<PAGE> 1
PART I
Item 1. Business.
Norwest Financial, Inc. (the "Company") is an Iowa
corporation organized on August 19, 1982, as the successor
to a business founded in 1897, and is a wholly-owned
subsidiary of Norwest Financial Services, Inc. (the
"Parent"). The Parent is a wholly-owned subsidiary of
Norwest Corporation ("Norwest"), an $88.5 billion
diversified financial services organization. (Unless the
context otherwise requires, any reference to "Norwest
Financial" shall include the Company and its subsidiaries.)
Norwest Financial is a leading diversified consumer finance
company. The Company's consumer finance operations make
loans to individuals and purchase sales finance contracts
through 998 consumer finance branches in 47 states, Guam,
Saipan, Puerto Rico and the ten Canadian provinces. The
Company's automobile finance operations have 238 branches in
32 states and specialize in purchasing sales finance
contracts directly from automobile dealers and making loans
secured by automobiles. Norwest Financial also issues
credit cards through two banking subsidiaries. For a
summary of total income, earnings before income taxes and
total assets by country, see note 8 to the consolidated
financial statements.
The Company also has insurance subsidiaries which are
primarily engaged in the business of providing, directly or
through reinsurance arrangements, credit life and credit
disability insurance as a part of Norwest Financial's
consumer business and the consumer business of certain
affiliates. Credit property, involuntary unemployment and
non-filing insurance are provided as part of Norwest
Financial's consumer business. Such business is written,
directly or through reinsurance agreements, by the Company's
insurance subsidiaries, or it is offered on an agency basis
by Norwest Financial. Information services are provided to
Norwest Financial and other financial services companies by
subsidiaries of the Company. The Company also has
subsidiaries engaged in the commercial finance business,
including lease financing and accounts receivable financing.
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 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 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.
Effective January 1, 1995, the Parent made a capital
contribution, without consideration, to the Company of the
issued and outstanding shares of capital stock of Community
Credit Co. and Dial National Bank (the "Contributed
Subsidiaries"). These capital contributions to the Company
have been accounted for as a merger of interests under
common control. Community Credit Co. is primarily engaged
in automobile finance and had 55 branch offices and assets
of $213.6 million at January 1, 1995. Net earnings in 1994
were $6.3 million. Dial National Bank is primarily engaged
in the credit card business and had assets of $112.2 million
at January 1, 1995 and net earnings of $4.0 million for the
year ended December 31, 1994.
<PAGE> 2
Effective May 4, 1995, Norwest purchased Island Finance, a
group of eight consumer finance companies headquartered in
San Juan, Puerto Rico, which currently has 136 branch
offices located in Puerto Rico, Panama, the Netherlands
Antilles, the U.S. Virgin Islands, Aruba, and Costa Rica.
Island Finance's principal business is making direct loans
to individuals. Although Island Finance is not included in
the Company's financial results, the Company manages Island
Finance and provided approximately $528 million of its
funding at December 31, 1997. In conjunction with the
Island Finance acquisition, the Company also acquired the
net assets of seven offices in Puerto Rico which are engaged
in purchasing sales finance contracts. The acquisition of
the net assets of those offices was accounted for as a
purchase.
Effective February 21, 1997, Norwest acquired Reliable
Financial Services, Inc. ("Reliable"). Norwest made a
capital contribution, without consideration, of all the
issued and outstanding shares of capital stock of Reliable
to the Parent. This capital contribution was accounted for
as a merger of interests under common control. Reliable is
engaged in automobile finance from its office in San Juan,
Puerto Rico. Reliable's financial results and receivables
are not included in the Company's consolidated earnings or
consolidated balance sheets. Reliable is managed by Island
Finance and had receivables outstanding of $212 million at
December 31, 1997.
The common stock of one of the Company's consumer finance
subsidiaries was transferred by way of a non-cash dividend
to the Parent on November 1, 1994. This subsidiary had
assets totaling $147.1 million and 39 branch offices at the
time of the transfer.
CONSUMER OPERATIONS
At December 31, 1997, consumer receivables accounted for 93%
of Norwest Financial's total finance receivables
outstanding. The amount and type of consumer receivables
outstanding in the United States and Canada are shown below:
<TABLE>
<CAPTION>
Consumer Receivables Outstanding
(In Thousands)
United
States Canada Total
Consumer finance:
<S> <C> <C> <C>
Loans secured by real estate $1,687,778 $ 64,679 $1,752,457
Loans not secured by real estate 1,189,823 399,618 1,589,441
Total loans 2,877,601 464,297 3,341,898
Sales finance contracts 1,288,042 153,531 1,441,573
Total consumer finance 4,165,643 617,828 4,783,471
Automobile finance 1,442,614 1,442,614
Credit card receivables 422,435 422,435
Total consumer receivables $6,030,692 $617,828 $6,648,520
</TABLE>
<PAGE> 3
Geography
At December 31, 1997, Norwest Financial had consumer finance
branch offices in 47 states, Guam, Saipan, Puerto Rico, and
the ten Canadian provinces and automobile finance branch
offices in 32 states. The number of branch offices and
percentage of receivables for consumer finance and for
automobile finance at December 31, 1997, are shown below:
<TABLE>
<CAPTION>
Consumer Finance Number of Branch Offices and Percent of
Receivables
Percent of Percent of
Consumer Consumer
Branch Finance Branch Finance
Location Offices Receivables Location Offices Receivables
<S> <C> <C> <C> <C> <C>
Alaska 6 .9% Oklahoma 18 1.5%
Arizona 18 1.5 Oregon 13 1.3
California 96 9.4 Pennsylvania 28 3.2
Colorado 15 1.5 Puerto Rico 7 .9
Connecticut 3 .2 Rhode Island 4 .5
Delaware 2 .1 Saipan 1 .1
Florida 46 4.8 South Carolina 24 2.6
Georgia 23 2.6 South Dakota 4 .2
Guam 3 .7 Tennessee 30 2.6
Hawaii 16 1.2 Texas 55 4.1
Idaho 13 1.1 Utah 13 1.4
Illinois 27 3.5 Virginia 11 .8
Indiana 16 1.3 Washington 23 2.5
Iowa 15 2.2 West Virginia 6 .7
Kansas 8 .7 Wisconsin 14 .9
Kentucky 21 2.1 Wyoming 4 .3
Louisiana 38 2.8
Maine 2 .1 Total U.S. 855 86.5%
Maryland 21 3.3
Massachusetts 12 1.4 Alberta 9 .9%
Michigan 5 .3 British Columbia 19 1.7
Minnesota 12 1.3 Manitoba 4 .4
Mississippi 21 1.7 New Brunswick 12 .9
Missouri 27 2.8 Newfoundland 13 1.0
Montana 7 .9 Nova Scotia 17 1.6
Nebraska 10 1.0 Ontario 42 4.3
Nevada 15 1.3 Prince Edward Island 2 .2
New Hampshire 1 .1 Quebec 21 2.0
New Jersey 11 .9 Saskatchewan 4 .5
New Mexico 21 1.7
New York 15 3.3 Total Canada 143 13.5%
North Carolina 19 2.4
North Dakota 6 .5 Total Consumer
Ohio 29 3.3 Finance 998 100.0%
</TABLE>
<PAGE> 4
Automobile Finance Number of Branch Offices and Percent of
Receivables
<TABLE>
<CAPTION>
Percent of Percent of
Automobile Automobile
Branch Finance Branch Finance
Location Offices Receivables Location Offices Receivables
<S> <C> <C> <C> <C> <C>
Alabama 6 1.9% Mississippi 6 2.8%
Arizona 10 5.2 Missouri 12 3.0
California 26 19.3 Nebraska 2 .7
Colorado 8 3.4 Nevada 4 1.7
Delaware 1 .4 New Jersey 2 .9
Florida 4 1.4 New Mexico 1 .2
Georgia 13 4.0 Ohio 18 7.1
Hawaii 1 .6 Oklahoma 4 1.1
Idaho 1 .1 Oregon 2 .7
Illinois 21 9.0 Pennsylvania 4 1.5
Indiana 10 3.7 South Carolina 2 .4
Kansas 5 3.2 Tennessee 8 2.7
Kentucky 8 3.4 Texas 6 2.6
Louisiana 4 2.1 Utah 4 1.4
Michigan 1 2.1 Washington 5 1.2
Minnesota 21 6.4 Wisconsin 18 5.8
Total Automobile
Finance 238 100.0%
</TABLE>
<PAGE> 5
Growth and Volume of Consumer Finance and Automobile Finance
Receivables
The following tables present the growth and volume of
Norwest Financial's consumer finance loans and sales finance
contracts for the five years ended December 31, 1997:
<TABLE>
<CAPTION>
Consumer Finance Receivables and Number of Accounts
Outstanding
Net Average
December Receivables Number Balance
31, (in thousands) of Accounts per Account
<S> <C> <C> <C>
1997 $4,783,471 2,447,000 $1,955
1996 4,770,519 2,539,000 1,879
1995 4,562,392 2,506,000 1,821
1994 4,153,594 2,311,000 1,797
1993 3,818,021 2,184,000 1,748
</TABLE>
<TABLE>
<CAPTION>
Consumer Finance Volume
Sales Finance
Loans Made Number of Contracts Number of
Years Ended and Acquired Loans Made Purchased Contracts
December 31, (in thousands)* and Acquired (in thousands) Purchased
<S> <C> <C> <C> <C>
1997 $2,812,670 956,000 $1,893,546 1,830,000
1996 2,859,161 1,025,000 1,977,983 1,918,000
1995 2,673,104 1,013,000 1,951,718 1,905,000
1994 2,729,095 1,051,000 1,825,917 1,825,000
1993 2,401,989 954,000 1,553,022 1,591,000
</TABLE>
* Includes balances renewed of $812,052,000; $840,256,000;
$766,552,000; $759,775,000; and $680,357,000 for the years
1997 through 1993, respectively.
The following tables present the growth and volume of
Norwest Financial's automobile finance receivables for the
three years ended December 31, 1997. (Only three years of
information is shown for automobile finance. This operation
consists of Community Credit Co. which was contributed by
the Parent effective January 1, 1995, and Fidelity
Acceptance Corporation which was contributed by the Parent
effective September 2, 1997.):
<TABLE>
<CAPTION>
Automobile Finance Receivables and Number of
Accounts Outstanding
Net Average
December Receivables Number Balance
31, (in thousands) of Accounts per Account
<S> <C> <C> <C>
1997 $1,442,614 182,000 $7,926
1996 306,537 40,000 7,663
1995 240,322 35,000 6,866
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Automobile Finance Volume
Net Receivables Number of
Years Ended Made and Acquired Accounts Made
December 31, (in thousands)* and Acquired
<S> <C> <C>
1997 $553,526 60,000
1996 267,175 30,000
1995 231,630 30,000
</TABLE>
* Includes balances renewed of $38,155,000; $33,794,000; and
$28,244,000 for the years 1997 through 1995 respectively.
Amounts for Fidelity are only included subsequent to the
contribution from the Parent.
Regulation
Norwest Financial's consumer finance and automobile finance
operations in the United States are, for the most part,
regulated by consumer finance laws or similar legislation in
each of the states or other jurisdictions where Norwest
Financial has branch offices. Although consumer finance
laws have been in effect many years, amending and new
legislation is frequently enacted. In those states which
have enacted legislation in recent years that affects the
maximum permitted amount of loan and maximum allowable rate
of charge, the trend has been to increase such amounts and
rates of charge or to deregulate the same altogether. With
respect to the foregoing, Norwest Financial's consumer
lending operations in Canada are, for the most part,
essentially unregulated.
Consumer finance laws generally require that each branch
office be licensed to conduct its business. In most
jurisdictions the granting of licenses is dependent on a
finding of financial responsibility, character and fitness
of the applicant and, in some jurisdictions, public
convenience and advantage. Each licensed branch office is
subject to state or provincial regulation and examination.
In nearly all states a report of the activities of licensed
branch offices must be made annually to the appropriate
state department. Licenses are revocable for cause and
their continuance depends upon compliance with the
provisions of the applicable state or provincial law.
Norwest Financial has never had any of its licenses revoked.
The Federal Consumer Credit Protection Act (the "Act")
requires a written statement showing the annual percentage
rate of finance charge and other information to be given to
borrowers when consumer credit contracts are made. When a
closed-end loan (a loan which does not allow additional
borrowings) with rates or fees above a certain percentage or
amount is secured by the borrower's principal dwelling,
additional disclosures must be given at least three business
days before the loan is consummated, and limits on
prepayment penalties apply to the loan. The Act also
requires certain disclosures to applicants concerning credit
reports that are used as a basis for denying or increasing
the charge for credit.
The Real Estate Settlement Procedures Act requires creditors
to provide consumers with estimates of closing costs and
other disclosures before loans secured by residential real
estate are made and disclosures of the actual closing costs
at the time the loan is made.
The Federal Equal Credit Opportunity Act prohibits
discrimination against applicants with respect to any aspect
of a credit transaction on the basis of sex, martial status,
race, color, religion, national origin, age (provided the
applicant has the capacity to contract), or because all or
part of the applicant's income derives from any public
assistance program, or because the applicant has in good
faith exercised any right under the Federal Consumer Credit
Protection Act.
<PAGE> 7
By virtue of a Federal Trade Commission rule, sales finance
contracts and certain loans (those made for the borrower's
purchase of personal property from a seller having a
relationship with the lender) contain a provision that the
lender is subject to all claims and defenses which the
borrower could assert against the seller. However, the
borrower's recovery under such provision cannot exceed the
amount paid under the contract.
A Federal Trade Commission trade regulation rule on creditor
practices prohibits, among other things, the taking of a
security interest (other than a purchase money security
interest) in certain of a borrower's household goods.
In Canada, there are similar laws regarding the granting of
credit.
Regulation of the Company's insurance subsidiaries is
described under "Insurance Operations."
Business Methods
In order to make a careful selection of credit risks,
Norwest Financial reviews credit information concerning each
applicant to determine income, living expenses, payment
obligations, indebtedness, paying habits, and length and
stability of employment. The information is obtained from
the applicants, the applicants' employers, creditors of the
applicants and credit reporting agencies. Norwest Financial
believes that any risk to its business which may be created
by unfavorable local conditions is minimized by the large
number of customers, their broad range of occupations and
geographical distribution.
Consumer Finance
Loans are generally repayable in monthly instalments and are
made for periods of 180 months or less. Sales finance
contracts may be either open-end (revolving) or closed-end.
An open-end sales finance contract establishes an account
that can be used from time to time for repeated purchases.
A closed-end sales finance contract covers only a single
purchase. At December 31, 1997, 66% of sales finance
receivables in the consumer finance operations were open-
end. Open-end sales finance contracts do not have an
original maturity because the accounts created by these
contracts may be used for repeated transactions. The
minimum monthly payment of open-end sales finance contracts
generally ranges from 1/12 to 1/30 of the highest unpaid
balance of the account. Closed-end sales finance contracts
are repayable in equal monthly instalments and generally
have original maturities of 60 months or less.
In many cases loans are secured by liens on household goods,
other personal property or real estate. Of the total loans
made during 1997, approximately 87% of the amount and 67% of
the number were secured by security agreements or other
forms of security. The decision to record a lien or to
appraise or examine the title to collateral depends upon the
size of loan and the type of collateral. As an alternative
to recording liens on personal property securing certain
loans, Norwest Financial purchases non-filing insurance, the
cost of which is borne by the borrowers. Generally, Norwest
Financial initiates legal proceedings on its loans,
including foreclosure on collateral, only when it appears
that a recovery is likely which will justify the cost of
bringing suit.
Generally, Norwest Financial carries only one loan with a
borrower at any one time. When a borrower wishes to obtain
additional money from Norwest Financial before the loan is
fully repaid, a new loan is made sufficient to pay the
balance on the old loan and supply the new money, provided
the borrower's credit is satisfactory. Of the total amount
of loans made during 1997, 61.7% represented funds lent to
borrowers who requested additional money while still owing
Norwest Financial. In the years 1996 through 1993, this
figure was 64.6%, 64.6%, 63.5% and 64.1%, respectively. In
1997, of the 956,000 loans made by Norwest Financial's
consumer finance operations, 377,000 were to borrowers who
requested additional money while still owing a balance to
Norwest Financial. The average amount of additional money
lent to such borrowers was $2,187; the average amount of the
old balance was $2,154. Norwest Financial's policy is that
loans are not made to present customers to cure a default in
principal or interest.
For consumer finance branch offices, sales finance contracts
are the primary source of new customers for direct loans; of
new loans made in 1997, 64.1% were to current or former sale
finance customers.
<PAGE> 8
Automobile Finance
Loans are generally repayable in monthly instalments and are
made for periods of 60 months or less. Sales finance
contracts are all closed-end. These contracts are repayable
in equal monthly instalments and generally have maturities
of 60 months or less.
In most cases, receivables are secured by automobiles. Of
the total receivable volume in 1997, approximately 97% of
the amount and 93% of the number were secured by security
agreements or other forms of security. Norwest Financial
initiates legal proceedings on its receivables, including
repossessions of collateral, when it appears that a recovery
is likely which will justify the cost of bringing suit.
Credit Cards
Norwest Financial began marketing VISAr and MasterCardr
credit cards to certain of its customers through its United
States consumer finance branch offices in 1987. These
credit cards are issued by Dial Bank, the Company's state
chartered bank subsidiary located in Sioux Falls, South
Dakota. Dial Bank had 246,000 accounts at December 31,
1997; credit card receivables outstanding were $251.4
million.
Dial National Bank is a federally-chartered bank located in
Des Moines, Iowa. The bank issues private label credit
cards and dual-line Co-Branded MasterCardr credit cards for
several national companies. The dual-line credit card
serves as a private label credit card for use at any of the
Co-Branders' retail locations, as well as a traditional
MasterCard credit card for use at locations around the
world. Dial National Bank had 154,000 accounts at December
31, 1997; credit card receivables outstanding were $171.0
million.
Loss Experience
The allowance for losses on consumer receivables is based on
loss experience in relation to consumer receivables
outstanding. All such receivables which appear to be
uncollectible or to require inordinate collection costs are
written off. Receivables are generally written off when
they reach a predetermined number of days past due depending
upon product, terms, and other factors.
<PAGE> 9
Information concerning consumer loss experience and
allowance for credit losses is shown below:
<TABLE>
<CAPTION>
(In Thousands) Years Ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Allowance, beginning
of year $162,983 $152,108 $126,802 $114,876 $106,024
Write-offs:
Loans (144,711) (122,703) (96,278) (77,751) (76,270)
Sales finance (90,515) (61,184) (37,118) (23,920) (21,221)
Credit cards (21,901) (23,903) (11,570) (5,925) (4,056)
Total write-offs (257,127) (207,790) (144,966) (107,596) (101,547)
Recoveries:
Loans 21,257 13,370 12,058 12,257 11,420
Sales finance 8,525 4,233 2,997 2,528 2,224
Credit cards 2,481 1,458 852 470 307
Total recoveries 32,263 19,061 15,907 15,255 13,951
Provision for credit
losses charged to
expense 232,818 195,952 143,467 107,931 96,448
Allowance related to
receivables
acquired,
contributed or
(transferred)-net 120,513 3,652 10,898 (3,664)
Allowance, end of year:
Loans 135,776 87,046 82,443 77,756 73,259
Sales finance 136,004 62,167 54,365 40,696 35,417
Credit cards 19,670 13,770 15,300 8,350 6,200
Total allowance $291,450 $162,983 $152,108 $126,802 $114,876
Ending receivables as
a percent of total
consumer receivables:
Loans 59% 62% 61% 68% 69%
Sales finance 35 31 29 28 27
Credit cards 6 7 10 4 4
100% 100% 100% 100% 100%
Allowance as a percent of
ending receivables 4.38% 2.99% 2.86% 2.92% 2.90%
Write-offs after
recoveries as a
percent of average
consumer receivables 3.87% 3.55% 2.66% 2.24% 2.41%
Consumer receivables
outstanding more
than three payments
contractually
delinquent $127,622 $123,961 $101,693 $77,233 $73,541
</TABLE>
Non-accrual automobile finance receivables were $9,629,000
at December 31, 1997.
<PAGE> 10
Insurance Operations
The credit insurance operations have a close relationship
with Norwest Financial's consumer operations. Generally,
where applicable laws permit, Norwest Financial makes credit
life, credit disability, property, and involuntary
unemployment insurance available to borrowers. If the
customer decides to purchase insurance, an additional charge
is made. Credit life insurance generally provides, at a
minimum, for the repayment of the indebtedness upon the
death of the insured borrower. Credit disability coverage
provides for the monthly payment of the indebtedness while
the borrower is disabled because of accident or illness.
Property insurance provides for the payment of the value or
cost of repairs or replacement of covered property of the
borrower if the property is damaged, destroyed or stolen.
Involuntary unemployment insurance provides for the monthly
payment of the indebtedness while the borrower is
unemployed, if the borrower becomes unemployed due to
layoff, termination, lockout, labor disputes or strike. Non-
filing insurance is an alternative to perfecting a security
interest in property used as collateral. Payment is
provided, up to a specified limit, when there is a loss with
this coverage which resulted from the failure to perfect a
security interest.
The Company's insurance subsidiaries provide, directly or
through reinsurance arrangements, credit life, credit
disability, property, and involuntary unemployment insurance
as part of Norwest Financial's consumer business and the
consumer business of certain affiliates. The Company also
offers property and involuntary unemployment insurance on an
agency basis in certain states. Under the Bank Holding
Company Act of 1956, the insurance underwriting activities
of the Company's insurance subsidiaries (other than the
Company's foreign insurance subsidiary and insurance
subsidiaries that are subsidiaries of the Company's state
chartered bank subsidiary) are limited generally to the
underwriting (directly or through reinsurance arrangements)
of insurance that (1) is directly related to an extension of
credit by Norwest or any of its subsidiaries, and (2) is
limited to assuring the repayment of the outstanding balance
due on the extension of credit in the event of the death,
disability or involuntary unemployment of the borrower. The
Company's casualty insurance subsidiaries are permitted
under this Act to underwrite non-filing insurance policies
issued to Norwest or any of its subsidiaries. In addition,
the Company's foreign insurance subsidiary also reinsures
credit life and disability insurance written by a non-
affiliated company.
The laws of most of the states in which Norwest Financial
operates regulate the sale of insurance to borrowers by
prescribing, among other things, the maximum amount and term
thereof and by fixing the permissible premium rates or
authorizing the state insurance commissioner or other state
official to fix the maximum premium rates on such insurance.
In several states such rates have been reduced in recent
years.
<PAGE> 11
Insurance premiums, claim and underwriting expenses and
income from underwriting for life and disability insurance
underwritten by the Company's insurance subsidiaries are
summarized below:
<TABLE>
<CAPTION>
Years Ended December 31,
(In Thousands) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Premiums earned:
Life $43,844 $43,725 $39,174 $28,414 $26,141
Disability 47,540 48,170 47,732 37,060 34,932
Claim expense:
Life 13,720 13,964 13,528 10,074 10,381
Disability 19,802 15,458 16,715 13,773 14,048
Underwriting expense:
Life 3,092 2,729 2,994 1,853 1,961
Disability 3,589 3,770 4,462 2,998 3,618
Income before income
taxes from underwriting:
Life 27,032 27,032 22,652 16,487 13,799
Disability 24,149 28,942 26,555 20,289 17,266
</TABLE>
Income before income taxes from the underwriting (as
principal), or the sale (as agent), of property insurance,
involuntary unemployment insurance and non-filing insurance
for the years 1997 through 1993 was $43,683,000;
$42,378,000; $34,707,000; $31,838,000; and $24,949,000,
respectively.
<PAGE> 12
COMMERCIAL FINANCE OPERATIONS
At December 31, 1997, commercial finance receivables
accounted for 7% of Norwest Financial's total finance
receivables outstanding. The following table presents
Norwest Financial's commercial finance receivables
outstanding for the five years ended December 31, 1997:
Commercial Finance Receivables Outstanding
(In Thousands)
Commercial Percentage
Finance Increase(Decrease)
December 31, Receivables From Previous Year
1997 $465,601 (6)%
1996 494,104 (3)
1995 507,480 1
1994 500,270 (2)
1993 512,112 (13)
Loss Experience
The allowance for losses on commercial finance receivables
is based on loss experience in relation to commercial
finance receivables outstanding. All such receivables which
appear to be uncollectible or to require inordinate
collection costs are written off. Receivables are generally
written off when they reach a predetermined number of days
past due depending upon product, terms, and other factors.
<PAGE> 13
Information concerning commercial loss experience and
allowance for credit losses is shown below:
<TABLE>
<CAPTION>
Years Ended December 31,
(In Thousands) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Allowance, beginning
of year $6,150 $6,510 $9,150 $10,250 $11,550
Write-offs (4,313) (4,081) (3,967) (3,287) (5,596)
Recoveries 1,454 1,193 1,476 1,248 1,564
Provision for
credit losses
charged (credited)
to expense 3,059 2,528 (149) 939 2,732
Allowance, end
of year $6,350 $6,150 $6,510 $9,150 $10,250
Allowance as a
percent of ending
commercial finance
receivables 1.36% 1.24% 1.28% 1.83% 2.00%
Write-offs after
recoveries as a
percent of average
commercial finance
receivables .61% .59% .50% .43% .73%
</TABLE>
Non-accrual commercial receivables totaled $4,121,000;
$3,189,000; $3,299,000; $2,606,000; and $5,349,000 at
December 31, 1997 through 1993, respectively. During 1997,
the finance charges and interest that would have been
recorded had non-accrual receivables been current in
accordance with their original terms would have been
$391,000. The amount of finance charges and interest
actually recorded on these receivables during 1997 totaled
$299,000.
Commercial receivables outstanding which were more than
three payments contractually delinquent and which were still
accruing interest totaled $771,000; $916,000; $1,025,000;
$1,202,000; and $1,443,000 at December 31, 1997 through
1993, respectively.
Norwest Financial Leasing, Inc.
Norwest Financial Leasing, Inc. ("NFLI") operates under two
separate divisions. Each division provides a different type
of financing and focuses on a different market. Receivables
are generated from business production offices and a sales
force that operates nationwide.
NFLI - Division I is headquartered in Des Moines, Iowa and
also has business production offices in Riverside,
California and Charlotte, North Carolina. Division I
specializes in financing commercial equipment such as office
copiers, telephone systems, small computers, and light
industrial equipment. The cost of this equipment generally
ranges from $2,000 to $50,000. Finance receivables are
generated primarily from equipment distributors ranging from
small independently-owned vendors to large equipment
manufacturers.
<PAGE> 14
Generally, an end-user will enter into a lease or rental
agreement with a vendor. After approving credit, Division I
purchases the contract from the vendor and collects the
lease payments from the end-user. Billing is often done in
the vendor's name, as are any customer service functions
that might become necessary in connection with the lease or
rental agreement (thus providing the vendor with a "private
label" financing service). In some instances, Division I
purchases the equipment and leases it to the end-user, with
billing and other customer contacts being done in the name
of NFLI. Leases and other commercial finance receivables
acquired by Division I generally provide for equal monthly
payments and normally have an initial term of 60 months or
less.
NFLI - Division II is headquartered in St. Louis, Missouri.
This division leases a variety of health care equipment from
blood chemistry analyzers, sterilizers, and fluoroscopes to
ultrasound equipment. Cost of the equipment can range from
$10,000 to above $200,000. Marketing efforts are directed
primarily toward manufacturers and distributors of such
equipment.
Norwest Financial Business Credit, Inc.
Norwest Financial Business Credit, Inc. provides custom-
designed financing programs to target the financing and
marketing needs of retailers of consumer goods and services.
These relationships are structured as a loan to the
retailer, using accounts receivable generated as a result of
retail sales as security. Consumer credit approvals,
billing, payment processing, and collections of the
receivables securing the loan are conducted largely in the
retailers' names to provide a private label service.
INFORMATION SERVICES OPERATIONS
Norwest Financial Information Services Group, Inc. ("NFISG")
has developed and installed an on-line real-time information
processing and communications system called SWIFT, which
connects, over leased telecommunication facilities,
equipment located in branch offices to computer centers at
the Company's principal executive offices to process loans
and payments, write checks, and perform bookkeeping
functions. The system provides information services to
consumer branch offices of Norwest Financial. In addition,
as of December 31, 1997, NFISG had contracts to supply
information services to 25 other finance companies. On that
date, approximately 3,000 branch offices were being served
and 6.3 million accounts were being maintained on the
system.
NFISG developed an enhancement to the system called SUPREME
which replaced the paper ledger card with video display
units. SUPREME provides greater efficiencies and enhanced
customer service by adding a number of new capabilities to
the existing system. For example, delinquency lists, daily
collection work lists, solicitation lists, automated
advertising, complete application processing including
retrieval of credit bureau reports, and company-wide access
of account records are a few of the automated features
provided by SUPREME. Twenty-two subscribing companies were
utilizing SUPREME at December 31, 1997. Norwest Financial
has installed SUPREME in all of its consumer finance branch
offices in the United States and Canada. Overall, 6.1
million accounts in over 2,900 locations were being
maintained on SUPREME at December 31, 1997.
NFISG is developing a new system called SAPPHIRE which will
replace all of NFISG's current system product offerings.
The new system design uses leading edge technology to
incorporate state-of-the-art support for virtually every
facet of the consumer financial services industry. Norwest
Financial plans to install SAPPHIRE in its branches
beginning in the first quarter of 1999. The system will be
made available to other companies later that year.
In March 1994, the Company acquired Allied Business Systems,
Inc., a computer software company headquartered in Macon,
Georgia. Since 1979, Allied Business Systems has been
providing computer systems and services to the consumer
finance industry and currently serves over 1,300 locations
for over 320 companies.
NFISG continues to offer such services for sale, although
there can be no assurance of future sales, or that existing
contracts will be renewed upon expiration.
<PAGE> 15
ASSETS UNDER MANAGEMENT
Island Finance
Island Finance, a group of eight consumer finance companies
headquartered in San Juan, Puerto Rico, was acquired by
Norwest in May 1995. Norwest Financial manages Island
Finance. Island Finance provides direct loans to
individuals through 136 consumer finance offices located in
Puerto Rico, Panama, the Netherlands Antilles, the U.S.
Virgin Islands, Aruba, and Costa Rica. Receivables
outstanding on December 31, 1997, totaled $1.3 billion.
Island Finance's financial results and receivables are not
included in the Company's statements of consolidated
earnings or consolidated balance sheets, however, Norwest
Financial provides a portion of the funding for Island
Finance. At December 31, 1997, Norwest Financial had term
loans of $528 million with Island Finance Puerto Rico, Inc.
("IFPR"), one of the companies in the Island Finance group.
The loans have a weighted average interest rate of 8.81% and
mature in 2000 and 2002. IFPR is also an issuer of
commercial paper in the United States. At December 31,
1997, IFPR's commercial paper outstanding totaled $703.3
million. Other entities in the Island Finance group obtain
funding by borrowing from commercial banks and other
affiliates.
The number of consumer finance offices and percent of
consumer finance receivables are shown below:
<TABLE>
<CAPTION>
Percent of
Consumer
Branch Finance
Location Offices Receivables
<S> <C> <C>
Aruba 3 2.0%
Costa Rica 3 .3
Netherlands Antilles 8 4.3
Panama 16 2.8
Puerto Rico 98 85.9
U.S. Virgin Islands 8 4.7
136 100.0%
</TABLE>
In conjunction with the Island Finance acquisition, the
Company also purchased seven offices in Puerto Rico which
are engaged in purchasing sales finance contracts.
Reliable Financial Services, Inc.
Effective February 21, 1997, Norwest acquired Reliable
Financial Services, Inc. ("Reliable"). Norwest made a
capital contribution, without consideration, of all the
issued and outstanding shares of capital stock of Reliable
to the Parent. This capital contribution was accounted for
as a merger of interests under common control. Reliable is
engaged in automobile finance from its office in San Juan,
Puerto Rico. Reliable's financial results and receivables
are not included in the Company's consolidated earnings or
consolidated balance sheets. Reliable is managed by Island
Finance and had receivables outstanding of $212 million at
December 31, 1997.
<PAGE> 16
SOURCES OF FUNDS
Norwest Financial funds its operations through payments of
principal and interest from finance receivables, capital
funds, the sale of debt securities, and borrowings from
banks and affiliates. Fixed rate borrowings with original
maturities of more than one year comprise 70% of the
Company's total indebtedness at December 31, 1997. The
remaining 30% includes commercial paper with maturities of
nine months or less (22%) and short-term debt to affiliates
and other short-term debt (8%).
The effective interest rate on commercial paper debt is
higher than the stated rates due to commitment fees paid in
connection with Norwest Financial's bank credit agreements
(lines of credit and revolving credit agreements). These
agreements provide an alternative source of liquidity to
support the Company's commercial paper borrowings.
The weighted average annual interest cost of the total
average daily borrowings outstanding in each of the
respective years 1997 through 1993 without commitment fees
relating to bank credit agreements were 6.37%, 6.44%, 6.74%,
6.22%, and 6.41%, respectively. The corresponding figures
including commitment fees were 6.39%, 6.46%, 6.76%, 6.25%,
and 6.45%, respectively. Norwest Financial has obtained and
continues to obtain, at prevailing rates, funds sufficient
to conduct its business.
<TABLE>
<CAPTION>
Years Ended December 31,
(Dollars in Thousands) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Bank credit
agreements
at December 31 $1,322,413 $1,327,680 $1,456,633 $1,147,700 $1,007,690
Number of banks
participating
in the credit
agreements 33 33 38 34 35
Daily average outstanding:
Commercial paper $1,817,534 $1,713,937 $1,523,898 $1,180,649 $1,065,491
Less excess funds
investments 33,833 18,884 41,331 26,097 15,436
Net average commercial
paper outstanding $1,783,701 $1,695,053 $1,482,567 $1,154,552 $1,050,055
Ratio of bank credit
agreements to above 74% 78% 98% 99% 96%
</TABLE>
See note 6 to the consolidated financial statements for a
listing of the amounts and maturities of the Company's
outstanding long-term debt at December 31, 1997 and 1996.
<PAGE> 17
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to
fixed charges of Norwest Financial for the periods
indicated:
Years Ended December 31,
1997 1996 1995 1994 1993
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).
COMPETITION
The business in which Norwest Financial is engaged is highly
competitive. In addition to competition from other
consumer, automobile, and commercial finance companies,
competition comes from sales finance companies, commercial
banks, savings and loan associations, credit card companies,
credit unions and retail establishments offering revolving
credit plans. The principal method of competition is
service to customers, although interest rates and other
financing charges are adjusted from time to time to reflect
market conditions. Generally, Norwest Financial's interest
rates or other financing charges are comparable to those of
other companies engaged in consumer finance, commercial
finance and lease financing business, sales finance
companies, credit card companies and retail establishments
offering revolving credit plans. They are usually higher
than those of commercial banks, savings and loan
associations and credit unions. Norwest Financial is among
the largest finance companies in the United States, but is
substantially smaller than the largest concerns. Trans
Canada Credit Corporation, one of the Company's Canadian
subsidiaries, has been ranked among the largest finance
companies in Canada.
EMPLOYEE RELATIONS
As of December 31, 1997, the Company and its subsidiaries
employed approximately 8,200 persons. Management believes
its employee relations are excellent.
Item 2. Properties.
The Company owns an eleven-story building in Des Moines,
Iowa, where its principal executive offices are maintained.
One of the Company's life insurance subsidiaries owns a
three-story building in Des Moines which is used by the
Company for administrative purposes. Dial Bank owns a one-
story building in Sioux Falls, South Dakota, where its
office is maintained. All of Norwest Financial's other
business offices (consisting of consumer finance and
automobile finance branch offices, commercial finance
executive and business production offices, and other
administrative offices) are located in rented office space.
Norwest Financial believes its facilities are suitable and
adequate for its business needs. These facilities are
generally fully occupied and utilized, although in some
instances, office space has been reserved for anticipated
business expansion; otherwise, additional office space or
facilities are leased only when they are needed.
The equipment used in the information processing system
(located at branch offices, relay communication sites, and
home office facilities) is leased or owned by Norwest
Financial. Telecommunication lines used in the information
processing system are leased on a monthly basis.
<PAGE> 18
Item 3. Legal Proceedings.
Norwest Financial is a defendant in various matters of
litigation generally incidental its business. Although it
is difficult to predict the ultimate outcome of these cases,
management believes, based on discussions with counsel, that
any ultimate liability will not materially affect the
financial position and results of operations of the Company
and its subsidiaries.
Item 4. Submission of Matters to a Vote of Security
Holders.
Omitted in accordance with General Instructions I(2) (c).
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
All of the outstanding common stock (1,000 shares) of the
Company is and was, at all times during 1997 and 1996, owned
beneficially and of record by a single stockholder, the
Parent.
The aggregate amount of dividends paid by the Company on its
common stock each quarter during 1997 and 1996 was as
follows:
(In Thousands) 1997 1996
First quarter $ 1,729 $75,000
Second quarter 75,000
Third quarter 50,000
Fourth quarter 60,000 50,000
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 $714
million of consolidated stockholder's equity was
unrestricted at December 31, 1997.
<TABLE>
<CAPTION>
Item 6. Selected Financial Data.
Years Ended December 31,
(In Thousands) 1997 1996 1995 1994
1993
<S> <C> <C> <C> <C> <C>
Total income $1,642,905 $1,546,557 $1,419,358 $1,175,285 $1,079,719
Net earnings 269,450 276,331 267,941 223,340 203,297
</TABLE>
<TABLE>
<CAPTION>
December 31,
(In Thousands) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Total assets $9,321,924 $7,760,845 $7,539,259 $6,124,742 $5,261,599
Long-term debt 5,221,413 4,132,894 4,081,531 3,092,623 2,741,692
</TABLE>
<PAGE> 19
NORWEST FINANCIAL, INC.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Effective August 31, 1997, Norwest, through its wholly-owned
subsidiary, 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 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.
Norwest Financial's total income (revenue) increased 6% in
1997 and 9% in 1996 ($1,642.9 million in 1997 compared with
$1,546.6 million in 1996 and $1,419.4 million in 1995).
Total income increased 1% in 1997 excluding Fidelity.
Income from finance charges and interest increased 6% in
1997 and 8% in 1996 ($1,282.6 million in 1997 compared with
$1,208.8 million in 1996 and $1,118.3 million in 1995).
Income from finance charges and interest remained unchanged
in 1997 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.
Increase (decrease) in average
finance receivables outstanding: 1997 1996
Consumer 9% 10%
Commercial (5) (1)
Total 8 9
Rate of charge on finance receivables: 1997 1996 1995
Consumer 20.94% 21.22% 21.56%
Commercial 13.95 14.97 14.69
Total 20.42 20.69 20.92
The increases in income from finance charges and interest in
both 1997 and 1996 were due primarily to growth in average
consumer receivables outstanding. This was offset in part
by the decline in the rate of charge. Growth in average
consumer receivables in 1997 and 1996 was due to regular
business activity combined with the increase due to Fidelity
in 1997. Excluding Fidelity, average consumer receivables
increased 3% in 1997. Changes in the earned rates of charge
were due to changes in prevailing market rates combined with
a change in the portfolio mix.
<PAGE> 20
Insurance premiums and commissions decreased 1% in 1997 and
increased 10% in 1996 ($138.4 million in 1997 compared with
$140.4 million in 1996 and $128.1 million in 1995). Changes
in insurance premiums and commissions generally correspond
to changes in average consumer loans outstanding not secured
by real estate and average credit card receivables
outstanding. These receivables increased 2% in 1997 and 9%
in 1996. Insurance losses and loss expenses increased 11%
in 1997 and decreased 9% in 1996 ($39.9 million in 1997
compared to $35.9 million in 1996 and $39.2 million in
1995.) The 1996 decrease was primarily due to lower
insurance losses incurred on Canadian business.
Other income increased 12% in 1997 and 14% in 1996 ($222.0
million in 1997 compared with $197.3 million in 1996 and
$173.0 million in 1995). The increases were due primarily
to increases in income from affiliates, investment income
and net gains on the sale of marketable securities. Income
from affiliates was $58.2 million in 1997, $54.4 million in
1996 and $43.3 million in 1995. The increase in income from
affiliates corresponds with the increase in notes receivable
- - affiliates combined with increased management fees charged
to affiliates. Investment income was $65.5 million in 1997,
$52.8 million in 1996 and $49.6 million in 1995. The
increases were due primarily to increases in average
investments. Net gains on the sale of marketable securities
were $16.9 million in 1997, $9.3 million in 1996 and $6.8
million in 1995.
Operating expenses increased 7% in 1997 and 11% in 1996
($551.8 million in 1997 compared with $514.9 million in 1996
and $461.9 million in 1995). A breakdown of operating
expenses between salaries and benefits and all other
operating expenses is shown below:
1997 1996 1995
Salaries and benefits $323,361 $307,234 $277,985
All other operating expenses 228,468 207,656 183,925
Total $551,829 $514,890 $461,910
The increase in operating expenses was due primarily to
increases in employee compensation and benefits and other
costs resulting from business expansion including the
addition of Fidelity. Excluding Fidelity, operating
expenses increased 3% in 1997. At December 31, 1997,
Norwest Financial was operating 1,236 consumer finance and
automobile finance branch offices compared with 1,073 and
1,029 at December 31, 1996 and 1995, respectively.
Interest and debt expense increased 8% in 1997 and 4% in
1996 ($401.7 million in 1997 compared with $372.9 million in
1996 and $359.1 million in 1995). 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 borrowings increased
primarily due to the addition of Fidelity.
Increase in average debt outstanding: 1997 1996
Short-term 10% 12%
Long-term 10 8
Total 10 9
Cost of funds: 1997 1996 1995
Short-term 5.30% 5.36% 6.12%
Long-term 6.83 6.90 7.00
Total 6.37 6.44 6.74
<PAGE> 21
Changes in average debt outstanding result primarily from
the change in average finance receivables outstanding
combined with the change in notes receivable - affiliates.
Average finance receivables and average notes receivable -
affiliates combined increased 9% in 1997 and 10% in 1996.
Provision for credit losses increased 19% in 1997 and 38% in
1996 ($235.9 million in 1997 compared with $198.5 million in
1996 and $143.3 million in 1995). Increases in average
finance receivables outstanding contributed to the increase
in the provision for credit losses. Average finance
receivables increased 8% in 1997 and 9% in 1996. During the
past two years Norwest Financial, along with the consumer
finance industry, has experienced an increase in net write-
offs. Net write-offs as a percentage of average net
receivables outstanding were 3.63% in 1997 compared with
3.30% in 1996 and 2.46% in 1995. Excluding Fidelity, net
write-offs as a percentage of net receivables were 3.30% in
1997. Management believes the allowance for credit losses
at December 31, 1997, is adequate to absorb expected losses
in the finance receivables portfolio.
Income taxes decreased 3% in 1997 and remained unchanged in
1996. Earnings before income taxes decreased 3% in 1997 and
increased 2% in 1996. The effective tax rates were 34.8% in
1997, 34.9% in 1996, and 35.6% in 1995.
Borrowings constitute the largest part of Norwest
Financial's capitalization. At December 31, 1997, 85% of
the Company's capital had been obtained from borrowings and
15% from stockholder's equity. Seventy percent of Norwest
Financial's borrowings was in fixed-rate term borrowings
with original maturities of more than one year. The
remaining 30% includes commercial paper with maturities of
nine months or less (22%) and short-term debt to affiliates
and other short-term debt (8%). At December 31, 1996, short-
term borrowings comprised 34% of total borrowings. This
consisted of commercial paper with maturities of nine months
or less (28%) and short-term debt to affiliates and other
short-term debt (6%). Short-term borrowings as a percent of
total borrowings averaged 30% in 1997 and 1996.
The Company maintains bank lines of credit and revolving
credit agreements to provide an alternative source of
liquidity to support the Company's commercial paper
borrowings. At December 31, 1997, lines of credit and
revolving credit agreements totaling $1,322 million were
being maintained at 33 unaffiliated banks; the entire amount
was available on that date.
The Company and a Canadian subsidiary obtain long-term debt
capital primarily from (1) the issuance of debt securities
to the public through underwriters on a firm-commitments
basis, (2) the issuance of debt securities to institutional
investors, and (3) term borrowings from commercial banks.
The Company and a Canadian subsidiary also obtain long-term
debt from the issuance of medium-term notes (which have
maturities ranging from nine months to 30 years) through
underwriters (acting as agent or principal).
The Company 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 on Norwest Financial's finance receivables.
Management has initiated a company-wide program to prepare
for year 2000 compliance. The year 2000 issue relates to
systems designed to use two digits rather than four to
define the applicable year. The Company has utilized
internal staff to perform a comprehensive analysis of year
2000 compliance on internal systems as well as external
systems on which the Company is dependent. Based on this
analysis, management anticipates the total costs of year 2000
compliance is expected to be approximately $5 million which will
be incurred throughout 1997 to 1999. Management believes that
the year 2000 issue will not pose a significant operational
matter for the Company and its subsidiaries.
<PAGE> 22
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income", ("FAS 130") and Statement
of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information"
("FAS 131"). FAS 130 requires disclosures of the components
of comprehensive income and accumulated balance of other
comprehensive income within total stockholders' equity. FAS
131 requires disclosure of selected information about
operating segments including total income, net earnings and
asset data. Operating segments, as defined in FAS 131,
would include those components for which financial
information is available and evaluated regularly by the
chief operating decision maker in assessing performance and
making resource allocation determinations for operating
components such as those which exceed 10 percent or more of
combined total income, net earnings or assets. The Company
will be required to adopt the provisions of FAS 130 and 131
in 1998; these standards are not expected to have a material
impact on the Company's financial statements.
<PAGE> 23
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Interest Sensitivity Risk
Interest sensitivity risk is the risk that future changes in
interest rates will reduce net interest income or the market
value of the balance sheet. Norwest Financial is subject to
the risk of fluctuating interest rates in the normal course
of business primarily in finance receivables, securities
available-for-sale, and both short-term and long-term debt.
Each these balance sheet categories will be discussed
individually.
Finance Receivables:
The interest rates on receivables outstanding at December
31, 1997, are consistent with the current rates at which
similar loans would be made to borrowers with similar credit
ratings and for the same remaining maturities. As a result,
the carrying value is a reasonable estimate of fair value.
Expected maturities presented below differ from contractual
maturities since it is the Company's experience that a
substantial portion of the consumer receivable portfolio is
renewed or repaid before contractual maturity dates.
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 Thereafter Total Fair
Value
(In Millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Finance
receivables $3,610 $1,143 $791 $553 $267 $750 $7,114 $7,114
Average
earned rate 19.51% 21.48% 21.22% 22.10% 22.34% 22.51% 20.64%
</TABLE>
Securities Available-for-Sale:
Norwest Financial does not use derivative financial
instruments in its investment portfolio. Norwest
Financial's investment policy only allows for purchases in
investment grade securities. In addition, the investment
policy also limits the amount of credit exposure to any one
issue, issuer and type of investment. Norwest Financial
does not expect any material loss with respect to its
investment portfolio. Maturities for investments available-
for-sale shown below are at amortized cost and are based on
contractual maturities for all debt securities except for
collateralized mortgage obligations which are based on
expected maturities.
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 Thereafter Total Fair
Value
(In Millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
Federal Agencies $33 $10 $12 $12 $8 $89 $164 $169
Average Yield 6.59% 6.99% 6.86% 7.24% 6.82% 7.34% 7.06%
States and Political
Subdivisions $10 $3 $25 $29 $15 $136 $218 $225
Average Yield 5.05% 6.40% 4.81% 4.68% 4.91% 5.32% 4.81%
Collateralized Mortgage
Obligations $49 $47 $46 $44 $42 $55 $283 $286
Average Yield 7.37% 7.01% 7.01% 7.01% 7.01% 7.19% 7.10%
Equity Securities $93 $93 $96
Average Yield 3.71% 3.71%
All Other
Securities $46 $35 $48 $33 $40 $79 $281 $288
Average Yield 7.11% 7.60% 7.40% 7.11% 6.76% 7.50% 7.27%
</TABLE>
<PAGE> 24
Short-Term and Long-Term Debt:
The table below provides information about Norwest
Financial's debt instruments. The table shows principal
cash flows and related weighted average interest rates by
expected maturity dates. The information is presented in
U.S. dollars which is the Company's reporting currency. The
instruments' actual cash flows are denominated in both U.S.
dollars and Canadian Dollars.
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 Thereafter Total Fair
Value
(In Millions
of U.S. Dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-Term Debt - U.S
Debt Outstanding $1,957 $1,957 $1,957
Average Interest
Rate 5.75% 5.75%
Short-Term Debt - Canada:
Debt Outstanding $270 $270 $270
Average Interest
Rate 4.05% 4.05%
Long-Term Debt - U.S.:
Debt Outstanding $414 $835 $754 $404 $654 $1,853 $4,914 $4,992
Average Interest
Rate 6.57% 6.33% 6.75% 6.68% 6.93% 6.70% 6.66%
Long-Term Debt- Canada:
Debt Outstanding $73 $80 $84 $35 $35 $307 $310
Average Interest
Rate 6.36% 7.21% 5.77% 6.05% 5.50% 6.29%
</TABLE>
Foreign Currency Exchange Rate Risk
The amount invested in subsidiaries and translated into U.S.
dollars using the year-end exchange rate was $117 million at
December 31, 1997. All investments in subsidiaries were
denominated in Canadian dollars. The potential loss in fair
value resulting from a hypothetical 10% adverse change in
quoted foreign currency exchange rates amounts to $12
million. Actual results may differ. A 10% change in the
foreign exchange rate has not occurred in the last three
years. Canadian operations are funded with borrowings in
Canadian dollars. In addition, a Canadian subsidiary has
loans totaling $73 million (U.S. dollars) to Norwest
Financial.
<PAGE> 25
Item 8. Financial Statements and Supplementary Data.
Deloitte & Touche LLP
(logo) Two Prudential Plaza Telephone: (312)946-3000
180 North Stetson Avenue Facsimile: (312)946-2600
Chicago, Illinois 60601-6779
INDEPENDENT AUDITORS' REPORT
Norwest Financial, Inc.:
We have audited the accompanying consolidated balance sheets
of Norwest Financial, Inc. (a wholly-owned subsidiary of
Norwest Financial Services, Inc. which is a wholly-owned
subsidiary of Norwest Corporation) and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated
statements of earnings and retained earnings and cash flows
for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express
an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial
position of Norwest Financial, Inc. and subsidiaries as of
December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years
in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
\s\ Deloitte & Touche LLP
January 14, 1998
Deloitte Touche
Tohmatsu
International
<PAGE> 26
NORWEST FINANCIAL, INC.
Consolidated Balance Sheets
(Thousands of Dollars)
<TABLE>
<CAPTION>
December 31,
Assets 1997 1996
<S> <C> <C>
Cash and cash equivalents $94,600 $141,692
Securities available-for-sale 1,063,600 816,980
Finance receivables:
Consumer:
Loans 3,893,550 3,393,401
Sales finance contracts 2,332,535 1,683,655
Credit cards 422,435 378,275
Commercial 465,601 494,104
Total finance receivables 7,114,121 5,949,435
Less allowance for credit losses 297,800 169,133
Finance receivables - net 6,816,321 5,780,302
Notes receivable - affiliates 646,832 574,344
Property and equipment (at cost, less
accumulated depreciation of $107,435
for 1997 and $89,373 for 1996) 102,537 75,068
Deferred income taxes 64,420 34,456
Other assets 533,614 338,003
Total assets $9,321,924 $7,760,845
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 27
NORWEST FINANCIAL, INC.
Consolidated Balance Sheets
(Thousands of Dollars)
<TABLE>
<CAPTION>
December 31,
Liabilities and
Stockholder's Equity 1997 1996
<S> <C> <C>
Loans payable - short-term:
Commercial paper $1,664,796 $1,732,095
Affiliates 392,165 173,006
Other 170,000 195,000
Unearned insurance premiums and commissions 143,478 136,564
Insurance claims and policy reserves 30,566 35,893
Accrued interest payable 93,344 75,765
Other payables to affiliates 13,815 5,565
Other liabilities 228,557 216,031
Long-term debt 5,221,413 4,132,894
Total liabilities 7,958,134 6,702,813
Commitments and contingencies
Stockholder's equity:
Common stock without par value
(authorized 1,000 shares,
issued 1,000 shares) 3,855 3,855
Additional paid in capital 185,410 90,766
Retained earnings 1,167,418 959,697
Foreign currency translation adjustment (8,757) (5,991)
Net unrealized holding gain
on securities available-for-sale,
net of deferred income taxes 15,864 9,705
Total stockholder's equity 1,363,790 1,058,032
Total liabilities and
stockholder's equity $9,321,924 $7,760,845
See accompanying notes to consolidated financial statements.
<PAGE> 28
NORWEST FINANCIAL, INC.
Statements of Consolidated Earnings and Retained Earnings
(Thousands of Dollars)
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Income:
Finance charges and interest $1,282,576 $1,208,794 $1,118,265
Insurance premiums
and commissions 138,351 140,418 128,093
Other income 221,978 197,345 173,000
Total income 1,642,905 1,546,557 1,419,358
Expenses:
Operating expenses 551,829 514,890 461,910
Interest and debt expense 401,736 372,859 359,079
Provision for credit losses 235,877 198,480 143,318
Insurance losses and loss expenses 39,931 35,901 39,237
Total expenses 1,229,373 1,122,130 1,003,544
Earnings before income taxes 413,532 424,427 415,814
Income taxes 144,082 148,096 147,873
Net earnings 269,450 276,331 267,941
Retained earnings - January 1 959,697 933,366 764,295
1,229,147 1,209,697 1,032,236
Dividends (61,729) (250,000) (145,000)
Contributed Subsidiaries 46,130
Retained earnings - December 31 $1,167,418 $ 959,697 $ 933,366
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 29
NORWEST FINANCIAL, INC.
Statements of Consolidated Cash
Flows
(Thousands of Dollars)
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $269,450 $276,331 $267,941
Adjustments to reconcile net earnings to
net cash flows from operating activities,
net of effect of contributed subsidiaries:
Provision for credit losses 235,877 198,480 143,318
Depreciation and amortization 34,906 27,613 25,404
Deferred income taxes 25,104 8,632 10,882
Other receivables from affiliate 31,643 (31,643)
Other assets (41,308) 30,925 (51,263)
Unearned insurance premiums
and commissions 6,076 (3,456) 9,655
Insurance claims and policy reserves (18,689) 1,210 1,479
Accrued interest payable 15,578 (1,151) 22,380
Other payables to affiliates 8,250 5,565 (7,170)
Other liabilities 3,604 6,002 (3,946)
Net cash flows from
operating activities 538,848 581,794 387,037
Cash flows used for investing activities:
Finance receivables:
Principal collected 5,665,098 5,587,314 4,897,983
Receivables originated
or purchased (5,955,306) (5,889,870) (5,728,651) (5,728,651)
Proceeds from sales of securities 136,041 145,791 99,959
Proceeds from maturities of securities 82,523 65,296 60,216
Purchase of securities (419,456) (279,090) (269,315)
Net additions to property and equipment(39,240) (25,626) (18,013)
Net increase in notes receivable - affiliates,
net of effect of contributed
subsidiaries (1,172,888) (22,339) (356,325)
Cash and cash equivalents of contributed
subsidiaries received 3,258 2,477
Other (82,507) (37,763) (7,689)
Net cash flows used for
investing activities (1,782,477) (456,287) (1,319,358)
Cash flows from financing activities:
Net increase in loans payable
- short-term 126,860 141,618 171,493
Proceeds from long-term debt
- senior 1,805,279 525,000 1,229,411
Repayments of long-term debt:
Senior (735,873) (308,424) (233,438)
Subordinated (50,000) (165,000) (80,650)
Additional paid in capital 112,000
Dividends paid (61,729) (250,000) (145,000)
Net cash flows from (used for)
financing activities 1,196,537 (56,806) 941,816
Net (decrease) increase in cash
and cash equivalents (47,092) 68,701 9,495
Cash and cash equivalents
beginning of year 141,692 72,991 63,496
Cash and cash equivalents end of year $ 94,600 $ 141,692 $ 72,991
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 30
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements
1. Significant Accounting Policies.
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").
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 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 and resulted in a reduction in
additional paid in capital of approximately $17.4 million.
Effective January 1, 1995, the Parent made a capital
contribution, without consideration, to the Company of the
issued and outstanding shares of capital stock of Community
Credit Co. and Dial National Bank (the "Contributed
Subsidiaries"). These capital contributions to the Company
have been accounted for as a merger of interests under common
control.
Securities Available-for-Sale. Debt and equity securities
are classified as available-for-sale. Debt and equity
securities classified as available-for-sale are reported at
fair value with net unrealized gains and losses, net of
deferred income taxes, excluded from earnings and recorded
as a separate component of stockholder's equity until
realized. If a decline in the security's fair value is
deemed to be other than temporary, the amount of the write-
down is recognized as a reduction in earnings.
Finance Charges and Interest:
Consumer. Finance charges and interest are earned
primarily using the interest method. No income is accrued
on automobile finance receivables which are more than
three payments contractually delinquent.
Commercial:
Accounts Receivable Financing. Dealer discounts are
deferred at the time receivables are recorded and taken
into income as payments are received. Finance charges
are recognized on the interest method as accounts are
billed. When a loan is delinquent and in management's
opinion the collectibility of interest is doubtful,
interest income is no longer accrued for financial
purposes.
Leasing and Other. Finance charges and interest are
earned using the interest method. No income is accrued
on receivables which are more than three payments
contractually delinquent.
Loan Origination Fees and Costs. Fees received and certain
direct costs incurred for the origination of receivables are
deferred and amortized to interest income over the
contractual lives of the receivables using the interest
method. Unamortized amounts are recognized at the time
receivables are paid in full. Material discounts and
premiums on purchased receivables are recognized over the
contractual life of the purchased receivable using a method
that approximates the interest method.
<PAGE> 31
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements, Continued
1. Significant Accounting Policies, Continued.
Allowance for Credit Losses. The allowance for credit losses
is based on loss experience in relation to finance
receivables outstanding and is established through a
provision for credit losses charged to expense. The
allowance is an amount that management believes will be
adequate to absorb possible losses on existing receivables
that may become uncollectible based on evaluations of
collectibility of receivables and prior credit loss
experience.
Finance receivables are generally written off when deemed
uncollectible or when they reach a predetermined number of
days past due depending upon product, terms and other
factors.
Derivative Instruments. The Company does not use derivative
instruments as a means of asset and liability management.
Property and Equipment. Depreciation is provided for
property and equipment on a straight-line basis over their
estimated useful lives, which are: 19 to 39 years for
buildings, 5 to 39 years for building equipment and
improvements, and 3 to 8 years for furniture, fixtures and
equipment. Generally, leasehold improvements are amortized
over five years. Maintenance and repairs of building and
office equipment (not significant in the aggregate) are
charged to expense. At the time assets are disposed of or
are retired, the related asset and accumulated depreciation
or amortization are removed from the respective accounts.
Gains and losses on dispositions are included in earnings.
Deferred Income Taxes. Deferred income taxes reflect the
impact of temporary differences between the amounts of
assets and liabilities recorded for financial reporting from
the basis used for income tax purposes (note 11).
Retirement Plans. Retirement plans cover substantially all
employees who meet certain age and service requirements.
Norwest Financial's funding policy is to contribute no more
than the maximum amount that can be deducted for federal
income tax purposes (note 12).
Insurance Income and Expense. Insurance premiums are
recognized as income over the terms of the policies.
Premiums for credit life insurance are recognized as revenue
using a method that approximates the interest method.
Premiums for credit disability insurance and involuntary
unemployment insurance are recognized as revenue in
relationship to anticipated claims. Premiums and
commissions from property insurance and non-filing insurance
are recognized as revenue on a pro-rata basis. Policy
acquisition expenses (principally ceding commissions) are
deferred and charged to expense over the terms of the
related policies in proportion to premium income
recognition.
Foreign Currency Translation. Assets and liabilities of the
Canadian operations are translated at the exchange rate as
of the balance sheet date. Canadian operating results are
translated at the average exchange rates for the period
covered by the income statement. The resulting translation
adjustments are recorded as a separate component of
stockholder's equity.
Use of Estimates. The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassifications. Certain amounts in the 1996 and 1995
financial statements have been reclassified to conform to
the presentation used in the 1997 financial statements.
<PAGE> 32
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements, Continued
1. Significant Accounting Policies, Continued.
New Standards. In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income", ("FAS
130") and Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and
Related Information"("FAS 131"). FAS 130 requires
disclosures of the components of comprehensive income and
accumulated balance of other comprehensive income within
total stockholders' equity. FAS 131 requires disclosure of
selected information about operating segments including
total income, net earnings and asset data. Operating
segments, as defined in FAS 131, would include those
components for which financial information is available and
evaluated regularly by the chief operating decision maker in
assessing performance and making resource allocation
determinations for operating components such as those which
exceed 10 percent or more of combined total income, net
earnings or assets. The Company will be required to adopt
the provisions of FAS 130 and 131 in 1998; these standards
are not expected to have a material impact on the Company's
financial statements.
<PAGE> 33
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements, Continued
2. Securities Available-for-Sale.
The amortized cost and fair value of securities available-
for-sale were:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
Amortized Fair Amortized Fair
(In Thousands) Cost Value Cost Value
<S> <C> <C> <C> <C>
U.S. Treasury and
federal agencies $ 164,239 $ 168,601 $397,754 $401,343
States and political
subdivisions 218,115 225,040 84,926 85,717
Other (corporate bonds, stocks,
and collateralized mortgage
obligations) 657,047 669,959 319,531 329,920
Total $1,039,401 $1,063,600 $802,211 $816,980
</TABLE>
The gross unrealized gains and losses of securities
available-for-sale were:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
Gross Unrealized Gross Unrealized
(In Thousands) Gains Losses Gains Losses
<S> <C> <C> <C> <C>
U.S. Treasury and
federal agencies $4,563 $201 $5,276 $1,687
States and political
subdivisions 7,028 103 864 73
Other (corporate bonds, stocks,
and collateralized mortgage
obligations) 16,439 3,527 13,218 2,829
Total $28,030 $3,831 $19,358 $4,589
</TABLE>
The amortized cost and fair values of securities available-
for-sale by maturity were:
<TABLE>
<CAPTION>
December 31, 1997
Amortized
Fair
(In Thousands) Cost
Value
<S> <C> <C>
In one year or less $ 138,273 $ 139,334
After one year through five years 449,825 457,661
After five years through fifteen years 230,309 236,539
After fifteen years 220,994 230,066
Total $1,039,401 $1,063,600
</TABLE>
Norwest Financial computes realized gains and losses using
the specific identification method. Total gross realized
gains and losses from the sale of marketable securities were
$18,394,000 and $1,521,000, respectively, in 1997;
$10,057,000 and $781,000, respectively, in 1996; and
$8,057,000 and $1,260,000, respectively in 1995. The
carrying amounts of securities on deposit under statutory or
other requirements at December 31, 1997 and 1996, were
$11,672,000 and $9,654,000 respectively.
Interest and dividends from securities available-for-sale
and cash equivalents were $65,547,000; $52,791,000; and
$49,613,000 for the years ended December 31, 1997, 1996, and
1995, respectively.
<PAGE> 34
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements, Continued
3. Finance Receivables.
Loans are generally repayable in monthly instalments over a
period of 180 months or less. Sales finance contracts can
be either open-end (revolving) or closed-end. Open-end
sales finance contracts do not have an original maturity
because the accounts created by these contracts can be used
for repeated transactions. The minimum monthly payment of
open-end sales finance contracts generally ranges from 1/12
to 1/30 of the highest unpaid balance of the account.
Closed-end sales finance contracts purchased are repayable
in equal monthly instalments and generally have original
maturities of 60 months or less.
The amounts of cash payments applied to consumer receivables
during the years ended December 31, 1997, 1996, and 1995
approximated $5,342,833,000, $4,510,330,000 and
$4,130,253,000, respectively. These amounts exceeded the
amount contractually due because a substantial portion of
such receivables are renewed, converted, or paid in full
prior to maturity. Unearned insurance premiums and
insurance claims and policy reserves which pertain to
Norwest Financial's consumer receivables were approximately
$152,584,000 and $146,313,000 at December 31, 1997 and 1996,
respectively.
At December 31, 1997, contractual maturities of commercial
receivables were as follows: $213,040,000 were due in one
year or less; $233,940,000 were due after one year through
five years; and $18,621,000 were due after five years.
Substantially all commercial receivables have fixed interest
rates. Contractual maturities are not presented for the
consumer receivables as it is the Company's experience that
a substantial portion of the consumer receivable portfolio
is renewed or repaid before contractual maturity dates.
Consumer receivables include Canadian receivables of
$617,828,000 and $545,658,000 at December 31, 1997 and 1996,
respectively.
4. Allowance for Credit Losses.
The analysis of the allowance for credit losses is as
follows:
<TABLE>
<CAPTION>
Years Ended
December 31,
(In Thousands) 1997 1996
1995
<S> <C> <C>
<C>
Allowance for credit
losses beginning of year $169,133 $158,618 $135,952
Provision for credit losses
charged to expense 235,877 198,480 143,318
Write-offs: United States (231,371) (187,274) (127,689)
Canada (30,069) (24,597) (21,244)
Recoveries: United States 28,618 16,451 13,860
Canada 5,099 3,803 3,523
Allowance related to receivables
contributed or acquired 120,513 3,652 10,898
Allowance for credit losses
end of year $297,800 $169,133 $158,618
</TABLE>
<PAGE> 35
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements, Continued
5. Loans Payable - Short-term.
Commitment fees are paid to support bank credit agreements
(lines of credit and revolving credit agreements). The bank
credit agreements amounted to $1,322,413,000 at December 31,
1997; the entire amount was available at that date. Unused
bank credit agreements are available to support outstanding
commercial paper. If all credit agreements in effect at
December 31, 1997 were to remain in effect and unused
throughout 1998, the Company would pay approximately
$934,000 in commitment fees.
Weighted average annual interest rates and average debt
outstanding for commercial paper and other short-term debt
excluding short-term debt from affiliates are shown below:
<TABLE>
<CAPTION>
(Dollars in Thousands)
1997 1996 1995
Weighted average annual interest
rate on commercial paper and
other short-term debt:
<S> <C> <C> <C>
During December 5.54% 5.15% 5.87%
During December after considering
the effect of commitment fees 5.59 5.21 5.93
For the year 5.30 5.36 6.10
For the year after considering
the effect of commitment fees 5.35 5.42 6.16
Average daily amount of commercial
paper and other short-term debt
outstanding during the year $1,894,706 $1,719,136 $1,530,109
Maximum amount of commercial paper
and other short-term debt
outstanding at any month-end
during the year $2,381,650 $2,100,101 $1,958,483
</TABLE>
The weighted average annual interest rate was computed by
dividing total interest expense on commercial paper and
other short-term debt by the average daily amount of such
debt outstanding. The weighted average annual interest rate
on short-term debt from affiliates for the years 1997, 1996,
and 1995 was 5.43%, 5.30%, and 8.91% respectively.
<PAGE> 36
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements, Continued
6. Long-term Debt.
<TABLE>
<CAPTION>
Long-term debt outstanding:
December 31,
(In Thousands)
1997 1996
<S> <C>
<C>
Senior - United States:
6 % due 1997 $ $150,000
6-1/4% due 1997 150,000
6-1/2% due 1997 150,000
6-1/2% due 1997 150,000
8.95 % due 1997 1,000
9.00 % due 1997 2,000
10.13% due 1997 550
5-1/2% due 1998 150,000 150,000
6.23 % due 1998 150,000 150,000
7.34 % due 1998 2,000 2,000
8-1/2% due 1998 100,000 100,000
6 % due 1999 150,000
6.20 % due 1999 75,000 75,000
6-1/4% due 1999 150,000 150,000
6-7/8% due 1999 100,000 100,000
6.99 % due 1998-99 4,600 7,000
9.50 % due 1998-99 6,700 10,000
5-1/8% due 2000 150,000 150,000
6.10 % due 2000 150,000
6-7/8% due 2000 150,000 150,000
7-1/4% due 2000 150,000 150,000
8-3/8% due 2000 150,000 150,000
6-3/8% due 2001 150,000 150,000
7-3/4% due 2001 100,000 100,000
6-1/4% due 2002 200,000 200,000
6-3/8% due 2002 200,000
7-7/8% due 2002 150,000 150,000
7.95 % due 2002 100,000 100,000
8.56% due 1998-2002 8,333 10,000
6-1/8% due 2003 150,000 150,000
6-3/8% due 2003 150,000 150,000
6.93 % due 1998-2003 15,000 15,000
7 % due 2003 150,000 150,000
6 % due 2004 150,000 150,000
6-5/8% due 2004 250,000
7.20 % due 2004 100,000
6-3/4% due 2005 150,000 150,000
7-1/2% due 2005 150,000 150,000
6-1/4% due 2007 100,000 100,000
</TABLE>
<PAGE> 37
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements, Continued
6. Long-term Debt, Continued.
Long-term debt outstanding, continued
<TABLE>
<CAPTION>
(In Thousands) December 31,
1997
1996
<S> <C> <C>
Senior - United States:
6-3/8% due 2007 $100,000 $
7.20% due 2007 150,000
6.85% due 2009 250,000
Medium-term notes, 6.05% to 6.68%,
due 1999 to 2001 500,000 225,000
Total senior - United States 4,911,633 3,897,550
Senior - Canada:
8.38% due 1997 21,888
6.25% due 1998 69,950 72,960
8.65% due 1998 3,497 3,648
8.50% due 1999 52,463 54,720
7.80% due 2000 6,995 7,296
Medium-term notes, 4.79% to 6.15%,
due 1999 to 2002 174,875
Total senior - Canada 307,780 160,512
Total senior 5,219,413 4,058,062
Senior subordinated - United States:
7.34% due 1998 2,000 2,000
Medium-term notes, 5.20% to 7.875%,
due 1997 50,000
Total senior subordinated 2,000 52,000
Other 22,832
Total long-term debt outstanding $5,221,413 $4,132,894
</TABLE>
Other debt consisted of senior debt secured by lease
receivables and related equipment under lease and had a
weighted average rate of 9.0% at December 31, 1996.
Contractual maturities of long-term debt for the years 1998
through 2002 are $487,315,000; $915,209,000; $838,107,000;
$439,142,000 and $689,140,000 respectively.
<PAGE> 38
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements, Continued
7. Interest and Debt Expense.
Interest and debt expense is summarized as follows:
<TABLE>
<CAPTION>
Years Ended December
31,
(In Thousands) 1997 1996 1995
<S> <C>
Short-term - affiliates $ 916 $ 83 $ 1,142
Short-term - commercial
paper and other 96,569 92,352 93,780
Long-term 298,293 274,586 258,376
Amortization of debt expense 5,958 5,838 5,781
Total interest and
debt expense $401,736 $372,859 $359,079
8. Operations by Country.
The following is a summary of total income, earnings before
income taxes, and total assets by country: (Results for
Puerto Rico sales finance branches, Guam, and Saipan are
included in United States amounts.)
</TABLE>
<TABLE>
<CAPTION>
Years Ended December
31,
(In Thousands) 1997 1996
1995
<S> <C> <C> <C>
Total income:
United States $1,450,050 $1,371,044 $1,265,937
Canada 192,855 175,513 153,421
Total $1,642,905 $1,546,557 $1,419,358
Earnings before income taxes:
United States $ 351,783 $ 358,667 $ 362,581
Canada 61,749 65,760 53,233
Total $ 413,532 $ 424,427 $ 415,814
Total assets at December 31:
United States $8,606,163 $7,128,734 $6,982,254
Canada 715,761 632,111 557,005
Total $9,321,924 $7,760,845 $7,539,259
</TABLE>
9. Leased Assets and Lease Commitments.
Lease terms are generally for three to seven years.
Commitments at December 31, 1997, under operating leases
having initial or remaining lease terms in excess of one
year are estimated to approximate $51 million.
<PAGE> 39
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements, Continued
10. 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 $714
million of consolidated stockholder's equity was
unrestricted at December 31, 1997.
11. Income Taxes.
The Company and its subsidiaries are included in the
consolidated federal income tax return of Norwest. Federal
income taxes are allocated to the Company and its
subsidiaries at the approximate amount which would have been
computed on a separate return basis. Current income taxes
payable of $13.8 million was included in other payables to
affiliates at December 31, 1997. The Company's Canadian
subsidiaries file separate federal and provincial returns in
Canada.
At December 31, 1997, no federal income taxes had been
provided on approximately $44 million of one of the United
States life insurance subsidiary's retained earnings since
such taxes become payable only to the extent such retained
earnings are distributed as dividends or to the extent
prescribed by tax laws. The life insurance subsidiary does
not contemplate distributing dividends from these retained
earnings. The amount of unrecognized deferred tax liability
at December 31, 1997, was $15.4 million.
Income taxes for the years 1997, 1996, and 1995 are composed
of the following elements:
<TABLE>
<CAPTION>
Years Ended December 31,
(In Thousands) 1997 1996 1995
<S> <C> <C> <C>
Current:
Federal $ 90,276 $110,569 $113,452
State 4,526 2,529 2,043
Foreign 24,176 26,300 21,915
Deferred:
Federal and state 26,982 10,776 13,239
Foreign (1,878) (2,078) (2,776)
Total income taxes $144,082 $148,096 $147,873
</TABLE>
Income before taxes from operations outside the United
States was $61.7 million, $65.8 million, and $53.2 million
for the years ended December 31, 1997, 1996, and 1995,
respectively.
Deferred income taxes are primarily due to leasing and lease
financing, the allowance for credit losses, accrued employee
benefits and the net unrealized holding gain (loss) on
securities available-for-sale.
<PAGE> 40
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements, Continued
12. Retirement Plans.
The Company has a defined benefit pension plan which covers
United States employees who meet certain age and service
requirements (the "NFI Plan"). Pension benefits provided
are based on the employee's highest compensation in three
consecutive years during the last ten calendar years of
employment. Benefits accrue under this plan at a rate of 1-
1/4% for each year of service.
The Company's Canadian subsidiary, Trans Canada Credit
Corporation ("TCC"), has a non-contributory defined benefit
pension plan (the "TCC Plan") which covers employees who
meet certain service requirements. Pension benefits under
the TCC Plan are based on the employee's highest
compensation in five consecutive calendar years during the
last ten calendar years of employment. Benefits generally
accrue under the TCC Plan at a rate of 1% of such highest
average compensation up to the average Canada/Quebec Pension
Plan Earnings Ceiling (an amount based on the maximum amount
of the annual compensation used to calculate the employee's
Canada/Quebec Pension Plan benefits) plus 1.5% of such
highest average compensation in excess of the average
Canada/Quebec Pension Plan Earnings Ceiling for each year of
service (not to exceed 35 years of service).
The funded status and reconciliation to the balance sheet of
the NFI Plan and the TCC Plan, combined for the years ended
December 31, 1997 and 1996, are presented below:
<TABLE>
<CAPTION>
Years Ended December 31,
(In Thousands) 1997 1996
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $54,683 and $54,800 at
December 31, 1997 and 1996, respectively $(74,155) $(64,468)
Projected benefit obligation for service
rendered to date (104,594) (89,290)
Plan assets at fair value* 118,992 103,066
Plan assets greater than projected
benefit obligation 14,398 13,776
Unrecognized net assets being
amortized through 2000 (1,245) (1,485)
Unrecognized prior service costs (628) (773)
Unrecognized net loss (gain) from past experience
different from that assumed and effects
of changes in assumptions 4,705 635
Prepaid pension cost at December 31 $ 17,230 $ 12,153
</TABLE>
*Consists primarily of marketable bonds and debentures and
obligations of the United States government and its
agencies and includes $3,482,000 and $3,057,000 invested
in the Norwest Short-Term Investment Fund at December 31,
1997 and 1996, respectively.
<PAGE> 41
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements, Continued
12. Retirement Plans, Continued.
<TABLE>
<CAPTION>
Assumptions used in the accounting for the NFI Plan were:
December 31,
1997 1996
<S> <C> <C>
Weighted average discount rate 7.0% 7.0%
Expected long-term rate of return on assets 9.0 8.0
Rate of increase in future compensation levels 5.0 5.0
Assumptions used in the accounting for the TCC Plan were:
December 31,
1997 1996
Weighted average discount rate 6.5% 8.0%
Expected long-term rate of return on assets 8.0 8.0
Rate of increase in future compensation levels 6.5 6.5
</TABLE>
The components of net pension expense for the NFI Plan and
TCC Plan, combined for 1997, 1996, and 1995 are presented
below:
<TABLE>
<CAPTION>
Years Ended
December 31,
(In Thousands) 1997 1996 1995
<S> <C> <C> <C>
Service cost - benefits
earned during the year 3,941 $4,204 $ 4,605
Interest cost on projected
benefit obligation 6,654 6,04 5 5,944
Actual return on plan assets (15,662) (9,645) (12,474)
Net amortization and deferral* 5,634 3,544 10,292
Net periodic pension expense $ 567 $4,148 $ 8,367
</TABLE>
* Consists of the net effects of delayed recognition of
certain events (for example, unanticipated investment
performance) arising during the current period and
amortization (recognition) of the net unrecognized
effects of past similar events over a five year period.
The NFI Plan holds single premium annuity contracts issued
by one of the Company's life insurance subsidiaries. Annual
benefits paid to retirees covered by the contracts were
approximately $1.8 million in 1997 and 1996.
The Company also has a defined contribution thrift and
profit sharing plan whereby each eligible United States
employee may make basic contributions up to 6% of his or her
compensation and supplemental contributions up to an
additional 4%. The Company makes a matching contribution of
$.25 for every dollar of the basic employee contribution
made during the year and not withdrawn. The Company may
also make a profit sharing contribution on the basic
employee contribution with the amount determined by the
percentage return on consolidated equity (as defined) of
Norwest Financial Services, Inc. and its subsidiaries.
Contribution expense for the Company was $15,051,000,
$13,694,000 and $10,842,000 for the years ended December 31,
1997, 1996, and 1995, respectively.
<PAGE> 42
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements, Continued
13. Postretirement Benefits.
The Company provides certain health care and life benefits
for substantially all of its retired United States employees
(the "NFI Plan"). In accordance with SFAS 106, the Company
has elected to recognize the transition obligation of
approximately $22.2 million over a period of twenty years.
The Company's Canadian subsidiary, Trans Canada Credit
Corporation ("TCC") provides certain health and life
insurance benefits to its retirees (the "TCC Plan").
The accumulated postretirement benefit obligation, funded
status, and reconciliation to the balance sheet for the NFI
Plan and the TCC Plan, combined, are presented below:
<TABLE>
<CAPTION>
Years Ended December 31,
(In Thousands) 1997 1996
<S> <C> <C>
Retirees $(12,972) $(11,150)
Fully eligible plan participants (288) (243)
Other active plan participants (41,010) (35,695)
Accumulated postretirement benefit obligation (54,270) (47,088)
Plan assets at fair value 14,999 10,100
Accumulated postretirement benefit
obligation in excess of plan assets (39,271) (36,988)
Unrecognized transition obligation 16,667 17,790
Unrecognized net loss 7,502 5,634
Unrecognized prior service cost 715 759
Accrued postretirement benefit liability $(14,387) $(12,805)
</TABLE>
The Company began funding the accumulated postretirement
benefit obligation of the NFI Plan during 1996. Plan assets
consist primarily of obligations of state and local
governments and mutual funds invested in obligations of
state and local governments.
Net postretirement benefit expense for the NFI Plan and the
TCC Plan, combined, consisted of the following components:
<TABLE>
<CAPTION>
Years Ended December 31,
(In Thousands) 1997 1996 1995
<S> <C> <C> <C>
Service cost - benefits earned
during the year $3,174 $3,361 $2,733
Interest cost on accumulated
postretirement benefit obligation 3,372 3,116 2,439
Return on plan assets (618)
Amortization of transition obligation 1,112 1,112 1,112
Amortization of unrecognized net loss 688 1,189 545
Amortization of unrecognized
prior service cost 43 43 44
Net postretirement benefit expense $7,771 $8,821 $6,873
</TABLE>
<PAGE> 43
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements, Continued
13. Postretirement Benefits, Continued.
The assumed health care cost trend rate used in measuring
the NFI Plan's accumulated postretirement benefit obligation
as of December 31, 1997 was 10% for 1998 decreasing each
successive year until it reaches 8% in 2001, after which it
remains constant. The TCC Plan assumed a 1998 health care
trend of 13% decreasing each successive year until it
reaches 6% in 2006. A one percent increase in the assumed
health care cost trend rate for each year would increase the
combined accumulated postretirement benefit obligation as of
December 31, 1997 by approximately $9.2 million and combined
net postretirement benefit expense by $1.5 million for the
year. The assumed discount rate used in determining the
accumulated postretirement benefit obligation was 7% at both
December 31, 1997 and 1996, respectively.
14. Statements of Consolidated Cash Flows.
The Company and its subsidiaries consider highly liquid debt
instruments purchased with a maturity of three months or
less to be cash equivalents. Supplemental disclosure of
certain cash flow information is presented below:
Years Ended December 31,
(In Thousands) 1997 1996 1995
Cash paid for:
Interest $375,376 $370,144 $328,255
Income taxes 109,391 110,026 181,022
15. Concentrations of Credit Risk.
The Company and its subsidiaries are primarily engaged in
the consumer and automobile finance business. The average
balance outstanding with any individual customer is not
significant. At December 31, 1997, the Company had 1,236
consumer and automobile finance offices in 47 states, Guam,
Saipan, Puerto Rico, and all ten Canadian provinces compared
with 1,073 consumer and automobile finance offices in 47
states, Guam, Puerto Rico, and ten Canadian provinces at
December 31, 1996. Credit cards are issued by Dial Bank to
customers located nationwide. Dial National Bank issues
private label and dual-line Co-Branded credit cards
nationwide.
A subsidiary of the Company also provides accounts
receivable financing primarily to high quality furniture
stores across the country. In addition, another subsidiary
of the Company provides lease financing and other leasing
services nationwide for a variety of commercial equipment
with an emphasis on health care equipment.
<PAGE> 44
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements, Continued
16. Selected Quarterly Financial Data (Unaudited).
Selected quarterly financial data for 1997 and 1996 were as
follows:
<TABLE>
<CAPTION>
Interest Provision
Total and Debt for Credit Net
(In Thousands) Income Expense Losses Earnings
<S> <C> <C> <C> <C>
March 31, 1996 $374,328 $94,704 $45,952 $61,999
June 30, 1996 378,110 92,703 43,884 66,998
September 30, 1996 383,332 92,557 49,295 67,557
December 31, 1996 410,787 92,895 59,349 79,777
March 31, 1997 384,455 92,879 54,749 62,777
June 30, 1997 383,438 92,934 44,627 68,309
September 30, 1997 409,633 102,042 57,819 67,640
December 31, 1997 465,379 113,881 78,682 70,724
</TABLE>
17. Fair Value of Financial Instruments.
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for
which it is practicable to estimate that value:
Cash and Cash Equivalents. Due to the relatively short
period of time between the origination of these instruments
and their expected realization, the carrying value of cash
equivalents is a reasonable estimate of fair value.
Securities Available-for-Sale. Fair values of these
financial instruments were estimated using quoted market
prices, when available. If quoted market prices were not
available, fair value was estimated using quoted market
prices for similar securities (note 2).
Finance Receivables and Notes Receivable - Affiliates. The
interest rates on the receivables outstanding at December
31, 1997 and 1996, are consistent with the current rates at
which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities. As a
result, the carrying value is a reasonable estimate of fair
value.
Loans Payable - Short-term and Accrued Interest Payable.
Carrying value is a reasonable estimate of fair value. The
carrying amount approximates fair value due to the short
maturity of these instruments.
<PAGE> 45
NORWEST FINANCIAL, INC.
Notes to Consolidated Financial Statements, Concluded
17. Fair Value of Financial Instruments, Continued.
Other Payables to Affiliates. Due to the relatively short
period of time between the origination of these instruments
and the expected realization, the carrying value of other
payables to affiliates is a reasonable estimate of fair
value.
Long-term Debt. Based on quoted market rates for the same
or similar issues of debt or on current rates offered to the
Company for similar debt of the same remaining maturities,
the fair value of long-term debt is $5,301,982,000 as of
December 31, 1997 and $4,147,816,000 as of December 31,
1996.
18. Related Parties.
Notes receivable - affiliates were $646,832,000 and
$574,344,000 at December 31, 1997 and 1996, respectively.
Notes receivable - affiliates include a combination of short-
term and long-term notes receivable. At December 31, 1997,
Norwest Financial, Inc. had term loans totaling $528 million
to an affiliate, Island Finance Puerto Rico, Inc. The loans
have a weighted average interest rate of 8.81% and mature in
2000 and 2002. The remainder of notes outstanding at
December 31, 1997 and 1996, earn interest at rates that
approximate the cost of borrowings of the Company.
Management fees paid to Norwest Corporation were $5,724,000;
$5,230,000; and $3,835,000 for the years ended December 31,
1997, 1996, and 1995, respectively.
19. Business Combination (Unaudited).
The following unaudited summary, prepared on a pro forma
basis, combines the consolidated results of operations of
the Company for the years ended December 31, 1997 and 1996,
with Fidelity as if the acquisition had occured on December
31, 1995:
(In Thousands) 1997 1996
Total income $1,772,029 1,717,752
Net earnings 282,623 276,331
<PAGE> 46
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial
Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the
Registrant.
Omitted in accordance with General Instruction I (2) (c).
Item 11. Executive Compensation.
Omitted in accordance with General Instruction I (2) (c).
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Omitted in accordance with General Instruction I (2) (c).
Item 13. Certain Relationships and Related Transactions.
Omitted in accordance with General Instruction I (2) (c).
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
(a) The following documents are filed as part of this
report:
(1) Financial Statements:
a. Consolidated balance
sheets as of December 31, 1997 and 1996.
b. Statements of
consolidated earnings and retained earnings for the
years ended December 31, 1997, 1996, and 1995.
c. Statements of
consolidated cash flows for the years ended December
31, 1997, 1996, and 1995.
(2) Financial Statement Schedules:
All schedules are omitted because they are not
applicable or the information is given in consolidated
financial statements or notes thereto.
(3) Exhibits:
3(a) Articles of
Incorporation of the Company (Exhibit 3(a) of the
Company's Form 10-K Annual Report for 1983, which
is hereby incorporated by reference).
3(b) By-laws of the
Company (Exhibit 3(b) of the Company's Form 10-K
Annual Report for 1983, which is hereby
incorporated by reference).
<PAGE> 47
4(a) Conformed copy of
Indenture dated as of May 1, 1986, between the
Company and The Chase Manhattan Bank (National
Association), Trustee (Exhibit 4(o) of the
Company's Form 10-K Annual Report for 1986, which
is hereby incorporated by reference).
4(b) Conformed copy of
Indenture dated as of May 1, 1986, between the
Company and Harris Trust and Savings Bank, Trustee
(Exhibit 4(p) of the Company's Form 10-K Annual
Report for 1986, which is hereby incorporated by
reference).
4(c) Copy of Norwest
Financial, Inc. Standard Multiple-Series Indenture
Provisions dated May 1, 1986, (Exhibit 4(q) of the
Company's Form 10-K Annual Report for 1986, which
is hereby incorporated by reference).
4(d) Conformed copy of
First Supplemental Indenture dated as of February
15, 1991, between the Company and The Chase
Manhattan Bank (National Association), Trustee
(Exhibit 4.3 of the Company's Form 8-K Current
Report dated February 25, 1991, which is hereby
incorporated by reference).
4(e) Conformed copy of
First Supplemental Indenture dated as of February
15, 1991, between the Company and Harris Trust and
Savings Bank, Trustee (Exhibit 4.4 of the Company's
Form 8-K Current Report dated February 25, 1991,
which is hereby incorporated by reference).
4(f) Conformed copy of
Indenture dated as of November 1, 1991, between the
Company and The First National Bank of Chicago,
Trustee (Exhibit 2(a) of the Company's Form 8-A
Registration Statement dated May 24, 1993, which is
hereby incorporated by reference).
*(12) Computation of
ratios of earnings to fixed charges for the years
ended December 31, 1997, 1996, 1995, 1994, and
1993.
*(23) Consent of Deloitte
& Touche LLP.
Certain instruments with respect to long-term debt publicly
issued, privately placed or borrowed from banks are not
filed herewith as exhibits as the total amount of securities
or indebtedness authorized under any of such instruments
does not exceed 10% of the total assets of the Company and
its subsidiaries on a consolidated basis. In accordance
with subsection (4)(iii) of paragraph (b) of Item 601 of
Regulation S-K, the Company hereby agrees to furnish a copy
of any such instrument to the Securities and Exchange
Commission upon request. The list of subsidiaries exhibit
required by Item 601 of Regulation S-K has been omitted in
accordance with General Instruction I(2)(b).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during
the last quarter of the period covered by this report.
<PAGE> 48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 20th day of
March 1998.
NORWEST FINANCIAL, INC.
By \s\ James R. Berens
James R. Berens
President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons, on behalf of the registrant and in the capacities
indicated, on the 20th day of March 1998.
\s\ David C. Wood
David C. Wood
Chairman of the Board
(Principal Executive Officer)
\s\ James R. Berens
James R. Berens
President and Director
\s\ Patricia J. McFarland
Patricia J. McFarland
Vice President, General Counsel and
Secretary and Director
Stanley S. Stroup
Director
\s\ Dennis E. Young
Dennis E. Young
Senior Vice President, Chief Financial
Officer, Treasurer and Director
(Principal Financial Officer)
\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>
Years Ended December 31,
(Thousands of Dollars)
<S> <C> <C> <C> <C>
<C>
1997 1996 1995 1994
1993
Net earnings $269,450 $276,331 $267,941 $223,340
$203,297
Add:
Fixed charges:
Interest including
amortization of
debt expense 401,736 372,859 359,079 259,605
242,440
One third of rentals* 12,107 10,748 10,317 9,747
10,146
Total fixed charges 413,843 383,607 369,396 269,352
252,586
Provision for
income taxes 144,082 148,096 147,873 116,900
104,228
Total net earnings,
fixed charges and
income taxes -
"Earnings" $827,375 $808,034 $785,210 $609,592
$560,111
Ratio of earnings
to fixed charges 2.00 2.11 2.13 2.26
2.22
</TABLE>
* One-third of rentals is deemed representative of the
interest factor.
EXHIBIT 23
Deloitte & Touche LLP
(logo) Two Prudential Plaza Telephone
312-946-3000
180 North Stetson Avenue
Facsimile: 312-946-2600
Chicago, Illinois 60601-6779
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-62635 of Norwest Financial, Inc. on Form S-3 of
our report dated January 14, 1998, appearing in the Annual Report
on Form 10-K of Norwest Financial, Inc. for the year ended
December 31, 1997.
\s\ Deloitte & Touche
March 20, 1998
Deloitte Touche
Tohmatsu
International
<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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 94,600
<SECURITIES> 1,063,600
<RECEIVABLES> 7,114,121
<ALLOWANCES> 297,800
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 209,972
<DEPRECIATION> 107,435
<TOTAL-ASSETS> 9,321,924
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 7,448,374<F2>
0
0
<COMMON> 3,855
<OTHER-SE> 1,359,935
<TOTAL-LIABILITY-AND-EQUITY> 9,321,924
<SALES> 0
<TOTAL-REVENUES> 1,642,905
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 591,760
<LOSS-PROVISION> 235,877
<INTEREST-EXPENSE> 401,736
<INCOME-PRETAX> 413,532
<INCOME-TAX> 144,082
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 269,450
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>NORWEST FINANCIAL INC. HAS A NON-CLASSIFIED
BALANCE SHEET SO THIS INFORMATION IS UNAVAILABLE.
<F2>INCLUDES $2.2 BILLION OF SHORT-TERM LOANS.
</FN>
</TABLE>
