SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 2, 1998
Wells Fargo & Company
(Exact name of registrant as specified in its charter)
Delaware 1-2979 41-0449260
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File 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
Norwest Corporation
(Former Name)
Sixth and Marquette, Minneapolis, Minnesota 55479
(Former Address)
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ITEM 2. Acquisition or Disposition of Assets
Effective November 2, 1998, Wells Fargo & Company (the "former Wells Fargo")
merged with and into WFC Holdings Corporation (WFC Holdings), a Delaware
corporation and a wholly-owned subsidiary of Norwest Corporation (the
"corporation"), with WFC Holdings as the surviving corporation.
Also, in conjunction with the merger, the corporation changed its name to
"Wells Fargo & Company."
The merger was consummated pursuant to an Agreement and Plan of Merger by and
among the former Wells Fargo, the corporation and WFC Holdings dated as of
June 7, 1998 and amended and restated as of September 10, 1998 (the
"Agreement"). Pursuant to the Agreement, upon consummation of the merger on
November 2, 1998, each share of the former Wells Fargo common stock was
converted into the right to receive ten shares of the corporation's common
stock. A copy of the press release announcing the close of the merger
transaction is filed as Exhibit 99(a) to this Current Report on Form 8-K.
The Joint Proxy Statement-Prospectus dated September 11, 1998 of the
corporation and the former Wells Fargo, forming a part of the corporation's
Registration Statement on Form S-4 (Registration No. 333-63247), sets forth
additional information regarding the merger, including a description of the
transaction, information concerning the corporation and the former Wells
Fargo and the intended structure and operation of the combined company
created by the merger.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial statements of business acquired.
The financial statements of the former Wells Fargo as of December
31, 1997 and 1996 and for each of the three years ended December 31,
1997, 1996 and 1995 are incorporated by reference to the
Registration Statement on Form S-4 of the corporation (Registration
No. 333-63247). The financial statements of the former Wells Fargo
as of September 30, 1998 and 1997 and for the nine months ended
September 30, 1998 and 1997 are incorporated by reference to the
Current Report on Form 8-K (Commission File 1-6214) dated and filed
October 20, 1998.
(b) Pro forma financial information.
The unaudited pro forma condensed combined financial information for
each of the three years ended December 31, 1997, 1996 and 1995 is
incorporated by reference to the corporation's Registration
Statement on Form S-4 (Registration No. 333-63427). The unaudited
pro forma condensed combined financial information as of September
30, 1998 and for the nine months ended September 30, 1998 and 1997
is filed as Exhibit 99(c) to this Current Report on Form 8-K.
(c) Exhibits. The following exhibits are filed with this Current
Report on Form 8-K:
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Exhibit Description
No.
99(a). Press Release, dated November 2, 1998, issued by the corporation.
99(b). Joint Proxy Statement-Prospectus dated September 11, 1998
(incorporated by reference to the corporation's Registration
Statement on Form S-4 (Registration No. 333-63427) previously
filed on September 11, 1998).
99(c). Unaudited pro forma condensed combined financial information as
of September 30, 1998 and for the nine months ended September 30,
1998 and 1997.
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Exhibit 99(a)
WELLS FARGO & COMPANY
MEDIA INVESTORS
Larry Haeg Robert S. Strickland
612-667-7043 612-667-7919
MERGER OF WELLS FARGO AND NORWEST COMPLETED
SAN FRANCISCO, Nov. 2, 1998 - Wells Fargo & Company (NYSE: WFC) and Norwest
Corporation said today they have completed their merger - creating the new
Wells Fargo, a diversified financial services company. The new company is
headquartered in San Francisco and has $196 billion in assets, 15 million
customers, 5,836 stores and almost 102,000 team members. It ranks seventh in
assets and third in the market value of its stock at Sept. 30 among U.S. bank
holding companies.
"We firmly believe this new company - which combines the best of both
organizations - will become the premier financial services company in the
United States and the leading banking franchise in the Midwest and Western
United States," said Dick Kovacevich, president and chief executive officer of
the new company. "Our customers, communities, shareowners and team members all
will benefit from this merger with greater convenience and a broader array of
products and services."
Added Kovacevich, "For our 15 million customers, nothing changes yet.
Integrating systems is expected to take from six months to two years to
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complete. During the second half of next year, Norwest customers will begin
seeing the Norwest name change to Wells Fargo on their stores, checks,
statements and other materials."
Paul Hazen, chairman of Wells Fargo, said the key to a successful integration
will be execution. "We're committed to the goal of doing it right so we can
continue to provide outstanding customer service throughout the integration,"
he said. "Dozens of transition teams comprised of hundreds of team members are
committed to making sure we begin every discussion with what's best for the
customer and ensure the interests of our team members and shareholders are
aligned. We're going to take our time. We're going to do it right."
The combined franchise has 2,859 banking stores and covers 21 states from
California to Ohio. Norwest Mortgage - the nation's leading originator and
servicer of mortgages - has 824 stores and a presence in all 50 states.
Norwest Financial - the premier consumer finance company in the hemisphere -
has 1,349 stores in 47 states, all 10 Canadian provinces, the Caribbean, Latin
America and elsewhere internationally.
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As previously announced, Wells Fargo's Hazen is chairman, Norwest's Kovacevich
is president and chief executive officer, Norwest's Les Biller is chief
operating officer and vice chairman, and Wells Fargo's Rod Jacobs is chief
financial officer and vice chairman. The four will work closely together and
will be involved in all major decisions affecting the combined company.
Common stockholders of Wells Fargo receive 10 shares of common stock of Norwest
in exchange for each share of Wells Fargo common stock.
Norwest's stock symbol NOB has been retired - stock of the new company will now
trade under the symbol WFC. The two companies announced a definitive agreement
June 8. The Board of Governors of the Federal Reserve system approved the
merger October 14; stockholders of both companies approved the merger
October 20.
The new company:
* ranks 1st in financial services stores in the Western Hemisphere,
* ranks 1st in mortgage originations and servicing,
* ranks 1st in Internet banking,
* ranks 1st in agricultural lending among U.S. banks,
* ranks 1st in student loans,
* ranks 1st in the number of small business loans among U.S. banks,
* ranks 1st in commercial real estate lending,
* ranks 1st in auto finance,
* ranks 1st among banks in insurance agency sales,
* ranks 3rd in the number of ATMs in the U.S,
* ranks 4th in middle-market lending among all banks,
* ranks 4th among all banks in mutual funds under management,
* ranks 3rd in market capitalization among U.S. bank holding companies,
* ranks 7th in assets among U.S. bank holding companies,
* is an industry leader in alternative banking strategy, developed by Wells
Fargo, and
* is an industry leader in community banking strategy, developed by Norwest.
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Combined data (pro forma 9/30/98)
Assets (billions) $196
Loans (billions) $108
Deposits (billions) $130
Net income (billions - ytd) $2.1
Revenue (billions - ytd) $15.3*
Customers (millions) 15
Mortgage originations (billions - ytd) $75
Mortgage servicing (billions) $233
Credit card loans (billions) $6
Consumer credit card accounts (millions) 4
Stores 5,836
ATMs 6,065
Market capitalization (billions - 9/30/98) $58.3
Common shares outstanding (millions) 1,620
Net interest margin (ytd) 5.88 %
Team members 101,591
*interest income plus non-interest income
Wells Fargo is a $196 billion diversified financial services company providing
banking, insurance, investments, mortgage and consumer finance through 5,836
stores in all 50 states, Canada, the Caribbean, Latin America and elsewhere
internationally.
Editors: Please refer to http://www.norwest.com/information-mergernews/presskit
or http://wellsfargo.com/merger/press/doc/ for more information.
This news release contains forward-looking statements with respect to financial
conditions, results of operations and businesses of Wells Fargo, Norwest and
the combined company including statements relating to: (a) the cost savings and
accretion to reported earnings that will be realized from the merger; (b) the
impact on revenues of the merger; and (c) the restructuring charges expected to
be incurred in connection with the merger. These forward looking statements
involve certain risks and uncertainties. Factors that may cause actual results
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to differ materially from those contemplated by such forward looking statements
include, among others, the following possibilities: (1) expected cost savings
from the merger cannot be fully realized or realized within this expected time
frame; (2) revenues following the merger are lower than expected; (3)
competitive pressure among financial services companies increases
significantly; (4) costs or difficulties related to the integration of the
businesses of Wells Fargo and Norwest are greater than expected; (5) changes in
the interest rate environment reduce interest margins; (6) general economic
conditions, either internationally or nationally or in the states in which the
combined company will be doing business, are less favorable than expected; or
(7) legislation or regulatory requirements or changes adversely affect the
businesses in which the combined company would be engaged.
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Exhibit 99(c)
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
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 the corporation and the former Wells
Fargo pursuant to the "merger of equals" ("Merger"), in accordance with the
Agreement, under the "pooling of interests" method of accounting. The
unaudited pro forma condensed combined financial information combines the
historical financial information of the corporation and the former Wells Fargo
as of September 30, 1998 and for the nine months ended September 30, 1998 and
1997, 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 September 30, 1998. The Merger provides for the exchange of ten
shares of the corporation's common stock for each outstanding share of the
former Wells Fargo common stock. The pro forma condensed combined financial
information as of September 30, 1998 and for the nine months ended September
30, 1998 and 1997 is based on, and derived from, and should be read in
conjunction with the historical consolidated financial statements and the
related notes thereto of the corporation and the former Wells Fargo which are
incorporated by reference herein. Pro forma stockholders' equity at September
30, 1998 includes the effect of an estimated non-recurring Merger charge of
$950 million ($625 million after taxes). See Note 3 to the unaudited pro forma
condensed financial information on page 15 for further information. The pro
forma condensed combined financial statements do not give effect to anticipated
cost savings or potential revenue enhancements in connection with the Merger.
The pro forma data are presented for comparative purposes only and are not
necessarily indicative of the future financial position or results of
operations of the combined company or of the combined financial position or the
results of operations that would have been realized had the Merger been
consummated during the periods or as of the dates for which the pro forma data
are presented.
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WELLS FARGO & COMPANY (FORMERLY NORWEST CORPORATION)
("CORPORATION") AND THE FORMER WELLS FARGO
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AT SEPTEMBER 30, 1998
(in millions)
FORMER
WELLS PROFORMA
CORPORATION FARGO ADJUSTMENTS COMBINED
ASSETS
Cash and due from banks ............$ 4,447 6,538 - 10,985
Interest-bearing deposits .......... 57 31 - 88
Federal funds sold and
resale agreements ................ 871 1,080 - 1,951
Total cash and cash equivalents .... 5,375 7,649 - 13,024
Trading account securities.......... 357 658 - 1,015
Investment securities
available for sale ............... 24,585 8,242 (669) 32,158
Investment securities
held to maturity ................. 901 405 - 1,306
Total investment securities ........ 25,486 8,647 (669) 33,464
Loans held for sale ................ 3,873 1,179 - 5,052
Mortgages held for sale ............ 14,721 748 - 15,469
Loans and leases, net of
unearned discount ................ 45,251 62,447 - 107,698
Allowance for credit losses ........ (1,337) (1,833) - (3,170)
Net loans and leases ............... 43,914 60,614 - 104,528
Premises and equipment, net ........ 1,470 1,913 (110) 3,273
Mortgage servicing rights, net ..... 2,725 - - 2,725
Goodwill and intangible assets ..... 1,109 8,454 - 9,563
Interest receivable
and other assets ................. 4,697 2,953 - 7,650
Total assets ..................$ 103,727 92,815 (779) 195,763
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing ..............$ 18,409 22,542 - 40,951
Interest bearing ................. 41,773 47,227 - 89,000
Total deposits ................. 60,182 69,769 - 129,951
Short-term borrowings .............. 15,700 1,870 - 17,570
Accrued expenses and
other liabilities ................ 5,685 2,863 657 9,205
Long-term debt ..................... 14,672 3,814 - 18,486
Guaranteed preferred beneficial
interest in the former Wells
Fargo subordinated debentures .... - 1,299 (669) 630
Preferred stock .................... 187 275 - 462
Common stock ....................... 1,306 426 994 2,726
Surplus ............................ 542 8,375 (994) 7,923
Retained earnings .................. 5,613 4,069 (767) 8,915
Accumulated other
comprehensive income ............. 405 55 - 460
Notes receivable from ESOP ......... (4) - - (4)
Treasury stock ..................... (561) - - (561)
Total stockholders' equity .... 7,488 13,200 (767) 19,921
Total liabilities and
stockholders' equity ........$ 103,727 92,815 (779) 195,763
The accompanying notes are an integral part of the unaudited pro forma combined
financial information.
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WELLS FARGO & COMPANY (FORMERLY NORWEST CORPORATION)
("CORPORATION") AND THE FORMER WELLS FARGO
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1998
(in millions, except for per common share amounts)
FORMER
WELLS PROFORMA
CORPORATION FARGO ADJUSTMENTS COMBINED
INTEREST INCOME ON
Loans and leases ....................$ 3,618 4,427 - 8,045
Investment securities
available for sale ................ 936 403 (10) 1,329
Investment securities
held to maturity .................. 20 18 - 38
Loans held for sale ................. 212 62 - 274
Mortgages held for sale ............. 574 35 - 609
Money market investments ............ 39 35 - 74
Trading account securities .......... 40 48 - 88
Total interest income .......... 5,439 5,028 (10) 10,457
INTEREST EXPENSE ON
Deposits ............................ 1,121 1,219 - 2,340
Short-term borrowings ............... 467 90 - 557
Long-term debt ...................... 588 217 - 805
Guaranteed preferred beneficial
interest in the former Wells Fargo
subordinated debentures ........... - 76 (10) 66
Total interest expense ......... 2,176 1,602 (10) 3,768
Net interest income ............ 3,263 3,426 - 6,689
Provision for credit losses ......... 411 510 - 921
Net interest income after
provision for credit losses .. 2,852 2,916 - 5,768
NON-INTEREST INCOME
Mortgage banking .................... 825 28 - 853
Trust and investment fees
and commissions ................... 386 408 - 794
Service charges and fees ............ 491 934 - 1,425
Credit card fee revenue ............. 116 269 - 385
Insurance ........................... 278 - - 278
Data processing ..................... 53 - - 53
Net investment securities
available for sale gains .......... 97 41 - 138
Net venture capital gains ........... 116 - - 116
Trading ............................. 111 30 - 141
Other ............................... 177 451 - 628
Total non-interest income ...... 2,650 2,161 - 4,811
NON-INTEREST EXPENSES
Salaries and benefits ............... 2,120 1,301 (6) 3,415
Net occupancy ....................... 264 295 - 559
Equipment rentals, depreciation
and maintenance ................... 280 294 8 582
Business development ................ 199 135 - 334
Communication ....................... 241 193 - 434
Data processing ..................... 123 51 - 174
Intangible asset amortization ....... 126 434 - 560
Other ............................... 447 538 - 985
Total non-interest expenses .... 3,800 3,241 2 7,043
(continued on page 12)
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WELLS FARGO & COMPANY (FORMERLY NORWEST CORPORATION)
("CORPORATION") AND THE FORMER WELLS FARGO
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1998
(in millions, except for per common share amounts)
(Continued from page 11)
FORMER
WELLS PROFORMA
CORPORATION FARGO ADJUSTMENTS COMBINED
INCOME BEFORE INCOME TAXES .......... 1,702 1,836 (2) 3,536
Income tax expense .................. 559 837 (1) 1,395
NET INCOME ..........................$ 1,143 999 (1) 2,141
NET INCOME PER COMMON SHARE
Basic ...............................$ 1.49 11.55 - 1.31
Diluted ............................. 1.46 11.44 - 1.29
WEIGHTED AVERAGE COMMON AND
POTENTIAL COMMON SHARES
Basic ............................... 760.4 85.4 768.6 1,614.4
Diluted ............................. 774.3 86.2 775.9 1,636.4
The accompanying notes are an integral part of the unaudited pro forma combined
financial information.
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WELLS FARGO & COMPANY (FORMERLY NORWEST CORPORATION)
("CORPORATION") AND THE FORMER WELLS FARGO
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(in millions, except for per common share amounts)
FORMER
WELLS PROFORMA
CORPORATION FARGO ADJUSTMENTS COMBINED
INTEREST INCOME ON
Loans and leases ....................$ 3,364 4,492 - 7,856
Investment securities
available for sale ................ 1,016 573 - 1,589
Investment securities
held to maturity .................. 21 18 - 39
Loans held for sale ................. 168 61 - 229
Mortgages held for sale ............. 324 17 - 341
Money market investments ............ 40 15 - 55
Trading account securities .......... 29 21 - 50
Total interest income .......... 4,962 5,197 - 10,159
INTEREST EXPENSE ON
Deposits ............................ 1,075 1,280 - 2,355
Short-term borrowings ............... 327 121 - 448
Long-term debt ...................... 579 234 - 813
Guaranteed preferred beneficial
interest in the former Wells Fargo
subordinated debentures ........... - 75 - 75
Total interest expense ......... 1,981 1,710 - 3,691
Net interest income ............ 2,981 3,487 - 6,468
Provision for credit losses ......... 379 420 - 799
Net interest income after
provision for credit losses .. 2,602 3,067 - 5,669
NON-INTEREST INCOME
Mortgage banking .................... 624 44 - 668
Trust and investment fees
and commissions ................... 321 389 - 710
Service charges and fees ............ 425 874 - 1,299
Credit card fee revenue ............. 88 234 - 322
Insurance ........................... 264 - - 264
Data processing ..................... 55 - - 55
Net investment securities
available for sale gains .......... 20 6 - 26
Net venture capital gains ........... 165 - - 165
Trading ............................. 65 59 - 124
Other ............................... 168 348 - 516
Total non-interest income ...... 2,195 1,954 - 4,149
NON-INTEREST EXPENSES
Salaries and benefits ............... 1,725 1,297 (6) 3,016
Net occupancy ....................... 242 292 - 534
Equipment rentals, depreciation
and maintenance ................... 248 289 8 545
Business development ................ 185 97 - 282
Communication ....................... 216 228 - 444
Data processing ..................... 127 37 - 164
Intangible asset amortization ....... 126 460 - 586
Other ............................... 404 708 - 1,112
Total non-interest expenses .... 3,273 3,408 2 6,683
(continued on page 14)
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WELLS FARGO & COMPANY (FORMERLY NORWEST CORPORATION)
("CORPORATION") AND THE FORMER WELLS FARGO
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(in millions, except for per common share amounts)
(Continued from page 13)
FORMER
WELLS PROFORMA
CORPORATION FARGO ADJUSTMENTS COMBINED
INCOME BEFORE INCOME TAXES 1,524 1,613 (2) 3,135
Income tax expense .................. 529 756 (1) 1,284
NET INCOME ..........................$ 995 857 (1) 1,851
NET INCOME PER COMMON SHARE
Basic ...............................$ 1.31 9.38 - 1.11
Diluted ............................. 1.29 9.28 - 1.10
WEIGHTED AVERAGE COMMON AND
POTENTIAL COMMON SHARES
Basic ............................... 748.0 89.1 801.9 1,639.0
Diluted ............................. 758.1 90.1 810.5 1,658.7
The accompanying notes are an integral part of the unaudited pro forma combined
financial information.
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WELLS FARGO & COMPANY (FORMERLY NORWEST CORPORATION)
("CORPORATION") AND THE FORMER WELLS FARGO
Notes to Unaudited Pro Forma Condensed 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 the 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 closed on November 2, 1998, provided for
issuance of ten shares of the corporation's common stock for each
outstanding share of the former Wells Fargo common stock. At September 30,
1998, the corporation had four pending transactions (exclusive of the
Merger) with total assets of approximately $317 million, and anticipated
that approximately 1.8 million common shares would be issued upon
consummation of these transactions. The pro forma information does not
give effect to such other pending transactions of the corporation as they
are not material to the pro forma condensed financial information, either
individually or in the aggregate. In order to comply with Department of
Justice merger guidelines, the corporation and the former Wells Fargo were
requested to sell approximately $1.2 billion of deposits. The impact of
such divestitures is not material and no adjustment has been included in
the unaudited pro forma combined financial statements for the pending
divestitures.
2. Accounting Policies and Financial Statement Classifications
The corporation and the former 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 the corporation
and the former 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 September 30, 1998, the
former Wells Fargo goodwill and intangibles amounted to $8.5 billion, and
the corporation's 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 the corporation and the former Wells Fargo are not
material in relation to the pro forma financial information. Therefore,
intercompany balances have not been eliminated from the pro forma combined
amounts, other than the elimination of the corporation's investment in the
guaranteed preferred beneficial interest in the former Wells Fargo
subordinated debentures, and related interest income and interest expense.
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.
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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 $994 million, based on 85.2
million shares of the former Wells Fargo common stock outstanding at
September 30, 1998, reflecting the exchange of 10 shares of the
corporation's common stock for each share of the former 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 the corporation's common
stock. The number of shares of the corporation's common stock to be
issued upon consummation of the Merger will be based on the number of
shares of the former Wells Fargo common stock outstanding at that time and
will include approximately 2.5 million shares of the former Wells Fargo
common stock that the former Wells Fargo issued subsequent to
September 30, 1998 and prior to consummation of the Merger 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, the former Wells Fargo repurchased and retired shares of
the former Wells Fargo common stock that are presumed to be "tainted"
under Accounting Principles Board (APB) Opinion No. 16 and
authoritative interpretations thereof. The former Wells Fargo rescinded
its stock 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. The former Wells
Fargo cured such "tainted" shares prior to completion of the Merger by
issuing shares of the former 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).
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* 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 former 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 1992. The corporation 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 pre-tax
charge of $8 million ($5 million, net of income taxes) related to the
amortization of the former Wells Fargo transition obligations.
* Premises and equipment and retained earnings have been adjusted by $110
million before taxes ($72 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 is consistent with the size of the combined
company. Equipment expense has been adjusted by $8 million for the first
nine months of 1998 and 1997, respectively, reflecting adjustments for
capitalization of such items, partially offset by related depreciation
previously recorded.
At September 30, 1998, the net adjustment to accrued expenses and other
liabilities is determined as follows (dollar amounts in millions):
Non-recurring merger charge .....................................$ 950
Tax effect of non-recurring merger charge ....................... (325)
Postretirement transition obligations ..................... 153
Less amortization through September 30, 1998 .............. (45) 108
Tax effect of unamortized postretirement
transition obligations ........................................ (38)
Tax effect of $110 adjustment to
premises and equipment ........................................ (38)
Net adjustment to accrued expenses
and other liabilities .........................................$ 657
At September 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 .......................... (70)
Adjustment to premises and equipment,
net of income taxes ........................................... (72)
Net adjustment to retained earnings..............................$ (767)
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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 the corporation and the former 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 the corporation's common stock for each share of the former
Wells Fargo common stock. Amounts used in the determination of pro forma
basic and diluted earnings per share are as follows:
For the Nine Months
(In millions) Ended September 30,
1998 1997
Net income................................. $ 2,141 1,851
Less dividends accrued on preferred stock.. 26 34
Income available to common stockholders.... $ 2,115 1,817
Weighted average shares outstanding ....... 1,614.4 1,639.0
Adjustments for dilutive securities:
Assumed exercise of stock options and
restricted share rights.................. 22.0 19.7
Diluted common shares...................... 1,636.4 1,658.7
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SIGNATURES
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 hereunto duly authorized.
Wells Fargo & Company
(Registrant)
Dated: November 16, 1998 By: /s/ Les L. Quock
Controller
(Principal Accounting Officer)
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