,964			4,057


Net loan charge-offs as a percentage of average total loans ⁽¹⁾		2.21	%		1.97			1.03			0.73			0.77
Allowance for loan losses as a percentage of total loans ⁽²⁾		3.13			2.43			1.39			1.18			1.25
Allowance for credit losses as a percentage of total loans ⁽²⁾		3.20			2.51			1.44			1.24			1.31


(1)		For PCI loans, charge-offs are only recorded to the extent that losses exceed the purchase accounting estimates.

(2)		The allowance for credit losses includes $333 million for the year ended December 31, 2009, and none for prior years related to PCI loans acquired from Wachovia. Loans acquired from Wachovia are included in total loans, net of related purchase accounting net write-downs.

Nonaccrual loans were $24.4 billion and $6.8 billion at December 31, 2009 and 2008, respectively. PCI loans have been classified as accruing. Loans past due 90 days or more as to interest or principal and still accruing interest were $22.2 billion at December 31, 2009, and $11.8 billion at December 31, 2008. The 2009 and 2008 balances included

$15.3 billion and $8.2 billion, respectively, in advances pursuant to our servicing agreements to the Government National Mortgage Association (GNMA) mortgage pools and similar loans whose repayments are insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).

121

Note 6: Loans and Allowance for Credit Losses ( continued)

We consider a loan to be impaired under the accounting guidance for loan impairment provisions when, based on current information and events, we determine that we will not be able to collect all amounts due according to the loan contract, including scheduled interest payments. We assess and account for as impaired certain nonaccrual commercial, CRE and foreign loan exposures that are over $5 million and certain consumer, commercial, CRE and foreign loans whose terms have been modified in a TDR. The recorded investment in impaired loans and the methodology used to measure impairment was:



	December 31,
(in millions)	2009		2008


Impairment measurement based on:
Collateral value method	$	561		88
Discounted cash flow method ⁽¹⁾		15,217		3,552


Total ⁽²⁾	$	15,778		3,640


(1)		The December 31, 2009, balance includes $501 million of GNMA loans that are insured by the FHA or guaranteed by the VA. Although both principal and interest are insured, the insured interest rate may be different than the original contractual interest rate prior to modification, resulting in interest impairment under a discounted cash flow methodology.

(2)		Includes $15.0 billion and $3.5 billion of impaired loans with a related allowance of $2.8 billion and $816 million at December 31, 2009 and 2008, respectively. The remaining impaired loans do not have a specific impaired allowance associated with them.

The average recorded investment in these impaired loans was $10.6 billion, $2.0 billion and $313 million, in 2009, 2008 and 2007, respectively.

When the ultimate collectibility of the total principal of an impaired loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal, under the cost recovery method. When the ultimate collectibility of the total principal of an impaired loan is not in doubt and the loan is on nonaccrual status, contractual interest is credited to interest income when received, under the cash basis method. Total interest income recognized for impaired loans in 2009, 2008 and 2007 under the cash basis method was not significant.

Purchased Credit-Impaired Loans

PCI loans had an unpaid principal balance of $83.6 billion at December 31, 2009, and $98.2 billion at December 31, 2008 (refined), and a carrying value, before the deduction of the allowance for loan losses, of $51.7 billion and $59.2 billion, respectively. The following table provides details on the PCI loans acquired from Wachovia.



(in millions)	December 31, 2008 (refined			)


Contractually required payments including interest		$	115,008
Nonaccretable difference ⁽¹⁾			(45,398	)


Cash flows expected to be collected ⁽²⁾			69,610
Accretable yield			(10,447	)



Fair value of loans acquired		$	59,163


(1)		Includes $40.9 billion in principal cash flows not expected to be collected, $2.0 billion of pre-acquisition charge-offs and $2.5 billion of future interest not expected to be collected.

(2)		Represents undiscounted expected principal and interest cash flows.

The excess of cash flows expected to be collected over the initial fair value of PCI loans is referred to as the accretable yield and is accreted into interest income over the estimated life of the PCI loans using the effective yield method. The accretable yield will change due to:

•		estimate of the remaining life of PCI loans which may change the amount of future interest income, and possibly principal, expected to be collected;

•		estimate of the amount of contractually required principal and interest payments over the estimated life that will not be collected (the nonaccretable difference); and

•		indices for PCI loans with variable rates of interest.

For PCI loans, the impact of loan modifications is included in the evaluation of expected cash flows for subsequent decreases or increases of cash flows. For variable rate PCI loans, expected future cash flows will be recalculated as the rates adjust over the lives of the loans. At acquisition, the expected future cash flows were based on the variable rates that were in effect at that time. The change in the accretable yield related to PCI loans is presented in the following table.



(in millions)	Year ended December 31, 2009


Total, beginning of year (refined)		$	(10,447	)
Accretion (recognized in earnings)			2,606
Reclassification from nonaccretable difference for loans with improving cash flows			(441	)
Changes in expected cash flows that do not affect nonaccretable difference ⁽¹⁾			(6,277	)


Total, end of year		$	(14,559	)


(1)		Represents changes in interest cash flows due to the impact of modifications incorporated into the quarterly assessment of expected future cash flows and/or changes in interest rates on variable rate loans.

When it is estimated that the expected cash flows have decreased subsequent to acquisition for a PCI loan or pool of loans, an allowance is established and a provision for additional loss is recorded as a charge to income. The table below summarizes the changes in allowance for PCI loan losses.



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


Balance at December 31, 2008		$	—			—		—		—
Provision for losses due to credit deterioration			850			—		3		853
Charge-offs			(520	)		—		—		(520	)


Balance at December 31, 2009		$	330			—		3		333

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Note 7: Premises, Equipment, Lease Commitments and Other Assets



	December 31,
(in millions)	2009		2008

Land	$	2,140		2,029
Buildings		8,143		8,232
Furniture and equipment		6,232		5,589
Leasehold improvements		1,381		1,309
Premises and equipment leased under capital leases		152		110


Total premises and equipment		18,048		17,269
Less: Accumulated depreciation and amortization		7,312		6,000


Net book value, premises and equipment	$	10,736		11,269

Depreciation and amortization expense for premises and equipment was $1.3 billion, $861 million and $828 million in 2009, 2008 and 2007, respectively.

Dispositions of premises and equipment, included in noninterest expense, resulted in net losses of $22 million in 2009 and net gains of $22 million and $3 million in 2008 and 2007, respectively.

We have obligations under a number of noncancelable operating leases for premises and equipment. The terms of these leases are predominantly up to 15 years, with the longest up to 78 years, and many provide for periodic adjustment of rentals based on changes in various economic indicators. Some leases also include a renewal option. The following table provides the future minimum payments under capital leases and noncancelable operating leases, net of sublease rentals, with terms greater than one year as of December 31, 2009.



	Operating		Capital
(in millions)	leases		leases


Year ended December 31,
2010	$	1,217		53
2011		1,078		13
2012		977		5
2013		849		4
2014		739		3
Thereafter		3,503		25


Total minimum lease payments	$	8,363		103


Executory costs			$	(13	)
Amounts representing interest				(13	)


Present value of net minimum lease payments			$	77

Operating lease rental expense (predominantly for premises), net of rental income, was $1.4 billion, $709 million and $673 million in 2009, 2008 and 2007, respectively.

The components of other assets were:



	December 31 ,
(in millions)	2009		2008


Nonmarketable equity investments:
Cost method:
Private equity investments	$	3,808		3,040
Federal bank stock		5,985		6,106


Total cost method		9,793		9,146
Equity method		5,138		6,358
Principal investments ⁽¹⁾		1,423		1,278


Total nonmarketable equity investments ⁽²⁾		16,354		16,782
Corporate/bank-owned life insurance		19,515		18,339
Accounts receivable		20,565		22,493
Interest receivable		5,946		5,746
Core deposit intangibles		10,774		11,999
Customer relationship and other intangibles		2,168		3,516
Net deferred taxes		3,212		13,864
Foreclosed assets:
GNMA loans ⁽³⁾		960		667
Other		2,199		1,526
Operating lease assets		2,395		2,251
Due from customers on acceptances		810		615
Other		19,282		12,003


Total other assets	$	104,180		109,801


(1)		Principal investments are recorded at fair value with realized and unrealized gains (losses) included in net gains (losses) from equity investments in the income statement.

(2)		Certain amounts in the above table have been reclassified to conform to the current presentation.

(3)		Consistent with regulatory reporting requirements, foreclosed assets include foreclosed real estate securing GNMA loans. Both principal and interest for GNMA loans secured by the foreclosed real estate are collectible because the GNMA loans are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs.

Income related to nonmarketable equity investments was:



	Year ended December 31,
(in millions)	2009			2008			2007


Net gains (losses) from:
Private equity investments ⁽¹⁾	$	(368	)		265			598
Principal investments		79			—			—
All other nonmarketable equity investments		(234	)		(10	)		4


Net gains (losses) from nonmarketable equity investments	$	(523	)		255			602


(1)		Net gains in 2008 include $334 million gain from our ownership in Visa, which completed its initial public offering in March 2008.

123

Note 8: Securitizations and Variable Interest Entities

Involvement with SPEs

In the normal course of business, we enter into various types of on- and off-balance sheet transactions with special purpose entities (SPEs), which are corporations, trusts or partnerships that are established for a limited purpose. Historically, the majority of SPEs were formed in connection with securitization transactions. In a securitization transaction, assets from our balance sheet are transferred to an SPE, which then issues to investors various forms of interests in those assets and may also enter into derivative transactions. In a securitization transaction, we typically receive cash and/or other interests in an SPE as proceeds for the assets we transfer. Also, in certain transactions, we may retain the right to service the transferred receivables and to repurchase those receivables from the SPE if the outstanding balance of the receivables falls to a level where the cost exceeds the benefits of servicing such receivables. In addition, we may purchase the right to service loans in a SPE that were transferred to the SPE by a third party.

In connection with our securitization activities, we have various forms of ongoing involvement with SPEs, which may include:

•		underwriting securities issued by SPEs and subsequently making markets in those securities;

•		providing liquidity facilities to support short-term obligations of SPEs issued to third party investors;

•		providing credit enhancement on securities issued by SPEs or market value guarantees of assets held by SPEs through the use of letters of credit, financial guarantees, credit default swaps and total return swaps;

•		entering into other derivative contracts with SPEs;

•		holding senior or subordinated interests in SPEs;

•		acting as servicer or investment manager for SPEs; and

•		providing administrative or trustee services to SPEs.

The SPEs we use are primarily either qualifying SPEs (QSPEs), which are not consolidated under existing accounting guidance if the criteria described below are met, or variable interest entities (VIEs). To qualify as a QSPE, an entity must be passive and must adhere to significant limitations on the types of assets and derivative instruments it may own and the extent of activities and decision making in which it may engage. For example, a QSPE’s activities are generally limited to purchasing assets, passing along the cash flows of those assets to its investors, servicing its assets and, in certain transactions, issuing liabilities. Among other restrictions on a QSPE’s activities, a QSPE may not actively manage its assets through discretionary sales or modifications.

A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest. Under existing accounting guidance, a VIE is consolidated by its primary beneficiary, which, under current accounting standards, is the entity that, through its variable interests, absorbs the majority of a VIE’s variability. A variable interest is a contractual, ownership or other interest that changes with changes in the fair value of the VIE’s net assets.

124

The classifications of assets and liabilities in our balance sheet associated with our transactions with QSPEs and VIEs follow:



								Transfers that
			VIEs that we			VIEs		we account
			do not			that we		for as secured
(in millions)	QSPEs		consolidate		⁽¹⁾	consolidate		borrowings		Total


December 31, 2008
Cash	$	—		—			117		287		404
Trading account assets		1,261		5,241			71		141		6,714
Securities ⁽²⁾		18,078		15,117			922		6,094		40,211
Mortgages held for sale		56		—			—		—		56
Loans ⁽³⁾		—		16,882			217		4,126		21,225
Mortgage servicing rights ⁽⁴⁾		14,966		—			—		—		14,966
Other assets		345		5,022			2,416		55		7,838


Total assets		34,706		42,262			3,743		10,703		91,414


Short-term borrowings		—		—			307		1,440		1,747
Accrued expenses and other liabilities ⁽⁴⁾		514		1,976			330		26		2,846
Long-term debt		—		—			1,773		7,125		8,898
Noncontrolling interests		—		—			121		—		121


Total liabilities and noncontrolling interests		514		1,976			2,531		8,591		13,612


Net assets	$	34,192		40,286			1,212		2,112		77,802


December 31, 2009
Cash	$	—		—			273		328		601
Trading account assets		1,309		4,788			77		35		6,209
Securities ⁽²⁾		21,015		14,171			1,794		7,126		44,106
Loans ⁽³⁾		—		15,698			561		2,007		18,266
Mortgage servicing rights		16,233		—			—		—		16,233
Other assets		41		5,563			2,595		68		8,267


Total assets		38,598		40,220			5,300		9,564		93,682


Short-term borrowings		—		—			351		1,996		2,347
Accrued expenses and other liabilities		1,113		2,239			708		4,864		8,924
Long-term debt		—		—			1,448		1,938		3,386
Noncontrolling interests		—		—			68		—		68


Total liabilities and noncontrolling interests		1,113		2,239			2,575		8,798		14,725


Net assets	$	37,485		37,981			2,725		766		78,957


(1)		Reverse repurchase agreements of $20 million are included in other assets at December 31, 2009. These instruments were included in loans at December 31, 2008, in the amount of $349 million. The balance for securities at December 31, 2008, has been revised to reflect the removal of funds for which we had no contractual support arrangements.

(2)		Excludes certain debt securities related to loans serviced for the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and Government National Mortgage Association (GNMA).

(3)		Excludes related allowance for loan losses.

(4)		Balances related to QSPEs involving mortgage servicing rights and accrued expenses and other liabilities have been revised to reflect additionally identified QSPEs.

The following disclosures regarding our continuing involvement with QSPEs and unconsolidated VIEs exclude entities where our only involvement is in the form of: (1) investments in trading securities, (2) investments in securities or loans underwritten by third parties, (3) derivative counterparty for certain derivatives such as interest rate swaps or cross currency swaps that have customary terms, and (4) administrative or trustee services. We determined these forms of involvement are not significant due to the temporary nature and size as well as our lack of involvement in the design or operations of unconsolidated VIEs or QSPEs. Also not included are investments accounted for in accordance with the AICPA Investment Company Audit Guide, investments accounted for under the cost method and investments accounted for under the equity method.

Transactions with QSPEs

We use QSPEs to securitize consumer and CRE loans and other types of financial assets, including student loans, auto loans and municipal bonds. We typically retain the servicing rights from these sales and may continue to hold other beneficial interests in QSPEs. We may also provide liquidity to investors in the beneficial interests and credit enhancements in the form of standby letters of credit. Through these securitizations we may be exposed to liability under limited amounts of recourse as well as standard representations and warranties we make to purchasers and issuers. The amount recorded for this liability is included in other commitments and guarantees in the following table.

125

Note 8: Securitizations and Variable Interest Entities ( continued)

A summary of our involvements with QSPEs follows:



												Other
	Total			Debt and								commitments
	QSPE			equity			Servicing					and			Net
(in millions)	assets		⁽¹⁾	interests		⁽²⁾	assets		Derivatives			guarantees			assets


December 31, 2008				Carrying value – asset (liability													)

Residential mortgage loan securitizations ⁽³⁾ :
Conforming ⁽⁴⁾	$	1,008,824			10,207			11,715		—			(426	)		21,496
Other/nonconforming		313,447			7,262			2,276		30			(85	)		9,483
Commercial mortgage securitizations ⁽³⁾		320,399			1,452			918		524			—			2,894
Auto loan securitizations		4,133			72			—		43			—			115
Student loan securitizations		2,765			76			57		—			—			133
Other		11,877			74			—		(3	)		—			71

Total	$	1,661,345			19,143			14,966		594			(511	)		34,192

				Maximum exposure to loss

Residential mortgage loan securitizations ⁽³⁾ :
Conforming ⁽⁴⁾				$	10,207			11,715		—			2,697			24,619
Other/nonconforming					7,262			2,276		300			71			9,909
Commercial mortgage securitizations ⁽³⁾					1,452			918		524			—			2,894
Auto loan securitizations					72			—		43			—			115
Student loan securitizations					76			57		—			—			133
Other					74			—		1,465			37			1,576

Total				$	19,143			14,966		2,332			2,805			39,246

December 31, 2009				Carrying value – asset (liability													)

Residential mortgage loan securitizations:
Conforming ⁽⁴⁾	$	1,150,515			5,846			13,949		—			(869	)		18,926
Other/nonconforming		251,850			11,683			1,538		16			(15	)		13,222
Commercial mortgage securitizations		345,561			3,760			696		489			—			4,945
Auto loan securitizations		2,285			137			—		21			—			158
Student loan securitizations		2,637			123			50		—			—			173
Other		8,391			57			—		4			—			61

Total	$	1,761,239			21,606			16,233		530			(884	)		37,485

				Maximum exposure to loss

Residential mortgage loan securitizations:
Conforming ⁽⁴⁾				$	5,846			13,949		—			4,567			24,362
Other/nonconforming					11,683			1,538		30			218			13,469
Commercial mortgage securitizations					3,760			696		766			—			5,222
Auto loan securitizations					137			—		21			—			158
Student loan securitizations					123			50		—			—			173
Other					57			—		78			—			135


Total				$	21,606			16,233		895			4,785			43,519



(1)		Represents the remaining principal balance of assets held by QSPEs using the most current information available.

(2)		Excludes certain debt securities held related to loans serviced for FNMA, FHLMC and GNMA.

(3)		Certain balances have been revised to reflect additionally identified residential mortgage QSPEs, as well as to reflect removal of commercial mortgage asset transfers that were subsequently determined not to be transfers to QSPEs.

(4)		Conforming residential mortgage loan securitizations are those that are guaranteed by GSEs. Other commitments and guarantees include amounts related to loans sold to QSPEs that we may be required to repurchase, or otherwise indemnify or reimburse the investor or insurer for losses incurred, due to material breach of contractual representations and warranties. The maximum exposure to loss for material breach of contractual representations and warranties represents a stressed case estimate we utilize for determining stressed case regulatory capital needs and has been revised as of December 31, 2008, to conform with the 2009 basis of determination.

“Maximum exposure to loss” represents the carrying value of our involvement with off-balance sheet QSPEs plus remaining undrawn liquidity and lending commitments, notional amount of net written derivative contracts, and generally the notional amount of, or stressed loss estimate for, other commitments and guarantees. Maximum exposure to loss is a required disclosure under GAAP and, as presented

in the preceding table, represents estimated loss that would be incurred under severe, hypothetical circumstances, for which we believe the possibility of occurrence is extremely remote, such as where the value of our interests and any associated collateral declines to zero, without any consideration of recovery or offset from any economic hedges. Accordingly, this required disclosure is not an indication of expected loss.

126

We recognized net gains of $1 million from sales of financial assets in securitizations in 2009 (none in 2008).

Additionally, we had the following cash flows with our securitization trusts.



	Year ended December 31 ,
			2009				2008
			Other				Other
	Mortgage		financial		Mortgage		financial
(in millions)	loans		assets		loans		assets


Sales proceeds from securitizations ⁽¹⁾	$	394,632		—		212,770		—
Servicing fees		4,283		42		3,128		—
Other interests held		3,757		296		1,509		131
Purchases of delinquent assets		45		—		36		—
Net servicing advances		257		—		61		—


(1)		Represents cash flow data for all loans securitized in the period presented.

For securitizations completed in 2009 and 2008, we used the following weighted-average assumptions to determine the fair value of

residential mortgage servicing rights and other interests held at the date of securitization.



	Mortgage				Other		Other interests held –
	servicing rights			interests held				subordinate debt
	2009		2008	2009		2008		2009	2008


Prepayment speed (annual CPR ⁽¹⁾ )	13.4	%	12.7	—		36.0		—	13.3
Life (in years)	5.6		7.1	—		2.3		—	5.7
Discount rate	8.3		9.4	—		7.2		—	6.7
Expected life of loan losses								—	1.1


(1)		Constant prepayment rate.

Key economic assumptions and the sensitivity of the current fair value to immediate adverse changes in those assumptions at December 31, 2009, for residential and

commercial mortgage servicing rights, and other interests held related primarily to residential mortgage loan securitizations are presented in the following table.




				Other interests held							⁽¹⁾

	Mortgage			Interest-
	servicing			only		Subordinated			Senior
(in millions)	rights			strips		bonds		⁽²⁾	bonds		⁽³⁾



Fair value of interests held	$	17,259			532		447			5,801
Expected weighted-average life (in years)		5.8			5.2		4.2			6.0
Prepayment speed assumption (annual CPR)		12.2	%		12.2		8.8			9.9
Decrease in fair value from:
10% adverse change	$	718			13		3			43
25% adverse change		1,715			35		9			116
Discount rate assumption		9.0	%		20.9		9.7			9.4
MSRs and other interests held
Decrease in fair value from:
100 basis point increase	$	755			14		14			203
200 basis point increase		1,449			28		27			389
Credit loss assumption							4.3	%		4.7
Decrease in fair value from:
10% higher losses						$	11			6
25% higher losses							22			16


(1)		Excludes securities retained in securitizations issued through GSEs such as FNMA, FHLMC and GNMA because we do not believe the value of these securities would be materially affected by the adverse changes in assumptions noted in the table. These GSE securities and other interests held presented in this table are included in debt and equity interests in our disclosure of our involvements with QSPEs shown on page 126.

(2)		Subordinated interests include only those bonds whose credit rating was below AAA by a major rating agency at issuance.

(3)		Senior interests include only those bonds whose credit rating was AAA by a major rating agency at issuance.

127

Note 8: Securitizations and Variable Interest Entities ( continued)

The sensitivities in the table above are hypothetical and caution should be exercised when relying on this data. Changes in fair value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in the assumption to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the other interests held is

calculated independently without changing any other assumptions. In reality, changes in one factor may result in changes in others (for example, changes in prepayment speed estimates could result in changes in the discount rates), which might magnify or counteract the sensitivities.

The table below presents information about the principal balances of owned and securitized loans.

Total loans

⁽¹⁾

Delinquent loans

⁽²⁾⁽³⁾

Net charge-offs

⁽³⁾

December 31,

Year ended December 31,

(in millions)

2009

2008

2009

2008

2009

2008

Commercial and commercial real estate:

Commercial

159,185

204,113

5,052

1,471

3,111

1,539

Real estate mortgage

326,314

310,480

12,375

1,058

833

Real estate construction

29,707

34,676

3,765

1,221

959

175

Lease financing

14,210

15,829

171

209

Total commercial and commercial real estate

529,416

565,098

21,363

3,842

5,112

1,792

Consumer:

Real estate 1-4 family first mortgage

1,331,568

1,165,456

19,224

6,849

4,420

902

Real estate 1-4 family junior lien mortgage

107,000

115,308

2,854

1,421

4,692

2,115

Credit card

24,003

23,555

795

687

2,528

1,416

Other revolving credit and installment

99,140

104,886

1,765

1,427

2,775

1,819

Total consumer

1,561,711

1,409,205

24,638

10,384

14,415

6,252

Foreign

29,398

33,882

219

197

196

Total loans owned and securitized

2,120,525

2,008,185

46,220

14,317

19,724

8,240

Less:

Securitized loans

1,292,928

1,117,039

Mortgages held for sale

39,094

20,088

Loans held for sale

5,733

6,228

Total loans held

782,770

864,830


(1)		Represents loans in the balance sheet or that have been securitized and includes residential mortgages sold to FNMA, FHLMC and GNMA and securitizations where servicing is our only form of continuing involvement.

(2)		Delinquent loans are 90 days or more past due and still accruing interest as well as nonaccrual loans.

(3)		Delinquent loans and net charge-offs exclude loans sold to FNMA, FHLMC and GNMA. We continue to service the loans and would only experience a loss if required to repurchase a delinquent loan due to a breach in original representations and warranties associated with our underwriting standards.

Transactions with VIEs

Our transactions with VIEs include securitization, investment and financing activities involving CDOs backed by asset-backed and CRE securities, collateralized loan obligations (CLOs) backed by corporate loans or bonds, and other types of structured financing. We have various forms of involvement

with VIEs, including holding senior or subordinated interests, entering into liquidity arrangements, credit default swaps and other derivative contracts. These involvements with unconsolidated VIEs are recorded on our balance sheet primarily in trading assets, securities available for sale, loans, MSRs, other assets and other liabilities, as appropriate.

128

The following table summarizes our involvement with unconsolidated VIEs.



									Other
	Total			Debt and					commitments
	VIE			equity					and			Net
(in millions)	assets		⁽¹⁾	interests		Derivatives			guarantees			assets


December 31, 2008				Carrying value – asset (liability										)

Collateralized debt obligations ⁽²⁾	$	54,294			14,080		1,053			—			15,133
Wachovia administered ABCP ⁽³⁾ conduit		10,767			—		—			—			—
Asset-based finance structures		11,614			9,232		(136	)		—			9,096
Tax credit structures		22,882			4,366		—			(516	)		3,850
Collateralized loan obligations		23,339			3,217		109			—			3,326
Investment funds		105,808			3,543		—			—			3,543
Credit-linked note structures		12,993			50		1,472			—			1,522
Money market funds ⁽⁴⁾		13,307			—		10			—			10
Other ⁽⁵⁾		1,832			3,983		(36	)		(141	)		3,806


Total	$	256,836			38,471		2,472			(657	)		40,286


				Maximum exposure to loss
Collateralized debt obligations				$	14,080		4,849			1,514			20,443
Wachovia administered ABCP ⁽³⁾ conduit					—		15,824			—			15,824
Asset-based finance structures					9,346		136			—			9,482
Tax credit structures					4,366		—			560			4,926
Collateralized loan obligations					3,217		109			555			3,881
Investment funds					3,550		—			140			3,690
Credit-linked note structures					50		2,253			—			2,303
Money market funds ⁽⁴⁾					—		51			—			51
Other ⁽⁵⁾					3,991		130			578			4,699


Total				$	38,600		23,352			3,347			65,299


December 31, 2009				Carrying value – asset (liability										)

Collateralized debt obligations	$	55,899			12,988		1,746			—			14,734
Wachovia administered ABCP ⁽³⁾ conduit		5,160			—		—			—			—
Asset-based finance structures		17,467			10,187		(72	)		(248	)		9,867
Tax credit structures		27,537			4,659		—			(653	)		4,006
Collateralized loan obligations		23,830			3,602		64			—			3,666
Investment funds		84,642			1,831		—			(129	)		1,702
Credit-linked note structures		1,755			40		985			—			1,025
Other ⁽⁵⁾		8,470			3,269		5			(293	)		2,981


Total	$	224,760			36,576		2,728			(1,323	)		37,981


				Maximum exposure to loss
Collateralized debt obligations				$	12,988		3,586			33			16,607
Wachovia administered ABCP ⁽³⁾ conduit					—		5,263			—			5,263
Asset-based finance structures					10,187		72			968			11,227
Tax credit structures					4,659		—			4			4,663
Collateralized loan obligations					3,702		64			473			4,239
Investment funds					2,331		500			89			2,920
Credit-linked note structures					40		1,714			—			1,754
Other ⁽⁵⁾					3,269		5			1,774			5,048


Total				$	37,176		11,204			3,341			51,721


(1)		Represents the remaining principal balance of assets held by unconsolidated VIEs using the most current information available. For VIEs that obtain exposure to assets synthetically through derivative instruments, the remaining notional amount of the derivative is included in the asset balance.

(2)		The balance of total VIE assets for VIEs involving CDOs has been revised to reflect additionally identified CDOs.

(3)		Asset-based commercial paper.

(4)		Includes only those money market mutual funds to which the Company had outstanding contractual support agreements in place. The balance has been revised to exclude certain funds because the support arrangements had lapsed or settled and the Company is not obligated to support such funds.

(5)		Contains investments in auction rate securities issued by VIEs that we do not sponsor and, accordingly, are unable to obtain the total assets of the entity.

129

Note 8: Securitizations and Variable Interest Entities ( continued)

“Maximum exposure to loss” represents the carrying value of our involvement with off-balance sheet (unconsolidated) VIEs plus remaining undrawn liquidity and lending commitments, notional amount of net written derivative contracts, and generally the notional amount of, or stressed loss estimate for, other commitments and guarantees. Maximum exposure to loss is a required disclosure under GAAP and, as presented in the preceding table, represents estimated loss that would be incurred under severe, hypothetical circumstances, for which we believe the possibility of occurrence is extremely remote, such as where the value of our interests and any associated collateral declines to zero, without any consideration of recovery or offset from any economic hedges. Accordingly, this required disclosure is not an indication of expected loss.

COLLATERALIZED DEBT OBLIGATIONS (CDOs) A CDO is a securitization where an SPE purchases a pool of assets consisting of asset-backed securities and issues multiple tranches of equity or notes to investors. In some transactions a portion of the assets are obtained synthetically through the use of derivatives such as credit default swaps or total return swaps. Prior to 2008, we engaged in the structuring of CDOs on behalf of third party asset managers who would select and manage the assets for the CDO. Typically, the asset manager has some discretion to manage the sale of assets of, or derivatives used by the CDO.

In addition to our role as arranger we may have other forms of involvement with these transactions. Such involvement may include acting as liquidity provider, derivative counterparty, secondary market maker or investor. For certain transactions, we may also act as the collateral manager or servicer. We receive fees in connection with our role as collateral manager or servicer.

We assess whether we are the primary beneficiary of CDOs at the inception of the transactions based on our expectation of the variability associated with our continuing involvement. Subsequently, we monitor our ongoing involvement in these transactions to determine if a more frequent assessment of variability is necessary. Variability in these transactions may be created by credit risk, market risk, interest rate risk or liquidity risk associated with the CDO’s assets. Our assessment of the variability is performed qualitatively because our continuing involvement is typically senior in priority to the third party investors in transactions. In most cases, we are not the primary beneficiary of these transactions because we do not retain the subordinate interests in these transactions and, accordingly, do not absorb the majority of the variability.

COLLATERALIZED LOAN OBLIGATIONS (CLOs) A CLO is a securitization where an SPE purchases a pool of assets consisting of loans and issues multiple tranches of equity or notes to investors. Generally, CLOs are structured on behalf of a third party asset manager that typically selects and manages the assets for the term of the CLO. Typically, the asset manager has some discretion to manage the sale of assets of the CLO.

Prior to the securitization, we may provide all or substantially all of the warehouse financing to the asset manager. The asset manager uses this financing to purchase the assets into a bankruptcy remote SPE during the warehouse period. At the completion of the warehouse period, the assets are sold to the CLO and the warehouse financing is repaid with the proceeds received from the securitization’s investors. The warehousing period is generally less than 12 months in duration. In the event the securitization does not take place, the assets in the warehouse are liquidated. We consolidate the warehouse SPEs when we are the primary beneficiary. We are the primary beneficiary when we provide substantially all of the financing and therefore absorb the majority of the variability. Sometimes we have loss sharing arrangements whereby a third party asset manager agrees to absorb the credit and market risk during the warehousing period or upon liquidation of the collateral in the event a securitization does not take place. In those circumstances we do not consolidate the warehouse SPE because the third party asset manager absorbs the majority of the variability through the loss sharing arrangement.

In addition to our role as arranger and warehouse financing provider, we may have other forms of involvement with these transactions. Such involvement may include acting as underwriter, derivative counterparty, secondary market maker or investor. For certain transactions, we may also act as the servicer, for which we receive fees in connection with that role. We also earn fees for arranging these transactions and distributing the securities.

We assess whether we are the primary beneficiary of CLOs at inception of the transactions based on our expectation of the variability associated with our continuing involvement. Subsequently, we monitor our ongoing involvement in these transactions to determine if a more frequent assessment of variability is necessary. Variability in these transactions may be created by credit risk, market risk, interest rate risk or liquidity risk associated with the CLO’s assets. Our assessment of the variability is performed qualitatively because our continuing involvement is typically senior in priority to the third party investors in transactions. In most cases, we are not the primary beneficiary of these transactions because we do not retain the subordinate interests in these transactions and, accordingly, do not absorb the majority of the variability.

MULTI-SELLER COMMERCIAL PAPER CONDUIT We administer a multi-seller ABCP conduit that finances certain client transactions. We acquired the relationship with this conduit in the Wachovia merger. This conduit is a bankruptcy remote entity that makes loans to, or purchases certificated interests, generally from SPEs, established by our clients (sellers) and which are secured by pools of financial assets. The conduit funds itself through the issuance of highly rated commercial paper to third party investors. The primary source of repayment of the commercial paper is the cash flows from the conduit’s assets or the re-issuance of commercial paper upon maturity. The conduit’s assets are structured with deal-specific credit enhancements generally in the form of overcollateralization

130

provided by the seller, but also may include subordinated interests, cash reserve accounts, third party credit support facilities and excess spread capture. The weighted-average

life of the conduit’s assets was 2.5 years at December 31, 2009, and 3.0 years at December 31, 2008, respectively.

The composition of the conduit’s assets follows:

December 31, 2009

December 31, 2008 ⁽¹⁾

Funded

Total

Funded

Total

asset

committed

asset

committed

composition

exposure

composition

exposure

Commercial and middle market loans

42.3

35.6

27.6

32.6

Auto loans

26.8

29.2

27.6

22.0

Equipment loans

18.5

16.8

14.4

11.4

Leases

4.2

3.2

12.6

11.7

Trade receivables

3.3

10.3

8.8

10.9

Credit cards

1.7

2.7

7.0

7.9

Other

3.2

2.2

2.0

3.5

Total

100.0

100.0

(1) Certain December 31, 2008, percentages have been revised to conform with the December 31, 2009, classification of certain assets.

The table below summarizes the weighted-average credit rating equivalents of the conduit’s assets.

These ratings are based on internal rating criteria.

December 31, 2009

December 31, 2008

Funded

Total

Funded

Total

asset

committed

asset

committed

composition

exposure

composition

exposure

AAA

—

9.4

10.4

12.8

18.7

8.3

11.7

29.4

36.5

52.2

51.5

BBB/BB

57.8

44.8

30.1

26.4

Total

100.0

100.0

The timely repayment of the commercial paper is further supported by asset-specific liquidity facilities in the form of liquidity asset purchase agreements that we provide. Each facility is equal to 102% of the conduit’s funding commitment to a client. The aggregate amount of liquidity must be equal to or greater than all the commercial paper issued by the conduit. At the discretion of the administrator, we may be required to purchase assets from the conduit at par value plus accrued interest or discount on the related commercial paper, including situations where the conduit is unable to issue commercial paper. Par value may be different from fair value.

We receive fees in connection with our role as administrator and liquidity provider. We may also receive fees related to the structuring of the conduit’s transactions.

The weighted average life of the commercial paper was 22.5 days at December 31, 2009, and the average yield on the commercial paper was 0.24%. The ability of the conduit to issue commercial paper is a function of general market conditions and the credit rating of the liquidity provider. At December 31, 2009, we did not hold any of the commercial paper issued by the conduit.

The conduit has issued a subordinated note to a third party investor. The subordinated note is designed to absorb the expected variability associated with the credit risk in the conduit’s assets as well as assets that may be or were funded by us as a result of a purchase under the provisions of a specific liquidity asset purchase agreement. Actual credit losses incurred on the conduit’s assets or assets purchased under the liquidity facilities are absorbed first by the subordinated note prior to any allocation to us as the liquidity provider.

We increased the face amount of our subordinated note to $60 million in March 2009. In fourth quarter 2009, the subordinated note absorbed $16 million of losses. At December 31, 2009, the available balance of the subordinated note was $44 million. The subordinated note matures in 2017.

At least quarterly, or more often if circumstances dictate, we assess whether we are the primary beneficiary of the conduit based on our expectation of the variability associated with our liquidity facilities and administrative fee arrangement. Such circumstances may include changes to the terms of the conduit’s assets, internal credit grades, outstanding amounts under each facility or the purchase of the conduit’s commercial paper. We assess variability using a quantitative expected loss model. The key inputs to the model include internally generated risk ratings that are mapped to third party rating agency loss-given-default assumptions. We do not consolidate the conduit because our expected loss model indicates that the holder of the subordinated note absorbs the majority of the variability of the conduit’s assets.

ASSET-BASED FINANCE STRUCTURES We engage in various forms of structured finance arrangements with VIEs that are collateralized by various asset classes including energy contracts, auto and other transportation leases, intellectual property, equipment and general corporate credit. We typically provide senior financing, and may act as an interest rate swap or commodity derivative counterparty when necessary. In most cases, we are not the primary beneficiary of these structures because we do not retain a majority of the variability in these transactions.

131

Note 8: Securitizations and Variable Interest Entities ( continued)

For example, we had investments in asset-backed securities that were collateralized by auto leases or loans and cash reserves. These fixed-rate securities are underwritten by us and have been structured as single-tranche, fully amortizing, unrated bonds that are equivalent to investment-grade securities due to their significant overcollateralization. The securities are issued by SPEs that have been formed by third party auto financing institutions primarily because they require a source of liquidity to fund ongoing vehicle sales operations.

TAX CREDIT STRUCTURES We co-sponsor and make investments in affordable housing and sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits. In some instances, our investments in these structures may require that we fund future capital commitments at the discretion of the project sponsors. While the size of our investment in a single entity may at times exceed 50% of the outstanding equity interests, we do not consolidate these structures due to performance guarantees provided by the project sponsors giving them a majority of the variability.

INVESTMENT FUNDS At December 31, 2009, we had investments of $1.3 billion and lending arrangements of $20 million with certain funds managed by one of our majority owned subsidiaries compared with investments of $2.1 billion and lending arrangements of $349 million at December 31, 2008. In addition, we also provide a default protection agreement to a third party lender to one of these funds. Our involvements in these funds are either senior or of equal priority to third party investors. We do not consolidate the investment funds because we do not absorb the majority of the expected future variability associated with the funds’ assets, including variability associated with credit, interest rate and liquidity risks.

We are also a passive investor in various investment funds that invest directly in private equity and mezzanine securities as well as funds sponsored by select private equity and venture capital groups. We also invest in hedge funds on behalf of clients. In these transactions, we use various derivative contracts that are designed to provide our clients with the returns of the underlying hedge fund investments. We do not consolidate these funds because we do not hold a majority of the subordinate interests in these funds.

MONEY MARKET FUNDS In 2008 we entered into a capital support agreement for up to $130 million related to an investment in a structured investment vehicle (SIV) held by AAA-rated money market funds we sponsor in order to maintain a AAA credit rating and a NAV of $1.00 for the funds. In third quarter 2008, we fulfilled our obligation under this agreement by purchasing the SIV investment from the funds. In third quarter 2009, we purchased additional SIV investments from the AAA-rated money market funds. At December 31, 2009, we had no outstanding support agreements. We recorded a loss of $27 million in 2009 in connection with support provided to our money market/collective funds. At December 31, 2009, the SIV investments were recorded as debt securities in our securities available-for-sale portfolio. We do not consolidate these funds because we do not absorb the majority of

the expected future variability associated with the fund’s assets. We are generally not responsible for investment losses incurred by funds we sponsor, and we do not have a contractual or implicit obligation to indemnify such losses or provide additional support to the funds. While we previously elected to enter into capital support agreements for the funds, we are not obligated and may elect not to provide support to these funds or other funds we sponsor in the future.

CREDIT-LINKED NOTE STRUCTURES We enter into credit-linked note structures for two separate purposes. First and primarily, we structure transactions for clients designed to provide investors with specified returns based on the returns of an underlying security, loan or index. Second, in certain situations, we also use credit-linked note structures to reduce risk-weighted assets for determining regulatory capital ratios by structuring similar transactions that are indexed to the returns of a pool of underlying loans that we own. These transactions reduce our risk-weighted assets because they transfer a portion of the credit risk in the indexed pool of loans to the holders of the credit-linked notes. Both of these types of transactions result in the issuance of credit-linked notes and typically involve a bankruptcy remote SPE that synthetically obtains exposure to the underlying loans through a derivative instrument such as a written credit default swap or total return swap. The SPE issues notes to investors based on the referenced underlying securities or loans. Proceeds received from the issuance of these notes are usually invested in investment grade financial assets. We are typically the derivative counterparty to these transactions and administrator responsible for investing the note proceeds. We do not consolidate these SPEs because we typically do not hold any of the notes that they issue.

OTHER TRANSACTIONS WITH VIES In August 2008, Wachovia reached an agreement to purchase at par auction rate securities (ARS) that were sold to third party investors by two of its subsidiaries. ARS are debt instruments with long-term maturities, but which reprice more frequently. Certain of these securities were issued by VIEs. At December 31, 2009, we held in our securities available-for-sale portfolio $3.2 billion of ARS issued by VIEs that we redeemed pursuant to this agreement, compared with $3.7 billion at December 31, 2008. At December 31, 2008, we had a liability in our balance sheet of $91 million for additional losses on anticipated future redemptions of ARS issued by VIEs. We did not have a liability related to this event at December 31, 2009, since all remaining ARS issued by VIEs subject to the agreement were redeemed.

On November 18, 2009, we reached agreements to purchase additional ARS from eligible investors who bought ARS through one of three of our broker-dealer subsidiaries. At December 31, 2009, we had a liability in our balance sheet of $261 million for losses on anticipated future redemptions of ARS associated with these agreements. As of December 31, 2009, we had not redeemed a substantial amount of these securities. Were we to redeem all ARS issued by VIEs that are subject to the agreement, our estimated maximum exposure to loss would be $1.6 billion; however, certain of these securities may be repaid in full by the issuer prior to redemption.

132

We do not consolidate the VIEs that issued the ARS because we do not expect to absorb the majority of the expected future variability associated with assets of the VIEs.

TRUST PREFERRED SECURITIES In addition to the involvements disclosed in the following table, we had $19.0 billion of debt financing through the issuance of trust preferred securities at December 31, 2009. In these transactions, VIEs that we wholly own issue preferred equity or debt securities to third party investors. All of the proceeds of the issuance are invested in debt securities that we issue to the VIEs. In certain instances, we may provide liquidity to third party investors that purchase long-term securities that reprice frequently issued by VIEs.

The VIEs’ operations and cash flows relate only to the issuance, administration and repayment of the securities held by third parties. We do not consolidate these VIEs because the sole assets of the VIEs are receivables from us. This is the case even though we own all of the voting equity shares of the VIEs, have fully guaranteed the obligations of the VIEs and may have the right to redeem the third party securities under certain circumstances. We report the debt securities that we issue to the VIEs as long-term debt in our consolidated balance sheet.

A summary of our transactions with VIEs accounted for as secured borrowings and involvements with consolidated VIEs follows:


			Carrying value						⁽¹⁾
	Total				Third
	VIE		Consolidated		party		Noncontrolling
(in millions)	assets		assets		liabilities		interests


December 31, 2008
Secured borrowings:
Municipal tender option bond securitizations	$	6,358		6,280		4,765		—
Auto loan securitizations		2,134		2,134		1,869		—
Commercial real estate loans		1,294		1,294		1,258		—
Residential mortgage securitizations		1,124		995		699		—


Total secured borrowings		10,910		10,703		8,591		—


Consolidated VIEs:
Structured asset finance		3,491		1,666		1,481		13
Investment funds		1,119		1,070		155		97
Other		1,007		1,007		774		11


Total consolidated VIEs		5,617		3,743		2,410		121


Total secured borrowings and consolidated VIEs	$	16,527		14,446		11,001		121


December 31, 2009
Secured borrowings:
Municipal tender option bond securitizations	$	7,156		7,189		6,856		—
Auto loan securitizations		274		274		121		—
Commercial real estate loans		1,309		1,309		1,269		—
Residential mortgage securitizations		901		792		552		—


Total secured borrowings		9,640		9,564		8,798		—


Consolidated VIEs:
Structured asset finance		2,791		1,074		1,088		10
Investment funds		2,257		2,245		271		33
Other		2,697		1,981		1,148		25


Total consolidated VIEs		7,745		5,300		2,507		68


Total secured borrowings and consolidated VIEs	$	17,385		14,864		11,305		68

(1)

Amounts exclude loan loss reserves, and total assets may differ from consolidated assets due to the different measurement methods used depending on classification of the assets.

We have raised financing through the securitization of certain financial assets in transactions with VIEs accounted for as secured borrowings. We also consolidate VIEs where we are the primary beneficiary. In certain transactions we provide contractual support in the form of limited recourse

and liquidity to facilitate the remarketing of short-term securities issued to third party investors. Other than this limited contractual support, the assets of the VIEs are the sole source of repayment of the securities held by third parties.

133

Note 9: Mortgage Banking Activities

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

The changes in residential MSRs measured using the fair value method were:


	Year ended December 31,
(in millions)	2009			2008			2007


Fair value, beginning of year	$	14,714			16,763			17,591
Purchases		—			191			803
Acquired from Wachovia ⁽¹⁾		34			479			—
Servicing from securitizations or asset transfers		6,226			3,450			3,680
Sales		—			(269	)		(1,714	)


Net additions		6,260			3,851			2,769


Changes in fair value:
Due to changes in valuation model inputs or assumptions ⁽²⁾		(1,534	)		(3,341	)		(571	)
Other changes in fair value ⁽³⁾		(3,436	)		(2,559	)		(3,026	)


Total changes in fair value		(4,970	)		(5,900	)		(3,597	)


Fair value, end of year	$	16,004			14,714			16,763

(1)		The 2009 amount reflects refinements to initial December 31, 2008, Wachovia purchase accounting adjustments.

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

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

The changes in amortized commercial MSRs were:


	Year ended December 31,
(in millions)	2009			2008			2007


Balance, beginning of year	$	1,446			466			377
Purchases ⁽¹⁾		11			10			120
Acquired from Wachovia ⁽²⁾		(135	)		1,021			—
Servicing from securitizations or asset transfers ⁽¹⁾		61			24			40
Amortization		(264	)		(75	)		(71	)


Balance, end of year ⁽³⁾	$	1,119			1,446			466


Fair value of amortized MSRs:
Beginning of year	$	1,555			573			457
End of year		1,261			1,555			573

(1)		Based on December 31, 2009, assumptions, the weighted-average amortization period for MSRs added during the twelve months of 2009 was approximately 18.1 years.

(2)		The 2009 amount reflects refinements to initial December 31, 2008, Wachovia purchase accounting adjustments.

(3)		There was no valuation allowance recorded for the periods presented. Commercial MSRs are evaluated for impairment purposes by the following asset classes: agency and non-agency commercial mortgage-backed securities (MBS), and loans.

We present the components of our managed servicing portfolio in the table below at unpaid principal balance for loans serviced and subserviced for others and at book value for owned loans serviced.


	December 31,
(in billions)	2009			2008		2007


Residential mortgage servicing
Serviced for others	$	1,422			1,388		1,283
Owned loans serviced		364			378		174
Subservicing		10			15		17


Total residential servicing		1,796			1,781		1,474


Commercial mortgage servicing
Serviced for others		454			472		147
Owned loans serviced		105			103		37
Subservicing		10			11		6


Total commercial servicing		569			586		190


Total managed servicing portfolio	$	2,365			2,367		1,664


Total serviced for others	$	1,876			1,860		1,430
Ratio of MSRs to related loans serviced for others		0.91	%		0.87		1.20

134

The components of mortgage banking noninterest income were:


	Year ended December 31,

(in millions)	2009			2008			2007


Servicing income, net:
Servicing fees	$	3,942			3,855			4,025
Changes in fair value of residential MSRs:
Due to changes in valuation model inputs or assumptions ⁽¹⁾		(1,534	)		(3,341	)		(571	)
Other changes in fair value ⁽²⁾		(3,436	)		(2,559	)		(3,026	)


Total changes in fair value of residential MSRs		(4,970	)		(5,900	)		(3,597	)
Amortization		(264	)		(75	)		(71	)
Net derivative gains from economic hedges ⁽³⁾		6,849			3,099			1,154


Total servicing income, net		5,557			979			1,511
Net gains on mortgage loan origination/sales activities		6,152			1,183			1,289
All other		319			363			333


Total mortgage banking noninterest income	$	12,028			2,525			3,133


Market-related valuation changes to MSRs, net of hedge results ^{(1) + (3)}	$	5,315			(242	)		583

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

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

(3)		Represents results from free-standing derivatives (economic hedges) used to hedge the risk of changes in fair value of MSRs. See Note 15 – Free-Standing Derivatives in this Report for additional discussion and detail.

Servicing fees include certain unreimbursed direct servicing obligations primarily associated with workout activities.

In addition, servicing fees and all other in the table above included:


	Year ended December 31,
(in millions)	2009		2008		2007


Contractually specified servicing fees	$	4,473		3,904		3,922
Late charges		329		283		293
Ancillary fees		187		148		124

135

Note 10: Intangible Assets

The gross carrying value of intangible assets and accumulated amortization was:

December 31

2009

2008

Gross

Gross

carrying

Accumulated

carrying

Accumulated

(in millions)

value

amortization

value

amortization

Amortized intangible assets:

MSRs ⁽¹⁾

1,606

487

1,672

226

Core deposit intangibles

15,140

4,366

14,188

2,189

Customer relationship and other intangibles

3,050

896

3,988

486

Total amortized intangible assets

19,796

5,749

19,848

2,901

MSRs (carried at fair value) ⁽¹⁾

16,004

14,714

Goodwill

24,812

22,627

Trademark

(1)

See Note 9 in this Report for additional information on MSRs.

The following table provides the current year and estimated future amortization expense for amortized intangible assets.


					Customer
	Amortized		Core		relationship
	commercial		deposit		and other
(in millions)	MSRs		intangibles		intangibles		⁽¹⁾	Total


Year ended December 31, 2009 (actual)		$264		2,180		412			2,856


Estimate for year ended December 31,
2010		$224		1,870		337			2,431
2011		198		1,593		289			2,080
2012		161		1,396		274			1,831
2013		125		1,241		254			1,620
2014		108		1,113		238			1,459

(1)

Includes amortization of lease intangibles reported in occupancy expense of $8 million for 2009, and estimated amortization of $9 million, $8 million, $8 million, $5 million, and $4 million for 2010, 2011, 2012, 2013 and 2014, respectively.

We based our projections of amortization expense shown above on existing asset balances at December 31, 2009. Future amortization expense may vary from these projections.

For our goodwill impairment analysis, we allocate all of the goodwill to the individual operating segments. As a result of the combination of Wells Fargo and Wachovia, management realigned its business segments into the following three lines of business: Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement. As part of this realignment, we updated our reporting units. We identify reporting units that are one level below an operating segment (referred to as a component), and distinguish these reporting units based on

how the segments and components are managed, taking into consideration the economic characteristics, nature of the products and customers of the components. We allocate goodwill to reporting units based on relative fair value, using certain performance metrics. We have revised prior period information to reflect this realignment. See Note 23 in this Report for further information on management reporting.

The following table shows the allocation of goodwill to our operating segments for purposes of goodwill impairment testing. The additions in 2009 predominantly relate to goodwill recorded in connection with refinements to our initial acquisition date purchase accounting.


							Wealth,
	Community			Wholesale			Brokerage and		Consolidated
(in millions)	Banking			Banking			Retirement		Company


December 31, 2007		$10,591			2,147			368		13,106
Reduction in goodwill related to divested businesses		—			(1	)		—		(1	)
Goodwill from business combinations		6,229			3,303			—		9,532
Foreign currency translation adjustments		(10	)		—			—		(10	)


December 31, 2008		16,810			5,449			368		22,627
Goodwill from business combinations		1,343			830			5		2,178
Foreign currency translation adjustments		7			—			—		7


December 31, 2009		$18,160			6,279			373		24,812

136

Note 11: Deposits

Time certificates of deposit (CDs) and other time deposits issued by domestic offices totaled $117.0 billion and $210.5 billion at December 31, 2009 and 2008, respectively. Substantially all of these deposits were interest bearing. The contractual maturities of these deposits follow.


(in millions)	December 31, 2009


2010	$	66,162
2011		20,617
2012		9,635
2013		15,354
2014		2,225
Thereafter		3,006


Total	$	116,999

Of these deposits, the amount of time deposits with a denomination of $100,000 or more was $43.7 billion and $90.1 billion at December 31, 2009 and 2008, respectively. The contractual maturities of these deposits follow.


(in millions)	December 31, 2009


Three months or less	$	10,146
After three months through six months		5,092
After six months through twelve months		8,592
After twelve months		19,907


Total	$	43,737

Time CDs and other time deposits issued by foreign offices with a denomination of $100,000 or more represent a major portion of all of our foreign deposit liabilities of $60.0 billion and $40.9 billion at December 31, 2009 and 2008, respectively.

Demand deposit overdrafts of $667 million and $1.1 billion were included as loan balances at December 31, 2009 and 2008, respectively.

Note 12: Short-Term Borrowings

The table below shows selected information for short-term borrowings, which generally mature in less than 30 days.

At December 31, 2009, we had $500 million available in lines of credit. These financing arrangements require the

maintenance of compensating balances or payment of fees, which were not material.


	2009					2008					2007
(in millions)	Amount		Rate			Amount		Rate			Amount		Rate


As of December 31,
Commercial paper and other short-term borrowings	$	12,950		0.39	%	$	45,871		0.93	%	$	30,427		4.45	%
Federal funds purchased and securities sold under agreements to repurchase		26,016		0.08			62,203		1.12			22,828		2.94

Total	$	38,966		0.18		$	108,074		1.04		$	53,255		3.80


Year ended December 31,
Average daily balance
Commercial paper and other short-term borrowings	$	27,793		0.43		$	43,792		2.43		$	8,765		4.96
Federal funds purchased and securities sold under agreements to repurchase		24,179		0.46			22,034		1.88			17,089		4.74


Total	$	51,972		0.44		$	65,826		2.25		$	25,854		4.81


Maximum month-end balance
Commercial paper and other short-term borrowings ⁽¹⁾	$	62,871		N/A		$	76,009		N/A		$	30,427		N/A
Federal funds purchased and securities sold
under agreements to repurchase ⁽²⁾		30,608		N/A			62,203		N/A			23,527		N/A

N/A – Not applicable.
(1) Highest month-end balance in each of the last three years was February 2009, August 2008 and December 2007.
(2) Highest month-end balance in each of the last three years was February 2009, December 2008 and September 2007.

137

Note 13: Long-Term Debt

Following is a summary of our long-term debt based on original maturity (reflecting unamortized debt discounts

and premiums, and purchase accounting adjustments for debt assumed in the Wachovia acquisition, where applicable):


	December 31,
	2009							2008
	Maturity		Stated
(in millions)	date(s)		interest rate(s)


Wells Fargo & Company (Parent only)
Senior
Fixed-rate notes ⁽¹⁾⁽²⁾		2010-2035		2.125-6.75	%	$	46,266		49,019
Floating-rate notes ⁽²⁾⁽³⁾		2010-2048	Varies				41,231		51,220
Extendible notes ⁽⁴⁾							—		8
Market-linked notes ⁽⁵⁾		2010-2018	Varies				458		933


Total senior debt – Parent							87,955		101,180


Subordinated
Fixed-rate notes ⁽¹⁾		2011-2035		4.375-7.574	%		12,148		12,204
Floating-rate notes		2015-2016	Varies				1,096		1,074


Total subordinated debt – Parent							13,244		13,278


Junior subordinated
Fixed-rate notes ^(1)(6)(7)(8)		2026-2068		5.625-10.18	%		8,661		10,111
FixFloat preferred purchase securities ^(9)(10)		2013-2044	7.70-9.75% to 2013, varies				4,296		4,308
Floating-rate notes		2027-2036	Varies				272		245
FixFloat notes		2036	6.28% to 2011, varies				10		10
Fixed-rate notes – hybrid trust securities ^{(1)(11)(12)(13)}		2037-2047		6.375-7.85	%		2,425		2,449
FixFloat notes – income trust securities ⁽¹⁴⁾		2011-2042	5.20% to 2011, varies				2,490		2,445


Total junior subordinated debt – Parent ⁽¹⁵⁾							18,154		19,568


Total long-term debt – Parent							119,353		134,026


Wells Fargo Bank, N.A. and its subsidiaries (WFB, N.A.)
Senior
Fixed-rate notes		2010-2011		1.122-3.720	%		6		63
Floating-rate notes							—		1,026
Fixed-rate advances – Federal Home Loan Bank (FHLB) ⁽¹⁾		2011-2012		1.60-5.20	%		707		202
Market-linked notes ⁽⁵⁾		2010-2016		0.025-5.75	%		304		437
Obligations of subsidiaries under capital leases (Note 7)		2010-2025	Varies				71		97


Total senior debt – WFB, N.A.							1,088		1,825


Subordinated
Fixed-rate notes ⁽¹⁾		2010-2036		4.75-7.55	%		6,383		6,941
Floating-rate notes ⁽³⁾		2016	Varies				500		500
Other notes and debentures		2010-2037		0.00-6.00	%		12		9


Total subordinated debt – WFB, N.A.							6,895		7,450


Total long-term debt – WFB, N.A.							7,983		9,275


Wachovia Bank, N.A. (WB, N.A.)
Senior
Fixed-rate notes ⁽¹⁾		2013		6.00	%		2,227		2,098
Fixed-rate advances – FHLB							—		8
Floating-rate notes ⁽³⁾		2010-2011	Varies				3,910		3,963
Floating-rate advances – FHLB							—		5,527
Primarily notes issued under global note programs ⁽¹⁶⁾		2010-2040	Varies				4,410		20,529
Obligations of subsidiaries under capital leases (Note 7)		2014		4.98	%		6		6


Total senior debt – WB, N.A.							10,553		32,131


Subordinated
Fixed-rate notes ⁽¹⁾		2010-2038		4.80-7.85	%		11,825		12,856
Floating-rate notes ⁽³⁾		2014-2017	Varies				1,437		1,388


Total subordinated debt – WB, N.A.							13,262		14,244


Junior subordinated
Fixed-rate notes – trust securities		2026		8.00	%		318		308
Floating-rate notes – trust securities		2027	Varies				270		243


Total junior subordinated debt – WB, N.A. ⁽¹⁵⁾							588		551


Mortgage notes and other debt		2010-2046	Varies				7,679		9,993


Total long-term debt – WB, N.A.							32,082		56,919

(continued on the following page)

138

(continued from previous page)


	December 31,

	2009							2008
	Maturity		Stated
(in millions)	date(s)		interest rate(s)


Wells Fargo Financial, Inc., and its subsidiaries (WFFI)
Senior
Fixed-rate notes		2010-2034		3.60-6.125	%	$	7,294		6,456
Floating-rate notes							—		1,075


Total senior debt – WFFI							7,294		7,531


Subordinated
Other subordinated – WFFI		2010-2017		3.50-5.125	%		4		6


Total subordinated debt – WFFI							4		6


Total long-term debt – WFFI							7,298		7,537


Other consolidated subsidiaries
Senior
Fixed-rate notes		2010-2049		0.00-7.50	%		617		2,489
Fixed-rate advances – FHLB		2010-2031		3.27-8.45	%		1,958		2,545
Floating-rate notes ⁽³⁾		2011	Varies				595		2,641
Floating-rate advances – FHLB ⁽³⁾		2010-2013	Varies				32,771		46,282
Other notes and debentures – floating-rate		2010-2028	Varies				70		3,347


Total senior debt – Other consolidated subsidiaries							36,011		57,304


Subordinated
Fixed-rate notes		2016		4.28-5.222	%		18		—
Floating-rate notes							—		421
Floating-rate notes – preferred units							—		349
Other notes and debentures – floating rate		2011-2016	Varies				54		84


Total subordinated debt – Other consolidated subsidiaries							72		854


Junior subordinated
Fixed-rate notes		2011-2030		5.50-10.875	%		63		116
Floating-rate notes		2027-2036	Varies				241		248
FixFloat notes		2036	7.064% through 2011, varies				79		80


Total junior subordinated debt – Other consolidated subsidiaries ⁽¹⁵⁾							383		444


Mortgage notes and other debt of subsidiaries		2013-2014	Varies				679		799


Total long-term debt – Other consolidated subsidiaries							37,145		59,401


Total long-term debt						$	203,861		267,158

(1)		We entered into interest rate swap agreements for most of the aggregate balance of these notes, whereby we receive fixed-rate interest payments approximately equal to interest on the notes and make interest payments based on an average one-month, three-month or six-month London Interbank Offered Rate (LIBOR).

(2)		On December 10, 2008, Wells Fargo issued $3 billion of 3% fixed senior unsecured notes and $3 billion of floating senior unsecured notes both maturing on December 9, 2011. On March 30, 2009, Wells Fargo issued $1.75 billion of 2.125% fixed senior unsecured notes and $1.75 billion of floating senior unsecured notes both maturing on June 15, 2012. These notes are guaranteed under the FDIC’s Temporary Liquidity Guarantee Program and are backed by the full faith and credit of the United States.

(3)		We entered into interest rate swap agreements for a portion of the aggregate balance of these notes, whereby we receive variable-rate interest payments and make interest payments based on a fixed rate.

(4)		The extendible notes are floating-rate securities with an initial maturity of 13 or 24 months, which can be extended on a rolling monthly or quarterly basis, respectively, to a final maturity of five years at the investor’s option.

(5)		Consists of long-term notes where the performance of the note is linked to an embedded equity, commodity, or currency index, or basket of indices accounted for separately from the note as a free-standing derivative. For information on embedded derivatives, see Note 15 – Free-standing derivatives in this Report.

(6)		On December 5, 2006, Wells Fargo Capital X issued 5.95% Capital Securities and used the proceeds to purchase from the Parent 5.95% Capital Efficient Notes (the Notes) due 2086 (scheduled maturity 2036). When it issued the Notes, the Parent entered into a Replacement Capital Covenant (the Covenant) in which it agreed for the benefit of the holders of the Parent’s 5.625% Junior Subordinated Debentures due 2034 that it will not repay, redeem or repurchase, and that none of its subsidiaries will purchase, any part of the Notes or the Capital Securities on or before December 1, 2066, unless the repayment, redemption or repurchase is made from the net cash proceeds of the issuance of certain qualified securities and pursuant to the other terms and conditions set forth in the Covenant. For more information, refer to the Covenant, which was filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed December 5, 2006.

(7)		On May 25, 2007, Wells Fargo Capital XI issued 6.25% Enhanced Trust Preferred Securities (Enhanced TRUPS ^® ) (the 2007 Capital Securities) and used the proceeds to purchase from the Parent 6.25% Junior Subordinated Deferrable Interest Debentures due 2067 (the 2007 Notes). When it issued the 2007 Notes, the Parent entered into a Replacement Capital Covenant (the 2007 Covenant) in which it agreed for the benefit of the holders of the Parent’s 5.625% Junior Subordinated Debentures due 2034 that it will not repay, redeem or repurchase, and that none of its subsidiaries will purchase, any part of the 2007 Notes or the 2007 Capital Securities on or before June 15, 2057, unless the repayment, redemption or repurchase is made from the net cash proceeds of the issuance of certain qualified securities and pursuant to the other terms and conditions set forth in the 2007 Covenant. For more information, refer to the 2007 Covenant, which was filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed May 25, 2007.

(8)		On March 12, 2008, Wells Fargo Capital XII issued 7.875% Enhanced Trust Preferred Securities (Enhanced TRUPS ^® ) (the First 2008 Capital Securities) and used the proceeds to purchase from the Parent 7.875% Junior Subordinated Deferrable Interest Debentures due 2068 (the First 2008 Notes). When it issued the First 2008 Notes, the Parent entered into a Replacement Capital Covenant (the First 2008 Covenant) in which it agreed for the benefit of the holders of the Parent’s 5.375% Junior Subordinated Debentures due 2035 (the Covered Debt) that it will not repay, redeem or repurchase, and that none of its subsidiaries will purchase, any part of the First 2008 Notes or the First 2008 Capital Securities on or before March 15, 2048, unless the repayment, redemption or repurchase is made from the net cash proceeds of the issuance of certain qualified securities and pursuant to the other terms and conditions set forth in the First 2008 Covenant. For more information, refer to the First 2008 Covenant, which was filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed March 12, 2008.

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Note 13: Long-Term Debt ( continued)

(9)		On May 19, 2008, Wells Fargo Capital XIII issued 7.70% Fixed-to-Floating Rate Normal Preferred Purchase Securities (PPS) (the Second 2008 Capital Securities). The proceeds were used to purchase Remarketable 7.50% Junior Subordinated Notes maturing in 2044 (the Second 2008 Notes) from the Parent. In connection with the issuance of the Second 2008 Capital Securities, the Trust and the Parent entered into a forward stock purchase contract that obligates the Trust to purchase the Parent’s Noncumulative Perpetual Preferred Stock, Series A (the Series A Preferred Stock) and obligates the Parent to make payments to the Trust of 0.20% per annum through the stock purchase date, expected to be March 26, 2013 (the Series A Stock Purchase Date). Prior to the Series A Stock Purchase Date, the Trust is required to remarket and sell the Second 2008 Notes to third party investors to generate cash proceeds to satisfy its obligation to purchase the Series A Preferred Stock. When it issued the Second 2008 Notes, the Parent entered into a Replacement Capital Covenant (the Second 2008 Covenant) in which it agreed for the benefit of the holders of the Covered Debt that, after the date it notifies the holders of the Covered Debt of the Second 2008 Covenant, it will not repay, redeem or repurchase, and that none of its subsidiaries will purchase, (i) any part of the Second 2008 Notes prior to the Series A Stock Purchase Date or (ii) any part of the Second 2008 Capital Securities or the Series A Preferred Stock prior to the date that is 10 years after the Series A Stock Purchase Date, unless the repayment, redemption or repurchase is made from the net cash proceeds of the issuance of certain qualified securities and pursuant to the other terms and conditions set forth in the Second 2008 Covenant. For more information, refer to the Second 2008 Covenant, which was filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed May 19, 2008.

(10)		On September 10, 2008, Wells Fargo Capital XV issued 9.75% Fixed-to-Floating Rate Normal PPS (the Third 2008 Capital Securities). The proceeds were used to purchase Remarketable 9.25% Junior Subordinated Notes maturing in 2044 (the Third 2008 Notes) from the Parent. In connection with the issuance of the Third 2008 Capital Securities, the Trust and the Parent entered into a forward stock purchase contract that obligates the Trust to purchase the Parent’s Noncumulative Perpetual Preferred Stock, Series B (the Series B Preferred Stock) and obligates the Parent to make payments to the Trust of 0.50% per annum through the stock purchase date, expected to be September 26, 2013 (the Series B Stock Purchase Date). Prior to the Series B Stock Purchase Date, the Trust is required to remarket and sell the Third 2008 Notes to third party investors to generate cash proceeds to satisfy its obligation to purchase the Series B Preferred Stock. When it issued the Third 2008 Notes, the Parent entered into a Replacement Capital Covenant (the Third 2008 Covenant) in which it agreed for the benefit of the holders of the Covered Debt that, after the date it notifies the holders of the Covered Debt of the Third 2008 Covenant, it will not repay, redeem or repurchase, and that none of its subsidiaries will purchase, (i) any part of the Third 2008 Notes prior to the Series B Stock Purchase Date or (ii) any part of the Third 2008 Capital Securities or the Series B Preferred Stock prior to the date that is 10 years after the Series B Stock Purchase Date, unless the repayment, redemption or repurchase is made from the net cash proceeds of the issuance of certain qualified securities and pursuant to the other terms and conditions set forth in the Third 2008 Covenant. For more information, refer to the Third 2008 Covenant, which was filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed September 10, 2008.

(11)		On February 15, 2007, Wachovia Capital Trust IV issued 6.375% Trust Preferred Securities (the First Wachovia Trust Securities) and used the proceeds to purchase from Wachovia 6.375% Extendible Long-Term Subordinated Notes (the First Wachovia Notes). When it issued the First Wachovia Notes, Wachovia entered into a Replacement Capital Covenant (the First Wachovia Covenant) in which it agreed for the benefit of the holders of Wachovia’s Floating-Rate Junior Subordinated Deferrable Interest Debentures due January 15, 2027, (the Wachovia Covered Debt) that it will not repay, redeem or repurchase, and that none of its subsidiaries will purchase, any part of the First Wachovia Notes or the First Wachovia Trust Securities on or after the scheduled maturity date of the First Wachovia Notes and prior to the date that is 20 years prior to the final repayment date of the First Wachovia Notes, unless the repayment, redemption or repurchase is made from the net cash proceeds of the issuance of certain qualified securities and pursuant to the other terms and conditions set forth in the First Wachovia Covenant. In connection with the Wachovia acquisition, the Parent assumed all of Wachovia’s obligations under the First Wachovia Covenant. For more information, refer to the First Wachovia Covenant, which was filed as Exhibit 99.1 to Wachovia’s Current Report on Form 8-K filed February 15, 2007.

(12)		On May 8, 2007, Wachovia Capital Trust IX issued 6.375% Trust Preferred Securities (the Second Wachovia Trust Securities) and used the proceeds to purchase from Wachovia 6.375% Extendible Long-Term Subordinated Notes (the Second Wachovia Notes). When it issued the Second Wachovia Notes, Wachovia entered into a Replacement Capital Covenant (the Second Wachovia Covenant) in which it agreed for the benefit of the holders of the Wachovia Covered Debt that it will not repay, redeem or repurchase, and that none of its subsidiaries will purchase, any part of the Second Wachovia Notes or the Second Wachovia Trust Securities (i) on or after the earlier of the date that is 30 years prior to the final repayment date of the Second Wachovia Notes and the scheduled maturity date of the Second Wachovia Notes and (ii) prior to the later of the date that is 20 years prior to the final repayment date of the Second Wachovia Notes and June 15, 2057, unless the repayment, redemption or repurchase is made from the net cash proceeds of the issuance of certain qualified securities and pursuant to the other terms and conditions set forth in the Second Wachovia Covenant. In connection with the Wachovia acquisition, the Parent assumed all of Wachovia’s obligations under the Second Wachovia Covenant. For more information, refer to the Second Wachovia Covenant, which was filed as Exhibit 99.1 to Wachovia’s Current Report on Form 8-K filed May 8, 2007.

(13)		On November 21, 2007, Wachovia Capital Trust X issued 7.85% Trust Preferred Securities (the Third Wachovia Trust Securities) and used the proceeds to purchase from Wachovia 7.85% Extendible Long-Term Subordinated Notes (the Third Wachovia Notes). When it issued the Third Wachovia Notes, Wachovia entered into a Replacement Capital Covenant (the Third Wachovia Covenant) in which it agreed for the benefit of the holders of the Wachovia Covered Debt that it will not repay, redeem or repurchase, and that none of its subsidiaries will purchase, any part of the Third Wachovia Notes or the Third Wachovia Trust Securities (i) on or after the earlier of the date that is 30 years prior to the final repayment date of the Third Wachovia Notes and the scheduled maturity date of the Third Wachovia Notes and (ii) prior to the later of the date that is 20 years prior to the final repayment date of the Third Wachovia Notes and December 15, 2057, unless the repayment, redemption or repurchase is made from the net cash proceeds of the issuance of certain qualified securities and pursuant to the other terms and conditions set forth in the Third Wachovia Covenant. In connection with the Wachovia acquisition, the Parent assumed all of Wachovia’s obligations under the Third Wachovia Covenant. For more information, refer to the Third Wachovia Covenant, which was filed as Exhibit 99.1 to Wachovia’s Current Report on Form 8-K filed November 21, 2007.

(14)		On February 1, 2006, Wachovia Capital Trust III issued 5.80% Fixed-to-Floating Rate Wachovia Income Trust Securities (the Fourth Wachovia Trust Securities) and used the proceeds to purchase from Wachovia Remarketable Junior Subordinated Notes due 2042 (the Fourth Wachovia Notes). In connection with the issuance of the Fourth Wachovia Trust Securities, the Trust and Wachovia entered into a forward stock purchase contract that obligates the Trust to purchase Wachovia’s Noncumulative Perpetual Class A Preferred Stock, Series I (the Series I Preferred Stock) and obligates Wachovia to make payments to the Trust of 0.60% per annum through the stock purchase date, expected to be March 15, 2011 (the Series I Stock Purchase Date). Prior to the Series I Stock Purchase Date, the Trust is required to remarket and sell the Fourth Wachovia Notes to third party investors to generate cash proceeds to satisfy its obligation to purchase the Series I Preferred Stock. When it issued the Fourth Wachovia Notes, Wachovia entered into a Declaration of Covenant (the Fourth Wachovia Covenant) in which it agreed for the benefit of the holders of the Wachovia Covered Debt that it will repurchase the Fourth Wachovia Trust Securities or redeem or repurchase shares of the Series I Preferred Stock only if and to the extent that the total redemption or repurchase price is equal to or less than the net cash proceeds of the issuance of certain qualified securities as described in the Fourth Wachovia Covenant. In connection with the Wachovia acquisition, the Parent assumed all of Wachovia’s obligations under the Fourth Wachovia Covenant. For more information, refer to the Fourth Wachovia Covenant, which was filed as Exhibit 99.1 to Wachovia’s Current Report on Form 8-K filed February 1, 2006.

(15)		Represents junior subordinated debentures held by unconsolidated wholly-owned trusts formed for the sole purpose of issuing trust preferred securities.

(16)		At December 31, 2009, bank notes of $3.8 billion had floating rates of interest ranging from 0.0006% to 7.6%, and $593 million of the notes had fixed rates of interest ranging from 1.00% to 5.00%.

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We participated in the Federal Deposit Insurance Corp-oration’s (FDIC) Temporary Liquidity Guarantee Program (TLGP). The TLGP had two components: the Debt Guarantee Program, which provided a temporary guarantee of newly issued senior unsecured debt issued by eligible entities; and the Transaction Account Guarantee Program, which provided a temporary unlimited guarantee of funds in noninterest-bearing transaction accounts at FDIC-insured institutions. The Debt Guarantee Program expired on October 31, 2009, and we opted out of the temporary unlimited guarantee of funds effective December 31, 2009.

The aggregate annual maturities of long-term debt obligations (based on final maturity dates) as of December 31, 2009, follow.


(in millions)	Parent		Company


2010	$	21,292		40,495
2011		22,466		37,699
2012		15,460		27,027
2013		9,871		19,716
2014		7,575		11,063
Thereafter		42,689		67,861


Total	$	119,353		203,861

The interest rates on floating-rate notes are determined periodically by formulas based on certain money market rates, subject, on certain notes, to minimum or maximum interest rates.

As part of our long-term and short-term borrowing arrangements, we are subject to various financial and operational covenants. Some of the agreements under which debt has been issued have provisions that may limit the merger or sale of certain subsidiary banks and the issuance of capital stock or convertible securities by certain subsidiary banks. At December 31, 2009, we were in compliance with all the covenants.

Note 14: Guarantees and Legal Actions

Guarantees
Guarantees are contracts that contingently require us to make payments to a guaranteed party based on an event or a change in an underlying asset, liability, rate or index. Guarantees are generally in the form of standby letters of credit, securities lending and other indemnifications, liquidity

agreements, written put options, recourse obligations, residual value guarantees, and contingent consideration. The following table shows carrying value, maximum exposure to loss on our guarantees and the amount with a higher risk of performance.


	December 31,
	2009						2008
			Maximum		Non-				Maximum		Non-
	Carrying		exposure		investment		Carrying		exposure		investment
(in millions)	value		to loss		grade		value		to loss		grade


Standby letters of credit	$	148		49,997		21,112		130		47,191		17,293
Securities lending and other indemnifications		51		20,002		2,512		—		30,120		1,907
Liquidity agreements ⁽¹⁾		66		7,744		—		30		17,602		—
Written put options ⁽¹⁾⁽²⁾		803		8,392		3,674		1,376		10,182		5,314
Loans sold with recourse		96		5,049		2,400		53		6,126		2,038
Residual value guarantees		8		197		—		—		1,121		—
Contingent consideration		11		145		102		11		187		—
Other guarantees		—		55		2		—		38		—


Total guarantees	$	1,183		91,581		29,802		1,600		112,567		26,552

(1)		Certain of these agreements included in this table are related to off-balance sheet entities and, accordingly, are also disclosed in Note 8 in this Report.
(2)		Written put options, which are in the form of derivatives, are also included in the derivative disclosures in Note 15 in this Report.

“Maximum exposure to loss” and “Non-investment grade” are required disclosures under GAAP. Non-investment grade represents those guarantees on which we have a higher risk of being required to perform under the terms of the guarantee. If the underlying assets under the guarantee are non-investment grade (that is, an external rating that is below investment grade or an internal credit default grade that is equivalent to a below investment grade external rating), we consider the risk of performance to be high.

Internal credit default grades are determined based upon the same credit policies that we use to evaluate the risk of payment or performance when making loans and other extensions of credit. These credit policies are more fully described in Note 6 in this Report.

Maximum exposure to loss represents the estimated loss that would be incurred under an assumed hypothetical circumstance, despite what we believe is its extremely remote possibility, where the value of our interests and any associated

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Note 14: Guarantees and Legal Actions ( continued)

collateral declines to zero, without any consideration of recovery or offset from any economic hedges. Accordingly, this required disclosure is not an indication of expected loss. We believe the carrying value, which is either fair value or cost adjusted for incurred credit losses, is more representative of our exposure to loss than maximum exposure to loss.

We issue standby letters of credit, which include performance and financial guarantees, for customers in connection with contracts between our customers and third parties. Standby letters of credit are agreements where we are obligated to make payment to a third party on behalf of a customer in the event the customer fails to meet their contractual obligations. We consider the credit risk in standby letters of credit and commercial and similar letters of credit in determining the allowance for credit losses.

As a securities lending agent, we loan client securities, on a fully collateralized basis, to third party borrowers. We indemnify our clients against borrower default of a return of those securities and, in certain cases, against collateral losses. We support these guarantees with collateral, generally in the form of cash or highly liquid securities that is marked to market daily. There was $20.7 billion at December 31, 2009, and $31.0 billion at December 31, 2008, in collateral supporting loaned securities with values of $20.0 billion and $30.1 billion, respectively.

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

We provide liquidity facilities on all commercial paper issued by the conduit we administer. We also provide liquidity to certain off-balance sheet entities that hold securitized fixed-rate municipal bonds and consumer or commercial assets that are partially funded with the issuance of money market and other short-term notes. See Note 8 in this Report for additional information on these arrangements.

Written put options are contracts that give the counterparty the right to sell to us an underlying instrument held by the counterparty at a specified price, and include options, floors, caps and credit default swaps. These written put option contracts generally permit net settlement. While these derivative transactions expose us to risk in the event the option is exercised, we manage this risk by entering into offsetting trades or by taking short positions in the underlying instrument. We offset substantially all put options written to customers with purchased options. Additionally, for certain of these contracts, we require the counterparty to pledge the underlying instrument as collateral for the transaction. Our ultimate obligation under written put options is based on

future market conditions and is only quantifiable at settlement. See Note 8 in this Report for additional information regarding transactions with VIEs and Note 15 in this Report for additional information regarding written derivative contracts.

In certain loan sales or securitizations, we provide recourse to the buyer whereby we are required to repurchase loans at par value plus accrued interest on the occurrence of certain credit-related events within a certain period of time. The maximum exposure to loss represents the outstanding principal balance of the loans sold or securitized that are subject to recourse provisions, but the likelihood of the repurchase of the entire balance is remote and amounts paid can be recovered in whole or in part from the sale of collateral. In 2009, we did not repurchase a significant amount of loans associated with these agreements.

We have provided residual value guarantees as part of certain leasing transactions of corporate assets. At December 31, 2009, the only remaining residual value guarantee related to a leasing transaction on certain corporate buildings. At December 31, 2008, the residual value guarantees also included leasing transactions related to railcars, which were unwound in first quarter 2009. The lessors in these leases are generally large financial institutions or their leasing subsidiaries. These guarantees protect the lessor from loss on sale of the related asset at the end of the lease term. To the extent that a sale of the leased assets results in proceeds less than a stated percent (generally 80% to 89%) of the asset’s cost less depreciation, we would be required to reimburse the lessor under our guarantee.

In connection with certain brokerage, asset management, insurance agency and other acquisitions we have made, the terms of the acquisition agreements provide for deferred payments or additional consideration, based on certain performance targets.

We have entered into various contingent performance guarantees through credit risk participation arrangements. Under these agreements, if a customer defaults on its obligation to perform under certain credit agreements with third parties, we will be required to make payments to the third parties.

Legal Actions

Wells Fargo and certain of our subsidiaries are involved in a number of judicial, regulatory and arbitration proceedings concerning matters arising from the conduct of our business activities. These proceedings include actions brought against Wells Fargo and/or our subsidiaries with respect to corporate related matters and transactions in which Wells Fargo and/or our subsidiaries were involved. In addition, Wells Fargo and our subsidiaries may be requested to provide information or otherwise cooperate with governmental authorities in the conduct of investigations of other persons or industry groups.

Although there can be no assurance as to the ultimate outcome, Wells Fargo and/or our subsidiaries have generally denied, or believe we have a meritorious defense and will deny, liability in all significant litigation pending against us, including the matters described below, and we intend to defend vigorously each case, other than matters we describe

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as having or being settled. Reserves are established for legal claims when it becomes probable that a loss will be incurred at the date of the financial statements and the amount of loss can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher or lower than the amounts reserved for those claims.

ADELPHIA LITIGATION Wachovia Bank, N.A. and Wachovia Capital Markets, LLC, are defendants in an adversary proceeding previously pending in the United States Bankruptcy Court for the Southern District of New York related to the bankruptcy of Adelphia Communications Corporation (Adelphia). The Official Committee of Unsecured Creditors in Adelphia’s bankruptcy case filed the claims; the current plaintiff is the Adelphia Recovery Trust, which was substituted as the plaintiff pursuant to Adelphia’s confirmed plan of reorganization. In February 2006, an order was entered moving the case to the United States District Court for the Southern District of New York. The complaint asserts claims against the defendants under state law, bankruptcy law and the Bank Holding Company Act and seeks equitable relief and an unspecified amount of compensatory and punitive damages. After rulings on various motions to dismiss, the remaining claims essentially allege the banks should be liable to Adelphia on theories of aiding and abetting a breach of fiduciary duty and violation of the Bank Holding Company Act. The case is scheduled to go to trial on September 13, 2010.

AUCTION RATE SECURITIES On November 20, 2008, the State of Washington Department of Financial Institutions filed a proceeding entitled In the Matter of determining whether there has been a violation of the Securities Act of Washington by: Wells Fargo Investments, LLC; Wells Fargo Brokerage Services, LLC; and Wells Fargo Institutional Securities, LLC . The action sought a cease and desist order against violations of the anti-fraud and suitability provisions of the Washington Securities Act. On April 23, 2009, the Attorney General of the State of California filed a complaint in the Superior Court of the State of California for the County of San Francisco alleging that certain Wells Fargo affiliates improperly sold ARS to customers. The Attorney General sought an injunction against those affiliates, enjoining them from violating certain California statutes, civil penalties, disgorgement of profits, restitution and damages. On November 18, 2009, Wells Fargo announced separate settlement agreements with the State of California Attorney General’s office and the North American Securities Administrators Association. The agreements resolve the above-referenced enforcement actions and all active regulatory investigations concerning Wells Fargo’s participation in the ARS market. In conjunction with the settlement agreements, Wells Fargo announced it would buy back ARS from eligible investors.

In addition, the purported civil class actions relating to the sale of ARS are no longer pending against various Wells Fargo affiliated defendants. On January 26, 2010, two of the pending civil class actions were dismissed in their entirety. The remaining cases have been settled or conditionally dismissed.

CASA DE CAMBIO INVESTIGATION An investigation is being conducted by the U.S. Attorney’s Office for the Southern District of Florida, in conjunction with certain regulators, into, among other matters, Wachovia Bank, N.A.’s prior correspondent banking relationship with certain non-domestic exchange houses and Wachovia Bank, N.A.’s compliance with Bank Secrecy Act and anti-money laundering requirements. Wachovia Bank, N.A. has cooperated fully with the regulators and with the U.S. Attorney’s Office’s investigation, and is engaged in discussions to resolve this matter by paying penalties and entering into agreements concerning future conduct.

DATA TREASURY LITIGATION Wells Fargo & Company, Wells Fargo Bank, N.A., Wachovia Bank, N.A. and Wachovia Corporation are among over 55 defendants originally named in two actions asserting patent infringement claims filed by Data Treasury Corporation in the U.S. District Court for the Eastern District of Texas. Data Treasury seeks a declaration that its patents are valid and have been infringed, and seeks damages and permanent injunctive relief. A trial on two of the patents is scheduled to be held on August 1, 2010. A second trial on the remaining patents has not been scheduled.

ELAVON LITIGATION On January 16, 2009, Elavon, Inc. (Elavon), a provider of merchant processing services, filed a complaint in the U.S. District Court for the Northern District of Georgia against Wachovia Corporation, Wachovia Bank, N.A., Wells Fargo & Company, and Wells Fargo Bank, N.A. The complaint seeks equitable relief, including specific performance, and damages for Wachovia Bank’s allegedly wrongful termination of its merchant referral contract with Elavon. The complaint also sought damages, including punitive damages, against the Wells Fargo entities for tortious interference with contractual relations; this claim was dismissed by the court on October 13, 2009. On September 29, 2009, Elavon filed an amended complaint adding a party not affiliated with Wells Fargo to the litigation. The case is currently in discovery.

ERISA LITIGATION Seven purported class actions have been filed against Wachovia Corporation (Wachovia), its board of directors and certain senior officers in the U.S. District Court for the Southern District of New York on behalf of employees of Wachovia and its affiliates who held shares of Wachovia common stock in their Wachovia Savings Plan accounts. On June 18, 2009, the U.S. District Court for the Southern District of New York entered a Memorandum and Order transferring these consolidated cases to the U.S. District Court for the Western District of North Carolina. The plaintiffs allege breach of fiduciary duty under the Employee Retirement Income Security Act (ERISA) claiming, among other things, that the defendants should not have permitted Wachovia common stock to remain an investment option in the Wachovia Savings Plan because alleged misleading disclosures relating to the Golden West mortgage portfolio, exposure to CDOs and other problem loans, and other alleged misstatements made its stock a risky and imprudent investment for employee retirement accounts. Wachovia has filed a motion to dismiss which is currently pending.

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GOLDEN WEST AND RELATED LITIGATION A purported securities class action, Lipetz v. Wachovia Corporation, et al. , was filed on July 7, 2008, in the U.S. District Court for the Southern District of New York alleging violations of Sections 10 and 20 of the Securities Exchange Act of 1934. An amended complaint was filed on December 15, 2008. Among other allegations, plaintiffs allege Wachovia Corporation’s common stock price was artificially inflated as a result of allegedly misleading disclosures relating to the Golden West Financial Corp. (Golden West) mortgage portfolio, Wachovia Corporation’s exposure to other mortgage related products such as CDOs, control issues and ARS. On March 19, 2009, the defendants filed a motion to dismiss the amended class action complaint in the Lipetz case, which has now been re-captioned as In re Wachovia Equity Securities Litigation . There are four additional cases (not class actions) containing allegations similar to the allegations in the In re Wachovia Equity Securities Litigation captioned Stichting Pensioenfonds ABP v. Wachovia Corp. et al., FC Holdings AB, et al. v. Wachovia Corp., et al., Deka Investment GmbH v. Wachovia Corp. et al. and Forsta AP-Fonden v. Wachovia Corp., et al. , respectively, which were filed in the U.S. District Court for the Southern District of New York, and there are a number of other similar actions filed in state courts in North Carolina and South Carolina by individual shareholders.

After a number of procedural motions, three purported class action cases alleging violations of Sections 11, 12, and 15 of the Securities Act of 1933 as a result of allegedly misleading disclosures relating to the Golden West mortgage portfolio in connection with Wachovia’s issuance of various preferred securities and bonds were transferred to the U.S. District Court for the Southern District of New York. A consolidated class action complaint was filed on September 4, 2009, and the matter is now captioned In Re Wachovia Preferred Securities and Bond/Notes Litigation . On September 29, 2009, a non-class action case containing allegations similar to the allegations in the In re Wachovia Preferred Securities and Bond/Notes litigation , and captioned City of Livonia Employees’ Retirement System v. Wachovia Corp et al. , was filed in the Southern District of New York.

Motions to dismiss all of these cases are pending.

Several government agencies are investigating matters similar to the issues raised in this litigation. Wells Fargo and its affiliates are cooperating fully.

ILLINOIS ATTORNEY GENERAL LITIGATION On July 31, 2009, the Attorney General for the State of Illinois filed a civil lawsuit against Wells Fargo & Company, Wells Fargo Bank, N.A. and Wells Fargo Financial Illinois, Inc. in the Circuit Court for Cook County, Illinois. The Illinois Attorney General alleges that the Wells Fargo defendants engaged in illegal discrimination by “reverse redlining” and by steering African-American and Latino customers into high cost, subprime mortgage loans while other borrowers with similar incomes received lower cost mortgages. Illinois also alleges that Wells Fargo Financial Illinois, Inc. misled Illinois customers about the terms of mortgage loans. Illinois’ complaint against all Wells Fargo defendants is based on

alleged violation of the Illinois Human Rights Act and the Illinois Fairness in Lending Act. The complaint also alleges that Wells Fargo Financial Illinois, Inc. violated the Illinois Consumer Fraud and Deceptive Business Practices Act and the Illinois Uniform Deceptive Trade Practices Act. Illinois’ complaint seeks an injunction against the defendants’ alleged violation of these Illinois statutes, restitution to consumers and civil money penalties. On October 9, 2009, the Company filed a motion to dismiss Illinois’ complaint.

INTERCHANGE LITIGATION Wells Fargo Bank, N.A., Wells Fargo & Company, Wachovia Bank, N.A. and Wachovia Corporation are named as defendants, separately or in combination, in putative class actions filed on behalf of a plaintiff class of merchants and in individual actions brought by individual merchants with regard to the interchange fees associated with Visa and MasterCard payment card transactions. These actions have been consolidated in the United States District Court for the Eastern District of New York. Visa, MasterCard and several banks and bank holding companies are named as defendants in various of these actions. The amended and consolidated complaint asserts claims against defendants based on alleged violations of federal and state antitrust laws and seeks damages, as well as injunctive relief. Plaintiff merchants allege that Visa, MasterCard and their member banks unlawfully colluded to set interchange rates. Plaintiffs also allege that enforcement of certain Visa and MasterCard rules and alleged tying and bundling of services offered to merchants are anticompetitive. Wells Fargo and Wachovia, along with other members of Visa, are parties to Loss and Judgment Sharing Agreements (the Agreements), which provide that they, along with other member banks of Visa, will share, based on a formula, in any losses from certain litigation specified in the Agreements, including the Interchange Litigation.

LE-NATURE’S INC. Wachovia Bank, N.A. is the administrative agent on a $285 million credit facility extended to Le-Nature’s, Inc. (Le-Nature’s) in September 2006, of which approximately $270 million was syndicated to other lenders by Wachovia Capital Markets, LLC. Le-Nature’s was the subject of a Chapter 7 bankruptcy petition which was converted to a Chapter 11 bankruptcy petition in November 2006 in the U.S. Bankruptcy Court for the Western District of Pennsylvania. The filing was precipitated by an apparent fraud relating to Le-Nature’s financial condition.

On March 14, 2007, the two Wachovia entities filed an action against several hedge funds in the Superior Court for the State of North Carolina, Mecklenburg County, alleging that the hedge fund defendants had acquired a significant quantity of the outstanding debt with full knowledge of Le-Nature’s fraud and with the intention of pursuing alleged fraud and other tort claims against the two Wachovia entities purportedly related to their role in Le-Nature’s credit facility. A preliminary injunction was entered by the Court that, among other things, prohibited defendants from asserting any such claims in any other forum. On March 13, 2008, the North Carolina judge granted Defendants’ motion to stay

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the North Carolina action and modified the injunction to allow the Defendants to attempt to assert claims in a Federal Court action in New York, the dismissal of which has been affirmed by the Second Circuit. The Wachovia entities’ appeal was denied by the North Carolina Court of Appeals on December 22, 2009, and the matter is back before the Superior Court. Plaintiffs in the dismissed Federal Court action have filed an additional case in the New York State Supreme Court for the County of Manhattan seeking to recover from Wachovia on various theories of liability.

On April 28, 2008, holders of Le-Nature’s Senior Subordinated Notes, an offering which was underwritten by Wachovia Capital Markets in June 2003, sued alleging various fraud claims. This case, captioned California Public Employees Retirement System, et al. v. Wachovia Capital Markets, LLC is pending in the U.S. District Court for the Western District of Pennsylvania. On April 3, 2009, after a number of procedural motions in various courts, the case was remanded to the Superior Court of the State of California for the County of Los Angeles. On January 14, 2010, the case was dismissed with plaintiffs granted the right to replead. On August 1, 2009, the trustee under the indenture for Le-Nature’s Senior Subordinated Notes also filed claims against Wachovia Capital Markets seeking recovery for the bondholders under a variety of theories.

On October 30, 2008, the liquidation trust created in Le-Nature’s bankruptcy filed suit against a number of individuals and entities, including Wachovia Capital Markets, LLC, and Wachovia Bank, N.A., in the U.S. District Court for the Western District of Pennsylvania, asserting a variety of claims on behalf of the estate. On March 2, 2009, the Wachovia defendants moved to dismiss the case filed by the liquidation trust. On September 16, 2009, the Court dismissed a cause of action for breach of fiduciary duty but denied the remainder of Wachovia’s motion to dismiss.

MERGER RELATED LITIGATION On October 4, 2008, Citigroup, Inc. (Citigroup) purported to commence an action in the Supreme Court of the State of New York for the County of Manhattan, captioned Citigroup, Inc. v. Wachovia Corp., et al. , naming as defendants Wachovia Corporation (Wachovia), Wells Fargo & Company (Wells Fargo), and the directors of both companies. The complaint alleged that Wachovia breached an exclusivity agreement with Citigroup, which by its terms was to expire on October 6, 2008, by entering into negotiations and an eventual acquisition agreement with Wells Fargo, and that Wells Fargo and the individual defendants had tortiously interfered with the same contract.

On October 4, 2008, Wachovia filed a complaint in the U.S. District Court for the Southern District of New York, captioned Wachovia Corp. v. Citigroup, Inc . On October 14, 2008, Wells Fargo filed a related complaint in the U.S. District Court for the Southern District of New York, captioned Wells Fargo v. Citigroup, Inc . Both complaints seek declaratory and injunctive relief, stating that the Wells Fargo merger agreement is valid, proper, and not prohibited by the exclusivity agreement. On March 20, 2009, the U.S. District Court for the Southern District of New York remanded the Citigroup, Inc. v. Wachovia

Corp., et al. case to the Supreme Court of the State of New York for the County of Manhattan, but retained jurisdiction over the Wachovia v. Citigroup and Wells Fargo v. Citigroup cases. On July 13, 2009, the U.S. District Court for the Southern District of New York issued an Opinion and Order denying Citigroup’s motion for partial judgment on the pleadings in the Wachovia Corp. v. Citigroup, Inc. case. The Court held that the Exclusivity Agreement, entered into between Citigroup and Wachovia on September 29, 2008, and which formed the basis for a substantial portion of the allegations of Citigroup’s complaint against Wachovia and Wells Fargo, was void as against public policy by enactment of Section 126(c) of the Emergency Economic Stabilization Act on October 3, 2008. These cases are currently in discovery in both courts.

MUNICIPAL DERIVATIVES BID PRACTICES INVESTIGATION The Department of Justice (DOJ) and the SEC, beginning in November 2006, have been requesting information from a number of financial institutions, including Wachovia Bank, N.A.’s municipal derivatives group, generally with regard to competitive bid practices in the municipal derivative markets. In connection with these inquiries, Wachovia Bank, N.A. has received subpoenas from both the DOJ and SEC as well as requests from the OCC and several states seeking documents and information. The DOJ and the SEC have advised Wachovia Bank, N.A. that they believe certain of its employees engaged in improper conduct in conjunction with certain competitively bid transactions and, in November 2007, the DOJ notified two Wachovia Bank, N.A. employees, both of whom have since been terminated, that they are regarded as targets of the DOJ’s investigation. Wachovia Bank, N.A. has been cooperating and continues to fully cooperate with the government investigations.

Wachovia Bank, N.A., along with a number of other banks and financial services companies, has also been named as a defendant in a number of substantially identical purported class actions, filed in various state and federal courts by various municipalities alleging they have been damaged by the activity which is the subject of the governmental investigations. On April 30, 2009, the Court granted a motion filed by Wachovia Bank, N.A. and certain other defendants to dismiss the Consolidated Class Action Complaint and dismissed all claims against Wachovia Bank, N.A., with leave to replead. A Second Consolidated Amended Complaint was filed on June 18, 2009, and a motion to dismiss this complaint has been filed and briefed. A number of putative class and individual actions have been brought in California, including five non-class complaints which were amended with new allegations and the addition of Wells Fargo & Company as a defendant. All of the cases are being coordinated in the Southern District of New York.

PAYMENT PROCESSING CENTER On February 17, 2006, the U.S. Attorney’s Office for the Eastern District of Pennsylvania filed a civil fraud complaint against a former Wachovia Bank, N.A. customer, Payment Processing Center (PPC). PPC was a third party payment processor for telemarketing and catalogue companies. On April 24, 2008, Wachovia Bank, N.A. and the

145

Note 14: Guarantees and Legal Actions ( continued)

OCC entered into an Agreement to resolve the OCC’s investigation into Wachovia Bank, N.A.’s relationship with PPC and three other companies. The Agreement provides, among other things, that (i) Wachovia Bank, N.A. will provide restitution to consumers, (ii) will create a segregated account in the amount of $125 million to cover the estimated maximum cost of the restitution, (iii) will fund organizations that provide education for consumers over a two year period in the amount of $8.9 million, (iv) will make various changes to its policies and procedures related to customers that use remotely created checks and (v) will appoint a special Compliance Committee to oversee compliance with the Agreement. Wachovia Bank, N.A. and the OCC also entered into a Consent Order for Payment of a Civil Money Penalty whereby Wachovia Bank, N.A., without admitting or denying the allegations contained therein, agreed to payment of a $10 million civil money penalty. The OCC Agreement was amended on December 8, 2008, to provide for direct restitution payments and those payments

were mailed to consumers on December 11, 2008. Wachovia Bank, N.A. is cooperating with government officials to administer the OCC settlement and in their continued investigation of this matter.

OUTLOOK Based on information currently available, advice of counsel, available insurance coverage and established reserves, Wells Fargo believes that the eventual outcome of the actions against Wells Fargo and/or its subsidiaries, including the matters described above, will not, individually or in the aggregate, have a material adverse effect on Wells Fargo’s consolidated financial position or results of operations. However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters, if unfavorable, may be material to Wells Fargo’s results of operations for any particular period.

Note 15: Derivatives

We use derivatives to manage exposure to market risk, interest rate risk, credit risk and foreign currency risk, to generate profits from proprietary trading and to assist customers with their risk management objectives. Derivative transactions are measured in terms of the notional amount, but this amount is not recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. The notional amount is generally not exchanged, but is used only as the basis on which interest and other payments are determined. Our approach to managing interest rate risk includes the use of derivatives. This helps minimize significant, unplanned fluctuations in earnings, fair values of assets and liabilities, and cash flows caused by interest rate volatility. This approach involves modifying the repricing characteristics of certain assets and liabilities so that changes in interest rates do not have a significant adverse effect on the net interest margin and cash flows. As a result of interest rate fluctuations, hedged assets and liabilities will gain or lose market value. In a fair value hedging strategy, the effect of this unrealized gain or loss will generally be offset by the gain or loss on the derivatives linked to the hedged assets and liabilities. In a cash flow hedging strategy, we manage the variability of cash payments due to interest rate fluctuations by the effective use of derivatives linked to hedged assets and liabilities.

We use derivatives that are designed as qualifying hedge contracts as defined by the Derivatives and Hedging topic in the Codification as part of our interest rate and foreign currency risk management, including interest rate swaps, caps and floors, futures and forward contracts, and options. We also offer various derivatives, including interest rate, commodity, equity, credit and foreign exchange contracts, to our customers but usually offset our exposure from such contracts by purchasing other financial contracts. The customer accommodations and any offsetting financial contracts are treated as free-standing derivatives. Free-standing derivatives also include derivatives we enter into for risk management that do not otherwise qualify for hedge accounting, including economic hedge derivatives. To a lesser extent, we take positions based on market expectations or to benefit from price differentials between financial instruments and markets. Additionally, free-standing derivatives include embedded derivatives that are required to be separately accounted for from their host contracts.

Our derivative activities are monitored by Corporate ALCO. Our Treasury function, which includes asset/liability management, is responsible for various hedging strategies developed through analysis of data from financial models and other internal and industry sources. We incorporate the resulting hedging strategies into our overall interest rate risk management and trading strategies.

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The total notional or contractual amounts and fair values for derivatives were:


	December 31, 2009									December 31, 2008
	Notional or		Fair value						Notional or			Fair value
	contractual		Asset			Liability				contractual		Asset			Liability
(in millions)	amount		derivatives			derivatives				amount		derivatives			derivatives

Qualifying hedge contracts ⁽¹⁾
Interest rate contracts ⁽²⁾	$	119,966		6,425			1,302				191,972		11,511			3,287
Foreign exchange contracts		30,212		1,553			811				38,386		1,138			1,198

Total derivatives designated as qualifying hedging instruments				7,978			2,113						12,649			4,485

Derivatives not designated as hedging instruments
Free-standing derivatives (economic hedges) ⁽¹⁾ :
Interest rate contracts ⁽³⁾		633,734		4,441			4,873				750,728		12,635			9,708
Equity contracts		300		—			2				—		—			—
Foreign exchange contracts		7,019		233			29				4,208		150			325
Credit contracts – protection purchased		577		261			—				644		528			—
Other derivatives		4,583		—			40				4,458		108			71

Subtotal				4,935			4,944						13,421			10,104

Customer accommodation, trading and other free-standing derivatives ⁽⁴⁾ :
Interest rate contracts		2,734,664		54,687			53,905				3,752,656		142,739			141,508
Commodity contracts		92,182		5,400			5,182				86,360		6,117			6,068
Equity contracts		27,123		2,434			2,977				37,136		3,088			2,678
Foreign exchange contracts		172,018		3,084			2,737				273,437		7,562			7,419
Credit contracts – protection sold		76,693		979			9,577				137,113		349			20,880
Credit contracts – protection purchased		81,357		9,349			1,089				140,442		22,100			1,281
Other derivatives		8,717		638			389				1,490		28			150

Subtotal				76,571			75,856						181,983			179,984

Total derivatives not designated as hedging instruments				81,506			80,800						195,404			190,088

Total derivatives before netting				89,484			82,913						208,053			194,573

Netting ⁽⁵⁾				(65,926	)		(73,303	)					(168,690	)		(182,435	)

Total			$	23,558			9,610						39,363			12,138


(1)		Represents asset/liability management hedges, which are included in other assets or other liabilities.

(2)		Notional amounts presented exclude $20.9 billion of basis swaps that are combined with receive fixed-rate/pay floating-rate swaps and designated as one hedging instrument.

(3)		Includes free-standing derivatives (economic hedges) used to hedge the risk of changes in the fair value of residential MSRs, MHFS, interest rate lock commitments and other interests held.

(4)		Customer accommodation, trading and other free-standing derivatives are included in trading assets or other liabilities.

(5)		Represents netting of derivative asset and liability balances, and related cash collateral, with the same counterparty subject to master netting arrangements under the accounting guidance covering the offsetting of amounts related to certain contracts. The amount of cash collateral netted against derivative assets and liabilities was $5.3 billion and $14.1 billion, respectively, at December 31, 2009, and $17.7 billion and $22.2 billion, respectively, at December 31, 2008.

Fair Value Hedges

We use interest rate swaps to convert certain of our fixed-rate long-term debt and CDs to floating rates to hedge our exposure to interest rate risk. We also enter into cross-currency swaps, cross-currency interest rate swaps and forward contracts to hedge our exposure to foreign currency risk and interest rate risk associated with the issuance of non-U.S. dollar denominated long-term debt and repurchase agreements. Consistent with our asset/liability management strategy of converting fixed-rate debt to floating rates, we believe interest expense should reflect only the current contractual interest cash flows on the liabilities and the related swaps. In addition, we use interest rate swaps and forward contracts to hedge against changes in fair value of certain debt securities that are classified as securities available for sale, due to changes in interest rates, foreign currency rates, or both. For fair value hedges of long-term debt, CDs, repur-

chase agreements and debt securities, all parts of each derivative’s gain or loss due to the hedged risk are included in the assessment of hedge effectiveness, except for foreign-currency denominated securities available for sale, short-term borrowings and long-term debt hedged with forward derivatives for which the time value component of the derivative gain or loss is excluded from the assessment of hedge effectiveness.

For fair value hedging relationships, we use statistical regression analysis to assess hedge effectiveness, both at inception of the hedging relationship and on an ongoing basis. The regression analysis involves regressing the periodic change in fair value of the hedging instrument against the periodic changes in fair value of the asset or liability being hedged due to changes in the hedged risk(s). The assessment includes an evaluation of the quantitative measures of the regression results used to validate the conclusion of high effectiveness.

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Note 15: Derivatives ( continued)

The following table shows the net gains (losses) recognized in the income statement related to derivatives

in fair value hedging relationships as defined by the Derivatives and Hedging topic in the Codification.


	Year ended December 31, 2009
	Interest rate contracts hedging						Foreign exchange contracts hedging
	Securities						Securities
	available			Long-term			available			Short-term			Long-term
(in millions)	for sale			debt			for sale			borrowings			debt

Gains (losses) recorded in net interest income	$	(289	)		1,677	⁽¹⁾		(56	)		27			349

Gains (losses) recorded in noninterest income
Recognized on derivatives		954			(3,270	)		(713	)		217			2,612
Recognized on hedged item		(936	)		3,132			713			(217	)		(2,626	)

Recognized on fair value hedges (ineffective portion)	$	18			(138	)		—			—			(14	)


(1)		Includes approximately $10 million of losses on forward derivatives hedging foreign-currency securities available for sale, short-term borrowings and long-term debt, representing the portion of derivative gain or loss excluded from assessment of hedge effectiveness (time value).

Cash Flow Hedges

We hedge floating-rate debt against future interest rate increases by using interest rate swaps, caps, floors and futures to limit variability of cash flows due to changes in the benchmark interest rate. We also use interest rate swaps and floors to hedge the variability in interest payments received on certain floating-rate commercial loans, due to changes in the benchmark interest rate. Gains and losses on derivatives that are reclassified from cumulative OCI to current period earnings are included in the line item in which the hedged item’s effect on earnings is recorded. All parts of gain or loss on these derivatives are included in the assessment of hedge effectiveness. For all cash flow hedges, we assess hedge effectiveness using regression analysis, both at inception of the hedging relationship and on an ongoing basis. The regression analysis involves regressing the periodic changes in cash flows of the hedging instrument against the periodic changes in cash flows of the forecasted transaction being hedged due to changes in the hedged risk(s). The assessment includes an evaluation of the quantitative measures of the regression results used to validate the conclusion of high effectiveness.

We expect that $284 million of deferred net gains on derivatives in OCI at December 31, 2009, will be reclassified as earnings during the next twelve months, compared with $60 million of net deferred losses at December 31, 2008. We are hedging our exposure to the variability of future cash flows for all forecasted transactions for a maximum of 17 years for both hedges of floating-rate debt and floating-rate commercial loans.

The following table shows the net gains recognized related to derivatives in cash flow hedging relationships as defined by the Derivatives and Hedging topic in the Codification.


(in millions)	Year ended December 31, 2009

Gains (after tax) recognized in OCI on derivatives (effective portion)	$	107
Gains (pre tax) reclassified from cumulative OCI into net interest income (effective portion)		531
Gains (pre tax) recognized in noninterest income on derivatives (ineffective portion) ⁽¹⁾		42


(1)		None of the change in value of the derivatives was excluded from the assessment of hedge effectiveness.

Free-Standing Derivatives

We use free-standing derivatives (economic hedges), in addition to debt securities available for sale, to hedge the risk of changes in the fair value of residential MSRs, new prime residential MHFS, derivative loan commitments and other interests held, with the resulting gain or loss reflected in other income.

The derivatives used to hedge residential MSRs, which include swaps, swaptions, forwards, Eurodollar and Treasury futures and options contracts, resulted in net derivative gains of $6.8 billion in 2009 and net derivative gains of $3.1 billion in 2008 from economic hedges related to our mortgage servicing activities and are included in mortgage banking noninterest income. The aggregate fair value of these derivatives used as economic hedges was a net liability of $961 million at December 31, 2009, and a net asset of $3.6 billion at December 31, 2008. Changes in fair value of debt securities available for sale (unrealized gains and losses) are not included in servicing income, but are reported in cumulative OCI (net of tax) or, upon sale, are reported in net gains (losses) on debt securities available for sale.

148

Interest rate lock commitments for residential mortgage loans that we intend to sell are considered free-standing derivatives. Our interest rate exposure on these derivative loan commitments, as well as most new prime residential MHFS for which we have elected the fair value option, is hedged with free-standing derivatives (economic hedges) such as forwards and options, Eurodollar futures and options, and Treasury futures, forwards and options contracts. The commitments, free-standing derivatives and residential MHFS are carried at fair value with changes in fair value included in mortgage banking noninterest income. For interest rate lock commitments we include, at inception and during the life of the loan commitment, the expected net future cash flows related to the associated servicing of the loan as part of the fair value measurement of derivative loan commitments. Changes subsequent to inception are based on changes in fair value of the underlying loan resulting from the exercise of the commitment and changes in the probability that the loan will not fund within the terms of the commitment (referred to as a fall-out factor). The value of the underlying loan is affected primarily by changes in interest rates and the passage of time. However, changes in investor demand, such as concerns about credit risk, can also cause changes in the spread relationships between underlying loan value and the derivative financial instruments that cannot be hedged. The aggregate fair value of derivative loan commitments in the balance sheet was a net liability of $312 million and a net asset of $125 million at December 31, 2009, and 2008, respectively, and is included in the caption “Interest rate contracts” under “Customer accommodation, trading and other free-standing derivatives” in the table on page 147.

We also enter into various derivatives primarily to provide derivative products to customers. To a lesser extent, we take positions based on market expectations or to benefit from price differentials between financial instruments and markets. These derivatives are not linked to specific assets and liabilities in the balance sheet or to forecasted transactions in an accounting hedge relationship and, therefore, do not qualify for hedge accounting. We also enter into free-standing derivatives for risk management that do not otherwise qualify for hedge accounting. They are carried at fair value with changes in fair value recorded as part of other noninterest income.

Additionally, free-standing derivatives include embedded derivatives that are required to be accounted for separate from their host contract. We periodically issue hybrid long-term notes and CDs where the performance of the hybrid instrument notes is linked to an equity, commodity or currency index, or basket of such indices. These notes contain explicit terms that affect some or all of the cash flows or the value of the note in a manner similar to a derivative instrument and therefore are considered to contain an “embedded” derivative instrument. The indices on which the performance of the hybrid instrument is calculated are not clearly and closely related to the host debt instrument. In accordance with accounting guidance for derivatives, the “embedded” derivative is separated from the host contract and accounted for as a free-standing derivative.

The following table shows the net gains (losses) recognized in the income statement related to derivatives not designated as hedging instruments under the Derivatives and Hedging topic of the Codification.


	Year ended
(in millions)	December 31, 2009

Gains (losses) recognized on free-standing derivatives (economic hedges)
Interest rate contracts ⁽¹⁾
Recognized in noninterest income:
Mortgage banking	$	5,582
Other		(15	)
Foreign exchange contracts		133
Credit contracts		(269	)

Subtotal		5,431

Gains (losses) recognized on customer accommodation, trading and other free-standing derivatives
Interest rate contracts ⁽²⁾
Recognized in noninterest income:
Mortgage banking		2,035
Other		1,139
Commodity contracts		29
Equity contracts		(275	)
Foreign exchange contracts		607
Credit contracts		(621	)
Other		(187	)

Subtotal		2,727

Net gains recognized related to derivatives not designated as hedging instruments	$	8,158


(1)		Predominantly mortgage banking noninterest income including gains (losses) on the derivatives used as economic hedges of MSRs, interest rate lock commitments, loans held for sale and mortgages held for sale.

(2)		Predominantly mortgage banking noninterest income including gains (losses) on interest rate lock commitments.

Credit Derivatives

We use credit derivatives to manage exposure to credit risk related to lending and investing activity and to assist customers with their risk management objectives. This may include protection sold to offset purchased protection in structured product transactions, as well as liquidity agreements written to special purpose vehicles. The maximum exposure of sold credit derivatives is managed through posted collateral, purchased credit derivatives and similar products in order to achieve our desired credit risk profile. This credit risk management provides an ability to recover a significant portion of any amounts that would be paid under the sold credit derivatives. We would be required to perform under the noted credit derivatives in the event of default by the referenced obligors. Events of default include events such as bankruptcy, capital restructuring or lack of principal and/or interest payment. In certain cases, other triggers may exist, such as the credit downgrade of the referenced obligors or the inability of the special purpose vehicle for which we have provided liquidity to obtain funding.

The following table provides details of sold and purchased credit derivatives. In 2009, we exited the legacy Wachovia market making activity of credit correlation trading resulting in a significant reduction in our credit derivative and counterparty credit exposures from December 31, 2008.

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Note 15: Derivatives ( continued)

Notional amount

Protection

sold –

purchased

Net

non-

with

protection

Other

Fair value

Protection

investment

identical

sold

protection

Range of

(in millions)

liability

sold (A)

grade

underlyings (B)

(A)-(B)

purchased

maturities

December 31, 2008

Credit default swaps on:

Corporate bonds

9,643

83,446

39,987

31,413

52,033

50,585

2009-2018

Structured products

4,940

7,451

5,824

5,061

2,390

6,559

2009-2056

Credit protection on:

Credit default swap index

2,611

35,943

6,364

4,606

31,337

31,410

2009-2017

Commercial mortgage-backed securities index

2,231

7,291

2,938

1,521

5,770

3,919

2009-2052

Asset-backed securities index

1,331

1,526

1,116

235

1,291

803

2037-2046

Loan deliverable credit default swaps

106

611

592

281

330

1,033

2009-2014

Other

845

150

824

—

2009-2020

Total credit derivatives

20,880

137,113

56,971

43,138

93,975

94,309

December 31, 2009

Credit default swaps on:

Corporate bonds

2,419

55,511

23,815

44,159

11,352

12,634

2010-2018

Structured products

4,498

6,627

5,084

4,999

1,628

3,018

2014-2056

Credit protection on:

Default swap index

6,611

2,765

4,202

2,409

2,510

2010-2017

Commercial mortgage-backed securities index

1,987

5,188

453

4,749

439

189

2049-2052

Asset-backed securities index

637

830

660

696

134

189

2037-2046

Loan deliverable credit default swaps

510

494

423

287

2010-2014

Other

1,416

809

1,384

100

2010-2020

Total credit derivatives

9,577

76,693

34,080

59,260

17,433

18,927

Protection sold represents the estimated maximum exposure to loss that would be incurred under an assumed hypothetical circumstance, despite what we believe is its extremely remote possibility, where the value of our interests and any associated collateral declines to zero, without any consideration of recovery or offset from any economic hedges. Accordingly, this required disclosure is not an indication of expected loss. The amounts under non-investment grade represent the notional amounts of those credit derivatives on which we have a higher performance risk, or higher risk of being required to perform under the terms of the credit derivative and is a function of the underlying assets. We consider the risk of performance to be high if the underlying assets under the credit derivative have an external rating that is below investment grade or an internal credit default grade that is equivalent thereto. We believe the net protection sold, which is representative of the net notional amount of protection sold and purchased with identical underlyings, in combination with other protection purchased, is more representative of our exposure to loss than either non-investment grade or protection sold. Other protection purchased represents additional protection, which may offset the exposure to loss for protection sold, that was not purchased with an identical underlying of the protection sold.

Credit-Risk Contingent Features

Certain of our derivative contracts contain provisions whereby if the credit rating of our debt, based on certain major credit rating agencies indicated in the relevant contracts, were to fall below investment grade, the counterparty could demand additional collateral or require termination or replacement of

derivative instruments in a net liability position. The aggregate fair value of all derivative instruments with such credit-risk-related contingent features that are in a net liability position on December 31, 2009, was $7.5 billion for which we have posted $7.1 billion collateral in the normal course of business. If the credit-risk-related contingent features underlying these agreements were triggered on December 31, 2009, we would be required to post additional collateral of $1.0 billion or potentially settle the contract in an amount equal to its fair value.

Counterparty Credit Risk

By using derivatives, we are exposed to counterparty credit risk if counterparties to the derivative contracts do not perform as expected. If a counterparty fails to perform, our counterparty credit risk is equal to the amount reported as a derivative asset on our balance sheet. The amounts reported as a derivative asset are derivative contracts in a gain position, and to the extent subject to master netting arrangements, net of derivatives in a loss position with the same counterparty and cash collateral received. We minimize counterparty credit risk through credit approvals, limits, monitoring procedures, executing master netting arrangements and obtaining collateral, where appropriate. To the extent the master netting arrangements and other criteria meet the requirements outlined in the Derivatives and Hedging topic of the Codification, derivatives balances and related cash collateral amounts are shown net in the balance sheet. Counterparty credit risk related to derivatives is considered in determining fair value.

150

Note 16: Fair Values of Assets and Liabilities

We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Trading assets, securities available for sale, derivatives, prime residential mortgages held for sale (MHFS), certain commercial loans held for sale (LHFS), residential MSRs, principal investments and securities sold but not yet purchased (short sale liabilities) are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other assets on a nonrecurring basis, such as nonprime residential and commercial MHFS, certain LHFS, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or write-downs of individual assets.

We adopted new guidance on fair value measurements effective January 1, 2009, which addresses measuring fair value in situations where markets are inactive and transactions are not orderly. In accordance with fair value accounting provisions, transaction or quoted prices for assets or liabilities in inactive markets may require adjustment due to the uncertainty of whether the underlying transactions are orderly. Prior to our adoption of the new provisions for measuring fair value, we primarily used unadjusted independent vendor or broker quoted prices to measure fair value for substantially all securities available for sale. In connection with the change in guidance for fair value measurement, we developed policies and procedures to determine when the level and volume of activity for our assets and liabilities requiring fair value measurements has significantly declined relative to normal conditions. For such items that use price quotes, such as certain security classes within securities available for sale, the degree of market inactivity and distressed transactions was analyzed to determine the appropriate adjustment to the price quotes. The security classes where we considered the market to be less orderly included non-agency residential MBS, commercial MBS, CDOs, home equity asset-backed securities, auto asset-backed securities and credit card-backed securities. The methodology used to adjust the quotes involved weighting the price quotes and results of internal pricing techniques such as the net present value of future expected cash flows (with observable inputs, where available) discounted at a rate of return market participants require. The significant inputs utilized in the internal pricing techniques, which were estimated by type of underlying collateral, included credit loss assumptions, estimated prepayment speeds and appropriate discount rates. The more active and orderly markets for particular security classes were determined to be, the more weighting assigned to price quotes. The less active and orderly markets were determined to be, the less weighting assigned to price quotes. For the impact of the new fair value measurement provisions, see Note 1 in this Report.

Under fair value option accounting guidance, we elected to measure MHFS at fair value prospectively for new prime residential MHFS originations, for which an active secondary market and readily available market prices existed to reliably support fair value pricing models used for these loans. We also elected to remeasure at fair value certain of our other interests held related to residential loan sales and securitizations. We believe the election for MHFS and other interests held (which are now hedged with free-standing derivatives (economic hedges) along with our MSRs) reduces certain timing differences and better matches changes in the value of these assets with changes in the value of derivatives used as economic hedges for these assets.

Fair Value Hierarchy

In accordance with the Fair Value Measurements and Disclosures topic of the Codification, we group our assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

•		Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.

•		Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

•		Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

In the determination of the classification of financial instruments in Level 2 or Level 3 of the fair value hierarchy, we consider all available information, including observable market data, indications of market liquidity and orderliness, and our understanding of the valuation techniques and significant inputs used. For securities in inactive markets, we use a predetermined percentage to evaluate the impact of fair value adjustments derived from weighting both external and internal indications of value to determine if the instrument is classified as Level 2 or Level 3. Based upon the specific facts and circumstances of each instrument or instrument category, judgments are made regarding the significance of the Level 3 inputs to the instruments’ fair value measurement in its entirety. If Level 3 inputs are considered significant, the instrument is classified as Level 3.

151

Note 16: Fair Values of Assets and Liabilities ( continued)

Upon the acquisition of Wachovia, we elected to measure at fair value certain portfolios of LHFS that we intend to hold for trading purposes and that may be economically hedged with derivative instruments. In addition, we elected to measure at fair value certain letters of credit that are hedged with derivative instruments to better reflect the economics of the transactions. These letters of credit are included in trading account assets or liabilities.

Determination of Fair Value

In accordance with the Fair Value Measurements and Disclosures topic of the Codification, we base our fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, as prescribed in the fair value hierarchy.

In instances where there is limited or no observable market data, fair value measurements for assets and liabilities are based primarily upon our own estimates or combination of our own estimates and independent vendor or broker pricing, and the measurements are often calculated based on current pricing policy, the economic and competitive environment, the characteristics of the asset or liability and other such factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, that could significantly affect the results of current or future values.

We incorporate lack of liquidity into our fair value measurement based on the type of asset measured and the valuation methodology used. For example, for residential MHFS and certain securities where the significant inputs have become unobservable due to the illiquid markets and vendor or broker pricing is not used, we use a discounted cash flow technique to measure fair value. This technique incorporates forecasting of expected cash flows (adjusted for credit loss assumptions and estimated prepayment speeds) discounted at an appropriate market discount rate to reflect the lack of liquidity in the market that a market participant would consider. For other securities where vendor or broker pricing is used, we use either unadjusted broker quotes or vendor prices or vendor or broker prices adjusted by weighting them with internal discounted cash flow techniques to measure fair value. These unadjusted vendor or broker prices inherently reflect any lack of liquidity in the market as the fair value measurement represents an exit price from a market participant viewpoint.

As required by FASB ASC 825-10, Financial Instruments , following are descriptions of the valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value for financial instruments not recorded at fair value.

Assets

SHORT-TERM FINANCIAL ASSETS Short-term financial assets include cash and due from banks, federal funds sold and securities purchased under resale agreements and due from customers on acceptances. These assets are carried at historical cost. The carrying amount is a reasonable estimate of fair value because of the relatively short time between the origination of the instrument and its expected realization.

TRADING ASSETS (EXCLUDING DERIVATIVES) AND SECURITIES AVAILABLE FOR SALE Trading assets and securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices in active markets, if available. Such instruments are classified within Level 1 of the fair value hierarchy. Examples include exchange-traded equity securities and some highly liquid government securities such as U.S. Treasuries. When instruments are traded in secondary markets and quoted market prices do not exist for such securities, we generally rely on internal valuation techniques or on prices obtained from independent pricing services or brokers (collectively, vendors) or combination thereof.

Trading securities are mostly valued using trader prices that are subject to independent price verification procedures. The majority of fair values derived using internal valuation techniques are verified against multiple pricing sources, including prices obtained from independent vendors. Vendors compile prices from various sources and often apply matrix pricing for similar securities when no price is observable. We review pricing methodologies provided by the vendors in order to determine if observable market information is being used, versus unobservable inputs. When evaluating the appropriateness of an internal trader price compared with vendor prices, considerations include the range and quality of vendor prices. Vendor prices are used to ensure the reasonableness of a trader price; however valuing financial instruments involves judgments acquired from knowledge of a particular market and is not perfunctory. If a trader asserts that a vendor price is not reflective of market value, justification for using the trader price, including recent sales activity where possible, must be provided to and approved by the appropriate levels of management.

Similarly, while securities available for sale traded in secondary markets are typically valued using unadjusted vendor prices or vendor prices adjusted by weighting them with internal discounted cash flow techniques, these prices are reviewed and, if deemed inappropriate by a trader who has the most knowledge of a particular market, can be adjusted. Securities measured with these internal valuation techniques are generally classified as Level 2 of the hierarchy and often involve using quoted market prices for similar securities, pricing models, discounted cash flow analyses using significant inputs observable in the market where available or combination of multiple valuation techniques. Examples include certain residential and commercial MBS, municipal bonds, U.S. government and agency MBS, and corporate debt securities.

152

Security fair value measurements using significant inputs that are unobservable in the market due to limited activity or a less liquid market are classified as Level 3 in the fair value hierarchy. Such measurements include securities valued using internal models or combination of multiple valuation techniques such as weighting of internal models and vendor or broker pricing, where the unobservable inputs are significant to the overall fair value measurement. Securities classified as Level 3 include certain residential and commercial MBS, asset-backed securities collateralized by auto leases or loans and cash reserves, CDOs and CLOs, and certain residual and retained interests in residential mortgage loan securitizations. CDOs are valued using the prices of similar instruments, the pricing of completed or pending third party transactions or the pricing of the underlying collateral within the CDO. Where vendor or broker prices are not readily available, management’s best estimate is used.

MORTGAGES HELD FOR SALE (MHFS) We elected to carry our new prime residential MHFS portfolio at fair value in accordance with fair value option accounting guidance. The remaining MHFS are carried at the lower of cost or market value. Fair value is based on independent quoted market prices, where available, or the prices for other mortgage whole loans with similar characteristics. As necessary, these prices are adjusted for typical securitization activities, including servicing value, portfolio composition, market conditions and liquidity. Most of our MHFS are classified as Level 2. For the portion where market pricing data is not available, we use a discounted cash flow model to estimate fair value and, accordingly, classify as Level 3.

LOANS HELD FOR SALE (LHFS) LHFS are carried at the lower of cost or market value, or at fair value for certain portfolios that we intend to hold for trading purposes. The fair value of LHFS is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, we classify those loans subjected to nonrecurring fair value adjustments as Level 2.

LOANS For the carrying value of loans, including PCI loans, see Note 1 (Summary of Significant Accounting Policies –Loans) in this Report. We do not record loans at fair value on a recurring basis. As such, valuation techniques discussed herein for loans are primarily for estimating fair value for financial instruments in accordance with accounting guidance on financial instruments. However, from time to time, we record nonrecurring fair value adjustments to loans to reflect (1) partial write-downs that are based on the observable market price or current appraised value of the collateral, or (2) the full charge-off of the loan carrying value.

The fair value estimates for financial instruments differentiate loans based on their financial characteristics, such as product classification, loan category, pricing features and remaining maturity. Prepayment and credit loss estimates are evaluated by product and loan rate.

The fair value of commercial and CRE and foreign loans is calculated by discounting contractual cash flows, adjusted

for credit loss estimates, using discount rates that reflect our current pricing for loans with similar characteristics and remaining maturity.

For real estate 1-4 family first and junior lien mortgages, fair value is calculated by discounting contractual cash flows, adjusted for prepayment and credit loss estimates, using discount rates based on current industry pricing (where readily available) or our own estimate of an appropriate risk-adjusted discount rate for loans of similar size, type, remaining maturity and repricing characteristics.

For credit card loans, the portfolio’s yield is equal to our current pricing and, therefore, the fair value is equal to book value adjusted for estimates of credit losses inherent in the portfolio at the balance sheet date.

For all other consumer loans, the fair value is generally calculated by discounting the contractual cash flows, adjusted for prepayment and credit loss estimates, based on the current rates we offer for loans with similar characteristics.

Loan commitments, standby letters of credit and commercial and similar letters of credit are not included in the table on page 160. These instruments generate ongoing fees at our current pricing levels, which are recognized over the term of the commitment period. In situations where the credit quality of the counterparty to a commitment has declined, we record a reserve. A reasonable estimate of the fair value of these instruments is the carrying value of deferred fees plus the related reserve. This amounted to $725 million at December 31, 2009, and $719 million at December 31, 2008. Certain letters of credit that are hedged with derivative instruments are carried at fair value in trading assets or liabilities. For those letters of credit fair value is calculated based on readily quotable credit default spreads, using a market risk credit default swap model.

DERIVATIVES Quoted market prices are available and used for our exchange-traded derivatives, such as certain interest rate futures and option contracts, which we classify as Level 1. However, substantially all of our derivatives are traded in over-the-counter (OTC) markets where quoted market prices are not readily available. OTC derivatives are valued using internal valuation techniques. Valuation techniques and inputs to internally-developed models depend on the type of derivative and nature of the underlying rate, price or index upon which the derivative’s value is based. Key inputs can include yield curves, credit curves, foreign-exchange rates, prepayment rates, volatility measurements and correlation of such inputs. Where model inputs can be observed in a liquid market and the model does not require significant judgment, such derivatives are typically classified as Level 2 of the fair value hierarchy. Examples of derivatives classified as Level 2 include generic interest rate swaps, foreign currency swaps, commodity swaps, and certain option and forward contracts. When instruments are traded in less liquid markets and significant inputs are unobservable, such derivatives are classified as Level 3. Examples of derivatives classified as Level 3 include complex and highly structured derivatives, credit default swaps, interest rate lock commitments written

153

Note 16: Fair Values of Assets and Liabilities ( continued)

for our residential mortgage loans that we intend to sell and long dated equity options where volatility is not observable. Additionally, significant judgments are required when classifying financial instruments within the fair value hierarchy, particularly between Level 2 and 3, as is the case for certain derivatives.

MORTGAGE SERVICING RIGHTS (MSRs) AND CERTAIN OTHER INTERESTS HELD IN SECURITIZATIONS MSRs and certain other interests held in securitizations (e.g., interest-only strips) do not trade in an active market with readily observable prices. Accordingly, we determine the fair value of MSRs using a valuation model that calculates the present value of estimated future net servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds (including housing price volatility), discount rate, cost to service (including delinquency and foreclosure costs), escrow account earnings, contractual servicing fee income, ancillary income and late fees. Commercial MSRs are carried at lower of cost or market value, and therefore can be subject to fair value measurements on a nonrecurring basis. For other interests held in securitizations (such as interest-only strips) we use a valuation model that calculates the present value of estimated future cash flows. The model incorporates our own estimates of assumptions market participants use in determining the fair value, including estimates of prepayment speeds, discount rates, defaults and contractual fee income. Interest-only strips are recorded as trading assets. Fair value measurements of our MSRs and interest-only strips use significant unobservable inputs and, accordingly, we classify as Level 3.

FORECLOSED ASSETS Foreclosed assets include foreclosed properties securing residential, auto and GNMA loans. Foreclosed assets are adjusted to fair value less costs to sell upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value less costs to sell. Fair value is generally based upon independent market prices or appraised values of the collateral and, accordingly, we classify foreclosed assets as Level 2.

NONMARKETABLE EQUITY INVESTMENTS Nonmarketable equity investments are recorded under the cost or equity method of accounting. Nonmarketable equity securities that fall within the scope of the AICPA Investment Company Audit Guide are carried at fair value (principal investments). There are generally restrictions on the sale and/or liquidation of these investments, including federal bank stock. Federal bank stock carrying value approximates fair value. We use facts and circumstances available to estimate the fair value of our nonmarketable equity investments. We typically consider our access to and need for capital (including recent or projected financing activity), qualitative assessments of the viability of the investee, evaluation of the financial statements of the investee and prospects for its future. Principal investments,

including certain public equity and non-public securities and certain investments in private equity funds, are recorded at fair value with realized and unrealized gains and losses included in gains and losses on equity investments in the income statement, and are included in other assets in the balance sheet. Public equity investments are valued using quoted market prices and discounts are only applied when there are trading restrictions that are an attribute of the investment. Investments in non-public securities are recorded at our estimate of fair value using metrics such as security prices of comparable public companies, acquisition prices for similar companies and original investment purchase price multiples, while also incorporating a portfolio company’s financial performance and specific factors. For investments in private equity funds, we use the NAV provided by the fund sponsor as an appropriate measure of fair value. In some cases, such NAVs require adjustments based on certain unobservable inputs.

Liabilities

DEPOSIT LIABILITIES Deposit liabilities are carried at historical cost. The Financial Instruments topic of the Codification states that the fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing checking, and market rate and other savings, is equal to the amount payable on demand at the measurement date. The fair value of other time deposits is calculated based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for like wholesale deposits with similar remaining maturities.

SHORT-TERM FINANCIAL LIABILITIES Short-term financial liabilities are carried at historical cost and include federal funds purchased and securities sold under repurchase agreements, commercial paper and other short-term borrowings. The carrying amount is a reasonable estimate of fair value because of the relatively short time between the origination of the instrument and its expected realization.

OTHER LIABILITIES Other liabilities recorded at fair value on a recurring basis, excluding derivative liabilities (see the “ Derivatives ” section for derivative liabilities), includes short sale liabilities and repurchase obligations (due to standard representations and warranties) under our residential mortgage loan contracts. Short sale liabilities are classified as either Level 1 or Level 2, generally dependent upon whether the underlying securities have readily obtained quoted prices in active exchange markets. The value of the repurchase obligations is determined using a cash flow valuation technique consistent with what market participants would use in estimating the fair value. Key assumptions in the valuation process are estimates for repurchase demands and losses subsequent to repurchase. Such assumptions are unobservable and, accordingly, we classify repurchase obligations as Level 3.

154

LONG-TERM DEBT Long-term debt is carried at amortized cost. However, we are required to estimate the fair value of long-term debt in accordance with accounting guidance on financial instruments. Generally, the discounted cash flow method is used to estimate the fair value of our long-term debt. Contractual cash flows are discounted using rates currently offered for new notes with similar remaining

maturities and, as such, these discount rates include our current spread levels.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis.


(in millions)	Level 1			Level 2			Level 3			Netting ⁽¹⁾			Total

Balance at December 31, 2008
Trading assets (excluding derivatives) ⁽²⁾	$	911			16,045			3,495			—			20,451
Derivatives (trading assets)		331			174,355			7,897			(148,150	)		34,433
Securities of U.S. Treasury and federal agencies		3,177			72			—			—			3,249
Securities of U.S. states and political subdivisions		1			11,754			903			—			12,658
Mortgage-backed securities:
Federal agencies		—			66,430			4			—			66,434
Residential		—			21,320			3,510			—			24,830
Commercial		—			8,192			286			—			8,478

Total mortgage-backed securities		—			95,942			3,800			—			99,742

Corporate debt securities		—			6,642			282			—			6,924
Collateralized debt obligations		—			2			2,083			—			2,085
Other		—			7,976			12,799			—			20,775

Total debt securities		3,178			122,388			19,867			—			145,433

Marketable equity securities:
Perpetual preferred securities		886			1,065			2,775			—			4,726
Other marketable equity securities		1,099			261			50			—			1,410

Total marketable equity securities		1,985			1,326			2,825			—			6,136

Total securities available for sale		5,163			123,714			22,692			—			151,569

Mortgages held for sale		—			14,036			4,718			—			18,754
Loans held for sale		—			398			—			—			398
Mortgage servicing rights (residential)		—			—			14,714			—			14,714
Other assets ⁽³⁾		3,975			21,751			2,041			(20,540	)		7,227

Total	$	10,380			350,299			55,557			(168,690	)		247,546

Other liabilities ⁽⁴⁾	$	(4,815	)		(187,098	)		(9,308	)		182,435			(18,786	)

Balance at December 31, 2009
Trading assets (excluding derivatives) ⁽²⁾	$	2,386			20,497			2,311			—			25,194
Derivatives (trading assets)		340			70,938			5,682			(59,115	)		17,845
Securities of U.S. Treasury and federal agencies		1,094			1,186			—			—			2,280
Securities of U.S. states and political subdivisions		4			12,708			818			—			13,530
Mortgage-backed securities:
Federal agencies		—			82,818			—			—			82,818
Residential		—			27,506			1,084			—			28,590
Commercial		—			9,162			1,799			—			10,961

Total mortgage-backed securities		—			119,486			2,883			—			122,369

Corporate debt securities		—			8,968			367			—			9,335
Collateralized debt obligations		—			—			3,725			—			3,725
Other		—			3,292			12,587			—			15,879

Total debt securities		1,098			145,640			20,380			—			167,118

Marketable equity securities:
Perpetual preferred securities		736			834			2,305			—			3,875
Other marketable equity securities		1,279			350			88			—			1,717

Total marketable equity securities		2,015			1,184			2,393			—			5,592

Total securities available for sale		3,113			146,824			22,773			—			172,710

Mortgages held for sale		—			33,439			3,523			—			36,962
Loans held for sale		—			149			—			—			149
Mortgage servicing rights (residential)		—			—			16,004			—			16,004
Other assets ⁽³⁾		1,932			11,720			1,690			(6,812	)		8,530

Total	$	7,771			283,567			51,983			(65,927	)		277,394

Other liabilities ⁽⁴⁾	$	(6,527	)		(81,613	)		(7,942	)		73,299			(22,783	)


(1)		Derivatives are reported net of cash collateral received and paid and, to the extent that the criteria of the accounting guidance covering the offsetting of amounts related to certain contracts are met, positions with the same counterparty are netted as part of a legally enforceable master netting agreement.

(2)		Includes trading securities of $24.0 billion and $19.5 billion at December 31, 2009 and 2008, respectively.

(3)		Derivative assets other than trading and principal investments are included in this category.

(4)		Derivative liabilities are included in this category.

155

Note 16: Fair Values of Assets and Liabilities ( continued)

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:


																			Net unrealized
										Purchases,									gains (losses)
				Total net gains						sales,			Net						included in net
				(losses) included in						issuances			transfers						income related
	Balance,						Other			and			into and/			Balance,			to assets and
	beginning			Net			comprehensive			settlements,			or out of			end			liabilities held
(in millions)	of year			income			income			net			Level 3		⁽¹⁾	of year			at period end		⁽²⁾

Year ended December 31, 2007
Trading assets (excluding derivatives)	$	360			(151	)		—			207			2			418			(86	) ⁽³⁾
Securities available for sale:
Securities of U.S. states and political subdivisions		134			—			(8	)		42			—			168			—
Mortgage-backed securities:
Federal agencies		—			—			—			—			—			—			—
Residential		—			(33	)		(5	)		524			—			486			(31	)
Commercial		—			—			—			—			—			—			—

Total mortgage-backed securities		—			(33	)		(5	)		524			—			486			(31	)

Corporate debt securities		—			—			—			—			—			—			—
Collateralized debt obligations		—			—			—			—			—			—			—
Other		3,313			—			—			1,413			—			4,726			—

Total debt securities		3,447			(33	)		(13	)		1,979			—			5,380			(31	)

Marketable equity securities:
Perpetual preferred securities		—			—			—			—			—			—			—
Other marketable equity securities		—			—			1			—			—			1			—

Total marketable equity securities		—			—			1			—			—			1			—

Total securities available for sale	$	3,447			(33	)		(12	)		1,979			—			5,381			(31	)

Mortgages held for sale	$	—			1			—			30			115			146			1	⁽⁴⁾
Mortgage servicing rights (residential)		17,591			(3,597	)		—			2,769			—			16,763			(594	) ⁽⁴⁾⁽⁵⁾
Net derivative assets and liabilities		(68	)		(108	)		—			178			4			6			6	⁽⁴⁾
Other assets (excluding derivatives)		—			—			—			—			—			—			—
Other liabilities (excluding derivatives)		(282	)		(97	)		—			99			—			(280	)		(98	)

Year ended December 31, 2008
Trading assets (excluding derivatives)	$	418			(120	)		—			3,197			—			3,495			(23	) ⁽³⁾
Securities available for sale:
Securities of U.S. states and political subdivisions		168			—			(81	)		538			278			903			—
Mortgage-backed securities:
Federal agencies		—			—			—			—			4			4			—
Residential		486			(180	)		(302	)		3,307			199			3,510			(150	)
Commercial		—			(10	)		(210	)		163			343			286			—

Total mortgage-backed securities		486			(190	)		(512	)		3,470			546			3,800			(150	)

Corporate debt securities		—			—			(44	)		326			—			282			—
Collateralized debt obligations		—			(152	)		(280	)		1,679			836			2,083			—
Other		4,726			(15	)		(572	)		8,379			281			12,799			—

Total debt securities		5,380			(357	)		(1,489	)		14,392			1,941			19,867			(150	)

Marketable equity securities:
Perpetual preferred securities		—			—			—			2,775			—			2,775			—
Other marketable equity securities		1			—			—			49			—			50			—

Total marketable equity securities		1			—			—			2,824			—			2,825			—

Total securities available for sale	$	5,381			(357	)		(1,489	)		17,216			1,941			22,692			(150	)

Mortgages held for sale	$	146			(280	)		—			561			4,291			4,718			(268	) ⁽⁴⁾
Mortgage servicing rights (residential)		16,763			(5,927	)		—			3,878			—			14,714			(3,333	) ⁽⁴⁾⁽⁵⁾
Net derivative assets and liabilities		6			(275	)		1			303			2			37			93	⁽⁴⁾
Other assets (excluding derivatives)		—			—			—			1,231			—			1,231			—
Other liabilities (excluding derivatives)		(280	)		(228	)		—			(130	)		—			(638	)		(228	)


(continued on the following page)

156

(continued from previous page)

Net unrealized

Purchases,

gains (losses)

Total net gains

sales,

Net

included in net

(losses) included in

issuances

transfers

income related

Balance,

Other

and

into and/

Balance,

to assets and

beginning

Net

comprehensive

settlements,

or out of

end

liabilities held

(in millions)

of year

income

net

Level 3 ⁽¹⁾

of year

at period end ⁽²⁾

Year ended December 31, 2009

Trading assets (excluding derivatives)

3,495

202

(1,749

)

361

2,311

276

⁽³⁾

Securities available for sale:

Securities of U.S. states and political subdivisions

903

—

(133

)

818

)

Mortgage-backed securities:

Federal agencies

—

)

—

Residential

3,510

(74

)

1,092

(759

)

(2,685

)

1,084

(227

)

Commercial

286

(220

)

894

798

1,799

(112

)

Total mortgage-backed securities

3,800

(294

)

1,986

(718

)

(1,891

)

2,883

(339

)

Corporate debt securities

282

)

367

—

Collateralized debt obligations

2,083

125

577

623

317

3,725

(84

)

Other

12,799

136

1,368

584

(2,300

)

12,587

(94

)

Total debt securities

19,867

)

3,992

507

(3,979

)

20,380

(525

)

Marketable equity securities:

Perpetual preferred securities

2,775

104

144

(723

)

2,305

)

Other marketable equity securities

—

)

(23

)

—

Total marketable equity securities

2,825

104

142

(660

)

(18

)

2,393

)

Total securities available for sale

22,692

4,134

(153

)

(3,997

)

22,773

(526

)

Mortgages held for sale

4,718

(96

)

—

(921

)

(178

)

3,523

(109)

⁽⁴⁾

Mortgage servicing rights (residential)

14,714

(4,970

)

—

6,260

—

16,004

(1,534)

⁽⁴⁾

Net derivative assets and liabilities

1,439

—

(2,291

)

(17

)

(832

)

(799)

⁽⁶⁾

Other assets (excluding derivatives)

1,231

—

132

—

1,373

Other liabilities (excluding derivatives)

(638

)

(630

)

—

168

(10

)

(1,110

)

(606

)


(1)		The amounts presented as transfers into and out of Level 3 represent fair value as of the beginning of the quarter in which each transfer occurred.

(2)		Represents only net gains (losses) that are due to changes in economic conditions and management’s estimates of fair value and excludes changes due to the collection/ realization of cash flows over time.

(3)		Included in other noninterest income in the income statement.

(4)		Included in mortgage banking in the income statement.
(5)		Represents total unrealized losses of $3.3 billion and $571 million, net of losses of $8 million and gains of $23 million related to sales, in 2008 and 2007, respectively.
(6)		Included in mortgage banking, trading activities and other noninterest income in the income statement.

For certain assets and liabilities, we obtain fair value measurements from independent brokers or independent third party pricing services and record the unadjusted fair value in our financial statements. The detail by level is shown in the table below. Fair value measurements obtained from

independent brokers or independent third party pricing services that we have adjusted to determine the fair value recorded in our financial statements are not included in the table below.


	Fair value measurements from:
	Independent brokers						Third party pricing services
(in millions)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3

December 31, 2008
Trading assets (excluding derivatives)	$	190		3,272		12		917		1,944		110
Derivatives (trading and other assets)		3,419		106		106		605		4,635		—
Securities available for sale		181		8,916		1,681		3,944		109,170		8
Loans held for sale		—		1		—		—		353		—
Other liabilities		1,105		175		128		2,208		5,171		1

December 31, 2009
Trading assets (excluding derivatives)	$	—		4,208		—		30		1,712		81
Derivatives (trading and other assets)		—		8		42		—		2,926		9
Securities available for sale		85		1,870		548		1,467		120,688		1,864
Loans held for sale		—		—		—		—		2		—
Derivatives (liabilities)		—		—		70		—		2,949		4
Other liabilities		—		—		—		10		3,916		26

157

Note 16: Fair Values of Assets and Liabilities ( continued)

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

We may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting

or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis in 2009 and 2008 that were still held in the balance sheet at each respective year end, the following table provides the fair value hierarchy and the carrying value of the related individual assets or portfolios at year end.


	Carrying value at year end
(in millions)	Level 1		Level 2		Level 3		Total

December 31, 2008
Mortgages held for sale	$	—		521		534		1,055
Loans held for sale		—		338		—		338
Loans ⁽¹⁾		—		1,487		107		1,594
Private equity investments		134		—		18		152
Foreclosed assets ⁽²⁾		—		274		55		329
Operating lease assets		—		186		—		186

December 31, 2009
Mortgages held for sale	$	—		1,105		711		1,816
Loans held for sale		—		444		—		444
Loans ⁽¹⁾		—		6,177		134		6,311
Private equity investments		—		—		52		52
Foreclosed assets ⁽²⁾		—		199		38		237
Operating lease assets		—		90		29		119


(1)		Represents carrying value of loans for which adjustments are based on the appraised value of the collateral. The carrying value of loans fully charged-off, which includes unsecured lines and loans, is zero.

(2)		Represents the fair value of foreclosed real estate and other collateral owned that were measured at fair value subsequent to their initial classification as foreclosed assets.

The following table presents the increase (decrease) in value of certain assets that are measured at fair value on a nonrecurring basis for which a fair value adjustment has

been included in the income statement, relating to assets held at period end.


	Year ended December 31,
(in millions)	2009			2008

Mortgages held for sale	$	(22	)		(28	)
Loans held for sale		158			(105	)
Loans ⁽¹⁾		(13,083	)		(6,400	)
Private equity investments		(112	)		(81	)
Foreclosed assets ⁽²⁾		(91	)		(165	)
Operating lease assets		(14	)		(28	)

Total	$	(13,164	)		(6,807	)


(1)		Represents write-downs of loans based on the appraised value of the collateral.

(2)		Represents the losses on foreclosed real estate and other collateral owned that were measured at fair value subsequent to their initial classification as foreclosed assets.

158

Fair Value Option

The following table reflects the differences between fair value carrying amount of MHFS and LHFS for which we

have elected the fair value option and the aggregate unpaid principal amount we are contractually entitled to receive at maturity.

December 31,

2009

2008

Fair value

Fair value

carrying

carrying

amount

amount

less

less

Fair value

Aggregate

aggregate

Fair value

Aggregate

aggregate

carrying

unpaid

carrying

unpaid

(in millions)

amount

principal

amount

principal

Mortgages held for sale reported at fair value:

Total loans

$ 36,962

37,072

(110)

⁽¹⁾

18,754

18,862

(108

) ⁽¹⁾

Nonaccrual loans

268

560

(292

)

152

344

(192

)

Loans 90 days or more past due and still accruing

(14

)

Loans held for sale reported at fair value:

Total loans

149

159

(10

)

398

760

(362

)

Nonaccrual loans

(16

)


(1)		The difference between fair value carrying amount and aggregate unpaid principal includes changes in fair value recorded at and subsequent to funding, gains and losses on the related loan commitment prior to funding, and premiums on acquired loans.

The assets accounted for under the fair value option are initially measured at fair value. Gains and losses from initial measurement and subsequent changes in fair value are recognized in earnings. The changes in fair values related

to initial measurement and subsequent changes in fair value included in earnings for these assets measured at fair value are shown, by income statement line item, below.

Year ended December 31,

2009

2008

Mortgages

Loans

Other

Mortgages

Other

held

interests

held

interests

(in millions)

for sale

held

for sale

held

Mortgage banking noninterest income:

Net gains on mortgage loan origination/sales activities ⁽¹⁾

$4,891

—

2,111

—

Other noninterest income

—

117

—

(109

)


(1)		Includes changes in fair value of servicing associated with MHFS.

Interest income on MHFS measured at fair value is calculated based on the note rate of the loan and is recorded in interest income in the income statement.

For MHFS that are accounted for under the fair value option, the estimated amount of losses included in earnings attributable to instrument-specific credit risk was $277 million and $648 million for the year ended December 31, 2009 and 2008, respectively. For performing loans, instrument-specific credit risk gains or losses were derived principally by

determining the change in fair value of the loans due to changes in the observable or implied credit spread. Credit spread is the market yield on the loans less the relevant risk-free benchmark interest rate. Since the second half of 2007, spreads have been significantly impacted by the lack of liquidity in the secondary market for mortgage loans. For nonperforming loans, we attribute all changes in fair value to instrument-specific credit risk.

159

Note 16: Fair Values of Assets and Liabilities ( continued)

Disclosures about Fair Value of Financial Instruments
The table below is a summary of fair value estimates for financial instruments, excluding short-term financial assets and liabilities because carrying amounts approximate fair value, and excluding financial instruments recorded at fair value on a recurring basis. The carrying amounts in the following table are recorded in the balance sheet under the indicated captions.

We have not included assets and liabilities that are not financial instruments in our disclosure, such as the value of the long-term relationships with our deposit, credit card and

trust customers, amortized MSRs, premises and equipment, goodwill and other intangibles, deferred taxes and other liabilities. The total of the fair value calculations presented does not represent, and should not be construed to represent, the underlying value of the Company.

The carrying amount of loans at December 31, 2008, in the table below includes $443.5 billion acquired from Wachovia. Under the purchase method of accounting, these loans were recorded at fair value upon acquisition, and accordingly, the carrying value and fair value at December 31, 2008 were the same.

Year ended December 31,

2009

2008

Carrying

Estimated

Carrying

Estimated

(in millions)

amount

fair value

amount

fair value

Financial assets

Mortgages held for sale ⁽¹⁾

2,132

1,334

1,333

Loans held for sale ⁽²⁾

5,584

5,719

5,830

5,876

Loans, net ⁽³⁾

744,225

717,798

828,123

813,950

Nonmarketable equity investments (cost method)

9,793

9,889

9,146

9,262

Financial liabilities

Deposits

824,018

824,678

781,402

781,964

Long-term debt ⁽⁴⁾

203,784

205,752

267,055

266,023


(1)		Balance excludes mortgages held for sale for which the fair value option under ASC 825-10 was elected, and therefore includes nonprime residential and commercial mortgages held for sale.
(2)		Balance excludes loans held for sale for which the fair value option under ASC 825-10 was elected.
(3)		Balance excludes lease financing with a carrying amount of $14.2 billion at December 31, 2009, and $15.8 billion at December 31, 2008.
(4)		The carrying amount and fair value exclude obligations under capital leases of $77 million at December 31, 2009, and $103 million at December 31, 2008.

Alternative Investments

The following table summarizes our investments in various types of funds. We use the funds’ NAVs per share as a practical

expedient to measure fair value on recurring and nonrecurring bases. The fair values presented in the table are based upon the funds’ NAVs or an equivalent measure.

December 31, 2009

Redemption

Fair

Unfunded

Redemption

notice

(in millions)

value

commitments

frequency

period

Offshore funds ⁽¹⁾

1,270

—

Daily-Quarterly

1-90 days

Funds of funds ⁽²⁾

—

Monthly-Annually

10-120 days

Hedge funds ⁽³⁾

—

Monthly-Annually

30-180 days

Private equity funds ⁽⁴⁾

901

340

N/A

Venture capital funds ⁽⁵⁾

N/A

Total

2,368

387


N/A — Not applicable.
(1)		Includes investments in funds that invest primarily in investment grade European fixed-income securities. Redemption restrictions are in place for investments with a fair value of $76 million due to a lock-up provision that will remain in effect until November 2012.
(2)		Represents funds that invest principally in publicly listed equity securities. For one investment valued at $3 million, a gate provision has been imposed by the fund manager, and no redemptions are currently allowed. This redemption restriction will remain in effect until January 2012.
(3)		Consists of investments in equity, multi-strategy, and event driven hedge funds. Redemption restrictions are in place for investments with a fair value of $10 million primarily because the funds are subject to lock-up provisions or are in the process of liquidating. The redemption restrictions are expected to remain in effect until January 2012.
(4)		Includes private equity funds that invest in equity and debt securities issued by private and publicly-held companies in connection with leveraged buy-outs, recapitalizations, and expansion opportunities. Substantially all of these investments do not allow redemptions. Alternatively, we receive distributions as the underlying assets of the funds liquidate, which we expect to occur over the next 10 years. We have begun withdrawal proceedings for investments with a fair value of $63 million and a 90-day redemption notice period. We expect to receive most of these funds by March 31, 2013.
(5)		Represents investments in funds that invest in domestic and foreign companies in a variety of industries, including information technology, financial services, and healthcare. These investments can never be redeemed with the funds. Instead, we receive distributions as the underlying assets of the fund liquidate, which we expect to occur over the next 7 years.

160

Note 17: Preferred Stock

We are authorized to issue 20 million shares of preferred stock and 4 million shares of preference stock, both without par value. Preferred shares outstanding rank senior to common shares both as to dividends and liquidation

preference but have no general voting rights. We have not issued any preference shares under this authorization.

The following table provides detail of preferred stock.

December 31, 2009

December 31, 2008

Shares

issued and

Carrying

Carrying

(in millions, except shares)

outstanding

Par value

value

Discount

value

Discount

Series D ⁽¹⁾

Fixed Rate Cumulative Perpetual Preferred Stock, Series D, $1,000,000 liquidation preference per share, 25,000 shares authorized

—

22,741

2,259

DEP Shares

Dividend Equalization Preferred Shares, $10 liquidation preference per share, 97,000 shares authorized

96,546

—

Series J ⁽¹⁾⁽²⁾

8.00% Non-Cumulative Perpetual Class A Preferred Stock, Series J, $1,000 liquidation preference per share, 2,300,000 shares authorized

2,150,375

2,150

1,995

155

1,995

155

Series K ⁽¹⁾⁽²⁾

7.98% Fixed-to-Floating Non-Cumulative Perpetual Class A Preferred Stock, Series K, $1,000 liquidation preference per share, 3,500,000 shares authorized

3,352,000

3,352

2,876

476

2,876

476

Series L ⁽¹⁾⁽²⁾

7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock, Series L, $1,000 liquidation preference per share, 4,025,000 shares authorized

3,968,000

3,968

3,200

768

3,200

768

Total

9,566,921

9,470

8,071

1,399

30,812

3,658


(1)		Series J, K and L preferred shares qualify as Tier 1 capital.
(2)		In conjunction with the acquisition of Wachovia, at December 31, 2008, shares of Series J, K and L perpetual preferred stock were converted into shares of a corresponding series of Wells Fargo preferred stock having substantially the same rights and preferences. The carrying value is par value adjusted to fair value in purchase accounting.

In addition to the preferred stock issued and outstanding described in the table above, we have the following preferred stock authorized with no shares issued and outstanding:

•		Series A – Non-Cumulative Perpetual Preferred Stock, Series A, $100,000 liquidation preference per share, 25,001 shares authorized
•		Series B – Non-Cumulative Perpetual Preferred Stock, Series B, $100,000 liquidation preference per share, 17,501 shares authorized
•		Series G – 7.25% Class A Preferred Stock, Series G, $15,000 liquidation preference per share, 50,000 shares authorized
•		Series H – Floating Class A Preferred Stock, Series H, $20,000 liquidation preference per share, 50,000 shares authorized
•		Series I – 5.80% Fixed to Floating Class A Preferred Stock, Series I, $100,000 liquidation preference per share, 25,010 shares authorized

PREFERRED STOCK ISSUED TO THE DEPARTMENT OF THE TREASURY On October 28, 2008, we issued to the United States Department of the Treasury 25,000 shares of our Fixed Rate Cumulative Perpetual Preferred Stock, Series D without par value, having a liquidation preference per share equal to $1,000,000. Under its terms, the Series D Preferred Stock paid cumulative dividends at a rate of 5% per year for the first five years. After obtaining the applicable regulatory approvals, on December 23, 2009, we redeemed the Series D Preferred Stock by paying the Treasury $25.13 billion, equal to the liquidation preference plus accrued but unpaid dividends to the date of redemption. In connection with the Series D Preferred Stock redemption, in the fourth quarter of 2009, we fully accreted the remaining discount at the time of redemption, or approximately $1.9 billion.

161

Note 17: Preferred Stock ( continued)

As part of the preferred stock issuance in 2008, Treasury received a warrant to purchase approximately 110.3 million shares of Wells Fargo common stock at an initial exercise price of $34.01. The preferred stock proceeds from Treasury were allocated based on the relative fair value of the warrant as compared with the fair value of the preferred stock. The fair value of the warrant was determined using a third party proprietary pricing model that produces results similar to the Black-Scholes model and incorporates a valuation model that incorporates assumptions including our common stock price, dividend yield, stock price volatility and the risk-free interest rate. We determined the fair value of the preferred stock based on assumptions regarding the discount rate (market rate) on the preferred stock which was estimated to be approximately 13% at the date of issuance. Prior to the December 23, 2009 redemption, the discount on the preferred stock was being accreted to par value using a constant effective yield of 7.2% over a five-year term, which was the expected life of the preferred stock.

ESOP CUMULATIVE CONVERTIBLE PREFERRED STOCK All shares of our ESOP (Employee Stock Ownership Plan) Cumulative Convertible Preferred Stock (ESOP Preferred Stock) were issued to a trustee acting on behalf of the Wells Fargo & Company 401(k) Plan (the 401(k) Plan). Dividends on the ESOP Preferred Stock are cumulative from the date of initial issuance and are payable quarterly at annual rates ranging from 8.50% to 12.50%, depending upon the year of issuance. Each share of ESOP Preferred Stock released from the unallocated reserve of the 401(k) Plan is converted into shares of our common stock based on the stated value of the ESOP Preferred Stock and the then current market price of our common stock. The ESOP Preferred Stock is also convertible at the option of the holder at any time, unless previously redeemed. We have the option to redeem the ESOP Preferred Stock at any time, in whole or in part, at a redemption price per share equal to the higher of (a) $1,000 per share plus accrued and unpaid dividends or (b) the fair market value, as defined in the Certificates of Designation for the ESOP Preferred Stock.



	Shares issued and outstanding					Carrying value						Adjustable
		December 31,				December 31,						dividend rate
(in millions, except shares)		2009		2008		2009			2008			Minimum			Maximum


ESOP Preferred Stock ⁽¹⁾
2008			120,289		156,914	$	120			157			10.50	%		11.50
2007			97,624		110,159		98			110			10.75			11.75
2006			71,322		83,249		71			83			10.75			11.75
2005			51,687		62,484		52			63			9.75			10.75
2004			36,425		45,950		37			46			8.50			9.50
2003			21,450		29,218		21			29			8.50			9.50
2002			11,949		18,889		12			19			10.50			11.50
2001			3,273		10,393		3			10			10.50			11.50
2000			—		2,644		—			3			11.50			12.50


Total ESOP Preferred Stock			414,019		519,900	$	414			520


Unearned ESOP shares ⁽²⁾						$	(442	)		(555	)


(1)		Liquidation preference $1,000. At December 31, 2009 and December 31, 2008, additional paid-in capital included $28 million and $35 million, respectively, related to preferred stock.
(2)		We 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.

162

Note 18: Common Stock and Stock Plans

Common Stock
The following table presents our reserved, issued and authorized shares of common stock at December 31, 2009.



	Number of shares


Dividend reinvestment and common stock purchase plans		6,085,410
Director plans		957,615
Stock plans ⁽¹⁾		551,231,665
Convertible securities and warrants		176,097,156


Total shares reserved		734,371,846
Shares issued		5,245,971,422
Shares not reserved		19,656,732


Total shares authorized		6,000,000,000


(1)		Includes employee option, restricted shares and restricted share rights, 401(k), profit sharing and compensation deferral plans.

Dividend Reinvestment and Common Stock

Purchase Plans
Participants in our dividend reinvestment and common stock direct purchase plans may purchase shares of our common stock at fair market value by reinvesting dividends and/or making optional cash payments, under the plan’s terms.

Employee Stock Plans
We offer the stock based employee compensation plans described below. We measure the cost of employee services received in exchange for an award of equity instruments, such as stock options, restricted share rights (RSRs) or performance shares, based on the fair value of the award on the grant date. The cost is normally recognized in our income statement over the vesting period of the award; awards with graded vesting are expensed on a straight line method. Awards to retirement eligible employees are subject to immediate expensing upon grant. Total stock option compensation expense was $221 million in 2009, $174 million in 2008 and $129 million in 2007 with a related recognized tax benefit of $83 million, $65 million and $49 million for the same years, respectively. Stock option expense is based on the fair value of the awards at the date of grant.

LONG-TERM INCENTIVE COMPENSATION PLANS Our Long Term Incentive Compensation Plan provides for awards of incentive and nonqualified stock options, stock appreciation rights, restricted shares, RSRs, performance awards and stock awards without restrictions. Options must have an exercise price at or above fair market value (as defined in the plan) of the stock at the date of grant (except for substitute or replacement options granted in connection with mergers or other acquisitions) and a term of no more than 10 years. Except for options granted in 2004 and 2005, which generally vested in full upon grant, options generally become exercisable over three years beginning on the first anniversary of the date

of grant. Except as otherwise permitted under the plan, if employment is ended for reasons other than retirement, permanent disability or death, the option exercise period is reduced or the options are canceled.

Options granted prior to 2004 may include the right to acquire a “reload” stock option. If an option contains the reload feature and if a participant pays all or part of the exercise price of the option with shares of stock purchased in the market or held by the participant for at least six months and, in either case, not used in a similar transaction in the last six months, upon exercise of the option, the participant is granted a new option to purchase, at the fair market value of the stock as of the date of the reload, the number of shares of stock equal to the sum of the number of shares used in payment of the exercise price and a number of shares with respect to related statutory minimum withholding taxes. Reload grants are fully vested upon grant and are expensed immediately.

Holders of RSRs are entitled to the related shares of common stock at no cost generally over three to five years after the RSRs were granted. Holders of RSRs may be entitled to receive cash payments or additional RSRs equal to the cash dividends that would have been paid had the RSRs been issued and outstanding shares of common stock. RSRs granted as dividend equivalents are subject to the same vesting schedule and conditions as the underlying RSRs. Except in limited circumstances, RSRs are canceled when employment ends. The compensation expense for RSRs equals the quoted market price of the related stock at the date of grant and is accrued over the vesting period. Total compensation expense for RSRs was not significant in 2009 or 2008.

In 2009, a target amount of 949,000 performance shares were granted with a fair value of $27.09 per share. The holder of each performance share may receive one share of our common stock at vesting in the first quarter of 2013. The final number of performance shares that will be granted is subject to the achievement of specified performance criteria over a three-year period ending December 31, 2012, and has a cap of 150% of the target amount of performance shares. Performance shares continue to vest after retirement according to the original vesting schedule subject to satisfying the performance criteria and other vesting conditions. Total compensation expense for performance shares was $21 million in 2009.

A portion of annual bonus awards recognized during 2009 that are normally paid in cash will be paid in our common stock as part of our agreement with the U.S. Treasury to repay our participation in the TARP Capital Purchase Program (CPP). The fair value of the stock that will be issued is about $50 million and there are no vesting conditions or other restrictions on the stock.

163

Note 18: Common Stock and Stock Plans ( continued)

During 2009 the Board of Directors approved salary increases for certain executive officers that were paid, after taxes and other withholdings, in our common stock. About 245,000 shares were issued in 2009 for salary increases at an average fair value of $27.77. There are no longer restrictions on these shares because we repaid the TARP CPP investment in Wells Fargo in December 2009.

For various acquisitions and mergers, we converted employee and director stock options of acquired or merged companies into stock options to purchase our common stock based on the terms of the original stock option plan and the agreed-upon exchange ratio. In addition, we converted restricted stock awards into awards that entitle holders to our stock after the vesting conditions are met. Holders receive cash dividends on outstanding awards if provided in the original award.

The total number of shares of common stock available for grant under the plans at December 31, 2009, was 304 million.

PARTNERSHARES PLAN In 1996, we adopted the PartnerShares ^® Stock Option Plan, a broad-based employee stock option plan. It covers full- and part-time employees who generally were not included in the long-term incentive compensation plan described above. No options have been granted under the plan since 2002, and as a result of action taken by the Board of Directors on January 22, 2008, no future awards will be granted under the plan. All of our PartnerShares Plan grants were fully vested as of December 31, 2007.

Director Plan

We grant common stock and options to purchase common stock to non-employee directors elected or re-elected at the annual meeting of stockholders and prorated awards to directors who join the Board at any other time. The stock award vests immediately. Options granted in 2008 or earlier can be exercised after six months through the tenth anniversary of the grant date. Prior to 2009, stock awards and option grants were made to non-employee directors under the Directors Stock Compensation and Deferral Plan. As a result of action taken by the Board of Directors on September 30, 2008, stock awards and options granted in 2009 were made under our Long Term Incentive Compensation Plan. Options granted in 2009 can be exercised after 12 months through the tenth anniversary of the grant date.

The table below summarizes stock option activity and related information. Options assumed in mergers are included in the activity and related information for Incentive Compensation Plans if originally issued under an employee plan, and in the activity and related information for Director Plans if originally issued under a director plan.



						Weighted-
				Weighted-		average		Aggregate
				average		remaining		intrinsic
				exercise		contractual		value
	Number			price		term (in yrs.)		(in millions)


Incentive compensation plans
Options outstanding as of December 31, 2008		283,607,257			$45.36
Granted		80,701,781			13.29
Canceled or forfeited		(13,296,344	)		76.37
Exercised		(6,641,018	)		21.24


Options outstanding as of December 31, 2009		344,371,676			37.11		5.9		$1,264


As of December 31, 2009:
Options exercisable and expected to be exercisable ⁽¹⁾		340,601,461			37.31		5.9		1,230
Options exercisable		221,963,884			46.47		4.4		190

*PartnerShares* Plan
Options outstanding as of December 31, 2008		17,662,467			24.33
Canceled or forfeited		(284,177	)		24.63
Exercised		(512,693	)		24.08


Options outstanding as of December 31, 2009		16,865,597			24.33		1.6		45


As of December 31, 2009:
Options exercisable and expected to be exercisable		16,865,597			24.33		1.6		45
Options exercisable		16,865,597			24.33		1.6		45

Director plans
Options outstanding as of December 31, 2008		907,109			28.12
Canceled		(53,476	)		21.57


Options outstanding as of December 31, 2009		853,633			28.53		4.9		1


As of December 31, 2009:
Options exercisable and expected to be exercisable		853,633			28.53		4.9		1
Options exercisable		853,633			28.53		4.9		1


(1)		Adjusted for estimated forfeitures.

164

As of December 31, 2009, there was $186 million of unrecognized compensation cost related to stock options. That cost is expected to be recognized over a weighted-average period of 1.9 years. The total intrinsic value of options exercised during 2009 and 2008 was $50 million and $348 million, respectively.

Cash received from the exercise of options for 2009 and 2008 was $153 million and $747 million, respectively. The actual tax benefit recognized in stockholders’ equity for the tax deductions from the exercise of options totaled $18 million and $123 million, respectively, for 2009 and 2008.

We do not have a specific policy on repurchasing shares to satisfy share option exercises. Rather, we have a general policy on repurchasing shares to meet common stock issuance requirements for our benefit plans (including share option exercises), conversion of our convertible securities, acquisitions and other corporate purposes. Various factors determine the amount and timing of our share repurchases, including our capital requirements, the number of shares we expect to issue for acquisitions and employee benefit plans, market conditions (including the trading price of our stock), and regulatory and legal considerations. These factors can change at any time, and there can be no assurance as to the number of shares we will repurchase or when we will repurchase them.

The fair value of each option award granted on or after January 1, 2006, is estimated using a Black-Scholes valuation model. The expected term of options granted is generally based on the historical exercise behavior of full-term options. Our expected volatilities are based on a combination of the historical volatility of our common stock and implied volatilities for traded options on our common stock. The risk-free rate is based on the U.S. Treasury zero-coupon yield curve in effect at the time of grant. Both expected volatility and the risk-free rates are based on a period commensurate with our expected term. For 2009, the expected dividend is based on a fixed dividend amount. For 2008 and 2007, the expected dividend was based on the current dividend, consideration of our historical pattern of dividend increases and the market price of our stock. We changed our method of estimating the expected dividend assumption from a yield approach to a fixed amount due to our participation in the TARP CPP during 2009, which restricted us from increasing our dividend without approval from the U.S. Treasury. A dividend yield approach models a constant dividend yield, which was considered inappropriate given the restriction on our ability to increase dividends.

The following table presents the weighted-average per share fair value of options granted and the assumptions used, based on a Black-Scholes option valuation model.



	Year ended December 31,
	2009			2008		2007


Per share fair value of options granted	$	3.29			4.06		3.84
Expected volatility		53.9	%		22.4		13.3
Expected dividends (yield)		—			4.1		3.4
Expected dividends	$	0.33			—		—
Expected term (in years)		4.5			4.4		4.2
Risk-free interest rate		1.8	%		2.7		4.6

At December 31, 2009, there was $22 million of total unrecognized compensation cost related to nonvested RSRs. The cost is expected to be recognized over a weighted-average period of 3.3 years. The total fair value of RSRs that vested during 2009 and 2008 was $2 million and $1 million, respectively.

A summary of the status of our RSRs and restricted share awards at December 31, 2009, and changes during 2009 is in the following table:



				Weighted-average
	Number			grant-date fair value


Nonvested at January 1, 2009		1,026,166			$29.79
Granted		1,100,241			19.04
Vested		(62,073	)		29.79
Canceled or forfeited		(155,379	)		29.56

Nonvested at December 31, 2009		1,908,955			23.62

The weighted-average grant date fair value of RSRs granted during 2008 was $29.68.

165

Note 18: Common Stock and Stock Plans ( continued)

Employee Stock Ownership Plan
Under the Wells Fargo & Company 401(k) Plan (the 401(k) Plan) and the Wachovia Savings Plan (the Savings Plan), defined contribution plans with an ESOP feature, these plans may borrow money to purchase our preferred or common stock. From 1994 through 2008, we have loaned money to the 401(k) Plan to purchase shares of our ESOP Preferred Stock. As we release and convert ESOP Preferred Stock into common shares, we record compensation expense equal to the current market price of the common shares. Dividends on the common shares allocated as a result of the release and conversion of the ESOP Preferred Stock reduce retained earnings and the shares are considered outstanding for computing earnings per share. Dividends on the unallocated ESOP Preferred Stock do not reduce retained earnings, and the shares are not considered to be common stock equivalents for computing earnings per share. Loan principal and interest payments are made from our contributions to the Wells Fargo 401(k) Plan, along with dividends paid on the ESOP Preferred Stock. With each principal and interest payment, a portion of the ESOP Preferred Stock is released and, after conversion of the ESOP Preferred Stock into common shares, allocated to the Wells Fargo 401(k) Plan participants.

The Savings Plan contains a similar loan option except in the form of ESOP Common Stock. Dividends on the common shares allocated as a result of the release of ESOP Common Stock reduce retained earnings and the shares are considered outstanding for computing earnings per share. Dividends on the unallocated ESOP Common Stock do not reduce retained earnings, and the shares are not considered to be common stock equivalents for computing earnings per share. Loan principal and interest payments are made from our contributions to the Wachovia Savings Plan. With each principal and interest payment, a portion of the ESOP Common Stock is released and allocated to the Wachovia Savings Plan participants.

In October 2009, the Wells Fargo Stock Fund and the Wells Fargo ESOP Fund held in the 401(k) Plan were combined to create a surviving Wells Fargo ESOP Fund. The Savings Plan was merged into the 401(k) Plan on December 31, 2009. Any outstanding ESOP loan previously held by the Savings Plan is now held by the 401(k) Plan.

The balance of ESOP shares, the dividends on allocated shares of common stock and unreleased preferred shares paid to the 401(k) Plan and the fair value of unearned ESOP shares were:



	Shares outstanding
	December 31,
(in millions, except shares)	2009		2008		2007


Allocated shares (common)		110,157,999		74,916,583		76,265,880
Unreleased shares (preferred)		414,019		519,900		449,804
Unreleased shares (common)		203,755		244,506		—
Fair value of unearned ESOP Preferred shares	$	414		520		450
Fair value of unearned ESOP Common shares		5		7		—


	Dividends paid
	Year ended December 31,
	2009		2008		2007


Allocated shares (common)	$	45		100		88
Unreleased shares (preferred)		51		66		57

Deferred Compensation Plan for Independent
Sales Agents
WF Deferred Compensation Holdings, Inc. is a wholly-owned subsidiary of the Parent formed solely to sponsor a deferred compensation plan for independent sales agents who provide investment, financial and other qualifying services for or with respect to participating affiliates. The

Nonqualified Deferred Compensation Plan for Independent Contractors, which became effective January 1, 2002, allows participants to defer all or part of their eligible compensation payable to them by a participating affiliate. The Parent has fully and unconditionally guaranteed the deferred compensation obligations of WF Deferred Compensation Holdings, Inc. under the plan.

166

Note 19: Employee Benefits and Other Expenses

Employee Benefits
We sponsor a noncontributory qualified defined benefit retirement plan, the Wells Fargo & Company Cash Balance Plan (Cash Balance Plan), which covers eligible employees of Wells Fargo; the benefits earned under the Cash Balance Plan were frozen effective July 1, 2009.

On April 28, 2009, the Board of Directors approved amendments to freeze the benefits earned under the Wells Fargo qualified and supplemental Cash Balance Plans and the Wachovia Corporation Pension Plan, a cash balance plan that covered eligible employees of the legacy Wachovia Corporation, and to merge the Wachovia Pension Plan into the qualified Cash Balance Plan. These actions became effective on July 1, 2009.

Prior to July 1, 2009, eligible employees’ cash balance plan accounts were allocated a compensation credit based on a percentage of their qualifying compensation. The compensation credit percentage was based on age and years of credited service. The freeze discontinues the allocation of compensation credit for services after June 30, 2009. Investment credits continue to be allocated to participants based on their accumulated balances. Employees become vested in their Cash Balance Plan accounts after completing three years of vesting service.

Freezing and merging the above plans effective July 1, 2009, resulted in a re-measurement of the pension obligations and plan assets as of April 30, 2009. Freezing and re-measuring decreased the pension obligations by approximately $945 million and decreased cumulative OCI by approximately $725 million pre tax ($456 million after tax) in second quarter 2009. The re-measurement resulted in a decrease in the fair value of plan assets of approximately $150 million. We used a discount rate of 7.75% for the April 30, 2009, re-measurement based on our consistent methodology of determining our discount rate based on an established yield curve developed by our outside actuarial firm. This methodology incorporates a broad group of top quartile Aa or higher rated bonds.

As a result of freezing our pension plans, we revised our amortization life for actuarial gains and losses from 5 years to 13 years to reflect the estimated average remaining participation period.

These actions lowered pension cost by approximately $500 million for 2009, including $67 million of one-time curtailment gains.

We did not make a contribution to our Cash Balance Plan in 2009. We do not expect that we will be required to make a contribution to the Cash Balance Plan in 2010; however, this is dependent on the finalization of the actuarial valuation. Our decision of whether to make a contribution in 2010 will be based on various factors including the actual investment performance of plan assets during 2010. Given these uncertainties, we cannot estimate at this time the amount, if any, that we will contribute in 2010 to the Cash Balance Plan.

The total amount contributed for our other pension plans in 2009 was $83 million. For the unfunded nonqualified pension plans and postretirement benefit plans, we will contribute the minimum required amount in 2010, which equals the benefits paid under the plans. In 2009, we paid $167 million in benefits for the postretirement plans, which included $79 million in retiree contributions.

We sponsor defined contribution retirement plans including the Wells Fargo & Company 401(k) Plan (401(k) Plan) and the Wachovia Savings Plan (Savings Plan). We also have a frozen defined contribution plan resulting from a company acquired by Wachovia. No contributions are permitted to that plan. Under the 401(k) Plan, after one month of service, eligible employees may contribute up to 25% of their pre-tax qualifying compensation, although there may be a lower limit for certain highly compensated employees in order to maintain the qualified status of the 401(k) Plan. Eligible employees who complete one year of service are eligible for matching company contributions, which are generally a 100% match up to 6% of an employee’s qualifying compensation. Prior to January 1, 2010, matching contributions generally vested over the first four years of an eligible employee’s service period. Effective January 1, 2010, prior and future matching contributions will be 100% vested.

Under the Savings Plan, after one month of service, eligible employees may contribute up to 30% of their qualifying compensation on a pre tax, Roth, or after-tax basis, although there may be a lower limit for certain highly compensated employees in order to maintain the qualified status of this Savings Plan. Eligible employees who complete one year of service are eligible for matching company contributions, which are generally a 100% match up to 6% of an employee’s qualifying compensation. The matching contributions vest immediately. Effective December 31, 2009, the Savings Plan was merged with the 401(k) Plan.

In 2009, the 401(k) Plan and the Savings Plan were amended to permit us to make discretionary profit sharing contributions. Based on 2009 earnings, we committed to make a contribution in shares of common stock to the plan accounts of eligible employees equaling 1% of qualifying compensation, which resulted in recognizing $150 million of defined contribution retirement plan expense recorded in 2009.

Expenses for defined contribution retirement plans were $862 million, $411 million and $426 million in 2009, 2008 and 2007, respectively.

We provide health care and life insurance benefits for certain retired employees and reserve the right to terminate or amend any of the benefits at any time.

The information set forth in the following tables is based on current actuarial reports using the measurement date of December 31 for our pension and postretirement benefit plans.

167

Note 19: Employee Benefits and Other Expenses ( continued)

In conjunction with our adoption of changes in accounting provisions for retirement benefits, we were required to change the measurement date for our pension and postretirement plan assets and benefit obligations from November 30 to December 31 beginning in 2008. To reflect this change, we recorded an $8 million (after tax) adjustment to the 2008 beginning balance of retained earnings.

The changes in the projected benefit obligation of pension benefits and the accumulated benefit obligation of other benefits and the fair value of plan assets during 2009 and 2008, the funded status at December 31, 2009 and 2008, and the amounts recognized in the balance sheet at December 31, 2009 and 2008, were:



	December 31,
	2009									2008
	Pension benefits									Pension benefits
				Non-			Other						Non-			Other
(in millions)	Qualified			qualified			benefits			Qualified			qualified			benefits


Change in benefit obligation:
Benefit obligation at beginning of year	$	8,977			684			1,325			4,565			366			663
Service cost		210			8			13			291			15			13
Interest cost		595			43			83			276			22			40
Plan participants’ contributions		—			—			79			—			—			39
Amendments		(210	)		(22	)		(54	)		—			—			—
Actuarial loss (gain)		1,063			46			120			(197	)		(15	)		(94	)
Benefits paid		(605	)		(79	)		(167	)		(317	)		(24	)		(65	)
Foreign exchange impact		8			1			2			—			—			—
Acquisitions		—			—			—			4,359			317			727
Measurement date adjustment ⁽¹⁾		—			—			—			—			3			2


Benefit obligation at end of year		10,038			681			1,401			8,977			684			1,325


Change in plan assets:
Fair value of plan assets at beginning of year		7,863			—			368			5,617			—			458
Actual return on plan assets		1,842			—			48			(1,750	)		—			(128	)
Employer contribution		4			79			48			260			24			22
Plan participants’ contributions		—			—			79			—			—			39
Benefits paid		(605	)		(79	)		(167	)		(317	)		(24	)		(65	)
Foreign exchange impact		8			—			—			—			—			—
Acquisitions		—			—			—			4,132			—			46
Measurement date adjustment ⁽¹⁾		—			—			—			(79	)		—			(4	)


Fair value of plan assets at end of year		9,112			—			376			7,863			—			368


Funded status at end of year	$	(926	)		(681	)		(1,025	)		(1,114	)		(684	)		(957	)


Amounts recognized in the balance sheet at end of year:
Liabilities	$	(926	)		(681	)		(1,025	)		(1,114	)		(684	)		(957	)


(1)		Represents change in benefit obligation and plan assets during December 2007 to reflect an additional month of activity due to the change in measurement date from November 30 to December 31 as required by FASB ASC 715.

Amounts recognized in accumulated OCI (pre tax) for the year ended December 31, 2009 and 2008, consist of:



	December 31,
	2009							2008
	Pension benefits							Pension benefits
			Non-		Other						Non-			Other
(in millions)	Qualified		qualified		benefits			Qualified			qualified			benefits


Net actuarial loss	$	1,836		70		140			2,349			50			91
Net prior service credit		1		—		(34	)		(7	)		(37	)		(38	)
Net transition obligation		—		—		2			—			—			3
Translation adjustments		1		—		—			(2	)		—			(2	)


Total	$	1,838		70		108			2,340			13			54

The net actuarial loss for the defined benefit pension plans that will be amortized from accumulated OCI into net periodic benefit cost in 2010 is $107 million. The net actuarial

loss and net prior service credit for the other postretirement plans that will be amortized from accumulated OCI into net periodic benefit cost in 2010 are $1 million and $4 million, respectively.

168

The weighted-average assumptions used to determine the projected benefit obligation were:

Year ended December 31,

2009

2008

Pension

Other

Pension

Other

benefits

⁽¹⁾

benefits

benefits

⁽¹⁾

benefits

Discount rate

5.75

6.75

Rate of compensation
increase ⁽²⁾

—

4.0

—


(1)		Includes both qualified and nonqualified benefits.
(2)		Due to the freeze of the Wells Fargo qualified and supplemental Cash Balance plans and the Wachovia Corporate Pension Plan, there is no rate of compensation increase at December 31, 2009.

We use a consistent methodology to determine the discount rate that is based on an established yield curve methodology. This methodology incorporates a broad group of top quartile Aa or higher rated bonds consisting of approximately 100-150 bonds. The discount rate is determined by matching this yield curve with the timing and amounts of the expected benefit payments for our plans.

The accumulated benefit obligation for the defined benefit pension plans was $10.7 billion and $9.4 billion at December 31, 2009 and 2008, respectively.

We seek to achieve the expected long-term rate of return with a prudent level of risk given the benefit obligations of the pension plans and their funded status. Our overall investment strategy is designed to provide our Cash Balance Plan with a balance of long-term growth opportunities and short-term benefit strategies while ensuring that risk is mitigated through diversification across numerous asset classes and various investment strategies. We target the asset allocation for our Cash Balance Plan at a target mix range of 35-65% equities, 30-50% fixed income, and approximately 10-15% in real estate, venture capital, private equity and other investments. The target ranges referenced above account for the employment of an asset allocation methodology designed to overweight stocks or bonds when a compelling opportunity exists. The Employee Benefit Review Committee (EBRC), which includes several members of senior management, formally reviews the investment risk and performance of our Cash Balance Plan on a quarterly basis. Annual Plan liability analysis and periodic asset/liability evaluations are also conducted.

The table below provides information for pension plans with benefit obligations in excess of plan assets.



	December 31,
(in millions)	2009		2008


Projected benefit obligation	$	10,719		9,661
Accumulated benefit obligation		10,706		9,423
Fair value of plan assets		9,112		7,863

The components of net periodic benefit cost were:



	December 31,
	2009									2008									2007
	Pension benefits									Pension benefits									Pension benefits
				Non-			Other						Non-			Other						Non-			Other
(in millions)	Qualified			qualified			benefits			Qualified			qualified			benefits			Qualified			qualified			benefits


Service cost	$	210			8			13			291			15			13			281			15			15
Interest cost		595			43			83			276			22			40			246			18			41
Expected return on plan assets		(643	)		—			(29	)		(478	)		—			(41	)		(452	)		—			(36	)
Amortization of net actuarial loss		194			2			3			1			13			1			32			13			5
Amortization of prior service cost		—			(1	)		(3	)		—			(5	)		(4	)		—			(3	)		(4	)
Curtailment gain		(32	)		(33	)		—			—			—			—			—			—			—
Settlement		—			—			—			—			—			—			1			—			—


Net periodic benefit cost		324			19			67			90			45			9			108			43			21


Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net actuarial loss (gain)		(346	)		25			99			2,102			(16	)		79			(213	)		16			(126	)
Amortization of net actuarial loss		(194	)		(2	)		(3	)		(1	)		(13	)		(1	)		(33	)		(13	)		(5	)
Prior service cost		—			—			—			—			—			—			—			(24	)		—
Amortization of prior service cost		—			1			3			—			5			4			—			3			4
Net loss (gain) in curtailment		32			33			(54	)		—			—			—			—			—			—
Translation adjustments		3			—			2			(5	)		—			(4	)		3			—			2


Total recognized in other comprehensive income		(505	)		57			47			2,096			(24	)		78			(243	)		(18	)		(125	)


Total recognized in net periodic benefit cost and other comprehensive income	$	(181	)		76			114			2,186			21			87			(135	)		25			(104	)

169

Note 19: Employee Benefits and Other Expenses ( continued)

The weighted-average assumptions used to determine the net periodic benefit cost were:

December 31,

2009

2008

2007

Pension

Other

Pension

Other

Pension

Other

benefits

⁽¹⁾

benefits

benefits

⁽¹⁾

benefits

⁽¹⁾

benefits

Discount rate ⁽²⁾

7.42

6.75

6.25

5.75

Expected return on plan assets

8.75

8.75

Rate of compensation increase

4.0

—

4.0

—

4.0

—


(1)		Includes both qualified and nonqualified pension benefits.

(2)		Due to the freeze of the Wells Fargo qualified and supplemental Cash Balance Plans and the Wachovia Corporation Pension Plan, the discount rate for the 2009 Pension benefits was the weighted average of 6.75% from January through April and 7.75% from May through December.

Our determination of the reasonableness of our expected long-term rate of return on plan assets is highly quantitative by nature. We evaluate the current asset allocations and expected returns under two sets of conditions: projected returns using several forward-looking capital market assumptions, and historical returns for the main asset classes dating back to 1970, the earliest period for which historical data was readily available as of a common time frame for the asset classes included. Using data dating back to 1970 allows us to capture multiple economic environments, which we believe is relevant when using historical returns. We place greater emphasis on the forward looking return and risk assumptions than on historical results. We use the resulting projections to derive a base line expected rate of return and risk level for the Cash Balance Plans’ prescribed asset mix. We then adjust the baseline projected returns for items not already captured, including the anticipated return differential from active over passive investment management and the estimated impact of an asset allocation methodology that allows for established deviations from the specified target allocations when a compelling opportunity exists.

We evaluate the portfolio based on: (1) the established target asset allocations over short term (one-year) and longer term (ten-year) investment horizons, and (2) the range of potential outcomes over these horizons within specific standard deviations. We perform the above analyses to assess the reasonableness of our expected long-term rate of return on plan assets. We consider the expected rate of return to be a long-term average view of expected returns. The expected rate of return would be assessed for significant long-term changes in economic conditions or in planned portfolio composition.

To account for postretirement health care plans we use health care cost trend rates to recognize the effect of expected changes in future health care costs due to medical inflation, utilization changes, new technology, regulatory requirements and Medicare cost shifting. We assumed average annual increases of approximately 9.5% (before age 65) and 9% (after age 65) for health care costs for 2010. The rates of average annual increases are assumed to trend down 0.5% each year until the trend rates reach an ultimate trend of 5% in 2017 (before age 65) and 2016 (after age 65). Increasing the assumed health care trend by one percentage point in each year would increase the benefit obligation as of December 31, 2009, by $71 million and the total of the interest cost and

service cost components of the net periodic benefit cost for 2009 by $5 million. Decreasing the assumed health care trend by one percentage point in each year would decrease the benefit obligation as of December 31, 2009, by $63 million and the total of the interest cost and service cost components of the net periodic benefit cost for 2009 by $4 million.

The investment strategy for assets held in the Retiree Medical Plan Voluntary Employees’ Beneficiary Association (VEBA) trust is established separately from the strategy for the assets in the Cash Balance Plan. The general target asset mix is 45-65% equities and 35-55% fixed income. In addition, the strategy for the VEBA trust assets considers the effect of income taxes by utilizing a combination of variable annuity and low turnover investment strategies. Members of the EBRC formally review the investment risk and performance of these assets on a quarterly basis.

Future benefits that we expect to pay under the pension and other benefit plans are presented in the following table.



	Pension benefits
			Non-		Other
(in millions)	Qualified		qualified		benefits

Year ended December 31,
2010	$	818		81		118
2011		796		78		121
2012		778		65		123
2013		779		59		125
2014		772		61		127
2015-2019		3,610		267		627

Other benefits payments are expected to be reduced by prescription drug subsidies from the federal government provided by the Medicare Prescription Drug, Improvement and Modernization Act of 2003, as follows:



	Other benefits
(in millions)	subsidy receipts

Year ended December 31,
2010	$	17
2011		18
2012		19
2013		20
2014		21
2015-2019		65

170

Fair Value of Plan Assets

The following table presents the balances of pension plan

assets measured at fair value. See Note 16 in this Report for fair value hierarchy level definitions.



	December 31, 2009
(in millions)	Level 1		Level 2		Level 3		Total

Cash and cash equivalents	$	52		515		—		567
Intermediate (core) fixed income ⁽¹⁾		647		1,457		9		2,113
High-yield fixed income		263		220		—		483
International fixed income		—		376		—		376
Specialty fixed income		—		76		—		76
Domestic large-cap stocks ⁽²⁾		1,046		630		5		1,681
Domestic mid-cap stocks		205		103		—		308
Domestic small-cap stocks ⁽³⁾		867		126		—		993
International stocks ⁽⁴⁾		354		890		1		1,245
Emerging market stocks		—		653		—		653
Real estate/timber ⁽⁵⁾		78		—		353		431
Multi-strategy hedge funds ⁽⁶⁾		—		—		339		339
Private equity		—		1		83		84
Other		—		25		46		71

Total pension plan investments	$	3,512		5,072		836		9,420

Payable upon return of securities loaned								(320	)
Net receivables								12

Total pension plan assets							$	9,112


(1)		This category includes assets that are primarily intermediate duration, investment grade bonds held in investment strategies benchmarked to the Barclays Capital U.S. Aggregate Bond Index. Includes U.S. Treasury securities, agency and non-agency asset-backed bonds and corporate bonds.

(2)		This category covers a broad range of investment styles, both active and passive approaches, as well as style characteristics of value, core and growth emphasized strategies. Assets in this category are currently diversified across ten unique investment strategies. Approximately 40% of the assets within this category are passively managed to popular mainstream market indexes including the Standard & Poor’s 500 Index; excluding the allocation to the S&P 500 Index strategy, no single investment manager represents more than 2% of total plan assets.

(3)		This category consists of a highly diversified combination of seven distinct investment management strategies with no single strategy representing more than about 2% of total plan assets. Allocations in this category are primarily spread across actively managed approaches with distinct value and growth emphasized approaches in fairly equal proportions.

(4)		This category includes assets diversified across nine unique investment strategies providing exposure to companies based primarily in developed market, non-U.S. countries with no single strategy representing more than 2% of total plan assets.

(5)		This category mostly includes investments in private and public real estate, as well as timber specific limited partnerships; real estate holdings are diversified by geographic location and sector (e.g., retail, office, apartments).

(6)		This category consists of several investment strategies managed by over 30 hedge fund managers. Single manager allocation exposure is limited to 0.15% (15 basis points) of total plan assets.

The changes in Level 3 pension plan assets measured at fair value are summarized as follows:



									Purchases,
									sales,
	December 31,		Gains (losses					)	issuances and			December 31,
(in millions)	2008		Realized			Unrealized		⁽¹⁾	settlements (net		)	2009

Intermediate (core) fixed income	$	5		—			1			3			9
High-yield fixed income		6		(5	)		—			(1	)		—
Domestic large-cap stocks		1		—			1			3			5
International stocks		—		—			—			1			1
Real estate/timber		433		1			(161	)		80			353
Multi-strategy hedge funds		310		1			36			(8	)		339
Private equity		88		—			(2	)		(3	)		83
Other		41		—			(5	)		10			46

	$	884		(3	)		(130	)		85			836


(1)		All unrealized gains (losses) relate to instruments held at period end.

171

Note 19: Employee Benefits and Other Expenses ( continued)

Other benefits plan assets include assets held in a 401(h) trust, which are invested using the same asset allocation targets as the Cash Balance Plan, and assets held in a VEBA

trust. The table below presents the balances of other benefits plan assets measured at fair value.



	December 31, 2009
(in millions)	Level 1		Level 2		Level 3		Total

Cash and cash equivalents	$	2		38		—		40
Intermediate (core) fixed income ⁽¹⁾		21		83		—		104
High-yield fixed income		8		4		—		12
International fixed income		—		3		—		3
Specialty fixed income		—		2		—		2
Domestic large-cap stocks ⁽²⁾		40		30		—		70
Domestic mid-cap stocks		7		16		—		23
Domestic small-cap stocks		18		16		—		34
International stocks ⁽³⁾		11		39		—		50
Emerging market stocks		—		14		—		14
Real estate/timber		2		—		4		6
Multi-strategy hedge funds		—		—		5		5
Private equity		—		—		2		2
Other		—		—		21		21

Total other benefits plan investments	$	109		245		32		386

Payable upon return of securities loaned								(10	)

Total other benefits plan assets							$	376


(1)		This category includes assets that are primarily intermediate duration, investment grade bonds held in investment strategies benchmarked to the Barclays Capital U.S. Aggregate Bond Index. Includes U.S. Treasury securities, agency and non-agency asset-backed bonds and corporate bonds.

(2)		This category covers a broad range of investment styles, both active and passive approaches, as well as style characteristics of value, core and growth emphasized strategies. The majority of the assets are passively managed to popular mainstream market indexes including the Standard & Poor ’s 500 Index.

(3)		This category includes assets diversified across several unique investment strategies providing exposure to companies based primarily in developed market, non-U.S. countries.

The changes in Level 3 other benefits plan assets measured at fair value are summarized as follows:



						Purchases,
			Unrealized			sales,
	December 31,		gains			issuances and			December 31,
(in millions)	2008		(losses		) ⁽¹⁾	settlements (net		)	2009

Real estate/timber	$	4		(1	)		1			4
Multi-strategy hedge funds		3		1			1			5
Private equity		2		—			—			2
Other		20		—			1			21

	$	29		—			3			32


(1)		All unrealized gains (losses) relate to instruments held at period end.

172

VALUATION METHODOLOGIES Following is a description of the valuation methodologies used for assets measured at fair value.

Cash and Cash Equivalents – includes investments in U.S. Treasury bills, valued at quoted market prices and collective investment funds. Investments in collective investment funds are valued at fair value based upon the quoted market values of the underlying net assets. The unit price is quoted on a private market that is not active; however, the unit price is based on underlying investments traded on an active market.

Intermediate (Core), High-Yield, International and Specialty Fixed Income – includes bonds and notes traded on a national securities exchange valued at the last reported sale price on the last business day of the year. Also includes investments traded on the OTC market and listed securities for which no sale was reported on that date; both are valued at the average of the last reported bid and ask prices. Also includes investments in collective investment funds described above.

Domestic, International and Emerging Market Stocks –investments in common stock are valued at quoted market values. Investments in registered investment companies are valued at the NAV of shares held at year end. Also includes investments in collective investment funds described above.

Real Estate and Timber – the fair value of real estate and timber is estimated based primarily on appraisals prepared by third-party appraisers. Market values are estimates and the actual market price of the real estate can only be determined by negotiation between independent third parties in a sales transaction.

Multi-Strategy Hedge Funds and Private Equity – the fair values of hedge funds are valued based on the proportionate share of the underlying net assets of the investment funds that comprise the fund, based on valuations supplied by the underlying investment funds. Investments in private equity funds are valued at the NAV provided by the fund sponsor. Market values are estimates and the actual market price of the investments can only be determined by negotiation between independent third parties in a sales transaction.

Other – the fair values of miscellaneous investments are valued at the NAV provided by the fund sponsor. Market values are estimates and the actual market price of the investments can only be determined by negotiation between independent third parties in a sales transaction. Also includes insurance contracts that are generally stated at cash surrender value.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Other Expenses

Expenses exceeding 1% of total interest income and noninterest income in any of the years presented that are not otherwise shown separately in the financial statements or Notes to Financial Statements were:



	Year ended December 31,
(in millions)	2009		2008		2007

Outside professional services	$	1,982		847		899
Contract services		1,088		407		448
Foreclosed assets		1,071		414		256
Outside data processing		1,027		480		482
Postage, stationery and supplies		933		556		565
Insurance		845		725		416

173

Note 20: Income Taxes

The components of income tax expense were:



	Year ended December 31,
(in millions)	2009			2008			2007

Current:
Federal	$	(3,952	)		2,043			3,181
State and local		(334	)		171			284
Foreign		164			30			136

Total current		(4,122	)		2,244			3,601

Deferred:
Federal		8,709			(1,506	)		(32	)
State and local		794			—			—
Foreign		(50	)		(136	)		1

Total deferred		9,453			(1,642	)		(31	)

Total	$	5,331			602			3,570

The tax benefit related to the exercise of employee stock options recorded in stockholders’ equity was $18 million, $123 million and $210 million for 2009, 2008 and 2007, respectively.



	Year ended December 31,
(in millions)	2009			2008

Deferred tax assets
Allowance for loan losses	$	9,178			7,859
Deferred compensation and employee benefits		3,026			2,016
Accrued expenses, deductible when paid		2,235			1,536
Basis difference in investments		208			—
PCI loans		8,645			13,806
Mark to market, net		—			194
Net unrealized losses on securities available for sale		—			3,887
Net operating loss and tax credit carry forwards		3,370			520
Other		1,706			1,421

Total deferred tax assets		28,368			31,239

Deferred tax assets valuation allowance		(827	)		(973	)

Deferred tax liabilities
Mortgage servicing rights		(8,073	)		(5,606	)
Leasing		(3,439	)		(2,617	)
Basis difference in investments		—			(325	)
Mark to market, net		(4,853	)		—
Intangible assets		(5,567	)		(5,625	)
Net unrealized gains on securities available for sale		(2,079	)		—
Other		(318	)		(2,229	)

Total deferred tax liabilities		(24,329	)		(16,402	)

Net deferred tax asset	$	3,212			13,864

We had a net deferred tax asset of $3.2 billion and $13.9 billion for 2009 and 2008, respectively. Our net deferred tax asset and the tax effects of temporary differences that gave rise to significant portions of these deferred tax assets and liabilities are presented in the preceding table.

Deferred taxes related to net unrealized losses on securities available for sale, net unrealized gains on derivatives, foreign currency translation, and employee benefit plan adjustments are recorded in cumulative OCI (see Note 22 in this Report). These associated adjustments decreased OCI by $5.9 billion. Deferred taxes totaling $2.7 billion were recorded against goodwill related to purchase price refinements (see Note 2 in this Report). Deferred taxes of $1.4 billion were also recorded on the purchase of the Prudential noncontrolling interest on December 31, 2009, with the associated adjustment increasing stockholders’ equity.

We have determined that a valuation reserve is required for 2009 in the amount of $827 million primarily attributable to deferred tax assets in various state and foreign jurisdictions where we believe it is more likely than not that these deferred tax assets will not be realized. In these jurisdictions, carry back limitations, lack of sources of taxable income, and tax planning strategy limitations contributed to our conclusion that the deferred tax assets would not be realizable. We have concluded that it is more likely than not that the remaining deferred tax assets will be realized based on our history of earnings, sources of taxable income in carry back periods, and our ability to implement tax planning strategies.

At December 31, 2009, we had net operating loss and credit carry forwards with related deferred tax assets of $3.0 billion and $366 million, respectively. If these carry forwards are not utilized, they will expire in varying amounts through 2029.

At December 31, 2009, Wachovia had undistributed foreign earnings of $1.4 billion related to foreign subsidiaries. We intend to reinvest these earnings indefinitely outside the U.S. and accordingly have not provided $464 million of income tax liability on these earnings.

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The table below reconciles the statutory federal income tax expense and rate to the effective income tax expense and rate. Effective January 1, 2009, we adopted new accounting guidance that changed the way noncontrolling interests are presented in the income statement such that the consolidated

income statement includes amounts from both Wells Fargo interests and the noncontrolling interests. As a result, our effective tax rate is calculated by dividing income tax expense by income before income tax expense less the net income from noncontrolling interests.



	December 31,
	2009						2008						2007
(in millions)	Amount			Rate			Amount			Rate			Amount			Rate

Statutory federal income tax expense and rate	$	6,162			35.0	%	$	1,140			35.0	%	$	4,070			35.0	%
Change in tax rate resulting from:
State and local taxes on income, net of federal income tax benefit		468			2.7			94			2.9			359			3.1
Tax-exempt interest		(260	)		(1.5	)		(130	)		(4.0	)		(81	)		(0.7	)
Excludable dividends		(253	)		(1.4	)		(186	)		(5.7	)		(23	)		(0.2	)
Other deductible dividends		(29	)		(0.2	)		(71	)		(2.2	)		(70	)		(0.6	)
Tax credits		(533	)		(3.0	)		(266	)		(8.2	)		(256	)		(2.2	)
Life insurance		(257	)		(1.5	)		(67	)		(2.0	)		(58	)		(0.5	)
Leveraged lease tax expense		400			2.3			—			—			—			—
Other		(367	)		(2.1	)		88			2.7			(371	)		(3.2	)

Effective income tax expense and rate	$	5,331			30.3	%	$	602			18.5	%	$	3,570			30.7	%

Income tax expense for 2009 increased primarily due to higher pre-tax earnings partially offset by favorable tax settlements.

The change in unrecognized tax benefits follows:



	Year ended December 31,
(in millions)	2009			2008

Balance at beginning of year	$	7,521			2,695
Additions:
For tax positions related to the current year		438			420
For tax positions related to prior years		898			452
For tax positions from business combinations ⁽¹⁾		6			4,308
Reductions:
For tax positions related to prior years		(834	)		(266	)
Lapse of statute of limitations		(75	)		(80	)
Settlements with tax authorities		(3,033	)		(8	)

Balance at end of year	$	4,921			7,521


(1)		Unrecognized tax benefits from the Wachovia acquisition.

Of the $4.9 billion of unrecognized tax benefits at December 31, 2009, approximately $2.8 billion would, if recognized, affect the effective tax rate. The remaining $2.1 billion of unrecognized tax benefits relates to income tax positions on temporary differences.

We recognize interest and penalties as a component of income tax expense. We accrued approximately $771 million and $1.6 billion for the payment of interest and penalties at December 31, 2009 and 2008, respectively. The decrease in accrued interest is primarily related to the Internal Revenue Service (IRS) settlement agreements (described below) on sale-in, lease-out (SILO) transactions. A net benefit from interest income and penalties expense of $72 million (after tax) for 2009 and interest expense of $62 million (after tax) for 2008 was recognized as a component of income tax expense.

We are subject to U.S. federal income tax as well as income tax in numerous state and foreign jurisdictions. With few exceptions, Wells Fargo and its subsidiaries are not subject to federal income tax examinations for taxable years prior to 2007, and state, local and foreign income tax examinations for taxable years prior to 2005. Wachovia Corporation and its subsidiaries, with few exceptions, are no longer subject to federal income tax examinations for taxable years prior to 2006, and state, local and foreign income tax examinations for taxable years prior to 2003.

We are routinely examined by tax authorities in various jurisdictions. The IRS is currently examining the consolidated federal income tax returns of Wachovia and its Subsidiaries for tax years 2006 through 2008. In addition, Wachovia is appealing various issues related to its 2000 through 2005 tax years. Wachovia is also currently subject to examination by various state, local and foreign taxing authorities. While it is possible that one or more of these examinations may be resolved within the next twelve months, we do not anticipate that there will be a significant impact to our unrecognized tax benefits as a result of these examinations.

The IRS is examining the 2007 and 2008 consolidated federal income tax returns of Wells Fargo & Company and its Subsidiaries. We are also litigating or appealing various issues related to our prior IRS examinations for the periods 1997-2006. We have paid the IRS the contested income tax associated with these issues and refund claims have been filed for the respective years. We are also under examination in numerous other taxing jurisdictions. While it is possible that one or more of these examinations may be resolved within the next 12 months, we do not anticipate that these examinations will significantly impact our uncertain tax positions.

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Note 20: Income Taxes ( continued)

During fourth quarter 2009, we and the IRS executed settlement agreements in accordance with the IRS’s settlement initiative related to certain leveraged leases that the IRS considers SILO transactions. These settlement agreements resolved the SILO transactions originally entered into by Wachovia and reduced our tax exposure on our overall SILO portfolio by approximately 90%. As a result of this resolution, our unrecognized tax benefits decreased $2.7 billion.

In September 2006, well before the IRS announced its SILO settlement initiative in August 2008, we filed a federal tax refund suit in the U.S. Court of Federal Claims related to certain SILO transactions we entered into between 1997 and 2002. Wells Fargo did not receive a letter from the IRS inviting us to participate in the SILO settlement initiative. On January 8, 2010, the U.S. Court of Federal Claims issued an adverse opinion on certain of the transactions at issue in the litigation. Because the opinion did not resolve all of the

transactions at issue, final judgment has not yet been entered by the court. Once final judgment is entered, we will have 60 days to file our Notice of Appeal. There will be no adverse financial statement impact resulting from the judgment, and no penalties have been asserted by the government in the litigation.

During fourth quarter 2009, we filed a federal tax refund suit relating to our 2003 tax year in U.S. District Court for the District of Minnesota. At issue in the litigation is a structured finance transaction, the timing of our deduction for certain state taxes, and SILO transactions entered into between 1997 and 2003. No penalties have been asserted in connection with this litigation.

We are estimating that our unrecognized tax benefits could decrease by between $100 million and $300 million during the next 12 months primarily related to statute expirations and settlements.

Note 21: Earnings Per Common Share

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

At December 31, 2009 and 2008, options to purchase 242.7 million and 172.4 million shares and a warrant to pur-

chase 110.3 million and 110.3 million shares, respectively, were outstanding but not included in the calculation of diluted earnings per common share because the exercise price was higher than the market price, and therefore were antidilutive. At December 31, 2007, options to purchase 13.8 million shares were antidilutive.



	Year ended December 31,
(in millions, except per share amounts)	2009		2008		2007

Wells Fargo net income	$	12,275		2,655		8,057
Less: Preferred stock dividends and accretion ⁽¹⁾		4,285		286		—

Wells Fargo net income applicable to common stock (numerator)	$	7,990		2,369		8,057

Earnings per common share
Average common shares outstanding (denominator)		4,545.2		3,378.1		3,348.5
Per share	$	1.76		0.70		2.41

Diluted earnings per common share
Average common shares outstanding		4,545.2		3,378.1		3,348.5
Add: Stock options		17.2		13.1		34.2
Restricted share rights		0.3		0.1		0.1

Diluted average common shares outstanding (denominator)		4,562.7		3,391.3		3,382.8

Per share	$	1.75		0.70		2.38


(1)		Includes $3.5 billion and $219 million in 2009 and 2008, respectively, for Series D Preferred Stock, which was redeemed in 2009. In conjunction with the redemption, we accelerated accretion of the remaining discount of $1.9 billion.

176

Note 22: Other Comprehensive Income

The components of other comprehensive income (OCI) and the related tax effects were:



	Year ended December 31,
	2009									2008									2007
	Before			Tax			Net of			Before			Tax			Net of			Before			Tax			Net of
(in millions)	tax			effect			tax			tax			effect			tax			tax			effect			tax

Translation adjustments	$	118			45			73			(93	)		(35	)		(58	)		36			13			23

Securities available for sale:
Unrealized losses related to factors other than credit arising during the year		(1,340	)		(497	)		(843	)		—			—			—			—			—			—
All other gains (losses)		17,253			6,437			10,816			(10,552	)		(3,960	)		(6,592	)		91			38			53
Reclassification of gains included in net income		(349	)		(129	)		(220	)		(29	)		(11	)		(18	)		(350	)		(133	)		(217	)

Net unrealized gains (losses) arising during the year		15,564			5,811			9,753			(10,581	)		(3,971	)		(6,610	)		(259	)		(95	)		(164	)

Derivatives and hedging activities:
Net unrealized gains arising during the year		193			86			107			955			363			592			645			246			399
Reclassification of net gains on cash flow hedges included in net income		(531	)		(203	)		(328	)		(252	)		(96	)		(156	)		(124	)		(47	)		(77	)

Net unrealized gains (losses) arising during the year		(338	)		(117	)		(221	)		703			267			436			521			199			322

Defined benefit pension plans:
Net actuarial gain (loss)		222			73			149			(2,165	)		(799	)		(1,366	)		347			132			215
Amortization of net actuarial loss and prior service cost included in net income		184			60			124			6			2			4			44			17			27

Net gains (losses) arising during the year		406			133			273			(2,159	)		(797	)		(1,362	)		391			149			242

Other comprehensive income	$	15,750			5,872			9,878			(12,130	)		(4,536	)		(7,594	)		689			266			423

Cumulative OCI balances were:



								Derivatives			Defined			Cumulative
					Securities			and			benefit			other
	Translation				available			hedging			pension			comprehensive
(in millions)	adjustments				for sale			activities			plans			income

Balance, December 31, 2006		$	29			562			113			(402	) ⁽¹⁾		302
Net change			23			(164	)		322			242			423

Balance, December 31, 2007			52			398			435			(160	)		725
Net change			(58	)		(6,610	)		436			(1,362	)		(7,594	)

Balance, December 31, 2008			(6	)		(6,212	)		871			(1,522	)		(6,869	)
Net change			73			9,753			(221	)		273			9,878

Balance, December 31, 2009		$	67			3,541			650			(1,249	)		3,009


(1)		Adoption of accounting change related to pension and other postretirement benefits as required by FASB ASC 715.

177

Note 23: Operating Segments

As a result of the combination of Wells Fargo and Wachovia, in first quarter 2009, management realigned its segments into the following three lines of business for management reporting: Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement. The results for these lines of business are based on our 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 our management structure and is not necessarily comparable with similar information for other financial services companies. We define our operating segments by product type and customer segment. If the management structure and/or the allocation process changes, allocations, transfers and assignments may change. We revised prior period information to reflect the first quarter 2009 realignment of our operating segments; however, because the acquisition was completed on December 31, 2008, Wachovia’s results are not included in the income statement or in average balances for periods prior to 2009.

Community Banking offers a complete line of diversified financial products and services to consumers and small businesses with annual sales generally up to $20 million in which the owner generally is the financial decision maker. Community Banking also offers investment management and other services to retail customers and securities brokerage through affiliates. These products and services include the Wells Fargo Advantage Funds ^SM , a family of mutual funds. Loan products include lines of credit, equity lines and loans, equipment and transportation (recreational vehicle and marine) loans, education loans, origination and purchase of residential mortgage loans and 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, Health Savings Accounts and merchant payment processing. Consumer and business deposit products include checking accounts, savings deposits, market rate accounts, Individual Retirement Accounts, time deposits and debit cards.

Community Banking serves customers through a complete range of channels, including traditional banking stores, in-store banking centers, business centers, ATMs, and Wells Fargo Customer Connection , a 24-hours a day, seven days a week telephone service. Online banking services include single sign-on to online banking, bill pay and brokerage, as well as online banking for small business.

Community Banking also includes Wells Fargo Financial consumer finance and auto finance operations. Consumer

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

Wholesale Banking provides financial solutions to businesses across the United States with annual sales generally in excess of $10 million and to financial institutions globally. Wholesale Banking provides a complete line of commercial, corporate, capital markets, cash management 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, trade financing, collection services, foreign exchange services, treasury management, investment management, institutional fixed-income sales, interest rate, commodity and equity risk management, online/electronic products such as the Commercial Electronic Office ^® ( CEO ^® ) portal, insurance, corporate trust fiduciary and agency services, and investment banking services. Wholesale Banking also supports the CRE 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, CRE loan servicing and real estate and mortgage brokerage services.

Wealth, Brokerage and Retirement provides a full range of financial advisory, lending, fiduciary, and investment management services to clients using a comprehensive planning approach to meet each client’s needs. Wealth Management uses an integrated model to provide affluent and high-net-worth customers with a complete range of wealth management solutions and services. Family Wealth meets the unique needs of ultra-high-net-worth customers managing multi-generational assets—those with at least $50 million in assets. Retail Brokerage’s financial advisors serve customers’ advisory, brokerage and financial needs, including investment management, portfolio monitoring and estate planning as part of one of the largest full-service brokerage firms in the United States. They also offer access to banking products, insurance, and investment banking services. First Clearing LLC, our correspondent clearing firm, provides technology, product and other business support to broker-dealers across the United States. Retirement supports individual investors’ retirement needs and is a leader in 401(k) and pension record keeping, investment services, trust and custody solutions for

178

U.S. companies and their employees. The division also provides investments and executive benefits to institutional clients and delivers reinsurance services to global insurance companies.

Other includes corporate items (such as integration expenses) not specific to a business segment and elimination of certain items that are included in more than one business segment.



					Wealth,
					Brokerage
	Community		Wholesale		and					Consolidated
(income/expense in millions, average balances in billions)	Banking		Banking		Retirement		Other		⁽³⁾	Company

2009
Net interest income ⁽¹⁾	$	34,372		10,063		2,974		(1,085	)		46,324
Provision for credit losses		17,743		3,594		467		(136	)		21,668
Noninterest income		24,650		10,274		8,492		(1,054	)		42,362
Noninterest expense		29,045		10,688		9,364		(77	)		49,020

Income (loss) before income tax expense (benefit)		12,234		6,055		1,635		(1,926	)		17,998
Income tax expense (benefit)		3,279		2,173		611		(732	)		5,331

Net income (loss) before noncontrolling interests		8,955		3,882		1,024		(1,194	)		12,667
Less: Net income from noncontrolling interests		339		26		27		—			392

Net income (loss) ⁽²⁾	$	8,616		3,856		997		(1,194	)		12,275

2008
Net interest income ⁽¹⁾	$	20,542		4,516		827		(742	)		25,143
Provision for credit losses		13,622		1,115		302		940			15,979
Noninterest income		12,424		3,685		1,839		(1,214	)		16,734
Noninterest expense		16,507		5,282		1,992		(1,183	)		22,598

Income (loss) before income tax expense (benefit)		2,837		1,804		372		(1,713	)		3,300
Income tax expense (benefit)		659		416		141		(614	)		602

Net income (loss) before noncontrolling interests		2,178		1,388		231		(1,099	)		2,698
Less: Net income from noncontrolling interests		32		11		—		—			43

Net income (loss) ⁽²⁾	$	2,146		1,377		231		(1,099	)		2,655

2007
Net interest income ⁽¹⁾	$	17,314		3,609		502		(451	)		20,974
Provision for credit losses		4,869		69		4		(3	)		4,939
Noninterest income		12,911		4,926		1,938		(1,229	)		18,546
Noninterest expense		17,159		4,833		1,870		(1,116	)		22,746

Income (loss) before income tax expense (benefit)		8,197		3,633		566		(561	)		11,835
Income tax expense (benefit)		2,311		1,257		215		(213	)		3,570

Net income (loss) before noncontrolling interests		5,886		2,376		351		(348	)		8,265
Less: Net income from noncontrolling interests		179		29		—		—			208

Net income (loss) ⁽²⁾	$	5,707		2,347		351		(348	)		8,057

2009
Average loans	$	538.0		255.4		45.7		(16.3	)		822.8
Average assets		788.7		380.8		109.4		(16.5	)		1,262.4
Average core deposits		533.0		146.6		114.3		(31.4	)		762.5
2008
Average loans	$	285.6		112.3		15.2		(14.6	)		398.5
Average assets		447.6		153.2		18.4		(14.8	)		604.4
Average core deposits		252.8		69.6		23.1		(20.3	)		325.2


(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 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.

(2)		Represents segment net income (loss) for Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement segments and Wells Fargo net income for the Consolidated Company.

(3)		Includes integration expenses and the elimination of items that are included in both Community Banking and Wealth, Brokerage and Retirement, largely representing wealth management customers serviced and products sold in the stores.

179

Note 24: Condensed Consolidating Financial Statements

Following are the condensed consolidating financial statements of the Parent and Wells Fargo Financial, Inc. and its wholly-owned subsidiaries (WFFI). In 2002, the Parent issued a full and unconditional guarantee of all outstanding term debt securities and commercial paper of WFFI. WFFI ceased filing periodic reports under the Securities Exchange Act

of 1934 and is no longer a separately rated company. The Parent also guaranteed all outstanding term debt securities of Wells Fargo Financial Canada Corporation (WFFCC), WFFI’s wholly-owned Canadian subsidiary. WFFCC has continued to issue term debt securities and commercial paper in Canada, unconditionally guaranteed by the Parent.

Condensed Consolidating Statement of Income



							Other
							consolidating					Consolidated
(in millions)	Parent			WFFI			subsidiaries		Eliminations			Company

Year ended December 31, 2009
Dividends from subsidiaries:
Bank	$	6,974			—			—		(6,974	)		—
Nonbank		528			—			—		(528	)		—
Interest income from loans		—			3,467			38,140		(18	)		41,589
Interest income from subsidiaries		2,126			—			—		(2,126	)		—
Other interest income		424			111			14,150		—			14,685

Total interest income		10,052			3,578			52,290		(9,646	)		56,274

Deposits		—			—			3,774		—			3,774
Short-term borrowings		174			38			782		(772	)		222
Long-term debt		3,391			1,305			2,458		(1,372	)		5,782
Other interest expense		—			—			172		—			172

Total interest expense		3,565			1,343			7,186		(2,144	)		9,950

Net interest income		6,487			2,235			45,104		(7,502	)		46,324
Provision for credit losses		—			1,901			19,767		—			21,668

Net interest income after provision for credit losses		6,487			334			25,337		(7,502	)		24,656

Noninterest income
Fee income – nonaffiliates		—			148			22,815		—			22,963
Other		738			169			19,135		(643	)		19,399

Total noninterest income		738			317			41,950		(643	)		42,362

Noninterest expense
Salaries and benefits		320			129			26,018		—			26,467
Other		521			711			21,964		(643	)		22,553

Total noninterest expense		841			840			47,982		(643	)		49,020

Income (loss) before income tax expense (benefit) and equity in undistributed income of subsidiaries		6,384			(189	)		19,305		(7,502	)		17,998
Income tax expense (benefit)		(164	)		(86	)		5,581		—			5,331
Equity in undistributed income of subsidiaries		5,727			—			—		(5,727	)		—

Net income (loss) before noncontrolling interests		12,275			(103	)		13,724		(13,229	)		12,667
Less: Net income from noncontrolling interests		—			1			391		—			392

Parent, WFFI, Other and Wells Fargo net income (loss)	$	12,275			(104	)		13,333		(13,229	)		12,275

180

Condensed Consolidating Statements of Income


							Other
							consolidating					Consolidated
(in millions)	Parent			WFFI			subsidiaries		Eliminations			Company

Year ended December 31, 2008
Dividends from subsidiaries:
Bank		$1,806			—			—		(1,806	)		—
Nonbank		326			—			—		(326	)		—
Interest income from loans		2			5,275			22,417		(62	)		27,632
Interest income from subsidiaries		2,892			—			—		(2,892	)		—
Other interest income		241			108			7,051		(134	)		7,266


Total interest income		5,267			5,383			29,468		(5,220	)		34,898


Deposits		—			—			4,966		(445	)		4,521
Short-term borrowings		475			220			1,757		(974	)		1,478
Long-term debt		2,957			1,807			661		(1,669	)		3,756


Total interest expense		3,432			2,027			7,384		(3,088	)		9,755


Net interest income		1,835			3,356			22,084		(2,132	)		25,143
Provision for credit losses		—			2,970			13,009		—			15,979


Net interest income after provision for credit losses		1,835			386			9,075		(2,132	)		9,164


Noninterest income
Fee income – nonaffiliates		—			437			10,110		—			10,547
Other		(101	)		168			8,181		(2,061	)		6,187


Total noninterest income		(101	)		605			18,291		(2,061	)		16,734


Noninterest expense
Salaries and benefits		(385	)		719			12,606		—			12,940
Other		15			1,119			10,585		(2,061	)		9,658


Total noninterest expense		(370	)		1,838			23,191		(2,061	)		22,598


Income (loss) before income tax expense (benefit) and equity in undistributed income of subsidiaries		2,104			(847	)		4,175		(2,132	)		3,300
Income tax expense (benefit)		(83	)		(289	)		974		—			602
Equity in undistributed income of subsidiaries		468			—			—		(468	)		—


Net income (loss) before noncontrolling interests		2,655			(558	)		3,201		(2,600	)		2,698
Less: Net income from noncontrolling interests		—			—			43		—			43


Parent, WFFI, Other and Wells Fargo net income (loss)		$2,655			(558	)		3,158		(2,600	)		2,655


Year ended December 31, 2007
Dividends from subsidiaries:
Bank		$4,587			—			—		(4,587	)		—
Nonbank		398			—			—		(398	)		—
Interest income from loans		—			5,643			23,453		(56	)		29,040
Interest income from subsidiaries		3,693			—			—		(3,693	)		—
Other interest income		152			115			5,875		(5	)		6,137


Total interest income		8,830			5,758			29,328		(8,739	)		35,177


Deposits		—			—			8,793		(641	)		8,152
Short-term borrowings		444			442			1,626		(1,267	)		1,245
Long-term debt		3,830			1,923			900		(1,847	)		4,806


Total interest expense		4,274			2,365			11,319		(3,755	)		14,203


Net interest income		4,556			3,393			18,009		(4,984	)		20,974
Provision for credit losses		—			969			3,970		—			4,939


Net interest income after provision for credit losses		4,556			2,424			14,039		(4,984	)		16,035


Noninterest income
Fee income – nonaffiliates		—			394			10,233		—			10,627
Other		117			140			9,190		(1,528	)		7,919


Total noninterest income		117			534			19,423		(1,528	)		18,546


Noninterest expense
Salaries and benefits		61			1,229			12,078		—			13,368
Other		291			1,119			9,495		(1,527	)		9,378

Total noninterest expense		352			2,348			21,573		(1,527	)		22,746

Income (loss) before income tax expense (benefit) and equity in undistributed income of subsidiaries		4,321			610			11,889		(4,985	)		11,835
Income tax expense (benefit)		(257	)		246			3,581		—			3,570
Equity in undistributed income of subsidiaries		3,479			—			—		(3,479	)		—


Net income (loss) before noncontrolling interests		8,057			364			8,308		(8,464	)		8,265
Less: Net income from noncontrolling interests		—			—			208		—			208


Parent, WFFI, Other and Wells Fargo net income (loss)		$8,057			364			8,100		(8,464	)		8,057

181

Note 24: Condensed Consolidating Financial Statements ( continued)

Condensed Consolidating Balance Sheets


						Other
						consolidating						Consolidated
(in millions)	Parent		WFFI			subsidiaries			Eliminations			Company

December 31, 2009
Assets
Cash and cash equivalents due from:
Subsidiary banks	$	27,303		205			—			(27,508	)		—
Nonaffiliates		11		249			67,705			—			67,965
Securities available for sale		4,666		2,665			165,379			—			172,710
Mortgages and loans held for sale		—		—			44,827			—			44,827
Loans		7		35,199			750,045			(2,481	)		782,770
Loans to subsidiaries:
Bank		6,760		—			—			(6,760	)		—
Nonbank		56,316		—			—			(56,316	)		—
Allowance for loan losses		—		(1,877	)		(22,639	)		—			(24,516	)


Net loans		63,083		33,322			727,406			(65,557	)		758,254


Investments in subsidiaries:
Bank		134,063		—			—			(134,063	)		—
Nonbank		12,816		—			—			(12,816	)		—
Other assets		10,758		1,500			189,049			(1,417	)		199,890


Total assets	$	252,700		37,941			1,194,366			(241,361	)		1,243,646


Liabilities and equity
Deposits	$	—		—			851,526			(27,508	)		824,018
Short-term borrowings		1,546		10,599			59,813			(32,992	)		38,966
Accrued expenses and other liabilities		7,878		1,439			54,542			(1,417	)		62,442
Long-term debt		119,353		24,437			80,499			(20,428	)		203,861
Indebtedness to subsidiaries		12,137		—			—			(12,137	)		—


Total liabilities		140,914		36,475			1,046,380			(94,482	)		1,129,287


Parent, WFFI, other and Wells Fargo stockholders’ equity		111,786		1,456			145,423			(146,879	)		111,786
Noncontrolling interests		—		10			2,563			—			2,573


Total equity		111,786		1,466			147,986			(146,879	)		114,359


Total liabilities and equity	$	252,700		37,941			1,194,366			(241,361	)		1,243,646


December 31, 2008
Assets
Cash and cash equivalents due from:
Subsidiary banks	$	15,658		246			—			(15,904	)		—
Nonaffiliates		—		180			73,016			—			73,196
Securities available for sale		4,950		2,130			144,494			(5	)		151,569
Mortgages and loans held for sale		—		—			26,316			—			26,316
Loans		9		45,930			827,242			(8,351	)		864,830
Loans to subsidiaries:
Bank		21,745		—			—			(21,745	)		—
Nonbank		68,527		—			—			(68,527	)		—
Allowance for loan losses		—		(2,359	)		(18,654	)		—			(21,013	)


Net loans		90,281		43,571			808,588			(98,623	)		843,817


Investments in subsidiaries:
Bank		105,721		—			—			(105,721	)		—
Nonbank		24,094		—			—			(24,094	)		—
Other assets		34,949		1,756			213,099			(35,063	)		214,741


Total assets	$	275,653		47,883			1,265,513			(279,410	)		1,309,639


Liabilities and equity
Deposits	$	—		—			791,728			(10,326	)		781,402
Short-term borrowings		23,434		12,911			150,156			(78,427	)		108,074
Accrued expenses and other liabilities		7,426		1,179			55,721			(13,637	)		50,689
Long-term debt		134,026		31,704			137,118			(35,690	)		267,158
Indebtedness to subsidiaries		11,683		—			—			(11,683	)		—


Total liabilities		176,569		45,794			1,134,723			(149,763	)		1,207,323


Parent, WFFI, other and Wells Fargo stockholders’ equity		99,084		2,074			127,573			(129,647	)		99,084
Noncontrolling interests		—		15			3,217			—			3,232


Total equity		99,084		2,089			130,790			(129,647	)		102,316


Total liabilities and equity	$	275,653		47,883			1,265,513			(279,410	)		1,309,639

182

Condensed Consolidating Statements of Cash Flows


	Year ended December 31,
	2009												2008
							Other												Other
							consolidating												consolidating
							subsidiaries/			Consolidated									subsidiaries/			Consolidated
(in millions)	Parent			WFFI			eliminations			Company			Parent			WFFI			eliminations			Company

Cash flows from operating activities:
Net cash provided (used) by operating activities	$	7,356			1,655			19,602			28,613			730			2,023			(7,541	)		(4,788	)


Cash flows from investing activities:
Securities available for sale:
Sales proceeds		1,184			925			50,929			53,038			2,570			875			57,361			60,806
Prepayments and maturities		—			290			38,521			38,811			—			283			24,034			24,317
Purchases		(463	)		(1,667	)		(93,155	)		(95,285	)		(3,514	)		(1,258	)		(100,569	)		(105,341	)
Loans:
Decrease (increase) in banking subsidiaries’ loan originations, net of collections		—			(981	)		53,221			52,240			—			(1,684	)		(53,131	)		(54,815	)
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries		—			—			6,162			6,162			—			—			1,988			1,988
Purchases (including participations) of loans by banking subsidiaries		—			—			(3,363	)		(3,363	)		—			—			(5,513	)		(5,513	)
Principal collected on nonbank entities’ loans		—			11,119			3,309			14,428			—			14,447			7,399			21,846
Loans originated by nonbank entities		—			(5,523	)		(4,438	)		(9,961	)		—			(12,362	)		(7,611	)		(19,973	)
Net repayments from (advances to) subsidiaries		11,369			(138	)		(11,231	)		—			(12,415	)		—			12,415			—
Capital notes and term loans made to subsidiaries		(497	)		(1,000	)		1,497			—			(2,008	)		—			2,008			—
Principal collected on notes/ loans made to subsidiaries		12,979			—			(12,979	)		—			8,679			—			(8,679	)		—
Net decrease (increase) in investment in subsidiaries		(1,382	)		—			1,382			—			(37,108	)		—			37,108			—
Net cash acquired from (paid for) acquisitions		—			—			(138	)		(138	)		9,194			—			2,009			11,203
Other, net		22,513			355			(7,015	)		15,853			(21,823	)		(91	)		69,235			47,321

Net cash provided (used) by investing activities		45,703			3,380			22,702			71,785			(56,425	)		210			38,054			(18,161	)


Cash flows from financing activities:
Net change in:
Deposits		—			—			42,473			42,473			—			—			7,697			7,697
Short-term borrowings		(19,100	)		2,158			(52,166	)		(69,108	)		17,636			5,580			(38,104	)		(14,888	)
Long-term debt:
Proceeds from issuance		8,297			1,347			(1,248	)		8,396			21,931			1,113			12,657			35,701
Repayment		(22,931	)		(8,508	)		(34,821	)		(66,260	)		(16,560	)		(8,983	)		(4,316	)		(29,859	)
Preferred stock:
Cash dividends paid		(2,178	)		—			—			(2,178	)		—			—			—			—
Proceeds from issuance		—			—			—			—			22,674			—			—			22,674
Redeemed		(25,000	)		—			—			(25,000	)		—			—			—			—
Proceeds from issuance of stock warrants		—			—			—			—			2,326			—			—			2,326
Common stock:
Proceeds from issuance		21,976			—			—			21,976			14,171			—			—			14,171
Repurchased		(220	)		—			—			(220	)		(1,623	)		—			—			(1,623	)
Cash dividends paid		(2,125	)		—			—			(2,125	)		(4,312	)		—			—			(4,312	)
Excess tax benefits related to stock option payments		18			—			—			18			121			—			—			121
Change in noncontrolling interests:
Purchase of Prudential’s noncontrolling interest		—			—			(4,500	)		(4,500	)		—			—			—			—
Other, net		—			(4	)		(549	)		(553	)		—			—			(53	)		(53	)
Other, net		(140	)		—			140			—			—			—			—			—


Net cash provided (used) by financing activities		(41,403	)		(5,007	)		(50,671	)		(97,081	)		56,364			(2,290	)		(22,119	)		31,955


Net change in cash and due from banks		11,656			28			(8,367	)		3,317			669			(57	)		8,394			9,006
Cash and due from banks at beginning of year		15,658			426			7,679			23,763			14,989			483			(715	)		14,757


Cash and due from banks at end of year	$	27,314			454			(688	)		27,080			15,658			426			7,679			23,763

183

Note 24: Condensed Consolidating Financial Statements ( continued)

Condensed Consolidating Statement of Cash Flows


							Other
							consolidating
							subsidiaries/			Consolidated
(in millions)	Parent			WFFI			eliminations			Company

Year ended December 31, 2007
Cash flows from operating activities:
Net cash provided by operating activities	$	3,715			1,446			4,125			9,286

Cash flows from investing activities:
Securities available for sale:
Sales proceeds		2,554			559			44,877			47,990
Prepayments and maturities		—			299			8,206			8,505
Purchases		(3,487	)		(1,174	)		(70,468	)		(75,129	)
Loans:
Increase in banking subsidiaries’ loan originations, net of collections		—			(2,686	)		(45,929	)		(48,615	)
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries		—			—			3,369			3,369
Purchases (including participations) of loans by banking subsidiaries		—			—			(8,244	)		(8,244	)
Principal collected on nonbank entities’ loans		—			18,729			2,747			21,476
Loans originated by nonbank entities		—			(20,461	)		(4,823	)		(25,284	)
Net repayments from (advances to) subsidiaries		(10,338	)		—			10,338			—
Capital notes and term loans made to subsidiaries		(10,508	)		—			10,508			—
Principal collected on notes/loans made to subsidiaries		7,588			—			(7,588	)		—
Net decrease (increase) in investment in subsidiaries		(1,132	)		—			1,132			—
Net cash paid for acquisitions		—			—			(2,811	)		(2,811	)
Other, net		(106	)		(847	)		2,349			1,396


Net cash used by investing activities		(15,429	)		(5,581	)		(56,337	)		(77,347	)


Cash flows from financing activities:
Net change in:
Deposits		—			—			27,058			27,058
Short-term borrowings		9,138			2,670			28,019			39,827
Long-term debt:
Proceeds from issuance		24,385			11,335			(6,360	)		29,360
Repayment		(11,726	)		(9,870	)		3,346			(18,250	)
Common stock:
Proceeds from issuance		1,876			—			—			1,876
Repurchased		(7,418	)		—			—			(7,418	)
Cash dividends paid		(3,955	)		—			—			(3,955	)
Excess tax benefits related to stock option payments		196			—			—			196
Change in noncontrolling interests:
Other, net		—			—			(176	)		(176	)
Other, net		(2	)		13			(739	)		(728	)


Net cash provided by financing activities		12,494			4,148			51,148			67,790


Net change in cash and due from banks		780			13			(1,064	)		(271	)
Cash and due from banks at beginning of year		14,209			470			349			15,028

Cash and due from banks at end of year	$	14,989			483			(715	)		14,757

Note 25: Regulatory and Agency Capital Requirements

The Company and each of its subsidiary banks are subject to various regulatory capital adequacy requirements administered by the Federal Reserve Board (FRB) and the OCC, respectively. The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) required that the federal regulatory agencies adopt regulations defining five capital tiers for banks: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on our financial statements.

Quantitative measures, established by the regulators to ensure capital adequacy, require that the Company and each of the subsidiary banks maintain minimum ratios (set forth in the following table) of capital to risk-weighted assets. There are three categories of capital under the guidelines. Tier 1 capital includes common stockholders’ equity, qualifying preferred stock and trust preferred securities, less goodwill and certain other deductions (including a portion of servicing assets and the unrealized net gains and losses, after taxes, on securities available for sale). Tier 2 capital includes preferred stock not qualifying as Tier 1 capital, subordinated debt, the allowance for credit losses and net unrealized gains

184

on marketable equity securities, subject to limitations by the guidelines. Tier 2 capital is limited to the amount of Tier 1 capital (i.e., at least half of the total capital must be in the form of Tier 1 capital). Tier 3 capital includes certain qualifying unsecured subordinated debt.

We do not consolidate our wholly-owned trusts (the Trusts) formed solely to issue trust preferred securities. The amount of trust preferred securities and perpetual preferred purchase securities issued by the Trusts that was includable in Tier 1 capital in accordance with FRB risk-based capital (RBC) guidelines was $19.3 billion at December 31, 2009. The junior subordinated debentures held by the Trusts were included in the Company’s long-term debt. See Note 13 in this Report for additional information on trust preferred securities.

Under the guidelines, capital is compared with the relative risk related to the balance sheet. To derive the risk included in the balance sheet, a risk weighting is applied to each balance sheet asset and off-balance sheet item, primarily based on the relative credit risk of the counterparty. For example, claims

guaranteed by the U.S. government or one of its agencies are risk-weighted at 0% and certain real estate related loans risk-weighted at 50%. Off-balance sheet items, such as loan commitments and derivatives, are also applied a risk weight after calculating balance sheet equivalent amounts. A credit conversion factor is assigned to loan commitments based on the likelihood of the off-balance sheet item becoming an asset. For example, certain loan commitments are converted at 50% and then risk-weighted at 100%. Derivatives are converted to balance sheet equivalents based on notional values, replacement costs and remaining contractual terms. See Notes 6 and 15 in this Report for further discussion of off-balance sheet items. For certain recourse obligations, direct credit substitutes, residual interests in asset securitization, and other securitized transactions that expose institutions primarily to credit risk, the capital amounts and classification under the guidelines are subject to qualitative judgments by the regulators about components, risk weightings and other factors.

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 December 31, 2009:

Total capital (to risk-weighted assets)

Wells Fargo & Company

$134.4

13.26

≥ $81.1

≥8.00

Wells Fargo Bank, N.A.

58.4

11.87

≥ 39.4

≥8.00

≥ $49.2

≥10.00

Wachovia Bank, N.A.

60.5

13.65

≥ 35.4

≥8.00

≥ 44.3

≥10.00

Tier 1 capital (to risk-weighted assets)

Wells Fargo & Company

93.8

9.25

≥ 40.5

≥4.00

Wells Fargo Bank, N.A.

43.8

8.90

≥ 19.7

≥4.00

≥ 29.5

≥ 6.00

Wachovia Bank, N.A.

39.7

8.97

≥ 17.7

≥4.00

≥ 26.6

≥ 6.00

Tier 1 capital (to average assets)

(Leverage ratio)

Wells Fargo & Company

93.8

7.87

≥ 47.7

≥4.00

⁽¹⁾

Wells Fargo Bank, N.A.

43.8

7.50

≥ 23.3

≥4.00

⁽¹⁾

≥ 29.2

≥ 5.00

Wachovia Bank, N.A.

39.7

8.23

≥ 19.3

≥4.00

⁽¹⁾

≥ 24.1

≥ 5.00

(1)

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

Management believes that, as of December 31, 2009, the Company and each of the covered subsidiary banks met all capital adequacy requirements to which they are subject.

The most recent notification from the OCC categorized each of the covered subsidiary banks as well capitalized, under the FDICIA prompt corrective action provisions applicable to banks. To be categorized as well capitalized, the institution must maintain a total RBC ratio as set forth in the table above and not be subject to a capital directive order. There are no conditions or events since that notification that management believes have changed the RBC category of any of the covered subsidiary banks.

Certain subsidiaries of the Company are approved seller/servicers, and are therefore required to maintain minimum levels of shareholders’ equity, as specified by various agencies, including the United States Department of Housing and Urban Development, GNMA, FHLMC and FNMA. At December 31, 2009, each seller/servicer met these requirements.

Certain broker-dealer subsidiaries of the Company are subject to SEC Rule 15c3-1 (the Net Capital Rule), which requires that we maintain minimum levels of net capital, as defined. At December 31, 2009, each of these subsidiaries met these requirements.

185

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Wells Fargo & Company:

We have audited the accompanying consolidated balance sheet of Wells Fargo & Company and Subsidiaries (the Company) as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of evaluating other-than-temporary impairment for debt securities in 2009 and certain investment securities in 2008.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 26, 2010, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

San Francisco, California
February 26, 2010

186

Quarterly Financial Data

Condensed Consolidated Statement of Income – Quarterly (Unaudited)


	2009											2008
	Quarter ended											Quarter ended
(in millions, except per share amounts)	Dec. 31		Sept. 30			June 30			Mar. 31			Dec. 31			Sept. 30			June 30			Mar. 31


Interest income	$	13,692		13,968			14,301			14,313			8,728			8,774			8,547			8,849


Interest expense		2,192		2,284			2,537			2,937			2,004			2,393			2,269			3,089


Net interest income		11,500		11,684			11,764			11,376			6,724			6,381			6,278			5,760
Provision for credit losses		5,913		6,111			5,086			4,558			8,444			2,495			3,012			2,028


Net interest income after provision for credit losses		5,587		5,573			6,678			6,818			(1,720	)		3,886			3,266			3,732


Noninterest income
Service charges on deposit accounts		1,421		1,478			1,448			1,394			803			839			800			748
Trust and investment fees		2,605		2,502			2,413			2,215			661			738			762			763
Card fees		961		946			923			853			589			601			588			558
Other fees		990		950			963			901			535			552			511			499
Mortgage banking		3,411		3,067			3,046			2,504			(195	)		892			1,197			631
Insurance		482		468			595			581			337			439			550			504
Net gains (losses) from trading activities		516		622			749			787			(409	)		65			516			103
Net gains (losses) on debt securities available for sale		110		(40	)		(78	)		(119	)		721			84			(91	)		323
Net gains (losses) from equity investments		273		29			40			(157	)		(608	)		(509	)		47			313
Operating leases		163		224			168			130			62			102			120			143
Other		264		536			476			552			257			193			182			218


Total noninterest income		11,196		10,782			10,743			9,641			2,753			3,996			5,182			4,803


Noninterest expense
Salaries		3,505		3,428			3,438			3,386			2,168			2,078			2,030			1,984
Commission and incentive compensation		2,086		2,051			2,060			1,824			671			555			806			644
Employee benefits		1,144		1,034			1,227			1,284			338			486			593			587
Equipment		681		563			575			687			402			302			305			348
Net occupancy		770		778			783			796			418			402			400			399
Core deposit and other intangible		642		642			646			647			47			47			46			46
FDIC and other deposit assessments		302		228			981			338			57			37			18			8
Other		3,691		2,960			2,987			2,856			1,709			1,594			1,647			1,426


Total noninterest expense		12,821		11,684			12,697			11,818			5,810			5,501			5,845			5,442


Income (loss) before income tax expense		3,962		4,671			4,724			4,641			(4,777	)		2,381			2,603			3,093
Income tax expense (benefit)		949		1,355			1,475			1,552			(2,036	)		730			834			1,074


Net income (loss) before noncontrolling interests		3,013		3,316			3,249			3,089			(2,741	)		1,651			1,769			2,019
Less: Net income (loss) from noncontrolling interests		190		81			77			44			(7	)		14			16			20


Wells Fargo net income (loss)	$	2,823		3,235			3,172			3,045			(2,734	)		1,637			1,753			1,999


Wells Fargo net income (loss) applicable to common stock	$	394		2,637			2,575			2,384			(3,020	)		1,637			1,753			1,999


Per share information
Earnings (loss) per common share	$	0.08		0.56			0.58			0.56			(0.84	)		0.49			0.53			0.61
Diluted earnings (loss) per common share		0.08		0.56			0.57			0.56			(0.84	)		0.49			0.53			0.60
Dividends declared per common share		0.05		0.05			0.05			0.34			0.34			0.34			0.31			0.31
Average common shares outstanding		4,764.8		4,678.3			4,483.1			4,247.4			3,582.4			3,316.4			3,309.8			3,302.4
Diluted average common shares outstanding		4,796.1		4,706.4			4,501.6			4,249.3			3,593.6			3,331.0			3,321.4			3,317.9
Market price per common share ⁽¹⁾
High	$	31.53		29.56			28.45			30.47			38.95			44.68			32.40			34.56
Low		25.00		22.08			13.65			7.80			19.89			20.46			23.46			24.38
Quarter-end		26.99		28.18			24.26			14.24			29.48			37.53			23.75			29.10

(1) Based on daily prices reported on the New York Stock Exchange Composite Transaction Reporting System.

187

Glossary of Acronyms


ABCP		Asset-backed commercial paper

AICPA		American Institute of Certified Public Accountants

ALCO		Asset/Liability Management Committee

AMTN		Australian medium-term note programme

ARS		Auction rate security

ASC		Accounting Standards Codification

ASU		Accounting Standards Update

ARM		Adjustable-rate mortgage

AVM		Automated valuation model

CDs		Certificates of deposit

CDO		Collateralized debt obligation

CLO		Collateralized loan obligation

CMO		Collateralized mortgage obligation

CPP		Capital Purchase Program

CPR		Constant prepayment rate

CRE		Commercial real estate

EITF		Emerging Issues Task Force

EMTN		European medium-term note programme

ESOP		Employee Stock Ownership Plan

FAS		Statement of Financial Accounting Standards

FASB		Financial Accounting Standards Board

FDIC		Federal Deposit Insurance Corporation

FHA		Federal Housing Administration

FHLB		Federal Home Loan Bank

FHLMC		Federal Home Loan Mortgage Company

FICO		Fair Isaac Corporation (credit rating)

FNMA		Federal National Mortgage Association

FRB		Federal Reserve Board

FSP		FASB Staff Position

GAAP		Generally Accepted Accounting Principles

GNMA		Government National Mortgage Association

GSE		Government-sponsored entity

IRA		Individual Retirement Account

LHFS		Loans held for sale


LIBOR		London Interbank Offered Rate

LTV		Loan-to-value

MBS		Mortgage-backed security

MHFS		Mortgages held for sale

MSR		Mortgage servicing right

NAV		Net asset value

NPA		Nonperforming asset

OCC		Office of the Comptroller of the Currency

OCI		Other comprehensive income

OTC		Over-the-counter

OTTI		Other-than-temporary impairment

PCI Loans		Purchased credit-impaired loans are acquired loans with evidence of credit deterioration accounted for under FASB ASC 310-30 (AICPA Statement of Position 03-3)

PTPP		Pre-tax pre-provision profit

QSPE		Qualifying special purpose entity

RBC		Risk-based capital

ROA		Wells Fargo net income to average total assets

ROE		Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity

SCAP		Supervisory Capital Assessment Program

SEC		Securities and Exchange Commission

S&P		Standard & Poors

SIV		Structured investment vehicle

SPE		Special purpose entity

TARP		Troubled Asset Relief Program

TDR		Troubled debt restructuring

TLGP		Temporary Liquidity Guarantee Program

VA		Department of Veterans Affairs

VaR		Value-at-risk

VIE		Variable interest entity

WFFCC		Wells Fargo Financial Canada Corporation

WFFI		Wells Fargo Financial, Inc. and its wholly-owned subsidiaries

188

Codification Cross Reference


Codification Topic		Superseded Authoritative Accounting Literature

FASB ASC 260, Earnings Per Share		FAS 128, Earnings Per Share, and FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities

FASB ASC 310, Receivables		FAS 114, Accounting by Creditors for Impairment of A Loan, an Amendment of FASB Statements No. 5 and 15, and AICPA SOP 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer

FASB ASC 320, Investments – Debt and Equity Securities		FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments

FASB ASC 715, Compensation – Retirement Benefits		FAS 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R), and FSP FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets

FASB ASC 718, Compensation – Stock Compensation		FAS 123(R), Share-Based Payment

FASB ASC 805, Business Combinations		FAS 141(R), Business Combinations

FASB ASC 810, Consolidation		FAS 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, FAS 167, Amendments to FASB Interpretation No. 46(R), and FIN 46(R), Consolidation of Variable Interest Entities – an amendment of ARB No. 51

FASB ASC 815, Derivatives and Hedging		FAS 133, Accounting for Derivative Instruments and Hedging Activities, and FAS 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133

FASB ASC 820, Fair Value Measurements and Disclosures		FAS 157, Fair Value Measurements

FASB ASC 820-10, Fair Value Measurements and Disclosures		FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly

FASB ASC 825, Financial Instruments		FAS 107, Disclosures about Fair Value of Financial Instruments, FAS 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115, and FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments

FASB ASC 855, Subsequent Events		FAS 165, Subsequent Events

FASB ASC 860, Transfers and Servicing		FAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities – A Replacement of FASB Statement 125, FAS 156, Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140, and FAS 166, Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140

189

EXHIBIT 21

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
1005 Corp.		North Carolina
110 Monastery Associates, Limited Partnership		Massachusetts
1368 Euclid Street Tenant L.P.		Virginia
150 Miami Associates Tenant, LLC		Florida
1st Capital Mortgage, LLC		Delaware
2007 Vento II, LLC		Delaware
425 South Tryon Street, LLC		North Carolina
509 Vine Street Tenant, L.P.		Pennsylvania
660 Master, LLC		Ohio
A. G. Edwards Technology Group, Inc.		Missouri
A. G. Edwards Technology Partners		Missouri
A.G. Edwards & Sons, LLC		Delaware
A.G. Edwards Capital, Inc.		Delaware
A.G. Edwards Hedging Services, Inc.		Nevada
A.G. Edwards Private Equity Partners II, L.P.		Delaware
A.G. Edwards Private Equity Partners QP II, L.P.		Delaware
A.G. Edwards Private Equity Partners QP, L.P.		Delaware
A.G. Edwards Private Equity Partners, L.P.		Delaware
A.G. Edwards, Inc.		Delaware
ABCA, Inc		Florida
ACAS/WCM, LLC		Delaware
ACO Brokerage Holdings Corporation		Delaware
Acordia of Indiana, Inc.		Indiana
Advance Mortgage		Virginia
Advantage Mortgage Partners, LLC		Delaware
AGE Capital Holding, Inc.		Delaware
AGE International, Inc.		Delaware
AGE Investments, Inc.		Delaware
AHC Limited Partnership - 10		Virginia
AHC Limited Partnership - 11		Virginia
AHG Tax Credit Fund I, L.L.C.		Delaware
AHG Tax Credit Fund II, L.L.C.		Delaware
AHG Tax Credit Fund III, L.L.C.		Delaware
AHG Tax Credit Fund IV, L.L.C.		Delaware
AHG Tax Credit Fund IX, L.L.C.		Delaware
AHG Tax Credit Fund V, L.L.C.		Delaware
AHG Tax Credit Fund VI, L.L.C.		Delaware
AHG Tax Credit Fund VII, L.L.C.		Delaware
AHG Tax Credit Fund X, L.L.C.		Delaware
AHG Tax Credit Fund XII L.L.C.		Delaware
AHG Tax Credit Fund XIV, L.L.C.		Delaware
AHG Tax Credit Fund XVI, L.P.		Delaware
AHG Tax Credit Fund XVII, L.P.		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
AHG Tax Credit Fund XVIII, LLC		Delaware
AILS, Inc.		Delaware
Alano Funding, LLC		Delaware
Alces Funding, LLC		Delaware
Alliance Home Mortgage, LLC		Delaware
Alta Mesa AZ, LLC		Delaware
Alternative Strategies Group, Inc.		North Carolina
Alternative Strategies Managed Futures & Commodities Platform, LLC		Delaware
Alternative Strategies Platform, LLC		Delaware
Alternative Strategies Real Estate Platform, LLC		Delaware
AM/F Managing Member, LLC		Delaware
AM/F-2 Managing Member, LLC		Delaware
AM/F-4A Managing Member, LLC		Delaware
Amber Asset Management Inc.		Maryland
American Capital/Wachovia CDO Investor Fund, L.P.		Delaware
American E & S Insurance Brokers California, Inc.		California
American Mortgage Network, LLC		Delaware
American Priority Mortgage, LLC		Delaware
American Securities Company		California
American Securities Company of Missouri		Missouri
American Securities Company of Nevada		Nevada
American Securities Company of Utah		Utah
American Southern Mortgage Services, LLC		Delaware
American Tobacco SCP, LP		Maryland
Amnet Mortgage, LLC		Delaware
Ao Cheng Ltd		British Virgin Islands
APM Mortgage, LLC		Delaware
Ascent Financial Services, LLC		Delaware
ASGI Hedged Equities, Accredited, L.P.		Delaware
ASGI Hedged Equities, Super Accredited, L.P.		Delaware
ASGI Multi-Strategy Fund II, Super Accredited, L.P.		Delaware
ASGI Multi-Strategy, Accredited, L.P.		Delaware
ASGI Multi-Strategy, Super Accredited, L.P.		Delaware
Ashton Woods Mortgage, LLC		Delaware
Aspen Delaware Funding, LLC		Delaware
ATC Realty Fifteen, Inc.		California
ATC Realty Nine, Inc.		California
ATC Realty Sixteen, Inc.		California
Atlas - OCI Enhanced Loan Income Fund LLC		Delaware
Atlas Capital Funding, Ltd.		Cayman Islands
Atlas Loan Funding (CENT I), LLC		Delaware
Atlas Loan Funding (Hartford), LLC		Delaware
Atlas Loan Funding (Navigator), LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Atlas Loan Funding 2, LLC		Delaware
Augusta Landings Raleigh, LLC		Delaware
Augustus Ventures, L.L.C.		Nevada
Aurora GP Holding, LLC		Delaware
AZ-#3644 Jackson, LLC		Delaware
Azalea Asset Management, Inc.		Delaware
Bacon Housing, L.P.		Virginia
BAFSC/WLC CX HUP I Trust		Delaware
BAFSC/WLC CX HUP II Trust		Delaware
BAFSC/WLC CX HUP, Ltd.		Bermuda
Bankers Funding Company, LLC		Delaware
Barrington Crestview GA, LLC		Delaware
Bateman Eichler, Hill Richards Housing Investors, Inc.		California
Bateman Eichler, Hill Richards Realty Co., Incorporated		California
Bateman Eichler, Hill Richards Realty Services, Inc.		California
BEHR Housing Investors 1981-1, L.P.		California
Belgravia Mortgage Group, LLC		Delaware
Benefit Mortgage, LLC		Delaware
Bergamasco Funding, LLC		Delaware
Berks Mortgage Services, LLC		Delaware
Besso Holdings Limited		United Kingdom-England
Besso Limited		United Kingdom-England
Besso Operational Support Services Limited		United Kingdom-England
Besso Re Limited		United Kingdom-England
Besso Risk Solutions Ltd		United Kingdom-England
Besso Special Groups Limited		United Kingdom-England
Besso Transportation Limited		United Kingdom-England
BGMCO PA, Inc.		Pennsylvania
BHS Home Loans, LLC		Delaware
Biggs Building SCP, L.P.		Virginia
Biscoe Finance, LLC		Delaware
Bitterroot Asset Management, Inc.		Cayman Islands
Blue Spirit Insurance Company		Vermont
Bluebonnet Asset Management, Inc.		Delaware
BluePoint Holdings Limited		Bermuda
Bluffwalk Center Lessee, L.P.		Virginia
Bluffwalk SCP, L.L.C.		Virginia
Boettcher Properties, Ltd.		Colorado
Bowler Housing L.P.		Virginia
BPL Holdings, Inc.		Delaware
B-R Penn Tenant, LLC		Pennsylvania
Bridgewater Falls Hamilton, LLC		Delaware
Brittlebush Financing, LLC		Nevada

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Bryan, Pendleton, Swats & McAllister, LLC		Tennessee
Business Development Corporation of South Carolina		South Carolina
CACC SCP, LP		Virginia
CACC Tenant, LP		Virginia
Calibre Advisory Services, Inc.		Delaware
Canal Walk Lofts II L.P.		Virginia
Canal Walk Lofts II SCP L.P.		Virginia
Canal Walk Lofts III SCP L.P.		Virginia
Canal Walk Lofts III Tenant L.P.		Virginia
Canal Walk Lofts Tenant L.P.		Virginia
Capitol Finance Group, Inc.		North Carolina
Capitol Places IV, LLC		South Carolina
Capstone Home Mortgage, LLC		Delaware
Cardinal Finance LLC		Delaware
Cardinal Holdings, LLC		Delaware
Cardinal International Leasing Holding Corp		Delaware
Cardinal International Leasing, LLC		Delaware
Carnation Asset Management, Inc.		Delaware
Carolina Mortgage/CDJ, LLC		Delaware
CAROLINA/CONSOLIDATED SCP, L.P.		Virginia
Caveness Partners, LLC		Delaware
CBC Affinity Groups Limited		United Kingdom-England
CBC UK Limited		United Kingdom-England
Centennial Home Mortgage, LLC		Delaware
Central Federal Mortgage Company		Not Required
Central Fidelity Capital Trust I		Delaware
Central Fidelity Properties, Inc.		Virginia
Centurion Agency Nevada, Inc.		Nevada
Centurion Casualty Company		Iowa
Centurion Funding, Inc.		California
Centurion Funding, LLC		Delaware
Centurion Life Insurance Company		Iowa
Century Bancshares, Inc.		Texas
Century Capital Trust		Delaware
Century Mill Investors LLC		Delaware
Cervus Funding, L.P.		Delaware
CGT Insurance Company LTD.		Barbados
Charter Holdings, Inc.		Nevada
Chestnut Asset Management, Inc.		Delaware
Choice Mortgage Servicing, LLC		Delaware
City First Capital III, LLC		Delaware
City First Capital V, LLC		Delaware
City First Capital XI, LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
City Market Lofts SCP, LLC		North Carolina
City Market Lofts Tenant, LLC		North Carolina
City Place Buckhead, LLC		Delaware
CityLife Lending Group, LLC		Delaware
CMLB 2001, LLC		Delaware
CNB Investment Trust I		Maryland
CNB Investment Trust II		Maryland
Collin Equities, Inc.		Texas
Colorado Capital Management Co, LLC		Delaware
Colorado Mortgage Alliance, LLC		Delaware
Colorado Professionals Mortgage, LLC		Delaware
CoLTS LLC 2005-1		Delaware
CoLTS LLC 2005-2		Delaware
CoLTS LLC 2007-1		Delaware
Columbine Asset Management, Inc.		Delaware
Columbus RI Operator, LLC		North Carolina
Congress Financial Capital (US) Corporation		Delaware
Congress Financial Capital Company		Canada-Nova Scotia
Congress Financial Capital Corporation (Canada)		Canada-Ontario
Consortium America II, LLC		Delaware
Conway Home Mortgage, LLC		Delaware
Cookman Restoration L.L.C.		New Jersey
CoreStates Capital I		Delaware
CoreStates Capital II		Delaware
CoreStates Capital III		Delaware
CoreStates Holdings, Inc.		Delaware
Crocker Properties, Inc.		California
CTB Realty Ventures XXI, Inc.		Connecticut
CWC MT, LLC		Virginia
CWC SCP, LLC		Virginia
Danube Holdings I C.V.		Netherlands
Danube Holdings II C.V.		Netherlands
Danube Holdings III C.V.		Netherlands
DE Capital Mortgage, LLC		Delaware
DFG Holdings, LLC		Delaware
DH Financial, LLC		Delaware
Dial Finance Company, Inc.		Nevada
Dial National Community Benefits, Inc.		Nevada
Diversified Finance Investments, LLC		Delaware
DNA Investments Holdings, LLC		Delaware
Dooley Transport, LLC		Delaware
Downtown Revival Limited Partnership		Pennsylvania
Dulles Station Herndon, LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Eastdil Secured, L.L.C.		New York
Eaton Village Associates, Ltd. Co.		New Mexico
ECM Holdings Limited		United Kingdom-England
Edgeworth SCP, LLC		Virginia
Edward Jones Mortgage, LLC		Delaware
Edwards Development Corporation		Missouri
EIMCO Trust		Massachusetts
Electric Building Tenant LLC		Mississippi
Elf Tenant, L.P.		Virginia
Elite Home Mortgage, LLC		Delaware
Ellis Advertising, Inc.		Iowa
EnerVestWachovia CoInvestment Partnership, L.P.		Delaware
Epic Funding Corporation		California
Equity Insurance Agency, Inc.		New Jersey
Estates at Dunwoody Park GA, LLC		Delaware
European Credit Management Limited		United Kingdom
EVEREN Capital Corporation		Delaware
Everen Leasing, LLC		Delaware
Evergreen Alternative Capital, Inc.		Delaware
Evergreen Asset Management Corp.		New York
Evergreen ECM Holdings B.V.		Netherlands
Evergreen Financing Company, LLC		Delaware
Evergreen International SMID Cap Absolute Return Offshore Fund Ltd		UK-Cayman Islands
Evergreen International SMID Cap Absolute Return Offshore Master Fund Ltd		UK-Cayman Islands
Evergreen International SMID Cap Absolute Return, LLC		Delaware
Evergreen Investment Company, Inc.		North Carolina
Evergreen Investment Management Company, LLC		Delaware
Evergreen Investment Management Trust		Delaware
Evergreen Investment Services, Inc.		Delaware
Evergreen Offshore SMID Cap Holding Co., LLC		Delaware
Evergreen Private Equity Fund II, L. P.		Delaware
Evergreen Private Equity Fund, L.P.		Delaware
Evergreen Private Investment Funds-Absolute Return Fund, Super Accredited, L.P.		Delaware
Evergreen Private Investment Funds-Global MultiStrategy Fund, Accredited, L.P.		Delaware
Evergreen Private Investment Funds-Hedged Opportunities Fund, Accredited, L. P.		Delaware
Evergreen Service Company LLC		Delaware
Evergreen Worldwide Distributors, Ltd.		Bermuda
Evergreen Worldwide U.S. Dollar Fund, Ltd.		UK-Cayman Islands
Express Financial & Mortgage Services, LLC		Delaware
FA Recruiting Services, LLC		Texas
Fairways 340 LLC		Delaware
Falcon Asset Management, Inc.		Delaware
Fannin County Equestrian Community, LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Farmington, Incorporated		North Carolina
FC Ashton Mill Master Lessee, LLC		Rhode Island
FC CONSOLIDATED MASTER LESSEE, LLC		Ohio
FC Edgeworth Lessor, LLC		Virginia
FC Edgeworth Master Lessee, LLC		Virginia
FC Lucky Strike Lessor, LLC		Virginia
FC Lucky Strike Master Lessee, LLC		Virginia
FCC-PR, Inc		Puerto Rico
FFL Services Corporation		New Jersey
Fidelcor Business Credit Corporation		New York
Finvercon USA, Inc.		Nevada
First Associates Mortgage, LLC		Delaware
First Citizens SC Capital Trust II		Delaware
First Clearing, LLC		Delaware
First Commonwealth Home Mortgage, LLC		Delaware
First Community Capital Trust I		Delaware
First Community Capital Trust II		Delaware
First Community Capital Trust III		Delaware
First Consumer Services, Inc.		New Jersey
First Fidelity Urban Investment Corporation		New Jersey
First Financial (CA) Statutory Trust I		Connecticut
First International Advisors, LLC		Delaware
First Mortgage Consultants, LLC		Delaware
First National Properties, Inc.		South Carolina
First Penco Realty, Inc.		Pennsylvania
First Peninsula Mortgage, LLC		Delaware
First Security Capital I		Delaware
First State Service Corporation		North Carolina
First Union Capital I		Delaware
First Union Capital II		Delaware
First Union Commercial Leasing Group, L.L.C.		North Carolina
First Union Community Development Corporation		Virginia
First Union Financial Investments, LLC		Tennessee
First Union Guaranteed Tax Credit Fund I, LLC		Delaware
First Union Holdings, LLC		Tennessee
First Union I, Inc.		US-Virgin Islands
First Union Institutional Capital I		Delaware
First Union Institutional Capital II		Delaware
First Union Insurance Group Trust I		Delaware
First Union Rail Corporation		North Carolina
First Union Title Corporation		Georgia
Five Star Lending, LLC		Delaware
Flagstone Apartment Property, LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Florida Home Finance Group, LLC		Delaware
FNL Insurance Company		Vermont
Foothill Capital Corporation		California
Foothill Group, Inc., The		Delaware
Foothill Group, LLC, The		Delaware
Foresight Business Plaza Investment Company Limited		Barbados
Forest Glen Ballroom, LLC		Wisconsin
Forest Glen Main Master Tenant, LLC		Maryland
Forum Capital Markets, LLC		Delaware
Foundation Mortgage Services, LLC		Delaware
FPFC Management LLC		New Mexico
FSD Master Tenant, LLC		North Carolina
Fullerton Towers Holdings, LLC		Delaware
Fulton Homes Mortgage, LLC		Delaware
FUNC Holdings, Inc.		Florida
G. C. Leasing, Inc.		Virginia
G/WDC 541 N Fairbanks, LLC		Delaware
Galliard Capital Management, Inc.		Minnesota
Garden-Howe Urban Renewal Associates, L.P.		New Jersey
GBB Capital II		Delaware
GBB Capital III		Delaware
GBB Capital IV		Delaware
GBB Capital VI		Delaware
GBB Capital VIII		Delaware
General Homes Corp.		Texas
Genesis Mortgage, LLC		Delaware
Gibraltar Mortgage Services, LLC		Delaware
Gibraltar Mortgage, LLC		Delaware
Global Flying Insurance Services Limited		UK-England
Golden Capital Management, LLC		Delaware
Golden Funding Company		Cayman Islands
Golden Pacific Insurance Company		Vermont
Golden West Savings Association Service Co.		California
Goldenrod Asset Management, Inc.		Delaware
Great East Mortgage, LLC		Delaware
Great Plains Insurance Company		Vermont
Greater Atlanta Financial Services, LLC		Delaware
Greater Bay Bancorp		California
Greenfield Funding, LLC		Minnesota
GreenPath Funding, LLC		Delaware
Greenridge Mortgage Services, LLC		Delaware
Greensboro-Richmond Properties, LLC		Delaware
GS Bridgeport I CDE, LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
GS Private Equity Partners IX ASW Fund, LLC		Delaware
Guarantee Pacific Mortgage, LLC		Delaware
Gunther HQ Federal LLC		Maryland
GWFC, LP		Delaware
H. Bernstein Insurance Brokers Limited		United Kingdom-England
H.D. Vest Advisory Services, Inc.		Texas
H.D. Vest Insurance Agency, L.L.C.		Texas
H.D. Vest Insurance Agency, L.L.C.		Montana
H.D. Vest Insurance Agency, L.L.C.		Massachusetts
H.D. Vest Investment Securities, Inc.		Texas
H.D. Vest, Inc.		Texas
HADBO Investments C.V.		Netherlands
Hallmark Mortgage Group, LLC		Delaware
Hanover/FUDC Master Limited Partnership		Delaware
Harrier Funding, LLC		Delaware
Haskell Limited Partnership		Massachusetts
Havanese Funding, LLC		Delaware
Head Crown Development Limited		British Virgin Islands
Headhouse Retail Associates, L.P.		Pennsylvania
Hendricks Mortgage, LLC		Delaware
Heritage Home Mortgage Group, LLC		Delaware
Heritage Indemnity Company		California
Heritage Mechanical Breakdown Corporation		Delaware
Highland Glen, LLC		Delaware
Historic West Elementary, LLC		Wisconsin
Hokkaido Apartments LLC		Delaware
Home Loan Experts, Inc.		California
Home Mortgage Specialists, LLC		Delaware
Home Services Title Reinsurance Company		Vermont
Homeservices Lending, LLC		Delaware
Horizon Management Services, Inc.		Florida
HSM/WDC Kansas City Portfolio, LLC		Delaware
HSM/WDC Pinetree, LLC		Delaware
HSM/WDC Regency, LLC		Delaware
HSM/WDC Westbrooke I, LLC		Delaware
HSM/WDC Westbrooke II, LLC		Delaware
HS-ORLANDO FL, LLC		Delaware
Iapetus Funding, LLC		Delaware
IBID, Inc.		Delaware
Iilustrated Properties Mortgage Company, LLC		Delaware
IJL 2004, LLC		North Carolina
Integrated Capital Group, Inc.		California
Integrity Home Funding, LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
InterWest Capital Trust I		Delaware
IntraWest Asset Management, Inc.		Delaware
Ironbrand Capital LLC		North Carolina
Island Finance Credit Services, Inc.		New York
Island Finance Holding Company, LLC		Cayman Islands
Island Finance New York, Inc.		New York
Island Finance Puerto Rico, Inc.		Delaware
Island Finance Sales Finance Corporation		Cayman Islands
Island Finance Sales Finance Trust		Puerto Rico
IWIC Insurance Company		Vermont
J. L. Kaplan Associates, LLC		Delaware
JC-Warren MI, LLC		Delaware
JERSEY CENTER/FIDOREO, INC.		New Jersey
Johnston Mill Master Tenant, LP		Georgia
Jordan Investments GP		UK-Cayman Islands
Jordan Investments LP		UK-Cayman Islands
JPSD, Inc.		Delaware
Kardon/Atlantic Associates, L.P.		Pennsylvania
Keller Mortgage, LLC		Delaware
Kidron Partners IV, LP		Minnesota
Killdeer Capital Company, LLC		Delaware
KW Investment Co., Ltd.		Japan
KW Residential, LLC		Delaware
KW/WDC Apartment Portfolio, LLC		Delaware
KW/WDC Beaverton, LLC		Delaware
KW/WDC Sacramento LLC		Delaware
KW/WDC Vallejo LLC		Delaware
KW/WDC Westmoreland, LLC		Delaware
KWI America Multifamily, LLC		Delaware
Lake Spivey Senior Living/WDC, LLC		Delaware
Lamont SCP, L.P.		Virginia
Landfill Portfolio, LLC		Delaware
Landmark Equity Partners XIV ASW Fund, LLC		Delaware
Legacy Glenn Partnership, LLC		Georgia
Legacy Mortgage		Delaware
LG-354 Lewisville TX, LLC		Delaware
Lincoln Building Corporation		Colorado
Linear Financial, LP		Delaware
Lordship, LLC		Delaware
Lowry Hill Investment Advisors, Inc.		Minnesota
LYNX 2002-I, Ltd.		UK-Cayman Islands
MAA/NCF SUB-CDE, LLC		Not Required
Mackerel Lane Carolina Beach, LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Macro*World Research Corporation		North Carolina
Macro*World Research Philippines Inc.		Philippines
Marben Mortgage, LLC		Delaware
Marigold Asset Management, Inc.		Delaware
Marigold International Limited		Cayman Islands
Marina Towers Melbourne, LLC		Delaware
Market Villas SCP, L.P.		Virginia
Martha Turner Mortgage, LLC		Delaware
Maryland Housing Equity Fund III Limited Partnership		Maryland
Mastiff Funding, LP		Delaware
Matthew International Sales, Inc.		US-Virgin Islands
Max Mortgage, LLC		Delaware
MC of America, LLC		Delaware
McCart Landing Conyers, LLC		Delaware
McClellan Greensboro, LLC		Delaware
McMillin Home Mortgage, LLC		Delaware
Meadowmont JV, LLC		Delaware
Melbourne Atlantic Joint Venture		Florida
Mercy Housing Georgia I, L.L.L.P.		Georgia
Meridian Mortgage Corporation		Pennsylvania
Meridian Venture Partners		Pennsylvania
Metropolitan West Capital Management, LLC		California
Metropolitan West Securities, LLC		California
MidCity Community CDE-Operating Fund, LLC		Delaware
Mid-Peninsula Capital, LLC		California
Milford Highlands PA, LLC		Delaware
Monument Peak, LLC		Delaware
Monument Street Funding, Inc.		California
Monument Street Funding, LLC		Delaware
Monument Street Funding-II, LLC		Delaware
Monument Street Holding LLC		Delaware
Monument Street International Funding-I, LLC		Delaware
Monument Street International Funding-II, LLC		Delaware
Mortgage 100, LLC		Delaware
Mortgage One		Not Required
Mortgages Unlimited, LLC		Delaware
Mountain Summit Mortgage, LLC		Delaware
Mountain Ventures Treviso Bay, LLC		Delaware
MSC Mortgage, LLC		Delaware
Mt. Vernon Middle Tier, LLC		Delaware
Mulberry Asset Management, Inc.		Delaware
Mulberry SCP, L.P.		Virginia
MVP Distribution Partners		Pennsylvania

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
MWI-2002, LLC		Delaware
NB Crossroads XVIII ASP Fund, LLC		Delaware
NCT Exchange, LLC		Delaware
NEC IX, LLC		Delaware
NEC VIII, LLC		Delaware
Neckar Financial, LLC		Delaware
Nelson Capital Management, LLC		Delaware
Nero Limited, LLC		Delaware
New Markets Investment XIII, LLC		Delaware
NFPS, Inc.		Delaware
Nolde Bakery SCP, L.P.		Virginia
North Fontana CA, LLC		Delaware
North Hart Run, Inc.		Virginia
North Star Mortgage Guaranty Reinsurance Company		Vermont
Northbrooke Woodstock, LLC		Delaware
Northern Prairie Indemnity Limited		Cayman Islands
Norwest Equity Capital, L.L.C.		Minnesota
Norwest Equity Partners IX, LP		Delaware
Norwest Equity Partners V, a Minnesota Limited Partnership		Minnesota
Norwest Equity Partners VI, LP		Minnesota
Norwest Equity Partners VII, LP		Minnesota
Norwest Equity Partners VIII, LP		Delaware
Norwest Financial Canada DE, Inc.		Delaware
Norwest Financial Funding, Inc.		Nevada
Norwest Financial Investment 1, Inc.		Nevada
Norwest Financial Investment, Inc.		Nevada
Norwest Financial Massachusetts		Massachusetts
Norwest Limited LP, LLLP		Delaware
Norwest Mezzanine Partners I, LP		Minnesota
Norwest Mezzanine Partners II, LP		Delaware
Norwest Mezzanine Partners III, LP		Delaware
Norwest Properties Holding Company		Minnesota
Norwest Venture Capital Management, Inc.		Minnesota
Norwest Venture Partners Advisory-Mauritius		Mauritius
Norwest Venture Partners FVCI-Mauritius		Mauritius
Norwest Venture Partners IX, LP		Delaware
Norwest Venture Partners VI, LP		Minnesota
Norwest Venture Partners VI-A, LP		Delaware
Norwest Venture Partners VII, LP		Minnesota
Norwest Venture Partners VII-A, LP		Delaware
Norwest Venture Partners VIII, LP		Delaware
Norwest Venture Partners X FII-Mauritius		Mauritius
Norwest Venture Partners X -Mauritius		Mauritius

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Norwest Venture Partners X, LP		Delaware
Norwest Venture Partners-Mauritius		Mauritius
Nucompass Mortgage Services, LLC		Delaware
NVP Associates, LLC		Delaware
NVP Israel Ltd		Israel
NVP Venture Capital India Private Limited		India
Oak Haven Senior Living, LLC		Delaware
Ocean View Holdco, LLC		Delaware
Oilwell Supply, L.P.		Texas
Old Swedish Bank Master Tenant, LLC		Minnesota
OmniPlus Capital Corporation		Tennessee
OmniServe of Alabama, L.L.C.		Alabama
Oosterpark, LLC		Delaware
OPC Hampton SCP, LP		Virginia
OPC Hampton Tenant, L.P.		Virginia
OPC Hampton, LLC		Virginia
O’Sullivan and Associates Limited		United Kingdom-England
Oxmoor Center, LLC		Delaware
Pacific Northwest Statutory Trust I		Connecticut
Palo Alto Partners, LLC		Delaware
Parachute Factory SCP, LLC		Virginia
Parachute Factory Tenant, LLC		Virginia
Paramount Theater SCP L.P.		Virginia
Paramount Theater Tenant L.P.		Virginia
Parkland Senior Housing, LP		Missouri
PASS Holding LLC		Delaware
Peachtree Residential Mortgage, LLC		Delaware
Pelican Asset Management, Inc.		Delaware
Peony Asset Management, Inc.		Delaware
Peregrine Capital Management, Inc.		Minnesota
Personal Mortgage Group, LLC		Delaware
Pheasant Asset Management, Inc.		Delaware
PHH Funding, LLC		Delaware
Philadelphia International Equities, Inc.		Delaware
Philadelphia National Limited		United Kingdom-England
Phoenix Metro Holdings, LLC		Delaware
PHX Mortgage Advisors, LLC		Delaware
Pinnacle Mortgage of Nevada, LLC		Delaware
PINTA, LLC		Delaware
Placer Sierra Bancshares		California
Placer Statutory Trust III		Delaware
Placer Statutory Trust IV		Delaware
Platinum Residential Mortgage, LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
PNC Mortgage, LLC		Delaware
Pohlig SCP, L.P.		Virginia
Pooled Auto Securities Shelf, LLC		Delaware
Preferred Funding S.a.r.l.		Luxembourg
Preferred Investments S.a.r.l.		Luxembourg
Premia Mortgage, LLC		Delaware
Premium Timberland Sales, Inc.		North Carolina
Prime Direct LLC		Delaware
Prime Era Investments Limited		UK-Virgin Islands
Prime Select Mortgage, LLC		Delaware
Primrose Asset Management, Inc.		Delaware
Princeton Reconveyance Services Inc.		California
Priority Mortgage Company, LLC		Delaware
Private Mortgage Advisors, LLC		Delaware
PRN Holdings, Inc.		Delaware
Professional Direct Agency, Inc.		Ohio
Professional Financial Services of Arizona, LLC		Delaware
Professional Mortgage Associates, LLC		Delaware
Prometheus Investment, LLC		North Carolina
PSH State Investor, LLC		Delaware
PTO Holdings, LLC		Delaware
Pumi Funding, LLC		Delaware
Pursuit of Joy, LLC		Delaware
Quail Asset Management, LLC		Delaware
Questpoint L.P., Inc.		Delaware
R.B.C. Corporation		North Carolina
Railcar Investment, LLC		Delaware
Railway Tenant, LLC		Maryland
Rainier Mortgage, LLC		Delaware
Real Estate Consultants of the South, Inc.		North Carolina
Real Estate Lenders		Not Required
Real Living Mortgage, LLC		Delaware
Real Sincere Group Limited		UK-Virgin Islands
Realty Home Mortgage, LLC		Delaware
REDUS Alabama Commercial, LLC		Delaware
REDUS Alabama, LLC		Delaware
REDUS Arizona, LLC		Delaware
REDUS Arlington Ridge FL Land, LLC		Delaware
REDUS Arlington Ridge FL, LLC		Delaware
REDUS Atlanta Club Homes, LLC		Delaware
REDUS Atlanta Housing, LLC		Delaware
REDUS Atlanta Subdivisions, LLC		Delaware
REDUS Bell Circle Revere MA, LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
REDUS Brookhaven Plaza, LLC		Delaware
REDUS CA Properties, LLC		Delaware
REDUS California Land, LLC		Delaware
REDUS Charlotte Housing, LLC		Delaware
REDUS Chase Oaks Village TX, LLC		Delaware
REDUS Chesapeake Bay Resort MD, LLC		Delaware
REDUS Colorado, LLC		Delaware
REDUS Dallas TX, LLC		Delaware
REDUS Delaware, LLC		Delaware
REDUS Ferguson, LLC		Delaware
REDUS FL Properties, LLC		Delaware
REDUS Florida Commercial, LLC		Delaware
REDUS Florida Condos, LLC		Delaware
REDUS Florida Housing, LLC		Delaware
REDUS Florida Land, LLC		Delaware
REDUS Frederica Club, LLC		Delaware
REDUS Frederica, LLC		Delaware
REDUS Georgia Commercial, LLC		Delaware
REDUS Greensboro Subdivisions, LLC		Delaware
REDUS HH, LLC		Delaware
REDUS Houston, LLC		Delaware
REDUS Idaho, LLC		Delaware
REDUS IDS, LLC		Delaware
REDUS Illinois, LLC		Delaware
REDUS Indiana, LLC		Delaware
REDUS Kentucky, LLC		Delaware
REDUS MA Subdivisions, LLC		Delaware
REDUS Maison 31 NY, LLC		Delaware
REDUS Maryland Commercial, LLC		Delaware
REDUS MD Land, LLC		Delaware
REDUS Mississippi Land, LLC		Delaware
REDUS Missouri, LLC		Delaware
REDUS Nashville Housing, LLC		Delaware
REDUS NC Costal, LLC		Delaware
REDUS NC Housing, LLC		Delaware
REDUS NC Land, LLC		Delaware
REDUS Nevada, LLC		Delaware
REDUS New Jersey, LLC		Delaware
REDUS New York, LLC		Delaware
REDUS Ohio, LLC		Delaware
REDUS Properties, Inc.		Delaware
REDUS Raleigh Housing, LLC		Delaware
REDUS Redmond OR land, LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
REDUS Salina Central Mall KS, LLC		Delaware
REDUS SC Coastal, LLC		Delaware
REDUS SC Housing, LLC		Delaware
REDUS Sheraton N. Dallas, LLC		Delaware
REDUS Somerly, LLC		Delaware
REDUS South Carolina, LLC		Delaware
REDUS Tennessee Housing, LLC		Delaware
REDUS Texas Land, LLC		Delaware
REDUS TX Homes, LLC		Delaware
REDUS TX Properties, LLC		Delaware
REDUS VA Housing, LLC		Delaware
REDUS Virginia Commercial, LLC		Delaware
REDUS Virginia Subdivisions, LLC		Delaware
REDUS Westwood, LLC		Delaware
REDUS Woodland, LLC		Delaware
Reliable Finance Holding Company		Puerto Rico
Reliable Finance Holding Company, LLC		Nevada
Reliable Financial Services, Inc.		Puerto Rico
Reliable Insurance Services Corp.		Puerto Rico
Renaissance Finance II, LLC		Delaware
Residential Asset Funding Corporation		North Carolina
Residential Home Division, LLC		Delaware
Residential Home Mortgage Investment, L.L.C.		Delaware
Residential Mortgage Division, LLC		Delaware
Residential Mortgage Services, LLC		Delaware
Rhine Investment Holdings, LLC		Delaware
Riggs Rental Exchange, LLC		Delaware
Rigil Funding, LLC		Delaware
RIJK, LLC		Delaware
Riverside Home Loans, LLC		Delaware
Roanoke TS SCP, LP		Virginia
Roanoke TS Tenant, LP		Virginia
Rocky River Project LLC		Delaware
Royalton Apartments, Ltd.		Florida
Ruby Asset Management Inc.		Maryland
Rural Community Insurance Agency, Inc.		Minnesota
Rural Community Insurance Company		Minnesota
RWF Mortgage Company		California
RWF Mortgage, LLC		Delaware
Ryaccom, LLC		Delaware
Ryder Exchange, LLC		Delaware
Sagebrush Asset Management, Inc.		Delaware
Saguaro Asset Management, Inc.		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Salvo Finance GP		Delaware
Santa Fe Mortgage, LLC		Delaware
Sapphire Asset Management Inc.		Maryland
Savings Associations Financial Enterprises, Incorporated (S.A.F.E., Inc.)		District of Columbia
SC Realty, LLC		Delaware
SCG Funding, LLC		Delaware
Select Home Mortgage, LLC		Delaware
Select Lending Services, LLC		Delaware
SelectNet Plus, Inc.		West Virginia
Seventeenth Street Lofts SCP L.P.		Virginia
Seventeenth Street Lofts Tenant L.P.		Virginia
SG Group Holdings LLC		Delaware
SG New York LLC		Delaware
SG Pennsylvania LLC		Delaware
SG Tucson LLC		Delaware
Shockoe-Cary Building Tenant, L.P.		Virginia
Sierra Delaware Funding, LLC		Delaware
Sierra Peaks Funding, LP		Delaware
Signature Home Mortgage, LLC		Delaware
Signet Student Loan Corporation		Virginia
Siguler Guff BRIC Opportunities II ASW Fund, LLC		Delaware
Silver Asset Management, Inc.		Delaware
Sirius Funding, LLC		Delaware
Site 15 Affordable Associates, LLC		New York
Skogman Mortgage Company		Not Required
SoCo Community Development Company, LLC		Alabama
Solution Delivery, LLC		Delaware
Source One Liquidation, LLC		Delaware
South Street Lofts SCP L.P.		Virginia
South Street Lofts Tenant L.P.		Virginia
Southeast Home Mortgage, LLC		Delaware
Southeast Minnesota Mortgage, LLC		Delaware
Southern Ohio Mortgage, LLC		Delaware
SouthSide Plaza 455 Ltd., L.L.P.		Texas
SouthTrust Capital Funding Corporation		Delaware
SouthTrust Community Reinvestment Company, LLC		Alabama
SouthTrust Development Corporation		Georgia
SouthTrust Mobile Services Funding Corporation		Alabama
SouthTrust Mortgage Corporation		Delaware
Southwest Community Statutory Trust I		Connecticut
Southwest Partners, Inc.		California
Sparta GP Holding REO Corp.		Delaware
Sparta GP Holding, LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
SPFE, Inc.		North Carolina
Spring Cypress Water Supply Corporation		Texas
SR 70 Land Bradenton, LLC		Delaware
SS Columbus Morse, LLC		Delaware
SS New Smyrna, LLC		Delaware
SS South Loop, LLC		Delaware
St. Joseph’s Affordable Housing Limited Partnership		Pennsylvania
Stagecoach Insurance Services, LLC		Delaware
Stirling Mortgage Services, LLC		Delaware
STRATS, LLC		Delaware
Structured Asset Investors, LLC		Delaware
Structured Credit Partners, LLC		Delaware
Structured Principal Strategies Holdings, LLC		Delaware
Structured Principal Strategies, LLC		Delaware
Suffolk Center for Cultural Arts SCP, L.P.		Virginia
Sullivan Investments, Inc.		Delaware
Summit National Mortgage, LLC		Delaware
Summitt PELS Funding, LLC		Delaware
Superior Guaranty Insurance Company		Vermont
Superior Warehouse Apartment SCP, L.P.		Virginia
SURREY DOWNS/FIDOREO, INC.		New Jersey
Sweetroot Funding, LLC		Cayman Islands
Synthetic Fixed-Income Securities, Inc.		Delaware
Tai Mo Shan Investments Partnership		Hong Kong
TAI Title Trust		Delaware
Tanford Holding Company Ltd		British Virgin Islands
Tattersall Advisory Group, Inc.		Virginia
Taylor County Land GA, LLC		Delaware
TAYLORR LAKES/FIDOREO, INC.		New Jersey
TCF A/GA-1, LLC		Delaware
TCF A/NC-1, LLC		Delaware
TCF A/V-1, LLC		Delaware
TCF AEG/GA, LLC		Delaware
TCF AM/F, LLC		Delaware
TCF AM/F-2, LLC		Delaware
TCF AM/F-4A, LLC		Delaware
TCF AM/F-4B, LLC		Delaware
TCF BA/F-G, LLC		Delaware
TCF BO/F, LLC		Delaware
TCF BOH/H-1, LLC		Delaware
TCF BOH/H-2, LLC		Delaware
TCF C/F, LLC		Delaware
TCF C/F-2, LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
TCF CN/VA-1, LLC		Delaware
TCF CN/VA-2, LLC		Delaware
TCF CN/VA-3, LLC		Delaware
TCF CON/GA, LLC		Delaware
TCF GW/F, LLC		Delaware
TCF GW/GA, LLC		Delaware
TCF GW-2, LLC		Delaware
TCF HH/GA, LLC		Delaware
TCF JH/GA, LLC		Delaware
TCF JP/F, LLC		Delaware
TCF JP/GA, LLC		Delaware
TCF JPM/F, LLC		Delaware
TCF JPM/F-2, LLC		Delaware
TCF JPM/F-3, LLC		Delaware
TCF M/F-1, LLC		Delaware
TCF NA/VA-1, LLC		Delaware
TCF NA/VA-2, LLC		Delaware
TCF NA/VA-3, LLC		Delaware
TCF P/GA-2, LLC		Delaware
TCF P/MO-1, LLC		Delaware
TCF P/VA, LLC		Delaware
TCF S/GA, LLC		Delaware
TCF U/GA-2, LLC		Delaware
TCF U/GA-3, LLC		Delaware
TCF U/MO, LLC		Delaware
TCF U/VA, LLC		Delaware
TCF U/VA-2, LLC		Delaware
TCF U/VA-3, LLC		Delaware
TCF UB-1, LLC		Delaware
TCF USB/F, LLC		Delaware
TCF WF-3, LLC		Delaware
TCF WF-4, LLC		Delaware
TCF WF-5, LLC		Delaware
TCIG Guaranteed Tax Credit Fund I, LLC		Delaware
TCIG Guaranteed Tax Credit Fund II, LLC		Delaware
TCIG Guaranteed Tax Credit Fund III, LLC		Delaware
TCIG Guaranteed Tax Credit Fund IV, LLC		Delaware
TCIG Guaranteed Tax Credit Fund V, LLC		Delaware
TCIG Guaranteed Tax Credit Fund VI, LLC		Delaware
TCIG Guaranteed Tax Credit Fund VII, LLC		Delaware
TCIG Historic Tax Credit Fund I, LLC		Delaware
TCIG NC State Credit Fund, LLC		North Carolina
TCIG Tax Credit Fund I, LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
TCIG Tax Credit Fund II, LLC		Delaware
The Ceres Investment Company		Missouri
The Exchange Building Limited Partnership		Maine
The Fairfax Corporation		North Carolina
The Florida Community New Markets Fund II, LLC		Florida
The Lofts San Marco Tenant, LLC		Florida
The Money Store, LLC		New Jersey
The Money Store/Service Corp.		New Jersey
The Preserve Sevierville, LLC		Delaware
The Ridges at Mountain Harbour, LLC		Delaware
The Thirty-Eight Hundred Fund, LLC		Delaware
The Westlake Group, Limited		British West Indies
Therapy Insurance Services Limited		United Kingdom-England
Thirty-Eight Hundred Investments Limited		Cayman Islands
THM Master TE, LLC		Minnesota
Thoroughbred Mortgage, LLC		Delaware
Tiberius Ventures, L.L.C.		Nevada
TMS Funding Limited		Cayman Islands
TMS Special Holdings, Inc.		Delaware
TMS Student Holdings, Inc.		Delaware
Todd Tenant, L. P.		Virginia
Topaz Asset Management Inc.		Maryland
Town & Country Mortgage Group, LLC		Delaware
TPG Funding, LLC		Delaware
Trademark Mortgage, LLC		Delaware
Transportation Equipment Advisors, Inc.		Illinois
Treviso Bay Development, LLC		Delaware
Triad Apartment Portfolio, LLC		Delaware
TRSTE II, Inc.		Tennessee
TRSTE, Inc.		Virginia
Tryon Management, Inc.		North Carolina
Two APM Plaza, Inc. (89%)		Pennsylvania
Tyree Financing, S.a.r.l.		Luxembourg
Tyro Funding, LLC		Delaware
Union Commerce Title Company, LLC		Delaware
Union Hamilton Reinsurance, Ltd.		Bermuda
Union Hamilton Special Purpose Funding 2005-1, LLC		Delaware
Union Hamilton Special Purpose Funding 2005-2, LLC		Delaware
Union Hamilton Special Purpose Funding 2006-1, LLC		Delaware
Union Station Holding Company LLC		Delaware
United Bancorporation of Wyoming Capital Trust I		Delaware
United Bancorporation of Wyoming Capital Trust II		Delaware
United Bancorporation of Wyoming Capital Trust III		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
United Bancshares, Inc.		Pennsylvania
United Bank of Philadelphia		Pennsylvania
United California Bank Realty Corporation		California
Universal Master Servicing, LLC		Delaware
Valley Asset Management, Inc.		Delaware
VCP-Carlington, LLC.		Florida
Vento WF LLC		Delaware
Veranda Park Orlando, LLC		Delaware
Vermillion Huntersville, LLC		Delaware
Vickery Village Cumming GA, LLC		Delaware
Victoria Investments, LLC		Delaware
Village Communities Financial, LLC		Delaware
Villages at Warner Ranch PUD, LP		Delaware
Violet Asset Management, Inc.		Delaware
Virginia Street SCP, L.P.		Virginia
Vista Lofts Denver, LLC		Delaware
Vondelpark, LLC		Delaware
W/A Tax Credit Fund 2003-I, LLC		Delaware
Wachovia 300 California Member, LLC		Delaware
Wachovia Administrative Services, Inc.		Florida
Wachovia Advisors International Limited		Hong Kong
Wachovia Affordable Housing Community Development Corporation		North Carolina
Wachovia Affordable Housing Corp.		North Carolina
Wachovia Alternative Strategies Offshore Platform, SPC		UK-Cayman Islands
Wachovia ARM Securitization, LLC		Delaware
Wachovia Asia Holding Corporation		Alabama
Wachovia Asia Limited		Hong Kong
Wachovia Asset Securitization Holding Corp.		Delaware
Wachovia Asset Securitization Issuance II, LLC		Delaware
Wachovia Asset Securitization Issuance, LLC		North Carolina
Wachovia Auto Loan Owner Trust 2006-1		Delaware
Wachovia Auto Loan Owner Trust 2006-2		Delaware
Wachovia Auto Loan Owner Trust 2007-1		Delaware
Wachovia Auto Loan Owner Trust 2008-1		Delaware
Wachovia Auto Owner Trust 2005-B		Delaware
Wachovia Auto Owner Trust 2006-A		Delaware
Wachovia Auto Owner Trust 2007-A		Delaware
Wachovia Auto Owner Trust 2008-A		Delaware
Wachovia Bank and Trust Company (Cayman) Ltd.		UK-Cayman Islands
Wachovia Bank of Delaware, National Association		United States
Wachovia Bank, National Association		United States
Wachovia Capital Finance Corporation (Canada)		Canada-Ontario
Wachovia Capital Finance Corporation (Central)		Illinois

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wachovia Capital Finance Corporation (New England)		Massachusetts
Wachovia Capital Finance Corporation (Western)		California
Wachovia Capital Investments, Inc.		Georgia
Wachovia Capital Investors, Inc.		North Carolina
Wachovia Capital Partners 1997, LLC		North Carolina
Wachovia Capital Partners 1998, LLC		North Carolina
Wachovia Capital Partners 1998-II, LLC		North Carolina
Wachovia Capital Partners 1999, LLC		North Carolina
Wachovia Capital Partners 1999-II, LLC		North Carolina
Wachovia Capital Partners 2000, LLC		North Carolina
Wachovia Capital Partners 2001, LLC		North Carolina
Wachovia Capital Partners 2002, LLC		North Carolina
Wachovia Capital Partners 2003, LLC		North Carolina
Wachovia Capital Partners 2004, LLC		North Carolina
Wachovia Capital Partners 2005, LLC		North Carolina
Wachovia Capital Partners II ASW Fund, LLC		Delaware
Wachovia Capital Partners Management Company, LLC		Delaware
Wachovia Capital Partners Secondary Fund I, L.P.		Delaware
Wachovia Capital Partners, Inc.		Virginia
Wachovia Capital Trust I		Delaware
Wachovia Capital Trust II		Delaware
Wachovia Capital Trust III		Delaware
Wachovia Capital Trust IV		Delaware
Wachovia Capital Trust IX		Delaware
Wachovia Capital Trust V		Delaware
Wachovia Capital Trust X		Delaware
Wachovia Card Receivables, LLC		Delaware
Wachovia Card Services, National Association		United States
Wachovia Caveness Member, LLC		Delaware
Wachovia Century Mill Member, LLC		Delaware
Wachovia Commercial Mortgage Loan Warehouse Corporation		North Carolina
Wachovia Commodities Holdings, Inc.		Delaware
Wachovia Community Development Corporation		North Carolina
Wachovia Community Development Enterprises I, LLC		North Carolina
Wachovia Community Development Enterprises II, LLC		North Carolina
Wachovia Community Development Enterprises III, LLC		North Carolina
Wachovia Community Development Enterprises V, LLC		North Carolina
Wachovia Community Development Enterprises, LLC		North Carolina
Wachovia CRE CDO 2006-1 Investor, LLC		Delaware
Wachovia CRE CDO 2006-1, LLC		Delaware
Wachovia CRE CDO 2006-1, Ltd.		UK-Cayman Islands
Wachovia Dealer Services, Inc.		California
Wachovia Defeasance 3409 PRIMM III LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wachovia Defeasance 601 Valley III, LLC		Delaware
Wachovia Defeasance Alta Mira Shopping Center LLC		Delaware
Wachovia Defeasance BACM 2000-2 LLC		Delaware
Wachovia Defeasance BACM 2001-1 LLC		Delaware
Wachovia Defeasance BACM 2001-PB1 III LLC		Delaware
Wachovia Defeasance BACM 2001-PB1 LLC		Delaware
Wachovia Defeasance BACM 2002-2 LLC		Delaware
Wachovia Defeasance BACM 2003-1 LLC		Delaware
Wachovia Defeasance BOA-FUNB 2001-3 CAC V-CRIT Portfolio LLC		Delaware
Wachovia Defeasance BOA-FUNB 2001-3 III LLC		Delaware
Wachovia Defeasance BOA-FUNB 2001-3 LLC		Delaware
Wachovia Defeasance BSCMS 1999-C1 II LLC		Delaware
Wachovia Defeasance BSCMS 1999-C1 III LLC		Delaware
Wachovia Defeasance BSCMS 1999-C1 LLC		Delaware
Wachovia Defeasance BSCMS 1999-WF2 III LLC		Delaware
Wachovia Defeasance BSCMS 1999-WF2 LLC		Delaware
Wachovia Defeasance BSCMS 2000-WF1 LLC		Delaware
Wachovia Defeasance BSCMS 2000-WF2 LLC		Delaware
Wachovia Defeasance BSCMS 2001-TOP2 LLC		Delaware
Wachovia Defeasance BSCMS 2002-PBW1 LLC		Delaware
Wachovia Defeasance BSCMS 2002-TOP6 LLC		Delaware
Wachovia Defeasance BSCMS 2003-TOP10 III LLC		Delaware
Wachovia Defeasance BSCMS 2003-Top10 LLC		Delaware
Wachovia Defeasance BSCMS 2003-Top12 LLC		Delaware
Wachovia Defeasance BSCMS 2004-PWR3 LLC		Delaware
Wachovia Defeasance BSCMS 2004-TOP16 525 Vine Street LLC		Delaware
Wachovia Defeasance BSCMS 2004-TOP16 III LLC		Delaware
Wachovia Defeasance BSCMS 2005-TOP18 III LLC		Delaware
Wachovia Defeasance BSCMS 2005-TOP18 LLC		Delaware
Wachovia Defeasance Chase 1997-2 LLC		Delaware
Wachovia Defeasance Chase 1999-2 II LLC		Delaware
Wachovia Defeasance CHASE 1999-2 III LLC		Delaware
Wachovia Defeasance Chase 1999-2 LLC		Delaware
Wachovia Defeasance Chase 2000-1 II LLC		Delaware
Wachovia Defeasance CHASE 2000-1 III LLC		Delaware
Wachovia Defeasance Chase 2000-1 LLC		Delaware
Wachovia Defeasance CHASE 2000-2 III LLC		Delaware
Wachovia Defeasance Chase 2000-2 LLC		Delaware
Wachovia Defeasance CHASE 2000-3 III LLC		Delaware
Wachovia Defeasance Chase 2000-3 LLC		Delaware
Wachovia Defeasance CHASE-FUNB 1999-1 II CPT Apartments LLC		Delaware
Wachovia Defeasance Chase-FUNB 1999-1 II LLC		Delaware
Wachovia Defeasance Chase-FUNB 1999-1 LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wachovia Defeasance Chase-FUNB 1999-1 Mazal LLC		Delaware
Wachovia Defeasance Citigroup 2004-C1 CF West Palm LLC		Delaware
Wachovia Defeasance Citigroup 2004-C1 LLC		Delaware
Wachovia Defeasance Citigroup 2004-C1 Seaboard Associates LLC		Delaware
Wachovia Defeasance CITIGROUP 2005-C3 LLC		Delaware
Wachovia Defeasance CMAC 1999-C1 LLC		Delaware
Wachovia Defeasance CMLB 2001-1 LLC		Delaware
Wachovia Defeasance CSFB 1997-C1 LLC		Delaware
Wachovia Defeasance CSFB 1997-C2 LLC		Delaware
Wachovia Defeasance CSFB 1998-C2 II LLC		Delaware
Wachovia Defeasance CSFB 1998-C2 LLC		Delaware
Wachovia Defeasance CSFB 1999-C1 LLC		Delaware
Wachovia Defeasance CSFB 2000-C1 LLC		Delaware
Wachovia Defeasance CSFB 2001-CF2 LLC		Delaware
Wachovia Defeasance CSFB 2001-CK1 LLC		Delaware
Wachovia Defeasance CSFB 2001-CK3 III LLC		Delaware
Wachovia Defeasance CSFB 2001-CK3 LLC		Delaware
Wachovia Defeasance CSFB 2001-CKN5 LLC		Delaware
Wachovia Defeasance CSFB 2001-CP4 LLC		Delaware
Wachovia Defeasance CSFB 2002-CKP1 LLC		Delaware
Wachovia Defeasance CSFB 2002-CKS4 LLC		Delaware
Wachovia Defeasance CSFB 2002-CP5 LLC		Delaware
Wachovia Defeasance CSFB 2003-C3 LLC		Delaware
Wachovia Defeasance CSFB 2003-C5 LLC		Delaware
Wachovia Defeasance CSFB 2003-CK2 LLC		Delaware
Wachovia Defeasance CSFB 2003-CPN1 LLC		Delaware
Wachovia Defeasance CSFB 2004-C1 LLC		Delaware
Wachovia Defeasance CSFB 2004-C2 LLC		Delaware
Wachovia Defeasance CSFB 2004-C3 III LLC		Delaware
Wachovia Defeasance CSFB 2005-C1 III LLC		Delaware
Wachovia Defeasance CSFB 2005-C2 III LLC		Delaware
Wachovia Defeasance CSFB 2005-C2 Penn’s Landing LLC		Delaware
Wachovia Defeasance CSFB 2005-C3 III LLC		Delaware
Wachovia Defeasance CSFB 2005-C6 III LLC		Delaware
Wachovia Defeasance CSFB 2005-C6 III-KEYCORP LLC		Delaware
Wachovia Defeasance DLJ 1998-CG1 II LLC		Delaware
Wachovia Defeasance DLJ 1998-CG1 III LLC		Delaware
Wachovia Defeasance DLJ 1998-CG1 LLC		Delaware
Wachovia Defeasance DLJ 1999-CG1 II LLC		Delaware
Wachovia Defeasance DLJ 1999-CG1 III LLC		Delaware
Wachovia Defeasance DLJ 1999-CG1 LLC		Delaware
Wachovia Defeasance DLJ 1999-CG2 II LLC		Delaware
Wachovia Defeasance DLJ 1999-CG2 III LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wachovia Defeasance DLJ 1999-CG2 LLC		Delaware
Wachovia Defeasance DLJ 1999-CG3 II LLC		Delaware
Wachovia Defeasance DLJ 1999-CG3 III LLC		Delaware
Wachovia Defeasance DLJ 1999-CG3 LLC		Delaware
Wachovia Defeasance DLJ 2000-CF1 LLC		Delaware
Wachovia Defeasance DLJ 2000-CKP1 LLC		Delaware
Wachovia Defeasance FUCM 1999-C4 II LLC		Delaware
Wachovia Defeasance FUCM 1999-C4 LLC		Delaware
Wachovia Defeasance FU-LB 1997-C1 LLC		Delaware
Wachovia Defeasance FU-LB 1997-C2 II LLC		Delaware
Wachovia Defeasance FU-LB II 1997-C2 LLC		Delaware
Wachovia Defeasance FU-LB-BOA 1998-C2 LLC		Delaware
Wachovia Defeasance FUNB 1999-C1 II LLC		Delaware
Wachovia Defeasance FUNB 1999-C1 III LLC		Delaware
Wachovia Defeasance FUNB 1999-C1 LLC		Delaware
Wachovia Defeasance FUNB 1999-C4 III LLC		Delaware
Wachovia Defeasance FUNB 1999-C4 LLC		Delaware
Wachovia Defeasance FUNB 1999-C4 ML Windsor-ML Hammocks LLC		Delaware
Wachovia Defeasance FUNB 2000-C1 III LLC		Delaware
Wachovia Defeasance FUNB 2000-C1 LLC		Delaware
Wachovia Defeasance FUNB 2000-C1 POOL SB LLC		Delaware
Wachovia Defeasance FUNB 2000-C2 II LLC		Delaware
Wachovia Defeasance FUNB 2000-C2 III LLC		Delaware
Wachovia Defeasance FUNB 2000-C2 LLC		Delaware
Wachovia Defeasance FUNB 2000-C2 Phoenix Crowne LLC		Delaware
Wachovia Defeasance FUNB 2001-C2 III LLC		Delaware
Wachovia Defeasance FUNB 2001-C2 LLC		Delaware
Wachovia Defeasance FUNB 2001-C3 CAC II LLC		Delaware
Wachovia Defeasance FUNB 2001-C3 III LLC		Delaware
Wachovia Defeasance FUNB 2001-C3 LLC		Delaware
Wachovia Defeasance FUNB 2001-C4 CRIT Portfolio LLC		Delaware
Wachovia Defeasance FUNB 2001-C4 CRIT-VA IV LLC		Delaware
Wachovia Defeasance FUNB 2001-C4 LLC		Delaware
Wachovia Defeasance FUNB 2002-C1 CRIT-VA V LLC		Delaware
Wachovia Defeasance FUNB 2002-C1 III LLC		Delaware
Wachovia Defeasance FUNB 2002-C1 LLC		Delaware
Wachovia Defeasance FUNB 2002-C1 Madison Sixty LLC		Delaware
Wachovia Defeasance FUNB-BOA 2001-C1 (CRIT NC) LLC		Delaware
Wachovia Defeasance FUNB-BOA 2001-C1 (CRIT VA) LLC		Delaware
Wachovia Defeasance FUNB-BOA 2001-C1 II LLC		Delaware
Wachovia Defeasance FUNB-BOA 2001-C1 LLC		Delaware
Wachovia Defeasance FUNB-BOA 2001-C1 POOL SB LLC		Delaware
Wachovia Defeasance FUNB-CHASE 1999-C2 III LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wachovia Defeasance FUNB-Chase 1999-C2 LLC		Delaware
Wachovia Defeasance GE 2002-2 183 Madison LLC		Delaware
Wachovia Defeasance GE 2002-2 II LLC		Delaware
Wachovia Defeasance GE 2002-2 LLC		Delaware
Wachovia Defeasance GECCMC 2000-1 III LLC		Delaware
Wachovia Defeasance GECCMC 2000-1 LLC		Delaware
Wachovia Defeasance GECCMC 2001-1 II LLC		Delaware
Wachovia Defeasance GECCMC 2001-1 III LLC		Delaware
Wachovia Defeasance GECCMC 2001-1 LLC		Delaware
Wachovia Defeasance GECCMC 2001-2 II LLC		Delaware
Wachovia Defeasance GECCMC 2001-2 III LLC		Delaware
Wachovia Defeasance GECCMC 2001-2 LLC		Delaware
Wachovia Defeasance GECCMC 2001-3 II LLC		Delaware
Wachovia Defeasance GECCMC 2001-3 III LLC		Delaware
Wachovia Defeasance GECCMC 2001-3 LLC		Delaware
Wachovia Defeasance GECCMC 2002-1 Cameron Crossing LLC		Delaware
Wachovia Defeasance GECCMC 2002-1 Culver Center West LLC		Delaware
Wachovia Defeasance GECCMC 2002-1 LLC		Delaware
Wachovia Defeasance GECCMC 2002-2 LLC		Delaware
Wachovia Defeasance GECCMC 2002-2 Wills Group FLP LLC		Delaware
Wachovia Defeasance GECCMC 2002-3 LLC		Delaware
Wachovia Defeasance GECCMC 2003-C2 Culver Center East LLC		Delaware
Wachovia Defeasance GECCMC 2003-C2 LLC		Delaware
Wachovia Defeasance GECCMC 2004-C2 LLC		Delaware
Wachovia Defeasance GECCMC 2004-C2 POOL SB LLC		Delaware
Wachovia Defeasance GECCMC 2004-C2 Stefan Associates LLC		Delaware
Wachovia Defeasance GECCMC 2005-C1 PIL I LLC		Delaware
Wachovia Defeasance GECCMC 2006-C1 III LLC		Delaware
Wachovia Defeasance GECC-Subway LLC		Delaware
Wachovia Defeasance GECMC 2003-C1 LLC		Delaware
Wachovia Defeasance GECMC 2004-C2 III LLC		Delaware
Wachovia Defeasance GMAC 1997-C2 LLC		Delaware
Wachovia Defeasance GMAC 1998-C2 LLC		Delaware
Wachovia Defeasance GMAC 1999-C1 LLC		Delaware
Wachovia Defeasance GMAC 1999-C2 LLC		Delaware
Wachovia Defeasance GMAC 2000-C3 LLC		Delaware
Wachovia Defeasance GMAC 2001-C1 LLC		Delaware
Wachovia Defeasance GMAC 2001-C2 LLC		Delaware
Wachovia Defeasance GMAC 2002-C1 LLC		Delaware
Wachovia Defeasance GMAC 2002-C2 LLC		Delaware
Wachovia Defeasance GMAC 2002-C3 LLC		Delaware
Wachovia Defeasance GMAC 2003-C1 LLC		Delaware
Wachovia Defeasance GMAC 2003-C2 LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wachovia Defeasance GMACCM 1997-C1 LLC		Delaware
Wachovia Defeasance Greenwich 2002-C1 II LLC		Delaware
Wachovia Defeasance GREENWICH 2002-C1 III LLC		Delaware
Wachovia Defeasance Greenwich 2002-C1 Landmark IV LLC		Delaware
Wachovia Defeasance Greenwich 2002-C1 LLC		Delaware
Wachovia Defeasance Greenwich 2003-C1 LLC		Delaware
Wachovia Defeasance Greenwich 2003-C2 LLC		Delaware
Wachovia Defeasance Greenwich 2004-GG1 LLC		Delaware
Wachovia Defeasance GREENWICH 2005-GG5 III LLC		Delaware
Wachovia Defeasance GS 1998-C1 LLC		Delaware
Wachovia Defeasance GS 2004-C1 LLC		Delaware
Wachovia Defeasance GSMSC II 1999-C1 LLC		Delaware
Wachovia Defeasance GSMSC II 2003-C1 LLC		Delaware
Wachovia Defeasance GSMSC II 2004-GG2 1410 Broadway LLC		Delaware
Wachovia Defeasance GSMSC II 2004-GG2 1441 Broadway LLC		Delaware
Wachovia Defeasance HF 1999-PH1 II LLC		Delaware
Wachovia Defeasance HF 1999-PH1 III LLC		Delaware
Wachovia Defeasance HF 1999-PH1 LLC		Delaware
Wachovia Defeasance HF 2000 PH1 LLC		Delaware
Wachovia Defeasance JPMC 1999-C7 LLC		Delaware
Wachovia Defeasance JPMC 1999-PLSI LLC		Delaware
Wachovia Defeasance JPMC 2000-C10 LLC		Delaware
Wachovia Defeasance JPMC 2000-C9 LLC		Delaware
Wachovia Defeasance JPMC 2001-C1 III LLC		Delaware
Wachovia Defeasance JPMC 2001-C1 LLC		Delaware
Wachovia Defeasance JPMC 2001-CIBC1 LLC		Delaware
Wachovia Defeasance JPMC 2001-CIBC2 LLC		Delaware
Wachovia Defeasance JPMC 2001-CIBC3 III LLC		Delaware
Wachovia Defeasance JPMC 2001-CIBC3 LLC		Delaware
Wachovia Defeasance JPMC 2002-C1 II LLC		Delaware
Wachovia Defeasance JPMC 2002-C1 III LLC		Delaware
Wachovia Defeasance JPMC 2002-C1 LLC		Delaware
Wachovia Defeasance JPMC 2002-C2 III LLC		Delaware
Wachovia Defeasance JPMC 2002-C2 LLC		Delaware
Wachovia Defeasance JPMC 2002-C3 LLC		Delaware
Wachovia Defeasance JPMC 2002-CIBC4 LLC		Delaware
Wachovia Defeasance JPMC 2002-CIBC5 CP Pembroke Pines LLC		Delaware
Wachovia Defeasance JPMC 2002-CIBC5 III LLC		Delaware
Wachovia Defeasance JPMC 2002-CIBC5 LLC		Delaware
Wachovia Defeasance JPMC 2003-C1 LLC		Delaware
Wachovia Defeasance JPMC 2003-C1BC6 CP Deerfield LLC		Delaware
Wachovia Defeasance JPMC 2003-C1BC6 LLC		Delaware
Wachovia Defeasance JPMC 2003-CIBC7 LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wachovia Defeasance JPMC 2003-LN1 LLC		Delaware
Wachovia Defeasance JPMC 2003-ML1 LLC		Delaware
Wachovia Defeasance JPMC 2003-PM1 Battery Commercial LLC		Delaware
Wachovia Defeasance JPMC 2003-PM1 LLC		Delaware
Wachovia Defeasance JPMC 2004-C2 LLC		Delaware
Wachovia Defeasance JPMC 2004-C3 LLC		Delaware
Wachovia Defeasance JPMC 2004-CIBC10 LLC		Delaware
Wachovia Defeasance JPMC 2005-LDP1 LLC		Delaware
Wachovia Defeasance JPMC 2005-LDP2 III LLC		Delaware
Wachovia Defeasance JPMC 2005-LDP2 LLC		Delaware
Wachovia Defeasance JPMC 2006-LDP7 III LLC		Delaware
Wachovia Defeasance LB 1998-C1 LLC		Delaware
Wachovia Defeasance LB 1998-C4 II Ardsey Associates LLC		Delaware
Wachovia Defeasance LB 1998-C4 II LLC		Delaware
Wachovia Defeasance LB 1998-C4 III LLC		Delaware
Wachovia Defeasance LB 1998-C4 LLC		Delaware
Wachovia Defeasance LB 1999-C1 II LLC		Delaware
Wachovia Defeasance LB 1999-C1 III LLC		Delaware
Wachovia Defeasance LB 1999-C1 LLC		Delaware
Wachovia Defeasance LB 1999-C2 II LLC		Delaware
Wachovia Defeasance LB 1999-C2 III LLC		Delaware
Wachovia Defeasance LB 1999-C2 LLC		Delaware
Wachovia Defeasance LB-UBS 2000-C3 II LLC		Delaware
Wachovia Defeasance LB-UBS 2000-C3 III LLC		Delaware
Wachovia Defeasance LB-UBS 2000-C3 LLC		Delaware
Wachovia Defeasance LB-UBS 2000-C4 II LLC		Delaware
Wachovia Defeasance LB-UBS 2000-C4 LLC		Delaware
Wachovia Defeasance LB-UBS 2000-C5 III LLC		Delaware
Wachovia Defeasance LB-UBS 2000-C5 LLC		Delaware
Wachovia Defeasance LB-UBS 2001-C2 II LLC		Delaware
Wachovia Defeasance LB-UBS 2001-C2 III LLC		Delaware
Wachovia Defeasance LB-UBS 2001-C2 LLC		Delaware
Wachovia Defeasance LB-UBS 2001-C3 1735 North Lynn LLC		Delaware
Wachovia Defeasance LB-UBS 2001-C3 II LLC		Delaware
Wachovia Defeasance LB-UBS 2001-C3 III LLC		Delaware
Wachovia Defeasance LB-UBS 2001-C3 LLC		Delaware
Wachovia Defeasance LB-UBS 2001-C7 II LLC		Delaware
Wachovia Defeasance LB-UBS 2001-C7 III LLC		Delaware
Wachovia Defeasance LB-UBS 2001-C7 LLC		Delaware
Wachovia Defeasance LB-UBS 2002-C1 400 Atlantic LLC		Delaware
Wachovia Defeasance LB-UBS 2002-C1 II LLC		Delaware
Wachovia Defeasance LB-UBS 2002-C1 LLC		Delaware
Wachovia Defeasance LB-UBS 2002-C2 Hibbs/Woodinville LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wachovia Defeasance LB UBS 2002-C2 II LLC		Delaware
Wachovia Defeasance LB-UBS 2002-C2 III LLC		Delaware
Wachovia Defeasance LB-UBS 2002-C2 LLC		Delaware
Wachovia Defeasance LB-UBS 2002-C4 III LLC		Delaware
Wachovia Defeasance LB-UBS 2002-C4 LLC		Delaware
Wachovia Defeasance LB-UBS 2002-C7 II LLC		Delaware
Wachovia Defeasance LB-UBS 2002-C7 III LLC		Delaware
Wachovia Defeasance LB-UBS 2002-C7 Independence Shoppingtown LLC		Delaware
Wachovia Defeasance LB-UBS 2002-C7 LLC		Delaware
Wachovia Defeasance LB-UBS 2003-C1 (Clear) LLC		Delaware
Wachovia Defeasance LB-UBS 2003-C1 Franklin Avenue LLC		Delaware
Wachovia Defeasance LB-UBS 2003-C1 II LLC		Delaware
Wachovia Defeasance LB-UBS 2003-C1 III LLC		Delaware
Wachovia Defeasance LB-UBS 2003-C1 LLC		Delaware
Wachovia Defeasance LB-UBS 2003-C3 III LLC		Delaware
Wachovia Defeasance LB-UBS 2003-C3 LLC		Delaware
Wachovia Defeasance LB-UBS 2003-C5 III LLC		Delaware
Wachovia Defeasance LB-UBS 2003-C5 LLC		Delaware
Wachovia Defeasance LB-UBS 2003-C7 (Getty) LLC		Delaware
Wachovia Defeasance LB-UBS 2003-C7 LLC		Delaware
Wachovia Defeasance LB-UBS 2003-C8 III LLC		Delaware
Wachovia Defeasance LB-UBS 2003-C8 LLC		Delaware
Wachovia Defeasance LB-UBS 2004-C1 LLC		Delaware
Wachovia Defeasance LB-UBS 2004-C4 III LLC		Delaware
Wachovia Defeasance LB-UBS 2004-C4 LLC		Delaware
Wachovia Defeasance LB-UBS 2004-C6 LLC		Delaware
Wachovia Defeasance LB-UBS 2004-C7 III LLC		Delaware
Wachovia Defeasance LB-UBS 2004-C7 LLC		Delaware
Wachovia Defeasance LB-UBS 2004-C8 III LLC		Delaware
Wachovia Defeasance LB-UBS 2004-C8 LLC		Delaware
Wachovia Defeasance LB-UBS 2005-C3 III LLC		Delaware
Wachovia Defeasance LB-UBS 2005-C7 VR Bayou LLC		Delaware
Wachovia Defeasance Management II LLC		Delaware
Wachovia Defeasance Management III LLC		Delaware
Wachovia Defeasance Management LLC		Delaware
Wachovia Defeasance Management-KeyCorp III LLC		Delaware
Wachovia Defeasance Management-KeyCorp LLC		Delaware
Wachovia Defeasance Management-Midland III LLC		Delaware
Wachovia Defeasance Management-Midland LLC		Delaware
Wachovia Defeasance MCF 1998-MC3 LLC		Delaware
Wachovia Defeasance MLMI 1998-C2 II LLC		Delaware
Wachovia Defeasance MLMI 1998-C2 III LLC		Delaware
Wachovia Defeasance MLMI 1998-C2 LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wachovia Defeasance MLMI 1998-C3 LLC		Delaware
Wachovia Defeasance MLMI 2002-MW1 III LLC		Delaware
Wachovia Defeasance MLMI 2002-MW1 LLC		Delaware
Wachovia Defeasance MLMI 2005-CKI1 III LLC		Delaware
Wachovia Defeasance MLMI 2005-CKI1 LLC		Delaware
Wachovia Defeasance MLMI 2005-MCP1 LLC		Delaware
Wachovia Defeasance MLMI 2005-MCP1 PVA III LLC		Delaware
Wachovia Defeasance MLMI 2005-MKB2 LLC		Delaware
Wachovia Defeasance MLMT 2004-MKB1 LLC		Delaware
Wachovia Defeasance MSCI 1998-CF1 LLC		Delaware
Wachovia Defeasance MSCI 1998-HF2 LLC		Delaware
Wachovia Defeasance MSCI 1998-WF2 LLC		Delaware
Wachovia Defeasance MSCI 1999-FNV1 LLC		Delaware
Wachovia Defeasance MSCI 1999-LIFE1 LLC		Delaware
Wachovia Defeasance MSCI 1999-RM1 LLC		Delaware
Wachovia Defeasance MSCI 1999-WF1 LLC		Delaware
Wachovia Defeasance MSCI 2003-IQ4 LLC		Delaware
Wachovia Defeasance MSCI 2003-IQ5 LLC		Delaware
Wachovia Defeasance MSCI 2003-IQ6 LLC		Delaware
Wachovia Defeasance MSCI 2003-Top11 LLC		Delaware
Wachovia Defeasance MSCI 2004-HQ3 LLC		Delaware
Wachovia Defeasance MSCI 2004-IQ7 LLC		Delaware
Wachovia Defeasance MSCI 2004-TOP15 III LLC		Delaware
Wachovia Defeasance MSCI 2004-TOP15 LLC		Delaware
Wachovia Defeasance MSCI 2005-TOP19 LLC		Delaware
Wachovia Defeasance MSDWCI 2000-LIFE1 LLC		Delaware
Wachovia Defeasance MSDWCI 2000-LIFE2 LLC		Delaware
Wachovia Defeasance MSDWCI 2001-Top3 III LLC		Delaware
Wachovia Defeasance MSDWCI 2001-Top5 III LLC		Delaware
Wachovia Defeasance MSDWCI 2001-Top5 LLC		Delaware
Wachovia Defeasance MSDWCI 2002-TOP7 III LLC		Delaware
Wachovia Defeasance MSDWCI 2002-Top7 LLC		Delaware
Wachovia Defeasance MSDWCI 2003-HQ2 LLC		Delaware
Wachovia Defeasance PMAC 1999-C1 LLC		Delaware
Wachovia Defeasance PNCMAC 1999-CM1 LLC		Delaware
Wachovia Defeasance PNCMAC 2000-C1 LLC		Delaware
Wachovia Defeasance PNCMAC 2001-C1 LLC		Delaware
Wachovia Defeasance PSSFC 1998-C1 LLC		Delaware
Wachovia Defeasance PSSFC 1999-NRF1 LLC		Delaware
Wachovia Defeasance PSSFC 2003-PWR1 LLC		Delaware
Wachovia Defeasance PSSFC 2003-PWR1 PAL-MED LLC		Delaware
Wachovia Defeasance River Terrace LLC		Delaware
Wachovia Defeasance SBMS 2000-C1 LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wachovia Defeasance SBMS VII 2000-C3 LLC		Delaware
Wachovia Defeasance SBMS VII 2000-C3 Wellington Place LLC		Delaware
Wachovia Defeasance SBMS VII 2001-C1 LLC		Delaware
Wachovia Defeasance SBMS VII 2001-C2 LLC		Delaware
Wachovia Defeasance Wachovia 2002-C1 III LLC		Delaware
Wachovia Defeasance Wachovia 2002-C1 LLC		Delaware
Wachovia Defeasance Wachovia 2002-C2 III LLC		Delaware
Wachovia Defeasance Wachovia 2002-C2 Lawndale Market Place LLC		Delaware
Wachovia Defeasance Wachovia 2002-C2 LLC		Delaware
Wachovia Defeasance Wachovia 2003-C3 Big Trout Lodge LLC		Delaware
Wachovia Defeasance Wachovia 2003-C3 Gaddis LLC		Delaware
Wachovia Defeasance Wachovia 2003-C3 III LLC		Delaware
Wachovia Defeasance Wachovia 2003-C3 LLC		Delaware
Wachovia Defeasance Wachovia 2003-C4 LLC		Delaware
Wachovia Defeasance Wachovia 2003-C5 III LLC		Delaware
Wachovia Defeasance Wachovia 2003-C5 LLC		Delaware
Wachovia Defeasance Wachovia 2003-C6 John & Son’s LLC		Delaware
Wachovia Defeasance Wachovia 2003-C6 LLC		Delaware
Wachovia Defeasance Wachovia 2003-C7 III LLC		Delaware
Wachovia Defeasance Wachovia 2003-C7 LLC		Delaware
Wachovia Defeasance Wachovia 2003-C8 LLC		Delaware
Wachovia Defeasance Wachovia 2003-C9 LLC		Delaware
Wachovia Defeasance Wachovia 2004-C10 III LLC		Delaware
Wachovia Defeasance Wachovia 2004-C10 LLC		Delaware
Wachovia Defeasance WACHOVIA 2004-C12 III LLC		Delaware
Wachovia Defeasance Wachovia 2004-C12 LLC		Delaware
Wachovia Defeasance Wachovia 2004-C14 Amstar LLC		Delaware
Wachovia Defeasance Wachovia 2004-C14 III LLC		Delaware
Wachovia Defeasance Wachovia 2004-C14 Lenexa LLC		Delaware
Wachovia Defeasance Wachovia 2004-C14 LLC		Delaware
Wachovia Defeasance Wachovia 2004-C15 III LLC		Delaware
Wachovia Defeasance Wachovia 2004-C15 LLC		Delaware
Wachovia Defeasance Wachovia 2005-C16 III LLC		Delaware
Wachovia Defeasance Wachovia 2005-C16 LLC		Delaware
Wachovia Defeasance Wachovia 2005-C17 450 Partners LLC		Delaware
Wachovia Defeasance Wachovia 2005-C17 III LLC		Delaware
Wachovia Defeasance Wachovia 2005-C17 LLC		Delaware
Wachovia Defeasance Wachovia 2005-C18 LLC		Delaware
Wachovia Defeasance Wachovia 2005-C20 III LLC		Delaware
Wachovia Defeasance Wachovia 2005-C20 LLC		Delaware
Wachovia Defeasance Wachovia 2005-C21 LLC		Delaware
Wachovia Defeasance Wachovia 2005-C22 III LLC		Delaware
Wachovia Defeasance Wachovia 2006-C23 III LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wachovia Defeasance Wachovia 2006-C24 III LLC		Delaware
Wachovia Defeasance Wachovia 2006-C25 III LLC		Delaware
Wachovia Defeasance Wachovia 202-C2 III LLC		Delaware
Wachovia Development Corporation		North Carolina
Wachovia Directors (Cayman) Ltd.		UK-Cayman Islands
Wachovia Education Finance Inc.		Delaware
Wachovia Education Loan Funding LLC		Delaware
Wachovia Encryption Technologies, LLC		North Carolina
Wachovia Equity Servicing, LLC		New Jersey
Wachovia Finance Ireland Limited		Ireland
Wachovia Financial Services, Inc.		North Carolina
Wachovia Fixed Income Structured Trading Solutions, LLC		Delaware
Wachovia FSD SCP, LLC		North Carolina
Wachovia Guaranteed Middle Tier III-A/NC, LLC		Delaware
Wachovia Guaranteed Middle Tier IV-P/NC, LLC		Delaware
Wachovia Guaranteed Middle Tier IV-U/NC, LLC		Delaware
Wachovia Guaranteed Tax Credit Fund II, LLC		Delaware
Wachovia Guaranteed Tax Credit Fund III-A/GA, LLC		Delaware
Wachovia Guaranteed Tax Credit Fund III-A/NC, LLC		Delaware
Wachovia Guaranteed Tax Credit Fund III-CN/GA, LLC		Delaware
Wachovia Guaranteed Tax Credit Fund IV-P/GA, LLC		Delaware
Wachovia Guaranteed Tax Credit Fund IV-P/NC, LLC		Delaware
Wachovia Guaranteed Tax Credit Fund IV-U/GA, LLC		Delaware
Wachovia Guaranteed Tax Credit Fund IV-U/NC, LLC		Delaware
Wachovia Guaranteed Tax Credit Fund V-F/M, LLC		Delaware
Wachovia Guaranteed Tax Credit Fund V-VA/M, LLC		Delaware
Wachovia Guaranteed Tax Credit Fund-C/GA, LLC		Delaware
Wachovia Guaranteed Tax Credit Fund-WF/CA, LLC		Delaware
Wachovia Guaranteed Tax Credit Fund-WF/CA-2, LLC		Delaware
Wachovia High Yield Investments Corporation		Delaware
Wachovia Holdings, Inc.		Delaware
Wachovia Insurance Agency, Inc.		Virginia
Wachovia Insurance Services Broker Dealer, Inc.		North Carolina
Wachovia International B.V.		Netherlands
Wachovia International Banking Corporation		United States
Wachovia International Capital Corporation		Georgia
Wachovia International Services Private Limited		India
Wachovia International Servicos, LTDA		Brazil
Wachovia Investment Holdings, LLC		Delaware
Wachovia Investors, Inc.		North Carolina
Wachovia KW1, LLC		Delaware
Wachovia KW2, LLC		Delaware
Wachovia Large Loan, Inc.		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wachovia Life Insurance Company		Arizona
Wachovia Management Corporation		California
Wachovia Management Services Private Limited		India
Wachovia Mortgage Corporation		North Carolina
Wachovia Mortgage Loan Trust, LLC		Delaware
Wachovia Multifamily Capital, Inc.		Delaware
Wachovia Netherlands B.V.		Netherlands
Wachovia Netherlands Holdings, Inc.		Delaware
Wachovia Ocean View Member, LLC		Delaware
Wachovia Operational Services, LLC		North Carolina
Wachovia PASS Co., LLC		Delaware
Wachovia Preferred Funding Corp.		Delaware
Wachovia Preferred Funding Holding Corp.		California
Wachovia Preferred Realty, LLC		Delaware
Wachovia Private Capital, Inc.		Pennsylvania
Wachovia Proprietary Equity Trading, LLC		Delaware
Wachovia RE, Inc.		South Carolina
Wachovia Real Estate Investment Corp.		Delaware
Wachovia Real Estate Korea, Inc.		Korea
Wachovia Regional Community Development Corporation, Inc.		Pennsylvania
Wachovia Residual Interest Securitization, LLC		Delaware
Wachovia Risk Services, Inc.		Virginia
Wachovia Secretaries (Cayman) Ltd.		UK-Cayman Islands
Wachovia Securities (Uruguay) S.A.		Uruguay
Wachovia Securities Financial Holdings, LLC		Delaware
Wachovia Securities Holdings, LLC		Delaware
Wachovia Securities Insurance Agency of Puerto Rico, Inc.		Puerto Rico
Wachovia Securities Servicos e Participacoes (Brasil) LTDA		Brazil
Wachovia Service Corporation		Delaware
Wachovia Settlement Services of AL, LLC		Alabama
Wachovia Settlement Services, LLC		Delaware
Wachovia Shared Resources, LLC		Delaware
Wachovia Student Loan Trust 2005-1		Delaware
Wachovia Student Loan Trust 2006-1		Delaware
Wachovia Technology Planning & Solutions Private Limited		India
Wachovia Trade Finance Corporation		Delaware
Wachovia Trust Services, Inc.		North Carolina
Wachovia Warranty Corporation		Delaware
Wachovia/Maher Partners		Delaware
Wapiti Funding, LLC		Delaware
Warder Mansion, L. P.		Virginia
Water’s Edge Clearwater, LLC		Delaware
Waterside Villages, LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wauregan Development LLC		Connecticut
WB Re Ltd.		Vermont
WBI Holdings I, LLC		Delaware
WBI Holdings II, LLC		Delaware
WBI Holdings III, LLC		Delaware
WBI Holdings IV, LLC		Delaware
WBI Holdings V, LLC		Delaware
WBI Holdings VI, LLC		Delaware
WCP Compression Holdings, LLC		North Carolina
WCP Compression, LLC		North Carolina
WCP Fund I, L.P.		Delaware
WCP Fund II, L.P.		Delaware
WCP Holdings 2002, LLC		North Carolina
WCP Holdings 2004, LLC		North Carolina
WCP Holdings 2005, LLC		North Carolina
WCP Holdings 2006, LLC		North Carolina
WCP Secondary Fund I GP, LLC		Delaware
WDC 541 N Fairbanks Member, LLC		Delaware
WDC KW America Member, LLC		Delaware
WDC Lake Spivey Member, LLC		Delaware
WDC Member KW Portfolio, LLC		Delaware
WDC PSL City Center, LLC		Delaware
WDC Triad Member I, LLC		Delaware
WDC Triad Parent, LLC		Delaware
WDC Union Station, LLC		Delaware
WDC Ventures Ltd.		Mauritius
WDC/Babcock Fairways, LLC		Delaware
WDS Holdings, Inc.		Delaware
WDS Receivables 2 LLC		Nevada
WDS Receivables LLC		Nevada
WDSI, LLC		Delaware
WELF Holding LLC		Delaware
Wells Capital Management Incorporated		California
Wells Fargo Advisors (Argentina) LLC		Delaware
Wells Fargo Advisors (Chile) LLC		Delaware
Wells Fargo Advisors (Montevideo) Usuaria de Zona Franca S.A.		Uruguay
Wells Fargo Advisors Financial Network, LLC		Delaware
Wells Fargo Advisors Insurance Agency, LLC		Virgina
Wells Fargo Advisors, LLC		Delaware
Wells Fargo Alaska Trust Company, National Association		United States
Wells Fargo Alternative Asset Management, LLC		Delaware
Wells Fargo Asia Limited		Hong Kong
Wells Fargo Asset Management Corporation		Minnesota

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wells Fargo Asset Securities Corporation		Delaware
Wells Fargo Auto Finance, Inc.		California
Wells Fargo Bank International		Ireland
Wells Fargo Bank Northwest, National Association		United States
Wells Fargo Bank South Central, National Association		United States
Wells Fargo Bank, Ltd.		California
Wells Fargo Bank, National Association		United States
Wells Fargo Bill Presentment Venture Member, LLC		Delaware
Wells Fargo Business Credit Canada ULC		Canada
Wells Fargo Capital A		Delaware
Wells Fargo Capital B		Delaware
Wells Fargo Capital C		Delaware
Wells Fargo Capital Holdings, Inc.		Delaware
Wells Fargo Capital I		Delaware
Wells Fargo Capital II		Delaware
Wells Fargo Capital IV		Delaware
Wells Fargo Capital IX		Delaware
Wells Fargo Capital VII		Delaware
Wells Fargo Capital VIII		Delaware
Wells Fargo Capital X		Delaware
Wells Fargo Capital XI		Delaware
Wells Fargo Capital XII		Delaware
Wells Fargo Capital XIII		Delaware
Wells Fargo Capital XIV		Delaware
Wells Fargo Capital XV		Delaware
Wells Fargo Cash Centers, Inc.		Nevada
Wells Fargo Cedar Creek, LLC		Delaware
Wells Fargo Central Bank		California
Wells Fargo Central Pacific Holdings, Inc.		California
Wells Fargo CM Funding, LLC		Delaware
Wells Fargo Commercial Mortgage Securities, Inc.		North Carolina
Wells Fargo Commodities, LLC		Delaware
Wells Fargo Community Development Corporation		Nevada
Wells Fargo Community Development Enterprises, Inc.		Nevada
Wells Fargo Community Investment Holdings, LLC		Delaware
Wells Fargo Credit Card Funding LLC		Delaware
Wells Fargo Credit Card Master Note Trust		Delaware
Wells Fargo Credit, Inc.		Minnesota
Wells Fargo Delaware Trust Company, National Association		United States
Wells Fargo Distribution Finance, LLC		Delaware
Wells Fargo Energy Capital, Inc.		Texas
Wells Fargo Equipment Finance Company		Canada
Wells Fargo Equipment Finance, Inc.		Minnesota

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wells Fargo Equity Capital, Inc.		California
Wells Fargo Escrow Company, LLC		Iowa
Wells Fargo Exchange Services, Inc.		North Carolina
Wells Fargo Exchange Services, LLC.		Delaware
Wells Fargo Financial Acceptance America, Inc.		Pennsylvania
Wells Fargo Financial Acceptance, LLC		Minnesota
Wells Fargo Financial Agency, Co.		Iowa
Wells Fargo Financial Alabama, Inc.		Alabama
Wells Fargo Financial Alaska, Inc.		Alaska
Wells Fargo Financial America, Inc.		Pennsylvania
Wells Fargo Financial Arizona, Inc.		Arizona
Wells Fargo Financial Arkansas, Inc.		Arkansas
Wells Fargo Financial California, Inc.		Colorado
Wells Fargo Financial Canada Corporation		Canada
Wells Fargo Financial Colorado, Inc.		Colorado
Wells Fargo Financial Connecticut, Inc.		Connecticut
Wells Fargo Financial Corporation Canada		Canada
Wells Fargo Financial Credit Services New York, Inc.		New York
Wells Fargo Financial Delaware, Inc.		Delaware
Wells Fargo Financial Florida, Inc.		Florida
Wells Fargo Financial Funding B.V.		Netherlands
Wells Fargo Financial Georgia, Inc.		Iowa
Wells Fargo Financial Guam, Inc.		Delaware
Wells Fargo Financial Hawaii, Inc.		Hawaii
Wells Fargo Financial Holdings, LLC		Delaware
Wells Fargo Financial Hong Kong Limited		Hong Kong
Wells Fargo Financial Idaho, Inc.		Idaho
Wells Fargo Financial Illinois, Inc.		Iowa
Wells Fargo Financial Indiana, Inc.		Indiana
Wells Fargo Financial Information Services, Inc.		Iowa
Wells Fargo Financial Investment, Inc.		Nevada
Wells Fargo Financial Iowa 1, Inc.		Iowa
Wells Fargo Financial Iowa 3, Inc.		Iowa
Wells Fargo Financial Kansas, Inc.		Kansas
Wells Fargo Financial Kentucky 1, Inc.		Kentucky
Wells Fargo Financial Kentucky, Inc.		Kentucky
Wells Fargo Financial Leasing, Inc.		Iowa
Wells Fargo Financial Louisiana, Inc.		Louisiana
Wells Fargo Financial Maine, Inc.		Maine
Wells Fargo Financial Maryland, Inc.		Maryland
Wells Fargo Financial Massachusetts 1, Inc.		Massachusetts
Wells Fargo Financial Massachusetts, Inc.		Massachusetts
Wells Fargo Financial Michigan, Inc.		Michigan

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wells Fargo Financial Minnesota, Inc.		Minnesota
Wells Fargo Financial Mississippi 2, Inc.		Delaware
Wells Fargo Financial Mississippi, Inc.		Delaware
Wells Fargo Financial Missouri, Inc.		Missouri
Wells Fargo Financial Montana, Inc.		Montana
Wells Fargo Financial National Bank		United States
Wells Fargo Financial Nebraska, Inc.		Nebraska
Wells Fargo Financial Nevada 1, Inc.		Nevada
Wells Fargo Financial Nevada 2, Inc.		Nevada
Wells Fargo Financial Nevada, Inc.		Nevada
Wells Fargo Financial New Hampshire 1, Inc.		New Hampshire
Wells Fargo Financial New Hampshire, Inc.		New Hampshire
Wells Fargo Financial New Jersey, Inc.		New Jersey
Wells Fargo Financial New Mexico, Inc.		New Mexico
Wells Fargo Financial New York, Inc.		New York
Wells Fargo Financial North Carolina 1, Inc.		North Carolina
Wells Fargo Financial North Carolina, Inc.		North Carolina
Wells Fargo Financial North Dakota, Inc.		North Dakota
Wells Fargo Financial Ohio 1, Inc.		New Hampshire
Wells Fargo Financial Ohio, Inc.		Ohio
Wells Fargo Financial Oklahoma, Inc.		Oklahoma
Wells Fargo Financial Oregon, Inc.		Oregon
Wells Fargo Financial Pennsylvania, Inc.		Pennsylvania
Wells Fargo Financial Puerto Rico, Inc.		Delaware
Wells Fargo Financial Resources, Inc.		Iowa
Wells Fargo Financial Retail Credit, Inc.		Iowa
Wells Fargo Financial Retail Services Company Canada		Canada
Wells Fargo Financial Retail Services, Inc.		Iowa
Wells Fargo Financial Rhode Island, Inc.		Rhode Island
Wells Fargo Financial Saipan, Inc.		Delaware
Wells Fargo Financial Security Services, Inc.		Iowa
Wells Fargo Financial Services Virginia, Inc.		Virginia
Wells Fargo Financial Services, Inc.		Delaware
Wells Fargo Financial South Carolina, Inc.		South Carolina
Wells Fargo Financial South Dakota, Inc.		South Dakota
Wells Fargo Financial System Florida, Inc.		Florida
Wells Fargo Financial System Minnesota, Inc.		Minnesota
Wells Fargo Financial System Virginia, Inc.		Virginia
Wells Fargo Financial Tennessee 1, LLC		Tennessee
Wells Fargo Financial Tennessee, Inc.		Tennessee
Wells Fargo Financial Texas, Inc.		Texas
Wells Fargo Financial Utah, Inc.		Utah
Wells Fargo Financial Vermont, Inc.		Vermont

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wells Fargo Financial Virginia, Inc.		Virginia
Wells Fargo Financial Washington 1, Inc.		Washington
Wells Fargo Financial Washington, Inc.		Washington
Wells Fargo Financial West Virginia, Inc.		West Virginia
Wells Fargo Financial Wisconsin, Inc.		Wisconsin
Wells Fargo Financial Wyoming, Inc.		Wyoming
Wells Fargo Financial, Inc.		Iowa
Wells Fargo Financing Corporation		California
Wells Fargo Foothill Canada ULC		Canada
Wells Fargo Foothill, Inc.		California
Wells Fargo Foothill, LLC		Delaware
Wells Fargo Funding, Inc.		Minnesota
Wells Fargo Funds Distributor, LLC		Delaware
Wells Fargo Funds Management, LLC		Delaware
Wells Fargo Global Broker Network, LLC		Delaware
Wells Fargo Home Mortgage of Hawaii, LLC		Delaware
Wells Fargo Housing Advisors, Inc.		California
Wells Fargo HSBC Trade Bank, National Association		United States
Wells Fargo India Solutions Private Limited		India
Wells Fargo Institutional Funding, LLC		Delaware
Wells Fargo Institutional Securities, LLC		Delaware
Wells Fargo Insurance Agency of Michigan, Inc.		Michigan
Wells Fargo Insurance Nevada, Inc.		Nevada
Wells Fargo Insurance Services Investment Advisors, Inc		Colorado
Wells Fargo Insurance Services Mountain West, Inc.		Colorado
Wells Fargo Insurance Services Northeast, Inc.		New Jersey
Wells Fargo Insurance Services Northwest, Inc.		Washington
Wells Fargo Insurance Services of Alabama, Inc.		Alabama
Wells Fargo Insurance Services of Alaska, Inc.		Alaska
Wells Fargo Insurance Services of Arizona, Inc.		Arizona
Wells Fargo Insurance Services of Illinois, Inc.		Illinois
Wells Fargo Insurance Services of Indiana, LLC		Indiana
Wells Fargo Insurance Services of Kentucky, Inc.		Kentucky
Wells Fargo Insurance Services of Minnesota, Inc.		Minnesota
Wells Fargo Insurance Services of Nevada, Inc.		Nevada
Wells Fargo Insurance Services of New York, Inc.		New York
Wells Fargo Insurance Services of North Carolina, Inc.		North Carolina
Wells Fargo Insurance Services of Ohio, LLC		Ohio
Wells Fargo Insurance Services of Oregon, Inc.		Oregon
Wells Fargo Insurance Services of Pennsylvania, Inc.		Pennsylvania
Wells Fargo Insurance Services of Tennessee, Inc.		Tennessee
Wells Fargo Insurance Services of Texas, Inc.		Texas
Wells Fargo Insurance Services of Virginia, Inc.		Virginia

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
Wells Fargo Insurance Services of West Virginia, Inc.		West Virginia
Wells Fargo Insurance Services Southeast, Inc.		Florida
Wells Fargo Insurance Services USA, Inc.		North Carolina
Wells Fargo Insurance Services, Inc.		Delaware
Wells Fargo Insurance Wyoming, Inc.		Wyoming
Wells Fargo Insurance, Inc.		Minnesota
Wells Fargo International Commercial Services Limited		Hong Kong
Wells Fargo Investment Group, Inc.		Delaware
Wells Fargo Investments, LLC		Delaware
Wells Fargo Merchant Services, L.LC.		Delaware
Wells Fargo of California Insurance Services, Inc.		California
Wells Fargo Preferred Capital, Inc.		Iowa
Wells Fargo Private Client Funding, Inc.		Delaware
Wells Fargo Properties, Inc.		Minnesota
Wells Fargo RE, Inc.		New Jersey
Wells Fargo Real Estate Capital Investments, LLC		Delaware
Wells Fargo Real Estate Tax Services, LLC		Delaware
Wells Fargo Retail Finance II, LLC		Delaware
Wells Fargo Retail Finance, LLC		Delaware
Wells Fargo Securities (Japan) Co. Ltd.		Japan
Wells Fargo Securities Asia Limited		Hong Kong
Wells Fargo Securities International Limited		United Kingdom-England
Wells Fargo Securities, LLC		Delaware
Wells Fargo Servicing Solutions, LLC		Florida
Wells Fargo Small Business Investment Company, Inc.		California
Wells Fargo Special Risks, Inc.		Illinois
Wells Fargo Structured Lending, LLC		Delaware
Wells Fargo Student Loans Receivables I, LLC		Delaware
Wells Fargo Third Party Administrators, Inc.		West Virginia
Wells Fargo Trade Capital Services, Inc.		New York
Wells Fargo Trade Capital, LLC		Delaware
Wells Fargo Trust Corporation Limited		United Kingdom
Wells Fargo Ventures, LLC		Delaware
Wells Fargo Wind Holdings, LLC		Delaware
WES Holding Corporation		Delaware
WestFin Insurance Agency, Inc.		California
Westlake Insurance Company (Bermuda), Ltd.		Bermuda
WF Deferred Compensation Holdings, Inc.		Delaware
WF Securities Services, LLC		Delaware
WFB International Holdings Corporation		United States
WFC Holdings Corporation		Delaware
WFI Insurance Agency Montana, Inc.		Montana
WFI Insurance Agency Washington, Inc.		Washington
WFLC Subsidiary, LLC		Delaware

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2009:


		Jurisdiction of
		Incorporation or
Subsidiary		Organization
WFS Financial 2002-2 Owner Trust		Not Required
WFS Financial 2002-3 Owner Trust		Not Required
WFS Financial 2002-4 Owner Trust		Not Required
WFS Financial 2003-1 Owner Trust		Not Required
WFS Financial 2003-2 Owner Trust		Not Required
WFS Financial 2003-3 Owner Trust		Not Required
WFS Financial 2003-4 Owner Trust		Not Required
WFS Financial 2004-1 Owner Trust		Not Required
WFS Financial 2004-2 Owner Trust		Not Required
WFS Financial 2004-3 Owner Trust		Not Required
WFS Financial 2004-4 Owner Trust		Not Required
WFS Financial 2005-1 Owner Trust		Not Required
WFS Financial 2005-2 Owner Trust		Not Required
WFS Financial 2005-3 Owner Trust		Not Required
WFS Financial 2005-A Owner Trust		Not Required
WFS Funding, Inc.		California
WFS Mortgage, LLC		Delaware
WFS Receivables Corporation		California
WFS Receivables Corporation 2		Nevada
WFS Receivables Corporation 3		California
WFS Receivables Corporation 4		Nevada
WFS Web Investments		California
WG-5278 MO, LLC		Delaware
Wheat First Butcher Singer Private Equity Fund, Limited Partnership		Virginia
Wheels Exchange, LLC		Delaware
Whippet Funding, LLC		Delaware
Whitney Hotel Limited Partnership		Louisiana
WIBC Aruba N.V.		Aruba
WIH CDO, LLC		Delaware
WIH Holdings		Mauritius
William Byrd Hotel Associates, L.P.		Virginia
William Pitt Mortgage, LLC		Delaware
Winchester REO, LLC		North Carolina
Winmark Financial, LLC		Delaware
WLC Company, LLC		Nevada
WLH 2008-1, LLC		Delaware
World Loan Company, LLC		Texas
World Mortgage Company		Colorado
World Savings Insurance Agency, Inc.		California
World Savings, Inc.		California
WPFC Asset Funding LLC		Delaware
WREK Retail I, LLC		Delaware
WSH Holdings, Ltd.		UK-Cayman Islands
Yucca Asset Management, Inc.		Delaware

Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Wells Fargo & Company:

We consent to the incorporation by reference in the registration statements noted below on Forms S-3, S-4 and S-8 of Wells Fargo & Company, of our reports dated February 26, 2010, with respect to the consolidated balance sheet of Wells Fargo & Company and Subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2009, and the effectiveness of internal control over financial reporting as of December 31, 2009, which reports appear in the December 31, 2009, Annual Report on Form 10-K of Wells Fargo & Company.


Registration
Statement
Number	Form	Description
333-163149	S-3	Wells Fargo Direct Purchase and Dividend Reinvestment Plan
333-155705	S-3	Deferred Compensation Plan for Independent Contractors
333-154876	S-3	Common Stock Shelf
333-159738	S-3	Debt Shelf 2009
333-159736	S-3	Universal Shelf 2009
333-121545	S-4/S-8	First Community Capital Corporation
333-107230	S-4/S-8	Pacific Northwest Bancorp
333-142102	S-4/S-8	Placer Sierra Bancshares
333-144455	S-4/S-8	Greater Bay Bancorp
333-154879	S-4/S-8	Wachovia Corporation
333-153922	S-4/S-8	Century Bancshares, Inc.
333-103776	S-8	Long-Term Incentive Compensation Plan
333-128598	S-8	Long-Term Incentive Compensation Plan
333-152415	S-8	Long-Term Incentive Compensation Plan
333-103777	S-8	PartnerShares Plan
333-149567	S-8	401(K) Plan
333-105091	S-8	Directors Stock Compensation and Deferral Plan
333-149566	S-8	Directors Stock Compensation and Deferral Plan
333-158711	S-8	Directors Stock Compensation and Deferral Plan
333-142491	S-8	Deferred Compensation Plan
333-164082	S-8	Deferred Compensation Plan
333-123243	S-8	Wells Fargo Stock Purchase Plan
333-158712	S-8	Wells Fargo Stock Purchase Plan
333-156545	S-8	Wachovia Savings Plan
333-161529	S-8	Wachovia deferred compensation obligations

/s/ KPMG LLP
San Francisco, California
February 26, 2010

Exhibit 24

WELLS FARGO & COMPANY

Power of Attorney of Director

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and appoint NICHOLAS G. MOORE, a director and Chairman of the Audit and Examination Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and member of the Audit and Examination Committee of the Board of Directors, and each or either of them, the undersigned’s true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned’s name, place, and stead, to sign and affix the undersigned’s name as such director of said Company to an Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C. under the Securities Exchange Act of 1934, and the rules and regulations of said Commission, and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers herein expressly granted.

IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 23rd day of February, 2010.


/s/ JOHN D. BAKER II		/s/ NICHOLAS G. MOORE
/s/ JOHN S. CHEN		/s/ PHILIP J. QUIGLEY
/s/ LLOYD H. DEAN		/s/ DONALD B. RICE
/s/ SUSAN E. ENGEL		/s/ JUDITH M. RUNSTAD
/s/ ENRIQUE HERNANDEZ, JR.		/s/ STEPHEN W. SANGER
/s/ DONALD M. JAMES		/s/ ROBERT K. STEEL
/s/ RICHARD D. McCORMICK		/s/ JOHN G. STUMPF
/s/ MACKEY J. McDONALD		/s/ SUSAN G. SWENSON
/s/ CYNTHIA H. MILLIGAN

Exhibit 31(a)

CERTIFICATION

I, John G. Stumpf, certify that:

	1.		I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2009, of Wells Fargo & Company;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 26, 2010


	/s/ JOHN G. STUMPF
	John G. Stumpf
	Chairman, President and Chief Executive Officer

Exhibit 31(b)

CERTIFICATION

I, Howard I. Atkins, certify that:

I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2009, of Wells Fargo & Company;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 26, 2010


	/s/ HOWARD I. ATKINS
	Howard I. Atkins
	Senior Executive Vice President and Chief Financial Officer

Exhibit 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

I, John G. Stumpf, Chairman, President and Chief Executive Officer of Wells Fargo & Company (the “Company”), certify that:

(1)

The Company’s Annual Report on Form 10-K for the year ended December 31, 2009, (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



	/s/ JOHN G. STUMPF
	John G. Stumpf
	Chairman, President and Chief Executive Officer Wells Fargo & Company February 26, 2010

A signed original of this written statement required by Section 906 has been provided to Wells Fargo & Company and will be retained by Wells Fargo & Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32(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

I, Howard I. Atkins, Senior Executive Vice President and Chief Financial Officer of Wells Fargo & Company (the “Company”), certify that:

	(1)		The Company’s Annual Report on Form 10-K for the year ended December 31, 2009, (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)		the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


	/s/ HOWARD I. ATKINS
	Howard I. Atkins
	Senior Executive Vice President and Chief Financial Officer Wells Fargo & Company February 26, 2010

Exhibit 99(a)

CERTIFICATION

I, John G. Stumpf, the Chief Executive Officer of Wells Fargo & Company (the “Company”), certify, based on my knowledge, that:

(i) The standard referred to in paragraph (i) of the model certification (the “Model Certification”) set forth in the U.S. Department of the Treasury’s Interim Final Rule, 31 C.F.R. Part 30, as amended, under section 111 of the Emergency Economic Stabilization Act of 2008, as amended (“EESA”), was not required to be met by the Company;

(ii) The standard referred to in paragraph (ii) of the Model Certification was not required to be met by the Company;

(iii) The standard referred to in paragraph (iii) of the Model Certification was not required to be met by the Company;

(iv) The standard referred to in paragraph (iv) of the Model Certification was not required to be met by the Company;

(v) The standard referred to in paragraph (v) of the Model Certification was not required to be met by the Company;

(vi) The Company has required that bonus payments, as defined in the regulations and guidance established under section 111 of EESA (“bonus payments”), of the senior executive officers (the “SEOs”) and twenty next most highly compensated employees be subject to a recovery or “clawback” provision during the period beginning on June 15, 2009 and ending on December 23, 2009 if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii) The Company has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to an SEO or any of the next five most highly compensated employees during the period beginning on June 15, 2009 and ending on December 23, 2009;

(viii) The Company has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during the period beginning on June 15, 2009 and ending on December 23, 2009;

(ix) The board of directors of the Company has established an excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA, by September 14, 2009; this policy has been provided to the U.S. Department of the Treasury (“Treasury”) and its primary regulatory agency; the Company and its employees have complied with this policy during the period beginning on September 14, 2009 and ending on December 23, 2009; and any expenses that, pursuant to this policy, required approval of the

board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility were properly approved;

(x) The standard referred to in paragraph (x) of the Model Certification was not required to be met by the Company;

(xi) The Company will disclose the amount, nature, and justification for the offering during the Company’s fiscal year 2009 of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

(xii) The Company will disclose whether the Company, the board of directors of the Company, or the compensation committee of the Company has engaged during the fiscal year 2009 a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii) The Company has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during the period beginning on June 15, 2009 and ending on December 23, 2009

(xiv) The Company has substantially complied with all other requirements related to employee compensation that are provided in the agreement between the Company and Treasury, including any amendments;

(xv) The Company will submit to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year and the most recently completed fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and most highly compensated employee identified; and

(xvi) I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both. (See, for example, 18 USC 1001).

Date: February 26, 2010



	/s/ JOHN G. STUMPF
	John G. Stumpf
	Chairman, President and Chief Executive Officer

Exhibit 99(b)

CERTIFICATION

I, Howard I. Atkins, the Chief Financial Officer of Wells Fargo & Company (the “Company”), certify, based on my knowledge, that:

(ii) The standard referred to in paragraph (ii) of the Model Certification was not required to be met by the Company;

(iii) The standard referred to in paragraph (iii) of the Model Certification was not required to be met by the Company;

(iv) The standard referred to in paragraph (iv) of the Model Certification was not required to be met by the Company;

(v) The standard referred to in paragraph (v) of the Model Certification was not required to be met by the Company;

board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility were properly approved;

(x) The standard referred to in paragraph (x) of the Model Certification was not required to be met by the Company;

(xvi) I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both. (See, for example, 18 USC 1001).

Date: February 26, 2010



	/s/ HOWARD I. ATKINS
	Howard I. Atkins
	Senior Executive Vice President and Chief Financial Officer