Bob Strickland – Director, IR John Stumpf – Chairman, President and CEO Howard Atkins – SVP and CFO

John Mcdonald – Sanford Bernstein Matthew O'Connor – Deutsche Bank Chris Kotowski – Oppenheimer Betsy Graseck – Morgan Stanley Chris Mutascio – Stifel Nicolaus Nancy Bush – NAB Research Joe Morford – RBC Capital Markets Moshe Orenbuch – Credit Suisse

Good morning. My name is Celeste, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wells Fargo first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) I would now like to turn today’s call over to Mr. Bob Strickland. Please go ahead, sir.

Good morning. Thank you for joining our call today during which our Chairman and CEO, John Stumpf; and CFO, Howard Atkins will review first quarter 2010 results and answer your questions. Before we get started, I would like to remind you that our first quarter earnings release and quarterly supplements are available on our Website. I’d also like to caution you that we may make forward-looking statements during today’s call and that those forward-looking statements are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are detailed in our SEC filings, including the Form 8-K filed today and the earnings release and quarterly supplement included as exhibits. In addition, some of the discussion today about the company’s performance will include references to non-GAAP financial measures. Information about those measures, including a reconciliation of those measures to GAAP measures, can be found in our SEC filings and in the earnings release and quarterly supplement available on our Website at wellsfargo.com. I will now turn the call over to our Chairman and CEO, John Stumpf.

Thanks Bob and thanks to everyone who has joined us on this call. We appreciate your interest in Wells Fargo. Before I turn this over to Howard Atkins for a more in-depth review of our results this quarter, let me review some highlights from the quarter and why I am excited about how Wells Fargo is positioned for the future. Our first quarter results reflect underlying strength, with revenue growth that demonstrates the power of our diversified business model and combined franchise. In fact, during the challenging economic environment of the past couple of years, which continues to affect employment, housing values, loan demand and interest rates, we have been afforded a great opportunity to clearly demonstrate how well our business model works for our customers and for shareholders, not matter what the economic conditions are. This wasn’t by chance, but reflects the benefit of our longstanding focus on diversification. Our team has continued to meet our customers’ financial needs, while pulling together to make our merger with Wachovia, the largest in US banking history a success. Over the past year, we have completed a tremendous amount of work behind the scenes, choosing and enhancing systems and products, aligning jobs and completing detailed integration plans. So, we are now well prepared for the more visible work you will see happening this year and next. Today, we have converted a number of business lines including mortgage and credit card and four of our overlapping banking states, and we are preparing to complete the California conversion this weekend. Texas, our last overlapping state would be converted in July. Our eastern states would be converting in the third quarter and we are on schedule to complete all conversions by the end of 2011 as we have planned. This merger has been a team effort and our entire team is working exceptionally well together. Culturally and financially, this merger is exceeding my expectations and I couldn’t be more excited about the opportunities ahead. At this point, we believe we have turned the corner on many of the credit challenges of the past two years. Throughout this economic downturn, we have continued to lend to our customers, but customer demand and therefore earnings asset growth remains soft. Against this backdrop, it’s important to note that we remain firmly committed to our discipline in managing credit risks and interest rate risks and to managing our company for long-term earnings growth, not short-term quarterly results. In short, we believe we have had demonstrable success throughout these tough economic times and we positioned our franchise well for better economic times ahead. We have held on to customers by providing a full spectrum of products and services to meet their needs throughout this period. We have dominant market positions in consumer, commercial, retail brokerage and other key business areas. We have a tremendous nationwide distribution network. In other words, Wells Fargo has proven to have the right business model and it’s right where it needs to be to be successful going forward. In our view, while the US economy is gradually regaining its footing, it has yet to deliver a broad base recovery for our country and for many of our customers. Though the signs of strength we are seeing in the economy are encouraging, we are not counting on them alone to deliver the performance you come to expect from Wells Fargo. I am confident our company will continue to find and leverage opportunities that are unique to our diversified business model, our valued customer relationships and our disciplined approach to managing our balance sheet. Now, let me turn this over to Howard Atkins, our Chief Financial Officer.

Thank you John. My remarks will follow the presentation that’s included in the first quarter quarterly supplement that’s available on the Wells Fargo Investor Relations Website, and I am going to focus in on first quarter earnings, capital and credit. Slide 3 of that presentation provides a high-level summary of the key messages about our first quarter. There are essentially three things I would like you all to take away from our first quarter results. First, we are very pleased with the $2.5 billion profit that was earned in the quarter, and the reason more pleased with the way that those results were achieved. Our earnings were broad-based. Each major business segment earned money and each contributed to the overall earnings results. Businesses as diverse as trusted invested, debit card, merchant processing, insurance, asset-based lending, real estate brokerage, all had very strong revenue growth year-over-year. In essence, as we think about our earnings, our earnings continued to come from core retail and commercial banking. Less than 3% of our total revenue this quarter was from trading and market-sensitive income and less than 5% of our total revenue was from net mortgage hedging results. Second message is that credit appears to have turned the corner. When we look back at this period, we will likely mark the third quarter of 2009 as the peak in provision expense and the fourth quarter of 2009 as the peak in charge-offs. Provision expense, charge-offs, early-staged delinquencies, low rates on both the impaired and unimpaired Pick-a-Pay portfolios, and inflows to non-accruals all continued to show improvement in the first quarter, in both the total consumer and total commercial portfolios. In part, this is related to the gradual improvement we have seen in housing and labor markets, but this largely reflects the actions we have taken, beginning almost three years ago to reduce risk and reduce loss in our loan portfolios. And our third message is we continue to build capital in the quarter. Our balance sheet, which has always been very strong, has never been as strong as it is right now. So, let me delve into these key messages a little bit more detail on slide 4. You can see that we earned again over $2.5 billion in net income after tax in the first quarter. That equates to $2.37 billion net income to common, roughly in line with the net income available to common we earned in the first quarter of 2009, which was a record at that time, and we earned that even with the decline in loans and increase in merger integration expenses from last year. Diluted earnings per share of course in the quarter was $0.45. We have always had among the best operating margins among large peers and we continue to do so in the first quarter, as you can see on slide 5. One of the key metrics we look at is return on assets. This is metric we have growth, operating margin, and risk discipline all meet. We have always had one of the highest return on assets among large peers and we once again had among the highest in the first quarter at 84 basis points. We would like to see our return on assets closer to the 1.5% we have earned historically. Our return on assets is typically higher than our peers for four reasons. First, our net interest margin tends to be higher, our NIM was 4.27% in the first quarter, up 11 basis points year-over-year, largely reflecting the fact that we continue to experience very strong growth in checking and savings deposits, which were up 12% year-over-year. Secondly, we tend to have lower credit loss rate on our loan portfolio, because of our strong underwriting discipline and the concentration of our loan portfolio in lower loss rate real estate secured loans. Third, we tend to have very positive operating leverage. Our efficiency ratio in the quarter was 56.5%, in line with the prior quarter’s post-Wachovia’s acquisition. And fourth, a high proportion of our total revenue comes from fee income, which is less asset-intensive, and this derives from the cross-sell model that we have always had in the company. Our business model also generates internally lots of new capital, which is why we have among the highest ROEs among large commercial bank peers, even as our total capital increases. Now, we have always been committed to maintaining a strong capital position for growth that’s consistent with our risk profile. As you can see on slide 6, our capital ratios are now higher than pre-Wachovia and pre-TARP levels, while at the same time, we are a more balanced, more diverse, less risky company with Wachovia in the mix. We are certainly more diversified geographically by customer segment and by source of income. Our capital ratios have been growing rapidly because our business model produces such a high rate of internal capital generation. In the first quarter, we added 60 basis points Tier 1 common, all internally generated. As I see it, we have never been better positioned in terms of our balance sheet strength. Our Tier 1 capital is now at $98 billion. Our allowance for credit reserves is now at $26 billion. The remaining non-accretable difference for purchase credit impaired loans is almost $20 billion, mortgage repurchase reserve is $1.3 billion, and we have $7.4 billion of unrealized gains in our available-for-sale securities portfolio. We are more liquid and have greater capacity to add assets that at any time in my tenure as the CFO of this company. We would love to see more loan demand or add more securities, but we are not willing to compromise our underwriting or pricing requirements or add long-term securities that what we believe to be low long-term yields. Now, despite a 7% decline in loans year-over-year, our total revenue is actually up 2%. There are four reasons for this increase as I see it. First, our NIM as I mentioned before was up 11 basis points. That’s a function of strong deposit growth, and the strong composition of checking and savings that we have in our overall deposit mix. Secondly, as John mentioned, we are already realizing revenue synergies from the Wachovia acquisition, cross-sell is going up at Wachovia. We have got a broader distribution of core banking products through Wachovia’s powerful financial advisor channel, and the application of Wachovia’s product set to the Wells Fargo customer base is also adding revenue. Third, the breadth of our business model clearly contributes to our overall revenue. Other revenue sources of course made up for the decline in lending income, including trust and investment fees, which were up 20%, insurance revenue up 7%, and processing and other fees up 14%. The fourth, underpinning all of the above, is the continued growth in cross-sell in our company. So, on cross-sell, the retail banking business achieved record sales of 7.81 million solutions, sales in other words in the first quarter, up 16% from a year ago, and also record cross-sell, which crossed six products per household on average. Now, keep in mind that this increase in the average products per household has been occurring on a growing base of households, in other words productivity is going up as well as deeper product penetration. One of the main opportunities from the Wachovia merger was to deepen customer relationships at Wachovia through cross-sell. When we acquired Wachovia, we estimated that the retail cross-sell was about 4.5 products on average compared with Wells Fargo’s 5.8. So, getting Wachovia just the way Wells Fargo was a year ago, represent about a 30% lift to revenue from Wachovia’s retail customer base, which is roughly the same size as the legacy Wells Fargo customer base. By trying Wells Fargo’s retail business model to be east footprint, we are well on our way to realizing that opportunity. Legacy Wachovia cross-sell increased from 4.55 products to 4.85 products, which helped drive the overall company’s revenue growth year-over-year. Slide 9 shows you our loans, coupled with key points on this. First, we continue to supply large amounts of credit to the US economy, over $128 billion in new originations and loan commitments just in the first quarter of 2010, but as John indicated, loan demand overall remains soft. Now, we did see some signs of growth in loans in some portfolios. Auto loans for example increased 14% linked-quarter annualized, student loans increased 13% linked-quarter annualized, and anecdotally, we are also experiencing more conversations at least with commercial customers about their potential credit needs, but fundamentally, we don’t expect material new loan demand until (inaudible) really takes hold. Fortunately and typically when that happens, Wells Fargo tends to get the first shot at the loan, because the customer already has all its other non-credit businesses realized. When we acquired Wachovia, we committed to aggressively reduce the higher risk non-strategic assets that we inherited from Wachovia, and as you can see on slide 10, we have continued to do that. Reducing the Pick-a-Pay portfolio, indirect home equity, and Wells Fargo’s indirect auto portfolios a combined $23 billion or about 20% since the merger. To put that in context, about a third of the decline we have experienced in our total loan portfolio since acquiring Wachovia is from our actions to reduce risk, not from reduced loans. On deposits, slide 11, we continue to get great deposit growth. We mentioned success in deposits in one fashion by looking at how our net gain, other words, net new checking accounts, net new checking accounts are up 7% year-over-year for the company. And in fact, in two important markets, one in the West Coast, California; one in the East Coast, New Jersey, those markets are experiencing net gain growth that’s well above the average across our footprint. Period-end checking and savings deposit balances were up 12% year-over-year, and very importantly, 88% of our core deposits are now in the form of checking and savings accounts. So, we continue to appear to be the bank of choice of our consumer and business customers to place their operating balances. We now have run-off almost all of Wachovia’s higher rate CDs, with only about $5 billion maturing in 2010 and throughout this process including the first quarter of 2010, we were very successful in retaining those deposits into lower rate checking, savings and CDs. Comment on expenses, slide 12, as you can see, our operating expenses were relatively flat year-over-year. When we think about expenses in the company, essentially we break down into three important missions from managing expenses. First, we are endeavoring to achieve the targeted consolidation expense savings. We calculate that we have already realized about 70% of the annualized savings on an annualized run rate basis. In the first quarter of 2010, we incurred $380 million of integration costs, that’s up from $205 million a year ago, and we expect to incur approximately $2 billion in integration costs during 2010, roughly in line with our original expectations. We are entering the more challenging part of the integration as John mentioned before. But so far, we have achieved all of the milestones, everything is on schedule and we still expect to realize the $5 billion in run rate saves, systems and store conversions are fully completed in late 2011. The second mission is on problem loans. We are diligently but quickly resolving problem loans in foreclosed assets. We have reviewed, resolving problems as quickly as we can and ultimately reducing the costs that are connected with the resolution process. Costs connected with credit resolution were up about $250 million from the first quarter of 2009, but trailed off by about $25 million from the fourth quarter of 2009. And third on expenses, we continue to invest for long-term revenue growth, particularly in building distribution for sales and technology for customer service. Couple of things on the individual business lines I would like to point out. As I mentioned before, each of our main business lines, community banking, wholesale banking, wealth and brokerage services were profitable in the quarter. Quickly on community banking, as you can see on slide 13, we had record sales, record cross-sell, very strong deposit growth. The mortgage servicing portfolio reached $1.8 trillion, up 2%. At the end of the quarter, the mortgage application pipeline was up about 4% from the prior quarter. And wholesale banking, slide 14, wholesale banking has been very consistent in producing solid revenue growth. In the first quarter in this year, revenue growth once again was up 9% from a year ago, despite the decline in commercial loan demand over the last year. And in the Asset Management Group, we have now reached $465 billion in assets under management. Wealth, Brokerage and Retirement services are on slide 15, we are getting very solid growth in this business. Revenue was up 16% from the first quarter of ’09. And we have now reached $1.1 trillion in retail brokerage client assets, that’s up 22% year-over-year. Let me now turn to credit. Slide 16 provides some detail on the impact of adopting FAS 167 on our credit portfolios. It’s important to understand this detail in order to understand the underlying trends in credit quality at the company. While FAS 167 had only a 1 basis point impact on Tier 1 common, it add $909 million to non-accruals in the quarter and $123 million to charge-offs in the quarter. In addition to the charge-offs from FAS 166, 167, charge-offs in the first quarter included $145 million related to newly issued regulatory charge-off guidance applicable to collateral-dependent residential real estate loan modifications that relates to high LTV, low FICO, interest-only consumer real estate that have already been reserved for. So, with that as perspective, slide 17. As John indicated before, we believe the credit at Wells Fargo has indeed turned the corner. Provision expense appears to have peaked in the third quarter of 2009 and the first quarter of 2010 provision expense of $5.3 billion was down almost $800 million from the peak and about $600 million from the fourth quarter of 2009. As indicated in the slide, the $5.3 billion provision expense in the quarter included the $145 million for collateral-dependent loans and the $123 million for FAS 167. So, provision expense for other charge-offs was $5.06 billion, down from $5.41 billion in the fourth quarter on an apples-to-apples basis. Two quarters ago, as you can see on slide 18, we were one of the first and few banks to project a peaking in credit costs and we now believe charge-offs already peaked in the fourth quarter earlier than we previously thought. Commercial and commercial real estate losses actually declined $356 million in the quarter, declining in all major commercial categories, C&I lending, commercial real estate, and lease financing. Losses in our $132 billion commercial real estate portfolio declined in the first quarter by $59 million, reducing the net charge-off rate to about 2%. This portfolio is secured by a well-diversified mix of property types across wholesale banking, community banking, and wealth brokerage and retirement services. The performance of the CRE portfolio has benefited from some price stability, increased liquidity, and the actions we have taken over the past year focused on restructuring disposition and workout strategies. Slide 18 also indicates where we have charge-offs in the consumer portfolios, FAS 167 and modified [ph] loans. Apart from those two items, all other consumer charge-offs were essentially flat in the quarter with all other revolving credit and installment charge-offs actually down largely due to improved auto finance markets. One of the reasons we are confident credit has turned is the stabilization and improvement we are experiencing in early-staged delinquencies across the major consumer portfolios as you can see on chart 19. Card and auto delinquencies stabilized in the middle of last year and showed noticeable improvement in the most recent quarter. Secured real estate is taking a little longer, but began to show improvement in delinquencies in the first quarter of 2010. Our $125 billion non-PCI home equity portfolio also demonstrated some positive credit trends in the first quarter. The delinquency rate on this portfolio, two or more payments past due, decreased in the first quarter to 3.4%, down from 3.58% in the fourth [ph]. Delinquencies declined in both the liquidating and the core portfolios and for loans in both California and Florida. Delinquency rates for loans in the core portfolio with a combined LTV above 100% or only 5.27%, as the vast majority of customers with negative equity continued to make their payments. On March 17th, we announced that we signed the agreement for the second lien modification program and we expect to begin offering the second lien program to customers who have both in Wells Fargo first and second lien customers within the next couple of weeks, and we will offer the program for other customers later in the second quarter. Our Pick-a-Pay portfolio which is highlighted on slide 20, roll rates on both the impaired and unimpaired Pick-a-Pay portfolio continued to trend better. The size of the Pick-a-Pay portfolio continued to decline in the quarter, with $82.9 billion outstanding at quarter end, down over $10 billion from a year ago. This portfolio continued to perform better than expected at the time of the merger, driven by 57,000 completed modifications, experiencing lower-than-industry re-default rates and stabilization in home prices in certain markets will get significant outstandings. This quarter, the current LTVs actually declined in both the impaired and non-impaired Pick-a-Pay portfolios. Early-staged delinquency trends improved to 30 days past due loans stabilizing are showing early indications of improvement in both the PCI and non-impaired portfolios. We also saw a continued improvement in first-time delinquencies, which are the percentage of new 30 plus day delinquent loans that are delinquent for the first time in the life of the loan. In the non-impaired portfolio, the percentage of first-time delinquency has dropped for four consecutive quarters, and in the PCI portfolio, the ratio of first-time delinquency was at levels not seen since early 2008. These improved trends led to our confidence in releasing $549 million of the remaining $14.5 billion non-accretable difference into accretable yield related to the improved life of loan loss estimates that we now see and this compares with only $27 million released in all of last year. This increase at accretable yield of course will be recognized through interest income over many years. Let me now turn to non-accrual loans on slide 21. Non-accrual loans as you can see were up in the quarter, $909 million of course as I said related to the FAS 167 announced, but we do not believe that the increase in non-accrual loans translates into increased future losses, since these non-accruals have either already been written down or their expected loss content is already been reserved for. Couple of important statistics on non-accrual loans. 37% of our total consumer non-accrual loans have already been written down and approximately two-thirds of consumer loans have either been written down or have current LTVs below 80%. On the commercial side, 29% of the commercial non-accrual loans have already been written down, 69% have been reserved for at life of loan projected loss content to the FAS routine [ph] allowance process and the remainder are accounted for with reduced future loss projections and reserves to the general allowance assessment. Over 45% of commercial and CRE non-accruals are currently paying interest as applied to principal. All of the increase in OREO in the quarter by definition represents assets that have been written down, and the bulk of the increase in OREO reflects GNMA guaranteed mortgage pools or PCI real estate that shifted into OREO from accruing PCI loans. The increase in non-accrual loans primarily came from consumer real estate and commercial real estate. Non-accruals in all of the other loan categories have stabilized or declined. Consumer real estate non-accruals remained elevated largely due to slower outflows, not increased quarterly inflows. Our reference to keep customers in their homes through loan modifications required customers to provide updated documentation and complete six-month trial repayment periods before the loan can be removed from non-accrual status. In addition for loans in the process for foreclosure, many states including California and Florida have an active legislation that significantly increase timeframes to complete the foreclosure process, which can be as long as 18 months, which means that loans remain in non-accrual status for longer periods, even though the loss is already been taken. Once the loan completes the foreclosure process, we have been able to sell the property in a very timely fashion. When consumer real estate loan is 120 days past due, we move it directly to non-accrual status and when the loan reaches 180 days past due, it’s our policy to mark it down to net realizable value. Thereafter we revalue each loan in non-accrual status regularly and recognize additional charges if needed. Since home prices stabilize in many metropolitan areas, we do not anticipate significant additional write-downs unlike consumer real estate loans that are already in non-accrual loan status. On the commercial side, CRE non-accrual loan inflows actually declined 27% in the first quarter, but it is typically in everyone’s economic interest including ours to write the loan down to continue to have the developer work the project for us rather than foreclose. The process of structuring and executing these solutions can take several quarters to complete, and throughout this process, these loans are closely monitored, collaterals are re-evaluated and if necessary loss content is recognized. It’s worth noting I believe that compared with our large peers, our total loan portfolio is comprised of proportionately less unsecured credit. For example, only 3% of our total loans are credit cards and proportionately more real estate secured loans, both consumer and commercial. Now, what this means is that some of our large peers have higher reserve coverage, which makes sense because unsecured loans, credit card in particular have higher loss rates, and therefore have higher charge-offs and fewer non-accruals, since unsecured loans are charged off more quickly. By comparison, a portfolio with proportionately more real estate secured loans like Wells Fargo would be expected to have lower loss rates, lower charge-offs, but lagging non-accrual improvements due to the extended period that real estate secured loans need in order to have complete resolution or collateral supporting of the non-accruals. Page 22 goes over our PCI loan portfolio, which is clearly performing better than our original expectations. Since the final true-up write-down of the PCI loan portfolio, we have now realized $476 million of value for PCI loans paid in full, we have realized $207 million on loans sold, and we have re-classified $1.1 billion to accretable yield for improving cash flow. Remember that, it will be taken to income over a long period of time, and we have also provided $1 billion for loans that have deteriorated since the Wachovia acquisition was completed. When you add all of those things together, that gives you a net increase of $774 million in the value of the PCI portfolio. Slide 23 goes over our allowance. At March 31st, our allowance is $25.7 billion, up almost $4 billion from the close of the Wachovia merger. That’s equal to five times a decline in quarterly charge-off and 3.3% of our total loans. In addition of course, we have a $19.9 billion in non-accretable difference for PCI loans. So, very quickly, in summary, we had $2.5 billion in earnings across a traditional and diverse business-serving consumers, more businesses and commercial customers. We believe credit has turned and our balance sheet has never been stronger and our financial capacity for growth never better. I would like to now open up the call for questions.

(Operator instructions) Your first question comes from the line of John Mcdonald with Sanford Bernstein. John Mcdonald – Sanford Bernstein: Hi good morning Howard.

Hi John. John Mcdonald – Sanford Bernstein: Hi John.

Hi John. John Mcdonald – Sanford Bernstein: On the repurchase reserve, Howard, do you have any visibility on how far along we might be in this process, aren’t we potentially turning the corner here, do we know?

You know, we think we are pretty far along. Most of the activity here relates to some of the older vintages which we think of now been clearing through. So, obviously, we take this one quarter at a time, but we did add pretty significant $400 million to the reserve in the quarter, and we think it’s a robust reserve at this point. John Mcdonald – Sanford Bernstein: Okay. And have you disclosed the amount of the reserve?

$1.3 billion at quarter end. John Mcdonald – Sanford Bernstein: Okay. And then on the net interest income fund, Howard, could you discuss a couple of the, kind of, what influenced the margin decline quarter-to-quarter, and just looking ahead, what is your ability to grow net interest income or at least stop it from going down if loan demand does not come back.

So, ironically, the 4 basis points is largely attributable to the strong deposit growth that we have had in the quarter. We are as I mentioned, very, very liquid. We continue to get this very strong deposit growth and soft loan demand, and we are keeping our powder dry on the investment portfolio. So, what all that means is the deposit growth, which is good for revenue and good for earnings is really winding up being invested in short-term cash. So, that’s really why the margin went down to 4 basis points. And we will take the deposit growth because that really is belief to all kinds of other good things in the company and we will just to have see where loan demand goes. John Mcdonald – Sanford Bernstein: And in terms of securities, you are still cautious waiting for high yields to invest?

Yes, this is a long-term proposition. We obviously evaluated quarter-to-quarter, but securities were down, you know, maturing, and we are keeping our powder dry. We obviously manage interest rate risk very carefully. We want to keep our rate risk as neutral as we can, but we still think that the right thing to do is invest for the long term. John Mcdonald – Sanford Bernstein: Sure. And related to that on the MSR hedge, will you relatively fully hedge this quarter? I know you are biased towards becoming less hedged as rates rise, can you kind of discuss of how you think about that?

We have been relatively fully hedged as you would expect as long as long-term rates have been coming down as they have for the last several years. We did shift the composition in the hedge somewhat in the quarter, which is not unusual, but we do want to take into account the possibility of extension risk in the hedges and if anything we may have tilted a little bit towards a slightly lower hedge, because we think again the odds of higher long-term rates are greater than the odds of lower long-term rates. So, naturally, in that kind of situation, we would be a little bit less hedged, but I don’t want to make too much of that. We didn’t significantly reduce the size of the hedge, we are just sort of tilting that way a little bit. John Mcdonald – Sanford Bernstein: It wasn’t clear to me in the documents, maybe disclose it, did you have a reduction in the carrying income on the hedge this quarter and did you disclose the amount on that?

We didn’t. The overall hedging result was down about $900 million in the quarter to bring it roughly in line with where hedging results were in the early part of last year, sort of more typical for this point in the cycle, largely due to a change in the composition of the hedge, and as I say, we tilted a little bit more from higher coupon mortgage forwards into lower note rates and the interest rate swops to get a little bit more balance in the hedge. John Mcdonald – Sanford Bernstein: Okay. My last question is on the PCI portfolio, the accretable yield balance went up to 15.8 billion, it looks like the drivers are both the modifications and then some change in your life of loan loss assumptions, is that right that both contributed?

That’s correct. The more important of that would be the modification. So, we have been very successful modifying this portfolio, and as a result –

The cash flows are assisting.

Cash flows are improving. John Mcdonald – Sanford Bernstein: And is there room, last quarter you mentioned that, if current trends continue, there is room to change the life of loan loss assumptions if those trends continue, is there room for that to change your hedge going forward?

Yes, again, we are being very cautious and very diligent about that. And we did as I mentioned take in some this quarter, and there’s more to come if this process continues and things improve, definitely some possibility there down the road. John Mcdonald – Sanford Bernstein: Okay. And the 9-year life of loan loss assumption, the 9-year duration assumption on the Pick-a-Pay, is that starting from here or over the life, meaning that is more like five to six years left to go?

That’s basically, it’s roughly from here, but again that’s an estimate. These portfolios have, you know, it’s duration, it’s not fixed maturities. So, that can change as the interest rates change up and down over the cycle. John Mcdonald – Sanford Bernstein: That’s roughly the period over which you recognize that accretable yield?

Correct. John Mcdonald – Sanford Bernstein: Okay. Thank you.

Again, you got to be – that’s an estimate. So, just be careful, it’s a rough number, right. John Mcdonald – Sanford Bernstein: Okay. And is it even over that life or does it fade as the balance of impaired loans goes down?

It’s rough John.

It’s rough John, it’s going to change, okay. I mean, the main point is it’s going to – we are not taking all of this into income either way, and it will just be spread over a period of time as these loan balances mature over that time period.

I think, John, the takeaway here is cash flows are improving. We are starting to move very cautiously, but moving non-accretable into accretable. More and more of these loans, we are moving out of the Pick-a-Pay category into fixed rates, if they don’t have the negative opportunity and we feel good about where we are in that portfolio.

Okay, thanks guys.

Thank you.

Your next question comes from the line of Matthew O'Connor with Deutsche Bank. Matthew O'Connor – Deutsche Bank: Hi John, Howard.

Good morning. Matthew O'Connor – Deutsche Bank: I guess first a big picture question. What’s your strategy on home equity? We are seeing some banks essentially exiting the business and anticipating a lot of runoff there. So, you have got about a $100 billion book I think in the core portfolio. Just one, what’s the strategy and then any guess on where those balances bottom out?

Well, we are in that business. We think it’s an important product to offer as part of the product suite to help customers succeed financially. We are doing that business. Obviously, differently in some cases we had in the past, but frankly, now is some of the better time we do that business. And I think as a general statement, consumers will probably borrow less in the future compared to the past as they save more, but we are not exiting that business. Matthew O'Connor – Deutsche Bank: Okay. So, it’s not going to go down like 50% or 75% like we might see in some other banks?

As we sell more and deepen relationships with the customers, we do business with one in three Americans one way or another. So, I can’t make that prediction, but we sure liked the performance of our advantages over the last few years. Matthew O'Connor – Deutsche Bank: Okay. And then separately, a little more of a detailed question, as we think about the net interest margin, one thing that’s dragging it down the industry and I think for you guys would be the high level of non-performing assets, and yours are up to I think about 30 billion, 31 billion or so. Do you guys have a rough estimate on what the drag is to the NIM from the NPAs on some of the interest reversals?

The NPAs themselves at this point given the fact that short-term interest rates are so low, it’s really not a big, not a big impact. As I said before, the bigger impact is the cash that we have on the balance sheet that’s been built up on the trend basis, but –

You could just do a math, our average loans equal about 5% give or take and you can do it –

We are talking about bps, we are not talking about –

Actually the bigger cost, and I have to be honest about it is all the people we have debt against, all the modifications and the workout and so forth, that is not an insignificant number. And as we get through this cycle, of course, we will be very thoughtful about taking those numbers down and getting that team right-sized. Matthew O'Connor – Deutsche Bank: I guess on that note, do you have an estimate of what the environmental costs are?

There are a lot.

As I said –

We have 17,400 people decked against just in them mortgage company. So, I mean, that’s one area of doing modifications and there’s lot of other folks around here doing commercial and other areas in loss mitigation, besides all the appraisal costs, legal costs and so forth.

I mean, just to give you some ideas, as I mentioned earlier, if you just add up all the foreclosed property expense and the people that we have got decked up against loan resolution, that cost alone is up about $250 million from a year ago, maybe running around $150 million to $170 million in the first quarter of this year, above the average from last year. So, that’s going to stay high for a short period of time, but really does represent a pretty important opportunity down the road to unwind those costs in the future. Matthew O'Connor – Deutsche Bank: Okay, thank you very much.

Thank you.

Your next question comes from the line of Chris Kotowski with Oppenheimer. Chris Kotowski – Oppenheimer: Yes, good morning. I wondered can you describe the second lien program a bit that you said. And you said it was first with Wells being about in the first and second position and do you forgive principal or just stretch it out and then how would you modify a mortgage where you are the second to somebody else’s first? Hello?

Yes, we do this a lot of different ways. We have been modifying seconds frankly for a long period of time. So, the program here is really not very different from the way we have been doing it all along. We do modify in terms, sometimes in terms of principal. So, we reuse all of that just to make this happen. Chris Kotowski – Oppenheimer: And is there any way you can sketch out what if any financial impact that has and would we see it in on the charge-off line, would we see it in the yield line, or is this something that we are going to notice at all in the financials in any meaningful way?

Yes, I think at the end of the day, we don’t think these programs are going to have a meaningful difference in net losses. It’s just we are using many of these tools already in the toolbox and so whether it be 2MP or whatever the case is, we are working with these customers and in most cases, where we do use a principal forgiveness, customer has to have at least enough income to pay the new payment and he has to look at a house or a housing situation where there is a highly unlikely valuable comeback in any reasonable period of time. But this is just one of a number of tools that we use as we work with these customers.

And I would say that the 2MP program itself again is very consistent with the way we have always been modifying seconds. And therefore you could conclude that the estimates of what that means financially, we have already in effect accounted this in our reserve position. Chris Kotowski – Oppenheimer: Okay. And then secondly on the Wachovia synergies, you have said that you have realized 70% and obviously, there has been many quarters now since the merger happened and there is organic growth in expenses and cutting, and so I had lost a bit of track of it in the numbers, but is there a reasonable way to think about this that, that if you originally said you would have $5 billion in savings, and you still expect to get 30% of that, that would be about $1.5 billion. And so, if we look at the rate of expense growth from 2010 to 2011, if we are going to say there was a $40 billion base, and you would have 5%, 6%, 7% growth off of that, and we subtract out $1.5 billion, is that the right way to think about it?

Yes, it’s a good approximation, yes. Chris Kotowski – Oppenheimer: Okay. Thank you.

And we have been reinvesting right in distribution, and people, and that’s – we always want to do that, so we can serve our customers completely and develop those relationships. Chris Kotowski – Oppenheimer: Okay. Thank you.

Your next question comes from the line of Betsy Graseck with Morgan Stanley. Betsy Graseck – Morgan Stanley: Thanks, good morning.

Good morning Betsy.

Good morning. Betsy Graseck – Morgan Stanley: Two questions. One, can you tell us how much cash interest on non-accruals you received this quarter?

I don’t think we have that out. We will get back to you on that, Betsy. Betsy Graseck – Morgan Stanley: Okay. And then secondly, the question I always get on the second liens is to other delinquencies so low when there is – obviously a relatively high portion is under water. Maybe to address that question, could you just give us a sense of what you see as the drivers for the delinquencies in your home equity book and the drivers for the charge-offs, because it’s clearly not LTV, right?

As I think I had mentioned in the past, I actually grew up as a collector, and the things that caused delinquency and frankly loss, the same things that were there 35 years ago when I started and the biggest issue there is unemployment. If people have a job, they want to intend to pay their bills. So, what causes loans to go into a delinquency situation typically is, you know, if you want the big four, it’s death, divorce, unscheduled medical payment, and a lack of a job. And lack of a job is the big one. So, we have many, many of our customers in the home equity area who are either high laundering value over 100% combined on the value who are paying as agreed never missed a payment. The factors in many cases, there’s little correlation between LTV and delinquency, but there is a big correlation between high LTV and loss, because when they don’t have any income and they are upside down, there is going to be a loss there. Betsy Graseck – Morgan Stanley: So, then you have got the handful of experience –

Betsy, so I look at jobs more than, than I look at LTVs with respect to the performance of the home equity portfolio. Betsy Graseck – Morgan Stanley: Okay. Now, that’s helpful. I mean, because the other question is on the seconds, was this really a secured product or is the documentation such that secured products does that matter for how you are reserving for it?

Well, again, it’s secured to the extent that there is collateral there, right. But it is also people are – there has been times in my life I have been upside down on a mortgage and if you give people a job, they want to stay in their home, they pay. Betsy Graseck – Morgan Stanley: And then on the HAMP programs where there has the new program that came out a few weeks ago that hasn’t yet started, but where on the first liens, you would be required to potentially do principal forgiveness, assuming you have done already. Is that going to change how you are thinking about recognizing loss content in the portfolios that you have got? I know, Howard you indicated that you already reserved for a large part of what you are seeing in the home equity portfolio, but I am wondering if the principal forgiveness in the HAMP ones is going to impact out at all?

I don’t, I think through the first quarter, we have forgiven 2.8 billion on programs outside of HAMP, and we think that was the right thing to do, and it’s just one of the tools we use and it doesn’t work for every customer. But no, that won’t have a significant impact on how we look at reserves or how we look at that portfolio. Betsy Graseck – Morgan Stanley: Okay.

And again, Betsy, just keep in mind that while HAMP is new and 2MP is new, we have been modifying these portfolios for the last five quarters. So, that’s not new. So, we are going to imply all of these methods for a longer period of time. Betsy Graseck – Morgan Stanley: Okay. Thank you.

Your next question comes from the line of Chris Mutascio with Stifel Nicolaus. Chris Mutascio – Stifel Nicolaus: Good morning. Thanks for taking my call.

Hi Chris. Chris Mutascio – Stifel Nicolaus: Howard, I don’t want to beat the horse on liquidity, but looking at your FED fund sold position and at $54 billion, as to more than some of the banks I cover, is there any, in terms of assets, is there any point of the curve I should be paying more attention to that would suggest when you start reinvesting some of that your massive excess liquidity?

Yes, deployment rates are higher. Chris Mutascio – Stifel Nicolaus: Is it a 5-year, is it a 7-year, is it 2-year, is it that FED is moving interest rates on a short end?

Look, I think the notion of buying really long-term assets before the FED is actually even started tightening is just something that we would need to think really carefully about. So, this is not new, Chris. We have always managed the portfolio this way as you know. We keep our investment portfolio. It self pretty liquidates, it’s typically mortgage-backed securities, and –

Plain vanilla.

Plain vanilla, it’s designed to frankly manage to keep the balance sheet risk, interest rate risk neutral against a growing base of long duration deposits that we have on the other side of the balance sheet. And it just makes sense to us to take our time here and do this right as we always have.

And frankly, Chris, we have been also sellers. As you recall, when we think things are at the right time, we have moved assets off the balance sheet, because we are afraid of things going up. So, I think we have shown discipline overtime, both in the buy and sell side. Chris Mutascio – Stifel Nicolaus: No, that’s fair. I think you show in the discipline. I am just looking out a huge amount of excess liquidity that you are kind of under earning on that until rates go up I guess. Howard, staying with –?

And in the meantime, Chris, as you know, we have also been paying down debt on the other side of the balance sheet. We have very, very flexible debt issuance position right now, but we have relative to large peers about half as much debt maturing in the next couple of years the other big companies. So, we actually think of the balance sheet as being a very flexible position and when – we are going to manage it as neutrally as we can. Chris Mutascio – Stifel Nicolaus: Kind of follow-up question, when I look at your tax rate this quarter, you kind of started or kind of bucked the trend in that, many of my banks are showing lower tax rates. If you guys had significantly increased, a steep increase in tax rate, if I calculate it correctly, your tax equivalent rate was 37%, is that a good run rate going forward or is there – I mean, I saw in the release it was impacted a little bit by a certain item, but still it seems like a pretty high tax rate going forward?

We calculate it at around 35%, Chris. Chris Mutascio – Stifel Nicolaus: Okay.

And it did include the 50-somewhat million dollar item that we indicated. You know, likely that it will be slightly down over the balance of the year. And again, that gets impacted in our case, but as you know, about the mix between taxable income and tax-exempt income in the overall net income before tax. So, that’s one of the reason it goes up and down, but I think you should expect it to be down a little bit over 2010. Chris Mutascio – Stifel Nicolaus: All right. And then just one final thing, can you refresh, given the stories in the news about CDOs, can you refresh my memory on what your exposure is from the Wachovia side to the CDO products and what you have written down to?

On the Wells side, we are never in that business, and Wachovia was mostly in commercial real estate, but exited that business toward the end of 2007, which was a year before the merger. Chris Mutascio – Stifel Nicolaus: Have you disclosed what the par is and what they have been written down to?

We haven’t, but I think generally you could assume that we have written it down to fair value at kind of the worst point in the cycle. Chris Mutascio – Stifel Nicolaus: Okay. Anything else you can add to that or no?

No. Chris Mutascio – Stifel Nicolaus: Thank you.

Your next question comes from the line of Nancy Bush with NAB Research. Nancy Bush – NAB Research: Good morning guys.

Hi Nancy. Nancy Bush – NAB Research: Two questions, Pick-a-Pay, can you tell us what the life on that portfolio is at this point? In other words, at what point do we start to sort of ignoring the Pick-a-Pay portfolio from a size perspective? I would like to ignore it now, but I can’t.

So, it’s roughly $89 billion portfolio that’s dropping –

$82 billion.

Sorry, $82 billion, that’s declining couple of billion dollars a quarter. So, we are down $10 billion year-over-year. So, do the math, as we said before, it’s around 9 years or so left of duration perspective.

And we are also moving the portfolio away from the Pick-a-Pay option to a fixed or a non (inaudible) kind of product. So, Nancy, about two-thirds of our PCI portfolio in Pick-a-Pay is in California and over 50% of the total portfolio is here, which has been good news for us, because that kind of house in the average loan, there is 220,000 or so is more of a starter home, and that housing has reached a bottom and probably bounced off the bottom here. So, of all the portfolios I worry a lot about, this is not one of them. Nancy Bush – NAB Research: My second question would just be this. I mean, as rates rise and inevitably they will hopefully, do you expect any changes in deposit behavior and speaking of deposits, do you expect that you are going to have to share more of the rise with consumers as they have become more knowledgeable that rates are coming off the floor, if you could just give us your thoughts about any inflection point in rates and how it impacts deposits?

Yes, what happens, Nancy, is that typically on the upside, when rates start to turn around, we actually at least it works historically, historically we actually see a benefit because some of the deposits we have are fixed rate and some of the assets re-priced earlier, and secondly, this company versus almost any other of our competitors, so many of our deposits are either interest-free or near-free that they don’t re-price and we are paying the price today, because you can’t bring them any lower than zero in their costs. And when rates turn around, they become more valuable of course. So, who knows what happens as time goes on, but we want to be competitive, we want to give our deposit rates a fair deal, and we are thoughtful on the way up, but I don’t view that as a big risk. Nancy Bush – NAB Research: Thank you.

: Joe Morford – RBC Capital Markets: Thanks, good morning everyone.

Good morning Joe. Joe Morford – RBC Capital Markets: You mentioned commercial real estate inflows were down 27% sequentially but commercial real estate non-accrual loans were up 20%, I just wondered if you could reconcile that, is it just the lag in migration or the fact that you let developers continue to work the projects, and where in the commercial real estate portfolio are you seeing the most improvements?

Yes, the developers are working the projects, Joe. That’s exactly the issue. We are not experts in this, and we will – the ultimate resolution that maximizes values where we want to be, so many cases, we will put something on accrual. We will still be quacking interest, like Howard said, almost half of our commercial real estate loans that are non-accrual are still paying the interests, but we want to be conservative and take that route and get those things worked out.

And that really is the point, Joe. So, the non-accruals, the inflows are going down a lot, which is good news for the future. And it’s just been everybody’s interest to have the developer continue to work the project and keep whatever cash flow is going rather than tossing into foreclosed and have us trying to deal over with it. So, that’s just economically better for everybody. Joe Morford – RBC Capital Markets: That makes sense. So, does that 27% decline include construction or is it just term CRE?

That’s both CRE.

It’s everything.

Inflows are down 27%. Joe Morford – RBC Capital Markets: Okay. And then secondly, would you please update us on your expectations for the impact of Reg E and the change in overdraft fees and talk about any efforts you are working on to mitigate that?

It hasn’t changed from what we previously announced, and we are going to be coming out shortly with the way that we are going to work with customers and provide them choice as part of the changes that will affect new customers, July 1st, and I think the existing customers in August 16th. Joe Morford – RBC Capital Markets: Okay. And can you remind us how much of your revenues currently come from overdraft fees?

I think we have mentioned that it’s a $500 million impact for this year. Joe Morford – RBC Capital Markets: Okay. All right. Fair enough, thanks so much.

Thank you.

Your final question comes from the line of Moshe Orenbuch with Credit Suisse. Moshe Orenbuch – Credit Suisse: Great. Thanks. I was intrigued by the comment in the press release about the rate of NPA increased kind of lagging charge-offs. I mean, I think that’s very different than kind of prior cycles, is that a function of the charges you have taken on NPAs, the marks on the credit impaired loans, some combination, I mean, because that’s not – I mean, normally it’s the other way around, normally charge-offs kind of keep going up well after NPA’s crest.

Again, a lot of that phenomenon in part is due to the nature of the portfolio being a secured portfolio. So, the sequencing is we charge it down, write it down, but it may hang in non-accrual for a period of time as either the commercial loan gets worked for or the consumer real estate gets modified or something else happens to the loans. So, it’s just the nature of the portfolio, Moshe. Moshe Orenbuch – Credit Suisse: And is it, but I guess, is it a different way of working it out, it’s with the existing either homeowner or developer, somewhat longer, is that the upshot?

Well, It think the modification process and the fact that so many of these loans are now out there is taking perhaps a little bit longer than we normally take in prior cycles, but fundamentally, it’s the nature of the portfolio again being very different than unsecured portfolio. We have just much higher losses, but you are getting rid of the (inaudible). Moshe Orenbuch – Credit Suisse: That’s great. Great, thanks so much.

Thank you. Is the operator there? Okay, thank you all very much for joining the call. We appreciate your interest in our company, and we thank you for your time. And we will talk to you next quarter at the same time. Thank you very much.

Ladies and gentlemen, that concludes today’s Wells Fargo first quarter earnings conference call. You may now disconnect.