Wells Fargo, First Security working on merger plans

Thursday, July 20, 2000 | 11 a.m.

Wells Fargo & Co. officials have begun discussing the transition of First Security Bank's Nevada accounts and employees to Wells Fargo, even though a decision on what bank branches will be sold or closed is still a month away.

Les Biller, vice chairman and chief operating officer of Wells Fargo in San Francisco, met with about 100 First Security officers in Las Vegas Tuesday to discuss the conversion, which is expected to occur over the next 15 months.

Biller and Wells Fargo are working to assure employees -- and customers -- that the merger with First Security will go as smoothly as its marriage with Norwest Bancorp and not like the rocky union with First Interstate Bank in 1996.

Biller knows that the difficulty in integrating computer systems in the First Interstate transition chased many customers away to other banks, including First Security. Wells Fargo is looking at the $2.9 billion acquisition of First Security as an opportunity to win some old customers back.

Wells Fargo will attempt to do that, Biller said, by retaining as many First Security employees as possible. Through a "retain and re-train" program, Wells Fargo says it is particularly interested in keeping the front-line customer service employees, including tellers.

"The fact is, it's the bank with the best people that wins," Biller said. "We've promised that any teller performing at an acceptable level will have a job."

It also helps that Wells Fargo may also have the top market share in Nevada when the First Security merger is completed, depending on the dollar amount of the accounts it will be required to sell because of antitrust law.

Because of the extended reach of First Security, Wells Fargo may also command the top market share in Utah, Idaho, Colorado and New Mexico and will be No. 4 in Washington and Oregon. When the merger is completed, Wells Fargo will have a presence in 23 states.

But increasing market share through acquisition is why Wells Fargo has to go through the divestiture process. The Department of Justice monitors competition and has determined that in Nevada, no bank shall have more than a 30 percent market share. The combination of Wells Fargo and First Security would result in a share of about 34 percent, according to Federal Deposit Insurance Corp. statistics from June 1999, the most recent figures available.

Banks are required to submit deposit information to the FDIC by June 30 every year, but the 2000 statistics aren't expected to be compiled until the end of September.

In the meantime, the Department of Justice is examining the impact of the merger and is expected to announce in mid-August how many branches Wells Fargo must sell and which ones they are.

Biller had no estimates on how many people would be affected by the divestiture.

"This is very inconsistent with our competitive philosophy," Biller said. "But the reality is, we have no choice."

When the divestiture is completed, Wells Fargo expects to be right at 30 percent market share. The bank can increase that through means other than acquisition. Biller said the company wants to find buyers that would keep branch employees to prevent layoffs.

Potential buyers include California Federal Bank, new Nevada market entrant Washington Mutual and a host of expansion-minded community banks. Analysts have said they don't expect big rivals like Bank of America to be among the buyers.

The First Security acquisition also will force branch divestitures in New Mexico.

Laura Schulte, president and chief executive officer of Wells Fargo Nevada, said she expects the computer system conversion of First Security to go smoothly. It's expected to be completed by the end of the year. The legal merger process isn't expected to be wrapped up until the end of the third quarter 2001.

Wells Fargo has extended its reach by acquiring 15 to 20 banks a year, Biller said, and the company has gotten used to the issues associated with mergers.

Because Wells Fargo plans to save money by cutting duplicative management positions, one First Security employee whose future is up in the air is Dave Smith, president and chief executive officer of the company's Nevada bank. Smith said Tuesday that he hasn't determined what he will be doing after the merger.