Wells Fargo, First Security prepare to sell branches

Phil Levine

Thursday, June 8, 2000 | 11:17 a.m.

Las Vegas' largest banks

Ranked by Clark County deposits:

$3.2 billion

$2.9 billion (includes merger partner Norwest)

$1.3 billion (includes merger partner Pioneer Citizens)

$927 million

$600 million

$408 million Note: Wells Fargo is buying First Security, but they will be required to sell some deposits to comply with antitrust law.

Source: Companies, Federal Deposit Insurance Corp. data as of June 30, 1999

The dust has yet to settle in Las Vegas from Wells Fargo & Co.'s purchase of First Security Corp., more than two months after the banks revealed plans to merge.

Currently, both San Francisco-based Wells and Salt Lake City-based First Security are finalizing their proposals to the U.S. Department of Justice as to which branches in Nevada and other states they will sell in order to comply with antitrust law.

But as the banks finalize plans for their forthcoming union, Wells also hopes to replicate the success of its recent low-key merger with Norwest Bancorp.

To do so, senior executives at both Wellls and First Security Bank acknowledge they must be careful to ensure a divestiture doesn't result in the loss of their two most vital assets: employees and customers.

"It's been about 60 days (since the merger announcement), and so the companies are currently going through a (divestiture) assessment process," said Wells' Nevada President Laura Schulte.

"But in terms of our personnel, I can tell you that our philosophy is to try to retain as many of our team members as we can."

Schulte said she expects Wells will present its divestiture proposals to the DOJ within the next 30 days.

"But for us, there is always a sense of urgency when there are (people's jobs) involved," she said.

First Security's Nevada President Dave Smith agrees both banks must make a concerted effort to retain their personnel.

"I admire Wells' retain and re-train philosophy with regards to personnel overlap resulting from mergers," he said.

"As for our employees, there is a little bit of apprehension, but they have been through this before. I think Wells is seen as a very good, large company, and many (employees) view that as an opportunity."

First Security employees had been bracing for a long-awaited merger with Salt Lake City-based rival Zions Bancorporation, parent of Nevada State Bank. That merger died at the end of March when Zions' shareholders rejected the deal.

A mere 10 days later, First Security employees found themselves preparing to hop aboard the Wells Fargo stagecoach.

As the banks prepare to put forth their divestiture proposals, they confront federal restrictions on their allowed market share.

The Department of Justice normally prohibits banks from attaining a market share in excess of 30 percent.

The most recent Federal Deposit Insurance Corp. statistics -- from June 30, 1999 -- show Wells and First Security have a combined market share of about 34 percent in Clark County.

Those statistics will serve as the basis for the divestiture decision, as the next FDIC market share survey won't be updated until at least the third quarter of this year.

"Every June 30, we collect deposit information submitted by the banks," explained FDIC spokesman David Barr. "The updated market share information (for Southern Nevada) should be available by Sept. 30, 2000"

Based on the June 1999, numbers, Bank of America is currently the leader in Clark County, with slightly less than 30 percent market share; prior to the forthcoming merger, Wells had a market share of about 25 percent of the Clark County market.

Wells and First Security currently have a combined total of 85 Southern Nevada branches; if the new Wells Fargo is required to divest about 5 percent of its local offices, both banks would need to sell less than half a dozen branches.

However, that number could be higher in Southern Nevada given the fact the two banks find themselves with overlapping locations.

For example: Wells currently operates a branch at 4720 S. Eastern Ave. near the intersection of Tropicana Avenue and Eastern Avenue; First Security has a branch at 4813 S. Eastern Avenue, near the same intersection.

Schulte said the merger may also assist Wells in its efforts to secure a larger foothold in the fastest growing areas of Clark County.

"Even before the merger, we planned to grow our franchise in areas such as Green Valley and Summerlin," she said.

"For example, First Security already has a branch in (Summerlin's) Town Center. As a result, that may mean we won't have to look at building a branch in that area."

Industry experts don't expect a prolonged delay in the DOJ's decision regarding divestiture requirements for the merger.

"It should be a very straightforward process," said Joe Morford, analyst with Dain Rauscher Wessels in San Francisco.

"Potentially, it could be a longer process -- the DOJ dragged its feet on the Zions-First Security divestiture decision -- but this appears to be a simpler decision."

Morford said there's little doubt there will be layoffs resulting from the merger, but Wells has a history of successful integration.

"First and foremost, Wells has an excellent track record for integrating mergers," he said.

"They also seem to abide by their theme of putting people first. It may sound hokey, but it seems to work well."

The possible buyers for Wells' divestiture range from local community banks to larger, national banks not yet players in Nevada.

Although Wells is unlikely to sell to rivals such as B of A and Nevada State Bank, observers say there should be no shortage of potential buyers.

"I think that Cal-Fed (California Federal Bank) might be an excellent choice for a buyer for any Southern Nevada branches Wells has to sell off," said Morford.

California Federal last year bought 12 Las Vegas-area branches from Wells Fargo and Norwest that they were required to sell because of their merger.

No matter what the outcome of the forthcoming Wells-First Security union, experts believe it is unlikely to be the last time Nevadans confront the prospect of major bank mergers.

"The fact is that new technology, combined with the relaxation of banking laws, means it is easier and more desirable than ever for banks to consider mergers," said Brad Wimmer, assistant professor of economics at UNLV.

"Last year's new law (the Bank Modernization Act) and the efficiencies provided by high-technology, mean banks are more likely than ever to examine the option to merge."