<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the year ended December 31, 1998 Commission File Number 001-2979
---------------------------
WELLS FARGO & COMPANY
(Exact name of registrant as specified in its charter)
Delaware No. 41-0449260
(State of incorporation) (I.R.S. Employer
Identification No.)
420 Montgomery Street, San Francisco, California 94163
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 1-800-411-4932
Former name of registrant: Norwest Corporation
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ----------------------
Common Stock, par value $1-2/3 New York Stock Exchange
Chicago Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Chicago Stock Exchange
6 3/4% Convertible Subordinated
Debentures Due 2003 New York Stock Exchange
Adjustable Rate Cumulative Preferred
Stock, Series B New York Stock Exchange
No securities are registered pursuant to Section 12(g) of the Act.
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 and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will be not
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
As of February 26, 1999 (the latest practicable date), 1,653,100,884 shares
of common stock were outstanding having an aggregate market value, based on a
closing price of $36.75 per share, of $60,751 million. At that date, the
aggregate market value of common stock held by non-affiliates was approximately
$58,262 million.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1998 Annual Report to Stockholders - Incorporated into Parts I,
II and IV.
Portions of the Proxy Statement for the 1999 Annual Meeting of Stockholders -
Incorporated into Part III.
<PAGE>
FORM 10-K CROSS-REFERENCE INDEX
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Page(s)
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FORM Annual Proxy
10-K Report (1) Statement
---- ------ ---------
<S> <C> <C> <C> <C>
PART I
Item 1. Business
Description of Business 2-8 34-96 --
Statistical Disclosure:
Distribution of Assets, Liabilities and
Stockholders' Equity; Interest Rates
and Interest Differential 9,11 38-41 --
Investment Portfolio -- 44-45, 55-56, 63 --
Loan Portfolio 12-17 45-46, 56-57, 64-66 --
Summary of Loan Loss Experience 18-22 47, 57, 65-66 --
Deposits -- 40-41, 47, 68 --
Return on Equity and Assets -- 34-35 --
Short-Term Borrowings -- 68 --
Derivative Financial Instruments 23-24 48, 58, 91-92 --
Item 2. Properties 24-25 67 --
Item 3. Legal Proceedings -- 89 --
Item 4. Submission of Matters to a Vote of Security
Holders (in fourth quarter 1998) 25 -- --
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters -- 50, 62 --
Item 6. Selected Financial Data -- 36 --
Item 7. Management's Discussion and Analysis of Finan-
cial Condition and Results of Operations -- 34-50 --
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk -- 47-48 --
Item 8. Financial Statements and Supplementary Data 10,11 51-96 --
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure (2) -- -- --
PART III
Item 10. Directors and Executive Officers of the
Registrant 26-28 -- (3)
Item 11. Executive Compensation -- -- (3)
Item 12. Security Ownership of Certain Beneficial
Owners and Management -- -- (3)
Item 13. Certain Relationships and Related Transactions -- -- (3)
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 29-35 51-96 --
SIGNATURES 36 -- --
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</TABLE>
(1) The 1998 Annual Report to Stockholders, portions of which are incorporated
by reference into this Form 10-K.
(2) None.
(3) The information required to be submitted in response to this item is
incorporated by reference from the Company's definitive Proxy Statement for
the 1999 Annual Meeting of Stockholders to be held on April 27, 1999, to
be filed with the Securities and Exchange Commission pursuant to Regulation
14(a).
1
<PAGE>
DESCRIPTION OF BUSINESS
GENERAL
Wells Fargo & Company is a diversified financial services company
organized under the laws of Delaware and registered under the Bank Holding
Company Act (BHC Act) of 1956, as amended. Based on assets as of December 31,
1998, it was the seventh largest bank holding company in the United States.
As a diversified financial services organization, Wells Fargo & Company
(Parent) owns subsidiaries engaged in banking and a variety of related
businesses. Subsidiaries of the Parent provide retail, commercial and
corporate banking services through banks located in Arizona, California,
Colorado, Idaho, Illinois, Indiana, Iowa, Minnesota, Montana, Nebraska,
Nevada, New Mexico, North Dakota, Ohio, Oregon, South Dakota, Texas, Utah,
Washington, Wisconsin and Wyoming. Additional financial services are
provided to customers by subsidiaries engaged in various businesses;
principally wholesale banking, mortgage banking, consumer finance, equipment
leasing, agricultural finance, commercial finance, securities brokerage and
investment banking, insurance agency services, computer and data processing
services, trust services, mortgage-backed securities servicing and venture
capital investment. Wells Fargo & Company together with its subsidiaries is
referred to in this report as the Company. Its significant subsidiaries are
Norwest Bank Minnesota, N.A. and its consolidated subsidiaries and WFC
Holdings Corporation and its consolidated subsidiaries, including its
principal subsidiary, Wells Fargo Bank, N.A.
On November 2, 1998, Norwest Corporation changed its name to "Wells
Fargo & Company" upon the merger (the Merger) of the former Wells Fargo &
Company (the former Wells Fargo) into a wholly-owned subsidiary of Norwest
Corporation. Norwest Corporation as it was before the Merger is referred to as
the former Norwest. The Merger was accounted for as a pooling of interests and,
accordingly, the information included in this Form 10-K presents the combined
results as if the Merger had been in effect for all periods presented.
The Parent provides to its subsidiaries various services, including
strategic planning, asset and liability management, investment administration
and portfolio planning, tax planning, new product and business development,
advertising, administration and internal auditing, employee benefits and
payroll management. In addition, the Parent provides funds to its
subsidiaries. The Parent derives substantially all its income from
investments in and advances to its subsidiaries and service fees received
from its subsidiaries.
The Company has four operating segments for the purpose of management
reporting: Community Banking, Wholesale Banking, Mortgage Banking and Norwest
Financial. Financial information and narrative descriptions of these operating
segments are included in the 1998 Annual Report to Stockholders.
2
<PAGE>
HISTORY AND GROWTH
The former Norwest provided banking services to customers in 16 states
and additional financial services through subsidiaries engaged in a variety of
businesses including mortgage banking and consumer finance.
The former Wells Fargo's principal subsidiary, Wells Fargo Bank,
N.A., continues to be a significant subsidiary of the new Company. The bank
was the successor to the banking portion of the business founded by Henry
Wells and William G. Fargo in 1852. That business later operated the
westernmost leg of the Pony Express and ran stagecoach lines in the western
part of the United States. The California banking business was separated
from the express business in 1905, and was merged in 1960 with American Trust
Company, another of the oldest banks in the Western United States, and became
Wells Fargo Bank, N.A., a national banking association, in 1968.
The former Wells Fargo acquired First Interstate Bancorp (First
Interstate) in April 1996. First Interstate's assets had an approximate book
value of $55 billion. The transaction was valued at approximately $11.3 billion
and was accounted for as a purchase.
The Company expands its business, in part, by acquiring banking
institutions and other companies engaged in activities closely related to
banking. The Company continues to explore opportunities to acquire banking
institutions and other companies permitted by the Bank Holding Company Act.
Discussions are continually being carried on related to such acquisitions. It is
not presently known whether, or on what terms, such discussions will result in
further acquisitions. It is the policy of the Company not to comment on such
discussions or possible acquisitions until a definitive agreement with respect
thereto has been signed.
COMPETITION
Legislative and regulatory changes coupled with technological advances
have significantly increased competition in the financial services industry.
The Company's banking and financial services subsidiaries compete with other
financial services providers, such as commercial banks and financial
institutions, including savings and loan associations, credit unions, finance
companies, mortgage banking companies and mutual funds. In addition, the
Company's subsidiaries compete with nonbank institutions such as brokerage
houses and insurance companies, as well as financial services subsidiaries of
commercial and manufacturing companies. Many of these competitors are not
subject to the same regulatory restrictions as banks and bank holding companies.
REGULATION AND SUPERVISION
The following discussion, together with Notes 3 and 22 to Financial
Statements, incorporated by reference herein, sets forth the material elements
of the regulatory framework applicable to bank holding companies and their
subsidiaries and provides certain specific information relevant to the Company.
This regulatory framework is intended primarily for the
3
<PAGE>
protection of depositors, federal deposit insurance funds and the banking system
as a whole, and not for the protection of security holders. To the extent that
the information describes statutory and regulatory provisions, it is qualified
in its entirety by reference to those provisions. Further, such statutes,
regulations and policies are continually under review by Congress and state
legislatures, and federal and state regulatory agencies. A change in statutes,
regulations or regulatory policies applicable to the Company or its subsidiaries
could have a material effect on the business of the Company.
This regulatory environment, among other things, may restrict the
Company's ability to diversify into certain areas of financial services, acquire
depository institutions in certain states, and pay dividends on the Company's
capital stock. It may also require the Company to provide financial support to
one or more of its banking subsidiaries, maintain capital balances in excess of
those desired by management, and pay higher deposit insurance premiums as a
result of the deterioration in the financial condition of depository
institutions in general.
GENERAL
PARENT BANK HOLDING COMPANY. As a bank holding company, the
Company is subject to regulation under the BHC Act and to inspection,
examination and supervision by the Federal Reserve Board (FRB).
SUBSIDIARY BANKS. The Company's national subsidiary banks are subject
to regulation and examination primarily by the Office of the Comptroller of the
Currency (OCC) and secondarily by the Federal Deposit Insurance Corporation
(FDIC) and the FRB. The Company's state-chartered banks are subject to primary
federal regulation and examination by the FDIC or the FRB and, in addition, are
regulated and examined by their respective state banking departments.
NONBANKING SUBSIDIARIES. Many of the Company's nonbank subsidiaries
are also subject to regulation by the FRB and other applicable federal and state
agencies. The Company's brokerage subsidiaries are regulated by the Securities
and Exchange Commission (SEC), the National Association of Securities Dealers,
Inc. and state securities regulators. The Company's insurance subsidiaries are
subject to regulation by applicable state insurance regulatory agencies. Other
nonbanking subsidiaries of the Company are subject to the laws and regulations
of both the federal government and the various states in which they conduct
business.
PARENT BANK HOLDING COMPANY ACTIVITIES
BANKING-RELATED REQUIREMENT. Under the BHC Act, bank holding
companies generally may not acquire the beneficial ownership or control of
more than 5% of the voting shares or substantially all the assets of any
company, including a bank, without the FRB's prior approval. Also, bank
holding companies generally may engage,
4
<PAGE>
directly or indirectly, only in banking and such other activities as are
determined by the FRB to be closely related to banking.
INTERSTATE BANKING. Under the Riegle-Neal Interstate Banking and
Branching Act (Riegle-Neal Act), which became effective on September 29, 1995, a
bank holding company may acquire banks in states other than its home state,
subject to any state requirement that the bank has been organized and operating
for a minimum period of time, not to exceed five years, and the requirement that
the bank holding company not control, prior to or following the proposed
acquisition, more than 10% of the total amount of deposits of insured depository
institutions nationwide or, unless the acquisition is the bank holding company's
initial entry into the state, more than 30% of such deposits in the state (or
such lesser or greater amount set by the state).
The Riegle-Neal Act also authorizes banks to merge across state lines
beginning June 1, 1997, thereby creating interstate branches. States may opt
out of the Riegle-Neal Act and thereby prohibit interstate mergers in the state.
The Company will be unable to consolidate its banking operations in one state
with those of another state if either state in question has opted out of the
Riegle-Neal Act. The state of Montana has opted out until at least the year
2001.
REGULATORY APPROVAL. In determining whether to approve a proposed
bank acquisition, federal bank regulators will consider, among other factors,
the effect of the acquisition on competition, the public benefits expected to be
received from the acquisition, the projected capital ratios and levels on a
post-acquisition basis, and the acquiring institution's record of addressing the
credit needs of the communities it serves, including the needs of low and
moderate income neighborhoods, consistent with the safe and sound operation of
the bank, under the Community Reinvestment Act of 1977, as amended.
DIVIDEND RESTRICTIONS
Wells Fargo & Company is a legal entity separate and distinct from
its subsidiary banks and other subsidiaries. Its principal source of funds
to pay dividends on its common and preferred stock and debt service on its
debt is dividends from its subsidiaries. Various federal and state statutory
provisions and regulations limit the amount of dividends the Company's
subsidiary banks and certain other subsidiaries may pay without regulatory
approval. For information about the restrictions applicable to the Company's
subsidiary banks, see Note 3 to Financial Statements, incorporated by
reference herein.
Federal bank regulatory agencies have the authority to prohibit the
Company's subsidiary banks from engaging in unsafe or unsound practices in
conducting their businesses. The payment of dividends, depending on the
financial condition of the bank in question, could be deemed an unsafe or
unsound practice. The ability of the Company's subsidiary banks to pay
dividends in the future is currently, and could be further, influenced by bank
regulatory policies and capital guidelines.
5
<PAGE>
HOLDING COMPANY STRUCTURE
TRANSFER OF FUNDS FROM SUBSIDIARY BANKS. The Company's subsidiary
banks are subject to restrictions under federal law that limit the transfer of
funds or other items of value from such subsidiaries to the Parent and its
nonbanking subsidiaries (including affiliates) in so-called "covered
transactions." In general, covered transactions include loans and other
extensions of credit, investments and asset purchases, as well as other
transactions involving the transfer of value from a subsidiary bank to an
affiliate or for the benefit of an affiliate. Unless an exemption applies,
covered transactions by a subsidiary bank with a single affiliate are limited to
10% of the subsidiary bank's capital and surplus and, with respect to all
covered transactions with affiliates in the aggregate, to 20% of the subsidiary
bank's capital and surplus. Also, loans and extensions of credit to affiliates
generally are required to be secured in specified amounts.
SOURCE OF STRENGTH DOCTRINE. The FRB has a policy that a bank holding
company is expected to act as a source of financial and managerial strength to
each of its subsidiary banks and, under appropriate circumstances, to commit
resources to support each such subsidiary bank. This support may be required at
times when the bank holding company may not have the resources to provide it.
Capital loans by a bank holding company to any of its subsidiary banks are
subordinate in right of payment to deposits and certain other indebtedness of
the subsidiary bank. In addition, in the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
DEPOSITOR PREFERENCE. The Federal Deposit Insurance Act (the FDI Act)
provides that, in the event of the "liquidation or other resolution" of an
insured depository institution, the claims of depositors of the institution
(including the claims of the FDIC as subrogee of insured depositors) and certain
claims for administrative expenses of the FDIC as a receiver will have priority
over other general unsecured claims against the institution. If an insured
depository institution fails, insured and uninsured depositors, along with the
FDIC, will have priority in payment ahead of unsecured, nondeposit creditors,
including the institution's parent holding company.
LIABILITY OF COMMONLY CONTROLLED INSTITUTIONS. Under the FDI Act, an
insured depository institution is generally liable for any loss incurred, or
reasonably expected to be incurred, by the FDIC in connection with (a) the
default of a commonly controlled insured depository institution or (b) any
assistance provided by the FDIC to a commonly controlled insured depository
institution in danger of default. "Default" is defined generally as the
appointment of a conservator or receiver and "in danger of default" is defined
generally as the existence of certain conditions indicating that a default is
likely to occur in the absence of regulatory assistance.
CAPITAL REQUIREMENTS
The Company is subject to risk-based capital requirements and guidelines
imposed by the FRB, which are substantially similar to the capital requirements
and guidelines
6
<PAGE>
imposed by the FRB, the OCC and the FDIC on depository institutions within their
respective jurisdictions. For information about these capital requirements and
guidelines, see Note 22 to Financial Statements, incorporated by reference
herein.
The FRB's capital guidelines provide that banking organizations
experiencing internal growth or making acquisitions are expected to maintain
strong capital positions substantially above the minimum supervisory levels,
without significant reliance on intangible assets. Also, the guidelines
indicate that the FRB will consider a "tangible Tier 1 leverage ratio" in
evaluating proposals for expansion or new activities. The tangible Tier 1
leverage ratio is the ratio of a banking organization's Tier 1 capital
(excluding intangibles) to total assets (excluding intangibles).
The FRB, the FDIC and the OCC have adopted rules to incorporate market
and interest rate risk components into their risk-based capital standards.
Amendments to the risk-based capital requirements, incorporating market risk,
became effective January 1, 1998. Under the new market risk requirements,
capital will be allocated to support the amount of market risk related to a
financial institution's ongoing trading activities.
As an additional means to identify problems in the financial
management of depository institutions, the FDI Act requires federal bank
regulatory agencies to establish certain non-capital safety and soundness
standards for institutions for which they are the primary federal regulator.
The standards relate generally to operations and management, asset quality,
interest rate exposure and executive compensation. The agencies are authorized
to take action against institutions that fail to meet such standards.
The FDI Act requires federal bank regulatory agencies to take "prompt
corrective action" with respect to FDIC-insured depository institutions that do
not meet minimum capital requirements. A depository institution's treatment for
purposes of the prompt corrective action provisions will depend upon how its
capital levels compare to various capital measures and certain other factors, as
established by regulation.
FDIC INSURANCE
Through the Bank Insurance Fund (BIF), the FDIC insures the deposits
of the Company's depository institution subsidiaries up to prescribed per
depositor limits. The amount of FDIC assessments paid by each BIF member
institution is based on its relative risk of default as measured by regulatory
capital ratios and other factors. Specifically, the assessment rate is based on
the institution's capitalization risk category and supervisory subgroup
category. An institution's capitalization risk category is based on the FDIC's
determination of whether the institution is well capitalized, adequately
capitalized or less than adequately capitalized. An institution's supervisory
subgroup category is based on the FDIC's assessment of the financial condition
of the institution and the probability that FDIC intervention or other
corrective action will be required.
7
<PAGE>
The BIF assessment rate currently ranges from zero to 27 cents per
$100 of domestic deposits. The FDIC may increase or decrease the assessment
rate schedule on a semiannual basis. An increase in the BIF assessment rate
could have a material adverse effect on the Company's earnings, depending on the
amount of the increase. The FDIC is authorized to terminate a depository
institution's deposit insurance upon a finding by the FDIC that the
institution's financial condition is unsafe or unsound or that the institution
has engaged in unsafe or unsound practices or has violated any applicable rule,
regulation, order or condition enacted or imposed by the institution's
regulatory agency. The termination of deposit insurance for one or more of the
Company's subsidiary depository institutions could have a material adverse
effect on the Company's earnings, depending on the collective size of the
particular institutions involved.
All FDIC-insured depository institutions must pay an annual assessment
to provide funds for the payment of interest on bonds issued by the Financing
Corporation, a federal corporation chartered under the authority of the Federal
Housing Finance Board. The bonds (commonly referred to as FICO bonds) were
issued to capitalize the Federal Savings and Loan Insurance Corporation.
FDIC-insured depository institutions paid approximately 1.2 cents per $100 of
BIF-assessable deposits in 1998, and will continue to pay as assessed until the
earlier of December 31, 1999 or the date the last savings and loan association
ceases to exist.
FISCAL AND MONETARY POLICIES
The Company's business and earnings are affected significantly by the
fiscal and monetary policies of the federal government and its agencies. The
Company is particularly affected by the policies of the FRB, which regulates the
supply of money and credit in the United States. Among the instruments of
monetary policy available to the FRB are (a) conducting open market operations
in United States government securities, (b) changing the discount rates of
borrowings of depository institutions, (c) imposing or changing reserve
requirements against depository institutions' deposits, and (d) imposing or
changing reserve requirements against certain borrowing by banks and their
affiliates. These methods are used in varying degrees and combinations to
directly affect the availability of bank loans and deposits, as well as the
interest rates charged on loans and paid on deposits. For that reason alone,
the policies of the FRB have a material effect on the earnings of the Company.
8
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ANALYSIS OF CHANGES IN NET INTEREST INCOME
The following table allocates the changes in net interest income on a
taxable-equivalent basis to changes in either average balances or average rates
for both interest-earning assets and interest-bearing liabilities. Because of
the numerous simultaneous volume and rate changes during any period, it is not
possible to precisely allocate such changes between volume and rate. For this
table, changes that are not solely due to either volume or rate are allocated to
these categories in proportion to the percentage changes in average volume and
average rate.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
--------------------------------------------------------
1998 OVER 1997 1997 over 1996
-------------------------- --------------------------
(in millions) VOLUME RATE TOTAL Volume Rate Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in interest income:
Federal funds sold and securities
purchased under resale agreements $ 29 $ 2 $ 31 $(25) $ (1) $(26)
Securities available for sale:
Securities of U.S. Treasury and federal agencies (13) (12) (25) 83 8 91
Securities of U.S. states and political subdivisions 12 -- 12 37 (4) 33
Mortgage-backed securities:
Federal agencies (199) (17) (216) (30) 23 (7)
Private collateralized mortgage obligations (14) (2) (16) 11 8 19
Other securities 29 7 36 (7) (3) (10)
Loans held for sale 75 (16) 59 25 (41) (16)
Mortgages held for sale 433 (25) 408 (11) (28) (39)
Loans:
Commercial 299 (76) 223 220 8 228
Real estate 1-4 family first mortgage (154) 28 (126) 25 15 40
Other real estate mortgage 5 (34) (29) 55 59 114
Real estate construction 29 (18) 11 36 (10) 26
Consumer:
Real estate 1-4 family junior lien mortgage (1) (45) (46) 80 25 105
Credit card (96) 28 (68) 23 (34) (11)
Other revolving credit and monthly payment (56) 60 4 55 28 83
Lease financing 109 (7) 102 79 8 87
Foreign 58 7 65 19 (2) 17
Other 33 (1) 32 33 7 40
----- ----- ----- ----- ----- -----
Total increase (decrease) in interest income 578 (121) 457 708 66 774
----- ----- ----- ----- ----- -----
Increase (decrease) in interest expense:
Deposits:
Interest-bearing checking (12) (11) (23) (59) 16 (43)
Market rate and other savings 43 10 53 161 (46) 115
Savings certificates (44) (14) (58) 89 27 116
Other time deposits 19 (6) 13 26 (4) 22
Deposits in foreign offices (23) -- (23) 27 1 28
Short-term borrowings 167 -- 167 35 13 48
Long-term debt 18 (14) 4 (72) 25 (47)
Guaranteed preferred beneficial interests
in Company's subordinated debentures (23) 3 (20) 95 -- 95
----- ----- ----- ----- ----- -----
Total increase (decrease) in interest expense 145 (32) 113 302 32 334
----- ----- ----- ----- ----- -----
Increase (decrease) in net interest income
on a taxable-equivalent basis $ 433 $ (89) $ 344 $406 $ 34 $440
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
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</TABLE>
9
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SUPPLEMENTARY FINANCIAL DATA - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following condensed, consolidated statement of income presents the Company's
results of operations for the eight quarters ended December 31, 1998. This
information should be read in conjunction with the Financial Review and the
Financial Statements contained in the 1998 Annual Report to Stockholders.
<TABLE>
<CAPTION>
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1998
QUARTER ENDED
-----------------------------------------------------
(in millions, except per share amounts) DEC. 31 SEPT. 30(1) JUNE 30(1) MAR. 31(1)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME $ 3,598 $ 3,528 $ 3,490 $ 3,439
INTEREST EXPENSE 1,297 1,265 1,258 1,245
-------- -------- -------- --------
NET INTEREST INCOME 2,301 2,263 2,232 2,194
Provision for loan losses 624 307 309 305
-------- -------- -------- --------
Net interest income after
provision for loan losses 1,677 1,956 1,923 1,889
-------- -------- -------- --------
NONINTEREST INCOME
Service charges on deposit accounts 364 356 332 305
Trust and investment fees and commissions 274 267 269 259
Credit card fee revenue 136 136 128 121
Other fees and commissions 252 241 232 221
Mortgage banking 252 275 303 276
Insurance 70 73 111 95
Net venture capital gains (losses) (4) 4 53 59
Net gains on securities
available for sale 8 76 66 19
Other 205 193 221 178
-------- -------- -------- --------
Total noninterest income 1,557 1,621 1,715 1,533
-------- -------- -------- --------
NONINTEREST EXPENSE
Salaries and benefits 1,292 1,061 1,055 1,007
Equipment 328 192 196 184
Net occupancy 200 188 187 189
Goodwill 104 108 104 104
Core deposit intangible 60 58 61 63
Net losses on dispositions of premises
and equipment 270 7 41 7
Operating losses 46 35 33 39
Other 1,182 698 775 703
-------- -------- -------- --------
Total noninterest expense 3,482 2,347 2,452 2,296
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAX
EXPENSE (BENEFIT) (248) 1,230 1,186 1,126
Income tax expense (benefit) (54) 488 467 442
-------- -------- -------- --------
NET INCOME (LOSS) $ (194) $ 742 $ 719 $ 684
-------- -------- -------- --------
-------- -------- -------- --------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCK $ (203) $ 733 $ 710 $ 676
-------- -------- -------- --------
-------- -------- -------- --------
EARNINGS (LOSS) PER COMMON SHARE $ (.12) $ .45 $ .44 $ .42
-------- -------- -------- --------
-------- -------- -------- --------
DILUTED EARNINGS (LOSS)
PER COMMON SHARE $ (.12) $ .45 $ .43 $ .41
-------- -------- -------- --------
-------- -------- -------- --------
DIVIDENDS DECLARED PER
COMMON SHARE $ .185 $ .185 $ .165 $ .165
-------- -------- -------- --------
-------- -------- -------- --------
Average common shares outstanding 1,642.4 1,617.3 1,610.3 1,615.7
-------- -------- -------- --------
-------- -------- -------- --------
Diluted average common
shares outstanding 1,642.4 1,640.7 1,632.2 1,639.1
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
1997
Quarter ended
------------------------------------------------------
(in millions, except per share amounts) Dec. 31(1) Sept. 30(1) June 30(1) Mar. 31(1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME $ 3,445 $ 3,400 $ 3,377 $ 3,380
INTEREST EXPENSE 1,263 1,251 1,230 1,210
-------- -------- -------- --------
NET INTEREST INCOME 2,182 2,149 2,147 2,170
Provision for loan losses 343 320 263 214
-------- -------- -------- --------
Net interest income after
provision for loan losses 1,839 1,829 1,884 1,956
-------- -------- -------- --------
NONINTEREST INCOME
Service charges on deposit accounts 315 311 308 310
Trust and investment fees and commissions 244 247 235 228
Credit card fee revenue 126 119 107 96
Other fees and commissions 213 214 206 193
Mortgage banking 258 254 188 226
Insurance 72 74 100 90
Net venture capital gains (losses) 26 53 93 19
Net gains on securities
available for sale 50 22 22 5
Other 175 133 169 173
-------- -------- -------- --------
Total noninterest income 1,479 1,427 1,428 1,340
-------- -------- -------- --------
NONINTEREST EXPENSE
Salaries and benefits 979 958 933 940
Equipment 195 181 187 176
Net occupancy 181 179 176 183
Goodwill 112 103 113 105
Core deposit intangible 67 68 71 67
Net losses on dispositions of premises
and equipment 19 11 7 39
Operating losses 72 62 190 50
Other 633 634 686 612
-------- -------- -------- --------
Total noninterest expense 2,258 2,196 2,363 2,172
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAX
EXPENSE (BENEFIT) 1,060 1,060 949 1,124
Income tax expense (benefit) 410 430 392 462
-------- -------- -------- --------
NET INCOME (LOSS) $ 650 $ 630 $ 557 $ 662
-------- -------- -------- --------
-------- -------- -------- --------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCK $ 640 $ 619 $ 546 $ 650
-------- -------- -------- --------
-------- -------- -------- --------
EARNINGS (LOSS) PER COMMON SHARE $ .40 $ .38 $ .33 $ .39
-------- -------- -------- --------
-------- -------- -------- --------
DILUTED EARNINGS (LOSS)
PER COMMON SHARE $ .39 $ .38 $ .33 $ .39
-------- -------- -------- --------
-------- -------- -------- --------
DIVIDENDS DECLARED PER
COMMON SHARE $ .165 $ .15 $ .15 $ .15
-------- -------- -------- --------
-------- -------- -------- --------
Average common shares outstanding 1,621.1 1,623.6 1,639.1 1,654.8
-------- -------- -------- --------
-------- -------- -------- --------
Diluted average common
shares outstanding 1,641.9 1,646.4 1,663.1 1,679.7
-------- -------- -------- --------
-------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1)Amounts have been restated to reflect the pooling-of-interests accounting
treatment of the Merger. The restated amounts include adjustments to conform
the accounting policies of the former Norwest and the former Wells Fargo. In
noninterest expense, salaries and benefits decreased by $2 million in each of
the quarters that preceded the fourth quarter of 1998 to conform the
accounting treatment for the postretirement transition obligation identified
with the implementation of FAS 106, Employers' Accounting for Postretirement
Benefits Other than Pensions. Additionally, equipment expense increased $2
million for the quarter ended June 30, 1998 and $6 million, $4 million, $6
million and $2 million for the quarters ended December 31, 1997, September
30, 1997, June 30, 1997 and March 31, 1997, respectively.
10
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS)--QUARTERLY (1)(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Quarter ended December 31,
------------------------------------------------------------------------
1998 1997
----------------------------------- ---------------------------------
INTEREST Interest
AVERAGE YIELDS/ INCOME/ Average Yields/ income/
(in millions) BALANCE RATES EXPENSE balance rates expense
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Federal funds sold and securities purchased
under resale agreements $ 2,011 5.25% $ 27 $ 909 5.42% $ 12
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 3,722 5.82 54 3,906 6.13 60
Securities of U.S. states and political subdivisions 1,539 8.41 31 1,513 8.38 31
Mortgage-backed securities:
Federal agencies 20,283 6.85 341 18,874 7.15 331
Private collateralized mortgage obligations 3,433 6.66 57 2,706 6.82 46
-------- ------ -------- ------
Total mortgage-backed securities 23,716 6.82 398 21,580 7.11 377
Other securities 2,738 5.86 43 1,331 4.80 17
-------- ------ -------- ------
Total securities available for sale 31,715 6.71 526 28,330 6.92 485
Loans held for sale (3) 5,099 7.63 97 4,078 8.08 82
Mortgages held for sale (3) 16,995 6.82 290 8,281 7.21 149
Loans:
Commercial 34,631 8.62 751 30,640 9.14 705
Real estate 1-4 family first mortgage 12,941 8.92 289 15,102 8.86 340
Other real estate mortgage 16,305 8.89 365 16,204 9.36 382
Real estate construction 3,779 9.12 87 3,366 9.64 82
Consumer:
Real estate 1-4 family junior lien mortgage 10,125 8.73 224 9,990 9.56 227
Credit card 5,644 14.67 207 6,542 14.66 240
Other revolving credit and monthly payment 16,284 12.69 518 17,414 12.76 557
-------- ------ -------- ------
Total consumer 32,053 12.33 949 33,946 12.54 1,024
Lease financing 6,177 8.02 124 4,782 8.43 101
Foreign 1,438 21.18 76 1,015 20.94 53
-------- ------ -------- ------
Total loans (4) 107,324 9.80 2,641 105,055 10.19 2,687
Other 2,353 5.27 31 2,666 6.18 41
-------- ------ -------- ------
Total earning assets $165,497 8.72 3,612 $149,319 9.25 3,456
-------- ------ -------- ------
-------- --------
FUNDING SOURCES
Deposits:
Interest-bearing checking $ 2,181 0.94 5 $ 2,172 2.02 11
Market rate and other savings 54,653 2.49 343 50,991 2.61 336
Savings certificates 27,673 5.11 357 28,351 5.34 381
Other time deposits 3,911 5.39 53 3,955 5.66 56
Deposits in foreign offices 1,130 4.69 13 866 4.50 10
-------- ------ -------- ------
Total interest-bearing deposits 89,548 3.42 771 86,335 3.65 794
Short-term borrowings 17,075 5.09 219 11,757 5.47 162
Long-term debt 19,143 6.09 292 17,465 6.41 280
Guaranteed preferred beneficial interests in Company's
subordinated debentures 774 7.65 15 1,298 7.81 25
-------- ------ -------- ------
Total interest-bearing liabilities 126,540 4.07 1,297 116,855 4.29 1,261
Portion of noninterest-bearing funding sources 38,957 -- -- 32,464 -- --
-------- ------ -------- ------
Total funding sources $165,497 3.12 1,297 $149,319 3.37 1,261
-------- ------ -------- ------
-------- --------
NET INTEREST MARGIN AND NET INTEREST INCOME ON
A TAXABLE-EQUIVALENT BASIS (5) 5.60% $2,315 5.88% $2,195
----- ------ ----- ------
----- ------ ----- ------
NONINTEREST-EARNING ASSETS
Cash and due from banks $ 11,086 $ 10,852
Goodwill 7,709 8,123
Other 13,480 12,949
-------- --------
Total noninterest-earning assets $ 32,275 $ 31,924
-------- --------
-------- --------
NONINTEREST-BEARING FUNDING SOURCES
Deposits $ 43,303 $ 38,127
Other liabilities 7,197 6,440
Preferred stockholders' equity 463 463
Common stockholders' equity 20,269 19,358
Noninterest-bearing funding sources used to
fund earning assets (38,957) (32,464)
-------- --------
Net noninterest-bearing funding sources $ 32,275 $ 31,924
-------- --------
-------- --------
TOTAL ASSETS $197,772 $181,243
-------- --------
-------- --------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The average prime rate of the Company was 7.92% and 8.50% for the quarters
ended December 31, 1998 and 1997, respectively. The average three-month
London Interbank Offered Rate (LIBOR) was 5.28% and 5.84% for the same
quarters, respectively.
(2) Interest rates and amounts include the effects of hedge and risk management
activities associated with the respective asset and liability categories.
(3) Yields are based on amortized cost balances.
(4) Nonaccrual loans and related income are included in their respective loan
categories.
(5) Includes taxable-equivalent adjustments that primarily relate to income on
certain loans and securities that is exempt from federal and applicable
state income taxes. The federal statutory tax rate was 35% for all periods
presented.
11
<PAGE>
LOAN PORTFOLIO
The following table presents the remaining contractual principal
maturities of selected loan categories at December 31, 1998 and a summary of
the major categories of loans outstanding at the end of the last five years.
At December 31, 1998, the Company did not have loan concentrations that
exceeded 10% of total loans, except as shown below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1998
------------------------------------------------------------------------------
OVER ONE YEAR
THROUGH FIVE YEARS OVER FIVE YEARS
------------------ ---------------
FLOATING FLOATING
OR OR
ONE YEAR FIXED ADJUSTABLE FIXED ADJUSTABLE
(in millions) OR LESS RATE RATE RATE RATE TOTAL
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Selected loan maturities:
Commercial $20,037 $3,072 $10,124 $ 352 $1,865 $ 35,450
Real estate 1-4 family first
mortgage 2,848 747 418 3,889 3,727 11,629
Other real estate mortgage 2,905 2,585 4,019 3,926 3,233 16,668
Real estate construction 2,165 193 1,124 145 163 3,790
Foreign 695 752 98 45 19 1,609
------- ------ ------- ------ ------ --------
Total selected loan
maturities $28,650 $7,349 $15,783 $8,357 $9,007 69,146
------- ------ ------- ------ ------ --------
------- ------ ------- ------ ------
Other loan categories:
Consumer:
Real estate 1-4 family
junior lien mortgage 10,996
Credit card 5,795
Other revolving credit and
monthly payment 15,677
--------
Total consumer 32,468
Lease financing 6,380
--------
Total loans $107,994
--------
--------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
December 31,
--------------------------------------------------
(in millions) 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Selected loan maturities:
Commercial $ 32,061 $ 30,794 $20,127 $16,550
Real estate 1-4 family first
mortgage 14,165 16,051 8,799 14,335
Other real estate mortgage 16,326 16,419 11,857 10,616
Real estate construction 3,326 3,247 2,108 1,581
Foreign 1,155 1,132 932 643
-------- -------- ------- -------
Total selected loan
maturities 67,033 67,643 43,823 43,725
-------- -------- ------- -------
Other loan categories:
Consumer:
Real estate 1-4 family
junior lien mortgage 10,618 10,357 6,970 6,433
Credit card 6,671 7,028 5,667 5,636
Other revolving credit and
monthly payment 17,021 16,916 11,715 8,686
-------- -------- ------- -------
Total consumer 34,310 34,301 24,352 20,755
Lease financing 4,968 3,816 2,605 2,095
-------- -------- ------- -------
Total loans $106,311 $105,760 $70,780 $66,575
-------- -------- ------- -------
-------- -------- ------- -------
- ---------------------------------------------------------------------------------------
</TABLE>
The table at the top of the following page summarizes other real estate
loans by state and property type. The table at the bottom of the following page
summarizes real estate construction loans by state and project type.
12
<PAGE>
REAL ESTATE MORTGAGE LOANS BY STATE AND TYPE
(excluding 1-4 family first mortgages)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
California Texas Minnesota Nevada
------------------- ----------------- ----------------- -----------------
Total Non- Total Non- Total Non- Total Non-
(in millions) loans accrual loans accrual loans accrual loans accrual
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Office buildings $ 2,032 $ 19 $ 218 $ -- $ 76 $ -- $ 117 $ --
Retail buildings 1,191 35 229 3 220 1 64 --
Industrial 1,564 8 246 2 269 1 102 --
Hotels/motels 278 2 251 2 49 -- 408 9
Apartments 620 7 123 -- 102 -- 108 --
Institutional 654 9 67 3 -- -- 33 --
Agricultural 274 8 50 1 64 2 -- --
Land 184 1 87 -- 27 -- 13 --
1-4 family structures (1) 3 -- 66 -- 43 -- 1 --
Other 123 1 137 3 90 1 52 --
------- ---- ------- ---- ----- --- ----- ----
Total by state $ 6,923 $ 90 $ 1,474 $ 14 $ 940 $ 5 $ 898 $ 9
------- ---- ------- ---- ----- --- ----- ----
------- ---- ------- ---- ----- --- ----- ----
% of total loans 41% 9% 6% 5%
------- ------- ----- -----
------- ------- ----- -----
Nonaccruals as a %
of total by state 1% 1% 1% 1%
---- ---- --- ----
---- ---- --- ----
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
December 31, 1998
- -----------------------------------------------------------------------------------------------
Other Non-
states (2) All states accruals
------------------- -------------------- as a %
Total Non- Total Non- of total
(in millions) loans accrual loans accrual by type
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Office buildings $ 1,162 $ 3 $ 3,605 $ 22 1%
Retail buildings 1,675 46 3,379 85 3
Industrial 773 3 2,954 14 --
Hotels/motels 700 15 1,686 28 2
Apartments 567 3 1,520 10 1
Institutional 354 4 1,108 16 1
Agricultural 510 7 898 18 2
Land 180 -- 491 1 --
1-4 family structures (1) 155 1 268 1 --
Other 357 3 759 8 1
------- ---- -------- -----
Total by state $ 6,433 $ 85 $ 16,668 $ 203 1%
------- ---- -------- ----- --
------- ---- -------- ----- --
% of total loans 39% 100%
------- --------
------- --------
Nonaccruals as a %
of total by state 1%
----
----
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents loans to real estate developers secured by 1-4 family
residential developments.
(2) Consists of 36 states; no state had loans in excess of $813 million at
December 31, 1998.
REAL ESTATE CONSTRUCTION LOANS BY STATE AND TYPE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
California Arizona Texas Colorado
---------------- ---------------- ---------------- ----------------
Total Non- Total Non- Total Non- Total Non-
(in millions) loans accrual loans accrual loans accrual loans accrual
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retail buildings $ 116 $ 1 $ 77 $ -- $ 27 $-- $ 19 $ --
1-4 family:
Land 151 -- 1 -- 6 -- 17 --
Structures 160 3 102 1 117 1 99 1
Land (excluding
1-4 family) 139 -- 37 -- 35 2 17 --
Apartments 134 4 83 -- 49 -- 37 --
Office buildings 140 -- 40 -- 30 -- 27 --
Industrial 152 2 27 -- 16 -- 40 --
Hotels/motels 53 -- 8 -- 7 -- 19 --
Institutional 51 -- 10 -- 31 -- 20 --
Agricultural 4 -- 2 -- 1 -- -- --
Other 123 -- 11 -- 12 1 13 --
------ --- ---- -- ---- -- ---- --
Total by state $1,223 $10 $398 $1 $331 $4 $308 $1
------ --- ---- -- ---- -- ---- --
------ --- ---- -- ---- -- ---- --
% of total loans 32% 11% 9% 8%
------ ---- ---- ----
------ ---- ---- ----
Nonaccruals as a %
of total by state 1% --% 1% --%
--- -- -- --
--- -- -- --
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
December 31, 1998
--------------------------------------------------
Other Non-
states(1) All states accruals
---------------- ---------------- as a%
Total Non- Total Non- of total
(in millions) loans accrual loans accrual by type
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Retail buildings $ 180 $ -- $ 419 $ 1 --%
1-4 family:
Land 73 -- 248 -- --
Structures 260 1 738 7 1
Land (excluding
1-4 family) 253 -- 481 2 --
Apartments 105 -- 408 4 1
Office buildings 141 -- 378 -- --
Industrial 90 -- 325 2 1
Hotels/motels 116 -- 203 -- --
Institutional 63 -- 175 -- --
Agricultural 5 -- 12 -- --
Other 244 -- 403 1 --
------ -- ------ ---
Total by state $1,530 $1 $3,790 $17 --%
------ -- ------ --- --
------ -- ------ --- --
% of total loans 40% 100%
------- ------
------- ------
Nonaccruals as a %
of total by state --%
--
--
- ---------------------------------------------------------------------------
</TABLE>
(1) Consists of 30 states; no state had loans in excess of $282 million at `
December 31, 1998.
13
<PAGE>
UNDERWRITING POLICIES AND PRACTICES
It is the policy of the Company to grant credit in accordance with the
principles of sound risk management and the Company's business strategy. The
Company obtains and analyzes sufficient information to determine that the
purpose of a credit extension is lawful and productive and that the borrower is
able to repay as scheduled. Credit is structured in a manner consistent with
such supporting analysis and is monitored to detect changes in quality. The
Company's credit policies establish the fundamental credit principles which
guide the Company in granting loans, leases, lines of credit, standby and
commercial letters of credit, acceptances and commitments ("direct credit") to
customers on an unsecured, partially secured or fully secured basis. The credit
product line for both businesses and individuals includes standardized products
as well as customized, individual accommodations. In addition, the Company
provides products and services which could become direct credit exposure unless
such products are offered on a "cash only" basis. These include: automated
clearing house services, controlled disbursement, wire services, foreign
exchange services, interest rate protection products, Federal fund lines to
banks, cash letters and deposit accounts which create exposure by allowing use
of funds advanced/uncollected funds ("operating credit"). Standardized
documentation and underwriting and a study of the requirements of the secondary
market are an explicit consideration in credit product development.
The Company requires some degree of background check into character and
credit history of all its credit customers. Extensions of credit must be
supported by current financial information on the borrower (and guarantor) which
is appropriate to the size and type of credit being offered; such information
can denote any material which serves to inform the Company about the financial
health of its credit customers. An accompanying credit analysis includes, at a
minimum, an evaluation of the customer's financial strength and probability of
repayment, with due consideration given to the negative factors which may affect
the borrower's ability to meet repayment schedules. Collateral is valued in
accordance with Company appraisal standards and, where applicable, appraisal
regulations issued under the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 and other applicable law. For commercial real estate
transactions, the recommending officer reviews and evaluates the key assumptions
supporting the appraised value.
In addition to a broad range of laws and regulations and the Company's
credit policies, the Company has established minimum underwriting standards
which delineate criteria for sources of repayment, financial strength and
enhancements such as guarantees. The primary source of repayment will be
recurring cash flow of the borrower or cash flow from the real estate project
being financed. Underwriting standards include: minimum financial condition and
cash flow hurdles for unsecured credit; maximum loan to collateral value ratios
for secured products; minimum cash flow coverage of debt service, or debt to
income ratios, for term products; minimum liquidity and maximum financial
leverage requirements when lending to highly leveraged borrowers; and, for
certain products, a description of any credit scoring criteria and methodology
employed. Prudent credit practice will permit credit extensions which are an
exception to the minimum underwriting standards; procedures for
14
<PAGE>
approval of exceptions are included in Company policy; and certain exceptions
are reported to the Board of Directors.
Generally, the Company's minimum underwriting standards for
commercial real estate include various maximum loan-to-value ("LTV") ratios
ranging from 50% to 80%, depending on the type of collateral and the size and
purpose of the loan; minimum debt service (stabilized net income divided by
debt service cost) ranging from 1.10 to 1.30 depending on the type of
property financed; and maximum terms ranging from 2 to 15 years for certain
commercial property loans depending on the same loan/collateral
characteristics. For example, a typical owner-occupied commercial real estate
loan would most often have a maximum LTV of 80%, debt service coverage of
1.25 and a term of 4 to 15 years. For community reinvestment projects, the
Company applies special underwriting criteria to its financing of
construction of affordable multi-family housing built by non-profit as well
as for-profit developers.
The Company has devoted a limited portion of its commercial real
estate portfolio to higher-risk loans, for which a commensurate return is
expected. Such transactions include purchases of performing or distressed
real estate loans at a discount, acquisition of rated and unrated tranches of
commercial mortgage obligations, senior loan originations, mezzanine
financing and origination of single assets for securitization. Many of the
higher-yielding transactions may contain non-recourse provisions. In general,
this business is more "opportunistic" in nature, as opposed to representing a
highly defined lending program. As such, higher LTVs (up to 90% or 95%) will
be underwritten on occasion, particularly in the case of junior and senior
participating debt.
Generally, commercial loan categories include unsecured loans and
lines of credit with minimum debt service coverage (earnings before interest,
taxes, depreciation and amortization divided by debt service cost) dependent
on the specific credit analysis. Common forms of collateral pledged to secure
commercial credit accommodations include accounts receivable, inventories,
equipment, agricultural crops or livestock, marketable securities and cash or
cash equivalent. In addition to the minimum debt service requirements, most
transactions have maximum terms of 1 to 8 years and/or LTVs in the range of
65% to 85%, based on an analysis of the collateral pledged. Wells Fargo HSBC
Trade Bank, which provides trade financing, letters of credit, foreign
exchange services and collection services, generally uses the same
underwriting guidelines as the Company has established for its commercial
lending functions.
The Company also allocates a relatively small percentage of its
commercial loan portfolio to the origination of asset-based loans secured by
"hard assets" (accounts receivable, inventory, equipment and/or real estate).
In contrast to traditional commercial lending, asset-based borrowers
generally do not have the ability to repay their debts through cash flow;
therefore, such loans are fully secured and tailored to the growth and
turnover of the borrower's self-liquidating asset base. Maximum LTVs are
generally in the range of 65% to 85%, with specialized collateral monitoring
and control procedures in place to mitigate risk exposure.
15
<PAGE>
The Company has devoted a focused product group to providing a full
range of credit products to small businesses with annual sales of up to $10
million and in which the owner of the business is also the principal
financial decision maker. Credit products include lines of credit,
receivables and inventory financing, equipment loans and leases and real
estate financing. In addition, the group employs a variety of government
sponsored credit programs designed to meet the credit needs of small
businesses who fit "near bankable" business profiles. The group utilizes
automated credit decision methods, including credit scoring and rule-based
criteria, to approve or decline requests for credit. In some cases, more
traditional analysis is employed. An evaluation of the soundness and
desirability of collateral, if any, is also required before an extension of
credit will be made. Loan-to-value, debt service coverage and maximum loan
term underwriting guidelines employed are, in general, similar to those
described earlier for commercial and commercial real estate loan products.
The Company is an active participant in the national transportation
finance market, underwriting primarily consumer auto leases and indirect auto
loans (sales finance contracts). Direct loans and marine and recreational
vehicle loans are also offered as accommodation products for our retail
customers and a select group of dealers. Most applicants for these credit
products are assigned a credit score which is indicative of their relative
probability of repayment. The credit scoring models are validated as to their
predictive power on a periodic basis. The lending group includes in its
credit decision making criteria other judgmental factors, such as advance
rate and debt to income ratio, which are used to augment this credit score.
However, all credit decisions made contrary to an established cut-off score
must be supported and documented by a credit officer with the appropriate
approval authority.
The Company's principal target market for offering consumer credit
cards and consumer loans and lines of credit is its franchise states in the
U.S. as well as customers from its national businesses. Some accounts from
previous national campaigns and portfolio acquisitions also remain in the
portfolio. The credit review process includes initial screens to ensure that
applicants meet minimum age and income level requirements for the product
requested. Fraud screens are also completed and credit bureau reports are
used to calculate the debt-to-income ratios and credit scores on which an
evaluation of creditworthiness is based. Analyst review may be used to
supplement the recommendations of the credit score. Applicants with major
derogatory bureau information, minimal credit references, or high
debt-to-income ratios may be considered for declines in spite of passing the
credit score, while other favorable factors may be considered in approving
applicants failing the credit score. Income, employment and/or collateral
verification may be required for certain products and loan amounts.
The Company offers a variety of first mortgage loan products to
customers. The loan products are underwritten and packaged for sale in the
secondary mortgage markets. A limited number of these loans are purchased by
the Company, typically for community lending purposes or other client
accommodations. The Company also provides second mortgage loans and lines of
16
<PAGE>
credit secured by first and second deeds of trust directly to its customers. The
Company relies on cash flow as the primary source of repayment for these equity
products. The nature of the credit review that is conducted depends on the
product, but typically consists of an evaluation of the applicant's debt ratios
and credit history, either judgmentally or using a credit score, along with a
review of the collateral. Maximum combined LTVs will range from 50% to 100%
depending on the nature, amount and term of the loan.
The Company operates a diversified consumer finance company, which
conducts consumer finance and auto finance business. The finance company also
issues credit cards and has a relatively small portfolio of accounts
receivable, lease and other commercial financing. The majority of its loans
are secured by liens on household goods, automobiles, other personal property
or real estate. The consumer finance operation makes direct loans to
consumers and purchase sales finance contracts from retail merchants from
offices throughout the United States, and in Canada, the Caribbean and Latin
America. The auto finance business specializes in purchasing sales finance
contracts directly from automobile dealers and making loans secured by
automobiles in the United States and Puerto Rico. In order to make a careful
selection of credit risks, the company reviews credit information concerning
each applicant to determine income, living expenses, payment obligations,
indebtedness, paying habits and length and stability of employment. The
information is obtained from the applicants, the applicants' employers,
creditors of the applicants and credit reporting agencies; however, credit
scoring is not used as an automated credit decision tool.
The above underwriting practices are general standards that are
subject to change; the actual terms and conditions of a specific credit
transaction are dependent on an analysis of the specific transaction.
17
<PAGE>
CHANGES IN THE ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
(in millions) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, BEGINNING OF YEAR $ 3,062 $ 3,059 $ 2,711 $2,872 $2,911
Allowances related to assets acquired, net 144 168 870 119 29
Provision for loan losses 1,545 1,140 500 312 365
Loan charge-offs:
Commercial (261) (357) (200) (99) (90)
Real estate 1-4 family first mortgage (26) (26) (24) (20) (23)
Other real estate mortgage (54) (26) (50) (59) (96)
Real estate construction (3) (5) (14) (10) (22)
Consumer:
Real estate 1-4 family junior lien mortgage (31) (37) (38) (23) (33)
Credit card (535) (579) (487) (330) (211)
Other revolving credit and monthly payment (1,002) (618) (488) (255) (167)
-------- -------- -------- ------ ------
Total consumer (1,568) (1,234) (1,013) (608) (411)
Lease financing (48) (46) (35) (18) (16)
Foreign (84) (37) (35) (29) (26)
-------- -------- -------- ------ ------
Total loan charge-offs (2,044) (1,731) (1,371) (843) (684)
-------- -------- -------- ------ ------
Loan recoveries:
Commercial 82 105 89 68 74
Real estate 1-4 family first mortgage 11 9 12 8 11
Other real estate mortgage 78 62 57 65 43
Real estate construction 4 12 12 5 22
Consumer:
Real estate 1-4 family junior lien mortgage 7 10 10 4 5
Credit card 56 61 50 26 29
Other revolving credit and monthly payment 163 144 101 57 46
-------- -------- -------- ------ ------
Total consumer 226 215 161 87 80
Lease financing 12 13 9 13 17
Foreign 14 10 9 5 4
-------- -------- -------- ------ ------
Total loan recoveries 427 426 349 251 251
-------- -------- -------- ------ ------
Total net loan charge-offs (1,617) (1,305) (1,022) (592) (433)
-------- -------- -------- ------ ------
BALANCE, END OF YEAR $ 3,134 $ 3,062 $ 3,059 $2,711 $2,872
-------- -------- -------- ------ ------
-------- -------- -------- ------ ------
Total net loan charge-offs as a percentage of
average total loans 1.52% 1.25% 1.04% .84% .70%
-------- -------- -------- ------ ------
-------- -------- -------- ------ ------
Allowance as a percentage of total loans 2.90% 2.88% 2.89% 3.83% 4.31%
-------- -------- -------- ------ ------
-------- -------- -------- ------ ------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The SEC requires the Company to present the ratio of the allowance for
loan losses to total nonaccrual loans. This ratio was 442% and 434% at
December 31, 1998 and 1997, respectively. This ratio may fluctuate
significantly from period to period due to such factors as the mix of loan types
in the portfolio, the prospects of borrowers and the value and marketability of
collateral as well as, for the nonaccrual portfolio taken as a whole, wide
variances from period to period in terms of delinquency and relationship of book
to contractual principal balance. Classification of a loan as nonaccrual does
not necessarily indicate that the principal of a loan is uncollectible in whole
or in part. Consequently, the ratio of the allowance for loan losses to
nonaccrual loans, taken alone and without taking into account numerous
additional factors, is not a reliable indicator of the adequacy of the allowance
for loan losses. Indicators of the credit quality of the Company's loan
portfolio and the method of determining the allowance for loan losses are
discussed in the 1998 Annual Report to Stockholders.
18
<PAGE>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The table on page 22 provides a breakdown of the allowance for loan
losses by loan category. The Company has an established process to determine the
adequacy of the allowance for loan losses which assesses the risk and losses
inherent in its portfolio. This process provides an allowance consisting of two
components, allocated and unallocated. To arrive at the allocated component of
the allowance, the Company combines estimates of the allowances needed for loans
analyzed individually (including impaired loans subject to Statement of
Financial Accounting Standards No. 114 (FAS 114), Accounting by Creditors for
Impairment of a Loan) and loans analyzed on a pool basis.
The determination of allocated reserves for portfolios of larger
commercial and commercial real estate loans involves a review of individual
higher-risk transactions, focusing on the accuracy of loan grading, assessments
of specific loss content, and, in some cases, strategies for resolving problem
credits. These considerations supplement the application of loss factors
delineated by individual loan grade to the existing distribution of risk
exposures, thus framing an assessment of inherent losses across the entire
wholesale lending portfolio segment which is responsive to shifts in portfolio
risk content. The loss factors used for this analysis have been derived from
migration models which track actual portfolio movements from problem asset loan
grades to loss over a 5 to 10 year period. In the case of pass loan grades, the
loss factors are derived from analogous loss experience in public debt markets,
calibrated to the long-term average loss experience of the Company's portfolios.
The loan loss reserve allocations arrived at through this loss factor
methodology are adjusted based on management's judgment concerning the effect of
recent economic events on portfolio performance.
In the case of more homogeneous portfolios, such as consumer loans and
leases, residential mortgage loans, and some segments of small business lending,
the determination of allocated reserves is conducted at an aggregate, or pooled,
level. For portfolios of this nature, the risk assessment process emphasizes
the development of rigorous forecasting models, which focus on recent
delinquency and loss trends in different portfolio segments to project relevant
risk metrics over an intermediate-term horizon. Such analyses are updated
frequently to capture the most recent behavioral characteristics of the subject
portfolios, as well as any changes in management's loss mitigation or customer
solicitation strategies, in order to reduce the differences between estimated
and observed losses. A reserve which approximates one year of projected net
losses is provided as the baseline allocation for most homogeneous portfolios,
to which management may add certain adjustments to ensure that a prudent amount
of conservatism is present in the specific assumptions underlying that forecast.
While coverage of one year's losses is often adequate (particularly
for homogeneous pools of loans and leases), the time period covered by the
allowance may vary by portfolio, based on the Company's best estimate of the
inherent losses in the entire portfolio as of the evaluation date. To mitigate
the imprecision inherent in most estimates of expected credit losses, the
allocated component of the allowance is supplemented by an unallocated
component. The unallocated component includes management's judgmental
determination of the amounts
19
<PAGE>
necessary for concentrations, economic uncertainties and other subjective
factors; correspondingly, the relationship of the unallocated component to
the total allowance for loan losses may fluctuate from period to period.
Although management has allocated a portion of the allowance to specific loan
categories, the adequacy of the allowance must be considered in its entirety.
At December 31, 1998 the allowance for loan losses was $3,134 million
(2.90% of total loans), compared with $3,062 million (2.88% of total loans) at
December 31, 1997. During 1998, net charge-offs exceeded the provision for loan
losses by $72 million; however, the addition of $144 million of allowances
related to acquired assets accounted for the net growth of $72 million in the
reserve, year over year. The components of the allowance, allocated and
unallocated, are shown in the table on page 22. The allocated component declined
to $1,968 million from $2,061 million, while the unallocated component grew to
$1,166 million from $1,001 million, as of December 31, 1998 and 1997,
respectively.
The $93 million reduction in the allocated component was
substantially due to the lower allocated allowance to loans outstanding
ratios in the credit card, other real estate mortgage, and lease financing
portfolios. The lower projected future losses in the leasing portfolio,
despite significant portfolio growth, reduced allocated reserves by roughly
$20 million year over year. Likewise, net loss rates in the credit card
portfolio are expected to improve modestly during 1999, which, combined with
further expected run-off in the portfolio, brought the allocated reserve
requirement down by roughly $65 million. Finally, the commercial real estate
portfolio showed continuing gradual improvement in problem asset trends, with
significant reductions in nonaccruing loans and increases in recoveries of
previous charge-offs. The improvements in the credit quality of this
portfolio translated into a reduction of approximately $55 million in the
allocated reserve. A portion of these reductions in the allocated component
was offset by increases of approximately $45 million in the foreign and other
consumer product categories which relate primarily to an increase in reserve
coverage of expected losses in Norwest Financial, including Island Finance.
The changes in the allocated reserve relate primarily to projected
rates of loss in different portfolio segments. Analyzing the movements in
the allocated reserve strictly from a loan volume perspective indicates that,
had the ratio of allocated reserves to loans outstanding remained flat with
the 1997 ratio of 1.94%, allocated reserves would have increased by roughly
$33 million, as loans outstanding grew by $1.7 billion during the year.
However, due to a shift in portfolio composition, the higher volume increased
the allocated reserve by only $12 million, as relatively lower-risk
commercial loans and lease financing supplanted higher-risk credit cards and
other consumer loans.
There were no material changes in estimation methods and assumptions
for the allowance that took place during the year. Relatively minor differences
existed in the methodologies for deriving the allocated portion of the allowance
employed by the former Norwest and the former Wells Fargo; these differences
will be reconciled in the first half of 1999. No material changes to the level
of the allowance are expected.
The Company considers the allowance for loan losses of $3,134 million
adequate to cover losses inherent in loans, loan commitments, and standby
letters of credit at December 31,
20
<PAGE>
1998. This allowance is roughly 1.9 times the level of 1998 net losses (or 2.4
times 1998 net losses, exclusive of approximately $300 million of losses in
Island Finance, reflecting a fourth quarter review of its loan portfolio). This
ratio is expected to remain in the range of 2.5 times coverage of 1999 net
losses, which was its approximate value during the first three quarters of 1998.
The foregoing discussion contains forward-looking statements about the
adequacy of the Company's reserves for future loan losses. These
forward-looking statements are inherently subject to risks and uncertainties. A
number of factors--many of which are beyond the Company's control--could cause
actual losses to be more than estimated losses. Among these factors are changes
in political and economic conditions, interest rate fluctuations, technological
changes (including the "Year 2000" data systems compliance issue), equity and
fixed income market fluctuations, personal and commercial customers'
bankruptcies, inflation, changes in law, changes in fiscal, monetary, regulatory
and tax policies, monetary fluctuations, credit quality and credit risk
management, mergers and acquisitions, and the integration of merged and acquired
companies.
21
<PAGE>
<TABLE>
<CAPTION>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
- -------------------------------------------------------------------------------------------------------------
(in millions) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial $ 605 $ 560 $ 472
Real estate 1-4 family first mortgage 50 64 53
Other real estate mortgage 230 277 340
Real estate construction 56 46 59
Consumer:
Credit card 344 471 440
Other consumer 550 542 452
------ ------ ------
Total consumer 894 1,013 892
Lease financing 54 58 47
Foreign 79 43 34
------ ------ ------
Total allocated 1,968 2,061 1,897
Unallocated component of
the allowance (1) 1,166 1,001 1,162
------ ------ ------
Total $3,134 $3,062 $3,059
------ ------ ------
------ ------ ------
--------------------------------------------------------------
1998 1997 1996
------------------ ------------------ ------------------
ALLOC. LOAN Alloc. Loan Alloc. Loan
ALLOW. CATGRY allow. catgry allow. catgry
AS% AS% as% as% as% as%
OF LOAN OF TOTAL of loan of total of loan of total
CATGRY LOANS catgry loans catgry loans
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Commercial 1.71% 33% 1.75% 30% 1.53% 29%
Real estate 1-4 family first mortgage .43 11 .45 14 .33 15
Other real estate mortgage 1.38 15 1.70 15 2.07 16
Real estate construction 1.48 4 1.38 3 1.82 3
Consumer:
Credit card 5.94 5 7.06 6 6.26 6
Other consumer 2.06 25 1.96 26 1.66 26
--- --- ---
Total consumer 2.75 30 2.95 32 2.60 32
Lease financing .85 6 1.17 5 1.23 4
Foreign 4.91 1 3.72 1 3.00 1
--- --- ---
Total allocated 1.82 100% 1.94 100% 1.79 100%
--- --- ---
--- --- ---
Unallocated component of
the allowance (1) 1.08 .94 1.10
---- --- ----
Total 2.90% 2.88% 2.89%
---- --- ----
---- --- ----
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
December 31,
- ---------------------------------------------------------------------------------------
(in millions) 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Commercial $ 321 $ 248
Real estate 1-4 family first mortgage 73 69
Other real estate mortgage 291 330
Real estate construction 68 62
Consumer:
Credit card 383 126
Other consumer 313 240
------ ------
Total consumer 696 366
Lease financing 41 34
Foreign 27 20
------ ------
Total allocated 1,517 1,129
Unallocated component of
the allowance (1) 1,194 1,743
------ ------
Total $2,711 $2,872
------ ------
------ ------
December 31,
---------------------------------------
1995 1994
----------------- -----------------
Alloc. Loan Alloc. Loan
allow. catgry allow. catgry
as% as% as% as%
of loan of total of loan of total
catgry loans catgry loans
------- -------- ------- --------
<S> <C> <C> <C> <C>
Commercial 1.59% 28% 1.50% 25%
Real estate 1-4 family first mortgage .83 13 .48 22
Other real estate mortgage 2.45 17 3.11 16
Real estate construction 3.23 3 3.92 2
Consumer:
Credit card 6.76 8 2.24 8
Other consumer 1.68 26 1.59 23
--- ---
Total consumer 2.86 34 1.76 31
Lease financing 1.57 4 1.62 3
Foreign 2.90 1 3.11 1
--- ---
Total allocated 2.14 100% 1.70 100%
--- ---
--- ---
Unallocated component of
the allowance (1) 1.69 2.61
---- ----
Total 3.83% 4.31%
---- ----
---- ----
- ---------------------------------------------------------------------------------------
</TABLE>
(1) This amount and any unabsorbed portion of the allocated allowance are also
available for any of the above listed loan categories.
22
<PAGE>
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses interest rate derivative financial instruments as
asset/liability management tools to hedge the Company's exposure to interest
rate fluctuations. The Company also offers contracts to its customers, but
hedges such contracts by purchasing other financial contracts or uses the
contracts for asset/liability management. The derivative activities table
below reconciles the beginning and ending notional or contractual amounts for
derivative financial instruments used for asset/liability management purposes
for 1998 and shows the expected remaining maturity at year-end 1998. The
interest rate swap maturities and average rates table on the following page
summarizes the notional amount, expected maturities and weighted average
interest rates associated with amounts to be received or paid on interest
rate swap agreements, together with an indication of the asset/liability
hedged. For a further discussion of derivative financial instruments, refer
to Note 23 to Financial Statements, incorporated by reference herein.
<TABLE>
<CAPTION>
DERIVATIVE ACTIVITIES
- ----------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1998
------------------------------------------------------------------------------------
Weighted
average
expected
Amortization remaining
Beginning and Ending maturity (in
(in millions) balance Additions maturities Terminations balance yrs.-mos.)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest rate contracts:
Swaps $24,052 $ 6,169 $ 4,059 $ 1,733 $24,429 2-10
Futures 10,949 117,615 450 65,766 62,348 1-4
Floors and caps 35,344 6,054 7,770 30 33,598 2-3
Options 11,168 156,776 62,832 79,290 25,822 0-2
Forwards 27,507 558,887 98,977 446,134 41,283 0-1
Foreign exchange contracts:
Forwards and spots 548 1,164 1,524 20 168 0-2
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Net deferred gains related to interest rate futures contracts were $316
million at December 31, 1998, most of which will be fully amortized within
seven years. The net deferred gains on terminated derivative financial
instruments were $412 million and $164 million at December 31, 1998 and 1997
respectively.
23
<PAGE>
<TABLE>
<CAPTION>
INTEREST RATE SWAP MATURITIES AND AVERAGE RATES (1)
- --------------------------------------------------------------------------------------------------------------
There-
(in millions) 1999 2000 2001 2002 after Total
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Receive-fixed rate (hedges loans)
Notional amount $2,577 $3,667 $4,193 $2,632 $1,163 $14,232
Weighted average rate received 6.70% 6.67% 6.23% 5.78% 5.98% 6.32%
Weighted average rate paid 5.06 5.09 5.16 5.24 5.42 5.16
Receive-fixed rate (hedges senior
and subordinated debt)
Notional amount $ 766 $ 400 $ 752 $ 400 $2,558 $ 4,876
Weighted average rate received 7.28% 6.17% 6.64% 6.59% 6.82% 6.79%
Weighted average rate paid 5.50 5.28 5.22 5.38 5.35 5.35
Receive-fixed rate (hedges
mortgage servicing rights)
Notional amount $ -- $ 173 $ -- $ -- $ -- $ 173
Weighted average rate received --% 2.89% --% --% --% 2.89%
Weighted average rate paid -- 5.72 -- -- -- 5.72
Receive-fixed rate (hedges deposits)
Notional amount $1,112 $1,950 $1,550 $ -- $ -- $ 4,612
Weighted average rate received 7.08% 5.55% 5.47% --% --% 5.90%
Weighted average rate paid 4.87 5.07 5.24 -- -- 5.08
Other swaps (2)
Notional amount $2,021 $1,942 $1,879 $ 563 $1,926 $ 8,331
Weighted average rate received 5.53% 5.57% 5.53% 5.83% 5.79% 5.62%
Weighted average rate paid 5.40 5.46 5.40 5.73 5.46 5.45
Total notional amount $6,476 $8,132 $8,374 $3,595 $5,647 $32,224
------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ -------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Variable interest rates are presented on the basis of rates in effect at
December 31, 1998. These rates may change substantially in the future due
to open market factors.
(2) Predominantly represents customer accommodation swaps not used for
asset/liability management purposes. The notional amount predominantly
reflects customer accommodations as well as the swaps used to hedge the
customer accommodations.
PROPERTIES
The Company owns its headquarters building in San Francisco as well as
Wells Fargo Centers in Phoenix, Arizona and Portland, Oregon. In addition, the
Company leases office space for data processing support and various
administrative departments in major locations in California, Minnesota, Texas,
Arizona, Colorado and Oregon.
As of December 31, 1998, the Company's Community Banking Group
subsidiaries operate out of about 6,000 banking locations under various types of
ownership and leasehold agreements. Norwest Mortgage leases its headquarters in
Des Moines, Iowa, servicing centers in Minneapolis, Minnesota; Phoenix, Arizona;
Charlotte, North Carolina; and Springfield, Illinois, operations centers in
Frederick, Maryland and St. Louis, Missouri and all mortgage production offices
nationwide. In addition, Norwest Mortgage owns servicing centers located in
Springfield,
24
<PAGE>
Ohio and Riverside, California. Norwest Financial owns its headquarters in Des
Moines, Iowa, and leases all branch locations.
The Company is also a joint venture partner in two office buildings in
downtown Los Angeles, California and one in Sacramento, California, of which
approximately one-half of the space is occupied by administrative staff of the
Company and the remainder is sublet.
For further information with respect to premises and equipment and
commitments under noncancelable leases for premises and equipment, refer to
Note 6 to Financial Statements, incorporated by reference herein.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of stockholders of Norwest Corporation was held on
October 20, 1998, to consider proposals to: 1) issue shares of Norwest common
stock, pursuant to an Agreement and Plan of Merger, dated as of June 7, 1998,
and amended and restated as of September 10, 1998 (the "Agreement"), by and
among Wells Fargo & Company, Norwest Corporation and WFC Holdings Corporation;
and 2) adopt amendments to Norwest Corporation's Restated Certificate of
Incorporation to (a) increase the number of authorized shares of common stock
from 2,000,000,000 to 4,000,000,000, (b) increase the number of authorized
shares of preferred stock, no par value, from 5,000,000 to 20,000,000 and (c)
change the name of Norwest Corporation to "Wells Fargo & Company." The proposals
were adopted by the following vote:
<TABLE>
<CAPTION>
Issuance Of Shares Adopt Amendments
------------------ ----------------
<S> <C> <C> <C>
For 548,748,383 For 540,906,762
Against 15,774,330 Against 24,041,280
Abstain 2,314,094 Abstain 1,888,765
</TABLE>
A special meeting of stockholders of the former Wells Fargo was
held on October 20, 1998, to consider adoption of the Agreement. The Agreement
was adopted by the following vote:
<TABLE>
<S> <C>
For 57,428,537
Against 500,572
Abstain 266,623
</TABLE>
25
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
YEARS WITH
NAME AND COMPANY OR
COMPANY POSITION POSITIONS PRIOR TO MERGER AGE PREDECESSORS
---------------- ------------------------- --- ------------
<S> <C> <C> <C>
John A. Berg Former Norwest: Senior Vice President and Regional 53 23
Group Executive Group Head (March 1998 to November 1998); Regional
Vice President President (Greater Minnesota/ La Crosse Region)
(Central Banking) (January 1990 to March 1998)
Leslie S. Biller Former Norwest: President and Chief Operating Officer 51 11
Vice Chairman and (January 1997 to November 1998); Executive Vice
Chief Operating President (South Central Community Banking) (July 1990
Officer to January 1997)
Patricia R. Callahan Former Wells Fargo: Executive Vice President 45 21
Executive Vice (Wholesale Banking) (July 1997
President (Human to November 1998); Executive Vice President
Resources) (Personnel) (March 1993 to July 1997)
James R. Campbell Former Norwest: Executive Vice President (North 56 34
Group Executive Central Banking) (August 1997 to November 1998);
Vice President Executive Vice President (Commercial Banking Services,
(Minnesota Banking) Specialized Lending and Nebraska) (January 1996 to
August 1997); Executive Vice President (Twin Cities
Banking) (February 1993 to January 1996); Executive
Vice President (Corporate Banking) (April 1988 to
February 1993); also at various times he served as
Chairman, President and Chief Executive Officer of
Norwest Bank Minnesota, N.A. (January 1984 to Present)
Teresa A. Dial Former Wells Fargo: Vice Chair (Consumer and Business 49 26
Group Executive Banking) (March 1996 to November 1998); Group
Vice President Executive Vice President (Business Banking) (September
(California, 1991 to March 1996)
Business Banking,
Phone Banking and
Distribution
Strategies)
Paul Hazen Former Wells Fargo: Chairman of the Board, President 57 28
Chairman of the and Chief Executive Officer (January 1995 to November
Board 1998); President and Chief Operating Officer (July
1984 to January 1995)
26
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT (continued)
YEARS WITH
NAME AND COMPANY OR
COMPANY POSITION POSITIONS PRIOR TO MERGER AGE PREDECESSORS
- ---------------- ------------------------- --- ------------
David A. Hoyt Former Wells Fargo: Vice Chairman (Real 43 17
Group Executive Estate Administration/ Capital Markets/
Vice President International) (May 1997 to November 1998);
(Wholesale Executive Vice President (Capital Markets/
Banking) Problem Loans) (September 1994 to May
1997); Executive Vice President (Workout
Group/ New Business Administration)
(November 1992 to September 1994)
Rodney L. Jacobs Former Wells Fargo: President 58 20
Vice Chairman and (May 1998 to November 1998); Vice Chairman
Chief Financial and Chief Financial Officer (February 1991
Officer to May 1998)
Richard M. Former Norwest: Chairman and Chief 55 13
Kovacevich Executive Officer (January 1997 to November
President and 1998); Chairman, President and Chief
Chief Executive Executive Officer (May 1995 to January
Officer 1997); President and Chief Executive Officer
(January 1993 to May 1995)
Ely L. Licht Former Wells Fargo: Executive Vice 51 15
Executive Vice President (Credit Administration) (February
President & Chief 1990 to November 1998)
Credit Officer
Kenneth R. Murray Former Norwest: Group Executive Vice 60 16
Group Executive President (Southwestern Banking) and
Vice President Head of Credit Policy (August
(Diversified 1997 to November 1998); Executive Vice
Financial) President (Southwestern Community Banking)
(July 1990 to August 1997)
John C. Nelson Former Norwest: Chairman and Chief 54 32
Group Executive Executive Officer of Norwest Bank Colorado,
Vice President N.A. (January 1995 to November 1998);
(Western Banking) Chairman, President and Chief Executive
Officer of Norwest Colorado, Inc. (February
1992 to January 1995); President and Chief
Operating Officer of Norwest Colorado, Inc.
(October 1991 to February 1992); President
of Norwest Colorado, Inc. (July 1991 to
October 1991); Chairman of the Board and
Chief Executive Officer of Norwest Bank
Iowa, N.A. (January 1988 to July 1991)
27
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT (continued)
YEARS WITH
NAME AND COMPANY OR
COMPANY POSITION POSITIONS PRIOR TO MERGER AGE PREDECESSORS
- ---------------- ------------------------- --- ------------
Mark C. Oman Former Norwest: Executive Vice 44 19
Group Executive President (Mortgage Services and Iowa
Vice President Community Banking (February 1997 to
(Mortgage and November 1998); President and Chief
Home Equity) Executive Officer of Norwest Mortgage, Inc.
(August 1989 to February 1997); also Chairman
and Chief Executive Officer of Norwest
Mortgage, Inc. (February 1997 to Present)
Clyde W. Ostler Former Wells Fargo: Vice Chairman 52 28
Group Executive (Business and Investment) (May 1993 to
Vice President November 1998)
(Investments)
Les L. Quock Former Wells Fargo: Senior Vice President 45 19
Senior Vice (Payment Systems Services Group) (February
President and 1997 to November 1998); Senior Vice
Controller President (BBG Systems) (October 1996 to
February 1997); Senior Vice President
(Business Loan Admin & Finance) (November
1995 to October 1996); Senior Vice
President (Business Loan Administration)
(January 1994 to November 1995)
Stanley S. Stroup Former Norwest: Executive Vice President 55 15
Executive Vice and General Counsel (February 1993 to
President and November 1998)
General Counsel
John G. Stumpf Former Norwest: Regional President of 45 17
Group Executive Norwest Bank Texas (July 1994 to November
Vice President 1998); Regional President of Norwest Bank
(Southwestern Colorado, N.A. (April 1991 to July 1994)
Banking)
</TABLE>
There is no family relationship among the above officers. All executive
officers serve at the pleasure of the Board of Directors.
28
<PAGE>
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements, Schedules and Exhibits:
(1) The consolidated financial statements and related notes and the
independent auditors' report thereon that appear on pages 51 through
96 of the 1998 Annual Report to Stockholders are incorporated herein
by reference.
(2) Financial Statement Schedules:
All schedules are omitted, because they are either not applicable or
the required information is shown in the consolidated financial
statements or the notes thereto.
(3) Exhibits:
The Company's SEC file number is 001-2979. On or before November 2,
1998, the Company filed documents with the SEC under the name Norwest
Corporation. The former Wells Fargo filed documents under SEC file
number 001-6214.
<TABLE>
<CAPTION>
Exhibit
number Description
------ -----------
<S> <C>
3(a) Restated Certificate of Incorporation, incorporated by
reference to Exhibit 3(b) to the Company's Current Report
on Form 8-K dated June 28, 1993. Certificates of
Amendment of Certificate of Incorporation, incorporated by
reference to Exhibit 3 to the Company's Current Report on
Form 8-K dated July 3, 1995 (authorizing preference
stock), and Exhibits 3(b) and 3(c) to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998 (changing the Company's name and
increasing authorized common and preferred stock,
respectively)
(b) Certificate of Designations for the Company's ESOP
Cumulative Convertible Preferred Stock, incorporated by
reference to Exhibit 4 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1994
(c) Certificate of Designations for the Company's Cumulative
Tracking Preferred Stock, incorporated by reference to
Exhibit 3 to the Company's Current Report on Form 8-K
dated January 9, 1995
(d) Certificate of Designations for the Company's 1995 ESOP
Cumulative Convertible Preferred Stock, incorporated by
reference to Exhibit 4 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1995
(e) Certificate Eliminating the Certificate of Designations
for the Company's Cumulative Convertible Preferred Stock,
Series B, incorporated by reference to Exhibit 3(a) to the
Company's Current Report on Form 8-K dated November 1,
1995
29
<PAGE>
3(f) Certificate Eliminating the Certificate of Designations
for the Company's 10.24% Cumulative Preferred Stock,
incorporated by reference to Exhibit 3 to the Company's
Current Report on Form 8-K dated February 20, 1996
(g) Certificate of Designations for the Company's 1996 ESOP
Cumulative Convertible Preferred Stock, incorporated by
reference to Exhibit 3 to the Company's Current Report on
Form 8-K dated February 26, 1996
(h) Certificate of Designations for the Company's 1997 ESOP
Cumulative Convertible Preferred Stock, incorporated by
reference to Exhibit 3 to the Company's Current Report on
Form 8-K dated April 14, 1997
(i) Certificate of Designations for the Company's 1998 ESOP
Cumulative Convertible Preferred Stock, incorporated by
reference to Exhibit 3 to the Company's Current Report on
Form 8-K dated April 20, 1998
(j) Certificate of Designations for the Company's Adjustable
Cumulative Preferred Stock, Series B, incorporated by
reference to Exhibit 3(j) to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1998
(k) Certificate of Designations for the Company's
Fixed/Adjustable Rate Noncumulative Preferred Stock,
Series H, incorporated by reference to Exhibit 3(k) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998
(l) Certificate of Designations for the Company's Series C
Junior Participating Preferred Stock
(m) By-Laws, as amended effective February 23, 1999
4(a) See Exhibits 3(a) through 3(m)
(b) Rights Agreement, dated as of October 21, 1998, between
the Company and ChaseMellon Shareholder Services, L.L.C.,
as Rights Agent, incorporated by reference to Exhibit 4.1
to the Company's Registration Statement on Form 8-A dated
October 21, 1998
(c) The Company agrees to furnish upon request to the
Commission a copy of each instrument defining the rights
of holders of senior and subordinated debt of the Company.
10*(a) Long-Term Incentive Compensation Plan as amended effective
February 23, 1999 (including Forms of Non-Qualified Stock
Option and Restricted Stock Agreements for grants
subsequent to November 2, 1998). Forms of Non-Qualified
Stock Option and Restricted Stock Agreements for grants
prior to November 2, 1998, incorporated by reference to
Exhibit 10(a) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997
30
<PAGE>
10*(b) Long-Term Incentive Plan, incorporated by reference to
Exhibit A to the former Wells Fargo's Proxy Statement
filed March 14, 1994
*(c) Executive Incentive Compensation Plan, incorporated by
reference to Exhibit 19(a) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1988.
Amendment to Executive Incentive Compensation Plan,
incorporated by reference to Exhibit 19(b) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1989
*(d) Performance-Based Compensation Policy, incorporated by
reference to Exhibit 10(a) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998
*(e) Executive Incentive Pay Plan, incorporated by reference to
Exhibit 10(h) to the former Wells Fargo's Annual Report on
Form 10-K for the year ended December 31, 1995
*(f) Senior Executive Performance Plan, incorporated by
reference to Exhibit B to the former Wells Fargo's Proxy
Statement filed March 14, 1994
*(g) 1990 Equity Incentive Plan, incorporated by reference to
Exhibit 10(f) to the former Wells Fargo's Annual Report on
Form 10-K for the year ended December 31, 1995
*(h) 1982 Equity Incentive Plan, incorporated by reference to
Exhibit 10(g) to the former Wells Fargo's Annual Report on
Form 10-K for the year ended December 31, 1993
*(i) Employees' Stock Deferral Plan, incorporated by reference
to Exhibit 10(c) to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998
*(j) Employees' Deferred Compensation Plan, incorporated by
reference to Exhibit 10(c) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1997
*(k) Elective Deferred Compensation Plan for Mortgage Banking
Executives, incorporated by reference to Exhibit 10(c) to
the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997
*(l) Performance Deferral Award Plan for Mortgage Banking
Executives, incorporated by reference to Exhibit 10(b) to
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997
*(m) Directors Formula Stock Award Plan, as amended effective
January 1, 1999
*(n) 1999 Directors Stock Option Plan
31
<PAGE>
10*(o) 1990 Director Option Plan for directors of the former
Wells Fargo, incorporated by reference to Exhibit 10(c) to
the former Wells Fargo's Annual Report on Form 10-K for
the year ended December 31, 1997
*(p) 1987 Director Option Plan for directors of the former
Wells Fargo, incorporated by reference to Exhibit A to the
former Wells Fargo's Proxy Statement filed March 10, 1995,
and as further amended by the amendment adopted September
16, 1997, incorporated by reference to Exhibit 10 to the
former Wells Fargo's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997
*(q) 1991 Director Option Plan for directors of the former
First Interstate Bancorp, incorporated by reference to
First Interstate Bancorp's Registration Statement on Form
S-8 (SEC File No. 033-37299) and to the former Wells
Fargo's Post-Effective Amendment No. 1 on Form S-8 filed
on April 2, 1996 (SEC File No. 033-64575)
*(r) Deferred Compensation Plan for Non-Employee Directors of
the former Norwest, incorporated by reference to Exhibit
10(i) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995
*(s) Directors' Stock Deferral Plan for directors of the former
Norwest, incorporated by reference to Exhibit 10(b) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998
*(t) Deferral Plan for Directors of the former Wells Fargo,
incorporated by reference to Exhibit 10(b) to the former
Wells Fargo's Annual Report on Form 10-K for the year
ended December 31, 1997
*(u) 1999 Deferral Plan for Directors
*(v) Supplemental Savings Investment Plan, incorporated by
reference to Exhibit 10(h) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1997
*(w) Supplemental Pension Plan, incorporated by reference to
Exhibit 10(i) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997
*(x) Supplemental Long Term Disability Plan, incorporated by
reference to Exhibit 10(f) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1990.
Amendment to Supplemental Long Term Disability Plan,
incorporated by reference to Exhibit 10(g) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992
*(y) Executive Financial Counseling Plan, incorporated by
reference to Exhibit 10(f) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1987
32
<PAGE>
10*(z) Benefits Restoration Program, incorporated by reference to
Exhibit 10(a) to the former Wells Fargo's Annual Report on
Form 10-K for the year ended December 31, 1995
(aa) Executive Loan Plan, incorporated by reference to Exhibit
10(i) to the former Wells Fargo's Annual Report on Form
10-K for the year ended December 31, 1994
*(bb) Agreement between the Company and Richard M. Kovacevich
dated March 18, 1991, incorporated by reference to Exhibit
19(e) to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1991. Amendment effective
January 1, 1995, to the March 18, 1991 agreement between
the Company and Richard M. Kovacevich, incorporated by
reference to Exhibit 10(c) to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995
*(cc) Employment Agreement, dated as of June 7, 1998, between
the Company and Paul Hazen, incorporated by reference to
Exhibit 10.01 to the Company's Registration Statement No.
333-63247 on Form S-4 filed September 11, 1998. Forms of
Stock Option and Restricted Stock Agreements pursuant to
Employment Agreement.
*(dd) Employment Agreement, dated as of January 1, 1999, between
the Company and Rodney L. Jacobs
*(ee) Form of severance agreement between the Company and
seven executive officers, including two directors, and
agreement between the Company and an executive officer.
Amendment effective January 1, 1995, to the March 11,
1991 agreement between the Company and Richard M.
Kovacevich, incorporated by reference to Exhibit 10(b)
to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995
*(ff) Change of Control Severance Plan of the former Wells
Fargo, incorporated by reference to Exhibit 10(c) to the
former Wells Fargo's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998
*(gg) Consulting Agreement dated January 25, 1999, between the
Company and Chang-Lin Tien
*(hh) Retirement Plan for Non-Employee Directors of the former
Norwest, as amended effective November 2, 1998
*(ii) Directors' Retirement Plan for directors of the former
Wells Fargo, as amended effective November 2, 1998
- -------------------------
* Management contract or compensatory plan or arrangement.
Stockholders may obtain a copy of any Exhibit, in Item 14(a)(3), upon payment of
a reasonable fee, by writing Wells Fargo & Company, Office of the Secretary,
Norwest Center, Sixth and Marquette, Minneapolis, Minnesota, 55479-1026.
33
<PAGE>
12(a) Computation of Ratios of Earnings to Fixed Charges -- the
ratios of earnings to fixed charges, including interest on
deposits, were 1.63, 1.81, 1.78, 1.80 and 1.92 for the
years ended December 31, 1998, 1997, 1996, 1995 and 1994,
respectively. The ratios of earnings to fixed charges,
excluding interest on deposits, were 2.56, 3.10, 2.98,
2.73 and 3.32 for the years ended December 31, 1998, 1997,
1996, 1995 and 1994, respectively.
12(b) Computation of Ratios of Earnings to Fixed Charges and
Preferred Dividends -- the ratios of earnings to fixed
charges and preferred dividends, including interest on
deposits, were 1.61, 1.79, 1.73, 1.74 and 1.85 for the
years ended December 31, 1998, 1997, 1996, 1995 and 1994,
respectively. The ratios of earnings to fixed charges and
preferred dividends, excluding interest on deposits, were
2.49, 2.99, 2.77, 2.55 and 3.02 for the years ended
December 31, 1998, 1997, 1996, 1995 and 1994,
respectively.
13 1998 Annual Report to Stockholders, pages 34 through 96
21 Subsidiaries of the Company
23 Consent of Independent Accountants
24 Powers of Attorney
27 Financial Data Schedule
</TABLE>
(b) The former Wells Fargo, the former Norwest and the Company filed, on the
dates indicated during the fourth quarter of 1998 and through the date
hereof in 1999, the following reports on Form 8-K:
FORMER WELLS FARGO (Commission File No. 001-6214)
(1) October 15, 1998 under Item 5, containing the Underwriting Agreement
between the former Wells Fargo and Goldman, Sachs & Co. dated October
12, 1998, in connection with the sale of 2.5 million shares of the
former Wells Fargo common stock
(2) October 20, 1998 under Item 5, containing the press release that
announced the former Wells Fargo financial results for the quarter and
nine months ended September 30, 1998
(3) November 17, 1998 (filed by WFC Holdings Corporation) under Items 2
and 7, describing the consummation of the merger by and among former
Wells Fargo & Company, Norwest Corporation and WFC Holdings
Corporation pursuant to an Agreement and Plan of Merger dated as of
June 7, 1998 and amended and restated as of September 10, 1998, and
containing the press release dated November 2, 1998 issued by Norwest
Corporation announcing the completion of the merger and unaudited pro
forma condensed combined financial information as of September 30,
1998
34
<PAGE>
FORMER NORWEST (Commission File No. 001-2979)
(4) October 21, 1998 under Item 5, containing the new preferred share
purchased rights plan pursuant to the Rights Agreement between the
former Norwest and ChaseMellon Shareholder Services, L.L.C., dated
October 21, 1998, to replace the preferred share purchased rights plan
expiring on November 23, 1998
(5) October 22, 1998 under Item 5, reporting consolidated operating
results of the former Norwest for the quarter and nine months ended
September 30, 1998
WELLS FARGO & COMPANY (Commission File No. 001-2979)
(6) November 16, 1998 under Items 2 and 7, describing the consummation of
the merger by and among former Wells Fargo & Company, Norwest
Corporation and WFC Holdings Corporation pursuant to an Agreement and
Plan of Merger dated as of June 7, 1998 and amended and restated as of
September 10, 1998, and containing the press release dated November 2,
1998 issued by Norwest Corporation announcing the completion of the
merger and unaudited pro forma condensed combined financial
information as of September 30, 1998
(7) January 19, 1999 under Item 5, containing the Supplemental Annual
Report for 1997; Supplemental Quarterly Report for the quarter ended
September 30, 1998; and the Company's financial results for the
quarter and year ended December 31, 1998
(8) January 29, 1999 under Item 5, describing the Company's most recent
Board action taken with respect to the Company's systematic stock
repurchase program
STATUS OF PRIOR DOCUMENTS
The Wells Fargo & Company Annual Report on Form 10-K for the year ended
December 31, 1998, at the time of filing with the Securities and Exchange
Commission, shall modify and supersede all documents filed prior to January 1,
1999 pursuant to Sections 13, 14 and 15(d) of the Securities Exchange Act of
1934 (other than the Current Report on Form 8-K filed October 13, 1997) for
purposes of any offers or sales of any securities after the date of such filing
pursuant to any Registration Statement or Prospectus filed pursuant to the
Securities Act of 1933 which incorporates by reference such Annual Report on
Form 10-K.
35
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 15, 1999.
WELLS FARGO & COMPANY
BY: /s/ RICHARD M. KOVACEVICH
---------------------------------------
Richard M. Kovacevich
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated.
By: /s/ RODNEY L. JACOBS
---------------------------------------
Rodney L. Jacobs
Vice Chairman and Chief Financial Officer
(Principal Financial Officer)
By: /s/ LES L. QUOCK
---------------------------------------
Les L. Quock
Senior Vice President and Controller
(Principal Accounting Officer)
The Directors of Wells Fargo & Company listed below have duly executed
powers of attorney empowering Philip J. Quigley to sign this document on their
behalf.
Leslie S. Biller Richard D. McCormick
J. A. Blanchard III Cynthia H. Milligan
Michael R. Bowlin Benjamin F. Montoya
Edward M. Carson Donald B. Rice
David A. Christensen Ian M. Rolland
William S. Davila Judith M. Runstad
Susan E. Engel Susan G. Swenson
Paul Hazen Daniel M. Tellep
Rodney L. Jacobs Chang-Lin Tien
Reatha Clark King Michael W. Wright
Richard M. Kovacevich John A. Young
By: /s/ PHILIP J. QUIGLEY
---------------------------------------
Philip J. Quigley
Director and Attorney-in-fact
March 15, 1999
36
<PAGE>
EXHIBIT 3 (l)
WELLS FARGO & COMPANY
------------------------------------------
CERTIFICATE OF DESIGNATIONS
Pursuant to Section 151 of the
Delaware General Corporation Law
------------------------------------------
SERIES C JUNIOR PARTICIPATING PREFERRED STOCK
------------------------------------------
Wells Fargo & Company, a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on September 22, 1998:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of the Corporation (hereinafter called the "Board of Directors" or
the "Board") in accordance with the provisions of the Restated Certificate of
Incorporation, as amended, the Board of Directors hereby creates a series of
Preferred Stock, without par value, of the Corporation (the "Preferred Stock"),
and hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
Series C Junior Participating Preferred Stock:
Section 1. DESIGNATION AND AMOUNT. The shares of such series
shall be designated as "Series C Junior Participating Preferred Stock" (the
"Series C Preferred Stock") and the number of shares constituting the Series C
Preferred Stock shall be 4,000,000. Such number of shares may be increased or
decreased by resolution of the Board of Directors; PROVIDED, that no decrease
shall reduce the number of shares of Series C Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares reserved
for issuance upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the Corporation
convertible into Series C Preferred Stock.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to the
Series C Preferred Stock with respect to dividends, the holders of shares
of Series C Preferred Stock, in preference to the holders of Common Stock,
par value $1-2/3 per share (the "Common Stock"), of the Corporation, and of
any other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends
<PAGE>
payable in cash on the first day of March, June, September and December
in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a
share of Series C Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $10 or (b) subject to the
provision for adjustment hereinafter set forth, 1000 times the aggregate
per share amount of all cash dividends, and 1000 times the aggregate per
share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of
a share of Series C Preferred Stock. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the amount
to which holders of shares of Series C Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series C Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$1 per share on the Series C Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series C Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series C Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the
-2-
<PAGE>
shares of Series C Preferred Stock in an amount less than the total amount
of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the
time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series C Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which
record date shall be not more than 60 days prior to the date fixed for the
payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series C
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to
1000 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes per
share to which holders of shares of Series C Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, or
by law, the holders of shares of Series C Preferred Stock and the holders
of shares of Common Stock and any other capital stock of the Corporation
having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series C Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series C Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series C Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:
-3-
<PAGE>
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series C Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the
Series C Preferred Stock, except dividends paid ratably on the Series
C Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series C Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series C Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series C Preferred Stock, or any shares of stock ranking
on a parity with the Series C Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(A) of this Section 4, purchase or otherwise acquire such shares at such
time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series C Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock subject to the conditions and restrictions on issuance set
forth herein, in the Certificate of Incorporation, or in any other Certificate
of Designations creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series C
Preferred Stock unless, prior
-4-
<PAGE>
thereto, the holders of shares of Series C Preferred Stock shall have received
$1000 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series C Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 1000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series C Preferred Stock,
except distributions made ratably on the Series C Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series C Preferred
Stock were entitled immediately prior to such event under the proviso in clause
(1) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case each share
of Series C Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series C Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. NO REDEMPTION. The shares of Series C Preferred Stock
shall not be redeemable.
Section 9. RANK. The Series C Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior to
all series of any other class of the Corporation's Preferred Stock.
-5-
<PAGE>
Section 10. AMENDMENT. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series C Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of
at least two-thirds of the outstanding shares of Series C Preferred Stock,
voting together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its Executive Vice President and attested by its
Secretary this 18th day of November, 1998.
By: /s/ Stanley S. Stroup
--------------------------
Stanley S. Stroup
Executive Vice President
Attest:
/s/ Laurel A. Holschuh
- ------------------------------
Laurel A. Holschuh
Secretary
[Filed in the Office of the Delaware Secretary of State on November 18, 1998]
-6-
<PAGE>
EXHIBIT 3(m)
WELLS FARGO & COMPANY
By-Laws
(As amended through February 23, 1999)
OFFICES
1. The principal office shall be in the City of Wilmington, County of New
Castle, State of Delaware, and the name of the resident agent in charge thereof
is The Corporation Trust Company.
The Corporation may also have an office in the City of San Francisco,
State of California, and also offices at such other places as the Board of
Directors may from time to time appoint or the business of the Corporation may
require.
SEAL
2. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
STOCKHOLDERS' MEETINGS
3. PLACE. All meetings of stockholders shall be held at the office of
the Corporation in San Francisco, California, or at such other place within or
without the State of Delaware as shall from time to time be designated by the
Board of Directors.
4. ANNUAL MEETING. An annual meeting of stockholders shall be held on
the fourth Tuesday of April in each year, or such other date as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting, if not a legal holiday, and if a legal holiday, then on the next
day following, at such time as shall be designated by the Board of Directors,
when the stockholders shall elect, by a plurality vote except as otherwise
provided by law, by the Certificate of Incorporation or by these By-Laws, by
ballot, a Board of Directors, and transact such other business as may properly
be brought before this meeting.
5. QUORUM. The holders of a majority of the stock issued and
outstanding, and entitled to vote thereat, present in person, or represented by
proxy, shall be requisite and shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
law, by the Certificate of Incorporation or by these By-Laws. If, however, such
majority shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of voting stock shall be
present. At such adjourned meeting at which the requisite amount of voting
stock shall be
<PAGE>
represented, any business may be transacted which might have been transacted at
the meeting as originally convened.
6. VOTING PROXIES. At each meeting of the stockholders every stockholder
having the right to vote shall be entitled to vote in person or by proxy
appointed by an instrument in writing subscribed by such stockholder and bearing
a date not more than one year prior to said meeting, unless said instrument
provides for a longer period. Each stockholder shall have one vote for each
share of stock having voting power registered in his name on the books of the
Corporation, provided that, except where the transfer books of the Corporation
shall have been closed or a date shall have been fixed as a record date for the
determination of stockholders entitled to vote, no share of stock shall be voted
at any election of directors which has been transferred on the books of the
Corporation within twenty days next preceding such election. The vote for
directors, and, upon the demand of any stockholder, the vote upon any question
before the meeting shall be by ballot. All elections shall be had and all
questions decided by a plurality vote, except such as may, under the provisions
of law, the Certificate of Incorporation, or these By-Laws, require the vote of
a larger number of shares.
7. NOTICE OF ANNUAL MEETING. Written notice of the annual meeting shall
be mailed to each stockholder entitled to vote thereat at such address as
appears on the stock records of the Corporation, at least ten days prior to the
meeting.
8. STOCKHOLDERS' LIST. A complete list of the stockholders entitled to
vote at the ensuing election, arranged in alphabetical order, shall be prepared
by the Secretary and shall, during the usual hours of business, be open to the
examination of any stockholder at the place where said election is to be held
for ten days before such election and shall be produced and kept at the time and
place of election during the whole time thereof, and subject to the inspection
of any stockholder who may be present.
9. NOTICE OF STOCKHOLDER BUSINESS AT ANNUAL MEETING. The proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders (a) pursuant to the Corporation's notice of meeting, (b) by or
at the direction of the Board of Directors or (c) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of notice
provided for in this By-Law, who is entitled to vote at the meeting and who
complies with the notice procedures set forth in this By-Law. For business to
be properly brought before an annual meeting pursuant to the foregoing sentence,
the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation and such business must otherwise be a proper matter
for stockholder action. To be timely, a stockholder's notice shall be delivered
to the Secretary at the principal executive offices of the Corporation not later
than the close of business on the 90th day, nor earlier than the close of
business on the 120th day, prior to the first anniversary of the preceding
year's annual meeting; provided, however, that, in the event that the date of
the annual meeting is more than 30 days before or more than 60 days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the 120th day prior to such annual
meeting and not later than the close of business on the later of the 90th day
prior to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made by the Corporation. In
no event shall the public announcement of an adjournment of an annual meeting
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commence a new time period for the giving of a stockholder's notice as described
above. Such stockholder's notice shall set forth a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made, and, as to the stockholder giving the notice and the beneficial owner, if
any, on whose behalf the proposal is made, the name and address of such
stockholder as they appear on the Corporation's books and of such beneficial
owner, and the class and number of shares of the Corporation that are owned
beneficially and of record by such stockholder and such beneficial owner.
Notwithstanding anything in these By-Laws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this Section 9. The Chairman of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting and in accordance with the provisions of this Section
9, and if he should so determine, he shall so declare to the meeting and any
such business not properly brought before the meeting shall not be transacted.
10. SPECIAL MEETINGS - CALL. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the Chairman or a Vice Chairman or the President or a majority of the Board
of Directors.
11. SPECIAL MEETING - BUSINESS. Business transacted at all special
meetings shall be confined to the objects stated in the call.
12. SPECIAL MEETINGS - NOTICE. Written notice of a special meeting of
stockholders, stating the time and place and object thereof, shall be mailed,
postage prepaid, at least ten days before such meeting, to each stockholder
entitled to vote thereat at his last known address as shown by the books of the
Corporation.
13. ACTION BY WRITTEN CONSENT OF STOCKHOLDERS. (a) Any action which is
required to be or may be taken at any annual or special meeting of stockholders
of the Corporation may be taken without a meeting, without prior notice and
without a vote, if consents in writing, setting forth the action so taken, shall
have been signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or to take such
action at a meeting at which all shares entitled to vote thereon were present
and voted; provided, however, that prompt notice of the taking of the corporate
action without a meeting and by less than unanimous written consent shall be
given to those stockholders who have not consented in writing.
(b) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting shall be fixed by the
Board of Directors. Any stockholder of record seeking to have the stockholders
authorize or take corporate action by written consent without a meeting shall,
by written notice to the Secretary, request the Board of Directors to fix a
record date. Upon receipt of such a request, the Secretary shall place such
request before the Board of Directors at its next regularly scheduled meeting,
provided, however, that if the stockholder represents in such request that he
intends, and is prepared, to commence a consent solicitation as soon as is
permitted by the Securities Exchange Act of 1934, as amended, and the
regulations thereunder and other applicable law, the Secretary shall as promptly
as practicable call a special meeting of the Board of Directors,
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which meeting shall be held as promptly as practicable. At such regular or
special meeting, the Board of Directors shall fix a record date as provided in
Section 40 of these By-Laws and Section 213(a) (or its successor provision) of
the Delaware General Corporation Law. Should the Board of Directors fail to fix
a record date as provided for in this Section 13, then the record date shall be
the day on which the first written consent is expressed.
(c) In the event of the delivery to the Corporation of written consents
purporting to represent the requisite voting power to authorize or take
corporate action and/or related revocations, the Secretary of the Corporation
shall provide for the safekeeping of such consents and revocations and shall, as
promptly as practicable, engage nationally recognized independent inspectors of
election for the purpose of promptly performing a ministerial review of the
validity of the consents and revocations. No action by written consent and
without a meeting shall be effective until such inspectors have completed their
review, determined that the requisite number of valid and unrevoked consents has
been obtained to authorize or take the action specified in the consents, and
certified such determination for entry in the records of the Corporation kept
for the purpose of recording the proceedings of meetings of stockholders.
DIRECTORS
14. NUMBER. The property and business of the Corporation shall be managed
by its Board of not less than ten nor more than twenty-eight directors, with the
number to be designated from time to time by resolution of the Board. Directors
shall be elected at the annual meeting of the stockholders, except as otherwise
provided by the Certificate of Incorporation or by these By-Laws, and each
director shall be elected to serve until his successor shall be elected and
shall qualify.
15. NOTICE OF STOCKHOLDER NOMINEES. Only persons who are nominated in
accordance with the procedures set forth in these By-Laws shall be eligible for
election as directors. Nominations of persons for election to the Board of
Directors of the Corporation may be made at a meeting of stockholders (a) by or
at the direction of the Board of Directors or (b) by any stockholder of the
Corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 15. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than 30 days nor more than 60 days prior to the meeting; provided, however,
that in the event that less than 40 days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the tenth day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); and (b) as to the stockholder giving
the notice (i) the name and address, as they appear on the Corporation's books,
of such stockholder and (ii) the class and number of shares of the Corporation
which are beneficially owned by such stockholder. At the request of the Board
of Directors any person nominated by the Board of Directors for election as a
director shall furnish to the Secretary of the Corporation that information
required to be set forth in a stockholder's notice of
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nomination which pertains to the nominee. No person shall be eligible for
election as a director of the Corporation unless nominated in accordance with
the procedures set forth in the By-Laws. The Chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by these By-Laws, and if
he should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
16. VACANCIES. If the office of any director or directors becomes vacant
by reason of death, resignation, retirement, disqualification, removal from
office, or otherwise, a majority of the remaining directors, though less than a
quorum, except as otherwise provided by law, by the Certificate of Incorporation
or by these By-Laws, shall choose a successor until a successor or successors
have been duly elected, unless sooner displaced.
17. PLACE OF MEETINGS. The directors may hold their meetings and have one
or more offices, and keep the books of the Corporation, except the original or
duplicate stock ledger, outside of Delaware, at the office of the Corporation in
the City of Minneapolis, Minnesota, or at such other places as they may from
time to time determine.
18. POWERS. In addition to the powers and authorities by these By-Laws
expressly conferred upon them, the Board may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Certificate of Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
COMMITTEES
19. PURPOSES - POWERS. The Board of Directors may, by resolution or
resolutions, passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation, which to the extent provided in said resolution or resolutions or
in these By-Laws, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation, and
may have power to authorize the seal of the Corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be stated in these By-Laws or as may be determined from time to
time by resolution adopted by the Board of Directors.
20. MINUTES. The committees may keep regular minutes of their proceedings
and shall report to the Board when required.
COMPENSATION
21. DIRECTORS. By resolution of the Board, directors may receive a fixed
fee for their services, and a fixed sum and expenses of attendance, if any, may
be allowed for attendance at each regular or special meeting of the Board;
provided, that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
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22. COMMITTEE MEMBERS. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
MEETINGS OF THE BOARD
23. ANNUAL MEETING. Immediately following the annual meeting of
stockholders and at the place of such meeting the newly elected Board shall meet
for the purpose of organization, the election of officers and the transaction of
other business, and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided that a
majority of the whole Board shall be present. In lieu of meeting at such time
and place, the newly elected Board may meet at such time and place as may be
fixed by the consent in writing of all the directors or by call issued by the
Chairman or a Vice Chairman or the President.
24. REGULAR MEETINGS. Regular meetings of the Board may be held without
notice at such time and place as shall from time to time be determined by the
Board.
25. SPECIAL MEETINGS - CALL. Special meetings of the Board may be called
by the Chairman or a Vice Chairman or the President on two days' notice to each
director, either personally or by mail or by telegram; special meetings shall be
called by the Chairman or a Vice Chairman or the President or the Secretary in
like manner and on like notice on the written request of two directors.
26. QUORUM. At all meetings of the Board of Directors any number of
directors constituting not less than one-third (1/3) of the total number of
members of said Board shall be necessary and sufficient to constitute a quorum
for the transaction of business, provided that where there is less than a
majority of the Board of Directors present at any meeting, no action by those
present, although constituting a quorum, shall be taken except by unanimous
vote.
OFFICERS
27. OFFICERS. The officers of the Corporation shall be a Chairman, one or
more Vice Chairmen, President, a Secretary, a Treasurer, a Controller, a Chief
Examiner, a Chief Auditor, and such other officers, and with such duties, as may
be determined by the Board as necessary for the prompt and orderly transaction
of the business of the Corporation. Any two or more offices may be held by the
same person. The Chairman and the President shall be members of the Board of
Directors and other officers may be members of the Board of Directors. The
salaries of all officers of the Corporation shall be fixed by the Board of
Directors.
In its discretion, the Board of Directors by a majority vote may leave
unfilled any offices specified in the preceding paragraph.
28. ELECTION - APPOINTMENT - TERM OF OFFICE - REMOVAL. All officers
holding the title of Chairman, Vice Chairman, President, Secretary, Treasurer,
Controller, Chief Examiner, Chief Auditor,
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and such other officers as may be designated by the Board of Directors shall be
elected by the Board of Directors. Any officer elected by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the whole Board of Directors. The Board of Directors may authorize officers
elected by the Board to appoint other officers and agents pursuant to procedures
established by resolution of the Board. All officers shall hold office until
their successors are elected or appointed and qualified, unless theretofore they
shall have resigned, become disqualified or been removed.
29. CHAIRMAN AND VICE CHAIRMAN. The Chairman may, by resolution of the
Board of Directors, be designated Chief Executive Officer of the Corporation.
The Chairman shall preside at all meetings of the stockholders and at all
meetings of the Board. If the Chairman is not designated Chief Executive
Officer, the Chairman shall assist the Chief Executive Officer in the management
of the Corporation and shall perform such other duties as the Board of Directors
shall prescribe. If the Chairman is not designated Chief Executive Officer, the
Chairman shall in the absence or disability of the Chief Executive Officer
perform the duties and exercise the powers of the Chief Executive Officer.
The Vice Chairman or Chairmen shall assist the Chief Executive Officer
in the management of the Corporation and shall perform such other duties as the
Board of Directors shall prescribe. In the absence or disability of the
Chairman, the President or a Vice Chairman shall perform the duties and exercise
the powers of the Chairman.
If at any time there shall be elected and serving more than one person
in the office of Vice Chairman, then in the absence or disability of the
Chairman, the President or the Vice Chairman as designated in writing by the
Chief Executive Officer shall perform the duties and exercise the powers of the
Chairman. In the absence of such designation by the Chief Executive Officer,
then the duties and powers of the Chairman shall be performed and exercised by
the President or the Vice Chairman with greater seniority of continuous service
in that office or, in the absence of such seniority, seniority of continuous
service to the Corporation and its subsidiaries.
30. PRESIDENT. The President may, by resolution of the Board of
Directors, be designated Chief Executive Officer of the Corporation. If the
President is not designated Chief Executive Officer, the President shall assist
the Chief Executive Officer in the management of the Corporation and shall
perform such other duties as the Board of Directors shall prescribe.
31. CHIEF EXECUTIVE OFFICER. The Board of Directors shall by resolution
designate either the Chairman or the President as the Chief Executive Officer of
the Corporation. The Chief Executive Officer shall be charged with the
management of the Corporation and shall see that all orders and resolutions of
the Board of Directors are carried into effect. The Chief Executive Officer
shall be charged with the duty of causing to be currently presented to the Board
of Directors full information regarding the conditions and operations of the
Corporation, as well as matters of a policy nature concerning the affairs of the
Corporation and all information requisite to enable the Board in the discharge
of its responsibilities to exercise judgment and take action upon all matters
requiring its consideration.
Except where by law the signature or action of any other officer is
required, the Chief Executive Officer shall possess the same power as any such
other officer to sign certificates, contracts and other instruments of the
Corporation and to take other action on behalf of the
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Corporation. The Chief Executive Officer shall have the general powers and
duties of supervision and management usually vested in the chief executive
officer of a corporation.
32. VICE PRESIDENTS. Any Vice President may, in the absence or disability
of the Chairman, all Vice Chairmen and the President, perform the duties and
exercise the powers of the Chairman, all Vice Chairmen and the President, and
shall perform such other duties as the Board of Directors shall prescribe.
33. SECRETARY AND ASSISTANT SECRETARIES. (a) Except as may be otherwise
expressly provided in these By-Laws, the Secretary shall attend all sessions of
the Board and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for the standing or special committees when requested. He
shall give, or cause to be given, notice of all meetings of the stockholders and
of the Board of Directors, and shall perform such other duties as may be
prescribed by the Board of Directors or the Chief Executive Officer, under whose
supervision he shall be. He shall keep in safe custody the seal of the
Corporation, and, when authorized by the Board, affix the same to any instrument
requiring it and when so affixed it shall be attested by his signature or by the
signature of the Treasurer or an Assistant Secretary or an Assistant Treasurer.
He shall be sworn to the faithful discharge of his duties.
(b) Any Assistant Secretary may, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary, and
shall perform such other duties as the Board of Directors shall prescribe.
(c) If the Board of Directors shall appoint a Secretary to the Board,
then such Secretary to the Board shall have and perform the duties of the
Secretary and with respect to attendance at and recording of votes and minutes
of all proceedings at sessions of the Board and meetings of the stockholders
and, when requested, meetings of standing and special committees.
34. TREASURER AND ASSISTANT TREASURERS. (a) The Treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts thereof, and shall deposit all moneys, and other valuable effects, in
the name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors.
(b) He shall disburse the funds of the Corporation as may be ordered
by the Board, taking proper vouchers for such disbursements, and shall render to
the Chief Executive Officer and the Board of Directors, whenever they may
require it, an account of all his transactions as Treasurer and of the financial
condition of the Corporation.
(c) He shall give the Corporation a bond, if required by the Board of
Directors, in a sum and with one or more sureties satisfactory to the Board, for
the faithful performance of the duties of his office, and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all money and other property of whatever kind in his possession or
under his control belonging to the Corporation.
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(d) Any Assistant Treasurer may, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer, and
shall perform such other duties as the Board of Directors shall prescribe.
35. CONTROLLER. The Controller shall supervise all accounting and
bookkeeping of the Corporation, shall make such reports to the Board on the
financial condition of the Corporation as shall be required by the Board, and
shall perform such other duties as the Board shall prescribe. He shall be
subject to removal only by the Board of Directors.
36. CHIEF EXAMINER. The Chief Examiner shall examine and appraise the
assets of each affiliate of the Corporation, shall make, at least once a year, a
report to the Board summarizing the condition of the assets and capital position
of the Corporation and its affiliates, and shall perform such other duties as
the Board shall prescribe. He shall be subject to removal only by the Board of
Directors.
37. DUTIES OF OFFICERS MAY BE DELEGATED. In case of the absence of any
officer of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may delegate, for the time being, the powers or duties, or
any of them, of such officer to any other officer or to any director, provided a
majority of the entire Board concurs therein.
CERTIFICATED AND UNCERTIFICATED SHARES
38. Shares of the Corporation's stock may be certificated or
uncertificated, as provided under Delaware law. All certificates of stock of
the Corporation shall be numbered and shall be entered in the books of the
Corporation as they are issued. They shall exhibit the holder's name and number
of shares and shall be signed by the Chairman or a Vice Chairman or the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary. Any of or all the signatures on the
certificate may be a facsimile.
TRANSFERS OF STOCK
39. Transfers of stock shall be made on the books of the Corporation only
by the record holder of such stock, or by attorney lawfully constituted in
writing, and, in the case of stock represented by a certificate, upon surrender
of the certificate.
CLOSING OF TRANSFER BOOKS
40. The Board of Directors shall have the power to close the stock
transfer books of the Corporation for a period not exceeding fifty days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, or for a
period not exceeding fifty days in connection with obtaining the consent of
stockholders for any purpose; provided, however, that in lieu of closing the
stock transfer books as aforesaid, the Board
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of Directors may fix in advance a date not exceeding fifty days preceding the
date of any meeting of stockholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining such consent, as a record date for the determination
of the stockholders entitled to notice of, and to vote at, any such meeting and
any adjournment thereof, or entitled to receive payment of any such dividend, or
to any such allotment of rights, or to exercise the rights in respect to any
such change, conversion or exchange of capital stock, or to give such consent,
and in such case such stockholders, and only such stockholders as shall be
stockholders of record on the date so fixed, shall be entitled to notice of, and
to vote at, such meeting and any adjournment thereof, or to receive payment of
any such dividends or to receive such allotment of rights, or to exercise such
rights, or to give such consent, as the case may be, notwithstanding any
transfer of such stock on the books of the Corporation after any such record
date fixed as aforesaid.
REGISTERED STOCKHOLDERS
41. The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and accordingly shall not
be bound to recognize any equitable or other claim to or interest in such share
on the part of any other person, whether or not it shall have express or other
notice thereof, save as expressly provided by the laws of Delaware.
LOST CERTIFICATES
42. Any person claiming a certificate of stock to be lost or destroyed
shall make an affidavit or affirmation of the fact and advertise the same in
such manner as the Board of Directors may require, and the Board of Directors
may, in their discretion, require the owner of the lost or destroyed
certificate, or his legal representative, to give the Corporation a bond in such
sum as they may direct to indemnify the Corporation against any claim that may
be made against it on account of the alleged loss of any such certificate, or
the issuance of a new certificate; a new certificate of the same tenor and for
the same number of shares as the one alleged to be lost or destroyed may be
issued without requiring any bond or advertisement when, in the judgment of the
directors, it is proper so to do.
CONTRACTS
43. Except as may be otherwise expressly provided in these By-Laws, all
contracts or other written instruments made in the Corporation's name shall be
signed by the Chairman or a Vice Chairman or the President or Executive Vice
President or Senior Vice President and attested by the Secretary or an Assistant
Secretary, or shall be executed by such other person or persons and in such
other manner as shall from time to time be directed by the Board of Directors by
appropriate resolutions.
STOCK HELD IN OTHER CORPORATIONS
44. VOTING - PROXIES. All capital stocks in other corporations owned by
this Corporation shall be voted at the regular and/or special meeting of the
stockholders of said other corporations by
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proxy by an attorney specifically named in a proxy and given a power of attorney
to represent this Corporation at such stockholders' meeting for the purposes in
said power of attorney specified; and the Chairman or any Vice Chairman or any
Vice President together with the Secretary or any Assistant Secretary of this
Corporation are hereby authorized to execute and deliver in the name and under
the seal of this Corporation proxies in such form as may be required by the
corporation whose stock is to be voted thereunder naming as the attorney
authorized to act by said proxy such individual or individuals as said Chairman
or Vice Chairman or Vice President together with said Secretary or Assistant
Secretary shall deem advisable; provided, however, that no stock in other
corporations shall be voted, and no proxies to vote the same shall be given,
with reference to the adoption, amendment or termination of any pension or
profit sharing plan or any other plan of deferred compensation except by the
affirmative vote of a majority of the Board of Directors of this Corporation at
the time when such action is taken and such majority shall not include any
director who is a salaried officer of this Corporation or of any affiliated bank
or company.
45. LOCAL DIRECTORS. In the event that this Corporation shall own in
excess of fifty percent of the capital stock of any financial or moneyed
corporation or association and if in the acquisition of such stock this
Corporation shall have agreed that as to the voting of such stock for the
election of directors this By-Law or an agreement substantially in accord
therewith shall be binding on the Corporation, then and in each such event the
stock so acquired shall, at all meetings for the election of a Board of
Directors of any such association or corporation, be voted in favor of the
election to such Board of a sufficient number of residents of the city where the
principal office of such corporation or association is located so that, if the
candidate so voted for shall be elected, at least seventy-five percent of the
members of said Board of Directors shall be residents of said city. This
Section 41 of these By-Laws shall be amended only upon the affirmative vote of
eighty percent in amount of the common stock of this Corporation outstanding at
the time of such amendment or by the Board of Directors after receipt of the
written consent of the holders of at least eighty percent of the common stock of
this Corporation.
INSPECTION OF BOOKS
46. The directors shall determine from time to time whether, and, if
allowed, when and under what conditions and regulations the accounts and books
of the Corporation (except as such as may by statute be specifically open to
inspection) or any of them shall be open to the inspection of the stockholders,
and the stockholders' rights in this respect are and shall be restricted and
limited accordingly.
CHECKS
47. All checks or demands for money and notes of the Corporation shall be
signed by such officer or officers or employees as the Board of Directors may
from time to time designate.
FISCAL YEAR
48. The fiscal year shall begin the first day of January in each year.
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DIVIDENDS
49. Dividends upon the capital stock of the Corporation, subject to the
provisions of the Certificate of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property or in shares of the capital stock.
Before payment of any dividend there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the directors
from time to time in their absolute discretion think proper as a reserve fund to
meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the Corporation, or for such other purpose as the directors
shall think conducive to the interests of the Corporation.
ANNUAL STATEMENT
50. The Chairman or a Vice Chairman or the President or a Vice President
shall present at each annual meeting of stockholders a statement of the business
and condition of the Corporation.
NOTICES
51. Whenever under the provisions of these By-Laws notice is required to
be given to any director, officer or stockholder, it shall not be construed to
mean personal notice, but such notice may be given in writing, by mail, by
depositing the same in the post office or letter box, in a postpaid sealed
wrapper, addressed to such stockholder, officer or director at such address as
appears on the books of the Corporation, or, in default of other address, to
such director, officer or stockholder at the General Post Office in the City of
Wilmington, Delaware, and such notice shall be deemed to be given at the time
when the same shall be thus mailed.
Any stockholder, director or officer may waive any notice required to
be given under these By-Laws.
AMENDMENTS
52. These By-Laws, except as hereinabove otherwise provided, may be
altered or amended by the affirmative vote of a majority of the stock issued and
outstanding and entitled to vote thereat, at any regular or special meeting of
the stockholders if notice of the proposed alteration or amendment be contained
in the notice of the meeting, or, except as hereinbefore and in the Certificate
of Incorporation of this Corporation otherwise provided, by the affirmative vote
of a majority of the Board of Directors; provided, however, that no change of
the time or place for the election of directors shall be made within sixty days
next before the day on which such election is to be held, and that in case of
any change of such time or place notice thereof shall be given to each
stockholder in person or by letter mailed to his last known post office address
at least twenty days before the election is held.
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LONG-TERM INCENTIVE COMPENSATION PLAN
(As amended effective February 23, 1999)
1. PURPOSE. The purpose of Wells Fargo & Company's Long-Term Incentive
Compensation Plan (the "Plan") is to motivate key employees to produce a
superior return to the stockholders of Wells Fargo & Company by offering
them an opportunity to participate in stockholder gains, by facilitating
stock ownership and by rewarding them for achieving a high level of
corporate financial performance. The Plan is also intended to facilitate
recruiting and retaining talented executives for key positions by providing
an attractive capital accumulation opportunity.
2. DEFINITIONS.
2.1 The following terms, whenever used in this Plan, shall have the
meanings set forth below:
(a) "Affiliate" means any corporation or limited liability
company, a majority of the voting stock or membership
interests of which is directly or indirectly owned by the
Company, and any partnership or joint venture designated by
the Committee in which any such corporation or limited
liability company is a partner or joint venturer.
(b) "Award" means a grant made under this Plan in the form of
Performance Shares, Restricted Stock, Stock Options,
Performance Units, Stock Appreciation Rights, or Stock.
(c) "Board" means the Board of Directors of the Company.
(d) "Committee" means a committee selected by the Board and
consisting of two or more members of the Board.
(e) "Company" means Wells Fargo & Company, a Delaware corporation
formerly known as Norwest Corporation.
(f) "Employee" means a regular salaried employee (including an
officer or director who is also an employee) of the Company or
an Affiliate.
(g) "Fair Market Value" as of any date means the immediately
preceding trading day's closing price of a share of Stock as
reported by the consolidated tape of the New York Stock
Exchange.
(h) "Incentive Stock Option" means any Option designated as such
and granted in accordance with the requirements of Section
422A of the Internal Revenue Code of 1986, as amended.
<PAGE>
(i) "Non-Qualified Stock Option" means an Option other than an
Incentive Stock Option.
(j) "Option" means a right to purchase Stock.
(k) "Participant" means a person designated by the Committee to
receive an Award under the Plan who is an Employee at the time
of such designation.
(l) "Performance Cycle" means the period of time of not fewer than
two years nor more than five years as specified by the
Committee over which Performance Shares or Performance Units
are to be earned.
(m) "Performance Shares" means an Award made pursuant to Section 6
which entitles a Participant to receive Shares, their cash
equivalent or a combination thereof based on the achievement
of performance targets during a Performance Cycle.
(n) "Performance Units" means an Award made pursuant to Section 6
which entitles a Participant to receive cash, Stock or a
combination thereof based on the achievement of performance
targets during a Performance Cycle.
(o) "Plan" means this Long-Term Incentive Compensation Plan, as
amended from time to time.
(p) "Restricted Stock" means Stock granted under Section 7 that is
subject to restrictions imposed pursuant to said Section.
(q) For all Awards outstanding on November 2, 1998, "Retirement"
means retirement which would entitle a Participant to a
benefit under Section 6.1 or Section 6.2 of the Norwest
Corporation Pension Plan or under Section 4.1 or Section 4.2
of the Norwest Financial Pension Plan if such plans had
remained in effect under their terms as of November 2, 1998.
For all Awards granted subsequent to November 2, 1998,
"Retirement" means termination of employment after reaching
the earlier of (i) age 55 with 10 completed years of service,
or (ii) 80 points (with one point credited for each completed
age year and one point credited for each completed year of
service), or (iii) age 65. For purposes of this definition, a
Participant is credited with one year of service after
completion of each full 12-month period of employment with the
Company or an Affiliate as determined by the Company or
Affiliate.
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(r) "Share" means a share of Stock.
(s) "Stock" means the common stock, $1-2/3 par value per share, of
the Company.
(t) "Stock Appreciation Right" means the right to receive a
payment in cash or in Stock or a combination thereof in an
amount equal to the excess of the Fair Market Value of the
Stock at the time of exercise over the Fair Market Value of
the Stock at the time of grant.
(u) "Successor" means the legal representative of the estate of a
deceased Participant or the person or persons who may acquire
the right to exercise an Option or to receive Shares issuable
in satisfaction of an Award, by bequest or inheritance.
(v) "Term" means the period during which an Option or Stock
Appreciation Right may be exercised or the period during which
the restrictions placed on Restricted Stock are in effect.
2.2 GENDER AND NUMBER. Except when otherwise indicated by context,
reference to the masculine gender shall include, when used, the
feminine gender and any term used in the singular shall also
include the plural.
3. ADMINISTRATION. The Plan shall be administered by the Committee. Subject
to the provisions of the Plan, the Committee shall have exclusive power to
determine when and to whom Awards will be granted, the form of each Award,
the amount of each Award, and any other terms or conditions of each Award.
The Committee's interpretation of the Plan and of any Awards made under the
Plan shall be final and binding on all persons with an interest therein.
The Committee shall have the authority, subject to the provisions of the
Plan, to establish, adopt and revise rules and regulations relating to the
Plan as it may deem necessary or advisable for the administration of the
Plan.
4. SHARES AVAILABLE UNDER THE PLAN; LIMITATION ON AWARDS. The maximum number
of Shares that may be issued under this Plan on and after April 28, 1998
(in addition to Shares which prior to April 28, 1998 were subject to
Awards) shall not exceed the sum of (i) the number of Shares available for,
but not yet subject to, an Award as of April 28, 1998, plus (ii) 37,000,000
Shares. These Shares may consist, in whole or in part, of authorized but
unissued Stock or treasury Stock not reserved for any other purpose. Any
Shares subject to the terms and conditions of an Award under this Plan
which are forfeited or not issued because the terms and conditions of the
Award are not met or for which payment is not made in Stock and any Shares
which are used for full or partial payment of the purchase price of Shares
with respect to which an Option is exercised may again be used for an Award
under the Plan. No Employee may
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be awarded in any calendar year Options or Stock Appreciation Rights
covering an aggregate of more than 7,000,000 Shares. On and after the
date referred to in clause (i) above, no more than five percent of the
sum of the numbers of Shares described in clauses (i) and (ii) above
shall be issued pursuant to Awards of unrestricted Stock not granted in
lieu of salary, cash bonus or other cash compensation, Awards of
Performance Shares or Performance Units earned over a Performance Cycle
of less than three years, and Awards of Restricted Stock having Terms of
less than three years at the time of grant.
5. PARTICIPATION. Participation in the Plan shall be limited to key Employees
of the Company or an Affiliate selected by the Committee. Participation is
entirely at the discretion of the Committee, and is not automatically
continued after an initial period of participation.
6. PERFORMANCE SHARES AND PERFORMANCE UNITS. An Award of Performance Shares
or Performance Units under the Plan shall entitle the Participant to future
payments or Shares or a combination thereof based upon the achievement of
pre-established performance targets.
6.1 AMOUNT OF AWARD. The Committee shall establish a maximum amount of
a Participant's Award, which amount shall be denominated in Shares
in the case of Performance Shares or in dollars in the case of
Performance Units.
6.2 COMMUNICATION OF AWARD. Written notice of the maximum amount of a
Participant's Award and the Performance Cycle determined by the
Committee shall be given to a Participant as soon as practicable
after approval of the Award by the Committee.
6.3 AMOUNT OF AWARD PAYABLE. The Committee shall establish maximum and
minimum performance targets to be achieved during the applicable
Performance Cycle. Performance targets established by the
Committee shall relate to corporate, group, unit or individual
performance and may be established in terms of earnings, growth in
earnings, ratios of earnings to equity or assets, or such other
measures or standards determined by the Committee. Multiple
performance targets may be used and the components of multiple
performance targets may be given the same or different weighting in
determining the amount of an Award earned, and may relate to
absolute performance or relative performance measured against other
groups, units, individuals or entities. Achievement of the maximum
performance target shall entitle the Participant to payment
(subject to Section 6.5) at the full or maximum amount specified
with respect to the Award; provided, however, that notwithstanding
any other provisions of this Plan, in the case of an Award of
Performance Shares the Committee in its discretion may
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<PAGE>
establish an upper limit on the amount payable (whether in cash
or Stock) as a result of the achievement of the maximum performance
target. The Committee may also establish that a portion of a full
or maximum amount of a Participant's Award will be paid (subject to
Section 6.5) for performance which exceeds the minimum performance
target but falls below the maximum performance target applicable to
such Award.
6.4 ADJUSTMENTS. At any time prior to payment of a Performance Share
or Performance Unit Award, the Committee may adjust previously
established performance targets or other terms and conditions to
reflect events such as changes in law, regulation, or accounting
practice, or mergers, acquisitions or divestitures.
6.5 PAYMENT OF AWARDS. Following the conclusion of each Performance
Cycle, the Committee shall determine the extent to which
performance targets have been attained, and the satisfaction of any
other terms and conditions with respect to an Award relating to
such Performance Cycle. The Committee shall determine what, if
any, payment is due with respect to an Award and whether such
payment shall be made in cash, Stock or some combination. Payment
shall be made in a lump sum or installments, as determined by the
Committee, commencing as promptly as practicable following the end
of the applicable Performance Cycle, subject to such terms and
conditions and in such form as may be prescribed by the Committee.
Payment in Stock may be in Restricted Stock.
6.6 TERMINATION OF EMPLOYMENT. If a Participant ceases to be an
Employee before the end of a Performance Cycle by reason of his
death, permanent disability or Retirement, the Performance Cycle
for such Participant for the purpose of determining the amount of
Award payable shall end at the end of the calendar quarter
immediately preceding the date on which such Participant ceased to
be an Employee. The amount of an Award payable to a Participant to
whom the preceding sentence is applicable shall be paid at the end
of the Performance Cycle and shall be that fraction of the Award
computed pursuant to the preceding sentence the numerator of which
is the number of calendar quarters during the Performance Cycle
during all of which said Participant was an Employee and the
denominator of which is the number of full calendar quarters in the
Performance Cycle. Upon any other termination of employment of a
Participant during a Performance Cycle, participation in the Plan
shall cease and all outstanding Awards of Performance Shares or
Performance Units to such Participant shall be cancelled.
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<PAGE>
7. RESTRICTED STOCK AWARDS. An Award of Restricted Stock under the Plan shall
consist of Shares subject to restrictions on transfer, conditions of
forfeiture, and such other terms and conditions as the Committee shall
determine.
7.1 AGREEMENTS. An Award of Restricted Stock shall be evidenced by a
Restricted Stock agreement in such form and not inconsistent with
this Plan as the Committee shall approve from time to time, which
shall include the following terms and conditions:
(a) RESTRICTIONS. A statement of the terms, conditions, and
restrictions to which the Restricted Stock awarded is subject,
including, without limitation, terms requiring forfeiture and
imposing restriction on transfer for such Term or Terms as
shall be determined by the Committee subject to the provisions
of this Plan. The Committee shall have the authority to
permit in its discretion an acceleration of the expiration of
the applicable Term with respect to any part or all of the
Restricted Stock awarded to a Participant in connection with
severance arrangements or changes in law, regulation or
accounting practice.
(b) LAPSE OF RESTRICTIONS. A statement of the terms and any other
conditions upon which any restrictions upon Restricted Stock
awarded shall lapse, as determined by the Committee subject to
the provisions of this Plan. Upon the lapse of the
restrictions, Shares free of restrictive legend, if any, shall
be issued to the Participant or his Successor.
7.2 TERM. Subject to acceleration of the expiration of the Term as
provided in or permitted by this Plan, the minimum Term for
Restricted Stock shall be three years unless the lapse of
restrictions is conditioned on the achievement of one or more
pre-established performance targets, in which case the minimum Term
shall be not less than one year, or the Restricted Stock is granted
in lieu of salary, cash bonus or other cash compensation, in which
case there may be no minimum Term.
7.3 NONTRANSFERABILITY. Restricted Stock awarded, and the right to
vote such Restricted Stock and to receive dividends thereon, may
not be sold, assigned, transferred, exchanged, pledged, or
otherwise encumbered, during the Term applicable to the Award. A
Participant with a Restricted Stock Award shall have all the other
rights of a stockholder including, but not limited to, the right to
receive dividends and the right to vote the Shares.
7.4 TERMINATION OF EMPLOYMENT. If a Participant ceases to be an
Employee prior to the lapse of restrictions by reason of his death,
permanent
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<PAGE>
disability or Retirement, all restrictions on Shares of
Restricted Stock held for his benefit shall immediately lapse.
Upon any other termination of employment prior to the lapse of
restrictions, participation in the Plan shall cease and all
Shares of Restricted Stock held for the benefit of a Participant
shall be forfeited by the Participant.
7.5 CERTIFICATES. Each certificate issued in respect to an Award of
Restricted Stock shall be deposited with the Company or its
designee and may, at the election of the Committee, bear the
following legend:
"This certificate and the shares of stock represented hereby
are subject to the terms and conditions (including forfeiture
provisions and restrictions against transfer) contained in the
Long-Term Incentive Compensation Plan and an Agreement entered
into between the registered owner and Wells Fargo & Company.
Release from such terms and conditions shall obtain only in
accordance with the provisions of the Plan and Agreement, a
copy of each of which is on file in the office of the
Secretary of Wells Fargo & Company."
8. STOCK AWARDS. Awards of Stock without restrictions may be made according
to terms and conditions established by the Committee.
9. STOCK OPTIONS.
9.1 AGREEMENTS. An Award of an Option shall be evidenced by a document
or other communication containing such terms and conditions as the
Committee shall approve from time to time, which terms and
conditions shall include the following:
(a) TYPE OF OPTION; NUMBER OF SHARES. A statement identifying the
Option represented thereby as an Incentive Stock Option or
Non-Qualified Stock Option, as the case may be, and the number
of Shares to which the Option applies.
(b) OPTION PRICE. A statement of the purchase price of the Stock
subject to Option which shall not be less than the Fair Market
Value, and in any event not less than the par value, of the
Stock on the date the Option is granted.
(c) EXERCISE TERM. A statement of the Term of each Option granted
as established by the Committee, provided that no Option shall
be exercisable after ten years from the date of grant. The
Committee shall have the authority to permit an acceleration
of previously established Terms, at its discretion.
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<PAGE>
(d) PAYMENT FOR SHARES. A statement that the purchase price of
the Shares with respect to which an Option is exercised shall
be payable at the time of exercise in accordance with
procedures established by the Company. The purchase price may
be payable in cash, in Stock having a Fair Market Value on the
date the Option is exercised equal to the Option price of the
Stock being purchased pursuant to the Option, or a combination
thereof, as the Committee shall determine. The Committee may,
either at the time the Option is granted or any time before it
is exercised, subject to such limitations as the Committee may
determine, authorize payment of the purchase price of the
Option by delivery to the Company of irrevocable instructions
to a broker, or some other communication acceptable to the
Company, requiring prompt delivery to the Company of the
amount of sale proceeds to pay the Option purchase price and
all applicable withholding taxes resulting from such exercise.
(e) NONTRANSFERABILITY. Each Option agreement shall state that
the Option is not transferable other than by will, the laws of
descent and distribution or by the Participant designating a
beneficiary in accordance with this Section 9.1(e). During
the lifetime of the Participant, Options may be exercised only
by the Participant or by the Participant's legal
representative. The Participant may, by completing and
signing a written beneficiary designation form which is
delivered to and accepted by the Company, designate a
beneficiary to exercise and receive any outstanding Options
(and all outstanding Stock Appreciation Rights granted in
conjunction with Options) upon 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
legal representative of the Participant's estate shall have
the right to exercise the Option.
(f) INCENTIVE STOCK OPTIONS. In the case of an Incentive Stock
Option, each Option agreement shall be subject to any terms,
conditions and provisions as the Committee determines
necessary or desirable in order to qualify the Option as an
Incentive Stock Option (within the meaning of Section 422A of
the Internal Revenue Code of 1986, or any amendment or
regulation pertaining to it) or any other law or regulation
providing special tax treatment for stock options and related
stock. Provided, however, that the aggregate Fair Market
Value (as determined at the effective date of the grant) of
the Stock with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any
calendar year shall not exceed $100,000.
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<PAGE>
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, each outstanding
Option shall become exercisable to the extent and for such
period or periods determined by the Committee but not beyond
the expiration date of said Option. If a Participant dies
before exercising all outstanding Options, the outstanding
Options shall be exercisable by the Participant's beneficiary
determined in accordance with Section 9.1(e).
(b) If a Participant ceases to be an Employee by reason of his
death, permanent disability or Retirement, each outstanding
Stock Appreciation Right granted in conjunction with an Option
shall become exercisable to the extent and for such period or
periods determined by the Committee but not beyond the
expiration date of said Stock Appreciation Right. If a
Participant dies before exercising all outstanding Stock
Appreciation Rights granted in conjunction with Options, said
outstanding Stock Appreciation Rights shall be exercisable by
the Participant's beneficiary determined in accordance with
Section 9.1(e).
9.3 TERMINATION OF EMPLOYMENT FOR REASONS OTHER THAN DEATH, DISABILITY,
OR RETIREMENT. Except as otherwise determined by the Committee, in
the event a Participant ceases to be an Employee for any reason
other than his death, permanent disability or Retirement, all
rights of the Participant under this Plan shall immediately
terminate without notice of any kind.
10. STOCK APPRECIATION RIGHTS. An Award of a Stock Appreciation Right shall
entitle the Participant, subject to terms and conditions determined by the
Committee, to receive upon exercise of the right all or a portion of the
excess of (i) the Fair Market Value of a specified number of Shares at the
time of exercise over (ii) a specified price which shall not be less than
100% of the Fair Market Value of the Shares at the time of grant. Stock
Appreciation Rights may be granted in connection with a previously or
contemporaneously granted Option, or independent of any Option. If issued
in connection with an Option, the Committee may impose a condition that
exercise of a Stock Appreciation Right cancels the Option with which it is
connected. A Stock Appreciation Right may not be exercised at any time
when the Fair Market Value of the Shares of Stock to which it relates does
not exceed the exercise price of the Option associated with those Shares.
10.1 AGREEMENT. An Award of a Stock Appreciation Right shall be
evidenced by a Stock Appreciation Right agreement in such form and
not inconsistent with this Plan as the Committee shall approve from
time to
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time, which shall include a statement of the Term within which
the Stock Appreciation Right may be exercised subject to terms
and conditions prescribed by the Committee, provided that no
Stock Appreciation Right shall be exercisable after ten years
from the date of grant. The Committee shall have the authority
to permit an acceleration of previously established exercise
Terms.
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, each Stock Appreciation Right
then outstanding which was granted independent of any Option shall
become exercisable to the extent and for such period or periods
determined by the Committee but not beyond the expiration date of
said Stock Appreciation Right.
10.3 TERMINATION OF EMPLOYMENT FOR REASONS OTHER THAN DEATH, DISABILITY,
OR RETIREMENT. Except as otherwise determined by the Committee, in
the event a Participant ceases to be an Employee for any reason
other than his death, permanent disability or Retirement, all
rights of the Participant under this Plan shall immediately
terminate without notice of any kind.
10.4 PAYMENT. Upon exercise of a Stock Appreciation Right, payment
shall be made in the form of cash or Stock or some combination
thereof as determined by the Committee. However, notwithstanding
any other provisions of this Plan, in no event may the payment
(whether in cash or Stock) upon exercise of a Stock Appreciation
Right exceed an amount equal to 100% of the Fair Market Value of
the Shares at the time of grant.
11. NONTRANSFERABILITY OF RIGHTS. Except as otherwise set forth in this Plan,
no rights under any Award will be transferable other than by will or the
laws of descent and distribution, and the rights and the benefits of any
Award may be exercised and received during the lifetime of the Participant
only by the Participant or by the Participant's legal representative.
12. TERMINATION OF EMPLOYMENT.
12.1 Transfers of employment between the Company and an Affiliate, or
between Affiliates, will not constitute termination of employment
for purposes of any Award.
12.2 The Committee may specify in the agreement relating to an Award
whether any authorized leave of absence or absence for military or
government service or for any other reasons will constitute a
termination of employment for purposes of the Award and the Plan.
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13. REORGANIZATION. If substantially all of the assets of the Company are
acquired by another corporation or in case of a reorganization of the
Company involving the acquisition of the Company by another entity, then as
to each Participant who is an Employee immediately prior to the
consummation of the transaction:
(a) All outstanding Options and Stock Appreciation Rights shall become
exercisable immediately prior to the consummation of the
transaction.
(b) All restrictions with respect to Restricted Stock shall lapse
immediately prior to the consummation of the transaction.
(c) All Performance Cycles for the purpose of determining the amounts
of Awards of Performance Shares and Performance Units payable shall
end at the end of the calendar quarter immediately preceding the
consummation of the transaction. The amount of an Award payable
shall be that fraction of the Award computed pursuant to the
preceding sentence the numerator of which is the number of calendar
quarters completed in the Performance Cycle through the end of the
calendar quarter immediately preceding the consummation of the
transaction and the denominator of which is the number of full
calendar quarters in the Performance Cycle. The amount of an Award
payable shall be paid within sixty days after consummation of the
transaction.
The Committee shall take such action as in their discretion may be
necessary or advisable to carry out the provisions of this Section.
14. BOARD CHANGES. On the date that a majority of the Board shall be persons
other than persons (a) for whose election proxies shall have been solicited
by the Board or (b) who are then serving as directors appointed by the
Board to fill vacancies on the Board caused by death or resignation (but
not by removal) or to fill newly-created directorships, then as to any
Participant who is an Employee immediately prior to said date and who
ceases to be an Employee within six months after said date for any reason
other than as a result of death, permanent disability or Retirement:
(i) All outstanding Options and Stock Appreciation Rights shall become
immediately exercisable and may be exercised at any time within six
months after the Participant ceases to be an Employee.
(ii) All restrictions with respect to Restricted Stock shall lapse and
Shares free of restrictive legend shall be delivered to the
Participant.
(iii) All Performance Cycles for the purpose of determining the amounts
of Awards of Performance Shares and Performance Units payable shall
end
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at the end of the calendar quarter immediately preceding the date
on which said Participant ceased to be an Employee. The amount
of an Award payable to said Participant shall be that fraction of
the Award computed pursuant to the preceding sentence the
numerator of which is the number of calendar quarters during the
Performance Cycle during all of which said Participant was an
Employee and the denominator of which is the number of full
calendar quarters in the Performance Cycle. The amount of an
Award payable shall be paid within sixty days after said
Participant ceases to be an Employee.
The Committee shall take such action as in their discretion may be
necessary or advisable to carry out the provisions of this Section.
15. EFFECTIVE DATE OF THE PLAN.
15.1 EFFECTIVE DATE. The Plan shall become effective as of September
25, 1984 upon the approval and ratification of the Plan by the
affirmative vote of the holders of a majority of the outstanding
Shares of Stock present or represented and entitled to vote in
person or by proxy at a meeting of the stockholders of the Company.
15.2 DURATION OF THE PLAN. The Plan shall remain in effect until all
Stock subject to it shall be distributed, until the Term of all
Options or Stock Appreciation Rights granted under this Plan shall
expire, until all restrictions on Restricted Stock granted under
this Plan shall lapse, or until the Performance Cycle for any
Performance Shares or Performance Units awarded under this Plan
shall end.
16. RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan shall confer upon any
Participant the right to continue in the employment of the Company or any
Affiliate or affect any right which the Company or any Affiliate may have
to terminate employment of the Participant.
17. WITHHOLDING TAXES. The Company and its Affiliates shall have the right to
deduct from all payments under this Plan, whether in cash or in Stock, an
amount necessary to satisfy any federal, state or local withholding tax
requirements.
18. DEFERRAL OF PAYMENTS. The Company may, from time to time, establish rules
and conditions under which a Participant may defer the payment of Awards.
Such terms and conditions shall be included in a deferral agreement signed
by a Participant electing such deferral.
19. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN. The Board or
Committee may at any time terminate, suspend or modify the Plan, except
that the Board or Committee will not, without authorization of the
stockholders of the
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Company, effect any change (other than through adjustment for changes in
capitalization as provided in Section 20) which will:
(a) Increase the total amount of Stock which may be awarded under the
Plan.
(b) Change the class of Employees eligible to participate in the Plan.
(c) Withdraw the administration of the Plan from the Committee.
(d) Permit any person, while a member of the Committee, to be eligible
to participate in the Plan.
(e) Extend the duration of the Plan.
No termination, suspension, or modification of the Plan will adversely
affect any right acquired by any Participant or any Successor under an
Award granted before the date of termination, suspension, or modification,
unless otherwise agreed to by the Participant; but it will be conclusively
presumed that any adjustment for changes in capitalization provided for in
Section 20 does not adversely affect any right.
20. ADJUSTMENT FOR CHANGES IN CAPITALIZATION. Any change in the number of
outstanding Shares occurring through Stock splits, reverse Stock splits, or
Stock dividends after the grant of an Award will be reflected
proportionately in the aggregate number of Shares then available for Awards
and in the number of Shares subject to Awards then outstanding; and a
proportionate change will be made in the per share Option price as to any
outstanding Options. Any fractional Shares resulting from adjustments will
be rounded to the nearest whole Share.
7/22/97
10/2/97
4/28/98
7/28/98
2/23/99
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WELLS FARGO
LONG-TERM INCENTIVE COMPENSATION PLAN
RESTRICTED STOCK GRANT AGREEMENT
This Restricted Stock Agreement (this "Agreement") between Wells Fargo & Company
(the "Company"), and ________________________ (the "Participant") is dated as of
__________________. The purpose of this Agreement is to implement the Company's
Long-Term Incentive Compensation Plan, as amended ("Plan").
1. GRANT - GRANT NUMBER: RS . The Company hereby grants Participant
_______ shares of the Company's Restricted Stock (the "Restricted Stock
Grant") subject to the terms of this Agreement.
2. TRANSFER RESTRICTION Participant may not sell, assign, pledge, encumber
or otherwise transfer any of the shares of the Restricted Stock Grant
until the Restriction Lapse described in paragraph 3 below ("Transfer
Restriction"). Prior to the Restriction Lapse, any stock certificates
issued to Participant for the Restricted Stock Grant shall be in the
sole custody of the Company.
3. RESTRICTION LAPSE Subject to the terms of the Plan, the Transfer
Restriction on the Restricted Stock Grant shall lapse in accordance with
the following schedule (if not forfeited prior to that date):
(a) thirty percent of the Restricted Stock Grant (rounded down
to the nearest whole share) on the third anniversary of the
grant (____________, 20__); and
(b) an additional thirty percent of the Restricted Stock Grant
(rounded down to the nearest whole share) on the fourth
anniversary of the grant (_______________, 20__); and
(c) the remainder of the Restricted Stock Grant on the fifth
anniversary of the grant (________, 20__)
Provided, however, that if Participant is an Employee immediately prior
to a reorganization as described in Section 13 of the Plan, the Transfer
Restriction shall lapse immediately prior to the consummation of the
reorganization for the entire Restricted Stock Grant. In addition, if
Participant is an Employee immediately prior to a change in the Board as
described in Section 14 of the Plan and thereafter within six months
after said change in the Board terminates his or her employment with the
Company or an Affiliate for any reason other than death, permanent
disability or Retirement, the Transfer Restriction shall lapse on said
termination date for the entire Restricted Stock Grant.
Upon lapse of the Transfer Restriction, stock certificates issued to
Participant for said shares shall be delivered to the Participant.
4. FORFEITURE Participant's right to retain the Restricted Stock Grant, or
any portion thereof, is subject to his/her continuous employment by the
Company or an Affiliate until the Restriction Lapse. If Participant's
employment by the Company or an Affiliate terminates for any reason
prior to the Restriction Lapse, the Restricted Stock Grant (or the
relevant portion(s) thereof) shall be forfeited and revert to the
Company. However, no such forfeiture shall occur if the termination of
the Participant's employment is due to the Participant's death,
permanent disability or Retirement.
5. VOTING POWER AND TAXES Prior to the earlier of the Restriction Lapse or
forfeiture of the Restricted Stock Grant, Participant shall have voting
power with respect to said shares and shall receive dividends thereon.
Any dividends or other distributions with respect to the Restricted
Stock Grant which are payable in Stock shall be subject to the same
restrictions then applicable to the Restricted Stock Grant and shall
thereafter be considered Restricted Stock for purposes of this
Agreement. If Participant recognizes ordinary income on the Restricted
Stock Grant or any related payments, it may be necessary to withhold
income taxes and social security taxes. Participant agrees to pay the
Company or its Affiliate to satisfy any withholding obligations.
Payment may be made by Participant in cash or, at Participant's
election, the Company may withhold from the Shares to be issued the
number of Shares (based on the Fair Market Value of the Stock as of the
date of the Restriction Lapse) that would satisfy the withholding taxes
due (except that any fractional share amount shall be paid by the
Participant in cash). The Company will not be obligated to deliver any
stock certificates for said Shares until withholding obligations are
met.
6. DEFINITIONS Capitalized terms not otherwise defined herein are used as
defined in the Plan.
<PAGE>
7. This Agreement is subject to the Plan and to the extent this Agreement
and the Plan are inconsistent, the Plan shall govern. Nothing in this
Agreement shall interfere with or limit in any way the right of the
Company or any of its Affiliates to terminate Participant's employment
at any time, nor confer upon Participant any right to continue in the
employ of the Company or any of its Affiliates.
8. This Agreement, together with the Plan, is the entire Agreement between
the Participant and the Company with regard to the Restricted Stock
Grant and may not be modified except in writing, signed by both parties
hereto. This Agreement is binding on the parties hereto and their
respective successors and assigns. It is governed and construed in
accordance with the laws of Delaware.
IN WITNESS WHEREOF, the Participant and the Company have executed this
Agreement as of the date above.
WELLS FARGO & COMPANY
By:
--------------------------------------
Its: Executive Vice President
- ------------------------------------------
Participant
-2-
<PAGE>
WELLS FARGO
LONG-TERM INCENTIVE COMPENSATION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
WITH RIGHT TO ACQUIRE A RELOAD STOCK OPTION
NAME: Name SOC. SEC. NO.: SSN
GRANT DATE: EXPIRATION DATE: [10 years from grant date]
SHARES: # shares EXERCISE PRICE:
1. GRANT OF OPTION. Wells Fargo & Company (the "Company") has granted to you
an option ("Option") to purchase _______ shares (the "Shares") of Wells Fargo &
Company common stock ("Common Stock"). The Option is granted subject in all
respects to the terms of the Company's Long-Term Incentive Compensation Plan
(the "Plan").
2. TERM, VESTING AND EXERCISE OF OPTION. The term of this Option commences on
[Grant Date] and, except as provided in paragraph 3 below, ends on [Expiration
Date], provided you are continuously employed by the Company or an Affiliate
("Wells Fargo"). If your employment with Wells Fargo is terminated, the Option
may be exercised only as described in paragraph 3 below. While you are alive,
the Option may be exercised only by you or your legal representative.
Except as provided in paragraph 3 below, this Option becomes exercisable
("vests") according to the following table provided it has not been terminated
before such date in accordance with the provisions of this Option:
Shares shares on Date
Shares shares on Date
Shares shares on Date
To exercise all or part of the Option you must deliver a "Notice of Exercise,"
in such form as the Company authorizes, along with payment as described herein
of the exercise price and all applicable withholding taxes. You must pay the
exercise price on the day you exercise the Option (a) in cash, (b) in whole
shares of Common Stock valued at their Fair Market Value (the prior trading
day's closing price), or (c) by delivering, with your Notice of Exercise,
irrevocable instructions to a broker to promptly deliver to the Company the
amount of the exercise price and all applicable withholding taxes. If Stock is
used to pay the exercise price ("swap transaction"), the Stock used (i) must
have been owned by you for at least six months prior to the date of exercise or
purchased by you in the open market; and (ii) must not have been used in a
stock-for-stock swap transaction within the preceding six months. You shall not
have any rights as a stockholder with respect to the Shares of Common Stock
subject to the Option until you have exercised the Option for such Shares.
3. RETIREMENT, DISABILITY, DEATH OR OTHER TERMINATION OF EMPLOYMENT. If your
termination of employment is due to Retirement, your Option will immediately
vest and become exercisable until the expiration date or until one year after
your date of death, whichever occurs first. If you become permanently disabled
while you are employed by Wells Fargo, then your entire Option is immediately
vested and exercisable and will remain exercisable until one year after your
date of death or until the Option expires, whichever occurs first. If you die
while you are employed by Wells Fargo, the entire Option is immediately vested
and exercisable, and the beneficiary as set forth in the Plan may exercise the
Option until one year after the date of your death or until the Option expires,
whichever occurs first.
If you leave Wells Fargo's employment for any reason other than death, permanent
disability, Retirement, or discharge for cause, you may exercise at any time
within three (3) months after the date of termination that part of the Option
which was exercisable on the date of termination. If you are discharged for
cause, the Option will expire upon receipt by you of oral or written notice of
termination.
4. COMPLIANCE AND WITHHOLDING TAXES. The issuance of Shares upon the exercise
of the Option shall be subject to compliance by the Company and you with all
applicable requirements of law relating thereto, including withholding tax
obligations, and with all applicable regulations of any stock exchange on which
the Common Stock may be listed at the time of such issuance. You agree to
satisfy all withholding tax obligations applicable to the acquisition of Shares
under the Option or the disposition of such Shares that the Company deems
necessary. Income taxes are computed based on the difference between the Fair
Market Value of the Shares acquired as of the date of exercise and the exercise
price for those Shares. Taxes may be paid either in cash or, if you elect, by
having the Company withhold from the Shares to be issued a number of Shares
(valued at their Fair Market Value as of the date of exercise) necessary to
satisfy the taxes. The Company is not obligated to exercise the Option and/or
deliver the Shares until all payment obligations are met.
5. RELOAD OPTION. If you exercise this Option while you are employed by Wells
Fargo and pay the exercise price in Stock as described herein, you are hereby
granted a non-qualified reload stock option ("Reload Option") at the Fair Market
Value as of the date of such exercise. The Reload Option will be for the number
of whole Shares used in the swap exercise to pay the exercise price plus a
number of Shares with respect to the tax liability related to the exercise.
Subject to the provisions of paragraph 3, the Reload Option may be exercised
between the date of grant and the date of expiration of this Option. The Reload
Option shall be subject to the terms and conditions of this Agreement, as
modified by this paragraph 5. No Reload Option is granted if this Option is
exercised after your Retirement, permanent disability, death or other
termination of employment. No Reload Option is granted upon exercise of the
Reload Option.
6. TRANSFERABILITY OF OPTION. The Option may be transferred only by will, the
laws of descent and distribution or by your designating a beneficiary in
accordance with Section 9.1(e) of the Plan.
7. NO AGREEMENT FOR WELLS FARGO TO CONTINUE YOUR EMPLOYMENT. Nothing in this
Agreement gives you any right to continued employment and Wells Fargo may
terminate you at any time for any reason.
8. GENERAL RESTRICTIONS. The Company may delay the exercise of the Option if
it determines that (a) the Shares subject to the Option should be listed,
registered or qualified on any securities exchange or under any law, or (b) the
consent of a regulatory body is desirable.
9. ADDITIONAL PROVISIONS AND INTERPRETATION OF THIS AGREEMENT. This Agreement
is subject to the provisions of the Plan. Capitalized terms not defined in this
Agreement are used as defined in the Plan. If the Plan and this Agreement are
inconsistent, provisions of the Plan will govern. Interpretations of the Plan
and this Agreement by the Committee are binding on you and the Company.
<PAGE>
WELLS FARGO & COMPANY
DIRECTORS FORMULA STOCK AWARD PLAN
(As amended effective January 1, 1999)
1. PURPOSE. The purpose of the Wells Fargo & Company Directors Formula
Stock Award Plan (the "Plan") is to provide compensation in the form of
shares of the Company's common stock, $1 2/3 par value per share ("Common
Stock"), to non-employee members of the Board of Directors (the "Board") of
Wells Fargo & Company (the "Company") in consideration for personal services
rendered in their capacity as directors of the Company. The Plan is intended
to aid in attracting and retaining individuals of outstanding abilities and
skills for service on the Board.
2. ELIGIBILITY. Any person who was a non-employee director of the
Company on the last day of a calendar year preceding an Award Date (as
defined below) shall be referred to hereinafter as an "Eligible Non-Employee
Director" and shall be awarded shares of Common Stock determined as set forth
in Section 3.
3. FORMULA AWARD. In consideration for past services rendered, on
February 1 of each year beginning February 1, 1997 (the "Award Date"), each
Eligible Non-Employee Director shall be awarded that number of shares of
Common Stock having an aggregate fair market value on the Award Date equal to
one-twelfth of the annual cash retainer established by the Board and in
effect as of the immediately preceding January 1, for each month or portion
of a month during which he or she served as a non-employee director of the
Company, rounded up to the next whole share (an "Award").
The fair market value shall be determined using the closing price of a
share of Common Stock as reported on the consolidated tape of the New York
Stock Exchange.
4. DEFERRAL OF AWARDS. An Eligible Non-Employee Director may elect to
defer under the terms of the 1999 Deferral Plan for Directors, in the form of
shares of Common Stock, all or a portion of the Award for his or her service
as a director for the calendar year (the "Deferral Year") following the year
in which the deferral election is made. Such election shall be made pursuant
to the terms of the 1999 Directors' Deferred Compensation Plan.
5. SHARES AVAILABLE FOR AWARDS. Subject to Section 6, no more than
200,000 shares of Common Stock may be awarded under the Plan. These shares
may consist, in whole or in part, of authorized but unissued Common Stock or
treasury Common Stock not reserved for any other purpose.
6. ADJUSTMENTS FOR CERTAIN CHANGES IN CAPITALIZATION. If the Company
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
<PAGE>
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. EFFECTIVE DATE. The Plan shall become effective on January 1, 1992.
8. NO GUARANTEE OF SERVICE. Participation in the Plan does not
constitute a guarantee or contract of service as a director.
9. NON-ASSIGNABILITY. No right to receive an award hereunder shall be
transferable or assignable by a Plan participant other than by will or the
laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Internal Revenue Code of 1986, as amended,
Title I of the Employee Retirement Income Security Act ("ERISA"), or rules
thereunder. The designation of a beneficiary by a participant pursuant to
the terms of the 1999 Directors' Deferred Compensation Plan does not
constitute a transfer.
10. ADMINISTRATION. This Plan shall be administered under such rules
and procedures as shall be established from time to time by the Company's
senior human resources officer (the "Plan Administrator").
11. AMENDMENT AND TERMINATION. This Plan may be amended, suspended or
terminated by action of the Board or the Board Affairs Committee, or any
successor committee, of the Board and automatically shall be terminated when
all Common Stock subject to the Plan has been awarded; provided, however,
that (a) the provisions of the Plan may not be amended more than once every
six months, other than to comport with changes in the Internal Revenue Code,
the Employee Retirement Income Security Act, or the rules thereunder; (b) if
the Plan has been approved by the stockholders of the Company, any amendment
shall be similarly approved if the amendment would (i) materially increase
the benefits accruing to participants under the Plan; or (ii) materially
increase the number of securities which may be issued under the Plan; or
(iii)materially modify the requirements as to eligibility for participation
in the Plan; and (c) if at the time of any such proposed amendment,
suspension or termination, any member of such committee does not satisfy the
requirements applicable to committee approval contained in regulations of the
Securities Exchange Commission promulgated under Section 16 of the Securities
Exchange Act of 1934, and applicable interpretations thereof, any such
amendment, suspension or termination must be approved by the Board.
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<PAGE>
WELLS FARGO & COMPANY
1999 DIRECTORS STOCK OPTION PLAN
I. PURPOSE
The purpose of the Wells Fargo & Company 1999 Directors Stock Option Plan is to
provide an opportunity to non-employee members of the Board of Directors of the
Company to participate in stockholder gains in consideration for personal
services rendered in their capacity as directors of the Company. The Plan is
also intended to aid in attracting and retaining individuals of outstanding
abilities and skills for service on the Company's Board of Directors.
II. DEFINITIONS
When used in this Plan, the following capitalized terms shall have the meanings
indicated below:
AWARD DATE The day of the Company's annual meeting of
stockholders in each year, beginning in 1999.
COMMON STOCK Common Stock of the Company, $1 2/3 par value.
COMPANY Wells Fargo & Company.
FAIR MARKET VALUE The closing price per share of the Common Stock
reported among the New York Stock Exchange
composite transactions for the trading day
immediately preceding the option grant date or
exercise date, as the case may be.
NON-EMPLOYEE DIRECTOR Any member of the Board of Directors of the
Company who is not an officer or employee of the
Company or of a subsidiary of the Company.
PLAN ADMINISTRATOR The Company's Director of Human Resources.
III. OPTION AWARD FORMULA
Every Non-Employee Director who is elected or re-elected to the Board of
Directors by the stockholders of the Company shall automatically receive an
option as of each Award Date to purchase Common Stock with a value of $25,000 on
such date determined in accordance with the Black-Scholes option pricing model.
A Non-Employee Director who joins the Board of Directors on any date other than
the Award Date shall automatically receive as of such other date an option to
purchase Common Stock with the same value determined as of such other date,
prorated to reflect the number of months (rounded up to the next whole month)
remaining until the next Award Date. The exercise price per share for each
stock option granted under this Plan
<PAGE>
shall be the Fair Market Value of the Common Stock as of the date the option is
granted. The number of shares subject to any such option shall be determined
using parameters determined as of the business day immediately preceding the
date as of which the option is granted and shall be rounded up to the next whole
share.
IV. EXERCISE OF OPTIONS
A. EXERCISE PRICE AND VESTING. Each option granted under the Plan shall
have an exercise price per share equal to the Fair Market Value as of
the grant date of the option. Except as set forth in Section V,
options granted under the Plan become fully exercisable six months
after their grant date and, subject to paragraphs C and D below, shall
remain exercisable until the tenth anniversary of their grant date.
B. PAYMENT OF EXERCISE PRICE. The exercise price of any stock option
awarded under the Plan shall be payable entirely in cash or entirely
in Common Stock, valued at Fair Market Value on the date the option is
exercised, in accordance with procedures determined by the Plan
Administrator. If the option exercise price is paid using Common
Stock, it (i) must have been owned by the optionee for at least six
months prior to the date of exercise or purchased by the optionee in
the open market; and (ii) must not have been used in a stock swap
transaction within the preceding six months. Regardless of how the
option exercise price is paid, any withholding taxes arising out of
the option exercise may be paid in cash or in Common Stock. To the
extent that no violation of Section 16(b) of the Securities Exchange
Act of 1934 or any other law would result, the payment of the exercise
price of options granted hereunder may also be made by delivering a
properly executed exercise notice together with irrevocable
instructions to a broker, or some other communication acceptable to
the Company, requiring the delivery to the Company of sale or loan
proceeds sufficient to pay the option exercise price, together with
any related withholding taxes if no other payment for such taxes
satisfactory to the Company has been arranged; provided that such
exercise shall be conditioned upon, and no shares shall be issued
pursuant to such exercise until, receipt of such amount by the
Company.
C. TERMINATION OF OPTIONS DUE TO DEATH. If a Non-Employee Director dies,
all outstanding options previously granted to him or her under this
Plan shall become immediately exercisable and remain exercisable for a
period of one year.
D. TERMINATION OF OPTIONS FOR REASONS OTHER THAN DEATH. In the event a
Non-Employee Director leaves the Board of Directors of the Company for
any reason other than his or her death or for cause, all options
granted to him or her under this Plan shall remain outstanding and
exercisable in accordance with their original terms. In the event that
a Non-Employee Director shall leave the Board for cause, in which case
all outstanding options granted to such Non-Employee Director under
this Plan shall immediately terminate and be cancelled as of the date
he or she ceases to be a director.
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<PAGE>
V. RELOAD AWARD
If while serving on the Board of Directors of the Company, a Non-Employee
Director exercises an option granted under Section III of the Plan (an "Original
Option") and pays the option exercise price using Common Stock in accordance
with paragraph B of Section IV, the Non-Employee Director shall automatically be
granted a "reload" stock option on the date of such exercise. The reload stock
option grant shall equal the number of whole shares of Common Stock used in the
swap exercise to pay the option exercise price. Subject to the provisions of
paragraphs B, C and D of Section IV, the reload stock option may be exercised
between the date of grant and the date of expiration of the Original Option. No
reload stock option is granted if the Original Option is exercised after a
Non-Employee Director leaves the Board of Directors of the Company for any
reason.
VI. TRANSFERABILITY; ASSIGNABILITY
No option granted hereunder shall be transferred or assigned other than by will,
the laws of descent and distribution or by the designation of a beneficiary in
accordance with this Section. During the lifetime of an optionee, options
granted hereunder may be exercised only by the optionee. The optionee may, by
completing and signing a written beneficiary designation form which is delivered
to and accepted by the Company, designate a beneficiary to exercise and receive
any outstanding options upon the optionee's death. If at the time of the
optionee's death there is not a fully effective beneficiary designation form on
file, or if the designated beneficiary does not survive the optionee, the legal
representative of the optionee's estate shall have the right to exercise the
option. No option granted under this Plan shall be assignable or transferable
except as provided in this Section.
VII. SHARES AVAILABLE FOR AWARDS
Subject to Section VIII, options for no more than 600,000 shares of Common Stock
may be awarded under the Plan; provided, however, that shares subject to options
granted hereunder that are cancelled or expire without being fully exercised and
shares used to pay the exercise price for options granted hereunder may again be
made subject to options granted under this Plan with no effect on the foregoing
limit. Shares made subject to options hereunder may consist, in whole or in
part, of authorized but unissued Common Stock or treasury Common Stock not
reserved for any other purpose.
VIII. ADJUSTMENTS FOR CERTAIN CHANGES IN CAPITALIZATION
In the event any change is made to the Common Stock subject to the Plan or
subject to any outstanding option granted under the Plan (whether by reason of
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, combination of shares, exchange of shares, change in corporate structure
or otherwise), then appropriate adjustments shall be made to the maximum number
of shares that may be granted under the Plan or subject to options granted under
the Plan as well as the number of shares and price per share of Common Stock
subject to options then outstanding under the Plan. The grant of options under
the Plan shall not affect the right of the Company to adjust, reclassify,
reorganize or otherwise change its capital or
3
<PAGE>
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets. Any fractional shares
resulting from adjustments will be rounded to the nearest whole share.
IX. PLAN ADMINISTRATOR
The Plan Administrator's responsibilities include, but are not limited to, the
following:
- To adopt rules for administration of the Plan.
- To interpret and implement the provisions of the Plan.
- To resolve all questions regarding the administration, interpretation
and application of the Plan.
- To have all other powers as may be necessary to discharge
responsibilities under the Plan.
The Plan Administrator's determinations will be conclusive and binding on all
participants in the Plan.
X. TERM AND TERMINATION
The Plan is effective as of January 1, 1999. The Plan will continue
indefinitely, as it may be amended or modified from time to time, until
terminated.
XI. TAX TREATMENT
All options granted under the Plan shall be non-qualified stock options not
entitled to preferential tax treatment under Section 422 of the Internal Revenue
Code of 1986, as it may be amended from time to time.
XII. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION
The Plan may be amended, modified, suspended or terminated by action of the
Board of Directors or the Board Affairs Committee, or any successor committee,
of its Board of Directors; provided, however, that if at the time of any such
proposed amendment, modification or termination, any member of such committee
does not satisfy the requirements applicable to committee approval contained in
regulations of the Securities and Exchange Commission promulgated under Section
16 of the Securities Exchange Act of 1934, and applicable interpretations
thereof, any such amendment, modification or termination must be approved by the
Board of Directors of the Company. The Plan shall terminate automatically when
all shares reserved for issuance hereunder have been issued or made subject to
options granted hereunder. No termination, suspension or modification of the
Plan will adversely affect any right in any option outstanding hereunder to the
extent the same has not been exercised unless otherwise agreed to by the
optionee. It will be conclusively presumed that any adjustment for changes in
capitalization provided for in Section VIII does not adversely affect any such
right.
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<PAGE>
XIII. NO GUARANTEE OF SERVICE
Participation in this Plan does not constitute a guarantee or contract of
service as a Non-Employee Director.
XIV. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant hereto shall be
governed by and construed in accordance with the law of the State of Delaware.
5
<PAGE>
WELLS FARGO & COMPANY
1999 DEFERRAL PLAN FOR DIRECTORS
I. PURPOSE
The purpose of the Wells Fargo & Company 1999 Deferral Plan for Directors is
to provide an opportunity to non-employee members of the Board of Directors
of the Company to defer receipt of all or a portion of their compensation
received in consideration for personal services rendered in their capacity as
directors of the Company. This Plan is effective as of January 1, 1999 and
is applicable to compensation earned after that date.
II. DEFINITIONS
When used in this Plan, the following capitalized terms shall have the
meanings indicated below:
<TABLE>
<S> <C>
BOARD The Board of Directors of the Company.
CASH COMPENSATION The annual retainer fees and Board meeting fees.
COMMON STOCK Common Stock of the Company, $1-2/3 par value.
COMPANY Wells Fargo & Company.
DEFERRAL ELECTION An irrevocable election to defer receipt of all or
a part of Eligible Compensation.
ELIGIBLE COMPENSATION Eligible compensation includes Cash Compensation,
Formula Stock Awards, Stock Option Gains,
Retirement Conversion Amounts or any other
compensation deemed eligible by the Board.
FAIR MARKET VALUE The closing price per share of the Common Stock
reported on the consolidated tape of the New York
Stock Exchange as of the trading day immediately
preceding the transaction and/or grant date.
FORMULA STOCK AWARD Any Award made pursuant to the Wells Fargo &
Company Directors Formula Stock Award Plan.
INTEREST The average annual rate for 3-Year Treasury Notes
for the immediately preceding calendar year plus
2%.
NON-EMPLOYEE DIRECTOR Any member of the Board who is not an employee of
the Company or of a subsidiary of the Company.
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<PAGE>
PARTICIPANT Any Non-Employee Director who elects to defer
Eligible Compensation under the Plan.
DEFERRAL YEAR January 1 through December 31 of the year in which
Eligible Compensation is earned.
PLAN Wells Fargo & Company 1999 Deferral Plan for
Directors.
PLAN ADMINISTRATOR The Director of Human Resources of the Company.
RETIREMENT CONVERSION A dollar amount equal to the accrued benefits
AMOUNT under the former Wells Fargo & Company Directors'
Retirement Plan or the Norwest Corporation
Retirement Plan for Non-Employee Directors,
calculated as if the Director's service on the
Board had ended as of November 2, 1998.
STOCK OPTION GAIN The difference between the stock option exercise
price and the Fair Market Value of the Common
Stock on the exercise date when the option is
exercised using the stock swap method.
</TABLE>
III. ELIGIBILITY
Any non-employee members of the Board of Directors of the Company are
eligible to participate in the Plan.
An eligible Non-Employee Director becomes a Participant in the Plan by filing
a Deferral Election to 1) defer receipt of all or a part of Eligible
Compensation, 2) designate the year in which distributions will commence, and
3) designate the form of distribution (which may be made in either a lump sum
or in up to 10 annual installments). A Deferral Election, once made, will be
irrevocable and will apply to the Deferral Year for which it was made. An
eligible Non-Employee Director who becomes a Participant continues as a
Participant until the date of the last distribution provided in Section VII.
IV. COMPENSATION ELIGIBLE FOR DEFERRAL
Forms of compensation eligible for irrevocable deferral include the
following:
A. CASH COMPENSATION. Directors may elect to defer receipt of all or a
portion of their Cash Compensation into either cash or stock deferral
accounts.
B. FORMULA STOCK AWARDS. Directors may elect to defer all or a portion
of Formula Stock Awards into deferred stock accounts.
C. STOCK OPTION GAINS. Directors may elect to defer receipt of Stock
Option Gains realized by exercising stock options using the stock swap
method. Stock option gain deferrals will be credited to the deferred
stock accounts.
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<PAGE>
Gains realized from any other method of exercising stock options are
not eligible for deferral.
D. RETIREMENT CONVERSION AMOUNT. Directors may elect to defer the entire
Retirement Conversion Amount into a deferred stock account.
E. OTHER. Directors may elect to defer any other compensation deemed to
be Eligible Compensation by the Board.
V. DEFERRAL ELECTIONS
A. CASH COMPENSATION AND FORMULA STOCK AWARD DEFERRAL ELECTIONS.
Deferral Elections must be filed with the Company prior to the
beginning of the year in which Eligible Compensation is earned. New
Directors must make Deferral Elections within thirty days of being
notified of eligibility to participate in the Plan in order to defer
Eligible Compensation earned in the year they are deemed eligible.
New Deferral Elections must be filed for each Deferral Year.
Notwithstanding the foregoing, a Deferral Election for Cash
Compensation in 1999 or for a Formula Stock Award to be issued in the
year 2000 may be filed with the Company no later than March 31, 1999.
B. STOCK OPTION GAINS DEFERRAL ELECTION. Deferral Elections may be filed
with the Company at any time following the stock option grant date and
at least one year before the stock options are exercised. A new
Deferral Election must be filed for each stock option grant. The
Deferral Election applies to all gains associated with a specific
grant even if options are exercised on different dates.
C. RETIREMENT CONVERSION AWARD. A Deferral Election must be filed no
later than June 30, 1999.
D. DESIGNATION OF BENEFICIARY. A Participant may, from time to time,
designate and/or revoke his or her beneficiary designation and file a
new beneficiary designation with the Company. The Designation of
Beneficiary will apply to all of the Participant's Deferred Account
balances.
VI. DEFERRED ACCOUNTS
A. DEFERRED CASH ACCOUNT. Any Cash Compensation deferred into the
Deferred Cash Account will be credited to the account on the date the
Cash Compensation would have otherwise been paid.
B. DEFERRED STOCK ACCOUNT. Any Cash Compensation, Formula Stock awards,
Stock Option Gains, or Retirement Conversion Amounts that are deferred
into the Deferred Stock Account will receive a credit to the Deferred
Stock Account on the date the Cash Compensation, Formula Stock Award,
Retirement Conversion Amount, or Stock Option Gain would have
otherwise been paid or realized. Cash amounts will be converted into
shares of Common Stock in the Deferred Stock Account based on
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<PAGE>
the Fair Market Value of the Common Stock on the day prior to the
date the compensation would have otherwise been paid or realized.
C. INTEREST. Deferred Cash Accounts will earn Interest. Interest will
be compounded annually and will be credited on the last day of each
calendar quarter until all funds in the Deferred Cash Account have
been distributed in accordance with Section VII.A.
D. DIVIDEND EQUIVALENTS. Deferred Stock Accounts will receive dividend
credits each time dividends are paid on the Common Stock.
The Deferred Accounts of each Participant will be divided into a series of
sub-accounts, one for each type of Eligible Compensation and one for each
year Eligible Compensation is deferred. Each Stock Option Gain which is
deferred will be accounted for in a separate sub-account. All Common Stock
share calculations will be rounded to the third decimal place. Each
Participant will, at all times, have a fully vested and non-forfeitable right
to all amounts properly credited to his or her Deferred Accounts.
VII. DISTRIBUTION OF DEFERRED ACCOUNTS
A. DISTRIBUTION FROM THE DEFERRED CASH ACCOUNT. A Participant's deferred
cash sub-accounts will be distributed in cash. Distributions will be
made in a lump sum or in up to 10 annual installments, as specified in
Participant's Deferral Election, as of: 1) March 1 of the first
calendar year following termination of a Participant's service as a
Non-Employee Director, or 2) March 1 of any other year elected by the
Participant which begins at least 12 months following the year in
which the deferred compensation would otherwise have been received, or
3) July 1 of the calendar year in which a Participant's service as a
Non-Employee Director terminates if such termination occurs on or
before June 30; provided, however, that if July 1 installments are
elected, subsequent annual installments shall be payable as of March 1
of each year thereafter. The amount of each installment distribution
will be equal to the total amount of the account divided by the number
of installments remaining to be made, including the current
installment.
B. DISTRIBUTION FROM THE DEFERRED STOCK ACCOUNT. A Participant's
deferred stock sub-accounts will be distributed in whole shares of
Common Stock. Distributions will be made in a lump sum or in up to 10
annual installments, as specified in Participant's Deferral Election,
as of: 1) March 1 of the first calendar year following termination of
a Participant's service as a Non-Employee Director, or 2) March 1 of
any other year elected by the Participant which begins at least 12
months following the year in which the deferred compensation would
otherwise have been received, or 3) July 1 of the calendar year in
which a Participant's service as a Non-Employee Director terminates if
such termination occurs on or before June 30; provided, however, that
if July 1 installments are elected, subsequent annual installments
shall be payable as of March 1 of each year thereafter. The amount of
each installment distribution will be equal to the total amount of the
account divided by the number of installments remaining to be made,
including the current installment, rounded up to the nearest whole
share and the whole number of shares so distributed shall be
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<PAGE>
deducted from the total amount of the account. The final
distribution will be rounded up to the nearest whole share.
C. DISTRIBUTION FROM THE DEFERRED CASH ACCOUNT. A Participant's deferred
cash sub-accounts will be distributed in cash. Distributions will be
made in a lump sum or in up to 10 annual installments commencing, as
specified in Participant's Deferral Election, on either: 1) March 1 of
the first calendar year following termination of a Participant's
service as a Non-Employee Director, or 2) on March 1 of any other year
elected by the Participant which begins at least 12 months following
the year in which the deferred compensation would otherwise have been
received. If March 1 is not a business day, distribution will
commence on the next succeeding business day. The amount of each
installment distribution will be equal to the total amount of the
account divided by the number of installments remaining to be made,
including the current installment.
D. DISTRIBUTION FROM THE DEFERRED STOCK ACCOUNT. A Participant's
deferred stock sub-accounts will be distributed in whole shares of
Common Stock. Distributions will be made in a lump sum or in up to 10
annual installments, as specified in Participant's Deferral Election,
commencing on either: 1) March 1 of the first calendar year following
termination of a Participant's service as a Non-Employee Director or
2) on March 1 of any other year elected by the Participant which
begins at least 12 months following the year in which the deferred
compensation would otherwise have been received. If March 1 is not a
business day, distribution will commence on the next succeeding
business day. Cash in lieu of fractional shares will be determined
based on the Fair Market Value of the Common Stock on the January 31
immediately preceding the date of distribution. The amount of each
installment distribution will be equal to the total amount of the
account divided by the number of installments remaining to be made,
including the current installment, rounded down to the nearest whole
share. The final distribution will be in whole shares together with
cash in lieu of a fractional share.
E. IN THE EVENT OF DEATH. If a Participant dies before receiving all
distributions to which he or she is entitled under the Plan, all
remaining distributions will be made in one lump sum. Such
distribution will be made in accordance with the Participant's
Designation of Beneficiary form. In the absence of a valid
designation, or if the designated beneficiary does not survive the
Participant, the distribution will be made to the Participant's
estate. If any beneficiary dies after becoming entitled to receive
Plan distributions, the remaining distribution will be made to the
beneficiary's estate.
VIII. PLAN ADMINISTRATOR
The Plan Administrator is the Company's Director of Human Resources. The
Plan Administrator's responsibilities include, but are not limited to, the
following:
- To adopt rules for administration of the Plan.
- To interpret and implement the provisions of the Plan.
- To resolve all questions regarding the administration,
interpretation and application of the Plan.
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<PAGE>
- To have all other powers as may be necessary to discharge
responsibilities under the Plan.
The Plan Administrator's determinations will be conclusive and binding on all
Participants.
IX. TRUST FUND
Shares of Common Stock credited to Deferred Stock Account under this Plan may,
in the sole discretion of the Company, be held and administered in trust ("Trust
Fund") in accordance with the terms of this Plan. The Trust Fund will be held
under a trust agreement between the Company and Norwest Bank Minnesota, N.A., as
Trustee, or any duly appointed successor trustee. All Common Stock in the Trust
Fund will be held on a commingled basis and will be subject to the claims of
general creditors of the Company. The Trustee, in its discretion, will vote
shares of Common Stock held in any Trust Fund under this Plan.
X. UNSECURED OBLIGATION
All amounts deferred pursuant to this Plan and credited to a Deferred Account
will be unsecured obligations of the Company. Each Participant's right will be
as an unsecured general creditor of the Company.
XI. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION
The Plan may be amended, modified, suspended or terminated by action of the
Board or the Board Affairs Committee, or any successor committee, of the
Board; provided however, that if at the time of any such proposed amendment,
modification, suspension or termination, any member of such committee does
not satisfy the requirements applicable to committee approval contained in
regulations of the Securities and Exchange Commission promulgated under
Section 16 of the Securities Exchange Act of 1934, and applicable
interpretations thereof, any such amendment, modification, suspension or
termination must be approved by the Board. No termination, suspension or
modification of the Plan will adversely affect any benefits to which a
Participant would have been entitled under the Plan if termination of the
Participant's service as a Non-Employee Director had occurred on the day
prior to the date such action was taken, unless agreed to by the Participant.
XII. NO GUARANTEE OF SERVICE
Participation in this Plan does not constitute a guarantee or contract of
service as a Non-Employee Director of the Company.
XIII. NON-ASSIGNABILITY
No right to receive distributions under this Plan will be assignable or
transferable by a Participant except:
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- - By will or the laws of descent and distribution.
- - Pursuant to a qualified domestic relations order as defined by the Internal
Revenue Code of 1986, as amended, Title I of the Employee Retirement Income
Security Act, or rules thereunder.
The designation of a beneficiary by a Participant as provided in Section V.D.
does not constitute a transfer.
XIV. CHANGE OF CONTROL
At the time of a Deferral Election, a Participant may also elect to have all
amounts deferred pursuant to this Plan become payable immediately if (i) a
third person, including a "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, becomes the beneficial owner, directly or
indirectly, of 25% or more of the combined voting power of the Company's
outstanding voting securities ordinarily having the right to vote for the
election of the directors of the Company, or (ii) individuals who constitute
the Board of the Company as of January 1, 1999 (Incumbent Board) cease for
any reason to constitute at least two-thirds thereof, provided that any
person becoming a director subsequent to said date whose election, or
nomination for election by the Company's stockholders, was approved by a vote
of at least three-quarters of the directors comprising the Incumbent Board
shall be, for purposes of this clause (ii), considered as though such person
were a member of the Incumbent Board. The value of a Participant's Deferred
Stock Account, Deferred Formula Stock Award Account and Deferred Stock Option
Gain Account for purposes of a distribution under this Section XV shall be
the Fair Market Value of the Common Stock for a day selected by the Plan
Administrator which occurs not more than seven days prior to the date payment
is made to the Participant pursuant to this Section XV.
XV. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant hereto shall
be governed by and construed in accordance with the law of the State of
Delaware.
1999 Deferral Plan for Directors
1/26/99
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LONG-TERM INCENTIVE COMPENSATION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
WITH RIGHT TO ACQUIRE ACCELERATED OWNERSHIP STOCK OPTION
GRANT DATE: _____________________
EMPLOYEE'S NAME: PAUL M. HAZEN
1. GRANT OF OPTION - GRANT#______ The Corporation has granted the
Employee a Non-Qualified Stock Option ("Option") to purchase _______ Shares
of the Corporation's common stock ("Stock").
2. OPTION PURCHASE PRICE. The Option purchase price is $_______ per
Share.
3. TERM AND EXERCISE OF OPTION. The Option will become exercisable in
increments over a period of three years [three equal installments vesting on the
first, second and third anniversaries of the date of grant] as indicated in the
attached Notice of Grant of Stock Options and Option Agreement. Each increment
of this grant may be exercised between the vesting date and the expiration date
[ten years from the date of grant] indicated in the Notice of Grant of Stock
Options and Option Agreement provided you are continuously employed by the
Corporation or an Affiliate ("Wells Fargo"). If your employment with Wells
Fargo is terminated, the Option may be exercised only as described in paragraph
4 below. While you are alive, the Option may be exercised only by you or your
legal representative.
To exercise all or part of the Option, deliver a "Notice of Exercise" to the
Corporation's Stock Option Administrator, Norwest Center, Sixth and
Marquette, Minneapolis, MN 55479-1037, specifying the number of whole Shares
you wish to purchase. You must pay the total Option price for that number of
Shares on the day that you exercise either (a) in cash or (b) in whole Shares
of Stock valued at its Fair Market Value on the date of exercise (except that
cash may be used to buy up to the next whole Share). If Stock is used to pay
the purchase price, the Stock used must have been (x) owned by you for at
least six months prior to the date of exercise or purchased by you in the
open market and (y) must not have been used in a stock-for-stock swap
transaction within the preceding six months.
4. TERMINATION OF EMPLOYMENT. If your termination of employment is due
to your "Disability" or is by the Corporation for other than "Cause" or by
you for "Good Reason," this Option grant will immediately vest and remain
exercisable until the expiration date indicated in the Notice of Grant of
Stock Options and Option Agreement or until one year after your date of
death, whichever occurs first. If you die while you are employed by Wells
Fargo, the entire Option is immediately vested and exercisable, and the
beneficiary as set forth in the Plan may exercise the Option until one year
after the date of your death or until the Option expires, whichever occurs
first. If your termination of employment is by the Corporation for "Cause"
or by you without "Good Reason," this Option grant will expire on your
termination date. Terms in quotation marks in this paragraph are used as
defined in your Employment Agreement with the Corporation dated as of June 7,
1998.
5. WITHHOLDING TAXES. When you exercise this Option, you agree to pay
all required withholding taxes to your Wells Fargo employer. Income taxes
are computed based on the difference between the Fair Market Value (the
average of the highest and lowest prices of Wells Fargo common stock) of the
Shares acquired on the date of exercise and the Option price for those
Shares. Taxes may be paid either in cash or, if you elect, by having the
Corporation withhold from the Shares to be issued a number of shares (valued
at their Fair Market Value on the date of exercise) necessary to satisfy the
taxes. The Corporation is not obligated to deliver the Shares until
withholding obligations are met.
6. AWARD OF ACCELERATED OWNERSHIP NON-QUALIFIED STOCK OPTION ("AO"). If
you exercise this Option while you are employed by Wells Fargo and pay the
purchase price in Stock, you are hereby granted an AO at the Fair Market
Value on the date of such exercise. The AO grant equals the number of whole
Shares used in the swap exercise to pay the purchase price plus a number of
Shares with respect to taxes payable upon exercise, determined in accordance
with procedures approved by the Committee which take into account estimated
incremental tax rates. Subject to the provisions of paragraphs 3 and 4, the
AO may be exercised between the date of grant and the date of expiration of
this Option. The AO shall be evidenced by an agreement containing such other
terms and conditions as the Committee approves. No AO is granted if the
Option is exercised after your Retirement, permanent disability, death or
other termination of employment.
7. TRANSFERABILITY OF OPTION. This Option may be transferred only by
will, the laws of descent and distribution or by your designating a
beneficiary in accordance with Section 9.1(e) of the Plan.
8. NO AGREEMENT FOR WELLS FARGO TO CONTINUE YOUR EMPLOYMENT. Nothing in
this Agreement gives you any right to continued employment .
9. GENERAL RESTRICTIONS. The Corporation may delay the exercise of any
Option if it determines that (a) the Shares subject to the Option should be
listed, registered or qualified on any securities exchange or under any law,
or (b) the consent of a regulatory body is desirable.
10. ADDITIONAL PROVISIONS AND INTERPRETATION OF THIS AGREEMENT.
Capitalized terms not defined in this Agreement are used as defined in the
Plan. Interpretations of the Plan and this Agreement by the Committee are
binding on you and the Corporation.
<PAGE>
WELLS FARGO
LONG-TERM INCENTIVE COMPENSATION PLAN
RESTRICTED STOCK GRANT AGREEMENT
This Restricted Stock Agreement (this "Agreement") between Wells Fargo &
Company, formerly known as Norwest Corporation (the "Corporation"), and Paul
M. Hazen (the "Participant") is dated as of __________________.
1. GRANT - GRANT NUMBER: The Corporation hereby grants Participant
_______ shares of the Corporation's Restricted Stock (the "Restricted
Stock Grant") subject to the terms of this Agreement.
2. TRANSFER RESTRICTION: Participant may not sell, assign, pledge,
encumber or otherwise transfer any of the shares of the Restricted Stock
Grant until the Restriction Lapse described in paragraph 3 below
("Transfer Restriction"). Prior to the Restriction Lapse, any stock
certificates issued to Participant for the Restricted Stock Grant shall
be in the sole custody of the Corporation.
3. RESTRICTION LAPSE: Subject to the terms of this Agreement, the Transfer
Restriction on the Restricted Stock Grant shall lapse in twenty percent
increments (rounded down to the nearest whole share) on each anniversary
of the date of grant (if not forfeited prior to the date of the
restriction lapse).
Provided, however, that if Participant is an Employee immediately prior
to a reorganization as described in Section 13 of the Plan, the Transfer
Restriction shall lapse immediately prior to the consummation of the
reorganization for the entire Restricted Stock Grant. In addition, if
Participant is an Employee immediately prior to a change in the Board as
described in Section 14 of the Plan and thereafter within six months
after said change in the Board terminates his or her employment with the
Corporation or an Affiliate for any reason other than death, permanent
disability or Retirement, the Transfer Restriction shall lapse on said
termination date for the entire Restricted Stock Grant.
Upon lapse of the Transfer Restriction, stock certificates issued to
Participant for said shares shall be delivered to the Participant.
4. FORFEITURE: Participant's right to retain the Restricted Stock Grant,
or any portion thereof, is subject to his/her continuous employment by
the Corporation or an Affiliate until the Restriction Lapse. If
Participant's employment by the Corporation or an Affiliate terminates
prior to the Restriction Lapse, the Restricted Stock Grant (or the
relevant portion(s) thereof) shall be treated as follows: If
Participant's termination of employment is due to his "Disability" or
death or is by the Corporation for other than "Cause" or by the
Participant for "Good Reason," the Transfer Restriction shall lapse and
this Restricted Stock Grant will immediately vest. If Participant's
termination of employment is by the Corporation for "Cause" or by the
Participant without "Good Reason," any unvested portion of this
Restricted Stock Grant shall be forfeited and revert to the Corporation
on the termination date. Terms in quotation marks in this paragraph are
used as defined in Participant's Employment Agreement with the
Corporation dated as of June 7, 1998.
5. VOTING POWER AND TAXES: Prior to the earlier of the Restriction Lapse
or forfeiture of the Restricted Stock Grant, Participant shall have
voting power with respect to said shares and shall receive dividends
thereon. Any dividends or other distributions with respect to the
Restricted Stock Grant which are payable in Stock shall be subject to
the same restrictions then applicable to the Restricted Stock Grant and
shall thereafter be considered Restricted Stock for purposes of this
Agreement. If Participant recognizes ordinary income on the Restricted
Stock Grant or any related payments, it may be necessary to withhold
income taxes and social security taxes. Participant agrees to pay the
Corporation or its Affiliate to satisfy any withholding obligations.
Payment may be made by Participant in cash or, at Participant's
election, the Corporation may withhold from the Shares to be issued the
number of Shares (based on the Fair Market Value of the Stock as of the
date of the Restriction Lapse) that would satisfy the withholding taxes
due (except that any fractional share amount shall be paid by the
Participant in cash). The Corporation will not be obligated to deliver
any stock certificates for said Shares until withholding obligations are
met.
6. DEFINITIONS: Capitalized terms not otherwise defined herein are used as
defined in the Corporation's Long-Term Incentive Compensation Plan, as
amended (the "Plan").
7. Nothing in this Agreement shall confer upon Participant any right to
continue in the employ of the Corporation or any of its Affiliates.
8. This Agreement is binding on the parties hereto and their respective
successors and assigns. It is governed and construed in accordance with
the laws of Minnesota.
<PAGE>
IN WITNESS WHEREOF, the Participant and the Corporation have executed
this Agreement as of the date above.
WELLS FARGO & COMPANY
FORMERLY KNOWN AS
NORWEST CORPORATION
By:
----------------------------
Its: Executive Vice President
- ------------------------------------------
Paul Hazen
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT by and between Wells Fargo & Company, formerly known as Norwest
Corporation, (the"Company") and Rodney L. Jacobs (the "Executive") dated as of
the 1st day of January, 1999.
On November 2, 1998, Norwest Corporation changed its name to Wells Fargo &
Company upon the merger of the former Wells Fargo & Company into a wholly owned
subsidiary of Norwest Corporation ("the Merger"). Prior to the announcement of
the Merger, the Executive was employed by the former Wells Fargo & Company
without there being an employment agreement. The Company desires to assure that
during the periods provided in the Agreement the Executive will provide services
to the Company and will not compete with the Company, in order to maximize the
future success of the Company. As an inducement to future performance by the
Executive, the Company desires to enter into this Agreement with the Executive
and to provide the consideration described in this Agreement. The Company has
determined that entering into this Agreement with the Executive is in the best
interests of its shareholders. Therefore, in order to accomplish these
objectives, the Executive and the Company desire to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EFFECTIVE DATE. The "Effective Date" shall mean the effective date of
the Merger.
2. EMPLOYMENT PERIOD. The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to enter into the employ of the Company subject
to the terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary thereof (the "Employment
Period").
3. TERMS OF EMPLOYMENT.
(a) POSITION AND DUTIES.
(i) During the Employment Period, the Executive shall serve as a
senior executive of the Company, reporting to either the Chief
Executive Officer or Chairman of the Company, with appropriate
authority, duties and responsibilities. The Executive shall
serve on the Company's Board of Directors during the Employment
Period.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote substantially all of his attention and
time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive
<PAGE>
hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. During
the Employment Period it shall not be a violation of this
Agreement for the Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (C)
manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature
and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) COMPENSATION
(i) BASE SALARY. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary") as set
by the Human Resources Committee of the Board of Directors of the
Company. Any increase in Annual Base Salary shall not serve to
limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any
such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As
used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common
control with the Company.
(ii) ANNUAL BONUS. During the Employment Period, the Executive
shall receive an annual bonus ("Annual Bonus"), whether payable
in cash or otherwise, as determined by the Human Resources
Committee of the Board of Directors of the Company.
(iii) RETIREMENT BENEFITS. Commencing immediately upon the
Executive's termination of employment for any reason, the
Executive shall be paid an annual retirement benefit pursuant to
the terms of a non-qualified supplemental retirement plan to be
established (the "Retirement Benefit"), provided, however, that
such Retirement Benefit shall be at least equal to 25% of the
Executive's 1997 Compensation (as defined below), less any
benefit payable pursuant to any qualified defined benefit pension
plan or other non-qualified defined benefit retirement plan of
the Company accrued after the Effective Date. The Executive
shall be fully vested in the Retirement Benefit as of the
Effective Date. For purposes of this Agreement, "1997
Compensation" means the compensation (within the meaning of
Section 61(a)(1) of the Internal Revenue Code of 1986, as
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<PAGE>
amended) includable in the Executive's gross income for federal
income tax purposes with respect to the calendar year 1997.
(iv) OTHER EMPLOYEE BENEFIT PLANS. During the Employment
Period, except as otherwise expressly provided herein, the
Executive shall be entitled to participate in, and shall receive
awards under, all employee benefit, stock or other incentive,
welfare and other plans, practices, policies and programs,
including perquisites (collectively, "Employee Benefit Plan")
applicable to other comparable executives of the Company in
accordance with the provisions of said Plans. For purposes of
all Employee Benefit Plans, service rendered by the Executive to
the former Wells Fargo & Company shall be deemed service with the
Company, provided that service credit shall only be granted to
the Executive under the Company's qualified defined benefit plans
to the extent such credit is granted to employees of the former
Wells Fargo & Company on or after the Effective Date.
4. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the
Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the
Executive written notice in accordance with Section 11(b) of this
Agreement of its intention to terminate the Executive's employment.
In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by
the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned
to full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for
180 consecutive business days as a result of incapacity due to mental
or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to
the Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of
its affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive
by the Board or the Chief
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<PAGE>
Executive Officer of the Company which specifically identifies
the manner in which the Board or Chief Executive Officer believes
that the Executive has not substantially performed the
Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious
to the Company, or
(iii) conviction of a felony or guilty or nolo contendere plea by
the Executive with respect thereto.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean in the absence of a written consent of the
Executive:
(i) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 3(a) of this
Agreement, or any other action by the Company which, in the
Executive's reasonable judgment, results in a diminution in such
position, authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent action
not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 3(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
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<PAGE>
(iii) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by
this Agreement; or
(iv) any failure by the Company to comply with and satisfy
Section 10(c) of this Agreement.
For purposes of this Section 4(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party hereto given in accordance with
Section 11(b) of this Agreement. For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to
the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii) if
the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice).
The failure by the Executive or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing
of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by
the Executive for Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein within 30 days of such
notice, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the Date
of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment
is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON; OTHER THAN
FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for Cause or
Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the sum of (1) the
Executive's Annual Base Salary through the Date of Termination to
the extent not yet paid, and (2) the product of (x) the highest
annual bonus
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<PAGE>
paid to the Executive for any of the three years prior to the
Date of Termination (the "Recent Annual Bonus") and (y)a
fraction, the numerator of which is the number of days in the
fiscal year in which the Date of Termination occurs through the
Date of Termination and the denominator of which is 365, to the
extent not yet paid (referred to herein as "the Accrued
Obligations);
(ii) for the remainder of the Executive's life and the life of
his spouse, the Company shall continue to provide medical and
dental benefits to the Executive and his spouse on the same basis
as such benefits are provided to the Executive immediately prior
to the Date of Termination (collectively "Medical Benefits");
(iii) until the third anniversary of the Effective Date, the
Executive shall continue to be provided with the benefits
described in Section 3(b)(iv) and shall be deemed to be an
employee for purposes of such plans, provided that the Executive
shall not be entitled to additional awards under any of the
Company's stock or other incentive plans and shall cease to
accrue additional benefits under the Company's qualified and
non-qualified retirement plans; and
(iv) to the extent not yet paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive
is eligible to receive under any plan, program, policy or
practice or contract or agreement of the Company and its
affiliated companies through the Date of Termination (such other
amounts and benefits shall be hereinafter referred to as the
"Other Benefits").
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of
Accrued Obligations and the timely payment or provision of Other
Benefits. In addition, all Stock Awards shall vest immediately.
Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 5(b)
shall include death benefits as in effect on the date of the
Executive's death with respect to the Peer Executive and his
beneficiaries and the continued provision of Medical Benefits to the
Executive's spouse.
(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. In
6
<PAGE>
addition, all Stock Awards shall vest immediately. Accrued
Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in
this Section 5(c) shall include, and the Executive shall be entitled
after the Disability Effective Date to receive, disability and other
benefits as in effect at any time thereafter generally with respect to
the Peer Executive and the continued provision of Medical Benefits to
the Executive and his spouse.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
shall be terminated for Cause or the Executive terminates his
employment without Good Reason during the Employment Period, this
Agreement shall terminate without further obligations to the Executive
other than the obligation to pay to the Executive (x) his Annual Base
Salary through the Date of Termination, and (y) Other Benefits, in
each case to the extent not yet paid.
6. NON-EXCLUSIVITY OF RIGHTS. Except as specifically provided, nothing
in this Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or any of its affiliated companies and for which the Executive may qualify, nor,
subject to Section 11(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Amounts which are vested benefits
or which the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
7. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that
any payment or distribution by the Company to or for the benefit of
the Executive (whether paid
7
<PAGE>
or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 8) (a "Payment") would
be subject to the excise tax imposed by Section 4999 of the Code or
any interest or penalties are incurred by the executive with respect
to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by
the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), icluding, without limitation, any
income taxes (and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 8(a), if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that the Payments do
not exceed 110% of the greatest amount (the "Reduced Amount") that
could be paid to the Executive such that the receipt of Payments would
not give rise to any Excise Tax, then no Gross-Up Payment shall be
made to the Executive and the Payments, in the aggregate, shall be
reduced to the Reduced Amount.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination,
shall be made by KPMG Peat Marwick LLP or such other certified public
accounting firm reasonably acceptable to the Company as may be
designated by the Executive (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid by the Company to
the Executive within five days of the later of (i) the due date for
the payment of any Excise Tax, and
(ii) the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by
the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to Section
8(c) and the Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit of
the Executive.
8
<PAGE>
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than ten business
days after the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim; provided, however, that the Company shall
bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with
such contest and shall indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed
as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this
Section 8(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue
or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and
in one or more appellate courts, as the Company shall determine;
provided, however, that if the Company directs the Executive to
pay such claim and sue for a refund, the Company shall advance
the amount of such payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect
to such advance or with respect to
9
<PAGE>
any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed
to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would
be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section
8(c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), a determination is
made that the Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.
9. CONFIDENTIAL INFORMATION/NONCOMPETITION.
(a) The Executive shall hold in a fiduciary capacity for the benefit
of the Company all secret or confidential information, knowledge or
data relating to the Company or any of its affiliated companies, and
their respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any of
its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of
the Executive in violation of this Agreement). After termination of
the Executive's employment with the Company, the Executive shall not,
without the prior written consent of the Company or as may otherwise
be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and
those designated by it. Except as expressly provided in Section 9(c),
in no event shall an asserted violation of the provisions of this
Section 9 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
(b) During the Employment Period and for one year thereafter, the
Executive will not directly or indirectly, own, manage, operate,
control or participate in the ownership, management, operation or
control of, or be connected as an officer, employee, partner, director
or otherwise with, or have any financial interest in,
10
<PAGE>
any business principally engaged in the commercial banking business in
California which is in material competition with the business
conducted by the Company. Ownership for personal investment purposes
only of less than 5% of the voting stock of any publicly held
corporation shall not constitute a violation hereof.
(c) In the event of a breach or threatened breach of Section 9(a),
the Executive agrees that the Company shall be entitled to injunctive
relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, the Executive acknowledges that damages
would be inadequate and insufficient. In the event of a breach of
Section 9(b), the Company's obligation to pay the Retirement Benefit
shall cease while the Executive is in violation of Section 9(b) and
the Retirement Benefit shall commence again when the Executive is no
longer engaged in activity prohibited by Section 9(b) but such benefit
shall thereafter be reduced by 50%.
(d) Any termination of the Executive's employment or of this
Agreement shall have no effect on the continuing operation of this
Section 9.
10. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as defined herein and any
successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
11. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect.
This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective
successors and legal representatives.
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(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
IF TO THE EXECUTIVE:
Rodney L. Jacobs
c/o Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94104
IF TO THE COMPANY:
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 4(c)(i)-(iv) of this
Agreement, shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
(f) Upon and after the Effective Date of this Agreement, the terms of
this Agreement shall supersede any employment, severance or change of
control agreement(s) between the parties with respect to the subject
matter hereof.
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<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Rodney L. Jacobs
-------------------------------------
RODNEY L. JACOBS
WELLS FARGO & COMPANY
By Richard M. Kovacevich
/s/ Richard M. Kovacevich
--------------------------------------
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SEVERANCE AGREEMENT
THIS AGREEMENT between Norwest Corporation, a Delaware corporation (the
"Corporation"), and (name) ("Executive"), dated this day of ,
19 .
WITNESSETH:
WHEREAS, the Corporation wishes to attract and retain well-qualified
executive and key personnel and to assure both itself and the Executive of
continuity of management in the event of any Change of Control (as defined in
Section 2) of the Corporation;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Corporation and the
Executive as follows:
1. OPERATION OF AGREEMENT. The "Effective Date of this Agreement"
(or "Effective Date") shall be the date during the Contract Period (as
defined in Section 3) on which a Change of Control occurs. Anything in this
Agreement to the contrary notwithstanding, if the Executive's employment with
the Corporation is terminated or the Executive ceases to be an officer of the
Corporation prior to the date on which a Change of Control occurs, and it is
reasonably demonstrated that such termination of employment or cessation of
status as an officer was at the request of a third party who has taken steps
reasonably calculated to effect the Change of Control, then for all purposes
of this Agreement the "Effective Date" shall mean the date immediately prior
to the date of such termination of employment or cessation of status as an
officer.
2. CHANGE OF CONTROL. For purposes of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition, other than from the Corporation, by any
individual, entity or group within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of the then outstanding shares
of voting securities ordinarily having the right to vote for
the election of directors of
<PAGE>
the Corporation, provided, however, that the following
acquisitions shall not constitute a change of control:
(i) any acquisition by the Corporation of any of its
subsidiaries, or (ii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained
by the Corporation or any of its subsidiaries; or
(b) Individuals who constitute the Board of Directors of the
Corporation as of the date of this Agreement (the
"Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person
becoming a director subsequent to the date of this
Agreement whose election, or nomination for election by
the Corporation's stockholders was approved by a vote of
at least three-quarters of the directors comprising the
Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board for
purposes of this clause (b), but excluding, for this
purpose, any such individual whose initial assumption of
office is in connection with an actual or threatened
election contest relating to the election of the
directors of the Corporation (as such terms are used in
Rule 14A-11 of Regulation 14A promulgated under the
Exchange Act).
3. CONTRACT PERIOD. The "Contract Period" is the period commencing
on the date of this Agreement and ending on the earlier to occur of (i) the
third anniversary of such date; (ii) the first day of the month coinciding
with or next following the date on which the Executive qualifies for regular
retirement under the Corporation's Retirement Plan then in effect; or (iii)
the Executive's death provided, however, that commencing on the date three
years after the date of the this Agreement, and on each successive third
anniversary of such date thereafter (hereinafter referred to as the "Renewal
Date"), the Contract Period shall be automatically extended so as to
terminate on the earlier of (w) the day prior to the next Renewal Date, if
prior to such day the Executive ceases to be an elected officer of the
Corporation; (x) the first day of the month coinciding with or next following
the date on which the Executive qualifies for regular retirement under the
Corporation's Retirement Plan, then in effect; (y) the Executive's death
(unless the Effective Date occurs prior to the Executive's death); or (z) the
day prior to the next Renewal Date if at least 60 days prior to such day, the
Corporation shall give notice to the Executive that the Contract Period shall
not be
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extended, provided, however, that in no event may the Corporation terminate
this Agreement after the Effective Date.
4. CERTAIN DEFINITIONS.
(a) CAUSE. The Executive's employment will be terminated for
Cause if a majority of the Board of Directors, after the
Executive shall have been afforded a reasonable opportunity
to appear in person before the Board of Directors and to
present such evidence as the Executive deems appropriate,
determines that Cause (as defined in this Agreement) exists.
For purposes of this Agreement, "Cause" means (i) an act or
acts of fraud or misappropriation on the Executive's part
which result in or are intended to result in his substantial
personal enrichment at the expense of the Corporation; or
(ii) conviction of a felony.
(b) GOOD REASON. For purposes of this Agreement, "Good Reason"
means, without the express written consent of the Executive:
(i) the assignment to the Executive of any duties
inconsistent in any substantial respect with the Executive's
position, authority or responsibilities as in effect during
the 90-day period immediately preceding the Effective Date
of this Agreement, or any other substantial adverse change
in such position (including titles), authority or
responsibilities, excluding, for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Corporation promptly after
receipt of notice thereof given by the Executive;
(ii) any failure by the Corporation to furnish the
Executive with compensation and benefits at a level equal to
or exceeding those received by the Executive from the
Corporation during the 90-day period preceding the Effective
Date of this Agreement, including a failure by the
Corporation to maintain its policy of paying retirement
benefits which would be payable under the Norwest
Corporation Retirement Plan but for limits imposed by the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), other than an insubstantial and
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<PAGE>
inadvertent failure remedied by the Corporation promptly
after receipt of notice thereof given by the Executive;
(iii) the Corporation's requiring the Executive to be based
or to perform services at any office or location other than
at the Corporation's headquarters in Minneapolis, Minnesota,
except for travel reasonably required in the performance of
the Executive's responsibilities;
(iv) any failure by the Corporation to obtain the
assumption and agreement to perform this Agreement by a
successor as contemplated by Section 9(b); or
(v) any failure by the Corporation to deposit amounts which
may become payable to the Executive with the Trustee as
contemplated by Section 8.
For the purposes of this Section 4(b), any determination of
"Good Reason" made by the Executive shall be conclusive.
(c) NOTICE OF TERMINATION. Any termination of Executive's
employment after the Effective Date by the Corporation for Cause or
by the Executive for Good Reason or otherwise shall be communicated
by Notice of Termination to the other party hereto given in
accordance with Section 10(b). For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon,
(ii) sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's
employment under the provision so indicated, and (iii) if the
termination date is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than
15 days after the giving of such notice). The failure by the
Executive or the Corporation to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing
of Good Reason or Cause shall not waive any right of the Executive
or the Corporation hereunder or preclude the Executive or the
Corporation from asserting such fact or circumstance in enforcing
the Executive's or the Corporation's right hereunder.
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<PAGE>
(d) DATE OF TERMINATION. Date of Termination means the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, or if the Executive's employment is
terminated by reason of death, the date of the Executive's death.
5. OBLIGATIONS OF THE CORPORATION UPON TERMINATION.
(a) GOOD REASON AND OTHER THAN FOR CAUSE OR DISABILITY. Subject
to Sections 5(c) and 5(d), if:
(i) within three years after the Effective Date of this
Agreement, the Corporation shall terminate the Executive's
employment for any reason other than for Cause or
Disability; or
(ii) within three years after the Effective Date of this
Agreement, the Executive shall terminate his employment for
Good Reason:
(I) the Corporation shall pay to the Executive in
a lump sum in cash within 30 days after the Date of
Termination, the aggregate of the amounts determined
pursuant to the following clauses (A) through (C)
inclusive;
(A) if not theretofore paid, the Executive's base
salary through the Date of Termination at the rate in
effect at the time the Notice of Termination was
given; and
(B) in lieu of any further payments to the
Executive for periods subsequent to the Date of
Termination, a lump sum payment ("Severance Payment")
in an amount equal to two times the sum of (x) the
Executive's annual base salary at the highest rate in
effect between the Effective Date of this Agreement
and the time the Notice of Termination was given, (y)
an amount equal to the annualized value of the
perquisites provided to the Executive as in effect at
the beginning of the year during which a Change of
Control occurs and (z)
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<PAGE>
an amount equal to the highest bonus that would be
payable to the Executive for the year during which
a Change in Control occurs if all criteria
necessary for payment had been satisfied (highest
bonus shall be determined solely by reference to
the maximum amount that would be payable to the
Executive if he were a participant in the EICP),
provided, however, that in no event shall the
Executive be entitled to receive under this clause
(B) more than the product obtained by multiplying
the amount determined as hereinabove provided in
this clause (B) by a fraction whose numerator shall
be the number of months (including fractions of a
month) which at the Date of Termination remain
until the first day of the month coinciding with or
next following the date on which the Executive
qualifies for regular retirement under the
Corporation's Retirement Plan then in effect and
whose denominator shall equal thirty-six (36); and
(C) until the earlier to occur of (i) the date
three years following the Date of Termination, or
(ii) the first day of the first month coinciding with
or next following the date on which the Executive
qualifies for regular retirement under the
Corporation's Retirement Plan, then in effect (the
period of time from the Date of Termination until the
earlier of (i) or (ii) is hereinafter referred to as
the "Unexpired Period"), the Corporation shall
continue to provide all benefits which the Executive
and/or his spouse is or would have been entitled to
receive under all medical, dental and group life
insurance plans and programs of the Corporation, in
each case on a basis providing the Executive or his
spouse with the opportunity to receive benefits at
least equal to the greatest benefits provided by the
Corporation for the Executive and/or his spouse under
such plans and programs if and as
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<PAGE>
in effect at any time during the 90-day period
immediately preceding the Effective Date.
(b) CAUSE OR DISABILITY. If the Corporation shall terminate
the Executive's employment for Cause or at a time the Executive
is entitled to receive benefits under the Norwest Corporation
Long-Term Salary Continuation Plan or any plan adopted as a
substitute or replacement therefor, the Corporation shall pay to
the Executive in a lump sum in cash within 20 days after the Date
of Termination all unpaid compensation earned through the Date of
Termination.
(c) DEATH. If the Executive dies before the Effective Date of
this Agreement (as defined in paragraph 1 herein), the Corporation
shall have no obligation to make any payments under this Agreement.
If the Executive dies after the Effective Date of this Agreement,
the Corporation shall make all payments due under Section 5(a) to
the designated beneficiary of the Executive, or in the event no
beneficiary is named or living, to the Executive's estate.
(d) CERTAIN ADDITIONAL PAYMENTS BY THE CORPORATION.
(i) Anything in this Agreement to the contrary
notwithstanding, if it shall be determined that any payment
or distribution by the Corporation to or for the benefit of
the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise (a "Payment") would impose an excise tax liability
on the Executive pursuant to Sections 1 and 4999 of the Code
and its regulations, or any interest or penalties are
incurred by the Executive with respect to such excise tax
(such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes
and Excise Tax imposed upon the
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<PAGE>
Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(ii) Subject to the provisions of Section 5(d)(iii),
determinations to be required under this Section 5(d),
including whether a Gross-Up Payments is required and the
amount of such Gross-Up Payment, shall be made by Arthur
Andersen & Co. or another big eight accounting firm selected
by the Executive within 5 days after the Date of Termination
("Accounting Firm") which shall provide detailed supporting
calculations both to the Corporation and to the Executive
within fifteen (15) business days of the Date of
Termination, if applicable, or such earlier time as is
requested by the Corporation. All fees and expenses of the
Accounting Firm shall be borne solely by the Corporation.
The initial Gross-Up Payment, if any, as determined pursuant
to this Section 5(d)(ii), shall be paid to the Executive
within five days of the receipt of the Accounting Firm's
determination.
If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall furnish the Executive
with an opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not
result in the imposition of a negligence or similar penalty.
Any determination by the Accounting Firm shall be binding
upon the Corporation and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Corporation should have been
made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the
Corporation exhausts its remedies pursuant to 5(d)(iii) and
the Executive thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Corporation to or
for the benefit of the Executive.
-8-
<PAGE>
(iii) The Executive shall notify the Corporation in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Corporation of
the Gross-Up Payment or Underpayment. Such notification
shall be given as soon as practicable but no later then ten
(10) business days after the Executive knows of such claim
and shall apprise the Corporation of the nature of such
claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which
it gives such notice to the Corporation (or such shorter
period ending on the date that any payment of taxes with
respect to such claim is due). If the Corporation notifies
the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
(aa) give the Corporation any information reasonably
requested by the Corporation relating to such claim,
(bb) take such action in connection with contesting such
claim as the Corporation shall reasonably request in writing
from time to time, including, without limitation, accepting
legal representation with respect to such claim by an
attorney reasonably selected by the Corporation,
(cc) cooperate with the Corporation in good faith in order
effectively to contest such claim,
(dd) permit the Corporation to participate in any
proceedings relating to such claim; provided, however, that
the Corporation shall bear and pay directly all costs and
expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify
and hold the Executive harmless, on an after-tax basis for
all such costs, expenses and any Excise Tax or income tax,
including interest and penalties with respect thereto,
imposed as a result of such representation. Without
limitation on the foregoing provisions of this Section, the
Corporation shall control all proceedings taken in
connection with
-9-
<PAGE>
such contest and, at its sole option, may pursue or forgo
any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more
appellate courts, as the Corporation shall determine;
provided, however, that if the Corporation directs the
Executive to pay such claim and sue for a refund, the
Corporation shall advance the amount of such payment to
the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an
after-tax basis, from any costs, expenses, Excise Tax or
income tax, including interest or penalties with respect
thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such
advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for
the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the
Corporation's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other
taxing authority.
(iv) If, after the receipt by the Executive of an amount
advanced by the Corporation pursuant to Section 5(d)(iii),
the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall promptly pay to
the Corporation the amount of such refund (together with any
interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an
amount advanced by the Corporation pursuant to Section
5(d)(iii),
-10-
<PAGE>
a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the
Corporation does not notify the Executive in writing of
its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment
required to be paid.
6. NON-EXCLUSIVITY OF RIGHTS. Except as set forth in Section 5(d),
nothing in this Agreement shall prevent or limit the Executive's continuing or
future participation in any benefit, bonus, incentive or other plan, policy,
program, or practice provided by the Corporation or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
employment, stock option or other agreements with the Corporation or any of its
affiliated companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan or program of the Corporation or
any of its affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan or program, except as specifically
modified hereunder.
7. FULL SETTLEMENT. The Corporation's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any setoff, counterclaim, recoupment, defense or other right which
the Corporation may have against the Executive or others or by any amounts
received by Executive from others. In no event shall the Executive be obligated
to seek other employment by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement. The Corporation agrees
to pay, to the full extent permitted by law, all legal fees and expenses which
the Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Corporation or others of the validity or enforceability
of, or liability under any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the Executive about
the amount of any payment pursuant to Section 5(d) of this Agreement), plus
interest in each case at the applicable federal rate provided for in Section
7872(f)(2) of the Code.
-11-
<PAGE>
8. TRUSTEE. Immediately upon execution of this Agreement, the
Corporation shall use its best efforts to establish a trust with an
institutional trustee selected by the Corporation (the "Trustee") for the
purpose of distributing payments pursuant to this Agreement. Upon written
demand by the Executive given at any time after a Change of Control occurs, the
Corporation shall deposit with the Trustee designated by the Corporation prior
to the Effective Date of this Agreement, or by the Executive in such written
demand if the Corporation has not designated the Trustee, amounts which may
become payable to the Executive pursuant to Section 5 with irrevocable
instructions to pay amounts to the Executive when due in accordance with the
terms of this Agreement. All charges of the Trustee shall be paid by the
Corporation. The Trustee shall be entitled to rely conclusively on the
Executive's or the Accounting Firm's written statement as to the fact that
payments are due under this Agreement and the amount of such payments. If the
Trustee is not notified that payments are due under this Agreement within three
years and 20 days after receipt of a deposit hereunder, all amounts deposited
with the Trustee and earnings with respect thereto shall be delivered to the
Corporation on demand.
9. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Corporation shall not be assignable by
the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's designated beneficiary or, if none,
estate.
(b) This Agreement shall inure to the benefit of and be binding
upon the Corporation and its successors. The Corporation shall
require any successor to all or substantially all of the business
and/or assets of the Corporation, whether directly or indirectly,
by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory to
the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the
Corporation would be required to perform if no such succession had
taken place.
-12-
<PAGE>
10. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the state of Minnesota, without
reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no
force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties
hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
IF TO THE EXECUTIVE:
(name)
Address
City, State, Zip
IF TO THE CORPORATION:
Norwest Corporation
Sixth & Marquette
Minneapolis, Minnesota 55479
Attention: Secretary
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(d) The Corporation may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or
regulation, provided, however, that such withholding shall be
consistent with the calculations made by Accounting Firm under
Section 5(d) of the Agreement.
(e) This Agreement contains the entire understanding with the
Executive with respect to the subject matter hereof.
-13-
<PAGE>
(f) The employment of Executive by the Corporation may be
terminated by either the Executive or the Corporation at any time
and for any reason. Nothing contained in the Agreement shall
affect such rights to terminate, provided, however, that nothing in
this Section 10(f) shall prevent the Executive from receiving any
amounts payable pursuant to Section 5 of this Agreement. However,
if prior to the Effective Date of this Agreement, (i) the
Executive's employment with the Corporation terminates, or (ii) the
Executive ceases to be an officer of the Corporation, then the
Executive shall have no further rights under this Agreement.
(g) The Executive's failure to insist upon strict compliance
with any provision hereof or the failure to assert any right the
Executive or the Corporation may have hereunder shall not be deemed
to be a waiver of such provision or any other provision thereof.
(h) If, at any time prior to the Effective Date, the Executive
ceases to be an employee of the Corporation or its subsidiaries,
this Agreement shall terminate and the Executive shall have no
right to receive any payments described herein.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Corporation has caused
these presents to be executed in its name on its behalf, and its corporate seal
to be hereunto affixed and attested by its secretary, all as of the day and year
first above written.
------------------------------------
Executive
NORWEST CORPORATION
ATTEST: By:
--------------------------------
Its:
-------------------------------
- ------------------------------------
Secretary
(Seal)
-14-
<PAGE>
DESIGNATION OF BENEFICIARY
For purposes of any and all payments due me pursuant to the Severance
Agreement entered into by me (name) and Norwest Corporation on _____________,
1995, as amended, I hereby make the following designation of beneficiary(ies):
PRIMARY BENEFICIARY(IES):
<TABLE>
<CAPTION>
NAME DATE OF BIRTH ADDRESS RELATIONSHIP
- ---- ------------- ------- ------------
<S> <C> <C> <C>
</TABLE>
Unless otherwise designated on this form, all primary beneficiaries shall be
paid equal shares of the total payment.
CONTINGENT BENEFICIARY(IES): (To be paid only if no primary beneficiary is
alive at the time of payment.)
<TABLE>
<CAPTION>
NAME DATE OF BIRTH ADDRESS RELATIONSHIP
- ---- ------------- ------- ------------
<S> <C> <C> <C>
</TABLE>
Unless otherwise designated, all contingent beneficiaries shall be paid equal
shares of the total payment.
I understand that the above designation of beneficiary(ies) may only be
changed by me, in writing.
DATE: Name:
----------------- -----------------------------
Type in Name: (name)
-----------------
-15-
<PAGE>
November 18, 1998
Terri Dial
Group Executive Vice President
Wells Fargo
420 Montgomery Street
San Francisco, CA 94104
Dear Terri:
I am very pleased that we were able to come to an agreement that allows you
to feel comfortable being part of the senior management of the new Wells
Fargo. I'd like to recap our commitment:
- - You will have a job as Group Executive Vice President. In this job you
will be responsible for California, Distribution Strategies, Telephone
Banking and Business Banking. In this job you will report directly to me.
- - If during the time period from April to October 2000 you decide that you no
longer want to be a part of this organization, you may elect to leave the
company with a severance package of $1,800,000.00 payable over an 18 month
period.
- - If, during the period between November 3, 1998 and October 31, 2000, Wells
Fargo participates in a merger of equals or is acquired as defined in the
Wells Fargo & Company Change of Control Severance Plan, you may elect to
leave the organization and participate in the original Change of Control
Severance Plan approved by the Wells Fargo board in June 1998. The Plan
provides, in general, for salary continuation leave of three years (base
and bonus).
- - If you were to leave under either of these circumstances, we would expect
you to sign an employee and customer non-solicitation agreement for the
period of the salary continuation leave. This agreement would restrict your
personal involvement in soliciting key Wells Fargo employees to leave
employment with Wells Fargo. It would not prohibit recruiting efforts by
the corporation for which you may be working during this period.
- - If you remain employed by Wells Fargo through October 31, 2000 and you have
earned incentive pay in the year 2000, you will be paid the incentive
earned through the last date of your active employment.
- - With the approval of the compensation committee of the board, you will be
awarded an extraordinary option grant with a Black Scholes value of
$600,000 following the closing of the Norwest/Wells merger. This will not
impact the option grant you would be eligible for at the next routine
option distribution to Wells senior management.
- - It is in our mutual interest that the terms of this agreement be kept
confidential.
All this said Terri, I want to be clear that my hope is that you will come to
the end of the year 2000 wanting to be a part of the ongoing senior
management team of this corporation. I believe that we will be successful.
I know you can be a big part of that success. I am looking forward to
working together with you as we build the new Wells Fargo into one of
America's great companies.
Sincerely,
Les Biller
-16-
<PAGE>
January 25, 1999
Chang-Lin Tien
1451 Olympus Avenue
Berkeley, CA 94708
Dear Chang-Lin:
As you are aware, in addition to your director relations with Wells
Fargo & Company, since May 2, 1997, you have been retained by the Company as a
consultant. In that connection, the terms of the consultant arrangement are set
forth in that certain letter dated May 2, 1997 as extended by letter dated June
23, 1998. The purpose of this letter is to restate and expand the consultant
relationship that currently exists between you and Wells Fargo & Company.
DESCRIPTION OF SERVICES:
We believe your background and experience together with your stature in
the international marketplace puts you in a unique position to assist us in
developing our business and competitive presence in this market area. In that
regard, we request that for the term of this Agreement you provide us with the
following services:
1. Be our representative and spokesperson in such international
market place and such communities located therein as we may
designate;
2. Be one of our representatives on the Board of Shanghai
Commercial Bank. In such capacity, you shall act on our behalf
and for such term as we may designate;
3. Provide us with advice and counsel in the development of our
marketing strategies for such market areas as we may
designate; and
4. Provide us with such other services as may mutually discuss
and agree upon.
COMPENSATION:
In consideration of obtaining the services contemplated hereby, we
agree to pay you the sum of $200,000.00 per annum. Such compensation shall be
paid in 12 equal installments of $16,666.66 each, commencing on the 1st day of
the month next
<PAGE>
following the effective date of this Agreement. We will also reimburse you
for reasonable expenses incurred in the performance of the services
contemplated hereby, including travel expenses. Reimbursement of such
expenses will be on a monthly basis upon receipt by us of a statement
therefore, and will be made in accordance with the procedures applicable to
our own employees.
In addition to the foregoing, we will provide you with office space and
such clerical and support help as you may need to perform the services described
herein.
OTHER BENEFITS:
You shall be free to exercise your discretion and independent judgment
as to the method and means of performance of the services contemplated hereby.
As a consultant, you will not be considered an employee of the Company, and
shall not, by virtue of the agreement be entitled to any benefits or privileges
provided by the Company to its employees.
TAXES:
You should treat the compensation received hereunder as self-employment
income for Federal Tax purposes. In that regard, we will neither withhold
federal Income Tax nor pay FICA, State unemployment or other employment taxes.
CONFIDENTIALITY:
The information, knowledge and data you will receive and develop in
performing these services contemplated hereby will be extremely sensitive and
should be kept confidential and should not be disclosed to any third party
except as we may from time to time mutually agree.
INDEMNITY:
We will indemnify you against and hold you harmless from any and all
losses, damages, liabilities, claims, costs and expenses and attorney fees which
you may expend or incur as a result of the performance of the services
contemplated hereby.
TERM:
The effective date of this Agreement shall be the date upon which it is
signed by you, in the place and manner so designated below. The Agreement will
continue thereafter unless and until
2
<PAGE>
one of us elects to terminate the Agreement. The Agreement may be terminated
at any time upon either of us sending notice of termination to the other. No
such termination shall in any manner effect the rights and obligations
existing as of the date of such termination; including without limitation,
your rights in connection with our obligations to indemnify you as set forth
herein.
SUPERCEDE OTHER AGREEMENTS:
This Agreement shall be deemed the only agreement between the parties
hereto concerning the matters discussed herein; as such it supercedes, replaces
and restates the earlier letter agreement dated May 2, 1997, as extended June
23, 1998, which as of the effective date hereof, shall be deemed of no further
force or effect.
Chang-Lin, we greatly appreciate your efforts and the results thereof
since the inception of our consultant relationship as of July 1, 1997. We are
also most appreciative of your willingness to continue the relationship and
expand its activities to include the board representation in connection with
Shanghai Commercial Bank. We continue to believe that in your role as a
consultant you are able to play a significant role on behalf of Wells Fargo &
Company as we continue to seek to take advantage of the many opportunities
presented by the international market place.
If you are in agreement please execute this letter in the place so
designated and return it to my attention at your convenience.
Best regards,
/s/ David J. Zuercher
David J. Zuercher
ACKNOWLEDGEMENT:
By: /s/ Chang-Lin Tien
Printed: Chang-Lin Tien
Date: January 26, 1999
3
<PAGE>
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS OF
THE FORMER NORWEST CORPORATION
(AS AMENDED AND RESTATED AS OF NOVEMBER 2, 1998)
1. PURPOSE:
The purpose of the Retirement Plan for Non-Employee Directors of the
former Norwest Corporation (the "Plan") is to provide unfunded retirement
benefits for certain non-employee members of the Board of Directors of the
former Norwest Corporation (the "Corporation") in consideration for personal
services rendered in their capacity as members of the Board of Directors (the
"Board") of the Corporation through November 2, 1998. The Corporation
changed its name to "Wells Fargo & Company" (the "Company") effective
November 2, 1998.
2. EFFECTIVE DATE:
The effective date of the Plan shall be January 1, 1988, as amended and
restated as of November 2, l998.
3. ADMINISTRATION:
The Plan shall be administered by the Company's Vice President-Compensation
and Benefits (the "Administrator"), who shall have the authority to adopt rules
for carrying out the Plan and to interpret and implement the provisions of the
Plan and whose determinations shall be conclusive and binding on all
participants.
4. ELIGIBILITY:
Any person who served as a member of the Board who was not an officer or
employee of the Corporation or of a subsidiary of the Corporation
("Non-Employee Director") shall be eligible to participate in the Plan. Any
Non-Employee Director shall be a Plan participant as of the later of the date
on which he or she has completed five full years of service as a Non-Employee
Director of the Board or January 1, 1988; provided, however, that any
Non-Employee Director who remained a Non-Employee Director of the Company on
and after November 2, 1998 (a "Continuing Director") shall be eligible to
participate in the Plan without regard to the length of their service on the
Board. The years of service need not be consecutive for purposes of becoming
a Plan participant. Prior years of service as a Non-
<PAGE>
Employee Director of a subsidiary of the Corporation will be included in the
calculation of years of service for the determination of status as a Plan
participant only. In calculating length of service on the Board for purposes
of determining whether a Non-Employee Director qualifies as a Plan
participant, only full years of service will be included for those who are
not Continuing Directors.
5. RETIREMENT BENEFIT:
Each Plan participant will be entitled to receive a cash retirement
benefit equal in amount to the product of (i) the annual retainer rate paid
in cash for Non-Employee Directors in effect at the time of the participant's
last day of service as a Non-Employee Director of the Corporation or the
Company, as the case may be (the "Final Retainer"), and (ii) the length of
service on the Board of the Corporation, up to a maximum of 10 years, by the
Non-Employee Director. For Non-Employee Directors who are not Continuing
Directors, only full years of service will be included; for Continuing
Directors, the length of service will be the number of months served on the
Board of the Corporation (rounded up to the next full month) divided by 12.
A participant's retirement benefit will be paid in annual installments equal
in number (as to a participant the participant's "Benefit Duration") to the
greater of (A) the number of whole years (or whole and partial years in the
case of a Continuing Director) up to a maximum of ten years that the
participant served as a Non-Employee Director on the Board of the Corporation
through November 2, l998, or (B) such other whole number as the participant
may irrevocably elect pursuant to a benefit payment election form (a copy of
which is attached hereto as Exhibit A) filed with the Administrator prior to
the date the Non-Employee Director becomes entitled to receive benefits under
the Plan, provided that in no event may a participant's Benefit Duration
exceed 10 years. For Non-Employee Directors whose Benefit Duration is a
whole number of years, the amount of each annual installment will equal the
participant's total retirement benefit payable under this paragraph divided
by such participant's Benefit Duration. A Continuing Director whose Benefit
Duration is measured in other than whole years will receive, first, annual
installments equal in amount to the Final Retainer for the number of whole
years of such Continuing Director's actual service on the Board and, after
all such annual installments have been paid, a final installment consisting
of the pro rata portion of the Final Retainer corresponding to the partial
year of his or her actual service. Payment of a participant's retirement
benefit will
2
<PAGE>
commence on February 28 of the year immediately following the year in which
the participant retires from service on the Board or such subsequent year as
the participant may irrevocably elect pursuant to a benefit payment election
form filed with the Administrator prior to the date the Non-Employee Director
becomes a Plan participant. For purposes of calculating the retirement
benefit to which a participant is entitled under this paragraph, years of
service as a Non-Employee Director of a subsidiary of the Corporation will
not be counted. Except as specifically provided in paragraph 7 below with
respect to deferred benefits, no interest shall accrue on any benefits
payable hereunder to Plan participants.
6. DEATH BENEFITS:
If a Plan participant dies while serving as a Non-Employee Director, the
benefit to which the Director is then entitled pursuant to paragraph 5 of
this Plan shall be paid in annual installments commencing on February 28 of
the year immediately following the year during which the participant dies to
the beneficiary designated by the Non-Employee Director pursuant to the Plan
beneficiary designation form (a copy of which is attached as Exhibit B) or,
in the absence of a valid designation or if the designated beneficiary does
not survive the participant, to such participant's estate. If a Plan
participant dies after completing his or her service as a Non-Employee
Director but before he or she has received all of the retirement benefits to
which he or she is entitled under the terms of this Plan, the remaining
benefits (as determined by paragraph 5) shall be paid in annual installments
to the beneficiary designated by the Non-Employee Director pursuant to the
Plan beneficiary designation form or, in the absence of a valid designation
or if the designated beneficiary does not survive the participant, to such
participant's estate. The Corporation may, in its discretion, pay to the
beneficiary or the participant's estate the present value of the entire
remaining benefit (as determined by the Administrator) to which the
Non-Employee Director is entitled, in one lump sum payment. If any
beneficiary dies after becoming entitled to receive payments hereunder, the
remaining payments shall be made to such beneficiary's estate.
7. INTEREST ON DEFERRED BENEFITS:
If a Plan participant files an election to defer the receipt of
benefits, in accordance with paragraph 5, all deferred benefits shall bear
interest from the date on which the
3
<PAGE>
participant, in absence of the deferral, would have received benefits under
this Plan until such benefits are paid at a rate per annum equal to the
interest equivalent of the secondary market yield for three-month United
States Treasury Bills as reported for the preceding month in FEDERAL RESERVE
STATISTICAL RELEASE H.15(519), which shall be credited to the amount of
benefit due a participant as of the last day of each month. The amount of
each benefit payment will be equal to the total amount of all benefit
payments remaining to be paid together with all interest accrued thereon
divided by the number of benefit payments to be made, including the current
payment.
8. BENEFITS NOT FUNDED:
All benefits under this Plan shall be unsecured obligations of the
Corporation, and each participant's right thereto shall be as an unsecured
creditor of the Corporation.
9. CHANGE OF CONTROL:
Pursuant to a benefit payment election form filed with the Administrator
prior to the date the Non-Employee Director becomes a Plan participant, a
participant may irrevocably elect to have all amounts payable to the
participant pursuant to this Plan, including all amounts deferred pursuant to
a benefit election form filed with the Plan Administrator, become payable
immediately in cash if (i) a third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the
beneficial owner, directly or indirectly, of 25% or more of the combined
voting power of the Corporation's outstanding voting securities ordinarily
having the right to vote for the election of directors of the Company or (ii)
individuals who constitute the Board of Directors of the Company as of
November 24, 1987 (the "Incumbent Board"), cease for any reason to constitute
at least two-thirds thereof, provided that any person becoming a director
subsequent to said date whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least three-quarters of
the directors comprising the Incumbent Board, shall be, for purposes of this
clause (ii), considered as though such person were a member of the Incumbent
Board.
10. NO GUARANTEE OF SERVICE:
Participation in this Plan does not constitute a guarantee or contract
of service as a Non-Employee Director.
4
<PAGE>
11. BENEFICIARY DESIGNATION AND NON-ASSIGNABILITY:
No right to receive payments hereunder shall be transferable or
assignable by a Plan participant, except as provided in paragraph 6 of this
Plan.
12. AMENDMENT AND TERMINATION:
This Plan may at any time or from time to time be amended, suspended or
terminated by action of the Board. However, no such action shall deprive any
Plan Participant of any benefits to which he or she is entitled under
paragraph 5 as of the day of amendment, suspension, or termination of the
Plan, as the case may be.
13. FORFEITURE OF BENEFITS:
Unless an exception to this paragraph is requested by a Plan participant
and approved by the Board Affairs Committee of the Board, a Plan Participant
who, after ceasing to be a Non-Employee Director of the Corporation, becomes
a "management official" of a competing "depository organization" shall
immediately forfeit all future benefits under the Plan to which such
participant is entitled. The terms "management official" and "depositary
organization" shall have the meanings set forth in the Depository Institution
Management Interlocks Act (the "Act") and Federal Reserve Regulation L
("Regulation L"). A depository organization shall be deemed to be a
competing depository organization if the Plan participant would be prohibited
by the Act and Regulation L from serving as a Non-Employee Director of the
Corporation and as a management official of such depository organization at
the same time.
14. ONE-TIME CONVERSION OPTION:
In lieu of all benefits otherwise payable under this Plan, any
Non-Employee Director of the Corporation who was a Plan participant on
November 2, 1998, may elect to receive an amount ("Retirement Conversion
Amount") under the Wells Fargo & Company 1999 Deferral Plan for Directors
equal to the sum of all benefits the Plan participant would have been
otherwise entitled to receive under the Plan if the Plan participant's
service on the Board had ended on November 2, 1998. Any such election must
be made in writing on a form provided by the Company for that purpose and
shall be irrevocable. Any such election will not be effective unless it is
received by the Corporate Secretary of
5
<PAGE>
the Company on or before June 30, 1999, and prior to termination of the
participant's service as a Non-Employee Director of the Company. Retirement
Conversion Amounts under the Wells Fargo & Company l999 Deferral Plan for
Directors in fulfillment of a participant's election hereunder shall be
effective as of July l, l999. Retirement Conversion Amounts will be credited
in accordance with the terms of the Wells Fargo & Company 1999 Deferral Plan
for Directors. After a Retirement Conversion Amount is credited under the
Wells Fargo & Company l999 Deferral Plan for Directors in fulfillment of a
Plan participant's election hereunder, neither the Plan participant nor his
or her beneficiaries shall have any further right to any benefit under this
Plan whatsoever.
11/17/87
7/24/90
2/26/96
1/28/97
11/2/98
6
<PAGE>
WFC HOLDINGS CORPORATION
DIRECTORS' RETIREMENT PLAN
(Amended and Restated as of November 2, l998)
I. PURPOSE OF THE PLAN
The purpose of this Plan is to assume the obligations of the former
Wells Fargo & Company ("Old Wells Fargo"), the predecessor of WFC Holdings
Corporation, under its Directors' Retirement Plan to former non-employee
Directors of Old Wells Fargo for the purpose of recognizing the value of
their past service to Old Wells Fargo and compensating them for their
availability as a resource to the current Wells Fargo & Company, formerly
Norwest Corporation ("New Wells Fargo").
II. EFFECTIVE DATE
The Plan is effective January 1, 1988, and is amended and restated as of
November 2, l998.
III. ADMINISTRATION OF THE PLAN
The Plan will be administered by the Board of Directors (the "Board") of
WFC Holdings Corporation (the "Corporation") or its delegate, which will have
sole authority to interpret and construe the provisions of the Plan and to
adopt rules and regulations for administering the Plan. Decisions of the
Board or its delegate will be final and binding on all parties who have an
interest in the Plan.
IV. ELIGIBILITY
Any person who was a member of Old Wells Fargo's Board of Directors on
or after the effective date of the Plan but before April 16, l996, and who
during that time was not a full-time employee of Old Wells Fargo or one of
its subsidiaries ("Outside Director") will be eligible to participate in the
Plan.
V. RETIREMENT BENEFITS
A Director who is a participant in the Plan will be entitled to a
retirement benefit payable at an annual rate equal to the annual cash
retainer in effect for non-employee Directors
<PAGE>
of Old Wells Fargo or New Wells Fargo, as the case may be, at the time of his
or her retirement (in either case not including any additional retainer paid
for being a member or chairman of a committee of the Board of Directors).
For Outside Directors who joined the Board of Directors of New Wells Fargo on
November 2, 1998 ("Continuing Directors"), the retirement benefit will be
payable for the lesser of ten years or the period of actual service as an
Outside Director, including service as a non-employee director of First
Interstate Bancorp, through November 2, l998, rounded up to the nearest
month. For all other Outside Directors, the retirement benefit will be
payable for the lesser of ten years or the number of full years of actual
service, including service as a non-employee director of First Interstate
Bancorp. Payment will commence on any date following retirement elected by
the participant, but not earlier than the date the participant attains age
65. If a participant is an Outside Director on January 1, 1988, the election
must be filed by March 31, 1988. If a participant first becomes an Outside
Director after January l, 1988, the election must be filed within 90 days of
the date he or she becomes an Outside Director. If no election is filed,
payment will commence on the later of the date the participant retires or the
date the participant attains age 65.
VI. SURVIVOR BENEFITS
In the event of the death of a participant prior to retirement, the
participant's designated beneficiary will receive an annual benefit equal in
amount and duration to the annual benefit to which the participant would have
been entitled hereunder if the participant had retired on the date of his or
her death. Payment of the survivor benefit will commence the month following
the Director's death. However, a Director may elect for benefits to commence
on any date following his or her death. If a participant is an Outside
Director on January 1, 1988, any such election must be filed by March 31,
1988. If a participant first becomes an Outside Director after January 1,
1988, the election must be filed within 90 days of the date he or she becomes
an Outside Director.
VII. ONE-TIME CONVERSION OPTION
In lieu of all benefits otherwise payable under the Plan, any Continuing
Director may elect to receive an amount ("Retirement Conversion Amount")
under the New Wells Fargo 1999 Deferral Plan for Directors equal to the sum
of all benefits the Plan participant would have been otherwise entitled to
receive
2
<PAGE>
under the Plan for service as an Outside Director of Old Wells Fargo through
November 2, 1998. Any such election must be made in writing on a form
provided by New Wells Fargo for that purpose and shall be irrevocable. Any
such election will not be effective unless it is received by the Corporate
Secretary of New Wells Fargo on or before June 30, 1999, and prior to
termination of the participant's service as a non-employee Director of New
Wells Fargo. Retirement Conversion Amounts under the New Wells Fargo l999
Deferral Plan for Directors in fulfillment of a participant's election
hereunder shall be effective as of July 1, l999. Retirement Conversion
Amounts will be credited in accordance with the terms of the New Wells Fargo
1999 Deferral Plan for Directors. After a Retirement Conversion Amount is
credited under the New Wells Fargo l999 Deferral Plan for Directors in
fulfillment of a Plan participant's election hereunder, neither the Plan
participant nor his or her beneficiaries shall have any further right to any
benefit under this Plan whatsoever.
VIII. GENERAL PROVISIONS
(A) The obligation to pay retirement or survivor benefits will at all
times be an unfunded and unsecured obligation of the Corporation. The
Corporation will not be under any obligation to invest any portion of its
general assets in mutual funds, stocks, bonds, securities or other similar
investments in order to accumulate funds for the satisfaction of its
obligations under the Plan. The participant and his or her beneficiary must
look solely and exclusively to the general assets of the Corporation for the
payment of the participant's benefits.
(B) The Board may at any time amend, suspend or terminate the Plan;
provided, however, that such action may not adversely affect rights
previously vested and non-forfeitable under the Plan.
(C) A participant will have no right to alienate, pledge or encumber his
interest in his or her benefits under the Plan, nor will such benefits be
subject in any way to the claims of a participant's creditors or to
attachment, execution or other process of law.
(D) In the event of a participant's death following retirement, the
balance of his or her retirement benefits, if any, will be paid to the
participant's designated beneficiary or, in the absence of such designation,
in accordance with the participant's will or the laws of descent and
distribution. In
3
<PAGE>
the event of a beneficiary's death, the balance of his or her benefits, if
any, will be paid in accordance with the beneficiary's will or the laws of
descent and distribution. A participant may from time to time revoke his or
her beneficiary designation and file a new beneficiary designation with the
Board. All beneficiary designations must be on the form prescribed by the
Board or its delegate.
4
<PAGE>
EXHIBIT 12(a)
WELLS FARGO & COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
------------------------------------------------------------------
(in millions) 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNINGS, INCLUDING INTEREST ON DEPOSITS (1):
Income before income tax expense $3,293 $4,193 $3,767 $3,201 $2,635
Fixed charges 5,218 5,149 4,816 4,000 2,854
------ ------ ------ ------ ------
$8,511 $9,342 $8,583 $7,201 $5,489
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Fixed charges (1):
Interest expense $5,065 $4,954 $4,619 $3,879 $2,745
Estimated interest component of net rental expense 153 195 197 121 109
------ ------ ------ ------ ------
$5,218 $5,149 $4,816 $4,000 $2,854
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of earnings to fixed charges (2) 1.63 1.81 1.78 1.80 1.92
------ ------ ------ ------ ------
------ ------ ------ ------ ------
EARNINGS, EXCLUDING INTEREST ON DEPOSITS:
Income before income tax expense $3,293 $4,193 $3,767 $3,201 $2,635
Fixed charges 2,107 1,999 1,905 1,847 1,137
------ ------ ------ ------ ------
$5,400 $6,192 $5,672 $5,048 $3,772
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Fixed charges:
Interest expense $5,065 $4,954 $4,619 $3,879 $2,745
Less interest on deposits 3,111 3,150 2,911 2,153 1,717
Estimated interest component of net rental expense 153 195 197 121 109
------ ------ ------ ------ ------
$2,107 $1,999 $1,905 $1,847 $1,137
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of earnings to fixed charges (2) 2.56 3.10 2.98 2.73 3.32
------ ------ ------ ------ ------
------ ------ ------ ------ ------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) As defined in Item 503(d) of Regulation S-K.
(2) These computations are included herein in compliance with Securities and
Exchange Commission regulations. However, management believes that fixed
charge ratios are not meaningful measures for the business of the Company
because of two factors. First, even if there were no change in net income,
the ratios would decline with an increase in the proportion of income which
is tax-exempt or, conversely, they would increase with a decrease in the
proportion of income which is tax-exempt. Second, even if there were no
change in net income, the ratios would decline if interest income and
interest expense increase by the same amount due to an increase in the
level of interest rates or, conversely, they would increase if interest
income and interest expense decrease by the same amount due to a decrease
in the level of interest rates.
<PAGE>
EXHIBIT 12(b)
WELLS FARGO & COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
AND PREFERRED DIVIDENDS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------------
(in millions) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNINGS, INCLUDING INTEREST ON DEPOSITS (1):
Income before income tax expense $3,293 $4,193 $3,767 $3,201 $2,635
Fixed charges 5,218 5,149 4,816 4,000 2,854
------ ------- ------- ------- ------
$8,511 $9,342 $8,583 $7,201 $5,489
------ ------- ------- ------- ------
------ ------- ------- ------- ------
Preferred dividend requirement $ 35 $ 43 $ 85 $ 83 $ 71
Ratio of income before income tax expense to net income 1.69 1.68 1.69 1.61 1.60
------ ------- ------- ------- ------
Preferred dividends (2) $ 59 $ 72 $ 144 $ 134 $ 114
------ ------- ------- ------- ------
Fixed charges (1):
Interest expense 5,065 4,954 4,619 3,879 2,745
Estimated interest component of net rental expense 153 195 197 121 109
------ ------- ------- ------- ------
5,218 5,149 4,816 4,000 2,854
------ ------- ------- ------- ------
Fixed charges and preferred dividends $5,277 $5,221 $4,960 $4,134 $2,968
------ ------- ------- ------- ------
------ ------- ------- ------- ------
Ratio of earnings to fixed charges and preferred dividends (3) 1.61 1.79 1.73 1.74 1.85
------ ------- ------- ------- ------
------ ------- ------- ------- ------
EARNINGS, EXCLUDING INTEREST ON DEPOSITS:
Income before income tax expense $3,293 $4,193 $3,767 $3,201 $2,635
Fixed charges 2,107 1,999 1,905 1,847 1,137
------ ------- ------- ------- ------
$5,400 $6,192 $5,672 $5,048 $3,772
------ ------- ------- ------- ------
------ ------- ------- ------- ------
Preferred dividends (2) $ 59 $ 72 $ 144 $ 134 $ 114
------ ------- ------- ------- ------
Fixed charges:
Interest expense 5,065 4,954 4,619 3,879 2,745
Less interest on deposits 3,111 3,150 2,911 2,153 1,717
Estimated interest component of net rental expense 153 195 197 121 109
------ ------- ------- ------- ------
2,107 1,999 1,905 1,847 1,137
------ ------- ------- ------- ------
Fixed charges and preferred dividends $2,166 $2,071 $2,049 $1,981 $1,251
------ ------- ------- ------- ------
------ ------- ------- ------- ------
Ratio of earnings to fixed charges and preferred dividends (3) 2.49 2.99 2.77 2.55 3.02
------ ------- ------- ------- ------
------ ------- ------- ------- ------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) As defined in Item 503(d) of Regulation S-K.
(2) The preferred dividends were increased to amounts representing the pretax
earnings that would be required to cover such dividend requirements.
(3) These computations are included herein in compliance with Securities and
Exchange Commission regulations. However, management believes that fixed
charge ratios are not meaningful measures for the business of the Company
because of two factors. First, even if there was no change in net income,
the ratios would decline with an increase in the proportion of income which
is tax-exempt or, conversely, they would increase with a decrease in the
proportion of income which is tax-exempt. Second, even if there was no
change in net income, the ratios would decline if interest income and
interest expense increase by the same amount due to an increase in the
level of interest rates or, conversely, they would increase if interest
income and interest expense decrease by the same amount due to a decrease
in the level of interest rates.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL REVIEW
34 Overview
37 Merger of Norwest and Wells Fargo
37 Operating Segment Results
38 Earnings Performance
38 Net Interest Income
39 Noninterest Income
42 Noninterest Expense
44 Earnings/Ratios Excluding Goodwill
and Nonqualifying CDI
44 Balance Sheet Analysis
44 Securities Available for Sale
(table on page 63)
45 Loan Portfolio (table on page 64)
45 Nonaccrual and Restructured Loans
and Other Assets
47 Allowance for Loan Losses
(table on page 66)
47 Deposits
47 Market Risks
48 Derivative Financial Instruments
48 Liquidity and Capital Management
49 Comparison of 1997 to 1996
50 Additional Information
FINANCIAL STATEMENTS
51 Consolidated Statement of Income
52 Consolidated Balance Sheet
53 Consolidated Statement of
Changes in Stockholders' Equity
and Comprehensive Income
54 Consolidated Statement of Cash Flows
55 Notes to Financial Statements
(index on page 96)
96 INDEPENDENT AUDITORS' REPORT
96 INDEX OF SPECIAL TOPICS
</TABLE>
33
<PAGE>
OVERVIEW
On November 2, 1998, Norwest Corporation changed its name to "Wells Fargo &
Company" upon the merger (the Merger) of the former Wells Fargo & Company (the
former Wells Fargo) into a wholly-owned subsidiary of Norwest Corporation.
Norwest Corporation as it was before the Merger is referred to as the former
Norwest. The Merger was accounted for as a pooling of interests and,
accordingly, the information included in the financial review presents the
combined results as if the Merger had been in effect for all periods presented.
Certain amounts in the financial review for prior years have been reclassified
to conform with the current financial statement presentation.
Wells Fargo & Company is a $202 billion diversified financial services
company providing banking, mortgage and consumer finance through about 6,000
stores and other distribution channels throughout North America, including all
50 states, and elsewhere internationally. It ranks seventh in assets at
December 31, 1998 among U.S. bank holding companies. In this Annual Report,
Wells Fargo & Company together with its subsidiaries is referred to as the
Company and Wells Fargo & Company alone is referred to as the Parent.
Net income in 1998 was $1,950 million, compared with $2,499 million in
1997, a decrease of 22%. Diluted earnings per common share were $1.17, compared
with $1.48 in 1997, a decrease of 21%.
Return on average assets (ROA) was 1.04% and return on average common
equity (ROE) was 9.86% in 1998, compared with 1.37% and 12.81%, respectively, in
1997.
Diluted earnings before the amortization of goodwill and nonqualifying core
deposit intangible (CDI) ("cash" or "tangible" earnings) were $1.50 per share in
1998, compared with $1.83 per share in 1997. On the same basis, ROA was 1.39%
and ROE was 23.15% in 1998, compared with 1.78% and 30.49%, respectively, in
1997.
Net interest income on a taxable-equivalent basis was $9,049 million in
1998, compared with $8,705 million a year ago. The Company's net interest margin
was 5.79% for 1998, compared with 5.86% in 1997.
Noninterest income increased from $5,675 million in 1997 to $6,427 million
in 1998, an increase of 13%.
Noninterest expense totaled $10,579 million in 1998, compared with $8,990
million in 1997. The increase was primarily due to the Merger-related charges
incurred during the fourth quarter.
The provision for loan losses was $1,545 million in 1998, compared with
$1,140 million in 1997. During 1998, net charge-offs were $1,617 million, or
1.52% of average total loans, compared with $1,305 million, or 1.25%, during
1997. The allowance for loan losses was $3,134 million, or 2.90% of total loans,
at December 31, 1998, compared with $3,062 million, or 2.88%, at December 31,
1997.
At December 31, 1998, total nonaccrual and restructured loans were $710
million, or .7% of total loans, compared with $715 million, or .7%, at December
31, 1997. Other real estate (ORE) was $173 million at December 31, 1998,
compared with $264 million at December 31, 1997.
The Company's direct credit risk related to the ongoing volatility of the
financial markets in Asia and, more recently, Latin America is predominantly
short-term in nature and is relatively insignificant. However, the primary risk
to the Company is the long-term effect of the Asian and Latin American financial
markets on the economy of the U.S. and the Company's borrowers. Understanding
this risk is more difficult and depends on the passage of time. To date, while
certain domestic sectors to which the Company has direct credit exposure have
been adversely impacted by the disruptions in Asian financial markets, the
results have not been material enough to create any significant credit losses
for the Company.
At December 31, 1998, the ratio of common stockholders' equity to total
assets was 10.02%, compared with 10.40% at December 31, 1997. The Company's
total risk-based capital (RBC) ratio at December 31, 1998 was 10.90% and its
Tier 1 RBC ratio was 8.08%, exceeding the minimum regulatory guidelines of 8%
and 4%, respectively, for bank holding companies. The Company's ratios at
December 31, 1997 were 11.20% and 8.16%, respectively. The Company's leverage
ratios were 6.58% and 6.72% at December 31, 1998 and 1997, respectively,
exceeding the minimum regulatory guideline of 3% for bank holding companies.
This Annual Report (including information incorporated by reference herein)
includes forward-looking statements about the Company's financial condition,
results of operations, plans, objectives and future performance and business.
These statements generally include the words "believe," "expect," "anticipate,"
"estimate," "may," "will" or similar expressions that suggest the statements are
forward looking in nature.
34
<PAGE>
These forward-looking statements involve inherent risks and uncertainties.
The Company cautions readers that a number of factors -- many of which are
beyond the control of the Company -- could cause actual results to differ
materially from those in the forward-looking statements. Among these factors are
changes in political and economic conditions, interest rate fluctuations,
technological changes (including the "Year 2000" data systems compliance issue),
customer disintermediation, competitive product and pricing pressures in the
Company's geographic and product markets, equity and fixed income market
fluctuations, personal and commercial customers' bankruptcies, inflation,
changes in law, changes in fiscal, monetary, regulatory and tax policies,
monetary fluctuations, credit quality and credit risk management, mergers and
acquisitions, the integration of merged and acquired companies, and success in
gaining regulatory approvals when required.
Also, actual results may differ materially from those in the forward-
looking statements because of factors relating to the combination of the former
Wells Fargo and the former Norwest Corporation, including the following:
expected cost savings from the Merger are not fully realized within the expected
time frame or additional or unexpected costs are incurred; and costs or
difficulties related to the integration of the former Wells Fargo and the former
Norwest Corporation are greater than expected.
RECENT ACCOUNTING STANDARDS
The Company adopted on January 1, 1998, Statement of Financial Accounting
Standards No. 130 (FAS 130), Reporting Comprehensive Income. This Statement sets
standards for reporting and displaying comprehensive income and its components
in the financial statements. It requires that a company classify items of other
comprehensive income, as defined by accounting standards, by their nature in the
financial statements. Other comprehensive income, as defined, is net of income
taxes. Cumulative other comprehensive income is displayed separately in the
equity section of the balance sheet and the consolidated statement of changes in
stockholders' equity and comprehensive income. For comparative purposes,
financial statements for earlier periods provided have been reclassified. The
amount of income tax expense or benefit allocated to each component of other
comprehensive income is presented in Note 16 to Financial Statements.
TABLE 1: RATIOS AND PER COMMON SHARE DATA
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
($ in millions, except Year ended December 31,
per share amounts) ----------------------
1998 1997 1996
<S> <C> <C> <C>
PROFITABILITY RATIOS
Net income to average total assets (ROA) 1.04% 1.37% 1.31%
Net income applicable to common stock to
average common stockholders' equity (ROE) 9.86 12.81 12.73
Net income to average stockholders' equity 9.81 12.67 12.52
EFFICIENCY RATIO (1) 68.5% 62.8% 67.0%
NET INCOME AND RATIOS EXCLUDING
GOODWILL AND NONQUALIFYING
CORE DEPOSIT INTANGIBLE (CDI)
AMORTIZATION AND BALANCES
("CASH" OR "TANGIBLE") (2)
Net income applicable to common stock $2,465 $3,031 $2,616
Earnings per common share 1.52 1.85 1.68
Diluted earnings per common share 1.50 1.83 1.67
ROA 1.39% 1.78% 1.66%
ROE 23.15 30.49 28.55
Efficiency ratio 64.3 57.8 63.5
CAPITAL RATIOS
At year end:
Common stockholders' equity to assets 10.02% 10.40% 10.21%
Stockholders' equity to assets 10.25 10.65 10.63
Risk-based capital (3)
Tier 1 capital 8.08 8.16 7.96
Total capital 10.90 11.20 11.11
Leverage (3) 6.58 6.72 6.36
Average balances:
Common stockholders' equity to assets 10.31 10.52 9.91
Stockholders' equity to assets 10.56 10.82 10.48
PER COMMON SHARE DATA
Dividend payout (4) 59% 41% 38%
Book value $12.35 $11.92 $11.66
Market prices (5):
High $43.88 $39.50 $23.44
Low 27.50 21.63 15.25
Year end 39.94 38.75 21.75
- ----------------------------------------------------------------------
</TABLE>
(1) The efficiency ratio is defined as noninterest expense divided by the total
of net interest income and noninterest income.
(2) Nonqualifying core deposit intangible (acquired after regulatory rule
changes in 1992) amortization and average balance excluded from these
calculations are, with the exception of the efficiency ratio, net of
applicable taxes. The after-tax amounts for the amortization and average
balance of nonqualifying CDI were $129 million and $906 million,
respectively, for the year ended December 31, 1998. Goodwill amortization
and average balance (which are not tax effected) were $421 million and
$7,865 million, respectively, for the year ended December 31, 1998. See
page 44 for additional information.
(3) See Note 22 to Financial Statements for additional information.
(4) Dividends declared per common share as a percentage of earnings per common
share.
(5) Based on daily prices reported on the New York Stock Exchange Composite
Transaction Reporting System.
35
<PAGE>
The Company adopted on December 31, 1998, FAS 131, Disclosures about
Segments of an Enterprise and Related Information. The Statement requires that a
public business enterprise report financial and descriptive information about
its reportable operating segments on the basis that is used internally for
evaluating segment performance and deciding how to allocate resources to
segments.
The Company adopted on December 31, 1998, FAS 132, Employers' Disclosures
about Pensions and Other Postretirement Benefits. The Statement only addresses
disclosure issues; it does not address measurement and recognition of pensions
and other postretirement benefits. This Statement requires the reconciliation of
changes in benefit obligations and plan assets for both pensions and other
postretirement benefits, showing the effects of the major components separately
for each reconciliation.
In June 1998, the Financial Accounting Standards Board (FASB) issued FAS
133, Accounting for Derivative Instruments and Hedging Activities, which will be
effective for the Company's financial statements for periods beginning January
1, 2000. This Statement requires companies to record derivatives on the balance
sheet, measured at fair value. Changes in the fair values of those derivatives
would be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. The key criterion for hedge accounting is that
the hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows. The Company has not yet determined when it
will implement the Statement nor has it completed the complex analysis required
to determine the impact on the financial statements.
In October 1998, the FASB issued FAS 134, Accounting for Mortgage-Backed
Securities Retained after Securitization of Mortgage Loans Held for Sale by a
Mortgage Banking Enterprise. This Statement requires that after mortgage loans
held for sale are securitized, an entity engaged in mortgage banking activities
classify the resulting mortgage-backed securities or other retained interests
based on its ability and intent to sell or hold investments. The Company
implemented FAS 134 in the fourth quarter of 1998, and, accordingly, classifies
its retained interests from securitizations as securities available for sale.
The Statement did not have a material impact on the financial statements.
TABLE 2: SIX-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
(in millions, except % CHANGE FIVE-YEAR
per share amounts) 1998/ COMPOUND
1998 1997 1996 1995 1994 1993 1997 GROWTH RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
Net interest income $ 8,990 $ 8,648 $ 8,222 $ 5,923 $ 5,414 $ 5,160 4% 12%
Provision for loan losses 1,545 1,140 500 312 365 708 36 17
Noninterest income 6,427 5,675 4,769 3,179 2,813 2,649 13 19
Noninterest expense 10,579 8,990 8,724 5,589 5,225 5,192 18 15
Net income 1,950 2,499 2,228 1,988 1,642 1,130 (22) 12
Earnings per common share $ 1.18 $ 1.50 $ 1.38 $ 1.66 $ 1.40 $ 1.85 (21) (9)
Diluted earnings
per common share 1.17 1.48 1.36 1.62 1.36 1.74 (21) (8)
Dividends declared
per common share (1) .70 .615 .525 .45 .383 .32 14 17
BALANCE SHEET
(at year end)
Securities available for sale $ 31,997 $ 27,872 $ 29,752 $ 24,163 $ 25,949 $ 25,530 15% 5%
Loans 107,994 106,311 105,760 70,780 66,575 59,829 2 13
Allowance for loan losses 3,134 3,062 3,059 2,711 2,872 2,911 2 1
Goodwill 7,664 8,062 8,200 1,212 574 618 (5) 65
Assets 202,475 185,685 188,633 122,200 112,674 107,170 9 14
Core deposits 132,289 122,327 128,178 77,355 72,738 75,379 8 12
Long-term debt 19,709 17,335 18,142 16,726 12,039 11,072 14 12
Guaranteed preferred beneficial
interests in Company's
subordinated debentures 785 1,299 1,150 -- -- -- (40) --
Common stockholders' equity 20,296 19,315 19,262 8,448 6,628 6,928 5 24
Stockholders' equity 20,759 19,778 20,051 9,239 7,629 7,947 5 21
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Dividends declared per common share represent the dividends of the former
Norwest. Dividends declared per common share for the former Wells Fargo
were $5.20, $5.20, $5.20, $4.60, $4.00 and $2.25 for 1998, 1997, 1996,
1995, 1994 and 1993, respectively.
36
<PAGE>
MERGER OF NORWEST AND WELLS FARGO
On November 2, 1998, the former Wells Fargo merged with a subsidiary of
Norwest Corporation, and Norwest changed its name to "Wells Fargo & Company."
The Merger resulted in a combined diversified financial services company with
$202 billion in assets at December 31, 1998, the seventh largest bank holding
company in the United States.
As a condition to the Merger, the Company was required by regulatory
agencies to divest stores in Arizona and Nevada having aggregate deposits of
approximately $1 billion. In the fourth quarter of 1998, the Company entered
into contracts to sell these stores. These sales are expected to be completed
during the second quarter of 1999.
In connection with the Merger, approximately $1 billion of Merger-related
expenses were recognized in the fourth quarter of 1998, which included
approximately $600 million of costs related to the restructuring of systems and
operations resulting from the Merger that qualified for immediate recognition.
The remainder of the Merger-related expenses were primarily for irrevocable
commitments to the Company's Foundation and fees for investment banking and
other professional services resulting from the Merger.
The restructuring charges include write-downs of approximately $100 million
for premises. The remaining charges of approximately $500 million primarily
represent future cash outflows, substantially comprised of severance-related
costs and costs related to the disposition of leased premises. These future cash
outflows are not expected to have a significant effect on the Company's
liquidity, capital resources or results of operations.
The restructuring charges for premises result from the identification of
specific premises that are held for sale or remarketing and are expected to be
removed from operations during 1999, pursuant to Merger plans. Severance-related
costs result from plans to eliminate redundant headquarters, back office and
other positions into 2000.
Based on accounting rules, not all Merger-related expenses qualified for
recognition in the fourth quarter of 1998. Additional Merger-related expenses
will be expensed when incurred as systems and operations are combined. The
Company estimates that Merger-related expenses will total about $1.15 billion.
The Company originally estimated total Merger-related expenses would be about
$950 million. The increase is due to the irrevocable commitments made to the
Company's Foundation. Because of inherent uncertainties associated with merging
two large companies, additional Merger-related costs, including additional
restructuring charges, may result as the integration process continues.
The Company expects to meet its pre-Merger target of approximately $650
million in annual pre-tax cost savings not later than 36 months after Merger
consummation. About 50% of the cost savings are expected to be achieved within
the first two years.
OPERATING SEGMENT RESULTS
COMMUNITY BANKING'S net income was $1,644 million in 1998 compared with
$2,081 million in 1997, a decrease of 21%. Net interest income declined by $121
million. A significant portion of the decrease in net interest income is due to
the run-off and sales of credit card receivables and a decline in the former
Wells Fargo real estate mortgage loans. Other loan portfolios remained stable.
The provision for loan losses decreased by $99 million. A significant portion of
the $607 million, or 17%, increase in noninterest income is due to increased fee
revenue. The number of checking accounts grew 2% from year-end 1997 to 1998.
Community Banking also experienced significant growth in assets under
management. Total noninterest expense increased by $1,359 million from 1997 due
to Merger expense accruals, including irrevocable commitments to the Company's
Foundation in connection with the Merger. Major changes in Community Banking
from 1996 to 1997 are attributed to the acquisition of First Interstate Bancorp
(First Interstate) effective April 1, 1996. First Interstate results prior to
April 1, 1996 are not included and, therefore, the year 1997 is not comparable
to 1996.
WHOLESALE BANKING'S net income was $780 million in 1998 compared with $792
million in 1997. Net interest income was flat for the year-over-year period. The
increasing competitive lending environment in 1998 led to a decrease in the
yields realized on the core commercial loan portfolio. In addition, interest
recoveries were lower in 1998 compared with 1997. Offsetting these unfavorable
conditions was an increase in commercial loan volume of $2 billion. Real estate
and
37
<PAGE>
construction loan balances were flat from 1997 to 1998. The year-over-year
improvement in noninterest income was due to a $54 million increase in fee
revenue, as well as foreign exchange gains and acquisition, development and
construction (ADC) income. The increase was primarily offset by mark-to-market
adjustments of the high-yield trading portfolio and commercial mortgages
originated for sale. The adjustments occurred as a result of the general market
volatility that occurred near the end of the third quarter of 1998. Noninterest
expense increased $56 million from 1997 due to a $34 million reduction in
foreclosed asset gains and an increase in incentive compensation related to
increased loan volume. Other operating expenses remained relatively flat. Major
changes in Wholesale Banking from 1996 to 1997 are attributed to the acquisition
of First Interstate effective April 1, 1996. First Interstate results prior to
April 1, 1996 are not included and, therefore, the year 1997 is not comparable
to 1996.
MORTGAGE BANKING earned $217 million in 1998, a 44% increase over the $151
million earned in 1997, which was 21% over the $125 million earned in 1996. The
increases were principally due to increases in mortgage loan fundings and the
growth in the servicing portfolio. Fundings were $109 billion in 1998, compared
with $55 billion and $52 billion in 1997 and 1996, respectively. The increases
in funding volume were attributable in part to the low mortgage interest rates
in 1998 which encouraged homeowners to refinance their mortgage loans. The
percentage of fundings attributed to mortgage loan refinancings was
approximately 52% in 1998 compared to 23% and 22% in 1997 and 1996,
respectively. The servicing portfolio increased to $245 billion at December 31,
1998 from $206 billion at December 31, 1997. The weighted average coupon of
loans in the servicing portfolio was 7% at December 31, 1998 compared with 8% a
year earlier. Total capitalized mortgage servicing rights amounted to $3 billion
or 126 basis points of the servicing portfolio at December 31, 1998.
Amortization of capitalized mortgage servicing rights was $785 million in 1998,
compared with $444 million and $301 million in 1997 and 1996, respectively.
Higher levels of amortization reflect increased assumed prepayments due to a
lower interest rate environment and increased balances of capitalized mortgage
servicing associated with a larger servicing portfolio. Combined gains on sales
of mortgages and servicing rights were $312 million in 1998, compared with $89
million and $70 million in 1997 and 1996, respectively.
NORWEST FINANCIAL reported a net loss of $19 million in 1998, which
included a $351 million charge to the provision for loan losses in the fourth
quarter. This charge includes losses at Island Finance reflecting a fourth
quarter review of the loan portfolio and realignment of charge-off policies in
other operating units. Norwest Financial's earnings for 1997 decreased 9% from
the $265 million earned in 1996. The 1997 net earnings include $27 million in
charges related to the acquisition of Fidelity Acceptance Corporation, an
automobile finance company with $1 billion in receivables and 150 locations in
31 states and Guam. Net interest income rose 12% in 1998 and 9% in 1997.
Increases in average loans reflect internal growth as well as acquisitions. The
net interest margin decreased 37 basis points in 1998 and 17 basis points in
1997 reflecting a change in the portfolio mix. Norwest Financial's noninterest
expense increased 16% in 1998 and 10% in 1997 primarily due to higher expenses
from acquisitions.
EARNINGS PERFORMANCE
NET INTEREST INCOME
Net interest income is the difference between interest income (which
includes yield-related loan fees) and interest expense. Net interest income on a
taxable-equivalent basis was $9,049 million in 1998, compared with $8,705
million in 1997.
Net interest income on a taxable-equivalent basis expressed as a percentage
of average total earning assets is referred to as the net interest margin, which
represents the average net effective yield on earning assets. For 1998, the net
interest margin was 5.79%, compared with 5.86% in 1997.
Table 4 presents the individual components of net interest income and net
interest margin.
The increase in net interest income for 1998 compared with 1997 was
primarily due to an increase in earning assets, which includes the effects of a
significantly higher volume of mortgage origination activity during 1998. This
activity also served to reduce the net interest margin in 1998 due to the lower
yields provided by mortgages held for sale relative to the average yield of all
other earning assets.
38
<PAGE>
Interest income included hedging income of $93 million in 1998, compared
with $79 million in 1997. Interest expense included hedging income of $94
million in 1998, compared with $81 million in 1997.
NONINTEREST INCOME
Table 3 shows the major components of noninterest income.
TABLE 3: NONINTEREST INCOME
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(in millions) Year ended December 31, % Change
------------------------ ------------
1998 1997 1996 1998/ 1997/
1997 1996
<S> <C> <C> <C> <C> <C>
Service charges on
deposit accounts $1,357 $1,244 $1,198 9% 4%
Trust and investment fees
and commissions:
Asset management and
custody fees 676 603 510 12 18
Mutual fund and
annuity sales fees 300 273 190 10 44
All other 92 78 75 18 4
------ ------ ------
Total trust and
investment fees
and commissions 1,068 954 775 12 23
Credit card fee revenue 520 448 350 16 28
Other fees and commissions:
ATM network fees 229 176 107 30 64
Charges and fees on loans 290 254 209 14 22
All other 427 396 373 8 6
------ ------ ------
Total other fees
and commissions 946 826 689 15 20
Mortgage banking:
Origination and other
closing fees 530 314 305 69 3
Servicing fees, net of
amortization 19 324 318 (94) 2
Net gains (losses) on sales of
mortgage servicing rights 16 (8) 57 -- --
Net gains on sales
of mortgages 296 120 13 147 823
Other 245 177 151 38 17
------ ------ ------
Total mortgage banking 1,106 927 844 19 10
Insurance 348 336 280 4 20
Net venture capital gains 113 191 256 (41) (25)
Net gains on securities
available for sale 169 99 12 71 725
Income from equity investments
accounted for by the:
Cost method 151 157 137 (4) 15
Equity method 47 57 24 (18) 138
Net gains (losses) from
dispositions of operations 100 15 (95) 567 --
Net gains on sales of loans 61 30 22 103 36
All other 441 391 277 13 41
------ ------ ------
Total $6,427 $5,675 $4,769 13% 19%
====== ====== ====== === ===
- --------------------------------------------------------------------------------
</TABLE>
The increase in service charges on deposit accounts and other fees and
commissions reflects overall increases in business activity due to acquisitions
and marketing efforts along with an increase in fees.
The increase in trust and investment fees and commissions for 1998 was
primarily due to an overall increase in mutual fund management fees, reflecting
the overall growth in fund families' net assets. The Company managed 85 mutual
funds consisting of $51.4 billion of assets at December 31, 1998 that included
42 Stagecoach Funds ($27.6 billion) and 43 Norwest Advantage Funds ($23.8
billion), compared with 78 mutual funds consisting of $41.9 billion of assets at
December 31, 1997 that included 36 Stagecoach Funds ($23.3 billion) and 42
Norwest Advantage Funds ($18.6 billion). The Company also managed or maintained
personal trust, employee benefit trust and agency assets of approximately $324.8
billion and $285.0 billion at December 31, 1998 and 1997, respectively.
The increase in mortgage banking revenue is attributed to increases in
origination and other closing fees and gains on sales of mortgages and servicing
rights, net of increased amortization of capitalized mortgage servicing rights,
related to the low mortgage interest rate environment.
The majority of the gains from disposition of operations were related to
the sale by the former Wells Fargo of its mortgage servicing business to GMAC
Mortgage Corporation in the second quarter of 1998.
At December 31, 1997, the Company had a liability of $48 million related to
the disposition of premises and, to a lesser extent, severance and miscellaneous
expenses associated with 65 stores not acquired as a result of the acquisition
of First Interstate Bancorp or with former First Interstate stores that were
identified in the fourth quarter of 1997 for closure in 1998. Of the 65 stores,
33 stores were closed in 1998. In 1998, the Company evaluated the remaining 32
stores scheduled to close and decided to retain them, which resulted in reducing
the liability by $18 million. The decision was made based on numerous factors,
including the need to maintain customer service levels, as well as improved
profitability for these 32 stores. These developments were not anticipated or
foreseen at the time these accruals were originally recorded. At December 31,
1998, there was no remaining liability.
39
<PAGE>
TABLE 4: AVERAGE BALANCES, YIELDS AND RATES PAID (TAXABLE-EQUIVALENT BASIS)
(1)(2)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
(in millions) 1998 1997
------------------------------- -------------------------------
AVERAGE YIELDS/ INTEREST Average Yields/ Interest
BALANCE RATES INCOME/ balance rates income/
EXPENSE expense
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Federal funds sold and securities purchased
under resale agreements $ 1,652 5.58% $ 92 $ 1,131 5.39% $ 61
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 4,868 5.94 287 5,078 6.16 312
Securities of U.S. states and political subdivisions 1,528 8.50 124 1,352 8.49 112
Mortgage-backed securities:
Federal agencies 17,194 7.05 1,187 19,844 7.13 1,403
Private collateralized mortgage obligations 2,841 6.74 190 3,024 6.81 206
-------- -------- -------- --------
Total mortgage-backed securities 20,035 7.01 1,377 22,868 7.09 1,609
Other securities 1,783 5.06 103 1,373 4.72 67
-------- -------- -------- --------
Total securities available for sale 28,214 6.80 1,891 30,671 6.88 2,100
Securities held to maturity -- -- -- -- -- --
-------- -------- -------- --------
Total securities 28,214 6.80 1,891 30,671 6.88 2,100
Loans held for sale (3) 4,804 7.71 371 3,849 8.11 312
Mortgages held for sale (3) 12,978 6.92 898 6,741 7.27 490
Loans:
Commercial 33,271 8.93 2,971 29,951 9.18 2,748
Real estate 1-4 family first mortgage 13,652 8.90 1,215 15,866 8.75 1,341
Other real estate mortgage 16,257 9.37 1,523 16,205 9.58 1,552
Real estate construction 3,601 9.39 338 3,298 9.92 327
Consumer:
Real estate 1-4 family junior lien mortgage 9,983 9.17 903 9,880 9.39 949
Credit card 6,012 14.96 900 6,663 14.53 968
Other revolving credit and monthly payment 16,497 12.78 2,109 16,947 12.42 2,105
-------- -------- -------- --------
Total consumer 32,492 12.55 3,912 33,490 12.28 4,022
Lease financing 5,608 8.22 461 4,285 8.38 359
Foreign 1,324 20.96 277 1,042 20.31 212
-------- -------- -------- --------
Total loans (4)(5) 106,205 10.07 10,697 104,137 10.14 10,561
Other 2,853 5.82 166 2,273 5.93 134
-------- -------- -------- --------
Total earning assets $156,706 9.03 14,115 $148,802 9.19 13,658
======== -------- ======== --------
FUNDING SOURCES
Deposits:
Interest-bearing checking $ 2,221 1.23 27 $ 3,016 1.66 50
Market rate and other savings 52,909 2.60 1,375 51,182 2.58 1,322
Savings certificates 27,749 5.22 1,448 28,581 5.27 1,506
Other time deposits 4,040 5.49 222 3,708 5.64 209
Deposits in foreign offices 801 4.82 39 1,287 4.85 62
-------- -------- -------- --------
Total interest-bearing deposits 87,720 3.55 3,111 87,774 3.59 3,149
Short-term borrowings 14,454 5.37 777 11,362 5.37 610
Long-term debt 17,411 6.30 1,097 17,149 6.38 1,093
Guaranteed preferred beneficial interests in Company's
subordinated debentures 1,010 8.06 81 1,287 7.82 101
-------- -------- -------- --------
Total interest-bearing liabilities 120,595 4.20 5,066 117,572 4.21 4,953
Portion of noninterest-bearing funding sources 36,111 -- -- 31,230 -- --
-------- -------- -------- --------
Total funding sources $156,706 3.24 5,066 $148,802 3.33 4,953
======== -------- ======== --------
NET INTEREST MARGIN AND NET INTEREST INCOME
ON A TAXABLE-EQUIVALENT BASIS (6) 5.79% $ 9,049 5.86% $ 8,705
===== ======== ===== ========
NONINTEREST-EARNING ASSETS
Cash and due from banks $ 10,669 $ 11,609
Goodwill 7,865 8,186
Other 13,115 13,653
-------- --------
Total noninterest-earning assets $ 31,649 $ 33,448
======== ========
NONINTEREST-BEARING FUNDING SOURCES
Deposits $ 40,922 $ 37,710
Other liabilities 6,958 7,243
Preferred stockholders' equity 463 554
Common stockholders' equity 19,417 19,171
Noninterest-bearing funding sources used to
fund earning assets (36,111) (31,230)
-------- --------
Net noninterest-bearing funding sources $ 31,649 $ 33,448
======== ========
TOTAL ASSETS $188,355 $182,250
======== ========
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) The average prime rate of the Company was 8.35%, 8.44%, 8.27%, 8.83% and
7.14% for 1998, 1997, 1996, 1995 and 1994, respectively. The average
three-month London Interbank Offered Rate (LIBOR) was 5.56%, 5.74%,
5.51%, 6.04% and 4.75% for the same years, respectively.
(2) Interest rates and amounts include the effects of hedge and risk management
activities associated with the respective asset and liability categories.
(3) Yields are based on amortized cost balances.
40
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
(in millions) 1996 1995
--------------------------------- -------------------------------
Average Yields/ Interest Average Yields/ Interest
balance rates income/ balance rates income/
expense expense
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Federal funds sold and securities purchased
under resale agreements $ 1,596 5.46% $ 87 $ 645 5.83% $ 38
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 3,730 5.95 221 1,604 6.60 105
Securities of U.S. states and political subdivisions 907 8.89 79 124 20.80 9
Mortgage-backed securities:
Federal agencies 20,199 6.98 1,410 13,897 7.27 1,017
Private collateralized mortgage obligations 2,852 6.51 187 1,252 6.39 82
-------- -------- -------- --------
Total mortgage-backed securities 23,051 6.92 1,597 15,149 7.19 1,099
Other securities 1,567 5.03 77 750 12.06 50
-------- -------- -------- --------
Total securities available for sale 29,255 6.76 1,974 17,627 7.48 1,263
Securities held to maturity -- -- -- 7,666 5.40 477
-------- -------- -------- --------
Total securities 29,255 6.76 1,974 25,293 5.40 1,740
Loans held for sale (3) 3,560 9.22 328 2,557 8.88 227
Mortgages held for sale (3) 6,889 7.68 529 4,996 7.86 393
Loans:
Commercial 27,547 9.15 2,520 17,773 9.67 1,718
Real estate 1-4 family first mortgage 15,522 8.64 1,301 11,883 8.51 976
Other real estate mortgage 15,612 9.21 1,438 11,742 9.40 1,104
Real estate construction 2,940 10.25 301 1,833 10.06 184
Consumer:
Real estate 1-4 family junior lien mortgage 8,995 9.11 844 7,512 8.64 678
Credit card 6,505 15.03 979 5,939 15.54 923
Other revolving credit and monthly payment 16,505 12.25 2,022 10,887 13.26 1,444
-------- -------- -------- --------
Total consumer 32,005 12.24 3,845 24,338 13.16 3,045
Lease financing 3,347 8.15 272 2,284 8.51 194
Foreign 950 20.52 195 704 23.01 162
-------- -------- -------- --------
Total loans (4)(5) 97,923 10.08 9,872 70,557 10.47 7,383
Other 1,696 5.51 94 940 5.87 55
-------- -------- -------- --------
Total earning assets $140,919 9.15 12,884 $104,988 9.36 9,836
======== -------- ======== --------
FUNDING SOURCES
Deposits:
Interest-bearing checking $ 6,749 1.38 93 $ 6,423 1.24 80
Market rate and other savings 45,049 2.68 1,207 28,622 2.78 796
Savings certificates 26,853 5.17 1,390 18,889 5.33 1,007
Other time deposits 3,245 5.77 187 2,244 5.81 131
Deposits in foreign offices 719 4.76 34 2,381 5.86 139
-------- -------- -------- --------
Total interest-bearing deposits 82,615 3.52 2,911 58,559 3.68 2,153
Short-term borrowings 10,692 5.25 562 12,682 5.88 746
Long-term debt 18,283 6.24 1,140 14,996 6.53 980
Guaranteed preferred beneficial interests in Company's
subordinated debentures 82 7.81 6 -- -- --
-------- -------- -------- --------
Total interest-bearing liabilities 111,672 4.14 4,619 86,237 4.50 3,879
Portion of noninterest-bearing funding sources 29,247 -- -- 18,751 -- --
-------- -------- -------- --------
Total funding sources $140,919 3.28 4,619 $104,988 3.69 3,879
======== -------- ======== --------
NET INTEREST MARGIN AND NET INTEREST INCOME
ON A TAXABLE-EQUIVALENT BASIS (6) 5.87% $ 8,265 5.67% $ 5,957
===== ======== ===== ========
NONINTEREST-EARNING ASSETS
Cash and due from banks $ 11,442 $ 5,858
Goodwill 6,477 895
Other 11,051 5,273
-------- --------
Total noninterest-earning assets $ 28,970 $ 12,026
======== ========
NONINTEREST-BEARING FUNDING SOURCES
Deposits $ 34,952 $ 19,070
Other liabilities 5,466 3,246
Preferred stockholders' equity 968 942
Common stockholders' equity 16,831 7,519
Noninterest-bearing funding sources used to
fund earning assets (29,247) (18,751)
-------- --------
Net noninterest-bearing funding sources $ 28,970 $ 12,026
======== ========
TOTAL ASSETS $169,889 $117,014
======== ========
<CAPTION>
(in millions) 1994
---------------------------------
Average Yields/ Interest
balance rates income/
expense
<S> <C> <C> <C>
EARNING ASSETS
Federal funds sold and securities purchased
under resale agreements $ 629 4.22% $ 27
Securities available for sale (3):
Securities of U.S. Treasury and federal agencies 1,836 5.84 107
Securities of U.S. states and political subdivisions 123 23.25 29
Mortgage-backed securities:
Federal agencies 11,822 6.63 801
Private collateralized mortgage obligations 1,372 6.16 88
-------- --------
Total mortgage-backed securities 13,194 6.58 889
Other securities 597 13.89 77
-------- --------
Total securities available for sale 15,750 6.88 1,102
Securities held to maturity 10,180 5.39 549
-------- --------
Total securities 25,930 6.37 1,651
Loans held for sale (3) 1,713 7.49 128
Mortgages held for sale (3) 3,764 7.19 271
Loans:
Commercial 15,017 8.64 1,298
Real estate 1-4 family first mortgage 13,522 7.77 1,022
Other real estate mortgage 11,513 8.51 980
Real estate construction 1,553 9.00 140
Consumer:
Real estate 1-4 family junior lien mortgage 6,309 7.77 519
Credit card 4,771 15.14 722
Other revolving credit and monthly payment 8,935 12.27 1,096
-------- --------
Total consumer 20,015 12.18 2,337
Lease financing 1,952 8.32 162
Foreign 555 21.58 120
-------- --------
Total loans (4)(5) 64,127 9.45 6,059
Other 746 6.77 50
-------- --------
Total earning assets $ 96,909 8.42 8,186
======== --------
FUNDING SOURCES
Deposits:
Interest-bearing checking $ 6,801 1.17 80
Market rate and other savings 31,846 2.32 740
Savings certificates 16,824 4.44 748
Other time deposits 1,843 5.01 93
Deposits in foreign offices 1,257 4.62 58
-------- --------
Total interest-bearing deposits 58,571 2.93 1,719
Short-term borrowings 9,075 4.39 399
Long-term debt 10,948 5.73 627
Guaranteed preferred beneficial interests in Company's
subordinated debentures -- -- --
-------- --------
Total interest-bearing liabilities 78,594 3.49 2,745
Portion of noninterest-bearing funding sources 18,315 -- --
-------- --------
Total funding sources $ 96,909 2.82 2,745
======== --------
NET INTEREST MARGIN AND NET INTEREST INCOME
ON A TAXABLE-EQUIVALENT BASIS (6) 5.60% $5,441
====== ========
NONINTEREST-EARNING ASSETS
Cash and due from banks $ 5,559
Goodwill 600
Other 3,853
--------
Total noninterest-earning assets $ 10,012
========
NONINTEREST-BEARING FUNDING SOURCES
Deposits $ 17,723
Other liabilities 2,681
Preferred stockholders' equity 865
Common stockholders' equity 7,058
Noninterest-bearing funding sources used to
fund earning assets (18,315)
--------
Net noninterest-bearing funding sources $ 10,012
========
TOTAL ASSETS $106,921
========
- ---------------------------------------------------------------
</TABLE>
(4) Interest income includes loan fees, net of deferred costs, of approximately
$120 million, $103 million, $86 million, $40 million and $37 million in
1998, 1997, 1996, 1995 and 1994, respectively.
(5) Nonaccrual loans and related income are included in their respective loan
categories.
(6) Includes taxable-equivalent adjustments that primarily relate to income on
certain loans and securities that is exempt from federal and applicable
state income taxes. The federal statutory tax rate was 35% for all years
presented.
41
<PAGE>
NONINTEREST EXPENSE
Table 5 shows the major components of noninterest expense.
TABLE 5: NONINTEREST EXPENSE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(in millions) Year ended December 31, % Change
--------------------------- ------------
1998 1997 1996 1998/ 1997/
1997 1996
<S> <C> <C> <C> <C> <C>
Salaries and benefits $ 4,416 $3,811 $3,624 16% 5%
Equipment 900 739 724 22 2
Net occupancy 764 719 688 6 5
Goodwill 421 433 339 (3) 28
Core deposit intangible:
Nonqualifying (1) 217 240 227 (10) 6
Qualifying 26 33 38 (21) (13)
Net losses on dispositions of
premises and equipment 325 76 45 328 69
Operating losses 152 374 189 (59) 98
Outside professional services 391 262 254 49 3
Contract services 342 271 329 26 (18)
Telecommunications 252 241 234 5 3
Outside data processing 250 217 216 15 --
Advertising and promotion 237 202 234 17 (14)
Postage 228 210 206 9 2
Travel and entertainment 212 188 188 13 --
Stationery and supplies 178 182 192 (2) (5)
Insurance 132 122 90 8 36
Security 84 87 56 (3) 55
All other 1,052 583 851 80 (31)
------- ------ ------
Total $10,579 $8,990 $8,724 18% 3%
======= ====== ====== === ===
- --------------------------------------------------------------------------------
</TABLE>
(1) Amortization of core deposit intangible acquired after February 1992 that
is subtracted from stockholders' equity in computing regulatory capital for
bank holding companies.
A major portion of the increase in salaries and benefits was due to
severance and other employee-related costs related to the Merger. The increase
was also due to an increase in staff levels.
The Company's active full-time equivalent (FTE) staff, including hourly
employees, was 92,178 at December 31, 1998, compared with 88,671 at December 31,
1997.
The increase in equipment expense was primarily due to personal computer
purchases during the fourth quarter, mostly related to the replacement of
personal computers.
The increase in net losses on dispositions of premises and equipment was
due to Merger-related costs associated with the disposition of leased and owned
premises.
Goodwill and CDI amortization resulting from the First Interstate
acquisition were $288 million and $199 million, respectively, for the year ended
December 31, 1998, compared with $292 million and $223 million, respectively,
for the year ended December 31, 1997. The core deposit intangible is amortized
on an accelerated basis based on an estimated useful life of 15 years. The
effect on noninterest expense from the amortization of the nonqualifying core
deposit intangible in 1999, 2000 and 2001 is expected to be $178 million, $162
million and $147 million, respectively. The related effect on income tax expense
is expected to be a benefit of $68 million, $62 million and $56 million in 1999,
2000 and 2001, respectively.
The increase in outside professional services was primarily due to fees for
investment banking and other professional services resulting from the Merger.
A major portion of the increase in the "All Other" category was due to the
accrual of $208 million of irrevocable commitments to the Company's Foundation
in connection with the Merger.
During 1998, the former Norwest and the former Wells Fargo continued with
their enterprise-wide project to prepare the Company's systems for Year 2000
compliance. The Year 2000 issue relates to computer systems that use two digits
rather than four to define the applicable year and whether such systems will
properly process information when the year changes to 2000. "Systems" includes
hardware, networks, system and application software, and commercial "off the
shelf" software, and embedded technology such as properties/date impacted
processors in automated systems such as elevators, telephone systems, security
systems, vault systems, heating and cooling systems and others. Priority is
given to "mission critical" systems. A system is considered "mission critical"
if it is vital to the successful continuation of a core business activity.
The former Norwest's Year 2000 readiness project is divided into four
phases -- Phase I: a comprehensive assessment and inventory of applicable
software, system hardware devices, data and voice communication devices and
embedded technology to determine Year 2000 vulnerability and risk; Phase II:
date detection on systems to determine which systems must be remediated and
which systems are compliant and require testing only, determination of the
resources and costs, and the development of schedules; Phase III: repair,
replacement and/or retirement of systems that are determined not to be Year 2000
compliant, and planning the integration testing for those systems that have
interfaces with other systems both internal and external to the Company, such as
customers and suppliers; and Phase IV: integration testing on applicable systems
to validate that interfaces are Year 2000 compliant and contingency planning.
The former Norwest has substantially completed Phases I, II and III of its Year
2000 project.
The former Wells Fargo uses a four-phase plan for achieving Year 2000
readiness. The Assessment Phase (Phase I) determines which computers, operating
systems, applications and facilities require remediation and prioritizing those
remediation efforts. This has been completed except for the on-going assessment
of new systems. The Renovation Phase (Phase II) corrects or replaces any
non-compliant hardware, software or facilities. This phase has been
substantially completed. All renovated software,
42
<PAGE>
both in-house applications and vendor software, was placed back into production
before the Validation Phase (Phase III). The Validation Phase, which tests
in-house systems, vendor software and service providers, is in process. During
Phase IV, the Implementation Phase, remediated and validated code will be tested
in interfaces with customers, business partners, government institutions and
others.
It is anticipated that the Company will have substantially completed the
unfinished phases discussed in the preceding two paragraphs by June 30, 1999.
The Company's Year 2000 Project Office oversees the Year 2000 efforts of the
Company and all of its subsidiaries. Representatives from other areas of the
Company, including the law department, audit, risk management and corporate
communications, provide support for the Year 2000 project. In addition, as a
financial services organization, the Company is under the supervision of federal
regulatory agencies which have provided guidelines and are performing ongoing
monitoring of the Year 2000 readiness of the Company.
The Company may be affected by the Year 2000 compliance issues of
governmental agencies, businesses and other entities who provide data to, or
receive data from, the Company, and by entities, such as borrowers, vendors,
customers and business partners, whose financial condition or operational
capability is significant to the Company. The Company's Year 2000 project also
includes assessing the Year 2000 readiness of certain customers, borrowers,
vendors, business partners, counterparties and governmental entities and the
testing of major external interfaces with third parties which the Company has
determined are critical. Using a combination of surveys and direct
communication, the Company has evaluated its major credit customers, assessed
their Year 2000 efforts, and incorporated any identified Year 2000 customer
risks into the Company's credit risk analysis processes. In addition to
assessing the readiness of these external parties, the Company is developing
contingency plans which will include plans to recover operations and
alternatives to mitigate the effects of counterparties whose failure to properly
address Year 2000 issues may adversely affect the Company's ability to perform
certain functions. These contingency plans are expected to be substantially
completed by June 30, 1999.
The Company currently estimates that its total cost for the Year 2000
project will approximate $315 million. Through December 31, 1998, the Company
has incurred charges of $202 million related to its Year 2000 project of which
$176 million total expenditures were incurred in 1998. Charges for the former
Norwest include the cost of internal staff redeployed to the Year 2000 project,
as well as external consulting costs and costs of accelerated replacement of
hardware and software due to Year 2000 issues. Charges for the former Wells
Fargo include the cost of external consulting and costs of accelerated
replacement of hardware and software, but do not include the cost of internal
staff redeployed to the Year 2000 project. The Company does not believe that the
redeployment of internal staff for the former Wells Fargo will have a material
impact on the financial condition or results of operations for the Company.
The previous paragraphs contain a number of forward-looking statements.
These statements reflect management's best current estimates, which were based
on numerous assumptions about future events, including the continued
availability of certain resources, representations received from third party
service providers and other third parties, and additional factors. There can be
no guarantee that these estimates, including Year 2000 costs, will be achieved,
and actual results could differ materially from those estimates. A number of
important factors could cause management's estimates and the impact of the Year
2000 issue to differ materially from what is described in the forward-looking
statements contained in the above paragraphs. Those factors include, but are not
limited to, uncertainties in the cost of hardware and software, the availability
and cost of programmers and other systems personnel, inaccurate or incomplete
execution of the phases, ineffective remediation of computer code, and whether
the Company's customers, vendors, competitors and counterparties effectively
address the Year 2000 issue.
If Year 2000 issues are not adequately addressed by the Company and
significant third parties, the Company's business, results of operations and
financial position could be materially adversely affected. Failure of certain
vendors to be Year 2000 compliant could result in disruption of important
services upon which the Company depends, including, but not limited to, such
services as telecommunications, electrical power and data processing. Failure of
the Company's loan customers to properly prepare for the Year 2000 could also
result in increases in problem loans and credit losses in future years.
Notwithstanding the Company's efforts, there can be no assurance that the
Company or significant third party vendors or other significant third parties
will adequately address their Year 2000 issues. The Company is continuing to
assess the Year 2000 readiness of third parties but does not know at this time
whether the failure of third parties to be Year 2000 compliant will have a
material effect on the Company's results of operations, liquidity and financial
condition.
The forward-looking statements made in the foregoing Year 2000 discussion
speak only as of the date on which such statements are made, and the Company
undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events.
43
<PAGE>
The Year 2000 disclosures contained in this Annual Report are designated as
Year 2000 Readiness Disclosures related to the Year 2000 Information and
Readiness Disclosure Act.
EARNINGS/RATIOS EXCLUDING GOODWILL AND NONQUALIFYING CDI
Table 6 reconciles reported earnings to net income excluding goodwill and
nonqualifying core deposit intangible amortization ("cash" or "tangible") for
the year ended December 31, 1998. Table 7 presents the calculation of the ROA,
ROE and efficiency ratios excluding goodwill and nonqualifying core deposit
intangible amortization and balances for the year ended December 31, 1998. These
calculations were specifically formulated by the Company and may not be
comparable to similarly titled measures reported by other companies. Also,
"cash" or "tangible" earnings are not entirely available for use by management.
See the Consolidated Statement of Cash Flows and Note 3 to Financial Statements
for other information regarding funds available for use by management.
TABLE 6: EARNINGS EXCLUDING GOODWILL AND NONQUALIFYING CDI
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(in millions, except
per share amounts) Year ended December 31, 1998
--------------------------------------------------
Reported Amortization "Cash"
earnings --------------------------- earnings
Goodwill Nonqualifying
core deposit
intangible
<S> <C> <C> <C> <C>
Income before income
tax expense $3,293 $421 $217 $3,931
Income tax expense 1,343 -- 88 1,431
------ ---- ---- ------
Net income 1,950 421 129 2,500
Preferred stock
dividends 35 -- -- 35
------ ---- ---- ------
Net income applicable
to common stock $1,915 $421 $129 $2,465
====== ==== ==== ======
Earnings per
common share $ 1.18 $.26 $.08 $ 1.52
====== ==== ==== ======
Diluted earnings per
common share $ 1.17 $.25 $.08 $ 1.50
====== ==== ==== ======
- -------------------------------------------------------------------------------
</TABLE>
TABLE 7: RATIOS EXCLUDING GOODWILL AND NONQUALIFYING CDI
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(in millions) Year ended December 31, 1998
---------------------------------------
ROA: A/(C-E) = 1.39%
ROE: B/(D-E) = 23.15%
Efficiency: (F-G)/H = 64.31%
---------------------------------------
<S> <C> <C>
Net income $ 2,500 (A)
Net income applicable to common stock 2,465 (B)
Average total assets 188,355 (C)
Average common stockholders' equity 19,417 (D)
Average goodwill ($7,865) and after-tax nonqualifying
core deposit intangible ($906) 8,771 (E)
Noninterest expense 10,579 (F)
Amortization expense for goodwill and nonqualifying
core deposit intangible 638 (G)
Net interest income plus noninterest income 15,417 (H)
- -------------------------------------------------------------------------------
</TABLE>
BALANCE SHEET ANALYSIS
A comparison between the year-end 1998 and 1997 balance sheets is presented
below.
SECURITIES AVAILABLE FOR SALE
Total securities available for sale averaged $28.2 billion in 1998, an 8%
decrease from $30.7 billion in 1997. Total securities available for sale were
$32.0 billion at December 31, 1998, a 15% increase from $27.9 billion at
December 31, 1997.
The securities available for sale portfolio includes both debt and
marketable equity securities. At December 31, 1998, the securities available for
sale portfolio had an unrealized net gain of $830 million, comprised of
unrealized gross gains of $919 million and unrealized gross losses of $89
million. At December 31, 1997, the securities available for sale portfolio had
an unrealized net gain of $740 million, comprised of unrealized gross gains of
$787 million and unrealized gross losses of $47 million. The unrealized net gain
or loss on securities available for sale is reported on an after-tax basis as a
valuation allowance that is a component of cumulative other comprehensive
income. At December 31, 1998, the valuation allowance amounted to an unrealized
net gain of $477 million, compared with an unrealized net gain of $474 million
at December 31, 1997.
The unrealized net gain in the debt securities portion of the securities
available for sale portfolio at December 31, 1998 was primarily attributable to
mortgage-backed securities, reflecting a decrease in interest rates since the
time of purchase. The Company may decide to
44
<PAGE>
sell certain of the securities available for sale to manage the level of earning
assets (for example, to offset loan growth that may exceed expected maturities
and prepayments of securities). (See Note 4 to Financial Statements for
securities available for sale by security type.)
At December 31, 1998, mortgage-backed securities, including collateralized
mortgage obligations (CMOs), represented $24.2 billion, or 76% of the Company's
securities available for sale portfolio. The CMO securities held by the Company
(including the private issues) are primarily shorter-maturity class bonds that
were structured to have more predictable cash flows by being less sensitive to
prepayments during periods of changing interest rates. As an indication of
interest rate risk, the Company has estimated the effect of a 200 basis point
increase in interest rates on the value of the mortgage-backed securities and
the corresponding expected remaining maturities. Based on this rate scenario,
mortgage-backed securities would decrease in fair value from $24.2 billion to
$22.7 billion and the expected remaining maturity of these securities would
increase from 4 years and 6 months to 6 years and 5 months.
LOAN PORTFOLIO
A comparative schedule of average loan balances is presented in Table 4;
year-end balances are presented in Note 5 to Financial Statements.
Loans averaged $106.2 billion in 1998, compared with $104.1 billion in
1997. Total loans at December 31, 1998 were $108.0 billion, compared with $106.3
billion at year-end 1997. The Company's total unfunded loan commitments
increased to $71.5 billion at December 31, 1998, from $66.5 billion at December
31, 1997.
Commercial loans grew 10.6% to $35.5 billion at year-end 1998, from $32.1
billion at December 31, 1997. Total unfunded commercial loan commitments were
$34.9 billion at December 31, 1998 compared with $33.7 billion at December 31,
1997.
NONACCRUAL AND RESTRUCTURED LOANS AND OTHER ASSETS
Table 8 presents comparative data for nonaccrual and restructured loans and
other assets. Management's classification of a loan as nonaccrual or
restructured does not necessarily indicate that the principal of the loan is
uncollectible in whole or in part. Table 8 excludes loans that are contractually
past due 90 days or more as to interest or principal, but are both well-secured
and in the process of collection or are real estate 1-4 family first mortgage
loans or consumer loans that are exempt under regulatory rules from being
classified as nonaccrual. This information is presented in Table 9.
Notwithstanding, real estate 1-4 family loans (first and junior liens) are
placed on nonaccrual within 120 days of becoming past due and are shown in the
table below. (Note 1 to Financial Statements describes the Company's accounting
policy relating to nonaccrual and restructured loans.)
TABLE 8: NONACCRUAL AND RESTRUCTURED LOANS AND OTHER ASSETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(in millions)
December 31,
----------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Nonaccrual loans (1)(2) $709 $706 $ 871 $705 $ 695
Restructured loans (3) 1 9 10 16 17
---- ---- ------ ---- ------
Nonaccrual and restructured loans 710 715 881 721 712
As a percentage of total loans .7% .7% .8% 1.0% 1.1%
Other real estate (ORE) 173 264 308 244 306
Real estate investments(4) 1 4 4 13 18
---- ---- ------ ---- ------
Total nonaccrual and restructured
loans and other assets $884 $983 $1,193 $978 $1,036
==== ==== ====== ==== ======
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes commercial agricultural loans of $32 million, $24 million, $25
million, $13 million and $4 million and agricultural loans secured by real
estate of $16 million, $18 million, $13 million, $5 million and $9 million
at December 31, 1998, 1997, 1996, 1995 and 1994, respectively.
(2) Of the total nonaccrual loans, $388 million, $411 million, $587 million and
$508 million at December 31, 1998, 1997, 1996 and 1995, respectively, were
considered impaired under FAS 114 (Accounting by Creditors for Impairment
of a Loan).
(3) In addition to originated loans that were subsequently restructured, there
were loans of $23 million, $23 million, $50 million and $50 million at
December 31, 1998, 1997, 1996 and 1995, respectively, that were purchased
at a steep discount whose contractual terms were modified after
acquisition. The modified terms did not affect the book balance nor the
yields expected at the date of purchase. Of the total restructured loans
and loans purchased at a steep discount, $23 million, $23 million, $50
million and $50 million were considered impaired under FAS 114 at December
31, 1998, 1997, 1996 and 1995, respectively.
(4) Represents the amount of real estate investments (contingent interest loans
accounted for as investments) that would be classified as nonaccrual if
such assets were loans. Real estate investments totaled $128 million, $172
million, $154 million, $96 million and $55 million at December 31, 1998,
1997, 1996, 1995 and 1994, respectively.
45
<PAGE>
The Company anticipates normal influxes of nonaccrual loans as it further
increases its lending activity as well as resolutions of loans in the nonaccrual
portfolio. The performance of any individual loan can be affected by external
factors, such as the interest rate environment or factors particular to a
borrower such as actions taken by a borrower's management. In addition, from
time to time, the Company purchases loans from other financial institutions that
may be classified as nonaccrual based on its policies.
The Company generally identifies loans to be evaluated for impairment under
FAS 114, Accounting by Creditors for Impairment of a Loan, when such loans are
on nonaccrual or have been restructured. However, not all nonaccrual loans are
impaired. Generally, a loan is placed on nonaccrual status upon becoming 90 days
past due as to interest or principal (unless both well-secured and in the
process of collection), when the full timely collection of interest or principal
becomes uncertain or when a portion of the principal balance has been charged
off. Real estate 1-4 family loans (both first liens and junior liens) are placed
on nonaccrual status within 120 days of becoming past due as to interest or
principal, regardless of security. In contrast, under FAS 114, loans are
considered impaired when it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the loan
agreement, including scheduled interest payments. For a loan that has been
restructured, the contractual terms of the loan agreement refer to the
contractual terms specified by the original loan agreement, not the contractual
terms specified by the restructuring agreement. Not all impaired loans are
necessarily placed on nonaccrual status. That is, restructured loans performing
under restructured terms beyond a specified performance period are classified as
accruing but may still be deemed impaired under FAS 114.
For loans covered under FAS 114, the Company makes an assessment for
impairment when and while such loans are on nonaccrual, or the loan has been
restructured. When a loan with unique risk characteristics has been identified
as being impaired, the Company will measure the amount of impairment using
discounted cash flows, except when the sole (remaining) source of repayment for
the loan is the operation or liquidation of the underlying collateral. In such
cases, the current fair value of the collateral, reduced by costs to sell, will
be used in place of discounted cash flows. Additionally, some impaired loans
with commitments of less than $1 million are aggregated for the purpose of
measuring impairment using historical loss factors as a means of measurement.
If the measurement of the impaired loan is less than the recorded
investment in the loan (including accrued interest, net deferred loan fees or
costs and unamortized premium or discount), an impairment is recognized by
creating or adjusting an existing allocation of the allowance for loan losses.
FAS 114 does not change the timing of charge-offs of loans to reflect the amount
ultimately expected to be collected.
If interest due on the book balances of all nonaccrual and restructured
loans (including loans no longer on nonaccrual or restructured at year end) had
been accrued under their original terms, $68 million of interest would have been
recorded in 1998, compared with $26 million actually recorded.
Other real estate (ORE) at December 31, 1998 decreased to $173 million from
$264 million at December 31, 1997. A majority of ORE at December 31, 1998 has
been in the portfolio three years or less, with land and agricultural properties
representing a significant portion of the amount greater than three years old.
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
Table 9 shows loans contractually past due 90 days or more as to interest
or principal, but not included in the nonaccrual or restructured categories. All
loans in this category are both well-secured and in the process of collection or
are real estate 1-4 family first mortgage loans or consumer loans that are
exempt under regulatory rules from being classified as nonaccrual because they
are automatically charged off after being past due for a prescribed period
(generally, within 180 days). Notwithstanding, real estate 1-4 family loans
(first liens and junior liens) are placed on nonaccrual within 120 days of
becoming past due and such nonaccrual loans are excluded from Table 9.
TABLE 9: LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(in millions) December 31,
---------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Commercial $ 9 $ 11 $ 69 $ 13 $ 8
Real estate
1-4 family
first mortgage 17 37 43 9 18
Other real estate
mortgage 41 35 78 32 52
Real estate
construction 6 13 10 3 1
Consumer:
Real estate
1-4 family junior
lien mortgage 32 42 23 4 4
Credit card 133 154 140 113 70
Other revolving
credit and
monthly
payment 104 105 81 62 23
---- ---- ---- ---- ----
Total consumer 269 301 244 179 97
---- ---- ---- ---- ----
Total $342 $397 $444 $236 $176
==== ==== ==== ==== ====
- ---------------------------------------------------------------------
</TABLE>
46
<PAGE>
ALLOWANCE FOR LOAN LOSSES
An analysis of the changes in the allowance for loan losses, including
charge-offs and recoveries by loan category, is presented in Note 5 to Financial
Statements. At December 31, 1998, the allowance for loan losses was $3,134
million, or 2.90% of total loans, compared with $3,062 million, or 2.88%, at
December 31, 1997 and $3,059 million, or 2.89%, at December 31, 1996. The
provision for loan losses totaled $1,545 million in 1998, $1,140 million in 1997
and $500 million in 1996. Of these amounts, the former Wells Fargo provided $670
million for loan losses in 1998, $615 million in 1997 and $105 million in 1996.
This trend of increasing provision expense at the former Wells Fargo followed a
period from 1993 to 1995 during which the Company had reduced its provision as
its loan portfolio (particularly in California) had made a gradual recovery in
credit quality following the recessionary economic environment of 1991 and 1992.
Throughout this period the Company considered its allowance for loan losses
adequate in relation to its existing loan portfolio. The provision for loan
losses in 1998 approximated net charge-offs, and the Company anticipates that it
will continue to make a provision in 1999 which is similarly close to the level
of actual net losses. Net charge-offs in 1998 were $1,617 million, or 1.52% of
average total loans, compared with $1,305 million, or 1.25%, in 1997 and $1,022
million, or 1.04%, in 1996. Loan loss recoveries were $427 million in 1998,
compared with $426 million in 1997 and $349 million in 1996.
The largest category of net charge-offs in 1998 was other revolving credit
and monthly payment loans, comprising 52% of the total net charge-offs. This
product category includes approximately $300 million of losses in Island Finance
reflecting a fourth quarter review of its loan portfolio. Results of the
portfolio review revealed the recent deterioration of economic conditions in
Puerto Rico. These problems were compounded by hurricane damage in the latter
part of 1998. In 1997 and 1996 credit card loans comprised the largest category
of net charge-offs, accounting for approximately 40% of total net charge-offs.
During 1998, credit card gross charge-offs due to bankruptcies were $214
million, or 40%, of total credit card charge-offs, compared with $244 million,
or 42%, and $215 million, or 44%, in 1997 and 1996, respectively. In addition,
credit card loans 30 to 89 days past due and still accruing totaled $154 million
at December 31, 1998, compared with $200 million and $228 million at December
31, 1997 and 1996, respectively.
Any loan that is past due as to principal or interest and that is not both
well-secured and in the process of collection is generally charged off (to the
extent that it exceeds the fair value of any related collateral) after a
predetermined period of time that is based on loan category. Additionally, loans
are charged off when classified as a loss by either internal loan examiners or
regulatory examiners.
The Company considers the allowance for loan losses of $3,134 million
adequate to cover losses inherent in loans, commitments to extend credit and
standby letters of credit at December 31, 1998. However, no assurance can be
given that the Company will not, in any particular period, sustain loan losses
that are sizable in relation to the amount reserved, or that subsequent
evaluations of the loan portfolio, in light of the factors then prevailing,
including economic conditions and the Company's ongoing examination process and
that of its regulators, will not require significant increases in the allowance
for loan losses. For discussion of the process by which the Company determines
the adequacy of the allowance for loan losses, see Note 5 to Financial
Statements.
DEPOSITS
Comparative detail of average deposit balances is presented in Table 4.
Average core deposits increased 3% in 1998 compared with 1997. Average core
deposits funded 66% of the Company's average total assets in 1998 and 1997.
Year-end deposit balances are presented in Table 10.
TABLE 10: DEPOSITS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(in millions) December 31, %
--------------------- Change
1998 1997
<S> <C> <C> <C>
Noninterest-bearing $ 46,732 $ 40,206 16%
Interest-bearing checking 2,402 2,759 (13)
Market rate and
other savings 55,658 51,038 9
Savings certificates 27,497 28,324 (3)
-------- --------
Core deposits 132,289 122,327 8
Other time deposits 3,753 3,927 (4)
Deposits in foreign offices 746 1,402 (47)
-------- --------
Total deposits $136,788 $127,656 7%
======== ======== ===
- ---------------------------------------------------------------------
</TABLE>
MARKET RISKS
Market risk is the exposure to loss resulting from changes in interest
rates, foreign currency exchange rates, commodity prices and equity prices. The
primary market risk to which the Company is exposed is interest rate risk. The
majority of the Company's interest rate risk arises from the instruments,
positions and transactions entered into for purposes other than trading. They
include loans, securities available for sale, deposit liabilities, short-term
borrowings, long-term debt and derivative financial instruments used for
asset/liability management. Interest rate risk occurs when assets and
liabilities reprice at different times as interest rates change. For example, if
fixed-rate assets are funded with floating-rate debt, the spread between asset
and liability
47
<PAGE>
rates will decline or turn negative if rates increase. The Company refers to
this type of risk as "term structure risk." There is, however, another source of
interest rate risk which results from changing spreads between asset and
liability rates. The Company calls this type of risk "basis risk;" it is a
significant source of interest rate risk for the Company and is more difficult
to quantify and manage than term structure risk. Two primary components of basis
risk for the Company are the spread between Prime-based loans and market rate
account (MRA) savings deposits and the rate paid on savings and interest-bearing
checking accounts as compared to LIBOR-based loans.
Interest rate risk is managed within an overall asset/liability framework
for the Company. The principal objectives of asset/liability management are to
manage the sensitivity of net interest spreads and net income to potential
changes in interest rates and to enhance profitability in ways that promise
sufficient reward for understood and controlled risk. Funding positions are kept
within predetermined limits designed to ensure that risk-taking is not excessive
and that liquidity is properly managed. The Company employs a sensitivity
analysis in the form of a net interest income simulation to help characterize
the market risk arising from changes in interest rates in the other-than-trading
portfolio.
The Company's net interest income simulation includes all other-than-
trading financial assets, financial liabilities, derivative financial
instruments and leases where the Company is the lessor. It captures the dynamic
nature of the balance sheet by anticipating probable balance sheet and off-
balance sheet strategies and volumes under different interest rate scenarios
over the course of a one-year period. This simulation measures both the term
structure risk and the basis risk in the Company's positions. The simulation
also captures the option characteristics of products, such as caps and floors on
floating rate loans, the right to prepay mortgage loans without penalty and the
ability of customers to withdraw deposits on demand. These options are modeled
directly in the simulation either through the use of option pricing models, in
the case of caps and floors on loans, or through statistical analysis of
historical customer behavior, in the case of mortgage loan prepayments or non-
maturity deposits.
The simulation model is used to measure the impact on after-tax net income,
relative to a base case scenario, of rates increasing or decreasing 100 basis
points over the next 12 months. The simulation showing the largest drop in net
income relative to the base case scenario over the next twelve months is a 100
basis point increase in rates which will result in a decrease in net income of
$26 million. In the simulation which was run at December 31, 1997, the largest
drop in net income relative to the base case scenario over the next twelve
months was a 100 basis point decrease in rates which would result in a decrease
in net income of $17 million.
The Company uses interest rate derivative financial instruments as an
asset/liability management tool to hedge mismatches in interest rate exposures
indicated by the net interest income simulation described above. They are used
to reduce the Company's exposure to interest rate fluctuations and provide more
stable spreads between loan yields and the rates on their funding sources. For
example, the Company uses interest rate futures to shorten the rate maturity of
MRA savings deposits to better match the maturity of Prime-based loans. The
Company also purchases interest rate floors to protect against the loss in
interest income on LIBOR-based loans during a declining interest rate
environment. Additionally, receive-fixed rate swaps are used to convert
floating-rate loans into fixed rates to better match the liabilities that fund
the loans. The Company also uses derivatives including floors, futures contracts
and options on futures contracts to hedge the Company's mortgage servicing
rights.
Looking toward managing interest rate risk in 1999, the Company will
continue to face term structure risk and basis risk and may be confronted with
several risk scenarios. If interest rates rise, net income may actually increase
if deposit rates lag increases in market rates (e.g., Prime, LIBOR). The Company
could, however, experience pressure on net income in this scenario if deposits
are aggressively repriced as market rates increase.
A declining interest rate environment might result in a decrease in loan
rates, while deposit rates remain relatively stable, as they did between 1994
and 1996. This rate scenario could also create significant risk to net income.
The Company has partially hedged against this risk with interest rate floors,
receive-fixed rate swap contracts and fixed-rate mortgage backed securities. As
mentioned above, the Company has also partially hedged the mortgage servicing
rights against this rate scenario using primarily floors, futures contracts and
options on futures contracts. Based on its current and projected balance sheet,
the Company does not expect that a change in interest rates would affect its
liquidity position.
The Company considers the fair values and the potential near term losses to
future earnings related to its customer accommodation derivative financial
instruments to be immaterial.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses interest rate derivative financial instruments as
asset/liability management tools to hedge the Company's exposure to interest
rate fluctuations. The Company also offers contracts to its customers, but
offsets such contracts by purchasing other financial contracts or uses the
contracts for asset/liability management. For further discussion of derivative
financial instruments, refer to Note 23 to Financial Statements.
48
<PAGE>
LIQUIDITY AND CAPITAL MANAGEMENT
The Company manages its liquidity and capital at both the parent and
subsidiary levels.
In addition to the immediately liquid resources of cash and due from banks
and federal funds sold and securities purchased under resale agreements, asset
liquidity is provided by the Company's securities available for sale portfolio.
The weighted average expected remaining maturity of the debt securities within
this portfolio was 4 years and 9 months at December 31, 1998. Of the $31.2
billion debt securities in this portfolio at December 31, 1998, $8.2 billion, or
26%, is expected to mature or be prepaid in 1999 and an additional $4.6 billion,
or 16%, is expected to mature or be prepaid in 2000. Asset liquidity is further
enhanced by the Company's ability to securitize assets such as mortgage loans.
Core deposits have historically provided the Company with a sizeable source
of relatively stable and low-cost funds. The Company's average core deposits and
stockholders' equity funded 76% and 77% of its average total assets in 1998 and
1997, respectively.
The remaining funding of average total assets was mostly provided by
long-term debt, deposits in foreign offices, short-term borrowings (federal
funds purchased and securities sold under repurchase agreements, commercial
paper and other short-term borrowings) and trust preferred securities.
Short-term borrowings averaged $14.5 billion and $11.4 billion in 1998 and 1997,
respectively. Long-term debt averaged $17.4 billion and $17.1 billion in 1998
and 1997, respectively. Trust preferred securities averaged $1.0 billion and
$1.3 billion in 1998 and 1997, respectively.
Liquidity for the Parent is provided by dividend and interest income from
its subsidiaries, potential disposition of readily marketable assets and through
its ability to raise funds in a variety of domestic and international money and
capital markets. In 1996, the Company filed a universal registration statement
with the Securities and Exchange Commission (SEC) that allows for the issuance
of $5 billion of domestic debt and equity securities, excluding common stock. In
1996, the Parent established a $2 billion Euro Medium-Term Note program (Euro
MTN). The proceeds from the sale of any securities are expected to be used for
general corporate purposes. As of December 31, 1998, the Company had issued $1.7
billion of domestic securities under the universal registration statement and
$300 million under the Euro MTN program.
To accommodate future growth and current business needs, the Company has a
capital expenditure program. Capital expenditures for 1999 are estimated at
about $470 million for equipment for stores, relocation and remodeling of
Company facilities and routine replacement of furniture and equipment. The
Company will fund these expenditures from various sources, including retained
earnings of the Company and borrowings of various maturities.
The Company and each of the subsidiary banks are subject to various
regulatory capital adequacy requirements administered by the Federal Reserve
Board and the Office of the Comptroller of the Currency. RBC guidelines
establish a risk-adjusted ratio relating capital to different categories of
assets and off-balance sheet exposures. (See Note 22 to Financial Statements for
additional information.)
Since 1986, the Company has repurchased common stock in the open market in
a systematic pattern to meet the common stock issuance requirements of the
Company's benefit plans and other common stock issuance requirements, including
acquisitions accounted for as purchases. As of December 31, 1998, the total
common stock purchase authority was approximately 3.1 million shares. In January
of 1999, the Board of Directors authorized the repurchase of up to 8 million
additional shares of the Company's outstanding common stock.
COMPARISON OF 1997 TO 1996
On April 1, 1996, the Company completed its acquisition of First
Interstate, which was accounted for as a purchase business combination. As a
result, the financial information presented in this Annual Report reflects the
effects of the acquisition subsequent to the consummation date (i.e., the year
1997 reflects twelve months of combined operations, compared with nine months
for the year 1996). Since the Company's results of operations subsequent to
April 1, 1996 reflect amounts recognized from the combined operations, they
cannot be divided between or attributed directly to either of the two former
entities nor can they be directly compared with prior periods.
Net interest income increased $426 million in 1997 compared to 1996. The
increase in net interest income was due to an increase in earning assets.
Net income in 1997 was $2,499 million, compared with $2,228 million in
1996, an increase of 12%. Diluted earnings per common share were $1.48 in 1997,
compared with $1.36 in 1996, an increase of 9%. Return on average assets (ROA)
was 1.37% and return on average common equity (ROE) was 12.81% in 1997, compared
with 1.31% and 12.73%, respectively, in 1996.
49
<PAGE>
Diluted earnings before the amortization of goodwill and nonqualifying core
deposit intangible (CDI) ("cash" or "tangible" earnings) were $1.83 per share in
1997, compared with $1.67 in 1996. On the same basis, ROA was 1.78% and ROE was
30.49% in 1997, compared with 1.66% and 28.55%, respectively, in 1996.
Net interest income on a taxable-equivalent basis was $8,705 million in
1997, compared with $8,265 million in 1996. The Company's net interest margin
was 5.86% for 1997, compared with 5.87% in 1996.
Noninterest income in 1997 was $5,675 million, compared with $4,769 million
in 1996, an increase of 19%. The increases in noninterest income were due to
increases in fee-based revenues, including trust and investment fees, credit
card fees, other fees and commissions and increased earnings for Mortgage
Banking. The increases for Mortgage Banking were principally due to increases in
mortgage loan funding and the servicing portfolio. These increases were
partially offset by higher levels of amortization in 1997 compared to 1996,
which reflected increased balances of capitalized servicing associated with a
larger servicing portfolio and increased assumed prepayments due to a lower
interest rate environment.
Noninterest expense in 1997 was $8,990 million, compared with $8,724
million in 1996. The largest of the increases were in salaries and operating
losses. The increase in salaries was due to increased staff levels due to
acquisitions. The increase in operating losses was predominantly a result of
back-office problems which arose subsequent to certain systems conversions and
other changes to operating processes that were a part of the First Interstate
integration.
There was a provision for loan losses of $1,140 million in 1997, compared
with $500 million in 1996. Of these amounts, the former Wells Fargo provided
$615 million for loan losses in 1997 and $105 million in 1996. Throughout this
period the Company considered its allowance for loan losses adequate in relation
to its existing loan portfolio, which had gradually improved in credit quality
following the economic environment of 1991 and 1992. Net charge-offs in 1997
were $1,305 million, or 1.25% of average total loans, compared with $1,022
million, or 1.04%, in 1996. The allowance for loan losses was 2.88% of total
loans at December 31, 1997, compared with 2.89% at December 31, 1996.
Total nonaccrual and restructured loans were $715 million, or .7% of total
loans, at December 31, 1997, compared with $881 million, or .8% of total loans,
at December 31, 1996. ORE was $264 million at December 31, 1997, compared with
$308 million at December 31, 1996.
ADDITIONAL INFORMATION
Common stock of the Company is traded on the New York Stock Exchange and
the Chicago Stock Exchange. The high, low and end-of-period annual and quarterly
closing prices of the Company's common stock as reported on the New York Stock
Exchange Composite Transaction Reporting System are presented in the graphs. The
number of holders of record of the Company's common stock was 88,275 as of
January 31, 1999.
PRICE RANGE OF COMMON STOCK -- ANNUAL ($)
[BAR GRAPH]
PRICE RANGE OF COMMON STOCK -- QUARTER ($)
[BAR GRAPH]
50
<PAGE>
WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(in millions, except per share amounts) Year ended December 31,
---------------------------------------------
1998 1997 1996
<S> <C> <C> <C>
INTEREST INCOME
Securities available for sale $ 1,844 $ 2,063 $ 1,950
Mortgages held for sale 898 490 529
Loans held for sale 371 312 328
Loans 10,685 10,539 9,854
Other interest income 257 198 180
-------- -------- --------
Total interest income 14,055 13,602 12,841
-------- -------- --------
INTEREST EXPENSE
Deposits 3,111 3,150 2,911
Short-term borrowings 777 610 562
Long-term debt 1,097 1,093 1,140
Guaranteed preferred beneficial interests
in Company's subordinated debentures 80 101 6
-------- -------- --------
Total interest expense 5,065 4,954 4,619
-------- -------- --------
NET INTEREST INCOME 8,990 8,648 8,222
Provision for loan losses 1,545 1,140 500
-------- -------- --------
Net interest income after provision for loan losses 7,445 7,508 7,722
-------- -------- --------
NONINTEREST INCOME
Service charges on deposit accounts 1,357 1,244 1,198
Trust and investment fees and commissions 1,068 954 775
Credit card fee revenue 520 448 350
Other fees and commissions 946 826 689
Mortgage banking 1,106 927 844
Insurance 348 336 280
Net venture capital gains 113 191 256
Net gains on securities available for sale 169 99 12
Other 800 650 365
-------- -------- --------
Total noninterest income 6,427 5,675 4,769
-------- -------- --------
NONINTEREST EXPENSE
Salaries and benefits 4,416 3,811 3,624
Equipment 900 739 724
Net occupancy 764 719 688
Goodwill 421 433 339
Core deposit intangible 243 273 265
Net losses on dispositions of premises and equipment 325 76 45
Operating losses 152 374 189
Other 3,358 2,565 2,850
-------- -------- --------
Total noninterest expense 10,579 8,990 8,724
-------- -------- --------
INCOME BEFORE INCOME TAX EXPENSE 3,293 4,193 3,767
Income tax expense 1,343 1,694 1,539
-------- -------- --------
NET INCOME $ 1,950 $ 2,499 $ 2,228
======== ======== ========
NET INCOME APPLICABLE TO COMMON STOCK $ 1,915 $ 2,456 $ 2,143
======== ======== ========
EARNINGS PER COMMON SHARE $ 1.18 $ 1.50 $ 1.38
======== ======== ========
DILUTED EARNINGS PER COMMON SHARE $ 1.17 $ 1.48 $ 1.36
======== ======== ========
DIVIDENDS DECLARED PER COMMON SHARE $ .70 $ .615 $ .525
======== ======== ========
Average common shares outstanding 1,621.5 1,634.6 1,553.3
======== ======== ========
Diluted average common shares outstanding 1,641.8 1,657.8 1,570.5
======== ======== ========
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
51
<PAGE>
WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(in millions, except shares) December 31,
-----------------------
1998 1997
<S> <C> <C>
ASSETS
Cash and due from banks $ 12,731 $ 13,081
Federal funds sold and securities
purchased under resale agreements 1,517 1,049
Securities available for sale 31,997 27,872
Mortgages held for sale 19,770 9,706
Loans held for sale 5,322 4,494
Loans 107,994 106,311
Allowance for loan losses 3,134 3,062
-------- --------
Net loans 104,860 103,249
-------- --------
Mortgage servicing rights 3,080 3,048
Premises and equipment, net 3,130 3,311
Core deposit intangible 1,510 1,737
Goodwill 7,664 8,062
Interest receivable and other assets 10,894 10,076
-------- --------
Total assets $202,475 $185,685
======== ========
LIABILITIES
Noninterest-bearing deposits $ 46,732 $ 40,206
Interest-bearing deposits 90,056 87,450
-------- --------
Total deposits 136,788 127,656
Short-term borrowings 15,897 13,381
Accrued expenses and other liabilities 8,537 6,236
Long-term debt 19,709 17,335
Guaranteed preferred beneficial interests
in Company's subordinated debentures 785 1,299
STOCKHOLDERS' EQUITY
Preferred stock 547 543
Unearned ESOP shares (84) (80)
-------- --------
Total preferred stock 463 463
Common stock-$1 2/3 par value, authorized 4,000,000,000 shares;
issued 1,661,392,590 shares and 1,630,640,939 shares 2,769 2,718
Additional paid-in capital 8,673 8,126
Retained earnings 9,045 8,292
Cumulative other comprehensive income 463 464
Notes receivable from ESOP (3) (10)
Treasury stock -- 17,334,787 shares and 10,493,685 shares (651) (275)
-------- --------
Total stockholders' equity 20,759 19,778
-------- --------
Total liabilities and stockholders' equity $202,475 $185,685
======== ========
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
52
<PAGE>
WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE
INCOME
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
(in millions, except shares)
Unearned Additional
Number Preferred ESOP Common paid-in
of shares stock shares stock capital
<S> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1995 $ 830 $(39) $1,381 $ 1,321
----- ---- ------ -------
Comprehensive income
Net income-1996
Other comprehensive income,
net of tax:
Translation adjustments
Unrealized gains (losses) on securities
available for sale arising
during the year
Reclassification adjustment for (gains)
losses on securities available for
sale included in net income
Total comprehensive income
Common stock issued 15,490,268 13 164
Preferred stock issued for acquisitions 1,750,000 350 10
Common stock issued for acquisitions 560,380,462 895 10,580
Preferred stock issued, net of issuance costs 4,000,000 200 (3)
Preferred stock repurchased 1,127,125 (552)
Common stock repurchased 101,936,842 (140) (2,018)
Preferred stock issued to ESOP 59,000 59 (61) 2
Preferred stock released to ESOP 39 (1)
Preferred stock (37,777) converted
to common shares 1,970,310 (37) 4
Preferred stock dividends
Common stock dividends
Fair value adjustment related to
acquiree's options 111
Cash payments received on notes
receivable from ESOP
----- ---- ------ -------
Net change 20 (22) 768 8,849
----- ---- ------ -------
BALANCE DECEMBER 31, 1996 850 (61) 2,149 10,170
----- ---- ------ -------
Comprehensive income
Net income-1997
Other comprehensive income,
net of tax:
Translation adjustments
Unrealized gains (losses) on securities
available for sale arising
during the year
Reclassification adjustment for (gains)
losses on securities available for
sale included in net income
Total comprehensive income
Common stock issued 18,793,327 10 155
Common stock issued for acquisitions 23,835,535 21 20
Preferred stock repurchased 1,100,000 (325)
Common stock repurchased 74,627,681 (97) (1,591)
Preferred stock issued to ESOP 51,700 52 (54) 2
Preferred stock released to ESOP 35 (1)
Preferred stock (34,074) converted
to common shares 1,212,871 (34) 6
Preferred stock dividends
Common stock dividends
Cash payments received on notes
receivable from ESOP
Stock split 635 (635)
----- ---- ------ -------
Net change (307) (19) 569 (2,044)
----- ---- ------ -------
BALANCE DECEMBER 31, 1997 543 (80) 2,718 8,126
----- ---- ------ -------
Comprehensive income
Net income-1998
Other comprehensive income,
net of tax:
Translation adjustments
Unrealized gains (losses) on securities
available for sale arising
during the year
Reclassification adjustment for (gains)
losses on securities available for
sale included in net income
Total comprehensive income
Common stock issued 39,048,384 49 910
Common stock issued for acquisitions 16,743,233 24 38
Common stock repurchased 32,676,277 (22) (407)
Preferred stock issued to ESOP 35 (37) 2
Preferred stock released to ESOP 33 (1)
Preferred stock (31,043) converted
to common shares 799,216 (31) 3
Preferred stock dividends
Common stock dividends
Cash payments received on notes
receivable from ESOP 2
Rabbi trust asset classified as treasury stock
----- ---- ------ -------
Net change 4 (4) 51 547
----- ---- ------ -------
BALANCE DECEMBER 31, 1998 $ 547 $(84) $2,769 $ 8,673
===== ==== ====== =======
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
(in millions, except shares) Notes Cumulative Total
receivable other stock-
Retained from Treasury comprehensive holders'
earnings ESOP stock income equity
<S> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1995 $5,542 $(13) $(126) $ 343 $ 9,239
------ ---- ----- ----- -------
Comprehensive income
Net income-1996 2,228 2,228
Other comprehensive income,
net of tax:
Translation adjustments (1) (1)
Unrealized gains (losses) on securities
available for sale arising
during the year (19) (19)
Reclassification adjustment for (gains)
losses on securities available for
sale included in net income (7) (7)
-------
Total comprehensive income 2,201
Common stock issued (71) 116 222
Preferred stock issued for acquisitions 360
Common stock issued for acquisitions 72 (2) 99 11,644
Preferred stock issued, net of issuance costs 197
Preferred stock repurchased (552)
Common stock repurchased (355) (2,513)
Preferred stock issued to ESOP --
Preferred stock released to ESOP 38
Preferred stock (37,777) converted
to common shares 33 --
Preferred stock dividends (85) (85)
Common stock dividends (815) (815)
Fair value adjustment related to
acquiree's options 111
Cash payments received on notes
receivable from ESOP 4 4
------ ---- ----- ----- -------
Net change 1,329 2 (107) (27) 10,812
------ ---- ----- ----- -------
BALANCE DECEMBER 31, 1996 6,871 (11) (233) 316 20,051
------ ---- ----- ----- -------
Comprehensive income
Net income-1997 2,499 2,499
Other comprehensive income,
net of tax:
Translation adjustments 1 1
Unrealized gains (losses) on securities
available for sale arising
during the year 206 206
Reclassification adjustment for (gains)
losses on securities available for
sale included in net income (59) (59)
-------
Total comprehensive income 2,647
Common stock issued (151) 282 296
Common stock issued for acquisitions 41 131 213
Preferred stock repurchased (325)
Common stock repurchased (483) (2,171)
Preferred stock issued to ESOP --
Preferred stock released to ESOP 34
Preferred stock (34,074) converted
to common shares 28 --
Preferred stock dividends (43) (43)
Common stock dividends (925) (925)
Cash payments received on notes
receivable from ESOP 1 1
Stock split --
------ ---- ----- ----- -------
Net change 1,421 1 (42) 148 (273)
------ ---- ----- ----- -------
BALANCE DECEMBER 31, 1997 8,292 (10) (275) 464 19,778
------ ---- ----- ----- -------
Comprehensive income
Net income-1998 1,950 1,950
Other comprehensive income,
net of tax:
Translation adjustments (4) (4)
Unrealized gains (losses) on securities
available for sale arising
during the year 104 104
Reclassification adjustment for (gains)
losses on securities available for
sale included in net income (101) (101)
-------
Total comprehensive income 1,949
Common stock issued (191) 319 1,087
Common stock issued for acquisitions 11 84 157
Common stock repurchased (741) (1,170)
Preferred stock issued to ESOP --
Preferred stock released to ESOP 32
Preferred stock (31,043) converted
to common shares 28 --
Preferred stock dividends (35) (35)
Common stock dividends (982) (982)
Cash payments received on notes
receivable from ESOP 7 9
Rabbi trust asset classified as treasury stock (66) (66)
------ ---- ----- ----- -------
Net change 753 7 (376) (1) 981
------ ---- ----- ----- -------
BALANCE DECEMBER 31, 1998 $9,045 $ (3) $(651) $ 463 $20,759
====== ==== ===== ===== =======
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
53
<PAGE>
WELLS FARGO & COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(in millions) Year ended December 31,
1998 1997 1996
--------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,950 $ 2,499 $ 2,228
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 1,545 1,140 500
Depreciation and amortization 1,205 1,734 1,458
Securities available for sale gains (169) (99) (12)
Gains on sales of loans (61) (30) (22)
(Gains) losses from disposition of operations (100) (15) 95
Release of preferred shares to ESOP 32 34 38
Net (increase) decrease in trading assets 542 (711) (440)
Deferred income tax expense (benefit) (129) 173 467
Net (increase) decrease in accrued interest receivable (5) 96 (75)
Net (decrease) increase in accrued interest payable (9) 43 37
Originations of mortgages held for sale (111,262) (56,297) (53,088)
Proceeds from sales of mortgages held for sale 101,371 53,252 55,920
Net (increase) decrease in loans held for sale (822) (846) 673
Other, net 752 978 (3,634)
--------- --------- --------
Net cash provided (used) by operating activities (5,160) 1,951 4,145
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Securities available for sale:
Proceeds from sales 11,073 9,798 5,905
Proceeds from prepayments and maturities 10,354 6,998 7,853
Purchases (24,650) (13,140) (10,100)
Net cash (paid for) acquired from acquisitions (286) (67) 3,561
Net (increase) decrease in banking subsidiaries' loans
resulting from originations and collections (1,383) 843 4,053
Proceeds from sales (including participations)
of banking subsidiaries' loans 1,648 437 364
Purchases (including participations) of banking subsidiaries' loans (135) (314) (133)
Principal collected on nonbank subsidiaries' loans 7,788 8,456 5,503
Nonbank subsidiaries' loans originated (8,962) (8,748) (6,950)
Proceeds from (cash paid for) disposition of operations 484 16 6
Proceeds from sales of other real estate (ORE) 279 278 200
Net (increase) decrease in federal funds sold and securities purchased
under resale agreements (468) 415 1,385
Other, net (2,776) (320) (929)
--------- --------- --------
Net cash provided (used) by investing activities (7,034) 4,652 10,718
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 6,749 (7,273) (2,198)
Net increase (decrease) in short-term borrowings 2,414 2,838 (1,970)
Proceeds from issuance of long-term debt 7,970 4,003 6,403
Repayment of long-term debt (5,642) (5,394) (6,293)
Proceeds from issuance of guaranteed preferred beneficial
interests in Company's subordinated debentures -- 149 1,150
Proceeds from issuance of preferred stock -- -- 197
Proceeds from issuance of common stock 1,087 238 199
Repurchases of preferred stock -- (325) (552)
Repurchases of common stock (1,170) (2,171) (2,513)
Net decrease in notes receivable from ESOP 9 1 4
Payment of cash dividends on preferred and common stock (1,017) (968) (900)
Other, net 1,444 (1,213) 508
--------- --------- --------
Net cash provided (used) by financing activities 11,844 (10,115) (5,965)
--------- --------- --------
NET CHANGE IN CASH AND DUE FROM BANKS (350) (3,512) 8,898
Cash and due from banks at beginning of year 13,081 16,593 7,695
--------- --------- --------
CASH AND DUE FROM BANKS AT END OF YEAR $ 12,731 $ 13,081 $ 16,593
========= ========= ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 5,074 $ 4,911 $ 4,582
Income taxes $ 1,289 $ 1,238 $ 684
Noncash investing and financing activities:
Transfers from loans to ORE $ 223 $ 162 $ 192
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
54
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Wells Fargo & Company (Parent) is a bank holding company. Wells Fargo &
Company and Subsidiaries (Company) is a diversified financial services company
providing banking, mortgage and consumer finance through about 6,000 stores and
other distribution channels throughout North America, including all 50 states
and elsewhere internationally.
The accounting and reporting policies of the Company conform with generally
accepted accounting principles (GAAP) and prevailing practices within the
financial services industry. The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and income and expenses during the reporting period. Actual
results could differ from those estimates.
On November 2, 1998, Norwest Corporation changed its name to "Wells Fargo &
Company" upon the merger (the Merger) of the former Wells Fargo & Company (the
former Wells Fargo) into a wholly-owned subsidiary of Norwest Corporation. The
Merger was accounted for as a pooling of interests and, accordingly, the
information included in the financial statements presents the combined results
as if the Merger had been in effect for all periods presented. Certain amounts
in the financial statements for prior years have been reclassified to conform
with the current financial statement presentation. The following is a
description of the significant accounting policies of the Company.
CONSOLIDATION
The consolidated financial statements of the Company include the accounts
of the Parent, and its majority-owned subsidiaries, which are consolidated on a
line-by-line basis. Significant intercompany accounts and transactions are
eliminated in consolidation. Other subsidiaries and affiliates in which there is
at least 20% ownership are generally accounted for by the equity method; those
in which there is less than 20% ownership are generally carried at cost.
Investments that are accounted for by either the equity or cost method are
included in other assets.
SECURITIES
Securities are accounted for according to their purpose and holding period.
SECURITIES AVAILABLE FOR SALE Debt securities that may not be held until
maturity and marketable equity securities are classified as securities available
for sale and are reported at fair value, with unrealized gains and losses, after
applicable taxes, reported as a component of cumulative other comprehensive
income. The estimated fair value of a security is determined based on current
quotations, where available. Where current quotations are not available, the
estimated fair value is determined based primarily on the present value of
future cash flows, adjusted for the quality rating of the securities, prepayment
assumptions and other factors. Declines in the value of debt securities and
marketable equity securities that are considered other than temporary are
recorded in noninterest income as a loss on securities available for sale.
Realized gains and losses are recorded in noninterest income using the
identified certificate method. For certain debt securities (for example,
Government National Mortgage Association securities), the Company anticipates
prepayments of principal in the calculation of the effective yield.
55
<PAGE>
TRADING SECURITIES Securities acquired for short-term appreciation or
other trading purposes are recorded in a trading portfolio and are carried at
fair value, with unrealized gains and losses recorded in noninterest income.
NONMARKETABLE EQUITY SECURITIES Nonmarketable equity securities include
the venture capital subsidiaries' equity securities that are not publicly traded
and securities acquired for various purposes, such as troubled debt
restructurings and as a regulatory requirement (for example, Federal Reserve
Bank stock). These securities are accounted for at cost. The asset value is
reduced when declines in value are considered to be other than temporary and the
estimated loss is recorded in noninterest income as a loss from equity
investments along with income recognized on these assets.
MORTGAGES HELD FOR SALE
Mortgages held for sale are stated at the lower of aggregate cost or market
value. The determination of market value includes consideration of all open
positions, outstanding commitments from investors, related fees paid and related
hedging gains and losses. Gains and losses on sales of mortgages are recognized
at settlement dates and are determined by the difference between sales proceeds
and the carrying value of the mortgages. Gains and losses are recorded in
noninterest income.
LOANS HELD FOR SALE
Loans held for sale include student loans which are classified as held for
sale because the Company does not intend to hold these loans until maturity or
sales of the loans are pending. Such loans are carried at the lower of aggregate
cost or market value. Gains and losses are recorded in noninterest income, based
on the difference between sales proceeds and carrying value.
LOANS
Loans are reported at the principal amount outstanding, net of unearned
income. Unearned income, which includes deferred fees net of deferred direct
incremental loan origination costs, is amortized to interest income generally
over the contractual life of the loan using an interest method or the
straight-line method if it is not materially different.
NONACCRUAL LOANS Generally, loans are placed on nonaccrual status upon
becoming 90 days past due as to interest or principal (unless both well-secured
and in the process of collection), when the full timely collection of interest
or principal becomes uncertain or when a portion of the principal balance has
been charged off. Real estate 1-4 family loans (both first liens and junior
liens) are placed on nonaccrual status within 120 days of becoming past due as
to interest or principal, regardless of security. Generally, consumer loans not
secured by real estate are placed on nonaccrual status only when a portion of
the principal has been charged off. Such loans are entirely charged off when
deemed uncollectible or when they reach a predetermined number of days past due
depending upon loan product, country, terms and other factors.
When a loan is placed on nonaccrual status, the accrued and unpaid interest
receivable is reversed and the loan is accounted for on the cash or cost
recovery method thereafter, until qualifying for return to accrual status.
Generally, a loan may be returned to accrual status when all delinquent interest
and principal become current in accordance with the terms of the loan agreement
or when the loan is both well-secured and in the process of collection and
collectibility is no longer doubtful.
IMPAIRED LOANS Loans, other than those included in large groups of
smaller-balance homogeneous loans, are considered impaired when, based on
current information and events, it is probable that the Company will be unable
to collect all amounts due according to the contractual terms of the loan
agreement, including scheduled interest payments. For a loan that has been
restructured, the contractual terms of the loan agreement refer to the
contractual terms specified by the original loan agreement, not the contractual
terms specified by the restructuring agreement.
This assessment for impairment occurs when and while such loans are on
nonaccrual, or the loan has been restructured. When a loan with unique risk
characteristics has been identified as being impaired, the amount of impairment
will be measured by the Company using discounted cash flows, except when it is
determined that the sole (remaining) source of repayment for the loan is the
operation or liquidation of the underlying collateral. In such cases, the
current fair value of the collateral, reduced by costs to sell, will be used in
place of discounted cash flows. Additionally, some impaired loans with
commitments of less than $1 million are aggregated for the purpose of measuring
impairment using historical loss factors as a means of measurement.
56
<PAGE>
If the measurement of the impaired loan is less than the recorded
investment in the loan (including accrued interest, net deferred loan fees or
costs and unamortized premium or discount), an impairment is recognized by
creating or adjusting an existing allocation of the allowance for loan losses.
RESTRUCTURED LOANS In cases where a borrower experiences financial
difficulties and the Company makes certain concessionary modifications to
contractual terms, the loan is classified as a restructured (accruing) loan.
Loans restructured at a rate equal to or greater than that of a new loan with
comparable risk at the time the contract is modified may be excluded from the
impairment assessment and may cease to be considered impaired loans in the
calendar years subsequent to the restructuring if they are not impaired based on
the modified terms.
Generally, a nonaccrual loan that is restructured remains on nonaccrual for
a period of six months to demonstrate that the borrower can meet the
restructured terms. However, performance prior to the restructuring, or
significant events that coincide with the restructuring, are included in
assessing whether the borrower can meet the new terms and may result in the loan
being returned to accrual at the time of restructuring or after a shorter
performance period. If the borrower's ability to meet the revised payment
schedule is uncertain, the loan remains classified as a nonaccrual loan.
ALLOWANCE FOR LOAN LOSSES The allowance for loan losses is a valuation
allowance for probable losses inherent in the portfolio as of the balance sheet
date. The Company's determination of the level of the allowance for loan losses
rests upon various judgments and assumptions, including general economic
conditions, loan portfolio composition, prior loan loss experience, evaluation
of credit risk related to certain individual borrowers and the Company's ongoing
examination process and that of its regulators. The Company considers the
allowance for loan losses adequate to cover losses inherent in loans, loan
commitments and standby letters of credit.
TRANSFERS AND SERVICING OF FINANCIAL ASSETS
A transfer of financial assets is accounted for as a sale when control is
surrendered over the assets transferred. Servicing rights and other retained
interests in the assets sold are recorded by allocating the previous recorded
investment between the asset sold and the interest retained based on their
relative fair values, if practicable to determine, at the date of transfer.
The Company recognizes as separate assets the rights to service mortgage
loans for others, whether the servicing rights are acquired through purchases
or retained upon sales of loan originations. For purposes of evaluating and
measuring impairment of mortgage servicing rights, the Company stratifies its
portfolio on the basis of certain risk characteristics including loan type
and note rate. Based upon current fair values and considering outstanding
positions of derivative financial instruments used as hedges, mortgage
servicing rights are periodically assessed for impairment. Impairment is
recognized in the statement of income during the period in which impairment
occurs as an adjustment to the corresponding valuation allowance. Mortgage
servicing rights are amortized over the period of estimated net servicing
income and take into account appropriate prepayment assumptions.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Capital leases are included in premises and equipment, at the
capitalized amount less accumulated amortization.
Depreciation and amortization are computed primarily using the
straight-line method. Estimated useful lives range up to 40 years for buildings,
2 to 10 years for furniture and equipment, and up to the lease term for
leasehold improvements. Capitalized leased assets are amortized on a
straight-line basis over the lives of the respective leases, which generally
range from 20 to 35 years.
57
<PAGE>
GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS
Goodwill, representing the excess of purchase price over the fair value of
net assets acquired, results from acquisitions made by the Company.
Substantially all of the Company's goodwill is being amortized using the
straight-line method over 25 years. Core deposit intangibles are amortized on an
accelerated basis based on an estimated useful life of 10 to 15 years. Certain
identifiable intangible assets that are included in other assets are generally
amortized using an accelerated method over an original life of 5 to 15 years.
The Company reviews its intangible assets periodically for
other-than-temporary impairment. If such impairment is indicated, recoverability
of the asset is assessed based on expected undiscounted net cash flows.
INCOME TAXES
The Company files a consolidated federal income tax return. Federal income
tax is generally allocated to individual subsidiaries as if each had filed a
separate return. Combined state tax returns are filed in certain states. State
taxes are also allocated to individual subsidiaries.
Deferred income tax assets and liabilities are determined using the
liability (or balance sheet) method. Under this method, the net deferred tax
asset or liability is determined based on the tax effects of the differences
between the book and tax bases of the various balance sheet assets and
liabilities and gives current recognition to changes in tax rates and laws.
Foreign taxes paid are applied as credits to reduce federal income taxes
payable.
EARNINGS PER COMMON SHARE
Earnings per common share are presented under two formats: earnings per
common share and diluted earnings per common share. Earnings per common share
are computed by dividing net income (after deducting dividends on preferred
stock) by the average number of common shares outstanding during the year.
Diluted earnings per common share are computed by dividing net income (after
deducting dividends on preferred stock) by the average number of common shares
outstanding during the year, plus the impact of those common stock equivalents
(i.e., stock options, restricted share rights and convertible subordinated
debentures) that are dilutive.
DERIVATIVE FINANCIAL INSTRUMENTS
INTEREST RATE DERIVATIVES The Company uses interest rate derivative
financial instruments (futures contracts, forward contracts, swaps, caps, floors
and options) primarily to hedge mismatches in the rate maturity of loans and
their funding sources and the price risk of interest-rate sensitive assets.
These instruments serve to reduce rather than increase the Company's exposure to
movements in interest rates. At the inception of the hedge, the Company
identifies an individual asset or liability, or an identifiable group of
essentially similar assets or liabilities, that expose the Company to interest
rate risk at the consolidated or enterprise level. Interest rate derivatives are
accounted for by the deferral or accrual method only if they are designated as a
hedge and are expected to be and are effective in substantially reducing the
risk arising from the asset or liability identified as exposing the Company to
risk. Futures contracts must meet specific high correlation tests. For caps,
floors and swaps hedging mismatches between interest-bearing assets and
liabilities, their notional amount, interest rate index and life must closely
match the related terms of the hedged asset or liability. Caps, floors, swaps
and options and the mortgage servicing rights that they hedge must correlate
based on certain duration and convexity parameters. For futures contracts, if
the underlying financial instrument differs from the hedged asset or liability,
there must be a clear economic relationship between the prices of the two
financial instruments. If periodic assessment indicates derivatives no longer
provide an effective hedge, the derivatives are closed out or settled;
previously unrecognized hedge results and the net settlement upon close-out or
termination that offset changes in value of the hedged asset or liability are
deferred and amortized over the life of the asset or liability with excess
amounts recognized in noninterest income or noninterest expense.
Gains and losses on futures contracts, which result from the daily
settlement of their open positions, and on forward contracts are deferred and
classified on the balance sheet consistent with the hedge strategy. They are
recognized in income along with and when the effects of the related changes
of the hedged asset or liability are recognized. Amounts payable or
receivable for swaps, caps and floors are accrued with the passage of time,
the effect of which is included in income along with and when the effects of
the related changes of the hedged
58
<PAGE>
asset or liability are recognized. Gains and losses on options are recognized as
a component of the income reported on the hedged asset or liability. Fees
associated with these financial contracts are included on the balance sheet at
the time that the fee is paid and are classified consistent with the hedge
strategy. These fees are fully recognized by the end of their contractual life.
If a hedged asset or liability settles before maturity of the hedging
interest rate derivatives, the derivatives are closed out or settled, and
previously unrecognized hedge results and the net settlement upon close-out or
termination are accounted for as part of the gains and losses on the hedged
asset or liability. If interest rate derivatives used in an effective hedge are
closed out or terminated before the hedged item settles, previously unrecognized
hedge results and the net settlement upon close-out or termination are deferred
and amortized over the life of the hedged asset or liability. Cash flows
resulting from interest rate derivatives (including any related fees) that are
accounted for as hedges of assets and liabilities are classified in the cash
flow statement in the same category as the cash flows from the items being
hedged and are reflected in that statement when the cash receipts or payments
due under the terms of the instruments are collected, paid or settled.
Interest rate derivatives entered into as an accommodation to customers,
interest rate derivatives used to offset the interest rate risk of those
contracts and positions taken based on the Company's market expectations or to
benefit from price differentials between financial instruments and markets are
carried at fair value with unrealized gains and losses recorded in noninterest
income. Losses are recognized currently on put options written when the fair
value of the underlying security falls below the contractual price at which the
security may be put to the Company plus the premium received. Premiums received
on covered call options written are deferred until the option terminates. If the
fair value of the underlying asset is greater than the contractual price at
which the Company must sell the asset, the option should be exercised, at which
time the premium will be recorded as an adjustment of the gain or loss
recognized on the underlying asset. If the option expires, the premium is
recognized in other noninterest income. The fair value of interest rate
derivative financial instruments with an unrealized gain is included in trading
assets (i.e., within other assets) while the fair value of instruments with an
unrealized loss is included in other liabilities. Cash flows resulting from
instruments carried at fair value are classified in the cash flow statement as
operating cash flows and are reflected in that statement when the cash receipts
or payments due under the terms of the instruments are collected, paid or
settled.
Credit risk related to interest rate derivative financial instruments is
considered and, if material, provided for separately from the allowance for loan
losses.
FOREIGN EXCHANGE DERIVATIVES The Company enters into foreign exchange
derivative financial instruments (forward and spot contracts and options)
primarily as an accommodation to customers and offsets the related foreign
exchange risk with other foreign exchange derivatives. Those contracts are
carried at fair value, with unrealized gains and losses recorded in noninterest
income. Cash flows resulting from foreign exchange derivatives are classified in
the cash flow statement as operating cash flows and are reflected in that
statement when the cash receipts or payments due under the terms of the foreign
exchange derivatives are collected, paid or settled.
The Company also uses forward foreign exchange contracts to hedge
uncertainties in funding costs related to specific liabilities denominated in
foreign currencies. Gains and losses on those contracts are recognized in income
and classified on the balance sheet consistent with the hedged item. Cash flows
resulting from these foreign exchange derivatives (including any related fees)
are classified in the cash flow statement in the same category as the cash flows
from the item being hedged and are reflected in that statement when the cash
receipts or payments due under the terms of the instruments are collected, paid
or settled.
Credit risk related to all foreign exchange derivatives is considered and,
if material, provided for separately from the allowance for loan losses.
FOREIGN CURRENCY TRANSLATION
The accounts of the Company's foreign consumer finance subsidiaries are
measured using local currency as the functional currency. Assets and liabilities
are translated into United States dollars at period-end exchange rates, and
income and expense accounts are translated at average monthly exchange rates.
Net exchange gains or losses resulting from such translation are excluded from
net income and included as a component of cumulative other comprehensive income.
59
<PAGE>
NOTE 2 BUSINESS COMBINATIONS
The Company regularly explores opportunities to acquire financial
institutions and related businesses. Generally, management of the Company does
not make a public announcement about an acquisition opportunity until a
definitive agreement is signed. At December 31, 1998, the Company had five
pending transactions with total assets of approximately $1.4 billion and
anticipated that approximately $200 million in cash and approximately 5.7
million common shares will be issued upon consummation of these transactions.
These pending acquisitions, subject to approval by regulatory agencies, are
expected to be completed by the end of the second quarter of 1999.
Transactions completed in the years ended December 31, 1998, 1997 and 1996
include:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
(in millions, except shares) Date Assets Cash Common Method of
paid shares accounting
issued
<S> <C> <C> <C> <C> <C>
1998
Finvercon S.A. Compania, Financiera, Argentina January 8 $ 57 $ 20 -- Purchase
Fidelity Bancshares, Inc., Fort Worth, Texas January 13 111 16 -- Purchase
Heritage Trust Company, Grand Junction, Colorado February 20 2 -- 136,950 Purchase
Founders Trust Company, Dallas, Texas March 2 2 7 -- Purchase
The T. Eaton Acceptance Company Limited and National
Retail Credit Services Limited, Don Mills, Ontario, Canada April 21 370 248 -- Purchase
WMC Mortgage Corporation, Woodland Hills, California April 30 5 22 -- Purchase
First Bank, Katy, Texas May 22 310 -- 1,999,980 Pooling of interests*
First Bank of Grants, Grants, New Mexico May 28 45 -- 212,487 Purchase
Spring Mountain Escrow Corporation, Irvine, California May 29 1 1 -- Purchase
Emjay Corporation, Milwaukee, Wisconsin June 15 6 -- 297,979 Purchase
Six affiliated bank holding companies and related entities,
located in Minnesota, Wisconsin, New Mexico, Arizona
and Colorado, including MidAmerica July 2, 23 1,317 -- 8,060,664 Pooling of interests*
First Bancshares of Valley City, Inc., Valley City, North Dakota July 31 96 -- 451,943 Purchase
Peoples Insurance Agency, Inc., Valley City, North Dakota July 31 -- -- 6,804 Purchase
Star Bancshares, Inc., Austin, Texas August 31 582 -- 4,275,077 Pooling of interests*
Freedom Trailer Leasing, Inc., Chesterfield, Missouri August 31 5 4 -- Purchase
Little Mountain Bancshares, Inc., Monticello, Minnesota September 8 82 -- 561,016 Purchase
First National Bank of Missouri City, Missouri City, Texas October 30 91 -- 740,333 Purchase
Franklin Bancshares, Inc., Franklin, Texas December 1 72 12 -- Purchase
------ ---- ----------
$3,154 $330 16,743,233
====== ==== ==========
1997
Franklin Federal Bancorp., F.S.B., Austin, Texas January 1 $ 621 $ 90 -- Purchase of assets
Central Bancorporation, Inc., Fort Worth, Texas January 28 1,105 -- 9,399,576 Pooling of interests*
Reliable Financial Services, Inc., San Juan, Puerto Rico February 21 39 -- 1,753,086 Pooling of interests*
Statewide Mortgage Company, Birmingham, Alabama February 26 28 -- 1,049,992 Purchase
The United Group, Inc., Charlotte, North Carolina March 21 41 -- 648,348 Purchase
Farmers National Bancorp, Inc., Geneseo, Illinois March 24 198 -- 1,207,198 Purchase
The First National Bankshares, Inc., Tucumcari, New Mexico June 17 90 -- 608,900 Purchase
Tennessee Credit Corporation, Nashville, Tennessee July 18 13 3 -- Purchase
Western National Trust Company, National Association,
Odessa, Texas July 31 -- 1 -- Purchase
Fidelity Acceptance Corporation, St. Louis, Missouri August 31 1,135 344 -- Purchase
The Bank of the Southwest, National Association,
Pagosa Springs, Colorado September 2 85 -- 490,790 Purchase
International Bancorporation, Inc., Golden Valley, Minnesota October 21 483 -- 3,601,935 Pooling of interests*
Subsidiaries of Cityside Holding L.L.C., Eden Prairie, Minnesota October 30 104 42 -- Purchase
J.L.J. Financial Services Corporation, Montvale, New Jersey October 31 26 6 -- Purchase
Myers Bancshares Inc., Dallas, Texas November 14 135 -- 613,247 Purchase
Packers Management Company, Inc., Omaha, Nebraska November 25 162 -- 1,171,161 Purchase
First Valley Bank Group, Inc., Los Fresnos, Texas December 1 519 -- 3,291,302 Pooling of interests*
------ ---- ----------
$4,784 $486 23,835,535
====== ==== ==========
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
(in millions, except shares) Date Assets Cash Common Method of
paid shares accounting
issued
<S> <C> <C> <C> <C> <C>
1996
The Bank of Robstown, Robstown, Texas January 12 $ 71 $ 9 -- Purchase
AMFED Financial, Inc., Reno, Nevada January 18 1,519 -- 12,093,272 Pooling of interests*
Irene Bancorporation, Inc., Viborg, South Dakota January 31 40 7 -- Purchase
Canton Bancshares, Inc., Canton, Illinois February 15 50 -- 558,540 Purchase
Henrietta Bancshares, Inc., Henrietta, Texas March 12 164 24 -- Purchase
First Interstate Bancorp, Los Angeles, California April 1 55,797 -- 520,019,700 Purchase
Victoria Bankshares, Inc., Victoria, Texas April 11 1,919 -- 17,021,602 Pooling of interests*
The Prudential Home Mortgage Company, Inc. May 7 3,336 3,336 -- Purchase of assets
Cardinal Credit Corporation, Lexington, Kentucky May 13 34 34 -- Purchase of assets
Benson Financial Corporation, San Antonio, Texas May 31 464 -- 4,088,070 Pooling of interests*
Regional Bank of Colorado, N.A., Rifle, Colorado June 1 56 -- 709,934 Purchase
AmeriGroup, Incorporated, Minneapolis, Minnesota June 4 155 -- 1,832,400 Purchase
Union Texas Bancorporation, Inc., Laredo, Texas June 27 245 -- 789,958 Purchase
B & G Investment Company, San Antonio, Texas July 3 71 -- 541,996 Purchase
PriMerit Bank, F.S.B., Las Vegas, Nevada July 19 1,578 191 -- Purchase of assets
Aman Collection Service, Inc., Aberdeen, South Dakota August 2 4 -- 1,200,000 Pooling of interests*
Rapid Finance, Inc., Jacksonville, Mississippi August 16 29 29 -- Purchase of assets
National Business Finance, Inc., Denver, Colorado September 30 8 7 -- Purchase
American Bank Moorhead, Moorhead, Minnesota October 1 155 24 -- Purchase
Texas Bancorporation, Inc., Odessa, Texas November 1 174 -- 1,524,990 Purchase
West Columbia National Bank, West Columbia, Texas December 27 34 5 -- Purchase
------- ------ -----------
$65,903 $3,666 560,380,462
======= ====== ===========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Pooling of interests transaction was not material to the Company's
consolidated financial statements; accordingly, previously reported results were
not restated.
MERGER OF NORWEST AND WELLS FARGO
On November 2, 1998, the former Wells Fargo merged with a subsidiary of
Norwest Corporation, and Norwest changed its name to "Wells Fargo & Company."
Under the terms of the Merger agreement, stockholders of the former Wells Fargo
received 10 shares of common stock of the Company for each share of common stock
owned. Each share of former Wells Fargo preferred stock was converted into one
share of the Company's preferred stock. These shares will rank on parity with
the Company's preferred stock as to dividends and upon liquidation. Each
outstanding and unexercised option granted by the former Wells Fargo was
converted into an option to purchase common stock of the Company based on the
agreed-upon exchange ratio.
As a condition to the Merger, the Company was required by regulatory
agencies to divest stores in Arizona and Nevada having aggregate deposits of
approximately $1 billion. In the fourth quarter of 1998, the Company entered
into contracts to sell these stores. These sales are expected to be completed
during the second quarter of 1999.
Merger-related expenses of approximately $1 billion that were recognized in
the fourth quarter of 1998 included restructuring charges of approximately $600
million. The following table presents the major components of the restructuring
charges:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Amounts Income statement
(in millions) classification
<S> <C> <C>
Severance- Salaries and
related costs $280 benefits
Premises:
Owned 100 (1) Net losses on
Leased 150 dispositions of
---- premises and
Total premises- equipment
related costs 250 (2)
Other 70 Various
----
Total restructuring
charges $600
====
- -----------------------------------------------------------
</TABLE>
(1) Carrying value of these assets totaled approximately $70 million at
December 31, 1998.
(2) These premises are held for sale or remarketing and are expected to be
removed from operations during 1999, pursuant to Merger plans.
61
<PAGE>
Accrued severance-related costs relate to the elimination into 2000 of
about 5% of the Company's positions. The majority of these reductions are the
result of eliminating redundant headquarters, back office and other positions.
Previously reported financial information for Norwest and the former Wells
Fargo is shown in the table below.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Year ended
(in millions) NINE MONTHS ENDED December 31,
SEPTEMBER 30, 1998 --------------------
(UNAUDITED) 1997 1996
<S> <C> <C> <C>
Revenue (1)
Norwest $5,913 $6,996 $6,266
Wells Fargo 5,623 7,318 6,721
Net Income
Norwest $1,143 $1,351 $1,154
Wells Fargo 999 1,155 1,071
- ---------------------------------------------------------------------
</TABLE>
(1) Revenue equals net interest income plus noninterest income.
The combined financial results of the Company include adjustments to
conform the accounting policies of the former Norwest and the former Wells
Fargo. The December 31, 1995 balances of certain balance sheet accounts were
adjusted to reflect the conforming accounting treatment. Other liabilities
increased $75 million and retained earnings decreased $75 million to conform the
accounting treatment for the postretirement transition obligation identified
with the implementation of FAS 106, Employers' Accounting for Postretirement
Benefits Other than Pensions. Premises and equipment decreased $53 million and
retained earnings decreased $53 million to reflect the conforming of the
capitalization policies. In noninterest expense, salaries and benefits decreased
$6 million for the nine months ended September 30, 1998 and $8 million for the
years ended December 31, 1997 and 1996 and equipment expense increased $2
million for the nine months ended September 30, 1998 and $18 million and $3
million for the years ended December 31, 1997 and 1996, respectively. Net income
increased $2 million for the nine months ended September 30, 1998 and
(decreased) increased $(7) million and $3 million for the years ended December
31, 1997 and 1996, respectively.
NOTE 3 CASH, LOAN AND DIVIDEND RESTRICTIONS
Federal Reserve Board (FRB) regulations require reserve balances on
deposits to be maintained by each of the banking subsidiaries with the Federal
Reserve Banks. The average required reserve balance was $2.2 billion and $2.3
billion in 1998 and 1997, respectively.
Federal law prevents the Company and its nonbank subsidiaries from
borrowing from its subsidiary banks unless the loans are secured by specified
collateral. Such secured loans by any subsidiary bank are generally limited to
10% of the subsidiary bank's capital and surplus (as defined, which for this
purpose represents Tier 1 and Tier 2 capital, as calculated under the risk-based
capital guidelines, plus the balance of the allowance for loan losses excluded
from Tier 2 capital) and aggregate loans to the Company and its nonbank
subsidiaries are limited to 20% of the subsidiary bank's capital and surplus.
(For further discussion of risk-based capital, see Note 22 to Financial
Statements.)
The payment of dividends to the Parent by subsidiary banks is subject to
various federal and state regulatory limitations. Dividends payable by a
national bank to the Parent without the express approval of the Office of the
Comptroller of the Currency (OCC) are limited to that bank's retained net
profits for the preceding two calendar years plus retained net profits up to the
date of any dividend declaration in the current calendar year. Retained net
profits are defined by the OCC as net income, less dividends declared during the
period, both of which are based on regulatory accounting principles. The Company
also has state-chartered subsidiary banks that are subject to state regulations
that limit dividends. Under these provisions and except for Wells Fargo Bank,
N.A. (WFB, N.A.), the Company's national and state-chartered subsidiary banks
could have declared dividends of $687 million and $495 million in 1998 and 1997,
respectively, without obtaining prior regulatory approval. With the express
approval of the OCC, WFB, N.A. declared dividends in 1998 and 1997 of $1.5
billion in excess of its net income of $2.0 billion for those years. (The total
dividends declared by WFB, N.A. in 1998, 1997 and 1996 were $1.5 billion, $2.0
billion and $1.5 billion, respectively.) Therefore, before it can declare
dividends in 1999 without the approval of the OCC, WFB, N.A. must have net
income of $1.5 billion plus an amount equal to or greater than the dividends
declared in 1999. Since it is not expected to have net income of $1.5 billion
plus an amount equal to or greater than the dividends expected to be declared in
1999, WFB, N.A. will again need to obtain the approval of the OCC before any
dividends are declared in 1999. In addition, the Company's non-bank subsidiaries
could have declared dividends of $1.2 billion and $1.0 billion at December 31,
1998 and 1997, respectively.
62
<PAGE>
NOTE 4 SECURITIES AVAILABLE FOR SALE
The following table provides the cost and fair value for the major
components of securities available for sale carried at fair value (there were no
securities held to maturity at the end of the last three years):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
(in millions) December 31,
-------------------------------------------------------------------------------------------
1998 1997
------------------------------------------- -------------------------------------------
Cost Estimated Estimated Estimated Cost Estimated Estimated Estimated
unrealized unrealized fair value unrealized unrealized fair value
gross gains gross losses gross gains gross losses
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities of U.S. Treasury
and federal agencies $ 3,260 $ 45 $18 $ 3,287 $ 3,594 $ 38 $ 6 $ 3,626
Securities of U.S. states and
political subdivisions 1,683 115 4 1,794 1,652 76 2 1,726
Mortgage-backed securities:
Federal agencies 20,539 293 28 20,804 18,203 369 20 18,552
Private collateralized
mortgage obligations (1) 3,420 29 9 3,440 2,646 21 13 2,654
------- ---- --- ------- ------- ---- --- -------
Total mortgage-backed securities 23,959 322 37 24,244 20,849 390 33 21,206
Other 1,879 41 21 1,899 729 18 3 744
------- ---- --- ------- ------- ---- --- -------
Total debt securities 30,781 523 80 31,224 26,824 522 44 27,302
Marketable equity securities 386 396 9 773 308 265 3 570
------- ---- --- ------- ------- ---- --- -------
Total $31,167 $919 $89 $31,997 $27,132 $787 $47 $27,872
======= ==== === ======= ======= ==== === =======
<CAPTION>
December 31,
------------------
1996
------------------
Cost Estimated
fair value
<S> <C> <C>
Securities of U.S. Treasury
and federal agencies $ 3,998 $ 4,017
Securities of U.S. states and
political subdivisions 928 962
Mortgage-backed securities:
Federal agencies 19,694 19,834
Private collateralized
mortgage obligations (1) 3,403 3,403
------- -------
Total mortgage-backed securities 23,097 23,237
Other 844 844
------- -------
Total debt securities 28,867 29,060
Marketable equity securities 374 692
------- -------
Total $29,241 $29,752
======= =======
- ------------------------------------------------------
</TABLE>
(1) Substantially all private collateralized mortgage obligations are AAA-rated
bonds collateralized by 1-4 family residential first mortgages.
At December 31, 1998, the Company held no securities of any single issuer
(excluding the U.S. Treasury and federal agencies) with a book value that
exceeded 10% of stockholders' equity.
Proceeds from the sale of securities in the securities available for sale
portfolio totaled $11.1 billion, $9.8 billion and $5.9 billion in 1998, 1997 and
1996.
For the year ended December 31, 1998, the sales of securities in the
securities available for sale portfolio resulted in a realized net gain of $169
million, comprised of realized gross gains of $209 million and realized gross
losses of $40 million. The sales of securities in the securities available for
sale portfolio resulted in a realized net gain of $99 million and $12 million,
comprised of realized gross gains of $168 million and $184 million, and realized
gross losses of $69 million and $172 million for the year ended December 31,
1997 and 1996, respectively.
The following table provides the remaining contractual principal maturities
and yields (taxable-equivalent basis) of debt securities available for sale. The
remaining contractual principal maturities for mortgage-backed securities were
allocated assuming no prepayments. Expected remaining maturities will differ
from contractual maturities because borrowers may have the right to prepay
obligations with or without penalties.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
(in millions) December 31, 1998
-------------------------------------------------------------------------------------------
Remaining contractual principal maturity
Total Weighted ------------------------------------------------------------------------
amount average After one year After five years
yield Within one year through five years through ten years After ten years
---------------- ------------------ ----------------- ---------------
Amount Yield Amount Yield Amount Yield Amount Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities of U.S. Treasury
and federal agencies $ 3,287 5.76% $1,241 5.91% $1,109 5.93% $ 872 5.38% $ 65 5.05%
Securities of U.S. states and
political subdivisions 1,794 6.54 79 5.58 423 6.58 293 6.94 999 6.49
Mortgage-backed securities:
Federal agencies 20,804 6.88 454 6.37 1,448 6.62 1,092 6.59 17,810 6.93
Private collateralized
mortgage obligations 3,440 6.71 274 6.28 843 6.54 644 7.12 1,679 6.71
------- ------ ------ ------ -------
Total mortgage-backed securities 24,244 6.86 728 6.34 2,291 6.59 1,736 6.79 19,489 6.91
Other 1,899 7.04 100 6.51 813 5.57 695 8.17 291 7.58
------- ------ ------ ------ -------
ESTIMATED FAIR VALUE
OF DEBT SECURITIES (1) $31,224 6.73% $2,148 6.06% $4,636 6.28% $3,596 6.72% $20,844 6.90%
======= ==== ====== ==== ====== ==== ====== ==== ======= ====
TOTAL COST OF
DEBT SECURITIES $30,781 $2,086 $4,430 $3,576 $20,689
======= ====== ====== ====== =======
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The weighted average yield is computed using the amortized cost of debt
securities available for sale.
Securities pledged primarily to secure trust and public deposits and for
other purposes as required or permitted by law was $11.2 billion, $13.8 billion
and $11.8 billion at December 31, 1998, 1997 and 1996, respectively.
63
<PAGE>
NOTE 5 LOANS AND ALLOWANCE FOR LOAN LOSSES
A summary of the major categories of loans outstanding is shown in the
following table.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
(in millions) December 31,
----------------------------------------------
1998 1997
<S> <C> <C>
Commercial $ 35,450 $ 32,061
Real estate 1-4 family first mortgage 11,629 14,165
Other real estate mortgage 16,668 16,326
Real estate construction 3,790 3,326
Consumer:
Real estate 1-4 family junior lien mortgage 10,996 10,618
Credit card 5,795 6,671
Other revolving credit and monthly payment 15,677 17,021
-------- --------
Total consumer 32,468 34,310
Lease financing 6,380 4,968
Foreign 1,609 1,155
-------- --------
Total loans (1) $107,994 $106,311
======== ========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Outstanding loan balances at December 31, 1998 and 1997 are net of unearned
income, including net deferred loan fees, of $2,967 million and $2,938
million, respectively.
Total unfunded commitments to extend credit were $71,467 million and
$66,511 million at December 31, 1998 and 1997, respectively. Unfunded
commitments are defined as all legally binding agreements to extend credit, net
of all funds lent and all standby and commercial letters of credit issued under
the terms of those commitments. At December 31, 1998 and 1997, the commercial
loan category and related unfunded commitments did not have an industry
concentration that exceeded 10% of total loans and unfunded commitments. The
table below summarizes the major categories of unfunded commitments to extend
credit:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
(in millions) December 31, 1998
<S> <C>
Commercial $34,892
Real estate 1-4 family first mortgage 1,311
Other real estate mortgage 1,302
Real estate construction 3,007
Consumer:
Real estate 1-4 family
junior lien mortgage 5,792
Credit card 18,874
Other revolving credit
and monthly payment 6,236
-------
Total consumer 30,902
Lease financing --
Foreign 53
-------
Total unfunded commitments
to extend credit $71,467
=======
- -----------------------------------------------------------
</TABLE>
In the course of evaluating the credit risk presented by a customer and the
pricing that will adequately compensate the Company for assuming that risk,
management may determine a requisite amount of collateral support. The type of
collateral held varies, but may include accounts receivable, inventory, land,
buildings, equipment, income-producing commercial properties and residential
real estate. The Company has the same collateral policy for loans whether they
are funded immediately or on a delayed basis (commitment).
A commitment to extend credit is a legally binding agreement to lend funds
to a customer and is usually for a specified interest rate and purpose. These
commitments have fixed expiration dates and generally require a fee. The
extension of a commitment gives rise to credit risk. The actual liquidity needs
or the credit risk that the Company will experience will be lower than the
contractual amount of commitments to extend credit shown in the table to the
left because a significant portion of these commitments is expected to expire
without being drawn upon. Certain commitments are subject to a loan agreement
containing covenants regarding the financial performance of the customer that
must be met before the Company is required to fund the commitment. The Company
uses the same credit policies in making commitments to extend credit as it does
in making loans.
In addition, the Company manages the potential credit risk in commitments
to extend credit by limiting the total amount of arrangements, both by
individual customer and in the aggregate; by monitoring the size and maturity
structure of these portfolios; and by applying the same credit standards
maintained for all of its related credit activities. The credit risk associated
with these commitments is considered in management's determination of the
allowance for loan losses.
Standby letters of credit totaled $3,332 million and $3,716 million at
December 31, 1998 and 1997, respectively. Standby letters of credit are issued
on behalf of customers in connection with contracts between the customers and
third parties. Under standby letters of credit, the Company assures that the
third
64
<PAGE>
parties will receive specified funds if customers fail to meet their contractual
obligations. The liquidity risk to the Company arises from its obligation to
make payment in the event of a customer's contractual default. The credit risk
involved in issuing letters of credit and the Company's management of that
credit risk is considered in management's determination of the allowance for
loan losses. Standby letters of credit are net of participations sold to other
institutions of $837 million in 1998 and $573 million in 1997.
Included in standby letters of credit are those that back financial
instruments (financial guarantees). The Company had issued or purchased
participations in financial guarantees of approximately $2,188 million and
$2,140 million at December 31, 1998 and 1997, respectively. The Company also had
commitments for commercial and similar letters of credit of $691 million and
$751 million at December 31, 1998 and 1997, respectively. Substantially all fees
received from the issuance of financial guarantees are deferred and amortized on
a straight-line basis over the term of the guarantee. Losses on standby letters
of credit and other similar letters of credit have been immaterial.
The Company has an established process to determine the adequacy of the
allowance for loan losses which assesses the risk and losses inherent in its
portfolio. This process provides an allowance consisting of two components,
allocated and unallocated. To arrive at the allocated component of the
allowance, the Company combines estimates of the allowances needed for loans
analyzed individually (including impaired loans subject to Statement of
Financial Accounting Standards No. 114 (FAS 114), Accounting by Creditors for
Impairment of a Loan) and loans analyzed on a pool basis.
The determination of allocated reserves for portfolios of larger commercial
and commercial real estate loans involves a review of individual higher-risk
transactions, focusing on the accuracy of loan grading, assessments of specific
loss content, and, in some cases, strategies for resolving problem credits.
These considerations supplement the application of loss factors delineated by
individual loan grade to the existing distribution of risk exposures, thus
framing an assessment of inherent losses across the entire wholesale lending
portfolio segment which is responsive to shifts in portfolio risk content. The
loss factors used for this analysis have been derived from migration models
which track actual portfolio movements from problem asset loan grades to loss
over a 5 to 10 year period. In the case of pass loan grades, the loss factors
are derived from analogous loss experience in public debt markets, calibrated to
the long-term average loss experience of the Company's portfolios. The loan loss
reserve allocations arrived at through this loss factor methodology are adjusted
by management's judgment concerning the effect of recent economic events on
portfolio performance.
In the case of more homogeneous portfolios, such as consumer loans and
leases, residential mortgage loans, and some segments of small business lending,
the determination of allocated reserves is conducted at a more aggregate, or
pooled, level. For portfolios of this nature, the risk assessment process
emphasizes the development of rigorous forecasting models, which focus on recent
delinquency and loss trends in different portfolio segments to project relevant
risk metrics over an intermediate-term horizon. Such analyses are updated
frequently to capture the most recent behavioral characteristics of the subject
portfolios, as well as any changes in management's loss mitigation or customer
solicitation strategies, in order to reduce the differences between estimated
and observed losses. A reserve which approximates one year of projected net
losses is provided as the baseline allocation for most homogeneous portfolios,
to which management will add certain adjustments to ensure that a prudent amount
of conservatism is present in the specific assumptions underlying that forecast.
While coverage of one year's losses is often adequate (particularly for
homogeneous pools of loans and leases), the time period covered by the allowance
may vary by portfolio, based on the Company's best estimate of the inherent
losses in the entire portfolio as of the evaluation date. To mitigate the
imprecision inherent in most estimates of expected credit losses, the allocated
component of the allowance is supplemented by an unallocated component. The
unallocated component includes management's judgmental determination of the
amounts necessary for concentrations, economic uncertainties and other
subjective factors; correspondingly, the relationship of the unallocated
component to the total allowance for loan losses may fluctuate from period to
period. At December 31, 1998, the unallocated portion amounted to 37% of the
total allowance, compared to 33% at December 31, 1997. Although management has
allocated a portion of the allowance to specific loan categories, the adequacy
of the allowance must be considered in its entirety.
The Company's determination of the level of the allowance and,
correspondingly, the provision for loan losses rests upon various judgments and
assumptions, including general economic conditions, loan portfolio composition,
prior loan loss experience and the Company's ongoing examination process and
that of its regulators. The Company has an internal risk analysis and review
staff that reports to the Board of Directors and continuously reviews loan
quality. Such reviews also assist management in establishing the level of the
allowance. Like all national banks, subsidiary national banks continue to be
subject to examination by their primary regulator, the Office of the Comptroller
of the Currency (OCC), and some have OCC examiners in residence. These
examinations occur throughout the year and target various activities of the
65
<PAGE>
subsidiary national banks, including specific segments of the loan portfolio
(for example, commercial real estate and shared national credits). In addition
to the subsidiary national banks being examined by the OCC, the Parent and its
nonbank subsidiaries are examined by the Federal Reserve.
The Company considers the allowance for loan losses of $3,134 million
adequate to cover losses inherent in loans, loan commitments and standby letters
of credit at December 31, 1998.
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(in millions) Year ended December 31,
----------------------------------
1998 1997 1996
<S> <C> <C> <C>
BALANCE, BEGINNING OF YEAR $ 3,062 $ 3,059 $ 2,711
Allowances related to assets
acquired, net 144 168 870
Provision for loan losses 1,545 1,140 500
Loan charge-offs:
Commercial (261) (357) (200)
Real estate 1-4 family
first mortgage (26) (26) (24)
Other real estate mortgage (54) (26) (50)
Real estate construction (3) (5) (14)
Consumer:
Real estate 1-4 family
junior lien mortgage (31) (37) (38)
Credit card (535) (579) (487)
Other revolving credit and
monthly payment (1,002) (618) (488)
------- ------- -------
Total consumer (1,568) (1,234) (1,013)
Lease financing (48) (46) (35)
Foreign (84) (37) (35)
------- ------- -------
Total loan charge-offs (2,044) (1,731) (1,371)
------- ------- -------
Loan recoveries:
Commercial 82 105 89
Real estate 1-4 family
first mortgage 11 9 12
Other real estate mortgage 78 62 57
Real estate construction 4 12 12
Consumer:
Real estate 1-4 family
junior lien mortgage 7 10 10
Credit card 56 61 50
Other revolving credit and
monthly payment 163 144 101
------- ------- -------
Total consumer 226 215 161
Lease financing 12 13 9
Foreign 14 10 9
------- ------- -------
Total loan recoveries 427 426 349
------- ------- -------
Total net loan
charge-offs (1,617) (1,305) (1,022)
------- ------- -------
BALANCE, END OF YEAR $ 3,134 $ 3,062 $ 3,059
======= ======= =======
Total net loan charge-offs
as a percentage of
average total loans 1.52% 1.25% 1.04%
======= ======= =======
Allowance as a percentage
of total loans 2.90% 2.88% 2.89%
======= ======= =======
- ---------------------------------------------------------------------
</TABLE>
In accordance with FAS 114, the table below shows the recorded
investment in impaired loans by methodology used to measure impairment at
December 31, 1998 and 1997:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
(in millions) December 31,
------------------
1998 1997
<S> <C> <C>
Impairment measurement based on:
Collateral value method $329 $346
Discounted cash flow method 67 61
Historical loss factors 15 27
---- ----
Total (1)(2) $411 $434
==== ====
- --------------------------------------------------------------------
</TABLE>
(1) Includes accruing loans of $23 million at December 31, 1998 and 1997 that
were purchased at a steep discount whose contractual terms were modified
after acquisition. The modified terms did not affect the book balance nor
the yields expected at the date of purchase.
(2) Includes $155 million and $115 million of impaired loans with a related FAS
114 allowance of $37 million and $36 million at December 31, 1998 and 1997,
respectively.
The average recorded investment in impaired loans during 1998, 1997 and
1996 was $456 million, $513 million and $655 million, respectively. Total
interest income recognized on impaired loans during 1998, 1997 and 1996 was $13
million, $15 million and $21 million, respectively, which was primarily recorded
using the cash method.
The Company uses either the cash or cost recovery method to record cash
receipts on impaired loans that are on nonaccrual. Under the cash method,
contractual interest is credited to interest income when received. This method
is used when the ultimate collectibility of the total principal is not in doubt.
Under the cost recovery method, all payments received are applied to principal.
This method is used when the ultimate collectibility of the total principal is
in doubt. Loans on the cost recovery method may be changed to the cash method
when the application of the cash payments has reduced the principal balance to a
level where collection of the remaining recorded investment is no longer in
doubt.
66
<PAGE>
NOTE 6 PREMISES, EQUIPMENT, LEASE COMMITMENTS AND OTHER ASSETS
The following table presents comparative data for premises and equipment:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(in millions) December 31,
--------------------
1998 1997
<S> <C> <C>
Land $ 357 $ 364
Buildings 2,135 2,403
Furniture and equipment 2,688 2,474
Leasehold improvements 732 609
Premises leased under capital leases 80 125
------ ------
Total 5,992 5,975
Less accumulated depreciation
and amortization 2,862 2,664
------ ------
Net book value $3,130 $3,311
====== ======
- -------------------------------------------------------------------------------
</TABLE>
Depreciation and amortization expense was $491 million, $457 million and
$451 million in 1998, 1997 and 1996, respectively. Losses on disposition of
premises and equipment, recorded in noninterest expense, were $325 million, $76
million and $45 million in 1998, 1997 and 1996, respectively. Gains (losses)
from disposition of operations, recorded in noninterest income, were $100
million, $15 million and $(95) million in 1998, 1997 and 1996, respectively.
The Company is obligated under a number of noncancelable operating leases
for premises (including vacant premises) and equipment with terms, including
renewal options, up to 100 years, many of which provide for periodic adjustment
of rentals based on changes in various economic indicators. The following table
shows future minimum payments under noncancelable operating leases and capital
leases, net of sublease rentals, with terms in excess of one year as of December
31, 1998:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(in millions) Operating leases Capital leases
<S> <C> <C>
Year ended December 31,
1999 $ 397 $ 8
2000 322 7
2001 248 6
2002 187 5
2003 144 5
Thereafter 905 25
------ ----
Total minimum lease payments $2,203 56
======
Executory costs (2)
Amounts representing interest (18)
----
Present value of net minimum $ 36
lease payments ====
- -------------------------------------------------------------------------------
</TABLE>
Rental expense, net of rental income, for all operating leases was $473
million, $441 million and $427 million in 1998, 1997 and 1996, respectively.
The components of interest receivable and other assets at December 31, 1998
and 1997 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(in millions) December 31,
---------------------
1998 1997
<S> <C> <C>
Nonmarketable equity investments $ 2,392 $ 1,860
Interest receivable 1,062 1,057
Trading assets 760 1,302
Certain identifiable intangible assets 212 206
Other real estate (ORE) 173 264
Due from customers on acceptances 128 129
Interest-earning deposits 113 68
Other 6,054 5,190
------- -------
Total interest receivable
and other assets $10,894 $10,076
======= =======
- -------------------------------------------------------------------------------
</TABLE>
Income from nonmarketable equity investments accounted for using the
cost method was $151 million, $157 million and $137 million in 1998, 1997 and
1996, respectively.
Trading assets consist predominantly of securities, including corporate
debt and U.S. government agency obligations. Income from trading assets was
$206 million, $151 million and $79 million in 1998, 1997 and 1996,
respectively.
Amortization expense for certain identifiable intangible assets included
in other assets was $79 million, $74 million and $78 million in 1998, 1997
and 1996, respectively.
67
<PAGE>
NOTE 7 DEPOSITS
The aggregate amount of time certificates of deposit and other time
deposits issued by domestic offices was $31,252 million and $32,257 million at
December 31, 1998 and 1997, respectively. At December 31, 1998, the contractual
maturities of these deposits were as follows: $24,931 million in 1999, $3,752
million in 2000, $1,485 million in 2001, $454 million in 2002, $380 million in
2003 and $250 million thereafter. Substantially all of these deposits were
interest bearing.
Of the total above, the amount of time deposits with a denomination of
$100,000 or more was $8,053 million and $7,571 million at December 31, 1998 and
1997, respectively. At December 31, 1998, the contractual maturities of these
deposits were as follows: $3,391 million in 3 months or less, $1,893 million
over 3 through 6 months, $1,999 million over 6 through 12 months and $770
million over 12 months.
Time certificates of deposit and other time deposits issued by foreign
offices with a denomination of $100,000 or more represent substantially all of
the foreign deposit liabilities of $746 million and $1,402 million at December
31, 1998 and 1997, respectively.
Demand deposit overdrafts that have been reclassified as loan balances were
$678 million and $703 million at December 31, 1998 and 1997, respectively.
NOTE 8 SHORT-TERM BORROWINGS
The table below shows selected information for short-term borrowings. These
borrowings generally mature in less than 30 days.
At December 31, 1998, the Company had available lines of credit totaling
$2,521 million, all of which was obtained by a subsidiary, Norwest Financial. A
portion of these financing arrangements require the maintenance of compensating
balances or payment of fees, which are not material.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(in millions) 1998 1997 1996
---------------------- ----------------------- ---------------------
AMOUNT RATE Amount Rate Amount Rate
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31,
Commercial paper and other
short-term borrowings $ 9,553 5.26% $ 6,456 5.73% $ 5,309 5.37%
Federal funds purchased and
securities sold under
agreements to repurchase 6,344 4.18 6,925 5.59 4,694 5.26
------- ------- -------
Total $15,897 4.83 $13,381 5.65 $10,003 5.32
======= ======= =======
YEAR ENDED DECEMBER 31,
AVERAGE DAILY BALANCE
Commercial paper and other
short-term borrowings $ 7,676 5.60% $ 5,473 5.59% $ 5,998 5.37%
Federal funds purchased and
securities sold under
agreements to repurchase 6,778 5.11 5,889 5.17 4,694 5.10
------- ------- -------
Total $14,454 5.37 $11,362 5.37 $10,692 5.26
======= ======= =======
MAXIMUM MONTH-END BALANCE
Commercial paper and other
short-term borrowings (1) $10,236 NA $ 6,456 NA $ 7,785 NA
Federal funds purchased and
securities sold under
agreements to repurchase (2) 10,364 NA 8,722 NA 6,320 NA
NA-Not applicable.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Highest month-end balance in each of the last three years appeared in
October 1998, December 1997 and July 1996, respectively.
(2) Highest month-end balance in each of the last three years appeared in April
1998, June 1997 and January 1996, respectively.
68
<PAGE>
NOTE 9 LONG-TERM DEBT
The following is a summary of long-term debt (reflecting unamortized debt
discounts and premiums, where applicable) owed by the Parent and its
subsidiaries:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Maturity Interest
(in millions) date rate 1998 1997
<S> <C> <C> <C> <C>
WELLS FARGO & COMPANY (PARENT ONLY)
SENIOR
Medium-Term Notes (1) 1999-2006 5.625% - 8.15% $ 3,275 $ 4,225
Medium-Term Notes 1999-2027 4.90% - 7.75% 1,125 233
Floating Rate Medium-Term Notes 1999 Various 700 330
Floating Rate Euro Medium-Term Notes 2001 Various 300 300
Notes (1) 2004 6.00% 2 100
Notes (1) 2000 6.00% 202 200
ESOP Notes 1999 8.52% 4 9
------- -------
Total senior debt - Parent 5,608 5,397
------- -------
SUBORDINATED
Notes 2003 6.625% 200 200
Debentures 2023 6.65% 200 200
Other notes (1) 2003-2004 6.0% - 6.625% 2 8
------- -------
Total subordinated debt - Parent 402 408
------- -------
Total long-term debt - Parent 6,010 5,805
------- -------
WFC HOLDINGS CORPORATION AND SUBSIDIARIES
SENIOR
Floating-Rate Medium-Term Notes 1999 Various 150 1,460
Notes (1) 1998 11.00% -- 55
Medium-Term Notes (1)(2) 1999-2002 7.78% - 10.90% 243 356
Notes payable by subsidiaries 51 53
Obligations of subsidiaries under capital leases (Note 6) 20 59
------- -------
Total senior debt - WFC Holdings 464 1,983
------- -------
SUBORDINATED
Floating-Rate Capital Notes (3)(4)(5) 1998 Various -- 200
Floating-Rate Notes (3)(4) 2000 Various 118 118
Capital Notes (5) 1999 8.625% 183 186
Notes (1)(2)(6) 2002 8.15% -- 101
Notes 2002 8.75% 195 200
Notes 2002 8.375% 138 149
Notes 2003 6.875% 150 150
Notes 2003 6.125% 249 249
Notes (1)(2) 2004 9.125% 136 137
Notes (1)(2)(6) 2004 9.0% 127 124
Notes (1) 2006 6.875% 499 499
Notes (1)(2) 2006 7.125% 299 299
Notes 2008 6.25% 199 --
Medium-Term Notes (1) 2001-2002 9.38% - 11.25% 157 173
Medium-Term Notes 2013 6.50% - 6.63% 50 --
------- -------
Total subordinated debt - WFC Holdings 2,500 2,585
------- -------
Total long-term debt - WFC Holdings 2,964 4,568
------- -------
NORWEST FINANCIAL, INC. AND ITS SUBSIDIARIES (NFI)
Senior debt 1999-2009 4.79% - 8.65% 5,273 5,219
------- -------
Subordinated debt 1998 7.34% -- 2
------- -------
Total long-term debt - NFI 5,273 5,221
------- -------
OTHER CONSOLIDATED SUBSIDIARIES
SENIOR
FHLB Notes and Advances (7) 1999-2027 3.15% - 8.38% 2,768 377
Floating Rate FHLB Advances (7) 1999-2011 Various 2,655 1,326
Senior Notes 1999-2000 12.25% 1 2
Other notes and debentures 1999-2006 3.00% - 12.72% 22 20
Capital lease obligations (Note 6) 16 16
------- -------
Total long-term debt - other consolidated subsidiaries 5,462 1,741
------- -------
Total consolidated long-term debt $19,709 $17,335
======= =======
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company entered into interest rate swap agreements for substantially
all of these Notes, whereby the Company receives fixed-rate interest
payments approximately equal to interest on the Notes and makes interest
payments based on an average three-month or six-month LIBOR rate.
(2) The interest rate swap agreement for these Notes is callable by the
counterparty prior to the maturity of the Notes.
(3) Notes are currently redeemable in whole or in part, at par.
(4) May be redeemed in whole, at par, at any time in the event withholding
taxes are imposed by the United States.
(5) Mandatory Equity Notes.
(6) These Notes are redeemable in whole or in part, at par, prior to maturity.
(7) The maturities of the FHLB advances are determined quarterly, based on the
outstanding balance, the then current LIBOR rate, and the maximum life of
the advance. Advances maturing within the next year are expected to be
refinanced, extending the maturity of such borrowings beyond one year.
69
<PAGE>
At December 31, 1998, the principal payments, including sinking fund
payments, on long-term debt are due as follows in the table below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(in millions) Parent Company
<S> <C> <C>
1999 $1,781 $ 7,679
2000 802 1,928
2001 801 1,687
2002 526 1,611
2003 400 1,820
Thereafter 1,700 4,984
------ -------
Total $6,010 $19,709
====== =======
- -------------------------------------------------------------------------------
</TABLE>
The interest rates on floating-rate notes are determined periodically by
formulas based on certain money market rates, subject, on certain notes, to
minimum or maximum interest rates.
The terms of the Mandatory Equity Notes of $183 million, due in 1999, require
the Company to sell or exchange with the noteholder the Company's common stock,
perpetual preferred stock or other capital securities at maturity or earlier
redemption of the Notes. At December 31, 1998, $183 million of stockholders'
equity had been designated for the retirement or redemption of these Notes.
Repayment is subordinated, but only to the extent described in the indenture
relating to the debentures, to the prior payment in full of all the Company's
obligations for borrowed money. They are redeemable at the principal amount.
Certain of the agreements under which debt has been issued contain provisions
that may limit the merger or sale of certain subsidiary banks and the issuance
of capital stock or convertible securities by certain subsidiary banks. The
Company was in compliance with the provisions of the borrowing agreements at
December 31, 1998.
NOTE 10 GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S SUBORDINATED
DEBENTURES
In 1996, the former Wells Fargo established four separate special purpose
trusts, which collectively issued $1,150 million in trust preferred securities.
In 1997, the former Wells Fargo issued an additional $150 million in trust
preferred securities through a separate trust. The proceeds from such issuances,
together with the proceeds of the related issuances of common securities of the
trusts, were invested in junior subordinated deferrable interest debentures
(debentures) of the former Wells Fargo. Concurrent with the issuance of the
preferred securities by the trusts, the former Wells Fargo issued guarantees for
the benefit of the security holders. These trust preferred securities provide
the Company with a more cost-effective means of obtaining Tier 1 capital for
regulatory purposes than if the Company itself were to issue additional
preferred stock because the Company is allowed to deduct, for income tax
purposes, distributions to the holders of the trust preferred securities. The
sole assets of these special purpose trusts are the debentures. WFC Holdings
Corporation (WFC Holdings), as successor to the former Wells Fargo, owns all of
the common securities of the five trusts. The preferred securities issued by the
trusts rank senior to the common securities. The obligations of WFC Holdings
under the debentures, the indentures, the relevant trust agreements and the
guarantees, in the aggregate, constitute a full and unconditional guarantee by
WFC Holdings of the obligations of the trusts under the trust preferred
securities and rank subordinate and junior in right of payment to all other
liabilities of WFC Holdings. The Parent guarantees the obligations of WFC
Holdings.
Listed below are the series of trust preferred securities of Wells Fargo
Capital A, Wells Fargo Capital B, Wells Fargo Capital C, Wells Fargo Capital I
and Wells Fargo Capital II issued at $1,000 per security. The distributions are
cumulative and payable semi-annually on the first day of June and December for
Wells Fargo Capital A, Wells Fargo Capital B and Wells Fargo Capital C and on
the fifteenth day of June and December for Wells Fargo Capital I. The
distributions are cumulative and payable
70
<PAGE>
quarterly on the 30th of January, April, July and October for Wells Fargo
Capital II. The trust preferred securities are subject to mandatory redemption
at the stated maturity date of the debentures, upon repayment of the debentures,
or earlier, pursuant to the terms of the Trust Agreement.
WELLS FARGO CAPITAL A: This trust issued $300 million in trust preferred
securities in November 1996 and concurrently invested $309 million in debentures
of WFC Holdings with a stated maturity of December 1, 2026. The Company
repurchased $85 million in this class of trust preferred securities in the open
market in 1998. The repurchased securities were cancelled and the trust
decreased its investment by $88 million in debentures of WFC Holdings. This
class of trust preferred securities will accrue semi-annual distributions
of $40.63 per security (8.13% annualized rate).
WELLS FARGO CAPITAL B: This trust issued $200 million in trust preferred
securities in November 1996 and concurrently invested $206 million in debentures
of WFC Holdings with a stated maturity of December 1, 2026. The Company
repurchased $153 million in this class of trust preferred securities on the open
market in 1998. The repurchased securities were cancelled and the trust
decreased its investment by $158 million in debentures of WFC Holdings. This
class of trust preferred securities will accrue semi-annual distributions of
$39.75 per security (7.95% annualized rate).
WELLS FARGO CAPITAL C: This trust issued $250 million in trust preferred
securities in November 1996 and concurrently invested $258 million in debentures
of WFC Holdings with a stated maturity of December 1, 2026. The Company
repurchased $186 million in this class of trust preferred securities on the open
market in 1998. The repurchased securities were cancelled and the trust
decreased its investment by $192 million in debentures of WFC Holdings. This
class of trust preferred securities will accrue semi-annual distributions of
$38.65 per security (7.73% annualized rate).
WELLS FARGO CAPITAL I: This trust issued $400 million in trust preferred
securities in December 1996 and concurrently invested $412 million in debentures
of WFC Holdings with a stated maturity of December 15, 2026. The Company
repurchased $212 million in this class of trust preferred securities on the open
market in 1998. The repurchased securities were cancelled and the trust
decreased its investment by $219 million in debentures of WFC Holdings. This
class of trust preferred securities will accrue semi-annual distributions of
$39.80 per security (7.96% annualized rate).
WELLS FARGO CAPITAL II: This trust issued $150 million in trust preferred
securities in January 1997 and concurrently invested $155 million in debentures
of WFC Holdings with a stated maturity of January 30, 2027. This class of trust
preferred securities will accrue quarterly distributions at a variable annual
rate of LIBOR plus 0.5%.
On or after December 2006 for Wells Fargo Capital A, Wells Fargo Capital B,
Wells Fargo Capital C and Wells Fargo Capital I and on or after January 2007 for
Wells Fargo Capital II, each of the series of trust preferred securities may be
redeemed and the corresponding debentures may be prepaid at the option of WFC
Holdings, subject to Federal Reserve approval, at declining redemption prices.
Prior to December 2006 for Wells Fargo Capital A, Wells Fargo Capital B, Wells
Fargo Capital C and Wells Fargo Capital I and prior to January 2007 for Wells
Fargo Capital II, the securities may be redeemed at the option of WFC Holdings
on the occurrence of certain events that result in a negative tax impact,
negative regulatory impact on the trust preferred securities of WFC Holdings or
negative legal or regulatory impact on the appropriate special purpose trust
which would define it as an investment company. In addition, WFC Holdings has
the right to defer payment of interest on the debentures and, therefore,
distributions on the trust preferred securities for up to five years.
71
<PAGE>
NOTE 11 PREFERRED STOCK
The Company is authorized to issue 20,000,000 shares of preferred stock and
4,000,000 shares of preference stock, without par value. Of the 20,000,000
preferred shares authorized, there were 6,535,362 shares and 6,531,405 shares of
preferred stock issued and outstanding at December 31, 1998 and 1997,
respectively. No shares of preference stock are currently outstanding. All
preferred shares outstanding rank senior to common shares both as to dividends
and liquidation preference but have no general voting rights.
The following table is a summary of preferred stock (adjustable and fixed):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Shares issued Carrying amount Dividends declared
and outstanding (in millions) (in millions)
-------------------- ----------------- Adjustable ----------------------
December 31, December 31, dividends rate Year ended December 31,
-------------------- ----------------- -------------------- ----------------------
1998 1997 1998 1997 Minimum Maximum 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Adjustable-Rate Cumulative, Series B
(Liquidation preference $50) 1,500,000 1,500,000 $ 75 $ 75 5.5% 10.5% $ 4 $ 4 $ 4
9% Cumulative, Series C
(Liquidation preference $500)(1) -- -- -- -- -- -- -- -- 21
8-7/8% Cumulative, Series D
(Liquidation preference $500)(2) -- -- -- -- -- -- -- 3 16
9-7/8% Cumulative, Series F
(Liquidation preference $200)(3)(4) -- -- -- -- -- -- -- -- 12
9% Cumulative, Series G
(Liquidation preference $200)(3)(5) -- -- -- -- -- -- -- 5 10
6.59%/Adjustable-Rate Noncumulative
Preferred Stock, Series H
(Liquidation preference $50) 4,000,000 4,000,000 200 200 7.0 13.0 13 13 4
Cumulative Tracking
(Liquidation preference $200) 980,000 980,000 196 196 9.30 9.30 18 18 18
1998 ESOP Cumulative Convertible
(Liquidation preference $1,000) 8,740 -- 9 -- 10.75 11.75 -- -- --
1997 ESOP Cumulative Convertible
(Liquidation preference $1,000) 19,698 22,927 20 23 9.50 10.50 -- -- --
1996 ESOP Cumulative Convertible
(Liquidation preference $1,000) 22,068 22,831 22 23 8.50 9.50 -- -- --
1995 ESOP Cumulative Convertible
(Liquidation preference $1,000) 20,130 20,625 20 21 10.0 10.0 -- -- --
ESOP Cumulative Convertible
(Liquidation preference $1,000) 9,726 10,022 10 10 9.0 9.0 -- -- --
Unearned ESOP shares (6) -- -- (84) (80) -- -- -- -- --
Less: Cumulative Tracking
held by subsidiary
(Liquidation preference $200) 25,000 25,000 5 5 9.30 9.30 -- -- --
--------- --------- ---- ---- --- --- ---
Total 6,535,362 6,531,405 $463 $463 $35 $43 $85
========= ========= ==== ==== === === ===
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In December 1996, the Company redeemed all $239 million (477,500 shares) of
its Series C preferred stock.
(2) In March 1997, the Company redeemed all $175 million (350,000 shares) of
its Series D preferred stock.
(3) In April 1996, the Series F and Series G preferred stock were converted
from First Interstate preferred stock into the right to receive one share
of the Company's preferred stock.
(4) In November 1996, the Company redeemed all $200 million (1,000,000 shares)
of its Series F preferred stock.
(5) In May 1997, the Company redeemed all $150 million (750,000 shares) of its
Series G preferred stock.
(6) In accordance with the American Institute of Certified Public Accountants
(AICPA) Statement of Position 93-6, "Employers' Accounting for Employee
Stock Ownership Plans," the Company recorded a corresponding charge to
unearned ESOP shares in connection with the issuance of the ESOP Preferred
Stock. The unearned ESOP shares are reduced as shares of the ESOP Preferred
Stock are committed to be released. For information on dividends declared,
see Note 12.
72
<PAGE>
ADJUSTABLE-RATE CUMULATIVE PREFERRED STOCK, SERIES B These shares are
redeemable at the option of the Company at $50 per share plus accrued and unpaid
dividends. Dividends are cumulative and payable quarterly on the 15th of
February, May, August and November. For each quarterly period, the dividend rate
is 76% of the highest of the three-month Treasury bill discount rate, 10-year
constant maturity Treasury security yield or 20-year constant maturity Treasury
bond yield, but limited to a minimum of 5.5% and a maximum of 10.5% per year.
The average dividend rate was 5.5% during 1998, 1997 and 1996.
6.59%/ADJUSTABLE-RATE NONCUMULATIVE PREFERRED STOCK, SERIES H These shares
are redeemable at the option of the Company on or after October 1, 2001 at a
price of $50 per share plus accrued and unpaid dividends. Dividends are
noncumulative and payable on the first day of each calendar quarter at an
annualized rate of 6.59% through October 1, 2001. The dividend rate after
October 1, 2001 will be equal to .44% plus the highest of the Treasury bill
discount rate, the 10-year constant maturity rate and the 30-year constant
maturity rate, as determined in advance of such dividend period, limited to a
minimum of 7% and a maximum of 13%.
CUMULATIVE TRACKING PREFERRED STOCK On December 30, 1994, the Company
issued 980,000 shares of Cumulative Tracking Preferred Stock, $200
liquidation value per share, of which 25,000 shares were held by a subsidiary
at December 31, 1998, 1997 and 1996. Dividends on shares of Cumulative
Tracking Preferred Stock are cumulative from the date of issue and are
payable quarterly. The initial dividend rate is 9.30 percent per annum. The
dividend rate is reset on January 1, 2000, and on January 1 of each fifth
year thereafter. The reset rate is the greater of the 5-, 10-, or 30-year
Treasury rate or three-month LIBOR plus 250 basis points. At the time of
initial issuance of the shares of Cumulative Tracking Preferred Stock, the
holders thereof became assignees of the Company's beneficial interest in an
equivalent number of Class A preferred limited liability company interests of
Residential Home Mortgage, L.L.C., a subsidiary of the Company. Holders of
shares of Cumulative Tracking Preferred Stock are entitled to receive, in
addition to the dividends, certain additional cash distributions that are
based on the results of operations of the limited liability company. The
shares of Cumulative Tracking Preferred Stock may be redeemed after December
31, 1999, at the option of the Company. The shares of Cumulative Tracking
Preferred Stock rank on a parity, both as to payment of dividends and the
distribution of assets on liquidation, with the Company's ESOP Preferred
Stock. The Cumulative Tracking Preferred Stock ranks prior, both as to
payment of dividends and the distribution of assets upon liquidation, to
common stock and, if any, the Company's junior participating preferred stock.
At December 31, 1998, there were two holders of record of Cumulative Tracking
Preferred Stock.
ESOP CUMULATIVE CONVERTIBLE PREFERRED STOCK All shares of the Company's
1998 ESOP Cumulative Convertible Preferred Stock, 1997 ESOP Cumulative
Convertible Preferred Stock, 1996 ESOP Cumulative Convertible Preferred
Stock, 1995 ESOP Cumulative Convertible Preferred Stock and ESOP Cumulative
Convertible Preferred Stock (collectively, ESOP Preferred Stock) were issued
to a trustee acting on behalf of the Norwest Corporation Savings Investment
Plan and Master Savings Trust (the Plan). Dividends on the ESOP Preferred
Stock are cumulative from the date of initial issuance and are payable
quarterly at annual rates ranging from 8.50 percent to 11.75 percent,
depending upon the year of issuance. Each share of ESOP Preferred Stock
released from the unallocated reserve of the Plan is converted into shares of
common stock of the Company based on the stated value of the ESOP Preferred
Stock and the then current market price of the Company's common stock. The
ESOP Preferred Stock is also convertible at the option of the holder at any
time, unless previously redeemed. The ESOP Preferred Stock is redeemable at
any time, in whole or in part, at the option of the Company at a redemption
price per share equal to the higher of (a) $1,000 per share plus accrued and
unpaid dividends and (b) the fair market value, as defined in the
Certificates of Designation of the ESOP Preferred Stock.
73
<PAGE>
NOTE 12 COMMON STOCK AND STOCK PLANS
COMMON STOCK
- --------------------------------------------------------------------------------
The table below summarizes common stock reserved, issued and authorized as of
December 31, 1998:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Number of shares
<S> <C>
Convertible subordinated
debentures and warrants (1) 35,962,948
Dividend reinvestment and
common stock purchased plans 2,903,154
Director plans 1,288,212
Employee stock plans 184,997,869
-------------
Total shares reserved 225,152,183
Shares issued 1,661,392,590
Shares not reserved 2,113,455,227
-------------
Total shares authorized 4,000,000,000
=============
- -------------------------------------------------------------------------------
</TABLE>
(1) Includes warrants issued by the Company to subsidiaries to purchase shares
of the Company's common stock as follows: 8,928,172 shares at $42.50 per
share in 1996, 11,000,176 shares at $37.50 per share in 1995 and 16,000,000
shares at $35.00 per share in 1994.
Under the terms of mandatory convertible debt, the Company must exchange with
the noteholder, or sell, various capital securities of the Company as described
in Note 9.
Each share of the Company's common stock includes one preferred share
purchase right. These rights will become exercisable only if a person or group
acquires or announces an offer to acquire 15 percent or more of the Company's
common stock. When exercisable, each right will entitle the holder to buy one
one-thousandth of a share of a new series of junior participating preferred
stock at a price of $160 for each one one-thousandth of a preferred share. In
addition, upon the occurrence of certain events, holders of the rights will be
entitled to purchase either the Company's common stock or shares in an
"acquiring entity" at one-half of the then current market value. The Company
will generally be entitled to redeem the rights at one cent per right at any
time before they become exercisable. The rights will expire on November 23,
2008, unless extended, previously redeemed or exercised. The Company has
reserved 1.125 million shares of preferred stock for issuance upon exercise of
the rights.
DIVIDEND REINVESTMENT AND
COMMON STOCK PURCHASE PLANS
The Company's dividend reinvestment and common stock direct purchase plans
permit participants to purchase at fair market value shares of the Company's
common stock by reinvestment of dividends and/or optional cash payments, subject
to the terms of the plans.
DIRECTOR PLANS
Under the Company's director plans, directors receive stock as a part of
their annual retainer or could elect to receive stock options in lieu of an
annual cash retainer, subject to the terms of the respective plans. Another plan
provides for annual grants of options to purchase common stock to each
non-employee director elected or re-elected at the annual meeting of
stockholders. Options granted become exercisable after one year and may be
exercised until the tenth anniversary of the date of grant. Compensation expense
for the options is measured as the quoted market price of the stock at the date
of grant less the exercise price and is accrued over the vesting period.
EMPLOYEE STOCK PLANS
LONG-TERM INCENTIVE PLANS The Company's stock incentive plans provide for
awards of incentive and nonqualified stock options, stock appreciation rights,
restricted shares, restricted share rights, performance awards and stock awards
without restrictions. Employee stock options can be granted with exercise prices
at or above the quoted market price of the stock at the date of grant and with
terms of up to ten years. The options generally become fully exercisable over
three years from the date of grant. Upon termination of employment for reasons
other than retirement, permanent disability or death, the option period is
reduced or the options are canceled. Options also may include the right to
acquire an Accelerated Ownership Non-Qualified Stock Option (AO). If an option
contains the AO feature and if a participant pays all or part of the exercise
price of the option with shares of stock purchased in the market or held by the
participant for at least six months, upon
74
<PAGE>
exercise of the option, the participant is granted an AO to purchase, at the
quoted market price at the date of the AO grant, the number of shares of stock
equal to the sum of the number of shares used in payment of the exercise price
and a number of shares with respect to taxes. No compensation expense was
recorded for the options granted under the plans, as the exercise price was
equal to the quoted market price of the stock at the date of grant. The total
number of shares of common stock available for grant under the plans as of
December 31, 1998 is 60,528,277.
Holders of restricted shares and restricted share rights are entitled at no
cost to the related shares of common stock generally five years after the
restricted shares or restricted share rights were granted. Upon grant of the
restricted shares or restricted share rights, generally holders are entitled to
receive quarterly cash payments equal to the cash dividends that would be paid
on common stock equal to the number of restricted shares or restricted share
rights. Except in limited circumstances, restricted shares and restricted share
rights are canceled upon termination of employment. In 1998, 1997 and 1996,
there were 371,560, 280,020 and 952,330 restricted shares and restricted share
rights granted, respectively, with a weighted-average grant-date fair value of
$37.72, $30.89 and $23.69, respectively. As of December 31, 1998, 1997 and 1996,
there were 3,086,500, 2,084,540 and 1,097,000 restricted shares and restricted
share rights outstanding, respectively. The compensation expense for the
restricted shares and restricted share rights equals the quoted market price of
the related stock at the date of grant and is accrued on a straight-line basis
over the vesting period. The total compensation expense recognized for the
restricted shares and restricted share rights was $9 million, $11 million and
$10 million in 1998, 1997 and 1996, respectively.
In connection with various acquisitions and mergers since 1992, the Company
converted employee and director stock options of acquired or merged companies
into stock options to purchase the Company's common stock based on the original
stock option plan and the agreed-upon exchange ratio.
BROAD-BASED PLANS In 1996, the Company adopted the Best Practices
PartnerShares Plan, a broad-based employee stock option plan covering full- and
part-time employees who were not participants in the long-term incentive plans
described above. The total number of shares of common stock issuable under the
plan as of December 31, 1998 is 56,569,400, including 16,082,000 shares
available for grant. Options granted under the PartnerShares Plan have an
exercise date that generally is the earlier of five years after the date of
grant or when the quoted market price of the stock exceeds a predetermined
price. Options generally expire ten years after the date of grant. No
compensation expense has been recorded for the options, as the exercise prices
were equal to or higher than the quoted market price of the Company's common
stock at the respective dates of grant.
The Company also offers participation in the Employee Stock Purchase Plan
(ESPP). Options to purchase 1,318,580 shares of common stock were outstanding as
of December 31, 1998 under the ESPP. Employees of the former Wells Fargo who
have completed their introductory period of employment, except hourly employees,
are eligible to participate. Certain highly compensated employees may be
excluded from participation at the discretion of a committee of the Board of
Directors. The ESPP provides for a purchase price of the lower of the quoted
market price of the stock at the date of grant or 85% to 100% (as determined by
the Board of Directors for each period) of the quoted market price at the end of
a one-year period. For the current period ending August 31, 1999, the Board
approved a closing purchase price of 85% of the quoted market price. The ESPP is
noncompensatory and results in no expense to the Company.
75
<PAGE>
The following table summarizes the Company's stock option activity and
related information for the three years ended December 31, 1998:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Director Plans Long-Term Incentive Plans Broad-Based Plans
--------------------- ------------------------- -------------------------
Number Weighted- Number Weighted- Number Weighted-
average average average
exercise exercise exercise
price price price
<S> <C> <C> <C> <C> <C> <C>
OPTIONS OUTSTANDING AS OF
DECEMBER 31, 1995 335,710 $ 9.67 47,289,664 $11.33 1,299,800 $18.23
------- ---------- ----------
1996:
Granted 113,910(1) 22.57 6,568,650(2)(3) 21.35 11,330,580(4) 17.43
Acquired (5) -- -- 9,379,334 9.33 -- --
Canceled -- -- (719,358) 14.10 (1,087,990) 17.91
Exercised (5,000) 6.63 (13,416,038) 10.08 (768,330) 18.23
------- ---------- ----------
OPTIONS OUTSTANDING AS OF
DECEMBER 31, 1996 444,620 13.01 49,102,252 12.59 10,774,060 17.42
------- ---------- ----------
1997:
Granted 103,890(1) 23.49 29,985,212(2)(3) 30.31 23,678,530(4) 30.11
Canceled -- -- (1,356,735) 22.89 (3,935,110) 17.93
Exercised (29,230) 9.87 (14,801,394) 10.30 (5,275,570) 17.57
------- ---------- ----------
OPTIONS OUTSTANDING AS OF
DECEMBER 31, 1997 519,280 15.28 62,929,335 21.34 25,241,910 29.21
------- ---------- ----------
1998:
Granted 84,860(1) 34.38 9,695,931(2)(3) 36.25 21,295,860(4) 37.29
Canceled -- -- (1,521,074) 27.08 (2,866,310) 31.22
Exercised (102,610) 11.72 (10,330,783) 15.50 (1,865,480) 21.40
------- ---------- ----------
OPTIONS OUTSTANDING AS OF
DECEMBER 31, 1998 501,530 $19.24 60,773,409 $24.58 41,805,980 $33.60
======= ====== ========== ====== ========== ======
Outstanding options
exercisable as of:
December 31, 1996 330,710 $ 9.71 37,222,532 $10.94 -- $ --
December 31, 1997 417,920 13.23 33,930,575 14.12 3,315,200 16.90
DECEMBER 31, 1998 434,020 17.29 35,990,530 19.57 3,255,200 22.05
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The weighted-average per share fair value of options granted was $11.85,
$10.26 and $9.05 for 1998, 1997 and 1996, respectively.
(2) The weighted-average per share fair value of options granted was $7.40,
$5.08 and $5.10 for 1998, 1997 and 1996, respectively.
(3) Includes 2,094,111, 2,687,762 and 2,680,800 AO grants at December 31, 1998,
1997 and 1996, respectively.
(4) The weighted-average per share fair value of options granted was $5.42,
$4.92 and $3.18 for 1998, 1997 and 1996, respectively.
(5) Options assumed in connection with the acquisition of First Interstate and
Benson Financial Corporation.
76
<PAGE>
The following table is a summary of selected information for the Company's
stock option plans described on the preceding page:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
December 31, 1998
-------------------------------------
Weighted- Number Weighted-
average average
remaining exercise
contractual price
life (in yrs.)
<S> <C> <C> <C>
RANGE OF EXERCISE PRICES
DIRECTOR PLANS
$.10
Options outstanding/exercisable 4.0 29,730 $ .10
$4.46-$6.69
Options outstanding 3.1 32,520 6.46
Options exercisable 27,520 6.43
$6.70-$10.05
Options outstanding/exercisable 2.0 45,000 7.45
$10.06-$15.09
Options outstanding/exercisable 5.7 105,570 13.07
$15.10-$22.65
Options outstanding 6.9 59,470 16.24
Options exercisable 46,580 16.03
$22.66-$33.99
Options outstanding/exercisable 7.7 159,620 25.67
$34.00-$51.00
Options outstanding 9.3 69,620 38.19
Options exercisable 20,000 38.20
LONG-TERM INCENTIVE PLANS
$2.24-$3.36
Options outstanding/exercisable 2.3 83,090 2.51
$3.37-$5.06
Options outstanding/exercisable 4.3 285,254 4.62
$5.07-$7.60
Options outstanding 2.8 4,197,516 7.22
Options exercisable 4,188,508 7.22
$7.61-$11.41
Options outstanding 4.1 3,321,876 10.70
Options exercisable 3,319,728 10.70
$11.42-$17.13
Options outstanding 5.1 11,450,694 13.84
Options exercisable 11,295,928 13.84
$17.14-$25.71
Options outstanding 6.2 4,495,337 20.60
Options exercisable 4,430,509 20.56
$25.72-$38.58
Options outstanding 8.5 35,970,343 31.57
Options exercisable 11,566,066 30.82
$38.59-$57.89
Options outstanding 6.7 969,299 40.22
Options exercisable 821,447 40.33
BROAD-BASED PLANS
$16.56-$24.84
Options outstanding/exercisable 7.5 2,191,000 16.56
$24.85-$37.81
Options outstanding 9.0 39,614,980 34.53
Options exercisable 1,064,200 33.37
- -----------------------------------------------------------------------------
</TABLE>
In October 1995, the FASB issued FAS 123, Accounting for Stock-Based
Compensation. As provided for under FAS 123, the Company elected to continue to
apply the provisions of Accounting Principles Board Opinion 25, Accounting for
Stock Issued to Employees, in accounting for the stock plans described above.
Had compensation cost for these stock plans been determined based on the
(optional) fair value method established by FAS 123, the Company's net income
and earnings per common share would have been reduced to the pro forma amounts
indicated below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Year ended December 31,
(in millions, except per ------------------------
common share amounts) 1998 1997 1996
<S> <C> <C> <C>
Net income
As reported $1,950 $2,499 $2,228
Pro forma (1) 1,867 2,448 2,210
Earnings per common share
As reported $ 1.18 $ 1.50 $ 1.38
Pro forma (1) 1.13 1.43 1.36
Diluted earnings per common share
As reported $ 1.17 $ 1.48 $ 1.36
Pro forma (1) 1.12 1.42 1.33
- -------------------------------------------------------------------------------
</TABLE>
(1) The pro forma amounts noted above only reflect the effects of stock-based
compensation grants made after 1994. Because stock options may be granted
each year and generally vest over three years, these pro forma amounts may
not reflect the full effect of applying the (optional) fair value method
established by FAS 123 that would be expected if all outstanding stock
option grants were accounted for under this method.
The fair value of each option grant is estimated based on the date of grant
using an option-pricing model. The following weighted-average assumptions were
used in 1998, 1997 and 1996: expected dividend yield ranging from 1.4% to 2.2%;
expected volatility ranging from 20.0% to 29.0%; risk-free interest rates
ranging from 5.5% to 7.8% and expected life ranging from 1 to 5.4 years.
77
<PAGE>
EMPLOYEE STOCK OWNERSHIP PLAN The Savings Investment Plan (SIP), a defined
contribution plan, contains Employee Stock Ownership Plan (ESOP) provisions
under which SIP may borrow money to purchase the Company's common or preferred
stock. Beginning in 1994, the Company has loaned money to SIP which has been
used to purchase shares of the Company's ESOP Preferred Stock. As ESOP Preferred
Stock is released and converted into common shares, compensation expense is
recorded equal to the current market price of the common shares. Dividends on
the common shares allocated as a result of the release and conversion of the
ESOP Preferred Stock are recorded as a reduction of retained earnings and the
shares are considered outstanding for purposes of earnings per share
computations. Dividends on the unallocated ESOP Preferred Stock are not recorded
as a reduction of retained earnings, and the shares are not considered to be
common stock equivalents for purposes of earnings per share computations. Loan
principal and interest payments are made from the Company's contributions to
SIP, along with dividends paid on the ESOP Preferred Stock. With each principal
and interest payment, a portion of the ESOP Preferred Stock is released and,
after conversion of the ESOP Preferred Stock into common shares, allocated to
SIP participants.
In 1989, the Company loaned money to SIP which was used to purchase shares of
the Company's common stock (the 1989 ESOP shares). The Company accounts for the
1989 ESOP shares in accordance with AICPA Statement of Position 76-3, Accounting
Practices for Certain Employee Stock Ownership Plans. Accordingly, the Company's
ESOP loans to SIP related to the purchase of the 1989 ESOP shares are recorded
as a reduction of stockholders' equity, and compensation expense based on the
cost of the shares is recorded as shares are released and allocated to
participants' accounts. The 1989 ESOP shares are considered outstanding for
purposes of earnings per share computations and dividends on the shares are
recorded as a reduction to retained earnings. The 1989 ESOP shares also include
ESOP shares acquired in conjunction with business combinations accounted for
under the pooling of interests method of accounting. The loans from the Company
to SIP are repayable in monthly installments through April 26, 1999, with
interest at 8.45%. Interest income on these loans was $1 million in 1998, 1997
and 1996 and is included as a reduction in employee benefits expense. Total
interest expense on the Series A and B ESOP Notes was $1 million, $1 million and
$4 million in 1998, 1997 and 1996, respectively. Total dividends paid to SIP on
ESOP shares were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(in millions) Year ended December 31,
-------------------------
1998 1997 1996
<S> <C> <C> <C>
ESOP Preferred Stock:
Common dividends $ 6 $ 4 $ 3
Preferred dividends 9 4 3
1989 ESOP shares:
Common dividends 11 11 9
--- --- ---
Total $26 $19 $15
=== === ===
- ------------------------------------------------------------------------------
</TABLE>
The ESOP shares as of December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
December 31,
-----------------------
1998 1997
<S> <C> <C>
ESOP Preferred Stock:
Allocated shares (common) 8,592,898 7,793,681
Unreleased shares (preferred) 80,362 76,405
1989 ESOP shares:
Allocated shares 15,018,861 15,555,673
Unreleased shares 320,285 1,053,925
Fair value of unearned ESOP shares
(in millions) $80 $76
- ------------------------------------------------------------------------------
</TABLE>
78
<PAGE>
NOTE 13 EMPLOYEE BENEFITS AND OTHER EXPENSES
EMPLOYEE BENEFITS
- --------------------------------------------------------------------------------
The Company's noncontributory defined benefit pension plans cover
substantially all full-time employees of the former Norwest. The Company also
has a defined benefit plan acquired as a result of the First Interstate Bancorp
(First Interstate) acquisition. Pursuant to the First Interstate merger
agreement, accrued benefits as of June 30, 1996 for all participants employed as
of March 28, 1996 became fully vested. Effective June 30, 1996, all accrued
benefits under the plan were frozen. The Company also provides health care and
life insurance benefits for certain retired employees. The Company reserves the
right to terminate those benefits at any time.
The following table shows the changes in the benefit obligation and the fair
value of plan assets during 1998 and 1997 and the amounts included in the
Company's Consolidated Balance Sheet as of December 31, 1998 and 1997 for the
Company's defined benefit pension and other postretirement benefit plans:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(in millions) December 31,
-------------------------------------------------
1998 1997
--------------------- ----------------------
PENSION OTHER Pension Other
BENEFITS BENEFITS benefits benefits
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT
OBLIGATION
Benefit obligation at
beginning of year $2,141 $ 457 $1,903 $ 424
Service cost 67 18 49 14
Interest cost 151 33 141 29
Plan participants'
contributions -- 5 -- 7
Amendments 1 -- -- --
Actuarial loss 231 58 144 15
Acquisitions 5 -- -- --
Benefits paid (109) (35) (96) (32)
------ ----- ------ -----
Benefit obligation
at end of year $2,487 $ 536 $2,141 $ 457
====== ===== ====== =====
CHANGE IN PLAN ASSETS
Fair value of plan assets
at beginning of year $2,521 $ 140 $2,100 $ 124
Actual return
on plan assets 115 12 477 17
Acquisitions 4 -- -- --
Employer contribution 17 96 40 24
Plan participants'
contributions -- 5 -- 7
Benefits paid (109) (35) (96) (32)
------ ----- ------ -----
Fair value of plan assets
at end of year $2,548 $ 218 $2,521 $ 140
====== ===== ====== =====
Funded status $ 61 $(318) $ 380 $(317)
Unrecognized net
actuarial gain (48) (5) (350) (52)
Unrecognized net
transition asset (7) -- (9) --
Unrecognized prior
service cost 7 1 7 --
------ ----- ------ -----
Prepaid (accrued)
benefit cost $ 13 $(322) $ 28 $(369)
====== ===== ====== =====
- ---------------------------------------------------------------------------
</TABLE>
The following table sets forth the components of net periodic benefit cost
for 1998, 1997 and 1996:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
(in millions) Year ended December 31,
----------------------------------------------------------
1998 1997 1996
------------------ ------------------ ------------------
PENSION OTHER Pension Other Pension Other
BENEFITS BENEFITS benefits benefits benefits benefits
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 67 $ 18 $ 49 $ 14 $ 50 $14
Interest cost 151 33 141 29 110 27
Expected return
on plan assets (205) (11) (174) (10) (132) (8)
Recognized
net actuarial
(gain) loss (1) 21 (1) 13 (9) (3) (5)
Amortization of
prior service cost 1 -- 1 -- -- --
Amortization of
unrecognized
transition asset (2) -- (2) -- (2) --
----- ---- ----- ---- ----- ---
Net periodic
benefit cost $ 33 $ 39 $ 28 $ 24 $ 23 $28
===== ==== ===== ==== ===== ===
- -------------------------------------------------------------------------------
</TABLE>
(1) Net gains and losses are generally amortized over five years.
The weighted-average assumptions used in calculating the amounts above were:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Year ended December 31,
-----------------------------------------------
1998 1997
--------------------- --------------------
PENSION OTHER Pension Other
BENEFITS BENEFITS benefits benefits
<S> <C> <C> <C> <C>
Discount rate 6.5% 6.5% 7.0% 6.9%-7.0%
Expected return
on plan assets 8.5%-9.0% 9.0% 8.5%-9.0% 5.4%
Rate of compensation
increase 5.0% --% 5.0% --%
- ------------------------------------------------------------------------------
</TABLE>
Accounting for the health care plans uses a health care cost trend rate to
recognize the effect of expected changes in future health care costs due to
medical inflation, utilization changes, technological changes, regulatory
requirements and Medicare cost shifting. Average annual increases of 5.5% for
HMOs and 9.0% to 10.0% for all other types of coverage in the per capita cost of
covered health care benefits were assumed for 1999. By 2006 and thereafter,
rates were assumed to remain level for HMOs at 5.5% and for all other types of
coverage at 5.5% to 8.0%. Increasing the assumed health care trend by one
percentage point in each year would increase the benefit obligation as of
December 31, 1998 by $62 million and the aggregate of the interest cost and
service cost components of the net periodic benefit cost for 1998 by $8 million.
Decreasing the assumed health care trend by one percentage point in each year
would decrease the benefit
79
<PAGE>
obligation as of December 31, 1998 by $53 million and the aggregate of the
interest cost and service cost components of the net periodic benefit cost for
1998 by $6 million.
The Company sponsors two primary defined contribution plans. Expenses for all
defined contribution plans were $174 million, $174 million, and $143 million in
1998, 1997 and 1996, respectively.
OTHER EXPENSES
The table to the right shows expenses which exceeded 1% of total interest
income and noninterest income and which are not otherwise shown separately in
the financial statements or notes thereto.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(in millions) Year ended December 31,
----------------------------
1998 1997 1996
<S> <C> <C> <C>
Outside professional services $391 $262 $254
Contract services 342 271 329
Donations 257 44 20
Telecommunications 252 241 234
Outside data processing 250 217 216
Advertising and promotion 237 202 234
Postage 228 210 206
Travel and entertainment 212 188 188
Stationery and supplies 178 182 192
- ------------------------------------------------------------------------------
</TABLE>
NOTE 14 INCOME TAXES
The following is a summary of the components of income tax expense applicable to
income before income taxes:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(in millions) Year ended December 31,
-------------------------------------
1998 1997 1996
<S> <C> <C> <C>
Current:
Federal $1,201 $1,242 $ 874
State and local 272 246 161
Foreign (1) 33 37
------ ------ ------
1,472 1,521 1,072
------ ------ ------
Deferred:
Federal (82) 147 371
State and local (32) 37 100
Foreign (15) (11) (4)
------ ------ ------
(129) 173 467
------ ------ ------
Total $1,343 $1,694 $1,539
====== ====== ======
- ------------------------------------------------------------------------------
</TABLE>
The Company's tax benefit related to the exercise of employee stock options
that were allocated to stockholders' equity was $90 million, $93 million and $37
million for 1998, 1997 and 1996, respectively.
The Company had a net deferred tax liability of $177 million and $163 million
at December 31, 1998 and 1997, respectively. The tax effect of temporary
differences that gave rise to significant portions of deferred tax assets and
liabilities at December 31, 1998 and 1997 are presented below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
(in millions) Year ended December 31,
----------------------
1998 1997
<S> <C> <C>
DEFERRED TAX ASSETS
Allowance for loan losses $1,143 $1,087
Net tax-deferred expenses 1,325 1,137
Other 271 365
------ ------
Total deferred tax assets 2,739 2,589
------ ------
DEFERRED TAX LIABILITIES
Core deposit intangible 498 624
Leasing 878 763
Mark to market 201 122
Mortgage servicing 871 747
FAS 115 adjustment 278 271
Other 190 225
------ ------
Total deferred tax liabilities 2,916 2,752
------ ------
NET DEFERRED TAX LIABILITY $ (177) $ (163)
====== ======
- -----------------------------------------------------------------------------
</TABLE>
80
<PAGE>
The Company has determined that it is not required to establish a valuation
reserve for any of the deferred tax assets since it is more likely than not that
these assets will be principally realized through carryback to taxable income in
prior years, and future reversals of existing taxable temporary differences,
and, to a lesser extent, future taxable income and tax planning strategies. The
Company's conclusion that it is "more likely than not" that the deferred tax
assets will be realized is based on federal taxable income of nearly $6 billion
in the carryback period, substantial state taxable income in the carryback
period, as well as a history of growth in earnings and the prospects for
continued growth.
The deferred tax liability related to unrealized gains and losses on
securities available for sale had no impact on 1998, 1997 or 1996 income tax
expense as these gains and losses, net of taxes, were recorded in cumulative
other comprehensive income.
The following table is a reconciliation of the statutory federal income tax
expense and rate to the effective income tax expense and rate:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(in millions) Year ended December 31,
-----------------------------------------------------------------------
1998 1997 1996
------------------- ------------------- ------------------
AMOUNT % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
Statutory federal income tax expense and rate $1,153 35.0% $1,468 35.0% $1,320 35.0%
Change in tax rate resulting from:
State and local taxes on income, net of
federal income tax benefit 156 4.7 162 3.8 155 4.1
Amortization of goodwill not
deductible for tax return purposes 125 3.8 151 3.6 118 3.1
Tax exempt income (57) (1.7) (37) (.9) (27) (.7)
Other (34) (1.0) (50) (1.1) (27) (.7)
------ ---- ------ ---- ------ ----
Effective income tax expense and rate $1,343 40.8% $1,694 40.4% $1,539 40.8%
====== ==== ====== ==== ====== ====
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company has not recognized a federal deferred tax liability of $36
million on $102 million of undistributed earnings of a foreign subsidiary
because such earnings are indefinitely reinvested in the subsidiary and are not
taxable under current law. A deferred tax liability would be recognized to the
extent the Company changed its intent to not indefinitely reinvest a portion or
all of such undistributed earnings. In addition, a current tax liability would
be recognized if the Company recovered those undistributed earnings in a taxable
manner, such as through the receipt of dividends or sale of the entity, or if
the tax law changed.
81
<PAGE>
NOTE 15 EARNINGS PER COMMON SHARE
The table below shows dual presentation of earnings per common share and
diluted earnings per common share and a reconciliation of the numerator and
denominator of both earnings per common share calculations.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
(in millions, except per share amounts) Year ended December 31,
-------------------------------------------------------
1998 1997 1996
<S> <C> <C> <C>
Net income $ 1,950 $ 2,499 $ 2,228
Less: Preferred stock dividends 35 43 85
-------- -------- --------
Net income applicable to common stock $ 1,915 $ 2,456 $ 2,143
======== ======== ========
EARNINGS PER COMMON SHARE
Net income applicable to common stock (numerator) $ 1,915 $ 2,456 $ 2,143
======== ======== ========
Average common shares outstanding (denominator) 1,621.5 1,634.6 1,553.3
======== ======== ========
Per share $ 1.18 $ 1.50 $ 1.38
======== ======== ========
DILUTED EARNINGS PER COMMON SHARE
Net income applicable to common stock (numerator) $ 1,915 $ 2,456 $ 2,143
======== ======== ========
Average common shares outstanding 1,621.5 1,634.6 1,553.3
Add: Stock options 18.3 20.6 14.3
Restricted share rights 2.0 2.6 2.9
-------- -------- --------
Diluted average common shares outstanding (denominator) 1,641.8 1,657.8 1,570.5
======== ======== ========
Per share $ 1.17 $ 1.48 $ 1.36
======== ======== ========
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
82
<PAGE>
NOTE 16 COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted FAS 130, Reporting Comprehensive
Income. The Statement requires that a company classify items of other
comprehensive income (and the related tax effect) by their nature (e.g.,
unrealized gains or losses on securities and foreign currency translation
adjustments) in a financial statement.
The following table presents the related tax effect allocated to each
component of other comprehensive income:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
(in millions) Before Tax Net of
tax effect tax
amount
<S> <C> <C> <C>
1996:
Translation adjustments $ (1) $ -- $ (1)
----- ---- -----
Unrealized losses on securities
available for sale arising
during the year (39) (20) (19)
Reclassification adjustment for
gains on securities available
for sale included in net income (12) (5) (7)
----- ---- -----
Net unrealized losses arising
during the year (51) (25) (26)
----- ---- -----
Other comprehensive income $ (52) $(25) $ (27)
===== ==== =====
1997:
Translation adjustments $ 1 $ -- $ 1
----- ---- -----
Unrealized gains on securities
available for sale arising
during the year 339 133 206
Reclassification adjustment for
gains on securities available
for sale included in net income (99) (40) (59)
----- ---- -----
Net unrealized gains arising
during the year 240 93 147
----- ---- -----
Other comprehensive income $ 241 $ 93 $ 148
===== ==== =====
1998:
Translation adjustments $ (6) $ (2) $ (4)
----- ---- -----
Unrealized gains on securities
available for sale arising
during the year 172 68 104
Reclassification adjustment for
gains on securities available
for sale included in net income (169) (68) (101)
----- ---- -----
Net unrealized gains arising
during the year 3 -- 3
----- ---- -----
Other comprehensive income $ (3) $ (2) $ (1)
===== ==== =====
- ------------------------------------------------------------------------------------
</TABLE>
The following table presents cumulative other comprehensive income balances:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
(in millions) Translation Unrealized Cumulative
adjustments gains (losses) other
on securities comprehensive
income
<S> <C> <C> <C>
Balance, December 31, 1995 $ (10) $ 353 $ 343
----- ----- -----
Net change (1) (26) (27)
----- ----- -----
Balance, December 31, 1996 (11) 327 316
----- ----- -----
Net change 1 147 148
----- ----- -----
Balance, December 31, 1997 (10) 474 464
----- ----- -----
Net change (4) 3 (1)
----- ----- -----
BALANCE, DECEMBER 31, 1998 $ (14) $ 477 $ 463
===== ===== =====
- ----------------------------------------------------------------------------------------------
</TABLE>
83
<PAGE>
NOTE 17 OPERATING SEGMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
(income/expense in millions, Community Wholesale Mortgage Norwest Reconciliation Consolidated
average balances in billions) Banking Banking Banking Financial column (7) Company
<S> <C> <C> <C> <C> <C> <C>
1998
Net interest income (1) $6,192 $1,344 $ 254 $1,303 $ (103) $ 8,990
Provision for loan losses (2) 653 148 4 752 (12) 1,545
Noninterest income (3) 4,186 892 1,078 303 (32) 6,427
Noninterest expense (3) 7,109 787 986 878 819 10,579
------ ------ ------ ------ ------ -------
Income (loss) before income tax expense (benefit) 2,616 1,301 342 (24) (942) 3,293
Income tax expense (benefit) (4) 972 521 125 ( 5) (270) 1,343
------ ------ ------ ------ ------ -------
Net income (loss) $1,644 $ 780 $ 217 $ (19) $ (672) $ 1,950
====== ====== ====== ====== ====== =======
1997
Net interest income (1) $6,313 $1,343 $ 69 $1,167 $ (244) $ 8,648
Provision for loan losses (2) 752 156 18 332 (118) 1,140
Noninterest income (3) 3,579 877 961 303 (45) 5,675
Noninterest expense (3) 5,750 731 774 758 977 8,990
------ ------ ------ ------ ------ -------
Income (loss) before income tax expense (benefit) 3,390 1,333 238 380 (1,148) 4,193
Income tax expense (benefit) (4) 1,309 541 87 138 (381) 1,694
------ ------ ------ ------ ------ -------
Net income (loss) $2,081 $ 792 $ 151 $ 242 $ (767) $ 2,499
====== ====== ====== ====== ====== =======
1996
Net interest income (1) $5,655 $1,307 $ 98 $1,067 $ 95 $ 8,222
Provision for loan losses (2) 652 141 1 247 (541) 500
Noninterest income (3) 2,867 713 874 280 35 4,769
Noninterest expense (3) 5,451 650 778 692 1,153 8,724
------ ------ ------ ------ ------ -------
Income (loss) before income tax expense (benefit) 2,419 1,229 193 408 (482) 3,767
Income tax expense (benefit) (4) 952 499 68 143 (123) 1,539
------ ------ ------ ------ ------ -------
Net income (loss) $1,467 $ 730 $ 125 $ 265 $ (359) $ 2,228
====== ====== ====== ====== ====== =======
1998
Average loans $ 64 $ 32 $ 1 $ 9 $ -- $ 106
Average assets 97 39 23 11 18 188
Average core deposits 110 9 5 -- -- 124
Return on equity (5) 24% 23% 16% --% --% 10%
Risk-adjusted efficiency ratio (6) 69% 35% 74% 55% --% --%
1997
Average loans $ 65 $ 30 $ 1 $ 8 $ -- $ 104
Average assets 100 37 13 9 23 182
Average core deposits 107 10 3 -- -- 120
Return on equity (5) 22% 25% 18% 20% --% 13%
Risk-adjusted efficiency ratio (6) 58% 33% 75% 52% --% --%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net interest income is the primary source of income for most of the
operating segments. Net interest income is the difference between actual
interest earned on assets (and interest paid on liabilities) owned by a
group and a funding charge (and credit) based on the Company's cost of
funds. Operating segments are charged a cost to fund any assets (e.g.,
loans) and are paid a funding credit for any funds provided (e.g.,
deposits). The interest spread is the difference between the interest rate
earned on an asset or paid on a liability and the Company's cost of funds
rate. (Mortgage Banking's net interest income comprises interest revenue of
$1,023 million, $549 million and $567 million for 1998, 1997 and 1996,
respectively, and interest expense of $769 million, $480 million and $469
million for 1998, 1997 and 1996, respectively.)
(2) The provision allocated to the operating segments is based on actual
provisions and adjusted in certain lines of business for management's
current assessment of what would have been a normalized net charge-off
ratio for these businesses. In any particular year, the actual net
charge-offs can be higher or lower than the normalized provision allocated
to those operating segments that were adjusted. The difference between the
normalized provision and the Company provision for these lines of business
are included in the reconciling column.
(3) Community Banking's charges to the product groups are shown as noninterest
income (intersegment revenues) to the physical distribution channels and
noninterest expense (intersegment expenditures) to the other operating
segments. They amounted to $35 million in 1998 and 1997, and none in 1996.
These charges are eliminated in the reconciliation column in arriving at
the Consolidated Company totals for noninterest income and expense. All
other noninterest revenues and expenses are derived from external sources.
(4) Businesses are taxed at the Company's marginal (statutory) tax rate,
adjusted for any nondeductible expenses. The differences between the
marginal and effective tax rate are in the reconciliation column.
(5) Equity is allocated to the operating segments based on an assessment of the
inherent risk associated with each business so that the returns on
allocated equity are on a risk-adjusted basis and comparable across
operating segments.
(6) The risk-adjusted efficiency ratio is defined as noninterest expense plus
the cost of capital divided by revenues (net interest income and
noninterest income) less normalized loan losses.
(7) The material items in the reconciliation column related to the revenue
(i.e., net interest income plus noninterest income) and net income consist
of Treasury activities, eliminations and unallocated items. Revenue
includes Treasury activities of $125 million, $87 million and $185 million;
eliminations of $(101) million, $(127) million and $(2) million; and
unallocated items of $(159) million, $(249) million, and $(53) million for
1998, 1997 and 1996, respectively. Net income includes Treasury activities
of $64 million, $46 million and $107 million; eliminations of $(39)
million, $(54) million and $(27) million; and unallocated items of $(697)
million, $(759) million and $(439) million for 1998, 1997 and 1996,
respectively. The material items in the reconciliation column related to
noninterest expense include goodwill and nonqualifying CDI amortization of
$549 million, $566 million and $484 million for 1998, 1997 and 1996,
respectively. The material items in the reconciliation column related to
average assets include investment securities in Treasury of $10 billion and
$14 billion and goodwill and nonqualifying CDI of $8 billion and $9 billion
for 1998 and 1997, respectively.
84
<PAGE>
The Company has identified four distinct lines of business for the purposes
of management reporting: Community Banking, Wholesale Banking, Mortgage Banking
and Norwest Financial. The results are determined based on the Company's
management accounting process, which assigns balance sheet and income statement
items to each responsible operating segment. This process is dynamic and
somewhat subjective. Unlike financial accounting, there is no comprehensive,
authoritative body of guidance for management accounting equivalent to generally
accepted accounting principles. The management accounting process measures the
performance of the operating segments based on the management structure of the
Company and is not necessarily comparable with similar information for any other
financial institution. The Company's operating segments are defined by product
type and customer segments. Changes in management structure and/or the
allocation process may result in changes in allocations, transfers and
assignments. In that case, results for prior periods would be restated to allow
comparability. Internal expense allocations are independently negotiated between
operating segments and, where possible, service and price is measured against
comparable services available in the external marketplace.
THE COMMUNITY BANKING GROUP offers a complete line of diversified financial
products and services for consumers and small businesses including retail and
trust services. These services include retail and business banking services,
consumer checking, lines of credit and direct installment loans and residential
mortgage products. Community Banking offers a full array of consumer loan
products, including credit cards, transportation (auto, recreational vehicle,
marine) financing, home equity lines and loans, lines of credit and installment
loans. Community Banking, through affiliates, also offers insurance, securities
brokerage, and investment banking services. Community Banking offers consumer
and business deposit products, which include checking and savings deposits.
Community Banking provides access to customers through a wide range of channels.
The Group encompasses a network of traditional banking stores, banking centers,
in-store banking centers, business centers and ATMs. Community Banking serves
consumers and small business customers through its 24-hour telephone centers,
the Telephone Banking Centers and the National Business Banking Center. Online
banking services include Wells Fargo's Online Financial Services, the Company's
personal computer banking service, and Business Gateway, a personal computer
banking service exclusively for the small business customer.
A full range of credit products and financial services are offered to small
businesses and their owners. These include lines of credit, receivables and
inventory financing, equipment loans and leases, real estate financing, SBA
financing, cash management, deposit and investment accounts, payroll services,
retirement plans, medical savings accounts and credit and debit card processing.
Community Banking customers are individual consumers and small businesses with
annual sales up to $10 million in which the owner is also the principal
financial decision maker.
Community Banking distributes credit products in all 50 states and Canada
through national direct marketing and 140 commercial loan specialists in small
business lending offices in 22 markets in the western United States. Community
Banking jointly owns a merchant card processing alliance with First Data Corp.
which acquires customers through a 150-person sales force.
The Community Banking Group is also responsible for the sales and management
of savings and investment products, investment management and fiduciary and
brokerage services to institutions, retail customers and high net worth
individuals. This includes the Stagecoach and Advantage family of mutual funds
as well as personal trust, employee benefit trust and agency assets. It also
includes product management for market rate accounts, savings deposits,
Individual Retirement Accounts (IRAs) and time deposits. Within this Group,
Private Client Services operates as a fully integrated financial services
organization focusing on banking/credit, trust services, investment management
and full-service and discount brokerage.
THE WHOLESALE BANKING GROUP serves businesses with annual sales in excess of
$5 million and maintains relationships with major corporations throughout the
United States. The Wholesale Banking Group provides a complete line of
commercial and corporate banking services. These include traditional commercial
loans and lines, letters of credit, international trade facilities, foreign
exchange services, cash management and electronic products. It includes the
majority ownership interest in the Wells Fargo HSBC Trade Bank which provides
trade and Eximbank (a public corporation offering export finance support
programs for American-made products) financing, letters of credit and collection
services. The Group also supports the commercial real estate market with
products and services such as equipment leasing, construction loans for
commercial and residential development, land acquisition and development loans,
secured and unsecured lines of credit, interim financing arrangements for
completed structures, rehabilitation loans, affordable housing loans and letters
of credit. Secondary market services are provided through the Real Estate
Capital Markets Group. Its business includes senior loan financing, mezzanine
financing, financing for leveraged transactions, purchasing distressed real
estate loans and high yield debt, origination of permanent loans for
securitization, loan syndications and commercial real estate loan servicing.
85
<PAGE>
THE MORTGAGE BANKING GROUP is comprised of Norwest Mortgage Banking. The
group's activities include the origination and purchase of residential mortgage
loans for sale to various investors as well as providing servicing of mortgage
loans for others.
NORWEST FINANCIAL includes consumer finance and auto finance operations.
Consumer finance operations make direct loans to consumers and purchase sales
finance contracts from retail merchants from offices throughout the United
States, Canada, the Caribbean and Latin America. Automobile finance operations
specialize in purchasing sales finance contracts directly from automobile
dealers and making loans secured by automobiles in the United States and Puerto
Rico. Credit cards are issued to its consumer finance customers through two
credit card banks. Norwest Financial also provides accounts receivable, lease,
and other commercial financing and provides information services to the consumer
finance industry.
THE RECONCILIATION COLUMN includes the Company's investment securities
portfolio, goodwill and the nonqualifying core deposit intangible, the
difference between the normalized provision for the line groups and the Company
provision for loan losses, the net impact of transfer pricing loan and deposit
balances, the cost of external debt, the elimination of intergroup noninterest
income and expense, and any residual effects of unallocated systems and other
support groups. It also includes the impact of asset/liability strategies the
Company has put in place to manage interest rate sensitivity at the enterprise
level.
NOTE 18 MORTGAGE BANKING ACTIVITIES
Mortgage banking activities include Norwest Mortgage Banking and certain
mortgage banking activities in other operating segments. The following table
presents the components of mortgage banking noninterest income:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(in millions) Year ended December 31,
---------------------------
1998 1997 1996
<S> <C> <C> <C>
Origination and other closing fees $ 530 $314 $305
Servicing fees, net of amortization 19 324 318
Net gains (losses) on sales
of servicing rights 16 (8) 57
Net gains on sales
of mortgages 296 120 13
Other 245 177 151
------ ---- ----
Total mortgage banking
noninterest income $1,106 $927 $844
====== ==== ====
</TABLE>
- ------------------------------------------------------------------------------
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The outstanding balances of serviced loans were
$245 billion, $230 billion and $202 billion at December 31, 1998, 1997 and 1996,
respectively.
The following table summarizes the changes in capitalized mortgage loan
servicing rights:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
(in millions) Year ended December 31,
-------------------------
1998 1997 1996
<S> <C> <C> <C>
Balance, beginning of year $3,112 $2,957 $1,443
Originations 756 361 361
Purchases 720 462 1,624
Sales (346) (34) (72)
Amortization (816) (513) (364)
Other (282) (121) (35)
------ ------ ------
3,144 3,112 2,957
Less valuation allowance 64 64 65
------ ------ ------
Balance, end of year $3,080 $3,048 $2,892
====== ====== ======
- ----------------------------------------------------------------------------
</TABLE>
The fair value of capitalized mortgage servicing rights included in the
consolidated balance sheet at December 31, 1998 was approximately $3.3 billion,
calculated using discount rates ranging from 500 to 700 basis points over the
ten-year U.S. Treasury rate.
The following table summarizes the changes in the valuation allowance for
capitalized mortgage servicing rights:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(in millions) Year ended December 31,
------------------------
<S> <C> <C> <C>
1998 1997 1996
Balance, beginning of year $64 $65 $64
Provision for (reversal of)
capitalized mortgage servicing
rights in excess of fair value -- (1) 1
--- --- ---
Balance, end of year $64 $64 $65
=== === ===
- ------------------------------------------------------------------------------
</TABLE>
86
<PAGE>
NOTE 19 PARENT COMPANY
Condensed financial information of the Parent follows. For information
regarding the Parent's long-term debt, see Note 9.
<TABLE>
<CAPTION>
CONDENSED STATEMENT OF INCOME
- -----------------------------------------------------------------------------------------------------------
(in millions) Year ended December 31,
---------------------------------------------------
1998 1997 1996
<S> <C> <C> <C>
INCOME
Dividends from subsidiaries:
Bank $1,354 $1,282 $1,292
Nonbank 403 343 713
Interest income from subsidiaries 459 388 431
Service fees from subsidiaries 127 118 113
Noninterest income 21 152 158
------ ------ ------
Total income 2,364 2,283 2,707
------ ------ ------
EXPENSE
Interest on:
Short-term borrowings 275 153 165
Long-term debt 341 364 377
Noninterest expense 379 177 96
------ ------ ------
Total expense 995 694 638
------ ------ ------
Income before income tax benefit
and undistributed income of subsidiaries 1,369 1,589 2,069
Income tax benefit (expense) 105 16 (32)
Equity in undistributed income of subsidiaries 476 894 191
------ ------ ------
NET INCOME $1,950 $2,499 $2,228
====== ====== ======
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEET
- -----------------------------------------------------------------------------------------------------------
(in millions) December 31,
-----------------------------
1998 1997
<S> <C> <C>
ASSETS
Cash and due from:
Subsidiary banks $ 678 $ 548
Non-affiliates 5 2
Securities available for sale 1,541 1,191
Advances to nonbank subsidiaries 6,800 5,590
Loans and advances to subsidiaries:
Bank 10 10
Nonbank 2,631 1,562
Investment in subsidiaries (1):
Bank 19,642 18,045
Nonbank 1,862 2,009
Other assets 1,603 1,235
------- -------
Total assets $34,772 $30,192
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 5,418 $ 3,574
Other liabilities 1,279 658
Long-term debt 6,010 5,805
Indebtedness to subsidiaries 1,296 367
Stockholders' equity 20,769 19,788
------- -------
Total liabilities and stockholders' equity $34,772 $30,192
======= =======
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The double leverage ratio, which represents the ratio of the Parent's total
equity investment in subsidiaries to its total stockholders' equity, was
104% and 101% at December 31, 1998 and 1997, respectively.
87
<PAGE>
<TABLE>
<CAPTION>
CONDENSED STATEMENT OF CASH FLOWS
- ---------------------------------------------------------------------------------------------------------------
(in millions) Year ended December 31,
---------------------------------------------------
1998 1997 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,950 $2,499 $ 2,228
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed income of subsidiaries (476) (894) (191)
Depreciation and amortization 10 19 21
Securities available for sale (gains) losses (3) (6) (5)
Release of preferred shares to ESOP 33 34 38
Other assets, net (401) (798) (103)
Accrued expenses and other liabilities 618 304 (65)
------- ------ -------
Net cash provided by operating activities 1,731 1,158 1,923
------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Securities available for sale:
Proceeds from sales 185 164 62
Proceeds from prepayments and maturities 665 299 70
Purchases (1,273) (326) (349)
Advances to non-bank subsidiaries (1,210) (140) (901)
Principal collected on notes/loans of subsidiaries 89 46 841
Capital notes and term loans made to subsidiaries (1,158) (113) (165)
Net increase in investment in subsidiaries (295) (384) (852)
------- ------ -------
Net cash used by investing activities (2,997) (454) (1,294)
------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short-term borrowings
and indebtedness to subsidiaries 2,773 1,709 (6)
Proceeds from issuance of long-term debt 500 403 1,803
Repayment of long-term debt (295) (981) (1,260)
Proceeds from issuance of common stock 171 150 83
Issuance of stock warrants to subsidiaries -- -- 2
Repurchases of preferred stock -- -- (113)
Repurchases of common stock (742) (483) (402)
Net decrease in ESOP loans 9 1 4
Payment of cash dividends (1,017) (968) (900)
------- ------ -------
Net cash provided (used) by financing activities 1,399 (169) (789)
------- ------ -------
NET CHANGE IN CASH AND CASH EQUIVALENTS 133 535 (160)
Cash and cash equivalents at beginning of year 550 15 175
------- ------ -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 683 $ 550 $ 15
======= ====== =======
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
88
<PAGE>
NOTE 20 WFC HOLDINGS CORPORATION
WFC Holdings is a wholly owned subsidiary of the Parent and the survivor of
the Merger with the former Wells Fargo. WFC Holdings is the sole stockholder of
Wells Fargo Bank, N.A. The Parent guarantees the debt obligations of WFC
Holdings. In view of this, the summarized assets, liabilities and results of
operations of WFC Holdings are presented below:
<TABLE>
<CAPTION>
SUMMARIZED CONSOLIDATED INCOME STATEMENT
- ----------------------------------------------------------------------------------------------------------------
(in millions) Year ended December 31,
-----------------------------------------------------------------
1998 1997 1996
<S> <C> <C> <C>
Interest income $6,654 $6,904 $6,523
Interest expense 2,107 2,290 2,002
Provision for loan losses 670 615 105
Noninterest income 2,911 2,712 2,203
Noninterest expense 4,818 4,547 4,633
------ ----- -----
Income before income tax expense 1,970 2,164 1,986
Income tax expense 938 1,002 911
------ ----- -----
Net income $1,032 $1,162 $1,075
====== ====== ======
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SUMMARIZED CONSOLIDATED BALANCE SHEET
- ----------------------------------------------------------------------------------------------------------------
(in millions) December 31,
---------------------------------
1998 1997
<S> <C> <C>
ASSETS
Cash and due from banks $ 7,513 $ 8,169
Securities available for sale 9,737 9,888
Loans, net 63,721 63,906
Other assets 17,185 15,541
------- -------
Total assets $98,156 $97,504
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Short-term borrowings $ 1,473 $3,825
Long-term debt 3,729 4,568
Other liabilities 78,341 74,990
Guaranteed preferred beneficial interest
in Company's subordinated debentures 785 1,299
Stockholder's equity 13,828 12,822
------- -------
Total liabilities and stockholder's equity $98,156 $97,504
======= =======
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 21 LEGAL ACTIONS
In the normal course of business, the Company is at all times subject to
numerous pending and threatened legal actions, some for which the relief or
damages sought are substantial. After reviewing pending and threatened actions
with counsel, management believes that the outcome of such actions will not have
a material adverse effect on stockholders' equity of the Company; the Company
is not able to predict whether the outcome of such actions may or may not have a
material adverse effect on results of operations in a particular future period
as the timing and amount of any resolution of such actions and its relationship
to the future results of operations are not known.
89
<PAGE>
NOTE 22 RISK-BASED CAPITAL
The Company and each of the subsidiary banks are subject to various
regulatory capital adequacy requirements administered by the FRB and the OCC,
respectively. The Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) required that the federal regulatory agencies adopt regulations
defining five capital tiers for banks: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions by regulators
that, if undertaken, could have a direct material effect on the Company's
financial statements.
Quantitative measures, established by the regulators to ensure capital
adequacy, require that the Company and each of the subsidiary banks maintain
minimum ratios (set forth in the table below) of capital to risk-weighted
assets. There are two categories of capital under the guidelines. Tier 1 capital
includes common stockholders' equity, qualifying preferred stock and trust
preferred securities, less goodwill and certain other deductions (including the
unrealized net gains and losses, after applicable taxes, on available-for-sale
securities carried at fair value). Tier 2 capital includes preferred stock not
qualifying as Tier 1 capital, mandatory convertible debt, subordinated debt,
certain unsecured senior debt issued by the Parent, the allowance for loan
losses and net unrealized gains on marketable equity securities, subject to
limitations by the guidelines. Tier 2 capital is limited to the amount of Tier 1
capital (i.e., at least half of the total capital must be in the form of Tier 1
capital).
Under the guidelines, capital is compared to the relative risk related to the
balance sheet. To derive the risk included in the balance sheet, one of four
risk weights (0%, 20%, 50% and 100%) is applied to the different balance sheet
and off-balance sheet assets, primarily based on the relative credit risk of the
counterparty. For example, claims guaranteed by the U.S. government or one of
its agencies are risk-weighted at 0%. Off-balance sheet items, such as loan
commitments and derivative financial instruments, are also applied a risk weight
after calculating balance sheet equivalent amounts. One of four credit
conversion factors (0%, 20%, 50% and 100%) is assigned to loan commitments based
on the likelihood of the off-balance sheet item becoming an asset. For example,
certain loan commitments are converted at 50% and then risk-weighted at 100%.
Derivative financial instruments are converted to balance sheet equivalents
based on notional values, replacement costs and remaining contractual terms.
(See Notes 5 and 23 for further discussion of off-balance sheet items.) The
capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings and other factors.
Management believes that, as of December 31, 1998, the Company and each of
the significant subsidiary banks met all capital adequacy requirements to which
they are subject.
Under the FDICIA prompt corrective action provisions applicable to banks, the
most recent notification from the OCC categorized each of the significant
subsidiary banks as well capitalized. To be categorized as well capitalized, the
institution must maintain a total risk-based capital ratio as set forth in the
following table and not be subject to a capital directive order. There are no
conditions or events since that notification that management believes have
changed the risk-based capital category of any of the significant subsidiary
banks.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
(in billions) To be well
capitalized under
the FDICIA
For capital prompt corrective
Actual adequacy purposes action provisions
-------------------- ---------------------- ----------------------
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total capital (to risk-weighted assets)
Wells Fargo & Company $16.7 10.90% >$12.3 >8.00%
- -
Norwest Bank Minnesota, N.A. 2.1 10.02 > 1.7 >8.00 >$2.1 >10.00%
- - - -
Wells Fargo Bank, N.A. 7.9 11.21 > 5.6 >8.00 > 7.0 >10.00
- - - -
Tier 1 capital (to risk-weighted assets)
Wells Fargo & Company $12.4 8.08% >$ 6.1 >4.00%
- -
Norwest Bank Minnesota, N.A. 1.8 8.51 > .8 >4.00 >$1.3 >6.00%
- - - -
Wells Fargo Bank, N.A. 5.0 7.18 > 2.8 >4.00 > 4.2 >6.00
- - - -
Tier 1 capital (to average assets)
(Leverage ratio)
Wells Fargo & Company $12.4 6.58% >$ 7.5 >4.00%(1)
- -
Norwest Bank Minnesota, N.A. 1.8 6.25 > 1.1 >4.00 (1) >$1.4 >5.00%
- - - -
Wells Fargo Bank, N.A. 5.0 6.39 > 3.2 >4.00 (1) > 3.9 >5.00
- - - -
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The leverage ratio consists of Tier 1 capital divided by quarterly average
total assets, excluding goodwill and certain other items. The minimum
leverage ratio guideline is 3% for banking organizations that do not
anticipate significant growth and that have well-diversified risk,
excellent asset quality, high liquidity, good earnings, effective
management and monitoring of market risk and, in general, are considered
top-rated, strong banking organizations.
90
<PAGE>
NOTE 23 DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into a variety of financial contracts, which include
interest rate futures and forward contracts, interest rate floors and caps,
options and interest rate swap agreements. The contract or notional amount of a
derivative is used to determine, along with the other terms of the derivative,
the amounts to be exchanged between the counterparties. It does not in itself
represent amounts exchanged by the parties and therefore is not a measure of
exposure through the use of derivatives nor of exposure to liquidity risk. The
Company is primarily an end-user of these instruments. The Company also offers
contracts to its customers but offsets such contracts by purchasing other
financial contracts or uses the contracts for asset/liability management. To a
lesser extent, the Company takes positions based on market expectations or to
benefit from price differentials between financial instruments and markets.
The Company is exposed to credit risk in the event of nonperformance by
counterparties to financial instruments. The Company controls the credit risk of
its financial contracts except for contracts for which credit risk is de minimus
through credit approvals, limits and monitoring procedures. Credit risk related
to derivative financial instruments is considered and, if material, provided for
separately from the allowance for loan losses. As the Company generally enters
into transactions only with high quality counterparties, losses associated with
counterparty nonperformance on derivative financial instruments have been
immaterial. Further, the Company obtains collateral where appropriate and uses
master netting arrangements in accordance with FASB Interpretation No. 39,
Offsetting of Amounts Related to Certain Contracts, as amended by FASB
Interpretation No. 41, Offsetting of Amounts Related to Certain Repurchase and
Reverse Repurchase Agreements.
The following table summarizes the aggregate notional or contractual amounts,
credit risk amount and net fair value for the Company's derivative financial
instruments at December 31, 1998 and 1997.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(in millions) December 31,
-------------------------------------------------------------------------------------
1998 1997
----------------------------------------- ---------------------------------------
NOTIONAL OR CREDIT ESTIMATED Notional or Credit Estimated
CONTRACTUAL RISK FAIR contractual risk fair
AMOUNT AMOUNT (3) VALUE amount amount (3) value
<S> <C> <C> <C> <C> <C> <C>
ASSET/LIABILITY MANAGEMENT
HEDGES
Interest rate contracts:
Swaps (1) $24,429 $735 $686 $24,052 $424 $364
Futures 62,348 -- -- 10,949 -- --
Floors and caps (1) 33,598 504 504 35,344 350 350
Options (2) 25,822 112 101 11,168 12 41
Forwards (1) 41,283 11 (58) 27,507 6 (29)
Foreign exchange contracts:
Forward contracts (1) 168 -- (1) 548 1 (5)
CUSTOMER ACCOMMODATIONS
Interest rate contracts:
Swaps (1) 7,795 81 10 4,297 17 3
Futures 8,440 -- -- 2,404 -- --
Floors and caps purchased (1) 5,619 42 42 4,448 22 22
Floors and caps written 5,717 -- (42) 4,567 -- (24)
Options purchased (1) -- -- -- 77 -- --
Options written -- -- -- 27 -- --
Forwards (1) 850 24 4 59 2 2
Commodity contracts:
Swaps (1) 78 4 -- 10 1 --
Floors and caps purchased (1) 4 -- -- 7 -- --
Floors and caps written 4 -- -- 10 -- --
Foreign exchange contracts:
Forwards and spots (1) 3,524 37 2 2,966 50 4
Options purchased (1) 44 2 2 116 -- --
Options written 43 -- (2) 114 -- --
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company anticipates performance by substantially all of the
counterparties for these or the underlying financial instruments.
(2) At December 31, 1997 the options contracts were substantially options on
futures contracts which are exchange traded for which the exchange assumes
the counterparty risk.
(3) Credit risk amounts reflect the replacement cost for those contracts in a
gain position in the event of nonperformance by counterparties.
91
<PAGE>
Interest rate futures and forward contracts are contracts in which the buyer
agrees to purchase and the seller agrees to make delivery of a specific
financial instrument at a predetermined price or yield. These contracts may be
settled either in cash or by delivery of the underlying financial instrument.
Futures contracts are standardized and are traded on exchanges. Gains and losses
on futures contracts are settled daily with the exchange based on a notional
principal value. The exchange assumes the risk that a counterparty will not pay
and generally requires margin payments to minimize such risk. Market risks arise
from movements in interest rates and security values. The Company uses 90- to
120-day futures contracts on Eurodollar deposits and U.S. Treasury notes to
shorten the interest rate maturity of deposits ($5 billion at December 31, 1998)
and to reduce the price risk of interest-sensitive assets ($57 billion at
December 31, 1998), primarily mortgage servicing rights. Initial margin
requirements on futures contracts are provided by investment securities pledged
as collateral.
Interest rate floors and caps are interest rate protection instruments that
involve the payment from the seller to the buyer of an interest differential.
This differential represents the difference between a short-term rate (e.g.,
three-month LIBOR) and an agreed-upon rate, the strike rate, applied to a
notional principal amount. By purchasing a floor, the Company will be paid the
differential by a counterparty, should the current short-term rate fall below
the strike level of the agreement. The Company generally receives cash quarterly
on purchased floors (when the current interest rate falls below the strike rate)
and purchased caps (when the current interest rate exceeds the strike rate). The
primary risk associated with purchased floors and caps is the ability of the
counterparties to meet the terms of the contract. Of the total purchased floors
and caps for asset/liability management of $34 billion at December 31, 1998, the
Company had $14 billion of floors to protect variable-rate loans from a drop in
interest rates. The Company also uses purchased floors and caps of $17 billion
at December 31, 1998 to hedge mortgage servicing rights. Cash flows from the
floors and caps offset lost future servicing revenue caused by increased levels
of loan prepayments associated with lower interest rates. The remaining
purchased floors and caps of $3 billion at December 31, 1998 were used to hedge
interest rate risk of various other specific assets and liabilities.
Interest rate swap contracts are entered into primarily as an asset/liability
management strategy to reduce interest rate risk. Interest rate swap contracts
are exchanges of interest payments, such as fixed-rate payments for
floating-rate payments, based on a notional principal amount. Payments related
to the Company's swap contracts are made either monthly, quarterly or
semi-annually by one of the parties depending on the specific terms of the
related contract. The primary risk associated with all swaps is the exposure to
movements in interest rates and the ability of the counterparties to meet the
terms of the contract. At December 31, 1998, the Company had $24 billion of
interest rate swaps outstanding for interest rate risk management purposes on
which the Company receives payments based on fixed interest rates and makes
payments based on variable rates (e.g., three-month LIBOR). Included in this
amount, $14 billion was used to convert floating-rate loans into fixed-rate
assets. The remaining swap contracts used for interest rate risk management of
$10 billion at December 31, 1998 were used to hedge interest rate risk of
various other specific assets and liabilities.
Options are contracts that grant the purchaser, for a premium payment, the
right, but not the obligation, to either purchase or sell the underlying
financial instrument at a set price during a period or at a specified date in
the future. The writer of the option is obligated to purchase or sell the
underlying financial instrument, if the purchaser chooses to exercise the
option. The writer of the option receives a premium when the option is entered
into and bears the risk of an unfavorable change in the price of the underlying
financial instrument. Of the total options for asset/liability management of $26
billion at December 31, 1998, the Company had $12 billion of options on futures
contracts hedging mortgage servicing rights. The futures exchange assumes the
risk that a counterparty will not pay. Market risks arise from movements in
interest rates and/or security values. The remaining options used for interest
rate risk management of $14 billion at December 31, 1998 were used to hedge
interest rate risk of various other specific assets.
The Company has entered into futures contracts and mandatory and standby
forward contracts, including options on futures and forward contracts, to reduce
interest rate risk on certain mortgage loans held for sale and other
commitments. For forward contracts, the primary risk is the exposure to
movements in interest rates and the ability of the counterparties to meet the
terms of the contracts. The net unrealized loss on these futures and forward
contracts at December 31, 1998 and 1997 was $12 million and $29 million,
respectively. These contracts mature within 180 days.
92
<PAGE>
NOTE 24 FAIR VALUE OF FINANCIAL INSTRUMENTS
FAS 107, Disclosures about Fair Value of Financial Instruments, requires that
the Company disclose estimated fair values for its financial instruments. Fair
value estimates, methods and assumptions set forth below for the Company's
financial instruments are made solely to comply with the requirements of this
Statement and should be read in conjunction with the financial statements and
notes in this Annual Report. The carrying amounts in the table are recorded in
the Consolidated Balance Sheet under the indicated captions, except for the
derivative financial instruments, which are recorded in the specific asset or
liability balance being hedged or in other assets if the derivative financial
instrument is a customer accommodation.
Fair values are based on estimates or calculations using present value
techniques in instances where quoted market prices are not available. Because
broadly traded markets do not exist for most of the Company's financial
instruments, the fair value calculations attempt to incorporate the effect of
current market conditions at a specific time. Fair valuations are management's
estimates of the values, and they are often calculated based on current pricing
policy, the economic and competitive environment, the characteristics of the
financial instruments and other such factors. These calculations are subjective
in nature, involve uncertainties and matters of significant judgment and do not
include tax ramifications; therefore, the results cannot be determined with
precision, substantiated by comparison to independent markets and may not be
realized in an actual sale or immediate settlement of the instruments. There may
be inherent weaknesses in any calculation technique, and changes in the
underlying assumptions used, including discount rates and estimates of future
cash flows, could significantly affect the results. The Company has not included
certain material items in its disclosure, such as the value of the long-term
relationships with the Company's deposit, credit card and trust customers, since
these intangibles are not financial instruments. For all of these reasons, the
aggregation of the fair value calculations presented herein do not represent,
and should not be construed to represent, the underlying value of the Company.
The following table presents a summary of the Company's financial
instruments, as defined by FAS 107:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(in millions) December 31,
-----------------------------------------------------------
1998 1997
-------------------------- -----------------------
CARRYING ESTIMATED Carrying Estimated
AMOUNT FAIR VALUE amount fair value
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Mortgages held for sale $ 19,770 $ 20,015 $ 9,706 $ 9,821
Loans, net (1) 104,714 105,253 103,091 105,110
Nonmarketable equity investments 2,392 2,719 1,860 2,101
FINANCIAL LIABILITIES
Deposits $136,788 $136,719 $127,656 $127,695
Long-term debt (2) 19,673 19,948 17,260 17,293
Guaranteed preferred beneficial interests in
Company's subordinated debentures 785 874 1,299 1,339
DERIVATIVE FINANCIAL INSTRUMENTS (3)
Interest rate contracts:
Floors and caps purchased $ 189 $ 546 $ 240 $ 372
Floors and caps written (42) (42) (24) (24)
Options purchased 154 161 34 64
Options written (62) (60) (23) (23)
Swaps (24) 696 1 367
Forwards (54) (54) (29) (27)
Foreign exchange contracts 1 1 5 (1)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Loans are net of deferred fees on loan commitments and standby letters of
credit of $146 million and $158 million at December 31, 1998 and 1997,
respectively.
(2) The carrying amount and fair value exclude obligations under capital leases
of $36 million and $75 million at December 31, 1998 and 1997, respectively.
(3) The carrying amounts include unamortized fees paid or received, deferred
gains or losses and gains or losses on derivative financial instruments
receiving mark-to-market treatment.
93
<PAGE>
FINANCIAL ASSETS
SHORT-TERM FINANCIAL ASSETS
Short-term financial assets include cash and due from banks, federal funds
sold and securities purchased under resale agreements and due from customers on
acceptances. The carrying amount is a reasonable estimate of fair value because
of the relatively short period of time between the origination of the instrument
and its expected realization.
SECURITIES AVAILABLE FOR SALE
Securities available for sale at December 31, 1998 and 1997 are set forth in
Note 4.
LOANS
The fair valuation calculation process differentiates loans based on their
financial characteristics, such as product classification, loan category,
pricing features and remaining maturity. Prepayment estimates are
evaluated by product and loan rate.
The fair value of commercial loans, other real estate mortgage loans and real
estate construction loans is calculated by discounting contractual cash flows
using discount rates that reflect the Company's current pricing for loans with
similar characteristics and remaining maturity.
For real estate 1-4 family first and junior lien mortgages, fair value is
calculated by discounting contractual cash flows, adjusted for prepayment
estimates, using discount rates based on current industry pricing for loans of
similar size, type, remaining maturity and repricing characteristics.
For credit card loans, the portfolio's yield is equal to the Company's
current pricing and, therefore, the fair value is equal to book value.
For other consumer loans, the fair value is calculated by discounting the
contractual cash flows, adjusted for prepayment estimates, based on the current
rates offered by the Company for loans with similar characteristics.
For auto lease financing, the fair value is calculated by discounting the
contractual cash flows at the Company's current pricing for items of similar
remaining term, without including any tax benefits.
Commitments, standby letters of credit and commercial and similar letters of
credit not included in the previous table have contractual values of $71,467
million, $3,332 million and $691 million, respectively, at December 31, 1998,
and $66,511 million, $3,716 million and $751 million, respectively, at December
31, 1997. These instruments generate ongoing fees at the Company's current
pricing levels. Of the commitments at December 31, 1998, 60% mature within one
year.
NONMARKETABLE EQUITY INVESTMENTS
There are restrictions on the sale and/or liquidation of the Company's
nonmarketable equity investments, which are generally in the form of limited
partnerships; and the Company has no direct control over the investment
decisions of the limited partnerships. To estimate fair value, a significant
portion of the underlying limited partnerships' investments are valued based on
market quotes.
94
<PAGE>
FINANCIAL LIABILITIES
DEPOSIT LIABILITIES
FAS 107 states that the fair value of deposits with no stated maturity, such
as noninterest-bearing demand deposits, interest-bearing checking and market
rate and other savings, is equal to the amount payable on demand at the
measurement date. Although the FASB's requirement for these categories is not
consistent with the market practice of using prevailing interest rates to value
these amounts, the amount included for these deposits in the previous table is
their carrying value at December 31, 1998 and 1997. The fair value of other time
deposits is calculated based on the discounted value of contractual cash flows.
The discount rate is estimated using the rates currently offered for like
deposits with similar remaining maturities.
SHORT-TERM FINANCIAL LIABILITIES
Short-term financial liabilities include federal funds purchased and
securities sold under repurchase agreements, commercial paper and other
short-term borrowings. The carrying amount is a reasonable estimate of fair
value because of the relatively short period of time between the origination of
the instrument and its expected realization.
LONG-TERM DEBT
The fair value of the Company's underwritten long-term debt is estimated based
on the quoted market prices of the instruments. The fair value of the
medium-term note programs, which are part of long-term debt, is calculated based
on the discounted value of contractual cash flows. The discount rate is
estimated using the rates currently offered for new notes with similar remaining
maturities.
GUARANTEED PREFERRED BENEFICIAL INTERESTS
IN COMPANY'S SUBORDINATED DEBENTURES
The fair value of the Company's trust preferred securities is estimated based
on the quoted market prices of the instruments.
DERIVATIVE FINANCIAL INSTRUMENTS
The fair value of derivative financial instruments is based on the estimated
amounts that the Company would receive or pay to terminate the contracts at the
reporting date (i.e., mark-to-market value). Dealer quotes are available for
substantially all of the Company's derivative financial instruments.
LIMITATIONS
These fair value disclosures are made solely to comply with the requirements
of FAS 107. The calculations represent management's best estimates; however, due
to the lack of broad markets and the significant items excluded from this
disclosure, the calculations do not represent the underlying value of the
Company. The information presented is based on fair value calculations and
market quotes as of December 31, 1998 and 1997. These amounts have not been
updated since year end; therefore, the valuations may have changed significantly
since that point in time.
As discussed above, certain of the Company's asset and liability financial
instruments are short-term, and therefore, the carrying amounts in the
consolidated balance sheets approximate fair value. Other significant assets and
liabilities, which are not considered financial assets or liabilities and for
which fair values have not been estimated, include premises and equipment,
goodwill and other intangibles, deferred taxes and other liabilities.
95
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
of Wells Fargo & Company:
We have audited the accompanying consolidated balance sheet of Wells Fargo &
Company and Subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of income, changes in stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Wells Fargo
& Company and Subsidiaries as of December 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
Certified Public Accountants
San Francisco, California
January 19, 1999
INDEX OF SPECIAL TOPICS
40 Average balances, yields and rates
52 Balance sheet
66 Charge-offs
35, 50 Common stock book value and market price
48, 91 Derivative financial instruments
34, 82 Earnings per share
35, 44 Earnings/ratios excluding goodwill and nonqualifying CDI
Financial Accounting Standards Board statements:
35, 83 FAS 130 -- Reporting Comprehensive Income
36 FAS 131 -- Disclosures about Segments of an Enterprise and
Related Information
36 FAS 132 -- Employers' Disclosures about Pension and Other
Postretirement Benefits
36 FAS 133 -- Accounting for Derivative Instruments and Hedging
Activities
36 FAS 134 -- Accounting for Mortgage-Backed Securities Retained
after Securitization of Mortgage Loans Held for Sale
by a Mortgage Banking Enterprise
36 Five-year compound growth rate
51 Income statement
Loans:
40 Average balances
45, 64 Commitments
64 Mix at year end
47 Market risks
37, 61 Merger of Norwest and Wells Fargo
38, 40 Net interest margin
55 Notes to financial statements:
55 Summary of significant accounting policies
60 Business combinations
62 Cash, loan and dividend restrictions
63 Securities available for sale
64 Loans and allowance for loan losses
67 Premises, equipment, lease commitments and other assets
68 Deposits
68 Short-term borrowings
69 Long-term debt
70 Guaranteed preferred beneficial interests in
Company's subordinated debentures
72 Preferred stock
74 Common stock and stock plans
79 Employee benefits and other expenses
80 Income taxes
82 Earnings per common share
83 Comprehensive income
84 Operating segments
86 Mortgage banking activities
87 Parent company
89 WFC Holdings Corporation
89 Legal actions
90 Risk-based capital
91 Derivative financial instruments
93 Fair value of financial instruments
37, 84 Operating Segments
Ratios:
35 Profitability (ROA and ROE)
35 Efficiency
35 Common stockholders' equity to assets
35, 90 Risk-based capital and leverage
36 Six-year summary of selected financial data
42 Year 2000 (Y2K)
96
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
The following is a list of subsidiaries of the Company as of February 15, 1999.
The Company's bank subsidiaries which have the words "National Association"
(N.A.), or "National" in their respective titles are organized under the laws of
the United States; and all state bank subsidiaries are incorporated under the
laws of the state in which each is domiciled. Each non-bank subsidiary is
incorporated or organized in the jurisdiction appearing opposite its name.
BANK SUBSIDIARIES
ARIZONA
Norwest Bank Arizona, N.A
Wells Fargo Bank (Arizona), N.A.
CALIFORNIA
Wells Fargo Bank, N.A.
Wells Fargo Bank, Ltd.
Wells Fargo Central Bank
Wells Fargo HSBC Trade Bank, N.A.
COLORADO
Norwest Bank Colorado, N.A.
Norwest Bank Grand Junction, N.A.
Norwest Bank Grand Junction-Downtown, N.A.
ILLINOIS
Norwest Bank Illinois, N.A.
INDIANA
Norwest Bank Indiana, N.A.
IOWA
Dial National Bank
Norwest Bank Iowa, N.A.
MINNESOTA
First National Bank of Monticello
Norwest Bank Faribault, N.A.
Norwest Bank Minnesota, N.A.
Norwest Bank Minnesota North, N.A.
Norwest Bank Minnesota South, N.A.
Norwest Bank Minnesota Southwest, N.A.
Norwest Bank Minnesota West, N.A.
Norwest Bank Red Wing, N.A.
1
<PAGE>
MONTANA
Norwest Bank Montana, N.A.
NEBRASKA
Norwest Bank Nebraska, N.A.
NEVADA
Norwest Bank Nevada, N.A.
NEW MEXICO
First Bank of Grants, N.A.
Norwest Bank New Mexico, N.A.
NORTH DAKOTA
Norwest Bank North Dakota, N.A.
OHIO
Norwest Bank Ohio, N.A.
SOUTH DAKOTA
Dial Bank
Norwest Bank South Dakota, N.A.
TEXAS
First Bank Katy, N.A.
First National Bank of Missouri City
First Valley Bank
Norwest Bank El Paso, N.A.
Norwest Bank Texas, N.A.
The First National Bank of Franklin
Wells Fargo Bank (Texas), N.A.
WISCONSIN
Norwest Bank Hudson, N.A.
Norwest Bank La Crosse, N.A.
Norwest Bank Wisconsin, N.A.
WYOMING
Norwest Bank Wyoming, N.A.
EDGE ACT CORPORATIONS
Norwest Bank International
2
<PAGE>
NON-BANK SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION OF
INCORPORATION OR
DIRECTLY OWNED: ORGANIZATION
- --------------- ------------
<S> <C>
B & G Investment Company Texas
Bancdata Processing Corporation Minnesota
Benson Financial Corporation Texas
Blackhawk Bancorporation Iowa
Canton Bancshares, Inc. Illinois
Central Bancorporation, Inc. Texas
Charter Bancorporation, Inc. Arizona
Charter Holdings, Inc. Nevada
Century Business Credit Corporation New York
Credisol, S.A. Costa Rica
Emjay Corporation Wisconsin
Farmers National Bancorp, Inc. Delaware
Fidelity Bancshares, Inc. Texas
Fidelity National Life Insurance Company Arizona
Financiera El Sol, S.A. Panama
First Bancshares of Valley City, Inc. North Dakota
First Valley Bank Group, Inc. Texas
Franklin Bancshares, Inc. Delaware
GST Co. Delaware
Goldenrod Asset Management Delaware
Henrietta Bancshares, Inc. Texas
Independent Bancorp of Arizona, Inc. Delaware
International Bancorporation, Inc. Minnesota
Irene Bancorporation, Inc. South Dakota
Island Finance (Aruba) N.V. Aruba
Island Finance (Bonaire) N.V. Netherlands Antilles
Island Finance (Cuaracao) N.V. Netherlands Antilles
Island Finance (St. Maarten) N.V. Netherlands Antilles
Island Finance Puerto Rico, Inc. Delaware
Island Finance Virgin Islands, Inc. Delaware
Lindeberg Financial Corporation Minnesota
Little Mountain Bancshares, Inc. Minnesota
Lowry Hill Investment Advisors, Inc. Minnesota
MidAmerica Bancshares, Inc. South Dakota
Midwest Credit Life Insurance Company Arizona
Minnesota Bancshares, Inc. Minnesota
Mountain Bancshares, Inc. Colorado
3
<PAGE>
<CAPTION>
JURISDICTION OF
INCORPORATION OR
DIRECTLY OWNED: ORGANIZATION
- --------------- ------------
<S> <C>
Myers Bancshares Inc. Texas
Northern Prairie Indemnity Limited Cayman Islands, BWI
Norwest Agricultural Credit, Inc. Minnesota
Norwest AMG, Inc. Delaware
Norwest Asia Limited Hong Kong
Norwest Audit Services, Inc. Minnesota
Norwest Auto Receivables Corporation Delaware
Norwest Credit, Inc. Minnesota
Norwest Escrow Funding, Inc. Delaware
Norwest Financial Services, Inc. Delaware
Norwest Foundation Minnesota
Norwest Holding Company Delaware
Norwest Home Improvement, Inc. Texas
Norwest Insurance, Inc. Minnesota
Norwest Investment Services, Inc. Minnesota
Norwest Investors, Inc. Minnesota
Norwest Limited, LLC Delaware
Norwest Nova, Inc. Minnesota
Norwest Properties, Inc. Minnesota
Norwest Services, Inc. Minnesota
Norwest Trust Company, Cayman Islands Cayman Islands, BWI
Packers Management Company, Inc. Nebraska
Peoples Mortgage and Investment Company Iowa
Rose Asset Management, Inc. Delaware
Star Bancshares, Inc. Texas
Texas Bancorporation, Inc. Texas
Texas National Bankshares, Inc. Texas
The Bank of New Mexico Holding Company New Mexico
The First National Bankshares, Inc. New Mexico
The Foothill Group, Inc. Delaware
The Wells Fargo Foundation California
Union Texas Bancorporation, Inc. Texas
Victoria Bankshares, Inc. Texas
WFC Holdings Corporation Delaware
Wisconsin Bancshares, Inc. Wisconsin
4
<PAGE>
<CAPTION>
JURISDICTION OF
INCORPORATION OR
INDIRECTLY OWNED: ORGANIZATION
- ----------------- ------------
<S> <C>
Admiral Life Insurance Company of America Arizona
Allied Business Systems, Inc. Iowa
AMAN Collection Service 1, Inc. Nevada
AMAN Collection Service, Inc. South Dakota
American Community Bank Group Service Corporation Minnesota
American Securities Company California
American Securities Company of Nevada Nevada
Americorp Financial, Inc. Nevada
ATC Realty Fifteen, Inc. California
ATC Realty Nine, Inc. California
ATC Realty Sixteen, Inc. California
ATI Foreclosure Services, Inc. California
ATI Title Agency of Arizona, Inc. (inactive) Arizona
ATI Title Agency of Ohio, Inc. Ohio
ATI Title Company, LLC Delaware
ATI Title Company of California California
ATI Title Company of Nevada Nevada
Bancshares Insurance Company Vermont
Blue Jay Asset Management, Inc. Delaware
Blue Spirit Insurance Company Vermont
Bluebonnet Asset Management, Inc. Delaware
Cardinal Asset Management, Inc. Delaware
CCC Investment NV, Inc. Nevada
Central Bancorporation of Delaware, Inc. Delaware
Central Casualty Insurance Agency, Inc. Oklahoma
Central Pacific Corporation Delaware
Century Data Services, Inc. New York
Centurion Agencies, Co. Iowa
Centurion Agency Nevada, Inc. Nevada
Centurion Casualty Company Iowa
Centurion Life Insurance Company Missouri
CGT Insurance Company Barbados
CHM Insurance Company South Dakota
Cityside Insurance Company, Ltd. Turks & Caicos Islands
Clinton Street Garage Company, Inc. Indiana
5
<PAGE>
<CAPTION>
JURISDICTION OF
INCORPORATION OR
INDIRECTLY OWNED: ORGANIZATION
- ----------------- ------------
<S> <C>
Collin Equities, Inc. Texas
Columbine Asset Management, Inc. Delaware
Commonwealth Leasing Corporation Minnesota
Community Casualty Co. (1) Vermont
Community Pacific Broadcasting Corporation Nevada
Community Credit Co. Minnesota
Copper Asset Management, Inc. Delaware
Crestone Capital Management, Inc. Colorado
Crocker Grande, Inc. California
Crocker Life Insurance Company California
Crocker Properties, Inc. California
DAG Management, Inc. Colorado
Dial National Community Benefits, Inc. Nevada
EZG Associates Limited Partnership Delaware
Ellis Advertising, Inc. Iowa
Falcon Asset Management, Inc. Delaware
FCC Holdings California
Fidelity Acceptance Corporation (2) Minnesota
Fidelity Acceptance Holding, Inc. Nevada
Fidelity Bancorporation, Inc. Delaware
Fidelity National Life Insurance Company Arizona
Finvercon S.A. Compania Financiera Argentina
Finvercon USA, Inc. Nevada
- ---------------
(1) Community Credit Co. is the parent and directly owns all the voting
securities of certain subsidiaries operating as consumer finance companies in
the United States (27 as of February 15, 1999). Such subsidiaries were
incorporated or otherwise organized in Arizona, California, Colorado,
Georgia, Illinois, Indiana, Iowa, Kentucky, Missouri, Montana, Nebraska,
Nevada, New Mexico, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, Utah,
Washington, Wisconsin and Wyoming.
(2) Fidelity Acceptance Corporation is the parent and directly or indirectly
beneficially owns all the voting securities of certain subsidiaries operating
as consumer finance companies in the United States and Guam (34 as of
February 15, 1999). Such subsidiaries were incorporated or otherwise
organized in Alabama, Arizona, California, Colorado, Delaware, Florida,
Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana,
Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New
Mexico, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee,
Texas, Utah, Virginia, Washington, Wisconsin and Guam.
6
<PAGE>
<CAPTION>
JURISDICTION OF
INCORPORATION OR
INDIRECTLY OWNED: ORGANIZATION
- ----------------- ------------
<S> <C>
First City Life Insurance Company Arizona
First DialWest Escrow Company, Inc. California
First Interstate Bancorporation, Inc. (inactive) Kansas
First Interstate Commercial Mortgage Company Delaware
First Interstate Insurance Company Arizona
First Interstate Mortgage Holding Company Arizona
First Valley Delaware Financial Corporation Delaware
Foothill Capital Corporation California
Fremont Properties, Inc. Colorado
Galliard Capital Management, Inc. Minnesota
Garces Water Company, Inc. California
Golden Pacific Insurance Company Vermont
Great Plains Insurance Company Vermont
Green Bay Asset Management, Inc. Delaware
Henrietta Delaware Financial Corporation Delaware
IntraWest Asset Management, Inc. Delaware
IntraWest Insurance Company Arizona
Iowa Asset Management, Inc. Delaware
Island Finance Credit Services, Inc. New York
Island Finance New York, Inc. New York
La Crosse Asset Management, Inc. Delaware
Las Vegas Building Corporation New Mexico
Lilac Asset Management, Inc. Delaware
Lily Asset Management, Inc. Delaware
Lincoln Building Corporation Colorado
Magnolia Asset Management, Inc. Delaware
Maier/Hauswirth Investment Advisors, LLC Wisconsin
Mail Systems Co. Iowa
Marigold Asset Management, Inc. Delaware
Mercury Marine Finance, Inc. Iowa
Mission Savings and Loan Association U.S.
Modern Casualty Insurance Agency Arizona
Montgomery Estates, Inc. Texas
National Letter Service Company Minnesota
NISI Nevada Insurance, Inc. Nevada
NISI Wyoming Insurance Wyoming
North Star Mortgage Guaranty Reinsurance Company Vermont
Norwest Asset Acceptance Corporation Delaware
Norwest Asset Company Iowa
Norwest Asset Securities Corporation Delaware
Norwest Auto Finance, Inc. Minnesota
7
<PAGE>
<CAPTION>
JURISDICTION OF
INCORPORATION OR
INDIRECTLY OWNED: ORGANIZATION
- ----------------- ------------
<S> <C>
Norwest Auto Lease, Inc. Minnesota
Norwest Business Credit, Inc. Minnesota
Norwest Colorado Community Development
Corporation Colorado
Norwest do Brasil Servicos Ltda Brazil
Norwest Electronic Tax Service, LLC Delaware
Norwest Energy Capital, Inc. Texas
Norwest Equipment Finance & Leasing, Inc. New Jersey
Norwest Equity Capital, L.L.C. Minnesota
Norwest Financial Alabama, Inc. Alabama
Norwest Financial Business Credit, Inc. Iowa
Norwest Financial Canada DE, Inc. Ontario
Norwest Financial Capital, Inc. Delaware
Norwest Financial Coast, Inc. California
Norwest Financial Credit Services, Inc. Florida
Norwest Financial DE Asset Management, Inc. Delaware
Norwest Financial Information Services
Group, Inc. Iowa
Norwest Financial Investment 1, Inc. Nevada
Norwest Financial Investment 2, Inc. Nevada
Norwest Financial Investment, Inc. Nevada
Norwest Financial Leasing, Inc. Iowa
Norwest Financial North Carolina 2, Inc. North Carolina
Norwest Financial North Carolina 3, Inc. North Carolina
Norwest Financial NV Asset Management, Inc. Nevada
Norwest Financial Resources, Inc. Iowa
Norwest Financial Security Services, Inc. Iowa
Norwest Financial South Carolina 1, Inc. North Carolina
Norwest Financial, Inc.(3) Iowa
Norwest Funding, Inc. Minnesota
Norwest Funding II, Inc. Minnesota
Norwest Insurance New Mexico, Inc. New Mexico
Norwest Insurance Wyoming, Inc. Wyoming
Norwest Integrated Structured Assets, Inc. Delaware
Norwest International Commercial Services Limited Hong Kong
Norwest Investment Advisors, Inc. Iowa
Norwest Investment Management, Inc. Minnesota
- ---------------
(3) Norwest Financial, Inc. is the parent and directly or indirectly
beneficially owns all the voting securities of certain subsidiaries operating
as consumer finance companies in the United States, Canada, Guam and Saipan.
(64 subsidiaries as of February 15, 1999). Such subsidiaries were
incorporated or otherwise organized in: Alaska, Arizona, California,
Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois,
Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts,
Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New
Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota,
Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South
Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia,
Wisconsin, Wyoming, Canada, Guam and Saipan.
8
<PAGE>
<CAPTION>
JURISDICTION OF
INCORPORATION OR
INDIRECTLY OWNED: ORGANIZATION
- ----------------- ------------
<S> <C>
Norwest Mortgage Asset Management Corporation Minnesota
Norwest Mortgage Closing Services, LLC Iowa
Norwest Mortgage Conventional 1, Inc. Delaware
Norwest Mortgage Insured 1, Inc. Delaware
Norwest Mortgage Insured 2, Inc. Delaware
Norwest Mortgage of Massachusetts, Inc. Massachusetts
Norwest Mortgage of New Mexico, Inc. New Mexico
Norwest Mortgage of New York, Inc. New York
Norwest Mortgage Real Estate Funding 1, Inc. Delaware
Norwest Mortgage Real Estate Funding 2, Inc. Delaware
Norwest Mortgage, Inc. California
Norwest Rural Insurance Services, Inc. Minnesota
Norwest Venture Capital Management, Inc. Minnesota
Norwest Ventures, LLC Delaware
Old Henry, Inc. Illinois
Osprey Asset Management, Inc. Delaware
Peregrine Capital Management, Inc. Minnesota
PGD, Inc. Texas
Premium Service/Norwest Financial Coast, Inc. South Carolina
Raven Asset Management, Inc. Delaware
Regency Insurance Agency, Inc. Minnesota
Reliable Financial Services, Inc. Puerto Rico
RELS, LLC Delaware
RELS Reporting Services, LLC Iowa
RELS Title Services, LLC Delaware
Residential Home Mortgage Investment, LLC Delaware
Residential Home Mortgage, LLC Delaware
Robin Asset Management, Inc. Delaware
Rural Community Insurance Agency, Inc. Minnesota
Rural Community Insurance Company Minnesota
Sagebrush Asset Management, Inc. Delaware
Saguaro Asset Management, Inc. Delaware
Scott Life Insurance Company Arizona
South Dakota Asset Management, Inc. Delaware
Spring Cypress Water Supply Corporation Texas
Spring Mountain Escrow Company California
Statewide Acceptance Corporation Texas
Superior Asset Management, Inc. Delaware
Star Bancshares of Nevada, Inc. Nevada
Superior Guaranty Insurance Company Vermont
Superior Health Care Management, Inc. Delaware
Superior North Asset Management, Inc. Delaware
9
<PAGE>
<CAPTION>
JURISDICTION OF
INCORPORATION OR
INDIRECTLY OWNED: ORGANIZATION
- ----------------- ------------
<S> <C>
Superior Red Wing Asset Management, Inc. Delaware
Superior South Asset Management, Inc. Delaware
Superior Southwest Asset Management, Inc. Delaware
Superior West Asset Management, Inc. Delaware
The United Group, Inc. North Carolina
Tower Data Processing Corporation Iowa
United California Bank Realty Corporation California
United New Mexico Financial Corporation New Mexico
United New Mexico Real Estate Services, Inc. New Mexico
USF Life Reinsurance Company Arizona
Valley Asset Management, Inc. Delaware
Valuation Information Technology, LLC Iowa
Victoria Financial Services, Inc. Delaware
Wells Capital Management Incorporated California
Wells Fargo Capital A California
Wells Fargo Capital B California
Wells Fargo Capital C California
Wells Fargo Capital I California
Wells Fargo Capital II California
Wells Fargo Cash Centers, Inc. Nevada
Wells Fargo Corporate Services, Inc. California
Wells Fargo Corporation Oregon
Wells Fargo Equipment Finance, Inc. Minnesota
Wells Fargo Equity Capital, Inc. California
Wells Fargo Financing Corporation California
Wells Fargo Housing Advisors, Inc. California
Wells Fargo Insurance Services California
Wells Fargo International, Ltd. Cayman Islands
Wells Fargo Leasing Corporation California
Wells Fargo Mondex, Inc. Arizona
Wells Fargo Realty Corporation I Maryland
Wells Fargo Realty Corporation II Maryland
Wells Fargo Realty Corporation III Maryland
Wells Fargo Realty Corporation IV Maryland
Wells Fargo Realty Holding Corporation III Delaware
Wells Fargo Realty Holding Corporation IV Delaware
Wells Fargo Securities, Inc. California
Wells Fargo Small Business
Investment Company, Inc. California
Wells Fargo Ventures, Inc. Delaware
10
<PAGE>
<CAPTION>
JURISDICTION OF
INCORPORATION OR
INDIRECTLY OWNED: ORGANIZATION
- ----------------- ------------
<S> <C>
Wells Fargo, Ltd. Hawaii
WFS Insurance Agency, Inc. Montana
WFS Insurance Agency, Inc. Nevada
WFS Insurance Agency, Inc. Oregon
WFS Insurance Agency, Inc. Washington
WFS Insurance Agency, Inc. Wyoming
Yucca Asset Management, Inc. Delaware
</TABLE>
NOTE: Not included in the above list of subsidiaries of the corporation are
inactive subsidiaries, certain subsidiaries formed solely for the
purpose of reserving a name, joint ventures or limited partnerships.
11
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of Wells Fargo & Company:
We consent to the incorporation by reference in the Registration Statements
noted below on Forms S-3, S-4 and S-8 of Wells Fargo & Company of our report
dated January 19, 1999, relating to the consolidated balance sheet of Wells
Fargo & Company and Subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, changes in stockholders' equity and
comprehensive income and cash flows for each of the years in the three-year
period ended December 31, 1998, which report is incorporated by reference in the
December 31, 1998 Annual Report on Form 10-K of Wells Fargo & Company.
<TABLE>
<CAPTION>
Registration
Statement Number Form Description
- ---------------- ---- -----------
<S> <C> <C>
033-50435 S-3 Universal Registration Statement 1993-2
033-61045 S-3 Universal Registration Statement 1995-1
333-01737 S-3 Universal Registration Statement 1996
333-09489 S-3 Dividend Reinvestment and Common Stock Purchase Plan
333-40989 S-4 Acquisition Registration Statement
333-53219 S-4 Acquisition Registration Statement
333-71125 S-4 Riverton State Bank Holding Company
033-10820 S-8 Norwest Financial Employee $20,000,000 Senior Indebtedness Plan
033-42198 S-8 1985 Long-Term Incentive Compensation Plan
033-50307 S-8 Norwest Corporation Employees' Deferred Compensation Plan
033-50309 S-8 1985 Long Term Incentive Compensation Plan
033-65007 S-8 Invest Norwest Program
033-65009 S-8 Norwest Corporation Master Savings Trust
033-57904 S-8 Financial Concepts Bancorp, Inc. Stock Option Plan
033-38013 S-8 United Banks of Colorado, Inc. Non-qualified Stock Option Plan
033-54322 S-8 Lincoln Financial Corporation 1988 Stock Option Plan
033-55533 S-8 First National Bank of Kerrville 1991 Stock Option Plan
333-12423 S-8 Long-Term Incentive Compensation Plan
333-02485 S-8 Benson Financial Corporation Stock Option Plan
333-09413 S-8 PartnerShares Plan
333-50789 S-8 PartnerShares Plan
333-62877 S-8 Long-Term Incentive Compensation Plan
333-63247 S-8 Wells Fargo & Company: 1982 Equity Incentive Plan, 1987
Director Option Plan, 1990 Equity Incentive Plan, 1990
Director Option Plan, Long-Term Incentive Plan, 1996
Employee Stock Purchase Plan, First Interstate Bancorp: 1983
Performance Stock Plan, 1988 Performance Stock Plan, 1991
Director Option Plan, 1991 Performance Stock Plan.
333-68093 S-8 Tax Advantage and Retirement Plan
</TABLE>
KPMG LLP
San Francisco, California
March 17, 1999
<PAGE>
EXHIBIT 24
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Leslie S. Biller
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ J.A. Blanchard III
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Michael R. Bowlin
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Edward M. Carson
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ David A. Christensen
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ William S. Davila
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Susan E. Engel
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Paul Hazen
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Rodney L. Jacobs
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Reatha Clark King
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Richard M. Kovacevich
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Richard D. McCormick
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Cynthia H. Milligan
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Benjamin F. Montoya
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Philip J. Quigley
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Donald B. Rice
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Ian M. Rolland
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Judith M. Runstad
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Susan G. Swenson
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Daniel M. Tellep
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Chang-Lin Tien
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ Michael W. Wright
-----------------------------------
<PAGE>
WELLS FARGO & COMPANY
Power of Attorney of Director
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of WELLS
FARGO & COMPANY, a Delaware corporation, does hereby make, constitute, and
appoint PHILIP J. QUIGLEY, a director and Chairman of the Audit and Examination
Committee of the Board of Directors, and CYNTHIA H. MILLIGAN, a director and
member of the Audit and Examination Committee of the Board of Directors, and
each or either of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place, and stead, to sign and affix the undersigned's name as such director of
said Company to an Annual Report on Form 10-K for the fiscal year ended December
31, 1998, and all amendments thereto, to be filed by said Company with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and the rules and regulations of said Commission, and to
file the same, with all exhibits thereto and other supporting documents, with
said Commission, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and perform any and all acts necessary or incidental
to the performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of February, 1999.
/s/ John A. Young
-----------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10-K FOR
THE PERIOD ENDED DECEMBER 31,1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 12,731
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,517
<TRADING-ASSETS> 760
<INVESTMENTS-HELD-FOR-SALE> 31,997
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 107,994
<ALLOWANCE> 3,134
<TOTAL-ASSETS> 202,475
<DEPOSITS> 136,788
<SHORT-TERM> 15,897
<LIABILITIES-OTHER> 8,537
<LONG-TERM> 20,494
0
463
<COMMON> 2,769
<OTHER-SE> 18,181
<TOTAL-LIABILITIES-AND-EQUITY> 202,475
<INTEREST-LOAN> 10,685
<INTEREST-INVEST> 1,844
<INTEREST-OTHER> 1,526
<INTEREST-TOTAL> 14,055
<INTEREST-DEPOSIT> 3,111
<INTEREST-EXPENSE> 5,065
<INTEREST-INCOME-NET> 8,990
<LOAN-LOSSES> 1,545
<SECURITIES-GAINS> 169
<EXPENSE-OTHER> 10,579
<INCOME-PRETAX> 3,293
<INCOME-PRE-EXTRAORDINARY> 1,950
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,950
<EPS-PRIMARY> 1.18<F1>
<EPS-DILUTED> 1.17
<YIELD-ACTUAL> 5.79
<LOANS-NON> 0
<LOANS-PAST> 342
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,062
<CHARGE-OFFS> 2,044
<RECOVERIES> 427
<ALLOWANCE-CLOSE> 3,134
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,166
<FN>
<F1>AMOUNT REPRESENTS BASIC EARNINGS PER COMMON SHARE PURSUANT TO FAS 128
</FN>
</TABLE>
