01—Abstract
Summary
Summary of the 10-K/A filed May 13, 1994. Cited figures are marked; the original filing is the authoritative source.
This Form 10-K/A (Amendment No. 1) restates the 1993 consolidated financial statements of Norwest Corporation, Minneapolis-based regional bank holding company, to reflect its January 14, 1994 pooling-of-interests acquisition of First United Bank Group, Inc. (about $3.9 billiona in assets).
The filing covers financial statements only. Note that the document is filed under Norwest Corporation, not Wells Fargo; Norwest later merged with Wells Fargo and adopted its name, which is likely the source of the WFC ticker reference. On a restated basis, 1993 net income was $613.1 millionb, up from $394.0 million in 1992, or $470.0 million before the 1992 cumulative accounting charge (a 30% increase).
Primary EPS was $1.89c versus $1.19 reported in 1992 ($1.44 before the charge), and the dividend rose to $0.64 from $0.54. Growth was driven by net interest income, which rose about 14% to $2,503.4 million, and by non-interest income, which rose about 24% to $1,585.0 million. Mortgage banking income nearly doubled to $472.3 million, and the servicing portfolio grew to $45.7 billion from $21.6 billion.
Credit quality improved: the provision for credit losses fell to $158.2 milliond from $270.8 million, net charge-offs fell to $178.3 million, and non-performing assets declined to $269.0 million from $376.7 million. Non-interest expense rose about 19% to $3,050.4 million, reflecting acquisitions and higher personnel costs, and the effective tax rate increased to 30.3% from 24.9%. Total assets reached $54.7 billion (up about 9%), and total stockholders' equity was $3.76 billion, or roughly 6.9% of assets.
Long-term debt more than doubled to $6.85 billion, reflecting heavy 1993 issuance of senior, subordinated and medium-term notes. Investors should note that the restated figures include First United's results, which posted a 1993 net loss of $40.5 million on a standalone basis, and that the acquisition added 17.8 million common shares.
02—Key points
Key Highlights
- Restated 1993 net income of $613.1 million, up 55% from $394.0 million in 1992 (about 30% higher before the 1992 cumulative accounting charge); primary EPS of $1.89 versus $1.19 reported in 1992
- Net interest income rose about 14% to $2,503.4 million, while non-interest income grew about 24% to $1,585.0 million, led by mortgage banking income of $472.3 million (up from $275.3 million)
- Credit quality improved: provision for credit losses fell to $158.2 million from $270.8 million, and non-performing assets dropped to $269.0 million from $376.7 million
- Total assets of $54.7 billion (up about 9%) and stockholders' equity of $3.76 billion; the First United acquisition (about $3.9 billion in assets) was accounted for as a pooling of interests with prior periods restated
- Non-interest expenses climbed about 19% to $3,050.4 million, and the effective tax rate rose to 30.3% from 24.9%, partially offsetting revenue gains
- Long-term debt more than doubled to $6.85 billion after significant 1993 issuance of senior notes, subordinated debentures and medium-term notes
- Dividends per share increased to $0.64 from $0.54, and the company completed a two-for-one stock split in June 1993
03—Questions
Frequently Asked Questions
Why was this 10-K/A filed, and how does it differ from the original annual report?
The amendment restates the consolidated financial statements in their entirety to reflect the January 14, 1994 acquisition of First United Bank Group, Inc., which was accounted for under the pooling-of-interests method. All prior periods were restated to include First United's results, so the figures here differ from those in the original 1993 10-K. KPMG Peat Marwick consented to the substitution and reissued its report dated January 19, 1994.
How strong were the company's earnings growth and profitability in 1993?
Net income was $613.1 million in 1993, compared with $394.0 million in 1992 (which included a $76.0 million after-tax charge for postretirement medical benefits). Excluding that charge, net income rose about 30%, from $470.0 million. Return on average common equity is roughly 17% based on the reported figures, a level the company achieved while raising its equity base.
What drove revenue growth, and was it sustainable?
Revenue growth came from both net interest income, which rose to $2,503.4 million, and non-interest income, which rose to $1,585.0 million. Mortgage banking was the largest contributor, with income up about 72% to $472.3 million and a serviced portfolio of $45.7 billion. Mortgage banking income is cyclical and sensitive to interest rates and refinancing activity, so investors should treat part of this growth as potentially non-recurring. Acquisitions also contributed to growth.
Are there risks investors should watch in the balance sheet or asset quality?
Long-term debt rose to $6.85 billion from $4.55 billion, and short-term borrowings declined to $6.0 billion from $8.8 billion, so funding shifted toward longer maturities. Total equity represents about 6.9% of assets, which is modest. Asset quality improved, with lower provisions and net charge-offs of $178.3 million, but the allowance for credit losses covered only about 2.6% of gross loans. Consumer loans grew to $8.6 billion from $7.0 billion, and that segment can carry higher credit risk.
What are the implications of the First United acquisition and other pending deals for shareholders?
First United added about 17.8 million common shares, and the company said that eight other pending acquisitions with about $1.3 billion in assets could add roughly 10.4 million shares during 1994. Because First United reported a 1993 standalone net loss of $40.5 million, its results weigh on the restated figures, though the pooling method means the combined results are presented as if the companies had always been combined. Shareholders should consider share dilution against the expected benefits of expanded scale and geographic reach across 15 states.
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