Ruling on Crocker Merger : U.S. Orders Wells Fargo to Sell Branches in 7 Cities

Federal authorities Friday ordered Wells Fargo & Co. to sell branches in seven Northern California cities where the bank’s merger with Crocker National Corp. will give it an excessive concentration of deposits.

The Federal Reserve Board and the Department of Justice, citing antitrust concerns, told the San Francisco bank holding company to divest the Wells Fargo Bank or Crocker National Bank branch in Eureka, Redding, Red Bluff, Yuba City, Placerville, Williams and Salinas.

Neither the bank nor the federal agencies would reveal the combined percentage of deposits that the bank merger would create in those communities. Wells Fargo said, however, that it has been told to divest a total of $107 million in deposits.

Wells Fargo said it would seek a buyer for the branches among California banks and savings and loans. The sale will be handled by Montgomery Securities of San Francisco.

Uncertainty Cited by Fed

Meanwhile, Wells Fargo said in official documents that it plans to complete its acquisition of Crocker by the end of May, several months earlier than expected when the merger was announced in January.

The new timetable was disclosed in Wells Fargo’s application to the Federal Reserve Board for approval of the merger, the largest combination in U.S. banking history.

Bank officials said the Fed wants an early completion of the merger because of the uncertainty surrounding Wells Fargo’s plans for Crocker’s employees, branches and customers.

The three-volume document also revealed that Wells Fargo will shed $5.9 billion in assets of the combined banks, primarily by selling off securities and deposits held by Crocker in other banks. Proceeds from the asset sales will be used to retire bank borrowings. The combined bank, which will be known simply as Wells Fargo Bank, will have $42.5 billion in assets, making it the nation’s 10th largest. Individually, Wells Fargo ranked 13th at the end of 1985; Crocker was 25th.

Management Changes Planned

In its Fed application, Wells Fargo said it planned “substantial further management changes” at Crocker. The acquisition “will begin to bring stability to this organization that has known nothing but management change and employee uncertainty for the past five years,” Wells Fargo said in the document.

Wells Fargo previously announced that it will not retain Crocker Chairman Frank V. Cahouet in a management post and will eliminate many overlapping positions.

Wells Fargo said the combined bank will have 8.3% of total deposits in California banks, credit unions and savings and loans. In the San Francisco Bay Area, Wells Fargo’s 19.6% share of deposits will rival Bank of America’s 24.7%. In the Los Angeles area, Wells Fargo will have 3.7% of deposits, compared to Bank of America’s 11.8% and Security Pacific’s 10.07%.

Separately, Wells Fargo said this week that it had issued 1.3 million new shares of common stock, bringing its total outstanding shares to 26.5 million. The new shares were sold at $87.675 a share.

In addition, the San Francisco bank holding company filed a shelf registration for $757 million in new debt securities to be used in part to fund the Crocker acquisition.