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

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

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

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.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

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/A or any amendment to this Form 10-K/A.

As of February 28, 2003, 1,680,063,635 shares of common stock were outstanding having an aggregate market value, based on a closing price of $45.35 per share, of $76,191 million. At that date, the aggregate market value of common stock held by non-affiliates was approximately $74,778 million.

Wells Fargo & Company (the Company) is filing this Amendment No. 1 on Form 10-K/A to amend its Annual Report on Form 10-K for the year ended December 31, 2002 to account for certain automobile leases as operating leases instead of direct financing leases. This amendment reflects the guidance specified in Topic D-107, Lessor Consideration of Third-Party Residual Value Guarantees, issued in May 2003 by the Emerging Issues Task Force of the Financial Accounting Standards Board. The Company’s implementation of this guidance did not have a material effect on the Company’s results of operations or financial position for any period in which such leasing activities were present. This guidance resulted in auto leases being reclassified from loans to operating lease assets included in other assets on the balance sheet. In addition, the revised income statement presentation reflects a reduction of interest income related to direct financing leases and the recognition of rental income and depreciation expense on operating leases. Refer to Note 2 (Auto Lease Accounting and Reclassifications) to Financial Statements included in this Amendment No. 1 for a summary of the impact of applying the guidance in Topic D-107 on the Company’s current and prior period results of operations and financial condition.

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Item 1 (Business), Item 6 (Selected Financial Data), Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations), and Item 8 (Financial Statements and Supplementary Data) primarily to reflect the guidance specified in Topic D-107. In addition, the Company has reclassified other amounts to conform with current financial statement presentation including;

Certain mortgages, loan charge-offs and recoveries from junior lien mortgages to first mortgages,

Temporary personnel expenses from outside professional services and other expenses to contract services,

Investment advisory fees from other noninterest income to trust and investment fees on the statement of income, and

In the statement of cash flows, provided separate presentation of mortgage servicing rights impairment;

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Item 14 (Controls and Procedures) to comply with changes in SEC regulations that became effective after the original filing date of the report, including the redesignation of Item 14 as Item 9A; and

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Item 15 (Exhibits, Financial Statement Schedules, and Reports on Form 8-K) to revise Exhibits 12(a) and 12(b) to reflect the guidance set forth in Topic D-107, and to comply with changes in SEC regulations that became effective after the original filing date of the report.

In addition, cross-references have been changed to reflect that certain information provided in response to Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) is physically included in this Form 10-K/A rather than incorporated by reference to the Company’s 2002 Annual Report to Stockholders.

This Amendment No. 1 does not change any information contained in any other item of the Company’s Form 10-K as originally filed on March 14, 2003. This Amendment No. 1 also does not reflect events that have occurred after the original filing date of the Form 10-K except as described above with respect to changes in SEC regulations, and does not change the “Factors That May Affect Future Results” discussion in the Form 10-K. Refer to that same section in the Company’s Form 10-Q for the quarter ended September 30, 2003 for a more current discussion of some of the factors that may cause actual results to differ from expectations.

The Company is not amending prior year Form 10-K filings as diluted earnings per share were reduced in 2001, 2000, 1999 and 1998 by nil, $0.01, $0.01, and $0.01, respectively.


		Page(s)
PART I
Item 1.	Business
	Description of Business		2-140
	Statistical Disclosure:
	Distribution of Assets, Liabilities and Stockholders’ Equity; Interest Rates and Interest Differential		23-25, 141
	Investment Portfolio		31, 61-62, 74-75
	Loan Portfolio		32, 39-42, 63-64, 76-81, 142
	Summary of Loan Loss Experience		16-18, 39-42, 63-64, 77-81, 142-144
	Deposits		33, 86
	Return on Equity and Assets		11, 14
	Short-Term Borrowings		87
	Derivative Financial Instruments		67-69, 130-134

PART II

Item 6.	Selected Financial Data		15
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11-56
Item 8.	Financial Statements and Supplementary Data		57-140
Item 9(a).	Controls and Procedures		145

PART IV

Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K		57-140, 146-153

SIGNATURES			154

This Form 10-K/A for the year ended 2002, including Item 1 (Business), Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and Item 8 (Financial Statements and Supplementary Data), contains forward-looking statements about the Company. Broadly speaking, forward-looking statements include forecasts of future financial results and condition, expectations for future operations and business, and any assumptions underlying those forecasts and expectations. Do not unduly rely on forward-looking statements. Actual outcomes and results might differ significantly from forecasts and expectations. Please refer to “Factors that May Affect Future Results” for a discussion of some of the factors that may cause results to differ.

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 at December 31, 2002, it was the fourth largest bank holding company in the United States. In this report, Wells Fargo & Company and Subsidiaries (consolidated) is referred to as the Company and Wells Fargo & Company alone is referred to as the Parent.

The Company engages in banking and a variety of related financial services businesses. Retail, commercial and corporate banking services are provided through bank subsidiaries located 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 services, computer and data processing services, trust services, mortgage-backed securities servicing and venture capital investment.

On October 25, 2000, the Company completed its merger with First Security Corporation (the FSCO Merger), with First Security Corporation surviving the merger as a wholly-owned subsidiary of the Parent. The Company accounted for the FSCO Merger under the pooling-of-interests method of accounting. Accordingly, the information included in this report, including the Financial Statements and Supplementary Data, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, presents the combined results as if the merger had been in effect for all periods presented.

The Company has three operating segments for management reporting purposes: Community Banking, Wholesale Banking and Wells Fargo Financial. Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Financial Statements and Supplementary Data include financial information and descriptions of these operating segments.

The Company is the product of the merger of equals 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, prior to the WFC Merger, 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, was 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.

The former Wells Fargo & Company acquired First Interstate Bancorp in April 1996. First Interstate’s assets had an approximate book value of $55 billion. The transaction was valued at approximately $11.3 billion and was accounted for as a purchase.

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. 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.

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.

Securities firms and insurance companies that elect to become financial holding companies may acquire banks and other financial institutions. Acquisitions 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.

The following discussion, together with Notes 4 (Cash, Loan and Dividend Restrictions) and 26 (Regulatory and Agency Capital Requirements) to Financial Statements sets forth the material elements of the regulatory framework applicable to bank holding companies and their subsidiaries and provides certain information specific to the Company. This regulatory framework is intended to protect depositors, federal deposit insurance funds 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 the Company, including changes in interpretation or implementation thereof, could have a material effect on the Company’s business.

Applicable laws and regulations could restrict the Company’s ability to diversify into other areas of financial services, acquire depository institutions, and pay dividends on the Company’s capital stock. They could also require the Company 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.

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 national subsidiary 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 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. Other nonbank subsidiaries of the Company may be subject to the laws and regulations of the federal government and/or the various states in which they conduct business.

“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. A bank holding company that is not also a financial holding company is limited to engaging in banking and such other activities as determined by the FRB to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.

Federal Reserve Board 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 subsidiary bank of the Company ceases to be “well capitalized” or “well managed” under applicable regulatory standards, the FRB may, among other actions, order the Company to divest the subsidiary bank. Alternatively, the Company may elect to restrict the Company’s activities to those permissible for a bank holding company that is not also a financial holding company.

Also because the Company is a financial holding company, if any subsidiary bank of the Company receives a rating under the Community Reinvestment Act of 1977 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.

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.

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 de novo 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, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s record of addressing the credit needs of the communities it serves, including the needs of low and moderate income neighborhoods, consistent with the safe and sound operation of the bank, under the Community Reinvestment Act of 1977, as amended.

The Parent is a legal entity separate and distinct from its subsidiary banks and other subsidiaries. Its principal 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 4 (Cash, Loan and Dividend Restrictions) to Financial Statements.

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.

Transfer of Funds from Subsidiary Banks. The Parent’s subsidiary banks are subject to restrictions under federal law that limit the transfer of funds or other items of value from such subsidiaries to the Parent and its nonbank subsidiaries (including affiliates) in so-called “covered transactions.” In general, covered transactions include loans and other extensions of credit, investments and asset purchases, as well as 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.

The Parent 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 26 (Regulatory and Agency Capital Requirements) to Financial Statements.

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.

Effective April 1, 2002, the FRB, OCC and FDIC issued new rules governing the capital treatment of nonfinancial equity investments, which includes investments made by the Company’s venture capital subsidiaries. The rules impose a capital charge that increases incrementally as the level of nonfinancial equity investments increases relative to Tier 1 capital. For covered investments that total less than 15% of Tier 1 capital, the rules require a Tier 1 capital charge of 8% of the adjusted carrying value of the covered investments. For covered investments that total 15% or more but less than 25%, the Tier 1 capital charge is 12%, and for covered investments that total 25% or more, the Tier 1 capital charge is 25%. The new rules have not had a material impact on the Company.

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, with the goal of finalizing the Accord by the fourth quarter of 2003 with anticipated implementation by 2006. The New Basel Capital Accord incorporates three pillars that address (a) minimum capital requirements, (b) supervisory review, which relates to an institution’s capital adequacy and internal assessment process, and (c) market discipline, through effective disclosure to encourage safe and sound banking practices. Embodied within these pillars are aspects of risk assessment that relate to credit risk, interest rate risk, operational risk, among others, and certain proposed approaches by the Basel Committee to complete such assessments may be considered complex. The Company continues to monitor the status of the New Basel Accord.

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 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.

Through the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF), the FDIC insures the deposits of the Parent’s depository institution subsidiaries up to prescribed limits for each depositor. The amount of FDIC assessments paid by 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 assessment rate for the Parent’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 Parent’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 Parent’s subsidiary depository institutions could have a material adverse effect on the Parent’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 1.8 cents per $100 of BIF-assessable deposits in 2002. The FDIC established the FICO assessment rate effective for the first quarter of 2003 at approximately 1.7 cents annually per $100 of assessable deposits.

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.

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.

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.

Wells Fargo & Company is a $349 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, commercial businesses and financial institutions in all 50 states of the U.S. and in other countries. It ranked fourth in assets and third in market capitalization among U.S. bank holding companies at December 31, 2002. In this Form 10-K/A, Wells Fargo & Company and Subsidiaries (consolidated) is referred to as the Company and Wells Fargo & Company alone is referred to as the Parent.

Certain amounts in the Financial Review for prior years have been reclassified to conform with the current financial statement presentation.

Net income for 2002, before the effect of the accounting change related to FAS 142, was $5.71 billion, or $3.32 per share, compared with $3.98 billion, or $2.30 per share (excluding goodwill amortization), for 2001. On the same basis, return on average assets (ROA) was 1.77% and return on average common equity (ROE) was 19.63% in 2002, compared with 1.40% and 14.88%, respectively, (excluding goodwill amortization) for 2001.

The Company completed its initial goodwill impairment assessment under Financial Accounting Standards Board (FASB) Statement No. 142 (FAS 142), Goodwill and Other Intangible Assets, and recorded a transitional impairment charge of $276 million (after tax) in first quarter 2002. At December 31, 2002, the Company had $9.75 billion of goodwill, $5.50 billion of which related to the 1996 purchase of First Interstate Bancorp.

Net income in 2002, after the effect of the accounting change related to FAS 142, was $5.43 billion compared with $3.41 billion in 2001. Earnings per common share were $3.16 in 2002, compared with $1.97 in 2001. ROA was 1.69% and ROE was 18.68% in 2002, compared with 1.20% and 12.73%, respectively, in 2001. Net income and earnings per share in 2001 included the second quarter 2001 impairment of public and private equity securities and other special charges of $1.16 billion (after tax), or $.67 per share. Excluding goodwill amortization, 2001 net income was $3.98 billion and earnings per share were $2.30.

Net interest income on a taxable-equivalent basis was $14.59 billion in 2002, compared with $12.05 billion a year ago. The Company’s net interest margin was 5.53% for 2002, compared with 5.29% in 2001.

Noninterest income was $10.77 billion in 2002, compared with $9.01 billion in 2001. Noninterest income in 2001 included approximately $1.72 billion (before tax) of other-than-temporary impairment in the valuation of publicly-traded securities and private equity investments recorded in the second quarter of 2001.

Revenue, the sum of net interest income and noninterest income, increased 20% to $25.25 billion in 2002 from $20.98 billion in 2001. Revenue in 2001 included approximately $1.72 billion (before tax) of non-cash impairment.

Noninterest expense totaled $14.71 billion in 2002, compared with $13.79 billion in 2001, an increase of 7%. The increase was primarily due to an increase in mortgage and home equity loan volume.

During 2002, net charge-offs were $1.68 billion, or .96% of average total loans, compared with $1.73 billion, or 1.10%, during 2001. The provision for loan losses in 2002 and 2001 approximated net charge-offs. The allowance for loan losses was $3.82 billion, or 1.98% of total loans, at December 31, 2002, compared with $3.72 billion, or 2.22%, at December 31, 2001.

At December 31, 2002, total nonaccrual loans were $1.49 billion, or .8% of total loans, compared with $1.64 billion, or 1.0%, at December 31, 2001. Foreclosed assets were $195 million at December 31, 2002, compared with $160 million at December 31, 2001.

The ratio of common stockholders’ equity to total assets was 8.67% at December 31, 2002, compared with 8.82% at December 31, 2001. The Company’s total risk-based capital (RBC) ratio at December 31, 2002 was 11.44% and its Tier 1 RBC ratio was 7.70%, exceeding the minimum regulatory guidelines of 8% and 4%, respectively, for bank holding companies. The Company’s RBC ratios at December 31, 2001 were 11.01% and 7.43%, respectively. The Company’s Tier 1 leverage ratios were 6.57% and 6.24% at December 31, 2002 and 2001, respectively, exceeding the minimum regulatory guideline of 3% for bank holding companies.

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 143 (FAS 143), Accounting for Asset Retirement Obligations, which addresses the recognition and measurement of obligations associated with the retirement of tangible long-lived assets. FAS 143 is effective January 1, 2003, with early adoption permitted. The Company adopted FAS 143 effective January 1, 2003 and the adoption of the statement will not have a material effect on the Company’s financial statements.

In June 2002, the FASB issued Statement No. 146 (FAS 146), Accounting for Costs Associated with Exit or Disposal Activities, which addresses financial accounting and reporting for costs associated with exit or disposal activities. Under FAS 146, such costs will be recognized when the liability is incurred, rather than at the date of commitment to an exit plan. FAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002, with early application permitted. The Company adopted FAS 146 on January 1, 2003 and the adoption of the statement will not have a material effect on the Company’s financial statements.

In October 2002, the FASB issued Statement No. 147 (FAS 147), Acquisitions of Certain Financial Institutions, which amends Statement No. 72 (FAS 72), Accounting for Certain Acquisitions of Banking or Thrift Institutions and no longer requires the separate recognition and subsequent amortization of goodwill that was originally required by FAS 72. FAS 147 also amends Statement No. 144 (FAS 144), Accounting for the Impairment or Disposal of Long-Lived

Assets, to include in its scope long-term customer-relationship intangible assets (such as core deposit intangibles). Effective October 1, 2002, the Company adopted FAS 147, and the adoption did not have a material effect on the Company’s financial statements.

In November of 2002, the FASB issued Interpretation No. 45 (FIN 45), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This Interpretation describes the disclosures to be made by a guarantor in interim and annual financial statements about obligations under certain guarantees the guarantor has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 will not have a material effect on the Company’s financial statements. The Company adopted the disclosure provisions of FIN 45 effective December 31, 2002.

In December 2002, the FASB issued Statement No. 148 (FAS 148), Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment to FASB Statement 123. FAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, FAS 148 amends the disclosure requirements of FASB Statement No. 123 (FAS 123), Accounting for Stock-Based Compensation, to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company adopted the disclosure provisions of FAS 148 effective December 31, 2002.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. The Company adopted the disclosure provisions of FIN 46 effective December 31, 2002. On February 1, 2003, the Company adopted the recognition and measurement provisions of FIN 46 for variable interest entities (VIEs) formed after January 31, 2003, and, on December 31, 2003, for all existing VIEs. The Company believes that it is reasonably possible that it could be a significant or majority variable interest holder in certain special-purpose entities formed to securitize high-yield corporate debt, commercial mortgage-backed and real estate investment trust securities. The total amount of assets in these entities at December 31, 2002 approximated $1.2 billion. The adoption of FIN 46 will not have a material effect on the Company’s financial statements.

In May 2003, the Emerging Issues Task Force published Topic D-107, Lessor Consideration of Third-Party Residual Value Guarantees, which clarified accounting guidance for certain lease transactions with residual value guarantees. Based on this guidance, the Company determined that certain auto leases previously accounted for as direct finance leases should be recorded as operating leases. The Company’s implementation of this guidance on January 16, 2004 did not have a material effect on the Company’s results of operations or financial position for any period in which such leasing activities were present (1998 through 2003).



	Year ended December 31								,
($ in millions, except per share amounts)	2002			2001			2000


Before effect of change in accounting principle (1) and excluding goodwill amortization

PROFITABILITY RATIOS
Net income to average total assets (ROA)		1.77	%		1.40	%		1.80	%
Net income applicable to common stock to average common stockholders’ equity (ROE)		19.63			14.88			18.25
Net income to average stockholders’ equity		19.61			14.81			18.13

EFFICIENCY RATIO (2)		58.3	%		62.8	%		59.7	%

After effect of change in accounting principle

PROFITABILITY RATIOS
ROA		1.69	%		1.20	%		1.60	%
ROE		18.68			12.73			16.24
Net income to average stockholders’ equity		18.66			12.69			16.13

EFFICIENCY RATIO (2)		58.3	%		65.7	%		62.3	%

CAPITAL RATIOS
At year end:
Common stockholders’ equity to assets		8.67	%		8.82	%		9.62	%
Stockholders’ equity to assets		8.68			8.84			9.71
Risk-based capital (3)
Tier 1 capital		7.70			7.43			7.30
Total capital		11.44			11.01			10.44
Tier 1 leverage (3)		6.57			6.24			6.48
Average balances:
Common stockholders’ equity to assets		9.03			9.35			9.84
Stockholders’ equity to assets		9.05			9.42			9.94

PER COMMON SHARE DATA
Dividend payout (4)		34.46	%		50.25	%		38.14	%
Book value	$	17.95		$	15.99		$	15.28
Market prices (5):
High	$	54.84		$	54.81		$	56.38
Low		38.10			38.25			31.00
Year end		46.87			43.47			55.69



											% Change
(in millions,											2002		/
except per share amounts)	2002		2001		2000		1999		1998		2001


INCOME STATEMENT
Net interest income	$	14,482	$	11,976	$	10,339	$	9,608	$	9,236		21	%
Provision for loan losses		1,684		1,727		1,284		1,079		1,576		(2	)
Noninterest income		10,767		9,005		10,360		9,277		8,113		20
Noninterest expense		14,711		13,794		12,889		11,483		12,130		7

Before effect of change in accounting principle

Net income	$	5,710	$	3,411	$	4,012	$	3,995	$	2,178		67

Earnings per common share		3.35		1.99		2.35		2.31		1.27		68
Diluted earnings per common share		3.32		1.97		2.32		2.28		1.25		69

After effect of change in accounting principle

Net income	$	5,434	$	3,411	$	4,012	$	3,995	$	2,178		59

Earnings per common share		3.19		1.99		2.35		2.31		1.27		60
Diluted earnings per common share		3.16		1.97		2.32		2.28		1.25		60

Dividends declared per common share		1.10		1.00		.90		.785		.70		10

BALANCE SHEET (at year end)
Securities available for sale	$	27,947	$	40,308	$	38,655	$	43,911	$	36,660		(31	)
Loans		192,478		167,096		155,451		126,700		114,546		15
Allowance for loan losses		3,819		3,717		3,681		3,312		3,274		3
Goodwill		9,753		9,527		9,303		8,046		7,889		2
Assets		349,197		307,506		272,382		241,032		224,141		14
Core deposits		198,234		182,295		156,710		138,247		144,179		9
Long-term debt		47,320		36,095		32,046		26,866		22,662		31
Guaranteed preferred beneficial interests in Company’s subordinated debentures		2,885		2,435		935		935		935		18
Common stockholders’ equity		30,258		27,111		26,194		23,587		21,873		12
Stockholders’ equity		30,319		27,175		26,461		23,858		22,336		12

The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition. The Company has identified three policies as being critical because they require management to make particularly difficult, subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies relate to the allowance for loan losses, the valuation of mortgage servicing rights and pension accounting. The Company, in consultation with the Audit and Examination Committee, has reviewed and approved these critical accounting policies (further described in Note 1 (Summary of Significant Accounting Policies) to Financial Statements).

The Company’s allowance for loan losses represents management’s estimate of probable losses inherent in the loan portfolio at the balance sheet date. Allocation of the allowance is made for analytical purposes only, and the entire allowance is available to absorb probable and estimable credit losses inherent in the portfolio including unfunded commitments. Additions to the allowance may result from recording provision for loan losses or loan recoveries, while charge-offs are deducted from the allowance.

Process to Determine the Adequacy of the Allowance for Loan Losses
The Company has an established process to determine the adequacy of the allowance for loan losses that relies on a number of analytical tools and benchmarks to arrive at a range of probable outcomes. No single statistic or measurement, in itself, determines the adequacy of the allowance. For analytical purposes, the allowance consists of two components, allocated and unallocated.

To arrive at the allocated component of the allowance, the Company combines estimates of the allowances needed for loans analyzed individually and loans analyzed on a pooled basis. The determination of the allocated allowance for portfolios of commercial and real estate loans involves the use of a continuous and standardized loan grading process in combination with a review of larger individual higher-risk transactions. The Company grades loans and assigns a loss factor to each pool of loans based on the grades. The loss factors used for this analysis are derived in two ways. First, migration models are used to determine loss factors by tracking actual portfolio movements between loan grades over the loss emergence period of these portfolios. Second, in the case of graded loans without identified credit weaknesses, the loss factors are estimated using a combination of long-term average loss experience of the Company’s own graded portfolios and external industry data. In addition, the Company analyzes non-performing loans over $1 million individually for impairment using a cash flow or collateral based methodology. Calculated impairment is included in the allocated allowance unless impairment has been recognized as a loss.

In the case of homogeneous portfolios, such as consumer loans and leases, residential mortgage loans, and some segments of small business loans, the determination of the allocated allowance is conducted at an aggregate, or pooled, level. For such portfolios, the risk assessment process includes the use of forecasting models to measure inherent loss in these portfolios. Such analyses are updated frequently to capture the recent behavioral characteristics of the subject portfolios, as well as any changes in the Company’s loss mitigation or customer solicitation strategies, in order to reduce the differences between estimated and observed losses.

To mitigate imprecision and incorporate the range of probable outcomes inherent in estimates of expected credit losses, the allocated component of the allowance is supplemented by an unallocated component. The unallocated component also incorporates the Company’s judgmental determination of risks inherent in portfolio composition, economic uncertainties and other subjective factors, including industry trends impacting specific portfolio segments that have not yet resulted in changes in individual loan grades. Therefore the ratio of the allocated to the unallocated components within the total allowance for loan losses may fluctuate from period to period. The allocated and unallocated components represent the total allowance for loan losses that would adequately cover losses inherent in the loan portfolio.

The determination of the level of the allowance and, correspondingly, the provision for loan losses, rests upon various judgments and assumptions, including: (1) general economic conditions, (2) loan portfolio composition, (3) prior loan loss experience, (4) management’s evaluation of credit risk related to both individual borrowers and pools of loans, (5) periodic use of sensitivity analysis and expected loss simulation modeling and (6) observations derived from the Company’s ongoing internal audit and examination processes and those of its regulators.

The assumptions below were used to estimate a range of the 2002 allowance outcomes and related changes in provision expense assuming either a reasonably possible deterioration in loan credit quality or a reasonably possible improvement in loan credit quality.

For the non-homogeneous wholesale components of the portfolio, a downward migration of certain loan grades to the next lower grade, resulting in a 70% increase in the balance of loans classified as special mention and substandard, as defined by the Office of the Comptroller of the Currency (OCC); and

For the homogeneous portfolio (such as consumer loans and leases, residential mortgage loans, and some segments of small business lending), a 20 basis point increase in estimated loss rates over the historical level of losses.

For the non-homogeneous wholesale components of the portfolio, a 25% decrease in the balance of loans classified as special mention and substandard, as defined by the OCC; and

For the homogeneous portfolio (such as consumer loans and leases, residential mortgage loans, and some segments of small business lending), a 10 basis point decrease in estimated loss rates over the historical level of losses.

These assumptions would result in a potential of $500 million in additional expected losses to emerge in the portfolio under the deterioration in loan credit quality scenario and a potential of a $350 million reduction to expected losses to emerge in the portfolio under the improvement in loan credit quality scenario.

Changes in the estimate related to the allowance for loan losses can materially affect net income. This is only one example of reasonably possible sensitivity scenarios. The process of determining the allowance requires us to forecast losses on loans in the future which are highly uncertain and require a high degree of judgment; and is impacted by regional, national and global economic trends, and different assumptions regarding “reasonably possible” future economic conditions could have been used and would have had a material impact on the provision for loan losses and on the consolidated results of operations.

The Company recognizes as assets the rights to service mortgage loans for others, known as mortgage servicing rights (MSRs), whether the servicing rights are acquired through purchases or retained upon sale or securitization of originated loans. Generally, purchased MSRs are capitalized at the cost to acquire the rights. Originated MSRs are capitalized based on the relative fair value of the servicing right and the mortgage loan on the date the mortgage loan is sold. Purchased and originated MSRs are carried at the lower of the capitalized amount, net of accumulated amortization and hedge accounting adjustments, or fair value. For MSRs designated as a hedged item in a fair value hedge under FASB Statement No. 133 (FAS 133), Accounting for Derivative Instruments and Hedging Activities, the carrying value of the MSRs is adjusted for changes in fair value resulting from the application of hedge accounting. If the MSRs carrying value is adjusted for changes in fair value resulting from the application of hedge accounting, the adjustment becomes part of the carrying value, which is still subject to a fair value test in accordance with FASB Statement No. 140 (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. The amortization of the MSRs is analyzed periodically and is adjusted to reflect changes in prepayment speeds and discount rates.

To determine the fair value of MSRs, the Company uses a valuation model that calculates the present value of estimated future net servicing income. In using this valuation method, the Company incorporates assumptions that market participants would use in estimating future net servicing income, which include estimates of prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, ancillary income, late fees and float income. The valuation of MSRs is discussed further in this section and in Notes 1 (Summary of Significant Accounting Policies), 22 (Securitizations) and 23 (Mortgage Banking Activities) to Financial Statements.

Each quarter, the Company evaluates the possible impairment of MSRs based on the difference between the carrying amount and current fair value of the MSRs, in accordance with FAS 140. For purposes of evaluating and measuring impairment, the Company stratifies its portfolio on the basis of certain risk characteristics, including loan type and note rate. If temporary impairment exists, a valuation allowance is established for any excess of amortized cost over the current fair value, by risk stratification tranche, through a charge to income. If the Company later determines that all or a portion of the temporary impairment no longer exists for a particular tranche, a reduction of the valuation allowance may be recorded as an increase to income.

The Company has a policy of reviewing MSRs for other-than-temporary impairment each quarter and recognizes a direct write-down when the recoverability of a recorded valuation allowance is determined to be remote. In determining whether other-than-temporary impairment has occurred, the Company considers both historical and projected trends in interest rates, pay off activity and the potential for impairment recovery through interest rate increases. Unlike a valuation allowance, a direct write-down permanently reduces the carrying value of the MSRs and the valuation allowance, precluding subsequent reversals.

To reduce the sensitivity of earnings to interest rate and market value fluctuations, the Company hedges the change in value of its MSRs with derivative financial instruments. To the extent that hedge instruments are highly effective, any reduction or increase in the value of the mortgage servicing asset is generally offset by gains or losses in the value of the derivative instrument. To the extent that the reduction or increase in the value of the MSRs is not offset, the Company immediately recognizes either a gain or loss for the amount of derivative ineffectiveness. The Company does not fully hedge MSRs because its origination volume is a “natural hedge”, i.e., as interest rates decline, origination volume increases even though servicing values decrease. Conversely, as interest rates increase, origination volumes decline, but the value of servicing increases.

Servicing fees, net of amortization, impairment and gain or loss on the ineffective portion and the excluded portion of the derivative financial instruments are recorded as a component of mortgage banking noninterest income.

The Company uses a dynamic and sophisticated model to estimate the value of its servicing asset. Loan prepayment speed is a key assumption in the valuation model and represents the annual rate at which borrowers are forecasted to repay their mortgage loan principal. The discount rate is another key assumption in the valuation model and is equal to what the Company believes would be the required rate of return for an asset with similar risk. The discount rate considers the risk premium for uncertainties associated with servicing operations (e.g., possible changes in future servicing costs, ancillary income and earnings on escrow accounts). Both variables can and generally will change in quarterly and annual valuations as market conditions and projected interest rates change. All assumptions are reviewed quarterly by senior management.

At December 31, 2002, key economic assumptions and the sensitivity of the current fair value of MSRs to an immediate adverse change in those assumptions are presented in the table on the next page.

In recent years, there have been significant market driven fluctuations in loan prepayment speeds and the discount rate appropriate for MSRs. Also, loan prepayment speeds and the market discount rate could fluctuate rapidly and significantly in the future. Accordingly, estimating prepayment speeds within a range that market participants would use in determining the fair value of MSRs requires significant management judgment.

There are four key variables utilized in the calculation of the Company’s annual pension cost; (1) size of the employee population, (2) actuarial assumptions, (3) expected long-term rate of return on plan assets, and (4) discount rate.

Size of the Employee Population
The amount of pension expense is directly related to the number of employees covered by the plan. The population of employees eligible for pension benefits has steadily increased over the last few years, causing a proportional growth in pension expense.

Actuarial Assumptions
In estimating the projected benefit obligation, actuaries must make assumptions about such factors as mortality rate, turnover rate, retirement rate, disability rate, and the rate of compensation increases. Because these factors do not tend to change over time, the range of actuarial assumptions is generally narrow. Consequently, pension plan expense is relatively insensitive to actuarial assumptions.

Expected Long-Term Rate of Return on Plan Assets
In accordance with FASB Statement No. 87, Employers’ Accounting for Pensions, the Company calculates the expected return on plan assets each year based on the balance in the pension asset portfolio at the beginning of the plan year and the expected long-term rate of return on that

portfolio. The expected long-term rate of return is designed to approximate the long-term rate of return actually earned on the plan assets over time and the expected long-term rate of return is generally held constant so that the pattern of income/expense recognition more closely matches the stable pattern of services provided by the Company’s employees over the life of the pension obligation.

In determining the reasonableness of the expected rate of return, a variety of factors are considered including the actual return earned on plan assets, historical rates of return on the various asset classes of which the plan portfolio is comprised, independent projections of returns on various asset classes, and current/prospective capital market conditions and economic forecasts. The Company has used an expected rate of return of 9% on plan assets in each of the past six years. Over the last two decades, the plan assets have actually earned a rate of return higher than 9%, although the return in the last three years was lower. Differences in each year, if any, between expected and actual returns in excess of a 5% corridor are amortized in the net periodic pension calculation over five years. See Note 16 (Employee Benefits and Other Expenses) to Financial Statements for details on the Company’s changes in pension benefit obligation and the fair value of plan assets.

Based on the pension asset and projected benefit obligation balances as of November 30, 2002, the Company’s measurement date, if the Company 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 $27 million.

Discount Rate
The discount rate is the rate used to determine the present value of the Company’s future benefit obligations. It is an assumption that reflects the rates available on long-term high-quality fixed-income debt instruments, reset annually on the measurement date of each year. The Company lowered its discount rate in 2002 to 7% from 7.5%, which was the rate used in 1999-2001.

If the Company were to assume a 1% increase/decrease in the discount rate, holding the expected long-term rate of return and other actuarial assumptions constant, pension expense would decrease/increase by approximately $65 million.

Net interest income is the difference between interest income (which includes yield-related loan fees) and interest expense. Net interest income on a taxable-equivalent basis was $14.59 billion in 2002, compared with $12.05 billion in 2001, an increase of 21%.

Net interest income on a taxable-equivalent basis expressed as a percentage of average total earning assets is referred to as the net interest margin, which represents the average net effective yield on earning assets. For 2002, the net interest margin was 5.53%, compared with 5.29% in 2001. In 2002, deposit and borrowing costs declined faster than declines in loans and debt securities yields due to the falling interest rate environment.

Earning assets increased $35.8 billion in 2002 from 2001 predominantly due to increases in average loans and mortgages held for sale. Loans averaged $174.5 billion in 2002, compared with $157.2 billion in 2001. The increase was predominantly due to growth in mortgage and home equity products. Average mortgages held for sale increased to $39.9 billion in 2002 from $23.7 billion in 2001. The increase was due to increased originations including refinancing activity. The increases were partially offset by a slowdown in commercial loan demand consistent with conditions in the current U.S. economy. Debt securities available for sale averaged $36.0 billion in 2002, compared with $36.7 billion in 2001.

An important contributor to the growth in net interest income and the net interest margin from 2001 was a 10% increase in average core deposits, the Company’s low-cost source of funding. Average core deposits were $184.1 billion and $167.9 billion and funded 57.2% and 58.9% of the Company’s average total assets in 2002 and 2001, respectively. While savings certificates of deposits declined on average from $29.9 billion to $24.3 billion, noninterest-bearing checking accounts and other core deposit categories increased on average from $138.1 billion in 2001 to $159.9 billion in 2002 reflecting a combination of growth in mortgage escrow deposits, resulting from higher origination volume, and growth in primary account relationships. Total average interest-bearing deposits increased to $133.8 billion in 2002 from $120.2 billion a year ago. For the same period, total average noninterest-bearing deposits increased to $63.6 billion from $55.3 billion.

Table 4 presents the individual components of net interest income and the net interest margin.



	2002									2001
							Interest									Interest
	Average			Yields		/	income		/	Average			Yields		/	income		/
(in millions)	balance			rates			expense			balance			rates			expense


EARNING ASSETS
Federal funds sold and securities purchased under resale agreements	$	2,652			1.67	%	$	44		$	2,583			3.69	%	$	95
Debt securities available for sale (3):
Securities of U.S. Treasury and federal agencies		1,770			5.57			95			2,158			6.55			137
Securities of U.S. states and political subdivisions		2,106			8.33			167			2,026			7.98			154
Mortgage-backed securities:
Federal agencies		26,718			7.23			1,856			27,433			7.19			1,917
Private collateralized mortgage obligations		2,341			7.18			163			1,766			8.55			148

Total mortgage-backed securities		29,059			7.22			2,019			29,199			7.27			2,065
Other debt securities (4)		3,029			7.74			232			3,343			7.80			254

Total debt securities available for sale (4)		35,964			7.25			2,513			36,726			7.32			2,610
Mortgages held for sale (3)		39,858			6.13			2,450			23,677			6.72			1,595
Loans held for sale (3)		5,380			4.69			252			4,820			6.58			317
Loans:
Commercial		46,520			6.80			3,164			48,648			8.01			3,896
Real estate 1-4 family first mortgage		32,669			6.69			2,185			23,359			7.54			1,761
Other real estate mortgage		25,413			6.17			1,568			24,194			7.99			1,934
Real estate construction		7,925			5.69			451			8,073			8.10			654
Consumer:
Real estate 1-4 family junior lien mortgage		25,220			7.07			1,783			17,587			9.20			1,619
Credit card		6,810			12.27			836			6,270			13.36			838
Other revolving credit and monthly payment		24,072			10.28			2,475			23,459			11.40			2,674

Total consumer		56,102			9.08			5,094			47,316			10.84			5,131
Lease financing		4,079			6.32			258			4,024			6.90			278
Foreign		1,774			18.90			335			1,603			20.82			333

Total loans (5)(6)		174,482			7.48			13,055			157,217			8.90			13,987
Other		6,492			3.80			248			4,000			4.77			191

Total earning assets	$	264,828			7.04			18,562		$	229,023			8.24			18,795


FUNDING SOURCES
Deposits:
Interest-bearing checking	$	2,494			.55			14		$	2,178			1.59			35
Market rate and other savings		93,787			.95			893			80,585			2.08			1,675
Savings certificates		24,278			3.21			780			29,850			5.13			1,530
Other time deposits		8,191			1.86			153			1,332			5.04			67
Deposits in foreign offices		5,011			1.58			79			6,209			3.96			246

Total interest-bearing deposits		133,761			1.43			1,919			120,154			2.96			3,553
Short-term borrowings		33,278			1.61			536			33,885			3.76			1,273
Long-term debt		42,158			3.33			1,404			34,501			5.29			1,826
Guaranteed preferred beneficial interests in Company’s subordinated debentures		2,780			4.23			118			1,394			6.40			89

Total interest-bearing liabilities		211,977			1.88			3,977			189,934			3.55			6,741
Portion of noninterest-bearing funding sources		52,851			—			—			39,089			—			—

Total funding sources	$	264,828			1.51			3,977		$	229,023			2.95			6,741


Net interest margin and net interest income on a taxable-equivalent basis (7)					5.53	%	$	14,585						5.29	%	$	12,054


NONINTEREST-EARNING ASSETS
Cash and due from banks	$	13,820								$	14,608
Goodwill		9,737									9,514
Other		33,340									32,222

Total noninterest-earning assets	$	56,897								$	56,344


NONINTEREST-BEARING FUNDING SOURCES
Deposits	$	63,574								$	55,333
Other liabilities		17,054									13,214
Preferred stockholders’ equity		55									210
Common stockholders’ equity		29,065									26,676
Noninterest-bearing funding sources used to fund earning assets		(52,851	)								(39,089	)

Net noninterest-bearing funding sources	$	56,897								$	56,344


TOTAL ASSETS	$	321,725								$	285,367



2000									1999									1998
						Interest									Interest									Interest
Average			Yields		/	income		/	Average			Yields		/	income		/	Average			Yields		/	income		/
balance			rates			expense			balance			rates			expense			balance			rates			expense



$	2,370			6.01	%	$	143		$	1,673			5.11	%	$	86		$	1,770			5.57	%	$	99

	3,322			6.16			210			6,124			5.51			348			5,916			6.02			353
	2,080			7.74			162			2,119			8.12			168			1,855			8.39			148

	26,054			7.22			1,903			23,542			6.77			1,599			20,079			6.99			1,376
	2,379			7.61			187			3,945			6.77			270			3,072			6.72			205

	28,433			7.25			2,090			27,487			6.77			1,869			23,151			6.95			1,581
	5,049			7.93			261			3,519			7.49			209			1,570			7.94			105

	38,884			7.24			2,723			39,249			6.69			2,594			32,492			6.90			2,187
	10,725			7.85			849			13,559			6.96			951			14,712			6.85			1,008
	4,915			8.50			418			5,154			7.31			377			4,876			7.71			376

	45,352			9.40			4,263			38,932			8.66			3,370			35,805			8.85			3,169
	17,190			7.72			1,327			13,396			7.76			1,039			13,870			7.92			1,098
	22,509			8.99			2,023			18,822			8.74			1,645			17,539			9.40			1,648
	6,934			10.02			695			5,260			9.56			503			4,270			9.71			415

	14,458			10.85			1,569			11,574			10.00			1,157			10,708			10.43			1,117
	5,867			14.58			856			5,686			13.77			783			6,322			14.99			948
	21,824			12.06			2,631			19,561			11.88			2,324			19,992			12.15			2,428

	42,149			11.99			5,056			36,821			11.58			4,264			37,022			12.13			4,493
	4,218			5.35			225			3,509			5.23			184			2,825			4.78			135
	1,621			21.15			343			1,554			20.65			321			1,353			20.65			279

	139,973			9.95			13,932			118,294			9.57			11,326			112,684			9.97			11,237
	3,206			6.21			199			3,252			5.01			162			3,092			5.86			181

$	200,073			9.18			18,264		$	181,181			8.57			15,496		$	169,626			8.94			15,088




$	3,424			1.88			64		$	3,120			.99			31		$	3,034			1.35			41
	63,577			2.81			1,786			60,901			2.30			1,399			56,724			2.63			1,492
	30,101			5.37			1,616			30,088			4.86			1,462			31,905			5.29			1,686
	4,438			5.69			253			3,957			4.94			196			4,565			5.47			250
	5,950			6.22			370			1,658			4.76			79			948			4.84			46

	107,490			3.80			4,089			99,724			3.17			3,167			97,176			3.62			3,515
	28,222			6.23			1,758			22,559			5.00			1,127			17,927			5.36			963
	29,000			6.69			1,939			24,646			5.90			1,453			19,294			6.29			1,214

	935			7.92			74			935			7.73			72			1,160			8.12			94

	165,647			4.75			7,860			147,864			3.94			5,819			135,557			4.27			5,786
	34,426			—			—			33,317			—			—			34,069			—			—

$	200,073			3.95			7,860		$	181,181			3.22			5,819		$	169,626			3.43			5,786


				5.23	%	$	10,404						5.35	%	$	9,677						5.51	%	$	9,302



$	13,103								$	12,252								$	11,410
	8,811									7,983									8,069
	28,170									23,673									18,486

$	50,084								$	43,908								$	37,965



$	48,691								$	45,201								$	43,229
	10,949									8,895									7,321
	266									461									463
	24,604									22,668									21,021
	(34,426	)								(33,317	)								(34,069	)

$	50,084								$	43,908								$	37,965


$	250,157								$	225,089								$	207,591



										% Change
	Year ended December 31								,	2002		/	2001		/
(in millions)	2002			2001			2000			2001			2000


Service charges on deposit accounts	$	2,179		$	1,876		$	1,704			16	%		10	%
Trust and investment fees:
Trust, investment and IRA fees		1,343			1,534			1,498			(12	)		2
Commissions and all other fees		532			257			126			107			104

Total trust and investment fees		1,875			1,791			1,624			5			10

Credit card fees		920			796			721			16			10
Other fees:
Cash network fees		183			202			187			(9	)		8
Charges and fees on loans		616			445			347			38			28
All other		585			597			579			(2	)		3

Total other fees		1,384			1,244			1,113			11			12

Mortgage banking:
Origination and other closing fees		1,048			737			350			42			111
Servicing fees, net of amortization and provision for impairment		(737	)		(260	)		665			183			—
Net gains on securities available for sale		—			134			—			(100	)		—
Net gains on sales of mortgage servicing rights		—			—			159			—			(100	)
Net gains on mortgage loan origination/sales activities		1,038			705			38			47			—
All other		364			355			232			3			53

Total mortgage banking		1,713			1,671			1,444			3			16

Operating leases		1,115			1,315			1,517			(15	)		(13	)
Insurance		997			745			411			34			81
Net gains (losses) on debt securities available for sale		293			316			(739	)		(7	)		—
Net (losses) gains from equity investments		(327	)		(1,538	)		2,130			(79	)		—
Net gains (losses) on sales of loans		19			35			(134	)		(46	)		—
Net gains on dispositions of operations		10			122			23			(92	)		430
All other		589			632			546			(7	)		16


Total	$	10,767		$	9,005		$	10,360			20	%		(13	)%

Service charges on deposit accounts increased 16% due to continued growth in primary checking accounts and increased activity.

The decrease in trust, investment and IRA fees in 2002 compared with 2001 was due to a decline in mutual fund values due to market conditions and a decline in fund balances due to lower interest rates. The increase in commissions and all other fees 2002 compared with 2001 was primarily due to the

acquisition of H.D. Vest, a financial planning services company, in the third quarter of 2001. The Company managed mutual funds with $74 billion of assets at December 31, 2002, compared with $77 billion at December 31, 2001. The Company also administered corporate trust, personal trust, employee benefit trust and agency assets of approximately $432 billion and $440 billion at December 31, 2002 and 2001, respectively, and actively managed corporate trust, personal trust, employee benefit trust and agency assets of approximately $102 billion and $99 billion at December 31, 2002 and 2001, respectively.

Credit card fees increased 16%, compared with 2001, primarily due to an increase in credit card accounts, credit and debit card usage and merchant fees on debit and credit cards.

Mortgage banking noninterest income was $1,713 million in 2002 compared with $1,671 million in 2001. Net servicing fees were a loss of $737 million and $260 million in 2002 and 2001, respectively. In both 2002 and 2001, net servicing fees were impacted by increased valuation provision for impairment of MSRs and increased amortization. During 2002 and 2001, the mortgage industry experienced high levels of prepayment activity as a result of lower interest rates. At December 31, 2002, the Federal National Mortgage Association (FNMA) Current Coupon rate (i.e., the secondary market par mortgage yield for 30 year fixed-rate mortgages) was 5.01%, compared with 6.45% at December 31, 2001. Consequently, assumed prepayment speeds, an important element in determining the fair value of MSRs, increased dramatically resulting in a valuation provision for impairment for MSRs in excess of fair value of $2.1 billion in 2002 and $1.1 billion in 2001 and for other retained interests of $567 million in 2002 and $27 million in 2001. During 2002, the Company recognized a direct write-down of the mortgage servicing asset of $1,071 million. See “Critical Accounting Policies – Mortgage Servicing Rights Valuation” in this report for the Company’s methodology for testing MSRs for impairment and for determining if such impairment is other-than-temporary. Key assumptions, including the sensitivity of those assumptions, used to determine the value of MSRs are disclosed in Notes 1 (Summary of Significant Accounting Policies) and 22 (Securitizations) to Financial Statements. Amortization of MSRs was $1,942 million in 2002 and $914 million in 2001. The increase in the valuation provision for impairment and amortization was substantially offset by gains representing the ineffective and the excluded portion of fair value hedges of MSRs and an increase in mortgage servicing fees resulting from growth of the servicing portfolio. Origination and other closing fees of $1,048 million and net gains on mortgage originations/sales activities of $1,038 million were higher in 2002 due to higher mortgage origination volume. Originations for 2002 grew to $333 billion from $202 billion in 2001.

Insurance income for 2002 increased from the prior year predominantly due to the second quarter 2001 acquisition of ACO Brokerage Holdings Corporation, the Acordia group of insurance agencies (a commercial insurance broker).

Net losses from equity investments for 2002 were $327 million, reflecting other-than-temporary impairment in the valuation of publicly-traded and private equity securities. Net losses from equity investments for the same period in 2001 included approximately $1.7 billion (before tax) of impairment write-downs recognized in the second quarter of 2001.

The Company routinely reviews its investment portfolios for impairment. Such write-downs are based primarily on issuer-specific factors and results. General economic and market conditions,

including those events occurring in the technology and telecommunications industries and adverse changes impacting the availability of venture capital financing are also taken into account. While the determination of impairment is based on all of the information available at the time of the assessment, new information or economic developments in the future could lead to additional impairment.

Net gains on disposition of operations for 2001 included a $96 million gain from the divestiture of 39 stores in Idaho, New Mexico, Nevada and Utah as a condition to completing the Company’s merger with First Security Corporation.



									% Change
	Year ended December 31,								2002/			2001/
(in millions)	2002		2001			2000			2001			2000

Salaries	$	4,383	$	4,027		$	3,652			9	%		10	%
Incentive compensation		1,706		1,195			846			43			41
Employee benefits		1,283		960			989			34			(3	)
Equipment		1,014		909			948			12			(4	)
Net occupancy		1,102		975			953			13			2
Operating leases		802		903			1,059			(11	)		(15	)
Goodwill		—		610			530			(100	)		15
Core deposit intangibles		155		165			186			(6	)		(11	)
Net losses (gains) on dispositions of premises and equipment		52		(21	)		(58	)		—			(64	)
Outside professional services		445		441			422			1			5
Contract services		546		538			562			1			(4	)
Outside data processing		350		319			343			10			(7	)
Telecommunications		347		355			303			(2	)		17
Travel and entertainment		337		286			287			18			—
Advertising and promotion		327		276			316			18			(13	)
Postage		256		242			252			6			(4	)
Stationery and supplies		226		242			223			(7	)		9
Insurance		169		167			157			1			6
Operating losses		163		234			179			(30	)		31
Security		159		156			98			2			59
All other		889		815			642			9			27


Total	$	14,711	$	13,794		$	12,889			7	%		7	%

The increase in salaries in 2002 resulted from additional active, full-time equivalent team members, a major portion of which was due to acquisitions and increased employment related to growth in the mortgage and home equity business. Incentive compensation increased predominantly due to mortgage commission expense resulting from higher origination volume. The increase in employee benefits for 2002 includes net pension cost of $150 million in 2002, due to the impact of a weaker stock market and plan asset returns, compared with net pension income of $49 million in 2001.

Under FAS 142, effective January 1, 2002, all goodwill amortization was discontinued.

The increase in outside professional services, travel and entertainment, and advertising and promotion was predominantly due to the increase in mortgage origination volume.

The Company undertook numerous initiatives in 2002 to reduce operating losses, which declined 30% from 2001.

Community Banking’s net income was $4.1 billion in 2002 and $2.6 billion in 2001. Net income in 2001 included impairment and other special charges of $1.1 billion (after tax). Net interest income increased to $10.4 billion in 2002 from $8.2 billion in 2001. Average loans grew 18% and average core deposits grew 9% from 2001. The provision for loan losses decreased by $97 million for 2002 due to the improvement in the credit environment relative to last year. Noninterest income for 2002 increased by $1.6 billion over 2001 mostly due to increases in gains on sales of debt securities and service charges on deposit accounts. Noninterest expense increased by $1.4 billion in 2002 over 2001 due mostly to increased expense from strong mortgage origination activity.

Wholesale Banking’s net income, before the effect of change in accounting principle, was $1.2 billion for 2002 and $1.1 billion in 2001. Net income in 2001 included impairment and other special charges of $62 million (after tax). Net interest income increased 4% in 2002, compared with 2001. Noninterest income increased $199 million to $2.3 billion in 2002 compared with 2001, which included impairment and other special charges of $99 million (before tax). Noninterest expense increased to $2.4 billion in 2002, compared with $2.3 billion for the prior year. The higher expenses in 2002 compared with 2001 were primarily due to the Acordia acquisition and increased personnel and occupancy expenses related to increased sales and service staff, higher operating losses and higher expense from minority interest in partnerships.

In first quarter 2002, under FAS 142, a transitional goodwill impairment charge of $98 million (after tax) was recognized in certain reporting units.

Wells Fargo Financial’s net income, before the effect of change in accounting principle, increased 8% to $360 million in 2002 from $334 million in 2001, due to growth in loans combined with lower funding costs. The provision for loan losses increased by $54 million in 2002 predominantly due to growth in loans.

During the second quarter of 2002, Wells Fargo Financial refined its reserve estimation process for its U.S. consumer finance business from a combined contractual and recency based charge-off methodology to a contractual basis. The contractual basis for estimating charge-offs is consistent with the method used throughout the Company’s consumer lines of business. Contractual delinquency loss recognition provides a more robust loss and reserve forecasting methodology and supports improved collections management. An estimate of the effect of this refinement was recognized as an additional $23 million provision expense in the second quarter of 2002. A subsequent $21 million charge-off was reflected in the third quarter of 2002.

In first quarter 2002, under FAS 142, a transitional goodwill impairment charge of $178 million (after tax) was recognized in certain international reporting units, substantially related to Island Finance, a Puerto Rico-based consumer finance company acquired in 1995.

For a further discussion of operating segments see Note 21 (Operating Segments) to Financial Statements.

A comparison between the year-end 2002 and 2001 balance sheets is presented below.

The Company holds both debt and marketable equity securities in its securities available for sale portfolio. Debt securities available for sale are primarily held for liquidity, interest rate risk management and yield enhancement purposes. Accordingly, the portfolio is primarily comprised of very liquid, high quality federal agency debt securities. At December 31, 2002, the Company held $27.4 billion of debt securities available for sale, compared with $39.3 billion at December 31, 2001. The decrease in mortgage-backed securities to $21.0 billion at December 31, 2002 from $32.4 billion at December 31, 2001 was largely due to the sale of certain longer-maturity mortgage-backed securities subject to prepayment risk and prepayments of mortgage-backed securities held. The Company had a net unrealized gain on debt securities available for sale of $1.7 billion at December 31, 2002 compared with a net unrealized gain of $655 million at December 31, 2001. The weighted-average expected maturity of the debt securities portion of the securities available for sale portfolio was 5 years and 3 months at December 31, 2002. Since 75% of this portfolio is held in mortgage-backed securities, the expected remaining maturity may differ from contractual maturity because the issuers of such securities may have the right to prepay obligations with or without penalty. 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 indicated in Table 7.

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

A comparative schedule of average loan balances is presented in Table 4; year-end balances are presented in Note 6 (Loans and Allowance for Loan Losses) to Financial Statements.

Loans averaged $174.5 billion in 2002, compared with $157.2 billion in 2001, an increase of 11%. Total loans at December 31, 2002 were $192.5 billion, compared with $167.1 billion at year-end 2001, an increase of 15%. Mortgages held for sale increased to $51.2 billion from $30.4 billion due to increased originations, including significant refinancing activity. A majority of the increase in loans was due to a strong demand for home mortgages and home equity loans and lines, as well as solid growth in credit card balances and consumer finance receivables.

Comparative detail of average deposit balances is presented in Table 4. Average core deposits funded 57.2% and 58.8% of the Company’s average total assets in 2002 and 2001, respectively. Year-end deposit balances are presented in Table 8. Total average interest-bearing deposits rose from $120.2 billion in 2001 to $133.8 billion in 2002. For the same periods, total average noninterest-bearing deposits rose from $55.3 billion to $63.6 billion. Savings certificates declined on average from $29.9 billion in 2001 to $24.3 billion in 2002. Noninterest-bearing checking accounts and other core deposit categories increased substantially in 2002 reflecting the Company’s success in growing customer accounts and balances and reflecting growth in mortgage escrow deposits associated with the record amount of mortgages originated in 2002, offsetting the decline in savings certificates.

As more fully described in Note 1 (Summary of Significant Accounting Policies) to Financial Statements, the Company consolidates majority-owned subsidiaries. Affiliates in which there is at least 20 percent ownership are generally accounted for under the equity method of accounting and affiliates in which there is less than 20 percent ownership are generally carried at cost.

In the ordinary course of business, the Company engages in financial transactions that are not recorded on the Company’s balance sheet, in accordance with generally accepted accounting principles, or may be recorded on the Company’s balance sheet in amounts that are different than the full contract or notional amount of the transaction. Such transactions are structured to meet the financial needs of customers, manage the Company’s credit, market or liquidity risks, diversify funding sources or optimize capital.

Substantially all of the Company’s off-balance sheet arrangements relate to securitization activities in the ordinary course of business. The Company routinely securitizes residential mortgage loans and, from time to time, other financial assets, including student loans, commercial mortgages and automobile receivables. The Company’s loan securitization transactions are normally structured as sales, in accordance with FAS 140, which involve the transfer of financial assets to certain qualifying special-purpose entities that are not subject to consolidation. In a securitization, an entity transferring the assets is able to convert those assets into cash before they would have been realized by holding the assets to maturity. Special-purpose entities used in such securitizations obtain cash to acquire the assets by issuing securities to investors. In a securitization transaction, the Company customarily provides for representations and warranties with respect to the receivables transferred. In addition, the terms of the transaction generally provide for the Company to 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 of servicing such receivables exceeds the benefits of servicing. In addition, the Company may structure investment vehicles, typically in the form of collateralized debt obligations, which are sold in the market place.

At December 31, 2002, the Company’s securitization arrangements were comprised of approximately $45.3 billion in securitized loan receivables, including $26.5 billion of residential mortgage loans. The Company retained servicing rights and other beneficial interests related to these securitizations of approximately $655 million, consisting of $288 million in securities, $99 million in servicing assets and $268 million in other retained interests. With respect to these securitizations, the Company provided $85 million in liquidity commitments in the form of demand notes and reserve fund balances, and had committed to provide up to $22 million in credit enhancements.

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities, which clarifies those entities that may be subject to consolidation because certain arrangements, as defined in FIN 46, may be controlled by financial interests in such entities, referred to as “variable interest entities” (VIEs), that may not be controlled through voting interests or in which the equity investors do not bear the residual economic risks. Such financial interests that convey economic risks and rewards associated with another entity can derive from relationships such as loans, leases, service contracts, credit enhancements, guarantees, derivatives and call options. An enterprise will be required to consolidate a variable interest entity if that enterprise has a variable interest (or combination of variable interests) that will absorb a majority of the entity’s expected losses, if they occur, or receive a majority of the entity’s expected residual returns, if they occur, or both.

The adoption of FIN 46 will not affect the Company’s accounting for securitization transactions involving qualifying special-purpose entities. However, the Company believes that it is reasonably possible that it could be a significant or majority variable interest holder in certain transactions involving VIEs. The aggregate amount of assets with respect to these transactions approximated $1.2 billion at December 31, 2002 and the Company estimates that its maximum exposure to loss as a result of its involvement with these VIEs is approximately $45 million, which approximated the Company’s variable interests in these entities at the end of 2002.

The Company’s 2002 sales proceeds and cash flows from securitizations, and additional information with respect to securitization activities are included in Note 22 (Securitizations) to Financial Statements.

The Company’s mortgage operation, in the ordinary course of business, originates a portion of its mortgage loans through unconsolidated joint ventures in which the Company owns an interest of 50 percent or less. Loans made by the joint ventures are funded by Wells Fargo Home Mortgage, Inc., or an affiliated entity, and are subject to specified underwriting criteria. At December 31, 2002, total assets of these mortgage origination joint ventures were approximately $160 million. The Company provides liquidity to these joint ventures in the form of outstanding lines of credit and, at December 31, 2002, such liquidity commitments totaled $510 million.

The Company also holds interests in other unconsolidated joint ventures that were formed with unrelated third parties to provide certain operational efficiencies due to economies of scale. The Company’s real estate lending services joint ventures are managed by a third party and provide customers title, escrow, appraisal and other real estate related services. The Company’s merchant services joint venture includes credit card processing and related activities. At December 31, 2002, total assets of the Company’s real estate lending and merchant services joint ventures were approximately $373 million.

In connection with certain brokerage, asset management and insurance agency acquisitions made by the Company, the terms of the acquisition agreement provide for deferred payments or additional consideration, based on certain performance targets. At December 31, 2002, the amount of contingent consideration expected to be paid was not material to the Company’s financial statements.

As a financial services provider, the Company routinely enters into commitments to extend credit, including loan commitments, standby letters of credit and financial guarantees. While these contractual obligations represent future cash requirements of the Company, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans made by the Company. For additional information, see Note 6 (Loans and Allowance for Loan Losses) to Financial Statements.

In the Company’s venture capital and capital markets businesses, commitments are made to fund equity investments directly to investment funds and to specific private companies. The timing of future cash requirements to fund such commitments is generally dependent upon the venture capital investment cycle. This cycle, the period over which privately-held companies are funded by venture capital investors and ultimately taken public through an initial offering, can vary based on overall market conditions, as well as the nature and type of industry in which the companies operate. It is anticipated that many such private equity investments would become public or otherwise become liquid before the balance of unfunded equity commitments is utilized. At December 31, 2002, such commitments totaled approximately $880 million. Other investment commitments, comprised principally of low-income housing, civic and other

community development initiatives undertaken by the Company, totaled approximately $230 million at December 31, 2002.

The Company enters into indemnification agreements in the ordinary course of business, including underwriting agreements relating to offers and sales of the Company’s 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 additional information, see Note 25 (Legal Actions and Other Contingent Commitments) to Financial Statements.

In the ordinary course of operations, the Company enters into certain contractual obligations. Such obligations include the funding of operations through debt issuances as well as leases for premises and equipment.

Table 9 summarizes the Company’s significant contractual obligations at December 31, 2002, except for obligations associated with short-term borrowing arrangements and pension and postretirement benefits plans. Additional information with respect to the obligations presented is included in the referenced Note to Financial Statements. In addition, refer to Notes 11 (Short-term Borrowings) and 16 (Employee Benefits and Other Expenses) to Financial Statements for further discussion of contractual obligations.

The Company enters into derivative financial instruments, which create contractual obligations, as part of its interest rate risk management process, customer accommodation or other trading activities. See “Asset/Liability and Market Risk Management” in this report and refer to Note 27 (Derivative Financial Instruments) to Financial Statements for additional information regarding derivative financial instruments.

There are no related party transactions required to be disclosed in accordance with FASB Statement No. 57, Related Party Disclosures. Loans to executive officers and directors of the Company and its banking subsidiaries were made in the ordinary course of business and were made on substantially the same terms as comparable transactions.

The Company’s credit risk management is an integrated process that stresses decentralized line of business group management and accountability, supported by the Chief Credit Officer’s oversight, consistent credit policies, and frequent and comprehensive risk measurement and modeling. The process is also reviewed regularly by the Company’s Loan Examiners and Internal Audit and is subject to examination by external auditors and regulators.

Credit risk (including counterparty risk) is managed within the framework and guidance of comprehensive company-wide policies. Credit policies are in place for all banking and non-banking operations that have exposure to credit risk. These policies provide a consistent and prudent approach to credit risk management across the enterprise. Actual credit performance and exception rates are measured through detailed tracking and analysis, and credit policies are routinely reviewed and/or modified as appropriate.

The Chief Credit Officer provides company-wide credit oversight. Each business group with credit risks has a designated credit officer and has the primary responsibility for managing that risk. The Chief Credit Officer delegates authority, limits and requirements to the business units. These delegations are reviewed and amended in the event of significant changes in personnel or credit performance.

All portfolios of credit risk are subject to periodic reviews, to ensure that the risk identification processes are functioning properly and that credit standards are followed. Such reviews are conducted by the business units themselves and by the office of the Chief Credit Officer. In addition, all such portfolios are subject to the independent review of the Company’s Loan Examiners and/or Internal Audit.

Quarterly asset quality forecasts are completed to quantify each business group’s intermediate-term outlook for loan losses and recoveries, nonperforming loans and market trends. Periodic stress tests are conducted to validate the adequacy of the overall allowance for loan losses, including a portfolio loss simulation model that simulates the allowance requirement of the Company’s various sub-portfolios assuming various trends in loan quality. Loan portfolios are assessed for geographic or industry concentrations and mitigation strategies are developed.

In addition, the Company routinely reviews and evaluates downside scenarios for risks that are not borrower specific but that may influence the behavior of a particular credit, group of credits, or entire sub-portfolios. This evaluation includes assessments related to particular industries and specific macroeconomic trends.

Table 10 presents comparative data for nonaccrual loans and other assets. Management’s classification of a loan as nonaccrual does not necessarily indicate that the principal of the loan is uncollectible in whole or in part. Table 10 excludes loans that are 90 days or more past due and still accruing, but are both well-secured and in the process of collection or are real estate 1-4 family first mortgage loans or consumer loans exempt under regulatory rules from being classified as nonaccrual, which are presented in Table 11. However, real estate 1-4 family loans (first and junior liens) are placed on nonaccrual within 120 days of becoming past due and are shown in Table 10. Note 1 (Summary of Significant Accounting Policies) to Financial Statements describes the Company’s accounting policy for nonaccrual loans.

The Company anticipates changes in the amount of nonaccrual loans that result from increases in lending activity or from resolutions of loans in the nonaccrual portfolio. The performance of any individual loan can be affected by external factors, such as economic conditions or factors particular to a borrower such as actions taken by a borrower’s management. In addition, from time to time, the Company purchases loans from other financial institutions that may be classified as nonaccrual based on the Company’s policies.

The Company generally identifies loans to be evaluated for impairment under FASB Statement No. 114 (FAS 114), Accounting by Creditors for Impairment of a Loan, when such loans are on nonaccrual. However, not all nonaccrual loans are impaired. A loan is placed on nonaccrual status upon becoming 90 days past due as to interest or principal (unless both well-secured and in the process of collection), when the full timely collection of interest or principal becomes uncertain or when a portion of the principal balance has been charged off. Real estate 1-4 family loans (first and junior liens) are placed on nonaccrual status within 120 days of becoming past due as to interest or principal, regardless of security. In contrast, under FAS 114, loans are considered impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments.

For loans covered under FAS 114, the Company assesses for impairment when such loans are on nonaccrual, or when the loan has been restructured. When a loan over $1 million with unique risk characteristics has been identified as impaired, the Company estimates the amount of impairment using discounted cash flows, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the underlying collateral. In such cases, the current fair value of the collateral, reduced by costs to sell, will be used in place of discounted cash flows.

If the measurement of the impaired loan results in a value that is less than the recorded investment in the loan (including accrued interest, net deferred loan fees or costs and unamortized premium or discount), an impairment is recognized through the allowance for loan losses. FAS 114 does not change the timing of charge-offs of loans to reflect the amount ultimately expected to be collected.

If interest that was 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 their original terms, $107 million of interest would have been recorded in 2002, compared with $41 million actually recorded.

Foreclosed assets at December 31, 2002 were $195 million, compared with $160 million at December 31, 2001. Substantially all of the foreclosed assets at December 31, 2002 have been in the portfolio three years or less.

Table 11 shows loans that are contractually past due 90 days or more as to interest or principal, but are not included in Table 10, Nonaccrual Loans and Other Assets.

The allowance for loan losses reflects the credit losses inherent in the Company’s loan portfolio as of the financial statement date based on a consistent methodology for assessing credit risk. The Company’s allowance methodology assumes that the allowance for loan losses as a percentage of charge-offs and non-performing loans will change at different points in time based on credit performance, loan mix and collateral values. An analysis of the changes in the allowance for loan losses, including charge-offs and recoveries by loan category, is presented in Note 6 (Loans and Allowance for Loan Losses) to Financial Statements. At December 31, 2002, the allowance for loan losses was $3.82 billion, or 1.98% of total loans, compared with $3.72 billion, or 2.22%, at December 31, 2001 and $3.68 billion, or 2.37%, at December 31, 2000. The primary driver of the decrease in the allowance for loan losses as a percentage of total loans in 2002 and in 2001 was the changing loan mix with residential real estate secured consumer loans representing a higher percentage of the overall loan portfolio. The Company has historically experienced lower losses on its residential real estate secured consumer loan portfolio. The provision for loan losses totaled $1.68 billion in 2002, $1.73 billion in 2001 and $1.28 billion in 2000. Net charge-offs in 2002 were $1.68 billion, or .96% of average total loans, compared with $1.73 billion, or 1.10%, in 2001 and $1.18 billion, or .84%, in 2000. Loan loss recoveries were $481 million in 2002, compared with $396 million in 2001 and $415 million in 2000. Any loan that is past due as to principal or interest and that is not both well-secured and in the process of collection is generally charged off (to the extent that it exceeds the fair value of any related collateral) after a predetermined period of time that is based on loan category. Additionally, loans are charged off when classified as a loss by either internal loan examiners or regulatory examiners.

The Company considers the allowance for loan losses of $3.82 billion adequate to cover losses inherent in loans, commitments to extend credit and standby and other letters of credit at December 31, 2002. The process for determining the adequacy for loan losses is critical to the financial results of the Company and requires subjective and complex judgment by management,

as a result of the need to make estimates about the effect of matters that are inherently uncertain (See “Financial Review – Critical Accounting Policies – Allowance for Loan Losses”). Therefore, no assurance can be given that the Company will not, in any particular period, sustain loan losses that are sizeable in relation to the amount reserved, or that subsequent evaluations of the loan portfolio, in light of the factors then prevailing, including economic conditions and the ongoing examination process by the Company and its regulators, will not require significant increases in the allowance for loan losses. For discussion of the process by which the Company determines the adequacy of the allowance for loan losses, see Note 6 (Loans and Allowance for Loan Losses) to Financial Statements.

Asset/liability management comprises the evaluation, monitoring, and management of the Company’s interest rate risk, market risk and liquidity and funding. The Corporate Asset/Liability Management Committee (Corporate ALCO) maintains oversight of these risks. Corporate ALCO is comprised of senior financial and senior business executives. Each of the Company’s principal business groups – Community Banking (including Mortgage Banking) and Wholesale Banking – have individual asset/liability management committees and processes linked to the Corporate ALCO process.

Interest rate risk, one of the more prominent risks in terms of potential earnings impact, is an inevitable part of being a financial intermediary. It can occur for any one or more of the following reasons: (a) assets and liabilities may mature or re-price at different times (for example, if assets re-price faster than liabilities and interest rates are generally falling, Company earnings will initially decline); (b) assets and liabilities may re-price at the same time but by different amounts (for example, when the general level of interest rates is falling, the Company may choose for customer management, competitive, or other reasons to reduce the rates paid on checking and savings deposit accounts by an amount that is less than the general decline in market interest rates); (c) short-term and long-term market interest rates may change by different amounts (i.e., the shape of the yield curve may impact new loan yields and funding costs differently); or (d) the remaining maturity of various assets or liabilities may shorten or lengthen as interest rates change (for example, mortgage-backed securities held in the securities available for sale portfolio may prepay significantly earlier than anticipated – with an associated reduction in portfolio income – if long-term mortgage interest rates decline sharply). In addition to the direct impact of interest rate changes on net interest income through these channels, interest rates indirectly impact earnings through their effect on loan demand, credit losses, mortgage origination fees, the value of mortgage servicing rights, the value of the pension liability and other sources of Company earnings.

The Company simulates its future net income under multiple interest rate paths 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. As of December 31, 2002, the simulation analysis indicated that the Company’s earnings would tend to decrease from most likely expectations under scenarios of much higher short-term rates accompanied by higher but less pronounced increases

in long-term rates. As an example, a 2.00% increase in the federal funds rate accompanied by a 1.50% increase in the 10 year constant maturity treasury rate from levels prevailing at year end would reduce estimated net income by approximately 2% relative to the Company’s most likely earnings plan over a twelve month horizon. The principal source of net income risk in that particular scenario is a modeled slowdown in mortgage origination activity and narrower new business spreads associated with a flatter yield curve. Simulation estimates are highly dependent on and will change with the size and mix of the actual and projected balance sheet at the time each simulation is done.

The Company uses exchange-traded and over-the-counter interest rate derivatives to hedge its interest rate exposures. The credit risk amount and estimated net fair values of these derivatives as of December 31, 2002 and 2001 are indicated in Note 27 (Derivative Financial Instruments) to Financial Statements. Derivatives are used for asset/liability management in three ways: (a) most of the Company’s long-term fixed-rate debt is converted to floating-rate payments by entering into receive-fixed swaps at issuance, (b) the cash flows from selected asset and/or liability instruments/portfolios are converted from fixed to floating payments or vice versa, and (c) the Company’s mortgage operation actively uses swaptions, futures, forwards and rate options to hedge the mortgage pipeline, funded mortgage loans, and mortgage servicing rights asset.

The Company originates, funds and services mortgage loans. These activities subject the Company to a number of risks, including credit, liquidity and interest rate risks. The Company manages credit and liquidity risk by selling or securitizing the loans it originates. Changes in interest rates, however, may have a potentially large impact on mortgage banking income in any calendar quarter and over time. The Company manages both the risk to net income over time from all sources as well as the risk to an immediate reduction in the fair value of its mortgage servicing rights. The Company relies on mortgage loans held on its balance sheet and derivative instruments to maintain these risks within Corporate ALCO parameters.

At December 31, 2002, the Company had capitalized mortgage servicing rights of $4.5 billion. The value of its servicing rights portfolio is influenced by prepayment speed assumptions affecting the duration of the mortgage loans to which the servicing rights relate. Changes in long-term interest rates affect these prepayment speed assumptions. For example, a decrease in long-term rates would accelerate prepayment speed assumptions as borrowers refinance their mortgage loans. Under GAAP, impairment to the Company’s servicing rights, due to a decrease in long-term rates or other reasons, would be reflected as a charge to earnings. The Company manages this risk in two ways. First, a major portion of the mortgage servicing rights asset is hedged with derivative contracts. The principal source of risk in this hedging process is the risk that changes in the value of the hedging contracts may not match changes in the value of the hedged portion of the mortgage servicing rights for any given change in long-term interest rates. Second, a portion of the potential reduction in the value of the mortgage servicing rights asset for a given decline in interest rates is offset by estimated increases in origination and servicing fees over a twelve month period from new mortgage activity or refinancing associated with that decline in interest rates. In a scenario of much lower long-term interest rates, the decline in the value of the mortgage servicing rights and its impact on net income would be immediate whereas

the additional origination and servicing fee income accrues over time. Net of impairment reserves, the capitalized mortgage servicing rights asset is valued at .92% of the total servicing portfolio at December 31, 2002, down from 1.54% of the servicing portfolio at December 31, 2001.

The Company incurs interest rate risk, foreign exchange risk, equity price risk and commodity price risk in several trading businesses managed under limits set by Corporate ALCO. The primary purpose of these businesses is to accommodate customers in the management of their market price risks. Additionally, the Company takes positions based on market expectations or to benefit from price differentials between financial instruments and markets. All securities, loans, foreign exchange transactions, commodity transactions and derivatives transacted with customers or used to hedge capital market transactions done with customers are carried at fair value. Counterparty risk limits are established and monitored by the Institutional Risk Committee. The notional or contractual amount, credit risk amount and estimated net fair value of all customer accommodation derivatives as of December 31, 2002 and 2001 are indicated in Note 27 (Derivative Financial Instruments) to Financial Statements. Open, “at risk” positions for all trading business are monitored by Corporate ALCO. During the 90 day period ending December 31, 2002 the maximum daily “value at risk”, the worst expected loss over a given time interval within a given confidence range (99%), for all trading positions covered by value at risk measures did not exceed $25 million.

Equity markets impact the Company in both direct and indirect ways. The Company makes and manages direct equity investments in start up businesses, emerging growth companies, management buy-outs, acquisitions and corporate recapitalizations. The Company also invests in non-affiliated funds that make similar private equity investments. These private equity investments are made within capital allocations approved by the Company’s management and its Board of Directors. Business developments, key risks and historical returns for the private equity investments are reviewed with the Board at least annually. Management reviews these investments at least quarterly and assesses for possible other-than-temporary impairment. For nonmarketable investments, the analysis is based on facts and circumstances of each individual investment and the expectations for that investment’s cash flows and capital needs, the viability of its business model and the Company’s exit strategy. At December 31, 2002, the private equity investments totaled $1,657 million, compared with $1,696 million at December 31, 2001.

The Company also has marketable equity securities in its available for sale investment portfolio, including shares distributed from the Company’s venture capital activities. These investments are managed 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, in addition, other-than-temporary impairment may be periodically recorded. The initial indicator of impairment for marketable equity securities is a sustained decline in market price below the amount recorded for that investment. The Company considers such factors as the length of time and the extent to which the market value has been less than cost; the financial

condition, capital strength, and near-term prospects of the issuer; any recent events specific to that issuer and economic conditions of its industry; and, to a lesser degree, the Company’s investment horizon in relationship to an anticipated near-term recovery in the stock price, if any. At December 31, 2002, the fair value of the marketable equity securities was $556 million and cost was $598 million, compared with $991 million and $815 million, respectively, at December 31, 2001.

Changes in equity market prices may also indirectly impact the Company’s net income by impacting the value of third party assets under management and hence fee income, by impacting particular borrowers whose ability to repay principal and/or interest may be impacted by the stock market, or by impacting other business activities. These indirect risks are monitored and managed as part of the operations of each business line.

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

In addition to the immediately liquid resources of cash and due from banks and federal funds sold and securities purchased under resale agreements, asset liquidity is provided by the debt securities in the securities available for sale portfolio. The weighted-average expected remaining maturity of the debt securities within this portfolio was 5 years and 3 months at December 31, 2002. Of the $25.7 billion (cost basis) of debt securities in this portfolio at December 31, 2002, $8.2 billion, or 32%, is expected to mature or be prepaid in 2003 and an additional $3.8 billion, or 15%, is expected to mature or be prepaid in 2004. (See Note 5 (Securities Available for Sale) to Financial Statements for more information.) Asset liquidity is further enhanced by the Company’s ability to sell or securitize loans in secondary markets through whole-loan sales and securitizations. In 2002, the Company sold residential mortgage loans of approximately $270 billion, including securitized residential mortgage loans and commercial mortgage loans of approximately $220 billion. The amount of such assets, as well as home equity loans and other consumer loans, available to be sold or securitized totaled approximately $115 billion at December 31, 2002.

Core customer deposits have historically provided the Company with a sizeable source of relatively stable and low-cost funds. The Company’s average core deposits and stockholders’ equity funded 66.3% and 68.3% of its average total assets in 2002 and 2001, respectively.

The remaining funding of assets was mostly provided by long-term debt, deposits in foreign offices, short-term borrowings (federal funds purchased and securities sold under repurchase

agreements, commercial paper and other short-term borrowings) and trust preferred securities. Short-term borrowings averaged $33.3 billion and $33.9 billion in 2002 and 2001, respectively. Long-term debt averaged $42.2 billion and $34.5 billion in 2002 and 2001, respectively. Trust preferred securities averaged $2.8 billion and $1.4 billion in 2002 and 2001, respectively.

Liquidity for the Company is also available through the Company’s ability to raise funds in a variety of domestic and international money and capital markets. The Company accesses the capital markets for long-term funding through the issuance of registered debt, private placements and asset-based secured funding. Approximately $60 billion of the Company’s debt is rated by Fitch, Inc. and Moody’s Investors Service as “AA” or equivalent, which is among the highest ratings given to a financial services company. The rating agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, level and quality of earnings and other tools. Material changes in these factors could result in a different debt rating.

Parent. The Parent has registered with the Securities and Exchange Commission (SEC) to issue a variety of securities, including senior and subordinated notes and preferred and common securities to be issued by one or more trusts that are directly or indirectly owned by the Company and consolidated in the financial statements. During 2002, the Parent issued a total of $8.9 billion of senior and subordinated notes and trust preferred securities leaving unused issuance capacity of $7.1 billion at December 31, 2002. The Company used the proceeds from securities issued in 2002 for general corporate purposes and expects that it will use the proceeds from the issuance of any securities in the future for general corporate purposes as well. The Parent also issues commercial paper and has two back-up credit facilities amounting to $2 billion.

Bank Note Program. In February 2001, Wells Fargo Bank, N.A. established a $20 billion bank note program under which it may issue up to $10 billion in short-term senior notes outstanding at any time and up to a total of $10 billion in long-term senior and subordinated notes. Securities are issued under this program as private placements in accordance with OCC regulations. During 2002, Wells Fargo Bank, N.A. issued $4.1 billion in long-term notes. At December 31, 2002, the remaining issuance authority under the long-term portion was $4.3 billion.

Wells Fargo Financial. During 2002, Wells Fargo Financial, Inc. (WFFI) issued $2.1 billion of senior notes. On October 22, 2002, WFFI announced that it will no longer issue term debt securities. During 2002, WFFI’s wholly owned Canadian subsidiary, Wells Fargo Financial Canada Corporation (WFFC), issued $350 million (Canadian) in senior notes, leaving at December 31, 2002 a total of $950 million (Canadian) available for issuance.

On October 22, 2002, the Parent issued a full and unconditional guarantee of all outstanding term debt securities and commercial paper of WFFI. WFFI ceased filing periodic reports under the Securities Exchange Act of 1934 and is no longer a separately rated company. Funding of WFFI has been assumed by the Parent to achieve corporate funding efficiencies. The Parent has also guaranteed all outstanding term debt and commercial paper of WFFC. WFFC expects to continue to issue term debt and commercial paper in Canada, fully guaranteed by the Parent.

The Company has an active program for managing stockholder capital. The objective of effective capital management 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.

The Company uses capital to fund organic growth, acquire banks and other financial services companies, pay dividends and repurchase its shares. During 2002, the Company’s consolidated assets increased by $42 billion, or 14%. Capital used for acquisitions in 2002 totaled $1.4 billion. During 2001 and 2002, the Board of Directors authorized the repurchase of up to 85 million and 50 million additional shares, respectively, of the Company’s outstanding common stock. During 2002, the Company repurchased approximately 43 million shares of its common stock. At December 31, 2002, the total remaining common stock repurchase authority under the 2001 and 2002 authorizations was approximately 58 million shares. Total common stock dividend payments in 2002 were $1.9 billion. In January 2003, the Board of Directors approved an increase in the Company’s quarterly common stock dividend to 30 cents per share from 28 cents per share, representing a 7% increase in the quarterly dividend rate.

The Company’s potential sources of capital include retained earnings, common and preferred stock issuance, issuance of subordinated debt and trust preferred securities. In 2002, total net income was $5.4 billion and the change in retained earnings was $3.4 billion after payment of $1.9 billion in common stock dividends. Total common stock issued in 2002 under various employee benefit and director plans and under the Company’s dividend reinvestment program was 22 million shares. Issuance of subordinated debt amounted to $1.7 billion, and one placement of trust preferred securities in the amount of $450 million was completed in 2002.

The Company anticipates that it will incur capital expenditures of approximately $600 million in 2003 for stores, relocation and remodeling of company facilities, routine replacement of furniture, equipment, servers and other networking equipment related to expansion of the Company’s internet services business. The Company will fund these expenditures from various sources, including retained earnings of the Company and borrowings of various maturities.

The Company and each of the 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, 2002, the Company and each of the covered subsidiary banks were “well capitalized” under regulatory standards. See Note 26 (Regulatory and Agency Capital Requirements) to Financial Statements for additional information.

Net income in 2001 was $3.41 billion, compared with $4.01 billion in 2000. Diluted earnings per common share were $1.97, compared with $2.32 in 2000. The decreases in net income and earnings per share were due to second quarter 2001 non-cash impairment of public and private equity securities and other special charges of $1.16 billion (after tax), or $.67 per share. Apart

from these charges, very strong growth in business revenue more than offset the impact of higher credit losses on 2001 profits.

Return on average assets (ROA) was 1.20% and return on average common equity (ROE) was 12.73% in 2001, compared with 1.60% and 16.24%, respectively, in 2000.

Net interest income on a taxable-equivalent basis was $12.05 billion in 2001, compared with $10.40 billion in 2000. The increase was primarily due to an increase in earning assets. The Company’s net interest margin was 5.29% for 2001, compared with 5.23% in 2000.

Noninterest income was $9.01 billion in 2001, compared with $10.36 billion in 2000. The decrease was due to approximately $1.72 billion (before tax) of impairment write-downs in the second quarter of 2001 reflecting other-than-temporary impairment in the valuation of publicly-traded securities and private equity investments, partially offset by increases in gains on sales of debt securities available for sale, mortgage banking income and gains on dispositions of operations. The increase in mortgage banking income was the result of an increase in mortgage origination and other closing fees that was predominantly due to increased refinancing activity resulting from the decline in fixed-rate mortgage rates during the last three quarters of 2001. Mortgage servicing fees before amortization and valuation provision for impairment increased in 2001 in line with substantial growth in the servicing portfolio. However, these additional fees were more than offset by increased amortization and valuation provision for impairment for mortgage servicing rights. Such valuation adjustments are driven by higher estimated prepayments assumed to be associated with the lower prevailing level of interest rates. During 2001, the mortgage industry experienced high levels of prepayment activity as a result of lower interest rates. The FNMA Current Coupon rate (i.e., the secondary market par mortgage yield for 30 year fixed-rate mortgages) was 6.45% at December 31, 2001, compared with 6.96% at December 31, 2000. Consequently, assumed prepayment speeds, an important element in determining the fair value of mortgage servicing rights, increased dramatically resulting in valuation provision for impairment of $1.1 billion for the year ended December 31, 2001. Given the level of interest rates at December 31, 2000, and the resulting assumptions used to value mortgage servicing rights and other retained interests, the fair value of the mortgage servicing rights were in excess of the Company’s carrying value at December 31, 2000. Therefore, no valuation allowance was recognized.

Revenue, the sum of net interest income and noninterest income, was $20.70 billion in 2000 and $20.98 billion in 2001. Revenue in 2001 included approximately $1.72 billion (before tax) of non-cash impairment.

Noninterest expense totaled $13.79 billion in 2001, compared with $12.89 billion in 2000, an increase of 7%. The increase was primarily due to an increase in salaries and incentive compensation from increases in full-time equivalent team members and higher commissions due to record mortgage originations. Expense growth also included the effect of acquisitions, particularly Acordia, the fifth largest insurance broker in the U.S.

The provision for loan losses was $1.73 billion in 2001, compared with $1.28 billion in 2000. During 2001, net charge-offs were $1.73 billion, or 1.10% of average total loans, compared with $1.18 billion, or .84%, during 2000. The allowance for loan losses was $3.72 billion, or 2.22% of total loans, at December 31, 2001, compared with $3.68 billion, or 2.37%, at December 31, 2000.

At December 31, 2001, total nonaccrual loans were $1.64 billion, or 1.0% of total loans, compared with $1.19 billion, or .7%, at December 31, 2000. Foreclosed assets were $160 million at December 31, 2001, compared with $120 million at December 31, 2000.

The ratio of common stockholders’ equity to total assets was 8.82% at December 31, 2001, compared with 9.62% at December 31, 2000. The Company’s total risk-based capital (RBC) ratio at December 31, 2001 was 11.01% and its Tier 1 RBC ratio was 6.99%, exceeding the minimum regulatory guidelines of 8% and 4%, respectively, for bank holding companies. The Company’s RBC ratios at December 31, 2000 were 10.44% and 7.30%, respectively. The Company’s Tier 1 leverage ratios were 6.24% and 6.48% at December 31, 2001 and 2000, respectively, exceeding the minimum regulatory guideline of 3% for bank holding companies.

We make forward-looking statements in this report and in other reports and proxy statements we file with the SEC. In addition, our senior management might make forward-looking statements orally to analysts, investors, the media and others. Broadly speaking, forward-looking statements include:

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projections of our revenues, income, earnings per share, capital expenditures, dividends, capital structure or other financial items;

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descriptions of plans or objectives of our management for future operations, products or services, including pending acquisitions;

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forecasts of our future economic performance; and

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descriptions of assumptions underlying or relating to any of the foregoing.

In this report, for example, we make forward-looking statements discussing our expectations about:

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future credit losses and non-performing assets;

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the future value of mortgage servicing rights;

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the future value of equity securities, including those in our venture capital portfolios;

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the impact of new accounting standards;

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

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future capital expenditures.

Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements often include words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” or similar expressions. Do not unduly rely on forward-looking

statements. They give our expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made, and we might not update them to reflect changes that occur after the date they are made.

There are several factors—many beyond our control—that could cause results to differ significantly from our expectations. Some of these factors are described below. Other factors, such as credit, market, operational, liquidity, interest rate and other risks and factors relating to the regulation and supervision of the Company, are described elsewhere in this report (see, for example, “Balance Sheet Analysis” and “Regulation and Supervision”). Any factor described in this report could by itself, or together with one or more other factors, adversely affect our business, results of operations and/or financial condition. There are factors not described in this Form 10-K/A that could cause results to differ from our expectations.

As a financial services company, our earnings are significantly affected by general business and economic conditions.

Our business and earnings are impacted by general business and economic conditions in the United States and abroad. These conditions include short-term and long-term interest rates, inflation, monetary supply, fluctuations in both debt and equity capital markets, and the strength of the U.S. economy and the local economies in which we operate. For example, an economic downturn, increase in unemployment, or other events that negatively impact household and/or corporate incomes could decrease the demand for the Company’s loan and non-loan products and services and increase the number of customers who fail to pay interest or principal on their loans.

Geopolitical conditions can also impact our earnings. Acts or threats of terrorism, actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts including a war with Iraq, could impact business and economic conditions in the U.S. and abroad. The terrorist attacks in 2001, for example, caused an immediate decrease in demand for air travel, which adversely affected not only the airline industry but also other travel-related and leisure industries, such as lodging, gaming and tourism.

We discuss other business and economic conditions in more detail elsewhere in this report.

Our earnings are significantly affected by the fiscal and monetary policies of the federal government and its agencies.

The Board of Governors of the Federal Reserve System 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 impact our net interest margin, and can materially affect the value of financial instruments we hold, such as debt securities and mortgage servicing rights. Its policies also can affect our borrowers, potentially increasing the risk that they may fail to repay their loans. Changes in Federal Reserve Board policies are beyond our control and hard to predict or anticipate.

We operate in a highly competitive industry which could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can now merge by creating a new type of financial services company called a “financial holding company,” which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Recently, a number of foreign banks have acquired financial services companies in the United States, further increasing competition in the U.S. market. Also, technology has lowered barriers to entry and made it possible for nonbanks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and some have lower cost structures.

The holding company, its subsidiary banks and many of its nonbank subsidiaries are heavily regulated at the federal and state levels. This regulation is to protect depositors, federal deposit insurance funds and the banking system as a whole, not security holders. Congress and state legislatures and federal and state regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect us in substantial and unpredictable ways including limiting the types of financial services and products we may offer and/or increasing the ability of nonbanks to offer competing financial services and products. Also, our failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies and damage to our reputation. For more information, refer to “Regulation and Supervision” and to Notes 4 (Cash, Loan and Dividend Restrictions) and 25 (Regulatory and Agency Capital Requirements) to Financial Statements.

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

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

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information furnished to us by or on behalf of customers and counterparties, including financial statements and other financial information. We also may rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit, we may assume that a customer’s audited financial statements conform with GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. We also may rely on the audit report covering those financial statements. Our financial condition and results of operations could be negatively impacted to the extent we rely on financial statements that do not comply with GAAP or that are materially misleading.

Consumers may decide not to use banks to complete their financial transactions.

Technology and other changes are allowing parties to complete financial transactions that historically have involved banks. For example, consumers can now pay bills and transfer funds directly without banks. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and income generated from those deposits.

Maintaining or increasing our market share depends on market acceptance and regulatory approval of new products and services.

Our success depends, in part, on our ability to adapt our products and services to evolving industry standards. There is increasing pressure on financial services companies to provide products and services at lower prices. This can reduce our net interest margin and revenues from our fee-based products and services. In addition, the widespread adoption of new technologies, including internet-based services, could require us to make substantial expenditures to modify or adapt our existing products and services. We might not successfully introduce new products and services, achieve market acceptance of our products and services, and/or develop and maintain loyal customers.

The holding company relies on dividends from its subsidiaries for most of its revenue.

The holding company is a separate and distinct legal entity from its subsidiaries. It receives substantially all of its revenue from dividends from its subsidiaries. These dividends are the principal source of funds to pay dividends on the holding company’s common and preferred stock and interest and principal on its debt. Various federal and/or state laws and regulations limit the amount of dividends that our bank and certain of our nonbank subsidiaries may pay to the holding company. Also, the holding company’s 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”.

Our accounting policies and methods are key to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain.

Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Our management must exercise judgment in selecting and applying many of these accounting policies and methods so that not only do they comply with generally accepted accounting principles but also that they reflect management’s judgment as to the most appropriate manner in which to record and report our financial condition and results of operations. In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which might be reasonable under the circumstances yet might result in our reporting materially different amounts than would have been reported under a different alternative. Note 1 (Summary of Significant Accounting Policies) to Financial Statements describes our significant accounting policies.

We have identified three accounting policies as being “critical” to the presentation of our financial condition and results of operations because they require management to make particularly subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These critical accounting policies relate to: (1) the determination of allowance for loan losses, (2) the valuation of mortgage servicing rights, and (3) pension accounting. Because of the inherent uncertainty of estimates about these matters, we cannot provide any assurance that the Company will not:

•

significantly increase its allowance for loan losses and/or sustain loan losses that are significantly higher than the amount reserved;

•

recognize significant provision for impairment of its mortgage servicing rights; or

•

significantly increase its pension liability.

For more information, refer in this report to “Critical Accounting Policies,” “Balance Sheet Analysis” and “Risk Management.”

We are a diversified financial services company. In addition to banking, we provide insurance, investments, mortgages and consumer finance. Although we believe our diversity helps mitigate the impact to the Company when downturns affect any one segment of our industry, it also means that our earnings could be subject to different risks and uncertainties. We discuss some examples below.

Merchant Banking. Our merchant banking activities include venture capital investments, which have a much greater risk of capital losses than our traditional banking activities. Also, it is difficult to predict the timing of any gains from these activities. Realization of gains from our venture capital investments depends on a number of factors—many beyond our control—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. Factors such as a slowdown in consumer demand or a deterioration in capital spending on technology and telecommunications equipment, could result in declines in the values of our publicly-traded and private equity securities. If we determine that the declines are other-than-temporary, additional impairment charges would be recognized. Also, we will realize losses to the extent we sell securities at less than book value. For more information, see in this report “Balance Sheet Analysis—Securities Available for Sale.”

Mortgage Banking. The impact of interest rates on our mortgage banking business can be large and complex. Changes in interest rates can impact loan origination fees and loan servicing fees, which account for a significant portion of mortgage-related revenues. A decline in mortgage rates generally increases the demand for mortgage loans as borrowers refinance, but also generally leads to accelerated payoffs in our mortgage servicing portfolio. Conversely, in a constant or increasing rate environment, we would expect fewer loans to be refinanced and a decline in payoffs in our servicing portfolio. Although the Company uses dynamic and sophisticated models to assess the impact of interest rates on mortgage fees, amortization of mortgage servicing rights, and the value of mortgage servicing assets, the estimates of net income and fair value produced by these models are dependent on estimates and assumptions of future loan demand, prepayment speeds and other factors which may overstate or understate actual subsequent experience. In addition, although the Company uses derivative instruments to hedge the value of its servicing portfolio, the hedges do not cover the full value of the portfolio and the Company can provide no assurances that the hedges will be effective to offset significant decreases in the value of the portfolio. For more information, see in this report “Critical Accounting Policies—Mortgage Servicing Rights Valuation” and “Asset /Liability and Market Risk Management.”

We rely on other companies to provide key components of our business infrastructure.

Third parties provide key components of our business infrastructure such as internet connections and network access. Any disruption in internet, network access or other voice or data communication services provided by these third parties or any failure of these third parties to handle current or higher volumes of use could adversely affect our ability to deliver products and services to our customers and otherwise to conduct our business. Technological or financial difficulties of a third party service provider could adversely affect our business to the extent those difficulties result in the interruption or discontinuation of services provided by that party.

We regularly explore opportunities to acquire financial institutions and other financial services providers. We cannot predict the number, size or timing of future acquisitions. We typically do not comment publicly on a possible acquisition or business combination until we have signed a definitive agreement for the transaction.

Our ability to successfully complete an acquisition generally is subject to regulatory approval, and 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 divest banks or branches 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/or other projected benefits from the acquisition. Specifically, the integration process could result in higher than expected deposit attrition (run-off), loss of key employees, the disruption of our business or the business of the acquired company, or otherwise adversely affect our ability to maintain relationships with customers and employees or achieve the anticipated benefits of the acquisition. Also, the negative impact of any divestitures required by regulatory authorities in connection with acquisitions or business combinations may be greater than expected.

Our business model is dependent on sharing information between the family of companies owned by Wells Fargo to better satisfy our customers’ needs. Laws that restrict the ability of our companies to share information about customers could negatively impact our revenue and profit.

Our success depends, in large part, on our ability to attract and retain key people. Competition for the best people in most activities engaged in by the Company can be intense. We may not be able to hire people or to keep them.

Our stock price can fluctuate widely in response to a variety of factors including:

•

actual or anticipated variations in our quarterly operating results;

•

recommendations by securities analysts;

•

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

•

significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors;

•

failure to integrate our acquisitions or realize anticipated benefits from our acquisitions;

•

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; and

•

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

General market fluctuations, industry factors and general economic and political conditions and events, such as the recent terrorist attacks, economic slowdowns or recessions, interest rate changes, credit loss trends or currency fluctuations, also could cause our stock price to decrease regardless of our operating results.

Common stock of the Company is traded on the New York Stock Exchange and the Chicago Stock Exchange. The high, low and end-of-period annual and quarterly prices of the Company’s common stock as reported on the New York Stock Exchange Composite Transaction Reporting System are presented in the tables below. The number of holders of record of the Company’s common stock was 97,002 as of January 31, 2003.

The Company makes available free of charge on or through its website (www.wellsfargo.com) its annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and amendments to those reports, electronically filed with or furnished to the Securities and Exchange Commission as soon as reasonably practicable. Those reports and amendments are also available free of charge on the SEC’s website (www.sec.gov).



	Year ended December 31								,
(in millions, except per share amounts)	2002			2001			2000

		(Revised)			(Revised)			(Revised)

INTEREST INCOME
Securities available for sale	$	2,424		$	2,544		$	2,671
Mortgages held for sale		2,450			1,595			849
Loans held for sale		252			317			418
Loans		13,045			13,977			13,920
Other interest income		288			284			341

Total interest income		18,459			18,717			18,199


INTEREST EXPENSE
Deposits		1,919			3,553			4,089
Short-term borrowings		536			1,273			1,758
Long-term debt		1,404			1,826			1,939
Guaranteed preferred beneficial interests in Company’s subordinated debentures		118			89			74

Total interest expense		3,977			6,741			7,860


NET INTEREST INCOME		14,482			11,976			10,339
Provision for loan losses		1,684			1,727			1,284

Net interest income after provision for loan losses		12,798			10,249			9,055


NONINTEREST INCOME
Service charges on deposit accounts		2,179			1,876			1,704
Trust and investment fees		1,875			1,791			1,624
Credit card fees		920			796			721
Other fees		1,384			1,244			1,113
Mortgage banking		1,713			1,671			1,444
Operating leases		1,115			1,315			1,517
Insurance		997			745			411
Net gains (losses) on debt securities available for sale		293			316			(739	)
Net (losses) gains from equity investments		(327	)		(1,538	)		2,130
Other		618			789			435

Total noninterest income		10,767			9,005			10,360


NONINTEREST EXPENSE
Salaries		4,383			4,027			3,652
Incentive compensation		1,706			1,195			846
Employee benefits		1,283			960			989
Equipment		1,014			909			948
Net occupancy		1,102			975			953
Operating leases		802			903			1,059
Goodwill		—			610			530
Core deposit intangibles		155			165			186
Net losses (gains) on dispositions of premises and equipment		52			(21	)		(58	)
Other		4,214			4,071			3,784

Total noninterest expense		14,711			13,794			12,889


INCOME BEFORE INCOME TAX EXPENSE AND EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE		8,854			5,460			6,526
Income tax expense		3,144			2,049			2,514


NET INCOME BEFORE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE		5,710			3,411			4,012
Cumulative effect of change in accounting principle		(276	)		—			—


NET INCOME	$	5,434		$	3,411		$	4,012


NET INCOME APPLICABLE TO COMMON STOCK	$	5,430		$	3,397		$	3,995


EARNINGS PER COMMON SHARE BEFORE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
Earnings per common share	$	3.35		$	1.99		$	2.35

Diluted earnings per common share	$	3.32		$	1.97		$	2.32


EARNINGS PER COMMON SHARE
Earnings per common share	$	3.19		$	1.99		$	2.35

Diluted earnings per common share	$	3.16		$	1.97		$	2.32


DIVIDENDS DECLARED PER COMMON SHARE	$	1.10		$	1.00		$	.90

Average common shares outstanding		1,701.1			1,709.5			1,699.5

Diluted average common shares outstanding		1,718.0			1,726.9			1,718.4



		December 31						,
(in millions, except shares)		2002				2001

	(Revised)				(Revised)
ASSETS
Cash and due from banks		$	17,820			$	16,968
Federal funds sold and securities purchased under resale agreements			3,174				2,530
Securities available for sale			27,947				40,308
Mortgages held for sale			51,154				30,405
Loans held for sale			6,665				4,745

Loans			192,478				167,096
Allowance for loan losses			3,819				3,717

Net loans			188,659				163,379


Mortgage servicing rights			4,489				6,241
Premises and equipment, net			3,688				3,549
Core deposit intangibles			868				1,013
Goodwill			9,753				9,527
Other assets			34,980				28,841


Total assets		$	349,197			$	307,506


LIABILITIES
Noninterest-bearing deposits		$	74,094			$	65,362
Interest-bearing deposits			142,822				121,904

Total deposits			216,916				187,266
Short-term borrowings			33,446				37,782
Accrued expenses and other liabilities			18,311				16,753
Long-term debt			47,320				36,095
Guaranteed preferred beneficial interests in Company’s subordinated debentures			2,885				2,435

STOCKHOLDERS’ EQUITY
Preferred stock			251				218
Unearned ESOP shares			(190	)			(154	)

Total preferred stock			61				64
Common stock – $1 2/3 par value, authorized 6,000,000,000 shares; issued 1,736,381,025 shares			2,894				2,894
Additional paid-in capital			9,498				9,436
Retained earnings			19,355				15,966
Cumulative other comprehensive income			976				752
Treasury stock – 50,474,518 shares and 40,886,028 shares			(2,465	)			(1,937	)


Total stockholders’ equity			30,319				27,175


Total liabilities and stockholders’ equity		$	349,197			$	307,506

WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME



																		Notes							Cumulative
						Unearned						Additional						receivable							other				Total
	Number of		Preferred			ESOP			Common			paid-in			Retained			from			Treasury			comprehensive				stockholders’
(in millions, except shares)	shares		stock			shares			stock			capital			earnings			ESOP			stock				income				equity

															(Revised)													(Revised)
BALANCE DECEMBER 31, 1999 (As previously filed)			$	344		$	(73	)	$	2,894		$	9,213		$	12,565		$	(1	)	$	(1,831	)		$	760			$	23,871

Adjustment (Note 2)																(13	)													(13	)

Balance December 31, 1999 (revised)															$	12,552													$	23,858

Comprehensive income
Net income - 2000																4,012														4,012
Other comprehensive income, net of tax:
Translation adjustments																										(2	)			(2	)
Net unrealized losses on securities available for sale																										(234	)			(234	)

Total comprehensive income																														3,776
Common stock issued		17,614,859								1			295			(458	)					716								554
Common stock issued for acquisitions		75,554,229											(185	)		(6	)					3,128								2,937
Common stock repurchased		78,573,812								(1	)		(42	)								(3,195	)							(3,238	)
Stock appreciation rights													48																	48
Preferred stock repurchased				(1	)																									(1	)
Preferred stock issued to ESOP				170			(181	)					11																	—
Preferred stock released to ESOP							136						(8	)																128
Preferred stock (122,288) converted to common shares		3,036,660		(128	)								5									123								—
Preferred stock dividends																(17	)													(17	)
Common stock dividends																(1,569	)													(1,569	)
Cash payments received on notes receivable from ESOP																			1											1
Change in Rabbi trust assets (classified as treasury stock)																						(16	)							(16	)

Net change				41			(45	)		—			124			1,962			1			756				(236	)			2,603

BALANCE DECEMBER 31, 2000				385			(118	)		2,894			9,337			14,514			—			(1,075	)			524				26,461

Comprehensive income
Net income - 2001																3,411														3,411
Other comprehensive income, net of tax:
Translation adjustments																										(3	)			(3	)
Minimum pension liability adjustment																										(42	)			(42	)
Net unrealized gains on securities available for sale and other retained interests																										10				10
Cumulative effect of the change in accounting principle for derivatives and hedging activities																										71				71
Net unrealized gains on derivatives and hedging activities																										192				192

Total comprehensive income																														3,639
Common stock issued		16,472,042											92			(236	)					738								594
Common stock issued for acquisitions		428,343											1			1						20								22
Common stock repurchased		39,474,053																				(1,760	)							(1,760	)
Preferred stock (192,000) issued to ESOP				192			(207	)					15																	—
Preferred stock released to ESOP							171						(12	)																159
Preferred stock (158,517) converted to common shares		3,422,822		(159	)								3									156								—
Preferred stock redeemed				(200	)																									(200	)
Preferred stock dividends																(14	)													(14	)
Common stock dividends																(1,710	)													(1,710	)
Change in Rabbi trust assets (classified as treasury stock)																						(16	)							(16	)

Net change				(167	)		(36	)		—			99			1,452			—			(862	)			228				714

BALANCE DECEMBER 31, 2001				218			(154	)		2,894			9,436			15,966			—			(1,937	)			752				27,175

Comprehensive income
Net income - 2002																5,434														5,434
Other comprehensive income, net of tax:
Translation adjustments																										1				1
Minimum pension liability adjustment																										42				42
Net unrealized gains on securities available for sale and other retained interests																										484				484
Net unrealized losses on derivatives and hedging activities																										(303	)			(303	)

Total comprehensive income																														5,658
Common stock issued		17,345,078											43			(168	)					777								652
Common stock issued for acquisitions		12,017,193											4									531								535
Common stock repurchased		43,170,943																				(2,033	)							(2,033	)
Preferred stock (238,000) issued to ESOP				239			(256	)					17																	—
Preferred stock released to ESOP							220						(14	)																206
Preferred stock (205,727) converted to common shares		4,220,182		(206	)								12									194								—
Preferred stock dividends																(4	)													(4	)
Common stock dividends																(1,873	)													(1,873	)
Change in Rabbi trust assets and similar arrangements (classified as treasury stock)																						3								3

Net change				33			(36	)		—			62			3,389			—			(528	)			224				3,144

BALANCE DECEMBER 31, 2002			$	251		$	(190	)	$	2,894		$	9,498		$	19,355		$	—		$	(2,465	)		$	976			$	30,319



	Year ended December 31								,
(in millions)	2002			2001			2000


Cash flows from operating activities:
Net income	$	5,434		$	3,411		$	4,012
Adjustments to reconcile net income to net cash (used) provided by operating activities:
Provision for loan losses		1,684			1,727			1,284
Net provision for mortgage servicing rights in excess of fair value		2,135			1,124			—
Depreciation and amortization		4,297			3,864			2,849
Net (gains) losses on securities available for sale		(198	)		726			(1,133	)
Net gains on mortgage loan origination/sales activities		(1,038	)		(705	)		(38	)
Net (gains) losses on sales of loans		(19	)		(35	)		134
Net losses (gains) on dispositions of premises and equipment		52			(21	)		(58	)
Net gains on dispositions of operations		(10	)		(122	)		(23	)
Release of preferred shares to ESOP		206			159			128
Net increase in trading assets		(3,859	)		(1,219	)		(1,087	)
Net increase (decrease) in deferred income taxes		305			(596	)		864
Net decrease (increase) in accrued interest receivable		145			232			(230	)
Net (decrease) increase in accrued interest payable		(53	)		(269	)		290
Originations of mortgages held for sale		(286,100	)		(179,475	)		(62,095	)
Proceeds from sales of mortgages held for sale		263,126			156,267			62,340
Principal collected on mortgages held for sale		2,063			1,731			1,731
Net increase in loans held for sale		(1,091	)		(206	)		(1,498	)
Other assets, net		(4,466	)		(1,780	)		(4,773	)
Other accrued expenses and liabilities, net		1,929			5,075			4,140


Net cash (used) provided by operating activities		(15,458	)		(10,112	)		6,837


Cash flows from investing activities:
Securities available for sale:
Proceeds from sales		11,863			19,586			23,624
Proceeds from prepayments and maturities		9,684			6,730			6,247
Purchases		(7,261	)		(29,053	)		(19,770	)
Net cash (paid for) acquired from acquisitions		(588	)		(459	)		469
Net increase in banking subsidiaries’ loan originations, net of collections		(18,992	)		(11,866	)		(36,707	)
Proceeds from sales (including participations) of banking subsidiaries’ loans		948			2,305			11,898
Purchases (including participations) of loans by banking subsidiaries		(2,818	)		(1,104	)		(409	)
Principal collected on nonbank subsidiaries’ loans		11,396			9,964			8,305
Nonbank subsidiaries’ loans originated		(14,621	)		(11,651	)		(9,300	)
Proceeds from dispositions of operations		94			1,191			13
Proceeds from sales of foreclosed assets		473			279			255
Net (increase) decrease in federal funds sold and securities purchased under resale agreements		(475	)		(932	)		124
Net increase in mortgage servicing rights		(1,492	)		(2,912	)		(927	)
Other, net		314			(825	)		(5,858	)


Net cash used by investing activities		(11,475	)		(18,747	)		(22,036	)


Cash flows from financing activities:
Net increase in deposits		25,050			17,707			20,745
Net (decrease) increase in short-term borrowings		(5,224	)		8,793			(3,511	)
Proceeds from issuance of long-term debt		21,711			14,658			15,544
Repayment of long-term debt		(10,902	)		(10,625	)		(9,849	)
Proceeds from issuance of guaranteed preferred beneficial interests in Company’s subordinated debentures		450			1,500			—
Proceeds from issuance of common stock		578			484			422
Redemption of preferred stock		—			(200	)		—
Repurchase of common stock		(2,033	)		(1,760	)		(3,238	)
Payment of cash dividends on preferred and common stock		(1,877	)		(1,724	)		(1,586	)
Other, net		32			16			(468	)


Net cash provided by financing activities		27,785			28,849			18,059


Net change in cash and due from banks		852			(10	)		2,860

Cash and due from banks at beginning of year		16,968			16,978			14,118


Cash and due from banks at end of year	$	17,820		$	16,968		$	16,978


Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	3,924		$	6,472		$	8,150
Income taxes	$	2,789		$	2,552		$	817
Noncash investing and financing activities:
Net transfers between mortgages held for sale and loans	$	439		$	1,230		$	129
Net transfers between loans held for sale and loans	$	829		$	—		$	1,388
Transfers from loans to foreclosed assets	$	491		$	325		$	189

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

The accounting and reporting policies of the Company conform with generally accepted accounting principles (GAAP) and prevailing practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to 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. Significant estimates have been made by management in several areas, including the allowance for loan losses (Note 6), the valuation of mortgage servicing rights (Notes 22 and 23) and pension accounting (Note 16). Actual results could differ from those estimates. Certain amounts in the financial statements for prior years have been reclassified to conform with the current financial statement presentation, as discussed in Note 2 (Auto Lease Accounting and Reclassification).

The following is a description of the significant accounting policies of the Company.

The consolidated financial statements of the Company include the accounts of the Parent, and its majority-owned subsidiaries, which are consolidated on a line-by-line basis. Significant intercompany accounts and transactions are eliminated in consolidation. Other affiliates in which there is at least 20% ownership are generally accounted for by the equity method; those in which there is less than 20% ownership are generally carried at cost, except for marketable equity securities, which are carried at fair value with changes in fair value included in other comprehensive income. Assets that are accounted for by either the equity or cost method are included in other assets.

Securities available for sale Debt securities that might not be held until maturity and marketable equity securities are classified as securities available for sale and are reported at estimated fair value, with unrealized gains and losses, after applicable taxes, reported as a component of cumulative other comprehensive income. The estimated fair value of a security is determined based on current quotations, where available. Where current quotations are not available, the estimated fair value is determined based primarily on the present value of future cash flows, adjusted for the quality rating of the securities, prepayment assumptions and other factors. The

asset value is reduced when declines in the value of debt securities and marketable equity securities are considered other than temporary and the estimated loss is recorded in noninterest income. The initial indicator of impairment for marketable equity securities is a sustained decline in market price below the amount recorded for that investment. The Company considers such factors as the length of time and the extent to which the market value has been less than cost; the financial condition, capital strength, and near-term prospects of the issuer; any recent events specific to that issuer and economic conditions of its industry; and, to a lesser degree, the Company’s investment horizon in relationship to an anticipated near-term recovery in the stock price, if any. These investments are managed within capital risk limits approved by management and the Board and monitored by the Corporate Asset/Liability Management Committee. Realized gains and losses on the sale of these securities are recognized in noninterest income using the specific identification method. For certain debt securities (for example, Government National Mortgage Association securities), the Company anticipates prepayments of principal in the calculation of the effective yield used to accrete discounts or amortize premiums to interest income.

Trading securities Securities acquired for short-term appreciation or other trading purposes are recorded in a trading portfolio and are carried at fair value, with unrealized gains and losses recorded in noninterest income. Trading securities are included in other assets in the balance sheet.

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 stock). These assets are reviewed at least quarterly for possible other-than-temporary impairment. Management’s review typically includes an analysis of the facts and circumstances of each individual investment, the expectations for that investment’s cash flows and capital needs, the viability of its business model and the Company’s exit strategy. These securities are generally accounted for at cost and are included in other assets. The asset value is reduced when declines in value are considered to be other than temporary and the estimated loss is recognized as a loss from equity investments and included in noninterest income.

Mortgages held for sale are stated at the lower of aggregate cost or market value. The determination of any write-down to market value includes consideration of all open positions, outstanding commitments from investors and interest rate lock commitment value already recorded.

Loans held for sale include those student loans that the Company has demonstrated the intent and ability to sell. Such loans are carried at the lower of aggregate cost or market value. Gains and losses on loan sales are recorded in noninterest income, based on the difference between sales proceeds and carrying value.

Loans are reported at the principal amount outstanding, net of unearned income. Unearned income, which includes deferred fees net of deferred direct incremental loan origination costs, is amortized to interest income generally over the contractual life of the loan using an interest method.

Nonaccrual loans Loans are placed on nonaccrual status upon becoming 90 days past due as to interest or principal (unless both well-secured and in the process of collection), when the full timely collection of interest or principal becomes uncertain or when a portion of the principal balance has been charged off. Real estate 1-4 family loans (both first liens and junior liens) are placed on nonaccrual status within 120 days of becoming past due as to interest or principal, regardless of security. Generally, consumer loans not secured by real estate are placed on nonaccrual status only when a portion of the principal has been charged off. Such loans are entirely charged off when deemed uncollectible or when they reach a predetermined number of days past due depending upon loan product, industry practice, country, terms and other factors.

When a loan is placed on nonaccrual status, the accrued and unpaid interest receivable is reversed and the loan is accounted for on the cash or cost recovery method thereafter, until qualifying for return to accrual status. Generally, a loan may be returned to accrual status when all delinquent interest and principal become current in accordance with the terms of the loan agreement or when the loan is both well-secured and in the process of collection and collectibility is no longer doubtful.

Impaired loans Loans, other than smaller-balance homogeneous loans and wholesale loans with a balance less than $1 million, are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments.

This assessment for impairment occurs when such loans are on nonaccrual. When a loan over $1 million with unique risk characteristics has been identified as being impaired, the amount of impairment will be measured by the Company using discounted cash flows, except when it is determined that the sole (remaining) source of repayment for the loan is the operation or liquidation of the underlying collateral. In such cases, the current fair value of the collateral, reduced by costs to sell, will be used in place of discounted cash flows.

If the measurement of the impaired loan is less than the recorded investment in the loan (including accrued interest, net deferred loan fees or costs and unamortized premium or discount), an impairment is recognized by creating or adjusting an existing allocation of the allowance for loan losses.

Allowance for loan losses The allowance for loan losses is a valuation allowance for probable credit losses inherent in the portfolio as of the balance sheet date. The Company’s determination of the level of the allowance for loan losses rests upon various judgments and assumptions, including general economic conditions, loan portfolio composition, prior loan loss experience, evaluation of credit risk related to certain individual borrowers and pools of homogenous loans,

periodic use of sensitivity analysis and expected loss simulation modeling and the Company’s ongoing internal audit and examination processes and those of its regulators.

A transfer of financial assets is accounted for as a sale when control is surrendered over the assets transferred. Servicing rights and other retained interests in the assets sold are recorded by allocating the previous recorded investment between the assets sold and the interest retained based on their relative fair values, if practicable to determine, at the date of transfer. Fair values of servicing rights and other retained interests at the date of transfer are determined using present value of estimated future cash flows valuation techniques, incorporating assumptions that market participants would use in their estimates of values.

The Company recognizes as assets the rights to service mortgage loans for others, whether the servicing rights are acquired through purchases or retained upon sales of loan originations. Mortgage servicing rights are amortized over the period of estimated net servicing income. For purposes of evaluating and measuring impairment of mortgage servicing rights, the Company stratifies its portfolio on the basis of certain risk characteristics including loan type and note rate. Based upon current fair values, mortgage servicing rights are assessed quarterly for impairment. Any such indicated provision for impairment is recognized in income, during the period in which it occurs, in a mortgage servicing rights valuation allowance account which is adjusted each subsequent period to reflect any increase or decrease in the indicated impairment. The Company reviews mortgage servicing rights for other-than-temporary impairment each quarter and recognizes a direct write-down when the recoverability of a recorded valuation allowance is determined to be remote. In determining whether other-than-temporary impairment has taken place, the Company considers both historical and projected trends in interest rates and pay off activity and the potential for impairment recovery through interest rate increases. Unlike a valuation allowance, a direct write-down permanently reduces the carrying value of the mortgage servicing rights, precluding subsequent reversals. The current fair values of mortgage servicing rights and other retained interests are determined using present value of estimated future cash flows valuation techniques, incorporating assumptions that market participants would use in their estimates of values.

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

Depreciation and amortization are computed primarily using the straight-line method. 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. Capitalized leased assets are amortized on a straight-line basis over the lives of the respective leases, which generally range from 20 to 35 years.

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations under the purchase method of accounting. On July 1, 2001, the Company adopted Financial Accounting Standards Board Statement No. 142 (FAS 142), Goodwill and Other Intangible Assets. FAS 142 eliminates amortization of goodwill associated with business combinations completed after June 30, 2001. During the transition period from July 1, 2001 through December 31, 2001, the Company’s goodwill associated with business combinations completed prior to July 1, 2001 continued to be amortized over periods of up to 25 years. Effective January 1, 2002, all goodwill amortization was discontinued.

Effective January 1, 2002, the Company assesses goodwill for impairment annually, and more frequently in the presence of certain circumstances, 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. In the first quarter of 2002, the Company completed its initial goodwill impairment assessment and recorded a transitional impairment charge as a cumulative effect of a change in accounting principle in the Consolidated Statement of Income. Impairment losses are recognized in accordance with FAS 142 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.

Core deposit intangibles are amortized on an accelerated basis based on useful lives of up to 15 years. Other identifiable intangible assets that are included in other assets are generally amortized using an accelerated method over useful lives of up to 15 years.

The Company reviews core deposit intangibles and other identifiable intangible assets for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable (except mortgage servicing rights, which are reviewed quarterly). For these intangible assets impairment is indicated if the sum of undiscounted estimated future net cash flows is less than the carrying value of the asset. Impairment is recognized by writing down the asset to the extent that the carrying value exceeds the estimated fair value. Subsequent reversals of intangible assets impairment losses are prohibited.

Operating lease rental income for leased assets, generally autos, is recognized on a straight-line basis. 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 considered 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 then estimated residual value upon the eventual disposition of the equipment. Auto lease receivables are written off when 120 days past due.

The Company accounts for its defined benefit pension plans using an actuarial model required by FASB Statement No. 87, Employers’ Accounting for Pensions. This model uses an approach that allocates pension costs over the service period of employees in the plan. The principle underlying this accounting is that employees render service ratably over this period and, therefore, the income statement effects of pensions should follow the same pattern.

One of the principal components of the net periodic pension calculation is the expected long-term rate of return on plan assets. The required use of an expected long-term rate of return on plan assets may result in recognized pension income returns that are greater or less than the actual returns of those plan assets in any given year. Over time, however, the expected long-term returns are designed to approximate the actual long-term returns and therefore result in a pattern of income and expense recognition that more closely matches the service period related to employees in the plan. Any difference between actual and expected return in excess of a 5% corridor is recognized in the net periodic pension calculation over five subsequent years.

The Company uses long-term historical actual return information, the mix of investments that comprise plan assets, and future estimates of long-term investment returns to develop its expected return on plan assets.

The discount rate assumptions used for pension accounting reflect the rates available at the measurement date on high-quality fixed-income debt instruments.

The Company files a consolidated federal income tax return. Combined state tax returns are filed in certain states.

Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. Foreign taxes paid are applied as credits to reduce federal income taxes payable.

The Company has several stock-based employee compensation plans, which are described more fully in Note 15. As permitted by FASB Statement No. 123 (FAS 123), Accounting for Stock-Based Compensation, the Company has elected to continue applying the intrinsic value method of Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees, in accounting for its stock plans. As required by FASB Statement No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment to FASB Statement 123, pro forma net income and earnings per common share information is provided below, as if the Company accounted for its employee stock option plans under the fair value method of FAS 123. The fair value of options was estimated at the grant date using a Black-Scholes option pricing

model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Because the Company’s stock options have characteristics significantly more restrictive than those of traded or transferable options, in management’s opinion, the existing valuation models do not necessarily provide a reliable single measure of the fair value of stock options.

Earnings per common share are presented under two formats: earnings per common share and diluted earnings per common share. Earnings per common share are computed by dividing net income (after deducting dividends on preferred stock) by the average number of common shares outstanding during the year. Diluted earnings per common share are computed by dividing net income (after deducting dividends on preferred stock) by the average number of common shares outstanding during the year, plus the impact of common stock equivalents (i.e., stock options, restricted share rights and convertible subordinated debentures) that are dilutive.

On January 1, 2001, the Company adopted FASB Statement No. 133 (FAS 133), Accounting for Derivative Instruments and Hedging Activities, and FASB Statement No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities-an amendment of FASB Statement No. 133. All derivative instruments are recognized on the balance sheet at fair value. On the date the Company enters into a derivative contract, the Company designates the derivative instrument as (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“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 not qualifying for hedge

accounting (“free-standing derivative instruments”). For a fair value hedge, changes in the fair value of the derivative instrument and changes in the fair value of the hedged asset or liability or of an unrecognized firm commitment attributable to the hedged risk are recorded in current period net income in the same financial statement category as the hedged item. For a cash flow hedge, changes in the fair value of the derivative instrument to the extent that it is effective are recorded in other comprehensive income within stockholders’ equity and subsequently reclassified to net income in the same period(s) that the hedged transaction impacts net income in the same financial statement category as the hedged item. For free-standing derivative instruments, changes in the fair values are reported in current period noninterest income.

The Company formally documents the relationship between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivative instruments that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific forecasted transactions. The Company also formally assesses, both at the inception of the hedge and on an ongoing basis, whether the derivative instruments used are highly effective in offsetting changes in fair values or cash flows of hedged items. If it is determined that the derivative instrument is not highly effective as a hedge, hedge accounting is discontinued.

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

When hedge accounting is discontinued because it is determined that a derivative instrument no longer qualifies as an effective fair value hedge, the derivative instrument will continue to be carried on the balance sheet at its fair value with changes in fair value included in earnings, and the previously hedged asset or liability will no longer be adjusted for changes in fair value. Previous adjustments to the hedged item will be accounted for in the same manner as other components of the carrying amount of the asset or liability. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, the derivative instrument will continue to be carried on the balance sheet at its fair value with changes in fair value included in earnings, and gains and losses that were accumulated in other comprehensive income will be recognized immediately in earnings. When hedge accounting is discontinued because the hedging instrument is sold, terminated, or dedesignated the amount reported in other comprehensive income to the date of sale, termination, or dedesignation will continue to be reported in other comprehensive income until the forecasted transaction impacts earnings. In all other situations in which hedge accounting is discontinued, the derivative instrument will be carried at its fair value on the balance sheet, with changes in its fair value recognized in current period earnings.

The Company occasionally purchases or originates financial instruments that contain an embedded derivative instrument. At inception of the financial instrument, the Company assesses whether the economic characteristics of the embedded derivative instrument are clearly and

closely related to the economic characteristics of the financial instrument (host contract), whether the financial instrument that embodies both the embedded derivative instrument and the host contract is currently measured at fair value with changes in fair value reported in earnings, and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. If the embedded derivative instrument is determined not to be clearly and closely related to the host contract, is not currently measured at fair value with changes in fair value reported in earnings, and the embedded derivative instrument would qualify as a derivative instrument, the embedded derivative instrument is separated from the host contract and carried at fair value with changes recorded in current period earnings. As permitted by the FASB, the Company has elected not to apply FAS 133 to embedded derivative instruments that existed on January 1, 2001 and were issued or acquired before January 1, 1999 and not substantially modified thereafter.

Prior to the adoption of FAS 133, the Company primarily used interest rate derivative contracts to hedge mismatches in the rate maturity of loans and their funding sources and the price risk of interest-rate sensitive assets. Interest rate derivative contracts were accounted for by the deferral or accrual method if designated as hedges and expected to be effective in reducing risk. The resulting gains or losses were deferred and recognized in income along with effects of related hedged asset or liability. If the hedge was no longer deemed to be effective, hedge accounting was discontinued; previously unrecognized hedge results and the net settlement upon close-out were deferred and amortized over the life of the hedged asset or liability. If the hedged asset or liability settled before maturity of the interest rate derivative contract and the derivative contract was closed out or settled, the net settlement amount was accounted for as part of the gains and losses on the hedged item. The Company also entered into various derivative contracts to provide derivative products as customer accommodations. Derivative contracts used for this purpose were marked to market and recorded as a component of noninterest income.

In May 2003, the Emerging Issues Task Force (EITF) published Topic D-107, Lessor Consideration of Third-Party Residual Value Guarantees, which clarifies accounting guidance for certain lease transactions with residual value guarantees. Based on this new guidance, the Company has determined that certain auto leases previously accounted for as direct financing leases should be recorded as operating leases. This guidance resulted in a reclassification of auto leases from loans to operating lease assets included in other assets on the balance sheet. In addition, the revised income statement presentation reflects a reduction of interest income related to direct financing leases and the recognition of rental income and depreciation expense on operating leases. Previously reported consolidated financial statements and the notes to those financial statements have been presented in conformity with the guidance in Topic D-107. The following tables present certain captions of the statement of income and cash flows for each of the years in the three-year period ended December 31, 2002 and certain captions in the Company’s balance sheet at December 31, 2002 and 2001, revised to conform with the guidance in Topic D-107.



	Year ended December 31												,
	2002				2001				2000
STATEMENT OF INCOME:	As		As		As		As		As		As
(in millions, except per share data)	Previously Reported		Revised		Previously Reported		Revised		Previously Reported		Revised


Net interest income	$	14,855	$	14,482	$	12,460	$	11,976	$	10,865	$	10,339
Provision for loan losses		1,733		1,684		1,780		1,727		1,329		1,284
Net interest income after provision for loan losses		13,122		12,798		10,680		10,249		9,536		9,055
Operating lease income		—		1,115		—		1,315		—		1,517
Total noninterest income		9,641		10,767		7,690		9,005		8,843		10,360
Operating lease expense		—		802		—		903		—		1,059
Total noninterest expense		13,909		14,711		12,891		13,794		11,830		12,889
Income tax expense		3,144		3,144		2,056		2,049		2,523		2,514
Net income		5,434		5,434		3,423		3,411		4,026		4,012

Earnings per share:
Basic		3.19		3.19		1.99		1.99		2.36		2.35
Diluted		3.16		3.16		1.97		1.97		2.33		2.32

Other information:
Net loan charge-offs		1,725		1,675		1,779		1,732		1,219		1,180

This guidance also resulted in revisions to Notes 6, 7, 21, 22, 24 and 28

In addition to the matter discussed above, the Company has reclassified other amounts to conform with current financial statement presentation including:

     1)  Certain mortgages, loan charge-offs and recoveries from junior lien mortgages to first mortgages in Notes 6 and 22;
     2)  Temporary personnel expenses from outside professional services and other expenses to contract services in Note 16;
     3)  Investment advisory fees from other noninterest income to trust and investment fees on the statement of income; and
     4)  In the statement of cash flows, provided separate presentation of mortgage servicing rights impairment.

The Company regularly explores opportunities to acquire financial institutions and related financial services businesses. Generally, management of the Company does not make a public announcement about an acquisition opportunity until a definitive agreement has been signed.

Excluding the Company’s merger with First Security Corporation, the table below includes transactions completed in the years ended December 31, 2002, 2001 and 2000:




	Date	Assets
(in millions)

2002
Risk Management Services, Inc., Morristown, Tennessee	January 1	$	2
Alcalay, Cohen, Inc. d/b/a General Insurance Consultants, Tarzana, California	February 1		6
Texas Financial Bancorporation, Inc., Minneapolis, Minnesota	February 1		2,957
Five affiliated banks and related entities of Marquette Bancshares, Inc. located in Minnesota, Wisconsin, Illinois, Iowa and South Dakota	February 1		3,086
SIFE, Walnut Creek, California	February 22		25
Rediscount business of Washington Mutual Bank, FA, Philadelphia, Pennsylvania	March 28		281
Tejas Bancshares, Inc., Amarillo, Texas	April 26		374
FAS Holdings, Inc., San Diego, California	July 22		48
Nelson Capital Management, Inc., Palo Alto, California	October 1		13
Daniel T. Nowels, Inc., Colorado Springs, Colorado	November 1		—


		$	6,792


2001
Conseco Finance Vendor Services Corporation, Paramus, New Jersey	January 31	$	860
Buffalo Insurance Agency Group, Inc., Buffalo, Minnesota	March 1		1
SCI Financial Group, Inc., Cedar Rapids, Iowa	March 29		21
Midland Trust Company, National Association, Midland, Texas	April 7		10
ACO Brokerage Holdings Corporation (Acordia Group of Insurance Agencies), Chicago, Illinois	May 1		866
H.D. Vest, Inc., Irving, Texas	July 2		182
CarFinance America, Inc., Memphis, Tennessee	July 25		6
H & R Phillips, Inc., New York, New York	December 6		4


		$	1,950


2000
First Place Financial Corporation, Farmington, New Mexico	January 18	$	733
North County Bancorp, Escondido, California	January 27		413
Prime Bancshares, Inc., Houston, Texas	January 28		1,366
Ragen MacKenzie Group Incorporated, Seattle, Washington	March 16		901
Napa National Bancorp, Napa, California	March 17		188
Servus Financial Corporation, Herndon, Virginia	March 17		168
Michigan Financial Corporation, Marquette, Michigan	March 30		975
Bryan, Pendleton, Swats & McAllister, LLC, Nashville, Tennessee	March 31		12
Black & Company, Inc., Portland, Oregon	May 1		4
1st Choice Financial Corp., Greeley, Colorado	June 13		483
First Commerce Bancshares, Inc., Lincoln, Nebraska	June 16		2,868
National Bancorp of Alaska, Inc., Anchorage, Alaska	July 14		3,518
Charter Financial, Inc., New York, New York	September 1		532
Buffalo National Bancshares, Inc., Buffalo, Minnesota	September 28		123
Brenton Banks, Inc., Des Moines, Iowa	December 1		2,191
Paragon Capital, LLC, Needham, Massachusetts	December 15		13
Flagship Credit Corporation, Philadelphia, Pennsylvania	December 21		841


		$	15,329

At December 31, 2002, the Company had three pending business combinations with total assets of approximately $700 million, and anticipates that the transactions will be completed during the first quarter of 2003.

In connection with certain brokerage, asset management and insurance agency acquisitions made by the Company, the terms of the acquisition agreement provide for deferred payments or additional consideration based on certain performance targets. At December 31, 2002, the amount of contingent consideration expected to be paid was not material to the Company’s financial statements.

On October 25, 2000 the merger involving the Company and First Security Corporation was completed as a pooling-of-interests. Under the terms of the merger agreement, stockholders of First Security received .355 shares of common stock of the Company for each share of common stock owned. As a condition to the merger, the Company was required by regulatory agencies to divest 39 stores in Idaho, New Mexico, Nevada and Utah having aggregate deposits of approximately $1.5 billion. These sales were completed in the first quarter of 2001 and the Company realized a net gain of $96 million, which included a $54 million reduction of goodwill.

Federal Reserve Board (FRB) regulations require reserve balances on deposits to be maintained with the Federal Reserve Banks by each of the banking subsidiaries. The average required reserve balance was $1.8 billion and $2.1 billion in 2002 and 2001, respectively.

Federal law places restrictions on the amount and the terms of both credit and non-credit transactions between a bank and its nonbank affiliates. These transactions between a bank and its nonbank affiliates are limited. 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 loan losses excluded from Tier 2 capital) with any single nonbank affiliate and 20% of the bank’s capital and surplus with all its nonbank affiliates. Transactions that are extensions of credit may require collateral to be held to provide added security to the bank. (For further discussion of risk-based capital, see Note 26).

The payment of dividends by subsidiary banks is subject to various federal and state regulatory limitations. Dividends payable 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 are defined by the OCC as net income less dividends declared during the period as determined based on regulatory accounting principles. The Company also has state-chartered subsidiary banks that are subject to state regulations that limit dividends. Under those provisions, the Company’s national and state-chartered subsidiary banks could have declared dividends of $1,585 million and $1,026 million in 2002 and 2001, respectively, without obtaining prior regulatory approval. In addition, the Company’s nonbank subsidiaries could have declared dividends of $1,252 million and $1,292 million at December 31, 2002 and 2001, respectively.

The following table provides the cost and fair value for the major components of securities available for sale carried at fair value. There were no securities classified as held to maturity at the end of 2002 or 2001.



	December 31																		,
	2002									2001
			Estimated		Estimated							Estimated		Estimated
			unrealized		unrealized			Estimated				unrealized		unrealized			Estimated
			gross		gross			fair				gross		gross			fair
(in millions)	Cost		gains		losses			value		Cost		gains		losses			value


Securities of U.S. Treasury and federal agencies	$	1,315	$	66	$	—		$	1,381	$	1,983	$	66	$	(2	)	$	2,047
Securities of U.S. states and political subdivisions		2,232		155		(5	)		2,382		2,146		90		(13	)		2,223
Mortgage-backed securities:
Federal agencies		17,766		1,325		(1	)		19,090		29,280		449		(8	)		29,721
Private collateralized mortgage obligations (1)		1,775		108		(3	)		1,880		2,628		49		(19	)		2,658

Total mortgage-backed securities		19,541		1,433		(4	)		20,970		31,908		498		(27	)		32,379
Other		2,608		125		(75	)		2,658		2,625		86		(43	)		2,668

Total debt securities		25,696		1,779		(84	)		27,391		38,662		740		(85	)		39,317
Marketable equity securities		598		72		(114	)		556		815		264		(88	)		991

Total (2)	$	26,294	$	1,851	$	(198	)	$	27,947	$	39,477	$	1,004	$	(173	)	$	40,308

Securities pledged where the secured party has the right to sell or repledge totaled $3.6 billion at December 31, 2002 and $7.6 billion at December 31, 2001. Securities pledged where the secured party does not have the right to sell or repledge totaled $17.9 billion at December 31, 2002 and $15.7 billion at December 31, 2001 and are primarily pledged to secure trust and public deposits and for other purposes as required or permitted by law. The Company has accepted collateral in the form of securities that it has the right to sell or repledge of $3.1 billion at December 31, 2002 and $2.7 billion at December 31, 2001, of which $1.7 billion and $1.4 billion had been sold or repledged at December 31, 2002 and 2001, respectively.

Securities available for sale decreased from $40.3 billion at December 31, 2001 to $27.9 billion at December 31, 2002. The decrease was predominantly due to a decrease in federal agency securities from the sale of certain longer-maturity mortgage-backed securities subject to prepayment risk and prepayments of mortgage-backed securities held.

The table below provides the components of the realized net gains (losses) on the sales of securities from the securities available for sale portfolio, including those related to mortgage banking and marketable equity securities.

The decrease in realized gross losses between December 31, 2002 and December 31, 2001 was due to a $1.18 billion other-than-temporary impairment the Company recognized in the second quarter of 2001.

The table below provides the remaining contractual principal maturities and yields (taxable-equivalent basis) of debt securities available for sale. The remaining contractual principal maturities for mortgage-backed securities were allocated assuming no prepayments. Remaining maturities will differ from contractual maturities because mortgage debt issuers may have the right to prepay obligations prior to contractual maturity.



	December 31, 2002
						Remaining contractual principal maturity
			Weighted-								After one year					After five years
	Total		average			Within one year					through five years					through ten years					After ten years
(in millions)	amount		yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield


Securities of U.S. Treasury and federal agencies	$	1,381		5.20	%	$	490		4.93	%	$	833		5.34	%	$	56		5.36	%	$	2		7.40	%
Securities of U.S. states and political subdivisions		2,382		8.53			127		8.63			550		8.22			296		7.60			1,409		8.83
Mortgage-backed securities:
Federal agencies		19,090		7.72			8		6.63			137		7.15			220		6.99			18,725		7.73
Private collateralized mortgage obligations		1,880		7.35			929		6.96			17		6.97			16		4.75			918		7.81

Total mortgage-backed securities		20,970		7.69			937		6.96			154		7.13			236		6.84			19,643		7.73
Other		2,658		7.76			43		6.16			642		6.09			330		7.26			1,643		8.55


ESTIMATED FAIR VALUE OF DEBT SECURITIES ⁽¹⁾	$	27,391		7.64	%	$	1,597		6.45	%	$	2,179		6.41	%	$	918		7.15	%	$	22,697		7.86	%

TOTAL COST OF DEBT SECURITIES	$	25,696				$	1,503				$	2,058				$	898				$	21,237

A summary of the major categories of loans outstanding and related unfunded commitments is shown in the table below. Unfunded commitments are defined as all legally binding agreements to extend credit, net of all funds lent, and all standby and commercial letters of credit issued under the terms of those commitments. At December 31, 2002 and 2001, the commercial loan category did not have a concentration in any industry that exceeded 10% of total loans. At December 31, 2002 and 2001, neither the real estate 1-4 family first nor junior lien mortgage categories had a concentration in any state that exceeded 10% of total loans, except for the 1-4 family first mortgage category in California, which represents 13% of total loans. At December 31, 2002 and 2001, the other revolving credit and monthly payment category did not have any concentration in any product type that exceeded 10% of total loans.

In the course of evaluating the credit risk presented by a customer and the pricing that will adequately compensate the Company for assuming that risk, management may require a certain amount of collateral support. The type of collateral held varies, but may include accounts receivable, inventory, land, buildings, equipment, income-producing commercial properties and residential real estate. The Company has the same collateral requirements for loans whether they are funded immediately or on a delayed basis (commitment).

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. Such commitments have fixed expiration dates and generally require a fee. The extension of a commitment gives rise to credit risk. The actual liquidity requirements or credit risk that the Company will experience will be lower than

the contractual amount of commitments to extend credit shown in the table on the previous page because a significant portion of those commitments are expected to expire without being drawn upon. Certain commitments are subject to loan agreements containing covenants regarding the financial performance of the customer that must be met before the Company is required to fund the commitment. The Company uses the same credit policies in making commitments to extend credit as it does in making loans.

In addition, the Company manages the potential credit risk in commitments to extend credit by limiting the total amount of arrangements, both by individual customer and in the aggregate; by monitoring the size and maturity structure of these portfolios; and by applying the same credit standards maintained for all of its related credit activities. The credit risk associated with these commitments is considered in management’s determination of the allowance for loan losses.

Standby letters of credit totaled $6.3 billion and $5.5 billion at December 31, 2002 and 2001, respectively. Standby letters of credit are issued on behalf of customers in connection with contracts between the customers and third parties. Under standby letters of credit, the Company assures that the third parties will receive specified funds if customers fail to meet their contractual obligations. The liquidity risk to the Company arises from its obligation to make payment in the event of a customer’s contractual default. The credit risk involved in issuing standby letters of credit and the Company’s management of that credit risk is considered in management’s determination of the allowance for loan losses. Standby letters of credit are reported net of participations sold to other institutions of $1,129 million and $736 million at December 31, 2002 and 2001, respectively. Deferred fees associated with these standby letters of credit were immaterial to the Company’s financial statements.

Included in standby letters of credit are those that back financial instruments (financial guarantees). The Company had issued or purchased participations in financial guarantees of approximately $3.0 billion and $1.6 billion at December 31, 2002 and 2001, respectively. The Company also had commitments for commercial and similar letters of credit of $719 million and $577 million at December 31, 2002 and 2001, respectively. Substantially all fees received from the issuance of financial guarantees are deferred and amortized on a straight-line basis over the term of the guarantee.

The Company has entered into various contingent performance guarantee arrangements with terms ranging from 1 to 30 years. These guarantees have arisen through certain risk participation agreements, lending arrangements, or sales of loans. The impact of these guarantees at December 31, 2002 was not material to the Company’s financial statements.

The Company has an established process to determine the adequacy of the allowance for loan losses which assesses the risk and losses inherent in its portfolio. This process provides an allowance consisting of two components, allocated and unallocated. To arrive at the allocated component of the allowance, the Company combines estimates of the allowances needed for loans analyzed individually (including impaired loans subject to FASB Statement No. 114 (FAS 114), Accounting by Creditors for Impairment of a Loan) and loans analyzed on a pooled basis.

The determination of the allocated allowance for portfolios of larger commercial and commercial real estate loans involves the use of a continuous and standardized loan grading process in combination with a review of individual higher-risk transactions. The Company grades loans and assigns a loss factor to each pool of loans based on the grades. The loss factors used for this analysis are derived in two ways. First, migration models are used to determine loss factors by tracking actual portfolio movements between loan grades over the loss emergence period of these portfolios. Second, in the case of graded loans without identified credit weakness, the loss factors are estimated using a combination of long-term average loss experience of the Company’s graded portfolios and external industry data. In addition, the Company analyzes larger non-performing loans individually for impairment using a cash flow or collateral based methodology. Calculated impairment is included in the allowance unless impairment is recognized through a charge-off.

In the case of more homogeneous portfolios, such as consumer loans and leases, residential mortgage loans, and some segments of small business loans, the determination of the allocated allowance is conducted at an aggregate, or pooled, level. For such portfolios, the risk assessment process includes the use of forecasting models, which focus on recent delinquency and loss trends in different portfolio segments to measure inherent loss in these portfolios. Such analyses are updated frequently to capture recent behavioral characteristics of the subject portfolios, as well as any changes in management’s loss mitigation or customer solicitation strategies, in order to reduce the differences between estimated and observed losses.

The risk associated with unfunded commitments and letters of credit are a consideration in the loss factor analysis associated with loans outstanding. This risk assessment is converted to a loan equivalent factor and has historically been a minor component of the allocated allowance. At December 31, 2002, 5.7% of allocated reserves and 3.8% of the total allowance is related to this potential risk. Any provision necessary to cover this exposure has been included as a component of the Company’s provision for loan losses.

While coverage of one year’s losses is often adequate (particularly for homogeneous pools of loans and leases), the time period covered by the allowance may vary by portfolio, based on the Company’s best estimate of the inherent losses in the entire portfolio as of the evaluation date.

To mitigate imprecision and incorporate the range of probable outcomes inherent in estimates of expected credit losses, the allocated component of the allowance is supplemented by an unallocated component. The unallocated component also incorporates the Company’s judgmental determination of risks inherent in portfolio composition or economic uncertainties and other subjective factors, including industry trends impacting specific portfolio segments that have not yet resulted in changes to individual loan grades. Therefore the ratio of the allocated to the unallocated components within the total allowance for loan losses may fluctuate from period to period. The allocated and unallocated components represent the total allowance for loan losses that would adequately cover losses inherent in the loan portfolio. Although management has allocated a portion of the allowance to specific loan categories, the adequacy of the allowance must be considered in its entirety.

The Company’s determination of the level of the allowance and, correspondingly, the provision for loan losses rests upon various judgments and assumptions, including (1) general economic conditions, (2) loan portfolio composition, (3) prior loan loss experience, (4) the evaluation of credit risk related to both individual borrowers and pools of homogenous loans, (5) periodic use of sensitivity analysis and expected loss simulation modeling and (6) the Company’s ongoing examination processes and that of its regulators. The Company has an internal risk analysis and review staff that continuously reviews loan quality and reports the results of its examinations to executive management and the Board of Directors. Such reviews also assist management in establishing the level of the allowance. In addition, the Company periodically evaluates the adequacy of its allowance for loan losses using a statistical loss model.

Like all national banks, 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. These examinations occur throughout the year and target various activities of the 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). In addition to the subsidiary national banks being examined by the OCC, the Parent and its nonbank subsidiaries are examined by the Federal Reserve Board.

The Company considers the allowance for loan losses of $3.82 billion adequate to cover losses inherent in loans, loan commitments and standby and other letters of credit at December 31, 2002.



	Year ended December 31														,
(in millions)	2002			2001			2000			1999			1998


Balance, beginning of year	$	3,717		$	3,681		$	3,312		$	3,274		$	3,192

Allowances related to business combinations/other		93			41			265			48			148

Provision for loan losses		1,684			1,727			1,284			1,079			1,576

Loan charge-offs:
Commercial		(716	)		(692	)		(429	)		(395	)		(271	)
Real estate 1-4 family first mortgage		(39	)		(40	)		(16	)		(14	)		(29	)
Other real estate mortgage		(24	)		(32	)		(32	)		(28	)		(54	)
Real estate construction		(40	)		(37	)		(8	)		(2	)		(3	)
Consumer:
Real estate 1-4 family junior lien mortgage		(55	)		(36	)		(34	)		(33	)		(31	)
Credit card		(407	)		(421	)		(367	)		(403	)		(549	)
Other revolving credit and monthly payment		(770	)		(770	)		(623	)		(585	)		(1,069	)

Total consumer		(1,232	)		(1,227	)		(1,024	)		(1,021	)		(1,649	)
Lease financing		(21	)		(22	)		—			—			(2	)
Foreign		(84	)		(78	)		(86	)		(90	)		(84	)

Total loan charge-offs		(2,156	)		(2,128	)		(1,595	)		(1,550	)		(2,092	)


Loan recoveries:
Commercial		162			96			98			90			87
Real estate 1-4 family first mortgage		8			6			4			6			12
Other real estate mortgage		16			22			13			38			79
Real estate construction		19			3			4			5			4
Consumer:
Real estate 1-4 family junior lien mortgage		10			8			14			15			7
Credit card		47			40			39			49			59
Other revolving credit and monthly payment		205			203			213			243			187

Total consumer		262			251			266			307			253
Lease financing		—			—			—			—			1
Foreign		14			18			30			15			14

Total loan recoveries		481			396			415			461			450

Net loan charge-offs		(1,675	)		(1,732	)		(1,180	)		(1,089	)		(1,642	)


Balance, end of year	$	3,819		$	3,717		$	3,681		$	3,312		$	3,274


Net loan charge-offs as a percentage of
average total loans		.96	%		1.10	%		.84	%		.92	%		1.46	%


Allowance as a percentage of total loans		1.98	%		2.22	%		2.37	%		2.61	%		2.86	%

Nonaccrual loans were $1.5 billion and $1.6 billion at December 31, 2002 and 2001, respectively. Loans past due 90 days or more as to interest or principal and still accruing interest were $672 million and $698 million at December 31, 2002 and 2001, respectively.

In accordance with FAS 114, the following table shows the recorded investment in impaired loans and the methodology used to measure impairment at December 31, 2002 and 2001:

The average recorded investment in impaired loans during 2002, 2001 and 2000 was $705 million, $707 million and $313 million, respectively. Total interest income recognized on impaired loans during 2002, 2001 and 2000 was $17 million, $13 million and $3 million, respectively, which was predominantly recorded using the cost recovery method. Under the cost recovery method, all payments received are applied to principal. This method is used when the ultimate collectibility of the total principal is in doubt.

Depreciation and amortization expense was $599 million, $561 million and $560 million in 2002, 2001 and 2000, respectively.

The Company is obligated under a number of noncancelable operating leases for premises (including vacant premises) and equipment with terms, including renewal options, up to 100 years, many of which provide for periodic adjustment of rentals based on changes in various economic indicators. The following table shows future minimum payments under noncancelable operating leases and capital leases, net of sublease rentals, with terms in excess of one year as of December 31, 2002:

Rental expense, net of rental income, for all operating leases was $535 million, $473 million and $499 million in 2002, 2001 and 2000, respectively.

Trading assets consist predominantly of securities, including corporate debt, U.S. government agency obligations and the fair value of derivative instruments held for customer accommodation purposes. Interest income from trading assets was $169 million, $114 million and $98 million in 2002, 2001 and 2000, respectively. Noninterest income from trading assets, included in the “other” category, was $321 million, $400 million and $238 million in 2002, 2001 and 2000, respectively.

Net (losses) gains from nonmarketable equity investments were $(202) million, $(566) million and $353 million for 2002, 2001 and 2000, respectively, and included other-than-temporary impairment of $318 million, $744 million and $63 million for the same periods, respectively.

GNMA pool buy-outs are advances made to GNMA mortgage pools that are guaranteed by the Federal Housing Administration or by the Department of Veterans Affairs (collectively, “the guarantors”). These advances are made to buy out government agency-guaranteed delinquent loans, pursuant to the Company’s servicing agreements. The Company undertakes the collection and foreclosure process on behalf of the guarantors. After the foreclosure process is complete, the Company is reimbursed for substantially all costs incurred, including the advances.

The gross carrying amount of intangible assets and the associated accumulated amortization at December 31, 2002 and 2001 is presented in the following table.

The projections of amortization expense shown below for mortgage servicing rights are based on asset balances and the interest rate environment as of December 31, 2002. Future amortization expense may be significantly different depending upon changes in the mortgage servicing portfolio, mortgage interest rates and market conditions.

The following table shows the current year and estimated future amortization expense for amortized intangible assets:

The following table summarizes the changes in 2002 in the carrying amount of goodwill as allocated to the Company’s operating segments for the purpose of goodwill impairment analysis.

During the first quarter of 2002, the Company completed its initial goodwill impairment testing under FAS 142, Goodwill and Other Intangible Assets. 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 Company’s respective reporting units. Through this allocation, the Company assigned enterprise-level goodwill to the reporting units that are expected to benefit from the synergies of the combination. All reporting units were evaluated using discounted estimated future net cash flows. The process resulted in a $276 million (after tax), $404 million (before tax), transitional impairment charge reported as a cumulative effect of a change in accounting principle. The transitional impairment resulted from a change in the method of testing for goodwill impairment under FAS 142, as well as a change in business strategies, reflecting the economic outlook, for certain reporting units in Wholesale Banking and Wells Fargo Financial, primarily Island Finance, a Puerto Rico-based consumer finance company acquired in 1995.

In 2002, the Company completed its annual goodwill impairment assessment and determined that no additional impairment was required.

Goodwill amounts allocated to the operating segments for goodwill impairment analysis differ from amounts allocated to the Company’s operating segments for management reporting discussed in Note 21. At December 31, 2002, for management reporting, the balance of goodwill for Community Banking, Wholesale Banking and Wells Fargo Financial was $2.89 billion, $591 million and $343 million, respectively, with $5.93 billion recorded at the enterprise level.

The total of time certificates of deposit and other time deposits issued by domestic offices was $31,637 million and $26,454 million at December 31, 2002 and 2001, respectively. Substantially all of those deposits were interest bearing. The contractual maturities of those deposits are shown in the following table.

Of the total above, the amount of time deposits with a denomination of $100,000 or more was $15,403 million and $6,427 million at December 31, 2002 and 2001, respectively. The contractual maturities of these deposits are shown in the following table.

Time certificates of deposit and other time deposits issued by foreign offices with a denomination of $100,000 or more represent substantially all of the foreign deposit liabilities of $9,454 million and $4,132 million at December 31, 2002 and 2001, respectively.

Demand deposit overdrafts that have been reclassified as loan balances were $564 million and $638 million at December 31, 2002 and 2001, respectively.

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



		2002					2001					2000
(in millions)	Amount		Rate			Amount		Rate			Amount		Rate


As of December 31,
Commercial paper and other short-term borrowings	$	11,109		1.57	%	$	13,965		2.01	%	$	15,844		6.64	%
Federal funds purchased and securities sold under
agreements to repurchase		22,337		1.08			23,817		1.53			13,145		5.81

Total	$	33,446		1.24		$	37,782		1.71		$	28,989		6.26


Year ended December 31,
Average daily balance
Commercial paper and other short-term borrowings	$	13,048		1.84	%	$	13,561		4.12	%	$	14,375		6.43	%
Federal funds purchased and securities sold under
agreements to repurchase		20,230		1.47			20,324		3.51			13,847		6.03

Total	$	33,278		1.61		$	33,885		3.76		$	28,222		6.23


Maximum month-end balance
Commercial paper and other short-term borrowings (1)	$	17,323		N/A		$	19,818		N/A		$	17,730		N/A
Federal funds purchased and securities sold under
agreements to repurchase (2)		33,647		N/A			26,346		N/A			16,535		N/A

At December 31, 2002, the Company had available lines of credit totaling $2.25 billion, of which $254 million was obtained through a subsidiary, Wells Fargo Financial, Inc. The remaining $2.0 billion was in the form of a revolving credit facility. A portion of these financing arrangements require the maintenance of compensating balances or payment of fees, which are not material.

The following is a summary of long-term debt (reflecting unamortized debt discounts and premiums, where applicable) owed by the Parent and its subsidiaries:



	Maturity	Interest
(in millions)	date(s)	rate(s)	2002		2001


Wells Fargo & Company (Parent only)

Senior

Global Notes (1)	2003-2007	3.75-7.25%	$	6,545	$	4,996
Global Notes	2004	Various		2,000		1,250
Medium-Term Notes (1)	2003-2006	4.80-6.875%		1,847		1,596
Medium-Term Notes	2003-2027	3.375-7.65%		1,546		1,670
Floating-Rate Medium-Term Notes	2003-2005	Various		2,150		2,300
Extendable Notes (2)	2004	Various		2,998		1,497
Equity Linked Notes (1)(3)	2008	2.778-2.836%		79		—
Notes	2004	6.00%		1		1

Total senior debt				17,166		13,310


Subordinated

Global Notes (1)	2011-2014	5.00-6.375%		1,588		748
Global Notes	2012	4.00-5.125%		795		—
Notes (1)	2003	6.625%		200		200
Debentures	2023	6.65%		198		198

Total subordinated debt				2,781		1,146

Total long-term debt — Parent				19,947		14,456


WFC Holdings Corporation

Senior

Medium-Term Notes (1)	2002	10.00%		—		2
Medium-Term Notes	2002	9.04-10.00%		—		2

Total senior debt				—		4


Subordinated
Medium-Term Notes (1)(4)	2013	6.50%		25		50
Medium-Term Notes	2002	9.375%		—		30
Notes	2003	6.125-6.875%		399		732
Notes (1)	2004-2006	6.875-9.125%		933		933
Notes (1)(4)	2008	6.25%		199		199

Total subordinated debt				1,556		1,944


Total long-term debt — WFC Holdings			$	1,556	$	1,948



	Maturity	Interest
(in millions)	date(s)	rate(s)	2002		2001


Wells Fargo Financial, Inc. and its subsidiaries (WFFI) (5)

Senior

Medium-Term Notes	2003-2012	5.10-7.47%	$	956	$	801
Floating-Rate Notes	2003-2005	Various		1,100		950
Notes	2003-2015	4.875-8.56%		6,678		6,395

Total long-term debt – WFFI				8,734		8,146


First Security Corporation and its subsidiaries (FSCO)

Senior

Medium-Term Notes	2003	6.40%		15		15
Floating-Rate Euro Medium-Term Notes (6)	2002	Various		—		300
Floating-Rate Euro Medium-Term Notes	2003	Various		285		285
Federal Home Loan Bank (FHLB) Notes and Advances (7)	2003-2010	3.00-6.47%		151		351
Floating-Rate FHLB Advances (7)	2003	Various		100		—
Notes	2003-2006	5.875-6.875%		474		473
Other notes (8)	2002-2007			—		3

Total senior debt				1,025		1,427


Subordinated

Notes (1)	2005-2006	7.00-7.31%		159		234

Total subordinated debt				159		234

Total long-term debt – FSCO				1,184		1,661


Wells Fargo Bank, N.A. (WFB, N.A.)

Senior

Floating-Rate Bank Notes	2003	Various		4,005		1,525
Floating-Rate Notes (9)	2007	Various		1,250		—
Notes payable by subsidiaries	2003-2009	8.25-17.87%		49		52
Other notes	2002-2007			—		3
Obligations of subsidiaries under capital leases (Note 7)				7		8

Total senior debt				5,311		1,588


Subordinated

FixFloat Notes (callable 6/15/2005) (1)	2010	7.8% through 2005, various		997		997
Notes (1)	2010-2011	6.45-7.55%		2,497		2,496

Total subordinated debt				3,494		3,493

Total long-term debt - WFB, N.A.				8,805		5,081


Other consolidated subsidiaries

Senior

FHLB Notes and Advances (7)	2003-2027	3.15-8.38%		2,780		2,211
Floating-Rate FHLB Advances (7)	2003-2011	Various		4,065		2,334
Other notes and debentures	2003-2015	3.00-12.00%		150		239
Capital lease obligations (Note 7)				14		19

Total senior debt				7,009		4,803


Subordinated

Other notes and debentures (10)	2005	7.55%		85		—

Total subordinated debt				85		—

Total long-term debt - other consolidated subsidiaries				7,094		4,803

Total consolidated long-term debt			$	47,320	$	36,095

At December 31, 2002, the principal payments, including sinking fund payments, on long-term debt are due as noted in the following table.

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 its long-term and short-term borrowing arrangements, the Company was subject to various financial and operational covenants. Certain of the agreements under which debt has been issued contain 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, 2002, the Company was in compliance with all the covenants.

GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY’S SUBORDINATED DEBENTURES

The special purpose trusts, identified in the table on the next page, were established to issue trust preferred securities and related common securities of the trust. The proceeds from such issuances were used by the trusts to purchase junior subordinated debentures (debentures) of the Parent or the debentures of the applicable holding company subsidiary, which are the sole assets of each trust. Concurrently with the issuance of the trust preferred securities, the Parent or the holding company subsidiary, as applicable, issued guarantees for the benefit of the holders of the trust preferred securities. The Company treats the trust preferred securities as Tier 1 capital.

The debentures issued by the Parent (for the 2002 and 2001 trusts) or the debentures issued by a holding company subsidiary, as applicable, are the sole assets of these special purpose trusts. The Parent and the holding company subsidiaries own all of the common securities of their related trusts. The trust preferred securities issued by the trusts rank senior to the common securities. The common securities and debentures, along with the related income effects, are eliminated within the Company’s consolidated financial statements. The respective obligations of the Parent and the holding company subsidiaries under the debentures, indentures, the trust agreements, and the guarantees relating to the trusts in each case constitute the full and unconditional guarantee by the Parent or the holding company subsidiary, as applicable, of the obligations of the trusts under the trust preferred securities and rank subordinate and junior in right of payment to all of

their other liabilities. The Parent guaranteed the obligations previously issued by the former Wells Fargo & Company and assumed by WFC Holdings.

The trust preferred securities are subject to mandatory redemption at the stated maturity date of the debentures, upon repayment of the debentures, or earlier, under the terms of the trust agreements. The table below summarizes the outstanding preferred securities issued by each special purpose trust and the debentures issued by the Parent or the holding company subsidiary to each trust as of December 31, 2002:

(in millions)

Principal

Trust preferred securities and debentures

Trust preferred securities

balance of

Stated

Redeemable

Annualized

Interest

Trust name

Issuance date

Amount

debentures

maturity

beginning

coupon rate

payable(3)

Wells Fargo Capital A(1)

November 1996

December 2026

December 2006

8.13

Semi-annual

Wells Fargo Capital B(1)

November 1996

153

157

December 2026

December 2006

7.95

Semi-annual

Wells Fargo Capital C(1)

November 1996

186

192

December 2026

December 2006

7.73

Semi-annual

Wells Fargo Capital I(1)

December 1996

212

218

December 2026

December 2006

7.96

Semi-annual

First Security Capital I

December 1996

150

155

December 2026

December 2006

8.41

Semi-annual

Wells Fargo Capital II(1)

January 1997

149

155

January 2027

January 2007

LIBOR + .5%

Quarterly

Wells Fargo Capital IV(2)

August 2001

1,300

1,340

September 2031

August 2006

7.00

Quarterly

Wells Fargo Capital V(2)

December 2001

200

206

December 2031

December 2006

7.00

Quarterly

Wells Fargo Capital VI(2)

March 2002

450

464

April 2032

April 2007

6.95

Quarterly

Total

2,885

The trust preferred securities and the corresponding debentures may be redeemed before the stated redemption date at the option of the Parent or the applicable holding company subsidiary. The trust preferred securities will be redeemed, if certain events occur that would have a negative tax effect on the Parent, the holding company subsidiaries or their applicable trusts, would cause the trust preferred securities to no longer qualify as Tier 1 capital, or would result in a trust being treated as an investment company. The ability of each trust to pay timely distributions on its trust preferred securities depends upon the Parent or the applicable holding company subsidiary making the related payment on the debentures when due. The Parent or the holding company subsidiaries can defer interest payments on the debentures and, therefore, distributions on the trust preferred securities for up to five years.

The Company is authorized to issue 20 million shares of preferred stock and 4 million shares of preference stock, both without par value. All preferred shares outstanding rank senior to common shares both as to dividends and liquidation preference but have no general voting rights. No preference shares have been issued under this authorization.



	Shares issued					Carrying amount												Dividends declared
	and outstanding					(in millions)						Adjustable						(in millions)
	December 31				,	December 31					,	dividend rate						Year ended December 31						,
	2002		2001			2002			2001			Minimum			Maximum			2002		2001		2000

Adjustable-Rate Cumulative, Series B (1)		1,460,000		1,460,000		$	73		$	73			5.50	%		10.50	%	$	4	$	4	$	4

Adjustable-Rate Noncumulative Preferred Stock, Series H (2)		—		—			—			—			7.00			13.00			—		10		13

2002 ESOP Cumulative Convertible (3)		64,049		—			64			—			10.50			11.50			—		—		—

2001 ESOP Cumulative Convertible (3)		46,126		61,800			46			62			10.50			11.50			—		—		—

2000 ESOP Cumulative Convertible (3)		34,742		39,962			35			40			11.50			12.50			—		—		—

1999 ESOP Cumulative Convertible (3)		13,222		15,552			13			15			10.30			11.30			—		—		—

1998 ESOP Cumulative Convertible (3)		5,095		6,145			5			6			10.75			11.75			—		—		—

1997 ESOP Cumulative Convertible (3)		5,876		7,576			6			8			9.50			10.50			—		—		—

1996 ESOP Cumulative Convertible (3)		5,407		7,707			6			8			8.50			9.50			—		—		—

1995 ESOP Cumulative Convertible (3)		3,043		5,543			3			5			10.00			10.00			—		—		—

ESOP Cumulative Convertible (3)		—		1,002			—			1			9.00			9.00			—		—		—

Unearned ESOP shares (4)		—		—			(190	)		(154	)		—			—			—		—		—


Total		1,637,560		1,605,287		$	61		$	64								$	4	$	14	$	17

Adjustable-Rate Cumulative Preferred Stock, Series B These shares are redeemable at the option of the Company at $50 per share plus accrued and unpaid dividends. Dividends are cumulative and payable quarterly on the 15th of February, May, August and November. For each quarterly period, the dividend rate is 76% of the highest of the three-month Treasury bill discount rate, 10-year constant maturity Treasury security yield or 20-year constant maturity Treasury bond yield, but limited to a minimum of 5.5% and a maximum of 10.5% per year. The average dividend rate was 5.5% during 2002, 2001 and 2000.

ESOP Cumulative Convertible Preferred Stock All shares of the Company’s 2002, 2001, 2000, 1999, 1998, 1997, 1996 and 1995 ESOP Cumulative Convertible Preferred Stock and ESOP Cumulative Convertible Preferred Stock (collectively, ESOP Preferred Stock) were issued to a trustee acting on behalf of the Wells Fargo & Company 401(k) Plan (formerly known as the Norwest Corporation Savings Investment 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 percent to 12.50 percent, depending upon the year of issuance. Each share of ESOP Preferred Stock released from the unallocated reserve of the Plan is converted into shares of common stock of the Company based on the stated value of the ESOP Preferred Stock and the then current market price of the Company’s common stock. The ESOP Preferred Stock is also convertible at the option of the holder at any time, unless previously redeemed. The ESOP Preferred Stock may be redeemed at any time, in whole or in part, at the option of the Company 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 of the ESOP Preferred Stock.

The following table summarizes common stock reserved, issued and authorized as of December 31, 2002:

The preferred share purchase rights issued under the Company’s rights plan and included with the Company’s common stock expired as of the close of business on August 12, 2002. Prior to their expiration, the rights entitled the holders thereof, upon the occurrence of certain events, to purchase shares of the Company’s Series C Junior Participating Preferred Stock. On October 16, 2002, the Company filed a Certificate Eliminating the Certificate of Designations for the Company’s Series C Junior Participating Preferred Stock.

The Company’s dividend reinvestment and common stock direct purchase plans permit participants to purchase at fair market value shares of the Company’s common stock by reinvestment of dividends and/or optional cash payments, subject to the terms of the plan.

Under the Company’s director plans, non-employee directors receive a stock award as part of their annual retainer. Annual grants of options to purchase common stock are also provided to each non-employee director elected or re-elected at the annual meeting of stockholders. Options granted become exercisable after six months and may be exercised until the tenth anniversary of the date of grant.

Long-Term Incentive Plans The Company’s 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. Employee stock options can be granted with exercise prices at or above the fair market value (as defined in the plan) of the stock at the date of grant and with terms of up to ten years. The options generally become fully exercisable over three years from the date of grant. Except as otherwise permitted under the plan, upon termination of employment 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. No compensation expense was recorded for the options granted under the plans, 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 as of December 31, 2002 was 79,865,035.

Holders of restricted shares and restricted share rights are entitled at no cost to the related shares of common stock 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 upon termination of employment. In 2002, 2001 and 2000, 81,380, 107,000 and 56,636 restricted shares and restricted share rights were granted, respectively, with a weighted-average grant-date per share fair value of $45.47, $46.73 and $40.61, respectively. As of December 31, 2002, 2001 and 2000, there were 656,124, 888,234 and 1,450,074 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. The total compensation expense recognized for the restricted shares and restricted share rights was $5 million in 2002 and $6 million in 2001 and 2000.

In connection with various acquisitions and mergers since 1992, the Company converted employee and director stock options of acquired or merged companies into stock options to purchase the Company’s common stock based on the terms of the original stock option plan and the agreed-upon exchange ratio.

Broad-Based Plans In 1996, the Company adopted the PartnerShares® Stock Option Plan, a broad-based employee stock option plan covering full- and part-time employees who were not participants in the long-term incentive plans described above. The total number of shares of common stock authorized for issuance under the plan since inception through

December 31, 2002 was 74,000,000, including 14,013,931 shares available for grant. Options granted under the PartnerShares Plan have an exercise date that generally is the earlier of five years after the date of grant or when the quoted market price of the stock reaches a predetermined price. Those options generally expire ten 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 the Company’s common stock at the date of grant, no compensation expense is recognized.

The following table summarizes the Company’s stock option activity and related information for the three years ended December 31, 2002:



	Director Plans					Long-Term Incentive Plans					Broad-Based Plans
				Weighted-					Weighted-					Weighted-
				average					average					average
				exercise					exercise					exercise
	Number			price		Number			price		Number			price

Options outstanding as of December 31, 1999		525,098		$	23.24		66,607,125		$	29.53		32,514,300		$	33.72

2000:
Granted		28,080	(1)		42.75		23,183,070	(2)		35.63		23,160,800	(3)		46.50
Canceled		(5,005	)		25.04		(1,896,001	)		35.74		(4,827,800	)		36.81
Exercised		(115,495	)		12.94		(13,906,642	)		22.93		(390,695	)		18.19
Acquisitions		—			—		797,076			20.43		—			—

Options outstanding as of December 31, 2000		432,678			27.23		74,784,628			32.39		50,456,605			39.41


2001:
Granted		49,635	(1)		47.55		19,930,772	(2)		49.52		353,600	(3)		41.84
Canceled		—			—		(1,797,865	)		43.21		(5,212,550	)		41.81
Exercised		(169,397	)		19.42		(10,988,267	)		25.61		(191,440	)		21.43

Options outstanding as of December 31, 2001		312,916			34.69		81,929,268			37.23		45,406,215			39.23


2002:
Granted		44,786	(1)		50.22		23,790,286	(2)		46.99		18,014,475	(3)		50.46
Canceled		—			—		(1,539,244	)		45.36		(10,092,056	)		42.15
Exercised		(8,594	)		30.56		(10,873,465	)		30.62		(3,249,213	)		30.54
Acquisitions		—			—		72,892			31.33		—			—

Options outstanding as of December 31, 2002		349,108		$	36.78		93,379,737		$	40.35		50,079,421		$	43.25


Outstanding options exercisable as of:
December 31, 2000		432,678		$	27.23		44,893,948		$	30.36		1,309,005		$	18.33
December 31, 2001		312,916			34.69		46,937,295			33.44		1,264,015			20.29
December 31, 2002		349,108			36.78		54,429,329			36.94		9,174,196			31.35

The fair value of each option grant is estimated based on the date of grant using a Black-Scholes option-pricing model. The following weighted-average assumptions were used in 2002, 2001 and 2000: expected dividend yield ranging from 2.3% to 2.6%; expected volatility ranging from 29% to 42%; risk-free interest rates ranging from 2.5% to 6.6% and expected life ranging from .1 to 6.0 years.

The following table is a summary of selected information for the Company’s stock option plans described on the preceding page:



	December 31, 2002
	Weighted-
	average				Weighted-
	remaining				average
	contractual				exercise
	life (in yrs.)		Number		price

RANGE OF EXERCISE PRICES
Director Plans

$.10
Options outstanding/exercisable		2.01		2,390	$	.10
$7.84-$13.48
Options outstanding/exercisable		1.36		8,210		11.49
$13.49-$16.00
Options outstanding/exercisable		2.27		30,940		15.10
$16.01-$25.04
Options outstanding/exercisable		2.98		61,194		22.10
$25.05-$38.29
Options outstanding/exercisable		4.88		69,620		33.14
$38.30-$69.01
Options outstanding/exercisable		7.68		176,754		48.76

Long-Term Incentive Plans

$3.37-$5.06
Options outstanding/exercisable		5.16		75,900		4.35
$5.07-$7.60
Options outstanding/exercisable		3.99		25,476		7.22
$7.61-$11.41
Options outstanding/ exercisable		.98		213,900		10.67
$11.42-$17.13
Options outstanding		1.99		2,355,591		14.11
Options exercisable		1.94		2,214,963		14.00
$17.14-$25.71
Options outstanding		1.76		1,976,202		19.52
Options exercisable		1.77		1,935,772		19.55
$25.72-$38.58
Options outstanding		5.81		39,155,259		33.88
Options exercisable		5.55		32,656,708		33.85
$38.59-$71.30
Options outstanding		7.94		49,577,409		47.73
Options exercisable		6.33		17,306,610		48.17

Broad-Based Plans

$16.56
Options outstanding/exercisable		3.56		779,316		16.56
$24.85-$37.81
Options outstanding		5.38		17,548,605		35.09
Options exercisable		4.80		7,870,605		31.75
$37.82-$46.50
Options outstanding		7.85		16,429,025		46.46
Options exercisable		7.85		418,675		46.49
$46.51-$51.15
Options outstanding		9.22		15,322,475		50.50
Options exercisable		9.22		105,600		50.50

Employee Stock Ownership Plan The Wells Fargo & Company 401(k) Plan (the 401(k) Plan) is a defined contribution employee stock ownership plan (ESOP) under which the 401(k) Plan may borrow money to purchase the Company’s common or preferred stock. Beginning in 1994, the Company has loaned money to the 401(k) Plan which has been used to purchase shares of the

Company’s ESOP Preferred Stock. As ESOP Preferred Stock is released and converted into common shares, compensation expense is recorded 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 are recorded as a reduction of retained earnings and the shares are considered outstanding for computing earnings per share. Dividends on the unallocated ESOP Preferred Stock are not recorded as a reduction of 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 the Company’s 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.

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 WF Deferred Compensation Holdings, Inc.’s deferred compensation obligations under the plan. Effective January 1, 2002, the H.D. Vest, Inc. Representatives’ Deferred Compensation Plan was merged into the plan.

The Company sponsors noncontributory qualified defined benefit retirement plans including the Cash Balance Plan and the First Security Corporation Retirement Plan (FSCO Retirement Plan). The Cash Balance Plan is an active plan and it covers eligible employees of the Company except certain subsidiaries. The FSCO Retirement Plan is an inactive plan, which provides benefits to eligible employees of the former First Security. All benefits under the FSCO Retirement Plan were frozen effective December 31, 2000.

Under the Cash Balance Plan, eligible employees’ Cash Balance Plan accounts are allocated a compensation credit based on a certain percentage of their certified compensation. The compensation credit percentage is based on age and years of credited service. In addition, participants are allocated at the end of each quarter investment credits on their accumulated balances. Employees become vested in their Cash Balance Plan accounts after completion of five years of vesting service or reaching age 65, if earlier. Pension benefits accrued before the conversion to the Cash Balance Plan are guaranteed. In addition, certain employees are eligible for a special transition benefit comparison.

In 2002, the Company contributed $626 million in total to the Cash Balance Plan and FSCO Retirement Plan. The Company funded the maximum amount deductible under the current Internal Revenue Service regulations. The Company also provides unfunded nonqualified pension plans for certain employees.

The Company sponsors defined contribution retirement plans including the 401(k) Plan and the First Security Incentive Savings Plan and Trust (FSCO 401(k) Plan). Under the 401(k) Plan, eligible employees who have completed one month of service are eligible to contribute up to 25% of their pretax certified compensation, although a lower limit may be applied to 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 Company’s matching contributions are generally subject to a four-year vesting schedule.

Under the FSCO 401(k) Plan, eligible employees who were 21 or older with one year of service were eligible to contribute up to 17% of their pretax certified compensation, although a lower limit may be applied to certain employees in order to maintain the qualified status of the FSCO 401(k) Plan. Eligible employees were eligible for matching company contributions, which are generally equal to 50% of the first 6% of an employee’s certified compensation. The Company’s matching contributions were fully vested upon enrollment. The FSCO 401(k) Plan was merged into the Wells Fargo 401(k) Plan effective January 1, 2001.

Expenses for defined contribution retirement plans were $248 million, $206 million and $169 million in 2002, 2001 and 2000, respectively.

The Company provides health care and life insurance benefits for certain retired employees and reserves the right to terminate or amend any of the benefits described above at any time.

In 2002, the Company changed the measurement date of its pension and postretirement health care plans from September 30 to November 30. This change in measurement date has been accounted for as a change in accounting principle and did not have a material cumulative effect on retirement benefit expense for the current or prior periods. The Company believes this method is preferable to the method previously employed.

The change in measurement date was made to allow pension cost measurements and future pension plan funding decisions to be based on information closer to the financial statement date of December 31. Also, the new measurement date is more closely aligned with the timing of the Company’s annual budgeting and planning process.

The following table shows the changes in the benefit obligation and the fair value of plan assets during 2002 and 2001 and the amounts included in the Company’s Consolidated Balance Sheet as of December 31, 2002 and 2001 for the Company’s qualified and nonqualified defined benefit pension and other postretirement benefit plans:



	December 31																	,
	2002									2001
	Pension benefits									Pension benefits
				Non-			Other						Non-			Other
(in millions)	Qualified			qualified			benefits			Qualified			qualified			benefits

Change in benefit obligation
Benefit obligation at beginning of year	$	2,781		$	153		$	546		$	2,502		$	154		$	578
Service cost		154			20			14			146			15			16
Interest cost		202			12			40			181			10			42
Plan participants’ contributions		—			—			13			—			—			12
Amendments		—			—			—			(36	)		(11	)		—
Plan mergers		4			—			—			—			—			(10	)
Actuarial gain (loss)		109			18			66			175			(10	)		(28	)
Benefits paid		(195	)		(15	)		(60	)		(187	)		(5	)		(64	)

Benefit obligation at end of year	$	3,055		$	188		$	619		$	2,781		$	153		$	546


Change in plan assets
Fair value of plan assets at beginning of year	$	2,761		$	—		$	226		$	3,270		$	—		$	236
Actual return on plan assets		(117	)		—			(10	)		(331	)		—			(12	)
Employer contribution		641			15			44			9			5			54
Plan participants’ contributions		—			—			13			—			—			12
Benefits paid		(195	)		(15	)		(60	)		(187	)		(5	)		(64	)

Fair value of plan assets at end of year	$	3,090		$	—		$	213		$	2,761		$	—		$	226


Funded status	$	35		$	(188	)	$	(406	)	$	(21	)	$	(154	)	$	(319	)
Employer contributions in December		—			—			7			—			—			—
Unrecognized net actuarial loss (gain)		660			45			66			188			40			(23	)
Unrecognized net transition asset		(1	)		—			4			1			—			4
Unrecognized prior service cost		(15	)		(8	)		(11	)		(13	)		(14	)		(12	)

Accrued benefit income (cost)	$	679		$	(151	)	$	(340	)	$	155		$	(128	)	$	(350	)


Amounts recognized in the balance sheet consist of:
Prepaid benefit cost	$	679		$	—		$	—		$	156		$	—		$	—
Accrued benefit liability		(2	)		(151	)		(340	)		(50	)		(147	)		(350	)
Intangible asset		2			—			—			—			—			—
Accumulated other comprehensive income		—			—			—			49			19			—

Accrued benefit income (cost)	$	679		$	(151	)	$	(340	)	$	155		$	(128	)	$	(350	)

The following table sets forth the components of net periodic benefit (income) cost for 2002, 2001 and 2000:

Accounting for postretirement health care plans uses a health care cost trend rate to recognize the effect of expected changes in future health care costs due to medical inflation, utilization changes, technological changes, regulatory requirements and Medicare cost shifting. Average annual increases of 10.5% for HMOs and for all other types of coverage in the per capita cost of covered health care benefits were assumed for 2003. By 2008 and thereafter, rates were assumed at 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, 2002 by $49 million and the aggregate of the interest cost and service cost components of the net periodic benefit cost for 2002 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, 2002 by $44 million and the aggregate of the interest cost and service cost components of the net periodic benefit cost for 2002 by $4 million.

The following table shows expenses which exceeded 1% of total interest income and noninterest income and which are not otherwise shown separately in the financial statements or notes thereto.

The following is a summary of the components of income tax expense applicable to income before income taxes:

The Company’s tax benefit related to the exercise of employee stock options recorded in stockholders’ equity was $73 million, $88 million and $112 million for 2002, 2001 and 2000, respectively.

The Company had a net deferred tax liability of $2,883 million and $2,590 million at December 31, 2002 and 2001, respectively. The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at December 31, 2002 and 2001 are presented in the following table.

The Company has 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, and future reversals of existing taxable temporary differences, and, to a lesser extent, future taxable income and tax planning strategies. The Company’s 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 $13 billion in the carry-back period, substantial state taxable income in the carry-back period, as well as a history of growth in earnings and the prospects for continued earnings growth.

The deferred tax liability related to 2002, 2001 or 2000 unrealized gains and losses on securities available for sale along with the deferred tax liability related to derivatives and hedging activities for 2002, had no impact on income tax expense as these gains and losses, net of taxes, were recorded in cumulative other comprehensive income.

The table below is a reconciliation of the statutory federal income tax expense and rate to the effective income tax expense and rate:

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



	Year ended December 31							,
(in millions, except per share amounts)	2002			2001		2000


Net income before effect of change in accounting principle	$	5,710		$	3,411	$	4,012
Less: Preferred stock dividends		4			14		17

Net income applicable to common stock before effect of change in accounting principle (numerator)		5,706			3,397		3,995
Cumulative effect of change in accounting principle (numerator)		(276	)		—		—

Net income applicable to common stock (numerator)	$	5,430		$	3,397	$	3,995


EARNINGS PER COMMON SHARE
Average common shares outstanding (denominator)		1,701.1			1,709.5		1,699.5


Per share before effect of change in accounting principle	$	3.35		$	1.99	$	2.35
Per share effect of change in accounting principle		(.16	)		—		—

Per share	$	3.19		$	1.99	$	2.35


DILUTED EARNINGS PER COMMON SHARE
Average common shares outstanding		1,701.1			1,709.5		1,699.5
Add: Stock options		16.6			16.8		17.7
Restricted share rights		.3			.6		1.2

Diluted average common shares outstanding (denominator)		1,718.0			1,726.9		1,718.4


Per share before effect of change in accounting principle	$	3.32		$	1.97	$	2.32
Per share effect of change in accounting principle		(.16	)		—		—

Per share	$	3.16		$	1.97	$	2.32

In 2002, 2001 and 2000, options to purchase 35.9 million, 39.9 million and 28.6 million shares, respectively, were outstanding but not included in the computation of earnings per share because the exercise price was higher than the market price, and therefore they were antidilutive.

Under FAS 142, effective January 1, 2002 amortization of goodwill was discontinued. For comparability, the table below reconciles the Company’s reported earnings to “adjusted” earnings, which exclude goodwill amortization.

The following table presents the components of other comprehensive income and the related tax effect allocated to each component:



	Before
	tax						Net of
(in millions)	amount			Tax effect			tax


2000:
Translation adjustments	$	(3	)	$	(1	)	$	(2	)


Securities available for sale:
Net unrealized losses arising during the year		(232	)		(88	)		(144	)
Reclassification of net gains included in net income		(145	)		(55	)		(90	)

Net unrealized losses arising during the year		(377	)		(143	)		(234	)

Other comprehensive income	$	(380	)	$	(144	)	$	(236	)


2001:
Translation adjustments	$	(5	)	$	(2	)	$	(3	)


Minimum pension liability adjustment		(68	)		(26	)		(42	)


Securities available for sale and other retained interests:
Net unrealized losses arising during the year		(574	)		(211	)		(363	)
Reclassification of net losses included in net income		601			228			373

Net unrealized gains arising during the year		27			17			10


Cumulative effect of the change in accounting principle for derivatives and hedging activities		109			38			71


Derivatives and hedging activities:
Net unrealized gains arising during the year		196			80			116
Reclassification of net losses on cash flow hedges included in net income		120			44			76

Net unrealized gains arising during the year		316			124			192

Other comprehensive income	$	379		$	151		$	228


2002:
Translation adjustments	$	1		$	—		$	1


Minimum pension liability adjustment		68			26			42


Securities available for sale and other retained interests:
Net unrealized gains arising during the year		414			159			255
Reclassification of net losses included in net income		369			140			229

Net unrealized gains arising during the year		783			299			484


Derivatives and hedging activities:
Net unrealized losses arising during the year		(800	)		(297	)		(503	)
Reclassification of net losses on cash flow hedges included in net income		318			118			200

Net unrealized losses arising during the year		(482	)		(179	)		(303	)


Other comprehensive income	$	370		$	146		$	224

The Company has 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 the Company’s 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 the Company’s management structure and is not necessarily comparable with similar information for other financial services companies. The Company’s operating segments are defined by product type and customer segments. Changes in management structure and/or the allocation process may result in changes in allocations, transfers and assignments. In that case, results for prior periods would be (and have been) restated for comparability. Results for 2001 and 2000 have been restated to eliminate goodwill amortization from the operating segments and results for 2001 have been restated to reflect changes in transfer pricing methodology applied in first quarter 2002.

The Community Banking Group offers a complete line of diversified financial products and services to individual consumers and small businesses with annual sales predominantly up to $10 million in which the owner is also the principal financial decision maker. Community Banking also offers investment management and other services to retail customers and high net worth individuals, insurance and securities brokerage through affiliates. These products and services include Wells Fargo Funds®, a family of mutual funds, as well as personal trust, employee benefit trust and agency assets. Loan products include lines of credit, equity lines and loans, equipment and transportation (auto, recreational vehicle and marine) loans, education loans, origination and purchase of residential mortgage loans for sale to investors and servicing

of mortgage loans. 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, medical 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) and time deposits.

Community Banking provides access to customers through a wide range of channels, which encompass a network of traditional banking stores, banking centers, in-store banking centers, business centers and ATMs. Additionally, 24-hour telephone service is provided by PhoneBank^SM centers and the National Business Banking Center. 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 predominantly with annual sales 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, online/electronic products, insurance and insurance brokerage services, and investment banking services. 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 loans to consumers and purchase sales finance contracts from retail merchants from offices throughout the United States and Canada and in the Caribbean. Automobile finance operations specialize in purchasing sales finance contracts directly from automobile dealers and making loans secured by automobiles in the United States and Puerto Rico. Wells Fargo Financial also provides credit cards, and lease and other commercial financing.

The Reconciliation Column for 2002 consists of Corporate level equity investment activities and balances. For 2001 and 2000 it includes all amortization of goodwill for 2001 and 2000, the net impact of transfer pricing loan and deposit balances, the cost of external debt, and any residual effects of unallocated systems and other support groups. It also includes the impact of asset/liability strategies the Company has put in place to manage interest rate sensitivity at the consolidated level. For all periods presented it includes unallocated goodwill balances held at the enterprise level.



(income/expense in millions,
average balances in billions)
									Recon-			Consoli-
	Community		Wholesale			Wells Fargo			ciliation			dated
	Banking		Banking			Financial			Column (3)			Company


2002

Net interest income (1)	$	10,372	$	2,257		$	1,866		$	(13	)	$	14,482
Provision for loan losses		865		278			541			—			1,684
Noninterest income		8,085		2,316			354			12			10,767
Noninterest expense		11,241		2,367			1,099			4			14,711

Income (loss) before income tax expense (benefit) and effect of change in accounting principle		6,351		1,928			580			(5	)		8,854
Income tax expense (benefit) (2)		2,235		692			220			(3	)		3,144

Net income before effect of change in accounting principle		4,116		1,236			360			(2	)		5,710
Cumulative effect of change in accounting principle		—		(98	)		(178	)		—			(276	)

Net income	$	4,116	$	1,138		$	182		$	(2	)	$	5,434


2001

Net interest income (1)	$	8,212	$	2,164		$	1,679		$	(79	)	$	11,976
Provision for loan losses		962		278			487			—			1,727
Noninterest income		6,503		2,117			371			14			9,005
Noninterest expense		9,840		2,300			1,028			626			13,794

Income (loss) before income tax expense (benefit)		3,913		1,703			535			(691	)		5,460
Income tax expense (benefit) (2)		1,325		610			201			(87	)		2,049

Net income (loss)		2,588		1,093			334			(604	)		3,411


2000

Net interest income (1)	$	7,060	$	1,949		$	1,424		$	(94	)	$	10,339
Provision for loan losses		804		151			329			—			1,284
Noninterest income		8,202		1,768			304			86			10,360
Noninterest expense		9,464		1,920			945			560			12,889

Income (loss) before income tax expense (benefit)		4,994		1,646			454			(568	)		6,526
Income tax expense (benefit) (2)		1,774		622			168			(50	)		2,514

Net income (loss)	$	3,220	$	1,024		$	286		$	(518	)	$	4,012


2002

Average loans	$	111	$	49		$	15		$	—		$	175
Average assets		228		71			17			6			322
Average core deposits		166		18			—			—			184

2001

Average loans	$	94	$	50		$	13		$	—		$	157
Average assets		198		66			15			6			285
Average core deposits		152		16			—			—			168

The Company routinely originates, securitizes and sells mortgage loans and, from time to time, other financial assets, including student loans, auto receivables and securities, into the secondary market. As a result, the Company typically retains the servicing rights and may retain other beneficial interests from the sales. These securitizations are usually structured without recourse to the Company and without restrictions on the retained interests. The retained interests do not contain significant credit risks.

The Company recognized gains of $100 million from sales of financial assets in securitizations in 2002, compared with $623 million in 2001. Additionally, the Company had the following cash flows with securitization trusts:

In the normal course of creating securities to sell to investors, the Company may sponsor the special-purpose entities which hold, for the benefit of the investors, financial instruments that are the source of payment to the investors. Those special-purpose entities are consolidated unless they meet the criteria for a qualifying special-purpose entity in accordance with FASB Statement No. 140 (FAS 140), Accounting for the Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, or were not required to be consolidated under then existing accounting guidance.

The key economic assumptions used in determining the fair value of mortgage servicing rights and other retained interests at the date of securitization resulting from securitizations completed in 2002 and 2001 were as follows:

At December 31, 2002, key economic assumptions and the sensitivity of the current fair value of mortgage servicing rights, both purchased and retained, and other retained interests related to residential mortgage loan securitizations to immediate adverse changes in those assumptions are presented in the table below.

These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship of the change in the assumption to the change in fair value may not be linear. Also, in the table below, 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.

The following table presents information about the principal balances of managed and securitized loans.



	December 31								,	Year ended December 31				,
					Delinquent
	Total loans (1)				loans (2)					Net charge-offs
(in millions)	2002		2001		2002		2001			2002		2001


Commercial	$	47,292	$	47,547	$	888	$	887		$	554	$	596
Real estate 1-4 family first mortgage		155,733		163,619		412		401			31		34
Other real estate mortgage		31,478		30,241		214		250			14		11
Real estate construction		7,804		7,806		104		192			21		34
Consumer:
Real estate 1-4 family junior lien mortgage		28,147		21,801		68		49			45		28
Credit card		7,455		6,700		131		117			360		381
Other revolving credit and monthly payment		34,330		31,298		377		376			590		638

Total consumer		69,932		59,799		576		542			995		1,047
Lease financing		4,085		4,017		79		163			27		22
Foreign		2,075		1,786		5		9			70		64

Total loans managed and securitized	$	318,399	$	314,815	$	2,278	$	2,444		$	1,712	$	1,808

Less:
Sold or securitized loans		68,102		112,569
Mortgages held for sale		51,154		30,405
Loans held for sale		6,665		4,745

Total loans held	$	192,478	$	167,096

The Company believes that it is reasonably possible that it could be a significant or majority variable interest holder in certain special-purpose entities formed to securitize high-yield corporate debt, commercial mortgage-backed and real estate investment trust securities. At inception of these entities, the Company was not required to consolidate them under then existing authoritative accounting guidance. 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 aggregate amount of assets in these entities at December 31, 2002 was approximately $1.2 billion and the Company estimates that its maximum exposure to loss as a result of its involvement with these entities to be $45 million, which approximated the book value of the Company’s variable interests in these entities at December 31, 2002.

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

The following table presents the components of mortgage banking noninterest income:

The managed mortgage servicing portfolio totaled $613 billion at December 31, 2002, $525 billion at December 31, 2001 and $468 billion at December 31, 2000, and included loans subserviced for others of $36 billion, $63 billion and $85 billion, respectively.

Net of valuation allowance, mortgage servicing rights totaled $4.5 billion (.92% of the total mortgage servicing portfolio) at December 31, 2002, compared with $6.2 billion (1.54% of the total mortgage servicing portfolio) at December 31, 2001. In 2002, the Company determined that a portion of the asset was not recoverable and reduced both the asset and the previously designated valuation allowance by $1,071 million reflecting the write-down.

Each quarter, the Company evaluates the possible impairment of mortgage servicing rights based on the difference between the carrying amount and current fair value of the mortgage servicing rights, in accordance with FAS 140. If a temporary impairment exists, a valuation allowance is established for any excess of amortized cost, as adjusted for hedge accounting, over the current fair value through a charge to income. The Company has a policy of reviewing mortgage servicing rights assets for other-than-temporary impairment each quarter and recognizes 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 mortgage servicing rights asset and the valuation allowance, precluding subsequent reversals. (See Note 1 – Transfer and Servicing of Financial Assets for additional discussion of the Company’s policy for valuation of mortgage servicing rights.)

The following table summarizes the changes in the valuation allowance for mortgage servicing rights:

On October 22, 2002, the Parent issued a full and unconditional guarantee of all outstanding term debt securities and commercial paper of its wholly owned subsidiary, WFFI. WFFI ceased filing periodic reports under the Securities Exchange Act of 1934 and is no longer a separately rated company. The Parent has also guaranteed all outstanding term debt and commercial paper of Wells Fargo Financial Canada Corporation (WFFC), WFFI’s wholly owned Canadian subsidiary. WFFC expects to continue to issue term debt and commercial paper in Canada, fully guaranteed by the Parent. Presented below are the Condensed Consolidating Financial Statements:



	December 31, 2002
						Other
						consolidating						Consolidated
(in millions)	Parent			WFFI		subsidiaries			Eliminations			Company

Dividends from subsidiaries:
Bank	$	3,561		$	—	$	—		$	(3,561	)	$	—
Nonbank		234			—		—			(234	)		—
Interest from loans		—			2,295		10,750			—			13,045
Interest income from subsidiaries		365			—		—			(365	)		—
Other interest income		78			78		5,270			(12	)		5,414

Total interest income		4,238			2,373		16,020			(4,172	)		18,459

Short-term borrowings		127			96		347			(34	)		536
Long-term debt		457			549		571			(173	)		1,404
Other interest expense		—			—		2,037			—			2,037

Total interest expense		584			645		2,955			(207	)		3,977


NET INTEREST INCOME		3,654			1,728		13,065			(3,965	)		14,482
Provision for loan losses		—			556		1,128			—			1,684

Net interest income after provision for loan losses		3,654			1,172		11,937			(3,965	)		12,798


NONINTEREST INCOME
Fee income – non-affiliates		—			202		6,156			—			6,358
Other		164			222		4,088			(65	)		4,409

Total noninterest income		164			424		10,244			(65	)		10,767


NONINTEREST EXPENSE
Salaries and benefits		162			560		6,650			—			7,372
Other		27			466		6,911			(65	)		7,339

Total noninterest expense		189			1,026		13,561			(65	)		14,711


INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE, EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES AND EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE		3,629			570		8,620			(3,965	)		8,854
Income tax (benefit) expense		(222	)		210		3,156			—			3,144
Equity in undistributed income of subsidiaries		1,602			—		—			(1,602	)		—


NET INCOME BEFORE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE		5,453			360		5,464			(5,567	)		5,710
Cumulative effect of change in accounting principle		(19	)		—		(257	)		—			(276	)

NET INCOME	$	5,434		$	360	$	5,207		$	(5,567	)	$	5,434



	December 31, 2001
						Other
						consolidating					Consolidated
(in millions)	Parent			WFFI		subsidiaries		Eliminations			Company

Dividends from subsidiaries:
Bank	$	2,360		$	—	$	—	$	(2,360	)	$	—
Nonbank		218			—		—		(218	)		—
Interest from loans		—			2,136		12,438		(597	)		13,977
Interest income from subsidiaries		566			—		—		(566	)		—
Other interest income		128			79		5,034		(501	)		4,740

Total interest income		3,272			2,215		17,472		(4,242	)		18,717

Short-term borrowings		305			187		2,063		(1,282	)		1,273
Long-term debt		691			498		777		(140	)		1,826
Other interest expense		—			—		3,910		(268	)		3,642

Total interest expense		996			685		6,750		(1,690	)		6,741


NET INTEREST INCOME		2,276			1,530		10,722		(2,552	)		11,976
Provision for loan losses		—			526		1,201		—			1,727

Net interest income after provision for loan losses		2,276			1,004		9,521		(2,552	)		10,249


NONINTEREST INCOME
Fee income – non-affiliates		2			199		5,506		—			5,707
Other		99			208		5,897		(2,906	)		3,298

Total noninterest income		101			407		11,403		(2,906	)		9,005


NONINTEREST EXPENSE
Salaries and benefits		(11	)		523		5,670		—			6,182
Other		159			465		9,869		(2,881	)		7,612

Total noninterest expense		148			988		15,539		(2,881	)		13,794


INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES		2,229			423		5,385		(2,577	)		5,460
Income tax (benefit) expense		(230	)		159		2,120		—			2,049
Equity in undistributed income of subsidiaries		952			—		—		(952	)		—

NET INCOME	$	3,411		$	264	$	3,265	$	(3,529	)	$	3,411



	December 31, 2000
						Other
						consolidating					Consolidated
(in millions)	Parent			WFFI		subsidiaries		Eliminations			Company

Dividends from subsidiaries:
Bank	$	2,318		$	—	$	—	$	(2,318	)	$	—
Nonbank		1,139			—		—		(1,139	)		—
Interest from loans		—			1,828		12,548		(456	)		13,920
Interest income from subsidiaries		701			—		—		(701	)		—
Other interest income		141			78		5,072		(1,012	)		4,279

Total interest income		4,299			1,906		17,620		(5,626	)		18,199

Short-term borrowings		464			238		2,308		(1,252	)		1,758
Long-term debt		739			401		910		(111	)		1,939
Other interest expense		—			—		4,420		(257	)		4,163

Total interest expense		1,203			639		7,638		(1,620	)		7,860


NET INTEREST INCOME		3,096			1,267		9,982		(4,006	)		10,339
Provision for loan losses		—			358		926		—			1,284

Net interest income after provision for loan losses		3,096			909		9,056		(4,006	)		9,055


NONINTEREST INCOME
Fee income – non-affiliates		3			150		5,009		—			5,162
Other		270			177		7,856		(3,105	)		5,198

Total noninterest income		273			327		12,865		(3,105	)		10,360


NONINTEREST EXPENSE
Salaries and benefits		19			465		5,003		—			5,487
Other		97			391		9,869		(2,955	)		7,402

Total noninterest expense		116			856		14,872		(2,955	)		12,889


INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE AND EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES		3,253			380		7,049		(4,156	)		6,526
Income tax (benefit) expense		(114	)		139		2,489		—			2,514
Equity in undistributed income of subsidiaries		645			—		—		(645	)		—

NET INCOME	$	4,012		$	241	$	4,560	$	(4,801	)	$	4,012



	December 31, 2002
					Other
					consolidating					Consolidated
(in millions)	Parent		WFFI		subsidiaries		Eliminations			Company

ASSETS
Cash and cash equivalents due from:
Subsidiary banks	$	2,919	$	—	$	—	$	(2,919	)	$	—
Other subsidiaries and non-affiliates		241		295		20,488		(30	)		20,994
Securities available for sale		1,009		1,527		25,417		(6	)		27,947
Mortgages and loans held for sale		—		—		57,819		—			57,819

Loans		2		16,247		176,229		—			192,478
Loans to subsidiaries:
Bank		—		—		—		—			—
Nonbank		15,172		755		—		(15,927	)		—
Allowance for loan losses		—		593		3,226		—			3,819

Net loans		15,174		16,409		173,003		(15,927	)		188,659

Investments in subsidiaries:
Bank		31,705		—		—		(31,705	)		—
Nonbank		4,273		—		—		(4,273	)		—
Other assets		2,434		720		50,835		(211	)		53,778


Total assets	$	57,755	$	18,951	$	327,562	$	(55,071	)	$	349,197


LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	—	$	88	$	216,964	$	(136	)	$	216,916
Short-term borrowings		3,550		4,476		29,134		(3,714	)		33,446
Accrued expenses and other liabilities		1,297		702		27,055		(10,743	)		18,311
Long-term debt		19,947		11,234		19,957		(3,818	)		47,320
Indebtedness to subsidiaries		692		—		—		(692	)		—
Guaranteed preferred beneficial interests in Company’s subordinated debentures		1,950		—		935		—			2,885
Stockholders’ equity		30,319		2,451		33,517		(35,968	)		30,319


Total liabilities and stockholders’ equity	$	57,755	$	18,951	$	327,562	$	(55,071	)	$	349,197



	December 31, 2001
					Other
					consolidating					Consolidated
(in millions)	Parent		WFFI		subsidiaries		Eliminations			Company

ASSETS
Cash and cash equivalents due from:
Subsidiary banks	$	2,836	$	—	$	27,570	$	(30,406	)	$	—
Other subsidiaries and non-affiliates		74		255		19,169		—			19,498
Securities available for sale		1,531		1,377		37,705		(305	)		40,308
Mortgages and loans held for sale		—		—		35,150		—			35,150

Loans		2		13,439		153,655		—			167,096
Loans to subsidiaries:
Bank		200		—		—		(200	)		—
Nonbank		10,439		637		2,945		(14,021	)		—
Allowance for loan losses		—		522		3,195		—			3,717

Net loans		10,641		13,554		153,405		(14,221	)		163,379

Investments in subsidiaries:
Bank		28,702		—		—		(28,702	)		—
Nonbank		4,781		—		—		(4,781	)		—
Other assets		2,324		661		54,236		(8,050	)		49,171


Total assets	$	50,889	$	15,847	$	327,235	$	(86,465	)	$	307,506


LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	—	$	79	$	199,257	$	(12,070	)	$	187,266
Short-term borrowings		4,969		4,148		64,507		(35,842	)		37,782
Accrued expenses and other liabilities		1,086		663		15,427		(423	)		16,753
Long-term debt		14,456		8,846		16,012		(3,219	)		36,095
Indebtedness to subsidiaries		1,703		—		—		(1,703	)		—
Guaranteed preferred beneficial interests in Company’s subordinated debentures		1,500		—		935		—			2,435
Stockholders’ equity		27,175		2,111		31,097		(33,208	)		27,175


Total liabilities and stockholders’ equity	$	50,889	$	15,847	$	327,235	$	(86,465	)	$	307,506



	December 31, 2002
							Other
							consolidating
							subsidiaries/			Consolidated
(in millions)	Parent			WFFI			eliminations			Company

Cash flows from operating activities:
Net cash provided (used) by operating activities	$	4,366		$	956		$	(20,780	)	$	(15,458	)


Cash flows from investing activities:
Securities available for sale:
Proceeds from sales		531			769			10,563			11,863
Proceeds from prepayments and maturities		150			143			9,391			9,684
Purchases		(201	)		(1,030	)		(6,030	)		(7,261	)
Net cash (paid for) acquired from acquisitions		(589	)		(281	)		282			(588	)
Net increase in banking subsidiaries’ loan originations, net of collections		—			—			(18,992	)		(18,992	)
Proceeds from sales (including participations) of banking subsidiaries’ loans		—			—			948			948
Purchases (including participations) of loans by banking subsidiaries		—			—			(2,818	)		(2,818	)
Principal collected on nonbank subsidiaries’ loans		—			10,984			412			11,396
Nonbank subsidiaries’ loans originated		—			(13,996	)		(625	)		(14,621	)
Net advances to nonbank subsidiaries		(2,728	)		—			2,728			—
Capital notes and term loans made to subsidiaries		(2,262	)		—			2,262			—
Principal collected on notes/loans of subsidiaries’ loans		457			—			(457	)		—
Net increase in investment in subsidiaries		507			—			(507	)		—
Other, net		—			(179	)		(907	)		(1,086	)

Net cash used by investing activities		(4,135	)		(3,590	)		(3,750	)		(11,475	)


Cash flows from financing activities
Net increase in deposits		—			9			25,041			25,050
Net (decrease) increase in short-term borrowings		(2,444	)		329			(3,109	)		(5,224	)
Proceeds from issuance of long-term debt		8,495			4,126			9,090			21,711
Repayment of long-term debt		(3,150	)		(1,745	)		(6,007	)		(10,902	)
Proceeds from issuance of guaranteed preferred beneficial interests in Company’s subordinated debentures		450			—			—			450
Proceeds from issuance of common stock		578			—			—			578
Redemption of preferred stock		—			—			—			—
Repurchase of common stock		(2,033	)		—			—			(2,033	)
Payment of cash dividends on preferred and common stock		(1,877	)		(45	)		45			(1,877	)
Other, net		—			—			32			32

Net cash provided by financing activities		19			2,674			25,092			27,785

Net change in cash and due from banks		250			40			562			852
Cash and due from banks at beginning of year		2,910			255			13,803			16,968

Cash and due from banks at end of year	$	3,160		$	295		$	14,365		$	17,820



	December 31, 2001
							Other
							consolidating
							subsidiaries/			Consolidated
(in millions)	Parent			WFFI			eliminations			Company

Cash flows from operating activities:
Net cash provided (used) by operating activities	$	1,932		$	903		$	(12,947	)	$	(10,112	)


Cash flows from investing activities:
Securities available for sale:
Proceeds from sales		626			445			18,515			19,586
Proceeds from prepayments and maturities		85			150			6,495			6,730
Purchases		(462	)		(732	)		(27,859	)		(29,053	)
Net cash paid for acquisitions		(370	)		(325	)		236			(459	)
Net increase in banking subsidiaries’ loan originations, net of collections		—			—			(11,866	)		(11,866	)
Proceeds from sales (including participations) of banking subsidiaries’ loans		—			—			2,305			2,305
Purchases (including participations) of loans by banking subsidiaries		—			—			(1,104	)		(1,104	)
Principal collected on nonbank subsidiaries’ loans		—			9,677			287			9,964
Nonbank subsidiaries’ loans originated		—			(11,395	)		(256	)		(11,651	)
Net advances to nonbank subsidiaries		(722	)		—			722			—
Capital notes and term loans made to subsidiaries		(159	)		—			159			—
Principal collected on notes/loans made to subsidiaries		1,304			—			(1,304	)		—
Net increase in investment in subsidiaries		(609	)		—			609			—
Other, net		—			(267	)		(2,932	)		(3,199	)

Net cash used by investing activities		(307	)		(2,447	)		(15,993	)		(18,747	)


Cash flows from financing activities:
Net increase in deposits		—			6			17,701			17,707
Net (decrease) increase in short-term borrowings		(331	)		445			8,679			8,793
Proceeds from issuance of long-term debt		4,573			2,904			7,181			14,658
Repayment of long-term debt		(3,066	)		(1,736	)		(5,823	)		(10,625	)
Proceeds from issuance of guaranteed preferred beneficial interests in Company’s subordinated debentures		1,500			—			—			1,500
Proceeds from issuance of common stock		484			—			—			484
Redemption of preferred stock		(200	)		—			—			(200	)
Repurchase of common stock		(1,760	)		—			—			(1,760	)
Payment of cash dividends on preferred and common stock		(1,724	)		(125	)		125			(1,724	)
Other, net		—			130			(114	)		16

Net cash (used) provided by financing activities		(524	)		1,624			27,749			28,849

Net change in cash and due from banks		1,101			80			(1,191	)		(10	)
Cash and due from banks at beginning of year		1,809			175			14,994			16,978

Cash and due from banks at end of year	$	2,910		$	255		$	13,803		$	16,968



	December 31, 2000
							Other
							consolidating
							subsidiaries/			Consolidated
(in millions)	Parent			WFFI			eliminations			Company

Cash flows from operating activities:
Net cash provided by operating activities	$	3,680		$	672		$	2,485		$	6,837


Cash flows from investing activities:
Securities available for sale:
Proceeds from sales		739			171			22,714			23,624
Proceeds from prepayments and maturities		112			152			5,983			6,247
Purchases		(1,067	)		(331	)		(18,372	)		(19,770	)
Net cash (paid for) acquired from acquisitions		(85	)		(493	)		1,047			469
Net increase in banking subsidiaries’ loan originations, net of collections		—			—			(36,707	)		(36,707	)
Proceeds from sales (including participations) of banking subsidiaries’ loans		—			—			11,898			11,898
Purchases (including participations) of loans by banking subsidiaries		—			—			(409	)		(409	)
Principal collected on nonbank subsidiaries’ loans		—			7,571			734			8,305
Nonbank subsidiaries’ loans originated		—			(9,300	)		—			(9,300	)
Net advances to nonbank subsidiaries		(2,499	)		—			2,499			—
Capital notes and term loans made to subsidiaries		(2,007	)		—			2,007			—
Principal collected on notes/loans made to subsidiaries		1,487			—			(1,487	)		—
Net increase in investment in subsidiaries		(1,719	)		—			1,719			—
Other, net		—			6			(6,399	)		(6,393	)

Net cash used by investing activities		(5,039	)		(2,224	)		(14,773	)		(22,036	)


Cash flows from financing activities:
Net increase in deposits		—			—			20,745			20,745
Net (decrease) increase in short-term borrowings		(743	)		475			(3,243	)		(3,511	)
Proceeds from issuance of long-term debt		6,590			2,305			6,649			15,544
Repayment of long-term debt		(4,400	)		(1,282	)		(4,167	)		(9,849	)
Proceeds from issuance of guaranteed preferred beneficial interests in Company’s subordinated debentures		—			—			—			—
Proceeds from issuance of common stock		422			—			—			422
Redemption of preferred stock		—			—			—			—
Repurchase of common stock		(3,235	)		—			(3	)		(3,238	)
Payment of cash dividends on preferred and common stock		(1,586	)		(45	)		45			(1,586	)
Other, net		—			95			(563	)		(468	)

Net cash (used) provided by financing activities		(2,952	)		1,548			19,463			18,059

Net change in cash and due from banks		(4,311	)		(4	)		7,175			2,860
Cash and due from banks at beginning of year		6,120			179			7,819			14,118

Cash and due from banks at end of year	$	1,809		$	175		$	14,994		$	16,978

In the normal course of business, the Company is at all times subject to numerous pending and threatened legal actions, some for which the relief or damages sought are substantial. After reviewing pending and threatened actions with counsel, management believes that the outcome of such actions will not have a material adverse effect on the results of operations or stockholders’ equity of the Company. The Company is 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.

The Company enters into indemnification agreements in the ordinary course of business under which the Company agrees to hold third parties harmless from any damages, losses and expenses, including out-of-pocket legal and other expenses incurred in connection with any claims made and legal and other proceedings arising from relationships and/or transactions between the indemnified persons and the Company. These relationships and/or transactions include those arising from service as a director or officer of the Company, one of its subsidiaries, or an entity in which the Company or one of its subsidiaries has an interest, underwriting agreements relating to offers and sales of the Company’s securities, acquisition agreements, and various other business transactions or arrangements. Because the extent of the Company’s obligations under such indemnification agreements depends entirely upon the occurrence of future events that may give rise to a claim, the Company is unable to estimate the amount it would be required to pay in connection with any such claim.

The Company has entered into various contingent performance guarantee arrangements with terms ranging from 1 to 30 years. These guarantees have arisen through certain risk participation agreements, lending arrangements or sales of loans. At December 31, 2002, potential payments under these guarantee arrangements were not material to the Company’s financial statements.

The Company and each of its subsidiary banks are subject to various regulatory capital adequacy requirements administered by the 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 the Company’s 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 on the

following page) 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 the unrealized net gains and losses, after applicable taxes, on securities available for sale carried at fair value). Tier 2 capital includes preferred stock not qualifying as Tier 1 capital, subordinated debt, the allowance for loan 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.

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 and off-balance sheet asset, 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 derivative financial instruments, 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%. Derivative financial instruments are converted to balance sheet equivalents based on notional values, replacement costs and remaining contractual terms. (See Notes 6 and 27 for further discussion of off-balance sheet items.) Effective January 1, 2002, federal banking agencies adopted an amendment to the regulatory capital guidelines regarding the treatment of certain recourse obligations, direct credit substitutes, residual interests in asset securitization, and other securitized transactions that expose institutions primarily to credit risk. The amendment creates greater differentiation in the capital treatment of residual interests. The capital amounts and classification under the guidelines are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Management believes that, as of December 31, 2002, the Company and each of the covered subsidiary banks met all capital adequacy requirements to which they are subject.

Under the FDICIA prompt corrective action provisions applicable to banks, the most recent notification from the OCC categorized each of the covered subsidiary banks as well capitalized. To be categorized as well capitalized, the institution must maintain a total risk-based capital ratio as set forth in the following table 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.



												To be well
												capitalized under
												the FDICIA
						For capital						prompt corrective
	Actual					adequacy purposes						action provisions
(in billions)	Amount		Ratio			Amount			Ratio			Amount			Ratio
As of December 31, 2002:
Total capital (to risk-weighted assets)
Wells Fargo & Company	$	31.9		11.44	%	>	$	22.3	>	8.00	%
Wells Fargo Bank, N.A		17.8		11.55		>		12.4	>	8.00		>	$	15.4	>	10.00	%
Wells Fargo Bank Minnesota, N.A		4.0		13.50		>		2.3	>	8.00		>		2.9	>	10.00
Tier 1 capital (to risk-weighted assets)
Wells Fargo & Company	$	21.5		7.70	%	>	$	11.2	>	4.00	%
Wells Fargo Bank, N.A		11.4		7.38		>		6.2	>	4.00		>	$	9.3	>	6.00	%
Wells Fargo Bank Minnesota, N.A		3.7		12.53		>		1.2	>	4.00		>		1.8	>	6.00
Tier 1 capital (to average assets)
(Leverage ratio)
Wells Fargo & Company	$	21.5		6.57	%	>	$	13.1	>	4.00	%(1)
Wells Fargo Bank, N.A		11.4		6.81		>		6.7	>	4.00	(1)	>	$	8.4	>	5.00	%
Wells Fargo Bank Minnesota, N.A		3.7		6.66		>		2.2	>	4.00	(1)	>		2.8	>	5.00

To remain a seller/servicer in good standing, the Company’s mortgage banking affiliate must maintain specified equity levels as required by the United States Department of Housing and Urban Development, Government National Mortgage Association, Federal Home Loan Mortgage Corporation, and Federal National Mortgage Association. The equity requirements are generally based on the size of the loan portfolio being serviced for each investor. At December 31, 2002, the equity requirements for these agencies ranged from $1 million to $190 million. The mortgage banking affiliate had agency capital levels in excess of these requirements.

The Company adopted FAS 133 on January 1, 2001. The effect on 2001 net income from the adoption was an increase of $13 million (after tax). The pretax amount of $22 million was recorded as a component of other noninterest income. In accordance with the transition provisions of FAS 133, the Company recorded a transition adjustment of $71 million, net of tax, (increase in equity) in 2001 in other comprehensive income in a manner similar to a cumulative effect of a change in accounting principle. The transition adjustment was the initial amount necessary to adjust the carrying values of certain derivative instruments (that qualified as cash flow hedges) to fair value to the extent that the related hedge transactions had not yet been recognized.

The Company maintains an overall interest rate risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings, fair

values of assets and liabilities, and cash flows caused by interest rate volatility. The Company’s interest rate risk management strategy 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 appreciate or depreciate in market value. In a fair value hedging strategy, the effect of this unrealized appreciation or depreciation will generally be offset by income or loss on the derivative instruments that are linked to the hedged assets and liabilities. In a cash flow hedging strategy, the variability of cash payments due to interest rate fluctuations is managed by the effective use of derivative instruments that are linked to hedged assets and liabilities.

Derivative instruments that the Company uses as part of its interest rate risk management include interest rate swaps and floors, interest rate futures and forward contracts, and options. The Company also offers various derivative contracts, which include interest rate, commodity, equity and foreign exchange contracts to its customers but usually offsets such contracts by purchasing other financial contracts. The customer accommodations are treated as free-standing derivatives. The free-standing derivative instruments also include derivative transactions entered into for risk management purposes that do not otherwise qualify for hedge accounting. To a lesser extent, the Company takes positions based on market expectations or to benefit from price differentials between financial instruments and markets.

By using derivative instruments, the Company is exposed to credit risk in the event of nonperformance by counterparties to financial instruments. If a counterparty fails to perform, credit risk is equal to the fair value gain in a derivative contract. The Company minimizes the credit risk through credit approvals, limits and monitoring procedures. Credit risk related to derivative contracts is considered and, if material, provided for separately. As the Company generally enters into transactions only with counterparties that carry quality credit ratings, losses associated with counterparty nonperformance on derivative contracts have been immaterial. Further, the Company obtains collateral where appropriate to mitigate 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.

The Company’s derivative activities are monitored by the Corporate Asset/Liability Management Committee. The Company’s Treasury function, which includes asset/liability management, is responsible for implementing various hedging strategies that are developed through its analysis of data from financial models and other internal and industry sources. The resulting hedging strategies are then incorporated into the Company’s overall interest rate risk management and trading strategies.

The Company uses derivative contracts to manage the risk associated with changes in the fair value of mortgage servicing rights and other retained interests. The change in value of these derivative contracts is included in current period earnings in their entirety. The Company evaluates hedge effectiveness excluding the impacts of changes in value associated with

volatility and the passage of time (time value), primarily representing the spread between spot and forward rates priced into these derivative contracts. The changes in value of derivatives excluded from the assessment of hedge effectiveness recorded in earnings amounted to a net gain of $1,201 million in 2002 and a net loss of $181 million in 2001. Also, the Company recognized net gains related to ineffectiveness in these hedging relationships in the amount of $1,125 million in 2002 and $702 million in 2001. The gain in 2002 primarily resulted from increased interest rate volatility. The gains were more than offset by higher valuation provision for impairment and amortization expense on mortgage servicing rights and other retained interests, amounting to $4,935 million in 2002 and $2,716 million in 2001. The gain on the derivative contracts, valuation provision for impairment and amortization expense are included in “Servicing fees, net of provision for impairment and amortization” in Note 23.

The Company also enters into interest rate swaps, designated as fair value hedges, to convert certain of its fixed-rate long-term debt to floating-rate debt. The ineffective portion of these fair value hedges was a net gain of $1 million in 2002 and was a net gain of $11 million in 2001, recorded as an offset to interest expense in the statement of income. For long-term debt, all components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness.

Beginning in 2002, the Company began using derivative contracts to hedge changes in fair value of its commercial real estate mortgages and franchise loans due to changes in LIBOR interest rates. The Company originates these loans with the intent to sell them. The ineffective portion of these fair value hedges was a net loss of $3 million in 2002, recorded as a component of mortgage banking noninterest income in the statement of income. For the commercial real estate and franchise loan hedges, all components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness.

As of December 31, 2002, all designated fair value hedges continued to qualify as fair value hedges.

The Company enters into derivative contracts to convert floating-rate loans to fixed rates and to hedge forecasted sales of its mortgage loans. The Company recognized a net loss of $311 million in 2002, which represents the total ineffectiveness of cash flow hedges, compared with a net loss of $120 million in 2001. The change was primarily due to growth in mortgages held for sale and increased interest rate volatility. Gains and losses on derivative contracts 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 components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness, except for time value and volatility of options hedging commercial loans indexed to LIBOR. As of December 31, 2002, all designated cash flow hedges continued to qualify as cash flow hedges.

At December 31, 2002, $125 million of deferred net losses on derivative instruments included in other comprehensive income are expected to be reclassified as earnings during the next twelve months, compared with $110 million of deferred net gains at December 31, 2001. The maximum

term for which the Company is hedging its exposure to the variability of future cash flows for all forecasted transactions is two years for hedges converting floating-rate loans to fixed and one year for hedges of forecasted sales of mortgage loans.

The Company enters into various derivative contracts primarily to focus on providing derivative products to customers. To a lesser extent, the Company takes positions based on market expectations or to benefit from price differentials between financial instruments and markets. These derivative contracts 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. They are carried at fair value with changes in fair value recorded as a component of other noninterest income in the statement of income.

Interest rate lock commitments issued on residential mortgage loans intended to be held for resale are considered free-standing derivative instruments. The interest rate exposure on these commitments is economically hedged with options, futures and forwards. The commitments and free-standing derivative instruments are carried at fair value with changes in fair value recorded as a component of mortgage banking noninterest income in the statement of income.

Derivative instruments utilized by the Company and classified as free-standing instruments include swaps, futures, forwards, floors and caps purchased and written, and options purchased and written.

The following table summarizes the aggregate notional or contractual amounts, credit risk amount and estimated net fair value for the Company’s derivative financial instruments at December 31, 2002 and 2001.



	December 31													,
	2002							2001
	Notional or		Credit		Estimated			Notional or		Credit		Estimated
	contractual		risk		net fair			contractual		risk		net fair
(in millions)	amount		amount (5)		value			amount		amount (5)		value

ASSET/LIABILITY MANAGEMENT HEDGES
Interest rate contracts:
Swaps (1)	$	24,533	$	2,238	$	2,180		$	27,868	$	1,594	$	1,559
Futures		16,867		—		—			264		—		—
Floors purchased (1)		500		11		11			500		27		27
Options purchased (1) (2)		90,959		520		520			263,617		286		286
Options written (3)		74,589		—		(236	)		235,813		—		(102	)
Forwards (1)		116,164		669		156			113,620		290		(263	)

CUSTOMER ACCOMMODATIONS AND TRADING
Interest rate contracts:
Swaps (1)		68,164		2,606		1			68,332		1,657		148
Futures		83,351		—		—			22,762		—		—
Floors and caps purchased (1)		29,381		299		299			24,255		440		440
Floors and caps written (3)		30,400		—		(274	)		24,309		—		(385	)
Options purchased (1)		5,484		108		108			2,435		18		18
Options written (1) (3)		58,846		328		280			23,117		—		(162	)
Forwards (1)		51,088		2		(383	)		41,837		248		173

Commodity contracts:
Swaps (1)		206		11		1			66		10		1
Floors and caps purchased (1)		168		17		17			104		8		8
Floors and caps written (3)		166		—		(14	)		105		—		(8	)

Equity contracts:
Options purchased (1)		382		29		29			704		33		33
Options written (3)		389		—		(49	)		529		—		(29	)

Foreign exchange contracts:
Forwards and spots (1)		14,596		251		30			8,968		227		65
Options purchased (1)		749		20		20			275		18		18
Options written (3)		735		—		(20	)		260		—		(17	)

Credit contracts:
Swaps (1)(4)		4,735		52		(11	)		3,464		13		(2	)

FAS 107, Disclosures about Fair Value of Financial Instruments, requires that the Company disclose estimated fair values for its financial instruments. Fair value estimates, methods and assumptions set forth below for the Company’s financial instruments are made solely to comply with the requirements of this Statement and should be read in conjunction with the financial statements and notes in this Form 10-K/A. The carrying amounts in the table on page 138 are recorded in the Consolidated Balance Sheet under the indicated captions.

Fair values are based on estimates or calculations using present value techniques in instances where quoted market prices are not available. Because broadly traded markets do not exist for most of the Company’s financial instruments, the fair value calculations attempt to incorporate the effect of current market conditions at a specific time. Fair valuations are management’s estimates of the values, and they 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 in nature, involve uncertainties and matters of 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. The Company has not included certain material items in its disclosure, such as the value of the long-term relationships with the Company’s deposit, credit card and trust customers, since these intangibles are not financial instruments. For all of these reasons, the aggregation of the fair value calculations presented herein do not represent, and should not be construed to represent, the underlying value of the Company.

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 period of time between the origination of the instrument and its expected realization.

Securities available for sale at December 31, 2002 and 2001 are set forth in Note 5.

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

The fair valuation calculation process 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 the Company’s 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 the Company’s 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 offered by the Company for loans with similar characteristics.

Commitments, standby letters of credit and commercial and similar letters of credit not included in the table on page 138 have contractual values of $113.2 billion, $6.3 billion and $719 million, respectively, at December 31, 2002, and $101.3 billion, $5.5 billion and $577 million, respectively, at December 31, 2001. These instruments generate ongoing fees at the Company’s current pricing levels. Of the commitments at December 31, 2002, 41% mature within one year.

There are generally restrictions on the sale and/or liquidation of the Company’s nonmarketable equity investments, including federal bank stock. Federal bank stock carrying value approximates fair value. The Company uses all facts and circumstances available to estimate the fair value of its cost method investments. Typical considerations include: 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.

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. Although the FASB’s requirement for these categories is not consistent with the market practice of using prevailing interest rates to value these amounts, the amount included for these deposits in the following table is their carrying value at December 31, 2002 and 2001. 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 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 period of time between the origination of the instrument and its expected realization.

LONG-TERM DEBT AND GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY’S SUBORDINATED DEBENTURES

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

The fair value of derivative financial instruments at December 31, 2002 and 2001 is set forth in Note 27.

These fair value disclosures are made solely 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, 2002 and 2001. These amounts have not been updated since year end; therefore, the valuations may have changed significantly since that point in time.

As discussed above, certain of the Company’s 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 premises and equipment, goodwill and other intangibles, deferred taxes and other liabilities.

The following table presents a summary of the Company’s financial instruments, as defined by FAS 107, excluding short-term financial assets and liabilities, for which carrying amounts approximate fair value, trading assets (Note 7), which are carried at fair value, securities available for sale (Note 5) and derivative financial instruments (Note 27).

We have audited the accompanying consolidated balance sheet of Wells Fargo & Company and Subsidiaries as of December 31, 2002 and 2001, 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, 2002. 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 auditing standards generally accepted in the United States of America. 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 Wells Fargo & Company and Subsidiaries as of December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Notes 1, 9 and 19 to the consolidated financial statements, the Company changed its method of accounting for goodwill in 2002.

As discussed in Note 2 to the consolidated financial statements, the Company has revised the 2002, 2001, and 2000 consolidated financial statements.

San Francisco, California
February 25, 2003 except for Note 2 as
to which the date is January 15, 2004



										2002			2001
	Quarter ended												Quarter ended
(in millions, except per share amounts)	Dec. 31			Sept. 30			June 30			Mar. 31			Dec. 31			Sept. 30			June 30			Mar. 31


INTEREST INCOME	$	4,744		$	4,609		$	4,530		$	4,577		$	4,581		$	4,698		$	4,687		$	4,752
INTEREST EXPENSE		959			1,004			988			1,026			1,258			1,615			1,807			2,061

NET INTEREST INCOME		3,785			3,605			3,542			3,551			3,323			3,083			2,880			2,691
Provision for loan losses		426			389			400			469			519			443			414			350

Net interest income after provision for loan losses		3,359			3,216			3,142			3,082			2,804			2,640			2,466			2,341


NONINTEREST INCOME
Service charges on deposit accounts		567			560			547			505			506			470			471			428
Trust and investment fees		480			462			472			461			477			447			437			428
Credit card fees		255			242			223			201			216			203			196			181
Other fees		375			372			326			311			323			303			311			307
Mortgage banking		515			426			412			359			394			369			517			391
Operating leases		252			268			289			306			294			311			329			381
Insurance		231			234			269			263			221			196			210			118
Net gains (losses) on debt securities available for sale		91			121			45			37			151			97			(19	)		88
Net (losses) gains from equity investments		(96	)		(152	)		(58	)		(19	)		(61	)		(58	)		(1,556	)		138
Other		210			80			142			183			220			256			(22	)		335

Total noninterest income		2,880			2,613			2,667			2,607			2,741			2,594			874			2,795


NONINTEREST EXPENSE
Salaries		1,091			1,110			1,106			1,076			1,012			1,020			1,018			977
Incentive compensation		541			446			362			357			411			315			265			204
Employee benefits		287			304			364			329			223			223			236			278
Equipment		317			232			228			236			237			217			217			237
Net occupancy		281			278			274			269			259			240			239			237
Operating leases		184			187			205			226			207			210			218			268
Goodwill		—			—			—			—			158			156			152			144
Core deposit intangibles		38			38			39			41			40			41			41			43
Net losses (gains) on dispositions of premises and equipment		26			—			29			(2	)		—			(2	)		—			(19	)
Other		1,189			999			1,003			1,022			1,114			977			1,087			895

Total noninterest expense		3,954			3,594			3,610			3,554			3,661			3,397			3,473			3,264


INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) AND EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE		2,285			2,235			2,199			2,135			1,884			1,837			(133	)		1,872
Income tax expense (benefit)		813			793			781			758			706			676			(43	)		710


NET INCOME (LOSS) BEFORE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE		1,472			1,442			1,418			1,377			1,178			1,161			(90	)		1,162
Cumulative effect of change in accounting principle		—			—			—			(276	)		—			—			—			—


NET INCOME (LOSS)	$	1,472		$	1,442		$	1,418		$	1,101		$	1,178		$	1,161		$	(90	)	$	1,162


NET INCOME (LOSS) APPLICABLE TO COMMON STOCK	$	1,471		$	1,441		$	1,417		$	1,100		$	1,177		$	1,156		$	(94	)	$	1,157


EARNINGS (LOSS) PER COMMON SHARE BEFORE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
Earnings (loss) per common share	$	.87		$	.85		$	.83		$	.81		$	.69		$	.68		$	(.06	)	$	.68


Diluted earnings (loss) per common share	$	.86		$	.84		$	.82		$	.80		$	.69		$	.67		$	(.06	)	$	.67


EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share	$	.87		$	.85		$	.83		$	.65		$	.69		$	.68		$	(.06	)	$	.68


Diluted earnings (loss) per common share	$	.86		$	.84		$	.82		$	.64		$	.69		$	.67		$	(.06	)	$	.67


DIVIDENDS DECLARED PER COMMON SHARE	$	.28		$	.28		$	.28		$	.26		$	.26		$	.26		$	.24		$	.24


Average common shares outstanding		1,690.4			1,700.7			1,710.4			1,703.0			1,696.7			1,710.6			1,714.9			1,715.9


Diluted average common shares outstanding		1,704.0			1,717.8			1,730.8			1,718.9			1,709.2			1,726.9			1,714.9			1,738.7

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																	,
	2002 over 2001									2001 over 2000
(in millions)	Volume			Rate			Total			Volume			Rate			Total


Increase (decrease) in interest income:

Federal funds sold and securities purchased under resale agreements	$	2		$	(53	)	$	(51	)	$	12		$	(60	)	$	(48	)
Debt securities available for sale:
Securities of U.S. Treasury and federal agencies		(22	)		(20	)		(42	)		(84	)		11			(73	)
Securities of U.S. states and political subdivisions		6			7			13			(8	)		—			(8	)
Mortgage-backed securities:
Federal agencies		(68	)		7			(61	)		28			(14	)		14
Private collateralized mortgage obligations		42			(27	)		15			(57	)		18			(39	)
Other debt securities		(20	)		(2	)		(22	)		(7	)		—			(7	)
Mortgages held for sale		1,005			(150	)		855			883			(137	)		746
Loans held for sale		34			(99	)		(65	)		(8	)		(93	)		(101	)
Loans:
Commercial		(164	)		(568	)		(732	)		295			(662	)		(367	)
Real estate 1-4 family first mortgage		640			(216	)		424			466			(32	)		434
Other real estate mortgage		93			(459	)		(366	)		145			(234	)		(89	)
Real estate construction		(12	)		(191	)		(203	)		104			(145	)		(41	)
Consumer:
Real estate 1-4 family junior lien mortgage		596			(432	)		164			310			(260	)		50
Credit card		69			(71	)		(2	)		56			(74	)		(18	)
Other revolving credit and monthly payment		69			(268	)		(199	)		191			(148	)		43
Lease financing		4			(24	)		(20	)		(11	)		63			52
Foreign		34			(32	)		2			(4	)		(6	)		(10	)
Other		101			(44	)		57			44			(52	)		(8	)

Total increase (decrease) in interest income		2,409			(2,642	)		(233	)		2,355			(1,825	)		530


Increase (decrease) in interest expense:

Deposits:
Interest-bearing checking		4			(25	)		(21	)		(20	)		(9	)		(29	)
Market rate and other savings		241			(1,023	)		(782	)		415			(526	)		(111	)
Savings certificates		(250	)		(500	)		(750	)		(14	)		(72	)		(86	)
Other time deposits		152			(66	)		86			(160	)		(26	)		(186	)
Deposits in foreign offices		(41	)		(126	)		(167	)		16			(140	)		(124	)
Short-term borrowings		(22	)		(715	)		(737	)		306			(791	)		(485	)
Long-term debt		349			(771	)		(422	)		332			(445	)		(113	)
Guaranteed preferred beneficial interests in Company’s subordinated debentures		67			(38	)		29			31			(16	)		15

Total increase (decrease) in interest expense		500			(3,264	)		(2,764	)		906			(2,025	)		(1,119	)


Increase in net interest income on a taxable-equivalent basis	$	1,909		$	622		$	2,531		$	1,449		$	200		$	1,649

The following table presents the remaining contractual principal maturities of selected loan categories at December 31, 2002 and a summary of the major categories of loans outstanding at the end of the last five years.



	December 31, 2002
			Over one year
			through five years				Over five years
					Floating				Floating
					or				or
	One year		Fixed		adjustable		Fixed		adjustable				December 31								,
(in millions)	or less		rate		rate		rate		rate		Total		2001		2000		1999		1998


Selected loan maturities:
Commercial	$	16,973	$	4,621	$	22,759	$	996	$	1,943	$	47,292	$	47,547	$	50,518	$	41,671	$	38,218
Real estate 1-4 family first mortgage		736		1,954		247		11,453		29,729		44,119		29,317		19,321		13,586		12,613
Other real estate mortgage		4,677		3,109		7,007		4,487		6,032		25,312		24,808		23,972		20,899		18,033
Real estate construction		3,817		584		2,880		215		308		7,804		7,806		7,715		6,067		4,529
Foreign		325		1,340		29		199		18		1,911		1,598		1,624		1,600		1,528


Total selected loan maturities	$	26,528	$	11,608	$	32,922	$	17,350	$	38,030		126,438		111,076		103,150		83,823		74,921


Other loan categories:
Consumer:
Real estate 1-4 family junior lien mortgage												28,147		21,801		17,361		12,869		11,135
Credit card												7,455		6,700		6,616		5,805		6,119
Other revolving credit and monthly payment												26,353		23,502		23,974		20,617		19,441

Total consumer												61,955		52,003		47,951		39,291		36,695

Lease financing												4,085		4,017		4,350		3,586		2,930

Total loans											$	192,478	$	167,096	$	155,451	$	126,700	$	114,546

The ratio of the allowance for loan losses to total nonaccrual loans was 256% and 227% at December 31, 2002 and 2001, 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. Classification of a loan as nonaccrual does not necessarily indicate that the principal of a loan is uncollectible in whole or in part. Consequently, the ratio of the allowance for loan losses to nonaccrual loans, without taking into account numerous additional factors, is not a reliable indicator of the adequacy of the allowance for loan losses. Indicators of the credit quality of the Company’s loan portfolio and the method of determining the allowance for loan losses are discussed below, in “Financial Review — Critical Accounting Policies” and in Notes 1 (Significant Accounting Policies) and 6 (Loans and Allowance for Loan Losses) to Financial Statements.

The table below provides a breakdown of the allowance for loan losses by loan category.


	December 31																													,
	2002						2001						2000						1999						1998
	Alloc.			Loan			Alloc.			Loan			Alloc.			Loan			Alloc.			Loan			Alloc.			Loan
	allow.			catgry			allow.			catgry			allow.			catgry			allow.			catgry			allow.			catgry
	as %			as %			as %			as %			as %			as %			as %			as %			as %			as %
	of loan			of total			of loan			of total			of loan			of total			of loan			of total			of loan			of total
	catgry			loans			catgry			loans			catgry			loans			catgry			loans			catgry			loans

Commercial		1.83	%		24	%		1.86	%		28	%		1.58	%		33	%		1.57	%		33	%		1.74	%		33	%
Real estate 1-4 family first mortgage		.24			23			.26			18			.30			12			.47			11			.46			11
Other real estate mortgage		1.21			13			1.11			15			.92			15			1.05			16			1.32			16
Real estate construction		.68			4			1.10			5			.89			5			.96			5			1.37			4
Consumer:
Real estate 1-4 family junior lien mortgage		.22			15			.20			13			.22			11			.22			10			.20			10
Credit card		5.18			4			5.88			4			5.96			4			6.01			5			5.82			5
Other revolving credit and monthly payment		2.27			14			2.57			14			2.15			16			1.94			16			2.91			17

Total consumer		1.69			33			2.00			31			1.98			31			1.98			31			2.57			32
Lease financing		1.84			2			2.76			2			.67			3			1.09			3			1.13			3
Foreign		4.50			1			7.26			1			5.85			1			3.88			1			5.17			1

Total allocated		1.32			100	%		1.55			100	%		1.43			100	%		1.48			100	%		1.81			100	%

Unallocated component of the allowance (1)		.66						.67						.94						1.13						1.05

Total		1.98	%					2.22	%					2.37	%					2.61	%					2.86	%

See Note 6 (Loans and Allowance for Loan Losses) to Financial Statements for a description of the process used by the Company to determine the adequacy and the components (allocated and unallocated) of the allowance for loan losses.

At December 31, 2002, the allowance for loan losses was $3,819 million, or 1.98% of total loans, compared with $3,717 million, or 2.22%, at December 31, 2001. During 2002, the net provision for loan losses approximated charge-offs. The components of the allowance, allocated and unallocated, are shown in the table above. The allocated component decreased to $2,535 million at December 31, 2002 from $2,588 million at December 31, 2001, while the unallocated increased to $1,284 million at December 31, 2002 from $1,129 million at December 31, 2001. At December 31, 2002, the unallocated portion of the allowance amounted to 34% of the total allowance, compared with 30% at December 31, 2001.

The $53 million decrease in the allocated component of the allowance from 2001 to 2002 was attributable to lower estimated loss rates in the retail lines of business, partially offset by loan portfolio growth and changes in the loan grades and loan factors in the commercial and wholesale lines of business. Changes in allocated loan loss allowances arrived at through this process reflect management’s judgment concerning the effect of trends in borrower performance and recent economic activity on portfolio performance. Without these changes in loss factors and loss rates, the allocated allowance would have increased by approximately $170 million due to loan growth of $25 billion during the year.

The unallocated component of the allowance increased $155 million from 2001 to 2002, primarily due to overall portfolio loan growth, economic uncertainties, and certain industry trends, including continued weakness in several sectors of agricultural lending, a deterioration in used car prices in automobile lending and increased vacancy rates in certain commercial office lending markets. While the allocated component and the total allowance as a percentage of total loans both declined from 2001 to 2002, the unallocated component remained flat, reflecting the uncertain economic environment and its impact on the Company’s processes for estimating credit risk. The reduction in the unallocated portion of the allowance in 2001 compared with 2000 reflects the Company’s on-going effort to integrate its credit risk management processes following the mergers with the former Wells Fargo & Company in 1998 and First Security Corporation in 2000. Prior to the migration to common processes, the Company maintained a portion of the unallocated allowance to mitigate the imprecision and uncertainty inherent in the Company’s diverse processes for estimating credit losses. The integration of credit risk management processes during 2001 increased the reliability of the Company’s loss forecasting process and permitted the Company to reduce its unallocated allowance.

Loan balances increased by 23% and the allocated portion of the allowance increased by 18% between 1999 and 2000. The unallocated portion of the allowance remained essentially flat, continuing to provide coverage for the uncertainties in the Company’s integration process. The Company continued the integration of its credit risk management processes during 2001 and reduced the unallocated portion of the allowance. The allocated portion of the allowance continued to increase in 2001 as loan balances increased and credit performance showed indications of deterioration.

No material changes in estimation methodology for the allowance were made in 2002.

The Company considers the allowance for loan losses of $3,819 million adequate to cover losses inherent in loans, loan commitments, and standby and other letters of credit at December 31, 2002.

The foregoing discussion contains forward-looking statements about the adequacy of the Company’s allowance for loan losses. These forward-looking statements are inherently subject to risks and uncertainties. A number of factors—many of which are beyond the Company’s control—could cause actual losses to be more than estimated losses. For a discussion of some of the other factors that could cause actual losses to be more than estimated losses, see “Factors That May Affect Future Results” in the “Financial Review” section.

As required by SEC rules, the Company’s management evaluated the effectiveness, as of December 31, 2002, 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, 2002.

No change occurred during the fourth quarter of 2002 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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.

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. First Security Corporation filed documents under SEC file number 001-6906.


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 of Designations for the Company’s ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1994

(d)		Certificate of Designations for the Company’s 1995 ESOP Cumulative Convertible Preferred Stock, incorporated by reference to Exhibit 4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1995

(e)		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 dated November 1, 1995


3(f)		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 dated February 20, 1996

(g)		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 dated February 26, 1996

(h)		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 dated April 14, 1997

(i)		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 dated April 20, 1998

(j)		Certificate of Designations for the Company’s Adjustable Cumulative Preferred Stock, Series B, incorporated by reference to Exhibit 3(j) to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998

(k)		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 dated April 21, 1999

(l)		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 dated April 21, 1999

(m)		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

(n)		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 dated April 17, 2001

(o)		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 dated April 16, 2002

(p)		By-Laws, incorporated by reference to Exhibit 3(m) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998


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

10*(a)		Long-Term Incentive Compensation Plan, incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. 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 and Restricted Stock Agreements for grants subsequent to 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, 1998. Forms of Non-Qualified Stock Option and Restricted Stock Agreements for grants prior to 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, 2000

*(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, 1999

*(e)		1990 Equity Incentive Plan, incorporated by reference to Exhibit 10(f) to the former Wells Fargo’s Annual Report on Form 10-K for the year ended December 31, 1995

*(f)		1982 Equity Incentive Plan, incorporated by reference to Exhibit 10(g) to the former Wells Fargo’s Annual Report on Form 10-K for the year ended December 31, 1993

*(g)		Employees’ 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, 1998. Amendment to Employees’ Stock Deferral Plan, effective November 1, 2000, filed as paragraph (2) of Exhibit 10(ff) hereto


10*(h)		Deferred Compensation Plan, incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001

*(i)		1999 Directors Stock Option Plan, incorporated by reference to Exhibit 10(c) to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001

*(j)		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

*(k)		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

*(l)		First Security Corporation Comprehensive Management Incentive Plan, incorporated by reference to Exhibit 10.1 to First Security Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999

*(m)		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) hereto

*(n)		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) hereto

*(o)		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) hereto

*(p)		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


10*(q)		1999 Deferral Plan for Directors, incorporated by reference to Exhibit 10(q) of the Company’s Annual Report on Form 10-K for the year ended December 31, 1999. Amendment to 1999 Deferral Plan for Directors, effective November 1, 2000, filed as paragraph (7) of Exhibit 10(ff) hereto

*(r)		1999 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 March 31, 2001

*(s)		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 September 30, 2002

*(t)		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, 1999. Amendment to 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, 2002

*(u)		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

*(v)		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

*(w)		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

*(x)		Amended and Restated Employment Agreement, dated as of October 18, 2000, between the Company and Spencer F. Eccles, incorporated by reference to Exhibit 10(x) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000


10*(y)		Agreement between the Company and Mark C. Oman, dated May 7, 1999 and agreement between the Company and one other executive officer, dated October 25, 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

*(z)		Form of severance agreement between the Company and five executive officers, including Richard M. Kovacevich, Les S. Biller, Mark C. Oman and C. Webb Edwards, 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

*(aa)		Description of Supplemental Retirement Benefit Arrangement for C. Webb Edwards, incorporated by reference to Exhibit 10(aa) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000

*(bb)		Agreement, effective April 15, 2002, between Robert L. Joss and Wells Fargo Bank, N.A., incorporated by reference to Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002

*(cc)		Description of Relocation Program, incorporated by reference to Exhibit 10(cc) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002

*(dd)		Description of Executive Financial Planning Program, incorporated by reference to Exhibit 10(ee) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999

*(ee)		Amendments to Employees’ Stock Deferral Plan, Deferred Compensation Plan for Non-Employee Directors, Directors’ Stock Deferral Plan, Directors’ Formula Stock Award Plan, and 1999 Deferral Plan for Directors, incorporated by reference to Exhibit 10(ff) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000

(ff)		PartnerShares Stock Option Plan, incorporated by reference to Exhibit 10(hh) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2001. 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, 2002


10*(gg)		Agreement, dated May 29, 2002, between the Company and Les S. Biller, incorporated by reference to Exhibit 10(c) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002

*(hh)		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

(ii)		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)

12(a)		Computation of Ratios of Earnings to Fixed Charges, filed herewith. The ratios of earnings to fixed charges, including interest on deposits, were 3.13, 1.79, 1.81, 2.06 and 1.61 for the years ended December 31, 2002, 2001, 2000, 1999 and 1998, respectively. The ratios of earnings to fixed charges, excluding interest on deposits, were 4.96, 2.63, 2.66, 3.28 and 2.51 for the years ended December 31, 2002, 2001, 2000, 1999 and 1998, 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 3.13, 1.79, 1.81, 2.05 and 1.60 for the years ended December 31, 2002, 2001, 2000, 1999 and 1998, respectively. The ratios of earnings to fixed charges and preferred dividends, excluding interest on deposits, were 4.95, 2.62, 2.64, 3.21 and 2.45 for the years ended December 31, 2002, 2001, 2000, 1999 and 1998, respectively.

18		Preferability letter from KPMG related to change in the measurement date for the Company’s pension and postretirement health care plans from September 30 to November 30, incorporated by reference to Exhibit 18 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

21		Subsidiaries of the Company, incorporated by reference to Exhibit 21 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002

23		Consent of Independent Accountants, filed herewith

24		Powers of Attorney, incorporated by reference to Exhibit 24 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002

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

(b) The Company filed the following reports on Form 8-K during the fourth quarter of 2002:

(1)

October 15, 2002, under Item 5, containing the Company’s financial results for the quarter ended September 30, 2002

(2)

October 22, 2002, under Item 5, related to the Company’s guarantee of term debt and commercial paper of Wells Fargo Financial, Inc. and commercial paper of Wells Fargo Financial, Inc.’s wholly owned Canadian subsidiary, Wells Fargo Financial Canada Corporation

(3)

December 26, 2002, under Item 7, related to the Company’s issuance of Notes linked to the S&P 500 Index ® due January 4, 2008

(4)

December 30, 2002, under Item 7, related to the Company’s issuance of Notes linked to the Nasdaq-100 Index ® due January 4, 2008

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 January 16, 2004.

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 indicated.

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.


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


		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

6 ¾% Convertible Subordinated Debentures Due 2003		New York Stock Exchange

Adjustable-Rate Cumulative Preferred Stock, Series B		New York Stock Exchange

Notes Linked to the S&P 500 Index Due 2008		American Stock Exchange

Notes Linked to the Nasdaq-100 Index Due 2008		American Stock Exchange




($ in millions)

Fair value of MSRs at December 31, 2002	$	4,494
Expected weighted-average life (in years)		2.1
Prepayment speed assumption (annual CPR⁽¹⁾)		36.8	%
Decrease in fair value from 10% adverse change	$	255
Decrease in fair value from 25% adverse change		577
Discount rate assumption		10.6	%
Decrease in fair value from 100 basis point adverse change	$	78
Decrease in fair value from 200 basis point adverse change		153


	2001								2002
	1Q		2Q		3Q		4Q		1Q		2Q		3Q		4Q

High	$	54.81	$	50.16	$	48.30	$	45.14	$	50.75	$	53.44	$	54.84	$	51.60
Low		42.55		42.65		40.50		38.25		42.90		48.12		38.10		43.30
End of period		49.47		46.43		44.45		43.47		49.40		50.06		48.16		46.87



	Year ended December 31								,
(in millions)	2002			2001			2000


Realized gross gains	$	617		$	789		$	2,353
Realized gross losses (1)		(419	)		(1,515	)		(1,220	)

Realized net gains (losses)	$	198		$	(726	)	$	1,133


For the fiscal year ended December 31, 2002		Commission File Number 001-2979

(1)		Change in accounting principle relates to transitional goodwill impairment charge recorded in first quarter 2002 related to the adoption of FAS 142.
(2)		The efficiency ratio is defined as noninterest expense divided by total revenue (net interest income and noninterest income).
(3)		See Note 26 (Regulatory and Agency Requirements) to Financial Statements for additional information.
(4)		Dividends declared per common share as a percentage of earnings per common share.
(5)		Based on daily prices reported on the New York Stock Exchange Composite Transaction Reporting System.

(1)		The average prime rate of the Company was 4.68%, 6.91%, 9.24%, 8.00% and 8.35% for 2002, 2001, 2000, 1999 and 1998, respectively. The average three-month London Interbank Offered Rate (LIBOR) was 1.80%, 3.78%, 6.52%, 5.42% and 5.56% 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.
(5)		Interest income includes loan fees, net of deferred costs, of approximately $101 million, $146 million, $194 million, $210 million and $148 million in 2002, 2001, 2000, 1999 and 1998, respectively.
(6)		Nonaccrual loans and related income are included in their respective loan categories.
(7)		Includes taxable-equivalent adjustments that primarily relate to income on certain loans and securities that is exempt from federal and applicable state income taxes. The federal statutory tax rate was 35% for all years presented.



									More		Indeter-
			Less than		1-3		3-5		than		minate
(in millions)	Note		1 year		years		years		5 years		maturity		(1)	Total

Payments by period:
Deposits		10	$	33,218	$	5,689	$	1,627	$	558	$	175,824		$	216,916
Long-term debt (2)		7,12		13,656		14,403		8,700		10,561		—			47,320
Guaranteed preferred beneficial interests in Company’s subordinated debentures		13		—		—		—		2,885		—			2,885
Operating leases		7		459		698		451		769		—			2,377
Purchase obligations				52		57		5		10		—			124

Total contractual obligations			$	47,385	$	20,847	$	10,783	$	14,783	$	175,824		$	269,622

(1)		Represents interest- and noninterest-bearing checking, market rate and other savings accounts.
(2)		Includes capital leases of $21 million.

(1)		Includes commercial agricultural loans of $48 million, $68 million, $44 million, $49 million and $41 million at December 31, 2002, 2001, 2000, 1999 and 1998, respectively.
(2)		Includes agricultural loans secured by real estate of $30 million, $43 million, $13 million, $17 million and $12 million at December 31, 2002, 2001, 2000, 1999 and 1998, respectively.
(3)		Includes impaired loans of $612 million, $823 million, $504 million, $258 million and $300 million at December 31, 2002, 2001, 2000, 1999 and 1998, respectively.
(4)		Represents the amount of real estate investments (contingent interest loans accounted for as investments) that would be classified as nonaccrual if such assets were recorded as loans. Real estate investments totaled $9 million, $24 million, $56 million, $89 million and $128 million at December 31, 2002, 2001, 2000, 1999 and 1998, respectively.



	December 31,
(in millions)	2002		2001			2000		1999		1998

Commercial	$	92	$	60		$	90	$	27	$	33
Real estate 1-4 family first mortgage		104		145	(1)		74		45		42
Other real estate mortgage		7		22			24		18		18
Real estate construction		11		47			12		4		6
Consumer:
Real estate 1-4 family junior lien mortgage		19		18			19		36		65
Credit card		131		117			96		105		145
Other revolving credit and monthly payment		308		289			263		198		171

Total consumer		458		424			378		339		381


Total	$	672	$	698		$	578	$	433	$	480



BALANCE SHEET:	December 31, 2002				December 31, 2001
	As		As		As		As
(in millions)	Previously Reported		Revised		Previously Reported		Revised


Total loans	$	196,634	$	192,478	$	172,499	$	167,096
Allowance for loan losses		3,862		3,819		3,761		3,717
Net loans		192,772		188,659		168,738		163,379
Other assets		30,929		34,980		23,545		28,841
Total assets		349,259		349,197		307,569		307,506

Accrued expenses and other liabilities		18,334		18,311		16,777		16,753
Retained earnings		19,394		19,355		16,005		15,966
Total stockholders’ equity		30,358		30,319		27,214		27,175
Total liabilities and stockholders’ equity		349,259		349,197		307,569		307,506

(1)		Substantially all private collateralized mortgage obligations are AAA-rated bonds collateralized by 1-4 family residential first mortgages.
(2)		At December 31, 2002, the Company 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.

(1)		Outstanding loan balances at December 31, 2002 and 2001 are net of unearned income, including net deferred loan fees, of $3,699 million and $3,316 million, respectively.
(2)		Revised to include certain interest rate loan commitments.



(in millions)	Operating leases		Capital leases


Year ended December 31,
2003	$	459	$	6
2004		388		4
2005		310		4
2006		248		3
2007		203		2
Thereafter		769		18

Total minimum lease payments	$	2,377		37


Executory costs				(1	)
Amounts representing interest				(15	)


Present value of net minimum lease payments			$	21



	Mortgage		Core
	servicing		deposit
(in millions)	rights		intangibles		Other		Total


Year ended December 31, 2002	$	1,942	$	155	$	29	$	2,126

Estimate for year ended December 31,
2003		2,625		142		22		2,789
2004		1,659		131		20		1,810
2005		972		120		15		1,107
2006		569		108		13		690
2007		341		99		11		451



(in millions)	December 31, 2002

Three months or less	$	10,444
After three months through six months		1,313
After six months through twelve months		1,328
After twelve months		2,318


Total	$	15,403

(1)		Highest month-end balance in each of the last three years appeared in January 2002, October 2001 and January 2000.
(2)		Highest month-end balance in each of the last three years appeared in January 2002, September 2001 and August 2000.

(1)		The Company entered into interest rate swap agreements for substantially all of these notes, whereby the Company receives fixed-rate interest payments approximately equal to interest on the notes and makes interest payments based on an average three-month or six-month LIBOR rate.
(2)		The extendable notes are a floating rate security with an initial maturity of 13 months, which can be extended on a rolling basis, at the investor’s option to a final maturity of 5 years.
(3)		Zero coupon notes linked to the S&P 500 and Nasdaq-100 indices.
(4)		The interest rate swap agreement for these notes is callable by the counterparty prior to the maturity of the notes.

(5)		On October 22, 2002, WFFI announced that it will no longer issue term debt securities and the Parent issued a full and unconditional guarantee of all outstanding debt of WFFI.
(6)		The Company entered into an interest rate swap agreement for these notes, whereby the Company receives interest payments based on an average three-month LIBOR rate and makes fixed-rate interest payments ranging from 5.625% to 5.65%.
(7)		The maturities of the FHLB advances are determined quarterly, based on the outstanding balance, the then current LIBOR rate, and the maximum life of the advance. Advances maturing within the next year are expected to be refinanced, extending the maturity of such borrowings beyond one year.
(8)		The notes are tied to low-income housing funding.
(9)		Callable by either the Company or the investor upon 30 days notice.
(10)		Callable by the Company upon 30 days notice.

(1)		Established by WFC Holdings (the former Wells Fargo).
(2)		Established by the Parent. The Parent may extend the stated maturity dates of the debentures for a period of up to 19 years.
(3)		All distributions are cumulative.

(1)		Liquidation preference $50.
(2)		On October 1, 2001 all shares were redeemed at the stated liquidation price of $50 plus accrued dividends.
(3)		Liquidation preference $1,000.
(4)		In accordance with the American Institute of Certified Public Accountants (AICPA) Statement of Position 93-6, Employers’ Accounting for Employee Stock Ownership Plans, the Company 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 15.



	Number of shares
Convertible subordinated debentures		20,400
Acquisition contingencies		138,161
Dividend reinvestment and common stock purchase plans		2,174,766
Director plans		1,294,604
Stock plans (1)		254,233,517


Total shares reserved		257,861,448
Shares issued		1,736,381,025
Shares not reserved		4,005,757,527


Total shares authorized		6,000,000,000

(1)		The weighted-average per share fair value of options granted was $13.45, $13.87 and $12.60 for 2002, 2001 and 2000, respectively.
(2)		The weighted-average per share fair value of options granted was $12.34, $14.16 and $10.13 for 2002, 2001 and 2000, respectively. Includes 2,860,926, 1,791,852 and 2,029,063 reload grants at December 31, 2002, 2001 and 2000, respectively.
(3)		The weighted-average per share fair value of options granted was $15.62, $12.42 and $13.30 for 2002, 2001 and 2000, respectively.



							Net unrealized			Net unrealized
				Minimum			gains (losses)			gains (losses)			Cumulative
				pension			on securities and			on derivatives			other
	Translation			liability			other retained			and other			comprehensive
(in millions)	adjustments			adjustment			interests			hedging activities			income


Balance, December 31, 1999	$	(10	)	$	—		$	770		$	—		$	760


Net change		(2	)		—			(234	)		—			(236	)

Balance, December 31, 2000		(12	)		—			536			—			524


Net change		(3	)		(42	)		10			263			228

Balance, December 31, 2001		(15	)		(42	)		546			263			752


Net change		1			42			484			(303	)		224

Balance, December 31, 2002	$	(14	)	$	—		$	1,030		$	(40	)	$	976

(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 actual 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)		Taxes vary by geographic concentration of revenue generation. Taxes as presented may differ from the consolidated Company’s effective tax rate as a result of taxable-equivalent adjustments that primarily relate to income on certain loans and securities that is exempt from federal and applicable state income taxes. The offsets for these adjustments are in the reconciliation column.
(3)		For 2002, the reconciling items for revenue (i.e., net interest income plus noninterest income) and net income are Corporate level equity investment activities. For 2001 and 2000, revenue includes Treasury activities of $28 million and $63 million; and unallocated items of $(93) million, and $(71) million, respectively. For 2001 and 2000, net income includes Treasury activities of $15 million and $38 million; and unallocated items of $(619) million and $(556) million, respectively. The material item in the reconciliation column for noninterest expense is amortization of goodwill of $610 million and $530 million for 2001 and 2000, respectively. The material item in the reconciliation column for average assets is unallocated goodwill. Results for 2001 and 2000 have been restated to reclassify goodwill amortization from the three operating segments to the reconciliation column for comparability.



	Mortgage servicing rights						Other retained interests
	2002			2001			2002			2001

Prepayment speed (annual CPR (1))		12.7	%		13.4	%		16.0	%		15.9	%
Weighted-average life (in years)		6.8			7.1			6.0			6.1
Discount rates (2)		8.9	%		8.9	%		14.6	%		11.3	%

(1)		Constant prepayment rate
(2)		Discount rates and prepayment speeds represent weighted averages for all retained interests resulting from securitizations completed in 2002 and 2001.

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

(1)		The Company anticipates performance by substantially all of the counterparties for these contracts or the underlying financial instruments.
(2)		At December 31, 2002 and 2001, the purchased option contracts were predominantly options on futures contracts, which are exchange traded, for which the exchange assumes counterparty risk.
(3)		The Company enters into written options to hedge servicing assets and mortgage loan commitments. These options are exercisable by the option holder based on favorable market conditions. At December 31, 2002, the carrying amount of the written options liability was $272 million. Because the Company’s ultimate obligation under a written option is based on future market conditions, the Company is unable to estimate the amount of maximum exposure it has related to written options. As part of its risk management strategy, the Company purchases options to minimize its obligations associated with its written options.
(4)		The Company enters into credit default swaps. At December 31, 2002, the gross carrying amount of the contracts sold was a $52 million liability. The maximum amount the Company would be required to pay under those swaps in which it sold protection, assuming all reference obligations default at a total loss, without recoveries, was $2.5 billion. The Company has bought protection of $2.2 billion of notional exposure. Almost all of the protection purchases are exact offsets (i.e., use the same reference obligation and maturity) to the contracts in which the Company is providing protection to a counterparty.
(5)		Credit risk amounts reflect the replacement cost for those contracts in a gain position in the event of nonperformance by all counterparties.

(1)		Loans are net of deferred fees on loan commitments and standby letters of credit of $18 million and $13 million at December 31, 2002 and 2001, respectively.
(2)		The carrying amount and fair value exclude obligations under capital leases of $21 million and $27 million at December 31, 2002 and 2001, respectively.


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

32(a)		Certification of Periodic Financial Report by Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. § 1350, furnished herewith

(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


		WELLS FARGO & COMPANY

		By: /s/ RICHARD M. KOVACEVICH
		Richard M. Kovacevich Chairman, President and Chief Executive Officer