Wells Fargo Financial 10-Q/A 2001 Q2 Quarterly report (amended)

Form 10-Q/A

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For Quarter Ended June 30, 2001 Commission file number 2-80466

Wells Fargo Financial, Inc.

(Exact name of registrant as specified in its charter)

Iowa	42 1186565
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
206 Eighth Street, Des Moines, Iowa	50309
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code	(515) 243-2131

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  ý              No  o.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.  Common Stock (without par value):  1,000 shares outstanding as of August 10,  2001.

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

PART I.  FINANCIAL INFORMATION

WELLS FARGO FINANCIAL, INC.

Consolidated Balance Sheets (Unaudited)

(Thousands of Dollars)

		June 30,		December 31,
Assets		2001		2000
Cash and cash equivalents		$	246,982	$	205,036
Securities available-for-sale		1,289,492		1,215,135
Finance receivables		12,578,460		11,417,862
Less allowance for credit losses		509,850		462,555
	Finance receivables – net	12,068,610		10,955,307
Notes receivable – affiliates		474,958		505,386
Property and equipment (at cost, less
accumulated depreciation of $145,947
for 2001 and $148,042 for 2000)		69,342		63,651
Deferred income taxes		114,159		111,262
Other assets		583,285		520,971
	Total assets	$	14,846,828	$	13,576,748

See accompanying notes to consolidated financial statements.

WELLS FARGO FINANCIAL, INC.

Consolidated Balance Sheets (Unaudited)

(Thousands of Dollars)

				June 30,		December 31,
				2001		2000
Liabilities and Stockholder’s Equity
Loans payable - short-term:
	Commercial paper			$	3,376,262	$	2,973,508
	Affiliates					99,379
	Other			138,833		709,988
Unearned insurance premiums and commissions				139,856		139,476
Insurance claims and policy reserves				34,913		34,978
Accrued interest payable				129,164		121,007
Other payables to affiliates				40,385		48,761
Other liabilities				408,791		370,363
Long-term debt:
	Senior			8,021,735		6,968,803
	Affiliate			500,000		255,870
			Total liabilities	12,789,939		11,722,133
Stockholder’s equity:
	Common stock without par value (authorized 1,000 shares, issued and outstanding 1,000 shares)			3,855		3,855
	Additional paid in capital			442,302		312,302
	Retained earnings			1,605,724		1,540,902
		Accumulated other comprehensive income (loss), net of income taxes		5,008		(2,444		)
			Total stockholder’s equity	2,056,889		1,854,615
			Total liabilities and stockholder’s equity	$	14,846,828	$	13,576,748

See accompanying notes to consolidated financial statements.

WELLS FARGO FINANCIAL, INC.

Consolidated Statements of Income (Unaudited)

(Thousands of Dollars)

				Quarter Ended June 30,				Six Months Ended June 30,
				2001		2000		2001		2000
Income:
	Finance charges and interest			$	548,612	$	452,664	$	1,091,445	$	901,656
	Insurance premiums and commissions			29,984		26,537		60,324		52,185
	Other income			66,901		47,850		131,154		98,323
		Total income		645,497		527,051		1,282,923		1,052,164
Expenses:
	Operating expenses			231,828		200,133		457,067		405,298
	Interest and debt expense			178,925		152,254		368,689		295,799
	Provision for credit losses			120,606		72,584		229,041		149,943
	Insurance losses and loss expenses			9,884		11,384		21,148		24,695
		Total expenses		541,243		436,355		1,075,945		875,735
			Income before income taxes	104,254		90,696		206,978		176,429
Income taxes				39,475		33,566		77,397		65,162
		Net income		$	64,779	$	57,130	$	129,581	$	111,267

See accompanying notes to consolidated financial statements.

WELLS FARGO FINANCIAL, INC.

Consolidated Statements of Comprehensive Income (Unaudited)

(Thousands of Dollars)

					Quarter Ended June 30,						Six Months Ended June 30,
					2001			2000			2001			2000
Net income					$	64,779		$	57,130		$	129,581		$	111,267
Other comprehensive income (loss), before income taxes:
	Unrealized gains (losses) on securities available-for-sale:
			Unrealized gains (losses) arising during the period		(3,148		)	(1,863		)	13,058			(9,374		)
			Reclassification adjustment for net (gains) losses included in net income		840			1,075			(1,270		)	(1,298		)
					(2,308		)	(788		)	11,788			(10,672		)
	Foreign currency translation adjustment				2,101			(924		)	(331		)	(1,107		)
		Other comprehensive income (loss) before income taxes			(207		)	(1,712		)	11,457			(11,779		)
Income tax (benefit) expense related to unrealized gains (losses) on securities available-for-sale					(879		)	(302		)	4,005			(3,669		)
Other comprehensive income (loss), net of income taxes					672			(1,410		)	7,452			(8,110		)
				Comprehensive income	$	65,451		$	55,720		$	137,033		$	103,157

See accompanying notes to consolidated financial statements.

WELLS FARGO FINANCIAL, INC.

Consolidated Statements of Cash Flows (Unaudited)

(Thousands of Dollars)

			Six Months Ended June 30,
			2001			2000
Cash flows from operating activities:
	Net income		$	129,581		$	111,267
	Adjustments to reconcile net income to net cash flows from operating activities, net of effect of contributed subsidiaries:
		Provision for credit losses	229,041			149,943
		Depreciation and amortization	26,660			24,980
		Deferred income taxes	3,892			(8,956		)
		Other assets	43,645			(8,488		)
		Unearned insurance premiums and commissions	380			2,295
		Insurance claims and policy reserves	(65		)	1,180
		Accrued interest payable	8,157			2,723
		Other payables to affiliates	(8,376		)	90,136
		Other liabilities	(47,210		)	(21,927		)
Net cash provided by operating activities			385,705			343,153
Cash flows from investing activities:
	Finance receivables:
		Principal collected	4,697,127			3,670,810
		Receivables originated or purchased	(5,254,036		)	(4,526,337		)
	Proceeds from sales of securities		189,726			58,076
	Proceeds from maturities of securities		71,884			62,952
	Purchases of securities		(326,154		)	(98,906		)
	Net additions to property and equipment		(12,970		)	(6,258		)
	Net decrease in notes receivable – affiliates, net of effect of contributed subsidiaries		30,428			33,673
	Cash and cash equivalents of contributed subsidiaries received and subsidiary transferred		(1,567		)	(6		)
	Net cash used for acquisition		(324,573		)
	Other		(28,963		)	53,001
Net cash used by investing activities			(959,098		)	(752,995		)
Cash flows from financing activities:
	Net decrease in loans payable – short term		(267,780		)	(248,356		)
	Proceeds from issuance of long term debt:
		Senior	1,081,364			685,886
		Affiliate	244,130			500,000
	Repayment of senior long-term debt		(512,375		)	(497,999		)
	Capital contribution by parent		130,000
	Dividends paid		(60,000		)	(45,000		)
Net cash provided by financing activities			615,339			394,531
Net increase (decrease) in cash and cash equivalents			41,946			(15,311		)
Cash and cash equivalents beginning of period			205,036			178,970
Cash and cash equivalents end of period			$	246,982		$	163,659

See accompanying notes to consolidated financial statements.

WELLS FARGO FINANCIAL, INC.

Consolidated Statements of Stockholder’s Equity (Unaudited)

(Thousands of Dollars)

									Accumulated Other Comprehensive Income (Loss)
		Common Stock		Additional Paid In Capital		Retained Earnings			Foreign Currency Translation			Unrealized Gains (Losses) on Securities Available- for-Sale			Total
Balance, December 31, 1999		$	3,855	$	196,697	$	1,407,743		$	(9,575	)	$	(11,156	)	$	1,587,564
Comprehensive income (loss):
	Net income					111,267									111,267
	Other								(1,107		)	(7,003		)	(8,110		)
Contributed subsidiaries				12,427		(11,168		)							1,259
Transfer of subsidiary						(60,171		)				3,095			(57,076		)
Dividends						(45,000		)							(45,000		)
Balance, June 30, 2000		$	3,855	$	209,124	$	1,402,671		$	(10,682	)	$	(15,064	)	$	1,589,904
Balance, December 31, 2000		$	3,855	$	312,302	$	1,540,902		$	(11,220	)	$	8,776		$	1,854,615
Comprehensive income (loss):
	Net income					129,581									129,581
	Other								(331		)	7,783			7,452
Capital contribution from parent				130,000											130,000
Dividends						(60,000		)							(60,000		)
Transfer of subsidiary						(4,759		)							(4,759		)
Balance, June 30, 2001		$	3,855	$	442,302	$	1,605,724		$	(11,551	)	$	16,559		$	2,056,889

See accompanying notes to consolidated financial statements.

WELLS FARGO FINANCIAL, INC.

Notes to Consolidated Financial Statements (Unaudited)

The accompanying unaudited consolidated financial statements and notes have been prepared in accordance with the accounting policies set forth in Wells Fargo Financial, Inc.’s 2000 Annual Report on Form 10-K, except as described in note 8, and should be read in conjunction with the Notes to Consolidated Financial Statements therein.  In the opinion of management, all adjustments (none of which were other than normal recurring accruals) necessary to present fairly the financial statements for the periods presented have been included.

The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year.

1.          Principles of Consolidation.

The consolidated financial statements include the accounts of Wells Fargo Financial, Inc. (the “Company”) and subsidiaries (collectively, “Wells Fargo Financial”).  Intercompany accounts and transactions are eliminated.  The Company is a wholly-owned subsidiary of Wells Fargo Financial Services, Inc. (the “Parent”) which is a wholly-owned subsidiary of Wells Fargo & Company (“Wells Fargo”).

2.          Dividend Restrictions.

Certain long-term debt instruments restrict payment of dividends on and acquisitions of the Company’s common stock.  In addition, such debt instruments and the Company’s bank credit agreements contain certain requirements as to maintenance of net worth (as defined).  Approximately $1,059 million of consolidated stockholder’s equity was unrestricted at June 30, 2001.

3.          Other Income.

Income from affiliates was $8.5 million and $9.9 million for the quarters ended June 30, 2001 and 2000, respectively, and $19.9 million and $18.6 million for the six months ended June 30, 2001 and 2000, respectively.

Interest and dividends from securities available-for-sale and cash equivalents were $20.1 million and $18.7 million for the quarters ended June 30, 2001 and 2000, and $39.1 million and $38.6 million for the six months ended June 30, 2001 and 2000 respectively.

4.          Finance Receivables.

Finance receivables are as follows:

			June 30,		December 31,
(In Thousands)			2001		2000
United States consumer finance:
	Loans secured by real estate		$	2,751,978	$	2,507,419
	Consumer loans		1,382,069		1,460,746
		Total loans	4,134,047		3,968,165
	Sales finance contracts		1,215,962		1,295,147
	Credit cards		1,128,583		1,148,486
		Total United States consumer finance	6,478,592		6,411,798
Canadian consumer finance:
	Loans secured by real estate		89,302		85,000
	Consumer loans		461,786		452,581
		Total loans	551,088		537,581
	Sales finance contracts		486,698		497,379
	Credit cards		23,434		21,298
		Total Canadian consumer finance	1,061,220		1,056,258
Automobile finance			3,207,497		3,078,026
Leasing			1,271,292		442,665
Other			559,859		429,115
		Total finance receivables	$	12,578,460	$	11,417,862

5.          Allowance for Credit Losses.

The analysis of the allowance for credit losses is as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
(In Thousands)	2001			2000			2001			2000
Allowance for credit losses beginning of period	$	503,074		$	381,978		$	462,555		$	367,712
Provision for credit losses charged to expense	120,606			72,584			229,041			149,943
Write-offs	(132,909		)	(79,103		)	(260,428		)	(167,628		)
Recoveries	19,079			15,083			39,107			30,672
Allowance related to businesses contributed or acquired							39,575			9,843
Allowance for credit losses end of period	$	509,850		$	390,542		$	509,850		$	390,542

6.          Statements of Consolidated Cash Flows.

The Company and its subsidiaries consider highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.  Supplemental disclosure of certain cash flow information is presented below:

		Quarter Ended June 30,				Six Months Ended June 30,
(In Thousands)		2001		2000		2001		2000
Cash paid for:
	Interest	$	162,494	$	146,627	$	347,422	$	306,604
	Income taxes	26,204		18,457		66,627		22,767

7.          Segment Information.

The Company has four reportable segments: U.S. consumer finance, Canadian consumer finance, automobile finance, and leasing.  The Company’s operating segments are determined by product type and geography.  U.S. consumer finance operations make loans to individuals and purchase sales finance contracts through 785 consumer finance branches in 47 states, Guam, Saipan, and Puerto Rico.  The U.S. consumer finance segment also issues credit cards through two banking subsidiaries.  Canadian consumer finance operations make loans to individuals and purchase sales finance contracts through 162 consumer finance branches in the 10 provinces.  Automobile finance operations specialize in purchasing sales finance contracts directly from automobile dealers and making loans secured by automobiles through 187 branches in 34 states and Puerto Rico.  Leasing operations specialize in financing commercial equipment such as office copiers, telephone systems, health care equipment, small computers, and light industrial equipment.  Lease finance receivables are generated primarily from equipment distributors ranging from small independently-owned vendors to large equipment manufacturers.  Results from insurance operations are included in the appropriate segment.

Selected financial information for each segment is shown below:

(In Thousands)

	U.S. Consumer Finance				Canadian Consumer Finance				Automobile Finance				Leasing				Other*					Total
Quarter Ended June 30,:	2001		2000		2001		2000		2001		2000		2001		2000		2001		2000			2001		2000
Finance charges and interest	$	304,548	$	260,124	$	60,815	$	61,726	$	130,065	$	102,479	$	37,411	$	12,761	$	15,773	$	15,574		$	548,612	$	452,664
Total income	369,737		315,365		67,940		68,703		138,133		106,517		45,037		13,967		24,650		22,499			645,497		527,051
Net income	32,360		35,635		9,408		4,862		15,311		13,794		6,440		2,475		1,260		364			64,779		57,130
Six Months Ended June 30,:
Finance charges and interest	$	608,630	$	517,934	$	121,741	$	123,099	$	259,985	$	204,201	$	69,432	$	25,589	$	31,657	$	30,833		$	1,091,445	$	901,656
Total income	740,326		630,659		135,367		136,593		275,467		212,801		82,247		27,973		49,516		44,138			1,282,923		1,052,164
Net income (loss)	64,159		73,948		19,716		11,658		26,755		23,649		14,623		5,172		4,328		(3,160		)	129,581		111,267
Total assets	8,226,148		7,487,581		1,236,999		1,126,482		3,471,367		2,448,133		1,373,595		376,964		538,719		499,773			14,846,828		11,938,933

* Information from other segments below the quantitative threshold are attributable to miscellaneous insurance companies, collection services, operations in Argentina and commercial finance operations including rediscounting.  Subsidiaries engaged in multiple peril crop insurance were transferred to another subsidiary of Wells Fargo effective June 1, 2000.

8.          Recent Accounting Standards.

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133 (FAS 133), Accounting for Derivative Instruments and Hedging Activities.  In July 1999, the FASB issued FAS 137, Deferral of the Effective Date of FASB Statement No. 133, which deferred the effective date for implementation of FAS 133 to no later than January 1, 2001 for the Company’s financial statements.  In June 2000, the FASB issued FAS 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment to FAS 133.  The Company implemented the statements on January 1, 2001 and there was no material impact on the Company’s financial statements as a result of the implementation.

In September 2000, the FASB issued Statement No. 140 (FAS 140), Accounting for the Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, which replaces FAS 125 (of the same title).  FAS 140 revises certain standards in the accounting for securitizations and other transfers of financial assets and collateral, and requires certain disclosures relating to securitization transactions and collateral, but it carries over most of FAS 125’s provisions.  The collateral and disclosure provisions of FAS 140 were effective for year-end 2000 financial statements.  The other provisions of this Statement were effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001; the Company implemented the revised provisions when effective and there was no material impact on the financial statements.

In July 2001, FASB issued Statement No. 141 (FAS 141), Business Combinations, and Statement No. 142 (FAS 142), Goodwill and Other Intangible Assets.

FAS 141, effective June 30, 2001, requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method of accounting; the use of the pooling-of-interests method of accounting is eliminated.  FAS 141 also establishes how the purchase method is to be applied for business combinations completed after June 30, 2001.  This guidance is similar to previous GAAP, however, FAS 141 establishes additional disclosure requirements for transactions occurring after the effective date.

FAS 142, effective on July 1, 2001, eliminates amortization of goodwill associated with business combinations completed after June 30, 2001.  During a transition period goodwill associated with business combinations completed prior to July 1, 2001, will continue to be amortized through the income statement.  All goodwill amortization expense will cease effective January 1, 2002.  However, goodwill will be assessed (at least annually) for impairment at the reporting unit level by applying a fair-value-based test.  FAS 142 also provides additional guidance on acquired intangibles that should be separately recognized and amortized, which could result in the recognition of additional intangible assets, as compared with previous GAAP.

Under FAS 142, the Company’s goodwill amortization expense (included in noninterest expense) will be approximately $9 million quarterly for the remainder of 2001.  The elimination of goodwill amortization effective January 1, 2002 is expected to reduce noninterest expense by approximately $38 million (pretax) and increase net income by approximately $26 million (after tax), for the year ended December 31, 2002, compared with 2001.

The initial goodwill impairment assessment is expected to be completed in early 2002; the Company cannot determine if a transition impairment charge will be recognized in 2002.

9.          Business Combinations.

Effective January 31, 2001, the Company acquired substantially all of the assets and assumed certain liabilities of Conseco Finance Vendor Services Corporation, a leasing company based in Paramus, New Jersey.  The acquisition was accounted for as a purchase.  The assets and liabilities acquired were recorded at fair value, and the Company’s financial statements contain only the results of operations since the acquisition date.  Conseco Finance Vendor Services Corporation had lease receivables outstanding of $825 million and had another $135 million of lease receivables under management at the time of acquisition.

WELLS FARGO FINANCIAL, INC.

Management’s Discussion and Analysis
of Financial Condition and Results of Operations

Statements made in Management’s Discussion and Analysis may be forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements address management’s present expectations about future performance and involve inherent risks and uncertainties.  A number of important factors (some of which are beyond the Company’s control) could cause actual results to differ materially from those in the forward-looking statements.  Those factors include the economic environment, competition, products and pricing in the geographic and business areas in which the Company conducts its operations, prevailing interest rates, changes in government regulations and policies affecting financial services companies, credit quality and credit risk management, acquisitions, and integration of acquired businesses.

Wells Fargo Financial’s performance for the second quarter of 2001 closely paralleled performance for the first six months of 2001.  The discussion and analysis that follows, therefore, is limited to a discussion of the first six months as a whole and does not include a separate discussion of the second quarter unless otherwise noted.

Wells Fargo Financial’s net income for the first six months of 2001 was $129.6 million compared with $111.3 million for the first six months of 2000.  Net income in the first quarter of 2000 included a $7.1 million loss incurred by subsidiaries engaged in multiple peril crop insurance business.  On June 1, 2000 these subsidiaries were transferred to another affiliate of Wells Fargo & Company.  Excluding these operations, net income increased to $129.6 million for the first six months of 2001 compared with $118.4 million in the first six months of 2000.

Well’s Fargo Financial’s total income (revenue) increased 22% for the first six months ($1,282.9 million in the first six months of 2001 compared with $1,052.2 million in the first six months of 2000).

Income from finance charges and interest increased 21% for the first six months ($1,091.4 million in the first six months of 2001 compared with $901.7 million in the first six months of 2000).  Changes in income from finance charges and interest result predominantly from (1) changes in the amount of finance receivables outstanding and (2) changes in the rate of charge on those receivables. In total, average finance receivables outstanding in the first six months of 2001 increased 30% from the first six months of 2000; average U.S. consumer finance receivables outstanding increased 19%, average Canadian consumer finance receivables outstanding increased 1%, average automobile finance receivables outstanding increased 43%, average leasing finance receivables outstanding increased 192%, and average other finance receivables outstanding increased 23%.

Rate of charge on finance receivables:			2001		2000
	U.S. consumer finance		18.87	%	19.05	%
	Canadian consumer finance		23.84		24.38
	Automobile finance		16.62		18.60
	Leasing		12.20		13.18
	Other		14.38		17.54
		Total	17.92		19.22

The increases in income from finance charges and interest were due predominantly to growth in average receivables outstanding.  Growth in average receivables for U.S. consumer finance was due to the purchase of $400 million in credit card receivables on June 30, 2000 and due to regular business activity.  Growth in average receivables for automobile finance was due primarily to the purchase of Flagship Credit Corporation on December 20, 2000.  The average receivable growth in leasing receivables was due primarily to the purchase of Conseco Finance Vendor Service Corporation on January 31, 2001.  The majority of the increase in other average receivables was due to significant receivable growth of the rediscounting operations.  Changes in the earned rates of charge were due to changes in prevailing market rates combined with a change in the portfolio mix.  The decline in the earned rate of charge for automobile finance was predominantly due to the change in portfolio mix as a result of the Flagship purchase. The decline in the earned rate of charge for other finance receivables occurred due to the change in portfolio mix occurring due to the growth of rediscounting operations.

Other income increased 33% ($131.2 million in the first six months of 2001 compared with $98.3 million in the first six months of 2000).  The increase in other income was due predominantly to additional fee income originating from the companies acquired in the past year.

Operating expenses increased 13% ($457.1 million in the first six months of 2001 compared with $405.3 million in the first six months of 2000).  The increase was due primarily to increases in employee compensation and benefits and other costs relating to business expansion and acquisitions.

Interest and debt expense increased 25% ($368.7 million in the first six months of 2001 compared with $295.8 million in the first six months of 2000).  Changes in interest and debt expense result predominantly from (1) changes in the amount of borrowings outstanding and (2) changes in the cost of those borrowings.  Average total outstanding borrowings in the first six months of 2001 increased 28% from the first six months of 2000.

		Six Months Ended June 30,
Costs of funds:		2001		2000
	Short-term	5.60	%	6.27	%
	Long-term	6.54		6.56
	Total	6.26		6.47

Changes in average debt outstanding generally correspond to changes in average finance receivables outstanding combined with the change in notes receivable - affiliates.  Average finance receivables and notes receivable - - affiliates increased 29% from the first six months of 2000.

Provision for credit losses increased 53% ($229.0 million in the first six months of 2001 compared with $149.9 million in the first six months of 2000).  Net write-offs increased 62% in the first six months of 2001.  The increase was due primarily to higher write-offs in the Company’s U.S. consumer finance and leasing portfolios (see following table).  This increase was partially offset by improvements in the automobile finance business and the Company’s private label credit card business in Canada.

			Six Months Ended June 30,
Net write-offs, not annualized, as a percentage of average net receivables outstanding:			2001		2000
	U.S. consumer finance		2.17	%	1.25	%
	Canadian consumer finance		2.04		2.74
	Automobile finance		1.35		1.56
	Leasing		1.11		.46
	Other		1.30		1.49
		Total	1.82		1.46

Through June 30, 2001, the provision for credit losses exceeded net write-offs by $7.7 million.  At June 30, 2001, the Company had an allowance for credit losses of $509.9 million (4.05% of receivables) compared with $462.6 million (4.05% of receivables) at December 31, 2000.  There were no material changes in estimation methods and assumptions during 2001 and 2000.  Non-accrual finance receivables were $74.6 million at June 30, 2001 compared with $58.0 million at December 31, 2000.  In addition, finance receivables outstanding which were more than three payments contractually delinquent and which were still accruing interest were $172.4 million at June 30, 2001 compared with $159.9 million at December 31, 2000.  Management believes the allowance for credit losses at June 30, 2001, is adequate to absorb probable losses on existing receivables in the finance receivables portfolio.

Income taxes increased 19% ($77.4 million in the first six months of 2001 compared with $65.2 million in the first six months of 2000).  Income before income taxes increased 17% ($207.0 million in the first six months of 2001 compared with $176.4 million in the first six months of 2000.)  The effective tax rate was 37.4% for the first six months of 2001 and 36.9% for the first six months of 2000.

The Company maintains bank lines of credit and revolving credit agreements to provide an alternative source of liquidity to support the Company’s commercial paper borrowings.  At June 30, 2001, lines of credit and revolving credit agreements totaling $2,364 million were being maintained at 19 domestic and international banks; the entire amount was available on that date.  Additionally, the Company’s bank subsidiaries, Wells Fargo Financial Bank and Wells Fargo Financial National Bank, have access to federal funds borrowings.  At June 30, 2001, federal funds availability at the two banks was $869 million.

The Company and a Canadian subsidiary obtain long-term debt capital primarily from the issuance of debt securities to the public through underwriters on a firm-commitment basis and the issuance of debt securities to institutional investors.  The Company and a Canadian subsidiary also obtain long-term debt from the issuance of medium-term notes (which have maturities ranging from nine months to 30 years) through underwriters (acting as agent or principal).

The Company anticipates the continued availability of borrowed funds, at prevailing interest rates, to provide for Wells Fargo Financial’s growth in the foreseeable future.  Funds are also generated internally from payments of principal and interest on Wells Fargo Financial’s finance receivables.

PART II.  OTHER INFORMATION

WELLS FARGO FINANCIAL, INC.

Item 5.  Other Information.

RATIOS OF EARNINGS TO FIXED CHARGES

The following table sets forth the ratios of earnings to fixed charges of Wells Fargo Financial, Inc. and its subsidiaries for the periods indicated:

	Years Ended December 31,
Six Months Ended June 30, 2001	2000	1999	1998	1997	1996
1.55	1.58	1.78	1.72	2.00	2.11

The ratios of earnings to fixed charges have been computed by dividing net earnings plus fixed charges and income taxes by fixed charges.  Fixed charges consist of interest and debt expense plus one-third of rentals (which is deemed representative of the interest factor).

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

(a)         Exhibits:

Exhibit (12) Computation of ratios of earnings to fixed charges for the years ended December 31, 2000, 1999, 1998, 1997 and 1996 and the six months ended June 30, 2001.

(b)        Reports on 8-K

No reports on Form 8-K were filed during the quarter for which this report is filed.

S I G N A T U R E S

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.

	WELLS FARGO FINANCIAL, INC.
Date:  August 10, 2001
	By	/s/ Eric Torkelson
		Eric Torkelson
		Senior Vice President and Controller
		(Principal Accounting Officer)