<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Act of 1934
Date of Report (date of earliest event reported): August 8, 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)
<PAGE>
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 six months ended June 30, 1996 and the year ended
December 31, 1995.
This pro forma information is being filed pursuant to a requirement of
Form S-3 in anticipation of 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 August 8, 1996.
WELLS FARGO & COMPANY
By: /s/ Frank A. Moeslein
-----------------------------
Frank A. Moeslein
Executive Vice President and Controller
<PAGE>
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 six months ended June
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 net cost savings are anticipated to be achieved within the
first nine months. The unaudited pro forma combined statements of income do not
reflect 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, in its quarterly report on Form 10-Q for the
quarter ended March 31, 1996 and by the financial information for the period
ended June 30, 1996 filed in its Form 8-K dated July 16, 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. The Company 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 the Company conducts its operations.
1
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WELLS FARGO AND FIRST INTERSTATE
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (A)
(UNAUDITED)
<TABLE>
<CAPTION>
Historical
-------------------------------------
Wells Fargo First Interstate
For The Six For The Three
Months Ended Months Ended
June 30, 1996 March 31, 1996 Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments (B) Combined
----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
(in millions)
INTEREST INCOME
Investment securities $ 353 $ 123 $ - $ 476
Loans 2,494 749 6 (C) 3,249
Other 17 14 - 31
----------------- ----------------- ----------------- -----------------
Total interest income 2,864 886 6 3,756
----------------- ----------------- ----------------- -----------------
INTEREST EXPENSE
Deposits 695 241 2 (D) 938
Federal funds purchased and securities
sold under repurchase agreements 57 4 - 61
Senior and subordinated debt 128 27 (1) (E) 154
Other 8 1 - 9
----------------- ----------------- ----------------- -----------------
Total interest expense 888 273 1 1,162
----------------- ----------------- ----------------- -----------------
NET INTEREST INCOME 1,976 613 5 2,594
Provision for loan losses - - - -
----------------- ----------------- ----------------- -----------------
Net interest income after provision for
loan losses 1,976 613 5 2,594
----------------- ----------------- ----------------- -----------------
NONINTEREST INCOME
Service charges on deposit accounts 380 150 - 530
Fees and commissions 329 63 - 392
Trust and investment services income 164 41 - 205
Other 120 51 (2) (F) 169
----------------- ----------------- ----------------- -----------------
Total noninterest income 993 305 (2) 1,296
----------------- ----------------- ----------------- -----------------
NONINTEREST EXPENSE
Salaries and employee benefits 800 274 - 1,074
Net occupancy 161 60 (13) (G) 208
Equipment 162 43 - 205
Core deposit intangible 91 1 47 (H) 139
Goodwill 89 14 58 (I) 161
Merger related 62 251 (313) (J) -
Other 479 165 4 (K) 648
----------------- ----------------- ----------------- -----------------
Total noninterest expense 1,844 808 (217) 2,435
----------------- ----------------- ----------------- -----------------
INCOME BEFORE INCOME TAXES 1,125 110 220 1,455
Income tax expense 498 133 17 648
----------------- ----------------- ----------------- -----------------
NET INCOME $ 627 $ (23) $ 203 $ 807
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
NET INCOME APPLICABLE TO
COMMON STOCK $ 598 $ (31) $ 203 $ 770
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
PER COMMON SHARE
Net income $ 8.39 $ 8.11 (L)
----------------- -----------------
----------------- -----------------
Dividends declared $ 2.60 $ 2.60
----------------- -----------------
----------------- -----------------
Average common shares outstanding 71.3 23.6 94.9 (L)
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
2
<PAGE>
WELLS FARGO AND FIRST INTERSTATE
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995 (A)
(UNAUDITED)
<TABLE>
<CAPTION>
Historical
------------------------------------- Pro Forma Pro Forma
Wells Fargo First Interstate Adjustments (B) Combined
----------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
(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 (29) (G) 417
Equipment 193 154 - 347
Core deposit intangible 42 3 269 (H) 314
Goodwill 35 54 233 (I) 322
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)
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>
See Notes to Pro Forma Combined Financial Statements.
3
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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 six months ended June 30, 1996 combines
Wells Fargo's historical results of operations for the six months ended June 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 six months ended
June 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 quarter 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 June 30, 1996 unaudited consolidated balance sheet
included in the financial information for the quarter ended June 30, 1996 filed
in its Form 8-K dated July 16, 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 the first
quarter of 1996, Wells Fargo entered into a contract with Home Savings of
America, principal subsidiary of H. F. Ahmanson & Company, to sell the 61 First
Interstate branches. At June 30, 1996, these branches had aggregate deposits of
approximately $2.1 billion and loans of approximately $1.3 billion. The selling
price of the divested branches represents a premium of 8.11% on the deposits.
The transaction is expected to close in September 1996. In addition, Wells
Fargo is selling First Interstate banks in Wyoming and Montana (for which Wells
Fargo has a definitive agreement and expects the sale to close on or about
October 1, 1996, subject to regulatory approval.) Wells Fargo is also
currently seeking a buyer for the bank subsidiary in Alaska. The aggregate
assets and deposits of these banks at June 30, 1996 were $649 million and $462
million, respectively. 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 net 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 these anticipated operating cost savings.
4
<PAGE>
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. Amounts exclude 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 six month period ended June 30, 1996, the actual amortization of $7
million recorded by Wells Fargo in the second quarter of 1996 more than
offsets the amortization of $5 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 $6 million and $15 million has been included in the
unaudited pro forma combined statements of income for the six months ended
June 30, 1996 and the year ended December 31, 1995, respectively. The amounts
were calculated using an accelarated 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
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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 $18 million and $29 million for the six months ended June 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 $120 million and $272
million has been included in the unaudited pro forma combined statements of
income for the six months ended June 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 $144 million and $287 million
for the six months ended June 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 $62 million ($37 million after
tax) for the six months ended June 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 six months ended June 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 $11 million and $24 million for the six months ended June 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
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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 six months ended June
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 June
30, 1996 of 94.9 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
