Reading Wells Fargo Annual Report 2009

I start reading Wells Fargo Annual Report 2009 on these two days, so far only managed to finish the Financial Review section (45 pages) which described in great details about the company. There are many financial jargons new to me and make my head spinning. Nevertheless, I am know more about the company now even some aspects described in the section I am not understand fully specially financial instruments that hedge against interest rest or other economic hedges.

While reading the annual report, I am thinking how should I value the bank?

To be the best in financial services, you have to be the best in credit and risk management. - John G. Stumpf, Chairman, President & CEO of Wells Fargo

By refer the quote above, I have preliminary ideas how to value banking businesses as following:

• Credit management; Ratio of credit loss for loan originated for given period and it growth rate (smaller number is better than bigger).
• Liquidity; Protection over bad economic environment.
• Performance; Pre-tax pre-provision profit (PTPP) - total revenue less non-interest expense to assess the company's ability to generate capital to cover credit losses through credit cycle (Taken from the annual report).

Below is some of financial terms new to me and definition find out from investopedia.com:

Loan-To-Value (LTV) ratio 

A lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage. Typically, assessments with high LTV ratios are generally seen as higher risk and, therefore, if the mortgage is accepted, the loan will generally cost the borrower more to borrow or he or she will need to purchase mortgage insurance.
Calculated as: LTV = Mortgage amount / Appraised value of the property

FICO Score
A type of credit score that makes up a substantial portion of the credit report that lenders use to assess an applicant's credit risk and whether to extend a loan. In general, a FICO score above 650 indicates that the individual has a very good credit history. People with scores below 620 will often find it substantially more difficult to obtain financing at a favorable rate.

Government National Mortgage Association (GNMA)
A U.S. government corporation within the U.S. Department of Housing and Urban Development (HUD). Ginnie May aims to:
1. Ensure liquidity for government-insured mortgages, including those insured by the Federal Housing Administration (FHA), the Veterans Administration (VA) and the Rural Housing Administration (RHA).
2. Bring investors' capital into the market for these types of loans, so that the issuers have the means to issue more.
Most of the mortgages securitized as Ginnie Mae mortgage-backed securities (MBSs) are those guaranteed by FHA, which are typically mortgages for first-time home buyers and low-income borrowers.

Mortgage Servicing Rights (MSR)
A contractual agreement where the right, or rights, to service an existing mortgage are sold by the original lender to another party who specializes in the various functions of servicing mortgages. Common rights included are the right to collect mortgage payments monthly, set aside taxes and insurance premiums in escrow, and forward interest and principle to the mortgage lender.