A Utah banking franchise changes hands
On October 25, 2000, Wells Fargo completed its acquisition of Salt Lake City-based First Security Corporation, bringing a major Utah banking franchise into a much larger organization. First Security survived the transaction as a wholly owned subsidiary. The corporate closing ended its independence, although it did not mean every operational integration step was complete. [1]
The outcome followed the collapse of a different plan: a combination with fellow Salt Lake City banking company Zions Bancorporation. Zions shareholders rejected that agreement on March 31, 2000, and First Security notified Zions of its termination the following day. The two transactions offer a revealing comparison of shareholder approval and local competition in bank consolidation. [2]
The regional institution behind the deal
First Security was already a regional institution. Incorporated on June 15, 1928, the holding company reported $23 billion in assets at the end of 1999 and 333 full-service domestic banking offices across Utah, Idaho, Oregon, Wyoming, New Mexico, Nevada and California. Its Utah identity therefore coexisted with a substantial interstate business. [6]
The proposed Zions combination would have joined Utah’s two largest commercial banking organizations. In its December 1999 review, the Federal Reserve identified First Security as the largest and Zions as the second largest. Even after planned divestitures, the combined organization would have held approximately 44 percent of Utah deposits under the order’s definitions and historical data. This was a projected result of an uncompleted transaction, not an achieved market share. [4]
Why local geography mattered
The Federal Reserve’s analysis did not treat the entire Wasatch Front as one interchangeable banking market. First Security argued for combining the Salt Lake City, Ogden and Provo-Orem areas. The Board instead treated them as three separate markets, examining commuting, development patterns and where customers obtained banking services. That distinction mattered because a broad regional footprint could obscure the loss of a close competitor in a particular community. [4]
On December 8, 1999, the Justice Department announced a remedy covering 63 branches with about $2 billion in deposits. Fifty-eight branches, carrying $1.9 billion of deposits, were in Utah; five were in Idaho. Associated commercial, consumer and agricultural loans were included. The companies also agreed not to prevent other institutions from acquiring or leasing branches they might close because of consolidation. The remedy sought to preserve functioning alternatives for customers, rather than merely remove offices from the merged company’s map. [5]
A cleared merger still had to survive
Regulatory progress continued, but the timetable slipped. First Security disclosed that a shareholder meeting scheduled for December 28, 1999, had been delayed because Zions needed to restate earlier acquisitions from pooling-of-interests to purchase accounting. In January 2000, the companies announced a planned sale to BancWest of a larger, 68-branch package in Utah and Idaho. That was a proposed divestiture associated with the Zions transaction, not evidence that the main merger had closed. [6]
On March 3, First Security issued an earnings warning while maintaining that the merger remained on track. It projected an 8 percent sequential revenue decline and earnings seven to nine cents below the prior quarter’s 33 cents per share. Management cited mortgage-banking weakness, pressure from rising interest rates and increased auto and consumer-loan . It attributed the latter to a temporary systems problem and said merger delays had hurt its funding mix and revenue momentum. Those were management’s explanations and forecasts at the time. [7]
The shareholder vote subsequently stopped the deal. Zions’ annual report recorded approximately $40.5 million in pretax expenses related to termination and disengagement. It also reported a $96.9 million impairment on its First Security shares and $23.6 million of gains on their later sale. Abandoning the merger therefore had recorded financial consequences even though the companies never combined. [2]
Wells Fargo offered another route
On April 10, 2000, Wells Fargo and First Security announced their definitive merger agreement. First Security shareholders were to receive 0.355 Wells Fargo share for each First Security share. Using Wells Fargo’s April 3 closing price, the announcement valued the transaction at approximately $3.2 billion, or $15.50 per First Security share. This was an announcement-date valuation based on a specified stock price, not a fixed cash payment. [3]
The companies presented the combination as a way to expand convenience and financial services across their western and midwestern networks. Wells Fargo forecast that the transaction would add to earnings per share in the second year and expected approximately $375 million of merger and integration charges. These were prospective company claims, not established benefits. The announcement also anticipated regulatory divestitures, making clear that a signed agreement still depended on further approvals and restructuring. [3]
A different competitive footprint
The second transaction required its own remedy. On September 14, 2000, the Justice Department announced an agreement to divest 37 branches with roughly $1.4 billion in deposits across New Mexico, Nevada, Utah and Idaho. Only two were in Utah, with $65 million in deposits: Wells Fargo’s Park City and Box Elder branches, the latter in Brigham City. The package also included associated loans and opportunities to hire certain lending employees. [8]
Compared with the earlier Zions remedy, the Utah branch requirement was much smaller. That comparison illustrates why the identity and existing footprint of the buyer matter: the same target can create different local overlaps with different purchasers. It does not establish that the second transaction lacked competitive concerns. [5] [8]
The Federal Reserve approved the Wells Fargo proposal on October 10. Its analysis projected a 39.7 percent share of deposits in the defined Salt Lake City market, combining First Security’s 34.8 percent with Wells Fargo’s 4.9 percent. The Board considered remaining banks and savings associations, the competitive influence of credit unions, and conditions supporting entry by additional institutions. These historical market figures belong to the regulatory review; they are not current shares. [9]
What completion did, and did not, establish
Wells Fargo’s 2000 annual report confirmed the October closing and reported $110 million in after-tax First Security integration and conversion costs in the fourth quarter. The accounts used pooling-of-interests treatment, presenting combined results as though the merger had applied throughout the periods shown. That accounting presentation must not be mistaken for ownership before the legal closing date. [1]
The historical result is clear: the Zions combination did not proceed, while Wells Fargo acquired First Security. Regulatory decisions explain how officials evaluated competition and imposed conditions. They do not, by themselves, prove what happened afterward to every customer’s fees, loan availability or service. First Security’s case is consequently both an ownership story and a reminder that announcement, approval, closing and integration are separate events. [1] [2] [9]
Sources
- Wells Fargo, 2000 Annual Report, financial reviewFiling / report · PDFBack to text: ↑1↑2↑3
- Zions Bancorporation, 2000 Annual Report, Note 3Filing / report · PDFBack to text: ↑1↑2↑3
- First Security SEC filing: Wells Fargo merger announcement, April 10, 2000Filing / reportBack to text: ↑1↑2
- Federal Reserve order on First Security–Zions, December 13, 1999Official release · PDFBack to text: ↑1↑2↑3
- Justice Department: Zions–First Security divestitures, December 8, 1999Official sourceBack to text: ↑1↑2
- First Security SEC filing: January 19, 2000 results and merger update, filed February 11, 2000Filing / reportBack to text: ↑1↑2
- First Security SEC filing: earnings and merger update, March 3, 2000Filing / reportBack to text: ↑
- Justice Department: Wells Fargo–First Security divestitures, September 14, 2000Official releaseBack to text: ↑1↑2
- Federal Reserve order on Wells Fargo–First Security, October 10, 2000Official release · PDFBack to text: ↑1↑2