WE CONNECT: TEAM MEMBERS CUSTOMERS PAUL HAZEN. CHAIRMAN RICHARD KOVACEVICH. PRESIDENT. CEO LES BILLER. VICE CHAIR. COO TO OUR OWNERS WELLS FARGO WAS FOUNDED ON lHE AMERICAN FRONTIER 148 YEARS AGO TO SATISFY A FUNDA­ MENTAL HUMAN NEED-TO CONNECT ONE CUSTOMER TO ANOTHER AND ONE MARKET TO ANOTHER BY TRANS­ PORTING GOODS, SERVICES AND FUNDS FAST AND SECURELY ACROSS GREAT DISJANCES. WE'RE STILL DOING IT TODAY. OUR VISION - SATISFYING ALL OUR CUSTOMERS' FINANCIAL NEEDS -IS BUILT ON THAT SAME PROCESS -CONNECTING. THAT'S THE "NEXT STAGE" OF THE NEW WELLS FARGO. or the past three decades, tech­ entirely new industry: financial services. nology has caused profound This new industry is huge. It has about change in the way am customers $2 trillion in revenue. That's more than Fshop for financial services and four times larger than banking. It's how you, our owners, view your growing very rapidly. Banking, mean­ investment in Wells Fargo. Technology while, has disappeared as a stand-alone has blurred distinctions among banIGng, industry. It's become just a segment of investment and insLLrance products. financial services, with slow if not stag­ It has brought the" bank" into the nant growth. The market share for home. It's also created a virtual bank. banking is less than 25 percent of Customers can use our bank anywhere Americans' financial assets. Because on the globe - when, where and how it's so highly fragmented, the financial they want to. It's helped create an services industry is ripe for consolida- STOCKHOLDERS COMMUNITIES 2 TO OUR OWNERS %Change ($ in millions, except per share amounts) 1999 1998 1999/1998 AS REPORTED FOR THE YEAR Net income 3,747 1,950 92% Net income applicable to common stock 3,712 1,915 94 Earnings per common share $ 2.26 5 1.18 92 Diluted earnings per common share 2.23 1.17 91 co N N ,., Dividends declared per common share .785 .70 12 '" ~ '":::J "1 ::; ~ ~ :e s: Vl V> Average common shares outstanding 1,645.6 1,621.5 '" tion. The largest provider of financial broker and real estate developer. education finance, small business 94 95 96 97 98 99 Diluted average common shares outstanding 1,665.2 1,641.8 services has a national market share Department stores aIways wanted lending, commercial banking for Revenue billions Profitability ratios Compound Annual a of only about three percent. your credit card business. Now some middle market and larger corpora­ Net income to average total assets (ROA) 1.85% 1.04% 78 Growth Rate (5 years) 15 Yo Congress recognized this new want to be your baruc Software tions, agricultural lending, and Net income applicable to common stock to average The single best measure reality last year. It repealed a makers and Internet portals want to supermarket banking. Our vision common stockholders' equity (ROE) 17.66 9.86 79 ofsuccess in our industry: Depression-era law that had built present and pay your bills electroni­ is not the vision of just a bank, a the ability to earn more of Total revenue $ 16,775 $ 15,417 9 ourcustomers' business. a wall between commercial banking cally. Internet discount brokers want brokerage firm, a mortgage company Efficiency ratio 58.3% 68.5% (15) and investment banking. Congress to give financial advice and be your or an insurance agency- our vision Average loans $111,374 $106,205 5 enacted a new law that allows bank­ bank. "Dot.coms" want to lend you is to bring a II these products to our Average assets 202,623 188,355 8 ing, insurance and investment firms money without ever serving you in customers through all our channels, Average core deposits 127,231 123,801 3 to enter fully into each others' busi­ person. Some web-sites try to make satisfy our customers' financial Net interest margin 5.66% 5.79% (2) nesses. This law also gives customers a profit simply by letting you choose needs, offer sound financial advice AT YEAR END more opportunities than ever for from a list of advertised mortgage and help them succeed financially. Securities available for sale $ 38,518 $ 31,997 20 better prices, convenience and value. rates from other providers. Loans 119,464 107,994 11 1 The evolution of this industry has The basic financial needs of our GREAT PEOPLE= REVENUE GROWTH Allowance for loan losses 3,170 3,134 1 coincided with another phenomenon: customers, however, do not change We believe there's only one sustainable Goodwill 7,702 7,664 ,., Assets 218,102 202,475 8 $ '"O! "" :7: ~ '" the explosive growth of the Internet. that much. They want to borrow, competitive advantage for a company Vl :;i V>'" J Core deposits 126,198 132,289 (5) '" a '" to 94 95 96 97 98 99 The result is an unprecedented invest, transact and be insured. They that wants be a consistent winner Common stockholders' equity 21,860 20,296 8 , Net Income billion> number of new players in this huge, want convenience, security, trust and - the best - in the financial services Stockholders' equity 22,131 20,759 7 Compound Annual a intensely competitive and very fast dependability. They want the best industry. It is not physical stores, Tier 1 capital 13,484 12,412 9 Growth Rate (5 years) 18 Yo Ba11/~ Total capital (Tiers 1 and 2) 17,555 16,733 5 growing industry. There are fewer return on their investment. They ATMs, Phone centers or even Since 1994, out net income banks in the United States but there want sound financial advice. They the internet. Our competitors ha ve Capital ratios has grown at a compound Common stockholders' equity to assets 10.02% 10.02% annual rate of18%, among also are more and more companies want to do these things when, where those channels. Nor is it products or the best in our industry. (1) offering financial services - from and how it's most convenient for technology. Both are commodities, Stockholders' equity to assets 10.15 10.25 Risk-based capital retailers to manufacturers to them. They want access to many easily imitated. Nor is it cost cutting. Tier 1 capital 8.07 8.08 I Internet portals. channels including traditional Every company must become more Total capital 10.50 10.90 (4) banking stores, ATMs, the Internet, effi ient but a financial services Leverage 6.77 6.58 3 I MORE CHOICE THAN EVER As a the telephone, mail, superrnarkets, company cannot cost cut its way to 800k value per common share $ 13.44 12.35 9 result, Americans today have more business offices and" bank at work" consistent, long-term growth in prof­ Team Members (active, full-time equivalent) 89,355 91,403 (2) financial choices than ever. To some, centers. If the value they're offered is itability. We believe the battle for the multitude of choices may be clear and compelling, if the service profit, market share and stock appre­ CASH OPERATING BASIS** r overwhelming. It seems everyone and advice they receive is outstanding, ciation will be won on the field of FOR THE YEAR these days wants to be in the money they will give the best providers more revenue growth. Revenue growth is Net income $ 4,304 3,456 25% Net income applicable to common stock 4,269 3,421 25 ""co ~ '" ,.,co'" business. Never before have so many of their business. simply another term for sales and "" '"": "'l '" ~ companies competed through so service. Products, technology and Earnings per common share $ 2.59 $ 2.11 23 94 95 96 97 98 99 Diluted earnings per common share 2.56 2.08 23 many different channels to lend THE NEXT STAGE At Wells Fargo, efficiency are all important but in Dividends Profitability ratios Compound Annual 0 money, accept deposits, sell insur­ we've been preparing for this next the end, great sales and service are Growth Rate (5 years) 15 Yo Net income to average total assets (ROA) 2.22% 1.92% 16 ance, mortgages and stocks, process stage for a long time. We've built one provided by people. Net income applicable to common stock to average We've increased our payments, finance equipment or of America's most diversified finan­ We believe the winners in any common stockholders· equity (ROE) 34.08 31.76 7 dividend every nine months for each of invest in businesses. Brokerage com­ cial services companies. We have industry- or in any delivery channel Efficiency ratio 54.6 57.0 (4) the past nine years. panies want to be your bank. Banks market leadership in major - wi II be those who ha ve the best want to be your broker. Banks want categories includillg community and most diverse people- people in to sell you insurance. Insurance banking, mortgage lending, Internet their stores, people building their *Cash operating earnings exclude goodWill and nonqualifying core deposit Intangible amortization and balances. companies want ro be your bank and banking, commercial real estate, technology, people operating their 'Excludes 1998 merger-related and other charges ofapproximately $1, 152 million ($748 million after tax) and $320 million ($208 million after tax) o(/oan losses, mostly In Island Finance. 4 TO OUR OWNERS WELLS FARGO & COMPANY 5 computers, people staffing their creating a spirit of teamwork and owners, because they are. Almost all phone banks and people creating cross-selling across all our busi­ our 1.04,000 team members own their web-sites. This allows nesses and geographies. Sharing a piece of the Company through customers to do routine transactions best practices. Partnering to satisfy PartnerShare stock options and their electronically but gives them the choice all our customers' financial needs.