This article details the history of Norwest up to the point of the purchase of Wells Fargo & Co. For the current company, see Wells Fargo

Wells Fargo

Wells Fargo & Company is an American multinational diversified financial services company with operations around the world. Wells Fargo is the fourth largest bank in the U.S. by assets and the largest bank by market capitalization. Wells Fargo is the second largest bank in deposits, home...

.

Norwest Corporation was a banking and financial services company based in Minneapolis, Minnesota

Minnesota

Minnesota is a U.S. state located in the Midwestern United States. The twelfth largest state of the U.S., it is the twenty-first most populous, with 5.3 million residents. Minnesota was carved out of the eastern half of the Minnesota Territory and admitted to the Union as the thirty-second state...

, United States

United States

The United States of America is a federal constitutional republic comprising fifty states and a federal district...

. In 1998, it merged with Wells Fargo & Co. and since that time has traded under the Wells Fargo name.

Early formation

During the generally prosperous 1920s, the nation's agricultural sector did not share in the good times. Many smaller banks that had overextended credit to farmer

Farmer

A farmer is a person engaged in agriculture, who raises living organisms for food or raw materials, generally including livestock husbandry and growing crops, such as produce and grain...

s ran into serious trouble. In the Upper Midwest

Upper Midwest

The Upper Midwest is a region in the northern portion of the U.S. Census Bureau's Midwestern United States. It is largely a sub-region of the midwest. Although there are no uniformly agreed-upon boundaries, the region is most commonly used to refer to the states of Minnesota, Wisconsin, and...

 alone, 1,500 banks became insolvent

Insolvency

Insolvency means the inability to pay one's debts as they fall due. Usually used to refer to a business, insolvency refers to the inability of a company to pay off its debts.Business insolvency is defined in two different ways:...

 from 1920 to 1929. It was with this backdrop that in early 1929, just months before the stock market crash, two banking associations were formed in the Twin Cities

Twin cities

Twin cities are a special case of two cities or urban centres which are founded in close geographic proximity and then grow into each other over time...

 of Minnesota

Minnesota

Minnesota is a U.S. state located in the Midwestern United States. The twelfth largest state of the U.S., it is the twenty-first most populous, with 5.3 million residents. Minnesota was carved out of the eastern half of the Minnesota Territory and admitted to the Union as the thirty-second state...

: Northwestern Bancorporation and the First Bank Stock Corporation (later known as First Bank System and then U.S. Bancorp

U.S. Bancorp

U.S. Bancorp is a diversified financial services holding company, headquartered in Minneapolis, Minnesota. It is the parent company of U.S. Bank, the fifth largest commercial bank in the United States based on $330 billion in assets. U.S. Bank ranks as the sixth largest bank in the U.S. based on...

).

The Northwestern cooperative

Cooperative

A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...

, known more simply as "Banco", was a federation anchored by Northwestern National Bank in Minneapolis. Banco acquired stock in the affiliated banks and served as a mutual protection association. Another 90 banks joined Banco in its first year of operation, and by 1932 there were 139 affiliates.

Great Depression and Banco

During the Great Depression

Great Depression

The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

, numerous additional banks failed. In 1932, 700 Upper Midwestern banks failed. None of the Banco members went under — and no depositor lost any savings — because the group was able to move liquidity around the system and in some cases, inject new capital into troubled banks. The number of members did decline, however, as some units in the group merged while others were sold off. Membership fell to 83 by 1940, then to 70 by 1952.

One of Banco's strategic advantages in the long run was its ability to operate in multiple states. The McFadden Act

McFadden Act

The McFadden Act is a United States federal law, named after Louis Thomas McFadden member of the United States House of Representatives and Chairman of the United States House Committee on Banking and Currency, enacted in 1927 from recommendations made by the comptroller of the currency Henry May...

 of 1927 had prohibited banks from operating branches across state lines. Banco was one of three major banks (the others being First Bank System and First Interstate Bancorp

First Interstate Bancorp

First Interstate Bancorp was a bank holding company based in the United States that was taken over in 1996 by Wells Fargo. Headquartered in Los Angeles, it was the nation's eighth largest banking company....

) that was allowed to conduct interstate banking under a grandfather clause in the 1927 act. This advantage was tempered somewhat by the emergence of bank holding companies in the late 1960s, but under the holding company arrangement, a subsidiary bank in one state was a separate entity from a subsidiary bank in another state.

1970s

Prior to the 1970s, Banco's affiliated members were largely autonomous. But during that decade, Banco began adopting a more unified structure in terms of systemwide planning, marketing, data processing, funds management, and loan syndication. By the end of the decade, Banco consisted of 85 affiliates in seven states: Minnesota

Minnesota

Minnesota is a U.S. state located in the Midwestern United States. The twelfth largest state of the U.S., it is the twenty-first most populous, with 5.3 million residents. Minnesota was carved out of the eastern half of the Minnesota Territory and admitted to the Union as the thirty-second state...

, Wisconsin

Wisconsin

Wisconsin is a U.S. state located in the north-central United States and is part of the Midwest. It is bordered by Minnesota to the west, Iowa to the southwest, Illinois to the south, Lake Michigan to the east, Michigan to the northeast, and Lake Superior to the north. Wisconsin's capital is...

, Iowa

Iowa

Iowa is a state located in the Midwestern United States, an area often referred to as the "American Heartland". It derives its name from the Ioway people, one of the many American Indian tribes that occupied the state at the time of European exploration. Iowa was a part of the French colony of New...

, Nebraska

Nebraska

Nebraska is a state on the Great Plains of the Midwestern United States. The state's capital is Lincoln and its largest city is Omaha, on the Missouri River....

, South Dakota

South Dakota

South Dakota is a state located in the Midwestern region of the United States. It is named after the Lakota and Dakota Sioux American Indian tribes. Once a part of Dakota Territory, South Dakota became a state on November 2, 1889. The state has an area of and an estimated population of just over...

, North Dakota

North Dakota

North Dakota is a state located in the Midwestern region of the United States of America, along the Canadian border. The state is bordered by Canada to the north, Minnesota to the east, South Dakota to the south and Montana to the west. North Dakota is the 19th-largest state by area in the U.S....

, and Montana

Montana

Montana is a state in the Western United States. The western third of Montana contains numerous mountain ranges. Smaller, "island ranges" are found in the central third of the state, for a total of 77 named ranges of the Rocky Mountains. This geographical fact is reflected in the state's name,...

. Total assets had reached $11 billion

1000000000 (number)

1,000,000,000 is the natural number following 999,999,999 and preceding 1,000,000,001.In scientific notation, it is written as 109....

, ranking Banco as the 20th largest bank in the United States

United States

The United States of America is a federal constitutional republic comprising fifty states and a federal district...

. Banco was also active on the international banking scene through its lead bank, Northwestern National, which controlled Canadian American Bank, a merchant bank with offices in Winnipeg

Winnipeg

Winnipeg is the capital and largest city of Manitoba, Canada, and is the primary municipality of the Winnipeg Capital Region, with more than half of Manitoba's population. It is located near the longitudinal centre of North America, at the confluence of the Red and Assiniboine Rivers .The name...

, London

London

London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...

, Nassau

Nassau, Bahamas

Nassau is the capital, largest city, and commercial centre of the Commonwealth of the Bahamas. The city has a population of 248,948 , 70 percent of the entire population of The Bahamas...

, and Luxembourg

Luxembourg

Luxembourg , officially the Grand Duchy of Luxembourg , is a landlocked country in western Europe, bordered by Belgium, France, and Germany. It has two principal regions: the Oesling in the North as part of the Ardennes massif, and the Gutland in the south...

.

1980s, and restructuring into Norwest

Banco was beset by a series of major setbacks in the early 1980s. The troubles actually began in late 1979 when Richard H. Vaughan, the president and CEO, was electrocuted by a wire that had fallen during a storm. This set off a management crisis. Chester Lind stepped in as a caretaker leader until a more permanent successor could be found. In October 1981 John W. Morrison was named chairman and CEO.

The new leader began centralizing the still loosely knit confederation into a more traditional bank holding company. In 1982 the 80-odd affiliates began to be grouped into eight regions reporting to a corporate vice-chairman. Plans were also laid to unify all the affiliates and Banco itself under a new name. The change occurred in 1983, when Northwest Bancorporation became Norwest Corporation. Tellingly, the new name did not include 'bank' or some variant thereof because Morrison aimed to create a diversified financial services

Financial services

Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...

 company. He'd taken steps in this direction a year earlier, when he engineered the acquisition of Dial Corporation (not to be confused with the consumer products company of the same name) in September 1982 for $252 million. Based in Des Moines, Iowa

Des Moines, Iowa

Des Moines is the capital and the most populous city in the US state of Iowa. It is also the county seat of Polk County. A small portion of the city extends into Warren County. It was incorporated on September 22, 1851, as Fort Des Moines which was shortened to "Des Moines" in 1857...

, Dial had more than 460 offices in 38 states offering consumer loans for everything from cars to sailboats. It was considered one of the top consumer finance firms in the country and had a $1 billion consumer loan operation. Dial was renamed Norwest Financial Services Inc. in 1983.

While these restructuring initiatives were being carried out, the bank suffered another blow during the 1982 Thanksgiving

Thanksgiving

Thanksgiving Day is a holiday celebrated primarily in the United States and Canada. Thanksgiving is celebrated each year on the second Monday of October in Canada and on the fourth Thursday of November in the United States. In Canada, Thanksgiving falls on the same day as Columbus Day in the...

 weekend when the downtown Minneapolis headquarters burned to the ground

Minneapolis Thanksgiving Day Fire

The Minneapolis Thanksgiving Day fire destroyed an entire block of Downtown Minneapolis on November 25–26, 1982, including the 16-story headquarters of Northwestern National Bank and the vacant, partially demolished location formerly occupied by Donaldson's department store, which had...

. It would be six years before Norwest would be able to move into its new quarters at the Norwest Center, during which time the corporate staff was scattered around 26 different sites in the city, leading to numerous logistical difficulties.

Meanwhile, with the farm economy going into a tailspin starting in 1981, Norwest began feeling the effects of its heavy farm loan portfolio--$1.2 billion, or seven percent of its overall loan portfolio. Norwest had another $1.2 billion in loans in foreign markets, which caused additional problems in the early 1980s as Norwest, like most U.S. banks, had made many bad loans overseas. As a result, Norwest saw its non-performing loan

Non-performing loan

A Non-performing loan is a loan that is in default or close to being in default. Many loans become non-performing after being in default for 3 months, but this can depend on the contract terms....

s increase 500 percent from 1983 to 1984, to more than $500 million. Further trouble came from the bank's mortgage unit, Norwest Mortgage Inc., which had been quickly built into the second largest holder of mortgages in the United States. In the summer of 1984, Norwest Mortgage lost nearly $100 million from an unsuccessful effort to hedge its mounting interest-rate risk on adjustable-rate mortgages. The loan losses and the mortgage debacle led to a drop in net income from $125.2 million in 1983 to $69.5 million in 1984.

In August 1984 the head of Norwest Mortgage was fired because of the hedging losses. By early 1995 substantial portions of Norwest Mortgage were divested, including operations involved in servicing mortgages and buying mortgages from other lenders for resale. The unit now focused strictly on originating mortgages. In the wake of Norwest's poor performance in 1984, Morrison resigned and was replaced by Lloyd P. Johnson, former vice-chairman of Security Pacific Corp. Johnson soon brought on board Richard M. Kovacevich

Richard Kovacevich

Richard M. "Dick" Kovacevich, is retired chairman of the board of directors and previous CEO of Wells Fargo & Company.A native of Tacoma, Washington, he grew up in Enumclaw, Washington. At Stanford University he received BS and MS degrees in industrial engineering, followed by an MBA degree from...

, who was hired away from Citicorp to become vice-chairman and CEO of Norwest's banking group in early 1996 (he was named to the additional posts of president and COO of Norwest Corp. in January 1989). The new managers began slashing away at Norwest's bloated bureaucracy. They drastically curtailed the bank's agricultural and international loan portfolios, the former being reduced to $400 million by early 1989, the latter to $10 million. By December 1988, the nonperforming loan total stood at just $150 million. To help prevent future calamities, Norwest instituted tighter lending criteria.

On the banking side, Kovacevich continued the process of standardizing the operating methods of the various Norwest banks, increased marketing efforts, and expanded the services offered. He also began seeking acquisitions, particularly aiming to bolster Norwest's presence in key cities; in 1986, for example, Norwest acquired Toy National Bank of Sioux City, Iowa, which had assets of $145 million. At the same time came the pruning of some rural operations, including eight banks in southern Minnesota and seven branches in South Dakota. Later in the decade, opportunities to expand outside the group's traditional seven-state banking region began to arise as the barriers to interstate banking began to be dismantled. In 1988 Norwest entered rapidly growing Arizona

Arizona

Arizona ; is a state located in the southwestern region of the United States. It is also part of the western United States and the mountain west. The capital and largest city is Phoenix...

 for the first time through the purchase of a small bank near Phoenix

Phoenix, Arizona

Phoenix is the capital, and largest city, of the U.S. state of Arizona, as well as the sixth most populated city in the United States. Phoenix is home to 1,445,632 people according to the official 2010 U.S. Census Bureau data...

. Norwest ended the 1980s fully recovered from its early-decade travails and ranking as one of the nation's most profitable regional banking companies and the 30th largest bank overall, with assets in excess of $25 billion. Net income stood at $237 million for 1989.

1990s

Acquisitions continued in the early 1990s. By early 1991 Norwest had 291 bank branches in 11 states, having moved into Indiana

Indiana

Indiana is a US state, admitted to the United States as the 19th on December 11, 1816. It is located in the Midwestern United States and Great Lakes Region. With 6,483,802 residents, the state is ranked 15th in population and 16th in population density. Indiana is ranked 38th in land area and is...

, Illinois

Illinois

Illinois is the fifth-most populous state of the United States of America, and is often noted for being a microcosm of the entire country. With Chicago in the northeast, small industrial cities and great agricultural productivity in central and northern Illinois, and natural resources like coal,...

, and Wyoming

Wyoming

Wyoming is a state in the mountain region of the Western United States. The western two thirds of the state is covered mostly with the mountain ranges and rangelands in the foothills of the Eastern Rocky Mountains, while the eastern third of the state is high elevation prairie known as the High...

. In April 1990 Norwest paid $173 million for Sheboygan

Sheboygan, Wisconsin

-Airport:Sheboygan is served by the Sheboygan County Memorial Airport, which is located several miles from the city.-Roads:Interstate 43 is the primary north-south transportation route into Sheboygan, and forms the west boundary of the city. U.S...

-based First Interstate of Wisconsin (formerly Citizen's Bank of Sheboygan), a $2 billion concern. Also acquired was a troubled "savings and loan"

Savings and loan association

A savings and loan association , also known as a thrift, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans...

 in Norwest's home state, First Minnesota Savings Bank. The largest purchase yet came in 1992 when Norwest paid about $420 million in stock for United Banks of Colorado Inc., a bank based in Denver with total assets of $6.3 billion. Norwest Financial grew through acquisition as well, with the 1992 purchase of Trans Canada Credit, the second largest consumer finance firm in Canada. By the end of 1992 Norwest had total assets of $44.56 billion, more than double the figure of 1988. At the beginning of 1993, Johnson handed over his CEO position to Kovacevich.

Expansion of the banking operation into New Mexico

New Mexico

New Mexico is a state located in the southwest and western regions of the United States. New Mexico is also usually considered one of the Mountain States. With a population density of 16 per square mile, New Mexico is the sixth-most sparsely inhabited U.S...

 and Texas

Texas

Texas is the second largest U.S. state by both area and population, and the largest state by area in the contiguous United States.The name, based on the Caddo word "Tejas" meaning "friends" or "allies", was applied by the Spanish to the Caddo themselves and to the region of their settlement in...

 came in 1993 through the acquisition of First United Bank Group Inc. of Albuquerque for about $490 million. First United had assets of $3.8 billion. Between January 1994 and June 1995, Norwest made an additional 25 acquisitions, including several in Texas, making it the most active acquirer among bank holding companies. In 1995 Norwest Mortgage became the nation's leading originator of home mortgages following the acquisition of Directors Mortgage Loan Corp., a Riverside, California

California

California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...

-based lender with a residential mortgage portfolio of $13.1 billion.

The following year Norwest Mortgage became the biggest home-mortgage servicer as well through the $600 million purchase of the bulk of the mortgage unit of the Prudential Insurance Co. of America, otherwise known as Prudential Home Mortgage. Prudential's high-quality loan portfolio and technology was key to this acquisition.

Meanwhile, in May 1996, Norwest Financial completed the purchase of $1 billion-asset ITT Island Finance, a consumer finance company based in San Juan

San Juan, Puerto Rico

San Juan , officially Municipio de la Ciudad Capital San Juan Bautista , is the capital and most populous municipality in Puerto Rico, an unincorporated territory of the United States. As of the 2010 census, it had a population of 395,326 making it the 46th-largest city under the jurisdiction of...

, Puerto Rico

Puerto Rico

Puerto Rico , officially the Commonwealth of Puerto Rico , is an unincorporated territory of the United States, located in the northeastern Caribbean, east of the Dominican Republic and west of both the United States Virgin Islands and the British Virgin Islands.Puerto Rico comprises an...

. About one-quarter of Norwest Corp.'s earnings were generated by Norwest Financial in the mid-1990s, with another 12 percent coming from Norwest Mortgage. The traditional community banking operations--which extended to 16 states by 1995--counted for only about 37 percent of the total. By year-end 1995, Norwest had total assets of $72.13 billion, making it the 13th largest bank holding company in the nation. Net income, which was nearing the $1 billion mark, had grown at a compounded annual rate of 25 percent over the previous eight years.

One of the keys to Norwest's success in the retail banking sector following the arrival of Kovacevich was the emphasis on relationship banking. His focus was on smaller customers, checking account depositors and small businesses, and he aimed to build relationships with them that would lead to cross-selling

Cross-selling

Cross-selling is the action or practice of selling among or between established clients, markets, traders, etc. or the action or practice of selling an additional product or service to an existing customer. This article deals exclusively with the latter meaning. In practice, businesses define...

 of other financial services - an auto loan, a mortgage, insurance, a mutual fund, and so on. To do so required the maintenance of an extensive network of bank branches staffed by well-trained tellers and bankers.

This ran counter to the mid-1990s trend in the industry away from expensive branch banking and toward impersonal ATMs

Automated teller machine

An automated teller machine or automatic teller machine, also known as a Cashpoint , cash machine or sometimes a hole in the wall in British English, is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public...

 and Internet banking - the latter of course making cross-selling difficult. It was also in this cross-selling that the main units of Norwest - the retail bank, the finance company, and the mortgage company - fit and worked together. Another key to Norwest's success was its focus on these three key areas; although it did have other operations, such as a successful venture capital unit, the bank was not moving into such areas as investment banking, unlike numerous other banks, and it was not attempting to compete with large New York

New York

New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...

 securities firms.

Merger with Wells Fargo

By the end of 1997, Norwest had become the 11th largest bank in the United States with total assets of $88.54 billion. With bank branches in 16 states, Norwest had the largest contiguous bank franchise in the nation. Its strongest markets were in Minnesota, Texas, Colorado

Colorado

Colorado is a U.S. state that encompasses much of the Rocky Mountains as well as the northeastern portion of the Colorado Plateau and the western edge of the Great Plains...

, and Iowa. Having entered the Texas market only a few years previous, Norwest had built up a $10 billion presence there by buying 33 bank and trust outfits. Norwest Mortgage was national in scope, while Norwest Financial covered all 50 states, along with additional operations in Canada, the Caribbean

Caribbean

The Caribbean is a crescent-shaped group of islands more than 2,000 miles long separating the Gulf of Mexico and the Caribbean Sea, to the west and south, from the Atlantic Ocean, to the east and north...

, and Central America

Central America

Central America is the central geographic region of the Americas. It is the southernmost, isthmian portion of the North American continent, which connects with South America on the southeast. When considered part of the unified continental model, it is considered a subcontinent...

. Net income had reached $1.35 billion by 1997. Norwest had grown into this position of strength without completing any of the blockbuster mergers that shook up the banking industry in the 1990s, but in June 1998 the bank merged with Wells Fargo

Wells Fargo

Wells Fargo & Company is an American multinational diversified financial services company with operations around the world. Wells Fargo is the fourth largest bank in the U.S. by assets and the largest bank by market capitalization. Wells Fargo is the second largest bank in deposits, home...

 & Company. Although Norwest was the nominal survivor, it opted to take the better-known Wells Fargo name and move to San Francisco.

Weatherball

In 1949, Northwestern National Bank constructed a 157-foot high weatherball atop its headquarters building in downtown Minneapolis. The weatherball became such an icon that the bank even incorporated it into its advertising and logo for a time. After the Minneapolis Thanksgiving Day Fire

Minneapolis Thanksgiving Day Fire

The Minneapolis Thanksgiving Day fire destroyed an entire block of Downtown Minneapolis on November 25–26, 1982, including the 16-story headquarters of Northwestern National Bank and the vacant, partially demolished location formerly occupied by Donaldson's department store, which had...

and before the building was demolished, the weatherball was dismantled and stored at the Minnesota State Fairgrounds. The weatherball was never restored and, in 2000, it was scrapped.