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, 1997
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, 1997 755,315,646 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, 1997 and December 31, 1996..................... 3
2. Consolidated Statements of Income -
Quarters and Nine Months Ended September 30, 1997 and 1996... 4
3. Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996................ 5
4. Consolidated Statements of Stockholders' Equity -
Nine Months Ended September 30, 1997 and 1996................ 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,
1997 1996
ASSETS
Cash and due from banks ...................... $ 4,346.3 4,856.6
Interest-bearing deposits with banks ......... 47.6 1,237.9
Federal funds sold and resale agreements ..... 418.1 1,276.8
Total cash and cash equivalents .......... 4,812.0 7,371.3
Trading account securities ................... 391.3 186.5
Investment and mortgage-backed securities
available for sale ......................... 19,131.4 16,247.1
Investment securities (fair value
$723.8 in 1997 and $745.2 in 1996) ......... 704.0 712.2
Total investment securities .............. 19,835.4 16,959.3
Loans held for sale .......................... 3,155.4 2,827.6
Mortgages held for sale ...................... 7,503.3 6,339.0
Loans and leases, net of unearned discount ... 41,728.1 39,381.0
Allowance for credit losses .................. (1,196.4) (1,040.8)
Net loans and leases ..................... 40,531.7 38,340.2
Premises and equipment, net .................. 1,257.4 1,200.9
Mortgage servicing rights, net ............... 2,750.3 2,648.5
Interest receivable and other assets ......... 5,015.4 4,302.1
Total assets ............................. $85,252.2 80,175.4
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing ........................ $15,299.1 14,296.3
Interest-bearing ........................... 37,233.8 35,833.9
Total deposits ........................... 52,532.9 50,130.2
Short-term borrowings ........................ 9,275.8 7,572.6
Accrued expenses and other liabilities ....... 3,969.1 3,326.2
Long-term debt ............................... 12,651.4 13,082.2
Total liabilities ........................ 78,429.2 74,111.2
Preferred stock .............................. 273.9 249.8
Unearned ESOP shares ......................... (86.1) (61.0)
Total preferred stock .................... 187.8 188.8
Common stock, $1 2/3 par value - authorized
1,000,000,000 shares:
Issued 762,219,912 and 751,067,250 shares
in 1997 and 1996, respectively ............ 1,270.4 625.9
Surplus ...................................... 378.8 948.6
Retained earnings ............................ 4,808.4 4,248.2
Net unrealized gains on securities
available for sale ......................... 445.2 303.5
Notes receivable from ESOP ................... (10.1) (11.1)
Treasury stock - 11,125,066 and 13,661,838
common shares in 1997 and 1996, respectively (250.0) (233.3)
Foreign currency translation ................. (7.5) (6.4)
Total common stockholders' equity ........ 6,635.2 5,875.4
Total stockholders' equity ............... 6,823.0 6,064.2
Total liabilities and
stockholders' equity ................... $85,252.2 80,175.4
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,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
INTEREST INCOME ON
Loans and leases ................................ $1,153.1 1,100.8 3,364.2 3,195.0
Investment and mortgage-backed securities
available for sale ............................. 326.1 312.0 1,016.4 871.1
Investment securities ........................... 6.9 8.7 21.0 27.6
Loans held for sale ............................. 56.2 48.6 168.3 201.8
Mortgages held for sale ......................... 128.5 125.1 324.0 366.8
Money market investments ........................ 8.9 9.6 39.4 27.4
Trading account securities ...................... 13.2 6.3 28.5 20.4
Total interest income ....................... 1,692.9 1,611.1 4,961.8 4,710.1
INTEREST EXPENSE ON
Deposits ........................................ 360.7 339.7 1,075.4 975.9
Short-term borrowings ........................... 112.0 117.8 327.1 345.2
Long-term debt .................................. 197.6 205.9 578.6 634.0
Total interest expense ...................... 670.3 663.4 1,981.1 1,955.1
Net interest income ....................... 1,022.6 947.7 2,980.7 2,755.0
Provision for credit losses ..................... 146.7 105.9 378.5 281.1
Net interest income after
provision for credit losses ............. 875.9 841.8 2,602.2 2,473.9
NON-INTEREST INCOME
Trust ........................................... 89.6 73.5 261.8 217.7
Service charges on deposit accounts ............. 97.1 84.9 280.6 239.8
Mortgage banking ................................ 224.7 203.5 623.8 596.2
Data processing ................................. 18.3 19.0 54.7 54.6
Credit card ..................................... 32.4 27.7 88.2 89.1
Insurance ....................................... 75.3 68.4 260.4 211.4
Other fees and service charges .................. 105.6 69.1 285.8 214.3
Net investment securities losses ................ (0.3) - - -
Net investment and mortgage-backed securities
available for sale gains (losses) .............. 15.7 (12.4) 19.9 (56.5)
Net venture capital gains ....................... 52.8 35.7 165.3 167.7
Trading ......................................... 12.7 21.2 64.9 25.2
Other ........................................... 29.5 41.2 89.0 67.0
Total non-interest income ................... 753.4 631.8 2,194.4 1,826.5
NON-INTEREST EXPENSES
Salaries and benefits ........................... 608.0 539.0 1,724.5 1,559.4
Net occupancy ................................... 82.0 88.5 241.6 230.4
Equipment rentals, depreciation and maintenance . 81.8 79.2 247.5 233.3
Business development ............................ 63.3 56.8 185.4 166.9
Communication ................................... 73.4 73.3 216.2 209.9
Data processing ................................. 39.6 47.6 127.0 120.6
Intangible asset amortization ................... 42.5 44.0 125.9 116.6
Other ........................................... 120.7 104.0 404.4 349.6
Total non-interest expenses ................. 1,111.3 1,032.4 3,272.5 2,986.7
INCOME BEFORE INCOME TAXES ...................... 518.0 441.2 1,524.1 1,313.7
Income tax expense .............................. 176.4 152.2 529.2 467.9
NET INCOME ...................................... $ 341.6 289.0 994.9 845.8
Average common and common equivalent shares ..... 758.5 748.6 758.0 736.4
PER COMMON SHARE
Net Income
Primary ....................................... $ 0.44 0.38 1.29 1.13
Fully diluted ................................. 0.44 0.38 1.29 1.13
Dividends ...................................... 0.150 0.135 0.450 0.390
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
In millions September 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income ............................................................$ 994.9 845.8
Adjustments to reconcile net income to net cash flows from operating
activities:
Provision for credit losses ....................................... 378.5 281.1
Depreciation and amortization ..................................... 603.3 489.7
Gains on sales of loans, securities and other assets, net ......... (279.9) (120.8)
Release of preferred shares to ESOP ............................... 27.6 30.4
Purchases of trading account securities ........................... (73,819.7) (53,003.0)
Proceeds from sales of trading account securities ................. 73,690.0 52,966.5
Originations of mortgages held for sale ........................... (38,729.2) (40,460.5)
Proceeds from sales of mortgages held for sale .................... 37,603.2 44,177.5
Originations of loans held for sale ............................... (989.5) (954.9)
Proceeds from sales of loans held for sale ........................ 648.8 1,610.4
Interest receivable ............................................... (64.2) (29.4)
Interest payable .................................................. 23.9 26.2
Other assets, net ................................................. (843.1) (551.5)
Other accrued expenses and liabilities, net ....................... 335.8 367.6
Net cash flows from (used for) operating activities ............. (419.6) 5,675.1
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and paydowns of investment securities ...... 0.5 78.7
Proceeds from maturities and paydowns of investment and mortgage-
backed securities available for sale .............................. 1,928.2 2,189.5
Proceeds from sales and calls of investment securities .............. 82.4 5.9
Proceeds from sales and calls of investment and mortgage-backed
securities available for sale ..................................... 7,822.3 3,296.1
Purchases of investment securities .................................. (120.8) (300.0)
Purchases of investment and mortgage-backed securities available
for sale .......................................................... (11,368.4) (6,442.0)
Net change in banking subsidiaries' loans and leases ................ (284.4) 1,166.5
Non-bank subsidiaries' loans and leases originated .................. (7,218.5) (5,062.8)
Principal collected on non-bank subsidiaries' loans and leases ...... 7,090.8 3,394.5
Purchases of premises and equipment ................................. (227.1) (180.6)
Proceeds from sales of premises, equipment & other real estate owned 82.5 68.1
Cash paid for acquisitions, net of cash and cash equivalents acquired (229.9) (2,495.8)
Divestiture of branches, net of cash and cash equivalents paid - (23.7)
Net cash flows used for investing activities ...................... (2,442.4) (4,305.6)
CASH FLOWS FROM FINANCING ACTIVITIES
Deposits, net ....................................................... 576.3 622.0
Short-term borrowings, net .......................................... 1,354.0 (655.1)
Long-term debt borrowings ........................................... 2,473.5 2,674.0
Repayments of long-term debt ........................................ (3,512.0) (3,272.1)
Issuances of common stock ........................................... 111.3 69.7
Repurchases of common stock ......................................... (351.1) (209.8)
Repurchases of preferred stock ...................................... - (112.7)
Net decrease in notes receivable from ESOP .......................... 1.0 2.3
Dividends paid ...................................................... (350.3) (298.8)
Net cash flows from (used for) financing activities ............... 302.7 (1,180.5)
Net increase (decrease) in cash and cash equivalents .............. (2,559.3) 189.0
CASH AND CASH EQUIVALENTS
Beginning of period ................................................. 7,371.3 4,946.5
End of period .......................................................$ 4,812.0 5,135.5
</TABLE>
See notes to unaudited consolidated financial statements.
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, 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
1,647,828 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 6,054,966
common shares.......... - - - 37.4 (44.2) - - 91.0 - 84.2
Issuance of 38,835,772
common shares for
acquisitions........... - - 28.7 165.9 72.3 (1.5) (1.4) 71.1 - 335.1
Repurchase of 11,374,382
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
</TABLE>
(Continued on page 7)
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, 1996...... $ 249.8 (61.0) 625.9 948.6 4,248.2 303.5 (11.1) (233.3) (6.4) 6,064.2
Net income.............. - - - - 994.9 - - - - 994.9
Dividends on
Common stock.......... - - - - (337.0) - - - - (337.0)
Preferred stock....... - - - - (13.3) - - - - (13.3)
Stock split............. - - 635.2 (635.2) - - - - - -
Conversion of 27,572
preferred shares to
1,044,696 common
shares................ (27.6) - - 3.9 - - - 23.7 - -
Cash payments received
on notes receivable
from ESOP............. - - - - - - 1.0 - - 1.0
Issuance of 51,700
preferred shares to
ESOP.................. 51.7 (53.8) - 2.1 - - - - - -
Release of preferred
shares to ESOP........ - 28.7 - (1.1) - - - - - 27.6
Issuance of 10,529,358
common shares......... - - - 61.5 (128.2) - - 226.5 - 159.8
Issuance of 15,157,890
common shares for
acquisitions.......... - - 9.3 (1.9) 43.8 1.0 - 85.1 - 137.3
Repurchase of 13,042,510
common shares......... - - - 0.9 - - - (352.0) - (351.1)
Change in net unrealized
gains (losses) on
securities available
for sale.............. - - - - - 140.7 - - - 140.7
Foreign currency
translation........... - - - - - - - - (1.1) (1.1)
Balance,
September 30, 1997.... $ 273.9 (86.1) 1,270.4 378.8 4,808.4 445.2 (10.1) (250.0) (7.5) 6,823.0
</TABLE>
See notes to unaudited consolidated financial statements.
7
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Changes in Accounting Policies
Effective January 1, 1997, the corporation adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" (FAS 125). FAS 125
sets forth the criteria for determining whether a transfer of financial
assets should be accounted for as a sale or as a pledge of collateral in a
secured borrowing. FAS 125 requires that after a transfer of financial
assets, a company must recognize the financial and servicing assets
controlled and liabilities incurred, and derecognize financial assets and
liabilities in which control is surrendered or debt is extinguished. The
adoption of FAS 125 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 1997 1996
Interest...................................... $1,957.2 1,928.9
Income taxes.................................. 300.9 41.9
Transfer of loans to other real estate owned.. 35.9 35.0
See Notes 7 and 12 for certain non-cash common and preferred stock
transactions.
8
<PAGE>
3. Investment Securities
The amortized cost and fair value of investment securities at
September 30, 1997 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 .. $ 1,827.3 38.0 (7.4) 1,857.9
State, municipal and housing -
tax exempt ......................... 1,403.2 74.2 (3.1) 1,474.3
Other ............................... 763.6 285.1 (10.0) 1,038.7
Total investment securities
available for sale .............. 3,994.1 397.3 (20.5) 4,370.9
Mortgage-backed securities:
Federal agencies ................... 14,240.1 336.9 (15.0) 14,562.0
Collateralized mortgage
obligations ....................... 191.5 9.7 (2.7) 198.5
Total mortgage-backed securities
available for sale .............. 14,431.6 346.6 (17.7) 14,760.5
Total investment and
mortgage-backed securities
available for sale .................. 18,425.7 743.9 (38.2) 19,131.4
Other securities held for investment . 704.0 21.1 (1.3) 723.8
Total investment securities ........ $19,129.7 765.0 (39.5) 19,855.2
</TABLE>
Interest income on investment securities for the quarters and nine months ended
September 30, was:
Quarter Nine Months
In millions 1997 1996 1997 1996
Available for sale:
U.S. Treasury and federal agencies .. $ 32.4 22.7 128.9 59.8
State, municipal and housing -
tax exempt ........................ 19.6 13.5 54.2 39.3
Other ............................... 11.7 12.2 35.9 35.2
Total investment securities
available for sale .............. 63.7 48.4 219.0 134.3
Mortgage-backed securities:
Federal agencies ................... 257.5 259.4 784.1 726.9
Collateralized mortgage
obligations ....................... 4.9 4.2 13.3 9.9
Total mortgage-backed securities
available for sale .............. 262.4 263.6 797.4 736.8
Total investment and mortgage-backed
securities available for sale ...... 326.1 312.0 1,016.4 871.1
Other securities held for investment . 6.9 8.7 21.0 27.6
Total investment securities ........ $ 333.0 320.7 1,037.4 898.7
Certain investment securities held for investment with a total amortized
cost of $38.7 million and $82.4 million for the three and nine months ended
September 30, 1997, respectively, and $0.4 million and $5.9 million for the
three and nine months ended September 30, 1996, respectively, were either
sold by the corporation due to significant deterioration in the
creditworthiness of the related issuers or called by the issuers prior to
maturity. The sales and calls of investment securities resulted in a loss
of $0.3 million for the quarter, and no gain or loss for the nine months
ended September 30, 1997. Sales and calls of investment securities held
for investment resulted in no gain or loss for the quarter and nine months
ended September 30, 1996.
9
<PAGE>
4. Loans and Leases
The carrying values of loans and leases at September 30, 1997 and
December 31, 1996 were:
In millions September 30, December 31,
1997 1996
Commercial, financial and industrial ..... $10,369.3 10,204.9
Agricultural ............................. 1,229.6 1,107.7
Real estate
Secured by 1-4 family residential
properties ........................... 10,724.4 10,376.3
Secured by development properties ...... 2,125.3 2,104.5
Secured by construction and land
development .......................... 982.3 943.8
Secured by owner-occupied properties ... 2,800.4 2,644.6
Consumer ................................. 12,135.9 10,431.2
Credit card .............................. 1,561.8 1,566.2
Lease financing .......................... 862.5 812.4
Foreign
Consumer ............................... 847.3 774.9
Commercial ............................. 212.6 187.7
Total loans and leases ............... 43,851.4 41,154.2
Unearned discount ........................ (2,123.3) (1,773.2)
Total loans and leases, net of
unearned discount .................... $41,728.1 39,381.0
Changes in the allowance for credit losses for the quarters and nine months
ended September 30, were:
Quarter Nine Months
In millions 1997 1996 1997 1996
Balance at beginning of period ....... $1,071.1 1,008.9 1,040.8 917.2
Allowance related to assets
acquired, net ..................... 104.1 18.4 129.4 104.3
Provision for credit losses ........ 146.7 105.9 378.5 281.1
Credit losses ...................... (159.2) (129.4) (462.9) (358.5)
Recoveries ......................... 33.7 30.0 110.6 89.7
Net credit losses ................ (125.5) (99.4) (352.3) (268.8)
Balance at end of period ............. $1,196.4 1,033.8 1,196.4 1,033.8
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, 1997 and 1996 and December 31, 1996 were:
In millions September 30, December 31,
1997 1996 1996
Impaired loans
Non-accrual ........................... $ 94.5 117.4 94.0
Restructured .......................... 0.1 0.6 0.2
Total impaired loans ................ 94.6 118.0 94.2
Other non-accrual loans and leases ...... 94.3 66.6 62.5
Total non-accrual and
restructured loans and leases ........ 188.9 184.6 156.7
Other real estate owned ................. 40.8 46.4 43.3
Total non-performing assets ........... 229.7 231.0 200.0
Loans and leases past due 90 days or more* 121.0 121.9 110.7
Total non-performing assets and
90-day past due loans and leases ..... $ 350.7 352.9 310.7
* Excludes non-accrual and restructured loans and leases.
The average balances of impaired loans for the nine months ended September 30,
1997 and 1996 were $107.2 million and $114.4 million, respectively. The
allowance for credit losses related to impaired loans at September 30, 1997 and
December 31, 1996 was $31.0 million and $31.4 million, respectively. Impaired
loans of $2.1 million and $0.9 million were not subject to a related allowance
for credit losses at September 30, 1997 and December 31, 1996, respectively,
because of the net realizable value of loan collateral, guarantees and other
factors.
The effect of non-accrual and restructured loans on interest income for the
quarters and nine months ended September 30, was:
Quarter Nine Months
In millions 1997 1996 1997 1996
Interest
As originally contracted ........... $ 3.8 9.8 15.1 20.0
As recognized ...................... (1.3) (4.1) (2.7) (6.1)
Reduction of interest income ..... $ 2.5 5.7 12.4 13.9
6. Long-term Debt
During the first nine months of 1997, the corporation issued $200 million in
medium-term notes bearing a fixed interest rate of 6.75 percent, which mature
in June 2007. Also, during the first nine months of 1997, certain
subsidiaries of the corporation received advances from the Federal Home Loan
Bank. Advances of $1,020 million were issued bearing interest at rates
ranging from one-month LIBOR less 17 basis points to three-month LIBOR less
seven basis points, and which mature between December, 1997 and September,
2000. Advances maturing within the next year are expected to be refinanced,
extending the maturity of such borrowings beyond one year. Norwest Financial,
Inc. and its subsidiaries issued $1,250 million in senior notes in the first
nine months of 1997 bearing interest at fixed rates ranging from 4.90 percent
to 7.20 percent, which mature from March 2000 to May 2007.
11
<PAGE>
7. Stockholders' Equity
The table below is a summary of the corporation's preferred and preference
stock at September 30, 1997 and December 31, 1996. 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 1996
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,
1997 1996 1997 1997 1996
<S> <C> <C> <C> <C> <C>
Cumulative
Tracking, $200
stated value .............. 980,000 980,000 9.30% $196.0 196.0
1997 ESOP Cumulative
Convertible, $1,000 stated
value ..................... 28,032 - 9.50% 28.0 -
1996 ESOP Cumulative
Convertible, $1,000 stated
value ..................... 23,260 24,469 8.50% 23.3 24.5
1995 ESOP Cumulative
Convertible, $1,000 stated
value ..................... 21,177 22,716 10.00% 21.2 22.7
ESOP Cumulative Convertible,
$1,000 stated value ....... 10,438 11,594 9.00% 10.4 11.6
Less: Cumulative
Tracking shares held by
a subsidiary .............. (25,000) (25,000) (5.0) (5.0)
1,037,907 1,013,779 273.9 249.8
Unearned ESOP shares ........ (86.1) (61.0)
Total preferred stock ... $187.8 188.8
</TABLE>
On February 24, 1997, the corporation issued 51,700 shares of 1997 ESOP
Cumulative Convertible Preferred Stock, $1,000 stated value per share ("1997
ESOP Preferred Stock"), in the stated amount of $51.7 million at a premium of
$2.1 million; a corresponding charge of $53.8 million was recorded to unearned
ESOP shares.
During the quarter and nine months ended September 30, 1997, 8,327 and 27,572
shares of ESOP Preferred Stock were converted into 273,024 and 1,044,696
shares, respectively, of common stock of the corporation. During the quarter
and nine months ended September 30, 1996, 7,817 and 30,466 shares of ESOP
Preferred Stock were converted into 388,838 shares and 1,647,828 shares,
respectively, of common stock of the corporation.
On September 23, 1997, the corporation's board of directors declared a two-
for-one stock split of the common shares to be effected in the form of a 100
percent stock dividend, payable on October 10, 1997, to stockholders of record
on October 2, 1997. The stock split resulted in an increase in common stock
of 381,109,956 shares and was accounted for by a transfer of $635.2 million to
common stock from surplus. All prior year common share and per share
disclosures have been restated to reflect the stock split.
12
<PAGE>
On July 10, 1997, the market value of the corporation's common stock closed
above the vesting price for options granted July 23, 1996 under the
corporation's Best Practices PartnerShares Plan, a broad-based employee stock
option plan. Of 3.8 million options which vested, 1.8 million had been
exercised as of September 30, 1997. On September 23, 1997, the corporation's
board of directors approved the second stock option grant under this plan to
eligible employees. Options for approximately 21.9 million common shares were
granted at an exercise price of $31.34 per share. The options under the
second grant are generally exercisable upon the earlier of September 24, 2002,
or the first date the closing market value of the corporation's common stock
equals or exceeds $60 per share.
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, 1996 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
1997 1996 1997 1996
Revenues:*
Banking ................ $ 1,555.4 1,417.7 4,655.2 4,172.7
Mortgage Banking ....... 400.9 378.7 1,092.4 1,048.9
Norwest Financial ...... 490.0 446.5 1,408.6 1,315.0
Total ................ $ 2,446.3 2,242.9 7,156.2 6,536.6
Organizational earnings:*
Banking ................ $ 254.8 189.6 711.0 560.1
Mortgage Banking ....... 37.7 31.8 106.8 92.9
Norwest Financial ...... 49.1 67.6 177.1 192.8
Total ................ $ 341.6 289.0 994.9 845.8
Total assets:
Banking ................ $61,283.5 59,261.2
Mortgage Banking ....... 13,737.8 10,499.5
Norwest Financial ...... 10,230.9 8,666.9
Total ................ $85,252.2 78,427.6
* 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 1997 1996 1997 1996
Origination and other
closing fees ............ $ 86.2 79.2 222.6 240.1
Servicing fees ............ 79.5 79.9 220.3 207.4
Net gains (losses) on sales
of servicing rights ..... (2.4) 1.7 (4.8) 41.5
Net gains on
sales of mortgages ...... 15.6 4.3 61.6 1.2
Other ..................... 45.8 38.4 124.1 106.0
Total mortgage banking
non-interest income ... $224.7 203.5 623.8 596.2
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The outstanding balances of serviced loans were
$198.2 billion and $176.3 billion at September 30, 1997 and 1996,
respectively, and $179.7 billion at December 31, 1996.
Changes in capitalized mortgage servicing rights for the quarters and nine
months ended September 30, were:
Quarter Nine Months
In millions 1997 1996 1997 1996
Balance at beginning
of period ............ $2,783.8 2,566.6 2,712.7 1,290.9
Originations ........... 93.7 88.9 253.5 272.9
Purchases and other
additions ............ 127.8 140.4 236.4 1,365.9
Sales .................. (17.0) (10.0) (34.4) (27.4)
Amortization ........... (104.9) (94.3) (322.1) (210.4)
Other .................. (68.9) (7.8) (31.6) (8.1)
2,814.5 2,683.8 2,814.5 2,683.8
Less valuation allowance (64.2) (64.2) (64.2) (64.2)
Balance at end of period . $2,750.3 2,619.6 2,750.3 2,619.6
The fair value of capitalized mortgage servicing rights at September 30, 1997
was approximately $3.2 billion, calculated using discount rates ranging from
500 to 700 basis points over the ten-year U.S. Treasury rate.
There were no changes in the valuation allowance for capitalized mortgage
servicing rights during the quarters and nine months ended September 30, 1997
and 1996.
14
<PAGE>
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 1997 1996 1997 1996
Interest income:
Securities .............................. $ 13.2 6.3 28.5 20.4
Non-interest income:
Gains(losses) on securities sold ........ 13.3 10.4 44.9 (4.4)
Swaps and other interest rate contracts . 0.8 (0.1) 1.4 23.1
Foreign exchange trading ................ 3.3 2.1 10.9 6.3
Options ................................. 1.1 8.1 4.9 (1.2)
Futures ................................. (5.8) 0.7 2.8 1.4
Total non-interest income ............. 12.7 21.2 64.9 25.2
Total trading revenues .................... $ 25.9 27.5 93.4 45.6
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, 1996
for a detailed description of derivative products utilized in end-user
activities.
Interest rate swaps generally involve the exchange of fixed and floating rate
interest payments based on an underlying notional amount. Generic swaps'
notional amounts do not change for the life of the contract. The rate of
return on the amortizing swaps is the underlying coupon yield, paydown
adjustment and price characteristics of an amortizing pool of mortgages or
mortgage-backed securities. Basis swaps are contracts where the corporation
receives an amount and pays an amount based on different floating indices.
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, 1997, end-user derivative activities
decreased interest income by $1.1 million and interest expense by $61.4
million, for a total benefit to net interest income of $60.3 million. For the
same period in 1996, the total benefit to net interest income was $51.0
million.
Activity in the notional amounts of end-user derivatives for the nine months
ended September 30, 1997 is summarized as follows:
<TABLE>
<CAPTION>
In millions December 31, Amortization September 30,
1996 Additions & Maturities Terminations 1997
<S> <C> <C> <C> <C> <C>
Swaps:
Generic receive fixed ..... $ 4,602 1,003 (650) (339) 4,616
Amortizing receive fixed .. 83 3,261 (37) (80) 3,227
Generic pay fixed ......... 354 15 (2) (150) 217
Basis ..................... 29 - - - 29
Total swaps ............. 5,068 4,279 (689) (569) 8,089
Interest rate caps
and floors ................ 15,977 7,000 - (5,100) 17,877
Futures contracts ........... 3,617 23,789 - (22,549) 4,857
Options on futures contracts. 5,559 46,954 (11,876) (27,481) 13,156
Security options ............ 825 3,415 (2,615) (900) 725
Total ....................... $ 31,046 85,437 (15,180) (56,599) 44,704
</TABLE>
Deferred gains and losses on closed end-user derivatives were not material at
September 30, 1997 and December 31, 1996.
A key assumption in the information which follows is that rates remain
constant at September 30, 1997 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:
Dollars in millions
<TABLE>
<CAPTION>
Maturity
There-
September 30, 1997 1997 1998 1999 2000 2001 after Total
<S> <C> <C> <C> <C> <C> <C> <C>
Swaps:
Generic receive fixed-
Notional value ........$ - 650 766 400 500 2,300 4,616
Weighted avg.
receive rate ........ -% 6.34% 7.28 6.17 6.35 6.57 6.60
Weighted avg. pay rate -% 5.74% 5.87 5.73 5.71 5.71 5.74
Amortizing receive fixed-
Notional value ........$ - - 1,975 1,252 - - 3,227
Weighted avg.
receive rate ........ -% - 7.46 6.41 - - 7.05
Weighted avg. pay rate -% - 5.64 5.69 - - 5.66
Generic pay fixed-
Notional value ........$ - - - - 7 210 217
Weighted avg.
receive rate ........ -% - - - 5.68 5.72 5.72
Weighted avg. pay rate -% - - - 6.33 5.86 5.87
Basis-
Notional value ........$ - 29 - - - - 29
Weighted avg.
receive rate ........ -% 4.41 - - - - 4.41
Weighted avg. pay rate -% 2.99 - - - - 2.99
Interest rate caps and
floors (1):
Notional value ........$ - 527 400 3,700 5,250 8,000 17,877
Futures contracts (1):
Notional value ........$ 4,857 - - - - - 4,857
Options on futures
contracts (1):
Notional value ........$ 9,961 3,195 - - - - 13,156
Security options (1)
Notional value ........$ 725 - - - - - 725
Total notional value ....$15,543 4,401 3,141 5,352 5,757 10,510 44,704
Total weighted avg.
rates on swaps:
Receive rate ........ -% 6.25 7.41 6.35 6.34 6.50 6.75
Pay rate ............ -% 5.63 5.70 5.70 5.71 5.72 5.70
</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, 1997.
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, 1997 Securities Leases Rights Deposits Debt Total
<S> <C> <C> <C> <C> <C> <C>
Swaps:
Pay variable
Unrealized gains ........ $ - - 13.3 57.7 61.2 132.2
Unrealized (losses) ..... - - - - (12.2) (12.2)
Pay variable net ........ - - 13.3 57.7 49.0 120.0
Pay fixed
Unrealized gains ........ - 0.8 - 2.8 - 3.6
Unrealized (losses) ..... - - - - - -
Pay fixed net ........... - 0.8 - 2.8 - 3.6
Basis
Unrealized gains ........ 0.1 - - - - 0.1
Unrealized (losses) ..... - - - - - -
Pay basis net ........... 0.1 - - - - 0.1
Total unrealized gains .... 0.1 0.8 13.3 60.5 61.2 135.9
Total unrealized (losses) . - - - - (12.2) (12.2)
Total net ............... $ 0.1 0.8 13.3 60.5 49.0 123.7
Interest rate caps and floors:
Unrealized gains .......... $ 19.9 - 64.0 - - 83.9
Unrealized (losses) ....... - - (7.4) (0.1) (0.1) (7.6)
Total net ............... $ 19.9 - 56.6 (0.1) (0.1) 76.3
Futures contracts:
Unrealized gains .......... $ 0.3 - 39.1 - - 39.4
Unrealized (losses) ....... - (2.1) (1.3) - - (3.4)
Total net ............... $ 0.3 (2.1) 37.8 - - 36.0
Options on futures contracts:
Unrealized gains .......... $ - - 34.2 - - 34.2
Unrealized (losses) ....... - (0.7) (22.6) - - (23.3)
Total net ............... $ - (0.7) 11.6 - - 10.9
Security options:
Unrealized gains .......... $ - - - - - -
Unrealized (losses) ....... - (1.2) - - - (1.2)
Total net ............... $ - (1.2) - - - (1.2)
Grand total
unrealized gains ........ $ 20.3 0.8 150.6 60.5 61.2 293.4
Grand total
unrealized (losses) ..... - (4.0) (31.3) (0.1) (12.3) (47.7)
Grand total net ........... $ 20.3 (3.2) 119.3 60.4 48.9 245.7
</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,
including options on 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, 1997, the corporation had forward
contracts and options on forward contracts totaling $27.1 billion, all of
which mature within 180 days. Gains and losses on forward contracts and
options on forward contracts are included in the determination of market value
of mortgages held for sale.
At September 30, 1997, the corporation's trading account portfolio primarily
included futures contracts of $2.0 billion notional value, 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, 1997, the corporation
had 9 pending acquisitions with total assets of approximately $1.5 billion,
and it is anticipated that cash of $73.2 million and approximately 8.5 million
common shares will be issued upon completion of these acquisitions.
These pending acquisitions, subject to approval by regulatory agencies, are
expected to be completed by the end of 1997 and are not significant to the
financial statements of the corporation, either individually or in the
aggregate.
19
<PAGE>
Transactions completed in the nine months ended September 30, 1997 include:
<TABLE>
<CAPTION>
In millions, except share amounts Common
Cash Shares Method of
Date Assets Paid Issued Accounting
<S> <C> <C> <C> <C> <C>
Franklin Federal
Bancorp., F.S.B.
Austin, Texas (B) ............ January 1 $ 621.3 $ 90.0 - Purchase of
assets
Central Bancorporation, Inc.
Fort Worth, Texas (B) ........ January 28 1,105.3 - 9,399,576 Pooling of
interests*
Reliable Financial
Services, Inc.
San Juan, Puerto Rico(F) ..... February 21 38.6 - 1,753,086 Pooling of
interests*
Statewide Mortgage Company,
Birmingham, Alabama (B) ...... February 26 27.9 - 1,049,992 Purchase
The United Group, Inc.
Charlotte, North Carolina (F). March 21 40.6 - 648,348 Purchase
Farmers National Bancorp, Inc.
Geneseo, Illinois (B) ........ March 24 197.6 - 1,207,198 Purchase
The First National
Bankshares, Inc.,
Tucumcari, New Mexico (B) .... June 17 90.2 - 608,900 Purchase
Tennessee Credit Corporation
Nashville, Tennessee (F) ..... July 18 13.4 3.3 - Purchase
Western National Trust
Company, National Association
Odessa, Texas (B) ............ July 31 0.3 0.9 - Purchase
Fidelity Acceptance Corporation
St. Louis, Missouri (F) ...... August 31 1,134.5 343.6 - Purchase
The Bank of the Southwest,
National Association,
Pagosa Springs, Colorado (B) . September 2 85.4 - 490,790 Purchase
$3,355.1 $ 437.8 15,157,890
</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; (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 1996 Annual Report on Form 10-K.
EARNINGS PERFORMANCE
The corporation reported net income of $341.6 million for the quarter ended
September 30, 1997, an 18.2 percent increase over the $289.0 million earned
in the third quarter of 1996. Fully diluted earnings per share were
44 cents, compared with 38 cents in the third quarter of 1996, an increase
of 15.8 percent. The per common share results have been restated to
reflect the two-for-one split of the outstanding shares of common stock of
the corporation, 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
third quarter of 1996.
For the nine months ended September 30, 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 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, for the same period in 1996.
ORGANIZATIONAL EARNINGS
The organizational earnings of the corporation's primary business segments
are included in Note 8 to the unaudited consolidated financial statements
for the three and nine months ended September 30, 1997 and 1996 and are
discussed in the following paragraphs.
Banking Group
The Banking Group reported third quarter 1997 earnings of $254.8 million, a
34.3 percent increase over third quarter 1996 earnings of $189.6 million.
For the nine months ended September 30, 1997, earnings increased 26.9
percent to $711.0 million, compared with $560.1 million for the same period
in 1996. The increased earnings in the first nine months of 1997 reflect
an 11.3 percent increase in tax-equivalent net interest income to
$2,125.6 million, primarily due to an 8.9 percent increase in average
earning assets and an 11 basis point increase in net interest margin. The
Banking Group's provision for credit losses for the nine months ended
September 30, 1997 increased $20.7 million to $127.7 million from a year
earlier, as average loans and leases rose $1.7 billion, or 5.6 percent, and
net charge-offs as a percent of average loans and leases increased 17 basis
points to 0.63 percent. Non-interest income rose $264.6 million to
$1,267.9 million for the first nine months of 1997, due primarily to growth
in trust, fees and service charges, insurance, and investment securities
and venture capital gains. Non-interest expenses of $2,155.6 million for
the first nine months of 1997 were $237.3 million higher than the first
nine months 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, the increase in non-interest expenses for the
21
<PAGE>
nine months ended September 30, 1997 over the comparable period of 1996
reflects increased operating expenses related to acquisitions.
Mortgage Banking
Mortgage Banking earned $37.7 million in the current quarter, compared with
$31.8 million in the third quarter of 1996. For the first nine months of
1997, Mortgage Banking earned $106.8 million, compared with $92.9 million
in the same period of 1996. See Note 9 to the unaudited consolidated
financial statements for additional information about mortgage banking
revenues for the three and nine months ended September 30, 1997 and 1996.
The growth in Mortgage Banking earnings over the first nine months of 1996
reflects higher servicing fees from a larger servicing portfolio and an
increase in the combined gains on sales of mortgages and servicing rights
to $56.8 million in the first nine months of 1997, compared with $42.7
million in the same period a year ago. Mortgage loan originations amounted
to $15.7 billion during the third quarter, and totaled $38.7 billion for
the first nine months of 1997, compared with $13.2 billion and $39.9
billion, respectively, in the comparable periods in 1996. The unclosed
pipeline of mortgage loans was $11.5 billion at September 30, 1997,
compared with $7.7 billion at December 31, 1996. The servicing portfolio
had a weighted average coupon of 7.77 percent and totaled $198.2 billion at
September 30, 1997, compared with $179.7 billion at December 31, 1996.
Capitalized mortgage servicing rights amounted to $2.8 billion, or 139
basis points of the mortgage servicing portfolio at September 30, 1997,
compared with $2.6 billion, or 147 basis points, at December 31, 1996.
Norwest Financial
Norwest Financial reported third quarter 1997 net income of $49.1 million,
which includes $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. The non-recurring charges include $16.0 million pre-tax to
conform Fidelity's credit policies to 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. The growth in operating earnings
reflected a 6.8 percent increase in Norwest Financial's tax-equivalent net
interest income as average finance receivables grew 6.5 percent from the
first nine months of 1996, partially offset by a higher provision for
credit losses. For the first nine months of 1997, Norwest Financial's net
charge-offs were $199.0 million, or 3.48 percent of average loans, compared
with $164.9 million, or 3.07 percent of average loans, in the comparable
period of 1996.
CONSOLIDATED INCOME STATEMENT ANALYSIS
Net Interest Income
Consolidated tax-equivalent net interest income was $1,034.2 million in the
third quarter of 1997, compared with $955.6 million in the third quarter of
1996, an increase of 8.2 percent. For the first nine months of 1997,
tax-equivalent net interest income increased 8.4 percent from the same period in
1996 to $3,013.0 million. Growth in tax-equivalent net interest income over
the third quarter ended September 30, 1996 was primarily due to a 5.9 percent
growth in average earning assets. Net interest margin, the ratio of annualized
tax-equivalent net interest income to average earning assets, was 5.81 percent
in the third quarter of 1997, compared with 5.66 percent in the third quarter of
1996. The increase in
22
<PAGE>
net interest margin from third quarter of 1996 is primarily due to an
improvement in funding costs.
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.
<TABLE>
<CAPTION>
Changes in Tax-Equivalent Net Interest Income*
In millions 3Q 97 3Q 97 9 Mos. 97
from from from
3Q 96 2Q 97 9 Mos. 96
<S> <C> <C> <C>
Increase (decrease) due to:
Change in earning asset volume ............ $ 52.5 0.4 195.5
Change in volume of interest-free funds ... 20.2 2.7 57.6
Change in net return from
Interest-free funds ...................... (1.8) 2.4 (10.1)
Interest-bearing funds ................... 6.3 3.4 (10.1)
Change in earning asset mix ............... (11.1) 13.2 (44.5)
Change in funding mix ..................... 12.5 0.5 46.2
Change in tax-equivalent net interest income. $ 78.6 22.6 234.6
</TABLE>
* Net interest income is presented on a tax-equivalent basis using a
federal incremental tax rate of 35 percent in each period presented.
Provision for Credit Losses
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 in 1997, the increase in the
provision for credit losses for the three and nine months ending September
30, 1997 over the 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-interest Income
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. The increases in trust
revenues, fees and service charges and insurance reflect overall increases
in business activity, including acquisitions, and marketing efforts. For
the nine months ended September 30, 1997, non-interest income was up $367.9
23
<PAGE>
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.
Mortgage banking revenues in the third quarter of 1997 were $224.7 million,
compared with $203.5 million in the third quarter of 1996. For the nine
months ended September 30, 1997, mortgage banking revenues were $623.8
million, compared with $596.2 million for the first nine months of 1996.
Amortization of capitalized servicing rights was $104.9 million and $322.1
million, respectively, for the three and nine-month periods ended September
30, 1997, compared with $94.3 million and $210.4 million, respectively, for
the comparable periods of 1996. The increase in amortization in 1997 is
due in part to the corporation electing to accelerate amortization of
mortgage servicing rights in the second quarter by recording an additional
$42.0 million of amortization. See Note 9 to the unaudited consolidated
financial statements for additional information about mortgage banking
revenues for the three and nine months ended September 30, 1997 and 1996.
Mortgage banking revenue derived from sales of servicing rights are largely
dependent upon portfolio characteristics and prevailing market conditions.
Net venture capital gains were $52.8 million for the three months and
$165.3 million for the nine months ended September 30, 1997, compared with
$35.7 million and $167.7 million, respectively, for the same periods in
1996. 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 $195.6 million
at September 30, 1997.
Insurance revenues in the third quarter of 1997 were $75.3 million,
compared with $68.4 million in the corresponding period in 1996. For the
first nine months of 1997, insurance revenues amounted to $260.4 million,
compared with $211.4 million in the corresponding period in 1996. While
insurance revenue is impacted by seasonality in the crop insurance
business, the year to date increases in insurance revenues over 1996 are
primarily attributed to higher volume of commissions on sales of crop hail
and credit life insurance.
The corporation's trading revenue for the third quarter of 1997 was $12.7
million, compared with $21.2 million in the third quarter of 1996. Trading
revenues amounted to $64.9 million in the first nine months of 1997,
compared with the $25.2 million in the same period of 1996. See Note 10 to
the unaudited consolidated financial statements for a detailed analysis of
trading revenues for the three and nine months ended September 30, 1997 and
1996.
Non-interest Expenses
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 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.
24
<PAGE>
CONSOLIDATED BALANCE SHEET ANALYSIS
At September 30, 1997, earning assets were $73.1 billion, an increase of
7.1 percent from $68.2 billion at December 31, 1996. This increase was
primarily due to a 17.0 percent increase in total investment securities and
a 6.0 percent increase in loans due to acquisitions.
At September 30, 1997, interest-bearing liabilities totaled $59.2 billion,
a 4.7 percent increase from $56.5 billion at December 31, 1996. The
increase was primarily due to increases in interest-bearing deposits due to
acquisitions and an increase in short-term borrowings, partially offset by
a decrease in long-term debt.
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, 1997.
At September 30, 1997, the allowance for credit losses totaled $1,196.4
million, or 2.87 percent of loans and leases outstanding. Comparable
amounts were $1,033.8 million, or 2.58 percent, at September 30, 1996, and
$1,040.8 million, or 2.64 percent, at December 31, 1996. The ratio of the
allowance for credit losses to total non-performing assets and 90-day past
due loans and leases was 341.1 percent at September 30, 1997, compared with
292.9 percent at September 30, 1996 and 335.0 percent at December 31, 1996.
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, 1997 and December 31, 1996 was:
September 30, December 31,
1997 1996
Commercial .................... $ 190.9 208.6
Consumer ...................... 410.7 285.7
Real estate ................... 172.7 150.3
Foreign ....................... 43.1 32.3
Unallocated ................... 379.0 363.9
Total ...................... $1,196.4 1,040.8
Non-performing assets and 90-day past due loans and leases totaled $350.7
million, or 0.41 percent of total assets, at September 30, 1997, compared
with $352.9 million, or 0.45 percent, at September 30, 1996, and $310.7
million, or 0.39 percent, at December 31, 1996.
25
<PAGE>
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 1997 was
approximately 62 percent in the North Central Midwest, seven percent in the
South Central Midwest and 31 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 United
States. The five states with the highest originations year to date in 1997
are: California $7.0 billion; Minnesota $2.1 billion; Texas $1.9 billion;
Illinois $1.8 billion; and Washington $1.8 billion. The originations in
these five states comprise approximately 37.5 percent of total originations
in 1997. The five largest states in the servicing portfolio include:
California $39.0 billion; Minnesota $11.3 billion; Texas $9.8 billion; New
York $9.3 billion; and New Jersey $8.5 billion. These five states comprise
approximately 39 percent of the total servicing portfolio at September 30,
1997.
Norwest Financial engages in consumer finance activities in 48 states, all
10 Canadian provinces, the Caribbean, Central America, Saipan and Guam.
The five states with the largest consumer finance receivables are:
California $708.7 million; Illinois $269.4 million; Texas $239.3 million;
Ohio $238.6 million; and Florida $238.4 million. Consumer finance
receivables in Puerto Rico and Canada totaled $1.3 billion and $606.8
million, respectively, at September 30, 1997. The consumer finance
receivables of Puerto Rico, Canada, and the five largest states listed
above comprise approximately 44 percent of total consumer finance
receivables at September 30, 1997.
With respect to credit card receivables, approximately 65 percent of the
portfolio is within the corporation's 16-state banking region. Minnesota
represents approximately 13 percent of the total outstanding credit card
portfolio. 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,
1997 1996
Tier 1 capital......................... $ 5,311 4,716
Tier 1 and Tier 2 capital.............. 6,420 5,692
Total risk adjusted assets............. 58,485 54,638
Tier 1 capital ratio................... 9.08% 8.63
Total capital to risk adjusted assets.. 10.98% 10.42
Leverage ratio......................... 6.60% 6.15
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 34.1 percent for the third
quarter of 1997, compared with 35.5 percent for the third quarter of 1996.
In October, 1997 the board of directors approved an increase in the
corporation's quarterly common stock dividend to 16.5 cents per share from
15 cents. The dividend is payable on December 1, 1997, to common
stockholders of record on November 7, 1997.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share," (FAS 128) which establishes new
standards for calculating and presenting earnings per share disclosures.
The corporation will be required to adopt the provisions of FAS 128 at
year-end 1997. Under FAS 128, basic and diluted earnings per share for the
quarters and nine months ended September 30 were:
Quarter Nine Months
In millions 1997 1996 1997 1996
Net income.................. $341.6 289.0 $994.9 845.8
Less dividends accrued
on preferred stock........ (4.4) (4.4) (13.3) (13.3)
Income available to common
stockholders.............. $337.2 284.6 981.6 832.5
Weighted average common
shares outstanding........ 749.3 741.3 748.0 729.5
Adjustments for dilutive
securities:
Assumed exercise of
outstanding stock options. 14.1 11.4 15.5 10.7
Diluted common shares....... 763.4 752.7 763.5 740.2
Earnings per common share:
Basic..................... $ 0.45 0.38 1.31 1.14
Diluted................... 0.44 0.37 1.29 1.12
27
<PAGE>
Also in February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure,"
(FAS 129) which codifies existing disclosure requirements regarding capital
structure. FAS 129 will be required to be adopted at year-end 1997 and is
not expected to have a material impact on the corporation's current capital
structure disclosures.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income," (FAS 130) and Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (FAS 131). FAS 130 requires
disclosures of the components of comprehensive income and the accumulated
balance of other comprehensive income within total stockholders' equity.
FAS 131 requires disclosure of selected information about operating
segments including segment income, revenues and asset data. Operating
segments, as defined in FAS 131, would include those components for which
financial information is available and evaluated regularly by the chief
operating decision maker in assessing performance and making resource
allocation determinations for operating components such as those which
exceed 10 percent or more of combined revenue, income or assets. The
corporation will be required to adopt the provisions of FAS 130 and FAS 131
in 1998 and these standards are not expected to have a material impact on
the corporation's consolidated financial statements.
28
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
<TABLE>
<CAPTION>
Quarter Ended September 30,
In millions, except ratios 1997 1996
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 .... $ 619 $ 8.9 5.76% $ 629 $ 9.6 5.97%
Trading account securities .. 741 13.3 7.14 365 6.3 6.95
Investment securities
available for sale
U.S. Treasury & federal
agencies ................ 2,262 32.4 5.76 1,419 22.7 6.36
State, municipal and
housing tax-exempt ...... 1,454 29.3 8.43 898 19.7 8.97
Mortgage-backed ........... 14,295 262.4 7.48 14,088 263.7 7.45
Other ..................... 976 11.8 6.39 1,135 12.3 6.12
Total investment
securities available
for sale ............. 18,987 335.9 7.30 17,540 318.4 7.38
Other securities held for
investment .............. 720 6.9 3.89 864 8.7 4.05
Total investment
securities ........... 19,707 342.8 7.17 18,404 327.1 7.22
Loans held for sale ......... 2,874 56.2 7.76 2,493 48.6 7.77
Mortgages held for sale ..... 6,980 128.5 7.36 6,385 125.1 7.84
Loans and leases
(net of unearned discount)
Commercial ................ 13,350 312.8 9.30 12,839 296.4 9.19
Real estate ............... 15,071 369.8 9.79 14,225 342.4 9.61
Consumer .................. 12,374 472.2 15.22 12,367 463.5 14.96
Total loans and leases .. 40,795 1,154.8 11.27 39,431 1,102.3 11.15
Allowance for credit losses (1,118) (1,034)
Net loans and leases .... 39,677 38,397
Total earning assets
(before the allowance for
credit losses) .......... 71,716 1,704.5 9.55 67,707 1,619.0 9.59
Cash and due from banks ..... 3,553 3,503
Other assets ................ 8,584 7,663
Total assets .............. $82,735 $77,839
</TABLE>
(Continued on page 30)
29
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
(Continued from page 29)
<TABLE>
<CAPTION>
Quarter Ended September 30,
In millions, except ratios 1997 1996
Interest Average Interest Average
Average Income/ Yields/ Average Income/ Yields/
Balance Expense* Rates* Balance Expense* Rates*
<S> <C> <C> <C> <C> <C> <C>
Liabilities and
Stockholders' Equity
Noninterest-bearing deposits. $14,351 $ - -% $12,499 $ - -%
Interest-bearing deposits
Savings and NOW accounts .. 9,472 38.6 1.62 7,634 32.9 1.72
Money market accounts ..... 10,851 85.3 3.12 10,910 88.6 3.23
Savings certificates ...... 12,884 176.5 5.44 12,696 172.9 5.42
Certificates of deposit
and other time .......... 3,424 50.0 5.78 2,940 41.3 5.58
Foreign time .............. 883 10.3 4.65 365 4.0 4.38
Total interest-bearing
deposits .............. 37,514 360.7 3.81 34,545 339.7 3.91
Federal funds purchased
repurchase agreements ..... 3,180 41.1 5.13 2,647 33.5 5.03
Short-term borrowings ....... 4,962 70.9 5.66 6,178 84.3 5.43
Long-term debt .............. 12,510 197.6 6.32 13,409 205.9 6.14
Total interest-bearing
liabilities ........... 58,166 670.3 4.58 56,779 663.4 4.66
Other liabilities ........... 3,626 2,814
Preferred stock ............. 187 188
Common stockholders' equity . 6,405 5,559
Total liabilities and
stockholders' equity .. $82,735 $77,839
Net interest income
(tax-equivalent basis) .. $1,034.2 $955.6
Yield spread .............. 4.97 4.93
Net interest margin ....... 5.81 5.66
Interest-bearing liabilities
to earning assets ....... 81.11 83.86
</TABLE>
30
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
<TABLE>
<CAPTION>
Nine Months Ended September 30,
In millions, except ratios 1997 1996
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 .... $ 964 $ 39.4 5.47% $ 659 $ 27.4 5.54%
Trading account securities .. 536 29.1 7.24 420 20.6 6.58
Investment securities
available for sale
U.S. Treasury & federal
agencies ................ 2,728 128.9 6.29 1,255 59.8 6.37
State, municipal and
housing tax-exempt ...... 1,287 80.8 8.66 872 57.5 9.08
Mortgage-backed ........... 14,395 797.4 7.44 13,319 736.9 7.39
Other ..................... 1,057 35.9 6.17 1,093 35.2 6.44
Total investment
securities available
for sale ............. 19,467 1,043.0 7.31 16,539 889.4 7.36
Other securities held for
investment .............. 726 21.0 3.87 833 27.6 4.42
Total investment
securities ........... 20,193 1,064.0 7.18 17,372 917.0 7.21
Loans held for sale ......... 2,880 168.3 7.82 2,966 201.8 9.09
Mortgages held for sale ..... 5,957 324.0 7.25 6,629 366.8 7.38
Loans and leases
(net of unearned discount)
Commercial ................ 13,364 917.5 9.18 12,622 863.7 9.14
Real estate ............... 15,040 1,093.4 9.70 13,588 989.9 9.72
Consumer .................. 11,927 1,358.4 15.20 11,961 1,346.3 15.02
Total loans and leases .. 40,331 3,369.3 11.16 38,171 3,199.9 11.19
Allowance for credit losses (1,084) (992)
Net loans and leases .... 39,247 37,179
Total earning assets
(before the allowance for
credit losses) .......... 70,861 4,994.1 9.46 66,217 4,733.5 9.60
Cash and due from banks ..... 3,571 3,562
Other assets ................ 8,449 6,839
Total assets .............. $81,797 $75,626
</TABLE>
(Continued on page 32)
31
<PAGE>
Norwest Corporation and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS AND RELATED YIELDS AND RATES
(Continued from page 31)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
In millions, except ratios 1997 1996
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. $13,637 $ - -% $11,866 $ - -%
Interest-bearing deposits
Savings and NOW accounts .. 9,490 116.7 1.64 6,356 83.1 1.75
Money market accounts ..... 10,647 258.7 3.25 11,441 260.1 3.04
Savings certificates ...... 13,054 529.7 5.43 12,288 502.3 5.46
Certificates of deposit
and other time .......... 3,425 146.2 5.70 2,741 116.0 5.65
Foreign time .............. 728 24.1 4.43 403 14.4 4.77
Total interest-bearing
deposits .............. 37,344 1,075.4 3.85 33,229 975.9 3.92
Federal funds purchased
repurchase agreements ..... 3,161 117.5 4.97 2,985 112.4 5.03
Short-term borrowings ....... 5,092 209.6 5.50 5,708 232.8 5.45
Long-term debt .............. 12,395 578.6 6.22 13,791 634.0 6.13
Total interest-bearing
liabilities ........... 57,992 1,981.1 4.56 55,713 1,955.1 4.68
Other liabilities ........... 3,839 2,514
Preferred stock ............. 188 189
Common stockholders' equity . 6,141 5,344
Total liabilities and
stockholders' equity .. $81,797 $75,626
Net interest income
(tax-equivalent basis) .. $3,013.0 $2,778.4
Yield spread .............. 4.90 4.92
Net interest margin ....... 5.71 5.63
Interest-bearing liabilities
to earning assets ....... 81.84 84.14
</TABLE>
* Interest income and yields are calculated on a tax-equivalent basis using
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.
32
<PAGE>
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. Certificate of Amendment of Certificate
of Incorporation of the corporation increasing the
authorized number of common shares to one billion
shares, incorporated by reference to Exhibit 3 to the
corporation's Current Report on Form 8-K dated
June 3, 1997.
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.
33
<PAGE>
Exhibit
No. Exhibit Page
3(h). Certificate of Designations of powers, preferences and
rights relating to the corporation's 1997 ESOP Cumulative
Convertible Preferred Stock incorporated by reference to
Exhibit 3 to the corporation's Current Report on Form 8-K
dated April 14, 1997.
3(i). By-Laws (as amended effective September 23, 1997), incorporated
by reference to Exhibit 3 to the corporation's Current Report
on Form 8-K dated October 10, 1997.
4(a). See 3(a) through 3(i) 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 Certificate of Adjustment
pursuant to Section 16 of the Rights Agreement
incorporated by reference to Exhibit 5 to the corporation's
Form 8-A/A dated October 14, 1997.
4(c). Copies of instruments with respect to long-term debt
will be furnished to the Commission upon request.
10(a). Long-Term Incentive Compensation Plan Amendment effective
July 22, 1997. 36
10(b). Employees' Deferred Compensation Plan (as amended effective
August 1, 1997). 37
10(c). Elective Deferred Compensation Plan for Mortgage Banking
Executives (as amended effective August 1, 1997). 45
11. Computation of Earnings Per Share. 51
12(a). Computation of Ratio of Earnings to Fixed Charges. 53
12(b). Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends. 54
Stockholders may obtain a copy of any Exhibit, upon payment of a reasonable
fee, by writing Norwest Corporation, Office of the Secretary, Norwest Center,
Sixth and Marquette, Minneapolis, Minnesota 55479-1026.
(b) Reports on Form 8-K.
The corporation filed a Current Report on Form 8-K, dated July 14, 1997,
reporting consolidated operating results of the corporation for the
quarter ended June 30, 1997.
34
<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 13, 1997 By /s/ Michael A. Graf
Senior Vice President
and Corporate Controller
(Chief Accounting Officer)
35
Exhibit 10(a).
NORWEST CORPORATION
July 22, 1997 Meeting of the Board of Directors
Amendments to the Long-Term Incentive Compensation Plan
RESOLVED that Section 9.2 of the Long-Term Incentive Compensation Plan, as
amended (the "Plan"), is amended to read as follows:
9.2 Termination of Employment Due to Death, Disability, or Retirement.
(a) If a Participant ceases to be an Employee by reason of his death,
permanent disability or Retirement, all Options outstanding shall become
immediately exercisable and remain exercisable to the extent and for such period
or periods determined by the Committee but not beyond the expiration date of
said Options.
(b) If a Participant ceases to be an Employee by reason of his death,
permanent disability or Retirement, all outstanding Stock Appreciation Rights
granted in conjunction with Options shall become immediately exercisable and
remain exercisable to the extent and for such period or periods determined by
the Committee but not beyond the expiration date of said Stock Appreciation
Rights.
RESOLVED that Section 10.2 of the Plan is amended to read as follows:
10.2 Termination of Employment Due to Death, Disability, or Retirement. If
a Participant ceases to be an Employee by reason of his death, permanent
disability or Retirement, all Stock Appreciation Rights then outstanding which
were granted independent of any Option shall become immediately exercisable and
remain exercisable to the extent and for such period or periods determined by
the Committee but not beyond the expiration date of said Stock Appreciation
Rights.
RESOLVED that Section 19 of the LTICP is amended by inserting the words
"or Committee" immediately following the word "Board" as it appears in two
places in the first sentence of Section 19.
36
Exhibit 10(b).
NORWEST CORPORATION
EMPLOYEES' DEFERRED COMPENSATION PLAN
(Amended and Restated August 1, 1997)
1. Restatement of Plan. On July 27, 1993, the Board of Directors of Norwest
Corporation, a Delaware corporation (the "Corporation"), authorized the
creation of a nonqualified, unfunded, elective deferral plan known as the
"Norwest Corporation Employees' Deferred Compensation Plan" (the "Old
Plan") for the purpose of allowing a select group of management and highly
compensated employees of the Corporation and its subsidiaries to defer the
receipt of compensation which would otherwise be paid to those employees.
The Corporation reserved the power to amend and terminate the Old Plan by
action of the Human Resources Committee of the Corporation's Board of
Directors. The Human Resources Committee desires to exercise that reserved
power of amendment by the adoption of this amended and restated Norwest
Corporation Employees' Deferred Compensation Plan (hereinafter referred to as
the "Plan").
2. Eligibility. Each full-time employee of the Corporation or any of its
subsidiaries who has target total compensation of $80,000 or more
("Compensation") and any other employee who is highly compensated and has
been selected for participation in this Plan by the Plan Administrator (as
defined in Section 11) or such officers of the Corporation to which the Plan
Administrator has delegated its authority shall be eligible to participate in
the Plan (each, an "Eligible Employee").
3. Deferral of Compensation. An Eligible Employee may elect to defer all or a
portion of the Eligible Employee's "Regular Compensation" (salaries, bonuses,
and commissions) that the Eligible Employee may earn from the Corporation or
its subsidiaries during the calendar year (the "Deferral Year") following the
year in which the Deferral Election (as defined in Section 4(A)(1)) is made.
However, any other payroll deductions elected by the Eligible Employee (such as
payments for welfare or retirement benefits or insurance), including FICA
taxes, shall be made before any deferrals are made under this Plan. Such
Deferral Election shall be made pursuant to Section 4(A)(2). An Eligible
Employee may also defer certain gains derived from specified stock option
grants ("Stock Option Compensation") under the Corporation's Long-Term
Incentive Compensation Plan and any other stock option plan approved by the
Plan Administrator. The terms of a Stock Option Compensation deferral will be
subject to an independent deferral election made pursuant to Section 4(B)(2).
4. Election to Participate and Defer Compensation.
A) Deferral of Regular Compensation.
1) Participation. Except as provided in Section 4(A)(3) as to
new Eligible Employees, an Eligible Employee becomes a participant in the Plan
by filing, during an enrollment period specified by the Plan Administrator but
no later than December 15 of the year preceding the Deferral Year, an
irrevocable election (the "Deferral Election") with the Plan Administrator. An
Eligible Employee who has made a Deferral Election under this Section for any
Deferral Year and has a Deferral Account (as defined in Section 5) is deemed a
"Participant." The Deferral Election shall be effective only for the Deferral
Year specified. A new Deferral Election must be filed for each Deferral Year.
Amounts deferred under a Regular Compensation Deferral Election shall be
credited to a "Regular Deferral Account" established under the Plan for the
Eligible Employee.
2) Deferral Election. The Deferral Election shall consist of
the Eligible Employee's election to defer Regular Compensation, election of
earnings option(s) as described in Section 5(A), and election of the timing and
form of distribution of amounts deferred as described in Section 7. An
Eligible Employee may elect to defer, in any combination, all or part of the
Eligible Employee's a) base salary earned and paid on a periodic basis
throughout the Deferral Year, b) incentive pay earned throughout the Deferral
Year and paid after the end of the Deferral Year, and c) commissions and other
periodic incentive payments paid during the Deferral Year. The Eligible
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Employee shall specify for each Regular Compensation category an amount to be
deferred per pay period, expressed either as a percentage or a dollar amount.
3) Initial Deferral Election or Initial Eligibility. A new
Eligible Employee must make a Deferral Election within thirty days of the date
the Eligible Employee becomes eligible to participate in the Plan in order to
defer Regular Compensation earned in the current Deferral Year.
4) Early Withdrawal. A Participant who wishes to receive
payment of all or part of the Participant's deferred Regular Compensation on a
date earlier than that specified in the Deferral Election may do so by filing
with the Plan Administrator a request for early withdrawal. Such payment will
be made from the earliest Deferral Year(s) in which the Participant has
participated in the Plan. Regular Deferral Accounts will be distributed in the
order in which the accounts were established. Stock Option Deferral Accounts
will be distributed in the order in which the accounts were established
following the distribution of all funds from Regular Deferral Accounts. For
the appropriate Deferral Year(s), account accruals to date shall be disbursed
completely, less a 10% early withdrawal penalty on the amount distributed. The
10% penalty assessed for early withdrawal will be permanently forfeited by the
Participant and will be credited to the account of the Corporation. Further,
the Participant shall forfeit eligibility to defer Regular Compensation or
Stock Option Compensation during the two Deferral Years following the year in
which the early withdrawal is made, but in no case shall an early withdrawal
cause a current Deferral Election (either of Regular Compensation or Stock
Option Compensation) to be suspended or canceled. In no case may a Participant
make more than one early withdrawal per calendar year.
B) Deferral of Stock Option Gains
1) Participation. An Eligible Employee may file, during an
enrollment period specified by the Plan Administrator, an irrevocable election
(a "Stock Option Deferral Election") with the Plan Administrator. Except as
provided in Section 4(B)(3), Stock Option Deferral Elections become effective
on the second January 1 following the date of the election. An Eligible
Employee who has made a Stock Option Deferral Election under this Section is
deemed a "Participant." Each Stock Option Deferral Election pertains only to
the specific option grant(s) covered. Amounts deferred under a Stock Option
Deferral Election shall be credited to a "Stock Option Deferral Account"
established under the Plan for the Eligible Employee.
2) Deferral Election. A Stock Option Deferral Election shall
consist of the Eligible Employee's election to defer all of the eligible Stock
Option Compensation derived from a specific stock option grant. Eligible Stock
Option Compensation consists of only stock option gains realized using the
stock-for-stock swap method of exercise. Stock option gains derived from
either a cash exercise or a same day sale will not be eligible Stock Option
Compensation. Therefore, if an Eligible Employee elects to defer the stock
option gain derived from a specific stock option grant, the Eligible Employee
must agree to use the stock-for-stock method (as set forth in the option
agreement) to exercise the specific option grant. Stock option gains from
stock-for-stock swaps will be allocated solely to the Norwest Corporation
common stock earnings option. The Stock Option Deferral Election must also
specify the timing and form of distribution of the amount deferred as described
in Section 7.
3) Deferral Elections for 1998. Stock Option Deferral
Elections made by August 31, 1997 shall become effective January 1, 1998.
4) Early Withdrawal. A Participant who wishes to receive
payment of all or part of the Participant's deferred Stock Option Compensation
on a date earlier than that specified in the Stock Option Deferral Election may
do so by filing with the Plan Administrator a request for early withdrawal.
Stock Option Deferral Accounts will be distributed in the order in which the
accounts were established after all funds from Regular Deferral Accounts are
distributed. A 10% early withdrawal penalty will be assessed on the amount
distributed. The 10% penalty assessed for early withdrawal will be permanently
forfeited by the Participant and will be credited to the account of the
Corporation. Further, the Participant shall forfeit eligibility to defer
Regular Compensation or Stock Option Compensation during the two Deferral Years
following the year in which the early withdrawal is made, but in no case shall
an early withdrawal cause a current Deferral Election (either of Regular
Compensation or Stock Option Compensation) to be suspended or canceled. In no
case may a Participant make more than one early withdrawal per calendar year.
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5) Effect on Stock Options. Stock Option Compensation which
the Participant has elected to defer may not be received between the filing of
the Stock Option Deferral Election and its effective date. Termination of
employment during this period other than by reason of death, disability or
retirement will void the Stock Option Deferral Election.
5. Deferral Account.
A) Earnings Options. The earnings options available for selection on
the Deferral Election are as follows:
1) Norwest Corporation common stock option ("Common Stock
Option"). This is the only earnings option available for Stock Option Deferral
Accounts.
2) Norwest Bank Minnesota, N.A. one-year certificate of deposit
option ("CD Option").
3) A selection of registered investment companies chosen by
the Employee Benefit Review Committee of the Corporation ("Fund Option").
A Participant must choose to allocate amounts credited to the Participant's
Regular Deferral Account among the earnings options in increments of five (5)
percent. Except as provided in Section 4(A)(3) as to new Eligible Employees,
the initial election of earnings options must be made by the Participant in
advance of each Deferral Year. A Participant's Stock Option Deferral Account
must be allocated to the Common Stock Option. Except with respect to a
Participant's Stock Option Deferral Account, after the initial election of
earnings options, Participants shall be entitled to change their earnings
options each January 1 by filing an irrevocable written earnings option
election form with the Plan Administrator at least thirty (30) days prior to
the January 1 effective date.
B) Periodic Credits. On each pay day on which the deferred Regular
Compensation would otherwise be paid to a Participant, the Participant shall
receive a credit to the Participant's Regular Deferral Account. When a stock
option covered by a Stock Option Deferral Election is exercised using a stock-
for-stock swap, the Participant's Stock Option Deferral Account will be
credited on the last day of the month in which the stock option is exercised.
The amount of each credit shall be equal to the amount deferred from the
Participant's Regular Compensation and/or Stock Option Compensation. In the
case of Regular Compensation, each credit shall be accounted for based on the
earnings options selected by the Participant on the Regular Compensation
Deferral Election. In the case of Stock Option Compensation, the credit shall
be a number of shares of Norwest common stock ("Common Stock") determined in
accordance with Section 6(B) below.
C) Adjustments. Subject to Section 5(C)(4), that portion of a
Participant's Regular Deferral Account which is accounted for under each
earnings option shall be further adjusted by an amount determined in accordance
with the respective earnings option as follows:
1) CD Option. Adjustments under the CD Option shall be made
monthly as of the last day of each month. The amount of the adjustment for the
CD Option shall be calculated by multiplying the Participant's average balance
in the CD Option for the month by an earnings factor based on the interest rate
for a Norwest Bank Minnesota, N.A. one-year certificate of deposit as
determined from time to time by the Plan Administrator.
2) Fund Option. Adjustments under any Fund Option shall be
made monthly as of the last day of each month. The amount of the adjustment
for a Fund Option shall be calculated by multiplying the Participant's average
balance in the Fund Option for the month by an adjustment factor based on the
reported positive or negative performance for the month of the registered
investment company assets relating to the Fund Option selected.
3) Common Stock Option. Adjustments under the Common Stock
Option shall be made each time a dividend is paid on Common Stock in accordance
with paragraph 6(C) below.
4) No Adjustments After Valuation. No adjustment shall be
made to a Participant's Regular Deferral Account with respect to a lump sum
payment or an installment payment after the valuation date used to determine
the amount of such payment pursuant to Section 7(A)(6).
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6. Common Stock Option.
A) Accounting. All periodic credits and all adjustments to a
Participant's Stock Option Deferral Account or Regular Deferral Account (the
"Deferral Accounts") under the Common Stock Option shall be credited in
shares of Common Stock. Shares of Common Stock shall be rounded to the nearest
ten-thousandth of a share.
B) Determination of Number of Shares. The number of shares of Common
Stock credited to a Participant's Deferral Accounts under the Common Stock
Option shall be determined by dividing the amount of each periodic credit by
the average of the high and low prices per share of Common Stock reported on
the consolidated tape of the New York Stock Exchange on the last day of each
month (or, if the New York Stock Exchange is closed on that date, on the next
preceding date on which it is open).
C) Adjustments Based on Dividends. Subject to Section 5(C)(4),
adjustments under the Common Stock Option shall be made each time a dividend is
paid on Common Stock. The number of shares credited to a Participant's
Deferral Accounts for such adjustments shall be determined by multiplying the
dividend amount per share by the number of shares credited to the Participant's
Deferral Accounts as of the record date for the dividend and dividing the
product by the average of the high and low prices per share of Common Stock
reported on the consolidated tape of the New York Stock Exchange on the
dividend payment date (or, if the New York Stock Exchange is closed on that
date, on the next preceding date on which it is open).
D) Number of Shares Issuable under the Plan. Subject to adjustment as
provided in Section 6(E), the maximum number of shares of Common Stock that may
be credited under the Plan is 500,000.
E) Adjustments for Certain Changes in Capitalization. If the
Corporation shall at any time increase or decrease the number of its
outstanding shares of Common Stock or change in any way the rights and
privileges of such shares by means of the payment of a stock dividend or any
other distribution upon such shares payable in Common Stock, or through a stock
split, subdivision, consolidation, combination, reclassification, or
recapitalization involving the Common Stock, then the numbers, rights, and
privileges of the shares issuable under the Plan shall be increased, decreased,
or changed in like manner as if such shares had been issued and outstanding,
fully paid, and nonassessable at the time of such occurrence.
7. Distributions.
A) Regular Deferral Accounts. Payment of Regular Deferral Accounts
shall be made pursuant to the Participant's Deferral Election, subject to the
following:
1) Upon Retirement or Date-Certain Distribution. A
Participant may designate on the Deferral Election that distribution of the
Regular Deferral Account shall be made either in a lump sum or in annual
installments over a period of years not to exceed ten if the Participant
elects distribution to commence upon retirement or a date certain. For this
purpose, retirement means the Participant is entitled to regular retirement
or early retirement as defined in Section 6.1 or 6.2 of the Norwest
Corporation Pension Plan.
2) Upon Disability. A Participant may designate on the
Deferral Election that distribution of the Regular Deferral Account shall be
made either in a lump sum or in annual installments over a period of years
not to exceed ten if the Participant becomes disabled as described in the
Norwest Corporation Long-Term Disability Plan. The Participant may also
specify on the Deferral Election that such disability shall not cause a
distribution before the originally elected distribution commencement date.
3) Upon Death. If a Participant dies before receiving all
payments under the Plan, payment of the balance in the Regular Deferral
Account shall be made to the Participant's designated beneficiary in the
form and manner designated in the Deferral Election or in a lump sum at the
request of the designated beneficiary, but not sooner than 90 days following
the date of the Participant's death. To be valid, a beneficiary designation
must be in writing and the written designation must have been delivered to
and accepted by the Plan Administrator prior to the Participant's death.
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If at the time of the Participant's death there is not on file a fully
effective beneficiary designation form, or if the designated beneficiary did
not survive the Participant, the person or persons surviving at the time of the
Participant's death in the first of the following classes of beneficiaries in
which there is a survivor, shall be entitled to receive the balance of the
Participant's Regular Deferral Account. If a person in the class surviving
dies before receiving the balance (or the person's share of the balance in case
of more than one person in the class) of the Participant's Regular Deferral
Account, that person's right to receive the Participant's Regular Deferral
Account will lapse and the determination of who will be entitled to receive the
Participant's Regular Deferral Account will be determined as if that person
predeceased the Participant.
(a) Participant's surviving spouse
(b) Equally to the Participant's children, except that if
any of the Participant's children predecease the Participant but leave
descendants surviving, such descendants shall take by right of representation
the share their parent would have taken if living
(c) Participant's surviving parents equally
(d) Participant's surviving brothers and sisters equally
(e) Representative of the Participant's estate.
4) Upon Other Termination of Employment. If a Participant
terminates employment with the Corporation prior to the Participant's regular
or early retirement as defined in Section 6.1 or 6.2 of the Norwest Corporation
Pension Plan, or disability as described in the Norwest Corporation Long-Term
Disability Plan, or death, the Regular Deferral Account will be paid in a lump
sum or in annual installments over a period of years not to exceed ten years to
the Participant in accordance with the elections made on the termination of
employment section of the Deferral Election.
5) Form of Distributions. All distributions from Regular
Deferral Accounts shall be payable as follows:
a) In cash for all Regular Deferral Accounts for which the
Participant elected an earnings option other than the Common Stock Option; or
b) If the Participant elected the Common Stock Option, in
cash or in whole shares of Common Stock (together with cash in lieu of a
fractional share), or in a combination thereof, as the Participant shall elect
prior to payment. If no election is made, distribution shall be made in cash.
6) Valuation of Deferral Accounts for Distribution.
a) The amount of the distribution in cash and/or Common Stock
on any February 28 (or the next preceding business day if February 28 is not a
business day) shall be determined based on the Participant's Regular Deferral
Account balance (and, if applicable, the price of Common Stock) as of the
preceding December 31 (or the next preceding business day if December 31 is not
a business day). The amount of the distribution in cash and/or Common Stock as
of any other date on which a distribution is made shall be determined based on
the Participant's Regular Deferral Account balance (and, if applicable, the
price of Common Stock) as of the end of the month in which the event which
triggers distribution occurs. Earnings adjustments to amounts that have been
valued for distribution shall cease as of the date used to value such amounts.
b) The amount of each installment payment shall be a fraction
of the value of the Participant's Regular Deferral Account as of the December
31 preceding the date of the installment payment (or the next preceding
business day if December 31 is not a business day), the numerator of which is
one and the denominator of which is the total number of installments elected
(not to exceed ten) minus the number of installments previously paid. The
balance remaining in the Regular Deferral Account shall continue to be adjusted
based on the earnings options selected by the Participant in the Deferral
Election until the valuation date used to determine the amount of the last
payment. All installment payments will be made by pro rata withdrawals from
each earnings option elected by the Participant.
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B) Stock Option Deferral Accounts. Payment of Stock Option Deferral
Accounts shall be made pursuant to the Participant's Stock Option Deferral
Election, subject to the following:
1) Date-Certain Distribution. A Participant may designate on the
Stock Option Deferral Election that distribution of the Stock Option
Deferral Account shall be made either in a lump sum or in annual
installments over a period of years not to exceed ten. The Participant may
not elect to receive the distribution earlier than 12 months after the date
on which the option is exercised.
2) Upon Retirement. A Participant may designate on the Stock
Option Deferral Election that distribution of the Stock Option Deferral
Account shall be made either in a lump sum or in annual installments over a
period of years not to exceed ten if the Participant elects distribution to
be made after the Participant's regular retirement date or early retirement
date as defined in Sec. 6.1 or 6.2 of the Norwest Corporation Pension Plan.
The Participant may also specify that retirement shall not cause a
distribution before the originally elected date-certain date.
3) Upon Disability. A Participant may designate on the Stock
Option Deferral Election that distribution of the Stock Option Deferral
Account shall be made in either a lump sum or annual installments over a
period of years not to exceed ten if the Participant becomes disabled as
described in the Norwest Corporation Long-Term Disability Plan. The
Participant may also specify that such a disability shall not cause a
distribution before the originally elected date-certain date.
4) Upon Death. If a Participant dies before receiving all
payments under the Plan, payment of the balance in the Stock Option Deferral
Account shall be made to the Participant's designated beneficiary in the
form and manner designated in the Stock Option Deferral Election or in a
lump sum at the request of the designated beneficiary, but not sooner than
90 days following the date of the Participant's death. To be valid, a
beneficiary designation must be in writing and the written designation must
have been delivered to and accepted by the Plan Administrator prior to the
Participant's death.
If at the time of the Participant's death there is not on file a fully
effective beneficiary designation form, or if the designated beneficiary did
not survive the Participant, the person or persons surviving at the time of the
Participant's death in the first of the following classes of beneficiaries in
which there is a survivor, shall be entitled to receive the balance of the
Participant's Stock Option Deferral Account. If a person in the class
surviving dies before receiving the balance (or the person's share of the
balance in case of more than one person in the class) of the Participant's
Stock Option Deferral Account, that person's right to receive the Participant's
Stock Option Deferral Account will lapse and the determination of who will be
entitled to receive the Participant's Stock Option Deferral Account will be
determined as if that person predeceased the Participant.
(a) Participant's surviving spouse
(b) Equally to the Participant's children, except that if any
of the Participant's children predecease the Participant but leave descendants
surviving, such descendants shall take by right of representation the share
their parent would have taken if living
(c) Participant's surviving parents equally
(d) Participant's surviving brothers and sisters equally
(e) Representative of the Participant's estate.
5) Upon Other Termination of Employment. If a Participant
terminates employment with the Corporation prior to the Participant's regular
or early retirement as defined in Section 6.1 or 6.2 of the Norwest Corporation
Pension Plan, or disability as described in the Norwest Corporation Long-Term
Disability Plan, or death, the Stock Option Deferral Account will be paid in a
lump sum or in annual installments over a period of years not to exceed ten
years to the Participant in accordance with the elections made in the
termination section of the Stock Option Deferral Election. Should the option
be unexercised, the Stock Option Deferral Election is canceled.
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6) Form of Distributions. All distributions from the Stock Option
Deferral Accounts shall be payable in whole shares of Common Stock (together
with cash in lieu of a fractional share).
7) Valuation of Stock Option Deferral Accounts for Distribution.
a) The amount of the distribution on any February 28 (or the
next preceding business day if February 28 is not a business day) shall be
determined based on the Participant's Stock Option Deferral Account balance and
on the price of Common Stock determined pursuant to Section 6 as of the
preceding December 31 (or the next preceding business day if December 31 is not
a business day). The amount of the distribution as of any other date on which a
distribution is made shall be determined based on the Participant's Stock
Option Deferral Account balance and on the price of Common Stock determined
pursuant to Section 6 as of the end of the month in which the event which
triggers distribution occurs. Earnings adjustments to amounts that have been
valued for distribution shall cease as of the date used to value such amounts.
b) The amount of each installment payment shall be a fraction
of the balance of the Participant's Stock Option Deferral Account as of the
December 31 preceding the date of the installment payment, the numerator of
which is one and the denominator of which is the total number of installments
elected (not to exceed ten) minus the number of installments previously paid.
The balance remaining in the Stock Option Deferral Account shall continue to be
adjusted until the valuation date used to determine the last payment.
8. Nonassignability. No Participant or beneficiary shall have any interest in
any Deferral Accounts which can be transferred, nor shall any Participant or
beneficiary have any power to anticipate, alienate, dispose of, pledge or
encumber the same while in the possession or control of the Corporation, nor
shall the Corporation recognize any assignment thereof, either in whole or in
part, nor shall any Deferral Account be subject to attachment, garnishment,
execution following judgment or other legal process while in the possession or
control of the Corporation. The designation of a beneficiary by a Participant
does not constitute a transfer.
9. Withholding of Taxes. Distributions under this Plan shall be subject to
the deduction of the amount of any federal, state, or local income taxes,
Social Security tax, Medicare tax, or other taxes required to be withheld from
such payments by applicable laws and regulations.
10. Unsecured Obligation. The obligation of the Corporation to make payments
under this Plan constitutes only the unsecured (but legally enforceable)
promise of the Corporation to make such payments. The Participant shall have
no lien, prior claim or other security interest in any property of the
Corporation. The Corporation is not required to establish or maintain any
fund, trust or account (other than a bookkeeping account or reserve) for the
purpose of funding or paying the benefits promised under this Plan. If such a
fund is established, the property therein shall remain the sole and exclusive
property of the Corporation. The Corporation will pay the cost of this Plan
out of its general assets. All references to accounts, accruals, gains,
losses, income, expenses, payments, custodial funds and the like are included
merely for the purpose of measuring the Corporation's obligation to
Participants in this Plan and shall not be construed to impose on the
Corporation the obligation to create any separate fund for purposes of this
Plan.
11. Administration. For purposes of Section 3(16)(A) of the Employee
Retirement Income Security Act of 1974 ("ERISA"), the Plan Administrator
shall be the Human Resources Committee of the Corporation's Board of Directors.
The Plan Administrator or its delegatee shall have the authority to interpret
the Plan, to adopt procedures for implementing the Plan, and to determine
adjustments under the Plan.
12. Amendment and Termination. The Board of Directors or the Human Resources
Committee of the Corporation's Board of Directors may at any time terminate,
suspend, or amend this Plan; provided, however, that if necessary to maintain
the availability of the exemption contained in Rule 16b-3, or any successor
regulation, under the Securities Exchange Act of 1934, as amended, for
transactions pursuant to this Plan, the provisions of this Plan relating to the
amount, price and timing of awards pursuant to this Plan may not be amended
more than once in every six months other than to comport with changes in the
Internal Revenue Code or ERISA, or the rules thereunder. No such action shall
deprive any Participant of any benefits to which the Participant would have
been entitled under the Plan if termination of the Participant's employment had
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occurred on the day prior to the date such action was taken, unless agreed to
by the Participant.
13. Effective Date. This restated Plan is generally effective August 1, 1997,
except that the provisions of Section 5(A) allowing changes to earnings options
elections for Regular Deferral Accounts will be effective January 1, 1998,
unless the Chairperson of the Human Resources Committee of the Corporation's
Board of Directors takes action in writing to delay the effectiveness of such
provisions. Once effective, the provisions of Section 5(A) will apply to all
earnings options elections, regardless of when made.
44
Exhibit 10(c).
NORWEST CORPORATION
ELECTIVE DEFERRED COMPENSATION PLAN
FOR MORTGAGE BANKING EXECUTIVES
(Amended and Restated August 1, 1997)
1. Restatement of Plan. On November 22, 1994, the Board of Directors of
Norwest Corporation, a Delaware corporation (the "Corporation"), authorized
the creation of a nonqualified, unfunded, elective deferral plan known as the
"Norwest Corporation Elective Deferred Compensation Plan for Mortgage Banking
Executives" (the "Prior Plan Statement") for the purpose of allowing a
select group of management and highly compensated employees of the Corporation
and its subsidiaries who are substantially involved in the mortgage banking
business and who participate in an incentive compensation plan requiring
mandatory deferral of incentive compensation to defer the receipt of
compensation which would otherwise be paid to those employees. The
Corporation reserved the power to amend or terminate the Prior Plan Statement
by action of the Human Resources Committee of the Corporation's Board of
Directors. The Human Resources Committee desires to exercise that reserved
power of amendment by the adoption of this amended and restated Plan Statement
(hereinafter referred to as the "Plan").
2. Eligibility. Each highly compensated employee of the Corporation or any
of its subsidiaries who is substantially involved in the mortgage banking
business and who either participates in an incentive compensation plan
requiring mandatory deferral of incentive compensation or has been selected
for participation in this Plan by the Plan Administrator (as defined in
Section 11) or such officers of the Corporation to which the Plan
Administrator has delegated its authority, shall be eligible to participate in
the Plan (each, an "Eligible Employee").
3. Deferral of Compensation. An Eligible Employee may elect to defer
pursuant to Section 4(A)(2) all or a portion of the Eligible Employee's
"Regular Compensation" (salary, bonus and incentive compensation not
mandatorily deferred as required under the incentive compensation plan) that
the Eligible Employee may earn from the Corporation or its subsidiaries during
the calendar year (the "Deferral Year") following the year in which the
Deferral Election (as defined in Section 4(A)(1)) is made. An Eligible
Employee may elect to defer all or a portion of the vested portion of the
Eligible Employee's interest in the PDA Plan pursuant to Section 4(B).
However, any other payroll deductions elected by the Eligible Employee or
required by law (such as payments for welfare or retirement benefits or
insurance), including FICA taxes, shall be made before any deferrals are made
under this Plan.
4. Election to Participate and Defer Compensation.
A) Deferral of Regular Compensation.
1) Participation. Except as provided in Section 4(A)(3) as to new
Eligible Employees, an Eligible Employee becomes a Participant in the Plan by
filing, during an enrollment period specified by the Plan Administrator but no
later than December 15 of the year preceding the Deferral Year, an irrevocable
election (the "Deferral Election") with the Plan Administrator. An Eligible
Employee who has made a Deferral Election under this Section for any Deferral
Year and has a Regular Deferral Account is deemed a "Participant." The
Deferral Election shall be effective only for the Deferral Year specified. A
new Deferral Election must be filed for each Deferral Year. Amounts deferred
under a Regular Compensation Deferral Election shall be credited to a
"Regular Deferral Account" established under the Plan for the Eligible
Employee.
2) Deferral Election. A Deferral Election shall consist of the
Eligible Employee's election to defer Regular Compensation, election of
earnings option(s) as described in Section 5(A), and election of the time and
form of distribution of amounts deferred as described in Section 7. An
Eligible Employee may elect to defer, in any combination, all or part of the
Eligible Employee's (a) base salary earned and paid on a periodic basis
throughout the Deferral Year, (b) certain incentive pay earned throughout the
Deferral Year and paid after the end of the Deferral Year, and (c) commissions
and other periodic incentive payments paid during the Deferral Year. The
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Eligible Employee shall specify for each Regular Compensation category an
amount to be deferred per pay period, expressed either as a percentage or a
dollar amount.
3) Initial Deferral Election or Initial Eligibility. A new
Eligible Employee must make a Deferral Election within thirty days of the date
the Eligible Employee becomes eligible to participate in the Plan in order to
defer Regular Compensation earned in the current Deferral Year.
4) Early Withdrawal. A Participant may request to receive
payment of all or part of the Participant's deferred Regular Compensation on a
date earlier than that specified on the Deferral Election by filing with the
Plan Administrator a request for early withdrawal. Such payment will be made
from the earliest Deferral Year(s) in which the Participant has participated
in the Plan. Regular Deferral Accounts will be distributed in the order in
which the Accounts were established. For the appropriate Deferral Year(s),
Regular Deferral Account accruals to date shall be disbursed completely, less
a 10% early withdrawal penalty on the amount distributed. The 10% penalty
assessed for early withdrawal will be permanently forfeited by the Participant
and will be credited to the Corporation. Further, the Participant shall
forfeit eligibility to defer Regular Compensation and vested PDA Plan amounts
during the two Deferral Years following the year in which the early withdrawal
is made, but in no case shall an early withdrawal cause a current Deferral
Election (Regular Compensation or PDA Plan amounts) to be suspended or
canceled. In no case may a Participant make more than one early withdrawal
per calendar year pursuant to this Section A(4) or Section B(3).
B) Deferral of PDA Plan Amounts.
1) Participation. An Eligible Employee may file, during an
enrollment period specified by the Plan Administrator, an irrevocable election
(a "PDA Deferral Election") with the Plan Administrator no later than March
31 of the year prior to the year in which the Eligible Employee's portion of
the Norwest Corporation Performance Deferral Award Plan for Mortgage Banking
Executives, or from other plans which may be approved from time to time by the
Plan Administrator (the "PDA Plan") vests and would otherwise be payable
under the provisions of the PDA Plan. An Eligible Employee who has made a PDA
Deferral Election under this Section for any Deferral Year is deemed a
"Participant." Each PDA Deferral Election pertains only to the specific
portion of the PDA Plan that vests in that Deferral Year. Amounts deferred
under a PDA Deferral Election shall be credited to a "PDA Deferral Account"
established under the Plan for the Eligible Employee.
2) Deferral Election. A PDA Deferral Election shall consist
of the Eligible Employee's election to defer the vested portion of the PDA
Plan attributable to the Eligible Employee that would otherwise be payable
under the PDA Plan during the Deferral Year. The Eligible Employee shall
specify on the PDA Deferral Election the percentage or dollar amount to be
deferred, the earnings option(s) as described in Section 5(A), and the time
and form of distribution of amounts deferred as described in Section 7.
3) Early Withdrawal. A Participant may request to receive
payment of all or part of the Participant's PDA Deferral Account on a date
earlier than that specified on the PDA Deferral Election by filing with the
Plan Administrator a request for early withdrawal. Such payment will be made
from the earliest PDA Deferral Election Deferral Years. PDA Deferral Accounts
will be distributed in the order in which the Accounts were established
following distribution of all funds from Regular Deferral Accounts. For the
appropriate Deferral Year(s), PDA Deferral Account accruals to date shall be
disbursed completely, less a 10% early withdrawal penalty on the amount
distributed. The 10% penalty assessed for early withdrawal will be
permanently forfeited by the Participant and will be credited to the
Corporation. Further, the Participant shall forfeit eligibility to defer
Regular Compensation and vested PDA Plan amounts during the two Deferral Years
following the year in which the early withdrawal is made, but in no case shall
an early withdrawal cause a current Deferral Election (Regular Compensation or
PDA Plan amounts) to be suspended or cancelled. In no case may a Participant
make more than one early withdrawal per calendar year pursuant to this Section
B(3) or Section A(4).
5. Deferral Account.
A) Earnings Options. The earnings options available for selection on
the Deferral Election are as follows:
46
<PAGE>
1) "Phantom Stock Option," wherein the Account balances earn
as though they were invested in Norwest Corporation Common Stock ("Common
Stock").
2) Norwest Bank Minnesota, N.A. one-year certificate of
deposit option ("CD Option").
3) A selection of registered investment companies chosen by
the Employee Benefit Review Committee of the Corporation ("Fund Option").
A Participant must choose to allocate amounts credited to the Participant's
Regular Deferral Account and PDA Deferral Account among the earnings options
in increments of five (5) percent. Except as provided in Section 4(A)(3) as
to new Eligible Employees, the initial election of earnings options must be
made by the Participant in advance of each Deferral Year. After the initial
election of earnings options, Participants shall be entitled to change their
earnings options each January 1 by filing an irrevocable written earnings
option election form with the Plan Administrator at least thirty (30) days
prior to the January 1 effective date.
B) Periodic Credits. On each pay day that deferred Regular
Compensation and/or PDA Plan amounts would otherwise be paid to a Participant,
the Participant shall receive a credit to the Participant's Regular Deferral
Account and/or PDA Deferral Account. The amount of each credit shall be equal
to the amount deferred from the Participant's Regular Compensation and/or PDA
Plan amounts. Each credit shall be accounted for based on the earnings
options selected by the Participant on the Regular Compensation Deferral
Election or PDA Deferral Election.
C) Adjustments. Subject to Section 5(C)(4), that portion of a
Participant's Regular Deferral Account or PDA Deferral Account that is
accounted for under each earnings option shall be further adjusted by an
amount determined in accordance with the respective earnings option as
follows:
1) CD Option. Adjustments under the CD Option shall be made
monthly as of the last day of each month. The amount of the adjustment for
the CD Option shall be calculated by multiplying the Participant's average
balance in the CD Option for the month by an earnings factor based on the
interest rate for a Norwest Bank Minnesota, N.A. one-year certificate of
deposit as determined from time to time by the Plan Administrator.
2) Fund Option. Adjustments under any Fund Option shall be
made monthly as of the last day of each month. The amount of the adjustment
for a Fund Option shall be calculated by multiplying the Participant's average
balance in the Fund Option for the month by an adjustment factor based on the
reported positive or negative performance for the month of the registered
investment company assets relating to the Fund Option selected.
3) Phantom Stock Option. Adjustments under the Phantom
Stock Option shall be made each time a dividend is paid on Common Stock in
accordance with Section 6(C) below.
4) No Adjustments After Valuation. No adjustment shall be
made to a Participant's Regular Deferral Account or PDA Deferral Account with
respect to a lump sum payment or an installment payment after the valuation
date used to determine the amount of such payment pursuant to Section 7(F).
6. Phantom Stock Option.
A) Accounting. All periodic credits and all adjustments to a
Participant's Regular Deferral Account or PDA Deferral Account (the "Deferral
Accounts") under the Phantom Stock Option shall be credited in Phantom Shares
of Common Stock. Phantom Shares of Common Stock shall be rounded to the
nearest ten-thousandth of a share.
B) Determination of Number of Phantom Shares. The number of Phantom
Shares of Common Stock credited to a Participant's Deferral Accounts under the
Phantom Stock Option shall be determined by dividing the amount of each
periodic credit by the average of the high and low prices per share of Common
Stock reported on the consolidated tape of the New York Stock Exchange on the
last day of each month (or, if the New York Stock Exchange is closed on that
date, on the next preceding date on which it is open).
47
<PAGE>
C) Adjustments Based on Dividends. Subject to Section 5(C)(4),
adjustments under the Phantom Stock Option shall be made each time a dividend
is paid on Common Stock. The number of Phantom Shares credited to a
Participant's Deferral Accounts for such adjustments shall be determined by
multiplying the dividend amount per share of Common Stock by the number of
Phantom Shares credited to the Participant's Deferral Accounts as of the
record date for the dividend and dividing the product by the average of the
high and low prices per share of Common Stock reported on the consolidated
tape of the New York Stock Exchange on the dividend payment date (or, if the
New York Stock Exchange is closed on that date, on the next preceding date on
which it is open).
D) Adjustments for Certain Changes in Capitalization. If the
Corporation shall at any time increase or decrease the number of its
outstanding shares of Common Stock or change in any way the rights and
privileges of such shares by means of the payment of a stock dividend or any
other distribution upon such shares payable in Common Stock, or through a
stock split, subdivision, consolidation, combination, reclassification, or
recapitalization involving the Common Stock, then the numbers, rights, and
privileges of the Phantom Shares issuable under the Plan shall be increased,
decreased, or changed in like manner as if such Phantom Shares had been issued
and outstanding, fully paid, and nonassessable at the time of such occurrence.
7. Distributions. Payment of Regular Deferral Accounts and PDA Deferral
Accounts shall be made pursuant to the Participant's Deferral Election and PDA
Deferral Election, subject to the following:
A) Upon Retirement or Date-Certain Distribution. A Participant may
designate on the Deferral Election or PDA Deferral Election that distribution
of the Regular Deferral Account or PDA Deferral Account shall be made either
in a lump sum or in annual installments over a period of years not to exceed
ten if the Participant elects distribution to commence upon retirement or a
date certain. For this purpose, retirement means the Participant is entitled
to regular retirement or early retirement as defined in Section 6.1 or 6.2 of
the Norwest Corporation Pension Plan.
B) Upon Disability. A Participant may designate on the Deferral
Election or PDA Deferral Election that distribution of the Regular Deferral
Account or PDA Deferral Account shall be made either in a lump sum or in
annual installments over a period of years not to exceed ten if the
Participant becomes disabled as described in the Norwest Corporation Long-Term
Disability Plan. The Participant may also specify on the Deferral Election or
PDA Deferral Election that such disability shall not cause a distribution
before the originally elected distribution commencement date.
C) Upon Death. If a Participant dies before receiving all payments
under the Plan, payment of the balance of the Participant's Regular Deferral
Account and PDA Deferral Account shall be made to the Participant's designated
beneficiary in the form and manner designated in the Deferral Election or PDA
Deferral Election or in a lump sum at the request of the designated
beneficiary, but not sooner than 90 days following the date of the
Participant's death. To be valid, a beneficiary designation must be in
writing and the written designation must have been delivered to and accepted
by the Plan Administrator prior to the Participant's death.
If at the time of the Participant's death there is not on file a fully
effective beneficiary designation form, or if the designated beneficiary did
not survive the Participant, the person or persons surviving at the time of
the Participant's death in the first of the following classes of beneficiaries
in which there is a survivor, shall be entitled to receive the balance of the
Participant's Regular Deferral Account and PDA Deferral Account. If a person
in the class surviving dies before receiving the balance (or the person's
share of the balance in case of more than one person in the class) of the
Participant's Regular Deferral Account and PDA Deferral Account, that person's
right to receive the Participant's Regular Deferral Account and PDA Deferral
Account will lapse and the determination of who will be entitled to receive
the Participant's Regular Deferral Account and PDA Deferral Account will be
determined as if that person predeceased the Participant.
(1) Participant's surviving spouse
(2) Equally to the Participant's children, except that if any
of the Participant's children predecease the Participant but leave descendants
surviving, such descendants shall take by right of representation the share
their parent would have taken if living
48
<PAGE>
(3) Participant's surviving parents equally
(4) Participant's surviving brothers and sisters equally
(5) Representative of the Participant's estate.
D) Upon Other Termination of Employment. If a Participant terminates
employment with the Corporation prior to the Participant's regular or early
retirement as defined in Section 6.1 or 6.2 of the Norwest Corporation Pension
Plan, or disability as described in the Norwest Corporation Long-Term
Disability Plan, or death, the Regular Deferral Account and PDA Deferral
Account will be paid in a lump sum or in annual installments over a period of
years not to exceed ten years to the Participant in accordance with the
elections made on the termination of employment section of the Deferral
Election and PDA Deferral Election.
E) Form of Distributions. All distributions from Regular Deferral
Accounts and PDA Deferral Accounts shall be payable in cash.
F) Valuation of Deferral Accounts for Distribution.
1) The amount of the distribution in cash on any February 28
(or the next preceding business day if February 28 is not a business day)
shall be determined based on the Participant's Regular Deferral Account and
PDA Deferral Account balances (and, if applicable, the price of Common Stock)
as of the preceding December 31 (or the next preceding business day if
December 31 is not a business day). The amount of the distribution in cash as
of any other date on which a distribution is made shall be determined based on
the Participant's Regular Deferral Account and PDA Deferral Account balance
(and, if applicable, the price of Common Stock) as of the end of the month in
which the event which triggers distribution occurs. Earnings adjustments to
amounts that have been valued for distribution shall cease as of the date used
to value such amounts.
2) The amount of each installment payment shall be a fraction
of the value of the Participant's Regular Deferral Account and PDA Deferral
Account as of the December 31 preceding the date of the installment payment
(or the next preceding business day if December 31 is not a business day), the
numerator of which is one and the denominator of which is the total number of
installments elected (not to exceed ten) minus the number of installments
previously paid. The balance remaining in the Participant's Regular Deferral
Account and PDA Deferral Account shall continue to be adjusted based on the
earnings options selected by the Participant on the Participant's Deferral
Election or PDA Deferral Election until the valuation date used to determine
the amount of the last payment. All installment payments will be made by pro
rata withdrawals from each earnings option elected by the Participant.
8. Nonassignability. No Participant or beneficiary shall have any interest
in any Deferral Account which can be transferred, nor shall any Participant or
beneficiary have any power to anticipate, alienate, dispose of, pledge or
encumber the same while in the possession or control of the Corporation, nor
shall the Corporation recognize any assignment thereof, either in whole or in
part, nor shall any Deferral Account be subject to attachment, garnishment,
execution following judgment or other legal process while in the possession or
control of the Corporation. The designation of a beneficiary by a Participant
does not constitute a transfer.
9. Withholding of Taxes. Distributions under this Plan shall be subject to
the deduction of the amount of any federal, state, or local income taxes,
Social Security tax, Medicare tax, or other taxes required to be withheld from
such payments by applicable laws and regulations.
10. Unsecured Obligation. The obligation of the Corporation to make payments
under this Plan constitutes only the unsecured (but legally enforceable)
promise of the Corporation to make such payments. The Participant shall have
no lien, prior claim or other security interest in any property of the
Corporation. The Corporation is not required to establish or maintain any
fund, trust or account (other than a bookkeeping account or reserve) for the
purpose of funding or paying the benefits promised under this Plan. If such a
fund is established, the property therein shall remain the sole and exclusive
property of the Corporation. The Corporation will pay the cost of this Plan
out of its general assets. All references to accounts, accruals, gains,
losses, income, expenses, payments, custodial funds and the like are included
merely for the purpose of measuring the Corporation's obligation to
Participants in this Plan and shall not be construed to impose on the
49
<PAGE>
Corporation the obligation to create any separate fund for purposes of this
Plan.
11. Administration. For purposes of Section 3(16)(A) of the Employee
Retirement Income Security Act of 1974 ("ERISA"), the Plan Administrator
shall be the Human Resources Committee of the Corporation's Board of
Directors. The Plan Administrator or its delegatee shall have the authority
to interpret the Plan, to adopt procedures for implementing the Plan, and to
determine adjustments under the Plan.
12. Amendment and Termination. The Board of Directors or the Human Resources
Committee of the Corporation's Board of Directors may at any time terminate,
suspend, or amend this Plan; provided, however, that if necessary to maintain
the availability of the exemption contained in Rule 16b-3, or any successor
regulation, under the Securities Exchange Act of 1934, as amended, for
transactions pursuant to this Plan, the provisions of this Plan relating to
the amount, price and timing of awards pursuant to this Plan may not be
amended more than once in every six months other than to comport with changes
in the Internal Revenue Code or ERISA, or the rules thereunder. No such
action shall deprive any Participant of any benefits to which the Participant
would have been entitled under the Plan if termination of the Participant's
employment had occurred on the day prior to the date such action was taken,
unless agreed to by the Participant.
13. Effective Date. This restated Plan is generally effective August 1,
1997, except that the provisions of Section 5(A) allowing changes to earnings
options elections for Regular Deferral Accounts will be effective January 1,
1998, unless the Chairperson of the Human Resources Committee of the
Corporation's Board of Directors takes action in writing to delay the
effectiveness of such provisions. Once effective, the provisions of Section
5(A) will apply to all earnings options elections, regardless of when made.
50
Exhibit 11.
Norwest Corporation and Subsidiaries
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
In thousands, except per common share amounts Quarter Ended
September 30,
1997 1996
PRIMARY:
Weighted average number of common shares
outstanding ..................................... 749,283 741,270
Net effect of assumed exercise of stock options
based on treasury stock method using average
market price .................................... 9,181 7,373
758,464 748,643
Net income ........................................ $341,614 288,984
Less dividends accrued on preferred stock ........ 4,441 4,441
Net income, as adjusted .......................... $337,173 284,543
Net income per common share ...................... $ 0.44 0.38
FULLY DILUTED:
Weighted average number of common shares
outstanding ..................................... 749,283 741,270
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 ............................. 9,292 8,923
Assumed conversion of 6 3/4% convertible
subordinated debentures due 2003 ................ 35 35
758,610 750,228
Net income ........................................ $341,614 288,984
Less dividends accrued on preferred stock ........ 4,441 4,441
Add 6 3/4% convertible subordinated debentures
interest and amortization of debt expense,
net of income tax effect ........................ 1 1
Net income, as adjusted .......................... $337,174 284,544
Net income per common share....................... $ 0.44 0.38
51
<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,
1997 1996
PRIMARY:
Weighted average number of common shares
outstanding ..................................... 748,012 729,508
Net effect of assumed exercise of stock options
based on treasury stock method using average
market price .................................... 10,032 6,938
758,044 736,446
Net income ........................................ $994,866 845,772
Less dividends accrued on preferred stock ........ 13,322 13,322
Net income, as adjusted .......................... $981,544 832,450
Net income per common share ...................... $ 1.29 1.13
FULLY DILUTED:
Weighted average number of common shares
outstanding ..................................... 748,012 729,508
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 ............................. 11,365 8,696
Assumed conversion of 6 3/4% convertible
subordinated debentures due 2003................. 35 36
759,412 738,240
Net income ........................................ $994,866 845,772
Less dividends accrued on preferred stock ........ 13,322 13,322
Add 6 3/4% convertible subordinated debentures
interest and amortization of debt expense,
net of income tax effect ........................ 3 3
Net income, as adjusted .......................... $981,547 832,453
Net income per common share....................... $ 1.29 1.13
52
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 1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Computation of Income:
Income before
income taxes $1,524,069 1,313,626 1,781,509 1,422,814 1,180,601 879,755 645,568
Capitalized interest - (14) (14) (112) (69) (65) (24)
Income before income
taxes and capitalized
interest 1,524,069 1,313,612 1,781,495 1,422,702 1,180,532 879,690 645,544
Fixed charges 2,032,875 2,003,755 2,685,447 2,503,603 1,640,049 1,485,936 1,651,664
Total income for
computation $3,556,944 3,317,367 4,466,942 3,926,305 2,820,581 2,365,626 2,297,208
Total income for
computation excluding
interest on deposits
from fixed charges $2,481,532 2,341,484 3,142,024 2,770,005 1,957,224 1,513,317 1,281,619
Computation of Fixed
Charges:
Net rental
expense (a) $ 155,309 145,813 205,409 166,591 149,462 128,573 123,342
Portion of rentals
deemed
representative
of interest $ 51,770 48,604 68,470 55,530 49,821 42,858 41,114
Interest:
Interest on
deposits 1,075,412 975,883 1,324,918 1,156,300 863,357 852,309 1,015,589
Interest on
federal funds
and other
short-term
borrowings 327,062 345,220 454,013 515,646 290,211 238,046 277,835
Interest on
long-term debt 578,631 634,034 838,032 776,015 436,591 352,658 317,102
Capitalized
interest - 14 14 112 69 65 24
Total interest 1,981,105 1,955,151 2,616,977 2,448,073 1,590,228 1,443,078 1,610,550
Total fixed
charges $2,032,875 2,003,755 2,685,447 2,503,603 1,640,049 1,485,936 1,651,664
Total fixed
charges excluding
interest on
deposits $ 957,463 1,027,872 1,360,529 1,347,303 776,692 633,627 636,075
Ratio of Income
to Fixed Charges:
Excluding
interest on
deposits 2.59x 2.28 2.31 2.06 2.52 2.39 2.01
Including
interest on
deposits 1.75x 1.66 1.66 1.57 1.72 1.59 1.39
</TABLE>
(a) Includes equipment rentals.
53
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 1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Computation of Income:
Income before
income taxes $1,524,069 1,313,626 1,781,509 1,422,814 1,180,601 879,755 645,568
Capitalized interest - (14) (14) (112) (69) (65) (24)
Income before income
taxes and capitalized
interest 1,524,069 1,313,612 1,781,495 1,422,702 1,180,532 879,690 645,544
Fixed charges 2,032,875 2,003,755 2,685,447 2,503,603 1,640,049 1,485,936 1,651,664
Total income for
computation $3,556,944 3,317,367 4,466,942 3,926,305 2,820,581 2,365,626 2,297,208
Total income for
computation excluding
interest on deposits
from fixed charges $2,481,532 2,341,484 3,142,024 2,770,005 1,957,224 1,513,317 1,281,619
Computation of Fixed
Charges:
Net rental
expense (a) $ 155,309 145,813 205,409 166,591 149,462 128,573 123,342
Portion of rentals
deemed
representative
of interest $ 51,770 48,604 68,470 55,530 49,821 42,858 41,114
Interest:
Interest on
deposits 1,075,412 975,883 1,324,918 1,156,300 863,357 852,309 1,015,589
Interest on
federal funds
and other
short-term
borrowings 327,062 345,220 454,013 515,646 290,211 238,046 277,835
Interest on
long-term debt 578,631 634,034 838,032 776,015 436,591 352,658 317,102
Capitalized
interest - 14 14 112 69 65 24
Total interest 1,981,105 1,955,151 2,616,977 2,448,073 1,590,228 1,443,078 1,610,550
Total fixed
charges $2,032,875 2,003,755 2,685,447 2,503,603 1,640,049 1,485,936 1,651,664
Total fixed
charges excluding
interest on
deposits $ 957,463 1,027,872 1,360,529 1,347,303 776,692 633,627 636,075
Preferred stock
dividends 13,322 13,322 17,763 41,220 27,827 31,170 32,219
Pre-tax earnings
needed to meet
preferred stock
dividend
requirements 20,409 20,691 27,424 61,349 41,044 44,728 44,367
Total combined fixed
charges and preferred
stock dividends $2,053,284 2,024,446 2,712,871 2,564,952 1,681,093 1,530,664 1,696,031
Total combined
fixed charges
and preferred stock
dividends excluding
interest on
deposits $ 977,872 1,048,563 1,387,953 1,408,652 817,736 678,355 680,442
</TABLE>
(a) Includes equipment rentals.
54
<PAGE>
Exhibit 12(b).
(continued)
Norwest Corporation and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
In thousands 1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Income to Combined
Fixed Charges and Preferred
Stock Dividends:
Excluding interest on
deposits 2.54x 2.23 2.26 1.97 2.39 2.23 1.88
Including interest on
deposits 1.73x 1.64 1.65 1.53 1.68 1.55 1.35
</TABLE>
55
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1997 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. PER COMMON SHARE
DATA HAS BEEN RESTATED FOR THE CORPORATION'S TWO-FOR-ONE STOCK SPLIT
EFFECTED IN THE FORM OF A 100 PERCENT STOCK DIVIDEND, DISTRIBUTED
ON OCTOBER 10, 1997.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 4346
<INT-BEARING-DEPOSITS> 48
<FED-FUNDS-SOLD> 418
<TRADING-ASSETS> 391
<INVESTMENTS-HELD-FOR-SALE> 19131
<INVESTMENTS-CARRYING> 704
<INVESTMENTS-MARKET> 724
<LOANS> 41728
<ALLOWANCE> 1196
<TOTAL-ASSETS> 85252
<DEPOSITS> 52533
<SHORT-TERM> 9276
<LIABILITIES-OTHER> 3969
<LONG-TERM> 12651
0
188
<COMMON> 1270
<OTHER-SE> 5365
<TOTAL-LIABILITIES-AND-EQUITY> 85252
<INTEREST-LOAN> 3364
<INTEREST-INVEST> 1016
<INTEREST-OTHER> 582
<INTEREST-TOTAL> 4962
<INTEREST-DEPOSIT> 1075
<INTEREST-EXPENSE> 1981
<INTEREST-INCOME-NET> 2981
<LOAN-LOSSES> 379
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3273
<INCOME-PRETAX> 1524
<INCOME-PRE-EXTRAORDINARY> 995
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 995
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.29
<YIELD-ACTUAL> 5.71
<LOANS-NON> 189
<LOANS-PAST> 121
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1041
<CHARGE-OFFS> 463
<RECOVERIES> 111
<ALLOWANCE-CLOSE> 1196
<ALLOWANCE-DOMESTIC> 774
<ALLOWANCE-FOREIGN> 43
<ALLOWANCE-UNALLOCATED> 379
</TABLE>
