PART I– FINANCIAL INFORMATION

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

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

Our company earned $3.1$3.3 billion in third quarter 2010, our highest quarterly net income ever, with $0.60 diluted earnings per common share, compared with $3.2 billion ($0.550.56 diluted earnings per common share) in secondthird quarter 2010, compared with $3.2 billion ($0.57 diluted earnings per common share) in second quarter 2009. This is the fourth time since the Wachovia merger that quarterly net income was greater than $3.0 billion. Net income for the first half ofnine months ended September 30, 2010 was $5.6$8.9 billion ($1.001.60 diluted earnings per common share), compared with $6.2$9.5 billion ($1.131.69 diluted earnings per common share) forin the first halfsame period of 2009. Despite declining loan demand since early last yearTotal revenue of $20.9 billion in third quarter 2010 was down 7% from third quarter 2009, reflecting lower net interest income, the impact of changes to Regulation E and related overdraft policy changes, and lower mortgage hedging results in secondbanking results. Net interest income of $11.1 billion was down 5% from third quarter total revenue2009 driven primarily by the continued reduction of our non-strategic loan portfolios. Third quarter 2010 earnings reflected the success of the Wachovia merger and pre-tax pre-provision profit remained strong at $21.4 billion and $8.6 billion, respectively. Year-over-year growth in the franchise was driven bybenefits of our diverse businesses including commercial real estate (CRE) brokerage, wealth management, asset-based lending, merchant services, debit card and global remittance.steady commitment to our core business of helping customers

Significant items (pre-tax impact) in secondthird quarter 2010 included:

The Wachovia merger has met or exceeded our merger with Wachovia, we have earned cumulative profitsexpectations in terms of $17.9 billion reflecting the breadthlower credit losses, more abundant revenue synergies and integration savings. We achieved approximately 85% of our business modeltargeted run-rate annual cost savings of $5.0 billion by the end of third quarter 2010, and the power of the consolidation with Wachovia. Merger integration activitieswe are proceeding on track and the combined company continued to produce financial results including revenue synergies better than our original expectations. We currently expect aggregate merger costs of approximately $5.7 billion ($3.0 billion in aggregate through June 30, 2010). Integration costs were $498 million in second quarter 2010. We currently project $600 million to $650 million in merger costs per quarter in the third and fourth quarters of 2010, before these costs decline in 2011. We continue to expect to achieve $5.0 billion in annual100% of targeted cost savings upon completing the merger integration. We have achieved approximately 80% of run-rate cost savings by the end of second quarter 2010, and expect to achieve 90% by year-end 2010.integration in 2011.

Our cross-sell at legacy Wells Fargo set a record in secondthird quarter 2010 with 6.06 Wells Fargo6.08 products for retail banking households. Our goal is eight products per customer, which is approximately half of our estimate of potential demand. One of every four of our legacy Wells Fargo retail banking households has eight or more products and our average middle-market commercial banking customer has almost eight products. Wachovia retail bank households hadhousehold cross-sell continued to grow to an average of 4.88 Wachovia4.91 products. We believe there is potentially significant opportunity for growth from an increase in cross-sell to Wachovia retail bank households. For legacy Wells Fargo, our average middle-market commercial banking customer had an average of 7.7 products and an average of 6.4 products for Wholesale Banking customers. Business banking cross-sell offers another potential opportunity for growth, with cross-sell of 3.88up to 3.97 products atin the legacy Wells Fargo.Fargo footprint, including Wells Fargo and Wachovia customers.

We continued taking actions to build capital and further strengthen our balance sheet, including reducing previously identified non-strategic and liquidating loan portfolios, (including the Wells Fargo Financial liquidating portfolio), which declined by $6.9$46.8 billion in second quarter 2010 and $40.6 billion cumulatively since the Wachovia acquisition. Weacquisition and $6.2 billion in third quarter 2010 to $119.1 billion at September 30, 2010. Our capital ratios grew significantly built capital in secondthird quarter 2010, driven by strong earnings.internal capital generation, with Tier 1 common equity reaching 8.01%, up 40 basis points from second quarter 2010, and Tier 1 capital at 10.90%. The Tier 1 leverage ratio increased to 9.01%. Our capital ratios at JuneSeptember 30, 2010, were higher than they were prior to the Wachovia acquisition. Our capital ratios continuedWhile Basel III requirements are still not final, we expect to build rapidly, withbe above a 7% Tier 1 common reaching 7.61%, up 52 basis points from first quarter 2010, and Tier 1 capital at 10.51%, even withequity ratio under the May 20, 2010, purchase of $540 million of Wells Fargo warrants auctioned byproposed rules, as we currently understand them, within the U.S. Treasury. The Tier 1 leverage ratio increased to 8.66%.next few quarters. See the “Capital Management” section in this Report for more information regarding Tier 1 common equity.

As we have stated in the past, successful companies must invest in their core businesses and maintain strong balance sheets to consistently grow over the long term. In secondthird quarter 2010, we opened 13 retail banking stores for a retail network total of 6,4456,335 stores. We converted 87193 Wachovia banking stores in California in second quarter 2010 and Texas and Kansas store conversions took place in July 2010.

offs less provision for credit losses) in secondthird quarter 2010. Absent significant deterioration in the economy, we currently expect the positive trend in charge-offsanticipate that reserve levels will continue over the coming year and expect future reductions in the allowance for loan losses.

The improvement in credit quality was also evident in the portfolio of PCI loans, which consists of loans acquired through the Wachovia merger that were deemed to have probable loss and therefore written down at acquisition. Overall this portfolio has continued to perform in line with or better than original expectations at the time of the Wachovia merger. In particular, the Pick-a-Pay portfolioexpectations. The commercial, CRE, foreign and other consumer portfolios continued to have positive performance trends, resulting in a $1.8 billioncombined $639 million transfer from nonaccretable difference to accretable yield in secondthird quarter 2010. This increase in the accretable yield for the Pick-a-Pay portfolio is expected to be recognized as a yield adjustment to income over the remaining life of these loans, which is estimated to have a weighted-average life of eight years.loans. In addition, for commercial PCI loans, due to increased payoffs and dispositions, we reduced the associated nonaccretable difference by $506$202 million (reflected in income in the secondthird quarter).

Nonaccrual loans increased 2% from second quarter 2010, ending the quarter at $28.3 billion. The continued improvementmodest growth in credit performancethird quarter 2010 occurred primarily in commercial loans, while nonaccruals in many other portfolios were essentially flat or down. For additional information, see “Risk Management — Credit Risk Management — Nonaccrual Loans and Other Nonperforming Assets” and Note 5 (Loans and Allowance for Credit Losses) in this Report.

In working with our customers, foreclosure is always a resultlast resort, and we work hard to find other solutions through multiple discussions with customers over many months before proceeding to foreclosure. Since January 2009 we have helped over 556,000 borrowers avoid foreclosure through active and trial modifications, and have forgiven $3.5 billion of principal. Over the same period, we completed fewer than 230,000 owner-occupied foreclosure sales. We believe we have a slowly improving economy coupled with actions taken by us overhigh quality residential mortgage servicing portfolio and that our repurchase exposure related to mortgage securitizations is manageable and that our liability for mortgage loan repurchase losses of $1.3 billion at September 30, 2010, is adequate. Repurchase demands in third quarter 2010 were down linked quarter in both number and balance. See the past several years“Risk Management — Credit Risk Management — Nonaccrual Loans and Other Nonperforming Assets, — Liability for Mortgage Loan Repurchase Losses and — Risks Relating to improve underwriting standards, mitigate lossesServicing Activities” sections and exit portfolios with unattractive credit metrics. We have seen the positive impactNote 1 (Summary of these actionsSignificant Accounting Changes — Subsequent Events) to Financial Statements in the current quarterthis Report for additional information regarding our foreclosure processes, mortgage repurchase exposure and in projected losses for future quarters.servicing activities.

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

Revenue was $21.4$20.9 billion in secondthird quarter 2010 essentially flat from first quarter 2010, and down 5% from secondcompared with $22.5 billion in third quarter 2009. Revenue for the first halfnine months of 2010 was $42.8$63.7 billion down 2% fromcompared with $66.0 billion in the same period a year ago. Net gains on mortgage loan origination/sales activities were up $835 million from a year ago, reflecting strong mortgage originations. Mortgage servicing income was down $1.4 billion from the prior year, primarily due to a decline in hedge carry income. Reflecting the breadth and growth potential of the Company’s business model, many businesses had double-digit revenue growth from secondthird quarter 2009, including merchant services, debit card, private student lending, capital finance, commercial real estate brokerage (deal flow), asset-based lending (loan volume(CRE) and syndications), merchant services (processing volume), debit cards (increased account activity) and wealth management. Mortgagereal estate investment banking revenues in second quarter 2010 were down 34% from the prior year due to lower origination volumes and a net increase in the mortgage loan repurchase reserve.(Eastdil Secured). Net interest income of $11.4$11.1 billion declined only 3%5% from a year ago despite the 7%compared with a 6% decline in average loans.

Noninterest expense of $12.7$12.3 billion in secondthird quarter 2010 was flatup 5% from a year ago. SecondThird quarter 2010 expenses included $498$476 million of merger integration costs, compared with $244$249 million a year ago, and $137 million of severance costs related to the Wells Fargo Financial restructuring. Operating losses were $627 million in second quarter 2010, up $468 million from the prior year, predominantly due to additional litigation accruals.ago. Our expenses reflect, in addition to merger integration and credit resolution expenses, our continued investment for long-term growth, hiring in regional and commercial banking as we apply the Wells Fargo business model throughout legacy Wachovia markets, and investing in technology to improve service across the franchise. As of secondthird quarter 2010, we have already realized approximately 80%85% of our targeted projected$5.0 billion annual run-rate cost savings from the Wachovia merger. The efficiency ratio was 58.7% in third quarter 2010 compared with 59.6% in second quarter 2010 compared with 56.5%and 52.0% in first quarter 2010 and 56.4% in secondthird quarter 2009, with the increase largelyfrom a year ago due to additional merger expenses, litigation accrualslower net interest income and Wells Fargo Financial’s restructuring costs.lower mortgage banking revenue.

NET INTEREST INCOME

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

Net interest income on a taxable-equivalent basis was $11.6$11.3 billion in secondthird quarter 2010 and $11.9 billion in secondthird quarter 2009, reflecting a decline in average loans, including a reduction in loans in the liquidating portfolios. Continued strong growth in consumer and commercial checking and savings accounts partially offset the impact on income from the decline in loans. The net interest margin was 4.38%4.25% in secondthird quarter 2010 updown from 4.30%4.36% a year ago, due to additionalthe continued run-off of non-strategic loan portfolios (including Pick-a-Pay mortgage, legacy Wells Fargo Financial indirect auto, and commercial and CRE PCI loans), which tend to have higher yields but also higher charge-offs than loans in our on-going loan resolution income and the benefit of lower deposit and market funding costs. portfolios.

Average earning assets were $1.1 trillion in secondthird quarter 2010, flat compared with secondthird quarter 2009. Average loans decreased to $772.5$759.5 billion in secondthird quarter 2010 from $833.9$810.2 billion a year ago. We continued to supply significant amounts of credit to consumers and businesses in secondthird quarter 2010, although loan demand remained soft. We continued to reduce high-risk/non-strategic loans (including Pick-a-Pay mortgage, legacy Wells Fargo Financial debt consolidation, and commercial and commercial real estate PCI loans), which were down $26.1 billion in second quarter 2010 from a year ago.2010. Average mortgages held for sale (MHFS) were $32.2$38.1 billion in secondthird quarter 2010, down from $43.2$40.6 billion a year ago. Average debt securities available for sale were $157.6$158.3 billion in secondthird quarter 2010, down from $179.0$186.3 billion a year ago.

Core deposits are a low-cost source of funding and thus have an important contributor toinfluence on net interest income and the net interest margin. Core deposits include noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). Average core deposits declinedincreased to $761.8$772.0 billion in secondthird quarter 2010 from $765.7$759.3 billion in secondthird quarter 2009, and funded 99%102% and 92%94% of average loans in the same periods, respectively. Average checking and savings deposits, typically the lowest cost deposits, represented about 88%89% of our average core deposits, one of the highest percentages in the industry. Average certificatesCertificates of deposit (CDs) declined $63$37.6 billion from secondthird quarter 2009, predominantly the result of $57including approximately $21 billion of higher-cost Wachovia CDs maturing,that matured, yet total average core deposits were down only $3.9up $23.9 billion from a year ago. Of average core deposits, $672.0$686.9 billion represent transaction accounts or low-cost savings accounts from consumer and commercial customers, which increased 10%9% from $613.3$629.6 billion in secondthird quarter 2009. Total average retail core deposits, which exclude Wholesale Banking core deposits and retail mortgage escrow deposits, decreased to $574.4$571.1 billion for secondthird quarter 2010 from $596.6$584.4 billion a year ago. Average mortgage escrow deposits were $25.7$30.2 billion in secondthird quarter 2010, compared with $32.0$28.7 billion a year ago. Average certificates of deposits decreased to $89.8$85.0 billion in secondthird quarter 2010 from $152.4$129.7 billion a year ago. Total average interest-bearing deposits decreased to $635.4were $631.2 billion in secondthird quarter 2010 from $638.0compared with $633.4 billion a year ago.

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

NONINTEREST INCOME