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 fiscal year ended December 31, 1999 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 not be 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. [ ]
As of February 29, 2000, 1,623,901,005 shares of common stock were
outstanding having an aggregate market value, based on a closing price of $33.06
per share, of $53,690 million. At that date, the aggregate market value of
common stock held by non-affiliates was approximately $52,508 million.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1999 Annual Report to Stockholders - Incorporated into Parts I,
II and IV. Portions of the Proxy Statement for the 2000 Annual Meeting of
Stockholders - Incorporated into Part III.
FORM 10-K CROSS-REFERENCE INDEX
Page(s)
-----------------------------------------------
FORM Annual Proxy
10-K Report (1) Statement(2)
---- ------ ---------
PART I
Item 1. Business
Description of Business 2-9 33-98 --
Statistical Disclosure:
Distribution of Assets, Liabilities and
Stockholders' Equity; Interest Rates
and Interest Differential 9 39-41 --
Investment Portfolio -- 44, 56, 63 --
Loan Portfolio 10-11 45-47, 57, 64-66 --
Summary of Loan Loss Experience 12-16 47, 57, 65-66 --
Deposits -- 47, 68 --
Return on Equity and Assets -- 34-35 --
Short-Term Borrowings -- 68 --
Derivative Financial Instruments -- 49, 58-59, 91-93 --
Item 2. Properties 16 67 --
Item 3. Legal Proceedings -- 90 --
Item 4. Submission of Matters to a Vote of
Security Holders (3) -- -- --
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters -- 51 --
Item 6. Selected Financial Data -- 36 --
Item 7. Management's Discussion and Analysis of Finan-
cial Condition and Results of Operations -- 34-51 --
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk -- 48-49 --
Item 8. Financial Statements and Supplementary Data -- 52-98 --
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure (3) -- -- --
PART III
Item 10. Directors and Executive Officers of the
Registrant 17-20 -- 6-9,34
Item 11. Executive Compensation -- -- 13-30,34
Item 12. Security Ownership of Certain Beneficial
Owners and Management -- -- 4-5
Item 13. Certain Relationships and Related Transactions -- -- 31-33
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 21-27 52-98 --
SIGNATURES 28 -- --
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(1) The 1999 Annual Report to Stockholders, portions of which are incorporated
by reference into this Form 10-K.
(2) The information required to be submitted in response to these items is
incorporated by reference to the Company's definitive Proxy Statement for
the 2000 Annual Meeting of Stockholders to be held on April 25, 2000, to be
filed with the Securities and Exchange Commission pursuant to
Regulation 14A.
(3) Not applicable.
1
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, 1999, 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. As of December 31, 1999, its significant subsidiaries, as
defined by Securities and Exchange Commission (SEC) rules, are (a) Norwest
Bank Minnesota, N.A. and its consolidated subsidiaries, (b) Norwest Limited,
L.L.C., (c) Norwest Venture Partners VI, LP, and (d) WFC Holdings Corporation
and its consolidated subsidiaries, including its principal subsidiary, Wells
Fargo Bank, N.A.
On November 2, 1998, the merger involving Norwest Corporation and Wells Fargo
& Company (the Merger) was completed. Norwest Corporation changed its name to
"Wells Fargo & Company" and the former Wells Fargo & Company (the former
Wells Fargo) became 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 Company has four operating segments for the purpose of management reporting:
Community Banking, Wholesale Banking, Norwest Mortgage and Norwest Financial.
Financial information and narrative descriptions of these operating segments are
included in the 1999 Annual Report to Stockholders, incorporated by reference
herein.
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
2
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, 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 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. 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. Generally it is the policy of
the Company not to comment on such discussions or possible acquisitions until a
definitive acquisition agreement has been signed.
COMPETITION
The financial services industry is highly competitive. The Company's
subsidiaries compete with financial services providers, such as banks, savings
and loan associations, credit unions, finance companies, mortgage banking
companies, insurance companies, and money market and mutual fund companies. They
also face increased competition from non-banking institutions such as brokerage
houses and insurance companies, as well as from financial services subsidiaries
of commercial and manufacturing companies. Many of these competitors enjoy the
benefits of fewer regulatory constraints and lower cost structures.
Effective March 13, 2000, securities firms and insurance companies that elect to
become financial holding companies may acquire banks and other financial
institutions. This may significantly change the competitive environment in which
the Company and its subsidiaries conduct business. The financial services
industry is also likely to become more competitive as further technological
advances enable more companies to provide financial services. These
technological advances may diminish the importance of depository institutions
and other financial intermediaries in the transfer of funds between parties.
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 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,
3
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 subsidiary banks, 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 (BHC), the Company is
subject to regulation, 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.
NONBANK 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 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 nonbank 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
PERMITTED ACTIVITIES. Prior to March 13, 2000, a BHC generally was prohibited
under the BHC Act from acquiring 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, prior to March 13,
2000, a BHC generally was limited to engaging in banking and such other
activities as determined by the FRB to be closely related to banking.
Under the Gramm-Leach-Bliley Act of 1999 (the GLB Act), beginning March 13,
2000, an eligible BHC may elect to become a financial holding company and
thereafter affiliate with securities firms and insurance companies and engage in
other activities that are financial in nature. The GLB Act defines "financial in
nature" to include securities underwriting, dealing and market making;
sponsoring mutual funds and investment companies; insurance
4
underwriting and agency; merchant banking activities; activities that the FRB
has determined to be closely related to banking; and other activities that
the FRB, after consultation with the Secretary of the Treasury, determines by
regulation or order to be financial in nature or incidental to a financial
activity. No FRB approval is required for a financial holding company to
acquire a company, other than a BHC, bank or savings association, engaged in
activities that are financial in nature or incidental to activities that are
financial in nature, as defined in the GLB Act or as determined by the FRB.
A BHC is eligible to become a financial holding company if each of its
subsidiary banks and savings associations is well capitalized under the prompt
corrective action provisions of the Federal Deposit Insurance Act (the FDI Act),
is well managed and has a rating under the Community Reinvestment Act (CRA) of
satisfactory or better. If any bank or savings association subsidiary of a
financial holding company ceases to be well capitalized or well managed, the FRB
may require the financial holding company to divest the subsidiary.
Alternatively, the financial holding company may elect to conform its activities
to those permissible for BHCs that do not elect to become financial holding
companies. If any bank or savings association subsidiary of a financial holding
company receives a CRA rating of less than satisfactory, the financial holding
company will be prohibited from engaging in new activities or acquiring
companies other than BHCs, banks or savings associations.
The Company became a financial holding company effective March 13, 2000. It
continues to maintain its status as a BHC for purposes of other FRB regulations.
INTERSTATE BANKING. Under the Riegle-Neal Interstate Banking and Branching Act
(Riegle-Neal Act), a BHC 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 BHC 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 BHC'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, 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. Of the Company's
banking states, only 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.
5
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 of the Company 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.
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 nonbank
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 BHC 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 BHC may not have
the resources to provide it. Capital loans by a BHC 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 BHC's
bankruptcy, any commitment by the BHC 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 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
6
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 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 average total assets (excluding intangibles).
The FRB, the FDIC and the OCC also have adopted rules to incorporate market and
interest rate risk components into their risk-based capital standards. Under the
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
7
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.
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 2.1 cents per $100 of
BIF-assessable deposits in 1999, and will continue to pay as assessed until the
earlier of December 31, 2000 or the date the last savings and loan association
ceases to exist. Thereafter, they will pay an assessment rate equal to the rate
assessed on deposits insured by the Savings Association Insurance Fund.
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
8
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.
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.
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Year ended December 31,
-----------------------------------------------------------------
1999 OVER 1998 1998 over 1997
------------------------------ -----------------------------
(in millions) VOLUME RATE TOTAL Volume Rate Total
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Increase (decrease) in interest income:
Federal funds sold and securities
purchased under resale agreements $ (13) $ (9) $ (22) $ 29 $ 2 $ 31
Securities available for sale:
Securities of U.S. Treasury and federal agencies 50 (21) 29 (13) (12) (25)
Securities of U.S. states and political subdivisions 24 (3) 21 12 -- 12
Mortgage-backed securities:
Federal agencies 213 (34) 179 (199) (17) (216)
Private collateralized mortgage obligations 17 4 21 (14) (2) (16)
Other securities 69 20 89 29 7 36
Loans held for sale 20 (19) 1 75 (16) 59
Mortgages held for sale (56) 11 (45) 433 (25) 408
Loans:
Commercial 243 (61) 182 299 (76) 223
Real estate 1-4 family first mortgage (57) (12) (69) (209) (129) (338)
Other real estate mortgage 94 (102) (8) 5 (34) (29)
Real estate construction 55 (4) 51 29 (18) 11
Consumer:
Real estate 1-4 family junior lien mortgage 96 (52) 44 72 94 166
Credit card (91) (72) (163) (96) 28 (68)
Other revolving credit and monthly payment (47) (44) (91) (56) 60 4
Lease financing 110 (25) 85 109 (7) 102
Foreign 40 1 41 58 7 65
Other 5 (26) (21) 33 (1) 32
----- ----- ----- ----- ----- -----
Total increase (decrease) in interest income 772 (448) 324 596 (139) 457
----- ----- ----- ----- ----- -----
Increase (decrease) in interest expense:
Deposits:
Interest-bearing checking 1 (10) (9) (5) (10) (15)
Market rate and other savings 92 (185) (93) 30 15 45
Savings certificates (103) (123) (226) (44) (14) (58)
Other time deposits (29) (20) (49) 19 (6) 13
Deposits in foreign offices 24 (1) 23 (23) -- (23)
Short-term borrowings 197 (50) 147 167 -- 167
Long-term debt 258 (76) 182 18 (14) 4
Guaranteed preferred beneficial interests
in Company's subordinated debentures (17) (4) (21) (23) 3 (20)
----- ----- ----- ----- ----- -----
Total increase (decrease) in interest expense 423 (469) (46) 139 (26) 113
----- ----- ----- ----- ----- -----
Increase (decrease) in net interest income
on a taxable-equivalent basis $ 349 $ 21 $ 370 $ 457 $(113) $ 344
===== ===== ===== ===== ===== =====
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9
LOAN PORTFOLIO
The following table presents the remaining contractual principal maturities of
selected loan categories at December 31, 1999 and a summary of the major
categories of loans outstanding at the end of the last five years. At December
31, 1999, the Company did not have loan concentrations that exceeded 10% of
total loans, except as shown below.
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DECEMBER 31, 1999
----------------------------------------------------------
OVER ONE YEAR
THROUGH FIVE YEARS OVER FIVE YEARS
------------------ ---------------
FLOATING FLOATING
OR OR December 31,
ONE YEAR FIXED ADJUSTABLE FIXED ADJUSTABLE -------------------------------------
(in millions) OR LESS RATE RATE RATE RATE TOTAL 1998 1997 1996 1995
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Selected loan maturities:
Commercial $19,528 $3,741 $12,879 $ 697 $1,843 $ 38,688 $ 35,450 $ 32,061 $ 30,794 $20,127
Real estate 1-4 family first
mortgage 2,429 367 394 5,813 3,395 12,398 11,496 14,165 16,051 8,799
Other real estate mortgage 2,795 3,080 5,424 4,784 3,095 19,178 16,668 16,326 16,419 11,857
Real estate construction 2,127 555 1,490 326 213 4,711 3,790 3,326 3,247 2,108
Foreign 774 112 428 173 86 1,573 1,478 1,155 1,132 932
------- ------- ------- ------- ------ -------- -------- -------- -------- -------
Total selected loan
maturities $27,653 $7,855 $20,615 $11,793 $8,632 76,548 68,882 67,033 67,643 43,823
======= ====== ======= ======= ====== -------- -------- -------- -------- -------
Other loan categories:
Consumer:
Real estate 1-4 family
junior lien mortgage 12,938 11,128 10,618 10,357 6,970
Credit card 5,472 5,795 6,671 7,028 5,667
Other revolving credit and
monthly payment 16,656 15,809 17,021 16,916 11,715
-------- -------- -------- -------- -------
Total consumer 35,066 32,732 34,310 34,301 24,352
Lease financing 7,850 6,380 4,968 3,816 2,605
-------- -------- -------- -------- -------
Total loans $119,464 $107,994 $106,311 $105,760 $70,780
======== ======== ======== ======== =======
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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.
10
REAL ESTATE MORTGAGE LOANS BY STATE AND TYPE
(excluding 1-4 family first mortgages)
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December 31, 1999
-------------------------------------------------------------------------------------------------------------
Other Non-
California Texas Minnesota Colorado states(2) All states accruals
--------------- -------------- -------------- -------------- --------------- ---------------- as a %
Total Non- Total Non- Total Non- Total Non- Total Non- Total Non- of total
(in millions) loans accrual loans accrual loans accrual loans accrual loans accrual loans accrual by type
- ------------------------------------------------------------------------------------------------------------------------------------
Office buildings $2,142 $16 $ 390 $ 2 $ 110 $-- $242 $-- $1,515 $ 2 $ 4,399 $ 20 --%
Retail buildings 1,467 22 356 4 242 1 217 -- 1,510 7 3,792 34 1
Industrial 1,779 6 316 4 271 -- 177 1 837 5 3,380 16 --
Hotels/motels 290 1 317 -- 58 -- 79 -- 1,251 2 1,995 3 --
Apartments 624 3 221 -- 96 -- 80 -- 625 3 1,646 6 --
Institutional 242 4 22 -- -- -- 1 -- 109 3 374 7 2
Agricultural 270 4 64 1 84 -- 36 -- 552 2 1,006 7 1
Land 341 5 125 1 40 -- 57 -- 238 1 801 7 1
1-4 family
structures (1) 154 1 25 -- 7 -- 9 -- 68 -- 263 1 --
Other 699 2 182 1 125 1 100 -- 416 7 1,522 11 1
------ --- ------ --- ----- --- ---- --- ----- --- ------ ----
Total by state $8,008 $64 $2,018 $13 $1,033 $ 2 $998 $ 1 $7,121 $32 $19,178 $112 1%
====== === ====== === ====== === ==== === ====== === ======= ==== ==
% of total loans 42% 11% 5% 5% 37% 100%
====== ====== ====== ==== ====== =======
Nonaccruals as a %
of total by state 1% 1% --% --% --%
=== === === === ===
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Represents loans to real estate developers secured by 1-4 family
residential developments.
(2) Consists of 40 states; no state had loans in excess of $928 million at
December 31, 1999.
REAL ESTATE CONSTRUCTION LOANS BY STATE AND TYPE
- --------------------------------------------------------------------------------------------------------------------------------
December 31, 1999
---------------------------------------------------------------------------------------------------------
Other Non-
California Arizona Texas Colorado states(1) All states accruals
-------------- ------------- ------------- -------------- ------------- -------------- as a %
Total Non- Total Non- Total Non- Total Non- Total Non- Total Non- of total
(in millions) loans accrual loans accrual loans accrual loans accrual loans accrual loans accrual by type
- --------------------------------------------------------------------------------------------------------------------------------
Retail buildings $ 225 $-- $ 93 $-- $ 39 $-- $ 25 $-- $ 253 $-- $ 635 $-- --%
1-4 family:
Land 140 -- -- -- 9 -- 12 -- 59 -- 220 -- --
Structures 157 -- 86 2 128 1 130 -- 312 1 813 4 --
Land (excluding
1-4 family) 203 -- 92 -- 54 1 38 -- 278 1 665 2 --
Apartments 135 -- 75 -- 35 -- 13 -- 133 -- 391 -- --
Office buildings 282 -- 30 -- 45 -- 43 -- 329 -- 729 -- --
Industrial 183 -- 28 -- 39 -- 50 -- 180 -- 480 -- --
Hotels/motels 55 -- 5 -- 2 -- 3 -- 79 -- 144 -- --
Institutional 12 -- 3 -- 8 -- -- -- 14 -- 37 -- --
Agricultural 3 -- -- -- -- -- -- -- 2 -- 5 -- --
Other 224 -- 10 -- 56 1 22 -- 280 -- 592 1 --
------ --- ---- --- ---- --- ---- --- ------ --- ------ ---
Total by state $1,619 $-- $422 $ 2 $415 $ 3 $336 $-- $1,919 $ 2 $4,711 $ 7 --%
====== === ==== === ==== === ==== === ====== === ====== === ===
% of total loans 34% 9% 9% 7% 41% 100%
====== ==== ==== ==== ====== ======
Nonaccruals as a %
of total by state --% --% 1% --% --%
=== === === ==== ===
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Consists of 33 states; no state had loans in excess of $280 million at
December 31, 1999.
11
CHANGES IN THE ALLOWANCE FOR LOAN LOSSES
- -------------------------------------------------------------------------------------------------------------------
(in millions) 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
BALANCE, BEGINNING OF YEAR $ 3,134 $ 3,062 $ 3,059 $ 2,711 $ 2,872
Allowances related to business combinations, net 40 144 168 870 119
Provision for loan losses 1,045 1,545 1,140 500 312
Loan charge-offs:
Commercial (382) (261) (357) (200) (99)
Real estate 1-4 family first mortgage (12) (26) (26) (24) (20)
Other real estate mortgage (28) (54) (26) (50) (59)
Real estate construction (2) (3) (5) (14) (10)
Consumer:
Real estate 1-4 family junior lien mortgage (33) (31) (37) (38) (23)
Credit card (388) (535) (579) (487) (330)
Other revolving credit and monthly payment (512) (1,002) (618) (488) (255)
------- ------- ------- ------- -------
Total consumer (933) (1,568) (1,234) (1,013) (608)
Lease financing (38) (48) (46) (35) (18)
Foreign (90) (84) (37) (35) (29)
------- ------- ------- ------- -------
Total loan charge-offs (1,485) (2,044) (1,731) (1,371) (843)
------- ------- ------- -------- -------
Loan recoveries:
Commercial 86 82 105 89 68
Real estate 1-4 family first mortgage 6 11 9 12 8
Other real estate mortgage 37 78 62 57 65
Real estate construction 5 4 12 12 5
Consumer:
Real estate 1-4 family junior lien mortgage 15 7 10 10 4
Credit card 46 56 61 50 26
Other revolving credit and monthly payment 214 163 144 101 57
------- ------- ------- ------- -------
Total consumer 275 226 215 161 87
Lease financing 12 12 13 9 13
Foreign 15 14 10 9 5
------- ------- ------- ------- -------
Total loan recoveries 436 427 426 349 251
------- ------- ------- ------- -------
Total net loan charge-offs (1,049) (1,617) (1,305) (1,022) (592)
------- ------- ------- ------- --------
BALANCE, END OF YEAR $ 3,170 $ 3,134 $ 3,062 $ 3,059 $ 2,711
======= ======= ======= ======= =======
Total net loan charge-offs as a percentage of
average total loans .94% 1.52% 1.25% 1.04% .84%
======= ======= ======= ======= =======
Allowance as a percentage of total loans 2.65% 2.90% 2.88% 2.89% 3.83%
======= ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------------------
12
The SEC requires the Company to present the ratio of the allowance for loan
losses to total nonaccrual loans. This ratio was 477% and 442% at December 31,
1999 and 1998, 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 below and in greater detail in the 1999
Annual Report to Stockholders, incorporated by reference herein.
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The table on page 16 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 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 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
13
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 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, 1999, the allowance for loan losses was $3,170 million, or 2.65%
of total loans, compared with $3,134 million, or 2.90%, at December 31, 1998.
During 1999, net charge-offs exceeded the provision for loan losses by $4
million; however, the addition of $40 million of allowances related to business
combinations in 1999 accounted for the net increase of $36 million in the
reserve, year over year. The components of the allowance, allocated and
unallocated, are shown in the table on page 16. The allocated component declined
to $1,767 million from $1,968 million, while the unallocated component grew to
$1,403 million from $1,166 million, as of December 31, 1999 and 1998,
respectively.
The $201 million reduction in the allocated component was substantially due to
the lower allocated allowance to loans outstanding ratios in the other consumer,
commercial loan, and other real estate mortgage portfolios. In total, lower
allocated reserve ratios resulted in a reduction of roughly $361 million in
allocated reserves, primarily a reflection of lower projected loss rates in the
loan portfolio. Of this reduction, $90 million was attributable to the domestic
portfolio of Norwest Financial, although the overall reserve in that entity
actually increased by virtue of additions to the unallocated portion of the
reserve. An additional $106 million was attributable to various other consumer
lending products. Finally, the commercial loan and other real estate mortgage
portfolios showed continuing gradual improvement in problem asset trends. The
improvements in the credit quality of those portfolios translated into a
reduction of approximately $132 million in the allocated reserve. Other smaller
portfolios accounted for the remaining $33 million in allocated reserve ratio
reductions during the year.
These 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 1998 ratio of
1.82%, allocated reserves would have increased by roughly
14
$208 million, as loans outstanding grew by $11.5 billion during the year.
However, due to a shift in portfolio composition, the higher volume increased
the allocated reserve by only $160 million, as relatively lower-risk
commercial loans, residential first and second mortgages, and lease financing
grew at a faster pace than 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 1999. 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 were
reconciled in the first quarter of 1999.
The Company considers the allowance for loan losses of $3,170 million
adequate to cover losses inherent in loans, loan commitments, and standby and
other letters of credit at December 31, 1999.
The foregoing discussion contains forward-looking statements about the adequacy
of the Company's reserves for 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. These factors include changes in business and economic
conditions that could increase the number of customers and counterparties who
become delinquent or who default on their loans or other obligations to the
Company. For a discussion of some of the other factors that could cause actual
losses to be more than estimated losses, see "Factors that May Affect Future
Results" in "Management's Discussion and Analysis of Financial Condition and
Results of Operations," incorporated by reference herein.
15
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
- ----------------------------------------------------------------------------------------------------------------------------------
December 31,
- ----------------------------------------------------------------------------------------------------------------------------------
(in millions) 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial $ 605 $ 605 $ 560 $ 472 $ 321
Real estate 1-4 family first mortgage 56 50 64 53 73
Other real estate mortgage 210 230 277 340 291
Real estate construction 48 56 46 59 68
Consumer:
Credit card 337 344 471 440 383
Other consumer 397 550 542 452 313
------ ------ ------ ------ ------
Total consumer 734 894 1,013 892 696
Lease financing 52 54 58 47 41
Foreign 62 79 43 34 27
------ ------ ------ ------ ------
Total allocated 1,767 1,968 2,061 1,897 1,517
Unallocated component of
the allowance (1) 1,403 1,166 1,001 1,162 1,194
------ ------ ------ ------ ------
Total $3,170 $3,134 $3,062 $3,059 $2,711
====== ====== ====== ====== ======
December 31,
--------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------- ---------------- ---------------- ---------------- -----------------
ALLOC. LOAN Alloc. Loan Alloc. Loan Alloc. Loan Alloc. Loan
ALLOW. CATGRY allow. catgry allow. catgry allow. catgry allow. catgry
AS % AS % as % as % as % as % as % as % as % as %
OF LOAN OF TOTAL of loan of total of loan of total of loan of total of loan of total
CATGRY LOANS catgry loans catgry loans catgry loans catgry loans
------- -------- ------- -------- ------- ------- -------- -------- ------- --------
Commercial 1.56% 32% 1.71% 33% 1.75% 30% 1.53% 29% 1.59% 28%
Real estate 1-4 family first mortgage .45 10 .43 11 .45 14 .33 15 .83 13
Other real estate mortgage 1.10 16 1.38 15 1.70 15 2.07 16 2.45 17
Real estate construction 1.02 4 1.48 4 1.38 3 1.82 3 3.23 3
Consumer:
Credit card 6.16 5 5.94 5 7.06 6 6.26 6 6.76 8
Other consumer 1.34 25 2.04 25 1.96 26 1.66 26 1.68 26
--- --- --- --- ---
Total consumer 2.09 30 2.73 30 2.95 32 2.60 32 2.86 34
Lease financing .66 7 .85 6 1.17 5 1.23 4 1.57 4
Foreign 3.94 1 5.35 1 3.72 1 3.00 1 2.90 1
--- --- --- --- ---
Total allocated 1.48 100% 1.82 100% 1.94 100% 1.79 100% 2.14 100%
=== === === === ===
Unallocated component of
the allowance (1) 1.17 1.08 .94 1.10 1.69
---- ---- ---- ---- ----
Total 2.65% 2.90% 2.88% 2.89% 3.83%
==== ==== ==== ==== ====
- ----------------------------------------------------------------------------------------------------------------------------------
(1) This amount and any unabsorbed portion of the allocated allowance are also
available for any of the above listed loan categories.
PROPERTIES
The Company owns and occupies its 340,000 square foot headquarters at 420
Montgomery Street, San Francisco, California. In addition, the Company leases
and occupies approximately 488,000 square feet in the Norwest Center, Sixth &
Marquette, Minneapolis, Minnesota, which is a 1.1 million square foot office
tower owned in part by a subsidiary of the Company. Major office and operational
facilities are owned or leased in Arizona, California, Colorado, Iowa,
Minnesota, Oregon, South Dakota and Texas. Approximately 5,500 stores and
secondary office facilities are owned or leased throughout the United States and
some foreign countries.
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.
16
EXECUTIVE OFFICERS OF THE REGISTRANT
YEARS WITH
NAME AND COMPANY OR
COMPANY POSITION POSITIONS HELD DURING THE PAST FIVE YEARS AGE PREDECESSORS
- ---------------- ----------------------------------------- --- ------------
John A. Berg Group Executive Vice President (Central Banking) (November 1998 to 54 24
Group Executive Present); Senior Vice President and Regional Group Head of former
Vice President (Central Norwest (March 1998 to November 1998); Regional President (Greater
Banking) Minnesota/La Crosse Region) (January 1990 to March 1998)
Leslie S. Biller Vice Chairman and Chief Operating Officer (November 1998 to Present); 52 12
Vice Chairman and Chief President and Chief Operating Officer of former Norwest (February 1997
Operating Officer to November 1998); Executive Vice President (South Central Community
Banking) (July 1990 to February 1997)
Patricia R. Callahan Executive Vice President (Human Resources) (November 1998 to 46 22
Executive Vice President Present); Executive Vice President of former Wells Fargo (Personnel)
(Human Resources) (September 1998 to November 1998); Executive Vice President (Wholesale
Banking) (July 1997 to September 1998); Executive Vice President
(Personnel) (March 1993 to July 1997)
James R. Campbell Group Executive Vice President (Minnesota Banking) (November 1998 to 57 35
Group Executive Present); Executive Vice President (North Central Banking) of former
Vice President (Minnesota Norwest (August 1997 to November 1998); Executive Vice President
Banking) (Commercial Banking Services, Specialized Lending and Nebraska)
(January 1996 to August 1997); Executive Vice President (Twin Cities
Banking) (February 1993 to January 1996)
Teresa A. Dial Group Executive Vice President (California, Business Banking, 50 27
Group Executive Telephone Banking, Distribution Strategies, Insurance, Diversified
Vice President Products Group, Education Finance) (November 1998 to Present); Vice
(California, Chair (Consumer and Business Banking) of former Wells Fargo
Business Banking, (March 1996 to November 1998); Group Executive Vice President
Telephone Banking, (Business Banking) (September 1991 to March 1996)
Distribution
Strategies, Insurance,
Diversified Products
Group, Education Finance)
17
YEARS WITH
NAME AND COMPANY OR
COMPANY POSITION POSITIONS HELD DURING THE PAST FIVE YEARS AGE PREDECESSORS
- ---------------- ----------------------------------------- --- ------------
David A. Hoyt Group Executive Vice President (Wholesale Banking) (November 1998 to 44 18
Group Executive Present); Vice Chair (Real Estate, Capital Markets,
Vice President International) of former Wells Fargo (May 1997 to November
(Wholesale Banking) 1998); Executive Vice President (Capital Markets, Special Loans)
(September 1994 to May 1997)
Ross J. Kari Executive Vice President and Chief Financial Officer (January 2000 to 41 17
Executive Vice President & Present); Executive Vice President and Deputy Chief Financial Officer
Chief Financial Officer (November 1998 to January 2000); Chief Financial Officer of former
Wells Fargo (May 1998 to November 1998); Executive Vice President
(Group Head of Finance) (March 1997 to May 1998); Executive Vice
President and General Auditor (September 1995 to March 1997); Senior
Vice President and General Auditor (January 1995 to September 1995)
Richard M. Kovacevich President and Chief Executive Officer (November 1998 to Present); 56 14
President and Chief Chairman and Chief Executive Officer of former Norwest (January 1997
Executive Officer to November 1998); Chairman, President and Chief Executive Officer
(May 1995 to January 1997); President and Chief Executive Officer
(January 1993 to May 1995)
Ely L. Licht Executive Vice President and Chief Credit Officer (November 1998 to 52 16
Executive Vice President Present); Executive Vice President (Credit Administration) of former
(Chief Credit Officer) Wells Fargo (February 1990 to November 1998)
Dennis J. Mooradian Group Executive Vice President (Private Client Services) (July 1999 52 3
Group Executive Vice to Present); Executive Vice President of Wells Fargo Bank, N.A. (May
President (Private Client 1996 to Present); various positions with Lehman Brothers since 1977
Services) including Global Private Client Services Division's Chief Operating
Officer (April 1995 to May 1996) and Managing Director (Head of
Domestic Branches) (August 1993 to April 1995)
18
YEARS WITH
NAME AND COMPANY OR
COMPANY POSITION POSITIONS HELD DURING THE PAST FIVE YEARS AGE PREDECESSORS
- ---------------- ----------------------------------------- --- ------------
John C. Nelson Group Executive Vice President (Western Banking) (November 1998 to 55 33
Group Executive Present); Chairman and Chief Executive Officer of Norwest Bank
Vice President (Western Colorado, N.A. of former Norwest (January 1995 to November 1998)
Banking)
Mark C. Oman Group Executive Vice President (Mortgage and Home Equity) (November 45 20
Group Executive 1998 to Present); Executive Vice President (Mortgage Services and
Vice President (Mortgage Iowa Community Banking) of former Norwest (February 1997 to November
and Home Equity) 1998); President and Chief 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 Group Executive Vice President (Internet Services) (October 1999 to 53 29
Group Executive Present); Group Executive Vice President (Investments) (November 1998
Vice President (Internet to October 1999); Vice Chair (Trust and Investment Services) of
Services) former Wells Fargo (May 1993 to November 1998)
Daniel W. Porter Group Executive Vice President (Norwest Financial) and Chairman and 44 --
Group Executive Vice Chief Executive Officer of Norwest Financial, Inc. (December 1999 to
President (Norwest Present); various positions with GE Capital since 1986 including
Financial) Managing Director of GE Capital Europe in London (European
Transportation Group) (March 1998 to December 1999); President of
Global Consumer Development (September 1997 to March 1998); and
President and Chief Executive Officer of Retailer Financial Services
(April 1994 to September 1997)
Les L. Quock, CPA Senior Vice President and Controller (November 1998 to Present); 46 20
Senior Vice President and Senior Vice President (Payment Systems Services Group) of former
Controller (Principal Wells Fargo (February 1997 to November 1998); Senior Vice President
Accounting Officer) (Business Banking Group Systems) (October 1996 to February 1997);
Senior Vice President (Business Loan Finance and Administration)
(November 1995 to October 1996); Senior Vice President (Business Loan
Administration) (January 1994 to November 1995)
19
YEARS WITH
NAME AND COMPANY OR
COMPANY POSITION POSITIONS HELD DURING THE PAST FIVE YEARS AGE PREDECESSORS
- ---------------- ----------------------------------------- --- ------------
Stanley S. Stroup Executive Vice President and General Counsel (November 1998 to 56 16
Executive Vice President Present); Executive Vice President and General Counsel of former
and General Counsel Norwest (February 1993 to November 1998)
(Law Department and
Government Relations)
John G. Stumpf Group Executive Vice President (Southwestern Banking) (November 1998 46 18
Group Executive to Present); Regional President of Norwest Bank Texas, N.A. of former
Vice President Norwest (July 1994 to November 1998)
(Southwestern Banking)
There is no family relationship among the above officers. All executive officers
serve at the pleasure of the Board of Directors.
20
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements, Schedules and Exhibits:
(1) The consolidated financial statements and related notes, the
independent auditors' report thereon and supplementary data that
appear on pages 52 through 98 of the 1999 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.
Exhibit
number Description
------ -----------
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 Change of Location of Registered Office
and Change of Registered Agent, incorporated by
reference to Exhibit 3(b) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999
(c) 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
(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
21
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, incorporated by
reference to Exhibit 3(l) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1998
(m) Certificate Eliminating the Certificate of Designations
for the Company's Series A Junior Participating
Preferred Stock, incorporated by reference to Exhibit
3(a) to the Company's Current Report on Form 8-K dated
April 21, 1999
(n) Certificate of Designations for the Company's 1999 ESOP
Cumulative Convertible Preferred Stock, incorporated by
reference to Exhibit 3(b) to the Company's Current
Report on Form 8-K dated April 21, 1999
(o) Certificate Eliminating the Certificate of Designations
for the Company's Cumulative Tracking Preferred Stock
(p) By-Laws, incorporated by reference to Exhibit 3(m) to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1998
22
4(a) See Exhibits 3(a) through 3(p)
(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 November 23, 1999 (including Forms of Award
Term Sheet for grants of restricted share rights). Forms
of Non-Qualified Stock Option and Restricted Stock
Agreements for grants subsequent 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, 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
*(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
*(e) 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
*(f) 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
*(g) 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
*(h) Deferred Compensation Plan, as amended and restated
effective January 1, 2000
*(i) 1999 Directors Stock Option Plan, incorporated by
reference to Exhibit 10(n) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1998
23
10*(j) 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
*(k) 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
*(l) 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)
*(m) Deferred Compensation Plan for Non-Employee Directors of
the former Norwest, incorporated by reference to Exhibit
10(c) to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999
*(n) Directors' Stock Deferral Plan for directors of the
former Norwest, incorporated by reference to Exhibit
10(d) to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999
*(o) Directors' Formula Stock Award Plan for directors of the
former Norwest, incorporated by reference to Exhibit
10(e) to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999
*(p) 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
*(q) 1999 Deferral Plan for Directors
*(r) 1999 Directors Formula Stock Award Plan, incorporated by
reference to Exhibit 10(b) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999
*(s) Supplemental 401(k) Plan, incorporated by reference to
Exhibit 10(a) to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999
*(t) Supplemental Cash Balance Plan, incorporated by
reference to Exhibit 10(b) to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1999
24
10*(u) 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
*(v) 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 11(c) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995
*(w) 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, incorporated by
reference to Exhibit 10(cc) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1998
*(x) Employment Agreement, dated as of January 1, 1999,
between the Company and Rodney L. Jacobs, incorporated
by reference to Exhibit 10(dd) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1998
*(y) Agreements between the Company and three executive
officers dated October 7, 1998, May 7, 1999 and October
25, 1999, respectively
*(z) Form of severance agreement between the Company and six
executive officers, including two directors, and
agreement between the Company and officer Terri A. Dial,
incorporated by reference to Exhibit 10(ee) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1998. 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
*(aa) 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
25
10*(bb) Consulting Agreement dated January 25, 1999, between the
Company and Chang-Lin Tien, incorporated by reference to
Exhibit 10(gg) to the Company's Annual Report on Form
10-K for the year ended December 31, 1998
*(cc) Directors' Retirement Plan for directors of the
former Wells Fargo, as amended effective November 2,
1998, incorporated by reference to Exhibit 10(ii) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1998
*(dd) Description of Relocation Program for Designated High-
Cost Areas
*(ee) Description of Executive Financial Planning Program
*(ff) 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
12(a) Computation of Ratios of Earnings to Fixed Charges --
the ratios of earnings to fixed charges, including
interest on deposits, were 2.16, 1.63, 1.81, 1.78 and
1.80 for the years ended December 31, 1999, 1998, 1997,
1996 and 1995, respectively. The ratios of earnings to
fixed charges, excluding interest on deposits, were
3.49, 2.56, 3.10, 2.98 and 2.73 for the years ended
December 31, 1999, 1998, 1997, 1996 and 1995,
respectively.
(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 2.13, 1.61, 1.79, 1.73 and 1.74 for the
years ended December 31, 1999, 1998, 1997, 1996 and
1995, respectively. The ratios of earnings to fixed
charges and preferred dividends, excluding interest on
deposits, were 3.41, 2.49, 2.99, 2.77 and 2.55 for the
years ended December 31, 1999, 1998, 1997, 1996 and
1995, respectively.
13 1999 Annual Report to Stockholders, pages 33 through 98
21 Subsidiaries of the Company
23 Consent of Independent Accountants
24 Powers of Attorney
27 Financial Data Schedule
(b) The Company filed the following report on Form 8-K during the fourth
quarter of 1999:
(1) October 19, 1999 under Item 5, containing the Company's
financial results for the quarter ended September 30, 1999
- ----------------------
* 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, N9305-173, Sixth and Marquette, Minneapolis, Minnesota 55479.
26
STATUS OF PRIOR DOCUMENTS
The Wells Fargo & Company Annual Report on Form 10-K for the year ended December
31, 1999, at the time of filing with the Securities and Exchange Commission,
shall modify and supersede all documents filed prior to January 1, 2000 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 14, 1997, containing a description
of the Company's common stock) 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.
27
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, 2000.
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/ Ross J. Kari
------------------------------------
Ross J. Kari
Executive Vice President 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
Michael R. Bowlin Cynthia H. Milligan
Edward M. Carson Benjamin F. Montoya
David A. Christensen Donald B. Rice
William S. Davila Ian M. Rolland
Susan E. Engel Susan G. Swenson
Paul Hazen Daniel M. Tellep
William A. Hodder Chang-Lin Tien
Robert L. Joss Michael W. Wright
Reatha Clark King John A. Young
Richard M. Kovacevich
By: /s/ Philip J. Quigley
------------------------------------
Philip J. Quigley
Director and Attorney-in-fact
March 15, 2000
28