WELLS FARGO & CO/MN (Form: 10-K, Received: 02/29/2008 14:23:01)

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, 2007		Commission File Number 001-2979

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


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

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

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

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
Basket Linked Notes due October 9, 2008		American Stock Exchange
Basket Linked Notes due April 15, 2009		American Stock Exchange
Callable Notes Linked to the S&P 500 Index ^® due August 25, 2009		American Stock Exchange
Notes Linked to the Dow Jones Industrial Average ^SM due May 5, 2010		American Stock Exchange

No securities are registered pursuant to Section 12(g) of the Act.


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 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.		þ

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 ¨
Non-accelerated filer ¨		Smaller reporting company ¨
(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, 2007, the aggregate market value of common stock held by non-affiliates was approximately $116.6 billion, based on a closing price of $35.17. At January 31, 2008, 3,296,806,740 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, 2007 (“2007 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 22, 2008 (“2008 Proxy Statement”)	Part III — Items 10, 11, 12, 13 and 14


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 the merger of Norwest Corporation and the former Wells Fargo & Company, completed on November 2, 1998. On completion of the merger, Norwest Corporation changed its name to Wells Fargo & Company. In October 2000, we acquired First Security Corporation, a $23 billion bank holding company in a transaction valued at $3 billion.

We expand our business, in part, by acquiring banking institutions and other companies engaged in activities that are financial in nature. We continue to explore opportunities to acquire banking institutions and other financial services companies, and discussions related to possible acquisitions may occur at any time. We cannot predict whether, or on what terms, discussions will result in further acquisitions. As a matter of policy, we generally do not comment on any discussions or possible acquisitions until a definitive acquisition agreement has been signed.

At December 31, 2007, we had assets of $575 billion, loans of $382 billion, deposits of $344 billion and stockholders’ equity of $48 billion. Based on assets, we were the fifth largest bank holding company in the United States. At December 31, 2007, Wells Fargo Bank, N.A. was the Company’s principal subsidiary with assets of $468 billion, or 81% of the Company’s assets. Our bank has the highest credit rating, “Aaa,” from Moody’s Investors Service and, in February 2007, was upgraded to “AAA” by Standard & Poor’s Ratings Services, its highest credit rating. Our bank is now the only U.S. bank, and one of two banks worldwide, to have the highest possible credit rating from both Moody’s and S&P.

At December 31, 2007, we had 159,800 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 “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 23 states: Alaska, Arizona, California, Colorado, Idaho, Illinois, Indiana, Iowa, Michigan, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio, Oregon, South Dakota, Texas, Utah, Washington, Wisconsin and 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 Wells Fargo Financial. The 2007 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 26 (Regulatory and Agency Capital Requirements) to Financial Statements included in the 2007 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, not 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.

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 secondarily by the Federal Deposit Insurance Corporation (FDIC) 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. FINRA was formed in July 2007 through a consolidation of the National Association of Securities Dealers, Inc. (NASD) and the member regulation, enforcement and arbitration functions of the NYSE. FINRA is the largest non-governmental regulator for all securities firms doing business in the United States. FINRA is responsible for rule writing, firm examination, enforcement, arbitration and mediation functions previously overseen by the NASD. Our other nonbank subsidiaries may be subject to the laws and regulations of the federal government and/or the various states in which they conduct business.

Parent Bank Holding Company Activities

“Financial in Nature” Requirement. 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 from time to time 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 would not be able to engage in any new activity or acquire 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.

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.

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 its common and preferred stock and principal and interest on its debt is dividends from its 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. 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 2007 Annual Report to Stockholders.

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.

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 in specified amounts. 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 federal bank regulatory agencies may, however, set higher capital requirements for an individual bank or when a bank’s particular circumstances warrant. The FRB may also set higher capital requirements for holding companies whose circumstances warrant it. 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. Also, the FRB considers a “tangible Tier 1 leverage ratio” (deducting all intangibles) and other indications of capital strength in evaluating proposals for expansion or engaging in new activities.

Effective April 1, 2002, the FRB, OCC and FDIC issued new rules that establish minimum capital requirements for equity investments in nonfinancial companies. These rules impose a capital charge that increases incrementally as the level of nonfinancial equity investments increases relative to Tier 1 capital. These capital charges range from Tier 1 capital charges of 8% to 25% of the adjusted carrying value of the nonfinancial equity investments.

The FRB, OCC and FDIC rules also require us to incorporate market and interest rate risk components into our regulatory capital computations. Under the market risk requirements, capital is allocated to support the amount of market risk related to a financial institution’s ongoing trading activities.

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. Under the final rule, banks subject to the rule must develop an implementation plan within six months of the rule’s effective date with the transitional period for capital calculation to begin within 36 months of the effective date of the final rule. 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. The first possible year for a bank to begin its parallel run is 2008. 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. 2009 is the first possible year a bank may begin its first of the three transitional floor periods. 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. We continue to analyze the Basel II capital standards and have established a project management infrastructure to address and meet the new 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, 2007 are included in Note 26 (Regulatory and Agency Capital Requirements) to Financial Statements included in the 2007 Annual Report to Stockholders.

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. Such 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 and executive compensation. 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., 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 established a range of 1.15% to 1.50% within which the FDIC Board of Directors may set the Designated Reserve Ratio (DRR). The current target DRR is 1.25%. However, the Act has eliminated the restrictions on premium rates based on the DRR and grants 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 with the institution’s long-term debt issuer ratings. The FDIC has established four risk categories, with assessment rates for 2007 ranging from a minimum of 5 cents per $100 of domestic deposits for well managed, well capitalized banks with the highest credit ratings, to 43 cents for institutions posing the most risk to the DIF. The FDIC may increase or decrease the assessment rate schedule quarterly.

To offset assessments, a member institution may apply certain one time credits, based on the institution’s (or its successor’s) assessment base as of the end of 1996. An institution may apply available credits up to 100% of assessments in 2007, and up to 90% of assessments in each of 2008, 2009 and 2010. Based on available credits, we did not incur a significant increase in total deposit insurance expense in 2007 under the new assessment schedule. There is no assurance that after 2007 we will have sufficient credits to apply to deposit insurance assessments or that our assessment rate will not increase significantly, which, depending on the extent of change, could have a material adverse effect on our earnings.

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.

All FDIC-insured depository institutions must also pay an annual assessment to 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 1.14 to 1.22 cents per $100 of assessable deposits in 2007. The FDIC established the FICO assessment rate effective for the first quarter of 2008 at approximately 1.14 cents annually per $100 of assessable deposits. This separate FICO assessment cannot be offset with any one time credits.

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 (the FACT 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 Wells Fargo companies for the purpose of cross-selling Wells Fargo’s products and services. This may result in certain cross-sell programs being less effective than they have been in the past. Wells Fargo must comply with these regulations no later than October 1, 2008.

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.

Future Legislation

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

ADDITIONAL INFORMATION

Additional information in response to this Item 1 can be found in the 2007 Annual Report to Stockholders under “Financial Review” on pages 34-71 and under “Financial Statements” on pages 74-129. 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 2-10 and in the 2007 Annual Report to Stockholders under “Financial Review – Risk Factors” on pages 66-71. 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; San Francisco, California; Minneapolis and Shoreview, Minnesota; Billings, Montana; 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, Oregon, Texas and Utah.

As of December 31, 2007, we provided banking, insurance, investments, mortgage and consumer finance from almost 6,000 stores under various types of ownership and leasehold agreements. We own the Wells Fargo Home Mortgage (Home Mortgage) headquarters in West 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; and all mortgage production offices nationwide. We own the Wells Fargo Financial, Inc. (WFFI) headquarters and six 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; Greenbelt, Maryland; Minneapolis, Minnesota; Las Vegas, Nevada; Mississauga, Ontario; Bethlehem and Philadelphia, Pennsylvania; San Juan, Puerto Rico; Aberdeen, South Dakota; and all store locations.

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 2007 Annual Report to Stockholders under “Financial Statements – Notes to Financial Statements – Note 7 (Premises, Equipment, Lease Commitments and Other Assets)” on page 91. 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 2007 Annual Report to Stockholders under “Financial Statements – Notes to Financial Statements – Note 15 (Guarantees and Legal Actions)” on page 100. 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 REGISTRANT

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 New York Stock Exchange. The Quarterly Financial Data table on page 130 of the 2007 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, 2007, 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 New York Stock Exchange Composite Transaction Reporting System for the periods indicated. At January 31, 2008, there were 91,462 holders of record of the Company’s common stock.

DIVIDENDS

The dividend restrictions discussions on pages 4-5 of this report and in the 2007 Annual Report to Stockholders under “Financial Statements – Notes to Financial Statements – Note 3 (Cash, Loan and Dividend Restrictions)” on page 85 are incorporated into this report by reference.

REPURCHASES OF COMMON STOCK

The following table shows Company’s repurchases of its common stock for each calendar month in the quarter ended December 31, 2007.



					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		17,774,260	$	33.83		31,660,056
November		63,645,200		31.49		43,014,856
December		1,503,623		31.74		41,511,233
Total		82,923,083


(1)		All shares were repurchased under two authorizations covering up to 50 million and 75 million shares of common stock approved by the Board of Directors and publicly announced by the Company on August 6, 2007, and November 7, 2007, respectively. Unless modified or revoked by the Board, the authorizations do not expire.


ITEM 6.		SELECTED FINANCIAL DATA

Information in response to this Item 6 can be found in the 2007 Annual Report to Stockholders under “Financial Review” in Table 1 on page 36. 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 2007 Annual Report to Stockholders under “Financial Review” on pages 34-71. 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 2007 Annual Report to Stockholders under “Financial Review – Risk Management – Asset/Liability and Market Risk Management” on pages 60-63. 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 2007 Annual Report to Stockholders under “Financial Statements” on pages 74-129 and under “Quarterly Financial Data” on page 130. 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 2007 Annual Report to Stockholders under “Controls and Procedures” on pages 72-73. 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 57)

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 6 years.

David A. Hoyt (age 52)

Senior Executive Vice President 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 26 years.

Richard M. Kovacevich (age 64)

Chairman since June 2007;

Chairman and Chief Executive Officer from August 2005 to June 2007;

Chairman, President and Chief Executive Officer from April 2001 to August 2005.

Mr. Kovacevich has served with the Company or its predecessors for 22 years.

Richard D. Levy (age 50)

Executive Vice President and Controller since February 2007;

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

Senior Vice President and Controller of New York Life Insurance Company from September 1997 to August 2002.

Mr. Levy has served with the Company for 5 years.

Michael J. Loughlin (age 52)

Executive Vice President (Chief Credit 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 26 years.

Mark C. Oman (age 53)

Senior Executive Vice President since August 2005;

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

Group Executive Vice President (Mortgage and Home Equity) from November 1998 to August 2002;

Chairman of Wells Fargo Home Mortgage, Inc. (formerly known as Norwest Mortgage, Inc.) February 1997 until

the merger with Wells Fargo Bank, N.A. in May 2004.

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

James M. Strother (age 56)

Executive Vice President and General Counsel since January 2004;

Deputy General Counsel from June 2001 to December 2003.

Mr. Strother has served with the Company or its predecessors for 21 years.

John G. Stumpf (age 54)

President and Chief Executive Officer since June 2007;

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 26 years.

Carrie L. Tolstedt (age 48)

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 18 years.

Julie M. White (age 53)

Group Executive Vice President (Human Resources) since June 2007;

Executive Vice President (Human Resources Wells Fargo Home and Consumer Finance Group) from March 1998

to June 2007.

Ms. White has served with the Company or its predecessors for 21 years.

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: Lloyd H. Dean, Enrique Hernandez, Jr., Robert L. Joss, 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 New York Stock Exchange rules. The Board of Directors has determined, in its business judgment, that each member of the Committee is financially literate, as required by New York Stock Exchange rules, and that each qualifies as an “audit committee financial expert” as defined by Securities and Exchange Commission 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 2008 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 2008 Proxy Statement under “Item 1– Election of Directors – Compensation Committee Interlocks and Insider Participation” and “–Director Compensation,” under “Executive Compensation” (other than “Human Resources Committee – Executive Compensation Process and Procedures”) 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 2008 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 2008 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 2008 Proxy Statement under “Item 2 – 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, include the notes thereto, and the report of the independent registered public accounting firm thereon, are set forth on pages 74 through 129 of the 2007 Annual Report to Stockholders, incorporated herein 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.

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 29, 2008.


	WELLS FARGO & COMPANY
	By:	/s/ JOHN G. STUMPF
		John G. Stumpf
		President and Chief 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 29, 2008



	By:	/s/ RICHARD D. LEVY
		Richard D. Levy
		Executive Vice President and Controller (Principal Accounting Officer) February 29, 2008

The Directors of Wells Fargo & Company listed below have duly executed powers of attorney empowering Philip J. Quigley to sign this document on their behalf.


		John S. Chen		Nicholas G. Moore
		Lloyd H. Dean		Donald B. Rice
		Susan E. Engel		Judith M. Runstad
		Enrique Hernandez, Jr.		Stephen W. Sanger
		Robert L. Joss		John G. Stumpf
		Richard M. Kovacevich		Susan G. Swenson
		Richard D. McCormick		Michael W. Wright
		Cynthia H. Milligan



	By:	/s/ PHILIP J. QUIGLEY
		Philip J. Quigley
		Director and Attorney-in-fact February 29, 2008

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)	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(d).

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 to the Company’s Current Report on Form 8-K filed May 2, 2005.

	Amendment to Long-Term Incentive Compensation Plan, effective August 1, 2005.	Incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.

	Amendment to Long-Term Incentive Compensation Plan, effective August 4, 2006.	Incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

	Amendment to Long-Term Incentive Compensation Plan, effective January 1, 2007.	Incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.

	Amendment to Long-Term Incentive Compensation Plan, effective February 28, 2007.	Incorporated by reference to Exhibit 10(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

	Amendments to Long-Term Incentive Compensation Plan, effective January 1, 2008.	Filed herewith.

	Action of Human Resources Committee Specifying “Fair Market Value” for February 27, 2007 Option Grants Under the Long-Term Incentive Compensation Plan and for Option Exercises Involving a Market Transaction.	Incorporated by reference to Exhibit 10(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

	Forms of Award Term Sheet for grants of restricted share rights.	Incorporated by reference to Exhibit 10(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999.


*		Management contract or compensatory plan or arrangement


Exhibit
Number	Description	Location

10(a)*	Forms of Non-Qualified Stock Option Agreement for executive officers:

	For grant to Richard M. Kovacevich on February 26, 2008;	Filed herewith.

	For grants on and after November 27, 2007;	Filed herewith.

	For grants on and after February 28, 2006, but prior to November 27, 2007;	Incorporated by reference to Exhibit 10(a) to the Company’s Current Report on Form 8-K filed March 6, 2006.

	For grants on August 1, 2005;	Incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K filed August 1, 2005.

	For grants in 2004 and on February 22, 2005;	Incorporated by reference to Exhibit 10(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

	For grants after November 2, 1998, through 2003; and	Incorporated by reference to Exhibit 10(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998.

	For grants on or before November 2, 1998.	Incorporated by reference to Exhibit 10(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997.

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

10(c)*	Wells Fargo Bonus Plan.	Incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.

10(d)*	Performance-Based Compensation Policy.	Incorporated by reference to Exhibit 10(d) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

10(e)*	Deferred Compensation Plan.	Incorporated by reference to Exhibit 10(f) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

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

	Amendment to Deferred Compensation Plan, effective September 26, 2006.	Incorporated by reference to Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

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

10(f)*	Directors Stock Compensation and Deferral Plan.	Filed herewith.

	Amendment to Directors Stock Compensation and Deferral Plan, effective January 22, 2008.	Filed herewith.


Exhibit
Number	Description	Location

10(f)*	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(g)*	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(h)*	1987 Director Option Plan for directors of the former Wells Fargo; and	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.

10(i)*	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(j)*	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(k)*	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(l)*	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.


Exhibit
Number	Description	Location

10(l)*	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(m)*	Supplemental 401(k) Plan.	Incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

	Amendment to Supplemental 401(k) Plan, effective August 4, 2006.	Incorporated by reference to Exhibit 10(e) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

10(n)*	Supplemental Cash Balance Plan.	Incorporated by reference to Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

10(o)*	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(p)*	Agreement between the Company and Richard M. Kovacevich dated March 18, 1991.	Incorporated by reference to Exhibit 19(e) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1991.

	Amendment effective January 1, 1995, to the March 18, 1991, agreement between the Company and Richard M. Kovacevich.	Incorporated by reference to Exhibit 10(c) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.

	Cancellation Agreement, effective February 28, 2006, between the Company and Richard M. Kovacevich.	Incorporated by reference to Exhibit 10(b) to the Company’s Current Report on Form 8-K filed March 6, 2006.

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.

10(s)*	Form of severance agreement between the Company and Richard M. Kovacevich and Mark C. Oman.	Incorporated by reference to Exhibit 10(ee) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998.

	Amendment effective January 1, 1995, to the March 11, 1991, agreement between the Company and Richard M. Kovacevich.	Incorporated by reference to Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.

	Cancellation Agreement, effective December 21, 2005, between the Company and Richard M. Kovacevich.	Incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K filed December 22, 2005.

	Cancellation Agreement, effective November 28, 2006, between the Company and Mark C. Oman.	Incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K filed December 4, 2006.


Exhibit
Number	Description	Location

10(t)*	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(u)*	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(v)	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.	Filed herewith.

10(w)*	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(x)	Non-Qualified Deferred Compensation Plan for Independent Contractors.	Filed herewith.

10(y)*	Description of Chairman/CEO Retirement Policy.	Filed herewith.

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



	Year ended December 31,
	2007		2006		2005		2004		2003

Including interest
on deposits		1.81		2.01		2.51		3.68		3.63
Excluding interest
on deposits		2.85		3.38		4.03		5.92		5.76



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



	Year ended December 31,
	2007		2006		2005		2004		2003

Including interest on deposits		1.81		2.01		2.51		3.68		3.62
Excluding interest on deposits		2.85		3.38		4.03		5.92		5.74


Exhibit
Number	Description	Location

13	2007 Annual Report to Stockholders, pages 33 through 129.	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.

Exhibit 10(a)
Amendments to Long-Term Incentive Compensation Plan

The Wells Fargo & Company Long-Term Incentive Compensation Plan is amended effective as of January 1, 2008 as set forth below. None of these amendments shall apply to Awards and to portions of Awards that were outstanding and vested prior to January 1, 2005. As indicated below, some of these amendments shall apply only to Awards granted on or after January 1, 2008.

1. The following new definition is inserted in Section 2.1, and all subsequent definitions in that section are relettered accordingly:

(bb)

“Specified Employee” means a Participant who is a “specified employee” within the meaning of Treas. Reg. §1.409A-1(i), as determined in a uniform manner by the Company or its duly authorized representative for purposes of this Plan and all other nonqualified deferred compensation plans maintained by the Company and its affiliates.

2. The following is substituted for the third sentence of Section 6.5:

Payment shall be made in a single lump sum on such date after the end of the applicable Performance Cycle as the Committee establishes at the time the Award is granted, subject to such terms and conditions and in such form as may be prescribed by the Committee. The payment date so established by the Committee shall not be later than March 1 of the year after the year in which the Performance Cycle ends.

3. The phrase “or Restricted Share Rights,” is deleted from the last sentence of Section 6.5.

4. With respect to Awards granted on or after January 1, 2008 only, the following new sentence is added at the end of Section 9.2:

Notwithstanding anything in this Section 9.2 to the contrary, settlement of Restricted Share Rights shall be completed not later than March 1 of the year after the year in which the vesting restrictions lapse on such Restricted Share Rights.

5. The following is added at the end of Section 9.3:

Any dividend equivalents payable pursuant to this Section 9.3 shall be paid no later than March 1 of the year after the year in which the applicable dividend record date occurs.

6. With respect to Awards granted on or after January 1, 2008 only, Section 9.4 is revised to read as follows:

9.4 Termination of Employment . Unless the Committee provides otherwise:

(a)

Due to Death or Disability . If a Participant ceases to be an Employee by reason of the Participant’s death or permanent disability, all restrictions on

			the Restricted Share Rights of the Participant shall lapse in accordance with the terms of the Award as determined by the Committee.

	(b)		Due to Reasons Other Than Death or Disability . If a Participant ceases to be an Employee for any reason other than death or permanent disability, all Restricted Share Rights of the Participant and all rights to receive dividend equivalents thereon shall immediately terminate without notice of any kind and shall be forfeited by the Participant.

7. The following new Section 9.5 is added:

9.5 Settlement of Rights Granted Prior to January 1, 2008 . Notwithstanding anything in this Section 9 or in the applicable Award Agreements to the contrary, Restricted Share Rights granted prior to January 1, 2008 that are outstanding on or after that date and that were not earned and vested prior to January 1, 2005 (“Transition Awards”) shall be subject to the following terms and conditions:

	(a)		Settlement of the portion of a Transition Award that vests on a scheduled vesting date shall occur on that scheduled vesting date unless earlier payment is required pursuant to subsection (d) below. Consistent with the regulations under Code §409A, payment shall be treated as made on the scheduled vesting date if it is actually made not later than the later of (i) December 31 of the year in which the scheduled vesting date occurs or (ii) the fifteenth day of the third month after the month in which the scheduled vesting date occurs.

	(b)		If a Participant ceases to be an Employee by reason of Retirement prior to the scheduled vesting date for any portion of a Transition Award and the Transition Award provides for earlier vesting due to Retirement, the Restricted Share Rights granted by such portion shall be settled prior to the scheduled vesting date only if the Participant’s termination of employment is a “separation from service” within the meaning of Treas. Reg. §1.409A-1(h).

	(c)		If a Participant ceases to be an Employee by reason of permanent disability prior to the scheduled vesting date for any portion of a Transition Award, the Restricted Share Rights granted by such portion shall be settled prior to the scheduled vesting date only if the Participant’s termination of employment is a “separation from service” within the meaning of Treas. Reg. §1.409A-1(h) or if the Participant is considered disabled within the meaning of Treas. Reg. §1.409A-3(i)(4).

	(d)		If a Participant’s employment terminates due to death, due to a Retirement that qualifies for early settlement as provided in subsection (b) above, or due to a permanent disability that qualifies for early settlement as provided in subsection (c) above, the portions of the Participant’s outstanding Transition Awards that have a scheduled vesting date later than the July 1

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next following the date on which the Participant’s employment terminates shall be paid on such July 1; provided, however, that if:

	(i)		the Participant’s employment termination is due to the Participant’s “separation from service” within the meaning of Treas. Reg. §1.409A-1(h) and is not due to the Participant’s death or disability (within the meaning of Treas. Reg. §1.409A-3(i)(4)); and

	(ii)		such July 1 is less than six months after the date of the Participant’s “separation from service”; and

	(iii)		at the time of his or her “separation from service” the Participant is a Specified Employee; then the Participant’s outstanding Transition Awards shall be settled on the earlier of their scheduled vesting date or six months after the date of the Participant’s “separation from service”.

(e)

Notwithstanding the foregoing provisions of this Section 9.5, if a Participant elected pursuant to Section 22 to defer delivery of any vested Shares payable pursuant to a Transition Award, such Shares shall be delivered in accordance with the terms and conditions set forth in Appendix A to this Plan.

8. The following is added at the end of Section 10.2:

The terms and conditions of any substitute or replacement award shall meet all requirements necessary to prevent such substitute or replacement awards from being treated as the grant of a new stock right or a change in the form of payment within the meaning of the final regulations under Code §409A.

9. The following is added at the end of Section 11.2:

10. The following new Section 13.3 is added:

13.3

Notwithstanding anything in this Section 13 to the contrary, if any portion of an Award that is subject to Code §409A may be distributed upon the event of a Participant’s termination of employment (including but not limited to a termination of employment that qualifies as a Retirement), the Participant will be deemed to have a termination of employment with respect to such portion of the Award if and only if the Participant has a “separation from service” within the meaning of Treas. Reg. §1.409A-1(h).

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11. The following is added at the end of Section 14:

Notwithstanding anything in this Section 14 to the contrary, payment of the portion of any Award that is subject to Code §409A shall not be accelerated pursuant to this Section 14 unless the event also qualifies as a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Treas. Reg. §1.409A-3(i)(5)(a “qualifying event”). In the event payment of Shares attributable to Restricted Share Rights is accelerated pursuant to this Section 14, such payment shall be made 30 days after the qualifying event.

12. The following is added at the end of Section 15:

Notwithstanding anything in this Section 15 to the contrary:

(A) This Section 15 shall apply to Restricted Share Right, Performance Share or Performance Unit Awards granted on or after January 1, 2007 without regard to whether the Participant ceased to be an Employee due to Retirement.

(B) Payment of the portion of any Restricted Share Right, Performance Share or Performance Unit Award that is subject to Code §409A shall not be accelerated pursuant to this Section 15 unless the changes in the Board also qualify as a change in the effective control of the Company within the meaning of Treas. Reg. §1.409A-3(i)(5)(vi).

(C) Except as provided in (D) below, Shares attributable to Restricted Share Rights that are payable to a Participant pursuant to this Section 15 shall be paid 30 days after the Participant’s termination of employment.

(D) Notwithstanding (C) above, the portion of any Restricted Share Right, Performance Share or Performance Unit Award that is subject to Code §409A and becomes payable to an employee pursuant to this Section 15 shall be paid six months after the date of such termination of employment if the employee is a Specified Employee.

13. Section 22 is amended to read as follows:

22.

Deferral of Payments . With respect to Awards granted before January 1, 2008, the Committee may provide for the deferred delivery of Shares upon settlement, vesting or other events with respect to Restricted Stock or Restricted Share Rights, or in payment or satisfaction of an Award of Performance Shares or Performance Units. The terms and conditions of any such deferred delivery occurring on or after January 1, 2008, and of any deferral election made on or after such date, shall be as set forth in the applicable Award Agreement and deferral election form, subject, however, to the terms and conditions set forth in Appendix A to this Plan. This section shall not apply and no right to defer delivery shall be given with respect to Awards granted on or after that date.

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14. A new subsection (d) is added to Section 25:

(d)

Any adjustment to Options or Stock Appreciation Rights made pursuant to this Section 25 shall satisfy all requirements necessary to prevent the adjusted Awards from being treated as the grant of a new stock right or a change in the form of payment within the meaning of the final regulations under Code §409A.

15. A new Section 26 is added:

26. Severability. If any provision of this Plan is determined to be illegal or invalid (in whole or in part) for any reason, or if the Plan Administrator cannot reasonably interpret any provision so as to avoid violation of Code §409A or constructive receipt of compensation under this Plan before the actual receipt of such compensation, this Plan shall be construed and enforced as if the provision had not been included.

16. A new Section 27 is added:

27. Interpretation. This Plan, as amended, is intended to satisfy the requirements of Code §409A and applicable guidance thereunder with respect to compensation payable pursuant to this Plan that was not outstanding and vested prior to January 1, 2005. It is not intended to materially modify the terms and conditions applicable to any other amounts payable pursuant to this Plan. This Plan shall be construed and administered accordingly.

17. A new Section 28 is added:

28. No Representation Made Regarding Code §409A Compliance . Notwithstanding any other provision in the Plan, the Company makes no representations that the Awards granted under the Plan shall be exempt from or comply with Code §409A and makes no undertaking to preclude Code §409A from applying to Awards granted under the Plan.

18. A new Appendix A is added:

APPENDIX A

The following terms and conditions shall apply to the deferred delivery of Shares attributable to Restricted Share Rights granted prior to January 1, 2008, to the extent such Restricted Share Rights were not earned and vested prior to January 1, 2005.

1. Deferral Elections. A Participant who wishes to defer the receipt of Shares payable pursuant to Restricted Share Rights must file an irrevocable deferral election, subject to the following:

	(a)		Separate deferral elections shall be required for the Restricted Share Rights granted pursuant to each Award.

	(b)		A deferral election must apply to all of the Restricted Share Rights that are scheduled to vest in a single calendar year under an Award.

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	(c)		The deferral election must be completed and filed more than 12 months prior to the date on which the affected Restricted Share Rights are scheduled to vest, unless the deferral election is made prior to January 1, 2009, in which case the deferral election may be filed at any time prior to the year in which the Restricted Share Rights are scheduled to vest. Deferral elections made on or after January 1, 2009 will not take effect until 12 months after they are made and shall be void if the Participant’s employment terminates before the end of such 12-month period.

	(d)		The deferral election shall indicate the affected Award, the calendar year in which the affected Restricted Share Rights under the indicated Award are scheduled to vest, and the calendar year in which the Shares payable pursuant to the affected Restricted Share Rights are to be paid (the “payment calendar year”). The payment calendar year shall not be later than the calendar year that includes the 10th anniversary of the affected Restricted Share Rights’ vesting date. With respect to elections made after December 31, 2008, the payment calendar year for Restricted Share Rights vesting prior to July 1st shall not be earlier than the year that includes the 5th anniversary of the calendar year in which the affected Restricted Share Rights will vest, and the payment calendar year for Restricted Share Rights vesting on or after July 1st shall not be earlier than the year that includes the 6th anniversary of the calendar year in which the affected Restricted Share Rights will vest.

Payment.

	(a)		Except as otherwise provided in this Section 2, Shares deferred pursuant to an election made in accordance with Section 1 above shall be distributed in July of the elected payment calendar year.

	(b)		Notwithstanding the payment calendar year elected by a Participant:

(i)

If (ii) below does not apply and the Participant has a “separation from service” with respect to the Company and its affiliates within the meaning of Treas. Reg. §1.409A-1(h), or the Participant dies prior to such a separation from service, the Shares deferred pursuant to a Participant’s deferral elections shall be paid in the first July following such separation from service or death; provided, however, that if:

	(A)		the Participant’s employment termination is due to the Participant’s “separation from service” and not the Participant’s death; and

	(B)		the first day of such first July is less than six months after the date of the Participant’s “separation from service”; and

	(C)		at the time of his or her “separation from service” the Participant is a Specified Employee;

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			then the deferred Shares shall be paid six months after the date of the Participant’s “separation from service”.

	(ii)		If the Participant has a separation from service that qualifies as a Retirement, the Shares deferred pursuant to the Participant’s deferral elections shall be paid in July of the year after the year in which the Participant’s separation from service occurs.

Form of Non-Qualified Stock Option Agreement for Grant to Richard M. Kovacevich on February 26, 2008

WELLS FARGO & COMPANY LONG-TERM INCENTIVE COMPENSATION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT FOR
FEBRUARY 26, 2008 GRANT TO RICHARD M. KOVACEVICH

Grant Date:

02/26/2008

Expiration Date:

02/26/2018

Number of Shares:

2,000,000

Exercise Price:

$ 31.40

1. Grant of Option. Wells Fargo & Company (the “Company”) has granted to you an option (“Option”) to purchase 2,000,000 shares (the “Shares”) of Wells Fargo & Company common stock (“Common Stock”). 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 02/26/2008 and, except as provided in paragraph 3 below, ends on 02/26/2018. Except as provided in paragraph 3 below, this Option becomes exercisable (“vests”) in full on 02/26/2011 (“vesting date”) 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 are available on a reasonable basis for consultation with management and to represent the Company with customers, the community and team members, (ii) you comply with the terms of the attached Wells Fargo Agreement Regarding Trade Secrets, Confidential Information, And Non-Solicitation, and (iii) 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 and as such term may be updated in a proxy statement for a subsequent annual stockholders’ meeting. 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. Disability, Death or Discharge for Cause. If you become permanently disabled (as determined by the Committee) before the vesting date, the Option is immediately vested and exercisable and will remain exercisable until the Option expires or until one year after your date of death, whichever occurs first. If you die before the vesting date, the Option is immediately vested and exercisable and will remain exercisable until one year after your date of death. In the event of your death, whether before or after vesting, your Beneficiary as determined in accordance with the Plan may exercise the Option until one year after your date of death or until the Option expires, whichever occurs first. If before the vesting date you fail to satisfy any vesting condition in accordance with paragraph 2, the Option will expire immediately. If you are discharged as an Employee for cause, the Option will expire immediately.

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 the Company to Continue Your Employment. Nothing in this Agreement gives you any right to continued employment and the Company 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. 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.

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

I. Introduction

In consideration for the stock option grant awarded to me on February 26, 2008 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

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.

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 February 26, 2011 (“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

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.


/s/ Richard M. Kovacevich		February 28, 2008
Richard M. Kovacevich		Date

Form of Non-Qualified Stock Option Agreement for Executive Officers for Grants on and after November 27, 2007

WELLS FARGO & COMPANY LONG-TERM INCENTIVE COMPENSATION PLAN
FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT FOR [GRANT DATE] GRANTS


Grant Date:		Expiration Date:

		Exercise Price:

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 [grant date] and, except as provided in paragraph 3 below, ends on [ten years from grant 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:


1/3	of Shares on	[first anniversary of grant date]
1/3	of Shares on	[second anniversary of grant date]
1/3	of Shares on	[third anniversary of grant date]

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 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 at any time within three (3) months after the 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.

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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.

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.

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Exhibit 10(f)
Amendment to Directors Stock Compensation and Deferral Plan

Effective January 22, 2008, Article III of the Directors Stock Compensation and Deferral Plan was amended to read in its entirety as follows:

	III.		SHARES AVAILABLE FOR AWARDS

			Subject to Article VII and the following proviso, no more than 1,600,000 shares of Common Stock (as adjusted to reflect the August 11, 2006 two-for-one stock split) shall be awarded or made subject to stock options awarded under the Plan; provided, however, that (i) effective January 22, 2008, an additional 100,000 shares of Common Stock shall be available for, but limited to, deferrals of Cash Compensation and dividend credits to Deferred Stock Accounts; and (ii) shares subject to options granted hereunder (or assumed hereby) that are cancelled or expire without being fully exercised and shares used to pay the exercise price for options granted hereunder (or assumed hereby) may again be made subject to options granted under this Plan with no effect on the foregoing limit. Shares awarded or made subject to options hereunder may consist, in whole or in part, of authorized but unissued Common Stock or treasury Common Stock not reserved for any other purpose. For purposes of this Article III, options that are assumed from a Prior Plan shall be deemed granted hereunder.

Directors Stock Compensation and Deferral Plan

WELLS FARGO & COMPANY
DIRECTORS STOCK COMPENSATION AND DEFERRAL PLAN

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

PURPOSE, HISTORY AND EFFECTIVE DATES

	A.		Purpose .

			The purpose of the Wells Fargo & Company Directors Stock Compensation and Deferral Plan (the “Plan”) is to provide non-employee members of the Board of Directors of the Company with equity compensation and compensation deferral opportunities in consideration for personal services rendered in their capacity as directors of the Company. The Plan is also intended to aid in attracting and retaining individuals of outstanding abilities and skills for service on the Company’s Board of Directors.

	B.		Prior Plans .

			The Plan superseded the 1999 Directors Stock Option Plan, the 1999 Directors Formula Stock Award Plan and the 1999 Deferral Plan for Directors (the “Prior Plans”) effective on the date that the Plan was approved by the Company’s stockholders (the “Effective Date”). Options outstanding on the Effective Date and amounts deferred under the Prior Plans before the Effective Date of the Plan were assumed by the Plan on such date. The terms of such options and deferrals remain the same as applicable thereto under the Prior Plans, unless and until amended under the terms of the Plan.

	C.		Restatement .

			Pursuant to its authority to amend the Plan, the Committee has amended and restated the Plan effective January 1, 2008 to address the requirements of Code §409A. The Committee does not intend the amended and restated Plan document, or any subsequent amendment, to materially modify the Plan with respect to Deferral Account balances attributable to amounts earned and vested prior to January 1, 2005. To the extent necessary to avoid such a material modification, any provision of the amended and restated document or any subsequent amendment that otherwise would so modify the Plan shall be construed and enforced as applicable only to the portion of Deferral Account balances attributable to amounts that were not earned and vested prior to that date.

II.		DEFINITIONS

		When used in this Plan, the following capitalized terms shall have the meanings indicated below:


Affiliate		Any entity other than the Company that would be treated as part of a “single employer,” within the meaning of Code §414(b) or (c), that includes the Company.

Award Date		The day of the Company’s annual meeting of stockholders in each year, beginning in 2003.

Board		The Board of Directors of the Company.

Cash Compensation		The annual retainer fees and Board and committee meeting fees.

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

Committee		The Governance and Nominating Committee or any successor committee of the Board; provided, however, that if at the time of any Committee action, any member of such committee does not satisfy the requirements applicable to committee approval contained in regulations of the Securities and Exchange Commission promulgated under Section 16 of the Securities Exchange Act of 1934, and applicable interpretations thereof, any such action must be taken or approved by the Board.

Common Stock		Common Stock of the Company, $1 2/3 par value.

Company		Wells Fargo & Company.

Deferral Account		A bookkeeping account that reflects the Company’s deferred compensation obligation under this Plan to each Non-Employee Director who is a Deferral Participant. A Deferral Account includes all of the Deferral Participant’s Deferred Cash Accounts and Deferred Stock Accounts.

Deferral Election		An irrevocable election by a Non-Employee Director to defer receipt of Eligible Compensation. Separate Deferral Elections shall be required for the deferral of Formula Stock Awards and the deferral of any other Eligible Compensation. Deferral Elections applicable to Eligible Compensation for a Deferral Year shall not apply to Eligible Compensation for any other Deferral Year.

Deferral Participant		Any Non-Employee Director who files a Deferral Election and has not received full distribution of his or her Deferral Account.

Deferral Year		The calendar year in which a Deferral Participant earns the Eligible Compensation (other than Retirement Conversion


		Amounts) that is subject to a Deferral Election.

Deferred Cash Account		A sub-account of a Deferral Account created for a Deferral Year, to which the Deferral Participant may allocate all or a portion of that Deferral Year’s deferred Cash Compensation and any other Eligible Compensation that the Board deems allocable to this subaccount.

Deferred Stock Account		A sub-account of a Deferral Account created for a Deferral Year (i) to which the Deferral Participant may allocate all or a portion of that Deferral Year’s deferred Cash Compensation and any other Eligible Compensation that the Board deems allocable to this subaccount, and (ii) to which the Plan automatically allocates all of that Deferral Year’s deferred Formula Stock Award. The sub-account to which any deferred Retirement Conversion Amounts was credited under a Prior Plan also is a Deferred Stock Account.

Effective Date		The date that the Plan was approved by the Company’s stockholders.

Eligible Compensation		Eligible compensation includes Cash Compensation, Formula Stock Awards, Retirement Conversion Amounts and any other compensation that, prior to the beginning of a Deferral Year, the Board has designated as Eligible Compensation for that Deferral Year.

Fair Market Value		The New York Stock Exchange-only closing price per share of the Common Stock for the relevant date (e.g., option grant date or exercise date, stock award date, etc., as the case may be) or, if the New York Stock Exchange is not open on the relevant date, the New York Stock Exchange-only closing price per share of the Common Stock for the trading day immediately preceding the relevant date.

Formula Stock Award		Any Award made pursuant to the Formula Stock Award Program described in Article V of the Plan.

Interest		The earnings credited to a Deferred Cash Account. For Deferred Cash Accounts relating to Deferral Years 2006 and earlier, the Interest for a calendar year is determined using the average annual rate for 3-Year Treasury Notes for the immediately preceding calendar year plus 2%.

		For Deferred Cash Accounts relating to Deferral Years 2007 and later, the Interest for a calendar year is determined using the


		average annual rate for 10-Year Treasury Notes for the immediately preceding calendar year, up to a maximum of 120% of the “Federal long-term rate” for annual compounding prescribed under §1274(d) of the Code for January of the calendar year for which the Interest is being credited.

Non-Employee Director		Any member of the Board of Directors of the Company who is not an employee of the Company or of a subsidiary of the Company.

Plan		Wells Fargo & Company Directors Stock Compensation and Deferral Plan.

Plan Administrator		The Company’s Director of Human Resources.

Prior Plans		The Wells Fargo & Company 1999 Directors Stock Option Plan, 1999 Directors Formula Stock Award Plan and 1999 Deferral Plan for Directors.

Retirement Conversion Amount		A dollar amount equal to the accrued benefits under the former Wells Fargo & Company Directors’ Retirement Plan or the Norwest Corporation Retirement Plan for Non-Employee Directors, calculated as if the director’s service on the Board had ended as of November 2, 1998.

Separation from Service		A Non-Employee Director shall be deemed to have had a Separation from Service at the time his or her service as a member of the Board ceases, or if later, when the Non-Employee Director is deemed to have had a “separation from service” within the meaning of Code §409A and applicable regulations thereunder. Generally, a Separation from Service will not occur within the meaning of Code §409A if the Non-Employee Director becomes an employee or continues to perform other services for the Company as an independent contractor.

III.		SHARES AVAILABLE FOR AWARDS

		Subject to Article VII, no more than 1,600,000 shares of Common Stock (as adjusted to reflect the August 11, 2006 two-for-one stock split) shall be awarded or made subject to stock options awarded under the Plan; provided, however, that shares subject to options granted hereunder (or assumed hereby) that are cancelled or expire without being fully exercised and shares used to pay the exercise price for options granted hereunder (or assumed hereby) may again be made subject to options granted under this Plan with no effect on the foregoing limit. Shares awarded or made subject to options hereunder may consist, in whole or in part, of authorized but unissued Common Stock or treasury

		Common Stock not reserved for any other purpose. For purposes of this Article III, options that are assumed from a Prior Plan shall be deemed granted hereunder.

IV.		STOCK OPTION AWARD PROGRAM

	A.		Formula Award of Options .

			Each Non-Employee Director who is elected or re-elected to the Board of Directors by the stockholders of the Company shall automatically receive an option as of each Award Date to purchase that number of shares of Common Stock with a Fair Market Value of $57,000 (or such other greater or lesser dollar amount, not to exceed $150,000, as the Committee shall specify) on such date determined in accordance with the Black-Scholes option pricing model but rounded up to the next whole share. A Non-Employee Director who joins the Board of Directors on any date other than the Award Date shall automatically receive as of such other date an option to purchase Common Stock with the same value determined as of such other date, prorated to reflect the number of months (rounded up to the next whole month) remaining until the next Award Date. The exercise price per share for each stock option granted under this Plan shall be the Fair Market Value of the Common Stock as of the date the option is granted.

	B.		Terms of Options .

Exercise Price and Vesting . Each option granted under the Plan shall have an exercise price per share equal to the Fair Market Value as of the grant date of the option. The exercise price shall be payable (i) entirely in cash or (ii) entirely in Common Stock valued at Fair Market Value on the date the option is exercised, in accordance with procedures determined by the Plan Administrator, plus an amount of cash sufficient to avoid the purchase of a fractional share of Common Stock. If the option exercise price is paid using Common Stock, it (i) must have been owned by the optionee for at least six months prior to the date of exercise or purchased by the optionee in the open market; and (ii) must not have been used in a stock swap transaction within the preceding six months. Regardless of how the option exercise price is paid, withholding taxes arising out of the option exercise, if any, may be paid in cash or in Common Stock. To the extent that no violation of Section 16(b) of the Securities Exchange Act of 1934 or any other law would result, the payment of the exercise price of options granted hereunder may also be made by delivering a properly executed exercise notice together with irrevocable instructions to a broker, or some other communication acceptable to the Company, requiring the delivery to the Company of sale or loan proceeds sufficient to pay the option exercise price, together with any related withholding taxes if no other payment for such taxes satisfactory to the Company has been arranged; provided that such exercise shall be conditioned upon, and no

			shares shall be issued pursuant to such exercise until, receipt of such amount by the Company.

	2.		Term and Exercisability . Except as set forth in paragraph 3 below, options granted under the Plan shall become fully exercisable six months after their grant date and shall remain exercisable until the tenth anniversary of their grant date; provided that (i) if a Non-Employee Director dies, all outstanding options previously granted to him or her under this Plan shall become immediately exercisable and remain exercisable until the earlier of (a) the first anniversary of the Non-Employee Director’s death or (b) the tenth anniversary of the option grant date and (ii) if a Non-Employee Director leaves the Board for cause, all outstanding options granted to such Non-Employee Director under this Plan shall immediately terminate and be cancelled as of the date he or she ceases to be a director. At any time during which an option granted under the Plan is exercisable, the option may be exercised in whole or in part.

	3.		Reload Award . With respect to an option granted under Section A of Article IV of the Plan on or before September 27, 2004 (an “Original Option”), if while serving on the Board, a Non-Employee Director exercises the Original Option and pays the option exercise price using Common Stock in accordance with the terms of the Plan, the Non-Employee Director shall automatically be granted a “reload” stock option on the date of such exercise. The reload stock option grant shall equal the number of whole shares of Common Stock used in the swap exercise to pay the option exercise price. Subject to the provisions of Section B of Article IV, the reload stock option may be exercised between the date of grant and the date of expiration of the Original Option. No reload stock option shall be granted if the Original Option is exercised after a Non-Employee Director leaves the Board of Directors of the Company for any reason. No reload stock option shall be granted upon exercise of a reload option or with respect to an option granted under Section A of Article IV of the Plan on or after September 28, 2004.

	4.		Transferability . No option granted under the Plan shall be transferred or assigned other than (i) by will or the laws of descent and distribution, (ii) to the extent required pursuant to a domestic relations order that satisfies the requirements of Rule 16a-12 under the Securities Exchange Act of 1934, or any successor rule, or (iii) by designation of a beneficiary under this paragraph 4. An optionee may, by completing and signing a written beneficiary designation form which is delivered to and accepted by the Company, designate a beneficiary to exercise and receive any outstanding options upon the optionee’s death. If at the time of the optionee’s death there is not a fully effective beneficiary designation form on file, or if the designated beneficiary does not survive the optionee, the legal representative of the optionee’s estate shall have the right to exercise the

			option. During the lifetime of an optionee, options granted hereunder may be exercised only by the optionee.

	5.		Tax Status of Options . All options granted under the Plan shall be non-qualified stock options not entitled to preferential tax treatment under Code §422.

FORMULA STOCK AWARD PROGRAM

Formula Stock Award . Commencing with the Award Date, each Non-Employee Director shall automatically receive shares of Common Stock on such date in the amounts (but rounded up to the next whole share) set forth in paragraph 1, 2 or 3 below (as applicable and subject to paragraph 4); provided, however, that if a Non-Employee Director has not attended at least one Board meeting as a Non-Employee Director on or before the date on which such award would otherwise be payable, such Non-Employee Director shall instead be eligible to receive the award provided as of the next succeeding date such awards are payable.

	1.		Election at Annual Meeting . A Non-Employee Director who has served as a director of the Company for at least the entire month of April in each year and is elected to the Board by the stockholders of the Company at the annual meeting held in such month, or held later within such year, shall receive as of the date of the meeting Common Stock with an aggregate Fair Market Value of $50,000 as of the date of the annual meeting.

	2.		After Annual Meeting Through September 30 . A Non-Employee Director who first joins the Board after the annual meeting of stockholders in each year but on or before September 30 in such year shall receive as of such September 30 Common Stock with an aggregate Fair Market Value of $50,000 as of September 30 ^th .

	3.		October 1 Through March 31 . A Non-Employee Director who first joins the Board on or after October 1 in each year but on or before March 31 in the following year shall receive as of the date of the next succeeding annual meeting of stockholders Common Stock with an aggregate Fair Market Value of $25,000 as of such succeeding annual meeting.

	4.		Adjustment to Number of Shares . The Committee may increase (by no more than 200%) or decrease the dollar amounts used to determine the number of shares to be granted under paragraphs 1, 2 and 3 above.

	B.		Deferral of Awards .

			A Non-Employee Director may elect, in accordance with the terms of Article VI of the Plan, to defer receipt of all or a portion of the shares of Common Stock such director has a right to receive under this Article V of the Plan.

	C.		Transferability .

			No right to receive an award hereunder shall be transferable or assignable other than (i) by will or the laws of descent and distribution, (ii) to the extent required pursuant to a domestic relations order that satisfies the requirements of Rule 16a-12 under the Securities Exchange Act of 1934, or any successor rule, or (iii) by designation of a beneficiary under Article VI of the Plan with respect to shares the receipt of which has been deferred thereunder.

VI.

DEFERRAL PROGRAM

	A.		Deferral Elections for Eligible Compensation Earned and Vested Prior to January 1, 2005 .

			Deferral Elections for Eligible Compensation earned and vested prior to January 1, 2005, were made pursuant to the terms of the Plan in effect at the time of the Deferral Election (and not as provided in Section B, below).

	B.		Deferral Elections for Eligible Compensation Not Earned and Vested Prior to January 1, 2005 .

			A Non-Employee Director may elect to defer all or any portion of his or her Eligible Compensation that was not earned and vested prior to January 1, 2005, by filing a Deferral Election for the Deferral Year in which such Eligible Compensation is earned in accordance with this Section B.

	1.		Content . A Deferral Election shall indicate i) the amount of Eligible Compensation for the Deferral Year to be deferred, ii) the allocation of deferred Cash Compensation (and any other Eligible Compensation that the Board deems allocable) between the Deferred Cash Account and the Deferred Stock Account, iii) when distribution of the deferred amounts will commence, and iv) the form of distribution. Separate Deferral Elections shall be required for the deferral of Formula Stock Awards and the deferral of other Eligible Compensation.

	2.		Election Timing . Subject only to the special rule for new Non-Employee Directors set forth in paragraph 3 below, Deferral Elections with respect to Eligible Compensation earned in a Deferral Year must be filed with the Company before the beginning of that Deferral Year. Deferral Elections applicable to Eligible Compensation for a Deferral Year shall not apply to Eligible Compensation for any other Deferral Year.

	3.		Newly Eligible Non-Employee Directors . A Non-Employee Director who has not previously been eligible to participate in any elective account balance plan (as defined in Treas. Reg. §1.409A-1(c)(2)(i)(A)) maintained

by the Company or an Affiliate for independent contractors (including directors), or whose previous participation in all such plans may be disregarded pursuant to Treas. Reg. §1.409A-2(a)(7)(ii), may file a Deferral Election applicable only to Eligible Compensation earned in the Deferral Year in which the Deferral Election is filed, but only if the Deferral Election is filed not more than thirty days after the date the individual first becomes a Non-Employee Director. Deferral Elections pursuant to this paragraph 3 shall be limited as follows:

	a.		If the Deferral Election is filed before the individual becomes a Non-Employee Director, the Deferral Election shall apply to all Eligible Compensation earned after the Deferral Election is filed and during the Deferral Year in which the Deferral Election is filed, including Cash Compensation and Formula Stock Awards.

	b.		If the Deferral Election is filed after the individual first becomes a Non-Employee Director but not more than thirty days after that event, the Deferral Election shall apply only to Cash Compensation earned in calendar quarters during the Deferral Year in which the Deferral Election is filed that begin after the calendar quarter in which the Deferral Election is filed. (For example, if an individual who becomes a new Non-Employee Director on May 22 ^nd files a Deferral Election on June 17 ^th , that Deferral Election will apply only to Cash Compensation for service from July 1 ^st through December 31 ^st of the year in which the Deferral Election is filed. It will not apply to any Formula Stock Award earned for that year.) Any Deferral Election subject to this subparagraph b that is filed later than September 30 ^th of the year of filing will have no effect.

Deferral Accounts .

	1.		Maintenance of Accounts . A Deferral Account will be maintained for each Deferral Participant. Within each Deferral Account, separate Deferred Cash Accounts and Deferred Stock Accounts will be maintained for each Deferral Year.

	2.		Cash/Stock Election . A Deferral Participant must elect, at the time of his or her Deferral Election, to allocate deferred Cash Compensation (and any other Eligible Compensation that the Board deems allocable) between the Deferred Cash Account and the Deferred Stock Account for the Deferral Year. Formula Stock Awards will be credited only to the Deferred Stock Account for the Deferral Year. Retirement Conversion Amounts were required under the Prior Plan to be credited to a Deferred Stock Account. Any Eligible Compensation other than Cash Compensation, Formula Stock Awards and Retirement Conversion Amounts that the Board does not deem allocable shall be credited as provided by the Board.

	3.		Deferred Cash Account . Eligible Compensation allocated to a Deferred Cash Account will be credited to that account as of the date the Eligible Compensation otherwise would have been paid.

	4.		Deferred Stock Account . Eligible Compensation allocated to a Deferred Stock Account will be credited to that account as of the date the Eligible Compensation would have otherwise been paid or realized. Cash amounts will be converted into share equivalents of Common Stock in the Deferred Stock Account based on the Fair Market Value of the Common Stock as of the day the compensation would have otherwise been paid or realized.

	5.		Interest . Deferred Cash Accounts will earn Interest. Interest will be compounded annually and will be credited on the last day of each calendar quarter. Interest will continue until all funds in the Deferred Cash Account have been distributed in accordance with Section D or E of this Article VI.

	6.		Dividend Equivalents . Each time a dividend is paid on the Common Stock, a Deferral Participant shall receive a credit to his or her Deferred Stock Account. The amount of the dividend credit shall be the number of share equivalents (rounded to the nearest one-hundredth) determined by multiplying the dividend amount per share by the number of share equivalents credited to the Deferral Participant’s Deferred Stock Account as of the record date for the dividend and dividing the product by the Fair Market Value of the Common Stock on the dividend payment date.

	7.		Vesting . Each Deferral Participant will, at all times, have a fully vested and non-forfeitable right to all amounts properly credited to his or her Deferral Account.

	D.		Distribution of Balances Attributable to Eligible Compensation Earned and Vested Prior to January 1, 2005 .

			Payment of the portion of a Deferral Participant’s Deferral Account that is attributable to Eligible Compensation earned and vested prior to January 1, 2005 shall be made as provided in this Section D.

Distribution from the Deferred Cash Account . A Deferral Participant’s Deferred Cash Account will be distributed in cash. Distribution of the balance attributable to a Deferral Election will be made in a lump sum or in up to 10 annual installments, as specified in that Deferral Election, as of: i) March 1 of the first calendar year following termination of the Deferral Participant’s service as a Non-Employee Director, or ii) March 1 of any other year elected by the Deferral Participant which begins at least 12 months following the year in which the deferred compensation would

			otherwise have been received, or iii) July 1 of the calendar year in which the Deferral Participant’s service as a Non-Employee Director terminates if such termination occurs on or before June 30; provided, however, that if July 1 installments are elected, subsequent annual installments shall be payable as of March 1 of each year thereafter. The amount of each installment distribution will be equal to the total amount of the account divided by the number of installments remaining to be made, including the current installment. Notwithstanding the foregoing, a Deferral Participant, while still a member of the Board, may elect one time to defer commencement of distribution of the portion of a Deferred Cash Account attributable to a Deferral Election until March 1 of any year so long as the new distribution commencement date (i.e., March 1 of the year so elected) is at least 36 months beyond the original March 1 distribution commencement date or 44 months beyond the original July 1 distribution commencement date, as applicable. To be effective, the election must be made by the Deferral Participant at least 12 months prior to the original March 1 or July 1 distribution commencement date, as applicable. A new distribution commencement election shall not change the form of distribution (lump sum or installments) originally elected by the Deferral Participant.

	2.		Distribution from the Deferred Stock Account . A Deferral Participant’s Deferred Stock Account will be distributed in whole shares of Common Stock. Distribution of the balance attributable to a Deferral Election will be made in a lump sum or in up to 10 annual installments as specified in that Deferral Election, as of: i) March 1 of the first calendar year following termination of the Deferral Participant’s service as a Non-Employee Director, or ii) March 1 of any other year elected by the Deferral Participant which begins at least 12 months following the year in which the deferred compensation would otherwise have been received, or iii) July 1 of the calendar year in which the Deferral Participant’s service as a Non-Employee Director terminates if such termination occurs on or before June 30; provided, however, that if July 1 installments are elected, subsequent annual installments shall be payable as of March 1 of each year thereafter. The amount of each installment distribution will be equal to the total amount of the account divided by the number of installments remaining to be made, including the current installment, rounded up to the nearest whole share and the whole number of shares so distributed shall be deducted from the total amount of the account. The final distribution will be rounded up to the nearest whole share. Notwithstanding the foregoing, a Deferral Participant, while still a member of the Board, may elect one time to defer commencement of distribution of the portion of a Deferred Stock Account attributable to a Deferral Election until March 1 of any year so long as the new distribution commencement date (i.e., March 1 of the year so elected) is at least 36 months beyond the original March 1 distribution commencement date or 44 months beyond the original July 1

			distribution commencement date, as applicable. To be effective, the election must be made by the Deferral Participant at least 12 months prior to the original March 1 or July 1 distribution commencement date, as applicable. A new distribution commencement election shall not change the form of distribution (lump sum or installments) originally elected by the Deferral Participant.

	3.		Death . If a Deferral Participant dies before receiving all distributions to which he or she is entitled under this Article VI of the Plan, all remaining distributions will be made in one lump sum. Such distribution will be made to the Deferral Participant’s beneficiary as determined pursuant to Section I of Article VI.

	4.		Change of Control . At the time of a Deferral Election, a Deferral Participant may also elect to have all amounts deferred pursuant to this Plan become payable immediately if (i) a third person, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner, directly or indirectly, of 25% or more of the combined voting power of the Company’s outstanding voting securities ordinarily having the right to vote for the election of the directors of the Company, or (ii) individuals who constitute the Board of the Company as of January 1, 1999 (Incumbent Board) cease for any reason to constitute at least two-thirds thereof, provided that any person becoming a director subsequent to said date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board shall be, for purposes of this clause (ii), considered as though such person were a member of the Incumbent Board. The value of a Deferral Participant’s Deferred Stock Account for purposes of a distribution under this paragraph 4 shall be the Fair Market Value of the Common Stock for a day selected by the Plan Administrator which occurs not more than seven days prior to the date payment is made to the Deferral Participant pursuant to this paragraph 4.

	E.		Distribution of Balances Attributable to Eligible Compensation Not Earned and Vested Prior to January 1, 2005 .

			Payment of the portion of a Deferral Participant’s Deferral Account that is attributable to Eligible Compensation that was not earned and vested prior to January 1, 2005 shall be made as provided in this Section E.

Lump Sum or Installment Distribution . At the time of his or her Deferral Election, a Deferral Participant must elect in writing to receive the balance attributable to the Deferral Election in either a lump sum or in annual installments over a period of years up to ten. If the Deferral Participant elects a lump sum, payment shall be made on the date elected in accordance with paragraph 2 below. If the Deferral Participant elects

			installments, the first installment payment shall be made on the commencement date elected in accordance with paragraph 2 below. Each subsequent installment payment shall be made on March 1 of the installment year. The amount of each installment distribution will equal the balance attributable to the Deferral Election immediately preceding the distribution divided by the number of installments remaining to be made, including the current installment. In the case of distributions from a Deferred Stock Account, installments will be rounded up to the nearest whole share. The amount so distributed will be deducted from the balance attributable to the Deferral Election immediately preceding the distribution.

	2.		Timing of Distribution . A Deferral Participant must elect to commence distribution of the balance attributable to a Deferral Election at one of the following times:

	a.		July 1 immediately following Separation from Service;

	b.		March 1 of the first calendar year following Separation from Service; or

	c.		March 1 of a calendar year designated by the Deferral Participant which begins at least 12 months following the year in which the Eligible Compensation otherwise would have been received.

	3.		Redeferral . A Deferral Participant who has not had a Separation from Service may elect to delay the commencement of distribution of the balance attributable to a Deferral Election until March 1 of any later year so long as the new distribution commencement date (i.e., March 1 of the year so elected) is at least 60 months beyond the original March 1 distribution commencement date or 68 months beyond the original July 1 distribution commencement date, as applicable. 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 12 months prior to the original March 1 or July 1 distribution commencement date, as applicable, and shall not take effect until at least 12 months after the date on which it is filed. A redeferral election made less than 12 months before the originally elected distribution commencement date shall be void and have no effect. A redeferral election shall not change the form of distribution (lump sum or installments) originally elected by the Deferral Participant. Only one redeferral election shall be permitted for amounts attributable to a Deferral Election.

	4.		Death . If a Deferral Participant dies before receiving all distributions to which he or she is entitled under this Article VI of the Plan, the balance of the Deferral Participant’s Deferral Account will be distributed in one lump

			sum 60 days after the Deferral Participant’s death. Such distribution will be made to the Deferral Participant’s beneficiary as determined pursuant to Section I of this Article VI.

	5.		Form of Distributions . Distributions from a Deferral Participant’s Deferred Cash Account shall be in cash. Except as provided in paragraph 6 below, distributions from a Deferral Participant’s Deferred Stock Account shall be in whole shares of Common Stock.

	6.		Change of Control . At the time of his or her Deferral Election, a Deferral Participant may elect in writing to commence distribution of the outstanding balance attributable to that Deferral Election upon the occurrence of a Change of Control, regardless of any other election made by the Deferral Participant pursuant to paragraphs 1, 2 or 3 above. If a Deferral Participant who makes an election pursuant to this paragraph elected to receive the balance attributable to his or her Deferral Election in a lump sum, such balance shall be paid 30 days after the date a Change of Control occurs. If a Deferral Participant who makes an election pursuant to this paragraph elected to receive the balance attributable to his or her Deferral Election in annual installments, the first annual installment shall be paid 30 days after the date a Change of Control occurs, and subsequent installments shall be paid on March 1 of each subsequent year, beginning with the year after the year in which the first annual installment is due, until such balance is exhausted. For purposes of this paragraph 6, a “Change of Control” shall be deemed to occur if there is a change in the ownership of the Company, within the meaning of Treas. Reg. §1.409A-3(i)(5)(v), or a change in the effective control of the Company, within the meaning of Treas. Reg. §1.409A-3(i)(5)(vi). Subject to the preceding sentence, a Change of Control will generally be deemed to occur:

	a.		on the date one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock held by the person or group, constitutes more than 50 percent of the total fair market value or total voting power of the Company;

	b.		on the date one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the person or group’s most recent acquisition) ownership of stock of the Company possessing 30 percent or more of the total voting power of the stock of the Company; or

	c.		on the date a majority of members of the Company’s Board are replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the

members of the Board before the date of the appointment or election.

			For purposes of a distribution under this paragraph 6, the value of a Deferral Participant’s Deferred Stock Account shall be the Fair Market Value of the Common Stock for a day selected by the Plan Administrator which occurs not more than seven days prior to the date payment is made to the Deferral Participant pursuant to this paragraph 6.

	7.		Payment Treated as Made on Designated Date . Consistent with the regulations under Code §409A, a payment shall be treated as made on the date specified by this Section E if it is actually made not earlier than 30 days before the specified date and not later than the later of (i) December 31 of the year in which the specified date occurs or (ii) the fifteenth day of the third month after the month in which the specified date occurs. If the period described in the preceding sentence includes dates in more than one taxable year, the Deferral Participant shall not be permitted, directly or indirectly, to designate the taxable year of payment.

	F.		Unsecured Obligation .

			All amounts deferred pursuant to this Plan and credited to a Deferral Account will be unfunded and unsecured and subject to obligations of the Company. Each Deferral Participant’s right will be as an unsecured general creditor of the Company. Except as set forth in Section G of this Article VI, no assets shall be set aside in trust or otherwise hereunder.

	G.		Trust Fund .

			Shares of Common Stock equal to all or a portion of the share equivalents credited to Deferred Stock Accounts under this Plan may, in the sole discretion of the Company, be held and administered in trust (“Trust Fund”) in accordance with the terms of this Plan. The Trust Fund will be held under a trust agreement between the Company and Wells Fargo Bank, N.A., as Trustee, or any duly appointed successor trustee. All Common Stock in the Trust Fund will be held on a commingled basis and will be subject to the claims of general creditors of the Company in accordance with the requirements of Revenue Procedure 92-65 or its successor. The Trustee, in its discretion, will vote shares of Common Stock held in any Trust Fund under this Plan.

	H.		Transferability .

			No right to receive a distribution hereunder shall be transferable or assignable other than (i) by will or the laws of descent and distribution, (ii) to the extent required pursuant to a domestic relations order that satisfies the requirements of

			Rule 16a-12 under the Securities Exchange Act of 1934, or any successor rule, or (iii) by designation of a beneficiary under Section I of this Article VI.

	I.		Beneficiary .

			A Deferral Participant may designate a beneficiary on or after the date he or she files a Deferral Election and may, from time to time, change or revoke his or her beneficiary designation and file a new beneficiary designation with the Company. The designation of beneficiary will apply to all of the Deferral Participant’s Deferral Account balances. In the absence of a valid designation, or if the designated beneficiary does not survive the Deferral Participant, the distribution will be made to the Deferral Participant’s estate. If any beneficiary dies after becoming entitled to receive Plan distributions, the remaining distribution will be made to the beneficiary’s estate.

VII.		ADJUSTMENTS FOR CERTAIN CHANGES IN CAPITALIZATION

		If any change is made to the Common Stock subject to the Plan or subject to any outstanding option granted under the Plan or Formula Stock Award (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividend, stock split, combination of shares, exchange of shares, change in corporate structure or otherwise), then appropriate adjustments shall be made, consistent with the requirements of Code §409A, to (i) the maximum number of shares that may be granted under the Plan or subject to options granted under the Plan, (ii) the number of shares and exercise price per share of Common Stock subject to options then outstanding under the Plan, and (iii) the number of share equivalents credited to any Deferred Stock Account. The grant of options or Formula Stock Awards under the Plan shall not affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. Any fractional shares or share equivalents resulting from adjustments will be rounded to the nearest whole share or share equivalent.

VIII.		ADMINISTRATION

		The Plan Administrator’s responsibilities include, but are not limited to, the following:

	•		To adopt rules for administration of the Plan.

	•		To interpret and implement the provisions of the Plan.

	•		To resolve all questions regarding the administration, interpretation and application of the Plan.

•

To have all other powers as may be necessary to discharge responsibilities under the Plan.

		The Plan Administrator’s determinations shall be conclusive and binding on all persons claiming any benefit or right under the Plan.

IX.		TERM

		The Plan will continue indefinitely, as it may be amended or modified from time to time, until terminated. No options or Formula Stock Awards may be granted under the Plan after the tenth anniversary of the Effective Date. Unless earlier terminated in accordance with Article X, the Plan will terminate when there are no longer options outstanding hereunder and all Deferral Account balances have been distributed.

X.		AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION

		The Plan may be amended, modified, suspended or terminated at any time by action of the Board of Directors or the Committee. No termination, suspension or modification of the Plan will (i) adversely affect any right in any option outstanding hereunder to the extent the same has not been exercised unless otherwise agreed to by the optionee or (ii) adversely affect any benefits to which a Deferral Participant would have been entitled under Article VI if termination of the Deferral Participant’s service as a Non-Employee Director had occurred on the day prior to the date such action was taken, unless agreed to by the Deferral Participant. It will be conclusively presumed that any adjustment for changes in capitalization provided for in Article VII does not adversely affect any such right. Notwithstanding the above, upon termination of the Plan, the Board or the Committee may mandate the immediate distribution of all amounts held in Deferral Accounts; provided, however, that accelerated distribution of the portions of Participants’ Deferral Accounts that are subject to Section E of Article VI of this Plan (i.e., balances attributable to eligible compensation not earned and vested prior to January 1, 2005) shall only be permitted on account of Plan termination in accordance with Treas. Reg. §1.409A-3(j)(4)(ix), which generally permits:

	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

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 Article X shall not prohibit the earlier distribution of any Deferral Account in accordance with the provisions of Article VI.

XI.		MISCELLANEOUS

	A.		No Guaranty of Service .

			Neither participation in this Plan nor the grant of any award hereunder constitutes a guarantee or contract of service as a Non-Employee Director.

	B.		Governing Law .

			The Plan and all determinations made and actions taken pursuant hereto shall be governed by and construed in accordance with the law of the State of Delaware.

	C.		Severability .

			If any provision of the Plan is determined to be illegal or invalid (in whole or in part) for any reason, or if the Plan Administrator cannot reasonably interpret any provision so as to avoid violation of Code §409A or constructive receipt of compensation under this Plan before the actual receipt of such compensation, this Plan shall be construed and enforced as if the provision had not been included.

Exhibit 10(v)
Amendment to PartnerShares Stock Option Plan

Effective January 22, 2008, no future awards may be granted under the PartnerShares Stock Option Plan, and the number of shares of Company common stock available for awards and authorized and reserved for issuance under the Plan shall be reduced accordingly.

Exhibit 10(x)

WF DEFERRED COMPENSATION HOLDINGS, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
FOR INDEPENDENT CONTRACTORS

As Amended and Restated Effective as of January 1, 2008

WF DEFERRED COMPENSATION HOLDINGS, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
FOR INDEPENDENT CONTRACTORS

TABLE OF CONTENTS


			Page
ARTICLE I	NAME AND PURPOSE			1

	Section 1.1	Name of Plan
	Section 1.2	Purpose
	Section 1.3	Effective Dates

ARTICLE II	DEFINITIONS			1

	Section 2.1	Definitions

ARTICLE III	PARTICIPATING COMPANY			4

	Section 3.1	Eligibility
	Section 3.2	Participation Requirements
	Section 3.3	Recordkeeping and Reporting
	Section 3.4	Termination of Participation
	Section 3.5	Separate Accounting

ARTICLE IV	ELIGIBILITY AND PARTICIPATION			5

	Section 4.1	Eligibility
	Section 4.2	Participation

ARTICLE V	DEFERRAL ELECTIONS			6

	Section 5.1	Deferral Elections
	Section 5.2	Transfer Amounts
	Section 5.3	Participant Accounts

ARTICLE VI	VALUATION OF ACCOUNTS			7

	Section 6.1	Establishment of Accounts
	Section 6.2	Deferral Accounts and Transfer Accounts
	Section 6.3	Allocation of Amounts
	Section 6.4	Hypothetical Accounts

ARTICLE VII	VESTING OF ACCOUNT			9

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			Page
	Section 7.1	Vested Benefit
	Section 7.2	Limitation on Amounts

ARTICLE VIII	DISTRIBUTIONS			10

	Section 8.1	Distribution Commencement Date
	Section 8.2	Subsequent Elections
	Section 8.3	Manner of Payment to Participant
	Section 8.4	Payment to Beneficiary
	Section 8.5	Withdrawals Due to Unforseeable Emergency
	Section 8.6	Designation of Beneficiaries
	Section 8.7	Death Prior to Full Distribution
	Section 8.8	Facility of Payment
	Section 8.9	Form of Distribution
	Section 8.10	Distributions As a Result of Tax Determination
	Section 8.11	Distribution of Small Aggregate Balances
	Section 8.12	Payment on the Designated Date

ARTICLE IX	FUNDING OF PLAN			15

	Section 9.1	Unfunded and Unsecured Plan
	Section 9.2	Corporate Obligation

ARTICLE X	AMENDMENT AND TERMINATION			16

	Section 10.1	Amendment and Termination
	Section 10.2	No Oral Amendments
	Section 10.3	Plan Binding on Successors

ARTICLE XI	DETERMINATIONS — RULES AND REGULATIONS			17

	Section 11.1	Determinations
	Section 11.2	Method of Executing Instruments
	Section 11.3	Claims Procedure
	Section 11.4	Limitations and Exhaustion

ARTICLE XII	PLAN ADMINISTRATION			20

	Section 12.1	Officers
	Section 12.2	President
	Section 12.3	Board of Directors
	Section 12.4	Delegation
	Section 12.5	Conflict of Interest
	Section 12.6	Administrator
	Section 12.7	Service of Process
	Section 12.8	Expenses
	Section 12.9	Spendthrift Provision

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			Page
	Section 12.10	Tax Withholding
	Section 12.11	Certifications
	Section 12.12	Errors in Computations
	Section 12.13	No Employment Rights
	Section 12.14	Participants Should Consult Advisors

ARTICLE XIII	CONSTRUCTION			22

	Section 13.1	Applicable Laws
	Section 13.2	Effect on Other Agreements
	Section 13.3	Disqualification
	Section 13.4	Rules of Document Construction
	Section 13.5	Choice of Law
	Section 13.6	No Employment Contract
	Section 13.7	Plan Obligation Guarantee

APPENDIX A				A-1

WF DEFERRED COMPENSATION HOLDINGS, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN
FOR INDEPENDENT CONTRACTORS

ARTICLE I

NAME, PURPOSE AND EFFECTIVE DATES

Section 1.1 Name of Plan . The name of the Plan is the “WF Deferred Compensation Holdings, Inc. Nonqualified Deferred Compensation Plan for Independent Contractors.”

Section 1.2 Purpose . The purpose of the Plan is to attract and retain individuals who are classified and treated as independent contractors who perform investment, financial or other services for or with respect to a Participating Company that are determined by the Company to be “Qualified Services.”

Section 1.3 Effective Dates . The Plan was established and adopted effective as of January 1, 2002. This amended and restated plan document (“Restatement”) is effective as of January 1, 2008. This Restatement is intended to satisfy the requirements of Code §409A and applicable guidance thereunder and shall be construed and administered accordingly.

ARTICLE II

DEFINITIONS

Section 2.1 Definitions . When the following terms are used in this instrument with initial capital letters, they shall have the meanings ascribed to them by this section unless the context indicates that other meanings are intended:

	(a)		Account . “Account” means a separate bookkeeping account established and maintained for a Participant representing a separate unfunded and unsecured general obligation of the Company with respect to the Participant under the Plan. An “Account” shall be either a Deferral Account or a Transfer Account.

	(b)		Affiliate . “Affiliate” means 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.

	(c)		Beneficiary . “Beneficiary” means the person, persons or trust designated by a Participant, or automatically by operation of the Plan, to receive any distributions

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which may become payable under this Plan by reason of the death of the Participant.

	(d)		Board of Directors . “Board of Directors” means the Board of Directors of the Company.

	(e)		Code . “Code” means the Internal Revenue Code of 1986, as from time to time amended.

	(f)		Common Stock . “Common Stock” means Wells Fargo & Company common stock.

	(g)		Company . “Company” means WF Deferred Compensation Holdings, Inc., which is the sponsor of the Plan, and its successors and assigns.

	(h)		Complete Termination . “Complete Termination” means a termination and liquidation of the Plan that satisfies the requirements of Treas. Reg. §1.409A-3(j)(4)(ix), which generally permits accelerated payment upon:

	(i)		termination and liquidation of the Plan within 12 months of a corporate dissolution or bankruptcy;

	(ii)		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

	(iii)		any other termination and liquidation of the Plan, if the following requirements are satisfied:

	(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,

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	(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.

	(i)		Deferral Account . “Deferral Account” means an Account established and maintained for a Participant to which is credited the amounts deferred by the Participant pursuant to a Deferral Election.

	(j)		Deferral Election . “Deferral Election” means an irrevocable election to defer receipt of Eligible Compensation by an individual who satisfies the eligibility requirements of Section 4.1, provided such election was made, accepted and approved in accordance with Section 5.1.

	(k)		Eligible Compensation . “Eligible Compensation” means the remuneration payable to an independent contractor by a Participating Company that the Participating Company (with approval of the Company) determines prior to the beginning of a Plan Year will be eligible for deferral in that Plan Year. Except as otherwise so determined, Eligible Compensation includes only securities commissions and net advisory service fees, and shall not include any other remuneration (such as, but not limited to, compensation for sales of fixed insurance and banking products).

	(l)		ERISA . “ERISA” means the Employee Retirement Income Security Act of 1974, as from time to time amended.

	(m)		Participant . Participant means an individual described in Section 4.2 of the Plan.

	(n)		Participating Company . “Participating Company” means any Affiliate participating in the Plan pursuant to Article III. A Participating Company that ceases to be an Affiliate shall nevertheless continue to be considered a Participating Company for the remainder of the Plan Year in which it ceased to be an Affiliate.

	(o)		Plan . “Plan” means the WF Deferred Compensation Holdings, Inc. Nonqualified Deferred Compensation Plan for Independent Contractors.

	(p)		Plan Year . “Plan Year” means the twelve (12) consecutive month period beginning January 1 and ending December 31.

	(q)		Qualified Services . “Qualified Services” means investment, financial or other services performed for or with respect to a Participating Company that the Participating Company (with approval of the Company) determines prior to the

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beginning of a Plan Year will satisfy the requirement of Section 4.1(a) for that Plan Year. Except as otherwise so determined, Qualified Services include services performed as an H.D. Vest Advisor by an individual who is not an employee or officer of the Company or any Affiliate, and for which the individual is paid Eligible Compensation.

	(r)		Separation From Service . “Separation From Service” means a Participant’s “separation from service” within the meaning of Code §409A(a)(2)(A)(i) and applicable guidance thereunder. Generally, those rules provide that a Separation from Service will occur upon the expiration of all contracts under which the Participant performs services for the Company or an Affiliate, provided such expiration constitutes a good-faith and complete termination of the contractual relationship. No such complete termination, and therefore no Separation from Service, will occur if the Company or an Affiliate anticipates either (i) a renewal of the contractual relationship (e.g., if the need for the services recurs or funds again become available to pay for the services) or (ii) the hiring of the Participant as an employee.

	(s)		Transfer Account . “Transfer Account” means an Account established and maintained for a Participant that is credited pursuant to Section 5.2 of this Plan with the benefit that was payable under another nonqualified deferred compensation plan prior to the combination or consolidation of that other plan with this Plan.

	(t)		Valuation Date . “Valuation Date” means each business day during the Plan Year.

	(u)		Vested . “Vested” means nonforfeitable. Pursuant to Section 7.2, only the Vested portion of a Participant’s Accounts under the Plan is payable to or with respect to the Participant.

ARTICLE III

PARTICIPATING COMPANY

Section 3.1 Eligibility . Any Affiliate approved by the Company pursuant to Section 3.2 is eligible to adopt and participate in the Plan.

Section 3.2 Participation Requirements . The Company may consent to the adoption of the Plan by any Affiliate subject to such conditions as the Company may impose. Any such Affiliate shall request to adopt the Plan by delivering to the Company a certified copy of the resolutions of its board of directors (or other authorized body or individual) adopting the Plan. The date on which such Affiliate may become a Participating Company in the Plan shall be the

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date such resolution is filed with the Company and approved by the Company, or such later date specified in the resolution after approval by the Company.

Section 3.3 Recordkeeping and Reporting . The Company shall maintain records sufficient to determine the amounts (and the remuneration sources of such amounts) which may become payable to or with respect to a Participant who performs services to or with respect to a Participating Company and to provide such Participant with any reports which may be required under the terms of the Plan or as required by law.

Section 3.4 Termination of Participation . A Participating Company may withdraw from participation in the Plan at the end of any Plan Year by providing the Company with 30 days advance written notice of such withdrawal from participation, which 30-day notice period may be waived by the Company. The Company may also terminate the participation of a Participating Company at the end of any Plan Year by providing such Participating Company with 30 days advance written notice of such termination of participation, which 30-day notice period may be waived by the Participating Company. In addition, if a Participating Company ceases to be an Affiliate of the Company, the Participating Company’s participation in the Plan shall automatically terminate as of the end of the Plan Year in which the Participating Company ceases to be an Affiliate.

Section 3.5 Separate Accounting . The Company shall establish and maintain separate Accounts for each Participant who performs services to or with respect to a Participating Company to which shall be credited any amounts that are allocated or credited under the Plan.

ARTICLE IV

ELIGIBILITY AND PARTICIPATION

Section 4.1 Eligibility . In order to make a Deferral Election under the Plan, an individual must satisfy the following requirements:

	(a)		the individual must be classified and treated by a Participating Company as an independent contractor who provides Qualified Services to or with respect to the Participating Company;

	(b)		the individual’s tax year must be the calendar year; and

	(c)		the individual must be designated as eligible to participate in the Plan by the Participating Company and the Company.

The determinations made by the Participating Company and Company with respect to an individual shall be conclusive and binding on all parties. Furthermore, the Participating Company (with approval of the Company) may in its discretion determine that a Participant who performs or who has performed Qualified Services to or with respect to the Participating

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Company is no longer eligible to defer Eligible Compensation under the Plan. In the event of such a determination, the Participant shall not be permitted to make any further Deferral Elections until his or her eligibility is restored, and any Deferral Election made prior to such determination that applies to a later Plan Year will be void. Any Deferral Election made prior to the Participant’s loss of eligibility that applies to Eligible Compensation for the Plan Year in which the determination is made, however, shall be unaffected.

Section 4.2 Participation . An individual who has made a Deferral Election or who has a Transfer Account shall be considered a Participant. Once an individual becomes a Participant in the Plan, the individual shall remain a Participant until his or her death or, if earlier, the date on which all amounts payable under the Plan to or on behalf of the individual have been distributed.

ARTICLE V

DEFERRAL ELECTIONS

Section 5.1 Deferral Elections . An individual who satisfies the requirements of Section 4.1 and is eligible to make a Deferral Election may elect to defer all or a portion of the Eligible Compensation earned by such individual’s service during the Plan Year first commencing after the Plan Year in which the Deferral Election is made. Deferral Elections shall be subject to the following:

	(a)		Deferral Elections must be made in the form and manner prescribed by the Company and must be filed with and accepted and approved by the Company before the first day of the Plan Year in which the affected Eligible Compensation is earned. For purposes of the preceding sentence, commissions subject to Treas. Reg. §1.409A-2(a)(12) shall be considered earned as provided therein. Eligible Compensation (including commission compensation) that is payable after the last day of the Plan Year in which it is earned shall be treated as earned when it is paid (or in the absence of a deferral would be payable), to the extent permitted by Treas. Reg. §1.409A-2(a)(13).

	(b)		Except in the event of a withdrawal pursuant to Section 8.5, a Deferral Election shall become irrevocable, and the Participant shall have no further right to the affected Eligible Compensation other than as provided under the Plan, no later than December 31 of the Plan Year in which the Deferral Election is made (i.e., December 31 of the Plan Year prior to the Plan Year in which the Eligible Compensation is earned).

	(c)		A Deferral Election shall be effective only for the Plan Year specified in the Deferral Election. A new Deferral Election must be filed for each Plan Year.

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	(d)		A Deferral Election shall specify the Eligible Compensation to be deferred, the investment option(s) that will determine the investment adjustments pursuant to Article VI, and the time and manner of distribution. The amount deferred may be determined either as a percentage of Eligible Compensation (expressed in whole percent increments up to 100%), or as a dollar amount (expressed in increments of $100 and limited by the Eligible Compensation payable to the Participant).

	(e)		Amounts deferred pursuant to a Deferral Election shall be credited to a Deferral Account established for the Participant. Such credits shall be effective as of the close of business on the date that the Eligible Compensation otherwise would have been paid to the Participant.

Section 5.2 Transfer Amounts . The Company may determine in its sole and absolute discretion to combine or consolidate other nonqualified deferred compensation plans with this Plan. If the Company combines or consolidates another nonqualified deferred compensation plan with this Plan, separate Transfer Accounts under this Plan shall be credited with the benefit payable to each participant in that other nonqualified deferred compensation plan. The manner in which such benefits are valued, the time as of which such values will be credited, and the other terms and conditions applicable to such Transfer Accounts shall be described in an appendix to this Plan document which shall be incorporated herein by reference.

Section 5.3 Participant Accounts . Accounts shall be established and maintained for each Participant. They shall be credited with amounts measured in U.S. dollars or the value of shares of Common Stock. Deferral Accounts for a Participant shall be credited as described in Section 5.1 for any deferred amounts. Transfer Accounts for a Participant shall be credited with such amounts as determined by the Company as set forth in an appendix attached to this Plan document and incorporated in the Plan by reference as described in Section 5.2.

ARTICLE VI

VALUATION OF ACCOUNTS

Section 6.1 Establishment of Accounts . There shall be established for each Participant one or more unfunded, bookkeeping Accounts which shall be adjusted each Valuation Date.

Section 6.2 Deferral Accounts and Transfer Accounts . As of each Valuation Date (the “current Valuation Date”), the value of each Deferral Account and Transfer Account determined as of the immediately preceding Valuation Date (the “previous Account value”) shall be adjusted in the following sequence:

(a)

Intermediate Distribution Subtraction . The previous Account value shall be reduced by the total amount distributed to or with respect to the Participant from such Account.

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	(b)		Deferral Amounts . The previous value (as adjusted above) of a Deferral Account shall be increased by the amounts deferred, if any, pursuant to Article V of the Plan.

	(c)		Investment Adjustment . The previous Account value (as adjusted above) shall be adjusted to reflect an amount determined based upon the value of the amounts that are allocated among one or more investment options made available by the Company. The value of amounts credited to the Account and allocated to an investment option shall be deemed to be invested in such investment option, reflecting all earnings, losses and other distributions or charges and changes in value which would have been incurred through such an investment.

	(d)		Final Distribution Subtraction . The previous Account value (as adjusted above) shall be reduced by the total amount distributed to or with respect to the Participant from such Account as of the current Valuation Date.

Section 6.3 Allocation of Amounts . Each year, a Participant may request to allocate or reallocate among one or more investment options made available by the Company for purposes of measuring the value of the benefit that may be payable to or with respect to the Participant under the Plan except as provided under subsection (a) of this Section 6.3. The Participant’s request must be made in the form and manner designated by the Company and must be submitted before the beginning of each calendar year to which such request applies. All such requests must designate the amount to be allocated or reallocated in one percent (1%) increments, and are subject to acceptance by the Company at its discretion. If accepted by the Company, an allocation request will be effective as of the first business day of the calendar year following the calendar year in which such request was made. Upon acceptance of an investment request pursuant to this Section 6.3, the Company will process the request and the request shall be implemented and reflected in the Participant’s Accounts. If no request is made, the Company may, in its sole discretion, allocate or reallocate amounts credited to the Participant’s Accounts among one or more investment options made available by the Company. The portion of any Accounts allocated to an investment option shall be deemed to be invested in such investment option, reflecting all earnings, losses and other distributions or charges and changes in value which would have been incurred through such an investment. The Company specifically reserves the authority and right to determine which investment options if any, to make available, and the continued availability of selected investment options. If an investment option includes Common Stock, the following rules shall also apply:

(a)

Common Stock . The Company may permit the value of any amounts credited to the Participant’s Accounts to be measured by the value of the Common Stock. If the Company permits amounts to be measured in this manner, a Participant may elect to have a portion (subject to any minimum percentage or minimum dollar amount) or all of such amounts credited to his or her Accounts measured by the value of Common Stock. Once a Participant has elected to have a portion (all or a part) of the Participant’s Accounts measured by the value of the Common Stock, the Participant shall not be permitted to reallocate that portion of the Participant’s

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Accounts (including any adjustments to that portion under Section 6.2(c)) to any other investment option. Once such election is made and accepted by the Company, the election shall be irrevocable. The election shall be effected as soon as possible by crediting the Account with the number of units (including fractions thereof) equal to the number of shares (including fractions thereof) of Common Stock that could have been purchased with the dollar amount subject to this election based upon the New York Stock Exchange only closing price as of the business day immediately preceding the date that the Account is credited with the units. Each unit shall be measured by the value of one share of Common Stock and treated as though invested in a share of Common Stock. The liability of the Company under the Plan with respect to such units shall be satisfied only in shares of Common Stock, subject to any applicable State and Federal securities requirements.

	(b)		Cash Dividends . Amounts measured by the value of Common Stock shall be credited on each Common Stock dividend payment date with that number of units equal to the number of shares which would have been acquired based upon the cash dividends paid on shares of Common Stock equal to the number of units credited to the Accounts as of the record date for such dividend based upon the New York Stock Exchange only closing price as of the business day immediately preceding the dividend payment date.

	(c)		Adjustments to Common Stock . The number of units credited to the Accounts shall be adjusted to reflect any change in the outstanding Common Stock by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change.

	(d)		Voting of Common Stock . No Participant or Beneficiary shall be entitled to any voting rights with respect to any units credited to the Accounts.

Section 6.4 Hypothetical Accounts . The Accounts established under this Plan (including any accounts established in an appendix attached to the Plan document and incorporated in the Plan by reference) shall be hypothetical in nature and shall be maintained for bookkeeping purposes only. Neither the Plan nor any of the Accounts (sub-accounts or any accounts established under this Plan) shall hold or be required to hold any actual funds or assets.

ARTICLE VII

VESTING OF ACCOUNT

Section 7.1 Vested Amount . Except as elsewhere specifically provided, the amounts credited to the Account or Accounts of each Participant shall be Vested as follows:

(a)

Deferral Accounts shall be one hundred percent (100%) Vested at all times.

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(b)

Unless otherwise provided for in an appendix which is attached to this Plan document and incorporated herein by reference, Transfer Accounts shall be one hundred percent (100%) Vested at all times.

Section 7.2 Limitation on Amounts . The amounts that may be payable to or on behalf of a Participant under the Plan shall not exceed an amount equal to the value of the Vested amounts credited to the Participant’s Accounts.

ARTICLE VIII

DISTRIBUTIONS

Section 8.1 Distribution Commencement Date . Distribution of a Participant’s Deferral Accounts shall be made (or, in the case of installments, shall commence) on the earliest of the following dates:

	(a)		March 1 of the year selected by the Participant in the Deferral Election that caused amounts to be credited to the Deferral Account, or, if the Participant has made a subsequent election pursuant to Section 8.2, March 1 of the year selected by the Participant in that subsequent election.

	(b)		March 1 immediately following the earliest to occur of the following events:

	(i)		the Participant’s death;

	(ii)		the Participant’s Separation From Service; and

(c)

the date on which all outstanding Accounts are distributed due to the Plan’s Complete Termination.

Distribution of Transfer Accounts shall be made (or in the case of installments, shall commence) as provided in the applicable appendix. If a Participant fails to elect a distribution commencement year for a Deferral Account, this Section 8.1 shall be applied to that Deferral Account without regard to subsection (a) above. The date for distribution of all outstanding Accounts referred to in (c) above shall be a date selected by the Company that allows payment to be made on or before the last day upon which accelerated payment due to a Complete Termination can be made in accordance with the applicable guidance under Code §409A(a)(3).

Section 8.2 Subsequent Elections . A Participant who previously elected a distribution commencement year for a Deferral Account and who has not had a Separation From Service may elect a new distribution commencement year for that Deferral Account that is at least five years after the Participant’s previously elected distribution commencement year for such Deferral Account. Any such election shall be filed on a form and in the manner provided by the Company, at least twelve (12) months prior to the previously elected distribution

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commencement year (if any). Such election shall not take effect until at least 12 months after the date on which it is filed. An election pursuant to this Section 8.2 shall not change the manner of distribution (lump sum or installments) applicable to that Deferral Account. Only one election pursuant to this Section 8.2 shall be permitted for any Deferral Account.

Section 8.3 Manner of Payment to Participant . Subject to the Board’s authority in Section 10.1, a Participant’s Deferral Accounts shall be paid as follows:

	(a)		Installments . If elected by the Participant in his or her Deferral Election, the Deferral Account credited with amounts attributable to that Deferral Election shall be paid in a series of annual installments selected by the Participant not to exceed ten (10) annual payments. Each annual installment payment shall be made as of the first day of March of the year for which payment is made. The amount of each installment payment shall be determined by dividing the amount credited to the Deferral Account as of the date on which the installment is to be paid by the number of remaining installment payments to be made from the Deferral Account (including the payment being determined). The Participant’s Accounts shall continue to be adjusted in accordance with the provisions of Article VI of the Plan.

	(b)		Lump Sum Election . If elected by the Participant in his or her Deferral Election, the Deferral Account credited with amounts attributable to that Deferral Election shall be paid in a single lump sum.

	(c)		Lump Sum Only . Notwithstanding any election by a Participant to the contrary, in the event distribution of the Vested Accounts of all of the Participants is made because of the Complete Termination of the Plan, the entire Vested Accounts of the Participants shall be payable only in a single lump sum. In the event no distribution election is made or is in effect with respect to a Deferral Account, the amount not subject to a valid distribution election shall be payable only in a single lump sum.

Section 8.4 Payment to Beneficiary . The Beneficiary of a deceased Participant shall receive the payment of any amounts payable on behalf of the Participant under the Plan in such manner as the Participant would have received them had the Participant survived. Such distribution shall be made (or, in the case of installments that did not begin prior to the Participant’s death, shall commence) on the March 1 immediately following the date of the Participant’s death.

Section 8.5 Withdrawals Due to Unforseeable Emergency . Notwithstanding any provision of this Article VIII to the contrary, a Participant may withdraw all or a portion of the balance of his or her Accounts due to unforeseeable emergency, subject to the following:

(a)

For purposes of this section, “unforeseeable emergency” means a severe financial hardship resulting from (i) illness or accident of the Participant or his or her

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spouse, beneficiary or dependent, (ii) loss of the Participant’s home or property due to casualty, or (iii) other similar extraordinary and unforeseeable circumstances beyond the control of the Participant. For example, needs such as the following may constitute unforeseeable emergencies: (1) imminent foreclosure of or eviction from the Participant’s primary residence; (2) funeral expenses for the Participant’s spouse, beneficiary or dependent; or (3) uninsured medical expenses of the Participant or his or her spouse, beneficiary or dependent.

	(b)		Withdrawals are available both before and after a Participant’s Separation From Service.

	(c)		Withdrawals under this section are not permitted to the extent the Participant’s hardship is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets (to the extent liquidation would not cause a severe financial hardship), or by cessation of deferrals under the Plan. For this purpose, any additional compensation that is available from a qualified employer plan (including any loan) or that, due to the unforeseeable emergency, is available under another nonqualified deferred compensation plan may be disregarded.

	(d)		If a Participant takes a withdrawal under this section, his or her Deferral Election for the year in which the withdrawal occurs (if any) will be terminated and no Eligible Compensation will be deferred under Section 5.1 for the remainder of that year.

	(e)		The amount withdrawn shall not exceed the amount reasonably necessary to satisfy the unforeseeable emergency (which may include amounts necessary to pay any Federal, state, or local income taxes or penalties reasonably anticipated to result from the withdrawal).

	(f)		Withdrawal requests must be made in writing and are subject to approval by the Company. The Company has discretionary authority to determine the extent to which a payment available under this Section 8.5 will be made. The Participant must supply any financial or other information the Company determines is necessary to determine whether to permit the withdrawal.

	(g)		The Participant’s Account balances will be reduced by the amounts withdrawn. If the Participant has more than one Account, the Company will designate how the withdrawal amount is allocated among those Accounts at the time the withdrawal is paid.

Section 8.6 Designation of Beneficiaries .

(a)

Right to Designate . Each Participant may designate, upon a form prescribed by and filed with the Company, one or more primary Beneficiaries or alternative Beneficiaries to receive all or a specified portion of any amounts which may be

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payable with respect to the Participant under the Plan in the event of such Participant’s death. The Participant may change or revoke any such designation from time to time without notice to or consent from any Beneficiary. No such designation, change or revocation shall be effective unless executed by the Participant and received and accepted by the Company during the Participant’s lifetime.

(b)

Failure of Designation . If a Participant:

	(i)		fails to designate a Beneficiary,

	(ii)		designates a Beneficiary and thereafter revokes such designation without naming another Beneficiary, or

	(iii)		designates one or more Beneficiaries and all such Beneficiaries so designated fail to survive the Participant,

the amounts which may be payable with respect to the Participant under the Plan, or the part thereof as to which such Participant’s designation fails, as the case may be, shall be payable to the first class of the following classes of automatic Beneficiaries with a member surviving the Participant and (except in the case of surviving issue) in equal shares if there is more than one member in such class surviving the Participant:

	(i)		Participant’s surviving spouse,

	(ii)		Participant’s surviving children, except that is any of the Participant’s children predecease the Participant but leave descendants surviving, such descendants shall take by right of representation the share their parent would have taken if living,

	(iii)		Participant’s surviving parents,

	(iv)		Participant’s surviving brothers and sisters,

	(v)		Representative of Participant’s estate.

(c)

Special Rules . Unless the Participant has otherwise specified in the Participant’s Beneficiary designation, the following rules shall apply:

	(i)		If there is not sufficient evidence that a Beneficiary was living at the time of the death of the Participant, it shall be deemed that the Beneficiary was not living at the time of the death of the Participant.

	(ii)		The automatic Beneficiaries specified in subsection (b) of this Section 8.6 and the Beneficiaries designated by the Participant shall become fixed at

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the time of the Participant’s death so that, if a Beneficiary survives the Participant but dies before the receipt of all payments due such Beneficiary hereunder, such remaining payments shall be payable to the representative of such Beneficiary’s estate.

Section 8.7 Death Prior to Full Distribution . If, at the death of the Participant, any payment to the Participant was due or otherwise distributable but not actually paid, the amount of such payment shall be included in the Account which is payable to the Beneficiary (and shall not be paid to the Participant’s estate).

Section 8.8 Facility of Payment . In case of the legal disability, including minority, of a Participant or Beneficiary eligible to receive distribution of an amount payable under the terms of the Plan, such amount shall be payable, if the Company shall be advised of the existence of such condition, to the duly appointed guardian, conservator or other legal representative of such Participant or Beneficiary.

Any payment made in accordance with the foregoing provisions of this section shall constitute a complete discharge of any liability or obligation of the Participating Company, the Company and Wells Fargo & Company for such benefit.

Section 8.9 Form of Distribution . Amounts attributable to the value of Deferral Accounts and Transfer Accounts that are based on investment options other than Common Stock shall be payable in the form of U.S. dollars. Amounts attributable to the value of Deferral Accounts and Transfer Accounts that are based on shares of Common Stock shall be payable in the form of shares of Common Stock. To the extent that the distribution is in the form of shares of Common Stock, such payment shall be subject to all federal and state securities laws and other rules and regulations as determined to be applicable.

Section 8.10 Distributions As a Result of Tax Determination . Notwithstanding anything in this Plan or any Participant election to the contrary, if at any time the value of any amounts credited to a Participant’s Account or Accounts under the Plan must be included in the gross income of the Participant and subject to tax due to a failure to meet the requirements of Code §409A, the Company may, in its sole discretion, permit a lump sum distribution of the included amount equal to the amount included in the Participant’s gross income as a result of such failure.

Section 8.11 Distribution of Small Aggregate Balances . Notwithstanding anything in this Plan or any Participant election to the contrary, if the aggregate value of a Participant’s Accounts on the date as of which benefit payments commence or any later date 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.

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Section 8.12 Payment on the Designated Date . Payment will be treated as made on the date specified pursuant to the preceding provisions of this Article VIII if it is made:

	(a)		on the specified date or any later date within the same taxable year of the Participant;

	(b)		by the 15 ^th day of the third calendar month following the specified date, provided the Participant is not permitted directly or indirectly to specify the taxable year of payment;

	(c)		within the 30-day period prior to the specified date, provided the Participant is not permitted directly or indirectly to specify the taxable year of payment;

	(d)		during the first taxable year of the Participant in which the calculation of the amount payable is administratively practicable due to events beyond the control of the Participant (or the Participant’s beneficiary).

ARTICLE IX

FUNDING OF PLAN

Section 9.1 Unfunded and Unsecured Plan . The Plan shall at all times be considered entirely unfunded for tax purposes and no provision shall at any time be made with respect to segregating assets of any Participating Company, the Company or Wells Fargo & Company for payment of any amounts under the Plan. The obligation of the Company under this Plan shall be an unfunded and unsecured promise to pay. Neither the Company nor Wells Fargo & Company shall be obligated under any circumstances to fund any financial obligations under this Plan. Any funds invested under the Plan shall continue for all purposes to be general assets of the Company and available to the general creditors of the Company in the event of a bankruptcy (involvement in a pending proceeding under the Federal Bankruptcy Code) or insolvency (inability to pay debts as they mature) of the Company. No Participant shall have any lien, prior claim or other security interest in any property of the Company. The Company shall have no obligation to establish or maintain any fund, trust or account (other than a bookkeeping account or reserve) for the purpose of funding or paying the amounts promised under this Plan. If such a fund, trust or account is established by the Company, the property therein shall remain the sole and exclusive property of the Company.

Section 9.2 Corporate Obligation . The officers of any Participating Company, the Company, or Wells Fargo & Company shall not in any way secure or guarantee the payment of any amount which may become due and payable under this Plan to or with respect to any Participant or Beneficiary. After amounts shall have been paid to or with respect to a Participant and such payment covers in full the benefits hereunder, such former Participant or other person or persons, as the case may be, shall have no further right or interest in any assets of the Company or Wells Fargo & Company in connection with this Plan. No person shall be under

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any liability or responsibility for failure to effect any of the objectives or purposes of this Plan by reason of the insolvency of the Participating Company, the Company or Wells Fargo & Company.

ARTICLE X

AMENDMENT AND TERMINATION

Section 10.1 Amendment and Termination . The Board of Directors reserves the power and authority to alter, amend or wholly revise the Plan document prospectively, retroactively or both, at any time and for any reason deemed sufficient by it without notice to any person affected by this Plan and may likewise terminate this Plan both with regard to persons currently receiving amounts under the Plan and persons expecting to receive amounts in the future. The interest of each Participant and Beneficiary is subject to the powers so reserved; provided, however, that:

	(a)		the amount, if any, payable to or with respect to a Participant who ceases to provide any Qualified Services to or with respect to a Participating Company as of the effective date of such amendment or the date on which the Participant ceases to provide such services shall not be, without the written consent of the Participant, diminished or delayed by such amendment or the termination of such services, and

	(b)		the amount, if any, payable to or with respect to each other Participant determined as if such Participant had ceased to provide any Qualified Services to or with respect to a Participating Company on the effective date of such amendment or the date on which the Participant is treated as if the Participant had ceased to provide such services shall not be, without the written consent of the Participant, diminished or delayed by such amendment or the termination of such services.

The protections described in (a) and (b) above shall not, however, prohibit the Board of Directors from amending the Plan to modify the time and form of payment of such benefits to the extent permitted under Code §409A.

Section 10.2 No Oral Amendments . No modification of the terms of the Plan document or termination of this Plan shall be effective unless it is in writing and signed on behalf of the Board of Directors by a person authorized to execute such writing. No oral representation concerning the interpretation or effect of the Plan document shall be effective to amend the Plan document.

Section 10.3 Plan Binding on Successors . The Plan shall be binding on any successor of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company) to the same extent that the Company would be required to perform as if no such succession had taken place.

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ARTICLE XI

DETERMINATIONS — RULES AND REGULATIONS

Section 11.1 Determinations . The Company shall make such determinations as may be required from time to time in the operation and administration of this Plan. The Company shall have the sole discretion, authority and responsibility to interpret and construe the Plan document and to determine all factual and legal questions under this Plan, including but not limited to the entitlement of Participants and Beneficiaries to any amounts which may be payable under the Plan, and the amounts of their respective interests. The Company shall have discretionary authority to grant or deny amounts under this Plan. The Company may, in its sole discretion delegate authority with respect to the administration of the Plan to such other committee, person or persons as it deems necessary or appropriate for the administration and operation of the Plan. Each interested party may act and rely upon all information reported to them hereunder and need not inquire into the accuracy thereof, nor be charged with any notice to the contrary.

Section 11.2 Method of Executing Instruments . Information to be supplied or written notices to be made or consents to be given by the Board of Directors pursuant to any provision of the Plan document may be signed in the name of the Board of Directors by any officer who has been authorized to make such certification or to give such notices or consents.

Section 11.3 Claims Procedure . The claims procedure set forth in this Section 11.3 shall be the exclusive administrative procedure for the disposition of claims for amounts arising under this Plan.

(a)

Original Claim . Any person may, if he or she so desires, file with the Company a written claim for amounts under this Plan. Within ninety (90) days after the filing of such a claim, the Company shall notify the claimant in writing whether the claim is upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred eighty (180) days from the date the claim was filed) to reach a decision on the claim. If the claim is denied in whole or in part, the Company shall state in writing:

	(i)		the specific reasons for the denial;

	(ii)		the specific references to the pertinent provisions of the Plan document on which the denial is based;

	(iii)		a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

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(iv)

an explanation of the claims review procedure set forth in this section.

	(b)		Review of Denied Claim . Within sixty (60) days after receipt of notice that the claim has been denied in whole or in part, the claimant may file with the Board of Directors a written request for a review and may, in conjunction therewith, submit written issues and comments. Within sixty (60) days after the filing of such a request for review, the Board of Directors shall notify the claimant in writing whether, upon review, the claim was upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred twenty (120) days from the date the request for review was filed) to reach a decision on the request for review.

	(c)		General Rules .

	(i)		No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the claims procedure. The Company may require that any claim for amounts and any request for a review of a denied claim be filed on forms to be furnished by the Company. Such forms will be furnished by the Company upon request.

	(ii)		All decisions on Original claims shall be made by the Company and all decisions on requests for a review of denied claims shall be made by the Board of Directors.

	(iii)		the Company and the Board of Directors may, in their discretion, hold one or more hearings on a claim or a request for a review of a denied claim.

	(iv)		A claimant may be represented by a lawyer or other representative (at the claimant’s own expense), but the Company and the Board of Directors reserve the right to require the claimant to furnish written authorization. A claimant’s representative shall be entitled, upon request, to copies of all notices given to the claimant.

	(v)		The decision of the Company on a claim and a decision of the Board of Directors on a request for a review of a denied claim shall be served on the claimant in writing. If a decision or notice is not received by a claimant within the time specified, the claim or request for a review of a denied claim shall be deemed to have been denied.

	(vi)		Prior to filing a claim or a request for a review of a denied claim, the claimant or his or her representative shall have a reasonable opportunity to review a copy of the Plan document and all other pertinent documents in the possession of the Company and the Board of Directors.

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(vii)

The Company and the Board of Directors may permanently or temporarily delegate its responsibilities under this claims procedure to an individual or a committee of individuals.

Section 11.4 Limitations and Exhaustion .

(a)

Limitations . No claim shall be considered under these administrative procedures unless it is filed with the Company within one (1) year after the claimant knew (or reasonably should have known) of the principal facts on which the claim is based. Every untimely claim shall be denied by the Company without regard to the merits of the claim. No legal action may be brought by any claimant on any matter pertaining to this Plan unless the legal action is commenced in the proper forum before the earlier of:

	(i)		two (2) years after the claimant knew (or reasonably should have known) of the principal facts on which the claim is based, or

	(ii)		ninety (90) days after the claimant has exhausted these administrative procedures.

Knowledge of all facts that a Participant knew (or reasonably should have known) shall be imputed to each claimant who is or claims to be a Beneficiary of the Participant (or otherwise claims to derive an entitlement by reference to a Participant) for the purpose of applying the one (1) year and two (2) year periods.

(b)

Exhaustion Required . The exhaustion of these administrative procedures is mandatory for resolving every claim and dispute arising under this Plan. As to such claims and disputes:

	(i)		no claimant shall be permitted to commence any legal action relating to any such claim or dispute unless a timely claim has been filed under these administrative procedures and these administrative procedures have been exhausted; and

	(ii)		in any such legal action all explicit and implicit determinations by the Company and the Board of Directors (including, but not limited to, determinations as to whether the claim was timely filed) shall be afforded the maximum deference permitted by law.

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ARTICLE XII

PLAN ADMINISTRATION

Section 12.1 Officers . Except as hereinafter provided, functions generally assigned to the Company shall be discharged by its President or delegated and allocated as provided herein.

Section 12.2 President . Except as hereinafter provided, the President of the Company may delegate or redelegate and allocate and reallocate to one or more persons or to a committee of persons jointly or severally, and whether or not such persons are directors, officers or employees, such functions assigned to the Company generally hereunder as the President may from time to time deem advisable.

Section 12.3 Board of Directors . Notwithstanding the foregoing, the Board of Directors shall have the exclusive authority, which may not be delegated, to amend the Plan document and to terminate this Plan.

Section 12.4 Delegation . The Board of Directors shall not be liable for an act or omission of another person with regard to a responsibility that has been allocated to or delegated to such other person pursuant to the terms of the Plan document or pursuant to procedures set forth in the Plan document.

Section 12.5 Conflict of Interest . If any individual to whom authority has been delegated or redelegated hereunder shall also be a Participant in this Plan, such Participant shall have no authority with respect to any matter specially affecting such Participant’s individual interest hereunder or the interest of a person superior to him or her in the organization (as distinguished from the interests of all Participants and Beneficiaries or a broad class of Participants and Beneficiaries), all such authority being reserved exclusively to other individuals as the case may be, to the exclusion of such Participant, and such Participant shall act only in such Participant’s individual capacity in connection with any such matter.

Section 12.6 Administrator . The Company shall be the Plan administrator.

Section 12.7 Service of Process . In the absence of any designation to the contrary by the Board of Directors, the President of the Company is designated as the appropriate and exclusive agent for the receipt of service of process directed to this Plan in any legal proceeding, including arbitration, involving this Plan.

Section 12.8 Expenses . All expenses of administering this Plan shall be borne by the Company and the Participating Companies. The Company shall determine the allocation of expenses among the Participating Companies.

Section 12.9 Spendthrift Provision . No Participant or Beneficiary shall have any interest in any Account which 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

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possession or control of the Company or any Participating 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 before any such Account is distributed to the Participant or Beneficiary.

The power to designate Beneficiaries to receive any amounts payable to or with respect to a Participant under the Plan in the event of such Participant’s death shall not permit or be construed to permit such power or right to be exercised by the Participant so as thereby to anticipate, pledge, mortgage or encumber such amounts or any part thereof and any attempt of a Participant to so exercise said power in violation of this provision shall be of no force and effect and shall be disregarded by the Company.

Section 12.10 Tax Withholding . A Participating Company or the Company shall have the authority, duty and power to withhold the amount of any applicable tax required to be withheld by the Participating Company or the Company under applicable law with respect to any amount payable under this Plan.

Section 12.11 Certifications . Information to be supplied or written notices to be made or consents to be given by the Company pursuant to any provision of this Plan may be signed in the name of the Company by any officer who has been authorized to make such certification or to give such notices or consents.

Section 12.12 Errors in Computations . The Company and any Participating Company shall not be liable or responsible for any error in the computation of any Account or the determination of any benefit payable to or with respect to any Participant resulting from any misstatement of fact made by the Participant or by or on behalf of any survivor to whom such benefit shall be payable, directly or indirectly, to the Company or any Participating Company and used by the Company in determining the benefit. The Company and any Participating Company shall not be obligated or required to increase the benefit payable to or with respect to such Participant which, on discovery of the misstatement, is found to be understated as a result of such misstatement of the Participant. However, the benefit of any Participant which is overstated by reason of any such misstatement or any other reason shall be reduced to the amount appropriate in view of the truth (and to recover any prior overpayment).

Section 12.13 No Employment Rights . Neither the Plan nor any action taken under the Plan shall be construed as providing any Participant any right to be employed by a Participating Company, the Company or an Affiliate or to be considered or classified by the Participating Company, the Company or an Affiliate as an employee of the Participating Company, the Company or an Affiliate.

Section 12.14 Participants Should Consult Advisors . Neither the Company nor any Participating Company nor any of their respective directors, officers, employees or agents makes any representation or warranty with respect to any applicable tax, financial, estate planning, or the securities or other legal implications of participation in the Plan. Participants should consult with their own tax, financial and legal advisors with respect to their participation in the Plan.

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ARTICLE XIII

CONSTRUCTION

Section 13.1 Applicable Laws .

	(a)		ERISA Status . This Plan is adopted with the understanding that it is an unfunded and unsecured plan maintained primarily for the purpose of providing deferred compensation for certain individuals who are classified and treated as independent contractors and is not subject to any requirements of ERISA. Each provision shall be interpreted and administered accordingly.

	(b)		IRC Status . This Plan is intended to be a nonqualified deferred compensation arrangement. The rules of section 401(a) et. seq. of the Code shall not apply to this Plan. This restatement of the Plan effective as of January 1, 2008 is intended to satisfy the requirements of Code §409A and applicable guidance thereunder. This restatement shall be construed and administered accordingly.

	(c)		References to Laws . Any reference in this Plan document to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation.

Section 13.2 Effect on Other Agreements . This Plan shall not alter, enlarge or diminish any person’s obligations or rights or obligations under any other agreement with any Participating Company or the Company except as provided in an appendix to this Plan. It being expressly intended that this Plan shall not be affected by the benefit structures of any other plan maintained by Wells Fargo & Company, the Company or any Participating Company as any such plan may exist at the adoption of this Plan or upon the commencement of participation or at any other time.

Section 13.3 Disqualification . Notwithstanding any other provision of the Plan document or any election or designation made under this Plan, any individual who feloniously and intentionally kills a Participant shall be deemed for all purposes of this Plan and all elections and designations made under this Plan to have died before such Participant. A final judgment or conviction of felonious and intentional killing is conclusive for this purpose. In the absence of a conviction of felonious and intentional killing, the Company shall determine whether the killing was felonious and intentional for this purpose.

Section 13.4 Rules of Document Construction .

(a)

An individual shall be considered to have attained a given age on such individual’s birthday for that age (and not on the day before). Individuals born on February 29 in a leap year shall be considered to have their birthdays on February 28 in each year that is not a leap year.

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	(b)		Whenever appropriate, words used herein in the singular may be read in the plural, or words used herein in the plural may be read in the singular; the masculine may include the feminine; and the words “hereof,” “herein” or “hereunder” or other similar compounds of the word “here” shall mean and refer to the entire Plan document and not to any particular paragraph or Section of the Plan document unless the context clearly indicates to the contrary.

	(c)		The titles given to the various sections of the Plan document are inserted for convenience of reference only and are not part of the Plan document, and they shall not be considered in determining the purpose, meaning or intent of any provision hereof.

	(d)		Notwithstanding anything apparently to the contrary contained in the Plan document, the Plan document shall be construed and administered to prevent the duplication of benefits provided under this Plan and any other qualified or nonqualified plan maintained in whole or in part by the Company, Wells Fargo & Company or any Affiliate.

	(e)		If a provision of the Plan shall be held to be illegal or invalid (in whole or in part), or if legislative, Internal Revenue Service, Department of Labor, court or other action could in the opinion of the Plan Administrator cause a provision to be interpreted so as to cause Participants in the Plan to be in constructive receipt of amounts in their Accounts for U.S. federal income tax purposes, the illegality or invalidity shall not affect the remaining parts of the Plan and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

Section 13.5 Choice of Law . This instrument has been executed and delivered in the State of Delaware and has been drawn in conformity to the laws of that State and shall, except to the extent that federal law is controlling, be construed and enforced in accordance with the laws of the State of Delaware (other than its laws regarding choice of law).

Section 13.6 No Employment Contract . This Plan is not and shall not be deemed to constitute a contract of employment between the Company, Wells Fargo & Company, a Participating Company, an Affiliate and any person, nor shall anything herein contained be deemed to give any person any right to be an employee of the Company, Wells Fargo & Company, any Participating Company or Affiliate or in any way limit or restrict the Company’s or Participating Company’s right or power to terminate any agreement with any person at any time and to treat any person without regard to the effect which such treatment might have upon him or her as a Participant in this Plan. Neither the terms of the Plan document nor the benefits under this Plan nor the continuance of the Plan shall affect the status of a Participant as an independent contractor. The Company shall not be obliged to continue this Plan.

Section 13.7 Plan Obligation Guarantee . Pursuant to and consistent with Berry v. United States , 593 F. Supp. 80 (M.D.N.C. 1984), aff’d 760 F. 2d 85 (4th Cir. 1985), and the determinations made by the Internal Revenue Service in Private Letter Ruling 8741078 and

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Private Letter Ruling 8509023 , Wells Fargo & Company shall, under a separate agreement which shall be incorporated herein by reference, unconditionally guarantee the obligations of the Company with respect to the amounts payable under the Plan to the respective Participants and their Beneficiaries in the event that the Company is unable to fulfill its promises and satisfy its deferred compensation obligations pursuant to the Plan. This guarantee by Wells Fargo & Company constitutes a mere promise to pay the amounts payable under the Plan and a general unsecured obligation of Wells Fargo & Company with respect to the obligations of the Company under the Plan, not represented by notes or secured in any way. Wells Fargo & Company will not, and shall have no obligation to, set aside or earmark any assets or funds or establish or maintain any fund, escrow, trust fund or account (other than a bookkeeping account or reserve) for purposes of the payment of any amounts payable under the Plan. The obligation of Wells Fargo & Company to pay any benefits payable under the Plan constitutes only the unsecured promise of Wells Fargo & Company to pay such amounts, and the rights of any Participants or their Beneficiaries to receive any amounts payable under the Plan pursuant to the provisions of this guarantee shall be no greater than the rights of general unsecured creditors of Wells Fargo & Company. No Participant in the Plan or any Beneficiary shall have any lien, prior claim or other security interest in any assets, funds or property of Wells Fargo & Company.

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APPENDIX A

MERGER OF H.D. VEST, INC. REPRESENTATIVES’ DEFERRED
COMPENSATION PLAN

Section 1.1. The provisions of this Appendix A apply with respect to benefits payable under the “H.D. Vest, Inc. Representatives’ Deferred Compensation Plan” (the “H.D. Vest Plan”) as of December 31, 2001.

Section 1.2. Effective January 1, 2002, the H.D. Vest Plan shall be consolidated with and merged into this Plan and the H.D. Vest Plan shall no longer separately exist for any purpose. All accounts under the H.D. Vest Plan shall be credited to Transfer Accounts established under this Plan for each H.D. Vest Plan participant in a manner consistent with the requirements of section 414(l) of the Code and section 1.414(l)-1(o) of the Treasury Regulations regarding a transfer of assets and liabilities, but without regard to any actual transfer of assets. The amount credited to each Transfer Account as an opening January 1, 2002, balance shall be determined pursuant to the rules contained in this Appendix A. Each H. D. Vest Plan participant who has a Transfer Account under this Plan shall be considered a Participant in this Plan only with respect to the Transfer Account unless the individual satisfies the definition of Participant in Section 2.1 of the Plan and the individual elects to have the Transfer Account become subject to all of the terms of this Plan as provided in Section 1.4 of this Appendix A.

Section 1.3. Each participant in the H.D. Vest Plan shall be provided with the opportunity to elect to have the Transfer Account become subject to all of the terms and conditions of this Plan as provided in Section 1.4 below. The result of such an election will be that the participant’s Transfer Account will be subject to all of the terms and conditions of this Plan and will no longer be subject to the terms and conditions of the H.D. Vest Plan. If a participant in the H.D. Vest Plan does not elect to have the Transfer Account become subject to the terms and conditions of this Plan, the Transfer Account shall remain subject to the same terms as those contained in the former H.D. Vest Plan (incorporated herein by reference) except as those terms are modified in Section 1.5 below.

Section 1.4. If a participant in the H.D. Vest Plan elects to have the Transfer Account become subject to all of the terms and conditions of this Plan and such election is accepted and approved by the Company, the following rules apply to the Transfer Account:

(a)

A lump sum present value shall be calculated for the participant’s benefit under the H.D. Vest Plan benefit as of December 31, 2001, and that amount shall be credited to the participant’s Transfer Account under this Plan and shown as the opening balance of the Transfer Account on January 1, 2002. The following rules shall apply in determining the December 31, 2001, lump sum present value of each participant’s H.D. Vest Plan benefit:

(i)

the present value of the benefit payable under the H.D. Vest Plan shall be determined as a lump sum amount as of December 31, 2001, and

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(ii)

the present value of the benefit shall be calculated by determining the projected benefit of the participant as of the expiration of the deferral periods elected by the participant under the H.D. Vest Plan and in effect as of December 31, 2001, assuming continued service as an independent contractor for the remaining portion of the deferral periods elected, discounted for the difference between the elective deferral amounts credited to the participant’s account under the H.D. Vest Plan and the projected benefit for the deferral periods elected, using the following actuarial factors:

	(A)		the annual rate of interest on 30-year U.S. Treasury securities, and the mortality table determined from the table prescribed by the Secretary of the Treasury under section 417(e)(3)(A)(ii)(I) of the Code based upon the prevailing standard table used to determine reserves for group annuity contracts; and

	(B)		the rate at which service as an independent contractor for the remaining portion of the deferral periods elected may continue.

	(b)		A Participant subject to this Section 1.4 shall complete a distribution election form pursuant to Article VIII of this Plan as in effect at the time of that election. Effective January 1, 2002, all distributions from the Participant’s Transfer Account shall be made in accordance with Article VIII. For purposes of applying Article VIII to a Transfer Account subject to this Section 1.4 after the restatement of this Plan that became effective January 1, 2008, the Transfer Account shall be subject to Article VIII as if it was a Deferral Account and the election made pursuant to this Section 1.4(b) was made in the Deferral Election for that Deferral Account.

	(c)		A Participant subject to this Section 1.4 shall complete an investment request form for the Transfer Account subject to the provisions of Article VI of this Plan. The provisions of Article VI shall apply to the Transfer Account effective January 1, 2002. If the Participant elects to have all or a portion of his or her Transfer Account measured by the value of the Common Stock, the Company shall credit the Participant’s Transfer Account with an additional amount equal to 10% of the amount of the Transfer Account that the Participant elected to be measured by the value of the Common Stock. Such additional amount shall be measured by the value of the Common Stock pursuant to the provisions of Article VI of this Plan. No Participant shall be entitled to allocate or reallocate any such additional amounts (including any adjustments to such amounts under Section 6.2(c) of the Plan) to an investment option other than one based on the value of Company Stock unless the Company determines that such an investment option will no longer be available.

- 26 -

(d)

The Participant’s Transfer Account shall be one hundred percent (100%) Vested at all times.

Section 1.5. If a participant in the H.D. Vest Plan does not elect to have the Transfer Account become subject to all of the terms and conditions of this Plan, the following rules apply to the Transfer Account:

	(a)		The Transfer Account payable to or on behalf of such Participant shall be determined as of any date determined by the Company by calculating the benefit payable to the Participant based on the amounts credited to the participant’s H.D. Vest Plan accounts as of December 31, 2001, and the elections made by the participant under the H.D. Vest Plan prior to December 31, 2001.

	(b)		Subject to paragraph (c) of this Section 1.5, the Transfer Account so established for such Participant shall be credited at the end of the deferral periods originally selected under the H.D. Vest Plan with an additional amount determined as follows:

Amount Credited by Company
As a Percentage of the Deferral Amount


Deferral Period	Amount Credited

Option 1: 36 month period		41	%
Option 2: 60 month period		85	%
Option 3: 84 month period		151	%
Option 4: 120 month period		305	%

	(c)		Notwithstanding any provision herein to the contrary, if, however, a Participant for whom a Transfer Account is established pursuant to this Section 1.5 ceases to provide any investment or other services to or with respect to a Participating Company before the expiration of the deferral period elected by the Participant under the H.D. Vest Plan, attainment of age 65, death or Disability, no additional amounts shall be credited to the Participant’s Transfer Account under Section 1.5(b) of this Appendix A.

	(d)		The amount credited to the Transfer Account under this Section 1.5 shall be distributed to or on behalf of the Participant in cash on a bi-monthly basis over the period of thirty-six (36), sixty (60), eighty-four (84), or one hundred twenty (120) consecutive months following the end of the deferral period as originally selected by the Participant with respect to amounts deferred under the H.D. Vest Plan. Notwithstanding anything in the H.D. Vest Plan to the contrary, if a Participant dies or becomes disabled before all of his or her Transfer Account has been distributed, the amount remaining shall be distributed at the same times and in the

- 27 -

same manner as it would have been distributed to the Participant if the Participant’s death or disability had not occurred.

Section 1.6. The Transfer Accounts established under this Appendix A shall be separate bookkeeping accounts representing an unfunded and unsecured promise of performance under the Plan.

Section 1.7 For purposes of this Appendix A, the term “Disability” means a medically determinable physical or mental impairment which: (i) renders the individual totally and permanently disabled and incapable of performing any substantial services for a Participating Company, (ii) can be expected to be of long-continued and indefinite duration or result in death, and (iii) is evidenced by a certification to this effect by a doctor of medicine approved by the Company. Notwithstanding the foregoing, a Participant who is determined to be eligible for Social Security disability benefits will be deemed to have a Disability for purposes of this Plan. The Company shall determine the date on which the Disability shall have occurred if such determination is necessary.

- 28 -

Exhibit 10(y)

Description of Chairman/CEO Retirement Policy

For 3 years following the date of retirement, a retiring management Chairman of the Board or CEO of Wells Fargo & Company may be provided with office space, an administrative assistant, and part-time driver at the Company’s expense. These services will be provided with the agreement of the Board of Directors or the Human Resources Committee of the Board and the retiree on the condition that the retiree continues to be available for consultation with management and to represent Wells Fargo with customers, the community, and team members during this period. At the end of the 3 years, if the retiree is still considered to be effective and is spending a reasonable amount of time representing Wells Fargo with customers, the community, and team members, then, with the recommendation of the Company’s current CEO and approval by the Human Resources Committee, these services may be extended for a maximum of an additional two years.

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


	Year ended December 31,
(in millions)	2007		2006		2005		2004		2003


Earnings including interest on deposits (1):
Income before income tax expense and effect of change in accounting principle	$	11,627	$	12,650	$	11,548	$	10,769	$	9,477
Fixed charges		14,428		12,498		7,656		4,017		3,606

	$	26,055	$	25,148	$	19,204	$	14,786	$	13,083


Fixed charges (1):
Interest expense	$	14,203	$	12,288	$	7,458	$	3,817	$	3,411
Estimated interest component of net rental expense		225		210		198		200		195

	$	14,428	$	12,498	$	7,656	$	4,017	$	3,606


Ratio of earnings to fixed charges (2)		1.81		2.01		2.51		3.68		3.63


Earnings excluding interest on deposits:
Income before income tax expense and effect of change in accounting principle	$	11,627	$	12,650	$	11,548	$	10,769	$	9,477
Fixed charges		6,276		5,324		3,808		2,190		1,993

	$	17,903	$	17,974	$	15,356	$	12,959	$	11,470


Fixed charges:
Interest expense	$	14,203	$	12,288	$	7,458	$	3,817	$	3,411
Less interest on deposits		8,152		7,174		3,848		1,827		1,613
Estimated interest component of net rental expense		225		210		198		200		195

	$	6,276	$	5,324	$	3,808	$	2,190	$	1,993


Ratio of earnings to fixed charges (2)		2.85		3.38		4.03		5.92		5.76

(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 were 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 were 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)	2007		2006		2005		2004		2003

Earnings including interest on deposits (1):
Income before income tax expense and effect of change in accounting principle	$	11,627	$	12,650	$	11,548	$	10,769	$	9,477
Fixed charges		14,428		12,498		7,656		4,017		3,606

	$	26,055	$	25,148	$	19,204	$	14,786	$	13,083

Preferred dividend requirement	$	—	$	—	$	—	$	—	$	3
Ratio of income before income tax expense and effect of change in accounting principle to net income before effect of change in accounting principle		1.44		1.50		1.51		1.54		1.53

Preferred dividends (2)	$	—	$	—	$	—	$	—	$	5

Fixed charges (1):
Interest expense		14,203		12,288		7,458		3,817		3,411
Estimated interest component of net rental expense		225		210		198		200		195

		14,428		12,498		7,656		4,017		3,606

Fixed charges and preferred dividends	$	14,428	$	12,498	$	7,656	$	4,017	$	3,611

Ratio of earnings to fixed charges and preferred dividends (3)		1.81		2.01		2.51		3.68		3.62

Earnings excluding interest on deposits:
Income before income tax expense and effect of change in accounting principle	$	11,627	$	12,650	$	11,548	$	10,769	$	9,477
Fixed charges		6,276		5,324		3,808		2,190		1,993

	$	17,903	$	17,974	$	15,356	$	12,959	$	11,470

Preferred dividends (2)	$	—	$	—	$	—	$	—	$	5

Fixed charges:
Interest expense		14,203		12,288		7,458		3,817		3,411
Less interest on deposits		8,152		7,174		3,848		1,827		1,613
Estimated interest component of net rental expense		225		210		198		200		195

		6,276		5,324		3,808		2,190		1,993

Fixed charges and preferred dividends	$	6,276	$	5,324	$	3,808	$	2,190	$	1,998

Ratio of earnings to fixed charges and preferred dividends (3)		2.85		3.38		4.03		5.92		5.74


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

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

Exhibit 13

Financial Review


34	Overview

39	Critical Accounting Policies

43	Earnings Performance

49	Balance Sheet Analysis

51	Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

53	Risk Management

65	Capital Management

65	Comparison of 2006 with 2005

66	Risk Factors

	Controls and Procedures

72	Disclosure Controls and Procedures

72	Internal Control over Financial Reporting

72	Management’s Report on Internal Control over Financial Reporting

73	Report of Independent Registered Public Accounting Firm

	Financial Statements

74	Consolidated Statement of Income

75	Consolidated Balance Sheet

76	Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income

77	Consolidated Statement of Cash Flows

	Notes to Financial Statements

78	1	Summary of Significant Accounting Policies

84	2	Business Combinations


85	3	Cash, Loan and Dividend Restrictions

85	4	Federal Funds Sold, Securities Purchased
		under Resale Agreements and Other
		Short-Term Investments

86	5	Securities Available for Sale

88	6	Loans and Allowance
		for Credit Losses

91	7	Premises, Equipment, Lease
		Commitments and Other Assets

92	8	Securitizations and Variable
		Interest Entities

94	9	Mortgage Banking Activities

95	10	Intangible Assets

96	11	Goodwill

97	12	Deposits

97	13	Short-Term Borrowings

98	14	Long-Term Debt

100	15	Guarantees and Legal Actions

101	16	Derivatives

105	17	Fair Values of Assets and Liabilities

110	18	Preferred Stock

110	19	Common Stock and
		Stock Plans

114	20	Employee Benefits and
		Other Expenses

118	21	Income Taxes

119	22	Earnings Per Common Share

120	23	Other Comprehensive Income

121	24	Operating Segments

123	25	Condensed Consolidating Financial
		Statements

127	26	Regulatory and Agency Capital
		Requirements

129	Report of Independent Registered Public Accounting Firm

130	Quarterly Financial Data

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 significantly from our forecasts and expectations due to several factors. Please refer to the “Risk Factors” section of this Report for a discussion of some of the factors that may cause results to differ.

Financial Review

Overview

Wells Fargo & Company is a $575 billion diversified financial services company providing banking, insurance, investments, mortgage banking and consumer finance through banking stores, the internet and other distribution channels to consumers, businesses and institutions in all 50 states of the U.S. and in other countries. We ranked fifth in assets and fourth in market value of our common stock among U.S. bank holding companies at December 31, 2007. When we refer to “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.

The financial services industry faced unprecedented challenges in 2007. Home values declined abruptly and sharply, adversely impacting the consumer lending business of many financial service providers; credit spreads widened as the capital markets repriced in many asset classes; price volatility increased and market liquidity decreased in several sectors of the capital markets; and, late in the year, economic growth declined sharply.

We were not immune to these unprecedented external factors. Our provision for credit losses was $2.7 billion higher in 2007 than in 2006, reflecting $1.3 billion in additional provisions for actual charge-offs that occurred in 2007 and a special $1.4 billion provision to further build reserves for loan losses.

While the $2.7 billion in additional provisions reduced consolidated net income after tax by 18%, consolidated full-year earnings per share declined only 4% to $2.38 per share, a strong overall result given the external environment and higher credit costs.

Our results were as strong as they were because we largely avoided or had negligible exposure to many of the problem areas that resulted in significant costs and write-downs at other large financial institutions and because we continued to build our diversified franchise throughout 2007, once again achieving growth rates, operating margins, and returns at or near the top of the financial services industry, while at the same time maintaining strong capital levels and strong liquidity.

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 and diversified business model facilitate growth in strong and

weak economic cycles, as we can grow by expanding the number of products our current customers have with us. Despite the aforementioned challenges, we continued to earn more of our customers’ business in 2007 in both our retail and commercial banking businesses. Our cross-sell set records for the ninth consecutive year—our average retail banking household now has 5.5 products, almost one in five have more than eight, 6.1 for Wholesale Banking customers, and our average middle-market commercial banking customer has almost eight products. Business banking cross-sell reached 3.5 products. Our goal in each customer segment is eight products per customer, which is currently half of our estimate of potential demand.

Revenue, the sum of net interest income and noninterest income, grew 10.4% to a record $39.4 billion in 2007 from $35.7 billion in 2006. The breadth and depth of our business model resulted in very strong and balanced growth in loans, deposits and fee-based products. Many of our businesses continued to post double-digit, year-over-year revenue growth, including business direct, wealth management, credit and debit card, global remittance services, personal credit management, home mortgage, asset-based lending, asset management, specialized financial services and international.

Among the many products and services that grew in 2007, we achieved the following results:

•		Average loans grew by 12%;
•		Average core deposits grew by 13%;
•		Assets under management were up 14%;
•		Mortgage servicing fees were up 14%;
•		Insurance premiums were up 14%; and
•		Total noninterest income rose 17%, reflecting the breadth of our cross-sell efforts.

We continue to maintain leading market positions in deposits in many communities within our banking footprint and to be #1 in many categories of financial services nationally, including small business lending, retail mortgage originations, agricultural lending, internet banking, insurance brokerage among banks, and provider of financial services to middle-market companies in the western U.S.

We have stated in the past that to consistently grow over the long term, successful companies must invest in their core businesses and maintain strong balance sheets. We continued to make investments in 2007 by opening 87 regional banking stores and converting 42 stores acquired from Placer Sierra Bancshares and National City Bank to our network. We grew our sales and service force by adding 1,755 team members (full-time equivalents) in 2007, including 578 retail

platform bankers. In fourth quarter 2007, we completed the acquisition of Greater Bay Bancorp, with $7.4 billion in assets, the third largest bank acquisition in our history, adding to our community banking, commercial insurance brokerage, specialty finance and trust businesses. We also recently agreed to acquire the banking operations of United Bancorporation of Wyoming, which will make us the largest bank in our nation’s ninth fastest growing state.

We believe it is important to maintain a well-controlled environment as we continue to grow our businesses. 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 prudent ranges, while ensuring adequate liquidity and funding. We maintain strong capital levels to provide for future growth. Our stockholder value has increased over time due to customer satisfaction, strong financial results, investment in our businesses, consistent execution of our business model and management of our business risks.

Wells Fargo Bank, N.A. continued to be rated as “Aaa,” the highest possible credit rating issued by Moody’s Investors Service (Moody’s), and was upgraded in February 2007 to “AAA,” the highest possible credit rating issued by Standard & Poor’s Ratings Services (S&P). Of the more than 1,100 financial institutions and 70 national banking systems covered by S&P globally, this upgrade makes our bank one of only two banks worldwide to have S&P’s “AAA” credit rating. Wells Fargo Bank, N.A. is now the only U.S. bank to have the highest possible credit rating from both Moody’s and S&P.

Our financial results included the following:

Net income in 2007 was $8.06 billion ($2.38 per share), compared with $8.42 billion ($2.47 per share) in 2006. Results for 2007 included the impact of the previously announced $1.4 billion (pre tax) credit reserve build ($0.27 per share) and $203 million of Visa litigation expenses ($0.04 per share), and for 2006 included $95 million ($0.02 per share) of Visa litigation expenses. Despite the challenging environment in 2007, we had a solid year and achieved both double-digit top line revenue growth and positive operating leverage (revenue growth of 10.4% exceeding expense growth of 9.5%). Return on average total assets (ROA) was 1.55% and return on average stockholders’ equity (ROE) was 17.12% in 2007, compared with 1.73% and 19.52%, respectively, in 2006. Both ROA and ROE were, once again, at or near the top of our large bank peers.

Net interest income on a taxable-equivalent basis was $21.1 billion in 2007, up from $20.1 billion a year ago, reflecting strong loan growth. Average earning assets grew 7% from 2006. Our net interest margin was 4.74% for 2007, compared with 4.83% in 2006, primarily due to earning assets increasing at a slightly faster rate than core deposits.

Noninterest income increased 17% to $18.4 billion in 2007 from $15.7 billion in 2006. The increase was across our businesses, with double-digit increases in debit and credit card fees (up 22%), deposit service charges (up 13%), trust

and investment fees (up 15%), and insurance revenue (up 14%). Capital markets and equity investment results were also strong. Mortgage banking noninterest income increased $822 million (36%) from 2006 because net servicing fee income increased due to growth in loans serviced for others.

During 2007, noninterest income was affected by changes in interest rates, widening credit spreads, and other credit and housing market conditions, including:

•		$(803) million – $479 million write-down of the mortgage warehouse/pipeline, and $324 million write-down, primarily due to mortgage loans repurchased and an increase in the repurchase reserve for projected early payment defaults.
•		$583 million – Increase in mortgage servicing income reflecting a $571 million reduction in the value of mortgage servicing rights (MSRs) due to the decline in mortgage rates during the year, offset by a $1.15 billion gain on the financial instruments hedging the MSRs. The ratio of MSRs to related loans serviced for others at December 31, 2007, was 1.20%, the lowest ratio in 10 quarters.

Noninterest expense was $22.8 billion in 2007, up 9.5% from $20.8 billion in 2006, primarily due to continued investments in new stores and additional sales and service-related team members. Despite these investments and the acquisition of Greater Bay Bancorp and related integration expense, our efficiency ratio improved to 57.9% in 2007 from 58.4% in 2006. We obtained concurrence from the staff of the Securities and Exchange Commission (SEC) regarding our accounting for certain transactions related to the restructuring of Visa Inc., and recorded a litigation liability and corresponding expense, included in operating losses, of $203 million for 2007 and $95 million for 2006.

During 2007, net charge-offs were $3.54 billion (1.03% of average total loans), up $1.3 billion from $2.25 billion (0.73%) during 2006. Commercial and commercial real estate net charge-offs increased $239 million in 2007 from 2006, of which $162 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 $103 million (0.08% of average loans). The remaining balance of commercial and commercial real estate (other real estate mortgage, real estate construction and lease financing) continued to have low net charge-off rates in 2007.

National Home Equity Group (Home Equity) portfolio net charge-offs totaled $595 million (0.73% of average loans) in 2007, compared with $110 million (0.14%) in 2006. Because the majority of the Home Equity net charge-offs were concentrated in the indirect or third party origination channels, which have a higher percentage of 90% or greater combined loan-to-value portfolios, we have discontinued third party activities not behind a Wells Fargo first mortgage and segregated these indirect loans into a liquidating portfolio. As previously disclosed, while the $11.9 billion of loans in this liquidating portfolio represented about 3% of total loans outstanding at December 31, 2007, these loans represent

the highest risk in our $84.2 billion Home Equity portfolio. The loans in the liquidating portfolio were primarily sourced through wholesale (brokers) and correspondents. Additionally, they are largely concentrated in geographic markets that have experienced the most abrupt and steepest declines in housing prices. We will continue to provide home equity financing directly to our customers, but have stopped originating or acquiring new home equity loans through indirect channels unless they are behind a Wells Fargo first mortgage and have a combined loan-to-value ratio lower than 90%. 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.

Full year 2007 auto portfolio net charge-offs were $1.02 billion (3.45% of average loans), compared with $857 million (3.15%) in 2006. These results were consistent with our expectations and reflected planned lower growth in originations and an improvement in collection activities within this business.

The provision for credit losses was $4.94 billion in 2007, an increase of $2.74 billion from $2.20 billion in 2006, due to higher net charge-offs and the 2007 credit reserve build of $1.4 billion, primarily for higher net loss content that we estimated in the Home Equity portfolio. Given the weakness in housing and the overall state of the U.S. economy, it is likely that net charge-offs will be higher in 2008. The allowance for credit losses, which consists of the allowance for loan losses and the reserve for unfunded credit commitments, was $5.52 billion (1.44% of total loans) at December 31, 2007, compared with $3.96 billion (1.24%) at December 31, 2006.

At December 31, 2007, total nonaccrual loans were $2.68 billion (0.70% of total loans) up from $1.67 billion (0.52%) at December 31, 2006. The majority of the increase in nonaccrual loans was concentrated in the first mortgage portfolio ($209 million in Wells Fargo Home Mortgage and $343 million in Wells Fargo Financial) and was due to the national rise in mortgage default rates. We believe there is minimal additional loss content in these loans since they are


Table 1: Six-Year Summary of Selected Financial Data
(in millions, except	2007		2006		⁽¹⁾	2005		2004		2003		2002		% Change			Five-year
per share amounts)														2007		/	compound
														2006			growth rate

INCOME STATEMENT
Net interest income	$	20,974	$	19,951		$	18,504	$	17,150	$	16,007	$	14,482		5	%		8	%
Noninterest income		18,416		15,740			14,445		12,909		12,382		10,767		17			11

Revenue		39,390		35,691			32,949		30,059		28,389		25,249		10			9
Provision for credit losses		4,939		2,204			2,383		1,717		1,722		1,684		124			24
Noninterest expense		22,824		20,837			19,018		17,573		17,190		14,711		10			9

Before effect of change in accounting principle ⁽²⁾
Net income	$	8,057	$	8,420		$	7,671	$	7,014	$	6,202	$	5,710		(4	)		7
Earnings per common share		2.41		2.50			2.27		2.07		1.84		1.68		(4	)		7
Diluted earnings per common share		2.38		2.47			2.25		2.05		1.83		1.66		(4	)		7

After effect of change in accounting principle
Net income	$	8,057	$	8,420		$	7,671	$	7,014	$	6,202	$	5,434		(4	)		8
Earnings per common share		2.41		2.50			2.27		2.07		1.84		1.60		(4	)		9
Diluted earnings per common share		2.38		2.47			2.25		2.05		1.83		1.58		(4	)		9
Dividends declared per common share		1.18		1.08			1.00		0.93		0.75		0.55		9			16

BALANCE SHEET (at year end)
Securities available for sale	$	72,951	$	42,629		$	41,834	$	33,717	$	32,953	$	27,947		71			21
Loans		382,195		319,116			310,837		287,586		253,073		192,478		20			15
Allowance for loan losses		5,307		3,764			3,871		3,762		3,891		3,819		41			7
Goodwill		13,106		11,275			10,787		10,681		10,371		9,753		16			6
Assets		575,442		481,996			481,741		427,849		387,798		349,197		19			11
Core deposits ⁽³⁾		311,731		288,068			253,341		229,703		211,271		198,234		8			9
Long-term debt		99,393		87,145			79,668		73,580		63,642		47,320		14			16
Guaranteed preferred beneficial interests in Company’s subordinated debentures ⁽⁴⁾		—		—			—		—		—		2,885		—			—
Stockholders’ equity		47,628		45,814			40,660		37,866		34,469		30,319		4			9


(1)		Results for 2006 have been revised to reflect $95 million of litigation expenses associated with indemnification obligations arising from the Company’s ownership interest in Visa.

(2)		Change in accounting principle is for a transitional goodwill impairment charge recorded in 2002 upon adoption of FAS 142, Goodwill and Other Intangible Assets .

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

(4)		At December 31, 2003, upon adoption of FIN 46 (revised December 2003), Consolidation of Variable Interest Entities (FIN 46(R)), these balances were reflected in long-term debt. See Note 14 (Long-Term Debt) to Financial Statements for more information.

adjusted to market value when transferred to nonperforming asset (NPA) status. Total NPAs were $3.87 billion (1.01% of total loans) at December 31, 2007, compared with $2.42 billion (0.76%) at December 31, 2006. Due to illiquid market conditions, we are now holding more foreclosed properties than we have historically. Foreclosed assets were $1.18 billion at December 31, 2007, compared with $745 million at December 31, 2006. Foreclosed assets, a component of total NPAs, included $649 million and $423 million in residential property or auto loans and $535 million and $322 million of foreclosed real estate securing Government National Mortgage Association (GNMA) loans at December 31, 2007 and 2006, respectively, consistent with regulatory reporting requirements. The foreclosed real estate securing GNMA loans of $535 million represented 14 basis points of the ratio of NPAs to loans at December 31, 2007. Both principal and interest for the 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.


Table 2: Ratios and Per Common Share Data

	Year ended December 31								,
	2007			2006			2005

PROFITABILITY RATIOS
Net income to average total assets (ROA)		1.55	%		1.73	%		1.72	%
Net income to average stockholders’ equity (ROE)		17.12			19.52			19.59

EFFICIENCY RATIO ⁽¹⁾		57.9			58.4			57.7

CAPITAL RATIOS
At year end:
Stockholders’ equity to assets		8.28			9.51			8.44
Risk-based capital ⁽²⁾
Tier 1 capital		7.59			8.93			8.26
Total capital		10.68			12.49			11.64
Tier 1 leverage ⁽²⁾		6.83			7.88			6.99
Average balances:
Stockholders’ equity to assets		9.04			8.88			8.78

PER COMMON SHARE DATA
Dividend payout ⁽³⁾		49.0			43.2			44.1
Book value	$	14.45		$	13.57		$	12.12
Market price ⁽⁴⁾
High	$	37.99		$	36.99		$	32.35
Low		29.29			30.31			28.81
Year end		30.19			35.56			31.42


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

(2)		See Note 26 (Regulatory and Agency Capital Requirements) to Financial Statements for additional information.

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

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

The Company and each of its subsidiary banks remained “well capitalized” under applicable regulatory capital adequacy guidelines. The ratio of stockholders’ equity to total assets was 8.28% at December 31, 2007, compared with 9.51% at December 31, 2006. Our total risk-based capital (RBC) ratio at December 31, 2007, was 10.68% and our Tier 1 RBC ratio was 7.59%, exceeding the minimum

regulatory guidelines of 8% and 4%, respectively, for bank holding companies. Our RBC ratios at December 31, 2006, were 12.49% and 8.93%, respectively. Our Tier 1 leverage ratios were 6.83% and 7.88% at December 31, 2007 and 2006, respectively, exceeding the minimum regulatory guideline of 3% for bank holding companies.

Current Accounting Developments

On January 1, 2007, we adopted the following new accounting pronouncements:

•		FIN 48 – Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 ;
•		FSP 13-2 – FASB Staff Position 13-2, Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction ;
•		FAS 155 – Statement of Financial Accounting Standards No. 155, Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140 ;
•		FAS 157 – Fair Value Measurements ; and
•		FAS 159 – The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115 .

The adoption of FIN 48, FAS 155, FAS 157 and FAS 159 did not have any effect on our financial statements at the date of adoption. For additional information, see Note 17 (Fair Values of Assets and Liabilities) and Note 21 (Income Taxes) to Financial Statements.

Upon adoption of FSP 13-2, we recorded a cumulative effect of change in accounting principle to reduce the beginning balance of 2007 retained earnings by $71 million after tax ($115 million pre tax). This amount will be recognized back into income over the remaining terms of the affected leases.

On July 1, 2007, we adopted Emerging Issues Task Force (EITF) Topic D-109, Determining the Nature of a Host Contract Related to a Hybrid Financial Instrument Issued in the Form of a Share under FASB Statement No. 133 (Topic D-109), which provides clarifying guidance as to whether certain hybrid financial instruments are more akin to debt or equity, for purposes of evaluating whether the embedded derivative financial instrument requires separate accounting under FAS 133, Accounting for Derivative Instruments and Hedging Activities . In accordance with the transition provisions of Topic D-109, we transferred $1.2 billion of securities, consisting of investments in preferred stock callable by the issuer, from trading assets to securities available for sale. Because the securities were carried at fair value, the adoption of Topic D-109 did not have any effect on our total stockholders’ equity.

On April 30, 2007, the FASB issued Staff Position FIN 39-1, Amendment of FASB Interpretation No. 39 (FSP FIN 39-1). FSP FIN 39-1 amends Interpretation No. 39 to permit a reporting entity to offset the right to reclaim cash collateral (a receivable), or the obligation to return cash collateral

(a payable), against derivative instruments executed with the same counterparty under the same master netting arrangement. The provisions of this FSP are effective for the year beginning on January 1, 2008, with early adoption permitted. We adopted FSP FIN 39-1 on January 1, 2008, and it did not have a material effect on our consolidated financial statements.

On September 20, 2006, the FASB ratified the consensus reached by the EITF at its September 7, 2006, meeting with respect to Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements (EITF 06-4). On March 28, 2007, the FASB ratified the consensus reached by the EITF at its March 15, 2007, meeting with respect to Issue No. 06-10, Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements (EITF 06-10). These pronouncements require that for endorsement split-dollar life insurance arrangements and collateral split-dollar life insurance arrangements where the employee is provided benefits in postretirement periods, the employer should recognize the cost of providing that insurance over the employee’s service period by accruing a liability for the benefit obligation. Additionally, for collateral assignment split-dollar life insurance arrangements, EITF 06-10 requires an employer to recognize and measure an asset based upon the nature and substance of the agreement. EITF 06-4 and EITF 06-10 are effective for the year beginning on January 1, 2008, with early adoption permitted. We adopted EITF 06-4 and EITF 06-10 on January 1, 2008, and reduced beginning retained earnings for 2008 by $20 million (after tax), primarily related to split-dollar life insurance arrangements from the acquisition of Greater Bay Bancorp.

On November 5, 2007, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 109, Written Loan Commitments Recorded at Fair Value Through Earnings (SAB 109). SAB 109 provides the staff’s views on the accounting for written loan commitments recorded at fair value under U.S. generally accepted accounting principles (GAAP). To make the staff’s views consistent with current authoritative accounting guidance, SAB 109 revises and rescinds portions of SAB 105, Application of Accounting Principles to Loan Commitments . Specifically, SAB 109 states the expected net future cash flows associated with the servicing of a loan should be included in the measurement of all written

loan commitments that are accounted for at fair value through earnings. The provisions of SAB 109, which we adopted on January 1, 2008, are applicable to written loan commitments recorded at fair value that are entered into beginning on or after January 1, 2008.

On December 4, 2007, the FASB issued FAS 141R, Business Combinations . This statement requires an acquirer to recognize the assets acquired (including loan receivables), the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, to be measured 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. FAS 141R should be applied prospectively to business combinations beginning with the first annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited. We are currently evaluating the impact that FAS 141R may have on our consolidated financial statements.

On December 4, 2007, the FASB issued FAS 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 . FAS 160 specifies that noncontrolling interests in a subsidiary are to be treated as a separate component of equity and, as such, increases and decreases in the parent’s ownership interest that leave control intact are accounted for as capital transactions. It changes the way the consolidated income statement is presented by requiring that an entity’s consolidated net income include the amounts attributable to both the parent and the noncontrolling interest. FAS 160 requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. This statement should be applied prospectively to all noncontrolling interests, including any that arose before the effective date. The statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. We are currently evaluating the impact that FAS 160 may have on our consolidated financial statements.

Critical Accounting Policies

Our significant accounting policies (see Note 1 (Summary of Significant Accounting Policies) to Financial Statements) are fundamental to understanding our results of operations and financial condition, because some accounting policies require that we use estimates and assumptions that may affect the value of our assets or liabilities and financial results. Five 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, the valuation of residential mortgage servicing rights (MSRs) and 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.

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. We have an established process, using several analytical tools and benchmarks, to calculate a range of possible outcomes and determine the adequacy of the allowance. No single statistic or measurement determines the adequacy of the allowance. Loan recoveries and the provision for credit losses increase the allowance, while loan charge-offs decrease the allowance.

PROCESS TO DETERMINE THE ADEQUACY OF THE ALLOWANCE FOR CREDIT LOSSES

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.

The remaining portion of the allowance is for commercial loans, commercial real estate loans and lease financing. 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, using a standardized loan grading process. 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 assess and account for as impaired certain nonaccrual commercial and commercial real estate loans that are over $3 million and certain consumer, commercial and commercial real estate loans whose terms have been modified in a troubled debt restructuring. We include the impairment on these nonperforming loans in the allowance unless it has already been recognized as a loss.

Reflected in the two 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.

The total allowance reflects management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. To estimate the possible range of allowance required at December 31, 2007, and the related change in provision expense, we assumed the following scenarios of a reasonably possible deterioration or improvement in loan credit quality.

Assumptions for deterioration in loan credit quality were:

•		for consumer loans, a 23 basis point increase in estimated loss rates from actual 2007 loss levels, moving closer to longer term average loss rates or more prolonged stress case for home equity loans; and
•		for wholesale loans, a 24 basis point increase in estimated loss rates, moving closer to historical averages.

Assumptions for improvement in loan credit quality were:

•		for consumer loans, an 18 basis point decrease in estimated loss rates from actual 2007 loss levels, adjusting for the elevated home equity losses and an improving real estate market for consumers; and
•		for wholesale loans, nominal change from the 2007 net credit loss performance.

Under the assumptions for deterioration in loan credit quality, another $804 million in expected losses could occur and under the assumptions for improvement, a $416 million reduction in expected losses could occur.

Changes in the estimate of the allowance for credit losses and the related provision expense can materially affect net income. The example above is only one of a number of reasonably possible scenarios. Determining the allowance for credit losses requires us to make forecasts of losses that are highly uncertain and require a high degree of judgment. Given that the majority of our loan portfolio is consumer loans, for which losses tend to emerge within a relatively short, predictable timeframe, and that a significant portion of the allowance for credit losses relates to estimated credit

losses associated with consumer loans, management believes that the provision for credit losses for consumer loans, absent any significant credit event, severe decrease in collateral values, significant acceleration of losses or significant change in payment behavior, will closely track the level of related net charge-offs. From time to time, events or economic factors may impact the loan portfolio, causing management to provide additional amounts or release balances from the allowance for credit losses. The increase in the allowance for credit losses in excess of net charge-offs in 2007 was primarily due to higher losses in the Home Equity portfolio stemming from the steeper than anticipated decline in national home prices. See Note 6 (Loans and Allowance for Credit Losses) to Financial Statements and “Risk Management – Credit Risk Management Process” for further discussion of our allowance for credit losses.

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. Effective January 1, 2006, under FAS 156, Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140 , we elected to initially measure and carry our MSRs related to residential mortgage loans (residential MSRs) using the fair value measurement method. Under this method, purchased MSRs and MSRs from asset transfers are capitalized and carried at fair value. Prior to the adoption of FAS 156, we capitalized purchased residential MSRs at cost, and MSRs from asset transfers based on the relative fair value of the servicing right and the residential mortgage loan at the time of sale, and carried both purchased MSRs and MSRs from asset transfers at the lower of cost or market value. Effective January 1, 2006, upon the remeasurement of our residential MSRs at fair value, we recorded a cumulative effect adjustment to increase the 2006 beginning balance of retained earnings by $101 million after tax ($158 million pre tax) in stockholders’ equity.

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 17 (Fair Values of Assets and Liabilities) to Financial Statements.

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 chosen 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 “Mortgage Banking Interest Rate and Market Risk” 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.

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 and substantially all mortgages held for sale (MHFS) are financial instruments recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other financial assets on a nonrecurring basis, such as nonprime residential and commercial MHFS, loans held for sale, 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 Notes to Financial Statements information about the extent to which fair value is used to measure assets and liabilities, the valuation methodologies used and its impact to earnings. Additionally, for financial instruments not recorded at fair value we disclose the estimate of their fair value.

FAS 157, Fair Value Measurements (FAS 157), defines fair value as 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.

FAS 157 establishes 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, other U.S. government and agency mortgage-backed securities that are traded by dealers or brokers in active over-the-counter 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 2 instruments include securities traded in less active dealer or broker markets and MHFS that are valued based on prices for other mortgage whole loans with similar characteristics.
•		Level 3 – Valuation is generated 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.

In accordance with FAS 157, it is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements. When available, we use quoted market prices to measure fair value. If market prices 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. Substantially all of our financial instruments use either of the foregoing methodologies, collectively Level 1 and Level 2 measurements, to determine fair value adjustments recorded to our financial statements. 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 market prices or observable market parameters. For financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value. When observable market prices and parameters are not fully available, management judgment is necessary to estimate fair value. In addition, changes in the market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. Therefore, when market data is not available, we would use valuation techniques requiring more management judgment to estimate the appropriate fair value measurement.

At December 31, 2007, approximately 22% of total assets, or $123.8 billion, consisted of financial instruments recorded at fair value on a recurring basis. Approximately 82% of these financial instruments used valuation methodologies involving market-based or market-derived information, collectively Level 1 and 2 measurements, to measure fair value. Approximately 18% of these financial assets are measured using model-based techniques, or Level 3 measurements. Virtually all of our financial assets valued using Level 3 measurements represented MSRs (previously described) or investments in asset-backed securities where we underwrite the underlying collateral (auto lease receivables). At December 31, 2007, approximately 0.5% of total liabilities, or $2.6 billion, consisted of financial instruments recorded at fair value on a recurring basis.

See Note 17 (Fair Values of Assets and Liabilities) to Financial Statements 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 required by FAS 87, Employers’ Accounting for Pensions , as amended by FAS 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R) . FAS 158 was issued on September 29, 2006, and became effective for us on December 31, 2006. FAS 158 requires us to recognize the funded status of our pension and postretirement benefit plans in our balance sheet. Additionally, FAS 158 will require us to use a year-end measurement date beginning in 2008. The adoption of FAS 158 did not change the amount of net periodic benefit expense recognized in our income statement.

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.

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.

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 2008 is 8.75%, the same rate used for 2007 and 2006. 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 other comprehensive income. We generally amortize any net actuarial gain or loss in excess of a 5% corridor (as defined in FAS 87) in net periodic pension expense calculations over the next five years. Our average remaining service period is approximately 11 years. See Note 20 (Employee Benefits and Other Expenses) to Financial Statements for information on funding, changes in the pension benefit obligation, and plan assets (including the investment categories, asset allocation and the fair value).

We use November 30 as the measurement date for our pension assets and projected benefit obligations. 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, pension expense would decrease/increase by approximately $54 million. In 2008 we will use December 31 as our measurement date as required under FAS 158.

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 in conjunction 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 6.25% in 2007 and 5.75% in 2006.

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, pension expense would decrease by approximately $6 million. If we were to assume a 1% decrease in the discount rate, and keep other assumptions constant, pension expense would increase by approximately $82 million. The decrease in pension expense due to a 1% increase in discount rate differs 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. We account for income taxes in accordance with FAS 109, Accounting for Income Taxes, as interpreted by FIN 48, Accounting for Uncertainty in Income Taxes . 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 is greater than 50% likely of being realized 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 21 (Income Taxes) to Financial Statements for a further description of our provision for income taxes and related income tax assets and liabilities.

Earnings Performance

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

Net interest income on a taxable-equivalent basis was $21.1 billion in 2007, up 5% from $20.1 billion in 2006. Our net interest margin decreased to 4.74% for 2007 from 4.83% for 2006. Both the increase in net interest income and the decrease in the net interest margin were largely driven by strong growth in earning assets which were up 7% in 2007.

Average earning assets increased $30.1 billion to $445.9 billion in 2007 from $415.8 billion in 2006. Average loans increased to $344.8 billion in 2007 from $306.9 billion in 2006. Average mortgages held for sale decreased to $33.1 billion in 2007 from $42.9 billion in 2006. Average debt securities available for sale increased to $57.0 billion in 2007 from $53.6 billion in 2006.

Core deposits are an important contributor to growth in net interest income and the net interest margin, and are

a low-cost source of funding. Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). We have one of the largest bases of core deposits among large U.S. banks. Average core deposits grew 13% to $303.1 billion in 2007 from $268.9 billion in 2006 and funded 88% of average total loans in both years. Total average retail core deposits, which exclude Wholesale Banking core deposits and retail mortgage escrow deposits, for 2007 grew $12.9 billion (6%) from 2006. Average mortgage escrow deposits increased to $21.5 billion in 2007 from $18.2 billion in 2006. Average savings certificates of deposit increased to $40.5 billion in 2007 from $32.4 billion in 2006 and average noninterest-bearing checking accounts and other core deposit categories (interest-bearing checking and market rate and other savings) increased to $241.9 billion in 2007 from $227.7 billion in 2006. Total average interest-bearing deposits increased to $239.2 billion in 2007 from $223.8 billion in 2006, due to a shift in the deposit mix in favor of higher-yielding savings and certificates of deposit relative to lower cost savings and demand deposit accounts.

Table 3 presents the individual components of net interest income and the net interest margin.

Table 3: Average Balances, Yields and Rates Paid (Taxable-Equivalent Basis) ⁽¹⁾⁽²⁾


(in millions)	2007									2006
	Average			Yields		/	Interest			Average			Yields		/	Interest
	balance			rates			income		/	balance			rates			income		/
							expense									expense
EARNING ASSETS
Federal funds sold, securities purchased under resale agreements and other short-term investments	$	4,468			4.99	%	$	223		$	5,515			4.80	%	$	265
Trading assets		4,291			4.37			188			4,958			4.95			245
Debt securities available for sale ⁽³⁾ :
Securities of U.S. Treasury and federal agencies		848			4.26			36			875			4.36			39
Securities of U.S. states and political subdivisions		4,740			7.37			342			3,192			7.98			245
Mortgage-backed securities:
Federal agencies		38,592			6.10			2,328			36,691			6.04			2,206
Private collateralized mortgage obligations		6,548			6.12			399			6,640			6.57			430

Total mortgage-backed securities		45,140			6.10			2,727			43,331			6.12			2,636
Other debt securities ⁽⁴⁾		6,295			7.52			477			6,204			7.10			439

Total debt securities available for sale ⁽⁴⁾		57,023			6.34			3,582			53,602			6.31			3,359
Mortgages held for sale ⁽⁵⁾		33,066			6.50			2,150			42,855			6.41			2,746
Loans held for sale ⁽⁵⁾		896			7.76			70			630			7.40			47
Loans:
Commercial and commercial real estate:
Commercial		77,965			8.17			6,367			65,720			8.13			5,340
Other real estate mortgage		32,722			7.38			2,414			29,344			7.32			2,148
Real estate construction		16,934			7.80			1,321			14,810			7.94			1,175
Lease financing		5,921			5.84			346			5,437			5.72			311

Total commercial and commercial real estate		133,542			7.82			10,448			115,311			7.78			8,974
Consumer:
Real estate 1-4 family first mortgage		61,527			7.25			4,463			57,509			7.27			4,182
Real estate 1-4 family junior lien mortgage		72,075			8.12			5,851			64,255			7.98			5,126
Credit card		15,874			13.58			2,155			12,571			13.29			1,670
Other revolving credit and installment		54,436			9.71			5,285			50,922			9.60			4,889

Total consumer		203,912			8.71			17,754			185,257			8.57			15,867
Foreign		7,321			11.68			855			6,343			12.39			786

Total loans ⁽⁵⁾		344,775			8.43			29,057			306,911			8.35			25,627
Other		1,402			5.07			71			1,357			4.97			68

Total earning assets	$	445,921			7.93			35,341		$	415,828			7.79			32,357

FUNDING SOURCES
Deposits:
Interest-bearing checking	$	5,057			3.16			160		$	4,302			2.86			123
Market rate and other savings		147,939			2.78			4,105			134,248			2.40			3,225
Savings certificates		40,484			4.38			1,773			32,355			3.91			1,266
Other time deposits		8,937			4.87			435			32,168			4.99			1,607
Deposits in foreign offices		36,761			4.57			1,679			20,724			4.60			953

Total interest-bearing deposits		239,178			3.41			8,152			223,797			3.21			7,174
Short-term borrowings		25,854			4.81			1,245			21,471			4.62			992
Long-term debt		93,193			5.18			4,824			84,035			4.91			4,124
Guaranteed preferred beneficial interests in Company’s subordinated debentures ⁽⁶⁾		—			—			—			—			—			—

Total interest-bearing liabilities		358,225			3.97			14,221			329,303			3.73			12,290
Portion of noninterest-bearing funding sources		87,696			—			—			86,525			—			—

Total funding sources	$	445,921			3.19			14,221		$	415,828			2.96			12,290

Net interest margin and net interest income on a taxable-equivalent basis ⁽⁷⁾					4.74	%	$	21,120						4.83	%	$	20,067

NONINTEREST-EARNING ASSETS
Cash and due from banks	$	11,806								$	12,466
Goodwill		11,957									11,114
Other		51,068									46,615

Total noninterest-earning assets	$	74,831								$	70,195

NONINTEREST-BEARING FUNDING SOURCES
Deposits	$	88,907								$	89,117
Other liabilities		26,557									24,467
Stockholders’ equity		47,063									43,136
Noninterest-bearing funding sources used to fund earning assets		(87,696	)								(86,525	)

Net noninterest-bearing funding sources	$	74,831								$	70,195

TOTAL ASSETS	$	520,752								$	486,023

(1)		Our average prime rate was 8.05%, 7.96%, 6.19%, 4.34% and 4.12% for 2007, 2006, 2005, 2004 and 2003, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 5.30%, 5.20%, 3.56%, 1.62% and 1.22% for the same years, respectively.
(2)		Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3)		Yields are based on amortized cost balances computed on a settlement date basis.
(4)		Includes certain preferred securities.


2005									2004									2003
Average			Yields		/	Interest			Average			Yields		/	Interest			Average			Yields		/	Interest
balance			rates			income		/	balance			rates			income		/	balance			rates			income		/
						expense									expense									expense

$	5,448			3.01	%	$	164		$	4,254			1.49	%	$	64		$	4,174			1.16	%	$	49
	5,411			3.52			190			5,286			2.75			145			6,110			2.56			156

	997			3.81			38			1,161			4.05			46			1,286			4.74			58
	3,395			8.27			266			3,501			8.00			267			2,424			8.62			196

	19,768			6.02			1,162			21,404			6.03			1,248			18,283			7.37			1,276
	5,128			5.60			283			3,604			5.16			180			2,001			6.24			120

	24,896			5.94			1,445			25,008			5.91			1,428			20,284			7.26			1,396
	3,846			7.10			266			3,395			7.72			236			3,302			7.75			240

	33,134			6.24			2,015			33,065			6.24			1,977			27,296			7.32			1,890
	38,986			5.67			2,213			32,263			5.38			1,737			58,672			5.34			3,136
	2,857			5.10			146			8,201			3.56			292			7,142			3.51			251


	58,434			6.76			3,951			49,365			5.77			2,848			47,279			6.08			2,876
	29,098			6.31			1,836			28,708			5.35			1,535			25,846			5.44			1,405
	11,086			6.67			740			8,724			5.30			463			7,954			5.11			406
	5,226			5.91			309			5,068			6.23			316			4,453			6.22			277

	103,844			6.58			6,836			91,865			5.62			5,162			85,532			5.80			4,964

	78,170			6.42			5,016			87,700			5.44			4,772			56,252			5.54			3,115
	55,616			6.61			3,679			44,415			5.18			2,300			31,670			5.80			1,836
	10,663			12.33			1,315			8,878			11.80			1,048			7,640			12.06			922
	43,102			8.80			3,794			33,528			9.01			3,022			29,838			9.09			2,713

	187,551			7.36			13,804			174,521			6.38			11,142			125,400			6.85			8,586
	4,711			13.49			636			3,184			15.30			487			2,200			18.00			396

	296,106			7.19			21,276			269,570			6.23			16,791			213,132			6.54			13,946
	1,581			4.34			68			1,709			3.81			65			1,626			4.57			74

$	383,523			6.81			26,072		$	354,348			5.97			21,071		$	318,152			6.16			19,502



$	3,607			1.43			51		$	3,059			0.44			13		$	2,571			0.27			7
	129,291			1.45			1,874			122,129			0.69			838			106,733			0.66			705
	22,638			2.90			656			18,850			2.26			425			20,927			2.53			529
	27,676			3.29			910			29,750			1.43			427			25,388			1.20			305
	11,432			3.12			357			8,843			1.40			124			6,060			1.11			67

	194,644			1.98			3,848			182,631			1.00			1,827			161,679			1.00			1,613
	24,074			3.09			744			26,130			1.35			353			29,898			1.08			322
	79,137			3.62			2,866			67,898			2.41			1,637			53,823			2.52			1,355
	—			—			—			—			—			—			3,306			3.66			121

	297,855			2.50			7,458			276,659			1.38			3,817			248,706			1.37			3,411
	85,668			—			—			77,689			—			—			69,446			—			—

$	383,523			1.95			7,458		$	354,348			1.08			3,817		$	318,152			1.08			3,411


				4.86	%	$	18,614						4.89	%	$	17,254						5.08	%	$	16,091


$	13,173								$	13,055								$	13,433
	10,705									10,418									9,905
	38,389									32,758									36,123

$	62,267								$	56,231								$	59,461


$	87,218								$	79,321								$	76,815
	21,559									18,764									20,030
	39,158									35,835									32,062
	(85,668	)								(77,689	)								(69,446	)

$	62,267								$	56,231								$	59,461

$	445,790								$	410,579								$	377,613

(5)		Nonaccrual loans and related income are included in their respective loan categories.
(6)		At December 31, 2003, upon adoption of FIN 46(R), these balances were reflected in long-term debt. See Note 14 (Long-Term Debt) to Financial Statements for more information.
(7)		Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for all years presented.

Table 4 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 4: Analysis of Changes in Net Interest Income


(in millions)	Year ended December 31																	,
	2007 over 2006									2006 over 2005
	Volume			Rate			Total			Volume			Rate			Total

Increase (decrease) in interest income:
Federal funds sold, securities purchased under resale agreements and other short-term investments	$	(52	)	$	10		$	(42	)	$	2		$	99		$	101
Trading assets		(30	)		(27	)		(57	)		(17	)		72			55
Debt securities available for sale:
Securities of U.S. Treasury and federal agencies		(2	)		(1	)		(3	)		(5	)		6			1
Securities of U.S. states and political subdivisions		117			(20	)		97			(13	)		(8	)		(21	)
Mortgage-backed securities:
Federal agencies		102			20			122			1,040			4			1,044
Private collateralized mortgage obligations		(5	)		(26	)		(31	)		93			54			147
Other debt securities		8			30			38			173			—			173
Mortgages held for sale		(634	)		38			(596	)		230			303			533
Loans held for sale		21			2			23			(146	)		47			(99	)
Loans:
Commercial and commercial real estate:
Commercial		1,001			26			1,027			529			860			1,389
Other real estate mortgage		248			18			266			16			296			312
Real estate construction		167			(21	)		146			278			157			435
Lease financing		28			7			35			12			(10	)		2
Consumer:
Real estate 1-4 family first mortgage		292			(11	)		281			(1,441	)		607			(834	)
Real estate 1-4 family junior lien mortgage		634			91			725			620			827			1,447
Credit card		448			37			485			247			108			355
Other revolving credit and installment		339			57			396			730			365			1,095
Foreign		116			(47	)		69			205			(55	)		150
Other		2			1			3			(10	)		10			—

Total increase in interest income		2,800			184			2,984			2,543			3,742			6,285

Increase (decrease) in interest expense:
Deposits:
Interest-bearing checking		23			14			37			12			60			72
Market rate and other savings		345			535			880			75			1,276			1,351
Savings certificates		343			164			507			337			273			610
Other time deposits		(1,134	)		(38	)		(1,172	)		167			530			697
Deposits in foreign offices		732			(6	)		726			376			220			596
Short-term borrowings		211			42			253			(88	)		336			248
Long-term debt		465			235			700			186			1,072			1,258

Total increase in interest expense		985			946			1,931			1,065			3,767			4,832

Increase (decrease) in net interest income on a taxable-equivalent basis	$	1,815		$	(762	)	$	1,053		$	1,478		$	(25	)	$	1,453

Noninterest Income
We earn trust, investment and IRA fees from managing and administering assets, including mutual funds, corporate trust, personal trust, employee benefit trust and agency assets. At December 31, 2007, these assets totaled $1.12 trillion, up 14% from $983 billion at December 31, 2006. 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 13% increase in these fees in 2007 from 2006 was due to continued strong asset growth across all the trust and investment management businesses.

We also receive commissions and other fees for providing services to full-service and discount brokerage customers. At December 31, 2007 and 2006, brokerage assets totaled $131

billion and $115 billion, respectively. Generally, these fees include transactional commissions, which are based on the number of transactions executed at the customer’s direction, or asset-based fees, which are based on the market value of the customer’s assets. A significant portion of the 20% increase in these fees in 2007 from a year ago was due to higher securities issuance and investment banking activity.

Card fees increased 22% to $2,136 million in 2007 from $1,747 million in 2006, primarily due to an increase in the percentage of our customer base using a Wells Fargo credit card and to higher credit and debit card transaction volume. Purchase volume on these cards increased 19% from a year ago and average card balances were up 28%.

Table 5: Noninterest Income


(in millions)	Year ended December 31							,	% Change
	2007		2006			2005			2007		/	2006		/
									2006			2005
Service charges on deposit accounts	$	3,050	$	2,690		$	2,512			13	%		7	%
Trust and investment fees:
Trust, investment and IRA fees		2,305		2,033			1,855			13			10
Commissions and all other fees		844		704			581			20			21

Total trust and investment fees		3,149		2,737			2,436			15			12
Card fees		2,136		1,747			1,458			22			20
Other fees:
Cash network fees		193		184			180			5			2
Charges and fees on loans		1,011		976			1,022			4			(5	)
All other fees		1,088		897			727			21			23

Total other fees		2,292		2,057			1,929			11			7
Mortgage banking:
Servicing income, net		1,511		893			987			69			(10	)
Net gains on mortgage loan origination/sales activities		1,289		1,116			1,085			16			3
All other		333		302			350			10			(14	)

Total mortgage banking		3,133		2,311			2,422			36			(5	)
Operating leases		703		783			812			(10	)		(4	)
Insurance		1,530		1,340			1,215			14			10
Net gains from trading activities		544		544			571			—			(5	)
Net gains (losses) on debt securities available for sale		209		(19	)		(120	)	NM				(84	)
Net gains from equity investments		734		738			511			(1	)		44
All other		936		812			699			15			16

Total	$	18,416	$	15,740		$	14,445			17			9

NM – Not meaningful

Mortgage banking noninterest income was $3,133 million in 2007, compared with $2,311 million in 2006. Servicing fees, included in net servicing income, increased to $4,025 million in 2007 from $3,525 million in 2006, due to growth in loans serviced for others, primarily reflecting the full year effect of the $140 billion servicing portfolio acquired from Washington Mutual, Inc. in July 2006. Our portfolio of loans serviced for others was $1.43 trillion at December 31, 2007, up 12% from $1.28 trillion at December 31, 2006. Servicing income also includes both changes in the fair value of MSRs during the period as well as changes in the value of derivatives (economic hedges) used to hedge the MSRs. Net servicing income for 2007 included a $583 million net MSRs valuation gain that was recorded to earnings ($571 million fair value loss offset by a $1.15 billion economic hedging gain) and for 2006 included a $154 million net MSRs valuation loss ($9 million fair value loss plus a $145 million economic hedging loss). At December 31, 2007, the ratio of MSRs to related loans serviced for others was 1.20%, the lowest ratio in 10 quarters.

Net gains on mortgage loan origination/sales activities were $1,289 million in 2007, up from $1,116 million in 2006. Gains for 2007 were partly offset by losses of $803 million, which consisted of a $479 million write-down of the mortgage warehouse/pipeline, and a $324 million write-down primarily due to mortgage loans repurchased and an increase in the repurchase reserve for projected early payment defaults. During 2006, we realized losses of $126 million resulting from the sale of low yielding ARMs as part of our balance sheet repositioning strategy. Residential real estate originations totaled $272 billion in 2007, compared

with $294 billion in 2006. Under FAS 159 we elected in 2007 to account for new prime MHFS at fair value. These loans are initially measured at fair value, with subsequent changes in fair value recognized as a component of net gains on mortgage loan origination/sales activities. Prior to the adoption of FAS 159, these fair value gains would have been deferred until the sale of these loans. (For additional detail, see “Asset/Liability and Market Risk Management — Mortgage Banking Interest Rate and Market Risk,” and Note 1 (Summary of Significant Accounting Policies), Note 9 (Mortgage Banking Activities) and Note 17 (Fair Values of Assets and Liabilities) to Financial Statements.) The 1-4 family first mortgage unclosed pipeline was $43 billion at December 31, 2007 and $48 billion at December 31, 2006.

Insurance revenue was up 14% from 2006, due to higher insurance commissions and increases in crop insurance premiums.

Income from trading activities was $544 million in both 2007 and 2006. Net gains on debt securities were $209 million for 2007, compared with losses of $19 million for 2006. Net gains from equity investments were $734 million in 2007, compared with $738 million in 2006.

We routinely review our investment portfolios and recognize impairment write-downs based primarily on fair market value, issuer-specific factors and results, and our intent to hold such securities to recovery. We also consider general economic and market conditions, including industries in which venture capital investments are made, and adverse changes affecting the availability of venture capital. We determine other-than-temporary impairment based on the information available at the time of the assessment, with particular focus on the severity and duration of specific security impairments, but new information or economic developments in the future could result in recognition of additional impairment.

Noninterest Expense

Table 6: Noninterest Expense


(in millions)	Year ended December 31						,	% Change
	2007		2006		2005			2007		/	2006		/
								2006			2005
Salaries	$	7,762	$	7,007	$	6,215			11	%		13	%
Incentive compensation		3,284		2,885		2,366			14			22
Employee benefits		2,322		2,035		1,874			14			9
Equipment		1,294		1,252		1,267			3			(1	)
Net occupancy		1,545		1,405		1,412			10			—
Operating leases		561		630		635			(11	)		(1	)
Outside professional services		899		942		835			(5	)		13
Outside data processing		482		437		449			10			(3	)
Travel and entertainment		474		542		481			(13	)		13
Contract services		448		579		596			(23	)		(3	)
Operating losses		437		275		194			59			42
Insurance		416		257		224			62			15
Advertising and promotion		412		456		443			(10	)		3
Postage		345		312		281			11			11
Telecommunications		321		279		278			15			—
Stationery and supplies		220		223		205			(1	)		9
Security		176		179		167			(2	)		7
Core deposit intangibles		113		112		123			1			(9	)
All other		1,313		1,030		973			27			6

Total	$	22,824	$	20,837	$	19,018			10			10

We continued to build our business with investments in additional team members, largely sales and service professionals, and new banking stores in 2007. The 10% increase in noninterest expense to $22.8 billion in 2007 from $20.8 billion in 2006 was due primarily to the increase in salaries, incentive compensation and employee benefits. We grew our sales and service force by adding 1,755 team members (full-time equivalents), including 578 retail platform bankers. In 2007, we opened 87 regional banking stores and converted 42 stores acquired from Placer Sierra Bancshares and National City Bank to our network. The acquisition of Greater Bay Bancorp added $87 million of expenses in 2007. Expenses also included stock option expense of $129 million in 2007, compared with $134 million in 2006. In addition, expenses in 2007 included $433 million in origination costs that, prior to the adoption of FAS 159, would have been deferred and recognized as a reduction of net gains on mortgage loan origination/sales activities at the time of sale.

Operating losses included $203 million for 2007 and $95 million for 2006 of litigation expenses associated with indemnification obligations arising from our ownership interest in Visa.

Wells Fargo is a member of the Visa USA network. On October 3, 2007, the Visa organization of affiliated entities completed a series of global restructuring transactions to combine its affiliated operating companies, including Visa USA, under a single holding company, Visa Inc. Visa Inc. intends to issue and sell a majority of its shares to the public in an initial public offering (IPO). We have an approximate 2.8% ownership interest in Visa Inc., which is included in our balance sheet at a nominal amount.

We obtained concurrence from the staff of the SEC concerning our accounting for the Visa restructuring transactions, including (1) judgment sharing agreements previously executed among the Company, Visa Inc. and its predecessors (collectively Visa) and certain other member banks of the Visa USA network, (2) litigation, and (3) an escrow account that will be established by Visa Inc. at the time of its IPO. The escrow account will be funded from IPO proceeds and will be used to make payments related to Visa litigation. We recorded litigation liabilities associated with indemnification obligations related to agreements entered into during second quarter 2006 and third quarter 2007. Based on our proportionate membership share of Visa USA, we recorded a litigation liability and corresponding expense of $95 million for 2006 and $203 million for 2007. The effect to the second quarter 2006 was estimated based upon our share of an actual settlement reached in November 2007. Management does not believe that the fair value of this obligation if determined in second quarter 2006 would have been materially different given information available at that time. Management has concluded, and the Audit and Examination Committee of our Board of Directors has concurred, that these amounts are immaterial to the periods affected.

Upon completion of Visa Inc.’s IPO, we will account for the funding of the escrow account by reducing our litigation liability with a corresponding credit to noninterest expense

for our portion of the escrow account, consistent with the method of allocating joint and several liability among potentially responsible parties in American Institute of Certified Public Accountants Statement of Position 96-1, Environmental Remediation Liabilities .

Income Tax Expense

On January 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). Implementation of FIN 48 did not result in a cumulative effect adjustment to retained earnings. At January 1, 2007, the total amount of unrecognized tax benefits and accrued interest was $3.1 billion, of which $1.7 billion related to tax benefits and interest that, if recognized, would impact the annual effective tax rate. Our effective tax rate for 2007 was 30.7%, compared with 33.4% for 2006. Income tax expense and the related effective tax rate for 2007 included FIN 48 tax benefits of $235 million, as well as the impact of lower pre-tax earnings in relation to the level of tax-exempt income and tax credits. The tax benefits were primarily related to the resolution of certain matters with federal and state taxing authorities and statute expirations, reduced by accruals for uncertain tax positions, in accordance with FIN 48. We expect that FIN 48 will cause more volatility in our effective tax rate from quarter to quarter as we are now required to recognize tax positions in our financial statements based on the probability of ultimately sustaining such positions with the respective taxing authorities, and we are required to reassess those positions each quarter based on our evaluation of new information.

Operating Segment Results

We have three lines of business for management reporting: Community Banking, Wholesale Banking and Wells Fargo Financial. For a more complete description of our operating segments, including additional financial information and the underlying management accounting process, see Note 24 (Operating Segments) to Financial Statements.

To reflect a change in the allocation of income taxes for management reporting adopted in 2007, results for prior periods have been revised.

COMMUNITY BANKING’S net income decreased 5% to $5.29 billion in 2007 from $5.55 billion in 2006. Strong sales and revenue growth combined with disciplined expense management were offset by higher credit costs, including the $1.4 billion (pre tax) credit reserve build. Revenue increased 11% to $25.54 billion from $23.03 billion in 2006. Net interest income increased 2% to $13.37 billion in 2007 from $13.12 billion in 2006. Although the net interest margin declined 3 basis points to 4.75% (primarily due to lower investment yields), the 3% growth in earning assets more than offset the impact of the lower margin. The growth in earning assets was predominantly driven by loan growth. Average loans were up 9% to $194.0 billion in 2007 from $178.0 billion in 2006. Average core deposits were up 7% to $249.8 billion in 2007 from $233.5 billion a year ago.

Noninterest income increased 23% to $12.17 billion in 2007 from $9.92 billion in 2006, primarily due to retail banking fee revenue growth in brokerage, deposit service charges, cards and investments. Noninterest income also included higher mortgage banking revenue, which increased $505 million (18%) largely due to higher servicing income. The provision for credit losses for 2007 increased to $3.19 billion in 2007 from $887 million in 2006 including the fourth quarter 2007 $1.4 billion credit reserve build, with over half of the remaining increase in the Home Equity portfolio. Noninterest expense for 2007 increased 8% to $15.00 billion in 2007 from $13.92 billion in 2006, due to growth in personnel expenses.

WHOLESALE BANKING’S net income increased 13% to a record $2.28 billion in 2007 from $2.02 billion in 2006. Revenue increased 15% to a record $8.34 billion from $7.23 billion in 2006. Net interest income increased 16% to $3.38 billion for 2007 from $2.92 billion for 2006 primarily due to higher earning asset volumes and earning asset yields and related fees, partially offset by higher funding costs. Average loans increased 20% to $85.6 billion in 2007 from $71.4 billion in 2006. Average core deposits grew 51% to $53.3 billion primarily due to large corporate and middle-market relationships, international and correspondent banking customers and from higher Eurodollar sweep and liquidity balances from our asset management customers. The increase in provision for credit losses to $69 million in 2007 from $16 million in 2006 was due to higher net charge-offs. Noninterest income increased 15% to $4.96 billion in 2007, due to higher deposit service charges, trust and investment income, foreign exchange

fees, insurance revenue, commercial real estate brokerage fees and capital markets activity. Noninterest expense increased 16% to $4.77 billion in 2007 from $4.11 billion in 2006, due to higher personnel-related costs, expenses related to higher sales volumes, investments in new offices and businesses and acquisitions.

WELLS FARGO FINANCIAL’S net income decreased 44% to $481 million in 2007 from $852 million in 2006 reflecting higher credit losses and our decision in late 2006 to slow the growth in our auto portfolio as well as the divestiture of some of our Latin American operations and a $50 million reversal of Hurricane Katrina-related reserves, both in 2006. Revenue was up 2% to $5.51 billion in 2007 from $5.43 billion in 2006. Net interest income increased 8% to $4.23 billion from $3.91 billion in 2006 due to growth in average loans. Average loans increased 13% to $65.2 billion in 2007 from $57.5 billion in 2006. The provision for credit losses increased $382 million in 2007 from 2006, primarily due to an increase in net charge-offs in the auto lending and credit card portfolios, and lower net charge-offs in early 2006 relating to the bankruptcy law change in October 2005. Noninterest income decreased $231 million in 2007 from 2006 in part, as a result of the Latin American sale. Noninterest expense increased $246 million (9%) in 2007 from 2006, primarily due to higher employee compensation and benefit costs. A significant portion of this increase was due to Wells Fargo Financial’s continued focus on reducing losses and delinquencies in auto lending and credit card portfolios by improving processes and staffing levels in collections.

Balance Sheet Analysis

Securities Available for Sale

Our 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 primarily includes very liquid, high-quality federal agency and privately issued mortgage-backed securities. At December 31, 2007, we held $70.2 billion of debt securities available for sale, with net unrealized gains of $775 million, compared with $41.8 billion at December 31, 2006, with net unrealized gains of $722 million. We also held $2.8 billion of marketable equity securities available for sale at December 31, 2007, and $796 million at December 31, 2006, with net unrealized losses of $95 million and net gains of $204 million for the same periods, respectively. The increase in marketable equity securities was primarily due to our adoption of Topic D-109 effective July 1, 2007, which resulted in the transfer of approximately $1.2 billion of securities, consisting of investments in preferred stock callable by the issuer, from trading assets to securities available for sale.

The weighted-average expected maturity of debt securities available for sale was 5.9 years at December 31, 2007. Since 78%

of this portfolio is mortgage-backed securities, the expected remaining maturity may differ from contractual maturity because borrowers may 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 mortgage-backed securities available for sale is shown in Table 7.

Table 7: Mortgage-Backed Securities

(in billions)

Fair

Net

Remaining

value

unrealized

maturity

gain (loss

)

At December 31, 2007

55.0

$ 0.9

4.0 yrs.

At December 31, 2007,

assuming a 200 basis point:

Increase in interest rates

50.7

(3.4

)

6.4 yrs.

Decrease in interest rates

56.7

2.6

1.7 yrs.

We have approximately $3 billion of investments in securities, primarily municipal bonds, that 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 ongoing 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.

See Note 5 (Securities Available for Sale) to Financial Statements for securities available for sale by security type.

Loan Portfolio

A discussion of average loan balances is included in “Earnings Performance – Net Interest Income” on page 43 and a comparative schedule of average loan balances is included in Table 3; year-end balances are in Note 6 (Loans and Allowance for Credit Losses) to Financial Statements.

Total loans at December 31, 2007, were $382.2 billion, up $63.1 billion (20%) from $319.1 billion at December 31, 2006. Consumer loans were $221.9 billion at December 31, 2007, up $31.5 billion (17%) from $190.4 billion a year ago. Commercial and commercial real estate loans of $152.8 billion at December 31, 2007, increased $30.8 billion (25%) from a year ago. Mortgages held for sale decreased to $26.8 billion at December 31, 2007, from $33.1 billion a year ago. Our acquisitions of Greater Bay Bancorp, Placer Sierra Bancshares and the CIT construction business in 2007 added $9.7 billion of total loans, consisting of $8.8 billion of commercial and commercial real estate loans and $866 million of consumer loans at December 31, 2007.

Table 8 shows contractual loan maturities and interest rate sensitivities for selected loan categories.


Table 8: Maturities for Selected Loan Categories

(in millions)	December 31, 2007
	Within		After			After			Total
	one		one year			five
	year		through			years
			five years

Selected loan maturities:
Commercial	$	27,381		$	45,185		$	17,902		$	90,468
Other real estate mortgage		4,828			12,606			19,313			36,747
Real estate construction		9,960			7,713			1,181			18,854
Foreign		770			3,897			2,774			7,441

Total selected loans	$	42,939		$	69,401		$	41,170		$	153,510


Sensitivity of loans due after one year to changes in interest rates:
Loans at fixed interest rates				$	12,744		$	14,727
Loans at floating/variable interest rates					56,657			26,443

Total selected loans				$	69,401		$	41,170

Deposits

Year-end deposit balances are shown in Table 9. Comparative detail of average deposit balances is included in Table 3. Average core deposits increased $34.2 billion to $303.1 billion in 2007 from $268.9 billion in 2006. Average core deposits funded 58.2% and 55.3% of average total assets in 2007 and 2006, respectively. Total average interest-bearing deposits increased to $239.2 billion in 2007 from $223.8 billion in 2006, largely due to growth in market rate and other savings deposits, along with growth in foreign deposits, offset by a decline in other time deposits. Total average noninterest-bearing deposits declined to $88.9 billion in 2007 from $89.1 billion in 2006. Savings certificates increased on average to $40.5 billion in 2007 from $32.4 billion in 2006.


Table 9: Deposits

(in millions)	December 31				,	%
	2007		2006			Change

Noninterest-bearing	$	84,348	$	89,119			(5	)%
Interest-bearing checking		5,277		3,540			49
Market rate and other savings		153,924		140,283			10
Savings certificates		42,708		37,282			15
Foreign deposits ⁽¹⁾		25,474		17,844			43

Core deposits		311,731		288,068			8
Other time deposits		3,654		13,819			(74	)
Other foreign deposits		29,075		8,356			248

Total deposits	$	344,460	$	310,243			11


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

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Off-Balance Sheet Arrangements, Variable Interest Entities, Guarantees and Other Commitments

We consolidate our majority-owned subsidiaries and variable interest entities in which we are the primary beneficiary. Generally, we use the equity method of accounting if we own at least 20% of an entity and we carry the investment at cost if we own less than 20% of an entity. See Note 1 (Summary of Significant Accounting Policies) to Financial Statements for our consolidation policy.

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, or (4) optimize capital, and are accounted for in accordance with U.S. GAAP.

We have largely avoided many of the industry issues associated with collateralized debt obligations (CDOs) and structured investment vehicles (SIVs). A CDO is a security backed by pools of assets, which may include debt securities, including bonds (collateralized bond obligations, or CBOs) or loans (collateralized loan obligations, or CLOs). CDOs often can have reinvestment periods in which they can trade assets and/or reinvest asset sales or liquidation proceeds. Like collateralized mortgage obligations, CDOs issue tranches of debt with different maturities and risk characteristics. We typically have not engaged in creating or sponsoring SIVs to hold off-balance sheet assets and we have not made a market in subprime securities.

Almost all of our off-balance sheet arrangements result from securitizations. We routinely securitize home mortgage loans and, from time to time, other financial assets, including commercial mortgages. We normally structure loan securitizations as sales, in accordance with FAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities – a replacement of FASB Statement No. 125 . This involves the transfer of financial assets to certain qualifying special-purpose entities that we are not required to consolidate. In a securitization, we can convert the assets into cash earlier

than if we held the assets to maturity. Special-purpose entities used in these types of securitizations obtain cash to acquire assets by issuing securities to investors. In a securitization, we record a liability related to standard representations and warranties we make to purchasers and issuers for receivables transferred. Also, we generally retain the right to service the transferred receivables and to repurchase those receivables from the special-purpose entity if the outstanding balance of the receivable falls to a level where the cost exceeds the benefits of servicing such receivables.

At December 31, 2007, securitization arrangements sponsored by the Company consisted of $224 billion in securitized loan receivables, including $135 billion of home mortgage loans and $89 billion of commercial mortgages. At December 31, 2007, the retained servicing rights and other interests held related to these securitizations were $10.8 billion, consisting of $8.8 billion in securities, $1.5 billion in servicing assets and $413 million in other interests held. Related to our securitizations, we have committed to provide up to $21 million in credit enhancements.

We have investments in certain special-purpose entities, generally created by other sponsoring organizations, where we hold variable interests greater than 20% but less than 50% (significant variable interests). These special-purpose entities were predominantly formed to invest in affordable housing and sustainable energy projects and to securitize corporate debt and had approximately $5.8 billion in total assets at December 31, 2007, including $960 million related to CDOs. We are not required to consolidate these entities. Our maximum exposure to loss as a result of our involvement with these unconsolidated variable interest entities was approximately $2.0 billion at December 31, 2007, primarily representing investments in entities formed to invest in affordable housing and sustainable energy projects. However, we expect to recover our investment in these entities over time primarily through realization of federal tax credits. Our investments in CDOs, including those special-purpose entities where we hold significant variable interests, totaled $860 million at December 31, 2007. Table 10 reflects these investments, including the corresponding asset collateral categories and related credit ratings.


Table 10: Investments in Collateralized Debt Obligations

(in millions)	December 31, 2007
														Distribution of fair value by rating category
														Investment grade
	Cost		Gross			Gross				Fair			AAA			AA to				Other				Total
			unrealized			unrealized				value						BBB			-
			gains			losses			⁽¹⁾

Corporate credit	$	589		$	1		$	(68	)		$	522		$	13		$	292			$	217	⁽²⁾		$	522
Bank or insurance trust preferred		298			1			(5	)			294			257			37				—				294
Commercial mortgage		49			—			(5	)			44			24			20				—				44
Residential mortgage		—			—			—				—			—			—				—				—

Total	$	936		$	2		$	(78	)		$	860		$	294		$	349			$	217			$	860


(1)		All unrecognized losses are reviewed for potential impairment on a quarterly basis. At December 31, 2007, there was no deterioration in cash flows for any of the investments reflected above and, therefore, no impairment charge. We have the ability and the intent to hold these investments until maturity or recovery.

(2)		Approximately 90% had underlying credit portfolios that were selected by Wells Fargo credit analysts. Included $192 million of non-rated securities.

In addition, in securities available for sale, we held approximately $1,735 million in tax-exempt bonds at December 31, 2007, in the form of CDOs, consolidated in our balance sheet with related liabilities, based on the Company’s participation in certain municipal tender option bond programs. The fair value includes a $69 million net unrealized loss due to changes in interest rates which is expected to be recovered over time. Approximately 98% of the bonds are rated investment grade while 2% are not rated. Under the municipal tender option bond programs in which we participate, we place long-term tax-exempt municipal bonds in a trust sponsored by a third party which serves as the collateral for short-term tender option bonds issued by the trust to investors. These tender option bonds can be “put” or tendered by the investor to the trust at par at predetermined times (generally weekly or monthly). We are required to consolidate the trusts in accordance with FIN 46R. We earn a spread between the long-term rate on the municipal bonds and the short-term rate on the corresponding tender option bonds.

For more information on securitizations, including sales proceeds and cash flows from securitizations, see Note 8 (Securitizations and Variable Interest Entities) to Financial Statements.

Our money market mutual funds are allowed to hold investments in SIVs in accordance with approved investment parameters for the respective funds and, therefore, may have indirect exposure to CDOs. At December 31, 2007, our money market mutual funds held $106 billion of assets under management including investments in eight SIVs not sponsored by the Company aggregating $1.6 billion, or 1.5% of the funds’ assets. Based on the maturity and paydown of these investments, by February 1, 2008, the funds held three SIVs aggregating $1.0 billion. At February 1, 2008, the remaining assets held by the money market funds were either U.S. government, high-grade municipal, or high-grade corporate securities. At such time, to maintain an investment rating of AAA for certain funds, we elected to enter into a capital support agreement for up to $130 million related to one SIV held by our AAA-rated non-government money market mutual funds. We are generally not responsible for investment losses incurred by our funds, and we do not have a contractual or implicit obligation to indemnify such losses or provide additional support to the funds. Based on our estimate of the guarantee obligation at the time we entered into the agreement, we recorded a liability of $39 million in 2008. While we elected to enter into the capital support agreement for the AAA-rated funds, we are not obligated and may elect not to provide additional support to these funds or other funds in the future.

Wells Fargo Home Mortgage (Home Mortgage), in the ordinary course of business, originates a portion of its mortgage loans through unconsolidated joint ventures in which we own an interest of 50% or less. Loans made by these

joint ventures are funded by Wells Fargo Bank, N.A. through an established line of credit and are subject to specified underwriting criteria. At December 31, 2007, the total assets of these mortgage origination joint ventures were approximately $55 million. We provide liquidity to these joint ventures in the form of outstanding lines of credit and, at December 31, 2007, these liquidity commitments totaled $238 million.

We also hold interests in other unconsolidated joint ventures formed with unrelated third parties to provide efficiencies from economies of scale. A third party manages our real estate lending services joint ventures and provides customers title, escrow, appraisal and other real estate related services. Our merchant services joint venture includes credit card processing and related activities. At December 31, 2007, total assets of our real estate lending and merchant services joint ventures were approximately $775 million.

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. At December 31, 2007, the amount of additional consideration we expected to pay was not significant to our financial statements.

As a financial services provider, we routinely commit to extend credit, including loan commitments, standby letters of credit and financial guarantees. A significant portion of commitments to extend credit may expire without being drawn upon. These commitments are subject to the same credit policies and approval process used for our loans. For more information, see Note 6 (Loans and Allowance for Credit Losses) and Note 15 (Guarantees and Legal Actions) to Financial Statements.

In our venture capital and capital markets businesses, we commit to fund equity investments directly to investment funds and to specific private companies. The timing of future cash requirements to fund these commitments generally depends on the related investment cycle, the period over which privately-held companies are funded by investors and ultimately sold or taken public. This cycle can vary based on market conditions and the industry in which the companies operate. We expect that many of these investments will become public, or otherwise become liquid, before the balance of unfunded equity commitments is used. At December 31, 2007, these commitments were approximately $895 million. Our other investment commitments, principally related to affordable housing, civic and other community development initiatives, were approximately $685 million at December 31, 2007.

In the ordinary course of business, we enter into indemnification agreements, including underwriting agreements relating to our securities, securities lending, acquisition agreements, and various other business transactions or arrangements. For more information, see Note 15 (Guarantees and Legal Actions) to Financial Statements.

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 11 summarizes these contractual obligations at December 31, 2007, except obligations for short-term borrowing arrangements and pension and postretirement benefit plans. More information on those obligations is in Note 13 (Short-Term Borrowings) and Note 20 (Employee Benefits and Other Expenses) to Financial Statements. The table also excludes other commitments more fully described under “Off-Balance Sheet Arrangements, Variable Interest Entities, Guarantees and Other Commitments.”

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 which may require

future cash tax payments to various taxing authorities. Because of their uncertain nature, the expected timing and amounts of these payments are not reasonably estimable or determinable. See Note 21 (Income Taxes) to Financial Statements 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 “Asset/Liability and Market Risk Management” in this Report and Note 16 (Derivatives) to Financial Statements for more information.

Transactions with Related Parties

FAS 57, Related Party Disclosures , 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 under FAS 57 for the years ended December 31, 2007, 2006 and 2005.


Table 11: Contractual Obligations

(in millions)	Note(s) to		Less than			1-3			3-5			More than			Indeterminate				Total
	Financial		1 year			years			years			5 years			maturity			⁽¹⁾
	Statements

Contractual payments by period:
Deposits		12		$	95,893		$	3,459		$	1,205		$	343		$	243,560			$	344,460
Long-term debt ⁽²⁾		7,14			18,397			27,221			22,015			31,760			—				99,393
Operating leases		7			618			976			681			1,408			—				3,683
Purchase obligations ⁽³⁾					386			539			317			254			—				1,496


Total contractual obligations				$	115,294		$	32,195		$	24,218		$	33,765		$	243,560			$	449,032


(1)		Includes interest-bearing and noninterest-bearing checking, and market rate and other savings accounts.

(2)		Includes obligations under capital leases of $20 million.

(3)		Represents agreements to purchase goods or services.

Risk Management

Credit Risk Management Process

Our credit risk management process 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. In 2007, the credit policies related to residential real estate lending were updated to reflect the current economic conditions in the industry. Credit policy was tightened as we made decisions to exit certain poorly performing indirect channels.

Managing credit risk is a company-wide process. We have credit policies for all banking and nonbanking operations incurring credit risk with customers or counterparties that provide a prudent approach to credit risk management. We use detailed tracking and analysis to measure credit

performance and exception rates and we routinely review and modify credit policies as appropriate. We have corporate data integrity standards to ensure accurate and complete credit performance reporting for the consolidated company. We strive to identify problem loans early and have dedicated, specialized collection and work-out units.

The Chief Credit Officer provides company-wide credit oversight. Each business unit with direct credit risks has a senior credit officer and has the primary responsibility for managing its own credit risk. The Chief Credit Officer delegates authority, limits and other requirements to the business units. These delegations are routinely reviewed and amended if there are significant changes in personnel, credit performance or business requirements. The Chief Credit Officer is a member of the Company’s Management Committee. The Chief Credit Officer provides a quarterly credit review to the Credit Committee of the Board of Directors and meets with them periodically.

Our business units and the office of the Chief Credit Officer periodically review all credit risk portfolios to ensure that the risk identification processes are functioning properly and that credit standards are followed. Business units conduct quality assurance reviews to ensure that loans meet portfolio or investor credit standards. Our loan examiners in risk asset review and internal audit independently review portfolios with credit risk, monitor performance, sample credits, review and test adherence to credit policy and recommend/require corrective actions as necessary.

Our primary business focus on middle-market commercial, residential real estate, auto, credit card and small consumer lending, results in portfolio diversification. We assess loan portfolios for geographic, industry or other concentrations and use mitigation strategies, which may include loan sales, syndications or third party insurance, to minimize these concentrations, as we deem appropriate.

In our commercial loan, commercial real estate loan and lease financing portfolios, larger or more complex loans are individually underwritten and judgmentally risk rated. They are periodically monitored and prompt corrective actions are taken on deteriorating loans. Smaller, more homogeneous commercial small business loans are approved and monitored using statistical techniques.

Retail loans are typically underwritten with statistical decision-making tools and are managed throughout their life cycle on a portfolio basis. The Chief Credit Officer establishes corporate standards for model development and validation to ensure sound credit decisions and regulatory compliance and approves new model implementation and periodic validation.

Residential real estate mortgages are one of our core products. We offer a broad spectrum of first mortgage and junior lien loans that we consider mostly prime or near prime. These loans are almost entirely secured by a primary residence for the purpose of purchase money, refinance, debt consolidation, or home equity loans. We do not make or purchase option adjustable-rate mortgage products (option ARMs) or variable-rate mortgage products with fixed payment amounts, commonly referred to within the financial services industry as negative amortizing mortgage loans, as we believe these products rarely provide a benefit to our customers.

We originate mortgage loans through a variety of sources, including our retail sales force and licensed real estate brokers. We apply consistent credit policies, borrower documentation standards, Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) compliant appraisal requirements, and sound underwriting, regardless of application source. We perform quality control reviews for third party originated loans and actively manage or terminate sources that do not meet our credit standards. Specifically, during 2007 we stopped originating first and junior lien residential mortgages where credit performance had deteriorated beyond our expectations, especially recent vintages of high combined loan-to-value home equity loans sourced through third party channels.

We believe our underwriting process is well controlled and 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. A small portion of borrower selected stated income loans originated from third party channels produced unacceptable performance in our Home Equity portfolio. We have tightened our bank-selected reduced documentation requirements as a precautionary measure and substantially reduced third party originations due to the negative trends experienced in these channels. Appraisals are used to support property values.

In the mortgage industry, it has been common for consumers, lenders, and servicers to purchase mortgage insurance, which can enhance the credit quality of the loan for investors and serves generally to expand the market for home ownership.

In our servicing portfolio, certain of the loans we service carry mortgage insurance, based largely on the requirements of investors, who bear the ultimate credit risk. Within our $1.5 trillion servicing portfolio, we service approximately $115 billion of loans that carry approximately $25 billion of mortgage insurance coverage purchased from a group of mortgage insurance companies that are rated AA or higher by one or more of the major rating agencies. Should any of these companies experience a downgrade by one or more of the rating agencies, investors may be exposed to a higher level of credit risk. In this event, as servicer, we would work with the investors to determine if it is necessary to obtain replacement coverage with another insurer. Our mortgage servicing portfolio consists of over 90% prime loans and we continue to be among the highest rated loan servicers for residential real estate mortgage loans, based on various servicing criteria. The foreclosure rate in our mortgage servicing portfolio was only 0.88% at year-end 2007.

Similarly, we obtained approximately $2 billion of mortgage insurance coverage for certain loans that we held for investment or for sale at December 31, 2007. In the event a mortgage insurer is unable to meet its obligations on defaulted loans in accordance with the insurance contract, we might be exposed to higher credit losses if replacement coverage on those loans cannot be obtained. However, approximately one-third of the coverage related to the debt consolidation nonprime real estate 1-4 family mortgage loans held by Wells Fargo Financial, which have had a low level of credit losses (0.31% loss rate (annualized) in fourth quarter 2007 for the entire debt consolidation portfolio). The remaining coverage primarily related to prime real estate 1-4 family mortgage loans, primarily high quality ARMs for our retail and wealth management customers, which also have had very low loss rates.

Each business unit regularly completes asset quality forecasts to quantify its intermediate-term outlook for loan losses and recoveries, nonperforming loans and market trends. To make sure our overall loss estimates and the allowance for credit losses is adequate, we conduct periodic stress tests. This includes a portfolio loss simulation model that simulates a range of possible losses for various sub-portfolios assuming various trends in loan quality, stemming from economic conditions or borrower performance.

We routinely review and evaluate risks that are not borrower specific but that may influence the behavior of a particular credit, group of credits or entire sub-portfolios. We also assess risk for particular industries, geographic locations such as states or Metropolitan Statistical Areas and specific macroeconomic trends.

LOAN PORTFOLIO CONCENTRATIONS

Loan concentrations may exist when there are borrowers engaged in similar activities or types of loans extended to a diverse group of borrowers that could cause those borrowers or portfolios to be similarly impacted by economic or other conditions.

The concentrations of real estate 1-4 family mortgage loans by state are presented in Table 12. Our real estate 1-4 family mortgage loans to borrowers in the state of California represented approximately 13% of total loans at December 31, 2007, compared with 11% at the end of 2006. These loans are mostly within several 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 the credit risk management process. 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, 2007, these loans were approximately 20% of total loans, compared with 19% at the end of 2006. Substantially all of these loans are considered to be prime or near prime. We do not make or purchase option ARMs or negative amortizing mortgage loans. We have minimal ARM reset risk across our owned mortgage loan portfolios.


Table 12: Real Estate 1-4 Family Mortgage Loans by State

(in millions)	December 31, 2007
	Real estate			Real estate			Total real			% of
	1-4 family			1-4 family			estate 1-4			total
	first			junior lien			family			loans
	mortgage			mortgage			mortgage

California		$	20,782		$	28,234		$	49,016		13	%
Minnesota			3,009			4,209			7,218		2
Arizona			2,986			3,451			6,437		2
Florida			3,127			2,851			5,978		2
Colorado			2,612			2,889			5,501		1
Washington			2,476			2,938			5,414		1
Texas			3,551			1,805			5,356		1
New York			2,200			2,275			4,475		1
Nevada			1,625			1,642			3,267		*
Illinois			1,616			1,444			3,060		*
Other ⁽¹⁾			27,431			23,827			51,258		13


Total		$	71,415		$	75,565		$	146,980		38	%


*		Less than 1%.

(1)		Consists of 40 states; no state had loans in excess of $2,959 million. Includes $5,029 million in GNMA early pool buyouts.

The deterioration in specific segments of the National Home Equity Group (Home Equity) portfolio required a targeted approach to managing these assets. A liquidating portfolio, consisting of all home equity loans generated through the wholesale channel not behind a Wells Fargo first mortgage, and all home equity loans acquired through correspondents was identified. While the $11.9 billion of loans in this liquidating portfolio represented about 3% of total loans outstanding at December 31, 2007, these loans represented the highest risk in the $84.2 billion Home Equity portfolio, with a loss rate of 4.80% (December 2007, annualized) compared with 0.86% for the remaining 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 remaining portfolio consists of $72.3 billion of loans in the Home Equity portfolio at December 31, 2007, of which $70.9 billion were originated through the retail channel, with approximately $11.4 billion of these retail originations in a first lien position. Retail originations in a second lien position included approximately $38.1 billion behind a Wells Fargo first mortgage. Table 13 includes the credit attributes of these two portfolios.


Table 13: National Home Equity Group Portfolio

	December 31, 2007
	Outstanding							December 2007
	balance				% 30 days			loss rate
	(in millions			)	past due			(annualized		)

Liquidating portfolio
California		$	4,387			2.94	%		7.34	%
Florida			582			4.98			7.08
Arizona			274			2.67			5.84
Texas			221			0.83			0.78
Minnesota			141			3.18			4.09
Other			6,296			2.00			2.94

Total		$	11,901			2.50			4.80


Remaining portfolio
California		$	25,991			1.63	%		1.27	%
Florida			2,614			2.92			2.57
Arizona			3,821			1.54			0.90
Texas			2,842			1.03			0.19
Minnesota			4,668			1.08			0.88
Other			32,393			1.43			0.44


Total		$	72,329			1.52			0.86


Home Equity Portfolios as of December 31, 2007

					Liquidating			Remaining
($ in billions)					portfolio			portfolio

December 2007 loss rate (annualized)						4.80	%		0.86	%

CLTV > 90% ⁽¹⁾						55	%		25	%
Average FICO						725			735

Wells Fargo retail originated						1	%		98	%
$ in 1st lien						$ 0.4			$ 11.4
$ in 2nd lien behind a Wells Fargo 1st lien						3.4			38.1

% in California						38	%		36	%


(1)		Combined loan-to-value ratio greater than 90% based primarily on automated appraisal updates as of September 30, 2007.

For purposes of portfolio risk management, we aggregate commercial loans and lease financing according to market segmentation and standard industry codes. Commercial loans and lease financing are presented by industry in Table 14. These groupings contain a highly diverse mix of customer relationships throughout our target markets. Loan types and product offerings are carefully underwritten and monitored. Credit policies incorporate specific industry risks.


Table 14: Commercial Loans and Lease Financing by Industry

(in millions)	December 31, 2007
	Commercial			% of
	loans and lease			total
	financing			loans

Small business loans		$	11,126		3	%
Lessors and other real estate activities ⁽¹⁾			4,888		1
Oil and gas			4,718		1
Retailers			4,699		1
Financial institutions			4,479		1
Food and beverage			4,145		1
Industrial equipment			4,123		1
Securities firms			3,592		*
Technology			3,298		*
Healthcare			2,785		*
Other ⁽²⁾			49,387		13


Total		$	97,240		25	%


*		Less than 1%.

(1)		Includes loans to lessors, appraisers, property managers, real estate agents and brokers.

(2)		No other single category had loans in excess of $2,748 million.

Other real estate mortgages and real estate construction loans that are diversified in terms of both the state where the property is located and by the type of property securing the loans are presented in Table 15. The composition of these portfolios was stable throughout 2007 and the distribution is consistent with our target markets and focus on customer relationships. Approximately 28% of other real estate and construction loans are loans to owner-occupants where more than 50% of the property is used in the conduct of their business. The largest group of loans in any one state is 5% of total loans and the largest group of loans secured by one type of property is 3% of total loans.


Table 15: Commercial Real Estate Loans by State and Property Type

(in millions)	December 31, 2007
	Other real			Real			Total			% of
	estate			estate			commercial			total
	mortgage			construction			real estate			loans

By state:
California		$	13,922		$	6,050		$	19,972		5	%
Texas			2,934			1,135			4,069		1
Arizona			1,926			1,262			3,188		*
Colorado			1,669			873			2,542		*
Washington			1,441			652			2,093		*
Minnesota			1,319			382			1,701		*
Florida			636			913			1,549		*
Utah			719			581			1,300		*
New York			331			949			1,280		*
Oregon			803			441			1,244		*
Other ⁽¹⁾			11,047			5,616			16,663		4


Total ⁽²⁾		$	36,747		$	18,854		$	55,601		15	%


By property type:
Office buildings		$	9,435		$	1,500		$	10,935		3	%
Industrial/ warehouse			5,817			789			6,606		2
Land			1			5,236			5,237		1
Retail			4,183			400			4,583		1
Apartments			2,468			1,166			3,634		1
Shopping center			2,206			927			3,133		*
1-4 family land			1			3,037			3,038		*
1-4 family structure			16			3,014			3,030		*
Hotels/motels			1,843			830			2,673		*
Agricultural			1,620			27			1,647		*
Other			9,157			1,928			11,085		3


Total ⁽²⁾		$	36,747		$	18,854		$	55,601		15	%


*		Less than 1%.

(1)		Consists of 40 states; no state had loans in excess of $1,000 million.

(2)		Includes owner-occupied real estate and construction loans of $15,295 million.

NONACCRUAL LOANS AND OTHER ASSETS

Table 16 shows the five-year trend for nonaccrual loans and other assets. 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.

Note 1 (Summary of Significant Accounting Policies) to Financial Statements describes our accounting policy for nonaccrual loans.

Nonperforming loans increased $1.0 billion in 2007 from 2006, with the majority of the increase in the real estate 1-4 family first mortgage loan portfolio (including $209 million in Home Mortgage and $343 million in Wells Fargo Financial real estate) due to the deteriorating conditions in the residential real estate market and the national rise in mortgage default rates. Additionally, a portion of the increase related to loan growth. The increase in the commercial and commercial real estate portfolios was influenced by

the deterioration of credits related to the residential real estate and construction industries. In addition, due to illiquid market conditions, we are now holding more foreclosed properties than we have historically. As a result, other foreclosed asset balances increased $226 million in 2007 (including $128 million from Home Equity and $52 million in Wells Fargo Financial real estate).

We expect that the amount of nonaccrual loans will change due to portfolio growth, portfolio seasoning, routine problem loan recognition and resolution through collections, sales or charge-offs. The performance of any one loan can be affected by external factors, such as economic or market conditions, or factors particular to a borrower, such as actions of a borrower’s management.

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 $165 million of interest would have been recorded in 2007, compared with payments of $47 million recorded as interest income.

Substantially all of the foreclosed assets at December 31, 2007, have been in the portfolio one year or less.


Table 16: Nonaccrual Loans and Other Assets

(in millions)		December 31																		,
	2007				2006				2005				2004				2003

Nonaccrual loans:
Commercial and commercial real estate:
Commercial		$	432			$	331			$	286			$	345			$	592
Other real estate mortgage			128				105				165				229				285
Real estate construction			293				78				31				57				56
Lease financing			45				29				45				68				73

Total commercial and commercial real estate			898				543				527				699				1,006
Consumer:
Real estate 1-4 family first mortgage ⁽¹⁾			1,272				688				471				386				274
Real estate 1-4 family junior lien mortgage			280				212				144				92				87
Other revolving credit and installment			184				180				171				160				88

Total consumer			1,736				1,080				786				638				449
Foreign			45				43				25				21				3

Total nonaccrual loans ⁽²⁾			2,679				1,666				1,338				1,358				1,458
As a percentage of total loans			0.70	%			0.52	%			0.43	%			0.47	%			0.58	%

Foreclosed assets:
GNMA loans ⁽³⁾			535				322				—				—				—
Other			649				423				191				212				198
Real estate and other nonaccrual investments ⁽⁴⁾			5				5				2				2				6

Total nonaccrual loans and other assets		$	3,868			$	2,416			$	1,531			$	1,572			$	1,662

As a percentage of total loans			1.01	%			0.76	%			0.49	%			0.55	%			0.66	%


(1)		Includes nonaccrual mortgages held for sale.

(2)		Includes impaired loans of $469 million, $230 million, $190 million, $309 million and $629 million at December 31, 2007, 2006, 2005, 2004 and 2003, respectively. (See Note 1 (Summary of Significant Accounting Policies) and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements for further discussion of impaired loans.)

(3)		Due to a change in regulatory reporting requirements effective January 1, 2006, foreclosed real estate securing GNMA loans has been 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 FHA or guaranteed by the Department of Veterans Affairs.

(4)		Includes real estate investments (contingent interest loans accounted for as investments) that would be classified as nonaccrual if these assets were recorded as loans.

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.

The total of loans 90 days or more past due and still accruing was $6,393 million, $5,073 million, $3,606 million, $2,578 million and $2,337 million at December 31, 2007, 2006, 2005, 2004 and 2003, respectively. The total included $4,834 million, $3,913 million, $2,923 million, $1,820 million and $1,641 million for the same periods, respectively, in advances pursuant to our servicing agreements to GNMA mortgage pools whose repayments are insured by the FHA or guaranteed by the Department of Veterans Affairs. Table 17 reflects loans 90 days or more past due and still accruing excluding the insured/guaranteed GNMA advances.


Table 17: Loans 90 Days or More Past Due and Still Accruing
(Excluding Insured/Guaranteed GNMA Advances)

(in millions)	December 31										,
	2007		2006		2005		2004		2003

Commercial and commercial real estate:
Commercial	$	32	$	15	$	18	$	26	$	87
Other real estate mortgage		10		3		13		6		9
Real estate construction		24		3		9		6		6

Total commercial and commercial real estate		66		21		40		38		102
Consumer:
Real estate 1-4 family first mortgage ⁽¹⁾		286		154		103		148		117
Real estate 1-4 family junior lien mortgage		201		63		50		40		29
Credit card		402		262		159		150		134
Other revolving credit and installment		552		616		290		306		271

Total consumer		1,441		1,095		602		644		551
Foreign		52		44		41		76		43

Total	$	1,559	$	1,160	$	683	$	758	$	696


(1)		Includes mortgage loans held for sale 90 days or more past due and still accruing.

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. We assume that our allowance for credit losses as a percentage of charge-offs and nonaccrual loans will change at different points in time based on credit performance, loan mix and collateral values. Any loan with past due principal or interest that is not both well-secured and in the process of collection generally is charged off (to the extent that it exceeds the fair value of any related collateral) based on loan category after a defined period of time. Also, a loan is charged off when clas-

sified as a loss by either internal loan examiners or regulatory examiners. 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.

At December 31, 2007, the allowance for loan losses was $5.31 billion (1.39% of total loans), compared with $3.76 billion (1.18%), at December 31, 2006. The allowance for credit losses was $5.52 billion (1.44% of total loans) at December 31, 2007, and $3.96 billion (1.24%) at December 31, 2006. These ratios fluctuate from period to period and the increase in the ratios of the allowance for loan losses and the allowance for credit losses to total loans in 2007 was primarily due to the $1.4 billion credit reserve build in 2007. Until 2007 we had historically experienced the lowest charge-offs on our residential real estate secured consumer loan portfolio. In 2007, net charge-offs in the Home Equity portfolio increased due to a severe decline in housing prices in several of our major geographic markets. The increased level of loss content in the Home Equity portfolio was the primary driver of the $1.4 billion increase to the allowance for loan losses. The reserve for unfunded credit commitments was $211 million at December 31, 2007, and $200 million at December 31, 2006.

The ratio of the allowance for credit losses to total nonaccrual loans was 206% and 238% at December 31, 2007 and 2006, respectively. 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, 2007. Nonaccrual loans are generally written down to fair value less cost to sell at the time they are placed on nonaccrual and accounted for on a cost recovery basis.

The provision for credit losses totaled $4.94 billion in 2007, $2.20 billion in 2006 and $2.38 billion in 2005. In 2007, the provision included $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.

Net charge-offs in 2007 were 1.03% of average total loans, compared with 0.73% in 2006 and 0.77% in 2005. Net charge-offs for 2007 in the Home Equity portfolio were $595 million (0.73% of average loans), a $485 million increase from $110 million (0.14%) for 2006. The increase was primarily due to loans in geographic markets that have experienced the most abrupt and steepest declines in housing prices. Because the majority of the Home Equity net charge-offs were concentrated in the indirect or third party origination channels, which have a higher percentage of 90% or greater combined loan-to-value portfolios, we have discontinued third party activities not behind a Wells Fargo first mortgage and segregated these loans into a liquidating portfolio. As previously disclosed, while the $11.9 billion of loans in this liquidating portfolio represented about 3% of total loans outstanding at December 31, 2007, these loans represent the highest risk in our $84.2 billion Home Equity portfolio. The loans in the liquidating portfolio were primarily

sourced through wholesale (brokers) and correspondents. Our real estate 1-4 family first mortgage portfolio continued to perform well, with net charge-offs of $87 million (0.14% of average loans) for 2007, up from $77 million (0.13%) for 2006.

Because of our responsible lending and risk management practices, we have not faced many of the issues others have in the mortgage industry. We do not make or purchase any negative amortizing mortgages, including option ARMs. We have minimal ARM reset risk across our owned loan portfolios. While our disciplined underwriting standards have resulted in first mortgage delinquencies below industry levels, we continued to tighten our underwriting standards in the last half of 2007. Home Mortgage closed its nonprime wholesale channel early in third quarter, after closing its nonprime correspondent channel in second quarter 2007. Rates were increased for nonconforming mortgage loans during third quarter reflecting the reduced liquidity in the capital markets.

Credit quality in Wells Fargo Financial’s real estate-secured lending business has not experienced the level of credit degradation that many nonprime lenders have because of our disciplined underwriting practices. Wells Fargo Financial does not use brokers or correspondents in its U.S. debt consolidation business. We endeavor to ensure that there is a tangible benefit to the borrower before we make a loan. The recent guidance issued by the federal financial regulatory agencies in June 2007, Statement on Subprime Mortgage Lending , which addresses issues relating to certain ARM products, will not have a significant impact on Wells Fargo Financial’s operations, since many of those guidelines have long been part of our normal business practices.

Higher net charge-offs in non-real estate consumer loans (credit card and other revolving credit and installment) were primarily due to increases in the indirect auto portfolio, with auto net charge-offs for 2007 up $164 million from 2006. The increase in all other consumer portfolios, including credit cards, was due to an overall weakening in the economy.

Credit performance in the commercial and commercial real estate portfolio remained strong, with net charge-offs of $536 million (0.40% of average loans), compared with $297

million (0.26%) in 2006. As is typical, the vast majority of these charge-offs came from loans originated through our business direct channel. Business direct consists primarily of unsecured lines of credit to small firms and properties that tend to perform in a manner similar to credit cards. Because of our Wholesale Banking business model, focused primarily on business customers, we do not actively participate in certain higher-risk activities. Our capital market business was largely not impacted by the credit crunch or market dislocations in 2007, including industry problem areas of CDOs, CLOs and SIVs. On the investment side of this business, we operate within disciplined credit standards and regularly monitor and manage our securities portfolios. From an underwriting standpoint, we have not participated in a significant way in any of the large leveraged buyouts that were “covenant lite” and we have minimal direct exposure to hedge funds. Similarly, we have not made a market in subprime securities. Leveraged-buyout-related outstandings are diversified by business and borrower and totaled less than 2% of total Wells Fargo loans. Our residential real estate development portfolio of approximately $6 billion, or 2% of total loans, continued to perform in a satisfactory manner.

Table 18 presents the allocation of the allowance for credit losses by type of loans. The $1.55 billion increase in the allowance for credit losses from year-end 2006 to year-end 2007 was due to actions taken in 2007 primarily related to the Home Equity portfolio and approximately $100 million acquired from bank acquisitions. The decrease of $93 million in the allowance for credit losses from year-end 2005 to year-end 2006 was primarily due to the release of the remaining portion of the provision made for Hurricane Katrina in 2005. 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 18: Allocation of the Allowance for Credit Losses

(in millions)		December 31																							,
		2007					2006					2005					2004					2003
	Loans					Loans					Loans					Loans					Loans
	as %					as %					as %					as %					as %
	of total					of total					of total					of total					of total
	loans					loans					loans					loans					loans

Commercial and commercial real estate:
Commercial		$	1,137	24	%		$	1,051	22	%		$	926	20	%		$	940	19	%		$	917	19	%
Other real estate mortgage			288	9				225	9				253	9				298	11				444	11
Real estate construction			156	5				109	5				115	4				46	3				63	3
Lease financing			51	2				40	2				51	2				30	2				40	2

Total commercial and commercial real estate			1,632	40				1,425	38				1,345	35				1,314	35				1,464	35
Consumer:
Real estate 1-4 family first mortgage			415	19				186	17				229	25				150	31				176	33
Real estate 1-4 family junior lien mortgage			1,329	20				168	21				118	19				104	18				92	15
Credit card			834	5				606	5				508	4				466	4				443	3
Other revolving credit and installment			1,164	14				1,434	17				1,060	15				889	11				802	13

Total consumer			3,742	58				2,394	60				1,915	63				1,609	64				1,513	64
Foreign			144	2				145	2				149	2				139	1				95	1

Total allocated			5,518	100	%			3,964	100	%			3,409	100	%			3,062	100	%			3,072	100	%

Unallocated component of allowance			—					—					648					888					819

Total		$	5,518				$	3,964				$	4,057				$	3,950				$	3,891

We consider the allowance for credit losses of $5.52 billion adequate to cover credit losses inherent in the loan portfolio, including unfunded credit commitments, at December 31, 2007. Given that the majority of our loan portfolio is consumer loans, for which losses tend to emerge within a relatively short, predictable timeframe, and that a significant portion of the allowance for credit losses is related to estimated credit losses associated with consumer loans, management believes that the provision for credit losses for consumer loans, absent any significant credit event, severe decrease in collateral values, significant acceleration of losses or significant change in payment behavior, will closely track the level of related net charge-offs. In 2007, due to further deterioration in the outlook for the housing market, we recorded a credit reserve build, primarily for higher loss content that we estimated in the Home Equity portfolio. The process for determining the adequacy of the allowance for credit losses is critical to our financial results. It requires difficult, subjective and complex judgments, as a result of the need to make estimates about the effect of matters that are uncertain. (See “Financial Review – Critical Accounting Policies – Allowance for Credit Losses.”) Therefore, we cannot provide assurance that, in any particular period, we will not have sizeable credit losses in relation to the amount reserved. We may need to significantly adjust the allowance for credit losses, considering current factors at the time, including economic or market conditions and ongoing internal and external examination processes. Our process for determining the adequacy of the allowance for credit losses is discussed in “Financial Review – Critical Accounting Policies – Allowance for Credit Losses” and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements.

Asset/Liability and Market Risk 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 individual asset/liability management committees and processes 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, mortgage-backed securities 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, 2007, our most recent simulation indicated estimated earnings at risk of approximately 4% of our most likely earnings plan over the next 12 months using a scenario in which the federal funds rate rises 175 basis points to 6% and the 10-year Constant Maturity Treasury bond yield rises 300 basis points to 7%. 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 “Mortgage Banking Interest Rate and Market Risk” below.

We use exchange-traded and over-the-counter 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, 2007 and 2006, are presented in Note 16 (Derivatives) to Financial Statements. 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. We reduce unwanted credit and liquidity risks by selling or securitizing predominantly all of the long-term fixed-rate mortgage loans we originate and most of the ARMs we originate. From time to time, we hold originated ARMs 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 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.

2007 was a challenging year for the financial services industry with the downturn in the national housing market, deterioration in the capital markets, widening credit spreads and increases in market volatility, in addition to changes in

interest rates discussed in the following sections. Notwithstanding the sharp downturn in the housing sector, the widening of nonconforming credit spreads and the lack of liquidity in the nonconforming secondary markets, our mortgage banking revenue grew, reflecting the complementary origination and servicing strengths of the business. The secondary market for agency-conforming mortgages functioned well for most of the year. However, secondary market spreads widened during the second half of 2007. The mortgage warehouse and pipeline, which predominantly consists of prime mortgage loans, was written down by $479 million in 2007 to reflect the unusual widening in nonconforming and conforming agency market spreads. In addition to the write-down associated with the mortgage warehouse and pipeline, we further reduced mortgage origination gains by $324 million primarily to reflect a write-down of mortgage loans repurchased during the year, as well as an increase to the repurchase reserve for projected early payment defaults.

Interest rate and market risk can be substantial in the mortgage business. Changes in interest rates may potentially impact 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 impact 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 impact 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.

Under FAS 159, which we adopted January 1, 2007, 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 currently exist to reliably support fair value pricing models used for these loans. 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) will reduce certain timing differences and better match changes in the value of these assets with changes in the value of derivatives used as economic hedges for these assets. Loan origination fees are recorded when earned, and related direct loan origination costs and fees are recognized when incurred.

Under FAS 156, which we adopted January 1, 2006, we elected to use the fair value measurement method to initially measure and carry our residential MSRs, 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. While 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. Assumptions affected include prepayment speed, expected returns and potential risks on the servicing asset portfolio, the value of escrow balances and other servicing valuation elements impacted by interest rates.

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 to not 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.” In 2007, the decrease in the fair value of our MSRs net of the gains on free-standing derivatives used to hedge the MSRs increased income by $583 million.

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 impacted by many factors. Such factors include the mix of new business between ARMs and fixed-rated mortgages, the relation-

		ship 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.

The total carrying value of our residential and commercial MSRs was $17.2 billion at December 31, 2007, and $18.0 billion at December 31, 2006. The weighted-average note rate on the owned servicing portfolio was 6.01% at December 31, 2007, and 5.92% at December 31, 2006. Our total MSRs were 1.20% of mortgage loans serviced for others at December 31, 2007, compared with 1.41% at December 31, 2006.

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. We record no value for the loan commitment at inception. Subsequent to inception, we recognize the fair value of the derivative loan commitment based on estimated changes in the fair value of the underlying loan that would result from the exercise of that commitment and on 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.

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 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 notional or contractual amount, credit risk amount and estimated net fair value of all customer accommodation derivatives at December 31, 2007 and 2006, are included in Note 16 (Derivatives) to Financial Statements. Open, “at risk” positions for all trading business are monitored by Corporate ALCO.

The standardized approach for monitoring and reporting market risk for the trading activities is the 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 2007 was $18 million, with a lower bound of $9 million and an upper bound of $93 million.

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 (the 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 these investments at least quarterly and assesses them for possible other-than-temporary impairment. 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. Private equity investments totaled $2.02 billion at December 31, 2007, and $1.67 billion at December 31, 2006.

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 other-than-temporary impairment may be periodically recorded when identified. The initial indicator of

impairment for marketable equity securities is a sustained decline in market price below the amount recorded for that investment. We consider a variety of factors, such as: the length of time and the extent to which the market value has been less than cost; the issuer’s financial condition, capital strength, and near-term prospects; any recent events specific to that issuer and economic conditions of its industry; and our investment horizon in relationship to an anticipated near-term recovery in the stock price, if any. The fair value of marketable equity securities was $2.78 billion and cost was $2.88 billion at December 31, 2007, and $796 million and $592 million, respectively, at December 31, 2006. The increase in marketable equity securities was primarily due to our adoption of Topic D-109 effective July 1, 2007, which resulted in the transfer of approximately $1.2 billion of securities, consisting of investments in preferred stock callable by the issuer, from trading assets to securities available for sale.

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 5.9 years at December 31, 2007. Of the $69.4 billion (cost basis) of debt securities in this portfolio at December 31, 2007, $12.0 billion (17%) is expected to mature or be prepaid in 2008 and an additional $7.8 billion (11%) in 2009. Asset liquidity is further enhanced by our ability to sell or securitize loans in secondary markets through whole-loan sales and securitizations. In 2007, we sold mortgage loans of $224 billion, including home mortgage loans and commercial mortgage loans of $48 billion that we securitized. The amount of mortgage loans, home equity loans and other consumer loans available to be sold or securitized was approximately $160 billion at December 31, 2007.

Core customer deposits have historically provided a sizeable source of relatively stable and low-cost funds. Average core deposits funded 58.2% and 55.3% of average total assets in 2007 and 2006, respectively.

The remaining assets were funded 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 $93.2 billion in 2007 and $84.0 billion in 2006. Short-term borrowings averaged $25.9 billion in 2007 and $21.5 billion in 2006.

We anticipate making capital expenditures of approximately $1 billion in 2008 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 by issuing registered debt, private placements and asset-backed secured funding. 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. Moody’s Investors Service rates Wells Fargo Bank, N.A. as “Aaa,” its highest investment grade, and rates the Company’s senior debt as “Aa1.” In February 2007, Standard & Poor’s Ratings Services raised Wells Fargo Bank, N.A.’s credit rating to “AAA” from “AA+,” and raised the Company’s senior debt rating to “AA+” from “AA.” Wells Fargo Bank, N.A. is now the only U.S. bank to have the highest possible credit rating from both Moody’s and S&P.

Table 19 provides the credit ratings of the Company and Wells Fargo Bank, N.A. as of December 31, 2007.

Table 19: Credit Ratings

Wells Fargo & Company

Wells Fargo Bank, N.A.

Senior

Subord

Commer

Long

Short

debt

inated

cial

term

debt

paper

deposits

borrow

ings

Moody’s

Aa1

Aa2

P-1

Aaa

P-1

S&P

A-1

AAA

A-1

Fitch, Inc.

Dominion Bond Rating Service

R-1

^**

^***

R-1

^***

* low ** middle *** high

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 2006, the Parent’s registration statement with the SEC for issuance of senior and subordinated notes, preferred stock and other securities became effective. However, 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 $30 billion in outstanding short-term debt and $105 billion in outstanding long-term debt, subject to a total outstanding debt limit of $135 billion. During 2007, the Parent issued a total of $21.6 billion of registered senior notes, including $1.5 billion (denominated in pounds sterling) sold primarily in the United Kingdom. The Parent also issued $1 billion in junior subordinated debt in connection with the issuance of trust preferred securities by a statutory business trust formed by the Parent. Also, in 2007, the Parent issued $413 million in private placements (denominated in Australian dollars) under the Parent’s Australian debt issuance program. We used the proceeds from securities issued in 2007 for general corporate purposes and expect that the proceeds in the future will also be used for general corporate purposes. In January 2008, the Parent issued $5.5 billion of registered senior notes. 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 $50 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. Securities are issued under this program as private placements in accordance with Office of the Comptroller of the Currency (OCC) regulations. During 2007, Wells Fargo Bank, N.A. issued $26.1 billion in short-term senior notes.

WELLS FARGO FINANCIAL. In January 2006, 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 of medium-term notes for distribution from time to time in Canada. During 2007, WFFCC issued CAD$1.4 billion in senior notes under its 2006 short form base shelf prospectus, which expired in February 2008. In February 2008, WFFCC filed a new short form base shelf prospectus qualifying an additional CAD$7.0 billion of issuance authority and issued CAD$500 million of medium-term notes, leaving CAD$6.5 billion available for future issuance. All medium-term notes issued by WFFCC are unconditionally guaranteed by the Parent.

Capital Management

We have an active program for managing stockholder capital. We use capital to fund organic growth, acquire banks and other financial services companies, pay dividends and repurchase our shares. Our objective is to produce above-market long-term returns by opportunistically using capital when returns are perceived to be high and issuing/accumulating capital when the costs of doing so are perceived to be low.

From time to time the Board of Directors 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 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.

Historically, our policy has been to repurchase shares under the “safe harbor” conditions of Rule 10b-18 of the Securities Exchange Act of 1934 including a limitation on the daily volume of repurchases. Rule 10b-18 imposes an additional daily volume limitation on share repurchases during a pending merger or acquisition in which shares of our stock will constitute some or all of the consideration. Our management may determine that during a pending stock merger or acquisition when the safe harbor would otherwise be available, it is in our best interest to repurchase shares in excess of this additional daily volume limitation. In such cases, we intend to repurchase shares in compliance with the

other conditions of the safe harbor, including the standing daily volume limitation that applies whether or not there is a pending stock merger or acquisition.

In March, August and November 2007, the Board authorized the repurchase of up to 75 million, 50 million and 75 million additional shares of our outstanding common stock, respectively. During 2007, we repurchased 220 million shares of our common stock. In 2007, we issued approximately 82 million shares of common stock (including shares issued for our ESOP plan) under various employee benefit and director plans and under our dividend reinvestment and direct stock purchase programs and approximately 58 million shares for acquisitions. At December 31, 2007, the total remaining common stock repurchase authority was 42 million shares.

Our potential sources of capital include retained earnings and issuances of common and preferred stock. In 2007, retained earnings increased $3.8 billion, predominantly as a result of net income of $8.1 billion less dividends of $4.0 billion. In 2007, we issued $2.3 billion of common stock under various employee benefit and director plans and $2.1 billion of common stock for acquisitions.

The Company and each of our subsidiary banks are subject to various regulatory capital adequacy requirements administered by the Federal Reserve Board and the OCC. Risk-based capital guidelines establish a risk-adjusted ratio relating capital to different categories of assets and off-balance sheet exposures. At December 31, 2007, the Company and each of our covered subsidiary banks were “well capitalized” under applicable regulatory capital adequacy guidelines. See Note 26 (Regulatory and Agency Capital Requirements) to Financial Statements for additional information.

Comparison of 2006 with 2005

Net income in 2006 increased 10% to a record $8.4 billion in 2006 from $7.7 billion in 2005. Diluted earnings per common share increased 10% to a record $2.47 in 2006 from $2.25 in 2005.

Our 10% growth in earnings per share was driven by revenue growth. Revenue grew 8% to a record $35.7 billion in 2006 from $32.9 billion in 2005. The breadth and depth of our business model resulted in very strong and balanced growth across product sources (net interest income up 8%, noninterest income up 9%) and across businesses (double-digit revenue and/or profit growth in regional banking, business direct, wealth management, credit and debit card, corporate trust, commercial banking, asset-based lending, asset management, real estate brokerage, insurance, international, commercial real estate, corporate banking and specialized financial services).

We continued to make investments in 2006 by opening 109 regional banking stores and growing our sales and service

force by adding 4,497 team members (full-time equivalents) in 2006, including 1,914 retail platform bankers. In 2006, we continued to be #1 in many categories of financial services nationally, including retail mortgage originations, home equity lending, small business lending, agricultural lending, internet banking, and provider of financial services to middle-market companies in the western U.S.

Our core products grew in 2006 from 2005:

•		Average loans grew by 4% (up 14% excluding real estate 1-4 family first mortgages);
•		Average core deposits grew by 10%; and
•		Assets managed and administered were up 26%.

Return on average total assets was 1.73% and return on average stockholders’ equity was 19.52% in 2006, compared with 1.72% and 19.59%, respectively, in 2005.

Net interest income on a taxable-equivalent basis was $20.1 billion in 2006, compared with $18.6 billion a year ago, reflecting solid loan growth (excluding ARMs) and a relatively stable net interest margin. With short-term interest

rates above 5% at year-end 2006, our cumulative sales of ARMs and debt securities from mid-2004 to mid-2006 had a positive impact on our net interest margin and net interest income. We completed our sales of over $90 billion of ARMs since mid-2004 with the sales of $26 billion of ARMs in second quarter 2006. Average earning assets grew 8% from 2005, or 17% excluding 1-4 family first mortgages (the loan category that includes ARMs). Our net interest margin was 4.83% for 2006, compared with 4.86% in 2005.

Noninterest income increased 9% to $15.7 billion in 2006 from $14.4 billion in 2005. Growth in noninterest income was driven by growth across our businesses, with particular strength in trust and investment fees (up 12%), card fees (up 20%), insurance fees (up 10%) and gains on equity investments (up 44%).

Revenue, the sum of net interest income and noninterest income, increased 8% to a record $35.7 billion in 2006 from $32.9 billion in 2005. Home Mortgage revenue decreased $704 million (15%) to $4.2 billion in 2006 from $4.9 billion in 2005. Combined revenue in businesses other than Home Mortgage grew 12% from 2005 to 2006, with double-digit revenue growth in virtually every major business line other than Home Mortgage.

Noninterest expense was $20.8 billion in 2006, up 10% from $19.0 billion in 2005, primarily due to continued investments in new stores and additional sales and service-related team members. We began expensing stock options on January 1, 2006. Total stock option expense reduced 2006 earnings by approximately $0.025 per share.

During 2006, net charge-offs were $2.25 billion (0.73% of average total loans), compared with $2.28 billion (0.77%) during 2005. Net charge-offs for auto loans increased $160 million in 2006 partially due to growth and seasoning, but largely due to collection capacity constraints and restrictive payment extension practices that occurred when Wells Fargo

Financial integrated its prime and nonprime auto loan businesses during 2006. Net charge-offs for 2005 included $171 million of incremental fourth quarter bankruptcy losses and increased net charge-offs of $163 million in first quarter 2005 to conform Wells Fargo Financial’s charge-off practices to more stringent Federal Financial Institutions Examination Council guidelines. The provision for credit losses was $2.20 billion in 2006, down $179 million from $2.38 billion in 2005. The 2005 provision for credit losses also included $100 million for estimated charge-offs related to Hurricane Katrina. We subsequently realized approximately $50 million of Katrina-related losses. Because we no longer anticipated further credit losses attributable to Katrina, we released the remaining $50 million reserve in 2006. The allowance for credit losses, which consists of the allowance for loan losses and the reserve for unfunded credit commitments, was $3.96 billion, or 1.24% of total loans, at December 31, 2006, compared with $4.06 billion (1.31%) at December 31, 2005.

At December 31, 2006, total nonaccrual loans were $1.67 billion (0.52% of total loans), up from $1.34 billion (0.43%) at December 31, 2005. Total nonperforming assets were $2.42 billion (0.76% of total loans) at December 31, 2006, compared with $1.53 billion (0.49%) at December 31, 2005. Foreclosed assets were $745 million at December 31, 2006, compared with $191 million at December 31, 2005. Foreclosed assets, a component of total nonperforming assets, included an additional $322 million of foreclosed real estate securing GNMA loans at December 31, 2006, due to a change in regulatory reporting requirements effective January 1, 2006. The foreclosed real estate securing GNMA loans of $322 million represented 10 basis points of the ratio of non-performing assets to loans at December 31, 2006.

Risk Factors

An investment in the Company has risk. We discuss below and elsewhere in this Report and in other documents we file with the SEC various risk factors that could cause our financial results and condition to vary significantly from period to period. We refer you to the Financial Review section and Financial Statements and related Notes in this Report for more information about credit, interest rate and market risks and to the “Regulation and Supervision” section of our 2007 Form 10-K for more information about legislative and regulatory risks. Any factor described below or elsewhere in this Report or in our 2007 Form 10-K could, by itself or together with other factors, have a material negative effect on our financial results and condition and on the value of an investment in Wells Fargo. Refer to our quarterly reports on Form 10-Q that we will file with the SEC in 2008 for material changes to the discussion of risk factors.

In accordance with the Private Securities Litigation Reform Act of 1995, we caution you that one or more of the factors discussed below, in the Financial Review section of this Report, in the Financial Statements and related Notes included in this Report, in the 2007 Form 10-K, or in other documents we file with the SEC from time to time could cause us to fall short of expectations for our future financial and business performance that we may express in forward-looking statements. We make forward-looking statements when we use words such as “believe,” “expect,” “anticipate,” “estimate,” “will,” “may,” “can” and similar expressions. Do not unduly rely on forward-looking statements. Actual results may differ significantly from expectations. Forward-looking statements speak only as of the date made. We do not undertake to update them to reflect changes or events that occur after that date.

In this Report we make forward-looking statements that we expect or believe:

•		net charge-offs will be higher in 2008, particularly in the Home Equity portfolio;
•		there is minimal additional loss content in nonaccrual loans;
•		the provision for credit losses for consumer loans, absent a significant credit event, severe decrease in collateral values, significant acceleration of losses or significant change in payment behavior, will closely track the level of related net charge-offs;
•		FIN 48 will cause more volatility in our effective tax rate from quarter to quarter;
•		our investments in affordable housing and sustainable energy projects will be recovered over time through realization of federal tax credits;
•		the amount of any additional consideration that may be payable in connection with previous acquisitions will not be significant to our financial statements;
•		the amount of nonaccrual loans will change due to portfolio growth, portfolio seasoning, routine problem loan recognition and resolution through collections, sales or charge-offs;
•		recent guidance issued by federal financial regulatory agencies for nonprime mortgage lending will not have a significant impact on Wells Fargo Financial’s operations;
•		the election to measure at fair value new prime residential MHFS and other interests held will reduce certain timing differences and better match changes in the value of these assets with changes in the value of derivatives used as economic hedges for these assets;
•		changes in the fair value of derivative financial instruments used as economic hedges of derivative loan commitments will fully or partially offset changes in the fair value of such commitments to the extent changes in value are due to interest rate changes;
•		capital expenditures of approximately $1 billion will be made in 2008 for our stores, relocation and remodeling of our facilities, and routine replacement of furniture, equipment and servers;
•		proceeds of securities issued in the future will be used for general corporate purposes;
•		the outcome of pending and threatened legal actions will not have a material adverse effect on our results of operations or stockholders’ equity;
•		$63 million of net deferred gains on derivatives in other comprehensive income at December 31, 2007, will be reclassified as earnings in the next 12 months;
•		$126 million of unrecognized compensation cost related to stock options will be recognized over a weighted-average period of 2.1 years;
•		a contribution to the Cash Balance Plan will not be required in 2008; and
•		our unrecognized tax benefits could decrease by approximately $100 to $200 million during the next 12 months primarily related to statute expirations.

This Report also includes various statements about the estimated impact on our earnings from simulated changes in interest rates and on expected losses in our loan portfolio from assumed changes in loan credit quality. As described in more detail below and elsewhere in this Report, changes in the estimate of the allowance for credit losses and the related provision expense could have a material negative effect on net income.

OUR ABILITY TO GROW REVENUE AND EARNINGS WILL SUFFER IF WE ARE UNABLE TO CROSS-SELL MORE PRODUCTS TO CUSTOMERS. Selling more products to our customers—“cross-selling”—is the foundation of 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 put pressure on 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, especially given that our cross-sell ratio is already high, and we might not attain our goal of selling an average of eight products to each customer.

AN ECONOMIC RECESSION OR EVEN A MODEST SLOWDOWN 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. When the economy slows, the demand for those products and services can fall, reducing our interest and fee income and our earnings. An economic downturn can also hurt the ability of our borrowers to repay their loans, causing us to incur higher credit losses. Several factors could cause the economy to slow down or even recede, including higher energy costs, higher interest rates, reduced consumer or corporate spending, a slowdown in housing, declining home values, natural disasters, terrorist activities, military conflicts, and the normal cyclical nature of the economy.

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.

For more information, refer to “Risk Management – Asset/Liability and Market Risk Management – Market Risk – Equity Markets” in the Financial Review section of this Report.

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. As a result, 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—up or down—could adversely 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. As a result, 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.

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, we could experience pressure on our net interest margin 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 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 or expenses when we take such actions.

For more information, refer to “Risk Management – Asset/Liability and Market Risk Management – Interest Rate Risk” in the Financial Review section of 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, escrow amounts, etc.—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. Effective January 1, 2006, upon adoption of FAS 156, we elected to 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 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.

Effective January 1, 2007, we elected to measure at fair value new prime mortgages held for sale (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 held 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 held, 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 “Critical Accounting Policies” and “Risk Management – Asset/Liability and Market Risk

Management – Mortgage Banking Interest Rate and Market Risk” in the Financial Review section of this Report.

MARKET ILLIQUIDITY AND INCREASED COMPETITION FOR FUNDING COULD INCREASE OUR FUNDING COSTS. 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 market investors to purchase loans that do not meet those requirements – referred to as “nonconforming” loans. In 2007, investor demand for nonconforming loans began to fall 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 associated with 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 requirements, or changes in criteria for conforming loans (e.g., maximum loan amount or borrower eligibility).

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.

WE MAY ELECT TO PROVIDE CAPITAL SUPPORT TO OUR MUTUAL FUNDS RELATING TO INVESTMENTS IN STRUCTURED CREDIT PRODUCTS. Our money market mutual funds 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 collateralized debt obligations (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 non-government 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.

For more information, refer to “Off-Balance Sheet Arrangements and Aggregate Contractual Obligations – Off-Balance Sheet Arrangements, Variable Interest Entities, Guarantees and Other Commitments” in the Financial Review section of this Report.

HIGHER CREDIT LOSSES 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. For example, in a rising interest rate environment, borrowers with adjustable-rate loans could see their payments increase. There may be a significant increase in the number of borrowers who are unable or unwilling to repay their loans, resulting in our charging off more loans and increasing our allowance. In addition, when home values decline, the potential severity of loss on a real estate-secured loan can increase significantly, especially in the case of loans with high combined loan-to-value ratios. In fourth quarter 2007, we recorded a special provision of $1.4 billion to build credit reserves, primarily for home equity losses incurred at December 31, 2007, expected to be realized in 2008, and incurred higher net charge-offs. We believe that we will incur higher charge-offs in 2008 than in 2007. There is no assurance that our allowance for credit losses at December 31, 2007, will be sufficient to cover future credit losses. We may be required to build reserves in 2008, thus reducing earnings.

For more information, refer to “Critical Accounting Policies – Allowance for Credit Losses” and “Risk Management – Credit Risk Management Process” in the Financial Review section of 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 2007 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. In addition, deterioration in housing conditions and real estate values in other areas and generally across the country could result in materially higher credit losses.

For more information, refer to “Risk Management – Credit Risk Management Process – Loan Portfolio Concentrations” in the Financial Review section of this Report and Note 9 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

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 current coverage. 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 “Earnings Performance – Balance Sheet Analysis – Securities Available for Sale” and “Risk Management – Credit Risk Management Process” in the Financial Review section of 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 tends to fall, reducing the revenue we receive from loan originations. At the same time, revenue from our MSRs can increase through increases in fair value. When rates fall, mortgage originations tend to increase and the value of our MSRs 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 immediate, but any offsetting revenue benefit from more originations and the MSRs relating to the new loans would accrue over time. It is also possible that, because of a slowing economy and a deterioration of the 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 MSR 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 the fact that we attempt to hedge any of the risk does not mean we will be successful. 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 “Risk Management – Asset/Liability and Market Risk Management – Mortgage Banking Interest Rate and Market Risk” in the Financial Review section of 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 can 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 can 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. Earnings from our venture capital investments can be volatile and hard to predict and can have a significant effect on our earnings from period to period. When—and if—we recognize gains can 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.

We assess our private and public equity portfolio at least quarterly for other-than-temporary impairment based on a number

of factors, including the then current market value of each investment compared to its carrying value. Our venture capital investments tend to be in technology and other volatile industries globally, so the value of our public and private equity portfolios can fluctuate widely. If we determine there is other-than-temporary impairment for an investment, we will write-down the carrying value of the investment, resulting in a charge to earnings. The amount of this charge could be significant, especially if under accounting rules we were required previously to write-up the value because of higher market prices.

For more information, refer to “Risk Management – Asset/Liability and Market Risk Management – Market Risk – Equity Markets” in the Financial Review section of 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 use these dividends 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 “Regulation and Supervision – Dividend Restrictions” and “– Holding Company Structure” in our 2007 Form 10-K and to Notes 3 (Cash, Loan and Dividend Restrictions) and 26 (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. Five 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 “Critical Accounting Policies” in the Financial Review section of 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 impact how we report our financial results and condition. We could 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.

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 approval before we can acquire a bank or bank holding company. In deciding 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 Community Reinvestment Act, and the effectiveness of the acquiring institution 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 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 filed with the SEC, 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.

The Patriot Act, which was enacted in the wake of the September 2001 terrorist attacks, 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.

A number of states have recently challenged the position of the OCC as the sole regulator 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. As an example, our business model depends on sharing information among the family of Wells Fargo businesses to better satisfy our customers’ needs. Laws that restrict the ability of our companies to share information about customers could limit our ability to cross-sell products and services, reducing our revenue and earnings. For example, 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 Wells Fargo companies for the purpose of cross-selling Wells Fargo’s products and services. This may result in certain cross-sell programs being less effective than they have been in the past. Wells Fargo must comply with these regulations not later than October 1, 2008.

For more information, refer to “Regulation and Supervision” in our 2007 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. Therefore, the establishment and maintenance of systems and procedures reasonably designed to ensure compliance cannot guarantee that we will be able to avoid a fine or penalty for noncompliance. For example, in April 2003 and January 2005 OFAC reported settlements with Wells Fargo Bank, N.A. in amounts of $5,500 and $42,833, respectively. These settlements related to transactions involving inadvertent acts or human error alleged to have violated OFAC regulations. 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.

WE DEPEND ON THE ACCURACY AND COMPLETENESS OF INFORMATION ABOUT CUSTOMERS AND COUNTERPARTIES. In deciding whether to extend credit or enter into other transactions, we rely on the accuracy and completeness of information about our customers, including financial statements and other financial information and reports of independent auditors. For example, in deciding whether to extend credit, we may assume that a customer’s audited financial statements conform with U.S. GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. We also may rely on the audit report covering those financial statements. If that information is incorrect or incomplete, we may incur credit losses or other charges to earnings.

WE RELY ON OTHERS TO HELP US WITH OUR OPERATIONS. We rely on outside vendors to provide key components of our business operations such as internet connections and network access. Disruptions in communication services provided by a vendor or any failure of a vendor to handle current or higher volumes of use could hurt our ability to deliver products and services to our customers and otherwise to conduct our business. Financial or operational difficulties of an outside vendor could also hurt our operations if those difficulties interfere with the vendor’s ability to serve us.

FEDERAL RESERVE BOARD POLICIES CAN SIGNIFICANTLY IMPACT 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.

OUR STOCK PRICE CAN BE VOLATILE DUE TO OTHER FACTORS. 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, 2007, 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, 2007.

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 of directors, 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 2007 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, 2007, 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, 2007, 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, 2007, 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, 2007, 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, 2007 and 2006, and the related consolidated statements of income, changes in stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2007, and our report dated February 25, 2008, expressed an unqualified opinion on those consolidated financial statements.

San Francisco, California
February 25, 2008

Financial Statements


Wells Fargo & Company and Subsidiaries
Consolidated Statement of Income

(in millions, except per share amounts)	Year ended December 31							,
	2007		2006			2005

INTEREST INCOME
Trading assets	$	173	$	225		$	190
Securities available for sale		3,451		3,278			1,921
Mortgages held for sale		2,150		2,746			2,213
Loans held for sale		70		47			146
Loans		29,040		25,611			21,260
Other interest income		293		332			232

Total interest income		35,177		32,239			25,962


INTEREST EXPENSE
Deposits		8,152		7,174			3,848
Short-term borrowings		1,245		992			744
Long-term debt		4,806		4,122			2,866

Total interest expense		14,203		12,288			7,458


NET INTEREST INCOME		20,974		19,951			18,504
Provision for credit losses		4,939		2,204			2,383

Net interest income after provision for credit losses		16,035		17,747			16,121


NONINTEREST INCOME
Service charges on deposit accounts		3,050		2,690			2,512
Trust and investment fees		3,149		2,737			2,436
Card fees		2,136		1,747			1,458
Other fees		2,292		2,057			1,929
Mortgage banking		3,133		2,311			2,422
Operating leases		703		783			812
Insurance		1,530		1,340			1,215
Net gains (losses) on debt securities available for sale		209		(19	)		(120	)
Net gains from equity investments		734		738			511
Other		1,480		1,356			1,270

Total noninterest income		18,416		15,740			14,445


NONINTEREST EXPENSE
Salaries		7,762		7,007			6,215
Incentive compensation		3,284		2,885			2,366
Employee benefits		2,322		2,035			1,874
Equipment		1,294		1,252			1,267
Net occupancy		1,545		1,405			1,412
Operating leases		561		630			635
Other		6,056		5,623			5,249

Total noninterest expense		22,824		20,837			19,018


INCOME BEFORE INCOME TAX EXPENSE		11,627		12,650			11,548
Income tax expense		3,570		4,230			3,877


NET INCOME	$	8,057	$	8,420		$	7,671


EARNINGS PER COMMON SHARE	$	2.41	$	2.50		$	2.27

DILUTED EARNINGS PER COMMON SHARE	$	2.38	$	2.47		$	2.25

DIVIDENDS DECLARED PER COMMON SHARE	$	1.18	$	1.08		$	1.00

Average common shares outstanding		3,348.5		3,368.3			3,372.5
Diluted average common shares outstanding		3,382.8		3,410.1			3,410.9

The accompanying notes are an integral part of these statements.


Wells Fargo & Company and Subsidiaries
Consolidated Balance Sheet

(in millions, except shares)	December 31					,
	2007			2006

ASSETS
Cash and due from banks	$	14,757		$	15,028
Federal funds sold, securities purchased under resale agreements and other short-term investments		2,754			6,078
Trading assets		7,727			5,607
Securities available for sale		72,951			42,629
Mortgages held for sale (includes $24,998 carried at fair value at December 31, 2007)		26,815			33,097
Loans held for sale		948			721

Loans		382,195			319,116
Allowance for loan losses		(5,307	)		(3,764	)

Net loans		376,888			315,352


Mortgage servicing rights:
Measured at fair value (residential MSRs)		16,763			17,591
Amortized		466			377
Premises and equipment, net		5,122			4,698
Goodwill		13,106			11,275
Other assets		37,145			29,543


Total assets	$	575,442		$	481,996


LIABILITIES
Noninterest-bearing deposits	$	84,348		$	89,119
Interest-bearing deposits		260,112			221,124

Total deposits		344,460			310,243
Short-term borrowings		53,255			12,829
Accrued expenses and other liabilities		30,706			25,965
Long-term debt		99,393			87,145


Total liabilities		527,814			436,182


STOCKHOLDERS’ EQUITY
Preferred stock		450			384
Common stock – $1 ² / ₃ par value, authorized 6,000,000,000 shares; issued 3,472,762,050 shares		5,788			5,788
Additional paid-in capital		8,212			7,739
Retained earnings		38,970			35,215
Cumulative other comprehensive income		725			302
Treasury stock – 175,659,842 shares and 95,612,189 shares		(6,035	)		(3,203	)
Unearned ESOP shares		(482	)		(411	)


Total stockholders’ equity		47,628			45,814


Total liabilities and stockholders’ equity	$	575,442		$	481,996

The accompanying notes are an integral part of these statements.


Wells Fargo & Company and Subsidiaries
Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income

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

BALANCE DECEMBER 31, 2004		3,389,183,274			$	270			$	5,788		$	6,912			$	26,482			$	950			$	(2,247	)		$	(289	)		$	37,866

Comprehensive income:
Net income – 2005																	7,671																7,671
Other comprehensive income, net of tax:
Translation adjustments																					5												5
Net unrealized losses on securities available for sale and other interests held																					(298	)											(298	)
Net unrealized gains on derivatives and hedging activities																					8												8

Total comprehensive income																																	7,386
Common stock issued		57,528,986											(52	)			(198	)							1,617								1,367
Common stock issued for acquisitions		3,909,004											12												110								122
Common stock repurchased		(105,597,728	)																						(3,159	)							(3,159	)
Preferred stock (363,000) issued to ESOP						362							25																(387	)			—
Preferred stock released to ESOP													(21	)															328				307
Preferred stock (307,100) converted to common shares		10,142,528				(307	)						21												286								—
Common stock dividends																	(3,375	)															(3,375	)
Tax benefit upon exercise of stock options													143																				143
Other, net																									3								3

Net change		(34,017,210	)			55				—			128				4,098				(285	)			(1,143	)			(59	)			2,794


BALANCE DECEMBER 31, 2005		3,355,166,064				325				5,788			7,040				30,580				665				(3,390	)			(348	)			40,660

Cumulative effect from adoption of FAS 156																	101																101

BALANCE JANUARY 1, 2006		3,355,166,064				325				5,788			7,040				30,681				665				(3,390	)			(348	)			40,761

Comprehensive income:
Net income – 2006																	8,420																8,420
Other comprehensive income, net of tax:
Net unrealized losses on securities available for sale and other interests held																					(31	)											(31	)
Net unrealized gains on derivatives and hedging activities																					70												70

Total comprehensive income																																	8,459
Common stock issued		70,063,930											(67	)			(245	)							2,076								1,764
Common stock repurchased		(58,534,072	)																						(1,965	)							(1,965	)
Preferred stock (414,000) issued to ESOP						414							29																(443	)			—
Preferred stock released to ESOP													(25	)															380				355
Preferred stock (355,659) converted to common shares		10,453,939				(355	)						41												314								—
Common stock dividends																	(3,641	)															(3,641	)
Tax benefit upon exercise of stock options													229																				229
Stock option compensation expense													134																				134
Net change in deferred compensation and related plans													50												(27	)							23
Reclassification of share-based plans													308												(211	)							97
Adoption of FAS 158																					(402	)											(402	)

Net change		21,983,797				59				—			699				4,534				(363	)			187				(63	)			5,053


BALANCE DECEMBER 31, 2006		3,377,149,861				384				5,788			7,739				35,215				302				(3,203	)			(411	)			45,814

Cumulative effect from adoption of FSP 13-2																	(71	)															(71	)

BALANCE JANUARY 1, 2007		3,377,149,861				384				5,788			7,739				35,144				302				(3,203	)			(411	)			45,743

Comprehensive income:
Net income – 2007																	8,057																8,057
Other comprehensive income, net of tax:
Translation adjustments																					23												23
Net unrealized losses on securities available for sale and other interests held																					(164	)											(164	)
Net unrealized gains on derivatives and hedging activities																					322												322
Defined benefit pension plans:
Amortization of net actuarial loss and prior service cost included in net income																					242												242

Total comprehensive income																																	8,480
Common stock issued		69,894,448											(132	)			(276	)							2,284								1,876
Common stock issued for acquisitions		58,058,813											190												1,935								2,125
Common stock repurchased		(220,327,473	)																						(7,418	)							(7,418	)
Preferred stock (484,000) issued to ESOP						484							34																(518	)			—
Preferred stock released to ESOP													(29	)															447				418
Preferred stock (418,000) converted to common shares		12,326,559				(418	)						13												405								—
Common stock dividends																	(3,955	)															(3,955	)
Tax benefit upon exercise of stock options													210																				210
Stock option compensation expense													129																				129
Net change in deferred compensation and related plans													58												(38	)							20

Net change		(80,047,653	)			66				—			473				3,826				423				(2,832	)			(71	)			1,885


BALANCE DECEMBER 31, 2007		3,297,102,208			$	450			$	5,788		$	8,212			$	38,970			$	725			$	(6,035	)		$	(482	)		$	47,628

The accompanying notes are an integral part of these statements.


Wells Fargo & Company and Subsidiaries
Consolidated Statement of Cash Flows

(in millions)	Year ended December 31								,
	2007			2006			2005

Cash flows from operating activities:
Net income	$	8,057		$	8,420		$	7,671
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Provision for credit losses		4,939			2,204			2,383
Change in fair value of MSRs (residential) and MHFS carried at fair value		2,611			2,453			—
Reversal of provision for MSRs in excess of fair value		—			—			(378	)
Depreciation and amortization		1,532			3,221			4,161
Other net gains		(1,407	)		(1,701	)		(1,200	)
Preferred shares released to ESOP		418			355			307
Stock option compensation expense		129			134			—
Excess tax benefits related to stock option payments		(196	)		(227	)		—
Originations of MHFS		(223,266	)		(237,841	)		(230,897	)
Proceeds from sales of and principal collected on mortgages originated for sale		216,270			238,800			213,514
Net change in:
Trading assets		(3,388	)		5,271			(1,905	)
Loans originated for sale		(222	)		(109	)		683
Deferred income taxes		(31	)		593			813
Accrued interest receivable		(407	)		(291	)		(796	)
Accrued interest payable		(87	)		455			311
Other assets, net		(365	)		3,570			(10,237	)
Other accrued expenses and liabilities, net		4,491			2,669			3,585

Net cash provided (used) by operating activities		9,078			27,976			(11,985	)


Cash flows from investing activities:
Net change in:
Federal funds sold, securities purchased under resale agreements and other short-term investments		3,331			(717	)		(281	)
Securities available for sale:
Sales proceeds		47,990			53,304			19,059
Prepayments and maturities		8,505			7,321			6,972
Purchases		(75,129	)		(62,462	)		(28,634	)
Loans:
Increase in banking subsidiaries’ loan originations, net of collections		(48,615	)		(37,730	)		(42,309	)
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries		3,369			38,343			42,239
Purchases (including participations) of loans by banking subsidiaries		(8,244	)		(5,338	)		(8,853	)
Principal collected on nonbank entities’ loans		21,476			23,921			22,822
Loans originated by nonbank entities		(25,284	)		(26,974	)		(33,675	)
Net cash acquired from (paid for) acquisitions		(2,811	)		(626	)		66
Proceeds from sales of foreclosed assets		1,405			593			444
Changes in MSRs from purchases and sales		791			(3,539	)		(1,943	)
Other, net		(4,099	)		(2,678	)		(3,324	)

Net cash used by investing activities		(77,315	)		(16,582	)		(27,417	)


Cash flows from financing activities:
Net change in:
Deposits		27,058			(4,452	)		38,961
Short-term borrowings		39,827			(11,156	)		1,878
Long-term debt:
Proceeds from issuance		29,360			20,255			26,473
Repayment		(18,250	)		(12,609	)		(18,576	)
Common stock:
Proceeds from issuance		1,876			1,764			1,367
Repurchased		(7,418	)		(1,965	)		(3,159	)
Cash dividends paid		(3,955	)		(3,641	)		(3,375	)
Excess tax benefits related to stock option payments		196			227			—
Other, net		(728	)		(186	)		(1,673	)

Net cash provided (used) by financing activities		67,966			(11,763	)		41,896

Net change in cash and due from banks		(271	)		(369	)		2,494
Cash and due from banks at beginning of year		15,028			15,397			12,903


Cash and due from banks at end of year	$	14,757		$	15,028		$	15,397


Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	14,290		$	11,833		$	7,769
Income taxes		3,719			3,084			3,584
Noncash investing and financing activities:
Transfers from trading assets to securities available for sale	$	1,268		$	—		$	—
Net transfers from loans held for sale to loans		—			—			7,444
Transfers from MHFS to securities available for sale		7,949			—			5,490
Transfers from MHFS to loans		2,133			—			—
Transfers from MHFS to MSRs		3,720			4,118			2,652
Transfers from loans to MHFS		—			32,383			41,270
Transfers from loans to foreclosed assets		2,666			1,918			567

The accompanying notes are an integral part of these statements.

Notes to Financial Statements

Note 1: Summary of Significant Accounting Policies

Wells Fargo & Company is a diversified financial services company. We provide banking, insurance, investments, mortgage banking and consumer finance through banking stores, the internet and other distribution channels to consumers, businesses and institutions in all 50 states of the U.S. and in other countries. In this Annual Report, when we refer to “the Company,” “we,” “our” or “us” we mean Wells Fargo & Company and Subsidiaries (consolidated). Wells Fargo & Company (the Parent) is a financial holding company and a bank holding company.

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 and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and income and expenses during the reporting period. Management has made significant estimates in several areas, including the allowance for credit losses (Note 6), valuing residential mortgage servicing rights (MSRs) (Notes 8 and 9) and financial instruments (Note 17), pension accounting (Note 20) and income taxes (Note 21). Actual results could differ from those estimates.

In the Financial Statements and related Notes, all common share and per share disclosures reflect a two-for-one stock split in the form of a 100% stock dividend distributed August 11, 2006.

On January 1, 2007, we adopted the following new accounting pronouncements:

•		FIN 48 – Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 ;
•		FSP 13-2 – FASB Staff Position 13-2, Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction ;
•		FAS 155 – Statement of Financial Accounting Standards No. 155, Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140 ;
•		FAS 157 – Fair Value Measurements ; and
•		FAS 159 – The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115 .

The adoption of FIN 48, FAS 155, FAS 157 and FAS 159 did not have any effect on our financial statements at the date of adoption. For additional information, see Note 17 and Note 21.

FSP 13-2 relates to the accounting for leveraged lease transactions for which there have been cash flow estimate changes based on when income tax benefits are recognized.

Certain of our leveraged lease transactions have been challenged by the Internal Revenue Service (IRS). We have paid the IRS the contested income tax associated with these transactions. However, we are continuing to vigorously defend our initial filing position as to the timing of the tax benefits associated with these transactions. Upon adoption of FSP 13-2, we recorded a cumulative effect of change in accounting principle to reduce the beginning balance of 2007 retained earnings by $71 million after tax ($115 million pre tax). Since this adjustment changes only the timing of income tax cash flows and not the total net income for these leases, this amount will be recognized back into income over the remaining terms of the affected leases.

IMMATERIAL ADJUSTMENTS

We obtained concurrence from the staff of the Securities and Exchange Commission (the SEC) subsequent to the filing of our third quarter 2007 Form 10-Q concerning our accounting for the Visa restructuring transactions, including judgment sharing agreements previously executed among Wells Fargo, Visa Inc. and its predecessors (collectively Visa) and certain other member banks of the Visa USA network. We recorded an immaterial adjustment to the previously filed 2006 Statement of Income associated with indemnification obligations related to agreements entered into during second quarter 2006. Based on our proportionate membership share of Visa USA, a litigation liability and corresponding expense of $95 million was recorded for second quarter 2006, which was included in Community Banking for management reporting. This adjustment was estimated based upon our share of an actual settlement reached in November 2007. The impact of this adjustment to the 2006 Statement of Income was to reduce net income by $62 million and diluted earnings per share by $0.02.

In 2006 and 2005, our consolidated statement of cash flows reflected mortgage servicing rights (MSRs) from securitizations and asset transfers, as separately detailed in Note 9, of $4,118 million and $2,652 million, respectively, as an increase to cash flows from operating activities with a corresponding decrease to cash flows from investing activities.

We have revised our consolidated statement of cash flows to appropriately reflect the proceeds from sales of mortgages held for sale (MHFS) and the related investment in MSRs as noncash transfers from MHFS to MSRs. The impact of the adjustments was to decrease net cash provided by operating activities from $32,094 million to $27,976 million in 2006, increase net cash used by operating activities from $9,333 million to $11,985 million in 2005, decrease net cash used by investing activities from $20,700 million to $16,582 million in 2006, and decrease net cash used by investing activities from $30,069 million to $27,417 million in 2005. These revisions to the historical financial statements were not considered to be material.

The following is a description of our significant accounting policies.

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 other comprehensive income. Assets accounted for under the equity or cost method are included in other assets.

We are a variable interest holder in certain special-purpose entities in which we do not have a controlling financial interest or do not have enough equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Our variable interest arises from contractual, ownership or other monetary interests in the entity, which change with fluctuations in the entity’s net asset value. We consolidate a VIE if we are the primary beneficiary because we 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. Trading assets are carried at fair value, with realized and unrealized gains and losses recorded in noninterest income. Noninterest income from trading assets was $544 million in 2007 and 2006, and $571 million in 2005.

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 estimated fair value. Unrealized gains and losses, after applicable taxes, are reported in cumulative other comprehensive income. Fair value measurement is based upon quoted prices, if available. If quoted prices 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.

We reduce the asset value when we consider the declines in the value of debt securities and marketable equity securities to be other than temporary and record the estimated loss in noninterest income. We conduct other-than-temporary impairment analysis on a quarterly basis. The initial indicator of other-than-temporary impairment 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. In determining whether an impairment is other than temporary, we consider the length of time and the extent to which market value has been less than cost, any recent events specific to the issuer and economic conditions of its industry, and our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery.

For marketable equity securities, we also consider the issuer’s financial condition, capital strength, and near-term prospects.

For debt securities we also consider:

•		the cause of the price decline—general level of interest rates and industry and issuer-specific factors;
•		the issuer’s financial condition, near term prospects and current ability to make future payments in a timely manner;
•		the issuer’s ability to service debt; and
•		any change in agencies’ ratings at evaluation date from acquisition date and any likely imminent action.

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) 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). We review these assets at least quarterly for possible other-than-temporary impairment. 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. These securities are accounted for under the cost or equity method and are included in other assets. 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.

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. Effective January 1, 2007, we elected to measure new prime residential MHFS at fair value.

Nonprime residential and commercial MHFS continue to be held at the lower of cost or market value. For these loans, gains and losses on loan sales (sales proceeds minus carrying value) are recorded in noninterest income. Direct loan origination costs and fees are deferred at origination of the loan. The deferred costs and fees are recognized in mortgage banking noninterest income upon sale of the loan.

At origination, 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.

Loans Held for Sale

Loans held for sale are carried at the lower of cost or market value. Gains and losses on loan sales (sales proceeds minus carrying value) are recorded in noninterest income. Direct loan origination costs and fees are deferred at origination of the loan. These deferred costs and fees are recognized in noninterest income upon sale of the loan.

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 purchased loans, which are recorded at fair value on their purchase date. Unearned income, deferred fees and costs, and discounts and premiums are amortized to 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, 2007 and 2006, we had $15.4 billion and $3.4 billion, respectively, of relationship ARMs in loans held for investment and $2 million and $163 million, respectively, in mortgages held for sale. Originations, net of collections and proceeds from the sale of these loans are reflected as investing cash flows consistent with their original classification.

Lease financing assets include aggregate lease rentals, net of related unearned income, which includes deferred investment tax credits, and 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.

From time to time, we pledge loans, primarily 1-4 family mortgage loans, to secure borrowings from the Federal Home Loan Bank.

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.

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 and 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 becomes 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.

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 assess and account for as impaired certain nonaccrual commercial and commercial real estate loans that are over $3 million and certain consumer, commercial and commercial real estate loans whose terms have been modified in a troubled debt restructuring.

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 an observable market price or 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.

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.

Transfers and Servicing of Financial Assets

We account for a transfer of financial assets as a sale when we surrender control of the transferred assets. Effective January 1, 2006, upon adoption of FAS 156, Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140 , 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 (a) proceeds received and (b) 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.

MORTGAGE SERVICING RIGHTS MEASURED AT FAIR VALUE

Effective January 1, 2006, upon adoption of FAS 156, we 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, 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 earnings in the period in which the change occurs.

Effective January 1, 2006, upon the remeasurement of our residential MSRs at fair value, we recorded a cumulative effect adjustment to increase the 2006 beginning balance of retained earnings by $101 million after tax ($158 million pre tax) in stockholders’ equity.

AMORTIZED MORTGAGE SERVICING RIGHTS

Amortized MSRs, which include commercial MSRs and, prior to January 1, 2006, residential 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.

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 when the purchase price is higher than the fair value of net assets acquired in business combinations under the purchase method of accounting.

We assess goodwill for impairment annually, and more frequently in certain circumstances. We assess goodwill for impairment on a reporting unit level by applying a fair-value-based test using discounted estimated future net cash flows. Impairment exists when the carrying amount of the goodwill exceeds its implied fair value. 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 intangibles on an accelerated basis based on useful lives of 10 to 15 years. We review core deposit 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, generally autos, 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 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 FAS 87, Employers’ Accounting for Pensions , as amended by FAS 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R) . 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.

FAS 158 was issued on September 29, 2006, and became effective for us on December 31, 2006. FAS 158 requires us to recognize the funded status of our pension and postretirement benefit plans on our balance sheet. Additionally, FAS 158 will require us to use a year-end measurement date beginning in 2008. We conformed our pension asset and our pension and postretirement liabilities to FAS 158 and recorded a corresponding reduction of $402 million (after tax) to the December 31, 2006, balance of cumulative other comprehensive income in stockholders’ equity. The adoption of FAS 158 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 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. 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 other comprehensive income. We generally amortize any net actuarial gain or loss in excess of a 5% corridor (as defined in FAS 87) in net periodic pension expense calculations over the next five 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 (November 30). In 2008, we will use December 31 as our measurement date as required under FAS 158.

Income Taxes

We file a consolidated federal income tax return and, in certain states, combined state tax returns.

We account for income taxes in accordance with FAS 109, Accounting for Income Taxes , as interpreted by FIN 48, resulting in 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 19. Prior to January 1, 2006, we accounted for stock options and stock awards under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and related interpretations, as permitted by FAS 123, Accounting for Stock-Based Compensation . Under this guidance, no stock option expense was recognized in our income statement for periods prior to January 1, 2006, as all options granted under our plans had an exercise price equal to the market value of the underlying common stock on the

date of grant. Effective January 1, 2006, we adopted FAS 123(R), Share-Based Payment , using the “modified prospective” transition method. Accordingly, compensation cost recognized in 2006 and 2007 includes (1) compensation cost for share-based payments granted prior to, but not yet vested as of the adoption date of January 1, 2006, based on the grant date fair value estimated in accordance with FAS 123, and (2) compensation cost for all share-based awards granted on or after January 1, 2006. Results for prior periods have not been restated. In calculating the common stock equivalents for purposes of diluted earnings per share, we selected the transition method provided by FASB Staff Position FAS 123(R)-3, Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards .

As a result of adopting FAS 123(R) on January 1, 2006, income before income taxes of $11.6 billion and net income of $8.1 billion for 2007 was $129 million and $80 million lower, respectively, than if we had continued to account for share-based compensation under APB 25, and, for 2006, income before income taxes of $12.7 billion and net income of $8.4 billion was $134 million and $84 million lower, respectively. Basic and diluted earnings per share for 2007 of $2.41 and $2.38, respectively, were both $0.025 per share lower than if we had not adopted FAS 123(R), and, for 2006, basic and diluted earnings per share of $2.50 and $2.47, respectively, were also both $0.025 per share lower.

Pro forma net income and earnings per common share information are provided in the following table as if we accounted for employee stock option plans under the fair value method of FAS 123 in 2005.


(in millions, except per share amounts)	Year ended December 31, 2005

Net income, as reported		$7,671

Add: Stock-based employee compensation expense included in reported net income, net of tax		1
Less: Total stock-based employee compensation expense under the fair value method for all awards, net of tax		(188	)

Net income, pro forma		$7,484


Earnings per common share
As reported		$ 2.27
Pro forma		2.22
Diluted earnings per common share
As reported		$ 2.25
Pro forma		2.19

Stock options granted in each of our February 2005 and February 2004 annual grants, under our Long-Term Incentive Compensation Plan (the Plan), fully vested upon grant, resulting in full recognition of stock-based compensation expense for both grants in the year of the grant under the fair value method in the table above. Stock options granted in our 2003 annual grant under the Plan vest over a three-year period, and expense reflected in the table for this grant is recognized over the vesting period.

Earnings Per Common Share

We present earnings per common share and diluted 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 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 and convertible debentures) that are dilutive.

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 under FAS 133, Accounting for Derivative Instruments and Hedging Activities (“free-standing derivative”). 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 other comprehensive income, 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 under FAS 133, 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 other comprehensive income up to the date of sale, termination or de-designation continues to be reported in other comprehensive income 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 other comprehensive income 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.

Note 2: Business Combinations

We regularly explore opportunities to acquire financial services companies and businesses. Generally, we do not make a public announcement about an acquisition opportunity until a definitive agreement has been signed.

Business combinations completed in 2007, 2006 and 2005 are presented below.

For information on additional consideration related to acquisitions, which is considered to be a guarantee, see Note 15.



(in millions)	Date	Assets
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 ⁽¹⁾	Various		61

		$	13,858


2006
Secured Capital Corp/Secured Capital LLC, Los Angeles, California	January 18	$	132
Martinius Corporation, Rogers, Minnesota	March 1		91
Commerce Funding Corporation, Vienna, Virginia	April 17		82
Fremont National Bank of Canon City/Centennial Bank of Pueblo, Canon City and Pueblo, Colorado	June 7		201
Certain assets of the Reilly Mortgage Companies, McLean, Virginia	August 1		303
Barrington Associates, Los Angeles, California	October 2		65
EFC Partners LP (Evergreen Funding), Dallas, Texas	December 15		93
Other ⁽²⁾	Various		20

		$	987


2005
Certain branches of PlainsCapital Bank, Amarillo, Texas	July 22	$	190
First Community Capital Corporation, Houston, Texas	July 31		644
Other ⁽³⁾	Various		40

		$	874

(1)		Consists of six acquisitions of insurance brokerage and third party health care payment processing businesses.
(2)		Consists of seven acquisitions of insurance brokerage businesses.
(3)		Consists of eight acquisitions of insurance brokerage and lockbox processing businesses.

Note 3: Cash, Loan and Dividend Restrictions

Federal Reserve Board regulations require that each of our subsidiary banks maintain reserve balances on deposits with the Federal Reserve Banks. The average required reserve balance was $2.0 billion in 2007 and $1.7 billion in 2006.

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 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 risk-based capital, see Note 26.)

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 $2.2 billion at December 31, 2007, 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, 2007, our nonbank subsidiaries could have declared additional dividends of $3.7 billion at December 31, 2007, without obtaining prior approval.


Note 4:		Federal Funds Sold, Securities Purchased Under Resale Agreements and Other Short-Term Investments

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



(in millions)	December 31				,
	2007		2006
Federal funds sold and securities purchased under resale agreements	$	1,700	$	5,024
Interest-earning deposits		460		413
Other short-term investments		594		641

Total	$	2,754	$	6,078

For resale agreements, which represent collateralized financing transactions, we hold collateral in the form of securities that we have the right to sell or repledge of $1.1 billion at December 31, 2007, and $1.8 billion at December 31, 2006, of which we sold or repledged $705 million and $1.4 billion, respectively.

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

other comprehensive income. There were no securities classified as held to maturity as of the periods presented.



(in millions)	December 31																								,
	2007												2006
	Cost		Gross			Gross				Fair			Cost		Gross			Gross				Fair
			unrealized			unrealized					value				unrealized			unrealized					value
			gains			losses									gains			losses
Securities of U.S. Treasury and federal agencies	$	962		$	20		$	—			$	982	$	774		$	2		$	(8	)		$	768
Securities of U.S. states and political subdivisions		6,128			135			(111	)			6,152		3,387			148			(5	)			3,530
Mortgage-backed securities:
Federal agencies		34,092			898			(3	)			34,987		26,981			497			(15	)			27,463
Private collateralized mortgage obligations ⁽¹⁾		20,026			82			(126	)			19,982		3,989			63			(6	)			4,046

Total mortgage-backed securities		54,118			980			(129	)			54,969		30,970			560			(21	)			31,509
Other		8,185			45			(165	)			8,065		5,980			67			(21	)			6,026

Total debt securities		69,393			1,180			(405	)			70,168		41,111			777			(55	)			41,833
Marketable equity securities		2,878			172			(267	)			2,783		592			210			(6	)			796

Total ⁽²⁾	$	72,271		$	1,352		$	(672	)		$	72,951	$	41,703		$	987		$	(61	)		$	42,629

(1)		Most of the private collateralized mortgage obligations are AAA-rated bonds collateralized by 1-4 family residential first mortgages.
(2)		At December 31, 2007, we held no securities of any single issuer (excluding the U.S. Treasury and federal agencies) with a book value that exceeded 10% of stockholders’ equity.

The following table shows the gross unrealized losses and fair value of securities in the securities available-for-sale portfolio at December 31, 2007 and 2006, by length of time

that individual securities in each category had been in a continuous loss position.



(in millions)	Less than 12 months							12 months or more							Total
	Gross				Fair			Gross				Fair			Gross				Fair
	unrealized				value			unrealized				value			unrealized				value
		losses							losses							losses
December 31, 2007
Securities of U.S. Treasury and federal agencies		$	—			$	—		$	—			$	—		$	—			$	—
Securities of U.S. states and political subdivisions			(98	)			1,957			(13	)			70			(111	)			2,027
Mortgage-backed securities:
Federal agencies			(1	)			39			(2	)			150			(3	)			189
Private collateralized mortgage obligations			(124	)			7,722			(2	)			54			(126	)			7,776

Total mortgage-backed securities			(125	)			7,761			(4	)			204			(129	)			7,965
Other			(140	)			2,425			(25	)			491			(165	)			2,916

Total debt securities			(363	)			12,143			(42	)			765			(405	)			12,908
Marketable equity securities			(266	)			1,688			(1	)			36			(267	)			1,724

Total		$	(629	)		$	13,831		$	(43	)		$	801		$	(672	)		$	14,632

December 31, 2006
Securities of U.S. Treasury and federal agencies		$	(1	)		$	164		$	(7	)		$	316		$	(8	)		$	480
Securities of U.S. states and political subdivisions			(4	)			203			(1	)			90			(5	)			293
Mortgage-backed securities:
Federal agencies			(10	)			342			(5	)			213			(15	)			555
Private collateralized mortgage obligations			(5	)			67			(1	)			68			(6	)			135

Total mortgage-backed securities			(15	)			409			(6	)			281			(21	)			690
Other			(6	)			365			(15	)			558			(21	)			923

Total debt securities			(26	)			1,141			(29	)			1,245			(55	)			2,386
Marketable equity securities			(6	)			75			—				—			(6	)			75

Total		$	(32	)		$	1,216		$	(29	)		$	1,245		$	(61	)		$	2,461

The decline in fair value for the debt securities that had been in a continuous loss position for 12 months or more at December 31, 2007, was due to changes in market interest rates and not due to the credit quality of the securities. We believe that the principal and interest on these securities are fully collectible and we have the intent and ability to retain our investment for a period of time to allow for any anticipated recovery in market value. We have reviewed these securities in accordance with our policy and do not consider them to be other-than-temporarily impaired.

Securities pledged where the secured party has the right to sell or repledge totaled $5.8 billion at December 31, 2007 and $5.3 billion at December 31, 2006. Securities pledged where the secured party does not have the right to sell or repledge totaled $44.9 billion at December 31, 2007, and $29.3 billion at December 31, 2006, primarily to secure trust and public deposits and for other purposes as required or permitted by law.

The following table shows the net realized gains on the sales of securities from the securities available-for-sale portfolio, including marketable equity securities.



(in millions)	Year ended December 31								,
	2007			2006			2005
Gross realized gains	$	472		$	621		$	355
Gross realized losses ⁽¹⁾		(127	)		(295	)		(315	)

Net realized gains	$	345		$	326		$	40

(1)

Includes other-than-temporary impairment of $50 million, $22 million and $45 million for 2007, 2006 and 2005, respectively.

The following table shows the remaining contractual principal maturities and contractual yields of debt securities available for sale. The remaining contractual principal maturities for mortgage-backed securities were allocated 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.



(in millions)	December 31, 2007
	Total		Weighted-
	amount		average					Remaining contractual principal maturity
				yield										After one year						After five years
								Within one year						through five years						through ten years						After ten years
							Amount			Yield			Amount			Yield			Amount			Yield			Amount			Yield
Securities of U.S. Treasury and federal agencies	$	982			4.25	%		$	87		3.78	%		$	666		4.14	%		$	227		4.73	%		$	2		7.25	%
Securities of U.S. states and political subdivisions		6,152			7.14				301		6.52				881		6.86				1,386		6.93				3,584		7.34
Mortgage-backed securities:
Federal agencies		34,987			5.92				1		6.27				128		8.25				160		7.00				34,698		5.91
Private collateralized mortgage obligations		19,982			6.04				—		—				—		—				318		6.01				19,664		6.04

Total mortgage-backed securities		54,969			5.96				1		6.27				128		8.25				478		6.34				54,362		5.95
Other		8,065			6.65				860		6.25				4,982		6.32				1,021		7.31				1,202		7.71

Total debt securities at fair value ⁽¹⁾	$	70,168			6.12	%		$	1,249		6.14	%		$	6,657		6.21	%		$	3,112		6.81	%		$	59,150		6.07	%

(1)

The weighted-average yield is computed using the contractual life amortization method.

Note 6: Loans and Allowance for Credit Losses

A summary of the major categories of loans outstanding is shown in the following table. Outstanding loan balances reflect unearned income, net deferred loan fees, and unamortized discount and premium totaling $4,083 million and $3,113 million at December 31, 2007 and 2006, respectively.

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, 2007 and 2006, we did not have concentrations representing 10% or more of our total loan portfolio in commercial loans and lease financing by industry or commercial real estate loans (other 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 13% of total loans at December 31, 2007, compared with 11% at December 31, 2006. 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 conditions for these areas are monitored continuously within our credit risk management process. 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, 2007, such loans were approximately 20% of total loans, compared with 19% at December 31, 2006. Substantially all of these loans are considered to be prime or near prime. We do not make or purchase option adjustable-rate mortgage products, nor do we make or purchase variable-rate mortgage products with fixed payment amounts, commonly referred to within the financial services industry as negative amortizing mortgage loans.



(in millions)	December 31										,
	2007		2006		2005		2004		2003
Commercial and commercial real estate:
Commercial	$	90,468	$	70,404	$	61,552	$	54,517	$	48,729
Other real estate mortgage		36,747		30,112		28,545		29,804		27,592
Real estate construction		18,854		15,935		13,406		9,025		8,209
Lease financing		6,772		5,614		5,400		5,169		4,477

Total commercial and commercial real estate		152,841		122,065		108,903		98,515		89,007
Consumer:
Real estate 1-4 family first mortgage		71,415		53,228		77,768		87,686		83,535
Real estate 1-4 family junior lien mortgage		75,565		68,926		59,143		52,190		36,629
Credit card		18,762		14,697		12,009		10,260		8,351
Other revolving credit and installment		56,171		53,534		47,462		34,725		33,100

Total consumer		221,913		190,385		196,382		184,861		161,615
Foreign		7,441		6,666		5,552		4,210		2,451

Total loans	$	382,195	$	319,116	$	310,837	$	287,586	$	253,073

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.

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. For information on standby letters of credit, see Note 15.

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:



(in millions)	December 31				,
	2007		2006
Commercial and commercial real estate:
Commercial	$	89,480	$	79,879
Other real estate mortgage		2,911		2,612
Real estate construction		9,986		9,600

Total commercial and commercial real estate		102,377		92,091
Consumer:
Real estate 1-4 family first mortgage		11,861		9,708
Real estate 1-4 family junior lien mortgage		47,763		44,179
Credit card		62,680		55,010
Other revolving credit and installment		16,220		14,679

Total consumer		138,524		123,576
Foreign		980		824

Total unfunded loan commitments	$	241,881	$	216,491

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. We combine estimates of the allowances needed for loans analyzed on a pooled basis and loans analyzed individually (including impaired loans) to determine the adequacy of the total allowance.

A significant portion of the allowance is estimated at a pooled level for consumer loans and some segments of commercial small business loans. We use forecasting models to measure the losses inherent in these portfolios. We validate and update these models periodically to capture recent behavioral characteristics of the portfolios, such as updated credit bureau information, actual changes in underlying economic or market conditions and changes in our loss mitigation strategies. The increase in provision for 2007 was a significant credit event where home equity credit losses emerged in excess of previous estimates and the allowance was increased primarily to reflect this increase in inherent losses.

We assess and account for as impaired certain nonaccrual commercial and commercial real estate loans that are over $3 million and certain consumer, commercial and commercial real estate loans whose terms have been modified in a troubled debt restructuring. We include the impairment on these nonperforming loans in the allowance unless it has already been recognized as a loss.

The potential risk from unfunded loan commitments and letters of credit for wholesale loan portfolios is considered along with the loss analysis of loans outstanding. Unfunded commercial loan commitments and letters of credit are converted to a loan equivalent factor as part of the analysis. The reserve for unfunded credit commitments was $211 million at December 31, 2007, and $200 million at December 31, 2006.

Like all national banks, our subsidiary national banks continue to be subject to examination by their primary regulator, the OCC, and some have OCC examiners in residence. The OCC examinations occur throughout the year and target various activities of our subsidiary national banks, including both the loan grading system and specific segments of the loan portfolio (for example, commercial real estate and shared national credits). The Parent and our nonbank subsidiaries are examined by the Federal Reserve Board.

We consider the allowance for credit losses of $5.52 billion adequate to cover credit losses inherent in the loan portfolio, including unfunded credit commitments, at December 31, 2007.

Nonaccrual loans were $2,679 million and $1,666 million at December 31, 2007 and 2006, respectively. Loans past due 90 days or more as to interest or principal and still accruing interest were $6,393 million at December 31, 2007, and $5,073 million at December 31, 2006. The 2007 and 2006 balances included $4,834 million and $3,913 million, respectively, in advances pursuant to our servicing agreements to the Government National Mortgage Association (GNMA) mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs.

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:



(in millions)	Year ended December 31														,
	2007			2006			2005			2004			2003
Balance, beginning of year	$	3,964		$	4,057		$	3,950		$	3,891		$	3,819
Provision for credit losses		4,939			2,204			2,383			1,717			1,722
Loan charge-offs:
Commercial and commercial real estate:
Commercial		(629	)		(414	)		(406	)		(424	)		(597	)
Other real estate mortgage		(6	)		(5	)		(7	)		(25	)		(33	)
Real estate construction		(14	)		(2	)		(6	)		(5	)		(11	)
Lease financing		(33	)		(30	)		(35	)		(62	)		(41	)

Total commercial and commercial real estate		(682	)		(451	)		(454	)		(516	)		(682	)
Consumer:
Real estate 1-4 family first mortgage		(109	)		(103	)		(111	)		(53	)		(47	)
Real estate 1-4 family junior lien mortgage		(648	)		(154	)		(136	)		(107	)		(77	)
Credit card		(832	)		(505	)		(553	)		(463	)		(476	)
Other revolving credit and installment		(1,913	)		(1,685	)		(1,480	)		(919	)		(827	)

Total consumer		(3,502	)		(2,447	)		(2,280	)		(1,542	)		(1,427	)
Foreign		(265	)		(281	)		(298	)		(143	)		(105	)

Total loan charge-offs		(4,449	)		(3,179	)		(3,032	)		(2,201	)		(2,214	)

Loan recoveries:
Commercial and commercial real estate:
Commercial		119			111			133			150			177
Other real estate mortgage		8			19			16			17			11
Real estate construction		2			3			13			6			11
Lease financing		17			21			21			26			8

Total commercial and commercial real estate		146			154			183			199			207
Consumer:
Real estate 1-4 family first mortgage		22			26			21			6			10
Real estate 1-4 family junior lien mortgage		53			36			31			24			13
Credit card		120			96			86			62			50
Other revolving credit and installment		504			537			365			220			196

Total consumer		699			695			503			312			269
Foreign		65			76			63			24			19

Total loan recoveries		910			925			749			535			495

Net loan charge-offs		(3,539	)		(2,254	)		(2,283	)		(1,666	)		(1,719	)

Allowances related to business combinations/other		154			(43	)		7			8			69

Balance, end of year	$	5,518		$	3,964		$	4,057		$	3,950		$	3,891

Components:
Allowance for loan losses	$	5,307		$	3,764		$	3,871		$	3,762		$	3,891
Reserve for unfunded credit commitments ⁽¹⁾		211			200			186			188			—

Allowance for credit losses	$	5,518		$	3,964		$	4,057		$	3,950		$	3,891

Net loan charge-offs as a percentage of average total loans		1.03	%		0.73	%		0.77	%		0.62	%		0.81	%

Allowance for loan losses as a percentage of total loans		1.39	%		1.18	%		1.25	%		1.31	%		1.54	%
Allowance for credit losses as a percentage of total loans		1.44			1.24			1.31			1.37			1.54

(1)

In 2004, we transferred the portion of the allowance for loan losses related to commercial lending commitments and letters of credit to other liabilities.

The recorded investment in impaired loans included in nonaccrual loans and the methodology used to measure impairment was:



(in millions)	December 31				,
	2007		2006
Impairment measurement based on:
Collateral value method	$	285	$	122
Discounted cash flow method		184		108

Total ⁽¹⁾	$	469	$	230

(1)

Includes $369 million and $146 million of impaired loans with a related allowance of $50 million and $29 million at December 31, 2007 and 2006, respectively.

The average recorded investment in these impaired loans during 2007, 2006 and 2005 was $313 million, $173 million and $260 million, respectively.

When the ultimate collectibility of the total principal of an impaired loan is in doubt, 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, contractual interest is credited to interest income when received, under the cash basis method. Total interest income recognized for impaired loans in 2007, 2006 and 2005 under the cash basis method was not significant.

Note 7: Premises, Equipment, Lease Commitments and Other Assets



(in millions)	December 31				,
	2007		2006
Land	$	707	$	657
Buildings		4,088		3,891
Furniture and equipment		4,526		3,786
Leasehold improvements		1,258		1,117
Premises and equipment leased under capital leases		67		60

Total premises and equipment		10,646		9,511
Less: Accumulated depreciation and amortization		5,524		4,813

Net book value, premises and equipment	$	5,122	$	4,698

Depreciation and amortization expense for premises and equipment was $828 million, $737 million and $810 million in 2007, 2006 and 2005, respectively.

Net gains on dispositions of premises and equipment, included in noninterest expense, were $3 million, $13 million and $56 million in 2007, 2006 and 2005, 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 72 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, 2007.



(in millions)	Operating			Capital
	leases			leases
Year ended December 31,
2008		$	618		$	4
2009			533			5
2010			443			5
2011			365			2
2012			316			1
Thereafter			1,408			14

Total minimum lease payments		$	3,683			31

Executory costs						(2	)
Amounts representing interest						(9	)

Present value of net minimum lease payments					$	20

Operating lease rental expense (predominantly for premises), net of rental income, was $673 million, $631 million and $583 million in 2007, 2006 and 2005, respectively.

The components of other assets were:



(in millions)	December 31				,
	2007		2006
Nonmarketable equity investments:
Private equity investments	$	2,024	$	1,671
Federal bank stock		1,925		1,326
All other		2,981		2,240

Total nonmarketable equity investments ⁽¹⁾		6,930		5,237
Operating lease assets		2,218		3,091
Accounts receivable		10,913		7,522
Interest receivable		2,977		2,570
Core deposit intangibles		435		383
Foreclosed assets:
GNMA loans ⁽²⁾		535		322
Other		649		423
Due from customers on acceptances		62		103
Other		12,426		9,892

Total other assets	$	37,145	$	29,543

(1)		At December 31, 2007 and 2006, $5.9 billion and $4.5 billion, respectively, of nonmarketable equity investments, including all federal bank stock, were accounted for at cost.
(2)		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:



(in millions)	Year ended December 31						,
	2007		2006		2005
Net gains from private equity investments	$	598	$	393	$	351
Net gains from all other nonmarketable equity investments		4		20		43

Net gains from nonmarketable equity investments	$	602	$	413	$	394

Note 8: Securitizations and Variable Interest Entities

We routinely originate, securitize and sell into the secondary market home mortgage loans and, from time to time, other financial assets, including student loans, commercial mortgages and auto receivables. We typically retain the servicing rights from these sales and may continue to hold other interests. Through these securitizations, which are structured without recourse to us and with no restrictions on the other interests held, we may be exposed to a liability under standard representations and warranties we make to purchasers and issuers. The amount recorded for this liability was not material to our consolidated financial statements at year-end 2007 or 2006. In response to the reduced liquidity in the capital markets, for certain sales and securitizations of nonconforming mortgage loans, we retained the subordinate bonds on these securitizations. At December 31, 2007, the total book value of these other interests held (subordinate bonds) was $486 million.

We recognized net gains of $10 million and $399 million from sales of financial assets in securitizations in 2007 and 2006, respectively. Additionally, we had the following cash flows with our securitization trusts.

(in millions)

Year ended December 31

2007

2006

Mortgage

Other

Mortgage

Other

loans

financial

loans

financial

assets

assets

Sales proceeds from securitizations

$ 38,971

$ —

$50,767

$103

Servicing fees

300

—

229

—

Cash flows on other interests held

496

259

In the normal course of creating securities to sell to investors, we may sponsor special-purpose entities that hold, for the benefit of the investors, financial instruments that are the source of payment to the investors. Special-purpose entities are consolidated unless they meet the criteria for a qualifying special-purpose entity in accordance with FAS 140 or are not required to be consolidated under existing accounting guidance.

For securitizations completed in 2007 and 2006, we used the following assumptions to determine the fair value of mortgage servicing rights and other interests held at the date of securitization.

Key economic assumptions and the sensitivity of the current fair value to immediate adverse changes in those assumptions at December 31, 2007, for residential and commercial mortgage servicing rights, and other interests held related to residential mortgage loan securitizations are presented in the following table.



($ in millions)	Mortgage				Other				Other
	servicing				interests				interests
	rights				held				held –
									subordinate
										bonds
Fair value of interests held		$	17,336			$	420			$	486
Expected weighted-average life (in years)			5.4				5.3				6.9
Prepayment speed assumption (annual CPR)			12.9	%			14.3	%			13.1	%
Decrease in fair value from:
10% adverse change		$	603			$	20			$	1
25% adverse change			1,403				48				4
Discount rate assumption			9.5	%			11.4	%			6.9	%
MSRs and other interests held
Decrease in fair value from:
100 basis point adverse change		$	664			$	16
200 basis point adverse change			1,277				31
Other interests held – subordinate bonds Decrease in fair value from:
50 basis point adverse change										$	13
100 basis point adverse change											27
Credit loss assumption											1.1	%
Decrease in fair value from:
10% higher losses										$	11
25% higher losses											29



	Mortgage						Other						Other interests held –
	servicing rights						interests held						subordinate bonds
	2007			2006			2007			2006				2007
Prepayment speed (annual CPR ⁽¹⁾ ) ⁽²⁾		13.5	%		15.7	%		14.1	%		13.9	%			24.3	%
Life (in years) ⁽²⁾		6.8			5.8			7.2			7.0				4.4
Discount rate ⁽²⁾		9.8	%		10.5	%		10.2	%		10.0	%			6.9	%
Life of loan losses															0.8	%

(1)		Constant prepayment rate.
(2)		Represents weighted averages for all other interests held resulting from securitizations completed in 2007 and 2006.

The sensitivities in the table to the left are hypothetical and should be relied on with caution. Changes in fair value based on a 10% variation 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, in the table to the left, 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 assumption. In reality, changes in one factor may result in changes in another (for example, changes in prepayment speed estimates could result in changes in the discount rates), which might magnify or counteract the sensitivities.

We also retained some AAA-rated floating-rate mortgage-backed securities. The fair value at the date of securitization was determined using quoted market prices. The key

economic assumptions at December 31, 2007, for these securities related to residential mortgage loan securitizations are presented in the following table.




($ in millions)	Other interests held - AAA
	mortgage-backed securities

Fair value of interests held		$7,423
Expected weighted-average life (in years)		10.3
Prepayment speed assumption (annual CPR)		26.7	%

The table below presents information about the principal balances of owned and securitized loans.




(in millions)	December 31									,	Year ended December 31				,
	Total loans				⁽¹⁾	Delinquent loans				⁽²⁾	Net charge-offs (recoveries				)
	2007		2006			2007		2006			2007		2006

Commercial and commercial real estate:
Commercial	$	91,186	$	70,779		$	464	$	346		$	510	$	303
Other real estate mortgage		75,642		44,834			179		178			7		(33	)
Real estate construction		18,854		15,935			317		81			12		(1	)
Lease financing		6,772		5,614			45		29			16		9

Total commercial and commercial real estate		192,454		137,162			1,005		634			545		278
Consumer:
Real estate 1-4 family first mortgage		146,997		114,676			1,745		929			87		77
Real estate 1-4 family junior lien mortgage		75,974		68,926			495		275			597		118
Credit card		18,762		14,697			402		262			712		409
Other revolving credit and installment		56,521		54,036			744		804			1,409		1,148

Total consumer		298,254		252,335			3,386		2,270			2,805		1,752
Foreign		7,647		6,983			104		94			206		210

Total loans owned and securitized		498,355		396,480		$	4,495	$	2,998		$	3,556	$	2,240

Less:
Securitized loans		88,397		43,546
Mortgages held for sale		26,815		33,097
Loans held for sale		948		721

Total loans held	$	382,195	$	319,116


(1)		Represents loans in the balance sheet or that have been securitized, but excludes securitized loans that we continue to service but as to which we have no other continuing involvement.
(2)		Includes nonaccrual loans and loans 90 days or more past due and still accruing.

We are a primary beneficiary in certain special-purpose entities that are consolidated because we absorb a majority of each entity’s expected losses, receive a majority of each entity’s expected returns or both. We do not hold a majority voting interest in these entities. Our consolidated variable interest entities, substantially all of which were formed to invest in securities and to securitize real estate investment trust securities, had approximately $3.5 billion and $3.4 billion in total assets at December 31, 2007 and 2006, respectively. The primary activities of these entities consist of acquiring and disposing of, and investing and reinvesting in securities, and issuing beneficial interests secured by those securities to investors. The creditors of a significant portion of these consolidated entities have no recourse against us.

We also hold variable interests greater than 20% but less than 50% in certain special-purpose entities predominantly formed to invest in affordable housing and sustainable energy projects, and to securitize corporate debt that had approximately $5.8 billion and $2.9 billion in total assets at December 31, 2007 and 2006, respectively. We are not required to consolidate these entities. Our maximum exposure to loss as a result of our involvement with these unconsolidated variable interest entities was approximately $2.0 billion and $980 million at December 31, 2007 and 2006, respectively, primarily representing investments in entities formed to invest in affordable housing and sustainable energy projects. However, we expect to recover our investment in these entities over time, primarily through realization of federal tax credits.

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.

Effective January 1, 2006, upon adoption of FAS 156, we remeasured our residential mortgage servicing rights (MSRs) at fair value and recognized a pre-tax adjustment of $158 million to residential MSRs and recorded a corresponding cumulative effect adjustment of $101 million (after tax) to increase the 2006 beginning balance of retained earnings in stockholders’ equity. The table below reconciles the December 31, 2005, and the January 1, 2006, balance of MSRs.




(in millions)	Residential			Commercial			Total
		MSRs		MSRs			MSRs
Balance at December 31, 2005		$	12,389		$	122		$	12,511
Remeasurement upon adoption of FAS 156			158			—			158

Balance at January 1, 2006		$	12,547		$	122		$	12,669

The changes in residential MSRs measured using the fair value method were:




(in millions)	Year ended December 31					,
	2007			2006
Fair value, beginning of year	$	17,591		$	12,547
Purchases		803			3,859
Servicing from securitizations or asset transfers		3,680			4,107
Sales		(1,714	)		(469	)

Net additions		2,769			7,497
Changes in fair value:
Due to changes in valuation model inputs or assumptions ⁽¹⁾		(571	)		(9	)
Other changes in fair value ⁽²⁾		(3,026	)		(2,444	)

Total changes in fair value		(3,597	)		(2,453	)

Fair value, end of year	$	16,763		$	17,591


(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.

The changes in amortized MSRs were:




(in millions)		Year ended December 31										,
	2007				2006				2005
Balance, beginning of year		$	377			$	122			$	9,466
Purchases ⁽¹⁾			120				278				2,683
Servicing from securitizations or asset transfers ⁽¹⁾			40				11				2,652
Amortization			(71	)			(34	)			(1,991	)
Other (includes changes due to hedging)			—				—				888

Balance, end of year		$	466			$	377			$	13,698

Valuation allowance:
Balance, beginning of year		$	—			$	—			$	1,565
Reversal of provision for MSRs in excess of fair value			—				—				(378	)

Balance, end of year		$	—			$	—			$	1,187

Amortized MSRs, net		$	466			$	377			$	12,511

Fair value of amortized MSRs:
Beginning of year		$	457			$	146			$	7,913
End of year			573				457				12,693


(1)		Based on December 31, 2007, assumptions, the weighted-average amortization period for MSRs added during the year was approximately 10.8 years.

The components of our managed servicing portfolio were:




(in billions)	December 31					,
	2007			2006
Loans serviced for others ⁽¹⁾	$	1,430		$	1,280
Owned loans serviced ⁽²⁾		98			86

Total owned servicing		1,528			1,366
Sub-servicing		23			19

Total managed servicing portfolio	$	1,551		$	1,385

Ratio of MSRs to related loans serviced for others		1.20	%		1.41	%


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

The components of mortgage banking noninterest income were:




(in millions)	Year ended December 31								,
	2007			2006			2005
Servicing income, net:
Servicing fees ⁽¹⁾	$	4,025		$	3,525		$	2,457
Changes in fair value of residential MSRs:
Due to changes in valuation model inputs or assumptions ⁽²⁾		(571	)		(9	)		—
Other changes in fair value ⁽³⁾		(3,026	)		(2,444	)		—

Total changes in fair value of residential MSRs		(3,597	)		(2,453	)		—
Amortization		(71	)		(34	)		(1,991	)
Reversal of provision for MSRs in excess of fair value		—			—			378
Net derivative gains (losses):
Fair value accounting hedges ⁽⁴⁾		—			—			(46	)
Economic hedges ⁽⁵⁾		1,154			(145	)		189

Total servicing income, net		1,511			893			987
Net gains on mortgage loan origination/sales activities		1,289			1,116			1,085
All other		333			302			350

Total mortgage banking noninterest income	$	3,133		$	2,311		$	2,422

Market-related valuation changes to MSRs, net of hedge results ^{(2) + (5)}	$	583		$	(154	)


(1)		Includes contractually specified servicing fees, late charges and other ancillary revenues. Also includes impairment write-downs on other interests held of $26 million for 2006. There were no impairment write-downs for 2007 or 2005.
(2)		Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates.
(3)		Represents changes due to collection/realization of expected cash flows over time.
(4)		Results related to MSRs fair value hedging activities under FAS 133, Accounting for Derivative Instruments and Hedging Activities (as amended), consist of gains and losses excluded from the evaluation of hedge effectiveness and the ineffective portion of the change in the value of these derivatives. Gains and losses excluded from the evaluation of hedge effectiveness are those caused by market conditions (volatility) and the spread between spot and forward rates priced into the derivative contracts (the passage of time). See Note 16 — Fair Value Hedges for additional discussion and detail.
(5)		Represents results from free-standing derivatives (economic hedges) used to hedge the risk of changes in fair value of MSRs. See Note 16 — Free-Standing Derivatives for additional discussion and detail.

Note 10: Intangible Assets

The gross carrying amount of intangible assets and accumulated amortization was:




(in millions)		December 31											,
		2007						2006
	Gross			Accumulated			Gross			Accumulated
	carrying			amortization			carrying			amortization
	amount						amount
Amortized intangible assets:
MSRs (commercial) ⁽¹⁾		$	617		$	151		$	457		$	80
Core deposit intangibles			2,539			2,104			2,374			1,991
Credit card and other intangibles			731			426			581			378

Total intangible assets		$	3,887		$	2,681		$	3,412		$	2,449

MSRs (fair value) ⁽¹⁾		$	16,763					$	17,591
Trademark			14						14


(1)		See Note 9 for additional information on MSRs.

The following table provides the current year and estimated future amortization expense for amortized intangible assets.




(in millions)	Core			Other			⁽¹⁾	Total
	deposit
	intangibles
Year ended December 31, 2007		$	113		$	116			$	229

Estimate for year ended December 31, 2008		$	122		$	134			$	256
2009			110			116				226
2010			97			103				200
2011			37			90				127
2012			17			79				96


(1)		Includes amortized commercial MSRs and credit card and other intangibles.

We based our projections of amortization expense shown above on existing asset balances at December 31, 2007. Future amortization expense may vary based on additional core deposit or other intangibles acquired through business combinations.

Note 11: Goodwill

The changes in the carrying amount of goodwill as allocated to our operating segments for goodwill impairment analysis were:




(in millions)	Community				Wholesale			Wells Fargo			Consolidated
	Banking				Banking			Financial			Company
December 31, 2005		$	7,374			$	3,047		$	366		$	10,787
Goodwill from business combinations			30				458			—			488
Realignment of businesses (primarily insurance)			(19	)			19			—			—

December 31, 2006			7,385				3,524			366			11,275
Goodwill from business combinations			1,224				550			49			1,823
Foreign currency translation adjustments			—				—			8			8

December 31, 2007		$	8,609			$	4,074		$	423		$	13,106

For goodwill impairment testing, enterprise-level goodwill acquired in business combinations is allocated to reporting units based on the relative fair value of assets acquired and recorded in the respective reporting units. Through this allocation, we assigned enterprise-level goodwill to the reporting units that are expected to benefit from the synergies of the combination. We used discounted estimated future net cash flows to evaluate goodwill reported at all reporting units.

For our goodwill impairment analysis, we allocate all of the goodwill to the individual operating segments. For management reporting we do not allocate all of the goodwill to the individual operating segments; some is allocated at the enterprise level. See Note 24 for further information on management reporting. The balances of goodwill for management reporting were:

(in millions)

Community

Wholesale

Wells Fargo

Enterprise

Consolidated

Banking

Financial

Company

December 31, 2006

$3,538

$1,574

$366

$5,797

$11,275

December 31, 2007

4,762

2,124

423

5,797

13,106

Note 12: Deposits

The total of time certificates of deposit and other time deposits issued by domestic offices was $46,351 million and $51,188 million at December 31, 2007 and 2006, respectively. Substantially all of these deposits were interest bearing. The contractual maturities of these deposits follow.



(in millions)	December 31, 2007
2008		$	41,364
2009			2,394
2010			1,045
2011			735
2012			470
Thereafter			343

Total		$	46,351

Of these deposits, the amount of time deposits with a denomination of $100,000 or more was $16,890 million and $26,522 million at December 31, 2007 and 2006, respectively. The contractual maturities of these deposits follow.



(in millions)	December 31, 2007
Three months or less		$	10,120
After three months through six months			4,812
After six months through twelve months			1,085
After twelve months			873

Total		$	16,890

Time certificates of deposit 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 $54,549 million and $26,200 million at December 31, 2007 and 2006, respectively.

Demand deposit overdrafts of $845 million and $673 million were included as loan balances at December 31, 2007 and 2006, respectively.

Note 13: Short-Term Borrowings

The table below shows selected information for short-term borrowings, which generally mature in less than 30 days.



(in millions)	2007					2006					2005
	Amount		Rate			Amount		Rate			Amount		Rate
As of December 31,
Commercial paper and other short-term borrowings		$ 30,427		4.45	%	$	1,122		4.06	%	$	3,958		3.80	%
Federal funds purchased and securities sold under agreements to repurchase		22,828		2.94			11,707		4.88			19,934		3.99

Total		$ 53,255		3.80		$	12,829		4.81		$	23,892		3.96

Year ended December 31,
Average daily balance
Commercial paper and other short-term borrowings		$ 8,765		4.96	%	$	7,701		4.61	%	$	9,548		3.09	%
Federal funds purchased and securities sold under agreements to repurchase		17,089		4.74			13,770		4.62			14,526		3.09

Total		$ 25,854		4.81		$	21,471		4.62		$	24,074		3.09

Maximum month-end balance
Commercial paper and other short-term borrowings ⁽¹⁾		$ 30,427		N/A		$	14,580		N/A		$	15,075		N/A
Federal funds purchased and securities sold under agreements to repurchase ⁽²⁾		23,527		N/A			16,910		N/A			22,315		N/A

N/A – Not applicable.
(1)		Highest month-end balance in each of the last three years was in December 2007, February 2006 and January 2005.
(2)		Highest month-end balance in each of the last three years was in September 2007, May 2006 and August 2005.

Note 14: Long-Term Debt

Following is a summary of our long-term debt based on original maturity (reflecting unamortized debt discounts and premiums, where applicable):



(in millions)			December 31				,
	Maturity	Stated	2007		2006
	date(s)	interest
		rate(s)
Wells Fargo & Company (Parent only)
Senior
Fixed-Rate Notes ⁽¹⁾	2008-2035	2.70-6.75%	$	25,105	$	21,225
Floating-Rate Notes ⁽²⁾	2008-2047	Varies		31,679		21,917
Extendable Notes ⁽³⁾	2008-2015	Varies		5,369		10,000
FixFloat Notes ⁽¹⁾	2010	5.51% through mid-2008, varies		2,200		—
Market-Linked Notes ⁽⁴⁾	2008-2018	2.89-5.57%		871		372
Convertible Debenture ⁽⁵⁾	2033	Varies		3,000		3,000

Total senior debt – Parent				68,224		56,514

Subordinated
Fixed-Rate Notes ⁽¹⁾	2011-2023	4.625-6.65%		4,550		4,560
FixFloat Notes	2012	4.00% through mid-2007, varies		—		300

Total subordinated debt – Parent				4,550		4,860

Junior Subordinated
Fixed-Rate Notes ^(1)(6)(7)(8)	2031-2067	5.625-7.00%		4,342		4,022

Total junior subordinated debt – Parent				4,342		4,022

Total long-term debt – Parent				77,116		65,396

Wells Fargo Bank, N.A. and its subsidiaries (WFB, N.A.)
Senior
Fixed-Rate Notes ⁽¹⁾	2008-2019	1.16-4.24%		34		173
Floating-Rate Notes	2008-2012	Varies		504		2,174
FHLB Notes and Advances	2012	5.20%		203		203
Market-Linked Notes ⁽⁴⁾	2008-2026	0.53-5.75%		658		985
Obligations of subsidiaries under capital leases (Note 7)				20		12

Total senior debt – WFB, N.A.				$1,419		$3,547

(1)		We entered into interest rate swap agreements for substantially all 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 or three-month London Interbank Offered Rate (LIBOR).
(2)		We entered into interest rate swap agreements for a significant portion of these notes, whereby we receive variable-rate interest payments and make interest payments based on a fixed rate.
(3)		The extendable 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.
(4)		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 16 – Free-standing derivatives.
(5)		On April 15, 2003, we issued $3 billion of convertible senior debentures as a private placement. In November 2004, we amended the indenture under which the debentures were issued to eliminate a provision in the indenture that prohibited us from paying cash upon conversion of the debentures if an event of default as defined in the indenture exists at the time of conversion. We then made an irrevocable election under the indenture on December 15, 2004, that upon conversion of the debentures, we must satisfy the accreted value of the obligation (the amount accrued to the benefit of the holder exclusive of the conversion spread) in cash and may satisfy the conversion spread (the excess conversion value over the accreted value) in either cash or stock. All or some of the convertible debt securities may be redeemed in certain circumstances for cash at any time on or after May 5, 2008, at their principal amount plus accrued interest, if any.
(6)		Effective December 31, 2003, as a result of the adoption of FIN 46 (revised December 2003), Consolidation of Variable Interest Entities (FIN 46(R)), we deconsolidated certain wholly-owned trusts formed for the sole purpose of issuing trust preferred securities (the Trusts). The junior subordinated debentures held by the Trusts are included in the Company’s long-term debt.
(7)		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.
(8)		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.

98 (continued on following page)

(continued from previous page)



(in millions)			December 31				,
	Maturity	Stated	2007		2006
	date(s)	interest
		rate(s)
Wells Fargo Bank, N.A. and its subsidiaries (WFB, N.A.)
Subordinated
Fixed-Rate Notes ⁽¹⁾	2010-2036	4.75-7.55%	$	6,151	$	6,264
Floating-Rate Notes	2016	Varies		500		500
Other notes and debentures	2008-2013	4.70-6.00%		11		13

Total subordinated debt – WFB, N.A.				6,662		6,777

Total long-term debt – WFB, N.A.				8,081		10,324

Wells Fargo Financial, Inc., and its subsidiaries (WFFI)
Senior
Fixed-Rate Notes	2008-2034	2.67-6.85%		8,103		7,654
Floating-Rate Notes	2008-2010	Varies		1,405		1,970

Total long-term debt – WFFI				9,508		9,624

Other consolidated subsidiaries
Senior
Fixed-Rate Notes	2008-2049	0.00-7.75%		951		378
Floating-Rate FHLB Advances	2009-2012	Varies		1,250		500
Other notes and debentures – Floating-Rate	2008-2048	Varies		1,752		404

Total senior debt – Other consolidated subsidiaries				3,953		1,282

Subordinated
Fixed-Rate Notes	2008	6.25%		202		209
Other notes and debentures – Floating-Rate	2011-2016	Varies		83		78

Total subordinated debt – Other consolidated subsidiaries				285		287

Junior Subordinated
Fixed-Rate Notes ⁽⁶⁾	2029-2031	9.875-10.875%		112		56
Floating-Rate Notes ⁽⁶⁾	2027-2036	Varies		257		176
FixFloat	2036	7.06% through mid-2011, varies		81		—

Total junior subordinated debt – Other consolidated subsidiaries				450		232

Total long-term debt – Other consolidated subsidiaries				4,688		1,801

Total long-term debt			$	99,393	$	87,145

The aggregate annual maturities of long-term debt obligations (based on final maturity dates) as of December 31, 2007, follow.



(in millions)	Parent		Company
2008	$	15,610		$	18,397
2009		7,760			9,756
2010		15,194			17,465
2011		7,173			10,379
2012		8,151			11,636
Thereafter		23,228			31,760

Total	$	77,116		$	99,393

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, 2007, we were in compliance with all the covenants.

Note 15: Guarantees and Legal Actions

The significant guarantees we provide to third parties include standby letters of credit, various indemnification agreements, guarantees accounted for as derivatives, additional consideration related to business combinations and contingent performance guarantees.

We issue standby letters of credit, which include performance and financial guarantees, for customers in connection with contracts between the customers and third parties. Standby letters of credit assure that the third parties will receive specified funds if customers fail to meet their contractual obligations. We are obligated to make payment if a customer defaults. Standby letters of credit were $12.5 billion at December 31, 2007, and $12.0 billion at December 31, 2006, including financial guarantees of $6.5 billion and $7.2 billion, respectively, that we had issued or purchased participations in. Standby letters of credit are net of participations sold to other institutions of $1.4 billion at December 31, 2007, and $2.8 billion at December 31, 2006. We consider the credit risk in standby letters of credit in determining the allowance for credit losses. We also had commitments for commercial and similar letters of credit of $955 million at December 31, 2007, and $801 million at December 31, 2006.

We enter into 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, securities lending, 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 write options, floors and caps. Periodic settlements occur on floors and caps based on market conditions. The fair value of the written options liability in our balance sheet was $700 million at December 31, 2007, and $556 million at December 31, 2006. The aggregate fair value of the written floors and caps liability was $280 million and $86 million for the same periods, respectively. Our ultimate obligation under written options, floors and caps is based on future market conditions and is only quantifiable at settlement. The notional value related to written options was $30.7 billion at December 31, 2007, and $47.3 billion at December 31, 2006, and the aggregate notional value related to written floors and caps was $26.5 billion and $11.9 billion for the same periods, respectively. We offset substantially all options written to customers with purchased options.

We also enter into credit default swaps under which we buy loss protection from or sell loss protection to a counterparty in the event of default of a reference obligation. The fair value of the contracts sold was a liability of $20 million at December 31, 2007, and $2 million at December 31, 2006. The maximum amount we would be required

to pay under the swaps in which we sold protection, assuming all reference obligations default at a total loss, without recoveries, was $873 million and $599 million, based on notional value, at December 31, 2007 and 2006, respectively. We purchased credit default swaps of comparable notional amounts to mitigate the exposure of the written credit default swaps at December 31, 2007 and 2006. These purchased credit default swaps had terms (i.e., used the same reference obligation and maturity) that would offset our exposure from the written default swap contracts in which we are providing protection to a counterparty.

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. At December 31, 2007 and 2006, the amount of additional consideration we expected to pay was not significant to our financial statements.

We have entered into various contingent performance guarantees through credit risk participation arrangements with remaining terms up to 22 years. We will be required to make payments under these guarantees if a customer defaults on its obligation to perform under certain credit agreements with third parties. The extent of our obligations under these guarantees depends entirely on future events and was contractually limited to an aggregate liability of approximately $50 million at December 31, 2007, and $125 million at December 31, 2006.

In the normal course of business, we are subject to pending and threatened legal actions, some for which the relief or damages sought are substantial. After reviewing pending and threatened actions with counsel, and any specific reserves established for such matters, management believes that the outcome of such actions will not have a material adverse effect on the results of operations or stockholders’ equity. We are not able to predict whether the outcome of such actions may or may not have a material adverse effect on results of operations in a particular future period as the timing and amount of any resolution of such actions and its relationship to the future results of operations are not known.

100

predecessors (collectively Visa) and certain other member banks of the Visa USA network, (2) litigation, and (3) an escrow account that will be established by Visa Inc. at the time of its IPO. The escrow account will be funded from IPO proceeds and will be used to make payments related to Visa litigation. We recorded litigation liabilities associated with indemnification obligations related to agreements entered into during second quarter 2006 and third quarter 2007. Based on our proportionate membership share of Visa USA, we recorded a litigation liability and corresponding expense

of $95 million for 2006 and $203 million for 2007. The effect to the second quarter 2006 was estimated based upon our share of an actual settlement reached in November 2007. Management does not believe that the fair value of this obligation if determined in second quarter 2006 would have been materially different given information available at that time. Management has concluded, and the Audit and Examination Committee of our Board of Directors has concurred, that these amounts are immaterial to the periods affected.

Note 16: Derivatives

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 as part of our interest rate 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.

By using derivatives, we are exposed to credit risk if counterparties to financial instruments do not perform as expected. If a counterparty fails to perform, our credit risk is equal to the fair value gain in a derivative contract. We minimize credit risk through credit approvals, limits and monitoring procedures. Credit risk related to derivatives is considered and, if material, provided for separately. As we generally enter into transactions only with counterparties that carry high quality credit ratings, losses from counterparty nonperformance on derivatives have not been significant.

Further, we obtain collateral, where appropriate, to reduce risk. To the extent the master netting arrangements and other criteria meet the requirements of FASB Interpretation No. 39, Offsetting of Amounts Related to Certain Contracts , as amended by FASB Interpretation No. 41, Offsetting of Amounts Related to Certain Repurchase and Reverse Repurchase Agreements , amounts are shown net in the balance sheet.

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.

Fair Value Hedges

Prior to January 1, 2006, we used derivatives as fair value hedges to manage the risk of changes in the fair value of residential MSRs and other interests held. These derivatives included interest rate swaps, swaptions, Eurodollar and Treasury futures and options, and forward contracts. Derivative gains or losses caused by market conditions (volatility) and the spread between spot and forward rates priced into the derivative contracts (the passage of time) were excluded from the evaluation of hedge effectiveness, but were reflected in earnings. Upon adoption of FAS 156, derivatives used to hedge our residential MSRs are no longer accounted for as fair value hedges under FAS 133, but as economic hedges. Net derivative gains and losses related to our residential mortgage servicing activities are included in “Servicing income, net” in Note 9.

We use interest rate swaps to convert certain of our fixed-rate long-term debt and certificates of deposit to floating rates to hedge our exposure to interest rate risk. We also enter into cross-currency swaps and cross-currency interest rate swaps 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. Prior to January 1, 2007, the ineffective portion of these fair value hedges was recorded as part of interest expense in the income statement. Subsequent to January 1, 2007, the ineffective portion of

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these fair value hedges is recorded as part of noninterest income. We made this change after converting these hedge relationships to the long-haul method of assessing hedge effectiveness, which results in recognition of more ineffectiveness compared to the short-cut method. 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 derivatives, such as Treasury and LIBOR futures and swaps, to hedge changes in fair value due to changes in interest rates of our commercial real estate mortgage loans held for sale. Prior to March 31, 2007, we used derivatives, such as Treasury and LIBOR futures and swaps, to hedge changes in fair value due to changes in interest rates of our franchise loans held for sale. Based upon a change in our intent, these loans have since been reclassified to held for investment, and therefore we no longer hedge these loans. The ineffective portion of these fair value hedges is recorded as part of mortgage banking noninterest income in the income statement. Finally, we use interest rate swaps to hedge against changes in fair value of certain debt securities that are classified as securities available for sale, primarily municipal bond securities beginning in second quarter 2006 and commercial mortgage-backed securities beginning in fourth quarter 2007, due to changes in interest rates. The ineffective portion of these fair value hedges is recorded in “Net gains (losses) on debt securities available for sale” in the income statement. For fair value hedges of long-term debt and certificates of deposit, commercial real estate loans, franchise loans 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.

For the previously mentioned fair value hedging relationships, we use 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.

Prior to June 1, 2006, we used the short-cut method of assessing hedge effectiveness for certain fair value hedging relationships of U.S. dollar denominated fixed-rate long-term debt and certificates of deposits. The short-cut method allows an entity to assume perfect hedge effectiveness if certain qualitative criteria are met, and accordingly, does not require quantitative measures such as regression analysis. We used the short-cut method only when appropriate, based on the qualitative assessment of the criteria in paragraph 68 of FAS 133, performed at inception of the hedging relationship and on an ongoing basis. Effective January 1, 2006, for any new hedging relationships of these types, we used the long-haul method to assess hedge effectiveness. By June 1, 2006, we stopped using the short-cut method by de-designating all

remaining short-cut relationships and re-designating them to use the long-haul method to evaluate hedge effectiveness.

We enter into equity collars to lock in share prices between specified levels for certain equity securities. As permitted, we include the intrinsic value only (excluding time value) when assessing hedge effectiveness. We assess hedge effectiveness based on a dollar-offset ratio, at inception of the hedging relationship and on an ongoing basis, by comparing cumulative changes in the intrinsic value of the equity collar with changes in the fair value of the hedged equity securities. The net derivative gain or loss related to the equity collars is recorded in other noninterest income in the income statement.

At December 31, 2007, all designated fair value hedges continued to qualify as fair value hedges.

Cash Flow Hedges

We use derivatives, such as forwards, options and Eurodollar and Treasury futures, to hedge forecasted sales of mortgage loans. We hedge floating-rate senior debt against future interest rate increases by using interest rate swaps to convert floating-rate senior debt to fixed rates and by using interest rate caps and floors to limit variability of rates. 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 interest rates. Upon adoption of FAS 159 on January 1, 2007, derivatives used to hedge the forecasted sales of prime residential MHFS originated subsequent to January 1, 2007, were accounted for as economic hedges. We previously accounted for these derivatives as cash flow hedges under FAS 133. Gains and losses on derivatives that are reclassified from cumulative other comprehensive income to current period earnings, are included in the line item in which the hedged item’s effect in 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. As of December 31, 2007, all designated cash flow hedges continued to qualify as cash flow hedges.

We expect that $63 million of deferred net gains on derivatives in other comprehensive income at December 31, 2007, will be reclassified as earnings during the next twelve months, compared with $53 million of net deferred gains and $13 million of net deferred losses at December 31, 2006 and 2005, respectively. We are hedging our exposure to the variability of future cash flows for all forecasted transactions for a maximum of seven years for both hedges of floating-rate senior debt and floating-rate commercial loans.

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The following table provides derivative gains and losses related to fair value and cash flow hedges resulting from the change in value of the derivatives excluded from the assessment of hedge effectiveness and the change in value of the ineffective portion of the derivatives.



(in millions)	December 31							,
	2007		2006			2005
Net gains (losses) from fair value hedges ⁽¹⁾ from:
Change in value of derivatives excluded from the assessment of hedge effectiveness	$	8	$	(5	)	$	350
Ineffective portion of change in value of derivatives		19		11			(399	)
Net gains from ineffective portion of change in the value of cash flow hedges ⁽²⁾		26		45			23

(1)		Includes hedges of long-term debt and certificates of deposit, commercial real estate and franchise loans, and debt and equity securities, and, for 2005, residential MSRs. Upon adoption of FAS 156, derivatives used to hedge our residential MSRs are no longer accounted for as fair value hedges under FAS 133.
(2)		Includes hedges of floating-rate long-term debt and floating-rate commercial loans and, for 2006 and 2005, hedges of forecasted sales of prime residential MHFS. Upon adoption of FAS 159, derivatives used to hedge our prime residential MHFS were no longer accounted for as cash flow hedges under FAS 133.

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 income.

The derivatives used to hedge residential MSRs include swaps, swaptions, forwards, Eurodollar and Treasury futures, and options contracts. Net derivative gains of $1,154 million for 2007 and net derivative losses of $145 million for 2006 from economic hedges related to our mortgage servicing activities are included in the income statement in “Mortgage banking.” The aggregate fair value of these derivatives used as economic hedges was a net asset of $1,652 million at December 31, 2007, and $157 million at December 31, 2006. 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 other comprehensive income (net of tax) or, upon sale, are reported in net gains (losses) on debt securities available for sale.

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 new prime residential MHFS

carried at fair value under FAS 159, is hedged with free-standing derivatives (economic hedges) such as forwards and options, Eurodollar futures, 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 the income statement in “Mortgage banking.” We record a zero fair value for a derivative loan commitment at inception consistent with Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 105, Application of Accounting Principles to 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 at December 31, 2007 and 2006, was a net asset of $6 million and a net liability of $65 million, respectively, and is included in the caption “Interest rate contracts” under Customer Accommodation, Trading and Other Free-Standing Derivatives in the following table.

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 in the income statement.

Additionally, free-standing derivatives include embedded derivatives that are required to be accounted for separate from their host contract. We periodically issue long-term notes 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 FAS 133, the “embedded” derivative is separated from the host contract and accounted for as a free-standing derivative.

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The total notional or contractual amounts, credit risk amount and estimated net fair value for derivatives were:



(in millions)	December 31															,
	2007								2006
	Notional or		Credit			Estimated			Notional or		Credit			Estimated
	contractual		risk			net fair			contractual		risk			net fair
	amount		amount		⁽²⁾	value			amount		amount		⁽²⁾	value
ASSET/LIABILITY MANAGEMENT HEDGES
Qualifying hedge contracts accounted for under FAS 133
Interest rate contracts:
Swaps	$	47,408	$	1,411		$	1,144		$	36,840	$	530		$	158
Futures		50		—			—			339		—			—
Floors and caps purchased		250		8			8			500		5			5
Floors and caps written		250		—			(5	)		—		—			—
Options purchased		—		—			—			—		—			—
Forwards		—		—			—			27,781		86			36
Equity contracts:
Options purchased		1		—			—			1		—			—
Options written		3		—			(3	)		75		—			(15	)
Forwards		—		—			—			4		—			—
Foreign exchange contracts:
Swaps		12,048		1,399			1,376			10,157		548			539
Free-standing derivatives (economic hedges)
Interest rate contracts ⁽¹⁾ :
Swaps		43,835		933			512			29,674		164			39
Futures		56,023		—			—			61,339		—			—
Options purchased		16,250		156			156			94,101		157			157
Options written		3,500		—			(20	)		11,620		—			(5	)
Forwards		353,095		1,094			807			260,751		394			(8	)
Foreign exchange contracts:
Swaps		603		202			202			603		87			87
Forwards		—		—			—			1,000		49			—
CUSTOMER ACCOMMODATION, TRADING AND OTHER FREE-STANDING DERIVATIVES
Interest rate contracts:
Swaps		195,144		3,584			388			100,944		1,286			230
Futures		33,443		—			—			16,870		—			—
Floors and caps purchased		21,629		143			143			6,929		30			30
Floors and caps written		24,466		—			(124	)		10,704		—			(20	)
Options purchased		2,573		88			88			8,993		102			102
Options written		19,074		35			(60	)		31,237		15			(133	)
Forwards		131,959		43			9			83,163		21			5
Commodity contracts:
Swaps		5,053		367			(48	)		3,422		277			34
Futures		1,417		—			—			518		—			—
Floors and caps purchased		1,869		290			290			839		55			55
Floors and caps written		1,738		—			(151	)		1,224		—			(66	)
Options purchased		761		74			74			184		30			30
Options written		552		—			(49	)		155		—			(31	)
Equity contracts:
Swaps		291		63			19			81		4			1
Futures		138		—			—			90		—			—
Options purchased		4,966		508			508			2,732		295			295
Options written		4,416		—			(433	)		2,113		—			(302	)
Forwards		74		—			(8	)		160		1			(7	)
Foreign exchange contracts:
Swaps		5,797		199			(20	)		4,133		40			(17	)
Futures		155		—			—			1		—			—
Options purchased		3,229		107			107			2,384		72			72
Options written		3,168		—			(100	)		2,145		—			(55	)
Forwards and spots		40,371		420			85			34,576		194			19
Credit contracts:
Swaps		2,752		75			51			1,513		30			3

(1)		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.
(2)		Credit risk amounts reflect the replacement cost for those contracts in a gain position in the event of nonperformance by all counterparties.

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Note 17: 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) and residential MSRs 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, loans held for sale, 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.

Effective January 1, 2007, upon adoption of FAS 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115 (FAS 159), 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 currently exist 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) will reduce certain timing differences and better match changes in the value of these assets with changes in the value of derivatives used as economic hedges for these assets. There was no transition adjustment required upon adoption of FAS 159 for MHFS because we continued to account for MHFS originated prior to 2007 at the lower of cost or market value. At December 31, 2006, the book value of other interests held was equal to fair value and, therefore, a transition adjustment was not required.

Upon adoption of FAS 159, we were also required to adopt FAS 157, Fair Value Measurements (FAS 157). FAS 157 defines fair value, establishes a consistent framework for measuring fair value and expands disclosure requirements for fair value measurements. Additionally, FAS 157 amended FAS 107, Disclosure about Fair Value of Financial Instruments (FAS 107), and, as such, we follow FAS 157 in determination of FAS 107 fair value disclosure amounts. The disclosures required under FAS 159, FAS 157 and FAS 107 have been included in this Note.

Fair Value Hierarchy

Under FAS 157, we group our assets and liabilities 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 our own 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.

Determination of Fair Value

Under FAS 157, 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, in accordance with the fair value hierarchy in FAS 157.

Fair value measurements for assets and liabilities where there exists limited or no observable market data and, therefore, are based primarily upon our own estimates, 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.

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value for financial instruments not recorded at fair value (FAS 107 disclosures).

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 Trading assets are recorded at fair value and consist primarily of securities and derivatives held for trading purposes. The valuation method for trading securities is the same as the methodology used for securities classified as available for sale (see the following page). The valuation methodology for derivatives is described in the following Derivatives section.

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SECURITIES AVAILABLE FOR SALE Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices 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. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, as well as U.S. Treasury, other U.S. government and agency mortgage-backed securities that are traded by dealers or brokers in active over-the-counter markets. Level 2 securities include private collateralized mortgage obligations, municipal bonds and corporate debt securities. Securities classified as Level 3 are primarily private placement asset-backed securities where we underwrite the underlying collateral (auto lease receivables) and residual certificated interests in our residential mortgage loan securitizations.

MORTGAGES HELD FOR SALE (MHFS) Under FAS 159, we elected to carry our new prime residential MHFS portfolio at fair value. 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. Nearly all of our MHFS are classified as Level 2. For a minor 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 Loans held for sale are carried at the lower of cost or market value. The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, we classify loans subjected to nonrecurring fair value adjustments as Level 2.

LOANS For the carrying value of loans, see Note 1 — Loans. 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 FAS 107 disclosure purposes. 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 FAS 107 purposes differentiates 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 commercial real estate loans is calculated by discounting contractual cash flows 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 not included in the following table had contractual values of $241.9 billion, $12.5 billion and $955 million, respectively, at December 31, 2007, and $216.5 billion, $12.0 billion and $801 million, respectively, at December 31, 2006. These instruments generate ongoing fees at our current pricing levels, which are recognized over the term of the commitment period. Of the commitments at December 31, 2007, 40% mature within one year. Deferred fees on commitments and standby letters of credit totaled $33 million and $39 million at December 31, 2007 and 2006, respectively. The fair value of these instruments is estimated based upon fees charged for similar agreements. The carrying value of the deferred fees is a reasonable estimate of the fair value of the commitments.

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 markets where quoted market prices are not readily available. For those derivatives, we measure fair value using internally developed models that use primarily market observable inputs, such as yield curves and option volatilities, and, accordingly, classify as Level 2. Examples of Level 2 derivatives are basic interest rate swaps and forward contracts. Any remaining derivative fair value measurements using significant assumptions that are unobservable we classify as Level 3. Level 3 derivatives include interest rate lock commitments written for our residential mortgage loans that we intend to sell.

MORTGAGE SERVICING RIGHTS AND CERTAIN OTHER INTERESTS HELD IN SECURITIZATIONS Mortgage servicing rights (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

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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. Since the adoption of FAS 156 on January 1, 2006, we record residential MSRs at fair value on a recurring basis. Commercial MSRs continue to be 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. We may also retain securities from our loan securitization activities. The valuation technique for these securities is discussed in Securities available for sale .

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. 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.

Liabilities

DEPOSIT LIABILITIES Deposit liabilities are carried at historical cost. FAS 107 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 Derivatives section for derivative liabilities), includes liabilities for securities sold, but not yet purchased (short sale liabilities), and repurchase obligations (due to standard representations and warranties) under our residential mortgage loan contracts. Short sale liabilities are priced based upon quoted prices in active exchange markets of the underlying security and are classified as Level 1. 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.

LONG-TERM DEBT Long-term debt is carried at amortized cost. However, we are required to estimate the fair value of long-term debt under FAS 107. 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. The fair value estimates generated are corroborated against observable market prices. For foreign-currency denominated debt, we estimate fair value based upon observable market prices for the instruments.

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)	December 31, 2007
	Total			Level 1			Level 2			Level 3
Trading assets	$	7,727		$	1,041		$	6,268		$	418
Securities available for sale		72,951			38,178			29,392			5,381	⁽²⁾
Mortgages held for sale		24,998			—			24,852			146
Mortgage servicing rights (residential)		16,763			—			—			16,763
Other assets ⁽¹⁾		1,393			1,145			207			41

Total	$	123,832		$	40,364		$	60,719		$	22,749

Other liabilities ⁽¹⁾	$	(2,591	)	$	(1,670	)	$	(606	)	$	(315	)

(1)		Derivatives are included in this category.
(2)		Asset-backed securities where we underwrite the underlying collateral (auto lease receivables) represent substantially all of this balance.

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The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:



(in millions)	Year ended December 31, 2007
	Trading			Securities			Mortgages			Mortgage			Net			Other
	assets			available			held for			servicing			derivative			liabilities
	(excluding			for sale			sale			rights			assets and			(excluding
	derivatives		)							(residential		)	liabilities			derivatives		)
Balance, beginning of year		$ 360			$3,447			$ —			$17,591			$ (68	)		$(282	)
Total net gains (losses) for the year included in:
Net income		(151	)		(33	)		1			(3,597	)		(108	)		(97	)
Other comprehensive income		—			(12	)		—			—			—			—
Purchases, sales, issuances and settlements, net		207			1,979			30			2,769			178			99
Net transfers into/out of Level 3		2			—			115	⁽³⁾		—			4			—

Balance, end of year		$ 418			$5,381			$146			$16,763			$ 6			$(280	)

Net unrealized gains (losses) included in net income for the year relating to assets and liabilities held at December 31, 2007 ⁽¹⁾		$ (86	) ⁽²⁾		$ (31	)		$ 1	⁽⁴⁾		$ (594	) ⁽⁴⁾⁽⁵⁾		$ 6	⁽⁴⁾		$ (98	) ⁽⁴⁾

(1)		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.
(2)		Included in other noninterest income in the income statement.
(3)		Represents loans previously classified as Level 2 that became unsaleable during 2007; therefore the fair value measurement was derived from discounted cash flow models using unobservable inputs and assumptions.
(4)		Included in mortgage banking in the income statement.
(5)		Represents total unrealized losses of $571 million, net of gains of $23 million related to sales, for 2007.

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. The valuation methodologies

used to measure these fair value adjustments are described previously in this Note. For assets measured at fair value on a nonrecurring basis in 2007 that were still held in the balance sheet at year end, the following table provides the level of valuation assumptions used to determine each adjustment and the carrying value of the related individual assets or portfolios at year end.



(in millions)									Year ended
	Carrying value at December 31, 2007									December 31, 2007
	Total		Level 1		Level 2		Level 3				Total
											losses
Mortgages held for sale	$	1,817		$—	$	1,817		$—			$	(76	)
Loans held for sale		691		—		691		—				(35	)
Loans ⁽¹⁾		816		—		804		12				(3,080	)
Private equity investments		22		—		—		22				(52	)
Foreclosed assets ⁽²⁾		454		—		454		—				(90	)
Operating lease assets		49		—		49		—				(3	)

											$	(3,336	)

(1)		Represents carrying value and related write-downs of loans for which adjustments are based on the appraised value of the collateral. The carrying value of loans fully charged-off, which includes auto loans and unsecured lines and loans, is zero.
(2)		Represents the fair value and related losses of foreclosed real estate and other collateral owned that were measured at fair value subsequent to their initial classification as foreclosed assets.

108

Fair Value Option

The following table reflects the differences between fair value carrying amount of MHFS measured at fair value under FAS 159 and the aggregate unpaid principal amount we are contractually entitled to receive at maturity.

(in millions)

December 31, 2007

Fair value

Aggregate

Fair value

carrying

unpaid

carrying

amount

principal

amount

less

aggregate

unpaid

principal

Mortgages held for sale reported at fair value:

Total loans

$24,998

$24,691

$307

⁽¹⁾

Nonaccrual loans

(26

)

Loans 90 days or more past due and still accruing

)

(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.

FAS 107, Disclosures about Fair Value of Financial Instruments

The table below is a summary of fair value estimates as of December 31, 2007 and 2006, for financial instruments, as defined by FAS 107, excluding short-term financial assets and liabilities, for which 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.

The assets accounted for under FAS 159 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 that are included in current period earnings for these assets measured at fair value are shown, by income statement line item, below.



(in millions)	Year ended December 31, 2007
	Mortgages		Other
	held for		interests
	sale		held
Changes in fair value included in net income:
Mortgage banking noninterest income:
Net gains on mortgage loan origination/sales activities ⁽¹⁾		$986	$	—
Other noninterest income		—		(153	)

(1)

Includes changes in fair value of servicing associated with MHFS.

Interest income on mortgages held for sale measured at fair value is calculated based on the note rate of the loan and is recorded in interest income in the income statement.

In accordance with FAS 107, 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. Additionally, the amounts in the table have not been updated since year end, therefore the valuations may have changed significantly since that point in time. For these reasons, the total of the fair value calculations presented does not represent, and should not be construed to represent, the underlying value of the Company.



(in millions)	December 31								,
	2007				2006
	Carrying		Estimated		Carrying		Estimated
	amount		fair value		amount		fair value
FINANCIAL ASSETS
Mortgages held for sale ⁽¹⁾	$	1,817	$	1,817	$	33,097	$	33,240
Loans held for sale		948		955		721		731
Loans, net		376,888		377,219		315,352		315,484
Nonmarketable equity investments (cost method)		5,855		6,076		4,451		4,711
FINANCIAL LIABILITIES
Deposits	$	344,460	$	344,484	$	310,243	$	310,116
Long-term debt ⁽²⁾		99,373		98,449		87,133		86,837

(1)		Balance excludes mortgages held for sale for which the fair value option under FAS 159 was elected, and therefore includes nonprime residential and commercial mortgages held for sale.
(2)		The carrying amount and fair value exclude obligations under capital leases of $20 million and $12 million at December 31, 2007 and 2006, respectively.

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Note 18: 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.

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					Carrying amount
	and outstanding					(in millions)						Adjustable
	December 31				,	December 31					,	dividend rate
	2007		2006			2007			2006			Minimum			Maximum
ESOP Preferred Stock ⁽¹⁾ :
2007		135,124		—		$	135		$	—			10.75	%		11.75	%
2006		95,866		115,521			96			116			10.75			11.75
2005		73,434		84,284			73			84			9.75			10.75
2004		55,610		65,180			56			65			8.50			9.50
2003		37,043		44,843			37			45			8.50			9.50
2002		25,779		32,874			26			33			10.50			11.50
2001		16,593		22,303			17			22			10.50			11.50
2000		9,094		14,142			9			14			11.50			12.50
1999		1,261		4,094			1			4			10.30			11.30
1998		—		563			—			1			10.75			11.75

Total ESOP Preferred Stock		449,804		383,804		$	450		$	384

Unearned ESOP shares ⁽²⁾						$	(482	)	$	(411	)

(1)		Liquidation preference $1,000. At December 31, 2007 and 2006, additional paid-in capital included $32 million and $27 million, respectively, related to preferred stock.
(2)		In accordance with the American Institute of Certified Public Accountants (AICPA) Statement of Position 93-6, Employers’ Accounting for Employee Stock Ownership Plans , 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. For information on dividends paid, see Note 19.

Note 19: Common Stock and Stock Plans

Common Stock

The table to the right presents our reserved, issued and authorized shares of common stock at December 31, 2007.



	Number of shares
Dividend reinvestment and common stock purchase plans		9,315,728
Director plans		1,022,372	⁽²⁾
Stock plans ⁽¹⁾		455,861,120	⁽³⁾

Total shares reserved		466,199,220
Shares issued		3,472,762,050
Shares not reserved		2,061,038,730

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.
(2)		On January 22, 2008, the Board of Directors authorized an additional 100,000 shares of common stock for issuance under the Directors Stock Compensation and Deferral Plan for compensation deferrals only.
(3)		Includes 10,285,112 shares available for future awards at December 31, 2007, under the PartnerShares Stock Option Plan. No awards have been granted under this 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 this plan.

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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. Effective January 1, 2006, we adopted FAS 123(R), Share-Based Payment , using the “modified prospective” transition method. FAS 123(R) requires that we measure the cost of employee services received in exchange for an award of equity instruments, such as stock options or restricted share rights (RSRs), 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 $129 million in 2007 and $134 million in 2006, with a related recognized tax benefit of $49 million and $50 million for the same years, respectively. Stock option expense is based on the fair value of the awards at the date of grant. Prior to January 1, 2006, we did not record any compensation expense for stock options.

LONG-TERM INCENTIVE COMPENSATION PLAN 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 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 under FAS 123(R) beginning in 2006.

The total number of shares of common stock available for grant under the plan at December 31, 2007, was 145,278,124.

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 granted prior to July 2007 may be entitled to receive cash payments equal to the cash dividends that would have been paid had the RSRs been issued and outstanding shares of common stock. 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 2007 or 2006.

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.

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. The total number of shares of common stock authorized for issuance under the plan since inception through December 31, 2007, was 108,000,000, including 10,285,112 shares available for grant at December 31, 2007. 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. The exercise date of options granted under the PartnerShares Plan is the earlier of (1) five years after the date of grant or (2) when the quoted market price of the stock reaches a predetermined price. These options generally expire 10 years after the date of grant. Because the exercise price of each PartnerShares Plan grant has been equal to or higher than the quoted market price of our common stock at the date of grant, we did not recognize any compensation expense in 2005 and prior years. In 2006, under FAS 123(R), we began to recognize expense related to these grants, based on the remaining vesting period. All of our PartnerShares Plan grants were fully vested as of December 31, 2007.

Director Plan

We provide a stock award to non-employee directors as part of their annual retainer under our Directors Stock Compensation and Deferred Plan. We also provide annual grants of options to purchase common stock to each non-employee director elected or re-elected at the annual meeting of stockholders. The options can be exercised after six months and through the tenth anniversary of the grant date.

111

The table below summarizes stock option activity and related information for 2007. 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.



	Number			Weighted		-	Weighted		-	Aggregate
				average			average			intrinsic
				exercise			remaining			value
				price			contractual			(in millions		)
							term (in yrs.		)
Incentive Compensation Plans
Options outstanding as of December 31, 2006		223,116,682		$	26.85
Granted		44,279,645			34.53
Canceled or forfeited		(2,183,078	)		32.81
Exercised		(33,390,005	)		23.27
Acquisitions		6,806,680			31.92

Options outstanding as of December 31, 2007		238,629,924			28.87			5.8		$	654

As of December 31, 2007:
Options exercisable and expected to be exercisable ⁽¹⁾		236,589,775			28.83			5.8			654
Options exercisable		174,612,827			27.15			4.8			654
PartnerShares Plan
Options outstanding as of December 31, 2006		38,010,790		$	23.18
Canceled or forfeited		(727,972	)		23.74
Exercised		(12,917,257	)		22.53

Options outstanding as of December 31, 2007		24,365,561			23.50			3.2		$	163

As of December 31, 2007:
Options exercisable and expected to be exercisable ⁽¹⁾		24,365,561			23.50			3.2			163
Options exercisable		24,365,561			23.50			3.2			163
Director Plans
Options outstanding as of December 31, 2006		794,611		$	26.16
Granted		103,516			35.78
Exercised		(70,842	)		22.04

Options outstanding as of December 31, 2007		827,285			27.72			5.4		$	3

As of December 31, 2007:
Options exercisable and expected to be exercisable ⁽¹⁾		827,285			27.72			5.4			3
Options exercisable		827,285			27.72			5.4			3

(1)

Adjusted for estimated forfeitures.

As of December 31, 2007, there was $126 million of unrecognized compensation cost related to stock options. That cost is expected to be recognized over a weighted-average period of 2.1 years.

The total intrinsic value of options exercised during 2007 and 2006 was $588 million and $617 million, respectively.

Cash received from the exercise of options for 2007 and 2006 was $1,026 million and $1,092 million, respectively. The actual tax benefit recognized in stockholders’ equity for the tax deductions from the exercise of options totaled $210 million and $229 million, respectively, for 2007 and 2006.

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 its 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 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.

Effective with the adoption of FAS 123(R), 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. The expected dividend is based on the current dividend, our historical pattern of dividend increases and the market price of our stock.

Prior to the adoption of FAS 123(R), we also used a Black-Scholes valuation model to estimate the fair value of options granted for the pro forma disclosures of net income and earnings per common share that were required by FAS 123.

112

Effective with the adoption of FAS 123(R), we changed our method of estimating our volatility assumption. Prior to 2006, we used a volatility based on historical stock price changes. Effective January 1, 2006, we used a volatility based on a combination of historical stock price changes and implied volatilities of traded options as both volatilities are relevant in estimating our expected volatility.

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								,
	2007			2006			2005

Per share fair value of options granted:
Incentive Compensation Plans	$	4.03		$	4.03		$	3.75
Director Plans		4.05			4.67			3.13
Expected volatility		13.3	%		15.9	%		16.1	%
Expected dividends		3.4			3.4			3.4
Expected term (in years)		4.2			4.3			4.4
Risk-free interest rate		4.6	%		4.5	%		4.0	%

The weighted-average grant-date fair value of RSRs granted during 2006 was $33.90. At December 31, 2007, there was $2 million of total unrecognized compensation cost related to nonvested RSRs. The cost is expected to be recognized over a weighted-average period of 3.0 years. The total fair value of RSRs that vested during 2007 and 2006 was $1 million and $3 million, respectively.

A summary of the status of our RSRs at December 31, 2007, and changes during 2007 is in the following table:




	Number			Weighted		-
				average
				grant-date
				fair value

Nonvested at January 1, 2007		147,146			$29.53
Granted		27,360			34.76
Canceled or forfeited		(27,586	)		27.51
Vested		(34,524	)		27.20


Nonvested at December 31, 2007		112,396			32.01

Employee Stock Ownership Plan

Under the Wells Fargo & Company 401(k) Plan (the 401(k) Plan), a defined contribution ESOP, the 401(k) Plan may borrow money to purchase our common or preferred stock. Since 1994, 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 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 401(k) Plan participants.

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:




(in millions, except shares)	Shares outstanding
	December 31						,
	2007		2006		2005

Allocated shares (common)		76,265,880		74,536,040		73,835,002
Unreleased shares (preferred)		449,804		383,804		325,463
Fair value of unearned ESOP shares		$450		$384		$325

	Dividends paid
	Year ended December 31						,
	2007		2006		2005

Allocated shares (common)		$88		$79		$71
Unreleased shares (preferred)		57		47		39

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.

113

Note 20: Employee Benefits and Other Expenses

Employee Benefits

We sponsor noncontributory qualified defined benefit retirement plans including the Cash Balance Plan. The Cash Balance Plan is an active plan that covers eligible employees (except employees of certain subsidiaries).

Under the Cash Balance Plan, eligible employees’ Cash Balance Plan accounts are allocated a compensation credit based on a percentage of their certified compensation. The compensation credit percentage is based on age and years of credited service. In addition, investment credits are allocated to participants quarterly based on their accumulated balances. Prior to January 1, 2008, employees became vested in their Cash Balance Plan accounts after completing five years of vesting service or reaching age 65, if earlier. Effective January 1, 2008, employees become vested in their Cash Balance Plan accounts after completing three years of vesting service or reaching age 65, if earlier.

We did not make a contribution in 2007 to our Cash Balance Plan because a contribution was not required and the Plan was well-funded. Although we will not be required to make a contribution in 2008 for the Cash Balance Plan, our decision on how much to contribute, if any, will be based on the maximum deductible contribution under the Internal Revenue Code, which has not yet been determined, and other factors, including the actual investment performance of plan assets during 2008. Given these uncertainties, we cannot estimate at this time the amount, if any, that we will contribute in 2008 to the Cash Balance Plan. The total amount contributed for our other pension plans in 2007 was $31 million. For the unfunded nonqualified pension plans and postretirement benefit plans, we will contribute the minimum required amount in 2008, which equals the benefits paid under the plans. In 2007, we paid $70 million in benefits for the postretirement plans, which included $39 million in retiree contributions.

We sponsor defined contribution retirement plans including the 401(k) Plan. Under the 401(k) Plan, after one month of service, eligible employees may contribute up to 25% of their pre-tax certified 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 certified compensation. The matching contributions generally vest over four years.

Expenses for defined contribution retirement plans were $426 million, $373 million and $370 million in 2007, 2006 and 2005, 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 November 30 for our pension and postretirement benefit plans.

On September 29, 2006, the FASB issued FAS 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R) , which requires us to recognize in our balance sheet as of December 31, 2006, the funded status of our pension and other postretirement plans. Effective January 1, 2007, we were required to recognize changes in our plans’ funded status in the year in which the changes occur in other comprehensive income.

114

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 2007 and

2006, the funded status at December 31, 2007 and 2006, and the amounts recognized in the balance sheet at December 31, 2007, were:




(in millions)	December 31																	,
	2007									2006
	Pension benefits									Pension benefits
				Non		-	Other						Non		-	Other
	Qualified			qualified			benefits			Qualified			qualified			benefits

Change in benefit obligation:
Benefit obligation at beginning of year		$4,443			$ 301			$ 739			$4,045			$ 277			$ 709
Service cost		281			15			15			247			16			15
Interest cost		246			18			41			224			16			39
Plan participants’ contributions		—			—			39			—			—			35
Amendments		—			(24	)		—			18			—			(11	)
Plan mergers ⁽¹⁾		—			64			—			—			—			—
Actuarial loss (gain)		(105	)		16			(105	)		225			31			26
Benefits paid		(310	)		(24	)		(70	)		(317	)		(39	)		(74	)
Foreign exchange impact		10			—			4			1			—			—

Benefit obligation at end of year		4,565			366			663			4,443			301			739


Change in plan assets:
Fair value of plan assets at beginning of year		5,351			—			412			4,944			—			370
Actual return on plan assets		560			—			56			703			—			37
Employer contribution		7			24			21			20			39			44
Plan participants’ contributions		—			—			39			—			—			35
Benefits paid		(310	)		(24	)		(70	)		(317	)		(39	)		(74	)
Foreign exchange impact		9			—			—			1			—			—

Fair value of plan assets at end of year		5,617			—			458			5,351			—			412


Funded status at end of year		$1,052			$(366	)		$(205	)		$ 908			$(301	)		$(327	)


Amounts recognized in the balance sheet at end of year:
Assets		$1,061			$ —			$ —			$ 927			$ —			$ —
Liabilities		(9	)		(366	)		(205	)		(19	)		(301	)		(327	)

		$1,052			$(366	)		$(205	)		$ 908			$(301	)		$(327	)


(1)		Represents acquisition of Greater Bay Bancorp on October 1, 2007.

Amounts recognized in accumulated other comprehensive income (pre tax) for the year ended December 31, 2007 and 2006, consist of:




(in millions)	December 31																	,
	2007									2006
	Pension benefits									Pension benefits
				Non		-	Other						Non		-	Other
	Qualified			qualified			benefits			Qualified			qualified			benefits

Net actuarial loss		$248			$ 79			$ 13			$494			$ 76			$144
Net prior service credit		(7	)		(42	)		(42	)		(7	)		(21	)		(46	)
Net transition obligation		—			—			3			—			—			3
Translation adjustments		3			—			2			—			—			—

		$244			$ 37			$ (24	)		$487			$ 55			$101

The net actuarial loss and net prior service credit for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2008 are $14 million and $5 million, respectively. The net actuarial loss and net prior service credit for the other postretirement plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2008 are $1 million and $4 million, respectively.

The weighted-average assumptions used to determine the projected benefit obligation were:

Year ended December 31

2007

2006

Pension

Other

Pension

Other

benefits

⁽¹⁾

benefits

benefits

⁽¹⁾

benefits

Discount rate

6.25

5.75

Rate of compensation increase

4.0

—

4.0

—


(1)		Includes both qualified and nonqualified pension benefits.

115

The accumulated benefit obligation for the defined benefit pension plans was $4,734 million and $4,550 million at December 31, 2007 and 2006, 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. We target the Cash Balance Plan’s asset allocation for a target mix range of 40–70% equities, 20–50% fixed income, and approximately 10% 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 the Cash Balance Plan on a quarterly basis. Annual Plan liability analysis and periodic asset/liability evaluations are also conducted.

The weighted-average allocation of plan assets was:




	Percentage of plan assets at December 31											,
	2007						2006
	Pension			Other			Pension			Other
	plan			benefit			plan			benefit
	assets			plan assets			assets			plan assets

Equity securities		67	%		63	%		70	%		62	%
Debt securities		26			34			24			35
Real estate		4			2			4			2
Other		3			1			2			1


Total		100	%		100	%		100	%		100	%

The table below provides information for pension plans with benefit obligations in excess of plan assets, substantially due to our nonqualified pension plans.




(in millions)	December 31				,
	2007		2006

Projected benefit obligation	$	463	$	399
Accumulated benefit obligation		422		345
Fair value of plan assets		88		70

The components of net periodic benefit cost were:




(in millions)	Year ended December 31																										,
	2007									2006									2005
	Pension benefits									Pension benefits									Pension benefits
				Non		-	Other						Non		-	Other						Non		-	Other
	Qualified			qualified			benefits			Qualified			qualified			benefits			Qualified			qualified			benefits

Service cost		$ 281			$ 15			$ 15			$ 247			$ 16			$ 15			$ 208			$ 21			$ 21
Interest cost		246			18			41			224			16			39			220			14			41
Expected return on plan assets		(452	)		—			(36	)		(421	)		—			(31	)		(393	)		—			(25	)
Amortization of net actuarial loss ⁽¹⁾		32			13			5			56			6			5			68			3			6
Amortization of prior service cost		—			(3	)		(4	)		—			(1	)		(4	)		(4	)		(2	)		(1	)
Special termination benefits		—			—			—			2			—			—			—			—			—
Curtailment gain		—			—			—			—			—			(9	)		—			—			—
Settlement		1			—			—			5			3			—			—			—			—


Net periodic benefit cost		108			43			21			$ 113			$ 40			$ 15			$ 99			$ 36			$ 42


Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net actuarial loss (gain)		(213	)		16			(126	)
Amortization of net actuarial loss		(33	)		(13	)		(5	)
Prior service cost		—			(24	)		—
Amortization of prior service cost		—			3			4
Translation adjustments		3			—			2


Total recognized in other comprehensive income		(243	)		(18	)		(125	)


Total recognized in net periodic benefit cost and other comprehensive income		$(135	)		$ 25			$(104	)


(1)		Net actuarial loss is generally amortized over five years.

116

The weighted-average assumptions used to determine the net periodic benefit cost were:




	Year ended December 31																	,
	2007						2006						2005
	Pension			Other			Pension			Other			Pension			Other
	benefits		⁽¹⁾	benefits			benefits		⁽¹⁾	benefits			benefits		⁽¹⁾	benefits

Discount rate		5.75	%		5.75	%		5.75	%		5.75	%		6.0	%		6.0	%
Expected return on plan assets		8.75			8.75			8.75			8.75			9.0			9.0
Rate of compensation increase		4.0			—			4.0			—			4.0			—


(1)		Includes both qualified and nonqualified pension benefits.

The long-term rate of return assumptions above were derived based on a combination of factors including (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.

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 8% (before age 65) and 9% (after age 65) for health care costs for 2008. The rates of average annual increases are assumed to trend down 1% each year until the trend rates reach an ultimate trend of 5% in 2011 (before age 65) and 2012 (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, 2007, by $49 million and the total of the interest cost and service cost components of the net periodic benefit cost for 2007 by $4 million. Decreasing the assumed health care trend by one percentage point in each year would decrease the benefit obligation as of December 31, 2007, by $43 million and the total of the interest cost and service cost components of the net periodic benefit cost for 2007 by $3 million.

The investment strategy for assets held in the Retiree Medical Plan Voluntary Employees’ Beneficiary Association (VEBA) trust and other pension plans is maintained separate from the strategy for the assets in the Cash Balance Plan. The general target asset mix is 55–65% equities and 35–45% 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, reflecting expected future service that we expect to pay under the pension and other benefit plans, follow.




(in millions)	Pension benefits
			Non		-	Other
	Qualified		qualified			benefits

Year ended December 31,
2008		$ 456		$ 44			$ 45
2009		474		45			49
2010		489		44			53
2011		433		37			57
2012		444		35			59
2013-2017		2,338		170			322

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:




(in millions)	Other benefits
	subsidy receipts

Year ended December 31,
2008		$ 5
2009		5
2010		6
2011		6
2012		6
2013-2017		33

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:




(in millions)	Year ended December 31						,
	2007		2006		2005

Outside professional services	$	899	$	942	$	835
Outside data processing		482		437		449
Travel and entertainment		474		542		481
Contract services		448		579		596
Advertising and promotion		412		456		443

117

Note 21: Income Taxes

The components of income tax expense were:




(in millions)	Year ended December 31							,
	2007			2006		2005

Current:
Federal	$	3,181		$	2,993	$	2,627
State and local		284			438		346
Foreign		136			239		91

		3,601			3,670		3,064


Deferred:
Federal		(32	)		491		715
State and local		1			69		98

		(31	)		560		813

Total	$	3,570		$	4,230	$	3,877

The tax benefit related to the exercise of employee stock options recorded in stockholders’ equity was $210 million, $229 million and $143 million for 2007, 2006 and 2005, respectively.

We had a net deferred tax liability of $4,657 million and $5,985 million at December 31, 2007 and 2006, respectively. The deferred tax balance at December 31, 2007, reflects the adoption of FIN 48 on January 1, 2007. The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities are presented in the table on the right.

We have determined that a valuation reserve is not required for any of the deferred tax assets since it is more likely than not that these assets will be realized principally through carry back to taxable income in prior years, future reversals of existing taxable temporary differences, and, to a lesser extent, future taxable income and tax planning strategies. Our conclusion that it is “more likely than not” that the deferred tax assets will be realized is based on federal taxable income in excess of $20 billion in the carry-back period, substantial state taxable income in the carry-back period and historical earnings growth.




(in millions)	December 31				,
	2007		2006

Deferred Tax Assets
Allowance for loan losses	$	1,977	$	1,430
Deferred compensation and employee benefits		576		484
Other		1,809		1,173

Total deferred tax assets		4,362		3,087

Deferred Tax Liabilities
Mortgage servicing rights		5,103		4,234
Leasing		1,737		2,349
Mark to market, net		427		972
Net unrealized gains on securities available for sale		242		342
Other		1,510		1,175

Total deferred tax liabilities		9,019		9,072

Net Deferred Tax Liability	$	4,657	$	5,985

Deferred taxes related to net unrealized gains and losses on securities available for sale and derivatives are recorded in cumulative other comprehensive income.

The table below reconciles the statutory federal income tax expense and rate to the effective income tax expense and rate.

Income tax expense for 2007 and the effective tax rate included FIN 48 tax benefits of $235 million, as well as the impact of lower pre-tax earnings in relation to the level of tax-exempt income and tax credits. The tax benefits were primarily related to the resolution of certain matters with federal and state taxing authorities and statute expirations, reduced by accruals for uncertain tax positions, in accordance with FIN 48.




(in millions)	Year ended December 31																	,
	2007						2006						2005
	Amount			Rate			Amount			Rate			Amount			Rate

Statutory federal income tax expense and rate		$4,070			35.0	%		$4,428			35.0	%		$4,042			35.0	%
Change in tax rate resulting from:
State and local taxes on income, net of federal income tax benefit		359			3.1			331			2.6			289			2.5
Tax-exempt income and tax credits		(424	)		(3.6	)		(356	)		(2.8	)		(327	)		(2.8	)
Other		(435	)		(3.8	)		(173	)		(1.4	)		(127	)		(1.1	)

Effective income tax expense and rate		$3,570			30.7	%		$4,230			33.4	%		$3,877			33.6	%

118

We adopted FIN 48, Accounting for Uncertainty in Income Taxes , on January 1, 2007. Implementation of FIN 48 did not result in a cumulative effect adjustment to retained earnings at the date of adoption.

The change in unrecognized tax benefits in 2007 follows:




(in millions)

Balance at January 1, 2007	$	2,875
Additions:
For tax positions related to the current year		203
For tax positions related to prior years ⁽¹⁾		105
Reductions:
For tax positions related to prior years		(82	)
Lapse of statute of limitations		(244	)
Settlements with tax authorities		(162	)

Balance at December 31, 2007	$	2,695


(1)		Prior year additions include $22 million of acquired unrecognized tax benefits.

Of the $2,695 million of unrecognized tax benefits at December 31, 2007, approximately $1,363 million of the unrecognized tax benefits would, if recognized, affect the effective tax rate. Also included in the unrecognized tax benefits are $22 million of liabilities that, if recognized, would be recorded as an adjustment to goodwill. The remaining $1,310 million of unrecognized tax benefits relates to income tax positions on temporary differences.

We recognize interest and penalties as a component of income tax expense. At the end of 2007 and 2006 we accrued approximately $230 million and $262 million for

the payment of interest, respectively. Interest income of $34 million was recognized for 2007 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, we are not subject to federal income tax examinations for taxable years prior to 2005, foreign income tax examinations for taxable years prior to 2004, or state and local income tax examinations prior to 2003.

We are routinely examined by tax authorities in various jurisdictions. The IRS recently began its examination of our 2005 and 2006 consolidated federal income tax returns. We are also litigating or appealing various issues related to our prior IRS examinations for the periods 1997-2004. We have paid the IRS the contested income tax associated with these issues and refund claims have been filed for the respective years. We do not anticipate that the current examination or the resolution of the contested issues will be completed in the next 12 months. 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. We are estimating that our unrecognized tax benefits could decrease by approximately $100 to $200 million during the next 12 months primarily related to statute expirations. It is also reasonably possible that the decreases to our unrecognized tax benefits will be more than offset by additions related to new matters arising during the current period.

Note 22: 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, 2007, 2006 and 2005, options to purchase 13.8 million, 6.7 million and 9.7 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 they were antidilutive.




(in millions, except per share amounts)	Year ended December 31						,
	2007		2006		2005

Net income (numerator)	$	8,057	$	8,420	$	7,671


EARNINGS PER COMMON SHARE
Average common shares outstanding (denominator)		3,348.5		3,368.3		3,372.5


Per share	$	2.41	$	2.50	$	2.27


DILUTED EARNINGS PER COMMON SHARE
Average common shares outstanding		3,348.5		3,368.3		3,372.5
Add: Stock options		34.2		41.7		37.8
Restricted share rights		0.1		0.1		0.6


Diluted average common shares outstanding (denominator)		3,382.8		3,410.1		3,410.9


Per share	$	2.38	$	2.47	$	2.25

119

Note 23: Other Comprehensive Income

The components of other comprehensive income and the related tax effects were:




(in millions)	Year ended December 31																										,
	2007									2006									2005
	Before			Tax			Net of			Before			Tax			Net of			Before			Tax			Net of
	tax			effect			tax			tax			effect			tax			tax			effect			tax

Translation adjustments		$ 36			$ 13			$ 23			$ —			$ —			$ —			$ 8			$ 3			$ 5


Securities available for sale and other interests held:
Net unrealized gains (losses) arising during the year		86			36			50			264			93			171			(401	)		(143	)		(258	)
Reclassification of gains included in net income		(345	)		(131	)		(214	)		(326	)		(124	)		(202	)		(64	)		(24	)		(40	)

Net unrealized losses arising during the year		(259	)		(95	)		(164	)		(62	)		(31	)		(31	)		(465	)		(167	)		(298	)


Derivatives and hedging activities:
Net unrealized gains arising during the year		645			246			399			46			16			30			349			134			215
Reclassification of net losses (gains) on cash flow hedges included in net income		(124	)		(47	)		(77	)		64			24			40			(335	)		(128	)		(207	)

Net unrealized gains arising during the year		521			199			322			110			40			70			14			6			8


Defined benefit pension plans:
Amortization of net actuarial loss and prior service cost included in net income		391			149			242			—			—			—			—			—			—


Other comprehensive income		$689			$266			$423			$ 48			$ 9			$ 39			$(443	)		$(158	)		$(285	)

Cumulative other comprehensive income balances were:




(in millions)	Translation		Net			Net		Defined			Cumulative
	adjustments		unrealized			unrealized		benefit			other
			gains			gains on		pension			compre		-
			(losses) on			derivatives		plans			hensive
			securities			and					income
			available			hedging
			for sale			activities
			and other
			interests
			held

Balance, December 31, 2004		$24		$ 891			$ 35		$ —			$ 950

Net change		5		(298	)		8		—			(285	)

Balance, December 31, 2005		29		593			43		—			665

Net change		—		(31	)		70		(402	) ⁽¹⁾		(363	)

Balance, December 31, 2006		29		562			113		(402	)		302

Net change		23		(164	)		322		242			423

Balance, December 31, 2007		$52		$ 398			$435		$(160	)		$ 725


(1)	Adoption of FAS 158.

120

Note 24: Operating Segments

We have three lines of business for management reporting: Community Banking, Wholesale Banking and Wells Fargo Financial. The results for these lines of business are based on 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 generally accepted accounting principles. 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 segments. If the management structure and/or the allocation process changes, allocations, transfers and assignments may change. To reflect a change in the allocation of income taxes for management reporting adopted in 2007, results for prior periods have been revised.

The Community Banking Group 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 high net worth individuals, securities brokerage through affiliates and venture capital financing. These products and services include the Wells Fargo Advantage Funds ^{^SM} , a family of mutual funds, as well as personal trust and agency assets. 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 (IRAs), time deposits and debit cards.

Community Banking serves customers through a wide range of channels, which include traditional banking stores, in-store banking centers, business centers and ATMs. Also, Phone Bank ^{^SM} centers and the National Business Banking Center provide 24-hour telephone service. Online banking services include single sign-on to online banking, bill pay and brokerage, as well as online banking for small business.

The Wholesale Banking Group serves businesses across the United States with annual sales generally in excess of $10 million. Wholesale Banking provides a complete line of commercial, corporate and real estate banking products and services. These include traditional commercial loans and lines of credit, letters of credit, asset-based lending, equipment leasing, mezzanine financing, high-yield debt, international trade facilities, foreign exchange services, treasury management, investment management, institutional fixed income sales, interest rate, commodity and equity risk management, online/electronic products such as the Commercial Electronic Office ^® ( CEO ^® ) portal, insurance and investment banking services. Wholesale Banking manages and administers institutional investments, employee benefit trusts and mutual funds, including the Wells Fargo Advantage Funds . Wholesale Banking includes the majority ownership interest in the Wells Fargo HSBC Trade Bank, which provides trade financing, letters of credit and collection services and is sometimes supported by the Export-Import Bank of the United States (a public agency of the United States offering export finance support for American-made products). Wholesale Banking also supports the commercial real estate market with products and services such as construction loans for commercial and residential development, land acquisition and development loans, secured and unsecured lines of credit, interim financing arrangements for completed structures, rehabilitation loans, affordable housing loans and letters of credit, permanent loans for securitization, commercial real estate loan servicing and real estate and mortgage brokerage services.

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

The Consolidated Company total of average assets includes unallocated goodwill balances held at the enterprise level.

121




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

2007
Net interest income ⁽¹⁾		$13,365		$3,382		$4,227		$20,974
Provision for credit losses		3,187		69		1,683		4,939
Noninterest income		12,173		4,959		1,284		18,416
Noninterest expense		15,000		4,772		3,052		22,824

Income before income tax expense		7,351		3,500		776		11,627
Income tax expense		2,058		1,217		295		3,570


Net income		$ 5,293		$2,283		$ 481		$ 8,057


2006
Net interest income ⁽¹⁾		$13,117		$2,924		$3,910		$19,951
Provision for credit losses		887		16		1,301		2,204
Noninterest income		9,915		4,310		1,515		15,740
Noninterest expense		13,917		4,114		2,806		20,837

Income before income tax expense		8,228		3,104		1,318		12,650
Income tax expense		2,678		1,086		466		4,230


Net income		$ 5,550		$2,018		$ 852		$ 8,420


2005
Net interest income ⁽¹⁾		$12,702		$2,393		$3,409		$18,504
Provision for credit losses		895		1		1,487		2,383
Noninterest income		9,418		3,756		1,271		14,445
Noninterest expense		12,972		3,487		2,559		19,018

Income before income tax expense		8,253		2,661		634		11,548
Income tax expense		2,717		931		229		3,877


Net income		$ 5,536		$1,730		$ 405		$ 7,671


2007
Average loans		$ 194.0		$ 85.6		$ 65.2		$ 344.8
Average assets ⁽²⁾		330.8		113.1		71.1		520.8
Average core deposits		249.8		53.3		—		303.1

2006
Average loans		$ 178.0		$ 71.4		$ 57.5		$ 306.9
Average assets ⁽²⁾		320.2		97.1		62.9		486.0
Average core deposits		233.5		35.3		0.1		268.9


(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. In general, Community Banking has excess liabilities and receives interest credits for the funding it provides to other segments.
(2)		The Consolidated Company balance includes unallocated goodwill held at the enterprise level of $5.8 billion for 2007 and 2006.

122

Note 25: 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. The Wells Fargo Financial business segment for management reporting (see Note 24) consists of WFFI and other affiliated consumer finance entities managed by WFFI that are included within other consolidating subsidiaries in the following tables.


Condensed Consolidating Statement of Income


(in millions)	Parent			WFFI		Other		Eliminations			Consolidated
						consolidating					Company
						subsidiaries

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		9,060		(1,528	)		7,789

Total noninterest income		117			534		19,293		(1,528	)		18,416


NONINTEREST EXPENSE
Salaries and benefits		61			1,229		12,078		—			13,368
Other		291			1,119		9,573		(1,527	)		9,456

Total noninterest expense		352			2,348		21,651		(1,527	)		22,824


INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES		4,321			610		11,681		(4,985	)		11,627
Income tax expense (benefit)		(257	)		246		3,581		—			3,570
Equity in undistributed income of subsidiaries		3,479			—		—		(3,479	)		—


NET INCOME		$8,057			$ 364		$ 8,100		$(8,464	)		$ 8,057

123


Condensed Consolidating Statements of Income

(in millions)	Parent			WFFI			Other		Eliminations			Consolidated
							consolidating					Company
							subsidiaries

Year ended December 31, 2006

Dividends from subsidiaries:
Bank		$2,176			$ —			$ —		$(2,176	)		$ —
Nonbank		876			—			—		(876	)		—
Interest income from loans		—			5,283			20,370		(42	)		25,611
Interest income from subsidiaries		3,266			—			—		(3,266	)		—
Other interest income		103			102			6,428		(5	)		6,628

Total interest income		6,421			5,385			26,798		(6,365	)		32,239


Deposits		—			—			7,174		—			7,174
Short-term borrowings		436			381			1,065		(890	)		992
Long-term debt		3,197			1,758			710		(1,543	)		4,122

Total interest expense		3,633			2,139			8,949		(2,433	)		12,288


NET INTEREST INCOME		2,788			3,246			17,849		(3,932	)		19,951
Provision for credit losses		—			1,061			1,143		—			2,204

Net interest income after provision for credit losses		2,788			2,185			16,706		(3,932	)		17,747


NONINTEREST INCOME
Fee income – nonaffiliates		—			285			8,946		—			9,231
Other		180			259			6,126		(56	)		6,509

Total noninterest income		180			544			15,072		(56	)		15,740


NONINTEREST EXPENSE
Salaries and benefits		95			1,128			10,704		—			11,927
Other		117			976			8,753		(936	)		8,910

Total noninterest expense		212			2,104			19,457		(936	)		20,837


INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES		2,756			625			12,321		(3,052	)		12,650
Income tax expense (benefit)		(198	)		205			4,223		—			4,230
Equity in undistributed income of subsidiaries		5,466			—			—		(5,466	)		—


NET INCOME		$8,420			$ 420			$ 8,098		$(8,518	)		$ 8,420


Year ended December 31, 2005

Dividends from subsidiaries:
Bank		$4,675			$ —			$ —		$(4,675	)		$ —
Nonbank		763			—			—		(763	)		—
Interest income from loans		—			4,467			16,809		(16	)		21,260
Interest income from subsidiaries		2,215			—			—		(2,215	)		—
Other interest income		105			104			4,493		—			4,702

Total interest income		7,758			4,571			21,302		(7,669	)		25,962


Deposits		—			—			3,848		—			3,848
Short-term borrowings		256			223			897		(632	)		744
Long-term debt		2,000			1,362			598		(1,094	)		2,866

Total interest expense		2,256			1,585			5,343		(1,726	)		7,458


NET INTEREST INCOME		5,502			2,986			15,959		(5,943	)		18,504
Provision for credit losses		—			1,582			801		—			2,383

Net interest income after provision for credit losses		5,502			1,404			15,158		(5,943	)		16,121


NONINTEREST INCOME
Fee income – nonaffiliates		—			224			8,111		—			8,335
Other		298			223			5,727		(138	)		6,110

Total noninterest income		298			447			13,838		(138	)		14,445


NONINTEREST EXPENSE
Salaries and benefits		92			985			9,378		—			10,455
Other		50			759			8,398		(644	)		8,563

Total noninterest expense		142			1,744			17,776		(644	)		19,018


INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES		5,658			107			11,220		(5,437	)		11,548
Income tax expense (benefit)		145			(2	)		3,734		—			3,877
Equity in undistributed income of subsidiaries		2,158			—			—		(2,158	)		—


NET INCOME		$7,671			$ 109			$ 7,486		$(7,595	)		$ 7,671

124


Condensed Consolidating Balance Sheets

(in millions)	Parent		WFFI			Other			Eliminations			Consolidated
						consolidating						Company
						subsidiaries
December 31, 2007

ASSETS
Cash and cash equivalents due from:
Subsidiary banks	$	14,989	$	253			$ —			$ (15,242	)		$ —
Nonaffiliates		—		230			17,281			—			17,511
Securities available for sale		2,481		2,091			68,384			(5	)		72,951
Mortgages and loans held for sale		—		—			27,763			—			27,763

Loans		106		51,222			344,037			(13,170	)		382,195
Loans to subsidiaries:
Bank		11,400		—			—			(11,400	)		—
Nonbank		53,272		—			—			(53,272	)		—
Allowance for loan losses		—		(1,041	)		(4,266	)		—			(5,307	)

Net loans		64,778		50,181			339,771			(77,842	)		376,888

Investments in subsidiaries:
Bank		49,461		—			—			(49,461	)		—
Nonbank		5,463		—			—			(5,463	)		—
Other assets		8,010		1,720			74,955			(4,356	)		80,329


Total assets	$	145,182	$	54,475			$528,154			$(152,369	)		$575,442

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	—	$	—			$359,702			$ (15,242	)		$344,460
Short-term borrowings		4,692		9,117			69,990			(30,544	)		53,255
Accrued expenses and other liabilities		5,432		1,393			27,307			(3,426	)		30,706
Long-term debt		77,116		40,753			19,603			(38,079	)		99,393
Indebtedness to subsidiaries		10,314		—			—			(10,314	)		—

Total liabilities		97,554		51,263			476,602			(97,605	)		527,814
Stockholders’ equity		47,628		3,212			51,552			(54,764	)		47,628


Total liabilities and stockholders’ equity	$	145,182	$	54,475			$528,154			$(152,369	)		$575,442


December 31, 2006
ASSETS
Cash and cash equivalents due from:
Subsidiary banks	$	14,131	$	146			$ —			$ (14,277	)		$ —
Nonaffiliates		78		324			20,704			—			21,106
Securities available for sale		920		1,725			39,990			(6	)		42,629
Mortgages and loans held for sale		—		15			33,803			—			33,818

Loans		—		47,136			272,339			(359	)		319,116
Loans to subsidiaries:
Bank		3,400		—			—			(3,400	)		—
Nonbank		48,014		538			—			(48,552	)		—
Allowance for loan losses		—		(1,193	)		(2,571	)		—			(3,764	)

Net loans		51,414		46,481			269,768			(52,311	)		315,352

Investments in subsidiaries:
Bank		43,098		—			—			(43,098	)		—
Nonbank		4,616		—			—			(4,616	)		—
Other assets		5,811		1,745			62,981			(1,446	)		69,091


Total assets	$	120,068	$	50,436			$427,246			$(115,754	)		$481,996


LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	—	$	—			$324,520			$ (14,277	)		$310,243
Short-term borrowings		19		7,708			18,793			(13,691	)		12,829
Accrued expenses and other liabilities		3,857		1,323			22,683			(1,898	)		25,965
Long-term debt		65,396		38,456			16,580			(33,287	)		87,145
Indebtedness to subsidiaries		4,982		—			—			(4,982	)		—

Total liabilities		74,254		47,487			382,576			(68,135	)		436,182
Stockholders’ equity		45,814		2,949			44,670			(47,619	)		45,814


Total liabilities and stockholders’ equity	$	120,068	$	50,436			$427,246			$(115,754	)		$481,996

125


Condensed Consolidating Statements of Cash Flows

(in millions)	Year ended December 31																							,
	2007												2006
	Parent			WFFI			Other			Consolidated			Parent			WFFI			Other			Consolidated
							consolidating			Company									consolidating			Company
							subsidiaries		/										subsidiaries		/
							eliminations												eliminations

Cash flows from operating activities:
Net cash provided by operating activities		$ 3,715			$ 1,446			$ 3,917			$ 9,078		$	3,536		$	1,179			$ 23,261			$ 27,976


Cash flows from investing activities:
Securities available for sale:
Sales proceeds		2,554			559			44,877			47,990			353			822			52,129			53,304
Prepayments and maturities		—			299			8,206			8,505			14			259			7,048			7,321
Purchases		(3,487	)		(1,174	)		(70,468	)		(75,129	)		(378	)		(1,032	)		(61,052	)		(62,462	)
Loans:
Increase in banking subsidiaries’ loan originations, net of collections		—			(2,686	)		(45,929	)		(48,615	)		—			(2,003	)		(35,727	)		(37,730	)
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries		—			—			3,369			3,369			—			50			38,293			38,343
Purchases (including participations) of loans by banking subsidiaries		—			—			(8,244	)		(8,244	)		—			(202	)		(5,136	)		(5,338	)
Principal collected on nonbank entities’ loans		—			18,729			2,747			21,476			—			19,998			3,923			23,921
Loans originated by nonbank entities		—			(20,461	)		(4,823	)		(25,284	)		—			(22,382	)		(4,592	)		(26,974	)
Net repayments from (advances to) subsidiaries		(10,338	)		—			10,338			—			(500	)		—			500			—
Capital notes and term loans made to subsidiaries		(10,508	)		—			10,508			—			(7,805	)		—			7,805			—
Principal collected on notes/ loans made to subsidiaries		7,588			—			(7,588	)		—			4,926			—			(4,926	)		—
Net decrease (increase) in investment in subsidiaries		(1,132	)		—			1,132			—			(145	)		—			145			—
Net cash paid for acquisitions		—			—			(2,811	)		(2,811	)		—			—			(626	)		(626	)
Other, net		(106	)		(847	)		2,381			1,428			—			1,081			(7,422	)		(6,341	)

Net cash used by investing activities		(15,429	)		(5,581	)		(56,305	)		(77,315	)		(3,535	)		(3,409	)		(9,638	)		(16,582	)


Cash flows from financing activities:
Net change in:
Deposits		—			—			27,058			27,058			—			—			(4,452	)		(4,452	)
Short-term borrowings		9,138			2,670			28,019			39,827			931			(1,297	)		(10,790	)		(11,156	)
Long-term debt:
Proceeds from issuance		24,385			11,335			(6,360	)		29,360			13,448			8,670			(1,863	)		20,255
Repayment		(11,726	)		(9,870	)		3,346			(18,250	)		(7,362	)		(5,217	)		(30	)		(12,609	)
Common stock:
Proceeds from issuance		1,876			—			—			1,876			1,764			—			—			1,764
Repurchased		(7,418	)		—			—			(7,418	)		(1,965	)		—			—			(1,965	)
Cash dividends paid		(3,955	)		—			—			(3,955	)		(3,641	)		—			—			(3,641	)
Excess tax benefits related to stock option payments		196			—			—			196			227			—			—			227
Other, net		(2	)		13			(739	)		(728	)		12			70			(268	)		(186	)

Net cash provided (used) by financing activities		12,494			4,148			51,324			67,966			3,414			2,226			(17,403	)		(11,763	)


Net change in cash and due from banks		780			13			(1,064	)		(271	)		3,415			(4	)		(3,780	)		(369	)

Cash and due from banks at beginning of year		14,209			470			349			15,028			10,794			474			4,129			15,397


Cash and due from banks at end of year		$ 14,989			$ 483			$ (715	)		$ 14,757		$	14,209		$	470			$ 349			$ 15,028

126


Condensed Consolidating Statement of Cash Flows

(in millions)	Parent			WFFI			Other			Consolidated
							consolidating			Company
							subsidiaries		/
							eliminations

Year ended December 31, 2005

Cash flows from operating activities:
Net cash provided (used) by operating activities	$	5,396		$	1,159			$(18,540	)		$(11,985	)


Cash flows from investing activities:
Securities available for sale:
Sales proceeds		631			281			18,147			19,059
Prepayments and maturities		90			248			6,634			6,972
Purchases		(231	)		(486	)		(27,917	)		(28,634	)
Loans:
Increase in banking subsidiaries’ loan originations, net of collections		—			(953	)		(41,356	)		(42,309	)
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries		—			232			42,007			42,239
Purchases (including participations) of loans by banking subsidiaries		—			—			(8,853	)		(8,853	)
Principal collected on nonbank entities’ loans		—			19,542			3,280			22,822
Loans originated by nonbank entities		—			(29,757	)		(3,918	)		(33,675	)
Net repayments from (advances to) subsidiaries		(3,166	)		—			3,166			—
Capital notes and term loans made to subsidiaries		(10,751	)		—			10,751			—
Principal collected on notes/loans made to subsidiaries		2,950			—			(2,950	)		—
Net decrease (increase) in investment in subsidiaries		194			—			(194	)		—
Net cash acquired from acquisitions		—			—			66			66
Other, net		—			(1,059	)		(4,045	)		(5,104	)

Net cash used by investing activities		(10,283	)		(11,952	)		(5,182	)		(27,417	)


Cash flows from financing activities:
Net change in:
Deposits		—			—			38,961			38,961
Short-term borrowings		1,048			3,344			(2,514	)		1,878
Long-term debt:
Proceeds from issuance		18,297			11,891			(3,715	)		26,473
Repayment		(8,216	)		(4,450	)		(5,910	)		(18,576	)
Common stock:
Proceeds from issuance		1,367			—			—			1,367
Repurchased		(3,159	)		—			—			(3,159	)
Cash dividends paid		(3,375	)		—			—			(3,375	)
Other, net		—			—			(1,673	)		(1,673	)

Net cash provided by financing activities		5,962			10,785			25,149			41,896


Net change in cash and due from banks		1,075			(8	)		1,427			2,494

Cash and due from banks at beginning of year		9,719			482			2,702			12,903


Cash and due from banks at end of year	$	10,794		$	474			$ 4,129			$ 15,397

Note 26: 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 on

127

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 issued by the Trusts that was includable in Tier 1 capital in accordance with FRB risk-based capital guidelines was $4.7 billion at December 31, 2007. The junior subordinated debentures held by the Trusts were included in the Company’s long-term debt. (See Note 14.)

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 16 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.

(in billions)

To be well capitalized

For capital

under the FDICIA prompt

Actual

adequacy purposes

corrective action provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

As of December 31, 2007:

Total capital (to risk-weighted assets)

Wells Fargo & Company

$51.6

10.68

³ $38.7

³ 8.00

Wells Fargo Bank, N.A.

42.8

11.14

³ 30.7

³ 8.00

³ $38.4

³ 10.00

Tier 1 capital (to risk-weighted assets)

Wells Fargo & Company

$36.7

7.59

³ $19.3

³ 4.00

Wells Fargo Bank, N.A.

29.5

7.68

³ 15.4

³ 4.00

³ $23.0

³ 6.00

Tier 1 capital (to average assets)
(Leverage ratio)

Wells Fargo & Company

$36.7

6.83

³ $21.5

³ 4.00

% ⁽¹⁾

Wells Fargo Bank, N.A.

29.5

6.84

³ 17.3

³ 4.00

⁽¹⁾

³ $21.6

³ 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, 2007, 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 risk-based capital 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 risk-based capital category of any of the covered subsidiary banks.

As an approved seller/servicer, Wells Fargo Bank, N.A., through its mortgage banking division, is required to maintain minimum levels of shareholders’ equity, as specified by various agencies, including the United States Department of Housing and Urban Development, Government National Mortgage Association, Federal Home Loan Mortgage Corporation and Federal National Mortgage Association. At December 31, 2007, Wells Fargo Bank, N.A. met these requirements.

128

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, 2007 and 2006, and the related consolidated statements of income, changes in stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2007. 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, 2007 and 2006, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.

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, 2007, 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 25, 2008, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for income taxes, leveraged lease transactions, certain mortgages held for sale and retained interests, and provided additional disclosure regarding the measurement of fair value for financial assets and liabilities in 2007, and changed its method of accounting for residential mortgage servicing rights and stock-based compensation in 2006.

San Francisco, California
February 25, 2008

129

Quarterly Financial Data

Condensed Consolidated Statement of Income — Quarterly (Unaudited)



(in millions, except per share amounts)									2007									2006
	Quarter ended										Quarter ended
	Dec. 31		Sept. 30		⁽¹⁾	June 30			Mar. 31		Dec. 31		Sept. 30		June 30		⁽¹⁾	Mar. 31
INTEREST INCOME		$ 9,242		$ 9,223			$ 8,573			$ 8,139		$ 8,231		$ 8,399		$ 8,077			$ 7,532
INTEREST EXPENSE		3,754		3,943			3,377			3,129		3,181		3,352		3,093			2,662

NET INTEREST INCOME		5,488		5,280			5,196			5,010		5,050		5,047		4,984			4,870
Provision for credit losses		2,612		892			720			715		726		613		432			433

Net interest income after provision for credit losses		2,876		4,388			4,476			4,295		4,324		4,434		4,552			4,437

NONINTEREST INCOME
Service charges on deposit accounts		788		837			740			685		695		707		665			623
Trust and investment fees		802		777			839			731		735		664		675			663
Card fees		588		561			517			470		481		464		418			384
Other fees		577		566			638			511		550		509		510			488
Mortgage banking		831		823			689			790		677		484		735			415
Operating leases		153		171			187			192		190		192		200			201
Insurance		370		329			432			399		299		313		364			364
Net gains (losses) on debt securities available for sale		60		160			(42	)		31		51		121		(156	)		(35	)
Net gains from equity investments		222		173			242			97		256		159		133			190
Other		326		176			453			525		429		274		261			392

Total noninterest income		4,717		4,573			4,695			4,431		4,363		3,887		3,805			3,685

NONINTEREST EXPENSE
Salaries		2,055		1,933			1,907			1,867		1,812		1,769		1,754			1,672
Incentive compensation		840		802			900			742		793		710		714			668
Employee benefits		558		518			581			665		501		458		487			589
Equipment		370		295			292			337		339		294		284			335
Net occupancy		413		398			369			365		367		357		345			336
Operating leases		124		136			148			153		157		155		157			161
Other		1,540		1,589			1,530			1,397		1,442		1,338		1,530			1,313

Total noninterest expense		5,900		5,671			5,727			5,526		5,411		5,081		5,271			5,074

INCOME BEFORE INCOME TAX EXPENSE		1,693		3,290			3,444			3,200		3,276		3,240		3,086			3,048
Income tax expense		332		1,117			1,165			956		1,095		1,046		1,059			1,030

NET INCOME		$ 1,361		$ 2,173			$ 2,279			$ 2,244		$ 2,181		$ 2,194		$ 2,027			$ 2,018

EARNINGS PER COMMON SHARE		$ 0.41		$ 0.65			$ 0.68			$ 0.66		$ 0.65		$ 0.65		$ 0.60			$ 0.60
DILUTED EARNINGS PER COMMON SHARE		$ 0.41		$ 0.64			$ 0.67			$ 0.66		$ 0.64		$ 0.64		$ 0.59			$ 0.60
DIVIDENDS DECLARED PER COMMON SHARE ⁽²⁾		$ 0.31		$ 0.31			$ 0.28			$ 0.28		$ 0.28		$ —		$ 0.54			$ 0.26
DIVIDENDS PAID PER COMMON SHARE		$ 0.31		$ 0.31			$ 0.28			$ 0.28		$ 0.28		$ 0.28		$ 0.26			$ 0.26
Average common shares outstanding		3,327.6		3,339.6			3,351.2			3,376.0		3,379.4		3,371.9		3,363.8			3,358.3
Diluted average common shares outstanding		3,352.2		3,374.0			3,389.3			3,416.1		3,424.0		3,416.0		3,404.4			3,395.7
Market price per common share ⁽³⁾
High		$ 37.78		$ 37.99			$ 36.49			$ 36.64		$ 36.99		$ 36.89		$ 34.86			$ 32.76
Low		29.29		32.66			33.93			33.01		34.90		33.36		31.90			30.31
Quarter end		30.19		35.62			35.17			34.43		35.56		36.18		33.54			31.94

(1)		Results for third quarter 2007 and second quarter 2006 have been revised to reflect $170 million and $95 million, respectively, of litigation expenses associated with indemnification obligations arising from the Company’s ownership interest in Visa.
(2)		On April 25, 2006, the Company’s Board of Directors declared the second quarter 2006 cash dividend payable June 1, 2006. On June 27, 2006, the Board declared a two-for-one split in the form of a 100% stock dividend on the Company’s common stock and, at the same time, the third quarter 2006 cash dividend payable September 1, 2006.
(3)		Based on daily prices reported on the New York Stock Exchange Composite Transaction Reporting System.

130

EXHIBIT 21

SUBSIDIARIES OF THE PARENT

The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2007:


		Jurisdiction of Incorporation
Subsidiary		or Organization
1st Capital Mortgage, LLC		Delaware
A.G. Edwards Mortgage, LLC		Delaware
ABD Financial Services, Inc.		Colorado
ABD Insurance and Financial Services		California
ACO Brokerage Holdings Corporation		Delaware
Acordia of Indiana, Inc.		Indiana
Acordia Services, Inc.		Delaware
Advance Mortgage		Virginia
Advantage Mortgage Partners, LLC		Delaware
Alano Funding, LLC		Delaware
Alaska Best Mortgage, LLC		Delaware
Alces Funding, LLC		Delaware
Alliance Home Mortgage, LLC		Delaware
Alopekis Funding, LLC		Delaware
Aman Collection Service, Inc.		South Dakota
Amber Asset Management Inc.		Maryland
Amber Mortgage, LLC		Delaware
American Clearinghouse, LLC		Delaware
American E & S Insurance Brokers California, Inc.		California
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
APM Mortgage, LLC		Delaware
Arcturus Trustee Limited		United Kingdom
Arizona Community Mortgage, LLC		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
Augustus Ventures, L.L.C.		Nevada
Azalea Asset Management, Inc.		Delaware
Bankers Funding Company, LLC		Delaware
Belgravia Mortgage Group, LLC		Delaware
Bellwether Mortgage, LLC		Delaware
Benefit Mortgage, LLC		Delaware
Bergamasco Funding, LLC		Delaware
Berks Mortgage Services, LLC		Delaware
BHS Home Loans, LLC		Delaware
Bitterroot Asset Management, Inc.		Cayman Islands
Blackhawk Bancorporation		Iowa
Blue Spirit Insurance Company		Vermont
Bluebonnet Asset Management, Inc.		Delaware
Brittlebush Financing, LLC		Nevada
Bryan, Pendleton, Swats & McAllister, LLC		Tennessee


		Jurisdiction of Incorporation
Subsidiary		or Organization
Canopus Finance Trust		Delaware
Capstone Home Mortgage, LLC		Delaware
Carnation Asset Management, Inc.		Delaware
Centennial Home Mortgage, LLC		Delaware
Centurion Agency Nevada, Inc.		Nevada
Centurion Casualty Company		Iowa
Centurion Life Insurance Company		Iowa
Certified Home Loans, LLC		Delaware
Cervus Funding, L.P.		Delaware
CGT Insurance Company LTD.		Barbados
Charter Holdings, Inc.		Nevada
Chestnut Asset Management, Inc.		Delaware
Choice Home Financing, LLC		Delaware
Choice Mortgage Servicing, LLC		Delaware
CityLife Lending Group, LLC		Delaware
CNB Investment Trust I		Maryland
CNB Investment Trust II		Maryland
Collin Equities, Inc.		Texas
Colorado Mortgage Alliance, LLC		Delaware
Colorado Professionals Mortgage, LLC		Delaware
Colorado Residential Lenders, LLC		Delaware
Columbine Asset Management, Inc.		Delaware
Crocker Properties, Inc.		California
DH Financial, LLC		Delaware
Dial Finance Company, Inc.		Nevada
Dial National Community Benefits, Inc.		Nevada
Discovery Home Loans, LLC		Delaware
Eastdil Secured, L.L.C.		New York
Eaton Village Associates, Ltd. Co.		New Mexico
Edward Jones Mortgage, LLC		Delaware
Elite Home Mortgage, LLC		Delaware
Ellis Advertising, Inc.		Iowa
Ennis Home Mortgage, LP		Delaware
Epic Funding Corporation		California
Express Financial & Mortgage Services, LLC		Delaware
Falcon Asset Management, Inc.		Delaware
Family Home Mortgage, LLC		Delaware
Finvercon USA, Inc.		Nevada
First Associates Mortgage, LLC		Delaware
First Commerce Bancshares, Inc.		Nebraska
First Commonwealth Home Mortgage, LLC		Delaware
First Community Capital Corporation		Texas
First Community Capital Corporation of Delaware, Inc.		Delaware
First Community Capital Trust I		Delaware
First Community Capital Trust II		Delaware
First Community Capital Trust III		Delaware
First Financial Bancorp (CA) Statutory Trust I		Connecticut
First Mortgage Consultants, LLC		Delaware
First Place Financial Corporation		New Mexico
First Rate Home Mortgage, LLC		Delaware
First Security Capital I		Delaware
Five Star Lending, LLC		Delaware
Florida Heritage Mortgage, LLC		Delaware
FNL Insurance Company		Vermont


		Jurisdiction of Incorporation
Subsidiary		or Organization
Foothill Capital Corporation		California
Foothill Group, Inc., The		Delaware
Foothill Partners IV, L.P.		Delaware
Foundation Mortgage Services, LLC		Delaware
FPFC Management LLC		New Mexico
Fulton Homes Mortgage, LLC		Delaware
Galliard Capital Management, Inc.		Minnesota
GBB Capital II		Delaware
GBB Capital III		Delaware
GBB Capital IV		Delaware
GBB Capital VI		Delaware
GBB Capital VIII		Delaware
Generation Homes Mortgage, LLC		Delaware
Genesis Designer Homes Mortgage, LLC		Delaware
Genesis Mortgage, LLC		Delaware
Global General Mortgage, LLC		Delaware
Gold Coast Mortgage		California
Golden Funding Company		Cayman Islands
Golden Pacific Insurance Company		Vermont
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
Greater Bay Bank, N.A.		California
Greenfield Funding, LLC		Minnesota
Greenridge Mortgage Services, LLC		Delaware
GST Co.		Delaware
Guarantee Pacific Mortgage, LLC		Delaware
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 Technology Services, Inc.		Texas
H.D. Vest, Inc.		Texas
HADBO Investments C.V.		Netherlands
Hallmark Mortgage Group, LLC		Delaware
Harrier Funding, LLC		Delaware
Havanese Funding, LLC		Delaware
Hearthside Funding, L.P.		California
Hendricks Mortgage, LLC		Delaware
Heritage Home Mortgage Group, LLC		Delaware
Hewitt Mortgage Services, LLC		Delaware
Home Mortgage Specialists, LLC		Delaware
Home Services Title Reinsurance Company		Vermont
HomeLife Financial, LLC		Delaware
Homeservices Lending, LLC		Delaware
Hometown Mortgage, LLC		Delaware
Horizon Mortgage, LLC		Delaware
HREG Mortgage Services, LLC		Delaware
Hubble Home Loans, LLC		Delaware


		Jurisdiction of Incorporation
Subsidiary		or Organization
Iapetus Funding, LLC		Delaware
IBID, Inc.		Delaware
Illustrated Properties Mortgage Company, LLC		Delaware
Ilumina Mortgage, LLC		Delaware
Integrity Home Funding, LLC		Delaware
Interwest Capital Trust I		Delaware
IntraWest Asset Management, Inc.		Delaware
Iris Asset Management, Inc.		Delaware
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
John Laing Mortgage, LP		California
Jones & Minear Financial Services, LLC		Delaware
KD Mortgage, LLC		Delaware
Keller Mortgage, LLC		Delaware
KH Mortgage, LLC		Delaware
Kidron Partners IV, LP		Minnesota
Legacy Mortgage		Delaware
Lincoln Building Corporation		Colorado
Linear Financial, LP		Delaware
Lowry Hill Investment Advisors, Inc.		Minnesota
Lucini/Parish Insurance		Nevada
Marben Mortgage, LLC		Delaware
Marigold Asset Management, Inc.		Delaware
Marigold International Limited		Cayman Islands
Martha Turner Mortgage, LLC		Delaware
Master Home Mortgage, LLC		Delaware
Mastiff Funding, LP		Delaware
Max Mortgage, LLC		Delaware
MC of America, LLC		Delaware
MCIG Pennsylvania, Inc.		Pennsylvania
MCZ/Centrum Mortgage Company, LLC		Delaware
Mid-Peninsula Capital, LLC		California
Monument Peak, LLC		Delaware
Mortgage 100, LLC		Delaware
Mortgage One		Not Required
Mortgages On-Site, LLC		Delaware
Mortgages Unlimited, LLC		Delaware
Mulberry Asset Management, Inc.		Delaware
Mutual Service Mortgage, LLC		Delaware
National Bancorp of Alaska, Inc.		Delaware
NDC Financial Services, LLC		Delaware
NEC VIII, LLC		Delaware
Nero Limited, LLC		Delaware
NHI Home Mortgage, LLC		Delaware
North Star Mortgage Guaranty Reinsurance Company		Vermont
Northern Prairie Indemnity Limited		Cayman Islands


		Jurisdiction of Incorporation
Subsidiary		or Organization
Norwest Alliance System, Inc.		Minnesota
Norwest Equity Capital, L.L.C.		Minnesota
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 Home Improvement, Inc.		Texas
Norwest Limited LP, LLLP		Delaware
Norwest Mezzanine Partners I, LP		Minnesota
Norwest Mezzanine Partners II, 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 -Mauritius		Mauritius
Norwest Venture Partners X, LP		Delaware
Norwest Venture Partners-Mauritius		Mauritius
NVP Associates, LLC		Delaware
NVP VC Management India Private Limited		India
Old Swedish Bank Master Tenant, LLC		Minnesota
Pacific Coast Home Mortgage, LLC		Delaware
Pacific Lifestyle Mortgage, LLC		Delaware
Pacific Northwest Bancorp		Washington
Pacific Northwest Statutory Trust I		Connecticut
Pageantry Mortgage, LLC		Delaware
Palo Alto Partners, LLC		Delaware
Parkway Mortgage and Financial Center, LLC		Delaware
PCM Mortgage, 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
Pinnacle Mortgage of Nevada, LLC		Delaware
Placer Sierra Bancshares		California
Placer Statutory Trust III		Delaware
Placer Statutory Trust IV		Delaware
Platinum Residential Mortgage, LLC		Delaware
PNC Mortgage, LLC		Delaware
Premier Home Mortgage		California


		Jurisdiction of Incorporation
Subsidiary		or Organization
Premium Financial Services, Inc.		Kentucky
Primrose Asset Management, Inc.		Delaware
Private Mortgage Advisors, LLC		Delaware
Professional Financial Services of Arizona, LLC		Delaware
Properties Mortgage, LLC		Delaware
Pumi Funding, LLC		Delaware
Quail Asset Management, LLC		Delaware
Rainier Mortgage, LLC		Delaware
Real Estate Lenders		Not Required
Real Living Mortgage, LLC		Delaware
Realty Home Mortgage, LLC		Delaware
Regency Insurance Agency, Inc.		Minnesota
Related Financial, 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
Residential Community Mortgage Company, LLC		Delaware
Residential Home Mortgage Investment, L.L.C.		Delaware
ResortQuest Mortgage, LLC		Delaware
Rigil Finance, LLC		Delaware
River City Group, LLC		Delaware
Riverside Home Loans, LLC		Delaware
Ruby Asset Management Inc.		Maryland
Rural Community Insurance Agency, Inc.		Minnesota
Rural Community Insurance Company		Minnesota
Russ Lyon Mortgage, LLC		Delaware
RWF Mortgage Company		California
RWF Mortgage, LLC		Delaware
Sagebrush Asset Management, Inc.		Delaware
Saguaro Asset Management, Inc.		Delaware
Sapphire Asset Management Inc.		Maryland
Scott Life Insurance Company		Arizona
Secured Capital Corp		California
Security First Financial Group, LLC		Delaware
SecurSource Mortgage, LLC		Delaware
Select Lending Services, LLC		Delaware
SelectNet Plus, Inc.		West Virginia
SG Group Holdings LLC		Delaware
SG New York LLC		Delaware
SG Pennsylvania LLC		Delaware
SG Tucson LLC		Delaware
Sierra Delaware Funding, LLC		Delaware
Sierra Peaks Funding, LP		Delaware
Signature Home Mortgage, LLC		Delaware
Silver Asset Management, Inc.		Delaware
Sirius Finance, LLC		Delaware
Skogman Mortgage Company		Not Required
Skyline Home Mortgage, LLC		Delaware
Smart Mortgage, LLC		Delaware
Smith Family Mortgage, LLC		Delaware


		Jurisdiction of Incorporation
Subsidiary		or Organization
Southeast Home Mortgage, LLC		Delaware
Southeast Minnesota Mortgage, LLC		Delaware
Southern Ohio Mortgage, LLC		Delaware
Southwest Community Statutory Trust I		Connecticut
Southwest Partners, Inc.		California
SPH Mortgage, LLC		Delaware
Spring Cypress Water Supply Corporation		Texas
Stagecoach Insurance Agency, Inc.		California
Stagecoach Insurance Services, LLC		Delaware
Stirling Mortgage Services, LLC		Delaware
Stock Financial Services, LLC		Delaware
Summit National Mortgage, LLC		Delaware
Superior Guaranty Insurance Company		Vermont
Sweetroot Funding, LLC		Cayman Islands
Tai Mo Shan Investments Partnership		Hong Kong
TAI Title Trust		Delaware
Telomian Funding, Inc.		Delaware
The Thirty-Eight Hundred Fund, LLC		Delaware
The Trumbull Group, LLC		Delaware
Thirty-Eight Hundred Investments Limited		Cayman Islands
Tiberius Ventures, L.L.C.		Nevada
TMS Funding Limited		Cayman Islands
Topaz Asset Management Inc.		Maryland
Trademark Mortgage, LLC		Delaware
United California Bank Realty Corporation		California
Valley Asset Management, Inc.		Delaware
Victoria Investments, LLC		Delaware
Village Communities Financial, LLC		Delaware
Village Mortgage, LLC		Delaware
Violet Asset Management, Inc.		Delaware
Wapiti Funding, LLC		Delaware
Wasatch Home Mortgage, LLC		Delaware
WCI Mortgage, LLC		Delaware
Wells Capital Management Incorporated		California
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
Wells Fargo Asset Securities Corporation		Delaware
Wells Fargo Auto Finance, Inc.		California
Wells Fargo Bank Grand Junction, National Association		United States
Wells Fargo Bank Grand Junction-Downtown, National Association		United States
Wells Fargo Bank International		United States
Wells Fargo Bank Northwest, 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 Brokerage Services, LLC		Delaware
Wells Fargo Capital A		Delaware
Wells Fargo Capital B		Delaware
Wells Fargo Capital C		Delaware
Wells Fargo Capital I		Delaware


		Jurisdiction of Incorporation
Subsidiary		or Organization
Wells Fargo Capital Holdings, Inc.		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 Cash Centers, Inc.		Nevada
Wells Fargo Cedar Creek, LLC		Delaware
Wells Fargo Central Bank		California
Wells Fargo Central Pacific Holdings, Inc.		California
Wells Fargo Century, Inc.		New York
Wells Fargo Community Development Corporation		Nevada
Wells Fargo Community Development Enterprises, Inc.		Nevada
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		Delaware
Wells Fargo Distribution Finance, LLC		Delaware
Wells Fargo Energy Capital, Inc.		Texas
Wells Fargo Equipment Finance Company		Canada
Wells Fargo Equipment Finance, Inc.		Minnesota
Wells Fargo Equity Capital, Inc.		California
Wells Fargo Escrow Company, LLC		Iowa
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 Auto Owner Trust 2004-A		Delaware
Wells Fargo Financial Auto Owner Trust 2005-A		Delaware
Wells Fargo Financial Bank		South Dakota
Wells Fargo Financial California, Inc.		Colorado
Wells Fargo Financial Canada Corporation		Canada
Wells Fargo Financial CAR LLC		Delaware
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


		Jurisdiction of Incorporation
Subsidiary		or Organization
Wells Fargo Financial Indiana, Inc.		Indiana
Wells Fargo Financial Information Services, Inc.		Iowa
Wells Fargo Financial Investments, 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 Florida, LLC		Florida
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
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 Receivables, LLC		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


		Jurisdiction of Incorporation
Subsidiary		or Organization
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
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 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 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
Wells Fargo Insurance Services, Inc.		Delaware
Wells Fargo Insurance Wyoming, Inc.		Wyoming
Wells Fargo Insurance, Inc.		Minnesota


		Jurisdiction of Incorporation
Subsidiary		or Organization
Wells Fargo Insurance Services of West Virginia, Inc.		West Virginia
Wells Fargo Insurance Services Southeast, Inc.		Florida
Wells Fargo International Commercial Services Limited		Hong Kong
Wells Fargo Investment Group, Inc.		Delaware
Wells Fargo Investments, LLC		Delaware
Wells Fargo of California Insurance Services, Inc.		California
Wells Fargo Preferred Capital, Inc.		Iowa
Wells Fargo Private Client Funding, Inc.		Delaware
Wells Fargo Private Investment Advisors, LLC		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 Limited		United Kingdom
Wells Fargo Securities, LLC		Delaware
Wells Fargo Securitisation Services Limited		United Kingdom
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 Ventures, LLC		Delaware
Wells Fargo Wind Holdings, LLC		Delaware
Wells Fargo, Ltd.		Hawaii
WF Deferred Compensation Holdings, Inc.		Delaware
WF National Bank South Central		United States
WFC Holdings Corporation		Delaware
WFI Insurance Agency Montana, Inc.		Montana
WFI Insurance Agency Washington, Inc.		Washington
WF-KW, LLC		Delaware
WFLC Subsidiary, LLC		Delaware
Whippet Funding, LLC		Delaware
William Pitt Mortgage, LLC		Delaware
Windward Home Mortgage, LLC		Delaware
Winmark Financial, LLC		Delaware
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 (the “Company”), of our report dated February 25, 2008, with respect to: (a) the consolidated balance sheet of Wells Fargo & Company and Subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of income, changes in stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2007; and (b) the effectiveness of internal control over financial reporting as of December 31, 2007; which reports appear in the Company’s December 31, 2007 Annual Report on Form 10-K. Our report on the aforementioned consolidated financial statements refers to a change in the method of accounting for income taxes, leveraged lease transactions, certain mortgages held for sale and retained interests, and provided additional disclosure regarding the measurement of fair value for financial assets and liabilities in 2007 and refers to a change in the method of accounting for residential mortgage servicing rights, stock-based compensation, and pensions in 2006.


Registration
Statement Number	Form	Description

333-76330	S-3	Deferred Compensation Plan for Independent Contractors
333-103711	S-3	Universal Shelf 2003
333-135006	S-3	Universal Shelf 2006
333-138793	S-3	Wells Fargo Direct Purchase and Dividend Reinvestment Plan
333-68512	S-4	Acquisition Registration Statement
333-115993	S-4	Acquisition Registration Statement
333-121545	S-4/S-8	First Community Capital Corporation
333-83604	S-4/S-8	Tejas Bancshares, Inc.
033-57904	S-4/S-8	Financial Concepts Bancorp, Inc.
333-63247	S-4/S-8	Former Wells Fargo & Company
333-37862	S-4/S-8	First Security Corporation
333-45384	S-4/S-8	Brenton Banks, Inc.
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
333-103776	S-8	Long-Term Incentive Compensation Plan
333-128598	S-8	Long-Term Incentive Compensation Plan
333-103777	S-8	PartnerShares Plan
333-123241	S-8	401(k) Plan
333-105091	S-8	Directors Stock Compensation and Deferral Plan
333-54354	S-8	Deferred Compensation Plan
333-115994	S-8	Deferred Compensation Plan
333-142941	S-8	Deferred Compensation Plan
333-123243	S-8	Wells Fargo Stock Purchase Plan

/s/ KPMG LLP
San Francisco, California
February 29, 2008

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 PHILIP J. QUIGLEY, 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, 2007, 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 26th day of February, 2008.



/s/ JOHN S. CHEN		/s/ NICHOLAS G. MOORE
/s/ LLOYD H. DEAN		/s/ PHILIP J. QUIGLEY
/s/ SUSAN E. ENGEL		/s/ DONALD B. RICE
/s/ ENRIQUE HERNANDEZ, JR.		/s/ JUDITH M. RUNSTAD
/s/ ROBERT L. JOSS		/s/ STEPHEN W. SANGER
/s/ RICHARD M. KOVACEVICH		/s/ JOHN G. STUMPF
/s/ RICHARD D. McCORMICK		/s/ SUSAN G. SWENSON
/s/ CYNTHIA H. MILLIGAN		/s/ MICHAEL W. WRIGHT

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, 2007, 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 29, 2008


	/s/ JOHN G. STUMPF
	John G. Stumpf
	President and Chief Executive Officer

Exhibit 31(b)

CERTIFICATION

I, Howard I. Atkins, certify that:

	1.		I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2007, 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

	(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 29, 2008


	/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, 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, 2007, (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
	President and Chief Executive Officer Wells Fargo & Company February 29, 2008

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, 2007, (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 29, 2008