Wells Fargo 2008 Annual Report Download - page 150

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The weighted-average grant-date fair value of RSRs
granted during 2007 was $34.76.
Employee Stock Ownership Plan
Under the Wells Fargo & Company 401(k) Plan (the 401(k)
Plan), a defined contribution ESOP, the 401(k) Plan may
borrow money to purchase our common or preferred stock.
Since 1994, we have loaned money to the 401(k) Plan to
purchase shares of our ESOP Preferred Stock. As we release
and convert ESOP Preferred Stock into common shares, we
record compensation expense equal to the current market
price of the common shares. Dividends on the common
shares allocated as a result of the release and conversion of
the ESOP Preferred Stock reduce retained earnings and the
shares are considered outstanding for computing earnings
per share. Dividends on the unallocated ESOP Preferred
Stock do not reduce retained earnings, and the shares are not
considered to be common stock equivalents for computing
earnings per share. Loan principal and interest payments
are made from our contributions to the 401(k) Plan, along
with dividends paid on the ESOP Preferred Stock. With
each principal and interest payment, a portion of the ESOP
Preferred Stock is released and, after conversion of the
ESOP Preferred Stock into common shares, allocated to
the 401(k) Plan participants.
The balance of ESOP shares, the dividends on allocated
shares of common stock and unreleased preferred shares
paid to the 401(k) Plan and the fair value of unearned ESOP
shares were:
Number Weighted-average
grant-date fair value
Nonvested at January 1, 2008 112,396 $32.01
Granted 201,910 29.68
Vested (40,045) 25.94
Acquisitions 751,905 29.48
Nonvested at December 31, 2008 1,026,166 29.79
including our capital requirements, the number of shares we
expect to issue for acquisitions and employee benefit plans,
market conditions (including the trading price of our stock),
and legal considerations. These factors can change at any
time, and there can be no assurance as to the number of
shares we will repurchase or when we will repurchase them.
Effective with the adoption of FAS 123(R), the fair value
of each option award granted on or after January 1, 2006, is
estimated using a Black-Scholes valuation model. The expected
term of options granted is generally based on the historical
exercise behavior of full-term options. Our expected volatilities
are based on a combination of the historical volatility of our
common stock and implied volatilities for traded options on
our common stock. The risk-free rate is based on the U.S.
Treasury zero-coupon yield curve in effect at the time of
grant. Both expected volatility and the risk-free rates are
based on a period commensurate with our expected term.
The expected dividend is based on the current dividend,
consideration of our historical pattern of dividend increases
and the market price of our stock.
Effective with the adoption of FAS 123(R), we changed our
method of estimating our volatility assumption. Prior to 2006,
we used a volatility based on historical stock price changes.
Effective January 1, 2006, we used a volatility based on a
combination of historical stock price changes and implied
volatilities of traded options as both volatilities are relevant
in estimating our expected volatility.
The following table presents the weighted-average per
share fair value of options granted and the assumptions used,
based on a Black-Scholes option valuation model.
At December 31, 2008, there was $5 million of total
unrecognized compensation cost related to nonvested RSRs.
The cost is expected to be recognized over a weighted-average
period of 2.4 years. The total fair value of RSRs that vested
during 2008 and 2007 was $1 million for both years.
A summary of the status of our RSRs and restricted share
awards at December 31, 2008, and changes during 2008 is in
the following table:
Year ended December 31,
2008 2007 2006
Per share fair value of options granted:
Incentive Compensation Plans $4.06 $4.03 $4.03
Director Plans 4.33 4.05 4.67
Expected volatility 22.4% 13.3% 15.9%
Expected dividends 4.1 3.4 3.4
Expected term (in years) 4.4 4.2 4.3
Risk-free interest rate 2.7% 4.6% 4.5%
Deferred Compensation Plan for Independent Sales Agents
WF Deferred Compensation Holdings, Inc. is a wholly-owned
subsidiary of the Parent formed solely to sponsor a deferred
compensation plan for independent sales agents who provide
investment, financial and other qualifying services for or with
respect to participating affiliates. The Nonqualified Deferred
Compensation Plan for Independent Contractors, which
became effective January 1, 2002, allows participants to defer
all or part of their eligible compensation payable to them by a
participating affiliate. The Parent has fully and unconditionally
guaranteed the deferred compensation obligations of WF
Deferred Compensation Holdings, Inc. under the plan.
(in millions, except shares) Shares outstanding
_ _________December 31,
2008 2007 2006
Allocated shares (common) 74,916,583 76,265,880 74,536,040
Unreleased shares (preferred) 519,900 449,804 383,804
Fair value of unearned ESOP shares $520 $450 $384
Dividends paid
Year ended December 31,
2008 2007 2006
Allocated shares (common) $100 $88 $79
Unreleased shares (preferred) 66 57 47