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

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended Commission file number 1-6214
September 30, 1996
---------------------------

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

Delaware 13-2553920
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

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

Registrant's telephone number, including area code: 415-477-1000

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 /X/ No
------ ------

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

Shares Outstanding
October 31, 1996
------------------
Common stock, $5 par value 92,484,712

FORM 10-Q
TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements Page
Consolidated Statement of Income . . . . . . . . . . . . . . . 2
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Changes in Stockholders' Equity. . . 4
Consolidated Statement of Cash Flows . . . . . . . . . . . . . 5
Note to Financial Statements . . . . . . . . . . . . . . . . . 6

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Summary Financial Data . . . . . . . . . . . . . . . . . . . . 9
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Merger with First Interstate Bancorp . . . . . . . . . . . . . 12
Line of Business Results . . . . . . . . . . . . . . . . . . . 13
Earnings Performance . . . . . . . . . . . . . . . . . . . . . 17
Net Interest Income . . . . . . . . . . . . . . . . . . . . . 17
Noninterest Income. . . . . . . . . . . . . . . . . . . . . . 21
Noninterest Expense . . . . . . . . . . . . . . . . . . . . . 23
Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 24
Earnings/Ratios Excluding Goodwill and Nonqualifying CDI . . 25
Balance Sheet Analysis . . . . . . . . . . . . . . . . . . . . 26
Investment Securities . . . . . . . . . . . . . . . . . . . . 26
Loan Portfolio. . . . . . . . . . . . . . . . . . . . . . . . 29
Commercial real estate . . . . . . . . . . . . . . . . . . . 29
Nonaccrual and Restructured Loans and Other Assets. . . . . . 30
Changes in total nonaccrual loans. . . . . . . . . . . . . . 30
Changes in foreclosed assets . . . . . . . . . . . . . . . . 33
Loans 90 days past due and still accruing. . . . . . . . . . 33
Allowance for Loan Losses . . . . . . . . . . . . . . . . . . 34
Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . 36
Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Capital Adequacy/Ratios . . . . . . . . . . . . . . . . . . . 38
Asset/Liability Management. . . . . . . . . . . . . . . . . . 40
Derivative Financial Instruments. . . . . . . . . . . . . . . 41
Liquidity Management. . . . . . . . . . . . . . . . . . . . . 42

PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 43

SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

- -------------------------------------------------------------------------------
The information furnished in these interim statements reflects all adjustments
which are, in the opinion of management, necessary for a fair statement of
the results for such periods. Such adjustments are of a normal recurring
nature, unless otherwise disclosed in this Form 10-Q. The results of
operations in the interim statements are not necessarily indicative of the
results that may be expected for the full year. In addition, this Form 10-Q
includes forward-looking statements that involve inherent risks and
uncertainties. The Company cautions readers that a number of important
factors could cause actual results to differ materially from those in the
forward-looking statements. Those factors include fluctuations in interest
rates, inflation, government regulations, the progress of integrating First
Interstate and economic conditions and competition in the geographic and
business areas in which the Company conducts its operations. The interim
financial information should be read in conjunction with the Company's 1995
Annual Report on Form 10-K.

PART I - FINANCIAL INFORMATION

WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME

- ----------------------------------------------------------------------------------------------------
Quarter Nine months
ended September 30, ended September 30,
------------------- -------------------
(in millions) 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------

INTEREST INCOME
Federal funds sold and securities
purchased under resale agreements $ 11 $ 1 $ 21 $ 3
Investment securities 215 143 568 460
Mortgage loans held for sale -- 19 -- 73
Loans 1,612 855 4,106 2,536
Other 9 1 16 2
----- ----- ----- -----
Total interest income 1,847 1,019 4,711 3,074
----- ----- ----- -----
INTEREST EXPENSE
Deposits 446 254 1,140 750
Federal funds purchased and securities
sold under repurchase agreements 15 46 72 160
Commercial paper and other short-term
borrowings 3 6 11 25
Senior and subordinated debt 88 50 217 152
----- ----- ----- -----
Total interest expense 552 356 1,440 1,087
----- ----- ----- -----
NET INTEREST INCOME 1,295 663 3,271 1,987
Provision for loan losses 35 -- 35 --
----- ----- ----- -----
Net interest income after provision
for loan losses 1,260 663 3,236 1,987
----- ----- ----- -----
NONINTEREST INCOME
Service charges on deposit accounts 254 121 634 357
Fees and commissions 205 112 534 316
Trust and investment services income 104 63 267 176
Investment securities gains (losses) -- -- 2 (15)
Other 80 43 199 56
----- ----- ----- -----
Total noninterest income 643 339 1,636 890
----- ----- ----- -----
NONINTEREST EXPENSE
Salaries 378 176 960 526
Incentive compensation 53 33 146 92
Employee benefits 105 46 261 147
Equipment 103 47 269 139
Net occupancy 96 54 257 159
Goodwill 81 9 170 26
Core deposit intangible 78 10 170 32
Other 411 167 916 517
----- ----- ----- -----
Total noninterest expense 1,305 542 3,149 1,638
----- ----- ----- -----
INCOME BEFORE INCOME TAX EXPENSE 598 460 1,723 1,239
Income tax expense 277 199 775 513
----- ----- ----- -----
NET INCOME $ 321 $ 261 $ 948 $ 726
----- ----- ----- -----
----- ----- ----- -----
NET INCOME APPLICABLE TO COMMON STOCK $ 302 $ 251 $ 901 $ 695
----- ----- ----- -----
----- ----- ----- -----
PER COMMON SHARE
Net income $ 3.23 $ 5.23 $11.42 $14.14
------ ------ ------ ------
------ ------ ------ ------
Dividends declared $ 1.30 $ 1.15 $ 3.90 $ 3.45
------ ------ ------ ------
------ ------ ------ ------
Average common shares outstanding 93.7 47.9 78.8 49.2
------ ------ ------ ------
------ ------ ------ ------
- ----------------------------------------------------------------------------------------------------

WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET

- -------------------------------------------------------------------------------------
SEPTEMBER 30, December 31, September 30,
(in millions) 1996 1995 1995
- -------------------------------------------------------------------------------------

ASSETS
Cash and due from banks $ 11,622 $ 3,375 $ 3,183
Federal funds sold and securities
purchased under resale agreements 284 177 52
Investment securities:
At fair value 13,433 8,920 2,476
At cost (estimated fair value $6,903) -- -- 6,960
-------- -------- --------
Total investment securities 13,433 8,920 9,436
Mortgage loans held for sale -- -- 510
Loans 69,233 35,582 34,298
Allowance for loan losses 2,137 1,794 1,872
-------- -------- --------
Net loans 67,096 33,788 32,426
-------- -------- --------
Due from customers on acceptances 356 98 83
Accrued interest receivable 590 308 321
Premises and equipment, net 2,380 862 873
Core deposit intangible 2,130 166 176
Goodwill 7,407 382 391
Other assets 3,878 2,240 2,483
-------- -------- --------
Total assets $109,176 $ 50,316 $ 49,934
-------- -------- --------
-------- -------- --------
LIABILITIES
Noninterest-bearing deposits $ 29,512 $ 10,391 $ 9,627
Interest-bearing deposits 54,225 28,591 29,321
-------- -------- --------
Total deposits 83,737 38,982 38,948
Federal funds purchased and securities
sold under repurchase agreements 1,033 2,781 2,554
Commercial paper and other short-term
borrowings 350 195 417
Acceptances outstanding 356 98 83
Accrued interest payable 215 85 113
Other liabilities 3,151 1,071 925
Senior debt 2,470 1,783 1,544
Subordinated debt 2,941 1,266 1,476
-------- -------- --------
Total liabilities 94,253 46,261 46,060
-------- -------- --------
STOCKHOLDERS' EQUITY
Preferred stock 1,039 489 489
Common stock - $5 par value,
authorized 150,000,000 shares; issued
and outstanding 92,875,661 shares,
46,973,319 shares and 47,465,721 shares 464 235 237
Additional paid-in capital 10,674 1,135 1,221
Retained earnings 2,766 2,174 1,932
Cumulative foreign currency translation
adjustments (4) (4) (4)
Investment securities valuation allowance (16) 26 (1)
-------- -------- --------
Total stockholders' equity 14,923 4,055 3,874
-------- -------- --------
Total liabilities and stockholders' $109,176 $ 50,316 $ 49,934
equity -------- -------- --------
-------- -------- --------
- -------------------------------------------------------------------------------------

WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

- -------------------------------------------------------------------------------------
Nine months ended September 30,
-------------------------------
(in millions) 1996 1995
- -------------------------------------------------------------------------------------

PREFERRED STOCK
Balance, beginning of period $ 489 $ 489
Preferred stock issued to First Interstate stockholders 350 --
Preferred stock issued 200 --
------ ------
Balance, end of period 1,039 489
------ ------
COMMON STOCK
Balance, beginning of period 235 256
Common stock issued to First Interstate stockholders 260 --
Common stock issued under employee benefit and
dividend reinvestment plans 3 3
Common stock repurchased (34) (22)
------ ------
Balance, end of period 464 237
------ ------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of period 1,135 871
Preferred stock issued to First Interstate stockholders 10 --
Preferred stock issuance costs (3) --
Common stock issued to First Interstate stockholders 11,037 --
Common stock issued under employee benefit and
dividend reinvestment plans 85 78
Common stock repurchased (1,701) (728)
Fair value adjustment related to First Interstate
stock options 111 --
Transfer from retained earnings -- 1,000
------ ------
Balance, end of period 10,674 1,221
------ ------
RETAINED EARNINGS
Balance, beginning of period 2,174 2,409
Net income 948 726
Preferred stock dividends (47) (31)
Common stock dividends (309) (172)
Transfer to additional paid-in-capital -- (1,000)
------ ------
Balance, end of period 2,766 1,932
------ ------
CUMULATIVE FOREIGN CURRENCY
TRANSLATION ADJUSTMENTS
Balance, beginning and end of period (4) (4)
------ ------
INVESTMENT SECURITIES VALUATION ALLOWANCE
Balance, beginning of period 26 (110)
Change in unrealized net gain (loss),
after applicable taxes (42) 109
------ ------
Balance, end of period (16) (1)
------ ------
Total stockholders' equity $14,923 $3,874
------- ------
------- ------
- -------------------------------------------------------------------------------------

WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 948 $ 726
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 35 --
Depreciation and amortization 560 204
Deferred income tax provision 165 --
Increase in net deferred loan fees (14) (10)
Net decrease in accrued interest receivable 26 7
Write-down on mortgage loans held for sale -- 71
Net increase in accrued interest payable 43 53
Other, net 208 (366)
------- -------
Net cash provided by operating activities 1,971 685
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment securities:
At cost:
Proceeds from prepayments and maturities -- 1,715
Purchases -- (56)
At fair value:
Proceeds from sales 763 670
Proceeds from prepayments and maturities 3,601 78
Purchases (1,347) (63)
Cash acquired from First Interstate 6,030 --
Proceeds from sales of mortgage loans held for sale -- 3,803
Net (increase) decrease in loans resulting
from originations and collections 804 (2,369)
Proceeds from sales (including participations) of loans 301 400
Purchases (including participations) of loans (93) (215)
Proceeds from sales of foreclosed assets 111 147
Net decrease in federal funds sold and securities
purchased under resale agreements 1,967 208
Other, net (411) (442)
------- -------
Net cash provided by investing activities 11,726 3,876
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits (2,693) (3,384)
Net decrease in short-term borrowings (1,939) (240)
Proceeds from issuance of senior debt 1,260 980
Repayment of senior debt (816) (801)
Proceeds from issuance of subordinated debt 800 --
Proceeds from issuance of preferred stock 197 --
Proceeds from issuance of common stock 88 81
Repurchase of common stock (1,735) (750)
Payment of cash dividends on preferred stock (56) (41)
Payment of cash dividends on common stock (309) (172)
Other, net (247) (25)
------- -------
Net cash used by financing activities (5,450) (4,352)
------- -------
NET CHANGE IN CASH AND CASH EQUIVALENTS (DUE FROM BANKS) 8,247 209
Cash and cash equivalents at beginning of period 3,375 2,974
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $11,622 $ 3,183
------- -------
------- -------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,310 $ 1,034
------- -------
------- -------
Income taxes $ 269 $ 455
------- -------
------- -------
Noncash investing and financing activities:
Transfers from loans to foreclosed assets $ 108 $ 91
------- -------
------- -------
Transfers from loans to mortgage loans held for sale $ -- $ 4,440
------- -------
------- -------
Acquisition of First Interstate:
Common stock issued $11,297 $ --
Fair value of preferred stock issued 360 --
Fair value of stock options 111 --
Fair value of assets acquired 55,797 --
Fair value of liabilities assumed 51,214 --
- -------------------------------------------------------------------------------------

WELLS FARGO & COMPANY AND SUBSIDIARIES
NOTE TO FINANCIAL STATEMENTS

MERGER WITH FIRST INTERSTATE BANCORP (MERGER)

On April 1, 1996, the Company completed its acquisition of First Interstate
Bancorp (First Interstate), the 14th largest bank holding company in the
nation as of March 31, 1996 with 405 offices in California and a total of
approximately 1,150 offices in 13 western states. The Merger resulted in the
creation of the eighth largest bank holding company in the United States
based on assets as of September 30, 1996. The purchase price of the
transaction was approximately $11.3 billion based on Wells Fargo's share
price on January 19, the last trading day before Wells Fargo and First
Interstate agreed on an exchange ratio. First Interstate shareholders
received two-thirds of a share of Wells Fargo common stock for each share of
common stock owned; 52,001,970 shares of the Company's common stock were
issued. Each share of First Interstate preferred stock was converted into
the right to receive one share of the Company's preferred stock. Each
outstanding and unexercised option granted by First Interstate was converted
into an option to purchase Company common stock based on the original plan
and the agreed upon exchange ratio.

The Merger was accounted for as a purchase transaction. Accordingly, the
results of operations of First Interstate are included with that of the
Company for periods subsequent to the date of the Merger (i.e., the financial
information for periods prior to April 1, 1996 included in this Form 10-Q
excludes First Interstate). The name of the combined company is Wells Fargo &
Company.

The major components of management's plan for the combined company include
the realignment of First Interstate's businesses to reflect Wells Fargo's
structure, consolidation of retail branches and administrative facilities and
reduction in staffing levels. As a result of this plan, the adjustments to
goodwill included accruals totaling approximately $307 million ($181 million
after tax) related to the disposition of premises, including an accrual of
$121 million ($71 million after tax) associated with the dispositions of
traditional former First Interstate branches in California and out of state.
The California dispositions include 175 branch closures in the third quarter
of 1996. The Company has also entered into definitive agreements with several
institutions to sell 20 former branches of First Interstate located in
California, which sales are expected to close in the first quarter of 1997.
(See Noninterest Income section for information on other, Wells Fargo branch
dispositions.) Additionally, the adjustments to goodwill included accruals
of approximately $415 million ($245 million after tax) related to severance
of former First Interstate employees throughout the Company who will be
displaced through December 31, 1997. Severance payments of $41 million and
$59 million were paid during the third and second quarters of 1996,
respectively.

As a condition of the Merger, Wells Fargo was required by regulatory agencies
to divest 61 First Interstate branches in California. In the first quarter
of 1996, the Company entered into a contract with Home Savings of America,
principal subsidiary of H.F. Ahmanson &

Company, for the sale of the 61 First Interstate branches, which was
completed in September 1996. In addition, the Company completed the sale of
the First Interstate banks in Wyoming and Montana effective October 1, 1996.
Also, the Company has entered into a definitive agreement to sell the bank
subsidiary in Alaska, and expects the sale to close on or about November 30,
1996, subject to regulatory approval.

Other significant adjustments to goodwill included the write-off of First
Interstate's existing goodwill and other intangibles of $701 million.

The pro forma amounts in the table below are presented for informational
purposes and are not necessarily indicative of the results of operations of
the combined company for the periods presented. The pro forma amounts are
also not necessarily indicative of the future results of operations of the
combined company. In particular, the Company expects to achieve significant
operating cost savings as a result of the Merger, which future savings have
not been included in the pro forma amounts.

The following pro forma combined summary of income gives effect to the
combination as if the Merger was consummated on January 1, 1995.

PRO FORMA COMBINED FINANCIAL DATA
- -----------------------------------------------------------------------------
Nine months ended September 30,
-------------------------------
(in millions, except per share data) 1996 1995
- -----------------------------------------------------------------------------
SUMMARY OF INCOME
Net interest income $ 3,881 $3,926
Provision for loan losses 35 --
Noninterest income 1,940 1,701
Noninterest expense (1) 3,646 3,653
Net income (1) 1,180 1,115

PER COMMON SHARE
Net income (1) $ 12.11 $10.63
Dividends declared 3.90 3.45

AVERAGE COMMON SHARES OUTSTANDING 92.9 99.6
- -----------------------------------------------------------------------------
(1) Noninterest expense for the nine months ended September 30, 1996 excludes
$251 million ($245 million after tax) of nonrecurring merger-related
expenses recorded by First Interstate in the first quarter of 1996.

The pro forma combined net income of $1,180 million for the nine months ended
September 30, 1996 consists of second and third quarter 1996 net income of
the combined company of $684 million, first quarter 1996 net income of the
Company of $264 million and a first quarter net loss of First Interstate of
$(23) million, plus pro forma adjustments of $255 million. The pro forma
combined net income of $1,115 million for the nine months ended September 30,
1995 consists of net income of the Company of $726 million and First
Interstate of $670 million for the nine months ended September 30, 1995, less
pro forma adjustments of $(281) million. The pro forma adjustments for both
periods include

amortization of $216 million relating to $7,195 million excess purchase price
over fair value of First Interstate's net assets acquired (goodwill).
Goodwill is amortized using the straight-line method over 25 years.

Goodwill may change as certain estimates and contingencies are finalized,
although any adjustments are not expected to have a significant effect on the
ultimate amount of goodwill.

In addition to First Interstate premise and severance costs affecting
goodwill, an estimated $60 million and $80 million of costs related to the
Company's premises, employees and operations as well as all costs relating to
systems conversions and other indirect, integration costs were expensed
during the second and third quarters, respectively, and are not included in
the Pro Forma Combined Financial Data. The Company expects to incur
additional merger-related costs, which will be expensed as incurred. With
respect to timing, it is assumed that the integration will be completed and
that such costs will be incurred not later than 18 months after the closing
of the Merger.

FINANCIAL REVIEW

SUMMARY FINANCIAL DATA

- ----------------------------------------------------------------------------------------------------------------------
% Change
Quarter ended Sept. 30, 1996 from Nine months ended
---------------------------------- -------------------- ---------------------
SEPT. 30, June 30, Sept. 30, June 30, SEPT. 30, SEPT. 30, Sept. 30, %
(in millions) 1996 1996 1995 1996 1995 1996 1995 Change
- ----------------------------------------------------------------------------------------------------------------------

FOR THE PERIOD
Net income $ 321 $ 363 $ 261 (12)% 23 % $ 948 $ 726 31 %
Net income applicable
to common stock 302 344 251 (12) 20 901 695 30
Per common share
Net income $ 3.23 $ 3.61 $ 5.23 (11) (38) $ 11.42 $ 14.14 (19)
Dividends declared 1.30 1.30 1.15 -- 13 3.90 3.45 13

Average common shares
outstanding 93.7 95.6 47.9 (2) 96 78.8 49.2 60

Profitability ratios
(annualized)
Net income to average
total assets (ROA) 1.18% 1.35% 2.07% (13) (43) 1.43% 1.89% (24)
Net income applicable to
common stock to average
common stockholders'
equity (ROE) 8.64 9.77 30.13 (12) (71) 11.36 27.91 (59)

Efficiency ratio (1) 67.3% 65.8% 54.1% 2 24 64.2% 56.9% 13

Average loans $ 69,274 $ 70,734 $34,103 (2) 103 $ 58,384 $34,538 69
Average assets 108,378 108,430 50,062 -- 116 88,719 51,306 73
Average core deposits 82,378 83,356 36,618 (1) 125 67,572 36,515 85

Net interest margin 6.15% 6.03% 5.90% 2 4 6.11% 5.72% 7

AT PERIOD END
Investment securities $ 13,433 $ 13,692 $ 9,436 (2) 42 $ 13,433 $ 9,436 42
Loans(2) 69,233 70,541 34,298 (2) 102 69,233 34,298 102
Allowance for loan losses 2,137 2,273 1,872 (6) 14 2,137 1,872 14
Goodwill 7,407 7,479 391 (1) -- 7,407 391 --
Assets 109,176 108,586 49,934 1 119 109,176 49,934 119
Core deposits 83,308 83,331 37,151 -- 124 83,308 37,151 124
Common stockholders'
equity 13,884 14,191 3,385 (2) 310 13,884 3,385 310
Stockholders' equity 14,923 15,030 3,874 (1) 285 14,923 3,874 285
Tier 1 capital (3) 6,111 6,346 3,436 (4) 78 6,111 3,436 78
Total capital
(Tiers 1 and 2)(3) 9,588 9,591 4,918 -- 95 9,588 4,918 95

Capital ratios
Common stockholders'
equity to assets 12.71% 13.07% 6.78% (3) 87 12.71% 6.78% 87
Stockholders' equity
to assets 13.66 13.84 7.76 (1) 76 13.66 7.76 76
Risk-based capital (3)
Tier 1 capital 7.04 7.40 8.56 (5) (18) 7.04 8.56 (18)
Total capital 11.05 11.18 12.25 (1) (10) 11.05 12.25 (10)
Leverage (3) 6.12 6.37 6.93 (4) (12) 6.12 6.93 (12)

Book value per common
share $ 149.44 $ 149.52 $ 71.32 -- 110 $149.44 $ 71.32 110
Staff (active, full-time
equivalent) 38,859 41,548 19,196 (6) 102 38,859 19,196 102

NET INCOME AND RATIOS
EXCLUDING GOODWILL AND
NONQUALIFYING CORE DEPOSIT
INTANGIBLE AMORTIZATION
AND BALANCES ("CASH" OR
"TANGIBLE")(4)
Net income applicable
to common stock $ 424 $ 468 $ 260 (9) 63 $ 1,154 $ 721 60
Net income per common share 4.52 4.89 5.41 (8) (16) 14.64 14.66 --
ROA 1.77% 1.96% 2.16% (10) (18) 1.94% 1.98% (2)
ROE 31.91 33.43 35.40 (5) (10) 32.70 32.95 (1)
Efficiency ratio 59.6 58.0 53.2 3 12 57.8 56.0 3

COMMON STOCK PRICE
High $264 $264-1/2 $189 -- 40 $264-1/2 $189 40
Low 220-1/8 232-1/8 177-3/4 (5) 24 203-1/8 143-3/8 42
Period end 260 239-1/8 185-5/8 9 40 260 185-5/8 40
- ----------------------------------------------------------------------------------------------------------------------

(1) The efficiency ratio is defined as noninterest expense divided by the
total of net interest income and noninterest income.
(2) Loans exclude mortgage loans held for sale at September 30, 1995 of
$510 million.
(3) See the Capital Adequacy/Ratios section for additional information.
(4) Nonqualifying core deposit intangible (CDI) amortization and average
balance excluded from these calculations are, with the exception of
the efficiency ratio, net of applicable taxes. The after-tax amounts
for the amortization and average balance of nonqualifying CDI were
$41 million and $1,196 million for the quarter ended September 30,
1996, respectively, and $84 million and $844 million for the nine
months ended September 30, 1996, respectively. Goodwill amortization
and average balance (which are not tax effected) were $81 million and
$7,439 million for the quarter ended September 30, 1996, respectively,
and $170 million and $5,027 million for the nine months ended
September 30, 1996, respectively.

OVERVIEW

Wells Fargo & Company (Parent) is a bank holding company whose principal
subsidiary is Wells Fargo Bank, N.A. (Bank). In this Form 10-Q, Wells Fargo
& Company and its subsidiaries are referred to as the Company.

On April 1, 1996, the Company completed its acquisition of First Interstate
Bancorp. As a result, the financial information presented in this Form 10-Q
for the third quarter and first nine months of 1996 reflects the effects of
the acquisition subsequent to the Merger's consummation.

The Company's results of operations for the third quarter and first nine
months of 1996 were significantly affected by the Merger. Since the
Company's results of operations subsequent to April 1, 1996 reflect amounts
recognized from combined operations, they cannot be divided between or
attributed directly to either of the two former entities.

In substantially all of the Company's income and expense categories, the
increases in the amounts reported for the third quarter and first nine months
of 1996 compared to the amounts reported in the corresponding periods in 1995
resulted from the Merger. The increases in substantially all of the
categories of the Company's balance sheet between amounts reported at
September 30, 1996 and those reported at December 31, 1995 also resulted from
the Merger. Other significant factors affecting the Company's results of
operations and financial position are described in the applicable sections
below.

Net income for the third quarter of 1996 was $321 million, compared with $261
million for the third quarter of 1995, an increase of 23%. Per share
earnings for the third quarter of 1996 were $3.23, compared with $5.23 in the
third quarter of 1995, a decrease of 38%. Net income for the first nine
months of 1996 was $948 million, or $11.42 per share, compared with $726
million, or $14.14 per share, for the first nine months of 1995.

Return on average assets (ROA) was 1.18% and 1.43% in the third quarter and
first nine months of 1996, respectively, compared with 2.07% and 1.89% in the
same periods of 1995. Return on average common equity (ROE) was 8.64% and
11.36% in the third quarter and first nine months of 1996, respectively,
compared with 30.13% and 27.91%, respectively, in the same periods of 1995.

Earnings before the amortization of goodwill and nonqualifying core deposit
intangible ("cash" or "tangible" earnings) for the third quarter of 1996 were
$4.52 per share, compared with $5.41 per share for the third quarter of 1995.
On the same basis, ROA was 1.77% in the third quarter of 1996, compared with
2.16% in the third quarter of 1995; ROE was 31.91% in the third quarter of
1996, compared with 35.40% in the third quarter of 1995.

Following the merger with First Interstate, "cash" earnings, as well as
"cash" ROA and ROE, are the measures of performance which will be most
comparable with prior quarters. They are also the most relevant measures of
financial performance for shareholders because they measure the Company's
ability to repurchase stock, pay dividends and support growth. Third quarter
"cash" EPS of $4.52 is down from the second quarter of 1996 "cash" EPS of
$4.89. This decrease is substantially due to a

one-time assessment of $22 million to replenish the Savings Association
Insurance Fund and the third quarter provision for loan losses of $35 million.

Net interest income on a taxable-equivalent basis was $1,299 million and $663
million in the third quarter of 1996 and 1995, respectively. The increase in
net interest income in both the third quarter and first nine months of 1996
compared with the same periods of 1995 was primarily due to an increase in
average earning assets as a result of the Merger. The Company's net interest
margin was 6.15% for the third quarter of 1996, compared with 5.90% in the
same quarter of 1995 and 6.03% in the second quarter of 1996.

Noninterest income was $643 million and $1,636 million in the third quarter
and first nine months of 1996, respectively, compared with $339 million and
$890 million in the same periods of 1995. In addition to the effects of the
Merger, the increase for the first nine months of 1996 as compared to the
same period of 1995 included an $83 million write-down to lower of cost or
estimated market in 1995 for certain product types within the real estate 1-4
family first mortgage portfolio that were reclassified to mortgage loans held
for sale.

Noninterest expense in the third quarter of 1996 was $1,305 million, compared
with $542 million for the third quarter of 1995. In addition to the effect
of combining operations of First Interstate with the Company, the increase
reflected goodwill and CDI amortization, severance for Wells Fargo employees
and other merger-related expenditures.

During the third quarter of 1996, net charge-offs totaled $171 million, or
0.98% of average loans (annualized). This compared with $178 million, or
1.01%, during the second quarter of 1996 and $75 million, or .86%, during the
third quarter of 1995. The allowance for loan losses was 3.09% of total
loans at September 30, 1996, compared with 3.22% at June 30, 1996 and 5.46%
at September 30, 1995.

Total nonaccrual and restructured loans were $728 million at September 30,
1996, compared with $552 million at December 31, 1995 and $600 million at
September 30, 1995. Foreclosed assets amounted to $227 million at September
30, 1996, $186 million at December 31, 1995 and $214 million at September 30,
1995.

The Company's effective tax rate was 46% and 45% for the third quarter and
first nine months of 1996, respectively. The effective tax rate was 43% and
41% for the same periods of 1995. The increase in the effective tax rate for
the third quarter and first nine months of 1996 was due to increased goodwill
amortization related to the Merger, which is not tax deductible. The increase
in the effective tax rate for the first nine months of 1996 was also due to a
$22 million reduction of income tax expense in 1995 related to the settlement
with the Internal Revenue Service of certain audit issues pertaining to auto
leases for the years 1987 through 1992.

Common stockholders' equity to total assets was 12.71% at September 30, 1996,
compared with 13.07% and 6.78% at June 30, 1996 and September 30, 1995,
respectively. The Company's total risk-based capital ratio at September 30,
1996 was 11.05% and its Tier 1 risk-based capital ratio was 7.04%, exceeding
minimum guidelines of 8% and 4%, respectively, for bank holding companies and
the "well capitalized" guidelines for banks of 10% and 6%, respectively. At
June 30, 1996, the

risk-based capital ratios were 11.18% and 7.40%, respectively; at September
30, 1995, these ratios were 12.25% and 8.56%, respectively. The Company's
leverage ratios were 6.12%, 6.37% and 6.93% at September 30, 1996, June 30,
1996 and September 30, 1995, respectively, exceeding the minimum regulatory
guideline of 3% for bank holding companies and the "well capitalized"
guideline of 5% for banks.

The Company has bought in the past, and will continue to buy, shares to
offset stock issued or expected to be issued under the Company's employee
benefit and dividend reinvestment plans. In addition to these shares, the
Board of Directors authorized in April 1996 the repurchase of up to 9.6
million shares of the Company's outstanding common stock. The Company
repurchased a total of 6.8 million shares of common stock during the nine
months ended September 30, 1996.

MERGER WITH FIRST INTERSTATE BANCORP

On April 1, 1996, the Company completed its acquisition of First Interstate
Bancorp. As a condition of the Merger, Wells Fargo was required by
regulatory agencies to divest 61 First Interstate branches in California. In
September, the Company completed the required divestiture of 61 branches to
Home Savings of America. These branches had aggregate deposits of
approximately $1.9 billion and loans of approximately $1.1 billion. The
selling price of the divested branches represented a premium of 8.11% on the
deposits.

As of the acquisition date, the California bank of First Interstate merged
into Wells Fargo Bank, N.A. In June 1996, the Company merged former First
Interstate bank subsidiaries in six states (Idaho, Nevada, New Mexico,
Oregon, Utah and Washington) into Wells Fargo Bank, N.A. In September 1996,
Wells Fargo Bank of Arizona, N.A. (formerly First Interstate Bank of Arizona,
N.A.) merged into Wells Fargo Bank, N.A. Each of these states has opted-in
early under the interstate branching provisions of the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994. In addition, the Company
completed the sale of the First Interstate banks in Wyoming and Montana
effective October 1, 1996. Also, the Company has entered into a definitive
agreement to sell the bank subsidiary in Alaska, and expects the sale to
close on or about November 30, 1996, subject to regulatory approval. The
aggregate assets and deposits of the banks in Wyoming, Montana and Alaska at
September 30, 1996 were $647 million and $505 million, respectively. Each of
the banks have three branches. Banks in the other states retained by the
Company are expected to merge into Wells Fargo Bank, N.A. as soon as
permitted by applicable state laws (i.e., Colorado in June 1997; Texas not
earlier than September 1999).

The Company expects to meet its pre-merger objective of realizing net annual
cost savings of $700 million ($800 million of noninterest expenses, less $100
million of revenues) not later than 18 months after the date of the Merger.
About 50% of the cost savings are anticipated to be achieved within the first
nine months. The full impact of revenue losses due to the Merger is expected
to be recognized by the first quarter of 1997, with revenue growth resuming
in the first half of 1997. For additional discussion of the Company's plan
for branch closures and consolidations and for pro forma information, see
Note to Financial Statements.

LINE OF BUSINESS RESULTS

The line of business results show the financial performance of the Company's
major business units. The table on pages 14 and 15 presents the third quarter
and nine months ended September 30, 1996 and the same periods of 1995. First
Interstate results prior to April 1, 1996 are not included and, therefore,
the current period is not comparable to prior periods.

The results incorporate estimates of cost allocations, transfers and
assignments reflecting management's current understanding of the First
Interstate businesses. The cost allocations are based on estimates of the
steady state level of expenses. Changes in management structure and/or the
allocation process may result in changes in allocations, transfers and
assignments. In that case, results for prior periods would be (and have
been) restated to allow comparability from one period to the next.

The Company believes that cash earnings is the most relevant measure of
financial performance for shareholders. For this reason, goodwill and
nonqualifying core deposit intangible have not been allocated to the business
units in this presentation and are reported in "Other."

The following table provides the line of business results (estimated) for the
Company's six major business units.

- ----------------------------------------------------------------------------------------------------------------------------------
(income/expense in millions, average balances in billions)
- ----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1996 1995
--------------------- --------------------- ---------------------
Retail Business
Distribution Banking Investment
Group Group Group
---------------------------------------------------------------------------------

QUARTER ENDED SEPTEMBER 30,
Net interest income (1) $ 243 $ 116 $ 181 $ 95 $ 212 $ 116
Provision for loan losses (2) -- -- 18 9 1 --
Noninterest income (3) 327 152 68 38 133 79
Noninterest expense (3) 513 239 119 71 178 99
------ ------ ------ ------ ------ ------
Income before income tax expense 57 29 112 53 166 96
Income tax expense (4) 23 13 46 23 67 40
------ ------ ------ ------ ------ ------
Net income $ 34 $ 16 $ 66 $ 30 $ 99 $ 56
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------

Average loans $ -- $ -- $ 4.8 $ 2.5 $ 1.9 $ .5
Average assets 2.2 1.0 7.0 3.7 2.6 .8
Average core deposits 18.8 9.3 12.9 6.4 35.8 18.0
Return on equity (5) 12% 14% 32% 32% 50% 52%
Risk-adjusted efficiency ratio (6) 99% 97% 68% 72% 63% 61%

NINE MONTHS ENDED SEPTEMBER 30,
Net interest income (1) $ 585 $ 347 $ 443 $ 274 $ 524 $ 360
Provision for loan losses (2) -- -- 45 25 3 1
Noninterest income (3) 812 468 180 104 338 223
Noninterest expense (3) 1,288 700 308 208 439 322
------ ------ ------ ------ ------ ------
Income before income tax expense 109 115 270 145 420 260
Income tax expense (4) 45 49 112 61 173 110
------ ------ ------ ------ ------ ------
Net income $ 64 $ 66 $ 158 $ 84 $ 247 $ 150
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------

Average loans $ -- $ -- $ 4.2 $ 2.3 $ 1.5 $ .5
Average assets 1.8 1.0 5.9 3.4 2.0 .8
Average core deposits 15.6 9.5 10.7 6.3 30.1 17.9
Return on equity (5) 10% 18% 31% 30% 51% 44%
Risk-adjusted efficiency ratio (6) 101% 94% 70% 74% 62% 66%
- ----------------------------------------------------------------------------------------------------------------------------------

(1) Net interest income is the difference between actual interest earned
on assets (and interest paid on liabilities) owned by a group and a
funding charge (and credit) based on the Company's cost of funds.
Groups are charged a cost to fund any assets (e.g., loans) and are
paid a funding credit for any funds provided (e.g., deposits). The
interest spread is the difference between the interest rate earned
on an asset or paid on a liability and the Company's cost of funds
rate.
(2) The provision allocated to the line groups is based on management's
current assessment of the normalized net charge-off ratio for each
line of business. In any particular year, the actual net charge-
offs can be higher or lower than the normalized provision allocated
to the lines of business. The difference between the normalized
provision and the Company provision is included in Other.
(3) The Retail Distribution Group's charges to the product groups are
shown as noninterest income to the branches and noninterest expense
to the product groups. They amounted to $113 million and
$52 million for the quarters ended September 30, 1996 and 1995,
respectively, and $274 million and $155 million for the nine months
ended September 30, 1996 and 1995, respectively. These charges are
eliminated in the Other category in arriving at the Consolidated
Company totals for noninterest income and expense.

- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1996 1995 1996 1995 1996 1995
------------- ------------- ------------- ----------------- ---------------
Wholesale
Real Estate Products Consumer Consolidated
Group Group Lending Other Company
- -----------------------------------------------------------------------------------------------------------------------------------

QUARTER ENDED SEPTEMBER 30,
Net interest income (1) $ 95 $ 61 $ 232 $ 112 $ 276 $ 166 $ 56 $ (3) $1,295 $ 663
Provision for loan losses (2) 11 7 20 11 113 60 (128) (87) 35 --
Noninterest income (3) 18 13 85 34 74 59 (62) (36) 643 339
Noninterest expense (3) 26 26 115 49 142 75 212 (17) 1,305 542
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income before income tax expense 76 41 182 86 95 90 (90) 65 598 460
Income tax expense (4) 31 17 75 37 39 38 (4) 31 277 199
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net income $ 45 $ 24 $ 107 $ 49 $ 56 $ 52 $ (86) $ 34 $ 321 $ 261
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------

Average loans $ 10.2 $ 6.2 $ 18.0 $ 9.3 $ 24.2 $ 11.1 $ 10.2 $ 4.5 $ 69.3 $ 34.1
Average assets 10.9 6.7 22.9 10.5 25.0 11.5 37.8 15.9 108.4 50.1
Average core deposits .3 .1 11.5 3.0 .4 .3 2.7 (.5) 82.4 36.6
Return on equity (5) 18% 15% 24% 25% 15% 28% --% --% 9% 30%
Risk-adjusted efficiency ratio (6) 73% 85% 67% 64% 90% 67% --% --% --% --%

NINE MONTHS ENDED SEPTEMBER 30,
Net interest income (1) $ 266 $ 181 $ 564 $ 323 $ 752 $ 467 $ 137 $ 35 $3,271 $1,987
Provision for loan losses (2) 31 21 51 30 287 165 (382) (242) 35 --
Noninterest income (3) 57 24 208 110 212 160 (171) (199) 1,636 890
Noninterest expense (3) 77 62 285 147 347 225 405 (26) 3,149 1,638
------ ------ ------ ------ ------ ------ ------ ------ ------ ------

Income before income tax expense 215 122 436 256 330 237 (57) 104 1,723 1,239
Income tax expense (4) 89 52 180 108 137 101 39 32 775 513
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net income $ 126 $ 70 $ 256 $ 148 $ 193 $ 136 $ (96) $ 72 $ 948 $ 726
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------

Average loans $ 9.2 $ 6.3 $ 15.3 $ 9.0 $ 20.1 $ 10.6 $ 8.1 $ 5.8 $ 58.4 $ 34.5
Average assets 9.8 6.8 18.8 10.2 20.7 10.9 29.7 18.2 88.7 51.3
Average core deposits .2 .1 8.4 2.9 .4 .2 2.2 (.4) 67.6 36.5
Return on equity (5) 18% 14% 24% 26% 20% 26% --% --% 11% 28%
Risk-adjusted efficiency ratio (6) 72% 84% 68% 63% 78% 70% --% --% --% --%

- -----------------------------------------------------------------------------------------------------------------------------------

(4) Businesses are taxed at the Company's marginal (statutory) tax rate,
adjusted for any nondeductible expenses. Any differences between
the marginal and effective tax rates are in Other.
(5) Equity is allocated to the lines of business based on an assessment
of the inherent risk associated with each business so that the
returns on allocated equity are on a risk-adjusted basis and
comparable across business lines.
(6) The risk-adjusted efficiency ratio is defined as noninterest expense
plus the cost of capital divided by revenues (net interest income and
noninterest income) less normalized loan losses.

The following describes the major business units.

The Retail Distribution Group sells and services a complete line of retail
financial products for consumers and small businesses. It encompasses a
network of traditional branches, supermarket branches and banking centers,
the 24-hour Telephone Banking Centers, the ATM network and Wells Fargo's
On-Line Financial Services, the Company's personal computer banking services.
In addition, Retail Distribution includes the consumer checking business,
which primarily uses the branches as a source of new customers.

In the third quarter of 1996, the Retail Distribution Group continued its
integration of First Interstate with the consolidation of the two banks'
physical distribution networks in California. This consolidation consisted of
the closure of 88 traditional Wells Fargo branches and 175 traditional former
First Interstate branches and the sale of 61 traditional former First
Interstate branches to Home Savings of America. The remaining First
Interstate branches in California were converted to Wells Fargo branches, and
all remaining California First Interstate retail accounts were converted to
Wells Fargo accounts. Average consumer checking core deposits for the third
quarter 1996 were $18.8 billion, compared with $9.3 billion in 1995.

The Business Banking Group provides a full range of financial services to
small businesses, including credit, deposits, investments, payroll services,
retirement programs and credit and debit card services. Business Banking
customers include small businesses with annual sales up to $10 million in
which the owner of the business is also the principal financial decision
maker. Core deposits for the third quarter 1996 averaged $12.9 billion,
compared with $6.4 billion in 1995. Loans averaged $4.8 billion, compared
with $2.5 billion in 1995.

The Investment Group is responsible for the sales and management of savings
and investment products, investment management, fiduciary and brokerage
services. This includes the Stagecoach and Overland Express families of
mutual funds as well as personal trust, employee benefit trust and agency
assets. It also includes product management for market rate accounts, savings
deposits, Individual Retirement Accounts (IRAs) and time deposits.

Major third quarter integration activities included the merger of the
Stagecoach and Pacifica mutual funds, the merger of personal trust funds and
the consolidation of investment management and private banking operations.

Assets under management for the third quarter 1996 were $56.7 billion,
compared with $40.4 billion for the same period in 1995. For the third
quarter ending 1996, average loans were $1.9 billion and average core
deposits were $35.8 billion, compared with average loans of $0.5 billion and
average core deposits of $18.0 billion for the same period in 1995.

The Real Estate Group provides a complete line of services supporting the
commercial real estate market. Products and services include construction
loans for commercial and residential development, land acquisition and
development loans, secured and unsecured lines of credit, interim financing
arrangements for completed structures, rehabilitation loans, affordable
housing loans and letters of credit. Secondary market services are provided
through the Real

Estate Capital Markets Group. Its business includes purchasing distressed
loans at a discount, mezzanine financing, acquisition financing, origination
of permanent loans for securitization, syndications, commercial real estate
loan servicing and real estate pension fund advisory services. The Merger
added lending offices in Portland, Houston, San Diego and Phoenix.
Integration activities completed in the third quarter included operation and
office consolidations. The Real Estate Group's loans averaged $10.2 billion
in third quarter 1996, compared with $6.2 billion in 1995.

The Wholesale Products Group serves businesses with annual sales in excess of
$5 million and maintains relationships with major corporations throughout the
United States. The Group is responsible for soliciting and maintaining
credit and noncredit relationships with businesses by offering a variety of
products and services, including traditional commercial loans and lines,
letters of credit, international trade facilities, foreign exchange services,
cash management and electronic products. The Group includes the majority
ownership interest in the Wells Fargo HSBC Trade Bank established in October
1995 that provides trade financing, letters of credit and collection
services. Middle market commercial banking distribution capability was
enhanced through the Merger with the addition of offices in the Pacific
Northwest, Southwest and Texas. The Merger also provided additional cash
management and electronic products market penetration, especially in the
large corporate segment. Integration activities completed in the third
quarter were the consolidations of the regional commercial banking offices,
cash management service centers and commercial loan service centers. The
Wholesale Products Group's loans averaged $18.0 billion in third quarter
1996, compared with $9.3 billion in 1995, and average core deposits were
$11.5 billion, compared with $3.0 billion in 1995.

Consumer Lending offers a full array of consumer loan products, including
credit cards, auto financing and leases, home equity lines and loans, lines
of credit and installment loans. The loan portfolio for third quarter 1996
averaged $24.2 billion, consisting of $5.3 billion in credit cards, $11.7
billion in equity/unsecured loans and $7.2 billion in auto financing. This
compares with $3.7 billion in credit cards, $5.4 billion in equity/unsecured
loans and $2.0 billion in auto financing in 1995.

The Other category includes the Company's 1-4 family first mortgage
portfolio, the investment securities portfolio, goodwill and the
nonqualifying core deposit intangible, the difference between the normalized
provision for the line groups and the Company provision for loan losses, the
net impact of transfer pricing loan and deposit balances, the cost of
external debt, the elimination of intergroup noninterest income and expense,
and any residual effects of unallocated systems and other support groups. It
also includes the impact of asset/liability strategies the Company has put in
place to manage the sensitivity of net interest spreads.

EARNINGS PERFORMANCE

NET INTEREST INCOME

Individual components of net interest income and the net interest margin are
presented in the rate/yield table on pages 18 and 19.

AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS) (1) (2)

- -----------------------------------------------------------------------------------------------------------------------------
Quarter ended September 30,
--------------------------------------------------------------------------
1996 1995
--------------------------------- ---------------------------------
Interest Interest
Average Yields/ income/ Average Yields/ income/
(in millions) balance rates expense balance rates expense
- -----------------------------------------------------------------------------------------------------------------------------

EARNING ASSETS
Federal funds sold and securities purchased
under resale agreements $ 800 5.44% $ 11 $ 79 6.32% $ 1
Investment securities:
At fair value (3):
U.S. Treasury securities 2,678 5.92 40 430 6.54 7
Securities of U.S. government agencies
and corporations 7,473 6.32 119 1,008 5.37 14
Private collateralized mortgage obligations 2,920 6.49 48 964 6.27 15
Other securities 489 6.49 8 68 14.28 2
------- ----- ------- ------
Total investment securities at fair value 13,560 6.28 215 2,470 6.07 38
At cost:
U.S. Treasury securities -- -- -- 1,203 4.89 15
Securities of U.S. government agencies
and corporations -- -- -- 4,663 6.04 70
Private collateralized mortgage obligations -- -- -- 1,205 5.77 17
Other securities -- -- -- 161 7.08 3
------- ----- ------- ------
Total investment securities at cost -- -- -- 7,232 5.83 105
------- ----- ------- ------
Total investment securities 13,560 6.28 215 9,702 5.89 143
Mortgage loans held for sale (3) -- -- -- 963 7.94 19
Loans:
Commercial 18,848 8.92 422 8,869 9.90 221
Real estate 1-4 family first mortgage 11,514 7.32 211 4,962 7.50 93
Other real estate mortgage 12,614 9.15 290 7,994 9.47 191
Real estate construction 2,345 10.97 65 1,184 10.24 31
Consumer:
Real estate 1-4 family junior lien mortgage 6,716 9.17 154 3,364 8.58 72
Credit card 5,295 14.84 196 3,738 15.56 145
Other revolving credit and monthly payment 9,011 9.44 214 2,445 10.73 67
------- ----- ------- ------
Total consumer 21,022 10.71 564 9,547 11.87 284
Lease financing 2,791 8.75 61 1,528 9.28 35
Foreign 140 8.25 3 19 -- --
------- ----- ------- ------
Total loans 69,274 9.30 1,616 34,103 9.98 855
Other 550 6.25 9 57 5.82 1
------- ----- ------- ------
Total earning assets $84,184 8.76 1,851 $44,904 9.05 1,019
------- ----- ------- ------
------- -------
FUNDING SOURCES
Interest-bearing liabilities:
Deposits:
Interest-bearing checking (4) $ 6,022 1.31 20 $ 4,118 1.00 10
Market rate and other savings (4) 32,918 2.64 218 14,970 2.66 100
Savings certificates 16,496 4.74 197 8,398 5.39 114
Other time deposits 381 6.89 7 444 6.99 8
Deposits in foreign offices 293 5.08 4 1,464 5.84 22
------- ----- ------- ------
Total interest-bearing deposits 56,110 3.15 446 29,394 3.43 254
Federal funds purchased and securities sold
under repurchase agreements 1,217 5.01 15 3,144 5.77 46
Commercial paper and other short-term
borrowings 361 3.37 3 442 5.65 6
Senior debt 2,607 6.05 40 1,555 6.56 26
Subordinated debt 2,816 6.92 48 1,478 6.47 24
------- ----- ------- ------
Total interest-bearing liabilities 63,111 3.48 552 36,013 3.92 356
Portion of noninterest-bearing funding
sources 21,073 -- -- 8,891 -- --
------- ----- ------- ------
Total funding sources $84,184 2.61 552 $44,904 3.15 356
------- ----- ------- ------
------- -------
NET INTEREST MARGIN AND NET INTEREST
INCOME ON A TAXABLE-EQUIVALENT BASIS (5) 6.15% $1,299 5.90% $ 663
----- ------ ----- ------
----- ------ ----- ------
NONINTEREST-EARNING ASSETS
Cash and due from banks $ 9,877 $ 2,673
Goodwill 7,439 395
Other 6,878 2,090
------- -------
Total noninterest-earning assets $24,194 $ 5,158
------- -------
------- -------
NONINTEREST-BEARING FUNDING SOURCES
Deposits $26,942 $ 9,132
Other liabilities 3,551 1,124
Preferred stockholders' equity 854 489
Common stockholders' equity 13,920 3,304
Noninterest-bearing funding sources
used to fund earning assets (21,073) (8,891)
------- -------
Net noninterest-bearing funding sources $24,194 $ 5,158
------- -------
------- -------

TOTAL ASSETS $108,378 $50,062
------- -------
------- -------
- -----------------------------------------------------------------------------------------------------------------------------

(1) The average prime rate of Wells Fargo Bank was 8.25% and 8.77% for the
quarters ended September 30, 1996 and 1995, respectively, and 8.28% and
8.86% for the nine months ended September 30, 1996 and 1995, respectively.
The average three-month London Interbank Offered Rate (LIBOR) was 5.59%
and 5.89% for the quarters ended September 30, 1996 and 1995,
respectively, and 5.51% and 6.10% for the nine months ended September 30,
1996 and 1995, respectively.
(2) Interest rates and amounts include the effects of hedge and risk
management activities associated with the respective asset and liability
categories.
(3) Yields are based on amortized cost balances. The average amortized cost
balances for investment securities at fair value totaled $13,651 million
and $2,482 million for the quarters ended September 30, 1996 and 1995,
respectively, and $12,431 million and $2,617 million for the nine months
ended September 30, 1996 and 1995, respectively. The average amortized
cost balances for mortgage loans held for sale totaled $963 million and
$1,300 million for the quarter and nine months ended September 30, 1995,
respectively.
(4) Due to the limited transaction activity on existing NOW (negotiable order
of withdrawal) account customers, $3.4 billion of interest-bearing
checking deposits at December 31, 1995 was reclassified to market rate and
other savings.
(5) Includes taxable-equivalent adjustments that primarily relate to income on
certain loans and securities that is exempt from federal and applicable
state income taxes. The federal statutory tax rate was 35% for all periods
presented.

Nine months ended September 30,
--------------------------------------------------------------------------
1996 1995
--------------------------------- --------------------------------
Interest Interest
Average Yields/ Income/ Average Yields / Income/
balance rates expense balance rates expense
- -----------------------------------------------------------------------------------------------------------------------------

EARNING ASSETS
Federal funds sold and securities purchased
under resale agreements $ 505 5.43% $ 21 $ 64 6.09% $ 3
Investment securities:
At fair value (3):
U.S. Treasury securities 2,405 5.67 102 414 6.64 20
Securities of U.S. government agencies
and corporations 6,968 6.13 322 1,072 5.52 46
Private collateralized mortgage obligations 2,552 6.28 122 1,003 6.35 50
Other securities 460 6.84 22 65 14.42 5
------- ----- ------- ------
Total investment securities at fair value 12,385 6.09 568 2,554 6.17 121
At cost:
U.S. Treasury securities -- -- -- 1,438 4.86 52
Securities of U.S. government agencies
and corporations -- -- -- 4,962 6.04 225
Private collateralized mortgage obligations -- -- -- 1,246 5.85 55
Other securities -- -- -- 160 6.86 8
------- ----- ------- ------
Total investment securities at cost -- -- -- 7,806 5.81 340
------- ----- ------- ------
Total investment securities 12,385 6.09 568 10,360 5.90 461
Mortgage loans held for sale (3) -- -- -- 1,286 7.46 73
Loans:
Commercial 15,883 9.05 1,077 8,455 9.89 626
Real estate 1-4 family first mortgage 9,287 7.43 518 6,341 7.32 348
Other real estate mortgage 11,277 9.23 778 8,058 9.52 574
Real estate construction 2,020 10.40 157 1,092 10.20 83
Consumer:
Real estate 1-4 family junior lien mortgage 5,617 8.95 377 3,347 8.59 216
Credit card 4,805 14.95 539 3,435 15.64 403
Other revolving credit and monthly payment 6,929 9.62 499 2,356 10.58 186
------- ----- ------- ------
Total consumer 17,351 10.88 1,415 9,138 11.75 805
Lease financing 2,430 8.87 162 1,429 9.22 99
Foreign 136 6.11 6 25 7.58 1
------- ----- ------- ------
Total loans 58,384 9.40 4,113 34,538 9.80 2,536
Other 339 6.39 16 59 5.57 2
------- ----- ------- ------
Total earning assets $71,613 8.79 4,718 $46,307 8.85 3,075
------- ----- ------- ------
------- -------
FUNDING SOURCES
Interest-bearing liabilities:
Deposits:
Interest-bearing checking (4) $ 4,651 1.26 44 $ 4,230 1.00 32
Market rate and other savings (4) 27,962 2.63 550 15,417 2.59 298
Savings certificates 13,979 4.88 511 7,901 5.20 307
Other time deposits 402 6.59 20 415 5.78 18
Deposits in foreign offices 373 5.26 15 2,142 5.93 95
------- ----- ------- ------
Total interest-bearing deposits 47,367 3.21 1,140 30,105 3.33 750
Federal funds purchased and securities sold
under repurchase agreements 1,861 5.20 72 3,649 5.88 160
Commercial paper and other short-term
borrowings 354 4.32 11 582 5.85 26
Senior debt 2,204 6.11 101 1,568 6.78 80
Subordinated debt 2,222 6.94 116 1,477 6.53 72
------- ----- ------- ------
Total interest-bearing liabilities 54,008 3.56 1,440 37,381 3.89 1,088
Portion of noninterest-bearing funding
sources 17,605 -- -- 8,926 -- --
------- ----- ------- ------
Total funding sources $71,613 2.68 1,440 $46,307 3.13 1,088
------- ----- ------- ------
------- -------
NET INTEREST MARGIN AND NET INTEREST
INCOME ON A TAXABLE-EQUIVALENT BASIS (5) 6.11% $ 3,278 5.72% $ 1,987
----- ------- ----- -------
----- ------- ----- -------
NONINTEREST-EARNING ASSETS
Cash and due from banks $ 7,116 $ 2,621
Goodwill 5,027 403
Other 4,963 1,975
------- -------
Total noninterest-earning assets $17,106 $ 4,999
------- -------
------- -------
NONINTEREST-BEARING FUNDING SOURCES
Deposits $20,980 $ 8,967
Other liabilities 2,418 1,140
Preferred stockholders' equity 728 489
Common stockholders' equity 10,585 3,329
Noninterest-bearing funding sources
used to fund earning assets (17,605) (8,926)
------- -------
Net noninterest-bearing funding sources $17,106 $ 4,999
------- -------
------- -------

TOTAL ASSETS $88,719 $51,306
------- -------
------- -------
- -----------------------------------------------------------------------------------------------------------------------------

Net interest income on a taxable-equivalent basis was $1,299 million in the
third quarter of 1996, compared with $663 million in the third quarter of 1995.
The Company's net interest margin was 6.15% in the third quarter of 1996,
compared with 5.90% in the third quarter of 1995 and 6.03% in the second quarter
of 1996. Net interest income on a taxable-equivalent basis was $3,278 million
in the first nine months of 1996, compared with $1,987 million in the first nine
months of 1995. The Company's net interest margin was 6.11% in the first nine
months of 1996, compared with 5.72% in the first nine months of 1995.

Interest income included hedging income of $24 million in the third quarter
of 1996, compared with $1 million in the third quarter of 1995. Interest
expense included hedging income of $5 million in the third quarter of 1995.

Loans averaged $69.3 billion in the third quarter of 1996, compared with $34.1
billion in the third quarter of 1995, and $58.4 billion in the first nine months
of 1996, compared with $34.5 billion in the first nine months of 1995. This
increase primarily reflects the acquisition of the First Interstate portfolio.

Investment securities averaged $13.6 billion during the third quarter of 1996,
compared with $9.7 billion in the third quarter of 1995, and $12.4 billion in
the first nine months of 1996, compared with $10.4 billion in the first nine
months of 1995. This increase reflects the acquisition of the First Interstate
portfolio.

Average core deposits were $82.4 billion and $36.6 billion in the third quarter
of 1996 and 1995, respectively, and funded 76% and 73% of the Company's average
total assets in the same quarter of 1996 and 1995, respectively. For the first
nine months of 1996 and 1995, average core deposits were $67.6 billion and $36.5
billion, respectively, and funded 76% and 71% of the Company's average total
assets in the same period of 1996 and 1995, respectively.

NONINTEREST INCOME

- ----------------------------------------------------------------------------------------------------------------------------------
Quarter Nine months
ended September 30, % ended September 30, %
------------------- -------------------
(in millions) 1996 1995 Change 1996 1995 Change
- ----------------------------------------------------------------------------------------------------------------------------------

Service charges on deposit accounts $ 254 $ 121 110% $ 634 $ 357 78%
Fees and commissions:
Debit and credit card merchant fees 33 17 94 85 48 77
Credit card membership and other credit
card fees 30 27 11 83 68 22
Charges and fees on loans 32 13 146 81 36 125
Shared ATM network fees 28 13 115 67 38 76
Mutual fund and annuity sales fees 17 7 143 44 25 76
All other 65 35 86 174 101 72
------ -------- -------- ------
Total fees and commissions 205 112 83 534 316 69
Trust and investment services income:
Asset management and custody fees 59 33 79 154 96 60
Mutual fund management fees 34 19 79 89 51 75
All other 11 11 -- 24 29 (17)
------ -------- -------- ------
Total trust and investment services income 104 63 65 267 176 52
Investment securities gains (losses) -- -- -- 2 (15) --
Income from equity investments accounted
for by the:
Cost method 37 9 311 92 41 124
Equity method 3 11 (73) 13 31 (58)
Check printing charges 15 9 67 39 29 34
Gains (losses) on sales of loans 6 19 (68) 11 (46) --
Gains (losses) from dispositions of operations (1) (13) 92 5 (22) --
Losses on dispositions of premises and equipment (8) (3) (167) (25) (11) (127)
All other 28 11 155 64 34 88
------ -------- -------- ------
Total $ 643 $ 339 90% $ 1,636 $ 890 84%
------ -------- ----- -------- ------ -----
------ -------- ----- -------- ------ -----
- ----------------------------------------------------------------------------------------------------------------------------------

The overall increase in noninterest income reflected the impact of the Merger.

"All other" fees and commissions include mortgage loan servicing fees and the
related amortization expense for purchased mortgage servicing rights. Mortgage
loan servicing fees totaled $21 million and $15 million for the third quarter of
1996 and 1995, respectively, and $58 million and $40 million for the first nine
months of 1996 and 1995, respectively. The related amortization expense was
$16 million and $11 million for the third quarter of 1996 and 1995,
respectively, and $43 million and $28 million for the first nine months of 1996
and 1995, respectively. The balance of purchased mortgage servicing rights was
$246 million and $156 million at September 30, 1996 and 1995, respectively. The
purchased mortgage loan servicing portfolio totaled $21 billion at September 30,
1996, compared with $13 billion at September 30, 1995.

A major portion of the increase in trust and investment services income for the
third quarter and first nine months of 1996 was due to greater mutual fund
management fees, reflecting the overall growth in the fund families' net assets,
including the Pacifica funds previously managed by First Interstate. In
September 1996, the Pacifica funds, totaling $5.3 billion, were merged into the
Stagecoach family of mutual funds. The Company managed 28 of the Stagecoach
family of mutual funds

consisting of $13.7 billion of assets at September 30, 1996, compared with 27
funds consisting of $8.7 billion of assets at September 30, 1995. Of the
newly merged Pacifica funds, $2.4 billion became the Stagecoach institutional
funds, while the remaining $2.9 billion merged into the Stagecoach retail
funds. The Company also manages the Overland Express family of 14 mutual
funds, which had $4.7 billion of assets under management at September 30,
1996, compared with $3.3 billion at September 30, 1995, and is sold through
brokers around the country. In addition to managing Stagecoach and Overland
Express Funds, the Company also managed or maintained personal trust,
corporate trust, employee benefit trust and agency assets of approximately
$299 billion (including $245 billion from First Interstate) and $53 billion
at September 30, 1996 and 1995, respectively.

The Masterworks division along with the Company's joint venture interest in
Wells Fargo Nikko Investment Advisors were sold at year-end 1995, resulting in a
reduction of $.5 billion of the retail funds and the entire $1.8 billion in
institutional funds.

At December 31, 1995, the Company had a liability of $83 million related to
the disposition of premises and, to a lesser extent, severance and
miscellaneous expenses associated with scheduled branch dispositions. Of
this amount, $13 million represented a third quarter 1995 accrual for the
closure of 21 branches, of which 19 were closed in March 1996. The remaining
amount consisted of a fourth quarter 1995 accrual for the disposition of 120
branches, of which 88 branches were closed in the third quarter of 1996. In
October 1996, the Company entered into definitive agreements with several
institutions to sell 12 traditional branches of Wells Fargo located in
California. The sales, which had been included in the fourth quarter 1995
accrual, are expected to close in the first quarter of 1997. The remaining
20 branch dispositions are expected to be completed by the first quarter of
1997. The liability at September 30, 1996 associated with branch dispositions
not acquired as a result of the Merger was $8 million. Additional expense
accruals are expected to be made in the fourth quarter of 1996 or the first
quarter of 1997 for additional Wells Fargo branch dispositions that are yet
to be identified as the Company continues to open more supermarket branches
and banking centers. At September 30, 1996, the Company had 1,847 retail
outlets, comprised of 1,266 traditional branches, 223 supermarket branches
and 358 banking centers, in 13 western states, including three traditional
branches each in Wyoming, Montana and Alaska. In August 1996, the Company and
Safeway Inc. signed an agreement in principle that would allow the Company to
open as many as 450 new retail outlets (banking centers and branches) in
Safeway stores in the western United States.

For the first half of 1995, gains and losses on sales of loans included an
estimated $83 million write-down to the lower of cost or estimated market due to
the reclassification of certain types of products within the real estate 1-4
family first mortgage loan portfolio to mortgage loans held for sale. This
write-down was partially offset by gains on sales of two loans, resulting from
the assumption of the borrowers' loans by third parties.

NONINTEREST EXPENSE

Salaries $ 378 $ 176 115% $ 960 $ 526 83%
Incentive compensation 53 33 61 146 92 59
Employee benefits 105 46 128 261 147 78
Equipment 103 47 119 269 139 94
Net occupancy 96 54 78 257 159 62
Contract services 88 40 120 196 104 88
Goodwill 81 9 800 170 26 554
Core deposit intangible:
Nonqualifying (1) 69 -- -- 142 -- --
Qualifying 9 10 (10) 28 32 (13)
Telecommunications 42 16 163 85 43 98
Outside professional services 32 11 191 76 31 145
Operating losses 31 13 138 72 39 85
Postage 27 13 108 68 39 74
Advertising and promotion 32 18 78 66 49 35
Stationery and supplies 18 9 100 49 27 81
Travel and entertainment 23 9 156 48 26 85
Security 16 5 220 38 15 153
Outside data processing 17 3 467 36 8 350
Federal deposit insurance 24 -- -- 28 47 (40)
Check printing 11 6 83 27 19 42
Escrow and collection agency fees 9 3 200 22 11 100
Foreclosed assets 2 4 (50) 5 2 150
All other 39 17 129 100 57 75
------ ------ ------ ------
Total $1,305 $ 542 141% $3,149 $1,638 92%
------ ------ ---- ------ ------ ---
------ ------ ---- ------ ------ ---
- ----------------------------------------------------------------------------------------------------------------------------------

(1) Amortization of core deposit intangibles acquired after February 1992 that
are subtracted from stockholders' equity in computing regulatory capital
for bank holding companies.

In addition to the effect of combining operations of First Interstate with the
Company, a major portion of the overall increase in noninterest expense
reflected merger-related expenses, including intangible amortization, severance,
advertising and higher expenses for contract and outside professional services.

Salaries, incentive compensation and employee benefits expense increased $281
million and $602 million from the third quarter and first nine months of
1995, respectively, substantially due to higher staff levels after the
consummation of the Merger. Salaries and employee benefits expense for the
third and second quarters of 1996 included merger-related severance expense
of $10 million and $27 million, respectively. Additional severance expense
may be incurred in future quarters as the Company continues the integration
process. The Company's active full-time equivalent (FTE) staff, including
hourly employees, was approximately 38,859 at September 30, 1996, compared
with approximately 19,196 at September 30, 1995. The Company currently
expects to have less than 35,000 active FTE by the third quarter of 1997.

Excluding the effects of the Merger, increases in equipment expense in the
third quarter and first nine months of 1996 compared with the same periods in
1995 were primarily due to a higher level of spending on software and
technology for product development and increased depreciation expense on
equipment related to business initiatives and system upgrades.

Goodwill and CDI amortization resulting from the Merger were $72 million and
$69 million for the quarter ended September 30, 1996, respectively. The core
deposit intangible is amortized on an accelerated basis based on an estimated
useful life of 15 years. The impact on

noninterest expense from the amortization of the nonqualifying core deposit
intangible in 1997, 1998 and 1999 is expected to be $241 million, $211
million and $186 million, respectively. The related impact on income tax
expense is expected to be a benefit of $99 million, $86 million and $76
million in 1997, 1998 and 1999, respectively.

The increase in federal deposit insurance for the third quarter of 1996,
compared with the same period of 1995, was due to the passage of the Deposit
Insurance Funds Act of 1996 (DIFA). DIFA was enacted, in part, to increase the
Federal Deposit Insurance Corporation Savings Association Insurance Fund reserve
ratio to 1.25% and levied a 65.7 cent fee on every $100 of thrift deposits held
on March 31, 1995. The Company acquired thrift deposits through the Merger.
Accordingly, $22 million was accrued in the third quarter 1996 based on the
March 31, 1995 thrift deposit base of First Interstate.

INCOME TAXES

The Company's effective tax rate was 46% and 45% for the third quarter and first
nine months of 1996, respectively, compared with 43% and 41% for the same
periods of 1995, respectively. The increase in the effective tax rate for the
third quarter and first nine months of 1996 was due to increased goodwill
amortization related to the Merger, which is not tax deductible. The increase
in the effective tax rate for the first nine months of 1996 was also due to a
$22 million reduction of income tax expense in 1995 related to the settlement
with the Internal Revenue Service of certain audit issues pertaining to auto
leases for the years 1987 through 1992.

EARNINGS/RATIOS EXCLUDING GOODWILL AND NONQUALIFYING CDI

The following table reconciles reported earnings to net income excluding
goodwill and nonqualifying core deposit intangible ("cash" or "tangible") for
the quarter ended September 30, 1996:

- -----------------------------------------------------------------------------------------------
Quarter ended
(in millions) September 30, 1996
- -----------------------------------------------------------------------------------------------
Amortization
-----------------------
Nonqualifying
Reported core deposit "Cash"
earnings Goodwill intangible earnings
- -----------------------------------------------------------------------------------------------

Income before income tax expense $ 598 $ 81 $ 69 $ 748
Income tax expense (277) -- (28) (305)
------ ----- ----- ------
Net income 321 81 41 443
Preferred dividends (19) -- -- (19)
------ ----- ----- ------

Net income applicable to common stock $ 302 $ 81 $ 41 $ 424
------ ----- ----- ------
------ ----- ----- ------
Per common share $ 3.23 $ .86 $ .43 $ 4.52
------ ----- ----- ------
------ ----- ----- ------
- -----------------------------------------------------------------------------------------------

The ROA, ROE and efficiency ratios excluding goodwill and nonqualifying
core deposit intangible amortization and balances for the quarter ended
September 30, 1996 were calculated as follows:

- ---------------------------------------------------------------------------------------------------------
Quarter ended
(in millions) September 30, 1996
- ---------------------------------------------------------------------------------------------------------

ROA: A*/ (C-E) = 1.77%
ROE: B*/ (D-E) = 31.91%
Efficiency: (F-G) / H = 59.6%

Net income $ 443 (A)
Net income applicable to common stock 424 (B)
Average total assets 108,378 (C)
Average common stockholders' equity 13,920 (D)
Average goodwill ($7,439) and after-tax nonqualifying core deposit intangible ($1,196) 8,635 (E)
Noninterest expense 1,305 (F)
Amortization expense for goodwill and nonqualifying core deposit intangible 150 (G)
Net interest income plus noninterest income 1,938 (H)
- ---------------------------------------------------------------------------------------------------------

* Annualized

BALANCE SHEET ANALYSIS
INVESTMENT SECURITIES

- ----------------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, December 31, September 30,
1996 1995 1995
--------------------- ---------------------- ---------------------
ESTIMATED Estimated Estimated
FAIR fair fair
(in millions) COST VALUE Cost value Cost value
- ----------------------------------------------------------------------------------------------------------------------------------

AVAILABLE-FOR-SALE SECURITIES
AT FAIR VALUE:
U.S. Treasury securities $ 2,607 $ 2,611 $ 1,347 $ 1,357 $ 423 $ 430
Securities of U.S. government
agencies and corporations (1) 7,306 7,264 5,218 5,223 1,032 1,010
Private collateralized mortgage obligations (2) 3,108 3,084 2,121 2,122 981 963
Other 403 408 169 181 25 36
-------- -------- -------- -------- -------- --------
Total debt securities 13,424 13,367 8,855 8,883 2,461 2,439
Marketable equity securities 36 66 18 37 17 37
-------- -------- -------- -------- -------- --------
Total $ 13,460 $ 13,433 $ 8,873 $ 8,920 $ 2,478 $ 2,476
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
HELD-TO-MATURITY SECURITIES
AT COST:
U.S. Treasury securities $ -- $ -- $ -- $ -- $ 1,073 $ 1,064
Securities of U.S. government
agencies and corporations (1) -- -- -- -- 4,535 4,503
Private collateralized mortgage obligations (2) -- -- -- -- 1,189 1,172
Other -- -- -- -- 163 164
-------- -------- -------- -------- -------- --------
Total debt securities $ -- $ -- $ -- $ -- $ 6,960 $ 6,903
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------------------------------------

(1) All securities of U.S. government agencies and corporations are mortgage-
backed securities.
(2) Substantially all private collateralized mortgage obligations (CMOs) are
AAA rated bonds collateralized by 1-4 family residential first mortgages.

In November 1995, the FASB permitted a one-time opportunity for companies to
reassess by December 31, 1995 their classification of securities under FAS 115,
Accounting for Certain Investments in Debt and Equity Securities. As a result,
on November 30, 1995, the Company reclassified all of its held-to-maturity
securities at cost portfolio of $6.5 billion to the available-for-sale
securities at fair value portfolio in order to provide increased liquidity
flexibility to meet anticipated loan growth.

The available-for-sale portfolio includes both debt and marketable equity
securities. At September 30, 1996, the available-for-sale securities portfolio
had an unrealized net loss of $27 million, or less than 1% of the cost of the
portfolio, comprised of unrealized gross losses of $107 million and
unrealized gross gains of $80 million. At December 31, 1995, the
available-for-sale securities portfolio had an unrealized net gain of $47
million, comprised of unrealized gross gains of $88 million and unrealized
gross losses of $41 million. At September 30, 1995, the available-for-sale
securities portfolio had an unrealized net loss of $2 million, comprised of
unrealized gross losses of $45 million and unrealized gross gains of $43
million. The unrealized net gain or loss on available-for-sale securities is
reported on an after-tax basis as a separate component of stockholders'
equity. At Sepember 30, 1996, the valuation allowance amounted to

an unrealized net loss of $16 million, compared with an unrealized net gain
of $26 million at December 31, 1995 and an unrealized net loss of $1 million
at September 30, 1995.

At September 30, 1995, the held-to-maturity securities portfolio had an
estimated unrealized net loss of $57 million (which reflected estimated
unrealized gross gains of $25 million).

The unrealized net loss in the available-for-sale portfolio at September 30,
1996 was predominantly due to investments in mortgage-backed securities. This
unrealized net loss reflected current interest rates that were higher than those
at the time the investments were purchased. The decline in the fair value of the
investment securities portfolio is not considered to be an other-than-temporary
impairment. The Company may decide to sell certain of the available-for-sale
securities to manage the level of earning assets (for example, to offset loan
growth that may exceed expected maturities and prepayments of securities).

During the first nine months of 1996, realized gross gains and losses resulting
from the sale of available-for-sale securities were $5 million and $2 million,
respectively.

During the first nine months of 1995, realized losses on the sale of investment
securities totaled $15 million. These losses resulted from the sale of $397
million of securities of U.S. government agencies and corporations, $288 million
of private collateralized mortgage obligations and $2 million of marketable
equity securities from the available-for-sale portfolio for asset/liability
management purposes.

The following table provides the expected remaining maturities and yields
(taxable-equivalent basis) of debt securities within the investment portfolio.

- ----------------------------------------------------------------------------------------------------------------------
September 30, 1996
-------------------------------------------------------------------------------
Expected remaining principal maturity
-------------------------------------------------------------------------------
Weighted
average
expected After one year
Weighted remaining One year or less through five years
Total average maturity ---------------- ------------------
(in millions) amount yield (in yrs.-mos.) Amount Yield Amount Yield
- ----------------------------------------------------------------------------------------------------------------------

AVAILABLE-FOR-SALE SECURITIES (1):
U.S. Treasury securities $ 2,607 6.00% 1-10 $ 970 5.80% $ 1,631 6.12%
Securities of U.S. government
agencies and corporations 7,306 6.49 2-4 2,509 5.95 4,061 6.60
Private collateralized mortgage
obligations 3,108 6.65 2-2 945 6.42 2,089 6.66
Other 403 7.23 2-2 122 6.45 261 6.82
-------- ------- --------

TOTAL COST OF DEBT SECURITIES $ 13,424 6.46% 2-3 $ 4,546 6.03% $ 8,042 6.53%
-------- ---- ---- ------- ---- -------- ----
-------- ---- ---- ------- ---- -------- ----

ESTIMATED FAIR VALUE $ 13,367 $ 4,527 $ 8,005
-------- ------- --------
-------- ------- --------
- ----------------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------
September 30, 1996
------------------------------------------
Expected remaining principal maturity
------------------------------------------
After five years
through ten years After ten years
------------------ ----------------
(in millions) Amount Yield Amount Yield
- -------------------------------------------------------------------------------------

AVAILABLE-FOR-SALE SECURITIES (1)
U.S. Treasury securities $ 6 6.32% $ -- --%
Securities of U.S. government
agencies and corporations 657 7.76 79 7.50
Private collateralized mortgage
obligations 64 7.37 10 22.06
Other 18 18.53 2 6.37
------ -------

TOTAL COST OF DEBT SECURITIES $ 745 7.98% $ 91 9.08%
------ ----- ------- -----
------ ----- ------- -----

ESTIMATED FAIR VALUE $ 743 $ 92
------ -------
------ -------
- -------------------------------------------------------------------------------------

(1) The weighted average yield is computed using the amortized cost of
available-for-sale investment securities carried at fair value.

The weighted average expected remaining maturity of the debt securities
portfolio was 2 years and 3 months at September 30, 1996, compared with 2 years
and 2 months at June 30, 1996 and 2 years and 1 month at December 31, 1995. The
short-term debt securities portfolio serves to maintain asset liquidity and to
fund loan growth.

At September 30, 1996, mortgage-backed securities included in securities of U.S.
government agencies and corporations primarily consisted of pass-through
securities and collateralized mortgage obligations (CMOs) and substantially all
were issued or backed by federal agencies. These securities, along with the
private CMOs, represented $10,348 million, or 77%, of the Company's investment
securities portfolio at September 30, 1996. The CMO securities held by the
Company (including the private issues) are primarily shorter-maturity class
bonds that were structured to have more predictable cash flows by being less
sensitive to prepayments during periods of changing interest rates. As an
indication of interest rate risk, the Company has estimated the impact of a 200
basis point increase in interest rates on the value of the mortgage-backed
securities and the corresponding expected remaining maturities. Based on this
rate scenario, mortgage-backed securities would decrease in fair value from
$10,348 million to $9,872 million and the expected remaining maturity of these
securities would increase from 2 years and 3 months to 2 years and 7 months.

LOAN PORTFOLIO

- ------------------------------------------------------------------------------------------------------------------
% Change
September 30, 1996 from
-----------------------
SEPT. 30, Dec. 31, Sept. 30, Dec. 31, Sept. 30,
(in millions) 1996 1995 1995 1995 1995
- ------------------------------------------------------------------------------------------------------------------

Commercial (1)(2) $ 20,064 $ 9,750 $ 9,247 106% 117%
Real estate 1-4 family first mortgage (3) 10,754 4,448 4,496 142 139
Other real estate mortgage (4) 12,462 8,263 7,943 51 57
Real estate construction 2,331 1,366 1,283 71 82
Consumer:
Real estate 1-4 family junior lien mortgage 6,406 3,358 3,365 91 90
Credit card 5,292 4,001 3,852 32 37
Other revolving credit and monthly payment 8,846 2,576 2,479 243 257
--------- ----------- -----------
Total consumer 20,544 9,935 9,696 107 112
Lease financing 2,891 1,789 1,610 62 80
Foreign 187 31 23 503 713
--------- ----------- -----------
Total loans (net of unearned income,
including net deferred loan fees,
of $561, $463 and $431) $ 69,233 $ 35,582 $ 34,298 95% 102%
--------- ----------- ----------- ---- ----
--------- ----------- ----------- ---- ----
- ------------------------------------------------------------------------------------------------------------------

(1) Includes loans (primarily unsecured) to real estate developers and real
estate investment trusts (REITs) of $990 million, $700 million and
$455 million at September 30, 1996, December 31, 1995 and September 30,
1995, respectively.
(2) Includes agricultural loans (loans to finance agricultural production and
other loans to farmers) of $1,441 million, $1,029 million and $931 million
at September 30, 1996, December 31, 1995 and September 30, 1995,
respectively.
(3) Excludes mortgage loans held for sale at September 30, 1995 of
$510 million, net of an estimated $13 million write-down to the lower of
cost or estimated market.
(4) Includes agricultural loans that are secured by real estate of
$349 million, $250 million and $247 million at September 30, 1996,
December 31, 1995 and September 30, 1995, respectively.

The table below presents comparative period-end commercial real estate loans.

Commercial loans to real
estate developers and REITs (1) $ 990 $ 700 $ 455 41% 118%
Other real estate mortgage 12,462 8,263 7,943 51 57
Real estate construction 2,331 1,366 1,283 71 82
----------- ----------- -----------
Total $ 15,783 $ 10,329 $ 9,681 53% 63%
----------- ----------- ----------- --- ---
----------- ----------- ----------- --- ---
Nonaccrual loans $ 412 $ 371 $ 413 11% --%
----------- ----------- ----------- --- ---
----------- ----------- ----------- --- ---
Nonaccrual loans as a % of total 2.6% 3.6% 4.3%
----------- ----------- -----------
----------- ----------- -----------
- ------------------------------------------------------------------------------------------------------------------

(1) Included in commercial loans.

NONACCRUAL AND RESTRUCTURED LOANS AND OTHER ASSETS (1)

- ----------------------------------------------------------------------------------------------------
SEPT. 30, Dec. 31, Sept. 30,
(in millions) 1996 1995 1995
- ----------------------------------------------------------------------------------------------------

Nonaccrual loans:
Commercial (2)(3) $ 216 $ 112 $ 128
Real estate 1-4 family first mortgage 77 64 56
Other real estate mortgage (4) 370 307 335
Real estate construction 28 46 55
Consumer:
Real estate 1-4 family junior lien mortgage 21 8 11
Other revolving credit and monthly payment 2 1 1
Lease financing 3 -- --
----------- ----------- -----------
Total nonaccrual loans (5) 717 538 586
Restructured loans (6) 11 14 14
----------- ----------- -----------
Nonaccrual and restructured loans 728 552 600
As a percentage of total loans (7) 1.1% 1.6% 1.8%
----------- ----------- -----------
Foreclosed assets 227 186 214
Real estate investments (8) 6 12 13
----------- ----------- -----------
Total nonaccrual and restructured loans
and other assets $ 961 $ 750 $ 827
----------- ----------- -----------
----------- ----------- -----------
- ----------------------------------------------------------------------------------------------------

(1) Excludes loans that are contractually past due 90 days or more as to
interest or principal, but are both well-secured and in the process of
collection or are real estate 1-4 family first mortgage loans or consumer
loans that are exempt under regulatory rules from being classified as
nonaccrual.
(2) Includes loans (primarily unsecured) to real estate developers and REITs
of $14 million, $18 million and $23 million at September 30, 1996,
December 31, 1995 and September 30, 1995, respectively.
(3) Includes agricultural loans of $15 million, $6 million and $7 million
at September 30, 1996, December 31, 1995 and September 30, 1995,
respectively.
(4) Includes agricultural loans secured by real estate of $5 million or
less for all periods presented.
(5) Of the total nonaccrual loans, $530 million, $408 million and $468
million at September 30, 1996, December 31, 1995 and September 30,
1995, respectively, were considered impaired under FAS 114 (Accounting
by Creditors for Impairment of a Loan).
(6) In addition to originated loans that were subsequently restructured,
there were loans of $50 million, $50 million and none at September 30,
1996, December 31, 1995 and September 30, 1995, respectively, that
were purchased at a steep discount whose contractual terms were
modified after acquisition. The modified terms did not affect the
book balance nor the yields expected at the date of purchase. Of the
total restructured loans and loans purchased at a steep discount,
$50 million, $50 million and none were considered impaired under FAS
114 at September 30, 1996, December 31, 1995 and September 30, 1995,
respectively.
(7) Total loans exclude mortgage loans held for sale at September
30, 1995.
(8) Represents the amount of real estate investments (contingent interest
loans accounted for as investments) that would be classified as
nonaccrual if such assets were loans. Real estate investments totaled
$128 million, $95 million and $116 million at September 30, 1996,
December 31, 1995 and September 30, 1995, respectively.

The table below summarizes the changes in total nonaccrual loans.

- -------------------------------------------------------------------------------
SEPT. 30, Sept. 30,
(in millions) 1996 1995
- -------------------------------------------------------------------------------

Balance, beginning of quarter $ 731 $ 631
New loans placed on nonaccrual 156 108
Loans sold -- (13)
Charge-offs (43) (27)
Payments (54) (70)
Transfers to foreclosed assets (36) (29)
Loans returned to accrual (37) (14)
----------- -----------
Balance, end of quarter $ 717 $ 586
----------- -----------
----------- -----------
- -------------------------------------------------------------------------------

The Company generally identifies loans to be evaluated for impairment under FAS
114 (Accounting by Creditors for Impairment of a Loan) when such loans are on
nonaccrual or have been restructured. However, not all nonaccrual loans are
impaired. Generally, a loan is placed on nonaccrual status upon becoming 90 days
past due as to interest or principal (unless both well-secured and in the
process of collection), when the full timely collection of interest or principal
becomes uncertain or when a portion of the principal balance has been charged
off. Real estate 1-4 family loans (both first liens and junior liens) are placed
on nonaccrual status within 150 days of becoming past due as to interest or
principal, regardless of security. In contrast, under FAS 114, loans are
considered impaired when it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the loan
agreement, including scheduled interest payments. For a loan that has been
restructured, the contractual terms of the loan agreement refer to the
contractual terms specified by the original loan agreement, not the contractual
terms specified by the restructuring agreement. Not all impaired loans are
necessarily placed on nonaccrual status. That is, restructured loans performing
under restructured terms beyond a specified performance period are classified as
accruing but may still be deemed impaired under FAS 114.

For loans covered under FAS 114, the Company makes an assessment for impairment
when and while such loans are on nonaccrual, or the loan has been restructured.
When a loan with unique risk characteristics has been identified as being
impaired, the amount of impairment will be measured by the Company using
discounted cash flows, except when it is determined that the sole (remaining)
source of repayment for the loan is the operation or liquidation of the
underlying collateral. In such cases, the current fair value of the collateral,
reduced by costs to sell, will be used in place of discounted cash flows.
Additionally, some impaired loans with commitments of less than $1 million are
aggregated for the purpose of measuring impairment using historical loss factors
as a means of measurement.

If the measurement of the impaired loan is less than the recorded investment in
the loan (including accrued interest, net deferred loan fees or costs and
unamortized premium or discount), an impairment is recognized by creating or
adjusting an existing allocation of the allowance for loan losses. FAS 114 does
not change the timing of charge-offs of loans to reflect the amount ultimately
expected to be collected.

The average recorded investment in impaired loans was $562 million and $542
million during the third quarter and first nine months of 1996, respectively,
and $493 million and $475 million during the third quarter and first nine months
of 1995, respectively. Total interest income recognized on impaired loans was
$5 million and $14 million during the third quarter and first nine months of
1996, respectively, and $5 million and $13 million during the third quarter and
first nine months of 1995, respectively. The interest income for all periods was
recorded using the cash method.

The table below shows the recorded investment in impaired loans by loan category
at September 30, 1996, December 31, 1995 and September 30, 1995:

- --------------------------------------------------------------------------------
SEPT. 30, Dec. 31, Sept. 30,
(in millions) 1996 1995 1995
- --------------------------------------------------------------------------------

Commercial $ 160 $ 77 $ 97
Real estate 1-4 family first mortgage 5 2 2
Other real estate mortgage (1) 386 330 315
Real estate construction 28 46 53
Other 1 3 1
----------- ----------- -----------

Total (2) $ 580 $ 458 $ 468
----------- ----------- -----------
----------- ----------- -----------

Impairment measurement based on:
Collateral value method $ 427 $ 374 $ 359
Discounted cash flow method 126 66 93
Historical loss factors 27 18 16
----------- ----------- -----------
$ 580 $ 458 $ 468
----------- ----------- -----------
----------- ----------- -----------
- --------------------------------------------------------------------------------

(1) Includes accruing loans of $50 million, $50 million and none purchased at a
steep discount at September 30, 1996, December 31, 1995 and September 30,
1995, respectively, whose contractual terms were modified after
acquisition. The modified terms did not affect the book balance nor the
yields expected at the date of purchase.
(2) Includes $33 million, $22 million and $31 million of impaired loans with a
related FAS 114 allowance of $4 million, $3 million and $5 million at
September 30, 1996, December 31, 1995 and September 30, 1995, respectively.

The Company uses either the cash or cost recovery method to record cash receipts
on impaired loans that are on nonaccrual. Under the cash method, contractual
interest is credited to interest income when received. This method is used when
the ultimate collectibility of the total principal is not in doubt. Under the
cost recovery method, all payments received are applied to principal. This
method is used when the ultimate collectibility of the total principal is in
doubt. Loans on the cost recovery method may be changed to the cash method when
the application of the cash payments has reduced the principal balance to a
level where collection of the remaining recorded investment is no longer in
doubt.

The Company anticipates normal influxes of nonaccrual loans as it further
increases its lending activity as well as resolutions of loans in the nonaccrual
portfolio. The performance of any individual loan can be impacted by external
factors, such as the interest rate environment or factors particular to a
borrower such as actions taken by a borrower's management. In addition, from
time to time, the Company purchases loans from other financial institutions that
may be classified as nonaccrual based on its policies.

The table below summarizes the changes in foreclosed assets.

- ----------------------------------------------------------------------------
SEPT. 30, Sept. 30,
(in millions) 1996 1995
- ----------------------------------------------------------------------------
BALANCE, BEGINNING OF QUARTER $ 238 $ 224
Additions 35 30
Sales (42) (32)
Charge-offs (3) (3)
Write-downs (1) (5)
------- -------
BALANCE, END OF QUARTER $ 227 $ 214
------- -------
------- -------
- ----------------------------------------------------------------------------

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING

The following table shows loans contractually past due 90 days or more as to
interest or principal, but not included in the nonaccrual or restructured
categories. All loans in this category are both well-secured and in the process
of collection or are real estate 1-4 family first mortgage loans or consumer
loans that are exempt under regulatory rules from being classified as nonaccrual
because they are automatically charged off after being past due for a prescribed
period (generally, 180 days). Notwithstanding, real estate 1-4 family loans
(first liens and junior liens) are placed on nonaccrual within 150 days of
becoming past due and such nonaccrual loans are excluded from the following
table.

- -------------------------------------------------------------------------------
SEPT. 30, Dec. 31, Sept. 30,
(in millions) 1996 1995 1995
- -------------------------------------------------------------------------------
Commercial $ 78 $ 12 $ 15
Real estate 1-4 family first mortgage 45 8 7
Other real estate mortgage 48 24 29
Real estate construction 4 -- 4
Consumer:
Real estate 1-4 family junior lien mortgage 23 4 4
Credit card 111 95 75
Other revolving credit and monthly payment 11 1 1
------ ------ ------
Total consumer 145 100 80
------ ------ ------
Total $ 320 $ 144 $ 135
------ ------ ------
------ ------ ------
- -------------------------------------------------------------------------------

ALLOWANCE FOR LOAN LOSSES

- -------------------------------------------------------------------------------------------------------------------
Quarter ended Nine months ended
-------------------------- ------------------------
SEPT. 30, Sept. 30, SEPT. 30, Sept. 30,
(in millions) 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------

BALANCE, BEGINNING OF PERIOD $ 2,273 $ 1,947 $ 1,794 $ 2,082

Allowance of First Interstate -- -- 770 --

Provision for loan losses 35 -- 35 --

Loan charge-offs:
Commercial (1) (30) (15) (91) (32)
Real estate 1-4 family first mortgage (4) (4) (13) (10)
Other real estate mortgage (13) (15) (29) (49)
Real estate construction (5) (1) (9) (5)
Consumer:
Real estate 1-4 family junior lien mortgage (7) (5) (24) (12)
Credit card (105) (55) (292) (138)
Other revolving credit and monthly payment (52) (15) (124) (38)
----------- ----------- ----------- -----------

Total consumer (164) (75) (440) (188)
Lease financing (7) (4) (21) (11)
----------- ----------- ----------- -----------
Total loan charge-offs (223) (114) (603) (295)
----------- ----------- ----------- -----------

Loan recoveries:
Commercial (2) 16 17 30 31
Real estate 1-4 family first mortgage 1 1 6 3
Other real estate mortgage 9 7 32 20
Real estate construction 2 -- 6 1
Consumer:
Real estate 1-4 family junior lien mortgage 2 1 7 3
Credit card 10 3 26 9
Other revolving credit and monthly payment 10 4 28 9
----------- ----------- ----------- -----------
Total consumer 22 8 61 21
Lease financing 2 6 6 9
----------- ----------- ----------- -----------
Total loan recoveries 52 39 141 85
----------- ----------- ----------- -----------
Total net loan charge-offs (171) (75) (462) (210)
----------- ----------- ----------- -----------

BALANCE, END OF PERIOD $ 2,137 $ 1,872 $ 2,137 $ 1,872
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Total net loan charge-offs as a percentage
of average loans (annualized) (3) .98% .86% 1.05% .81%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

Allowance as a percentage of total loans (3) 3.09% 5.46% 3.09% 5.46%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
- -------------------------------------------------------------------------------------------------------------------

(1) There were no charge-offs of loans (primarily unsecured) to real estate
developers and REITs for the quarters ended September 30, 1996 and 1995,
respectively, and $1 million and none for the nine months ended
September 30, 1996 and 1995, respectively.
(2) Includes recoveries from loans (primarily unsecured) to real estate
developers and REITs of $7 million and $1 million for the quarters ended
September 30, 1996 and 1995, respectively, and $8 million and $3 million
for the nine months ended September 30, 1996 and 1995, respectively.
(3) Average and total loans exclude first mortgage loans held for sale at
September 30, 1995.

The table below presents net charge-offs by loan category.

- -------------------------------------------------------------------------------------------------------------------------------
Quarter ended Nine Months Ended
----------------------------------------- ---------------------------------------
SEPTEMBER 30, 1996 September 30, 1995 SEPTEMBER 30, 1996 September 30, 1995
------------------ ------------------ ------------------ ------------------
% OF % of % OF % of
AVERAGE average AVERAGE average
(in millions) AMOUNT LOANS(1) Amount loans(1) AMOUNT LOANS(1) Amount loans(1)
- -------------------------------------------------------------------------------------------------------------------------------

Commercial $ 14 .28% $ (2) (.06)% $ 61 .50% $ 1 .01%
Real estate 1-4 family first mortgage 3 .09 3 .21 7 .10 7 .14
Other real estate mortgage 4 .12 8 .41 (3) (.04) 29 .49
Real estate construction 3 .46 1 .28 3 .20 4 .48
Consumer:
Real estate 1-4 family
junior lien mortgage 5 .28 4 .47 17 .41 9 .39
Credit card 95 7.18 52 5.49 266 7.42 129 5.02
Other revolving credit
and monthly payment 42 1.87 11 1.78 96 1.84 29 1.58
------ ------ ------ ------
Total consumer 142 2.70 67 2.78 379 2.92 167 2.44
Lease financing 5 .83 (2) (.54) 15 .86 2 .14
------ ------ ------ ------
Total net loan charge-offs $ 171 .98% $ 75 .86% $ 462 1.05% $ 210 .81%
------ ---- ------ ---- ------ ---- ------ ----
------ ---- ------ ---- ------ ---- ------ ----
- -------------------------------------------------------------------------------------------------------------------------------

(1) Calculated on an annualized basis.

The largest category of net charge-offs in the third quarter and first nine
months of 1996 was credit card loans, comprising more than 50% of total net
charge-offs in each period. During the third quarter of 1996, credit card
charge-offs due to bankruptcies were $46 million, or 49%, of total credit
card charge-offs, compared with $40 million, or 44%, in the second quarter of
1996. In addition, credit card loans 30 to 89 days past due and still
accruing totaled $170 million at September 30, 1996, compared with $174
million at June 30, 1996.

During the first half of 1995, the Company grew its credit card loan
portfolio through nationwide direct mail campaigns as well as through retail
outlets. The objective of the direct mail campaigns was higher yielding
loans to higher-risk cardholders. As these loans continue to mature, the
total amount of credit card charge-offs and the percentage of net charge-offs
to average credit card loans is expected to continue at a level higher than
experienced in the past. The Company continuously evaluates and monitors its
selection criteria for direct mail campaigns and other account acquisition
methods to accomplish the desired risk/customer mix within the credit card
portfolio.

The Company considers the allowance for loan losses of $2,137 million adequate
to cover losses inherent in loans, loan commitments and standby letters of
credit at September 30, 1996. The Company's determination of the level of the
allowance and, correspondingly, the provision for loan losses rests upon various
judgments and assumptions, including general economic

conditions, loan portfolio composition, prior loan loss experience and the
Company's ongoing examination process and that of its regulators. The
Company made a $35 million provision in the third quarter 1996, which is the
first provision since the fourth quarter of 1994. The Company anticipates
that it will increase the provision by $30 to $40 million in the fourth quarter
of 1996 and will continue making incremental increases to the provision of
approximately the same amount through the third quarter of 1997, when it is
expected that the provision will approximate net charge-offs.

OTHER ASSETS
- -------------------------------------------------------------------------------
SEPTEMBER 30, December 31, September 30,
(in millions) 1996 1995 1995
- -------------------------------------------------------------------------------
Nonmarketable equity investments $ 902 $ 428 $ 425
Net deferred tax asset (1) 491 854 908
Certain identifiable intangible assets 469 220 228
Foreclosed assets 227 186 214
Other 1,789 552 708
------- ------- -------

Total other assets $ 3,878 $ 2,240 $ 2,483
------- ------- -------
------- ------- -------
- -------------------------------------------------------------------------------
(1) Net of a valuation allowance of none, none and $2 million at September 30,
1996, December 31, 1995 and September 30, 1995, respectively.

The Company estimates that approximately $455 million of the $491 million net
deferred tax asset at September 30, 1996 could be realized by the recovery of
previously paid federal taxes; however, the Company expects to actually realize
the federal net deferred tax asset by claiming deductions against future taxable
income. The balance of approximately $36 million primarily relates to
approximately $441 million of net deductions that are expected to reduce future
California taxable income (California tax law does not permit recovery of
previously paid taxes). The Company's California taxable income has averaged
approximately $1.3 billion for each of the last three years. The Company
believes that it is more likely than not that it will have sufficient future
California taxable income to fully utilize these deductions.

In October 1995, the Company adopted Statement of Financial Accounting
Standards No. 122 (FAS 122), Accounting for Mortgage Servicing Rights. This
Statement amends FAS 65, Accounting for Certain Mortgage Banking Activities,
to require that, for mortgage loans originated for sale with servicing rights
retained, the right to service those loans be recognized as a separate asset,
similar to purchased mortgage servicing rights. This Statement also requires
that capitalized mortgage servicing rights be assessed for impairment based
on the fair value of those rights. Mortgage servicing rights purchased
during third quarter 1996, fourth quarter 1995 and third quarter 1995 were
$32 million, $7 million and none, respectively. There were no originated
mortgage servicing rights capitalized during the same periods. Purchased
mortgage servicing rights are amortized in proportion to and over the period
of estimated net servicing income. Amortization expense, recorded in
noninterest income, totaled $16 million, $11 million and $11 million for the
quarters ended September 30, 1996, December 31, 1995 and September 30, 1995,
respectively. Purchased mortgage servicing rights included in certain
identifiable intangible assets were $246 million, $152 million and $157
million at September 30, 1996, December 31, 1995 and September 30, 1995,
respectively.

Other identifiable intangible assets are generally amortized using an
accelerated method, which is based on estimated useful lives ranging from
5 to 15 years. Amortization expense was $20 million, $15 million and $15
million for the quarters ended September 30, 1996, December 31, 1995 and
September 30, 1995, respectively.

In June 1996, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 125 (FAS 125), Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities. This Statement provides guidance for distinguishing transfers
of financial assets that are sales from transfers that are secured
borrowings. FAS 125 supersedes FAS 76, 77 and 122, while amending both FAS
65 and 115. The Statement is effective January 1, 1997 and is to be applied
prospectively. Earlier implementation is not permitted. (However, at an
October 30, 1996 meeting, the FASB agreed to issue an Exposure Draft to
propose deferring certain provisions of FAS 125 for one year.)

A transfer of financial assets in which control is surrendered over those assets
is accounted for as a sale to the extent that consideration other than
beneficial interests in the transferred assets is received in the exchange.
Liabilities and derivatives incurred or obtained by the transfer of financial
assets are required to be measured at fair value, if practicable. Also, any
servicing assets and other retained interests in the transferred assets must be
measured by allocating the previous carrying value between the asset sold and
the interest retained, if any, based on their relative fair values at the date
of transfer. For each servicing contract in existence before January 1, 1997,
previously recognized servicing rights and excess servicing receivables that do
not exceed contractually specified servicing are required to be combined, net of
any previously recognized servicing obligations under that contract, as a
servicing asset or liability. Previously recognized servicing receivables that
exceed contractually specified servicing fees are required to be reclassified as
interest-only strips receivable.

The Statement also requires an assessment of interest-only strips, loans, other
receivables and retained interests in securitizations. If these assets can be
contractually prepaid or otherwise settled such that the holder would not
recover substantially all of its recorded investment, the asset will be measured
like available-for-sale securities or trading securities, under FAS 115. This
assessment is required for financial assets held on or acquired after January 1,
1997.

It is expected that, upon implementation, the Statement will not have a
material effect on the Company's financial statements.

DEPOSITS
- -------------------------------------------------------------------------------
SEPTEMBER 30, December 31, September 30,
(in millions) 1996 1995 1995
- -------------------------------------------------------------------------------
Noninterest-bearing $ 29,512 $ 10,391 $ 9,627
Interest-bearing checking (1) 5,460 887 4,067
Market rate and other savings (1) 32,332 17,944 14,850
Savings certificates 16,004 8,636 8,607
----------- ----------- -----------
Core deposits 83,308 37,858 37,151
Other time deposits 381 248 248
Deposits in foreign offices (2) 48 876 1,549
----------- ----------- -----------
Total deposits $ 83,737 $ 38,982 $ 38,948
----------- ----------- -----------
----------- ----------- -----------
- -------------------------------------------------------------------------------
(1) Due to the limited transaction activity of existing NOW (negotiable order
of withdrawal) account customers, $3.4 billion of interest-bearing
checking deposits at December 31, 1995 was reclassified to market rate and
other savings deposits.
(2) Short-term (under 90 days) interest-bearing deposits used to fund short-
term borrowing needs.

CAPITAL ADEQUACY/RATIOS

Risk-based capital (RBC) guidelines issued by the Federal Reserve Board (FRB)
establish a risk-adjusted ratio relating capital to different categories of
assets and off-balance sheet exposures. The Company's Tier 1 and Tier 2 capital
components are presented on the following page. The guidelines require a
minimum total RBC ratio of 8%, with at least half of the total capital in the
form of Tier 1 capital. To supplement the RBC guidelines, the FRB established a
minimum leverage ratio guideline of 3% of Tier 1 capital to average total
assets.

The decrease in the Company's RBC and leverage ratios at September 30, 1996
compared with December 31, 1995 resulted primarily from an overall increase in
risk-weighted assets due to the Merger.

In September 1996, $200 million of Preferred Stock, Series F, was called for
redemption in November 1996. This stock was excluded from the risk-based
capital and leverage ratios as of September 30, 1996. This redemption was offset
by the issuance of $200 million of new Preferred Stock, Series H, in September
1996, which qualifies as Tier 1 capital and, therefore, is included in the risk-
based capital and leverage ratios as of September 30, 1996.

The table below presents the Company's risk-based capital and leverage ratios.

- -----------------------------------------------------------------------------------------------
SEPT. 30, Dec. 31, Sept. 30,
(in billions) 1996 1995 1995
- -----------------------------------------------------------------------------------------------

Tier 1:
Common stockholders' equity $ 13.9 $ 3.6 $ 3.4
Preferred stock .8 .5 .5
Less goodwill and other deductions (1) (8.6) (.5) (.5)
---------- ----------- -----------
Total Tier 1 capital 6.1 3.6 3.4
---------- ----------- -----------
Tier 2:
Mandatory convertible debt .2 -- --
Subordinated debt and unsecured senior debt 2.2 1.0 1.0
Allowance for loan losses allowable in Tier 2 1.1 .5 .5
---------- ----------- -----------
Total Tier 2 capital 3.5 1.5 1.5
---------- ----------- -----------

Total risk-based capital $ 9.6 $ 5.1 $ 4.9
---------- ----------- -----------
---------- ----------- -----------

Risk-weighted balance sheet assets $ 83.4 $ 39.2 $ 38.5
Risk-weighted off-balance sheet items:
Commitments to make or purchase loans 10.4 2.7 2.6
Standby letters of credit 2.2 .7 .6
Other .5 .4 .3
---------- ----------- -----------
Total risk-weighted off-balance sheet items 13.1 3.8 3.5
---------- ----------- -----------
Goodwill and other deductions (1) (8.7) (.5) (.5)
Allowance for loan losses not included in Tier 2 (1.0) (1.3) (1.4)
---------- ----------- -----------

Total risk-weighted assets $ 86.8 $ 41.2 $ 40.1
---------- ----------- -----------
---------- ----------- -----------

Risk-based capital ratios:
Tier 1 capital (4% minimum requirement) 7.04% 8.81% 8.56%
Total capital (8% minimum requirement) 11.05 12.46 12.25

Leverage ratio (3% minimum requirement) (2) 6.12% 7.46% 6.93%
- -----------------------------------------------------------------------------------------------

(1) Other deductions include the unrealized net loss on available-for-sale
investment securities carried at fair value.

(2) Tier 1 capital divided by quarterly average total assets (excluding
goodwill and other items which were deducted to arrive at Tier 1 capital).

Under the Federal Deposit Insurance Corporation Improvement Act of 1991, a "well
capitalized" bank must have a Tier 1 RBC ratio of at least 6%, a combined Tier 1
and Tier 2 ratio of at least 10% and a leverage ratio of at least 5%. At
September 30, 1996, the Bank had a Tier 1 RBC ratio of 8.80%, a combined Tier 1
and Tier 2 ratio of 11.49% and a leverage ratio of 7.13%.

ASSET/LIABILITY MANAGEMENT

As is typical in the banking industry, most of the Company's assets and
liabilities are sensitive to fluctuation in interest rates. Accordingly, an
essential objective of asset/liability management is to control interest rate
risk.

Interest rate risk occurs when assets and liabilities reprice at different times
as interest rates change. For example, if fixed-rate assets are funded with
floating-rate debt, the spread between the two will decline or turn negative if
rates increase. The Company refers to this type of risk as "term structure
risk." Another source of interest rate risk, "basis risk," results from
changing spreads between loan and deposit rates. More difficult to quantify and
manage, this type of risk is not highly correlated to changes in the level of
interest rates, and is driven by other market conditions.

The Company employs various asset/liability strategies, including the use of
interest rate derivative products, to ensure that exposure to interest rate
fluctuations is limited within Company guidelines of acceptable levels of risk-
taking. The Company uses interest rate derivatives as an asset/liability
management tool to hedge mismatches in interest rate maturities. For example,
futures are used to shorten the rate maturity of market rate savings to better
match the maturity of prime-based loans.

One way to measure the impact that future changes in interest rates will have on
net interest income is through a cumulative gap measure. The gap represents the
net position of assets and liabilities subject to repricing in specified time
periods. Generally, a liability sensitive gap indicates that there would be a
negative impact on the net interest margin from an increasing rate environment.
At September 30, 1996, the under-one-year cumulative gap was a $1,679 million
(1.5% of total assets) net liability position, compared with a net asset
position of $985 million (.9% of total assets) at June 30, 1996 and a net
liability position of $394 million (.8% of total assets) at December 31, 1995.
The shift to a net liability position at September 30, 1996 is predominantly due
to decreases in fed funds sold, securities maturing within one year and other
real estate mortgages.

Two adjustments to the cumulative gap provide comparability with those bank
holding companies that present interest rate sensitivity in an alternative
manner. However, management does not believe that these adjustments depict its
interest rate risk. The first adjustment excludes noninterest-earning assets,
noninterest-bearing liabilities and stockholders' equity from the reported
cumulative gap. The second adjustment moves interest-bearing checking, savings
deposits and Wells Extra Savings (included in market rate savings) from the
nonmarket category to the shortest possible maturity category. The second
adjustment reflects the availability of the deposits for immediate withdrawal.
The resulting adjusted under-one-year cumulative gap (net liability position)
was $15.3 billion, $14.7 billion and $8.7 billion at September 30, 1996,
June 30, 1996 and December 31, 1995, respectively.

The gap analysis provides a useful framework to measure the term structure risk.
To more fully explore the complex relationships within the gap over time and
interest rate environments, the Company performs simulation modeling to estimate
the potential effects of changing interest rates.

DERIVATIVE FINANCIAL INSTRUMENTS

The following table summarizes the aggregate notional or contractual amounts,
credit risk amount and net fair value of the Company's derivative financial
instruments at September 30, 1996 and December 31, 1995.

- --------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, 1996 December 31, 1995
------------------------------------- -------------------------------------
NOTIONAL OR CREDIT ESTIMATED Notional or Credit Estimated
CONTRACTUAL RISK FAIR contractual risk fair
(in millions) AMOUNT AMOUNT (3) VALUE amount amount (3) value
- --------------------------------------------------------------------------------------------------------------

ASSET/LIABILITY MANAGEMENT HEDGES
Interest rate contracts:
Futures contracts $ 5,408 $ -- $ -- $ 5,372 $ -- $ --
Floors purchased (1) 20,659 81 81 15,522 206 206
Caps purchased (1) 445 4 4 391 1 1
Swap contracts (1) 17,221 121 (59) 6,314 185 175

Foreign exchange contracts:
Forward contracts (1) 25 -- -- 25 -- --

CUSTOMER ACCOMMODATIONS
Interest rate contracts:
Futures contracts 5 -- -- 23 -- --
Floors written 221 -- -- 105 -- (1)
Caps written 2,197 -- (5) 1,170 -- (4)
Floors purchased (1) 219 -- -- 105 1 1
Caps purchased (1) 2,065 5 5 1,139 4 4
Swap contracts (1) 2,029 16 3 1,518 5 1

Foreign exchange contracts (2):
Forward and spot contracts (1) 1,503 10 1 909 10 1
Option contracts purchased (1) 32 1 1 29 -- --
Option contracts written 28 -- (1) 23 -- --
- --------------------------------------------------------------------------------------------------------------

(1) The Company anticipates performance by substantially all of the
counterparties for these financial instruments.
(2) The Company has immaterial trading positions in these contracts.
(3) Credit risk amounts reflect the replacement cost for those contracts in a
gain position in the event of nonperformance by counterparties.

The Company enters into a variety of financial contracts, which include interest
rate futures and forward contracts, interest rate floors and caps and interest
rate swap agreements. The contract or notional amounts of interest rate
derivatives do not represent amounts exchanged by the parties and therefore are
not a measure of exposure through the use of derivatives. The amounts exchanged
are determined by reference to the notional amounts and the other terms of the
derivatives. The contract or notional amounts do not represent exposure to
liquidity risk. The Company is not a dealer in these instruments and does not
use them speculatively. The Company offers contracts to its customers, but
hedges such contracts by purchasing other financial contracts or uses the
contracts for asset/liability management. The contracts that are used primarily
to hedge mismatches in interest rate maturities serve to reduce rather than
increase the Company's exposure to movements in interest rates.

The Company also enters into foreign exchange positions, such as forward, spot
and option contracts, primarily as customer accommodations.

The Company is exposed to credit risk in the event of nonperformance by
counterparties to financial instruments. The Company controls the credit risk
of its financial contracts (except futures contracts, interest rate cap and
floor contracts written and foreign exchange option contracts written for which
credit risk is DE MINIMUS) through credit approvals, limits and monitoring
procedures. Credit risk related to derivative financial instruments is
considered and, if material, provided for separately from the allowance for loan
losses. As the Company generally enters into transactions only with high
quality institutions, losses associated with counterparty nonperformance on
derivative financial instruments have been immaterial.

LIQUIDITY MANAGEMENT

Liquidity for the Parent Company and its subsidiaries is generated through its
ability to raise funds in a variety of domestic and international money and
capital markets, and through dividends from subsidiaries and lines of credit.
In the third quarter of 1996, the Company issued the remaining $.8 billion from
its shelf registration filed with the Securities and Exchange Commission (SEC)
in 1995. The Company subsequently filed a new shelf registration that allows for
the issuance of $3.5 billion of senior or subordinated debt or preferred stock.
The proceeds from the sale of any securities will be used for general corporate
purposes. During the third quarter of 1996, the Company issued $.2 billion of
preferred stock under this shelf registration and $3.3 billion of securities
remained unissued at September 30, 1996. No additional securities have been
issued under this shelf registration.

During the fourth quarter of 1996, the Company filed a preliminary shelf
registration statement of $750 million with the SEC to issue junior subordinated
debentures and preferred securities of a special-purpose subsidiary, senior or
subordinated debt or preferred stock. The registration would allow the special-
purpose subsidiary to issue quarterly income preferred securities (QUIPS).
QUIPS would count as Tier 1 capital of the Company for regulatory purposes. The
special-purpose subsidiary would hold junior subordinated debentures of the
Company. Interest paid on the junior subordinated debenture would be distributed
to the holders of the QUIPS. As a result, distributions to the holders of the
QUIPS would be tax deductible and treated as an expense in the consolidated
statement of income.

PART II - OTHER INFORMATION
---------------------------

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

3(ii) By-Laws

4 The Company hereby agrees to furnish upon request to the
Commission a copy of each instrument defining the rights
of holders of securities of the Company.

11 Computation of Earnings Per Common Share

27 Financial Data Schedule

99(a) Computation of Ratios of Earnings to Fixed Charges -- the
ratios of earnings to fixed charges, including interest
on deposits, were 2.02 and 2.24 for the quarters ended
September 30, 1996 and 1995, respectively, and 2.13 and
2.09 for the nine months ended September 30, 1996 and
1995, respectively. The ratios of earnings to fixed
charges, excluding interest on deposits, were 5.34 and
4.90 for the quarters ended September 30, 1996 and 1995,
respectively, and 5.46 and 4.22 for the nine months ended
September 30, 1996 and 1995, respectively.

(b) Computation of Ratios of Earnings to Fixed Charges and
Preferred Dividends -- the ratios of earnings to fixed
charges and preferred dividends, including interest on
deposits, were 1.91 and 2.13 for the quarters ended
September 30, 1996 and 1995, respectively, and 2.02 and
2.00 for the nine months ended September 30, 1996 and
1995, respectively. The ratios of earnings to fixed
charges and preferred dividends, excluding interest on
deposits, were 4.28 and 4.25 for the quarters ended
September 30, 1996 and 1995, respectively, and 4.48 and
3.71 for the nine months ended September 30, 1996 and
1995, respectively.

(b) The Company filed the following reports on Form 8-K during the
third quarter of 1996 and through the date hereof:

(1) July 16, 1996 under Item 5, containing the Press Release
that announced the Company's financial results for the
quarter ended June 30, 1996

(2) August 9, 1996 under Item 7, containing the unaudited pro
forma combined financial information of the Company and
First Interstate Bancorp for the six months ended June 30,
1996 and the year ended December 31, 1995

(3) September 20, 1996 under Item 5, containing exhibits
related to the sale of Fixed/Adjustable Rate Preferred
Stock, Series H

(4) September 23, 1996 under Item 5, containing amendments to
the exhibits filed on Form 8-K dated Spetember 20, 1996

(5) October 15, 1996 under Item 5, containing the Press Release
that announced the Company's financial results for the
quarter ended September 30, 1996

SIGNATURE
---------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on November 14, 1996.

WELLS FARGO & COMPANY

By: /s/ FRANK A. MOESLEIN
---------------------------------------
Frank A. Moeslein
Executive Vice President and Controller
(Principal Accounting Officer)