10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

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

For the fiscal year ended December 31, 2005 Commission File Number 001-2979

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

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

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

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

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

	Name of Each Exchange
Title of Each Class	on Which Registered
Common Stock, par value $1-2/3	New York Stock Exchange
	Chicago Stock Exchange
Notes Linked to the S&P 500 Index® due January 4, 2008	American Stock Exchange
Notes Linked to the Nasdaq -100 Index® due January 4, 2008	American Stock Exchange
Basket Linked Notes due October 9, 2008	American Stock Exchange
Basket Linked Notes due April 15, 2009	American Stock Exchange
Callable Notes Linked to the S&P 500 Index® due August 25, 2009	American Stock Exchange
Notes Linked to the Dow Jones Industrial AverageSM due May 5, 2010	American Stock Exchange

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  ü  No        

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes         No  ü 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.

Yes  ü  No        

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

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

     Large accelerated filer þ            Accelerated filer o            Non-accelerated filer o

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

Yes         No  ü 

At June 30, 2005, the aggregate market value of common stock held by non-affiliates was approximately $102,556 million, based on a closing price of $61.58. At February 28, 2006, 1,675,891,369 shares of common stock were outstanding.

Documents Incorporated by Reference

Portions of the Company’s 2005 Annual Report to Stockholders are incorporated by reference into Parts I, II and IV of this Form 10-K, and portions of the Company’s definitive Proxy Statement for its 2006 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K. The cross-reference index on the following page identifies by page numbers the portions of each document that are incorporated by reference into this Form 10-K. Only those portions identified in the cross-reference index are incorporated into this Form 10-K.

TABLE OF CONTENTS

EXHIBIT 12.(A)

EXHIBIT 12.(B)

EXHIBIT 13

EXHIBIT 21

EXHIBIT 23

EXHIBIT 24

EXHIBIT 31.(A)

EXHIBIT 31.(B)

EXHIBIT 32.(A)

EXHIBIT 32.(B)

FORM 10-K CROSS-REFERENCE INDEX

		Page(s)
		Form	Annual	Proxy
		10-K	Report (1)	Statement (2)
PART I
Item 1.	Business
	Description of Business	2-11, 31	33-113	—
	Statistical Disclosure:
	Distribution of Assets, Liabilities and Stockholders’ Equity; Interest Rates and Interest Differential	22	41-43	—
	Investment Portfolio	—	46, 64-65, 71-72	—
	Loan Portfolio	23-25	46, 49-50, 65, 73-76	—
	Summary of Credit Loss Experience	26	38-39, 49-51, 66, 74-75	—
	Deposits	—	46, 80	—
	Return on Equity and Assets	—	36	—
	Short-Term Borrowings	—	80	—
	Derivatives	—	68, 107-109	—
Item 1A.	Risk Factors	12-21	—	—
Item 1B.	Unresolved Staff Comments (3)	—	—	—
Item 2.	Properties	27	77	—
Item 3.	Legal Proceedings	—	104	—
Item 4.	Submission of Matters to a Vote of Security Holders (3)	—	—	—
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	6, 28	60, 62, 70, 113	—
Item 6.	Selected Financial Data	—	37	—
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	—	34-57	—
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	—	52-54	—
Item 8.	Financial Statements and Supplementary Data	—	60-113	—
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure (3)	—	—	—
Item 9A.	Controls and Procedures	—	58-59	—
Item 9B.	Other Information (3)	—	—	—
PART III
Item 10.	Directors and Executive Officers of the Registrant	29-31	—	9, 16-21
Item 11.	Executive Compensation	—	—	21-41
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	—	—	7-9, 42-44
Item 13.	Certain Relationships and Related Transactions	—	—	20-23, 40-41
Item 14.	Principal Accountant Fees and Services	—	—	45-46(4)
PART IV
Item 15.	Exhibits, Financial Statement Schedules	32-39	60-113	—
SIGNATURES		40	—	—

(1)	The information required to be submitted in response to these items is incorporated by reference to the identified portions of the Company’s 2005 Annual Report to Stockholders. Pages 33 through 113 of the 2005 Annual Report to Stockholders have been filed as Exhibit 13 to this Form 10-K.
(2)	The information required to be submitted in response to these items is incorporated by reference to the identified portions of the Company’s definitive Proxy Statement for the 2006 Annual Meeting of Stockholders to be held on April 25, 2006, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A.
(3)	Not applicable.
(4)	Not including information under “Audit and Examination Committee Report.”

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DESCRIPTION OF BUSINESS

General

Wells Fargo & Company is a diversified financial services company organized under the laws of Delaware and registered as a bank holding company and financial holding company under the Bank Holding Company Act of 1956, as amended (BHC Act). Based on assets of $482 billion at December 31, 2005, we were the fifth largest bank holding company in the United States. When we refer to “the Company,” “we,” “our” and “us” in this report, we mean Wells Fargo & Company and Subsidiaries (consolidated). When we refer to “the Parent,” we mean Wells Fargo & Company.

The Company engages in banking and a variety of related financial services businesses. Retail, commercial and corporate banking services are provided through banking stores in Alaska, Arizona, California, Colorado, Idaho, Illinois, Indiana, Iowa, Michigan, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, Ohio, Oregon, South Dakota, Texas, Utah, Washington, Wisconsin and Wyoming. Other financial services are provided by subsidiaries engaged in various businesses, principally: wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, insurance agency and brokerage services, computer and data processing services, trust services, investment advisory services, mortgage-backed securities servicing and venture capital investment.

In February 2004, the Company completed the consolidation of 19 of its national bank charters into a single national bank charter, Wells Fargo Bank, National Association (Wells Fargo Bank). At December 31, 2005, Wells Fargo Bank was the Parent’s principal subsidiary with $407 billion in total assets, or 84% of the Company’s assets. Wells Fargo Bank is rated “Aaa” by Moody’s Investors Service and is the only U.S. bank to have the highest possible credit rating assigned by Moody’s.

With the acquisition of certain assets of Strong Financial Corporation at the end of 2004, the Company became one of the top 20 U.S. mutual fund companies, managing $108 billion in mutual funds. Total assets managed or administered (including retail brokerage) by the Company were $880 billion at December 31, 2005.

The Company has three operating segments for management reporting purposes: Community Banking, Wholesale Banking and Wells Fargo Financial. The 2005 Annual Report to Stockholders includes financial information and descriptions of these operating segments.

The Company had 153,500 active, full-time equivalent team members at December 31, 2005.

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History and Growth

The Company is the product of the merger involving Norwest Corporation and the former Wells Fargo & Company, completed on November 2, 1998 (the WFC Merger). On completion of the WFC Merger, Norwest Corporation changed its name to Wells Fargo & Company.

Norwest Corporation was organized in 1929 under the laws of the State of Delaware. Prior to the WFC Merger, it provided banking services to customers in 16 states and additional financial services through subsidiaries engaged in a variety of businesses including mortgage banking and consumer finance.

The former Wells Fargo & Company’s principal subsidiary, Wells Fargo Bank, N.A., was the successor to the banking portion of the business founded by Henry Wells and William G. Fargo in 1852. That business later operated the westernmost leg of the Pony Express and ran stagecoach lines in the western part of the United States. The California banking business was separated from the express business in 1905, merged in 1960 with American Trust Company, another of the oldest banks in the Western United States, and became Wells Fargo Bank, N.A., a national banking association, in 1968.

In April 1996, the former Wells Fargo & Company acquired First Interstate Bancorp, a $55 billion bank holding company in a transaction valued at $11 billion. In October 2000, the Company acquired First Security Corporation, a $23 billion bank holding company in a transaction valued at $3 billion.

The Company expands its business, in part, by acquiring banking institutions and other companies engaged in activities that are financial in nature. The Company continues to explore opportunities to acquire banking institutions and other financial services companies, and discussions are continually being carried on related to such possible acquisitions. The Company cannot predict whether, or on what terms, such discussions will result in further acquisitions. As a matter of policy, the Company generally does not comment on such discussions or possible acquisitions until a definitive acquisition agreement has been signed.

Competition

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

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

REGULATION AND SUPERVISION

The following discussion, together with Notes 3 (Cash, Loan and Dividend Restrictions) and 25 (Regulatory and Agency Capital Requirements) to Financial Statements included in the 2005 Annual Report to Stockholders, sets forth the material elements of the regulatory framework applicable to bank holding companies and their subsidiaries and provides certain information specific to us. This regulatory framework is intended to protect depositors, federal deposit insurance funds, consumers and the banking system as a whole, and not to protect security holders. To the extent that the information describes statutory and regulatory provisions, it is qualified in its entirety by reference to those provisions. Further, such statutes, regulations and policies are continually under review by Congress and state legislatures, and federal and state regulatory agencies. A change in statutes, regulations or regulatory policies applicable to us, including changes in interpretation or implementation thereof, could have a material effect on the Company’s business.

Laws and regulations could restrict our ability to diversify into other areas of financial services, acquire depository institutions, and pay dividends on our capital stock. The Company may also be required to provide financial support to one or more of its subsidiary banks, maintain capital balances in excess of those desired by management, and pay higher deposit insurance premiums as a result of a general deterioration in the financial condition of depository institutions.

General

Parent Bank Holding Company. As a bank holding company, the Parent is subject to regulation under the BHC Act and to inspection, examination and supervision by the Board of Governors of the Federal Reserve System (Federal Reserve Board or FRB).

Subsidiary Banks. The Company’s subsidiary national banks are subject to regulation and examination primarily by the Office of the Comptroller of the Currency (OCC) and secondarily by the Federal Deposit Insurance Corporation (FDIC) and the FRB. The Company’s state-chartered banks are subject to primary federal regulation and examination by the FDIC and, in addition, are regulated and examined by their respective state banking departments.

Nonbank Subsidiaries. Many of the Company’s nonbank subsidiaries are also subject to regulation by the FRB and other applicable federal and state agencies. The Company’s brokerage

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subsidiaries are regulated by the Securities and Exchange Commission (SEC), the National Association of Securities Dealers, Inc. and state securities regulators. The Company’s insurance subsidiaries are subject to regulation by applicable state insurance regulatory agencies. The Company’s other nonbank subsidiaries may be subject to the laws and regulations of the federal government and/or the various states in which they conduct business.

Parent Bank Holding Company Activities

“Financial in Nature” Requirement. As a bank holding company that has elected to become a financial holding company pursuant to the BHC Act, the Company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or incidental or complementary to activities that are financial in nature. “Financial in nature” activities include securities underwriting, dealing and market making, sponsoring mutual funds and investment companies, insurance underwriting and agency, merchant banking, and activities that the FRB, in consultation with the Secretary of the U.S. Treasury, determines from time to time to be financial in nature or incidental to such financial activity or is complementary to a financial activity and does not pose a safety and soundness risk.

FRB approval is not required for the Company to acquire a company (other than a bank holding company, bank or savings association) engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the FRB. Prior FRB approval is required before the Company may acquire the beneficial ownership or control of more than 5% of the voting shares or substantially all of the assets of a bank holding company, bank or savings association.

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

The Company became a financial holding company effective March 13, 2000. It continues to maintain its status as a bank holding company for purposes of other FRB regulations.

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Interstate Banking. Under the Riegle-Neal Interstate Banking and Branching Act (Riegle-Neal Act), a bank holding company may acquire banks in states other than its home state, subject to any state requirement that the bank has been organized and operating for a minimum period of time, not to exceed five years, and the requirement that the bank holding company not control, prior to or following the proposed acquisition, more than 10% of the total amount of deposits of insured depository institutions nationwide or, unless the acquisition is the bank holding company’s initial entry into the state, more than 30% of such deposits in the state (or such lesser or greater amount set by the state).

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

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

Dividend Restrictions

The Parent is a legal entity separate and distinct from its subsidiary banks and other subsidiaries. A significant source of funds to pay dividends on its common and preferred stock and principal and interest on its debt is dividends from its subsidiaries. Various federal and state statutory provisions and regulations limit the amount of dividends the Parent’s subsidiary banks and certain other subsidiaries may pay without regulatory approval. For information about the restrictions applicable to the Parent’s subsidiary banks, see Note 3 (Cash, Loan and Dividend Restrictions) to Financial Statements included in the 2005 Annual Report to Stockholders.

Federal bank regulatory agencies have the authority to prohibit the Parent’s subsidiary banks from engaging in unsafe or unsound practices in conducting their businesses. The payment of dividends, depending on the financial condition of the bank in question, could be deemed an unsafe or unsound practice. The ability of the Parent’s subsidiary banks to pay dividends in the future is currently, and could be further, influenced by bank regulatory policies and capital guidelines.

Holding Company Structure

Transfer of Funds from Subsidiary Banks. The Parent’s subsidiary banks are subject to restrictions under federal law that limit the transfer of funds or other items of value from such subsidiaries to the Parent and its nonbank subsidiaries (including affiliates) in so-called “covered

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transactions.” In general, covered transactions include loans and other extensions of credit, investments and asset purchases, as well as certain other transactions involving the transfer of value from a subsidiary bank to an affiliate or for the benefit of an affiliate. Unless an exemption applies, covered transactions by a subsidiary bank with a single affiliate are limited to 10% of the subsidiary bank’s capital and surplus and, with respect to all covered transactions with affiliates in the aggregate, to 20% of the subsidiary bank’s capital and surplus. Also, loans and extensions of credit to affiliates generally are required to be secured in specified amounts. A bank’s transactions with its nonbank affiliates are also generally required to be on arm’s length terms.

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

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

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

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

Liability of Commonly Controlled Institutions. All of the Parent’s banks are insured by the FDIC. FDIC-insured depository institutions can be held liable for any loss incurred, or reasonably expected to be incurred, by the FDIC due to the default of an FDIC-insured depository institution controlled by the same bank holding company, and for any assistance provided by the FDIC to an FDIC-insured depository institution that is in danger of default and that is controlled by the same bank holding company. “Default” means generally the appointment of a conservator or receiver. “In danger of default” means generally the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance.

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Capital Requirements

The Company is subject to regulatory capital requirements and guidelines imposed by the FRB, which are substantially similar to the capital requirements and guidelines imposed by the FRB, the OCC and the FDIC on depository institutions within their jurisdictions. For information about these capital requirements and guidelines, see Note 25 (Regulatory and Agency Capital Requirements) to Financial Statements included in the 2005 Annual Report to Stockholders.

The FRB may set higher capital requirements for holding companies whose circumstances warrant it. For example, holding companies experiencing internal growth or making acquisitions are expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. Also, the FRB considers a “tangible Tier 1 leverage ratio” (deducting all intangibles) and other indications of capital strength in evaluating proposals for expansion or engaging in new activities.

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

The Basel Committee on Banking Supervision continues to evaluate certain aspects of the proposed New Basel Capital Accord (Basel II). Basel II incorporates three pillars that address (a) capital adequacy, (b) supervisory review, which relates to the computation of capital and internal assessment processes, and (c) market discipline, through increased disclosure requirements. Embodied within these pillars are aspects of risk strategy, measurement and management that relate to credit risk, market risk, and operational risk. Certain proposed approaches by the Basel Committee in Basel II may be considered complex.

Federal banking agencies expect that their revised proposal for U.S. implementation of Basel II will be available in mid-2006. Under the revised timeline, the first opportunity for an institution to conduct a parallel run of Basel II with existing Basel I capital requirement calculations would be January 2008.

From time to time, the FRB and the Federal Financial Institutions Examination Council (FFIEC) propose changes and amendments to, and issue interpretations of, risk-based capital guidelines and related reporting instructions. Such proposals or interpretations could, if implemented in the future, affect the Company’s reported capital ratios and net risk-adjusted assets.

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

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and executive compensation. The agencies are authorized to take action against institutions that fail to meet such standards.

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

Deposit Insurance Assessments

Through the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF), the FDIC insures the deposits of the Company’s depository institution subsidiaries up to prescribed limits for each depositor. The amount of FDIC assessments paid by a BIF and SAIF member institution is based on its relative risk of default as measured by regulatory capital ratios and other factors. Specifically, the assessment rate is based on the institution’s capitalization risk category and supervisory subgroup category. An institution’s capitalization risk category is based on the FDIC’s determination of whether the institution is well capitalized, adequately capitalized or less than adequately capitalized. An institution’s supervisory subgroup category is based on the FDIC’s assessment of the financial condition of the institution and the probability that FDIC intervention or other corrective action will be required.

The BIF and SAIF assessment rate currently ranges from zero to 27 cents per $100 of domestic deposits. The BIF and SAIF assessment rate for the Company’s depository institutions currently is zero. The FDIC may increase or decrease the assessment rate schedule on a semi-annual basis. An increase in the assessment rate could have a material adverse effect on the Company’s earnings, depending on the amount of the increase. The FDIC is authorized to terminate a depository institution’s deposit insurance upon a finding by the FDIC that the institution’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition enacted or imposed by the institution’s regulatory agency. The termination of deposit insurance for one or more of the Company’s subsidiary depository institutions could have a material adverse effect on the Company’s earnings, depending on the collective size of the particular institutions involved.

All FDIC-insured depository institutions must pay an annual assessment to provide funds for the payment of interest on bonds issued by the Financing Corporation, a federal corporation chartered under the authority of the Federal Housing Finance Board. The bonds (commonly referred to as FICO bonds) were issued to capitalize the Federal Savings and Loan Insurance Corporation. FDIC-insured depository institutions paid approximately 1.4 cents per $100 of BIF-assessable deposits in 2005. The FDIC established the FICO assessment rate effective for the first quarter of 2006 at approximately 1.3 cents annually per $100 of assessable deposits.

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In December 2005, Congress passed legislation that contained a deposit insurance reform provision. The Federal Deposit Insurance Reform Act of 2005 will merge BIF and SAIF into a new Deposit Insurance Fund (DIF). The legislation also authorized the FDIC to revise the current risk-based assessment system described above. Because the FDIC has not yet proposed these revisions, the Company cannot predict the effect they may have on the Company’s business, results of operations or financial condition.

Fiscal and Monetary Policies

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

Privacy Provisions of the Gramm-Leach-Bliley Act

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

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) implemented a broad range of corporate governance and accounting measures to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies, and to protect investors by improving the accuracy and reliability of disclosures under federal securities laws. The Company is subject to Sarbanes-Oxley because it is required to file periodic reports with the SEC under the Securities and Exchange Act of 1934. Among other things, Sarbanes-Oxley and/or its implementing regulations have established new membership requirements and additional responsibilities for our audit committee, imposed restrictions on the relationship between the Company and its outside auditors (including restrictions on the types of non-audit services our auditors may provide to us), imposed additional responsibilities for our

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external financial statements on our chief executive officer and chief financial officer, expanded the disclosure requirements for our corporate insiders, required our management to evaluate the Company’s disclosure controls and procedures and its internal control over financial reporting, and required our auditors to issue a report on our internal control over financial reporting. The New York Stock Exchange has imposed a number of new corporate governance requirements as well.

Patriot Act

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

Future Legislation

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

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RISK FACTORS

An investment in the Company has risk. We discuss below and elsewhere in this report and in other documents we file with the SEC various risk factors that could cause our financial results and condition to vary significantly from period to period. We refer you to the “Regulation and Supervision” section of this report for more information about legislative and regulatory risks and to the Financial Review section and Financial Statements and related Notes on pages 33 through 113 of our 2005 Annual Report to Stockholders, filed as Exhibit 13 to this report, and incorporated by reference, for more information about credit, interest rate and market risks. Any factor described below or elsewhere in this report or in our 2005 Annual Report to Stockholders could, by itself or together with one or more other factors, have a material adverse effect on our financial results and condition and on the value of an investment in Wells Fargo. Refer to our quarterly reports on Form 10-Q filed with the SEC for material changes from the risk factors described below.

In accordance with the Private Securities Litigation Reform Act of 1995, we caution you that one or more of these same factors, as well as other factors described in this report and in our 2005 Annual Report to Stockholders, could cause us to fall short of expectations for our future financial and business performance that we express in forward-looking statements in this report and other reports we file with the SEC and in other communications. We make forward-looking statements when we use words such as “believe,” “expect,” “anticipate,” “estimate,” “will,” “may,” “can” and similar expressions. Do not unduly rely on forward-looking statements, as actual results may differ significantly from expectations. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date.

For example, in our 2005 Annual Report to Stockholders, we make forward-looking statements about:

• the expected impact of expensing stock options on our 2006 earnings per share;

• the expected impact of pending and proposed accounting standards, including FASB Staff Position No. 13-a relating to leveraged lease transactions;

• future credit losses and nonperforming assets, including changes in the amount of nonaccrual loans due to portfolio growth, portfolio seasoning and other factors;

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

• anticipated capital expenditures in 2006;

• expectations for unfunded credit and equity investment commitments;

• the expected impact of pending and threatened legal actions on our results of operations and stockholders’ equity;

• the anticipated use of proceeds from the issuance of securities;

• the amount and timing of future contributions to the Cash Balance Plan;

• the recovery of our investment in variable interest entities;

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• future reclassification to earnings of deferred net gains on derivatives;

• expected completion dates of pending business combinations and other acquisitions; and

• the amount of contingent consideration payable in connection with certain acquisitions.

Our ability to grow revenue and earnings will suffer if we are unable to cross-sell more products to customers.

Selling more products to our customers – or “cross-selling” – is the essence of our business model and key to our ability to grow revenue and earnings. Many of our competitors also focus on cross-selling, especially in retail banking and mortgage lending. This can put pressure on us to sell our products at lower prices, reducing our net interest income and revenue from our fee-based products. It could also affect our ability to keep existing customers. New technologies could require us to spend more to modify or adapt our products to attract and retain customers. Increasing our cross-sell ratio – or the average number of products sold to existing customers – may become more challenging, and we might not attain our goal of selling an average of eight products to each customer.

An economic slowdown could reduce demand for our products and services and lead to lower revenue and lower earnings.

We earn revenue from interest and fees we charge on the loans and other products and services we sell. When the economy slows, the demand for those products and services can fall, reducing our interest and fee income and our earnings. An economic downturn can also hurt the ability of our borrowers to repay their loans, causing us to incur more credit losses than we estimated. Several factors could cause the economy to slow down or even recede, including higher energy costs, higher interest rates, reduced consumer or corporate spending, natural disasters such as hurricane Katrina, terrorist activities, military conflicts, and the normal cyclical nature of the economy.

Changes in stock market prices could reduce fee income from our brokerage and asset management businesses.

We earn fee income from managing assets for others and providing brokerage services. Because investment management fees are often based on the value of assets under management, a fall in the market prices of those assets could reduce our fee income. Changes in stock market prices could affect the trading activity of investors, reducing commissions and other fees we earn from our brokerage business.

For more information, refer to “Risk Management – Asset/Liability and Market Risk Management – Market Risk-Equity Markets” in the Financial Review section of our 2005 Annual Report to Stockholders.

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Changes in interest rates could reduce our net interest income and earnings.

Our net interest income is the interest we earn on loans, debt securities and other assets we hold minus the interest we pay on our deposits, long-term and short-term debt and other liabilities. Net interest income reflects both our net interest margin – the difference between the yield we earn on our assets and the interest rate we pay for deposits and our other sources of funding – and the amount of earning assets we hold. As a result, changes in either our net interest margin or the amount of earning assets we hold could affect our net interest income and our earnings.

Changes in interest rates – up or down – could adversely affect our net interest margin. Although the yield we earn on our assets and our funding costs tend to move in the same direction in response to changes in interest rates, one can rise or fall faster than the other, causing our net interest margin to expand or contract. Our liabilities tend to be shorter in duration than our assets, so they may adjust faster in response to changes in interest rates. As a result, when interest rates rise, our funding costs may rise faster than the yield we earn on our assets, causing our net interest margin to contract until the yield catches up.

Changes in the slope of the “yield curve” – or the spread between short-term and long-term interest rates – could also reduce our net interest margin. Normally, the yield curve is upward sloping, meaning short-term rates are lower than long-term rates. Because our liabilities tend to be shorter in duration than our assets, when the yield curve flattens or even inverts, we could experience pressure on our net interest margin as our cost of funds increases relative to the yield we can earn on our assets.

We assess our interest rate risk by estimating the effect on our earnings under various scenarios that differ based on assumptions about the direction, magnitude and speed of interest rate changes and the slope of the yield curve. We hedge some of that interest rate risk with interest rate derivatives. We also rely on the “natural hedge” that our loan originations and servicing rights can provide.

We do not hedge all of our interest rate risk. There is always the risk that changes in interest rates could reduce our net interest income and our earnings in material amounts, especially if actual conditions turn out to be materially different than what we assumed. For example, if interest rates rise or fall faster than we assumed or the slope of the yield curve changes, we may incur significant losses on debt securities we hold as investments. To reduce our interest rate risk, we may rebalance our investment and loan portfolios, refinance our debt and take other strategic actions. We may incur losses or expenses when we take such actions.

For more information, refer to “Risk Management – Asset/Liability and Market Risk Management – Interest Rate Risk” in the Financial Review section of our 2005 Annual Report to Stockholders.

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Changes in interest rates could also reduce the value of our mortgage servicing rights and earnings.

We have a sizeable portfolio of mortgage servicing rights. A mortgage servicing right (MSR) is the right to service a mortgage loan – collect principal, interest, escrow amounts, etc. – for a fee. We acquire MSRs when we originate mortgage loans and keep the servicing rights after we sell or securitize the loans or when we purchase the servicing rights to mortgage loans originated by other lenders. We carry MSRs at the lower of cost or fair value. Fair value is the present value of estimated future net servicing income, calculated based on a number of variables, including assumptions about the likelihood of prepayment by borrowers.

Changes in interest rates can affect prepayment assumptions and thus fair value. When interest rates fall, borrowers are more likely to prepay their mortgage loans by refinancing them at a lower rate. As the likelihood of prepayment increases, the fair value of our MSRs can decrease. Each quarter we evaluate our MSRs for impairment based on the difference between carrying amount and fair value at quarter end. If temporary impairment exists, we establish a valuation allowance through a charge to earnings for the amount the carrying amount exceeds fair value. We also evaluate our MSRs for other-than-temporary impairment. If we determine that permanent impairment exists, we will recognize a direct write-down of the carrying value of the MSRs.

For more information, refer to “Critical Accounting Policies – Valuation of Mortgage Servicing Rights” and “Risk Management – Asset/Liability and Market Risk Management – Mortgage Banking Interest Rate Risk” in the Financial Review section of our 2005 Annual Report to Stockholders.

Higher credit losses could require us to increase our allowance for credit losses through a charge to earnings.

When we loan money or commit to loan money we incur credit risk, or the risk of losses if our borrowers do not repay their loans. We reserve for credit losses by establishing an allowance through a charge to earnings. The amount of this allowance is based on our assessment of credit losses inherent in our loan portfolio (including unfunded credit commitments). The process for determining the amount of the allowance is critical to our financial results and condition. It requires difficult, subjective and complex judgments about the future, including forecasts of economic conditions that might impair the ability of our borrowers to repay their loans.

We might underestimate the credit losses inherent in our loan portfolio and have credit losses in excess of the amount reserved. We might increase the allowance because of changing economic conditions. For example, in a rising interest rate environment, borrowers with adjustable rate loans could see their payments increase. In the absence of offsetting factors such as increased economic activity and higher wages, this could reduce their ability to repay their loans, resulting

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in our increasing the allowance. We might also increase the allowance because of unexpected events, as we did in third quarter 2005 for hurricane Katrina.

Hurricane Katrina has affected our loan portfolios by damaging properties pledged as collateral and by impairing the ability of certain borrowers to repay their loans. The ultimate impact of the hurricane on us is difficult to predict and will be affected by a number of factors, including the extent of damage to the collateral, the extent to which damaged collateral is not covered by insurance, the extent to which unemployment and other economic conditions caused by the hurricane adversely affect the ability of borrowers to repay their loans, and the cost to us of collection and foreclosure moratoriums, loan forbearances and other accommodations granted to borrowers and other customers. The impact of the hurricane on us may be greater than anticipated.

For more information, refer to “Critical Accounting Policies – Allowance for Credit Losses” and “Risk Management – Credit Risk Management Process” in the Financial Review section of our 2005 Annual Report to Stockholders.

Our mortgage banking revenue can be volatile from quarter to quarter.

We earn revenue from fees we receive for originating mortgage loans and for servicing mortgage loans. When rates rise, the demand for mortgage loans tends to fall, reducing the revenue we receive from loan originations. At the same time, revenue from our MSRs can increase, either through recovery of a previously established valuation allowance or a reduction in the periodic amortization expense. When rates fall, mortgage originations tend to increase and the value of our MSRs tends to decline, also with some offsetting revenue effect. Even though they can act as a “natural hedge,” the hedge is not perfect, either in amount or timing. For example, the negative effect on revenue from an increase in the MSRs valuation allowance is immediate, but any offsetting revenue benefit from more originations and the MSRs relating to the new loans would accrue over time.

From time to time we may use derivatives and other instruments to hedge our mortgage banking interest rate risk. We generally do not hedge all of our risk, and the fact that we attempt to hedge any of the risk does not mean we will be successful. Hedging is a complex process, requiring sophisticated models and constant monitoring, and is not a perfect science. We may use hedging instruments tied to U.S. Treasury rates or LIBOR that may not perfectly correlate with the value or income being hedged. We could incur losses from our hedging activities. There may be periods where we elect not to use derivatives and other instruments to hedge mortgage banking interest rate risk.

For more information, refer to “Risk Management – Asset/Liability and Market Risk Management – Mortgage Banking Interest Rate Risk” in the Financial Review section of our 2005 Annual Report to Stockholders.

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Our venture capital business can also be volatile from quarter to quarter.

Earnings from our venture capital investments can be volatile and hard to predict and can have a significant effect on our earnings from period to period. When – and if – we recognize gains can depend on a number of factors, including general economic conditions, the prospects of the companies in which we invest, when these companies go public, the size of our position relative to the public float, and whether we are subject to any resale restrictions. Our venture capital investments could result in significant losses.

We assess our private and public equity portfolio at least quarterly for other-than-temporary impairment based on a number of factors, including the then current market value of each investment compared to its carrying value. Our venture capital investments tend to be in technology, telecommunications and other volatile industries, so the value of our public and private equity portfolios can fluctuate widely. If we determine there is other-than-temporary impairment for an investment, we will write-down the carrying value of the investment, resulting in a charge to earnings. The amount of this charge could be significant, especially if under accounting rules we were required previously to write-up the value because of higher market prices.

For more information, refer to “Risk Management – Asset/Liability and Market Risk Management – Market Risk-Equity Markets” in the Financial Review section of our 2005 Annual Report to Stockholders.

We rely on dividends from our subsidiaries for revenue, and federal and state law can limit those dividends.

Wells Fargo & Company, the parent holding company, is a separate and distinct legal entity from its subsidiaries. It receives a significant portion of its revenue from dividends from its subsidiaries. We use these dividends to pay dividends on our common and preferred stock and interest and principal on our debt. Federal and state laws limit the amount of dividends that our bank and some of our nonbank subsidiaries may pay to us. Also, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors.

For more information, refer to “Regulation and Supervision – Dividend Restrictions” and “– Holding Company Structure” in this report and to Notes 3 (Cash, Loan and Dividend Restrictions) and 25 (Regulatory and Agency Capital Requirements) to Financial Statements in our 2005 Annual Report to Stockholders.

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Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition.

Our accounting policies are fundamental to understanding our financial results and condition. Some of these policies require use of estimates and assumptions that may affect the value of our assets or liabilities and financial results. Three of our accounting policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. For a description of these three policies, refer to “Critical Accounting Policies” in the Financial Review section of our 2005 Annual Report to Stockholders.

From time to time the Financial Accounting Standards Board (FASB) and the SEC change the financial accounting and reporting standards that govern the preparation of our external financial statements. These changes are beyond our control, can be hard to predict and could materially impact how we report our financial results and condition. We could be required to apply a new or revised standard retroactively, resulting in our restating prior period financial statements in material amounts.

Acquisitions could reduce our stock price upon announcement and reduce our earnings if we overpay or have difficulty integrating them.

We regularly explore opportunities to acquire companies in the financial services industry. We cannot predict the frequency, size or timing of our acquisitions, and we typically do not comment publicly on a possible acquisition until we have signed a definitive agreement. When we do announce an acquisition, our stock price may fall depending on the size of the acquisition and the purchase price. It is also possible that an acquisition could dilute earnings per share.

We must generally receive federal regulatory approval before we can acquire a bank or bank holding company. In deciding whether to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on competition, financial condition, and future prospects including current and projected capital ratios and levels, the competence, experience, and integrity of management and record of compliance with laws and regulations, the convenience and needs of the communities to be served, including the acquiring institution’s record of compliance under the Community Reinvestment Act, and the effectiveness of the acquiring institution in combating money laundering. Also, we cannot be certain when or if, or on what terms and conditions, any required regulatory approvals will be granted. We might be required to sell banks, branches and/or business units as a condition to receiving regulatory approval.

Difficulty in integrating an acquired company may cause us not to realize expected revenue increases, cost savings, increases in geographic or product presence, and other projected benefits from the acquisition. The integration could result in higher than expected deposit attrition (run-

18

off), loss of key employees, disruption of our business or the business of the acquired company, or otherwise harm our ability to retain customers and employees or achieve the anticipated benefits of the acquisition. Time and resources spent on integration may also impair our ability to grow our existing businesses. Also, the negative effect of any divestitures required by regulatory authorities in acquisitions or business combinations may be greater than expected.

Federal and state regulations can restrict our business, and non-compliance could result in penalties, litigation and damage to our reputation.

Our parent company, our subsidiary banks and many of our nonbank subsidiaries are heavily regulated at the federal and/or state levels. This regulation is to protect depositors, federal deposit insurance funds, consumers and the banking system as a whole, not our stockholders. Federal and state regulations can significantly restrict our businesses, and we could be fined or otherwise penalized if we are found to be out of compliance.

Recent high-profile corporate scandals and other events have resulted in additional regulations. For example, Sarbanes-Oxley limits the types of non-audit services our outside auditors may provide to us in order to preserve the independence of our auditors from us. If our auditors were found not to be “independent” of us under SEC rules, we could be required to engage new auditors and file new financial statements and audit reports with the SEC. We could be out of compliance with SEC rules until new financial statements and audit reports were filed, limiting our ability to raise capital and resulting in other adverse consequences.

Sarbanes-Oxley also requires our management to evaluate the Company’s disclosure controls and procedures and its internal control over financial reporting and requires our auditors to issue a report on our internal control over financial reporting. We are required to disclose, in our annual report on Form 10-K filed with the SEC, the existence of any “material weaknesses” in our internal control. We cannot assure that we will not find one or more material weaknesses as of the end of any given year, nor can we predict the effect on our stock price of disclosure of a material weakness.

The Patriot Act, which was enacted in the wake of the September 2001 terrorist attacks, requires us to implement new or revised policies and procedures relating to anti-money laundering, compliance, suspicious activities, and currency transaction reporting and due diligence on customers. The Patriot Act also requires federal bank regulators to evaluate the effectiveness of an applicant in combating money laundering in determining whether to approve a proposed bank acquisition.

A number of states have recently challenged the position of the OCC as the sole regulator of national banks. If these challenges are successful or if Congress acts to give greater effect to state regulation, the impact on us could be significant, not only because of the potential additional restrictions on our businesses but also from having to comply with potentially 50 different sets of regulations.

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From time to time Congress considers legislation that could significantly change our regulatory environment, potentially increasing our cost of doing business, limiting the activities we may pursue or affecting the competitive balance among banks, savings associations, credit unions, and other financial institutions. As an example, our business model depends on sharing information among the family of Wells Fargo businesses to better satisfy our customers’ needs. Laws that restrict the ability of our companies to share information about customers could limit our ability to cross-sell products and services, reducing our revenue and earnings.

For more information, refer to “Regulation and Supervision” in this report and to “Report of Independent Registered Public Accounting Firm” in our 2005 Annual Report to Stockholders.

Negative publicity could damage our reputation.

Reputation risk, or the risk to our earnings and capital from negative public opinion, is inherent in our business. Negative public opinion could adversely affect our ability to keep and attract customers and expose us to adverse legal and regulatory consequences. Negative public opinion could result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance, regulatory compliance, mergers and acquisitions, and disclosure, sharing or inadequate protection of customer information, and from actions taken by government regulators and community organizations in response to that conduct. Because we conduct most of our businesses under the “Wells Fargo” brand, negative public opinion about one business could affect our other businesses.

Our bank customers could take their money out of the bank and put it in alternative investments, causing us to lose a lower cost source of funding.

Checking and savings account balances and other forms of customer deposits can decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return tradeoff. When customers move money out of bank deposits and into other investments, we can lose a relatively low cost source of funds, increasing our funding costs and reducing our net interest income.

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

In deciding whether to extend credit or enter into other transactions, we rely on the accuracy and completeness of information about our customers, including financial statements and other financial information and reports of independent auditors. For example, in deciding whether to extend credit, we may assume that a customer’s audited financial statements conform with U.S. generally accepted accounting principles (GAAP) and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. We also may rely on the

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audit report covering those financial statements. If that information is incorrect or incomplete, we may incur credit losses or other charges to earnings.

We rely on others to help us with our operations.

We rely on outside vendors to provide key components of our business operations such as internet connections and network access. Disruptions in communication services provided by a vendor or any failure of a vendor to handle current or higher volumes of use could hurt our ability to deliver products and services to our customers and otherwise to conduct our business. Financial or operational difficulties of an outside vendor could also hurt our operations if those difficulties interfere with the vendor’s ability to serve us.

Federal Reserve Board policies can significantly impact business and economic conditions and our financial results and condition.

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

Our stock price can be volatile due to other factors.

Our stock price can fluctuate widely in response to a variety of factors, in addition to those described above, including:

• general business and economic conditions;

• recommendations by securities analysts;

• new technology used, or services offered, by our competitors;

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

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

• changes in government regulations;

• natural disasters, such as the recent Gulf State hurricanes; and

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

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ANALYSIS OF CHANGES IN NET INTEREST INCOME

The following table allocates the changes in net interest income on a taxable-equivalent basis to changes in either average balances or average rates for both interest-earning assets and interest-bearing liabilities. Because of the numerous simultaneous volume and rate changes during any period, it is not possible to precisely allocate such changes between volume and rate. For this table, changes that are not solely due to either volume or rate are allocated to these categories in proportion to the percentage changes in average volume and average rate.

	Year ended December 31																	,
	2005 over 2004									2004 over 2003
(in millions)	Volume			Rate			Total			Volume			Rate			Total
Increase (decrease) in interest income:
Federal funds sold, securities purchased under resale agreements and other short-term investments	$	22		$	78		$	100		$	1		$	14		$	15
Trading assets		3			42			45			(22	)		11			(11	)
Debt securities available for sale:
Securities of U.S. Treasury and federal agencies		(6	)		(2	)		(8	)		(5	)		(7	)		(12	)
Securities of U.S. states and political subdivisions		(9	)		8			(1	)		87			(16	)		71
Mortgage-backed securities:
Federal agencies		(84	)		(2	)		(86	)		224			(252	)		(28	)
Private collateralized mortgage obligations		86			17			103			85			(25	)		60
Other debt securities		45			(15	)		30			(2	)		(2	)		(4	)
Mortgages held for sale		378			98			476			(1,422	)		23			(1,399	)
Loans held for sale		(240	)		94			(146	)		37			4			41
Loans:
Commercial and commercial real estate:
Commercial		570			533			1,103			123			(151	)		(28	)
Other real estate mortgage		21			280			301			153			(23	)		130
Real estate construction		142			135			277			41			16			57
Lease financing		10			(17	)		(7	)		39			—			39
Consumer:
Real estate 1-4 family first mortgage		(555	)		799			244			1,714			(57	)		1,657
Real estate 1-4 family junior lien mortgage		658			721			1,379			677			(213	)		464
Credit card		218			49			267			146			(20	)		126
Other revolving credit and installment		844			(72	)		772			333			(24	)		309
Foreign		212			(63	)		149			157			(66	)		91
Other		(5	)		8			3			4			(13	)		(9	)
Total increase (decrease) in interest income		2,310			2,691			5,001			2,370			(801	)		1,569
Increase (decrease) in interest expense:
Deposits:
Interest-bearing checking		3			35			38			1			5			6
Market rate and other savings		52			984			1,036			101			32			133
Savings certificates		96			135			231			(50	)		(54	)		(104	)
Other time deposits		(32	)		515			483			58			64			122
Deposits in foreign offices		45			188			233			36			21			57
Short-term borrowings		(30	)		421			391			(44	)		75			31
Long-term debt (1)		305			924			1,229			283			(122	)		161
Total increase in interest expense		439			3,202			3,641			385			21			406
Increase (decrease) in net interest income on a taxable-equivalent basis	$	1,871		$	(511	)	$	1,360		$	1,985		$	(822	)	$	1,163

(1) Includes guaranteed preferred beneficial interests in Company’s subordinated debentures, which were reflected in long-term debt at December 31, 2003, upon adoption of FIN 46 (revised December 2003), Consolidation of Variable Interest Entities (FIN 46R).

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LOAN PORTFOLIO

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

Our real estate 1-4 family mortgage loans to borrowers in the state of California represented approximately 14% of total loans at December 31, 2005, compared with 18%, at the end of 2004. These loans are mostly within the larger metropolitan areas in California, with no single area consisting of more than 3% of our total loans. Changes in real estate values and underlying economic conditions for these areas are monitored continuously within the credit risk management process.

Some of our real estate 1-4 family mortgage loans, including first mortgage and home equity products, include an interest-only feature as part of the loan terms. At December 31, 2005, such loans were approximately 26% of total loans, compared with 28% at the end of 2004. Substantially all of these loans are considered to be prime or near prime. We do not offer option adjustable-rate mortgage products, nor do we offer variable-rate mortgage products with fixed payment amounts, commonly referred to within the financial services industry as negative amortizing mortgage loans.

REAL ESTATE 1-4 FAMILY MORTGAGE LOANS BY STATE

	December 31, 2005
					Total real
	Real estate 1-4		Real estate 1-4		estate 1-4
	family first		family junior		family			% of total
(in millions)	mortgage		lien mortgage		mortgage			loans
California		$22,479		$22,112		$ 44,591			14	%
Minnesota		3,188		3,754		6,942			2
Florida		3,818		2,099		5,917			2
Colorado		2,821		2,579		5,400			2
Arizona		2,722		2,462		5,184			2
Texas		3,488		1,366		4,854			2
Washington		2,317		2,225		4,542			1
New York		2,339		1,574		3,913			1
Virginia		2,173		1,597		3,770			1
New Jersey		1,907		1,521		3,428			1
Other		30,516		17,854		48,370	(1)		16
Total		$77,768		$59,143		$136,911			44	%

(1) Consists of 40 states; no state had loans in excess of $3,299 million, and includes $3,277 million in Government National Mortgage Association early pool buyouts.

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For purposes of portfolio risk management, we aggregate commercial loans and lease financing according to market segmentation and standard industry codes. These groupings contain a diverse mix of customer relationships throughout our target markets. Loan types and product offerings are carefully underwritten and monitored. Credit policies consider industry risks where appropriate for credit risk management.

COMMERCIAL LOANS AND LEASE FINANCING BY INDUSTRY

	December 31, 2005
	Commercial loans			% of total
(in millions)	and lease financing			loans
Small business direct		$ 7,925			2	%
Property investment and services		5,567	(1)		2
Agricultural production		5,194			2
Automotive		3,326			1
Financial institutions		3,197			1
Food and beverage		2,896			1
Oil and gas		2,505			1
Industrial equipment		2,373			1
Retailers		2,352			1
Healthcare		1,856			1
Other		29,761	(2)		9
Total		$66,952			22	%

(1)	Includes loans to builders, developers and operators, trusts and title companies.
(2)	No other single category had loans in excess of $1,733 million.

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Other real estate and real estate construction loans are diversified in terms of both the state where the property is located and by the type of property securing the loans. The composition of these portfolios was stable throughout 2005 and the distribution is consistent with our target markets and focus on customer relationships. Approximately 20% of other real estate and construction loans are loans to owner-occupants where more than 50% of the property is used in the conduct of their business. The largest group of loans in any one state is 5% of total loans and the largest group of loans secured by one type of property is 3% of total loans.

COMMERCIAL REAL ESTATE LOANS BY STATE AND PROPERTY TYPE

	December 31, 2005
					Total
	Other real estate		Real estate		commercial			% of total
(in millions)	mortgage		construction		real estate			loans
By state:
California		$11,033		$ 4,018		$15,051			5	%
Texas		2,764		1,033		3,797			1
Arizona		1,501		1,024		2,525			1
Washington		1,524		515		2,039			1
Colorado		1,370		669		2,039			1
Minnesota		1,262		486		1,748			.5
Oregon		735		307		1,042			.3
Florida		307		660		967			.3
Nevada		615		335		950			.3
Utah		578		340		918			.2
Other		6,856		4,019		10,875	(1)		3.4
Total		$28,545		$13,406		$41,951	(2)		14	%
By property type:
Office buildings		$ 7,573		$ 844		$ 8,417			3	%
Retail buildings		4,396		1,261		5,657			2
Industrial		4,774		625		5,399			2
Apartments		2,761		995		3,756			1
Land		92		3,213		3,305			1
1-4 family structures		120		3,065		3,185			1
Hotels/motels		1,777		263		2,040			1
1-4 family land		—		1,640		1,640			.5
Agriculture		1,445		46		1,491			.5
Institutional		866		196		1,062			.3
Other		4,741		1,258		5,999			1.7
Total		$28,545		$13,406		$41,951	(2)		14	%

(1)	Consists of 40 states; no state had loans in excess of $770 million.
(2)	Includes owner-occupied real estate and construction loans of $9,308 million.

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ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES

		December 31																		,
(in millions)		2005				2004				2003				2002				2001
		Loan				Loan				Loan				Loan				Loan
		catgry				catgry				catgry				catgry				catgry
		as %				as %				as %				as %				as %
		of total				of total				of total				of total				of total
		loans				loans				loans				loans				loans
Commercial and commercial real estate:
Commercial	$926		20	%	$940		19	%	$917		19	%	$865		24	%	$882		28	%
Other real estate mortgage	253		9		298		11		444		11		307		13		276		15
Real estate construction	115		4		46		3		63		3		53		4		86		5
Lease financing	51		2		30		2		40		2		75		2		111		2
Total commercial and commercial real estate	1,345		35		1,314		35		1,464		35		1,300		43		1,355		50
Consumer:
Real estate 1-4 family first mortgage	229		25		150		31		176		33		104		23		76		18
Real estate 1-4 family junior lien mortgage	118		19		104		18		92		15		62		15		43		13
Credit card	508		4		466		4		443		3		386		4		394		4
Other revolving credit and installment	1,060		15		889		11		802		13		597		14		604		14
Total consumer	1,915		63		1,609		64		1,513		64		1,149		56		1,117		49
Foreign	149		2		139		1		95		1		86		1		116		1
Total allocated	3,409		100	%	3,062		100	%	3,072		100	%	2,535		100	%	2,588		100	%
Unallocated component of allowance (1)	648				888				819				1,284				1,129
Total	$4,057				$3,950				$3,891				$3,819				$3,717

(1) This amount and any unabsorbed portion of the allocated allowance are also available for any of the above listed loan categories.

See “Critical Accounting Policies – Allowance for Credit Losses” and “Risk Management – Credit Risk Management Process – Allowance for Credit Losses” in the “Financial Review” section and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements included in the 2005 Annual Report to Stockholders for a description of the process used by the Company to determine the adequacy and the components (allocated and unallocated) of the allowance for credit losses.

26

PROPERTIES

The Company owns its corporate headquarters building in San Francisco, California. The Company also owns administrative facilities in Anchorage, Alaska; Chandler, Phoenix, and Tempe, Arizona; San Francisco, California; Minneapolis and Shoreview, Minnesota; Billings, Montana; Albuquerque, New Mexico; Portland, Oregon; Sioux Falls, South Dakota; and Salt Lake City, Utah. In addition, the Company leases office space for various administrative departments in major locations in Arizona, California, Colorado, Minnesota, Oregon, Texas, and Utah.

As of December 31, 2005, the Company provided banking, insurance, investments, mortgage banking and consumer finance through more than 6,200 stores under various types of ownership and leasehold agreements. The Company owns the Wells Fargo Home Mortgage (Home Mortgage) headquarters in Des Moines, Iowa and operations/servicing centers in Springfield, Illinois; Des Moines, Iowa; and Minneapolis, Minnesota. The Company leases administrative space for Home Mortgage in Tempe, Arizona; Riverside and San Bernardino, California; Des Moines, Iowa; Frederick, Maryland; Minneapolis, Minnesota; St. Louis, Missouri; Fort Mill, South Carolina; and all mortgage production offices nationwide. The Company owns the Wells Fargo Financial, Inc. (WFFI) headquarters and two administrative buildings in Des Moines, Iowa, and an operations center in Sioux Falls, South Dakota. The Company leases administrative space for WFFI in Des Moines, Iowa; Minneapolis, Minnesota; Mississauga, Ontario; Philadelphia, Pennsylvania; San Juan, Puerto Rico; Aberdeen, South Dakota; and all store locations.

The Company is also a joint venture partner in an office building in downtown Minneapolis, Minnesota.

For further information with respect to premises and equipment and commitments under noncancelable leases for premises and equipment, refer to Note 7 (Premises, Equipment, Lease Commitments and Other Assets) to Financial Statements included in the 2005 Annual Report to Stockholders.

27

MARKET FOR REGISTRANT’S COMMON EQUITY

The Company’s common stock is traded on the New York Stock Exchange and the Chicago Stock Exchange. At January 31, 2006, there were 92,112 holders of record of the Company’s common stock.

REPURCHASES OF COMMON STOCK

The following table shows Company repurchases of its common stock for each calendar month in the quarter ended December 31, 2005.

						Total number of
				Weighted-		shares repurchased			Maximum number of
	Total number			average		as part of publicly			shares that may yet
Calendar	of shares			price paid		announced			be repurchased under
month	repurchased		(1)	per share		authorizations		(1)	the authorizations		(2)
October		8,077,376		$	58.56		8,077,376			15,724,288
November		4,189,478			61.51		4,189,478			36,534,810
December		1,348,421			63.26		1,348,421			35,186,389
Total		13,615,275					13,615,275

(1)	All shares were repurchased under the authorization covering up to 25 million shares of common stock approved by the Board of Directors and publicly announced by the Company on July 26, 2005. Unless modified or revoked by the Board, the authorization does not expire.
(2)	On November 15, 2005, the Board authorized the repurchase of an additional 25 million shares of common stock. The Company publicly announced this authorization on the same day.

28

EXECUTIVE OFFICERS OF THE REGISTRANT

			Years with
Name and			Company or
Company Position	Positions Held During the Past Five Years	Age	Predecessors
Howard I. Atkins Senior Executive Vice President and Chief Financial Officer	Senior Executive Vice President and Chief Financial Officer (August 2005 to Present); Executive Vice President and Chief Financial Officer (August 2001 to August 2005); Executive Vice President and Chief Financial Officer of New York Life Insurance Company (April 1996 to July 2001)	55	4
Patricia R. Callahan Executive Vice President (Compliance and Risk Management)	Executive Vice President (Compliance and Risk Management) (June 2005 to Present); Executive Vice President (Human Resources) (November 1998 to June 2005)	52	28
David A. Hoyt Senior Executive Vice President (Wholesale Banking)	Senior Executive Vice President (August 2005 to Present); Group Executive Vice President (Wholesale Banking) (November 1998 to August 2005)	50	24
Richard M. Kovacevich Chairman and Chief Executive Officer	Chairman and Chief Executive Officer (August 2005 to Present); Chairman, President and Chief Executive Officer (April 2001 to August 2005); President and Chief Executive Officer (November 1998 to April 2001)	62	20
Richard D. Levy Senior Vice President and Controller (Principal Accounting Officer)	Senior Vice President and Controller (September 2002 to Present); Senior Vice President and Controller of New York Life Insurance Company (September 1997 to August 2002)	48	3
Avid Modjtabai Executive Vice President (Human Resources)	Executive Vice President (Human Resources) (June 2005 to Present); Executive Vice President (Internet Services) of Wells Fargo Bank, N.A. (March 2001 to June 2005); Senior Vice President (Consumer Internet Services) (July 1999 to March 2001)	44	12
David J. Munio Executive Vice President (Chief Credit Officer)	Executive Vice President (Chief Credit Officer) (November 2001 to Present); Executive Vice President and Deputy Chief Credit Officer of Wells Fargo Bank, N.A. (September 1999 to November 2001)	61	32

29

			Years with
Name and			Company or
Company Position	Positions Held During the Past Five Years	Age	Predecessors
Mark C. Oman Senior Executive Vice President (Home and Consumer Finance)	Senior Executive Vice President (August 2005 to Present); Group Executive Vice President (Home and Consumer Finance) (September 2002 to August 2005); Group Executive Vice President (Mortgage and Home Equity) (November 1998 to August 2002); Chairman of Wells Fargo Home Mortgage, Inc. (formerly known as Norwest Mortgage, Inc.) (February 1997 until the merger with Wells Fargo Bank, N.A. in May 2004), Chief Executive Officer (August 1989 to January 2001)	51	26
James M. Strother Executive Vice President and General Counsel (Law and Government Relations)	Executive Vice President and General Counsel (January 2004 to Present); Deputy General Counsel (June 2001 to December 2003); General Counsel of Wells Fargo Home Mortgage, Inc. (formerly known as Norwest Mortgage, Inc.) (March 1998 to June 2001)	54	19
John G. Stumpf President and Chief Operating Officer (Community Banking)	President and Chief Operating Officer (August 2005 to Present); Group Executive Vice President (Community Banking) (July 2002 to August 2005); Group Executive Vice President (Western Banking) (May 2000 to June 2002); Group Executive Vice President (Southwestern Banking) (November 1998 to May 2000)	52	24
Carrie L. Tolstedt Group Executive Vice President (Regional Banking)	Group Executive Vice President (Regional Banking) (July 2002 to Present); Group Executive Vice President (California and Border Banking) (January 2001 to June 2002); Regional President of Wells Fargo Bank, N.A. (Central California Banking) (December 1998 to January 2001)	46	16

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

30

AUDIT COMMITTEE INFORMATION

The Audit and Examination Committee is a standing audit committee of the Board of Directors established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Committee has eight members: J.A. Blanchard III, Lloyd H. Dean, Enrique Hernandez, Jr., Reatha Clark King, Cynthia H. Milligan, Philip J. Quigley, Judith M. Runstad and Susan G. Swenson. Each member is independent, as independence for audit committee members is defined by New York Stock Exchange rules. The Board of Directors has determined, in its business judgment, that each member of the Committee is financially literate, as required by New York Stock Exchange rules, and that J.A. Blanchard III, Lloyd H. Dean, Enrique Hernandez, Jr., Cynthia H. Milligan, Philip J. Quigley and Susan G. Swenson each qualifies as an “audit committee financial expert” as defined by Securities and Exchange Commission regulations.

SEC FILINGS AND CORPORATE GOVERNANCE DOCUMENTS

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

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

31

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(1)	The consolidated financial statements and related notes, the report of independent registered public accounting firm, and supplementary data that appear on pages 33 through 113 of the 2005 Annual Report to Stockholders are incorporated herein by reference.
(2)	Financial Statement Schedules:
	All schedules are omitted, because they are either not applicable or the required information is shown in the consolidated financial statements or the notes thereto.
(3)	Exhibits:
	The Company’s SEC file number is 001-2979. On and before November 2, 1998, the Company filed documents with the SEC under the name Norwest Corporation. The former Wells Fargo & Company filed documents under SEC file number 001-6214.
	Stockholders may obtain a copy of any of the following exhibits, upon payment of a reasonable fee, by writing to Wells Fargo & Company, Office of the Secretary, Wells Fargo Center, N9305-173, Sixth and Marquette, Minneapolis, Minnesota 55479.

32

Exhibit
number	Description
3(a)	Restated Certificate of Incorporation, incorporated by reference to Exhibit 3(b) to the Company’s Current Report on Form 8-K dated June 28, 1993. Certificates of Amendment of Certificate of Incorporation, incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K dated July 3, 1995 (authorizing preference stock), Exhibits 3(b) and 3(c) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (changing the Company’s name and increasing authorized common and preferred stock, respectively) and Exhibit 3(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (increasing authorized common stock)
(b)	Certificate of Change of Location of Registered Office and Change of Registered Agent, incorporated by reference to Exhibit 3(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999
(c)	Certificate Eliminating the Certificate of Designations for the Company’s Cumulative Convertible Preferred Stock, Series B, incorporated by reference to Exhibit 3(a) to the Company’s Current Report on Form 8-K filed November 1, 1995
(d)	Certificate Eliminating the Certificate of Designations for the Company’s 10.24% Cumulative Preferred Stock, incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K filed February 20, 1996
(e)	Certificate of Designations for the Company’s 1996 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K filed March 13, 1996
(f)	Certificate of Designations for the Company’s 1997 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K filed April 21, 1997
(g)	Certificate of Designations for the Company’s 1998 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K filed April 20, 1998
(h)	Certificate Eliminating the Certificate of Designations for the Company’s Series A Junior Participating Preferred Stock, incorporated by reference to Exhibit 3(a) to the Company’s Current Report on Form 8-K filed April 21, 1999
(i)	Certificate of Designations for the Company’s 1999 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3(b) to the Company’s Current Report on Form 8-K filed April 21, 1999

33

3(j)	Certificate of Designations for the Company’s 2000 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3(o) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000
(k)	Certificate of Designations for the Company’s 2001 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K filed April 17, 2001
(l)	Certificate of Designations for the Company’s 2002 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K filed April 16, 2002
(m)	Certificate of Designations for the Company’s 2003 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed April 15, 2003
(n)	Certificate of Designations for the Company’s 2004 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 3(o) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004
(o)	Certificate of Designations for the Company’s 2005 ESOP Cumulative
	Convertible Preferred Stock, incorporated by reference to Exhibit 3(a) to the Company’s Current Report on Form 8-K filed March 18, 2005
(p)	By-Laws, incorporated by reference to Exhibit 3 to the Company’s Current Report on Form 8-K filed January 30, 2006
4(a)	See Exhibits 3(a) through 3(p)
(b)	The Company agrees to furnish upon request to the Commission a copy of each instrument defining the rights of holders of senior and subordinated debt of the Company

34

10*(a)	Long-Term Incentive Compensation Plan, incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K filed May 2, 2005. Amendment to Long-Term Incentive Compensation Plan, incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. Forms of Award Term Sheet for grants of restricted share rights, incorporated by reference to Exhibit 10(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999. Forms of Non-Qualified Stock Option Agreement for executive officers: for grants on and after February 28, 2006, incorporated by reference to Exhibit 10(a) to the Company’s Current Report on Form 8-K filed March 6, 2006; for grants on August 1, 2005, incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K filed August 1, 2005; for grants in 2004 and on February 22, 2005, incorporated by reference to Exhibit 10(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004; for grants after November 2, 1998 through 2003, incorporated by reference to Exhibit 10(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998; and for grants on or before November 2, 1998, incorporated by reference to Exhibit 10(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997
*(b)	Long-Term Incentive Plan, incorporated by reference to Exhibit A to the former Wells Fargo’s Proxy Statement filed March 14, 1994
*(c)	Wells Fargo Bonus Plan, incorporated by reference to Exhibit 10(c) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003
*(d)	Performance-Based Compensation Policy, incorporated by reference to Exhibit 10(d) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004
*(e)	Deferred Compensation Plan, incorporated by reference to Exhibit 10(f) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003. Amendment to Deferred Compensation Plan, incorporated by reference to Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005

* Management contract or compensatory plan or arrangement

35

10*(f)	Directors Stock Compensation and Deferral Plan, incorporated by reference to Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003. Amendments to Directors Stock Compensation and Deferral Plan, incorporated by reference to Exhibit 10(e) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, and to Exhibit 10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004. Action to increase amount of formula stock awards payable to non-employee directors effective January 1, 2005, incorporated by reference to Exhibit 10(a) to the Company’s Current Report on Form 8-K filed January 31, 2005
*(g)	1990 Director Option Plan for directors of the former Wells Fargo, incorporated by reference to Exhibit 10(c) to the former Wells Fargo’s Annual Report on Form 10-K for the year ended December 31, 1997
*(h)	1987 Director Option Plan for directors of the former Wells Fargo, incorporated by reference to Exhibit A to the former Wells Fargo’s Proxy Statement filed March 10, 1995, and as further amended by the amendment adopted September 16, 1997, incorporated by reference to Exhibit 10 to the former Wells Fargo’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1997
*(i)	Deferred Compensation Plan for Non-Employee Directors of the former Norwest, incorporated by reference to Exhibit 10(c) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. Amendment to Deferred Compensation Plan for Non-Employee Directors, effective November 1, 2000, filed as paragraph (4) of Exhibit 10(ff) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000. Amendment to Deferred Compensation Plan for Non-Employee Directors, incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003
*(j)	Directors’ Stock Deferral Plan for directors of the former Norwest, incorporated by reference to Exhibit 10(d) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. Amendment to Directors’ Stock Deferral Plan, effective November 1, 2000, filed as paragraph (5) of Exhibit 10(ff) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000. Amendment to Directors’ Stock Deferral Plan, incorporated by reference to Exhibit 10(c) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003

36

10*(k)	Directors’ Formula Stock Award Plan for directors of the former Norwest, incorporated by reference to Exhibit 10(e) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. Amendment to Directors’ Formula Stock Award Plan, effective November 1, 2000, filed as paragraph (6) of Exhibit 10(ff) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000. Amendment to Directors’ Formula Stock Award Plan, incorporated by reference to Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003
*(l)	Deferral Plan for Directors of the former Wells Fargo, incorporated by reference to Exhibit 10(b) to the former Wells Fargo’s Annual Report on Form 10-K for the year ended December 31, 1997. Amendment to Deferral Plan, incorporated by reference to Exhibit 10(d) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003
*(m)	Supplemental 401(k) Plan, incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005
*(n)	Supplemental Cash Balance Plan, incorporated by reference to Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005
*(o)	Supplemental Long-Term Disability Plan, incorporated by reference to Exhibit 10(f) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1990. Amendment to Supplemental Long-Term Disability Plan, incorporated by reference to Exhibit 10(g) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1992
*(p)	Agreement between the Company and Richard M. Kovacevich dated March 18, 1991, incorporated by reference to Exhibit 19(e) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1991. Amendment effective January 1, 1995, to the March 18, 1991 agreement between the Company and Richard M. Kovacevich, incorporated by reference to Exhibit 10(c) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1995. Cancellation Agreement, effective February 28, 2006, between the Company and Richard M. Kovacevich, incorporated by reference to Exhibit 10(b) to the Company’s Current Report on Form 8-K filed March 6, 2006
*(q)	Agreement, dated July 11, 2001, between the Company and Howard I. Atkins, incorporated by reference to Exhibit 10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001
*(r)	Agreement between the Company and Mark C. Oman, dated May 7, 1999, incorporated by reference to Exhibit 10(y) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999

37

10*(s)	Form of severance agreement between the Company and Richard M. Kovacevich and Mark C. Oman, incorporated by reference to Exhibit 10(ee) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998. Amendment effective January 1, 1995, to the March 11, 1991, agreement between the Company and Richard M. Kovacevich, incorporated by reference to Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1995. Cancellation Agreement, effective December 21, 2005, between the Company and Richard M. Kovacevich, incorporated by reference to Exhibit 10 to the Company’s Current Report on Form 8-K filed December 22, 2005
*(t)	Description of Relocation Program, incorporated by reference to Exhibit 10(y) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003
*(u)	Description of Executive Financial Planning Program, incorporated by reference to Exhibit 10(w) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004
*(v)	PartnerShares Stock Option Plan, incorporated by reference to Exhibit 10(x) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. Amendment to PartnerShares Stock Option Plan, incorporated by reference to Exhibit 10(c) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005
*(w)	Agreement, dated July 26, 2002, between the Company and Richard D. Levy, including a description of his executive transfer bonus, incorporated by reference to Exhibit 10(d) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002
(x)	Non-Qualified Deferred Compensation Plan for Independent Contractors, incorporated by reference to Exhibit 4.18 to the Company’s Registration Statement on Form S-3 filed January 4, 2002 (File No. 333-76330)
(y)	Description of compensation payable to non-employee directors effective January 1, 2005, incorporated by reference to Exhibit 10(a) to the Company’s Current Report on Form 8-K filed January 31, 2005

38

12(a)	Computation of Ratios of Earnings to Fixed Charges, filed herewith. The ratios of earnings to fixed charges, including interest on deposits, were 2.51, 3.68, 3.63, 3.13, and 1.79 for the years ended December 31, 2005, 2004, 2003, 2002 and 2001, respectively. The ratios of earnings to fixed charges, excluding interest on deposits, were 4.03, 5.92, 5.76, 4.96, and 2.63 for the years ended December 31, 2005, 2004, 2003, 2002 and 2001, respectively.
(b)	Computation of Ratios of Earnings to Fixed Charges and Preferred Dividends, filed herewith. The ratios of earnings to fixed charges and preferred dividends, including interest on deposits, were 2.51, 3.68, 3.62, 3.13, and 1.79 for the years ended December 31, 2005, 2004, 2003, 2002 and 2001, respectively. The ratios of earnings to fixed charges and preferred dividends, excluding interest on deposits, were 4.03, 5.92, 5.74, 4.95, and 2.62 for the years ended December 31, 2005, 2004, 2003, 2002 and 2001, respectively.
13	2005 Annual Report to Stockholders, pages 33 through 113, filed herewith
21	Subsidiaries of the Company, filed herewith
23	Consent of Independent Registered Public Accounting Firm, filed herewith
24	Powers of Attorney, filed herewith
31(a)	Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith
(b)	Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith
32(a)	Certification of Periodic Financial Report by Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. § 1350, furnished herewith
(b)	Certification of Periodic Financial Report by Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. § 1350, furnished herewith

STATUS OF PRIOR DOCUMENTS

The Wells Fargo & Company Annual Report on Form 10-K for the year ended December 31, 2005, at the time of filing with the Securities and Exchange Commission, shall modify and supersede all documents filed prior to January 1, 2005, pursuant to Sections 13, 14 and 15(d) of the Securities Exchange Act of 1934 (other than Exhibit 99(e) to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, containing a description of the Company’s common stock) for purposes of any offers or sales of any securities after the date of such filing pursuant to any Registration Statement or Prospectus filed pursuant to the Securities Act of 1933 which incorporates by reference such Annual Report on Form 10-K.

39

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 9, 2006.

WELLS FARGO & COMPANY
By:	/s/ RICHARD M. KOVACEVICH
	Richard M. Kovacevich
	Chairman and Chief Executive Officer

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

By:	/s/ HOWARD I. ATKINS
	Howard I. Atkins
	Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer) March 9, 2006
By:	/s/ RICHARD D. LEVY
	Richard D. Levy
	Senior Vice President and Controller (Principal Accounting Officer) March 9, 2006

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

J.A. Blanchard III	Richard D. McCormick
Lloyd H. Dean	Cynthia H. Milligan
Susan E. Engel	Donald B. Rice
Enrique Hernandez, Jr.	Judith M. Runstad
Robert L. Joss	Stephen W. Sanger
Reatha Clark King	Susan G. Swenson
Richard M. Kovacevich	Michael W. Wright

By:	/s/ PHILIP J. QUIGLEY
	Philip J. Quigley
	Director and Attorney-in-fact March 9, 2006

40

EX-12.(A)

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

	Year ended December 31										,
(in millions)	2005		2004		2003		2002		2001
Earnings, including interest on deposits (1):
Income before income tax expense and effect of change in accounting principle	$	11,548	$	10,769	$	9,477	$	8,854	$	5,460
Fixed charges		7,656		4,017		3,606		4,155		6,893
	$	19,204	$	14,786	$	13,083	$	13,009	$	12,353
Fixed charges (1):
Interest expense	$	7,458	$	3,817	$	3,411	$	3,977	$	6,741
Estimated interest component of net rental expense		198		200		195		178		152
	$	7,656	$	4,017	$	3,606	$	4,155	$	6,893
Ratio of earnings to fixed charges (2)		2.51		3.68		3.63		3.13		1.79
Earnings excluding interest on deposits:
Income before income tax expense and effect of change in accounting principle	$	11,548	$	10,769	$	9,477	$	8,854	$	5,460
Fixed charges		3,808		2,190		1,993		2,236		3,340
	$	15,356	$	12,959	$	11,470	$	11,090	$	8,800
Fixed charges:
Interest expense	$	7,458	$	3,817	$	3,411	$	3,977	$	6,741
Less interest on deposits		3,848		1,827		1,613		1,919		3,553
Estimated interest component of net rental expense		198		200		195		178		152
	$	3,808	$	2,190	$	1,993	$	2,236	$	3,340
Ratio of earnings to fixed charges (2)		4.03		5.92		5.76		4.96		2.63

(1)

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

(2)

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

EX-12.(B)

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

	Year ended December 31										,
(in millions)	2005		2004		2003		2002		2001
Earnings, including interest on deposits (1):
Income before income tax expense and effect of change in accounting principle	$	11,548	$	10,769	$	9,477	$	8,854	$	5,460
Fixed charges		7,656		4,017		3,606		4,155		6,893
	$	19,204	$	14,786	$	13,083	$	13,009	$	12,353
Preferred dividend requirement	$	—	$	—	$	3	$	4	$	14
Ratio of income before income tax expense and effect of change in accounting principle to net income before effect of change in accounting principle		1.51		1.54		1.53		1.55		1.60
Preferred dividends (2)	$	—	$	—	$	5	$	6	$	22
Fixed charges (1):
Interest expense		7,458		3,817		3,411		3,977		6,741
Estimated interest component of net rental expense		198		200		195		178		152
		7,656		4,017		3,606		4,155		6,893
Fixed charges and preferred dividends	$	7,656	$	4,017	$	3,611	$	4,161	$	6,915
Ratio of earnings to fixed charges and preferred dividends (3)		2.51		3.68		3.62		3.13		1.79
Earnings excluding interest on deposits:
Income before income tax expense and effect of change in accounting principle	$	11,548	$	10,769	$	9,477	$	8,854	$	5,460
Fixed charges		3,808		2,190		1,993		2,236		3,340
	$	15,356	$	12,959	$	11,470	$	11,090	$	8,800
Preferred dividends (2)	$	—	$	—	$	5	$	6	$	22
Fixed charges:
Interest expense		7,458		3,817		3,411		3,977		6,741
Less interest on deposits		3,848		1,827		1,613		1,919		3,553
Estimated interest component of net rental expense		198		200		195		178		152
		3,808		2,190		1,993		2,236		3,340
Fixed charges and preferred dividends	$	3,808	$	2,190	$	1,998	$	2,242	$	3,362
Ratio of earnings to fixed charges and preferred dividends (3)		4.03		5.92		5.74		4.95		2.62

(1)	As defined in Item 503(d) of Regulation S-K.
(2)	The preferred dividends were increased to amounts representing the pretax earnings that would be required to cover such dividend requirements.
(3)	These computations are included herein in compliance with Securities and Exchange Commission regulations. However, management believes that fixed charge ratios are not meaningful measures for the business of the Company because of two factors. First, even if there was no change in net income, the ratios would decline with an increase in the proportion of income which is tax-exempt or, conversely, they would increase with a decrease in the proportion of income which is tax-exempt. Second, even if there was no change in net income, the ratios would decline if interest income and interest expense increase by the same amount due to an increase in the level of interest rates or, conversely, they would increase if interest income and interest expense decrease by the same amount due to a decrease in the level of interest rates.

EX-13

Exhibit 13

	Financial Review
34	Overview
38	Critical Accounting Policies
41	Earnings Performance
41	Net Interest Income
44	Noninterest Income
45	Noninterest Expense
45	Income Tax Expense
45	Operating Segment Results
46	Balance Sheet Analysis
46	Securities Available for Sale (table on page 71)
46	Loan Portfolio (table on page 73)
46	Deposits
47	Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
47	Off-Balance Sheet Arrangements, Variable Interest Entities, Guarantees and Other Commitments
48	Contractual Obligations
48	Transactions with Related Parties
49	Risk Management
49	Credit Risk Management Process
49	Nonaccrual Loans and Other Assets
50	Loans 90 Days or More Past Due and Still Accruing
51	Allowance for Credit Losses (table on page 75)
52	Asset/Liability and Market Risk Management

52	Interest Rate Risk
52	Mortgage Banking Interest Rate Risk
54	Market Risk – Trading Activities
54	Market Risk – Equity Markets
54	Liquidity and Funding
56	Capital Management
57	Comparison of 2004 with 2003
	Controls and Procedures
58	Disclosure Controls and Procedures
58	Internal Control over Financial Reporting
58	Management’s Report on Internal Control over Financial Reporting
59	Report of Independent Registered Public Accounting Firm
	Financial Statements
60	Consolidated Statement of Income
61	Consolidated Balance Sheet
62	Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income
63	Consolidated Statement of Cash Flows
64	Notes to Financial Statements
112	Report of Independent Registered Public Accounting Firm
113	Quarterly Financial Data

     This Annual Report, including the Financial Review and the Financial Statements and related Notes, has forward-looking statements, which may include forecasts of our financial results and condition, expectations for our operations and business, and our assumptions for those forecasts and expectations. Do not unduly rely on forward-looking statements. Actual results might differ significantly from our forecasts and expectations due to several factors. Some of these factors are described in the Financial Review and in the Financial Statements and related Notes. For a discussion of other factors, refer to the “Risk Factors” and “Regulation and Supervision” sections of our Annual Report on Form 10-K for the year ended December 31, 2005, filed with the Securities and Exchange Commission (SEC) and available on the SEC’s website at www.sec.gov.

Financial Review

Overview

Wells Fargo & Company is a $482 billion diversified financial services company providing banking, insurance, investments, mortgage banking and consumer finance through banking stores, the internet and other distribution channels to consumers, businesses and institutions in all 50 states of the U.S. and in other countries. We ranked fifth in assets and fourth in market value of our common stock among U.S. bank holding companies at December 31, 2005. When we refer to “the Company,” “we,” “our” and “us” in this Report, we mean Wells Fargo & Company and Subsidiaries (consolidated). When we refer to “the Parent,” we mean Wells Fargo & Company.

     We had another exceptional year in 2005, with record diluted earnings per share of $4.50, record net income of $7.7 billion and solid market share growth across our more than 80 businesses. Our earnings growth from a year ago was broad based, with nearly every consumer and commercial business line achieving double-digit profit growth, including regional banking, private client services, corporate trust, business direct, asset-based lending, student lending, consumer credit, commercial real estate and international trade services. Both net interest income and noninterest income for 2005 grew solidly from last year and virtually all of our fee-based products had double-digit revenue growth. We took significant actions to reposition our balance sheet in 2005 designed to improve yields on earning assets, including the sale of $48 billion of our lowest-yielding adjustable rate mortgages (ARMs), resulting in $119 million of sales-related losses, and the sale of $17 billion of debt securities, including low-yielding fixed-income securities, resulting in $120 million of losses.

     Our growth in earnings per share was driven by revenue growth, operating leverage (revenue growth in excess of expense growth) and credit quality, which remained solid despite the following credit-related events:

• $171 million of net charge-offs from incremental consumer bankruptcy filings nationwide due to a change in bankruptcy law in October 2005;

• $163 million first quarter 2005 initial implementation of conforming to more stringent Federal Financial Institutions Examination Council (FFIEC) charge-off rules at Wells Fargo Financial; and

• $100 million provision for credit losses for our assessment of the effect of Hurricane Katrina.

     Our primary sources of earnings are driven by lending and deposit taking activities, which generate net interest income, and providing financial services that generate fee income.

     Revenue grew 10% from 2004. In addition to double-digit growth in earnings per share, we also had double-digit growth in average loans. We have been achieving these results not just for one year, but for the past five, 10, 15 and 20 years. Our total shareholder return the past five years was 10 times that of the S&P 500^®, and almost double the S&P 500 including the past 10, 15 and 20 years. These periods included almost every economic cycle and economic condition a financial institution can experience, including high and low interest rates, high and low unemployment, bubbles and recessions and all types of yield curves — steep, flat and inverted. For us to achieve double-digit growth through different economic cycles, our primary strategy, consistent for 20 years, is to satisfy all our customers’ financial needs, help them succeed financially and, through cross-selling, gain market share, wallet share and earn 100% of their business.

     We have stated in the past that to consistently grow over the long term, successful companies must invest in their core businesses and in maintaining strong balance sheets. We continued to make investments in 2005 by opening 92 banking stores, seven commercial banking offices, 47 mortgage stores and 20 consumer finance stores. We continued to be #1 nationally in retail mortgage originations, home equity lending, small business lending, agricultural lending, consumer internet banking, and providing financial services to middle-market companies in the western U.S.

34

     Our solid financial performance enables us to be one of the top givers to non-profits among all U.S. companies. We continued to have the only “Aaa” rated bank in the U.S., the highest possible credit rating issued by Moody’s Investors Service.

     Our vision is to satisfy all the financial needs of our customers, help them succeed financially, be recognized as the premier financial services company in our markets and be one of America’s great companies. Our primary strategy to achieve this vision is to increase the number of products our customers buy from us and to give them all the financial products that fulfill their needs. Our cross-sell strategy and diversified business model facilitate growth in strong and weak economic cycles, as we can grow by expanding the number of products our current customers have with us. At year-end 2005, our average cross-sell set new records for the Company — our average retail banking household now has 4.8 products with us, up from 4.6 a year ago and our average Wholesale Banking customer now has a record 5.7 products. Our goal is eight products per customer, which is currently half of our estimate of potential demand.

     Our core products grew this year:

• Average loans grew by 10%;

• Average retail core deposits grew by 10% (average core deposits grew by 9%); and

• Assets managed and administered were up 11%.

     We believe it is important to maintain a well controlled environment as we continue to grow our businesses. We manage our credit risk by maintaining prudent credit policies for underwriting with effective procedures for monitoring and review. We have a well diversified loan portfolio, measured by industry, geography and product type. We manage the interest rate and market risks inherent in our asset and liability balances within prudent ranges, while ensuring adequate liquidity and funding. Our stockholder value has increased over time due to customer satisfaction, strong financial results, investment in our businesses and the prudent way we attempt to manage our business risks.

     Our financial results included the following:

     Net income in 2005 increased 9% to $7.7 billion from $7.0 billion in 2004. Diluted earnings per common share increased 10% to $4.50 in 2005 from $4.09 in 2004. Return on average total assets was 1.72% and return on average common equity was 19.57% in 2005, and 1.71% and 19.56%, respectively, in 2004.

     Net interest income on a taxable-equivalent basis was $18.6 billion in 2005, compared with $17.3 billion a year ago, reflecting solid loan growth (other than ARMs) and a relatively flat net interest margin. Average earning assets grew 8% from a year ago, or 15% excluding 1-4 family first mortgages. Our net interest margin was 4.86% for 2005, compared with 4.89% in 2004. Given the prospect of higher short-term interest rates and a flatter yield curve, beginning in second quarter 2004, as part of our asset/liability management

strategy, we sold the lowest-yielding ARMs on our balance sheet, replacing some of these loans with higher-yielding ARMs. At the end of 2005, new ARMs being held for investment within real estate 1-4 family mortgage loans had yields more than 1% higher than the average yield on the ARMs sold since second quarter 2004.

     Noninterest income increased 12% to $14.4 billion in 2005 from $12.9 billion in 2004. Double-digit growth in noninterest income was driven by growth across our businesses, with particular strength in trust, investment and IRA fees, card fees, loan fees, mortgage banking income and gains on equity investments.

     Revenue, the sum of net interest income and noninterest income, increased 10% to a record $32.9 billion in 2005 from $30.1 billion in 2004 despite balance sheet repositioning actions, including losses from the sales of low-yielding ARMs and debt securities. For the year, Wells Fargo Home Mortgage (Home Mortgage) revenue increased $455 million, or 10%, from $4.4 billion in 2004 to $4.9 billion in 2005. Operating leverage improved during 2005 with revenue growing 10% and noninterest expense up only 8%.

     Noninterest expense was $19.0 billion in 2005, up 8% from $17.6 billion in 2004, primarily due to increased mortgage production and continued investments in new stores and additional sales-related team members. Noninterest expense also included a $117 million expense to adjust the estimated lives for certain depreciable assets, primarily building improvements, $62 million of airline lease write-downs, $56 million of integration expense and $25 million for the adoption of FIN 47. We began expensing stock options, as required, on January 1, 2006. Taking into account our February 2006 option grant, we anticipate that total stock option expense will reduce earnings by approximately $.06 per share for 2006.

     During 2005, net charge-offs were $2.28 billion, or .77% of average total loans, compared with $1.67 billion, or .62%, during 2004. Credit losses for 2005 included $171 million of incremental fourth quarter bankruptcy losses and increased losses of $163 million for first quarter 2005 initial implementation of conforming to more stringent FFIEC charge-off timing rules at Wells Fargo Financial. The provision for credit losses was $2.38 billion in 2005, up $666 million from $1.72 billion in 2004. The 2005 provision for credit losses also included $100 million for estimated credit losses related to Hurricane Katrina. The allowance for credit losses, which consists of the allowance for loan losses and the reserve for unfunded credit commitments, was $4.06 billion, or 1.31% of total loans, at December 31, 2005, compared with $3.95 billion, or 1.37%, at December 31, 2004.

     At December 31, 2005, total nonaccrual loans were $1.34 billion, or .43% of total loans, down from $1.36 billion, or .47%, at December 31, 2004. Foreclosed assets were $191 million at December 31, 2005, compared with $212 million at December 31, 2004.

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     The ratio of stockholders’ equity to total assets was 8.44% at December 31, 2005, compared with 8.85% at December 31, 2004. Our total risk-based capital (RBC) ratio at December 31, 2005, was 11.64% and our Tier 1 RBC ratio was 8.26%, exceeding the minimum regulatory guidelines of 8% and 4%, respectively, for bank holding companies. Our RBC ratios at December 31, 2004, were 12.07% and 8.41%, respectively. Our Tier 1 leverage ratios were 6.99% and 7.08% at December 31, 2005 and 2004, respectively, exceeding the minimum regulatory guideline of 3% for bank holding companies.

Table 1: Ratios and Per Common Share Data

	Year ended December 31								,
	2005			2004			2003
PROFITABILITY RATIOS
Net income to average total assets (ROA)		1.72	%		1.71	%		1.64	%
Net income applicable to common stock to average common stockholders’ equity (ROE)		19.57			19.56			19.36
Net income to average stockholders’ equity		19.59			19.57			19.34
EFFICIENCY RATIO(1)		57.7			58.5			60.6
CAPITAL RATIOS
At year end:
Stockholders’ equity to assets		8.44			8.85			8.89
Risk-based capital(2)
Tier 1 capital		8.26			8.41			8.42
Total capital		11.64			12.07			12.21
Tier 1 leverage(2)		6.99			7.08			6.93
Average balances:
Stockholders’ equity to assets		8.78			8.73			8.49
PER COMMON SHARE DATA
Dividend payout(3)		44.0			44.8			40.7
Book value	$	24.25		$	22.36		$	20.31
Market price(4)
High	$	64.70		$	64.04		$	59.18
Low		57.62			54.32			43.27
Year end		62.83			62.15			58.89

(1)	The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(2)	See Note 25 (Regulatory and Agency Capital Requirements) to Financial Statements for additional information.
(3)	Dividends declared per common share as a percentage of earnings per common share.
(4)	Based on daily prices reported on the New York Stock Exchange Composite Transaction Reporting System.

Current Accounting Developments

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123 (revised 2004),

Share-Based Payment (FAS 123R), which replaced FAS 123, Accounting for Stock-Based Compensation, and superceded Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. We adopted FAS 123R on January 1, 2006, using the “modified prospective” transition method. The scope of FAS 123R includes a wide range of stock-based compensation arrangements including stock options, restricted stock plans, performance-based awards, stock appreciation rights, and employee stock purchase plans. FAS 123R requires that we measure the cost of employee services received in exchange for an award of equity instruments based on the fair value of the award on the grant date. That cost must be recognized in the income statement over the vesting period of the award. Under the “modified prospective” transition method, awards that are granted, modified or settled beginning at the date of adoption will be measured and accounted for in accordance with FAS 123R. In addition, expense must be recognized in the income statement for unvested awards that were granted prior to the date of adoption. The expense will be based on the fair value determined at the grant date. Taking into account our February 2006 option grant, we anticipate that total stock option expense will reduce 2006 earnings by approximately $.06 per share.

     On March 30, 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations – An Interpretation of FASB Statement No. 143 (FIN 47). FIN 47 was issued to address diverse accounting practices that developed with respect to the timing of liability recognition for legal obligations associated with the retirement of tangible long-lived assets, such as building and leasehold improvements, when the timing and/or method of settlement of the obligations are conditional on a future event. FIN 47 requires companies to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability’s fair value can be reasonably estimated. We adopted FIN 47 in 2005 and recorded a $25 million charge to noninterest expense.

     We continuously monitor emerging accounting issues, including proposed standards issued by the FASB, for any impact on our financial statements. We are currently aware of a proposed FASB Staff Position (FSP) related to the accounting for leveraged lease transactions for which there have been cash flow estimate changes based on when income tax benefits are recognized. Certain leveraged lease transactions have been challenged by the Internal Revenue Service (IRS). While we have not made investments in a broad class of transactions that the IRS commonly refers to as “Lease-In, Lease-Out” (LILO) transactions, we have previously invested in certain leveraged lease transactions that the IRS labels as “Sale-In, Lease-Out” (SILO) transactions. We have paid the IRS the income tax associated with our SILO transactions. However, we are continuing to vigorously defend our initial filing position as to the timing of the tax benefits associated with these transactions. If the draft FSP had been effective at December 31, 2005, we would have been required to record a pre-tax charge of approximately $125 million as a cumulative effect of change in accounting principle. However, subsequent deliberations by the FASB could significantly change the draft FSP, which, in turn, could affect our estimate and the method of adoption. We will continue to monitor the FASB’s deliberations regarding this proposal.

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     On August 11, 2005, the FASB issued for public comment an Exposure Draft that would amend FAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This Exposure Draft, Accounting for Servicing of Financial Assets – An Amendment of FASB Statement No. 140, would require that all separately recognized servicing rights be initially measured at fair value, if practicable. For each class of separately recognized servicing assets and liabilities, this proposed standard would permit an entity to choose from two subsequent measurement methods. Specifically, an entity could amortize servicing assets and

liabilities in proportion to and over the period of estimated net servicing income or servicing loss (effectively the existing requirement in FAS 140) or an entity could report servicing assets or liabilities at fair value at each reporting date with any changes reported currently in operations. We expect this guidance to be finalized and issued in early 2006. Based on the guidance in the current Exposure Draft, it is likely that we will adopt the fair value alternative upon issuance of the standard. We will continue to monitor this emerging guidance in order to finalize our decision and determine the impact on our financial statements.

Table 2: Six-Year Summary of Selected Financial Data

(in millions, except													% Change			Five-year
per share amounts)													2005/			compound
	2005		2004		2003		2002		2001		2000		2004			growth rate
INCOME STATEMENT
Net interest income	$	18,504	$	17,150	$	16,007	$	14,482	$	11,976	$	10,339		8	%		12	%
Noninterest income		14,445		12,909		12,382		10,767		9,005		10,360		12			7
Revenue		32,949		30,059		28,389		25,249		20,981		20,699		10			10
Provision for credit losses		2,383		1,717		1,722		1,684		1,727		1,284		39			13
Noninterest expense		19,018		17,573		17,190		14,711		13,794		12,889		8			8
Before effect of change in accounting principle(1) Net income	$	7,671	$	7,014	$	6,202	$	5,710	$	3,411	$	4,012		9			14
Earnings per common share		4.55		4.15		3.69		3.35		1.99		2.35		10			14
Diluted earnings per common share		4.50		4.09		3.65		3.32		1.97		2.32		10			14
After effect of change in accounting principle Net income	$	7,671	$	7,014	$	6,202	$	5,434	$	3,411	$	4,012		9			14
Earnings per common share		4.55		4.15		3.69		3.19		1.99		2.35		10			14
Diluted earnings per common share		4.50		4.09		3.65		3.16		1.97		2.32		10			14
Dividends declared per common share		2.00		1.86		1.50		1.10		1.00		.90		8			17
BALANCE SHEET (at year end)
Securities available for sale	$	41,834	$	33,717	$	32,953	$	27,947	$	40,308	$	38,655		24			2
Loans		310,837		287,586		253,073		192,478		167,096		155,451		8			15
Allowance for loan losses		3,871		3,762		3,891		3,819		3,717		3,681		3			1
Goodwill		10,787		10,681		10,371		9,753		9,527		9,303		1			3
Assets		481,741		427,849		387,798		349,197		307,506		272,382		13			12
Core deposits (2)		253,341		229,703		211,271		198,234		182,295		156,710		10			10
Long-term debt		79,668		73,580		63,642		47,320		36,095		32,046		8			20
Guaranteed preferred beneficial interests in Company’s subordinated debentures(3)		—		—		—		2,885		2,435		935		—			—
Stockholders’ equity		40,660		37,866		34,469		30,319		27,175		26,461		7			9

(1)	Change in accounting principle is for a transitional goodwill impairment charge recorded in 2002 upon adoption of FAS 142, Goodwill and Other Intangible Assets.
(2)	Core deposits consist of noninterest-bearing deposits, interest-bearing checking, savings certificates and market rate and other savings.
(3)	At December 31, 2003, upon adoption of FIN 46 (revised December 2003), Consolidation of Variable Interest Entities (FIN 46R), these balances were reflected in long-term debt. See Note 12 (Long-Term Debt) to Financial Statements for more information.

37

Critical Accounting Policies

Our significant accounting policies (see Note 1 (Summary of Significant Accounting Policies) to Financial Statements) are fundamental to understanding our results of operations and financial condition, because some accounting policies require that we use estimates and assumptions that may affect the value of our assets or liabilities and financial results. Three of these policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. These policies govern the allowance for credit losses, the valuation of mortgage servicing rights and pension accounting. Management has reviewed and approved these critical accounting policies and has discussed these policies with the Audit and Examination Committee.

Allowance for Credit Losses
The allowance for credit losses, which consists of the allowance for loan losses and the reserve for unfunded credit commitments, is management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. We have an established process, using several analytical tools and benchmarks, to calculate a range of possible outcomes and determine the adequacy of the allowance. No single statistic or measurement determines the adequacy of the allowance. Loan recoveries and the provision for credit losses increase the allowance, while loan charge-offs decrease the allowance.

PROCESS TO DETERMINE THE ADEQUACY OF THE ALLOWANCE FOR CREDIT LOSSES

While we allocate a portion of the allowance to specific loan categories (the allocated allowance), the entire allowance (both allocated and unallocated) is used to absorb credit losses inherent in the total loan portfolio.

     Approximately two-thirds of the allocated allowance is determined at a pooled level for consumer loans and some segments of commercial small business loans. We use forecasting models to measure the losses inherent in these portfolios. We frequently validate and update these models to capture recent behavioral characteristics of the portfolios, as well as changes in our loss mitigation or marketing strategies.

     The remaining allocated allowance is for commercial loans, commercial real estate loans and lease financing. We initially estimate this portion of the allocated allowance by applying historical loss factors statistically derived from tracking loss content associated with actual portfolio movements over a specified period of time, using a standardized loan grading process. Based on this process, we assign loss factors to each pool of graded loans and a loan equivalent amount for unfunded loan commitments and letters of credit. These estimates are then adjusted or supplemented where necessary from additional analysis of long term average loss experience, external loss data, or other risks identified from current conditions and trends in selected portfolios. Also, we individually review nonperforming loans over $3 million for impairment based on cash flows or collateral. We include impairment on these nonperforming loans in the allocated allowance unless it has already been recognized as a loss.

     The allocated allowance is supplemented by the unallocated allowance to adjust for imprecision and to incorporate the range of probable outcomes inherent in estimates used for the allocated allowance. The unallocated allowance is the result of our judgment of risks inherent in the portfolio, economic uncertainties, historical loss experience and other subjective factors, including industry trends, not reflected in the allocated allowance.

     The ratios of the allocated allowance and the unallocated allowance to the total allowance may change from period to period. The total allowance reflects management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date.

     The allowance for credit losses, and the resulting provision, is based on judgments and assumptions, including:

• general economic conditions;

• loan portfolio composition;

• loan loss experience;

• management’s evaluation of the credit risk relating to pools of loans and individual borrowers;

• sensitivity analysis and expected loss models; and

• observations from our internal auditors, internal loan review staff or banking regulators.

     To estimate the possible range of allowance required at December 31, 2005, and the related change in provision expense, we assumed the following scenarios of a reasonably possible deterioration or improvement in loan credit quality.

38

Assumptions for deterioration in loan credit quality were:

• for retail loans, a 12 basis point increase in estimated loss rates from actual 2005 loss levels, moving closer to longer term average loss rates; and

• for wholesale loans, a 30 basis point increase in estimated loss rates, moving closer to historical averages.

Assumptions for improvement in loan credit quality were:

• for retail loans, an 8 basis point decrease in estimated loss rates from actual 2005 loss levels, adjusting for incremental consumer bankruptcy losses; and

• for wholesale loans, no change from the essentially zero 2005 net loss performance.

     Under the assumptions for deterioration in loan credit quality, another $550 million in expected losses could occur and under the assumptions for improvement, a $170 million reduction in expected losses could occur.

     Changes in the estimate of the allowance for credit losses can materially affect net income. The example above is only one of a number of reasonably possible scenarios. Determining the allowance for credit losses requires us to make forecasts that are highly uncertain and require a high degree of judgment.

Valuation of Mortgage Servicing Rights

We recognize as assets the rights to service mortgage loans for others, or mortgage servicing rights (MSRs), whether we purchase the servicing rights, or keep them after the sale or securitization of loans we originate. Purchased MSRs are capitalized at cost. Originated MSRs are recorded based on the relative fair value of the retained servicing right and the mortgage loan on the date the mortgage loan is sold. Both purchased and originated MSRs are carried at the lower of (1) the capitalized amount, net of accumulated amortization and hedge accounting adjustments, or (2) fair value. If MSRs are designated as a hedged item in a fair value hedge, the MSRs’ carrying value is adjusted for changes in fair value resulting from the application of hedge accounting. The carrying value of these MSRs is subject to a fair value test under FAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.

     MSRs are amortized in proportion to and over the period of estimated net servicing income. We analyze the amortization of MSRs monthly and adjust amortization to reflect changes in prepayment speeds, discount rates and other factors that affect estimated net servicing income.

     We determine the fair value of MSRs using a valuation model that calculates the present value of estimated future net servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, ancillary income and late fees. The valuation of MSRs is discussed further in this section and in

Note 1 (Summary of Significant Accounting Policies), Note 20 (Securitizations and Variable Interest Entities) and Note 21 (Mortgage Banking Activities) to Financial Statements.

     At the end of each quarter, we evaluate MSRs for possible impairment based on the difference between the carrying amount and current estimated fair value. To evaluate and measure impairment, we stratify the portfolio based on certain risk characteristics, including loan type and note rate. If temporary impairment exists, we establish a valuation allowance through a charge to income for those risk stratifications with an excess of amortized cost over the current fair value. If we later determine that all or part of the temporary impairment no longer exists for a particular risk stratification, we may reduce the valuation allowance through an increase to income.

     Under our policy, we also evaluate other-than-temporary impairment of MSRs by considering both historical and projected trends in interest rates, pay-off activity and whether the impairment could be recovered through interest rate increases. We recognize a direct write-down if we determine that the recoverability of a recorded valuation allowance is remote. A direct write-down permanently reduces the carrying value of the MSRs, while a valuation allowance (temporary impairment) can be reversed.

     To reduce the sensitivity of earnings to interest rate and market value fluctuations, we hedge the change in value of MSRs primarily with derivative contracts. Reductions or increases in the value of the MSRs are generally offset by gains or losses in the value of the derivatives. We immediately recognize a gain or loss for the amount of change in the value of MSRs that is not offset by the change in value of the hedge instrument (i.e., hedge ineffectiveness). We may choose not to fully hedge MSRs partly because origination volume tends to act as a “natural hedge” (for example, as interest rates decline, servicing values decrease and fees from origination volume increase). Conversely, as interest rates increase, the value of the MSRs increases, while fees from origination volume tend to decline.

     Servicing income—net of amortization, provision for impairment and net derivative gains and losses—is recorded in mortgage banking noninterest income.

     We use a dynamic and sophisticated model to estimate the value of our MSRs. Mortgage loan prepayment speed—a key assumption in the model—is the annual rate at which borrowers are forecasted to repay their mortgage loan principal. The discount rate—another key assumption in the model—is the required rate of return the market would expect for an asset with similar risk. To determine the discount rate, we consider the risk premium for uncertainties from servicing operations (e.g., possible changes in future servicing costs, ancillary income and earnings on escrow accounts). Both assumptions can and generally will change quarterly and annual valuations as market conditions and interest rates change. Senior management reviews all assumptions quarterly.

39

     Our key economic assumptions and the sensitivity of the current fair value of MSRs to an immediate adverse change in those assumptions are shown in Note 20 (Securitizations and Variable Interest Entities) to Financial Statements.

     In recent years, there have been significant market-driven fluctuations in loan prepayment speeds and the discount rate. These fluctuations can be rapid and may be significant in the future. Therefore, estimating prepayment speeds within a range that market participants would use in determining the fair value of MSRs requires significant management judgment.

Pension Accounting
We use four key variables to calculate our annual pension cost; size and characteristics of the employee population, actuarial assumptions, expected long-term rate of return on plan assets, and discount rate. We describe below the effect of each of these variables on our pension expense.

SIZE AND CHARACTERISTICS OF THE EMPLOYEE POPULATION

Pension expense is directly related to the number of employees covered by the plans, and other factors including salary, age and years of employment.

ACTUARIAL ASSUMPTIONS

To estimate the projected benefit obligation, actuarial assumptions are required about factors such as the rates of mortality, turnover, retirement, disability and compensation increases for our participant population. These demographic assumptions are reviewed periodically. In general, the range of assumptions is narrow.

EXPECTED LONG-TERM RATE OF RETURN ON PLAN ASSETS

We determine the expected return on plan assets each year based on the composition of assets and the expected long-term rate of return on that portfolio. The expected long-term rate of return assumption is a long-term assumption and is not anticipated to change significantly from year to year.

     To determine if the expected rate of return is reasonable, we consider such factors as (1) the actual return earned on plan assets, (2) historical rates of return on the various asset classes in the plan portfolio, (3) projections of returns on various asset classes, and (4) current/prospective capital market conditions and economic forecasts. Including 2005, we have used an expected rate of return of 9% on plan assets for the past nine years. In light of the market conditions in recent years, including a marked increase in volatility, we

reduced the expected long-term rate of return on plan assets to 8.75% for 2006. Differences in each year, if any, between expected and actual returns are included in our unrecognized net actuarial gain or loss amount. We generally amortize any unrecognized net actuarial gain or loss in excess of a 5% corridor (as defined in FAS 87, Employers’ Accounting for Pensions) in net periodic pension expense calculations over the next five years. Our average remaining service period is approximately 11 years. See Note 15 (Employee Benefits and Other Expenses) to Financial Statements for information on funding, changes in the pension benefit obligation, and plan assets (including the investment categories, asset allocation and the fair value).

     We use November 30 as the measurement date for our pension assets and projected benefit obligations. If we were to assume a 1% increase/decrease in the expected long-term rate of return, holding the discount rate and other actuarial assumptions constant, pension expense would decrease/increase by approximately $50 million.

DISCOUNT RATE

We use the discount rate to determine the present value of our future benefit obligations. It reflects the rates available on long-term high-quality fixed-income debt instruments, and is reset annually on the measurement date. As the basis for determining our discount rate, we review the Moody’s Aa Corporate Bond Index, on an annualized basis, and the rate of a hypothetical portfolio using the Hewitt Yield Curve (HYC) methodology, which was developed by our independent actuary. The instruments used in both the Moody’s Aa Corporate Bond Index and the HYC consist of high quality bonds for which the timing and amount of cash outflows approximates the estimated payouts of our Cash Balance Plan. We lowered our discount rate to 5.75% in 2005 from 6% in 2004 and 6.5% in 2003, reflecting the decline in market interest rates during these periods.

     If we were to assume a 1% increase in the discount rate, and keep the expected long-term rate of return and other actuarial assumptions constant, pension expense would decrease by approximately $59 million. If we were to assume a 1% decrease in the discount rate, and keep other assumptions constant, pension expense would increase by approximately $104 million. The decrease in pension expense due to a 1% increase in discount rate differs from the increase in pension expense due to a 1% decrease in discount rate due to the impact of the 5% gain/loss corridor.

40

Earnings Performance

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

     Net interest income on a taxable-equivalent basis was $18.6 billion in 2005, compared with $17.3 billion in 2004, an increase of 8%, reflecting solid loan growth (other than ARMs) and a relatively flat net interest margin.

     Our net interest margin was 4.86% for 2005 and 4.89% for 2004. During a year in which the Federal Reserve raised rates eight times and the yield curve flattened, our net interest margin remained essentially flat compared with a year ago. Given the prospect of higher short-term interest rates and a flatter yield curve, beginning in second quarter 2004, as part of our asset/liability management strategy, we sold the lowest-yielding ARMs on our balance sheet, replacing some of these loans with higher-yielding ARMs. Over the last seven quarters, we sold $65 billion in ARMs at an average yield of 4.28%. As a result, the average yield on our 1-4 family first mortgage portfolio—which includes ARMs—increased from 5.19% on an average balance of $89.4 billion in second quarter 2004 to 6.75% on an average balance of $76.2 billion in fourth quarter 2005. At year-end 2005, yields on new ARMs being held for investment within real estate 1-4 family mortgage loans were more than 1% higher

than the average yield on the ARMs sold since second quarter 2004. Our net interest margin has performed better than our peers’ due to our balance sheet repositioning actions and our ability to grow transaction and savings deposits while maintaining our deposit pricing discipline.

     Average earning assets increased $29.2 billion to $383.5 billion in 2005 from $354.3 billion in 2004. Loans averaged $296.1 billion in 2005, compared with $269.6 billion in 2004. Average mortgages held for sale were $39.0 billion in 2005 and $32.3 billion in 2004. Debt securities available for sale averaged $33.1 billion in both 2005 and 2004.

     Average core deposits are an important contributor to growth in net interest income and the net interest margin. This low-cost source of funding rose 9% from 2004. Average core deposits were $242.8 billion and $223.4 billion and funded 54.5% and 54.4% of average total assets in 2005 and 2004, respectively. Total average retail core deposits, which exclude Wholesale Banking core deposits and retail mortgage escrow deposits, for 2005 grew $18.2 billion, or 10%, from a year ago. Average mortgage escrow deposits were $16.7 billion in 2005 and $14.1 billion in 2004. Savings certificates of deposits increased on average from $18.9 billion in 2004 to $22.6 billion in 2005 and noninterest-bearing checking accounts and other core deposit categories increased on average from $204.5 billion in 2004 to $220.1 billion in 2005. Total average interest-bearing deposits increased to $194.6 billion in 2005 from $182.6 billion a year ago. Total average noninterest-bearing deposits increased to $87.2 billion in 2005 from $79.3 billion a year ago.

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

41

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

(in millions)	2005								2004
	Average			Yields/			Interest		Average			Yields/			Interest
	balance			rates			income/		balance			rates			income/
							expense								expense
EARNING ASSETS
Federal funds sold, securities purchased under resale agreements and other short-term investments	$	5,448			3.01	%	$	164	$	4,254			1.49	%	$	64
Trading assets		5,411			3.52			190		5,286			2.75			145
Debt securities available for sale (3):
Securities of U.S. Treasury and federal agencies		997			3.81			38		1,161			4.05			46
Securities of U.S. states and political subdivisions		3,395			8.27			266		3,501			8.00			267
Mortgage-backed securities:
Federal agencies		19,768			6.02			1,162		21,404			6.03			1,248
Private collateralized mortgage obligations		5,128			5.60			283		3,604			5.16			180
Total mortgage-backed securities		24,896			5.94			1,445		25,008			5.91			1,428
Other debt securities (4)		3,846			7.10			266		3,395			7.72			236
Total debt securities available for sale (4)		33,134			6.24			2,015		33,065			6.24			1,977
Mortgages held for sale (3)		38,986			5.67			2,213		32,263			5.38			1,737
Loans held for sale (3)		2,857			5.10			146		8,201			3.56			292
Loans:
Commercial and commercial real estate:
Commercial		58,434			6.76			3,951		49,365			5.77			2,848
Other real estate mortgage		29,098			6.31			1,836		28,708			5.35			1,535
Real estate construction		11,086			6.67			740		8,724			5.30			463
Lease financing		5,226			5.91			309		5,068			6.23			316
Total commercial and commercial real estate		103,844			6.58			6,836		91,865			5.62			5,162
Consumer:
Real estate 1-4 family first mortgage		78,170			6.42			5,016		87,700			5.44			4,772
Real estate 1-4 family junior lien mortgage		55,616			6.61			3,679		44,415			5.18			2,300
Credit card		10,663			12.33			1,315		8,878			11.80			1,048
Other revolving credit and installment		43,102			8.80			3,794		33,528			9.01			3,022
Total consumer		187,551			7.36			13,804		174,521			6.38			11,142
Foreign		4,711			13.49			636		3,184			15.30			487
Total loans (5)		296,106			7.19			21,276		269,570			6.23			16,791
Other		1,581			4.34			68		1,709			3.81			65
Total earning assets	$	383,523			6.81			26,072	$	354,348			5.97			21,071
FUNDING SOURCES
Deposits:
Interest-bearing checking	$	3,607			1.43			51	$	3,059			.44			13
Market rate and other savings		129,291			1.45			1,874		122,129			.69			838
Savings certificates		22,638			2.90			656		18,850			2.26			425
Other time deposits		27,676			3.29			910		29,750			1.43			427
Deposits in foreign offices		11,432			3.12			357		8,843			1.40			124
Total interest-bearing deposits		194,644			1.98			3,848		182,631			1.00			1,827
Short-term borrowings		24,074			3.09			744		26,130			1.35			353
Long-term debt		79,137			3.62			2,866		67,898			2.41			1,637
Guaranteed preferred beneficial interests in Company’s subordinated debentures (6)		—			—			—		—			—			—
Total interest-bearing liabilities		297,855			2.50			7,458		276,659			1.38			3,817
Portion of noninterest-bearing funding sources		85,668			—			—		77,689			—			—
Total funding sources	$	383,523			1.95			7,458	$	354,348			1.08			3,817
Net interest margin and net interest income on a taxable- equivalent basis (7)					4.86	%	$	18,614					4.89	%	$	17,254
NONINTEREST-EARNING ASSETS
Cash and due from banks	$	13,173							$	13,055
Goodwill		10,705								10,418
Other		38,389								32,758
Total noninterest-earning assets	$	62,267							$	56,231
NONINTEREST-BEARING FUNDING SOURCES
Deposits	$	87,218							$	79,321
Other liabilities		21,559								18,764
Stockholders’ equity		39,158								35,835
Noninterest-bearing funding sources used to fund earning assets		(85,668	)							(77,689	)
Net noninterest-bearing funding sources	$	62,267							$	56,231
TOTAL ASSETS	$	445,790							$	410,579

(1)	Our average prime rate was 6.19%, 4.34%, 4.12%, 4.68% and 6.91% for 2005, 2004, 2003, 2002 and 2001, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 3.56%, 1.62%, 1.22%, 1.80% and 3.78% for the same years, respectively.
(2)	Interest rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.
(3)	Yields are based on amortized cost balances computed on a settlement date basis.
(4)	Includes certain preferred securities.

42

	2003									2002										2001
Average			Yields/			Interest			Average				Yields/			Interest			Average				Yields/			Interest
balance			rates			income/			balance				rates			income/			balance				rates			income/
						expense										expense										expense
$	4,174			1.16	%		$	49		$	2,961			1.73	%		$	51		$	2,741			3.72	%		$	102
	6,110			2.56				156			4,747			3.58				169			2,580			4.44				115
	1,286			4.74				58			1,770			5.57				95			2,158			6.55				137
	2,424			8.62				196			2,106			8.33				167			2,026			7.98				154
	18,283			7.37				1,276			26,718			7.23				1,856			27,433			7.19				1,917
	2,001			6.24				120			2,341			7.18				163			1,766			8.55				148
	20,284			7.26				1,396			29,059			7.22				2,019			29,199			7.27				2,065
	3,302			7.75				240			3,029			7.74				232			3,343			7.80				254
	27,296			7.32				1,890			35,964			7.25				2,513			36,726			7.32				2,610
	58,672			5.34				3,136			39,858			6.13				2,450			23,677			6.72				1,595
	7,142			3.51				251			5,380			4.69				252			4,820			6.58				317
	47,279			6.08				2,876			46,520			6.80				3,164			48,648			8.01				3,896
	25,846			5.44				1,405			25,413			6.17				1,568			24,194			7.99				1,934
	7,954			5.11				406			7,925			5.69				451			8,073			8.10				654
	4,453			6.22				277			4,079			6.32				258			4,024			6.90				278
	85,532			5.80				4,964			83,937			6.48				5,441			84,939			7.96				6,762
	56,252			5.54				3,115			32,669			6.69				2,185			23,359			7.54				1,761
	31,670			5.80				1,836			25,220			7.07				1,783			17,587			9.20				1,619
	7,640			12.06				922			6,810			12.27				836			6,270			13.36				838
	29,838			9.09				2,713			24,072			10.28				2,475			23,459			11.40				2,674
	125,400			6.85				8,586			88,771			8.20				7,279			70,675			9.75				6,892
	2,200			18.00				396			1,774			18.90				335			1,603			20.82				333
	213,132			6.54				13,946			174,482			7.48				13,055			157,217			8.90				13,987
	1,626			4.57				74			1,436			4.87				72			1,262			5.50				69
$	318,152			6.16				19,502		$	264,828			7.04				18,562		$	229,023			8.24				18,795
$	2,571			.27				7		$	2,494			.55				14		$	2,178			1.59				35
	106,733			.66				705			93,787			.95				893			80,585			2.08				1,675
	20,927			2.53				529			24,278			3.21				780			29,850			5.13				1,530
	25,388			1.20				305			8,191			1.86				153			1,332			5.04				67
	6,060			1.11				67			5,011			1.58				79			6,209			3.96				246
	161,679			1.00				1,613			133,761			1.43				1,919			120,154			2.96				3,553
	29,898			1.08				322			33,278			1.61				536			33,885			3.76				1,273
	53,823			2.52				1,355			42,158			3.33				1,404			34,501			5.29				1,826
	3,306			3.66				121			2,780			4.23				118			1,394			6.40				89
	248,706			1.37				3,411			211,977			1.88				3,977			189,934			3.55				6,741
	69,446			—				—			52,851			—				—			39,089			—				—
$	318,152			1.08				3,411		$	264,828			1.51				3,977		$	229,023			2.95				6,741
				5.08	%		$	16,091						5.53	%		$	14,585						5.29	%		$	12,054
$	13,433									$	13,820									$	14,608
	9,905										9,737										9,514
	36,123										33,340										32,222
$	$59,461									$	56,897									$	56,344
$	76,815									$	63,574									$	55,333
	20,030										17,054										13,214
	32,062										29,120										26,886
	(69,446	)									(52,851	)									(39,089	)
$	59,461									$	56,897									$	56,344
$	377,613									$	321,725									$	285,367

(5)	Nonaccrual loans and related income are included in their respective loan categories.
(6)	At December 31, 2003, upon adoption of FIN 46 (revised December 2003), Consolidation of Variable Interest Entities (FIN 46R), these balances were reflected in long-term debt. See Note 12 (Long-Term Debt) to Financial Statements for more information.
(7)	Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate was 35% for all years presented.

43

Noninterest Income

Table 4: Noninterest Income

(in millions)	Year ended December 31,									% Change
	2005			2004			2003			2005/			2004/
										2004			2003
Service charges on deposit accounts	$	2,512		$	2,417		$	2,297			4	%		5	%
Trust and investment fees:
Trust, investment and IRA fees		1,855			1,509			1,345			23			12
Commissions and all other fees		581			607			592			(4	)		3
Total trust and investment fees		2,436			2,116			1,937			15			9
Card fees		1,458			1,230			1,079			19			14
Other fees:
Cash network fees		180			180			179			—			1
Charges and fees on loans		1,022			921			756			11			22
All other		727			678			625			7			8
Total other fees		1,929			1,779			1,560			8			14
Mortgage banking:
Servicing income, net of amortization and provision for impairment		987			1,037			(954	)		(5	)		—
Net gains on mortgage loan origination/sales activities		1,085			539			3,019			101			(82	)
All other		350			284			447			23			(36	)
Total mortgage banking		2,422			1,860			2,512			30			(26	)
Operating leases		812			836			937			(3	)		(11	)
Insurance		1,215			1,193			1,071			2			11
Trading assets		571			523			502			9			4
Net gains (losses) on debt securities available for sale		(120	)		(15	)		4			700			—
Net gains from equity investments		511			394			55			30			616
Net gains on sales of loans		5			11			28			(55	)		(61	)
Net gains (losses) on dispositions of operations		14			(15	)		29			—			—
All other		680			580			371			17			56
Total	$	14,445		$	12,909		$	12,382			12			4

We earn trust, investment and IRA fees from managing and administering assets, including mutual funds, corporate trust, personal trust, employee benefit trust and agency assets. At December 31, 2005, these assets totaled $783 billion, up 11% from $705 billion at December 31, 2004. At December 31, 2004, we acquired $24 billion in mutual fund assets and $5 billion in institutional investment accounts from Strong Financial Corporation (Strong Financial). When the Wells Fargo Funds^® and certain Strong Financial funds merged in April 2005, we renamed our mutual fund family the Wells Fargo Advantage Funds^SM.

Generally, trust, investment and IRA fees are based on the market value of the assets that are managed, administered, or both. The increase in these fees was due to additional revenue from the December 31, 2004, acquisition of assets from the Strong Financial transaction and our successful efforts to grow our investment businesses.

     Also, we receive commissions and other fees for providing services for retail and discount brokerage customers. At December 31, 2005 and 2004, brokerage balances were $97 billion and $86 billion, respectively. Generally, these fees are based on the number of transactions executed at the customer’s direction.

     Card fees increased 19% to $1,458 million in 2005 from $1,230 million in 2004, predominantly due to increases in credit card accounts and credit and debit card transaction volume.

     Mortgage banking noninterest income increased to $2,422 million in 2005 from $1,860 million in 2004, due to an increase in net gains on mortgage loan origination/sales activities partly offset by the decline in net servicing income.

     Net gains on mortgage loan origination/sales activities were $1,085 million in 2005, up from $539 million in 2004, primarily due to higher origination volume. Originations were $366 billion in 2005 and $298 billion in 2004. The 1-4 family first mortgage unclosed pipeline was $50 billion at both year-end 2005 and 2004.

     Net servicing income was $987 million in 2005 compared with $1,037 million in 2004. Servicing income includes net derivative gains and losses and is net of amortization and impairment of MSRs, which are all influenced by both the level and direction of mortgage interest rates. The Company’s portfolio of loans serviced for others was $871 billion at December 31, 2005, up 27% from $688 billion at year-end 2004. Given a larger servicing portfolio year over year, the increase in servicing income was partly offset by higher amortization of MSRs. Servicing fees increased to $2,457 million in 2005 from $2,101 million in 2004 and amortization of MSRs increased to $1,991 million in 2005 from $1,826 million in 2004. Servicing income in 2005 also included a higher MSRs valuation allowance release of $378 million in 2005 compared with $208 million in 2004, due to higher long-term interest rates in certain quarters of 2005. The increase in fee revenue and the higher MSRs valuation allowance release were mostly offset by the decrease in net derivative gains to $143 million in 2005 from $554 million in 2004.

     Net losses on debt securities were $120 million for 2005, compared with $15 million for 2004. Net gains from equity investments were $511 million in 2005, compared with $394 million in 2004, primarily reflecting the continued strong performance of our venture capital business.

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

44

Noninterest Expense

Table 5: Noninterest Expense

(in millions)	Year ended December 31,						% Change
	2005		2004		2003		2005/			2004/
							2004			2003
Salaries	$	6,215	$	5,393	$	4,832		15	%		12	%
Incentive compensation		2,366		1,807		2,054		31			(12	)
Employee benefits		1,874		1,724		1,560		9			11
Equipment		1,267		1,236		1,246		3			(1	)
Net occupancy		1,412		1,208		1,177		17			3
Operating leases		635		633		702		—			(10	)
Outside professional services		835		669		509		25			31
Contract services		596		626		866		(5	)		(28	)
Travel and entertainment		481		442		389		9			14
Outside data processing		449		418		404		7			3
Advertising and promotion		443		459		392		(3	)		17
Postage		281		269		336		4			(20	)
Telecommunications		278		296		343		(6	)		(14	)
Insurance		224		247		197		(9	)		25
Stationery and supplies		205		240		241		(15	)		—
Operating losses		194		192		193		1			(1	)
Security		167		161		163		4			(1	)
Core deposit intangibles		123		134		142		(8	)		(6	)
Charitable donations		61		248		237		(75	)		5
Net losses from debt extinguishment		11		174		—		(94	)		—
All other		901		997		1,207		(10	)		(17	)
Total	$	19,018	$	17,573	$	17,190		8			2

Noninterest expense in 2005 increased 8% to $19.0 billion from $17.6 billion in 2004, primarily due to increased mortgage production and continued investments in new stores and additional sales-related team members. Noninterest expense in 2005 included a $117 million expense to adjust the estimated lives for certain depreciable assets, primarily building improvements, $62 million of airline lease write-downs, $56 million of integration expense and $25 million for the adoption of FIN 47, which relates to recognition of obligations associated with the retirement of long-lived assets, such as building and leasehold improvements. Home Mortgage expenses increased $426 million from 2004, reflecting higher production costs from an increase in loan origination volume. For 2004, employee benefits included a $44 million special 401(k) contribution and charitable donations included a $217 million contribution to the Wells Fargo Foundation.

     See “Current Accounting Developments” for information on accounting for share-based awards, such as stock option grants. On January 1, 2006, we adopted FAS 123R, which requires that we include the cost of such grants in our income statement over the vesting period of the award.

Income Tax Expense

Our effective income tax rate for 2005 decreased to 33.57% from 34.87% for 2004, due primarily to higher tax-exempt income and income tax credits, and the tax benefit associated with our donation of appreciated securities.

Operating Segment Results

Our lines of business for management reporting are Community Banking, Wholesale Banking and Wells Fargo Financial. For a more complete description of our operating segments, including additional financial information and the underlying management accounting process, see Note 19 (Operating Segments) to Financial Statements.

COMMUNITY BANKING’S net income increased 13% to $5.5 billion in 2005 from $4.9 billion in 2004. Total revenue for 2005 increased 9%, driven by loan and deposit growth and higher mortgage origination volumes. The provision for credit losses for 2005 increased $108 million, or 14%, reflecting incremental consumer bankruptcy filings before the mid-October legislative reform. Noninterest expense for 2005 increased $982 million, or 8%, driven by mortgage production, growth in other businesses, and investments in new stores, sales staff and technology. Average loans were $187.0 billion in 2005, up 5% from $178.9 billion in 2004.

WHOLESALE BANKING’S net income was a record $1.73 billion in 2005, up 8% from $1.60 billion in 2004, driven largely by a 15% increase in earning assets, as well as very low loan losses. Average loans increased 17% to $62.2 billion in 2005 from $53.1 billion in 2004, with double-digit increases across wholesale lending businesses. The provision for credit losses decreased to $1 million in 2005 from $62 million in 2004, with loan charge-offs at very low levels throughout 2005. Noninterest income increased 13% to $3.4 billion in 2005 from $3.0 billion in 2004, largely due to the Strong Financial acquisition completed at the end of 2004. Noninterest expense increased 16% to $3.17 billion in 2005 from $2.73 billion in 2004, due to the Strong Financial acquisition and airline lease writedowns.

WELLS FARGO FINANCIAL’S net income decreased 34% to $409 million in 2005 from $617 million in 2004. Net income was reduced by incremental bankruptcies related to the change in bankruptcy law and the $163 million first quarter 2005 initial implementation of conforming to more stringent FFIEC charge-off timing rules. Also, a $100 million provision for credit losses was taken in third quarter 2005 for estimated losses from Hurricane Katrina. Total revenue rose 12% in 2005, reaching $4.7 billion, compared with $4.2 billion in 2004, due to higher net interest income. Noninterest expense increased $202 million, or 9%, in 2005 from 2004, reflecting investments in new consumer finance stores and additional team members.

     Segment results for prior periods have been revised due to the realignment of our automobile financing businesses into Wells Fargo Financial in 2005, designed to leverage the expertise, systems and resources of the existing businesses.

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Balance Sheet Analysis

Securities Available for Sale

Our securities available for sale portfolio consists of both debt and marketable equity securities. We hold debt securities available for sale primarily for liquidity, interest rate risk management and yield enhancement. Accordingly, this portfolio primarily includes very liquid, high-quality federal agency debt securities. At December 31, 2005, we held $40.9 billion of debt securities available for sale, compared with $33.0 billion at December 31, 2004, with a net unrealized gain of $591 million and $1.2 billion for the same periods, respectively. We also held $900 million of marketable equity securities available for sale at December 31, 2005, and $696 million at December 31, 2004, with a net unrealized gain of $342 million and $189 million for the same periods, respectively.

     The weighted-average expected maturity of debt securities available for sale was 5.9 years at December 31, 2005. Since 79% of this portfolio is mortgage-backed securities, the expected remaining maturity may differ from contractual maturity because borrowers may have the right to prepay obligations before the underlying mortgages mature.

     The estimated effect of a 200 basis point increase or decrease in interest rates on the fair value and the expected remaining maturity of the mortgage-backed securities available for sale portfolio is shown in Table 6.

Table 6: Mortgage-Backed Securities

(in billions)	Fair		Net unrealized			Remaining
	value		gain (loss)			maturity
At December 31, 2005	$	32.4	$	.4		5.3 yrs.
At December 31, 2005, assuming a 200 basis point:
Increase in interest rates		29.9		(2.1	)	7.5 yrs.
Decrease in interest rates		33.5		1.5		2.0 yrs.

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

Loan Portfolio

A comparative schedule of average loan balances is included in Table 3; year-end balances are in Note 6 (Loans and Allowance for Credit Losses) to Financial Statements.

     Loans averaged $296.1 billion in 2005, compared with $269.6 billion in 2004, an increase of 10%. Total loans at December 31, 2005, were $310.8 billion, compared with $287.6 billion at year-end 2004, an increase of 8%. Average 1-4 family first mortgages decreased $9.5 billion, or 11%, and average junior liens increased $11.2 billion, or 25%, in 2005 compared with a year ago. Average commercial and commercial real estate loans increased $12.0 billion, or 13%, in 2005 compared with a year ago. Average mortgages held for sale increased $6.7 billion, or 21%, to $39.0 billion in

2005 from $32.3 billion in 2004, due to higher origination volume. Residential mortgage originations of $366 billion were up 23% from $298 billion in 2004. Loans held for sale decreased to $612 million at December 31, 2005, from $8.7 billion a year ago, due to the transfer of student loans held for sale to the held for investment portfolio. Our decision to hold these loans for investment was based on present yields and our intent and ability to hold this portfolio for the foreseeable future.

     Table 7 shows contractual loan maturities and interest rate sensitivities for selected loan categories.

Table 7: Maturities for Selected Loan Categories

(in millions)	December 31, 2005
	Within		After		After		Total
	one		one year		five
	year		through		years
			five years
Selected loan maturities:
Commercial	$	18,748	$	31,627	$	11,177	$	61,552
Other real estate mortgage		3,763		11,777		13,005		28,545
Real estate construction		5,081		6,887		1,438		13,406
Foreign		525		3,995		1,032		5,552
Total selected loans	$	28,117	$	54,286	$	26,652	$	109,055
Sensitivity of loans due after one year to changes in interest rates:
Loans at fixed interest rates			$	11,145	$	7,453
Loans at floating/variable interest rates				43,141		19,199
Total selected loans			$	54,286	$	26,652

Deposits

Year-end deposit balances are in Table 8. Comparative detail of average deposit balances is included in Table 3. Average core deposits funded 54.5% and 54.4% of average total assets in 2005 and 2004, respectively. Total average interest-bearing deposits rose from $182.6 billion in 2004 to $194.6 billion in 2005. Total average noninterest-bearing deposits rose from $79.3 billion in 2004 to $87.2 billion in 2005. Savings certificates increased on average from $18.9 billion in 2004 to $22.6 billion in 2005.

Table 8: Deposits

(in millions)	December 31,				%
	2005		2004		Change
Noninterest-bearing	$	87,712	$	81,082		8	%
Interest-bearing checking		3,324		3,122		6
Market rate and other savings		134,811		126,648		6
Savings certificates		27,494		18,851		46
Core deposits		253,341		229,703		10
Other time deposits		46,488		36,622		27
Deposits in foreign offices		14,621		8,533		71
Total deposits	$	314,450	$	274,858		14

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Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

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

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

     In the ordinary course of business, we engage in financial transactions that are not recorded on the balance sheet, or may be recorded on the balance sheet in amounts that are different than the full contract or notional amount of the transaction. These transactions are designed to (1) meet the financial needs of customers, (2) manage our credit, market or liquidity risks, (3) diversify our funding sources or (4) optimize capital, and are accounted for in accordance with U.S. generally accepted accounting principles (GAAP).

     Almost all of our off-balance sheet arrangements result from securitizations. We routinely securitize home mortgage loans and, from time to time, other financial assets, including student loans, commercial mortgages and automobile receivables. We normally structure loan securitizations as sales, in accordance with FAS 140. This involves the transfer of financial assets to certain qualifying special-purpose entities that we are not required to consolidate. In a securitization, we can convert the assets into cash earlier than if we held the assets to maturity. Special-purpose entities used in these types of securitizations obtain cash to acquire assets by issuing securities to investors. In a securitization, we record a liability related to standard representations and warranties we make to purchasers and issuers for receivables transferred. Also, we generally retain the right to service the transferred receivables and to repurchase those receivables from the special-purpose entity if the outstanding balance of the receivable falls to a level where the cost exceeds the benefits of servicing such receivables.

     At December 31, 2005, securitization arrangements sponsored by the Company consisted of $121 billion in securitized loan receivables, including $75 billion of home mortgage loans. At December 31, 2005, the retained servicing rights and other beneficial interests related to these securitizations were $4,426 million, consisting of $3,501 million in securities, $784 million in servicing assets and $141 million in other retained interests. Related to our securitizations, we have committed to provide up to $40 million in credit enhancements.

     We also hold variable interests greater than 20% but less than 50% in certain special-purpose entities formed to provide affordable housing and to securitize corporate debt that had approximately $3 billion in total assets at December 31, 2005. We are not required to consolidate

these entities. Our maximum exposure to loss as a result of our involvement with these unconsolidated variable interest entities was approximately $870 million at December 31, 2005, predominantly representing investments in entities formed to invest in affordable housing. We, however, expect to recover our investment over time primarily through realization of federal low-income housing tax credits.

     For more information on securitizations including sales proceeds and cash flows from securitizations, see Note 20 (Securitizations and Variable Interest Entities) to Financial Statements.

     Home Mortgage, in the ordinary course of business, originates a portion of its mortgage loans through unconsolidated joint ventures in which we own an interest of 50% or less. Loans made by these joint ventures are funded by Wells Fargo Bank, N.A., or an affiliated entity, through an established line of credit and are subject to specified underwriting criteria. At December 31, 2005, the total assets of these mortgage origination joint ventures were approximately $55 million. We provide liquidity to these joint ventures in the form of outstanding lines of credit and, at December 31, 2005, these liquidity commitments totaled $358 million.

     We also hold interests in other unconsolidated joint ventures formed with unrelated third parties to provide efficiencies from economies of scale. A third party manages our real estate lending services joint ventures and provides customers title, escrow, appraisal and other real estate related services. Our merchant services joint venture includes credit card processing and related activities. At December 31, 2005, total assets of our real estate lending and merchant services joint ventures were approximately $715 million.

     When we acquire brokerage, asset management and insurance agencies, the terms of the acquisitions may provide for deferred payments or additional consideration, based on certain performance targets. At December 31, 2005, the amount of contingent consideration we expected to pay was not significant to our financial statements.

     As a financial services provider, we routinely commit to extend credit, including loan commitments, standby letters of credit and financial guarantees. A significant portion of commitments to extend credit may expire without being drawn upon. These commitments are subject to the same credit policies and approval process used for our loans. For more information, see Note 6 (Loans and Allowance for Credit Losses) and Note 24 (Guarantees) to Financial Statements.

     In our venture capital and capital markets businesses, we commit to fund equity investments directly to investment funds and to specific private companies. The timing of future cash requirements to fund these commitments generally depends on the venture capital investment cycle, the period over which privately-held companies are funded by venture capital investors and ultimately sold or taken public. This

47

cycle can vary based on market conditions and the industry in which the companies operate. We expect that many of these investments will become public, or otherwise become liquid, before the balance of unfunded equity commitments is used. At December 31, 2005, these commitments were approximately $650 million. Our other investment commitments, principally related to affordable housing, civic and other community development initiatives, were approximately $465 million at December 31, 2005.

     In the ordinary course of business, we enter into indemnification agreements, including underwriting agreements relating to offers and sales of our securities, acquisition agreements, and various other business transactions or arrangements, such as relationships arising from service as a director or officer of the Company. For more information, see Note 24 (Guarantees) to Financial Statements.

Contractual Obligations

In addition to the contractual commitments and arrangements described above, which, depending on the nature of the obligation, may or may not require use of our resources, we enter into other contractual obligations in the ordinary course of business, including debt issuances for the funding of operations and leases for premises and equipment.

     Table 9 summarizes these contractual obligations at December 31, 2005, except obligations for short-term borrowing arrangements and pension and postretirement benefit plans. More information on these obligations is in Note 11 (Short-Term Borrowings) and Note 15 (Employee Benefits and Other Expenses) to Financial Statements. The table also excludes other commitments more fully described under “Off-Balance Sheet Arrangements, Variable Interest Entities, Guarantees and Other Commitments.”

     We enter into derivatives, which create contractual obligations, as part of our interest rate risk management process, for our customers or for other trading activities. See “Asset/Liability and Market Risk Management” in this report and Note 26 (Derivatives) to Financial Statements for more information.

Transactions with Related Parties

FAS 57, Related Party Disclosures, requires disclosure of material related party transactions, other than compensation arrangements, expense allowances and other similar items in the ordinary course of business. The Company had no related party transactions required to be reported under FAS 57 for the years ended December 31, 2005, 2004 and 2003.

Table 9: Contractual Obligations

(in millions)	Note(s) to		Less than		1-3		3-5		More than		Indeterminate		Total
	Financial Statements		1 year		years		years		5 years		maturity(1)
Contractual payments by period:
Deposits		10	$	80,461	$	5,785	$	1,307	$	231	$	226,666	$	314,450
Long-term debt(2)		7, 12		11,124		27,704		15,869		24,971		—		79,668
Operating leases		7		514		786		535		898		—		2,733
Purchase obligations(3)				548		244		28		—		—		820
Total contractual obligations			$	92,647	$	34,519	$	17,739	$	26,100	$	226,666	$	397,671

(1)	Represents interest-bearing and noninterest-bearing checking, market rate and other savings accounts.
(2)	Includes capital leases of $14 million.
(3)	Represents agreements to purchase goods or services.

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Risk Management

Credit Risk Management Process

Our credit risk management process provides for decentralized management and accountability by our lines of business. Our overall credit process includes comprehensive credit policies, frequent and detailed risk measurement and modeling, extensive credit training programs and a continual loan audit review process. In addition, regulatory examiners review and perform detailed tests of our credit underwriting, loan administration and allowance processes.

     Managing credit risk is a company-wide process. We have credit policies for all banking and nonbanking operations incurring credit risk with customers or counterparties that provide a consistent, prudent approach to credit risk management. We use detailed tracking and analysis to measure credit performance and exception rates and we routinely review and modify credit policies as appropriate. We have corporate data integrity standards to ensure accurate and complete credit performance reporting. We strive to identify problem loans early and have dedicated, specialized collection and work-out units.

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

     Our business units and the office of the Chief Credit Officer periodically review all credit risk portfolios to ensure that the risk identification processes are functioning properly and that credit standards are followed. Business units conduct quality assurance reviews to ensure that loans meet portfolio or investor credit standards. Our loan examiners and internal auditors also independently review portfolios with credit risk.

     Our primary business focus in middle-market commercial and residential real estate, auto and small consumer lending, results in portfolio diversification. We ensure that we use appropriate methods to understand and underwrite risk.

     In our wholesale portfolios, larger or more complex loans are individually underwritten and judgmentally risk rated. They are periodically monitored and prompt corrective actions are taken on deteriorating loans. Smaller, more homogeneous loans are approved and monitored using statistical techniques.

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

     Each business unit completes quarterly asset quality forecasts to quantify its intermediate-term outlook for loan losses and recoveries, nonperforming loans and market trends. To make sure our overall allowance for credit losses is adequate we conduct periodic stress tests. This includes a portfolio loss simulation model that simulates a range of possible losses for various sub-portfolios assuming various trends in loan quality. We assess loan portfolios for geographic, industry, or other concentrations and use mitigation strategies, which may include loan sales, syndications or third party insurance, to minimize these concentrations, as we deem necessary.

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

NONACCRUAL LOANS AND OTHER ASSETS

Table 10 shows the five-year trend for nonaccrual loans and other assets. We generally place loans on nonaccrual status when:

• the full and timely collection of interest or principal becomes uncertain;

• they are 90 days (120 days with respect to real estate 1-4 family first and junior lien mortgages) past due for interest or principal (unless both well-secured and in the process of collection); or

• part of the principal balance has been charged off.

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

     The decrease in nonaccrual loans was primarily due to payoffs of commercial and commercial real estate nonaccrual loans.

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

     If interest due on the book balances of all nonaccrual loans (including loans that were but are no longer on nonaccrual at year end) had been accrued under the original terms, approximately $85 million of interest would have been recorded in 2005, compared with payments of $35 million recorded as interest income.

     Most of the foreclosed assets at December 31, 2005, have been in the portfolio one year or less.

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Table 10: Nonaccrual Loans and Other Assets

(in millions)	December 31														,
	2005			2004			2003			2002			2001
Nonaccrual loans:
Commercial and commercial real estate:
Commercial	$	286		$	345		$	592		$	796		$	827
Other real estate mortgage		165			229			285			192			210
Real estate construction		31			57			56			93			145
Lease financing		45			68			73			79			163
Total commercial and commercial real estate		527			699			1,006			1,160			1,345
Consumer:
Real estate 1-4 family first mortgage		471			386			274			230			205
Real estate 1-4 family junior lien mortgage		144			92			87			49			22
Other revolving credit and installment		171			160			88			48			59
Total consumer		786			638			449			327			286
Foreign		25			21			3			5			9
Total nonaccrual loans (1)		1,338			1,358			1,458			1,492			1,640
As a percentage of total loans		.43	%		.47	%		.58	%		.78	%		.98	%
Foreclosed assets		191			212			198			195			160
Real estate investments (2)		2			2			6			4			2
Total nonaccrual loans and other assets	$	1,531		$	1,572		$	1,662		$	1,691		$	1,802
As a percentage of total loans		.49	%		.55	%		.66	%		.88	%		1.08	%

(1)	Includes impaired loans of $190 million, $309 million, $629 million, $612 million and $823 million at December 31, 2005, 2004, 2003, 2002 and 2001, respectively. (See Note 1 (Summary of Significant Accounting Policies) and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements for further discussion of impaired loans.)
(2)	Real estate investments (contingent interest loans accounted for as investments) that would be classified as nonaccrual if these assets were recorded as loans. Real estate investments totaled $84 million, $4 million, $9 million, $9 million and $24 million at December 31, 2005, 2004, 2003, 2002 and 2001, respectively.

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

Loans in this category are 90 days or more past due as to interest or principal and still accruing, because they are (1) well-secured and in the process of collection or (2) real estate 1-4 family first mortgage loans or consumer loans exempt under regulatory rules from being classified as nonaccrual.

     The total of loans 90 days or more past due and still accruing was $3,606 million, $2,578 million, $2,337 million, $672 million and $698 million at December 31, 2005, 2004, 2003, 2002 and 2001, respectively. At December 31, 2005, 2004, and 2003, the total included $2,923 million, $1,820 million and $1,641 million, respectively, in advances pursuant to our servicing agreements to Government National Mortgage Association (GNMA) mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. Before clarifying guidance issued in 2003 as to classification as loans, GNMA advances were included in other assets. Table 11 provides detail by loan category excluding GNMA advances.

Table 11: Loans 90 Days or More Past Due and Still Accruing (Excluding Insured/Guaranteed GNMA Advances)

(in millions)	December 31										,
	2005		2004		2003		2002		2001
Commercial and commercial real estate:
Commercial	$	18	$	26	$	87	$	92	$	60
Other real estate mortgage		13		6		9		7		22
Real estate construction		9		6		6		11		47
Total commercial and commercial real estate		40		38		102		110		129
Consumer:
Real estate 1-4 family first mortgage		103		148		117		104		145
Real estate 1-4 family junior lien mortgage		50		40		29		18		17
Credit card		159		150		134		130		116
Other revolving credit and installment		290		306		271		282		268
Total consumer		602		644		551		534		546
Foreign		41		76		43		28		23
Total	$	683	$	758	$	696	$	672	$	698

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ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses, which consists of the allowance for loan losses and the reserve for unfunded credit commitments, is management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. We assume that our allowance for credit losses as a percentage of charge-offs and nonaccrual loans will change at different points in time based on credit performance, loan mix and collateral values. Any loan with past due principal or interest that is not both well-secured and in the process of collection generally is charged off (to the extent that it exceeds the fair value of any related collateral) based on loan category after a defined period of time. Also, a loan is charged off when classified as a loss by either internal loan examiners or regulatory examiners. The detail of the changes in the allowance for credit losses, including charge-offs and recoveries by loan category, is in Note 6 (Loans and Allowance for Credit Losses) to Financial Statements.

     At December 31, 2005, the allowance for loan losses was $3.87 billion, or 1.25% of total loans, compared with $3.76 billion, or 1.31%, at December 31, 2004, and $3.89 billion, or 1.54%, at December 31, 2003. The decrease in the ratio of the allowance for loan losses to total loans was primarily due to a continued shift toward a higher percentage of consumer loans in our portfolio, including consumer loans and some small business loans, which have shorter loss emergence periods, and home mortgage loans, which have inherently lower losses that emerge over a longer time frame compared to other consumer products. We have historically experienced lower losses on our residential real estate secured consumer loan portfolio.

     The allowance for credit losses was $4.06 billion at December 31, 2005, and $3.95 billion at December 31, 2004. The ratio of the allowance for credit losses to net charge-offs was 178% and 237% at December 31, 2005 and 2004, respectively. This ratio fluctuates from period to period and the decrease in 2005 reflects increased loss rates within the various consumer and small business portfolios impacted by higher consumer bankruptcies in fourth quarter 2005.

     The ratio of the allowance for credit losses to total nonaccrual loans was 303% and 291% at December 31, 2005 and 2004, respectively. This ratio may fluctuate significantly from period to period due to such factors as the mix of loan types in the portfolio, borrower credit strength and the value and marketability of collateral. Over half of nonaccrual loans were home mortgages and other consumer loans at December 31, 2005. Nonaccrual loans are generally written down to a net realizable value at the time they are placed on nonaccrual and accounted for on a cost recovery basis.

     The provision for credit losses totaled $2.38 billion in 2005, and $1.72 billion in both 2004 and 2003. In 2005, the provision included $100 million in excess of net charge-offs,

which was our estimate of probable credit losses related to Hurricane Katrina. We continue to work with customers under various payment moratoriums and forbearance programs to re-evaluate and refine our estimates as more information becomes available and can be confirmed in subsequent quarters.

     Net charge-offs in 2005 were .77% of average total loans, compared with .62% in 2004 and .81% in 2003. Higher net charge-offs in 2005 included the additional credit losses from the change in bankruptcy laws and conforming Wells Fargo Financial to FFIEC charge-off rules. A portion of these bankruptcy charge-offs represent an acceleration of charge-offs that would have likely occurred in 2006. The increase in consumer bankruptcies primarily impacted our credit card, unsecured consumer loans and lines, auto and small business portfolios.

     The reserve for unfunded credit commitments was $186 million at December 31, 2005, and $188 million at December 31, 2004, less than 5% of the total allowance for credit losses related to this potential risk for both years.

     The allocated component of the allowance for credit losses was $3.41 billion at December 31, 2005, and $3.06 billion at December 31, 2004, an increase of $347 million year over year. Changes in the allocated allowance reflect changes in statistically derived loss estimates, historical loss experience, and current trends in borrower risk and/or general economic activity on portfolio performance. The unallocated allowance decreased to $648 million, or 16% of the allowance for credit losses, at December 31, 2005, from $888 million, or 22%, at December 31, 2004.

     We consider the allowance for credit losses of $4.06 billion adequate to cover credit losses inherent in the loan portfolio, including unfunded credit commitments, at December 31, 2005. The process for determining the adequacy of the allowance for credit losses is critical to our financial results. It requires difficult, subjective and complex judgments, as a result of the need to make estimates about the effect of matters that are uncertain. (See “Financial Review — Critical Accounting Policies — Allowance for Credit Losses.”) Therefore, we cannot provide assurance that, in any particular period, we will not have sizeable credit losses in relation to the amount reserved. We may need to significantly adjust the allowance for credit losses, considering current factors at the time, including economic conditions and ongoing internal and external examination processes. Our process for determining the adequacy of the allowance for credit losses is discussed in Note 6 (Loans and Allowance for Credit Losses) to Financial Statements.

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Asset/Liability and Market Risk Management

Asset/liability management involves the evaluation, monitoring and management of interest rate risk, market risk, liquidity and funding. The Corporate Asset/Liability Management Committee (Corporate ALCO)—which oversees these risks and reports periodically to the Finance Committee of the Board of Directors—consists of senior financial and business executives. Each of our principal business groups—Community Banking (including Mortgage Banking), Wholesale Banking and Wells Fargo Financial—have individual asset/liability management committees and processes linked to the Corporate ALCO process.

INTEREST RATE RISK

Interest rate risk, which potentially can have a significant earnings impact, is an integral part of being a financial intermediary. We are subject to interest rate risk because:

• assets and liabilities may mature or reprice at different times (for example, if assets reprice faster than liabilities and interest rates are generally falling, earnings will initially decline);

• assets and liabilities may reprice at the same time but by different amounts (for example, when the general level of interest rates is falling, we may reduce rates paid on checking and savings deposit accounts by an amount that is less than the general decline in market interest rates);

• short-term and long-term market interest rates may change by different amounts (for example, the shape of the yield curve may affect new loan yields and funding costs differently); or

• the remaining maturity of various assets or liabilities may shorten or lengthen as interest rates change (for example, if long-term mortgage interest rates decline sharply, mortgage-backed securities held in the securities available for sale portfolio may prepay significantly earlier than anticipated—which could reduce portfolio income).

     Interest rates may also have a direct or indirect effect on loan demand, credit losses, mortgage origination volume, the value of MSRs, the value of the pension liability and other sources of earnings.

     We assess interest rate risk by comparing our most likely earnings plan with various earnings simulations using many interest rate scenarios that differ in the direction of interest rate changes, the degree of change over time, the speed of change and the projected shape of the yield curve. For example, as of December 31, 2005, our most recent simulation indicated estimated earnings at risk of less than 1% of our most likely earnings plan over the next 12 months using a scenario in which the federal funds rate dropped 200 basis points to 2.25% and the 10-year Constant Maturity Treasury bond yield dropped 125 basis points to 3.25% over the same period. Simulation estimates depend on, and will change with, the size and mix of our actual and projected

balance sheet at the time of each simulation. Due to timing differences between the quarterly valuation of MSRs and the eventual impact of interest rates on mortgage banking volumes, earnings at risk in any particular quarter could be higher than the average earnings at risk over the twelve month simulation period, depending on the path of interest rates and on our MSRs hedging strategies. See “Mortgage Banking Interest Rate Risk” below.

     We use exchange-traded and over-the-counter interest rate derivatives to hedge our interest rate exposures. The notional or contractual amount, credit risk amount and estimated net fair values of these derivatives as of December 31, 2005 and 2004, are presented in Note 26 (Derivatives) to Financial Statements. We use derivatives for asset/liability management in three ways:

• to convert a major portion of our long-term fixed-rate debt, which we issue to finance the Company, from fixed-rate payments to floating-rate payments by entering into receive-fixed swaps;

• to convert the cash flows from selected asset and/or liability instruments/portfolios from fixed-rate payments to floating-rate payments or vice versa; and

• to hedge our mortgage origination pipeline, funded mortgage loans and MSRs using interest rate swaps, swaptions, futures, forwards and options.

MORTGAGE BANKING INTEREST RATE RISK

We originate, fund and service mortgage loans, which subjects us to various risks, including credit, liquidity and interest rate risks. We avoid unwanted credit and liquidity risks by selling or securitizing virtually all of the long-term fixed-rate mortgage loans we originate and most of the ARMs we originate. From time to time, we hold originated ARMs in portfolio as an investment for our growing base of core deposits, and we may subsequently sell some or all of these ARMs as part of our corporate asset/liability management.

     While credit and liquidity risks are relatively low for mortgage banking activities, interest rate risk can be substantial. Changes in interest rates may potentially impact origination and servicing fees, the value of our MSRs, the income and expense associated with instruments used to hedge changes in the value of MSRs, and the value of derivative loan commitments extended to mortgage applicants.

     Interest rates impact the amount and timing of origination and servicing fees because consumer demand for new mortgages and the level of refinancing activity are sensitive to changes in mortgage interest rates. Typically, a decline in mortgage interest rates will lead to an increase in mortgage originations and fees and, depending on our ability to retain market share, may also lead to an increase in servicing fees. Given the time it takes for consumer behavior to fully react to interest rate changes, as well as the time required for processing a new application, providing the commitment, and securitizing and selling the loan, interest rate changes will

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impact origination and servicing fees with a lag. The amount and timing of the impact on origination and servicing fees will depend on the magnitude, speed and duration of the change in interest rates.

     Under GAAP, MSRs are adjusted at the end of each quarter to the lower of cost or market. While the valuation of MSRs can be highly subjective and involve complex judgments by management about matters that are inherently unpredictable, changes in interest rates influence a variety of assumptions included in the periodic valuation of MSRs. Assumptions affected include prepayment speed, expected returns and potential risks on the servicing asset portfolio, the value of escrow balances and other servicing valuation elements impacted by interest rates.

     A decline in interest rates increases the propensity for refinancing, reduces the expected duration of the servicing portfolio and therefore reduces the estimated value of MSRs. This reduction in value causes a charge to income as a result of increasing the valuation allowance for potential MSRs impairment (net of any gains on derivatives used to hedge MSRs). We typically do not fully hedge with financial instruments (derivatives or securities) all of the potential decline in the value of our MSRs to a decline in interest rates because the potential increase in origination/servicing fees in that scenario provides a partial “natural business hedge.” In a rising rate period, when the MSRs valuation is not fully hedged with derivatives, the amount of valuation allowance that can be recaptured into income will typically—although not always—exceed the losses on any derivatives hedging the MSRs.

     Hedging the various sources of interest rate risk in mortgage banking is a complex process that requires sophisticated modeling and constant monitoring. While we attempt to balance these various aspects of the mortgage business, there are several potential risks to earnings:

• MSRs valuation changes associated with interest rate changes are recorded in earnings immediately within the accounting period in which those interest rate changes occur, whereas the impact of those same changes in interest rates on origination and servicing fees occur with a lag and over time. Thus, the mortgage business could be protected from adverse changes in interest rates over a period of time on a cumulative basis but still display large variations in income in any accounting period.

• The degree to which the “natural business hedge” offsets changes in MSRs valuations is imperfect, varies at different points in the interest rate cycle, and depends not just on the direction of interest rates but on the pattern of quarterly interest rate changes. For example, given the relatively high level of refinancing activity in recent years and the increase in interest rates in 2005, any significant increase in refinancing activity would likely occur only if rates drop substantially from year-end 2005 levels.

• Origination volumes, the valuation of MSRs and hedging results and associated costs are also impacted by many factors. Such factors include the mix of new business between ARMs and fixed-rated mortgages, the relationship between short-term and long-term interest rates, the degree of volatility in interest rates, the relationship between mortgage interest rates and other interest rate markets, and other interest rate factors. Many of these factors are hard to predict and we may not be able to directly or perfectly hedge their effect.

• While our hedging activities are designed to balance our mortgage banking interest rate risks, the financial instruments we use, including mortgage, U.S. Treasury, and LIBOR-based futures, forwards, swaps and options, may not perfectly correlate with the values and income being hedged.

     Our MSRs totaled $12.5 billion, net of a valuation allowance of $1.2 billion at December 31, 2005, and $7.9 billion, net of a valuation allowance of $1.6 billion, at December 31, 2004. The weighted-average note rate of our owned servicing portfolio was 5.72% at December 31, 2005, and 5.75% at December 31, 2004. Our MSRs were 1.44% of mortgage loans serviced for others at December 31, 2005, and 1.15% at December 31, 2004.

     As part of our mortgage banking activities, we enter into commitments to fund residential mortgage loans at specified times in the future. A mortgage loan commitment is an interest rate lock that binds us to lend funds to a potential borrower at a specified interest rate and within a specified period of time, generally up to 60 days after inception of the rate lock. These loan commitments are derivative loan commitments if the loans that will result from the exercise of the commitments will be held for sale. Under FAS 133, Accounting for Derivative Instruments and Hedging Activities (as amended), these derivative loan commitments are recognized at fair value on the consolidated balance sheet with changes in their fair values recorded as part of income from mortgage banking operations. Consistent with EITF 02-3, Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities, and SEC Staff Accounting Bulletin No. 105, Application of Accounting Principles to Loan Commitments, we record no value for the loan commitment at inception. Subsequent to inception, we recognize fair value of the derivative loan commitment based on estimated changes in the fair value of the underlying loan that would result from the exercise of that commitment and on changes in the probability that the loan will fund within the terms of the commitment. The value of that loan is affected primarily by changes in interest rates and the passage of time. We also apply a fall-out factor to the valuation of the derivative loan commitment for the probability that the loan will not fund within the terms of the commitments. The value of the MSRs is recognized only after the servicing asset has been contractually separated from the underlying loan by sale or securitization.

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     Outstanding derivative loan commitments expose us to the risk that the price of the loans underlying the commitments might decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. To minimize this risk, we utilize options, futures and forwards to economically hedge the potential decreases in the values of the loans that could result from the exercise of the loan commitments. We expect that these derivative financial instruments will experience changes in fair value that will either fully or partially offset the changes in fair value of the derivative loan commitments.

MARKET RISK – TRADING ACTIVITIES

From a market risk perspective, our net income is exposed to changes in interest rates, credit spreads, foreign exchange rates, equity and commodity prices and their implied volatilities. The primary purpose of our trading businesses is to accommodate customers in the management of their market price risks. Also, we take positions based on market expectations or to benefit from price differences between financial instruments and markets, subject to risk limits established and monitored by Corporate ALCO. All securities, foreign exchange transactions, commodity transactions and derivatives—transacted with customers or used to hedge capital market transactions with customers—are carried at fair value. The Institutional Risk Committee establishes and monitors counterparty risk limits. The notional or contractual amount, credit risk amount and estimated net fair value of all customer accommodation derivatives at December 31, 2005 and 2004, are included in Note 26 (Derivatives) to Financial Statements. Open, “at risk” positions for all trading business are monitored by Corporate ALCO.

     The standardized approach for monitoring and reporting market risk for the trading activities is the value-at-risk (VAR) metrics complemented with factor analysis and stress testing. VAR measures the worst expected loss over a given time interval and within a given confidence interval. We measure and report daily VAR at 99% confidence interval based on actual changes in rates and prices over the past 250 days. The analysis captures all financial instruments that are considered trading positions. The average one-day VAR throughout 2005 was $18 million, with a lower bound of $11 million and an upper bound of $24 million.

MARKET RISK – EQUITY MARKETS

We are directly and indirectly affected by changes in the equity markets. We make and manage direct equity investments in start-up businesses, emerging growth companies, management buy-outs, acquisitions and corporate recapitalizations. We also invest in non-affiliated funds that make similar private equity investments. These private equity investments are made within capital allocations approved by management and the Board of Directors (the Board).

The Board reviews business developments, key risks and historical returns for the private equity investments at least annually. Management reviews these investments at least quarterly and assesses them for possible other-than-temporary impairment. For nonmarketable investments, the analysis is based on facts and circumstances of each investment and the expectations for that investment’s cash flows and capital needs, the viability of its business model and our exit strategy. Private equity investments totaled $1,537 million at December 31, 2005, and $1,449 million at December 31, 2004.

     We also have marketable equity securities in the available for sale investment portfolio, including securities relating to our venture capital activities. We manage these investments within capital risk limits approved by management and the Board and monitored by Corporate ALCO. Gains and losses on these securities are recognized in net income when realized and other-than-temporary impairment may be periodically recorded when identified. The initial indicator of impairment for marketable equity securities is a sustained decline in market price below the amount recorded for that investment. We consider a variety of factors, such as the length of time and the extent to which the market value has been less than cost; the issuer’s financial condition, capital strength, and near-term prospects; any recent events specific to that issuer and economic conditions of its industry; and, to a lesser degree, our investment horizon in relationship to an anticipated near-term recovery in the stock price, if any. The fair value of marketable equity securities was $900 million and cost was $558 million at December 31, 2005, and $696 million and $507 million, respectively, at December 31, 2004.

     Changes in equity market prices may also indirectly affect our net income (1) by affecting the value of third party assets under management and, hence, fee income, (2) by affecting particular borrowers, whose ability to repay principal and/or interest may be affected by the stock market, or (3) by affecting brokerage activity, related commission income and other business activities. Each business line monitors and manages these indirect risks.

LIQUIDITY AND FUNDING

The objective of effective liquidity management is to ensure that we can meet customer loan requests, customer deposit maturities/withdrawals and other cash commitments efficiently under both normal operating conditions and under unpredictable circumstances of industry or market stress. To achieve this objective, Corporate ALCO establishes and monitors liquidity guidelines that require sufficient asset-based liquidity to cover potential funding requirements and to avoid over-dependence on volatile, less reliable funding markets. We set these guidelines for both the consolidated balance sheet and for the Parent to ensure that the Parent is a source of strength for its regulated, deposit-taking banking subsidiaries.

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     Debt securities in the securities available for sale portfolio provide asset liquidity, in addition to the immediately liquid resources of cash and due from banks and federal funds sold and securities purchased under resale agreements. The weighted-average expected remaining maturity of the debt securities within this portfolio was 5.9 years at December 31, 2005. Of the $40.3 billion (cost basis) of debt securities in this portfolio at December 31, 2005, $5.1 billion, or 13%, is expected to mature or be prepaid in 2006 and an additional $5.5 billion, or 14%, in 2007. Asset liquidity is further enhanced by our ability to sell or securitize loans in secondary markets through whole-loan sales and securitizations. In 2005, we sold mortgage loans of approximately $435 billion, including securitized home mortgage loans and commercial mortgage loans of approximately $190 billion. The amount of mortgage loans, home equity loans and other consumer loans available to be sold or securitized was approximately $150 billion at December 31, 2005.

     Core customer deposits have historically provided a sizeable source of relatively stable and low-cost funds. Average core deposits and stockholders’ equity funded 63.2% and 63.1% of average total assets in 2005 and 2004, respectively.

     The remaining assets were funded by long-term debt, deposits in foreign offices, short-term borrowings (federal funds purchased, securities sold under repurchase agreements, commercial paper and other short-term borrowings) and trust preferred securities. Short-term borrowings averaged $24.1 billion in 2005 and $26.1 billion in 2004. Long-term debt averaged $79.1 billion in 2005 and $67.9 billion in 2004.

     We anticipate making capital expenditures of approximately $900 million in 2006 for our stores, relocation and remodeling of Company facilities, and routine replacement of furniture, equipment and servers. We fund expenditures from various sources, including cash flows from operations, retained earnings and borrowings.

     Liquidity is also available through our ability to raise funds in a variety of domestic and international money and capital markets. We access capital markets for long-term funding by issuing registered debt, private placements and asset-backed secured funding. Rating agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix and level and quality of earnings. Material changes in these factors could result in a different debt rating; however, a change in debt rating would not cause us to violate any of our debt covenants. In September 2003, Moody’s Investors Service rated Wells Fargo Bank, N.A. as “Aaa,” its highest investment grade, and rated the Company’s senior debt rating as “Aa1.” In July 2005, Dominion Bond Rating Service raised the Company’s senior debt rating to “AA” from “AA(low).”

     Table 12 provides the credit ratings of the Company and Wells Fargo Bank, N.A. as of December 31, 2005.

Table 12: Credit Ratings

	Wells Fargo & Company			Wells Fargo Bank, N.A.
	Senior	Subordinated	Commercial	Long-term	Short-term
	debt	debt	paper	deposits	borrowings
Moody’s	Aa1	Aa2	P-1	Aaa	P-1
Standard & Poor’s	AA-	A+	A-1+	AA	A-1+
Fitch, Inc.	AA	AA-	F1+	AA+	F1+
Dominion Bond Rating Service	AA	AA(low)	R-1(middle)	AA(high)	R-1(high)

     On June 29, 2005, the SEC adopted amendments to its rules with respect to the registration, communications and offerings processes under the Securities Act of 1933. The rules, which became effective December 1, 2005, facilitate access to the capital markets by well-established public companies, modernize the existing restrictions on corporate communications during a securities offering and further integrate disclosures under the Securities Act of 1933 and the Securities Exchange Act of 1934. The amended rules provide the most flexibility to “well-known seasoned issuers” (Seasoned Issuers), including the option of automatic effectiveness upon filing of shelf registration statements and relief under the less restrictive communications rules. Seasoned Issuers generally include those companies with a public float of common equity of at least $700 million or those companies that have issued at least $1 billion in aggregate principal amount of non-convertible securities, other than common equity, in the last three years. Based on each of these criteria calculated as of December 1, 2005, the Company met the eligibility requirements to qualify as a Seasoned Issuer.

PARENT. In July 2005, the Parent’s registration statement with the SEC for issuance of $30 billion in senior and subordinated notes, preferred stock and other securities became effective. During 2005, the Parent issued a total of $16.0 billion of senior notes, including approximately $1.3 billion (denominated in pounds sterling) sold primarily in the United Kingdom. Also, in 2005, the Parent issued $1.5 billion (denominated in Australian dollars) in senior notes under the Parent’s Australian debt issuance program. At December 31, 2005, the Parent’s remaining authorized issuance capacity under its effective registration statements was $24.8 billion. We used the proceeds from securities issued in 2005 for general corporate purposes and expect that the proceeds in the future will also be used for general corporate purposes. In January and February 2006, the Parent issued a total of $3.6 billion in senior notes, including approximately $900 million denominated in pounds sterling. The Parent also issues commercial paper from time to time.

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WELLS FARGO BANK, N.A. In March 2003, Wells Fargo Bank, N.A. established a $50 billion bank note program under which it may issue up to $20 billion in short-term senior notes outstanding at any time and up to a total of $30 billion in long-term senior notes. Securities are issued under this program as private placements in accordance with Office of the Comptroller of the Currency (OCC) regulations. During 2005, Wells Fargo Bank, N.A. issued $2.3 billion in long-term senior notes. At December 31, 2005, the remaining long-term issuance authority was $6.7 billion. Wells Fargo Bank, N.A. also issued $1.5 billion in subordinated debt in 2005.

WELLS FARGO FINANCIAL. In November 2003, Wells Fargo Financial Canada Corporation (WFFCC), a wholly-owned Canadian subsidiary of Wells Fargo Financial, Inc. (WFFI), qualified for distribution with the provincial securities exchanges in Canada $1.5 billion (Canadian) of issuance authority. In December 2004, WFFCC amended its existing shelf registration by adding $2.5 billion (Canadian) of issuance authority. During 2005, WFFCC issued $2.2 billion (Canadian) in senior notes. The remaining issuance capacity for WFFCC of $700 million (Canadian) expired in December 2005. In January 2006, a $7.0 billion (Canadian) shelf registration became effective. In 2005, WFFI entered into a secured borrowing arrangement for $1 billion (U.S.). Under the terms of the arrangement, WFFI pledged auto loans as security for the borrowing.

Capital Management

We have an active program for managing stockholder capital. We use capital to fund organic growth, acquire banks and other financial services companies, pay dividends and repurchase our shares. Our objective is to produce above-market long-term returns by opportunistically using capital when returns are perceived to be high and issuing/accumulating capital when such costs are perceived to be low.

     From time to time our Board of Directors authorizes the Company to repurchase shares of our common stock. Although we announce when our Board authorizes share repurchases, we typically do not give any public notice before we repurchase our shares. Various factors determine the amount and timing of our share repurchases, including our capital requirements, the number of shares we expect to issue for acquisitions and employee benefit plans, market conditions (including the trading price of our stock), and legal considerations. These factors can change at any time, and there can be no assurance as to the number of shares we will repurchase or when we will repurchase them.

     Historically, our policy has been to repurchase shares under the “safe harbor” conditions of Rule 10b-18 of the Exchange Act including a limitation on the daily volume of repurchases. Rule 10b-18 imposes an additional daily volume limitation on share repurchases during a pending merger or acquisition in which shares of our stock will constitute some or all of the consideration. Our management may determine that during a pending stock merger or acquisition when the safe harbor would otherwise be available, it is in the Company’s best interest to repurchase shares in excess of

this additional daily volume limitation. In such cases, we intend to repurchase shares in compliance with the other conditions of the safe harbor, including the standing daily volume limitation that applies whether or not there is a pending stock merger or acquisition.

     In 2005, the Board of Directors authorized the repurchase of up to 75 million additional shares of our outstanding common stock. During 2005, we repurchased approximately 53 million shares of our common stock. At December 31, 2005, the total remaining common stock repurchase authority was approximately 35 million shares.

     Our potential sources of capital include retained earnings, and issuances of common and preferred stock and subordinated debt. In 2005, retained earnings increased $4.1 billion, predominantly as a result of net income of $7.7 billion less dividends of $3.4 billion. In 2005, we issued $1.9 billion of common stock under various employee benefit and director plans and under our dividend reinvestment and direct stock purchase programs.

     The Company and each of our subsidiary banks are subject to various regulatory capital adequacy requirements administered by the Federal Reserve Board and the OCC. Risk-based capital guidelines establish a risk-adjusted ratio relating capital to different categories of assets and off-balance sheet exposures. At December 31, 2005, the Company and each of our covered subsidiary banks were “well capitalized” under applicable regulatory capital adequacy guidelines. See Note 25 (Regulatory and Agency Capital Requirements) to Financial Statements for additional information.

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Comparison of 2004 with 2003

Net income in 2004 increased 13% to $7.0 billion from $6.2 billion in 2003. Diluted earnings per common share increased 12% to $4.09 in 2004 from $3.65 in 2003. In addition to incremental investments in new stores, sales-focused team members and technology, 2004 results included $217 million ($.08 per share) of charitable contribution expense for the Wells Fargo Foundation, $44 million ($.02 per share) for a special 401(k) contribution and $19 million ($.01 per share) in integration expense related to the Strong Financial transaction. We also took significant actions to reposition our balance sheet in 2004 designed to improve earning asset yields and to reduce long-term debt costs. The extinguishment of high interest rate debt reduced earnings by $174 million ($.06 per share) for 2004. Return on average assets was 1.71% and return on average common equity was 19.56% in 2004, up from 1.64% and 19.36%, respectively, for 2003.

     Net interest income on a taxable-equivalent basis was $17.3 billion in 2004, compared with $16.1 billion in 2003, an increase of 7%. The increase was primarily due to strong consumer loan growth, especially in mortgage products. The benefit of this growth was partially offset by lower loan yields as new volumes were added below the portfolio average.

     The net interest margin for 2004 decreased to 4.89% from 5.08% in 2003. The decrease was primarily due to lower investment portfolio yields following maturities and prepayments of higher yielding mortgage-backed securities, and the addition of new consumer and commercial loans with yields below the existing portfolio average. These factors were partially offset by the benefits of balance sheet repositioning actions taken in 2004.

     Noninterest income was $12.9 billion in 2004, compared with $12.4 billion in 2003, an increase of 4%, driven by growth across our business, with particular strength in trust, investment and IRA fees, card fees, loan fees and gains on equity investments.

     Mortgage banking noninterest income was $1,860 million in 2004, compared with $2,512 million in 2003. Net servicing income was $1,037 million in 2004, compared with losses of $954 million in 2003. The increase in net servicing income in 2004, compared with 2003, reflected a reduction of $934 million in amortization due to an increase in average

interest rates and higher gross servicing fees resulting from growth in the servicing portfolio. In addition, to reflect the higher value of our MSRs, we reversed $208 million of the valuation allowance in 2004, compared with an impairment provision of $1,092 million in 2003. Net derivative gains on fair value hedges of our MSRs were $554 million and $1,111 million in 2004 and 2003, respectively.

     Net gains on mortgage loan origination/sales activities were $539 million in 2004, compared with $3,019 million for 2003. Lower gains in 2004 compared with 2003 reflected lower origination volume and a decrease in margins, due primarily to the increase in average interest rates and lower consumer demand. Originations during 2004 declined to $298 billion from $470 billion in 2003.

     Revenue, the sum of net interest income and noninterest income, increased 6% to a record $30.1 billion in 2004 from $28.4 billion in 2003, despite a 37% decrease in mortgage originations as the refinance driven market declined from its exceptional 2003 level. Despite our balance sheet repositioning actions in 2004, which reduced 2004 revenue growth by approximately 1 percentage point due to the loss on sale of lower yielding assets, and our significant level of investment spending, operating leverage improved during 2004 with revenue growing 6% and noninterest expense up only 2%. For the year, Home Mortgage revenue declined $807 million, or 16%, from $5.2 billion in 2003 to $4.4 billion in 2004.

     Noninterest expense was $17.6 billion in 2004, compared with $17.2 billion in 2003, an increase of 2%.

     During 2004, net charge-offs were $1.67 billion, or .62% of average total loans, compared with $1.72 billion, or .81%, during 2003. The provision for credit losses was $1.72 billion in 2004, flat compared with 2003. The allowance for credit losses, which consists of the allowance for loan losses and the reserve for unfunded credit commitments, was $3.95 billion, or 1.37% of total loans, at December 31, 2004, and $3.89 billion, or 1.54%, at December 31, 2003.

     At December 31, 2004, total nonaccrual loans were $1.36 billion, or .47% of total loans, down from $1.46 billion, or .58%, at December 31, 2003. Foreclosed assets were $212 million at December 31, 2004, compared with $198 million at December 31, 2003.

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Controls and Procedures

Disclosure Controls and Procedures

As required by SEC rules, the Company’s management evaluated the effectiveness, as of December 31, 2005, of the Company’s disclosure controls and procedures. The Company’s chief executive officer and chief financial officer participated in the evaluation. Based on this evaluation, the Company’s chief executive officer and the chief financial officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2005.

Internal Control over Financial Reporting

Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the company;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. No change occurred during fourth quarter 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Management’s report on internal control over financial reporting is set forth below, and should be read with these limitations in mind.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on this assessment, management concluded that as of December 31, 2005, the Company’s internal control over financial reporting was effective.

     KPMG LLP, the independent registered public accounting firm that audited the Company’s financial statements included in this Annual Report, issued an audit report on management’s assessment of the Company’s internal control over financial reporting. KPMG’s audit report appears on the following page.

58

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Wells Fargo & Company:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Wells Fargo & Company and Subsidiaries (“the Company”) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by COSO. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2005, and our report dated February 21, 2006, expressed an unqualified opinion on those consolidated financial statements.

San Francisco, California
February 21, 2006

59

Financial Statements

Wells Fargo & Company and Subsidiaries

Consolidated Statement of Income

(in millions, except per share amounts)	Year ended December 31								,
	2005			2004			2003
INTEREST INCOME
Trading assets	$	190		$	145		$	156
Securities available for sale		1,921			1,883			1,816
Mortgages held for sale		2,213			1,737			3,136
Loans held for sale		146			292			251
Loans		21,260			16,781			13,937
Other interest income		232			129			122
Total interest income		25,962			20,967			19,418
INTEREST EXPENSE
Deposits		3,848			1,827			1,613
Short-term borrowings		744			353			322
Long-term debt		2,866			1,637			1,355
Guaranteed preferred beneficial interests in Company’s subordinated debentures		—			—			121
Total interest expense		7,458			3,817			3,411
NET INTEREST INCOME		18,504			17,150			16,007
Provision for credit losses		2,383			1,717			1,722
Net interest income after provision for credit losses		16,121			15,433			14,285
NONINTEREST INCOME
Service charges on deposit accounts		2,512			2,417			2,297
Trust and investment fees		2,436			2,116			1,937
Card fees		1,458			1,230			1,079
Other fees		1,929			1,779			1,560
Mortgage banking		2,422			1,860			2,512
Operating leases		812			836			937
Insurance		1,215			1,193			1,071
Net gains (losses) on debt securities available for sale		(120	)		(15	)		4
Net gains from equity investments		511			394			55
Other		1,270			1,099			930
Total noninterest income		14,445			12,909			12,382
NONINTEREST EXPENSE
Salaries		6,215			5,393			4,832
Incentive compensation		2,366			1,807			2,054
Employee benefits		1,874			1,724			1,560
Equipment		1,267			1,236			1,246
Net occupancy		1,412			1,208			1,177
Operating leases		635			633			702
Other		5,249			5,572			5,619
Total noninterest expense		19,018			17,573			17,190
INCOME BEFORE INCOME TAX EXPENSE		11,548			10,769			9,477
Income tax expense		3,877			3,755			3,275
NET INCOME	$	7,671		$	7,014		$	6,202
EARNINGS PER COMMON SHARE	$	4.55		$	4.15		$	3.69
DILUTED EARNINGS PER COMMON SHARE	$	4.50		$	4.09		$	3.65
DIVIDENDS DECLARED PER COMMON SHARE	$	2.00		$	1.86		$	1.50
Average common shares outstanding		1,686.3			1,692.2			1,681.1
Diluted average common shares outstanding		1,705.5			1,713.4			1,697.5

The accompanying notes are an integral part of these statements.

60

Wells Fargo & Company and Subsidiaries

Consolidated Balance Sheet

(in millions, except shares)	December 31					,
	2005			2004
ASSETS
Cash and due from banks	$	15,397		$	12,903
Federal funds sold, securities purchased under resale agreements and other short-term investments		5,306			5,020
Trading assets		10,905			9,000
Securities available for sale		41,834			33,717
Mortgages held for sale		40,534			29,723
Loans held for sale		612			8,739
Loans		310,837			287,586
Allowance for loan losses		(3,871	)		(3,762	)
Net loans		306,966			283,824
Mortgage servicing rights, net		12,511			7,901
Premises and equipment, net		4,417			3,850
Goodwill		10,787			10,681
Other assets		32,472			22,491
Total assets	$	481,741		$	427,849
LIABILITIES
Noninterest-bearing deposits	$	87,712		$	81,082
Interest-bearing deposits		226,738			193,776
Total deposits		314,450			274,858
Short-term borrowings		23,892			21,962
Accrued expenses and other liabilities		23,071			19,583
Long-term debt		79,668			73,580
Total liabilities		441,081			389,983
STOCKHOLDERS’ EQUITY
Preferred stock		325			270
Common stock — $12/3 par value, authorized 6,000,000,000 shares; issued 1,736,381,025 shares		2,894			2,894
Additional paid-in capital		9,934			9,806
Retained earnings		30,580			26,482
Cumulative other comprehensive income		665			950
Treasury stock — 58,797,993 shares and 41,789,388 shares		(3,390	)		(2,247	)
Unearned ESOP shares		(348	)		(289	)
Total stockholders’ equity		40,660			37,866
Total liabilities and stockholders’ equity	$	481,741		$	427,849

The accompanying notes are an integral part of these statements.

61

Wells Fargo & Company and Subsidiaries

Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income

(in millions, except shares)	Number			Preferred			Common		Additional			Retained			Cumulative			Treasury			Unearned			Total
	of common			stock			stock		paid-in			earnings			other			stock			ESOP			stock-
	shares								capital						comprehensive						shares			holders'
															income									equity
BALANCE DECEMBER 31, 2002		1,685,906,507		$	251		$	2,894	$	9,498		$	19,355		$	976		$	(2,465	)	$	(190	)	$	30,319
Comprehensive income
Net income — 2003													6,202												6,202
Other comprehensive income, net of tax:
Translation adjustments																26									26
Net unrealized losses on securities available for sale and other retained interests																(117	)								(117	)
Net unrealized gains on derivatives and hedging activities																53									53
Total comprehensive income																									6,164
Common stock issued		26,063,731								63			(190	)					1,221						1,094
Common stock issued for acquisitions		12,399,597								66									585						651
Common stock repurchased		(30,779,500	)																(1,482	)					(1,482	)
Preferred stock (260,200) issued to ESOP					260					19												(279	)		—
Preferred stock released to ESOP										(16	)											240			224
Preferred stock (223,660) converted to common shares		4,519,039			(224	)				13									211						—
Preferred stock (1,460,000) redeemed					(73	)																			(73	)
Preferred stock dividends													(3	)											(3	)
Common stock dividends													(2,527	)											(2,527	)
Change in Rabbi trust assets and similar arrangements (classified as treasury stock)																			97						97
Other, net													5												5
Net change		12,202,867			(37	)		—		145			3,487			(38	)		632			(39	)		4,150
BALANCE DECEMBER 31, 2003		1,698,109,374			214			2,894		9,643			22,842			938			(1,833	)		(229	)		34,469
Comprehensive income
Net income — 2004													7,014												7,014
Other comprehensive income, net of tax:
Translation adjustments																12									12
Net unrealized losses on securities available for sale and other retained interests																(22	)								(22	)
Net unrealized gains on derivatives and hedging activities																22									22
Total comprehensive income																									7,026
Common stock issued		29,969,653								129			(206	)					1,523						1,446
Common stock issued for acquisitions		153,482								1									8						9
Common stock repurchased		(38,172,556	)																(2,188	)					(2,188	)
Preferred stock (321,000) issued to ESOP					321					23												(344	)		—
Preferred stock released to ESOP										(19	)											284			265
Preferred stock (265,537) converted to common shares		4,531,684			(265	)				29									236						—
Common stock dividends													(3,150	)											(3,150	)
Change in Rabbi trust assets and similar arrangements (classified as treasury stock)																			7						7
Other, net													(18	)											(18	)
Net change		(3,517,737	)		56			—		163			3,640			12			(414	)		(60	)		3,397
BALANCE DECEMBER 31, 2004		1,694,591,637			270			2,894		9,806			26,482			950			(2,247	)		(289	)		37,866
Comprehensive income
Net income — 2005													7,671												7,671
Other comprehensive income, net of tax:
Translation adjustments																5									5
Net unrealized losses on securities available for sale and other retained interests																(298	)								(298	)
Net unrealized gains on derivatives and hedging activities																8									8
Total comprehensive income																									7,386
Common stock issued		28,764,493								91			(198	)					1,617						1,510
Common stock issued for acquisitions		1,954,502								12									110						122
Common stock repurchased		(52,798,864	)																(3,159	)					(3,159	)
Preferred stock (363,000) issued to ESOP					362					25												(387	)		--
Preferred stock released to ESOP										(21	)											328			307
Preferred stock (307,100) converted to common shares		5,071,264			(307	)				21									286						--
Common stock dividends													(3,375	)											(3,375	)
Other, net																			3						3
Net change		(17,008,605	)		55			—		128			4,098			(285	)		(1,143	)		(59	)		2,794
BALANCE DECEMBER 31, 2005		1,677,583,032		$	325		$	2,894	$	9,934		$	30,580		$	665		$	(3,390	)	$	(348	)	$	40,660

The accompanying notes are an integral part of these statements.

62

Wells Fargo & Company and Subsidiaries

Consolidated Statement of Cash Flows

(in millions)	Year ended December 31								,
	2005			2004			2003
Cash flows from operating activities:
Net income	$	7,671		$	7,014		$	6,202
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		2,383			1,717			1,722
Provision (reversal of provision) for mortgage servicing rights in excess of fair value		(378	)		(208	)		1,092
Depreciation and amortization		4,161			3,449			4,305
Net gains on securities available for sale		(40	)		(60	)		(62	)
Net gains on mortgage loan origination/sales activities		(1,085	)		(539	)		(3,019	)
Other net losses (gains)		(75	)		9			(11	)
Preferred shares released to ESOP		307			265			224
Net decrease (increase) in trading assets		(1,905	)		(81	)		1,248
Net increase in deferred income taxes		813			432			1,698
Net increase in accrued interest receivable		(796	)		(196	)		(148	)
Net increase (decrease) in accrued interest payable		311			47			(63	)
Originations of mortgages held for sale		(230,897	)		(221,978	)		(382,335	)
Proceeds from sales of mortgages originated for sale		214,740			217,272			404,207
Principal collected on mortgages originated for sale		1,426			1,409			3,136
Net decrease (increase) in loans originated for sale		683			(1,331	)		(832	)
Other assets, net		(10,237	)		(2,468	)		(5,099	)
Other accrued expenses and liabilities, net		3,585			1,732			(1,070	)
Net cash provided (used) by operating activities		(9,333	)		6,485			31,195
Cash flows from investing activities:
Securities available for sale:
Sales proceeds		19,059			6,322			7,357
Prepayments and maturities		6,972			8,823			13,152
Purchases		(28,634	)		(16,583	)		(25,131	)
Net cash acquired from (paid for) acquisitions		66			(331	)		(822	)
Increase in banking subsidiaries’ loan originations, net of collections		(42,309	)		(33,800	)		(36,235	)
Proceeds from sales (including participations) of loans by banking subsidiaries		42,239			14,540			1,590
Purchases (including participations) of loans by banking subsidiaries		(8,853	)		(5,877	)		(15,087	)
Principal collected on nonbank entities’ loans		22,822			17,996			17,638
Loans originated by nonbank entities		(33,675	)		(27,751	)		(21,792	)
Purchases of loans by nonbank entities		—			—			(3,682	)
Proceeds from sales of foreclosed assets		444			419			264
Net increase in federal funds sold, securities purchased under resale agreements and other short-term investments		(281	)		(1,287	)		(208	)
Net increase in mortgage servicing rights		(4,595	)		(1,389	)		(3,875	)
Other, net		(3,324	)		(516	)		3,852
Net cash used by investing activities		(30,069	)		(39,434	)		(62,979	)
Cash flows from financing activities:
Net increase in deposits		38,961			27,327			28,643
Net increase (decrease) in short-term borrowings		1,878			(2,697	)		(8,901	)
Proceeds from issuance of long-term debt		26,473			29,394			29,490
Long-term debt repayment		(18,576	)		(19,639	)		(17,931	)
Proceeds from issuance of guaranteed preferred beneficial interests in Company’s subordinated debentures		—			—			700
Proceeds from issuance of common stock		1,367			1,271			944
Preferred stock redeemed		—			—			(73	)
Common stock repurchased		(3,159	)		(2,188	)		(1,482	)
Cash dividends paid on preferred and common stock		(3,375	)		(3,150	)		(2,530	)
Other, net		(1,673	)		(13	)		651
Net cash provided by financing activities		41,896			30,305			29,511
Net change in cash and due from banks		2,494			(2,644	)		(2,273	)
Cash and due from banks at beginning of year		12,903			15,547			17,820
Cash and due from banks at end of year	$	15,397		$	12,903		$	15,547
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	7,769		$	3,864		$	3,348
Income taxes		3,584			2,326			2,713
Noncash investing and financing activities:
Net transfers from loans to mortgages held for sale		41,270			11,225			368
Net transfers from loans held for sale to loans		7,444			—			—
Transfers from loans to foreclosed assets		567			603			411
Transfers from mortgages held for sale to securities available for sale		5,490			—			—

The accompanying notes are an integral part of these statements.

63

Notes to Financial Statements

Note 1: Summary of Significant Accounting Policies

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

     Our accounting and reporting policies conform with U.S. generally accepted accounting principles (GAAP) and practices in the financial services industry. To prepare the financial statements in conformity with GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and income and expenses during the reporting period. Management has made significant estimates in several areas, including the allowance for credit losses (Note 6), valuing mortgage servicing rights (Notes 20 and 21) and pension accounting (Note 15). Actual results could differ from those estimates.

     The following is a description of our significant accounting policies.

Consolidation

Our consolidated financial statements include the accounts of the Parent and our majority-owned subsidiaries and variable interest entities (VIEs) (defined below) in which we are the primary beneficiary. Significant intercompany accounts and transactions are eliminated in consolidation. If we own at least 20% of an entity, we generally account for the investment using the equity method. If we own less than 20% of an entity, we generally carry the investment at cost, except marketable equity securities, which we carry at fair value with changes in fair value included in other comprehensive income. Assets accounted for under the equity or cost method are included in other assets.

     We are a variable interest holder in certain special purpose entities in which we do not have a controlling financial interest or do not have enough equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Our variable interest arises from contractual, ownership or other monetary interests in the entity, which change with fluctuations in the entity’s net asset value. We consolidate a VIE if we are the primary beneficiary because we will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns, or both.

Trading Assets

Trading assets are primarily securities, including corporate debt, U.S. government agency obligations and other securities that we acquire for short-term appreciation or other trading purposes, and the fair value of derivatives held for customer accommodation purposes or proprietary trading. Trading assets are carried at fair value, with realized and unrealized gains and losses recorded in noninterest income.

Securities

SECURITIES AVAILABLE FOR SALE Debt securities that we might not hold until maturity and marketable equity securities are classified as securities available for sale and reported at estimated fair value. Unrealized gains and losses, after applicable taxes, are reported in cumulative other comprehensive income. We use current quotations, where available, to estimate the fair value of these securities. Where current quotations are not available, we estimate fair value based on the present value of future cash flows, adjusted for the credit rating of the securities, prepayment assumptions and other factors.

     We reduce the asset value when we consider the declines in the value of debt securities and marketable equity securities to be other-than-temporary and record the estimated loss in noninterest income. The initial indicator of impairment for both debt and marketable equity securities is a sustained decline in market price below the amount recorded for that investment. We consider the length of time and the extent to which market value has been less than cost, any recent events specific to the issuer and economic conditions of its industry and our investment horizon in relationship to an anticipated near-term recovery in the stock or bond price, if any.

     For marketable equity securities, we also consider the issuer’s financial condition, capital strength, and near-term prospects.

     For debt securities we also consider:

• the cause of the price decline – general level of interest rates and industry and issuer-specific factors;

• the issuer’s financial condition, near term prospects and current ability to make future payments in a timely manner;

• the issuer’s ability to service debt; and

• any change in agencies’ ratings at evaluation date from acquisition date and any likely imminent action.

64

     We manage these investments within capital risk limits approved by management and the Board of Directors and monitored by the Corporate Asset/Liability Management Committee. We recognize realized gains and losses on the sale of these securities in noninterest income using the specific identification method.

     Unamortized premiums and discounts are recognized in interest income over the contractual life of the security using the interest method. As principal repayments are received on securities (i.e., primarily mortgage-backed securities) a pro-rata portion of the unamortized premium or discount is recognized in interest income.

NONMARKETABLE EQUITY SECURITIES Nonmarketable equity securities include venture capital equity securities that are not publicly traded and securities acquired for various purposes, such as to meet regulatory requirements (for example, Federal Reserve Bank and Federal Home Loan Bank stock). We review these assets at least quarterly for possible other-than-temporary impairment. Our review typically includes an analysis of the facts and circumstances of each investment, the expectations for the investment’s cash flows and capital needs, the viability of its business model and our exit strategy. These securities are accounted for under the cost or equity method and are included in other assets. We reduce the asset value when we consider declines in value to be other-than-temporary. We recognize the estimated loss as a loss from equity investments in noninterest income.

Mortgages Held for Sale

Mortgages held for sale include residential mortgages that were originated in accordance with secondary market pricing and underwriting standards and certain mortgages originated initially for investment and not underwritten to secondary market standards, and are stated at the lower of cost or market value. Gains and losses on loan sales (sales proceeds minus carrying value) are recorded in noninterest income. Direct loan origination costs and fees are deferred at origination of the loan. These deferred costs and fees are recognized in mortgage banking noninterest income upon sale of the loan.

Loans Held for Sale

Loans held for sale are carried at the lower of cost or market value. Gains and losses on loan sales (sales proceeds minus carrying value) are recorded in noninterest income. Direct loan origination costs and fees are deferred at origination of the loan. These deferred costs and fees are recognized in noninterest income upon the sale of the loan.

Loans

Loans are reported at their outstanding principal balances net of any unearned income, charge-offs, unamortized deferred fees and costs on originated loans and premiums or discounts on purchased loans, except for certain purchased loans, which are recorded at fair value on their purchase date. Unearned income, deferred fees and costs, and discounts and premiums are amortized to income over the contractual life of the loan using the interest method.

     Lease financing assets include aggregate lease rentals, net of related unearned income, which includes deferred investment tax credits, and related nonrecourse debt. Leasing income is recognized as a constant percentage of outstanding lease financing balances over the lease terms.

     Loan commitment fees are generally deferred and amortized into noninterest income on a straight-line basis over the commitment period.

     From time to time, we pledge loans, primarily 1-4 family mortgage loans, to secure borrowings from the Federal Home Loan Bank.

NONACCRUAL LOANS We generally place loans on nonaccrual status when:

• the full and timely collection of interest or principal becomes uncertain;

• they are 90 days (120 days with respect to real estate 1-4 family first and junior lien mortgages) past due for interest or principal (unless both well-secured and in the process of collection); or

• part of the principal balance has been charged off.

     Generally, consumer loans not secured by real estate are placed on nonaccrual status only when part of the principal has been charged off. These loans are entirely charged off when deemed uncollectible or when they reach a defined number of days past due based on loan product, industry practice, country, terms and other factors.

     When we place a loan on nonaccrual status, we reverse the accrued and unpaid interest receivable against interest income and account for the loan on the cash or cost recovery method, until it qualifies for return to accrual status. Generally, we return a loan to accrual status when (a) all delinquent interest and principal becomes current under the terms of the loan agreement or (b) the loan is both well-secured and in the process of collection and collectibility is no longer doubtful, after a period of demonstrated performance.

IMPAIRED LOANS We assess, account for and disclose as impaired certain nonaccrual commercial and commercial real estate loans that are over $3 million. We consider a loan to be impaired when, based on current information and events, we will probably not be able to collect all amounts due according to the loan contract, including scheduled interest payments.

     When we identify a loan as impaired, we measure the impairment based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral. In these cases we use an observable market price or the current fair value of the collateral, less selling costs, instead of discounted cash flows.

     If we determine that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), we recognize impairment through an allocated reserve or a charge-off to the allowance.

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ALLOWANCE FOR CREDIT LOSSES The allowance for credit losses, which consists of the allowance for loan losses and the reserve for unfunded credit commitments, is management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. Our determination of the allowance, and the resulting provision, is based on judgments and assumptions, including:

• general economic conditions;

• loan portfolio composition;

• loan loss experience;

• management’s evaluation of credit risk relating to pools of loans and individual borrowers;

• sensitivity analysis and expected loss models; and

• observations from our internal auditors, internal loan review staff or banking regulators.

Transfers and Servicing of Financial Assets

We account for a transfer of financial assets as a sale when we surrender control of the transferred assets. Servicing rights and other retained interests in the sold assets are recorded by allocating the previously recorded investment between the assets sold and the interest retained based on their relative fair values at the date of transfer. We determine the fair values of servicing rights and other retained interests at the date of transfer using the present value of estimated future cash flows, using assumptions that market participants use in their estimates of values. We use quoted market prices when available to determine the value of other retained interests.

     We recognize the rights to service mortgage loans for others, or mortgage servicing rights (MSRs), as assets whether we purchase the servicing rights or sell or securitize loans we originate and retain servicing rights. MSRs are amortized in proportion to, and over the period of, estimated net servicing income. The amortization of MSRs is analyzed monthly and is adjusted to reflect changes in prepayment speeds, as well as other factors.

     To determine the fair value of MSRs, we use a valuation model that calculates the present value of estimated future net servicing income. We use assumptions in the valuation model that market participants use in estimating future net servicing income, including estimates of prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, ancillary income and late fees.

     At the end of each quarter, we evaluate MSRs for possible impairment based on the difference between the carrying amount and current fair value, in accordance with Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (FAS 140). To evaluate and measure impairment we stratify the portfolio based on certain risk characteristics, including loan type and note rate. If temporary impairment

exists, we establish a valuation allowance through a charge to income for those risk stratifications with an excess of amortized cost over the current fair value. If we later determine that all or a portion of the temporary impairment no longer exists for a particular risk stratification, we will reduce the valuation allowance through an increase to income.

     Under our policy, we evaluate other-than-temporary impairment of MSRs by considering both historical and projected trends in interest rates, pay off activity and whether the impairment could be recovered through interest rate increases. We recognize a direct write-down when we determine that the recoverability of a recorded valuation allowance is remote. A direct write-down permanently reduces the carrying value of the MSRs, while a valuation allowance (temporary impairment) can be reversed.

Premises and Equipment

Premises and equipment are carried at cost less accumulated depreciation and amortization. Capital leases are included in premises and equipment at the capitalized amount less accumulated amortization.

     We primarily use the straight-line method of depreciation and amortization. Estimated useful lives range up to 40 years for buildings, up to 10 years for furniture and equipment, and the shorter of the estimated useful life or lease term for leasehold improvements. We amortize capitalized leased assets on a straight-line basis over the lives of the respective leases.

Goodwill and Identifiable Intangible Assets

Goodwill is recorded when the purchase price is higher than the fair value of net assets acquired in business combinations under the purchase method of accounting.

     We assess goodwill for impairment annually, and more frequently in certain circumstances. We assess goodwill for impairment on a reporting unit level by applying a fair-value-based test using discounted estimated future net cash flows. Impairment exists when the carrying amount of the goodwill exceeds its implied fair value. We recognize impairment losses as a charge to noninterest expense (unless related to discontinued operations) and an adjustment to the carrying value of the goodwill asset. Subsequent reversals of goodwill impairment are prohibited.

     We amortize core deposit intangibles on an accelerated basis based on useful lives of 10 to 15 years. We review core deposit intangibles for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Impairment is indicated if the sum of undiscounted estimated future net cash flows is less than the carrying value of the asset. Impairment is permanently recognized by writing down the asset to the extent that the carrying value exceeds the estimated fair value.

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Operating Lease Assets

Operating lease rental income for leased assets, generally automobiles, is recognized in other income on a straight-line basis over the lease term. Related depreciation expense is recorded on a straight-line basis over the life of the lease, taking into account the estimated residual value of the leased asset. On a periodic basis, leased assets are reviewed for impairment. Impairment loss is recognized if the carrying amount of leased assets exceeds fair value and is not recoverable. The carrying amount of leased assets is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the lease payments and the estimated residual value upon the eventual disposition of the equipment. Auto lease receivables are written off when 120 days past due.

Pension Accounting

We account for our defined benefit pension plans using an actuarial model required by FAS 87, Employers’ Accounting for Pensions. This model allocates pension costs over the service period of employees in the plan. The underlying principle is that employees render service ratably over this period and, therefore, the income statement effects of pensions should follow a similar pattern.

     One of the principal components of the net periodic pension calculation is the expected long-term rate of return on plan assets. The use of an expected long-term rate of return on plan assets may cause us to recognize pension income returns that are greater or less than the actual returns of plan assets in any given year.

     The expected long-term rate of return is designed to approximate the actual long-term rate of return over time and is not expected to change significantly. Therefore, the pattern of income/expense recognition should closely match the stable pattern of services provided by our employees over the life of our pension obligation. To determine if the expected rate of return is reasonable, we consider such factors as (1) the actual return earned on plan assets, (2) historical rates of return on the various asset classes in the plan portfolio, (3) projections of returns on various asset classes, and (4) current/prospective capital market conditions and economic forecasts. Differences in each year, if any, between expected and actual returns are included in our unrecognized net actuarial gain or loss amount. We generally amortize any unrecognized net actuarial gain or loss in excess of a 5% corridor (as defined in FAS 87) in net periodic pension calculations over the next five years.

     We use a discount rate to determine the present value of our future benefit obligations. The discount rate reflects the rates available at the measurement date on long-term high-quality fixed-income debt instruments and is reset annually on the measurement date (November 30).

Income Taxes

We file a consolidated federal income tax return and, in certain states, combined state tax returns.

     We determine deferred income tax assets and liabilities using the balance sheet method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and recognizes enacted changes in tax rates and laws. Deferred tax assets are recognized subject to management judgment that realization is more likely than not. Foreign taxes paid are generally applied as credits to reduce federal income taxes payable.

Stock-Based Compensation

We have several stock-based employee compensation plans, which are described more fully in Note 14. As permitted by FAS 123, Accounting for Stock-Based Compensation, we have elected to apply the intrinsic value method of Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees (APB 25), in accounting for stock-based employee compensation plans through December 31, 2005. Pro forma net income and earnings per common share information is provided below, as if we accounted for employee stock option plans under the fair value method of FAS 123.

     On December 16, 2004, the FASB issued FAS 123 (revised 2004), Share-Based Payment (FAS 123R), which replaced FAS 123 and superceded APB 25. We adopted FAS 123R on January 1, 2006, which requires us to measure the cost of employee services received in exchange for an award of equity instruments, such as stock options or restricted stock, based on the fair value of the award on the grant date. This cost must be recognized in the income statement over the vesting period of the award.

(in millions, except per	Year ended December 31								,
share amounts)	2005			2004			2003
Net income, as reported	$	7,671		$	7,014		$	6,202
Add: Stock-based employee compensation expense included in reported net income, net of tax		1			2			3
Less: Total stock-based employee compensation expense under the fair value method for all awards, net of tax		(188	)		(275	)		(198	)
Net income, pro forma	$	7,484		$	6,741		$	6,007
Earnings per common share
As reported	$	4.55		$	4.15		$	3.69
Pro forma		4.44			3.99			3.57
Diluted earnings per common share
As reported	$	4.50		$	4.09		$	3.65
Pro forma		4.38			3.93			3.53

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     Stock options granted in each of our February 2005 and February 2004 annual grants, under our Long-Term Incentive Compensation Plan (the Plan), fully vested upon grant, resulting in full recognition of stock-based compensation expense for both grants in the year of the grant under the fair value method in the table on the previous page. Stock options granted in our 2003, 2002 and 2001 annual grants under the Plan vest over a three-year period, and expense reflected in the table for these grants is recognized over the vesting period.

Earnings Per Common Share

We present earnings per common share and diluted earnings per common share. We compute earnings per common share by dividing net income (after deducting dividends on preferred stock) by the average number of common shares outstanding during the year. We compute diluted earnings per common share by dividing net income (after deducting dividends on preferred stock) by the average number of common shares outstanding during the year, plus the effect of common stock equivalents (for example, stock options, restricted share rights and convertible debentures) that are dilutive.

Derivatives and Hedging Activities

We recognize all derivatives on the balance sheet at fair value. On the date we enter into a derivative contract, we designate the derivative as (1) a hedge of the fair value of a recognized asset or liability (“fair value” hedge), (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge) or (3) held for trading, customer accommodation or for risk management not qualifying for hedge accounting (“free-standing derivative”). For a fair value hedge, we record changes in the fair value of the derivative and, to the extent that it is effective, changes in the fair value of the hedged asset or liability attributable to the hedged risk, in current period earnings in the same financial statement category as the hedged item. For a cash flow hedge, we record changes in the fair value of the derivative to the extent that it is effective in other comprehensive income. We subsequently reclassify these changes in fair value to net income in the same period(s) that the hedged transaction affects net income in the same financial statement category as the hedged item. For free-standing derivatives, we report changes in the fair values in current period noninterest income.

     We formally document at inception the relationship between hedging instruments and hedged items, our risk management objective, strategy and our evaluation of effectiveness for our hedge transactions. This includes linking all derivatives designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific forecasted transactions. Periodically, as required, we

also formally assess whether the derivative we designated in each hedging relationship is expected to be and has been highly effective in offsetting changes in fair values or cash flows of the hedged item using either the dollar offset or the regression analysis method. If we determine that a derivative is not highly effective as a hedge, we discontinue hedge accounting.

     We discontinue hedge accounting prospectively when (1) a derivative is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item, (2) a derivative expires or is sold, terminated, or exercised, (3) a derivative is dedesignated as a hedge, because it is unlikely that a forecasted transaction will occur, or (4) we determine that designation of a derivative as a hedge is no longer appropriate.

     When we discontinue hedge accounting because a derivative no longer qualifies as an effective fair value hedge, we continue to carry the derivative on the balance sheet at its fair value with changes in fair value included in earnings, and no longer adjust the previously hedged asset or liability for changes in fair value. Previous adjustments to the hedged item are accounted for in the same manner as other components of the carrying amount of the asset or liability.

     When we discontinue hedge accounting because it is probable that a forecasted transaction will not occur, we continue to carry the derivative on the balance sheet at its fair value with changes in fair value included in earnings, and immediately recognize gains and losses that were accumulated in other comprehensive income in earnings.

     When we discontinue hedge accounting because the hedging instrument is sold, terminated, or no longer designated (dedesignated), the amount reported in other comprehensive income up to the date of sale, termination or dedesignation continues to be reported in other comprehensive income until the forecasted transaction affects earnings.

     In all other situations in which we discontinue hedge accounting, the derivative will be carried at its fair value on the balance sheet, with changes in its fair value recognized in current period earnings.

     We occasionally purchase or originate financial instruments that contain an embedded derivative. At inception of the financial instrument, we assess (1) if the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the financial instrument (host contract), (2) if the financial instrument that embodies both the embedded derivative and the host contract is measured at fair value with changes in fair value reported in earnings, or (3) if a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative. If the embedded derivative does not meet any of these conditions, we separate it from the host contract and carry it at fair value with changes recorded in current period earnings.

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Note 2: Business Combinations

We regularly explore opportunities to acquire financial services companies and businesses. Generally, we do not make a public announcement about an acquisition opportunity until a definitive agreement has been signed.

     Effective December 31, 2004, we completed the acquisition of $29 billion in assets under management, consisting of $24 billion in mutual fund assets and $5 billion in institutional investment accounts, from Strong Financial Corporation. Other business combinations completed in 2005, 2004 and 2003 are presented below.

     At December 31, 2005, we had three pending business combinations with total assets of approximately $278 million. We expect to complete these transactions by second quarter 2006.

     For information on contingent consideration related to acquisitions, which is considered to be a guarantee, see Note 24.

(in millions)		Date	Assets
2005
Certain branches of PlainsCapital Bank, Amarillo, Texas	July 22		$	190
First Community Capital Corporation, Houston, Texas	July 31			644
Other (1)	Various			40
			$	874
2004
Other (2)	Various		$	74
2003
Certain assets of Telmark, LLC, Syracuse, New York	February 28		$	660
Pacific Northwest Bancorp, Seattle, Washington	October 31			3,245
Two Rivers Corporation, Grand Junction, Colorado	October 31			74
Other (3)	Various			136
			$	4,115

(1)	Consists of 8 acquisitions of insurance brokerage and lockbox processing businesses.
(2)	Consists of 13 acquisitions of insurance brokerage and payroll services businesses.
(3)	Consists of 14 acquisitions of asset management, commercial real estate brokerage, bankruptcy and insurance brokerage businesses.

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Note 3: Cash, Loan and Dividend Restrictions

Federal Reserve Board regulations require that each of our subsidiary banks maintain reserve balances on deposits with the Federal Reserve Banks. The average required reserve balance was $1.4 billion in 2005 and $1.2 billion in 2004.

     Federal law restricts the amount and the terms of both credit and non-credit transactions between a bank and its nonbank affiliates. They may not exceed 10% of the bank’s capital and surplus (which for this purpose represents Tier 1 and Tier 2 capital, as calculated under the risk-based capital guidelines, plus the balance of the allowance for credit losses excluded from Tier 2 capital) with any single nonbank affiliate and 20% of the bank’s capital and surplus with all its nonbank affiliates. Transactions that are extensions of credit may require collateral to be held to provide added security to the bank. (For further discussion of risk-based capital, see Note 25.)

     Dividends paid by our subsidiary banks are subject to various federal and state regulatory limitations. Dividends that may be paid by a national bank without the express

approval of the Office of the Comptroller of the Currency (OCC) are limited to that bank’s retained net profits for the preceding two calendar years plus retained net profits up to the date of any dividend declaration in the current calendar year. Retained net profits, as defined by the OCC, consist of net income less dividends declared during the period. We also have state-chartered subsidiary banks that are subject to state regulations that limit dividends. Under those provisions, our national and state-chartered subsidiary banks could have declared additional dividends of $1,185 million at December 31, 2005, without obtaining prior regulatory approval. Our nonbank subsidiaries are also limited by certain federal and state statutory provisions and regulations covering the amount of dividends that may be paid in any given year. Based on retained earnings at year-end 2005, our nonbank subsidiaries could have declared additional dividends of $2,411 million at December 31, 2005, without obtaining prior approval.

Note 4: Federal Funds Sold, Securities Purchased Under Resale Agreements and Other Short-Term Investments

The table to the right provides the detail of federal funds sold, securities purchased under resale agreements and other short-term investments.

(in millions)	December 31				,
	2005		2004
Federal funds sold and securities purchased under resale agreements	$	3,789	$	3,009
Interest-earning deposits		847		1,397
Other short-term investments		670		614
Total	$	5,306	$	5,020

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Note 5: Securities Available for Sale

The following table provides the cost and fair value for the major categories of securities available for sale carried at fair

value. There were no securities classified as held to maturity as of the periods presented.

(in millions)	December 31																		,
	2005									2004
	Cost		Unrealized		Unrealized			Fair		Cost		Unrealized		Unrealized			Fair
			gross		gross			value				gross		gross			value
			gains		losses							gains		losses
Securities of U.S. Treasury and federal agencies	$	845	$	4	$	(10	)	$	839	$	1,128	$	16	$	(4	)	$	1,140
Securities of U.S. states and political subdivisions		3,048		149		(6	)		3,191		3,429		196		(4	)		3,621
Mortgage-backed securities:
Federal agencies		25,304		336		(24	)		25,616		20,198		750		(4	)		20,944
Private collateralized mortgage obligations (1)		6,628		128		(6	)		6,750		4,082		121		(4	)		4,199
Total mortgage-backed securities		31,932		464		(30	)		32,366		24,280		871		(8	)		25,143
Other		4,518		75		(55	)		4,538		2,974		157		(14	)		3,117
Total debt securities		40,343		692		(101	)		40,934		31,811		1,240		(30	)		33,021
Marketable equity securities		558		349		(7	)		900		507		198		(9	)		696
Total (2)	$	40,901	$	1,041	$	(108	)	$	41,834	$	32,318	$	1,438	$	(39	)	$	33,717

(1)	Substantially all of the private collateralized mortgage obligations are AAA-rated bonds collateralized by 1-4 family residential first mortgages.
(2)	At December 31, 2005, we held no securities of any single issuer (excluding the U.S. Treasury and federal agencies) with a book value that exceeded 10% of stockholders’ equity.

     The following table shows the unrealized gross losses and fair value of securities in the securities available for sale portfolio at December 31, 2005 and 2004, by length of time that individual securities in each category had been in a continuous loss position.

     The decline in fair value for the debt securities that had been in a continuous loss position for 12 months or more at December 31, 2005, was primarily due to changes in market

interest rates and not due to the credit quality of the securities. We believe that the principal and interest on these securities are fully collectible and we have the intent and ability to retain our investment for a period of time to allow for any anticipated recovery in market value. We have reviewed these securities in accordance with our policy and do not consider them to be other-than-temporarily impaired.

(in millions)	Less than 12 months					12 months or more					Total
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
	gross			value		gross			value		gross			value
	losses					losses					losses
December 31, 2005
Securities of U.S. Treasury and federal agencies	$	(6	)	$	341	$	(4	)	$	142	$	(10	)	$	483
Securities of U.S. states and political subdivisions		(3	)		204		(3	)		57		(6	)		261
Mortgage-backed securities:
Federal agencies		(22	)		2,213		(2	)		89		(24	)		2,302
Private collateralized mortgage obligations		(6	)		1,494		—			—		(6	)		1,494
Total mortgage-backed securities		(28	)		3,707		(2	)		89		(30	)		3,796
Other		(38	)		890		(17	)		338		(55	)		1,228
Total debt securities		(75	)		5,142		(26	)		626		(101	)		5,768
Marketable equity securities		(7	)		185		—			—		(7	)		185
Total	$	(82	)	$	5,327	$	(26	)	$	626	$	(108	)	$	5,953
December 31, 2004
Securities of U.S. Treasury and federal agencies	$	(4	)	$	304	$	—		$	—	$	(4	)	$	304
Securities of U.S. states and political subdivisions		(1	)		65		(3	)		62		(4	)		127
Mortgage-backed securities:
Federal agencies		(4	)		450		—			—		(4	)		450
Private collateralized mortgage obligations		(4	)		981		—			—		(4	)		981
Total mortgage-backed securities		(8	)		1,431		—			—		(8	)		1,431
Other		(11	)		584		(3	)		56		(14	)		640
Total debt securities		(24	)		2,384		(6	)		118		(30	)		2,502
Marketable equity securities		(9	)		44		—			—		(9	)		44
Total	$	(33	)	$	2,428	$	(6	)	$	118	$	(39	)	$	2,546

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     Securities pledged where the secured party has the right to sell or repledge totaled $5.3 billion at December 31, 2005, and $2.3 billion at December 31, 2004. Securities pledged where the secured party does not have the right to sell or repledge totaled $24.3 billion at December 31, 2005, and $19.4 billion at December 31, 2004, primarily to secure trust and public deposits and for other purposes as required or permitted by law. We have accepted collateral in the form of securities that we have the right to sell or repledge of $3.4 billion at December 31, 2005, and $2.5 billion at December 31, 2004, of which we sold or repledged $2.3 billion and $1.7 billion, respectively.

     The following table shows the realized net gains on the sales of securities from the securities available for sale portfolio, including marketable equity securities.

(in millions)	Year ended December 31								,
	2005			2004			2003
Realized gross gains	$	355		$	168		$	178
Realized gross losses (1)		(315	)		(108	)		(116	)
Realized net gains	$	40		$	60		$	62

(1) Includes other-than-temporary impairment of $45 million, $9 million and $50 million for 2005, 2004 and 2003, respectively.

     The following table shows the remaining contractual principal maturities and contractual yields of debt securities available for sale. The remaining contractual principal maturities for mortgage-backed securities were allocated assuming no prepayments. Remaining expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations before the underlying mortgages mature.

(in millions)	December 31, 2005
	Total		Weighted-			Remaining contractual principal maturity
	amount		average								After one year					After five years
			yield			Within one year					through five years					through ten years					After ten years
						Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Securities of U.S. Treasury and federal agencies	$	839		4.38	%	$	50		5.11	%	$	677		4.21	%	$	93		4.69	%	$	19		6.88	%
Securities of U.S. states and political subdivisions		3,191		7.57			86		6.63			281		6.06			560		7.25			2,264		7.87
Mortgage-backed securities:
Federal agencies		25,616		5.68			33		6.02			49		6.51			69		5.91			25,465		5.68
Private collateralized mortgage obligations		6,750		5.40			—		—			—		—			42		6.45			6,708		5.40
Total mortgage-backed securities		32,366		5.62			33		6.02			49		6.51			111		6.12			32,173		5.62
Other		4,538		6.11			225		5.80			2,773		5.70			953		7.13			587		6.53
Total debt securities at fair value (1)	$	40,934		5.80	%	$	394		5.91	%	$	3,780		5.47	%	$	1,717		6.97	%	$	35,043		5.78	%

(1) The weighted-average yield is computed using the contractual life amortization method.

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Note 6: Loans and Allowance for Credit Losses

A summary of the major categories of loans outstanding is shown in the following table. Outstanding loan balances reflect unearned income, net deferred loan fees, and unamortized discount and premium totaling $3,918 million and $3,766 million at December 31, 2005 and 2004, respectively.

     Loan concentrations may exist when there are amounts loaned to a multiple number of borrowers engaged in similar activities or similar types of loans extended to a diverse group of borrowers that would cause them to be similarly impacted by economic or other conditions. At December 31, 2005 and 2004, we did not have concentrations representing 10% or more of our total loan portfolio in commercial loans (by industry); commercial real estate loans (other real estate mortgage and real estate construction) (by state or property type); or other revolving credit and installment loans (by product type). Our real estate 1-4 family mortgage loans to borrowers in the state of California represented approximately

14% of total loans at December 31, 2005, compared with 18% at the end of 2004. These loans are mostly within the larger metropolitan areas in California, with no single area consisting of more than 3% of our total loans. Changes in real estate values and underlying economic conditions for these areas are monitored continuously within our credit risk management process.

     Some of our real estate 1-4 family mortgage loans, including first mortgage and home equity products, include an interest-only feature as part of the loan terms. At December 31, 2005, such loans were approximately 26% of total loans, compared with 28% at the end of 2004. Substantially all of these loans are considered to be prime or near prime. We do not offer option adjustable-rate mortgage products, nor do we offer variable-rate mortgage products with fixed payment amounts, commonly referred to within the financial services industry as negative amortizing mortgage loans.

(in millions)	December 31										,
	2005		2004		2003		2002		2001
Commercial and commercial real estate:
Commercial	$	61,552	$	54,517	$	48,729	$	47,292	$	47,547
Other real estate mortgage		28,545		29,804		27,592		25,312		24,808
Real estate construction		13,406		9,025		8,209		7,804		7,806
Lease financing		5,400		5,169		4,477		4,085		4,017
Total commercial and commercial real estate		108,903		98,515		89,007		84,493		84,178
Consumer:
Real estate 1-4 family first mortgage		77,768		87,686		83,535		44,119		29,317
Real estate 1-4 family junior lien mortgage		59,143		52,190		36,629		28,147		21,801
Credit card		12,009		10,260		8,351		7,455		6,700
Other revolving credit and installment		47,462		34,725		33,100		26,353		23,502
Total consumer		196,382		184,861		161,615		106,074		81,320
Foreign		5,552		4,210		2,451		1,911		1,598
Total loans	$	310,837	$	287,586	$	253,073	$	192,478	$	167,096

     For certain extensions of credit, we may require collateral, based on our assessment of a customer’s credit risk. We hold various types of collateral, including accounts receivable, inventory, land, buildings, equipment, automobiles, financial instruments, income-producing commercial properties and residential real estate. Collateral requirements for each customer may vary according to the specific credit underwriting, terms and structure of loans funded immediately or under a commitment to fund at a later date.

     A commitment to extend credit is a legally binding agreement to lend funds to a customer, usually at a stated interest rate and for a specified purpose. These commitments have

fixed expiration dates and generally require a fee. When we make such a commitment, we have credit risk. The liquidity requirements or credit risk will be lower than the contractual amount of commitments to extend credit because a significant portion of these commitments are expected to expire without being used. Certain commitments are subject to loan agreements with covenants regarding the financial performance of the customer that must be met before we are required to fund the commitment. We use the same credit policies in extending credit for unfunded commitments and letters of credit that we use in making loans. For information on standby letters of credit, see Note 24.

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     In addition, we manage the potential risk in credit commitments by limiting the total amount of arrangements, both by individual customer and in total, by monitoring the size and maturity structure of these portfolios and by applying the same credit standards for all of our credit activities.

     The total of our unfunded loan commitments, net of all funds lent and all standby and commercial letters of credit issued under the terms of these commitments, is summarized by loan category in the following table:

(in millions)	December 31				,
	2005		2004
Commercial and commercial real estate:
Commercial	$	71,548	$	59,603
Other real estate mortgage		2,398		2,788
Real estate construction		9,369		7,164
Total commercial and commercial real estate		83,315		69,555
Consumer:
Real estate 1-4 family first mortgage		10,229		9,009
Real estate 1-4 family junior lien mortgage		37,909		31,396
Credit card		45,270		38,200
Other revolving credit and installment		13,957		15,427
Total consumer		107,365		94,032
Foreign		675		407
Total unfunded loan commitments	$	191,355	$	163,994

     We have an established process to determine the adequacy of the allowance for credit losses that assesses the risks and losses inherent in our portfolio. This process supports an allowance consisting of two components, allocated and unallocated. For the allocated component, we combine estimates of the allowances needed for loans analyzed on a pooled basis and loans analyzed individually (including impaired loans).

     Approximately two-thirds of the allocated allowance is determined at a pooled level for consumer loans and some segments of commercial small business loans. We use forecasting models to measure inherent loss in these portfolios. We frequently validate and update these models to capture recent behavioral characteristics of the portfolios, as well as changes in our loss mitigation or marketing strategies.

     The remaining allocated allowance is for commercial loans, commercial real estate loans and lease financing. We initially estimate this portion of the allocated allowance by applying historical loss factors statistically derived from tracking loss content associated with actual portfolio movements over a specified period of time, using a standardized loan grading

process. Based on this process, we assign loss factors to each pool of graded loans and a loan equivalent amount for unfunded loan commitments and letters of credit. These estimates are then adjusted or supplemented where necessary from additional analysis of long term average loss experience, external loss data, or other risks identified from current conditions and trends in selected portfolios. Also, we individually review nonperforming loans over $3 million for impairment based on cash flows or collateral. We include the impairment on these nonperforming loans in the allocated allowance unless it has already been recognized as a loss.

     The potential risk from unfunded loan commitments and letters of credit for wholesale loan portfolios is considered along with the loss analysis of loans outstanding. Unfunded commercial loan commitments and letters of credit are converted to a loan equivalent factor as part of the analysis. The reserve for unfunded credit commitments was $186 million at December 31, 2005, and $188 million at December 31, 2004, both representing less than 5% of the total allowance for credit losses.

     The allocated allowance is supplemented by the unallocated allowance to adjust for imprecision and to incorporate the range of probable outcomes inherent in estimates used for the allocated allowance. The unallocated allowance is the result of our judgment of risks inherent in the portfolio, economic uncertainties, historical loss experience and other subjective factors, including industry trends.

     No material changes in estimation methodology for the allowance for credit losses were made in 2005.

     The ratios of the allocated allowance and the unallocated allowance to the total allowance may change from period to period. The total allowance reflects management’s estimate of credit losses inherent in the loan portfolio, including unfunded credit commitments, at December 31, 2005.

     Like all national banks, our subsidiary national banks continue to be subject to examination by their primary regulator, the Office of the Comptroller of the Currency (OCC), and some have OCC examiners in residence. The OCC examinations occur throughout the year and target various activities of our subsidiary national banks, including both the loan grading system and specific segments of the loan portfolio (for example, commercial real estate and shared national credits). The Parent and its nonbank subsidiaries are examined by the Federal Reserve Board.

     We consider the allowance for credit losses of $4.06 billion adequate to cover credit losses inherent in the loan portfolio, including unfunded credit commitments, at December 31, 2005.

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

(in millions)	Year ended December 31														,
	2005			2004			2003			2002			2001
Balance, beginning of year	$	3,950		$	3,891		$	3,819		$	3,717		$	3,681
Provision for credit losses		2,383			1,717			1,722			1,684			1,727
Loan charge-offs:
Commercial and commercial real estate:
Commercial		(406	)		(424	)		(597	)		(716	)		(692	)
Other real estate mortgage		(7	)		(25	)		(33	)		(24	)		(32	)
Real estate construction		(6	)		(5	)		(11	)		(40	)		(37	)
Lease financing		(35	)		(62	)		(41	)		(21	)		(22	)
Total commercial and commercial real estate		(454	)		(516	)		(682	)		(801	)		(783	)
Consumer:
Real estate 1-4 family first mortgage		(111	)		(53	)		(47	)		(39	)		(40	)
Real estate 1-4 family junior lien mortgage		(136	)		(107	)		(77	)		(55	)		(36	)
Credit card		(553	)		(463	)		(476	)		(407	)		(421	)
Other revolving credit and installment		(1,480	)		(919	)		(827	)		(770	)		(770	)
Total consumer		(2,280	)		(1,542	)		(1,427	)		(1,271	)		(1,267	)
Foreign		(298	)		(143	)		(105	)		(84	)		(78	)
Total loan charge-offs		(3,032	)		(2,201	)		(2,214	)		(2,156	)		(2,128	)
Loan recoveries:
Commercial and commercial real estate:
Commercial		133			150			177			162			96
Other real estate mortgage		16			17			11			16			22
Real estate construction		13			6			11			19			3
Lease financing		21			26			8			—			—
Total commercial and commercial real estate		183			199			207			197			121
Consumer:
Real estate 1-4 family first mortgage		21			6			10			8			6
Real estate 1-4 family junior lien mortgage		31			24			13			10			8
Credit card		86			62			50			47			40
Other revolving credit and installment		365			220			196			205			203
Total consumer		503			312			269			270			257
Foreign		63			24			19			14			18
Total loan recoveries		749			535			495			481			396
Net loan charge-offs		(2,283	)		(1,666	)		(1,719	)		(1,675	)		(1,732	)
Other		7			8			69			93			41
Balance, end of year	$	4,057		$	3,950		$	3,891		$	3,819		$	3,717
Components:
Allowance for loan losses	$	3,871		$	3,762		$	3,891		$	3,819		$	3,717
Reserve for unfunded credit commitments (1)		186			188			—			—			—
Allowance for credit losses	$	4,057		$	3,950		$	3,891		$	3,819		$	3,717
Net loan charge-offs as a percentage of average total loans		.77	%		.62	%		.81	%		.96	%		1.10	%
Allowance for loan losses as a percentage of total loans		1.25	%		1.31	%		1.54	%		1.98	%		2.22	%
Allowance for credit losses as a percentage of total loans		1.31			1.37			1.54			1.98			2.22

(1) Effective September 30, 2004, we transferred the portion of the allowance for loan losses related to commercial lending commitments and letters of credit to other liabilities.

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     Nonaccrual loans were $1,338 million and $1,358 million at December 31, 2005 and 2004, respectively. Loans past due 90 days or more as to interest or principal and still accruing interest were $3,606 million at December 31, 2005, and $2,578 million at December 31, 2004. The 2005 and 2004 balances included $2,923 million and $1,820 million, respectively, in advances pursuant to our servicing agreements to the Government National Mortgage Association mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veteran Affairs.

     The recorded investment in impaired loans and the methodology used to measure impairment was:

(in millions)	December 31				,
	2005		2004
Impairment measurement based on:
Collateral value method	$	115	$	183
Discounted cash flow method		75		126
Total (1)	$	190	$	309

(1) Includes $56 million and $107 million of impaired loans with a related allowance of $10 million and $17 million at December 31, 2005 and 2004, respectively.

     The average recorded investment in impaired loans during 2005, 2004 and 2003 was $260 million, $481 million and $668 million, respectively.

     All of our impaired loans are on nonaccrual status. When the ultimate collectibility of the total principal of an impaired loan is in doubt, all payments are applied to principal, under the cost recovery method. When the ultimate collectibility of the total principal of an impaired loan is not in doubt, contractual interest is credited to interest income when received, under the cash basis method. Total interest income recognized for impaired loans in 2005, 2004 and 2003 under the cash basis method was not significant.

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Note 7: Premises, Equipment, Lease Commitments and Other Assets

(in millions)	December 31				,
	2005		2004
Land	$	649	$	585
Buildings		3,617		2,974
Furniture and equipment		3,425		3,110
Leasehold improvements		1,115		1,049
Premises and equipment leased under capital leases		60		60
Total premises and equipment		8,866		7,778
Less: Accumulated depreciation and amortization		4,449		3,928
Net book value, premises and equipment	$	4,417	$	3,850

Depreciation and amortization expense for premises and equipment was $810 million, $654 million and $666 million in 2005, 2004 and 2003, respectively.

     Net gains (losses) on dispositions of premises and equipment, included in noninterest expense, were $56 million, $(5) million and $(46) million in 2005, 2004 and 2003, respectively.

     We have obligations under a number of noncancelable operating leases for premises (including vacant premises) and equipment. The terms of these leases, including renewal options, are predominantly up to 15 years, with the longest up to 72 years, and many provide for periodic adjustment of rentals based on changes in various economic indicators. The future minimum payments under noncancelable operating leases and capital leases, net of sublease rentals, with terms greater than one year as of December 31, 2005, were:

(in millions)	Operating leases		Capital leases
Year ended December 31,
2006	$	514	$	4
2007		426		2
2008		360		2
2009		298		1
2010		237		1
Thereafter		898		14
Total minimum lease payments	$	2,733		24
Executory costs				(2	)
Amounts representing interest				(8	)
Present value of net minimum lease payments			$	14

     Operating lease rental expense (predominantly for premises), net of rental income, was $583 million, $586 million and $574 million in 2005, 2004 and 2003, respectively.

     The components of other assets were:

(in millions)	December 31				,
	2005		2004
Nonmarketable equity investments:
Private equity investments	$	1,537	$	1,449
Federal bank stock		1,402		1,713
All other		2,151		2,067
Total nonmarketable equity investments (1)		5,090		5,229
Operating lease assets		3,414		3,642
Accounts receivable		11,606		2,682
Interest receivable		2,279		1,483
Core deposit intangibles		489		603
Foreclosed assets		191		212
Due from customers on acceptances		104		170
Other		9,299		8,470
Total other assets	$	32,472	$	22,491

(1) At December 31, 2005 and 2004, $3.1 billion and $3.3 billion, respectively, of nonmarketable equity investments, including all federal bank stock, were accounted for at cost.

     Income related to nonmarketable equity investments was:

(in millions)	Year ended December 31						,
	2005		2004		2003
Net gains (losses) from private equity investments	$	351	$	319	$	(3	)
Net gains from all other nonmarketable equity investments		43		33		116
Net gains from nonmarketable equity investments	$	394	$	352	$	113

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Note 8: Intangible Assets

The gross carrying amount of intangible assets and accumulated amortization was:

(in millions)	December 31								,
	2005				2004
	Gross		Accumulated		Gross		Accumulated
	carrying		amortization		carrying		amortization
	amount				amount
Amortized intangible assets:
Mortgage servicing rights, before valuation allowance (1)	$	25,126	$	11,428	$	18,903	$	9,437
Core deposit intangibles		2,432		1,943		2,426		1,823
Other		567		312		567		296
Total amortized intangible assets	$	28,125	$	13,683	$	21,896	$	11,556
Unamortized intangible asset (trademark)	$	14			$	14

(1) See Note 21 for additional information on MSRs and the related valuation allowance.

     As of December 31, 2005, the current year and estimated future amortization expense for amortized intangible assets was:

(in millions)	Mortgage		Core		Other		Total
	servicing		deposit
	rights		intangibles
Year ended December 31, 2005	$	1,991	$	123	$	55	$	2,169
Estimate for year ended December 31,
2006	$	1,959	$	111	$	48	$	2,118
2007		1,659		101		46		1,806
2008		1,426		93		30		1,549
2009		1,246		85		25		1,356
2010		1,068		77		23		1,168

     We based the projections of amortization expense for mortgage servicing rights shown above on existing asset balances and the existing interest rate environment as of December 31, 2005. Future amortization expense may be significantly different depending upon changes in the mortgage servicing portfolio, mortgage interest rates and market conditions. We based the projections of amortization expense for core deposit intangibles shown above on existing asset balances at December 31, 2005. Future amortization expense may vary based on additional core deposit intangibles acquired through business combinations.

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Note 9: Goodwill

The changes in the carrying amount of goodwill as allocated to our operating segments for goodwill impairment analysis were:

(in millions)	Community			Wholesale			Wells Fargo		Consolidated
	Banking			Banking			Financial		Company
December 31, 2003	$	7,286		$	2,735		$	350	$	10,371
Goodwill from business combinations		5			302			—		307
Foreign currency translation adjustments		—			—			3		3
December 31, 2004		7,291			3,037			353		10,681
Reduction in goodwill related to divested businesses		(31	)		(3	)		—		(34	)
Goodwill from business combinations		125			13			—		138
Realignment of automobile financing business		(11	)		—			11		—
Foreign currency translation adjustments		—			—			2		2
December 31, 2005	$	7,374		$	3,047		$	366	$	10,787

     For goodwill impairment testing, enterprise-level goodwill acquired in business combinations is allocated to reporting units based on the relative fair value of assets acquired and recorded in the respective reporting units. Through this allocation, we assigned enterprise-level goodwill to the reporting units that are expected to benefit from the synergies of the combination. We used discounted estimated future net cash flows to evaluate goodwill reported at all reporting units.

     For our goodwill impairment analysis, we allocate all of the goodwill to the individual operating segments. For management reporting we do not allocate all of the goodwill to the individual operating segments: some is allocated at the enterprise level. See Note 19 for further information on management reporting. The balances of goodwill for management reporting were:

(in millions)	Community		Wholesale		Wells Fargo		Enterprise		Consolidated
	Banking		Banking		Financial				Company
December 31, 2004	$	3,433	$	1,087	$	364	$	5,797	$	10,681
December 31, 2005	$	3,527	$	1,097	$	366	$	5,797	$	10,787

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Note 10: Deposits

The total of time certificates of deposit and other time deposits issued by domestic offices was $74,023 million and $55,495 million at December 31, 2005 and 2004, respectively. Substantially all of those deposits were interest bearing. The contractual maturities of those deposits were:

(in millions)	December 31, 2005
2006	$	66,700
2007		3,886
2008		1,899
2009		769
2010		538
Thereafter		231
Total	$	74,023

     Of those deposits, the amount of time deposits with a denomination of $100,000 or more was $56,123 million and $41,851 million at December 31, 2005 and 2004, respectively. The contractual maturities of these deposits were:

(in millions)	December 31, 2005
Three months or less	$	45,763
After three months through six months		2,154
After six months through twelve months		5,867
After twelve months		2,339
Total	$	56,123

     Time certificates of deposit and other time deposits issued by foreign offices with a denomination of $100,000 or more represent the majority of all of our foreign deposit liabilities of $14,621 million and $8,533 million at December 31, 2005 and 2004, respectively.

     Demand deposit overdrafts of $618 million and $470 million were included as loan balances at December 31, 2005 and 2004, respectively.

Note 11: Short-Term Borrowings

The table below shows selected information for short-term borrowings, which generally mature in less than 30 days.

(in millions)	2005					2004					2003
	Amount		Rate			Amount		Rate			Amount		Rate
As of December 31,
Commercial paper and other short-term borrowings	$	3,958		3.80	%	$	6,225		2.40	%	$	6,709		1.26	%
Federal funds purchased and securities sold under agreements to repurchase		19,934		3.99			15,737		2.04			17,950		.84
Total	$	23,892		3.96		$	21,962		2.14		$	24,659		.95
Year ended December 31,
Average daily balance
Commercial paper and other short-term borrowings	$	9,548		3.09	%	$	10,010		1.56	%	$	11,506		1.22	%
Federal funds purchased and securities sold under agreements to repurchase		14,526		3.09			16,120		1.22			18,392		.99
Total	$	24,074		3.09		$	26,130		1.35		$	29,898		1.08
Maximum month-end balance
Commercial paper and other short-term borrowings (1)	$	15,075		N/A		$	16,492		N/A		$	14,462		N/A
Federal funds purchased and securities sold under agreements to repurchase (2)		22,315		N/A			22,117		N/A			24,132		N/A

N/A — Not applicable.
(1)	Highest month-end balance in each of the last three years was in January 2005, July 2004 and January 2003.
(2)	Highest month-end balance in each of the last three years was in August 2005, June 2004 and April 2003.

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Note 12: Long-Term Debt

Following is a summary of our long-term debt based on original maturity (reflecting unamortized debt discounts and premiums, where applicable):

(in millions)			December 31				,
	Maturity	Stated	2005		2004
	date(s)	interest
		rate(s)
Wells Fargo & Company (Parent only)
Senior
Fixed-Rate Notes (1)	2006-2035	2.20-6.875%	$	16,081	$	12,970
Floating-Rate Notes	2006-2015	Varies		21,711		20,155
Extendable Notes (2)	2008-2015	Varies		10,000		5,500
Equity-Linked Notes (3)	2006-2014	Varies		444		472
Convertible Debenture (4)	2033	Varies		3,000		3,000
Total senior debt — Parent				51,236		42,097
Subordinated
Fixed-Rate Notes (1)	2011-2023	4.625-6.65%		4,558		4,502
FixFloat Notes	2012	4.00% through 2006, varies		300		299
Total subordinated debt — Parent				4,858		4,801
Junior Subordinated
Fixed-Rate Notes (1)(5)	2031-2034	5.625-7.00%		3,247		3,248
Total junior subordinated debt — Parent				3,247		3,248
Total long-term debt — Parent				59,341		50,146
Wells Fargo Bank, N.A. and its subsidiaries (WFB, N.A.)
Senior
Fixed-Rate Notes (1)	2006-2019	1.16-4.24%		256		218
Floating-Rate Notes	2006-2034	Varies		3,138		7,615
Floating-Rate Federal Home Loan Bank (FHLB) Advances (6)	—	—		—		1,400
FHLB Notes and Advances	2012	5.20%		203		200
Equity-Linked Notes (3)	2006-2014	Varies		229		40
Notes payable by subsidiaries	—	—		—		79
Obligations of subsidiaries under capital leases (Note 7)				14		19
Total senior debt — WFB, N.A.				3,840		9,571
Subordinated
FixFloat Notes (7)	—	—		—		998
Fixed-Rate Notes (1)	2010-2015	4.07-7.55%		4,330		2,821
Other notes and debentures	2006-2013	4.50-12.00%		13		11
Total subordinated debt — WFB, N.A.				4,343		3,830
Total long-term debt — WFB, N.A.				8,183		13,401
Wells Fargo Financial, Inc., and its subsidiaries (WFFI)
Senior
Fixed-Rate Notes	2006-2034	2.06-7.47%		7,159		5,343
Floating-Rate Notes	2007-2010	Varies		1,714		1,303
Total long-term debt — WFFI			$	8,873	$	6,646

(1)	We entered into interest rate swap agreements for a major portion of these notes, whereby we receive fixed-rate interest payments approximately equal to interest on the notes and make interest payments based on an average one-month, three-month or six-month London Interbank Offered Rate (LIBOR).
(2)	The extendable notes are floating-rate securities with an initial maturity of 13 months or 2 years, which can be extended, respectively, on a rolling monthly basis, to a final maturity of 5 or 6 years, or, on a 6 month rolling basis, to a final maturity of 10 years, at the investor’s option.
(3)	These notes are linked to baskets of equities, commodities or equity indices.
(4)	On April 15, 2003, we issued $3 billion of convertible senior debentures as a private placement. In November 2004, we amended the indenture under which the debentures were issued to eliminate a provision in the indenture that prohibited us from paying cash upon conversion of the debentures if an event of default as defined in the indenture exists at the time of conversion. We then made an irrevocable election under the indenture on December 15, 2004, that upon conversion of the debentures, we must satisfy the accreted value of the obligation (the amount accrued to the benefit of the holder exclusive of the conversion spread) in cash and may satisfy the conversion spread (the excess conversion value over the accreted value) in either cash or stock. We can also redeem all or some of the convertible debt securities for cash at any time on or after May 5, 2008, at their principal amount plus accrued interest, if any.
(5)	Effective December 31, 2003, as a result of the adoption of FIN 46R we deconsolidated certain wholly-owned trusts formed for the sole purpose of issuing trust preferred securities (the Trusts). The junior subordinated debentures held by the Trusts are included in the Company’s long-term debt.
(6)	During 2005, the FHLB exercised their put options on all outstanding floating-rate advances.
(7)	Note was called in June 2005.

(continued on following page)

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(continued from previous page)

(in millions)			December 31				,
	Maturity	Stated	2005		2004
	date(s)	interest
		rate(s)
Other consolidated subsidiaries
Senior
Fixed-Rate Notes	2006-2045	1.50-6.90%	$	502	$	564
Floating-Rate FHLB Advances	2008-2009	Varies		500		500
Other notes and debentures — Floating-Rate	2012	Varies		14		1
Obligations of subsidiaries under capital leases (Note 7)				—		1
Total senior debt — Other consolidated subsidiaries				1,016		1,066
Subordinated
Fixed-Rate Notes (1)	2006-2009	1.00-13.87%		1,138		1,194
Other notes and debentures — Floating-Rate	2011-2015	Varies		66		95
Total subordinated debt — Other consolidated subsidiaries				1,204		1,289
Junior Subordinated
Fixed-Rate Notes (5)	2026-2031	7.73-10.18%		869		865
Floating-Rate Notes (5)	2027-2034	Varies		182		167
Total junior subordinated debt — Other consolidated subsidiaries				1,051		1,032
Total long-term debt — Other consolidated subsidiaries				3,271		3,387
Total long-term debt			$	79,668	$	73,580

     At December 31, 2005, aggregate annual maturities of long-term debt obligations (based on final maturity dates) were as follows:

(in millions)	Parent		Company
2006	$	7,309	$	11,124
2007		10,557		13,962
2008		11,648		13,742
2009		5,904		6,926
2010		6,911		8,943
Thereafter		17,012		24,971
Total	$	59,341	$	79,668

     The interest rates on floating-rate notes are determined periodically by formulas based on certain money market rates, subject, on certain notes, to minimum or maximum interest rates.

     As part of our long-term and short-term borrowing arrangements, we are subject to various financial and operational covenants. Some of the agreements under which debt has been issued have provisions that may limit the merger or sale of certain subsidiary banks and the issuance of capital stock or convertible securities by certain subsidiary banks. At December 31, 2005, we were in compliance with all the covenants.

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Note 13: Preferred Stock

We are authorized to issue 20 million shares of preferred stock and 4 million shares of preference stock, both without par value. Preferred shares outstanding rank senior to common shares both as to dividends and liquidation preference but have no general voting rights. We have not issued any preference shares under this authorization.

ESOP CUMULATIVE CONVERTIBLE PREFERRED STOCK
All shares of our ESOP (Employee Stock Ownership Plan) Cumulative Convertible Preferred Stock (ESOP Preferred Stock) were issued to a trustee acting on behalf of the Wells Fargo & Company 401(k) Plan (the 401(k) Plan). Dividends on the ESOP Preferred Stock are cumulative from the date of initial issuance and are payable quarterly

at annual rates ranging from 8.50% to 12.50%, depending upon the year of issuance. Each share of ESOP Preferred Stock released from the unallocated reserve of the 401(k) Plan is converted into shares of our common stock based on the stated value of the ESOP Preferred Stock and the then current market price of our common stock. The ESOP Preferred Stock is also convertible at the option of the holder at any time, unless previously redeemed. We have the option to redeem the ESOP Preferred Stock at any time, in whole or in part, at a redemption price per share equal to the higher of (a) $1,000 per share plus accrued and unpaid dividends or (b) the fair market value, as defined in the Certificates of Designation for the ESOP Preferred Stock.

	Shares issued					Carrying amount
	and outstanding					(in millions)						Adjustable
	December 31				,	December 31					,	dividend rate
	2005		2004			2005			2004			Minimum			Maximum
ESOP Preferred Stock (1):
2005		102,184		—		$	102		$	—			9.75	%		10.75	%
2004		74,880		89,420			75			90			8.50			9.50
2003		52,643		60,513			53			61			8.50			9.50
2002		39,754		46,694			40			47			10.50			11.50
2001		28,263		34,279			28			34			10.50			11.50
2000		19,282		24,362			19			24			11.50			12.50
1999		6,368		8,722			6			9			10.30			11.30
1998		1,953		2,985			2			3			10.75			11.75
1997		136		2,206			—			2			9.50			10.50
1996		—		382			—			—			8.50			9.50
Total ESOP Preferred Stock		325,463		269,563		$	325		$	270
Unearned ESOP shares (2)						$	(348	)	$	(289	)

(1)

Liquidation preference $1,000.

(2)

In accordance with the American Institute of Certified Public Accountants (AICPA) Statement of Position 93-6, Employers’ Accounting for Employee Stock Ownership Plans, we recorded a corresponding charge to unearned ESOP shares in connection with the issuance of the ESOP Preferred Stock. The unearned ESOP shares are reduced as shares of the ESOP Preferred Stock are committed to be released. For information on dividends paid, see Note 14.

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Note 14: Common Stock and Stock Plans

Common Stock
Our reserved, issued and authorized shares of common stock at December 31, 2005, were:

	Number of shares
Dividend reinvestment and common stock purchase plans		3,088,307
Director plans		651,102
Stock plans (1)		307,357,126
Total shares reserved		311,096,535
Shares issued		1,736,381,025
Shares not reserved		3,952,522,440
Total shares authorized		6,000,000,000

(1) Includes employee option, restricted shares and restricted share rights,
401(k), profit sharing and compensation deferral plans.

Dividend Reinvestment and Common Stock Purchase Plans
Participants in our dividend reinvestment and common stock direct purchase plans may purchase shares of our common stock at fair market value by reinvesting dividends and/or making optional cash payments, under the plan’s terms.

Director Plans
We provide a stock award to non-employee directors as part of their annual retainer under our director plans. We also provide annual grants of options to purchase common stock to each non-employee director elected or re-elected at the annual meeting of stockholders. The options can be exercised after six months and through the tenth anniversary of the grant date.

Employee Stock Plans
LONG-TERM INCENTIVE PLANS Our stock incentive plans provide for awards of incentive and nonqualified stock options, stock appreciation rights, restricted shares, restricted share rights, performance awards and stock awards without restrictions. Options must have an exercise price at or above fair market value (as defined in the plan) of the stock at the date of grant (except for substitute or replacement options granted in connection with mergers or other acquisitions) and a term of no more than 10 years. Options granted in 2003 and prior generally become exercisable over three years from the date of grant. Options granted in 2004 and the beginning of 2005 generally were fully vested upon grant. Effective April 26, 2005, options granted under our plan generally cannot fully vest in less than one year. Options granted generally have a contractual term of 10 years. Except as otherwise permitted under the plan, if employment is ended for reasons other than retirement, permanent disability or death, the option period is reduced or the options are canceled.

     Options also may include the right to acquire a “reload” stock option. If an option contains the reload feature and if a participant pays all or part of the exercise price of the option with shares of stock purchased in the market or held by the participant for at least six months, upon exercise of the option, the participant is granted a new option to purchase, at the fair market value of the stock as of the date of the reload, the number of shares of stock equal to the sum of the number of shares used in payment of the exercise price and a number of shares with respect to related statutory minimum withholding taxes. Options granted after 2003 did not include a reload feature.

     We did not record any compensation expense for the options granted under the plans during 2005, 2004 and 2003, as the exercise price was equal to the quoted market price of the stock at the date of grant. The total number of shares of common stock available for grant under the plans at December 31, 2005, was 116,604,733.

     Holders of restricted shares and restricted share rights are entitled to the related shares of common stock at no cost generally over three to five years after the restricted shares or restricted share rights were granted. Holders of restricted shares generally are entitled to receive cash dividends paid on the shares. Holders of restricted share rights generally are entitled to receive cash payments equal to the cash dividends that would have been paid had the restricted share rights been issued and outstanding shares of common stock. Except in limited circumstances, restricted shares and restricted share rights are canceled when employment ends.

     In 2005, 26,400 restricted shares and restricted share rights were granted with a weighted-average grant-date per share fair value of $61.59. In 2004, no restricted shares or restricted share rights were granted. In 2003, 61,740 restricted shares and restricted share rights were granted with a weighted-average grant-date per share fair value of $56.05. At December 31, 2005, 2004 and 2003, there were 353,022, 448,150 and 577,722 restricted shares and restricted share rights outstanding, respectively. The compensation expense for the restricted shares and restricted share rights equals the quoted market price of the related stock at the date of grant and is accrued over the vesting period. We recognized total compensation expense for the restricted shares and restricted share rights of $2 million in 2005, $3 million in 2004 and $4 million in 2003.

     For various acquisitions and mergers since 1992, we converted employee and director stock options of acquired or merged companies into stock options to purchase our common stock based on the terms of the original stock option plan and the agreed-upon exchange ratio.

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BROAD-BASED PLANS In 1996, we adopted the PartnerShares^® Stock Option Plan, a broad-based employee stock option plan. It covers full- and part-time employees who were generally not included in the long-term incentive plans described on the preceding page. The total number of shares of common stock authorized for issuance under the plan since inception through December 31, 2005, was 54,000,000, including 3,669,903 shares available for grant. No options have been granted under the PartnerShares Plan since 2002. The exercise date of options granted under the PartnerShares Plan is the earlier of (1) five years after the

date of grant, or (2) when the quoted market price of the stock reaches a predetermined price. These options generally expire 10 years after the date of grant. Because the exercise price of each PartnerShares grant has been equal to or higher than the quoted market price of our common stock at the date of grant, we have not recognized any compensation expense in 2005 and prior years.

     The following table summarizes stock option activity and related information for the three years ended December 31, 2005.

	Director Plans					Long-Term Incentive Plans					Broad-Based Plans
	Number			Weighted-average		Number			Weighted-average		Number			Weighted-average
				exercise price					exercise price					exercise price
Options outstanding as of December 31, 2002		349,108		$	36.78		93,379,737		$	40.35		50,088,196		$	43.25
2003:
Granted		62,346			47.22		23,052,384	(1)		46.04		—			—
Canceled		—			—		(1,529,868	)		46.76		(4,293,930	)		46.85
Exercised		(59,707	)		26.90		(13,884,561	)		31.96		(6,408,797	)		34.09
Acquisitions		4,769			31.42		889,842			25.89		—			—
Options outstanding as of December 31, 2003		356,516			40.19		101,907,534			42.56		39,385,469			44.35
2004:
Granted		50,960			56.39		21,983,690	(1)		57.41		—			—
Canceled		—			—		(1,241,637	)		48.06		(2,895,200	)		48.26
Exercised		(21,427	)		18.81		(18,574,660	)		37.89		(3,792,605	)		34.84
Options outstanding as of December 31, 2004		386,049			43.51		104,074,927			46.46		32,697,664			45.10
2005:
Granted		64,252			59.33		21,601,697	(1)		60.12		—			—
Canceled		(3,594	)		19.93		(623,384	)		51.80		(2,475,617	)		47.51
Exercised		(57,193	)		27.66		(14,514,952	)		42.20		(5,729,286	)		42.78
Acquisitions		—			—		52,824			27.35		—			—
Options outstanding as of December 31, 2005		389,514		$	48.67		110,591,112		$	49.65		24,492,761		$	45.51
Outstanding options exercisable as of:
December 31, 2003		353,131		$	40.08		63,257,541		$	40.33		12,063,244		$	35.21
December 31, 2004		386,049			43.51		84,702,073			46.64		8,590,539			35.99
December 31, 2005		389,514			48.67		103,053,320			49.80		14,444,786			42.10

(1) Includes 4,014,597, 4,909,864 and 2,311,824 reload grants in 2005, 2004 and 2003, respectively.

     The following table presents the weighted-average per share fair value of options granted estimated using a Black-Scholes option-pricing model and the weighted-average assumptions used.

	2005			2004			2003
Per share fair value of options granted:
Director Plans	$	6.27		$	9.34		$	9.59
Long-Term Incentive Plans		7.50			9.32			9.48
Expected life (years)		4.4			4.4			4.3
Expected volatility		16.1	%		23.8	%		29.2	%
Risk-free interest rate		4.0			2.9			2.5
Expected annual dividend yield		3.4			3.4			2.9

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     This table is a summary of our stock option plans described on the preceding page.

	December 31, 2005
	Options outstanding						Options exercisable
Range of exercise prices	Number		Weighted-average		Weighted-average		Number		Weighted-average
			exercise price		remaining contractual				exercise price
					life (in yrs.)
Director Plans
$13.49-$16.00		2,530	$	13.49		1.01		2,530	$	13.49
$16.01-$25.04		17,010		24.09		.49		17,010		24.09
$25.05-$38.29		34,620		33.09		1.88		34,620		33.09
$38.30-$51.00		197,942		46.51		5.60		197,942		46.51
$51.01-$69.01		137,412		59.38		7.69		137,412		59.38
Long-Term Incentive Plans
$3.37-$5.06		29,012	$	4.23		6.50		29,012	$	4.23
$5.07-$7.60		4,366		5.84		20.02		4,366		5.84
$11.42-$17.13		101,430		16.53		.60		101,430		16.53
$17.14-$25.71		57,574		23.33		3.53		57,574		23.33
$25.72-$38.58		16,442,280		34.24		2.98		16,277,280		34.22
$38.59-$71.30		93,956,450		52.41		5.99		86,583,658		52.80
Broad-Based Plans
$16.56		287,403	$	16.56		.56		287,403	$	16.56
$24.85-$37.81		5,107,673		35.35		2.42		5,107,673		35.35
$37.82-$46.50		8,661,248		46.44		4.86		8,540,348		46.50
$46.51-$51.15		10,436,437		50.50		6.22		509,362		50.50

EMPLOYEE STOCK OWNERSHIP PLAN Under the Wells Fargo & Company 401(k) Plan (the 401(k) Plan), a defined contribution ESOP, the 401(k) Plan may borrow money to purchase our common or preferred stock. Since 1994, we have loaned money to the 401(k) Plan to purchase shares of our ESOP Preferred Stock. As we release and convert ESOP Preferred Stock into common shares, we record compensation expense equal to the current market price of the common shares. Dividends on the common shares allocated as a result of the release and conversion of the ESOP Preferred Stock reduce retained earnings and the shares are considered outstanding

for computing earnings per share. Dividends on the unallocated ESOP Preferred Stock do not reduce retained earnings, and the shares are not considered to be common stock equivalents for computing earnings per share. Loan principal and interest payments are made from our contributions to the 401(k) Plan, along with dividends paid on the ESOP Preferred Stock. With each principal and interest payment, a portion of the ESOP Preferred Stock is released and, after conversion of the ESOP Preferred Stock into common shares, allocated to the 401(k) Plan participants.

     The balance of ESOP shares, the dividends on allocated shares of common stock and unreleased preferred shares paid to the 401(k) Plan and the fair value of unearned ESOP shares were:

(in millions, except shares)	Shares outstanding							Dividends paid
	December 31						,	Year ended December 31						,
	2005		2004		2003			2005		2004		2003
Allocated shares (common)		36,917,501		33,921,758		31,927,982		$	71	$	61	$	46
Unreleased shares (preferred)		325,463		269,563		214,100			39		32		26
Fair value of unearned ESOP shares	$	325	$	270	$	214

Deferred Compensation Plan for Independent Sales Agents
WF Deferred Compensation Holdings, Inc. is a wholly owned subsidiary of the Parent formed solely to sponsor a deferred compensation plan for independent sales agents who provide investment, financial and other qualifying services for or with respect to participating affiliates.

The plan, which became effective January 1, 2002, allows participants to defer all or part of their eligible compensation payable to them by a participating affiliate. The Parent has fully and unconditionally guaranteed the deferred compensation obligations of WF Deferred Compensation Holdings, Inc. under the plan.

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Note 15: Employee Benefits and Other Expenses

Employee Benefits
We sponsor noncontributory qualified defined benefit retirement plans including the Cash Balance Plan. The Cash Balance Plan is an active plan that covers eligible employees (except employees of certain subsidiaries).

     Under the Cash Balance Plan, eligible employees’ Cash Balance Plan accounts are allocated a compensation credit based on a percentage of their certified compensation. The compensation credit percentage is based on age and years of credited service. In addition, investment credits are allocated to participants quarterly based on their accumulated balances. Employees become vested in their Cash Balance Plan accounts after completing five years of vesting service or reaching age 65, if earlier.

     Although we were not required to make a contribution in 2005 for our Cash Balance Plan, we funded the maximum amount deductible under the Internal Revenue Code, or $288 million. The total amount contributed for our pension plans was $340 million. We expect that we will not be required to make a contribution in 2006 for the Cash Balance Plan. The maximum we can contribute in 2006 for the Cash Balance Plan depends on several factors, including the finalization of participant data. Our decision on how much to contribute, if any, depends on other factors, including the actual investment performance of plan assets. Given these uncertainties, we cannot at this time reliably estimate the maximum deductible contribution or the amount that we will contribute in 2006 to the Cash

Balance Plan. For the unfunded nonqualified pension plans and postretirement benefit plans, we will contribute the minimum required amount in 2006, which equals the benefits paid under the plans. In 2005, we paid $78 million in benefits for the postretirement plans, which included $29 million in retiree contributions, and $13 million for the unfunded pension plans.

     We sponsor defined contribution retirement plans including the 401(k) Plan. Under the 401(k) Plan, after one month of service, eligible employees may contribute up to 25% of their pretax certified compensation, although there may be a lower limit for certain highly compensated employees in order to maintain the qualified status of the 401(k) Plan. Eligible employees who complete one year of service are eligible for matching company contributions, which are generally a 100% match up to 6% of an employee’s certified compensation. The matching contributions generally vest over four years.

     Expenses for defined contribution retirement plans were $370 million, $356 million and $257 million in 2005, 2004 and 2003, respectively.

     We provide health care and life insurance benefits for certain retired employees and reserve the right to terminate or amend any of the benefits at any time.

     The information set forth in the following tables is based on current actuarial reports using the measurement date of November 30 for our pension and postretirement benefit plans.

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     The changes in the projected benefit obligation during 2005 and 2004 and the amounts included in the Consolidated Balance Sheet at December 31, 2005 and 2004, were:

(in millions)	December 31																	,
	2005									2004
	Pension benefits									Pension benefits
				Non-			Other						Non-			Other
	Qualified			qualified			benefits			Qualified			qualified			benefits
Projected benefit obligation at beginning of year	$	3,777		$	228		$	751		$	3,387		$	202		$	698
Service cost		208			21			21			170			23			17
Interest cost		220			14			41			215			13			43
Plan participants’ contributions		—			—			29			—			—			26
Amendments		37			—			(44	)		(54	)		(12	)		(1	)
Actuarial gain (loss)		43			27			(12	)		296			27			37
Benefits paid		(242	)		(13	)		(78	)		(240	)		(25	)		(70	)
Foreign exchange impact		2			—			1			3			—			1
Projected benefit obligation at end of year	$	4,045		$	277		$	709		$	3,777		$	228		$	751

     The weighted-average assumptions used to determine the projected benefit obligation were:

	Year ended December 31											,
	2005						2004
	Pension			Other			Pension			Other
	benefits(1)			benefits			benefits(1)			benefits
Discount rate		5.75	%		5.75	%		6.0	%		6.0	%
Rate of compensation increase		4.0			—			4.0			—

(1) Includes both qualified and nonqualified pension benefits.

     The accumulated benefit obligation for the defined benefit pension plans was $4,076 million and $3,786 million at December 31, 2005 and 2004, respectively.

     The changes in the fair value of plan assets during 2005 and 2004 were:

(in millions)	Year ended December 31																	,
	2005									2004
	Pension benefits									Pension benefits
				Non-			Other						Non-			Other
	Qualified			qualified			benefits			Qualified			qualified			benefits
Fair value of plan assets at beginning of year	$	4,457		$	—		$	329		$	3,690		$	—		$	272
Actual return on plan assets		400			—			34			450			—			27
Employer contribution		327			13			56			555			25			74
Plan participants’ contributions		—			—			29			—			—			26
Benefits paid		(242	)		(13	)		(78	)		(240	)		(25	)		(70	)
Foreign exchange impact		2			—			—			2			—			—
Fair value of plan assets at end of year	$	4,944		$	—		$	370		$	4,457		$	—		$	329

     We seek to achieve the expected long-term rate of return with a prudent level of risk given the benefit obligations of the pension plans and their funded status. We target the Cash Balance Plan’s asset allocation for a target mix range of 40–70% equities, 20–50% fixed income, and approximately 10% in real estate, venture capital, private equity and other investments. The target ranges employ a Tactical Asset

Allocation overlay, which is designed to overweight stocks or bonds when a compelling opportunity exists. The Employee Benefit Review Committee (EBRC), which includes several members of senior management, formally reviews the investment risk and performance of the Cash Balance Plan on a quarterly basis. Annual Plan liability analysis and periodic asset/liability evaluations are also conducted.

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     The weighted-average allocation of plan assets was:

	Percentage of plan assets at December 31											,
	2005						2004
	Pension			Other			Pension			Other
	plan			benefit			plan			benefit
	assets			plan assets			assets			plan assets
Equity securities		69	%		58	%		63	%		51	%
Debt securities		27			40			33			46
Real estate		3			1			3			1
Other		1			1			1			2
Total		100	%		100	%		100	%		100	%

     This table reconciles the funded status of the plans to the amounts included in the Consolidated Balance Sheet.

(in millions)	December 31																	,
	2005									2004
	Pension benefits									Pension benefits
				Non-			Other						Non-			Other
	Qualified			qualified			benefits			Qualified			qualified			benefits
Funded status (1)	$	899		$	(277	)	$	(339	)	$	680		$	(228	)	$	(422	)
Employer contributions in December		—			2			4			—			1			5
Unrecognized net actuarial loss		615			42			131			647			25			158
Unrecognized net transition asset		—			—			3			—			—			3
Unrecognized prior service cost		(25	)		(11	)		(51	)		(67	)		(20	)		(8	)
Accrued benefit income (cost)	$	1,489		$	(244	)	$	(252	)	$	1,260		$	(222	)	$	(264	)
Amounts recognized in the balance sheet consist of:
Prepaid benefit cost	$	1,489		$	—		$	—		$	1,260		$	—		$	—
Accrued benefit liability		—			(245	)		(252	)		—			(223	)		(264	)
Accumulated other comprehensive income		—			1			—			—			1			—
Accrued benefit income (cost)	$	1,489		$	(244	)	$	(252	)	$	1,260		$	(222	)	$	(264	)

(1) Fair value of plan assets at year end less projected benefit obligation at year end.

     The table to the right provides information for pension plans with benefit obligations in excess of plan assets, substantially due to our nonqualified pension plans.

(in millions)	December 31				,
	2005		2004
Projected benefit obligation	$	359	$	294
Accumulated benefit obligation		297		247
Fair value of plan assets		60		55

     The net periodic benefit cost was:

(in millions)	Year ended December 31																									,
	2005									2004									2003
	Pension benefits									Pension benefits									Pension benefits
				Non-			Other						Non-			Other						Non-		Other
	Qualified			qualified			benefits			Qualified			qualified			benefits			Qualified			qualified		benefits
Service cost	$	208		$	21		$	21		$	170		$	23		$	17		$	164		$	22	$	15
Interest cost		220			14			41			215			13			43			209			14		42
Expected return on plan assets		(393	)		—			(25	)		(327	)		—			(23	)		(275	)		—		(18	)
Recognized net actuarial loss (gain) (1)		68			3			6			51			1			2			85			7		(3	)
Amortization of prior service cost		(4	)		(2	)		(1	)		(1	)		(1	)		(1	)		16			—		(1	)
Amortization of unrecognized transition asset		—			—			—			—			—			—			—			—		1
Settlement		—			—			—			(2	)		2			—			—			—		—
Net periodic benefit cost	$	99		$	36		$	42		$	106		$	38		$	38		$	199		$	43	$	36

(1) Net actuarial loss (gain) is generally amortized over five years.

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     The weighted-average assumptions used to determine the net periodic benefit cost were:

	Year ended December 31																	,
	2005						2004						2003
	Pension			Other			Pension			Other			Pension			Other
	benefits(1)			benefits			benefits(1)			benefits			benefits(1)			benefits
Discount rate		6.0	%		6.0	%		6.5	%		6.5	%		7.0	%		7.0	%
Expected return on plan assets		9.0			9.0			9.0			9.0			9.0			9.0
Rate of compensation increase		4.0			—			4.0			—			4.0			—

(1) Includes both qualified and nonqualified pension benefits.

     The long-term rate of return assumptions above were derived based on a combination of factors including (1) long-term historical return experience for major asset class categories (for example, large cap and small cap domestic equities, international equities and domestic fixed income), and (2) forward-looking return expectations for these major asset classes.

     To account for postretirement health care plans we use a health care cost trend rate to recognize the effect of expected changes in future health care costs due to medical inflation, utilization changes, new technology, regulatory requirements and Medicare cost shifting. We assumed average annual increases of 9.5% for health care costs for 2006. The rate of average annual increases is assumed to trend down 1% each year between 2006 and 2010. By 2010 and thereafter, we assumed rates of 5.5% for HMOs and for all other types of coverage. Increasing the assumed health care trend by one percentage point in each year would increase the benefit obligation as of December 31, 2005, by $52 million and the total of the interest cost and service cost components of the net periodic benefit cost for 2005 by $4 million. Decreasing the assumed health care trend by one percentage point in each year would decrease the benefit obligation as of December 31, 2005, by $48 million and the total of the interest cost and service cost components of the net periodic benefit cost for 2005 by $4 million.

     The investment strategy for the postretirement plans is maintained separate from the strategy for the pension plans. The general target asset mix is 55–65% equities and 35–45% fixed income. In addition, the Retiree Medical Plan Voluntary Employees’ Beneficiary Association (VEBA) considers the effect of income taxes by utilizing a combination of variable annuity and low turnover investment strategies. Members of the EBRC formally review the investment risk and performance of the postretirement plans on a quarterly basis.

     Future benefits, reflecting expected future service that we expect to pay under the pension and other benefit plans, were:

(in millions)	Pension benefits				Other
	Qualified		Non-qualified		benefits
Year ended December 31,
2006	$	288	$	24	$	54
2007		315		27		55
2008		366		28		56
2009		329		34		57
2010		339		33		62
2011-2015		1,986		158		313

Other Expenses

Expenses exceeding 1% of total interest income and noninterest income that are not otherwise shown separately in the financial statements or Notes to Financial Statements were:

(in millions)	Year ended December 31						,
	2005		2004		2003
Outside professional services	$	835	$	669	$	509
Contract services		596		626		866
Travel and entertainment		481		442		389
Outside data processing		449		418		404
Advertising and promotion		443		459		392
Postage		281		269		336
Telecommunications		278		296		343

90

Note 16: Income Taxes

The components of income tax expense were:

(in millions)	Year ended December 31						,
	2005		2004		2003
Current:
Federal	$	2,627	$	2,815	$	1,298
State and local		346		354		165
Foreign		91		154		114
		3,064		3,323		1,577
Deferred:
Federal		715		379		1,492
State and local		98		53		206
		813		432		1,698
Total	$	3,877	$	3,755	$	3,275

     The tax benefit related to the exercise of employee stock options recorded in stockholders’ equity was $143 million, $175 million and $148 million for 2005, 2004 and 2003, respectively.

     We had a net deferred tax liability of $5,595 million and $4,940 million at December 31, 2005 and 2004, respectively. The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities are presented in the table to the right.

     We have determined that a valuation reserve is not required for any of the deferred tax assets since it is more likely than not that these assets will be realized principally through carry back to taxable income in prior years, future reversals of existing taxable temporary differences, and, to a lesser extent, future taxable income and tax planning strategies. Our conclusion that it is “more likely than not” that the deferred tax assets will be realized is based on federal taxable income in excess of $17 billion in the carry-back period, substantial state taxable income in the carry-back period, as well as a history of growth in earnings.

(in millions)	December 31				,
	2005		2004
Deferred Tax Assets
Allowance for loan losses	$	1,471	$	1,430
Net tax-deferred expenses		179		217
Other		461		402
Total deferred tax assets		2,111		2,049
Deferred Tax Liabilities
Core deposit intangibles		153		188
Leasing		2,430		2,461
Mark to market		708		448
Mortgage servicing		3,517		2,848
FAS 115 adjustment		368		535
FAS 133 adjustment		29		23
Other		501		486
Total deferred tax liabilities		7,706		6,989
Net Deferred Tax Liability	$	5,595	$	4,940

     The deferred tax liability related to 2005, 2004 or 2003 unrealized gains and losses on securities available for sale along with the deferred tax liability related to certain derivative and hedging activities for 2005 and 2004, had no effect on income tax expense as these gains and losses, net of taxes, were recorded in cumulative other comprehensive income.

     The table below reconciles the statutory federal income tax expense and rate to the effective income tax expense and rate.

(in millions)	Year ended December 31																	,
	2005						2004						2003
	Amount			Rate			Amount			Rate			Amount			Rate
Statutory federal income tax expense and rate	$	4,042			35.0	%	$	3,769			35.0	%	$	3,317			35.0	%
Change in tax rate resulting from:
State and local taxes on income, net of federal income tax benefit		289			2.5			265			2.5			241			2.5
Tax-exempt income and tax credits		(327	)		(2.8	)		(224	)		(2.1	)		(161	)		(1.7	)
Donations of appreciated securities		(33	)		(.3	)		—			—			(90	)		(.9	)
Other		(94	)		(.8	)		(55	)		(.5	)		(32	)		(.3	)
Effective income tax expense and rate	$	3,877			33.6	%	$	3,755			34.9	%	$	3,275			34.6	%

91

Note 17: Earnings Per Common Share

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

At December 31, 2005, 2004 and 2003, options to purchase 4.9 million, 3.3 million and 4.4 million shares, respectively, were outstanding but not included in the calculation of earnings per common share because the exercise price was higher than the market price, and therefore they were antidilutive.

(in millions, except per share amounts)	Year ended December 31						,
	2005		2004		2003
Net income	$	7,671	$	7,014	$	6,202
Less: Preferred stock dividends		—		—		3
Net income applicable to common stock (numerator)	$	7,671	$	7,014	$	6,199
EARNINGS PER COMMON SHARE
Average common shares outstanding (denominator)		1,686.3		1,692.2		1,681.1
Per share	$	4.55	$	4.15	$	3.69
DILUTED EARNINGS PER COMMON SHARE
Average common shares outstanding		1,686.3		1,692.2		1,681.1
Add: Stock options		18.9		20.8		16.0
Restricted share rights		.3		.4		.4
Diluted average common shares outstanding (denominator)		1,705.5		1,713.4		1,697.5
Per share	$	4.50	$	4.09	$	3.65

92

Note 18: Other Comprehensive Income

The components of other comprehensive income and the related tax effects were:

(in millions)	Year ended December 31																										,
	2005									2004									2003
	Before			Tax			Net of			Before			Tax			Net of			Before			Tax			Net of
	tax			effect			tax			tax			effect			tax			tax			effect			tax
Translation adjustments	$	8		$	3		$	5		$	20		$	8		$	12		$	42		$	16		$	26
Securities available for sale and other retained interests:
Net unrealized gains (losses) arising during the year		(401	)		(143	)		(258	)		35			12			23			(117	)		(42	)		(75	)
Reclassification of gains included in net income		(64	)		(24	)		(40	)		(72	)		(27	)		(45	)		(68	)		(26	)		(42	)
Net unrealized losses arising during the year		(465	)		(167	)		(298	)		(37	)		(15	)		(22	)		(185	)		(68	)		(117	)
Derivatives and hedging activities:
Net unrealized gains (losses) arising during the year		349			134			215			(376	)		(137	)		(239	)		(1,629	)		(603	)		(1,026	)
Reclassification of net losses (gains) on cash flow hedges included in net income		(335	)		(128	)		(207	)		413			152			261			1,707			628			1,079
Net unrealized gains arising during the year		14			6			8			37			15			22			78			25			53
Other comprehensive income	$	(443	)	$	(158	)	$	(285	)	$	20		$	8		$	12		$	(65	)	$	(27	)	$	(38	)

Cumulative other comprehensive income balances were:

(in millions)	Translation			Net unrealized			Net unrealized			Cumulative other
	adjustments			gains (losses) on			gains (losses) on			comprehensive income
				securities and other			derivatives and other
				retained interests			hedging activities
Balance, December 31, 2002	$	(14	)	$	1,030		$	(40	)	$	976
Net change		26			(117	)		53			(38	)
Balance, December 31, 2003		12			913			13			938
Net change		12			(22	)		22			12
Balance, December 31, 2004	$	24		$	891		$	35		$	950
Net change		5			(298	)		8			(285	)
Balance, December 31, 2005	$	29		$	593		$	43		$	665

93

Note 19: Operating Segments

We have three lines of business for management reporting: Community Banking, Wholesale Banking and Wells Fargo Financial. The results for these lines of business are based on our management accounting process, which assigns balance sheet and income statement items to each responsible operating segment. This process is dynamic and, unlike financial accounting, there is no comprehensive, authoritative guidance for management accounting equivalent to generally accepted accounting principles. The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with similar information for other financial services companies. We define our operating segments by product type and customer segments. If the management structure and/or the allocation process changes, allocations, transfers and assignments may change. To reflect the realignment of our automobile financing businesses into Wells Fargo Financial in 2005, segment results for prior periods have been revised.

     The Community Banking Group offers a complete line of banking and diversified financial products and services to consumers and small businesses with annual sales generally up to $20 million in which the owner generally is the financial decision maker. Community Banking also offers investment management and other services to retail customers and high net worth individuals, insurance, securities brokerage through affiliates and venture capital financing. These products and services include the Wells Fargo Advantage Funds^SM, a family of mutual funds, as well as personal trust and agency assets. Loan products include lines of credit, equity lines and loans, equipment and transportation (recreational vehicle and marine) loans, education loans, origination and purchase of residential mortgage loans and servicing of mortgage loans and credit cards. Other credit products and financial services available to small businesses and their owners include receivables and inventory financing, equipment leases, real estate financing, Small Business Administration financing, venture capital financing, cash management, payroll services, retirement plans, Health Savings Accounts and credit and debit card processing. Consumer and business deposit products include checking accounts, savings deposits, market rate accounts, Individual Retirement Accounts (IRAs), time deposits and debit cards.

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

     The Wholesale Banking Group serves businesses across the United States with annual sales generally in excess of $10 million. Wholesale Banking provides a complete line of commercial, corporate and real estate banking products and services. These include traditional commercial loans and lines of credit, letters of credit, asset-based lending, equipment leasing, mezzanine financing, high-yield debt, international trade facilities, foreign exchange services, treasury management, investment management, institutional fixed income and equity sales, interest rate, commodity and equity risk management, online/electronic products such as the Commercial Electronic Office^® (CEO^®) portal, insurance brokerage services and investment banking services. Wholesale Banking manages and administers institutional investments, employee benefit trusts and mutual funds, including the Wells Fargo Advantage Funds. Wholesale Banking includes the majority ownership interest in the Wells Fargo HSBC Trade Bank, which provides trade financing, letters of credit and collection services and is sometimes supported by the Export-Import Bank of the United States (a public agency of the United States offering export finance support for American-made products). Wholesale Banking also supports the commercial real estate market with products and services such as construction loans for commercial and residential development, land acquisition and development loans, secured and unsecured lines of credit, interim financing arrangements for completed structures, rehabilitation loans, affordable housing loans and letters of credit, permanent loans for securitization, commercial real estate loan servicing and real estate and mortgage brokerage services.

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

     The “Other” Column consists of unallocated goodwill balances held at the enterprise level. This column also may include separately identified transactions recorded at the enterprise level for management reporting.

94

(income/expense in millions,
average balances in billions)	Community		Wholesale		Wells Fargo		Other		(2)	Consolidated
	Banking		Banking		Financial					Company
2005
Net interest income (1)	$	12,708	$	2,387	$	3,409	$	—		$	18,504
Provision for credit losses		895		1		1,487		—			2,383
Noninterest income		9,822		3,352		1,271		—			14,445
Noninterest expense		13,294		3,165		2,559		—			19,018
Income before income tax expense		8,341		2,573		634		—			11,548
Income tax expense		2,812		840		225		—			3,877
Net income	$	5,529	$	1,733	$	409	$	—		$	7,671
2004
Net interest income (1)	$	12,019	$	2,209	$	2,922	$	—		$	17,150
Provision for credit losses		787		62		868		—			1,717
Noninterest income		8,670		2,974		1,265		—			12,909
Noninterest expense		12,312		2,728		2,357		176			17,573
Income (loss) before income tax expense (benefit)		7,590		2,393		962		(176	)		10,769
Income tax expense (benefit)		2,678		794		345		(62	)		3,755
Net income (loss)	$	4,912	$	1,599	$	617	$	(114	)	$	7,014
2003
Net interest income (1)	$	11,360	$	2,228	$	2,435	$	(16	)	$	16,007
Provision for credit losses		817		177		698		30			1,722
Noninterest income		8,336		2,707		1,339		—			12,382
Noninterest expense		12,332		2,579		2,228		51			17,190
Income (loss) before income tax expense (benefit)		6,547		2,179		848		(97	)		9,477
Income tax expense (benefit)		2,259		733		317		(34	)		3,275
Net income (loss)	$	4,288	$	1,446	$	531	$	(63	)	$	6,202
2005
Average loans	$	187.0	$	62.2	$	46.9	$	—		$	296.1
Average assets		298.6		88.7		52.7		5.8			445.8
Average core deposits		218.2		24.6		—		—			242.8
2004
Average loans	$	178.9	$	53.1	$	37.6	$	—		$	269.6
Average assets		284.2		77.6		43.0		5.8			410.6
Average core deposits		197.8		25.5		.1		—			223.4

(1)

Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment. In general, Community Banking has excess liabilities and receives interest credits for the funding it provides the other segments.

(2)

The items recorded at the enterprise level included a $176 million loss on debt extinguishment for 2004 and a $30 million non-recurring loss on sale of a sub-prime credit card portfolio and $51 million of other charges related to employee benefits and software for 2003.

95

Note 20: Securitizations and Variable Interest Entities

We routinely originate, securitize and sell into the secondary market home mortgage loans and, from time to time, other financial assets, including student loans, commercial mortgage loans, home equity loans, auto receivables and securities. We typically retain the servicing rights and may retain other beneficial interests from these sales. Through these securitizations, which are structured without recourse to us and with no restrictions on the retained interests, we may be exposed to a liability under standard representations and warranties we make to purchasers and issuers. The amount recorded for this liability was not material to our consolidated financial statements at year-end 2005 or 2004. We do not have significant credit risks from the retained interests.

     We recognized gains of $326 million from sales of financial assets in securitizations in 2005 and $199 million in 2004. Additionally, we had the following cash flows with our securitization trusts.

(in millions)	Year ended December 31								,
	2005				2004
	Mortgage		Other		Mortgage		Other
	loans		financial		loans		financial
			assets				assets
Sales proceeds from securitizations	$	40,982	$	225	$	33,550	$	—
Servicing fees		154		—		88		—
Cash flows on other retained interests		560		6		138		11

     In the normal course of creating securities to sell to investors, we may sponsor special-purpose entities that hold, for the benefit of the investors, financial instruments that are the source of payment to the investors. Special-purpose entities are consolidated unless they meet the criteria for a qualifying special-purpose entity in accordance with FAS 140 or are not required to be consolidated under existing accounting guidance.

     For securitizations completed in 2005 and 2004, we used the following assumptions to determine the fair value of mortgage servicing rights and other retained interests at the date of securitization.

	Mortgage						Other retained
	servicing rights						interests
	2005			2004			2005			2004
Prepayment speed (annual CPR (1)) (2)		16.9	%		16.8	%		12.7	%		14.9	%
Life (in years) (2)		5.6			4.9			7.0			3.9
Discount rate (2)		10.1	%		9.9	%		10.2	%		10.3	%

(1)	Constant prepayment rate.
(2)	Represents weighted averages for all retained interests resulting from securitizations completed in 2005 and 2004.

     We also retained some AAA-rated floating-rate mortgage-backed securities. The fair value at the date of securitization was determined using quoted market prices. The implied CPR, life, and discount spread to the London Interbank Offered Rate (LIBOR) curve at the date of securitization is presented in the following table.

	Retained interest – AAA
	mortgage-backed securities
	2005			2004
Prepayment speed (annual CPR)		26.8	%		34.8	%
Life (in years)		2.4			2.2
Discount spread to LIBOR curve		.22	%		.32	%

     Key economic assumptions and the sensitivity of the current fair value to immediate adverse changes in those assumptions at December 31, 2005, for mortgage servicing rights, both purchased and retained, and other retained interests related to residential mortgage loan securitizations are presented in the following table.

($ in millions)	Mortgage			Other retained
	servicing rights			interests
Fair value of retained interests	$	12,687		$	223
Expected weighted-average life (in years)		5.8			6.4
Prepayment speed assumption (annual CPR)		11.6	%		8.6	%
Decrease in fair value from 10% adverse change	$	441		$	7
Decrease in fair value from 25% adverse change		1,032			17
Discount rate assumption		10.5	%		10.5	%
Decrease in fair value from 100 basis point adverse change	$	476		$	7
Decrease in fair value from 200 basis point adverse change		916			14

     Key economic assumptions and the sensitivity of the current fair value to immediate adverse changes in those assumptions at December 31, 2005, for the AAA-rated floating-rate mortgage-backed securities related to residential mortgage loan securitizations are presented in the table on the next page. The fair value of these securities was determined using quoted market prices.

96

($ in millions)	Retained
	interest – AAA
	mortgage-
	backed
	securities
Fair value of retained interests	$	3,358
Expected weighted-average life (in years)		2.2
Prepayment speed assumption (annual CPR)		28.1	%
Decrease in fair value from 10% adverse change	$	—
Decrease in fair value from 25% adverse change		—
Discount spread to LIBOR curve assumption		.22	%
Decrease in fair value from 10 basis point adverse change	$	7
Decrease in fair value from 20 basis point adverse change		14

     The sensitivities in the previous tables are hypothetical and should be relied on with caution. Changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship of the change in the assumption to the change in fair value may not be linear. Also, in the previous tables, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated independently without changing any other assumption. In reality, changes in one factor may result in changes in another (for example, changes in prepayment speed estimates could result in changes in the discount rates), which might magnify or counteract the sensitivities.

     This table presents information about the principal balances of owned and securitized loans.

(in millions)	December 31									,	Year ended December 31					,
	Total loans				(1)	Delinquent loans				(2)	Net charge-offs (recoveries					)
	2005		2004			2005		2004			2005			2004
Commercial and commercial real estate:
Commercial	$	61,552	$	54,517		$	304	$	371		$	273		$	274
Other real estate mortgage		45,042		48,402			344		370			11			32
Real estate construction		13,406		9,025			40		63			(7	)		(1	)
Lease financing		5,400		5,169			45		68			14			36
Total commercial and commercial real estate		125,400		117,113			733		872			291			341
Consumer:
Real estate 1-4 family first mortgage		136,261		132,703			709		724			90			47
Real estate 1-4 family junior lien mortgage		59,143		52,190			194		132			105			83
Credit card		12,009		10,260			159		150			467			401
Other revolving credit and installment		48,287		43,744			470		476			1,115			699
Total consumer		255,700		238,897			1,532		1,482			1,777			1,230
Foreign		5,930		4,527			71		99			239			122
Total loans owned and securitized		387,030		360,537		$	2,336	$	2,453		$	2,307		$	1,693
Less:
Securitized loans		35,047		34,489
Mortgages held for sale		40,534		29,723
Loans held for sale		612		8,739
Total loans held	$	310,837	$	287,586

(1)	Represents loans on the balance sheet or that have been securitized, but excludes securitized loans that we continue to service but as to which we have no other continuing involvement.
(2)	Includes nonaccrual loans and loans 90 days or more past due and still accruing.

     We are a variable interest holder in certain special-purpose entities that are consolidated because we absorb a majority of each entity’s expected losses, receive a majority of each entity’s expected returns or both. We do not hold a majority voting interest in these entities. Our consolidated variable interest entities (VIEs), substantially all of which were formed to invest in securities and to securitize real estate investment trust securities, had approximately $2.5 billion and $6 billion in total assets at December 31, 2005 and 2004, respectively. The primary activities of these entities consist of acquiring and disposing of, and investing and reinvesting in securities, and issuing beneficial interests secured by those securities to investors. The creditors of most of these consolidated entities have no recourse against us.

     We also hold variable interests greater than 20% but less than 50% in certain special-purpose entities formed to provide affordable housing and to securitize corporate debt that had approximately $3 billion in total assets at December 31, 2005 and 2004. We are not required to consolidate these entities. Our maximum exposure to loss as a result of our involvement with these unconsolidated variable interest entities was approximately $870 million and $950 million at December 31, 2005 and 2004, respectively, predominantly representing investments in entities formed to invest in affordable housing. We, however, expect to recover our investment over time primarily through realization of federal low-income housing tax credits.

97

Note 21: Mortgage Banking Activities

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

     The components of mortgage banking noninterest income were:

(in millions)	Year ended December 31								,
	2005			2004			2003
Servicing income, net:
Servicing fees (1)	$	2,457		$	2,101		$	1,787
Amortization		(1,991	)		(1,826	)		(2,760	)
Reversal of provision (provision) for mortgage servicing rights in excess of fair value		378			208			(1,092	)
Net derivative gains (losses):
Fair value hedges (2)		(46	)		554			1,111
Other (3)		189			—			—
Total servicing income, net		987			1,037			(954	)
Net gains on mortgage loan origination/sales activities		1,085			539			3,019
All other		350			284			447
Total mortgage banking noninterest income	$	2,422		$	1,860		$	2,512

(1)	Includes impairment write-downs on other retained interests of $79 million for 2003. There were no impairment write-downs on other retained interests for 2005 and 2004.
(2)	Results related to mortgage servicing rights fair value hedging activities consist of gains (losses) excluded from the evaluation of hedge effectiveness and the ineffective portion of the change in the value of these derivatives. Gains and losses excluded from the evaluation of hedge effectiveness are those caused by market conditions (volatility) and the spread between spot and forward rates priced into the derivative contracts (the passage of time). See Note 26 – Fair Value Hedges for additional discussion and detail.
(3)	Other consists of results from free-standing derivatives used to economically hedge the risk of changes in fair value of mortgage servicing rights. See Note 26 – Free-Standing Derivatives for additional discussion and detail.

     At the end of each quarter, we evaluate MSRs for possible impairment based on the difference between the carrying amount and current fair value of the MSRs by risk stratification. If a temporary impairment exists, we establish a valuation allowance for any excess of amortized cost, as adjusted for hedge accounting, over the current fair value through a charge to income. We have a policy of reviewing MSRs for other-than-temporary impairment each quarter and recognize a direct write-down when the recoverability of a recorded valuation allowance is determined to be remote. Unlike a valuation allowance, a direct write-down permanently reduces the carrying value of the MSRs and the valuation allowance, precluding subsequent reversals. (See Note 1 –Transfers and Servicing of Financial Assets for additional discussion of our policy for valuation of MSRs.)

     The changes in mortgage servicing rights were:

(in millions)	Year ended December 31								,
	2005			2004			2003
Mortgage servicing rights:
Balance, beginning of year	$	9,466		$	8,848		$	6,677
Originations (1)		2,652			1,769			3,546
Purchases (1)		2,683			1,353			2,140
Amortization		(1,991	)		(1,826	)		(2,760	)
Write-down		—			(169	)		(1,338	)
Other (includes changes in mortgage servicing rights due to hedging)		888			(509	)		583
Balance, end of year	$	13,698		$	9,466		$	8,848
Valuation allowance:
Balance, beginning of year	$	1,565		$	1,942		$	2,188
Provision (reversal of provision) for mortgage servicing rights in excess of fair value		(378	)		(208	)		1,092
Write-down of mortgage servicing rights		—			(169	)		(1,338	)
Balance, end of year	$	1,187		$	1,565		$	1,942
Mortgage servicing rights, net	$	12,511		$	7,901		$	6,906
Ratio of mortgage servicing rights to related loans serviced for others		1.44	%		1.15	%		1.15	%

(1) Based on December 31, 2005, assumptions, the weighted-average amortization period for mortgage servicing rights added during the year was approximately 5.6 years.

     The components of our managed servicing portfolio were:

(in billions)	December 31				,
	2005		2004
Loans serviced for others (1)	$	871	$	688
Owned loans serviced (2)		118		117
Total owned servicing		989		805
Sub-servicing		27		27
Total managed servicing portfolio	$	1,016	$	832

(1)	Consists of 1-4 family first mortgage and commercial mortgage loans.
(2)	Consists of mortgages held for sale and 1-4 family first mortgage loans.

98

Note 22: Condensed Consolidating Financial Statements

Following are the condensed consolidating financial statements of the Parent and Wells Fargo Financial, Inc. and its wholly-owned subsidiaries (WFFI). The Wells Fargo Financial business segment for management reporting

(see Note 19) consists of WFFI and other affiliated consumer finance entities managed by WFFI that are included within other consolidating subsidiaries in the following tables.

Condensed Consolidating Statement of Income
(in millions)	Parent		WFFI			Other		Eliminations			Consolidated
						consolidating					Company
						subsidiaries
Year ended December 31, 2005
Dividends from subsidiaries:
Bank	$	4,675	$	—		$	—	$	(4,675	)	$	—
Nonbank		763		—			—		(763	)		—
Interest income from loans		—		4,467			16,809		(16	)		21,260
Interest income from subsidiaries		2,215		—			—		(2,215	)		—
Other interest income		105		104			4,493		—			4,702
Total interest income		7,758		4,571			21,302		(7,669	)		25,962
Deposits		—		—			3,848		—			3,848
Short-term borrowings		256		223			897		(632	)		744
Long-term debt		2,000		1,362			598		(1,094	)		2,866
Total interest expense		2,256		1,585			5,343		(1,726	)		7,458
NET INTEREST INCOME		5,502		2,986			15,959		(5,943	)		18,504
Provision for credit losses		—		1,582			801		—			2,383
Net interest income after provision for credit losses		5,502		1,404			15,158		(5,943	)		16,121
NONINTEREST INCOME
Fee income — nonaffiliates		—		224			8,111		—			8,335
Other		298		223			5,727		(138	)		6,110
Total noninterest income		298		447			13,838		(138	)		14,445
NONINTEREST EXPENSE
Salaries and benefits		92		985			9,378		—			10,455
Other		50		759			8,398		(644	)		8,563
Total noninterest expense		142		1,744			17,776		(644	)		19,018
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES		5,658		107			11,220		(5,437	)		11,548
Income tax expense (benefit)		145		(2	)		3,734		—			3,877
Equity in undistributed income of subsidiaries		2,158		—			—		(2,158	)		—
NET INCOME	$	7,671	$	109		$	7,486	$	(7,595	)	$	7,671

99

Condensed Consolidating Statements of Income
(in millions)	Parent			WFFI		Other		Eliminations			Consolidated
						consolidating					Company
						subsidiaries
Year ended December 31, 2004
Dividends from subsidiaries:
Bank	$	3,652		$	—	$	—	$	(3,652	)	$	—
Nonbank		307			—		—		(307	)		—
Interest income from loans		—			3,548		13,233		—			16,781
Interest income from subsidiaries		1,117			—		—		(1,117	)		—
Other interest income		91			84		4,011		—			4,186
Total interest income		5,167			3,632		17,244		(5,076	)		20,967
Deposits		—			—		1,827		—			1,827
Short-term borrowings		106			47		458		(258	)		353
Long-term debt		872			1,089		387		(711	)		1,637
Total interest expense		978			1,136		2,672		(969	)		3,817
NET INTEREST INCOME		4,189			2,496		14,572		(4,107	)		17,150
Provision for credit losses		—			833		884		—			1,717
Net interest income after provision for credit losses		4,189			1,663		13,688		(4,107	)		15,433
NONINTEREST INCOME
Fee income — nonaffiliates		—			223		7,319		—			7,542
Other		139			256		5,053		(81	)		5,367
Total noninterest income		139			479		12,372		(81	)		12,909
NONINTEREST EXPENSE
Salaries and benefits		64			944		7,916		—			8,924
Other		313			746		7,820		(230	)		8,649
Total noninterest expense		377			1,690		15,736		(230	)		17,573
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES		3,951			452		10,324		(3,958	)		10,769
Income tax expense (benefit)		(97	)		159		3,693		—			3,755
Equity in undistributed income of subsidiaries		2,966			—		—		(2,966	)		—
NET INCOME	$	7,014		$	293	$	6,631	$	(6,924	)	$	7,014
Year ended December 31, 2003
Dividends from subsidiaries:
Bank	$	5,194		$	—	$	—	$	(5,194	)	$	—
Nonbank		841			—		—		(841	)		—
Interest income from loans		2			2,799		11,136		—			13,937
Interest income from subsidiaries		567			—		—		(567	)		—
Other interest income		75			77		5,329		—			5,481
Total interest income		6,679			2,876		16,465		(6,602	)		19,418
Short-term borrowings		81			73		413		(245	)		322
Long-term debt		560			730		321		(256	)		1,355
Other interest expense		—			—		1,734		—			1,734
Total interest expense		641			803		2,468		(501	)		3,411
NET INTEREST INCOME		6,038			2,073		13,997		(6,101	)		16,007
Provision for credit losses		—			814		908		—			1,722
Net interest income after provision for credit losses		6,038			1,259		13,089		(6,101	)		14,285
NONINTEREST INCOME
Fee income — nonaffiliates		—			209		6,664		—			6,873
Other		167			239		5,195		(92	)		5,509
Total noninterest income		167			448		11,859		(92	)		12,382
NONINTEREST EXPENSE
Salaries and benefits		134			745		7,567		—			8,446
Other		18			583		8,301		(158	)		8,744
Total noninterest expense		152			1,328		15,868		(158	)		17,190
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES		6,053			379		9,080		(6,035	)		9,477
Income tax expense (benefit)		(48	)		143		3,180		—			3,275
Equity in undistributed income of subsidiaries		101			—		—		(101	)		—
NET INCOME	$	6,202		$	236	$	5,900	$	(6,136	)	$	6,202

100

Condensed Consolidating Balance Sheets
(in millions)	Parent		WFFI			Other			Eliminations			Consolidated
						consolidating						Company
						subsidiaries
December 31, 2005
ASSETS
Cash and cash equivalents due from:
Subsidiary banks	$	10,720	$	255		$	25		$	(11,000	)	$	—
Nonaffiliates		74		219			20,410			—			20,703
Securities available for sale		888		1,763			39,189			(6	)		41,834
Mortgages and loans held for sale		—		32			41,114			—			41,146
Loans		1		44,598			267,121			(883	)		310,837
Loans to subsidiaries:
Bank		3,100		—			—			(3,100	)		—
Nonbank		44,935		1,003			—			(45,938	)		—
Allowance for loan losses		—		(1,280	)		(2,591	)		—			(3,871	)
Net loans		48,036		44,321			264,530			(49,921	)		306,966
Investments in subsidiaries:
Bank		37,298		—			—			(37,298	)		—
Nonbank		4,258		—			—			(4,258	)		—
Other assets		6,272		1,247			65,336			(1,763	)		71,092
Total assets	$	107,546	$	47,837		$	430,604		$	(104,246	)	$	481,741
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	—	$	—		$	325,450		$	(11,000	)	$	314,450
Short-term borrowings		81		9,005			28,746			(13,940	)		23,892
Accrued expenses and other liabilities		3,480		1,241			20,856			(2,506	)		23,071
Long-term debt		59,341		35,087			16,613			(31,373	)		79,668
Indebtedness to subsidiaries		3,984		—			—			(3,984	)		—
Total liabilities		66,886		45,333			391,665			(62,803	)		441,081
Stockholders’ equity		40,660		2,504			38,939			(41,443	)		40,660
Total liabilities and stockholders’ equity	$	107,546	$	47,837		$	430,604		$	(104,246	)	$	481,741
December 31, 2004
ASSETS
Cash and cash equivalents due from:
Subsidiary banks	$	9,493	$	171		$	—		$	(9,664	)	$	—
Nonaffiliates		226		311			17,386			—			17,923
Securities available for sale		1,419		1,841			30,463			(6	)		33,717
Mortgages and loans held for sale		—		23			38,439			—			38,462
Loans		1		33,624			253,961			—			287,586
Loans to subsidiaries:
Bank		700		—			—			(700	)		—
Nonbank		36,368		856			—			(37,224	)		—
Allowance for loan losses		—		(952	)		(2,810	)		—			(3,762	)
Net loans		37,069		33,528			251,151			(37,924	)		283,824
Investments in subsidiaries:
Bank		35,357		—			—			(35,357	)		—
Nonbank		4,413		—			—			(4,413	)		—
Other assets		4,720		807			48,997			(601	)		53,923
Total assets	$	92,697	$	36,681		$	386,436		$	(87,965	)	$	427,849
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	—	$	—		$	284,522		$	(9,664	)	$	274,858
Short-term borrowings		65		5,662			27,985			(11,750	)		21,962
Accrued expenses and other liabilities		2,535		1,103			17,342			(1,397	)		19,583
Long-term debt		50,146		27,508			19,354			(23,428	)		73,580
Indebtedness to subsidiaries		2,085		—			—			(2,085	)		—
Total liabilities		54,831		34,273			349,203			(48,324	)		389,983
Stockholders’ equity		37,866		2,408			37,233			(39,641	)		37,866
Total liabilities and stockholders’ equity	$	92,697	$	36,681		$	386,436		$	(87,965	)	$	427,849

101

Condensed Consolidating Statement of Cash Flows
(in millions)	Parent			WFFI			Other			Consolidated
							consolidating			Company
							subsidiaries		/
							eliminations
Year ended December 31, 2005
Cash flows from operating activities:
Net cash provided (used) by operating activities	$	5,396		$	1,159		$	(15,888	)	$	(9,333	)
Cash flows from investing activities:
Securities available for sale:
Sales proceeds		631			281			18,147			19,059
Prepayments and maturities		90			248			6,634			6,972
Purchases		(231	)		(486	)		(27,917	)		(28,634	)
Net cash acquired from acquisitions		—			—			66			66
Increase in banking subsidiaries’ loan originations, net of collections		—			(953	)		(41,356	)		(42,309	)
Proceeds from sales (including participations) of loans by banking subsidiaries		—			232			42,007			42,239
Purchases (including participations) of loans by banking subsidiaries		—			—			(8,853	)		(8,853	)
Principal collected on nonbank entities’ loans		—			19,542			3,280			22,822
Loans originated by nonbank entities		—			(29,757	)		(3,918	)		(33,675	)
Net advances to nonbank entities		(3,166	)		—			3,166			—
Capital notes and term loans made to subsidiaries		(10,751	)		—			10,751			—
Principal collected on notes/loans made to subsidiaries		2,950			—			(2,950	)		—
Net decrease (increase) in investment in subsidiaries		194			—			(194	)		—
Other, net		—			(1,059	)		(6,697	)		(7,756	)
Net cash used by investing activities		(10,283	)		(11,952	)		(7,834	)		(30,069	)
Cash flows from financing activities:
Net increase in deposits		—			—			38,961			38,961
Net increase (decrease) in short-term borrowings		1,048			3,344			(2,514	)		1,878
Proceeds from issuance of long-term debt		18,297			11,891			(3,715	)		26,473
Long-term debt repayment		(8,216	)		(4,450	)		(5,910	)		(18,576	)
Proceeds from issuance of common stock		1,367			—			—			1,367
Common stock repurchased		(3,159	)		—			—			(3,159	)
Cash dividends paid on common stock		(3,375	)		—			—			(3,375	)
Other, net		—			—			(1,673	)		(1,673	)
Net cash provided by financing activities		5,962			10,785			25,149			41,896
Net change in cash and due from banks		1,075			(8	)		1,427			2,494
Cash and due from banks at beginning of year		9,719			482			2,702			12,903
Cash and due from banks at end of year	$	10,794		$	474		$	4,129		$	15,397

102

Condensed Consolidating Statement of Cash Flows
(in millions)	Parent			WFFI			Other			Consolidated
							consolidating			Company
							subsidiaries		/
							eliminations
Year ended December 31, 2004
Cash flows from operating activities:
Net cash provided by operating activities	$	3,848		$	1,297		$	1,340		$	6,485
Cash flows from investing activities:
Securities available for sale:
Sales proceeds		78			268			5,976			6,322
Prepayments and maturities		160			152			8,511			8,823
Purchases		(207	)		(580	)		(15,796	)		(16,583	)
Net cash paid for acquisitions		—			—			(331	)		(331	)
Increase in banking subsidiaries’ loan originations, net of collections		—			—			(33,800	)		(33,800	)
Proceeds from sales (including participations) of loans by banking subsidiaries		—			—			14,540			14,540
Purchases (including participations) of loans by banking subsidiaries		—			—			(5,877	)		(5,877	)
Principal collected on nonbank entities’ loans		—			17,668			328			17,996
Loans originated by nonbank entities		—			(27,778	)		27			(27,751	)
Net advances to nonbank entities		(92	)		—			92			—
Capital notes and term loans made to subsidiaries		(11,676	)		—			11,676			—
Principal collected on notes/loans made to subsidiaries		896			—			(896	)		—
Net decrease (increase) in investment in subsidiaries		(353	)		—			353			—
Other, net		—			(121	)		(2,652	)		(2,773	)
Net cash used by investing activities		(11,194	)		(10,391	)		(17,849	)		(39,434	)
Cash flows from financing activities:
Net increase (decrease) in deposits		—			(110	)		27,437			27,327
Net increase (decrease) in short-term borrowings		(831	)		683			(2,549	)		(2,697	)
Proceeds from issuance of long-term debt		19,610			12,919			(3,135	)		29,394
Long-term debt repayment		(4,452	)		(4,077	)		(11,110	)		(19,639	)
Proceeds from issuance of common stock		1,271			—			—			1,271
Common stock repurchased		(2,188	)		—			—			(2,188	)
Cash dividends paid on common stock		(3,150	)		—			—			(3,150	)
Other, net		—			—			(13	)		(13	)
Net cash provided by financing activities		10,260			9,415			10,630			30,305
Net change in cash and due from banks		2,914			321			(5,879	)		(2,644	)
Cash and due from banks at beginning of year		6,805			161			8,581			15,547
Cash and due from banks at end of year	$	9,719		$	482		$	2,702		$	12,903

103

Condensed Consolidating Statement of Cash Flows
(in millions)	Parent			WFFI			Other			Consolidated
							consolidating			Company
							subsidiaries		/
							eliminations
Year ended December 31, 2003
Cash flows from operating activities:
Net cash provided by operating activities	$	6,352		$	1,271		$	23,572		$	31,195
Cash flows from investing activities:
Securities available for sale:
Sales proceeds		146			347			6,864			7,357
Prepayments and maturities		150			223			12,779			13,152
Purchases		(655	)		(732	)		(23,744	)		(25,131	)
Net cash paid for acquisitions		(55	)		(600	)		(167	)		(822	)
Increase in banking subsidiaries’ loan originations, net of collections		—			—			(36,235	)		(36,235	)
Proceeds from sales (including participations) of loans by banking subsidiaries		—			—			1,590			1,590
Purchases (including participations) of loans by banking subsidiaries		—			—			(15,087	)		(15,087	)
Principal collected on nonbank entities’ loans		3,683			13,335			620			17,638
Loans originated by nonbank entities		—			(21,035	)		(757	)		(21,792	)
Purchases of loans by nonbank entities		(3,682	)		—			—			(3,682	)
Net advances to nonbank entities		(2,570	)		—			2,570			—
Capital notes and term loans made to subsidiaries		(14,614	)		—			14,614			—
Principal collected on notes/loans made to subsidiaries		6,160			—			(6,160	)		—
Net decrease (increase) in investment in subsidiaries		122			—			(122	)		—
Other, net		—			107			(74	)		33
Net cash used by investing activities		(11,315	)		(8,355	)		(43,309	)		(62,979	)
Cash flows from financing activities:
Net increase in deposits		—			22			28,621			28,643
Net decrease in short-term borrowings		(1,182	)		(676	)		(7,043	)		(8,901	)
Proceeds from issuance of long-term debt		15,656			10,355			3,479			29,490
Long-term debt repayment		(3,425	)		(2,151	)		(12,355	)		(17,931	)
Proceeds from issuance of guaranteed preferred beneficial interests in Company’s subordinated debentures		700			—			—			700
Proceeds from issuance of common stock		944			—			—			944
Preferred stock redeemed		(73	)		—			—			(73	)
Common stock repurchased		(1,482	)		—			—			(1,482	)
Cash dividends paid on preferred and common stock		(2,530	)		(600	)		600			(2,530	)
Other, net		—			—			651			651
Net cash provided by financing activities		8,608			6,950			13,953			29,511
Net change in cash and due from banks		3,645			(134	)		(5,784	)		(2,273	)
Cash and due from banks at beginning of year		3,160			295			14,365			17,820
Cash and due from banks at end of year	$	6,805		$	161		$	8,581		$	15,547

Note 23: Legal Actions

In the normal course of business, we are subject to pending and threatened legal actions, some for which the relief or damages sought are substantial. After reviewing pending and threatened actions with counsel, and any specific reserves established for such matters, management believes that the outcome of such actions will not have a material

adverse effect on the results of operations or stockholders’ equity. We are not able to predict whether the outcome of such actions may or may not have a material adverse effect on results of operations in a particular future period as the timing and amount of any resolution of such actions and its relationship to the future results of operations are not known.

104

Note 24:   Guarantees

We provide significant guarantees to third parties including standby letters of credit, various indemnification agreements, guarantees accounted for as derivatives, contingent consideration related to business combinations and contingent performance guarantees.

     We issue standby letters of credit, which include performance and financial guarantees, for customers in connection with contracts between the customers and third parties. Standby letters of credit assure that the third parties will receive specified funds if customers fail to meet their contractual obligations. We are obliged to make payment if a customer defaults. Standby letters of credit were $10.9 billion at December 31, 2005, and $9.4 billion at December 31, 2004, including financial guarantees of $6.4 billion and $5.3 billion, respectively, that we had issued or purchased participations in. Standby letters of credit are net of participations sold to other institutions of $2.1 billion at December 31, 2005, and $1.7 billion at December 31, 2004. We consider the credit risk in standby letters of credit in determining the allowance for credit losses. Deferred fees for these standby letters of credit were not significant to our financial statements. We also had commitments for commercial and similar letters of credit of $761 million at December 31, 2005, and $731 million at December 31, 2004. At December 31, 2004, we also provided a back-up liquidity facility to a commercial paper conduit that we considered to be a financial guarantee. This credit facility, which was terminated in 2005, would have required us to advance, under certain conditions, up to $860 million at December 31, 2004. This back-up liquidity facility was included within our commercial loan commitments at December 31, 2004, and was substantially collateralized in the event it was drawn upon.

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

     We write options, floors and caps. Options are exercisable based on favorable market conditions. Periodic settlements occur on floors and caps based on market conditions. The fair value of the written options liability in our balance sheet

was $563 million at December 31, 2005, and $374 million at December 31, 2004. The aggregate written floors and caps liability was $169 million and $227 million, respectively. Our ultimate obligation under written options, floors and caps is based on future market conditions and is only quantifiable at settlement. The notional value related to written options was $45.5 billion at December 31, 2005, and $29.7 billion at December 31, 2004, and the aggregate notional value related to written floors and caps was $24.3 billion and $34.7 billion, respectively. We offset substantially all options written to customers with purchased options.

     We also enter into credit default swaps under which we buy loss protection from or sell loss protection to a counterparty in the event of default of a reference obligation. The carrying amount of the contracts sold was a liability of $6 million at December 31, 2005, and $2 million at December 31, 2004. The maximum amount we would be required to pay under the swaps in which we sold protection, assuming all reference obligations default at a total loss, without recoveries, was $2.7 billion and $2.6 billion based on notional value at December 31, 2005 and 2004, respectively. We purchased credit default swaps of comparable notional amounts to mitigate the exposure of the written credit default swaps at December 31, 2005 and 2004. These purchased credit default swaps had terms (i.e., used the same reference obligation and maturity) that would offset our exposure from the written default swap contracts in which we are providing protection to a counterparty.

     In connection with certain brokerage, asset management and insurance agency acquisitions we have made, the terms of the acquisition agreements provide for deferred payments or additional consideration based on certain performance targets. At December 31, 2005 and 2004, the amount of contingent consideration we expected to pay was not significant to our financial statements.

     We have entered into various contingent performance guarantees through credit risk participation arrangements with remaining terms ranging from one to 24 years. We will be required to make payments under these guarantees if a customer defaults on its obligation to perform under certain credit agreements with third parties. Because the extent of our obligations under these guarantees depends entirely on future events, our potential future liability under these agreements is not fully determinable. However, our exposure under most of the agreements can be quantified and for those agreements our exposure was contractually limited to an aggregate liability of approximately $110 million at December 31, 2005, and $370 million at December 31, 2004.

105

Note 25:   Regulatory and Agency Capital Requirements

The Company and each of its subsidiary banks are subject to various regulatory capital adequacy requirements administered by the Federal Reserve Board (FRB) and the OCC, respectively. The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) required that the federal regulatory agencies adopt regulations defining five capital tiers for banks: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements.

     Quantitative measures, established by the regulators to ensure capital adequacy, require that the Company and each of the subsidiary banks maintain minimum ratios (set forth in the table below) of capital to risk-weighted assets. There are three categories of capital under the guidelines. Tier 1 capital includes common stockholders’ equity, qualifying preferred stock and trust preferred securities, less goodwill and certain other deductions (including a portion of servicing assets and the unrealized net gains and losses, after taxes, on securities available for sale). Tier 2 capital includes preferred stock not qualifying as Tier 1 capital, subordinated debt, the allowance for credit losses and net unrealized gains on marketable equity securities, subject to limitations by the guidelines. Tier 2 capital is limited to the amount of Tier 1 capital (i.e., at least half of the total capital must be in the form of Tier 1 capital). Tier 3 capital includes certain qualifying unsecured subordinated debt.

     We do not consolidate our wholly-owned trusts (the Trusts) formed solely to issue trust preferred securities. The amount

of trust preferred securities issued by the Trusts that was includable in Tier 1 capital in accordance with FRB risk-based capital guidelines was $4.2 billion at December 31, 2005. The junior subordinated debentures held by the Trusts were included in the Company’s long-term debt. (See Note 12.)

     Under the guidelines, capital is compared with the relative risk related to the balance sheet. To derive the risk included in the balance sheet, a risk weighting is applied to each balance sheet asset and off-balance sheet item, primarily based on the relative credit risk of the counterparty. For example, claims guaranteed by the U.S. government or one of its agencies are risk-weighted at 0% and certain real estate related loans risk-weighted at 50%. Off-balance sheet items, such as loan commitments and derivatives, are also applied a risk weight after calculating balance sheet equivalent amounts. A credit conversion factor is assigned to loan commitments based on the likelihood of the off-balance sheet item becoming an asset. For example, certain loan commitments are converted at 50% and then risk-weighted at 100%. Derivatives are converted to balance sheet equivalents based on notional values, replacement costs and remaining contractual terms. (See Notes 6 and 26 for further discussion of off-balance sheet items.) For certain recourse obligations, direct credit substitutes, residual interests in asset securitization, and other securitized transactions that expose institutions primarily to credit risk, the capital amounts and classification under the guidelines are subject to qualitative judgments by the regulators about components, risk weightings and other factors.

(in billions)											To be well
											capitalized under
											the FDICIA
						For capital					prompt corrective
	Actual					adequacy purposes					action provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2005:
Total capital (to risk-weighted assets)
Wells Fargo & Company	$	44.7		11.64	%	>$	30.7	>	8.00	%
Wells Fargo Bank, N.A.		34.7		11.04		>	25.2	>	8.00		>$	31.5	>	10.00	%
Tier 1 capital (to risk-weighted assets)
Wells Fargo & Company	$	31.7		8.26	%	>$	15.4	>	4.00	%
Wells Fargo Bank, N.A.		25.2		8.01		>	12.6	>	4.00		>$	18.9	>	6.00	%
Tier 1 capital (to average assets) (Leverage ratio)
Wells Fargo & Company	$	31.7		6.99	%	>$	18.1	>	4.00	%(1)
Wells Fargo Bank, N.A.		25.2		6.61		>	15.3	>	4.00	(1)	>$	19.1	>	5.00	%

(1) The leverage ratio consists of Tier 1 capital divided by quarterly average total assets, excluding goodwill and certain other items. The minimum leverage ratio guideline is 3% for banking organizations that do not anticipate significant growth and that have well-diversified risk, excellent asset quality, high liquidity, good earnings, effective management and monitoring of market risk and, in general, are considered top-rated, strong banking organizations.

106

     Management believes that, as of December 31, 2005, the Company and each of the covered subsidiary banks met all capital adequacy requirements to which they are subject.

     The most recent notification from the OCC categorized each of the covered subsidiary banks as well capitalized, under the FDICIA prompt corrective action provisions applicable to banks. To be categorized as well capitalized, the institution must maintain a total risk-based capital ratio as set forth in the table on the previous page and not be subject to a capital directive order. There are no conditions or events since that notification that management believes

have changed the risk-based capital category of any of the covered subsidiary banks.

     As an approved seller/servicer, Wells Fargo Bank, N.A., through its mortgage banking division, is required to maintain minimum levels of shareholders’ equity, as specified by various agencies, including the United States Department of Housing and Urban Development, Government National Mortgage Association, Federal Home Loan Mortgage Corporation and Federal National Mortgage Association. At December 31, 2005, Wells Fargo Bank, N.A. met these requirements.

Note 26:   Derivatives

Our approach to managing interest rate risk includes the use of derivatives. This helps minimize significant, unplanned fluctuations in earnings, fair values of assets and liabilities, and cash flows caused by interest rate volatility. This approach involves modifying the repricing characteristics of certain assets and liabilities so that changes in interest rates do not have a significant adverse effect on the net interest margin and cash flows. As a result of interest rate fluctuations, hedged assets and liabilities will gain or lose market value. In a fair value hedging strategy, the effect of this unrealized gain or loss will generally be offset by income or loss on the derivatives linked to the hedged assets and liabilities. In a cash flow hedging strategy, we manage the variability of cash payments due to interest rate fluctuations by the effective use of derivatives linked to hedged assets and liabilities.

     We use derivatives as part of our interest rate risk management, including interest rate swaps, caps and floors, futures and forward contracts, and options. We also offer various derivatives, including interest rate, commodity, equity, credit and foreign exchange contracts, to our customers but usually offset our exposure from such contracts by purchasing other financial contracts. The customer accommodations and any offsetting financial contracts are treated as free-standing derivatives. Free-standing derivatives also include derivatives we enter into for risk management that do not otherwise qualify for hedge accounting. To a lesser extent, we take positions based on market expectations or to benefit from price differentials between financial instruments and markets.

     By using derivatives, we are exposed to credit risk if counterparties to financial instruments do not perform as expected. If a counterparty fails to perform, our credit risk is equal to the fair value gain in a derivative contract. We minimize credit risk through credit approvals, limits and monitoring procedures. Credit risk related to derivatives is considered and, if material, provided for separately. As we generally enter into transactions only with counterparties that carry high quality credit ratings, losses from counterparty nonperformance on derivatives have not been significant. Further, we obtain collateral, where appropriate, to reduce risk. To the extent the master netting arrangements meet the requirements of FASB Interpretation No. 39, Offsetting of

Amounts Related to Certain Contracts, as amended by FASB Interpretation No. 41, Offsetting of Amounts Related to Certain Repurchase and Reverse Repurchase Agreements, amounts are shown net in the balance sheet.

     Our derivative activities are monitored by the Corporate Asset/Liability Management Committee. Our Treasury function, which includes asset/liability management, is responsible for various hedging strategies developed through analysis of data from financial models and other internal and industry sources. We incorporate the resulting hedging strategies into our overall interest rate risk management and trading strategies.

Fair Value Hedges

We use derivatives, such as interest rate swaps, swaptions, Treasury futures and options, Eurodollar futures and options, and forward contracts, to manage the risk of changes in the fair value of MSRs and other retained interests. Derivative gains or losses caused by market conditions (volatility) and the spread between spot and forward rates priced into the derivative contracts (the passage of time) are excluded from the evaluation of hedge effectiveness, but are reflected in earnings. Net derivative gains and losses related to our mortgage servicing activities are included in “Servicing income, net” in Note 21.

     We use derivatives, such as Treasury and LIBOR futures and swaptions, to hedge changes in fair value due to changes in interest rates of our commercial real estate mortgages and franchise loans held for sale. The ineffective portion of these fair value hedges is recorded as part of mortgage banking noninterest income in the income statement. We also enter into interest rate swaps, designated as fair value hedges, to convert certain of our fixed-rate long-term debt to floating-rate debt. In addition, we enter into cross-currency swaps and cross-currency interest rate swaps to hedge our exposure to foreign currency risk and interest rate risk associated with the issuance of non-U.S. dollar denominated debt. For commercial real estate, long-term debt and foreign currency hedges, all parts of each derivative’s gain or loss are included in the assessment of hedge effectiveness.

     At December 31, 2005, all designated fair value hedges continued to qualify as fair value hedges.

107

Cash Flow Hedges

We hedge floating-rate senior debt against future interest rate increases by using interest rate swaps to convert floating-rate senior debt to fixed rates and by using interest rate caps and floors to limit variability of rates. We also use derivatives, such as Treasury futures, forwards and options, Eurodollar futures, and forward contracts, to hedge forecasted sales of mortgage loans. Gains and losses on derivatives that are reclassified from cumulative other comprehensive income to current period earnings, are included in the line item in which the hedged item’s effect in earnings is recorded. All parts of gain or loss on these derivatives are included in the assessment of hedge effectiveness. As of December 31, 2005, all designated cash flow hedges continued to qualify as cash flow hedges.

     At December 31, 2005, we expected that $13 million of deferred net losses on derivatives in other comprehensive income will be reclassified as earnings during the next twelve months, compared with $8 million and $9 million of deferred net losses at December 31, 2004 and 2003, respectively. We are hedging our exposure to the variability of future cash flows for all forecasted transactions for a maximum of one year for hedges converting floating-rate loans to fixed rates, 10 years for hedges of floating-rate senior debt and one year for hedges of forecasted sales of mortgage loans.

     The following table provides derivative gains and losses related to fair value and cash flow hedges resulting from the change in value of the derivatives excluded from the assessment of hedge effectiveness and the change in value of the ineffective portion of the derivatives.

(in millions)	December 31								,
	2005			2004			2003
Gains (losses) from derivatives related to MSRs and other retained interests from change in value of:
Derivatives excluded from the assessment of hedge effectiveness	$	338		$	944		$	908
Ineffective portion of derivatives		(384	)		(390	)		203
Net derivative gains (losses) related to MSRs and other retained interests	$	(46	)	$	554		$	1,111
Losses from ineffective portion of change in the value of other fair value hedges (1)	$	(15	)	$	(21	)	$	(22	)
Gains from ineffective portion of change in the value of cash flow hedges	$	23		$	10		$	72

(1) Includes commercial real estate, long-term debt and foreign currency.

Free-Standing Derivatives

We enter into various derivatives primarily to provide derivative products to customers. To a lesser extent, we take positions based on market expectations or to benefit from price differentials between financial instruments and markets. These derivatives are not linked to specific assets and liabilities on the balance sheet or to forecasted transactions in an accounting hedge relationship and, therefore, do not qualify for hedge accounting. We also enter into free-standing derivatives for risk management that do not otherwise qualify for hedge accounting. They are carried at fair value with changes in fair value recorded as part of other noninterest income in the income statement.

     Interest rate lock commitments for residential mortgage loans that we intend to resell are considered free-standing derivatives. Our interest rate exposure on these derivative loan commitments is economically hedged with Treasury futures, forwards and options, Eurodollar futures, and forward contracts. The commitments and free-standing derivatives are carried at fair value with changes in fair value recorded as a part of mortgage banking noninterest income in the income statement. We record a zero fair value for a derivative loan commitment at inception consistent with EITF 02-3, Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities,

and Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 105, Application of Accounting Principles to Loan Commitments. Changes subsequent to inception are based on changes in fair value of the underlying loan resulting from the exercise of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and passage of time. The aggregate fair value of derivative loan commitments on the consolidated balance sheet at December 31, 2005 and 2004, was a net liability of $54 million and $38 million, respectively; and is included in the caption “Interest rate contracts – Options written” under Customer Accommodations and Trading in the following table.

     In 2005, we also used derivatives, such as swaps, swaptions, Treasury futures and options, Eurodollar futures and options, and forward contracts, to economically hedge the risk of changes in the fair value of MSRs and other retained interests, with the resulting gain or loss reflected in income. Net derivative gains of $189 million for 2005 from economic hedges related to our mortgage servicing activities are included on the income statement in “Mortgage Banking – Servicing income, net.” The aggregate fair value of these economic hedges was a net asset of $32 million at December 31, 2005, and is included on the balance sheet in “Other assets.”

108

     The total notional or contractual amounts, credit risk amount and estimated net fair value for derivatives were:

(in millions)	December 31															,
	2005								2004
	Notional or		Credit			Estimated			Notional or		Credit			Estimated
	contractual		risk			net fair			contractual		risk			net fair
	amount		amount		(1)	value			amount		amount		(1)	value
ASSET/LIABILITY MANAGEMENT HEDGES
Interest rate contracts:
Swaps	$	36,978	$	409		$	26		$	27,145	$	626		$	524
Futures		25,485		—			—			10,314		—			—
Floors and caps purchased		5,250		87			87			1,400		25			25
Floors and caps written		5,250		—			(13	)		—		—			—
Options purchased		26,508		103			103			51,670		49			49
Options written		405		1			(3	)		—		—			—
Forwards		106,146		126			18			103,948		137			113
Equity contracts:
Options purchased		3		1			1			25		1			1
Options written		75		—			(3	)		99		—			(18	)
Forwards		15		2			2			19		1			—
Foreign exchange contracts:
Swaps		4,217		142			93			—		—			—
Forwards		1,000		11			—			—		—			—
CUSTOMER ACCOMMODATIONS AND TRADING
Interest rate contracts:
Swaps		92,462		1,175			133			74,659		1,631			28
Futures		251,534		—			—			152,943		—			—
Floors and caps purchased		7,169		33			33			32,715		170			170
Floors and caps written		12,653		—			(27	)		34,119		1			(189	)
Options purchased		10,160		129			129			699		4			4
Options written		41,124		41			(160	)		26,418		45			(45	)
Forwards		56,644		17			(61	)		46,167		13			(19	)
Commodity contracts:
Swaps		20,633		599			(1	)		4,427		141			(27	)
Futures		555		—			—			230		—			—
Floors and caps purchased		5,464		195			195			391		39			39
Floors and caps written		6,356		—			(130	)		609		—			(37	)
Options purchased		12		7			7			35		17			17
Options written		52		—			(33	)		42		—			(6	)
Equity contracts:
Swaps		55		5			(2	)		4		—			—
Futures		480		—			—			730		—			—
Options purchased		1,810		253			253			1,011		189			189
Options written		1,601		—			(263	)		935		—			(181	)
Foreign exchange contracts:
Swaps		1,078		35			1			673		53			52
Futures		53		—			—			24		—			—
Options purchased		2,280		60			60			2,211		79			79
Options written		2,219		—			(59	)		2,187		—			(79	)
Forwards and spots		21,516		220			22			25,788		489			19
Credit contracts:
Swaps		5,454		23			(33	)		5,443		36			(22	)

(1) Credit risk amounts reflect the replacement cost for those contracts in a gain position in the event of nonperformance by all counterparties.

109

Note 27: Fair Value of Financial Instruments

FAS 107, Disclosures about Fair Value of Financial Instruments, requires that we disclose estimated fair values for our financial instruments. This disclosure should be read with the financial statements and Notes to Financial Statements in this Annual Report. The carrying amounts in the following table are recorded in the Consolidated Balance Sheet under the indicated captions.

     We base fair values on estimates or calculations using present value techniques when quoted market prices are not available. Because broadly-traded markets do not exist for most of our financial instruments, we try to incorporate the effect of current market conditions in the fair value calculations. These valuations are our estimates, and are often calculated based on current pricing policy, the economic and competitive environment, the characteristics of the financial instruments and other such factors. These calculations are subjective, involve uncertainties and significant judgment and do not include tax ramifications. Therefore, the results cannot be determined with precision, substantiated by comparison to independent markets and may not be realized in an actual sale or immediate settlement of the instruments. There may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, that could significantly affect the results.

     We have not included certain material items in our disclosure, such as the value of the long-term relationships with our deposit, credit card and trust customers, since these intangibles are not financial instruments. For all of these reasons, the total of the fair value calculations presented do not represent, and should not be construed to represent, the underlying value of the Company.

Financial Assets

SHORT-TERM FINANCIAL ASSETS

Short-term financial assets include cash and due from banks, federal funds sold and securities purchased under resale agreements and due from customers on acceptances. The carrying amount is a reasonable estimate of fair value because of the relatively short time between the origination of the instrument and its expected realization.

TRADING ASSETS

Trading assets are carried at fair value.

SECURITIES AVAILABLE FOR SALE

Securities available for sale are carried at fair value.
For further information, see Note 5.

MORTGAGES HELD FOR SALE

The fair value of mortgages held for sale is based on quoted market prices or on what secondary markets are currently offering for portfolios with similar characteristics.

LOANS HELD FOR SALE

The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics.

LOANS

The fair valuation calculation differentiates loans based on their financial characteristics, such as product classification, loan category, pricing features and remaining maturity. Prepayment estimates are evaluated by product and loan rate.

     The fair value of commercial loans, other real estate mortgage loans and real estate construction loans is calculated by discounting contractual cash flows using discount rates that reflect our current pricing for loans with similar characteristics and remaining maturity.

     For real estate 1-4 family first and junior lien mortgages, fair value is calculated by discounting contractual cash flows, adjusted for prepayment estimates, using discount rates based on current industry pricing for loans of similar size, type, remaining maturity and repricing characteristics.

     For consumer finance and credit card loans, the portfolio’s yield is equal to our current pricing and, therefore, the fair
value is equal to book value.

     For other consumer loans, the fair value is calculated by discounting the contractual cash flows, adjusted for prepayment estimates, based on the current rates we offer for loans with similar characteristics.

     Loan commitments, standby letters of credit and commercial and similar letters of credit not included in the following table had contractual values of $191.4 billion, $10.9 billion and $761 million, respectively, at December 31, 2005, and $164.0 billion, $9.4 billion and $731 million, respectively, at December 31, 2004. These instruments generate ongoing fees at our current pricing levels. Of the commitments at December 31, 2005, 40% mature within one year. Deferred fees on commitments and standby letters of credit totaled $47 million and $46 million at December 31, 2005 and 2004, respectively. Carrying cost estimates fair value for these fees.

NONMARKETABLE EQUITY INVESTMENTS

There are generally restrictions on the sale and/or liquidation of our nonmarketable equity investments, including federal bank stock. Federal bank stock carrying value approximates fair value. We use all facts and circumstances available to estimate the fair value of our cost method investments. We typically consider our access to and need for capital (including recent or projected financing activity), qualitative assessments of the viability of the investee, and prospects for its future.

110

Financial Liabilities

DEPOSIT LIABILITIES

FAS 107 states that the fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing checking and market rate and other savings, is equal to the amount payable on demand at the measurement date. The amount included for these deposits in the following table is their carrying value at December 31, 2005 and 2004. The fair value of other time deposits is calculated based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for like wholesale deposits with similar remaining maturities.

SHORT-TERM FINANCIAL LIABILITIES

Short-term financial liabilities include federal funds purchased and securities sold under repurchase agreements, commercial paper and other short-term borrowings. The carrying amount is a reasonable estimate of fair value because of the relatively short time between the origination of the instrument and its expected realization.

LONG-TERM DEBT

The discounted cash flow method is used to estimate the fair value of our fixed-rate long-term debt. Contractual cash flows are discounted using rates currently offered for new notes with similar remaining maturities.

Derivatives
The fair values of derivatives are reported in Note 26.

Limitations
We make these fair value disclosures to comply with the requirements of FAS 107. The calculations represent management’s best estimates; however, due to the lack of broad markets and the significant items excluded from this disclosure, the calculations do not represent the underlying value of the Company. The information presented is based on fair value calculations and market quotes as of December 31, 2005 and 2004. These amounts have not been updated since year end; therefore, the valuations may have changed significantly since that point in time.

     As discussed above, some of our asset and liability financial instruments are short-term, and therefore, the carrying amounts in the Consolidated Balance Sheet approximate fair value. Other significant assets and liabilities, which are not considered financial assets or liabilities and for which fair values have not been estimated, include mortgage servicing rights, premises and equipment, goodwill and other intangibles, deferred taxes and other liabilities.

     This table is a summary of financial instruments, as defined by FAS 107, excluding short-term financial assets and liabilities, for which carrying amounts approximate fair value, and trading assets, securities available for sale and derivatives, which are carried at fair value.

(in millions)	December 31								,
	2005				2004
	Carrying		Estimated		Carrying		Estimated
	amount		fair value		amount		fair value
FINANCIAL ASSETS
Mortgages held for sale	$	40,534	$	40,666	$	29,723	$	29,888
Loans held for sale		612		629		8,739		8,972
Loans, net		306,966		307,721		283,824		285,488
Nonmarketable equity investments		5,090		5,533		5,229		5,494
FINANCIAL LIABILITIES
Deposits		314,450		314,301		274,858		274,900
Long-term debt (1)		79,654		78,868		73,560		74,085

(1) The carrying amount and fair value exclude obligations under capital leases of $14 million and $20 million at December 31, 2005 and 2004, respectively.

111

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Wells Fargo & Company:

We have audited the accompanying consolidated balance sheet of Wells Fargo & Company and Subsidiaries (“the Company”) as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 21, 2006, expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

San Francisco, California
February 21, 2006

112

Quarterly Financial Data

Condensed Consolidated Statement of Income — Quarterly (Unaudited)

(in millions, except per share amounts)	2005											2004
	Quarter ended											Quarter ended
	Dec. 31			Sept. 30			June 30		Mar. 31			Dec. 31		Sept. 30		June 30			Mar. 31
INTEREST INCOME	$	7,244		$	6,645		$	6,200	$	5,873		$	5,635	$	5,405	$	5,069		$	4,858
INTEREST EXPENSE		2,405			1,969			1,664		1,420			1,179		987		843			808
NET INTEREST INCOME		4,839			4,676			4,536		4,453			4,456		4,418		4,226			4,050
Provision for credit losses		703			641			454		585			465		408		440			404
Net interest income after provision for credit losses		4,136			4,035			4,082		3,868			3,991		4,010		3,786			3,646
NONINTEREST INCOME
Service charges on deposit accounts		655			654			625		578			594		618		611			594
Trust and investment fees		623			614			597		602			543		508		530			535
Card fees		394			377			361		326			321		319		308			282
Other fees		478			520			478		453			479		452		437			411
Mortgage banking		628			743			237		814			790		262		493			315
Operating leases		200			202			202		208			211		207		209			209
Insurance		272			248			358		337			265		264		347			317
Net gains (losses) on debt securities available for sale		(124	)		(31	)		39		(4	)		3		10		(61	)		33
Net gains from equity investments		93			146			201		71			170		48		81			95
Other		434			354			231		251			336		212		245			306
Total noninterest income		3,653			3,827			3,329		3,636			3,712		2,900		3,200			3,097
NONINTEREST EXPENSE
Salaries		1,613			1,571			1,551		1,480			1,438		1,383		1,295			1,277
Incentive compensation		663			676			562		465			526		449		441			391
Employee benefits		428			467			432		547			451		390		391			492
Equipment		328			306			263		370			410		254		271			301
Net occupancy		344			354			310		404			301		309		304			294
Operating leases		161			159			157		158			164		158		156			155
Other		1,346			1,356			1,279		1,268			1,681		1,277		1,495			1,119
Total noninterest expense		4,883			4,889			4,554		4,692			4,971		4,220		4,353			4,029
INCOME BEFORE INCOME TAX EXPENSE		2,906			2,973			2,857		2,812			2,732		2,690		2,633			2,714
Income tax expense		976			998			947		956			947		942		919			947
NET INCOME	$	1,930		$	1,975		$	1,910	$	1,856		$	1,785	$	1,748	$	1,714		$	1,767
EARNINGS PER COMMON SHARE	$	1.15		$	1.17		$	1.14	$	1.09		$	1.06	$	1.03	$	1.02		$	1.04
DILUTED EARNINGS PER COMMON SHARE	$	1.14		$	1.16		$	1.12	$	1.08		$	1.04	$	1.02	$	1.00		$	1.03
DIVIDENDS DECLARED PER COMMON SHARE	$	.52		$	.52		$	.48	$	.48		$	.48	$	.48	$	.45		$	.45
Average common shares outstanding		1,675.4			1,686.8			1,687.7		1,695.4			1,692.7		1,688.9		1,688.1			1,699.3
Diluted average common shares outstanding		1,693.9			1,705.3			1,707.2		1,715.7			1,715.0		1,708.7		1,708.3			1,721.2
Market price per common share (1)
High	$	64.70		$	62.87		$	62.22	$	62.75		$	64.04	$	59.86	$	59.72		$	58.98
Low		57.62			58.00			57.77		58.15			57.55		56.12		54.32			55.97
Quarter end		62.83			58.57			61.58		59.80			62.15		59.63		57.23			56.67

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

113 EX-21 5 f17867exv21.htm EXHIBIT 21

EXHIBIT 21

SUBSIDIARIES OF THE PARENT

     The following is a list of the direct and indirect subsidiaries of the Parent as of December 31, 2005:

	Jurisdiction of Incorporation
Subsidiary	or Organization
1st Capital Mortgage, LLC	Delaware
Academy Financial Services, LLC	Delaware
ACO Brokerage Holdings Corporation	Delaware
Acordia Brokerage Services, Ltd.	Bermuda
Acordia IP Group, Inc.	Delaware
Acordia Management Services Ltd.	Bermuda
Acordia Mountain West, Inc.	Colorado
Acordia National, Inc.	West Virginia
Acordia Northeast, Inc.	Pennsylvania
Acordia Northeast, Inc.	New Jersey
Acordia Northeast, Inc.	New York
Acordia Northwest, Inc.	Washington
Acordia of Alaska, Inc.	Alaska
Acordia of California Insurance Services, Inc.	California
Acordia of Illinois, Inc.	Illinois
Acordia of Indiana, Inc.	Indiana
Acordia of Indiana, LLC	Indiana
Acordia of Kentucky, Inc.	Kentucky
Acordia of Michigan, Inc.	Michigan
Acordia of Minnesota, Inc.	Minnesota
Acordia of Nevada, Inc.	Nevada
Acordia of North Carolina, Inc.	North Carolina
Acordia of Ohio, LLC	Ohio
Acordia of Oregon, Inc.	Oregon
Acordia of Phoenix, Inc.	Arizona
Acordia of Tennessee, Inc.	Tennessee
Acordia of Texas, Inc.	Texas
Acordia of Virginia Insurance Agency, Inc.	Virginia
Acordia of West Virginia, Inc.	West Virginia
Acordia RE, Inc.	New Jersey
Acordia Services, Inc.	Delaware
Acordia Southeast, Inc.	Florida
Acordia Southeast, Inc.	Mississippi
Acordia Southeast, Inc.	Alabama
Acordia, Inc.	Delaware
Administradora Progreso, S.A. de C.V.	Mexico
Advance Mortgage	Virginia
Advantage Home Mortgage, LLC	Delaware
Advantage Mortgage Partners, LLC	Delaware
Alano Funding, LLC	Delaware
Alces Funding, LLC	Delaware
Alliance Home Mortgage, LLC	Delaware
Alopekis Funding, LLC	Delaware
Alpha Home Loans, LLC	Delaware
AMAN Collection Service 1, Inc.	Nevada
AMAN Collection Service, Inc.	South Dakota

	Jurisdiction of Incorporation
Subsidiary	or Organization
Amber Asset Management Inc.	Maryland
Amber Mortgage, LLC	Delaware
American Clearinghouse, LLC	Delaware
American E & S Insurance Brokers California, Inc.	California
American Priority Mortgage, LLC	Delaware
American Securities Company	California
American Securities Company of Missouri	Missouri
American Securities Company of Nevada	Nevada
American Securities Company of Utah	Utah
American Southern Mortgage Services, LLC	Delaware
APM Mortgage, LLC	Delaware
Arcturus Trustee Limited	United Kingdom
Ashton Woods Mortgage, LLC	Delaware
Aspen Delaware Funding, LLC	Delaware
Asset Recovery, Inc.	Utah
ATC Realty Fifteen, Inc.	California
ATC Realty Nine, Inc.	California
ATC Realty Sixteen, Inc.	California
Augustus Ventures, L.L.C.	Nevada
Avenue Financial Services, LLC	Delaware
Azalea Asset Management, Inc.	Delaware
Bancshares Insurance Company	Vermont
Belgravia Mortgage Group, LLC	Delaware
Bellwether Mortgage, LLC	Delaware
Benefit Mortgage, LLC	Delaware
Bergamasco Funding, LLC	Delaware
BHS Home Loans, LLC	Delaware
Bitterroot Asset Management, Inc.	Delaware
Blackhawk Bancorporation	Iowa
Blue Spirit Insurance Company	Vermont
Bluebonnet Asset Management, Inc.	Delaware
Brenton Realty Services, Ltd.	Iowa
Brittlebrush Financing, LLC	Nevada
Bryan, Pendleton, Swats & McAllister, LLC	Tennessee
Builders Mortgage Company, LLC	Delaware
Canopus Finance Trust	Delaware
Capital Pacific Home Loans, LP	Delaware
Capstone Home Mortgage, LLC	Delaware
Carnation Asset Management, Inc.	Delaware
Central Bucks Mortgage, LLC	Delaware
Centurion Agency Nevada, Inc.	Nevada
Centurion Casualty Company	Iowa
Centurion Life Insurance Company	Missouri
Certified Home Loans, LLC	Delaware
Cervus Funding, L.P.	Delaware
CGT Insurance Company LTD.	Barbados
Charter Canadian Trust	Canada
Charter Holdings, Inc.	Nevada
Chestnut Asset Management, Inc.	Delaware
CHL Home Mortgage, LLC	Delaware
Choice Home Financing, LLC	Delaware
Choice Mortgage Servicing, LLC	Delaware
Collin Equities, Inc.	Texas
Colorado Professionals Mortgage, LLC	Delaware
Columbine Asset Management, Inc.	Delaware

	Jurisdiction of Incorporation
Subsidiary	or Organization
Copper Asset Management, Inc.	Delaware
Credito Progreso S.A. de C.V.	Mexico
Crocker Properties, Inc.	California
DH Financial, LLC	Delaware
Dial Finance Company, Inc.	Nevada
Dial National Community Benefits, Inc.	Nevada
Discovery Home Loans, LLC	Delaware
Eastdil Realty Company, L.L.C.	New York
Eaton Village Associates, Ltd. Co.	New Mexico
EDI Mortgage, LLC	Delaware
Edward Jones Mortgage, LLC	Delaware
Ellis Advertising, Inc.	Iowa
Empire Homes Financial Services, LLC	Delaware
Everest Management S.A.	Luxembourg
Express Financial & Mortgage Services, LLC	Delaware
EZG Associates Limited Partnership	Delaware
Falcon Asset Management, Inc.	Delaware
Family Home Mortgage, LLC	Delaware
Financial Resources Mortgage, LLC	Delaware
Financiera El Sol, S.A.	Panama
Finvercon USA, Inc.	Nevada
First Associates Mortgage, LLC	Delaware
First Commerce Bancshares, Inc.	Nebraska
First Community Capital Corporation	Texas
First Community Capital Corporation of Delaware, Inc.	Delaware
First Community Capital Trust I	Delaware
First Community Capital Trust II	Delaware
First Community Capital Trust III	Delaware
First DialWest, Inc.	California
First Mortgage Consultants, LLC	Delaware
First Place Financial Corporation	New Mexico
First Rate Home Mortgage, LLC	Delaware
First Security Capital I	Delaware
First Security Information Technology, Inc.	Utah
First Security Service Company	Utah
First Valley Delaware Financial Corporation	Delaware
FITII GP, LLC	Delaware
FNL Insurance Company	Vermont
Foothill Capital Corporation	California
Foothill Income Trust II, L.P.	Delaware
Foothill Partners II L.P.	Delaware
Foothill Partners III L.P.	Delaware
Foothill Partners IV, L.P.	Delaware
Foundation Mortgage Services, LLC	Delaware

	Jurisdiction of Incorporation
Subsidiary	or Organization
FP, IV GP, LLC	Delaware
FPFC Management LLC	New Mexico
Fulton Homes Mortgage, LLC	Delaware
Galliard Capital Management, Inc.	Minnesota
Genesis Mortgage, LLC	Delaware
Gold Coast Home Mortgage	Delaware
Golden Funding Company	Cayman Islands
Golden Pacific Insurance Company	Vermont
Goldenrod Asset Management, Inc.	Delaware
Great East Mortgage, LLC	Delaware
Great Plains Insurance Company	Vermont
Greenfield Funding, LLC	Minnesota
Greenridge Mortgage Services, LLC	Delaware
Greylock Investments, LLC	Delaware
GST Co.	Delaware
Guarantee Pacific Mortgage, LLC	Delaware
H.D. Vest Advisory Services, Inc.	Texas
H.D. Vest Insurance Agency, L.L.C.	Texas
H.D. Vest Insurance Agency, L.L.C.	Montana
H.D. Vest Insurance Agency, L.L.C.	Massachusetts
H.D. Vest Investment Securities, Inc.	Texas
H.D. Vest Technology Services, Inc.	Texas
H.D. Vest, Inc.	Texas
HADBO Investments C.V.	Netherlands
Hallmark Mortgage Group, LLC	Delaware
Harrier Funding, LLC	Delaware
Hearthside Funding, L.P.	California
Hendricks Mortgage, LLC	Delaware
Hewitt Mortgage Services, LLC	Delaware
Homebuilders Choice Mortgage, LLC	Delaware
Home Services Title Reinsurance Company	Vermont
Homeland Mortgage, LLC	Delaware
Homeservices Lending, LLC	Delaware
Hometown Mortgage, LLC	Delaware
Horizon Mortgage, LLC	Delaware
Hubble Home Loans, LLC	Delaware
Iapetus Funding, LLC	Delaware
IBID, Inc.	Delaware
Insurance Risk Managers, Ltd.	Illinois
Interwest Capital Trust I	Delaware
IntraWest Asset Management, Inc.	Delaware
Iris Asset Management, Inc.	Delaware
Island Finance (Aruba) N.V.	Aruba
Island Finance (Bonaire) N.V.	Netherland Antilles
Island Finance (Curacao) N.V.	Netherland Antilles
Island Finance (Sint Maarten) N.V.	Netherland Antilles
Island Finance Credit Services, Inc.	New York

	Jurisdiction of Incorporation
Subsidiary	or Organization
Island Finance Holding Company, LLC	Cayman Islands
Island Finance New York, Inc.	New York
Island Finance Puerto Rico, Inc.	Delaware
Island Finance Sales Finance Corporation	Cayman Islands
Island Finance Sales Finance Trust	Puerto Rico
Island Finance Trinidad & Tobago Limited	Trinidad & Tobago
IWIC Insurance Company	Vermont
Jerboa Funding, LLC	Delaware
John Laing Mortgage, LP	California
JTS Financial, LLC	Delaware
KD Mortgage, LLC	Delaware
Keller Mortgage, LLC	Delaware
Laurel Hills Mortgage, LLC	Delaware
Leader Mortgage, LLC	Delaware
Legacy Mortgage	Delaware
Lincoln Building Corporation	Colorado
Linear Financial, LP	Delaware
Lowry Hill Investment Advisors, Inc.	Minnesota
M.C.E.B. Agency, Inc.	Ohio
Marben Mortgage, LLC	Delaware
Marigold Asset Management, Inc.	Delaware
Marigold International Limited	Cayman Islands
Master Home Mortgage, LLC	Delaware
Mastiff Funding, LP	Delaware
Max Mortgage, LLC	Delaware
MCIG Pennsylvania, Inc.	Pennsylvania
MC of America, LLC	Delaware
Mercantile Mortgage, LLC	Delaware
Meridian Home Mortgage, LP	Delaware
MJC Mortgage Company, LLC	Delaware
Monument Peak, LLC	Delaware
Morrison Financial Services, LLC	Delaware
Mortgage 100, LLC	Delaware
Mortgages On-Site, LLC	Delaware
Mortgages Unlimited, LLC	Delaware
Mulberry Asset Management, Inc.	Delaware
Mutual Service Mortgage, LLC	Delaware
National Bancorp of Alaska, Inc.	Delaware
National Condo Lending, LLC	Delaware
NDC Financial Services, LLC	Delaware
NEC VIII, LLC	Delaware
Nero Limited, LLC	Delaware
New West Mortgage Services, LLC	Delaware
North Star Mortgage Guaranty Reinsurance Company	Vermont
Northern Prairie Indemnity Limited	Cayman Islands
Northland Escrow Services, Inc.	Alaska
Northwest Home Finance, LLC	Delaware
Norwest Alliance System, Inc.	Minnesota
Norwest Auto Finance, Inc.	Minnesota
Norwest Equity Capital, L.L.C.	Minnesota
Norwest Equity Partners IV, a Minnesota Limited Partnership	Minnesota
Norwest Equity Partners V, a Minnesota Limited Partnership	Minnesota
Norwest Equity Partners VI, LP	Minnesota
Norwest Equity Partners VII, LP	Minnesota
Norwest Equity Partners VIII, LP	Delaware
Norwest Financial Canada DE, Inc.	Delaware
Norwest Financial Funding, Inc.	Nevada
Norwest Financial Investment 1, Inc.	Nevada

	Jurisdiction of Incorporation
Subsidiary	or Organization
Norwest Financial Investment, Inc.	Nevada
Norwest Financial Massachusetts	Massachusetts
Norwest Home Improvement, Inc.	Texas
Norwest Limited LP, LLLP	Delaware
Norwest Mezzanine Partners I, LP	Minnesota
Norwest Mezzanine Partners II, LP	Delaware
Norwest Properties Holding Company	Minnesota
Norwest Venture Capital Management, Inc.	Minnesota
Norwest Venture Partners FVCI-Mauritius	Mauritius
Norwest Venture Partners IX, LP	Delaware
Norwest Venture Partners VI, LP	Minnesota
Norwest Venture Partners VI-A, LP	Delaware
Norwest Venture Partners VII, LP	Minnesota
Norwest Venture Partners VII-A, LP	Delaware
Norwest Venture Partners VIII, LP	Delaware
Norwest Venture Partners-Mauritius	Mauritius
NVP Associates, LLC	Delaware
Orchid Asset Management, Inc.	Delaware
Pacific Coast Home Mortgage, LLC	Delaware
Pacific Northwest Bancorp	Washington
Pacific Northwest Statutory Trust I	Connecticut
Pageantry Mortgage, LLC	Delaware
Paramount Mortgage of Polk County, LLC	Delaware
Parkway Mortgage and Financial Center, LLC	Delaware
PCM Mortgage, LLC	Delaware
Peak Home Mortgage, LLC	Delaware
Pelican Asset Management, Inc.	Delaware
Peony Asset Management, Inc.	Delaware
Peregrine Capital Management, Inc.	Minnesota
Personal Mortgage Group, LLC	Delaware
Pheasant Asset Management, Inc.	Delaware
Pinnacle Mortgage of Nevada, LLC	Delaware
Playground Financial Services, LLC	Delaware
PNC Mortgage, LLC	Delaware
Precedent Mortgage, LLC	Delaware
Premier Home Mortgage	California
Premium Financial Services, Inc.	Kentucky
Prestige Claims Service, Inc.	West Virginia
Primrose Asset Management, Inc.	Delaware
Priority Mortgage, LLC	Delaware
Private Mortgage Advisors, LLC	Delaware
Professional Financial Services of Arizona, LLC	Delaware
Properties Mortgage, LLC	Delaware
Provident Mortgage Company, LLC	Delaware
Pumi Funding, LLC	Delaware
Quail Asset Management, LLC	Delaware
Real Estate Financial	Delaware
Real Living Mortgage, LLC	Delaware
Realtec Financial Services, LLC	Delaware
Regency Insurance Agency, Inc.	Minnesota
Related Financial, LLC	Delaware
Reliable Finance Holding Company	Puerto Rico
Reliable Finance Holding Company, LLC	Nevada
Reliable Financial Services, Inc.	Puerto Rico
Reliable Insurance Services Corp.	Puerto Rico

	Jurisdiction of Incorporation
Subsidiary	or Organization
Residential Community Mortgage Company, LLC	Delaware
Residential Home Mortgage Investment, L.L.C.	Delaware
ResortQuest Mortgage, LLC	Delaware
Rigil Finance, LLC	Delaware
River City Group, LLC	Delaware
Riverside Home Loans, LLC	Delaware
Roddel Mortgage Company, LP	Delaware
Ruby Asset Management Inc.	Maryland
Rural Community Insurance Agency, Inc.	Minnesota
Rural Community Insurance Company	Minnesota
Russ Lyon Mortgage, LLC	Delaware
RWF Mortgage, LLC	Delaware
RWF Mortgage Company	California
Sagebrush Asset Management, Inc.	Delaware
Saguaro Asset Management, Inc.	Delaware
Sapphire Asset Management Inc.	Maryland
Scott Life Insurance Company	Arizona
Security First Financial Group, LLC	Delaware
SecurSource Mortgage, LLC	Delaware
SelectNet Plus, Inc.	West Virginia
Servicing Mortgage Company, LLC	Delaware
SG Group Holdings LLC	Delaware
SG New York LLC	Delaware
SG Pennsylvania LLC	Delaware
SG Tucson LLC	Delaware
Sierra Delaware Funding, LLC	Delaware
Sierra Peaks Funding, LP	Delaware
Signature Home Mortgage, LP	Delaware
Silver Asset Management, Inc.	Delaware
Silver State Home Financial, LLC	Delaware
Sirius Finance, LLC	Delaware
Smart Mortgage, LLC	Delaware
Smith Family Mortgage, LLC	Delaware
Southeast Home Mortgage, LLC	Delaware
Southern Ohio Mortgage, LLC	Delaware
Southwest Partners, Inc.	California
Spring Cypress Water Supply Corporation	Texas
Stagecoach Insurance Agency, Inc.	California
Steinbeck Advantage Mortgage, LLC	Delaware
Stock Financial Services, LLC	Delaware
Stoneridge Mortgage, LLC	Delaware
Summit National Mortgage, LLC	Delaware
Sundance Mortgage, LLC	Delaware
Sunsouth Mortgage, LLC	Delaware
Superior Guaranty Insurance Company	Vermont
Superior Health Care Management, Inc.	Delaware
Sutter Advisors LLC	Delaware
Sutter Investment Grade SCDO 2001-1 (Delaware) Corp.	Delaware
Sutter Investment Grade SCDO 2001-1 Ltd.	Cayman Islands
Sweetroot Funding, LLC	Delaware
Tai Mo Shan Investments Partnership	Hong Kong

	Jurisdiction of Incorporation
Subsidiary	or Organization
TAI Title Trust	Delaware
Telomian Funding, Inc.	Delaware
Texas Financial Bancorporation, Inc.	Minnesota
The Foothill Group, Inc.	Delaware
The Trumbull Group, LLC	Delaware
Tiberius Ventures, L.L.C.	Nevada
Topaz Asset Management Inc.	Maryland
Touchstone Home Mortgage, LLC	Delaware
Trademark Mortgage, LLC	Delaware
Traditions Mortgage, LLC	Delaware
Trinity Mortgage Affiliates	Delaware
Triple Diamond Mortgage and Financial, LLC	Delaware
Two Rivers Corporation	Colorado
United California Bank Realty Corporation	California
United Michigan Mortgage, LLC	Delaware
Valley Asset Management, Inc.	Delaware
Victoria Investments, LLC	Delaware
Violet Asset Management, Inc.	Delaware
Vista Mortgage, LLC	Delaware
Wapiti Funding, LLC	Delaware
Washington Mortgage, LLC	Delaware
Waterways Home Mortgage, LLC	Delaware
Wells Capital Management Incorporated	California
Wells Fargo Alaska Trust Company, National Association	United States
Wells Fargo Alternative Asset Management, LLC	Delaware
Wells Fargo Asia Limited	Hong Kong
Wells Fargo Asset Management Corporation	Minnesota
Wells Fargo Asset Securities Corporation	Delaware
Wells Fargo Auto Finance, Inc.	California
Wells Fargo Auto Receivables Corporation	Delaware
Wells Fargo Bank Grand Junction, National Association	United States
Wells Fargo Bank Grand Junction-Downtown, National Association	United States
Wells Fargo Bank International	United States
Wells Fargo Bank, Ltd.	California
Wells Fargo Bank, National Association	United States
Wells Fargo Bank Northwest, National Association	United States
Wells Fargo Bill Presentment Venture Member, LLC	Delaware
Wells Fargo Brokerage Services, LLC	Delaware
Wells Fargo Capital A	Delaware
Wells Fargo Capital B	Delaware
Wells Fargo Capital C	Delaware
Wells Fargo Capital I	Delaware
Wells Fargo Capital II	Delaware
Wells Fargo Capital IV	Delaware
Wells Fargo Capital V	Delaware
Wells Fargo Capital VI	Delaware
Wells Fargo Capital VII	Delaware
Wells Fargo Capital VIII	Delaware
Wells Fargo Capital IX	Delaware
Wells Fargo Capital Holdings, Inc.	Delaware
Wells Fargo Cash Centers, Inc.	Nevada
Wells Fargo Central Bank	California

	Jurisdiction of Incorporation
Subsidiary	or Organization
Wells Fargo Century, Inc.	New York
Wells Fargo Community Development Corporation	Nevada
Wells Fargo Community Development Enterprises, Inc.	Nevada
Wells Fargo Credit Card Funding LLC	Delaware
Wells Fargo Credit Card Master Note Trust	Delaware
Wells Fargo Credit, Inc.	Minnesota
Wells Fargo Delaware Trust Company	Delaware
Wells Fargo Energy Capital, Inc.	Texas
Wells Fargo Equipment Finance Company	Canada
Wells Fargo Equipment Finance, Inc.	Minnesota
Wells Fargo Equity Capital, Inc.	California
Wells Fargo Escrow Company, LLC	Iowa
Wells Fargo Financial Acceptance Alabama, Inc.	Alabama
Wells Fargo Financial Acceptance Alaska, LLC	Delaware
Wells Fargo Financial Acceptance America, Inc.	Pennsylvania
Wells Fargo Financial Acceptance Arizona, Inc.	Arizona
Wells Fargo Financial Acceptance Arkansas, Inc.	Arkansas
Wells Fargo Financial Acceptance California, Inc.	California
Wells Fargo Financial Acceptance Colorado, Inc.	Colorado
Wells Fargo Financial Acceptance Connecticut, Inc.	Connecticut
Wells Fargo Financial Acceptance Delaware, Inc.	Delaware
Wells Fargo Financial Acceptance Florida, Inc.	Florida
Wells Fargo Financial Acceptance Georgia, Inc.	Georgia
Wells Fargo Financial Acceptance Idaho, Inc.	Idaho
Wells Fargo Financial Acceptance Illinois, Inc.	Illinois
Wells Fargo Financial Acceptance Indiana, Inc.	Indiana
Wells Fargo Financial Acceptance Iowa 1, Inc.	Iowa
Wells Fargo Financial Acceptance Iowa, Inc.	Iowa
Wells Fargo Financial Acceptance Kansas, Inc.	Kansas
Wells Fargo Financial Acceptance Kentucky 1, Inc.	Kentucky
Wells Fargo Financial Acceptance Kentucky, Inc.	Kentucky
Wells Fargo Financial Acceptance Louisiana, Inc.	Louisiana
Wells Fargo Financial Acceptance Maine, Inc.	Maine
Wells Fargo Financial Acceptance Maryland 1, Inc.	Maryland
Wells Fargo Financial Acceptance Maryland, Inc.	Maryland
Wells Fargo Financial Acceptance Massachusetts, Inc.	Massachusetts
Wells Fargo Financial Acceptance Michigan, Inc.	Michigan
Wells Fargo Financial Acceptance Mississippi, Inc.	Delaware
Wells Fargo Financial Acceptance Missouri, Inc.	Missouri
Wells Fargo Financial Acceptance Montana, Inc.	Montana
Wells Fargo Financial Acceptance Nebraska, Inc.	Nebraska
Wells Fargo Financial Acceptance Nevada 1, Inc.	Nevada
Wells Fargo Financial Acceptance Nevada, Inc.	Nevada
Wells Fargo Financial Acceptance New Hampshire, Inc.	New Hampshire
Wells Fargo Financial Acceptance New Jersey, Inc.	New Jersey
Wells Fargo Financial Acceptance New Mexico, Inc.	New Mexico
Wells Fargo Financial Acceptance New York, Inc.	New York
Wells Fargo Financial Acceptance North Carolina 1, Inc.	North Carolina
Wells Fargo Financial Acceptance North Carolina, Inc.	North Carolina
Wells Fargo Financial Acceptance North Dakota, Inc.	North Dakota
Wells Fargo Financial Acceptance Ohio 1, Inc.	Ohio
Wells Fargo Financial Acceptance Ohio, Inc.	Ohio
Wells Fargo Financial Acceptance Oklahoma, Inc.	Oklahoma
Wells Fargo Financial Acceptance Oregon, Inc.	Oregon

	Jurisdiction of Incorporation
Subsidiary	or Organization
Wells Fargo Financial Acceptance Pennsylvania, Inc.	Pennsylvania
Wells Fargo Financial Acceptance Rhode Island, Inc.	Rhode Island
Wells Fargo Financial Acceptance South Carolina, Inc.	South Carolina
Wells Fargo Financial Acceptance South Dakota, Inc.	South Dakota
Wells Fargo Financial Acceptance System Florida, Inc.	Florida
Wells Fargo Financial Acceptance System Virginia, Inc.	Virginia
Wells Fargo Financial Acceptance Tennessee, Inc.	Tennessee
Wells Fargo Financial Acceptance Texas, Inc.	Texas
Wells Fargo Financial Acceptance Utah, Inc.	Utah
Wells Fargo Financial Acceptance Vermont, Inc.	Vermont
Wells Fargo Financial Acceptance Virginia, Inc.	Virginia
Wells Fargo Financial Acceptance Washington, Inc.	Washington
Wells Fargo Financial Acceptance West Virginia, Inc.	West Virginia
Wells Fargo Financial Acceptance Wisconsin, Inc.	Wisconsin
Wells Fargo Financial Acceptance Wyoming, Inc.	Wyoming
Wells Fargo Financial Acceptance, Inc.	Minnesota
Wells Fargo Financial Agency, Co	Iowa
Wells Fargo Financial Alabama, Inc.	Alabama
Wells Fargo Financial Alaska, Inc.	Alaska
Wells Fargo Financial America, Inc.	Pennsylvania
Wells Fargo Financial Arizona, Inc.	Arizona
Wells Fargo Financial Auto Owner Trust 2004-A	Delaware
Wells Fargo Financial Auto Owner Trust 2005-A	Delaware
Wells Fargo Financial Bank	South Dakota
Wells Fargo Financial California, Inc.	Colorado
Wells Fargo Financial Canada Corporation	Canada
Wells Fargo Financial CAR LLC	Delaware
Wells Fargo Financial Colorado, Inc.	Colorado
Wells Fargo Financial Connecticut, Inc.	Connecticut
Wells Fargo Financial Corporation	Canada
Wells Fargo Financial Corporation Canada	Canada
Wells Fargo Financial Credit Services New York, Inc.	New York
Wells Fargo Financial Delaware, Inc.	Delaware
Wells Fargo Financial Florida, Inc.	Florida
Wells Fargo Financial Funding B.V.	Netherlands
Wells Fargo Financial Georgia, Inc.	Iowa
Wells Fargo Financial Guam 1, Inc.	Colorado
Wells Fargo Financial Guam, Inc.	Delaware
Wells Fargo Financial Hawaii, Inc.	Hawaii
Wells Fargo Financial Hong Kong Limited	Hong Kong
Wells Fargo Financial Idaho, Inc.	Idaho
Wells Fargo Financial Illinois, Inc.	Iowa
Wells Fargo Financial Indiana, Inc.	Indiana
Wells Fargo Financial Information Services, Inc.	Iowa
Wells Fargo Financial Investments, Inc.	Nevada
Wells Fargo Financial Iowa 1, Inc.	Iowa
Wells Fargo Financial Iowa 3, Inc.	Iowa
Wells Fargo Financial Kansas, Inc.	Kansas
Wells Fargo Financial Kentucky 1, Inc.	Kentucky
Wells Fargo Financial Kentucky, Inc.	Kentucky
Wells Fargo Financial Leasing Florida, LLC	Florida
Wells Fargo Financial Leasing, Inc.	Iowa
Wells Fargo Financial Louisiana, Inc.	Louisiana
Wells Fargo Financial Maine, Inc.	Maine
Wells Fargo Financial Maryland, Inc.	Maryland
Wells Fargo Financial Massachusetts 1, Inc.	Massachusetts
Wells Fargo Financial Massachusetts, Inc.	Massachusetts

	Jurisdiction of Incorporation
Subsidiary	or Organization
Wells Fargo Financial Michigan, Inc.	Michigan
Wells Fargo Financial Minnesota, Inc.	Minnesota
Wells Fargo Financial Mississippi 2, Inc.	Delaware
Wells Fargo Financial Mississippi, Inc.	Delaware
Wells Fargo Financial Missouri, Inc.	Missouri
Wells Fargo Financial Montana, Inc.	Montana
Wells Fargo Financial National Bank	United States
Wells Fargo Financial Nebraska, Inc.	Nebraska
Wells Fargo Financial Nevada 1, Inc.	Nevada
Wells Fargo Financial Nevada 2, Inc.	Nevada
Wells Fargo Financial Nevada, Inc.	Nevada
Wells Fargo Financial New Hampshire 1, Inc.	New Hampshire
Wells Fargo Financial New Hampshire, Inc.	New Hampshire
Wells Fargo Financial New Jersey, Inc.	New Jersey
Wells Fargo Financial New Mexico, Inc.	New Mexico
Wells Fargo Financial New York, Inc.	New York
Wells Fargo Financial North Carolina 1, Inc.	North Carolina
Wells Fargo Financial North Carolina, Inc.	North Carolina
Wells Fargo Financial North Dakota, Inc.	North Dakota
Wells Fargo Financial Ohio 1, Inc.	New Hampshire
Wells Fargo Financial Ohio, Inc.	Ohio
Wells Fargo Financial Oklahoma, Inc.	Oklahoma
Wells Fargo Financial Oregon, Inc.	Oregon
Wells Fargo Financial Pennsylvania, Inc.	Pennsylvania
Wells Fargo Financial Preferred Capital, Inc.	Iowa
Wells Fargo Financial Puerto Rico, Inc.	Delaware
Wells Fargo Financial Receivables, LLC	Delaware
Wells Fargo Financial Resources, Inc.	Iowa
Wells Fargo Financial Retail Credit, Inc.	Iowa
Wells Fargo Financial Retail Services Company Canada	Canada
Wells Fargo Financial Retail Services, Inc.	Iowa
Wells Fargo Financial Rhode Island, Inc.	Rhode Island
Wells Fargo Financial Saipan, Inc.	Delaware
Wells Fargo Financial Security Services, Inc.	Iowa
Wells Fargo Financial Services Funding, Inc.	Delaware
Wells Fargo Financial Services Virginia, Inc.	Virginia
Wells Fargo Financial Services, Inc.	Delaware
Wells Fargo Financial South Carolina, Inc.	South Carolina
Wells Fargo Financial South Dakota, Inc.	South Dakota
Wells Fargo Financial System Florida, Inc.	Florida
Wells Fargo Financial System Minnesota, Inc.	Minnesota
Wells Fargo Financial System Virginia, Inc.	Virginia
Wells Fargo Financial Tennessee, Inc.	Tennessee
Wells Fargo Financial Tennessee 1, LLC	Tennessee
Wells Fargo Financial Texas, Inc.	Texas
Wells Fargo Financial Utah, Inc.	Utah
Wells Fargo Financial Virginia, Inc.	Virginia
Wells Fargo Financial Washington 1, Inc.	Washington
Wells Fargo Financial Washington, Inc.	Washington
Wells Fargo Financial West Virginia, Inc.	West Virginia
Wells Fargo Financial Wisconsin, Inc.	Wisconsin
Wells Fargo Financial Wyoming, Inc.	Wyoming

	Jurisdiction of Incorporation
Subsidiary	or Organization
Wells Fargo Financial, Inc.	Iowa
Wells Fargo Financing Corporation	California
Wells Fargo Foothill, Inc.	California
Wells Fargo Foothill, LLC	Delaware
Wells Fargo Funding, Inc.	Minnesota
Wells Fargo Funds Distributor, LLC	Delaware
Wells Fargo Funds Management (Ireland) Limited	Ireland
Wells Fargo Funds Management, LLC	Delaware
Wells Fargo Home Mortgage of Hawaii, LLC	Delaware
Wells Fargo Housing Advisors, Inc.	California
Wells Fargo HSBC Trade Bank, National Association	United States
Wells Fargo Institutional Funding, LLC	Delaware
Wells Fargo Institutional Securities, LLC	Delaware
Wells Fargo Insurance Nevada, Inc.	Nevada
Wells Fargo Insurance Wyoming, Inc.	Wyoming
Wells Fargo Insurance, Inc.	Minnesota
Wells Fargo International Commercial Services Limited	Hong Kong
Wells Fargo Investment Group, Inc.	Delaware
Wells Fargo Investment Services, LLC	Delaware
Wells Fargo Investments, LLC	Delaware
Wells Fargo Private Client Funding, Inc.	Delaware
Wells Fargo Private Investment Advisors, LLC	Delaware
Wells Fargo Properties, Inc.	Minnesota
Wells Fargo Real Estate Capital Investments, LLC	Delaware
Wells Fargo Real Estate Tax Services, LLC	Delaware
Wells Fargo Retail Finance, LLC	Delaware
Wells Fargo Retail Finance II, LLC	Delaware
Wells Fargo Rural Insurance Agency, Inc.	Minnesota
Wells Fargo Securities, LLC	Delaware
Wells Fargo Securitisation Services Limited	United Kingdom
Wells Fargo Servicing Solutions, LLC	Florida
Wells Fargo Small Business Investment Company, Inc.	California
Wells Fargo Structured Lending, LLC	Delaware
Wells Fargo Student Loans Receivables I, LLC	Delaware
Wells Fargo Ventures, LLC	Delaware
Wells Fargo, Ltd.	Hawaii
WF CLT Capital 2002, LLC	Delaware
WF Deferred Compensation Holdings, Inc.	Delaware
WF National Bank South Central	United States
WFC Holdings Corporation	Delaware
WFF Auto Hawaii, Inc.	Hawaii
WFI Insurance Agency Montana, Inc.	Montana
WFI Insurance Agency Washington, Inc.	Washington
WFI Insurance Agency Wyoming, Inc.	Wyoming
WF-KW, LLC	Delaware
WF/TW Mortgage Venture, LLC	Delaware
WFLC Subsidiary, LLC	Delaware
Whippet Funding, LLC	Delaware
Windward Home Mortgage, LLC	Delaware
Yucca Asset Management, Inc.	Delaware

EX-21

exv21

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
Wells Fargo & Company:

We consent to the incorporation by reference in the registration statements noted below on Forms S-3, S-4 and S-8 of Wells Fargo & Company (the “Company”), of our reports dated February 21, 2006, with respect to: (a) the consolidated balance sheet of Wells Fargo & Company and Subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2005; and (b) management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 and the effectiveness of internal control over financial reporting as of December 31, 2005; which reports appear in the Company’s December 31, 2005 Annual Report on Form 10-K.

Registration
Statement Number	Form	Description
333-76330	S-3	Deferred Compensation Plan for Independent Contractors
333-103711	S-3	Universal Shelf 2003
333-105939	S-3	Convertible Debentures
333-113573	S-3	Wells Fargo Direct Purchase and Dividend Reinvestment Plan
333-123689	S-3	Universal Shelf 2005
333-68512	S-4	Acquisition Registration Statement
333-115993	S-4	Acquisition Registration Statement
333-121545	S-4/S-8	First Community Capital Corporation
333-83604	S-4/S-8	Tejas Bancshares, Inc.
033-57904	S-4/S-8	Financial Concepts Bancorp, Inc.
333-63247	S-4/S-8	Former Wells Fargo & Company
333-37862	S-4/S-8	First Security Corporation
333-45384	S-4/S-8	Brenton Banks, Inc.
333-107230	S-4/S-8	Pacific Northwest Bancorp
333-62877	S-8	Long-Term Incentive Compensation Plan
333-103776	S-8	Long-Term Incentive Compensation Plan
333-128598	S-8	Long-Term Incentive Compensation Plan
333-50789	S-8	PartnerShares Plan
333-74655	S-8	PartnerShares Plan
333-103777	S-8	PartnerShares Plan
333-123241	S-8	401(k) Plan
333-105091	S-8	Directors Stock Compensation and Deferral Plan
333-52600	S-8	Wells Fargo Financial Thrift and Profit Sharing Plan
333-54354	S-8	Deferred Compensation Plan
333-115994	S-8	Deferred Compensation Plan
333-123243	S-8	Wells Fargo Stock Purchase Plan

/s/ KPMG LLP
San Francisco, California
March 9, 2006

EX-24

Exhibit 24

WELLS FARGO & COMPANY

Power of Attorney of Director

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and member of the Audit and Examination Committee of the Board of Directors, and each or either of them, the undersigned’s true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned’s name, place, and stead, to sign and affix the undersigned’s name as such director of said Company to an Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and all amendments thereto, to be filed by said Company with the Securities and Exchange Commission, Washington, D.C. under the Securities Exchange Act of 1934, and the rules and regulations of said Commission, and to file the same, with all exhibits thereto and other supporting documents, with said Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers herein expressly granted.

     IN WITNESS WHEREOF, the undersigned has executed this power of attorney this 28th day of February, 2006.

/s/ J.A. BLANCHARD III	/s/ CYNTHIA H. MILLIGAN
/s/ LLOYD H. DEAN	/s/ PHILIP J. QUIGLEY
/s/ SUSAN E. ENGEL	/s/ DONALD B. RICE
/s/ ENRIQUE HERNANDEZ, JR.	/s/ JUDITH M. RUNSTAD
/s/ ROBERT L. JOSS	/s/ STEPHEN W. SANGER
/s/ REATHA CLARK KING	/s/ SUSAN G. SWENSON
/s/ RICHARD M. KOVACEVICH	/s/ MICHAEL W. WRIGHT
/s/ RICHARD D. McCORMICK

EX-31.(A)

Exhibit 31(a)

CERTIFICATION

I, Richard M. Kovacevich, certify that:

1.	I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2005, of Wells Fargo & Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 9, 2006

/s/ RICHARD M. KOVACEVICH  

Richard M. Kovacevich 

Chairman and Chief Executive Officer 

EX-31.(B)

Exhibit 31(b)

CERTIFICATION

I, Howard I. Atkins, certify that:

1.	I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2005, of Wells Fargo & Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 9, 2006

/s/ HOWARD I. ATKINS  

Howard I. Atkins 

Senior Executive Vice President and
Chief Financial Officer 

EX-32.(A)

Exhibit 32(a)

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

     I, Richard M. Kovacevich, Chairman and Chief Executive Officer of Wells Fargo & Company (the “Company”), certify that:

(1)	The Company’s Annual Report on Form 10-K for the period ended December 31, 2005 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ RICHARD M. KOVACEVICH  

Richard M. Kovacevich 

Chairman and Chief Executive Officer

Wells Fargo & Company 

March 9, 2006

     A signed original of this written statement required by Section 906 has been provided to Wells Fargo & Company and will be retained by Wells Fargo & Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.(B)

Exhibit 32(b)

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

     I, Howard I. Atkins, Senior Executive Vice President and Chief Financial Officer of Wells Fargo & Company (the “Company”), certify that:

(1)	The Company’s Annual Report on Form 10-K for the period ended December 31, 2005 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ HOWARD I. ATKINS  

Howard I. Atkins 

Senior Executive Vice President and
Chief Financial Officer
Wells Fargo & Company 
March 9, 2006

     A signed original of this written statement required by Section 906 has been provided to Wells Fargo & Company and will be retained by Wells Fargo & Company and furnished to the Securities and Exchange Commission or its staff upon request.