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, 1996
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, 1996 370,327,489 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, 1996 and December 31, 1995..................... 3
2. Consolidated Statements of Income -
Quarters and Nine Months Ended September 30, 1996 and 1995... 4
3. Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996 and 1995................ 5
4. Consolidated Statements of Stockholders' Equity -
Nine Months Ended September 30, 1996 and 1995................ 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,
1996 1995
ASSETS
Cash and due from banks ...................... $ 4,242.2 4,320.3
Interest-bearing deposits with banks ......... 26.5 29.4
Federal funds sold and resale agreements ..... 866.8 596.8
Total cash and cash equivalents .......... 5,135.5 4,946.5
Trading account securities ................... 212.2 150.6
Investment securities (fair value
$782.5 in 1996 and $795.8 in 1995) ....... 764.4 760.5
Investment and mortgage-backed securities
available for sale.......................... 17,867.7 15,243.0
Total investment securities .............. 18,632.1 16,003.5
Loans held for sale .......................... 2,732.5 3,343.9
Mortgages held for sale ...................... 5,162.9 6,514.5
Loans and leases, net of unearned discount.... 40,085.6 36,153.1
Allowance for credit losses .................. (1,033.8) (917.2)
Net loans and leases ..................... 39,051.8 35,235.9
Premises and equipment, net .................. 1,183.3 1,034.1
Mortgage servicing rights, net ............... 2,619.6 1,226.7
Interest receivable and other assets ......... 3,697.7 3,678.7
Total assets ............................. $78,427.6 72,134.4
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing ........................ $12,910.6 11,623.9
Interest-bearing ........................... 35,115.2 30,404.9
Total deposits ........................... 48,025.8 42,028.8
Short-term borrowings ........................ 7,993.4 8,527.2
Accrued expenses and other liabilities ....... 3,219.9 2,589.5
Long-term debt ............................... 13,250.1 13,676.8
Total liabilities ........................ 72,489.2 66,822.3
Preferred stock .............................. 257.1 341.2
Unearned ESOP shares ......................... (68.6) (38.9)
Total preferred stock .................... 188.5 302.3
Common stock, $1 2/3 par value - authorized
500,000,000 shares:
Issued 375,533,625 and 358,332,153 shares
in 1996 and 1995, respectively ............ 625.9 597.2
Surplus ...................................... 942.4 734.2
Retained earnings ............................ 4,071.4 3,496.3
Net unrealized gains on securities
available for sale ......................... 275.2 327.1
Notes receivable from ESOP ................... (12.4) (13.3)
Treasury stock - 5,191,076 and 5,571,696
common shares in 1996 and 1995, respectively (147.0) (125.9)
Foreign currency translation ................. (5.6) (5.8)
Total common stockholders' equity ........ 5,749.9 5,009.8
Total stockholders' equity ............... 5,938.4 5,312.1
Total liabilities and
stockholders' equity ................... $78,427.6 72,134.4
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,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME ON
Loans and leases ............................... $1,100.8 1,028.4 3,195.0 2,898.8
Investment securities .......................... 8.7 21.3 27.6 61.7
Investment and mortgage-backed securities
available for sale ............................ 312.0 264.9 871.1 778.3
Loans held for sale ............................ 48.6 44.5 201.8 137.5
Mortgages held for sale ........................ 125.1 107.9 366.8 240.0
Money market investments ....................... 9.6 5.2 27.4 25.2
Trading account securities ..................... 6.3 4.0 20.4 11.8
Total interest income ...................... 1,611.1 1,476.2 4,710.1 4,153.3
INTEREST EXPENSE ON
Deposits ....................................... 339.7 296.3 975.9 846.6
Short-term borrowings .......................... 117.8 140.4 345.2 368.8
Long-term debt ................................. 205.9 199.7 634.0 556.2
Total interest expense ..................... 663.4 636.4 1,955.1 1,771.6
Net interest income ...................... 947.7 839.8 2,755.0 2,381.7
Provision for credit losses .................... 105.9 86.5 281.1 216.5
Net interest income after
provision for credit losses ............ 841.8 753.3 2,473.9 2,165.2
NON-INTEREST INCOME
Trust .......................................... 73.5 63.6 217.7 173.4
Service charges on deposit accounts ............ 84.9 68.9 239.8 195.5
Mortgage banking ............................... 203.5 134.0 596.2 395.5
Data processing ................................ 19.0 19.8 54.6 51.6
Credit card .................................... 27.7 34.0 89.1 97.2
Insurance ...................................... 68.4 53.5 211.4 171.9
Other fees and service charges ................. 69.1 63.5 214.3 164.4
Net investment securities gains ................ - 0.4 - 0.5
Net investment and mortgage-backed
securities available for sale losses........... (12.4) (22.3) (56.5) (48.3)
Net venture capital gains ...................... 35.7 37.9 167.7 64.3
Trading ........................................ 21.2 16.9 25.2 26.1
Other .......................................... 41.2 13.5 67.0 33.8
Total non-interest income .................. 631.8 483.7 1,826.5 1,325.9
NON-INTEREST EXPENSES
Salaries and benefits .......................... 539.0 455.7 1,559.4 1,279.6
Net occupancy .................................. 88.5 66.4 230.4 186.5
Equipment rentals, depreciation and maintenance. 79.2 68.6 233.3 197.9
Business development ........................... 56.8 39.7 166.9 121.3
Communication .................................. 73.3 56.1 209.9 160.0
Data processing ................................ 47.6 36.8 120.6 102.8
Intangible asset amortization .................. 44.0 39.2 116.6 84.3
Other .......................................... 104.0 103.7 349.6 315.0
Total non-interest expenses ................ 1,032.4 866.2 2,986.7 2,447.4
INCOME BEFORE INCOME TAXES ..................... 441.2 370.8 1,313.7 1,043.7
Income tax expense ............................. 152.2 125.6 467.9 347.4
NET INCOME ..................................... $ 289.0 245.2 845.8 696.3
Average common and common equivalent shares .... 374.3 331.8 368.2 324.7
PER COMMON SHARE
Net Income
Primary ...................................... $ 0.76 0.70 2.26 2.04
Fully diluted ................................ 0.76 0.69 2.26 2.01
Dividends ..................................... 0.27 0.24 0.78 0.66
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,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................................$ 845.8 696.3
Adjustments to reconcile net income to net cash flows from operating
activities:
Provision for credit losses ....................................... 281.1 216.5
Depreciation and amortization ..................................... 489.7 202.1
Gains on sales of loans, securities and other assets, net.......... (120.8) (24.6)
Release of preferred shares to ESOP................................ 30.4 30.5
Purchases of trading account securities ........................... (53,003.0) (66,235.7)
Proceeds from sales of trading account securities ................. 52,966.5 66,052.2
Originations of mortgages held for sale ........................... (40,460.5) (23,771.6)
Proceeds from sales of mortgages held for sale .................... 44,177.5 20,201.2
Originations of loans held for sale ............................... (954.9) (830.7)
Proceeds from sales of loans held for sale ........................ 1,610.4 582.2
Interest receivable ............................................... (29.4) (111.3)
Interest payable .................................................. 26.2 107.1
Other assets, net ................................................. (551.5) (1,212.0)
Other accrued expenses and liabilities, net ....................... 367.6 582.4
Net cash flows from (used for) operating activities ............. 5,675.1 (3,515.4)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and paydowns of investment securities....... 78.7 129.5
Proceeds from maturities and paydowns of investment and mortgage-
backed securities available for sale............................... 2,189.5 1,040.0
Proceeds from sales and calls of investment securities .............. 5.9 61.9
Proceeds from sales and calls of investment and mortgage-backed
securities available for sale...................................... 3,296.1 3,590.2
Purchases of investment securities .................................. (300.0) (214.8)
Purchases of investment and mortgage-backed securities available
for sale........................................................... (6,442.0) (5,203.8)
Net change in banking subsidiaries'loans and leases.................. 1,166.5 (1,470.0)
Non-bank subsidiaries' loans and leases originated................... (5,062.8) (4,391.7)
Principal collected on non-bank subsidiaries' loans and leases....... 3,394.5 4,264.0
Purchases of premises and equipment ................................. (180.6) (156.4)
Proceeds from sales of premises, equipment & other real estate owned. 68.1 35.1
Cash paid for acquisitions, net of cash and cash equivalents acquired (2,495.8) (85.0)
Divestiture of branches, net of cash and cash equivalents paid....... (23.7) (4.1)
Net cash flows used for investing activities....................... (4,305.6) (2,405.1)
CASH FLOWS FROM FINANCING ACTIVITIES
Deposits, net ....................................................... 622.0 289.9
Short-term borrowings, net .......................................... (655.1) 1,995.9
Long-term debt borrowings ........................................... 2,674.0 4,543.2
Repayments of long-term debt ........................................ (3,272.1) (1,072.5)
Issuances of common stock ........................................... 69.7 50.6
Repurchases of common stock ......................................... (209.8) (178.5)
Sale of preferred stock held by subsidiary .......................... - 20.0
Repurchases of preferred stock ...................................... (112.7) (0.4)
Net decrease in notes receivable from ESOP .......................... 2.3 -
Dividends paid ...................................................... (298.8) (246.0)
Net cash flows from (used for) financing activities................ (1,180.5) 5,402.2
Net increase (decrease) in cash and cash equivalents .............. 189.0 (518.3)
CASH AND CASH EQUIVALENTS
Beginning of period ................................................. 4,946.5 4,024.3
End of period .......................................................$ 5,135.5 3,506.0
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, 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
(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 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, 1995...... $ 341.2 (38.9) 597.2 734.2 3,496.3 327.1 (13.3) (125.9) (5.8) 5,312.1
Net income.............. - - - - 845.8 - - - - 845.8
Dividends on
Common stock.......... - - - - (285.5) - - - - (285.5)
Preferred stock....... - - - - (13.3) - - - - (13.3)
Conversion of 30,466
preferred shares to
823,914 common shares. (30.4) - - 3.8 - - - 26.6 - -
Repurchase of 1,127,125
preferred shares...... (112.7) - - - - - - - - (112.7)
Cash payments received
on notes receivable
from ESOP............. - - - - - - 2.3 - - 2.3
Issuance of 59,000
preferred shares to
ESOP.................. 59.0 (61.3) - 2.3 - - - - - -
Release of preferred
shares to ESOP........ - 31.6 - (1.2) - - - - - 30.4
Issuance of 3,027,483
common shares......... - - - 37.4 (44.2) - - 91.0 - 84.2
Issuance of 19,417,886
common shares for
acquisitions.......... - - 28.7 165.9 72.3 (1.5) (1.4) 71.1 - 335.1
Repurchase of 5,687,191
common shares......... - - - - - - - (209.8) - (209.8)
Change in net unrealized
gains (losses) on
securities available
for sale.............. - - - - - (50.4) - - - (50.4)
Foreign currency
translation........... - - - - - - - - 0.2 0.2
Balance,
September 30, 1996.... $ 257.1 (68.6) 625.9 942.4 4,071.4 275.2 (12.4) (147.0) (5.6) 5,938.4
See notes to unaudited consolidated financial statements.
</TABLE>
7
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Changes in Accounting Policies
Effective January 1, 1996, the corporation adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-lived
Assets and for Long-lived Assets to be Disposed Of," (FAS 121). FAS 121
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset is not fully recoverable.
The adoption of FAS 121 has not had a material effect on the corporation's
consolidated financial statements.
2. Consolidated Statements of Cash Flows
Supplemental disclosures of cash flow information for the nine months
ended September 30, include:
In millions 1996 1995
Interest...................................... $ 1,928.9 1,664.5
Income taxes.................................. 41.9 442.5
Transfer of loans to other real estate owned.. 35.0 22.7
See Notes 7 and 12 for certain non-cash common and preferred stock
transactions.
8
<PAGE>
3. Investment and Mortgage-backed Securities
The amortized cost and fair value of investment securities at
September 30, 1996 were:
<TABLE>
<CAPTION>
In millions Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasury and federal agencies .. $ 1,517.1 10.7 (5.9) 1,521.9
State, municipal and housing -
tax exempt ......................... 938.1 33.5 (6.1) 965.5
Other ............................... 878.6 405.1 (7.9) 1,275.8
Total investment securities
available for sale .............. 3,333.8 449.3 (19.9) 3,763.2
Mortgage-backed securities:
Federal agencies ................... 13,963.1 144.8 (149.7) 13,958.2
Collateralized mortgage
obligations ....................... 145.1 2.3 (1.1) 146.3
Total mortgage-backed securities
available for sale .............. 14,108.2 147.1 (150.8) 14,104.5
Total investment and
mortgage-backed securities
available for sale .................. 17,442.0 596.4 (170.7) 17,867.7
Other securities held for investment.. 764.4 24.9 (6.8) 782.5
Total investment securities ........ $18,206.4 621.3 (177.5) 18,650.2
</TABLE>
Interest income on investment securities for the quarters and nine
months ended September 30, were:
Quarter Nine Months
In millions 1996 1995 1996 1995
Available for sale:
U.S. Treasury and federal agencies .. $ 22.7 19.1 59.8 53.4
State, municipal and housing -
tax exempt ........................ 13.5 1.6 39.3 4.6
Other ............................... 12.2 10.6 35.2 25.3
Total investment securities
available for sale .............. 48.4 31.3 134.3 83.3
Mortgage-backed securities:
Federal agencies ................... 259.4 231.0 726.9 686.3
Collateralized mortgage
obligations ....................... 4.2 2.6 9.9 8.7
Total mortgage-backed securities
available for sale .............. 263.6 233.6 736.8 695.0
Total investment and mortgage-backed
securities available for sale....... 312.0 264.9 871.1 778.3
Other securities held for investment.. 8.7 21.3 27.6 61.7
Total investment securities......... $ 320.7 286.2 898.7 840.0
Certain investment securities with a total amortized cost of $0.4 million
and $5.9 million for the three and nine months ended September 30, 1996,
respectively, and $21.2 million and $61.4 million for the three and nine
months ended September 30, 1995, 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 no gain
or loss for the quarter and nine months ended September 30, 1996. 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.
9
<PAGE>
4. Loans and Leases
The carrying values of loans and leases at September 30, 1996 and
December 31,1995 were:
In millions September 30, December 31,
1996 1995
Commercial, financial and industrial...... $10,142.9 9,327.3
Agricultural.............................. 1,097.6 1,090.8
Real estate
Secured by 1-4 family residential
properties............................ 10,330.5 8,592.9
Secured by development properties....... 2,076.1 2,024.0
Secured by construction and land
development........................... 885.2 742.0
Secured by owner-occupied properties.... 2,733.1 2,149.9
Consumer ................................. 11,336.2 10,520.7
Credit card .............................. 1,557.6 1,666.1
Lease financing .......................... 779.6 815.7
Foreign
Consumer ............................... 740.1 705.2
Commercial ............................. 179.0 196.1
Total loans and leases ............... 41,857.9 37,830.7
Unearned discount ........................ (1,772.3) (1,677.6)
Total loans and leases, net of
unearned discount..................... $40,085.6 36,153.1
Changes in the allowance for credit losses for the quarters and nine
months ended September 30, were:
Quarter Nine Months
In millions 1996 1995 1996 1995
Balance at beginning of period ....... $1,008.9 854.6 917.2 789.9
Allowance related to assets
acquired, net ..................... 18.4 12.3 104.3 69.4
Provision for credit losses ........ 105.9 86.5 281.1 216.5
Credit losses....................... (129.4) (116.7) (358.5) (297.6)
Recoveries ......................... 30.0 30.8 89.7 89.3
Net credit losses ................ (99.4) (85.9) (268.8) (208.3)
Balance at end of period ............. $1,033.8 867.5 1,033.8 867.5
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, 1996 and 1995 and December 31, 1995 were:
In millions September 30, December 31,
1996 1995 1995
Impaired loans
Non-accrual ........................... $ 117.4 76.9 100.1
Restructured .......................... 0.6 2.5 2.0
Total impaired loans ................ 118.0 79.4 102.1
Other non-accrual loans and leases....... 66.6 54.0 66.8
Total non-accrual and
restructured loans and leases......... 184.6 133.4 168.9
Other real estate owned ................. 46.4 35.3 37.1
Total non-performing assets ........... 231.0 168.7 206.0
Loans and leases past due 90 days or more* 121.9 94.3 91.9
Total non-performing assets and
90-day past due loans and leases ..... $ 352.9 263.0 297.9
* Excludes non-accrual and restructured loans.
The average balances of impaired loans for the nine months ended September
30, 1996 and 1995 were $114.4 million and $85.8 million, respectively. The
allowance for credit losses related to impaired loans at September 30, 1996
and December 31, 1995 was $51.9 million and $43.3 million, respectively.
Impaired loans of $3.3 million and $2.7 million were not subject to a
related allowance for credit losses at September 30, 1996 and December 31,
1995, respectively, due to the net realizable value of loan collateral,
guarantees and other factors.
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 1996 1995 1996 1995
Interest
As originally contracted ........... $ 9.8 3.3 20.0 12.2
As recognized ...................... (4.1) (1.1) (6.1) (2.6)
Reduction of interest income ..... $ 5.7 2.2 13.9 9.6
6. Long-term Debt
During the first nine months of 1996, the corporation issued $1.1 billion
in medium-term notes bearing fixed rates of interest ranging from 5.625
percent to 6.875 percent, which mature from April 1999 to August 2006.
Certain banking subsidiaries of the corporation received advances from the
Federal Home Loan Bank. Advances of $1,470 million were issued bearing
interest at one-month LIBOR minus six basis points to one-month LIBOR minus
four basis points, which mature from March 1997 to March 2011. Norwest
Financial, Inc. issued $100 million of senior medium-term notes bearing
interest at a fixed rate of 6.68 percent, which mature in September 1999.
11
<PAGE>
7. Stockholders' Equity
The table below is a summary of the corporation's preferred and preference
stock at September 30, 1996 and December 31, 1995. A detailed description
of the corporation's preferred and preference stock is provided in Note 10
to the audited consolidated financial statements included in the
corporation's 1995 Annual Report on Form 10-K.
In millions, except share amounts
<TABLE>
<CAPTION>
Annual
Dividend
Shares Outstanding Rate at Amount Outstanding
September 30, December 31, September 30, September 30, December 31,
1996 1995 1996 1996 1995
<S> <C> <C> <C> <C> <C>
Cumulative
Tracking, $200
stated value............... 980,000 980,000 9.30% $196.0 196.0
1996 ESOP Cumulative
Convertible, $1,000 stated
value...................... 30,951 - 8.50% 31.0 -
1995 ESOP Cumulative
Convertible, $1,000
stated value............... 23,190 24,572 10.00% 23.2 24.5
ESOP Cumulative Convertible,
$1,000 stated value........ 11,949 12,984 9.00% 11.9 13.0
10.24% Cumulative,
$100 stated value.......... - 1,127,125 - - 112.7
Less: Cumulative
Tracking shares held by
a subsidiary............... (25,000) (25,000) (5.0) (5.0)
1,021,090 2,119,681 257.1 341.2
Unearned ESOP shares......... (68.6) (38.9)
Total preferred stock.... $188.5 302.3
</TABLE>
On February 26, 1996, the corporation issued 59,000 shares of 1996 ESOP
Cumulative Convertible Preferred Stock, $1,000 stated value per share
("1996 ESOP Preferred Stock"), in the stated amount of $59.0 million at a
premium of $2.3 million; a corresponding charge of $61.3 million was
recorded to unearned ESOP shares.
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.
During the quarter and nine months ended September 30, 1996, 7,817 and
30,466 shares of ESOP preferred stock were converted into 194,419 shares
and 823,914 shares of common stock of the corporation, respectively. During
the quarter and nine months ended September 30, 1995, 9,623 and 30,522
shares of ESOP preferred stock were converted into 296,091 and 1,073,266
shares of common stock of the corporation, respectively.
All shares of the corporation's 10.24% Cumulative Preferred Stock, $100
stated value, in the form of 4,508,500 depositary shares, were called for
redemption on January 2, 1996. Each depositary share represented one-
quarter of a share of preferred stock. The shares were redeemed in
accordance with their terms at the stated value.
12
<PAGE>
8. Business Segments
The corporation's operations include three primary business segments:
banking, mortgage banking and consumer finance. See Note 16 to the audited
consolidated financial statements included in the corporation's annual
report on Form 10-K for the year ended December 31, 1995 for a detailed
description of each business segment. 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
1996 1995 1996 1995
Revenues:*
Banking................. $ 1,417.7 1,285.9 4,172.7 3,658.4
Mortgage Banking........ 378.7 259.2 1,048.9 697.1
Norwest Financial....... 446.5 414.8 1,315.0 1,123.7
Total................. $ 2,242.9 1,959.9 6,536.6 5,479.2
Organizational earnings:*
Banking................. $ 189.6 153.0 560.1 440.0
Mortgage Banking........ 31.8 28.0 92.9 75.5
Norwest Financial....... 67.6 64.2 192.8 180.8
Total................. $ 289.0 245.2 845.8 696.3
Total assets:
Banking................. $59,261.2 53,431.2
Mortgage Banking........ 10,499.5 9,936.9
Norwest Financial....... 8,666.9 8,043.8
Total................. $78,427.6 71,411.9
* Revenues (interest income plus non-interest income), 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.
13
<PAGE>
9. Mortgage Banking Activities
Additional information about mortgage banking non-interest income for the
quarters and nine months ended September 30, is presented below:
Quarter Nine Months
In millions 1996 1995 1996 1995
Origination and other
closing fees............. $ 79.2 47.9 240.1 129.0
Servicing fees............. 79.9 66.1 207.4 168.2
Net gains on sales of
servicing rights......... 1.7 19.1 41.5 73.5
Net gains (losses) on
sales of mortgages....... 4.3 (18.6) 1.2 (22.2)
Other ..................... 38.4 19.5 106.0 47.0
Total mortgage banking
non-interest income.... $203.5 134.0 596.2 395.5
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The outstanding balances of serviced loans
were $176.3 billion and $100.1 billion at September 30, 1996 and 1995,
respectively, and $107.4 billion at December 31, 1995.
Changes in capitalized mortgage servicing rights for the quarters and nine
months ended September 30, were:
Quarter Nine Months
In millions 1996 1995 1996 1995
Mortgage servicing rights:
Balance at beginning
of period............. $2,156.9 890.5 1,061.5 550.3
Originations............ 88.9 75.8 272.9 157.1
Purchases............... 46.5 75.4 1,066.4 468.9
Sales................... (3.6) (64.3) (21.0) (156.9)
Amortization............ (80.4) (30.8) (171.2) (72.3)
Other................... (7.8) - (8.1) (0.5)
2,200.5 946.6 2,200.5 946.6
Less valuation allowance (64.2) (49.3) (64.2) (49.3)
Balance at end of period.. 2,136.3 897.3 2,136.3 897.3
Excess servicing rights
receivable:
Balance at beginning
of period............. 409.7 121.2 229.4 98.9
Additions............... 93.9 61.3 299.5 122.4
Sales................... (6.4) (17.7) (6.4) (43.5)
Amortization............ (13.9) (7.0) (39.2) (16.2)
Other................... - (2.5) - (6.3)
Balance at end of period.. 483.3 155.3 483.3 155.3
Mortgage servicing
rights, net........... $2,619.6 1,052.6 2,619.6 1,052.6
14
<PAGE>
The fair value of capitalized mortgage servicing rights at September 30,
1996 was approximately $3.2 billion, calculated using discount rates
ranging from 500 to 700 basis points over the ten-year U.S. Treasury rate.
Changes in the valuation allowance for capitalized mortgage servicing
rights for the quarters and nine months ended September 30, were:
Quarter Nine Months
In millions 1996 1995 1996 1995
Balance at beginning of period.............. $ 64.2 48.7 64.2 -
Provision for capitalized mortgage
servicing rights in excess of fair value.. - 0.6 - 49.3
Balance at end of period.................... $ 64.2 49.3 64.2 49.3
10. Trading Revenues
For the quarters and nine months ended September 30, trading revenues were
derived from the following activities:
Quarter Nine Months
In millions 1996 1995 1996 1995
Interest income:
Securities............................... $ 6.3 3.3 20.4 8.2
Swaps and other interest rate contracts.. - 0.7 - 3.6
Total interest income.................. 6.3 4.0 20.4 11.8
Non-interest income:
Gains(losses) on securities sold......... 10.4 3.9 (4.4) 7.6
Swaps and other interest rate contracts.. (0.1) (2.0) 23.1 1.1
Foreign exchange trading................. 2.1 1.8 6.3 5.7
Options.................................. 8.1 12.6 (1.2) 12.4
Futures.................................. 0.7 0.6 1.4 (0.7)
Total non-interest income.............. 21.2 16.9 25.2 26.1
Total trading revenues..................... $ 27.5 20.9 45.6 37.9
11. Derivative Activities
The corporation and its subsidiaries, as end-users, utilize various types
of derivative products (principally interest rate swaps and interest rate
caps and floors) as part of an overall interest rate risk management
strategy. See Note 15 to the audited consolidated financial statements
included in the corporation's annual report on Form 10-K for the year ended
December 31, 1995 for a detailed description of derivative products
utilized in end-user activities.
Currently, interest rate floors, futures contracts and options on futures
contracts are principally being used by the corporation in 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 (losses) on interest rate floors and futures
contracts are included, as appropriate, in determining the fair value of
the capitalized mortgage servicing rights.
15
<PAGE>
For the nine months ended September 30, 1996, end-user derivative
activities decreased interest income by $0.6 million and interest expense
by $51.6 million, for a total benefit to net interest income of $51.0
million. For the same period in 1995, interest income was decreased by
$2.5 million and interest expense was decreased by $3.1 million, for a
total benefit to net interest income of $0.6 million.
Activity in the notional amounts of end-user derivatives for the nine
months ended September 30, 1996 is summarized as follows:
<TABLE>
<CAPTION>
In millions December 31, Amortizations September 30,
1995 Additions & Maturities Terminations 1996
<S> <C> <C> <C> <C> <C>
Swaps:
Generic receive fixed...... $ 2,816 2,500 (255) - 5,061
Amortizing receive fixed... 1,575 522 (133) - 1,964
Generic pay fixed.......... 330 - (30) - 300
Basis...................... 229 - (200) - 29
Total swaps.............. 4,950 3,022 (618) - 7,354
Interest rate caps
and floors................. 7,843 11,000 (6) - 18,837
Futures contracts............ - 11,606 (1,817) (5,399) 4,390
Options on futures contracts. - 16,993 (8,828) (3,365) 4,800
Security options............. - 4,400 (3,400) (200) 800
Total........................ $ 12,793 47,021 (14,669) (8,964) 36,181
</TABLE>
Deferred gains and losses on closed end-user derivatives were not material
at September 30, 1996 and December 31, 1995.
A key assumption in the information which follows is that rates remain
constant at September 30, 1996 levels. To the extent that rates change,
both the average notional and variable interest rate information may
change.
16
<page
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, 1996 1996 1997 1998 1999 2000 after Total
<S> <C> <C> <C> <C> <C> <C> <C>
Swaps:
Generic receive fixed-
Notional value.........$ 420 650 650 1,016 225 2,100 5,061
Weighted avg.
receive rate......... 7.18% 6.77 6.34 6.81 6.33 6.47 6.61
Weighted avg. pay rate. 5.65% 5.95 5.62 5.56 5.69 5.58 5.59
Amortizing receive fixed-
Notional value.........$ 463 1,416 64 21 - - 1,964
Weighted avg.
receive rate......... 7.50% 7.49 2.89 2.89 - - 7.30
Weighted avg. pay rate. 5.34% 5.31 5.72 5.75 - - 5.33
Generic pay fixed-
Notional value.........$ - - - - - 300 300
Weighted avg.
receive rate......... -% - - - - 5.63 5.63
Weighted avg. pay rate. -% - - - - 5.89 5.89
Basis-
Notional value.........$ - - 29 - - - 29
Weighted avg.
receive rate......... -% - 4.02 - - - 4.02
Weighted avg. pay rate. -% - 3.86 - - - 3.86
Interest rate caps and
floors (1):
Notional value.........$ 10 - 1,077 2,650 6,350 8,750 18,837
Futures contracts (1):
Notional value.........$ 3,615 725 50 - - - 4,390
Options on futures
contracts (1):
Notional value.........$ 3,760 1,040 - - - - 4,800
Security options (1):
Notional value.........$ 800 - - - - - 800
Total notional value.....$ 9,068 3,831 1,870 3,687 6,575 11,150 36,181
Total weighted avg.
rates on swaps:
Receive rate......... 7.35% 7.27 5.95 6.74 6.33 6.37 6.75
Pay rate............. 5.48% 5.39 5.56 5.57 5.69 5.62 5.53
</TABLE>
(1) Average rates are not meaningful for interest rate caps and floors, futures
contracts or options.
Note: Weighted average variable rates are based on the actual rates as of
September 30, 1996.
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
Loans Mortgage Interest- Long-
Investment and Servicing bearing term
September 30, 1996 Securities Leases Rights Deposits Debt Total
Swaps:
<S> <C> <C> <C> <C> <C> <C>
Pay variable
Unrealized gains......... $ - - - - 37.4 37.4
Unrealized (losses)...... - - (6.6) (23.7) (70.7) (101.0)
Pay variable net......... - - (6.6) (23.7) (33.3) (63.6)
Pay fixed
Unrealized gains......... - 3.6 - 10.2 - 13.8
Basis
Unrealized gains......... 0.5 - - - - 0.5
Total unrealized gains..... 0.5 3.6 - 10.2 37.4 51.7
Total unrealized (losses).. - - (6.6) (23.7) (70.7) (101.0)
Total net................ $ 0.5 3.6 (6.6) (13.5) (33.3) (49.3)
Interest rate caps and floors:
Unrealized gains........... $ 1.3 - 10.3 - - 11.6
Unrealized (losses)........ - - (77.7) (0.2) (0.2) (78.1)
Total net................ $ 1.3 - (67.4) (0.2) (0.2) (66.5)
Futures contracts:
Unrealized gains........... $ - 0.3 4.9 - - 5.2
Options on futures contracts:
Unrealized gains........... $ - 10.9 7.3 - - 18.2
Unrealized (losses)........ - (0.7) - - - (0.7)
Total net................ $ - 10.2 7.3 - - 17.5
Security options:
Unrealized gains........... $ - 3.3 - - - 3.3
Unrealized (losses)........ - (0.9) (0.7) - - (1.6)
Total net................ $ - 2.4 (0.7) - - 1.7
Grand total
unrealized gains......... $ 1.8 18.1 22.5 10.2 37.4 90.0
Grand total
unrealized (losses)...... - (1.6) (85.0) (23.9) (70.9) (181.4)
Grand total net............ $ 1.8 16.5 (62.5) (13.7) (33.5) (91.4)
</TABLE>
18
<PAGE>
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,
1996, the corporation had forward contracts totaling $14.5 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.
At September 30, 1996, the corporation's trading account portfolio included
futures and written options of $318 million and $260 million notional
value, respectively, which are valued at market with any gains or losses
recognized currently.
12. 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. At September 30,
1996, the corporation had five pending acquisitions with total assets of
approximately $2.0 billion, and it is anticipated that cash of $91.1
million and approximately 5.5 million common shares will be issued upon
completion of these acquisitions. Pending acquisitions include Central
Bancorporation, Inc., a $1.1 billion bank holding company based in Fort
Worth, Texas.
The pending acquisitions, subject to approval by regulatory agencies, are
expected to be completed by the first quarter of 1997 and are not
individually significant to the financial statements of the corporation.
19
<PAGE>
Transactions completed in the nine months ended September 30, 1996 include:
<TABLE>
<CAPTION>
In millions, except share amounts Common
Cash Shares Method of
Date Assets Paid Issued Accounting
<S> <C> <C> <C> <C> <C>
The Bank of Robstown,
Robstown, Texas (B)......... January 12 $ 71.4 $ 9.5 - Purchase
AMFED Financial, Inc.,
Reno, Nevada (B)............ January 18 1,518.8 - 6,046,636 Pooling of
interests*
Irene Bancorporation, Inc.,
Viborg, South Dakota (B).... January 31 39.7 7.1 - Purchase
Canton Bancshares, Inc.,
Canton, Illinois (B)........ February 15 49.7 - 279,270 Purchase
Henrietta Bancshares, Inc.,
Henrietta, Texas (B)........ March 12 164.0 24.4 - Purchase
Victoria Bankshares, Inc.,
Victoria, Texas (B)......... April 11 1,918.7 - 8,510,801 Pooling of
interests*
The Prudential Home Mortgage
Company, Inc. (M)........... May 7 3,335.6 3,335.6 - Purchase
of assets
Cardinal Credit Corporation,
Lexington, Kentucky (F)..... May 13 34.2 33.6 - Purchase
of assets
Benson Financial Corporation,
San Antonio, Texas (B)...... May 31 463.8 - 2,044,035 Pooling of
interests*
Regional Bank of Colorado,
N.A., Rifle, Colorado (B)... June 1 56.0 - 354,967 Purchase
AmeriGroup, Incorporated,
Minneapolis, Minnesota (B).. June 4 155.1 - 916,200 Purchase
Union Texas Bancorporation,
Inc., Laredo, Texas (B)..... June 27 245.0 - 394,979 Purchase
B & G Investment Company,
San Antonio, Texas (B)...... July 3 71.2 - 270,998 Purchase
PriMerit Bank, F.S.B.,
Las Vegas, Nevada (B)........ July 19 1,577.6 190.7 - Purchase
of assets
DUMAE Insurance Agency, Inc.
Baltic, South Dakota (B).... July 25 0.2 0.2 - Purchase
of assets
Aman Collection Service, Inc.
Aberdeen, South Dakota (F).. August 1 4.1 - 600,000 Pooling of
interests*
Rapid Finance, Inc.,
Jacksonville, Mississippi (F) August 19 28.6 28.6 - Purchase
of assets
National Business Finance,
Inc., Denver, Colorado (B)..September 30 8.4 7.5 - Purchase
$9,742.1 $3,637.2 19,417,886
</TABLE>
* Pooling of interests transactions were not material to the corporation's
consolidated financial statements; accordingly, previously reported results
have not been restated.
(B) - Banking Group; (M) - Mortgage Banking; (F) - Norwest Financial.
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 1995 Annual Report on Form 10-K.
EARNINGS PERFORMANCE
The corporation reported net income of $289.0 million for the quarter ended
September 30, 1996, a 17.9 percent increase over the $245.2 million earned
in the third quarter of 1995. Fully diluted earnings per share were 76
cents, compared with 69 cents in the third quarter of 1995, an increase of
10.1 percent. Return on realized common equity was 21.0 percent and return
on assets was 1.48 percent for the third quarter of 1996, compared with
22.3 percent and 1.43 percent, respectively, in the third quarter of 1995.
For the nine months ended September 30, 1996, net income was $845.8
million, or $2.26 per fully diluted common share, an increase of 21.5
percent and 12.4 percent, respectively, over the $696.3 million or $2.01
per fully diluted common share earned in the first nine months of 1995.
Return on realized common equity was 21.9 percent and return on assets was
1.49 percent for the first nine months of 1996, compared with 22.4 percent
and 1.45 percent for the same period a year ago.
In September 1996, legislation was enacted by Congress that imposed a one-
time charge on deposits insured by the Savings Association Insurance Fund
(SAIF) to recapitalize the SAIF deposit insurance fund for savings and loan
associations. In the past, the corporation acquired savings and loan
associations which are subject to this charge. In the third quarter of
1995, when the SAIF recapitalization legislation was first introduced in
Congress, the corporation included as a charge in its operating results
$23.5 million for its share of recapitalization of the SAIF deposit
insurance fund. In 1996 the corporation has acquired thrift institutions
and recorded a charge of $19.0 million in the third quarter 1996 results
for the payments due for these institutions. Excluding the $19.0 million
pre-tax charge, net operating earnings were $300.8 million or 79 cents per
fully diluted share for the third quarter of 1996, and $857.6 million or
$2.29 per fully diluted share for the nine months ended September 30, 1996.
On an operating basis, return on realized common equity was 21.9 percent
and 22.2 percent, respectively, and return on assets was 1.54 percent and
1.51 percent, respectively, for the three and nine-month periods ended
September 30, 1996.
ORGANIZATIONAL EARNINGS
The organizational earnings of the corporation's primary business segments
for the three and nine months ended September 30, 1996 and 1995 are
included in Note 8 to the unaudited consolidated financial statements for
the quarter ended September 30, 1996 and are discussed in the following
paragraphs.
Banking Group
The Banking Group reported third quarter 1996 earnings of $189.6 million, a
24.0 percent increase over the third quarter 1995 earnings of $153.0
million. For the nine months ended September 30, 1996, earnings increased
27.3 percent to $560.1 million, compared with $440.0 million for the same
period in 1995. The increased earnings in the first nine months of 1996
reflected a 15.0 percent increase in tax-equivalent net interest income to
$1,909.6 million, due to a 10.8 percent increase in average earning assets
and a 22 basis point increase in net interest margin. The Banking Group's
21
<PAGE>
provision for credit losses for the nine months ended September 30, 1996
increased $12.9 million to $107.0 million from a year earlier, as average
loans and leases rose $2.1 billion, or 7.3 percent, while net charge-offs
as a percent of average loans and leases remained essentially unchanged at
0.46 percent. Non-interest income rose $253.0 million to $1,003.4 million
for the first nine months of 1996, due primarily to increases in venture
capital gains and $33.5 million in gains on sale of credit card
receivables. Non-interest expenses of $1,918.4 million for the first nine
months of 1996 were $270.3 million higher when compared with the first nine
months of 1995, reflecting the previously discussed SAIF assessment charge,
writedowns of goodwill and other intangibles and additional operating
expenses related to acquired companies, partially offset by reduced pension
expense.
Mortgage Banking
Mortgage Banking earned $31.8 million in the current quarter compared with
$28.0 million in the third quarter of 1995. For the first nine months of
1996, Mortgage Banking earned $92.9 million compared with $75.5 million in
the same period of 1995. See Note 9 to the unaudited consolidated
financial statements for the quarter ended September 30, 1996 for
additional information about mortgage banking revenues for the three and
nine months ended September 30, 1996 and 1995.
The growth in Mortgage Banking earnings reflects the continued growth in
mortgage loan fundings and the servicing portfolio, partially offset by a
decrease in combined gains on sales of mortgages and servicing rights.
Such combined gains totaled $42.7 million in the first nine months of 1996,
compared with $51.3 million in the same period a year ago. Mortgage loan
originations amounted to $13.2 billion during the third quarter, and
totaled $39.8 billion for the first nine months of 1996, compared with
$10.7 billion and $23.0 billion, respectively, in the comparable periods in
1995. Increases in volume were attributable in part to the acquisition of
certain assets of Prudential Home Mortgage Company, Inc. in May 1996,
including $47 billion of its mortgage servicing portfolio. Mortgage
Banking capitalized $272.9 million of mortgage servicing rights in the
first nine months of 1996, representing 122 basis points of originated
mortgage loans, compared with $157.1 million for the first nine months of
1995. Amortization of capitalized mortgage servicing rights, including
excess servicing rights, was $210.4 million for the nine months ended
September 30, 1996, compared with $88.5 million for the nine months ended
September 30, 1995. The servicing portfolio totaled $176.3 billion at
September 30, 1996, compared with $107.4 billion at year-end 1995 and
currently has a weighted average coupon of 7.77 percent.
Norwest Financial
Norwest Financial (including Norwest Financial Services, Inc. and Island
Finance) reported earnings of $67.6 million in the third quarter of 1996,
compared with $64.2 million in the third quarter of 1995, an increase of
5.2 percent. For the first nine months of 1996, Norwest Financial's net
income was $192.8 million, up 6.7 percent from the first nine months of
1995. The growth in earnings reflected a 19.1 percent increase in Norwest
Financial's tax-equivalent net interest income as average finance
receivables grew 18.3 percent from the first nine months of 1995. The
increase in net interest income was partially offset by a higher provision
for credit losses of $173.1 million, compared with $121.3 million for the
first nine months of 1995. Norwest Financial's net charge-offs in the
first nine months of 1996 were $164.9 million, or 3.07 percent of average
loans, compared with $110.0 million, or 2.43 percent of average loans, in
the same period in 1995. The increase in charge-offs was due to higher
domestic consumer credit losses as well as to Island Finance.
22
<PAGE>
CONSOLIDATED INCOME STATEMENT ANALYSIS
Net Interest Income
Consolidated tax-equivalent net interest income was $955.6 million in the
third quarter of 1996, compared with $848.1 million in the third quarter of
1995, an increase of 12.7 percent. For the first nine months of 1996, tax-
equivalent net interest income increased 15.4 percent from the same period
in 1995 to $2,778.4 million. The increase in tax-equivalent net interest
income over the three and nine months ended September 30, 1995 was
primarily due to growth in average earning assets, principally loans and
investment securities.
Net interest margin, the ratio of annualized tax-equivalent net interest
income to average earning assets, was 5.66 percent in the third quarter of
1996, compared with 5.59 percent in the third quarter of 1995. Net
interest margin was 5.63 percent for the nine months ended September 30,
1996, up from 5.58 percent for the first nine months of 1995. The
following table summarizes changes in tax-equivalent net interest income
between the quarters ended September 30 and June 30 and the nine months
ended September 30.
Changes in Tax-Equivalent Net Interest Income*
In millions 3Q 96 3Q 96 9 Mos. 96
from from from
3Q 95 2Q 96 9 Mos. 95
Increase (decrease) due to:
Change in earning asset volume ............ $ 94.7 9.6 344.5
Change in volume of interest-free funds ... (2.2) 7.3 (32.6)
Change in net return from
Interest-free funds ...................... 39.6 (2.8) 168.2
Interest-bearing funds ................... (8.8) 1.0 (20.2)
Change in earning asset mix ............... (24.3) 9.6 (81.8)
Change in funding mix ..................... 8.5 6.4 (6.4)
Change in tax-equivalent net interest income. $107.5 31.1 371.7
* Net interest income is presented on a tax-equivalent basis utilizing a
federal incremental tax rate of 35 percent in each period presented.
Provision for Credit Losses
The corporation provided $105.9 million for credit losses in the third
quarter of 1996, compared with $86.5 million in the same period a year ago.
Net credit losses totaled $99.4 million and $85.9 million for the three
months ended September 30, 1996 and 1995, respectively. As a percentage of
average loans and leases, net credit losses were 100 basis points in the
third quarter of 1996, compared with 94 basis points in the same period a
year ago.
For the first nine months of 1996, the provision for credit losses totaled
$281.1 million, compared with $216.5 million in the first nine months of
1995. Net credit losses were $268.8 million, or 94 basis points of average
loans and leases, for the nine months ended September 30, 1996, compared
with $208.3 million, or 80 basis points, for the same period in 1995.
23
<PAGE>
The increase in net credit losses for the third quarter and the first nine
months of 1996 is principally due to higher levels of charge-offs in
regions where Norwest has had acquisitions and to slightly higher consumer
credit charge-offs at Norwest Financial.
Non-interest Income
Consolidated non-interest income was $631.8 million in the third quarter of
1996, an increase of $148.1 million, or 30.6 percent, from the third
quarter of 1995, due to increased mortgage banking revenues and a lower
level of net investment securities losses. Net investment securities losses
of $12.4 million were recorded in the third quarter of 1996, compared with
losses of $21.9 million in the third quarter of 1995. For the first nine
months of 1996, consolidated non-interest income was up $500.6 million to
$1,826.5 million, an increase of 37.8 percent over 1995. The increase was
primarily due to increased mortgage banking revenues, gains on the
disposition of credit card receivables held for sale and increases in
venture capital gains.
Net venture capital gains were $35.7 million for the three months and
$167.7 million for the nine months ended September 30, 1996, compared with
$37.9 million and $64.3 million, respectively, for the same periods in
1995. 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 $256.8 million
at September 30, 1996.
Mortgage banking revenues in the third quarter of 1996 were $203.5 million,
compared with $134.0 million in the third quarter of 1995. For the nine
months ended September 30, 1996, mortgage banking revenues were $596.2
million, compared with $395.5 million for the first nine months of 1995.
The increases for both the quarter and the first nine months were
principally due to increased levels of origination and other closing fees
and servicing fees. Mortgage banking revenue derived from sales of
servicing rights and future sales of servicing rights are largely dependent
upon portfolio characteristics and prevailing market conditions. See Note 9
to the unaudited consolidated financial statements for the quarter ended
September 30, 1996 for additional information about mortgage banking
revenues for the three and nine months ended September 30, 1996 and 1995.
Non-interest Expenses
Consolidated non-interest expenses were $1,032.4 million in the third
quarter of 1996, compared with $866.2 million in the same period of 1995,
an increase of 19.2 percent. In addition to the non-recurring charge
related to recapitalization of SAIF, third quarter 1996 results reflect
increased operating expenses associated with acquisitions and included one-
time acquisition charges of $32.7 million taken in connection with
acquisitions closed within the quarter. Third quarter 1996 non-interest
expenses also reflect a $13.3 million reduction in salaries and benefits
expense due to changes in pension assumptions. For the nine months ended
September 30, 1996, non-interest expenses were up $539.3 million to
$2,986.7 million, an increase of 22.0 percent over the nine months ended
September 30, 1995, and primarily reflect increased operating expenses
related to acquisitions, acquisition-related special charges of $49.9
million related to completed 1996 transactions, and writedowns of goodwill
and other intangibles of $58.6 million before taxes ($50.6 million after
taxes, since $35.7 million of the writedown is not tax deductible) in the
second quarter of 1996, partially offset by reduced pension benefits
expense of $39.9 million due to the change in pension assumptions.
24
<PAGE>
Income Taxes
The effective income tax rate for the first nine months of 1996 was 35.6
percent, which reflects the non-deductible intangible writedowns during the
second quarter. Excluding the effect of those writedowns, the effective
income tax rate was 34.7 percent for the nine months ended September 30,
1996.
CONSOLIDATED BALANCE SHEET ANALYSIS
At September 30, 1996, earning assets were $67.7 billion, an increase of
7.8 percent from $62.8 billion at December 31, 1995. This increase was
primarily due to a 10.9 percent increase in net loans and a 16.4 percent
increase in total investment securities. The increase in mortgage
servicing rights of $1.4 billion since December 31, 1995, included $0.8
billion from the Prudential acquisition, with the remaining increase due to
higher levels of originations.
At September 30, 1996, interest-bearing liabilities totaled $56.4 billion,
a 7.1 percent increase from $52.6 billion at December 31, 1995. The
increase was primarily due to increases in interest-bearing deposits from
acquisitions.
Credit Quality
The major categories of loans and leases are included in Note 4 to the
unaudited consolidated financial statements for the quarter ended September
30, 1996.
At September 30, 1996, the allowance for credit losses totaled $1,033.8
million, or 2.58 percent of loans and leases outstanding. Comparable
amounts were $867.5 million, or 2.37 percent, at September 30, 1995, and
$917.2 million, or 2.54 percent, at December 31, 1995. The ratio of the
allowance for credit losses to total non-performing assets and 90-day past
due loans and leases was 292.9 percent at September 30, 1996, compared with
329.8 percent at September 30, 1995 and 307.9 percent at December 31, 1995.
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, 1996 and December 31, 1995 was:
September 30, December 31,
1996 1995
Commercial .................... $ 224.9 186.4
Consumer ...................... 308.5 276.5
Real estate ................... 163.9 171.8
Foreign ....................... 30.6 27.0
Unallocated ................... 305.9 255.5
Total ...................... $1,033.8 917.2
25
<PAGE>
Non-performing assets and 90-day past due loans and leases totaled $352.9
million, or 0.45 percent of total assets, at September 30, 1996, compared
with $263.0 million, or 0.37 percent, at September 30, 1995, and $297.9
million, or 0.41 percent, at December 31, 1995. Non-performing loans
increased because of acquisitions by $48.7 million and $66.0 million from
December 31, 1995 and September 30, 1995, respectively.
The corporation manages exposure to credit risk through loan portfolio
diversification by customer, product, industry and geography in order to
minimize concentrations in any single sector.
The corporation's Banking Group operates in 16 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 1996 was
approximately 59 percent in the North Central Midwest, 13 percent in the
South Central Midwest and 28 percent in the Rocky Mountain/Southwest
region.
Norwest Mortgage, Norwest Financial and Norwest Card Services operate on a
nationwide basis. Mortgage Banking includes the largest retail mortgage
origination network and the largest servicing portfolio in the country.
The five states with the highest originations year to date in 1996 are:
California $7.6 billion; Minnesota $2.5 billion; Illinois $1.8 billion;
Washington $1.8 billion; and Colorado $1.8 billion. The originations in
these five states comprise approximately 39 percent of total originations
in 1996. The five highest states in servicing include: California $35.2
billion; Minnesota $10.1 billion; Texas $8.5 billion; New York $8.5
billion; and Florida $7.9 billion. These five states comprise
approximately 40 percent of the total servicing portfolio at September 30,
1996.
Norwest Financial engages in consumer finance activities in 47 states, all
10 Canadian provinces, the Caribbean, Central America and Guam. The five
states with the largest consumer finance receivables are: California
$456.8 million; Florida $232.5 million; Texas $230.9 million; Illinois
$220.0 million; and Ohio $178.9 million. Consumer finance receivables in
Puerto Rico and Canada totaled $1.3 billion and $519.3 million,
respectively, at September 30, 1996. The consumer finance receivables of
Puerto Rico, Canada, and the five largest states listed above comprise
approximately 42 percent of total consumer finance receivables at September
30, 1996.
With respect to credit card receivables, approximately 61 percent of the
portfolio is within the corporation's 16-state banking region. Minnesota
and Iowa represent approximately 12 percent and 10 percent of the total
outstanding credit card portfolio, respectively. No other state accounts
for more than 10 percent of the portfolio.
In general, the economy in regions of the U.S. where the corporation
primarily conducts operations continues to reflect modest growth. The
corporation's credit-risk management policies and activities as well as the
geographical diversification of the corporation's Banking Group (including
Norwest Card Services), Mortgage Banking, and Norwest Financial help
mitigate the credit risk in their respective portfolios.
26
<page
Capital and Liquidity Management
The corporation's regulatory capital and ratios are summarized as follows:
September 30, December 31,
1996 1995
Tier 1 capital......................... $ 4,660 3,994
Tier 1 and Tier 2 capital.............. 5,716 5,012
Total risk adjusted assets............. 54,066 49,255
Tier 1 capital ratio................... 8.62% 8.11
Total capital to risk adjusted assets.. 10.57% 10.18
Leverage ratio......................... 6.12% 5.65
The corporation's Tier 1 capital, total capital to risk-adjusted assets and
leverage ratios exceed the regulatory minimums of 4.0 percent, 8.0 percent
and 3.0 percent, respectively.
The corporation's dividend payout ratio was 35.5 percent for the third
quarter of 1996 compared with 34.3 percent for the third quarter of 1995.
The corporation filed shelf registration statements in July, 1996 which
permit the corporation to issue up to $5 billion and $2 billion of debt
securities in domestic and international money and capital markets,
respectively. As of September 30, 1996, the corporation has not issued any
securities under such shelf registrations.
On September 24, 1996, the corporation's board of directors authorized the
corporation to repurchase up to 4.5 million shares of the corporation's
common stock to be used to meet periodic common stock issuance requirements
of the corporation's Dividend Reinvestment Plan, the Savings Investment
Plans, the Long-Term Incentive Compensation Plan and other stock issuance
requirements other than acquisitions accounted for as pooling of interests.
27
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
<TABLE>
<CAPTION>
Quarter Ended September 30,
In millions, except ratios 1996 1995
Interest Average Interest Average
Average Income/ Yields/ Average Income/ Yields/
Balance Expense* Rates* Balance Expense* Rates*
Assets
<S> <C> <C> <C> <C> <C> <C>
Money market investments..... $ 629 $ 9.6 5.97% $ 364 $ 5.2 5.52%
Trading account securities... 365 6.3 6.95 212 4.1 7.72
Investment securities
U.S. Treasury & federal
agencies................. - - - 27 0.3 5.36
State, municipal and
housing tax-exempt....... - - - 710 17.9 10.13
Other...................... 864 8.7 4.05 700 8.8 4.90
Total.................... 864 8.7 4.05 1,437 27.0 7.52
Investment securities available
for sale
U.S. Treasury & federal
agencies................. 1,419 22.7 6.36 1,125 19.1 6.89
State, municipal and
housing tax-exempt....... 898 19.7 8.97 127 2.2 7.31
Mortgage-backed............ 14,088 263.7 7.45 12,623 233.6 7.44
Other...................... 1,135 12.3 6.12 747 10.7 7.71
Total.................... 17,540 318.4 7.38 14,622 265.6 7.40
Loans held for sale.......... 2,493 48.6 7.77 2,089 44.5 8.46
Mortgages held for sale...... 6,385 125.1 7.84 5,923 107.9 7.29
Loans and leases
(net of unearned discount)
Commercial................. 12,839 296.4 9.19 10,683 249.8 9.28
Real estate................ 14,225 342.4 9.61 13,390 318.7 9.52
Consumer................... 12,367 463.5 14.96 12,192 461.7 15.09
Total loans and leases... 39,431 1,102.3 11.15 36,265 1,030.2 11.32
Allowance for credit losses (1,034) (869)
Net loans and leases..... 38,397 35,396
Total earning assets
(before the allowance for
credit losses)........... 67,707 1,619.0 9.59 60,912 1,484.5 9.76
Cash and due from banks...... 3,503 3,074
Other assets................. 7,663 5,044
Total assets............... $77,839 $68,161
(Continued on page 29)
</TABLE>
28
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
(Continued from page 28)
<TABLE>
<CAPTION>
Quarter Ended September 30,
In millions, except ratios 1996 1995
Interest Average Interest Average
Average Income/ Yields/ Average Income/ Yields/
Balance Expense* Rates* Balance Expense* Rates*
Liabilities and
Stockholders' Equity
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing deposits. $12,499 $ - -% $10,415 $ - -%
Interest-bearing deposits
Savings and NOW accounts... 7,634 32.9 1.72 5,017 24.4 1.93
Money market accounts...... 10,910 88.6 3.23 10,495 82.2 3.11
Savings certificates....... 12,696 172.9 5.42 10,940 152.9 5.54
Certificates of deposit
and other time........... 2,940 41.3 5.58 1,896 27.1 5.66
Foreign time............... 365 4.0 4.38 673 9.7 5.74
Total interest-bearing
deposits............... 34,545 339.7 3.91 29,021 296.3 4.05
Federal funds purchased &
repurchase agreements...... 2,647 33.5 5.03 3,966 57.1 5.71
Short-term borrowings........ 6,178 84.3 5.43 5,727 83.3 5.78
Long-term debt............... 13,409 205.9 6.14 12,203 199.7 6.55
Total interest-bearing
liabilities............ 56,779 663.4 4.66 50,917 636.4 4.97
Other liabilities............ 2,814 2,062
Preferred stock.............. 188 454
Common stockholders' equity.. 5,559 4,313
Total liabilities and
stockholders' equity... $77,839 $68,161
Net interest income
(tax-equivalent basis)... $955.6 $ 848.1
Yield spread............... 4.93 4.79
Net interest margin........ 5.66 5.59
Interest-bearing liabilities
to earning assets........ 83.86 83.59
</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.
29
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
In millions, except ratios 1996 1995
Interest Average Interest Average
Average Income/ Yields/ Average Income/ Yields/
Balance Expense* Rates* Balance Expense* Rates*
Assets
<S> <C> <C> <C> <C> <C> <C>
Money market investments..... $ 659 $ 27.4 5.54% $ 580 $ 25.2 5.81%
Trading account securities... 420 20.6 6.58 173 12.1 9.39
Investment securities
U.S. Treasury & federal
agencies................. - - - 28 1.0 5.00
State, municipal and
housing tax-exempt....... - - - 702 53.9 10.24
Other...................... 833 27.6 4.42 643 24.0 4.93
Total.................... 833 27.6 4.42 1,373 78.9 7.66
Investment securities available
for sale
U.S. Treasury & federal
agencies................. 1,255 59.8 6.37 1,058 53.4 6.79
State, municipal and
housing tax-exempt....... 872 57.5 9.08 119 6.6 7.37
Mortgage-backed............ 13,319 736.9 7.39 12,387 695.0 7.40
Other...................... 1,093 35.2 6.44 611 25.4 7.34
Total.................... 16,539 889.4 7.36 14,175 780.4 7.35
Loans held for sale.......... 2,966 201.8 9.09 2,148 137.5 8.56
Mortgages held for sale...... 6,629 366.8 7.38 4,146 240.0 7.72
Loans and leases
(net of unearned discount)
Commercial................. 12,622 863.7 9.14 10,416 721.7 9.26
Real estate................ 13,588 989.9 9.72 13,059 911.8 9.31
Consumer................... 11,961 1,346.3 15.02 11,512 1,270.7 14.74
Total loans and leases... 38,171 3,199.9 11.19 34,987 2,904.2 11.08
Allowance for credit losses (992) (843)
Net loans and leases..... 37,179 34,144
Total earning assets
(before the allowance for
credit losses)........... 66,217 4,733.5 9.60 57,582 4,178.3 9.69
Cash and due from banks...... 3,562 3,101
Other assets................. 6,839 4,281
Total assets............... $75,626 $64,121
(Continued on page 31)
</TABLE>
30
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
(Continued from page 30)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
In millions, except ratios 1996 1995
Interest Average Interest Average
Average Income/ Yields/ Average Income/ Yields/
Balance Expense* Rates* Balance Expense* Rates*
Liabilities and
Stockholders' Equity
<S> <S> <S> <C> <C> <C> <C>
Noninterest-bearing deposits. $11,866 $ - -% $ 9,626 $ - -%
Interest-bearing deposits
Savings and NOW accounts... 6,356 83.1 1.75 4,898 74.3 2.03
Money market accounts...... 11,441 260.1 3.04 10,486 247.2 3.15
Savings certificates....... 12,288 502.3 5.46 10,664 427.1 5.35
Certificates of deposit
and other time........... 2,741 116.0 5.65 1,744 73.7 5.65
Foreign time............... 403 14.4 4.77 566 24.3 5.74
Total interest-bearing
deposits............... 33,229 975.9 3.92 28,358 846.6 3.99
Federal funds purchased &
repurchase agreements...... 2,985 112.4 5.03 3,715 161.5 5.81
Short-term borrowings........ 5,708 232.8 5.45 4,590 207.3 6.04
Long-term debt............... 13,791 634.0 6.13 11,303 556.2 6.56
Total interest-bearing
liabilities............ 55,713 1,955.1 4.68 47,966 1,771.6 4.93
Other liabilities............ 2,514 2,055
Preferred stock.............. 189 505
Common stockholders' equity.. 5,344 3,969
Total liabilities and
stockholders' equity... $75,626 $64,121
Net interest income
(tax-equivalent basis)... $2,778.4 $2,406.7
Yield spread............... 4.92 4.76
Net interest margin........ 5.63 5.58
Interest-bearing liabilities
to earning assets........ 84.14 83.30
</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.
31
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
The following exhibits are filed or incorporated by reference in
response to Item 601 of Regulation S-K.
Exhibit
No. Exhibit Page
3(a). Restated Certificate of Incorporation, as amended,
incorporated by reference to Exhibit 3(b) to the
corporation's Current Report on Form 8-K dated
June 28, 1993. Certificate of Amendment of
Certificate of Incorporation of the corporation
authorizing 4,000,000 shares of Preference Stock,
incorporated by reference to Exhibit 3 to the
corporation's Current Report on Form 8-K dated
July 3, 1995.
3(b). Certificate of Designations of powers, preferences and
rights relating to the corporation's ESOP Cumulative
Convertible Preferred Stock incorporated by reference
to Exhibit 4 to the corporation's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1994.
3(c). Certificate of Designations of powers, preferences and
rights relating to the corporation's Cumulative Tracking
Preferred Stock incorporated by reference to Exhibit 3
to the corporation's Current Report on Form 8-K dated
January 9, 1995.
3(d). Certificate of Designations of powers, preferences and
rights relating to the corporation's 1995 ESOP Cumulative
Convertible Preferred Stock incorporated by reference to
Exhibit 4 to the corporation's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995.
3(e). Certificate Eliminating the Certificate of Designations
with respect to the Cumulative Convertible Preferred Stock,
Series B, incorporated by reference to Exhibit 3(a) to the
corporation's Current Report on Form 8-K dated
November 1, 1995.
3(f). Certificate Eliminating the Certificate of Designations
with respect to the 10.24% Cumulative Preferred Stock
incorporated by reference to Exhibit 3 to the corporation's
Current Report on Form 8-K dated February 20, 1996.
3(g). Certificate of Designations of powers, preferences and
rights relating to the corporation's 1996 ESOP Cumulative
Convertible Preferred Stock incorporated by reference to
Exhibit 3 to the corporation's Current Report on Form 8-K
dated February 26, 1996.
32
<PAGE>
Exhibit
No. Exhibit Page
3(h). By-Laws, as amended, incorporated by reference to
Exhibit 4(c) to the corporation's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1991.
4(a). See 3(a) through 3(h) of this Item.
4(b). Rights Agreement dated as of November 22, 1988 between
the corporation and Citibank, N.A., incorporated by
reference to Exhibit 1 to the corporation's Form 8-A
dated November 6, 1988 and Certificates of Adjustment
pursuant to Section 16 of the Rights Agreement
incorporated by reference to Exhibit 3 to the
corporation's Form 8 dated July 21, 1989 and Exhibit 4
to the corporation's Form 8-A/A dated June 29, 1993.
4(c). 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 2,
1996, filing certain documents in connection with the offering of
Medium-Term Notes, Series J.
The corporation filed a Current Report on Form 8-K, dated July 15,
1996, reporting consolidated operating results of the corporation for
the quarter ended June 30, 1996.
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, 1996 By /s/ Michael A. Graf
Senior Vice President
and Controller
(Chief Accounting Officer)
34
<PAGE>
</TABLE>
Exhibit 11.
Norwest Corporation and Subsidiaries
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
In thousands, except per common share amounts Quarter Ended
September 30,
1996 1995
PRIMARY:
Weighted average number of common shares
outstanding ..................................... 370,635 329,149
Net effect of assumed exercise of stock options
based on treasury stock method using average
market price .................................... 3,686 2,687
374,321 331,836
Net income ........................................ $288,985 245,138
Less dividends accrued on preferred stock ........ 4,442 11,706
Net income, as adjusted .......................... $284,543 233,432
Net income per common share ...................... $ 0.76 0.70
FULLY DILUTED:
Weighted average number of common shares
outstanding ..................................... 370,635 329,149
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 ............................. 4,462 3,381
Assumed conversion of 6 3/4% convertible
subordinated debentures due 2003 ................ 17 21
Assumed conversion of Cumulative Convertible
Preferred Stock ................................. - 8,428
375,114 340,979
Net income ........................................ $288,984 245,138
Less dividends accrued on preferred stock ........ 4,440 9,091
Add 6 3/4% convertible subordinated debentures
interest and amortization of debt expense,
net of income tax effect ........................ 1 1
Net income, as adjusted .......................... $284,545 236,048
Net income per common share....................... $ 0.76 0.69
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,
1996 1995
PRIMARY:
Weighted average number of common shares
outstanding ..................................... 364,754 322,436
Net effect of assumed exercise of stock options
based on treasury stock method using average
market price .................................... 3,469 2,230
368,223 324,666
Net income ........................................ $845,773 696,264
Less dividends accrued on preferred stock ........ 13,323 32,582
Net income, as adjusted .......................... $832,450 663,682
Net income per common share ...................... $ 2.26 2.04
FULLY DILUTED:
Weighted average number of common shares
outstanding ..................................... 364,754 322,436
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 ............................. 4,348 3,538
Assumed conversion of 6 3/4% convertible
subordinated debentures due 2003 ................ 18 25
Assumed conversion of Cumulative Convertible
Preferred Stock ................................. - 11,204
369,120 337,203
Net income ........................................ $845,773 696,264
Less dividends accrued on preferred stock ........ 13,323 21,971
Add 6 3/4% convertible subordinated debentures
interest and amortization of debt expense,
net of income tax effect ........................ 3 4
Net income, as adjusted .......................... $832,453 674,297
Net income per common share....................... $ 2.26 2.01
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 1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Computation of Income:
Income before
income taxes $1,313,626 1,043,705 1,422,814 1,180,601 879,755 645,568 491,673
Capitalized interest (14) (98) (112) (69) (65) (24) -
Income before income
taxes and capitalized
interest 1,313,612 1,043,607 1,422,702 1,180,532 879,690 645,544 491,673
Fixed charges 2,003,755 1,812,879 2,503,603 1,640,049 1,485,936 1,651,664 2,187,536
Total income for
computation $3,317,367 2,856,486 3,926,305 2,820,581 2,365,626 2,297,208 2,679,209
Total income for
computation excluding
interest on deposits
from fixed charges $2,341,484 2,009,880 2,770,005 1,957,224 1,513,317 1,281,619 1,196,648
Computation of Fixed
Charges:
Net rental
expense (a) $ 145,813 123,454 166,591 149,462 128,573 123,342 111,609
Portion of rentals
deemed
representative
of interest $ 48,604 41,151 55,530 49,821 42,858 41,114 37,203
Interest:
Interest on
deposits 975,883 846,606 1,156,300 863,357 852,309 1,015,589 1,482,561
Interest on
federal funds
and other
short-term
borrowings 345,220 368,765 515,646 290,211 238,046 277,835 352,384
Interest on
long-term debt 634,034 556,259 776,015 436,591 352,658 317,102 315,388
Capitalized
interest 14 98 112 69 65 24 -
Total interest 1,955,151 1,771,728 2,448,073 1,590,228 1,443,078 1,610,550 2,150,333
Total fixed
charges $2,003,755 1,812,879 2,503,603 1,640,049 1,485,936 1,651,664 2,187,536
Total fixed
charges excluding
interest on
deposits $1,027,872 966,273 1,347,303 776,692 633,627 636,075 704,975
Ratio of Income
to Fixed Charges:
Excluding
interest on
deposits 2.28x 2.08 2.06 2.52 2.39 2.01 1.70
Including
interest on
deposits 1.66x 1.58 1.57 1.72 1.59 1.39 1.22
(a) Includes equipment rentals.
</TABLE>
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 1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Computation of Income:
Income before
income taxes $1,313,626 1,043,705 1,422,814 1,180,601 879,755 645,568 491,673
Capitalized interest (14) (98) (112) (69) (65) (24) -
Income before income
taxes and capitalized
interest 1,313,612 1,043,607 1,422,702 1,180,532 879,690 645,544 491,673
Fixed charges 2,003,755 1,812,879 2,503,603 1,640,049 1,485,936 1,651,664 2,187,536
Total income for
computation $3,317,367 2,856,486 3,926,305 2,820,581 2,365,626 2,297,208 2,679,209
Total income for
computation excluding
interest on deposits
from fixed charges $2,341,484 2,009,880 2,770,005 1,957,224 1,513,317 1,281,619 1,196,648
Computation of Fixed
Charges:
Net rental
expense (a) $ 145,813 123,454 166,591 149,462 128,573 123,342 111,609
Portion of rentals
deemed
representative
of interest $ 48,604 41,151 55,530 49,821 42,858 41,114 37,203
Interest:
Interest on
deposits 975,883 846,606 1,156,300 863,357 852,309 1,015,589 1,482,561
Interest on
federal funds
and other
short-term
borrowings 345,220 368,765 515,646 290,211 238,046 277,835 352,384
Interest on
long-term debt 634,034 556,259 776,015 436,591 352,658 317,102 315,388
Capitalized
interest 14 98 112 69 65 24 -
Total interest 1,955,151 1,771,728 2,448,073 1,590,228 1,443,078 1,610,550 2,150,333
Total fixed
charges $2,003,755 1,812,879 2,503,603 1,640,049 1,485,936 1,651,664 2,187,536
Total fixed
charges excluding
interest on
deposits $1,027,872 966,273 1,347,303 776,692 633,627 636,075 704,975
Preferred stock
dividends 13,322 32,582 41,220 27,827 31,170 32,219 20,065
Pre-tax earnings
needed to meet
preferred stock
dividend
requirements 20,691 48,841 61,349 41,044 44,728 44,367 23,997
Total combined fixed
charges and preferred
stock dividends $2,024,446 1,861,720 2,564,952 1,681,093 1,530,664 1,696,031 2,211,533
Total combined
fixed charges
and preferred stock
dividends excluding
interest on
deposits $1,048,563 1,015,114 1,408,652 817,736 678,355 680,442 728,972
(a) Includes equipment rentals.
</TABLE>
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 1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Income to Combined
Fixed Charges and Preferred
Stock Dividends:
Excluding interest on
deposits 2.23x 1.98 1.97 2.39 2.23 1.88 1.64
Including interest on
deposits 1.64x 1.53 1.53 1.68 1.55 1.35 1.21
</TABLE>
39
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1996 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-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 4242
<INT-BEARING-DEPOSITS> 27
<FED-FUNDS-SOLD> 867
<TRADING-ASSETS> 212
<INVESTMENTS-HELD-FOR-SALE> 17868
<INVESTMENTS-CARRYING> 764
<INVESTMENTS-MARKET> 782
<LOANS> 40086
<ALLOWANCE> 1034
<TOTAL-ASSETS> 78428
<DEPOSITS> 48026
<SHORT-TERM> 7993
<LIABILITIES-OTHER> 3220
<LONG-TERM> 13250
0
189
<COMMON> 626
<OTHER-SE> 5124
<TOTAL-LIABILITIES-AND-EQUITY> 78428
<INTEREST-LOAN> 3195
<INTEREST-INVEST> 899
<INTEREST-OTHER> 616
<INTEREST-TOTAL> 4710
<INTEREST-DEPOSIT> 976
<INTEREST-EXPENSE> 1955
<INTEREST-INCOME-NET> 2755
<LOAN-LOSSES> 281
<SECURITIES-GAINS> (56)
<EXPENSE-OTHER> 2987
<INCOME-PRETAX> 1314
<INCOME-PRE-EXTRAORDINARY> 1314
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 846
<EPS-PRIMARY> 2.26
<EPS-DILUTED> 2.26
<YIELD-ACTUAL> 5.63
<LOANS-NON> 184
<LOANS-PAST> 122
<LOANS-TROUBLED> 1
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 917
<CHARGE-OFFS> 359
<RECOVERIES> 90
<ALLOWANCE-CLOSE> 1034
<ALLOWANCE-DOMESTIC> 697
<ALLOWANCE-FOREIGN> 31
<ALLOWANCE-UNALLOCATED> 306
</TABLE>
