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 September 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 October 31, 1995 353,053,457 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 -
September 30, 1995 and December 31, 1994...................... 3
2. Consolidated Statements of Income -
Quarters and Nine Months Ended September 30, 1995 and 1994.... 4
3. Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1995 and 1994................. 5
4. Consolidated Statements of Stockholders' Equity -
Nine Months Ended September 30, 1995 and 1994................. 6
5. Notes to Unaudited Consolidated Financial Statements............ 8
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 September 30, December 31,
1995 1994
ASSETS
Cash and due from banks ....................... $ 3,233.5 3,431.2
Interest-bearing deposits with banks .......... 21.1 41.1
Federal funds sold and resale agreements ...... 251.4 552.0
Total cash and cash equivalents ........... 3,506.0 4,024.3
Trading account securities .................... 248.3 172.3
Investment securities (fair value
$1,523.3 in 1995 and $1,268.7 in 1994) ..... 1,455.0 1,235.1
Investment and mortgage-backed securities
available for sale.......................... 16,212.3 13,601.8
Total investment securities .............. 17,667.3 14,836.9
Student loans available for sale ............. 2,281.1 2,031.4
Mortgages held for sale ...................... 6,813.2 3,115.3
Loans and leases, net of unearned discount.... 36,554.8 32,576.0
Allowance for credit losses .................. (867.5) (789.9)
Net loans and leases ..................... 35,687.3 31,786.1
Premises and equipment, net .................. 1,017.0 955.2
Interest receivable and other assets ......... 4,191.7 2,394.4
Total assets ............................. $71,411.9 59,315.9
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing ........................ $10,040.5 9,283.1
Interest-bearing ........................... 29,650.6 27,140.9
Total deposits ........................... 39,691.1 36,424.0
Short-term borrowings ........................ 11,279.5 7,850.2
Accrued expenses and other liabilities ....... 2,814.9 2,009.0
Long-term debt ............................... 12,686.3 9,186.3
Total liabilities ........................ 66,471.8 55,469.5
Preferred stock .............................. 350.8 526.7
Unearned ESOP shares ......................... (48.8) (14.7)
Total preferred stock .................... 302.0 512.0
Common stock, $1 2/3 par value - authorized
500,000,000 shares:
Issued 342,699,461 and 323,084,474 shares
in 1995 and 1994, respectively ............. 571.2 538.5
Surplus ....................................... 667.0 578.8
Retained earnings ............................. 3,276.1 2,950.0
Net unrealized gains (losses)
on securities available for sale ............ 238.7 (360.4)
Note receivable from ESOP ..................... (13.3) (13.3)
Treasury stock - 4,768,328 and 13,939,617
common shares in 1995 and 1994, respectively. (97.7) (350.9)
Foreign currency translation .................. (3.9) (8.3)
Total common stockholders' equity ......... 4,638.1 3,334.4
Total stockholders' equity ................ 4,940.1 3,846.4
Total liabilities and
stockholders' equity .................... $71,411.9 59,315.9
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 Nine Months Ended
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
INTEREST INCOME ON
Loans and leases ............................... $1,028.4 789.9 2,898.8 2,236.6
Investment securities .......................... 21.3 18.6 61.7 53.9
Investment and mortgage-backed securities
available for sale ............................ 264.9 225.7 778.3 599.1
Student loans available for sale ............... 44.5 26.0 137.5 76.2
Mortgages held for sale ........................ 107.9 62.2 240.0 194.9
Money market investments ....................... 5.2 3.6 25.2 15.9
Trading account securities ..................... 4.0 4.7 11.8 20.7
Total interest income ...................... 1,476.2 1,130.7 4,153.3 3,197.3
INTEREST EXPENSE ON
Deposits ....................................... 296.3 214.6 846.6 628.0
Short-term borrowings .......................... 140.4 82.2 368.8 195.8
Long-term debt ................................. 199.7 112.1 556.2 304.5
Total interest expense ..................... 636.4 408.9 1,771.6 1,128.3
Net interest income ...................... 839.8 721.8 2,381.7 2,069.0
Provision for credit losses .................... 86.5 41.6 216.5 101.6
Net interest income after
provision for credit losses ............ 753.3 680.2 2,165.2 1,967.4
NON-INTEREST INCOME
Trust .......................................... 63.6 51.1 173.4 153.5
Service charges on deposit accounts ............ 68.9 60.0 195.5 176.1
Mortgage banking ............................... 134.1 141.6 392.6 416.8
Data processing ................................ 19.8 15.7 51.6 46.4
Credit card .................................... 34.0 29.9 97.2 82.6
Insurance ...................................... 59.1 49.6 186.2 161.7
Other fees and service charges ................. 63.5 45.0 164.4 133.4
Net investment securities gains ................ 0.4 0.9 0.5 0.2
Net investment and mortgage-backed
securities available for sale losses........... (16.0) (52.8) (39.4) (59.1)
Net venture capital gains ...................... 37.9 16.2 64.3 51.4
Other .......................................... 24.1 22.2 51.0 37.4
Total non-interest income .................. 489.4 379.4 1,337.3 1,200.4
NON-INTEREST EXPENSES
Salaries and benefits .......................... 455.7 389.9 1,279.6 1,180.3
Net occupancy .................................. 66.4 59.4 186.5 167.8
Equipment rentals, depreciation and maintenance. 68.6 60.2 197.9 170.4
Business development ........................... 39.7 50.6 121.3 139.6
Communication .................................. 56.1 44.7 160.0 134.6
Data processing ................................ 36.8 26.7 102.8 80.9
FDIC assessment and regulatory examination fees. 26.4 21.5 71.7 65.6
Intangible asset amortization .................. 39.2 16.8 84.3 54.1
Other .......................................... 83.0 90.7 254.7 295.3
Total non-interest expenses ................ 871.9 760.5 2,458.8 2,288.6
INCOME BEFORE INCOME TAXES ..................... 370.8 299.1 1,043.7 879.2
Income tax expense ............................. 125.6 96.1 347.4 283.7
NET INCOME ..................................... $ 245.2 203.0 696.3 595.5
Average Common and Common Equivalent Shares .... 331.8 317.3 324.7 316.5
PER COMMON SHARE
Net Income
Primary ...................................... $ 0.70 0.62 2.04 1.82
Fully diluted ................................ 0.69 0.61 2.01 1.79
Dividends ..................................... 0.240 0.185 0.660 0.555
See notes to unaudited consolidated financial statements.
</TABLE>
4
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
In millions September 30
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...........................................................$ 696.3 595.5
Adjustments to reconcile net income to net cash flows from operating
activities:
Provision for credit losses ...................................... 216.5 101.6
Depreciation and amortization .................................... 202.1 184.6
Gains on sales of loans, securities and other assets.............. (24.6) (86.2)
Release of preferred shares to ESOP............................... 30.5 18.4
Purchases of trading account securities .......................... (66,235.7) (43,544.4)
Proceeds from sales of trading account securities ................ 66,052.2 43,513.8
Originations of mortgages held for sale .......................... (23,771.6) (19,973.0)
Proceeds from sales of mortgages held for sale ................... 20,201.2 22,882.4
Originations of student loans available for sale ................. (830.7) (660.9)
Proceeds from sales of student loans available for sale .......... 582.2 446.6
Deferred income taxes ............................................ (0.8) (20.9)
Interest receivable .............................................. (111.3) (31.1)
Interest payable ................................................. 107.1 (7.0)
Other assets, net ................................................ (1,212.0) (39.2)
Other accrued expenses and liabilities, net ...................... 583.2 326.2
Net cash flows from (used for) operating activities ............ (3,515.4) 3,706.4
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and paydowns of investment securities...... 129.5 847.2
Proceeds from maturities and paydowns of investment and mortgage-
backed securities available for sale.............................. 1,040.0 2,400.2
Proceeds from sales and calls of investment securities ............. 61.9 73.9
Proceeds from sales and calls of investment and mortgage-backed
securities available for sale..................................... 3,590.2 2,658.6
Purchases of investment securities ................................. (214.8) (581.9)
Purchases of investment and mortgage-backed securities available
for sale.......................................................... (5,203.8) (6,594.9)
Banking subsidiaries' loans and leases, net......................... (1,470.0) (644.2)
Originations of non-bank subsidiaries' loans and leases............. (4,391.7) (3,804.4)
Principal collections on non-bank subsidiaries' loans and leases.... 4,264.0 2,715.8
Purchases of premises and equipment ................................ (156.4) (203.6)
Proceeds from sales of premises, equipment & other real estate owned 35.1 80.3
Purchases of subsidiaries, net of cash and cash equivalents acquired (85.0) 90.1
Divestiture of branches, net of cash and cash equivalents paid...... (4.1) (55.1)
Net cash flows used for investing activities...................... (2,405.1) (3,018.0)
CASH FLOWS FROM FINANCING ACTIVITIES
Deposits, net ...................................................... 289.9 (2,354.9)
Short-term borrowings, net ......................................... 1,995.9 1,017.4
Long-term debt borrowings .......................................... 4,543.2 2,454.4
Repayments of long-term debt ....................................... (1,072.5) (1,091.0)
Issuances of common stock .......................................... 50.6 40.4
Repurchases of common stock ........................................ (178.5) (316.6)
Sale of preferred stock held by subsidiary ......................... 20.0 -
Repurchases of preferred stock ..................................... (0.4) (8.3)
Net decrease in notes receivable from ESOP ......................... - 3.0
Dividends paid ..................................................... (246.0) (196.3)
Net cash flows from (used for) financing activities .............. 5,402.2 (451.9)
Net increase (decrease) in cash and cash equivalents ............. (518.3) 236.5
CASH AND CASH EQUIVALENTS
Beginning of period ................................................ 4,024.3 3,608.0
End of period ......................................................$ 3,506.0 3,844.5
See notes to unaudited consolidated financial statements.
</TABLE>
5
<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>
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 - - - - 595.5 - - - - 595.5
Dividends on
Common stock - - - - (175.3) - - - - (175.3)
Preferred stock - - - - (21.0) - - - - (21.0)
Conversion of 1,222,074
preferred shares to
3,405,917 common shares (48.7) - 4.4 24.6 - - - 19.7 - -
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 - 19.0 - (0.6) - - - - - 18.4
Issuance of 2,478,203
common shares - - 0.1 19.9 (36.3) - - 65.7 - 49.4
Issuance of 11,894,200
common shares for
acquisitions - - 18.6 29.7 58.5 - - 19.3 - 126.1
Repurchase of 12,071,500
common shares - - - - - - - (316.6) - (316.6)
Change in net unrealized
gains (losses) on securities
available for sale - - - - - (520.3) - - - (520.3)
Cash payments received
on notes receivable
from ESOP - - - - - - 3.0 - - 3.0
Foreign currency
translation - - - - - - - - (0.9) (0.9)
Balance,
September 30, 1994 $ 363.9 (23.1) 538.5 578.1 2,854.7 (206.9) (13.3) (263.4) (4.2) 3,824.3
(Continued on page 7)
</TABLE>
6
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(Continued from page 6)
<TABLE>
<CAPTION>
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 - - - - 696.3 - - - - 696.3
Dividends on
Common stock - - - - (212.1) - - - - (212.1)
Preferred stock - - - - (33.9) - - - - (33.9)
Conversion of 1,174,197
preferred shares to
13,604,269 common shares (258.8) - 7.1 (7.8) (4.6) - - 264.1 - -
Repurchase of 1,784
preferred shares (0.4) - - - - - - - - (0.4)
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 - 31.7 - (1.2) - - - - - 30.5
Issuance of 2,594,010
common shares - - - 119.1 (133.4) - - 72.3 - 58.0
Issuance of 18,900,556
common shares for
acquisitions - - 25.6 (24.4) 13.8 (0.2) - 95.3 - 110.1
Repurchase of 6,312,559
common shares - - - - - - - (178.5) - (178.5)
Change in net unrealized
gains (losses) on
securities available
for sale - - - - - 599.3 - - - 599.3
Foreign currency
translation - - - - - - - - 4.4 4.4
Balance,
September 30, 1995 $ 350.8 (48.8) 571.2 667.0 3,276.1 238.7 (13.3) (97.7) (3.9) 4,940.1
See notes to unaudited consolidated financial statements.
</TABLE>
7
<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
Supplemental disclosures of cash flow information for the nine months ended
September 30, 1995 and 1994 include:
In millions 1995 1994
Interest $1,664.5 1,135.4
Income taxes 442.5 89.8
Transfer of loans to other real estate owned 22.7 43.4
In conjunction with the acquisition of First United Bank Group, Inc.("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. See notes 7
and 11 for additional common and preferred stock transactions.
Mortgage-backed securities of $151.0 million, held for investment by 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.
8
<PAGE>
3. Investment and Mortgage-backed Securities
The amortized cost and fair value of investment and mortgage-backed
securities at September 30, 1995 were:
<TABLE>
<CAPTION>
In millions 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 ......................... 704.5 31.3 (3.2) 732.6
Other ............................... 723.1 43.8 (3.6) 763.3
Total investment securities
held for investment ............. $ 1,455.0 75.1 (6.8) 1,523.3
Available for sale:
U.S. Treasury and federal agencies .. $ 1,133.2 18.6 (4.5) 1,147.3
State, municipal and housing -
tax exempt ......................... 128.5 1.3 (0.6) 129.2
Other ............................... 555.3 210.6 (3.3) 762.6
Total investment securities
available for sale .............. 1,817.0 230.5 (8.4) 2,039.1
Mortgage-backed securities:
Federal agencies ................... 13,866.4 211.4 (64.3) 14,013.5
Collateralized mortgage
obligations ....................... 158.4 2.8 (1.5) 159.7
Total mortgage-backed securities
available for sale .............. 14,024.8 214.2 (65.8) 14,173.2
Total investment and
mortgage-backed securities
available for sale .............. $15,841.8 444.7 (74.2) 16,212.3
</TABLE>
Interest income on investment and mortgage-backed securities for the quarters
and nine months ended September 30 were:
<TABLE>
<CAPTION>
Quarter Nine Months
In millions 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Held for investment:
U.S. Treasury and federal agencies .. $ 0.3 0.2 1.0 0.9
State, municipal and housing -
tax exempt ........................ 12.2 12.9 36.7 38.1
Other ............................... 8.8 5.5 24.0 14.9
Total investment securities
held for investment ............. $ 21.3 18.6 61.7 53.9
Available for sale:
U.S. Treasury and federal agencies .. $ 19.1 26.0 53.4 74.9
State, municipal and housing -
tax exempt ........................ 1.6 1.4 4.6 4.0
Other ............................... 10.6 5.2 25.3 15.1
Total investment securities
available for sale .............. 31.3 32.6 83.3 94.0
Mortgage-backed securities:
Federal agencies ................... 231.0 191.0 686.3 498.8
Collateralized mortgage
obligations ....................... 2.6 2.1 8.7 6.3
Total mortgage-backed securities
available for sale .............. 233.6 193.1 695.0 505.1
Total investment and mortgage-backed
securities available for sale.... $ 264.9 225.7 778.3 599.1
</TABLE>
9
<PAGE>
Certain investment securities with a total amortized cost of $21.2 million
and $61.4 million for the three and nine months ended September 30, 1995,
respectively, and $24.2 million and $73.7 million for the three and nine
months ended September 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 net gains of $0.4
million and $0.5 million for the quarter and nine months ended September 30,
1995, respectively, and $0.9 million and $0.2 million for the quarter and nine
months ended September 30, 1994, respectively.
4. Loans and Leases
The carrying values of loans and leases at September 30, 1995 and December 31,
1994 were:
September 30, December 31,
In millions 1995 1994
Commercial, financial and industrial...... $ 8,232.0 7,434.4
Agricultural.............................. 1,010.2 956.0
Real estate
Secured by 1-4 family residential
properties............................ 9,984.2 8,959.2
Secured by development properties....... 1,630.8 1,513.8
Secured by construction and land
development........................... 724.0 568.1
Secured by owner-occupied properties.... 2,302.1 2,075.8
Consumer ................................. 10,164.2 8,304.9
Credit card .............................. 2,470.0 2,511.0
Lease financing .......................... 798.9 764.5
Foreign
Consumer ............................... 699.3 486.1
Commercial ............................. 129.8 129.8
Total loans and leases ............... 38,145.5 33,703.6
Unearned discount ........................ (1,590.7) (1,127.6)
Total loans and leases, net of
unearned discount..................... $36,554.8 32,576.0
Changes in the allowance for credit losses for the quarters and nine months
ended September 30 were:
Quarter Nine Months
In millions 1995 1994 1995 1994
Balance at beginning of period ............ $ 854.6 790.4 789.9 789.2
Allowance related to assets
acquired, net .......................... 12.3 1.9 69.4 19.7
Provision for credit losses ............. 86.5 41.6 216.5 101.6
Credit losses............................ (116.7) (71.3) (297.6) (214.9)
Recoveries .............................. 30.8 27.3 89.3 94.3
Net credit losses ..................... (85.9) (44.0) (208.3) (120.6)
Balance at end of period .................. $ 867.5 789.9 867.5 789.9
10
<PAGE>
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 September
30, 1995 and 1994 and December 31, 1994 were:
In millions September 30, December 31,
1995 1994 1994
Impaired loans
Non-accrual ........................... $ 76.9 95.8 96.8
Restructured .......................... 2.5 2.2 1.8
Total impaired loans ................ 79.4 98.0 98.6
Other non-accrual loans and leases....... 54.0 32.6 31.7
Total non-accrual and
restructured loans and leases......... 133.4 130.6 130.3
Other real estate owned ................. 35.3 44.2 29.6
Total non-performing assets ........... 168.7 174.8 159.9
Loans and leases past due 90 days or more* 94.3 73.7 58.4
Total non-performing assets and
90-day past due loans and leases ..... $ 263.0 248.5 218.3
* Excludes non-accrual and restructured loans.
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 September 30,
1995 and December 31, 1994 was $32.7 million and $31.6 million, respectively.
Impaired loans of $1.6 million and $4.6 million were not subject to a related
allowance for credit losses at September 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 nine months ended September 30,
1995 and 1994 were $85.8 million and $128.3 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 $2.6 million was recognized on impaired
loans for the quarter and nine months ended September 30, 1995, respectively,
and $1.8 million and $3.0 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 nine months ended September 30 were:
Quarter Nine Months
In millions 1995 1994 1995 1994
Interest
As originally contracted ........... $ 3.3 3.5 $ 12.2 15.3
As recognized ...................... (1.1) (1.8) (2.6) (3.0)
Reduction of interest income ..... $ 2.2 1.7 $ 9.6 12.3
11
<PAGE>
6. Long-term Debt
During the first nine months of 1995, the corporation issued $1,950 million in
medium-term notes bearing fixed rates ranging from 6.375 percent to 8.67
percent, which mature from December 1996 to June 2005, and $75 million in
medium-term notes bearing interest at three-month LIBOR plus eight basis
points maturing in 1998 and a $200 million senior note at 6.003 percent
maturing in September 1997. Also during the first nine months of 1995,
Norwest Financial, Inc. issued $929.4 million in senior notes bearing fixed
interest rates ranging from 6.23 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 $1,169 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 $203 million at fixed interest rates from
3.15 percent to 8.38 percent maturing from June 1997 to December 2014.
7. Stockholders' Equity
Preferred and Preference Stock
The corporation is authorized to issue 5,000,000 shares of preferred stock
without par value and 4,000,000 shares of preference stock, without par value.
Shares of preference stock have such powers, preferences and rights as may be
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. No
shares of preference stock are currently outstanding. The table below is a
summary of the corporation's preferred stock at September 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.
<TABLE>
<CAPTION>
In millions, except share amounts
Annual
Dividend
Shares Outstanding Rate at Amount Outstanding
September 30, December 31, September 30, September 30, December 31,
1995 1994 1995 1995 1994
<S> <C> <C> <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 - 1,143,675 7.00% - 228.7
ESOP Cumulative Convertible,
$1,000 stated value 13,311 14,265 9.00% 13.3 14.3
1995 ESOP Cumulative
Convertible, $1,000
stated value 33,732 - 10.00% 33.8 -
Less: Cumulative
Tracking shares held by
a subsidiary (25,000) (125,000) (5.0) (25.0)
2,129,168 3,140,065 350.8 526.7
Unearned ESOP shares (48.8) (14.7)
Total preferred stock $302.0 512.0
</TABLE>
On March 28, 1995, the corporation issued 63,300 shares of 1995 ESOP
Cumulative Convertible Preferred Stock, $1,000 stated value per share ("1995
ESOP 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.
12
<PAGE>
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.
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. Preferred stock in the amount of $31.7 million and
$19.0 million was released to the ESOP during the nine months ended September
30, 1995 and 1994, respectively.
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 nine months ended September 30, 1995, 9,623 and
30,522 shares of ESOP Preferred Stock, respectively, were converted into
296,091 and 1,073,266 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.
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.
All shares of the corporation's Cumulative Convertible Preferred Stock,
Series B, in the form of depositary shares, were called for redemption on
September 1, 1995. Each depositary share, which represented one-quarter of a
share of the preferred stock, was convertible at the option of the stockholder
into approximately 2.74 shares of the corporation's common stock or redeemable
at a price of $52.10 per depositary share plus accrued dividends. On
September 1, 1995, 1,115,652 preferred shares were converted into 12,243,077
shares of common stock and 1,784 preferred shares were redeemed.
8. Segment Reporting
The corporation's operations include three primary business segments:
banking, mortgage banking and consumer finance. The corporation, through its
subsidiary banks, offers diversified banking services including retail,
commercial and corporate banking, equipment leasing, and trust services; and
through their affiliates offer insurance, 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.
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.
13
<PAGE>
Selected financial information by business segment for the quarters and nine
months ended September 30 is included in the following summary:
In millions Quarter Nine Months
1995 1994 1995 1994
Revenues:*
Banking $ 1,285.9 975.0 3,658.4 2,836.0
Mortgage banking 264.9 225.2 708.5 667.1
Norwest Financial 414.8 309.9 1,123.7 894.6
Total $ 1,965.6 1,510.1 5,490.6 4,397.7
Organizational earnings:*
Banking $ 153.0 128.4 440.0 392.5
Mortgage banking 28.0 18.6 75.5 40.9
Norwest Financial 64.2 56.0 180.8 162.1
Total $ 245.2 203.0 696.3 595.5
Total assets:
Banking $53,431.2 45,775.6
Mortgage banking 9,936.9 4,997.8
Norwest Financial 8,043.8 5,792.0
Total $71,411.9 56,565.4
* 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 nine
months ended September 30 is presented below:
Quarter Nine Months
In millions 1995 1994 1995 1994
Origination fees $ 23.0 25.7 76.2 82.2
Servicing fees 66.1 51.1 168.2 129.5
Net gains on sales of
servicing rights 19.1 37.4 73.5 74.6
Net gains (losses) on
sales of mortgages (18.6) 8.1 (22.2) 70.4
Other mortgage fee income 44.5 19.3 96.9 60.1
Total mortgage banking
non-interest income $134.1 141.6 392.6 416.8
Origination fees primarily consist of mortgage production revenue which has
been allocated from net gains (losses) on sales of mortgages based upon
volume.
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The outstanding balances of serviced loans were
$100.1 billion and $70.5 billion at September 30, 1995 and 1994, respectively.
14
<PAGE>
Changes in capitalized mortgage loan servicing rights for the quarters and
nine months ended September 30 were:
Quarter Nine Months
In millions 1995 1994 1995 1994
Balance at beginning
of period $890.5 349.8 550.3 185.2
Originations 75.8 - 157.1 -
Purchases 75.4 110.7 468.9 311.6
Sales (64.3) (15.0) (156.9) (32.9)
Amortization (30.8) (13.5) (72.3) (31.7)
Other - (0.2) (0.5) (0.4)
946.6 431.8 946.6 431.8
Less valuation allowance (49.3) - (49.3) -
Balance at end of period $897.3 431.8 897.3 431.8
The fair value of capitalized mortgage servicing rights at September 30, 1995
was approximately $1,014.0 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 nine months ended September 30, 1995 were:
Nine
In millions Quarter Months
Balance at beginning of period $ 48.7 -
Provision for capitalized mortgage
servicing rights in excess of fair value 0.6 49.3
Balance at end of period $ 49.3 49.3
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 September 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.
15
<PAGE>
For the nine months ended September 30, 1995, the end-user derivative
activities decreased interest income by $2.5 million and decreased interest
expense by $3.1 million, for a total benefit to net interest income of $0.6
million. For the same period in 1994, interest income was increased by $5.9
million and interest expense was reduced by $5.9 million, for a total benefit
to net interest income of $11.8 million.
The following table presents the maturities and weighted average rates for
end-user derivatives by type:
<TABLE>
<CAPTION>
Dollars in millions
Maturity
There-
September 30, 1995 1995 1996 1997 1998 1999 after Total
<S> <C> <C> <C> <C> <C> <C> <C>
Swaps:
Generic receive fixed-
Notional value $ - 675 250 100 466 925 2,416
Weighted avg.
receive rate - % 6.23 8.18 7.88 7.92 6.79 7.04
Weighted avg. pay rate - % 5.94 6.00 5.88 5.88 5.87 5.90
Generic pay fixed-
Notional value $ - 30 - - - 300 330
Weighted avg.
receive rate - % 5.88 - - - 5.85 5.86
Weighted avg. pay rate - % 6.27 - - - 5.89 5.92
Basis -
Notional value $ - 200 - 29 - - 229
Weighted avg.
receive rate - % 5.88 - 4.51 - - 5.70
Weighted avg. pay rate - % 5.91 - 3.18 - - 5.57
Interest rate caps and
floors (1):
Notional value $ - 16 - 577 400 4,100 5,093
Security options (1):
Notional value $1,250 - - - - - 1,250
Total notional value $1,250 921 250 706 866 5,325 9,318
Total weighted avg.
rates on swaps:
Receive rate - % 6.14 8.18 7.13 7.92 6.56 6.80
Pay rate - % 5.94 6.00 5.27 5.88 5.88 5.88
</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
September 30, 1995.
16
<PAGE>
Activity in the notional amounts of end-user derivatives for the nine
months ended September 30, 1995 is summarized as follows:
<TABLE>
<CAPTION>
In millions December 31, Amortizations September 30,
1994 Additions and Maturities Terminations 1995
<S> <C> <C> <C> <C> <C>
Swaps:
Generic receive fixed $ 1,025 1,491 - (100) 2,416
Generic pay fixed 130 200 - - 330
Basis 229 - - - 229
Total swaps 1,384 1,691 - (100) 2,975
Interest rate caps
and floors 751 4,350 (8) - 5,093
Security options - 4,651 (2,270) (1,131) 1,250
Total $ 2,135 10,692 (2,278) (1,231) 9,318
Deferred gains and losses on closed end-user derivatives were not material
at September 30, 1995 and December 31, 1994.
</TABLE>
17
<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:
<TABLE>
<CAPTION>
In millions Balance Sheet Category
Interest- Other Long-
Investment bearing Short-term term
September 30, 1995 Securities Deposits Borrowings Debt Other* Total
<S> <C> <C> <C> <C> <C> <C>
Swaps:
Pay variable
Unrealized gains $ - - - 69.2 - 69.2
Unrealized (losses) - (1.8) - (3.5) - (5.3)
Pay variable net - (1.8) - 65.7 - 63.9
Pay fixed
Unrealized gains - 6.7 - - 2.2 8.9
Unrealized (losses) - (0.1) - - - (0.1)
Pay fixed net - 6.6 - - 2.2 8.8
Basis
Unrealized gains 1.0 - - - - 1.0
Total unrealized gains 1.0 6.7 - 69.2 2.2 79.1
Total unrealized (losses) - (1.9) - (3.5) - (5.4)
Total net $ 1.0 4.8 - 65.7 2.2 73.7
Interest rate caps and floors:
Unrealized gains $ - - - - 28.5 28.5
Unrealized (losses) - (0.3) (0.1) (0.1) (2.7) (3.2)
Total net $ - (0.3) (0.1) (0.1) 25.8 25.3
Security options:
Unrealized gains $ 3.4 - - - - 3.4
Unrealized (losses) (0.9) - - - - (0.9)
Total net $ 2.5 - - - - 2.5
Grand total
unrealized gains $ 4.4 6.7 - 69.2 30.7 111.0
Grand total
unrealized (losses) (0.9) (2.2) (0.1) (3.6) (2.7) (9.5)
Grand total net $ 3.5 4.5 (0.1) 65.6 28.0 101.5
</TABLE>
*Includes $28.5 million in gains and $2.7 million in losses on floors hedging
mortgage servicing rights, and $2.2 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.
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 September 30, 1995,
the corporation had forward contracts totaling $13.9 billion, all of which
18
<PAGE>
mature within 240 days. Gains and losses on forward contracts are included
in the determination of market value of mortgages held for sale.
At September 30, 1995, the corporation's trading account portfolio included
contracts of $150 million notional value, which are valued at market with any
gains or losses recognized currently.
During the first nine months of 1995, the corporation entered into a series of
interest rate floor contracts with an aggregate notional amount of $4.4
billion. The corporation utilizes these floors for hedging its portfolio
of mortgage servicing rights. The floors provide for the receipt of payments
when interest rates are below predetermined interest rate levels. The
unrealized gains are included in determining the fair value of the capitalized
mortgage servicing rights.
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.
Transactions completed in the nine months ended September 30, 1995 include:
<TABLE>
<CAPTION>
Common
In millions, except share amounts Cash Shares
Date Assets Paid Issued
<S> <C> <C> <C> <C>
Ken-Caryl Investment Company
(Littleton, Colorado) January 5 $ 29.0 $ - 149,774
American Republic Bancshares, Inc.
(Belen, New Mexico) January 6 222.0 - 1,206,546
Independent Bancorp of Arizona, Inc.
(Phoenix, Arizona) February 12 1,600.0 159.7 -
Parker Bankshares, Incorporated
(Parker, Colorado) February 28 59.0 - 394,995
Directors Mortgage Loan Corporation
(Riverside, California) March 13 270.8 - 10,545,778
Babbscha Company
(Fridley, Minnesota) April 1 53.0 - 275,921
The First National Bank of Bay City
(Bay City, Texas) April 10 146.0 - 932,642
Goldenbanks of Colorado, Inc.
(Golden, Colorado) May 1 361.3 - 2,716,629
ITT Financial Corporation - Island
Finance business May 4 1,016.1 574.3 -
New Braunfels Bancshares, Inc.
(New Braunfels, Texas) May 10 43.1 7.0 -
United Texas Financial Corporation
(Wichita Falls, Texas) June 1 296.3 - 1,515,851
First American National Bank
(Chandler, Arizona) June 1 39.0 - 192,831
First Tule Bancorp, Inc.
(Tulia, Texas) June 1 61.4 8.25 -
Comfort Bancshares, Inc.
(Comfort, Texas) July 10 41.1 6.2 -
Valley-Hi Investment Company
(San Antonio, Texas) August 1 121.6 - 427,998
Dickinson Bancorporation, Inc.
(Dickinson, North Dakota) August 8 123.3 - 541,591
Alice Bancshares, Inc.
(Alice, Texas) September 15 187.6 40.2 -
</TABLE>
19
<PAGE>
The corporation also acquired $15 billion of mortgage servicing rights from
BarclaysAmerican/Mortgage Corporation on March 31, 1995 for cash. The
acquisitions of Goldenbanks of Colorado, Inc., First American National Bank
(Chandler, Arizona), Parker Bankshares, Incorporated, 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 was accounted for using the
purchase method.
On October 2, 1995, the corporation acquired State National Bank, a
$1 billion bank in El Paso, Texas, for cash of $157 million. On October 19,
1995, the corporation completed its acquisition of The Foothill Group, Inc.,
an asset-based commercial lending and asset management company based in
Los Angeles, California, with finance receivables of $917 million, for
approximately 15,633,092 shares of the corporation's common stock. At
October 31, 1995, the corporation had eight other pending acquisitions with
total assets of approximately $2.3 billion and it is anticipated that cash
of $106 million and approximately 8.5 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.
20
<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 $245.2 million for the quarter ended
September 30, 1995, a 20.8 percent increase over the $203.0 million earned in
the third quarter of 1994. Net income per common share was 70 cents, compared
with 62 cents in the third quarter of 1994, an increase of 12.9 percent.
Return on realized common equity was 22.3 percent and return on assets was
1.43 percent for the third quarter of 1995, compared with 21.1 percent and
1.45 percent, respectively, in the third quarter of 1994.
For the nine months ended September 30, 1995, net income was $696.3 million,
or $2.04 per common share, an increase of 16.9 percent and 12.1 percent,
respectively, over the $595.5 million or $1.82 per common share earned in the
first nine months of 1994. Return on realized common equity was 22.4 percent
and return on assets was 1.45 percent for the first nine months of 1995,
compared with 21.4 percent and 1.46 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.
ORGANIZATIONAL EARNINGS
The organizational earnings of the corporation's primary business segments are
included in Note 8 to the unaudited consolidated statements for the quarters
and nine months ended September 30, 1995 and 1994 and are discussed in the
following paragraphs.
Banking
The Banking group reported third quarter 1995 earnings of $153.0 million, a
19.1 percent increase over the third quarter 1994 earnings of $128.4 million.
For the nine months ended September 30, 1995, earnings increased 12.1 percent
to $440.0 million compared with $392.5 million for the same period in 1994.
The increased earnings in the first nine months of 1995 reflected a 16.9
percent growth in tax-equivalent net interest income to $1,660.2 million, due
to a 15.9 percent increase in average earning assets and a five basis point
increase in net interest margin. The Banking group's provision for credit
losses for the nine months ended September 30, 1995 increased $74.3 million to
$94.1 million from a year earlier as average loans and leases rose $4.0
billion or 16.6 percent and net charge-offs as a percent of average loans
increased from .20 percent to .47 percent. Noninterest income rose $125.6
million to $750.5 million for the first nine months of 1995. The Banking
group recorded investment securities losses of $39.5 million in the nine
months ended September 30, 1995, compared with investment securities losses of
$57.6 million in the same period last year. Noninterest expenses of $1,648.1
million for the first nine months of 1995 were $203.1 million higher when
compared with the first nine months of 1994, reflecting additional expenses
related to acquired companies.
21
<PAGE>
During September 1995, the Banking group received an FDIC premium reduction of
$20.6 million. The Banking group is now being assessed insurance premiums at
the rate of approximately 4 cents per $100 of insured deposits, down from 23
cents per $100 of insured deposits. Legislation has been introduced in
Congress that would impose a one-time charge on deposits insured by the
Savings Association Insurance Fund to recapitalize the SAIF deposit insurance
fund for savings and loan associations. In the past five years, the
corporation has acquired savings and loan associations and would be subject to
such a charge. Consequently, a $23.5 million accrual for such an assessment
based on an estimated rate of 66 cents per $100 of insured deposits was
established.
Mortgage Banking
Mortgage banking operations earned $28.0 million in the current quarter
compared with $18.6 million in the third quarter of 1994. For the first nine
months of 1995, mortgage banking operations earned $75.5 million compared with
$40.9 million in the same period of 1994. Combined gains on sales of
mortgages and servicing rights in the first nine months of 1995 amounted to
$51.3 million compared with $145.0 million in the same period last year. See
Note 9 to the unaudited consolidated financial statements for a detailed
analysis of mortgage banking revenues for the quarters and nine months ended
September 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
$10.7 billion during the quarter, compared with $6.0 billion in the comparable
period in 1994 and totaled $23.0 billion for the first nine months of 1995.
The servicing portfolio increased to $100.1 billion from $70.5 billion at
September 30, 1994 and $71.5 billion at year-end 1994. The servicing
portfolio, which currently carries a weighted average coupon of 7.83 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.
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. Mortgage
servicing rights of $75.8 million and $157.1 million were capitalized in the
quarter and nine months ended September 30, 1995, respectively, representing
120 points and 125 basis points, respectively, of originated mortgage loans.
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 by risk
stratums. The fair value has been determined utilizing conservative
assumptions for discount and prepayment rates. Total impairment of $0.6
million and $49.3 million was recognized for the quarter and nine months ended
September 30, 1995.
Norwest Financial
Norwest Financial (including Norwest Financial Services, Inc. and Island
Finance) reported earnings of $64.2 million in the third quarter of 1995,
compared with $56.0 million in the third quarter of 1994, an increase of 14.6
percent. Norwest Financial's net income of $180.8 million for the first nine
months of 1995 was up 11.5 percent from the first nine months of 1994. The
growth in year-to-date earnings reflected an 18.7 percent increase in Norwest
Financial's net interest income as average finance receivables grew 26.1
22
<PAGE>
percent from the first nine months 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, with $1 billion in
receivables, in May 1995. Excluding Island Finance, Norwest Financial's
average receivables grew 13.9 percent from the first nine months of 1994.
CONSOLIDATED INCOME STATEMENT ANALYSIS
Net Interest Income
Consolidated tax-equivalent net interest income was $848.1 million in the
third quarter of 1995, compared with $728.9 million in the third quarter of
1994, an increase of 16.3 percent. For the first nine months of 1995, tax-
equivalent net interest income increased 15.1 percent from the same period in
1994 to $2,406.7 million. Growth in tax-equivalent net interest income over
the third quarter of 1994 was a result of a 20.9 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 5.59 percent in the third quarter of 1995, compared with 5.76
percent in the third quarter of 1994. Net interest margin was 5.58 percent
for the nine months ended September 30, 1995, down from 5.64 percent for the
first nine months of 1994. The following table summarizes changes in tax-
equivalent net interest income between the quarters and nine months ended
September 30.
Changes in Tax-Equivalent Net Interest Income*
In millions 3Q 95 9 Mos. 95
over over
3Q 94 9 Mos. 94
Increase (decrease) due to:
Change in earning asset volume ................ $144.9 339.6
Change in volume of interest-free funds ....... (11.7) (27.0)
Change in net return from
Interest-free funds .......................... 28.9 95.4
Interest-bearing funds ....................... (18.5) (47.8)
Change in earning asset mix ................... 4.5 34.8
Change in funding mix ......................... (28.9) (79.0)
Change in tax-equivalent net interest income .... $119.2 316.0
* Net interest income is presented on a tax-equivalent basis utilizing a
federal incremental tax rate of 35 percent in each period presented.
23
<PAGE>
Trading Revenues
Trading revenues were derived from the following activities:
In millions Quarter Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
Interest income:
Securities $ 3.3 2.7 8.2 11.4
Swaps and other interest rate contracts 0.7 2.0 3.6 9.3
Total interest income 4.0 4.7 11.8 20.7
Non-interest income:
Gains on securities sold 3.8 13.7 7.5 2.7
Swaps and other interest rate contracts 14.0 (8.2) 17.1 (25.3)
Foreign exchange trading 1.8 1.9 5.7 4.7
Options 12.6 0.8 12.4 7.4
Futures 0.7 (0.4) (0.6) 1.0
Total non-interest income 32.9 7.8 42.1 (9.5)
Total trading revenues $36.9 12.5 53.9 11.2
Provision for Credit Losses
The corporation provided $86.5 million for credit losses in the third quarter
of 1995, compared with $41.6 million in the same period a year ago. Net credit
losses totaled $85.9 million and $44.0 million for the three months ended
September 30, 1995 and 1994, respectively. As a percentage of average loans
and leases, net credit losses were 0.94 percent in the third quarter of 1995,
compared with 0.57 percent in the same period a year ago.
For the first nine months of 1995, the provision for credit losses totaled
$216.5 million, compared with $101.6 million in the first nine months of 1994.
Net credit losses were $208.3 million, or 0.80 percent of average loans and
leases, for the nine months ended September 30, 1995, compared with $120.6
million, or 0.54 percent, for the same period in 1994.
Non-interest Income
Consolidated non-interest income was $489.4 million in the third quarter of
1995, an increase of $110.0 million, or 29.0 percent, from the third quarter of
1994. Net investment securities losses of $15.6 million were recorded in the
third quarter of 1995 compared with net losses of $51.9 million in the third
quarter of 1994. For the first nine months of 1995, non-interest income was up
$136.9 million, an increase of 11.4 percent over 1994. The increase was
primarily due to increased fee income and insurance revenues, and lower levels
of investment securities losses.
Excluding gains (losses) on investment securities and investment securities
available for sale and venture capital gains, non-interest income increased
12.5 percent from the third quarter of 1994 and 8.6 percent from the first
nine months of 1994.
Mortgage banking revenues were $134.1 million for the third quarter of 1995,
compared with $141.6 million for the same period in 1994. A decrease in net
gains from the sales of mortgages and servicing rights was partially offset by
increased servicing fees from growth in the corporation's servicing portfolio
and other fee income related to higher levels of loan originations. For the
nine months ended September 30, 1995, mortgage banking revenues were $392.6
million compared with $416.8 million for the first nine months of 1994. A
24
<PAGE>
decrease in gains on sales of mortgages, due to lower market interest rates, was
partially offset by higher servicing fees and other loan production fees.
Future sales of mortgages and servicing rights are largely dependent upon
portfolio characteristics and prevailing market conditions. See Note 9 to
the unaudited consolidated financial statements for a detailed analysis of
mortgage banking revenues for the three and nine months ended September 30,
1995 and 1994.
Net venture capital gains were $37.9 million for the three months and $64.3
million for the nine months ended September 30, 1995, compared with $16.2
million and $51.4 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 $142.2 million at September 30, 1995.
Non-interest Expenses
Consolidated non-interest expenses of $871.9 million increased 14.6 percent
over the third quarter of 1994. For the nine months ended September 30,
1995, non-interest expenses were up $170.2 million to $2,458.8 million, an
increase of 7.4 percent over 1994. The quarterly and year-to-date results
reflect additional expenses related to acquired companies.
CONSOLIDATED BALANCE SHEET ANALYSIS
At September 30, 1995, earning assets were $63.8 billion, an increase of 19.7
percent from $53.3 billion at December 31, 1994. This increase was primarily
due to a 19.1 percent increase in total investment securities and a 12.2
percent increase in net loans. The inventory of mortgages held for sale
increased due to higher origination volumes. The increase in other assets from
December 31, 1994 was principally due to goodwill and other intangibles
from acquisitions and increases in capitalized mortgage servicing rights.
At September 30, 1995, interest-bearing liabilities totaled $53.6 billion, a
21.4 percent increase from $44.2 billion at December 31, 1994. The increase
is primarily due to increases in short-term borrowings and long-term debt.
The short-term borrowings increased principally to fund the growth in
mortages held for sale. See Note 6 to the unaudited consolidated financial
statements for the third quarter of 1995 for a detailed discussion of
long-term debt issued during 1995.
25
<PAGE>
Credit Quality
The major categories of loans and leases are included in Note 4 to the
unaudited consolidated financial statements for the third quarter of 1995.
The increases in consumer and foreign loans from the beginning of 1995 are
primarily due to the acquisition of Island Finance.
At September 30, 1995, the allowance for credit losses totaled $867.5 million,
or 2.37 percent of loans and leases outstanding. Comparable amounts were
$789.9 million, or 2.54 percent, at September 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
329.8 percent at September 30, 1995, compared with 317.9 percent at September
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.
The allocation of the allowance for credit losses to major categories of loans
at September 30, 1995 and December 31, 1994 was:
September 30, December 31,
1995 1994
Commercial .................... $ 171.2 151.9
Consumer ...................... 265.6 209.0
Real estate ................... 169.9 163.5
Foreign ....................... 27.0 20.0
Unallocated ................... 233.8 245.5
Total ...................... $ 867.5 789.9
Non-performing assets and 90-day past due loans and leases totaled $263.0
million, or 0.37 percent of total assets, at September 30, 1995, compared with
$248.5 million, or 0.44 percent, at September 30, 1994, and $218.3 million, or
0.37 percent, at December 31, 1994. The increase from September 30, 1994,
primarily reflects a $20.7 million increase in 90-day past due loans and
leases and $12.2 million increase in commercial nonaccrual loans, partially
offset by an $8.9 million decrease in other real estate owned and an $8.0
million decrease in real estate nonaccrual loans. The increase from December
31, 1994 is primarily due to a $36.0 million increase in 90-day past due loans
and leases.
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. Distribution of average
loans by region during the first nine months of 1995 was approximately 57
26
<PAGE>
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 47 states, all 10 Canadian provinces, Puerto Rico, and
elsewhere in the Caribbean and Central America.
In general the economy in regions of the U.S. where the corporation primarily
conducts operations continues to reflect growth although certain areas have
displayed higher levels of consumer-related loan delinquencies and charge-
offs. The corporation's credit card charge-offs amounted to $28.5 million in
the third quarter of 1995, and $16.9 million of such charge-offs relate to
receivables from the corporation's direct mail programs which were suspended
in 1995. Norwest Financial's charge-offs increased $10.9 million in the third
quarter of 1995 from the previous quarter, and approximately $4.1 million of
the increase relates to its Island Finance operations. Overall, the
corporation's total nonperforming assets and 90-day past due loans as a
percent of total assets remained unchanged from the end of 1994, and the
geographical diversification of the corporation's Banking group including
Norwest Card Services, Mortgage banking operations, and Norwest Financial help
to mitigate the credit risk in their respective portfolios.
Credit Ratings
The commercial paper/short-term debt and senior debt of the corporation and
Norwest Financial are currently rated as follows:
Norwest Corporation_______ Norwest Financial________
Commercial Paper Senior Commercial Paper Senior
Short-term Debt Debt Short-term Debt Debt
Thomson BankWatch, Inc. TBW-1 AA+ TBW-1 AA+
Moody's Investors
Service P1 Aa3 P1 Aa3
Standard & Poor's
Corporation A1+ AA- A1+ AA-
Duff & Phelps Duff-1+ AA Duff-1+ AA
Fitch Investors
Service, Inc. F-1+ AA F-1+ AA+
27
<PAGE>
Capital
The corporation's regulatory capital and ratios are summarized as follows:
September 30, December 31,
1995 1994
Tier 1 capital $ 3,826 3,939
Tier 1 and Tier 2 capital 4,827 4,872
Total risk adjusted assets 47,771 39,827
Tier 1 capital ratio 8.01% 9.89
Total capital to risk
adjusted assets 10.10% 12.23
Leverage ratio 5.74% 6.94
The corporation's Tier 1 capital, total capital to risk-adjusted assets and
leverage ratios compare favorably to regulatory minimums of 4.0 percent, 8.0
percent and 3.0 percent, respectively. The decrease in capital ratios from
year-end 1994 reflects intangibles arising from purchase acquisitions
completed in the first nine months of 1995.
All shares of the corporation's Cumulative Convertible Preferred Stock, Series
B, in the form of depositary shares, were called for redemption on September
1, 1995. A detailed description of the redemption is included in Note 7 to
the unaudited consolidated financial statements for the quarters and nine
months ended September 30, 1995 and 1994.
The corporation's dividend payout was 34.3 percent for the third quarter of
1995 compared with 29.8 percent for the third quarter of 1994.
28
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
<TABLE>
<CAPTION>
Quarter Ended September 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 $ 364 $ 5.2 5.52% $ 471 $ 3.6 3.05%
Trading account securities 212 4.1 7.72 198 4.9 9.84
Investment securities
U.S. Treasury & federal
agencies 27 0.3 5.36 27 0.3 3.02
State, municipal and
housing tax-exempt 710 17.9 10.13 716 18.2 10.19
Other 700 8.8 4.90 448 5.4 4.94
Total 1,437 27.0 7.52 1,191 23.9 8.05
Investment securities available
for sale
U.S. Treasury & federal
agencies 1,125 19.1 6.89 1,560 26.0 6.66
State, municipal and
housing tax-exempt 127 2.2 7.31 95 2.0 8.19
Mortgage-backed 12,623 233.6 7.44 11,189 193.1 6.73
Other 747 10.7 7.71 362 5.2 7.27
Total 14,622 265.6 7.40 13,206 226.3 6.74
Student loans available
for sale 2,089 44.5 8.46 1,425 26.0 7.22
Mortgages held for sale 5,923 107.9 7.29 3,399 62.2 7.32
Loans and leases
(net of unearned discount)
Commercial 10,683 249.8 9.28 9,257 193.6 8.30
Real estate 13,390 318.7 9.52 11,447 253.8 8.87
Consumer 12,192 461.7 15.09 9,798 343.5 13.96
Total loans and leases 36,265 1,030.2 11.32 30,502 790.9 10.33
Allowance for credit losses (869) (798)
Net loans and leases 35,396 29,704
Total earning assets
(before the allowance for
credit losses) 60,912 1,484.5 9.76 50,392 1,137.8 8.97
Cash and due from banks 3,074 2,811
Other assets 5,044 2,958
Total assets $68,161 $55,363
</TABLE>
(Continued on page 30)
29
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
(Continued from page 29)
<TABLE>
<CAPTION>
Quarter Ended September 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 $10,415 $ - -% $ 8,455 $ - -%
Interest-bearing deposits
Savings and NOW accounts 5,017 24.4 1.93 4,653 21.6 1.84
Money market accounts 10,495 82.2 3.11 10,451 59.9 2.27
Savings certificates 10,940 152.9 5.54 9,714 110.0 4.49
Certificates of deposit
and other time 1,896 27.1 5.66 1,482 18.1 4.87
Foreign time 673 9.7 5.74 447 5.0 4.44
Total interest-bearing
deposits 29,021 296.3 4.05 26,747 214.6 3.18
Federal funds purchased &
repurchase agreements 3,966 57.1 5.71 3,319 37.7 4.51
Short-term borrowings 5,727 83.3 5.78 3,754 44.5 4.70
Long-term debt 12,203 199.7 6.55 7,665 112.1 5.85
Total interest-bearing
liabilities 50,917 636.4 4.97 41,485 408.9 3.92
Other liabilities 2,062 1,536
Preferred stock 454 341
Common stockholders' equity 4,313 3,546
Total liabilities and
stockholders' equity $68,161 $55,363
Net interest income
(tax-equivalent basis) $848.1 $728.9
Yield spread 4.79 5.05
Net interest margin 5.59 5.76
Interest-bearing liabilities
to earning assets 83.59 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.
30
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
<TABLE>
<CAPTION>
Nine Months Ended September 30
In millions, 1995 1994
except ratios 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 $ 580 $ 25.2 5.81% $ 511 $ 15.9 4.16%
Trading account securities 173 12.1 9.39 278 21.2 10.21
Investment securities
U.S. Treasury & federal
agencies 28 1.0 5.00 26 1.0 4.97
State, municipal and
housing tax-exempt 702 53.9 10.24 674 53.8 10.65
Other 643 24.0 4.93 401 14.8 4.94
Total 1,373 78.9 7.66 1,101 69.6 8.43
Investment securities
available for sale
U.S. Treasury & federal
agencies 1,058 53.4 6.79 1,779 74.9 5.67
State, municipal and
housing tax-exempt 119 6.6 7.37 92 5.7 8.29
Mortgage-backed 12,387 695.0 7.40 10,117 505.1 6.57
Other 611 25.4 7.34 399 15.1 6.19
Total 14,175 780.4 7.35 12,387 600.8 6.45
Student loans available
for sale 2,148 137.5 8.56 1,499 76.2 6.79
Mortgages held for sale 4,146 240.0 7.72 3,960 194.9 6.56
Loans and leases
(net of unearned discount)
Commercial 10,416 721.7 9.26 9,216 541.1 7.85
Real estate 13,059 911.8 9.31 11,308 732.4 8.64
Consumer 11,512 1,270.7 14.74 9,223 966.9 14.00
Total loans and leases 34,987 2,904.2 11.08 29,747 2,240.4 10.05
Allowance for credit losses (843) (804)
Net loans and leases 34,144 28,943
Total earning assets
(before the allowance
for credit losses) 57,582 4,178.3 9.69 49,483 3,219.0 8.68
Cash and due from banks 3,101 2,914
Other assets 4,281 2,854
Total assets $64,121 $54,447
</TABLE>
(Continued on page 32)
31
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
(Continued from page 31)
<TABLE>
<CAPTION>
Nine Months Ended September 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 $ 9,626 $ - -% $ 8,583 $ - -%
Interest-bearing deposits
Savings and NOW accounts 4,898 74.3 2.03 4,606 61.9 1.80
Money market accounts 10,486 247.2 3.15 10,551 172.5 2.19
Savings certificates 10,664 427.1 5.35 9,831 332.9 4.53
Certificates of deposit
and other time 1,744 73.7 5.65 1,560 51.9 4.45
Foreign time 566 24.3 5.74 297 8.8 3.98
Total interest-bearing
deposits 28,358 846.6 3.99 26,845 628.0 3.13
Federal funds purchased &
repurchase agreements 3,715 161.5 5.81 2,831 84.9 4.01
Short-term borrowings 4,590 207.3 6.04 3,623 110.9 4.09
Long-term debt 11,303 556.2 6.56 7,135 304.5 5.69
Total interest-bearing
liabilities 47,966 1,771.6 4.93 40,434 1,128.3 3.73
Other liabilities 2,055 1,543
Preferred stock 505 343
Common stockholders' equity 3,969 3,544
Total liabilities and
stockholders' equity $64,121 $54,447
Net interest income
(tax-equivalent basis) $2,406.7 $2,090.7
Yield spread 4.76 4.95
Net interest margin 5.58 5.64
Interest-bearing liabilities
to earning assets 83.30 81.71
</TABLE>
32
<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.
11. Computation of Earnings Per Share 35
12(a). Computation of Ratio of Earnings to Fixed Charges 37
12(b). Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends 38
(b) Reports on Form 8-K.
The corporation filed a Current Report on Form 8-K, dated July 3,
1995, reporting consolidated pro forma combining financial
information to reflect certain consummated and pending acquisitions, and
filing an amendment to the corporation's Certificate of Incorporation
authorizing 4,000,000 shares of Preference Stock.
The corporation filed a Current Report on Form 8-K, dated September 13,
1995, filing certain documents in connection with the corporation's
offering of Medium-Term Notes, Series G.
33
<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
November 14, 1995 By /s/ Michael A. Graf
Senior Vice President
and Controller
(Chief Accounting Officer)
34
<PAGE>
Exhibit 11.
Norwest Corporation and Subsidiaries
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
In thousands, except per common share amounts Quarter Ended
September 30
1995 1994
PRIMARY:
Weighted average number of common shares
outstanding ..................................... 329,149 315,059
Net effect of assumed exercise of stock options
based on treasury stock method using average
market price .................................... 2,687 2,255
331,836 317,314
Net income ........................................ $245,138 202,988
Less dividends accrued on preferred stock ........ 11,706 6,888
Net income, as adjusted .......................... $233,432 196,100
Net income per common share ...................... $ 0.70 0.62
FULLY DILUTED:
Weighted average number of common shares
outstanding ..................................... 329,149 315,059
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 ............................. 3,381 2,268
Assumed conversion of 6 3/4% convertible
subordinated debentures due 2003 ................ 21 47
Assumed conversion of Cumulative Convertible
Preferred Stock ................................. 8,428 12,627
340,979 330,001
Net income ........................................ $245,138 202,988
Less dividends accrued on preferred stock ........ 9,091 2,885
Add 6 3/4% convertible subordinated debentures
interest and amortization of debt expense,
net of income tax effect ........................ 1 3
Net income, as adjusted .......................... $236,048 200,106
Net income per common share....................... $ 0.69 0.61
35
<PAGE>
Exhibit 11.
(continued)
Norwest Corporation and Subsidiaries
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
In thousands, except per common share amounts Nine Months Ended
September 30
1995 1994
PRIMARY:
Weighted average number of common shares
outstanding ..................................... 322,436 314,238
Net effect of assumed exercise of stock options
based on treasury stock method using average
market price .................................... 2,230 2,310
324,666 316,548
Net income ........................................ $696,264 595,488
Less dividends accrued on preferred stock ........ 32,582 20,938
Net income, as adjusted .......................... $663,682 574,550
Net income per common share ...................... $ 2.04 1.82
FULLY DILUTED:
Weighted average number of common shares
outstanding ..................................... 322,436 314,238
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 ............................. 3,538 2,332
Assumed conversion of 6 3/4% convertible
subordinated debentures due 2003................. 25 48
Assumed conversion of Cumulative Convertible
Preferred Stock ................................. 11,204 12,627
337,203 329,245
Net income ........................................ $696,264 595,488
Less dividends accrued on preferred stock ........ 21,971 8,929
Add 6 3/4% convertible subordinated debentures
interest and amortization of debt expense,
net of income tax effect ........................ 4 8
Net income, as adjusted .......................... $674,297 586,567
Net income per common share....................... $ 2.01 1.79
36
<PAGE>
Exhibit 12(a).
Norwest Corporation and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 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 $1,043,705 879,156 1,180,601 879,755 645,568 491,673 284,453
Capitalized interest (98) (56) (69) (65) (24) - (13)
Income before income
taxes and capitalized
interest 1,043,607 879,100 1,180,532 879,690 645,544 491,673 284,440
Fixed charges 1,812,879 1,166,207 1,640,049 1,485,936 1,651,664 2,187,536 2,354,041
Total income for
computation $2,856,486 2,045,307 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 $2,009,880 1,417,351 1,957,224 1,513,317 1,281,619 1,196,648 1,111,762
Computation of Fixed
Charges:
Net rental
expense (a) $ 123,454 113,457 149,462 128,573 123,342 111,609 102,192
Portion of rentals
deemed
representative
of interest $ 41,151 37,819 49,821 42,858 41,114 37,203 34,064
Interest:
Interest on
deposits 846,606 627,956 863,357 852,309 1,015,589 1,482,561 1,526,719
Interest on
federal funds
and other
short-term
borrowings 368,765 195,732 290,211 238,046 277,835 352,384 522,849
Interest on
long-term debt 556,259 304,644 436,591 352,658 317,102 315,388 270,396
Capitalized
interest 98 56 69 65 24 - 13
Total interest 1,771,728 1,128,388 1,590,228 1,443,078 1,610,550 2,150,333 2,319,977
Total fixed
charges $1,812,879 1,166,207 1,640,049 1,485,936 1,651,664 2,187,536 2,354,041
Total fixed
charges excluding
interest on
deposits $ 966,273 538,251 776,692 633,627 636,075 704,975 827,322
Ratio of Income
to Fixed Charges:
Excluding
interest on
deposits 2.08x 2.63 2.52 2.39 2.01 1.70 1.34
Including
interest on
deposits 1.58x 1.75 1.72 1.59 1.39 1.22 1.12
</TABLE>
(a) Includes equipment rentals.
37
<PAGE>
Exhibit 12(b).
Norwest Corporation and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 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 $1,043,705 879,156 1,180,601 879,755 645,568 491,673 284,453
Capitalized interest (98) (56) (69) (65) (24) - (13)
Income before income
taxes and capitalized
interest 1,043,607 879,100 1,180,532 879,690 645,544 491,673 284,440
Fixed charges 1,812,879 1,166,207 1,640,049 1,485,936 1,651,664 2,187,536 2,354,041
Total income for
computation $2,856,486 2,045,307 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 $2,009,880 1,417,351 1,957,224 1,513,317 1,281,619 1,196,648 1,111,762
Computation of Fixed
Charges:
Net rental
expense (a) $ 123,454 113,457 149,462 128,573 123,342 111,609 102,192
Portion of rentals
deemed
representative
of interest $ 41,151 37,819 49,821 42,858 41,114 37,203 34,064
Interest:
Interest on
deposits 846,606 627,956 863,357 852,309 1,015,589 1,482,561 1,526,719
Interest on
federal funds
and other
short-term
borrowings 368,765 195,732 290,211 238,046 277,835 352,384 522,849
Interest on
long-term debt 556,259 304,644 436,591 352,658 317,102 315,388 270,396
Capitalized
interest 98 56 69 65 24 - 13
Total interest 1,771,728 1,128,388 1,590,228 1,443,078 1,610,550 2,150,333 2,319,977
Total fixed
charges $1,812,879 1,166,207 1,640,049 1,485,936 1,651,664 2,187,536 2,354,041
Total fixed
charges excluding
interest on
deposits $ 966,273 538,251 776,692 633,627 636,075 704,975 827,322
Preferred stock
dividends 32,582 20,938 27,827 31,170 32,219 20,065 3,225
Pre-tax earnings
needed to meet
preferred stock
dividend
requirements 48,841 30,913 41,044 44,728 44,367 23,997 5,294
Total combined fixed
charges and preferred
stock dividends $1,861,720 1,197,120 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 $1,015,114 569,164 817,736 678,355 680,442 728,972 832,616
</TABLE>
(a) Includes equipment rentals.
38
<PAGE>
Exhibit 12(b).
(continued)
Norwest Corporation and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 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 1.98x 2.49 2.39 2.23 1.88 1.64 1.34
Including interest on
deposits 1.53x 1.71 1.68 1.55 1.35 1.21 1.12
</TABLE>
39
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 3234
<INT-BEARING-DEPOSITS> 21
<FED-FUNDS-SOLD> 251
<TRADING-ASSETS> 248
<INVESTMENTS-HELD-FOR-SALE> 16212
<INVESTMENTS-CARRYING> 1455
<INVESTMENTS-MARKET> 1523
<LOANS> 36555
<ALLOWANCE> 868
<TOTAL-ASSETS> 71412
<DEPOSITS> 39691
<SHORT-TERM> 11280
<LIABILITIES-OTHER> 2815
<LONG-TERM> 12686
<COMMON> 571
0
302
<OTHER-SE> 4067
<TOTAL-LIABILITIES-AND-EQUITY> 71412
<INTEREST-LOAN> 2899
<INTEREST-INVEST> 840
<INTEREST-OTHER> 414
<INTEREST-TOTAL> 4153
<INTEREST-DEPOSIT> 847
<INTEREST-EXPENSE> 1772
<INTEREST-INCOME-NET> 2381
<LOAN-LOSSES> 217
<SECURITIES-GAINS> (39)
<EXPENSE-OTHER> 2459
<INCOME-PRETAX> 1044
<INCOME-PRE-EXTRAORDINARY> 1044
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 696
<EPS-PRIMARY> 2.04
<EPS-DILUTED> 2.01
<YIELD-ACTUAL> 5.58
<LOANS-NON> 131
<LOANS-PAST> 94
<LOANS-TROUBLED> 3
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 790
<CHARGE-OFFS> 298
<RECOVERIES> 89
<ALLOWANCE-CLOSE> 868
<ALLOWANCE-DOMESTIC> 607
<ALLOWANCE-FOREIGN> 27
<ALLOWANCE-UNALLOCATED> 234
</TABLE>
