Wells Fargo & Company — 2009 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2009. Wells Fargo is a diversified financial services holding company with Community Banking, Wholesale Banking, and Wealth, Brokerage and Retirement operating segments. The company acquired Wachovia on December 31, 2008; 2009 therefore includes Wachovia operations, making comparisons with 2008 potentially difficult.
Key financial metrics
- At December 31, 2009, the company reported assets of $1.2 trillion, loans of $783 billion, deposits of $824 billion, and stockholders’ equity of $112 billion.
- Wells Fargo Bank, N.A. had $609 billion of assets and Wachovia Bank, N.A. had $510 billion of assets at year-end.
- The company and each subsidiary bank were classified as “well capitalized” under applicable regulatory capital adequacy guidelines. The filing excerpt does not provide clear year-end capital ratios.
- In 2009, the company prepaid $3.9 billion of estimated FDIC assessments for the fourth quarter of 2009 and 2010–2012.
- The filing’s exhibit reports 2009 earnings-to-fixed-charges ratios of 2.68 including deposit interest and 3.64 excluding deposit interest; including preferred dividends, the respective ratios were 1.69 and 1.90.
- The provided filing text does not provide clear values for revenue, net income, cash flow, margins, or debt balances. Detailed financial statements and management’s discussion are incorporated by reference to the 2009 Annual Report to Stockholders.
Material changes versus the prior comparable period
- The Wachovia acquisition, completed on December 31, 2008, substantially expanded the company; year-over-year results may not be directly comparable.
- The common-stock dividend was reduced to $0.05 per share quarterly in the second quarter of 2009 to retain earnings and build common equity.
- Wells Fargo redeemed the U.S. Treasury’s $25 billion TARP preferred-stock investment on December 23, 2009, plus accrued dividends. The Treasury continued to hold its warrant to purchase common stock.
- Following the Federal Reserve’s 2009 stress test, the company was required to generate a $13.7 billion regulatory capital buffer by November 9, 2009. The filing says it exceeded the requirement through an $8.6 billion common-stock offering (gross proceeds), revenue, realization of deferred tax assets, and other internal sources.
Outlook, risks and unusual items
- No specific earnings or operating guidance is provided in the excerpt. Management’s detailed outlook and commentary are incorporated by reference rather than reproduced here.
- Key disclosed exposures include changing banking regulation and capital requirements, potential limits on dividends and transfers from subsidiary banks, FDIC assessment costs, monetary-policy changes, and competition in financial services.
- The company participated in the FDIC Temporary Liquidity Guarantee Program; its debt-guarantee component expired October 31, 2009, and Wells Fargo opted out of the transaction-account guarantee program effective December 31, 2009.
- The company said it would not participate in the FDIC program providing temporary unlimited coverage for noninterest-bearing transaction accounts beginning January 1, 2010.
- The filing refers readers to incorporated disclosures for legal actions and risk factors; the supplied text does not provide enough detail to assess their amounts or outcomes.
Important facts for investors to verify
- Review the incorporated 2009 Annual Report for full-year revenue, net income, credit-loss provisions, cash flows, margins, liquidity measures, debt, and regulatory capital ratios.
- Assess the effect of Wachovia’s inclusion on year-over-year comparability and the progress and costs of integration.
- Verify the composition and sustainability of the capital-buffer sources, and the implications of the Treasury’s remaining warrant.
- Review the incorporated risk-factor and legal-action disclosures, including potential credit losses, regulatory changes, and FDIC-related costs.