WELLS FARGO & CO/MN - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
		THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended June 30, 2003

		OR

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

		Commission file number 001-2979

WELLS FARGO & COMPANY

(Exact name of registrant as specified in its charter)


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

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

Registrant’s telephone number, including area code: 1-800-411-4932

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

Yes þ No o

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

Yes þ No o

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


		Shares Outstanding
		July 31, 2003
		1,679,532,244
Common stock, $1-2/3 par value

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
	CONSOLIDATED STATEMENT OF INCOME
	CONSOLIDATED BALANCE SHEET
	CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
	CONSOLIDATED STATEMENT OF CASH FLOWS
	NOTES TO FINANCIAL STATEMENTS
		SUMMARY FINANCIAL DATA
		OVERVIEW
		CRITICAL ACCOUNTING POLICIES
		EARNINGS PERFORMANCE
		NET INTEREST INCOME
		NONINTEREST INCOME
		NONINTEREST EXPENSE
		OPERATING SEGMENT RESULTS
		BALANCE SHEET ANALYSIS
		SECURITIES AVAILABLE FOR SALE
		LOAN PORTFOLIO
		NONACCRUAL LOANS AND OTHER ASSETS
		Loans 90 Days or More Past Due and Still Accruing
		ALLOWANCE FOR LOAN LOSSES
		OTHER ASSETS
		DEPOSITS
		REGULATORY AND AGENCY CAPITAL REQUIREMENTS
		OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
		ASSET/LIABILITY AND MARKET RISK MANAGEMENT
		CAPITAL MANAGEMENT
		FACTORS THAT MAY AFFECT FUTURE RESULTS
		CONTROLS AND PROCEDURES
		DISCLOSURE CONTROLS AND PROCEDURES
		INTERNAL CONTROL OVER FINANCIAL REPORTING
PART II — OTHER INFORMATION
	Item 2. Changes in Securities and Use of Proceeds.
	Item 4. Submission of Matters to a Vote of Security Holders.
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
Exhibit 10.1(a)
Exhibit 10.2(b)
Exhibit 31.1(a)
Exhibit 31.2(b)
Exhibit 32.1(a)
Exhibit 32.2(b)
Exhibit 99.1(a)
Exhibit 99.2(b)

FORM 10-Q
TABLE OF CONTENTS


PART I	Financial Information			Page
Item 1.	Financial Statements
	Consolidated Statement of Income				2
	Consolidated Balance Sheet				3
	Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income				4
	Consolidated Statement of Cash Flows				5
	Notes to Financial Statements				6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
	Summary Financial Data				31
	Overview				32
	Critical Accounting Policies				34
	Earnings Performance				34
		Net Interest Income			34
		Noninterest Income			38
		Noninterest Expense			40
		Operating Segment Results			41
	Balance Sheet Analysis				42
		Securities Available for Sale			42
		Loan Portfolio			44
		Nonaccrual Loans and Other Assets			45
			Loans 90 Days Past Due and Still Accruing		46
		Allowance for Loan Losses			47
		Other Assets			48
		Deposits			49
		Regulatory and Agency Capital Requirements			49
	Off-Balance Sheet Arrangements and Contractual Obligations				50
	Asset/Liability and Market Risk Management				50
	Capital Management				54
	Factors that May Affect Future Results				55

Item 3.	Quantitative and Qualitative Disclosures About Market Risk				51

Item 4.	Controls and Procedures
		Disclosure Controls and Procedures			61
		Internal Control Over Financial Reporting			61

PART II	Other Information
Item 2.	Changes in Securities and Use of Proceeds				62

Item 4.	Submission of Matters to a Vote of Security Holders				64

Item 6.	Exhibits and Reports on Form 8-K				65

Signature					68

PART I — FINANCIAL INFORMATION

WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME



			Quarter ended June 30					,	Six months ended June 30					,

(in millions, except per share amounts)			2003			2002			2003			2002

INTEREST INCOME
Securities available for sale			$	435		$	656		$	888		$	1,312
Mortgages held for sale				864			440			1,678			1,031
Loans held for sale				67			73			134			142
Loans				3,482			3,379			6,892			6,671
Other interest income				80			79			141			151

		Total interest income		4,928			4,627			9,733			9,307

INTEREST EXPENSE
Deposits				425			483			852			977
Short-term borrowings				87			131			182			305
Long-term debt				341			344			671			674
Guaranteed preferred beneficial interests in Company’s subordinated debentures				29			30			56			58

		Total interest expense		882			988			1,761			2,014

NET INTEREST INCOME				4,046			3,639			7,972			7,293
Provision for loan losses				424			410			849			900

Net interest income after provision for loan losses				3,622			3,229			7,123			6,393

NONINTEREST INCOME
Service charges on deposit accounts				587			547			1,140			1,052
Trust and investment fees				470			472			929			934
Credit card fees				257			223			501			424
Other fees				373			326			739			637
Mortgage banking				543			412			1,104			772
Insurance				289			269			556			532
Net gains on debt securities available for sale				20			45			38			81
Net losses from equity investments				(47	)		(58	)		(145	)		(78	)
Other				217			142			429			325

		Total noninterest income		2,709			2,378			5,291			4,679

NONINTEREST EXPENSE
Salaries				1,155			1,106			2,296			2,182
Incentive compensation				503			362			950			719
Employee benefits				350			364			769			693
Equipment				305			228			573			464
Net occupancy				288			274			585			543
Net losses on dispositions of premises and equipment				10			29			6			27
Other				1,369			1,042			2,570			2,104

		Total noninterest expense		3,980			3,405			7,749			6,732

INCOME BEFORE INCOME TAX EXPENSE
	AND EFFECT OF CHANGE IN
	ACCOUNTING PRINCIPLE			2,351			2,202			4,665			4,340
Income tax expense				826			782			1,648			1,541

NET INCOME BEFORE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE				1,525			1,420			3,017			2,799
Cumulative effect of change in accounting principle				—			—			—			(276	)

NET INCOME			$	1,525		$	1,420		$	3,017		$	2,523

NET INCOME APPLICABLE TO COMMON STOCK			$	1,524		$	1,419		$	3,015		$	2,521

EARNINGS PER COMMON SHARE BEFORE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
	Earnings per common share		$	.91		$	.83		$	1.80		$	1.64

	Diluted earnings per common share		$	.90		$	.82		$	1.78		$	1.62

EARNINGS PER COMMON SHARE
	Earnings per common share		$	.91		$	.83		$	1.80		$	1.48

	Diluted earnings per common share		$	.90		$	.82		$	1.78		$	1.46

DIVIDENDS DECLARED PER COMMON SHARE			$	.30		$	.28		$	.60		$	.54

Average common shares outstanding				1,675.7			1,710.4			1,678.5			1,706.7

Diluted average common shares outstanding				1,690.6			1,730.8			1,692.1			1,725.1

WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET



		June 30		,	December 31		,	June 30		,
(in millions, except shares)		2003			2002			2002

ASSETS
Cash and due from banks		$	16,045		$	17,820		$	14,701
Federal funds sold and securities purchased under resale agreements			2,768			3,174			3,741
Securities available for sale			24,625			27,947			37,132
Mortgages held for sale			58,716			51,154			24,685
Loans held for sale			7,009			6,665			5,165

Loans			215,392			196,634			185,001
Allowance for loan losses			3,894			3,862			3,883

	Net loans		211,498			192,772			181,118

Mortgage servicing rights, net			3,821			4,489			5,956
Premises and equipment, net			3,604			3,688			3,638
Goodwill			9,803			9,753			9,724
Other assets			31,756			31,797			28,942

Total assets		$	369,645		$	349,259		$	314,802

LIABILITIES
Noninterest-bearing deposits		$	80,943		$	74,094		$	61,499
Interest-bearing deposits			149,941			142,822			131,712

	Total deposits		230,884			216,916			193,211
Short-term borrowings			23,883			33,446			30,107
Accrued expenses and other liabilities			20,705			18,334			17,159
Long-term debt			58,513			47,320			41,913
Guaranteed preferred beneficial interests in Company’s subordinated debentures			3,385			2,885			2,885

Total liabilities			337,370			318,901			285,275

STOCKHOLDERS’ EQUITY
Preferred stock			375			251

Table of Contents

Table of Contents

Table of Contents

Table of Contents