-----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, FaVpl34Jgbs9c+plGYQRNiSB+jOAxATy2qjZiuTcyn1sCXMerjvgf0VZ5Yx8boTP ub0EUXX/v7oAzNI49nz+uQ== 0000950149-98-001573.txt : 19980916 0000950149-98-001573.hdr.sgml : 19980916 ACCESSION NUMBER: 0000950149-98-001573 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980608 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980915 SROS: NYSE SROS: PCX 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: SEC FILE NUMBER: 001-06214 FILM NUMBER: 98709769 BUSINESS ADDRESS: STREET 1: 420 MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94163 BUSINESS PHONE: 8004114932 MAIL ADDRESS: STREET 1: 343 SANSOME ST 3RD FL STREET 2: WELLS FARGO BANK CITY: SAN FRANCISCO STATE: CA ZIP: 94163 8-K 1 DATE OF REPORT: JUNE 8, 1998 1 TYPE: 8-K UNITED STATES 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): June 8, 1998 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: 1-800-411-4932 Not applicable (Former name or former address, if changed since last report) 2 Item 5. Other Events On June 8, 1998, Wells Fargo & Company ("Wells Fargo") announced it had entered into a definitive agreement for a merger of equals ("Merger") with Norwest Corporation ("Norwest"). The name of the combined company will be Wells Fargo & Company and its corporate headquarters will be in San Francisco. In accordance with the agreement, common shareholders of Wells Fargo will receive ten shares of Norwest Common Stock in exchange for each share of Wells Fargo Common Stock. The consummation of the Merger is subject to various conditions, including required approvals of Norwest's and Wells Fargo's shareholders and receipt of all requisite regulatory approvals. There is no assurance as to when or whether the required approvals would be obtained, and if obtained, as to what conditions or restrictions would be imposed. Subject to these conditions, the merger is currently expected to close in the fourth quarter of 1998. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (b) Pro Forma Financial Information The following unaudited pro forma condensed combined financial information and explanatory notes are presented to show the impact on the historical financial positions and results of operations of Norwest and Wells Fargo of the Merger under the "pooling of interests" method of accounting. The unaudited pro forma condensed combined financial information combines the historical financial information of Norwest and Wells Fargo as of June 30, 1998 and for the six months ended June 30, 1998 and 1997 and for the twelve-month periods ended December 31, 1997, 1996 and 1995, respectively. The unaudited pro forma condensed combined statements of income give effect to the Merger as if the Merger had been consummated at the beginning of the earliest period presented. The pro forma condensed combined balance sheet assumes the Merger was consummated on June 30, 1998. The pro forma condensed combined financial information as of June 30, 1998 and for the six months ended June 30, 1998 and 1997 and each of the three years ended December 31, 1997, 1996 and 1995 is based on and derived from, and should be read in conjunction with, the historical consolidated financial statements and the related notes thereto of Norwest and Wells Fargo. Pro forma stockholders' equity at June 30, 1998 includes the effect of an estimated non-recurring Merger charge of $950 million ($625 million after taxes). See Note 3 to the unaudited pro forma financial information for further information. The pro forma condensed combined financial statements do not give effect to anticipated cost savings or potential revenue enhancements in connection with the Merger. The pro forma data are presented for comparative purposes only and are not necessarily indicative of the future financial position or results of operations of the combined company or of the combined financial position or the results of operations that would have been realized had the Merger been consummated during the periods or as of the dates for which the pro forma data are presented. 2 3 NORWEST CORPORATION AND WELLS FARGO & COMPANY UNAUDITED PRO FORMA COMBINED BALANCE SHEET AT JUNE 30, 1998
(in millions) WELLS PRO FORMA NORWEST FARGO ADJUSTMENTS COMBINED ASSETS Cash and due from banks ........... $ 4,954 7,130 -- 12,084 Interest-bearing deposits ......... 63 17 -- 80 Federal funds sold and resale agreements ............... 866 590 -- 1,456 ------- ------ ---- ------- Total cash and cash equivalents.. 5,883 7,737 -- 13,620 ------- ------ ---- ------- Trading account securities ........ 247 941 -- 1,188 Investment securities available for sale .............. 18,432 8,449 -- 26,881 Investment securities held to maturity ........................ 752 405 -- 1,157 ------- ------ ---- ------- Total investment securities ..... 19,184 8,854 -- 28,038 ------- ------ ---- ------- Loans held for sale ............... 3,470 1,085 -- 4,555 Mortgages held for sale ........... 12,191 319 -- 12,510 Loans and leases, net of unearned discount ............... 43,391 62,916 -- 106,307 Allowance for credit losses ....... 1,262 1,835 -- 3,097 ------- ------ ---- ------- Net loans and leases ............ 42,129 61,081 -- 103,210 ------- ------ ---- ------- Premises and equipment, net ....... 1,377 2,017 (107) 3,287 Mortgage servicing rights, net .... 2,904 - -- 2,904 Goodwill and intangible assets .... 1,141 8,596 -- 9,737 Interest receivable and other assets ................ 4,627 2,570 -- 7,197 ------- ------ ---- ------- Total assets ................. $93,153 93,200 (107) 186,246 ======= ====== ==== ======= LIABILITIES Deposits Noninterest-bearing ............... $17,797 23,411 -- 41,208 Interest-bearing .................. 38,998 47,039 -- 86,037 ------- ------ ---- ------- Total deposits .................. 56,795 70,450 -- 127,245 Short-term borrowings ............. 12,188 1,549 -- 13,737 Accrued expenses and other liabilities ............... 4,508 2,537 660 7,705 Long-term debt .................... 12,316 4,415 -- 16,731 Guaranteed preferred beneficial interest in Wells Fargo subordinated debentures ... -- 1,299 -- 1,299 STOCKHOLDERS' EQUITY Preferred stock ................... 186 275 -- 461 Common stock ...................... 1,285 425 993 2,703 Surplus ........................... 483 8,347 (993) 7,837 Retained earnings ................. 5,365 3,837 (767) 8,435 Cumulative other comprehensive income ............ 375 66 -- 441 Notes receivable from ESOP ........ (5) -- -- (5) Treasury stock .................... (343) -- -- (343) ------- ------ ---- ------- Total stockholders' equity ... 7,346 12,950 (767) 19,529 ------- ------ ---- ------- Total liabilities and stockholders' equity ....... $93,153 93,200 (107) 186,246 ======= ====== ==== =======
The accompanying notes are an integral part of the unaudited pro forma combined financial information. 3 4 NORWEST CORPORATION AND WELLS FARGO & COMPANY UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME SIX MONTHS ENDED JUNE 30, 1998
(in millions, except per share amounts) WELLS PRO FORMA NORWEST FARGO ADJUSTMENTS COMBINED INTEREST INCOME Loans and leases ...................... $2,384 2,959 -- 5,343 Investment securities available for sale .................. 631 275 -- 906 Investment securities held to maturity ............................ 13 12 -- 25 Loans held for sale ................... 139 42 -- 181 Mortgages held for sale ............... 353 26 -- 379 Money market investments .............. 21 17 -- 38 Trading account securities ............ 28 30 -- 58 ------ ----- -- ----- Total interest income ............. 3,569 3,361 -- 6,930 ------ ----- -- ----- INTEREST EXPENSE Deposits .............................. 739 811 -- 1,550 Short-term borrowings ................. 291 72 -- 363 Long-term debt ........................ 391 148 -- 539 Guaranteed preferred beneficial interest in Wells Fargo subordinated debentures ............. -- 51 -- 51 ------ ----- -- ----- Total interest expense ............ 1,421 1,082 -- 2,503 ------ ----- -- ----- NET INTEREST INCOME ................... 2,148 2,279 -- 4,427 Provision for credit losses ........... 264 350 -- 614 ------ ----- -- ----- Net interest income after provision for credit losses ......... 1,884 1,929 -- 3,813 ------ ----- -- ----- NONINTEREST INCOME Mortgage banking ...................... 540 38 -- 578 Trust and investment fees and commissions ..................... 256 271 -- 527 Service charges and fees .............. 311 607 -- 918 Credit card fee revenue ............... 73 176 -- 249 Insurance ............................. 205 -- -- 205 Data processing ....................... 33 -- -- 33 Net investment securities available for sale gains ............ 42 23 -- 65 Net venture capital gains ............. 112 -- -- 112 Trading ............................... 66 38 -- 104 Other ................................. 123 283 -- 406 ------ ----- -- ----- Total noninterest income .......... 1,761 1,436 -- 3,197 ------ ----- -- ----- NONINTEREST EXPENSE Salaries and benefits ................. 1,389 875 (4) 2,260 Net occupancy ......................... 174 199 -- 373 Equipment rentals, depreciation and maintenance ..................... 183 197 5 385 Business development .................. 132 87 -- 219 Communication ......................... 159 127 -- 286 Data processing ....................... 78 30 -- 108 Intangible asset amortization ......... 86 293 -- 379 Other ................................. 334 357 -- 691 ------ ----- -- ----- Total noninterest expense ......... 2,535 2,165 1 4,701 ------ ----- -- -----
4 (Continued on page 5) 5 NORWEST CORPORATION AND WELLS FARGO & COMPANY UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME SIX MONTHS ENDED JUNE 30, 1998
(in millions, except per share amounts) WELLS PRO FORMA NORWEST FARGO ADJUSTMENTS COMBINED (continued from page 4) INCOME BEFORE INCOME TAX EXPENSE .... 1,110 1,200 (1) 2,309 Income tax expense .................. 360 548 -- 908 ------ ----- -- ------ NET INCOME .......................... $ 750 652 (1) 1,401 ====== ===== == ===== EARNINGS PER COMMON SHARE ........... $ 0.98 7.52 -- 0.86 DILUTED EARNINGS PER COMMON SHARE ... 0.96 7.45 -- 0.85 Average common shares outstanding ... 757.8 85.5 769.7 1,613.0 Diluted average common shares outstanding ....................... 771.5 86.4 777.1 1,635.0
The accompanying notes are an integral part of the unaudited pro forma combined financial information. 5 6 NORWEST CORPORATION AND WELLS FARGO & COMPANY UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME SIX MONTHS ENDED JUNE 30, 1997
(in millions, except per share amounts) WELLS PRO FORMA NORWEST FARGO ADJUSTMENTS COMBINED INTEREST INCOME Loans and leases ...................... $2,211 3,002 -- 5,213 Investment securities available for sale ............................ 690 398 -- 1,088 Investment securities held to maturity ............................ 14 12 -- 26 Loans held for sale ................... 112 42 -- 154 Mortgages held for sale ............... 196 13 -- 209 Money market investments .............. 31 12 -- 43 Trading account securities ............ 15 11 -- 26 ------ ----- -- ----- Total interest income ............. 3,269 3,490 -- 6,759 ------ ----- -- ----- INTEREST EXPENSE Deposits .............................. 715 851 -- 1,566 Short-term borrowings ................. 215 71 -- 286 Long-term debt ........................ 381 159 -- 540 Guaranteed preferred beneficial interest in Wells Fargo subordinated debentures ............. -- 50 -- 50 ------ ----- -- ----- Total interest expense ............ 1,311 1,131 -- 2,442 ------ ----- -- ----- NET INTEREST INCOME ................... 1,958 2,359 -- 4,317 Provision for credit losses ........... 232 245 -- 477 ------ ----- -- ----- Net interest income after provision for credit losses ......... 1,726 2,114 -- 3,840 ------ ----- -- ----- NONINTEREST INCOME Mortgage banking ...................... 399 14 -- 413 Trust and investment fees and commission ...................... 209 253 -- 462 Service charges and fees .............. 276 580 -- 856 Credit card fee revenue ............... 56 146 -- 202 Insurance ............................. 190 -- -- 190 Data processing ....................... 36 -- -- 36 Net investment securities available for sale gains (losses) ...................... 4 7 -- 11 Net venture capital gains ............. 113 -- -- 113 Trading ............................... 52 38 -- 90 Other ................................. 106 251 -- 357 ------ ----- -- ----- Total noninterest income .......... 1,441 1,289 -- 2,730 ------ ----- -- ----- NONINTEREST EXPENSE Salaries and benefits ................. 1,117 872 (4) 1,985 Net occupancy ......................... 160 196 -- 356 Equipment rentals, depreciation and maintenance ..................... 166 192 5 363 Business development .................. 122 63 -- 185 Communication ......................... 143 154 -- 297 Data processing ....................... 87 26 -- 113 Intangible asset amortization ......... 83 308 -- 391 Other ................................. 283 522 -- 805 ------ ----- -- ----- Total noninterest expense ......... 2,161 2,333 1 4,495 ------ ----- -- -----
6 (continued on page 7) 7 NORWEST CORPORATION AND WELLS FARGO & COMPANY UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME SIX MONTHS ENDED JUNE 30, 1997 (in millions, except per share amounts)
WELLS PRO FORMA NORWEST FARGO ADJUSTMENTS COMBINED (continued from page 6) INCOME BEFORE INCOME TAX EXPENSE .... 1,006 1,070 (1) 2,075 Income tax expense .................. 353 502 -- 855 ------ ----- -- ----- NET INCOME .......................... $ 653 568 (1) 1,220 ====== ===== == ===== EARNINGS PER COMMON SHARE ........... $ 0.86 6.12 -- 0.73 DILUTED EARNINGS PER COMMON SHARE ... 0.85 6.06 -- 0.72 Average common shares outstanding ... 747.4 89.9 809.1 1,646.4 Diluted average common shares outstanding ....................... 757.7 90.9 818.2 1,666.8
The accompanying notes are an integral part of the unaudited pro forma combined financial information. 7 8 NORWEST CORPORATION AND WELLS FARGO & COMPANY UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 1997
(in millions, except per share amounts) WELLS PRO FORMA NORWEST FARGO ADJUSTMENTS COMBINED INTEREST INCOME Loans and leases .................... $4,553 5,986 -- 10,539 Investment securities available for sale ................ 1,331 732 -- 2,063 Investment securities held to maturity .......................... 28 25 -- 53 Loans held for sale ................. 232 80 -- 312 Mortgages held for sale ............. 462 28 -- 490 Money market investments ............ 50 18 -- 68 Trading account securities .......... 41 35 -- 76 ------- ------ -- ------ Total interest income .......... 6,697 6,904 -- 13,601 ------- ------ -- ------ INTEREST EXPENSE Deposits ............................ 1,447 1,703 -- 3,150 Short-term borrowings ............... 439 171 -- 610 Long-term debt ...................... 778 315 -- 1,093 Guaranteed preferred beneficial interest in Wells Fargo subordinated debentures ........... -- 101 -- 101 ------- ------ -- ------ Total interest expense .......... 2,664 2,290 -- 4,954 ------- ------ -- ------ NET INTEREST INCOME ................. 4,033 4,614 -- 8,647 Provision for credit losses ......... 525 615 -- 1,140 ------- ------ -- ------ Net interest income after provision for credit losses ....... 3,508 3,999 -- 7,507 ------- ------ -- ------ NONINTEREST INCOME Mortgage banking .................... 876 51 -- 927 Trust and investment fees and commissions ................... 435 519 -- 954 Service charges and fees ............ 579 1,168 -- 1,747 Credit card fee revenue ............. 123 325 -- 448 Insurance ........................... 336 -- -- 336 Data processing ..................... 71 -- -- 71 Net investment securities available for sale gains .................... 38 20 -- 58 Net venture capital gains ........... 191 -- -- 191 Trading ............................. 79 72 -- 151 Other ............................... 234 494 -- 728 ------- ------ -- ------ Total noninterest income ........ 2,962 2,649 -- 5,611 ------- ------ -- ------ NONINTEREST EXPENSE Salaries and benefits ............... 2,361 1,715 (8) 4,068 Net occupancy ....................... 326 388 -- 714 Equipment rentals, depreciation and maintenance ................... 341 385 10 736 Business development ................ 254 136 -- 390 Communication ....................... 295 295 -- 590 Data processing ..................... 168 49 -- 217 Intangible asset amortization ....... 169 610 -- 779 Other ............................... 506 916 -- 1,422 ------- ------ -- ------ Total noninterest expense ....... 4,420 4,494 2 8,916 ------- ------ -- ------
8 (continued on page 9) 9 NORWEST CORPORATION AND WELLS FARGO & COMPANY UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 1997
(in millions, except per share amounts) WELLS PRO FORMA NORWEST FARGO ADJUSTMENTS COMBINED (continued from page 8) INCOME BEFORE INCOME TAX EXPENSE .... 2,050 2,154 (2) 4,202 Income tax expense .................. 699 999 (1) 1,697 ------ ----- -- ------ NET INCOME .......................... $1,351 1,155 (1) 2,505 ====== ===== == ====== EARNINGS PER COMMON SHARE ........... $ 1.78 12.77 - 1.51 DILUTED EARNINGS PER COMMON SHARE ... 1.75 12.64 - 1.49 Average common shares outstanding ... 750.1 88.4 796.0 1,634.5 Diluted average common shares outstanding ....................... 760.1 89.4 804.4 1,653.9
The accompanying notes are an integral part of the unaudited pro forma combined financial information. 9 10 NORWEST CORPORATION AND WELLS FARGO & COMPANY UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 1996
(in millions, except per share amounts) WELLS PRO FORMA NORWEST FARGO ADJUSTMENTS COMBINED INTEREST INCOME Loans and leases ................... $4,302 5,592 -- 9,894 Investment securities available for sale ............... 1,170 779 -- 1,949 Investment securities held to maturity ......................... 36 13 -- 49 Loans held for sale ................ 254 74 -- 328 Mortgages held for sale ............ 469 22 -- 491 Money market investments ........... 62 33 -- 95 Trading account securities ......... 25 10 -- 35 ------ ----- -- ------ Total interest income ......... 6,318 6,523 -- 12,841 ------ ----- -- ------ INTEREST EXPENSE Deposits ........................... 1,325 1,586 -- 2,911 Short-term borrowings .............. 453 108 -- 561 Long-term debt ..................... 838 302 -- 1,140 Guaranteed preferred beneficial interest in Wells Fargo subordinated debentures .......... -- 6 -- 6 ------ ----- -- ------ Total interest expense ......... 2,616 2,002 -- 4,618 ------ ----- -- ------ NET INTEREST INCOME ................ 3,702 4,521 -- 8,223 Provision for credit losses ........ 395 105 -- 500 ------ ----- -- ------ Net interest income after provision for credit losses ...... 3,307 4,416 -- 7,723 ------ ----- -- ------ NONINTEREST INCOME Mortgage banking ................... 822 26 -- 848 Trust and investment fees and commissions .................. 360 438 -- 798 Service charges and fees ........... 484 1,082 -- 1,566 Credit card fee revenue ............ 122 228 -- 350 Insurance .......................... 280 -- -- 280 Data processing .................... 73 -- -- 73 Net investment securities available for sale gains (losses) ................... (47) 10 -- (37) Net venture capital gains .......... 256 -- -- 256 Trading ............................ 35 44 -- 79 Other .............................. 180 329 -- 509 ------ ----- -- ------ Total noninterest income ...... 2,565 2,157 -- 4,722 ------ ----- -- ------ NONINTEREST EXPENSE Salaries and benefits .............. 2,097 1,866 (8) 3,955 Net occupancy ...................... 316 366 -- 682 Equipment rentals, depreciation and maintenance .................. 328 399 10 737 Business development ............... 228 194 -- 422 Communication ...................... 285 312 -- 597 Data processing .................... 163 55 -- 218 Intangible asset amortization ...... 162 519 -- 681 Other .............................. 511 883 -- 1,394 ------ ----- -- ------ Total noninterest expense ..... 4,090 4,594 2 8,686 ------ ----- -- ------
10 (continued on page 11) 11 NORWEST CORPORATION AND WELLS FARGO & COMPANY UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 1996
(in millions, except per share amounts) WELLS PRO FORMA NORWEST FARGO ADJUSTMENTS COMBINED (continued from page 10) INCOME BEFORE INCOME TAX EXPENSE ...... 1,782 1,979 (2) 3,759 Income tax expense .................... 628 908 (1) 1,535 ------ ----- -- ------ NET INCOME ............................ $1,154 1,071 (1) 2,224 ====== ===== == ====== EARNINGS PER COMMON SHARE ............. $ 1.55 12.21 -- 1.38 DILUTED EARNINGS PER COMMON SHARE ..... 1.54 12.05 -- 1.36 Average common shares outstanding ..... 731.8 82.2 739.9 1,553.9 Diluted average common shares outstanding ......................... 739.5 83.3 749.5 1,572.3
The accompanying notes are an integral part of the unaudited pro forma combined financial information. 11 12 NORWEST CORPORATION AND WELLS FARGO & COMPANY UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 1995
(in millions, except per share amounts) WELLS PRO FORMA NORWEST FARGO ADJUSTMENTS COMBINED INTEREST INCOME Loans and leases ................ $3,956 3,435 -- 7,391 Investment securities available for sale ............ 1,065 599 -- 1,664 Investment securities held to maturity ...................... 84 3 -- 87 Loans held for sale ............. 196 31 -- 227 Mortgages held for sale ......... 366 13 -- 379 Money market investments ........ 35 4 -- 39 Trading account securities ...... 15 -- -- 15 ------ ----- -- ----- Total interest income ...... 5,717 4,085 -- 9,802 ------ ----- -- ----- INTEREST EXPENSE Deposits ........................ 1,156 997 -- 2,153 Short-term borrowings ........... 516 231 -- 747 Long-term debt .................. 776 203 -- 979 ------ ----- -- ----- Total interest expense ..... 2,448 1,431 -- 3,879 ------ ----- -- ----- NET INTEREST INCOME ............. 3,269 2,654 -- 5,923 Provision for credit losses ..... 312 -- -- 312 ------ ----- -- ----- Net interest income after provision for credit losses ... 2,957 2,654 -- 5,611 ------ ----- -- ----- NONINTEREST INCOME Mortgage banking ................ 536 19 -- 555 Trust and investment fees and commissions ............... 284 274 -- 558 Service charges and fees ........ 342 581 -- 923 Credit card fee revenue ......... 133 160 -- 293 Insurance ....................... 225 -- -- 225 Data processing ................. 72 -- -- 72 Net investment securities held to maturity gains ........ 1 -- -- 1 Net investment securities available for sale (losses) ... (45) (17) -- (62) Net venture capital gains ....... 102 -- -- 102 Trading ......................... 40 27 -- 67 Other ........................... 158 255 -- 413 ------ ----- -- ----- Total noninterest income .... 1,848 1,299 -- 3,147 ------ ----- -- ----- NONINTEREST EXPENSE Salaries and benefits ........... 1,745 995 (8) 2,732 Net occupancy ................... 254 211 -- 465 Equipment rentals, depreciation and maintenance ............... 273 193 10 476 Business development ............ 172 109 -- 281 Communication ................... 225 147 -- 372 Data processing ................. 136 11 -- 147 Intangible asset amortization ... 125 88 -- 213 Other ........................... 452 422 -- 874 ------ ----- -- ----- Total noninterest expense .. 3,382 2,176 2 5,560 ------ ----- -- -----
12 (continued on page 13) 13 NORWEST CORPORATION AND WELLS FARGO & COMPANY UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31, 1995
(in millions, except per share amounts) WELLS PRO FORMA NORWEST FARGO ADJUSTMENTS COMBINED (continued from page 12) INCOME BEFORE INCOME TAX EXPENSE ...... 1,423 1,777 (2) 3,198 Income tax expense .................... 467 745 (1) 1,211 ------ ----- -- ----- NET INCOME ............................ $ 956 1,032 (1) 1,987 ====== ===== == ===== EARNINGS PER COMMON SHARE ............. $ 1.39 20.37 -- 1.67 DILUTED EARNINGS PER COMMON SHARE ..... 1.36 20.06 -- 1.63 Average common shares outstanding . 658.4 48.6 437.5 1,144.5 Diluted average common shares outstanding ..................... 680.2 49.4 444.1 1,173.7
The accompanying notes are an integral part of the unaudited pro forma combined financial information. 13 14 NORWEST CORPORATION AND WELLS FARGO & COMPANY Notes to Unaudited Pro Forma Condensed Combined Financial Information 1. Basis of Presentation The unaudited pro forma condensed financial information has been prepared using the pooling of interests method of accounting, giving effect to the Merger as if it had occurred as of the beginning of the earliest period presented. The pro forma financial information presented is not necessarily indicative of the results of operations had the Merger been consummated at the beginning of the periods presented, nor is it necessarily indicative of the results of operations in future periods or the future financial position of the combined entities. Certain historical financial information has been reclassified to conform with the current presentation. The Merger, which is expected to be completed in the fourth quarter of 1998, provides for issuance of ten shares of Norwest Common Stock for each outstanding share of Wells Fargo Common Stock, and is subject to regulatory and Norwest Stockholder and Wells Fargo Stockholder approval. At June 30, 1998, Norwest had five pending acquisitions (exclusive of the Merger) with total assets of approximately $2.3 billion, and it is expected that approximately 14.0 million common shares will be issued upon consummation of these acquisitions. The pro forma information does not give effect to these other pending acquisitions of Norwest as they are not material to the pro forma condensed combined financial information, either individually or in the aggregate. Norwest and Wells Fargo anticipate that, in order to comply with the Department of Justice merger guidelines, the companies will be requested to sell a modest level of deposits. In this connection, the companies expect to divest branches in various markets having aggregate deposits of approximately $1 billion. The impact of such divestitures is not expected to be material and no adjustment has been included in the unaudited pro forma combined financial statements for the anticipated divestitures. 2. Accounting Policies and Financial Statement Classifications Norwest and Wells Fargo have identified and conformed certain accounting policies, and as described below in Note 4, the accompanying pro forma financial information reflects such conforming accounting adjustments. The accounting policies of both Norwest and Wells Fargo are in the process of being reviewed in detail. Upon completion of such review, other conforming adjustments or financial statement reclassifications may be determined. At June 30, 1998, Wells Fargo goodwill and intangibles amounted to $8.6 billion, and Norwest goodwill and intangibles amounted to $1.1 billion. In conjunction with the Merger and recent financial projections, management is currently in the process of assessing such intangibles for impairment. Transactions between Norwest and Wells Fargo are not material in relation to the pro forma financial information and therefore intercompany balances have not been eliminated from the pro forma combined amounts. 3. Non-recurring Merger Charge Pro forma stockholders' equity includes the effect of an estimated non-recurring charge of approximately $950 million, $625 million net of income taxes. Since the estimated charge is non-recurring, it has not been reflected in the pro forma condensed combined statements of income and related per common share calculations. The charge does not include any impairment of intangibles that may be identified upon completion of the review discussed in Note 2. 14 15 The estimated non-recurring charge consists of the following (in millions): Employee-related expense ......................................... $295 Costs associated with systems integration, operations and customer conversions ............................ 350 Branch consolidations, name change and signage ................... 185 Investment banking, legal and accounting fees .................... 120 ---- 950 Income tax benefit ............................................... 325 ---- Total estimated non-recurring charge ............................. $625 ====
The pro forma condensed combined financial information does not reflect any benefit expected from revenue enhancements or derived from potential cost savings related to the Merger. Although management anticipates revenue enhancements and cost savings will result from the Merger, there can be no assurance these items will be achieved. 4. Pro Forma Adjustments The following pro forma adjustments have been reflected in the pro forma condensed combined financial information: - Common stock and surplus were adjusted by $993 million, based on 85.1 million shares of Wells Fargo Common Stock outstanding at June 30, 1998, reflecting the exchange of ten shares of Norwest Common Stock for each share of Wells Fargo Common Stock, and accounting for the Merger as a pooling of interests. The adjustment reflects the reclassification from surplus to common stock to reflect the $1-2/3 par value of Norwest Common Stock. The number of shares of Norwest Common Stock to be issued upon consummation of the Merger will be based on the number of shares of Wells Fargo Common Stock outstanding at that time and will include approximately 2.5 million shares of Wells Fargo Common Stock that Wells Fargo intends to issue to cure a portion of previously repurchased "tainted" shares prior to the Merger. For the two-year period from June 8, 1996 to the announcement date of the Merger, Wells Fargo repurchased and retired shares of Wells Fargo Common Stock that are presumed to be tainted under Accounting Principles Board (APB) Opinion No. 16 and authoritative interpretations thereof. Wells Fargo rescinded its share repurchase programs as of June 7, 1998. These tainted shares may be deemed to result in certain conditions to the use of pooling of interests accounting for the Merger not being met. Wells Fargo intends to cure such "tainted" shares prior to the effective time of the Merger by issuing shares of Wells Fargo common stock in a manner that complies with the requirements of APB Opinion No. 16 and authoritative interpretations thereof. - Other liabilities and retained earnings were adjusted by $950 million ($625 million net of income taxes), to reflect the non-recurring Merger charge discussed in Note 3. 15 16 - Other liabilities and retained earnings have been adjusted by $153 million before taxes ($100 million, net of income taxes) reflecting the transition obligation for the Wells Fargo postretirement medical and life insurance benefits upon initial adoption of Statement of Financial Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions (FAS 106) at the beginning of 1993. Norwest adopted FAS 106 in 1992 and immediately recognized the accumulated postretirement benefit obligations at the time of adoption as a cumulative effect of change in accounting principle. Subsequent to 1992, salaries and benefits expense has been reduced and retained earnings has been credited to eliminate the annual charge of $8 million ($5 million, net of income taxes) related to the amortization of the Wells Fargo transition obligations. - Premises and equipment and retained earnings have been adjusted by $107 million before taxes ($70 million, net of income taxes) reflecting the conforming of capitalization policies for premises and equipment. The capitalization policy of the pro forma combined company reflects a higher dollar threshold for capitalizing purchases of furniture and equipment that is currently used by one of the parties to the Merger. Use of a higher dollar threshold amount is consistent with the size of the combined company. Equipment expense has been adjusted by $5 million for the first half of 1998 and 1997, respectively, and by $10 million for each of the years ended December 31, 1997, 1996 and 1995, reflecting adjustments for capitalization of such items, partially offset by related depreciation previously recorded. At June 30, 1998, the net adjustment to accrued expenses and other liabilities is determined as follows (dollar amounts in millions): Non-recurring Merger charge ................................. $ 950 Tax effect of non-recurring Merger charge ................... (325) Postretirement transition obligations ....................... 153 Less amortization through June 30, 1998 ..................... (43) 110 --- Tax effect of unamortized postretirement transition obligations .................................... (38) Tax effect of $107 adjustment to premises and equipment ..... (37) ----- Net adjustment to accrued expenses and other liabilities .... $ 660 ===== At June 30, 1998, the net adjustment to retained earnings is determined as follows (dollar amounts in millions): ....... Non-recurring Merger charge, net of income taxes ............ $(625) Postretirement transition obligation adjustment, net of amortization and income taxes ............................. (72) Adjustment to premises and equipment, net of income taxes ... (70) ----- Net adjustment to retained earnings ......................... $(767) ===== 16 17 5. Pro Forma Earnings Per Share The pro forma combined basic and diluted earnings per share for the respective periods presented is based on the combined weighted average number of common and dilutive potential common shares and adjusted weighted shares of Norwest and Wells Fargo. The number of weighted average common shares and adjusted weighted average shares, including all dilutive potential common shares, reflects the exchange of ten shares of Norwest Common Stock for each share of Wells Fargo Common Stock. Amounts used in the determination of pro forma basic and diluted earnings per share are as follows:
(in millions) For the six months For the year ended ended June 30, December 31, ---------------------- -------------------------------------- 1998 1997 1997 1996 1995 ------ ------ ------ ------ ------ Net income $1,401 1,220 2,505 2,224 1,987 Less dividends accrued on preferred stock 18 26 43 85 81 ------ ------ ------ ------ ------ Income available to common stockholders - basic 1,383 1,194 2,462 2,139 1,906 Add interest expense and amortization of debt expense, net of taxes, on convertible subordinated debentures and dividends accrued on convertible preferred stock -- -- -- -- 11 ------ ------ ------ ------ ------ Income available to common stockholders - diluted $1,383 1,194 2,462 2,139 1,917 ====== ====== ====== ====== ====== Weighted average shares outstanding 1,613.0 1,646.4 1,634.5 1,553.9 1,144.5 Adjustments for dilutive securities: Assumed exercise of stock options and restricted share rights 22.0 20.4 19.4 18.4 12.4 Assumed conversion of preferred stock and convertible subordinated debentures -- -- -- -- 16.8 ------- ------- ------- ------- ------- Diluted common shares 1,635.0 1,666.8 1,653.9 1,572.3 1,173.7 ======= ======= ======= ======= =======
17 18 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 September 15, 1998. WELLS FARGO & COMPANY By: FRANK A. MOESLEIN ---------------------------------------- Frank A. Moeslein Executive Vice President and Controller 18 -----END PRIVACY-ENHANCED MESSAGE-----