Wells Fargo & Co. reported this morning that it made $2.4 billion in the first quarter, a huge turnaround from the loss it suffered in the previous earnings period. Those earnings are measured after the bank paid $661 million in dividends on preferred shares, more than half of which went to the U.S. government.

Investors sent the bank's shares up 5 percent in afternoon trading. That signals they were pleased with the results, though not surprised: Wells, the country's No. 4 bank by assets, already announced two weeks ago that it expected to make record profits this quarter, which blew away analysts' expectations and sent the stock soaring that day.

Like other banks, Wells benefited from a huge demand for mortgages, which was driven by low interest rates, and a recent change in accounting rules that gives banks more leeway in how they value distressed assets. And it says it's benefiting from its Dec. 31 purchase of Charlotte's Wachovia Corp., a move that doubled its assets and customers, as well as its decision to go ahead and take most of Wachovia's expected losses in the fourth quarter rather than over time.

In an interview with the Observer, Chief Financial Officer Howard Atkins noted how some analysts criticized Wells' decision to buy the struggling Wachovia. “This was a really good merger, a really good deal. … Now the two companies can enjoy the benefits of being married and growing old together.”

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