Edgar Filing: WELLS FARGO & CO/MN

e10vq

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

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2011

Commission file number 001-2979

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


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

420 Montgomery Street, San Francisco, California 94163
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: 1-866-249-3302

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 ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer þ		Accelerated filer ¨

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

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

Yes ¨ No þ

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


	Shares Outstanding
	April 29, 2011
Common stock, $1-2/3 par value		5,289,099,076

FORM 10-Q
CROSS-REFERENCE INDEX


PART I	Financial Information
Item 1.	Financial Statements	Page
	Consolidated Statement of Income		49
	Consolidated Balance Sheet		50
	Consolidated Statement of Changes in Equity and Comprehensive Income		51
	Consolidated Statement of Cash Flows		53
	Notes to Financial Statements
	1 - Summary of Significant Accounting Policies		54
	2 - Business Combinations		55
	3 - Federal Funds Sold, Securities Purchased under Resale Agreements and Other Short-Term Investments		55
	4 - Securities Available for Sale		56
	5 - Loans and Allowance for Credit Losses		65
	6 - Other Assets		81
	7 - Securitizations and Variable Interest Entities		82
	8 - Mortgage Banking Activities		93
	9 - Intangible Assets		96
	10 - Guarantees, Pledged Assets and Collateral		97
	11 - Legal Actions		99
	12 - Derivatives		100
	13 - Fair Values of Assets and Liabilities		107
	14 - Preferred Stock		120
	15 - Employee Benefits		123
	16 - Earnings Per Common Share		124
	17 - Operating Segments		125
	18 - Condensed Consolidating Financial Statements		127
	19 - Regulatory and Agency Capital Requirements		130

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (Financial Review)
	Summary Financial Data		1
	Overview		2
	Earnings Performance		4
	Balance Sheet Analysis		9
	Off-Balance Sheet Arrangements		12
	Risk Management		13
	Capital Management		42
	Critical Accounting Policies		44
	Current Accounting Developments		45
	Forward-Looking Statements		46
	Risk Factors		47
	Glossary of Acronyms		131

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		38

Item 4.	Controls and Procedures		48

PART II	Other Information
Item 1.	Legal Proceedings		132

Item 1A.	Risk Factors		132

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		132

Item 6.	Exhibits		133

Signature			133

Exhibit Index			134
EX-3.A
EX-10.C
EX-10.D
EX-12.A
EX-12.B
EX-31.A
EX-31.B
EX-32.A
EX-32.B
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I - FINANCIAL INFORMATION

FINANCIAL REVIEW

Summary Financial Data


										% Change
	Quarter ended									Mar. 31, 2011 from

	Mar. 31		,	Dec. 31		,	Mar. 31		,	Dec. 31		,		Mar. 31		,
($ in millions, except per share amounts)	2011			2010			2010			2010				2010


For the Period
Wells Fargo net income	$	3,759			3,414			2,547			10		%		48
Wells Fargo net income applicable to common stock		3,570			3,232			2,372			10				51
Diluted earnings per common share		0.67			0.61			0.45			10				49
Profitability ratios (annualized):
Wells Fargo net income to average assets (ROA)		1.23	%		1.09			0.84			13				46
Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity (ROE)		11.98			10.95			8.96			9				34
Efficiency ratio (1)		62.6			62.1			56.5			1				11
Total revenue	$	20,329			21,494			21,448			(5	)			(5	)
Pre-tax pre-provision profit (PTPP) (2)		7,596			8,154			9,331			(7	)			(19	)
Dividends declared per common share		0.12			0.05			0.05			140				140
Average common shares outstanding		5,278.8			5,256.2			5,190.4			-				2
Diluted average common shares outstanding		5,333.1			5,293.8			5,225.2			1				2
Average loans	$	754,077			753,675			797,389			-				(5	)
Average assets		1,241,176			1,237,037			1,226,120			-				1
Average core deposits (3)		796,826			794,799			759,169			-				5
Average retail core deposits (4)		584,100			573,843			573,653			2				2
Net interest margin		4.05	%		4.16			4.27			(3	)			(5	)
At Period End
Securities available for sale	$	167,906			172,654			162,487			(3	)			3
Loans		751,155			757,267			781,430			(1	)			(4	)
Allowance for loan losses		21,983			23,022			25,123			(5	)			(12	)
Goodwill		24,777			24,770			24,819			-				-
Assets		1,244,666			1,258,128			1,223,630			(1	)			2
Core deposits (3)		795,038			798,192			756,050			-				5
Wells Fargo stockholders’ equity		133,471			126,408			116,142			6				15
Total equity		134,943			127,889			118,154			6				14
Tier 1 capital (5)		110,761			109,353			98,329			1				13
Total capital (5)		147,311			147,142			137,600			-				7
Capital ratios:
Total equity to assets		10.84	%		10.16			9.66			7				12
Risk-based capital (5):
Tier 1 capital		11.50			11.16			9.93			3				16
Total capital		15.30			15.01			13.90			2				10
Tier 1 leverage (5)		9.27			9.19			8.34			1				11
Tier 1 common equity (6)		8.93			8.30			7.09			8				26
Book value per common share	$	23.18			22.49			20.76			3				12
Team members (active, full-time equivalent)		270,200			272,200			267,400			(1	)			1
Common stock price:
High	$	34.25			31.61			31.99			8				7
Low		29.82			23.37			26.37			28				13
Period end		31.71			30.99			31.12			2				2


(1)		The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).

(2)		Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.

(3)		Core deposits are noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances).

(4)		Retail core deposits are total core deposits excluding Wholesale Banking core deposits and retail mortgage escrow deposits.

(5)		See Note 19 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information.

(6)		See the “Capital Management” section in this Report for additional information.

This Report on Form 10-Q for the quarter ended March 31, 2011, including the Financial Review and the Financial Statements and related Notes, contains forward-looking statements, which may include forecasts of our financial results and condition, expectations for our operations and business, and our assumptions for those forecasts and expectations. Do not unduly rely on forward-looking statements. Actual results may differ materially from our forward-looking statements due to several factors. Some of these factors are described in the Financial Review and in the Financial Statements and related Notes. For a discussion of other factors, refer to the “Forward-Looking Statements” section in this Report and to the “Risk Factors” and “Regulation and Supervision” sections of our Annual Report on Form 10-K for the year ended December 31, 2010 (2010 Form 10-K), filed with the Securities and Exchange Commission (SEC) and available on the SEC’s website at www.sec.gov.

See the Glossary of Acronyms at the end of this Report for terms used throughout this Report.

Financial Review

Overview

Wells Fargo & Company is a $1.2 trillion diversified financial services company providing banking, insurance, trust and investments, mortgage banking, investment banking, retail banking, brokerage and consumer finance through banking stores, the internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia (D.C.) and in other countries. We ranked fourth in assets and second in the market value of our common stock among our large bank peers at March 31, 2011. When we refer to “Wells Fargo,” “the Company,” “we,” “our” or “us” in this Report, we mean Wells Fargo & Company and Subsidiaries (consolidated). When we refer to the “Parent,” we mean Wells Fargo & Company. When we refer to “legacy Wells Fargo,” we mean Wells Fargo excluding Wachovia Corporation (Wachovia).

Our Vision and Strategy

Our vision is to satisfy all our customers’ financial needs, help them succeed financially, be recognized as the premier financial services company in our markets and be one of America’s great companies. Our primary strategy to achieve this vision is to increase the number of products our customers buy from us and to offer them all of the financial products that fulfill their needs. Our cross-sell strategy, diversified business model and the breadth of our geographic reach facilitate growth in both strong and weak economic cycles, as we can grow by expanding the number of products our current customers have with us, gain new customers in our extended markets, and increase market share in many businesses.

Our combined company retail bank household cross-sell was 5.79 products per household in first quarter 2011, up from 5.60 a year ago. We believe there is more opportunity for cross-sell as we continue to earn more business from our Wachovia customers. Our goal is eight products per customer, which is approximately half of our estimate of potential demand for an average U.S. household. One of every four of our retail banking households has eight or more products. Business banking cross-sell offers another potential opportunity for growth, with cross-sell of 4.09 products in our Western footprint (including legacy Wells Fargo and converted Wachovia customers), up from 4.04 in fourth quarter 2010.

Our pursuit of growth and earnings performance is influenced by our belief that it is important to maintain a well controlled operating environment as we complete the integration of the Wachovia businesses and grow the combined company. We manage our credit risk by establishing what we believe are sound credit policies for underwriting new business, while monitoring and reviewing the performance of our loan portfolio. We manage the interest rate and market risks inherent in our asset and liability balances within established ranges, while ensuring adequate liquidity and funding. We maintain strong capital levels to facilitate future growth.

Financial Performance

Wells Fargo net income was a record $3.8 billion in first quarter 2011, up 48% from a year ago, and diluted earnings per common share were $0.67, up 49%. Our results included contributions from each of our three business segments: Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement. In first quarter 2011, credit quality improved, capital ratios increased and cross-selling reached new highs. Reflecting the significant improvement in our credit portfolios, the provision for credit losses was $1.0 billion less than net charge-offs for first quarter 2011. Revenue was down 5% from a year ago, reflecting a decline in mortgage banking income and lower service charges on deposits due to regulatory changes, as well as a decline in average loans as we continued to reduce our non-strategic and liquidating loan portfolios. Noninterest expense was up 5% primarily due to higher commission and incentive compensation.

Our average core deposits grew 5% from a year ago to $796.8 billion at March 31, 2011. Average core deposits were 106% of total average loans in first quarter 2011, up from 95% a year ago. We continued to attract high quality core deposits in the form of checking and savings deposits, which grew 9% to $722.5 billion at March 31, 2011, from $664.4 billion a year ago, as we added new customers and deepened our relationships with existing customers.

Wells Fargo remained one of the largest providers of credit to the U.S. economy. We continued to lend to creditworthy customers and made $151 billion in new loan commitments to consumer, small business and commercial customers, including

Overview (continued)

$84 billion of residential mortgage originations in first quarter 2011, up from a total of $128 billion a year ago. We are an industry leader in loan modifications for homeowners. As of March 31, 2011, approximately 665,000 Wells Fargo mortgage customers were in active trial or had completed loan modifications since the beginning of 2009.

Credit Quality

We experienced significant improvement in our credit portfolio with lower net charge-offs, lower nonperforming assets and improved delinquency trends. The improvement in our credit portfolio was due in part to the continued decline in our non-strategic and liquidating loan portfolios (primarily from the Wachovia acquisition), which decreased $6.5 billion in first quarter 2011, and $65.0 billion in total since the Wachovia acquisition, to $126.8 billion at March 31, 2011.

Reflecting the improved performance in our loan portfolios, the provision for credit losses was $1.0 billion less than net charge-offs for first quarter 2011. Absent significant deterioration in the economy, we expect future reductions in the allowance for credit losses. First quarter 2011 marked the fifth consecutive quarter of declining loan losses and the second consecutive quarter of reduced nonperforming assets. Net charge-offs decreased significantly to $3.2 billion in first quarter 2011 from $3.8 billion in fourth quarter 2010, and $5.3 billion a year ago. Nonperforming assets decreased to $30.6 billion at March 31, 2011, from $32.4 billion at December 31, 2010, and $31.5 billion a year ago. Loans 90 days or more past due and still accruing (excluding government insured/guaranteed loans) decreased to $2.4 billion at March 31, 2011, from $2.6 billion at December 31, 2010, and $4.9 billion a year ago. In addition, the portfolio of purchased credit-impaired (PCI) loans acquired in the Wachovia merger has performed better than originally expected.

Capital

We continued to build capital in first quarter 2011, with total shareholders’ equity up $7.1 billion from year-end 2010. In first quarter 2011, our Tier 1 common equity ratio grew more than 60 basis points to 8.93% of risk-weighted assets under Basel I, reflecting strong internal capital generation. Under our interpretation of current Basel III capital proposals, we estimate that our Tier 1 common equity ratio grew to 7.2% in first quarter 2011. Our other regulatory capital ratios also continued to grow with the Tier 1 capital ratio reaching 11.50% and Tier 1 leverage ratio reaching 9.27% at March 31, 2011. See the “Capital Management” section in this Report for more information regarding our capital, including Tier 1 common equity.

We took several capital actions in first quarter 2011. Reflecting our strong capital position, we returned more capital to shareholders in first quarter 2011, with an increase in our quarterly common stock dividend to $0.12 per share. We also increased our share repurchase authority by 200 million shares. In addition, we issued notice to call $3.2 billion of high-cost trust preferred securities and expect to call additional trust preferred securities.

Wachovia Merger Integration

On December 31, 2008, Wells Fargo acquired Wachovia, one of the nation’s largest diversified financial services companies. At the beginning of our third year of the Wachovia integration, our progress to date is on track and on schedule, and business and revenue synergies have exceeded our expectations at the time the merger was announced. First quarter 2011 marked further milestones in our integration of legacy Wells Fargo and Wachovia: we completed our conversion to one common retail brokerage platform and we converted retail banking stores in several eastern states, including Connecticut, Delaware, New Jersey, and New York. With our April conversion of the Pennsylvania retail banking stores, 74% of our banking customers are now on a single deposit system. The Wachovia merger has already proven to be a financial success, with substantially all of the originally expected savings already realized and growing revenue synergies reflecting market share gains in many businesses, including mortgage, auto dealer services and investment banking.

As a result of PCI accounting for loans acquired in the Wachovia merger, ratios of the Company, including the growth rate in nonperforming assets (NPAs) since December 31, 2008, may not be directly comparable with periods prior to the merger or with credit-related ratios of other financial institutions. In particular:

•		Wachovia’s high risk loans were written down pursuant to PCI accounting at the time of merger. Therefore, the allowance for credit losses is lower than otherwise would have been required without PCI loan accounting; and

•		Because we virtually eliminated Wachovia’s nonaccrual loans at December 31, 2008, the quarterly growth rate in our nonaccrual loans following the merger was higher than it would have been without PCI loan accounting. Similarly, our net charge-offs rate was lower than it otherwise would have been.

Market and Industry Developments

The Board of Governors of the Federal Reserve System (FRB) and the Office of the Comptroller of the Currency (OCC) recently issued consent orders that will require us to promptly correct deficiencies in our residential mortgage loan servicing and foreclosure practices that were identified by federal banking regulators in their review conducted in fourth quarter 2010. The consent orders also require that we improve our servicing and foreclosure practices. We are committed to compliance with the consent orders and support the development of national servicing standards that will provide greater clarity for servicers, investors and customers. We continue to be committed to modifying mortgages for at-risk customers. We have been working with our regulators for an extended period to improve our processes and have already begun making some of the operational changes that will result from the expanded servicing responsibilities outlined in the consent orders.

In 2009, the FRB announced regulatory changes to debit card and ATM overdraft practices, which have reduced our service charges on deposit accounts. The Dodd-Frank Act, among other things, authorizes the FRB to issue regulations

governing debit card interchange fees, which are expected to be implemented in 2011. We continue to refine our estimate of the potential impact on our income of these regulations, if implemented in 2011. Based on the current FRB proposals, we

currently expect that our quarterly income would be reduced by approximately $325 million (after tax), before the impact of any offsetting actions.

Earnings Performance

Net income for first quarter 2011 was $3.8 billion ($0.67 diluted per share) with $3.6 billion applicable to common stock, compared with net income of $2.5 billion ($0.45 diluted per share) with $2.4 billion applicable to common stock for first quarter 2010. Our first quarter 2011 earnings reflected the benefit of continued improvements in credit quality, partially offset by a decrease in total loans and elevated balances of lower yielding earning assets.

Revenue, the sum of net interest income and noninterest income, was $20.3 billion in first quarter 2011 compared with $21.4 billion in first quarter 2010. The decline in revenue was predominantly due to lower net interest income and lower mortgage banking revenue. However, many businesses generated year over year revenue growth, including corporate banking, commercial mortgage servicing, fixed income and equity sales and trading, global remittance, real estate capital markets, retail brokerage, auto dealer services and wealth management. Net interest income of $10.7 billion in first quarter 2011 declined 4% from a year ago compared with a 5% decline in average loans. The decline in average loans reflected continued reductions in the non-strategic/liquidating portfolios and soft consumer loan demand.

Noninterest expense was $12.7 billion (63% of revenue) in first quarter 2011, compared with $12.1 billion (56% of revenue) a year ago. First quarter 2011 included $440 million of merger integration costs (up from $380 million a year ago), $472 million of operating losses (up from $208 million a year ago) substantially all from additional litigation accruals for foreclosure-related matters, and higher incentive compensation expenses caused by sales increases in commission-based business units as well as other earnings-based incentives. Certain expenses remained elevated year over year, including loan resolution costs and merger costs. As we conclude the integration process, and as the economy continues to recover, we expect these expenses to decline.

Net Interest Income

Net interest income is the interest earned on debt securities, loans (including yield-related loan fees) and other interest-earning assets minus the interest paid for deposits, short-term borrowings and long-term debt. The net interest margin is the average yield on earning assets minus the average interest rate paid for deposits and our other sources of funding. Net interest income and the net interest margin are presented on a taxable-equivalent basis in Table 1 to consistently reflect income from taxable and tax-exempt loans and securities based on a 35% federal statutory tax rate.

Net interest income on a taxable-equivalent basis was $10.8 billion in first quarter 2011, compared with $11.3 billion a year ago. The net interest margin was 4.05% in first quarter 2011,

down 22 basis points from 4.27% in first quarter 2010. Net interest margin was compressed relative to first quarter 2010 as lower-yielding cash and short-term investments increased as loan balances declined. The impact of these factors was somewhat mitigated by continued disciplined deposit pricing and reduced long-term debt.

The mix of earning assets and their yields are important drivers of net interest income. Soft consumer loan demand and the impact of liquidating certain loan portfolios reduced average loans in first quarter 2011 to 70% of average earning assets from 74% in first quarter 2010. Average short-term investments and trading account assets increased to 11% of earning assets in first quarter 2011, up from 6% of earning assets in first quarter 2010.

Core deposits are a low-cost source of funding and thus an important contributor to both net interest income and the net interest margin. Core deposits include noninterest-bearing deposits, interest-bearing checking, savings certificates, certain market rate and other savings, and certain foreign deposits (Eurodollar sweep balances). Average core deposits rose to $796.8 billion in first quarter 2011 from $759.2 billion in first quarter 2010 and funded 106% and 95% of average loans, respectively. Average core deposits increased to 74% of average earning assets in first quarter 2011, up from 71% a year ago, yet the cost of these deposits declined significantly as the mix shifted from higher cost certificates of deposit to checking and savings products, which were also at lower yields relative to first quarter 2010. About 90% of our core deposits are now in checking and savings deposits, one of the highest percentages in the industry.

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


	Quarter ended March 31,

	2011								2010

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


Earning assets
Federal funds sold, securities purchased under resale agreements and other short-term investments	$	83,386			0.35	%	$	72		40,833			0.33	%	$	33
Trading assets		37,403			3.81			356		27,911			3.91			272
Debt securities available for sale (3):
Securities of U.S. Treasury and federal agencies		1,575			2.87			11		2,278			3.62			20
Securities of U.S. states and political subdivisions		19,570			5.45			270		13,696			6.60			221
Mortgage-backed securities:
Federal agencies		73,466			4.72			832		79,730			5.39			1,023
Residential and commercial		32,934			9.68			732		32,768			9.67			790


Total mortgage-backed securities		106,400			6.21			1,564		112,498			6.67			1,813
Other debt securities (4)		35,920			5.55			465		32,346			6.51			492


Total debt securities available for sale (4)		163,465			5.94			2,310		160,818			6.59			2,546
Mortgages held for sale (5)		38,742			4.51			437		31,368			4.93			387
Loans held for sale (5)		975			4.88			12		6,406			2.15			34
Loans:
Commercial:
Commercial and industrial		150,047			4.65			1,723		156,466			4.51			1,743
Real estate mortgage		99,797			3.92			967		97,967			3.68			889
Real estate construction		24,281			4.26			255		35,852			3.07			272
Lease financing		13,020			7.83			255		14,008			9.22			323
Foreign		33,638			2.83			235		28,561			3.62			256


Total commercial		320,783			4.33			3,435		332,854			4.23			3,483


Consumer:
Real estate 1-4 family first mortgage		229,570			5.01			2,867		245,024			5.26			3,210
Real estate 1-4 family junior lien mortgage		94,708			4.35			1,018		105,640			4.47			1,168
Credit card		21,509			13.18			709		23,345			13.15			767
Other revolving credit and installment		87,507			6.36			1,371		90,526			6.40			1,427


Total consumer		433,294			5.54			5,965		464,535			5.70			6,572


Total loans (5)		754,077			5.03			9,400		797,389			5.09			10,055
Other		5,228			3.90			50		6,069			3.36			50


Total earning assets	$	1,083,276			4.73	%	$	12,637		1,070,794			5.06	%	$	13,377


Funding sources
Deposits:
Interest-bearing checking	$	58,503			0.10	%	$	14		62,021			0.15	%	$	23
Market rate and other savings		443,586			0.22			237		403,945			0.29			286
Savings certificates		74,371			1.39			255		94,763			1.36			317
Other time deposits		13,850			2.24			76		15,878			2.03			80
Deposits in foreign offices		57,473			0.23			33		55,434			0.21			29


Total interest-bearing deposits		647,783			0.38			615		632,041			0.47			735
Short-term borrowings		54,751			0.22			30		45,081			0.18			19
Long-term debt		150,144			2.95			1,104		209,008			2.45			1,276
Other liabilities		9,472			3.24			76		5,664			3.43			49


Total interest-bearing liabilities		862,150			0.85			1,825		891,794			0.94			2,079
Portion of noninterest-bearing funding sources		221,126			-			-		179,000			-			-


Total funding sources	$	1,083,276			0.68			1,825		1,070,794			0.79			2,079


Net interest margin and net interest income on a taxable-equivalent basis (6)					4.05	%	$	10,812					4.27	%	$	11,298

Noninterest-earning assets
Cash and due from banks	$	17,360								18,049
Goodwill		24,775								24,816
Other		115,765								112,461


Total noninterest-earning assets	$	157,900								155,326


Noninterest-bearing funding sources
Deposits	$	193,100								172,039
Other liabilities		55,316								44,739
Total equity		130,610								117,548
Noninterest-bearing funding sources used to fund earning assets		(221,126	)							(179,000	)


Net noninterest-bearing funding sources	$	157,900								155,326


Total assets	$	1,241,176								1,226,120


(1)		Our average prime rate was 3.25% for the quarters ended March 31, 2011 and 2010. The average three-month London Interbank Offered Rate (LIBOR) was 0.31% and 0.26% for the same quarters, respectively.

(2)		Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.

(3)		Yields and rates are based on interest income/expense amounts for the period, annualized based on the accrual basis for the respective accounts. The average balance amounts include the effects of any unrealized gain or loss marks but those marks carried in other comprehensive income are not included in yield determination of affected earning assets. Thus yields are based on amortized cost balances computed on a settlement date basis.

(4)		Includes certain preferred securities.

(5)		Nonaccrual loans and related income are included in their respective loan categories.

(6)		Includes taxable-equivalent adjustments of $161 million and $151 million for March 31, 2011 and 2010, respectively, primarily related to tax-exempt income on certain loans and securities. The federal statutory tax rate utilized was 35% for the periods presented.

Noninterest Income


Table 2: Noninterest Income

	Quarter ended March 31,					%

(in millions)	2011			2010		Change


Service charges on deposit accounts	$	1,012			1,332		(24	)	%
Trust and investment fees:
Trust, investment and IRA fees		1,060			1,049		1
Commissions and all other fees		1,856			1,620		15


Total trust and investment fees		2,916			2,669		9


Card fees		957			865		11
Other fees:
Cash network fees		81			55		47
Charges and fees on loans		397			419		(5	)
Processing and all other fees		511			467		9


Total other fees		989			941		5


Mortgage banking:
Servicing income, net		866			1,366		(37	)
Net gains on mortgage loan origination/sales activities		1,150			1,104		4


Total mortgage banking		2,016			2,470		(18	)


Insurance		503			621		(19	)
Net gains from trading activities		612			537		14
Net gains (losses) on debt securities available for sale		(166	)		28	NM
Net gains from equity investments		353			43		721
Operating leases		77			185		(58	)
All other		409			610		(33	)


Total	$	9,678			10,301		(6	)

NM - Not meaningful

Noninterest income was $9.7 billion for first quarter 2011, compared with $10.3 billion for first quarter 2010, representing 48% of revenue for both periods. The decrease from March 31, 2010 was due largely to lower mortgage banking net servicing income and lower service charges on deposit accounts.

Our service charges on deposit accounts decreased in first quarter by $320 million from a year ago. This decrease was primarily the result of changes to Regulation E and related overdraft policy changes.

We earn trust, investment and IRA (Individual Retirement Account) fees from managing and administering assets, including mutual funds, corporate trust, personal trust, employee benefit trust and agency assets. At March 31, 2011, these assets totaled $2.2 trillion, up 10% from $2.0 trillion at March 31, 2010. Trust, investment and IRA fees are largely based on a tiered scale relative to the market value of the assets under management or administration. These fees were $1.1 billion in first quarter 2011, up 1% from a year ago.

We receive commissions and other fees for providing services to full-service and discount brokerage customers as well as from investment banking activities including equity and bond underwriting. These fees increased to $1.9 billion in first quarter 2011 from $1.6 billion a year ago. These fees include transactional commissions, which are based on the number of

transactions executed at the customer’s direction, and asset-based fees, which are based on the market value of the customer’s assets. Brokerage client assets totaled $1.2 trillion at March 31, 2011, up from $1.1 trillion a year ago.

Card fees increased to $957 million in first quarter 2011, from $865 million a year ago, mainly due to growth in purchase volume and new accounts growth driven by improvements in the economy.

Mortgage banking noninterest income consists of net servicing income and net gains on loan origination/sales activities and totaled $2.0 billion in first quarter 2011, compared with $2.5 billion a year ago. The reduction year over year in mortgage banking noninterest income was primarily driven by a decline in net servicing income.

Net servicing income includes both changes in the fair value of mortgage servicing rights (MSRs) during the period as well as changes in the value of derivatives (economic hedges) used to hedge the MSRs. Net servicing income for first quarter 2011 included a $379 million net MSR valuation gain that was recorded to earnings ($499 million increase in the fair value of the MSRs offset by a $120 million hedge loss) and for first quarter 2010 included a $989 million net MSR valuation gain ($777 million decrease in the fair value of MSRs offset by a $1.8 billion hedge gain). The valuation of our MSRs at the end of first quarter 2011 reflected our assessment of changes in servicing and foreclosure costs, including the estimated impact from regulatory consent orders. See the “Risk Management – Credit Risk Management – Risks Relating to Servicing Activities” section and Note 11 (Legal Actions) to Financial Statements in this Report for information on the regulatory consent orders. The $610 million decline in net MSR valuation gain results for first quarter 2011 compared with first quarter 2010 was primarily due to a decline in hedge carry income. See the “Risk Management – Mortgage Banking Interest Rate and Market Risk” section of this Report for a detailed discussion of our MSRs risks and hedging approach. Our portfolio of loans serviced for others was $1.86 trillion at March 31, 2011, and $1.84 trillion at December 31, 2010. At March 31, 2011, the ratio of MSRs to related loans serviced for others was 0.92%, compared with 0.86% at December 31, 2010.

Income from loan origination/sale activities was $1.2 billion in first quarter 2011 compared with $1.1 billion a year ago. The slight increase in first quarter 2011 was driven by lower provision for loan repurchase losses and higher loan origination volume, offset by lower margins on loan originations.

Net gains on mortgage loan origination/sales activities include the cost of any additions to the mortgage repurchase liability. Mortgage loans are repurchased from third parties based on standard representations and warranties and early payment default clauses in mortgage sale contracts. Additions to the mortgage repurchase liability that were charged against net gains on mortgage loan origination/sales activities during first quarter 2011 totaled $249 million (compared with $402 million for first quarter 2010), of which $214 million ($358 million for first quarter 2010) was for subsequent increases in estimated losses on prior year’s loan sales because of the current economic environment. For additional information about mortgage loan

repurchases, see the “Risk Management – Credit Risk Management – Liability for Mortgage Loan Repurchase Losses” section in this Report.

Residential real estate originations were $84 billion in first quarter 2011 compared with $76 billion a year ago and mortgage applications were $102 billion in first quarter 2011 compared with $125 billion a year ago. The 1-4 family first mortgage unclosed pipeline was $45 billion at March 31, 2011, and $59 billion at March 31, 2010. For additional detail, see the “Risk Management – Mortgage Banking Interest Rate and Market Risk” section and Note 8 (Mortgage Banking Activities) and Note 13 (Fair Values of Assets and Liabilities) to Financial Statements in this Report.

Net gains on debt and equity securities totaled $187 million for first quarter 2011 and $71 million for first quarter 2010, after other-than-temporary impairment (OTTI) write-downs of $121 million for first quarter 2011 and $197 million a year ago.

Noninterest Expense


Table 3: Noninterest Expense

	Quarter ended Mar. 31,				%

(in millions)	2011		2010		Change


Salaries	$	3,454		3,314		4		%
Commission and incentive compensation		2,347		1,992		18
Employee benefits		1,392		1,322		5
Equipment		632		678		(7	)
Net occupancy		752		796		(6	)
Core deposit and other intangibles		483		549		(12	)
FDIC and other deposit assessments		305		301		1
Outside professional services		580		484		20
Contract services		369		347		6
Foreclosed assets		408		386		6
Operating losses		472		208		127
Outside data processing		220		272		(19	)
Postage, stationery and supplies		235		242		(3	)
Travel and entertainment		206		171		20
Advertising and promotion		116		112		4
Telecommunications		134		143		(6	)
Insurance		133		148		(10	)
Operating leases		24		37		(35	)
All other		471		615		(23	)


Total	$	12,733		12,117		5

Noninterest expense was $12.7 billion in first quarter 2011, up 5% from $12.1 billion in first quarter 2010, mostly due to performance-based compensation in brokerage and mortgage, as well as higher operating losses. Commission and incentive compensation expense increased proportionately more than salaries due to higher revenues generated by businesses with revenue-based compensation including the brokerage and mortgage businesses. Volume-related mortgage personnel expense reductions initiated in first quarter 2011 were not fully realized in the first quarter as team member displacement notification periods can lag volume declines. Operating losses of $472 million were substantially all from litigation accruals for foreclosure-related matters.

Merger integration costs totaled $440 million and $380 million in first quarter 2011 and 2010, respectively. Integration expense drove the majority of the increase in outside professional services. First quarter 2011 marked further milestones in our integration of legacy Wells Fargo and Wachovia: we completed our conversion to one common retail brokerage platform and we converted retail banking stores in several eastern states, including Connecticut, Delaware, New Jersey, and New York. With our April conversion of the Pennsylvania retail banking stores, 74% of our banking customers are now on a single deposit system.

Income Tax Expense

Our effective tax rate was 29.5% for first quarter 2011, which included the benefit associated with the realization for tax purposes of a previously written-down investment. Our current estimate of the effective tax rate for the full year 2011 is 32%.

Operating Segment Results

We define our operating segments by product and customer. In fourth quarter 2010, we aligned certain lending businesses into Wholesale Banking from Community Banking to reflect our previously announced restructuring of Wells Fargo Financial. In first quarter 2011, we realigned a private equity business into Wholesale Banking from Community Banking. Prior periods

have been revised to reflect these changes. Table 4 and the following discussion present our results by operating segment. For a more complete description of our operating segments, including additional financial information and the underlying management accounting process, see Note 17 (Operating Segments) to Financial Statements in this Report.

Table 4: Operating Segment Results – Highlights

Wealth, Brokerage

Community Banking

Wholesale Banking

and Retirement

(in billions)

2011

2010

2011

2010

2011

2010

Quarter ended March 31,

Revenue

12.6

14.0

5.5

5.4

3.2

2.9

Net income

2.2

1.4

1.7

1.2

0.3

0.3

Average loans

509.8

550.4

234.7

237.0

42.7

43.8

Average core deposits

548.1

531.5

184.8

161.6

125.4

121.1

Community Banking offers a complete line of diversified financial products and services for consumers and small businesses including investment, insurance and trust services in 39 states and D.C., and mortgage and home equity loans in all 50 states and D.C. through its Regional Banking and Wells Fargo Home Mortgage business units.

Community Banking reported net income of $2.2 billion and revenue of $12.6 billion in first quarter 2011. Revenue declined $1.4 billion from first quarter 2010 driven primarily by a decrease in mortgage banking income due to a decrease in servicing income, lower deposit service charges due to Regulation E and related overdraft policy changes, and lower net interest income from the planned reduction in certain liquidating loan portfolios. Average core deposits increased $16.6 billion, or 3%, as growth in liquid deposits more than offset planned certificates of deposit run-off. We generated strong growth in the number of consumer and business checking accounts (up 7.4% and 5.3%, respectively, from March 31, 2010). Noninterest expense increased from first quarter 2010 due primarily to higher operating losses due to litigation-related accruals and volume driven mortgage-related expenses. The provision for credit losses decreased $2.5 billion from first quarter 2010 and credit quality indicators in most of our consumer and business loan portfolios generally continued to improve. Net credit losses declined in almost all portfolios and we released $850 million in reserves in first quarter 2011, compared with no reserve release a year ago.

Wholesale Banking provides financial solutions across the U.S. and globally to middle market and large corporate customers with annual revenue generally in excess of $20 million. Products and businesses include commercial banking, investment banking and capital markets, securities investment, government and institutional banking, corporate banking, commercial real estate, treasury management, capital finance, international, insurance, real estate capital markets, commercial mortgage servicing, corporate trust, equipment finance, asset backed finance, and asset management.

Wholesale Banking reported net income of $1.7 billion, up $415 million, or 34%, from first quarter 2010. Revenue increased $37 million, or 1%, from the prior year, driven by growth in net interest income due to stronger earning assets, solid deposit growth and higher loan portfolio yields. Noninterest income declined $164 million, or 6%, from prior year as growth in investment banking and capital markets, corporate banking, foreign exchange and real estate capital markets was more than offset by reduced levels of PCI portfolio recoveries, crop insurance gains and trading portfolio income. Noninterest expense increased $115 million, or 4%, from prior year related to higher personnel expenses. Total provision for credit losses of $134 million declined $676 million, or 83%, from first quarter 2010. The decrease included a $150 million allowance release along with a $526 million improvement in credit losses, compared with no allowance release a year ago.

Wealth, Brokerage and Retirement provides a full range of financial advisory services to clients using a planning approach to meet each client’s needs. Wealth Management provides affluent and high net worth clients with a complete range of wealth management solutions including financial planning, private banking, credit, investment management and trust. Family Wealth meets the unique needs of the ultra high net worth customers. Brokerage serves customers’ advisory, brokerage and financial needs as part of one of the largest full-service brokerage firms in the United States. Retirement is a national leader in providing institutional retirement and trust services (including 401(k) and pension plan record keeping) for businesses, retail retirement solutions for individuals, and reinsurance services for the life insurance industry.

Wealth, Brokerage and Retirement earned net income of $339 million in first quarter 2011. Revenue of $3.2 billion included a mix of brokerage commissions, asset-based fees and net interest income. Net interest income was up $32 million compared with first quarter 2010 as higher investment income was driven by solid deposits growth. Noninterest income was up $208 million, or 9%, as higher asset-based fees were partially

offset by lower brokerage transaction revenue and miscellaneous fees. Noninterest expense was up $169 million, or 7%, from first

quarter 2010, primarily due to increased broker commissions from increased production levels.

Balance Sheet Analysis

During first quarter 2011, our total assets, loans and core deposits each declined slightly from December 31, 2010, but the strength of our business model produced record earnings and high rates of internal capital generation as reflected in our improved capital ratios. Tier 1 capital increased to 11.50% as a percentage of total risk-weighted assets, total capital to 15.30%, Tier 1 leverage to 9.27% and Tier 1 common equity to 8.93% at March 31, 2011, up from 11.16%, 15.01%, 9.19% and 8.30%, respectively, at December 31, 2010. At March 31, 2011, core

deposits funded 106% of the loan portfolio, and we have significant capacity to add loans and higher yielding long-term MBS to generate future revenue and earnings growth.

The following discussion provides additional information about the major components of our balance sheet. Information about changes in our asset mix and about our capital is included in the “Earnings Performance – Net Interest Income” and “Capital Management” sections of this Report.

Securities Available for Sale

Table 5: Securities Available for Sale – Summary

March 31, 2011

December 31, 2010

Net

Net

unrealized

Fair

unrealized

Fair

(in millions)

Cost

gain

value

Cost

gain

value

Debt securities available for sale

155,147

7,751

162,898

160,071

7,394

167,465

Marketable equity securities

3,883

1,125

5,008

4,258

931

5,189

Total securities available for sale

159,030

8,876

167,906

164,329

8,325

172,654

Table 5 presents a summary of our securities available-for-sale portfolio. Securities available for sale consist of both debt and marketable equity securities. We hold debt securities available for sale primarily for liquidity, interest rate risk management and long-term yield enhancement. Accordingly, this portfolio consists primarily of very liquid, high quality federal agency debt and privately issued MBS. The total net unrealized gains on securities available for sale were $8.9 billion at March 31, 2011, up from net unrealized gains of $8.3 billion at December 31, 2010, primarily due to narrowing of credit spreads.

We analyze securities for OTTI quarterly or more often if a potential loss-triggering event occurs. Of the $121 million OTTI write-downs in first quarter 2011, $80 million related to debt securities. There were no OTTI write-downs for marketable equity securities and there were $41 million in OTTI write-downs related to nonmarketable equity securities. For a discussion of our OTTI accounting policies and underlying considerations and analysis see Note 1 (Summary of Significant Accounting Policies – Securities) in our 2010 Form 10-K and Note 4 (Securities Available for Sale) to Financial Statements in this Report.

At March 31, 2011, debt securities available for sale included $21 billion of municipal bonds, of which 84% were rated “A-” or better, based on external, and in some cases internal, ratings. Additionally, some of these bonds are guaranteed against loss by bond insurers. These bonds are predominantly investment grade and were generally underwritten in accordance with our own investment standards prior to the determination to

purchase, without relying on the bond insurer’s guarantee in making the investment decision. These municipal bonds will continue to be monitored as part of our ongoing impairment analysis of our securities available for sale.

The weighted-average expected maturity of debt securities available for sale was 6.5 years at March 31, 2011. Because 66% of this portfolio is MBS, the expected remaining maturity may differ from contractual maturity because borrowers generally have the right to prepay obligations before the underlying mortgages mature. The estimated effect of a 200 basis point increase or decrease in interest rates on the fair value and the expected remaining maturity of the MBS available for sale are shown in Table 6.

Table 6: Mortgage-Backed Securities



						Expected

			Net			remaining

	Fair		unrealized			maturity

(in billions)	value		gain (loss)			(in years)


At March 31, 2011	$	108.3		5.9			5.0

At March 31, 2011, assuming a 200 basis point:

Increase in interest rates		97.2		(5.2	)		6.4

Decrease in interest rates		115.6		13.2			3.6

See Note 4 (Securities Available for Sale) to Financial Statements in this Report for securities available for sale by security type.

Balance Sheet Analysis (continued)

Loan Portfolio

Table 7: Loan Portfolios


	Mar. 31,		Dec. 31,

(in millions)	2011		2010


Commercial	$	323,222		322,058

Consumer		427,933		435,209


Total loans	$	751,155		757,267

A discussion of average loan balances and a comparative detail of average loan balances is included in Table 1 under “Earnings Performance – Net Interest Income” earlier in this Report. Year-end balances and other loan related information

are in Note 5 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Deposits

Deposits totaled $837.7 billion at March 31, 2011, compared with $847.9 billion at December 31, 2010. Table 8 provides additional detail regarding deposits. Comparative detail of average deposit balances is provided in Table 1 under “Earnings Performance – Net Interest Income” earlier in this Report. Total core deposits were $795.0 billion at March 31, 2011, down $3.2 billion from $798.2 billion at December 31, 2010.

Table 8: Deposits


				% of						% of

	March 31		,	total			December 31		,	total			%

(in millions)	2011			deposits			2010			deposits			Change


Noninterest-bearing	$	190,935			23	%	$	191,231			23	%		—

Interest-bearing checking		55,632			6			63,440			7			(12	)

Market rate and other savings		441,383			53			431,883			51			2

Savings certificates		73,063			9			77,292			9			(5	)

Foreign deposits (1)		34,025			4			34,346			4			(1	)


Core deposits		795,038			95			798,192			94			—
Other time and savings deposits		19,288			2			19,412			2			(1	)

Other foreign deposits		23,336			3			30,338			4			(23	)


Total deposits	$	837,662			100	%	$	847,942			100	%		(1	)


(1)		Reflects Eurodollar sweep balances included in core deposits.

Fair Valuation of Financial Instruments

We use fair value measurements to record fair value adjustments to certain financial instruments and to determine fair value disclosures. See our 2010 Form 10-K for a description of our critical accounting policy related to fair valuation of financial instruments.

We may use independent pricing services and brokers to obtain fair values based on quoted prices. We determine the most appropriate and relevant pricing service for each security class and generally obtain one quoted price for each security. For certain securities, we may use internal traders to obtain quoted prices. Quoted prices are subject to our internal price verification procedures. We validate prices received using a variety of methods, including, but not limited to, comparison to pricing services, corroboration of pricing by reference to other independent market data such as secondary broker quotes and relevant benchmark indices, and review of pricing by Company personnel familiar with market liquidity and other market-related conditions.

Table 9 presents the summary of the fair value of financial instruments recorded at fair value on a recurring basis, and the amounts measured using significant Level 3 inputs (before derivative netting adjustments). The fair value of the remaining assets and liabilities were measured using valuation methodologies involving market-based or market-derived information, collectively Level 1 and 2 measurements.

Table 9: Fair Value Level 3 Summary



	March 31, 2011					December 31, 2010

	Total					Total

($ in billions)	balance			Level 3 (1)		balance		Level 3 (1)


Assets carried at fair value	$	277.1			47.6		293.1		47.9

As a percentage of total assets		22	%		4		23		4

Liabilities carried at fair value	$	24.7			5.7		21.2		6.4

As a percentage of total liabilities		2	%		1		2		1


(1)		Before derivative netting adjustments.

See Note 13 (Fair Values of Assets and Liabilities) to Financial Statements in this Report for a complete discussion on our use of fair valuation of financial instruments, our related measurement techniques and the impact to our financial statements.

Off-Balance Sheet Arrangements

In the ordinary course of business, we engage in financial transactions that are not recorded in the balance sheet, or may be recorded in the balance sheet in amounts that are different from the full contract or notional amount of the transaction. These transactions are designed to (1) meet the financial needs of customers, (2) manage our credit, market or liquidity risks, (3) diversify our funding sources, and/or (4) optimize capital.

Off-Balance Sheet Transactions with Unconsolidated Entities

We routinely enter into various types of on- and off-balance sheet transactions with special purpose entities (SPEs), which are corporations, trusts or partnerships that are established for a limited purpose. Historically, the majority of SPEs were formed in connection with securitization transactions. For more information on securitizations, including sales proceeds and cash flows from securitizations, see Note 7 (Securitizations and Variable Interest Entities) to Financial Statements in this Report.

Risk Management

All financial institutions must manage and control a variety of business risks that can significantly affect their financial performance. Key among those are credit, asset/liability and market risk.

For more information about how we manage these risks, see the “Risk Management” section in our 2010 Form 10-K. The discussion that follows is intended to provide an update on these risks.

Credit Risk Management

Table 10: Total Loans Outstanding by Portfolio Segment and Class of Financing Receivable


	Mar. 31		,	Dec. 31		,

(in millions)	2011			2010


Commercial:

Commercial and industrial	$	150,857			151,284

Real estate mortgage		101,084			99,435

Real estate construction		22,868			25,333

Lease financing		12,937			13,094

Foreign (1)		35,476			32,912


Total commercial		323,222			322,058


Consumer:

Real estate 1-4 family first mortgage		226,509			230,235

Real estate 1-4 family junior lien mortgage		93,041			96,149

Credit card		20,996			22,260

Other revolving credit and installment		87,387			86,565


Total consumer		427,933			435,209


Total loans	$	751,155			757,267


(1)		Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign if the borrower’s primary address is outside of the United States.

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

A key to our credit risk management is adhering to a well controlled underwriting process, which we believe is appropriate for the needs of our customers as well as investors who purchase the loans or securities collateralized by the loans. We approve applications and make loans only if we believe the customer has the ability to repay the loan or line of credit according to all its terms. Our underwriting of loans collateralized by residential real property includes appraisals or automated valuation models (AVMs) to support property values. AVMs are computer-based tools used to estimate the market value of homes. AVMs are a lower-cost alternative to

appraisals and support valuations of large numbers of properties in a short period of time. AVMs estimate property values based on processing large volumes of market data including market comparables and price trends for local market areas. The primary risk associated with the use of AVMs is that the value of an individual property may vary significantly from the average for the market area. We have processes to periodically validate AVMs and specific risk management guidelines addressing the circumstances when AVMs may be used. Generally AVMs are used in underwriting to support property values on loan originations only where the loan amount is under $250,000. For underwriting residential property loans of $250,000 or more, we generally require property visitation appraisals by qualified independent appraisers.

Non-Strategic and Liquidating Portfolios We continually evaluate and modify our credit policies to address appropriate levels of risk. Accordingly, from time to time, we designate certain portfolios and loan products as non-strategic or high risk to limit or cease their continued origination as we actively work to limit losses and reduce our exposures.

Table 11 identifies our non-strategic and liquidating loan portfolios. These portfolios have decreased 34% since the merger with Wachovia at December 31, 2008, and decreased 5% from the end of 2010. They consist primarily of the Pick-a-Pay mortgage portfolio and non Pick-a-Pay PCI loans acquired in our acquisition of Wachovia as well as some portfolios from legacy Wells Fargo home equity and Wells Fargo Financial. Effective first quarter 2011, we added our education finance government guaranteed loan portfolio to the non-strategic and liquidating portfolios as there is no longer a U.S. Government guaranteed student loan program available to private financial institutions pursuant to legislation in 2010.

The legacy Wells Fargo Financial debt consolidation portfolio included $1.2 billion of loans at March 31, 2011, and December 31, 2010, that were considered prime based on secondary market standards. The remainder is non-prime but was originated with standards to reduce credit risk.

Analysis of the Pick-a-Pay and the commercial and industrial and CRE domestic PCI portfolios is presented below in the Significant Credit Concentrations and Portfolios Reviews section.

Risk Management – Credit Risk Management (continued)

Table 11: Non-Strategic and Liquidating Loan Portfolios


	Outstanding balance

	Mar. 31		,	Dec. 31		,	Dec. 31		,	Dec. 31		,
(in millions)	2011			2010			2009			2008


Commercial:
Commercial and industrial, CRE and foreign PCI loans (1)	$	7,507			7,935			12,988			18,704


Total commercial		7,507			7,935			12,988			18,704


Consumer:
Pick-a-Pay mortgage (1)		71,506			74,815			85,238			95,315
Liquidating home equity		6,568			6,904			8,429			10,309
Legacy Wells Fargo Financial indirect auto		4,941			6,002			11,253			18,221
Legacy Wells Fargo Financial debt consolidation		18,344			19,020			22,364			25,299
Education Finance - government guaranteed (2)		16,907			17,510			21,150			20,465
Other PCI loans (1)		1,048			1,118			1,688			2,478


Total consumer		119,314			125,369			150,122			172,087


Total non-strategic and liquidating loan portfolios	$	126,821			133,304			163,110			190,791


(1)		Net of purchase accounting adjustments related to PCI loans.

(2)		Effective first quarter 2011, we included our education finance government guaranteed loan portfolio as there is no longer a U. S. Government guaranteed student loan program available to private financial institutions, pursuant to legislation in 2010. Prior periods have been adjusted to reflect this change.

Significant Credit Concentrations and Portfolio Reviews Measuring and monitoring our credit risk is an ongoing process that tracks delinquencies, collateral values, FICO scores, economic trends by geographic areas, loan-level risk grading for certain portfolios (typically commercial) and other indications of credit risk. Our credit risk monitoring process is designed to enable early identification of developing risk and to support our determination of an adequate allowance for credit losses. The following analysis reviews the relevant concentrations and certain credit metrics of our significant portfolios. See Note 5 (Loans and Allowance for Credit Losses) to Financial Statements in this Report for more analysis and credit metric information.

COMMERCIAL REAL ESTATE (CRE) The CRE portfolio consists of both CRE mortgage loans and CRE construction loans. The combined CRE loans outstanding totaled $124.0 billion at March 31, 2011, or 17% of total loans. CRE construction loans totaled $22.9 billion at March 31, 2011, or 3% of total loans. CRE mortgage loans totaled $101.1 billion at March 31, 2011, or 14% of total loans, of which over 38% was to owner-occupants. Table 12 summarizes CRE loans by state and property type with the related nonaccrual totals. CRE nonaccrual loans totaled 6% of the non-PCI CRE outstanding balance at March 31, 2011. The portfolio is diversified both geographically and by property type. The largest geographic concentrations of combined CRE loans are in California and Florida, which represented 24% and 10% of the total CRE portfolio, respectively. By property type, the largest concentrations are office buildings at 25% and industrial/warehouse at 11% of the portfolio.

The underwriting of CRE loans primarily focuses on cash flows and creditworthiness of the customer, in addition to collateral valuations. To identify and manage newly emerging problem CRE loans, we employ a high level of surveillance and regular customer interaction to understand and manage the risks associated with these assets, including regular loan reviews and appraisal updates. As issues are identified, management is engaged and dedicated workout groups are put in place to manage problem assets. At March 31, 2011, the recorded investment in PCI CRE loans totaled $5.4 billion, down from $12.3 billion at December 31, 2008, reflecting the reduction resulting from loan resolutions and write-downs.

Table 12: CRE Loans by State and Property Type


	March 31, 2011

	Real estate mortgage					Real estate construction				Total					% of

	Nonaccrual		Outstanding			Nonaccrual		Outstanding		Nonaccrual		Outstanding			total
(in millions)	loans		balance (1)			loans		balance (1)		loans		balance (1)			loans


By state:
PCI loans (1):
Florida	$	-		449			-		436		-		885			*	%
California		-		606			-		174		-		780			*
New York		-		288			-		223		-		511			*
Virginia		-		212			-		241		-		453			*
North Carolina		-		98			-		307		-		405			*
Other		-		1,311			-		1,066		-		2,377	(2)		*


Total PCI loans	$	-		2,964			-		2,447		-		5,411			*	%


All other loans:
California	$	1,201		25,343			323		3,262		1,524		28,605			4	%
Florida		858		9,493			348		2,083		1,206		11,576			2
Texas		370		6,825			140		1,978		510		8,803			1
North Carolina		377		4,497			224		1,322		601		5,819			*
New York		58		3,953			13		1,069		71		5,022			*
Virginia		88		3,380			44		1,423		132		4,803			*
Georgia		393		3,587			111		789		504		4,376			*
Arizona		231		3,557			93		673		324		4,230			*
Colorado		109		3,039			59		482		168		3,521			*
Washington		60		2,907			32		440		92		3,347			*
Other		1,494		31,539			852		6,900		2,346		38,439	(3)		5


Total all other loans	$	5,239		98,120			2,239		20,421		7,478		118,541			16	%


Total	$	5,239		101,084			2,239		22,868		7,478		123,952			17	%


By property:
PCI loans (1):
Apartments	$	-		737			-		583		-		1,320			*	%
Office buildings		-		938			-		281		-		1,219			*
1-4 family land		-		239			-		429		-		668			*
Retail (excluding shopping center)		-		288			-		94		-		382			*
Land (excluding 1-4 family)		-		50			-		290		-		340			*
Other		-		712			-		770		-		1,482			*


Total PCI loans	$	-		2,964			-		2,447		-		5,411			*	%


All other loans:
Office buildings	$	1,203		27,386			107		2,139		1,310		29,525			4	%
Industrial/warehouse		727		13,175			45		802		772		13,977			2
Apartments		387		9,515			282		3,200		669		12,715			2
Retail (excluding shopping center)		612		10,584			90		819		702		11,403			2
Shopping center		337		8,010			188		1,587		525		9,597			1
Real estate - other		302		8,629			17		342		319		8,971			1
Hotel/motel		497		6,168			46		852		543		7,020			*
Land (excluding 1-4 family)		47		442			596		6,553		643		6,995			*
Institutional		84		2,657			9		190		93		2,847			*
Agriculture		142		2,551			-		27		142		2,578			*
Other		901		9,003			859		3,910		1,760		12,913			2


Total all other loans	$	5,239		98,120			2,239		20,421		7,478		118,541			16	%


Total	$	5,239		101,084	(4)		2,239		22,868		7,478		123,952			17	%


*		Less than 1%.

(1)		For PCI loans, amounts represent carrying value. PCI loans are considered to be accruing due to the existence of the accretable yield and not based on consideration given to contractual interest payments.

(2)		Includes 35 states; no state had loans in excess of $405 million.

(3)		Includes 40 states; no state had loans in excess of $3.0 billion.

(4)		Includes $38.6 billion of loans to owner-occupants where 51% or more of the property is used in the conduct of their business.

Risk Management – Credit Risk Management (continued)

COMMERCIAL AND INDUSTRIAL LOANS AND LEASE FINANCING For purposes of portfolio risk management, we aggregate commercial and industrial loans and lease financing according to market segmentation and standard industry codes. Table 13 summarizes commercial and industrial loans and lease financing by industry with the related nonaccrual totals. We believe this portfolio has experienced less credit deterioration than our CRE portfolios. For the quarter ended March 31, 2011, the commercial and industrial loans and lease financing portfolios had (1) a lower percentage of loans 90 days or more past due and still accruing of 0.21%; 0.27% for CRE, (2) a lower percentage of nonperforming loans to total loans outstanding of 1.68%; 6.03% for CRE. Also, the annualized loss rate for both portfolios declined from first quarter 2010. We believe this portfolio is well underwritten and is diverse in its risk with relatively even concentrations across several industries. Our credit risk management process for this portfolio primarily focuses on a customer’s ability to repay the loan through their cash flow. Generally, the collateral securing this portfolio represents a secondary source of repayment.

A majority of our commercial and industrial loans and lease financing portfolio is secured by short-term liquid assets, such as accounts receivable, inventory and securities, as well as long-lived assets, such as equipment and other business assets.

Table 13: Commercial and Industrial Loans and Lease Financing by Industry


	March 31, 2011

						% of
	Nonaccrual		Outstanding			total
(in millions)	loans		balance (1)			loans


PCI loans (1):
Insurance	$	-		94			*	%
Investors		-		81			*
Technology		-		67			*
Cyclical retailers		-		51			*
Healthcare		-		38			*
Residential construction		-		38			*
Other		-		239	(2)		*


Total PCI loans	$	-		608			*	%


All other loans:
Financial institutions	$	138		11,285			2	%
Cyclical retailers		52		9,683			1
Food and beverage		66		8,423			1
Oil and gas		142		7,911			1
Healthcare		74		7,693			1
Industrial equipment		87		6,773			*
Transportation		25		6,451			*
Business services		69		5,923			*
Investors		92		5,678			*
Real estate		96		5,654			*
Technology		21		5,432			*
Utilities		2		4,712			*
Other		1,884		77,568	(3)		10


Total all other loans	$	2,748		163,186			22	%


Total	$	2,748		163,794			22	%


*		Less than 1%.

(1)		For PCI loans, amounts represent carrying value. PCI loans are considered to be accruing due to the existence of the accretable yield and not based on consideration given to contractual interest payments.

(2)		No other single category had loans in excess of $32.7 million.

(3)		No other single category had loans in excess of $4.6 billion. The next largest categories included public administration, hotel/restaurant, securities firms, non-residential construction and leisure.

During the recent credit cycle, we have experienced an increase in requests for extensions of commercial and industrial and CRE loans. All extensions granted are based on a re-underwriting of the loan and our assessment of the borrower’s ability to perform under the agreed-upon terms. At the time of extension, borrowers are generally performing in accordance with the contractual loan terms. Extension terms generally range from six to thirty-six months and may require that the borrower provide additional economic support in the form of partial repayment, amortization or additional collateral or guarantees. In cases where the value of collateral or financial condition of the borrower is insufficient to repay our loan, we may rely upon the support of an outside repayment guarantee in providing the extension. In considering the impairment status of the loan, we evaluate the collateral and future cash flows as well as the anticipated support of any repayment guarantor. When performance under a loan is not reasonably assured, including the performance of the guarantor, we place the loan on nonaccrual status and we charge-off all or a portion of the loan based on the fair value of the collateral securing the loan.

Our ability to seek performance under a guarantee is directly related to the guarantor’s creditworthiness, capacity and willingness to perform, which is evaluated on an annual basis, or more frequently as warranted. Our evaluation is based on the most current financial information available and is focused on various key financial metrics, including net worth, leverage, and current and future liquidity. We consider the guarantor’s reputation, creditworthiness, and willingness to work with us based on our analysis as well as other lenders’ experience with the guarantor. Our assessment of the guarantor’s credit strength is reflected in our loan risk ratings for such loans. The loan risk rating is an important factor in our allowance methodology for commercial and industrial and CRE loans.

Risk Management – Credit Risk Management (continued)

REAL ESTATE 1-4 FAMILY MORTGAGE LOANS The concentrations of real estate 1-4 family mortgage loans by state are presented in Table 14. Our real estate 1-4 family mortgage loans to borrowers in California represented approximately 14% of total loans (3% of this amount were PCI loans from Wachovia) at March 31, 2011, mostly within the larger metropolitan areas, with no single area consisting of more than 3% of total loans. Changes in real estate values and underlying economic or market conditions for these areas are monitored continuously within our credit risk management process.

Some of our real estate 1-4 family mortgage loans (representing first mortgage and home equity products) include an interest-only feature as part of the loan terms. At March 31, 2011, these interest-only loans were approximately 24% of total commercial and consumer loans, compared with 25% at December 31, 2010. Substantially all of these interest-only loans are considered to be prime or near prime. We believe we have manageable adjustable-rate mortgage (ARM) reset risk across our Wells Fargo originated and owned mortgage loan portfolios. We do not offer option ARM products, nor do we offer variable-rate mortgage products with fixed payment amounts, commonly referred to within the financial services industry as negative amortizing mortgage loans. Our option ARM portfolio was acquired in the Wachovia merger on December 31, 2008.

Table 14: Real Estate 1-4 Family Mortgage Loans by State


	March 31, 2011

	Real estate		Real estate		Total real
	1-4 family		1-4 family		estate 1-4		% of
	first		junior lien		family		total
(in millions)	mortgage		mortgage		mortgage		loans


PCI loans:
California	$	21,139		47		21,186		3	%
Florida		3,169		50		3,219		*
New Jersey		1,344		31		1,375		*
Other (1)		6,589		111		6,700		*


Total PCI loans	$	32,241		239		32,480		4	%


All other loans:
California	$	55,137		25,626		80,763		11	%
Florida		16,848		7,808		24,656		3
New Jersey		8,917		6,412		15,329		2
New York		8,348		3,718		12,066		2
Virginia		6,048		4,623		10,671		1
Pennsylvania		6,126		4,032		10,158		1
North Carolina		5,797		3,479		9,276		1
Georgia		4,725		3,520		8,245		1
Texas		6,531		1,423		7,954		1
Other (2)		75,791		32,161		107,952		14


Total all other loans	$	194,268		92,802		287,070		38	%


Total	$	226,509		93,041		319,550		43	%


*		Less than 1%.

(1)		Consists of 46 states; no state had loans in excess of $786 million.

(2)		Consists of 41 states; no state had loans in excess of $6.9 billion. Includes $15.9 billion in loans which are insured by the Federal Housing Authority (FHA) or guaranteed by the Department of Veterans Affairs (VA).

PURCHASED CREDIT-IMPAIRED (PCI) LOANS As of December 31, 2008, certain of the loans acquired from Wachovia had evidence of credit deterioration since their origination, and it was probable that we would not collect all contractually required principal and interest payments. Such loans identified at the time of the acquisition were accounted for in the acquisition using the measurement provisions for PCI loans. PCI loans were recorded at fair value at the date of acquisition, and the historical allowance for credit losses related to these loans was not carried over. Such loans are considered to be accruing due to the existence of the accretable yield and not based on consideration given to contractual interest payments.

A nonaccretable difference was established in purchase accounting for PCI loans to absorb losses expected at that time on those loans. Amounts absorbed by the nonaccretable difference do not affect the income statement or the allowance for credit losses.

Substantially all commercial and industrial, CRE and foreign PCI loans are accounted for as individual loans. Conversely, Pick-a-Pay and other consumer PCI loans have been aggregated into several pools based on common risk characteristics. Each pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.

Resolutions of loans may include sales to third parties, receipt of payments in settlement with the borrower, or foreclosure of the collateral. Our policy is to remove an individual loan from a pool based on comparing the amount received from its resolution with its contractual amount. Any difference between these amounts is absorbed by the nonaccretable difference. This removal method assumes that the amount received from resolution approximates pool performance expectations. The accretable yield percentage is unaffected by the resolution and any changes in the effective yield for the remaining loans in the pool are addressed by our quarterly cash flow evaluation process for each pool. For loans that are resolved by payment in full, there is no release of the nonaccretable difference for the pool because there is no difference between the amount received at resolution and the contractual amount of the loan. Modified PCI loans are not removed from a pool even if those loans would otherwise be deemed TDRs. Modified PCI loans that are accounted for individually are considered TDRs, and removed from PCI accounting, if there has been a concession granted in excess of the original nonaccretable difference.

During first quarter 2011, we recognized in income $71 million released from nonaccretable difference related to commercial PCI loans due to payoffs and dispositions of these loans. We also transferred $115 million from the nonaccretable difference to the accretable yield and $393 million of losses from loan resolutions and write-downs were absorbed by the nonaccretable difference. Table 15 provides an analysis of changes in the nonaccretable difference related to principal that is not expected to be collected.

Risk Management – Credit Risk Management (continued)

Table 15: Changes in Nonaccretable Difference for PCI Loans


							Other
(in millions)	Commercial			Pick-a-Pay			consumer			Total


Balance at December 31, 2008	$	10,410			26,485			4,069			40,964
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1)		(330	)		-			-			(330	)
Loans resolved by sales to third parties (2)		(86	)		-			(85	)		(171	)
Reclassification to accretable yield for loans with improving credit-related cash flows (3)		(138	)		(27	)		(276	)		(441	)
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)		(4,853	)		(10,218	)		(2,086	)		(17,157	)


Balance at December 31, 2009		5,003			16,240			1,622			22,865
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1)		(817	)		-			-			(817	)
Loans resolved by sales to third parties (2)		(172	)		-			-			(172	)
Reclassification to accretable yield for loans with improving credit-related cash flows (3)		(726	)		(2,356	)		(317	)		(3,399	)
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)		(1,698	)		(2,959	)		(391	)		(5,048	)


Balance at December 31, 2010		1,590			10,925			914			13,429
Release of nonaccretable difference due to:
Loans resolved by settlement with borrower (1)		(53	)		-			-			(53	)
Loans resolved by sales to third parties (2)		(18	)		-			-			(18	)
Reclassification to accretable yield for loans with improving credit-related cash flows (3)		(94	)		-			(21	)		(115	)
Use of nonaccretable difference due to:
Losses from loan resolutions and write-downs (4)		(30	)		(299	)		(64	)		(393	)


Balance at March 31, 2011	$	1,395			10,626			829			12,850


(1)		Release of the nonaccretable difference for settlement with borrower, on individually accounted PCI loans, increases interest income in the period of settlement. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations.

(2)		Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale.

(3)		Reclassification of nonaccretable difference to accretable yield for loans with increased cash flow estimates will result in increased interest income as a prospective yield adjustment over the remaining life of the loan or pool of loans.

(4)		Write-downs to net realizable value of PCI loans are absorbed by the nonaccretable difference when severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.

Since the Wachovia acquisition, we have released $5.5 billion in nonaccretable difference for certain PCI loans and pools of PCI loans, including $4.0 billion transferred from the nonaccretable difference to the accretable yield and $1.5 billion released to income through loan resolutions. We have provided $1.6 billion in the allowance for credit losses for certain PCI loans or pools of PCI loans that have had credit-related decreases to cash flows expected to be collected. The net result is a $3.9 billion reduction from December 31, 2008 through March 31, 2011, in our initial expected losses on all PCI loans.

At March 31, 2011, the allowance for credit losses in excess of nonaccretable difference on certain PCI loans was $257 million. The allowance is necessary to absorb credit-related decreases in cash flows expected to be collected since acquisition and primarily relates to individual PCI loans. Table 16 analyzes the actual and projected loss results on PCI loans since the acquisition of Wachovia on December 31, 2008, through March 31, 2011.

Table 16: Actual and Projected Loss Results on PCI Loans


						Other
(in millions)	Commercial			Pick-a-Pay		consumer			Total


Release of unneeded nonaccretable difference due to:
Loans resolved by settlement with borrower (1)	$	1,200			-		-			1,200
Loans resolved by sales to third parties (2)		276			-		85			361
Reclassification to accretable yield for loans with improving credit-related cash flows (3)		958			2,383		614			3,955


Total releases of nonaccretable difference due to better than expected losses		2,434			2,383		699			5,516
Provision for worse than originally expected losses (4)		(1,573	)		-		(61	)		(1,634	)


Actual and projected losses on PCI loans less than originally expected	$	861			2,383		638			3,882


(1)		Release of the nonaccretable difference for settlement with borrower, on individually accounted PCI loans, increases interest income in the period of settlement. Pick-a-Pay and Other consumer PCI loans do not reflect nonaccretable difference releases due to pool accounting for those loans, which assumes that the amount received approximates the pool performance expectations.

(2)		Release of the nonaccretable difference as a result of sales to third parties increases noninterest income in the period of the sale.

(3)		Reclassification of nonaccretable difference to accretable yield for loans with increased cash flow estimates will result in increased interest income as a prospective yield adjustment over the remaining life of the loan or pool of loans.

(4)		Provision for additional losses recorded as a charge to income, when it is estimated that the cash flows expected to be collected for a PCI loan or pool of loans have decreased subsequent to the acquisition.

For further detail on PCI loans, see Note 5 (Loans and Allowance
for Credit Losses) to Financial Statements in this Report.

Risk Management – Credit Risk Management (continued)

PICK-A-PAY PORTFOLIO The Pick-a-Pay portfolio was one of the consumer residential first mortgage portfolios we acquired from Wachovia. We considered a majority of the Pick-a-Pay loans to be PCI loans. The Pick-a-Pay portfolio is a liquidating portfolio, as Wachovia ceased originating new Pick-a-Pay loans in 2008.

Real estate 1-4 family junior lien mortgages and lines of credit associated with Pick-a-Pay loans are reported in the Home Equity core portfolio. The Pick-a-Pay portfolio includes loans

that offer payment options (Pick-a-Pay option payment loans), and also includes loans that were originated without the option payment feature, loans that no longer offer the option feature as a result of our modification efforts since the acquisition, and loans where the customer voluntarily converted to a fixed-rate product. The Pick-a-Pay portfolio is included in the consumer real estate 1-4 family first mortgage class of loans throughout this Report. Table 17 provides balances over time related to the types of loans included in the portfolio.

Table 17: Pick-a-Pay Portfolio – Balances Over Time


	March 31,					December 31,
	2011					2010					2008
	Adjusted					Adjusted					Adjusted
	unpaid					unpaid					unpaid
	principal					principal					principal
(in millions)	balance		% of total			balance		% of total			balance		% of total


Option payment loans (1)	$	46,908		58	%	$	49,958		59	%	$	99,937		86	%
Non-option payment adjustable-rate and fixed-rate loans (1)		10,900		14			11,070		13			15,763		14
Full-term loan modifications (1)		22,779		28			23,132		28			-		-


Total adjusted unpaid principal balance (1)	$	80,587		100	%	$	84,160		100	%	$	115,700		100	%


Total carrying value	$	71,506				$	74,815				$	95,315


(1)		Adjusted unpaid principal balance includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.

PCI loans in the Pick-a-Pay portfolio had an adjusted unpaid principal balance of $40.7 billion and a carrying value of $31.4 billion at March 31, 2011. The carrying value of the PCI loans is net of remaining purchase accounting write-downs, which reflected their fair value at acquisition. Upon acquisition, we recorded a $22.4 billion write-down in purchase accounting on Pick-a-Pay loans that were impaired.

Due to the sustained positive performance observed on the Pick-a-Pay portfolio compared with the original acquisition estimates, we have reclassified $2.4 billion from the nonaccretable difference to the accretable yield since the Wachovia merger. This improvement in the lifetime credit outlook for this portfolio is primarily attributable to the significant modification efforts as well as the portfolio’s delinquency stabilization. This improvement in the credit outlook is expected to be realized over the remaining life of the portfolio, which is estimated to have a weighted-average life of approximately nine years. The accretable yield percentage in first quarter 2011 was 4.54%, consistent with fourth quarter 2010. Fluctuations in the accretable yield are driven by changes in interest rate indices for variable rate PCI loans, prepayment assumptions, and expected principal and interest payments over the estimated life of the portfolio. Changes in the projected timing of cash flow events, including loan liquidations, modifications and short sales, can also affect the accretable yield percentage and the estimated weighted-average life of the portfolio.

Pick-a-Pay option payment loans may be adjustable or fixed rate. They are home mortgages on which the customer has the option each month to select from among four payment options: (1) a minimum payment as described below, (2) an interest-only payment, (3) a fully amortizing 15-year payment, or (4) a fully amortizing 30-year payment.

The minimum monthly payment for substantially all of our Pick-a-Pay loans is reset annually. The new minimum monthly payment amount usually cannot increase by more than 7.5% of the then-existing principal and interest payment amount. The minimum payment may not be sufficient to pay the monthly interest due and in those situations a loan on which the customer has made a minimum payment is subject to “negative amortization,” where unpaid interest is added to the principal balance of the loan. The amount of interest that has been added to a loan balance is referred to as “deferred interest.” Total deferred interest of $2.5 billion at March 31, 2011, was down from $2.7 billion at December 31, 2010, due to loan modification efforts as well as falling interest rates resulting in the minimum payment option covering the interest and some principal on many loans. At March 31, 2011, approximately 76% of customers choosing the minimum payment option did not defer interest.

Deferral of interest on a Pick-a-Pay loan may continue as long as the loan balance remains below a pre-defined principal cap, which is based on the percentage that the current loan balance represents to the original loan balance. Loans with an original loan-to-value (LTV) ratio equal to or below 85% have a cap of 125% of the original loan balance, and these loans represent substantially all the Pick-a-Pay portfolio. Loans with an original LTV ratio above 85% have a cap of 110% of the original loan balance. Most of the Pick-a-Pay loans on which there is a deferred interest balance re-amortize (the monthly payment amount is reset or “recast”) on the earlier of the date when the loan balance reaches its principal cap, or the 10-year anniversary of the loan. For a small population of Pick-a-Pay loans, the recast occurs at the five-year anniversary. After a recast, the customers’ new payment terms are reset to the amount necessary to repay the balance over the remainder of the original loan term.

Due to the terms of the Pick-a-Pay portfolio, there is little recast risk over the next three years. Based on assumptions of a flat rate environment, if all eligible customers elect the minimum payment option 100% of the time and no balances prepay, we would expect the following balances of loans to recast based on reaching the principal cap: $1 million for the remainder of 2011, $3 million in 2012, and $30 million in 2013. In first quarter 2011, the amount of loans recast based on reaching the principal cap was $2 million. In addition, in a flat rate environment, we would expect the following balances of loans to start fully amortizing due to reaching their recast anniversary date and also having a payment change at the recast date greater than the annual 7.5% reset: $22 million for the remainder of 2011, $65 million in 2012, and $265 million in 2013. In first quarter 2011, the amount of loans reaching their recast anniversary date and also having a payment change over the annual 7.5% reset was $3 million.

Table 18 reflects the geographic distribution of the Pick-a-Pay portfolio broken out between PCI loans and all other loans. In stressed housing markets with declining home prices and increasing delinquencies, the LTV ratio is a useful metric in predicting future real estate 1-4 family first mortgage loan performance, including potential charge-offs. Because PCI loans were initially recorded at fair value, including write-downs for expected credit losses, the ratio of the carrying value to the current collateral value will be lower compared with the LTV based on the adjusted unpaid principal balance. For informational purposes, we have included both ratios for PCI loans in the following table.

Risk Management – Credit Risk Management (continued)

Table 18: Pick-a-Pay Portfolio (1)


	March 31, 2011

	PCI loans										All other loans

								Ratio of
	Adjusted							carrying
	unpaid		Current					value to					Current
	principal		LTV			Carrying		current			Carrying		LTV
(in millions)	balance (2)		ratio (3)			value (4)		value			value (4)		ratio (3)


California	$	27,645		119	%	$	20,952		90	%	$	19,571		83	%
Florida		3,782		125			2,878		90			4,152		103
New Jersey		1,409		93			1,235		80			2,512		78
Texas		365		79			332		72			1,636		65
New York		781		92			682		79			1,087		81
Other states		6,692		109			5,353		86			11,116		86

Total Pick-a-Pay loans	$	40,674				$	31,432				$	40,074


(1)		The individual states shown in this table represent the top five states based on the total net carrying value of the Pick-a-Pay loans at the beginning of 2011.

(2)		Adjusted unpaid principal balance includes write-downs taken on loans where severe delinquency (normally 180 days) or other indications of severe borrower financial stress exist that indicate there will be a loss of contractually due amounts upon final resolution of the loan.

(3)		The current LTV ratio is calculated as the adjusted unpaid principal balance divided by the collateral value. Collateral values are generally determined using automated valuation models (AVM) and are updated quarterly. AVMs are computer-based tools used to estimate market values of homes based on processing large volumes of market data including market comparables and price trends for local market areas.

(4)		Carrying value, which does not reflect the allowance for loan losses, includes remaining purchase accounting adjustments, which, for PCI loans may include the nonaccretable difference and the accretable yield and, for all other loans, an adjustment to mark the loans to a market yield at date of merger less any subsequent charge-offs.

To maximize return and allow flexibility for customers to avoid foreclosure, we have in place several loss mitigation strategies for our Pick-a-Pay loan portfolio. We contact customers who are experiencing difficulty and may in certain cases modify the terms of a loan based on a customer’s documented income and other circumstances.

We also have taken steps to work with customers to refinance or restructure their Pick-a-Pay loans into other loan products. For customers at risk, we offer combinations of term extensions of up to 40 years (from 30 years), interest rate reductions, forbearance of principal, and, in geographies with substantial property value declines, we may offer permanent principal reductions.

We offer proprietary modification programs and the U.S. Treasury Department’s Home Affordability Modification Program (HAMP) to our real estate 1-4 family mortgage borrowers. In first quarter 2011, we completed more than 4,600 proprietary and HAMP Pick-a-Pay loan modifications and have completed more than 85,000 modifications since the Wachovia acquisition, resulting in $3.9 billion of principal forgiveness to our Pick-a-Pay customers. The majority of the loan modifications were concentrated in our PCI Pick-a-Pay loan portfolio. As part of the modification process, the loans are re-underwritten, income is documented and the negative amortization feature is eliminated. Most of the modifications result in material payment reduction to the customer. Because of the write-down of the PCI loans in purchase accounting, our post-merger modifications to PCI Pick-a-Pay loans have not resulted in any provision for credit losses. To the extent we modify loans not in the PCI Pick-a-Pay portfolio, we separately estimate impairment to the extent loans have been modified in a TDR.

HOME EQUITY PORTFOLIOS The deterioration in specific segments of the legacy Wells Fargo Home Equity portfolios, which began in 2007, required a targeted approach to managing these assets. In fourth quarter 2007, a liquidating portfolio was identified, consisting of home equity loans generated through the wholesale channel not behind a Wells Fargo first mortgage, and home equity loans acquired through correspondents. The liquidating portfolio was $6.6 billion at March 31, 2011, compared with $6.9 billion at December 31, 2010. The loans in this liquidating portfolio represent less than 1% of our total loans outstanding at March 31, 2011, and contain some of the highest risk in our $114.1 billion Home Equity portfolio, with a loss rate of 10.10% compared with 3.44% for the core Home Equity portfolio.

The loans in the liquidating portfolio are largely concentrated in geographic markets that have experienced the most abrupt and steepest declines in housing prices. The core portfolio was $107.6 billion at March 31, 2011, of which 98% was originated through the retail channel and approximately 20% of the outstanding balance was in a first lien position. Table 19 shows the credit attributes of the Home Equity core and liquidating portfolios. California loans represent the largest state concentration in each of these portfolios and have experienced among the highest early-term delinquency and loss rates.

Table 19: Home Equity Portfolios (1)


							% of loans								Loss rate
							two payments							(annualized)
	Outstanding balance						or more past due							Quarter ended
	Mar. 31		,	Dec. 31		,	Mar. 31		,		Dec. 31		,	Mar. 31		,	Dec. 31		,
(in millions)	2011			2010			2011				2010			2011			2010


Core portfolio (2)
California	$	27,048			27,850			3.17		%		3.30			3.98			3.95
Florida		11,742			12,036			5.07				5.46			6.16			5.84
New Jersey		8,460			8,629			3.24				3.44			2.83			1.83
Virginia		5,535			5,667			2.30				2.33			1.91			1.70
Pennsylvania		5,304			5,432			2.42				2.48			1.49			1.11
Other		49,491			50,976			2.65				2.83			2.97			2.86

Total		107,580			110,590			3.06				3.24			3.44			3.24


Liquidating portfolio
California		2,421			2,555			6.11				6.66			13.19			13.48
Florida		312			330			7.16				8.85			15.15			10.59
Arizona		139			149			6.25				6.91			20.02			18.45
Texas		118			125			2.15				2.02			3.39			2.95
Minnesota		87			91			4.24				5.39			8.94			8.73
Other		3,491			3,654			3.98				4.53			7.36			6.46

Total		6,568			6,904			4.94				5.54			10.10			9.49


Total core and liquidating portfolios	$	114,148			117,494			3.17				3.37			3.83			3.61


(1)		Consists predominantly of real estate 1-4 family junior lien mortgages and first and junior lines of credit secured by real estate, excluding PCI loans.

(2)		Includes $1.6 billion and $1.7 billion at March 31, 2011, and December 31, 2010, respectively, associated with the Pick-a-Pay portfolio.

CREDIT CARDS Our credit card portfolio totaled $21.0 billion at March 31, 2011, which represented 3% of our total outstanding loans. The quarterly net charge-off rate (annualized) for our credit card loans declined throughout 2010 and was 7.21% for first quarter 2011 compared with 11.17% for first quarter 2010.

OTHER REVOLVING CREDIT AND INSTALLMENT Other revolving credit and installment loans totaled $87.4 billion at March 31, 2011, and predominantly include automobile, student and security-based margin loans. Education finance government guaranteed student loans totaled $16.8 billion of this group of loans at March 31, 2011, and are included in our non-strategic and liquidating portfolios as discussed earlier in this Report. The quarterly net charge-off rate (annualized) for other revolving credit and installment loans was 1.42% for first quarter 2011 compared with 2.45% for first quarter 2010.

For further credit quality details on our loan portfolios, see Note 5 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

Risk Management — Credit Risk Management (continued)

NONACCRUAL LOANS AND OTHER NONPERFORMING ASSETS We generally place loans on nonaccrual status when:

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

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

•

part of the principal balance has been charged off and no restructuring has occurred.

Table 20 shows a quarterly trend for nonaccrual loans and other NPAs, and, for fourth quarter 2010, shows a decline in the total balance from the prior quarter for the first time since the acquisition of Wachovia. The decline continued in first quarter 2011.

Table 20: Nonaccrual Loans and Other Nonperforming Assets


	March 31, 2011						December 31, 2010						September 30, 2010					June 30, 2010

				% of						% of					% of					% of
				total						total					total					total
($ in millions)		Balances		loans				Balances		loans				Balances	loans				Balances	loans


Commercial:
Commercial and industrial	$	2,653			1.76	%	$	3,213			2.12	%	$	4,103		2.79	%	$	3,843		2.63	%
Real estate mortgage		5,239			5.18			5,227			5.26			5,079		5.14			4,689		4.71
Real estate construction		2,239			9.79			2,676			10.56			3,198		11.46			3,429		11.10
Lease financing		95			0.73			108			0.82			138		1.06			163		1.21
Foreign		86			0.24			127			0.39			126		0.42			115		0.38


Total commercial (1)		10,312			3.19			11,351			3.52			12,644		3.99			12,239		3.82

Consumer:
Real estate 1-4 family first mortgage (2)		12,143			5.36			12,289			5.34			12,969		5.69			12,865		5.50
Real estate 1-4 family junior lien mortgage		2,235			2.40			2,302			2.39			2,380		2.40			2,391		2.36
Other revolving credit and installment		275			0.31			300			0.35			312		0.35			316		0.36


Total consumer		14,653			3.42			14,891			3.42			15,661		3.58			15,572		3.49

Total nonaccrual loans (3)(4)(5)		24,965			3.32			26,242			3.47			28,305		3.76			27,811		3.63


Foreclosed assets:
Government insured/guaranteed (6)		1,457						1,479						1,492					1,344
Non-government insured/guaranteed		4,055						4,530						4,635					3,650


Total foreclosed assets		5,512						6,009						6,127					4,994

Other (7)		140						120						141					131


Total nonaccrual loans and other nonperforming assets	$	30,617			4.08	%	$	32,371			4.27	%	$	34,573		4.59	%	$	32,936		4.30	%


Change from prior quarter	$	(1,754	)					(2,202	)					1,637					1,436


(1)		Includes LHFS of $17 million, $3 million, $89 million and $19 million at March 31, 2011, and December 31, September 30, and June 30, 2010, respectively.

(2)		Includes MHFS of $430 million, $426 million, $448 million and $450 million at March 31, 2011, and December 31, September 30, and June 30, 2010, respectively.

(3)		Excludes loans acquired from Wachovia that are accounted for as PCI loans because they continue to earn interest income from accretable yield, independent of performance in accordance with their contractual terms.

(4)		Real estate 1-4 family mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veteran Affairs (VA) and student loans predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program are not placed on nonaccrual status because they are insured or guaranteed.

(5)		See Note 5 (Loans and Allowance for Credit Losses) to Financial Statements in this Report and Note 6 (Loans and Allowance for Credit Losses) to Financial Statements in our 2010 Form 10-K for further information on impaired loans.

(6)		Consistent with regulatory reporting requirements, foreclosed real estate securing government insured/guaranteed loans is classified as nonperforming. Both principal and interest for government insured/guaranteed loans secured by the foreclosed real estate are collectible because the loans are insured by the FHA or guaranteed by the VA.

(7)		Includes real estate investments (loans for which any yield is based on performance of the underlying real estate collateral and are accounted for as investments) that would be classified as nonaccrual if these assets were recorded as loans, and nonaccrual debt securities.

Total NPAs were $30.6 billion (4.08% of total loans) at March 31, 2011, and included $25.0 billion of nonaccrual loans and $5.5 billion of foreclosed assets. Since the peak in third quarter 2010, NPAs have declined for all loan and other asset types through March 31, 2011, except commercial real estate

mortgages which increased slightly. Nonaccruals in all other loan portfolios were essentially flat or down year over year. New inflows to nonaccrual loans continued to decline. Table 21 provides an analysis of the changes in nonaccrual loans.

Table 21: Analysis of Changes in Nonaccrual Loans


	Quarter ended

	Mar. 31		,	Dec. 31		,	Sept. 30		,	June 30		,	Mar. 31		,
(in millions)	2011			2010			2010			2010			2010


Commercial nonaccrual loans
Balance, beginning of quarter	$	11,351			12,644			12,239			12,265			11,723
Inflows		1,881			2,329			2,807			2,560			2,763
Outflows		(2,920	)		(3,622	)		(2,402	)		(2,586	)		(2,221	)


Balance, end of quarter		10,312			11,351			12,644			12,239			12,265


Consumer nonaccrual loans
Balance, beginning of quarter		14,891			15,661			15,572			15,036			12,695
Inflows		3,955			4,357			4,866			4,733			6,169
Outflows		(4,193	)		(5,127	)		(4,777	)		(4,197	)		(3,828	)


Balance, end of quarter		14,653			14,891			15,661			15,572			15,036


Total nonaccrual loans	$	24,965			26,242			28,305			27,811			27,301

Typically, changes to nonaccrual loans period-over-period represent inflows for loans that reach a specified past due status, offset by reductions for loans that are charged off, sold, transferred to foreclosed properties, or are no longer classified as nonaccrual because they return to accrual status. We continue to modify loans to assist homeowners and other borrowers in the current difficult economic cycle.

Loans are re-underwritten at the time of the modification in accordance with underwriting guidelines established for governmental and proprietary loan modification programs. For an accruing loan that has been modified, if the borrower has demonstrated performance under the previous terms and shows the capacity to continue to perform under the restructured terms, the loan will remain in accruing status. Otherwise, the loan will be placed in a nonaccrual status generally until the borrower has made six consecutive months of payments, or equivalent, inclusive of consecutive payments made prior to modification.

Loans are placed on nonaccrual status when it is probable that we will not collect the contractual value of the asset. While nonaccrual loans are not free of loss content, we believe exposure to loss is significantly mitigated by four factors. First, 99% of consumer nonaccrual loans and 96% of commercial nonaccrual loans are secured. Second, losses have already been recognized on 55% of the remaining balance of consumer nonaccruals and commercial nonaccruals have been written down by $2.8 billion. Residential nonaccrual loans are written down to net realizable value (fair value of collateral less estimated costs to sell) at 180 days past due, except for loans that go into trial modification prior to becoming 180 days past due, and which are not written down in the trial period (three months) as long as trial payments are being made on time. Third, as of March 31, 2011, 54% of commercial nonaccrual loans were current on interest. Fourth, the inherent risk of loss

in all nonaccruals has been considered and we believe is adequately covered by the allowance for loan losses.

Commercial nonaccrual loans, net of write-downs, amounted to $10.3 billion at March 31, 2011, compared with $12.3 billion a year ago. Consumer nonaccrual loans amounted to $14.7 billion at March 31, 2011, compared with $15.0 billion a year ago. Federal government modification programs, such as HAMP, and Wells Fargo proprietary modification programs, such as the Company’s Pick-a-Pay Mortgage Assistance program, require customers to provide updated documentation, and some programs require completion of trial payment periods to demonstrate sustained performance, before the loan can be removed from nonaccrual status. In addition, for loans in foreclosure, many states, including California, Florida and New Jersey, have enacted legislation that significantly increases the time frames to complete the foreclosure process, meaning that loans will remain in nonaccrual status for longer periods. At the conclusion of the foreclosure process, we continue to sell real estate owned in a timely fashion.

Generally, when a consumer real estate loan is 120 days past due, we move it to nonaccrual status. When the loan reaches 180 days past due it is our policy to write these loans down to net realizable value, except for modifications in their trial period. Thereafter, we revalue each loan regularly and recognize additional charges if needed. Of the $14.7 billion of consumer nonaccrual loans at March 31, 2011, 98% are secured by real estate and 32% have a combined LTV (CLTV) ratio of 80% or below.

Table 22 provides a summary of foreclosed assets.

Risk Management – Credit Risk Management (continued)

Table 22: Foreclosed Assets


	Mar. 31		,	Dec. 31		,	Sept. 30		,	June 30		,	Mar. 31		,
(in millions)	2011			2010			2010			2010			2010


Government insured/guaranteed (1)	$	1,457			1,479			1,492			1,344			1,111
PCI loans:
Commercial		1,005			967			1,043			940			697
Consumer		741			1,068			1,109			722			490


Total PCI loans		1,746			2,035			2,152			1,662			1,187


All other loans:
Commercial		1,408			1,412			1,343			1,087			820
Consumer		901			1,083			1,140			901			963


Total all other loans		2,309			2,495			2,483			1,988			1,783


Total foreclosed assets	$	5,512			6,009			6,127			4,994			4,081


(1)		Consistent with regulatory reporting requirements, foreclosed real estate securing government insured/guaranteed loans is classified as nonperforming. Both principal and interest for government insured/guaranteed loans secured by the foreclosed real estate are collectible because the loans are insured by the FHA or guaranteed by the VA.

NPAs at March 31, 2011, included $1.5 billion of foreclosed real estate that is FHA insured or VA guaranteed and expected to have little to no loss content, and $4.0 billion of foreclosed assets, which have been written down to net realizable value. Foreclosed assets increased $1.4 billion, or 35%, year over year in first quarter 2011. Of this increase, $559 million were foreclosed loans from the PCI portfolio that are now recorded as foreclosed assets. At March 31, 2011, substantially all of our foreclosed assets of $5.5 billion have been in the foreclosed assets portfolio one year or less.

Given our real estate-secured loan concentrations and current economic conditions, we anticipate continuing to hold a high level of NPAs on our balance sheet. The loss content in the nonaccrual loans has been recognized through charge-offs or provided for in the allowance for credit losses at March 31, 2011. The performance of any one loan can be affected by external factors, such as economic or market conditions, or factors affecting a particular borrower. We are maintaining increased staffing in our workout and collection organizations to ensure troubled borrowers receive the attention and help they need. See the “Risk Management – Allowance for Credit Losses” section in this Report for additional information.

We process foreclosures on a regular basis for the loans we service for others as well as those we hold in our loan portfolio. However, we utilize foreclosure only as a last resort for dealing with borrowers who are experiencing financial hardships. We employ extensive contact and restructuring procedures to attempt to find other solutions for our borrowers.

TROUBLED DEBT RESTRUCTURINGS (TDRs)

Table 23: Troubled Debt Restructurings (TDRs)


	Mar. 31		,	Dec. 31		,	Sept. 30		,	June 30		,	Mar. 31		,
(in millions)	2011			2010			2010			2010			2010


Consumer TDRs:
Real estate 1-4 family first mortgage	$	12,261			11,603			10,951			9,525			7,972
Real estate 1-4 family junior lien mortgage		1,824			1,626			1,566			1,469			1,563
Other revolving credit and installment		859			778			674			502			310


Total consumer TDRs		14,944			14,007			13,191			11,496			9,845


Commercial TDRs		2,352			1,751			1,350			656			386


Total TDRs	$	17,296			15,758			14,541			12,152			10,231


TDRs on nonaccrual status	$	5,041			5,185			5,177			3,877			2,738
TDRs on accrual status		12,255			10,573			9,364			8,275			7,493


Total TDRs	$	17,296			15,758			14,541			12,152			10,231

Table 23 provides information regarding the recorded investment of loans modified in TDRs. The allowance for TDR loans was $4.2 billion at March 31, 2011, and $3.9 billion at December 31, 2010. Total charge-offs related to loans modified in a TDR were $349 million for first quarter 2011 and $322 million for first quarter 2010.

Our nonaccrual policies are generally the same for all loan types when a restructuring is involved. We underwrite loans at the time of restructuring to determine whether there is sufficient evidence of sustained repayment capacity based on the borrower’s documented income, debt to income ratios, and other factors. Any loans lacking sufficient evidence of sustained repayment capacity at the time of modification are charged down to the fair value of the collateral, if applicable. If the borrower has demonstrated performance under the previous terms and the underwriting process shows the capacity to continue to perform under the restructured terms, the loan will remain in accruing status. Otherwise, the loan will be placed in nonaccrual status generally until the borrower demonstrates a sustained period of performance, generally six consecutive months of payments, or equivalent, inclusive of consecutive payments made prior to modification. Loans will also be placed on nonaccrual, and a corresponding charge-off is recorded to the loan balance, if we believe that principal and interest contractually due under the modified agreement will not be collectible.

We do not forgive principal for a majority of our TDRs, but in those situations where principal is forgiven, the entire amount of such principal forgiveness is immediately charged off to the extent not done so prior to the modification. We sometimes delay the required timing of a portion of principal (principal forbearance) and charge off the amount of forbearance if that amount is not considered fully collectible. When a TDR performs in accordance with its modified terms, the loan either continues to accrue interest (for performing loans), or will return to accrual status after the borrower demonstrates a sustained period of performance.

Risk Management – Credit Risk Management (continued)

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING Loans included in this category are 90 days or more past due as to interest or principal and still accruing, because they are (1) well-secured and in the process of collection or (2) real estate 1-4 family mortgage loans or consumer loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due. PCI loans of $10.8 billion at March 31, 2011, and $11.6 billion at December 31, 2010, are excluded from this disclosure even though they are 90 days or more contractually past due. These PCI loans are considered to be accruing due to the existence of the accretable

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

Excluding insured/guaranteed loans, loans 90 days or more past due and still accruing at March 31, 2011, were down $221 million, or 8%, from December 31, 2010. The decline was due to loss mitigation activities including modifications and increased collection capacity/process improvements, charge-offs, lower early stage delinquency levels and credit stabilization.

Table 24 reflects non-PCI loans 90 days or more past due and still accruing by class for loans not government insured/guaranteed.

Table 24: Loans 90 Days or More Past Due and Still Accruing


	Mar. 31		,	Dec. 31		,	Sept. 30		,	June 30		,	Mar. 31		,
(in millions)	2011			2010			2010			2010			2010


Total (excluding PCI):	$	17,901			18,488			18,815			19,384			21,822
Less: FHA insured/guaranteed by the VA (1)		14,353			14,733			14,529			14,387			15,865
Less: Student loans guaranteed under the FFELP (2)		1,120			1,106			1,113			1,122			1,072


Total, not government insured/guaranteed	$	2,428			2,649			3,173			3,875			4,885


By segment and class, not insured/guaranteed:
Commercial:
Commercial and industrial	$	338			308			222			540			561
Real estate mortgage		177			104			463			654			947
Real estate construction		156			193			332			471			787
Foreign		16			22			27			21			29


Total commercial		687			627			1,044			1,686			2,324


Consumer:
Real estate 1-4 family first mortgage (3)		858			941			1,016			1,049			1,281
Real estate 1-4 family junior lien mortgage (3)		325			366			361			352			414
Credit card		413			516			560			610			719
Other revolving credit and installment		145			199			192			178			147


Total consumer		1,741			2,022			2,129			2,189			2,561


Total, not government insured/guaranteed	$	2,428			2,649			3,173			3,875			4,885


(1)		Represents loans whose repayments are insured by the FHA or guaranteed by the VA.

(2)		Represents loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the Federal Family Education Loan Program (FFELP).

(3)		Includes mortgages held for sale 90 days or more past due and still accruing.

NET CHARGE-OFFS

Table 25: Net Charge-offs


	Quarter ended

	March 31, 2011					December 31, 2010					September 30, 2010					June 30, 2010					March 31, 2010

	Net loan		% of			Net loan		% of			Net loan		% of			Net loan		% of			Net loan		% of
	charge-		avg.			charge-		avg.			charge-		avg.			charge-		avg.			charge-		avg.
($ in millions)	offs		loans(1)			offs		loans (1)			offs		loans (1)			offs		loans (1)			offs		loans (1)


Commercial:
Commercial and industrial	$	354		0.96	%	$	500		1.34	%	$	509		1.38	%	$	689		1.87	%	$	650		1.68	%
Real estate mortgage		152		0.62			234		0.94			218		0.87			360		1.47			271		1.12
Real estate construction		83		1.38			171		2.51			276		3.72			238		2.90			394		4.45
Lease financing		6		0.18			21		0.61			23		0.71			27		0.78			29		0.85
Foreign		28		0.34			28		0.36			39		0.52			42		0.57			36		0.52


Total commercial		623		0.79			954		1.19			1,065		1.33			1,356		1.69			1,380		1.68


Consumer:
Real estate 1-4 family first mortgage		904		1.60			1,024		1.77			1,034		1.78			1,009		1.70			1,311		2.17
Real estate 1-4 family junior lien mortgage		994		4.25			1,005		4.08			1,085		4.30			1,184		4.62			1,449		5.56
Credit card		382		7.21			452		8.21			504		9.06			579		10.45			643		11.17
Other revolving credit and installment		307		1.42			404		1.84			407		1.83			361		1.64			547		2.45


Total consumer		2,587		2.42			2,885		2.63			3,030		2.72			3,133		2.79			3,950		3.45


Total	$	3,210		1.73	%	$	3,839		2.02	%	$	4,095		2.14	%	$	4,489		2.33	%	$	5,330		2.71	%


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

Risk Management – Credit Risk Management (continued)

Table 25 presents net charge-offs for first quarter 2011 and each of the four quarters of 2010. Net charge-offs in first quarter 2011 were $3.2 billion (1.73% of average total loans outstanding) compared with $5.3 billion (2.71%) in first quarter 2010.

Net charge-offs in the 1-4 family first mortgage portfolio totaled $904 million in first quarter 2011. Our 1-4 family first mortgage portfolio continued to reflect relatively low loss rates, although until housing prices fully stabilize, these credit losses will continue to remain elevated.

Net charge-offs in the real estate 1-4 family junior lien portfolio were $994 million in first quarter 2011. More information about the Home Equity portfolio, which includes substantially all of our real estate 1-4 family junior lien mortgage loans, is available in Table 19 in this Report and the related discussion.

Credit card net charge-offs of $382 million in first quarter 2011 decreased $261 million from a year ago.

Commercial and CRE net charge-offs were $623 million in first quarter 2011 compared with $1.4 billion a year ago. Commercial business line credit results continued to improve from first quarter 2010 as market liquidity and improving market conditions helped stabilize performance results. Increased lending activity in first quarter 2011 in the majority of our commercial business lines further supported our belief of a turn in the demand for credit.

ALLOWANCE FOR CREDIT LOSSES The allowance for credit losses, which consists of the allowance for loan losses and the allowance for unfunded credit commitments, is management’s estimate of credit losses inherent in the loan portfolio and unfunded credit commitments at the balance sheet date, excluding loans carried at fair value. The detail of the changes in the allowance for credit losses by portfolio segment (including charge-offs and recoveries by loan class) is in Note 5 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

We employ a disciplined process and methodology to establish our allowance for credit losses each quarter. This process takes into consideration many factors, including historical and forecasted loss trends, loan-level credit quality ratings and loan grade-specific loss factors. The process involves subjective as well as complex judgments. In addition, we review a variety of credit metrics and trends. However, these trends do not solely determine the adequacy of the allowance as we use several analytical tools in determining its adequacy. For additional information on our allowance for credit losses, see the “Critical Accounting Policies – Allowance for Credit Losses” section in our 2010 Form 10-K and Note 5 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

At March 31, 2011, the allowance for loan losses totaled $22.0 billion (2.93% of total loans), compared with $23.0 billion (3.04%), at December 31, 2010. The allowance for credit losses was $22.4 billion (2.98% of total loans) at March 31, 2011, and $23.5 billion (3.10%) at December 31, 2010. The allowance for credit losses included $257 million at March 31, 2011, and $298 million at December 31, 2010, related to PCI loans acquired from Wachovia. The allowance for unfunded credit commitments was $400 million at March 31, 2011, and $441 million at December 31, 2010. In addition to the allowance for credit losses, at March 31, 2011, and December 31, 2010, there was $12.9 billion and $13.4 billion, respectively, of nonaccretable difference to absorb losses for PCI loans. For additional information on PCI loans, see the “Risk Management – Credit Risk Management – Purchased Credit-Impaired Loans” section and Note 5 (Loans and Allowance for Credit Losses) to Financial Statements in this Report.

The ratio of the allowance for credit losses to total nonaccrual loans was 90% at March 31, 2011, and 89% at December 31, 2010. This ratio may fluctuate significantly from period to period due to such factors as the mix of loan types in the portfolio, borrower credit strength and the value and marketability of collateral. Over half of nonaccrual loans were home mortgages, auto and other consumer loans at March 31, 2011.

The ratio of the allowance for loan losses to annualized net charge-offs was 169% at March 31, 2011, and 130% at December 31, 2010. The $1.0 billion decline in the allowance for loan losses in first quarter 2011 reflected continued improvement in delinquencies and portfolio performance primarily in consumer portfolios. As a result of significant levels of previous charge-offs, the loan portfolio at March 31, 2011, consisted of higher percentages of more recent vintage loans subjected to tightened underwriting standards.

Total provision for credit losses was $2.2 billion in first quarter 2011, compared with $5.3 billion a year ago. The first quarter 2011 provision was $1.0 billion less than net charge-offs, compared with a provision that equaled net charge-offs in first quarter 2010. Absent significant deterioration in the economy, we expect future allowance releases.

In determining the appropriate allowance attributable to our residential real estate portfolios, the loss rates used in our analysis include the impact of our established loan modification programs. When modifications occur or are probable to occur, our allowance considers the impact of these modifications, taking into consideration the associated credit cost, including re-defaults of modified loans and projected loss severity. The loss content associated with existing and probable loan modifications has been considered in our allowance methodology.

Changes in the allowance reflect changes in statistically derived loss estimates, historical loss experience, current trends in borrower risk and/or general economic activity on portfolio performance, and management’s estimate for imprecision and uncertainty.

We believe the allowance for credit losses of $22.4 billion was adequate to cover credit losses inherent in the loan portfolio, including unfunded credit commitments, at March 31, 2011. The allowance for credit losses is subject to change and considers existing factors at the time, including economic or market conditions and ongoing internal and external examination processes. Due to the sensitivity of the allowance for credit losses to changes in the economic environment, it is possible that unanticipated economic deterioration would create incremental credit losses not anticipated as of the balance sheet date. Our process for determining the allowance for credit losses is discussed in the “Critical Accounting Policies – Allowance for Credit Losses” section in our 2010 Form 10-K and Note 5 (Loans and Allowance for Credit Losses) to the Financial Statements in this Report.

Risk Management – Credit Risk Management (continued)

LIABILITY FOR MORTGAGE LOAN REPURCHASE LOSSES We sell residential mortgage loans to various parties, including (1) Freddie Mac and Fannie Mae (GSEs) who include the mortgage loans in GSE-guaranteed mortgage securitizations, (2) special purpose entities (SPEs) that issue private label mortgage-backed securities (MBS), and (3) other financial institutions that purchase mortgage loans for investment or private label securitization. In addition, we pool FHA-insured and VA-guaranteed mortgage loans that back securities guaranteed by GNMA. We may be required to repurchase these mortgage loans, indemnify the securitization trust, investor or insurer, or reimburse the securitization trust, investor or insurer for credit losses incurred on loans (collectively “repurchase”) in the event of a breach of contractual representations or warranties that is not remedied within a period (usually 90 days or less) after we receive notice of the breach. For further detail see our 2010 Form 10-K.

We have established a mortgage repurchase liability related to various representations and warranties that reflect management’s estimate of losses for loans for which we could have a repurchase obligation, whether or not we currently service those loans, based on a combination of factors. Currently, repurchase demands primarily relate to 2006 through 2008 vintages and to GSE-guaranteed MBS.

During first quarter 2011, we observed a decline in our level of repurchases and losses as we continued to work through the remaining risk associated with the 2006 through 2008 vintages. We repurchased or reimbursed investors for incurred losses on mortgage loans with original balances of $805 million. We incurred net losses on repurchased loans and investor reimbursements totaling $331 million in first quarter 2011.

Table 26 provides the number of unresolved repurchase demands and mortgage insurance rescissions. We generally do not have unresolved repurchase demands from the FHA or VA for loans in GNMA-guaranteed securities because those demands are relatively few and we quickly resolve them.

Table 26: Unresolved Repurchase Demands and Mortgage Insurance Rescissions


	Government								Mortgage insurance
	sponsored entities (1)				Private				rescissions with no demand (2)				Total

	Number of		Original loan		Number of		Original loan		Number of		Original loan		Number of		Original loan
($ in millions)	loans		balance (3)		loans		balance (3)		loans		balance (3)		loans		balance (3)


March 31, 2011		6,210	$	1,395		1,973	$	424		2,885	$	674		11,068	$	2,493

2010
December 31,		6,501		1,467		2,899		680		3,248		801		12,648		2,948
September 30,		9,887		2,212		3,605		882		3,035		748		16,527		3,842
June 30,		12,536		2,840		3,160		707		2,979		760		18,675		4,307
March 31,		10,804		2,499		2,320		519		2,843		737		15,967		3,755

December 31, 2009		8,354		1,911		2,929		886		2,965		859		14,248		3,656


(1)		Includes repurchase demands of 685 and $132 million, 1,495 and $291 million, 2,263 and $437 million, 2,141 and $417 million, and 1,824 and $372 million, for March 31, 2011, and December 31, September 30, June 30, and March 31, 2010, respectively, received from investors on mortgage servicing rights acquired from other originators. We generally have the right of recourse against the seller and may be able to recover losses related to such repurchase demands subject to counterparty risk associated with the seller.

(2)		As part of our representations and warranties in our loan sales contracts, we represent that certain loans have mortgage insurance. To the extent the mortgage insurance is rescinded by the mortgage insurer, the lack of insurance may result in a repurchase demand from an investor. Similar to repurchase demands, we evaluate mortgage insurance rescission notices for validity and appeal for reinstatement if the rescission was not based on a contractual breach.

(3)		While original loan balance related to these demands is presented above, the establishment of the repurchase reserve is based on a combination of factors, such as our appeals success rates, reimbursement by correspondent and other third party originators, and projected loss severity, which is driven by the difference between the current loan balance and the estimated collateral value less costs to sell the property.

The level of repurchase demands outstanding at March 31, 2011, was generally down from a year ago in both number of outstanding loans and in total dollar balances as we continued to work through the demands. Customary with industry practice, we have the right of recourse against correspondent lenders from whom we have purchased loans with respect to representations and warranties. Of the repurchase demands presented in Table 26, approximately 20% relate to loans purchased from correspondent lenders. Due primarily to the financial difficulties of some correspondent lenders, we typically recover on average approximately 50% of losses from these lenders. Historical recovery rates as well as projected lender performance are incorporated in the establishment of our mortgage repurchase liability.

Our liability for repurchases, included in “Accrued expenses and other liabilities” in our consolidated financial statements, was $1.2 billion at March 31, 2011, and $1.3 billion at December 31, 2010. In the quarter ended March 31, 2011, $249 million of additions to the liability were recorded, which reduced net gains on mortgage loan origination/sales activities. Our additions to the repurchase liability in the quarter ended March 31, 2011, reflect updated assumptions about the repurchase rate on outstanding demands, particularly on the 2006-2008 vintages.

We believe we have a high quality residential mortgage loan servicing portfolio. Of the $1.8 trillion in the residential mortgage loan servicing portfolio at March 31, 2011, 93% was current, less than 2% was subprime at origination, and approximately 1% was home equity securitizations. Our combined delinquency and foreclosure rate on this portfolio was 7.22% at March 31, 2011, compared with 8.02% at December 31, 2010. In this portfolio 6% are private securitizations where we originated the loan and therefore have some repurchase risk. For this private securitization segment of our residential mortgage loan servicing portfolio, 58% are loans from 2005 vintages or earlier (weighted average age of 66 months); 80% were prime at origination; and approximately 70% are jumbo loans. The weighted-average LTV as of March 31, 2011, for this private securitization segment was 77%. We believe the highest risk segment of these private securitizations are the subprime loans originated in 2006 and 2007. These subprime loans have seller representations and warranties and currently have LTVs close to or exceeding 100%, and represent 8% of the 6% private securitization portion of the residential mortgage servicing portfolio. We had only $21 million of repurchases related to private securitizations in first quarter 2011. Of the servicing portfolio, 4% is non-agency acquired servicing and 3% is private whole loan sales. We did not underwrite and securitize the non-agency acquired servicing and therefore we have no obligation on that portion of our servicing portfolio to the investor for any repurchase demands arising from origination practices.

Table 27 summarizes the changes in our mortgage repurchase liability.

Risk Management – Credit Risk Management (continued)

Table 27: Changes in Mortgage Repurchase Liability


	Quarter ended

	Mar. 31		,	Dec. 31		,	Sept. 30		,	June 30		,	Mar. 31		,
(in millions)	2011			2010			2010			2010			2010


Balance, beginning of period	$	1,289			1,331			1,375			1,263			1,033
Provision for repurchase losses:
Loan sales		35			35			29			36			44
Change in estimate – primarily due to credit deterioration		214			429			341			346			358


Total additions		249			464			370			382			402
Losses		(331	)		(506	)		(414	)		(270	)		(172	)


Balance, end of period	$	1,207			1,289			1,331			1,375			1,263

The mortgage repurchase liability of $1.2 billion at March 31, 2011, represents our best estimate of the probable loss that we may incur for various representations and warranties in the contractual provisions of our sales of mortgage loans. A range of reasonably possible losses in excess of the estimated liability may exist, but cannot be estimated with confidence. Because the level of mortgage loan repurchase losses depends upon economic factors, investor demand strategies and other external conditions that may change over the life of the underlying loans, the level of the liability for mortgage loan repurchase losses is difficult to estimate and requires considerable management judgment. We maintain regular contact with the GSEs and other significant investors to monitor and address their repurchase demand practices and concerns. For additional information on our repurchase liability, see the “Critical Accounting Policies – Liability for Mortgage Loan Repurchase Losses” section in our 2010 Form 10-K and Note 8 (Mortgage Banking Activities) to Financial Statements in this Report.

The repurchase liability is primarily applicable to loans we originated and sold with representations and warranties. Most of these loans are included in our servicing portfolio. Our repurchase liability estimate considers many factors that influence the key assumptions of what our repurchase volume may be and what loss on average we may incur. Those key assumptions and the sensitivity of the liability to immediate adverse changes in them at March 31, 2011, are presented in Table 28.


Table 28: Mortgage Repurchase Liability – Sensitivity/Assumptions

	Mortgage
	repurchase
(in millions)	liability

Balance at March 31, 2011	$	1,207

Loss on repurchases (1)		39.0	%
Increase in liability from:
10% higher losses	$	114
25% higher losses		285

Repurchase rate assumption		0.3	%
Increase in liability from:
10% higher repurchase rates	$	109
25% higher repurchase rates		273


(1)		Represents total estimated average loss rate on repurchased loans, net of recovery from third party originators, based on historical experience and current economic conditions. The average loss rate includes the impact of repurchased loans for which no loss is expected to be realized.

To the extent that economic conditions and the housing market do not recover or future investor repurchase demands and appeals success rates differ from past experience, we could continue to have increased demands and increased loss severity on repurchases, causing future additions to the repurchase liability. However, some of the underwriting standards that were permitted by the GSEs for conforming loans in the 2006 through 2008 vintages, which significantly contributed to recent levels of repurchase demands, were tightened starting in mid to late 2008. Accordingly, we do not expect a similar rate of repurchase requests from the 2009 and prospective vintages, absent deterioration in economic conditions or changes in investor behavior.

RISKS RELATING TO SERVICING ACTIVITIES In addition to servicing loans in our portfolio, we act as servicer and/or master servicer of residential mortgage loans included in GSE-guaranteed mortgage securitizations, GNMA-guaranteed mortgage securitizations and private label mortgage securitizations, as well as for unsecuritized loans owned by institutional investors. The loans we service were originated by us or by other mortgage loan originators. As servicer, our primary duties are typically to (1) collect payment due from borrowers, (2) advance certain delinquent payments of principal and interest, (3) maintain and administer any hazard, title or primary mortgage insurance policies relating to the mortgage loans, (4) maintain any required escrow accounts for payment of taxes and insurance and administer escrow payments, and (5) foreclose on defaulted mortgage loans or, to the extent consistent with the documents governing a securitization, consider alternatives to foreclosure, such as loan modifications or short sales. As master servicer, our primary duties are typically to (1) supervise, monitor and oversee the servicing of the mortgage loans by the servicer, (2) consult with each servicer and use reasonable efforts to cause the servicer to observe its servicing obligations, (3) prepare monthly distribution statements to security holders and, if required by the securitization documents, certain periodic reports required to be

filed with the Securities and Exchange Commission (SEC), (4) if required by the securitization documents, calculate distributions and loss allocations on the mortgage-backed securities, (5) prepare tax and information returns of the securitization trust, and (6) advance amounts required by non-affiliated servicers who fail to perform their advancing obligations.

Each agreement under which we act as servicer or master servicer generally specifies a standard of responsibility for actions we take in such capacity and provides protection against expenses and liabilities we incur when acting in compliance with the specified standard. For example, most private label securitization agreements under which we act as servicer or master servicer typically provide that the servicer and the master servicer are entitled to indemnification by the securitization trust for taking action or refraining from taking action in good faith or for errors in judgment. However, we are not indemnified, but rather are required to indemnify the securitization trustee, against any failure by us, as servicer or master servicer, to perform our servicing obligations or any of our acts or omissions that involve wilful misfeasance, bad faith or gross negligence in the performance of, or reckless disregard of, our duties. In addition, if we commit a material breach of our obligations as servicer or master servicer, we may be subject to termination if the breach is not cured within a specified period following notice, which can generally be given by the securitization trustee or a specified percentage of security holders. Whole loan sale contracts under which we act as servicer generally include similar provisions with respect to our actions as servicer. The standards governing servicing in GSE-guaranteed securitizations, and the possible remedies for violations of such standards, vary, and those standards and remedies are determined by servicing guides maintained by the GSEs, contracts between the GSEs and individual servicers and topical guides published by the GSEs from time to time. Such remedies could include indemnification or repurchase of an affected mortgage loan.

For additional information regarding risks relating to our servicing activities, see pages 75-76 in our 2010 Form 10-K.

The FRB and OCC completed a joint interagency horizontal examination of foreclosure processing at large mortgage servicers, including Wells Fargo, to evaluate the adequacy of their controls and governance over bank foreclosure processes, including compliance with applicable federal and state law. The OCC and other federal banking regulators published this review on April 13, 2011. We have entered into consent orders with the OCC and FRB, both of which were made public on April 13, 2011. These orders incorporate remedial requirements for identified deficiencies; however civil money penalties have not been assessed at this time. We have been working with our regulators for an extended period on servicing improvements and have already instituted enhancements. For additional information, see the discussion of mortgage-related regulatory investigations in Note 11 (Legal Actions) to Financial Statements in this Report. Changes in servicing and foreclosure practices will increase the Company’s costs of servicing mortgage loans. As part of our quarterly MSR valuation process, we assess changes in servicing and foreclosure costs, which in first quarter 2011,

Risk Management – Credit Risk Management (continued)

included the estimated impact from the regulatory consent orders.

Asset/Liability Management

Asset/liability management involves the evaluation, monitoring and management of interest rate risk, market risk, liquidity and funding. The Corporate Asset/Liability Management Committee (Corporate ALCO), which oversees these risks and reports periodically to the Finance Committee of the Board of Directors (Board), consists of senior financial and business executives. Each of our principal business groups has its own asset/liability management committee and process linked to the Corporate ALCO process.

INTEREST RATE RISK Interest rate risk, which potentially can have a significant earnings impact, is an integral part of being a financial intermediary. We assess interest rate risk by comparing our most likely earnings plan with various earnings simulations using many interest rate scenarios that differ in the direction of interest rate changes, the degree of change over time, the speed of change and the projected shape of the yield curve. For example, as of March 31, 2011, our most recent simulation indicated estimated earnings at risk of less than 1% of our most likely earnings plan over the next 12 months using a scenario in which the federal funds rate rises to 4.25% and the 10-year Constant Maturity Treasury bond yield rises to 5.55%. Simulation estimates depend on, and will change with, the size and mix of our actual and projected balance sheet at the time of each simulation. Due to timing differences between the quarterly valuation of MSRs and the eventual impact of interest rates on mortgage banking volumes, earnings at risk in any particular quarter could be higher than the average earnings at risk over the 12-month simulation period, depending on the path of interest rates and on our hedging strategies for MSRs. See the “Risk Management – Mortgage Banking Interest Rate and Market Risk” section in this Report for more information.

We use exchange-traded and over-the-counter (OTC) interest rate derivatives to hedge our interest rate exposures. The notional or contractual amount, credit risk amount and estimated net fair value of these derivatives as of March 31, 2011, and December 31, 2010, are presented in Note 12 (Derivatives) to Financial Statements in this Report.

For additional information regarding interest rate risk, see page 76 of our 2010 Form 10-K.

MORTGAGE BANKING INTEREST RATE AND MARKET RISK We originate, fund and service mortgage loans, which subjects us to various risks, including credit, liquidity and interest rate risks. For a discussion of mortgage banking interest rate and market risk, see pages 76-78 of our 2010 Form 10-K.

While our hedging activities are designed to balance our mortgage banking interest rate risks, the financial instruments we use may not perfectly correlate with the values and income being hedged. For example, the change in the value of ARM production held for sale from changes in mortgage interest rates may or may not be fully offset by Treasury and LIBOR index-based financial instruments used as economic hedges for such ARMs. Additionally, the hedge-carry income we earn on our

economic hedges for the MSRs may not continue if the spread between short-term and long-term rates decreases, we shift composition of the hedge to more interest rate swaps, or there are other changes in the market for mortgage forwards that affect the implied carry.

The total carrying value of our residential and commercial MSRs was $17.1 billion at March 31, 2011, and $15.9 billion at December 31, 2010. The weighted-average note rate on our portfolio of loans serviced for others was 5.31% at March 31, 2011, and 5.39% at December 31, 2010. Our total MSRs were 0.92% of mortgage loans serviced for others at March 31, 2011, compared with 0.86% at December 31, 2010.

MARKET RISK – TRADING ACTIVITIES From a market risk perspective, our net income is exposed to changes in interest rates, credit spreads, foreign exchange rates, equity and commodity prices and their implied volatilities. The credit risk amount and estimated net fair value of all customer accommodation derivatives are included in Note 12 (Derivatives) to Financial Statements in this Report. Trading positions and market risk exposure are monitored by the Market Risk Committee and Corporate ALCO.

The standardized approach for monitoring and reporting market risk for the trading activities consists of value-at-risk (VaR) metrics complemented with sensitivity analysis and stress testing. VaR measures the worst expected loss over a given time interval and within a given confidence interval. We measure and report daily VaR at a 99% confidence interval based on actual changes in rates and prices over the past 250 trading days. The analysis captures all financial instruments that are considered trading positions. The average one-day VaR throughout first quarter 2011 was $25 million, with a lower bound of $19 million and an upper bound of $32 million. For additional information regarding market risk related to trading activities, see pages 78-79 of our 2010 Form 10-K.

MARKET RISK – EQUITY MARKETS We are directly and indirectly affected by changes in the equity markets. For additional information regarding market risk related to equity markets, see page 79 of our 2010 Form 10-K.

Table 29 provides information regarding our marketable and nonmarketable equity investments.

Table 29: Marketable and Nonmarketable Equity Investments


		Mar. 31	,	Dec. 31		,
(in millions)	2011			2010


Nonmarketable equity investments:
Private equity investments:
Cost method	$	3,117			3,240
Equity method		7,692			7,624
Federal bank stock		5,129			5,254
Principal investments		302			305


Total nonmarketable equity investments (1)	$	16,240			16,423


Marketable equity securities:
Cost	$	3,883			4,258
Net unrealized gains		1,125			931


Total marketable equity securities (2)	$	5,008			5,189


(1)		Included in other assets on the balance sheet. See Note 6 (Other Assets) to Financial Statements in this Report for additional information.

(2)		Included in securities available for sale. See Note 4 (Securities Available for Sale) to Financial Statements in this Report for additional information.

Risk Management – Asset/Liability Management (continued)

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

Unencumbered debt and equity securities in the securities available-for-sale portfolio provide asset liquidity, in addition to the immediately liquid resources of cash and due from banks

and federal funds sold, securities purchased under resale agreements and other short-term investments. Asset liquidity is further enhanced by our ability to sell or securitize loans in secondary markets and to pledge loans to access secured borrowing facilities through the Federal Home Loan Banks (FHLB) and the FRB.

Core customer deposits have historically provided a sizeable source of relatively stable and low-cost funds. Average core deposits funded 64.2% and 61.9% of average total assets in first quarter 2011 and 2010, respectively.

Additional funding is provided by long-term debt (including trust preferred securities), other foreign deposits, and short-term borrowings.

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

Table 30: Short-Term Borrowings


	Quarter ended

	Mar. 31		,	Dec. 31		,	Sept. 30		,	June 30		,	Mar. 31,
(in millions)	2011			2010			2010			2010			2010


Balance, period end
Commercial paper and other short-term borrowings	$	17,228			17,454			16,856			16,604			17,646
Federal funds purchased and securities sold under agreements to repurchase		37,509			37,947			33,859			28,583			28,687


Total	$	54,737			55,401			50,715			45,187			46,333


Average daily balance for period
Commercial paper and other short-term borrowings	$	17,005			16,370			15,761			16,316			16,885
Federal funds purchased and securities sold under agreements to repurchase		37,746			34,239			30,707			28,766			28,196


Total	$	54,751			50,609			46,468			45,082			45,081


Maximum month-end balance for period
Commercial paper and other short-term borrowings (1)	$	17,597			17,454			16,856			17,388			17,646
Federal funds purchased and securities sold under agreements to repurchase (2)		37,509			37,947			33,859			28,807			29,270


(1)		Highest month-end balance in each of the last five quarters was in February 2011, and December, September, April and March 2010.

(2)		Highest month-end balance in each of the last five quarters was in March 2011, and December, September, May and February 2010.

Liquidity is also available through our ability to raise funds in a variety of domestic and international money and capital markets. We access capital markets for long-term funding through issuances of registered debt securities, private placements and asset-backed secured funding. Investors in the long-term capital markets generally will consider, among other factors, a company’s debt rating in making investment decisions. Rating agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix, the level and quality of earnings, and rating agency assumptions regarding the probability and extent of Federal financial assistance or support for certain large financial institutions. Adverse changes in these factors could result in a reduction of our credit rating; however, a reduction in credit rating would not cause us to violate any of our debt covenants. See the “Risk Factors” section in our 2010 Form 10-K for additional information regarding recent legislative developments and our credit ratings.

We continue to evaluate the potential impact on liquidity management of regulatory proposals, including Basel III and

those required under the Dodd-Frank Act, throughout the rule-making process.

Parent Under SEC rules, the Parent is classified as a “well-known seasoned issuer,” which allows it to file a registration statement that does not have a limit on issuance capacity. In June 2009, the Parent filed a registration statement with the SEC for the issuance of senior and subordinated notes, preferred stock and other securities. The Parent’s ability to issue debt and other securities under this registration statement is limited by the debt issuance authority granted by the Board. The Parent is currently authorized by the Board to issue $60 billion in outstanding short-term debt and $170 billion in outstanding long-term debt. During first quarter 2011, the Parent issued $5.7 billion in registered senior notes. The Parent also took several actions related to Wachovia’s 2006 issuance of 5.80% fixed-to-floating rate trust preferred securities. In February 2011, the Parent remarketed $2.5 billion of junior subordinated notes owned by an unconsolidated, wholly-owned trust. The purchasers of the junior subordinated notes exchanged them

with the Parent for newly issued senior notes, which are included in the Parent issuances described above. Proceeds of the remarketed junior subordinated securities were used by the trust to purchase $2.5 billion of Class A, Series I Preferred Stock issued by the Parent.

Parent’s proceeds from securities issued in first quarter 2011 were used for general corporate purposes, and we expect that the proceeds from securities issued in the future will also be used for the same purposes.

Table 31 provides information regarding the Parent’s medium-term note (MTN) programs. The Parent may issue senior and subordinated debt securities under Series I & J, and the European and Australian programmes. Under Series K, the Parent may issue senior debt securities linked to one or more indices.

Table 31: Medium-Term Note (MTN) Programs

March 31, 2011

Debt

Available

Date

issuance

for

(in billions)

established

authority

issuance

MTN program:

Series I & J (1)

August 2009

25.0

18.8

Series K (1)

April 2010

25.0

24.5

European (2)

December 2009

25.0

Australian (2)(3)

June 2005

AUS

10.0

6.8


(1)		SEC registered.

(2)		Not registered with the SEC. May not be offered in the United States without applicable exemptions from registration.

(3)		As amended in October 2005 and March 2010.

Wells Fargo Bank, N.A. Wells Fargo Bank, N.A. is authorized by its board of directors to issue $100 billion in outstanding short-term debt and $125 billion in outstanding long-term debt. In December 2007, Wells Fargo Bank, N.A. established a $100 billion bank note program under which, subject to any other debt outstanding under the limits described above, it may issue $50 billion in outstanding short-term senior notes and $50 billion in long-term senior or subordinated notes. At March 31, 2011, Wells Fargo Bank, N.A. had remaining issuance capacity on the bank note program of $50 billion in short-term senior notes and $50 billion in long-term senior or subordinated notes. Securities are issued under this program as private placements in accordance with OCC regulations.

Wells Fargo Financial Canada Corporation In January 2010, Wells Fargo Financial Canada Corporation (WFFCC), an indirect wholly owned Canadian subsidiary of the Parent, qualified with the Canadian provincial securities commissions CAD$7.0 billion in medium-term notes for distribution from time to time in Canada. During first quarter 2011, WFFCC issued CAD$500 million in medium-term notes. At March 31,2011, CAD$6.5 billion remained available for future issuance. All medium-term notes issued by WFFCC are unconditionally guaranteed by the Parent.

FEDERAL HOME LOAN BANK MEMBERSHIP We are a member of the Federal Home Loan Banks based in Dallas, Des Moines and San Francisco (collectively, the FHLBs). Each member of each of the FHLBs is required to maintain a minimum investment in capital stock of the applicable FHLB. The board of directors of each FHLB can increase the minimum investment requirements in the event it has concluded that additional capital is required to allow it to meet its own regulatory capital requirements. Any increase in the minimum investment requirements outside of specified ranges requires the approval of the Federal Housing Finance Board. Because the extent of any obligation to increase our investment in any of the FHLBs depends entirely upon the occurrence of a future event, potential future payments to the FHLBs are not determinable.

Capital Management

We have an active program for managing stockholders’ equity and regulatory capital and we maintain a comprehensive process for assessing the Company’s overall capital adequacy. We generate capital internally primarily through the retention of earnings net of dividends. Our objective is to maintain capital levels at the Company and its bank subsidiaries above the regulatory “well-capitalized” thresholds by an amount commensurate with our risk profile and risk tolerance objectives. Our potential sources of stockholders’ equity include retained earnings and issuances of common and preferred stock. Retained earnings increased $2.9 billion from December 31, 2010, predominantly from Wells Fargo net income of $3.8 billion, less common and preferred dividends of $822 million. During first quarter 2011, we issued approximately 40 million shares of common stock, with net proceeds of $634 million.

On March 18, 2011, the Company was notified by the FRB that it did not object to the capital plan the Company submitted on January 7, 2011, as part of the Comprehensive Capital Analysis and Review (CCAR). Following that notification, the Company initiated several capital actions contemplated in its capital plan, including increasing the quarterly common stock dividend to $0.12 a share, authorizing the repurchase of an additional 200 million shares of our common stock, and issuing notice to call $3.2 billion of trust preferred securities that will no longer count as Tier 1 capital under the Dodd-Frank Act and the proposed Basel III capital standards. The Company will participate in any future CCAR activities to demonstrate that proposed capital actions are consistent with the existing supervisory guidance, including demonstrating that our internal capital assessment process is consistent with the complexity of our activities and risk profile.

From time to time the Board authorizes the Company to repurchase shares of our common stock. Although we announce when the Board authorizes share repurchases (including the authorization announced on March 18, 2011), we typically do not give any public notice before we repurchase our shares. Various factors determine the amount and timing of our share repurchases, including our capital requirements, the number of shares we expect to issue for acquisitions and employee benefit plans, market conditions (including the trading price of our stock), and regulatory and legal considerations.

In 2008, the Board authorized the repurchase of up to 25 million additional shares of our outstanding common stock. In first quarter 2011, the Board authorized the repurchase of an additional 200 million shares. During first quarter 2011, we repurchased 1.7 million shares of our common stock, all from our employee benefit plans. At March 31, 2011, the remaining common stock repurchase authority from the 2008 and 2011 authorizations was approximately 201 million shares. For more information about share repurchases during first quarter 2011, see Part II, Item 2 of this Report.

Historically, our policy has been to repurchase shares under the “safe harbor” conditions of Rule 10b-18 of the Securities

Exchange Act of 1934 including a limitation on the daily volume of repurchases. Rule 10b-18 imposes an additional daily volume limitation on share repurchases during a pending merger or acquisition in which shares of our stock will constitute some or all of the consideration. Our management may determine that during a pending stock merger or acquisition when the safe harbor would otherwise be available, it is in our best interest to repurchase shares in excess of this additional daily volume limitation. In such cases, we intend to repurchase shares in compliance with the other conditions of the safe harbor, including the standing daily volume limitation that applies whether or not there is a pending stock merger or acquisition.

In connection with our participation in the Troubled Asset Relief Program (TARP) Capital Purchase Program (CPP), we issued to the U.S. Treasury Department warrants to purchase 110,261,688 shares of our common stock with an exercise price of $34.01 per share expiring on October 28, 2018. The Board has authorized the repurchase by the Company of up to $1 billion of the warrants. On May 26, 2010, in an auction by the U.S. Treasury, we purchased 70,165,963 of the warrants at a price of $7.70 per warrant. We have purchased an additional 651,244 warrants since the U.S. Treasury auction; however, no purchases were made during first quarter 2011. At March 31, 2011, there were 39,444,481 warrants outstanding and exercisable and $455 million of unused warrant repurchase authority. Depending on market conditions, we may purchase from time to time additional warrants and/or our outstanding debt securities in privately negotiated or open market transactions, by tender offer or otherwise.

Subsequent to the remarketing of certain junior subordinated notes issued in connection with Wachovia’s 2006 issuance of 5.80% fixed-to-floating rate trust preferred securities, the Company issued 25,010 shares of Class A, Series I Preferred Stock, with a par value of $2,501 million to Wachovia Capital Trust III (Trust), an unconsolidated wholly-owned trust. The action completed the Company’s and the Trust’s obligations under an agreement dated February 1, 2006, as amended, between the Trust and the Company (as successor to Wachovia Corporation). The Series I Preferred Stock replaces the trust preferred securities that will no longer count as Tier 1 capital under the Dodd-Frank Act.

The Company and each of our subsidiary banks are subject to various regulatory capital adequacy requirements administered by the FRB and the OCC. Risk-based capital (RBC) guidelines establish a risk-adjusted ratio relating capital to different categories of assets and off-balance sheet exposures. At March 31, 2011, the Company and each of our subsidiary banks were “well-capitalized” under applicable regulatory capital adequacy guidelines. See Note 19 (Regulatory and Agency Capital Requirements) to Financial Statements in this Report for additional information.

Current regulatory RBC rules are based primarily on broad credit-risk considerations and limited market-related risks, but do not take into account other types of risk a financial company may be exposed to. Our capital adequacy assessment process

Capital Management (continued)

contemplates a wide range of risks that the Company is exposed to and also takes into consideration our performance under a variety of stressed economic conditions, as well as regulatory expectations and guidance, rating agency viewpoints and the view of capital market participants.

In July 2009, the Basel Committee on Bank Supervision published an additional set of international guidelines for review known as Basel III and finalized these guidelines in December 2010. The additional guidelines were developed in response to the financial crisis of 2009 and 2010 and address many of the weaknesses identified in the banking sector as contributing to the crisis including excessive leverage, inadequate and low quality capital and insufficient liquidity buffers. The U.S. regulatory bodies are reviewing the final international standards and final U.S. rulemaking is expected to be completed in 2011. Although uncertainty exists regarding the final rules, we evaluate the impact of Basel III on our capital ratios based on our interpretation of the proposed capital requirements and we estimate that our Tier 1 common equity ratio under the proposal exceeded the fully-phased in minimum of 7.0% by 20 basis points at the end of first quarter 2011. This estimate is subject to

change depending on final promulgation of Basel III capital rulemaking and interpretations thereof by regulatory authorities.

We are well underway toward Basel II and Basel III implementation and are currently on schedule to enter the parallel run phase of Basel II in 2012 with regulatory approval. Our delayed entry into the parallel run phase was approved by the FRB in 2010 as a result of the acquisition of Wachovia.

At March 31, 2011, stockholders’ equity and Tier 1 common equity levels were higher than the quarter ending prior to the Wachovia acquisition. During 2009, as regulators and the market focused on the composition of regulatory capital, the Tier 1 common equity ratio gained significant prominence as a metric of capital strength. There is no mandated minimum or “well-capitalized” standard for Tier 1 common equity; instead the RBC rules state voting common stockholders’ equity should be the dominant element within Tier 1 common equity. Tier 1 common equity was $86.0 billion at March 31, 2011, or 8.93% of risk-weighted assets, an increase of $4.7 billion from December 31, 2010. Table 32 provides the details of the Tier 1 common equity calculation.

Table 32: Tier 1 Common Equity (1)


		Mar. 31		,		Dec. 31		,
(in billions)		2011				2010


Total equity		$	134.9				127.9

Noncontrolling interests			(1.5	)			(1.5	)


Total Wells Fargo stockholders’ equity			133.4				126.4


Adjustments:

Preferred equity (2)			(10.6	)			(8.1	)

Goodwill and intangible assets (other than MSRs)			(35.1	)			(35.5	)

Applicable deferred taxes			4.2				4.3

MSRs over specified limitations			(0.9	)			(0.9	)

Cumulative other comprehensive income			(4.9	)			(4.6	)

Other			(0.1	)			(0.3	)


Tier 1 common equity	(A)	$	86.0				81.3


Total risk-weighted assets (3)	(B)	$	962.9				980.0


Tier 1 common equity to total risk-weighted assets	(A)/(B)		8.93		%		8.30


(1)		Tier 1 common equity is a non-generally accepted accounting principle (GAAP) financial measure that is used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies. Tier 1 common equity includes total Wells Fargo stockholders’ equity, less preferred equity, goodwill and intangible assets (excluding MSRs), net of related deferred taxes, adjusted for specified Tier 1 regulatory capital limitations covering deferred taxes, MSRs, and cumulative other comprehensive income. Management reviews Tier 1 common equity along with other measures of capital as part of its financial analyses and has included this non-GAAP financial information, and the corresponding reconciliation to total equity, because of current interest in such information on the part of market participants.

(2)		In March 2011, we issued $2.5 billion of Series I Preferred Stock to an unconsolidated wholly-owned trust.

(3)		Under the regulatory guidelines for risk-based capital, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories according to the obligor or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar amount in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total risk-weighted assets.

Critical Accounting Policies

Our significant accounting policies (see Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2010 Form 10-K) are fundamental to understanding our results of operations and financial condition because they require that we use estimates and assumptions that may affect the value of our assets or liabilities and financial results. Six of these policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. These policies govern:

•		the allowance for credit losses;

•		purchased credit-impaired (PCI) loans;

•		the valuation of residential mortgage servicing rights (MSRs);

•		liability for mortgage loan repurchase losses;

•		the fair valuation of financial instruments; and

•		income taxes.

Management has reviewed and approved these critical accounting policies and has discussed these policies with the Board’s Audit and Examination Committee. These policies are described further in the “Financial Review – Critical Accounting Policies” section and Note 1 (Summary of Significant Accounting Policies) to Financial Statements in our 2010 Form 10-K.

Current Accounting Developments

The following accounting pronouncement has been issued by the Financial Accounting Standards Board (FASB) but is not yet effective:

•

Accounting Standards Update (ASU or Update) 2011-02, A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring.

ASU 2011-02 provides guidance clarifying under what circumstances a creditor should classify a restructured receivable as a troubled debt restructuring (TDR). A receivable is a TDR if both of the following exist: 1) a creditor has granted a concession to the debtor, and 2) the debtor is experiencing financial difficulties. The Update clarifies that a creditor should consider all aspects of a restructuring when evaluating whether it has granted a concession, which include determining whether a debtor can obtain funds from another source at market rates and assessing the value of additional collateral and guarantees obtained at the time of restructuring. The Update also provides factors a creditor should consider when determining if a debtor is experiencing financial difficulties, such as probability of payment default and bankruptcy declarations. The Update is effective for us in third quarter 2011 with retrospective application to January 1, 2011. Early adoption is permitted. We are evaluating the impact these accounting changes may have on our consolidated financial statements.

Forward-Looking Statements

This Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “projects,” “outlook,” “forecast,” “will,” “may,” “could,” “should,” “can” and similar references to future periods. Examples of forward-looking statements in this Report include, but are not limited to, statements we make about: (i) future results of the Company; (ii) future credit quality and expectations regarding future loan losses in our loan portfolios and life-of-loan estimates; the level and loss content of NPAs and nonaccrual loans; the adequacy of the allowance for credit losses, including our current expectation of future reductions in the allowance for credit losses; and the reduction or mitigation of risk in our loan portfolios and the effects of loan modification programs; (iii) the merger integration of the Company and Wachovia, including merger costs, expense savings, revenue synergies and store conversions; (iv) our mortgage repurchase exposure and exposure relating to our foreclosure practices; (v) our current estimate of our effective tax rate for 2011; (vi) our estimated future expenses, including loan resolution costs; (vii) future capital levels and our expectations regarding our estimated Tier 1 common equity ratio under proposed Basel III capital standards; (viii) the expected outcome and impact of legal, regulatory and legislative developments, including Dodd-Frank Act and FRB restrictions on debit interchange fees; and (ix) the Company’s plans, objectives and strategies.

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

•		current and future economic and market conditions, including the effects of further declines in housing prices and high unemployment rates;

•		our capital and liquidity requirements (including under regulatory capital standards, such as the proposed Basel III capital standards, as determined and interpreted by applicable regulatory authorities) and our ability to generate capital internally or raise capital on favorable terms;

•		financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and legislation and regulation relating to overdraft fees (and changes to our overdraft practices as a

		result thereof), debit card interchange fees, credit cards, and other bank services;

•		legislative proposals to allow mortgage cram-downs in bankruptcy or require other loan modifications;

•		the extent of our success in our loan modification efforts, as well as the effects of regulatory requirements or guidance regarding loan modifications or changes in such requirements or guidance;

•		the amount of mortgage loan repurchase demands that we receive and our ability to satisfy any such demands without having to repurchase loans related thereto or otherwise indemnify or reimburse third parties, and the credit quality of or losses on such repurchased mortgage loans;

•		negative effects relating to mortgage foreclosures, including changes in our procedures or practices and/or industry standards or practices, regulatory or judicial requirements, penalties or fines, increased costs, or delays or moratoriums on foreclosures;

•		our ability to successfully integrate the Wachovia merger and realize all of the expected cost savings and other benefits and the effects of any delays or disruptions in systems conversions relating to the Wachovia integration;

•		our ability to realize the efficiency initiatives to lower expenses when and in the amount expected;

•		recognition of OTTI on securities held in our available-for-sale portfolio;

•		the effect of changes in interest rates on our net interest margin and our mortgage originations, MSRs and MHFS;

•		hedging gains or losses;

•		disruptions in the capital markets and reduced investor demand for mortgage loans;

•		our ability to sell more products to our customers;

•		the effect of the economic recession on the demand for our products and services;

•		the effect of the fall in stock market prices on our investment banking business and our fee income from our brokerage, asset and wealth management businesses;

•		our election to provide support to our mutual funds for structured credit products they may hold;

•		changes in the value of our venture capital investments;

•		changes in our accounting policies or in accounting standards or in how accounting standards are to be applied or interpreted;

•		mergers, acquisitions and divestitures;

•		changes in the Company’s credit ratings and changes in the credit quality of the Company’s customers or counterparties;

•		reputational damage from negative publicity, fines, penalties and other negative consequences from regulatory violations and legal actions;

•		the loss of checking and savings account deposits to other investments such as the stock market, and the resulting increase in our funding costs and impact on our net interest margin;

•		fiscal and monetary policies of the FRB; and

•

the other risk factors and uncertainties described under “Risk Factors” in our 2010 Form 10-K and in this Report.

In addition to the above factors, we also caution that there is no assurance that our allowance for credit losses will be adequate to cover future credit losses, especially if credit markets, housing prices and unemployment do not continue to stabilize or improve. Increases in loan charge-offs or in the allowance for

credit losses and related provision expense could materially adversely affect our financial results and condition.

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

Risk Factors

An investment in the Company involves risk, including the possibility that the value of the investment could fall substantially and that dividends or other distributions on the investment could be reduced or eliminated. We discuss previously under “Forward-Looking Statements” and elsewhere in this Report, as well as in other documents we file with the SEC, risk factors that could adversely affect our financial results and condition and the value of, and return on, an investment in the Company. We refer you to the Financial Review section and Financial Statements (and related Notes) in this Report for more information about credit, interest rate, market, and litigation risks and to the “Risk Factors” and “Regulation and Supervision” sections in our 2010 Form 10-K for more information about risks. Any factor described in this Report or in our 2010 Form 10-K could by itself, or together with other factors, adversely affect our financial results and condition, or the value of an investment in the Company. There are factors not discussed in this Report or in our 2010 Form 10-K that could adversely affect our financial results and condition.

Controls and Procedures

Disclosure Controls and Procedures

As required by SEC rules, the Company’s management evaluated the effectiveness, as of March 31, 2011, 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 chief financial officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2011.

Internal Control Over Financial Reporting

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

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

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

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

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. No change occurred during first quarter 2011 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Wells Fargo & Company and Subsidiaries

Consolidated Statement of Income (Unaudited)


	Quarter ended March 31,

(in millions, except per share amounts)		2011			2010


Interest income
Trading assets		$	350			267
Securities available for sale			2,164			2,415
Mortgages held for sale			437			387
Loans held for sale			12			34
Loans			9,387			10,038
Other interest income			122			84


Total interest income			12,472			13,225


Interest expense
Deposits			615			735
Short-term borrowings			26			18
Long-term debt			1,104			1,276
Other interest expense			76			49


Total interest expense			1,821			2,078


Net interest income			10,651			11,147
Provision for credit losses			2,210			5,330


Net interest income after provision for credit losses			8,441			5,817


Noninterest income
Service charges on deposit accounts			1,012			1,332
Trust and investment fees			2,916			2,669
Card fees			957			865
Other fees			989			941
Mortgage banking			2,016			2,470
Insurance			503			621
Net gains from trading activities			612			537
Net gains (losses) on debt securities available for sale (1)			(166	)		28
Net gains from equity investments (2)			353			43
Operating leases			77			185
Other			409			610


Total noninterest income			9,678			10,301


Noninterest expense
Salaries			3,454			3,314
Commission and incentive compensation			2,347			1,992
Employee benefits			1,392			1,322
Equipment			632			678
Net occupancy			752			796
Core deposit and other intangibles			483			549
FDIC and other deposit assessments			305			301
Other			3,368			3,165


Total noninterest expense			12,733			12,117


Income before income tax expense			5,386			4,001
Income tax expense			1,572			1,401


Net income before noncontrolling interests			3,814			2,600
Less: Net income from noncontrolling interests			55			53


Wells Fargo net income		$	3,759			2,547


Less: Preferred stock dividends and other			189			175


Wells Fargo net income applicable to common stock		$	3,570			2,372


Per share information
Earnings per common share		$	0.68			0.46
Diluted earnings per common share			0.67			0.45
Dividends declared per common share			0.12			0.05
Average common shares outstanding			5,278.8			5,190.4
Diluted average common shares outstanding			5,333.1			5,225.2


(1)		Includes other-than-temporary impairment (OTTI) credit-related losses of $80 million and $92 million recognized in earnings for the quarters ended March 31, 2011 and 2010, respectively. Total OTTI losses (gains) were $(76) million and $154 million, net of $(156) million and $62 million recognized as non-credit related OTTI in other comprehensive income) for the quarters ended March 31, 2011 and 2010, respectively.

(2)		Includes OTTI losses of $41 million and $105 million for the quarters ended March 31, 2011 and 2010, respectively.

The accompanying notes are an integral part of these statements.

Wells Fargo & Company and Subsidiaries

Consolidated Balance Sheet (Unaudited)


	Mar. 31,			Dec. 31,

(in millions, except shares)	2011			2010


Assets
Cash and due from banks	$	16,978			16,044
Federal funds sold, securities purchased under resale agreements and other short-term investments		93,041			80,637
Trading assets		57,890			51,414
Securities available for sale		167,906			172,654
Mortgages held for sale (includes $28,931 and $47,531 carried at fair value)		33,121			51,763
Loans held for sale (includes $1,003 and $873 carried at fair value)		1,428			1,290

Loans (includes $98 and $309 carried at fair value)		751,155			757,267
Allowance for loan losses		(21,983	)		(23,022	)


Net loans		729,172			734,245


Mortgage servicing rights:
Measured at fair value		15,648			14,467
Amortized		1,423			1,419
Premises and equipment, net		9,545			9,644
Goodwill		24,777			24,770
Other assets		93,737			99,781


Total assets (1)	$	1,244,666			1,258,128


Liabilities
Noninterest-bearing deposits	$	190,959			191,256
Interest-bearing deposits		646,703			656,686


Total deposits		837,662			847,942
Short-term borrowings		54,737			55,401
Accrued expenses and other liabilities		68,721			69,913
Long-term debt (includes $99 and $306 carried at fair value)		148,603			156,983


Total liabilities (2)		1,109,723			1,130,239


Equity
Wells Fargo stockholders’ equity:
Preferred stock		11,897			8,689
Common stock – $1-2/3 par value, authorized 9,000,000,000 shares; issued 5,312,696,671 shares and 5,272,414,622 shares		8,854			8,787
Additional paid-in capital		54,815			53,426
Retained earnings		54,855			51,918
Cumulative other comprehensive income		5,021			4,738
Treasury stock – 11,818,765 shares and 10,131,394 shares		(541	)		(487	)
Unearned ESOP shares		(1,430	)		(663	)


Total Wells Fargo stockholders’ equity		133,471			126,408
Noncontrolling interests		1,472			1,481


Total equity		134,943			127,889


Total liabilities and equity	$	1,244,666			1,258,128


(1)		Our consolidated assets at March 31, 2011 and December 31, 2010, include the following assets of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs: Cash and due from banks, $154 million and $200 million; Trading assets, $98 million and $143 million; Securities available for sale, $2.4 billion and $2.2 billion; Loans held for sale, $53 million and $0; Net loans, $15.4 billion and $16.7 billion; Other assets, $1.4 billion and $2.0 billion, and Total assets, $19.6 billion and $21.2 billion, respectively.

(2)		Our consolidated liabilities at March 31, 2011 and December 31, 2010, include the following VIE liabilities for which the VIE creditors do not have recourse to Wells Fargo: Short-term borrowings, $31 million and $7 million; Accrued expenses and other liabilities, $90 million and $71 million; Long-term debt, $7.1 billion and $8.3 billion; and Total liabilities, $7.2 billion and $8.4 billion, respectively.

The accompanying notes are an integral part of these statements.

Wells Fargo & Company and Subsidiaries

Consolidated Statement of Changes in Equity and Comprehensive Income (Unaudited)

Preferred stock

Common stock

(in millions, except shares)

Shares

Amount

Shares

Amount

Balance January 1, 2010

9,980,940

8,485

5,178,624,593

8,743

Cumulative effect from change in accounting for VIEs

Comprehensive income:

Net income

Other comprehensive income, net of tax:

Translation adjustments

Net unrealized gains on securities available for sale,
net of reclassification of $40 million of net gains included in net income

Net unrealized gains on derivatives and hedging activities, net of reclassification
of $88 million of net gains on cash flow hedges included in net income

Unamortized losses under defined benefit plans, net of amortization

Total comprehensive income

Noncontrolling interests

Common stock issued

21,683,461

Common stock repurchased

(1,312,992

)

Preferred stock issued to ESOP

1,000,000

1,000

Preferred stock released by ESOP

Preferred stock converted to common shares

(209,008

)

(209

)

6,716,195

Common stock dividends

Preferred stock dividends

Tax benefit upon exercise of stock options

Stock incentive compensation expense

Net change in deferred compensation and related plans

Net change

790,992

791

27,086,664

Balance March 31, 2010

10,771,932

9,276

5,205,711,257

8,743

Balance January 1, 2011

10,185,303

8,689

5,262,283,228

8,787

Comprehensive income:

Net income

Other comprehensive income, net of tax:

Translation adjustments

Net unrealized gains on securities available for sale,
net of reclassification of $32 million of net losses included in net income

Net unrealized losses on derivatives and hedging activities, net of reclassification of $100 million of net gains on cash flow hedges included in net income

Unamortized gains under defined benefit plans, net of amortization

Total comprehensive income

Noncontrolling interests

Common stock issued

24,788,653

Common stock repurchased

(1,687,371

)

Preferred stock issued to ESOP

1,200,000

1,200

Preferred stock released by ESOP

Preferred stock converted to common shares

(492,873

)

(493

)

15,493,396

Preferred stock issued

25,010

2,501

Common stock dividends

Preferred stock dividends

Tax benefit upon exercise of stock options

Stock incentive compensation expense

Net change in deferred compensation and related plans

Net change

732,137

3,208

38,594,678

Balance March 31, 2011

10,917,440

11,897

5,300,877,906

8,854

The accompanying notes are an integral part of these statements.


Wells Fargo stockholders’ equity
						Cumulative									Total
Additional						other						Unearned			Wells Fargo
paid-in			Retained			comprehensive			Treasury			ESOP			stockholders’			Noncontrolling			Total
capital			earnings			income			stock			shares			equity			interests			equity

	52,878			41,563			3,009			(2,450	)		(442	)		111,786			2,573			114,359

				183												183						183


				2,547												2,547			53			2,600


							5									5						5


							984									984			1			985


							73									73						73

							16									16						16

																3,625			54			3,679

	16															16			(615	)		(599	)

	(13	)		(213	)					690						464						464

										(38	)					(38	)					(38	)

	80												(1,080	)		-						-

	(17	)											226			209						209

	(4	)								213						-						-

				(260	)											(260	)					(260	)

				(184	)											(184	)					(184	)

	51															51						51

	175															175						175

	(10	)								125						115						115

	278			2,073			1,078			990			(854	)		4,356			(561	)		3,795

	53,156			43,636			4,087			(1,460	)		(1,296	)		116,142			2,012			118,154


	53,426			51,918			4,738			(487	)		(663	)		126,408			1,481			127,889


				3,759												3,759			55			3,814


							15									15						15


							352									352			(4	)		348


							(99	)								(99	)					(99	)

							15									15						15

																4,042			51			4,093

	(35	)														(35	)		(60	)		(95	)

	593															634						634

										(55	)					(55	)					(55	)

	102												(1,302	)		-						-

	(42	)											535			493						493

	467															-						-

																2,501						2,501

	4			(638	)											(634	)					(634	)

				(184	)											(184	)					(184	)

	54															54						54

	261															261						261

	(15	)								1						(14	)					(14	)

	1,389			2,937			283			(54	)		(767	)		7,063			(9	)		7,054

	54,815			54,855			5,021			(541	)		(1,430	)		133,471			1,472			134,943

Wells Fargo & Company and Subsidiaries

Consolidated Statement of Cash Flows (Unaudited)


	Quarter ended March 31,
(in millions)		2011			2010

Cash flows from operating activities:
Net income before noncontrolling interests		$	3,814			2,600
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses			2,210			5,330
Changes in fair value of MSRs, MHFS and LHFS carried at fair value			(586	)		(80	)
Depreciation and amortization			477			713
Other net losses (gains)			(1,354	)		319
Preferred stock released by ESOP			493			209
Stock incentive compensation expense			261			175
Excess tax benefits related to stock option payments			(55	)		(51	)
Originations of MHFS			(79,389	)		(74,290	)
Proceeds from sales of and principal collected on mortgages originated for sale			88,264			81,466
Originations of LHFS			-			(3,155	)
Proceeds from sales of and principal collected on LHFS			2,299			6,036
Purchases of LHFS			(2,313	)		(2,407	)
Net change in:
Trading assets			5,826			(3,834	)
Deferred income taxes			539			1,199
Accrued interest receivable			(156	)		690
Accrued interest payable			14			(142	)
Other assets, net			2,389			3,431
Other accrued expenses and liabilities, net			(5,522	)		(9,328	)

Net cash provided by operating activities			17,211			8,881

Cash flows from investing activities:
Net change in:
Federal funds sold, securities purchased under resale agreements and other short-term investments			(12,404	)		(13,307	)
Securities available for sale:
Sales proceeds			15,361			1,795
Prepayments and maturities			11,651			9,295
Purchases			(18,831	)		(4,191	)
Loans:
Loans originated by banking subsidiaries, net of principal collected			(214	)		15,532
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries			2,165			1,341
Purchases (including participations) of loans by banking subsidiaries			(644	)		(566	)
Principal collected on nonbank entities’ loans			2,546			4,286
Loans originated by nonbank entities			(1,904	)		(2,861	)
Proceeds from sales of foreclosed assets			1,642			1,109
Changes in MSRs from purchases and sales			(45	)		(8	)
Other, net			1,909			270

Net cash provided by investing activities			1,232			12,695

Cash flows from financing activities:
Net change in:
Deposits			(10,280	)		(19,125	)
Short-term borrowings			(664	)		2,240
Long-term debt:
Proceeds from issuance			5,217			1,415
Repayment			(13,933	)		(16,508	)
Preferred stock:
Proceeds from issuance			2,501			-
Cash dividends paid			(251	)		(251	)
Common stock:
Proceeds from issuance			634			464
Repurchased			(55	)		(38	)
Cash dividends paid			(634	)		(260	)
Excess tax benefits related to stock option payments			55			51
Net change in noncontrolling interests			(99	)		(343	)

Net cash used by financing activities			(17,509	)		(32,355	)

Net change in cash and due from banks			934			(10,779	)
Cash and due from banks at beginning of period			16,044			27,080

Cash and due from banks at end of period		$	16,978			16,301

Supplemental cash flow disclosures:
Cash paid for interest		$	1,807			2,220
Cash paid for income taxes			144			325

The accompanying notes are an integral part of these statements. See Note 1 for noncash activities.

See the Glossary of Acronyms at the end of this Report for terms used throughout the Financial Statements and related Notes of this Form 10-Q.

Note 1: Summary of Significant Accounting Policies

Wells Fargo & Company is a nation-wide diversified, community-based financial services company. We provide banking, insurance, investments, mortgage banking, investment banking, retail banking, brokerage, and consumer finance through banking stores, the internet and other distribution channels to consumers, businesses and institutions in all 50 states, the District of Columbia, and in other countries. When we refer to “Wells Fargo,” “the Company,” “we,” “our” or “us” in this Form 10-Q, we mean Wells Fargo & Company and Subsidiaries (consolidated). Wells Fargo & Company (the Parent) is a financial holding company and a bank holding company. We also hold a majority interest in a real estate investment trust, which has publicly traded preferred stock outstanding.

Our accounting and reporting policies conform with U.S. generally accepted accounting principles (GAAP) and practices in the financial services industry. To prepare the financial statements in conformity with GAAP, management must make estimates based on assumptions about future economic and market conditions (for example, unemployment, market liquidity, real estate prices, etc.) that affect the reported amounts of assets and liabilities at the date of the financial statements and income and expenses during the reporting period and the related disclosures. Although our estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that actual conditions could be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Management has made significant estimates in several areas, including other-than-temporary impairment (OTTI) on investment securities (Note 4), allowance for credit losses and purchased credit-impaired (PCI) loans (Note 5), valuations of residential mortgage servicing rights (MSRs) (Notes 7 and 8) and financial instruments (Note 13), liability for mortgage loan repurchase losses (Note 8) and income taxes. Actual results could differ from those estimates.

The information furnished in these unaudited interim statements reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the periods presented. These adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q. The results of operations in the interim statements do not necessarily indicate the results that may be expected for the full year. The interim financial information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2010 (2010 Form 10-K).

Accounting Standards Adopted in 2011
In first quarter 2011, we adopted certain provisions of Accounting Standards Update (ASU or Update) 2010-6, Improving Disclosures about Fair Value Measurements.

ASU 2010-6 amends the disclosure requirements for fair value measurements. Companies are required to disclose significant transfers in and out of Levels 1 and 2 of the fair value hierarchy. The Update also clarifies that fair value measurement disclosures should be presented for each asset and liability class, which is generally a subset of a line item in the statement of financial position. In the rollforward of Level 3 activity, companies must present information on purchases, sales, issuances, and settlements on a gross basis rather than on a net basis. Companies should also provide information about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring instruments classified as either Level 2 or Level 3. In first quarter 2011, we adopted the requirement for gross presentation in the Level 3 rollforward with prospective application. The remaining provisions were effective for us in first quarter 2010. Our adoption of the Update did not affect our consolidated financial statement results since it amends only the disclosure requirements for fair value measurements.

Note 1: Summary of Significant Accounting Policies (continued)

SUPPLEMENTAL CASH FLOW INFORMATION Noncash activities are presented below, including information on transfers affecting MHFS, LHFS, and MSRs.


	Quarter ended March 31,

(in millions)		2011			2010


Transfers from loans to securities available for sale		$	-			2,057

Trading assets retained from securitization of MHFS			12,302			-
Capitalization of MSRs from sale of MHFS			1,291			1,065
Transfers from MHFS to foreclosed assets			40			51
Transfers from loans to MHFS			25			46
Transfers from (to) loans to (from) LHFS			106			(149	)
Transfers from loans to foreclosed assets			1,237			2,697
Changes in consolidations of variable interest entities:
Trading assets			-			155
Securities available for sale			9			(7,590	)
Loans			(210	)		25,657
Other assets			-			193
Short-term borrowings			-			5,127
Long-term debt			(204	)		13,134
Accrued expenses and other liabilities			-			(32	)
Decrease in noncontrolling interests due to deconsolidation of subsidiaries			-			239

SUBSEQUENT EVENTS We have evaluated the effects of subsequent events that have occurred subsequent to period end March 31, 2011, and there have been no material events that

would require recognition in our first quarter 2011 consolidated financial statements or disclosure in the Notes to the financial statements.

Note 2: Business Combinations

We regularly explore opportunities to acquire financial services companies and businesses. Generally, we do not make a public announcement about an acquisition opportunity until a definitive agreement has been signed. For information on additional consideration related to acquisitions, which is considered to be a guarantee, see Note 10.

We did not complete any acquisitions in first quarter 2011. At March 31, 2011, we had one pending business combination with total assets of approximately $5 million. We expect to complete this transaction in 2011.

Note 3: Federal Funds Sold, Securities Purchased under Resale Agreements and Other Short-Term Investments

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


	Mar. 31,		Dec. 31,

(in millions)	2011		2010


Federal funds sold and securities purchased under resale agreements	$	20,868		24,880
Interest-earning deposits		70,058		53,433
Other short-term investments		2,115		2,324


Total	$	93,041		80,637

We receive collateral from other entities under resale agreements and securities borrowings. For additional information, see Note 10.

Note 4: Securities Available for Sale

The following table provides the cost and fair value for the major categories of securities available for sale carried at fair value. The net unrealized gains (losses) are reported on an after-tax basis as

a component of cumulative OCI. There were no securities classified as held to maturity as of the periods presented.


			Gross		Gross
			unrealized		unrealized			Fair
(in millions)	Cost		gains		losses			value


March 31, 2011

Securities of U.S. Treasury and federal agencies	$	1,483		43		(19	)		1,507
Securities of U.S. states and political subdivisions		21,374		616		(831	)		21,159
Mortgage-backed securities:
Federal agencies		72,475		3,207		(130	)		75,552
Residential		17,119		2,188		(359	)		18,948
Commercial		12,823		1,343		(386	)		13,780


Total mortgage-backed securities		102,417		6,738		(875	)		108,280


Corporate debt securities		9,506		1,412		(90	)		10,828
Collateralized debt obligations (1)		5,322		478		(184	)		5,616
Other (2)		15,045		642		(179	)		15,508


Total debt securities		155,147		9,929		(2,178	)		162,898


Marketable equity securities:
Perpetual preferred securities		3,290		287		(66	)		3,511
Other marketable equity securities		593		905		(1	)		1,497


Total marketable equity securities		3,883		1,192		(67	)		5,008


Total	$	159,030		11,121		(2,245	)		167,906


December 31, 2010

Securities of U.S. Treasury and federal agencies	$	1,570		49		(15	)		1,604
Securities of U.S. states and political subdivisions		18,923		568		(837	)		18,654
Mortgage-backed securities:
Federal agencies		78,578		3,555		(96	)		82,037
Residential		18,294		2,398		(489	)		20,203
Commercial		12,990		1,199		(635	)		13,554


Total mortgage-backed securities		109,862		7,152		(1,220	)		115,794


Corporate debt securities		9,015		1,301		(37	)		10,279
Collateralized debt obligations (1)		4,638		369		(229	)		4,778
Other (2)		16,063		576		(283	)		16,356


Total debt securities		160,071		10,015		(2,621	)		167,465


Marketable equity securities:
Perpetual preferred securities		3,671		250		(89	)		3,832
Other marketable equity securities		587		771		(1	)		1,357


Total marketable equity securities		4,258		1,021		(90	)		5,189


Total	$	164,329		11,036		(2,711	)		172,654


(1)		Includes collateralized loan obligations with a cost basis and fair value of $4.7 billion and $5.0 billion, respectively, at March 31, 2011, and $4.0 billion and $4.2 billion, respectively, at December 31, 2010.

(2)		Included in the “Other” category are asset-backed securities collateralized by auto leases or loans and cash reserves with a cost basis and fair value of $4.4 billion and $4.4 billion, respectively, at March 31, 2011, and $6.2 billion and $6.4 billion, respectively, at December 31, 2010. Also included in the “Other” category are asset-backed securities collateralized by home equity loans with a cost basis and fair value of $900 million and $1.1 billion, respectively, at March 31, 2011, and $927 million and $1.1 billion, respectively, at December 31, 2010. The remaining balances primarily include asset-backed securities collateralized by credit cards and student loans.

Note 4: Securities Available for Sale (continued)

Gross Unrealized Losses and Fair Value
The following table shows the gross unrealized losses and fair value of securities in the securities available-for-sale portfolio by length of time that individual securities in each category had been in a continuous loss position. Debt securities on which we

have taken only credit-related OTTI write-downs are categorized as being “less than 12 months” or “12 months or more” in a continuous loss position based on the point in time that the fair value declined to below the cost basis and not the period of time since the credit-related OTTI write-down.


	Less than 12 months					12 months or more					Total
	Gross					Gross					Gross
	unrealized			Fair		unrealized			Fair		unrealized			Fair
(in millions)	losses			value		losses			value		losses			value


March 31, 2011

Securities of U.S. Treasury and federal agencies	$	(19	)		583		-			-		(19	)		583
Securities of U.S. states and political subdivisions		(319	)		6,358		(512	)		3,002		(831	)		9,360
Mortgage-backed securities:
Federal agencies		(121	)		15,690		(9	)		701		(130	)		16,391
Residential		(32	)		1,068		(327	)		3,870		(359	)		4,938
Commercial		(15	)		607		(371	)		4,021		(386	)		4,628


Total mortgage-backed securities		(168	)		17,365		(707	)		8,592		(875	)		25,957


Corporate debt securities		(7	)		459		(83	)		193		(90	)		652
Collateralized debt obligations		(15	)		844		(169	)		473		(184	)		1,317
Other		(13	)		933		(166	)		782		(179	)		1,715


Total debt securities		(541	)		26,542		(1,637	)		13,042		(2,178	)		39,584


Marketable equity securities:
Perpetual preferred securities		(9	)		490		(57	)		672		(66	)		1,162
Other marketable equity securities		-			-		(1	)		5		(1	)		5


Total marketable equity securities		(9	)		490		(58	)		677		(67	)		1,167


Total	$	(550	)		27,032		(1,695	)		13,719		(2,245	)		40,751


December 31, 2010

Securities of U.S. Treasury and federal agencies	$	(15	)		544		-			-		(15	)		544
Securities of U.S. states and political subdivisions		(322	)		6,242		(515	)		2,720		(837	)		8,962
Mortgage-backed securities:
Federal agencies		(95	)		8,103		(1	)		60		(96	)		8,163
Residential		(35	)		1,023		(454	)		4,440		(489	)		5,463
Commercial		(9	)		441		(626	)		5,141		(635	)		5,582


Total mortgage-backed securities		(139	)		9,567		(1,081	)		9,641		(1,220	)		19,208


Corporate debt securities		(10	)		477		(27	)		157		(37	)		634
Collateralized debt obligations		(13	)		679		(216	)		456		(229	)		1,135
Other		(13	)		1,985		(270	)		757		(283	)		2,742


Total debt securities		(512	)		19,494		(2,109	)		13,731		(2,621	)		33,225


Marketable equity securities:
Perpetual preferred securities		(41	)		962		(48	)		467		(89	)		1,429
Other marketable equity securities		-			-		(1	)		7		(1	)		7


Total marketable equity securities		(41	)		962		(49	)		474		(90	)		1,436


Total	$	(553	)		20,456		(2,158	)		14,205		(2,711	)		34,661

We do not have the intent to sell any securities included in the previous table. For debt securities included in the table, we have concluded it is more likely than not that we will not be required to sell prior to recovery of the amortized cost basis. We have assessed each security for credit impairment. For debt securities, we evaluate, where necessary, whether credit impairment exists by comparing the present value of the expected cash flows to the securities amortized cost basis. For equity securities, we consider numerous factors in determining whether impairment exists, including our intent and ability to hold the securities for a period of time sufficient to recover the cost basis of the securities.

For complete descriptions of the factors we consider when analyzing debt securities for impairment, see Note 5 in our 2010 Form 10-K. There have been no material changes to our methodologies for assessing impairment in first quarter 2011.

SECURITIES OF U.S. TREASURY AND FEDERAL AGENCIES AND FEDERAL AGENCY MORTGAGE-BACKED SECURITIES (MBS) The unrealized losses associated with U.S. Treasury and federal agency securities and federal agency MBS are primarily driven by changes in interest rates and not due to credit losses given the explicit or implicit guarantees provided by the U.S. government.

SECURITIES OF U.S. STATES AND POLITICAL SUBDIVISIONS The unrealized losses associated with securities of U.S. states and political subdivisions are primarily driven by changes in interest rates and not due to the credit quality of the securities. Substantially all of these investments are investment grade. The securities were generally underwritten in accordance with our own investment standards prior to the decision to purchase, without relying on a bond insurer’s guarantee in making the investment decision. These investments will continue to be monitored as part of our ongoing impairment analysis, but are expected to perform, even if the rating agencies reduce the credit rating of the bond insurers. As a result, we expect to recover the entire amortized cost basis of these securities.

RESIDENTIAL AND COMMERCIAL MORTGAGE-BACKED SECURITIES (MBS) The unrealized losses associated with private residential MBS and commercial MBS are primarily driven by changes in projected collateral losses, credit spreads and interest rates. We assess for credit impairment using a cash flow model. The key assumptions include default rates, severities and prepayment rates. We estimate losses to a security by forecasting the underlying mortgage loans in each transaction. We use forecasted loan performance to project cash flows to the various tranches in the structure. We also consider cash flow forecasts and, as applicable, independent industry analyst reports and forecasts, sector credit ratings, and other independent market data. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared with our credit enhancement, we expect to recover the entire amortized cost basis of these securities.

CORPORATE DEBT SECURITIES The unrealized losses associated with corporate debt securities are primarily related to securities backed by commercial loans and individual issuer

companies. For securities with commercial loans as the underlying collateral, we have evaluated the expected credit losses in the security and concluded that we have sufficient credit enhancement when compared with our estimate of credit losses for the individual security. For individual issuers, we evaluate the financial performance of the issuer on a quarterly basis to determine that the issuer can make all contractual principal and interest payments. Based upon this assessment, we expect to recover the entire amortized cost basis of these securities.

COLLATERALIZED DEBT OBLIGATIONS (CDOs) The unrealized losses associated with CDOs relate to securities primarily backed by commercial, residential or other consumer collateral. The losses are primarily driven by changes in projected collateral losses, credit spreads and interest rates. We assess for credit impairment using a cash flow model. The key assumptions include default rates, severities and prepayment rates. We also consider cash flow forecasts and, as applicable, independent industry analyst reports and forecasts, sector credit ratings, and other independent market data. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared with our credit enhancement, we expect to recover the entire amortized cost basis of these securities.

OTHER DEBT SECURITIES The unrealized losses associated with other debt securities primarily relate to other asset-backed securities, which are primarily backed by home equity and student loans. The losses are primarily driven by changes in projected collateral losses, credit spreads and interest rates. We assess for credit impairment using a cash flow model. The key assumptions include default rates, severities and prepayment rates. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared with our credit enhancement, we expect to recover the entire amortized cost basis of these securities.

MARKETABLE EQUITY SECURITIES Our marketable equity securities include investments in perpetual preferred securities, which provide very attractive tax-equivalent yields. We evaluated these hybrid financial instruments with investment-grade ratings for impairment using an evaluation methodology similar to that used for debt securities. Perpetual preferred securities are not considered to be other-than-temporarily impaired if there is no evidence of credit deterioration or investment rating downgrades of any issuers to below investment grade, and we expect to continue to receive full contractual payments. We will continue to evaluate the prospects for these securities for recovery in their market value in accordance with our policy for estimating OTTI. We have recorded impairment write-downs on perpetual preferred securities where there was evidence of credit deterioration.

Note 4: Securities Available for Sale (continued)

The fair values of our investment securities could decline in the future if the underlying performance of the collateral for the residential and commercial MBS or other securities deteriorate and our credit enhancement levels do not provide sufficient protection to our contractual principal and interest. As a result, there is a risk that significant OTTI may occur in the future.

The following table shows the gross unrealized losses and fair value of debt and perpetual preferred securities available for sale by those rated investment grade and those rated less than investment grade, according to their lowest credit rating by Standard & Poor’s Rating Services (S&P) or Moody’s Investors Service (Moody’s). Credit ratings express opinions about the credit quality of a security. Securities rated investment grade, that is those rated BBB- or higher by S&P or Baa3 or higher by Moody’s, are generally considered by the rating agencies and

market participants to be low credit risk. Conversely, securities rated below investment grade, labeled as “speculative grade” by the rating agencies, are considered to be distinctively higher credit risk than investment grade securities. We have also included securities not rated by S&P or Moody’s in the table below based on the internal credit grade of the securities (used for credit risk management purposes) equivalent to the credit rating assigned by major credit agencies. The unrealized losses and fair value of unrated securities categorized as investment grade based on internal credit grades were $201 million and $1.9 billion, respectively, at March 31, 2011, and $83 million and $1.3 billion, respectively, at December 31, 2010. If an internal credit grade was not assigned, we categorized the security as non-investment grade.



	Investment grade					Non-investment grade

	Gross					Gross

	unrealized			Fair		unrealized			Fair

(in millions)	losses			value		losses			value


March 31, 2011

Securities of U.S. Treasury and federal agencies	$	(19	)		583		-			-
Securities of U.S. states and political subdivisions		(733	)		8,911		(98	)		449
Mortgage-backed securities:
Federal agencies		(130	)		16,391		-			-
Residential		(21	)		714		(338	)		4,224
Commercial		(200	)		3,725		(186	)		903


Total mortgage-backed securities		(351	)		20,830		(524	)		5,127

Corporate debt securities		(13	)		339		(77	)		313
Collateralized debt obligations		(42	)		954		(142	)		363
Other		(158	)		1,477		(21	)		238


Total debt securities		(1,316	)		33,094		(862	)		6,490
Perpetual preferred securities		(63	)		1,052		(3	)		110


Total	$	(1,379	)		34,146		(865	)		6,600


December 31, 2010

Securities of U.S. Treasury and federal agencies	$	(15	)		544		-			-
Securities of U.S. states and political subdivisions		(722	)		8,423		(115	)		539
Mortgage-backed securities:
Federal agencies		(96	)		8,163		-			-
Residential		(23	)		888		(466	)		4,575
Commercial		(299	)		4,679		(336	)		903


Total mortgage-backed securities		(418	)		13,730		(802	)		5,478


Corporate debt securities		(22	)		330		(15	)		304
Collateralized debt obligations		(42	)		613		(187	)		522
Other		(180	)		2,510		(103	)		232


Total debt securities		(1,399	)		26,150		(1,222	)		7,075
Perpetual preferred securities		(81	)		1,327		(8	)		102


Total	$	(1,480	)		27,477		(1,230	)		7,177

Contractual Maturities
The following table shows the remaining contractual maturities and contractual yields of debt securities available for sale. The remaining contractual principal maturities for MBS do not consider prepayments. Remaining expected maturities will differ

from contractual maturities because borrowers may have the right to prepay obligations before the underlying mortgages mature.



						Remaining contractual 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


March 31, 2011

Securities of U.S. Treasury and federal agencies	$	1,507		3.05	%	$	8		4.99	%	$	583		2.86	%	$	816		3.04	%	$	100		4.04	%
Securities of U.S. states and political subdivisions		21,159		5.66			339		3.12			4,565		3.07			1,935		5.85			14,320		6.52
Mortgage-backed securities:
Federal agencies		75,552		5.06			5		6.57			34		6.09			529		5.06			74,984		5.06
Residential		18,948		5.02			-		-			-		-			660		2.04			18,288		5.13
Commercial		13,780		5.39			-		-			1		1.03			205		5.04			13,574		5.40


Total mortgage-backed securities		108,280		5.09			5		6.57			35		5.97			1,394		3.63			106,846		5.11


Corporate debt securities		10,828		5.76			416		6.36			5,041		5.16			3,939		6.57			1,432		5.46
Collateralized debt obligations		5,616		0.84			-		-			579		0.91			3,155		0.80			1,882		0.90
Other		15,508		2.17			1,609		1.66			7,557		2.41			3,393		2.44			2,949		1.55


Total debt securities at fair value	$	162,898		4.77	%	$	2,377		2.71	%	$	18,360		3.30	%	$	14,632		3.79	%	$	127,529		5.13	%


December 31, 2010

Securities of U.S. Treasury and federal agencies	$	1,604		2.54	%	$	9		5.07	%	$	641		1.72	%	$	852		2.94	%	$	102		4.15	%
Securities of U.S. states and political subdivisions		18,654		5.99			322		3.83			3,210		3.57			1,884		6.13			13,238		6.60
Mortgage-backed securities:
Federal agencies		82,037		5.01			5		6.63			28		6.58			420		5.23			81,584		5.00
Residential		20,203		4.98			-		-			-		-			341		3.20			19,862		5.01
Commercial		13,554		5.39			-		-			1		1.38			215		5.28			13,338		5.39


Total mortgage-backed securities		115,794		5.05			5		6.63			29		6.38			976		4.53			114,784		5.05

Corporate debt securities		10,279		5.94			545		7.82			3,853		6.01			4,817		5.62			1,064		6.21
Collateralized debt obligations		4,778		0.80			-		-			545		0.88			2,581		0.72			1,652		0.90
Other		16,356		2.53			1,588		2.89			7,887		3.00			4,367		2.01			2,514		1.72


Total debt securities at fair value	$	167,465		4.81	%	$	2,469		4.12	%	$	16,165		3.72	%	$	15,477		3.63	%	$	133,354		5.10	%

Note 4: Securities Available for Sale (continued)

Realized Gains and Losses
The following table shows the gross realized gains and losses on sales and OTTI write-downs related to the securities available-for-sale portfolio, which includes marketable equity securities, as well as net realized gains and losses on nonmarketable equity securities (see Note 6 – Other Assets).


	Quarter ended March 31,

(in millions)	2011			2010


Gross realized gains	$	70			184
Gross realized losses		(42	)		(15	)
OTTI write-downs		(80	)		(106	)


Net realized gains (losses) from securities available for sale		(52	)		63


Net realized gains from principal and private equity investments		239			8


Net realized gains from debt securities and equity investments	$	187			71

Other-Than-Temporary Impairment
The following table shows the detail of total OTTI write-downs included in earnings for debt securities and marketable and nonmarketable equity securities.


	Quarter ended March 31,

(in millions)	2011		2010


OTTI write-downs included in earnings
Debt securities:
U.S. states and political subdivisions	$	-		5
Mortgage-backed securities:
Residential		62		39
Commercial		14		13
Corporate debt securities		-		1
Collateralized debt obligations		-		6
Other debt securities		4		28


Total debt securities		80		92


Equity securities:
Marketable equity securities:
Perpetual preferred securities		-		14


Total marketable equity securities		-		14


Total securities available for sale		80		106

Nonmarketable equity securities		41		91


Total OTTI write-downs included in earnings	$	121		197

Other-Than-Temporarily Impaired Debt Securities
The following table shows the detail of OTTI write-downs on debt securities available for sale included in earnings and the related changes in OCI for the same securities.


	Quarter ended March 31,

(in millions)	2011			2010

OTTI on debt securities
Recorded as part of gross realized losses:
Credit-related OTTI	$	79			89
Intent-to-sell OTTI		1			3


Total recorded as part of gross realized losses		80			92


Recorded directly to OCI for non-credit-related impairment:
U.S. states and political subdivisions		-			(4	)
Residential mortgage-backed securities		(104	)		26
Commercial mortgage-backed securities		(53	)		(2	)
Collateralized debt obligations		-			59
Other debt securities		1			(17	)


Total recorded directly to OCI for increase (decrease) in noncredit related impairment (1)		(156	)		62


Total OTTI losses (gains) recorded on debt securities	$	(76	)		154


(1)		Represents amounts recorded to OCI on debt securities in periods OTTI write-downs have occurred. Changes in fair value in subsequent periods on such securities, to the extent additional credit-related OTTI did not occur, are not reflected in this total. For the quarter ended March 31, 2011, the non-credit-related impairment recorded to OCI was a $156 million reduction in total OTTI because the fair value of the security increased due to factors other than credit. This fair value increase (net of the $79 million decrease related to credit) was not sufficient to recover the full amount of the unrealized loss on such securities and therefore required recognition of OTTI.

Note 4: Securities Available for Sale (continued)

The following table presents a rollforward of the credit loss component recognized in earnings for debt securities we still own (referred to as “credit-impaired” debt securities). The credit loss component of the amortized cost represents the difference between the present value of expected future cash flows and the amortized cost basis of the security prior to considering credit losses. OTTI recognized in earnings for credit-impaired debt securities is presented as additions in two components based upon whether the current period is

the first time the debt security was credit-impaired (initial credit impairment) or is not the first time the debt security was credit impaired (subsequent credit impairments). The credit loss component is reduced if we sell, intend to sell or believe we will be required to sell previously credit-impaired debt securities. Additionally, the credit loss component is reduced if we receive or expect to receive cash flows in excess of what we previously expected to receive over the remaining life of the credit-impaired debt security, the security matures or is fully written down.

Changes in the credit loss component of credit-impaired debt securities that we do not intend to sell were:


	Quarter ended March 31,

(in millions)	2011			2010


Credit loss component, beginning of period	$	1,043			1,187
Additions:
Initial credit impairments		11			20
Subsequent credit impairments		68			69


Total additions		79			89


Reductions:
For securities sold		(23	)		(25	)
For securities derecognized resulting from adoption of consolidation accounting guidance		-			(242	)
For recoveries of previous credit impairments (1)		(12	)		(7	)


Total reductions		(35	)		(274	)


Credit loss component, end of period	$	1,087			1,002


(1)		Recoveries of previous credit impairments result from increases in expected cash flows subsequent to credit loss recognition. Such recoveries are reflected prospectively as interest yield adjustments using the effective interest method.

For asset-backed securities (e.g., residential MBS), we estimated expected future cash flows of the security by estimating the expected future cash flows of the underlying collateral and applying those collateral cash flows, together with any credit enhancements such as subordinated interests owned by third parties, to the security. The expected future cash flows of the underlying collateral are determined using the remaining contractual cash flows adjusted for future expected credit losses (which consider current delinquencies and nonperforming assets

(NPAs), future expected default rates and collateral value by vintage and geographic region) and prepayments. The expected cash flows of the security are then discounted at the interest rate used to recognize interest income on the security to arrive at a present value amount. Total credit impairment losses on residential MBS that we do not intend to sell are shown in the table below. The table also presents a summary of the significant inputs considered in determining the measurement of the credit loss component recognized in earnings for residential MBS.


	Quarter ended March 31,

($ in millions)	2011			2010


Credit impairment losses on residential MBS
Investment grade	$	5			-
Non-investment grade		57			39


Total credit impairment losses on residential MBS	$	62			39


Significant inputs (non-agency – non-investment grade MBS)
Expected remaining life of loan losses (1):
Range (2)		2-26	%		2-36
Credit impairment distribution (3):
0 - 10% range		57			53
10 - 20% range		25			20
20 - 30% range		18			22
Greater than 30%		-			5
Weighted average (4)		9			10
Current subordination levels (5):
Range (2)		0-11			0-22
Weighted average (4)		5			7
Prepayment speed (annual CPR (6)):
Range (2)		5-15			3-13
Weighted average (4)		10			8


(1)		Represents future expected credit losses on underlying pool of loans expressed as a percentage of total current outstanding loan balance.
(2)		Represents the range of inputs/assumptions based upon the individual securities within each category.
(3)		Represents distribution of credit impairment losses recognized in earnings categorized based on range of expected remaining life of loan losses. For example 57% of credit impairment losses recognized in earnings for the quarter ended March 31, 2011, had expected remaining life of loan loss assumptions of 0 to 10%.
(4)		Calculated by weighting the relevant input/assumption for each individual security by current outstanding amortized cost basis of the security.
(5)		Represents current level of credit protection (subordination) for the securities, expressed as a percentage of total current underlying loan balance.
(6)		Constant prepayment rate.

Note 5: Loans and Allowance for Credit Losses

The following table presents total loans outstanding by portfolio segment and class of financing receivable. Outstanding balances are presented net of unearned income, net deferred loan fees, and unamortized discounts and premiums totaling a net reduction of $10.8 billion and $11.3 billion at March 31, 2011 and

December 31, 2010, respectively. Outstanding balances also include PCI loans net of any remaining purchase accounting adjustments. Information about PCI loans is presented separately in the “Purchased Credit-Impaired Loans” section of this Note.


	Mar. 31,		Dec. 31,

(in millions)	2011		2010


Commercial:
Commercial and industrial	$	150,857		151,284
Real estate mortgage		101,084		99,435
Real estate construction		22,868		25,333
Lease financing		12,937		13,094
Foreign (1)		35,476		32,912


Total commercial		323,222		322,058


Consumer:
Real estate 1-4 family first mortgage		226,509		230,235
Real estate 1-4 family junior lien mortgage		93,041		96,149
Credit card		20,996		22,260
Other revolving credit and installment		87,387		86,565


Total consumer		427,933		435,209


Total loans	$	751,155		757,267


(1)		Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign if the borrower’s primary address is outside of the United States.

The following table summarizes the proceeds paid or received for purchases and sales of loans, respectively. It also includes transfers from (to) mortgages/loans held for sale at lower of

cost or market. The table excludes PCI loans and loans recorded at fair value, including loans originated for sale. This activity primarily includes purchases or sales of commercial loan participation interests, whereby we receive or transfer a portion of a loan after origination.



	Quarter ended March 31,

	2011									2010

(in millions)	Commercial			Consumer			Total			Commercial			Consumer			Total


Purchases	$	644			-			644			543			24			567
Sales		(1,571	)		(1	)		(1,572	)		(1,068	)		-			(1,068	)
Transfers from/(to) MHFS/LHFS		106			25			131			(15	)		(88	)		(103	)

Allowance for Credit Losses (ACL)
The ACL is management’s estimate of credit losses inherent in the loan portfolio, including unfunded credit commitments, at the balance sheet date. We have an established process to determine the adequacy of the allowance for credit losses that assesses the losses inherent in our portfolio and related unfunded credit commitments. While we attribute portions of the allowance to specific portfolio segments, the entire allowance is available to absorb credit losses inherent in the total loan portfolio and unfunded credit commitments.

Our process involves procedures to appropriately consider the unique risk characteristics of our commercial and consumer loan portfolio segments. For each portfolio segment, losses are estimated collectively for groups of loans with similar characteristics, individually for impaired loans or, for PCI loans, based on the changes in cash flows expected to be collected.

Our allowance levels are influenced by loan volumes, loan grade migration or delinquency status, historic loss experience influencing loss factors, and other conditions influencing loss expectations, such as economic conditions.

COMMERCIAL PORTFOLIO SEGMENT ACL METHODOLOGY Generally, commercial loans are assessed for estimated losses by grading each loan using various risk factors as identified through periodic reviews. We apply historic grade-specific loss factors to the aggregation of each funded grade pool. These historic loss factors are also used to estimate losses for unfunded credit commitments. In the development of our statistically derived loan grade loss factors, we observe historical losses over a relevant period for each loan grade. These loss estimates are adjusted as appropriate based on additional analysis of long-term average loss experience compared to previously forecasted losses, external loss data or other risks identified from current economic conditions and credit quality trends.

The allowance also includes an amount for the estimated impairment on nonaccrual commercial loans and commercial loans modified in a TDR, whether on accrual or nonaccrual status.

CONSUMER PORTFOLIO SEGMENT ACL METHODOLOGY For consumer loans, not identified as a TDR, we determine the allowance on a collective basis utilizing forecasted losses to represent our best estimate of inherent loss. We pool loans, generally by product types with similar risk characteristics, such as residential real estate mortgages and credit cards. As appropriate, to achieve greater accuracy, we may further stratify selected portfolios by sub-product, origination channel, vintage, loss type, geographic location and other predictive characteristics. Models designed for each pool are utilized to develop the loss estimates. We use assumptions for these pools in our forecast models, such as historic delinquency and default, loss severity, home price trends, unemployment trends, and other key economic variables that may influence the frequency and severity of losses in the pool.

We separately estimate impairment for consumer loans that have been modified in a TDR, whether on accrual or nonaccrual status.

OTHER ACL MATTERS Commercial and consumer PCI loans may require an allowance subsequent to their acquisition. This allowance requirement is due to probable decreases in expected principal and interest cash flows (other than due to decreases in interest rate indices and changes in prepayment assumptions).

The allowance for credit losses for both portfolio segments includes an amount for imprecision or uncertainty that may change from period to period. This amount represents management’s judgment of risks inherent in the processes and assumptions used in establishing the allowance. This imprecision considers economic environmental factors, modeling assumptions and performance, process risk, and other subjective factors, including industry trends.

Note 5: Loans and Allowance for Credit Losses (continued)

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




	Quarter ended March 31,

(in millions)	2011			2010


Balance, beginning of period	$	23,463			25,031
Provision for credit losses		2,210			5,330
Interest income on certain impaired loans (1)		(83	)		(74	)
Loan charge-offs:
Commercial:
Commercial and industrial		(468	)		(767	)
Real estate mortgage		(179	)		(281	)
Real estate construction		(119	)		(405	)
Lease financing		(13	)		(34	)
Foreign		(39	)		(47	)


Total commercial		(818	)		(1,534	)


Consumer:
Real estate 1-4 family first mortgage		(1,015	)		(1,397	)
Real estate 1-4 family junior lien mortgage		(1,046	)		(1,496	)
Credit card		(448	)		(696	)
Other revolving credit and installment		(500	)		(750	)


Total consumer		(3,009	)		(4,339	)


Total loan charge-offs		(3,827	)		(5,873	)


Loan recoveries:
Commercial:
Commercial and industrial		114			117
Real estate mortgage		27			10
Real estate construction		36			11
Lease financing		7			5
Foreign		11			11


Total commercial		195			154


Consumer:
Real estate 1-4 family first mortgage		111			86
Real estate 1-4 family junior lien mortgage		52			47
Credit card		66			53
Other revolving credit and installment		193			203


Total consumer		422			389


Total loan recoveries		617			543


Net loan charge-offs (2)		(3,210	)		(5,330	)


Allowances related to business combinations/other (3)		3			699


Balance, end of period	$	22,383			25,656


Components:
Allowance for loan losses	$	21,983			25,123
Allowance for unfunded credit commitments		400			533


Allowance for credit losses (4)	$	22,383			25,656


Net loan charge-offs (annualized) as a percentage of average total loans (2)		1.73	%		2.71
Allowance for loan losses as a percentage of total loans (4)		2.93			3.22
Allowance for credit losses as a percentage of total loans (4)		2.98			3.28


(1)		Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize reductions in the allowance as interest income.
(2)		For PCI loans, charge-offs are only recorded to the extent that losses exceed the purchase accounting estimates.
(3)		Includes $693 million for the quarter ended March 31, 2010, related to the adoption of consolidation accounting guidance on January 1, 2010.
(4)		The allowance for credit losses includes $257 million and $247 million at March 31, 2011 and 2010, respectively, related to PCI loans acquired from Wachovia. Loans acquired from Wachovia are included in total loans net of related purchase accounting net write-downs.

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




	Quarter ended March 31,

	2011									2010

(in millions)	Commercial			Consumer			Total			Commercial			Consumer			Total


Balance, beginning of period	$	8,169			15,294			23,463			8,141			16,890			25,031
Provision for credit losses		472			1,738			2,210			2,104			3,226			5,330
Interest income on certain impaired loans		(45	)		(38	)		(83	)		(41	)		(33	)		(74	)

Loan charge-offs		(818	)		(3,009	)		(3,827	)		(1,534	)		(4,339	)		(5,873	)
Loan recoveries		195			422			617			154			389			543


Net loan charge-offs		(623	)		(2,587	)		(3,210	)		(1,380	)		(3,950	)		(5,330	)


Allowance related to business combinations/other		-			3			3			9			690			699


Balance, end of period	$	7,973			14,410			22,383			8,833			16,823			25,656

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





	Allowance for credit losses						Recorded investment in loans

(in millions)	Commercial		Consumer		Total		Commercial		Consumer		Total


March 31, 2011

Collectively evaluated (1)	$	5,222		10,480		15,702		304,630		380,509		685,139
Individually evaluated (2)		2,517		3,907		6,424		11,085		14,944		26,029
PCI (3)		234		23		257		7,507		32,480		39,987


Total	$	7,973		14,410		22,383		323,222		427,933		751,155


December 31, 2010

Collectively evaluated (1)	$	5,424		11,539		16,963		302,392		387,707		690,099
Individually evaluated (2)		2,479		3,723		6,202		11,731		14,007		25,738
PCI (3)		266		32		298		7,935		33,495		41,430


Total	$	8,169		15,294		23,463		322,058		435,209		757,267


(1)		Represents loans collectively evaluated for impairment in accordance with ASC 450-20, Loss Contingencies (formerly FAS 5), and pursuant to amendments by ASU 2010-20 regarding allowance for unimpaired loans.
(2)		Represents loans individually evaluated for impairment in accordance with ASC 310-10, Receivables (formerly FAS 114), and pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans.
(3)		Represents the allowance and related loan carrying value determined in accordance with ASC 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality (formerly SOP 03-3) and pursuant to amendments by ASU 2010-20 regarding allowance for PCI loans.

Note 5: Loans and Allowance for Credit Losses (continued)

Credit Quality

We monitor credit quality as indicated by evaluating various attributes and utilize such information in our evaluation of the adequacy of the allowance for credit losses. The following sections provide the credit quality indicators we most closely monitor. See the “Purchased Credit-Impaired Loans” section of this Note for credit quality information on our PCI portfolio.

The majority of credit quality indicators are based on March 31, 2011, information, with the exception of updated FICO and updated loan-to-value (LTV)/combined LTV (CLTV), which are obtained at least quarterly. Generally, these indicators are updated in the second month of each quarter, with updates no older than December 31, 2010.

COMMERCIAL CREDIT QUALITY INDICATORS In addition to monitoring commercial loan concentration risk, we manage a

consistent process for assessing commercial loan credit quality. Commercial loans are subject to individual risk assessment using our internal borrower and collateral quality ratings. Our ratings are aligned to Pass and Criticized categories. The Criticized category includes Special Mention, Substandard, and Doubtful categories which are defined by banking regulatory agencies.

The table below provides a breakdown of outstanding commercial loans by risk category. Both the CRE mortgage and construction criticized totals are relatively high as a result of the current conditions in the real estate market. Of the $35.0 billion in criticized CRE loans, $7.5 billion has been placed on nonaccrual status and written down to net realizable value. Loans in both populations have a high level of surveillance and monitoring in place to manage these assets and mitigate any loss exposure.

Commercial

Real

and

estate

Lease

(in millions)

industrial

mortgage

construction

financing

Foreign

Total

March 31, 2011

By risk category:

Pass

127,340

72,940

10,586

12,341

32,834

256,041

Criticized

22,909

25,180

9,835

596

1,154

59,674

Total commercial loans (excluding PCI)

150,249

98,120

20,421

12,937

33,988

315,715

Total commercial PCI loans (carrying value)

608

2,964

2,447

1,488

7,507

Total commercial loans

150,857

101,084

22,868

12,937

35,476

323,222

December 31, 2010

By risk category:

Pass

126,058

70,597

11,256

12,411

30,341

250,663

Criticized

24,508

25,983

11,128

683

1,158

63,460

Total commercial loans (excluding PCI)

150,566

96,580

22,384

13,094

31,499

314,123

Total commercial PCI loans (carrying value)

718

2,855

2,949

1,413

7,935

Total commercial loans

151,284

99,435

25,333

13,094

32,912

322,058

In addition, while we monitor past due status, we do not consider it a key driver of our credit risk management practices

for commercial loans. The following table provides past due information for commercial loans.



	Commercial		Real		Real
	and		estate		estate		Lease
(in millions)	industrial		mortgage		construction		financing		Foreign		Total


March 31, 2011

By delinquency status:

Current-29 DPD	$	146,268		91,667		17,473		12,772		33,779		301,959
30-89 DPD		990		1,037		553		70		107		2,757
90+ DPD and still accruing		338		177		156		-		16		687
Nonaccrual loans		2,653		5,239		2,239		95		86		10,312


Total commercial loans (excluding PCI)		150,249		98,120		20,421		12,937		33,988		315,715
Total commercial PCI loans (carrying value)		608		2,964		2,447		-		1,488		7,507


Total commercial loans	$	150,857		101,084		22,868		12,937		35,476		323,222


December 31, 2010

By delinquency status:
Current-29 DPD	$	146,135		90,233		19,005		12,927		31,350		299,650
30-89 DPD		910		1,016		510		59		-		2,495
90+ DPD and still accruing		308		104		193		-		22		627
Nonaccrual loans		3,213		5,227		2,676		108		127		11,351


Total commercial loans (excluding PCI)		150,566		96,580		22,384		13,094		31,499		314,123
Total commercial PCI loans (carrying value)		718		2,855		2,949		-		1,413		7,935


Total commercial loans	$	151,284		99,435		25,333		13,094		32,912		322,058

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

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

Note 5: Loans and Allowance for Credit Losses (continued)

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



	Real estate		Real estate				Other
	1-4 family		1-4 family				revolving
	first		junior lien		Credit		credit and
(in millions)	mortgage		mortgage		card		installment		Total


March 31, 2011

By delinquency status:
Current	$	156,523		86,950		19,623		62,579		325,675
1-29 DPD		5,723		2,811		578		6,687		15,799
30-59 DPD		4,080		817		215		836		5,948
60-89 DPD		1,831		508		167		258		2,764
90-119 DPD		1,272		415		148		127		1,962
120-179 DPD		1,934		695		264		51		2,944
180+ DPD		7,053		606		1		9		7,669
Government insured/guaranteed loans (1)		15,852		-		-		16,840		32,692


Total consumer loans (excluding PCI)		194,268		92,802		20,996		87,387		395,453
Total consumer PCI loans (carrying value)		32,241		239		-		-		32,480


Total consumer loans	$	226,509		93,041		20,996		87,387		427,933


December 31, 2010 (2)

By delinquency status:
Current	$	158,961		89,408		20,546		59,295		328,210
1-29 DPD		5,597		3,104		730		7,834		17,265
30-59 DPD		4,516		917		262		1,261		6,956
60-89 DPD		2,173		608		207		376		3,364
90-119 DPD		1,399		476		190		171		2,236
120-179 DPD		2,080		764		324		58		3,226
180+ DPD		6,750		622		1		117		7,490
Government insured/guaranteed loans (1)		15,514		-		-		17,453		32,967


Total consumer loans (excluding PCI)		196,990		95,899		22,260		86,565		401,714
Total consumer PCI loans (carrying value)		33,245		250		-		-		33,495


Total consumer loans	$	230,235		96,149		22,260		86,565		435,209


(1)		Represents loans whose repayments are insured by the FHA or guaranteed by the VA and student loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under FFELP.

(2)		Amounts at December 31, 2010, have been revised to conform to the current presentation.

Of the $12.6 billion of loans that are 90 days or more past due at March 31, 2011, $1.7 billion was accruing, compared with $13.0 billion and $20.0 billion, respectively, at December 31, 2010.

Real estate 1-4 family first mortgage loans 180 days or more past due totaled $7.1 billion, or 3.6% of total first mortgages (excluding PCI), up slightly from 3.4% at December 31, 2010. The aging of the delinquent real estate 1-4 family first mortgage loans is a result of the prolonged foreclosure process and our effort to help customers stay in their homes through various loan modification programs, as loans continue to age until these processes are complete.

The following table provides a breakdown of our consumer portfolio by updated FICO. We obtain FICO scores at loan origination and the scores are updated at least quarterly. FICO is not available for certain loan types and may not be obtained if we deem it unnecessary due to strong collateral and other borrower attributes, primarily securities-based margin loans of $5.2 billion at March 31, 2011, and $4.1 billion at December 31, 2010. The majority of our portfolio is underwritten with a FICO score of 680 and above.



	Real estate		Real estate				Other
	1-4 family		1-4 family				revolving
	first		junior lien		Credit		credit and
(in millions)	mortgage		mortgage		card		installment		Total


March 31, 2011

By updated FICO:
< 600	$	25,024		7,915		2,643		10,453		46,035
600-639		11,148		4,186		1,743		5,893		22,970
640-679		15,940		7,530		3,159		8,427		35,056
680-719		24,942		13,587		4,350		9,597		52,476
720-759		29,162		19,614		4,250		8,845		61,871
760-799		47,466		25,854		2,966		9,106		85,392
800+		19,252		9,467		1,625		4,622		34,966
No FICO available		5,482		4,649		260		8,444		18,835
FICO not required		-		-		-		5,160		5,160
Government insured/guaranteed loans (1)		15,852		-		-		16,840		32,692


Total consumer loans (excluding PCI)		194,268		92,802		20,996		87,387		395,453
Total consumer PCI loans (carrying value)		32,241		239		-		-		32,480


Total consumer loans	$	226,509		93,041		20,996		87,387		427,933


December 31, 2010 (2)

By updated FICO:
< 600	$	26,013		9,126		2,872		10,806		48,817
600-639		11,105		4,457		1,826		5,965		23,353
640-679		16,202		7,678		3,305		8,344		35,529
680-719		25,549		13,759		4,522		9,480		53,310
720-759		29,443		20,334		4,441		8,808		63,026
760-799		47,250		27,222		3,215		9,357		87,044
800+		19,719		10,607		1,794		4,692		36,812
No FICO available		6,195		2,716		285		7,528		16,724
FICO not required		-		-		-		4,132		4,132
Government insured/guaranteed loans (1)		15,514		-		-		17,453		32,967


Total consumer loans (excluding PCI)		196,990		95,899		22,260		86,565		401,714
Total consumer PCI loans (carrying value)		33,245		250		-		-		33,495


Total consumer loans	$	230,235		96,149		22,260		86,565		435,209


(1)		Represents loans whose repayments are insured by the FHA or guaranteed by the VA and student loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under FFELP.

(2)		Amounts at December 31, 2010, have been revised to conform to the current presentation.

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

The following table shows the most updated LTV and CLTV distribution of the real estate 1-4 family first and junior lien mortgage loan portfolios. In recent years, the residential real estate markets have experienced significant declines in property values and several markets, particularly California and Florida have experienced declines that turned out to be more significant than the national decline. These trends are considered in the way that we monitor credit risk and establish our allowance for credit

losses. LTV does not necessarily reflect the likelihood of performance of a given loan, but does provide an indication of collateral value. In the event of a default, any loss should be limited to the portion of the loan amount in excess of the net realizable value of the underlying real estate collateral value. Certain loans do not have an LTV or CLTV primarily due to industry data availability and portfolios acquired from or serviced by other institutions.

Note 5: Loans and Allowance for Credit Losses (continued)

March 31, 2011

December 31, 2010 (3)

Real estate

Real estate

1-4 family

1-4 family

first

junior lien

first

junior lien

mortgage

mortgage

(in millions)

by LTV

by CLTV

Total

by LTV

by CLTV

Total

By LTV/CLTV:

0-60%

46,886

13,286

60,172

47,808

14,814

62,622

60.01-80%

42,682

16,692

59,374

42,542

17,744

60,286

80.01-100%

40,168

22,354

62,522

39,497

24,255

63,752

100.01-120% (1)

23,416

17,870

41,286

24,147

17,887

42,034

> 120% (1)

21,299

19,716

41,015

24,243

18,628

42,871

No LTV/CLTV available

3,965

2,884

6,849

3,239

2,571

5,810

Government insured/guaranteed loans (2)

15,852

15,514

Total consumer loans (excluding PCI)

194,268

92,802

287,070

196,990

95,899

292,889

Total consumer PCI loans (carrying value)

32,241

239

32,480

33,245

250

33,495

Total consumer loans

226,509

93,041

319,550

230,235

96,149

326,384


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

(2)		Represents loans whose repayments are insured by the FHA or guaranteed by the VA.

(3)		Amounts at December 31, 2010, have been revised to conform to the current presentation.

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



	Mar. 31,		Dec. 31,
(in millions)	2011		2010


Commercial:
Commercial and industrial	$	2,653		3,213
Real estate mortgage		5,239		5,227
Real estate construction		2,239		2,676
Lease financing		95		108
Foreign		86		127


Total commercial (1)		10,312		11,351


Consumer:
Real estate 1-4 family first mortgage (2)		12,143		12,289
Real estate 1-4 family junior lien mortgage		2,235		2,302
Other revolving credit and installment		275		300


Total consumer		14,653		14,891


Total nonaccrual loans (excluding PCI)	$	24,965		26,242


(1)		Includes LHFS of $17 million and $3 million at March 31, 2011 and December 31, 2010, respectively.

(2)		Includes MHFS of $430 million and $426 million at March 31, 2011 and December 31, 2010, respectively.

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING Certain loans 90 days or more past due as to interest or principal are still accruing, because they are (1) well-secured and in the process of collection or (2) real estate 1-4 family mortgage loans or consumer loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due. PCI loans of $10.8 billion at March 31, 2011, and $11.6 billion at December 31, 2010, are excluded from this disclosure even though they are 90 days or more contractually past due. These PCI loans are considered to be accruing due to the existence of the accretable yield and not based on consideration given to contractual interest payments.

The following table shows non-PCI loans 90 days or more past due and still accruing by class for loans not government insured/guaranteed.



	Mar. 31,		Dec. 31,

(in millions)	2011		2010


Total (excluding PCI):	$	17,901		18,488
Less: FHA insured/guaranteed by the VA (1)		14,353		14,733
Less: Student loans guaranteed under the FFELP (2)		1,120		1,106


Total, not government insured/guaranteed	$	2,428		2,649


By segment and class, not insured/guaranteed:
Commercial:
Commercial and industrial	$	338		308
Real estate mortgage		177		104
Real estate construction		156		193
Foreign		16		22


Total commercial		687		627


Consumer:
Real estate 1-4 family first mortgage (3)		858		941
Real estate 1-4 family junior lien mortgage (3)		325		366
Credit card		413		516
Other revolving credit and installment		145		199


Total consumer		1,741		2,022


Total, not government insured/guaranteed	$	2,428		2,649


(1)		Represents loans whose repayments are insured by the FHA or guaranteed by the VA.

(2)		Represents loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the FFELP.

(3)		Includes mortgage loans held for sale 90 days or more past due and still accruing.

Note 5: Loans and Allowance for Credit Losses (continued)

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

These impaired loans may have estimated impairment which is included in the allowance for credit losses. Impaired loans exclude PCI loans.



			Recorded investment

						Impaired loans
	Unpaid					with related		Related
	principal			Impaired		allowance for		allowance for
(in millions)	balance			loans		credit losses		credit losses


March 31, 2011

Commercial:
Commercial and industrial	$	7,501			2,901		2,901		548
Real estate mortgage		7,374			5,566		5,239		1,357
Real estate construction		4,078			2,495		2,495		573
Lease financing		139			97		90		32
Foreign		175			26		22		7


Total commercial		19,267			11,085		10,747		2,517


Consumer:
Real estate 1-4 family first mortgage		13,706			12,261		12,261		2,875
Real estate 1-4 family junior lien mortgage		1,949			1,824		1,824		621
Credit card		602			602		602		356
Other revolving credit and installment		259			257		257		55


Total consumer		16,516			14,944		14,944		3,907


Total impaired loans (excluding PCI)	$	35,783			26,029		25,691		6,424


December 31, 2010

Commercial:
Commercial and industrial	$	8,190			3,600		3,276		607
Real estate mortgage		7,439			5,239		5,163		1,282
Real estate construction		4,676			2,786		2,786		548
Lease financing		149			91		91		34
Foreign		215			15		15		8


Total commercial		20,669			11,731		11,331		2,479


Consumer:
Real estate 1-4 family first mortgage		12,834			11,603		11,603		2,754
Real estate 1-4 family junior lien mortgage		1,759			1,626		1,626		578
Credit card		548			548		548		333
Other revolving credit and installment		231			230		230		58


Total consumer		15,372			14,007		14,007		3,723


Total impaired loans (excluding PCI)	$	36,041			25,738		25,338		6,202

Commitments to lend additional funds on loans whose terms have been modified in a TDR amounted to $1.7 billion and $1.2 billion at March 31, 2011 and December 31, 2010, respectively. These commitments primarily relate to CRE loans, which, at the time of modification, had an amount of availability to the borrower that continues under the modified terms of the TDR

and totaled $1.3 billion and $861 million at March 31, 2011 and December 31, 2010, respectively.

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



	Quarter ended March 31,

	2011				2010

	Average		Recognized		Average		Recognized
	recorded		interest		recorded		interest
(in millions)	investment		income		investment		income


Commercial:
Commercial and industrial	$	3,105		24		3,277		29
Real estate mortgage		5,522		13		2,040		8
Real estate construction		2,681		14		2,556		4
Lease financing		106		-		73		-
Foreign		40		-		78		-


Total commercial		11,454		51		8,024		41


Consumer:
Real estate 1-4 family first mortgage		11,901		151		7,491		104
Real estate 1-4 family junior lien mortgage		1,763		14		1,404		13
Credit card		581		6		105		1
Other revolving credit and installment		243		9		47		-


Total consumer		14,488		180		9,047		118


Total impaired loans (excluding PCI)	$	25,942		231		17,071		159


Interest income:

Cash basis of accounting			$	38				47
Other (1)				193				112

Total interest income			$	231				159


(1)		Includes interest recognized on accruing TDRs, interest recognized related to certain impaired loans which have an allowance calculated using discounting, and amortization of purchase accounting adjustments related to certain impaired loans. See footnote 1 to the table of changes in the allowance for credit losses.

Note 5: Loans and Allowance for Credit Losses (continued)

Purchased Credit-Impaired Loans

Certain loans acquired in the Wachovia acquisition are accounted for as PCI loans. The following table presents PCI loans net of any remaining purchase accounting adjustments.




	Mar. 31,		Dec. 31,

(in millions)	2011		2010


Commercial:
Commercial and industrial	$	608		718
Real estate mortgage		2,964		2,855
Real estate construction		2,447		2,949
Foreign		1,488		1,413


Total commercial		7,507		7,935


Consumer:
Real estate 1-4 family first mortgage		32,241		33,245
Real estate 1-4 family junior lien mortgage		239		250
Other revolving credit and installment		-		-


Total consumer		32,480		33,495


Total PCI loans (carrying value)	$	39,987		41,430


Total PCI loans (unpaid principal balance)	$	61,341		64,331

ACCRETABLE YIELD The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the loan, or pools of loans. The accretable yield is affected by:

•		Changes in interest rate indices for variable rate PCI loans – Expected future cash flows are based on the variable rates in effect at the time of the regular evaluations of cash flows expected to be collected;

•		Changes in prepayment assumptions – Prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and

•

Changes in the expected principal and interest payments over the estimated life – Updates to expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected.

The change in the accretable yield related to PCI loans is presented in the following table.




	Quarter ended			Year ended

	Mar. 31,			Dec. 31,

(in millions)	2011			2010			2009


Total, beginning of period	$	16,714			14,559			10,447
Accretion(1)		(701	)		(2,435	)		(2,606	)
Reclassification from nonaccretable difference for loans with improving cash flows		115			3,399			441
Changes in expected cash flows that do not affect nonaccretable difference (2)		(247	)		1,191			6,277


Total, end of period	$	15,881			16,714			14,559


(1)		Includes accretable yield released as a result of settlements with borrowers, which are included in interest income, and sales to third parties, which are included in noninterest income ($155 million in first quarter 2011).

(2)		Represents changes in cash flows expected to be collected due to changes in interest rates on variable rate PCI loans and the impact of modifications.

PCI ALLOWANCE When it is estimated that the cash flows expected to be collected have decreased subsequent to acquisition for a PCI loan or pool of loans, an allowance is

established and a provision for additional loss is recorded as a charge to income. The following table summarizes the changes in allowance for PCI loan losses.



						Other
(in millions)	Commercial			Pick-a-Pay		consumer			Total


Balance, December 31, 2008	$	-			-		-			-
Provision for losses due to credit deterioration		850			-		3			853
Charge-offs		(520	)		-		-			(520	)


Balance, December 31, 2009		330			-		3			333
Provision for losses due to credit deterioration		712			-		59			771
Charge-offs		(776	)		-		(30	)		(806	)


Balance, December 31, 2010		266			-		32			298
Provision for losses due to credit deterioration		11			-		(1	)		10
Charge-offs		(43	)		-		(8	)		(51	)

Balance, March 31, 2011	$	234			-		23			257

COMMERCIAL PCI CREDIT QUALITY INDICATORS The following table provides a breakdown of commercial PCI loans by risk category.

Commercial

Real

and

estate

(in millions)

industrial

mortgage

construction

Foreign

Total

March 31, 2011

By risk category:

Pass

227

530

204

1,048

Criticized

381

2,434

2,360

1,284

6,459

Total commercial PCI loans

608

2,964

2,447

1,488

7,507

December 31, 2010

By risk category:

Pass

214

352

128

210

904

Criticized

504

2,503

2,821

1,203

7,031

Total commercial PCI loans

718

2,855

2,949

1,413

7,935

The following table provides past due information for commercial PCI loans.

Commercial

Real

and

estate

(in millions)

industrial

mortgage

construction

Foreign

Total

March 31, 2011

By delinquency status:

Current-29 DPD

477

2,479

1,193

1,309

5,458

30-89 DPD

121

192

359

90+ DPD and still accruing

364

1,062

179

1,690

Total commercial PCI loans

608

2,964

2,447

1,488

7,507

December 31, 2010

By delinquency status:

Current-29 DPD

612

2,295

1,395

1,209

5,511

30-89 DPD

113

178

313

90+ DPD and still accruing

447

1,376

204

2,111

Total commercial PCI loans

718

2,855

2,949

1,413

7,935

Note 5: Loans and Allowance for Credit Losses (continued)

CONSUMER PCI CREDIT QUALITY INDICATORS Our consumer PCI loans were aggregated into several pools of loans at acquisition. Below, we have provided credit quality indicators based on the individual loans included in the pool,

but we have not allocated the remaining purchase accounting adjustments, which were established at a pool level. The following table provides the delinquency status of consumer PCI loans.




		March 31, 2011					December 31, 2010

	Real estate		Real estate				Real estate		Real estate
	1-4 family		1-4 family				1-4 family		1-4 family
	first		junior lien				first		junior lien
(in millions)	mortgage		mortgage		Total		mortgage		mortgage		Total


By delinquency status:
Current	$	28,664		249		28,913		29,253		357		29,610
1-29 DPD		42		57		99		44		79		123
30-59 DPD		3,207		20		3,227		3,586		30		3,616
60-89 DPD		1,185		11		1,196		1,364		17		1,381
90-119 DPD		779		8		787		881		13		894
120-179 DPD		1,353		13		1,366		1,346		19		1,365
180+ DPD		7,125		177		7,302		7,214		220		7,434


Total consumer PCI loans	$	42,355		535		42,890		43,688		735		44,423


Total consumer PCI loans (carrying value)	$	32,241		239		32,480		33,245		250		33,495

The following table provides FICO scores for consumer PCI loans.




		March 31, 2011						December 31, 2010

	Real estate		Real estate				Real estate		Real estate

	1-4 family		1-4 family				1-4 family		1-4 family

	first		junior lien				first		junior lien

(in millions)	mortgage		mortgage		Total		mortgage		mortgage		Total


By FICO:

< 600	$	20,959		282		21,241		22,334		363		22,697

600-639		7,586		81		7,667		7,563		109		7,672

640-679		6,374		78		6,452		6,185		96		6,281

680-719		3,877		49		3,926		3,949		60		4,009

720-759		1,966		14		1,980		2,057		17		2,074

760-799		1,026		6		1,032		1,087		7		1,094

800+		208		2		210		232		2		234

No FICO available		359		23		382		281		81		362


Total consumer PCI loans	$	42,355		535		42,890		43,688		735		44,423


Total consumer PCI loans (carrying value)	$	32,241		239		32,480		33,245		250		33,495

The following table shows the distribution of consumer PCI loans by LTV for real estate 1-4 family first mortgages and by CLTV for real estate 1-4 family junior lien mortgages.



		March 31, 2011						December 31, 2010

	Real estate		Real estate				Real estate		Real estate

	1-4 family		1-4 family				1-4 family		1-4 family

	first		junior lien				first		junior lien

	mortgage		mortgage				mortgage		mortgage

(in millions)	by LTV		by CLTV		Total		by LTV		by CLTV		Total


By LTV/CLTV:

0-60%	$	1,280		32		1,312		1,653		43		1,696

60.01-80%		4,623		57		4,680		5,513		42		5,555

80.01-100%		11,416		82		11,498		11,861		89		11,950

100.01-120% (1)		9,618		93		9,711		9,525		116		9,641

> 120% (1)		15,295		269		15,564		15,047		314		15,361

No LTV/CLTV available		123		2		125		89		131		220


Total consumer PCI loans	$	42,355		535		42,890		43,688		735		44,423


Total consumer PCI loans (carrying value)	$	32,241		239		32,480		33,245		250		33,495


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

Note 6: Other Assets

The components of other assets were:




	Mar. 31,			Dec. 31,

(in millions)		2011			2010


Nonmarketable equity investments:

Cost method:

Private equity investments		$	3,117			3,240

Federal bank stock			5,129			5,254


Total cost method			8,246			8,494

Equity method			7,692			7,624
Principal investments (1)			302			305



Total nonmarketable equity investments			16,240			16,423

Corporate/bank-owned life insurance			19,924			19,845

Accounts receivable			19,126			23,763

Interest receivable			5,051			4,895

Core deposit intangibles			8,493			8,904

Customer relationship and other amortized intangibles			1,773			1,847
Foreclosed assets:

Government insured/guaranteed (2)			1,457			1,479

Non-government insured/guaranteed			4,055			4,530

Operating lease assets			1,785			1,873

Due from customers on acceptances			165			229

Other			15,668			15,993


Total other assets		$	93,737			99,781


(1)		Principal investments are recorded at fair value with realized and unrealized gains (losses) included in net gains (losses) from equity investments in the income statement.

(2)		These are foreclosed real estate securing FHA insured and VA guaranteed loans. Both principal and interest for these loans secured by the foreclosed real estate are collectible because they are insured/guaranteed.

Income related to nonmarketable equity investments was:




	Quarter ended March 31,

(in millions)		2011		2010


Net gains (losses) from:

Private equity investments	$	221		(1	)

Principal investments		18		9

All other nonmarketable equity investments		(60	)	(17	)


Net gains (losses) from nonmarketable equity investments	$	179		(9	)

Note 7: Securitizations and Variable Interest Entities

Involvement with SPEs

In the normal course of business, we enter into various types of on- and off-balance sheet transactions with special purpose entities (SPEs), which are corporations, trusts or partnerships that are established for a limited purpose. Historically, the majority of SPEs were formed in connection with securitization transactions. In a securitization transaction, assets from our balance sheet are transferred to an SPE, which then issues to investors various forms of interests in those assets and may also enter into derivative transactions. In a securitization transaction, we typically receive cash and/or other interests in an SPE as proceeds for the assets we transfer. Also, in certain transactions, we may retain the right to service the transferred receivables and to repurchase those receivables from the SPE if the outstanding balance of the receivables falls to a level where the cost exceeds the benefits of servicing such receivables. In addition, we may purchase the right to service loans in an SPE that were transferred to the SPE by a third party.

In connection with our securitization activities, we have various forms of ongoing involvement with SPEs, which may include:

•		underwriting securities issued by SPEs and subsequently making markets in those securities;

•		providing liquidity facilities to support short-term obligations of SPEs issued to third party investors;

•		providing credit enhancement on securities issued by SPEs or market value guarantees of assets held by SPEs through the use of letters of credit, financial guarantees, credit default swaps and total return swaps;

•		entering into other derivative contracts with SPEs;

•		holding senior or subordinated interests in SPEs;

•		acting as servicer or investment manager for SPEs; and

•		providing administrative or trustee services to SPEs.

SPEs are generally considered variable interest entities (VIEs). A VIE is an entity that has either a total equity investment that is insufficient to finance its activities without additional subordinated financial support or whose equity investors lack the ability to control the entity’s activities. A VIE is consolidated by its primary beneficiary, the party that has both the power to direct the activities that most significantly impact the VIE and a variable interest that could potentially be significant to the VIE. A variable interest is a contractual, ownership or other interest that changes with changes in the fair value of the VIE’s net assets. To determine whether or not a variable interest we hold could potentially be significant to the VIE, we consider both qualitative and quantitative factors regarding the nature, size and form of our involvement with the VIE. We assess whether or not we are the primary beneficiary of a VIE on an on-going basis.

We have segregated our involvement with VIEs between those VIEs which we consolidate, those which we do not consolidate and transfers of financial assets that are accounted for as secured borrowings. Secured borrowings are transactions involving transfers of our financial assets to third parties that are accounted for as financings with the assets pledged as collateral. Accordingly, the transferred assets remain recognized on our balance sheet. Subsequent tables within this Note further segregate these transactions by structure type.

The classifications of assets and liabilities in our balance sheet associated with our transactions with VIEs follow:




						Transfers that

	VIEs that we		VIEs			we account

	do not		that we			for as secured

(in millions)	consolidate		consolidate			borrowings		Total


March 31, 2011

Cash	$	-		154			480		634

Trading assets		4,808		98			30		4,936

Securities available for sale (1)		21,065		2,377			8,459		31,901

Loans held for sale		-		53			-		53

Loans		12,205		15,407			1,480		29,092

Mortgage servicing rights		14,432		-			-		14,432

Other assets		3,831		1,467			114		5,412


Total assets		56,341		19,556			10,563		86,460


Short-term borrowings		-		3,608	(2)		8,455		12,063

Accrued expenses and other liabilities		3,417		660	(2)		16		4,093

Long-term debt		-		7,173	(2)		1,681		8,854


Total liabilities		3,417		11,441			10,152		25,010


Noncontrolling interests		-		20			-		20


Net assets	$	52,924		8,095			411		61,430


December 31, 2010

Cash	$	-		200			398		598

Trading assets		5,351		143			32		5,526

Securities available for sale (1)		24,001		2,159			7,834		33,994

Loans		12,401		16,708			1,613		30,722

Mortgage servicing rights		13,261		-			-		13,261

Other assets		3,783		2,039			90		5,912


Total assets		58,797		21,249			9,967		90,013


Short-term borrowings		-		3,636	(2)		7,773		11,409

Accrued expenses and other liabilities		3,514		716	(2)		14		4,244

Long-term debt		-		8,377	(2)		1,700		10,077


Total liabilities		3,514		12,729			9,487		25,730


Noncontrolling interests		-		40			-		40


Net assets	$	55,283		8,480			480		64,243


(1)		Excludes certain debt securities related to loans serviced for the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and GNMA.

(2)		Includes the following VIE liabilities at March 31, 2011 and December 31, 2010, respectively, with recourse to the general credit of Wells Fargo: Short-term borrowings, $3.6 billion and $3.6 billion; Accrued expenses and other liabilities, $570 million and $645 million; and Long-term debt, $53 million and $53 million.

Transactions with Unconsolidated VIEs

Our transactions with VIEs include securitizations of consumer loans, CRE loans, student loans, auto loans and municipal bonds; investment and financing activities involving CDOs backed by asset-backed and CRE securities, collateralized loan obligations (CLOs) backed by corporate loans, and other types of structured financing. We have various forms of involvement with VIEs, including holding senior or subordinated interests, entering into liquidity arrangements, credit default swaps and other derivative contracts. These involvements with unconsolidated VIEs are recorded on our balance sheet primarily in trading assets, securities available for sale, loans, MSRs, other assets and other liabilities, as appropriate.

The following tables provide a summary of unconsolidated VIEs with which we have significant continuing involvement, but are not the primary beneficiary. The balances presented represent our unconsolidated VIEs for which we consider our involvement to be significant. Our definition of significant continuing involvement excludes unconsolidated VIEs when our continuing involvement relates to third-party sponsored VIEs for which we were not the transferor, and unconsolidated VIEs for which we were the sponsor but do not have any other significant continuing involvement.

Significant continuing involvement includes transactions where we were the sponsor or transferor and have other significant forms of involvement. Sponsorship includes transactions with unconsolidated VIEs where we solely or materially participated in the initial design or structuring of the entity or marketing of the transaction to investors. When we

transfer assets to a VIE and account for the transfer as a sale, we are considered the transferor. We consider investments in securities held outside of trading, loans, guarantees, liquidity agreements, written options and servicing of collateral to be other forms of involvement that may be significant. We have excluded certain transactions with unconsolidated VIEs from the balances presented in the table below where we have determined

that our continuing involvement is not significant due to the temporary nature and size of our variable interests, because we were not the transferor or because we were not involved in the design or operations of the unconsolidated VIEs.

Other

Total

Debt and

commitments

VIE

equity

Servicing

and

Net

(in millions)

assets

interests (1)

assets

Derivatives

guarantees

assets

March 31, 2011

Carrying value - asset (liability)

Residential mortgage loan
securitizations:

Conforming

1,108,820

5,282

13,248

(898

)

17,632

Other/nonconforming

68,234

2,777

525

(129

)

3,177

Commercial mortgage securitizations

188,172

5,553

617

240

6,410

Collateralized debt obligations:

Debt securities

18,257

1,317

598

1,915

Loans (2)

9,986

9,736

Asset-based finance structures

9,310

4,511

(96

)

4,415

Tax credit structures

18,805

3,662

(1,168

)

2,494

Collateralized loan obligations

12,435

2,718

2,778

Investment funds

8,575

1,459

Other (3)

18,278

2,553

314

)

2,908

Total

1,460,872

39,568

14,432

1,120

(2,196

)

52,924

Maximum exposure to loss

Residential mortgage loan
securitizations:

Conforming

5,282

13,248

3,516

22,046

Other/nonconforming

2,777

525

196

3,502

Commercial mortgage securitizations

5,553

617

441

6,611

Collateralized debt obligations:

Debt securities

1,317

2,528

3,845

Loans (2)

9,736

Asset-based finance structures

4,511

2,484

7,091

Tax credit structures

3,662

Collateralized loan obligations

2,718

576

3,354

Investment funds

1,459

1,516

Other (3)

2,553

789

150

3,534

Total

39,568

14,432

3,918

6,979

64,897

(continued on following page)

(continued from previous page)




											Other

	Total			Debt and							commitments

	VIE			equity		Servicing					and			Net

(in millions)	assets			interests (1)		assets		Derivatives			guarantees			assets


December 31, 2010

				Carrying value - asset (liability)


Residential mortgage loan securitizations:

Conforming	$	1,068,737			5,527		12,115		-			(928	)		16,714

Other/nonconforming		76,304			2,997		495		6			(107	)		3,391

Commercial mortgage securitizations		190,377			5,506		608		261			-			6,375

Collateralized debt obligations:

Debt securities		20,046			1,436		-		844			-			2,280

Loans (2)		9,970			9,689		-		-			-			9,689

Asset-based finance structures		12,055			6,556		-		(118	)		-			6,438

Tax credit structures		20,981			3,614		-		-			(1,129	)		2,485

Collateralized loan obligations		13,196			2,804		-		56			-			2,860

Investment funds		10,522			1,416		-		-			-			1,416

Other (3)		20,031			3,221		43		377			(6	)		3,635


Total	$	1,442,219			42,766		13,261		1,426			(2,170	)		55,283


				Maximum exposure to loss


Residential mortgage loan securitizations:

Conforming			$		5,527		12,115		-			4,248			21,890

Other/nonconforming					2,997		495		6			233			3,731

Commercial mortgage securitizations					5,506		608		488			-			6,602

Collateralized debt obligations:

Debt securities					1,436		-		2,850			7			4,293

Loans (2)					9,689		-		-			-			9,689

Asset-based finance structures					6,556		-		118			2,175			8,849

Tax credit structures					3,614		-		-			1			3,615

Collateralized loan obligations					2,804		-		56			519			3,379

Investment funds					1,416		-		-			87			1,503

Other (3)					3,221		43		916			162			4,342


Total			$		42,766		13,261		4,434			7,432			67,893


(1)		Excludes certain debt securities held related to loans serviced for FNMA, FHLMC and GNMA.

(2)		Represents senior loans to trusts that are collateralized by asset-backed securities. The trusts invest primarily in senior tranches from a diversified pool of primarily U.S. asset securitizations, of which all are current, and over 92% were rated as investment grade by the primary rating agencies at March 31, 2011. These senior loans were acquired in the Wachovia business combination and are accounted for at amortized cost as initially determined under purchase accounting and are subject to the Company’s allowance and credit charge-off policies.

(3)		Includes student loan securitizations, auto loan securitizations and credit-linked note structures. Also contains investments in auction rate securities (ARS) issued by VIEs that we do not sponsor and, accordingly, are unable to obtain the total assets of the entity.

In the two preceding tables, “Total VIE assets” represents the remaining principal balance of assets held by unconsolidated VIEs using the most current information available. For VIEs that obtain exposure to assets synthetically through derivative instruments, the remaining notional amount of the derivative is included in the asset balance. “Carrying value” is the amount in our consolidated balance sheet related to our involvement with the unconsolidated VIEs. “Maximum exposure to loss” from our involvement with off-balance sheet entities, which is a required disclosure under GAAP, is determined as the carrying value of our involvement with off-balance sheet (unconsolidated) VIEs plus the remaining undrawn liquidity and lending commitments, the notional amount of net written derivative contracts, and generally the notional amount of, or stressed loss estimate for, other commitments and guarantees. It represents estimated loss that would be incurred under severe, hypothetical circumstances, for which we believe the possibility is extremely remote, such as where the value of our interests and any associated collateral declines to zero, without any consideration of recovery or offset from any economic hedges. Accordingly, this required disclosure is not an indication of expected loss.

RESIDENTIAL MORTGAGE LOANS Residential mortgage loan securitizations are financed through the issuance of fixed- or floating-rate-asset-backed-securities, which are collateralized by the loans transferred to a VIE. We typically transfer loans we originated to these VIEs, account for the transfers as sales, retain the right to service the loans and may hold other beneficial interests issued by the VIEs. We also may be exposed to limited liability related to recourse agreements and repurchase agreements we make to our issuers and purchasers, which are included in other commitments and guarantees. In certain instances, we may service residential mortgage loan securitizations structured by third parties whose loans we did not originate or transfer. Our residential mortgage loan securitizations consist of conforming and nonconforming securitizations.

Conforming residential mortgage loan securitizations are those that are guaranteed by GSEs, including GNMA. We do not consolidate our conforming residential mortgage loan securitizations because we do not have power over the VIEs.

The loans sold to the VIEs in nonconforming residential mortgage loan securitizations are those that do not qualify for a GSE guarantee. We do not consolidate the nonconforming residential mortgage loan securitizations included in the table because we do not have a variable interest that could potentially be significant or we do not have power to direct the activities that most significantly impact the performance of the VIE.

Other commitments and guarantees include amounts related to loans sold that we may be required to repurchase, or otherwise indemnify or reimburse the investor or insurer for losses incurred, due to material breach of contractual representations and warranties. The maximum exposure to loss for material breach of contractual representations and warranties represents a stressed case estimate we utilize for determining stressed case regulatory capital needs.

COMMERCIAL MORTGAGE LOAN SECURITIZATIONS Commercial mortgage loan securitizations are financed through the issuance of fixed- or floating-rate-asset-backed-securities, which are collateralized by the loans transferred to the VIE. In a typical securitization, we may transfer loans we originate to these VIEs, account for the transfers as sales, retain the right to service the loans and may hold other beneficial interests issued by the VIEs. In certain instances, we may service commercial mortgage loan securitizations structured by third parties whose loans we did not originate or transfer. We typically serve as primary or master servicer of these VIEs. The primary or master servicer in a commercial mortgage loan securitization typically cannot make the most significant decisions impacting the performance of the VIE and therefore does not have power over the VIE. We do not consolidate the commercial mortgage loan securitizations included in the disclosure because we either do not have power or do not have a variable interest that could potentially be significant to the VIE.

COLLATERALIZED DEBT OBLIGATIONS (CDOs) A CDO is a securitization where an SPE purchases a pool of assets consisting of asset-backed securities and issues multiple tranches of equity or notes to investors. In some transactions, a portion of the assets are obtained synthetically through the use of derivatives such as credit default swaps or total return swaps.

Prior to 2008, we engaged in the structuring of CDOs on behalf of third party asset managers who would select and manage the assets for the CDO. Typically, the asset manager has some discretion to manage the sale of assets of, or derivatives used by the CDO, which generally gives the asset manager the power over the CDO. We have not structured these types of transactions since the credit market disruption began in late 2007.

In addition to our role as arranger we may have other forms of involvement with these transactions, including transactions established prior to 2008. Such involvement may include acting as liquidity provider, derivative counterparty, secondary market maker or investor. For certain transactions, we may also act as the collateral manager or servicer. We receive fees in connection with our role as collateral manager or servicer.

We assess whether we are the primary beneficiary of CDOs based on our role in the transaction in combination with the variable interests we hold. Subsequently, we monitor our ongoing involvement in these transactions to determine if the nature of our involvement has changed. We are not the primary beneficiary of these transactions in most cases because we do not act as the collateral manager or servicer, which generally denotes power. In cases where we are the collateral manager or servicer, we are not the primary beneficiary because we do not hold interests that could potentially be significant to the VIE.

COLLATERALIZED LOAN OBLIGATIONS (CLOs) A CLO is a securitization where an SPE purchases a pool of assets consisting of loans and issues multiple tranches of equity or notes to investors. Generally, CLOs are structured on behalf of a third party asset manager that typically selects and manages the assets for the term of the CLO. Typically, the asset manager has the power over the significant decisions of the VIE through its

discretion to manage the assets of the CLO. We assess whether we are the primary beneficiary of CLOs based on our role in the transaction and the variable interests we hold. In most cases, we are not the primary beneficiary of these transactions because we do not have the power to manage the collateral in the VIE.

In addition to our role as arranger, we may have other forms of involvement with these transactions. Such involvement may include acting as underwriter, derivative counterparty, secondary market maker or investor. For certain transactions, we may also act as the servicer, for which we receive fees in connection with that role. We also earn fees for arranging these transactions and distributing the securities.

ASSET-BASED FINANCE STRUCTURES We engage in various forms of structured finance arrangements with VIEs that are collateralized by various asset classes including energy contracts, auto and other transportation leases, intellectual property, equipment and general corporate credit. We typically provide senior financing, and may act as an interest rate swap or commodity derivative counterparty when necessary. In most cases, we are not the primary beneficiary of these structures because we do not have power over the significant activities of the VIEs involved in these transactions.

For example, we have investments in asset-backed securities that are collateralized by auto leases or loans and cash reserves. These fixed-rate and variable-rate securities have been structured as single-tranche, fully amortizing, unrated bonds that are equivalent to investment-grade securities due to their significant overcollateralization. The securities are issued by VIEs that have been formed by third party auto financing institutions primarily because they require a source of liquidity to fund ongoing vehicle sales operations. The third party auto financing institutions manage the collateral in the VIEs, which is indicative of power in these transactions and we therefore do not consolidate these VIEs.

TAX CREDIT STRUCTURES We co-sponsor and make investments in affordable housing and sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits. In some instances, our investments in these structures may require that we fund future capital commitments at the discretion of the project sponsors. While the size of our investment in a single entity may at times exceed 50% of the outstanding equity interests, we do not consolidate these structures due to the project sponsor’s ability to manage the projects, which is indicative of power in these transactions.

INVESTMENT FUNDS At March 31, 2011, we had investments of $1.5 billion and no lending arrangements with certain funds managed by one of our majority owned subsidiaries compared with investments of $1.4 billion and lending arrangements of $14 million at December 31, 2010. In addition, we also provide a default protection agreement to a third party lender to one of these funds. Our involvement in these funds is either senior or of equal priority to third party investors. We do not consolidate the investment funds because we do not absorb the majority of the expected future variability associated with the funds’ assets,

including variability associated with credit, interest rate and liquidity risks.

OTHER TRANSACTIONS WITH VIEs In August 2008, Wachovia reached an agreement to purchase at par auction rate securities (ARS) that were sold to third-party investors by certain of its subsidiaries. ARS are debt instruments with long-term maturities, but which re-price more frequently, and preferred equities with no maturity. All remaining ARS issued by VIEs subject to the agreement were redeemed. At March 31, 2011, we held in our securities available-for-sale portfolio $1.3 billion of ARS issued by VIEs redeemed pursuant to this agreement, compared with $1.6 billion at December 31, 2010.

On November 18, 2009, we reached agreements to purchase additional ARS from eligible investors who bought ARS through one of our broker-dealer subsidiaries. All remaining ARS issued by VIEs subject to the agreement were redeemed. As of March 31, 2011, we held in our securities available-for-sale portfolio $809 million of ARS issued by VIEs redeemed pursuant to this agreement, compared with $901 million at December 31, 2010.

We do not consolidate the VIEs that issued the ARS because we do not have power over the activities of the VIEs.

TRUST PREFERRED SECURITIES In addition to the involvements disclosed in the preceding table, through the issuance of trust preferred securities we had $16.7 billion and $19.3 billion of junior subordinated debt financing at March 31, 2011 and December 31, 2010, respectively, and $2.5 billion of preferred stock at March 31, 2011. In these transactions, VIEs that we wholly own issue debt securities or preferred equity to third party investors. All of the proceeds of the issuance are invested in debt securities or preferred equity that we issue to the VIEs. The VIEs’ operations and cash flows relate only to the issuance, administration and repayment of the securities held by third parties. We do not consolidate these VIEs because the sole assets of the VIEs are receivables from us. This is the case even though we own all of the voting equity shares of the VIEs, have fully guaranteed the obligations of the VIEs and may have the right to redeem the third party securities under certain circumstances. We report the debt securities issued to the VIEs as long-term debt and the preferred equity securities issued to the VIEs as preferred stock in our consolidated balance sheet.

In first quarter 2011, we issued notice to call $3.2 billion of trust preferred securities that will no longer count as Tier 1 capital under the Dodd-Frank Act and the Basel Committee recommendations known as the Basel III standards.

Securitization Activity Related to Unconsolidated VIEs

We use VIEs to securitize consumer and CRE loans and other types of financial assets, including student loans, auto loans and municipal bonds. We typically retain the servicing rights from these sales and may continue to hold other beneficial interests in the VIEs. We may also provide liquidity to investors in the beneficial interests and credit enhancements in the form of standby letters of credit. Through these securitizations we may

be exposed to liability under limited amounts of recourse as well as standard representations and warranties we make to purchasers and issuers.

We recognized net gains of $34 million from transfers accounted for as sales of financial assets in securitizations in first quarter 2011, and net gains of $2 million in first quarter 2010. Additionally, we had the following cash flows with our securitization trusts that were involved in transfers accounted for as sales.




	2011					2010

				Other				Other

	Mortgage			financial		Mortgage		financial

(in millions)	loans			assets		loans		assets


Quarter ended March 31,

Sales proceeds from securitizations (1)	$	100,241			-		82,322		-

Servicing fees		1,088			3		1,040		9

Other interests held		503			87		407		112

Purchases of delinquent assets		3			-		-		-

Net servicing advances		(9	)		-		19		-


(1)		Represents cash flow data for all loans securitized in the period presented.

Sales with continuing involvement during the first quarter of 2011 predominantly related to conforming residential mortgage securitizations. During first quarter 2011 we transferred $101.4 billion in fair value of conforming residential mortgages to unconsolidated VIEs and recorded the transfers as sales. These transfers did not result in a gain or loss because the loans are

already carried at fair value. In connection with these transfers, in first quarter 2011 we recorded a $1.3 billion servicing asset and a $35 million liability for repurchase reserves, which are both initially measured at fair value.

We used the following key assumptions to measure mortgage servicing assets at the date of securitization:




	2011			2010


Quarter ended March 31,

Prepayment speed (annual CPR (1))		11.4	%		12.4

Life (in years)		6.4			5.8

Discount rate		7.9	%		8.2


(1)		Constant prepayment rate.

Key economic assumptions and the sensitivity of the current fair value to immediate adverse changes in those assumptions at March 31, 2011, for residential and commercial mortgage servicing rights, and other interests held related primarily to residential mortgage loan securitizations are presented in the following table. In the following table “Other interests held” exclude securities retained in securitizations issued through GSEs such as FNMA, FHLMC and GNMA because we do not

believe the value of these securities would be materially affected by the adverse changes in assumptions noted in the table. Subordinated interests include only those bonds whose credit rating was below AAA by a major rating agency at issuance. Senior interests include only those bonds whose credit rating was AAA by a major rating agency at issuance. The information presented excludes trading positions held in inventory.




				Other interests held

	Mortgage			Interest-

	servicing			only		Subordinated			Senior

(in millions)	rights			strips		bonds			bonds


Fair value of interests held at March 31, 2011	$	17,546			231		47			420

Expected weighted-average life (in years)		5.6			5.9		7.3			5.9

Prepayment speed assumption (annual CPR)		11.9	%		10.0		5.9			12.4

Decrease in fair value from:

10% adverse change	$	880			6		-			1

25% adverse change		2,075			14		1			3

Discount rate assumption		7.8	%		17.1		13.6			6.4

Decrease in fair value from:

100 basis point increase	$	870			7		3			17

200 basis point increase		1,664			13		5			34

Credit loss assumption							1.2	%		3.8

Decrease in fair value from:

10% higher losses						$	-			1

25% higher losses							-			2

The sensitivities in the preceding table are hypothetical and caution should be exercised when relying on this data. Changes in value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in the assumption to the change in value may not be linear. Also, the effect of a variation in a particular assumption on the value of the other interests held is calculated independently without changing any other assumptions. In reality, changes in one factor may result in changes in others (for example, changes in prepayment speed estimates could result in changes in the credit losses), which might magnify or counteract the sensitivities.

The following table presents information about the principal balances of off-balance sheet securitized loans, including residential mortgages sold to FNMA, FHLMC and GNMA and securitizations where servicing is our only form of continuing involvement. Delinquent loans include loans 90 days or more past due and still accruing interest as well as nonaccrual loans. Delinquent loans and net charge-offs exclude loans sold to FNMA, FHLMC and GNMA. We continue to service those loans and would only experience a loss if required to repurchase a delinquent loan due to a breach in original representations and warranties associated with their required underwriting standards.




									Net charge-offs

	Total loans				Delinquent loans				Three months
	Mar. 31,		Dec. 31,		Mar. 31,		Dec. 31,		ended Mar. 31,

(in millions)	2011		2010		2011		2010		2011		2010


Commercial:

Commercial and industrial	$	1		1		-		-		-		-

Real estate mortgage		143,938		207,015		8,697		11,515		73		70


Total commercial		143,939		207,016		8,697		11,515		73		70


Consumer:

Real estate 1-4 family first mortgage		1,129,770		1,090,755		5,096		5,275		406		330

Real estate 1-4 family junior lien mortgage		1		1		-		-		-		-

Other revolving credit and installment		2,408		2,454		102		102		-		-


Total consumer		1,132,179		1,093,210		5,198		5,377		406		330


Total off-balance sheet securitized loans	$	1,276,118		1,300,226		13,895		16,892		479		400

Transactions with Consolidated VIEs and Secured Borrowings

The following table presents a summary of transfers of financial assets accounted for as secured borrowings and involvements with consolidated VIEs. “Consolidated assets” are presented using GAAP measurement methods, which may include fair

value, credit impairment or other adjustments, and therefore in some instances will differ from “Total VIE assets.” On the consolidated balance sheet, we separately disclose the consolidated assets of certain VIEs that can only be used to settle the liabilities of those VIEs.


			Carrying value

	Total				Third
	VIE		Consolidated		party			Noncontrolling			Net
(in millions)	assets		assets		liabilities			interests			assets


March 31, 2011

Secured borrowings:
Municipal tender option bond securitizations	$	11,391		8,510		(8,461	)		-			49
Auto loan securitizations		129		129		-			-			129
Commercial real estate loans		1,336		1,336		(1,274	)		-			62
Residential mortgage securitizations		664		588		(417	)		-			171


Total secured borrowings		13,520		10,563		(10,152	)		-			411


Consolidated VIEs:
Nonconforming residential mortgage loan securitizations		13,267		12,442		(5,953	)		-			6,489
Multi-seller commercial paper conduit		3,184		3,184		(3,254	)		-			(70	)
Auto loan securitizations		610		610		(561	)		-			49
Structured asset finance		145		145		(22	)		-			123
Investment funds		1,175		1,175		(54	)		(14	)		1,107
Other		2,048		2,000		(1,597	)		(6	)		397


Total consolidated VIEs		20,429		19,556		(11,441	)		(20	)		8,095


Total secured borrowings and consolidated VIEs	$	33,949		30,119		(21,593	)		(20	)		8,506


December 31, 2010

Secured borrowings:
Municipal tender option bond securitizations	$	10,687		7,874		(7,779	)		-			95
Auto loan securitizations		154		154		-			-			154
Commercial real estate loans		1,321		1,321		(1,272	)		-			49
Residential mortgage securitizations		700		618		(436	)		-			182


Total secured borrowings		12,862		9,967		(9,487	)		-			480


Consolidated VIEs:
Nonconforming residential mortgage loan securitizations		14,518		13,529		(6,723	)		-			6,806
Multi-seller commercial paper conduit		3,197		3,197		(3,279	)		-			(82	)
Auto loan securitizations		1,010		1,010		(955	)		-			55
Structured asset finance		146		146		(21	)		(11	)		114
Investment funds		1,197		1,197		(54	)		(14	)		1,129
Other		2,173		2,170		(1,697	)		(15	)		458


Total consolidated VIEs		22,241		21,249		(12,729	)		(40	)		8,480


Total secured borrowings and consolidated VIEs	$	35,103		31,216		(22,216	)		(40	)		8,960

In addition to the transactions included in the table above, at March 31, 2011, we had issued approximately $6.0 billion of private placement debt financing through a consolidated VIE. The issuance is classified as long-term debt in our consolidated financial statements. At March 31, 2011, we had pledged approximately $6.1 billion in loans, $446 million in securities available for sale and $178 million in cash and cash equivalents to collateralize the VIE’s borrowings. Such assets were not transferred to the VIE and accordingly we have excluded the VIE from the previous table.

We have raised financing through the securitization of certain financial assets in transactions with VIEs accounted for as

secured borrowings. We also consolidate VIEs where we are the primary beneficiary. In certain transactions other than the multi-seller commercial paper conduit, we provide contractual support in the form of limited recourse and liquidity to facilitate the remarketing of short-term securities issued to third party investors. Other than this limited contractual support, the assets of the VIEs are the sole source of repayment of the securities held by third parties. The liquidity support we provide to the multi-seller commercial paper conduit ensures timely repayment of commercial paper issued by the conduit and is described further below.

NONCONFORMING RESIDENTIAL MORTGAGE LOAN SECURITIZATIONS We have consolidated certain of our nonconforming residential mortgage loan securitizations in accordance with consolidation accounting guidance. We have determined we are the primary beneficiary of these securitizations because we have the power to direct the most significant activities of the entity through our role as primary servicer and also hold variable interests that we have determined to be significant. The nature of our variable interests in these entities may include beneficial interests issued by the VIE, mortgage servicing rights and recourse or repurchase reserve liabilities.

MULTI-SELLER COMMERCIAL PAPER CONDUIT We administer a multi-seller asset-based commercial paper conduit that finances certain client transactions. This conduit is a bankruptcy remote entity that makes loans to, or purchases certificated interests, generally from SPEs, established by our clients (sellers) and which are secured by pools of financial assets. The conduit funds itself through the issuance of highly rated commercial paper to third party investors. The primary source of repayment of the commercial paper is the cash flows from the conduit’s assets or the re-issuance of commercial paper upon maturity. The conduit’s assets are structured with deal-specific credit enhancements generally in the form of overcollateralization provided by the seller, but may also include subordinated interests, cash reserve accounts, third party credit support facilities and excess spread capture. The timely repayment of the commercial paper is further supported by asset-specific liquidity facilities in the form of liquidity asset purchase agreements that we provide. Each facility is equal to 102% of the conduit’s funding commitment to a client. The aggregate amount of liquidity must be equal to or greater than all the commercial paper issued by the conduit. At the discretion of the administrator, we may be required to purchase assets from the conduit at par value plus accrued interest or discount on the related commercial paper, including situations where the conduit is unable to issue commercial paper. Par value may be different from fair value.

We receive fees in connection with our role as administrator and liquidity provider. We may also receive fees related to the structuring of the conduit’s transactions. In 2010, the conduit terminated its subordinated note to a third party investor and repaid all amounts due under the terms of the note agreement. We are the primary beneficiary of the conduit because we have power over the significant activities of the conduit and have a significant variable interest due to our liquidity arrangement.

Note 8: Mortgage Banking Activities

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

We apply the amortization method to all commercial and some residential MSRs and apply the fair value method to only residential MSRs. The changes in MSRs measured using the fair value method were:


	Quarter ended March 31,

(in millions)	2011			2010


Fair value, beginning of period	$	14,467			16,004
Adjustments from adoption of consolidation accounting guidance		-			(118	)
Servicing from securitizations or asset transfers		1,262			1,054


Net additions		1,262			936


Changes in fair value:
Due to changes in valuation model inputs or assumptions (1)		499			(777	)
Other changes in fair value (2)		(580	)		(619	)


Total changes in fair value		(81	)		(1,396	)


Fair value, end of period	$	15,648			15,544

(1)		Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates, and costs to service, including delinquency and foreclosure costs.

(2)		Represents changes due to collection/realization of expected cash flows over time.

The changes in amortized MSRs were:


	Quarter ended March 31,

(in millions)	2011			2010


Balance, beginning of period	$	1,422			1,119
Adjustments from adoption of consolidation accounting guidance		-			(5	)
Purchases		45			1
Servicing from securitizations or asset transfers		29			11
Amortization		(64	)		(57	)


Balance, end of period (1)		1,432			1,069


Valuation allowance:
Balance, beginning of period		(3	)		-
Provision for MSRs in excess of fair value		(6	)		-


Balance, end of period (2)		(9	)		-


Amortized MSRs, net	$	1,423			1,069


Fair value of amortized MSRs:
Beginning of period	$	1,812			1,261
End of period (3)		1,898			1,283

(1)		Includes $390 million in residential amortized MSRs at March 31, 2011. The March 31, 2010 balance is commercial amortized MSRs. For the quarter ended March 31, 2011, the residential MSR amortization was $(10) million.

(2)		Commercial amortized MSRs are evaluated for impairment purposes by the following risk strata: agency (GSEs) and non-agency. There was no valuation allowance recorded for the periods presented on the commercial amortized MSRs. Residential amortized MSRs are evaluated for impairment purposes by the following risk strata: Mortgages sold to GSEs (FHLMC and FNMA) and mortgages sold to GNMA, each by interest rate stratifications. A valuation allowance of $9 million was recorded on the residential amortized MSRs at March 31, 2011.

(3)		Includes fair value of $445 million in residential amortized MSRs and $1,453 million in commercial amortized MSRs at March 31, 2011.

We present the components of our managed servicing portfolio in the following table at unpaid principal balance for

loans serviced and subserviced for others and at book value for owned loans serviced.


	Mar. 31,			Dec. 31,

(in billions)	2011			2010


Residential mortgage servicing:
Serviced for others	$	1,453			1,429
Owned loans serviced		346			371
Subservicing		9			9


Total residential servicing		1,808			1,809


Commercial mortgage servicing:
Serviced for others		406			408
Owned loans serviced		101			99
Subservicing		14			13


Total commercial servicing		521			520


Total managed servicing portfolio	$	2,329			2,329


Total serviced for others	$	1,859			1,837
Ratio of MSRs to related loans serviced for others		0.92	%		0.86

The components of mortgage banking noninterest income were:


	Quarter ended March 31,

(in millions)	2011			2010


Servicing income, net:
Servicing fees (1)	$	1,137			1,053
Changes in fair value of MSRs carried at fair value:
Due to changes in valuation model inputs or assumptions (2)		499			(777	)
Other changes in fair value (3)		(580	)		(619	)


Total changes in fair value of MSRs carried at fair value		(81	)		(1,396	)
Amortization		(64	)		(57	)
Provision for MSRs in excess of fair value		(6	)		-
Net derivative gains (losses) from economic hedges (4)		(120	)		1,766


Total servicing income, net		866			1,366
Net gains on mortgage loan origination/sales activities		1,150			1,104


Total mortgage banking noninterest income	$	2,016			2,470


Market-related valuation changes to MSRs, net of hedge results (2) + (4)	$	379			989

(1)		Amounts are presented net of certain unreimbursed direct servicing obligations primarily associated with workout activities.

(2)		Principally reflects changes in discount rates and prepayment speed assumptions, mostly due to changes in interest rates and costs to service, including delinquency and foreclosure costs.

(3)		Represents changes due to collection/realization of expected cash flows over time.

(4)		Represents results from free-standing derivatives (economic hedges) used to hedge the risk of changes in fair value of MSRs. See Note 12 – Free-Standing Derivatives for additional discussion and detail.

In addition, servicing fees in the previous table included:


	Quarter ended March 31,

(in millions)	2011		2010


Contractually specified servicing fees	$	1,145		1,107
Late charges		94		90
Ancillary fees		89		106

The table below summarizes the changes in our liability for mortgage loan repurchase losses. This liability is in “Accrued expenses and other liabilities” in our consolidated financial statements and the provision for repurchase losses reduces net gains on mortgage loan origination/sales activities.


	Quarter ended March 31,

(in millions)	2011			2010


Balance, beginning of period	$	1,289			1,033
Provision for repurchase losses:
Loan sales		35			44
Change in estimate – primarily due to credit deterioration		214			358


Total additions		249			402

Losses		(331	)		(172	)


Balance, end of period	$	1,207			1,263

Note 9: Intangible Assets

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




	March 31, 2011							December 31, 2010

	Gross					Net		Gross					Net
	carrying		Accumulated			carrying		carrying		Accumulated			carrying
(in millions)	value		amortization			value		value		amortization			value


Amortized intangible assets:
MSRs (1)	$	2,199		(776	)		1,423		2,131		(712	)		1,419
Core deposit intangibles		15,079		(6,586	)		8,493		15,133		(6,229	)		8,904
Customer relationship and other intangibles		3,077		(1,304	)		1,773		3,077		(1,230	)		1,847


Total amortized intangible assets	$	20,355		(8,666	)		11,689		20,341		(8,171	)		12,170


MSRs (carried at fair value) (1)	$	15,648					15,648		14,467					14,467
Goodwill		24,777					24,777		24,770					24,770
Trademark		14					14		14					14

(1)

See Note 8 for additional information on MSRs.

We based our projections of amortization expense shown below on existing asset balances at March 31, 2011. Future amortization expense may vary from these projections.

The following table provides the current year and estimated future amortization expense for amortized intangible assets.


					Customer
			Core		relationship
	Amortized		deposit		and other
(in millions)	MSRs		intangibles		intangibles		Total


Three months ended March 31, 2011 (actual)	$	64		412		73		549


Estimate for the remainder of 2011	$	171		1,182		213		1,566
Estimate for year ended December 31,
2012		221		1,396		269		1,886
2013		190		1,241		249		1,680
2014		165		1,113		234		1,512
2015		147		1,022		212		1,381

For our goodwill impairment analysis, we allocate all of the goodwill to the individual operating segments. We identify reporting units that are one level below an operating segment (referred to as a component), and distinguish these reporting units based on how the segments and components are managed, taking into consideration the economic characteristics, nature of

the products and customers of the components. We allocate goodwill to reporting units based on relative fair value, using certain performance metrics. See Note 17 for further information on management reporting.

The following table shows the allocation of goodwill to our operating segments for purposes of goodwill impairment testing.


					Wealth,
	Community		Wholesale		Brokerage and		Consolidated
(in millions)	Banking		Banking		Retirement		Company


December 31, 2009	$	17,974		6,465		373		24,812
Goodwill from business combinations		-		7		-		7


March 31, 2010	$	17,974		6,472		373		24,819


December 31, 2010	$	17,922		6,475		373		24,770
Goodwill from business combinations		-		7		-		7


March 31, 2011	$	17,922		6,482		373		24,777

Note 10: Guarantees, Pledged Assets and Collateral

Guarantees are contracts that contingently require us to make payments to a guaranteed party based on an event or a change in an underlying asset, liability, rate or index. Guarantees are generally in the form of standby letters of credit, securities lending and other indemnifications, liquidity agreements,

written put options, recourse obligations, residual value guarantees, and contingent consideration. The following table shows carrying value, maximum exposure to loss on our guarantees and the amount with a higher risk of performance.


	March 31, 2011						December 31, 2010

			Maximum		Non-				Maximum		Non-
	Carrying		exposure		investment		Carrying		exposure		investment
(in millions)	value		to loss		grade		value		to loss		grade


Standby letters of credit	$	115		42,564		20,327		142		42,159		19,596
Securities lending and other indemnifications		21		14,682		3,416		45		13,645		3,993
Liquidity agreements (1)		-		-		2		-		49		1
Written put options (1)(2)		647		7,718		2,405		747		8,134		2,615
Loans and MHFS sold with recourse		116		5,831		3,692		119		5,474		3,564
Residual value guarantees		8		197		-		8		197		-
Contingent consideration		23		97		95		23		118		116
Other guarantees		1		179		-		-		73		-


Total guarantees	$	931		71,268		29,937		1,084		69,849		29,885

(1)		Certain of these agreements included in this table are related to off-balance sheet entities and, accordingly, are also disclosed in Note 7.

(2)		Written put options, which are in the form of derivatives, are also included in the derivative disclosures in Note 12.

“Maximum exposure to loss” and “Non-investment grade” are required disclosures under GAAP. Non-investment grade represents those guarantees on which we have a higher risk of being required to perform under the terms of the guarantee. If the underlying assets under the guarantee are non-investment grade (that is, an external rating that is below investment grade or an internal credit default grade that is equivalent to a below investment grade external rating), we consider the risk of performance to be high. Internal credit default grades are determined based upon the same credit policies that we use to evaluate the risk of payment or performance when making loans and other extensions of credit. These credit policies are more fully described in Note 5.

Maximum exposure to loss represents the estimated loss that would be incurred under an assumed hypothetical circumstance, despite what we believe is its extremely remote possibility, where the value of our interests and any associated collateral declines to zero, without any consideration of recovery or offset from any economic hedges. Accordingly, this required disclosure is not an indication of expected loss. We believe the carrying value, which is either fair value or cost adjusted for incurred credit losses, is more representative of our exposure to loss than maximum exposure to loss.

STANDBY LETTERS OF CREDIT We issue standby letters of credit, which include performance and financial guarantees, for customers in connection with contracts between our customers and third parties. Standby letters of credit are agreements where we are obligated to make payment to a third party on behalf of a customer in the event the customer fails to meet their contractual obligations. We consider the credit risk in standby letters of credit and commercial and similar letters of credit in determining the allowance for credit losses.

SECURITIES LENDING AND OTHER INDEMNIFICATIONS As a securities lending agent, we lend securities from participating institutional clients’ portfolios to third-party borrowers. We indemnify our clients against default by the borrower in returning these lent securities. This indemnity is supported by collateral received from the borrowers. Collateral is generally in the form of cash or highly liquid securities that are marked to market daily. There was $15.1 billion at March 31, 2011, and $14.0 billion at December 31, 2010, in collateral supporting loaned securities with values of $14.7 billion and $13.6 billion, respectively.

We enter into other types of indemnification agreements in the ordinary course of business under which we agree to indemnify third parties against any damages, losses and expenses incurred in connection with legal and other proceedings arising from relationships or transactions with us. These relationships or transactions include those arising from service as a director or officer of the Company, underwriting agreements relating to our securities, acquisition agreements and various other business transactions or arrangements. Because the extent of our obligations under these agreements depends entirely upon the occurrence of future events, our potential future liability under these agreements we are unable to determine. We do, however, record a liability for residential mortgage loans that we may have to repurchase pursuant to various representations and warranties. See Note 8 for additional information on the liability for mortgage loan repurchase losses.

LIQUIDITY AGREEMENTS We provide liquidity facilities on all commercial paper issued by the conduit we administer. We also provide liquidity to certain off-balance sheet entities that hold securitized fixed-rate municipal bonds and consumer or commercial assets that are partially funded with the issuance of

money market and other short-term notes. See Note 7 for additional information on these arrangements.

WRITTEN PUT OPTIONS Written put options are contracts that give the counterparty the right to sell to us an underlying instrument held by the counterparty at a specified price, and include options, floors, caps and credit default swaps. These written put option contracts generally permit net settlement. While these derivative transactions expose us to risk in the event the option is exercised, we manage this risk by entering into offsetting trades or by taking short positions in the underlying instrument. We offset substantially all put options written to customers with purchased options. Additionally, for certain of these contracts, we require the counterparty to pledge the underlying instrument as collateral for the transaction. Our ultimate obligation under written put options is based on future market conditions and is only quantifiable at settlement. See Note 7 for additional information regarding transactions with VIEs and Note 12 for additional information regarding written derivative contracts.

LOANS AND MHFS SOLD WITH RECOURSE In certain loan sales or securitizations, we provide recourse to the buyer whereby we are required to repurchase loans at par value plus accrued interest on the occurrence of certain credit-related events within a certain period of time. The maximum exposure to loss represents the outstanding principal balance of the loans sold or securitized that are subject to recourse provisions or the maximum losses per the contractual agreements, but the likelihood of the repurchase of the entire balance is remote and amounts paid can be recovered in whole or in part from the sale of collateral. In first quarter 2011, we did not repurchase a significant amount of loans associated with these agreements. We do not consider loans sold with representation and warranty requirements, for which we have established a repurchase liability, to be loans sold with recourse.

RESIDUAL VALUE GUARANTEES We have provided residual value guarantees as part of certain leasing transactions of corporate assets. At March 31, 2011, the only remaining residual value guarantee is related to a leasing transaction on certain corporate buildings. The lessors in these leases are generally large financial institutions or their leasing subsidiaries. These guarantees protect the lessor from loss on sale of the related asset at the end of the lease term. To the extent that a sale of the leased assets results in proceeds less than a stated percent (generally 80% to 89%) of the asset’s cost, we would be required to reimburse the lessor under our guarantee.

CONTINGENT CONSIDERATION In connection with certain brokerage, asset management, insurance agency and other acquisitions we have made, the terms of the acquisition agreements provide for deferred payments or additional consideration, based on certain performance targets.

We have entered into various contingent performance guarantees through credit risk participation arrangements. Under these agreements, if a customer defaults on its obligation

to perform under certain credit agreements with third parties, we will be required to make payments to the third parties.

Pledged Assets and Collateral

As part of our liquidity management strategy, we pledge assets to secure trust and public deposits, borrowings from the FHLB and FRB and for other purposes as required or permitted by law. The following table provides pledged loans and securities available for sale where the secured party does not have the right to sell or repledge the collateral. At March 31, 2011, and December 31, 2010, we did not pledge any loans or securities available for sale where the secured party has the right to sell or repledge the collateral. The table excludes pledged assets related to VIEs, which can only be used to settle the liabilities of those entities. See Note 7 for additional information on consolidated VIE assets.


	Mar. 31,		Dec. 31,

(in millions)	2011		2010

Securities available for sale	$	84,225		94,212
Loans		298,270		312,602


Total	$	382,495		406,814

We also pledge certain financial instruments that we own to collateralize repurchase agreements and other securities financings. The types of collateral we pledge include securities issued by federal agencies, government-sponsored entities (GSEs), and domestic and foreign companies. We pledged $29.0 billion at March 31, 2011, and $27.3 billion at December 31, 2010, under agreements that permit the secured parties to sell or repledge the collateral. Pledged collateral where the secured party cannot sell or repledge were $4.6 billion and $5.9 billion as of the same periods, respectively.

We receive collateral from other entities under resale agreements and securities borrowings. We received $16.8 billion at March 31, 2011, and $22.5 billion at December 31, 2010, for which we have the right to sell or repledge the collateral. These amounts include securities we have sold or repledged to others with a fair value of $16.1 billion at March 31, 2011, and $14.6 billion at December 31, 2010.

Note 11: Legal Actions

The following supplements and amends our discussion of certain matters previously reported in Item 3 (Legal Proceedings) of our 2010 Form 10-K for events occurring in first quarter 2011.

ERISA LITIGATION A hearing on final approval of the settlement of the In re Wachovia Corporation ERISA Litigation is scheduled before the U.S. District Court for the Western District of North Carolina on August 25, 2011.

A hearing on final approval of the settlement of Figas v. Wells Fargo & Company, et al. is scheduled before the U.S. District Court for the District of Minnesota on July 21, 2011.

IN RE WELLS FARGO MORTGAGE-BACKED CERTIFICATES LITIGATION A hearing on plaintiffs’ motion for class certification has been scheduled for June 23, 2011.

MORTGAGE FORECLOSURE DOCUMENT LITIGATION On March 29, 2011, Wells Fargo, along with other mortgage servicers, entered into a stipulation in connection with the action commenced by the New Jersey Supreme Court, the New Jersey Administrative Office of the Courts and the Superior Court of New Jersey for Mercer County providing for the appointment of a special master to review mortgage foreclosure affidavit processes.

MORTGAGE RELATED REGULATORY INVESTIGATIONS On March 31, 2011, Wells Fargo Bank, N.A. (the Bank) entered into a Consent Order with the Office of the Comptroller of the Currency (OCC) under which the OCC made certain findings in connection with the Bank’s foreclosure practices, which findings the Bank neither admitted nor denied. The Bank agreed in the consent order, among other things, and subject to the OCC’s approval (i) to establish a Compliance Committee to monitor and coordinate the Bank’s compliance with the Consent Order; (ii) to create a comprehensive Action Plan describing the actions needed to achieve compliance with the Consent Order; (iii) to submit an acceptable compliance plan to ensure that its mortgage servicing and foreclosure operations, including loss mitigation and loan modification, comply with legal requirements, OCC supervisory guidance, and the terms of the Consent Order; (iv) to submit a plan to ensure appropriate controls and oversight of the Bank’s activities with respect to the Mortgage Electronic Registration System; (v) to take certain other actions with respect to its mortgage servicing and foreclosure operations; and (vi) to conduct a foreclosure review through an independent consultant on certain residential foreclosure actions. On April 4, 2011, Wells Fargo & Company (Wells Fargo) entered into a Consent Order with the Board of Governors of the Federal Reserve pursuant to which Wells Fargo agreed, among other things, (i) to ensure the Bank’s compliance with the OCC Consent Order; (ii) to develop for the Federal Reserve’s approval a written plan to enhance its Enterprise Risk Management with respect to oversight of residential mortgage loan servicing; (iii) to develop for the Federal Reserve’s approval a written plan to enhance its enterprise-wide compliance program with respect to oversight of residential mortgage loan

servicing; and (iv) to develop for the Federal Reserve’s approval a written plan to enhance the internal audit program with respect to residential mortgage loan servicing. Neither Consent Order provided for civil money penalties but both government entities reserved the ability to seek such penalties and Wells Fargo reserved the ability to oppose the imposition of such penalties. In addition, as previously disclosed in our 2010 Form 10-K, other government agencies, including state attorneys general and the U.S. Department of Justice, continue to investigate various mortgage related practices of the Bank and other major mortgage servicers. Wells Fargo continues to cooperate with these investigation. These investigations could result in material fines, penalties, equitable remedies (including requiring default servicing or other process changes), or other enforcement actions, and result in significant legal costs in responding to governmental investigations and additional litigation.

WACHOVIA EQUITY SECURITIES AND BONDS/NOTES LITIGATION On March 31, 2011, the U.S. District Court for the Southern District of New York entered a Decision and Order granting Wachovia’s motions to dismiss the In re Wachovia Equity Securities Litigation and the Stichting Pensioenfonds ABP, FC Holdings AB, Deka Investment GmbH and Forsta AP-Fonden cases. By the same Decision and Order, the Court granted in part and denied in part Wachovia’s motion to dismiss the In re Wachovia Preferred Securities and Bond/Notes Litigation, allowing that case to go forward after limiting the number of offerings at issue.

OUTLOOK When establishing a liability for contingent litigation losses, the Company determines a range of potential losses for each matter that is both probable and estimable, and records the amount it considers to be the best estimate within the range. The high end of the range of potential litigation losses in excess of the Company’s best estimates within the range of potential losses used in establishing the total litigation liability was $1.7 billion as of March 31, 2011. For these matters and others where an unfavorable outcome is reasonably possible but not probable, there may be a range of possible losses in excess of the established liability that cannot be estimated. Based on information currently available, advice of counsel, available insurance coverage and established reserves, Wells Fargo believes that the eventual outcome of the actions against Wells Fargo and/or its subsidiaries, including the matters described above, will not, individually or in the aggregate, have a material adverse effect on Wells Fargo’s consolidated financial position. However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters, if unfavorable, may be material to Wells Fargo’s results of operations for any particular period.

Note 12: Derivatives

We use derivatives to manage exposure to market risk, interest rate risk, credit risk and foreign currency risk, to generate profits from proprietary trading and to assist customers with their risk management objectives. Derivative transactions are measured in terms of the notional amount, but this amount is not recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. The notional amount is generally not exchanged, but is used only as the basis on which interest and other payments are determined.

Our asset/liability management approach to interest rate, foreign currency and certain other risks includes the use of derivatives. Such derivatives are typically designated as fair value or cash flow hedges, or economic hedge derivatives for those that do not qualify for hedge accounting. This helps minimize significant, unplanned fluctuations in earnings, fair values of assets and liabilities, and cash flows caused by interest rate, foreign currency and other market value volatility. This approach involves modifying the repricing characteristics of certain assets and liabilities so that changes in interest rates, foreign currency and other exposures do not have a significant adverse effect on the net interest margin, cash flows and earnings. As a result of fluctuations in these exposures, hedged assets and liabilities will gain or lose market value. In a fair value or economic hedge, the effect of this unrealized gain or loss will generally be offset by the gain or loss on the derivatives linked to the hedged assets and liabilities. In a cash flow hedge, where we manage the variability of cash payments due to interest rate fluctuations by the effective use of derivatives linked to hedged assets and liabilities, the unrealized gain or loss on the derivatives or the hedged asset or liability is generally not reflected in earnings.

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

The following table presents the total notional or contractual amounts and fair values for derivatives, the fair values of derivatives designated as qualifying hedge contracts, which are used as asset/liability management hedges, and free-standing derivatives (economic hedges) not designated as hedging instruments are recorded on the balance sheet in other assets or other liabilities. Customer accommodation, trading and other free-standing derivatives are recorded on the balance sheet at fair value in trading assets or other liabilities.

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Note 12: Derivatives (continued)


	March 31, 2011								December 31, 2010

	Notional or		Fair value						Notional or		Fair value
	contractual		Asset			Liability			contractual		Asset			Liability
(in millions)	amount		derivatives			derivatives			amount		derivatives			derivatives


Qualifying hedge contracts
Interest rate contracts (1)	$	97,822		6,014			1,301			110,314		7,126			1,614
Foreign exchange contracts		25,256		2,107			482			25,904		1,527			727


Total derivatives designated as qualifying hedging instruments				8,121			1,783					8,653			2,341


Derivatives not designated as hedging instruments
Free-standing derivatives (economic hedges):
Interest rate contracts (2)		325,303		1,342			1,074			408,563		2,898			2,625
Equity contracts		-		-			-			176		-			46
Foreign exchange contracts		7,184		11			210			5,528		23			53
Credit contracts - protection purchased		361		41			-			396		80			-
Other derivatives		2,597		8			26			2,538		-			35


Subtotal				1,402			1,310					3,001			2,759


Customer accommodation, trading and other free-standing derivatives:
Interest rate contracts		2,693,468		50,229			51,200			2,809,387		58,225			59,329
Commodity contracts		96,134		5,446			4,940			83,114		4,133			3,918
Equity contracts		72,980		3,798			3,980			73,278		3,272			3,450
Foreign exchange contracts		151,790		3,022			2,852			110,889		2,800			2,682
Credit contracts - protection sold		45,738		622			5,180			47,699		605			5,826
Credit contracts - protection purchased		44,713		3,917			609			44,776		4,661			588
Other derivatives		194		1			-			190		8			-


Subtotal				67,035			68,761					73,704			75,793


Total derivatives not designated as hedging instruments				68,437			70,071					76,705			78,552


Total derivatives before netting				76,558			71,854					85,358			80,893


Netting (3)				(54,113	)		(59,793	)				(63,469	)		(70,009	)


Total			$	22,445			12,061					21,889			10,884

(1)		Notional amounts presented exclude $20.1 billion at March 31, 2011, and $20.9 billion at December 31, 2010, of basis swaps that are combined with receive fixed-rate/pay floating-rate swaps and designated as one hedging instrument.

(2)		Includes free-standing derivatives (economic hedges) used to hedge the risk of changes in the fair value of residential MSRs, MHFS, interest rate lock commitments and other interests held.

(3)		Represents netting of derivative asset and liability balances, and related cash collateral, with the same counterparty subject to master netting arrangements. The amount of cash collateral netted against derivative assets and liabilities was $5.5 billion and $11.2 billion, respectively, at March 31, 2011, and $5.5 billion and $12.1 billion, respectively, at December 31, 2010.

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Fair Value Hedges

We use interest rate swaps to convert certain of our fixed-rate long-term debt and CDs to floating rates to hedge our exposure to interest rate risk. We also enter into cross-currency swaps, cross-currency interest rate swaps and forward contracts to hedge our exposure to foreign currency risk and interest rate risk associated with the issuance of non-U.S. dollar denominated long-term debt and repurchase agreements. In addition, we use interest rate swaps and forward contracts to hedge against changes in fair value of certain investments in available-for-sale debt securities due to changes in interest rates, foreign currency rates, or both. The entire derivative gain or loss is included in the assessment of hedge effectiveness for all fair value hedge relationships, except for those involving foreign-currency denominated securities available for sale, short-term borrowings and long-term debt hedged with foreign currency forward derivatives for which the component of the derivative gain or

loss related to the changes in the difference between the spot and forward price is excluded from the assessment of hedge effectiveness.

We use statistical regression analysis to assess hedge effectiveness, both at inception of the hedging relationship and on an ongoing basis. The regression analysis involves regressing the periodic change in fair value of the hedging instrument against the periodic changes in fair value of the asset or liability being hedged due to changes in the hedged risk(s). The assessment includes an evaluation of the quantitative measures of the regression results used to validate the conclusion of high effectiveness.

The following table shows the net gains (losses) recognized in the income statement related to derivatives in fair value hedging relationships.




	Interest rate						Foreign exchange						Total net
	contracts hedging:						contracts hedging:						gains
													(losses)
	Securities						Securities						on fair
	available			Long-term			available			Long-term			value
(in millions)	for sale			debt			for sale			debt			hedges


Quarter ended March 31, 2011
Gains (losses) recorded in net interest income	$	(106	)		414			(1	)		90			397


Gains (losses) recorded in noninterest income
Recognized on derivatives		169			(645	)		35			1,080			639
Recognized on hedged item		(237	)		622			(33	)		(1,117	)		(765	)


Recognized on fair value hedges (ineffective portion) (1)	$	(68	)		(23	)		2			(37	)		(126	)


Quarter ended March 31, 2010
Gains (losses) recorded in net interest income	$	(94	)		531			(1	)		97			533


Gains (losses) recorded in noninterest income
Recognized on derivatives		(126	)		532			119			(1,136	)		(611	)
Recognized on hedged item		135			(517	)		(119	)		1,154			653


Recognized on fair value hedges (ineffective portion) (1)	$	9			15			-			18			42


(1)		Includes $8 million and $1 million, respectively, for the quarters ended March 31, 2011 and 2010, of gains (losses) on forward derivatives hedging foreign currency securities available for sale, short-term borrowings and long-term debt, representing the portion of derivatives gains (losses) excluded from the assessment of hedge effectiveness (time value).

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Note 12: Derivatives (continued)

Cash Flow Hedges

We hedge floating-rate debt against future interest rate increases by using interest rate swaps, caps, floors and futures to limit variability of cash flows due to changes in the benchmark interest rate. We also use interest rate swaps and floors to hedge the variability in interest payments received on certain floating-rate commercial loans, due to changes in the benchmark interest rate. Gains and losses on derivatives that are reclassified from cumulative OCI to current period earnings are included in the line item in which the hedged item’s effect on earnings is recorded. All parts of gain or loss on these derivatives are included in the assessment of hedge effectiveness. We assess hedge effectiveness using regression analysis, both at inception of the hedging relationship and on an ongoing basis. The regression analysis involves regressing the periodic

changes in cash flows of the hedging instrument against the periodic changes in cash flows of the forecasted transaction being hedged due to changes in the hedged risk(s). The assessment includes an evaluation of the quantitative measures of the regression results used to validate the conclusion of high effectiveness.

Based upon current interest rates, we estimate that $359 million of deferred net gains on derivatives in OCI at March 31, 2011, will be reclassified as earnings during the next twelve months, compared with $367 million at December 31, 2010. Future changes to interest rates may significantly change actual amounts reclassified to earnings. We are hedging our exposure to the variability of future cash flows for all forecasted transactions for a maximum of 7 years for both hedges of floating-rate debt and floating-rate commercial loans.

The following table shows the net gains (losses) recognized related to derivatives in cash flow hedging relationships.




	Quarter ended
	March 31,
(in millions)	2011			2010


Gains (after tax) recognized in OCI on derivatives	$	1			159
Gains (pre tax) reclassified from cumulative OCI into net interest income		156			142
Gains (losses) (pre tax) recognized in noninterest income on derivatives (1)		(2	)		7


(1)		None of the change in value of the derivatives was excluded from the assessment of hedge effectiveness.

Free-Standing Derivatives

We use free-standing derivatives (economic hedges), in addition to debt securities available for sale, to hedge the risk of changes in the fair value of residential MSRs measured at fair value, certain residential MHFS, derivative loan commitments and other interests held. The resulting gain or loss on these economic hedges is reflected in other income.

The derivatives used to hedge these MSRs measured at fair value, which include swaps, swaptions, forwards, Eurodollar and Treasury futures and options contracts, resulted in net derivative losses of $120 million in first quarter 2011 and net derivative gains of $1.8 billion in first quarter 2010, which are included in mortgage banking noninterest income. The aggregate fair value of these derivatives was a net asset of $548 million at March 31, 2011, and a net liability of $943 million at December 31, 2010. Changes in fair value of debt securities available for sale (unrealized gains and losses) are not included in servicing income, but are reported in cumulative OCI (net of tax) or, upon sale, are reported in net gains (losses) on debt securities available for sale.

Interest rate lock commitments for residential mortgage loans that we intend to sell are considered free-standing derivatives. Our interest rate exposure on these derivative loan commitments, as well as substantially all residential MHFS, is hedged with free-standing derivatives (economic hedges) such as forwards and options, Eurodollar futures and options, and Treasury futures, forwards and options contracts. The commitments, free-standing derivatives and residential MHFS are carried at fair value with changes in fair value included in mortgage banking noninterest income. For the fair value measurement of interest rate lock commitments we include, at inception and during the life of the loan commitment, the

expected net future cash flows related to the associated servicing of the loan. Fair value changes subsequent to inception are based on changes in fair value of the underlying loan resulting from the exercise of the commitment and changes in the probability that the loan will not fund within the terms of the commitment (referred to as a fall-out factor). The value of the underlying loan is affected primarily by changes in interest rates and the passage of time. However, changes in investor demand can also cause changes in the value of the underlying loan value that cannot be hedged. The aggregate fair value of derivative loan commitments in the balance sheet was a net asset of $30 million at March 31, 2011, and a net liability of $271 million at December 31, 2010, and is included in the caption “Interest rate contracts” under “Customer accommodation, trading and other free-standing derivatives” in the first table in this Note.

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

Free-standing derivatives also include embedded derivatives that are required to be accounted for separate from their host contract. We periodically issue hybrid long-term notes and CDs where the performance of the hybrid instrument notes is linked to an equity, commodity or currency index, or basket of such indices. These notes contain explicit terms that affect some or all

103

of the cash flows or the value of the note in a manner similar to a derivative instrument and therefore are considered to contain an “embedded” derivative instrument. The indices on which the performance of the hybrid instrument is calculated are not clearly and closely related to the host debt instrument. The “embedded” derivative is separated from the host contract and accounted for as a free-standing derivative. Additionally, we may invest in hybrid instruments that contain embedded derivatives,

such as credit derivatives, that are not clearly and closely related to the host contract. In such instances, we either elect fair value option for the hybrid instrument or separate the embedded derivative from the host contract and account for the host contract and derivative separately.

The following table shows the net gains recognized in the income statement related to derivatives not designated as hedging instruments.




	Quarter ended
	March 31,
(in millions)	2011			2010


Gains (losses) recognized on free-standing derivatives (economic hedges):
Interest rate contracts (1)
Recognized in noninterest income:
Mortgage banking	$	53			668
Other		11			(6	)
Foreign exchange contracts		(264	)		76
Credit contracts		(5	)		(89	)


Subtotal		(205	)		649


Gains (losses) recognized on customer accommodation, trading and other free-standing derivatives:
Interest rate contracts (2)
Recognized in noninterest income:
Mortgage banking		400			903
Other		196			319
Commodity contracts		(15	)		20
Equity contracts		(162	)		(46	)
Foreign exchange contracts		182			118
Credit contracts		(47	)		(430	)
Other		7			(7	)


Subtotal		561			877


Net gains recognized related to derivatives not designated as hedging instruments	$	356			1,526


(1)		Predominantly mortgage banking noninterest income including gains (losses) on the derivatives used as economic hedges of MSRs measured at fair value, interest rate lock commitments and mortgages held for sale.
(2)		Predominantly mortgage banking noninterest income including gains (losses) on interest rate lock commitments.

Credit Derivatives

We use credit derivatives to manage exposure to credit risk related to lending and investing activity and to assist customers with their risk management objectives. This may include protection sold to offset purchased protection in structured product transactions, as well as liquidity agreements written to special purpose vehicles. The maximum exposure of sold credit derivatives is managed through posted collateral, purchased credit derivatives and similar products in order to achieve our desired credit risk profile. This credit risk management provides an ability to recover a significant portion of any amounts that would be paid under the sold credit derivatives. We would be required to perform under the noted credit derivatives in the event of default by the referenced obligors. Events of default include events such as bankruptcy, capital restructuring or lack of principal and/or interest payment. In certain cases, other triggers may exist, such as the credit downgrade of the referenced obligors or the inability of the special purpose vehicle for which we have provided liquidity to obtain funding.

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Note 12: Derivatives (continued)

The following table provides details of sold and purchased credit derivatives.

Notional amount

Protection

sold -

purchased

Net

non-

with

protection

Other

Fair value

Protection

investment

identical

sold

protection

Range of

(in millions)

liability

sold (A)

grade

underlyings (B)

(A) - (B)

purchased

maturities

March 31, 2011

Credit default swaps on:

Corporate bonds

661

29,393

15,864

16,220

13,173

10,547

2011-2020

Structured products

3,761

5,670

5,101

4,865

805

2,380

2016-2056

Credit protection on:

Default swap index

3,247

1,070

3,133

114

598

2011-2017

Commercial mortgage-
backed securities index

633

1,863

556

1,225

638

392

2049-2052

Asset-backed securities index

104

122

101

144

2037-2046

Loan deliverable credit default swaps

481

456

379

102

275

2011-2014

Other

4,962

4,551

4,948

3,109

2011-2056

Total credit derivatives

5,180

45,738

27,720

25,857

19,881

17,445

December 31, 2010

Credit default swaps on:

Corporate bonds

810

30,445

16,360

17,978

12,467

9,440

2011-2020

Structured products

4,145

5,825

5,246

4,948

877

2,482

2016-2056

Credit protection on:

Default swap index

2,700

909

2,167

533

1,106

2011-2017

Commercial mortgage-backed securities index

717

1,977

612

924

1,053

779

2049-2052

Asset-backed securities index

128

144

142

2037-2046

Loan deliverable credit default swaps

481

456

391

261

2011-2014

Other

6,127

5,348

6,086

2,745

2011-2056

Total credit derivatives

5,826

47,699

29,075

26,495

21,204

16,955

Protection sold represents the estimated maximum exposure to loss that would be incurred under an assumed hypothetical circumstance, where the value of our interests and any associated collateral declines to zero, without any consideration of recovery or offset from any economic hedges. We believe this hypothetical circumstance to be an extremely remote possibility and accordingly, this required disclosure is not an indication of expected loss. The amounts under non-investment grade represent the notional amounts of those credit derivatives on which we have a higher risk of being required to perform under the terms of the credit derivative and are a function of the underlying assets.

We consider the risk of performance to be high if the underlying assets under the credit derivative have an external rating that is below investment grade or an internal credit default grade that is equivalent thereto. We believe the net protection sold, which is representative of the net notional amount of protection sold and purchased with identical underlyings, in combination with other protection purchased, is more representative of our exposure to loss than either non-investment grade or protection sold. Other protection purchased represents additional protection, which may offset the exposure to loss for protection sold, that was not purchased with an identical underlying of the protection sold.

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Credit-Risk Contingent Features

Certain of our derivative contracts contain provisions whereby if the credit rating of our debt, based on certain major credit rating agencies indicated in the relevant contracts, were to fall below investment grade, the counterparty could demand additional collateral or require termination or replacement of derivative instruments in a net liability position. The aggregate fair value of all derivative instruments with such credit-risk-related contingent features that are in a net liability position was $12.1 billion at March 31, 2011, and $12.6 billion at December 31, 2010, respectively, for which we posted $11.4 billion and $12.0 billion, respectively, in collateral in the normal course of business. If the credit-risk-related contingent features underlying these agreements had been triggered on March 31, 2011, or December 31, 2010, we would have been required to post additional collateral of $1.1 billion or $1.0 billion, respectively, or potentially settle the contract in an amount equal to its fair value.

Counterparty Credit Risk

By using derivatives, we are exposed to counterparty credit risk if counterparties to the derivative contracts do not perform as expected. If a counterparty fails to perform, our counterparty credit risk is equal to the amount reported as a derivative asset on our balance sheet. The amounts reported as a derivative asset are derivative contracts in a gain position, and to the extent subject to master netting arrangements, net of derivatives in a loss position with the same counterparty and cash collateral received. We minimize counterparty credit risk through credit approvals, limits, monitoring procedures, executing master netting arrangements and obtaining collateral, where appropriate. To the extent the master netting arrangements and other criteria meet the applicable requirements, derivatives balances and related cash collateral amounts are shown net in the balance sheet. Counterparty credit risk related to derivatives is considered in determining fair value and our assessment of hedge effectiveness.

106

Note 13: Fair Values of Assets and Liabilities

We use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Trading assets, securities available for sale, derivatives, substantially all prime residential MHFS, certain commercial LHFS, fair value MSRs, principal investments and securities sold but not yet purchased (short sale liabilities) are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other assets on a nonrecurring basis, such as certain residential and commercial MHFS, certain LHFS, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or write-downs of individual assets.

Fair Value Hierarchy

We group our assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

•

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.

•

Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

•

Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

In the determination of the classification of financial instruments in Level 2 or Level 3 of the fair value hierarchy, we consider all available information, including observable market data, indications of market liquidity and orderliness, and our understanding of the valuation techniques and significant inputs used. For securities in inactive markets, we use a predetermined percentage to evaluate the impact of fair value adjustments derived from weighting both external and internal indications of value to determine if the instrument is classified as Level 2 or Level 3. Based upon the specific facts and circumstances of each instrument or instrument category, judgments are made regarding the significance of the Level 3 inputs to the instruments’ fair value measurement in its entirety. If Level 3 inputs are considered significant, the instrument is classified as Level 3.

Determination of Fair Value

We base our fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements.

In instances where there is limited or no observable market data, fair value measurements for assets and liabilities are based primarily upon our own estimates or combination of our own estimates and independent vendor or broker pricing, and the measurements are often calculated based on current pricing for products we offer or issue, the economic and competitive environment, the characteristics of the asset or liability and other such factors. As with any valuation technique used to estimate fair value, changes in underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values. Accordingly, these fair value estimates may not be realized in an actual sale or immediate settlement of the asset or liability.

We incorporate lack of liquidity into our fair value measurement based on the type of asset or liability measured and the valuation methodology used. For example, for certain residential MHFS and certain securities where the significant inputs have become unobservable due to illiquid markets and vendor or broker pricing is not used, we use a discounted cash flow technique to measure fair value. This technique incorporates forecasting of expected cash flows (adjusted for credit loss assumptions and estimated prepayment speeds) discounted at an appropriate market discount rate to reflect the lack of liquidity in the market that a market participant would consider. For other securities where vendor or broker pricing is used, we use either unadjusted broker quotes or vendor prices or vendor or broker prices adjusted by weighting them with internal discounted cash flow techniques to measure fair value. These unadjusted vendor or broker prices inherently reflect any lack of liquidity in the market as the fair value measurement represents an exit price from a market participant viewpoint.

For complete descriptions of the valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value for financial instruments not recorded at fair value, see Note 16 in our 2010 Form 10-K. There have been no material changes to our valuation methodologies in first quarter 2011.

107

Fair Value Measurements from Independent Brokers or Independent Third Party Pricing Services

For certain assets and liabilities, we obtain fair value measurements from independent brokers or independent third party pricing services and record the unadjusted fair value in our

financial statements. The detail by level is shown in the table below. Fair value measurements obtained from independent brokers or independent third party pricing services that we have adjusted to determine the fair value recorded in our financial statements are not included in the following table.




	Independent brokers						Third party pricing services
(in millions)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3


March 31, 2011
Trading assets (excluding derivatives)	$	-		1,448		12		38		1,835		-
Securities available for sale:
Securities of U.S. Treasury and federal agencies		-		-		-		910		596		-
Securities of U.S. states and political subdivisions		-		15		-		-		14,995		170
Mortgage-backed securities		-		169		54		-		94,826		226
Other debt securities		-		232		4,918		-		15,607		814


Total debt securities		-		416		4,972		910		126,024		1,210
Total marketable equity securities		-		-		-		2		824		16


Total securities available for sale		-		416		4,972		912		126,848		1,226


Derivatives (trading and other assets)		-		50		6		-		667		8
Loans held for sale		-		-		-		-		1		-
Derivatives (liabilities)		-		32		18		-		785		-
Other liabilities		-		87		-		-		508		-



December 31, 2010
Trading assets (excluding derivatives)	$	-		1,211		6		21		2,123		-
Securities available for sale:
Securities of U.S. Treasury and federal agencies		-		-		-		936		263		-
Securities of U.S. states and political subdivisions		-		15		-		-		14,055		-
Mortgage-backed securities		-		3		50		-		102,206		169
Other debt securities		-		201		4,133		-		14,376		606


Total debt securities		-		219		4,183		936		130,900		775
Total marketable equity securities		-		-		-		201		727		16


Total securities available for sale		-		219		4,183		1,137		131,627		791


Derivatives (trading and other assets)		-		15		44		-		740		8
Loans held for sale		-		-		-		-		1		-
Derivatives (liabilities)		-		-		46		-		841		-
Other liabilities		-		20		-		-		393		-

108

Note 13: Fair Values of Assets and Liabilities (continued)

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The tables below present the balances of assets and liabilities measured at fair value on a recurring basis.



(in millions)	Level 1			Level 2			Level 3			Netting			Total

March 31, 2011
Trading assets (excluding derivatives)
Securities of U.S. Treasury and federal agencies	$	2,243			4,443			-			-			6,686
Securities of U.S. states and political subdivisions		-			2,319			130			-			2,449
Collateralized debt obligations(1)		-			-			1,910			-			1,910
Corporate debt securities		-			10,845			97			-			10,942
Mortgage-backed securities		-			10,920			144			-			11,064
Asset-backed securities		-			2,167			252			-			2,419
Equity securities		2,475			482			32			-			2,989

Total trading securities		4,718			31,176			2,565			-			38,459

Other trading assets		930			1,076			144			-			2,150

Total trading assets (excluding derivatives)		5,648			32,252			2,709			-			40,609

Securities of U.S. Treasury and federal agencies		912			595			-			-			1,507
Securities of U.S. states and political subdivisions		-			16,129			5,030			-			21,159
Mortgage-backed securities:
Federal agencies		-			75,552			-			-			75,552
Residential		-			18,938			10			-			18,948
Commercial		-			13,499			281			-			13,780

Total mortgage-backed securities		-			107,989			291			-			108,280

Corporate debt securities		38			10,296			494			-			10,828
Collateralized debt obligations(2)		-			-			5,616			-			5,616
Asset-backed securities:
Auto loans and leases		-			190			4,244			-			4,434
Home equity loans		-			986			98			-			1,084
Other asset-backed securities		-			6,519			3,411			-			9,930

Total asset-backed securities		-			7,695			7,753			-			15,448

Other debt securities		-			60			-			-			60

Total debt securities		950			142,764			19,184			-			162,898

Marketable equity securities:
Perpetual preferred securities (3)		788			734			1,989			-			3,511
Other marketable equity securities		1,348			114			35			-			1,497

Total marketable equity securities		2,136			848			2,024			-			5,008

Total securities available for sale		3,086			143,612			21,208			-			167,906

Mortgages held for sale		-			25,617			3,314			-			28,931
Loans held for sale		-			1,003			-			-			1,003
Loans		-			-			98			-			98
Mortgage servicing rights (residential)		-			-			15,648			-			15,648
Derivative assets:
Interest rate contracts		6			56,864			715			-			57,585
Commodity contracts		-			5,386			60			-			5,446
Equity contracts		626			2,298			874			-			3,798
Foreign exchange contracts		86			4,995			59			-			5,140
Credit contracts		-			1,935			2,645			-			4,580
Other derivative contracts		1			-			8			-			9

Netting		-			-			-			(54,113	) (4)		(54,113	)

Total derivative assets (5)		719			71,478			4,361			(54,113	)		22,445

Other assets		39			141			311			-			491

Total assets recorded at fair value	$	9,492			274,103			47,649			(54,113	)		277,131

Derivative liabilities:
Interest rate contracts	$	(10	)		(53,149	)		(416	)		-			(53,575	)
Commodity contracts		-			(4,877	)		(63	)		-			(4,940	)
Equity contracts		(328	)		(2,553	)		(1,099	)		-			(3,980	)
Foreign exchange contracts		(67	)		(3,441	)		(36	)		-			(3,544	)
Credit contracts		-			(1,993	)		(3,796	)		-			(5,789	)
Other derivative contracts		-			-			(26	)		-			(26	)

Netting		-			-			-			59,793	(4)		59,793

Total derivative liabilities (6)		(405	)		(66,013	)		(5,436	)		59,793			(12,061	)

Short sale liabilities:
Securities of U.S. Treasury and federal agencies		(3,982	)		(1,259	)		-			-			(5,241	)
Corporate debt securities		-			(4,887	)		-			-			(4,887	)
Equity securities		(1,917	)		(36	)		-			-			(1,953	)
Other securities		-			(144	)		(106	)		-			(250	)

Total short sale liabilities		(5,899	)		(6,326	)		(106	)		-			(12,331	)

Other liabilities		-			(179	)		(136	)		-			(315	)

Total liabilities recorded at fair value	$	(6,304	)		(72,518	)		(5,678	)		59,793			(24,707	)


(1)		Includes collateralized loan obligations of $740 million that are classified as trading assets.

(2)		Includes collateralized loan obligations of $5.0 billion that are classified as securities available for sale.

(3)		Perpetual preferred securities are primarily ARS. See Note 7 for additional information.

(4)		Derivatives are reported net of cash collateral received and paid and, to the extent that the criteria of the accounting guidance covering the offsetting of amounts related to certain contracts are met, positions with the same counterparty are netted as part of a legally enforceable master netting agreement.

(5)		Derivative assets include contracts qualifying for hedge accounting, economic hedges, and derivatives included in trading assets.

(6)		Derivative liabilities include contracts qualifying for hedge accounting, economic hedges, and derivatives included in trading liabilities.

109

(continued from previous page)



(in millions)	Level 1			Level 2			Level 3			Netting			Total

December 31, 2010
Trading assets (excluding derivatives)
Securities of U.S. Treasury and federal agencies	$	1,340			3,335			-			-			4,675
Securities of U.S. states and political subdivisions		-			1,893			5			-			1,898
Collateralized debt obligations (1)		-			-			1,915			-			1,915
Corporate debt securities		-			10,164			166			-			10,330
Mortgage-backed securities		-			9,137			117			-			9,254
Asset-backed securities		-			1,811			366			-			2,177
Equity securities		2,143			625			34			-			2,802

Total trading securities		3,483			26,965			2,603			-			33,051

Other trading assets		816			987			136			-			1,939

Total trading assets (excluding derivatives)		4,299			27,952			2,739			-			34,990

Securities of U.S. Treasury and federal agencies		938			666			-			-			1,604
Securities of U.S. states and political subdivisions		-			14,090			4,564			-			18,654
Mortgage-backed securities:
Federal agencies		-			82,037			-			-			82,037
Residential		-			20,183			20			-			20,203
Commercial		-			13,337			217			-			13,554

Total mortgage-backed securities		-			115,557			237			-			115,794

Corporate debt securities		-			9,846			433			-			10,279
Collateralized debt obligations (2)		-			-			4,778			-			4,778
Asset-backed securities:
Auto loans and leases		-			223			6,133			-			6,356
Home equity loans		-			998			112			-			1,110
Other asset-backed securities		-			5,285			3,150			-			8,435

Total asset-backed securities		-			6,506			9,395			-			15,901

Other debt securities		-			370			85			-			455

Total debt securities		938			147,035			19,492			-			167,465

Marketable equity securities:
Perpetual preferred securities (3)		721			677			2,434			-			3,832
Other marketable equity securities		1,224			101			32			-			1,357

Total marketable equity securities		1,945			778			2,466			-			5,189

Total securities available for sale		2,883			147,813			21,958			-			172,654

Mortgages held for sale		-			44,226			3,305			-			47,531
Loans held for sale		-			873			-			-			873
Loans		-			-			309			-			309
Mortgage servicing rights (residential)		-			-			14,467			-			14,467
Derivative assets:
Interest rate contracts		-			67,380			869			-			68,249
Commodity contracts		-			4,133			-			-			4,133
Equity contracts		511			2,040			721			-			3,272
Foreign exchange contracts		42			4,257			51			-			4,350
Credit contracts		-			2,148			3,198			-			5,346
Other derivative contracts		8			-			-			-			8

Netting		-			-			-			(63,469	) (4)		(63,469	)

Total derivative assets (5)		561			79,958			4,839			(63,469	)		21,889

Other assets		38			45			314			-			397

Total assets recorded at fair value	$	7,781			300,867			47,931			(63,469	)		293,110

Derivative liabilities:
Interest rate contracts	$	(7	)		(62,769	)		(792	)		-			(63,568	)
Commodity contracts		-			(3,917	)		(1	)		-			(3,918	)
Equity contracts		(259	)		(2,291	)		(946	)		-			(3,496	)
Foreign exchange contracts		(69	)		(3,351	)		(42	)		-			(3,462	)
Credit contracts		-			(2,199	)		(4,215	)		-			(6,414	)
Other derivative contracts		-			-			(35	)		-			(35	)

Netting		-			-			-			70,009	(4)		70,009

Total derivative liabilities (6)		(335	)		(74,527	)		(6,031	)		70,009			(10,884	)

Short sale liabilities:
Securities of U.S. Treasury and federal agencies		(2,827	)		(1,129	)		-			-			(3,956	)
Corporate debt securities		-			(3,798	)		-			-			(3,798	)
Equity securities		(1,701	)		(178	)		-			-			(1,879	)
Other securities		-			(347	)		-			-			(347	)

Total short sale liabilities		(4,528	)		(5,452	)		-			-			(9,980	)

Other liabilities		-			(36	)		(344	)		-			(380	)

Total liabilities recorded at fair value	$	(4,863	)		(80,015	)		(6,375	)		70,009			(21,244	)


(1)		Includes collateralized loan obligations of $671 million that are classified as trading assets.

(2)		Includes collateralized loan obligations of $4.2 billion that are classified as securities available for sale.

(3)		Perpetual preferred securities are primarily ARS. See Note 7 for additional information.

(4)		Derivatives are reported net of cash collateral received and paid and, to the extent that the criteria of the accounting guidance covering the offsetting of amounts related to certain contracts are met, positions with the same counterparty are netted as part of a legally enforceable master netting agreement.

(5)		Derivative assets include contracts qualifying for hedge accounting, economic hedges, and derivatives included in trading assets.

(6)		Derivative liabilities include contracts qualifying for hedge accounting, economic hedges, and derivatives included in trading liabilities.

110

Note 13: Fair Values of Assets and Liabilities (continued)

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarter ended March 31, 2011, are summarized as follows:




																						Net unrealized
				Total net gains						Purchases,												gains (losses)
				(losses) included in						sales,												included in net

							Other			issuances												income related
	Balance,						compre-			and			Transfers			Transfers			Balance,			to assets and
	beginning			Net			hensive			settlements,			into			out of			end of			liabilities held
(in millions)	of period			income			income			net			Level 3			Level 3			period			at period end (1)


Quarter ended March 31, 2011
Trading assets (excluding derivatives):
Securities of U.S. states and political subdivisions	$	5			2			-			85			38			-			130			1
Collateralized debt obligations		1,915			13			-			(17	)		-			(1	)		1,910			(10)
Corporate debt securities		166			(2	)		-			(67	)		-			-			97			-
Mortgage-backed securities		117			5			-			18			4			-			144			(3)
Asset-backed securities		366			9			-			(13	)		-			(110	)		252			9
Equity securities		34			(1	)		-			(2	)		1			-			32			(2)

Total trading securities		2,603			26			-			4			43			(111	)		2,565			(5)

Other trading assets		136			6			-			2			-			-			144			17

Total trading assets (excluding derivatives)		2,739			32			-			6			43			(111	)		2,709			12	(2)

Securities available for sale:
Securities of U.S. states and political subdivisions		4,564			2			69			395			-			-			5,030			3
Mortgage-backed securities:
Residential		20			-			(1	)		2			6			(17	)		10			(1)
Commercial		217			(8	)		70			2			-			-			281			(4)

Total mortgage-backed securities		237			(8	)		69			4			6			(17	)		291			(5)

Corporate debt securities		433			2			9			49			1			-			494			-
Collateralized debt obligations		4,778			53			153			632			-			-			5,616			-
Asset-backed securities:
Auto loans and leases		6,133			1			(39	)		(1,851	)		-			-			4,244			-
Home equity loans		112			2			1			(1	)		10			(26	)		98			(1)
Other asset-backed securities		3,150			(5	)		55			162			49			-			3,411			-

Total asset-backed securities		9,395			(2	)		17			(1,690	)		59			(26	)		7,753			(1)

Other debt securities		85			-			-			(85	)		-			-			-			-

Total debt securities		19,492			47			317			(695	)		66			(43	)		19,184			(3)	(3)

Marketable equity securities:
Perpetual preferred securities		2,434			68			6			(519	)		-			-			1,989			-
Other marketable equity securities		32			-			-			3			-			-			35			-

Total marketable equity securities		2,466			68			6			(516	)		-			-			2,024			-	(4)

Total securities available for sale		21,958			115			323			(1,211	)		66			(43	)		21,208			(3)

Mortgages held for sale		3,305			(32	)		-			42			72			(73	)		3,314			(32)	(5)
Loans		309			10			-			(221	)		-			-			98			10	(5)
Mortgage servicing rights		14,467			(81	)		-			1,262			-			-			15,648			499	(5)
Net derivative assets and liabilities:
Interest rate contracts		77			406			-			(185	)		1			-			299			(9)
Commodity contracts		(1	)		-			-			1			(3	)		-			(3	)		-
Equity contracts		(225	)		-			-			6			-			(6	)		(225	)		29
Foreign exchange contracts		9			21			-			(7	)		-			-			23			11
Credit contracts		(1,017	)		(86	)		-			(48	)		-			-			(1,151	)		(133)
Other derivative contracts		(35	)		17			-			-			-			-			(18	)		-

Total derivative contracts		(1,192	)		358			-			(233	)		(2	)		(6	)		(1,075	)		(102)	(6)

Other assets		314			2			-			(5	)		-			-			311			4	(2)
Short sale liabilities (corporate debt securities)		-			1			-			(107	)		-			-			(106	)		-
Other liabilities (excluding derivatives)		(344	)		(9	)		-			217			-			-			(136	)		(10)


(1)		Represents only net gains (losses) that are due to changes in economic conditions and management’s estimates of fair value and excludes changes due to the collection/realization of cash flows over time.

(2)		Included in other noninterest income in the income statement.

(3)		Included in debt securities available for sale in the income statement.

(4)		Included in equity investments in the income statement.

(5)		Included in mortgage banking in the income statement.

(6)		Included in mortgage banking, trading activities and other noninterest income in the income statement.

(continued on following page)

111

The following table presents gross purchases, sales, issuances and settlements related to the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarter ended March 31, 2011.




(in millions)	Purchases			Sales			Issuances		Settlements			Net

Quarter ended March 31, 2011
Trading assets (excluding derivatives):
Securities of U.S. states and political subdivisions	$	97			(12	)		-		-			85
Collateralized debt obligations		365			(366	)		-		(16	)		(17	)
Corporate debt securities		13			(80	)		-		-			(67	)
Mortgage-backed securities		345			(327	)		-		-			18
Asset-backed securities		245			(243	)		-		(15	)		(13	)
Equity securities		5			(7	)		-		-			(2	)

Total trading securities		1,070			(1,035	)		-		(31	)		4

Other trading assets		2			-			-		-			2

Total trading assets (excluding derivatives)		1,072			(1,035	)		-		(31	)		6

Securities available for sale:
Securities of U.S. states and political subdivisions		557			6			-		(168	)		395
Mortgage-backed securities:
Residential		4			-			-		(2	)		2
Commercial		4			-			-		(2	)		2

Total mortgage-backed securities		8			-			-		(4	)		4

Corporate debt securities		95			-			-		(46	)		49
Collateralized debt obligations		865			(20	)		-		(213	)		632
Asset-backed securities:
Auto loans and leases		366			-			-		(2,217	)		(1,851	)
Home equity loans		-			-			-		(1	)		(1	)
Other asset-backed securities		797			(17	)		-		(618	)		162

Total asset-backed securities		1,163			(17	)		-		(2,836	)		(1,690	)

Other debt securities		-			(85	)		-		-			(85	)

Total debt securities		2,688			(116	)		-		(3,267	)		(695	)

Marketable equity securities:
Perpetual preferred securities		1			-			-		(520	)		(519	)
Other marketable equity securities		3			-			-		-			3

Total marketable equity securities		4			-			-		(520	)		(516	)

Total securities available for sale		2,692			(116	)		-		(3,787	)		(1,211	)

Mortgages held for sale		219			-			-		(177	)		42
Loans		-			(210	)		-		(11	)		(221	)
Mortgage servicing rights		-			-			1,262		-			1,262
Net derivative assets and liabilities:
Interest rate contracts		-			1			-		(186	)		(185	)
Commodity contracts		-			-			-		1			1
Equity contracts		49			(124	)		-		81			6
Foreign exchange contracts		2			(2	)		-		(7	)		(7	)
Credit contracts		1			(1	)		-		(48	)		(48	)

Total derivative contracts		52			(126	)		-		(159	)		(233	)

Other assets		-			(1	)		-		(4	)		(5	)
Short sale liabilities (corporate debt securities)		(114	)		7			-		-			(107	)
Other liabilities (excluding derivatives)		-			-			-		217			217

112

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarter ended March 31, 2010, are summarized as follows:

Note 13: Fair Values of Assets and Liabilities (continued)




																						Net unrealized
				Total net gains						Purchases,												gains (losses)
				(losses) included in						sales,												included in net

							Other			issuances												income related
	Balance,						compre-			and			Transfers			Transfers			Balance,			to assets and
	beginning			Net			hensive			settlements,			into			out of			end of			liabilities held
(in millions)	of period			income			income			net			Level 3			Level 3			period			at period end (1)

Quarter ended March 31, 2010
Trading assets (excluding derivatives):
Securities of U.S. states and political subdivisions	$	5			2			-			(4	)		9			-			12			-
Collateralized debt obligations		1,133			351			-			405			-			-			1,889			33
Corporate debt securities		223			7			-			40			9			(3	)		276			5
Mortgage-backed securities		146			2			-			116			-			(123	)		141			2
Asset-backed securities		497			12			-			(190	)		1			(71	)		249			11
Equity securities		36			1			-			28			2			-			67			-

Total trading securities		2,040			375			-			395			21			(197	)		2,634			51

Other trading assets		271			(15	)		-			-			-			(82	)		174			(7)

Total trading assets (excluding derivatives)		2,311			360			-			395			21			(279	)		2,808			44	(2)

Securities available for sale:
Securities of U.S. states and political subdivisions		818			1			62			1,968			28			(6	)		2,871			-
Mortgage-backed securities:
Residential		1,084			(7	)		7			(40	)		184			(822	)		406			(3)
Commercial		1,799			-			5			1			59			(1,361	)		503			(7)

Total mortgage-backed securities		2,883			(7	)		12			(39	)		243			(2,183	)		909			(10)

Corporate debt securities		367			1			44			(6	)		138			(41	)		503			-
Collateralized debt obligations		3,725			39			76			223			-			(212	)		3,851			(6)
Asset-backed securities:
Auto loans and leases		8,525			-			(67	)		(1,049	)		178			-			7,587			-
Home equity loans		1,677			(1	)		7			(1	)		15			(1,590	)		107			(3)
Other asset-backed securities		2,308			54			(43	)		(137	)		679			(671	)		2,190			(1)

Total asset-backed securities		12,510			53			(103	)		(1,187	)		872			(2,261	)		9,884			(4)

Other debt securities		77			-			(3	)		5			-			-			79			-

Total debt securities		20,380			87			88			964			1,281			(4,703	)		18,097			(20)	(3)

Marketable equity securities:
Perpetual preferred securities		2,305			8			(12	)		678			-			(12	)		2,967			-
Other marketable equity securities		88			-			-			(53	)		-			(23	)		12			-

Total marketable equity securities		2,393			8			(12	)		625			-			(35	)		2,979			-	(4)

Total securities available for sale		22,773			95			76			1,589			1,281			(4,738	)		21,076			(20)

Mortgages held for sale		3,523			2			-			(162	)		99			(124	)		3,338			(1)	(5)
Loans		-			44			-			(39	)		366			-			371			44	(5)
Mortgage servicing rights		16,004			(1,396	)		-			1,054			-			(118	)		15,544			(777)	(5)
Net derivative assets and liabilities:
Interest rate contracts		(114	)		988			-			(617	)		-			-			257			54
Equity contracts		(344	)		80			-			20			(28	)		(9	)		(281	)		1
Foreign exchange contracts		(1	)		5			-			-			-			-			4			-
Credit contracts		(330	)		(490	)		-			56			6			-			(758	)		(461)
Other derivative contracts		(43	)		13			-			-			-			-			(30	)		-

Total derivative contracts		(832	)		596			-			(541	)		(22)			(9	)		(808	)		(406)	(6)

Other assets		1,373			23			-			(30	)		-			(989	)		377			(8)	(2)
Short sale liabilities (corporate debt securities)		(26	)		(2	)		-			(37	)		-			-			(65	)		(1)
Other liabilities (excluding derivatives) (7)		(10	)		(36	)		-			29			(359)			-			(376	)		(37)


(1)		Represents only net gains (losses) that are due to changes in economic conditions and management’s estimates of fair value and excludes changes due to the collection/realization of cash flows over time.

(2)		Included in other noninterest income in the income statement.

(3)		Included in debt securities available for sale in the income statement.

(4)		Included in equity investments in the income statement.

(5)		Included in mortgage banking in the income statement.

(6)		Included in mortgage banking, trading activities and other noninterest income in the income statement.

(7)		Balances have been revised to conform with current period presentation.

113

Changes in Fair Value Levels

We monitor the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. The amounts reported as transfers represent the fair value as of the beginning of the quarter in which the transfer occurred.

We evaluate the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets, total liabilities or total earnings. For the quarter ended March 31, 2011, there were no significant transfers in or out of Levels 1, 2 or 3.

Significant changes to Level 3 assets for the quarter ended March 31, 2010, are described as follows:

•

We adopted new consolidation accounting guidance, which impacted Level 3 balances for certain financial instruments. Reductions in Level 3 balances, which represent derecognition of existing investments in newly consolidated VIEs, are reflected as transfers out for the following categories: trading assets, $276 million; securities available for sale, $1.9 billion; and mortgage servicing rights, $118 million. Increases in Level 3 balances, which represent newly consolidated VIE assets, are reflected as transfers in for the following categories: securities available for sale, $829 million; loans, $366 million; and long-term debt, $359 million.

•

We transferred $1.4 billion of debt securities available for sale from Level 3 to Level 2 due to an increase in the volume of trading activity for certain securities, which resulted in increased occurrences of observable market prices.

114

Note 13: Fair Values of Assets and Liabilities (continued)

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

We may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from application of LOCOM accounting or write-downs of individual

assets. For assets measured at fair value on a nonrecurring basis in the quarter ended March 31, 2011, and year ended December 31, 2010, that were still held in the balance sheet at each respective period end, the following table provides the fair value hierarchy and the carrying value of the related individual assets or portfolios at period end.


	March 31, 2011								December 31, 2010

(in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total


Mortgages held for sale (1)	$	-		2,136		871		3,007		-		2,000		891		2,891
Loans held for sale		-		364		-		364		-		352		-		352
Loans:
Commercial		-		714		120		834		-		2,480		67		2,547
Consumer		-		2,457		5		2,462		-		5,870		18		5,888


Total loans (2)		-		3,171		125		3,296		-		8,350		85		8,435


Mortgage servicing rights (amortized)		-		-		97		97		-		-		104		104
Other assets (3)		-		525		89		614		-		765		82		847


(1)		Predominantly real estate 1-4 family first mortgage loans measured at LOCOM.

(2)		Represents carrying value of loans for which adjustments are based on the appraised value of the collateral.

(3)		Includes the fair value of foreclosed real estate and other collateral owned that were measured at fair value subsequent to their initial classification as foreclosed assets.

The following table presents the increase (decrease) in value of certain assets that are measured at fair value on a nonrecurring basis for which a fair value adjustment has been included in the income statement.


	Quarter ended March 31,

(in millions)	2011			2010


Mortgages held for sale	$	(26	)		17
Loans held for sale		2			9
Loans:
Commercial (1)		(240	)		(838	)
Consumer (2)		(1,752	)		(3,310	)


Total loans		(1,992	)		(4,148	)


Mortgage servicing rights (amortized)		(6	)		-
Other assets (3)		(116	)		(101	)


Total	$	(2,138	)		(4,223	)


(1)		Prior period amount has been revised to correct previously reported amounts.

(2)		Represents write-downs of loans based on the appraised value of the collateral. Prior period amount has been revised to conform with current period presentation.

(3)		Includes the losses on foreclosed real estate and other collateral owned that were measured at fair value subsequent to their initial classification as foreclosed assets.

115

Alternative Investments

The following table summarizes our investments in various types of funds, which are included in trading assets, securities available for sale and other assets. We use the funds’ net asset

values (NAVs) per share as a practical expedient to measure fair value on recurring and nonrecurring bases. The fair values presented in the table are based upon the funds’ NAVs or an equivalent measure.

Redemption

Fair

Unfunded

Redemption

notice

(in millions)

value

commitments

frequency

period

March 31, 2011

Offshore funds

1,739

Daily - Annually

1 - 180 days

Funds of funds

Monthly - Quarterly

10 - 90 days

Hedge funds

Monthly - Annually

30 - 120 days

Private equity funds

1,927

687

N/A

Venture capital funds

N/A

Total

3,786

721

December 31, 2010

Offshore funds

1,665

Daily - Annually

1 - 180 days

Funds of funds

Monthly - Quarterly

10 - 90 days

Hedge funds

Monthly - Annually

30 - 120 days

Private equity funds

1,830

669

N/A

Venture capital funds

N/A

Total

3,669

705

N/A - Not applicable

Offshore funds primarily invest in investment grade European fixed-income securities. Redemption restrictions are in place for investments with a fair value of $72 million and $74 million at March 31, 2011, and December 31, 2010, respectively, due to lock-up provisions that will remain in effect until November 2013.

Private equity funds invest in equity and debt securities issued by private and publicly-held companies in connection with leveraged buyouts, recapitalizations and expansion opportunities. Substantially all of these investments do not allow redemptions. Alternatively, we receive distributions as the underlying assets of the funds liquidate, which we expect to occur over the next nine years.

Venture capital funds invest in domestic and foreign companies in a variety of industries, including information technology, financial services and healthcare. These investments can never be redeemed with the funds. Instead, we receive distributions as the underlying assets of the fund liquidate, which we expect to occur over the next six years.

116

Note 13: Fair Values of Assets and Liabilities (continued)

Fair Value Option

We measure MHFS at fair value for prime MHFS originations for which an active secondary market and readily available market prices exist to reliably support fair value pricing models used for these loans. Loan origination fees on these loans are recorded when earned, and related direct loan origination costs are recognized when incurred. We also measure at fair value certain of our other interests held related to residential loan sales and securitizations. We believe fair value measurement for prime MHFS and other interests held, which we hedge with free-standing derivatives (economic hedges) along with our MSRs, measured at fair value reduces certain timing differences and better matches changes in the value of these assets with changes in the value of derivatives used as economic hedges for these assets.

Upon the acquisition of Wachovia, we elected to measure at fair value certain portfolios of LHFS that we intend to hold for trading purposes and that may be economically hedged with

derivative instruments. In addition, we elected to measure at fair value certain letters of credit that are hedged with derivative instruments to better reflect the economics of the transactions. These letters of credit are included in trading account assets or liabilities.

Upon the adoption of new consolidation guidance on January 1, 2010, we elected to measure at fair value the eligible assets (loans) and liabilities (long-term debt) of certain nonconforming mortgage loan securitization VIEs. We elected the fair value option for such newly consolidated VIEs to continue fair value accounting as our interests prior to consolidation were predominantly carried at fair value with changes in fair value recognized in earnings.

The following table reflects the differences between fair value carrying amount of certain assets and liabilities for which we have elected the fair value option and the contractual aggregate unpaid principal amount at maturity.


	March 31, 2011								December 31, 2010

					Fair value								Fair value
					carrying								carrying
					amount								amount
					less								less
	Fair value		Aggregate		aggregate				Fair value		Aggregate		aggregate
	carrying		unpaid		unpaid				carrying		unpaid		unpaid
(in millions)	amount		principal		principal				amount		principal		principal


Mortgages held for sale:
Total loans	$	28,931		29,071		(140	) (	1)		47,531		47,818		(287)	(1)
Nonaccrual loans		314		649		(335	)			325		662		(337)
Loans 90 days or more past due and still accruing		34		44		(10	)			38		47		(9)
Loans held for sale:
Total loans		1,003		1,031		(28	)			873		897		(24)
Nonaccrual loans		17		26		(9	)			1		7		(6)
Loans:
Total loans		98		120		(22	)			309		348		(39)
Nonaccrual loans		11		14		(3	)			13		16		(3)
Loans 90 days or more past due and still accruing		-		-		-				2		2		-
Long-term debt		99		121		(22	)			306		353		(47)


(1)		The difference between fair value carrying amount and aggregate unpaid principal includes changes in fair value recorded at and subsequent to funding, gains and losses on the related loan commitment prior to funding, and premiums on acquired loans.

117

The assets accounted for under the fair value option are initially measured at fair value. Gains and losses from initial measurement and subsequent changes in fair value are recognized in earnings. The changes in fair value related to

initial measurement and subsequent changes in fair value included in earnings for these assets measured at fair value are shown, by income statement line item, below.


	Quarter ended March 31,

	2011				2010

	Mortgage banking				Mortgage banking
	noninterest income				noninterest income

	Net gains (losses) on		Other		Net gains (losses) on		Other
	mortgage loan origination/		noninterest		mortgage loan origination/		noninterest
(in millions)	sales activities		income		sales activities		income

Mortgages held for sale	$	658		-		1,462		-
Loans held for sale		-		9		-		14
Loans		10		-		44		-
Long-term debt		(10)		-		(37)		-
Other interests held		-		10		-		(18)

The following table shows the estimated gains and losses from earnings attributable to instrument-specific credit risk related to assets accounted for under the fair value option.


	Quarter ended Mar. 31,
(in millions)	2011			2010


Gains (losses) attributable to
instrument-specific credit risk:
Mortgages held for sale	$	(59	)		(22	)
Loans held for sale		9			14


Total	$	(50	)		(8	)

For performing loans, instrument-specific credit risk gains or losses were derived principally by determining the change in fair value of the loans due to changes in the observable or implied credit spread. Credit spread is the market yield on the loans less the relevant risk-free benchmark interest rate. In recent years spreads have been significantly affected by the lack of liquidity in the secondary market for mortgage loans. For nonperforming loans, we attribute all changes in fair value to instrument-specific credit risk.

118

Note 13: Fair Values of Assets and Liabilities (continued)

Disclosures about Fair Value of Financial Instruments

The table below is a summary of fair value estimates for financial instruments, excluding short-term financial assets and liabilities because carrying amounts approximate fair value, and excluding financial instruments recorded at fair value on a recurring basis. The carrying amounts in the following table are recorded in the balance sheet under the indicated captions.

We have not included assets and liabilities that are not financial instruments in our disclosure, such as the value of the long-term relationships with our deposit, credit card and trust customers, amortized MSRs, premises and equipment, goodwill and other intangibles, deferred taxes and other liabilities. The total of the fair value calculations presented does not represent, and should not be construed to represent, the underlying value of the Company.

March 31, 2011

December 31, 2010

Carrying

Estimated

Carrying

Estimated

(in millions)

amount

fair value

amount

fair value

Financial assets

Mortgages held for sale (1)

4,190

4,191

4,232

4,234

Loans held for sale (2)

425

445

417

441

Loans, net (3)

716,256

705,958

721,016

710,147

Nonmarketable equity investments (cost method)

8,246

8,751

8,494

8,814

Financial liabilities

Deposits

837,662

839,093

847,942

849,642

Long-term debt (3)(4)

148,346

150,859

156,651

159,996


(1)		Balance excludes MHFS for which the fair value option was elected.

(2)		Balance excludes LHFS for which the fair value option was elected.

(3)		At March 31, 2011, loans and long-term debt exclude balances for which the fair value option was elected. Loans exclude lease financing with a carrying amount of $12.9 billion at March 31, 2011, and $13.1 billion at December 31, 2010.

(4)		The carrying amount and fair value exclude obligations under capital leases of $158 million at March 31, 2011, and $26 million at December 31, 2010.

Loan commitments, standby letters of credit and commercial and similar letters of credit are not included in the table above. A reasonable estimate of the fair value of these instruments is the carrying value of deferred fees plus the related allowance. This amounted to $612 million at March 31, 2011, and $673 million at December 31, 2010.

119

Note 14: Preferred Stock

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

preferred stock includes Dividend Equalization Preferred (DEP) shares and Series I, J, K and L, which are presented in the following tables, and Employee Stock Ownership Plan (ESOP) Cumulative Convertible Preferred Stock, which are presented in the tables on the following page.


	March 31, 2011 and December 31, 2010

		Liquidation		Shares
		preference		authorized
		per share		and designated


DEP Shares
Dividend Equalization Preferred Shares		$	10		97,000

Series A
Non-Cumulative Perpetual
Preferred Stock			100,000		25,001

Series B
Non-Cumulative Perpetual
Preferred Stock			100,000		17,501

Series G
7.25% Class A Preferred Stock			15,000		50,000

Series H
Floating Class A Preferred Stock			20,000		50,000

Series I
5.80% Fixed to Floating Class A
Preferred Stock			100,000		25,010

Series J
8.00% Non-Cumulative Perpetual
Class A Preferred Stock			1,000		2,300,000

Series K
7.98% Fixed-to-Floating Non-Cumulative
Perpetual Class A Preferred Stock			1,000		3,500,000

Series L
7.50% Non-Cumulative Perpetual
Convertible Class A Preferred Stock			1,000		4,025,000


Total					10,089,512

120

March 31, 2011

December 31, 2010

Shares

issued and

Carrying

issued and

Carrying

(in millions, except shares)

outstanding

Par value

value

Discount

outstanding

Par value

value

Discount

DEP Shares

Dividend Equalization Preferred Shares

96,546

96,546

Series I (1)

5.80% Fixed to Floating Class A Preferred Stock

25,010

2,501

Series J (1)

8.00% Non-Cumulative Perpetual Class A

Preferred Stock

2,150,375

2,150

1,995

155

2,150,375

2,150

1,995

155

Series K (1)

7.98% Fixed-to-Floating Non-Cumulative

Perpetual Class A Preferred Stock

3,352,000

3,352

2,876

476

3,352,000

3,352

2,876

476

Series L (1)

7.50% Non-Cumulative Perpetual

Convertible Class A Preferred Stock

3,968,000

3,968

3,200

768

3,968,000

3,968

3,200

768

Total

9,591,931

11,971

10,572

1,399

9,566,921

9,470

8,071

1,399


(1)		Preferred shares qualify as Tier 1 capital.

In March 2011, the Company issued preferred stock for Series I (25,010 shares with a par value of $2.5 billion) to an unconsolidated wholly-owned trust related to our income trust securities.

We have a commitment to issue preferred stock for Series A ($2.5 billion) and Series B ($1.8 billion) to unconsolidated wholly-owned trusts. The issuance dates are dependent on the sale of our income trust securities held by these trusts to third party investors, but we expect those dates will be March 2013 and September 2013, respectively. See Note 7 for additional information on our trust preferred securities. We do not have a commitment to issue Series G or H preferred stock.

121

ESOP CUMULATIVE CONVERTIBLE PREFERRED STOCK All shares of our ESOP Cumulative Convertible Preferred Stock (ESOP Preferred Stock) were issued to a trustee acting on behalf of the Wells Fargo & Company 401(k) Plan (the 401(k) Plan). Dividends on the ESOP Preferred Stock are cumulative from the date of initial issuance and are payable quarterly at annual rates based upon the year of issuance. Each share of ESOP Preferred Stock released from the unallocated reserve of the 401(k) Plan is converted into shares of our common stock based on the stated

value of the ESOP Preferred Stock and the then current market price of our common stock. The ESOP Preferred Stock is also convertible at the option of the holder at any time, unless previously redeemed. We have the option to redeem the ESOP Preferred Stock at any time, in whole or in part, at a redemption price per share equal to the higher of (a) $1,000 per share plus accrued and unpaid dividends or (b) the fair market value, as defined in the Certificates of Designation for the ESOP Preferred Stock.


	Shares issued and outstanding					Carrying value					Adjustable
	March 31,		December 31,		March 31,			December 31,				dividend rate
(in millions, except shares)	2011		2010		2011			2010			Minimum			Maximum


ESOP Preferred Stock $1,000 liquidation preference per share
2011		707,127		-	$	707			-			9.00	%		10.00
2010		287,161		287,161		287			287			9.50			10.50
2008		104,854		104,854		105			105			10.50			11.50
2007		82,994		82,994		83			83			10.75			11.75
2006		58,632		58,632		59			59			10.75			11.75
2005		40,892		40,892		41			41			9.75			10.75
2004		26,815		26,815		27			27			8.50			9.50
2003		13,591		13,591		13			13			8.50			9.50
2002		3,443		3,443		3			3			10.50			11.50


Total ESOP Preferred Stock (1)		1,325,509		618,382	$	1,325			618


Unearned ESOP shares (2)					$	(1,430	)		(663	)


(1)		At March 31, 2011, and December 31, 2010, additional paid-in capital included $105 million and $45 million, respectively, related to preferred stock.

(2)		We recorded a corresponding charge to unearned ESOP shares in connection with the issuance of the ESOP Preferred Stock. The unearned ESOP shares are reduced as shares of the ESOP Preferred Stock are committed to be released.

122

Note 15: Employee Benefits

We sponsor a noncontributory qualified defined benefit retirement plan, the Wells Fargo & Company Cash Balance Plan (Cash Balance Plan), which covers eligible employees of

Wells Fargo; the benefits earned under the Cash Balance Plan were frozen effective July 1, 2009.

The net periodic benefit cost was:


	2011								2010

	Pension benefits								Pension benefits

				Non-		Other						Non-		Other
(in millions)	Qualified			qualified		benefits			Qualified			qualified		benefits


Quarter ended March 31,
Service cost	$	1			-		3			1			-		3
Interest cost		130			9		18			139			9		20
Expected return on plan assets		(189	)		-		(10	)		(179	)		-		(7	)
Amortization of net actuarial loss		21			2		-			26			1		-
Amortization of prior service credit		-			-		(1	)		-			-		(1	)
Settlement		2			-		-			-			-		-


Net periodic benefit cost (income)	$	(35	)		11		10			(13	)		10		15

123

Note 16: Earnings Per Common Share

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


	Quarter ended March 31,

(in millions, except per share amounts)	2011		2010


Wells Fargo net income	$	3,759		2,547
Less: Preferred stock dividends and other (1)		189		175


Wells Fargo net income applicable to common stock (numerator)	$	3,570		2,372


Earnings per common share
Average common shares outstanding (denominator)		5,278.8		5,190.4
Per share	$	0.68		0.46


Diluted earnings per common share
Average common shares outstanding		5,278.8		5,190.4
Add: Stock options		37.8		31.1
Restricted share rights		16.5		3.7


Diluted average common shares outstanding (denominator)		5,333.1		5,225.2


Per share	$	0.67		0.45


(1)		Includes $184 million of preferred stock dividends for both first quarter 2011 and 2010.

The following table presents the outstanding options and warrants to purchase shares of common stock that were anti-dilutive (the exercise price was higher than the weighted-average market price), and therefore not included in the calculation of diluted earnings per common share.


	Weighted-average shares

	Quarter ended March 31,

(in millions)	2011		2010


Options		69.0		190.1
Warrants		39.4		110.3

124

Note 17: Operating Segments

We have three operating segments for management reporting: Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement. The results for these operating segments are based on our management accounting process, for which there is no comprehensive, authoritative guidance equivalent to GAAP for financial accounting. The management accounting process measures the performance of the operating segments based on our management structure and is not necessarily comparable with similar information for other financial services companies. We define our operating segments by product type and customer segment. If the management structure and/or the allocation process changes, allocations, transfers and assignments may change. In first quarter 2010, we conformed certain funding and allocation methodologies of legacy Wachovia to those of Wells Fargo; in addition, integration expense related to mergers other than the Wachovia merger is now included in segment results. In fourth quarter 2010, we aligned certain lending businesses into Wholesale Banking from Community Banking to reflect our previously announced restructuring of Wells Fargo Financial. In first quarter 2011, we realigned a private equity business into Wholesale Banking from Community Banking. The prior periods have been revised to reflect these changes.

Community Banking offers a complete line of diversified financial products and services to consumers and small businesses with annual sales generally up to $20 million in which the owner generally is the financial decision maker. Community Banking also offers investment management and other services to retail customers and securities brokerage through affiliates. These products and services include the Wells Fargo Advantage Funds^SM, a family of mutual funds. Loan products include lines of credit, auto floor plan lines, equity lines and loans, equipment and transportation loans, education loans, origination and purchase of residential mortgage loans and servicing of mortgage loans and credit cards. Other credit products and financial services available to small businesses and their owners include equipment leases, real estate and other commercial financing, Small Business Administration financing, venture capital financing, cash management, payroll services, retirement plans, Health Savings Accounts, credit cards, and merchant payment processing. Community Banking also purchases sales finance contracts from retail merchants throughout the United States and directly from auto dealers in Puerto Rico. Consumer and business deposit products include checking accounts, savings deposits, market rate accounts, Individual Retirement Accounts, time deposits and debit cards.

Community Banking serves customers through a complete range of channels, including traditional banking stores, in-store banking centers, business centers, ATMs, Online and Mobile Banking, and Wells Fargo Customer Connection, a 24-hours a day, seven days a week telephone service.

Wholesale Banking provides financial solutions to businesses across the United States with annual sales generally in excess of $20 million and to financial institutions globally. Wholesale

Banking provides a complete line of commercial, corporate, capital markets, cash management and real estate banking products and services. These include traditional commercial loans and lines of credit, letters of credit, asset-based lending, equipment leasing, international trade facilities, trade financing, collection services, foreign exchange services, treasury management, investment management, institutional fixed-income sales, interest rate, commodity and equity risk management, online/electronic products such as the Commercial Electronic Office^{^®} (CEO^{^®}) portal, insurance, corporate trust fiduciary and agency services, and investment banking services. Wholesale Banking manages customer investments through institutional separate accounts and mutual funds, including the Wells Fargo Advantage Funds and Wells Capital Management. Wholesale Banking also supports the CRE 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, CRE loan servicing and real estate and mortgage brokerage services.

Wealth, Brokerage and Retirement provides a full range of financial advisory services to clients using a planning approach to meet each client’s needs. Wealth Management provides affluent and high net worth clients with a complete range of wealth management solutions, including financial planning, private banking, credit, investment management and trust. Family Wealth meets the unique needs of ultra high net worth customers. Brokerage serves customers’ advisory, brokerage and financial needs as part of one of the largest full-service brokerage firms in the United States. Retirement is a national leader in providing institutional retirement and trust services (including 401(k) and pension plan record keeping) for businesses, retail retirement solutions for individuals, and reinsurance services for the life insurance industry.

Other includes corporate items (such as integration expenses related to the Wachovia merger) not specific to a business segment and elimination of certain items that are included in more than one business segment.

125



										Wealth, Brokerage										Consolidated
(income/expense in millions,		Community Banking				Wholesale Banking				and Retirement				Other (1)						Company
average balances in billions)		2011		2010		2011		2010		2011		2010		2011			2010			2011		2010


Quarter ended March 31,
Net interest income (2)	$		7,543		8,253		2,755		2,554		696		664		(343	)		(324	)		10,651		11,147
Provision for credit losses			2,065		4,519		134		810		41		63		(30	)		(62	)		2,210		5,330
Noninterest income			5,094		5,711		2,705		2,869		2,454		2,246		(575	)		(525	)		9,678		10,301
Noninterest expense			7,605		7,205		2,800		2,685		2,559		2,390		(231	)		(163	)		12,733		12,117


Income (loss) before income tax expense (benefit)			2,967		2,240		2,526		1,928		550		457		(657	)		(624	)		5,386		4,001
Income tax expense (benefit)			742		777		872		688		208		173		(250	)		(237	)		1,572		1,401


Net income (loss) before noncontrolling interests			2,225		1,463		1,654		1,240		342		284		(407	)		(387	)		3,814		2,600
Less: Net income from noncontrolling interests			50		48		2		3		3		2		-			-			55		53


Net income (loss) (3)	$		2,175		1,415		1,652		1,237		339		282		(407	)		(387	)		3,759		2,547


Average loans	$		509.8		550.4		234.7		237.0		42.7		43.8		(33.1	)		(33.8	)		754.1		797.4
Average assets			759.9		776.8		399.6		369.5		146.5		137.8		(64.8	)		(58.0	)		1,241.2		1,226.1
Average core deposits			548.1		531.5		184.8		161.6		125.4		121.1		(61.5	)		(55.0	)		796.8		759.2


(1)		Includes Wachovia integration expenses and the elimination of items that are included in both Community Banking and Wealth, Brokerage and Retirement, largely representing services and products for wealth management customers provided in Community Banking stores.
(2)		Net interest income is the difference between interest earned on assets and the cost of liabilities to fund those assets. Interest earned includes actual interest earned on segment assets and, if the segment has excess liabilities, interest credits for providing funding to other segments. The cost of liabilities includes interest expense on segment liabilities and, if the segment does not have enough liabilities to fund its assets, a funding charge based on the cost of excess liabilities from another segment.
(3)		Represents segment net income (loss) for Community Banking; Wholesale Banking; and Wealth, Brokerage and Retirement segments and Wells Fargo net income for the consolidated company.

126

Note 18: Condensed Consolidating Financial Statements

Following are the condensed consolidating financial statements of the Parent
and Wells Fargo Financial, Inc. and its owned subsidiaries (WFFI).

Condensed Consolidating Statement of Income


							Other
							consolidating					Consolidated
(in millions)	Parent			WFFI			subsidiaries		Eliminations			Company


Quarter ended March 31, 2011
Dividends from subsidiaries:
Bank	$	1,592			-			-		(1,592	)		-
Nonbank		-			-			-		-			-
Interest income from loans		-			578			8,932		(123	)		9,387
Interest income from subsidiaries		308			-			-		(308	)		-
Other interest income		48			29			3,008		-			3,085


Total interest income		1,948			607			11,940		(2,023	)		12,472


Deposits		-			-			615		-			615
Short-term borrowings		105			15			187		(281	)		26
Long-term debt		694			167			393		(150	)		1,104
Other interest expense		1			-			75		-			76


Total interest expense		800			182			1,270		(431	)		1,821


Net interest income		1,148			425			10,670		(1,592	)		10,651
Provision for credit losses		-			247			1,963		-			2,210


Net interest income after provision for credit losses		1,148			178			8,707		(1,592	)		8,441


Noninterest income
Fee income – nonaffiliates		-			28			5,846		-			5,874
Other		(3	)		24			3,939		(156	)		3,804


Total noninterest income		(3	)		52			9,785		(156	)		9,678


Noninterest expense
Salaries and benefits		190			27			6,976		-			7,193
Other		153			145			5,398		(156	)		5,540


Total noninterest expense		343			172			12,374		(156	)		12,733


Income (loss) before income tax expense (benefit) and equity in undistributed income of subsidiaries		802			58			6,118		(1,592	)		5,386
Income tax expense (benefit)		(434	)		15			1,991		-			1,572
Equity in undistributed income of subsidiaries		2,523			-			-		(2,523	)		-


Net income (loss) before noncontrolling interests		3,759			43			4,127		(4,115	)		3,814
Less: Net income from noncontrolling interests		-			-			55		-			55


Parent, WFFI, Other and Wells Fargo net income (loss)	$	3,759			43			4,072		(4,115	)		3,759


Quarter ended March 31, 2010
Dividends from subsidiaries:
Bank	$	-			-			-		-			-
Nonbank		6			-			-		(6	)		-
Interest income from loans		-			726			9,350		(38	)		10,038
Interest income from subsidiaries		348			-			-		(348	)		-
Other interest income		78			30			3,079		-			3,187


Total interest income		432			756			12,429		(392	)		13,225


Deposits		-			-			735		-			735
Short-term borrowings		23			9			94		(108	)		18
Long-term debt		718			287			549		(278	)		1,276
Other interest expense		-			-			49		-			49


Total interest expense		741			296			1,427		(386	)		2,078


Net interest income		(309	)		460			11,002		(6	)		11,147
Provision for credit losses		-			321			5,009		-			5,330

Net interest income after provision for credit losses		(309	)		139			5,993		(6	)		5,817


Noninterest income
Fee income – nonaffiliates		-			28			5,779		-			5,807
Other		211			47			4,387		(151	)		4,494


Total noninterest income		211			75			10,166		(151	)		10,301


Noninterest expense
Salaries and benefits		(33	)		70			6,591		-			6,628
Other		258			147			5,235		(151	)		5,489


Total noninterest expense		225			217			11,826		(151	)		12,117


Income (loss) before income tax expense (benefit) and equity in undistributed income of subsidiaries		(323	)		(3	)		4,333		(6	)		4,001
Income tax expense (benefit)		(90	)		(1	)		1,492		-			1,401
Equity in undistributed income of subsidiaries		2,780			-			-		(2,780	)		-


Net income (loss) before noncontrolling interests		2,547			(2	)		2,841		(2,786	)		2,600
Less: Net income from noncontrolling interests		-			-			53		-			53


Parent, WFFI, Other and Wells Fargo net income (loss)	$	2,547			(2	)		2,788		(2,786	)		2,547

127

Condensed Consolidating Balance Sheets


						Other
						consolidating						Consolidated
(in millions)	Parent		WFFI			subsidiaries			Eliminations			Company


March 31, 2011

Assets
Cash and cash equivalents due from:
Subsidiary banks	$	31,906		232			-			(32,138	)		-
Nonaffiliates		24		186			109,809			-			110,019
Securities available for sale		2,390		2,687			162,829			-			167,906
Mortgages and loans held for sale		-		-			34,549			-			34,549

Loans		7		29,359			738,193			(16,404	)		751,155
Loans to subsidiaries:
Bank		3,885		-			-			(3,885	)		-
Nonbank		52,081		-			-			(52,081	)		-
Allowance for loan losses		-		(1,670	)		(20,313	)		-			(21,983	)


Net loans		55,973		27,689			717,880			(72,370	)		729,172


Investments in subsidiaries:
Bank		135,857		-			-			(135,857	)		-
Nonbank		15,600		-			-			(15,600	)		-
Other assets		8,815		1,161			194,226			(1,182	)		203,020


Total assets	$	250,565		31,955			1,219,293			(257,147	)		1,244,666


Liabilities and equity
Deposits	$	-		-			869,800			(32,138	)		837,662
Short-term borrowings		785		15,977			86,275			(48,300	)		54,737
Accrued expenses and other liabilities		7,294		1,566			61,043			(1,182	)		68,721
Long-term debt		96,767		12,746			50,912			(11,822	)		148,603
Indebtedness to subsidiaries		12,248		-			-			(12,248	)		-


Total liabilities		117,094		30,289			1,068,030			(105,690	)		1,109,723


Parent, WFFI, Other and Wells Fargo stockholders’ equity		133,471		1,666			149,791			(151,457	)		133,471
Noncontrolling interests		-		-			1,472			-			1,472


Total equity		133,471		1,666			151,263			(151,457	)		134,943


Total liabilities and equity	$	250,565		31,955			1,219,293			(257,147	)		1,244,666


December 31, 2010

Assets
Cash and cash equivalents due from:
Subsidiary banks	$	30,240		154			-			(30,394	)		-
Nonaffiliates		9		212			96,460			-			96,681
Securities available for sale		2,368		2,742			167,544			-			172,654
Mortgages and loans held for sale		-		-			53,053			-			53,053

Loans		7		30,329			742,807			(15,876	)		757,267
Loans to subsidiaries:
Bank		3,885		-			-			(3,885	)		-
Nonbank		53,382		-			-			(53,382	)		-
Allowance for loan losses		-		(1,709	)		(21,313	)		-			(23,022	)


Net loans		57,274		28,620			721,494			(73,143	)		734,245


Investments in subsidiaries:
Bank		133,867		-			-			(133,867	)		-
Nonbank		14,904		-			-			(14,904	)		-
Other assets		8,363		1,316			192,821			(1,005	)		201,495


Total assets	$	247,025		33,044			1,231,372			(253,313	)		1,258,128


Liabilities and equity
Deposits	$	-		-			878,336			(30,394	)		847,942
Short-term borrowings		2,412		14,490			86,523			(48,024	)		55,401
Accrued expenses and other liabilities		6,819		1,685			62,414			(1,005	)		69,913
Long-term debt		99,745		15,240			55,476			(13,478	)		156,983
Indebtedness to subsidiaries		11,641		-			-			(11,641	)		-


Total liabilities		120,617		31,415			1,082,749			(104,542	)		1,130,239


Parent, WFFI, Other and Wells Fargo stockholders’ equity		126,408		1,618			147,153			(148,771	)		126,408
Noncontrolling interests		-		11			1,470			-			1,481


Total equity		126,408		1,629			148,623			(148,771	)		127,889


Total liabilities and equity	$	247,025		33,044			1,231,372			(253,313	)		1,258,128

128

Note 18: Condensed Consolidating Financial Statements (continued)

Condensed Consolidating Statements of Cash Flows


	Quarter ended March 31,
	2011												2010
							Other												Other
							consolidating												consolidating
							subsidiaries/			Consolidated									subsidiaries/			Consolidated
(in millions)	Parent			WFFI			eliminations			Company			Parent			WFFI			eliminations			Company


Cash flows from operating activities:
Net cash provided by operating activities	$	2,409			394			14,408			17,211			600			601			7,680			8,881


Cash flows from investing activities:
Securities available for sale:
Sales proceeds		152			92			15,117			15,361			289			271			1,235			1,795
Prepayments and maturities		-			60			11,591			11,651			-			19			9,276			9,295
Purchases		(117	)		(100	)		(18,614	)		(18,831	)		(29	)		(314	)		(3,848	)		(4,191	)
Loans:
Loans originated by banking subsidiaries, net of principal collected		-			152			(366	)		(214	)		-			118			15,414			15,532
Proceeds from sales (including participations) of loans originated for investment by banking subsidiaries		-			-			2,165			2,165			-			-			1,341			1,341
Purchases (including participations) of loans by banking subsidiaries		-			-			(644	)		(644	)		-			-			(566	)		(566	)
Principal collected on nonbank entities’ loans		-			2,549			(3	)		2,546			-			2,901			1,385			4,286
Loans originated by nonbank entities		-			(1,903	)		(1	)		(1,904	)		-			(1,635	)		(1,226	)		(2,861	)
Net repayments from (advances to) subsidiaries		(212	)		(82	)		294			-			145			(704	)		559			-
Capital notes and term loans made to subsidiaries		(364	)		-			364			-			-			-			-			-
Principal collected on notes/loans made to subsidiaries		1,900			-			(1,900	)		-			3,983			-			(3,983	)		-
Net decrease (increase) in investment in subsidiaries		(13	)		-			13			-			1,403			-			(1,403	)		-
Other, net		14			29			(8,941	)		(8,898	)		1			20			(11,957	)		(11,936	)


Net cash provided (used) by investing activities		1,360			797			(925	)		1,232			5,792			676			6,227			12,695


Cash flows from financing activities:
Net change in:
Deposits		-			-			(10,280	)		(10,280	)		-			-			(19,125	)		(19,125	)
Short-term borrowings		(1,076	)		1,487			(1,075	)		(664	)		(343	)		(243	)		2,826			2,240
Long-term debt:
Proceeds from issuance		3,238			513			1,466			5,217			1,340			-			75			1,415
Repayment		(6,500	)		(3,128	)		(4,305	)		(13,933	)		(9,735	)		(1,132	)		(5,641	)		(16,508	)
Preferred stock:
Proceeds from issuance		2,501			-			-			2,501			-			-			-			-
Cash dividends paid		(251	)		-			-			(251	)		(251	)		-			-			(251	)
Common stock:
Proceeds from issuance		634			-			-			634			464			-			-			464
Repurchased		(55	)		-			-			(55	)		(38	)		-			-			(38	)
Cash dividends paid		(634	)		-			-			(634	)		(260	)		-			-			(260	)
Excess tax benefits related to stock option payments		55			-			-			55			51			-			-			51
Net change in noncontrolling interests		-			(11	)		(88	)		(99	)		-			-			(343	)		(343	)


Net cash used by financing activities		(2,088	)		(1,139	)		(14,282	)		(17,509	)		(8,772	)		(1,375	)		(22,208	)		(32,355	)


Net change in cash and due from banks		1,681			52			(799	)		934			(2,380	)		(98	)		(8,301	)		(10,779	)
Cash and due from banks at beginning of period		30,249			366			(14,571	)		16,044			27,314			454			(688	)		27,080


Cash and due from banks at end of period	$	31,930			418			(15,370	)		16,978			24,934			356			(8,989	)		16,301

129

Note 19: Regulatory and Agency Capital Requirements

The Company and each of its subsidiary banks are subject to regulatory capital adequacy requirements promulgated by federal regulatory agencies. The Federal Reserve establishes capital requirements, including well capitalized standards, for the consolidated financial holding company, and the OCC has similar requirements for the Company’s national banks, including Wells Fargo Bank, N.A.

We do not consolidate our wholly-owned trusts (the Trusts) formed solely to issue trust preferred securities. Trust preferred securities and perpetual preferred purchase securities issued by the Trusts includable in Tier 1 capital were $13.5 billion at March 31, 2011. The junior subordinated debentures held by the Trusts were included in the Company’s long-term debt.

Certain subsidiaries of the Company are approved seller/servicers, and are therefore required to maintain minimum levels of shareholders’ equity, as specified by various agencies, including the United States Department of Housing and Urban Development, GNMA, FHLMC and FNMA. At March 31, 2011, each seller/servicer met these requirements. Certain broker-dealer subsidiaries of the Company are subject to SEC Rule 15c3-1 (the Net Capital Rule), which requires that we maintain minimum levels of net capital, as defined. At March 31, 2011, each of these subsidiaries met these requirements.

The following table presents regulatory capital information for Wells Fargo & Company and Wells Fargo Bank, N.A.

Wells Fargo & Company

Wells Fargo Bank, N.A.

Well-

Minimum

Mar. 31,

Dec. 31,

Mar. 31,

Dec. 31,

capitalized

capital

(in billions, except ratios)

2011

2010

2011

2010

ratios (1)

Regulatory capital:

Tier 1

110.8

109.4

92.0

90.2

Total

147.3

147.1

118.0

117.1

Assets:

Risk-weighted

962.9

980.0

883.4

895.2

Adjusted average (2)

1,194.7

1,189.5

1,047.7

1,057.7

Capital ratios:

Tier 1 capital

11.50

11.16

10.42

10.07

6.00

4.00

Total capital

15.30

15.01

13.36

13.09

10.00

8.00

Tier 1 leverage (2)

9.27

9.19

8.78

8.52

5.00

4.00


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

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Glossary of Acronyms


ACL		Allowance for credit losses
ALCO		Asset/Liability Management Committee
ARS		Auction rate security
ASC		Accounting Standards Codification
ASU		Accounting Standards Update
ARM		Adjustable-rate mortgage
AVM		Automated valuation model
CD		Certificate of deposit
CDO		Collateralized debt obligation
CLO		Collateralized loan obligation
CLTV		Combined loan-to-value
CPP		Capital Purchase Program
CPR		Constant prepayment rate
CRE		Commercial real estate
ESOP		Employee Stock Ownership Plan
FAS		Statement of Financial Accounting Standards
FASB		Financial Accounting Standards Board
FDIC		Federal Deposit Insurance Corporation
FFELP		Federal Family Education Loan Program
FHA		Federal Housing Administration
FHLB		Federal Home Loan Bank
FHLMC		Federal Home Loan Mortgage Company
FICO		Fair Isaac Corporation (credit rating)
FNMA		Federal National Mortgage Association
FRB		Board of Governors of the Federal Reserve System
GAAP		Generally accepted accounting principles
GNMA		Government National Mortgage Association
GSE		Government-sponsored entity
HAMP		Home Affordability Modification Program
HPI		Home Price Index
LHFS		Loans held for sale
LIBOR		London Interbank Offered Rate
LOCOM		Lower of cost or market value
LTV		Loan-to-value
MBS		Mortgage-backed security
MERS		Mortgage Electronic Registration Systems, Inc.
MHFS		Mortgages held for sale
MSR		Mortgage servicing right
MTN		Medium-term note
NAV		Net asset value


NPA		Nonperforming asset
OCC		Office of the Comptroller of the Currency
OCI		Other comprehensive income
OTC		Over-the-counter
OTTI		Other-than-temporary impairment
PCI Loans		Purchased credit-impaired loans
PTPP		Pre-tax pre-provision profit
RBC		Risk-based capital
ROA		Wells Fargo net income to average total assets
ROE		Wells Fargo net income applicable to common stock to average Wells Fargo common stockholders’ equity
SEC		Securities and Exchange Commission
S&P		Standard & Poor’s
SPE		Special purpose entity
TARP		Troubled Asset Relief Program
TDR		Troubled debt restructuring
VA		Department of Veterans Affairs
VaR		Value-at-risk
VIE		Variable interest entity
WFFCC		Wells Fargo Financial Canada Corporation
WFFI		Wells Fargo Financial, Inc. and its wholly-owned subsidiaries

131

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

Information in response to this item can be found in Note 11 (Legal Actions) to Financial Statements in this Report which information is incorporated by reference into this item.

Item 1A.		Risk Factors

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

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The following table shows Company repurchases of its common stock for each calendar month in the quarter ended March 31, 2011.



					Maximum number of
	Total number				shares that may yet
	of shares		Weighted-average		be purchased under
Calendar month	repurchased (1)		price paid per share		the authorizations


January		370,577	$	32.19		2,701,677
February		884,215		33.54		1,817,462
March		432,579		31.81		201,384,883


Total		1,687,371


(1)		All shares were repurchased under two authorizations covering up to 25 million and 200 million shares of common stock approved by the Board of Directors and publicly announced by the Company on September 23, 2008, and March 18, 2011, respectively. Unless modified or revoked by the Board, these authorizations do not expire.

The following table shows Company repurchases of the warrants for each calendar month in the quarter ended March 31, 2011.



	Total number				Maximum dollar value
	of warrants		Average price		of warrants that
Calendar month	repurchased (1)		paid per warrant		may yet be purchased


January		-	$	-		454,692,072
February		-		-		454,692,072
March		-		-		454,692,072


Total		-


(1)		No warrants were purchased in first quarter 2011. Warrants are purchased under the authorization covering up to $1 billion in warrants approved by the Board of Directors (ratified and approved on June 22, 2010.) Unless modified or revoked by the Board, authorization does not expire.

132

Item 6. Exhibits

A list of exhibits to this Form 10-Q is set forth on the Exhibit Index immediately preceding such exhibits and is incorporated herein by reference.

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.

SIGNATURE

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


Dated: May 6, 2011	WELLS FARGO & COMPANY
	By:	/s/ RICHARD D. LEVY
		Richard D. Levy
		Executive Vice President and Controller (Principal Accounting Officer)

133

EXHIBIT INDEX


Exhibit
Number	Description	Location

3(a)	Restated Certificate of Incorporation, as amended and in effect on the date hereof.	Filed herewith.

3(b)	By-Laws.	Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed January 28, 2011.

4(a)	See Exhibits 3(a) and 3(b).

4(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)	Form of Performance Share Award Agreement for grants on or after February 22, 2011.	Incorporated by reference to Exhibit 10(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

10 (b)	Form of Restricted Share Rights Agreement for grants on or after February 22, 2011.	Incorporated by reference to Exhibit 10(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

10(c)	Wells Fargo Bonus Plan, as amended effective January 1, 2011.	Filed herewith.

10(d)	Amendment to Directors Stock Compensation and Deferral Plan, effective January 25, 2011.	Filed herewith.

12(a)	Computation of Ratios of Earnings to Fixed Charges:	Filed herewith.


	Quarter ended March 31,
	2011		2010

Including interest on deposits		3.79		2.79

Excluding interest on deposits		5.11		3.69


12(b)	Computation of Ratios of Earnings to Fixed Charges and Preferred Dividends:	Filed herewith.


	Quarter ended March 31,
	2011		2010

Including interest on deposits		3.32		2.49

Excluding interest on deposits		4.23		3.12

134


Exhibit
Number	Description	Location

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

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.

32(b)	Certification of Periodic Financial Report by Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. § 1350.	Furnished herewith.

101^*	Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2011, is formatted in XBRL interactive data files: (i) Consolidated Statement of Income for the three months ended March 31, 2011 and 2010; (ii) Consolidated Balance Sheet at March 31, 2011, and December 31, 2010; (iii) Consolidated Statement of Changes in Equity and Comprehensive Income for the three months ended March 31, 2011 and 2010; (iv) Consolidated Statement of Cash Flows for the three months ended March 31, 2011 and 2010; and (v) Notes to Financial Statements.	Furnished herewith.

*As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

135