<PAGE> 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)
<PAGE> 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
<PAGE> 3
NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AT JUNE 30, 1998
<TABLE>
<CAPTION>
(in millions)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
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
======= ====== ==== =======
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma combined
financial information.
3
<PAGE> 4
NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
(in millions, except per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
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
------ ----- -- -----
</TABLE>
4
(Continued on page 5)
<PAGE> 5
NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
(in millions, except per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
(continued from page 4)
<S> <C> <C> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma combined
financial information.
5
<PAGE> 6
NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
(in millions, except per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
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
------ ----- -- -----
</TABLE>
6
(continued on page 7)
<PAGE> 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)
<TABLE>
<CAPTION>
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
(continued from page 6)
<S> <C> <C> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma combined
financial information.
7
<PAGE> 8
NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
(in millions, except per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
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
------- ------ -- ------
</TABLE>
8
(continued on page 9)
<PAGE> 9
NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
(in millions, except per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
(continued from page 8)
<S> <C> <C> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma combined
financial information.
9
<PAGE> 10
NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
(in millions, except per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
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
------ ----- -- ------
</TABLE>
10
(continued on page 11)
<PAGE> 11
NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
(in millions, except per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
(continued from page 10)
<S> <C> <C> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma combined
financial information.
11
<PAGE> 12
NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
(in millions, except per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
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
------ ----- -- -----
</TABLE>
12
(continued on page 13)
<PAGE> 13
NORWEST CORPORATION AND WELLS FARGO & COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
(in millions, except per share amounts)
WELLS PRO FORMA
NORWEST FARGO ADJUSTMENTS COMBINED
(continued from page 12)
<S> <C> <C> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma combined
financial information.
13
<PAGE> 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
<PAGE> 15
The estimated non-recurring charge consists of the following (in millions):
<TABLE>
<S> <C>
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
====
</TABLE>
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
<PAGE> 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)
=====
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<PAGE> 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:
<TABLE>
<CAPTION>
(in millions)
For the
six months For the year ended
ended June 30, December 31,
---------------------- --------------------------------------
1998 1997 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
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
======= ======= ======= ======= =======
</TABLE>
17
<PAGE> 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
