1 Mark Wood: cdwood@smu.edu Wells Fargo Company Beau Longino: jlongino@smu.edu NYSE: WFC Le Qian: lqian@smu.edu Financial Sector

November 13, 2005

Recommendation: SELL Report Summary: • Based on Market predictions of growth

of approximately 11 % Wells Fargo is fairly priced at approximately $61.00 based on a beta of .55.

• The Valuation is based off a perpetual 6.5 percent average increase in interest expense for the future of the DCF.

• We believe that the market is overestimating growth within the commercial and mortgage sectors for the foreseeable future.

• Increase in the Federal Funds rate will margins of loans and mortgages

• Fed Funds Increase results in a decline of new mortgages.

• Within the banking sector, there will be fierce competition for new loans and mortgages.

• The alternative DCF has only 6.5 percent yearly growth.

• In addition, the a model for Interest Expense has been develop to help predict growth of interest expense in relation to the rise of the Federal Funds Rate for the alternate DCF.

• The alternate DCF model predicts a price in the range of $47-$50 range.

Key Financial Information Recent Price 60.43 52 Week High 64.04 52 Week Low 57.62 P/E Ratio TTM 13.74 EPS TTM 4.4

• Wells Fargo for the Past Two years

has traded within a narrow region of 55 – 65 after seeing a sharp increase during 2002 and 2003 probably as a result of the decrease in interest expense from a substantial drop in Federal Funds Rate.

2 Company Overview: Wells Fargo is the fifth largest bank in the United States, it operates approximately 3,000 bank branches in two dozen western and Midwestern states, in addition to approximately 1,000 home mortgage stores throughout the country. The company’s services include retail and business banking, investment management, and venture capital investment, as well as international trade activities through a joint venture with HSBC. A top residential mortgage lender in the US, Wells Fargo is one of the largest mortgage servicers. Revenue Stream: Wells Fargo revenue is structured on their ability to “cross sell” different products to the same customer. This bank has the goal of selling a customer at least three different products which may include a checking account, a credit card, and a mortgage or loan.

Break Down of Wells Revenue

Commuinity

Banking

33%

Investments &

Insurance

15%

Home Mortgage/

Home Equity

20%

Wholesale Banking

7%

Consumer Finance

7%

Commercial Real

Estate

4%

Specialized Lending

14%

Wells Fargo Income generation is nicely diversified across many different sections in the financial sector helping to cushion any particular downfall within a particular section of their business. In addition, during 2004 Wells Fargo opened 104 new locations, and remodeled 396 locations to continue to expand across the United States. Even though they are well diversified across many different sectors, the revenue growth of 11 percent cannot be maintained within the banking sector.

3

Current Market Expectations: The market or “street” analyses of Wells Fargo predict a sustained growth rate of approximately 11 percent as predicted by value line. If this growth rate is maintained in both interest income and in non interest income, and interest expense grows at a stable level then the stock of Wells Fargo is accurately priced at a price of approximately $61.62. The valuation encompasses market expectations with a beta of .55 approximated from Bloomberg, Value line, and Multex. Comparables:

Date of valuation 11/09/04 Risk Free Rate: 4.00% Equity Market Risk Premium: 7.00% Long term inflation: 2.50% Terminal Growth: 5.00% Equity beta : 0.55 No. of shares (diluted): 1,672,000,000 Current Market Price per share: $60.54 Market Valuation $61.62

Wells Fargo Bank of America Comp. Agg MV of Equity / Book Value 11.57 1.76 Price/Sales (TTM) 1.98 3.3 3.48 Price / EPS (TTM) 13.73 10.73 12.17 Forward PE 13.04 10.08 11.43

The Comparables indicate that Wells Fargo is slight overpriced with respect to the PE Ratio. In comparison to its largest competitor Bank of America it has a PE ratio (29%) three full points above it. In addition the Forward PE’s fall for all of the comparables, but the PE ratio for Wells Fargo continues to be relatively high. Analyst Expectations and Predications: We believe the market has an overestimation of the current market outlook in relation to potential growth of Wells Fargo and the general banking industry. The Primary Areas Where The Market is Overestimating:

1) Interest Expense 2) Interest Income Growth

3) Banking Interest Woes

4 Interest Expense: The interest expense for Wells Fargo will grow faster than anticipated by the market. During the late part of 2002 and early part of 2003 the Federal Funds rate finally bottomed out at one percent being an unprecedented level. The interest expense that banks encountered also bottomed out during this time. Wells Fargo experienced drops of 14, 41, and 14 percent during 2001-2003. This is when the stock price climbed from a range of

Federal Funds Rate

0.75

1

1.25

1.5

1.75

2

2.25

2.5

2.75

3

3.25

3.5

3.75

4

4.25

11/02

1/03

3/03

5/03

7/03

9/03

11/03

1/04

3/04

5/04

7/04

9/04

11/04

1/05

3/05

5/05

7/05

9/05

Years

Ra

te

40-45 to a range of 55-65. From the indicated graph the Fed Rate has risen steadily over the past two to four years. During the Fiscal Year 2004 the Fed Rate rose by 125 basis points which resulted in an increase of in the interest expense by 11.90 %. The 2004 year was the base for developing a model to predict interest expense for the upcoming years. For every basis point increase will result in a .0952 increase in Interest expense. During the 2005 Fiscal year the Fed Rate has increased by 175 basis points, which according to our model should increase by 16.66 percent. In the 2006 fiscal year we are predicting an increase of nearly 200 basis points based upon the Fed maintaining the “slow and steady increases” of the Fed rate for the foreseeable future that will increase Interest expense by 19.04 %. For 2007 – 2014 we believe the interest rate will maintain between four to six percent to allow for a steady and stable increase in interest expense. Mortgages: In our opinion, mortgage growth for the foreseeable future will slow down. The years of 2002-2004 experienced a very large amount of new mortgages and refinancing as a result of the low interest rates. The low interest rates allowed a great many people to lock in these low rates. Any person that expected to refinance or buy a house in the foreseeable future probably did so, and took out a mortgage potentially bringing demand from the future into the present situation.

5 In addition as the Fed Funds rate continues to raise, the demand for mortgages will fall, which will depress Interest Income and decrease margins with Interest Expense also increasing. Banking Industry Worries: In our opinion, the Banking Industry will see higher competition among commercial banks that will lead to lower margins. The three primary types of banking institutions include the large national players such as Bank of America, Regional Players such as Wells Fargo, and the smaller local banks such as Legacy Bank of Plano. All three types of banks are in competition for the same consumer with respect to personal loans and mortgages. In addition, all three are continual growing to expand their income. This will lead to higher competition and result in lower profits. Wild Card: Real Estate Bubble? If a Real Estate Bubble exists, when it bursts it will hurt lenders by the possibility of delinquent accounts and the uncertainty created. The question no one seems to be able to answer effectively is whether there is a Real Estate Bubble, and if there is a Bubble, when will it burst. The price of Real Estate continues to appreciate in value at between 15 – 20 percent on either the East or West Coast, while disposable income grows at only 3 percent. The money to make up the difference is coming in the form of debt. From 1999-2004 household debt has increased by an amount of “45 percent and stand at nearly 9.4 Trillion dollars.”1 1 http://www.oregonherald.com/n/trueblood/us_real_estate.html

6 Revised DCF Model: The Revised DCF model takes into account the increase in Interest Expense, and the foreseeable decrease in banking growth. The growth rate for Wells Fargo was slashed from a market prediction of 11 percent and cut to approximately 7 percent. The interest expense was modeled based off of the increases in the Federal Funds rate and then given a consistent increase half that of the growth of Interest Income. The non Interest Expense which includes SGA was given a rate of approximately six percent based off historical records. Please See Exhibit 2 for more details and income projections. The Beta for both models was chosen as an approximation of several sources including Bloomberg, Value Line, and Multex.

The Revised DCF based on the Analysts predictions result in a stock price of only $48.82. The past several years with the Federal Funds rate at record lows has allowed commercial banks to minimize their interest expense while increasing their interest income through a surge in mortgages. But now the Federal Rate is rising and will result in an increase in interest expense on accounts, while the increase in the rate will decrease interest income.

Date of valuation 11/09/05 Risk Free Rate: 4.00% Equity Market Risk Premium: 7.00% Long term inflation: 2.50% Terminal Growth: 5.00% Equity beta : 0.55 No. of shares (diluted): 1,672,000,000 Current Market Price per share: $60.54 Valuation Price $48.82

7 DCF Inputs Market Predictions 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Term inal

(Dollars in Thousands)

Net Incom e 8,498.15$ 10,110.53$ 11,982.03$ 14,148.60$ 16,650.71$ 19,533.94$ 22,849.58$ 26,655.44$ 31,016.65$ 36,006.69$ 41,708.43$

Plus Depr. & Am ort. 5579.28 5858.244 6151.1562 6458.71401 6781.649711 7120.732196 7476.768806 7850.607246 8243.137608 8655.294489 9088.059213

Equals Value Line "Cash Flow" 14,077.43$ 15,968.77$ 18,133.18$ 20,607.31$ 23,432.36$ 26,654.67$ 30,326.35$ 34,506.04$ 39,259.79$ 44,661.98$ 50,796.49$

- Change in NWC Increases/(Decreases) 24,828.39$ (174.75)$ (6,425.25)$ (7,180.44)$ (8,026.53)$ (8,974.86)$ (10,038.30)$ (11,231.40)$ (12,570.69)$ (14,074.91)$ (15,765.38)$

= Cash Flow contributed by operations 38,905.82$ 15,794.02$ 11,707.94$ 13,426.87$ 15,405.83$ 17,679.81$ 20,288.05$ 23,274.64$ 26,689.10$ 30,587.07$ 35,031.10$

- Capital Expenditures: all categories 12,400.98$ (6,645.91)$ (4,427.63)$ (4,948.04)$ (5,531.07)$ (6,184.57)$ (6,917.38)$ (7,739.55)$ (8,662.45)$ (9,699.01)$ (10,863.91)$

Equals OCF to Equity (Before Debt Adjs.) 51,306.80$ 9,148.11$ 7,280.31$ 8,478.83$ 9,874.76$ 11,495.24$ 13,370.67$ 15,535.09$ 18,026.65$ 20,888.06$ 24,167.19$

Tax Rate for leverage adjustm ents 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00%

+ Increase (decrease) in debt (11,698.86)$ 9,713.07$ 10,852.04$ 12,127.54$ 13,556.55$ 15,158.26$ 16,954.37$ 18,969.48$ 21,231.50$ 23,772.08$ 26,627.23$

Equals "EFCF" or "FCFE" 39,607.94$ 18,861.18$ 18,132.34$ 20,606.37$ 23,431.31$ 26,653.50$ 30,325.03$ 34,504.58$ 39,258.15$ 44,660.14$ 50,794.42$

+ Interest Expense 1421.7554 1212.371768 1352.822818 1509.74327 1685.107525 1881.1353 2100.323717 2345.483871 2619.782568 2926.790008 3270.534329

Equals "FCF" 52,728.55$ 10,360.48$ 8,633.13$ 9,988.57$ 11,559.87$ 13,376.37$ 15,470.99$ 17,880.58$ 20,646.43$ 23,814.85$ 27,437.73$

- Interest Tax Shields (497.61)$ (424.33)$ (473.49)$ (528.41)$ (589.79)$ (658.40)$ (735.11)$ (820.92)$ (916.92)$ (1,024.38)$ (1,144.69)$

Equals "UFCF" 52,230.94$ 9,936.15$ 8,159.64$ 9,460.16$ 10,970.08$ 12,717.98$ 14,735.88$ 17,059.66$ 19,729.51$ 22,790.47$ 26,293.04$

Risk Free Rate 4.00%

Market Prem ium 7.00%

Key Assumptions for the models: Beta Debt

Date of valuation 12/31/04 Beta Equity 0.55

Beta - Adjusted Market Prem ium 3.85%

Risk Free Rate: 4.00%

Equity Market Risk Prem ium : 7.00% Various Costs of Capital

Long term inflation: 2.50% R(u) - required return for firm if unlevered

R(e) - required return for equity as levered 7.85%

Term inal Growth: 5.00% WACC

AT-WACC

Equity beta : 0.55

No. of shares (diluted): 1,672,000,000

Current Market Price per share: $60.54

Market Valuation $61.62

8

9 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 T erm inal

Date: 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Interest Incom e $15,934.00 $18,725.00 $19,201.00 $18,459.00 $19,418.00 $20,967.00 $23,273.37 $25,830.88 $28,666.60 $31,810.47 $35,295.65 $39,158.80 $43,440.48 $48,185.59 $53,443.75 $59,269.86 $65,724.64

Interest Expense - Banks/F inance $5,818.00 $7,860.00 $6,741.00 $3,977.00 $3,411.00 $3,817.00 4,065.11$ 4,329.34$ 4,610.74$ 4,910.44$ 5,229.62$ 5,569.55$ 5,931.57$ 6,317.12$ 6,727.73$ 7,165.03$ 7,630.76$

Net Interest Incom e $11,569.00 $12,055.00 $11,520.00 $11,942.00 $11,471.00 $11,753.00 $19,208.27 21,501.54$ 24,055.85$ 26,900.03$ 30,066.03$ 33,589.25$ 37,508.92$ 41,868.47$ 46,716.02$ 52,104.83$ 58,093.88$

Provision for Loan Losses $1,104.00 $1,329.00 $1,780.00 $1,684.00 $1,722.00 $1,717.00 $1,755.74 $1,795.76 $1,837.10 $1,879.81 $1,923.95 $1,969.58 $2,016.76 $2,065.55 $2,116.02 $2,168.24 $2,222.29

Net Int Inc Aft Prov $9,012.00 $9,536.00 $10,680.00 $12,798.00 $14,285.00 $15,433.00 17,452.52$ 19,705.78$ 22,218.76$ 25,020.22$ 28,142.08$ 31,619.67$ 35,492.16$ 39,802.92$ 44,600.00$ 49,936.59$ 55,871.60$

Non Interest Incom e $7,975.00 $8,843.00 $7,741.00 $10,757.00 $12,353.00 $12,909.00 $14,328.99 $15,920.94 $17,707.45 $19,714.29 $21,970.91 $24,510.99 $27,373.07 $30,601.31 $34,246.36 $38,366.38 $43,028.22

Non-interest exp $10,653.00 $11,888.00 $12,782.00 $14,711.00 $17,190.00 $17,399.00 $18,707.44 $20,072.07 $21,492.32 $22,967.43 $24,496.51 $26,078.45 $27,712.04 $29,395.87 $31,128.43 $32,908.07 $34,733.01

Sales (Interest Incom e + Non) $19,544.00 $20,898.00 $19,261.00 $22,699.00 $23,824.00 $24,662.00 $33,537.26 $37,422.48 $41,763.30 $46,614.32 $52,036.94 $58,100.24 $64,881.99 $72,469.78 $80,962.38 $90,471.21 $101,122.11

Interest Expense from LT Debt $1,453.00 $1,939.00 $1,404.00 $1,826.00 $1,355.00 $1,637.00 $1,212.37 $1,352.82 $1,509.74 $1,685.11 $1,881.14 $2,100.32 $2,345.48 $2,619.78 $2,926.79 $3,270.53 $3,246.00

Percentages 24.97% 24.67% 20.83% 45.91% 39.72% 42.89% 29.82% 31.25% 32.74% 34.32% 35.97% 37.71% 39.54% 41.47% 43.50% 45.65% 42.54%

Operating Incom e (Losses) $6,334.00 $6,491.00 $5,639.00 $8,844.00 $9,448.00 $10,943.00 13,074.07$ 15,554.66$ 18,433.89$ 21,767.07$ 25,616.48$ 30,052.21$ 35,153.20$ 41,008.36$ 47,717.93$ 55,394.90$ 64,166.81$

Net Non-Oper Losses(Gains) -$16.00 -$58.00 $160.00 -$10.00 -$29.00 $174.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Pretax Incom e $6,350.00 $6,549.00 $5,479.00 $8,854.00 $9,477.00 $10,769.00 13,074.07$ 15,554.66$ 18,433.89$ 21,767.07$ 25,616.48$ 30,052.21$ 35,153.20$ 41,008.36$ 47,717.93$ 55,394.90$ 64,166.81$

Incom e Tax Expenses (Credits) $2,338.00 $2,523.00 $2,056.00 $3,144.00 $3,275.00 $3,755.00 4,575.93$ 5,444.13$ 6,451.86$ 7,618.48$ 8,965.77$ 10,518.27$ 12,303.62$ 14,352.93$ 16,701.28$ 19,388.22$ 22,458.38$

Incom e Tax Rate 36.82% 38.52% 37.53% 35.51% 34.56% 34.87% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00%

Inc(Loss) bef Extraord Item s $4,012.00 $4,026.00 $3,423.00 $5,710.00 $6,202.00 $7,014.00 8,498.15$ 10,110.53$ 11,982.03$ 14,148.60$ 16,650.71$ 19,533.94$ 22,849.58$ 26,655.44$ 31,016.65$ 36,006.69$ 41,708.43$

XO (G)L Net Of Tax $0.00 $0.00 $0.00 $276.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Net Incom e/Net Profit (Losses) $4,012.00 $4,026.00 $3,423.00 $5,434.00 $6,202.00 $7,014.00 8,498.15$ 10,110.53$ 11,982.03$ 14,148.60$ 16,650.71$ 19,533.94$ 22,849.58$ 26,655.44$ 31,016.65$ 36,006.69$ 41,708.43$

Total Cash Preferred Dividends $35.00 $17.00 $14.00 $4.00 $3.00 $0.00 0 0 0 0 0 0 0 0 0 0

Total Cash Com m on Dividends $1,401.00 $1,569.00 $1,710.00 $1,873.00 $2,527.00 $3,150.00 3,399.26$ 4,044.21$ 4,792.81$ 5,659.44$ 6,660.29$ 7,813.57$ 9,139.83$ 10,662.17$ 12,406.66$ 14,402.67$ 16,683.37$

Reinvested Earnings $2,576.00 $2,440.00 $1,699.00 $3,557.00 $3,672.00 $3,864.00 5,098.89$ 6,066.32$ 7,189.22$ 8,489.16$ 9,990.43$ 11,720.36$ 13,709.75$ 15,993.26$ 18,609.99$ 21,604.01$ 25,025.06$

Sales/Revenue/Turnover $23,909.00 $27,568.00 $26,942.00 $29,216.00 $31,771.00 $33,876.00

Growth Assum ptions: T rend Historic Growth

Interest Incom e 0.999 7.34% 17.52% 2.54% -3.86% 5.20% 7.98% 11.00% 10.99% 10.98% 10.97% 10.96% 10.95% 10.93% 10.92% 10.91% 10.90% 10.89%

Interest Expense 1 -5.62% 35.10% -14.24% -41.00% -14.23% 11.90% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50% 6.50%

Provision for Loan Losses 1.01 12.16% 20.38% 33.94% -5.39% 2.26% -0.29% 2.26% 2.28% 2.30% 2.32% 2.35% 2.37% 2.40% 2.42% 2.44% 2.47% 2.49%

Non Interest Incom e 1.01 14.18% 10.88% -12.46% 38.96% 14.84% 4.50% 11.00% 11.11% 11.22% 11.33% 11.45% 11.56% 11.68% 11.79% 11.91% 12.03% 12.15%

Non-Interest Expense 0.97 13.07% 11.59% 7.52% 15.09% 16.85% 1.22% 7.52% 7.29% 7.08% 6.86% 6.66% 6.46% 6.26% 6.08% 5.89% 5.72% 5.55%

Profit M argin for Net Interest 76.05% 64.38% 60.00% 64.69% 59.07% 56.05% 82.53% 83.24% 83.92% 84.56% 85.18% 85.78% 86.35% 86.89% 87.41% 87.91% 88.39%

Profit M argin for Net Interest After Provision 64.61% 50.93% 55.62% 69.33% 73.57% 73.61% 74.99% 76.29% 77.51% 78.65% 79.73% 80.75% 81.70% 82.60% 83.45% 84.25% 85.01%

10

11 DCF Inputs Analyst Predictions 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Term inal

(Dollars in Thousands)

Net Incom e 7,834.58$ 8,574.71$ 9,921.99$ 11,464.61$ 13,228.18$ 15,241.52$ 17,537.12$ 20,151.65$ 23,126.54$ 26,508.68$ 30,351.21$

Plus Depr. & Am ort. 5579.28 5858.244 6151.1562 6458.71401 6781.649711 7120.732196 7476.768806 7850.607246 8243.137608 8655.294489 9088.059213

Equals Value Line "Cash Flow" 13,413.86$ 14,432.95$ 16,073.14$ 17,923.32$ 20,009.83$ 22,362.25$ 25,013.89$ 28,002.26$ 31,369.68$ 35,163.97$ 39,439.27$

- Change in NWC Increases/(Decreases) 26,630.23$ 605.05$ (4,989.62)$ (5,495.29)$ (6,057.66)$ (6,683.92)$ (7,382.26)$ (8,162.07)$ (9,034.09)$ (10,010.65)$ (11,105.91)$

= Cash Flow contributed by operations 40,044.08$ 15,038.00$ 11,083.53$ 12,428.04$ 13,952.17$ 15,678.34$ 17,631.63$ 19,840.19$ 22,335.59$ 25,153.32$ 28,333.36$

- Capital Expenditures: all categories 13,486.57$ (5,033.26)$ (3,438.34)$ (3,786.80)$ (4,174.33)$ (4,605.88)$ (5,087.11)$ (5,624.48)$ (6,225.38)$ (6,898.33)$ (7,653.07)$

Equals OCF to Equity (Before Debt Adjs.) 53,530.65$ 10,004.75$ 7,645.19$ 8,641.24$ 9,777.84$ 11,072.46$ 12,544.53$ 14,215.72$ 16,110.20$ 18,254.99$ 20,680.29$

Tax Rate for leverage adjustm ents 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00%

+ Increase (decrease) in debt (14,586.06)$ 5,986.93$ 8,427.31$ 9,281.36$ 10,231.19$ 11,288.92$ 12,468.40$ 13,785.48$ 15,258.30$ 16,907.67$ 18,757.53$

Equals "EFCF" or "FCFE" 38,944.59$ 15,991.67$ 16,072.49$ 17,922.60$ 20,009.04$ 22,361.38$ 25,012.93$ 28,001.19$ 31,368.50$ 35,162.66$ 39,437.82$

+ Interest Expense 1421.7554 1170.622887 1257.193825 1379.052677 1513.261211 1661.204266 1824.442076 2004.735177 2204.07319 2424.708145 2669.193096

Equals "FCF" 54,952.41$ 11,175.37$ 8,902.38$ 10,020.29$ 11,291.10$ 12,733.66$ 14,368.97$ 16,220.45$ 18,314.27$ 20,679.70$ 23,349.48$

- Interest Tax Shields (497.61)$ (409.72)$ (440.02)$ (482.67)$ (529.64)$ (581.42)$ (638.55)$ (701.66)$ (771.43)$ (848.65)$ (934.22)$

Equals "UFCF" 54,454.79$ 10,765.65$ 8,462.36$ 9,537.62$ 10,761.46$ 12,152.24$ 13,730.41$ 15,518.79$ 17,542.85$ 19,831.05$ 22,415.27$

Key Assumptions for the models:

Date of valuation 11/09/05

Actual

Risk Free Rate: 4.00% Risk Free Rate 4.00%

Market Prem ium 7.00%

Equity Market Risk Prem ium : 7.00% Beta Debt

Beta Equity 0.55

Long term inflation: 2.50% Beta - Adjusted Market Prem ium 3.85%

Term inal Growth: 5.00% Various Costs of Capital

Equity beta : 0.55 R(u) - required return for firm if unlevered

R(e) - required return for equity as levered 7.85%

No. of shares (diluted): 1,672,000,000 WACC

AT-WACC

Current Market Price per share: $60.54

Valuation Price $48.82

12

13 Wells Fargo -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7

Date: 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Interest Income $15,934.00 $18,725.00 $19,201.00 $18,459.00 $19,418.00 $20,967.00 $22,506.30 $24,156.95 $25,926.90 $27,824.62 $29,859.21 $32,040.40 $34,378.58

Interest Expense - Banks/Finance $5,818.00 $7,860.00 $6,741.00 $3,977.00 $3,411.00 $3,817.00 4,452.91$ 5,300.75$ 5,486.27$ 5,678.29$ 5,877.03$ 6,082.73$ 6,295.62$ Net Interest Income $11,569.00 $12,055.00 $11,520.00 $11,942.00 $11,471.00 $11,753.00 $18,053.39 18,856.21$ 20,440.62$ 22,146.33$ 23,982.18$ 25,957.67$ 28,082.95$

Provision for Loan Losses $1,104.00 $1,329.00 $1,780.00 $1,684.00 $1,722.00 $1,717.00 $1,755.74 $1,795.76 $1,837.10 $1,879.81 $1,923.95 $1,969.58 $2,016.76

Net Int Inc Aft Prov $9,012.00 $9,536.00 $10,680.00 $12,798.00 $14,285.00 $15,433.00 16,297.64$ 17,060.45$ 18,603.53$ 20,266.52$ 22,058.23$ 23,988.09$ 26,066.20$

Non Interest Income $7,975.00 $8,843.00 $7,741.00 $10,757.00 $12,353.00 $12,909.00 $14,328.99 $15,920.94 $17,707.45 $19,714.29 $21,970.91 $24,510.99 $27,373.07

Non-interest exp $10,653.00 $11,888.00 $12,782.00 $14,711.00 $17,190.00 $17,399.00 $18,573.43 $19,789.53 $21,046.38 $22,342.95 $23,678.10 $25,050.59 $26,459.08

Sales (Interest Income + Non) $19,544.00 $20,898.00 $19,261.00 $22,699.00 $23,824.00 $24,662.00 $32,382.38 $34,777.15 $38,148.07 $41,860.61 $45,953.09 $50,468.66 $55,456.02

Interest Expense from LT Debt $1,453.00 $1,939.00 $1,404.00 $1,826.00 $1,355.00 $1,637.00 $1,170.62 $1,257.19 $1,379.05 $1,513.26 $1,661.20 $1,824.44 $2,004.74Percentages 24.97% 24.67% 20.83% 45.91% 39.72% 42.89% 26.29% 23.72% 25.14% 26.65% 28.27% 29.99% 31.84%

Operating Income (Losses) $6,334.00 $6,491.00 $5,639.00 $8,844.00 $9,448.00 $10,943.00 12,053.20$ 13,191.86$ 15,264.60$ 17,637.86$ 20,351.04$ 23,448.49$ 26,980.19$

Net Non-Oper Losses(Gains) -$16.00 -$58.00 $160.00 -$10.00 -$29.00 $174.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Pretax Income $6,350.00 $6,549.00 $5,479.00 $8,854.00 $9,477.00 $10,769.00 12,053.20$ 13,191.86$ 15,264.60$ 17,637.86$ 20,351.04$ 23,448.49$ 26,980.19$ Income Tax Expenses (Credits) $2,338.00 $2,523.00 $2,056.00 $3,144.00 $3,275.00 $3,755.00 4,218.62$ 4,617.15$ 5,342.61$ 6,173.25$ 7,122.87$ 8,206.97$ 9,443.07$

Income Tax Rate 36.82% 38.52% 37.53% 35.51% 34.56% 34.87% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00%

Inc(Loss) bef Extraord Items $4,012.00 $4,026.00 $3,423.00 $5,710.00 $6,202.00 $7,014.00 7,834.58$ 8,574.71$ 9,921.99$ 11,464.61$ 13,228.18$ 15,241.52$ 17,537.12$

XO (G)L Net Of Tax $0.00 $0.00 $0.00 $276.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Net Income/Net Profit (Losses) $4,012.00 $4,026.00 $3,423.00 $5,434.00 $6,202.00 $7,014.00 7,834.58$ 8,574.71$ 9,921.99$ 11,464.61$ 13,228.18$ 15,241.52$ 17,537.12$

Total Cash Preferred Dividends $35.00 $17.00 $14.00 $4.00 $3.00 $0.00 0 0 0 0 0 0 0Total Cash Common Dividends $1,401.00 $1,569.00 $1,710.00 $1,873.00 $2,527.00 $3,150.00 3,133.83$ 3,429.88$ 3,968.80$ 4,585.84$ 5,291.27$ 6,096.61$ 7,014.85$

Reinvested Earnings $2,576.00 $2,440.00 $1,699.00 $3,557.00 $3,672.00 $3,864.00 4,700.75$ 5,144.82$ 5,953.19$ 6,878.77$ 7,936.91$ 9,144.91$ 10,522.27$

Sales/Revenue/Turnover $23,909.00 $27,568.00 $26,942.00 $29,216.00 $31,771.00 $33,876.00

Growth Assumptions: Trend Historic Growth

Interest Income 0.999 7.34% 17.52% 2.54% -3.86% 5.20% 7.98% 7.34% 7.33% 7.33% 7.32% 7.31% 7.30% 7.30%

Interest Expense 1 -5.62% 35.10% -14.24% -41.00% -14.23% 11.90% 16.66% 19.04% 3.50% 3.50% 3.50% 3.50% 3.50%Provision for Loan Losses 1.01 12.16% 20.38% 33.94% -5.39% 2.26% -0.29% 2.26% 2.28% 2.30% 2.32% 2.35% 2.37% 2.40%

Non Interest Income 1.01 14.18% 10.88% -12.46% 38.96% 14.84% 4.50% 11.00% 11.11% 11.22% 11.33% 11.45% 11.56% 11.68%

Non-Interest Expense 0.97 13.07% 11.59% 7.52% 15.09% 16.85% 1.22% 6.75% 6.55% 6.35% 6.16% 5.98% 5.80% 5.62%

Profit Margin for Net Interest 76.05% 64.38% 60.00% 64.69% 59.07% 56.05% 80.21% 78.06% 78.84% 79.59% 80.32% 81.02% 81.69%

Profit Margin for Net Interest After Provision 64.61% 50.93% 55.62% 69.33% 73.57% 73.61% 72.41% 70.62% 71.75% 72.84% 73.87% 74.87% 75.82%

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