-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FpiAIZHXazsVIB1oGKgHRqXrNd0plWfGpfgnVLR2SjZeRofOYayKW9slok0WWMFh I+q1EHMes7HaxB4jbyEMSA== 0000912057-96-026767.txt : 19961120 0000912057-96-026767.hdr.sgml : 19961120 ACCESSION NUMBER: 0000912057-96-026767 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961115 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961115 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WELLS FARGO & CO CENTRAL INDEX KEY: 0000105598 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 132553920 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06214 FILM NUMBER: 96667997 BUSINESS ADDRESS: STREET 1: 420 MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94163 BUSINESS PHONE: 4154771000 MAIL ADDRESS: STREET 1: 343 SANSOME ST 3RD FL STREET 2: WELLS FARGO BANK CITY: SAN FRANCISCO STATE: CA ZIP: 94163 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): November 15, 1996 WELLS FARGO & COMPANY (Exact name of registrant as specified in its charter) Delaware 1-6214 No. 13-2553920 (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification No.) 420 Montgomery Street, San Francisco, California 94163 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 477-1000 Not applicable (Former name or former address, if changed since last report) Item 5: OTHER EVENTS Attached hereto as Exhibit 99 is the Wells Fargo & Company and First Interstate Bancorp Pro Forma Combined Financial Information (unaudited) for the nine months ended September 30, 1996 and the year ended December 31, 1995. This pro forma information is being filed pursuant to a requirement of Form S-3 regarding the registration of new securities and the Company does not anticipate being required to file similar pro forma information for future periods. Item 7: FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits 99 Pro Forma Combined Financial Information (unaudited) SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 15, 1996. WELLS FARGO & COMPANY By: FRANK A. MOESLEIN ----------------------------------------- Frank A. Moeslein Executive Vice President and Controller EX-99 2 EXHIBIT 99 WELLS FARGO AND FIRST INTERSTATE PRO FORMA COMBINED FINANCIAL INFORMATION (unaudited) On January 23, 1996, Wells Fargo & Company ("Wells Fargo") and First Interstate Bancorp ("First Interstate") entered into a definitive agreement to merge ("the Merger"). The purchase price of the transaction was approximately $11.3 billion based on Wells Fargo's share price on January 19, the last trading day before Wells Fargo and First Interstate agreed on an exchange ratio. The Merger was consummated on April 1, 1996. The following unaudited pro forma combined statements of income were prepared in connection with the Merger (in which each outstanding share of First Interstate Common Stock was exchanged for two-thirds of a share of Wells Fargo Common Stock) and give effect to the adjustments described in the accompanying notes. The Merger was accounted for as a purchase. The unaudited pro forma combined statements of income are based on the consolidated statement of income of Wells Fargo for the nine months ended September 30, 1996, the consolidated statement of income of First Interstate for the three months ended March 31, 1996 and the consolidated statements of income of Wells Fargo and First Interstate for the year ended December 31, 1995. The pro forma adjustments to income and expense are the net result of the pro forma amounts that assume a January 1, 1995 merger date, less the actual amounts booked by Wells Fargo and First Interstate. The actual amount of goodwill, and related amortization, recorded by Wells Fargo may change as certain estimates and contingencies are finalized, although any adjustments are not expected to have a significant effect on the ultimate amount of goodwill. Wells Fargo expects to meet its pre-merger objective of realizing net annual cost savings of $700 million ($800 million of noninterest expenses, less $100 million of revenues) not later than 18 months after the date of the Merger. About 50% of the cost savings are anticipated to be achieved within the first nine months. The unaudited pro forma combined statements of income do not reflect the full impact of the anticipated cost savings. These unaudited pro forma combined statements of income and the accompanying notes should be read in conjunction with and are qualified in their entirety by the consolidated financial statements, including the accompanying notes, of Wells Fargo in its Annual Report on Form 10-K for the year ended December 31, 1995 and in its quarterly reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 1996. These unaudited pro forma combined statements of income and the accompanying notes should also be read in conjunction with and are qualified in their entirety by the consolidated financial statements, including the accompanying notes, of First Interstate in its Annual Report on Form 10-K for the year ended December 31, 1995 and by the First Interstate financial information for the quarter ended March 31, 1996 included in a filing by Wells Fargo on Form 8-K dated April 16, 1996. The pro forma data are presented for comparative purposes only and are not necessarily indicative of the combined results of operations in the future. The pro forma data are also not necessarily indicative of the combined results of operations which would have been realized had the Merger been in effect during the periods for which the pro forma financial statements are presented. In addition, this Form 8-K includes forward-looking statements that involve inherent risks and uncertainties. Wells Fargo cautions readers that a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Those factors include fluctuations in interest rates, inflation, government regulations, the progress of integrating First Interstate and economic conditions and competition in the geographic and business areas in which Wells Fargo conducts its operations. 1 WELLS FARGO AND FIRST INTERSTATE PRO FORMA COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1995 (A)
Historical ---------------------------------- Pro Forma Pro Forma Wells Fargo First Interstate Adjustments (B) Combined ------------- ---------------- --------------- ------------- (in millions) INTEREST INCOME Investment securities $ 599 $ 609 $ - $ 1,208 Loans 3,403 3,052 11 (C) 6,466 Other 83 47 - 130 ------------- ---------------- --------------- ------------- Total interest income 4,085 3,708 11 7,804 ------------- ---------------- --------------- ------------- INTEREST EXPENSE Deposits 997 975 (20) (D) 1,952 Federal funds purchased and securities sold under repurchase agreements 199 74 - 273 Senior and subordinated debt 203 119 (12) (E) 310 Other 32 3 - 35 ------------- ---------------- --------------- ------------- Total interest expense 1,431 1,171 (32) 2,570 ------------- ---------------- --------------- ------------- NET INTEREST INCOME 2,654 2,537 43 5,234 Provision for loan losses - - - - ------------- ---------------- --------------- ------------- Net interest income after provision for loan losses 2,654 2,537 43 5,234 ------------- ---------------- --------------- ------------- NONINTEREST INCOME Service charges on deposit accounts 478 597 - 1,075 Fees and commissions 433 215 - 648 Trust and investment services income 241 170 - 411 Other 172 137 (15) (F) 294 ------------- ---------------- --------------- ------------- Total noninterest income 1,324 1,119 (15) 2,428 ------------- ---------------- --------------- ------------- NONINTEREST EXPENSE Salaries and employee benefits 1,026 1,061 - 2,087 Net occupancy 211 235 (30) (G) 416 Equipment 193 154 - 347 Core deposit intangible 42 3 269 (H) 314 Goodwill 35 54 234 (I) 323 Merger related - 28 (28) (J) - Other 694 678 20 (K) 1,392 ------------- ---------------- --------------- ------------- Total noninterest expense 2,201 2,213 465 4,879 ------------- ---------------- --------------- ------------- INCOME BEFORE INCOME TAXES 1,777 1,443 (437) 2,783 Income tax expense 745 558 (95) 1,208 ------------- ---------------- --------------- ------------- NET INCOME $ 1,032 $ 885 $ (342) $ 1,575 ------------- ---------------- --------------- ------------- ------------- ---------------- --------------- ------------- NET INCOME APPLICABLE TO COMMON STOCK $ 990 $ 852 $ (342) $ 1,500 ------------- ---------------- --------------- ------------- ------------- ---------------- --------------- ------------- PER COMMON SHARE Net income $ 20.37 $ 15.14 (L) ------------- ------------- ------------- ------------- Dividends declared $ 4.60 $ 4.60 ------------- ------------- ------------- ------------- Average common shares outstanding 48.6 50.5 99.1 (L) ------------- --------------- ------------- ------------- --------------- -------------
See notes to Pro Forma Combined Financial Statements 2 WELLS FARGO AND FIRST INTERSTATE PRO FORMA COMBINED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (A)
Historical ---------------------------------- Wells Fargo First Interstate For The Nine For The Three Months Ended Months Ended September 30, March 31, 1996 1996 Pro Forma Pro Forma (As Reported) (As Reported) Adjustments (B) Combined ------------- ---------------- --------------- ------------- (in millions) INTEREST INCOME Investment securities $ 568 $ 123 $ - $ 691 Loans 4,106 749 4 (C) 4,859 Other 37 14 - 51 ------------- ---------------- --------------- ------------- Total interest income 4,711 886 4 5,601 ------------- ---------------- --------------- ------------- INTEREST EXPENSE Deposits 1,140 241 6 (D) 1,387 Federal funds purchased and securities sold under repurchase agreements 72 4 - 76 Senior and subordinated debt 217 27 1 (E) 245 Other 11 1 - 12 ------------- ---------------- --------------- ------------- Total interest expense 1,440 273 7 1,720 ------------- ---------------- --------------- ------------- NET INTEREST INCOME 3,271 613 (3) 3,881 Provision for loan losses 35 - - 35 ------------- ---------------- --------------- ------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,236 613 (3) 3,846 ------------- ---------------- --------------- ------------- NONINTEREST INCOME Service charges on deposit accounts 634 150 - 784 Fees and commissions 534 63 - 597 Trust and investment services income 267 41 - 308 Other 201 51 (1) (F) 251 ------------- ---------------- --------------- ------------- Total noninterest income 1,636 305 (1) 1,940 ------------- ---------------- --------------- ------------- NONINTEREST EXPENSE Salaries and employee benefits 1,367 274 - 1,641 Net occupancy 257 60 (14) (G) 303 Equipment 269 43 - 312 Core deposit intangible 170 1 35 (H) 206 Goodwill 170 14 58 (I) 242 Merger related 142 251 (393) (J) - Other 774 165 3 (K) 942 ------------- ---------------- --------------- ------------- Total noninterest expense 3,149 808 (311) 3,646 ------------- ---------------- --------------- ------------- INCOME BEFORE INCOME TAXES 1,723 110 307 2,140 Income tax expense 775 133 52 960 ------------- ---------------- --------------- ------------- NET INCOME $ 948 $ (23) $ 255 $ 1,180 ------------- ---------------- --------------- ------------- ------------- ---------------- --------------- ------------- NET INCOME APPLICABLE TO COMMON STOCK $ 901 $ (31) $ 255 $ 1,125 ------------- ---------------- --------------- ------------- ------------- ---------------- --------------- ------------- PER COMMON SHARE Net income $ 11.42 $ 12.11 (L) ------------- ------------- ------------- ------------- Dividends declared $ 3.90 $ 3.90 ------------- ------------- ------------- ------------- Average common shares outstanding 78.8 14.1 92.9 (L) ------------- ---------------- ------------- ------------- ---------------- -------------
See notes to Pro Forma Combined Financial Statements 3 WELLS FARGO AND FIRST INTERSTATE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED) NOTE A: BASIS OF PRESENTATION The unaudited pro forma combined statements of income are presented as if the Merger had become effective on January 1, 1995. The unaudited pro forma combined statement of income for the nine months ended September 30, 1996 combines Wells Fargo's historical results of operations for the nine months ended September 30, 1996, which include the combined operations from April 1, 1996 forward, and First Interstate's results of operations for the period January 1, 1996 through March 31, 1996. The combined historical results of operations have been adjusted for amortization of purchase accounting adjustments and the elimination of merger-related expenses incurred by Wells Fargo and First Interstate (see Note J). The pro forma purchase accounting adjustments for the nine months ended September 30, 1996 represent the amortization that would have taken place from the beginning of the period, less the actual amortization recorded by Wells Fargo in the second and third quarters of 1996. The unaudited pro forma combined statement of income for the year ended December 31, 1995 combines the historical results of operations of Wells Fargo and First Interstate for the year ended December 31, 1995, after giving effect to the amortization of purchase accounting adjustments. Certain amounts in the historical financial statements of First Interstate have been reclassified in the unaudited pro forma combined financial statements to conform to Wells Fargo's historical financial statements. The Merger was accounted for as a purchase. Under this method of accounting, assets and liabilities of First Interstate are adjusted to their estimated fair value and combined with the recorded book values of the assets and liabilities of Wells Fargo. Applicable income tax effects of such adjustments are included as a component of Wells Fargo's net deferred tax asset with a corresponding offset to goodwill. Such asset and liability values are reflected in Wells Fargo's September 30, 1996 unaudited consolidated balance sheet included in the financial information for the quarter ended September 30, 1996 filed in its Form 10-Q dated November 14, 1996. Certain transactions conducted in the ordinary course of business between Wells Fargo and First Interstate are immaterial and, accordingly, have not been eliminated. As a condition of the merger, Wells Fargo was required by regulatory agencies to divest 61 First Interstate branches in California. In September, the Company completed the required divestiture of 61 branches to Home Savings of America. These branches had aggregate deposits of approximately $1.9 billion and loans of approximately $1.1 billion. The selling price of the divested branches represents a premium of 8.11% on the deposits. In addition, Wells Fargo completed the sale of First Interstate banks in Wyoming and Montana effective October 1, 1996. Also, Wells Fargo has entered into a definitive agreement to sell the bank subsidiary in Alaska and expects the sale to close on or about November 30, 1996, subject to regulatory approval. The aggregate assets and deposits of these banks at September 30, 1996 were $647 million and $505 million, respectively. Each of the banks have three branches. The branch divestitures and bank sales have not been reflected in the pro forma financial data since they are not expected to have a material impact on net income. The combined company expects to achieve substantial operating cost savings through consolidation of certain operations and the elimination of redundant costs. The combined company expects to realize such operating cost savings primarily through reductions in staff, consolidation and elimination of certain branches and office facilities and consolidation of certain data processing and other support services. The combined company ultimately expects to achieve Wells Fargo's pre-merger objective of net annual cost savings of approximately $700 million ($800 million of noninterest expenses, less $100 million of revenues) not later than 18 months after the closing of the Merger. About 50% of the cost savings are anticipated to be achieved within the first nine months. No adjustment has been included in the unaudited pro forma combined statements of income for future operating cost savings. 4 WELLS FARGO AND FIRST INTERSTATE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS - (CONTINUED) (UNAUDITED) NOTE B: PURCHASE ACCOUNTING ADJUSTMENTS - FIVE YEAR ESTIMATES Purchase accounting adjustments are made to reflect the recording of intangibles, including goodwill, as well as to eliminate any intangible balances previously recorded by First Interstate in accordance with the purchase method of accounting. Purchase accounting adjustments also include adjusting to fair value First Interstate's assets and liabilities as of April 1, 1996. The incremental effect of the purchase accounting adjustments is estimated to be a net after-tax expense of approximately $370 million for the first 12-month period subsequent to the Merger, approximately $350 million for the second 12-month period subsequent to the Merger, approximately $335 million for the third 12-month period subsequent to the Merger, approximately $325 million for the fourth 12-month period subsequent to the Merger and approximately $310 million for the fifth 12-month period subsequent to the Merger. These amounts are in addition to the amortization of goodwill and identifiable intangibles of First Interstate existing prior to the Merger. NOTE C: INTEREST INCOME - LOANS First Interstate's loans were recorded at their estimated fair values on April 1, 1996. The resulting fair value discount, which was primarily due to changes in interest rates, has been amortized using an accelerated method to increase interest income based on the estimated remaining maturities of the related loans, which range from one month to 30 years. NOTE D: INTEREST EXPENSE - DEPOSITS First Interstate's deposits have been recorded at their estimated fair values on April 1, 1996. The resulting fair value premium has been amortized using an accelerated method to offset interest expense over the remaining maturities of the deposits, which range from one month to 10 years. However, for the nine months ended September 30, 1996, the actual amortization of $13 million recorded by Wells Fargo in the second and third quarters of 1996 more than offsets the amortization of $7 million that would have been recorded assuming a January 1, 1995 merger date (see Note A). NOTE E: INTEREST EXPENSE - SENIOR AND SUBORDINATED DEBT First Interstate's senior and subordinated debt has been recorded at its estimated fair value on April 1, 1996. The resulting fair value premium includes the effect resulting from interest rate swaps used to hedge certain long-term debt instruments. The fair value premium has been amortized to offset interest expense over the estimated lives of the instruments, which range from approximately one month to nine years. NOTE F: NONINTEREST INCOME - OTHER Mortgage servicing rights amortization expense (included in other noninterest income) of $9 million and $15 million has been included in the unaudited pro forma combined statements of income for the nine months ended September 30, 1996 and the year ended December 31, 1995, respectively. The amounts were calculated using an accelerated method over 9 years. In addition, First Interstate's historical mortgage servicing rights amortization of less than $1 million included in both the three months ended March 31, 1996 and the year ended December 31, 1995 has been reversed. 5 WELLS FARGO AND FIRST INTERSTATE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS - (CONTINUED) (UNAUDITED) NOTE G: NONINTEREST EXPENSE - NET OCCUPANCY Net amortization related to reserve for disposal of leased properties and net lease intangible assets (due to adjusting leases to market rates at April 1, 1996) of $26 million and $30 million for the nine months ended September 30, 1996 and the year ended December 31, 1995, respectively, has been included in the unaudited pro forma combined statements of income as an offset to net occupancy expense. These amounts were calculated based on amortizing the reserve for disposal of leased properties and the net lease intangible assets over the remaining term of the leases. NOTE H: NONINTEREST EXPENSE - AMORTIZATION OF CORE DEPOSIT INTANGIBLE Core deposit intangible amortization expense of $177 million and $272 million has been included in the unaudited pro forma combined statements of income for the nine months ended September 30, 1996 and the year ended December 31, 1995, respectively. The amounts were calculated using an accelerated method over 15 years. In addition, First Interstate's historical core deposit intangible amortization of $1 million included in the three months ended March 31, 1996 and $3 million for the year ended December 31, 1995 has been reversed. NOTE I: NONINTEREST EXPENSE - AMORTIZATION OF GOODWILL Goodwill of $7.2 billion was derived by taking the $11.3 billion base purchase price plus $.2 billion related to the fair value of First Interstate stock options outstanding at April 1, 1996 and legal, investment banking and other direct acquisition costs minus $4.3 billion for the fair value of net assets acquired. Amortization expense related to goodwill of $216 million and $288 million for the nine months ended September 30, 1996 and the year ended December 31, 1995, respectively, has been included in the unaudited pro forma combined statements of income. These amounts were calculated using the straight-line method over 25 years. In addition, First Interstate's historical goodwill amortization of $14 million included in the three months ended March 31, 1996 and $54 million for the year ended December 31, 1995 has been reversed. Goodwill, and related amortization, may change as certain estimates and contingencies are finalized, although any adjustments are not expected to have a significant effect on the ultimate amount of goodwill. NOTE J: NONINTEREST EXPENSE - MERGER RELATED Wells Fargo's merger-related expenses of $142 million ($84 million after tax) for the nine months ended September 30, 1996 and First Interstate's merger-related expenses of $251 million ($245 million after tax) and $28 million ($28 million after tax) for the nine months ended September 30, 1996 and the year ended December 31, 1995, respectively, have been eliminated from the combined historical results of income, as these expenses do not represent ongoing expenses of Wells Fargo. NOTE K: NONINTEREST EXPENSE - OTHER Amortization expense related to purchased credit card relationships (PCCRs) of $16 million and $24 million for the nine months ended September 30, 1996 and the year ended December 31, 1995, respectively, has been included in the unaudited pro forma combined statements of income. The amounts were calculated using an accelerated method over 15 years. In addition, First Interstate's historical amortization of PCCRs and other intangibles of $1 million included in the three months ended March 31, 1996 and $4 million for the year ended December 31, 1995 has been reversed. 6 WELLS FARGO AND FIRST INTERSTATE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS - (CONTINUED) (UNAUDITED) NOTE L: EARNINGS PER SHARE Pro forma combined earnings per common share for the nine months ended September 30, 1996 was calculated based on pro forma combined net income applicable to common stock divided by the actual number of common shares outstanding at September 30, 1996 of 92.9 million shares (as an approximation of average common shares outstanding if the Merger had taken place on January 1, 1995). Pro forma combined earnings per common share for the year ended December 31, 1995 was calculated based on pro forma combined net income applicable to common stock divided by the sum of the average common shares outstanding of Wells Fargo for 1995 of 48.6 million shares, plus the equivalent of the average common shares outstanding of First Interstate for 1995 of 50.5 million shares (75.7 million shares multiplied by the exchange ratio of two-thirds). 7 -----END PRIVACY-ENHANCED MESSAGE-----