<PAGE 1>
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1998 Commission file number 2-80466
Norwest Financial, Inc.
(Exact name of registrant as specified in its charter)
Iowa 42 1186565
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
206 Eighth Street, Des Moines,Iowa 50309
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (515) 243-2131
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock (without par value): 1,000 shares outstanding as of
November 2, 1998.
The registrant meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing
this Form with the reduced disclosure format.
<PAGE 2>
PART I. FINANCIAL INFORMATION
NORWEST FINANCIAL, INC.
Consolidated Balance Sheets (Unaudited)
(Thousands of Dollars)
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1998 1997
<S> <C> <C>
Cash and cash equivalents $ 350,920 $ 94,600
Securities available-for-sale 1,160,592 1,063,600
Finance receivables:
Consumer:
Loans 4,010,169 3,893,550
Sales finance contracts 2,747,962 2,332,535
Credit cards 458,868 422,435
Commercial 541,573 465,601
Total finance receivables 7,758,572 7,114,121
Less allowance for credit losses 337,837 297,800
Finance receivables - net 7,420,735 6,816,321
Notes receivable - affiliates 612,710 646,832
Property and equipment (at cost, less
accumulated depreciation of $123,944
for 1998 and $107,435 for 1997) 161,253 102,537
Deferred income taxes 53,932 64,420
Other assets 483,340 533,614
Total assets $10,243,482 $9,321,924
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE 3>
NORWEST FINANCIAL, INC.
Consolidated Balance Sheets (Unaudited)
(Thousands of Dollars)
<TABLE>
<CAPTION>
September 30, December 31,
Liabilities and
Stockholder's Equity 1998 1997
<S> <C> <C>
Loans payable - short-term:
Commercial paper $ 2,301,199 $1,664,796
Affiliates 390,448 392,165
Other 48,232 170,000
Unearned insurance premiums
and commissions 136,191 143,478
Insurance claims and policy reserves 30,841 30,566
Accrued interest payable 104,524 93,344
Other payables to affiliates 47,123 13,815
Other liabilities 367,722 228,557
Long-term debt:
Senior 5,271,044 5,219,413
Subordinated 2,000
Total long-term debt 5,271,044 5,221,413
Total liabilities 8,697,324 7,958,134
Stockholder's equity:
Common stock without par value
(authorized 1,000 shares,
issued 1,000 shares) 3,855 3,855
Additional paid in capital 189,438 185,410
Retained earnings 1,342,296 1,167,418
Accumulated other comprehensive
Income 10,569 7,107
Total stockholder's equity 1,546,158 1,363,790
Total liabilities and
stockholder's equity $10,243,482 $9,321,924
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE 4>
NORWEST FINANCIAL, INC.
Statements of Consolidated Earnings(Unaudited)
(Thousands of Dollars)
<TABLE>
<CAPTION>
Quarter Ended Nine Months
September 30, Ended September 30,
1998 1997 1998 1997
Income:
<S> <C> <C> <C> <C>
Finance charges and interest $379,188 $322,762 $1,101,196 $ 922,719
Insurance premiums and
commissions 30,380 33,894 99,642 103,751
Other income 57,707 52,977 173,985 151,056
Total income 467,275 409,633 1,374,823 1,177,526
Expenses:
Operating expenses 166,278 139,003 498,503 399,809
Interest and debt expense 123,787 102,042 357,840 287,855
Provision for credit losses 68,935 57,819 199,415 157,195
Insurance losses and loss expenses 10,789 9,125 31,864 29,406
Total expenses 369,789 307,989 1,087,622 874,265
Earnings before income taxes 97,486 101,644 287,201 303,261
Income taxes 31,952 34,004 98,671 104,535
Net income $ 65,534 $ 67,640 $ 188,530 $198,726
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE 5>
NORWEST FINANCIAL, INC.
Consolidated Statements of Comprehensive Income (Unaudited)
(Thousands of Dollars)
<TABLE>
<CAPTION>
Quarter Ended Nine Months
September 30, Ended September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net income $65,534 $67,640 $188,530 $198,726
Other comprehensive income,
before income taxes:
Unrealized gains on securities
available-for-sale:
Unrealized gains arising
during the period 4,578 14,097 16,256 23,061
Less: reclassification
adjustment for net gains
included in net income 436 2,420 4,043 8,941
4,142 11,677 12,213 14,120
Foreign currency
translation adjustment (2,895) 25 (4,606) (865)
Other comprehensive income
before income taxes 1,247 11,702 7,607 13,255
Income tax expense related to
components of other
comprehensive income 1,451 3,955 4,145 4,766
Other comprehensive income (loss),
net of income taxes (204) 7,747 3,462 8,489
Comprehensive income $65,330 $75,387 $191,992 $207,215
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE 6>
NORWEST FINANCIAL, INC.
Statements of Consolidated Cash Flows (Unaudited)
Increase(Decrease) in Cash and Cash Equivalents
(Thousands of Dollars)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 188,530 $ 198,726
Adjustments to reconcile net earnings to
net cash flows from operating activities:
Provision for credit losses 199,415 157,195
Depreciation and amortization 36,846 23,890
Deferred income taxes 6,122 (1,509)
Other assets (47,414) (60,651)
Unearned insurance premiums and
Commissions (7,287) 10,120
Insurance claims and policy reserves 275 (12,428)
Accrued interest payable 11,180 13,795
Other payables to affiliates 31,551 (2,297)
Other liabilities 126,689 31,095
Net cash flows from operating activities 545,907 357,936
Cash flows from investing activities:
Finance receivables:
Principal collected 4,832,556 4,139,548
Receivables originated or purchased (5,347,850) (4,444,668)
Proceeds from sales of securities 101,348 87,058
Proceeds from maturities of securities 145,085 57,868
Purchases of securities (331,212) (331,273)
Net additions to property and equipment (71,517) (25,087)
Net increase in notes
receivable - affiliates (236,497) (1,138,196)
Contributed subsidiary received,
net of cash 503 3,258
Other 40,407 160,599
Net cash flows used for investing activities (867,177) (1,490,893)
Cash flows from financing activities:
Net increase in loans payable - short term 512,918 281,549
Proceeds from issuance of long-term debt -
Senior 511,960 1,251,882
Repayment of long-term debt:
Senior (425,288) (503,473)
Subordinated (2,000) (50,000)
Dividends paid (20,000) (1,729)
Paid in capital 112,000
Net cash flows from financing activities 577,590 1,090,229
Net increase (decrease) in cash and
cash equivalents 256,320 (42,728)
Cash and cash equivalents beginning of period 94,600 141,692
Cash and cash equivalents end of period $ 350,920 $ 98,964
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE 7>
NORWEST FINANCIAL, INC.
Consolidated Statements of Stockholder's Equity (Unaudited)
(Thousands of Dollars)
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive Income
Unrealized Gains
Additional Foreign on Securities
Common Paid In Retained Currency Available-
Stock Capital Earnings Translation for-Sale Total
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $3,855 $ 90,766 $ 959,697 $ (5,991) $ 9,705 $1,058,032
Comprehensive income:
Net income 198,726 198,726
Other (865) 9,354 8,489
Paid in capital 112,000 112,000
Contributed subsidiary 3 (17,359) (17,356)
Dividends (1,729) (1,729)
Balance, September 30, 1997 $3,855 $202,769 $1,139,335 $ (6,856) $19,059 $1,358,162
Balance, December 31, 1997 $3,855 $185,410 $1,167,418 $ (8,757) $15,864 $1,363,790
Comprehensive income:
Net income 188,530 188,530
Other (4,606) 8,068 3,462
Contributed subsidiary 4,028 6,348 10,376
Dividends (20,000) (20,000)
Balance, September 30, 1998 $3,855 $189,438 $1,342,296 $(13,363) $23,932 $1,546,158
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE 8>
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements (Unaudited)
The accompanying unaudited financial statements and notes have been
prepared in accordance with the accounting policies set forth in
Norwest Financial, Inc.'s 1997 Annual Report on Form 10-K and should
be read in conjunction with the Notes to Consolidated Financial Statements
therein. In the opinion of management, all adjustments (none of which
were other than normal recurring accruals) necessary to present fairly
the financial statements for the periods presented have been included.
1. Principles of Consolidation.
The consolidated financial statements include the accounts of Norwest
Financial, Inc. (the "Company") and subsidiaries (collectively, "Norwest
Financial"). Intercompany accounts and transactions are eliminated.
The Company is a wholly-owned subsidiary of Norwest Financial Services, Inc.
(the "Parent") which is a wholly-owned subsidiary of Norwest Corporation
("Norwest").
2. Dividend Restrictions.
Certain long-term debt instruments restrict payment of dividends on and
acquisitions of the Company's common stock. In addition, such debt
instruments and the Company's bank credit agreements contain certain
requirements as to maintenance of net worth (as defined). Approximately
$896 million of consolidated stockholder's equity was unrestricted at
September 30, 1998.
3. Other Income.
Income from affiliates was $14.7 million and $13.9 million for the quarters
ended September 30, 1998 and 1997, respectively, and $47.2 million and $40.8
million for the nine months ended September 30, 1998 and 1997, respectively.
Interest and dividends from securities available-for-sale and cash
equivalents were $18.1 million and $17.8 million for the quarters ended
September 30, 1998 and 1997, respectively, and $54.2 million and $47.7
million for the nine months ended September 30, 1998 and 1997, respectively.
4. Reclassifications.
Certain amounts in the 1997 financial statements have been reclassified
to conform to the presentation used in the 1998 financial statements.
<PAGE 9>
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements (Unaudited)
5. Change in Accounting Policy.
Effective January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("FAS 130"). FAS 130 requires
disclosures of the components of comprehensive income and
the accumulated balance of other comprehensive income with
total stockholder's equity. The adoption of FAS 130 has not
had a material effect on the Company's financial statements.
6. Business Combinations.
Effective April 21, 1998, one of the Company's Canadian
subsidiaries acquired all of the issued and outstanding
shares of capital stock of The T. Eaton Acceptance Co.
Limited ("TEAC") and National Retail Credit Services Limited
("NRCS"). The acquisition was accounted for as a purchase.
TEAC and NRCS are headquartered in Toronto, Ontario and are
primarily engaged in purchasing sales finance contracts.
TEAC and NRCS had finance receivables outstanding of $305
million at the time of the acquisition.
Effective June 30, 1998, the Parent made a capital
contribution, without consideration, to the Company of the
issued and outstanding shares of capital stock of Reliable
Financial Services, Inc. (the "Contributed Subsidiary" or
"Reliable"). This capital contribution was accounted for as
a merger of interests under common control. Reliable's
headquarters are in San Juan, Puerto Rico and its principal
business is automobile finance. Reliable had finance
receivables outstanding of $293 million at the time of the
contribution.
<PAGE 10>
NORWEST FINANCIAL, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Statements made in Management's Discussion and Analysis may be forward-
looking and are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements
address management's present expectations about future performance and
involve inherent risks and uncertainties. A number of important factors
(some of which are beyond the Company's control) could cause actual
results to differ materially from those in the forward-looking statements.
Those factors include the economic environment, competition, products
and pricing in the geographic and business areas in which the Company
conducts its operations, prevailing interest rates, changes in government
regulations and policies affecting financial services companies,
credit quality and credit risk management, acquisitions, and integration
of acquired businesses.
Effective August 31, 1997, Norwest, through its wholly-owned subsidiary,
Fidelity Acceptance Holding, Inc. ("FAHI"), acquired Fidelity Acceptance
Corporation. The acquisition was accounted for as a purchase. Funding
necessary for this acquisition (totaling approximately $1.1 billion) was
provided to FAHI by the Company. Effective September 2, 1997, Norwest
made a capital contribution, without consideration, of all of the issued
and outstanding shares of capital stock of FAHI to the Parent. Immediately
thereafter, the Parent made a capital contribution, without consideration,
of all the issued and outstanding shares of capital stock of FAHI to the
Company. This capital contribution was accounted for as a merger of interests
under common control. The principal business of Fidelity Acceptance
Corporation and its subsidiaries ("Fidelity") is purchasing sales finance
contracts directly from automobile dealers and making direct loans
secured by automobiles. Fidelity operated 147 branch offices in 31
states and Guam and had approximately $1.1 billion in finance receivables
outstanding at the time of the contribution.
<PAGE 11>
NORWEST FINANCIAL, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Norwest Financial's performance for the third quarter of 1998 closely
paralleled performance for the first nine months of 1998. The discussion
and analysis that follows, therefore, is limited to a discussion of the
first nine months as a whole and does not include a separate discussion
of the third quarter unless otherwise noted.
Norwest Financial's total income (revenue) increased 17% for the first
nine months ($1,374.8 million in the first nine months of 1998 compared
with $1,177.5 million in the first nine months of 1997).
Income from finance charges and interest increased 19% for the first
nine months ($1,101.2 million in the first nine months of 1998 compared
with $922.7 million in the first nine months of 1997). Income from
finance charges and interest increased 5% excluding Fidelity. Changes
in income from finance charges and interest result primarily from (1)
changes in the amount of finance receivables outstanding and (2) changes
in the rate of charge on those receivables. In total, average finance
receivables outstanding in the first nine months of 1998 increased 22%
from the first nine months of 1997; average consumer receivables outstanding
increased 23% while average commercial receivables outstanding increased 4%.
Excluding Fidelity, average finance receivables outstanding in the first
nine months of 1998 increased 8% from the first nine months of 1997.
Nine Months Ended September 30,
Rate of charge on finance receivables: 1998 1997
Consumer 20.46% 21.02%
Commercial 13.88 13.88
Total 20.02 20.46
The increase in income from finance charges and interest was due to
growth in average finance receivables outstanding offset somewhat by
the decline in the rate of charge. The increase in average finance
receivables was due primarily to acquisitions combined with regular
business activity.
Insurance premiums and commissions decreased 4% ($99.6 million
in the first nine months of 1998 compared with $103.8 million in
the first nine months of 1997.) Changes in insurance premiums and
commissions generally correspond to changes in average consumer finance
loans outstanding not secured by real estate and average credit card
receivables outstanding. Average consumer finance loans outstanding not
secured by real estate and average credit card receivables outstanding
increased 15% in the first nine months of 1998 compared with the first
nine months of 1997. This increase was due primarily to the addition of
Fidelity. Excluding Fidelity, average consumer finance loans not secured
by real estate and credit card receivables remained constant. Insurance
premiums and commissions in Fidelity during the first nine months of 1998
were $3.4 million.
<PAGE 12>
NORWEST FINANCIAL, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations, Continued
Insurance losses and loss expenses increased 8% ($31.9 million in the
first nine months of 1998 compared with $29.4 million in the first nine
months of 1997).
Other income increased 15% ($174.0 million in the first nine months of
1998 compared with $151.1 million in the first nine months of 1997).
The increase is due primarily to an increase in interest and dividends
from securities available-for-sale and cash equivalents, income from
affiliates and other fee income.
Operating expenses increased 25% ($498.5 million in the first nine months
of 1998 compared with $399.8 million in the first nine months of 1997).
Excluding Fidelity, operating costs increased 13% in the first nine months of
1998. The increase was due primarily to increases in employee compensation
and benefits and other costs resulting from business expansion.
Interest and debt expense increased 24% ($357.8 million in the first nine
months of 1998 compared with $287.9 million in the first nine months of 1997).
Average total borrowings increased primarily due to the addition of Fidelity.
Changes in interest and debt expense result primarily from (1) changes in the
amount of borrowings outstanding and (2) changes in the cost of those
borrowings. Average total outstanding borrowings in the first nine months
of 1998 increased 22% from the first nine months of 1997.
Nine Months Ended September 30,
Costs of funds: 1998 1997
Short-term 5.64% 5.23%
Long-term 6.76 6.84
Total 6.44 6.36
Changes in average debt outstanding generally correspond to changes in
average finance receivables outstanding combined with the change in
notes receivable - affiliates. Average finance receivables and notes
receivable - affiliates increased 21% from the first nine months of 1997.
<PAGE 13>
NORWEST FINANCIAL, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations, Continued
Provision for credit losses increased 27% ($199.4 million in the first
nine months of 1998 compared with $157.2 million in the first nine months
of 1997). Net write-offs as a percentage of average net receivables
outstanding increased to 2.61% in the first nine months of 1998 compared
with 2.50% in the first nine months of 1997. Excluding Fidelity,
net write-offs as a percentage of average net receivables were 2.14%
in the first nine months of 1998 compared with 2.42% in the first nine
months of 1997. Provision for credit losses in the third quarter of
1998 increased 19% compared with the third quarter of 1997 ($68.9 million
compared with $57.8 million). Net write-offs as a percentage of average
net receivables outstanding were .83% for the third quarter of 1998
and .89% for the third quarter of 1997. Excluding Fidelity, net write-offs
as a percentage of average net receivables outstanding were .68% for the
third quarter of 1998 compared with .81% in the third quarter of 1997.
Management believes the allowance for credit losses at September 30, 1998,
and December 31, 1997, is adequate to absorb possible losses in the finance
receivables portfolio.
Federal and state income taxes decreased 6% ($98.7 million in the first
nine months of 1998 compared with $104.5 million in the first nine
months of 1997). The effective tax rate was 34.4% for the first nine
months of 1998 and 34.5% for the first nine months of 1997.
The Company and one of its Canadian subsidiaries maintain bank lines
of credit and revolving credit agreements to provide an alternative
source of liquidity to support the commercial paper borrowings.
At September 30, 1998, lines of credit and revolving credit agreements
totaling $1,477 million were being maintained at 33 unaffiliated banks.
None of this credit was in use at the time.
The Company and one of its Canadian subsidiaries obtain long-term debt
capital primarily from (i) the issuance of debt securities to the public
through underwriters on a firm-commitment basis, (ii) the issuance of
debt securities to institutional investors, and (iii) term borrowings
from commercial banks. The Company and one of its Canadian subsidiaries
also obtain long-term debt from the issuance of medium-term notes
(which may have maturities ranging from nine months to 30 years)
through underwriters (acting as agent or principal).
Norwest Financial anticipates the continued availability of borrowed funds,
at prevailing interest rates, to provide for Norwest Financial's growth
in the foreseeable future. Funds are also generated internally from
payments of principal and interest received on Norwest Financial's finance
receivables.
The Company has experienced slower internal growth in receivables
and a reduction in earned rate as a result of repayments and
competitive pressures causing industry loan standards and pricing
to fall below levels which management considers prudent. Management
now estimates that Norwest Financial's 1998 earnings will be
approximately ten percent lower than the amount earned in 1997.
Management will continue to maintain its financial discipline and is
confident of the Company's long-term growth prospects.
<PAGE 14>
NORWEST FINANCIAL, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations, Continued
During 1998, Norwest Financial has continued with its company-wide
project to prepare Norwest Financial's systems for Year 2000 compliance.
The Year 2000 issue relates to computer systems that use two digits rather
than four to define the applicable year and whether such systems will
properly process information when the year changes to 2000.
"Systems" include all firmware, hardware, system and application software,
and commercial "off the shelf" software and networks, and embedded technology
such as properties/date impacted processors in automated systems such as
elevators, telephone systems, security, heating and cooling systems and
others. Priority is given to "mission critical" systems. A system is
considered "mission critical" if it is vital to the successful continuation
of a core business activity.
The implementation of Norwest Financial's Year 2000 readiness project
is divided into four principal phases: Phase I requires a comprehensive
assessment and inventory of all applicable software, system hardware devices,
data and voice communication devices and other embedded technology to
determine Year 2000 vulnerability and risk; Phase II requires date detection
on systems to determine which systems must be repaired and which systems
are compliant and require testing only, determination of the resources and
costs, and the development of high level testing plans and schedules for the
repair, replacement and/or retirement of systems; Phase III requires repairs,
replacement and/or retirement of systems not Year 2000 compliant, and
planning the integration testing for those systems that have interfaces with
other systems both internal and external to Norwest Financial, such as
customers/suppliers; and Phase IV requires integration testing on applicable
systems to validate that interfaces are Year 2000 compliant.
Norwest Financial may be impacted by the Year 2000 compliance issues
of governmental agencies, business and other entities who provide data to,
or receive data from, Norwest Financial, and by entities, such as borrowers,
vendors, customers and business partners, whose financial condition
or operational capability is significant to Norwest Financial. Norwest
Financial's Year 2000 project also includes assessing the Year 2000 readiness of
significant customers, borrowers, vendors, business partners, counterparties
and governmental entities. In addition to assessing the readiness of these
external parties, Norwest Financial is developing contingency plans which
will include recovery plans and alternatives to mitigate the effects of
counterparties whose own failure to properly address Year 2000 issues may
adversely impact Norwest Financial's ability to perform mission critical
functions. These contingency plans are currently being developed and are to
be completed in conjunction with Phase IV.
Norwest Financial has substantially completed Phases I and
II of its Year 2000 project. It is anticipated that Phase
III will be substantially completed for all mission critical
systems by December 31, 1998. Phase IV for all mission
critical systems is anticipated to be completed by June 30,
1999.
<PAGE 15>
NORWEST FINANCIAL, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations, Continued
To date, Norwest Financial has incurred charges of $2.4 million related
to its Year 2000 project; $1.7 million and $2.4 million total expenditures
were incurred in the quarter and nine months ended September 30, 1998,
respectively. Norwest Financial currently estimates that its total cost
for the Year 2000 project will be $3.2 million. Charges include the cost
of internal staff redeployed to the Year 2000 project, as well as external
consulting costs and costs of accelerated replacement of hardware and
software due to Year 2000 issues. The redeployment of internal staff has
not delayed other information technology projects, and thus will not have
an impact on the financial condition or results of operations.
The foregoing paragraphs contain a number of forward-looking statements.
These statements reflect management's best current estimates, which were
based on numerous assumptions about future events, including the continued
availability of certain resources, representations received from third party
service providers and other third parties, and additional factors. There
can be no guarantee that these estimates will be achieved, and actual results
could differ materially from those estimates.
A number of important factors could cause the actual costs of Year 2000
compliance and the impact of the Year 2000 issue to differ materially
from what is described in the forward-looking statements contained in
the above paragraphs. Those factors include, but are not limited to,
uncertainties in the costs of hardware and software, the availability
and cost of programmers and other systems personnel, inaccurate or
incomplete execution of the phases, ineffective remediation of computer
code, and the ability of Norwest Financial's customers, vendors,
competitors and counterparties to effectively address the Year 2000 issue.
Notwithstanding Norwest Financial's efforts, there can be no assurance
that significant third party vendors or other significant third parties
will adequately address their Year 2000 issues. Risks associated with
such third parties which are located outside the United States may be
higher insofar as it is generally believed that non-U.S. businesses may
not be addressing their Year 2000 issues on as timely a basis as U.S.
businesses. Failure of the corporation's loan customers to properly
prepare for the Year 2000 could also result in increases in problem
loans and credit losses in future years. It is not, however, possible
to quantify the potential impact of such losses at this time. If Year
2000 issues are not adequately addressed by Norwest Financial and
significant third parties, Norwest Financial's business, results of
operations and financial position could be materially adversely affected.
<PAGE 16>
NORWEST FINANCIAL, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations, Concluded
The forward-looking statements made in the foregoing Year 2000
discussion speak only as of the date on which such statements are made,
and Norwest Financial undertakes no obligation to update any forward-
looking statement to reflect events or circumstances after the date on
which such statement is made to reflect the occurrence of unanticipated
events.
<PAGE 17>
PART II. OTHER INFORMATION
NORWEST FINANCIAL, INC.
Item 5. Other Information
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges
of Norwest Financial, Inc. and its subsidiaries for the periods indicated:
Nine Months Ended Years Ended December 31,
September 30, 1998 1997 1996 1995 1994 1993
1.78 2.00 2.11 2.13 2.26 2.22
The ratios of earnings to fixed charges have been computed by dividing
net earnings plus fixed charges and income taxes by fixed charges.
Fixed charges consist of interest and debt expense plus one-third of
rentals (which is deemed representative of the interest factor).
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit (12) Computation of ratios of earnings to fixed charges for
the years ended December 31, 1997, 1996, 1995, 1994
and 1993 and the nine months ended September 30, 1998.
(b) Reports on 8-K
No reports on Form 8-K were filed during the quarter for which this report
is filed.
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NORWEST FINANCIAL, INC.
Date: November 2, 1998
By \S\ Eric Torkelson
Eric Torkelson
Vice President and Controller
(Principal Accounting Officer)
NORWEST FINANCIAL, INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
Exhibit (12)
<TABLE>
<CAPTION>
Nine
Months
Ended
September 30,
1998 Years Ended December 31,
(Thousands of Dollars)
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net earnings $188,530 $269,450 $276,331 $267,941 $223,340 $203,297
Add:
Fixed charges:
Interest including
amortization of
debt expense 357,840 401,736 372,859 359,079 259,605 242,440
One-third of
rentals* 10,050 12,107 10,748 10,317 9,747 10,146
Total fixed
Charges 367,890 413,843 383,607 369,396 269,352 252,586
Provision for
income taxes 98,671 144,082 148,096 147,873 116,900 104,228
Total net earnings,
fixed charges and
income taxes -
"Earnings" $655,091 $827,375 $808,034 $785,210 $609,592 $560,111
Ratio of earnings
to fixed charges 1.78 2.00 2.11 2.13 2.26 2.22
</TABLE>
*One-third of rentals is deemed representative of the interest factor.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
NORWEST FINANCIAL INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 350,920
<SECURITIES> 1,160,592
<RECEIVABLES> 7,758,572
<ALLOWANCES> 337,837
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 285,197
<DEPRECIATION> 123,944
<TOTAL-ASSETS> 10,243,482
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,010,923<F2>
0
0
<COMMON> 3,855
<OTHER-SE> 1,542,303
<TOTAL-LIABILITY-AND-EQUITY> 10,243,482
<SALES> 0
<TOTAL-REVENUES> 1,374,823
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 530,367
<LOSS-PROVISION> 199,415
<INTEREST-EXPENSE> 357,840
<INCOME-PRETAX> 287,201
<INCOME-TAX> 98,671
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 188,530
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>NORWEST FINANCIAL HAS A NON-CLASSIFIED BALANCE SHEET
SO THIS INFORMATION IS UNAVAILABLE.
<F2>INCLUDES $2.7 BILLION OF SHORT-TERM LOANS.
</FN>
</TABLE>
