Wells Fargo Financial 10-Q 2001 Q3 Quarterly report

Form 10-Q

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 September 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 November 8,  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)

Assets	September 30, 2001		December 31, 2000
Cash and cash equivalents	$	226,092	$	205,036
Securities available-for-sale	1,381,411		1,215,135
Finance receivables	13,055,743		11,417,862
Less allowance for credit losses	519,760		462,555
Finance receivables - net	12,535,983		10,955,307
Notes receivable - affiliates	565,949		505,386
Property and equipment (at cost, less accumulated depreciation of $145,199 for 2001 and $148,042 for 2000)	77,947		63,651
Deferred income taxes	114,566		111,262
Other assets	572,587		520,971
Total assets	$	15,474,535	$	13,576,748

See accompanying notes to consolidated financial statements.

WELLS FARGO FINANCIAL, INC.

Consolidated Balance Sheets (Unaudited)

(Thousands of Dollars)

Liabilities and Stockholder’s Equity	September 30, 2001		December 31, 2000
Loans payable - short-term:
Commercial paper	$	3,575,367	$	2,973,508
Affiliates	295,688		99,379
Other	111,693		709,988
Unearned insurance premiums and commissions	135,767		139,476
Insurance claims and policy reserves	34,906		34,978
Accrued interest payable	131,196		121,007
Other payables to affiliates	80,236		48,761
Other liabilities	460,107		370,363
Long-term debt:
Senior	8,038,200		6,968,803
Affiliate	500,000		255,870
Total liabilities	13,363,160		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	1,648,292		1,540,902
Accumulated other comprehensive income (loss), net of income taxes	16,926		(2,444		)
Total stockholder’s equity	2,111,375		1,854,615
Total liabilities and stockholder’s equity	$	15,474,535	$	13,576,748

See accompanying notes to consolidated financial statements.

WELLS FARGO FINANCIAL, INC.

Consolidated Statements of Income (Unaudited)

(Thousands of Dollars)

	Quarter Ended September 30,				Nine Months Ended September 30,
	2001		2000		2001		2000
Income:
Finance charges and interest	$	560,401	$	493,046	$	1,651,846	$	1,394,702
Insurance premiums and commissions	31,003		31,596		91,327		83,781
Other income	74,831		58,303		205,985		156,626
Total income	666,235		582,945		1,949,158		1,635,109
Expenses:
Operating expenses	242,684		200,719		699,751		606,017
Interest and debt expense	171,072		170,268		539,761		466,067
Provision for credit losses	133,638		102,154		362,679		252,097
Insurance losses and loss expenses	11,369		11,572		32,517		36,267
Total expenses	558,763		484,713		1,634,708		1,360,448
Income before income taxes	107,472		98,232		314,450		274,661
Income taxes	39,904		35,997		117,301		101,159
Net income	$	67,568	$	62,235	$	197,149	$	173,502

See accompanying notes to consolidated financial statements.

WELLS FARGO FINANCIAL, INC.

Consolidated Statements of Comprehensive Income (Unaudited)

(Thousands of Dollars)

	Quarter Ended September 30,						Nine Months Ended September 30,
	2001			2000			2001			2000
Net income	$	67,568		$	62,235		$	197,149		$	173,502
Other comprehensive income before income taxes: Unrealized gains on securities available-for-sale:
Unrealized gains arising during the period	23,832			14,992			36,890			5,618
Reclassification adjustment for net (gains) losses included in net income	(1,867		)	2,246			(3,137		)	948
	21,965			17,238			33,753			6,566
Foreign currency translation adjustment	(2,509		)	(836		)	(2,840		)	(1,943		)
Other comprehensive income before income taxes	19,456			16,402			30,913			4,623
Income tax expense related to unrealized gains on securities available-for-sale	7,538			5,896			11,543			2,227
Other comprehensive income, net of income taxes	11,918			10,506			19,370			2,396
Comprehensive income	$	79,486		$	72,741		$	216,519		$	175,898

See accompanying notes to consolidated financial statements.

WELLS FARGO FINANCIAL, INC.

Consolidated Statements of Cash Flows (Unaudited)

(Thousands of Dollars)

	Nine Months Ended September 30,
	2001			2000
Cash flows from operating activities:
Net income	$	197,149		$	173,502
Adjustments to reconcile net income to net cash flows from operating activities, net of effect of contributed subsidiaries:
Provision for credit losses	362,679			252,097
Depreciation and amortization	40,175			37,007
Deferred income taxes	13,523			(23,195		)
Other assets	41,371			(16,774		)
Unearned insurance premiums and commissions	(3,709		)	1,531
Insurance claims and policy reserves	(72		)	574
Accrued interest payable	10,189			19,621
Other payables to affiliates	31,475			121,139
Other liabilities	4,106			(38,852		)
Net cash provided by operating activities	696,886			526,650
Cash flows from investing activities:
Finance receivables:
Principal collected	7,087,213			5,600,887
Receivables originated or purchased	(8,245,133		)	(6,861,423		)
Proceeds from sales of securities	267,253			127,150
Proceeds from maturities of securities	98,938			90,227
Purchases of securities	(499,033		)	(238,211		)
Net additions to property and equipment	(25,353		)	(9,947		)
Net (increase) decrease in notes receivable – affiliates, net of effect of contributed subsidiaries	(60,563		)	64,579
Cash and cash equivalents of contributed subsidiaries received and subsidiary transferred	(1,567		)	(5		)
Net cash used for acquisitions	(324,573		)	(26,987		)
Other	(73,449		)	48,824
Net cash used by investing activities	(1,776,267		)	(1,204,906		)
Cash flows from financing activities:
Net increase (decrease) in loans payable – short term	199,873			(117,042		)
Proceeds from issuance of long term debt:
Senior	1,683,668			1,435,886
Affiliate	244,130			500,000
Repayment of senior long-term debt	(1,072,234		)	(1,090,927		)
Capital contribution by parent	130,000
Dividends paid	(85,000		)	(45,000		)
Net cash provided by financing activities	1,100,437			682,917
Net increase in cash and cash equivalents	21,056			4,661
Cash and cash equivalents beginning of period	205,036			178,970
Cash and cash equivalents end of period	$	226,092		$	183,631

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					173,502									173,502
Other								(1,943		)	4,339			2,396
Contributed subsidiaries			12,427		(10,182		)							2,245
Transfer of subsidiary					(60,171		)				3,095			(57,076		)
Dividends					(45,000		)							(45,000		)
Balance, September 30, 2000	$	3,855	$	209,124	$	1,465,892		$	(11,518	)	$	(3,722	)	$	1,663,631
Balance, December 31, 2000	$	3,855	$	312,302	$	1,540,902		$	(11,220	)	$	8,776		$	1,854,615
Comprehensive income (loss):
Net income					197,149									197,149
Other								(2,840		)	22,210			19,370
Capital contribution from parent			130,000											130,000
Dividends					(85,000		)							(85,000		)
Transfer of subsidiary					(4,759		)							(4,759		)
Balance, September 30, 2001	$	3,855	$	442,302	$	1,648,292		$	(14,060	)	$	30,986		$	2,111,375

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 $1.1 billion of consolidated stockholder’s equity was unrestricted at September 30, 2001.

3.             Other Income.

Income from affiliates was $10.5 million and $9.5 million for the quarters ended September 30, 2001 and 2000, respectively, and $30.4 million and $28.1 million for the nine months ended September 30, 2001 and 2000, respectively.

Interest and dividends from securities available-for-sale and cash equivalents were $20.4 million and $18.9 million for the quarters ended September 30, 2001 and 2000, and $59.6 million and $57.5 million for the nine months ended September 30, 2001 and 2000 respectively.

WELLS FARGO FINANCIAL, INC.

Notes to Consolidated Financial Statements (Unaudited)

4.             Finance Receivables.

Finance receivables are as follows:

(In Thousands)	September 30, 2001		December 31, 2000
United States consumer finance:
Loans secured by real estate	$	2,905,295	$	2,507,419
Consumer loans	1,450,724		1,460,746
Total loans	4,356,019		3,968,165
Sales finance contracts	1,218,002		1,295,147
Credit cards	1,199,751		1,148,486
Total United States consumer finance	6,773,772		6,411,798
Canadian consumer finance:
Loans secured by real estate	88,199		85,000
Consumer loans	450,687		452,581
Total loans	538,886		537,581
Sales finance contracts	510,885		497,379
Credit cards	23,745		21,298
Total Canadian consumer finance	1,073,516		1,056,258
Automobile finance	3,302,316		3,078,026
Leasing	1,292,345		442,665
Other	613,794		429,115
Total finance receivables	$	13,055,743	$	11,417,862

WELLS FARGO FINANCIAL, INC.

Notes to Consolidated Financial Statements (Unaudited)

5.             Allowance for Credit Losses.

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

	Quarter Ended September 30,						Nine Months Ended September 30,
(In Thousands)	2001			2000			2001			2000
Allowance for credit losses beginning of period	$	509,850		$	390,542		$	462,555		$	367,712
Provision for credit losses charged to expense	133,638			102,154			362,679			252,097
Write-offs	(142,803		)	(94,883		)	(403,231		)	(262,511		)
Recoveries	19,075			13,402			58,182			44,074
Allowance related to businesses contributed or acquired				3,044			39,575			12,887
Allowance for credit losses end of period	$	519,760		$	414,259		$	519,760		$	414,259

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 September 30,				Nine Months Ended September 30,
(In Thousands)	2001		2000		2001		2000
Cash paid for:
Interest	$	188,717	$	147,883	$	536,139	$	454,487
Income taxes	11,664		18,172		78,291		40,939

WELLS FARGO FINANCIAL, INC.

Notes to Consolidated Financial Statements (Unaudited)

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 780 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 161 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 189 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 September 30,:	2001			2000		2001		2000		2001		2000		2001		2000		2001		2000			2001		2000
Finance charges and interest	$		309,938	$	298,615	$	62,633	$	62,737	$	133,235	$	103,695	$	37,977	$	13,318	$	16,618	$	14,681		$	560,401	$	493,046
Total income	382,965			363,156		69,464		73,388		141,203		108,240		45,685		14,487		26,918		23,674			666,235		582,945
Net income	41,257			33,883		8,721		9,775		10,422		13,734		4,681		2,472		2,487		2,371			67,568		62,235
Nine Months Ended September 30,:
Finance charges and interest	$	918,568		$	816,549	$	184,374	$	185,836	$	393,220	$	307,896	$	107,409	$	38,907	$	48,275	$	45,514		$	1,651,846	$	1,394,702
Total income	1,123,291			993,815		204,831		209,981		416,670		321,041		127,932		42,460		76,434		67,812			1,949,158		1,635,109
Net income (loss)	105,416			107,831		28,437		21,433		37,177		37,383		19,304		7,644		6,815		(789		)	197,149		173,502
Total assets	8,620,014			7,796,956		1,259,277		1,204,833		3,548,719		2,437,623		1,402,845		393,101		643,680		493,628			15,474,535		12,326,141

*      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.

WELLS FARGO FINANCIAL, INC.

Notes to Consolidated Financial Statements (Unaudited)

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 $34 million (pretax) and increase net income by approximately $24 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 yet determine if a transition impairment charge will be recognized in 2002.

WELLS FARGO FINANCIAL, INC.

Notes to Consolidated Financial Statements (Unaudited)

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 third quarter of 2001 closely paralleled performance for the first nine months of 2001.  The discussion and analysis that follows, therefore, is limited to a discussion of the first nine months as a whole and does not include a separate discussion of the third quarter unless otherwise noted.

Wells Fargo Financial’s net income for the first nine months of 2001 was $197.1 million compared with $173.5 million for the first nine months of 2000.  Net income in 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 $197.1 million for the first nine months of 2001 compared with $180.6 million in the first nine months of 2000.

Well’s Fargo Financial’s total income (revenue) increased 19% for the first nine months ($1,949.2 million in the first nine months of 2001 compared with $1,635.1 million in the first nine months of 2000).

Income from finance charges and interest increased 18% for the first nine months ($1,651.8 million in the first nine months of 2001 compared with $1,394.7 million in the first nine 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 nine months of 2001 increased 28% from the first nine months of 2000; average U.S. consumer finance receivables outstanding increased 15%, average Canadian consumer finance receivables outstanding increased 2%, average automobile finance receivables outstanding increased 42%, average leasing finance receivables outstanding increased 202%, and average other finance receivables outstanding increased 32%.

Rate of charge on finance receivables:	2001		2000
U.S. consumer finance	18.89	%	19.23	%
Canadian consumer finance	23.72		24.44
Automobile finance	16.57		18.45
Leasing	12.07		13.23
Other	13.30		16.90
Total	17.83		19.26

WELLS FARGO FINANCIAL, INC.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations, Continued

The increase in income from finance charges and interest was due 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 32% ($206.0 million in the first nine months of 2001 compared with $156.6 million in the first nine 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 15% ($699.8 million in the first nine months of 2001 compared with $606.0 million in the first nine 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 16% ($539.8 million in the first nine months of 2001 compared with $466.1 million in the first nine 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 nine months of 2001 increased 26% from the first nine months of 2000.

	Quarter Ended September 30,				Nine Months Ended September 30,
Costs of funds:	2001		2000		2001		2000
Short-term	3.96	%	6.71	%	5.05	%	6.44	%
Long-term	6.27		6.68		6.45		6.60
Total	5.52		6.69		6.01		6.55

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 28% from the first nine months of 2000.

Provision for credit losses increased 44% ($362.7 million in the first nine months of 2001 compared with $252.1 million in the first nine months of 2000).  Net write-offs increased 58% in the first nine 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.

WELLS FARGO FINANCIAL, INC.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations, Continued

	Nine Months Ended September 30,
Net write-offs, not annualized, as a percentage of average net receivables outstanding:	2001		2000
U.S. consumer finance	3.29	%	2.10	%
Canadian consumer finance	3.19		4.01
Automobile finance	2.15		2.22
Leasing	1.89		.66
Other	1.69		1.99
Total	2.79		2.26

Through September 30, 2001, the provision for credit losses exceeded net write-offs by $17.6 million.  At September 30, 2001, the Company had an allowance for credit losses of $519.8 million (3.98% 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 $83.5 million at September 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 $178.0 million at September 30, 2001 compared with $159.9 million at December 31, 2000.  Management believes the allowance for credit losses at September 30, 2001, is adequate to absorb probable losses on existing receivables in the finance receivables portfolio.

Income taxes increased 16% ($117.3 million in the first nine months of 2001 compared with $101.2 million in the first nine months of 2000).  Income before income taxes increased 14% ($314.5 million in the first nine months of 2001 compared with $274.7 million in the first nine months of 2000.)  The effective tax rate was 37.3% for the first nine months of 2001 and 36.8% for the first nine 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 September 30, 2001, lines of credit and revolving credit agreements totaling $2,353 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 September 30, 2001, federal funds availability at the two banks was $676 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.

WELLS FARGO FINANCIAL, INC.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations, Continued

September 11, 2001 Terrorist Attacks

We cannot predict at this time the severity or duration of the impact on the general economy or the Company of the September 11, 2001 terrorist attacks or any subsequent terrorist activities or any actions taken in response to or as a result of those attacks or activities.  The most likely immediate impact will be decreased demand for air travel, which could adversely affect not only the airline industry but also other travel-related and leisure industries, such as lodging, gaming and tourism.  The impact could spread beyond certain industries to the overall U.S. and global economies, further decreasing capital and consumer spending and increasing the risk of a U.S. and/or global recession.  Decreased capital and consumer spending and other recessionary trends could adversely affect the Company in a number of ways including decreased demand for our products and services and increased credit losses.

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:

Nine Months Ended September 30, 2001	Years Ended December 31,
	2000	1999	1998	1997	1996
1.57	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 nine months ended September 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:  November 08, 2001
	By	/s/ Eric Torkelson
		Eric Torkelson
		Senior Vice President and Controller
		(Principal Accounting Officer)