SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 13, 1997
NORWEST CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-2979 41-0449260
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 612-667-1234
<PAGE>
ITEM 5. Other Events.
RECENT OPERATING RESULTS
Norwest Corporation's ("Norwest") net income for the quarter ended
September 30, 1997 was $341.6 million, or 44 cents per fully diluted common
share, an increase of 18.2 percent and 15.8 percent, respectively, over the
$289.0 million, or 38 cents per fully diluted common share, earned in the
third quarter of 1996. The per common share results have been restated to
reflect the two-for-one split of the outstanding shares of common stock of
Norwest effected in the form of a 100 percent stock dividend distributed on
October 10, 1997. Return on realized common equity was 22.2 percent and
return on assets was 1.64 percent for the third quarter of 1997, compared with
21.0 percent and 1.48 percent, respectively, in the same period of 1996.
For the first nine months of 1997, net income was $994.9 million, or $1.29 per
fully diluted common share, an increase of 17.6 percent and 14.2 percent,
respectively, over the $845.8 million, or $1.13 per fully diluted common
share, earned in the first nine months of 1996. Return on realized common
equity was 22.3 percent and return on assets was 1.63 percent for the first
nine months of 1997, compared with 21.9 percent and 1.49 percent,
respectively, in the same period a year ago.
Consolidated net interest income in the third quarter of 1997 was $1,022.6
million, compared with $947.7 million in the third quarter of 1996, an
increase of 7.9 percent. The improvement from the third quarter of 1996 was
principally due to a 5.9 percent growth in average earning assets and a 15
basis point increase in net interest margin from 5.66 percent to 5.81 percent.
Net interest income increased 8.2 percent to $2,980.7 million for the first
nine months of 1997, compared with the same period in 1996. The improvement
from the first nine months of 1996 was due to a 7.0 percent growth in average
earning assets and a nine basis point increase in net interest margin.
Norwest provided $146.7 million for credit losses in the third quarter of
1997, or 143 basis points of average loans and leases on an annualized basis,
including $16.0 million, or 16 basis points, of one-time provision for credit
losses related to the acquisition of Fidelity Acceptance Corporation. This
compares with $105.9 million, or 107 basis points, in the same period a year
ago. Net credit losses totaled $125.5 million in the third quarter of 1997,
up from $99.4 million in the third quarter of 1996. As a percent of average
loans and leases, net credit losses were 122 basis points in the third quarter
of 1997, compared with 100 basis points in the same period a year ago. For
the first nine months of 1997, Norwest's provision for credit losses amounted
to $378.5 million, or 125 basis points of average loans and leases on an
annualized basis, compared with $281.1 million, or 98 basis points, for the
same period of 1996. Net credit losses as a percent of average loans and
leases were 117 basis points in the first nine months of 1997, compared with
94 basis points in the same period of 1996. Excluding the $16.0 million
special acquisition charge described below, the increase in the provision for
credit losses for the three and nine months ending September 30, 1997 over the
-2-
<PAGE>
comparable periods of 1996 relates to higher levels of charge-offs in regions
which have had acquisitions and to higher consumer credit charge-offs.
Non-performing assets totaled $229.7 million at September 30, 1997, an
increase of $29.7 million from year-end 1996. As a percent of loans, leases
and other real estate owned, non-performing assets were 0.55 percent at
September 30, 1997, compared with 0.58 percent at the same time last year.
Reserve coverage of non-performing assets was 520.9 percent at September 30,
1997, and the allowance for credit losses was 2.87 percent of loans and
leases.
Consolidated non-interest income was $753.4 million in the third quarter of
1997, an increase of $121.6 million, or 19.2 percent, from the third quarter
of 1996. Contributing to the 1997 increase was continued growth in trust,
fees and service charges, mortgage banking, insurance, and investment
securities and venture capital gains. For the first nine months of 1997,
consolidated non-interest income was up $367.9 million to $2,194.4 million, an
increase of 20.1 percent over 1996. The increase was due to higher revenues
in essentially all categories.
Consolidated non-interest expenses were $1,111.3 million in the third quarter
of 1997, an increase of 7.6 percent from the third quarter of 1996. For the
first nine months of 1997, non-interest expenses increased $285.8 million, or
9.6 percent, over the same period of 1996. Prior year non-interest expenses
include a $19.0 million charge recorded in the third quarter of 1996 related
to recapitalization of the Savings Association Insurance Fund (SAIF).
Excluding the SAIF charge, increases in non-interest expenses for the three
and nine months ended September 30, 1997 over the comparable periods of 1996
primarily reflect increased operating expenses and one-time charges related to
acquisitions.
Norwest's Banking Group reported earnings of $254.8 million in the third
quarter of 1997, 34.3 percent above third quarter 1996 earnings of $189.6
million. The increased earnings from third quarter 1996 was the result of
higher fee income, and investment securities and venture capital gains. Also,
as discussed above, 1996 results also include a SAIF recapitalization charge.
For the first nine months of 1997, the Banking Group's earnings were $711.0
million, an increase of 26.9 percent over the $560.1 million earned in the
first nine months of 1996. At September 30, 1997, Norwest Venture Capital had
net unrealized appreciation in its investment portfolio of $195.6 million.
Mortgage Banking earned $37.7 million in the quarter ended September 30, 1997,
compared with $31.8 million in the third quarter of 1996. Net gains on sales
of mortgages and servicing rights in the third quarter of 1997 amounted to
$13.2 million, compared with $6.0 million in the same quarter last year. The
pipeline of unclosed mortgage loans was $11.5 billion at September 30, 1997,
compared with $7.9 billion at September 30, 1996 and $7.7 billion at December
31, 1996. Mortgage loan originations were $15.7 billion in the third quarter
of 1997, compared with $13.2 billion in the third quarter of 1996. The
servicing portfolio increased $21.9 billion from the third quarter of 1996 and
$18.5 billion from year-end 1996, and at September 30, 1997, totaled $198.2
billion with a weighted average interest rate of 7.77 percent. Capitalized
mortgage servicing rights amounted to $2.8 billion, or 139 basis points of the
mortgage servicing portfolio at September 30, 1997. Amortization of
capitalized mortgage servicing rights was $104.9 million for the quarter ended
-3-
<PAGE>
September 30, 1997, compared with $94.3 million for the quarter ended
September 30, 1996. For the first nine months of 1997, Mortgage Banking's
earnings were $106.8 million, an increase of 15.0 percent over the $92.9
million earned in the first nine months of 1996.
Norwest Financial reported third quarter 1997 net income of $49.1 million.
Such results include $27.3 million in non-recurring pre-tax acquisition
charges related to Norwest's acquisition of Fidelity Acceptance Corporation
during the quarter. Fidelity is an automobile finance company with $1.1
billion in receivables with 150 locations in 31 states and Guam, managed by
Norwest Financial. These acquisition charges include $16.0 million to conform
Fidelity's credit policies with those of Norwest. Excluding the special
acquisition charges, Norwest Financial's operating earnings were $194.9
million for the first nine months of 1997, compared with $192.8 million for
the same period in 1996. An increase in net interest income due to a 6.5
percent increase in average receivables was offset by a higher provision for
credit losses. For the first nine months of 1997, Norwest Financial's net
charge-offs as a percentage of average loans was 3.48 percent, compared with
3.07 percent in the comparable period of 1996.
At September 30, 1997, consolidated total assets were $85.3 billion, compared
with $80.2 billion at December 31, 1996. Consolidated loans and leases, net
of unearned discount, increased 6.0 percent from December 31, 1996, and
totaled $41.7 billion at September 30, 1997. Consolidated total deposits were
$52.5 billion at September 30, 1997, compared with $50.1 billion at December
31, 1996. Consolidated long-term debt at September 30, 1997, was $12.7
billion, compared with $13.1 billion at year-end 1996. Consolidated
stockholders' equity was $6.8 billion at September 30, 1997, compared with
$6.1 billion at December 31, 1996. Tier 1 and total capital ratios were 9.08
percent and 10.98 percent, respectively, at September 30, 1997, compared with
8.63 percent and 10.42 percent, respectively, at December 31, 1996. The
leverage ratio was 6.60 percent at September 30, 1997, and 6.15 percent at
December 31, 1996. After adjustment for the two-for-one stock split,
dividends declared per common share were 15 cents for the third quarter of
1997, compared with 13.5 cents for the same period of 1996. The dividend
payout ratio was 34.1 percent and 35.5 percent for the three months ended
September 30, 1997, and 1996, respectively.
-4-
<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 hereunto duly authorized.
Norwest Corporation
(Registrant)
Dated: October 22, 1997 By: \s\ Michael A. Graf
Senior Vice President and
Corporate Controller
(Principal Accounting Officer)
-5-
