The new Wells Fargo & Co. may begin hunting for small bank acquisitions this year to fill gaps in its western markets, a top executive said. The search could begin well before Wells and Norwest Corp. finish integrating their Nov. 2 merger. The combined company, based in San Francisco, has retained the Wells name.
"It takes a while to get to the altar, ... so beginning to have discussions with other banks in 1999 is totally appropriate," Leslie S. Biller, vice chairman and chief operating officer of Wells Fargo, said in an interview Monday.
Mr. Biller, who was president and chief operating officer of Norwest, said his former bank had developed an expertise in buying small banks. In Texas, for example, it became the state's fourth-biggest bank by buying 30 community banks since 1994.
"We've got a core competency in acquiring and quickly converting banks on a fill-in basis," he said.
California and the Pacific Northwest are obvious target areas, analysts said, but Mr. Biller said Wells would be looking "in any area where we have a distribution capability that isn't adequate relative to the competitive environment."
Mr. Biller stressed that the new $202.5 billion-asset banking company would move cautiously. The approach of the year 2000 poses concerns, he said, making it unlikely that any deals would be made this year, unless the acquired bank could operate outside of the Wells Fargo computer systems until well into 2000.
"We'd have to be comfortable that the acquired bank could stand alone in the traditional Wells market," Mr. Biller said. In addition, Norwest's acquisition prowess has not been tested in the West, he said.
The old Wells "just did not have that kind of program," he said. "We just don't have the expertise to be able to say we can buy in California yet. This program of getting out and talking to people has probably not even kicked off yet."
Analysts, however, said Norwest's ability to efficiently absorb small banks would work well in California, the old Wells Fargo's core market. "We haven't thought of Wells as a buyer in this state for some time, but now I'd say they can leverage Norwest's expertise at small-bank acquisitions out here," said Joseph K. Morford, an analyst with First Security Van Kasper in San Francisco.
Wells Fargo has "a lot of places to fill in," said James Bradshaw, an analyst with Pacific Crest Securities of Portland, Ore. He pointed to the regions along the coasts of Oregon and Washington as likely areas. In addition, the franchise is thin in California's central valley from Redding south to Fresno, he said.
Analysts named several potential California targets: Fresno-based Regency Bancorp, with $200 million of assets; $244 million-asset United Security Bank, also of Fresno; Merced-based Capital Corporation of the West, with $425 million of assets; and Kerman State Bank of Kerman, which has $103 million of assets.
Yet some observers were skeptical that Wells would devote much attention to bank acquisitions before its integration is complete, which will probably be in 2001.
"If you find a deal that is cheap enough or strategically important enough, I think most people will be willing enough to look at it," said R. Jay Tejera, an analyst with Dain Rauscher Wessels in Minneapolis. "They are just so busy converting the computer systems, I really can't see them doing any bank acquisitions for the time being."
Specialty finance, auto finance, and mortgage banking acquisitions are more likely, he said.
"These kinds of acquisitions are not dependent on the bank's systems," Mr. Tejera said. "They tend to run as stand-alone businesses.