<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-2979
NORWEST CORPORATION
A Delaware Corporation-I.R.S. No. 41-0449260
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479
Telephone (612) 667-1234
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. X Yes ___ No.
Common Stock, par value $1 2/3 per share,
outstanding at August 1, 1994 315,813,687 shares
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The following consolidated financial statements of Norwest Corporation and
its subsidiaries are included herein:
Page
1. Consolidated Balance Sheets -
June 30, 1994 and December 31, 1993 ......................... 3
2. Consolidated Statements of Income -
Quarters and Six Months Ended June 30, 1994 and 1993 ........ 4
3. Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1994 and 1993 ...................... 6
4. Consolidated Statements of Stockholders' Equity -
Six Months Ended June 30, 1994 and 1993 ...................... 8
5. Notes to Consolidated Financial Statements ..................... 10
The financial information for the interim periods is unaudited. In the
opinion of management, all adjustments necessary (which are of a normal
recurring nature) have been included for a fair presentation of the results
of operations. The results of operations for an interim period are not
necessarily indicative of the results that may be expected for a full year
or any other interim period.
2
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
In millions, except shares June 30, December 31,
1994 1993
ASSETS
Cash and due from banks ....................... $ 2,680.3 2,844.4
Interest-bearing deposits with banks .......... 22.5 55.9
Federal funds sold and resale agreements ...... 491.6 707.7
Total cash and cash equivalents ........... 3,194.4 3,608.0
Trading account securities .................... 226.6 279.1
Investment securities (fair value
$1,504.2 in 1994 and $1,597.6 in 1993) ...... 1,423.3 1,542.7
Mortgage-backed securities (fair value
$153.1 in 1993) ............................. - 151.0
Investment securities available for sale
(fair value $2,260.9 in 1993) ............... 2,073.9 2,001.2
Mortgage-backed securities available for
sale (fair value $9,244.0 in 1993) .......... 11,310.3 9,021.6
Total investment securities ............... 14,807.5 12,716.5
Student loans available for sale .............. 1,217.6 1,349.2
Mortgages held for sale ....................... 3,848.0 6,090.7
Loans and leases .............................. 31,253.5 29,781.9
Unearned discount ............................. (1,080.7) (1,021.1)
Allowance for credit losses ................... (790.4) (789.2)
Net loans and leases ...................... 29,382.4 27,971.6
Premises and equipment, net ................... 900.8 842.1
Interest receivable and other assets .......... 2,179.5 1,807.8
Total assets .............................. $55,756.8 54,665.0
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing ......................... $ 8,023.9 9,054.3
Interest-bearing ............................ 26,657.7 26,922.2
Total deposits ............................ 34,681.6 35,976.5
Short-term borrowings ......................... 7,880.5 5,996.8
Accrued expenses and other liabilities ........ 2,102.9 2,079.9
Long-term debt ................................ 7,255.2 6,850.9
Total liabilities ......................... 51,920.2 50,904.1
Preferred stock ............................... 376.6 380.0
Unearned ESOP shares .......................... (31.5) -
Total preferred stock ..................... 345.1 380.0
Common stock, $1 2/3 par value - authorized
500,000,000 shares:
Issued 323,084,474 and 309,255,558 shares
in 1994 and 1993, respectively ............. 538.5 515.4
Surplus ....................................... 573.2 503.3
Retained earnings ............................. 2,742.3 2,433.3
Net unrealized losses
on securities available for sale ............ (140.2) -
Notes receivable from ESOP .................... (13.6) (16.3)
Treasury stock - 7,627,247 and 1,956,803 common
shares in 1994 and 1993, respectively ....... (201.9) (51.5)
Foreign currency translation .................. (6.8) (3.3)
Total common stockholders' equity ......... 3,491.5 3,380.9
Total stockholders' equity ................ 3,836.6 3,760.9
Total liabilities and
stockholders' equity .................... $55,756.8 54,665.0
See notes to unaudited consolidated financial statements.
3
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
In millions, except per common share amounts Quarter Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
INTEREST INCOME ON
Loans and leases ................................ $ 746.8 647.1 1,446.7 1,293.0
Investment securities ........................... 19.3 30.4 36.2 61.1
Mortgage-backed securities ...................... - 2.5 - 4.3
Investment securities available for sale ........ 28.0 29.1 60.5 58.3
Mortgage-backed securities available for sale ... 174.5 149.1 312.0 313.7
Student loans available for sale ................ 26.1 23.1 50.2 43.7
Mortgages held for sale ......................... 64.6 76.0 132.7 143.4
Money market investments ........................ 6.9 3.5 12.3 8.1
Trading account securities ...................... 7.6 10.5 16.0 13.5
Total interest income ....................... 1,073.8 971.3 2,066.6 1,939.1
INTEREST EXPENSE ON
Deposits ........................................ 208.3 208.7 413.4 418.0
Short-term borrowings ........................... 68.6 60.8 113.6 126.6
Long-term debt .................................. 99.6 87.5 192.4 169.6
Total interest expense ...................... 376.5 357.0 719.4 714.2
Net interest income ....................... 697.3 614.3 1,347.2 1,224.9
Provision for credit losses ..................... 23.7 39.4 60.0 77.5
Net interest income after
provision for credit losses ............. 673.6 574.9 1,287.2 1,147.4
NON-INTEREST INCOME
Trust ........................................... 50.5 46.1 102.4 94.1
Service charges on deposit accounts ............. 58.7 51.5 116.1 102.3
Mortgage banking ................................ 145.3 132.1 280.7 209.9
Data processing ................................. 15.5 16.4 30.7 32.3
Credit card ..................................... 27.0 28.5 52.7 57.0
Insurance ....................................... 70.1 64.1 112.1 103.4
Other fees and service charges .................. 42.8 39.4 88.4 77.7
Net investment and mortgage-backed
securities losses .............................. (0.2) - (0.7) -
Net investment and mortgage-backed
securities available for sale gains (losses).... (43.3) 6.1 (6.3) 29.4
Net venture capital gains ....................... 15.0 20.9 35.2 26.6
Other ........................................... 5.5 16.6 9.7 38.1
Total non-interest income ................... 386.9 421.7 821.0 770.8
NON-INTEREST EXPENSES
Salaries and benefits ........................... 393.4 358.5 790.4 691.5
Net occupancy ................................... 52.4 45.8 108.4 90.8
Equipment rentals, depreciation
and maintenance ................................ 56.9 48.4 110.2 92.6
Business development ............................ 49.3 34.7 89.0 65.5
Communication ................................... 45.5 39.7 89.9 76.3
Data processing ................................. 26.4 25.7 54.2 53.4
FDIC assessment and regulatory examination fees . 22.3 19.5 44.1 38.9
Intangible asset amortization ................... 17.8 20.2 37.3 32.7
Other ........................................... 95.0 163.2 204.6 297.7
Total non-interest expenses ................. 759.0 755.7 1,528.1 1,439.4
INCOME BEFORE INCOME TAXES ...................... 301.5 240.9 580.1 478.8
Income tax expense .............................. 99.5 72.0 187.6 151.6
NET INCOME ...................................... $ 202.0 168.9 392.5 327.2
</TABLE>
(Continued on page 5)
4
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Continued from page 4)
<TABLE>
<CAPTION>
In millions, except per common share amounts Quarter Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Average Common and Common Equivalent Shares ..... 319.2 307.9 316.1 306.8
PER COMMON SHARE
Net Income
Primary ....................................... $ 0.61 0.52 1.20 1.01
Fully diluted ................................. 0.60 0.51 1.17 0.99
Dividends ...................................... 0.185 0.165 0.370 0.310
See notes to unaudited consolidated financial statements.
</TABLE>
5
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
In millions Six Months Ended
June 30
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .......................................... $ 392.5 327.2
Adjustments to reconcile net income to net cash
flows from operating activities:
Provision for credit losses ...................... 60.0 77.5
Depreciation and amortization .................... 112.4 94.6
Gain on divestiture of branches .................. (5.1) -
Gains on other real estate owned, net ............ (6.9) (0.7)
Losses on sales of premises and equipment ........ - 0.2
Gains on sales of mortgages held
for sale ....................................... (62.3) (29.1)
Losses on sales of investment and
mortgage-backed securities ..................... 0.7 -
Gains on sales of investment, mortgage-backed
and venture capital securities
available for sale .............................. (28.9) (56.0)
Gains on sales of student loans
available for sale ............................. (5.7) (3.2)
Release of preferred shares to ESOP .............. 10.3 -
Trading account securities losses (gains) ........ (11.0) 6.1
Purchases of trading account securities .......... (29,019.8) (28,466.9)
Proceeds from sales of trading account
securities ..................................... 29,076.0 28,319.7
Originations of mortgages held for sale .......... (13,990.5) (14,011.2)
Proceeds from sales of mortgages held for sale ... 16,296.5 13,074.0
Proceeds from sales of investment and mortgage-
backed securities available for sale ............ - 1,335.1
Purchases of investment and mortgage-backed
securities available for sale ................... - (2,173.9)
Proceeds from maturities and paydowns of
investment and mortgage-backed securities
available for sale ............................. - 1,137.2
Originations of student loans available for sale.. (369.3) (274.1)
Proceeds from sales of student loans
available for sale .............................. 555.4 338.4
Deferred income taxes ............................ 29.0 (21.5)
Interest receivable .............................. (22.1) 22.2
Interest payable ................................. (21.2) (43.9)
Other assets, net ................................ (122.5) (73.1)
Other accrued expenses and liabilities, net ...... 15.3 290.6
Net cash flows from (used for)
operating activities .......................... 2,882.8 (130.8)
(Continued on page 7)
6
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Continued from page 6)
In millions Six Months Ended
June 30
1994 1993
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and paydowns of:
Investment securities ........................... 765.5 395.5
Investment and mortgage-backed
securities available for sale ................. 1,777.7 -
Proceeds from sales and calls of:
Investment securities ........................... 15.4 0.7
Investment and mortgage-backed
securities available for sale ................. 1,270.1 -
Purchases of:
Investment securities ........................... (418.3) (450.6)
Investment and mortgage-backed
securities available for sale ................. (5,372.7) -
Net increase in banking
subsidiaries' loans and leases.................... (542.7) (253.4)
Principal collected on non-bank
subsidiaries' loans and leases ................... 2,347.4 1,929.0
Non-bank subsidiaries' loans and
leases originated ................................ (2,579.3) (2,029.2)
Purchases of premises and equipment ............... (117.6) (88.2)
Proceeds from sales of premises and equipment ..... 10.7 21.4
Proceeds from sales of other real estate owned .... 39.0 57.6
Purchases of subsidiaries, net of cash
and cash equivalents acquired .................... 83.3 74.5
Divestiture of branches, net of cash and
cash equivalents paid ............................ (55.1) -
Net cash flows used for
investing activities .......................... (2,776.6) (342.7)
CASH FLOWS FROM FINANCING ACTIVITIES
Deposits, net ..................................... (2,299.3) (1,050.5)
Short-term borrowings, net ........................ 1,773.2 163.9
Long-term debt borrowings ......................... 1,351.3 1,670.2
Repayments of long-term debt ...................... (1,041.6) (545.1)
Issuances of common stock ......................... 32.6 31.3
Repurchases of common stock ....................... (199.3) (64.2)
Repurchases of preferred stock .................... (8.3) (0.6)
Net decrease in notes receivable from ESOP ........ 2.7 1.1
Dividends paid .................................... (131.1) (106.5)
Net cash flows from (used for)
financing activities ........................... (519.8) 99.6
Net decrease in cash and
cash equivalents .............................. (413.6) (373.9)
CASH AND CASH EQUIVALENTS
Beginning of period ............................... 3,608.0 3,428.0
End of period ..................................... $ 3,194.4 3,054.1
See notes to unaudited consolidated financial statements.
7
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Net
Unrealized
Gains
In (Losses) on
millions, Unearned Securities Notes Foreign
except for Preferred ESOP Common Sur- Retained Available Receivable Treasury Currency
shares Stock Shares Stock plus Earnings for Sale from ESOP Stock Translation Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1992, as
originally reported $ 342.5 - 242.4 616.0 2,002.8 - (19.5) (43.2) (0.3) 3,140.7
Adjustments for
pooling of interests 51.5 - 22.7 70.6 86.3 - - - - 231.1
Balance, December 31,
1992, restated 394.0 - 265.1 686.6 2,089.1 - (19.5) (43.2) (0.3) 3,371.8
Net income 327.2 327.2
Dividends on
Common stock (90.7) (90.7)
Preferred stock (15.8) (15.8)
Stock split 244.2 (244.2) -
Repurchase of 4,950
preferred shares (0.5) (0.1) (0.6)
Conversion of 186,698
preferred shares to
899,152 common shares (7.8) 0.8 7.0 _
Issuance of 2,817,656
common shares 1.6 60.4 (32.3) 17.2 46.9
Issuance of 2,438,760
common shares for
acquisitions 0.7 (16.4) (1.6) 34.4 17.1
Repurchase of 2,572,446
common shares (64.2) (64.2)
Cash payments
received on notes
receivable from ESOP 1.1 1.1
Tax benefits of dividends
on common stock held
by ESOP 0.2 0.2
Foreign currency
translation (0.9) (0.9)
Balance,
June 30, 1993 $ 385.7 - 512.4 493.4 2,276.0 - (18.4) (55.8) (1.2) 3,592.1
(Continued on page 9)
</TABLE>
8
Norwest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(Continued from page 8)
<TABLE>
<CAPTION>
Net
Unrealized
Gains
(Losses) on
millions, Unearned Securities Notes Foreign
except for Preferred ESOP Common Sur- Retained Available Receivable Treasury Currency
shares Stock Shares Stock plus Earnings for Sale from ESOP Stock Translation Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993 as originally
reported $ 341.9 - 490.2 413.0 2,394.4 - (16.3) (51.5) (3.3) 3,568.4
Adjustments for
pooling of interests 38.1 - 25.2 90.3 38.9 - - - - 192.5
Balance, December 31,
1993, restated 380.0 - 515.4 503.3 2,433.3 - (16.3) (51.5) (3.3) 3,760.9
Net unrealized gains
on securities
available for sale,
January 1, 1994 313.4 313.4
Net income 392.5 392.5
Dividends on
Common stock (117.0) (117.0)
Preferred stock (14.1) (14.1)
Conversion of 1,209,345
preferred shares to
2,903,443 common shares (36.0) 4.4 25.2 6.4 -
Repurchase of 192,220
preferred shares (8.3) (8.3)
Issuance of 40,900
preferred shares
to ESOP 40.9 (42.1) 1.2 -
Release of preferred
shares to ESOP 10.6 (0.3) 10.3
Issuance of 1,604,448
common shares 0.1 3.5 (10.9) 42.5 35.2
Issuance of 11,162,981
common shares for
acquisitions 18.6 40.3 58.5 117.4
Repurchase of 7,512,400
common shares (199.3) (199.3)
Change in net unrealized
gains (losses) on securities
available for sale (453.6) (453.6)
Cash payments received
on notes receivable
from ESOP 2.7 2.7
Foreign currency
translation (3.5) (3.5)
Balance,
June 30, 1994 $ 376.6 (31.5) 538.5 573.2 2,742.3 (140.2) (13.6) (201.9) (6.8) 3,836.6
See notes to unaudited consolidated financial statements.
</TABLE>
9
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Change in Accounting Policies
Effective January 1, 1994, the corporation adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," ("FAS 115"). Accordingly, debt and equity securities
available for sale are measured at fair value. Net unrealized gains (losses)
on securities available for sale are excluded from earnings and reported as a
separate component of stockholders' equity until realized. Realized gains and
losses on sales are computed by the specific identification method at the time
of disposition and are recorded in non-interest income.
Prior to the adoption of FAS 115, debt and equity securities available for
sale were carried at the lower of aggregate cost or market value.
2. Consolidated Statements of Cash Flows
Cash paid for interest and income taxes for the six months ended June 30 was:
In millions
1994 1993
Interest $ 740.6 757.5
Income taxes 88.4 144.9
During the first six months of 1994 and 1993, $27.6 million and $34.9 million,
respectively, of loans were transferred to other real estate owned. Mortgage-
backed securities of $151.0 million, held for investment by First United Bank
Group, Inc. ("First United") were transferred to available for sale in the
first quarter of 1994. The transfer was made to comply with the corporation's
investment and interest rate risk policies. See Note 11 for a discussion of
the acquisition of First United.
During the six months ended June 30, 1994 and 1993, the corporation issued
340,669 shares and 1,591,344 shares of common stock, respectively, in
connection with acquisitions accounted for using the purchase method. On
March 31, 1994, the corporation issued 40,900 shares of ESOP Cumulative
Convertible Preferred Stock in the par amount of $40.9 million at a premium of
$1.2 million. A corresponding charge of $42.1 million was recorded to
unearned ESOP shares (see Note 7). Preferred stock in the amount of $10.6
million was released to the ESOP during the six months ended June 30, 1994.
In conjunction with the acquisition of First United, $30.2 million of
preferred stock of First United was converted into common stock of the
corporation.
10
<PAGE>
3. Investment and Mortgage-backed Securities
The amortized cost and fair value of investment and mortgage-backed
securities at June 30, 1994 and December 31, 1993 were:
<TABLE>
<CAPTION>
In millions June 30, 1994
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Held for investment:
U.S. Treasury and federal agencies .. $ 236.9 - - 236.9
State, municipal and housing -
tax exempt.......................... 744.6 33.1 (5.4) 772.3
Other ............................... 441.8 56.3 (3.1) 495.0
Total investment securities
held for investment ............. $ 1,423.3 89.4 (8.5) 1,504.2
Available for sale:
U.S. Treasury and federal agencies .. $ 1,652.6 16.3 (21.4) 1,647.5
State, municipal and housing -
tax exempt ......................... 90.0 1.2 (1.6) 89.6
Other ............................... 276.7 69.1 (9.0) 336.8
Total investment securities
available for sale .............. 2,019.3 86.6 (32.0) 2,073.9
Mortgage-backed securities:
Federal agencies ................... 11,448.7 57.0 (327.8) 11,177.9
Collateralized mortgage
obligations ....................... 132.9 0.8 (1.3) 132.4
Total mortgage-backed securities
available for sale .............. 11,581.6 57.8 (329.1) 11,310.3
Total investment and
mortgage-backed securities
available for sale .............. $13,600.9 144.4 (361.1) 13,384.2
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
In millions December 31, 1993
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Held for investment:
U.S. Treasury and federal agencies .. $ 665.0 5.5 - 670.5
State, municipal and housing -
tax exempt ........................ 632.9 50.1 (1.0) 682.0
Other ............................... 244.8 0.3 - 245.1
Total investment securities
held for investment ............. 1,542.7 55.9 (1.0) 1,597.6
Mortgage-backed securities:
Federal agencies ................... 126.0 2.1 - 128.1
Collateralized mortgage
obligations ....................... 25.0 - - 25.0
Total mortgage-backed
securities held for investment .. 151.0 2.1 - 153.1
Total investment and
mortgage-backed securities
held for investment ............. $ 1,693.7 58.0 (1.0) 1,750.7
Available for sale:
U.S. Treasury and federal agencies .. $ 1,520.5 77.2 (2.8) 1,594.9
State, municipal and housing -
tax exempt ........................ 96.2 3.7 (0.1) 99.8
Other ............................... 384.5 188.8 (7.1) 566.2
Total investment securities
available for sale .............. 2,001.2 269.7 (10.0) 2,260.9
Mortgage-backed securities:
Federal agencies ................... 8,889.1 227.5 (7.5) 9,109.1
Collateralized mortgage
obligations ....................... 132.5 2.7 (0.3) 134.9
Total mortgage-backed securities
available for sale .............. 9,021.6 230.2 (7.8) 9,244.0
Total investment and
mortgage-backed securities
available for sale .............. $11,022.8 499.9 (17.8) 11,504.9
</TABLE>
12
<PAGE>
Interest income on investment and mortgage-backed securities for the quarters
and six months ended June 30 were:
<TABLE>
<CAPTION>
Quarter Six Months
In millions 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Held for investment:
U.S. Treasury and federal agencies .. $ 2.2 11.7 2.2 23.8
State, municipal and housing -
tax exempt ........................ 12.8 14.5 25.2 29.4
Other ............................... 4.3 4.2 8.8 7.9
Total investment securities
held for investment ............. $ 19.3 30.4 36.2 61.1
Mortgage-backed securities:
Federal agencies ................... $ - 2.2 - 3.7
Collateralized mortgage
obligations ....................... - 0.3 - 0.6
Total mortgage-backed securities
held for investment ............. $ - 2.5 - 4.3
Available for sale:
U.S. Treasury and federal agencies .. $ 21.7 24.3 48.0 49.3
State, municipal and housing -.......
tax exempt ........................ 1.3 1.2 2.6 2.3
Other ............................... 5.0 3.6 9.9 6.7
Total investment securities
available for sale .............. $ 28.0 29.1 60.5 58.3
Mortgage-backed securities:
Federal agencies ................... $ 172.3 141.8 307.8 299.1
Collateralized mortgage
obligations ....................... 2.2 7.3 4.2 14.6
Total mortgage-backed securities
available for sale .............. $ 174.5 149.1 312.0 313.7
</TABLE>
During the three and six months ended June 30, 1994, certain investment
securities with a total amortized cost of $39.1 million and $49.5 million,
respectively, were sold by the corporation principally because such securities
were called by the issuers prior to maturity, or in certain cases due to
significant deterioration in the creditworthiness of the related issuers. The
sales and calls of investment securities resulted in net losses of $0.2 million
for the second quarter and $0.7 million for the six months ended June 30, 1994.
13
<PAGE>
4. Loans and Leases
The carrying values of loans and leases at June 30, 1994 and December 31, 1993
were:
In millions June 30, December 31,
1994 1993
Commercial ............................... $ 7,910.4 7,624.1
Construction and land development ........ 595.6 565.6
Real estate .............................. 11,920.3 11,738.8
Consumer ................................. 9,586.1 8,606.3
Lease financing .......................... 669.8 698.6
Foreign .................................. 571.3 548.5
Total loans and leases ................. 31,253.5 29,781.9
Unearned discount ........................ (1,080.7) (1,021.1)
Loans and leases, net of
unearned discount .................... $ 30,172.8 28,760.8
Changes in the allowance for credit losses for the quarters and six months
ended June 30 were:
Quarter Six Months
In millions 1994 1993 1994 1993
Balance at beginning of period ............ $ 793.2 774.7 789.2 773.1
Allowance related to loans acquired ..... 6.9 4.1 17.8 5.8
Provision for credit losses ............. 23.7 39.4 60.0 77.5
Credit losses ........................... (68.9) (73.0) (143.6) (142.0)
Recoveries .............................. 35.5 27.8 67.0 58.6
Net credit losses ..................... (33.4) (45.2) (76.6) (83.4)
Balance at end of period .................. $ 790.4 773.0 790.4 773.0
5. Non-accrual, Restructured and 90-Day Past Due Loans and Other Real Estate
Owned
Non-accrual, restructured and 90-day past due loans and other real estate
owned at June 30, 1994 and 1993 and December 31, 1993 were:
In millions June 30 December 31,
1994 1993 1993
Non-accrual loans ....................... $ 143.6 237.4 195.7
Restructured loans ...................... 2.0 2.7 10.3
Total non-accrual and
restructured loans ................... 145.6 240.1 206.0
Other real estate owned ................. 55.1 103.2 63.0
Total non-performing assets ........... 200.7 343.3 269.0
Loans and leases past due
90 days or more* ...................... 68.2 61.7 50.8
Total non-performing assets and
90-day past due loans and leases ..... $ 268.9 405.0 319.8
* Excludes non-accrual and restructured loans.
14
<PAGE>
The effects of non-accrual and restructured loans on interest income for the
quarters and six months ended June 30 were:
Quarter Six Months
In millions 1994 1993 1994 1993
Interest
As originally contracted ........... $ 8.1 3.4 11.8 10.9
As recognized ...................... (0.7) (0.3) (1.2) (1.9)
Reduction of interest income ..... $ 7.4 3.1 10.6 9.0
6. Long-term Debt
During the first six months of 1994, certain banking subsidiaries of the
corporation received $8 million in advances from the Federal Home Loan Bank
(FHLB) bearing interest at 6.23 percent and maturing in April 2009 and $41
million in FHLB advances bearing interest at LIBOR minus 10 basis points
maturing in November 1994. During the first six months of 1994, the
corporation issued $200 million of medium term notes at LIBOR plus 5 basis
points due in May 1996 and $200 million of medium term notes at LIBOR maturing
in May 1996. Additionally, the corporation issued $200 million of
subordinated notes bearing interest at LIBOR plus 5 basis points and maturing
in February 1999. Also, during the first six months of 1994, Norwest
Financial, Inc. issued $716 million of senior and senior subordinated notes
bearing fixed rates ranging from 5.40% to 8.50% and maturing from March 1996
to February 2004.
15
<PAGE>
7. Preferred Stock
The corporation is authorized to issue 5,000,000 shares of preferred stock
without par value. The table below is a summary of the corporation's
preferred stock at June 30, 1994 and December 31, 1993. A detailed
description of the corporation's preferred stock is provided in Note 10 of the
Notes to Consolidated Financial Statements in the corporation's 1993 Annual
Report on Form 10-K, as amended by Amendment No. 1 on Form 10-K/A dated May
13, 1994.
<TABLE>
<CAPTION>
In millions, except share amounts
Annual
Dividend
Shares Outstanding Rate at Amount Outstanding
June 30 December 31 June 30 June 30, December 31,
1994 1993 1994 1994 1993
<S> <C> <C> <C> <C> <C>
10.24% Cumulative,
$100 stated value 1,127,125 1,131,250 10.24% $112.8 113.2
7.00% Cumulative
Convertible, Series B,
$200 stated value 1,143,750 1,143,750 7.00% 228.7 228.7
ESOP Cumulative Convertible,
$1,000 stated value 35,125 - 9.00% 35.1 -
First United Cumulative
Convertible Exchangeable,
Series A, $25 stated value - 1,200,000 - - 30.0
First United Adjustable Rate
Cumulative, Series B,
$1 par value - 188,095 - - 7.9
First United 10.00% Cumulative
Convertible Exchangeable,
Series C, $1 par value - 3,570 - - 0.2
Preferred stock 376.6 380.0
Unearned ESOP shares (31.5) -
Total preferred stock $345.1 380.0
</TABLE>
16
<PAGE>
On March 31, 1994 the corporation issued 40,900 shares of ESOP Cumulative
Convertible Preferred Stock, $1,000 stated value per share ("ESOP Preferred
Stock"). All shares of the ESOP Preferred Stock have been issued to a trustee
acting on behalf of the Norwest Corporation Savings-Investment Plan and Master
Savings Trust (the "Plan"). Dividends are cumulative from the date of initial
issuance and are payable quarterly at an annual rate of 9.00%.
Each share of ESOP Preferred Stock released from the unallocated reserve of
the Plan is convertible into shares of common stock of the corporation based
on the stated value of the ESOP Preferred Stock and the then current market
price of the corporation's common stock. During the second quarter of 1994,
5,775 shares of ESOP Preferred Stock were converted into 241,884 shares of
common stock of the corporation. The ESOP Preferred Stock is also convertible
at the option of the holder at any time, unless previously redeemed. The ESOP
Preferred Stock is redeemable at any time, in whole or in part, at the option
of the corporation at a redemption price per share equal to the higher of (a)
$1,000 per share plus accrued and unpaid dividends and (b) the fair market
value, as defined in the ESOP Preferred Stock Certificate of Designations, of
the ESOP Preferred Stock.
In accordance with the American Institute of Certified Public Accountants
Statement of Position 93-6, "Employers' Accounting for Employee Stock
Ownership Plans", the corporation recorded a corresponding charge to unearned
ESOP shares in connection with the issuance of the ESOP Preferred Stock. The
unearned ESOP shares are reduced as shares of the ESOP Preferred Stock are
committed to be released.
As a result of the acquisition of First United (See Note 11), each share of
the Cumulative Convertible Exchangeable Preferred Stock, Series A, and the
10.00% Cumulative Convertible Exchangeable Preferred Stock, Series C, was
converted into 2.2 and 6.039 shares, respectively, of the corporation's common
stock and each outstanding share of the Adjustable Rate Cumulative Preferred
Stock, Series B, was converted into $42 per share plus accrued and unpaid
dividends.
8. Segment Reporting
The corporation's operations include three primary business segments:
banking, mortgage banking and consumer finance. The corporation, primarily
through its subsidiary banks, offers diversified banking services including
retail, commercial and corporate banking, equipment leasing, trust services,
securities brokerage, investment banking and venture capital investments.
Mortgage banking activities include the origination and purchase of
residential mortgage loans for sale to various investors as well as providing
servicing of mortgage loans for others where servicing rights have been
retained. Consumer finance activities, provided through the corporation's
Norwest Financial subsidiaries, include providing direct installment loans to
individuals, purchasing of sales finance contracts, private label and lease
accounts receivable financing and other related products and services.
17
<PAGE>
Selected financial information by business segment for the quarters and six
months ended June 30 is included in the following summary:
Quarter Six Months
In millions 1994 1993 1994 1993
Revenues:*
Banking $ 938.3 905.3 1,861.0 1,803.5
Mortgage banking 223.0 219.3 441.9 374.6
Consumer finance 299.4 268.4 584.7 531.8
Total $ 1,460.7 1,393.0 2,887.6 2,709.9
Organizational earnings:*
Banking $ 136.2 98.7 264.1 203.1
Mortgage banking 11.5 23.0 22.3 33.5
Consumer finance 54.3 47.2 106.1 90.6
Total $ 202.0 168.9 392.5 327.2
Total assets:
Banking $44,918.4 39,872.3
Mortgage banking 5,261.3 6,523.1
Consumer finance 5,577.1 4,807.8
Total $55,756.8 51,203.2
* Revenues, where applicable, and organizational earnings by business
segment are impacted by intercompany revenues and expenses, such as
interest on borrowings from the parent company, corporate service
fees and allocation of federal income taxes.
9. Mortgage Banking Activities
The detail of mortgage banking non-interest income for each of the quarters
and six months ended June 30 is presented below:
Quarter Six Months
In millions 1994 1993 1994 1993
Origination fees $ 29.4 37.4 56.5 58.1
Servicing fees 48.5 3.5 83.9 22.2
Net gains on sales of
servicing rights 28.7 61.6 37.2 61.8
Net gains on sales of
mortgages 15.9 6.5 62.3 29.2
Other mortgage fee income 22.8 23.1 40.8 38.6
Total mortgage banking
non-interest income $145.3 132.1 280.7 209.9
Mortgage loans serviced for others are not included in the accompanying
consolidated statements of financial condition. The outstanding balances of
serviced loans were $59,321.9 million and $30,221.0 million at June 30, 1994
and 1993, respectively.
18
<PAGE>
Changes in mortgage loan servicing rights purchased for the quarters and six
months ended June 30 were:
Quarters Six Months
In millions 1994 1993 1994 1993
Balance at beginning
of period $210.1 92.4 185.2 64.0
Purchases 158.3 37.8 200.9 69.0
Sales (10.9) (2.4) (17.9) (2.4)
Amortization (7.6) (4.8) (18.2) (7.6)
Adjustments due to
changes in prepayment
assumptions (0.1) (12.6) (0.2) (12.6)
Balance at end of period $349.8 110.4 349.8 110.4
10. Derivative Activities
The corporation and its subsidiaries, as end-users, utilize various types of
derivative products (principally interest rate swaps) as part of an overall
interest rate risk management strategy. Interest rate swaps generally involve
the exchange of fixed and floating rate interest payments based on an
underlying notional amount. Generic swaps' notional amounts do not change for
the life of the contract. Amortizing swaps' notional amounts and lives change
based on a remaining principal amount of a pool of mortgage-backed securities.
Generally, as rates fall the notional amounts decline more rapidly and as
rates increase notional amounts decline more slowly. A key assumption in the
information below is that rates remain constant at June 30, 1994 levels. To
the extent that rates change, both the maturity and variable interest rate
information will change. The basis swaps are contracts where the corporation
receives an amount and pays an amount based on different floating indices.
For the six months ended June 30, 1994, the end-user derivative activities
increased interest income by $6.3 million and reduced interest expense by $15.2
million, for a total benefit to net interest income of $21.5 million. For the
same period in 1993, interest income was increased by $6.7 million and
interest expense was reduced by $9.1 million, for a total benefit to net
interest income of $15.8 million.
19
<PAGE>
The following table presents the maturities and weighted average rates for end-
user derivatives by type:
<TABLE>
<CAPTION>
In millions
Maturity
There-
June 30, 1994 1994 1995 1996 1997 1998 after Total
<S> <C> <C> <C> <C> <C> <C> <C>
Swaps:
Generic receive fixed-
Notional value $ 500 - 405 50 200 100 1,255
Weighted avg.
receive rate 6.15% - 4.71 9.12 5.60 6.11 5.71
Weighted avg. pay rate 4.64% - 4.49 4.63 4.56 4.56 4.57
Amortizing receive fixed-
Notional value $ - 1,838 - - - - 1,838
Weighted avg.
receive rate - 6.50% - - - - 6.50
Weighted avg. pay rate - 4.12% - - - - 4.12
Generic pay fixed-
Notional value $ 100 - - - - 100 200
Weighted avg.
receive rate 4.31% - - - - 4.56 4.44
Weighted avg. pay rate 4.55% - - - - 5.69 5.12
Basis -
Notional value $ - - 200 - 29 - 229
Weighted avg.
receive rate - - 4.56% - 2.76 - 4.33
Weighted avg. pay rate - - 4.35% - 9.80 - 5.04
Interest rate caps (1):
Notional value $ 248 8 16 - 327 - 599
Total notional value $ 848 1,846 621 50 556 200 4,121
Total weighted avg.
rates on swaps:
Receive rate 5.85% 6.50 4.66 9.12 5.24 5.34 5.96
Pay rate 4.63% 4.12 4.44 4.63 5.23 5.12 4.40
(1) Average rates are not meaningful for interest rate caps.
Note: Weighted average variable rates are the actual rates as of June 30, 1994.
</TABLE>
20
Activity in the notional amounts of end-user derivatives for the six months
ended June 30, 1994 is summarized as follows:
<TABLE>
<CAPTION>
In millions December 31, Amortizations June 30,
1993 Additions Maturities Terminations 1994
<S> <C> <C> <C> <C> <C>
Swaps:
Generic receive fixed $ 875 480 - (100) 1,255
Amortizing receive fixed - 1,900 (62) - 1,838
Generic pay fixed 300 - - (100) 200
Basis - 229 - - 229
Total swaps 1,175 2,609 (62) (200) 3,522
Interest rate caps 649 - (50) - 599
Futures 2,000 - - (2,000) -
Total $ 3,824 2,609 (112) (2,200) 4,121
</TABLE>
Gains and losses on terminations of end-user derivatives were not material at
June 30, 1994 and December 31, 1993.
As of December 31, 1993 the corporation had hedged for one year $2.0 billion
of variable rate FHLB borrowings and variable rate deposits using
a stream of purchased put options of Euro Futures. These futures were closed
out during the first quarter of 1994.
21
<PAGE>
The following table provides the gross gains and gross losses not yet
recognized in the income statements for end-user derivatives applicable
to certain hedged assets and liabilities:
<TABLE>
<CAPTION>
In millions
Balance Sheet Category
Interest- Other Long-
Investment bearing Short-term term
June 30, 1994 Securities Loans Deposits Borrowings Debt Total
<S> <C> <C> <C> <C> <C> <C> <C>
Swaps:
Pay variable
Unrealized gains $ - 0.4 - - 3.1 3.5
Pay variable
Unrealized (losses) (7.5) (18.9) (121.5) (9.8) (11.9) (169.6)
Pay variable net (7.5) (18.5) (121.5) (9.8) (8.8) (166.1)
Pay fixed
Unrealized gains - - 11.6 - - 11.6
Basis
Unrealized (losses) (1.9) - - - - (1.9)
Total unrealized gains - 0.4 11.6 - 3.1 15.1
Total unrealized (losses) (9.4) (18.9) (121.5) (9.8) (11.9) (171.5)
Total net $ (9.4) (18.5) (109.9) (9.8) (8.8) (156.4)
Interest rate caps:
Unrealized gains $ 1.4 - - 0.1 0.9 2.4
Unrealized (losses) - - - (0.1) (0.1) (0.2)
Total net $ 1.4 - - - 0.8 2.2
Grand total
Unrealized gains $ 1.4 0.4 11.6 0.1 4.0 17.5
Grand total
Unrealized (losses) (9.4) (18.9) (121.5) (9.9) (12.0) (171.7)
Grand total net $ (8.0) (18.5) (109.9) (9.8) (8.0) (154.2)
</TABLE>
The Corporation has entered into mandatory and standby forward contracts to
reduce interest rate risk on certain mortgage loans held for sale and other
commitments. The contracts provide for the delivery of securities at a
specified future date, at a specified price or yield. At June 30, 1994, the
corporation had forward contracts totaling $4.1 billion, all of which mature
within 240 days. Gains and losses on forward contracts are included in the
determination of market value of mortgages held for sale.
22
<PAGE>
11. Business Combinations
The corporation regularly explores opportunities for acquisitions of financial
institutions and related businesses. Generally, management of the corporation
does not make a public announcement about an acquisition opportunity until a
definitive agreement has been signed.
On January 14, 1994, the corporation completed its acquisition of First
United, a multibank holding company headquartered in Albuquerque, New Mexico,
with total assets of $3.9 billion. The corporation issued 17,784,916 shares
of its common stock in connection with the acquisition. The acquisition was
accounted for using the pooling of interests method of accounting and,
accordingly, the corporation's financial statements have been restated for all
periods prior to the acquisition to include the accounts and operations of
First United.
Net income and net income per share amounts of the corporation and First
United prior to restatement for the years ended December 31, 1993, 1992 and
1991 were:
In millions, except per share amounts 1993 1992 1991
The corporation
Net income ............................ $ 653.6 364.1 400.9
Net income per share
Primary .............................. 2.13 1.16 1.34
Fully diluted ........................ 2.10 1.16 1.33
First United
Net (loss) income ..................... $ (40.5) 29.9 17.4
Net (loss) income per share
Primary .............................. (3.40) 2.18 1.34
Fully diluted ........................ (3.40) 1.84 1.29
The corporation acquired American Land Title Company of Kansas City, Inc. on
July 1, 1994, and issued 166,666 common shares. On April 28, 1994, the
corporation completed its acquisition of D.L. Bancshares, Inc., a $78 million
bank holding company located in Detroit Lakes, Minnesota, for cash of $11.9
million. On May 1, 1994, the corporation completed its acquisition of Double
Eagle Financial Corporation, an insurance agency, located in Phoenix, Arizona,
and issued 307,700 common shares. On April 15, 1994, the corporation
completed its acquisition of Bank of Montana System with assets of $807
million, located in Great Falls, Montana, and issued 4,174,105 common shares.
On March 15, 1994, the corporation completed its acquisition of Community
Credit Co., a $173 million consumer finance company located in Minneapolis,
Minnesota, and issued 3,726,871 common shares. On February 2, 1994, the
corporation completed its acquisition of First National Bank of Arapahoe
County, First National Bank of Lakewood and First National Bank of Southeast
Denver, with assets of $36 million, $61 million and $134 million,
respectively, located in the Denver, Colorado metro area, and issued 260,896,
337,582 and 803,439 common shares, respectively. Also on February 2, 1994,
the corporation completed its acquisition of Lindeberg Financial Corporation,
a $55 million bank holding company, located in Forest Lake, Minnesota, and
issued 413,599 common shares. On January 1, 1994, the corporation completed
its acquisition of St. Cloud National Bank & Trust Co., a $119 million bank,
and on January 6, 1994, closed on St. Cloud Metropolitan Agency, Inc., an
insurance agency, and issued 1,105,820 and 32,969 common shares, respectively.
23
<PAGE>
The acquisitions of Bank of Montana System, First National Bank of Arapahoe
County, First National Bank of Lakewood, First National Bank of Southeast
Denver, Lindeberg Financial Corporation, St. Cloud National Bank & Trust Co.
and Community Credit Co. were accounted for using the pooling of interests
method of accounting; however, the financial results of the corporation for
periods prior to these acquisitions have not been restated because the effect
of these acquisitions on the corporation's financial statements was not
material. The acquisitions of St. Cloud Metropolitan Agency, Inc., D.L.
Bancshares, Inc., Double Eagle Financial Corporation and American Land Title
of Kansas City, Inc., were accounted for using the purchase method.
The corporation has seven other pending acquisitions with total assets of
approximately $997 million and it is anticipated that cash of $39.8 million
and approximately 3.8 million common shares will be issued upon completion of
these acquisitions. These pending acquisitions, subject to approval by
regulatory agencies, are expected to be completed during 1994 and are not
significant to the financial statements of the corporation, either
individually or in the aggregate.
24
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Management's discussion and analysis should be read together with the
financial statements submitted under Item 1 of Part I and with Norwest
Corporation's 1993 Annual Report on Form 10-K, as amended by Amendment No. 1
on Form 10-K/A dated May 13, 1994.
EARNINGS PERFORMANCE
The corporation reported net income of $202.0 million for the quarter ended
June 30, 1994, a 19.6 percent increase over the $168.9 million earned in the
second quarter of 1993. Net income per common share was 61 cents, compared
with 52 cents in the second quarter of 1993, an increase of 17.3 percent.
Return on realized common equity was 21.7 percent and return on assets was
1.48 percent for the second quarter of 1994, compared with 20.4 percent and
1.37 percent, respectively, in the second quarter of 1993.
The 1993 results have been restated to include First United Bank Group, Inc.
("First United"), acquired on January 14, 1994, in a pooling of interests
transaction. For a discussion of additional completed and pending
acquisitions, see Note 9 to the unaudited consolidated financial statements
for the second quarter 1994.
ORGANIZATIONAL EARNINGS*
The earnings of the corporation's major entities appear below for the quarters
and six months ended June 30.
Quarter Six Months
In millions 1994 1993 1994 1993
Banking $ 136.2 98.7 264.1 203.1
Mortgage banking 11.5 23.0 22.3 33.5
Norwest Financial Services, Inc.
and subsidiaries 54.3 47.2 106.1 90.6
Net income $ 202.0 168.9 392.5 327.2
* Earnings of the entities listed are impacted by intercompany revenues and
expenses, such as interest on borrowings from the parent company, corporate
service fees and allocation of federal income taxes.
Banking
The Banking Group reported second quarter 1994 earnings of $136.2 million, a
38.0 percent increase over the second quarter 1993 earnings of $98.7 million.
For the six months ended June 30, 1994, earnings increased 30.0 percent to
$264.1 million compared with $203.1 million for the same period in 1993. The
increased earnings in the first six months of 1994 reflected an 11.8 percent
growth in tax-equivalent net interest income to $916.7 million, due to a 9.7
percent increase in average earning assets and a 10 basis point increase in
net interest margin. The Banking Group's provision for credit losses
decreased $18.5 million to $7.8 million, compared with the same period in
1993, reflecting continued decreases in non-performing assets and net credit
losses. Non-interest income decreased 6.0 percent to $443.7 million from the
first half of 1993. The Banking Group recorded securities losses of $5.0
million in the six months ended June 30, 1994, compared with securities gains
of $28.7 million in the same period last year. Non-interest expenses of
$961.0 million for the first half of 1994 were essentially flat compared with
the first six months of 1993.
25
<PAGE>
Mortgage Banking
Mortgage banking operations earned $11.5 million for the second quarter of
1994 and $22.3 million during the first six months of 1994 compared with
$23.0 million earned in the second quarter of 1993 and $33.5 million in the
first half of 1993, decreases of 49.9 percent and 33.4 percent, respectively.
The 1993 earnings reflected a gain of $61.8 million realized on the sale of
$2.9 billion of mortgage servicing rights in accordance with the terms of a
long-term contract. Mortgage originations were $6.7 billion in the second
quarter of 1994, a decrease of 22.7 percent from the same period last year.
For the first six months of 1994, mortgage originations were $13.9 billion, up
1.5 percent over the first six months of 1993. The mortgage servicing
portfolio has increased $29.1 billion from the end of the second quarter of
1993 and $13.7 billion from year-end 1993 and totaled $59.3 billion at June
30, 1994.
Norwest Financial Services, Inc. and subsidiaries ("Norwest Financial")
Norwest Financial reported earnings of $54.3 million in the second quarter of
1994, compared with $47.2 million in the second quarter of 1993, an increase
of 15.0 percent. Norwest Financial's net income of $106.1 million for the
first six months of 1994 was up 17.1 percent from the first six months of
1993. The growth in year-to-date earnings reflected a 13.5 percent increase
in Norwest Financial's tax-equivalent net interest income as average finance
receivables grew 12.9 percent from the first half of 1993 and net interest
margin widened 4 basis points, reflecting lower funding costs.
CONSOLIDATED INCOME STATEMENT ANALYSIS
Net Interest Income
Consolidated tax-equivalent net interest income was $704.6 million in the
second quarter of 1994, compared with $621.9 million in the second quarter of
1993, an increase of 13.3 percent. For the first six months of 1994, tax-
equivalent net interest income increased 9.8 percent from the same period in
1993 to $1,361.8 million. Growth in tax-equivalent net interest income over
the second quarter of 1993 was a result of a 10.7 percent growth in average
earning assets and an 11 basis point increase in net interest margin. Net
interest margin, the ratio of annualized tax-equivalent net interest income to
average earning assets, was 5.65 percent in the second quarter of 1994,
compared with 5.54 percent in the second quarter of 1993. Net interest margin
was 5.56 percent for the six months ended June 30, 1994, down slightly from
5.58 percent for the first half of 1993. The increase in net interest margin
from the second quarter of 1993 is primarily due to a 16 basis point decline
in funding costs, partially offset by slightly lower yields on earning assets.
The following table summarizes changes in tax-equivalent net interest income
between the quarters ended June 30 and March 31 and six months ended June 30.
26
<PAGE>
Changes in Tax-Equivalent Net Interest Income*
In millions 2Q 94 2Q 94 6 Mos. 94
over over over
2Q 93 1Q 94 6 Mos. 93
Increase (decrease) due to
Change in earning asset volume ................ $ 69.4 26.5 126.8
Change in volume of interest-free funds ....... 5.4 (4.7) 20.2
Change in net return from
Interest-free funds .......................... (3.1) 3.5 (9.5)
Interest-bearing funds ....................... (14.3) 24.2 (63.4)
Change in earning asset mix ................... 21.9 - 43.4
Change in funding mix ......................... 3.4 (2.1) 3.9
Change in tax-equivalent net interest income .... $ 82.7 47.4 121.4
* Net interest income is presented on a tax-equivalent basis utilizing a
federal incremental tax rate of 35% in the first and second quarters of
1994 and the six months ended June 30, 1994 and 34% for all prior periods.
Trading Revenues
Interest income on a tax-equivalent basis derived from trading account
securities was $7.8 million and $10.6 million for the three months ended June
30, 1994 and 1993, respectively. Year-to-date tax-equivalent interest income
was $16.3 million for the first half of 1994 compared with $13.8 million for
the comparable period of 1993. Non-interest trading revenues were $(8.9)
million and $(17.3) million for the three and six months ended June 30, 1994,
respectively. The comparable figures for 1993 were $10.3 million for the
second quarter and $16.6 million for the first six months. The trading
revenues were derived from the following activities:
<TABLE>
<CAPTION>
Three Months Ended June 30,
In millions 1994 1993
Non- Non-
Interest interest Interest interest
Income Income Total Income Income Total
<S> <C> <C> <C> <C> <C> <C>
Securities:
U.S. Treasury
and agencies $ 3.0 - 3.0 2.3 - 2.3
State and
municipal 0.5 - 0.5 0.4 - 0.4
Mortgage-backed 0.2 - 0.2 0.4 - 0.4
Other 0.3 - 0.3 0.3 - 0.3
4.0 - 4.0 3.4 - 3.4
Derivatives:
Swaps and other
interest rate
contracts 3.8 (9.1) (5.3) 7.2 5.4 12.6
Options - 3.7 3.7 - - -
Debt instruments - - - - (0.4) (0.4)
Futures - 0.3 0.3 - 0.1 0.1
Gains (losses) on
securities sold - (5.2) (5.2) - 4.1 4.1
Foreign exchange
trading - 1.4 1.4 - 1.1 1.1
Total $ 7.8 (8.9) (1.1) 10.6 10.3 20.9
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
In millions 1994 1993
Non- Non-
Interest interest Interest interest
Income Income Total Income Income Total
<S> <C> <C> <C> <C> <C> <C>
Securities:
U.S. Treasury
and agencies $ 6.9 - 6.9 4.4 - 4.4
State and
municipal 1.0 - 1.0 1.0 - 1.0
Mortgage-backed 0.8 - 0.8 0.6 - 0.6
Other 0.3 - 0.3 0.6 - 0.6
9.0 - 9.0 6.6 - 6.6
Derivatives:
Swaps and other
interest rate
contracts 7.3 (17.1) (9.8) 7.2 9.5 16.7
Options - 6.6 6.6 - - -
Debt instruments - - - - 0.1 0.1
Futures - 1.4 1.4 - (1.2) (1.2)
Gains (losses) on
securities sold - (11.0) (11.0) - 6.1 6.1
Foreign exchange
trading - 2.8 2.8 - 2.1 2.1
Total $ 16.3 (17.3) (1.0) 13.8 16.6 30.4
</TABLE>
Provision for Credit Losses
The corporation provided $23.7 million for credit losses in the second quarter
of 1994, compared with $39.4 million in the same period a year ago. Net
credit losses totaled $33.4 million and $45.2 million for the three months
ended June 30, 1994 and 1993, respectively. As a percent of average loans and
leases, net credit losses were 0.45 percent in the second quarter of 1994,
compared with 0.70 percent in the same period a year ago.
For the first six months of 1994, the provision for credit losses totaled
$60.0 million, compared with $77.5 million in the year-earlier period. Net
credit losses were $76.6 million, or 0.53 percent of average loans and leases,
for the six months ended June 30, 1994, compared with $83.4 million, or 0.65
percent, for the same period in 1993. The decrease in the provision for
credit losses reflects the continued reduction in net credit losses and non-
performing assets.
Non-interest Income
Consolidated non-interest income of $386.9 million decreased 8.2 percent from
$421.7 million in the second quarter of 1993 primarily due to investment
securities losses of $43.5 million recorded during the second quarter of 1994,
providing an opportunity to reinvest at higher yields, and a reduction in net
gains on sales of servicing rights of $32.9 million. For the first six months
of 1994, non-interest income was up $50.2 million, an increase of 6.5 percent
over 1993. This increase was primarily due to increased mortgage banking
revenues, insurance fees and deposit service charges. Excluding gains
(losses) on investment/mortgage-backed securities and investment/mortgage-
backed securities available for sale and venture capital gains, non-interest
income increased 5.3 percent from the second quarter of 1993 and 10.9 percent
from the first six months of 1993.
28
<PAGE>
Mortgage banking revenues were $145.3 million for the second quarter of 1994,
an increase of 13.2 percent over the same period in 1993. For the six months
ended June 30, 1994, mortgage banking revenues were $280.7 million compared
with $209.9 million for the first half of 1993, an increase of 33.7 percent.
The growth in mortgage banking revenues reflects the continued growth in
mortgage loan fundings and the servicing portfolio. See Note 9 to the
unaudited consolidated financial statements for the second quarter of 1994 for
a detailed analysis of mortgage banking revenues for the three and six months
ended June 30, 1994 and 1993.
Credit card fees were lower for both the quarter and the six months ended June
30, 1994, compared with the same periods in the preceding year. The decrease
is attributable to the repurchase of $858 million of credit card receivables
from the securitized credit card receivable trusts during 1993 and 1994. The
repurchase program was completed during the second quarter of 1994. Revenues
on securitized credit card receivables are recorded in non-interest income
rather than net interest income.
Net venture capital gains were $15.0 million for the three months and $35.2
million for the six months ended June 30, 1994, compared with $20.9 million
and $26.6 million, respectively, for the same periods in 1993. Sales of
venture capital securities generally relate to timing of holdings becoming
publicly traded and prevailing subsequent market conditions. Therefore,
venture capital gains are unpredictable in nature. Net unrealized
appreciation in the venture capital investment portfolio was $81.5 million at
June 30, 1994.
Non-interest Expenses
Consolidated non-interest expenses of $759.0 million increased 0.5 percent
over the second quarter of 1993. For the six months ended June 30, 1994, non-
interest expenses were up $88.7 million to $1,528.1 million, an increase of
6.2 percent over 1993. The quarterly and year-to-date results reflected
higher salaries and benefits costs at Norwest Mortgage to support origination
and servicing growth and in the Banking Group due to acquisitions. Offsetting
the increases in salaries and benefits were decreases in other non-interest
expenses of $68.2 million for the three months and $93.1 million for the six
months ended June 30, 1994, compared with the same periods of the prior year.
These decreases principally reflect one-time special charges recorded in 1993
for changes in amortization methods of certain intangibles and write-downs of
excess facilities and other assets.
29
<PAGE>
CONSOLIDATED BALANCE SHEET ANALYSIS
Earning Assets
At June 30, 1994, earning assets were $50.8 billion, an increase of 1.7
percent from $50.0 billion at December 31, 1993. This increase was primarily
due to a 16.4 percent increase in total investment securities and a 4.9
percent increase in net loans, partially offset by a 36.8 percent decrease in
mortgages held for sale.
Average earning assets were $49.7 billion in the second quarter of 1994, an
increase of 10.7 percent compared with the second quarter of 1993. This
increase is due to a 14.9 percent increase in average loans and leases and a
8.8 percent increase in total investment securities.
Average earnings assets for the six months ended June 30, 1994 were $49.0
billion, 10.3 percent higher than the year-earlier period. Average loans and
leases increased 14.2 percent to $29.4 billion. Average deposits for the
first half of 1994 were $35.5 billion, compared to $31.0 billion for the same
period in 1993, an increase of 14.5 percent.
Credit Quality
Loans and leases as of the end of each of the last five quarters were as
follows:
In millions 1994 1993
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
Commercial, financial and
industrial ................ $ 6,952 6,984 6,686 6,631 6,454
Agricultural ................ 959 869 938 836 820
Real estate
Secured by 1-4 family
residential properties .. 8,521 8,256 8,321 8,483 7,941
Secured by development
properties .............. 1,767 1,686 1,641 1,596 1,516
Secured by construction
and land development .... 596 590 566 540 458
Secured by owner-
occupied properties ..... 1,632 1,755 1,777 1,731 1,642
Consumer .................... 7,157 6,769 6,560 6,242 5,931
Credit card and check credit 2,429 2,227 2,046 1,623 1,340
Lease financing ............. 670 672 698 677 645
Foreign ..................... 571 539 549 542 532
Total loans and leases .. 31,254 30,347 29,782 28,901 27,279
Unearned discount ....... (1,081) (1,060) (1,021) (1,014) (1,007)
Total loans and leases,
net of unearned
discount ............. $30,173 29,287 28,761 27,887 26,272
30
<PAGE>
At June 30, 1994, the allowance for credit losses totaled $790.4 million, or
2.62 percent of loans and leases outstanding. Comparable amounts were $773.0
million, or 2.94 percent, at June 30, 1993, and $789.2 million, or 2.74
percent, at December 31, 1993. The ratio of the allowance for credit losses
to the total non-performing assets and 90-day past due loans and leases was
293.9 percent at June 30, 1994, compared with 190.9 percent at June 30, 1993
and 246.8 percent at December 31, 1993.
Non-performing assets and 90-day past due loans totaled $268.9 million, or
0.48 percent of total assets, at June 30, 1994, compared with $405.0 million,
or 0.79 percent, at June 30, 1993, and $319.8 million, or 0.59 percent, at
December 31, 1993. The decrease from June 30, 1993, reflects a $55.6 million
decrease in commercial non-accrual loans, a $23.8 million decrease in real
estate non-accrual loans, and a $48.0 million decrease in other real estate
owned. The decrease from December 31, 1993, included an $18.5 million
decrease in commercial non-accrual loans, a $12.7 million decrease in real
estate non-accrual loans, a $6.5 million decrease in construction and
development non-accrual loans, a $14.5 million decrease in other non-accrual
loans, an $8.3 million decrease in restructured loans and an $8.0 million
decrease in other real estate owned, partially offset by a $17.5 million
increase in 90-day past due loans.
The corporation manages exposure to credit risk through loan portfolio
diversification by customer, product, industry and geography. As a result,
there is no undue concentration in any single sector.
The corporation's banking group operates in 15 states, largely in the Midwest
and Rocky Mountain regions of the country. In general, the economy in both of
these regions is noticeably stronger than last fall. Midwestern employment
growth is accelerating with respect to construction and manufacturing. Though
agricultural conditions vary considerably throughout the Midwest, farmland
prices have shown considerable strength and substantial disaster payments are
mitigating the effects of last year's poor crops. The economy of the Rocky
Mountain region remains the strongest in the nation. In some Rocky Mountain
states, job growth is double the national average.
Norwest Card Services, Norwest Mortgage and Norwest Financial operate on a
nationwide basis. With respect to Norwest Card Services, 44 percent of the
credit card portfolio is within the 15-state Norwest banking region.
Approximately 61 percent of the portfolio is accounted for by the states of
Massachusetts, Minnesota, Iowa, New York, Connecticut, Colorado, California,
Illinois, Nebraska and Oklahoma. No one state accounts for more than 10
percent of the total credit card portfolio.
31
<PAGE>
Norwest Mortgage operates in all 50 states, representing the largest retail
mortgage network in the country. Norwest Financial engages in consumer
finance activities in 46 states and all 10 Canadian provinces. The general
strength of the consumer sector of the national economy and the extent of the
geographical diversification exercised by Norwest Mortgage and Norwest
Financial help to mitigate the credit risk in the related loan portfolios.
Interest-bearing Liabilities
At June 30, 1994, interest-bearing liabilities totaled $41.8 billion, a 5.1
percent increase from $39.8 million at December 31, 1993. The increase is
primarily due to increases in short-term borrowings and long-term debt.
Average interest-bearing liabilities were $40.9 billion during the second
quarter of 1994, up 9.6 percent from the second quarter of 1993. The increase
is due to an 11.9 percent increase in average interest-bearing deposits and a
26.8 percent increase in average long-term debt, partially offset by a 10.2
percent decrease in average short-term borrowings.
The corporation's senior debt is currently rated AA+ by Thomson BankWatch, AA
by Fitch Investors Services, Inc. and Duff & Phelps, AA- by Standard & Poor's
and Aa3 by Moody's. The corporation's commercial paper/short-term debt is
currently rated TBW-1 by Thomson BankWatch, P1 by Moody's, A1+ by Standard &
Poor's, Duff 1+ by Duff & Phelps and F-1+ by Fitch Investors Services, Inc.
Norwest Financial's senior debt is currently rated AA+ by Thomson BankWatch
and Fitch Investors Services, Inc., AA by Duff & Phelps, AA- by Standard &
Poor's and Aa3 by Moody's.
Capital Ratios
The corporation's Tier 1 capital ratio was 10.00 percent at June 30, 1994, and
its total capital to risk-based assets ratio was 12.40 percent, compared with
9.71 percent and 12.39 percent, respectively, at December 31, 1993. The
corporation's leverage ratio was 6.85 percent at June 30, 1994, compared with
6.46 percent at December 31, 1993. These ratios compare favorably to the
regulatory minimums of 4.0 percent for Tier 1, 8.0 percent for total capital
to risk-based assets, and 3.0 percent for leverage ratio. The corporation's
dividend payout was 30.3 percent for the second quarter of 1994 compared with
31.7 percent for the second quarter of 1993. During the first and second
quarters of 1994, the corporation paid a quarterly dividend of 18.5 cents per
common share, up 2 cents per common share from the from the fourth quarter
1993.
32
<PAGE>
Consolidated average balance sheets and related tax-equivalent yields and
rates for the quarters ended June 30, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
In millions 1994 1993
Interest Average Interest Average
Average Income/ Yields/ Average Income/ Yields/
Balance Expense* Rates* Balance Expense* Rates*
<S> <C> <C> <C> <C> <C> <C>
Assets
Money market investments $ 562 $ 6.9 5.01% $ 482 $ 3.5 2.89%
Trading account securities 267 7.8 11.66 250 10.6 17.09
Investment securities 1,210 24.5 8.07 1,918 36.0 7.52
Mortgage-backed securities - - - 191 2.5 5.28
Investment securities
available for sale 2,140 28.5 5.54 1,620 29.6 7.32
Mortgage-backed securities
available for sale 10,298 174.5 6.60 8,813 149.1 6.76
Total investment
securities 13,648 227.5 6.57 12,542 217.2 6.93
Student loans available
for sale 1,557 26.1 6.73 1,276 23.1 7.27
Mortgages held for sale 3,873 64.6 6.67 4,421 76.0 6.87
Loans and leases 29,820 748.2 10.05 25,951 648.5 10.01
Total earning assets 49,727 1,081.1 8.67 44,922 978.9 8.72
Allowance for credit losses (805) (788)
Cash and due from banks 2,949 2,716
Other assets 2,860 2,517
Total assets $54,731 $49,367
Liabilities and Stockholders' Equity
Non interest-bearing
deposits $ 8,515 $ 7,203
Interest-bearing
deposits 27,019 208.3 3.09 24,143 208.7 3.47
Short-term borrowings 6,827 68.6 4.03 7,604 60.8 3.21
Long-term debt 7,096 99.6 5.62 5,597 87.5 6.26
Total interest-bearing
liabilities 40,942 376.5 3.69 37,344 357.0 3.83
Other liabilities 1,437 1,265
Stockholders' equity 3,837 3,555
Total liabilities and
stockholders' equity $54,731 $49,367
Net interest income
tax-equivalent basis $ 704.6 $621.9
Yield spread 4.98 4.89
Net interest income to
earning assets 5.65 5.54
Interest-bearing
liabilities to
earning assets 82.33 83.13
</TABLE>
* Interest income and yields are calculated on a tax-equivalent basis
utilizing a federal incremental tax rate of 35% and 34% in 1994 and 1993,
respectively. Non-accrual loans and the related negative income effect have
been included in the calculation of yields.
33
<PAGE>
Consolidated average balance sheets and related tax-equivalent yields and rates
for the six months ended June 30, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
In millions 1994 1993
Interest Average Interest Average
Average Income/ Yields/ Average Income/ Yields/
Balance Expense* Rates* Balance Expense* Rates*
<S> <C> <C> <C> <C> <C> <C>
Assets
Money market investments $ 531 $ 12.3 4.67% $ 542 $ 8.1 3.01%
Trading account securities 319 16.3 10.33 233 13.8 11.98
Investment securities 1,096 46.6 8.50 1,938 72.6 7.49
Mortgage-backed securities - - - 160 4.3 5.33
Investment securities
available for sale 2,358 61.6 5.46 1,575 59.3 7.54
Mortgage-backed securities
available for sale 9,572 312.0 6.48 8,975 313.7 6.99
Total investment
securities 13,026 420.2 6.48 12,648 449.9 7.11
Student loans available
for sale 1,537 50.2 6.59 1,256 43.7 7.01
Mortgages held for sale 4,245 132.7 6.25 4,037 143.4 7.11
Loans and leases 29,363 1,449.5 9.91 25,714 1,295.7 10.11
Total earning assets 49,021 2,081.2 8.52 44,430 1,954.6 8.82
Allowance for credit losses (807) (786)
Cash and due from banks 2,967 2,685
Other assets 2,801 2,547
Total assets $53,982 $48,876
Liabilities and Stockholders' Equity
Non interest-bearing
deposits $ 8,649 $ 6,992
Interest-bearing
deposits 26,895 413.4 3.10 24,057 418.0 3.50
Short-term borrowings 6,139 113.6 3.73 7,755 126.6 3.29
Long-term debt 6,866 192.4 5.61 5,344 169.6 6.35
Total interest-bearing
liabilities 39,900 719.4 3.63 37,156 714.2 3.87
Other liabilities 1,546 1,229
Stockholders' equity 3,887 3,499
Total liabilities and
stockholders' equity $53,982 $48,876
Net interest income
tax-equivalent basis $1,361.8 $1,240.4
Yield spread 4.89 4.95
Net interest income to
earning assets 5.56 5.58
Interest-bearing
liabilities to
earning assets 81.39 83.63
</TABLE>
* Interest income and yields are calculated on a tax-equivalent basis
utilizing a federal incremental tax rate of 35% and 34% in 1994 and 1993,
respectively. Non-accrual loans and the related negative income effect have
been included in the calculation of yields.
34
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of stockholders of the corporation was held on April 26,
1994. There were 310,965,468 shares of common stock outstanding and entitled
to vote at said meeting; and a total 270,028,969 shares (86.8%) were present
at the meeting in person or by proxy. The stockholders voted to approve the
corporation's Performance-Based Compensation Policy for Covered Executive
Officers (243,282,092 for, 24,156,494 against, and 2,590,383 abstained), the
Employee's Deferred Compensation Plan (247,752,056 for, 20,290,781 against,
and 1,986,132 abstained), an amendment to the corporation's Directors' Formula
Stock Award Plan to increase the annual award to non-employee directors
(235,871,993 for, 31,013,526 against, and 3,143,450 abstained), and ratified
the appointment of KPMG Peat Marwick to audit the books of the corporation and
subsidiaries for the year ending December 31, 1994 (267,693,292 for, 823,558
against, and 1,512,119 abstained).
In addition, 17 nominees were elected directors of the corporation, as
follows:
Shares FOR Shares WITHHELD
David A. Christensen 268,684,377 1,344,592
Gerald J. Ford 268,560,380 1,468,589
Pierson M. Grieve 268,767,325 1,261,644
Charles M. Harper 268,586,139 1,442,830
N. Berne Hart 267,684,395 2,344,574
William A. Hodder 268,670,016 1,358,953
George C. Howe 268,638,646 1,390,323
Lloyd P. Johnson 268,795,494 1,233,475
Reatha Clark King 268,563,757 1,465,212
Richard M. Kovacevich 268,774,011 1,254,958
Richard S. Levitt 268,759,588 1,269,381
Richard D. McCormick 259,381,835 10,647,134
Cynthia H. Milligan 268,114,103 1,914,866
John E. Pearson 268,603,181 1,425,788
Ian M. Rolland 268,619,841 1,409,128
Stephen E. Watson 268,666,943 1,362,026
Michael W. Wright 268,671,942 1,357,027
There were no broker non-votes.
35
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
The following exhibits are filed in response to Item 601 of Regulation
S-K.
Exhibit
No. Exhibit Page
4. Copies of instruments with respect to long-term debt
will be furnished to the Commission upon request.
10(a). Performance-Based Compensation Policy for Covered
Executive Officers ...................................... 38
10(b). Employees' Deferred Compensation Plan .................... 41
10(c). Directors' Formula Stock Award Plan as Amended ........... 47
11. Computation of Earnings Per Share ........................ 51
12(a). Computation of Ratio of Earnings to Fixed Charges ........ 53
12(b). Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends ........................... 54
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended June 30, 1994.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NORWEST CORPORATION
August 15, 1994 By /s/ Michael A. Graf
Senior Vice President
and Controller
(Chief Accounting Officer)
37
<PAGE>
Exhibit 10(a).
NORWEST CORPORATION
Performance-Based Compensation Policy for Covered
Executive Officers
1. Purpose. The purpose of the "Norwest Corporation
Performance-Based Compensation Policy for Covered Executive
Officers" (the "Policy") is to establish one or more
performance goals for payment of incentive compensation other
than stock options and the maximum amount of such incentive
compensation that may be paid to certain executive officers.
It is the Committee's intention that incentive compensation
awarded to each Covered Executive Officer (as defined below)
pursuant to the Policy for the taxable year commencing January
1, 1994 and each taxable year thereafter be deductible by the
Corporation for federal income tax purposes in accordance with
Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the Proposed Regulations published December
20, 1993 relating thereto (the "Proposed Regulations").
2. Covered Executive Officers. This Policy shall apply to
any individual (a "Covered Executive Officer") who, on the last
day of a taxable year, commencing with the taxable year
beginning January 1, 1994, is (a) the chief executive officer
of the Corporation or is acting in such capacity, or (b) is
among the four highest compensated executive officers (other
than the chief executive officer) of the Corporation. Whether
an individual is the chief executive officer or among the four
highest compensated executive officers shall be determined
pursuant to the executive compensation disclosure rules under
the Securities Exchange Act of 1934.
3. Incentive Compensation Award/Establishment of Performance
Goals. An incentive compensation award to a Covered Executive
Officer pursuant to this Policy may be paid in the form of
cash, stock, or restricted stock, or any combination thereof.
Payment of an incentive compensation award to a Covered
Executive Officer under this Policy will be contingent upon the
attainment of the performance goal or goals for the Performance
Period established for such Covered Executive Officer by the
Committee as provided herein. The Committee shall retain the
discretion to reduce the incentive compensation award payable
to a Covered Executive Officer, notwithstanding attainment of
any performance goal.
The Committee shall establish in writing one or more
performance goals to be attained (which perfomance goals may be
stated as alternative performance goals) for a Performance
Period for each Covered Executive Officer on or before the
latest date permitted under Section 162(m) of the Code, the
Proposed Regulations or in any other regulations promulgated
thereunder or in rulings or advisory opinions published by the
Internal Revenue Service (the "IRS"). Performance goals may be
based on any one or more of the following business criteria (as
defined in paragraph 4 below) as the Committee may select:
* Earnings Per Share
* Business Unit Net Earnings
38
<PAGE>
* Return on Common Equity.
The maximum amount of an incentive compensation award for any
Performance Period to any Covered Executive Officer shall be a
dollar amount not to exceed four tenths of one percent (.4%) of
the Corporation's Net Income (as defined below).
4. Definitions. For purposes of this Policy and for
determining whether a particular performance goal is attained,
the following terms shall have the meanings given them below:
(a) The term "Business Unit Net Earnings" shall mean the
net earnings of the business unit of the Corporation
managed by a Covered Executive Officer, as determined in
accordance with generally accepted accounting principles,
adjusted in accordance with the Corporation's management
accounting practices and conventions in effect at the
beginning of the Performance Period, and as further
adjusted in the same manner as provided below for Net
Income.
(b) The term "Earnings Per Share" shall mean the
Corporation's primary earnings per share as reported in the
Corporation's consolidated financial statements for the
Performance Period, adjusted in the same manner as provided
below for Net Income.
(c) The term "Net Income" shall mean the Corporation's
net income for the applicable Performance Period as
reported in the Corporation's consolidated financial
statements, adjusted to eliminate the effect of (1)
restatements of prior years' financial results relating to
an acquisition accounted for as a pooling of interests; (2)
losses resulting from discontinued operations; (3)
extraordinary gains or losses; (4) the cumulative effect
of changes in generally accepted accounting principles; and
(5) any other unusual, non-recurring gain or loss which is
separately identified and quantified in the Corporation's
financial statements.
(d) The term "Performance Period" shall mean a calendar
year, commencing January 1 and ending December 31.
(e) The term "Return on Common Equity" shall mean the
Net Income of the Corporation on an annualized basis less
dividends paid on outstanding preferred stock, divided by
the Corporation's average total common equity for the
Performance Period.
5. Applicability of Certain Provisions of the 1985 Long-Term
Incentive Compensation Plan and the Employees' Deferred
Compensation Plan to Incentive Compensation Awards. An
incentive compensation award paid in stock or restricted stock
pursuant to this policy shall be governed by the provisions
(other than provisions with respect to the computation of such
award) of the Corporation's 1985 Long-Term Incentive
Compensation Plan. Deferral of an incentive compensation award
paid in cash under this Policy shall be made pursuant to the
provisions of the Corporation's Employees' Deferred
Compensation Plan.
39
<PAGE>
6. Effective Date; Amendment and Termination. This Policy
shall be effective as of January 1, 1994; provided, however,
that no incentive compensation award shall be paid pursuant to
this Policy unless this Policy has been approved by the
stockholders of the Corporation. The Committee may at any time
terminate, suspend, amend or modify this Policy except that
stockholder approval shall be required for any amendment or
modification to this Policy that, in the opinion of counsel,
would be required by Section 162(m) of the Code, the Proposed
Regulations, or any other regulations promulgated under the
Code, or rulings or advisory opinions published by the IRS.
40
<PAGE>
Exhibit 10(b).
NORWEST CORPORATION
EMPLOYEES' DEFERRED COMPENSATION PLAN
1. Eligibility. Each full-time employee of Norwest
Corporation (the "Corporation") or any of its subsidiaries who
has target total compensation of $80,000 or more
("Compensation") and who has also been selected for
participation in this Plan by the Human Resources Committee of
the Board of Directors or such officers of the Corporation to
which said Committee has delegated its authority ("Eligible
Employee") shall be eligible to participate in the Employees'
Deferred Compensation Plan (the "Plan").
2. Deferral of Compensation. An Eligible Employee may
elect to defer all or a portion of his or her Compensation,
subject, however, to a minimum deferral per pay period of
$100, that he or she may earn from the Corporation or its
subsidiaries during the calendar year (the "Deferral Year")
following the year in which the Deferral Election (as defined
in Section 3(a)) is made; provided however, that any other
payroll deductions elected by the Eligible Employee (such as
payments for welfare or retirement benefits or insurance),
including FICA taxes, shall be made before any deferrals are
made under this Plan. Such election shall be made pursuant to
Section 3.
3. Election to Participate and Defer Compensation.
a) Participation. An Eligible Employee becomes a
participant in the Plan by filing not later than December 15
of the year preceding the Deferral Year an irrevocable
election (the "Deferral Election") with the Plan Administrator
(as defined in Section 10) on a form provided for that
purpose. An Eligible Employee who has made a Deferral
Election under this Section for any year and has a Deferral
Account (as defined in Section 4) is deemed a "Participant."
The Deferral Election shall be effective only for the Deferral
Year specified. A new Deferral Election must be filed for
each Deferral Year.
b) Deferral Election. The Deferral Election shall
consist of two parts: 1) the deferral of incentive pay which
is earned throughout the year and paid after the end of the
year, and 2) the deferral of base pay or incentives, which are
paid on a periodic basis during the year. The employee shall
specify in the Deferral Election a) an amount to be deferred,
expressed either as a percentage or a dollar amount of
Compensation otherwise payable in cash to the employee; b) an
earnings option as described in Section 4; c) one of the
payment options described in Section 6; and d) the event which
triggers payment or the year in which amounts deferred shall
be paid in a lump sum or in which installment payments shall
commence pursuant to Section 6.
c) Initial Deferral Election or Initial Eligibility.
The initial Deferral Elections by Participants will be made
within thirty days of the effective date of the Plan for
compensation to be earned subsequent to the Deferral Election.
41
<PAGE>
A new Eligible Employee must make a Deferral Election within
thirty days of the date the employee becomes eligible to
participate in the Plan to defer compensation earned in the
current year.
d) Early Withdrawal. A Participant who wishes to
receive payment of all of his or her deferred Compensation on
a date earlier than that specified in the Deferral Election
may do so by filing a request for such early withdrawal with
the Corporation, whereupon the balance of the Deferral
Account, reduced by 10%, shall be paid to the Participant.
Further, the Participant will be ineligible to defer any
further Compensation in the current Deferral Year and for the
two subsequent Deferral Years.
4. Deferral Account
a) Earnings Options. The earnings options available for
selection in the Deferral Election are as follows:
i) Norwest Corporation common stock option ("Common
Stock Option").
ii) Norwest Bank Minnesota, N.A. one-year
certificate of deposit option ("CD Option").
iii) A selection of registered investment companies
chosen by the Employee Benefit Review Committee of the
Corporation ("Fund Option").
A Participant may choose to allocate amounts credited to his
or her account under the Plan (the "Deferral Account") among
the earnings options in increments of five (5) percent. The
alloca tion of earnings options must be made by the
Participant in advance of each Deferral Year and, once made,
cannot be changed for the deferred Compensation. If the
Participant makes no earnings option election, the Participant
will be deemed to have selected the Common Stock Option for
that Deferral Year.
b) Periodic Credits. On each pay day on which the
deferred Compensation would otherwise be paid to a
Participant, the Participant shall receive a credit to his or
her Deferral Account. The amount of each credit shall be
equal to the amount the Participant elected to defer in the
Deferral Election, and each credit shall be accounted for
based on the earnings options selected by the Participant in
the Deferral Election. In the case of the Common Stock
Option, the credit shall be a number of shares of Norwest
common stock ("Common Stock") determined in accordance with
paragraph 5(b) below.
c) Adjustments. That portion of a Participant's Deferral
Account which is accounted for under each earnings option
shall be further adjusted by an amount determined in
accordance with the respective earnings option as follows:
i) CD Option. Adjustments under the CD Option shall
be made monthly as of the last day of each month. The amount
of the adjustment for the CD Option shall be calculated by
multiplying the Participant's average balance in the CD Option
for the month by an earnings factor based on the interest rate
for a Norwest Bank Minnesota, N.A. one-year certificate of
deposit as determined from time to time by the Plan
Administrator.
42
<PAGE>
ii) Fund Option. Adjustments under any Fund Option
shall be made monthly as of the last day of each month. The
amount of the adjustment for a Fund Option shall be calculated
by multiplying the Participant's average balance in the Fund
Option for the month by an adjustment factor based on the
reported positive or negative performance for the month of the
registered investment company assets relating to the Fund
Option selected.
iii) Common Stock Option. Adjustments under the Common
Stock Option shall be made each time a dividend is paid on
Common Stock in accordance with paragraph 5(c) below.
5. Common Stock Option
a) Accounting. All periodic credits and all adjustments
to a Participant's Deferral Account under the Common Stock
Option shall be credited in shares of Common Stock. Shares of
Common Stock shall be rounded to the nearest one-hundredth of
a share.
b) Determination of Number of Shares. The number of
shares of Common Stock credited to a Participant's Deferral
Account under the Common Stock Option shall be determined by
dividing the amount of each periodic credit by the average of
the high and low prices per share of Common Stock reported on
the consolidated tape of the New York Stock Exchange on the
last day of each month (or, if the New York Stock Exchange is
closed on that date, on the next preceding date on which it
was open).
c) Adjustments Based on Dividends. Adjustments under
the Common Stock Option shall be made each time a dividend is
paid on Common Stock. The number of shares credited to a
Participant's Deferral Account for such adjustments shall be
determined by multiplying the dividend amount per share by the
number of shares credited to the Participant's Deferral
Account as of the record date for the dividend and dividing
the product by the average of the high and low prices per
share of Common Stock reported on the consolidated tape of the
New York Stock Exchange on the dividend payment date (or, if
the New York Stock Exchange is closed on that date, on the
next preceding date on which it was open).
d) Number of Shares Issuable under the Plan. Subject
to adjustment as provided in Section 5(e), the maximum number
of shares of Common Stock that may be credited under the Plan
is 500,000.
e) Adjustments for Certain Changes in Capitalization.
If the Corporation shall at any time increase or decrease the
number of its outstanding shares of Common Stock or change in
any way the rights and privileges of such shares by means of
the payment of a stock dividend or any other distribution upon
such shares payable in Common Stock, or through a stock split,
subdivision, consolidation, combination, reclassification, or
recapitalization involving the Common Stock, then the numbers,
rights, and privileges of the shares issuable under the Plan
shall be increased, decreased, or changed in like manner as if
such shares had been issued and outstanding, fully paid, and
nonassessable at the time of such occurrence.
f) Availability. The Common Stock Option shall be
available only to those Participants who are not subject to
the provisions of Section 16 of the Securities Exchange Act of
1934 and rules promulgated by the Securities and Exchange
Commission thereunder ("Insiders") until such time as this
Plan has been approved by a vote of the stockholders of the
43
<PAGE>
Corporation. After such approval, the Common Stock Option
shall be available to Insiders on the same basis as it is to
other Participants.
6. Distributions. Payment of Deferral Accounts shall be
made pursuant to the Participant's Deferral Election, subject
to the following:
a) Upon Retirement or Disability. A Participant may
designate in the Deferral Election distribution of the
Deferral Account in either a lump sum or annual installments
for a period of years not to exceed ten if the Participant
elects distribution to be made following his or her disability
as described in the Norwest Corporation Long Term Disability
Plan or after his or her regular retirement date or early
retirement as defined in Sec. 6.1 or 6.2 of the Norwest
Corporation Pension Plan.
b) Upon death. If a Participant dies before receiving
all payments to which he or she is entitled under the Plan,
payment of the balance in the Deferral Account shall be made
as designated in the Deferral Election in a lump sum on
February 28 (or the next preceding business day if February 28
is not a business day) of the year following the date of death
or 60 days following the date of death to such Participant's
estate or, if the Participant has designated a beneficiary in
writing and the written designation has been delivered to and
accepted by the Plan Administrator prior to the Participant's
death, to such beneficiary.
c) Upon other termination of employment.
Notwithstanding any Deferral Election to the contrary, if a
Participant terminates employment with the Corporation prior
to regular or early retirement as defined in Section 6.1 or
6.2 of the Norwest Corporation Pension Plan or disability as
described in the Norwest Corporation Long-Term Disability
Plan, the Deferral Account will be paid to the Participant in
a lump sum.
d) Form of distributions. All distributions shall be
payable as follows:
i) in cash for all Deferral Accounts for which the
Participant elected an earnings option other than the Common
Stock Option; or
ii) if the Participant elected the Common Stock
Option, in cash, or in whole shares of Common Stock (together
with cash in lieu of a fractional share), or in a combination
thereof, as the Participant shall elect prior to payment. If
no election is made, distribution shall be made in whole
shares of Common Stock (together with cash in lieu of a
fractional share).
e) Valuation of Deferral Accounts for distribution.
i) Amounts paid on any February 28 (or the next
preceding business day if February 28 is not a business day)
shall be determined based on the Participant's Deferral
Account balance and/or on the price of Common Stock determined
pursuant to Section 5 as of the preceding December 31 (or the
next preceding business day if December 31 is not a business
day). Amounts paid as of any other date on which a
distribution is made shall be determined based on the
Participant's Deferral Account balance and/or on the price of
44
<PAGE>
Common Stock determined pursuant to Section 5 as of the end of
the month in which the event which triggers distribution
occurs.
ii) The amount of each installment payment shall be a
fraction of the value of the Participant's Deferral Account
as of the December 31 preceding the date of the installment
payment (or the next preceding business day if December 31 is
not a business day), the numerator of which is one and the
denominator of which is the total number of installments
elected (not to exceed ten) minus the number of installments
previously paid. The balance remaining in the Deferral
Account shall continue to be adjusted based on the earnings
options selected by the Participant in the Deferral Election
until the Deferral Account is paid out in full. All
installment payments will be made by pro rata withdrawals
from each earnings option elected by the Participant.
f) Timing of distributions.
i) All lump sum distributions shall be made as
designated in the Deferral Election on either February 28 (or
the next preceding business day if February 28 is not a
business day) of the year designated in the Deferral Election
or on the date 60 days following the occurrence of the event
which triggers distribution.
ii) All annual installment distributions shall be made on
February 28 (or the next preceding business day if February 28
is not a business day), commencing on February 28 of the
calendar year following disability or retirement.
7. Nonassignability. No right to receive cash payments
under the Plan nor any shares of Common Stock credited to a
Participant's Deferral Account shall be assignable or
transferable by a Participant other than by will or the laws
of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Internal Revenue
Code of 1986, as amended ("Internal Revenue Code"), Title I of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or rules thereunder. The designation of a
beneficiary by a Participant does not constitute a transfer.
8. Withholding of Taxes. Distributions under this Plan
shall be subject to the deduction of the amount of any
federal, state, or local income taxes, Social Security tax,
Medicare tax, or other taxes required to be withheld from such
payments by applicable laws and regulations.
9. Unsecured Obligation. Benefits payable under this Plan
shall be an unsecured obligation of the Corporation.
10. Administration. The Plan shall be administered by the
Human Resources Committee of the Corporation's Board of
Directors (the "Plan Administrator") or its delegate, which
shall have the authority to interpret the Plan, to adopt
procedures for implementing the Plan, and to determine
adjustments under the Plan.
11. Amendment and Termination. The Human Resources
Committee of the Corporation's Board of Directors may at any
time terminate, suspend, or amend this Plan; provided,
45
<PAGE>
however, that the provisions of Sections 1, 2, 3, 4 and 5 may
not be amended more than once in every six months other than
to comport with changes in the Internal Revenue Code, ERISA,
or the rules thereunder or the regulations of the Securities
and Exchange Commission. No such action shall deprive any
Participant of any benefits to which he or she would have been
entitled under the Plan if termination of the Participant's
employment had occurred on the day prior to the date such
action was taken, unless agreed to by the Participant.
12. Effective Date. The effective date of the Plan shall
be determined by the Human Resources Committee of the Board of
Directors or such officers of the Corporation to which said
Committee has delegated its authority to set the effective
date.
46
<PAGE>
Exhibit 10(c).
NORWEST CORPORATION
DIRECTORS' FORMULA STOCK AWARD PLAN
(As Amended April 26, 1994)
l. Purpose. The purpose of the Norwest Corporation
Directors' Formula Stock Award Plan (the "Plan") is to provide
compensation in the form of shares of the Corporation's common
stock, $1 2/3 par value per share ("Common Stock"), to non-
employee members of the Board of Directors (the "Board") of
Norwest Corporation (the "Corporation") in consideration for
personal services rendered in their capacity as directors of
the Corporation. The Plan is intended to aid in attracting
and retaining individuals of outstanding abilities and skills
for service on the Board.
2. Eligibility. Any person who (a) has served as a non-
employee director of the Corporation during the calendar year
preceding an Award Date (as defined below) and (b) is a non-
employee director of the Corporation on the last day of such
calendar year ("Eligible Non-Employee Director") shall be
awarded shares of Common Stock determined as set forth in
Section 3.
3. Formula Award. In consideration for past services
rendered, on January 31 of each year (the "Award Date"), each
Eligible Non-Employee Director who was a non-employee director
of the Corporation during all of the preceding calendar year
shall be awarded that number of shares (rounded up to the next
whole share) of Common Stock having an aggregate fair market
value on the Award Date of $18,000 (an "Award"). Each
Eligible Non-Employee Director who was a non-employee director
of the Corporation for less than all of the calendar year
preceding an Award Date shall be awarded one-twelfth of an
Award for each calendar month or portion thereof during which
such person served as a non-employee director of the
Corporation.
The fair market value shall be determined using the closing
price of a share of Common Stock as reported on the
consolidated tape of the New York Stock Exchange. If the New
York Stock Exchange is not open on the Award Date, the shares
shall be valued at their fair market value as of the next
preceding day on which the New York Stock Exchange is open.
4. Deferral of Awards. An Eligible Non-Employee Director
may elect to defer, in the form of shares of Common Stock, all
or a portion of the Award for his or her service as a director
for the calendar year (the "Deferral Year") following the year
in which the deferral election is made. Such election shall
be made pursuant to Section 5.
5. Election to Participate and Defer Awards.
a. Participation. An Eligible Non-Employee Director
becomes a participant in the deferral provisions of the Plan
by filing not later than December 15 of the year preceding the
Deferral Year an irrevocable election with the Plan
Administrator (as defined in Section 15) on a form provided
for that purpose. The election form shall specify an amount
to be deferred expressed as a percentage of the Award, one of
47
<PAGE>
the payment options described in Sections 8 and 9, and the
year in which amounts deferred shall be distributed in a lump
sum pursuant to Section 8 or in which distribution in
installments shall commence pursuant to Section 9. The
deferral election shall be effective only with respect to the
Award for the Deferral Year specified on the election form. A
new deferral election form must be filed for each Deferral
Year.
b. Initial Deferral Election or Initial Eligibility.
The initial deferral elections by Eligible Non-Employee
Directors must be made within 30 days of the date on which the
Board of Directors of the Corporation approves the amendment
of the Plan to include deferral provisions and shall be for
compensation to be earned subsequent to the deferral election.
A new Eligible Non-Employee Director must make a deferral
election within 30 days of the date in which he or she becomes
eligible to participate in the Plan.
6. Deferred Stock Account. On the Award Date, a
participant shall receive a credit to his or her account under
the Plan (the "Deferred Stock Account"). The amount of the
credit shall be the number of shares determined by multiplying
the amount of the Award by the percentage specified on the
election form (rounded down to the nearest whole share).
7. Dividend Credit. Each time a dividend is paid on the
Common Stock, a participant shall receive a credit to his or
her Deferred Stock Account. The amount of the dividend credit
shall be the number of shares (rounded to the nearest one-
hundredth of a share) determined by multiplying the dividend
amount per share by the number of shares credited to the
participant's Deferred Stock Account as of the record date for
the dividend and dividing the product by the average of the
high and low prices per share of Common Stock reported on the
consolidated tape of the New York Stock Exchange on the
dividend payment date or, if the New York Stock Exchange is
closed on the dividend payment date, the next preceding date
on which it was open.
8. Distribution of Deferred Stock Accounts in a Lump Sum.
Unless a participant elects pursuant to Section 5 to have his
or her Deferred Stock Account distributed in installments as
described in Section 9, credits to a participant's Deferred
Stock Account shall be distributed in whole shares of Common
Stock (together with cash in lieu of a fractional share) on
February 28 (or the next succeeding business day if February
28 is not a business day) of the calendar year following
termination of service as a director or such other year as
elected by the participant pursuant to Section 5. Cash
distributed in lieu of any fractional share shall be
determined based on the average of the high and low prices per
share of Common Stock reported on the consolidated tape of the
New York Stock Exchange on the date of distribution or, if the
New York Stock Exchange is closed on that date, the next
preceding date on which it was open. If a participant dies
before receiving a lump sum distribution to which he or she is
entitled under the Plan, such distribution shall be made on
February 28 (or the next succeeding business day if February
28 is not a business day) of the calendar year following the
date of death in accordance with the participant's designation
of a beneficiary on a form provided for that purpose and
delivered to and accepted by the Plan Administrator or, in the
48
<PAGE>
absence of a valid designation or if the designated
beneficiary does not survive the participant, to such
participant's estate.
9. Distribution of Deferred Stock Accounts in Installments.
A participant may elect pursuant to Section 5 to have his or
her Deferred Stock Account distributed in stock in annual
installments commencing on February 28 of the calendar year
following termination of service as a director or such other
year as elected by the participant pursuant to Section 5. The
amount of each installment shall be a fraction of the number
of shares in the participant's Deferred Stock Account on the
January 31 (the "Valuation Date") prior to the date of the
distribution of the installment, the numerator of which is one
and the denominator of which is the total number of
installments elected (not to exceed ten) minus the number of
installments previously paid (rounded down to the nearest
whole share). Cash in lieu of any fractional share (based on
the average of the high and low prices per share of Common
Stock reported on the consolidated tape of the New York Stock
Exchange on the Valuation Date) shall be distributed with the
final installment. Undistributed shares remaining in the
Deferred Stock Account after the first installment
distribution has been made shall receive dividends in
accordance with Section 7. If a participant dies before
receiving all distributions to which he or she is entitled
under the Plan, distribution of all shares remaining in the
Deferred Stock Account (together with cash in lieu of any
fractional share) shall be made on February 28 (or the next
succeeding business day if February 28 is not a business day)
of the calendar year following the date of death in accordance
with the participant's designation of a beneficiary on a form
provided for that purpose and delivered to and accepted by the
Plan Administrator or, in the absence of a valid designation
or if the designated beneficiary does not survive the
participant, to such participant's estate.
10. Shares Available for Awards. No more than 50,000
shares of Common Stock may be awarded under the Plan. These
shares may consist, in whole or in part, of authorized but
unissued Common Stock or treasury Common Stock not reserved
for any other purpose.
11. Adjustments for Certain Changes in Capitalization. If
the Corporation shall at any time increase or decrease the
number of its outstanding shares of Common Stock or change in
any way the rights and privileges of such shares by means of
the payment of a stock dividend or any other distribution upon
such shares payable in Common Stock, or through a stock split,
subdivision, consolidation, combination, reclassification, or
recapitalization involving the Common Stock, then the numbers,
rights, and privileges of the shares issuable under the Plan
shall be increased, decreased, or changed in like manner as if
such shares had been issued and outstanding, fully paid, and
nonassessable at the time of such occurrence.
12. Effective Date. The Plan shall become effective on
January 1, 1992.
13. No Guarantee of Service. Participation in the Plan
does not constitute a guarantee or contract of service as a
director.
14. Non-Assignability. No right to receive an award
hereunder shall be transferable or assignable by a Plan
49
<PAGE>
participant other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations
order as defined by the Internal Revenue Code of 1986, as
amended, Title I of the Employee Retirement Income Security
Act ("ERISA"), or rules thereunder. The designation of a
beneficiary by a participant pursuant to Section 8 or 9 does
not constitute a transfer.
15. Administration. This Plan shall be administered under
such rules and procedures as shall be established from time to
time by the Corporation's senior human resources officer (the
"Plan Administrator").
16. Amendment and Termination. This Plan may be amended,
suspended or terminated by action of the Board and
automatically shall be terminated when all Common Stock
subject to the Plan has been awarded; provided, however, that
(a) the provisions of the Plan may not be amended more than
once every six months, other than to comport with changes in
the Internal Revenue Code, the Employee Retirement Income
Security Act, or the rules thereunder, and (b) if the Plan has
been approved by the stockholders of the Corporation, any
amendment shall be similarly approved if the amendment would:
(i) materially increase the benefits accruing to
participants under the Plan;
(ii) materially increase the number of securities
which may be issued under the Plan; or
(iii) materially modify the requirements as to
eligibility for participation in the Plan.
7/27/93
4/26/94
50
<PAGE>
Exhibit 11.
Norwest Corporation and Subsidiaries
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
In thousands, except per common share amounts Quarter Ended
June 30
1994 1993
PRIMARY:
Weighted average number of common shares
outstanding ..................................... 316,728 304,789
Net effect of assumed exercise of stock options
based on treasury stock method using average
market price .................................... 2,423 3,115
319,151 307,904
Net income ........................................ $201,958 168,886
Less dividends accrued on preferred stock ........ 6,889 7,824
Net income, as adjusted .......................... $195,069 161,062
Net income per common share ...................... $ 0.61 0.52
FULLY DILUTED:
Weighted average number of common shares
outstanding ..................................... 316,728 304,789
Net effect of assumed exercise of stock options
based on treasury stock method using average
market price or period-end market price,
whichever is higher ............................. 2,426 3,428
Assumed conversion of 6 3/4% convertible
subordinated debentures due 2003 and 12%
convertible notes due 1993 as of the beginning
of the period ................................... 47 78
Assumed conversion of Cumulative Convertible
Preferred Stock ................................. 12,628 16,545
331,829 324,840
Net income ........................................ $201,958 168,886
Less dividends accrued on preferred stock ........ 2,886 3,039
Add 6 3/4% convertible subordinated debentures
interest and amortization of debt expense,
net of income tax effect ........................ 3 5
Net income, as adjusted .......................... $199,075 165,852
Net income per common share....................... $ 0.60 0.51
51
<PAGE>
Exhibit 11.
(continued)
Norwest Corporation and Subsidiaries
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
In thousands, except per common share amounts Six Months Ended
June 30
1994 1993
PRIMARY:
Weighted average number of common shares
outstanding ..................................... 313,834 303,838
Net effect of assumed exercise of stock options
based on treasury stock method using average
market price .................................... 2,308 3,002
316,142 306,840
Net income ........................................ $392,500 327,214
Less dividends accrued on preferred stock ........ 14,050 15,787
Net income, as adjusted .......................... $378,450 311,427
Net income per common share ...................... $ 1.20 1.01
FULLY DILUTED:
Weighted average number of common shares
outstanding ..................................... 313,834 303,838
Net effect of assumed exercise of stock options
based on treasury stock method using average
market price or period-end market price,
whichever is higher ............................. 2,409 3,486
Assumed conversion of 6 3/4% convertible
subordinated debentures due 2003 and 12%
convertible notes due 1993 as of the beginning
of the period ................................... 48 86
Assumed conversion of Cumulative Convertible
Preferred Stock ................................. 12,626 16,707
328,917 324,117
Net income ........................................ $392,500 327,214
Less dividends accrued on preferred stock ........ 6,044 6,113
Add 6 3/4% convertible subordinated debentures
interest and amortization of debt expense,
net of income tax effect ........................ 5 9
Net income, as adjusted .......................... $386,461 321,110
Net income per common share....................... $ 1.17 0.99
52
<PAGE>
Exhibit 12(a).
Norwest Corporation and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
In thousands 1994 1993 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Computation of Income:
Income before
income taxes $580,085 478,813 879,755 645,568 491,673 284,453 383,681
Capitalized interest - (22) (65) (24) - (13) (165)
Income before income
taxes and capitalized
interest 580,085 478,791 879,690 645,544 491,673 284,440 383,516
Fixed charges 743,997 734,411 1,485,936 1,651,664 2,187,536 2,354,041 2,241,827
Total income for
computation $1,324,082 1,213,202 2,365,626 2,297,208 2,679,209 2,638,481 2,625,343
Total income for
computation excluding
interest on deposits
from fixed charges $ 910,704 795,194 1,513,317 1,281,619 1,196,648 1,111,762 1,166,852
Computation of Fixed
Charges:
Net rental
expense (a) $ 73,646 60,504 128,573 123,342 111,609 102,192 94,568
Portion of rentals
deemed
representative
of interest $ 24,549 20,168 42,858 41,114 37,203 34,064 31,523
Interest:
Interest on
deposits 413,378 418,008 852,309 1,015,589 1,482,561 1,526,719 1,458,491
Interest on
federal funds
and other
short-term
borrowings 113,581 126,552 238,046 277,835 352,384 522,849 493,142
Interest on
long-term debt 192,489 169,661 352,658 317,102 315,388 270,396 258,506
Capitalized
interest - 22 65 24 - 13 165
Total interest 719,448 714,243 1,443,078 1,610,550 2,150,333 2,319,977 2,210,304
Total fixed
charges $ 743,997 734,411 1,485,936 1,651,664 2,187,536 2,354,041 2,241,827
Total fixed
charges excluding
interest on
deposits $ 330,619 316,403 633,627 636,075 704,975 827,322 783,336
Ratio of Income
to Fixed Charges:
Excluding
interest on
deposits 2.75X 2.51 2.39 2.01 1.70 1.34 1.49
Including
interest on
deposits 1.78X 1.65 1.59 1.39 1.22 1.12 1.17
(a) Includes equipment rentals.
</TABLE>
53
<PAGE>
Exhibit 12(b).
Norwest Corporation and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
In thousands 1994 1993 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Computation of Income:
Income before
income taxes $ 580,085 478,813 879,755 645,568 491,673 284,453 383,681
Capitalized interest - (22) (65) (24) - (13) (165)
Income before income
taxes and capitalized
interest 580,085 478,791 879,690 645,544 491,673 284,440 383,516
Fixed charges 743,997 734,411 1,485,936 1,651,664 2,187,536 2,354,041 2,241,827
Total income for
computation $1,324,082 1,213,202 2,365,626 2,297,208 2,679,209 2,638,481 2,625,343
Total income for
computation excluding
interest on deposits
from fixed charges $ 910,704 795,194 1,513,317 1,281,619 1,196,648 1,111,762 1,166,852
Computation of Fixed
Charges:
Net rental
expense (a) $ 73,646 60,504 128,573 123,342 111,609 102,192 94,568
Portion of rentals
deemed
representative
of interest $ 24,549 20,168 42,858 41,114 37,203 34,064 31,523
Interest:
Interest on
deposits 413,378 418,008 852,309 1,015,589 1,482,561 1,526,719 1,458,491
Interest on
federal funds
and other
short-term
borrowings 113,581 126,552 238,046 277,835 352,384 522,849 493,142
Interest on
long-term debt 192,489 169,661 352,658 317,102 315,388 270,396 258,506
Capitalized
interest - 22 65 24 - 13 165
Total interest 719,448 714,243 1,443,078 1,610,550 2,150,333 2,319,977 2,210,304
Total fixed
charges $ 743,997 734,411 1,485,936 1,651,664 2,187,536 2,354,041 2,241,827
Total fixed
charges excluding
interest on
deposits $ 330,619 316,403 633,627 636,075 704,975 827,322 783,336
Preferred stock
dividends 14,050 15,786 31,170 32,219 20,065 3,225 6,870
Pre-tax earnings
needed to meet
preferred stock
dividend
requirements 20,765 23,100 44,728 44,367 23,997 5,294 9,232
Total combined fixed
charges and preferred
stock dividends $ 764,762 757,511 1,530,664 1,696,031 2,211,533 2,359,335 2,251,059
Total combined
fixed charges
and preferred stock
dividends excluding
interest on
deposits $ 351,384 339,503 678,355 680,442 728,972 832,616 792,568
(a) Includes equipment rentals.
</TABLE>
54
<PAGE>
Exhibit 12(b).
(continued)
Norwest Corporation and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30 Year Ended December 31
In thousands 1994 1993 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Income to Combined
Fixed Charges and Preferred
Stock Dividends:
Excluding interest on
deposits 2.59X 2.34 2.23 1.88 1.64 1.34 1.47
Including interest on
deposits 1.73X 1.60 1.55 1.35 1.21 1.12 1.17
55
</TABLE>