SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 15, 1998
NORWEST CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-2979 41-0449260
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 612-667-1234
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ITEM 5. Other Events.
(a) Recent Operating Results
Norwest Corporation's ("Norwest") net income for the quarter ended
September 30, 1998 was $392.9 million, or 50 cents per diluted common share,
an increase of 15.0 percent and 13.6 percent, respectively, over the $341.6
million, or 44 cents per diluted common share, earned in the third quarter of
1997. Basic earnings per share increased 13.3 percent to 51 cents per common
share in the third quarter of 1998 from 45 cents a year earlier. Return on
realized common equity was 22.6 percent and return on assets was 1.64 percent
for the third quarter of 1998, compared with 22.1 percent and 1.64 percent,
respectively, in the same period of 1997.
For the first nine months of 1998, net income was $1,142.7 million, or $1.46
per diluted common share, an increase of 14.9 percent and 13.2 percent,
respectively, over the $994.9 million, or $1.29 per diluted common share,
earned in the first nine months of 1997. Return on realized common equity was
22.9 percent and return on assets was 1.66 percent for the first nine months
of 1998, compared with 22.3 percent and 1.63 percent, respectively, in the same
period a year ago.
Consolidated net interest income in the third quarter of 1998 was $1,115.4
million, compared with $1,022.6 million in the third quarter of 1997, an
increase of 9.1 percent. The increase from the third quarter of 1997 was
principally due to a 14.3 percent growth in average earning assets, partially
offset by a 28 basis point decrease in net interest margin. The decrease in
net interest margin is due to a higher mix of mortgages held for sale, which
have lower yields than other interest-bearing assets. Net interest income
increased 9.5 percent to $3,263.1 million for the first nine months of 1998,
compared with the same period of 1997. The improvement from the first nine
months of 1997 was due primarily to an 11.7 percent increase in average
earning assets.
Norwest provided $146.8 million for credit losses in the third quarter of
1998, or 131 basis points of average loans and leases on an annualized basis.
This compares with $146.7 million, or 143 basis points, in the same period a
year ago. Net credit losses totaled $155.0 million in the third quarter of
1998, up from $125.5 million in the third quarter of 1997 principally due to
higher levels of consumer credit charge-offs. As a percent of average loans
and leases, net credit losses were 138 basis points in the third quarter of
1998, compared with 122 basis points in the same period a year ago. For the
first nine months of 1998, Norwest's provision for credit losses amounted to
$410.7 million, or 127 basis points of average loans and leases on an
annualized basis, compared with $378.5 million or 125 basis points for the
same period of 1997. Net credit losses as a percent of average loans and
leases were 132 basis points in the first nine months of 1998, compared with
117 basis points in the same period of 1997.
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Consumer past-due delinquencies were as follows:
9/30/98 6/30/98 12/31/97 9/30/97
Banking Group 30 days past due ......... 1.65% 1.66 2.02 1.84
Norwest Financial 60 days past due ..... 3.85 3.56 3.58 3.63
Credit card 30 days past due ........... 3.44 3.76 3.92 3.98
Non-performing assets totaled $261.8 million at September 30, 1998, an
increase of $33.3 million from year-end 1997. The allowance for credit losses
as a percentage of loans, non-performing loans and non-performing assets and
also non-performing assets as a percent of total loans, leases and OREO
strengthened at September 30, 1998 from the prior quarter:
9/30/98 6/30/98 12/31/97 9/30/97
Allowance as a % of:
Total loans ......................... 2.95% 2.91 2.90 2.87
Non-performing loans ................ 619.83 585.55 692.51 633.40
Non-performing assets ............... 510.61 476.58 539.89 520.93
Non-performing assets as a %
of total loans, leases and OREO ..... 0.58 0.61 0.54 0.55
Consolidated non-interest income was $889.5 million in the third quarter of
1998, an increase of $136.1 million, or 18.1 percent, from the third quarter
of 1997. For the first nine months of 1998, consolidated non-interest income
rose $455.6 million to $2,650.0 million, an increase of 20.8 percent over the
same period in 1997. Contributing to these increases was continued growth in
virtually all categories, including mortgage banking revenues, trust and
investment fees and commissions, service charges and fees and credit card fee
revenue, partially offset by lower net venture capital gains.
Consolidated non-interest expenses were $1,266.3 million in the third quarter
of 1998, an increase of 14.0 percent over the third quarter of 1997. For the
nine months ended September 30, 1998, non-interest expenses increased $528.3
million, or 16.1 percent, over the nine months ended September 30, 1997. The
increase in non-interest expenses reflects increased Mortgage Banking expenses
due to higher volume and additional operating expenses related to
acquisitions. During 1998, Norwest has recorded non-recurring charges of
$25.4 million related to completed acquisitions, of which $20.5 was incurred
during the third quarter.
Norwest's Banking Group reported earnings of $281.4 million in the third
quarter of 1998, 10.5 percent above third quarter 1997 earnings of $254.8
million. The increased earnings were attributed to growth in virtually all
categories including trust and investment fees and commissions, service
charges and fees and credit card fee revenue, partially offset by lower
insurance revenues, due to seasonality, lower net venture capital gains
due to overall market conditions and acquisition related one-time charges.
Norwest Venture Capital had net unrealized appreciation in its investment
portfolio of $126.5 million at September 30, 1998. For the first nine months
of 1998, the Banking Group's earnings were $819.7 million, an increase of 15.3
percent over the $711.0 million earned in the first nine months of 1997.
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For the third quarter of 1998, Mortgage Banking earned $56.0 million, on
record originations and volume, compared with $37.7 million in the third
quarter of 1997. Combined gains on sales of mortgages and servicing rights in
the third quarter of 1998 amounted to $152.0 million, compared with $13.2
million in the same quarter last year. The pipeline of unclosed mortgage
loans was $23.5 billion at September 30, 1998, compared with $11.5 billion at
September 30, 1997 and $10.6 billion at December 31, 1997. Mortgage loan
originations were $27.9 billion in the third quarter of 1998, compared with
$15.7 billion in the third quarter of 1997. The servicing portfolio increased
$34.5 billion from the third quarter of 1997 and $26.9 billion from year-end
1997, and at September 30, 1998, totaled $232.7 billion with a weighted
average interest rate of 7.54 percent. Capitalized mortgage servicing rights
amounted to $2.7 billion, or 117 basis points of the mortgage servicing
portfolio at September 30, 1998. Amortization of capitalized mortgage
servicing rights was $241.9 million for the three months ended September 30,
1998, compared with $103.4 million for the three months ended September 30,
1997. The increased amortization is due to a larger servicing portfolio and
the increased assumed prepayments as a result of the current low interest rate
environment. For the first nine months of 1998, Mortgage Banking's earnings
were $161.9 million, an increase of 51.5 percent over the $106.8 million
earned in the first nine months of 1997.
Norwest Financial reported third quarter 1998 earnings of $55.5 million that
were 12.8 percent higher than third quarter 1997 earnings which included
charges related to the acquisition of Fidelity Acceptance Corporation.
Earnings for the first nine months of 1998 of $161.1 million represent a
decrease of 9.0 percent from the same period a year ago. Norwest Financial's
net charge-offs were $93.2 million and $278.4 million for the quarter and nine
months ended September 30, 1998, respectively, compared with $73.4 million and
$199.0 million, respectively, in the same periods of 1997. The increase from
the prior year is due to the acquisition of Fidelity Acceptance in August 1997
and to higher bankruptcy levels in Puerto Rico. Net charge-offs in Norwest
Financial's domestic base business continued to decline in the third quarter.
Selected consolidated financial data at September 30, 1998 and December 31,
1997 is as follows:
(dollars in billions) 9/30/98 12/31/97
Total assets ................................. $103.7 88.5
Loans and leases, net of
unearned discount .......................... 45.3 42.5
Total deposits ............................... 60.2 55.5
Long-term debt ............................... 14.7 12.8
Total stockholders' equity ................... 7.5 7.0
Tier 1 capital ratio ......................... 8.06% 9.09
Total capital ratio .......................... 9.92 11.01
Leverage ratio ............................... 6.19 6.63
Dividends declared per common share were 18.5 cents for the third quarter of
1998, compared with 15 cents for the same period of 1997. The dividend payout
ratio was 36.3 percent and 33.3 percent for the three months ended
September 30, 1998 and 1997, respectively.
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On June 8, 1998, Norwest and Wells Fargo & Company announced they had
signed a definitive agreement for a merger of equals. In accordance with the
agreement, common stockholders of Wells Fargo will receive ten shares of
Norwest common stock in exchange for each share of Wells Fargo common stock.
The transaction is expected to close in November 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Norwest Corporation
(Registrant)
Dated: October 22, 1998 By: \s\ Michael A. Graf
Senior Vice President and
Controller
(Principal Accounting Officer)
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