Wachovia Corporation Lowers Prime Rate

/PRNewswire-FirstCall/ -- Effective today, Wachovia Corporation (NYSE:WB) lowered its prime interest rate to 3.25 percent from 4 percent at Wachovia Bank, National Association, and all of its other banking subsidiaries.

The prime rate is a benchmark used to set interest rates on various forms of corporate and consumer credit. It is one of several interest rate bases used by Wachovia, which lends at interest rates above and below the prime rate. The prime rate last changed on Oct. 29, 2008.

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North Carolina Judge Rules in Favor of Wells Fargo and Wachovia on Voting Preferred Shares

(BUSINESS WIRE)--On December 5, 2008, a North Carolina Business Court judge ruled in favor of Wachovia Corporation (NYSE:WB) and Wells Fargo & Company (NYSE:WFC) in a case brought to enjoin Wells Fargo from voting shares of voting preferred stock issued to Wells Fargo by Wachovia. The shares were issued to Wells Fargo on October 20, 2008 pursuant to a share exchange agreement entered in connection with the merger agreement between Wells Fargo and Wachovia and gave Wells Fargo 39.9% of the voting power of Wachovia. The Court’s ruling keeps the Wachovia shareholder vote on schedule for Tuesday, December 23, 2008. As previously disclosed, Wells Fargo will vote its shares of Wachovia voting preferred stock in favor of approval of the merger. The Court specifically found that Wachovia's board "acted in good faith, on an informed basis, and in the best interests of the Company in approving the Merger Agreement."

The Court also considered a provision allowing Wells Fargo’s preferred shares to remain outstanding in the event the merger remains unconsummated for 18 months following the shareholder vote. In granting preliminary injunctive relief relating to this provision, the Court noted that granting Plaintiff's request for injunctive relief on this provision would cause little if any harm to Wells Fargo or Wachovia because "[t]his is not a provision that affects the value or structure of the [Merger Agreement.]"

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Wells Fargo Reports Net Income of $1.64 Billion, or $0.49 Per Share

(BUSINESS WIRE)--Wells Fargo & Company (NYSE:WFC):
-- Strong business momentum continues:
-- Year-to-date revenue up 11 percent
-- Average loans up 15 percent from prior year and 13 percent
(annualized) from prior quarter
-- Average earning assets up 15 percent from prior year and 13
percent (annualized) from prior quarter
-- Core deposits up 10 percent from September 30, 2007, and 30
percent (annualized) from June 30, 2008
-- Cross-sell of 6.3 for wholesale customers and a record 5.7 for
retail bank households

-- Credit reserve build of $500 million ($0.10 per share), bringing
allowance for credit losses to $8.0 billion

-- Previously announced impairment charges for investments in Fannie
Mae, Freddie Mac and Lehman Brothers totaling $646 million ($0.13
per share)

-- Revenue up 5 percent from prior year despite impact of investment
write-downs

-- Tier 1 capital of 8.58 percent, up from 8.24 percent in second
quarter 2008

Wells Fargo & Company (NYSE:WFC) reported diluted earnings per common share of $0.49 in third quarter 2008 compared with $0.53 in second quarter 2008 and $0.64 in third quarter 2007. Net income was $1.64 billion compared with $1.75 billion in second quarter 2008 and $2.17 billion in third quarter 2007.

“Despite the dramatic changes in our industry and economy, the Wells Fargo team rose to the challenge this quarter and achieved solid growth in loans and deposits, a truly remarkable accomplishment,” said President and CEO John Stumpf. “Revenue year to date was up 11 percent continuing our track record of strong, double-digit growth. Our strength, security and outstanding financial performance continued to compare favorably with our industry peers. Our vision and values and our diversified business model are time-tested over more than two decades. We’re focused, as always, on building lifelong relationships with our customers and communities, and because of that we continue to grow market share and wallet share. Barron’s ranks us one of the world’s 20 most admired companies.

“We’re known and admired for our conservative financial position, and a disciplined acquisition strategy that will not change. In that regard, we look forward with great anticipation and confidence to completing our merger with Wachovia Corporation by year end. The union of our two companies will provide compelling value for all our stakeholders, including Wachovia’s team members, combining the industry’s best in service and best in sales, an unbeatable combination that will create the nation’s premier coast-to-coast financial services company.”

Financial Performance

“Wells Fargo earned $1.64 billion, or $0.49 per share, in the third quarter, after incurring $0.13 per share of previously announced write-downs for investments in Fannie Mae, Freddie Mac and Lehman Brothers,” said Chief Financial Officer Howard Atkins. “We also built our credit reserves by an additional $500 million ($0.10 per share), bringing the allowance for credit losses to $8.0 billion, a $4.0 billion increase in the allowance since the credit crunch began a year ago. Business momentum remained strong in the quarter, with double-digit loan and earning asset growth (both up 15 percent year over year), double-digit growth in core deposits (up 10 percent from September 30, 2007), and 30 percent (annualized) from June 30, 2008, double-digit growth in assets under management, primarily mutual funds (up 12 percent year over year) and a record 5.7 cross-sell in our retail banking business. In addition, we continued to fortify our already strong balance sheet.

“Our net interest margin remained among the best of the large bank holding companies at 4.79 percent, reflecting the decline in our funding costs since last year and continued above-market growth in core deposits. Finally, despite the strong growth in earning assets, investment write-downs and higher credit costs in the quarter, our capital ratios increased, with Tier 1 capital rising to 8.58 percent, one of the strongest capital positions in the industry. The strength of our franchise, earnings and balance sheet positions us well for the exciting merger about to take place with Wachovia.”

Revenue

Revenue was $10.38 billion, up 5 percent from $9.85 billion a year ago. The write-downs for investments in Fannie Mae, Freddie Mac and Lehman Brothers reduced revenue by 7 percentage points. “Year-to-date revenue was up 11 percent, a remarkable accomplishment in this environment,” said Atkins. “Many of our businesses continued to generate double-digit, year-over-year revenue growth including asset-based lending, commercial banking, credit cards, mortgage banking, insurance, international and wealth management, and the significant growth this quarter in net new checking accounts positions us well with new accounts and new customers to continue our strong, double-digit revenue growth.”

Loans

Average loans of $404.2 billion increased $53.5 billion, or 15 percent, from a year ago. On a linked-quarter basis, average loans grew $12.7 billion, or 13 percent (annualized). Average commercial and commercial real estate loans increased $36.0 billion, or 27 percent, from third quarter 2007 and increased $9.7 billion, or 24 percent (annualized), from second quarter 2008, making this the 16th consecutive quarter of double-digit, year-over-year growth. Average consumer loans increased $17.8 billion, or 9 percent, from third quarter 2007, and increased $3.1 billion, or 5 percent (annualized), from second quarter 2008. “We continued to provide new, appropriately-priced credit to our customers while at the same time paring down indirect channels and higher risk tiers,” said Atkins.

Deposits

“We saw a tremendous inflow of deposits in the latter part of the quarter, especially at the end of September reflecting what we believe is a significant flight to quality,” said Atkins. Core deposits increased $23.7 billion, or 30 percent (annualized), from June 30, 2008. Average core deposits of $320.1 billion increased $13.9 billion, or 5 percent, from a year ago and $1.7 billion, or 2 percent (annualized), linked quarter. Average mortgage escrow deposits were $21.2 billion, down $1.2 billion from third quarter 2007 and down $1.5 billion linked quarter. Average retail core deposits increased $13.2 billion, or 6 percent, from third quarter 2007 and increased $3.8 billion, or 7 percent (annualized), linked quarter. Average consumer checking accounts grew a net 6.1 percent from second quarter 2007, with 8 percent growth in California, the largest increase in net new checking accounts in California in almost four years. Wealth Management group average core deposits of $22.7 billion increased $7.7 billion, or 52 percent, from third quarter 2007.

Net Interest Income

Net interest income increased $1.1 billion, or 21 percent, from third quarter 2007 driven by double-digit earning asset growth (up 15 percent) and a 24 basis point increase in the net interest margin to 4.79 percent. Net interest income grew $103 million, or 7 percent (annualized), linked quarter due to 13 percent (annualized) linked-quarter growth in earning assets offset in part by a 13 basis point linked-quarter decline in the net interest margin. “At 4.79 percent, we continued to have an industry-leading net interest margin in large part due to wider new business spreads, significantly lower funding costs, and our success in building core deposits,” said Atkins. “The modest decline in our net interest margin on a linked-quarter basis was due to asset growth and slightly lower loan yields. The year-to-date increase in net interest income has basically offset the year-to-date increase in net loan charge-offs. Thus, for Wells Fargo, excluding the credit reserve build, the benefits of the credit crisis in terms of increasing assets at wider spreads have offset the negative aspects of the credit crisis in terms of higher loan losses.”

Noninterest Income

Noninterest income decreased $575 million from third quarter 2007, including a $756 million decline in net investment gains. The $1.2 billion decrease in noninterest income linked quarter was primarily due to a $378 million decline in net investment gains, as well as lower linked-quarter mortgage banking income. Net investment losses of $423 million consisted of previously announced other-than-temporary impairment charges of $646 million for Fannie Mae, Freddie Mac and Lehman Brothers, an additional $247 million of other-than-temporary write-downs on debt securities and $470 million of realized bond and equity gains.

Despite the 24 percent decline in the S&P500® year over year, trust and investment fees declined only 5 percent. Card fees were up 7 percent year over year and 9 percent (annualized) linked quarter due to continued growth in new accounts and greater purchase activity. Insurance fees were up 33 percent year over year due to customer growth, higher crop insurance revenues and the fourth quarter 2007 acquisition of ABD Insurance, but declined 20 percent linked quarter due to seasonally lower crop insurance revenues. Charges and fees on loans were up 8 percent, primarily reflecting strong commercial loan demand. Net unrealized losses on securities available for sale were $4.9 billion at September 30, 2008, compared with net unrealized losses of $2.1 billion at June 30, 2008.

Mortgage banking noninterest income was a solid $892 million, the second best quarter ever. Mortgage banking noninterest income increased $69 million from third quarter 2007 and was down $305 million linked quarter, with higher servicing income offset by lower origination volumes. The owned mortgage servicing portfolio was $1.56 trillion at quarter end, up 6 percent from a year ago. Mortgage applications of $83 billion in the quarter were down 13 percent from a year ago but at wider margins.

Noninterest Expense

Noninterest expense decreased $154 million, or 3 percent, from third quarter 2007 and decreased $343 million linked quarter. “We continued to make investments in distribution and sales and service team members, adding over 1,000 platform bankers since last year end and adding 12 new banking stores in third quarter 2008 alone. We continue to be disciplined about our efforts to restrict expenses to revenue-creating opportunities while at the same time paring down other unit costs,” said Atkins. The efficiency ratio was 53.2 percent even after taking into account the non-cash, other-than-temporary impairment.

Credit Quality

“The current credit cycle continued to be challenging,” said Chief Credit Officer Mike Loughlin. “While our wholesale portfolios continued to perform well given current market conditions, several consumer loan portfolios remained under stress.” Third quarter 2008 net charge-offs were $1,995 million (1.96 percent of average loans, annualized) compared with $1,512 million (1.55 percent) in second quarter 2008 and $892 million (1.01 percent) in third quarter 2007. A significant part of the sequential increase reflected the changes in the National Home Equity Group (Home Equity) charge-off policy in the second quarter, which deferred an estimated $265 million of charge-offs. After taking into account the impact of the new Home Equity policy, charge-offs rose at a more moderate pace in third quarter than in the last few quarters. Third quarter 2008 provision was $2.5 billion, including a $500 million credit reserve build primarily related to higher projected losses in several consumer credit businesses, as well as growth in the wholesale portfolios, bringing the allowance for credit losses to $8.0 billion, double its level from just before the credit crunch began a year ago. “As expected, consumer behavior continued to be influenced by weakness in residential real estate values. Additionally, the effects of higher energy prices and higher unemployment levels impacted the performance of the consumer loan portfolios during the quarter. On the positive side, we saw signs of stabilizing loan losses in our business direct and student loan business. Loan requests in our wholesale businesses have increased dramatically as quality borrowers are providing attractive business opportunities that are both well-structured and appropriately priced for risk.”

Net charge-offs in the real estate 1-4 family first mortgage portfolio increased $43 million linked quarter, including the $19 million increase from Wells Fargo Financial’s residential real estate portfolio. “As stated in prior quarters, residential real estate loss levels will continue to be driven by housing price trends,” said Loughlin. Credit card charge-offs increased $32 million. “Loss levels continued to increase in this credit cycle as the impacts from lower disposable income and unemployment weigh on the consumer.” Losses in the auto portfolio increased $74 million from second quarter 2008 in part due to seasonality and lower used car values. “While we remain optimistic about the positive impacts of process improvements and underwriting changes we made in the auto business in prior quarters, as well as our robust loss mitigation efforts, the economic environment continued to stress the consumer and influence loan performance.”

Net charge-offs in the real estate 1-4 family junior lien portfolio increased $307 million from second quarter 2008 as the effect of the second quarter charge-off policy change dissipated. “The fact that property values continued to drop in many markets directly impacted loss levels in this portfolio,” said Loughlin. “Until residential real estate values stabilize, the Home Equity portfolio will produce higher than normal loss levels.” Of the combined $350 million increase in real estate first and second mortgage losses, approximately $265 million was due to the deferral of charge-offs from second quarter related to the change in the Home Equity charge-off policy.

Commercial and commercial real estate net charge-offs decreased $4 million linked quarter, including a modest decline in charge-offs on loans originated through our Business Direct small business lending group. “The wholesale businesses continued to weather the turbulent credit environment relatively well and we are pleased with the progress we’ve made in small business credit,” said Loughlin. “Commercial credits related to residential real estate and the consumer segment have shown some weakness, but remained within our expectations. On the positive side, additional lending opportunities have increased as our customers have seen credit availability shrink in the market place. Our ability to lend to our quality customers is a win-win scenario.”

Nonperforming Assets

Total nonperforming assets were $6.29 billion (1.53 percent of total loans) at September 30, 2008, and included $5.00 billion of nonperforming loans, $596 million of insured Government National Mortgage Association (GNMA) loan repurchases, and $700 million of foreclosed and repossessed real estate and vehicles. This compares with $5.23 billion (1.31 percent) at June 30, 2008, consisting of $4.07 billion of nonperforming loans, $535 million of GNMA loan repurchases and $619 million of foreclosed and repossessed assets. “Until conditions improve in the residential real estate and liquidity markets, we will continue to hold more nonperforming assets on our balance sheet as it is currently the most economic option available,” said Loughlin. “A portion of the increase in nonperforming loans continued to relate to our active loss mitigation strategies at Home Equity, Wells Fargo Home Mortgage (Home Mortgage) and Wells Fargo Financial as we are aggressively working with customers to keep them in their homes. Increases in commercial nonperforming assets were also a direct result of the conditions in the residential real estate markets and general consumer economy. The home builders, mortgage service providers, contractors, suppliers and others in the residential real estate-related segments continued to be stressed as this cycle plays out. Additionally, as the consumer cuts back on discretionary spending we are seeing some of those credits dependent on this spending weaken.”

Loans 90 days or more past due and still accruing totaled $8.44 billion, $7.26 billion, and $5.53 billion at September 30, 2008, June 30, 2008, and September 30, 2007, respectively. For the same periods, the totals included $6.30 billion, $5.48 billion and $4.26 billion, respectively, in advances pursuant to our servicing agreement to GNMA mortgage pools and similar loans whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veteran Affairs. “We continued to see the balances of 90 days or greater past due and still accruing increasing as the negative credit trends impact loan performance.”

Allowance for Credit Losses

The allowance for credit losses, including unfunded commitments, totaled $8.03 billion at September 30, 2008, compared with $7.52 billion at June 30, 2008. Third quarter 2008 results included a credit reserve build of $500 million primarily for higher projected loss rates across several consumer credit businesses, as well as growth in the wholesale portfolios. Since the beginning of fourth quarter 2007, the Company has provided $3.9 billion in excess of net charge-offs. “Over the last 12 months, we have doubled the size of the allowance to address higher credit losses and support the strength of our balance sheet in these volatile times,” said Loughlin. “We believe the allowance was adequate for losses inherent in the portfolio at September 30, 2008.”


Regional Banking
-- Record core product solutions (sales) of 6.30 million, up 20
percent from prior year
-- Record core sales per platform banker FTE (active, full-time
equivalent) of 5.72 per day, up from 5.18 in prior year
-- Record retail bank household cross-sell of 5.7 products per
household; 24 percent of our retail bank households have 8 or more
products, our long-term goal

-- Sales of Wells Fargo Packages(R) (a checking account and at least
three other products) up 47 percent from prior year, purchased by
74 percent of new checking account customers
-- Consumer checking accounts up a net 6.1 percent from prior year, up
over 8 percent in California
-- Customer loyalty scores up 7 percent and welcoming and wait time
scores up 8 percent from prior year (based on customers conducting
transactions with tellers)
-- Added 1,115 platform banker FTEs from prior year through hiring and
acquisitions

-- Opened 12 banking stores, added 13 webATM(R) machines and converted

226 to Envelope-freeSM webATM machines
-- Business Banking
-- Store-based business solutions up 25 percent from prior year
-- Loans to small businesses (loans primarily less than $100,000
on our Business Direct platform) up 6 percent from prior year
-- Business checking accounts up a net 2.3 percent from prior year
-- Business Banking household cross-sell of 3.6 products per
household

-- Sales of Wells Fargo Business Services Packages (a business
checking account and at least three other business products) up
42 percent from prior year, purchased by 50 percent of new
business checking account customers
-- According to 2007 CRA data, Wells Fargo was America's #1 small
business lender for the sixth consecutive year, extending $23
billion in originations to small business owners nationwide (in
loans under $100,000)

“Our amazing regional banking team continued to focus on helping our customers succeed financially by providing a record 6.30 million core product solutions in the third quarter, up 20 percent from the prior year,” said Carrie Tolstedt, senior EVP, Community Banking. “In addition to our record retail bank household cross-sell, we experienced significant gains in net new customer relationships. Consumer checking accounts were up a net 6.1 percent, the highest growth in almost four years, with over 8 percent net gain in California. We continued to have success with cross-selling these new relationships, with sales of Wells Fargo Packages® remaining strong, purchased by 74 percent of new checking account customers. Many indicators show that new and existing customers are honoring us with more of their business.”

Home Mortgage
-- Home Mortgage retail originations of $23 billion, down 21 percent
from prior year
-- Mortgage applications of $83 billion, down 13 percent from prior
year
-- Mortgage application pipeline of $41 billion, down 9 percent from
prior year
-- Record owned mortgage servicing portfolio of $1.56 trillion, up 6
percent from prior year and 4 percent (annualized) from prior
quarter

“Our talented and dedicated sales, servicing and capital markets teams continued to manage through all the turmoil in the housing and financial markets and delivered very strong performance this quarter,” said Mark Oman, senior EVP, Home and Consumer Finance Group. “By staying true to the Wells Fargo vision of satisfying all our customers’ financial needs and helping them succeed financially and to our long-term commitment to responsible lending and responsible servicing principles, we have avoided many of the issues which have plagued the industry this year.

“While mortgage originations declined as a result of the combined slowdown in home purchase and refinancing activities thus reducing gains on sales of mortgage loans, this reduction in revenue was partially offset by higher servicing income which benefited from the decline in mortgage pre-payments.

“Despite the economic slowdown, our servicing portfolio continued to perform relatively well. For our largest product category, prime conventional first mortgages representing 5.7 million customers and over $1 trillion of servicing, 97 out of every 100 customers were current with their payments as of September 30, 2008, compared with 98 out of every 100 as of September 30, 2007. We believe in homeownership and do all we can to keep people in their homes. We are committed to working with our customers, government agencies and our mortgage securities investors to find potential solutions when our customers experience financial difficulties and only as a last resort will we foreclose.”

Wealth Management Group
-- Revenue up 14 percent from prior year
-- Net income up 32 percent from prior year
-- Private Bank revenue up 56 percent, net income up 99 percent from
prior year
-- Private Bank average core deposits up 52 percent, average loans up
29 percent from prior year

-- WellsTrade(R) revenue up 40 percent from prior year
-- Wells Fargo Private Bank opened its first location in Manhattan

Online Banking
-- 10.8 million active online consumers, up 14 percent from prior
year; 68 percent of all consumer checking accounts are online
-- 5.4 million online money movement customers, up 16 percent from
prior year
-- 1.1 million active online small business customers, up 16 percent
from prior year

-- Announced national availability of Wells Fargo vSafeSM service,
lets customers protect, organize and access online copies of
important documents, first storage solution of its kind from a
major financial institution

Wholesale Banking serves customers coast to coast, including middle market banking, corporate banking, commercial real estate, treasury management, asset-based lending, insurance brokerage, foreign exchange, trade services, specialized lending, equipment finance, corporate trust, capital markets activities and asset management.

Selected Financial Information

Third Quarter %
(in millions) 2008 2007 Change
Total revenue $ 1,782 $ 2,157 (17 )%
Provision for credit losses 294 19 NM
Noninterest expense 1,393 1,230 13
Net income 83 591 (86 )

(in billions)
Average loans 116.2 87.5 33
Average assets 156.6 115.9 35
Average core deposits 65.2 63.1 3
NM - Not meaningful
-- Average loans up 33 percent
-- Average mutual fund balances up 12 percent over same period last
year
-- Institutional Brokerage record revenue up 57 percent over same
period last year
-- Foreign Exchange revenue up 33 percent over same period last year
-- Acquired insurance brokerages in Indiana, New Jersey, North
Carolina and Washington

“Wholesale Banking’s third quarter results were substantially impacted by the illiquidity and disruption in the credit markets, particularly write-downs associated with Fannie Mae, Freddie Mac and Lehman Brothers,” said Dave Hoyt, senior EVP, Wholesale Banking Group. “While we’re not pleased about the impacts of these events brought on by current market conditions, these same market conditions have benefited us by creating more opportunities to increase market share by bringing in new customers and increase wallet share by doing more business with existing customers. Our underlying business performance was good, with strong loan and deposit growth across the board. We’re growing relationships, gaining new customers, and getting more chances to compete for their business. Wholesale Banking’s overall cross-sell was 6.3 products per customer relationship, and our middle market business had an average of 7.8 products per customer relationship. Average loans increased 33 percent from a year ago. Our credit performance was in line with our expectations, but we continue to have a cautious outlook. Our credit policies and disciplined approach work for us and our customers in good times and bad.

“In a testament to our diversified business model, revenue was broad-based. Certain business lines – such as Commercial Real Estate brokerage – were more impacted by current conditions while others – including Foreign Exchange, Treasury Management and Institutional Brokerage – did very well. Even given the difficult equity market performance, with the S&P500 Index down 24 percent in the last 12 months, our mutual fund balances grew 12 percent. Growth was fueled mainly by increased money market balances, up over 15 percent in third quarter 2008 on a linked-quarter basis. Since the launch of our CEO Mobile® service last year – the only browser-based mobile banking service for corporate banking customers – we have transferred over $1 billion through the phone channel. Foreign Exchange Online (FXOL) – the online foreign exchange customer platform accessed through the Commercial Electronic Office® (CEO®) portal – was extended to small businesses to help them manage their foreign currency risk.”

Wholesale Banking reported net income of $83 million in third quarter 2008 compared with $591 million a year ago, mainly due to other-than-temporary impairment charges in our securities portfolio. Revenue decreased $375 million, including impairment charges of $407 million. Net interest income increased $136 million or 15 percent, driven by strong loan and deposit growth. Average loans grew to $116 billion, up 33 percent from a year ago, with double-digit increases across nearly all wholesale lending businesses. Average total deposits were $84 billion, up 10 percent from a year ago, all in interest-bearing balances. Noninterest income decreased $511 million from third quarter 2007, primarily due to impairment charges. Noninterest income from foreign exchange, loan fees, institutional brokerage and insurance all increased. Noninterest expense increased $163 million from a year ago, mainly due to higher personnel-related costs including expenses due to the acquisition of ABD Insurance and higher agent commissions in the crop insurance business stemming from higher commodity prices. The provision for credit losses was $294 million, an increase of $275 million from third quarter 2007, and included $115 million of net charge-offs (0.39 percent of total loans) and a $178 million credit reserve build for the wholesale portfolio.

Wells Fargo Financial offers consumer loans primarily through real estate-secured debt consolidation products, automobile financing, consumer and private-label credit cards and commercial services to consumers and businesses throughout the United States, Canada, Puerto Rico and the Pacific Rim.

Selected Financial Information

Third Quarter %
(in millions) 2008 2007 Change
Total revenue $ 1,394 $ 1,373 2 %
Provision for credit losses 770 427 80
Noninterest expense 677 728 (7 )
Net income (loss) (33 ) 135 NM

(in billions)
Average loans 67.5 65.8 3
Average assets 71.4 71.7 --
NM - Not meaningful
-- Average loans/leases of $67.5 billion, up 3 percent from third
quarter 2007
-- Real estate-secured receivables of $29.2 billion, up 12 percent
from third quarter 2007
-- Auto finance receivables/operating leases of $26.2 billion, down 14
percent from third quarter 2007

“Although Wells Fargo Financial credit losses were elevated from historic norms in all of our portfolios because of current market stress on consumers, we continued to fare much better than industry averages due to previously implemented tightened underwriting standards in our real estate, auto and credit cards businesses that have enabled us to effectively manage risk,” said Tom Shippee, Wells Fargo Financial CEO. “In our real estate-secured portfolio, those losses have been predominately concentrated in California, Florida, Arizona and Nevada, where 26 percent of our $29.2 billion portfolio is based. In the first nine months of 2008, we have worked to reduce expenses during this difficult credit environment by consolidating our store network – closing 9 percent, or 86, of our U.S. stores – and also by reducing our full-time equivalent team member base by 14 percent, or almost 3,000 FTEs.”

“We work hard to keep our real estate customers in their homes,” said Dave Kvamme, Wells Fargo Financial president and chief operating officer. “Our foreclosure rate was dramatically below the industry average for nonprime lenders. The strength of our portfolio relative to the industry is due to our sound and conservative underwriting standards, which prohibit the selling of higher-risk products such as stated income or teaser rate loans. Losses in our auto portfolio increased this quarter, driven by a decline in used car values. Across all of our businesses, we continue to take actions to reduce credit risk and right-size our expense base.”

Wells Fargo Financial lost $33 million this quarter reflecting higher credit costs, including a $162 million credit reserve build as a result of continued softening in the real estate, auto and credit card markets. Third quarter revenue of $1.39 billion was flat from a year ago. Pre-tax pre-provision income (i.e., revenue less noninterest expense) increased $72 million, or 11 percent from a year ago. Average loans increased 3 percent from third quarter 2007. Noninterest expense declined 7 percent from third quarter 2007.

Recorded Message

A recorded message reviewing Wells Fargo’s results is available at 5:30 a.m. Pacific Time through October 18, 2008. Dial 866-519-1052 (domestic) or 585-295-6792 (international). No password is required. The call is also available on the internet at www.wellsfargo.com/invest_relations/earnings and http://www.investorcalendar.com/IC/CEPage.asp?ID=135429.

Wells Fargo & Company is a diversified financial services company with $623 billion in assets, providing banking, insurance, investments, mortgage and consumer finance through almost 6,000 stores and the internet (wellsfargo.com) across North America and elsewhere internationally. Wells Fargo Bank, N.A. is the only bank in the U.S., and one of only two banks worldwide, to have the highest possible credit rating from both Moody’s Investors Service, “Aaa,” and Standard & Poor’s Ratings Services, “AAA.”

The following appears in accordance with the Private Securities Litigation Reform Act of 1995:

This news release contains forward-looking statements about the Company, including our beliefs and expectations for future credit quality and losses and our expectations for the Wachovia merger transaction, the statement that residential real estate loss levels will continue to be driven by housing price trends, the statement that until residential real estate values stabilize, the Home Equity portfolio will produce higher than normal loss levels, and the statement that until conditions improve in the residential real estate and liquidity markets, we will continue to hold more nonperforming assets on our balance sheet. 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 do not undertake any obligation to update them to reflect changes that occur after that date.

There are a number of factors that could cause results to differ significantly from our expectations, including further deterioration in the credit quality of our home equity, real estate, auto or other loan portfolios, or in the value of the collateral securing those loans, due to higher interest rates, increased unemployment, declining home or auto values, economic recession or other economic factors. Factors related to the Wachovia merger include the receipt of necessary regulatory approvals and the approval of Wachovia shareholders. For a discussion of factors that may cause actual results to differ from expectations, refer to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, and our Annual Report on Form 10-K for the year ended December 31, 2007, including information incorporated into the 10-K from our 2007 Annual Report to Stockholders, filed with the Securities and Exchange Commission (SEC) and available on the SEC’s website at www.sec.gov.

Any factor described in this news release or in any document referred to in this news release could, by itself or together with one or more other factors, adversely affect the Company’s business, earnings and/or financial condition.

Where to Find More Information About the Wachovia Merger

The proposed merger will be submitted to Wachovia Corporation shareholders for their consideration. Wells Fargo will file with the SEC a registration statement on Form S-4 that will include a proxy statement of Wachovia Corporation that also constitutes a prospectus of Wells Fargo. Wachovia Corporation will mail the proxy statement-prospectus to its shareholders. Wachovia shareholders and other investors are urged to read the final proxy statement-prospectus when it becomes available because it will describe the proposed merger and contain other important information. You may obtain copies of all documents filed with the SEC regarding the proposed merger, free of charge, on the SEC’s website at www.sec.gov. You may also obtain free copies of these documents by contacting Wells Fargo or Wachovia, as follows:

Wells Fargo & Company, Investor Relations, MAC A0101-25, 420 Montgomery Street, 2nd Floor, San Francisco, California 94104-1207, (415) 396-3668.

Wachovia Corporation, Investor Relations, One Wachovia Center, 301 South College Street, Charlotte, North Carolina 28288, (704) 374-6782.

Wells Fargo and Wachovia and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Wachovia Corporation shareholders in connection with the proposed merger. Information about Wells Fargo’s directors and executive officers and their ownership of Wells Fargo common stock is contained in the definitive proxy statement for Wells Fargo’s 2008 annual meeting of stockholders, as filed by Wells Fargo with the SEC on Schedule 14A on March 17, 2008. Information about Wachovia’s directors and executive officers and their ownership of Wachovia common stock is contained in the definitive proxy statement for Wachovia’s 2008 annual meeting of shareholders, as filed by Wachovia with the SEC on Schedule 14A on March 10, 2008. You may obtain a free copy of these documents by contacting Wells Fargo or Wachovia at the contact information provided above. The proxy statement-prospectus for the proposed merger will provide more information about participants in the solicitation of proxies from Wachovia Corporation shareholders.

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Federal Reserve Board Approves Wells Fargo’s Application to Merge with Wachovia Corporation

(BUSINESS WIRE)--Wells Fargo & Company (NYSE:WFC) said today that the Board of Governors of the Federal Reserve has approved its application to merge with Wachovia Corporation (NYSE: WB) including all its subsidiaries, and the share exchange agreement previously entered into between Wachovia and Wells Fargo.

The approval is an important step forward in the transaction, which still requires the approval of Wachovia shareholders. The merger is on schedule to be completed by the end of this year.

Wells Fargo & Company is a diversified financial services company with $609 billion in assets, providing banking, insurance, investments, mortgage and consumer finance through almost 6,000 stores and the internet (wellsfargo.com) across North America and elsewhere internationally. Wells Fargo Bank, N.A. is the only bank in the U.S., and one of only two banks worldwide, to have the highest possible credit rating from both Moody’s Investors Service, “Aaa,” and Standard & Poor’s Ratings Services, “AAA.”

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements about Wells Fargo and Wachovia and the proposed transaction between the companies. There are several factors – many beyond Wells Fargo’s control – that could cause actual results to differ significantly from expectations described in the forward-looking statements. Among these factors are the receipt of necessary regulatory approvals and the approval of Wachovia shareholders. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them to reflect changes that occur after that date.

For a discussion of factors that may cause actual results to differ from expectations, refer to each company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, and Annual Report on Form 10-K for the year ended December 31, 2007, including information incorporated into each company’s 10-K from their respective 2007 annual reports, filed with the Securities and Exchange Commission (SEC) and available on the SEC’s website at www.sec.gov.

MORE INFORMATION ABOUT THE MERGER AND WHERE TO FIND IT

The proposed merger will be submitted to Wachovia Corporation shareholders for their consideration. Wells Fargo will file with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 that will include a proxy statement of Wachovia Corporation that also constitutes a prospectus of Wells Fargo. Wachovia Corporation will mail the proxy statement-prospectus to its shareholders. Wachovia shareholders and other investors are urged to read the final proxy statement-prospectus when it becomes available because it will describe the proposed merger and contain other important information. You may obtain copies of all documents filed with the SEC regarding the proposed merger, free of charge, at the SEC’s website (www.sec.gov). You may also obtain free copies of these documents by contacting Wells Fargo or Wachovia, as follows:

Wells Fargo & Company, Attention Corporate Secretary, MAC N9305-173, Sixth and Marquette, Minneapolis, Minnesota 55479, (612) 667-0087.

Wachovia Corporation, Investor Relations, One Wachovia Center, 301 South College Street, Charlotte, North Carolina 28288, (704) 374-6782

Wells Fargo and Wachovia and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Wachovia Corporation shareholders in connection with the proposed merger. Information about Wells Fargo’s directors and executive officers and their ownership of Wells Fargo common stock is contained in the definitive proxy statement for Wells Fargo’s 2008 annual meeting of stockholders, as filed by Wells Fargo with the SEC on Schedule 14A on March 17, 2008. Information about Wachovia’s directors and executive officers and their ownership of Wachovia common stock is contained in the definitive proxy statement for Wachovia’s 2008 annual meeting of shareholders, as filed by Wachovia with the SEC on Schedule 14A on March 10, 2008. You may obtain a free copy of these documents by contacting Wells Fargo or Wachovia at the contact information provided above. The proxy statement-prospectus for the proposed merger will provide more information about participants in the solicitation of proxies from Wachovia Corporation shareholders.

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Wells Fargo’s Merger With Wachovia to Proceed as Whole Company Transaction With All of Wachovia’s Banking Operations

(BUSINESS WIRE)--Wells Fargo & Company (NYSE:WFC) said today (October 9, 2008) that it and Citigroup, Inc. (NYSE:C) have terminated discussions concerning a possible sale of certain banking assets of Wachovia Corporation (NYSE:WB) and reaffirmed that it is proceeding with its merger with Wachovia Corporation as a whole company transaction with all of Wachovia’s banking and other operations, requiring no financial assistance from the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

Wells Fargo has submitted its application to the Federal Reserve Board seeking expedited approval of the merger and the share exchange agreement previously entered into between Wachovia and Wells Fargo. Under the share exchange agreement, Wachovia is issuing Wells Fargo preferred stock that votes as a single class with Wachovia’s common stock representing 39.9 percent of Wachovia’s voting power. The acquisition of the non-banking related operations of Wachovia and the share exchange agreement have received early termination from the Federal Trade Commission (FTC), under the Hart-Scott-Rodino Act.

As previously announced, under the definitive agreement between the two companies, Wells Fargo will acquire all outstanding shares of common stock of Wachovia in a stock-for-stock transaction. In the transaction, Wells Fargo will acquire all of Wachovia Corporation and all its businesses and obligations, including its preferred equity and indebtedness, and all its banking deposits.

Wells Fargo Chairman Dick Kovacevich said the merger is “simply an incredible fit that will result in an immensely strong, stable financial services company that will carry on Wachovia’s proud tradition of being one of the very best financial institutions in the world. We’re combining the industry’s number one ranking customer service culture of Wachovia with the industry’s number one sales and cross-selling culture of Wells Fargo. The best in service and the best in sales, an unbeatable combination. We also bring to this merger our 157 years of experience in financial services and the unparalleled convenience we can offer Wachovia customers through one of the most extensive financial services distributions systems in North America. We have the highest regard for the quality and commitment and caring of Wachovia team members. We believe their demonstrated commitment to outstanding customer service and their highest standards of community leadership are identical to our own values.”

Kovacevich reiterated that the two companies have a firm, binding merger agreement, are confident the merger will be completed, that it will keep Wachovia intact and create significant value for Wachovia and Wells Fargo shareholders. Wells Fargo will record Wachovia’s credit-impaired assets at fair value. “Credit teams at Wells Fargo have had an opportunity to work with their counterparts at Wachovia,” said Kovacevich. “Much of Wachovia’s portfolio involves businesses where Wells Fargo has a significant market presence, operating history and expertise. We have had experience with such businesses through a variety of credit cycles. Given our broad based operating expertise, and specific understanding of these individual businesses we believe we have adequately evaluated the risks inherent in the portfolios as of the time of this merger agreement.”

In addition, Kovacevich said Wells Fargo is pleased that Citigroup announced that it is no longer seeking that the Wells Fargo-Wachovia merger be enjoined. “We believe that that is the correct and right decision for our Country and our citizens and the health of our already stressed financial system, as well as our and Wachovia’s respective shareholders and stakeholders,” said Kovacevich.

“We are delighted to stride ahead with Wells Fargo in creating a coast-to-coast financial institution -- one of the strongest financial firms in the world,” said Wachovia Corporation President and CEO Robert K. Steel.

The combined company will have $1.42 trillion in assets, $787 billion in deposits, 48 million customers, $258 billion assets under management in mutual funds, 10,761 stores, 12,227 ATMs and 280,000 team members. The merger will create the nation’s premier coast-to-coast community banking presence with community banks in 39 states and the District of Columbia. Wachovia will add the following banking stores, ATMs and deposits to the combined company (Stores/ATMs as of 9/30/08; U.S. Deposits 6/30/08):


Banking stores

ATMs

Deposits (billions)

Alabama 141 178 $ 8.8
Arizona 21 44 2.7
California 193 255 37.1
Colorado 34 35 4.8
Connecticut 74 105 7.4
Delaware 20 37 3.4
Florida 712 963 71.1
Georgia 277 653 27.8
Illinois 8 9 .9
Kansas 8 8 1.2
Maryland 80 116 7.5
Mississippi 13 20 .5
North Carolina 325 649 96.2
Pennsylvania 294 457 30.9
Nevada 6 26 19.0
New Jersey 312 468 28.4
New York 84 183 15.1
South Carolina 143 275 11.7
Tennessee 17 20 .5
Texas 241 290 14.1
Virginia 290 443 25.9
Washington D.C. 32 66 6.9
Total 3325 5300 $ 422

The combined company will be #1 in deposit market share1 in 17 of its 39 Community Banking states: Alaska, Arizona, California, Colorado, Florida, Georgia, Idaho, Minnesota, Iowa, Montana, Nebraska, New Jersey, New Mexico, North Carolina, South Dakota, Texas, and Virginia. Ninety-three percent of its deposits will be in states in which it ranks #1, 2 or 3 and the combined company will rank #1 in ten of the nation’s 20 largest Metropolitan Statistical Areas (MSAs) in deposit market share.1

1 excludes deposits greater than $500 million in a single banking store

Wells Fargo also is the nation’s:

* #1 small business lender,
* #1 agricultural lender,
* #1 commercial real estate broker,
* #2 largest mortgage originator,
* #2 largest mortgage servicer,
* #2 largest debit card issuer,
* #1 financial services provider to middle market businesses in the western U.S. and a national presence in commercial banking (29 states),
* largest bank-owned U.S. insurance brokerage

Wells Fargo & Company is a diversified financial services company with $609 billion in assets, providing banking, insurance, investments, mortgage and consumer finance through almost 6,000 stores and the internet (wellsfargo.com) across North America and elsewhere internationally. Wells Fargo Bank, N.A. is the only bank in the U.S., and one of only two banks worldwide, to have the highest possible credit rating from both Moody’s Investors Service, “Aaa,” and Standard & Poor’s Ratings Services, “AAA.”

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements about Wells Fargo and Wachovia and the proposed transaction between the companies. There are several factors – many beyond Wells Fargo’s control – that could cause actual results to differ significantly from expectations described in the forward-looking statements. Among these factors are the receipt of necessary regulatory approvals and the approval of Wachovia shareholders. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them to reflect changes that occur after that date.

For a discussion of factors that may cause actual results to differ from expectations, refer to each company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, and Annual Report on Form 10-K for the year ended December 31, 2007, including information incorporated into each company’s 10-K from their respective 2007 annual reports, filed with the Securities and Exchange Commission (SEC) and available on the SEC’s website at www.sec.gov.

MORE INFORMATION ABOUT THE MERGER AND WHERE TO FIND IT

The proposed merger will be submitted to Wachovia Corporation shareholders for their consideration. Wells Fargo will file with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 that will include a proxy statement of Wachovia Corporation that also constitutes a prospectus of Wells Fargo. Wachovia Corporation will mail the proxy statement-prospectus to its shareholders. Wachovia shareholders and other investors are urged to read the final proxy statement-prospectus when it becomes available because it will describe the proposed merger and contain other important information. You may obtain copies of all documents filed with the SEC regarding the proposed merger, free of charge, at the SEC’s website (www.sec.gov). You may also obtain free copies of these documents by contacting Wells Fargo or Wachovia, as follows:

Wells Fargo & Company, Attention Corporate Secretary, MAC N9305-173, Sixth and Marquette, Minneapolis, Minnesota 55479, (612) 667-0087.

Wachovia Corporation, Investor Relations, One Wachovia Center, 301 South College Street, Charlotte, North Carolina 28288, (704) 374-6782

Wells Fargo and Wachovia and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Wachovia Corporation shareholders in connection with the proposed merger. Information about Wells Fargo’s directors and executive officers and their ownership of Wells Fargo common stock is contained in the definitive proxy statement for Wells Fargo’s 2008 annual meeting of stockholders, as filed by Wells Fargo with the SEC on Schedule 14A on March 17, 2008. Information about Wachovia’s directors and executive officers and their ownership of Wachovia common stock is contained in the definitive proxy statement for Wachovia’s 2008 annual meeting of shareholders, as filed by Wachovia with the SEC on Schedule 14A on March 10, 2008. You may obtain a free copy of these documents by contacting Wells Fargo or Wachovia at the contact information provided above. The proxy statement-prospectus for the proposed merger will provide more information about participants in the solicitation of proxies from Wachovia Corporation shareholders.

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Wachovia, Citigroup, Wells Fargo Agree to Extend Litigation Standstill

PRNewswire-FirstCall/ -- Wachovia, Citigroup and Wells Fargo, in consultation with the Federal Reserve, announce the extension until 8 a.m. (EDT), on Friday, Oct. 10, 2008, of their litigation standstill agreement of Oct. 6, 2008.

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Wachovia Corporation Lowers Prime Rate

PRNewswire-FirstCall/ -- Effective today, Wachovia Corporation (NYSE:WB) lowered its prime interest rate to 4.50 percent from 5 percent at Wachovia Bank, National Association, and all of its other banking subsidiaries.

The prime rate is a benchmark used to set interest rates on various forms of corporate and consumer credit. It is one of several interest rate bases used by Wachovia, which lends at interest rates above and below the prime rate. The prime rate last changed on Apr. 30, 2008.

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Wachovia, Citigroup and Wells Fargo Agree on Litigation Standstill

BUSINESS WIRE --Wachovia, Citigroup and Wells Fargo, in consultation with the Federal Reserve, announce the following agreement.

Wachovia, Citigroup, and Wells Fargo have agreed to:

1) a standstill of all formal litigation activity effective immediately;

2) cease any formal discovery activities, and

3) cooperate in good faith to agree among themselves to secure orders where necessary in all applicable cases in all jurisdictions tolling any schedules for the filing of litigation papers or court appearances or any other formal litigation deadlines, with the goal of preserving the status quo during the litigation standstill period.

This standstill agreement will terminate at noon on Wednesday, October 8, 2008, unless otherwise extended.

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Wells Fargo Statement on Appellate Court Decision to Vacate Temporary Restraining Order

BUSINESS WIRE --Wells Fargo & Company (NYSE:WFC) issued the following statement this evening (October 5, 2008) regarding Citigroup’s claimed exclusivity agreement with Wachovia Corporation:

“The appellate court has entered an order vacating Judge Ramos’s order of yesterday. We are pleased that the unfounded order entered yesterday has been vacated. Wells Fargo will continue working toward the completion of its firm, binding merger agreement with Wachovia Corporation.”

Wells Fargo & Company is a diversified financial services company with $609 billion in assets, providing banking, insurance, investments, mortgage and consumer finance through almost 6,000 stores and the internet (wellsfargo.com) across North America and elsewhere internationally. Wells Fargo Bank, N.A. is the only bank in the U.S., and one of only two banks worldwide, to have the highest possible credit rating from both Moody’s Investors Service, “Aaa,” and Standard & Poor’s Ratings Services, “AAA.”

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements about Wells Fargo and Wachovia and the proposed transaction between the companies. There are several factors – many beyond Wells Fargo’s control – that could cause actual results to differ significantly from expectations described in the forward-looking statements. Among these factors are the receipt of necessary regulatory approvals and the approval of Wachovia shareholders. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them to reflect changes that occur after that date.

For a discussion of factors that may cause actual results to differ from expectations, refer to each company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, and Annual Report on Form 10-K for the year ended December 31, 2007, including information incorporated into each company’s 10-K from their respective 2007 annual reports, filed with the Securities and Exchange Commission (SEC) and available on the SEC’s website at www.sec.gov.

MORE INFORMATION ABOUT THE MERGER AND WHERE TO FIND IT

The proposed merger will be submitted to Wachovia Corporation shareholders for their consideration. Wells Fargo will file with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 that will include a proxy statement of Wachovia Corporation that also constitutes a prospectus of Wells Fargo. Wachovia Corporation will mail the proxy statement-prospectus to its shareholders. Wachovia shareholders and other investors are urged to read the final proxy statement-prospectus when it becomes available because it will describe the proposed merger and contain other important information. You may obtain copies of all documents filed with the SEC regarding the proposed merger, free of charge, at the SEC’s website (www.sec.gov). You may also obtain free copies of these documents by contacting Wells Fargo or Wachovia, as follows:

Wells Fargo & Company, Attention Corporate Secretary, MAC N9305-173, Sixth and Marquette, Minneapolis, Minnesota 55479, (612) 667-0087.

Wachovia Corporation, Investor Relations, One Wachovia Center, 301 South College Street, Charlotte, North Carolina 28288, (704) 374-6782.

Wells Fargo and Wachovia and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Wachovia Corporation shareholders in connection with the proposed merger. Information about Wells Fargo’s directors and executive officers and their ownership of Wells Fargo common stock is contained in the definitive proxy statement for Wells Fargo’s 2008 annual meeting of stockholders, as filed by Wells Fargo with the SEC on Schedule 14A on March 17, 2008. Information about Wachovia’s directors and executive officers and their ownership of Wachovia common stock is contained in the definitive proxy statement for Wachovia’s 2008 annual meeting of shareholders, as filed by Wachovia with the SEC on Schedule 14A on March 10, 2008. You may obtain a free copy of these documents by contacting Wells Fargo or Wachovia at the contact information provided above. The proxy statement-prospectus for the proposed merger will provide more information about participants in the solicitation of proxies from Wachovia Corporation shareholders.

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Wells Fargo, Wachovia Agree to Merge

BUSINESS WIRE)--Wells Fargo & Company (NYSE:WFC) and Wachovia Corporation (NYSE:WB) said today (October 3, 2008) they have signed a definitive agreement for the merger of the two companies including all of Wachovia’s banking operations in a whole company transaction requiring no financial assistance from the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

Under the agreement, Wells Fargo will acquire all outstanding shares of common stock of Wachovia in a stock-for-stock transaction. In the transaction, Wells Fargo will acquire all of Wachovia Corporation and all its businesses and obligations, including its preferred equity and indebtedness, and all its banking deposits.

Under terms of the agreement, which has been approved unanimously by the boards of both companies, Wachovia shareholders will receive 0.1991 shares of Wells Fargo common stock in exchange for each share of Wachovia common stock. The transaction, based on Wells Fargo’s closing stock price of $35.16 on October 2, 2008, is valued at $7.00 per Wachovia common share for a total transaction value of approximately $15.1 billion. Wachovia has almost 2.2 billion common shares outstanding. The agreement requires the approval of Wachovia shareholders and customary approvals of regulators.

Wells Fargo will record Wachovia’s credit-impaired assets at fair value. The acquisition is expected to exceed Wells Fargo’s internal rate of return goal and add to Wells Fargo’s earnings per share in the first year of operations, excluding integration costs, write-downs, transaction charges, and credit reserve build. Wells Fargo expects to incur merger and integration charges of approximately $10 billion. To maintain its strong capital position, Wells Fargo intends to issue up to $20 billion of new Wells Fargo securities, primarily common stock.

“We at Wachovia have great admiration and respect for the people and businesses at Wells Fargo and we are extremely pleased to join forces with this outstanding company,” said Robert K. Steel, President and CEO of Wachovia Corp. “Today’s announcement creates one of the strongest financial firms in the world and is great for all Wachovia constituencies: our shareholders, customers, colleagues and communities. This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support. The market presence and composition of our businesses, along with our service-oriented cultures, are extraordinarily complementary and this combination creates great potential for sustained stability and growth.”

“This agreement represents a compelling value for Wachovia shareholders,” said Wells Fargo Chairman Dick Kovacevich. “It provides superior value compared to the previous offer to acquire only the banking operations of the company and because Wachovia shareholders will have a meaningful opportunity to participate in the growth and success of a combined Wachovia-Wells Fargo that will be one of the world’s great financial services companies. We are combining the industry’s number one ranking customer service culture of Wachovia with the industry’s number one sales and cross-selling culture of Wells Fargo. The best in service and the best in sales, an unbeatable combination. Wachovia shareholders also will benefit from holding the stock of a strong financial institution, the U.S. bank with the highest credit ratings and with a long history of increasing dividends on its common stock. Wachovia’s brokerage and asset management businesses, which would have been left behind in the prior proposal, are tightly interwoven with Wachovia’s core banking business – and this agreement avoids the complexity and unavoidable loss of value in trying to separate them, which would have disrupted Wachovia’s team members and customers. We also bring to this merger agreement our 157 years of experience in financial services and the unparalleled convenience we can offer Wachovia customers through one of the most extensive financial services distributions systems in North America. We have the highest regard for the quality and commitment and caring of Wachovia team members. We believe their demonstrated commitment to outstanding customer service and their highest standards of community leadership are identical to our own values. And, of course, this agreement won’t require even a penny from the FDIC.”

The combined company will have a strong presence in Charlotte, which will be the headquarters for the combined company’s East Coast retail and commercial and corporate banking business. St. Louis will remain the headquarters of Wachovia Securities. In addition, three members of the Wachovia Board will be invited to join the Wells Fargo & Company Board when the transaction is completed.

Kovacevich said, “This agreement is an outstanding opportunity for Wachovia common and preferred shareholders and debt holders, team members and customers, for the Charlotte and St. Louis communities and indeed all of the communities that Wachovia serves, and for the U.S. government and our banking system. It makes compelling business and strategic sense and is simply an incredible fit that will result in an immensely strong, stable financial services company that will carry on Wachovia’s proud tradition of being one of the very best financial institutions in the world.”

“We know this has been a time of great uncertainty for Wachovia team members and many of its customers as their company has gone through a very painful and challenging time of unprecedented change in our industry,” said Wells Fargo President and CEO John Stumpf. “We want to assure them we’ll do everything we can to make the integration of our operations as smooth as possible. An important measure of success for this integration will be our ability to retain as many of the talented Wachovia team members as possible so they can continue to provide outstanding service and financial advice to their customers and continue their careers with Wells Fargo.”

The combined company will be one of North America’s most extensive financial services distribution networks:

6/30/08

Wells Fargo

Wachovia

Combined
Assets $609 billion $812 billion $1.42 trillion
Deposits $339 billion $448 billion $787 billion
Customers 28 million 20 million

48 million1
Assets under Mgt.
(Mutual Funds) $151 billion $107 billion $258 billion
Stores 5,941 4,820 10,761
ATMs 6,950 5,277 12,227
Team Members 160,000 120,000 280,000

1 unadjusted for customer overlap

Wells Fargo’s Chief Financial Officer Howard Atkins said Wells Fargo used conservative assumptions in evaluating this opportunity. "As always, we only consider acquisitions that add to earnings per share no later than the third year after purchase and earn an internal rate of return of at least 15 percent,” said Atkins. “This acquisition comfortably exceeds all our financial requirements. This is a unique opportunity to expand both our Community Banking and Wholesale Banking presence in current markets and enter some new markets by acquiring another full service financial services retail banking company with a strong culture of customer service and community involvement very similar to ours.”

Wells Fargo and Wachovia will create the nation’s premier coast-to-coast community banking presence. The combined company will have community banks in 39 states and the District of Columbia. The acquisition will establish a Wells Fargo Community Banking presence for the first time in Alabama, Connecticut, Delaware, Florida, Georgia, Kansas, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia and Washington, D.C. Wells Fargo already has a Community Banking presence in Alaska, Arizona, Arkansas (pending), 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.

The combined company will be #1 in deposit market share2 in 17 of its 39 Community Banking states: Alaska, Arizona, California, Colorado, Florida, Georgia, Idaho, Minnesota, Iowa, Montana, Nebraska, New Jersey, New Mexico, North Carolina, South Dakota, Texas, and Virginia. Ninety-three percent of its deposits will be in states in which it ranks #1, 2 or 3 and the combined company will rank #1 in ten of the nation’s 20 largest Metropolitan Statistical Areas (MSAs) in deposit market share.2

2 excludes deposits greater than $500 million in a single banking store

Wells Fargo also is the nation’s:

* #1 small business lender,
* #1 agricultural lender,
* #1 commercial real estate broker,
* #2 largest mortgage originator,
* #2 largest mortgage servicer,
* #2 largest debit card issuer,
* #1 financial services provider to middle market businesses in the western U.S. and a national presence in commercial banking (29 states),
* largest bank-owned U.S. insurance brokerage

In connection with the agreement, Wachovia and Wells Fargo entered into a share exchange agreement under which Wachovia is issuing Wells Fargo preferred stock that votes as a single class with Wachovia’s common stock representing 39.9 percent of Wachovia’s voting power.

Wells Fargo was advised on the transaction by Wachtell, Lipton, Rosen & Katz and JPMorgan Securities, Inc. was the exclusive financial advisor to Wells Fargo. Wachovia was advised on the transaction by Sullivan & Cromwell LLP, Goldman Sachs & Co. and Perella Weinberg Partners.

Wells Fargo & Company is a diversified financial services company with $609 billion in assets, providing banking, insurance, investments, mortgage and consumer finance through almost 6,000 stores and the internet (wellsfargo.com) across North America and elsewhere internationally. Wells Fargo Bank, N.A. is the only bank in the U.S., and one of only two banks worldwide, to have the highest possible credit rating from both Moody’s Investors Service, “Aaa,” and Standard & Poor’s Ratings Services, “AAA.”

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements about Wells Fargo and Wachovia and the proposed transaction between the companies. There are several factors – many beyond Wells Fargo’s control – that could cause actual results to differ significantly from expectations described in the forward-looking statements. Among these factors are the receipt of necessary regulatory approvals and the approval of Wachovia shareholders. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them to reflect changes that occur after that date.

For a discussion of factors that may cause actual results to differ from expectations, refer to each company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, and Annual Report on Form 10-K for the year ended December 31, 2007, including information incorporated into each company’s 10-K from their respective 2007 annual reports, filed with the Securities and Exchange Commission (SEC) and available on the SEC’s website at www.sec.gov.

MORE INFORMATION ABOUT THE MERGER AND WHERE TO FIND IT

The proposed merger will be submitted to Wachovia Corporation shareholders for their consideration. Wells Fargo will file with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 that will include a proxy statement of Wachovia Corporation that also constitutes a prospectus of Wells Fargo. Wachovia Corporation will mail the proxy statement-prospectus to its shareholders. Wachovia shareholders and other investors are urged to read the final proxy statement-prospectus when it becomes available because it will describe the proposed merger and contain other important information. You may obtain copies of all documents filed with the SEC regarding the proposed merger, free of charge, at the SEC’s website (www.sec.gov). You may also obtain free copies of these documents by contacting Wells Fargo or Wachovia, as follows:

Wells Fargo & Company, Attention Corporate Secretary, MAC N9305-173, Sixth and Marquette, Minneapolis, Minnesota 55479, (612) 667-0087.

Wachovia Corporation, Investor Relations, One Wachovia Center, 301 South College Street, Charlotte, North Carolina 28288, (704) 374-6782

Wells Fargo and Wachovia and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Wachovia Corporation shareholders in connection with the proposed merger. Information about Wells Fargo’s directors and executive officers and their ownership of Wells Fargo common stock is contained in the definitive proxy statement for Wells Fargo’s 2008 annual meeting of stockholders, as filed by Wells Fargo with the SEC on Schedule 14A on March 17, 2008. Information about Wachovia’s directors and executive officers and their ownership of Wachovia common stock is contained in the definitive proxy statement for Wachovia’s 2008 annual meeting of shareholders, as filed by Wachovia with the SEC on Schedule 14A on March 10, 2008. You may obtain a free copy of these documents by contacting Wells Fargo or Wachovia at the contact information provided above. The proxy statement-prospectus for the proposed merger will provide more information about participants in the solicitation of proxies from Wachovia Corporation shareholders.

CONFERENCE CALL UPDATE

Wells Fargo will host a conference call Friday, October 3, 2008, at 6:30 a.m. (Pacific Time) to review the acquisition. Investors can call 877-425-9480 (domestic) and (210) 689-8848 (international) with the access code 299254, or listen via live audio webcast. The live audio webcast and presentation visuals will be available on http://www.wellsfargo.com/invest_relations/presents. A replay of the conference call will be available through October 10, 2008 at (877) 660-6853 (domestic) and (201) 612-7415 (international). Enter account 286 and Conference ID 299254. The replay also will be available online.

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Citi and Wachovia Reach Agreement-In-Principle for Citi to Acquire Wachovia’s Banking Operations in an FDIC-Assisted Transaction

BUSINESS WIRE)--Citi (NYSE: C) today (September 29, 2008) announced it has reached an agreement–in-principle to acquire all of the banking subsidiaries of Wachovia Corporation (NYSE: WB), creating the largest U.S. bank by total deposits.

Wachovia will remain a public company and retain its asset management, retail brokerage, and certain select parts of its wealth management businesses, including the Evergreen and Wachovia Securities franchises. Going forward, Wachovia expects to have adequate capital to support its remaining businesses, an appropriate allocation of tangible equity, and certain tax assets that will be recognized immediately.

Under the terms of the agreement-in-principle, Citi will pay Wachovia approximately $2.16 billion in stock and assume Wachovia senior and subordinated debt, totaling approximately $53 billion.

Citi will acquire more than $700 billion of assets of Wachovia’s banking subsidiaries, and related liabilities. The Federal Deposit Insurance Corporation (FDIC) has agreed to provide loss protection in connection with approximately $312 billion of mortgage-related and other Wachovia assets. Citi is responsible for the first $30 billion of losses on this portfolio, and expects to record these expected losses under purchase accounting upon closing of the transaction. Citi is also responsible for the next $12 billion in losses up to a maximum of $4 billion per year for the next three years. Citi has also agreed to issue to the FDIC preferred stock and warrants with a combined value of approximately $12 billion. The FDIC has agreed to be responsible for any further losses on this portfolio.

The transaction, which has been approved by the Boards of Directors of both companies, is subject to: approval by Wachovia’s shareholders; to the occurrence of the closing by December 31, 2008; definitive documentation; regulatory approvals; and other customary closing conditions.

The deal is expected to be accretive to Citi’s earnings from year one excluding a total of $3.7 billion in pre-tax restructuring charges for severance over the next four years, and expected to be fully accretive in 2010.

Citi expects to raise $10 billion in common equity in connection with this transaction and reduce its quarterly dividend to 16 cents per share, effective immediately, to maintain the company’s strong capital position. On a pro forma basis for the second quarter ended June 30, 2008, Citi’s Tier 1 capital ratio is expected to be 8.8% assuming completion of the transaction.

“The transaction is extremely attractive from a strategic perspective. It will deliver the combined capabilities of two powerful organizations to our customers and shareholders, providing meaningful EPS accretion and downside loss protection,” said Vikram Pandit, Chief Executive Officer, Citi. “It will augment our access to stable funding and liquidity, and will accelerate our efforts to establish Citi as the world’s leading global financial institution. Citi will have more than $600 billion in deposits in the U.S., giving us about a 9.8% market share. Our total deposits will be $1.3 trillion globally, $350 billion more than our next largest U.S. competitor, making us one of the world's largest core deposit-funded financial institutions. Moreover, it is essential that Wachovia, a company we deeply respect, maintain a strong presence in Charlotte, N.C.”

“Our core businesses continue to perform well but amid uncertain markets and a fast-changing industry landscape, we found in Citi a strong partner to preserve the stability and quality of our banking franchise,” said Robert Steel, CEO, Wachovia. “We are pleased to meet these key goals, as well as advance our legacy of innovative thinking, best-in-class customer service, and growth opportunities for our colleagues.”

Wachovia has a strong, attractive customer base, talented employees, and its retail bank footprint is highly complementary with that of Citi, with just 31% of Wachovia branches located in existing Citi markets. The transaction propels Citi to a top three ranking in seven metropolitan statistical areas (MSAs): New York, Miami, Atlanta, Washington D.C., Las Vegas, Charlotte, and San Francisco.

At the completion of the transaction, Citi will have: about 4,300 branches in the U.S. and approximately another 3,300 throughout the world; and 28,000 fee-free ATMs in the U.S. As there is little overlap between the two footprints, Citi expects to close less than 5% of the combined branches. In addition, Citi will benefit from Wachovia’s leading technology platform, including the opportunity to expand its award-winning online banking platform, and proven integration capabilities.

The transaction also brings a strong, highly complementary U.S. cash management platform to Citi’s leading international Global Transaction Services business; a strong U.S. mid-market corporate banking franchise; and, a small, successful private banking business that Citi intends to integrate into its existing Global Wealth Management business.

In addition, Citi expects to realize more than $3 billion of annualized expense synergies through the consolidation of overlapping functions. Following the closing of the transaction, Citi expects to complete the integration of the retail banking operations by year-end 2010.

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