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, 1995
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 July 31, 1995 325,291,043 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, 1995 and December 31, 1994 ......................... 3
2. Consolidated Statements of Income -
Quarters and Six Months Ended June 30, 1995 and 1994......... 4
3. Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1995 and 1994 ..................... 6
4. Consolidated Statements of Stockholders' Equity -
Six Months Ended June 30, 1995 and 1994 ..................... 8
5. Notes to Unaudited 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,
1995 1994
ASSETS
Cash and due from banks ...................... $ 3,273.4 3,431.2
Interest-bearing deposits with banks ......... 26.3 41.1
Federal funds sold and resale agreements ..... 562.0 552.0
Total cash and cash equivalents .......... 3,861.7 4,024.3
Trading account securities ................... 210.5 172.3
Investment securities (fair value
$1,512.8 in 1995 and $1,268.7 in 1994) ..... 1,453.9 1,235.1
Investment securities available for sale ..... 1,960.5 1,427.6
Mortgage-backed securities available for
sale ....................................... 12,047.4 12,174.2
Total investment securities .............. 15,461.8 14,836.9
Student loans available for sale ............. 1,930.2 2,031.4
Mortgages held for sale ...................... 4,938.2 3,115.3
Loans and leases ............................. 37,812.1 33,703.6
Unearned discount ............................ (1,535.3) (1,127.6)
Allowance for credit losses .................. (854.6) (789.9)
Net loans and leases ..................... 35,422.2 31,786.1
Premises and equipment, net .................. 1,023.7 955.2
Interest receivable and other assets ......... 3,774.7 2,394.4
Total assets ............................. $66,623.0 59,315.9
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing ........................ $ 9,800.1 9,283.1
Interest-bearing ........................... 28,389.4 27,140.9
Total deposits ........................... 38,189.5 36,424.0
Short-term borrowings ........................ 8,617.3 7,850.2
Accrued expenses and other liabilities ....... 2,708.1 2,009.0
Long-term debt ............................... 12,382.1 9,186.3
Total liabilities ........................ 61,897.0 55,469.5
Preferred stock .............................. 588.6 526.7
Unearned ESOP shares ......................... (58.8) (14.7)
Total preferred stock .................... 529.8 512.0
Common stock, $1 2/3 par value - authorized
500,000,000 shares:
Issued 338,450,558 and 323,084,474 shares
in 1995 and 1994, respectively ............ 564.1 538.5
Surplus ...................................... 590.3 578.8
Retained earnings ............................ 3,224.6 2,950.0
Net unrealized gains (losses)
on securities available for sale ........... 178.1 (360.4)
Note receivable from ESOP ... ................ (13.3) (13.3)
Treasury stock - 13,424,543 and 13,939,617
common shares in 1995 and 1994, respectively. (341.4) (350.9)
Foreign currency translation ................. (6.2) (8.3)
Total common stockholders' equity ........ 4,196.2 3,334.4
Total stockholders' equity ............... 4,726.0 3,846.4
Total liabilities and
stockholders' equity ................... $66,623.0 59,315.9
See notes to unaudited consolidated financial statements.
3
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
In millions, except per common share amounts Quarter Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
INTEREST INCOME ON
Loans and leases ............................... $ 982.9 746.8 1,870.4 1,446.7
Investment securities .......................... 21.2 17.8 40.4 35.3
Investment securities available for sale ....... 25.4 29.4 52.0 61.4
Mortgage-backed securities available for sale .. 226.6 174.6 461.4 312.0
Student loans available for sale ............... 47.5 26.1 93.0 50.2
Mortgages held for sale ........................ 74.9 64.6 132.1 132.7
Money market investments ....................... 6.1 6.9 20.0 12.3
Trading account securities ..................... 4.5 7.6 7.8 16.0
Total interest income ...................... 1,389.1 1,073.8 2,677.1 2,066.6
INTEREST EXPENSE ON
Deposits ....................................... 283.2 208.3 550.3 413.4
Short-term borrowings .......................... 115.6 68.6 228.4 113.6
Long-term debt ................................. 192.1 99.6 356.5 192.4
Total interest expense ..................... 590.9 376.5 1,135.2 719.4
Net interest income ...................... 798.2 697.3 1,541.9 1,347.2
Provision for credit losses .................... 74.7 23.7 130.0 60.0
Net interest income after
provision for credit losses ............ 723.5 673.6 1,411.9 1,287.2
NON-INTEREST INCOME
Trust .......................................... 53.3 50.5 109.8 102.4
Service charges on deposit accounts ............ 65.1 58.7 126.6 116.1
Mortgage banking ............................... 129.1 139.8 258.5 275.2
Data processing ................................ 17.0 15.5 31.8 30.7
Credit card .................................... 32.3 27.0 63.2 52.7
Insurance ...................................... 76.1 70.1 127.1 112.1
Other fees and service charges ................. 53.0 42.8 100.9 88.4
Net investment securities gains (losses)........ 0.1 (0.2) 0.1 (0.7)
Net investment and mortgage-backed
securities available for sale gains (losses)... 11.8 (43.3) (23.4) (6.3)
Net venture capital gains ...................... 4.8 15.0 26.4 35.2
Other .......................................... 8.7 11.0 26.9 15.2
Total non-interest income .................. 451.3 386.9 847.9 821.0
NON-INTEREST EXPENSES
Salaries and benefits .......................... 425.4 393.4 823.9 790.4
Net occupancy .................................. 60.4 52.4 120.1 108.4
Equipment rentals, depreciation
and maintenance ............................... 65.7 56.9 129.3 110.2
Business development ........................... 38.1 49.3 81.6 89.0
Communication .................................. 53.4 45.5 103.9 89.9
Data processing ................................ 35.9 26.4 66.0 54.2
FDIC assessment and regulatory examination fees. 22.9 22.3 45.3 44.1
Intangible asset amortization .................. 26.7 17.8 45.1 37.3
Other .......................................... 97.4 95.0 171.7 204.6
Total non-interest expenses ................ 825.9 759.0 1,586.9 1,528.1
INCOME BEFORE INCOME TAXES ..................... 348.9 301.5 672.9 580.1
Income tax expense ............................. 114.6 99.5 221.8 187.6
NET INCOME ..................................... $ 234.3 202.0 451.1 392.5
(Continued on page 5)
</TABLE>
4
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Continued from page 4)
<TABLE>
In millions, except per common share amounts Quarter Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Average Common and Common Equivalent Shares .... 327.5 319.2 321.0 316.1
PER COMMON SHARE
Net Income
Primary ...................................... $ 0.68 0.61 1.34 1.20
Fully diluted ................................ 0.67 0.60 1.32 1.18
Dividends ..................................... 0.210 0.185 0.420 0.370
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
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ........................................... $ 451.1 392.5
Adjustments to reconcile net income to net cash
flows from operating activities:
Provision for credit losses ...................... 130.0 60.0
Depreciation and amortization .................... 124.5 112.4
Gains on other real estate owned, net ............ (3.6) (6.9)
Gains on sales of premises and equipment.......... (0.3) -
(Gains) losses on sales of mortgages held
for sale ....................................... 3.6 (62.3)
(Gains) losses on sales of investment securities.. (0.1) 0.7
Gains on sales of investment,
mortgage-backed and venture capital
securities available for sale .................. (3.0) (28.9)
Gains on sales of student loans
available for sale ............................. (10.7) (5.7)
Release of preferred shares to ESOP .............. 20.9 10.3
Trading account securities (gains) losses......... (9.2) 17.3
Purchases of trading account securities .......... (45,656.9) (29,019.8)
Proceeds from sales of trading account
securities ..................................... 45,518.8 29,076.0
Originations of mortgages held for sale .......... (12,884.7) (13,990.5)
Proceeds from sales of mortgages held for sale ... 11,207.9 16,296.5
Originations of student loans available for sale . (394.7) (369.3)
Proceeds from sales of student loans
available for sale .............................. 510.6 555.4
Deferred income taxes ............................ 20.6 29.0
Interest receivable .............................. (157.8) (22.1)
Interest payable ................................. 76.9 (21.2)
Other assets, net ................................ (650.2) (155.9)
Other accrued expenses and liabilities, net ...... 128.8 15.3
Net cash flows from (used for)
operating activities .......................... (1,577.5) 2,882.8
(Continued on page 7)
6
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued from page 6)
In millions Six Months Ended
June 30
1995 1994
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and paydowns of:
Investment securities ........................... 45.2 765.5
Investment and mortgage-backed
securities available for sale ................. 569.7 1,777.7
Proceeds from sales and calls of:
Investment securities ........................... 75.2 15.4
Investment and mortgage-backed
securities available for sale ................. 3,098.7 1,270.1
Purchases of:
Investment securities ........................... (160.8) (418.3)
Investment and mortgage-backed
securities available for sale ................. (2,104.5) (5,372.7)
Net increase in banking
subsidiaries' loans and leases.................... (1,237.4) (542.7)
Principal collected on non-bank
subsidiaries' loans and leases ................... 2,642.1 2,347.4
Non-bank subsidiaries' loans and
leases originated ................................ (2,797.8) (2,579.3)
Purchases of premises and equipment ............... (105.0) (117.6)
Proceeds from sales of premises and equipment ..... 5.8 10.7
Proceeds from sales of other real estate owned .... 15.7 39.0
Purchases of subsidiaries, net of cash
and cash equivalents acquired .................... (94.9) 83.3
Divestiture of branches, net of cash and
cash equivalents paid ............................ (4.1) (55.1)
Net cash flows used for investing activities..... (52.1) (2,776.6)
CASH FLOWS FROM FINANCING ACTIVITIES
Deposits, net ..................................... (807.1) (2,299.3)
Short-term borrowings, net ........................ (662.7) 1,773.2
Long-term debt borrowings ......................... 3,372.2 1,351.3
Repayments of long-term debt ...................... (203.5) (1,041.6)
Issuances of common stock ......................... 34.8 32.6
Repurchases of common stock ....................... (131.9) (199.3)
Sale of preferred stock held by subsidiary ........ 20.0 -
Repurchases of preferred stock .................... - (8.3)
Net decrease in notes receivable from ESOP ........ - 2.7
Dividends paid .................................... (154.8) (131.1)
Net cash flows from (used for)
financing activities ........................... 1,467.0 (519.8)
Net decrease in cash and cash equivalents........ (162.6) (413.6)
CASH AND CASH EQUIVALENTS
Beginning of period ............................... 4,024.3 3,608.0
End of period ..................................... $ 3,861.7 3,194.4
See notes to unaudited consolidated financial statements.
7
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
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>
Balance,
December 31, 1993 $ 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
(Continued on page 9)
</TABLE>
8
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(Continued from page 8)
<TABLE> Net
Unrealized
Gains
In (Losses) on
millions, Unearned Securities Note 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>
Balance,
December 31, 1994 $ 526.7 (14.7) 538.5 578.8 2,950.0 (360.4) (13.3) (350.9) (8.3) 3,846.4
Net income - - - - 451.1 - - - - 451.1
Dividends on
Common stock - - - - (133.9) - - - - (133.9)
Preferred stock - - - - (20.9) - - - - (20.9)
Conversion of 23,699
preferred shares to
808,089 common shares (21.4) - - (1.2) (0.1) - - 22.7 - -
Sale of 100,000 preferred
shares held by
subsidiary 20.0 - - - - - - - - 20.0
Issuance of 63,300
preferred shares to
ESOP 63.3 (65.8) - 2.5 - - - - - -
Release of preferred
shares to ESOP - 21.7 - (0.8) - - - - - 20.9
Issuance of 1,813,771
common shares - - - 24.3 (35.4) - - 50.6 - 39.5
Issuance of 17,930,967
common shares for
acquisitions - - 25.6 (13.3) 13.8 (0.3) - 68.1 - 93.9
Repurchase of 4,671,669
common shares - - - - - - - (131.9) - (131.9)
Change in net unrealized
gains (losses) on
securities available
for sale - - - - - 538.8 - - - 538.8
Foreign currency
translation - - - - - - - - 2.1 2.1
Balance,
June 30, 1995 $ 588.6 (58.8) 564.1 590.3 3,224.6 178.1 (13.3) (341.4) (6.2) 4,726.0
See notes to unaudited consolidated financial statements.
</TABLE>
9
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Changes in Accounting Policies
Effective January 1, 1995, the corporation adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan" and Statement of Financial Accounting Standards No. 118, "Accounting by
Creditors for Impairment of a Loan -- Income Recognition and Disclosures"
(SFAS 114 and 118). Accordingly, loan impairment is measured based on the
present value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the observable
market price of the loan or the fair value of the collateral if the loan is
collateral dependent. The adoption of these statements did not have a
material effect on the corporation's financial position or results of
operations. See Note 5 for a discussion of impaired loans.
During the second quarter of 1995, the corporation adopted Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage
Servicing Rights, an amendment of FASB Statement No. 65" (SFAS 122),
effective January 1, 1995. Accordingly, the corporation recognizes as
separate assets the rights to service mortgage loans for others whether
the servicing rights are acquired through purchases or loan
originations. The fair value of capitalized mortgage servicing rights
is based upon the present value of estimated expected future cash
flows. Based upon current fair values, capitalized mortgage servicing
rights are periodically assessed for impairment, which is recognized in
the statement of income during the period in which impairment occurs by
establishing a corresponding valuation allowance. For purposes of
performing its impairment evaluation, the corporation stratifies its
portfolio of capitalized mortgage servicing rights on the basis of
certain risk characteristics including loan type, note rate, and age of
the mortgage loan. The corporation's financial statements for the
quarter ended March 31, 1995 have been restated to reflect the adoption
of SFAS 122. See Note 9 for a discussion of mortgage banking
activities.
2. Consolidated Statements of Cash Flows
Cash paid for interest and income taxes for the six months ended June 30 was:
In millions
1995 1994
Interest $1,058.4 740.6
Income taxes 203.5 88.4
During the first six months of 1995 and 1994, $12.7 million and $27.6
million, respectively, of loans were transferred to other real estate owned.
During the six months ended June 30, 1995 and 1994, the corporation issued
4,080,734 shares and 340,669 shares of common stock, respectively, in
connection with acquisitions accounted for using the purchase method.
On March 28, 1995, the corporation issued 63,300 shares of 1995 ESOP
Cumulative Convertible Preferred Stock in the stated amount of $63.3 million
at a premium of $2.5 million; a corresponding charge of $65.8 million was
recorded to unearned ESOP shares. On March 31, 1994, the corporation issued
40,900 shares of ESOP Cumulative Convertible Preferred Stock in the stated
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 $20.9 million and $10.3 million was released
to the ESOP during the six months ended June 30, 1995 and 1994, respectively.
10
<PAGE>
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. 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 during the
first quarter of 1994.
3. Investment and Mortgage-backed Securities
The amortized cost and fair value of investment and mortgage-backed
securities at June 30, 1995 and December 31, 1994 were:
<TABLE>
In millions June 30, 1995
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Held for investment:
U.S. Treasury and federal agencies .. $ 27.4 - - 27.4
State, municipal and housing -
tax exempt ......................... 727.0 28.4 (4.4) 751.0
Other ............................... 699.5 43.5 (8.6) 734.4
Total investment securities
held for investment ............. $ 1,453.9 71.9 (13.0) 1,512.8
Available for sale:
U.S. Treasury and federal agencies .. $ 1,098.1 19.7 (4.7) 1,113.1
State, municipal and housing -
tax exempt ......................... 129.9 1.1 (1.1) 129.9
Other ............................... 532.2 191.4 (6.1) 717.5
Total investment securities
available for sale .............. 1,760.2 212.2 (11.9) 1,960.5
Mortgage-backed securities:
Federal agencies ................... 11,816.2 170.0 (93.0) 11,893.2
Collateralized mortgage
obligations ....................... 153.2 2.6 (1.6) 154.2
Total mortgage-backed securities
available for sale .............. 11,969.4 172.6 (94.6) 12,047.4
Total investment and
mortgage-backed securities
available for sale .............. $13,729.6 384.8 (106.5) 14,007.9
</TABLE>
11
<PAGE>
<TABLE>
In millions December 31, 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 .. $ 27.4 - - 27.4
State, municipal and housing -
tax exempt ........................ 712.2 17.1 (16.5) 712.8
Other ............................... 495.5 39.6 (6.6) 528.5
Total investment securities
held for investment ............. $ 1,235.1 56.7 (23.1) 1,268.7
Available for sale:
U.S. Treasury and federal agencies .. $ 932.4 6.3 (15.4) 923.3
State, municipal and housing -
tax exempt ........................ 107.1 0.3 (3.9) 103.5
Other ............................... 321.2 97.0 (17.4) 400.8
Total investment securities
available for sale .............. 1,360.7 103.6 (36.7) 1,427.6
Mortgage-backed securities:
Federal agencies ................... 12,635.2 19.1 (642.4) 12,011.9
Collateralized mortgage
obligations ....................... 165.8 0.5 (4.0) 162.3
Total mortgage-backed securities
available for sale .............. 12,801.0 19.6 (646.4) 12,174.2
Total investment and
mortgage-backed securities
available for sale .............. $14,161.7 123.2 (683.1) 13,601.8
</TABLE>
12
<PAGE>
Interest income on investment and mortgage-backed securities for the quarters
and six months ended June 30 were:
<TABLE>
Quarter Six Months
In millions 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Held for investment:
U.S. Treasury and federal agencies . $ 0.4 0.2 0.7 0.7
State, municipal and housing -
tax exempt ....................... 12.0 12.8 24.5 25.2
Other .............................. 8.8 4.8 15.2 9.4
Total investment securities
held for investment ............ $ 21.2 17.8 40.4 35.3
Available for sale:
U.S. Treasury and federal agencies . $ 16.1 23.1 34.3 48.9
State, municipal and housing -
tax exempt ....................... 1.6 1.3 3.0 2.6
Other .............................. 7.7 5.0 14.7 9.9
Total investment securities
available for sale ............. $ 25.4 29.4 52.0 61.4
Mortgage-backed securities:
Federal agencies .................. $ 226.3 172.4 455.3 307.8
Collateralized mortgage
obligations ...................... 0.3 2.2 6.1 4.2
Total mortgage-backed securities
available for sale ............. $ 226.6 174.6 461.4 312.0
</TABLE>
Certain investment securities with a total amortized cost of $19.7 million
and $40.2 million for the three and six months ended June 30, 1995,
respectively, and $39.1 million and $49.5 million for the three and six
months ended June 30, 1994, respectively, were sold by the corporation due
to significant deterioration in the creditworthiness of the related issuers
or because such securities were called by the issuers prior to maturity.
The sales and calls of investment securities resulted in a $0.1 million gain
for the quarter and six months ended June 30, 1995. Sales and calls of
investment securities resulted in net losses of $0.2 million and $0.7
million for the quarter and six months ended June 30, 1994, respectively.
13
<PAGE>
4. Loans and Leases
The carrying values of loans and leases at June 30, 1995 and December 31,
1994 were:
In millions June 30, December 31,
1995 1994
Commercial ............................... $ 9,128.0 8,390.4
Construction and land development ........ 689.3 568.1
Real estate .............................. 14,020.4 12,548.8
Consumer ................................. 12,354.5 10,815.9
Lease financing .......................... 790.1 764.5
Foreign
Consumer ............................... 681.8 486.1
Commercial ............................. 148.0 129.8
Total loans and leases ............... 37,812.1 33,703.6
Unearned discount ........................ (1,535.3) (1,127.6)
Loans and leases, net of
unearned discount .................... $ 36,276.8 32,576.0
Changes in the allowance for credit losses for the quarters and six months
ended June 30 were:
Quarter Six Months
In millions 1995 1994 1995 1994
Balance at beginning of period ............ $ 812.5 793.2 789.9 789.2
Allowance related to assets
acquired, net .......................... 41.8 6.9 57.1 17.8
Provision for credit losses ............. 74.7 23.7 130.0 60.0
Credit losses ........................... (100.4) (68.9) (180.9) (143.6)
Recoveries .............................. 26.0 35.5 58.5 67.0
Net credit losses ..................... (74.4) (33.4) (122.4) (76.6)
Balance at end of period .................. $ 854.6 790.4 854.6 790.4
5. Non-performing Assets and 90-day Past Due Loans and Leases
Total non-performing assets and 90-day past due loans and leases at June 30,
1995 and 1994 and December 31, 1994 were:
In millions June 30, December 31,
1995 1994 1994
Impaired loans
Non-accrual ........................... $ 70.9 108.8 96.8
Restructured .......................... 1.9 2.0 1.8
Total impaired loans ................ 72.8 110.8 98.6
Other non-accrual loans and leases....... 49.9 34.8 31.7
Total non-accrual and
restructured loans and leases......... 122.7 145.6 130.3
Other real estate owned ................. 32.2 55.1 29.6
Total non-performing assets ........... 154.9 200.7 159.9
Loans and leases past due
90 days or more* ...................... 92.4 68.2 58.4
Total non-performing assets and
90-day past due loans and leases ..... $ 247.3 268.9 218.3
* Excludes non-accrual and restructured loans.
14
<PAGE>
Under the corporation's credit policies and practices, all non-accrual and
restructured commercial, agricultural, construction, and commercial real estate
loans meet the definition of impaired loans under SFAS 114 and 118. Impaired
loans as defined by SFAS 114 and 118 exclude certain consumer loans,
residential real estate loans and lease financing classified as non-accrual.
The allowance for credit losses related to impaired loans at June 30, 1995 and
December 31, 1994 was $33.0 million and $31.6 million, respectively. Impaired
loans of $6.0 million and $4.6 million were not subject to a related allowance
for credit loss at June 30, 1995 and December 31, 1994, respectively, because
of the net realizable value of loan collateral, guarantees and other factors.
The average balances of impaired loans for the six months ended June 30, 1995
and 1994 were $86.7 million and $137.7 million, respectively.
Interest income on impaired loans is recognized after all past due and current
principal payments have been made, and collectibility is no longer doubtful.
Interest income of $1.1 million and $1.5 million was recognized on impaired
loans for the quarter and six months ended June 30, 1995, respectively, and
$0.7 million and $1.2 million was recognized for the comparable periods of
1994.
The effects of total non-accrual and restructured loans on interest income for
the quarters and six months ended June 30 were:
Quarter Six Months
In millions 1995 1994 1995 1994
Interest
As originally contracted ........... $ 4.4 8.1 $ 8.9 11.8
As recognized ...................... (1.1) (0.7) (1.5) (1.2)
Reduction of interest income ..... $ 3.3 7.4 $ 7.4 10.6
6. Long-term Debt
During the first six months of 1995, the corporation issued $1,750 million in
medium-term notes bearing fixed rates ranging from 6.50 percent to 8.67
percent, which mature from December 1996 to June 2005, and $50 million in
medium-term notes bearing interest at three-month LIBOR plus eight basis points
maturing in January 1998. Also during the first six months of 1995, Norwest
Financial, Inc. issued $779.4 million in senior notes bearing fixed interest
rates ranging from 6.75 percent to 8.375 percent maturing from April 1997 to
June 2005. Certain banking subsidiaries of the corporation received advances
from the Federal Home Loan Bank of $574 million bearing interest at one-month
LIBOR minus eight basis points to one-month LIBOR minus two basis points
maturing from March 1996 to January 2000, $25 million at three-month LIBOR
maturing September 1996, and $202 million at fixed interest rates from 5.70
percent to 8.38 percent maturing from June 1997 to December 2014.
15
<PAGE>
7. Stockholders' Equity
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, 1995 and December 31, 1994. 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 1994 Annual Report on
Form 10-K.
In millions, except share amounts
<TABLE>
Annual
Dividend
Shares Outstanding Rate at Amount Outstanding
June 30, December 31, June 30, June 30, December 31,
1995 1994 1995 1995 1994
<S> <C> <C> <C>
10.24% Cumulative,
$100 stated value 1,127,125 1,127,125 10.24% $112.7 112.7
Cumulative
Tracking, $200
stated value 980,000 980,000 9.30% 196.0 196.0
Cumulative
Convertible, Series B,
$200 stated value 1,140,875 1,143,675 7.00% 228.2 228.7
ESOP Cumulative Convertible,
$1,000 stated value 13,647 14,265 9.00% 13.7 14.3
1995 ESOP Cumulative
Convertible, $1,000
stated value 43,019 - 10.00% 43.0 -
Less: Cumulative
Tracking shares held by
a subsidiary (25,000) (125,000) (5.0) (25.0)
3,279,666 3,140,065 588.6 526.7
Unearned ESOP shares (58.8) (14.7)
Total preferred stock $529.8 512.0
</TABLE>
On March 29, 1995 the corporation issued 63,300 shares of 1995 ESOP Cumulative
Convertible Preferred Stock, $1,000 stated value per share ("1995 ESOP
Preferred Stock"). All shares of the 1995 ESOP Preferred Stock were 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 10.00
percent.
Each share of ESOP Cumulative Convertible Preferred Stock and 1995 ESOP
Cumulative Convertible Preferred Stock (collectively, 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 quarter and six months ended June 30, 1995, 10,036 and
20,899 shares of ESOP Preferred Stock, respectively, were converted into
349,078 and 777,175 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 Certificates
of Designations of the ESOP Preferred Stock.
16
<PAGE>
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.
On July 25, 1995, the corporation's board of directors approved the redemption
of all of the outstanding shares of the Cumulative Convertible Preferred
Stock, Series B and related depositary shares effective September 1, 1995.
Each depositary share, which represents one-quarter of a share of the
preferred stock, will be redeemed at a price of $52.10 plus accrued dividends.
Preference Stock
At the annual meeting of stockholders held on April 25, 1995, the stockholders
authorized a new class of capital stock consisting of a total of 4,000,000
shares of "Preference Stock." The shares of Preference Stock will have such
powers, preferences and rights as determined by the corporation's board of
directors, provided that each share of Preference Stock will not be entitled
to more than one vote per share.
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. Norwest Financial (including Norwest Financial Services, Inc. and
Island Finance) provides consumer finance services, including direct
installment loans to individuals, purchase 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 1995 1994 1995 1994
Revenues:*
Banking $ 1,213.7 938.3 $ 2,372.5 1,861.0
Mortgage banking 247.2 223.0 443.6 441.9
Norwest Financial 379.5 299.4 708.9 584.7
Total $ 1,840.4 1,460.7 $ 3,525.0 2,887.6
Organizational earnings:*
Banking $ 146.9 136.2 $ 287.0 $ 264.1
Mortgage banking 26.4 11.5 47.5 22.3
Norwest Financial 61.0 54.3 116.6 106.1
Total $ 234.3 202.0 $ 451.1 $ 392.5
Total assets:
Banking $50,837.1 44,918.4
Mortgage banking 7,960.0 5,261.3
Norwest Financial 7,825.9 5,577.1
Total $66,623.0 55,756.8
* 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 the quarters and six
months ended June 30 is presented below:
Quarter Six Months
In millions 1995 1994 1995 1994
Origination fees $ 33.3 29.4 53.2 56.5
Servicing fees 53.7 43.0 102.1 78.4
Net gains on sales of
servicing rights 8.6 28.7 54.4 37.2
Net gains (losses) on
sales of mortgages 1.1 15.9 (3.6) 62.3
Other mortgage fee income 32.4 22.8 52.4 40.8
Total mortgage banking
non-interest income $129.1 139.8 258.5 275.2
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The outstanding balances of serviced loans were
$100.5 billion and $59.3 billion at June 30, 1995 and 1994, respectively.
18
<PAGE>
Changes in capitalized mortgage loan servicing rights for the quarters and six
months ended June 30 were:
Quarter Six Months
In millions 1995 1994 1995 1994
Balance at beginning
of period $862.1 210.1 550.3 185.2
Originations 55.9 - 81.3 -
Purchases 62.1 158.3 393.5 200.9
Sales (64.8) (10.9) (92.6) (17.9)
Amortization (24.6) (7.6) (41.5) (18.2)
Other (0.2) (0.1) (0.5) (0.2)
890.5 349.8 890.5 349.8
Less valuation allowance (48.7) - (48.7) -
Balance at end of period $841.8 349.8 841.8 349.8
The fair value of capitalized mortgage servicing rights at June 30, 1995 was
approximately $919.0 million, calculated using discount rates ranging from 225
to 425 basis points over the ten-year U.S. Treasury rate.
Changes in the valuation allowance for capitalized mortgage servicing rights
for the quarter and six months ended June 30, 1995 were:
In millions Quarter Six Months
Balance at beginning of period $ 24.2 -
Provision for capitalized mortgage
servicing rights in excess of fair value 24.5 48.7
Balance at end of period $ 48.7 48.7
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. A key assumption in the information which follows
is that rates remain constant at June 30, 1995 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. Option
contracts allow the holder of the option to purchase or sell a financial
instrument at a specified price and within a specified period of time from or
to the seller or "writer" of the option. As a writer of options, the
corporation receives a premium at the outset and then bears the risk of an
unfavorable change in the price of the underlying financial instrument.
19
<PAGE>
For the six months ended June 30, 1995, the end-user derivative activities
decreased interest income by $2.0 million and increased interest expense by
$0.2 million, for a total reduction to net interest income of $2.2 million.
For the same period in 1994, interest income was increased by $6.3 million and
interest expense was reduced by $15.2 million, for a total benefit to net
interest income of $21.5 million.
The following table presents the maturities and weighted average rates for
end-user derivatives by type:
Dollars in millions
<TABLE>
Maturity
There-
June 30, 1995 1995 1996 1997 1998 1999 after Total
<S> <C> <C> <C> <C> <C> <C> <C>
Swaps:
Generic receive fixed-
Notional value $ - 675 250 100 466 525 2,016
Weighted avg.
receive rate - % 6.32 8.18 7.88 7.92 7.07 7.16
Weighted avg. pay rate - % 6.09 6.21 6.25 6.13 6.17 6.14
Generic pay fixed-
Notional value $ - 30 - - - 300 330
Weighted avg.
receive rate - % 6.19 - - - 5.93 5.95
Weighted avg. pay rate - % 6.27 - - - 5.89 5.92
Basis -
Notional value $ - 200 - 29 - - 229
Weighted avg.
receive rate - % 6.04 - 3.47 - - 5.91
Weighted avg. pay rate - % 6.10 - 5.01 - - 5.77
Interest rate caps and
floors (1):
Notional value $ - 16 - 377 400 1,000 1,793
Security options (1):
Notional value 1,535 - - - - - 1,535
Total notional value $1,535 921 250 506 866 1,825 5,903
Total weighted avg.
rates on swaps:
Receive rate - % 6.18 8.18 7.24 7.92 6.65 6.89
Pay rate - % 6.09 6.21 5.63 6.13 6.07 6.08
</TABLE>
(1) Average rates are not meaningful for interest rate caps and floors or
security options.
Note: Weighted average variable rates are based on the actual rates as of
June 30, 1995.
20
<PAGE>
Activity in the notional amounts of end-user derivatives for the six months
ended June 30, 1995 is summarized as follows:
<TABLE>
In millions December 31, Amortizations June 30,
1994 Additions and Maturities Terminations 1995
<S> <C> <C> <C> <C> <C>
Swaps:
Generic receive fixed $ 1,025 1,091 - (100) 2,016
Generic pay fixed 130 200 - - 330
Basis 229 - - - 229
Total swaps 1,384 1,291 - (100) 2,575
Interest rate caps
and floors 751 1,050 (8) - 1,793
Security options - 2,778 (748) (495) 1,535
Total $ 2,135 5,119 (756) (595) 5,903
Deferred gains and losses on closed end-user derivatives were not material at June 30, 1995 and
December 31, 1994.
</TABLE>
21
<PAGE>
The following table provides the gross gains and gross losses not yet
recognized in the consolidated financial statements for open end-user
derivatives applicable to certain hedged assets and liabilities:
In millions
<TABLE>
Balance Sheet Category
Interest- Other Long-
Investment bearing Short-term term
June 30, 1995 Securities Deposits Borrowings Debt Other* Total
<S> <C> <C> <C> <C> <C> <C>
Swaps:
Pay variable
Unrealized gains $ - - - 66.9 15.1 82.0
Unrealized (losses) - (2.2) - (2.3) - (4.5)
Pay variable net - (2.2) - 64.6 15.1 77.5
Pay fixed
Unrealized gains - 5.2 - - 1.3 6.5
Unrealized (losses) - (0.1) - - - (0.1)
Pay fixed net - 5.1 - - 1.3 6.4
Basis
Unrealized gains 1.1 - - - - 1.1
Total unrealized gains 1.1 5.2 - 66.9 16.4 89.6
Total unrealized (losses) - (2.3) - (2.3) - (4.6)
Total net $ 1.1 2.9 - 64.6 16.4 85.0
Interest rate caps and floors:
Unrealized gains $ - - - - 16.1 16.1
Unrealized (losses) - (0.3) (0.1) (0.2) (1.1) (1.7)
Total net $ - (0.3) (0.1) (0.2) 15.0 14.4
Security options:
Unrealized gains $ 1.9 - - - - 1.9
Unrealized (losses) (2.4) - - - - (2.4)
Total net $ (0.5) - - - - (0.5)
Grand total
unrealized gains $ 3.0 5.2 - 66.9 32.5 107.6
Grand total
unrealized (losses) (2.4) (2.6) (0.1) (2.5) (1.1) (8.7)
Grand total net $ 0.6 2.6 (0.1) 64.4 31.4 98.9
</TABLE>
*Includes $16.1 million in gains and $1.1 million in losses on floors hedging
mortgage servicing rights, $15.1 million in gains on swaps hedging the
Cumulative Tracking Preferred Stock and $1.3 million in gains hedging leasing
activity.
As a result of interest rate fluctuations, off balance-sheet derivatives have
unrealized appreciation or depreciation in market values as compared with
their cost. As these derivatives hedge certain assets and liabilities of the
corporation, as noted in the table above, there has been offsetting unrealized
appreciation and depreciation in the assets and liabilities hedged.
22
<PAGE>
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, 1995, the
corporation had forward contracts totaling $10.4 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.
During the first six months of 1995, the corporation entered into futures
contracts of $1.4 billion notional value, as part of its trading account
portfolio, which are valued at market with any gains or losses recognized
currently.
During the first six months of 1995, the corporation entered into a series of
interest rate floor contracts with an aggregate notional amount of $1.1
billion. The corporation utilizes these floors for hedging its portfolio of
mortgage servicing rights. The floors provide for the receipt of payments
when rates are below predetermined interest rate levels.
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 June 1, 1995, the corporation completed acquisitions of three financial
institutions. The corporation acquired United Texas Financial Corporation, a
$296 million two-bank holding company based in Wichita Falls, Texas, and
issued 1,515,851 common shares. The corporation also acquired First American
National Bank, a $39 million bank located in Chandler, Arizona, through the
issuance of 192,831 common shares, and First Tule Bancorp, Inc., a $61 million
bank holding company in Tulia, Texas for cash of $8.25 million.
On May 10, 1995, the corporation acquired New Braunfels, Inc., a $43 million
bank holding company in New Braunfels, Texas, for $7 million cash. The
corporation completed its acquisition on May 4, 1995 of certain subsidiaries
and net assets of ITT Financial Corporation's Island Finance business for $574
million cash. On May 1, 1995, the corporation acquired Goldenbanks of
Colorado, Inc., a $361 million multi-bank holding company based in Golden,
Colorado, and issued 2,716,629 common shares. On April 10, 1995 the
corporation completed its acquisition of The First National Bank of Bay City,
a $146 million bank in Bay City, Texas, and issued 932,642 common shares. On
April 1, 1995, the corporation acquired Babbscha Company, a $53 million bank
holding company in Fridley, Minnesota, and issued 275,921 common shares.
On March 31, 1995, the corporation completed its acquisition of the $15
billion servicing portfolio of BarclaysAmerican/Mortgage Corporation for cash.
On March 13, 1995, the corporation acquired Directors Mortgage Loan
Corporation in Riverside, California, and issued 10,545,778 common shares. On
February 28, 1995, the corporation acquired Parker Bankshares, Inc., a bank
holding company located in Parker, Colorado, with total assets of $59 million,
and issued 394,995 common shares. On February 12, 1995, the corporation
acquired Independent Bancorp of Arizona, Inc., a $1.6 billion bank holding
company headquartered in Phoenix, Arizona, for cash of $159.7 million. On
January 6, 1995, the corporation acquired American Republic Bancshares, Inc.,
a $222 million bank holding company located in Belen, New Mexico, and issued
1,206,546 common shares. On January 5, 1995, the corporation completed its
acquisition of Ken-Caryl Investment Company, a bank holding company
23
<PAGE>
headquartered in Littleton, Colorado, with total assets of $29 million, and
issued 149,774 common shares.
The acquisitions of Goldenbanks of Colorado, Inc., First American National
Bank (Chandler, Arizona), Parker Bankshares, Inc., and Directors Mortgage Loan
Corporation 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. Each
of the other acquisitions above were accounted for using the purchase method.
At July 31, 1995, the corporation had twelve other pending acquisitions with
total assets of approximately $4.5 billion and it is anticipated that cash of
$278.2 million and approximately 25.7 million common shares will be issued
upon completion of these acquisitions. Pending acquisitions include AMFED
Financial, Inc., a $1.6 billion thrift holding company in Nevada, which will
become the corporation's 16th community banking state. The pending
acquisitions, subject to approval by regulatory agencies, are expected to be
completed by the end of the first quarter of 1996 and are not individually
significant to the financial statements of the corporation.
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 1994 Annual Report on Form 10-K.
EARNINGS PERFORMANCE
The corporation reported net income of $234.3 million for the quarter ended
June 30, 1995, a 16.0 percent increase over the $202.0 million earned in the
second quarter of 1994. Net income per common share was 68 cents, compared
with 61 cents in the second quarter of 1994, an increase of 11.5 percent.
Return on realized common equity was 22.6 percent and return on assets was
1.48 percent for the second quarter of 1995, compared with 21.7 percent and
1.48 percent, respectively, in the second quarter of 1994.
For the six months ended June 30, 1995, net income was $451.1 million, or
$1.34 per common share, an increase of 14.9 percent and 11.7 percent,
respectively, over the $392.5 million or $1.20 per common share earned in the
first six months of 1994. Return on realized common equity was 22.4 percent
and return on assets was 1.47 percent for the first six months of 1995,
compared with 21.6 percent and 1.47 percent, respectively, for the same period
a year ago.
The 1995 results discussed above include the impact of the corporation's
adoption of Statement of Financial Accounting Standards No. 122, "Accounting
for Mortgage Servicing Rights, an amendment of FASB Statement No. 65" (SFAS
122) as of the beginning of 1995. The financial statements for the quarter
ended March 31, 1995 have been restated to reflect the adoption of SFAS 122.
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 1995 1994 1995 1994
Banking $ 146.9 136.2 287.0 264.1
Mortgage banking 26.4 11.5 47.5 22.3
Norwest Financial 61.0 54.3 116.6 106.1
Net income $ 234.3 202.0 451.1 392.5
* 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.
25
<PAGE>
Banking
The Banking group reported second quarter 1995 earnings of $146.9 million, an
8.0 percent increase over the second quarter 1994 earnings of $136.2 million.
For the six months ended June 30, 1995, earnings increased 8.7 percent to
$287.0 million compared with $264.1 million for the same period in 1994. The
increased earnings in the first six months of 1995 reflected an 18.9 percent
growth in tax-equivalent net interest income to $1,090.4 million, due to a
16.9 percent increase in average earning assets and a seven basis point
increase in net interest margin. The Banking group's provision for credit
losses for the six months ended June 30, 1995 increased $52.0 million to $59.8
million from a year earlier as average loans and leases rose $4.0 billion or
16.5 percent. Noninterest income rose $16.3 million to $460.0 million for the
first half of 1995. The Banking group recorded securities losses of $23.4
million in the six months ended June 30, 1995, compared with securities losses
of $5.0 million in the same period last year. Noninterest expenses of
$1,061.1 million for the first half of 1995 were $100.1 million higher when
compared with the first six months of 1994, reflecting increased expenses
related to acquisitions.
Mortgage Banking
Mortgage banking operations earned $26.4 million in the current quarter
compared with $11.5 million in the second quarter of 1994. For the first six
months of 1995, mortgage banking operations earned $47.5 million compared with
$22.3 million in the same period of 1994. Combined gains on sales of
mortgages and servicing rights in the first half of 1995 amounted to $50.8
million compared with $99.5 million in the same period last year. See Note 9
to the unaudited consolidated financial statements for the second quarter of
1995 for a detailed analysis of mortgage banking revenues for the quarters and
six months ended June 30, 1995 and 1994.
The growth in mortgage banking earnings reflects the continued growth in
mortgage loan fundings and the servicing portfolio as well as the
corporation's adoption of SFAS 122. Mortgage loan originations amounted to
$7.7 billion during the quarter as compared with $6.7 billion in the
comparable period in 1994 and totaled $12.3 billion for the first half of
1995. The servicing portfolio increased to $100.5 billion from $59.3 billion
at June 30, 1994 and $71.5 billion at year-end 1994. The servicing portfolio,
which currently carries a weighted average coupon of 7.51 percent, has grown
in part due to acquisitions of Directors Mortgage Loan Corporation and the
servicing portfolio of BarclaysAmerican/Mortgage Corporation in the first
quarter of 1995.
Net capitalized mortgage servicing rights totaled $841.8 million at June 30,
1995. Under SFAS 122 the corporation recognizes as separate assets the rights
to service mortgage loans for others whether the servicing rights are acquired
through purchase transactions or through loan originations. SFAS 122 also
requires that capitalized mortgage servicing rights be periodically evaluated
for impairment based on a comparison of the carrying value of the servicing
rights and their respective fair value. The fair value has been determined
utilizing conservative assumptions for discount and prepayment rates. Total
impairment of $24.5 million and $48.7 million was recognized for the quarter
26
<PAGE>
and six months ended June 30, 1995. These amounts consider unrealized gains
on a series of floors used by the corporation as hedges in its management of
the value of the mortgage servicing portfolio.
Norwest Financial
Norwest Financial (including Norwest Financial Services, Inc. and Island
Finance) reported earnings of $61.0 million in the second quarter of 1995,
compared with $54.3 million in the second quarter of 1994, an increase of 12.2
percent. Norwest Financial's net income of $116.6 million for the first six
months of 1995 was up 9.8 percent from the first six months of 1994. The
growth in year-to-date earnings reflected a 14.9 percent increase in Norwest
Financial's tax-equivalent net interest income as average finance receivables
grew 22.3 percent from the first half of 1994. The increase in net interest
income and average receivables was due in part to the acquisition of ITT
Financial Corporation's Island Finance business in May 1995.
CONSOLIDATED INCOME STATEMENT ANALYSIS
Net Interest Income
Consolidated tax-equivalent net interest income was $806.6 million in the
second quarter of 1995, compared with $704.6 million in the second quarter of
1994, an increase of 14.5 percent. For the first six months of 1995, tax
equivalent net interest income increased 14.5 percent from the same period in
1994 to $1,558.6 million. Growth in tax-equivalent net interest income over
the second quarter of 1994 was a result of a 15.0 percent growth in average
earning assets, partially offset by increases in funding costs and a change in
funding mix due to increases in long-term debt. Net interest margin, the
ratio of annualized tax-equivalent net interest income to average earning
assets, was 5.66 percent in the second quarter of 1995, compared with 5.65
percent in the second quarter of 1994. Net interest margin was 5.58 percent
for the six months ended June 30, 1995, up slightly from 5.56 percent for the
first half of 1994. The net interest margin for the second quarter of 1995
improved 17 basis points from the first quarter of this year primarily due to
the Island Finance acquisition, on which higher margins are earned, and an
improved earning asset mix. 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.
27
<PAGE>
Changes in Tax-Equivalent Net Interest Income*
<TABLE>
In millions 2Q 95 2Q 95 6 Mos. 95
over over over
2Q 94 1Q 95 6 Mos. 94
<S> <C> <C> <C>
Increase (decrease) due to:
Change in earning asset volume ................ $100.4 29.1 195.2
Change in volume of interest-free funds ....... (6.3) (2.8) (15.3)
Change in net return from
Interest-free funds .......................... 33.4 4.7 66.4
Interest-bearing funds ....................... (17.9) 16.8 (22.2)
Change in earning asset mix ................... 17.3 11.9 22.6
Change in funding mix ......................... (24.9) (5.1) (49.9)
Change in tax-equivalent net interest income .... $102.0 54.6 196.8
</TABLE>
* Net interest income is presented on a tax-equivalent basis utilizing a
federal incremental tax rate of 35 percent in each period presented.
Trading Revenues
Interest income derived from trading account securities was $4.5 million and
$7.6 million for the three months ended June 30, 1995 and 1994, respectively.
Year-to-date tax-equivalent interest income was $7.8 million for the first
half of 1995 compared with $16.0 million for the comparable period of 1994.
Non-interest trading revenues were $(1.2) million and $9.2 million for the
three and six months ended June 30, 1995, respectively. The comparable
figures for 1994 were $(8.9) million for the second quarter and $(17.3)
million for the first six months. The trading revenues were derived from the
following activities:
<TABLE>
Three Months Ended June 30,
In millions 1995 1994
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 $ 1.6 - 1.6 3.0 - 3.0
State and
municipal 0.2 - 0.2 0.3 - 0.3
Mortgage-backed 0.3 - 0.3 0.2 - 0.2
Other 0.5 - 0.5 0.3 - 0.3
2.6 - 2.6 3.8 - 3.8
Derivatives:
Swaps and other
interest rate
contracts 1.9 0.5 2.4 3.8 (9.1) (5.3)
Options - (4.5) (4.5) - 3.7 3.7
Futures - (1.2) (1.2) - 0.3 0.3
Gains (losses) on
securities - 1.9 1.9 - (5.2) (5.2)
Foreign exchange
trading - 2.1 2.1 - 1.4 1.4
Total $ 4.5 (1.2) 3.3 7.6 (8.9) (1.3)
</TABLE>
28
<PAGE>
<TABLE>
Six Months Ended June 30,
In millions 1995 1994
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 $ 3.1 - 3.1 6.9 - 6.9
State and
municipal 0.4 - 0.4 0.7 - 0.7
Mortgage-backed 0.6 - 0.6 0.8 - 0.8
Other 0.8 - 0.8 0.3 - 0.3
4.9 - 4.9 8.7 - 8.7
Derivatives:
Swaps and other
interest rate
contracts 2.9 3.1 6.0 7.3 (17.1) (9.8)
Options - (0.2) (0.2) - 6.6 6.6
Futures - (1.3) (1.3) - 1.4 1.4
Gains (losses) on
securities - 3.7 3.7 - (11.0) (11.0)
Foreign exchange
trading - 3.9 3.9 - 2.8 2.8
Total $ 7.8 9.2 17.0 16.0 (17.3) (1.3)
</TABLE>
Provision for Credit Losses
The corporation provided $74.7 million for credit losses in the second quarter
of 1995, compared with $23.7 million in the same period a year ago. Net
credit losses totaled $74.4 million and $33.4 million for the three months
ended June 30, 1995 and 1994, respectively. As a percentage of average loans
and leases, net credit losses were 0.84 percent in the second quarter of 1995,
compared with 0.45 percent in the same period a year ago.
For the first six months of 1995, the provision for credit losses totaled
$130.0 million, compared with $60.0 million in the first six months of 1994.
Net credit losses were $122.4 million, or 0.72 percent of average loans and
leases, for the six months ended June 30, 1995, compared with $76.6 million,
or 0.53 percent, for the same period in 1994.
Non-interest Income
Consolidated non-interest income was $451.3 million in the second quarter of
1995, an increase of $64.4 million, or 16.6 percent, from the second quarter
of 1994. Net investment securities gains of $11.9 million were recorded in
the second quarter of 1995 compared with net losses of $43.5 million in the
second quarter of 1994. For the six months of 1995, non-interest income was
up $26.9 million, an increase of 3.3 percent over 1994. The increase was
primarily due to increased fee income and insurance revenues, partially offset
by higher levels of investment securities losses and lower venture capital
gains.
Excluding gains (losses) on investment securities and investment securities
available for sale and venture capital gains, non-interest income increased
4.6 percent from the second quarter of 1994 and 6.6 percent from the first six
months of 1994.
29
<PAGE>
Mortgage banking revenues were $129.1 million for the second quarter of 1995,
compared with $139.8 million for the same period in 1994. A decrease in gains
from the sales of servicing rights was partially offset by increased servicing
fees from growth in the corporation's servicing portfolio. For the six months
ended June 30, 1995, mortgage banking revenues were $258.5 million compared
with $275.2 million for the first half of 1994. A decrease in gains on sales
of mortgages, due to lower market interest rates, was partially offset by
higher servicing fees and gains on sales of mortgage servicing rights. Future
sales of such rights are largely dependent upon portfolio characteristics and
prevailing market conditions. See Note 9 to the unaudited consolidated
financial statements for the second quarter of 1995 for a detailed analysis of
mortgage banking revenues for the three and six months ended June 30, 1995 and
1994.
Net venture capital gains were $4.8 million for the three months and $26.4
million for the six months ended June 30, 1995, compared with $15.0 million
and $35.2 million, respectively, for the same periods in 1994. Sales of
venture capital securities generally relate to timing of holdings becoming
publicly traded and subsequent market conditions, causing venture capital
gains to be unpredictable in nature. Net unrealized appreciation in the
venture capital investment portfolio was $138.8 million at June 30, 1995.
Non-interest Expenses
Consolidated non-interest expenses of $825.9 million increased 8.8 percent
over the second quarter of 1994. For the six months ended June 30, 1995, non-
interest expenses were up $58.8 million to $1,586.9 million, an increase of
3.8 percent over 1994. The quarterly and year-to-date results reflect
increased expenses related to acquisitions.
CONSOLIDATED BALANCE SHEET ANALYSIS
At June 30, 1995, earning assets were $59.4 billion, an increase of 11.4
percent from $53.3 billion at December 31, 1994. This increase was primarily
due to a 4.2 percent increase in total investment securities and an 11.4
percent increase in net loans. The increase in other assets from December 31,
1994 was principally due to goodwill and other intangibles from acquisitions,
purchases of mortgage servicing rights and an increase in receivables
associated with sales of investment securities.
At June 30, 1995, interest-bearing liabilities totaled $49.4 billion, an 11.8
percent increase from $44.2 billion at December 31, 1994. The increase is
primarily due to increases in interest-bearing deposits and long-term debt.
See Note 6 to the unaudited consolidated financial statements for the second
quarter of 1995 for a detailed discussion of long-term debt issued during
1995.
30
<PAGE>
Credit Quality
Loans and leases as of the end of each of the last five quarters were as
follows:
In millions 1995 1994
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
Commercial, financial and
industrial ................ $ 8,179 $ 7,846 7,434 7,090 6,952
Agricultural ................ 949 890 956 967 959
Real estate
Secured by 1-4 family
residential properties .. 10,166 9,716 8,959 8,689 8,521
Secured by development
properties .............. 1,607 1,541 1,514 1,713 1,767
Secured by construction
and land development .... 689 623 568 588 596
Secured by owner-
occupied properties ..... 2,247 2,147 2,076 1,713 1,632
Consumer .................... 9,490 8,022 7,923 7,537 7,157
Credit card and check credit. 2,865 2,838 2,893 2,577 2,429
Lease financing ............. 790 764 765 689 670
Foreign
Consumer ................. 682 494 486 486 456
Commercial................ 148 135 130 132 115
Total loans and leases . 37,812 35,016 33,704 32,181 31,254
Unearned discount ...... (1,535) (1,139) (1,128) (1,106) (1,081)
Total loans and leases,
net of unearned
discount ............ $36,277 33,877 32,576 31,075 30,173
The increases in consumer and foreign loans from the first quarter of 1995 are
primarily due to the acquisition of Island Finance.
At June 30, 1995, the allowance for credit losses totaled $854.6 million, or
2.36 percent of loans and leases outstanding. Comparable amounts were $790.4
million, or 2.62 percent, at June 30, 1994, and $789.9 million, or 2.42
percent, at December 31, 1994. The ratio of the allowance for credit losses
to total non-performing assets and 90-day past due loans and leases was 345.7
percent at June 30, 1995, compared with 293.9 percent at June 30, 1994 and
361.8 percent at December 31, 1994.
Although it is impossible for any lender to predict future credit losses with
complete accuracy, management monitors the allowance for credit losses with
the intent to provide for all losses that can reasonably be anticipated based
on current conditions. The corporation maintains the allowance for credit
losses as a general allowance available to cover future credit losses within
the entire loan and lease portfolio and other credit-related risks. However,
management has prepared an allocation of the allowance based on its views of
risk characteristics of the portfolio. This allocation of the allowance for
credit losses does not represent the total amount available for actual future
credit losses in any single category nor does it prohibit future credit losses
from being absorbed by portions of the allowance allocated to other categories
or by the unallocated portion.
31
<PAGE>
The allocation of the allowance for credit losses to major categories of loans
at June 30, 1995 and December 31, 1994 was:
June 30, December 31,
1995 1994
Commercial ...................... $ 157.7 151.9
Consumer ........................ 244.9 209.0
Real estate ..................... 161.0 163.5
Foreign ......................... 27.0 20.0
Unallocated ..................... 264.0 245.5
Total ........................ $ 854.6 789.9
Non-performing assets and 90-day past due loans and leases totaled $247.3
million, or 0.37 percent of total assets, at June 30, 1995, compared with
$268.9 million, or 0.48 percent, at June 30, 1994, and $218.3 million, or 0.37
percent, at December 31, 1994. The decrease from June 30, 1994, primarily
reflects a $16.0 million decrease in real estate non-accrual loans and a $23.0
million decrease in other real estate owned, partially offset by a $24.1
million increase in 90-day past due loans and leases. The increase from
December 31, 1994 included a $34.0 million increase in 90-day past due loans
and leases, partially offset by an $8.7 million decrease in real estate non-
accrual 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,
Southwest and Rocky Mountain regions of the country. In general, the economy
in these regions continues to remain strong, though growth is slowing as a
result of prior year interest rate increases. Distribution of average loans
by region during the first half of 1995 was approximately 57 percent in the
North Central Midwest, 13 percent in the South Central Midwest and 30 percent
in the Rocky Mountain/Southwest region.
Norwest Card Services, Norwest Mortgage and Norwest Financial operate on a
nationwide basis. With respect to credit card receivables, approximately 45
percent of the portfolio is within the 15-state Norwest banking region.
Approximately 56 percent of the portfolio is accounted for by the states of
Massachusetts, Minnesota, Iowa, New York, Connecticut, Colorado, California,
Illinois, Nebraska and Texas. No one state accounts for more than 10 percent
of the total credit card portfolio.
Mortgage banking operates in all 50 states, representing the largest retail
mortgage network in the country. Norwest Financial engages in consumer
finance activities in 46 states, all 10 Canadian provinces, Puerto Rico, and
elsewhere in the Caribbean and Central America. The general strength of the
consumer sector of the national economy and the geographical diversification
of Mortgage banking and Norwest Financial help to mitigate the credit risk in
their loan portfolios.
32
<PAGE>
Credit Ratings
The commercial paper/short-term debt of the corporation and Norwest Financial,
Inc. are 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. 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. 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
The corporation's Tier 1 capital ratio was 8.04 percent at June 30, 1995, and
its total capital to risk-based assets ratio was 10.18 percent, compared with
9.89 percent and 12.23 percent, respectively, at December 31, 1994. The
corporation's leverage ratio was 5.85 percent at June 30, 1995, compared with
6.94 percent at December 31, 1994. 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 decrease in the
capital ratios from year-end 1994 reflects intangibles arising from
acquisitions completed in the first half of 1995, principally Island Finance.
On July 25, 1995, the corporation's board of directors approved the redemption
of all of the outstanding shares of the Cumulative Convertible Preferred
Stock, Series B, and related depositary shares effective September 1, 1995.
Each depositary share, which represents one-quarter of a share of the
preferred stock, may be converted into approximately 2.74 shares of common
stock up until the call date; otherwise the depositary shares will be redeemed
for $52.10 plus accrued dividends.
The corporation's dividend payout was 30.9 percent for the second quarter of
1995 compared with 30.3 percent for the second quarter of 1994. The board of
directors also approved an increase in the corporation's quarterly common
stock dividend to 24 cents per share from 21 cents. The dividend is payable
on September 1, 1995, to common stockholders of record on August 4, 1995.
33
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
<TABLE>
Quarter Ended June 30
In millions, except ratios 1995 1994
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 $ 408 $ 6.1 6.15% $ 562 $ 6.9 5.01%
Trading account securities 165 4.6 11.27 267 7.8 11.66
Investment securities
U.S. Treasury & federal
agencies 28 0.4 5.16 27 0.2 2.98
State, municipal and
housing tax-exempt 695 17.7 10.15 669 17.9 10.72
Other 661 8.8 5.33 434 4.8 4.48
Total 1,384 26.9 7.75 1,130 22.9 8.13
Investment securities available
for sale
U.S. Treasury & federal
agencies 993 16.1 6.56 1,797 23.1 5.16
State, municipal and
housing tax-exempt 121 2.3 7.59 90 1.9 8.47
Mortgage-backed 12,133 226.6 7.44 10,298 174.6 6.60
Other 662 7.7 6.23 333 5.0 7.63
Total 13,909 252.7 7.33 12,518 204.6 6.43
Student loans available
for sale 2,202 47.5 8.65 1,557 26.1 6.73
Mortgages held for sale 3,657 74.9 8.19 3,873 64.6 6.67
Loans and leases
(net of unearned discount)
Commercial 10,654 246.0 9.26 9,290 183.1 7.90
Real estate 13,212 309.0 9.36 11,294 242.9 8.60
Consumer 11,578 429.8 14.87 9,236 322.2 13.98
Total loans and leases 35,444 984.8 11.13 29,820 748.2 10.05
Allowance for credit losses (851) (805)
Net loans and leases 34,593 29,015
Total earning assets
(before the allowance for
credit losses) 57,169 1,397.5 9.81 49,727 1,081.1 8.67
Cash and due from banks 3,155 2,949
Other assets 4,232 2,860
Total assets $63,705 $54,731
(Continued on page 35)
</TABLE>
34
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
(Continued from page 34)
<TABLE>
Quarter Ended June 30
In millions, except ratios 1995 1994
Interest Average Interest Average
Average Income/ Yields/ Average Income/ Yields/
Balance Expense* Rates* Balance Expense* Rates*
<S> <C> <C> <C> <C> <C> <C>
Liabilities and
Stockholders' Equity
Noninterest-bearing deposits $ 9,526 $ - -% $ 8,515 $ - -%
Interest-bearing deposits
Savings and NOW accounts 4,879 24.8 2.04 4,679 20.5 1.76
Money market accounts 10,562 84.6 3.21 10,663 58.1 2.19
Savings certificates 10,771 144.2 5.37 9,825 109.8 4.48
Certificates of deposit
and other time 1,785 25.8 5.80 1,560 17.1 4.39
Foreign time 275 3.8 5.54 292 2.8 3.88
Total interest-bearing
deposits 28,272 283.2 4.02 27,019 208.3 3.09
Federal funds purchased &
repurchase agreements 3,345 49.5 5.94 3,229 32.0 3.97
Short-term borrowings 4,237 66.1 6.25 3,598 36.6 4.08
Long-term debt 11,603 192.1 6.62 7,096 99.6 5.62
Total interest-bearing
liabilities 47,457 590.9 4.99 40,942 376.5 3.69
Other liabilities 2,145 1,437
Preferred stock 530 341
Common stockholders' equity 4,047 3,496
Total liabilities and
stockholders' equity $63,705 $54,731
Net interest income
(tax-equivalent basis) $806.6 $704.6
Yield spread 4.82 4.98
Net interest margin 5.66 5.65
Interest-bearing liabilities
to earning assets 83.01 82.33
</TABLE>
* Interest income and yields are calculated on a tax-equivalent basis
utilizing a federal incremental tax rate of 35% in each period presented.
Non-accrual loans and the related negative income effect have been included
in the calculation of yields.
35
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
<TABLE>
Six Months Ended June 30
In millions, except ratios 1995 1994
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 $ 688 $ 20.0 5.89% $ 531 $ 12.3 4.67%
Trading account securities 153 8.0 10.57 319 16.3 10.33
Investment securities
U.S. Treasury & federal
agencies 28 0.7 4.83 25 0.7 6.04
State, municipal and
housing tax-exempt 698 36.0 10.30 652 35.6 10.90
Other 614 15.2 4.95 379 9.4 4.94
Total 1,340 51.9 7.73 1,056 45.7 8.65
Investment securities available
for sale
U.S. Treasury & federal
agencies 1,024 34.3 6.73 1,890 48.9 5.25
State, municipal and
housing tax-exempt 115 4.4 7.41 90 3.7 8.34
Mortgage-backed 12,267 461.4 7.39 9,572 312.0 6.48
Other 543 14.7 7.10 418 9.9 5.73
Total 13,949 514.8 7.33 11,970 374.5 6.28
Student loans available
for sale 2,178 93.0 8.61 1,537 50.2 6.59
Mortgages held for sale 3,243 132.1 8.15 4,245 132.7 6.25
Loans and leases
(net of unearned discount)
Commercial 10,281 471.9 9.25 9,193 347.5 7.62
Real estate 12,891 593.1 9.20 11,238 478.6 8.52
Consumer 11,166 809.0 14.55 8,932 623.4 14.02
Total loans and leases 34,338 1,874.0 10.96 29,363 1,449.5 9.91
Allowance for credit losses (831) (807)
Net loans and leases 33,507 28,556
Total earning assets
(before the allowance for
credit losses) 55,889 2,693.8 9.65 49,021 2,081.2 8.52
Cash and due from banks 3,115 2,967
Other assets 3,895 2,801
Total assets $62,068 $53,982
(Continued on page 37)
</TABLE>
36
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
(Continued from page 36)
<TABLE>
Six Months Ended June 30
In millions, except ratios 1995 1994
Interest Average Interest Average
Average Income/ Yields/ Average Income/ Yields/
Balance Expense* Rates* Balance Expense* Rates*
<S> <C> <C> <C> <C> <C> <C>
Liabilities and Stockholders'
Equity
Noninterest-bearing deposits $ 9,225 $ - -% $ 8,649 $ - -%
Interest-bearing deposits
Savings and NOW accounts 4,837 49.9 2.08 4,582 40.3 1.77
Money market accounts 10,481 165.0 3.17 10,602 112.6 2.14
Savings certificates 10,524 274.2 5.25 9,891 222.9 4.54
Certificates of deposit
and other time 1,667 46.6 5.64 1,598 33.8 4.26
Foreign time 512 14.6 5.74 222 3.8 3.50
Total interest-bearing
deposits 28,021 550.3 3.96 26,895 413.4 3.10
Federal funds purchased &
repurchase agreements 3,588 104.4 5.87 2,583 47.2 3.69
Short-term borrowings 4,011 124.0 6.23 3,556 66.4 3.76
Long-term debt 10,846 356.5 6.57 6,866 192.4 5.61
Total interest-bearing
liabilities 46,466 1,135.2 4.91 39,900 719.4 3.63
Other liabilities 2,052 1,546
Preferred stock 531 345
Common stockholders' equity 3,794 3,542
Total liabilities and
stockholders' equity $62,068 $53,982
Net interest income
(tax-equivalent basis) $1,558.6 $1,361.8
Yield spread 4.74 4.89
Net interest margin 5.58 5.56
Interest-bearing liabilities
to earning assets 83.14 81.39
</TABLE>
*Interest income and yields are calculated on a tax-equivalent basis
utilizing a federal incremental tax rate of 35% in each period presented.
Non-accrual loans and the related negative income effect have been included
in the calculation of yields.
37
<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 25,
1995. There were 311,274,079 shares of common stock outstanding and entitled
to vote at said meeting; and a total 268,285,856 (86.19%) were present at the
meeting in person or by proxy. The stockholders voted to approve an amendment
to the corporation's Restated Certificate of Incorporation to authorize a new
class of capital stock consisting of 4,000,000 shares of Preference Stock
(211,586,741 for, 33,084,001 against, 2,918,408 abstained and 20,696,706
broker non-votes) and to ratify the appointment of KPMG Peat Marwick LLP to
audit the books of the corporation for the year ending December 31, 1995
(266,066,794 for, 842,204 against, 1,376,858 abstained and no broker non-
votes).
In addition, 14 nominees were elected directors of the corporation, as
follows:
Shares FOR Shares WITHHELD
David A. Christensen 266,209,843 2,076,013
Gerald J. Ford 265,440,400 2,845,456
Pierson M. Grieve 266,028,574 2,257,282
Charles M. Harper 266,086,381 2,199,475
William A. Hodder 266,209,185 2,076,671
Lloyd P. Johnson 265,573,111 2,712,745
Reatha Clark King 266,148,119 2,137,737
Richard M. Kovacevich 265,803,142 2,482,714
Richard S. Levitt 266,142,763 2,143,093
Richard D. McCormick 266,133,483 2,152,373
Cynthia H. Milligan 265,295,627 2,990,229
Ian M. Rolland 266,155,170 2,130,686
Stephen E. Watson 266,211,589 2,074,267
Michael W. Wright 266,151,499 2,134,357
38
<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
11. Computation of Earnings Per Share 41
12(a). Computation of Ratio of Earnings to Fixed Charges 43
12(b). Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends 44
(b) Reports on Form 8-K.
The corporation filed a Current Report on Form 8-K, dated April 21,
1995, reporting consolidated operating results of the corporation for
the quarter ended March 31, 1995.
39
<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 14, 1995 By /s/ Michael A. Graf
Senior Vice President
and Controller
(Chief Accounting Officer)
40
<PAGE>
Exhibit 11.
Norwest Corporation and Subsidiaries
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
In thousands, except per common share amounts Quarter Ended
June 30
1995 1994
PRIMARY:
Weighted average number of common shares
outstanding ..................................... 325,239 316,728
Net effect of assumed exercise of stock options
based on treasury stock method using average
market price .................................... 2,309 2,423
327,548 319,151
Net income ........................................ $234,303 201,958
Less dividends accrued on preferred stock ........ 10,422 6,889
Net income, as adjusted .......................... $223,881 195,069
Net income per common share ...................... $ 0.68 0.61
FULLY DILUTED:
Weighted average number of common shares
outstanding ..................................... 325,239 316,728
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 ............................. 2,665 2,426
Assumed conversion of 6 3/4% convertible
subordinated debentures due 2003 ................ 24 47
Assumed conversion of Cumulative Convertible
Preferred Stock ................................. 12,610 12,628
340,538 331,829
Net income ........................................ $234,303 201,958
Less dividends accrued on preferred stock ........ 6,429 2,886
Add 6 3/4% convertible subordinated debentures
interest and amortization of debt expense,
net of income tax effect ........................ 1 3
Net income, as adjusted .......................... $227,875 199,075
Net income per common share....................... $ 0.67 0.60
41
<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
1995 1994
PRIMARY:
Weighted average number of common shares
outstanding ..................................... 319,023 313,834
Net effect of assumed exercise of stock options
based on treasury stock method using average
market price .................................... 1,982 2,308
321,005 316,142
Net income ........................................ $451,126 392,500
Less dividends accrued on preferred stock ........ 20,876 14,050
Net income, as adjusted .......................... $430,250 378,450
Net income per common share ...................... $ 1.34 1.20
FULLY DILUTED:
Weighted average number of common shares
outstanding ..................................... 319,023 313,834
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 ............................. 2,738 2,409
Assumed conversion of 6 3/4% convertible
subordinated debentures due 2003................. 28 48
Assumed conversion of Cumulative Convertible
Preferred Stock ................................. 12,616 12,626
334,405 328,917
Net income ........................................ $451,126 392,500
Less dividends accrued on preferred stock ........ 12,880 6,044
Add 6 3/4% convertible subordinated debentures
interest and amortization of debt expense,
net of income tax effect ........................ 3 5
Net income, as adjusted .......................... $438,249 386,461
Net income per common share....................... $ 1.32 1.18
42
<PAGE>
Exhibit 12(a).
Norwest Corporation and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
<TABLE>
Six Months Ended
June 30 Year Ended December 31
In thousands 1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Computation of Income:
Income before
income taxes $ 672,972 580,085 1,180,601 879,755 645,568 491,673 284,453
Capitalized interest (23) - (69) (65) (24) - (13)
Income before income
taxes and capitalized
interest 672,949 580,085 1,180,532 879,690 645,544 491,673 284,440
Fixed charges 1,161,531 743,997 1,640,049 1,485,936 1,651,664 2,187,536 2,354,041
Total income for
computation $1,834,480 1,324,082 2,820,581 2,365,626 2,297,208 2,679,209 2,638,481
Total income for
computation excluding
interest on deposits
from fixed charges $1,284,139 910,704 1,957,224 1,513,317 1,281,619 1,196,648 1,111,762
Computation of Fixed
Charges:
Net rental
expense (a) $ 78,917 73,646 149,462 128,573 123,342 111,609 102,192
Portion of rentals
deemed
representative
of interest $ 26,306 24,549 49,821 42,858 41,114 37,203 34,064
Interest:
Interest on
deposits 550,341 413,378 863,357 852,309 1,015,589 1,482,561 1,526,719
Interest on
federal funds
and other
short-term
borrowings 228,341 113,581 290,211 238,046 277,835 352,384 522,849
Interest on
long-term debt 356,520 192,489 436,591 352,658 317,102 315,388 270,396
Capitalized
interest 23 - 69 65 24 - 13
Total interest 1,135,225 719,448 1,590,228 1,443,078 1,610,550 2,150,333 2,319,977
Total fixed
charges $1,161,531 743,997 1,640,049 1,485,936 1,651,664 2,187,536 2,354,041
Total fixed
charges excluding
interest on
deposits $ 611,190 330,619 776,692 633,627 636,075 704,975 827,322
Ratio of Income
to Fixed Charges:
Excluding
interest on
deposits 2.10x 2.75 2.52 2.39 2.01 1.70 1.34
Including
interest on
deposits 1.58x 1.78 1.72 1.59 1.39 1.22 1.12
(a) Includes equipment rentals.
</TABLE>
43
<PAGE>
Exhibit 12(b).
Norwest Corporation and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Unaudited)
<TABLE>
Six Months Ended
June 30 Year Ended December 31
In thousands 1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Computation of Income:
Income before
income taxes $ 672,972 580,085 1,180,601 879,755 645,568 491,673 284,453
Capitalized interest (23) - (69) (65) (24) - (13)
Income before income
taxes and capitalized
interest 672,949 580,085 1,180,532 879,690 645,544 491,673 284,440
Fixed charges 1,161,531 743,997 1,640,049 1,485,936 1,651,664 2,187,536 2,354,041
Total income for
computation $1,834,480 1,324,082 2,820,581 2,365,626 2,297,208 2,679,209 2,638,481
Total income for
computation excluding
interest on deposits
from fixed charges $1,284,139 910,704 1,957,224 1,513,317 1,281,619 1,196,648 1,111,762
Computation of Fixed
Charges:
Net rental
expense (a) $ 78,917 73,646 149,462 128,573 123,342 111,609 102,192
Portion of rentals
deemed
representative
of interest $ 26,306 24,549 49,821 42,858 41,114 37,203 34,064
Interest:
Interest on
deposits 550,341 413,378 863,357 852,309 1,015,589 1,482,561 1,526,719
Interest on
federal funds
and other
short-term
borrowings 228,341 113,581 290,211 238,046 277,835 352,384 522,849
Interest on
long-term debt 356,520 192,489 436,591 352,658 317,102 315,388 270,396
Capitalized
interest 23 - 69 65 24 - 13
Total interest 1,135,225 719,448 1,590,228 1,443,078 1,610,550 2,150,333 2,319,977
Total fixed
charges $1,161,531 743,997 1,640,049 1,485,936 1,651,664 2,187,536 2,354,041
Total fixed
charges excluding
interest on
deposits $ 611,190 330,619 776,692 633,627 636,075 704,975 827,322
Preferred stock
dividends 20,876 14,050 27,827 31,170 32,219 20,065 3,225
Pre-tax earnings
needed to meet
preferred stock
dividend
requirements 31,143 20,765 41,044 44,728 44,367 23,997 5,294
Total combined fixed
charges and preferred
stock dividends $1,192,674 764,762 1,681,093 1,530,664 1,696,031 2,211,533 2,359,335
Total combined
fixed charges
and preferred stock
dividends excluding
interest on
deposits $ 642,333 351,384 817,736 678,355 680,442 728,972 832,616
(a) Includes equipment rentals.
</TABLE>
44
<PAGE>
Exhibit 12(b).
(continued)
Norwest Corporation and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Unaudited)
<TABLE>
Six Months Ended
June 30 Year Ended December 31
In thousands 1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Income to Combined
Fixed Charges and Preferred
Stock Dividends:
Excluding interest on
deposits 2.00x 2.59 2.39 2.23 1.88 1.64 1.34
Including interest on
deposits 1.54x 1.73 1.68 1.55 1.35 1.21 1.12
</TABLE>
45
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
JUNE 30, 1995 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 3273
<INT-BEARING-DEPOSITS> 26
<FED-FUNDS-SOLD> 562
<TRADING-ASSETS> 211
<INVESTMENTS-HELD-FOR-SALE> 14008
<INVESTMENTS-CARRYING> 1454
<INVESTMENTS-MARKET> 1513
<LOANS> 36277
<ALLOWANCE> 855
<TOTAL-ASSETS> 66623
<DEPOSITS> 38190
<SHORT-TERM> 8617
<LIABILITIES-OTHER> 2708
<LONG-TERM> 12382
<COMMON> 564
0
530
<OTHER-SE> 3632
<TOTAL-LIABILITIES-AND-EQUITY> 66623
<INTEREST-LOAN> 1870
<INTEREST-INVEST> 554
<INTEREST-OTHER> 253
<INTEREST-TOTAL> 2677
<INTEREST-DEPOSIT> 550
<INTEREST-EXPENSE> 1135
<INTEREST-INCOME-NET> 1542
<LOAN-LOSSES> 130
<SECURITIES-GAINS> (23)
<EXPENSE-OTHER> 1587
<INCOME-PRETAX> 673
<INCOME-PRE-EXTRAORDINARY> 673
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 451
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.32
<YIELD-ACTUAL> 5.58
<LOANS-NON> 121
<LOANS-PAST> 92
<LOANS-TROUBLED> 2
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 790
<CHARGE-OFFS> 181
<RECOVERIES> 59
<ALLOWANCE-CLOSE> 855
<ALLOWANCE-DOMESTIC> 564
<ALLOWANCE-FOREIGN> 27
<ALLOWANCE-UNALLOCATED> 264
</TABLE>
