SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2013

or

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

For the transition period from                      to                                 

Commission file number 1-31557

Wachovia Preferred Funding Corp.

(Exact name of registrant as specified in its charter)

Delaware	56-1986430
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer     Identification No.)

90 South 7th Street, 13^th Floor

Minneapolis, Minnesota 55402

(Address of principal executive offices)

(Zip Code)

(855) 825-1437

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No ¨

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer  ¨	Accelerated filer ¨	Non-accelerated filer  x	Smaller reporting company  ¨
		(Do not check if a smaller   reporting company.)

Indicate by check mark whether the registrant is a shell company (defined in Rule 12b-2 of the Exchange Act).  Yes ¨  No x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes ¨  No ¨

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

As of April 30, 2013, there were 99,999,900 shares of the registrant’s common stock outstanding.

FORM 10-Q

CROSS-REFERENCE INDEX

PART I	Financial Information
Item 1.	Financial Statements	Page
	Consolidated Statement of Income	25
	Consolidated Balance Sheet	26
	Consolidated Statement of Changes in Stockholders’ Equity	27
	Consolidated Statement of Cash Flows	28
	Notes to Financial Statements
	1   -   Summary of Significant Accounting Policies	29
	2   -   Loans and Allowance for Credit Losses	30
	3   -   Fair Values of Assets and Liabilities	43
	4   -   Common and Preferred Stock	44
	5   -   Transactions with Related Parties	46
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (Financial Review)
	Summary Financial Data	2
	Overview	3
	Earnings Performance	5
	Balance Sheet Analysis	7
	Risk Management	8
	Critical Accounting Policy	21
	Current Accounting Developments	21
	Forward-Looking Statements	22
	Risk Factors	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	24
PART II	Other Information
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 6.	Exhibits	47
Signature		48
Exhibit Index		47

1

PART I – FINANCIAL INFORMATION

Summary Financial Data
	Quarter ended							% Change March 31, 2013 from
(in thousands, except per share data)	Mar. 31,   2013			Dec. 31, 2012		Mar. 31, 2012		Dec. 31, 2012			Mar. 31, 2012
For the period
Net income	$	171,440			110,916		150,015		55	%		14
Net income available to common stockholders		125,426			64,180		100,429		95			25
Diluted earnings per common share		1.25			0.64		1.00		95			25
Profitability ratios (annualized)
Return on average assets		5.05	%		3.14		4.40		61			15
Return on average stockholders’ equity		5.23			3.28		4.45		59			18
Average stockholders’ equity to assets		96.44			95.73		98.70		1			(2	)
Common dividend payout ratio (1)		163.44			194.76		150.00		(16	)		9
Dividend coverage ratio (2)		905.20			576.50		766.30		57			18
Total revenue	$	200,017			213,677		217,276		(6	)		(8	)
Average loans		13,000,913			12,695,521		12,259,816		2			6
Average assets		13,775,883			14,035,717		13,726,605		(2	)		-
Net interest margin		5.89	%		6.05		6.26		(3	)		(6	)
Net loan charge-offs	$	38,584			55,168		53,173		(30	)		(27	)
As a percentage of average total loans (annualized)		1.20	%		1.73		1.74		(31	)		(31	)
At period end
Loans, net of unearned income	$	12,510,908			13,550,474		12,639,638		(8	)		(1	)
Allowance for loan losses		281,548			309,220		309,913		(9	)		(9	)
As a percentage of total loans		2.25	%		2.28		2.45		(1	)		(8	)
Assets	$	13,315,128			14,068,785		13,679,834		(5	)		(3	)
Total stockholders’ equity		13,217,297			13,296,871		13,452,872		-			(2	)
Total nonaccrual loans and foreclosed assets		467,041			460,235		414,133		1			13
As a percentage of total loans		3.73	%		3.40		3.28		10			14
Loans 90 days or more past due and still accruing (3)	$	24,019			29,777		21,771		(19	)		10

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

(2) The dividend coverage ratio reflects the extent that funds from operations (defined as net income, as adjusted for depreciation of real or personal property used to generate income and gains and losses on the sale of real estate) exceed dividends on the Series A preferred securities and parity preferred securities. With respect to dividends, the Series A preferred securities rank on parity with the Series B and Series D preferred securities. The certificates of designation for these securities limit, among other matters, our ability to pay dividends on our common stock or other junior securities or make any payment of interest or principal on our Bank lines of credit if the dividend coverage ratio for the last four quarters is less than 150%.

(3) The carrying value of PCI loans contractually 90 days or more past due is excluded. These PCI loans are considered to be accruing due to the existence of the accretable yield and not based on consideration given to contractual interest payments.

2

This Report on Form 10-Q for the quarter ended March 31, 2013, including 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. Factors that could cause our actual results to differ materially from our forward-looking statements are described in this Report, including in the “Forward-Looking Statements” section and the “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2012 (2012 Form 10-K), filed with the Securities and Exchange Commission (SEC) and available on the SEC’s website at www.sec.gov and on Wells Fargo’s website, www.wellsfargo.com/invest_relations/filings/preferred-funding.

“Wachovia Funding”, “we”, “our” and “us” refer to Wachovia Preferred Funding Corp. “Wachovia Preferred Holding” refers to Wachovia Preferred Funding Holding Corp., the “Bank” refers to Wells Fargo Bank, National Association including predecessor entities, “Wachovia” refers to Wachovia Corporation, a North Carolina corporation, and “Wells Fargo” refers to Wells Fargo & Company.

Financial Review

Overview

Wachovia Funding is engaged in acquiring, holding and managing domestic mortgage assets and other authorized investments that generate net income for distribution to our shareholders. We are classified as a real estate investment trust (REIT) for income tax purposes. As of March 31, 2013, we had $13.3 billion in assets, which included $12.5 billion in loans.

We are a direct subsidiary of Wachovia Preferred Holding and an indirect subsidiary of Wells Fargo and the Bank. At March 31, 2013, the Bank was considered “well-capitalized” under risk-based capital guidelines issued by federal banking regulators.

REIT Tax Status

For the tax year ended December 31, 2012, we complied with the relevant provisions of the Internal Revenue Code of 1986, as amended to be taxed as a REIT. These provisions for qualifying as a REIT for federal income tax purposes are complex, involving many requirements, including among others, distributing at least 90% of our REIT taxable income to shareholders and satisfying certain asset, income and stock ownership tests. To the extent we meet those provisions, with the exception of the income of our taxable REIT subsidiary, we will not be subject to federal income tax on net income. For the period ended March 31, 2013, we believe that we continued to satisfy each of these requirements and therefore continued to qualify as a REIT. We continue to monitor each of these complex tests.

In the event we do not continue to qualify as a REIT, we believe there should be minimal adverse effect of that characterization to us or to our shareholders:

• From a shareholder’s perspective, the dividends we pay as a REIT are ordinary investment income not eligible for the dividends received deduction for corporate shareholders or for the favorable qualified dividend tax rate applicable to non-corporate taxpayers. If we were not a REIT, dividends we pay generally would qualify for the dividends received deduction for corporate shareholders and the favorable

qualified dividend tax rate applicable to non-corporate taxpayers.

• In addition, we would no longer be eligible for the dividends paid deduction, thereby creating a tax liability for us. Wells Fargo agreed to make, or cause its subsidiaries to make, a capital contribution to us equal in amount to any income taxes payable by us. Therefore, we believe a failure to qualify as a REIT would not result in any net capital impact to us.

Financial Performance

We earned $171.4 million in first quarter 2013, or $1.25 diluted earnings per common share, compared with $150.0 million, or $1.00 per common share, in first quarter 2012. The 2013 increase in net income was primarily attributable to a lower provision for credit losses, partially offset by a decrease in interest income.

Loans

Total loans, which consist of loan participation interests, were $12.5 billion at March 31, 2013, compared with $13.6 billion at December 31, 2012. Loans represented approximately 94% and 96% of assets at March 31, 2013 and December 31, 2012, respectively. Annualized loan pay-downs and pay-offs represented 29.8% and 25.6% of loan balances during first quarter 2013 and 2012, respectively. We did not purchase loans in first quarter 2013. In first quarter 2012, we purchased $943.5 million of consumer loans from the Bank. If in future periods we do not reinvest loan pay-downs at sufficient levels by purchasing loans, management may request our board of directors to consider a return of capital to holders of our common stock.

Purchased credit-impaired (PCI) loans represented less than 1 percent of total loans at both March 31, 2013 and December 31, 2012. See Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2012 Form 10-K for additional information.

3

Credit quality continued to improve during first quarter 2013 reflecting the benefit of a slowly improving economy:

• net charge-offs were $38.6 million in first quarter 2013 (1.20% of average loans), compared with $53.2 million in first quarter 2012 (1.74% of average loans);

• nonperforming assets were $467.0 million at March 31, 2013, compared with $460.2 million at December 31, 2012; and

• loans 90 days or more past due and still accruing were $24.0 million at March 31, 2013, compared with $29.8 million at December 31, 2012.

Our $13.1 million provision for credit losses in first quarter 2013 was $38.2 million less than first quarter 2012. See “– Risk Management – Credit Risk Management” section in this Report for more information.

Capital Distributions

Dividends declared to holders of our preferred securities totaled $46.0 million in first quarter 2013, which included $13.6 million in dividends on our Series A preferred securities held by non-affiliated investors. Dividends declared to holders of our preferred securities were $49.6 million in first quarter 2012, which included $13.6 million in dividends on our Series A preferred securities.

Distributions made to holders of our common stock totaled $205.0 million in first quarter 2013. Distributions made to holders of our common stock in first quarter 2012 totaled $150.0 million.

Regulatory Capital

In June 2012, federal banking agencies, including the Board of Governors of the Federal Reserve System (FRB), jointly published notices of proposed rulemaking, which would substantially amend the risk-based capital rules for banks. The proposed capital rules are intended to implement in the U.S. the Basel III regulatory capital reforms (Basel III NPR), comply with changes required by the Dodd-Frank Act, and replace the existing Basel I-based capital requirements. Based on our current interpretation, we believe the Wachovia Funding Series A preferred securities would no longer constitute Tier 1 capital for Wells Fargo or the Bank under the Basel III NPR. Although the proposed rules contemplated an effective date of January 1, 2013, with phased in compliance requirements, the rules have not yet been finalized by the U.S. banking regulators due to the volume of comments received and concerns expressed during the comment period. The FRB may not adopt the Basel III NPR as proposed or may make additional changes to the applicable Tier 1 capital rules prior to final adoption. In the event the FRB’s applicable final rules regarding Tier 1 capital treatment are the same as the Basel III NPR or otherwise result in the Series A preferred securities no longer constituting Tier 1 capital for Wells Fargo or the Bank, Wachovia Funding may determine to redeem the Wachovia Funding Series A preferred securities due to a Regulatory Capital Event. See also “Risk Factors” and “Note 4 (Common and Preferred Stock)” to Financial Statements in this Report.

4

Earnings Performance

Net Income

We earned net income of $171.4 million and $150.0 million in first quarter 2013 and 2012, respectively. The 2013 increase in net income was primarily attributable to a lower provision for credit losses, partially offset by a decrease in interest income.

Interest Income

Interest income was $200.2 million in first quarter 2013, compared with $216.9 million a year ago. The decrease was primarily driven by a decrease in the yield on total interest-earning assets.

The average yield on total interest-earning assets was 5.89% in first quarter 2013, compared with 6.26% a year ago. The decrease in the average yield partially resulted from continued declines in discount accretion on purchased consumer loans. Interest income included net discount accretion of $23.1 million and $38.7 million in first quarter 2013 and 2012, respectively. The decrease in discount accretion was primarily driven by a decrease in loan pay-downs and pay-offs on those loans purchased with a discount as well as an increase in amortization of purchase premiums

associated with recent loan purchases. Moreover, the reinvestment of higher yielding consumer loan pay-downs and pay-offs into lower yielding assets also contributed to the decrease in average yield.

We expect continued downward pressure on our average yield on total interest-earning assets as we reinvest proceeds from loan payments in the low interest rate environment and we also expect to recognize less discount accretion due to the passage of time from when the loans purchased at a discount were acquired. Wachovia Funding has the ability to increase interest income over time by reinvesting loan payments in real estate 1-4 family loans, commercial loans and other REIT-eligible assets; however interest income in any one period can be impacted by a variety of factors, including mix and size of the earning asset portfolio. See the “Risk Management—Asset/Liability Management—Interest Rate Risk” section in this Report for more information on interest rates and interest income.

Table 1 presents the components of earning assets and related average yield to provide an analysis of year-over-year changes that influenced interest income.

Table 1: Interest Income
	Quarter ended March 31,
					2013							2012
(in thousands)	Average balance		Interest income		Yields			Average balance		Interest income		Yields
Commercial loans (1)	$	2,497,626		15,518		2.52	%	$	1,294,510		7,771		2.41	%
Real estate 1-4 family		10,503,287		184,202		7.08			10,965,306		208,523		7.62
Interest-bearing deposits in banks and other interest-earning assets		742,148		464		0.25			1,631,314		624		0.15
Total interest-earning assets	$	13,743,061		200,184		5.89	%	$	13,891,130		216,918		6.26	%

(1)  Includes taxable-equivalent adjustments.

Interest Expense

Wachovia Funding and its subsidiaries have $2.2 billion of lines of credit with the Bank. At March 31, 2013, the outstanding balance under the Bank lines of credit was $27.2 million. During first quarter 2013, we applied a portion of loan pay-downs and pay-offs to reduce the amount borrowed on our lines of credit. Interest expense related to borrowings on the lines of credit was $353 thousand in first quarter 2013 on average borrowings of $376.1 million at an annualized weighted average rate of 0.38%. During first quarter 2012, Wachovia Funding had no amount outstanding on its lines and therefore did not incur interest expense.

Provision for Credit Losses

The provision for credit losses was $13.1 million in first quarter 2013, compared with $51.3 million a year ago. Primary drivers of the lower provision were decreased net-charge-offs and improvement in the credit quality of the portfolios and related loss estimates as seen in lower loss trends. For additional information on the allowance for credit

losses, please see “Balance Sheet Analysis—Allowance for Loan Losses” and “Risk Management—Credit Risk Management—Allowance for Credit Losses” sections in this Report.

Noninterest Income

Noninterest income in first quarter 2013 was $187 thousand, compared with $360 thousand a year ago. In first quarter 2013 and 2012, noninterest income consisted primarily of fees related to loans.

Noninterest Expense

Noninterest expense in first quarter 2013 was $15.3 million, compared with $15.9 million in first quarter 2012. Noninterest expense primarily consists of loan servicing costs, management fees, and foreclosed assets expense.

Loan servicing costs were $9.7 million and $10.8 million in first quarter 2013 and 2012 respectively. The decrease in these costs reflected an increased percentage of commercial loans with lower servicing rates than residential loans.

5

Management fees were $1.7 million in first quarter 2013, compared with $1.9 million a year ago. Management fees represent reimbursements made to the Bank for general overhead expenses incurred on our behalf. The decrease in management fees related to a decrease in the rates of certain technology system and support expenses.

Foreclosed assets expense was $3.4 million in first quarter 2013 and $2.3 million a year ago. Substantially all of our foreclosed assets consist of residential 1-4 family real estate assets.

Income Tax Expense

Income tax expense, which is based on the pre-tax income of Wachovia Preferred Realty, LLC (WPR), our taxable REIT subsidiary, was $128 thousand in first quarter 2013, compared with $89 thousand a year ago. WPR holds certain cash investments and previously held certain interest rate swaps.

6

Balance Sheet Analysis

Total Assets

Our assets predominantly consist of consumer and commercial loans, although we have the authority to hold assets other than loans. Total assets were $13.3 billion at March 31, 2013, and $14.1 billion at December 31, 2012.

Cash and Cash Equivalents

Cash and cash equivalents were $918.1 million at March 31, 2013, and $642.9 million at December 31, 2012.

Loans

Loans, net of unearned income decreased $1.1 billion to $12.5 billion at March 31, 2013, compared with $13.6 billion at December 31, 2012, primarily reflecting pay-downs and charge-offs across the entire portfolio. We did not purchase loans in first quarter 2013. At March 31, 2013 and December 31, 2012, consumer loans represented 81% of total loans and commercial loans represented the balance of our loan portfolio. To the extent we reinvest loan pay-downs or make purchases, we anticipate that we will acquire consumer and commercial loans and other REIT-eligible assets.

Allowance for Loan Losses

The allowance for loan losses decreased $27.7 million to $281.5 million at March 31, 2013, from $309.2 million at December 31, 2012. The decrease in the allowance was primarily due to lower levels of inherent credit loss in the portfolio compared with levels existing at December 31, 2012.

At March 31, 2013, the allowance for loan losses included $260.2 million for consumer loans and $21.3 million for commercial loans. The total allowance reflects management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. See “Risk Management—Credit Risk Management—Allowance for Credit Losses” section in this Report for a description of how management estimates the allowance for loan losses and the allowance for unfunded credit commitments.

Accounts Receivable/Payable—Affiliates, Net

The accounts payable and receivable from affiliates result from intercompany transactions in the normal course of business related to net loan pay-downs, interest receipts, servicing costs, management fees and other transactions with the Bank.

Lines of Credit with Bank

We drew upon our lines of credit to finance certain loan purchases in 2012. At March 31, 2013, we had $2.2 billion of lines of credit with the Bank, of which $27.2 million was outstanding.

Dividends Payable—Affiliates

Dividends payable to affiliates was $32.4 million at March 31, 2013, and represented dividends declared during first quarter 2013, payable primarily to Wachovia Preferred Holding, but not paid until April 1, 2013.

7

Risk Management

We use Wells Fargo’s risk management framework to manage our credit, interest rate, market and liquidity risks, and funding risks.

Credit Risk Management

Loans represent the largest component of assets on our balance sheet and their related credit risk is a significant

risk we manage. We define credit risk as the risk of loss associated with a borrower or counterparty default (failure to meet obligations in accordance with agreed upon terms).

The table below represents loans by segment and class of financing receivable and the weighted average maturity for those loans calculated using contractual maturity dates.

Table 2: Total Loans Outstanding by Portfolio Segment and Class of Financing Receivable and Weighted Average Maturity

	Loans outstanding				Weighted average maturity in years
	Mar. 31,		Dec. 31,		Mar. 31,		Dec. 31,
(in thousands)	2013		2012		2013		2012
Commercial:
Commercial and industrial	$	83,456		99,207		1.9		1.6
Secured by real estate		2,333,974		2,534,064		3.4		3.5
Total commercial		2,417,430		2,633,271		3.4		3.5
Consumer:
Real estate 1-4 family first mortgage		7,484,604		8,137,597		20.1		20.2
Real estate 1-4 family junior lien mortgage		2,608,874		2,779,606		17.0		17.1
Total consumer		10,093,478		10,917,203		19.3		19.4
Total loans	$	12,510,908		13,550,474		16.2		16.3

The discussion that follows provides analysis of the risk elements of our loan portfolios and our credit risk management and measurement practices. See Note 2 (Loans and Allowance for Credit Losses) to Financial Statements in this Report for more analysis and credit metric information.

In order to maintain REIT status, the composition of the loans underlying the participation interests are highly concentrated in real estate.

We continually evaluate and modify our credit policies. Measuring and monitoring our credit risk is an ongoing process that tracks delinquencies, collateral values, Fair Isaac Corporation (FICO) scores, economic trends by geographic areas, loan-level risk grading for certain portfolios (typically commercial) and other indications of credit risk. Our credit risk monitoring process is designed to enable early identification of developing risk and to support our determination of an appropriate allowance for credit losses.

8

LOAN PORTFOLIO BY GEOGRAPHY The following table is a summary of the geographical distribution of our loan

portfolio for the top five states by loans outstanding.

Table 3: Loan Portfolio by Geography
	March 31, 2013
			Real estate		Real estate
			1-4 family		1-4 family				% of
			first		junior lien				total
(in thousands)	Commercial		mortgage		mortgage		Total		loans
Florida	$	249,652		919,560		336,915		1,506,127		12	%
New Jersey		189,342		707,586		497,573		1,394,501		11
Pennsylvania		37,536		902,512		404,520		1,344,568		11
North Carolina		226,239		750,730		197,929		1,174,898		9
California		539,017		576,238		40,090		1,155,345		9
All other states		1,175,644		3,627,978		1,131,847		5,935,469		48
Total loans	$	2,417,430		7,484,604		2,608,874		12,510,908		100	%

COMMERCIAL AND INDUSTRIAL LOANS (C&I) Table 4 summarizes C&I loans by industry. We believe the C&I loan portfolio is appropriately underwritten and diversified. Our credit risk management process for this portfolio primarily focuses on a customers’ ability to repay the loan through

their cash flows. A portion of the loans in our C&I portfolio are unsecured with the remainder secured by short-term assets, such as accounts receivable, inventory and securities, as well as long-lived assets, such as equipment and other business assets. Generally, the collateral securing this portfolio represents a secondary source of repayment.

Table 4: Commercial and Industrial Loans by Industry
	March 31, 2013
			% of
			total
(in thousands)	Total		C&I loans
Real estate lessor	$	22,858		27	%
Public administration		15,421		19
Food and beverage		15,147		18
Healthcare		4,067		5
Textiles/apparel		3,247		4
Industrial equipment		2,542		3
Investors		2,500		3
Leasing		1,723		2
Other		15,951		19
Total loans	$	83,456		100	%

9

COMMERCIAL SECURED BY REAL ESTATE (CSRE) The CSRE portfolio consists of both mortgage loans and construction loans. Table 5 summarizes CSRE loans by state and property type. To identify and manage newly emerging problem loans, we employ a high level of monitoring and

regular customer interaction to understand and manage the risks associated with these loans, including regular loan reviews and appraisal updates. We consider the creditworthiness of the customers and collateral valuations when selecting CSRE loans for purchase.

Table 5: CSRE Loans by State and Property Type
	March 31, 2013
			% of
			total
(in thousands)	CSRE loans		CSRE loans
By state:
California	$	539,064		23	%
North Carolina		222,701		10
Florida		219,904		9
Texas		164,551		7
Georgia		153,679		7
All other states		1,034,075		44
Total loans	$	2,333,974		100	%
By property type:
Office buildings	$	858,801		37	%
Warehouse		375,078		16
Shopping center		249,966		11
Retail establishment (restaurant, stores)		227,047		10
5+ multifamily residence		150,967		6
Manufacturing plant		145,831		6
Real estate collateral pool		83,625		4
Motels/hotels		75,315		3
Institutional		49,239		2
Commercial/industrial (non-residential)		30,242		1
Churches, synagogues, mosques and temples		20,677		1
Research and development		19,376		1
Other		47,810		2
Total loans	$	2,333,974		100	%

10

REAL ESTATE 1-4 FAMILY MORTGAGE LOANS The distribution of real estate 1-4 family mortgages by state and the related combined loan-to-value (CLTV) ratio are presented in Table 6. Our underwriting and periodic review of loans collateralized by residential real property includes appraisals or estimates from automated valuation models (AVMs) to support property values. Additional information about AVMs and our policy for their use can be found in the “Risk Management – Credit Risk Management – Real Estate 1-4 Family Mortgage Loans” section in our 2012 Form 10-K.

We continue to modify real estate 1-4 family mortgage loans to assist homeowners and other borrowers in the current difficult economic cycle. We monitor changes in real estate values and underlying economic or market conditions for all geographic areas of our real estate 1-4 family mortgage portfolio as part of our credit risk management process. For more information on our participation in the U.S. Treasury’s Making Home Affordable (MHA) programs, see the “Risk Management – Credit Risk Management – Real Estate 1-4 Family Mortgage Loans” section in our 2012 Form 10-K.

The Bank and/or other Wells Fargo affiliates act as servicer for predominantly all of our loan portfolio.

Additional information about Wells Fargo mortgage and foreclosure settlements can be found in the “Risk Management – Credit Risk Management – Real Estate 1-4 Family Mortgage Loans” section in our 2012 Form 10-K. We believe these settlements will not have a material impact on our consolidated financial statements.

We monitor the credit performance of our junior lien mortgage portfolio for trends and factors that influence the frequency and severity of loss. In first quarter 2012, we aligned our nonaccrual reporting so that a junior lien is reported as a nonaccrual loan if the related first lien is 120 days past due or is in the process of foreclosure regardless of the junior lien delinquency status in accordance with Interagency Guidance issued by bank regulators. Also, in third quarter 2012 we aligned our nonaccrual and troubled debt reclassification policies in accordance with guidance in the Office of the Comptroller of the Currency (OCC) update to the Bank Accounting Advisory Series (OCC guidance), which requires consumer loans discharged in bankruptcy to be written down to net realizable collateral value and classified as nonaccrual TDRs, regardless of their delinquency status.

Table 6: Real Estate 1-4 Family Mortgage Loans by State and CLTV
	March 31, 2013
	Real estate		Current
	1-4 family		CLTV
(in thousands)	mortgage		ratio (1)
Pennsylvania	$	1,307,032		71	%
Florida		1,256,475		78
New Jersey		1,205,159		72
North Carolina		948,659		70
Virginia		828,664		69
All other states		4,547,489		69
Total loans	$	10,093,478

(1)  Collateral values are generally determined using AVMs and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing large volumes of market data including market comparables and price trends for local market areas.

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HOME EQUITY PORTFOLIOS Our home equity portfolio includes real estate 1-4 family junior lien mortgages secured by real estate. Predominantly all of our junior lien loans are amortizing payment loans with fixed interest rates and repayment periods between 5 to 30 years. Junior lien loans with balloon payments at the end of the repayment term represent less than 1% of our junior lien loans. We frequently monitor the credit performance of our junior lien mortgage portfolio for trends and factors that influence the frequency and severity of loss.

In accordance with Interagency Guidance, junior lien loans are reported as nonaccrual if the related first lien is

120 days past due or is in the process of foreclosure. This action had minimal financial impact as the expected loss content of these loans was already considered in the loan loss allowance. See “Risk Management – Credit Risk Management – Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)” section in this Report for more information.

Table 7 summarizes delinquency and loss rates by state for our home equity portfolio, which reflected the largest portion of our credit losses.

Table 7: Home Equity Portfolio (1)

					% of loans two payments					Loss rate (annualized)
	Outstanding balance				or more past due					Quarter ended
	Mar. 31,		Dec. 31,		Mar. 31,			Dec. 31,		Mar. 31,		Dec. 31,		Sept. 30,		June 30,		Mar. 31,
(in thousands)	2013		2012		2013			2012		2013		2012 (2)		2012 (2)		2012		2012
New Jersey	$	495,964		531,622		5.08	%		5.38		3.78		3.99		7.68		3.21		3.67
Pennsylvania		402,202		428,841		3.46			3.88		1.70		3.50		4.47		2.62		1.36
Florida		336,116		357,586		4.66			5.15		6.48		5.84		8.26		6.54		7.03
Virginia		259,857		277,294		3.29			3.40		3.15		3.40		4.97		3.15		2.50
North Carolina		196,728		208,315		4.32			4.17		1.94		4.71		6.53		3.46		3.60
Other		907,003		963,944		3.48			3.61		2.69		4.48		6.70		3.43		4.27
Total	$	2,597,870		2,767,602		3.98			4.21		3.22		4.32		6.56		3.64		3.82

(1)  Consists of real estate 1-4 family junior lien mortgages, excluding PCI loans of $11,004 thousand at March 31, 2013 and $12,004 thousand at December 31, 2012.

(2)  Reflects the OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be written down to net realizable collateral value, regardless of their delinquency status.

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NONPERFORMING ASSETS (NONACCRUAL LOANS AND FORECLOSED ASSETS) Table 8 summarizes nonperforming assets (NPAs) for each of the last five quarters. We generally place loans on nonaccrual status when:

• the full and timely collection of interest or principal becomes uncertain (generally based on an assessment of the borrower’s financial condition and the adequacy of collateral, if any);

• they are 90 days (120 days with respect to real estate 1-4 family first and junior lien mortgages) past due for

interest or principal, unless both well-secured and in the process of collection;

• part of the principal balance has been charged off;

• effective first quarter 2012, for junior lien mortgages, we have evidence that the related first lien mortgage may be 120 days past due or in the process of foreclosure regardless of the junior lien delinquency status; or

• effective third quarter 2012, performing consumer loans are discharged in bankruptcy, regardless of their delinquency status.

Table 8: Nonperforming Assets (Nonaccrual Loans and Foreclosed Assets)

	Mar. 31,			Dec. 31,		Sept. 30,		June 30,		Mar. 31,
(in thousands)	2013			2012		2012		2012		2012
Nonaccrual loans:
Commercial:
Commercial and industrial	$	-			-		-		-		-
Secured by real estate		18,856			16,270		24,054		22,353		18,803
Total commercial		18,856			16,270		24,054		22,353		18,803
Consumer:
Real estate 1-4 family first mortgage		320,508			306,922		313,389		233,500		235,737
Real estate 1-4 family junior lien mortgage		120,276			129,251		142,896		136,609		152,824
Total consumer (1)		440,784			436,173		456,285		370,109		388,561
Total nonaccrual loans		459,640			452,443		480,339		392,462		407,364
Foreclosed assets		7,401			7,792		10,282		10,999		6,769
Total nonperforming assets	$	467,041			460,235		490,621		403,461		414,133
As a percentage of total loans		3.73	%		3.40		4.08		3.32		3.28

(1) Includes $108.4 million, $77.8 million and $87.7 million at March 31, 2013, December 31 and September 30, 2012, respectively, resulting from the OCC guidance issued in third quarter 2012, which requires performing consumer loans discharged in bankruptcy to be placed on nonaccrual status and written down to net realizable collateral value, regardless of their delinquency status.

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Total NPAs were $467.0 million (3.73% of total loans) at March 31, 2013, and included $459.6 million of nonaccrual loans and $7.4 million of foreclosed assets. Nonaccrual loans increased $7.2 million in first quarter 2013.

Changes to nonaccrual loans period-over-period represent inflows for loans that are placed on nonaccrual status in accordance with our policy, offset by reductions for loans that

are paid down, charged off, sold, transferred to foreclosed properties, or are no longer classified as nonaccrual as a result of continued performance and an improvement in the borrower’s financial condition and loan repayment capabilities. Also, reductions can come from borrower repayments even if the loan stays on nonaccrual status. Table 9 provides an analysis of the changes in nonaccrual loans.

Table 9: Analysis of Changes in Nonaccrual Loans
		Quarter ended
	Mar. 31,			Dec. 31,			Sept. 30,			June 30,			Mar. 31,
(in thousands)	2013			2012			2012			2012			2012
Commercial nonaccrual loans
Balance, beginning of quarter	$	16,270			24,054			22,353			18,803			21,383
Inflows		5,653			167			3,714			4,796			1,871
Outflows		(3,067	)		(7,951	)		(2,013	)		(1,246	)		(4,451	)
Balance, end of quarter		18,856			16,270			24,054			22,353			18,803
Consumer nonaccrual loans
Balance, beginning of quarter		436,173			456,285			370,109			388,561			327,710
Inflows (1)		96,821			81,122			174,193			89,718			154,618
Outflows:
Returned to accruing		(49,077	)		(42,561	)		(44,316	)		(53,016	)		(42,556	)
Foreclosures		(2,730	)		(3,747	)		(3,921	)		(7,696	)		(4,897	)
Charge-offs		(30,371	)		(53,227	)		(36,052	)		(38,171	)		(42,903	)
Payment, sales and other		(10,032	)		(1,699	)		(3,728	)		(9,287	)		(3,411	)
Total outflows		(92,210	)		(101,234	)		(88,017	)		(108,170	)		(93,767	)
Balance, end of quarter		440,784			436,173			456,285			370,109			388,561
Total nonaccrual loans	$	459,640			452,443			480,339			392,462			407,364

(1)  Quarter ended September 30, 2012, includes $87.7 million of performing loans moved to nonaccrual status as a result of OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be placed on nonaccrual status and written down to net realizable collateral value, regardless of their delinquency status. Quarter ended March 31, 2012, includes $55.2 million of loans moved to nonaccrual status as a result of implementing Interagency Guidance issued January 31, 2012.

TROUBLED DEBT RESTRUCTURINGS (TDRs)

Table 10: Troubled Debt Restructurings (TDRs)
	Mar. 31,		Dec. 31,		Sept. 30,		June 30,		Mar. 31,
(in thousands)	2013		2012		2012		2012		2012
Commercial TDRs:
Commercial and industrial	$	-		-		-		-		-
Secured by real estate		3,632		3,593		3,696		5,134		2,664
Total commercial TDRs		3,632		3,593		3,696		5,134		2,664
Consumer TDRs:
Real estate 1-4 family first mortgage		367,005		345,640		320,821		206,720		198,756
Real estate 1-4 family junior lien mortgage		138,508		135,029		136,316		108,726		110,441
Trial modifications		21,654		20,183		22,300		22,875		23,681
Total consumer TDRs (1)		527,167		500,852		479,437		338,321		332,878
Total TDRs	$	530,799		504,445		483,133		343,455		335,542
TDRs on nonaccrual status	$	230,913		222,448		234,310		96,465		97,942
TDRs on accrual status		299,886		281,997		248,823		246,990		237,600
Total TDRs	$	530,799		504,445		483,133		343,455		335,542

(1) Includes $146.2 million, $132.0 million and $120.7 million at March 31, 2013, December 31 and September 30, 2012, respectively, resulting from the OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be classified as TDRs, as well as written down to net realizable collateral value.

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Table 11: Analysis of Changes in TDRs
	Quarter ended
	Mar. 31,			Dec. 31,			Sept. 30,			June 30,			Mar. 31,
(in thousands)	2013			2012			2012			2012			2012
Commercial TDRs:
Balance, beginning of quarter	$	3,593			3,696			5,134			2,664			2,470
Inflows		366			-			74			2,505			1,377
Outflows		(327	)		(103	)		(1,512	)		(35	)		(1,183	)
Balance, end of quarter		3,632			3,593			3,696			5,134			2,664
Consumer TDRs:
Balance, beginning of quarter		500,852			479,437			338,321			332,878			324,605
Inflows (1)		47,574			61,212			155,557			19,722			19,648
Outflows:
Charge-offs (2)		(10,695	)		(28,094	)		(5,161	)		(7,693	)		(7,223	)
Foreclosures (2)		(1,040	)		(386	)		-			(749	)		(141	)
Payments, sales and other (3)		(10,995	)		(9,200	)		(8,705	)		(5,031	)		(6,323	)
Net change in trial modifications (4)		1,471			(2,117	)		(575	)		(806	)		2,312
Total outflows		(21,259	)		(39,797	)		(14,441	)		(14,279	)		(11,375	)
Balance, end of quarter		527,167			500,852			479,437			338,321			332,878
Total TDRs	$	530,799			504,445			483,133			343,455			335,542

(1) Includes $16.1 million, $6.8 million and $120.7 million of loans for the quarters ended March 31, 2013, December 31 and September 30, 2012, respectively, resulting from the OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be classified as TDRs, as well as written down to net realizable collateral value.

(2) Fourth quarter 2012 outflows reflect the impact of loans discharged in bankruptcy being reported as TDRs in accordance with the OCC guidance starting in third quarter 2012.

(3) Other outflows include normal amortization/accretion of loan basis adjustments.

(4) Net change in trial modifications includes: inflows of new TDRs entering the trial payment period, net of outflows for modifications that either (i) successfully perform and enter into a permanent modification, or (ii) do not successfully perform according to the terms of the trial period plan and are subsequently charged-off, foreclosed upon or otherwise resolved. Our recent experience is that most of the mortgages that enter a trial payment period program are successful in completing the program requirements.

Recorded investment of loans modified in TDRs is provided in Table 10. Table 11 provides an analysis of the changes in TDRs. Loans that may be modified more than once are reported as TDR inflows only in the period they are first modified. The allowance for loan losses for TDRs was $113.1 million and $103.5 million at March 31, 2013 and December 31, 2012, respectively. See Note 2 (Loans and Allowance for Credit Losses) to Financial Statements in this Report for more information. Those loans discharged in bankruptcy and reported as TDRs have been written down to net realizable collateral value.

In those situations where principal is forgiven, the entire amount of such principal forgiveness is immediately charged off to the extent not done so prior to the modification. We sometimes delay the timing on the repayment of a portion of principal (principal forbearance) and charge off the amount of forbearance if that amount is not considered fully collectible.

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LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING Certain loans 90 days or more past due as to interest or principal are still accruing, because they are (1) well-secured and in the process of collection or (2) real estate 1-4 family mortgage loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due. PCI loans of $6.8 million, $7.0 million, $6.6 million, $8.4 million, and $7.1 million at March 31, 2013 and December 31, September 30, June 30 and March 31, 2012, respectively, are excluded from this disclosure even though they are 90 days or more contractually past due. These PCI loans are considered to be accruing due to the existence of the

accretable yield and not based on consideration given to contractual interest payments.

Loans 90 days or more past due and still accruing at March 31, 2013, were down $5.8 million from December 31, 2012, predominantly due to a CSRE loan moving into nonaccrual status, as well as loss mitigation activities including modifications and continued credit quality improvement during first quarter 2013 as the overall financial condition of businesses and consumers strengthened and the housing market in many areas of the nation improved. Table 12 reflects non-PCI loans 90 days or more past due and still accruing.

Table 12: Loans 90 Days or More Past Due and Still Accruing
	Mar. 31,		Dec. 31,		Sept. 30,		June 30,		Mar. 31,
(in thousands)	2013		2012		2012		2012		2012
Commercial:
Commercial and industrial	$	-		-		-		-		-
Secured by real estate		-		4,455		-		-		-
Total commercial		-		4,455		-		-		-
Consumer:
Real estate 1-4 family first mortgage		18,665		18,382		14,502		16,343		16,211
Real estate 1-4 family junior lien mortgage		5,354		6,940		7,813		5,327		5,560
Total consumer		24,019		25,322		22,315		21,670		21,771
Total	$	24,019		29,777		22,315		21,670		21,771

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NET CHARGE-OFFS

Table 13: Net Charge-offs
	Quarter ended
	March 31,					December 31,						September 30,					June 30,					March 31,
	2013					2012						2012					2012					2012
	Net loan		% of			Net loan			% of			Net loan		% of			Net loan		% of			Net loan		% of
	charge-		avg.			charge-			avg.			charge-		avg.			charge-		avg.			charge-		avg.
($ in thousands)	offs		loans (1)			offs			loans (1)			offs		loans (1)			offs		loans (1)			offs		loans (1)
Total commercial	$	237		0.04	%	$	(1,337	)		(0.21	)%	$	1,461		0.40	%	$	187		0.06	%	$	248		0.08	%
Consumer:
Real estate 1-4 family first mortgage		17,008		0.88			25,395			1.38			17,791		0.93			14,327		0.73			22,865		1.18
Real estate 1-4 family junior lien mortgage		21,339		3.21			31,110			4.30			50,548		6.52			28,613		3.62			30,060		3.80
Total consumer (2)		38,347		1.48			56,505			2.21			68,339		2.55			42,940		1.56			52,925		1.94
Total	$	38,584		1.20	%	$	55,168			1.73	%	$	69,800		2.30	%	$	43,127		1.41	%	$	53,173		1.74	%

(1) Quarterly net charge-offs (net recoveries) as a percentage of average loans are annualized.

(2) The quarters ended December 31, 2012 and September 30, 2012 include $17.5 million and $28.6 million respectively, resulting from the OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be placed on nonaccrual status and written down to net realizable collateral value, regardless of their delinquency status.

Table 13 presents net charge-offs for the current and previous four quarters. Net charge-offs in first quarter 2013 were $38.6 million (1.20% of average total loans outstanding) compared with $53.2 million (1.74%) in first quarter 2012.

Due to the larger dollar amounts associated with individual commercial loans, loss recognition tends to be irregular and varies more than with consumer loan portfolios.

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ALLOWANCE FOR CREDIT LOSSES The allowance for credit losses, which consists of the allowance for loan losses and the allowance for unfunded credit commitments, is management’s estimate of credit losses inherent in the loan portfolio and unfunded credit commitments at the balance sheet date.

We use a disciplined process and methodology to establish our allowance for credit losses each quarter. This process takes into consideration many factors, including historical and forecasted loss trends, loan-level credit quality ratings and loan grade-specific loss factors. The process involves subjective and complex judgments. In addition, we review a variety of credit metrics and trends. These credit metrics and trends, however, do not solely determine the amount of the allowance as we use several analytical tools.

The ratio of the allowance for credit losses to total nonaccrual loans may fluctuate significantly from period to period due to such factors as the mix of loan types in the portfolio, the amount of nonaccrual loans that have been written down to current collateral value, borrower credit strength, foreclosure process timeframes and the value and marketability of collateral.

The provision for credit losses was $13.1 million in first quarter 2013 and $51.3 million in first quarter 2012. The first quarter 2013 provision was $25.5 million less than net charge-offs. In first quarter 2012 the provision was lower than net charge-offs by $1.9 million. Primary drivers of the lower provision were decreased loss estimates supported by lower loss trends and improvement in the credit quality of the portfolios.

In determining the appropriate allowance attributable to our residential real estate portfolios, our process considers

the associated credit cost, including re-defaults of modified loans and projected loss severity for loan modifications that occur or are probable to occur. In addition, our process incorporates the estimated allowance associated with high risk portfolios defined in the Interagency Guidance relating to junior lien mortgages.

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.

We believe the allowance for credit losses of $282.1 million at March 31, 2013, was appropriate to cover credit losses inherent in the loan portfolio, including unfunded credit commitments, at that date. The allowance for credit losses is subject to change and reflects existing factors as of the date of determination, including economic or market conditions and ongoing internal and external examinations processes. Due to the sensitivity of the allowance for credit losses to changes in the economy and business environment, it is possible that we will incur incremental credit losses not anticipated as of the balance sheet date. Our process for determining the allowance for credit losses is discussed in the “Critical Accounting Policy – Allowance for Credit Losses” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2012 Form 10-K. The detail of the changes in the allowance for credit losses by portfolio segment (including charge-offs and recoveries by loan class) is in Note 2 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Table 14 presents an analysis of the allowance for credit losses for the last five quarters.

Table 14: Allowance for Credit Losses

(in thousands)	Mar. 31, 2013			Dec. 31, 2012		Sep. 30, 2012		June 30, 2012		Mar. 31, 2012
Components:
Allowance for loan losses	$	281,548			309,220		278,056		292,780		309,913
Allowance for unfunded credit commitments		508			384		582		258		200
Allowance for credit losses	$	282,056			309,604		278,638		293,038		310,113
Allowance for loan losses as a percentage of total loans		2.25	%		2.28		2.31		2.41		2.45
Allowance for loan losses as a percentage of annualized net charge-offs		179.93			140.89		100.13		168.79		144.91
Allowance for credit losses as a percentage of total loans		2.25			2.28		2.32		2.41		2.45
Allowance for credit losses as a percentage of total nonaccrual loans		61.36			68.43		58.01		74.67		76.13

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Asset/Liability Management

Asset/liability management involves the evaluation, monitoring and management of interest rate risk, market risk and liquidity and funding.

INTEREST RATE RISK Interest rate risk is the sensitivity of earnings to changes in interest rates. Approximately 22% of our loan portfolio consisted of variable rate loans at March 31, 2013. In a declining rate environment, we may experience a reduction in interest income on our loan portfolio and a corresponding decrease in funds available to be distributed to our shareholders. The reduction in interest income may result from downward adjustment of the indices upon which the interest rates on loans are based and from prepayments of loans with fixed interest rates, resulting in reinvestment of the proceeds in lower yielding assets.

At March 31, 2013, approximately 78% of our loans had fixed interest rates. Such loans increase our interest rate risk. We monitor the rate sensitivity of assets acquired. Our methods for evaluating interest rate risk include an analysis of interest-rate sensitivity “gap,” which is defined as the difference between interest-earning assets and interest-bearing liabilities maturing or repricing within a given time period. A gap is considered positive when the amount of interest rate-sensitive assets exceeds the amount of interest rate-sensitive liabilities. A gap is considered negative when the amount of interest rate-sensitive liabilities exceeds interest rate-sensitive assets.

During a period of rising interest rates, a negative gap would tend to adversely affect net interest income, while a positive gap would tend to result in an increase in net interest income. During a period of falling interest rates, a negative gap would tend to result in an increase in net interest income, while a positive gap would tend to affect net interest income adversely. Because different types of assets and liabilities with the same or similar maturities may react differently to changes in overall market rates or conditions, changes in interest rates may affect net interest income positively or negatively even if an institution is perfectly matched in each maturity category.

At March 31, 2013, $3.7 billion, or 28% of our assets, had variable interest rates and could be expected to reprice with changes in interest rates. At March 31, 2013, our liabilities were $97.8 million, or 1% of our assets, while stockholders’ equity was $13.2 billion, or 99% of our assets. This positive gap between our assets and liabilities indicates that an increase in interest rates would result in an increase in net interest income and a decrease in interest rates would result in a decrease in net interest income.

MARKET RISK Market risk is the risk of loss from adverse changes in market prices and interest rates. Market risk arises primarily from interest rate risk inherent in lending and borrowing activities.

LIQUIDITY AND FUNDING The objective of effective liquidity management is to ensure that we can meet

customer loan requests and other cash commitments efficiently under both normal operating conditions and under unpredictable circumstances of industry or market stress. To achieve this objective, Wells Fargo’s Corporate Asset/Liability Management Committee 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.

Proceeds received from pay-downs of loans are typically sufficient to fund existing lending commitments and loan purchases. Depending upon the timing of the loan purchases, we may draw on the Bank lines of credit as a short-term liquidity source. At March 31, 2013, there was $27.2 million outstanding on our Bank lines of credit.

Wachovia Funding’s primary liquidity needs are to pay operating expenses, fund our lending commitments, purchase loans as the underlying loans mature or repay, and pay dividends. Operating expenses and dividends are expected to be funded through cash generated by operations or paid-in capital, while funding commitments and the acquisition of additional participation interests in loans are intended to be funded with the proceeds obtained from repayment of principal balances by individual borrowers. If in future periods we do not reinvest loan pay-downs at sufficient levels, management may request our board of directors to consider an additional return of capital to holders of our common stock. We expect to distribute annually an aggregate amount of dividends with respect to outstanding capital stock equal to approximately 100 percent of our REIT taxable income for federal tax purposes. Such distributions may in some periods exceed net income determined under generally accepted accounting principles.

To the extent that we determine that additional funding is required, we could issue additional common or preferred stock, subject to any pre-approval rights of our shareholders or raise funds through debt financings, retention of cash flows or a combination of these methods. We do not have and do not anticipate having any material capital expenditures in the foreseeable future. We believe our existing sources of liquidity are sufficient to meet our funding needs. However, any cash flow retention must be consistent with the provisions of the Investment Company Act and the Code which requires the distribution by a REIT of at least 90% of its REIT taxable income, excluding capital gains, and must take into account taxes that would be imposed on undistributed income.

At March 31, 2013, our liabilities consisted of the lines of credit, dividends payable to affiliates and other liabilities. Our certificate of incorporation does not contain any limitation on the amount or percentage of debt, funded or otherwise, we may incur, except the incurrence of debt for borrowed money or our guarantee of debt for borrowed money in excess of amounts borrowed or guaranteed. However, the certificate of designation for our Series A preferred securities contains a covenant in which we agree not to incur indebtedness over 20% of our stockholders’ equity unless approved by two-thirds of the Series A preferred securities, voting as a separate class.

19

Except in certain circumstances, our Series A preferred securities may not be redeemed prior to December 31, 2022. Prior to that date, among other things, if regulators adopt capital standards that do not permit Wells Fargo or the Bank to treat our Series A preferred securities as Tier 1 capital, we may determine to redeem the Series A preferred securities, as provided in our certificate of incorporation.

In June 2012, federal banking agencies, including the FRB, jointly published notices of proposed rulemaking, which would substantially amend the risk-based capital rules for banks. The proposed capital rules are intended to implement in the U.S. the Basel III regulatory capital reforms, comply with changes required by the Dodd-Frank Act, and replace the existing Basel I-based capital requirements. Based on our current interpretation, we believe the Wachovia Funding Series A preferred securities would no longer constitute Tier 1 capital for Wells Fargo or the Bank under the Basel III NPR. Although the proposed rules contemplated an effective date of January 1, 2013, with phased in compliance requirements, the rules have not yet been finalized by the U.S. banking regulators due to the volume of comments received and concerns expressed during the comment period. The FRB may not adopt the Basel III NPR as proposed or may make additional changes to the applicable Tier 1 capital rules prior to final adoption. In the event the FRB’s applicable final rules regarding Tier 1 capital treatment are the same as the Basel III NPR or otherwise result in the Series A preferred securities no longer constituting Tier 1 capital for Wells Fargo or the Bank, Wachovia Funding may determine to redeem the Wachovia Funding Series A preferred securities due to a Regulatory Capital Event. Although any such redemption must be in whole for a redemption price of $25.00 per Series A preferred security, plus all authorized, declared but unpaid dividends to the date of redemption, such event may have an adverse effect on the trading price of the Series A preferred securities.

20

Critical Accounting Policy

Our significant accounting policies (see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2012 Form 10-K) are fundamental to understanding our results of operations and financial condition because they require that we use estimates and assumptions that may affect the value of our assets or liabilities and financial results. One of these policies is critical because it requires 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. We have identified the allowance for credit losses policy as being particularly sensitive in terms of judgments and the extent to which estimates are used.

Management and the Audit Committee of Wachovia Preferred Funding have reviewed and approved this critical accounting policy. This policy is described in the “Critical Accounting Policy” section in our 2012 Form 10-K.

Current Accounting Developments

There are no pending accounting pronouncements issued by the Financial Accounting Standards Board (FASB) that would impact Wachovia Funding.

21

Forward-Looking Statements

This Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “target”, “projects,” “outlook,” “forecast,” “will,” “may,” “could,” “should,” “can” and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements we make about: future results of Wachovia Funding; expectations for consumer and commercial credit losses, life-of-loan losses, and the sufficiency of our credit loss allowance to cover future credit losses; our net interest income, including our expectation that we expect continued pressure on average yield on total interest-earning assets; expectations regarding loan purchases and pay downs; future capital expenditures; future capital distributions; the expected outcome and impact of proposed regulatory capital standards, including the Basel III NPR, the possibility of the Series A preferred securities no longer constituting Tier 1 capital of Wells Fargo or the Bank, and the possibility of a Regulatory Capital Event; the expected outcome and impact of legal, regulatory and legislative developments, including the effects to Wachovia Funding of the Bank’s settlement with certain regulatory authorities related to mortgage servicing and foreclosure practices; and Wachovia Funding’s plans, objectives and strategies.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:

• the effect of political and economic conditions and geopolitical events;

• losses relating to natural disasters such as Super Storm Sandy and related storms, including as to our consumer and commercial loan portfolios, the extent of damage or loss to our collateral for loans in our portfolios or the unavailability of adequate insurance coverage or government assistance for our borrowers;

• economic conditions that affect the general economy, housing prices, the job market, consumer confidence and spending habits, including our borrowers’ repayment of our loan participations;

• the level and volatility of the capital markets, interest rates, currency values and other market indices that affect the value of our assets and liabilities;

• the availability and cost of both credit and capital;

• investor sentiment and confidence in the financial markets;

• our reputation and the reputation of Wells Fargo and the Bank;

• the impact of current, pending and future legislation, regulation and legal actions applicable to us, the Bank or Wells Fargo, including the Dodd-Frank Act and related regulations and the Basel III NPR;

• changes in accounting standards, rules and interpretations;

• various monetary and fiscal policies and regulations of the U.S. and foreign governments;

• a failure in or breach of our, the Bank’s or Wells Fargo’s operational or security systems or infrastructure, or those of third party vendors and other security providers, including as a result of cyber attacks; and

• the other factors described in “Risk Factors” in the 2012 Form 10-K.

In addition to the above factors, we also caution that there is no assurance that our allowance for credit losses will be appropriate to cover future credit losses, especially if housing prices decline or unemployment worsens. Increases in loan charge-offs or in the allowance for credit losses and related provision expense could materially adversely affect our financial results and condition.

Any forward-looking statement made by us in this Report speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

22

Risk Factors

An investment in Wachovia Funding involves risk, including the possibility that the value of the investment could fall substantially and that dividends or other distributions on the investment could be reduced or eliminated. For a discussion of risk factors that could adversely affect our financial results and condition and the value of, and return on, an investment in Wachovia Funding, we refer you to the “Risk Factors” section in our 2012 Form 10-K.

23

Controls and Procedures

Disclosure Controls and Procedures

Wachovia Funding’s management evaluated the effectiveness, as of March 31, 2013, of disclosure controls and procedures. Wachovia Funding’s chief executive officer and chief financial officer participated in the evaluation. Based on this evaluation, the chief executive officer and chief financial officer concluded that Wachovia Funding’s disclosure controls and procedures were effective as of March 31, 2013.

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, Wachovia Funding’s principal executive and principal financial officers and effected by Wachovia Funding’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 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 Wachovia Funding;

• 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 Wachovia Funding are being made only in accordance with authorizations of management and directors of Wachovia Funding; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Wachovia Funding’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 first quarter 2013 that has materially affected, or is reasonably likely to materially affect, Wachovia Funding’s internal control over financial reporting.

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Financial Statements

Wachovia Preferred Funding Corp. and Subsidiaries

Consolidated Statement of Income (Unaudited)

	Quarter ended March 31,
(in thousands, except per share amounts)		2013	2012
Interest income	$	200,183	216,916
Interest expense		353	-
Net interest income		199,830	216,916
Provision for credit losses		13,127	51,259
Net interest income after provision for credit losses		186,703	165,657
Noninterest income
Gain on interest rate swaps		-	56
Other		187	304
Total noninterest income		187	360
Noninterest expense
Loan servicing costs		9,708	10,804
Management fees		1,696	1,932
Foreclosed assets		3,427	2,340
Other		491	837
Total noninterest expense		15,322	15,913
Income before income tax expense		171,568	150,104
Income tax expense		128	89
Net income		171,440	150,015
Comprehensive income		171,440	150,015
Dividends on preferred stock		46,014	49,586
Net income applicable to common stock	$	125,426	100,429
Per common share information
Earnings per common share	$	1.25	1.00
Diluted earnings per common share		1.25	1.00
Dividends declared per common share	$	2.05	1.50
Average common shares outstanding		99,999.9	99,999.9
Diluted average common shares outstanding		99,999.9	99,999.9

The accompanying notes are an integral part of these statements.

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Financial Statements

Wachovia Preferred Funding Corp. and Subsidiaries

Consolidated Balance Sheet (Unaudited)

	Mar. 31,			Dec. 31,
(in thousands, except shares)		2013			2012
Assets
Cash and cash equivalents	$	918,102			642,946
Loans, net of unearned income		12,510,908			13,550,474
Allowance for loan losses		(281,548	)		(309,220	)
Net loans		12,229,360			13,241,254
Accounts receivable - affiliates, net		116,653			131,216
Other assets		51,013			53,369
Total assets	$	13,315,128			14,068,785
Liabilities
Lines of credit with Bank	$	27,152			745,016
Dividends payable - affiliates		32,420			-
Other liabilities		38,259			26,898
Total liabilities		97,831			771,914
Stockholders’ Equity
Preferred stock		743			743
Common stock - $0.01 par value, authorized 100,000,000 shares; issued and outstanding 99,999,900 shares		1,000			1,000
Additional paid-in capital		14,026,608			14,026,608
Retained earnings (deficit)		(811,054	)		(731,480	)
Total stockholders’ equity		13,217,297			13,296,871
Total liabilities and stockholders’ equity	$	13,315,128			14,068,785

The accompanying notes are an integral part of these statements.

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Financial Statements

Wachovia Preferred Funding Corp. and Subsidiaries

Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)

(in thousands, except per share data)	Preferred stock		Common stock		Additional paid-in capital		Retained earnings (deficit)			Total stockholders’ equity
Balance, December 31, 2011	$	743		1,000		14,026,608		(525,908	)		13,502,443
Net income		-		-		-		150,015			150,015
Cash dividends
Series A preferred securities at $0.45 per share		-		-		-		(13,594	)		(13,594	)
Series B preferred securities at $0.15 per share		-		-		-		(6,028	)		(6,028	)
Series C preferred securities at $7.08 per share		-		-		-		(29,964	)		(29,964	)
Common stock at $1.50 per share		-		-		-		(150,000	)		(150,000	)
Balance, March 31, 2012	$	743		1,000		14,026,608		(575,479	)		13,452,872
Balance, December 31, 2012	$	743		1,000		14,026,608		(731,480	)		13,296,871
Net income		-		-		-		171,440			171,440
Cash dividends
Series A preferred securities at $0.45 per share		-		-		-		(13,594	)		(13,594	)
Series B preferred securities at $0.13 per share		-		-		-		(5,345	)		(5,345	)
Series C preferred securities at $6.40 per share		-		-		-		(27,075	)		(27,075	)
Common stock at $2.05 per share		-		-		-		(205,000	)		(205,000	)
Balance, March 31, 2013	$	743		1,000		14,026,608		(811,054	)		13,217,297

The accompanying notes are an integral part of these statements.

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Financial Statements

Wachovia Preferred Funding Corp. and Subsidiaries

Consolidated Statement of Cash Flows (Unaudited)

	Quarter ended March 31,
(in thousands)		2013		2012
Cash flows from operating activities:
Net income	$	171,440		150,015
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of discounts on loans		(20,150	)	(34,674	)
Provision for credit losses		13,127		51,259
Deferred income tax benefits		-		(4,879	)
Other operating activities, net		3,224		1,119
Net cash provided by operating activities		167,641		162,840
Cash flows from investing activities:
Increase (decrease) in cash realized from:
Loans:
Purchases		-		(943,508	)
Proceeds from payments and sales		1,030,379		843,563
Net cash provided (used) by investing activities		1,030,379		(99,945	)
Cash flows from financing activities:
Increase (decrease) in cash realized from:
Draws on line of credit with Bank		27,848		-
Repayments of line of credit with Bank		(745,712	)	-
Cash dividends paid		(205,000	)	(13,594	)
Net cash used by financing activities		(922,864	)	(13,594	)
Net change in cash and cash equivalents		275,156		49,301
Cash and cash equivalents at beginning of period		642,946		1,186,165
Cash and cash equivalents at end of period	$	918,102		1,235,466
Supplemental cash flow disclosures:
Cash paid for income taxes	$	-		5,500
Change in non cash items:
Transfers from loans to foreclosed assets		3,591		4,897

The accompanying notes are an integral part of these statements.

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Note 1: Summary of Significant Accounting Policies

Wachovia Preferred Funding Corp. (Wachovia Funding, we or us) is a direct subsidiary of Wachovia Preferred Funding Holding Corp. (Wachovia Preferred Holding) and an indirect subsidiary of both Wells Fargo & Company (Wells Fargo) and Wells Fargo Bank, National Association (the Bank). Wachovia Funding is a real estate investment trust (REIT) for income tax purposes.

The accounting and reporting policies of Wachovia Funding are in accordance with U.S. generally accepted accounting principles (GAAP). Our significant accounting policies are discussed in our Form 10-K for the year ended December 31, 2012 (2012 Form 10-K). The preparation of the financial statements in accordance with GAAP requires management to make estimates based on assumptions about future economic and market conditions that affect the reported amounts of assets and liabilities at the date of the financial statements and income and expenses during the reporting period and the related disclosures. Although our estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that actual future conditions could be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Management has made significant estimates related to the allowance for credit losses (Note 2). Actual results could differ from those estimates.

The information furnished in these unaudited interim statements reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the periods presented. These adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q. The results of operations in the interim statements do not necessarily indicate the results that may be expected for the full year. The interim financial information should be read in conjunction with our 2012 Form 10-K.

Subsequent Events

We have evaluated the effects of events that have occurred subsequent to period end March 31, 2013, and there have been no material events that would require recognition in our first quarter 2013 consolidated financial statements or disclosure in the Notes to the financial statements.

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Note 2: Loans and Allowance for Credit Losses

Wachovia Funding acquires participation interests in loans originated or purchased by the Bank. In order to maintain Wachovia Funding’s status as a REIT, the composition of the loans underlying the participation interests are highly concentrated in real estate. Underlying loans are concentrated primarily in Florida, New Jersey, Pennsylvania, North Carolina and California. These markets include

approximately 52% of Wachovia Funding’s total loan portfolio at March 31, 2013.

The following table presents total loans outstanding by portfolio segment and class of financing receivable. Outstanding balances include a total net reduction of $441.2 million and $472.9 million at March 31, 2013 and December 31, 2012, respectively, for unearned income, net deferred loan fees, and unamortized discounts and premiums.

(in thousands)	March 31, 2013		December 31, 2012
Commercial:
Commercial and industrial	$	83,456		99,207
Secured by real estate		2,333,974		2,534,064
Total commercial		2,417,430		2,633,271
Consumer:
Real estate 1-4 family first mortgage		7,484,604		8,137,597
Real estate 1-4 family junior lien mortgage		2,608,874		2,779,606
Total consumer		10,093,478		10,917,203
Total loans	$	12,510,908		13,550,474

The following table summarizes the proceeds paid (including accrued interest receivable of $2.9 million in first

quarter 2012) or received from the Bank for purchases and sales of loans, respectively.

	2013								2012
(in thousands)	Commercial		Consumer			Total			Commercial			Consumer			Total
Quarter ended March 31,
Purchases	$	-		-			-			-			943,508			943,508
Sales		-		(5,573	)		(5,573	)		(900	)		(16,312	)		(17,212	)

Commitments to Lend

The contract or notional amount of commercial loan commitments to extend credit at March 31, 2013 and December 31, 2012 was $371.1 million and $312.5 million, respectively.

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Allowance for Credit Losses (ACL)

The allowance for credit losses consists of the allowance for loan losses and the allowance for unfunded credit commitments. Changes in the allowance for credit losses were:

	Quarter ended March 31,
(in thousands)		2013		2012
Balance, beginning of quarter	$	309,604		313,928
Provision for credit losses		13,127		51,259
Interest income on certain impaired loans (1)		(2,091	)	(1,901	)
Loan charge-offs:
Commercial:
Commercial and industrial		-		-
Secured by real estate		(253	)	(252	)
Total commercial		(253	)	(252	)
Consumer:
Real estate 1-4 family first mortgage		(17,825	)	(23,324	)
Real estate 1-4 family junior lien mortgage		(24,127	)	(32,422	)
Total consumer		(41,952	)	(55,746	)
Total loan charge-offs		(42,205	)	(55,998	)
Loan recoveries:
Commercial:
Commercial and industrial		-		-
Secured by real estate		16		4
Total commercial		16		4
Consumer:
Real estate 1-4 family first mortgage		817		459
Real estate 1-4 family junior lien mortgage		2,788		2,362
Total consumer		3,605		2,821
Total loan recoveries		3,621		2,825
Net loan charge-offs		(38,584	)	(53,173	)
Balance, end of quarter	$	282,056		310,113
Components:
Allowance for loan losses	$	281,548		309,913
Allowance for unfunded credit commitments		508		200
Allowance for credit losses	$	282,056		310,113
Net loan charge-offs (annualized) as a percentage of average total loans		1.20	%	1.74
Allowance for loan losses as a percentage of total loans		2.25		2.45
Allowance for credit losses as a percentage of total loans		2.25		2.45

  (1) Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize reductions in allowance as interest income.

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The following table summarizes the activity in the allowance for credit losses by our commercial and consumer portfolio segments.

		Quarter ended March 31,
		2013									2012
(in thousands)		Commercial			Consumer			Total			Commercial			Consumer			Total
Balance, beginning of quarter	$		26,046			283,558			309,604			23,091			290,837			313,928
Provision (reversal of provision) for credit losses			(3,956	)		17,083			13,127			(2,886	)		54,145			51,259
Interest income on certain impaired loans			-			(2,091	)		(2,091	)		-			(1,901	)		(1,901	)
Loan charge-offs			(253	)		(41,952	)		(42,205	)		(252	)		(55,746	)		(55,998	)
Loan recoveries			16			3,605			3,621			4			2,821			2,825
Net loan charge-offs			(237	)		(38,347	)		(38,584	)		(248	)		(52,925	)		(53,173	)
Balance, end of quarter	$		21,853			260,203			282,056			19,957			290,156			310,113

The following table disaggregates our allowance for credit losses and recorded investment in loans by impairment methodology.

		Allowance for credit losses						Recorded investment in loans
(in thousands)		Commercial		Consumer		Total		Commercial		Consumer		Total
March 31, 2013
Collectively evaluated (1)	$		16,031		149,999		166,030		2,398,544		9,520,571		11,919,115
Individually evaluated (2)			5,822		110,204		116,026		13,706		527,168		540,874
Purchased credit-impaired (PCI) (3)			-		-		-		5,180		45,739		50,919
Total	$		21,853		260,203		282,056		2,417,430		10,093,478		12,510,908
December 31, 2012
Collectively evaluated (1)	$		16,219		181,107		197,326		2,611,746		10,368,082		12,979,828
Individually evaluated (2)			9,827		102,451		112,278		15,434		500,852		516,286
PCI (3)			-		-		-		6,091		48,269		54,360
Total	$		26,046		283,558		309,604		2,633,271		10,917,203		13,550,474

(1) Represents loans collectively evaluated for impairment in accordance with ASC 450-20, Loss Contingencies (formerly FAS 5), and pursuant to amendments by ASU 2010-20 regarding allowance for unimpaired loans.

(2) Represents loans individually evaluated for impairment in accordance with ASC 310-10, Receivables (formerly FAS 114), and pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans.

(3) Represents the allowance and related loan carrying value determined in accordance with ASC 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality (formerly SOP 03-3) and pursuant to amendments by ASU 2010-20 regarding allowance for PCI loans.

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Credit Quality

We monitor credit quality by evaluating various attributes and use such information in our evaluation of the appropriateness of the allowance for credit losses. The following sections provide the credit quality indicators we most closely monitor. The majority of credit quality indicators are based on March 31, 2013, information, with the exception of updated Fair Isaac Corporation (FICO) scores and updated loan-to-value (LTV)/combined LTV (CLTV), which are obtained at least quarterly. Generally, these indicators are updated in the second month of each quarter, with updates no older than December 31, 2012.

COMMERCIAL CREDIT QUALITY INDICATORS In addition to monitoring commercial loan concentration risk, we manage a consistent process for assessing commercial loan credit quality. Generally commercial loans are subject to individual risk assessment using our internal borrower and collateral quality ratings. Our ratings are aligned to Pass and Criticized categories. The Criticized category includes Special Mention, Substandard, and Doubtful categories which are defined by bank regulatory agencies.

The table below provides a breakdown of outstanding commercial loans by risk category.

(in thousands)	Commercial and industrial		Secured by real estate		Total
March 31, 2013
By risk category:
Pass	$	83,456		2,225,922		2,309,378
Criticized		-		108,052		108,052
Total commercial loans	$	83,456		2,333,974		2,417,430
December 31, 2012
By risk category:
Pass	$	98,395		2,412,569		2,510,964
Criticized		812		121,495		122,307
Total commercial loans	$	99,207		2,534,064		2,633,271

In addition, while we monitor past due status, we do not consider it a key driver of our credit risk management practices for commercial loans. The following table provides past due information for commercial loans.

(in thousands)	Commercial and industrial		Secured by real estate		Total
March 31, 2013
By delinquency status:
Current-29 days past due (DPD) and still accruing	$	83,456		2,304,546		2,388,002
30-89 DPD and still accruing		-		10,572		10,572
90+ DPD and still accruing		-		-		-
Nonaccrual loans		-		18,856		18,856
Total commercial loans	$	83,456		2,333,974		2,417,430
December 31, 2012
By delinquency status:
Current-29 DPD and still accruing	$	99,207		2,512,524		2,611,731
30-89 DPD and still accruing		-		815		815
90+ DPD and still accruing		-		4,455		4,455
Nonaccrual loans		-		16,270		16,270
Total commercial loans	$	99,207		2,534,064		2,633,271

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CONSUMER CREDIT QUALITY INDICATORS We have various classes of consumer loans that present respective unique risks. Loan delinquency, FICO credit scores and LTV/CLTV for loan types are common credit quality indicators that we monitor and utilize in our evaluation of the appropriateness of the allowance for credit losses for the consumer portfolio segment.

The majority of our loss estimation techniques used for the allowance for credit losses rely on delinquency matrix models or delinquency roll rate models. Therefore, delinquency is an important indicator of credit quality and the establishment of our allowance for credit losses.

The following table provides the outstanding balances of our consumer portfolio by delinquency status.

(in thousands)	Real estate 1-4 family first mortgage			Real estate 1-4 family junior lien mortgage			Total
March 31, 2013
By delinquency status:
Current - 29 DPD	$	7,174,778			2,504,651			9,679,429
30-59 DPD		76,263			34,525			110,788
60-89 DPD		35,191			15,159			50,350
90-119 DPD		27,509			13,277			40,786
120-179 DPD		34,560			17,238			51,798
180+ DPD		146,462			25,145			171,607
Remaining PCI accounting adjustments		(10,159	)		(1,121	)		(11,280	)
Total consumer loans	$	7,484,604			2,608,874			10,093,478
December 31, 2012
By delinquency status:
Current - 29 DPD	$	7,828,564			2,661,528			10,490,092
30-59 DPD		71,969			36,427			108,396
60-89 DPD		40,411			22,331			62,742
90-119 DPD		29,805			14,476			44,281
120-179 DPD		30,645			22,085			52,730
180+ DPD		146,293			23,517			169,810
Remaining PCI accounting adjustments		(10,090	)		(758	)		(10,848	)
Total consumer loans	$	8,137,597			2,779,606			10,917,203

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The following table provides a breakdown of our consumer portfolio by updated FICO. We obtain FICO scores at loan origination and the scores are updated at least

quarterly. FICO is not available for certain loan types and may not be obtained if we deem it unnecessary due to strong collateral and other borrower attributes.

(in thousands)	Real estate 1-4 family first mortgage			Real estate 1-4 family junior lien mortgage			Total
March 31, 2013
By updated FICO:
< 600	$	494,126			299,074			793,200
600-639		324,735			171,137			495,872
640-679		601,789			286,535			888,324
680-719		1,130,793			426,368			1,557,161
720-759		1,493,578			541,357			2,034,935
760-799		2,156,367			581,719			2,738,086
800+		1,160,326			288,385			1,448,711
No FICO available		133,049			15,420			148,469
Remaining PCI accounting adjustments		(10,159	)		(1,121	)		(11,280	)
Total consumer loans	$	7,484,604			2,608,874			10,093,478
December 31, 2012
By updated FICO:
< 600	$	491,057			313,648			804,705
600-639		325,524			173,130			498,654
640-679		611,895			302,895			914,790
680-719		1,221,513			452,768			1,674,281
720-759		1,630,309			575,418			2,205,727
760-799		2,446,778			636,079			3,082,857
800+		1,271,774			310,009			1,581,783
No FICO available		148,837			16,417			165,254
Remaining PCI accounting adjustments		(10,090	)		(758	)		(10,848	)
Total consumer loans	$	8,137,597			2,779,606			10,917,203

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LTV refers to the ratio comparing the loan’s recorded investment to the property’s collateral value. CLTV refers to the combination of first mortgage and junior lien mortgage ratios. LTVs and CLTVs are updated quarterly using a cascade approach which first uses values provided by automated valuation models (AVMs) for the property. If an AVM is not available, then the value is estimated using the original appraised value adjusted by the change in Home Price Index (HPI) for the property location. If an HPI is not available, the original appraised value is used. The HPI value is normally the only method considered for high value properties, generally with an original value of $1 million or more, as the AVM values have proven less accurate for these properties.

The following table shows the most updated LTV and CLTV distribution of the real estate 1-4 family first and junior

lien mortgage loan portfolios. In recent years, the residential real estate markets experienced significant declines in property values and several markets, particularly California and Florida, experienced more significant declines than the national decline. These trends are considered in the way that we monitor credit risk and establish our allowance for credit losses. LTV does not necessarily reflect the likelihood of performance of a given loan, but does provide an indication of collateral value. In the event of a default, any loss should be limited to the portion of the loan amount in excess of the net realizable value of the underlying real estate collateral value. Certain loans do not have an LTV or CLTV primarily due to industry data availability and portfolios acquired from or serviced by other institutions.

(in thousands)	Real estate 1-4 family first mortgage by LTV			Real estate 1-4 family junior lien mortgage by CLTV			Total
March 31, 2013
By LTV/CLTV:
0-60%	$	3,097,387			549,840			3,647,227
60.01-80%		2,448,313			546,943			2,995,256
80.01-100%		1,239,279			610,719			1,849,998
100.01-120% (1)		442,596			492,453			935,049
> 120% (1)		208,251			406,995			615,246
No LTV/CLTV available		58,937			3,045			61,982
Remaining PCI accounting adjustments		(10,159	)		(1,121	)		(11,280	)
Total consumer loans	$	7,484,604			2,608,874			10,093,478
December 31, 2012
By LTV/CLTV:
0-60%	$	3,420,971			579,292			4,000,263
60.01-80%		2,642,888			591,307			3,234,195
80.01-100%		1,338,223			639,891			1,978,114
100.01-120% (1)		441,791			498,614			940,405
> 120% (1)		244,398			434,238			678,636
No LTV/CLTV available		59,416			37,022			96,438
Remaining PCI accounting adjustments		(10,090	)		(758	)		(10,848	)
Total consumer loans	$	8,137,597			2,779,606			10,917,203

(1) Reflects total loan balances with LTV/CLTV amounts in excess of 100%. In the event of default, the loss content would generally be limited to only the amount in excess of 100% LTV/CLTV.

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NONACCRUAL LOANS The following table provides loans on nonaccrual status. PCI loans are excluded from this table due to the existence of the accretable yield.

(in thousands)	Mar. 31, 2013		Dec. 31, 2012
Commercial:
Commercial and industrial	$	-		-
Secured by real estate		18,856		16,270
Total commercial		18,856		16,270
Consumer:
Real estate 1-4 family first mortgage		320,508		306,922
Real estate 1-4 family junior lien mortgage		120,276		129,251
Total consumer		440,784		436,173
Total nonaccrual loans
(excluding PCI)	$	459,640		452,443

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING Certain loans 90 days or more past due as to interest or principal are still accruing, because they are (1) well-secured and in the process of collection or (2) real estate 1-4 family mortgage loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due. PCI loans of $6.8 million at March 31, 2013, and $7.0 million at December 31, 2012, are excluded from this disclosure even though they are 90 days or more contractually past due. These PCI loans are considered to be accruing due to the existence of the accretable yield and not based on consideration given to contractual interest payments.

The following table shows non-PCI loans 90 days or more past due and still accruing.

(in thousands)	Mar. 31 2013		Dec. 31 2012
Commercial:
Commercial and industrial	$	-		-
Secured by real estate		-		4,455
Total commercial		-		4,455
Consumer:
Real estate 1-4 family first mortgage		18,665		18,382
Real estate 1-4 family junior lien mortgage		5,354		6,940
Total consumer		24,019		25,322
Total past due (excluding PCI)	$	24,019		29,777

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IMPAIRED LOANS The table below summarizes key information for impaired loans. Our impaired loans predominantly include loans on nonaccrual status in the commercial portfolio segment and loans modified in a TDR, whether on accrual or nonaccrual status. These impaired loans generally have estimated losses

which are included in the allowance for credit losses. Impaired loans exclude PCI loans. The table below includes trial modifications that totaled $21.7 million at March 31, 2013, and $20.2 million at December 31, 2012.

			Recorded investment
(in thousands)	Unpaid principal balance		Impaired loans		Impaired loans with related allowance for credit losses		Related allowance for credit losses
March 31, 2013
Commercial:
Commercial and industrial	$	-		-		-		-
Secured by real estate		21,411		13,706		13,706		5,822
Total commercial		21,411		13,706		13,706		5,822
Consumer:
Real estate 1-4 family first mortgage		467,122		383,072		295,163		58,472
Real estate 1-4 family junior lien mortgage		160,636		144,095		122,791		51,731
Total consumer		627,758		527,167		417,954		110,203
Total impaired loans (excluding PCI)	$	649,169		540,873		431,660		116,025
December 31, 2012
Commercial:
Commercial and industrial	$	-		-		-		-
Secured by real estate		18,697		15,434		15,434		9,827
Total commercial		18,697		15,434		15,434		9,827
Consumer:
Real estate 1-4 family first mortgage		439,213		361,162		262,803		53,539
Real estate 1-4 family junior lien mortgage		156,186		139,690		119,078		48,912
Total consumer		595,399		500,852		381,881		102,451
Total impaired loans (excluding PCI)	$	614,096		516,286		397,315		112,278

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The following table provides the average recorded investment in impaired loans and the amount of interest income recognized on impaired loans by portfolio segment and class.

	Quarter ended March 31,
	2013				2012
(in thousands)	Average recorded investment		Recognized interest income		Average recorded investment		Recognized interest income
Commercial:
Commercial and industrial	$	-		-		-		-
Secured by real estate		14,330		212		18,953		47
Total commercial		14,330		212		18,953		47
Consumer:
Real estate 1-4 family first mortgage		368,436		6,587		203,327		2,809
Real estate 1-4 family junior lien mortgage		139,787		2,911		113,176		1,644
Total consumer (1)		508,223		9,498		316,503		4,453
Total impaired loans	$	522,553		9,710		335,456		4,500
Interest income:
Cash basis of accounting			$	4,331				59
Other (2)				5,379				4,441
Total interest income			$	9,710				4,500

(1) Quarter ended March 31, 2013, reflects OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be classified as TDRs, as well as written down to net realizable collateral value.

(2) Includes interest recognized on accruing TDRs and interest recognized related to the passage of time on certain impaired loans. See footnote 1 to the table of changes in the allowance for credit losses.

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TROUBLED DEBT RESTUCTURINGS (TDRs) When, for economic or legal reasons related to a borrower’s financial difficulties, we grant a concession for other than an insignificant period of time to a borrower that we would not otherwise consider, the related loan is classified as a TDR. We do not consider any loans modified through a loan resolution such as foreclosure or short sale to be a TDR.

We may require some borrowers experiencing financial difficulty to make trial payments generally for a period of three to four months, according to the terms of a planned permanent modification, to determine if they can perform according to those terms. These arrangements represent trial modifications, which we classify and account for as TDRs. While loans are in trial payment programs, their original terms are not considered modified and they continue to advance through delinquency status and accrue interest according to their original terms. The planned modifications for these arrangements predominantly involve interest rate reductions or other interest rate concessions, however, the exact concession type and resulting financial effect are usually not finalized and do not take effect until the loan is permanently modified. The trial period terms are developed in accordance with our proprietary programs or the U.S. Treasury’s Making Homes Affordable programs for real estate 1-4 family first lien (i.e. Home Affordable Modification Program – HAMP) and junior lien (i.e. Second Lien Modification Program – 2MP) mortgage loans.

At March 31, 2013, the loans in trial modification period were $8.7 million under HAMP, $2.1 million under 2MP and $10.9 million under proprietary programs, compared with $8.8 million, $2.2 million and $9.2 million at December 31, 2012, respectively. Trial modifications with a recorded investment of $9.8 million at March 31, 2013, and $9.2 million at December 31, 2012, were accruing loans and $11.9 million and $11.0 million, respectively, were nonaccruing loans. Our recent experience is that most of the mortgages that enter a trial payment period program are successful in completing the program requirements and are then permanently modified at the end of the trial period. As previously discussed, our allowance process considers the impact of those modifications that are probable to occur including the associated credit cost and related re-default risk.

The following table summarizes our TDR modifications for the periods presented by primary modification type and includes the financial effects of these modifications. For those loans that may be modified more than once, the table reflects each modification.

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	Primary modification type (1)								Financial effects of modifications
(in thousands)	Principal (2)		Interest rate reduction		Other interest rate concessions (3)		Total		Charge- offs (4)		Weighted average interest rate reduction			Recorded investment related to interest rate reduction (5)
Quarter ended March 31, 2013
Commercial:
Commercial and industrial	$	-		-		-		-		-		-	%	$	-
Secured by real estate		-		161		206		367		-		0.80			161
Total commercial		-		161		206		367		-		0.80			161
Consumer:
Real estate 1-4 family first mortgage		5,783		10,370		32,565		48,718		2,311		3.22			14,524
Real estate 1-4 family junior lien mortgage		1,654		3,543		19,000		24,197		586		5.08			4,851
Trial modifications (6)		-		-		1,433		1,433		-		-			-
Total consumer		7,437		13,913		52,998		74,348		2,897		3.68			19,375
Total	$	7,437		14,074		53,204		74,715		2,897		3.66	%	$	19,536
Quarter ended March 31, 2012
Commercial:
Commercial and industrial	$	-		-		-		-		-		-	%	$	-
Secured by real estate		-		-		1,377		1,377		-		-			-
Total commercial		-		-		1,377		1,377		-		-			-
Consumer:
Real estate 1-4 family first mortgage		2,837		8,371		6,319		17,527		1,807		3.72			10,585
Real estate 1-4 family junior lien mortgage		492		4,997		1,451		6,940		73		6.08			5,489
Trial modifications (6)		-		-		16,124		16,124		-		-			-
Total consumer		3,329		13,368		23,894		40,591		1,880		4.53			16,074
Total	$	3,329		13,368		25,271		41,968		1,880		4.53	%	$	16,074

(1) Amounts represent the recorded investment in loans after recognizing the effects of the TDR, if any. TDRs with multiple types of concessions are presented only once in the table in the first category type based on the order presented.

(2) Principal modifications include principal forgiveness at the time of the modification, contingent principal forgiveness granted over the life of the loan based on borrower performance, and principal that has been legally separated and deferred to the end of the loan, with a zero percent contractual interest rate.

(3) Other interest rate concessions include loans modified to an interest rate that is not commensurate with the risk, even though the rate may have been increased. These modifications would include renewals, term extensions and other interest adjustments, but exclude modifications that also forgive principal and/or reduce the interest rate. Quarter ended March 31, 2013 includes $16.1 million of consumer loans, resulting from the OCC guidance issued in third quarter 2012, which requires consumer loans discharged in bankruptcy to be classified as TDRs, as well as written down to net realizable collateral value.

(4) Charge-offs include write-downs of the investment in the loan in the period of modification. In some cases, the amount of charge off will differ from the modification terms if the loan has already been charged down based on our policies. Modifications resulted in forgiving principal (actual, contingent or deferred) of $2.0 million and $2.1 million at March 31, 2013 and 2012, respectively.

(5) Reflects the effect of reduced interest rates to loans with principal or interest rate reduction primary modification type.

(6) Trial modifications are granted a delay in payments due under the original terms during the trial payment period. However, these loans continue to advance through delinquency status and accrue interest according to their original terms. Any subsequent permanent modification generally includes interest rate related concessions; however, the exact concession type and resulting financial effect are usually not known until the loan is permanently modified. Trial modifications for the period are presented net of previously reported trial modifications that became permanent in the current period. Reflects revision of first quarter 2012 trial modification activity.

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The table below summarizes permanent modification TDRs that have defaulted in the current period within 12 months of their permanent modification date. We report these defaulted TDRs based on a payment default definition of 90 days past due for the commercial portfolio segment and 60 days past due for the consumer portfolio segment.

	Recorded investment of defaults
	Quarter ended March 31,
(in thousands)	2013		2012
Total commercial	$	-		-
Consumer:
Real estate 1-4 family first mortgage		875		1,999
Real estate 1-4 family junior lien mortgage		583		1,352
Total consumer		1,458		3,351
Total	$	1,458		3,351

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Note 3: Fair Values of Assets and Liabilities

As of March 31, 2013, assets and liabilities measured at fair value on a nonrecurring basis were insignificant. Additionally, we did not elect fair value option for any financial instruments as permitted in FASB ASC 825, Financial Instruments, which allows companies to elect to carry certain financial instruments at fair value with corresponding changes in fair value reported in the results of operations.

Disclosures about Fair Value of Financial Instruments The table below is a summary of fair value estimates by level for financial instruments. The carrying amounts in the following table are recorded in the balance sheet under the indicated captions.

We have not included assets and liabilities that are not financial instruments in our disclosure, such as other assets, deferred taxes and other liabilities. The total of the fair value calculations presented does not represent, and should not be construed to represent, the underlying value of Wachovia Funding. For descriptions of the valuation methodologies we use for estimating fair value for financial instruments that are not recorded at fair value, see Note 5 in our 2012 10-K.

	Carrying amount		Estimated fair value
(in thousands)			Level 1		Level 2		Level 3		Total
March 31, 2013
Financial assets
Cash and cash equivalents	$	918,102		918,102		-		-		918,102
Loans, net (1)		12,229,360		-		-		13,533,504		13,533,504
December 31, 2012
Financial assets
Cash and cash equivalents	$	642,946		642,946		-		-		642,946
Loans, net (1)		13,241,254		-		-		14,575,463		14,575,463

(1) Carrying amount reflects unearned income of $441.2 million and $472.9 million and allowance for loan losses of $281.5 million and $309.2 million at March 31, 2013 and December 31, 2012, respectively.

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Note 4: Common and Preferred Stock

Wachovia Funding has authorized preferred and common stock. In order to remain qualified as a REIT, Wachovia Funding must distribute annually at least 90% of taxable

earnings. The following table provides detail of preferred stock.

	March 31, 2013 and December 31, 2012
(in thousands, except shares and liquidation preference per share)	Liquidation preference per share		Shares authorized		Shares issued and outstanding		Par value		Carrying value
Series A
7.25% Non-Cumulative Exchangeable, Perpetual Series A Preferred Securities	$	25		30,000,000		30,000,000	$	300		300
Series B
Floating rate (three-month LIBOR plus 1.83%) Non-Cumulative Exchangeable,
Perpetual Series B Preferred Securities		25		40,000,000		40,000,000		400		400
Series C
Floating rate (three-month LIBOR plus 2.25%) Cumulative,
Perpetual Series C Preferred Securities		1,000		5,000,000		4,233,754		43		43
Series D
8.50% Non-Cumulative, Perpetual Series D Preferred Securities		1,000		913		913		-		-
Total				75,000,913		74,234,667	$	743		743

In the event that Wachovia Funding is liquidated or dissolved, the holders of the preferred securities will be entitled to a liquidation preference for each security plus any authorized, declared and unpaid dividends that will be paid prior to any payments to common stockholders. With respect to the payment of dividends and liquidation preference, the Series A preferred securities rank on parity with Series B and Series D preferred securities and senior to the common stock and Series C preferred securities. In the event that a supervisory event occurs in which the Bank is placed into conservatorship or receivership, the Series A and Series B preferred securities are convertible into certain preferred stock of Wells Fargo.

Except upon the occurrence of a Special Event (as defined below), the Series A preferred securities are not redeemable prior to December 31, 2022. On or after such date, we may redeem these securities for cash, in whole or in part, with the prior approval of the Office of the Comptroller of the Currency (OCC), at the redemption price of $25 per security, plus authorized, declared, but unpaid dividends to the date of redemption. The Series B and Series C preferred securities may be redeemed for cash, in whole or in part, with the prior approval of the OCC, at redemption prices of $25 and $1,000 per security, respectively, plus authorized, declared, but unpaid dividends to the date of redemption, including any accumulation of any unpaid dividends for the Series C preferred securities. We can redeem the Series D preferred securities in whole or in part at any time at $1,000 per security plus authorized, declared and unpaid dividends.

A Special Event, which allows redemption of the Series A preferred securities prior to December 31, 2022, means: a Tax Event; an Investment Company Act Event; or a Regulatory Capital Event.

Tax Event means our determination, based on the receipt by us of a legal opinion, that there is a significant risk that

dividends paid or to be paid by us with respect to our capital stock are not or will not be fully deductible by us for United States Federal income tax purposes or that we are or will be subject to additional taxes, duties, or other governmental charges, in an amount we reasonably determine to be significant as a result of:

• any amendment to, clarification of, or change in, the laws, treaties, or related regulations of the United States or any of its political subdivisions or their taxing authorities affecting taxation; or

• any judicial decision, official administrative pronouncement, published or private ruling, technical advice memorandum, Chief Counsel Advice, as such term is defined in the Code, regulatory procedure, notice, or official announcement.

Investment Company Act Event means our determination, based on the receipt by us of a legal opinion, that there is a significant risk that we are or will be considered an “investment company” that is required to be registered under the Investment Company Act, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency, or regulatory authority.

Regulatory Capital Event means our determination, based on the receipt by us of an opinion or letter of counsel, that there is a significant risk that the Series A preferred securities will no longer constitute Tier 1 capital of the Bank or Wells Fargo for purposes of the capital adequacy regulations or guidelines or policies of the OCC or the Federal Reserve Board, or their respective successor as the Bank’s and Wells Fargo’s, respectively, primary Federal banking regulator, as a result of any amendments to, clarification of, or change in applicable laws or related regulations, guidelines, policies or

44

official interpretations thereof, or any official administrative pronouncement or judicial decision interpreting or applying such laws or related regulations, guidelines, policies or official interpretations thereof.

In June 2012, federal banking agencies, including the Board of Governors of the Federal Reserve System (FRB), jointly published notices of proposed rulemaking, which would substantially amend the risk-based capital rules for banks. The proposed capital rules are intended to implement in the U.S. the Basel III regulatory capital reforms (Basel III NPR), comply with changes required by the Dodd-Frank Act, and replace the existing Basel I-based capital requirements. Based on our current interpretation, we believe the Wachovia Funding Series A preferred securities would no longer constitute Tier 1 capital for Wells Fargo or the Bank under the Basel III NPR. Although the proposed rules contemplated an effective date of January 1, 2013, with phased in compliance requirements, the rules have not yet been finalized by the U.S. banking regulators due to the volume of comments received and concerns expressed during the comment period. The FRB may not adopt the Basel III NPR as proposed or may make additional changes to the applicable Tier 1 capital rules prior to final adoption. In the event the FRB’s applicable final rules regarding Tier 1 capital treatment are the same as the Basel III NPR or otherwise result in the Series A preferred securities no longer constituting Tier 1 capital for Wells Fargo or the Bank, Wachovia Funding may determine to redeem the Wachovia Funding Series A preferred securities due to a Regulatory Capital Event.

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Note 5: Transactions With Related Parties

Wachovia Funding engages in various transactions and agreements with affiliated parties. Due to the nature of common ownership of Wachovia Funding and the affiliated parties by Wells Fargo, these transactions and agreements could differ from those conducted with unaffiliated parties.

The principal items related to transactions with affiliated parties included in the accompanying consolidated statement of income and consolidated balance sheet are described in the table and narrative below.

	Quarter ended March 31,
(in thousands)	2013		2012
Income statement data
Interest income:
Accretion of discounts on loans	$	23,134		38,271
Interest on deposits (1)		464		624
Total interest income		23,598		38,895
Interest expense		353		-
Loan servicing costs		9,690		10,796
Management fees		1,696		1,932

(1) Includes $221 thousand from interest rate swaps for quarter ended March 31, 2012.

(in thousands)	March 31, 2013			Dec. 31, 2012
Balance sheet related data
Loans purchases (year-to-date data) (1)	$	-			4,397,812
Loans sales (year-to-date data)		(5,573	)		(58,375	)
Foreclosed assets sales (year-to-date data)		(1,989	)		(12,438	)
Accounts receivable/payable—affiliates, net		116,653			131,216
Deposits		918,102			642,946
Lines of credit with Bank		27,152			745,016
Dividends payable—affiliate		32,420			-

(1) Includes accrued interest, see Note 2 for additional details.

Loan Participations We purchase and sell loans and/or 100% interests in loan participations (which are reflected as loans in the accompanying consolidated financial statements) to and from the Bank or its affiliates. The purchases and sales are transacted at fair value resulting in purchase discounts and premiums or gains and losses on sales. The net purchase discount accretion is reported within interest income. In first quarter 2013, we did not purchase loans, and sales were with the Bank or its affiliates.

Loan Servicing Costs The loans in our portfolio are serviced by the Bank or its affiliates pursuant to the terms of participation and servicing agreements. In some instances, the Bank has delegated servicing responsibility to third parties that are not affiliated with us or the Bank or its affiliates. Depending on the loan type, the monthly servicing fee charges are based in part on (a) outstanding principal balances, (b) a flat fee per month, or (c) a total loan commitment amount.

Management Fees We pay the Bank a management fee to reimburse for general overhead expenses paid on our behalf. Management fees for first quarter 2013 and 2012 were calculated based on Wells Fargo’s total monthly allocable costs multiplied by a formula. The formula is based on our proportion of Wells Fargo’s consolidated: 1) full-time equivalent employees, 2) total average assets and 3) total revenue.

Foreclosed Assets We sell foreclosed assets to the Bank from time to time at estimated fair value.

Accounts Receivable/Payable, Net Accounts receivable from or payable to the Bank or its affiliates result from intercompany transactions which include net loan pay-downs, interest receipts, servicing costs, management fees and other transactions, including those transactions noted herein, which have not yet settled.

Deposits Our primary cash management vehicle is a deposit account with the Bank. Interest income earned on deposits is included in interest income.

Lines of Credit Wachovia Funding and its subsidiaries have revolving lines of credit with the Bank, pursuant to which we can borrow up to $2.2 billion at a rate of interest equal to the average federal funds rate plus 12.5 basis points (0.125%).

Dividends Payable – Affiliates

Represents dividends declared in first quarter 2013, payable primarily to Wachovia Preferred Holding, but not paid until April 1, 2013.

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PART II – OTHER INFORMATION

Item 1.    Legal Proceedings

Wachovia Funding is not currently involved in nor, to our knowledge, currently threatened with any material litigation. From time to time we may become involved in routine litigation arising in the ordinary course of business. We do not believe that the eventual outcome of any such routine litigation will, in the aggregate, have a material adverse effect on our consolidated financial statements. However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters, if unfavorable, could be material to our consolidated financial statements for any particular period.

Item 1A. Risk Factors

Information in response to this item can be found under the “Risk Factors” section in this Report which information is incorporated by reference into this item.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

Information required by this Item 2 pursuant to Item 703 of Regulation S-K regarding issuer repurchases of equity securities is not applicable since we do not have a program providing for the repurchase of our securities.

Item 6.    Exhibits

(a)     Exhibits

Exhibit No.

(12)(a) Computation of Consolidated Ratios of Earnings to Fixed Charges.

(12)(b) Computation of Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends.

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

(31)(b) Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32)(a) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(32)(b) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(99)(a) Wells Fargo & Company Supplementary Consolidating Financial Information (Unaudited).

(101) XBRL Instance Document

(101) XBRL Taxonomy Extension Schema Document

(101) XBRL Taxonomy Extension Calculation Linkbase Document

(101) XBRL Taxonomy Extension Label Linkbase Document

(101) XBRL Taxonomy Extension Presentation Linkbase Document

(101) XBRL Taxonomy Extension Definitions Linkbase Document

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SIGNATURE

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

Dated: May 9, 2013	WACHOVIA PREFERRED FUNDING CORP.
	By: /s/ RICHARD D. LEVY
	Richard D. Levy
	Executive Vice President and Controller
	(Principal Accounting Officer)

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