<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549 - 1004
FORM 10-K
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4075
GREAT WESTERN FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-1913457
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9200 Oakdale Avenue, Chatsworth, California 91311-6519
(Address of principal executive offices) (Zip Code)
(818) 775-3411
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, $1 par value New York Stock Exchange
(and accompanying Preferred Pacific Stock Exchange
Stock Purchase Rights) London Stock Exchange
8 3/4% Cumulative Convertible New York Stock Exchange
Preferred Stock, $1 par value
8.30% Cumulative Preferred New York Stock Exchange
Stock, $1 par value
Securities registered pursuant to Section 12(g) of the Act: None
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549-1004
FORM 10-K
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 (or for such shorter period that the
registrant was required to file such reports), 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. [X]
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant as of February 28, 1994: $2,264,607,585
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of February 28, 1994: 132,965,734
DOCUMENTS INCORPORATED BY REFERENCE:
Part III - Portions of Proxy Statement for Annual Meeting of
Stockholders, April 26, 1994.
Part IV - Portions of Proxy Statement for Annual Meeting of
Stockholders, April 26, 1994.
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GREAT WESTERN FINANCIAL CORPORATION
1993 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
Part I
Item 1. Business.................................................... 4
Item 2. Properties.................................................. 27
Item 3. Legal Proceedings........................................... 28
Item 4. Submission of Matters to a Vote of Security Holders......... 28
Part II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters......................... 28
Item 6. Selected Financial Data..................................... 29
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 30
Item 8. Financial Statements and Supplementary Data................. 52
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.................. 125
Part III
Item 10. Directors and Executive Officers of the Registrant.......... 125
Item 11. Executive Compensation...................................... 125
Item 12. Security Ownership of Certain Beneficial
Owners and Management................................... 125
Item 13. Certain Relationships and Related Transactions.............. 125
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K................................. 125
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PART I
ITEM 1. BUSINESS
GENERAL DESCRIPTION
Great Western Financial Corporation ("GWFC" or "the Company"), with
consolidated assets of approximately $38.3 billion, is a savings and loan
holding company organized in 1955 under the laws of the state of Delaware.
The principal assets of the Company are the capital stock of Great Western
Bank, a Federal Savings Bank ("GWB" or "the Bank") and Aristar, Inc.
("Aristar"). GWB is a federally chartered stock savings bank and conducts
most of its retail banking through 440 offices located in California and
Florida. Real estate lending operations are conducted directly by the Bank
or by direct subsidiaries through 214 offices in 21 states with
concentrations in California, Florida and Washington. Directly or through
its subsidiaries, the Bank also engages in consumer finance, mortgage
banking, and other related financial services. Aristar conducts consumer
finance operations through 522 offices in 23 states, most of which operate
principally under the names Blazer Financial Services or City Finance and
provide direct installment loans and related credit insurance services and
purchase retail installment contracts. For financial information concerning
the Company's two principal lines of business, see Segment Data in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
The Company is a legal entity separate and distinct from the Bank. The
principal source of the Company's revenues on an unconsolidated basis has
been dividends, interest and management fees from GWB. Dividends from
Aristar are expected to be a greater source of revenue in future periods.
Various statutory and regulatory restrictions and tax considerations,
however, can limit, directly or indirectly, the amounts that may be paid by
the Bank. For a discussion of dividend restrictions, see Regulation -
Capital Requirements, Capital Distributions by GWB and Restrictions on
Transactions with Affiliates.
The operations of savings institutions are significantly influenced by
general economic conditions, by the related monetary and fiscal policies of
the federal government, and by the regulatory policies of financial
institution regulatory authorities, including the Federal Reserve Board
("FRB"), the Office of Thrift Supervision ("OTS") and the Federal Deposit
Insurance Corporation ("FDIC"). Deposit flows and cost of funds are
influenced by interest rates on competing investments and general market
rates of interest. Lending and other investment activities are affected by
the demand for mortgage financing and consumer and other types of loans,
which in turn are affected by the interest rates at which such financing may
be offered and other factors affecting the supply of housing and the
availability of funds. Weakening real estate markets during the past three
years have resulted in reduced loan originations of adjustable rate mortgages
("ARMs"). In addition there has been deterioration in collateral values
supporting real estate loans which impacted the valuation of the Company's
loans and real estate and caused increases in nonperforming assets in 1992
and 1991. In 1993, the Company's program to accelerate its disposition of
distressed assets resulted in a significant decline in nonperforming assets.
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ACQUISITIONS
Great Western Financial Corporation has grown in recent years through
acquisitions. During 1993, the Company continued to acquire retail branches
and deposits from the Resolution Trust Corporation ("RTC"). The
transactions, which began in 1990, were primarily branch deposit acquisitions
which complemented the California and Florida retail banking operations.
In December 1993, GWB purchased certain assets and assumed certain
liabilities from the RTC of HomeFed Bank, F.A., San Diego, California. As
a result of the transaction, GWB acquired 119 branches with retail deposits
of $4.1 billion. The deposits were acquired for a premium of $151 million.
GWFC is frequently engaged in discussions with other financial
institutions of various sizes in various locations throughout the United
States and with governmental agencies regarding mergers or acquisitions. No
assurance can be given that GWFC will complete any particular transaction.
Additional information on specific acquisitions is summarized in Note
2 of the Notes to Consolidated Financial Statements in "Financial Statements
and Supplementary Data".
INTEREST RATE MARGINS
GWFC's core operating results depend primarily on the margin between
the income the Bank receives from interest earning assets and its cost of
funds. The Bank now competes with commercial banks and other financial
intermediaries for funds in a deregulated environment. For additional
information see Lending and Customer Accounts below.
The composition of the interest rate margin is shown in "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
The following table shows the components of the change in net interest
income for the years ended December 31, 1993, 1992 and 1991 that are included
in the Consolidated Statement of Operations in "Financial Statements and
Supplementary Data".
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<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------
(Dollars in millions) 1993 vs. 1992 1992 vs. 1991 1991 vs. 1990
------------- ------------- -------------
<S> <C> <C> <C>
Mortgage-backed securities
Rate (1) $ (47) $ (49) $ (21)
Volume (2) (33) (38) 56
Rate/Volume (3) 6 5 (4)
----- ----- -----
(74) (82) 31
----- ----- -----
Real estate loans
Rate (1) (327) (512) (244)
Volume (2) 31 (56) (52)
Rate/Volume (3) (4) 10 4
----- ----- -----
(300) (558) (292)
----- ----- -----
Consumer loans
Rate (1) (17) 1 7
Volume (2) (15) 39 (17)
Rate/Volume (3) 1 - -
----- ----- -----
(31) 40 (10)
----- ----- -----
Securities and other
Rate (1) 8 (17) (41)
Volume (2) (12) (13) (54)
Rate/Volume (3) (1) 2 12
----- ----- -----
(5) (28) (83)
----- ----- -----
Interest earning assets
Rate (383) (577) (299)
Volume (29) (68) (67)
Rate/Volume 2 17 12
----- ----- -----
(410) (628) (354)
----- ----- -----
Customer accounts
Rate (1) (325) (667) (288)
Volume (2) (92) 50 279
Rate/Volume (3) 22 (17) (40)
----- ----- -----
(395) (634) (49)
----- ----- -----
Borrowings
Rate (1) (71) (13) (69)
Volume (2) 121 (141) (361)
Rate/Volume (3) (26) 3 28
----- ----- -----
24 (151) (402)
----- ----- -----
Interest bearing liabilities
Rate (396) (680) (357)
Volume 29 (91) (82)
Rate/Volume (4) (14) (12)
----- ----- -----
(371) (785) (451)
----- ----- -----
Change in net interest income $ (39) $ 157 $ 97
===== ===== =====
/TABLE
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(1) The rate variance reflects the change in the average rate multiplied
by the average balance outstanding during the prior period.
(2) The volume variance reflects the change in the average balance
outstanding multiplied by the average rate during the prior period.
(3) The rate/volume variance reflects the change in average rate
multiplied by the change in the average balance outstanding.
(4) Nonaccrual loans and amortized deferred loan fees are included in the
interest income calculations.
ASSET LIABILITY MANAGEMENT
As noted above, net interest income is a critical component of GWFC's
earnings. Therefore, asset liability management is of continuing importance
to the profitability of the Company. Using its Asset Liability Management
System, the sensitivity of interest variances is monitored using a model to
measure the effects of various rates, maturities and growth assumptions.
Through this process the Company is able to monitor the degree of interest
rate responsiveness at any time.
For information on interest earning assets and interest bearing
liabilities, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
LENDING
A summary of GWFC's lending activities is set forth on pages 116 and
117, titled Loan Analysis in "Financial Statements and Supplementary Data".
The Bank originates loans on existing residential property through
district loan offices which utilize loan agents who are compensated
principally on a commission basis. The value of the property as security for
a loan is determined by qualified real estate appraisers. The Bank requires
title insurance equal to the amount of the loan and fire and extended
coverage insurance at least equal to the lesser of full replacement value or
the loan amount on all real estate which it finances subject to any
limitations imposed by state law.
ARMs represent the principal real estate loan investment of the
Company. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
<PAGE>
<PAGE>
Many ARMs have annual percentage limits on the maximum amount of
interest change. In most cases, the interest rate charged on ARMs is lower
in the introductory period, generally three months, than the rate which is
charged thereafter and which is based on relevant indices. A significant
portion of the ARM portfolio is subject to lifetime maximum interest rates
("caps") and minimum interest rates ("floors"). Because of declining
interest rates and a reduction in the related indices, the rates on many
mortgages have been reduced to their floor level. At December 31, 1993, $8.8
billion, or 31.7 percent, of ARMs had reached their floors.
Payments generally are adjusted annually and, during certain intervals,
negative amortization ("deferred interest") may occur. Amounts added to ARM
loan balances as a result of deferred interest were $18 million, or .07
percent of such balances in 1993.
The Bank generally does not make loans with loan-to-value ratios
("LTV") exceeding 90 percent. Federal laws and regulations restrict the
nature, amount, terms and security for real estate loans which savings
institutions may originate or purchase. Savings institutions are generally
permitted to make real estate loans up to 100 percent of the appraised value
of the real property securing the loan. If real estate loans with a LTV
exceeding 100 percent are made, the portion of the loan exceeding the value
of the property must be made under another source of investment authority,
such as the authority to make unsecured loans. In addition, the board of
directors of a savings institution is required to approve any real estate
loan (other than a home loan) with a LTV exceeding 90 percent. The LTV of
a home loan may exceed 90 percent only if private mortgage insurance is
obtained with respect to that portion of the loan which exceeds 80 percent
of the value of the property. Underwriting standards for loans with a LTV
over 80 percent are more stringent than those with a LTV of 80 percent or
less. These more stringent standards include higher credit quality, tighter
documentation and additional internal review procedures.
Effective March 19, 1993, depository institutions became subject to
real estate lending standards which, with limited exceptions, require that
the LTVs of real estate loans not exceed 65 percent for raw land, 75 percent
for developed land, 80 percent for construction of commercial, multifamily
and other nonresidential property, and 85 percent for one to four family
residential property. Owner occupied one to four family and home equity
loans are not subject to specific percentages, but to the extent the LTV
exceeds 90 percent, the loan must have private mortgage insurance or be
secured by readily marketable collateral.
<PAGE>
<PAGE>
As of December 31, 1993 the contractual maturities of all loans and
mortgage-backed securities were as follows:
<TABLE>
<CAPTION>
Mortgage-backed
Real Estate Loans Securities
----------------- ----------------
Fixed Fixed
(Dollars in millions) ARM Rate ARM Rate Consumer Total
--- ----- --- ------ -------- -----
December 31, 1993
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
One year or less $ 581 $ 55 $ 32 $ 218 $ 833 $ 1,719
Over one to two years 437 60 34 223 530 1,284
Over two to three years 833 69 36 163 370 1,471
Over three to five years 1,577 147 79 114 150 2,067
Over five to ten years 3,374 482 242 153 191 4,442
Over ten to fifteen years 4,455 226 322 118 103 5,224
Over fifteen years 16,391 426 1,423 39 31 18,310
------- ------ ------ ------ ------ -------
$27,648 $1,465 $2,168 $1,028 $2,208 $34,517
======= ====== ====== ====== ====== =======
</TABLE>
For information about real estate loans and mortgage-backed securities
("mortgages") available for sale, mortgage sales and servicing income see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Notes 1, 4, 5 and 6 of the Notes to Consolidated Financial
Statements in "Financial Statements and Supplementary Data".
Federal savings institutions have consumer lending powers which permit
the origination of unsecured as well as secured consumer loans for personal,
family or household purposes, which together with investments in commercial
paper and corporate debt securities, may not exceed 35 percent of the Bank's
assets. The Bank makes unsecured consumer loans in the form of student
educational loans, overdraft protection on checking accounts and other
consumer loans. GWB also is actively involved in consumer finance through
Great Western Financial Services, a division of the Bank. The Bank was well
below the maximum allowable percentage. See discussion in Related Financial
Services Activities following.
<PAGE>
<PAGE>
Federal savings institutions are authorized to invest up to 400 percent
of their capital in loans secured by nonresidential real property. GWB's
loans secured by nonresidential real property at December 31, 1993
represented approximately 71 percent of its capital. In addition, federal
savings institutions may also make secured and unsecured loans for
commercial, corporate, business or agricultural purposes in a total amount
of not more than 10 percent of the institution's assets. The Bank does not
engage in this type of lending.
LOAN IMPAIRMENT
The Company adopted Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan" ("FAS 114") as of
January 1, 1993. FAS 114 provides guidance on the measurement of impaired
loans. GWFC measures impairment based primarily on the fair value of the
loan's collateral.
The recorded investment in loans for which impairment has been
recognized in accordance with FAS 114 and the reserve for estimated losses
related to such loans follows:
<TABLE>
<CAPTION>
Reserve for
Loan Estimated
(Dollars in thousands) Balance Losses
------- ------------
December 31, 1993
-----------------------
<S> <C> <C>
Real estate loans
Residential
Single-family $ 37,047 $ 3,396
Apartments 103,840 15,823
Commercial
Offices 52,553 10,067
Retail 25,817 3,201
Hotel/motel 108,320 5,025
Industrial 17,157 2,614
Other 3,021 441
-------- -------
$347,755 $40,567
======== =======
</TABLE>
Single-family residential mortgage loans are generally evaluated for
impairment as homogeneous pools of loans. Certain situations may arise
leading to single-family residential mortgage loans being evaluated for
impairment on an individual basis.<PAGE>
<PAGE>
NONPERFORMING ASSETS
There are certain risks and uncertainties in originating loans. These
pertain to credit, appraisals and other underwriting factors occurring in the
loan portfolio subsequent to origination. Market risk has become
increasingly important in the recent recessionary environment. These risks
may result in loans becoming nonperforming assets.
The increase in delinquencies and foreclosures of single-family
properties has continued from 1991 into 1993. While delinquencies of single-
family properties have declined during 1993, due in part to bulk asset sales,
management expects increases in the earthquake affected areas in early 1994.
Foreclosures continue to occur at historically high levels.
Information regarding nonperforming assets, valuation reserves and loss
provisions is presented in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and in Notes 5 and 7 of the Notes to
Consolidated Financial Statements in "Financial Statements and Supplementary
Data".
INVESTMENT ACTIVITIES
Income from securities and other short-term investments generally
provides the largest source of interest income for GWFC after interest on
mortgages and consumer loans. The Bank is required to maintain a specified
minimum amount of liquid assets which may be invested in securities specified
by regulations as qualifying liquidity. Liquidity in excess of legal
requirements at December 31, 1993 was $429 million. Substantially all
security investments are of investment grade.
Dividends on Federal Home Loan Bank ("FHLBank" or "FHLB") stock are
included in income on securities in the Consolidated Statement of Operations
(see Note 9 of the Notes to Consolidated Financial Statements in "Financial
Statements and Supplementary Data").
For information on the Company's securities portfolio, see Notes 1 and
3 of the Notes to Consolidated Financial Statements in "Financial Statements
and Supplementary Data".
CUSTOMER ACCOUNTS
Customer accounts have traditionally been an important source of the
Bank's funds for use in lending and for other general business purposes.
Inflows to customer accounts historically have been related to general
economic conditions. Rates offered on new accounts are primarily based on
yields on Treasury securities and rates offered by competing financial
institutions.<PAGE>
<PAGE>
For information on the Company's customer accounts, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note 11 of the Notes to Consolidated Financial Statements in "Financial
Statements and Supplementary Data".
BORROWINGS
GWFC issued debt totaling $375 million in 1993 to facilitate the
transfer of Aristar to GWFC from GWB. GWB borrows funds from many sources,
including the FHLBank of San Francisco. In addition, both GWB and Aristar
have issued commercial paper, medium-term notes and have entered into various
borrowing agreements. Securities sold under agreements to repurchase have
been a source of short-term funds.
In February 1993, Standard and Poor's lowered its ratings on GWFC's
senior debt to BBB+ and preferred depositary shares to BBB-, as a result of
asset quality pressures from the continuing recession in California.
Standard and Poor's also lowered GWB's ratings on senior debt to A-,
subordinated debt to BBB+ and commercial paper to A-2. Although the debt
ratings were downgraded by one level, the Company still enjoys the benefits
of an investment grade rating.
For information on the Company's borrowings see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Notes 12 and 13 of the Notes to Consolidated Financial Statements in
"Financial Statements and Supplementary Data".
RELATED FINANCIAL SERVICES ACTIVITIES
The principal non-depository business activities of GWFC are described
below.
CONSUMER FINANCE GROUP Consumer finance activities are highly
regulated by federal and state laws of both general and specific
applicability. Federal regulations relate primarily to fair credit practice
matters. State regulations may include certain licensing requirements, which
vary from state to state and may require periodic examination to verify
compliance with, among other restraints, state interest rate and loan size
limits. GWB also has industrial banks which conduct activities similar to
those of consumer finance operations.
OTHER ACTIVITIES GWFC and its direct and indirect subsidiaries also
engage in related service businesses, including investment company advisor
and administration activities, insurance operations, real estate development
and other lines of business. GWFC and its direct and indirect subsidiaries
in the future may also pursue other business opportunities, although no
assurances concerning the timing or nature of such activities can be given.
<PAGE>
<PAGE>
COMPETITION AND OTHER MATTERS
Competition for customer accounts comes principally from other savings
institutions, commercial banks, money market funds, credit unions,
corporations, governmental agencies and governmental debt securities,
insurance companies, pension funds, and other investment media, many of which
can offer investment alternatives. Many of these institutions also have
nationwide retail networks.
Competition in residential lending activities comes principally from
other savings institutions, mortgage companies, commercial banks and, to a
lesser degree, from finance companies, insurance companies, governmental
agencies, pension funds and trusts, and sellers of properties.
Competition in the provision of services being offered by GWFC and its
subsidiaries and affiliates in consumer lending, investment company advisor
and administration activities and other activities comes principally from the
traditional providers of such services and from other financial institutions.
INFLATION
While inflation has declined significantly during the past few years,
the Company recognizes the adverse effects that inflation could bring to its
financial position and operations and consequently monitors its effects
closely.
REGULATION
Holding Company Regulation
General The Company is a savings and loan holding company as a result
of its control of GWB. As such it is subject to regulation, supervision, and
examination by, and the reporting requirements of, the OTS and is governed
by the savings and loan holding company provisions of the Home Owners' Loan
Act.
Restrictions on Activities A savings and loan holding company is
prohibited, directly or indirectly, from obtaining control of a savings
association or savings and loan holding company without the prior approval
of the OTS. The Financial Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA"), permits the acquisition by a savings and loan holding
company of up to 5 percent of the voting shares of a savings association or
savings and loan holding company which is not one of its present affiliates.
No director, officer, or controlling shareholder of the Company may, except
with the prior approval of the OTS, acquire control of any savings
association which is not a subsidiary of the Company.
<PAGE>
<PAGE>
FIRREA empowers the OTS to impose restrictions when it determines that
there is reasonable cause to believe that the continuation by a savings and
loan holding company of any particular activity constitutes a serious risk
to the financial safety, soundness, or stability of a holding company's
subsidiary savings association. Thus, FIRREA confers on the OTS oversight
authority for all holding company affiliates, not just the savings
association. Specifically, the OTS may (i) limit the payment of dividends
by a savings association; (ii) limit transactions between a savings
association, the holding company and the subsidiaries or affiliates of
either; and (iii) limit any activities of the savings association that might
create a serious risk that the liabilities of the holding company and its
affiliates may be imposed on the savings association. Any such limits will
be issued in the form of a directive having the effect of a cease and desist
order.
Regulation of Subsidiaries
General Deposits in GWB and the Company's industrial banks are insured
by the FDIC up to $100,000 and those institutions are regulated by the FDIC.
GWB is a federally chartered institution which is also regulated by the OTS.
The industrial banks are state chartered institutions which are regulated
by state authorities in addition to being regulated by the FDIC. State laws
specify the investments which these state institutions may make and the
activities in which they may engage. Under the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), however, insured state banks
may not engage in activities not permissible for national banks unless the
FDIC determines the activity will pose no significant risk to the insurance
fund and the Bank complies with applicable capital standards.
The Company's consumer finance subsidiaries are governed by state and
federal laws. Federal laws relate primarily to fair credit practice matters.
State laws set out applicable licensing requirements, provide for periodic
examinations and establish maximum finance charges on credit extensions.
The Company's insurance subsidiaries are governed by state law and the
Company's securities brokerage and investment advisory subsidiaries are
governed by federal and state laws relating to their operation, registration,
capital and other matters.
Qualified Thrift Lender FDICIA imposes revised requirements for
qualification as a qualified thrift lender ("QTL"). The test requires that
65 percent of an association's "portfolio assets" (all assets except
goodwill, intangibles, property used to conduct the thrift's business and
certain liquid assets up to 20 percent of assets) consist of "qualified
thrift investments" (including, subject to certain limits, residential
mortgage and construction loans, home improvement and repair loans, mortgage-
backed securities, home equity loans, FHLBank stock, Federal Savings and Loan
<PAGE>
<PAGE>
Insurance Corporation ("FSLIC"), FDIC, and RTC obligations, Residential
Funding Corporation obligations, Federal National Mortgage Association and
Federal Home Loan Mortgage Corporation stock, consumer loans, certain small
business loans and loans to construct or purchase or maintain churches,
schools, nursing homes and hospitals, investments in residential housing-
oriented service corporations, and 50 percent of mortgages originated and
sold within 90 days). At December 31, 1993, the asset composition of GWB was
substantially in excess of that required to qualify it to meet the QTL test.
The following sanctions may apply as the result of failure of a savings
association to remain a QTL: (i) required conversion of the savings
association's charter to a bank charter; (ii) limitations on new investments
and activities to those permissible for national banks; (iii) imposition of
branching restrictions applicable to national banks; (iv) prohibitions on new
advances to the savings association from its FHLBank; and (v) imposition of
dividend restrictions applicable to national banks. Three years after a
savings association ceases to be a QTL, it would be required to divest all
investments and cease all activities not permissible for national banks and
all FHLBank advances would have to be repaid in a prompt and prudent manner.
In addition, a savings and loan holding company owning such an association
would be required to register as a bank holding company.
Deposit Insurance The FDIC maintains two separate funds - the Bank
Insurance Fund ("BIF"), which insures the deposits of the industrial banks
(the "Company's BIF-insured institutions"), and the Savings Association
Insurance Fund ("SAIF") which insures the deposits of GWB.
Under FDICIA, the FDIC was required to establish a system of risk-based
deposit insurance premiums for BIF and SAIF members by no later than January
1, 1994. The legislation requires the FDIC to establish maximum rates and
assessments so as to achieve the target ratio (at least 1.25 percent of
estimated insured deposits) for each fund within specified periods of time.
In addition, FDICIA permits the FDIC to impose one or more emergency special
assessments.
In September 1992, the FDIC adopted a transitional risk-related deposit
insurance premium system which charges higher rates to those institutions
which pose greater risks to the deposit insurance funds and lower rates to
"well capitalized" institutions. The new system took effect on January 1,
1993 and contains premium increases that are intended to raise the reserves
of the Bank Insurance Fund and the Savings Association Insurance Fund. Under
the system a bank or thrift will pay within a range of .23 percent of
domestic deposits to .31 percent of domestic deposits depending upon its risk
classification. The current assessment rate for GWB is .26 percent of
deposits for the first half of 1994. During 1993, the FDIC adopted a final
rule to implement the permanent risk-based assessment system, effective
January 1, 1994. The final rule uses the same assessment categories and
rates as the transitional system.
<PAGE>
<PAGE>
FIRREA requires insured depository institutions to reimburse the FDIC
for any loss or anticipated loss to the FDIC that arises from a default of
a commonly controlled insured depository institution or assistance provided
to such an institution in danger of default. FIRREA provides that, for a
period of five years from August 9, 1989, SAIF-insured members, such as GWB,
shall have no liability to the FDIC for assistance to or losses incurred as
a result of a default by a BIF-insured subsidiary acquired by GWFC prior to
August 9, 1989. A like exemption is provided the Company's BIF-insured
subsidiaries for assistance to or losses incurred as a result of a default
by GWB.
FIRREA generally imposes a five-year moratorium (from August 1989) on
conversions from SAIF membership to BIF membership subject to certain
exceptions. FDICIA, however, permits savings associations and banks to merge
with each other with federal regulatory approval, so long as the resulting
institution continues to pay proportionate assessments to each respective
insurance fund until the moratorium expires. The legislation also permits
a federal savings association to acquire or be acquired by any insured
depository institution.
Capital Requirements Capital standards applicable to savings
associations consist of three components - a leverage ratio requirement, a
tangible capital requirement and a risk-based capital requirement. All three
components are required by FIRREA to be no less stringent than the
corresponding requirements applicable to national banks, except that the
risk-based capital requirement for savings associations may deviate to
reflect interest-rate risk or other risks if such deviations do not, in the
aggregate, result in materially lower levels of capital being required of
savings associations than would be required under the risk-based capital
standards applicable to national banks.
The capital regulations contain special capital rules affecting savings
associations with certain kinds of subsidiaries. For purposes of determining
compliance with each of the capital standards, a savings association's
investment in and extensions of credit to subsidiaries engaged in activities
not permissible for a national bank are, with certain exceptions, deducted
from the savings association's capital. Until June 1994 a declining
percentage (which was 75 percent until July 1992, 60 percent until July 1993,
40 percent until July 1994 and fully phased-in thereafter) of investments in
and extensions of credit to subsidiaries which were engaged in activities not
permissible for a national bank as of April 12, 1989 may be included in
capital. However, on October 30, 1992, the OTS announced that it would allow
savings institutions to apply to the OTS to receive an extension until July
1, 1994 on further deductions from regulatory capital for investments in
subsidiaries. GWB filed an application with the OTS and received such an
extension with respect to its property development subsidiaries until July
1, 1994, at which time the original phase-in schedule will be reinstituted
until full phase-in as of July 1996. All or a portion of the assets and
liabilities of each of a savings association's subsidiaries are generally
consolidated with the capital and liabilities of the savings association for
<PAGE>
capital purposes unless all of the savings association's investments in and
extensions of credit to such subsidiary are deducted from capital. At
December 31, 1993, GWB's investments in and extensions of credit to such
subsidiaries aggregated $65 million, of which $32 million was included in
capital at December 31, 1993. The Bank has filed notice with the OTS of its
intent to dividend its property development subsidiary to GWFC.
The leverage ratio requirement requires a savings association to
maintain "core capital" of not less than 3 percent of adjusted total assets.
As mentioned below, it is expected that the OTS will adopt a stricter
standard which has become applicable to banks and under which banks are
required to maintain a core capital ratio of at least 3 percent and up to 5
percent depending upon their condition and the rating they have received from
the applicable regulatory body. Under the current standard, "core capital"
generally includes common equity, noncumulative perpetual preferred stock and
related surplus, and minority interests in consolidated subsidiaries, less
certain intangible assets (including goodwill), plus qualifying supervisory
goodwill and purchased mortgage servicing rights valued on a quarterly basis
at not more than the lower of 90 percent of fair value, 90 percent of
original cost or the current amortized book value. GWB's ratio at December
31, 1993 was 5.33 percent. GWB's fully phased-in ratio of "core capital" to
adjusted total assets was 5.25 percent at December 31, 1993. Between January
1992 and January 1995, the amount of qualifying supervisory goodwill which
may be included in core capital will be phased out. The Bank has no
qualifying supervisory goodwill.
The tangible capital requirement requires a savings association to
maintain "tangible capital" in an amount not less than 1.5 percent of
adjusted total assets. "Tangible capital" means core capital less any
intangible assets (including qualifying supervisory goodwill), plus purchased
mortgage servicing rights, valued on a quarterly basis at not more than 90
percent of fair value. At December 31, 1993, GWB had a ratio of tangible
capital to total adjusted assets of 5.33 percent. GWB's fully phased-in
ratio of tangible capital to total adjusted assets was 5.25 percent at
December 31, 1993.
The risk-based capital requirements for savings associations are
similar in many respects to the risk-based capital guidelines of the FRB, the
Comptroller of the Currency and the FDIC. Among other things, the risk-based
capital requirements provide that the capital ratio applicable to an asset
will be adjusted to reflect the degree of credit risk associated with such
asset and the asset base for computing a savings association's capital
requirement will include off-balance sheet assets. The regulations require
savings associations to maintain capital equal to 8 percent of risk-weighted
assets. A savings association's supplementary capital may be used to satisfy
the risk-adjusted capital ratios only to the extent of that association's
core capital. At December 31, 1993, GWB had a ratio of capital to risk-based
assets of 11.88 percent. The fully phased-in ratio of capital to risk-based
assets for GWB was 11.69 percent at December 31, 1993.<PAGE>
<PAGE>
FDICIA requires the federal regulatory agencies to review the risk-
based capital standards to ensure that they adequately address interest-rate
risk, concentration of credit risk and risks from nontraditional activities.
On August 31, 1993, the OTS amended its risk-based capital rules to
incorporate interest-rate risk ("IRR") requirements. Effective January 1,
1994, a savings association is required to hold additional capital if it is
projected to experience a 2 percent decline in "net portfolio value" in the
event interest rates increase or decrease by two percentage points.
Additional capital required is equal to one-half of the amount by which any
decline in net portfolio value exceeds 2 percent of the savings association's
total net portfolio value.
A savings association which fails to meet the capital standards must
submit to the OTS Director a business plan which describes the manner in
which it proposes to increase its capital and the activities in which it will
engage. Any increase in the association's assets must be met with a
commensurate increase in the association's tangible capital and risk-based
capital. As part of the submission of a capital plan, a savings association
will be required to certify that during the pendency of its application for
approval of its capital plan, it will adhere to certain asset growth
restrictions, and will not make any capital distributions or engage in
certain other prohibited or restricted activities. The OTS Director must,
with certain limited exceptions, limit the asset growth of any such
association. In addition, the OTS Director may issue a capital directive to
such an association which may contain restrictions the OTS Director deems
necessary or appropriate.
Pursuant to FDICIA, the federal banking agencies have adopted
regulations which became effective on December 19, 1992, and which establish
a system of progressive constraints as capital levels decline at banks and
savings institutions. The "prompt corrective action" rules classify banks
and savings institutions into one of five categories based upon capital
adequacy, ranging from "well capitalized" to "critically undercapitalized".
Furthermore, FDICIA provides that under certain circumstances a federal
banking agency may reclassify an institution to the next lower capital
category based on supervisory information other than the capital levels of
the institution. Pursuant to FDICIA, the OTS issued a final regulation
effective December 19, 1992 under which a savings association is deemed to
be "well capitalized" if it: (a) has a risk-based capital ratio of 10 percent
or greater; (b) has a ratio of core capital to risk-adjusted assets of 6
percent or greater; (c) has a ratio of core capital to adjusted total assets
of 5 percent or greater; and (d) is not subject to an order, written
agreement, capital directive or prompt corrective action directive to meet
and maintain a specific capital level for any capital measure. A savings
association is deemed to be "adequately capitalized" if it is not "well
capitalized" and: (a) has a risk-based capital ratio of 8 percent or greater;
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(b) has a ratio of core capital to risk-adjusted assets of 4 percent or
greater; and (c) has a ratio of core capital to adjusted total assets of 4
percent or greater (except that certain associations rated "composite 1"
under the OTS's MACRO rating system may be adequately capitalized if their
ratio of core capital to adjusted total assets is 3 percent or greater). GWB
believes that it met the requirements to be "well capitalized" under the
regulations in effect as of December 31, 1993.
FDICIA also requires the appropriate federal banking agencies to take
corrective action to restrict asset growth, acquisitions, branching and new
business with respect to an "undercapitalized" institution and to take
increasingly severe additional actions if the institution becomes
"significantly undercapitalized" or "critically undercapitalized". FDICIA
also prohibits dividends and other capital distributions and the payment of
management fees to a controlling person if, following such distribution or
payment, the institution would fall within one of the three
"undercapitalized" categories.
FDICIA also requires an institution which is "undercapitalized" to
submit a capital restoration plan for improving its capital to the
appropriate federal banking agency. The holding company of such an
institution must guarantee that the institution will meet its capital
restoration plan, subject to certain limitations. If such a guarantee were
deemed to be a commitment to maintain capital under the federal Bankruptcy
Code, a claim under such guarantee in a bankruptcy proceeding involving the
holding company would be entitled to a priority over third party creditors
of the holding company.
As a condition of prior regulatory approval of certain transactions,
the Company has provided federal regulators with a commitment to maintain the
regulatory net worth of GWB at the minimum required amount and, if necessary,
to infuse sufficient additional capital to maintain such level. See
Regulation - Capital Requirements.
Under FDICIA, a bank or savings institution that is "significantly
undercapitalized" is subject to severe restrictions on its activities, and
may be required, among other things, to issue additional debt or stock, to
sell assets or to be acquired by a depository institution holding company or
combine with another depository institution if one or more grounds exist for
appointing a conservator or receiver for the institution. A bank or savings
institution that is "critically undercapitalized" will be subject, with
certain exceptions, to the mandatory appointment of a conservator or receiver
by the appropriate federal banking agency within 90 days after such
institution becomes "critically undercapitalized". The effect of this
provision is to increase significantly the circumstances in which a
conservator or receiver may be appointed for an institution. In addition,
a bank or savings institution that is "critically undercapitalized" is
subject to more severe restrictions on its activities and on payment of
subordinated debt, and may be prohibited, among other things, from entering
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into material investment, expansion, acquisition or disposition transactions
or paying interest on new or renewed liabilities at a rate that would
significantly increase the institution's weighted average cost of funds. An
institution will be considered to be "critically undercapitalized" if the
institution has a ratio of "tangible equity" to total assets that is equal
to or less than 2 percent.
The FDIC has adopted a minimum core capital standard under which state
nonmember banks are required to hold core capital consisting generally of
common equity, minority interests in equity accounts of consolidated
subsidiaries, and qualifying perpetual preferred stock, of at least 3 percent
and up to 5 percent of total assets. Banks receiving the highest rating
from the FDIC are permitted to maintain core capital of 3 percent of total
assets, while less healthy banks are required to maintain core capital of 4
to 5 percent. A bank with core capital of less than 2 percent would be
deemed to be in an unsafe and unsound condition. It is expected that the OTS
will adopt a similar standard that will be applicable to savings
associations.
With respect to savings associations, the FDIC will use the core
capital standard in determining whether to approve applications for deposit
insurance, the right to exercise additional powers, or to merge or make
acquisitions. The FDIC may also use the new standard in determining whether
to take enforcement action against a savings association when an unsafe or
unsound practice exists.
The Company's BIF-insured institutions are required to have risk-based
capital of 8 percent of risk-weighted assets, based on the credit risk deemed
inherent in institutions' assets, including certain off-balance-sheet assets.
In addition, core capital must be 4 percent of risk-weighted assets. At
December 31, 1993, the industrial banks exceeded the required ratios.
Capital Distributions by GWB The Company is a legal entity separate
and distinct from the Bank and the Company's other subsidiaries. The primary
source of the Company's revenues on an unconsolidated basis has been
dividends from GWB. Various regulatory and tax considerations, however,
limit directly or indirectly the amount of dividends GWB can pay. Should GWB
distribute dividends in excess of the amount of its available earnings and
profits (as determined for federal income tax purposes), such excess would
be subject to federal income tax. At December 31, 1993, the Bank had
approximately $658 million of retained earnings available for the payment of
dividends without adverse tax consequences. Dividend payments are further
restricted by regulations as discussed below.
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The OTS regulations impose limitations upon "capital distributions" by
savings associations, including cash dividends. The regulations established
a three-tiered system: Tier 1 includes savings associations with capital at
least equal to their fully phased-in capital requirement which have not been
notified that they are in need of more than normal supervision; Tier 2
includes savings associations with capital above their minimum capital
requirement but less than their fully phased-in requirement; and Tier 3
includes savings associations with capital below their minimum capital
requirement. Tier 1 associations may, after prior notice but without
approval of the OTS, make capital distributions up to the higher of (1) 100
percent of their net income during the calendar year plus the amount that
would reduce by one half their "surplus capital ratio" (the excess over their
fully phased-in capital requirement) at the beginning of the calendar year
or (2) 75 percent of their net income over the most recent four-quarter
period. Tier 2 associations may, after prior notice but without approval
of the OTS, make capital distributions of up to 25 percent to 75 percent of
their net income over the most recent four-quarter period depending upon
their current risk-based capital position. Tier 3 associations may not make
capital distributions without prior approval. An association subject to
more stringent restrictions imposed by agreement may apply to remove the more
stringent restrictions.
The Company believes that GWB is a Tier 1 association. Notwithstanding
the foregoing, the regulatory authorities have broad discretion to prohibit
any payment of dividends and take other actions if they determine that the
payment of such dividends would constitute an unsafe or unsound practice.
Among the circumstances posing such risk would be a capital distribution by
a Tier 1 or Tier 2 association whose capital is decreasing because of
substantial losses. In addition, FDICIA prohibits dividends and other
capital distributions if, following such distribution, the savings
association would fall within one of three "undercapitalized" categories.
See Regulation - Capital Requirements.
Community Reinvestment Act The Community Reinvestment Act ("CRA")
requires each savings association to identify the communities it serves and
the types of credit the association is prepared to extend within those
communities. CRA also requires the OTS to assess the association's record
of helping to meet the credit needs of its community and to take such
assessment into consideration when evaluating applications for mergers,
acquisitions and other transactions. A less than satisfactory CRA rating may
be the basis for denying such applications.
In connection with its assessment of CRA performance, the OTS assigns
a rating of "outstanding", "satisfactory", "needs to improve" or "substantial
noncompliance". Based on the most recent examination conducted in 1993, the
Bank received a rating of "outstanding". The OTS and other federal bank
regulatory agencies recently proposed revisions to the rules governing CRA
compliance. The proposed rules are intended to simplify CRA compliance
evaluations by establishing performance-based criteria.
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Restrictions on Transactions with Affiliates FIRREA imposes on savings
associations the affiliate transaction restrictions contained in Sections
23A, 23B, 22(g) and 22(h) of the Federal Reserve Act in the same manner and
to the same extent as such restrictions now apply to member banks. Such
restrictions are also applicable to the industrial banks. In addition, a
savings association may not make any loan or other extension of credit to an
affiliate unless that affiliate is engaged only in activities permissible for
bank holding companies. Further, a savings association may not purchase or
invest in securities issued by an affiliate other than a subsidiary. The OTS
is authorized to impose more stringent restrictions on an association's
affiliated transactions than those contained in Sections 23A and 23B.
Subsidiary Investment Limits The amount which a federal savings bank
may invest in service corporations and subsidiaries (whether in equity or
debt of such corporations) is limited to an amount equal to 3 percent of
assets, provided investments in excess of 2 percent of assets serve certain
community purposes. The service corporation investment limit (for
institutions like GWB which meet net worth and certain other requirements)
is exclusive of an amount not to exceed 50 percent of net worth which may be
invested in "conforming" (i.e., otherwise authorized) loans to service
corporations. At December 31, 1993, GWB's aggregate investment in service
corporations (exclusive of conforming loans of $49 million) was approximately
.2 percent of its assets.
Notice of Certain Activities FIRREA requires a savings association
seeking to establish a new subsidiary, acquire control of an existing company
(after which it would be a subsidiary), or conduct a new activity through a
subsidiary, to provide 30 days prior notice to the FDIC and the OTS and
conduct any activities of the subsidiary in accordance with regulations and
orders of the OTS. The OTS has the power to force a savings association to
divest or terminate any activity that it determines is a serious threat to
the financial safety, soundness or stability of such institution or is
otherwise inconsistent with sound banking practices. In addition, the FDIC
is authorized to determine whether any specific investment activity poses a
threat to the SAIF and to prohibit any SAIF member from engaging directly in
such activity, even if it is an activity that is a permissible investment for
a federal savings association.
Loans-to-One Borrower Limitations FIRREA conforms savings
associations' loans-to-one borrower limitations to those applicable to
national banks. The lending limits for national banks apply to all savings
associations in the same manner and to the same extent as they now apply to
national banks. Thus, savings associations generally are not permitted to
make loans to a single borrower in excess of 15 percent of the association's
unimpaired capital and surplus. It is not expected that this limitation will
have any significant effect upon GWB's activities as currently conducted.
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Brokered Deposits A final rule adopted by the FDIC permits only "well
capitalized" institutions to obtain brokered deposits. "Adequately
capitalized" institutions may obtain brokered deposits if they receive a
waiver from the FDIC. The rule adopted by the FDIC also prohibits
institutions which are not "well capitalized" from soliciting deposits at
rates significantly higher than prevailing rates.
Liquidity OTS regulations require savings associations to maintain for
each calendar month an average daily balance of liquid assets (including cash
and certain time deposits, bankers' acceptances, specified corporate
obligations and specified United States government, state government and
federal agency obligations) of not less than 5 percent of the average daily
balance of its net withdrawable deposit accounts (the amount of all deposit
accounts less the unpaid balance of all loans made on the security of such
accounts) and borrowings payable on demand or in one year or less. This
liquidity requirement may be changed from time to time by the OTS within the
range of 4 percent to 10 percent. OTS regulations also require each savings
association to maintain for each calendar month an average daily balance of
short-term liquid assets (generally those having maturities of 12 months or
less) at an amount not less than 1 percent of the average daily balance of
its net withdrawable accounts plus such short-term debt during the preceding
calendar month. At December 31, 1993, the liquidity ratio of GWB was 6.81
percent and its short-term liquidity ratio was 2.57 percent which was in
compliance with these requirements.
Federal Home Loan Bank System GWB is a member of the FHLBank System,
which consists of 12 regional Federal Home Loan Banks. It is required to
acquire and hold shares of capital stock in the applicable FHLBank in an
amount equal to the greater of 1 percent of the aggregate principal amount
of its unpaid residential mortgages, one-twentieth of its outstanding
advances and letters of credit from the FHLBanks or .3 percent of total
assets as of the close of each calendar year.
The FHLBank serves as a reserve or central bank for the member
institutions within its assigned region. It makes advances (i.e. loans) to
members in accordance with its established policies and procedures. The
maximum amount of credit which the FHLBank will extend for purposes other
than meeting withdrawals varies from time to time in accordance with its
policies. The FHLBank interest rates charged for advances vary depending
upon maturity, the cost of funds to the FHLBank and the purpose of the
borrowing.
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FIRREA requires the FHLBanks to contribute a significant amount of
their reserves and up to $300 million a year in annual earnings to fund the
principal and a portion of the interest payable on bonds issued to fund the
resolution of failed savings associations. In addition, the statute provides
that each FHLBank must transfer a percentage of its annual net earnings to
a specified affordable housing program. As a result of these requirements,
it is anticipated that the FHLBanks will pay reduced dividends with respect
to their stock and that GWB will receive reduced dividends on such stock in
the foreseeable future. As of December 31, 1993, GWB held $307 million of
FHLBank stock and received dividends in the amount of $12.2 million in 1993
with respect to such stock.
Federal Reserve Board Regulations Pursuant to the Depository
Institutions Deregulation and Monetary Control Act of 1980, the FRB adopted
regulations that require savings institutions to maintain reserves against
their transaction accounts and nonpersonal time deposits. In December 1990,
the FRB eliminated the reserve requirement on nonpersonal time deposits. The
balances maintained to meet the reserve requirements imposed by the FRB may
be used to satisfy liquidity requirements imposed by the OTS. At December
31, 1993, balances at GWB totaled $259 million. The effect of this reserve
requirement is to decrease an institution's available investment funds.
Effective April 2, 1992, the FRB cut the reserve requirement on transaction
accounts to 10 percent from 12 percent. Savings associations have authority
to use various FRB services and to borrow from the Federal Reserve Bank's
"discount window", but FRB regulations require them to exhaust all FHLBank
sources before borrowing from a Federal Reserve Bank. In addition, FDICIA
restricts the period during which discount advances may be outstanding to
undercapitalized depository institutions. As a creditor and a financial
institution, GWB is subject to additional regulations promulgated by the FRB,
including, without limitation, Regulation B (Equal Credit Opportunity Act),
Regulation E (Electronic Funds Transfers Act), Regulation F (Interbank
Liabilities), Regulation Z (Truth in Lending Act), Regulation CC (Expedited
Funds Availability Act) and Regulation DD (Truth in Savings Act).
Safety and Soundness Standards Pursuant to statutory requirements,
the OTS issued a proposed rule on November 17, 1993 that prescribes certain
"safety and soundness standards". The standards are intended to enable the
OTS to address problems at savings associations before the problems cause
significant deterioration in the financial condition of the association.
The proposed regulation provides operational and managerial standards for
internal controls and information systems, loan documentation, internal
audit systems, credit underwriting, interest rate exposure, asset growth and
compensation, fees and benefits. The proposed regulation also requires a
savings association to maintain a ratio of classified assets no greater than
100 percent of total capital and ineligible allowances. A minimum earnings
standard is also included in the proposed regulation requiring earnings
sufficient to absorb losses without impairing capital. Earnings are
sufficient under the proposed regulation if the association meets applicable
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capital requirements and would remain in capital compliance if its net
income or loss over the last four quarters of earnings continued over the
next four quarters of earnings. An association that fails to meet any of
the standards must submit a compliance plan. Failure to submit an
acceptable compliance plan or to implement the plan could result in an OTS
order or other enforcement action against the association.
Real Estate Lending Standards The federal banking regulatory
agencies, including the OTS, adopted final regulations, effective March 19,
1993, which require institutions to adopt written real estate lending
policies that, among other things, must be consistent with guidelines
adopted by the agencies. Among the guidelines adopted by the OTS and the
other agencies are maximum loan-to-value ratios for land loans (65 percent);
land development loans (75 percent); construction loans (80-85 percent);
loans on owner-occupied 1-4 unit residential properties, including home
equity loans (no specific required limit, but loans at or above 90 percent
require private mortgage insurance or readily marketable collateral); and
loans on other improved property (85 percent).
The guidelines permit institutions to make loans in excess of the
supervisory loan-to-value limits if such loans are supported by other credit
factors, but the aggregate of such nonconforming loans should not exceed the
institution's total capital, and the aggregate of nonconforming loans
secured by real estate other than 1-4 unit residential properties should not
exceed 30 percent of total capital.
Classification of Assets Savings associations are required to
classify their assets on a regular basis, to establish allowances for losses
and report the results of such classification quarterly to the OTS. For
additional information see Note 1 of the Notes to Consolidated Financial
Statements in "Financial Statements and Supplementary Data".
With respect to classified assets, if the OTS concludes that
additional assets should be classified or that the valuation allowances
established by the savings association are inadequate, the examiner may
determine, subject to review by the savings association's Regional Director,
the need for and extent of additional classification or any increase
necessary in the savings association's general or specific valuation
allowances.
A savings association is also required to set aside adequate valuation
allowances to the extent that an affiliate holds assets posing a risk to the
association. A savings association must also establish liabilities for off-
balance-sheet items, such as letters of credit, when loss becomes probable
and estimable.
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In August 1993, the OTS issued revised guidance for the classification
of assets and a new policy on the classification of collateral-dependent
loans (where proceeds from repayment can be expected to come only from the
operation and sale of the collateral). With limited exceptions, effective
September 30, 1993, for troubled collateral-dependent loans where it is
probable that the lender will be unable to collect all amounts due, an
association must classify as "loss" any excess of the recorded investment
in the loan over its "value", and classify the remainder as "substandard".
The "value" of a loan is either the present value of expected future cash
flows, the loans' observable market price or the fair value of the
collateral.
On December 21, 1993, the federal banking agencies, including the OTS,
issued an interagency policy statement on the allowance for loan and lease
losses (the "Policy Statement"). The Policy Statement requires that
federally-insured depository institutions maintain an allowance for loan and
lease losses ("ALLL") adequate to absorb credit losses associated with the
loan and lease portfolio, including all binding commitments to lend. Given
the appropriate facts and circumstances as of the evaluation date, the
Policy Statement defines an adequate ALLL as a level that is no less than
the sum of (1) for loans and leases classified as substandard or doubtful,
credit losses over the remaining effective lives of such loans and leases;
(2) for loans and leases that are not classified, all estimated credit
losses forecasted for the upcoming twelve months; and (3) amounts for
estimated losses from transfer risk on international loans. Additionally,
an adequate level of ALLL should reflect an additional margin for
imprecision inherent in most estimates of expected credit losses.
The Policy Statement also provides guidance to examiners in evaluating
the adequacy of the ALLL. Among other things, the Policy Statement directs
examiners to check the reasonableness of ALLL methodology by comparing the
reported ALLL against the sum of (1) 50 percent of the portfolio that is
classified doubtful, (2) 15 percent of the portfolio that is classified
substandard; and (3) for the portions of the portfolio that have not been
classified (including those loans and leases designated special mention),
estimated credit losses over the upcoming twelve months given the facts and
circumstances as of the evaluation date (based on the institution's average
annual rate of net charge-offs experienced over the previous two or three
years on similar loans and leases, adjusted for current conditions and
trends).
The Policy Statement specifies that the amount of ALLL determined by
the sum of the amounts above is neither a floor nor a "safe harbor".
However, it is expected that examiners will review a shortfall relative to
this amount as indicating a need to more closely review management's
analysis to determine whether it is reasonable, supported by the weight of
reliable evidence and that all relevant factors have been appropriately
considered.
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TAXATION
Under the Internal Revenue Code, chartered savings institutions that
meet certain definitional tests and conditions are allowed federal income
tax deductions for additions to bad debt reserves. Such additions may be
determined under the experience method or the percentage of taxable income
method. In order to retain the special bad debt reserve treatment, savings
associations must maintain 60 percent or more of their assets in certain
qualifying assets, consisting of some of the same assets as in the QTL test,
as well as other assets. GWB has met all tests for all applicable years.
If in some future year the Bank either fails the QTL test and converts
to a bank charter or fails to meet the tax asset test, it would be
ineligible to obtain a bad debt deduction under the reserve method and may
be required to recapture its existing tax bad debt reserves.
In 1993, GWB paid dividends totaling $501 million to GWFC, which
included the book value of Aristar of $369 million. Future dividends by GWB
are subject to certain tax restrictions in addition to regulatory and other
considerations. Retained earnings that have not been subject to federal
income tax, because of the above bad debt deduction, are not available for
dividends or any other distribution, including one made on dissolution or
liquidation, without the payment of federal income taxes. Further, at
December 31, 1993, GWB's limitations on capital distributions would have
restricted the payment of dividends before untaxed retained earnings were
reached.
Notes 1, 14, and 16 of the Notes to Consolidated Financial Statements
in "Financial Statements and Supplementary Data", present the accounting
implications for income taxes.
EMPLOYEES
GWFC employed 17,029 persons at December 31, 1993. Employees are not
represented by a union or collective bargaining group and GWFC considers its
employee relations to be satisfactory. Employees are provided retirement,
savings incentive and other benefits, including life, health and accident
and hospital insurance.
ITEM 2. PROPERTIES
The executive offices of both GWFC and GWB are located in the home
office building owned by GWB at 9200 Oakdale Avenue, Chatsworth, California.
GWFC owns approximately 45 percent of the 6.1 million square feet in which
its headquarters, administrative and branch offices are located throughout
several states, including California and Florida.
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See Note 10 of the Notes to Consolidated Financial Statements in
"Financial Statements and Supplementary Data", for information on
properties, leases and property operations.
ITEM 3. LEGAL PROCEEDINGS
GWFC and its subsidiaries are parties from time to time in litigation
arising in the normal course of business.
In the opinion of the management of GWFC, after consultation with
various law firms representing it and its subsidiaries in such matters, the
outcome of currently pending actions in which it or any of its subsidiaries
is a party will not have a material effect on its consolidated financial
position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The following information appears in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Financial
Statements and Supplementary Data".
(a) Market and market prices of the common stock - pages 122, 123 and
124
(b) Approximate number of common security holders - pages 122, 123
and 124
(c) Common stock dividend history and restrictions - pages 122, 123
and 124
(d) Common stock dividend policy - pages 49, 103, 104 and 105
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FIVE-YEAR SUMMARY
(Dollars in thousands, except per share) 1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Summary of Operations
Interest income $ 2,680,784 $ 3,091,093 $ 3,718,796 $ 4,073,085 $ 3,667,441
Interest expense 1,297,930 1,668,731 2,453,540 2,905,134 2,711,677
----------- ----------- ----------- ----------- -----------
Net interest income 1,382,854 1,422,362 1,265,256 1,167,951 955,764
Provision for loan losses 463,000 420,000 149,900 285,000 232,000
----------- ----------- ----------- ----------- -----------
Net interest income after provision
for loan losses 919,854 1,002,362 1,115,356 882,951 723,764
Other income 202,072 62,856 233,857 138,793 130,607
Operating and administrative expenses 1,029,879 969,706 843,783 746,070 639,976
----------- ----------- ----------- ----------- -----------
Earnings before taxes on income 92,047 95,512 505,430 275,674 214,395
Federal and state taxes on income 30,000 41,600 207,300 148,600 114,300
Accounting changes - 31,094 - - -
----------- ----------- ----------- ----------- -----------
Net earnings $ 62,047 $ 85,006 $ 298,130 $ 127,074 $ 100,095
=========== =========== =========== =========== ===========
Summary of Financial Condition
Cash and securities $ 1,846,780 $ 1,660,485 $ 1,397,529 $ 1,819,823 $ 1,889,771
Loans receivable and mortgage-backed
securities 33,850,799 33,752,661 35,115,730 34,767,295 33,186,973
Real estate 434,077 1,153,383 1,123,043 960,815 513,371
Other assets 2,216,704 1,872,657 1,963,326 1,857,874 1,586,237
----------- ----------- ----------- ----------- -----------
Total assets 38,348,360 38,439,186 39,599,628 39,405,807 37,176,352
=========== =========== =========== =========== ===========
Customer accounts 31,531,563 30,908,665 30,570,368 29,649,038 23,784,286
Borrowings and debentures 3,479,341 4,151,052 5,592,453 6,539,388 10,275,161
Other liabilities 914,055 929,735 1,115,747 1,207,539 1,128,600
Stockholders' equity 2,423,401 2,449,734 2,321,060 2,009,842 1,988,305
----------- ----------- ----------- ----------- -----------
Total liabilities and equity $38,348,360 $38,439,186 $39,599,628 $39,405,807 $37,176,352
=========== =========== =========== =========== ===========
Per Common Share Data
Fully diluted earnings $ .28 $ .53 $ 2.24 $ .99 $ .78
Dividends .92 .91 .87 .83 .79
Stock price - high 20 3/8 19 3/4 20 7/8 20 1/2 24 5/8
- low 15 5/8 13 11 1/4 8 3/4 14 5/8
Year-end closing price 20 17 1/2 18 12 1/4 17 1/2
Stockholders' equity 16.05 16.48 17.01 15.64 15.48
Earnings rate of return on stockholders' equity 2.53% 3.50% 13.73% 6.19% 4.95%
Price earnings ratio 71 33 8 12 22
Dividend rate of return 4.6% 5.2% 4.8% 6.8% 4.5%
Dividend rate as a percent of earnings 328.6% 171.7% 38.8% 83.8% 101.3%
At Year End
Average equity to average assets 6.5% 6.2% 5.5% 5.2% 5.7%
Return on average assets .16% .22% .75% .32% .28%
Number of common shares issued 132,616,172 130,814,018 128,875,761 128,536,888 128,436,710
Number of beneficial and record stockholders 55,469 42,332 33,662 34,075 33,874
Number of employees 17,029 16,016 14,786 14,057 12,791
Number of offices 1,180 1,101 1,095 1,222 1,120
/TABLE
<PAGE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Great Western Financial Corporation reported consolidated net earnings
of $62 million, or $.28 per share, for the year ended December 31, 1993,
compared with $85 million, or $.53 per share, for 1992 and $298 million, or
$2.24 per share, for 1991. Earnings before taxes and accounting changes in
1993 were $92 million compared with $95.5 million in 1992 and $505 million
in 1991. Earnings in 1993 were again affected by higher loss provisions on
real estate loans and real estate, including $150 million related to four
bulk sales of $659 million of troubled real estate assets completed in the
second half of 1993.
Provisions for losses on loans and real estate in 1993, 1992 and 1991
were $555 million, $640 million and $171 million, respectively. The
provision for loan losses in 1993 was affected by the significant increases
in 1-4 unit residential loan ("single-family" or "SFR") charge-offs. Single-
family foreclosures continued to rise in 1993 reflecting high unemployment,
slow economic activity and falling housing prices, particularly in
California, which is the Company's primary market. In 1992 and 1991, the
loss provisions were the result of specific write-downs of major properties
and increases to general loss reserves. The weak economic conditions and a
continued oversupply of commercial space have also resulted in a further
decrease in the value of such real estate, as appraisals continue to reflect
the economic decline. The provision for estimated losses included an
increase in general loan loss reserves for both the higher foreclosure level
and the loss experience applied to single-family delinquencies.
While the past two years have been adversely affected by the general
economic condition and declining asset levels, the Company's core business
performance remains viable. Net interest income for 1993 was $1.38 billion
compared with $1.42 billion in 1992 and $1.27 billion in 1991. The 1993
decrease in net interest income was the result of both a slightly narrower
net interest margin and a lower level of average interest earning assets.
In both 1992 and 1991, the effect of an increase in the net interest margin,
partially a result of falling interest rates, more than offset a small
decline in average interest earning assets. In a declining interest rate
environment, borrowing costs decline more swiftly than rates charged on ARMs,
thereby improving net interest margins. Should interest rates begin to
increase, it is anticipated that the net interest margin will contract and
net interest income will decline without asset growth.
As a result of the high level of provisions for losses in 1993 and
1992, the returns on average assets and average equity have been
disappointing. The components of the ratio to average assets follow:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------
Ratio to Average Assets 1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net interest income 3.64% 3.66% 3.19% 2.94% 2.69%
Other income .77 .73 .64 .50 .55
Less: Operating expenses (2.71) (2.50) (2.13) (1.90) (1.80)
Provisions for losses (1.46) (1.64) (.43) (.85) (.84)
----- ----- ----- ----- -----
Income before taxes and
accounting changes .24 .25 1.27 .69 .60
Taxes (.08) (.11) (.52) (.37) (.32)
Accounting changes - .08 - - -
----- ----- ----- ----- -----
Return on average assets .16% .22% .75% .32% .28%
===== ===== ===== ===== =====
Return on average equity 2.53% 3.50% 13.73% 6.19% 4.95%
===== ===== ===== ===== =====
</TABLE>
The following summarizes the contribution to net earnings from the
principal business units:
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------
(Dollars in millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Banking operations $ 5 $ 45 $257
Consumer finance operations 57 40 41
---- ---- ----
$ 62 $ 85 $298
==== ==== ====
</TABLE>
<PAGE>
<PAGE>
ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS
As of January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan". FAS 114 requires that impaired loans be measured based on the present
value of expected future cash flows discounted at the loan's effective
interest rate. As a practical expedient, impairment may be measured based
on the loan's observable market price or the fair value of the collateral if
the loan is collateral dependent. When the measure of the impaired loan is
less than the recorded investment in the loan, the impairment should be
recorded through a valuation allowance.
As of December 31, 1993, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("FAS 115"). Investments in debt and equity securities
for which the Company has the positive intent and ability to hold to maturity
are recorded at amortized cost. All other investments are classified as
available for sale and recorded at fair value. Unrealized gains and losses
on available-for-sale securities are excluded from earnings and reported as
a separate component of stockholders' equity. The Company has no trading
portfolio as defined by FAS 115.
The presentation of this information is included below and in the Notes
to Consolidated Financial Statements in "Financial Statements and
Supplementary Data".
INTEREST EARNING ASSETS
Interest earning assets primarily comprise real estate loans and
mortgage-backed securities, consumer finance loans and marketable securities.
Average interest earning assets declined 1 percent in 1993 after decreases
of 3 percent in 1992 and 1 percent in 1991.
ARMs on residential property continue to be the primary lending
product. The demand for this product is a primary factor governing asset
growth. As a result of the recession, the real estate lending market
continued to decline for property sales throughout the past three years, but
it was supported by heavier refinance activity during 1992 and 1993. The low
interest-rate environment kept adjustable rate lending under extreme
pressure. ARMs comprised 62 percent of real estate loans originated in 1993
compared with 54 percent in 1992 and 68 percent in 1991. Loans originated
at fixed rates, which comprised the remainder of the volume, were sold to
others to minimize portfolio interest-rate risk; however, this limited asset
growth. Much of the fixed-rate lending resulted from the active refinance
market. Refinance activity comprised 64 percent of real estate lending in
1993 compared with 65 percent in 1992 and 51 percent in 1991. <PAGE>
<PAGE>
The mix of interest earning assets continued to reflect a rising
concentration of single-family loans. The SFR portfolio represented 72
percent of total interest earning assets at year-end 1993 compared with 71
percent at year-end 1992 and 70 percent at year-end 1991. This trend is the
result of Great Western's decision, in 1987, to discontinue commercial real
estate lending except to finance the sale of foreclosed properties. The
increase in the percentage of single-family loans should continue in 1994.
The following table shows the shift in the composition of interest earning
assets:
<TABLE>
<CAPTION>
December 31
------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loans receivable
Single-family 71.7% 71.2% 70.4% 68.2% 66.7%
Apartments 5.1 5.4 5.7 6.1 7.0
Commercial 4.4 4.4 4.8 5.4 7.9
Consumer 6.2 6.6 6.6 5.7 5.6
----- ----- ----- ----- -----
87.4 87.6 87.5 85.4 87.2
Mortgage-backed securities 8.9 8.9 9.7 10.8 8.8
Securities 2.9 2.6 2.0 3.0 3.3
Investment in FHLB stock .8 .9 .8 .8 .7
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
The following table summarizes the real estate loan portfolio as of
December 31, 1993 by security type and year of origination:
<TABLE>
<CAPTION>
(Dollars in millions) SFRs Apartments Commercial Total
---- ---------- ---------- -----
<S> <C> <C> <C> <C>
Year of Origination
1993 $ 5,462 $ 50 $ 106 $ 5,618
1992 4,234 70 87 4,391
1991 3,357 31 16 3,404
1990 4,481 49 28 4,558
1989 3,511 151 28 3,690
Prior to 1989 4,665 1,463 1,324 7,452
------- ------ ------ -------
$25,710 $1,814 $1,589 $29,113
======= ====== ====== =======
</TABLE>
<PAGE>
<PAGE>
The tables on pages 112, 117, and 118 in "Financial Statements and
Supplementary Data" present additional data on the interest earning asset
portfolio.
INTEREST BEARING LIABILITIES
Interest bearing liabilities comprise retail and wholesale customer
accounts and borrowings.
Customer account growth totaled $623 million in 1993, or 2 percent of
the beginning balance, compared with $338 million, or 1 percent, in 1992 and
$921 million, or 3 percent, in 1991. The 1993, 1992 and 1991 increases
included approximately $4.4 billion, $2.2 billion and $2.9 billion,
respectively, in retail deposits from several acquisitions, primarily from
the RTC. Since 1990, Great Western has concentrated on increasing
transaction account balances while certificates of deposit declined and were
not renewed in many instances because of lower interest rates. The following
table shows the shift in interest bearing liabilities:
<TABLE>
<CAPTION>
December 31
-----------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Customer accounts
Retail accounts
Term 50.2% 50.1% 55.2% 56.7% 46.1%
Transaction 38.2 36.1 26.4 19.2 16.0
Wholesale accounts 1.7 2.0 2.9 6.0 7.8
----- ----- ----- ----- -----
90.1 88.2 84.5 81.9 69.9
Borrowings 9.9 11.8 15.5 18.1 30.1
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
/TABLE
<PAGE>
<PAGE>
The following table shows the components of the change in customer
account balances:
<TABLE>
<CAPTION>
December 31, 1993
----------------------------------------------
(Dollars in millions) 1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Transaction
Demand accounts $ 314 $ 802 $ 348 $ 95 $ (117)
Money market and other
transaction accounts (511) 1,301 1,564 394 (62)
Certificates of deposit (3,179) (3,657) (2,645) 1,193 1,444
Wholesale accounts (95) (366) (1,129) (467) 403
------- ------- ------- ------- ------
(3,471) (1,920) (1,862) 1,215 1,668
Acquisitions of California
deposits 4,420 469 2,080 50 -
Acquisitions of Florida
deposits - 1,773 1,870 6,976 68
Withdrawals of high-rate
accounts included in
acquisitions - - (1,055) (2,426) -
Other purchase and sale
activity (326) 16 (112) 50 (159)
------- ------- ------- ------- ------
$ 623 $ 338 $ 921 $ 5,865 $1,577
======= ======= ======= ======= ======
</TABLE>
Transaction account growth is a principal objective of deposit
activity. In 1993, transaction accounts declined $197 million after
increases of $2.1 billion in 1992 and $1.9 billion in 1991. The low rates
offered on money market accounts in 1993 have prompted customers to seek
alternative investments with higher yields. Transaction accounts now
comprise 43 percent of total customer deposits compared with 42 percent at
year-end 1992 and 32 percent at year-end 1991. These balances include 21
percent, 23 percent and 18 percent, respectively, in money market accounts
which were more popular with customers than certificates of deposit in 1993,
1992 and 1991.
<PAGE>
<PAGE>
Certificates of deposit have declined over the last three years due to
the low interest rates offered on such accounts. A portion of the 1993
decrease in certificates of deposit was the withdrawal of $1.6 billion of
deferred compensation accounts, which included $1.3 billion from the State
of California. The Company chose to reduce the interest rate offered on
these accounts due to other funding opportunities, which reduced the overall
cost of funds, thereby increasing the net interest spread, net interest
income and net income.
Wholesale accounts, which are able to be used as an alternative source
of lendable funds, totaled $588 million at December 31, 1993 and have
continued to run off during the past three years. The balance of wholesale
accounts at year-end 1993 comprised 1.9 percent of total deposits. Wholesale
accounts totaled $683 million at year-end 1992 and $1 billion at year-end
1991. Wholesale account activity will fluctuate depending upon the need for
funding sources for asset growth.
Borrowings, other than customer accounts, totaled $3.5 billion at
December 31, 1993 compared with $4.2 billion at December 31, 1992 and $5.6
billion at December 31, 1991. Borrowings have not been a significant factor
in funding new lending during the past three years as a result of customer
deposit acquisitions. At December 31, 1993, customer accounts comprised 90
percent of interest bearing liabilities, compared with 88 percent and 85
percent at year-ends 1992 and 1991, respectively.
The tables on pages 113, 114 and 115 in "Financial Statements and
Supplementary Data" present a detailed composition of borrowings and customer
accounts.
NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income was $1.38 billion in 1993 compared with $1.42
billion in 1992 and $1.27 billion in 1991. For the year 1993, the average
net interest margin was 3.79 percent compared with 3.89 percent for 1992 and
3.33 percent for 1991. Net interest income and net interest margin are the
two primary measures of core earnings strength. The average net interest
margin contracted in 1993 as market rates generally stabilized and the
Company's margin was less affected by the ARM repricing lag.
Great Western offers two primary adjustable rate mortgage products: one
is tied to the Federal Cost of Funds Index ("FCOFI"), and the other is tied
to the 11th District Federal Home Loan Bank's ("FHLB") Cost of Funds Index
("COFI"). The FCOFI is tied to two components of the federal government's
cost of funds - the monthly average interest rate on all marketable Treasury
<PAGE>
<PAGE>
bills and the monthly average interest rate on all marketable Treasury
notes. Customer acceptance of either product depends upon the relationship
of the index and initial offering rates. The interest differential over the
appropriate index is approximately 20 to 25 basis points lower for FCOFI
loans than COFI loans. The COFI ARM was the primary mortgage instrument in
1993 and the FCOFI ARM was the product of choice by the customer in 1992.
The cost of funds of GWB relative to COFI and FCOFI is shown as
follows:
<TABLE>
<CAPTION>
GWB Cost of
----------------
GWB Cost Funds Less Than
of Funds COFI FCOFI COFI FCOFI
-------- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
December 31, 1993 3.319% 3.879% 4.892% .560% 1.573%
September 30, 1993 3.395 3.881 4.966 .486 1.571
June 30, 1993 3.490 4.050 5.064 .560 1.574
March 31, 1993 3.654 4.245 5.222 .591 1.568
December 31, 1992 3.730 4.432 5.384 .702 1.654
December 31, 1991 5.667 6.245 6.776 .578 1.109
</TABLE>
Both FCOFI and COFI ARMs lag changes in market rates by approximately
two months. In a rising rate environment, the cost of short-term liabilities
will increase ahead of the ARMs; whereas, in a declining rate environment,
net interest income and net interest margins increase during the lag period.
The repricing lag in the declining rate environment added approximately eight
basis points in 1993, 24 basis points in 1992 and 23 basis points in 1991 to
the effective net interest margin. With the ARM, there is little of the
long-term interest-rate risk that is associated with fixed-rate lending.
The Company currently originates ARMs for its own portfolio and
originates fixed-rate residential loans for sale in the secondary market.
In 1991, Great Western commenced a short-term hedge contract program for the
fixed-rate commitment period to protect against rate fluctuations on the
commitments to fund fixed-rate loans. Hedge contracts are recorded at cost.
Fixed-rate lending totaled $3.4 billion in 1993, $4.2 billion in 1992 and
$2.5 billion in 1991. Sales of these mortgages totaled $3.1 billion in 1993,
$4.1 billion in 1992 and $2.1 billion in 1991. Total mortgage sales in 1993
<PAGE>
<PAGE>
were $3.6 billion, which included $473 million of distressed asset bulk
sales, compared with $4.2 billion in 1992 and $2.5 billion in 1991. Nearly
all mortgage sales, excluding bulk sales, were loans originated for sale or
held as available for sale. At December 31, 1993, the Company serviced for
others $12.3 billion in mortgages with a loan servicing spread of 42 basis
points compared with $13.1 billion at December 31, 1992 with a loan servicing
spread of 34 basis points and $12.8 billion at December 31, 1991 with a loan
servicing spread of 48 basis points.
Loans available for sale are valued at the lower of cost or market.
As of December 31, 1993, $320 million of real estate loans, primarily fixed-
rate loans, were designated as available for sale. Gains of $23.7 million
in the real estate loan portfolio were recognized. Unrecognized gains on
real estate loans available for sale totaled $8 million at year end.
Mortgage-backed securities and other securities available for sale are
carried at fair value. At December 31, 1993, $2.6 billion in mortgage-backed
securities, primarily ARM securitized products, were designated as available
for sale. Sales of mortgage-backed securities available for sale in 1993
resulted in realized gains of $1.1 million and no realized losses. Gains
and losses are calculated on the specific identification method. Securities
available for sale at the end of 1993 had a fair value of $871 million.
Gains recognized during the year totaled $254,000.
Great Western monitors asset and liability maturities and reviews
exposure to interest-rate risk, giving consideration to interest-rate trends
and funding requirements. The following table shows that the portfolio of
short-term assets exceeded liabilities maturing or subject to interest
adjustment within one year by $3.1 billion at December 31, 1993. This
compared with $5.1 billion and $2.9 billion at December 31, 1992 and 1991,
respectively.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Maturity/Rate Sensitivity
---------------------------------------------------------------
December 31, 1993 % of Within Over
(Dollars in millions) Rate Balance Total 1 year 1-5 years 5-15 years 15 years
---- ------- ----- ------ --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Earning Assets
Securities 4.66% $ 1,027 3 $ 1,027 $ - $ - $ -
Mortgage-backed securities 5.93 3,196 9 2,677 519 - -
Investment in FHLB stock 3.90 307 1 - - - 307
Loans receivable
Real estate
Adjustable rate 6.83 27,648 77 25,924 1,724 - -
Fixed-rate
Short-term 8.68 553 2 244 283 26 -
Long-term 8.62 912 2 519 393 - -
Consumer 15.69 2,208 6 520 1,340 271 77
----- ------- --- ------- ------- ------ -----
7.28 35,851 100 30,911 4,259 297 384
----- ------- --- ------- ------- ------ -----
Interest Bearing Liabilities
Customer accounts
Regular savings 2.04 2,146 6 2,146 - - -
Checking and limited access 1.73 11,232 32 11,232 - - -
Wholesale transaction - 173 1 173 - - -
Term accounts 4.12 17,981 51 13,125 4,846 10 -
----- ------- --- ------- ------- ------ -----
3.10 31,532 90 26,676 4,846 10 -
Borrowings
Federal Home Loan Bank 5.83 306 1 233 73 - -
Other 7.48 3,173 9 1,006 1,064 1,051 52
Impact of interest rate swaps - - - (109) 109 - -
----- ------- --- ------- ------- ------ -----
3.52 35,011 100 27,806 6,092 1,061 52
----- ------- --- ------- ------- ------ -----
Excess of Interest Earning Assets
over Interest Bearing Liabilities
at December 31, 1993 3.76% $ 840 $ 3,105 $(1,833) $ (764) $ 332
===== ======= ======= ======= ====== =====
Excess of Interest Earning Assets
over Interest Bearing Liabilities
at December 31, 1992 4.09% $ 551 $ 5,126 $(4,216) $ (711) $ 352
===== ======= ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
December 31
-------------
Calculation of Adjusted Margin 1993 1992
---- ----
<S> <C> <C>
Unadjusted margin 3.76% 4.09%
Benefit of net interest earning assets .08 .07
---- ----
Adjusted Margin 3.84% 4.16%
==== ====
</TABLE>
<PAGE>
<PAGE>
The following table shows the year-end interest-rate margins and the
components used in the margin calculation, reflecting the trends during the
past five years:
<TABLE>
<CAPTION>
December 31
------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Average Yield on
Loans 7.54% 8.32% 9.84% 11.01% 11.43%
Mortgage-backed securities 5.93 7.08 8.63 8.92 9.68
Securities 4.49 4.07 6.24 7.87 8.76
----- ----- ----- ----- -----
Earning assets 7.28 8.06 9.62 10.67 11.19
----- ----- ----- ----- -----
Average Cost of
Customer accounts 3.10 3.48 5.34 7.40 7.73
Borrowings 7.34 7.60 7.69 9.16 9.21
----- ----- ----- ----- -----
Cost of funds 3.52 3.97 5.70 7.72 8.18
----- ----- ----- ----- -----
Net Interest Margin 3.76% 4.09% 3.92% 2.95% 3.01%
===== ===== ===== ===== =====
</TABLE>
Because the effective yield is subject to varying interest rates during
the year and also is affected by the loss of interest on nonaccrual loans,
the following table on net interest income shows the average monthly
balances, interest income and interest expense, and effective average rates
by asset and liability component. This table also reflects the yield which
results because of the benefit of interest earning assets exceeding interest
bearing liabilities.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1993 December 31, 1992 December 31, 1991
------------------------ ------------------------- ------------------------
Average Average Average Average Average Average
(Dollars in millions) Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets
Securities $ 897 $ 68 7.60% $ 1,075 $ 73 6.84% $ 1,234 $ 101 8.18%
Mortgage-backed securities 2,958 186 6.27 3,390 260 7.67 3,818 342 8.96
Loans receivable
Real estate 29,439 2,042 6.94 29,045 2,342 8.06 29,621 2,900 9.79
Consumer 2,263 385 17.02 2,343 416 17.74 2,121 376 17.71
------- ------ ----- ------- ------ ----- ------- ------ -----
Total interest earning assets 35,557 2,681 7.54 35,853 3,091 8.62 36,794 3,719 10.11
Other assets 2,453 2,985 2,861
Total assets $38,010 $38,838 $39,655
======= ======= =======
Interest bearing liabilities
Customer accounts
Term accounts $16,378 693 4.23 $19,619 1,022 5.21 $21,742 1,573 7.23
Transaction accounts 12,712 246 1.93 11,618 312 2.68 8,728 395 4.53
------- ------ ----- ------- ------ ----- ------- ------ -----
29,090 939 3.23 31,237 1,334 4.27 30,470 1,968 6.46
Borrowings
Federal Home Loan Bank 1,058 51 4.79 342 31 9.05 612 59 9.61
Other 4,482 308 6.88 3,730 304 8.16 5,130 427 8.31
------- ------ ----- ------- ------ ----- ------- ------ -----
Total interest bearing liabilities 34,630 1,298 3.75 35,309 1,669 4.73 36,212 2,454 6.78
Other liabilities 926 1,102 1,272
Stockholders' equity 2,454 2,427 2,171
------- ------- -------
Total liabilities and
equity $38,010 $38,838 $39,655
======= ======= =======
Interest-rate spread 3.79% 3.89% 3.33%
===== ===== =====
Effective yield summary
Interest income/earning assets $35,557 $2,681 7.54% $35,853 $3,091 8.62% $36,794 $3,719 10.11%
Interest expense/earning assets 35,557 1,298 3.65 35,853 1,669 4.65 36,794 2,454 6.67
------ ----- ------ ----- ------ -----
Net yield on earning assets $1,383 3.89% $1,422 3.97% $1,265 3.44%
====== ===== ====== ===== ====== =====
/TABLE
<PAGE>
<PAGE>
ASSET QUALITY
The Company regularly reviews its assets to determine that each
category is reasonably valued. In this review process, it monitors the loss
exposure relating to nonperforming assets, assets adversely classified for
regulatory purposes, the delinquency trend and market environment to identify
potential problems.
Loss reserves have been provided, where necessary in management's
judgment, for interest earning assets, including residential loans and
consumer loans. Valuation reserves for consumer loans are provided based
upon a percentage of the loans outstanding in relation to the loss experience
within the loan categories.
As noted earlier, the economic climate, particularly in California has
not been favorable. Continuing deterioration in market values has persisted
in both single-family residential and income producing properties. Single-
family loan values have deteriorated because of continued high unemployment
rates as well as the weak economy and its effects upon the residential
market. The Company is unable to predict when this trend will reverse, but
it is not expected to change appreciably until the California economy
improves.
On January 17, 1994, a 6.7 magnitude earthquake centered in the San
Fernando Valley, where the Company's administrative headquarters is located,
occurred. Losses in the loan portfolio have not been determined at this
time; however, the Company does not expect earthquake losses to be material.
The earthquake's effect on the Southern California economy in both the short
term and long term cannot be determined at this time.
The Company assesses the status of general loss reserves on real estate
loans based upon its current loss experience as applied to the loan portfolio
including loans that are delinquent or adversely classified because of
declining collateral values. Because of the current recessionary
environment, the Company has increased its general loss reserves on both
loans and real estate to give effect to current trends in this environment
in valuing its loan and real estate portfolios. The Company evaluates these
trends for their effect on regional and property type concentrations.
On a regional basis, the economic factors affecting the office space
market appear to be somewhat more favorable in Northern California than in
Southern California. In particular, the vacancy rate at September 30, 1993
and September 30, 1992 was 13 percent in the San Francisco area. In the Los
Angeles area, the vacancy rate was 20 percent at September 30, 1993 and
September 30, 1992. The highest vacancy rate existed in San Diego County
where it was 21 percent at September 30, 1993 compared with 24 percent at
September 30, 1992.
<PAGE>
<PAGE>
In the industrial space market, Northern and Southern California
vacancy rates appear to be more comparable. In the San Francisco and Los
Angeles areas, vacancy rates increased to 12 percent at September 30, 1993
from 11 percent a year earlier. Unlike the office space market, San Diego
County's industrial space market had the lowest vacancy rate consisting of
3 percent at September 30, 1993 and September 30, 1992.
In the single-family market, regional differences also exist in the
economic performance of Northern, Central and Southern California. For
example, the median metropolitan area sales price of existing single-family
homes in the San Jose area decreased from the third quarter of 1992 to the
third quarter of 1993 by 2 percent. During the same period, the median sales
price declined 7 percent in the Los Angeles area and 3.5 percent in the San
Diego area.
As a monitoring device, the Company reviews the trends of loans
delinquent for periods of less than 90 days on a monthly (and within-month)
basis. The following summarizes loans delinquent for periods from 30 to 89
days:
<TABLE>
<CAPTION>
December 31
----------------------------
(Dollars in millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <c.
30-59 days delinquent
SFR loans $190.9 $291.0 $317.3
Other 19.0 46.3 45.3
60-89 days delinquent
SFR loans 105.2 137.3 132.6
Other 8.8 10.5 36.2
</TABLE>
While delinquencies in the 30-to-89-day categories have declined during
1993, management expects increases in the earthquake affected areas in early
1994. Foreclosures continue to occur at historically high levels.
Loans delinquent over 30 days, together with restructured loans, have
been included in the process to determine estimated losses. The effects of
various loan characteristics such as geographic concentrations, loan purpose,
negative amortization and LTV ratios are considered in this review process.
The following table shows the trend in single-family residential
portfolio and delinquency (two or more payments delinquent) over the past
three years:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
December 31
------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
SFR loans as a percent of total
real estate loans 88.3% 87.9% 87.0%
SFR delinquency as a percent of total
single-family residential loans 3.2 4.8 3.6
</TABLE>
The level of nonperforming assets declined 44 percent in 1993 after
increases of 24 percent and 37 percent in 1992 and 1991, respectively. In
the second half of 1993, the Company completed four bulk asset sales which
totaled $659 million, in an effort to reduce nonperforming assets. The
Company completed two sales totaling $330 million of single-family real
estate loans and real estate and the sale of $115 million of single-family
owned real estate. Nonperforming SFR loans have fallen to $522 million at
December 31, 1993 compared with $782 million and $481 million at year-end
1992 and 1991, respectively. A sale of $214 million of income property
loans, some of which were performing assets, was also completed in 1993.
The loss exposure on the SFR portfolio increased in 1993, due in part
to the Company's accelerated disposition program. Net charge-offs in the SFR
portfolio increased to $252 million, or .98 percent of the SFR portfolio, in
1993 from $53 million, or .21 percent, in 1992 and $32 million, or .13
percent, in 1991. At December 31, 1993, the Company's real estate loan
portfolio included $3.5 billion in uninsured residential mortgage loans that
were originated with terms on which the LTV exceeded 80 percent (but not in
excess of 90 percent). This balance represents a decline from the level of
$4.5 billion a year ago. For the year 1993, losses totaled $44.8 million,
or .81 percent of this portfolio, compared with $10.1 million, or .15
percent, in 1992 and $4.4 million, or .06 percent, in 1991. Since November
1, 1990, the Company has purchased mortgage insurance on all new single-
family residential mortgages originated with LTVs in excess of 80 percent.
Certain loans (where GWB works with borrowers encountering economic
difficulty) meet the criteria of, and are classified as, troubled debt
restructurings ("TDRs") because of modification to loan terms. In the second
quarter of 1993, Federal Banking Regulators issued a joint release regarding
credit availability, which allowed some nonperforming loans to be returned
to performing status. As a result, TDRs which meet certain conditions of
repayment and performance have not been included in nonperforming assets.
At December 31, 1993, $81.6 million of TDRs were classified as performing
assets.
<PAGE>
<PAGE>
As a result of the adoption of FAS 114, impaired loans for which
foreclosure is probable have been reclassified from real estate available for
sale or development to loans receivable on the Consolidated Statement of
Financial Condition, and are included in delinquent loans or troubled debt
restructurings, as appropriate. The recorded investment in loans for which
impairment has been recognized in accordance with FAS 114 totaled $348
million at December 31, 1993. The reserves for estimated losses related to
such loans were $40.6 million at December 31, 1993. A change in the fair
value of an impaired loan is reported as an increase or reduction to the
provision for loan losses.
Real estate acquired through foreclosure is classified as performing
when it meets certain criteria of operating profitability. As of December
31, 1993, such assets totaled $43 million.
The following table presents nonperforming assets together with related
ratios to total assets:
<TABLE>
<CAPTION>
December 31
----------------------------
(Dollars in millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Delinquent loans $ 626 $ 880 $ 611
TDRs 213 161 152
Loans in-substance foreclosed - 480 486
Real estate acquired through foreclosure 293 490 376
------ ------ ------
$1,132 $2,011 $1,625
====== ====== ======
Ratio of nonperforming assets
to total assets 2.90% 5.12% 4.04%
</TABLE>
The table on page 117 in "Financial Statements and Supplementary Data"
presents nonperforming assets together with related ratios to total assets,
and the table on pages 119 in "Financial Statements and Supplementary Data"
presents nonperforming real estate assets by state and by security type.
<PAGE>
<PAGE>
Provisions for loan losses totaled $463 million in 1993 compared with
$420 million in 1992 and $150 million in 1991. Provisions in 1993 included
$125 million related to three bulk loan sales of $544 million and $20 million
for the continued accelerated disposition of single-family real estate in
1994. The California real estate market requires continued review. At
December 31, 1993, real estate owned had been written down to 70 percent of
the previous loan balances. At December 31, 1992, loans carried as in-
substance foreclosures and real estate owned had been written down to 67
percent of the previous loan balances. Loan loss reserves were 60 percent
of nonperforming or restructured loans as of December 31, 1993, compared with
43 percent a year earlier.
The Company recorded provisions for real estate losses of $92 million,
$220 million and $21 million for 1993, 1992 and 1991, respectively, on its
real estate available for sale or development. Loss provisions in 1993
included $31 million for single-family real estate developments located in
Southern California and $25 million related to the $115 million SFR bulk real
estate sale. The 1992 provision was primarily for commercial and apartment
real estate.
The Company's provision for loan losses, charge-off experience, and
reserve for estimated losses for the last five years is presented in the
Notes to Consolidated Financial Statements in "Financial Statements and
Supplementary Data" on page 78.
The Company has not experienced a need for loss reserves on security
investments, which are of investment grade. Security investments available
for sale are carried at fair value.
OPERATIONS
Net interest income declined in 1993 due to lower net interest earning
assets and net interest margin. Other interest income totaled $39 million
in 1993. This compared with $35 million in 1992 and $62 million in 1991.
Other interest income included interest on settlements with the IRS,
dividends on FHLB stock and interest on short-term investments.
Real estate services net losses were $12 million in 1993 and $101
million in 1992 compared with income of $104 million in 1991. The 1993 and
1992 losses were primarily attributable to the $92 million in 1993 and $220
million in 1992 of loss provisions on real estate as previously discussed.
Mortgage servicing income totaled $51.2 million in 1993 compared with $52.7
million in 1992 and $68.4 million in 1991. The 1992 decline reflects a
declining net loan servicing spread. Gain on mortgage sales was $24.8
million, $32.8 million and $29.6 million for the years 1993, 1992 and 1991,
respectively. The gain as a percent of mortgage-banking sales, primarily
fixed-rate mortgages, was .80 percent in 1993 compared with .79 percent in
1992 and 1.19 percent in 1991. Real estate servicing and origination related
<PAGE>
<PAGE>
fee income was $37.9 million in 1993 compared with $33.1 million in 1992 and
$29.9 million in 1991. Real estate operations included $45.9 million in
operating losses and holding costs in 1993, compared with $6.6 million in
1992 and $6.2 million in 1991. The 1993 increase was due in part to an
increased volume of new foreclosures and a decision by the Company to expense
acquisition and refurbishment costs as incurred. In 1992 and 1991, these
costs were added to the carrying value of the asset.
Retail banking fee income increased in 1993 to $113 million from $92.4
million in 1992 and $71.5 million in 1991. The growth in this income is
attributable to higher balances in transaction accounts and to the growth in
deposits as a result of acquisitions. The Company has also expanded mutual
fund activity and now manages mutual funds with assets aggregating $3.2
billion compared with $2.2 billion at December 31, 1992. Net revenue from
these operations, which comprises commissions and other income from mutual
fund operations, totaled $38 million in 1993 compared with $36.7 million in
1992 and $18.5 million in 1991.
The Company sold its $219 million bank card portfolio because it was
not expected to achieve the economies of scale that are increasingly
necessary in the bank card business, resulting in a net gain of $22.9
million. The following is a summary of gains and losses on the Company's
securities and investments:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
(Dollars in millions) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Gain on sale of bank card portfolio $22.9 $ - $ -
Gain on securities .2 .4 3.8
Other gains 2.1 .9 .9
----- ---- ----
$25.2 $1.3 $4.7
===== ==== ====
</TABLE>
Other income totaled $7 million in 1993 and 1992 compared with $8.9
million in 1991.
The growth in operating and administrative expenses during the past
three years was primarily the result of significant branch acquisitions. The
Company has acquired 399 branches in California and Florida from the RTC and
other sources since 1990 when it began its program to increase transaction
accounts. Nearly half of these branches were consolidated with existing
facilities. Expenses totaled $1.03 billion in 1993 compared with $970
million in 1992 and $844 million in 1991. Operating expenses in 1993
included restructuring charges of $30 million, primarily severance benefits
<PAGE>
associated with the cost-reduction program at the Company's administrative
headquarters. The Company expects to eliminate approximately 1,000 jobs by
the end of 1994, or 25 percent of the administrative work force.
Approximately 500 of these reductions have been realized by year-end 1993
from a job-hiring freeze imposed in late summer of 1993. The cost-reduction
program, which will eliminate unnecessary tasks and improve efficiency, will
be phased in throughout 1994. Reductions in nonpersonnel related costs will
also contribute to the overall savings through renegotiation of existing
vendor contracts and elimination of other administrative expenses.
Anticipated savings in 1995 and beyond will exceed $100 million, a portion
of which will be realized in 1994.
The January 17, 1994 Northridge Earthquake caused damage at the
Company's administrative headquarters, however, earthquake insurance will
limit the Company's exposure.
Operating expenses increased by 6.2 percent during the past year
compared with 14.9 percent in 1992. The overhead ratios are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
As a percent of average assets
Corporate 2.71% 2.50% 2.13%
Banking operations 2.47 2.24 1.89
As a percent of average retail deposits
Banking operations 3.15 2.73 2.48
As a percent of revenue
Corporate 62.26 56.87 55.51
Banking operations 64.27 57.67 55.59
</TABLE>
Revenue is defined as net interest income and other operating income.
The Company's effective tax rate for 1993 was 32.6 percent compared
with 43.6 percent in 1992 and 41 percent in 1991. The decrease in the
effective tax rate in 1993 is mainly due to the favorable settlement of tax
issues and the reversal of certain tax liabilities no longer required. The
Company also reflected applicable changes pursuant to the Omnibus Budget
Reconciliation Act of 1993 including the 1 percent federal corporate tax rate
increase. The 1992 rate increase was due in part to the amortization of
intangibles, which was only partially deductible for income taxes. In 1992,
with the adoption of FAS 109, the Company began to provide a tax benefit for
the general loss reserves.
<PAGE>
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
Stockholders' equity ("capital") totaled $2.4 billion at year-end 1993
compared with $2.4 billion at year-end 1992 and $2.3 billion at year-end
1991. In 1992, the Company issued $165 million of 8.30 percent cumulative
preferred stock. In 1991, the Company issued $129 million of 8.75 percent
cumulative convertible preferred stock. The ratio of capital to total assets
was 6.3 percent, 6.4 percent and 5.9 percent at December 31, 1993, 1992 and
1991, respectively.
The Company's primary subsidiary, GWB, is subject to certain capital
requirements under the regulations of the Federal Deposit Insurance
Corporation and the Office of Thrift Supervision and meets all such
requirements. At December 31, 1993, GWB's capital was $2.7 billion,
including subordinated notes of $429 million.
Total dividends per share were $.92 in 1993, $.91 in 1992 and $.87 in
1991. The Company increased its quarterly dividend on its common stock to
$.23 per share in April 1992. Payment of dividends by the Company is
subject to restrictions on the receipt of dividends from GWB. Payment of
dividends to the Company by GWB is linked by federal regulation to the
Bank's capital. The Bank's level of capital exceeds the requirements for the
payment of dividends. Should this level decline below the fully phased-in
requirements, limitations on the dividend distributions to a percentage of
net income could be imposed.
Liquidity used in financing activities was $164 million in 1993
compared with $1.1 billion in 1992 and $13 million in 1991. Liquidity used
in financing activities was decreased commensurate with funds used in
investing activities due to the lack of asset growth in the previous three
years. GWB acquired $4.1 billion, $2.3 billion and $3.8 billion in 1993,
1992 and 1991, respectively, in deposits from acquisitions. Planned
withdrawals of repriced wholesale accounts totaled $95 million in 1993, $366
million in 1992 and $2.2 billion in 1991. The retail branch network
experienced net customer account outflows of $3.4 billion in 1993 compared
with $1.6 billion in 1992 and $733 million in 1991, primarily certificate of
deposit accounts being repriced downward. In the same three years, repayment
of borrowings totaled $672 million, $1.4 billion and $947 million.
Funds used in investing activities were $238 million in 1993 and $507
million in 1991 compared with funds provided by investing activities of $518
million in 1992. Real estate loans originated for investment were $5.4
billion in 1993, $5 billion in 1992 and $5.1 billion in 1991. Mortgage
payments in 1993 were $5.6 billion, $6.1 billion in 1992 and $4.8 billion in
1991. Mortgage payments fluctuate for various reasons including the level
of refinancings. Consumer loans declined $98.6 million in 1993 compared with
$5.9 million in 1992 and a $408 million increase in 1991.
<PAGE>
<PAGE>
Funds provided by operating activities were $341 million in 1993
compared with $862 million in 1992 and $374 million in 1991. Net change in
assets available for sale decreased cash $102 million in 1993 compared with
cash provided of $68 million in 1992 and a decline of $47 million in cash in
1991. Cash provided from earnings totaled $442 million in 1993 compared with
$793 million and $421 million in 1992 and 1991, respectively.
The Company has several sources for raising funds for lending among
which are customer deposits, mortgage sales, FHLB borrowings and public debt
offerings. The following table presents the debt ratings of the Company and
GWB at December 31, 1993:
<TABLE>
<CAPTION>
Moody's Investors
Standard & Poor's Service
----------------- -----------------
GWFC GWB GWFC GWB
---- --- ---- ---
<S> <C> <C> <C> <C>
Unsecured short-term A-2 P-2
Senior term debt BBB+ A- Baa2 A-3
Subordinated term debt BBB+ Baa1
Preferred stock BBB- Baa3
</TABLE>
Cash and securities totaled $1.8 billion at December 31, 1993. The
balance was $1.7 billion at December 31, 1992 and $1.4 billion at December
31, 1991. GWB is in excess of required liquidity levels. The excess
balances in the above amounts over those required for regulatory purposes
will fluctuate between periods and are a source of short-term funding.
<PAGE>
<PAGE>
SEGMENT DATA
The business segment information is presented in the accompanying
table.
<TABLE>
<CAPTION>
Banking Consumer
(Dollars in thousands) Operations Finance Consolidated
---------- -------- ------------
<S> <C> <C> <C>
1993
Total revenue $ 1,409,968 $ 266,958 $ 1,676,926
Earnings before income taxes 1,309 90,738 92,047
Depreciation and amortization 106,690 9,726 116,416
Identifiable assets $36,293,223 $2,055,137 $38,348,360
1992
Total revenue $ 1,431,569 $ 273,649 $ 1,705,218
Earnings before income taxes
and accounting changes 7,854 87,658 95,512
Depreciation and amortization 100,988 8,686 109,674
Identifiable assets $36,496,254 $1,942,932 $38,439,186
1991
Total revenue $ 1,290,468 $ 229,645 $ 1,520,113
Earnings before income taxes 434,752 70,678 505,430
Depreciation and amortization 81,244 4,863 86,107
Identifiable assets $37,646,595 $1,953,033 $39,599,628
/TABLE
<PAGE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Page
----
Consolidated Statement of Operations for the years
ended December 31, 1993, 1992 and 1991........................... 53
Consolidated Statement of Financial Condition at
December 31, 1993 and 1992....................................... 54
Consolidated Statement of Cash Flows for the years
ended December 31, 1993, 1992 and 1991........................... 55
Consolidated Statement of Stockholders' Equity for the
years ended December 31, 1993, 1992 and 1991..................... 57
Notes to Consolidated Financial Statements......................... 58
Report of Independent Accountants.................................. 110
Management's Commentary on Financial Statements.................... 111
Statistical Information............................................ 112
Stockholder and Quarterly Information.............................. 122
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Operations
Year Ended December 31
----------------------------------
(Dollars in thousands, except per share) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Interest Income
Real estate loans $2,041,989 $2,341,942 $2,900,127
Mortgage-backed securities 185,500 259,891 342,050
Consumer loans 385,145 415,701 375,623
Securities 29,242 38,558 38,641
Other 38,908 35,001 62,355
---------- ---------- ----------
2,680,784 3,091,093 3,718,796
Interest Expense
Customer accounts 939,081 1,333,473 1,968,205
Borrowings
Short-term 59,688 37,338 74,223
Long-term 299,161 297,920 411,112
---------- ---------- ----------
1,297,930 1,668,731 2,453,540
---------- ---------- ----------
Net Interest Income 1,382,854 1,422,362 1,265,256
Provision for loan losses 463,000 420,000 149,900
---------- ---------- ----------
Net interest income after provision for
loan losses 919,854 1,002,362 1,115,356
Other operating income
Real estate services
Loan fees 37,855 33,091 29,862
Mortgage banking
Gain on mortgage sales 24,754 32,786 29,631
Servicing 51,185 52,689 68,439
Real estate operations (33,783) 725 (2,725)
Provision for real estate losses (92,000) (220,000) (21,000)
---------- ---------- ----------
(11,989) (100,709) 104,207
Retail banking
Banking fees 113,461 92,403 71,505
Securities operations 38,045 36,652 18,463
---------- ---------- ----------
151,506 129,055 89,968
Net gain on securities and investments 25,169 1,287 4,684
Net insurance operations 30,341 26,187 26,056
Other 7,045 7,036 8,942
---------- ---------- ----------
Total other operating income 202,072 62,856 233,857
Operating and administrative expenses
Salaries and related personnel 487,532 449,512 380,726
Premises and occupancy 184,682 168,511 151,698
FDIC insurance premium 51,328 66,725 63,662
Amortization of intangibles 40,798 49,061 30,677
Other 265,539 235,897 217,020
---------- ---------- ----------
1,029,879 969,706 843,783
---------- ---------- ----------
Earnings Before Taxes and Accounting Changes 92,047 95,512 505,430
Taxes on income 30,000 41,600 207,300
---------- ---------- ----------
Earnings Before Accounting Changes 62,047 53,912 298,130
Accounting changes
Postretirement benefits cost, net - (29,906) -
Income taxes - 61,000 -
---------- ---------- ----------
Net Earnings $ 62,047 $ 85,006 $ 298,130
========== ========== ==========
Earnings per share based on average common shares outstanding
Primary before accounting changes $.28 $.30 $2.25
Fully diluted before accounting changes .28 .30 2.24
Primary .28 .53 2.25
Fully diluted .28 .53 2.24
</TABLE>
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Financial Condition
December 31
--------------------------
(Dollars in thousands, except per share) 1993 1992
---- ----
<S> <C> <C>
Assets
Cash and securities
Cash $ 758,581 $ 686,230
Certificates of deposit and federal funds 217,125 350,349
Securities available for sale (fair value
$871,074 and $632,671) 871,074 623,906
----------- -----------
1,846,780 1,660,485
Mortgage-backed securities held to maturity
(fair value $605,512) 618,574 -
Mortgage-backed securities available for sale
(fair value $2,570,822 and $3,212,443) 2,570,822 3,168,057
----------- -----------
3,189,396 3,168,057
Loans receivable, less reserve for
estimated losses 30,162,401 30,185,358
Loans receivable available for sale 499,002 399,246
----------- -----------
30,661,403 30,584,604
Real estate available for sale or development, net 434,077 1,153,383
Interest receivable 214,990 229,719
Investment in Federal Home Loan Banks 307,352 314,373
Premises and equipment, at cost, less
accumulated depreciation 623,691 595,461
Other assets 638,983 410,379
Intangibles arising from acquisitions 431,688 322,725
----------- -----------
$38,348,360 $38,439,186
=========== ===========
Liabilities
Customer accounts $31,531,563 $30,908,665
Short-term borrowings 676,483 1,203,685
Other borrowings 2,802,858 2,947,367
Other liabilities and accrued expenses 729,229 729,936
Taxes on income, principally deferred 184,826 199,799
----------- -----------
35,924,959 35,989,452
----------- -----------
Commitments and contingent liabilities
Stockholders' Equity
Preferred stock, par value $1.00 a share;
Authorized 10,000,000 shares;
Cumulative convertible issued 517,500 129,375 129,375
Cumulative issued 660,000 165,000 165,000
Common stock, par value $1.00 a share;
Authorized 200,000,000 shares;
Issued 132,616,172 and 130,814,018 132,616 130,814
Additional capital 627,717 598,927
Retained earnings--substantially restricted 1,357,753 1,441,598
Unearned compensation (11,711) (15,980)
Unrealized holding gains and losses, net of taxes 22,651 -
----------- -----------
2,423,401 2,449,734
----------- -----------
$38,348,360 $38,439,186
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
Year Ended December 31
-----------------------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Operating Activities
Net earnings $ 62,047 $ 85,006 $ 298,130
Noncash adjustments to net earnings:
Provision for loan losses 463,000 420,000 149,900
Provision for real estate losses 92,000 220,000 21,000
Depreciation and amortization 75,618 60,613 55,430
Amortization of intangibles 40,798 49,061 30,677
Income taxes (30,566) (274,430) 53,317
Capitalized interest (14,950) (21,595) (77,288)
Net change in accrued interest 14,248 17,810 8,455
Other (259,725) 236,976 (118,611)
----------- ----------- -----------
442,470 793,441 421,010
----------- ----------- -----------
Sales and repayments of loans receivable available for sale 3,318,233 4,346,245 2,486,999
Originations and purchases of loans receivable available
for sale (3,420,025) (4,277,791) (2,534,358)
----------- ----------- -----------
(101,792) 68,454 (47,359)
----------- ----------- -----------
Net cash provided by operating activities 340,678 861,895 373,651
----------- ----------- -----------
Financing Activities
Customer accounts
Net (decrease) increase in transaction accounts (220,828) 1,985,043 1,872,486
Net (decrease) in term accounts (3,250,080) (3,904,956) (4,789,579)
----------- ----------- -----------
(3,470,908) (1,919,913) (2,917,093)
Customer account acquisitions, net 4,093,806 2,258,210 3,838,423
Borrowings
Proceeds from new long-term debt 1,121,805 716,885 995,530
Repayments of long-term debt (1,266,314) (1,166,035) (3,598,766)
Net change in short-term debt (527,202) (992,251) 1,656,301
----------- ----------- -----------
(671,711) (1,441,401) (946,935)
Other financing activity
Proceeds from issuance of common stock 31,168 14,419 6,137
Proceeds from issuance of preferred stock - 165,000 129,375
Cost of issuance of preferred stock - (5,554) (3,334)
Cash dividends paid (145,892) (134,263) (119,090)
----------- ----------- -----------
(114,724) 39,602 13,088
----------- ----------- -----------
Net cash (used in) financing activities (163,537) (1,063,502) (12,517)
----------- ----------- -----------
/TABLE
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
Year Ended December 31
-----------------------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Investing Activities
Investment securities
Proceeds from maturities $ 1,767,582 $ 681,147 $ 1,344,260
Purchases of securities (1,541,383) (616,211) (943,985)
Net change in short term - (10,427) 18,618
----------- ----------- -----------
226,199 54,509 418,893
Real estate loans and mortgage-backed securities
Loans originated for investment (5,398,105) (4,968,665) (5,109,203)
Purchases of mortgage-backed securities (924,843) (655,359) (261,694)
Net change in undisbursed loan funds (6,318) (5,651) (22,351)
Mortgage payments 5,576,899 6,094,679 4,792,537
Mortgage sales 509,477 113,044 382,072
Repurchase (185,825) (91,263) (66,531)
----------- ----------- -----------
(428,715) 486,785 (285,170)
Consumer loans
Loans originated for investment (2,161,269) (2,132,343) (1,937,814)
Loan sales 219,154 - -
Acquisitions (12,649) (7,134) (367,051)
Loan payments 2,053,371 2,145,386 1,896,887
----------- ----------- -----------
98,607 5,909 (407,978)
Other investing activity
Purchases and sales of premises and equipment, net (103,169) (146,005) (113,580)
Sales of real estate 793,730 181,430 149,153
Acquisition and disposition of assets, net (672,852) (40,529) (228,198)
Other (151,814) (23,667) (39,689)
----------- ----------- -----------
(134,105) (28,771) (232,314)
----------- ----------- -----------
Net cash (used in) provided by investing activities (238,014) 518,432 (506,569)
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (60,873) 316,825 (145,435)
Cash and cash equivalents at beginning of year 1,036,579 719,754 865,189
----------- ----------- -----------
Cash and cash equivalents at end of year $ 975,706 $ 1,036,579 $ 719,754
=========== =========== ===========
Supplemental Cash Flow Disclosure
Cash paid for
Interest on deposits $ 939,842 $ 1,344,740 $ 1,989,200
Interest on borrowings 358,849 343,845 528,539
Income taxes 62,277 242,450 184,602
Noncash investing activities
Loans transferred to foreclosed real estate $ 761,939 $ 568,726 $ 327,952
Loans originated to facilitate the sale of real estate 101,476 78,633 -
Loans exchanged for mortgage-backed securities 2,036 - -
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Unrealized
Holding Total
(Dollars in thousands, Preferred Common Additional Retained Unearned Gains Stockholders'
except per share) Stock Stock Capital Earnings Compensation and Losses Equity
--------- ------ ----------- -------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1990 $ - $128,537 $569,490 $1,311,815 $ - $ - $2,009,842
Common stock issued upon exercise
of stock options 105 1,599 1,704
Common stock issued under Dividend
Reinvestment Plan 234 4,199 4,433
Issuance of preferred stock 129,375 (3,334) 126,041
Net earnings for the year 1991 298,130 298,130
Cash dividends paid:
$.87 per common share (112,067) (112,067)
$13.57 per cumulative convertible
preferred share (7,023) (7,023)
-------- -------- -------- ---------- -------- ------- ----------
Balance December 31, 1991 129,375 128,876 571,954 1,490,855 - - 2,321,060
Common stock issued upon exercise
of stock options 329 4,351 4,680
Common stock issued under Dividend
Reinvestment Plan 549 9,190 9,739
Restricted stock awards granted,
net of cancellations 1,060 18,591 (19,651) -
Unearned compensation amortized
to expense 3,671 3,671
Issuance of preferred stock 165,000 (5,554) 159,446
Net earnings for the year 1992 85,006 85,006
Cash dividends paid:
$.91 per common share (118,720) (118,720)
$21.88 per cumulative convertible
preferred share (11,320) (11,320)
$6.40 per cumulative preferred share (4,223) (4,223)
Tax benefit of restricted stock awards 395 395
-------- -------- -------- ---------- -------- ------- ----------
Balance December 31, 1992 294,375 130,814 598,927 1,441,598 (15,980) - 2,449,734
Common stock issued upon exercise of
stock options 441 6,877 7,318
Common stock issued under Dividend
Reinvestment Plan 1,391 22,459 23,850
Restricted stock awards granted,
net of cancellations (30) (546) 576 -
Unearned compensation amortized
to expense 3,693 3,693
Net earnings for the year 1993 62,047 62,047
Cash dividends paid:
$.92 per common share (120,877) (120,877)
$21.88 per cumulative convertible
preferred share (11,320) (11,320)
$20.75 per cumulative preferred share (13,695) (13,695)
Unrealized holding gains and losses,
net of taxes 22,651 22,651
-------- -------- -------- ---------- -------- ------- ----------
Balance December 31, 1993 $294,375 $132,616 $627,717 $1,357,753 $(11,711) $22,651 $2,423,401
======== ======== ======== ========== ======== ======= ==========
</TABLE>
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Statement of Accounting Policies
Principles of Accounting and Consolidation
The accounts of Great Western Financial Corporation and its wholly-
owned subsidiaries, Great Western Bank, a Federal Savings Bank, Aristar,
Inc., a consumer finance holding company, and companies operating in related
fields, are included in the accompanying consolidated financial statements
and are referred to collectively as the Company. Significant intercompany
items have been eliminated. Certain prior year amounts have been
reclassified to conform with the 1993 presentation.
Adoption of Recently Issued Accounting Standards
The Company adopted Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan" ("FAS 114") as of
January 1, 1993. FAS 114 provides guidance on the measurement and
recognition of loan impairment.
FAS 114 requires that impaired loans for which foreclosure is probable
continue to be accounted for as loans. Those loans have been reclassified
from real estate available for sale or development to loans receivable on the
Consolidated Statement of Financial Condition. Impaired loans recorded in
accordance with FAS 114 are included in delinquent loans or in troubled debt
restructurings, as appropriate. The Company had previously measured loan
impairment pursuant to the methods prescribed in FAS 114. As a result, no
additional reserves were required by early adoption of the pronouncement.
The effect of the adoption of FAS 114 on the Consolidated Statement of
Financial Condition follows:
<TABLE>
<CAPTION>
(Dollars in thousands) January 1, 1993
---------------
<S> <C>
Loans receivable $ 479,740
Reserve for loan losses (47,974)
Real estate available for sale
or development (497,868)
Reserve for real estate losses 66,102
---------
$ -
=========
/TABLE
<PAGE>
<PAGE>
The effect on nonperforming assets follows:
<TABLE>
<CAPTION>
(Dollars in thousands) January 1, 1993
---------------
<S> <C>
Delinquent loans $ 158,698
Troubled debt restructurings 229,431
Loans in-substance foreclosed (479,740)
---------
Decrease in nonperforming assets $ (91,611)
=========
</TABLE>
The decrease in nonperforming assets represents performing loans which
were previously classified as loans in-substance foreclosed.
The Company adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities" ("FAS
115") as of December 31, 1993. FAS 115 requires that investments in debt
securities and certain equity securities be reported at fair value unless the
Company has the positive intent and ability to hold such securities to
maturity. Investments held to maturity are to be reported at amortized
cost. Unrealized holding gains and losses on securities available for sale,
net of income taxes, are reported as a separate component of stockholders'
equity.
The adoption of these accounting standards did not materially affect
the comparability of the financial statements.
Accounting Changes
The Company adopted Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions"
("FAS 106") as of January 1, 1992. FAS 106 requires that the expected cost
of postretirement benefits be charged to expense during the period that
eligible employees render such service.
The unfunded benefit obligation as of January 1, 1992, reflected in
other liabilities on the Consolidated Statement of Financial Condition and
shown as an accounting change on the Consolidated Statement of Operations
follows:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands) January 1, 1992
---------------
<S> <C>
Accumulated postretirement benefit obligation
Retirees $24,433
Active plan participants 26,273
-------
50,706
Tax benefit 20,800
-------
$29,906
=======
</TABLE>
In 1992, the Company also adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("FAS 109") which supersedes
Statement No. 96, "Accounting for Income Taxes" which was adopted by the
Company in 1987. FAS 109 required the Company to record previously
unrecognized tax benefits totaling $61 million as of January 1, 1992 for its
general loss reserves.
The Company elected to give cumulative effect to the changes in the
first quarter of 1992.
Fair Value Disclosure
Quoted market prices are used, where available, to estimate the fair
value of financial instruments. Because no quoted market prices exist for
a significant portion of the Company's financial instruments, fair value is
estimated using comparable market prices for similar instruments or using
management's economic estimates of discounted cash flows for the underlying
asset or liability. A change in management's assumptions could significantly
affect these estimates and, accordingly, fair value is not necessarily
indicative of the value which would be realized upon disposition of the
financial instruments.
<PAGE>
<PAGE>
Cash and Securities
Liquid assets consist principally of cash, certificates of deposit,
federal funds, U.S. government, corporate and other securities approved for
investment by regulations. Certificates of deposit and federal funds
purchased with a maturity of three months or less are considered to be cash
equivalents. Other securities, readily convertible into cash, are available
for sale and are recorded at fair value. Fair value is generally determined
on the aggregate method. Certain securities are designated as held for
investment based on management's positive intent and ability to hold those
securities to maturity. Securities held for investment are recorded at
amortized cost. Discounts or premiums on securities recorded at cost are
amortized using the interest method. For the Consolidated Statement of Cash
Flows, cash includes cash on hand, cash in banks and cash equivalents.
Mortgage-backed Securities
The Company's mortgage-backed securities portfolio consists of real
estate loan receivables originated by the Bank and subsequently securitized
primarily through the Federal Home Loan Mortgage Corporation ("FHLMC") or the
Federal National Mortgage Association ("FNMA"). Loans are also securitized
for sale directly in the public market. The Company also purchases
commercial mortgage pass-through certificates from the RTC. In addition, the
Company purchases, for liquidity purposes, investments in Collateralized
Mortgage Obligations ("CMOs") and Real Estate Mortgage Investment Conduits
("REMICs"). REMICs and GWB-originated pass-through certificates are held for
investment based on management's positive intent and ability to hold these
securities until maturity and recorded at amortized cost. All other
mortgage-backed securities are available for sale and recorded at fair value.
Fair value is generally determined on the aggregate method. Discounts or
premiums on mortgage-backed securities recorded at cost are amortized using
the interest method.
Loans Receivable
Real Estate Loans
The Company's real estate loan portfolio consists primarily of long-
term loans secured by first trust deeds on single-family residences, other
residential property, commercial property and land. The adjustable rate
mortgage is the Bank's primary loan investment.
Fees are charged for originating loans at the time the loan is granted.
Loan origination fees, partially offset by the deferral of certain expenses
associated with loans originated, are amortized to interest income over the
life of the loan using the interest method. ARMs with a lower rate during
the introductory period (usually three months) will reflect the amortization
of a substantial portion of the net deferred fee as a yield adjustment during
the introductory period. Amortization is discontinued for nonperforming
loans and loans available for sale and is realized upon the ultimate
disposition of the assets.<PAGE>
<PAGE>
Loan fee income represents income from the prepayment of loans,
delinquent payments or miscellaneous loan services and is recorded when
collected.
Interest receivable represents, for the most part, the current month's
interest which will be included as a part of the borrower's next monthly loan
payment. Interest receivable is accrued only if deemed collectible. Loan
payments generally are deemed to be in nonaccrual status when they become 90
days past due. When a loan is designated as nonaccrual, all previously
accrued interest is reversed.
Below-market-rate loans are made to facilitate the sale of certain
foreclosed real estate. These transactions reduce the gain on sale and
provide a loan discount which is amortized on the interest method resulting
in a market yield on the new loan.
Consumer Loans
The Bank's consumer loans include student educational loans insured by
the U.S. government or the state of California, fully secured loans made to
holders of customer accounts and checking overdraft loans. Consumer loans
made by the consumer finance subsidiaries of Aristar have maximum terms of
180 months. The weighted average contractual term of all loans written by
the consumer finance subsidiaries in 1993 was 41 months. Experience,
however, has shown that a majority of consumer loans will be renewed prior
to maturity. Finance charges included in consumer loans receivable are
deferred and amortized into income over the term of the loan with appropriate
limitation for delinquent installments for which collection is not reasonably
assured. Student educational loans are available for sale and are recorded
at the lower of cost or fair value. Fair value is determined on the
aggregate method. All other consumer loans are held to maturity.
Reserve for Estimated Loan Losses
It is the policy of the Company to provide for estimated losses on real
estate loans when any significant and permanent decline in value is
identified. A change in the fair value of an impaired loan is reported as
an increase or reduction to the provision for loan losses. Periodic reviews
are made of major loans and major lending areas in an attempt to identify
potential problems at an early date. Various factors will affect the level
of reserves, including economic conditions, trends and previous loss
experience. Major properties are reviewed individually and are classified
as "satisfactory, special mention, substandard, doubtful or loss." Based
upon the classification, an appropriate reserve is established. Loans
transferred to foreclosed real estate are transferred at the lower of the net
loan value or the fair value of the collateral, less estimated costs to sell.
<PAGE>
<PAGE>
General loan loss reserves are provided on classified assets. The
doubtful, substandard and special mention asset classifications used by the
Company for major loans form the basis from which to analyze the possible
loss exposure. Consideration is given to the Company's historical experience
of losses on loans so classified and to current economic conditions and
trends.
The single-family residential loan portfolio is reviewed based upon the
delinquency and loss experience of the portfolio. The portfolio also is
reviewed by geographic area. Based upon the current loss experience and the
losses and delinquencies within each lending area, a general loss reserve is
provided on the portfolio giving consideration to current economic conditions
and trends.
Loans made by consumer finance subsidiaries are also reviewed on a
systematic basis. In evaluating the adequacy of the allowance, consideration
is given to recent loan loss experience and such other factors which, in
management's judgment, deserve current recognition in estimating losses.
Non-real estate secured accounts are charged off based on contractual
delinquency of 120 days on closed-end accounts and 180 days on open-end
accounts.
Similar reviews are made for retail banking consumer loan operations,
where provisions are based upon recent loss experience.
Mortgage Banking Activities
Real estate loans are originated principally for investment. Since the
Company is primarily an ARM portfolio lender for its own investment, most
other products are originated and available for sale.
As of December 31, 1993, the following loans were designated as
available for sale and were carried at the lower of cost or fair value:
1. All single-family, fixed-rate product in the portfolio originated
subsequent to January 1, 1989.
2. Single-family, adjustable rate product designated as available for
sale.
3. Loans other than single-family which have been designated at the date
of origination.
Fair value on fixed-rate product is generally determined on the
specific identification method. An aggregate method is used on adjustable
rate products.
<PAGE>
<PAGE>
The Company sells loans or participating interests in loans to generate
servicing income, to limit interest-rate risk and to provide funds for
additional investment. Under the servicing agreements, the Company continues
to service the loans and the investor is paid its share of principal
collections together with interest at an agreed upon rate, which generally
differs from the loan's contractual interest rate. Such difference results
in a "loan servicing spread". Gains or losses on sales of loans are
recognized at time of sale and are generally determined by: 1) the difference
between the net sales proceeds and the book value of the loans sold; 2)
recognition of deferred loan fees; and 3) an adjustment, if necessary, to
increase or decrease the loan servicing spread in order to provide for normal
servicing. In sales involving credit enhancements, fair value is used in
calculating the gain or loss.
The Company purchases short-term hedge contracts for the commitment
period to protect against rate fluctuations on its commitments to fund fixed-
rate loans originated for sale. Hedge contracts are recorded at cost.
Real Estate Available for Sale or Development
Real estate available for sale or development comprises both purchased
and foreclosed properties. Foreclosed properties are carried at cost at
acquisition, which is the lower of the net loan value on the property or the
fair value of the property, less estimated costs to sell, at the date of
foreclosure. Thereafter, with the implementation of American Institute of
Certified Public Accountants' Statement of Position ("SOP") 92-3, "Accounting
for Foreclosed Assets" in July 1992, specific valuation allowances have been
established for changes in the fair value of real estate. Prior to the
implementation of this SOP, all such valuation adjustments were directly
charged against the asset. Other real estate available for sale is carried
at the lower of cost or fair value. Property development projects, carried
at the lower of cost or net realizable value, are accounted for on the equity
method.
Premises and Equipment
The Company has followed the policy of capitalizing expenditures for
improvements and major refurbishments and has charged ordinary maintenance
and repairs to earnings as incurred. Depreciation and amortization are
computed principally on the straight-line method over the estimated useful
lives as follows:
<PAGE>
<PAGE>
Buildings 30 to 60 years
Leasehold improvements Lesser of term of lease or useful
life of property
Furniture, fixtures and equipment 3 to 12 years
Intangibles Arising rom Acquisition
Because of the earning power or other special values of certain
purchased companies or businesses, the Company paid amounts in excess of fair
value for businesses, core deposits and tangible assets acquired. Generally,
such amounts are being amortized by systematic charges to income (primarily
for periods from six to 25 years) over a period no greater than the estimated
remaining life of the assets acquired or not exceeding the estimated average
remaining life of the existing deposit base assumed.
Customer Accounts
Customer accounts comprise primarily the Bank's savings and checking
accounts. Customer accounts vary as to terms, with the major differences
being minimum balance required, maturity, interest rates and the provisions
for payment of interest. The Bank's customer accounts are insured by the
FDIC, through either the Bank Insurance Fund ("BIF") or Savings Association
Insurance Fund ("SAIF") for up to an aggregate amount of $100,000 per
customer.
The Bank may offer large denomination negotiable certificates of
deposit. The negotiable certificates of deposit are primarily sold through
brokers and may subsequently be traded on the open market.
Interest is accrued and either paid to the customer or added to the
customer's account on a periodic basis. On term accounts, the forfeiture of
interest (because of withdrawal prior to maturity) is offset as of the date
of withdrawal against interest expense.
Financial Instruments with Off-balance-sheet Risk and Concentrations
of Credit Risk
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest rates.
These financial instruments include commitments to extend credit, at both
fixed and variable rates, loans sold with credit enhancements, standby
letters of credit, interest- rate caps and floors written, and interest-rate
and cash-flow swap agreements. Purchased put options and forward sales are
used as a hedge of fixed-rate commitments. These instruments involve, to
<PAGE>
varying degrees, elements of credit and interest-rate risk in excess of the
amount recognized in the Consolidated Statement of Financial Condition. The
contract or notional amounts of these instruments reflect the extent of
involvement the Company has in particular classes of financial instruments.
For interest-rate caps, floors, swap transactions, purchased put options and
forward sales, the contract or notional amounts do not represent exposure to
risk of loss.
The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
notional amount of those instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it does for on-
balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since a portion of the commitments
may expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Company evaluates each
customer's credit worthiness on a case-by-case basis. The amount of
collateral obtained upon extension of credit is based on management's credit
evaluation of the counterparty. The value of the property as security for
a mortgage loan is determined by qualified real estate appraisers.
The Company extends credit and requires collateral for loans sold with
credit enhancements under the same lending policies as for all other real
estate loans.
The Company primarily originates real estate loans of which a
substantial portion of the portfolio is secured by real estate located in
California and Florida.
Federal and State Taxes on Income
Taxes are provided on substantially all income and expense items
included in earnings, regardless of the period in which such items are
recognized for tax purposes. As of January 1, 1992, tax benefits are
recognized for general loss reserve additions.
Beginning in 1992, taxes on income are determined by using the
liability method as prescribed by FAS 109. This approach requires the
recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax consequences,
FAS 109 requires the consideration of all expected future events other than
enactments of changes in the tax law or rates.
<PAGE>
<PAGE>
Earnings Per Common Share
Income for the calculation of primary earnings per common share is
based on net income less preferred stock dividend requirements. The average
common shares and common share equivalents outstanding, based upon amounts
used in the calculation of primary earnings per common share, were
132,007,559 in 1993, 130,735,867 in 1992 and 129,131,472 in 1991. Fully
diluted earnings per common share give effect to the dilutive effect of stock
options and assume the conversion of all convertible securities into common
stock at the later of the beginning of the year or the date of issuance
(unless antidilutive).
Note 2: Acquisitions and Dispositions
In December 1993, GWB purchased certain assets and assumed certain
liabilities from the RTC of HomeFed Bank, F.A., San Diego, California. As
a result of the transaction, GWB acquired 119 branches with retail deposits
of $4.1 billion. The deposits were acquired for a premium of $151 million.
During the first quarter 1993, the Company exchanged 12 of its branches
located in the State of Washington, with deposits aggregating $327 million,
with Pacific First Bank, a Federal Savings Bank for seven branches located
in Southern California with deposits aggregating $360 million.
In March 1992, GWB acquired from the RTC 53 branches of the former
AmeriFirst Federal Savings Bank in Florida with retail customer accounts
totaling $1.8 billion. These branches were acquired at a premium of $27.5
million. Also in March, GWB acquired five California branches of Republic
Federal Savings and Loan Association and assumed deposits totaling $469
million at a premium of $4.7 million.
In December 1991, Aristar acquired assets of $149 million from Capitol
Finance Group, a subsidiary of First Union Corporation of Charlotte, North
Carolina, for a premium of $21.8 million.
In October 1991, GWB consummated the acquisition from the RTC of 23
branches and assumption of certain assets of The First, F.A. in Orlando,
Florida. The deposit base assumed totaled $938 million for which a premium
of $23.4 million was paid. Consumer loans of approximately $150 million were
added to GWB's portfolio. A portion of the assets were sold at a gain
resulting in a reduction of the premium paid to $3.3 million.
In March 1991, GWB consummated the acquisition and assumption from the
RTC of approximately 28 California branches of Lincoln Savings with retail
deposits totaling $1 billion and 33 Florida branches of Pioneer Savings with
deposits totaling $931 million. An aggregate premium of $17.4 million was
paid.
<PAGE>
<PAGE>
Intangibles arising from acquisitions as shown on the Consolidated
Statement of Financial Condition consisted of the following:
<TABLE>
<CAPTION>
December 31
------------------------
(Dollars in thousands) 1993 1992
---- ----
<S> <C> <C>
Balance at acquisition $ 592,540 $ 442,837
Accumulated amortization (160,852) (120,112)
--------- ---------
$ 431,688 $ 322,725
========= =========
</TABLE>
Note 3: Cash and Securities
An analysis of cash and securities by investment type at December 31,
1993 and December 31, 1992 and by maturity at December 31, 1993 is included
in the table on page 112 under the caption "By Type" and "Year-end 1993 by
Maturity."
<PAGE>
<PAGE>
Following is a summary of the amortized cost and fair values of the
Company's securities portfolio available for sale:
<TABLE>
<CAPTION>
Gross Gross
Weighted Amortized Unrealized Unrealized
Average Cost Fair Holding Holding
(Dollars in thousands) Yield Basis Value Gains Losses
-------- ---------- ----- ----------- -----------
December 31, 1993
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. government securities 3.24% $335,509 $335,625 $ 120 $ 4
Federal agency securities 6.24 40,841 41,565 1,418 694
Corporate debt securities 6.49 426,910 432,780 6,564 694
Other securities 5.11 60,619 61,104 524 39
----- -------- -------- ------ ------
5.13% $863,879 $871,074 $8,626 $1,431
===== ======== ======== ====== ======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. government securities 6.43% $ 3,909 $ 3,902 $ 27 $ 34
Federal agency securities 7.09 48,702 49,550 957 109
Corporate debt securities 7.00 451,960 459,870 8,233 323
Other securities 4.20 119,335 119,349 34 20
----- -------- -------- ------ ------
6.47% $623,906 $632,671 $9,251 $ 486
===== ======== ======== ====== ======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1991
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. government securities 7.80% $100,306 $102,070 $1,771 $ 7
Federal agency securities 9.90 2,906 2,931 25 -
Corporate debt securities 7.13 243,593 247,807 4,280 66
Other securities 7.78 120,598 123,008 2,431 21
----- -------- -------- ------ ------
7.46% $467,403 $475,816 $8,507 $ 94
===== ======== ======== ====== ======
/TABLE
<PAGE>
<PAGE>
Following is a summary of the amortized cost and fair values of the
Company's securities portfolio held for investment:
<TABLE>
<CAPTION>
Gross Gross
Weighted Amortized Unrealized Unrealized
Average Cost Fair Holding Holding
(Dollars in thousands) Yield Basis Value Gains Losses
-------- --------- ----- ----------- ----------
December 31, 1991
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. government and federal
agency obligations 7.67% $ 26,868 $ 27,849 $ 981 $ -
Other securities 6.77 183,504 177,887 2,513 8,130
---- -------- -------- ------- -------
6.89% $210,372 $205,736 $ 3,494 $ 8,130
==== ======== ======== ======= =======
</TABLE>
At December 31, 1993 and 1992, there were no securities held for
investment.
The fair value of securities is principally based on quoted market
prices from various sources. For securities which have no quoted market
price and are short-term in nature, the market value is determined to be the
book value at the reporting date.
Realized gains and losses on the available for sale portfolio are
calculated on the specific identification method and were as follows:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Realized gains $333 $499 $4,091
Realized losses 79 60 256
</TABLE>
<PAGE>
<PAGE>
The Company purchases securities under agreements to resell (repurchase
agreements) having terms of up to 90 days; however, they are typically
overnight investments. Repurchase agreements outstanding were $210,000,000
at 3.36 percent at December 31, 1993, sold by CS First Boston Corporation;
and $345,000,000 at 3.37 percent at December 31, 1992, sold by Morgan Stanley
& Co. Incorporated. The repurchase agreements were collateralized by federal
agency issues with market values at least 2 percent above the repurchase
agreements. The highest month-end balances outstanding were $210,000,000 in
1993 and $345,000,000 in 1992. The average balances outstanding were
$60,000,000 at a rate of 3.34 percent in 1993 and $78,846,000 at 3.69 percent
in 1992.
GWB is required to maintain certain minimum reserve balances with the
FRB. Included in cash were deposits at the FRB of $258,672,000 at December
31, 1993 and $198,708,000 at December 31, 1992.
Note 4: Mortgage-backed Securities
An analysis of the mortgage-backed securities portfolio by loan type
at December 31, 1993 and December 31, 1992 is included in the table on page
117 under the caption "Mortgage-backed Securities by Type."
Mortgage-backed securities available for sale consisted of the
following:
<TABLE>
<CAPTION>
Gross Gross
Weighted Unrealized Unrealized
Average Amortized Fair Holding Holding
Yield Cost Basis Value Gains Losses
------- ---------- ------ --------- ---------
(Dollars in thousands) December 31, 1993
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FNMA 6.24% $ 531,445 $ 538,600 $ 7,569 $ 414
FHLMC 6.79 1,238,968 1,258,202 19,241 7
RTC 6.03 248,140 245,086 - 3,054
Other 5.03 528,126 528,934 1,161 353
Unearned income - (6,906) - 6,906 -
----- ---------- ---------- ------- ------
6.24% $2,539,773 $2,570,822 $34,877 $3,828
===== ========== ========== ======= ======
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Gross Gross
Weighted Unrealized Unrealized
Average Amortized Fair Holding Holding
Yield Cost Basis Value Gains Losses
------- ---------- ----- --------- --------
(Dollars in thousands) December 31, 1992
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FNMA 7.18% $ 736,875 $ 751,014 $14,296 $ 157
FHLMC 7.14 1,580,066 1,602,577 26,066 3,555
REMIC 6.79 517,401 520,948 3,796 249
RTC 7.01 272,378 270,791 146 1,733
Other 7.14 70,049 67,113 517 3,453
Unearned income - (8,712) - 8,712 -
----- ---------- ---------- ------- ------
7.08% $3,168,057 $3,212,443 $53,533 $9,147
===== ========== ========== ======= ======
</TABLE>
Mortgage-backed securities held to maturity consisted of the following:
<TABLE>
<CAPTION>
Gross Gross
Weighted Unrealized Unrealized
Average Amortized Fair Holding Holding
(Dollars in thousands) Yield Cost Basis Value Gains Losses
------- ---------- ------ --------- ----------
December 31, 1993
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REMIC 4.80% $518,979 $516,820 $974 $ 3,133
Other 3.66 99,595 88,692 - 10,903
---- -------- -------- ---- -------
4.61% $618,574 $605,512 $974 $14,036
==== ======== ======== ==== =======
</TABLE>
At December 31, 1992 there were no mortgage-backed securities held to
maturity.
The fair value of mortgage-backed securities is principally based on
quoted market prices.
<PAGE>
<PAGE>
Gross realized gains and gross realized losses on mortgage-backed
securities, which are included in gain on mortgage sales on the Consolidated
Statement of Operations, were as follows:
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Realized gains $1,097 $1,414 $641
Realized losses - - 62
</TABLE>
Gains and losses on mortgage-backed securities are calculated on the
specific identification method.
Note 5: Loans Receivable
An analysis of the loan portfolio by type at December 31, 1993 and
December 31, 1992 is included in the table on page 117 under the caption "Loan
Portfolio by Type." An analysis of the real estate loan portfolio by security
type and state at December 31, 1993 is included in the table on page 118 titled
"Real Estate Loans and Real Estate by State." An analysis of the California
real estate loan portfolio and nonperforming loans by region at December 31,
1993 is included in the table on pages 120 and 121 under the caption
"California Real Estate Loans and Foreclosed Real Estate."
<PAGE>
<PAGE>
The following comprised loans receivable:
<TABLE>
<CAPTION>
December 31
----------------------------
(Dollars in thousands) 1993 1992
---- ----
<S> <C> <C>
Loans receivable
Real estate
Held for investment $28,788,519 $28,620,125
Available for sale 324,080 239,161
Consumer
Held for investment 2,028,255 2,180,975
Available for sale 179,642 164,514
----------- -----------
31,320,496 31,204,775
----------- -----------
Undisbursed loan funds 617 (5,701)
Unearned income (157,441) (169,573)
Reserve for estimated losses (502,269) (444,897)
----------- -----------
(659,093) (620,171)
----------- -----------
$30,661,403 $30,584,604
=========== ===========
</TABLE>
As a result of the adoption of FAS 114, loans previously classified as
in-substance foreclosed and reported in real estate are included in loans
receivable as of January 1, 1993. The recorded investment in loans for which
impairment has been recognized in accordance with FAS 114 totaled
$347,755,000 at December 31, 1993. The reserves for estimated losses related
to such loans were $40,567,000 at December 31, 1993.
<PAGE>
<PAGE>
An analysis of the fair value of loans receivable follows:
<TABLE>
<CAPTION>
Net Book Fair Unrecognized
(Dollars in thousands) Value Value Gains (Losses)
--------- ----- --------------
December 31, 1993
------------------------------------------
<S> <C> <C> <C>
Financial instruments
Real estate $28,519,144 $29,311,099 $791,955
Consumer
Term 1,849,874 1,874,501 24,627
Nonterm 205,528 205,528 -
----------- ----------- --------
30,574,546 $31,391,128 $816,582
=========== ========
Lease financing 86,857
-----------
$30,661,403
===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992
------------------------------------------
<S> <C> <C> <C>
Financial instruments
Real estate $28,319,540 $28,818,923 $499,383
Consumer
Term 1,807,317 1,804,735 (2,582)
Nonterm 359,861 359,861 -
----------- ----------- --------
30,486,718 $30,983,519 $496,801
=========== ========
Lease financing 97,886
-----------
$30,584,604
===========
</TABLE>
<PAGE>
<PAGE>
The fair value of single-family real estate loans is principally based
on readily available market prices, adjusted for excess yields and various
risk factors. Fair value of commercial and apartment loans is determined by
computing discounted cash flows on various segments of the loan portfolio.
Recent national commitment rates were used as a guide in establishing
regional discount rates for commercial and apartment loans. Because the
Company's primary asset, SFR ARMs, sells at a premium in the secondary
market, the fair value was $790,393,000 higher than the book value at year
end. The difference between fair value and book value is not expected to
vary significantly in the future. The fair value of income-producing real
estate loans, fixed-rate SFRs and second trust deed ARMs held for investment
was $1,562,000 higher than book value. The fair value of these portfolios
will fluctuate with changes in interest rates.
Fair value of consumer loans is based on discounted future cash flows.
The discount rate used was based upon a projected treasury yield curve
adjusted for various risk factors depending on the type of loan. The fair
value of nonterm consumer loans is the book value at the reporting date.
These loans include checking overdraft, installment loans and other
miscellaneous consumer loan related accounts.
Loans receivable totaling $5,821,415,000 at December 31, 1993, were
pledged to secure FHLB borrowings, certain deposits, securities sold under
agreements to repurchase and other obligations and accounts.
Gross unrealized gains on real estate loans available for sale totaled
$8,245,000 at December 31, 1993 and $9,266,000 at December 31, 1992.
The Company had outstanding commitments to fund real estate loans of
$776,574,000 at December 31, 1993 which consisted of $196,472,000 fixed-rate
and $580,102,000 adjustable rate. At December 31, 1993, fixed-rate
commitments had a fair value of $344,000. Fair value is estimated using
current market prices adjusted for various risk factors and market
volatility. At December 31, 1993, standby letters of credit totaled
$14,272,000.
The Company purchases put options as a hedge of fixed-rate commitments.
At December 31, 1993, the options had a notional value of $100,000,000 and
a fair value of $272,000. Fair value is estimated using current market
prices adjusted for various risk factors and market volatility.
The Company had outstanding commitments to sell fixed-rate real estate
loans of $140,445,000 at December 31, 1993.
<PAGE>
<PAGE>
A significant portion of the ARM portfolio is subject to lifetime
interest-rate caps and floors. Each loan is priced separately with a maximum
cap and a minimum floor. The weighted-average cap was 13.66 percent and the
weighted-average floor was 5.72 percent at December 31, 1993. At December
31, 1993, $8,758,905,000 of ARM loans with an average yield of 7.03 percent
had reached their floor rate. Without the floor, the average yield on those
loans would have been 6.32 percent. The contract amount on ARMs subject to
interest-rate caps and floors does not represent the exposure to market loss.
The amortization of deferred loan fees included in interest income
totaled $50,339,000 in 1993, $51,507,000 in 1992 and $57,239,000 in 1991.
Certain loans meet the criteria of troubled debt restructurings
("TDRs"). TDRs totaled $294,772,000 at December 31, 1993. This compared
with $160,513,000 at the end of 1992 and $151,609,000 at the end of 1991.
There were no additional funds committed at December 31, 1993.
The Company provides a reserve for uncollected interest, which is
essentially based upon loans in foreclosure or delinquent 90 days or more.
These loans are considered in "nonaccrual" status. Interest not accrued on
all loans that were nonperforming totaled $79,588,000 for the year ended
December 31, 1993 compared with $73,230,000 for the year ended December 31,
1992 and $51,160,000 for the year ended December 31, 1991.<PAGE>
<PAGE>
Following is a summary of the reserve for estimated losses and charge-
off experience for loans receivable:
<TABLE>
<CAPTION>
Real Estate Loans Consumer Loans
--------------------- -------------------------------------------
Consumer Bank
(Dollars in thousands) SFR Other Finance Card Other Total
--- ----- -------- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1988 $ 10,701 $ 40,386 $ 31,175 $ 9,786 $ 13,254 $ 105,302
Provision for losses 29,400 165,000 21,400 11,195 5,005 232,000
Charge-offs (9,374) (55,997) (26,244) (11,980) (12,099) (115,694)
Recoveries 155 3 5,385 2,155 3,865 11,563
--------- --------- -------- -------- -------- ---------
Balance at December 31, 1989 30,882 149,392 31,716 11,156 10,025 233,171
Provision for losses 50,650 169,234 50,300 12,364 2,452 285,000
Charge-offs (11,354) (193,442) (30,568) (13,638) (5,742) (254,744)
Recoveries 84 1,416 8,960 2,409 2,550 15,419
--------- --------- -------- -------- -------- ---------
Balance at December 31, 1990 70,262 126,600 60,408 12,291 9,285 278,846
Provision for losses 61,724 23,576 32,600 27,200 4,800 149,900
Charge-offs (32,529) (68,366) (63,949) (20,192) (8,309) (193,345)
Recoveries 896 5,831 8,923 1,874 1,420 18,944
Reserves of acquired companies - - 7,434 - 1,271 8,705
--------- --------- -------- -------- -------- ---------
Balance at December 31, 1991 100,353 87,641 45,416 21,173 8,467 263,050
Provision for losses 113,808 228,492 41,900 30,254 5,546 420,000
Charge-offs (53,459) (117,611) (55,436) (28,150) (8,069) (262,725)
Recoveries 240 5,008 14,661 2,022 2,641 24,572
--------- --------- -------- -------- -------- ---------
Balance at December 31, 1992 160,942 203,530 46,541 25,299 8,585 444,897
Adoption of FAS 114 3,153 44,821 - - - 47,974
--------- --------- -------- -------- -------- ---------
Balance at January 1, 1993 164,095 248,351 46,541 25,299 8,585 492,871
Provision for losses 300,185 123,468 37,900 (6,533) 7,980 463,000
Charge-offs (254,075) (151,700) (50,174) (20,794) (1,911) (478,654)
Recoveries 2,034 4,273 15,523 2,028 1,194 25,052
--------- --------- -------- -------- -------- ---------
Balance at December 31, 1993 $ 212,239 $ 224,392 $ 49,790 $ - $ 15,848 $ 502,269
========= ========= ======== ======== ======== =========
</TABLE>
The ratio of net charge-offs to average loans follows:
<TABLE>
<CAPTION>
Real Estate Loans Consumer Loans
----------------- ---------------------------------------------
Consumer Bank
SFR Other Finance Card Other Total
--- ----- -------- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31,
1993 .98% 3.96% 2.01% 10.44% .19% 1.43%
1992 .21 3.07 2.42 9.62 1.41 .76
1991 .13 1.53 3.84 6.18 1.75 .55
1990 .04 4.01 1.64 4.04 .77 .75
1989 .04 1.02 1.70 4.09 2.02 .36
/TABLE
<PAGE>
<PAGE>
The following table presents the Company's reserve for estimated losses
as a percent of the respective loans receivable portfolios:
<TABLE>
<CAPTION>
Real Estate Loans Consumer Loans
----------------- -------------------------------------------
Consumer Bank
SFR Other Finance Card Other Total
--- ----- -------- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
December 31,
1993 .83% 6.59% 2.72% -% 4.20% 1.60%
1992 .63 5.83 2.70 9.88 2.34 1.43
1991 .39 2.27 2.64 7.06 2.18 .82
1990 .28 2.98 4.39 4.08 2.35 .89
1989 .13 2.87 2.45 4.12 2.40 .76
</TABLE>
Note 6: Mortgage Banking
Data pertaining to mortgage banking operations follow:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Loans sold
Adjustable rate $ 420,864 $ 95,218 $ 370,250
Fixed-rate 3,112,773 4,058,811 2,108,947
Mortgage-backed securities sold
Adjustable rate 32,010 - -
Fixed-rate 2,035 - 11,822
---------- ---------- ----------
$3,567,682 $4,154,029 $2,491,019
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
December 31
----------------------------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Loans serviced for others $12,336,807 $13,106,074 $12,812,247
Loan servicing spread .42% .34% .48%
</TABLE>
<PAGE>
<PAGE>
Loan servicing spread represents net servicing income as a percentage of
the average portfolio serviced.
The present value of retained yield on loans sold is amortized using the
interest method adjusted quarterly for actual prepayment experience. Following
is a summary of the net unamortized balance of excess servicing on loans sold
included in other assets:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992
---- ----
<S> <C> <C>
Balance at beginning of year $ 28,043 $ 74,811
Reductions from sales (3,327) (21,313)
Amortization (15,556) (25,455)
-------- --------
Balance at end of year $ 9,160 $ 28,043
======== ========
</TABLE>
The fair value of excess/short servicing fees at December 31, 1993 was
$17,307,000 and $29,434,000 at December 31, 1992, as determined by
recalculation of the discounted cash flows at market rates.
Gains on mortgage sales were derived from:
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Loan servicing spread
Gains $ 5,271 $ 961 $ -
Losses (8,598) (22,274) (4,045)
-------- -------- --------
Net (3,327) (21,313) (4,045)
Premiums, net of discounts 4,985 1,343 361
Deferred loan fees 29,968 53,787 34,391
Hedging losses, net (6,822) (2,410) (2,067)
Adjust to lower of cost or market (50) 1,379 991
-------- -------- --------
$ 24,754 $ 32,786 $ 29,631
======== ======== ========
/TABLE
<PAGE>
<PAGE>
Mortgage banking servicing income consisted of:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Collections $ 66,741 $ 78,144 $ 92,372
Amortization of excess servicing (15,556) (25,455) (23,933)
-------- -------- --------
$ 51,185 $ 52,689 $ 68,439
======== ======== ========
</TABLE>
GWB, as seller and servicer, issued mortgage pass-through certificates
comprised of Class A certificates and Class B certificates. The Class B
certificate, which GWB retained, are subordinated to the rights of the Class A
certificate holders. GWB also sold loans to FNMA and FHLMC whereby a portion of
the credit risk was retained. Following are data related to loans sold with
credit enhancements and the accompanying exposure related thereto:
<TABLE>
<CAPTION>
December 31
------------------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Loans sold with credit enhancements
outstanding $1,756,576 $2,405,413 $3,355,281
Maximum exposure under credit
enhancements 772,583 817,152 817,152
</TABLE>
To facilitate the servicing of delinquent loans under these
commitments and to minimize losses to the Company, loans in the amount of
$185,825,000 in 1993, $91,263,000 in 1992 and $66,531,000 in 1991 have been
repurchased from investors. Repurchased loans are included in the Company's
periodic analysis of the adequacy of valuation reserves. Delinquent interest
of approximately $8,339,000 in 1993, $6,397,000 in 1992 and $3,453,000 in
1991 was repurchased and subsequently written off.
<PAGE>
<PAGE>
Note 7: Real Estate
An analysis of the real estate portfolio and nonperforming real estate
by state at December 31, 1993 is included in the tables on pages 118 and 119
titled "Real Estate Loans and Real Estate by State." An analysis of
California foreclosed real estate and nonperforming real estate by region at
December 31, 1993 is included in the table on pages 120 and 121 titled
"California Real Estate Loans and Foreclosed Real Estate."
Real estate available for sale or development consisted of:
<TABLE>
<CAPTION>
December 31
-------------------------
(Dollars in thousands) 1993 1992
---- ----
<S> <C> <C>
Real estate available for sale
Real estate acquired through foreclosure $ 370,630 $ 618,470
Loans in-substance foreclosed - 497,868
Other 82,174 115,851
--------- ----------
452,804 1,232,189
Property development 131,017 132,065
Accumulated depreciation (26,193) (25,667)
Reserve for estimated losses (123,551) (185,204)
--------- ----------
$ 434,077 $1,153,383
========= ==========
</TABLE>
Real estate available for sale was reduced in 1993 by the adoption of
FAS 114, which resulted in the reclassification of loans in-substance
foreclosed to loans receivable.
Interest capitalized on property development totaled $7,484,000 at
December 31, 1993 and $6,957,000 at December 31, 1992.
<PAGE>
<PAGE>
Real estate operations are summarized below:
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Net gain on sales of real estate $ 11,079 $ 5,639 $ 1,193
Interest recognized on advances 1,023 1,695 2,314
Net operating losses and holding costs (45,885) (6,609) (6,232)
-------- ------- -------
$(33,783) $ 725 $(2,725)
======== ======= =======
</TABLE>
Following is a summary of the reserve for estimated losses:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $185,204 $ 6,862 $ 13,389 $ 6,682 $ 7,996
Adoption of FAS 114 (66,102) - - - -
-------- -------- -------- -------- --------
Adjusted balance at
beginning of year 119,102 6,862 13,389 6,682 7,996
Provision for losses 92,000 220,000 21,000 53,600 65,577
Charge-offs (87,673) (41,658) (28,266) (47,813) (70,192)
Recoveries 122 - 739 920 3,301
-------- -------- -------- -------- --------
Balance at end of year $123,551 $185,204 $ 6,862 $ 13,389 $ 6,682
======== ======== ======== ======== ========
</TABLE>
<PAGE>
<PAGE>
Note 8: Interest Receivable
Following is a summary of interest receivable:
<TABLE>
<CAPTION>
December 31
---------------------
(Dollars in thousands) 1993 1992
---- ----
<S> <C> <C>
Real estate loans $134,334 $149,808
Mortgage-backed securities 25,051 31,184
Consumer loans 4,046 5,119
Securities 7,876 8,492
Taxes 43,188 27,836
Other 495 7,280
-------- --------
$214,990 $229,719
======== ========
</TABLE>
Other includes interest receivable on property development advances and
interest-rate swaps.
Note 9: Investment in the Federal Home Loan Bank System
The investment in the Federal Home Loan Banks consisted of capital
stock, at cost, totaling $307,352,000 at December 31, 1993 and $314,373,000
at December 31, 1992.
The Company earned 3.93 percent in 1993, 1.88 percent in 1992 and 6.01
percent in 1991 from dividends on its investment in FHLB stock. FHLB capital
stock is pledged to secure FHLB borrowings. The future earnings on FHLB
stock will presumably be restricted due to the funding requirements imposed
on the Federal Home Loan Banks for affordable housing programs and the
Resolution Funding Corporation.
<PAGE>
<PAGE>
Note 10: Premises and Equipment
Premises and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31
-----------------------
(Dollars in thousands) 1993 1992
---- ----
<S> <C> <C>
Land $ 84,950 $ 82,770
Buildings and leasehold improvements 416,676 381,921
Furniture, fixtures and equipment 528,020 453,143
Construction in progress 21,808 55,714
---------- ---------
1,051,454 973,548
Accumulated depreciation and amortization (427,763) (378,087)
---------- ---------
$ 623,691 $ 595,461
========== =========
</TABLE>
The Company leases various branch offices under capital and noncancellable
operating leases which expire at various dates through 2032. Some leases
contain escalation provisions for adjustments in the consumer price index
and provide for renewal options for five-to 10-year periods. Future minimum
lease payments under all noncancellable leases at December 31, 1993 were as
follows:
<TABLE>
<CAPTION>
Operating Capital
(Dollars in thousands) Leases Leases
--------- -------
<S> <C> <C>
Year ending December 31,
1994 $ 47,740 $ 7,633
1995 43,071 7,633
1996 38,296 7,633
1997 33,514 7,633
1998 28,602 7,633
Thereafter 192,920 97,902
-------- --------
Total minimum lease payments $384,143 136,067
Amount representing interest ======== 60,301
--------
Present value of minimum lease payments $ 75,766
========
</TABLE>
<PAGE>
<PAGE>
Rental expense charged to earnings was $53,638,000 in the year ended
December 31, 1993, $57,823,000 in the year ended December 31, 1992 and
$51,440,000 in the year ended December 31, 1991.
Note 11: Customer Accounts
A summary of balances at December 31, 1993 and December 31, 1992 by
type of account, and at December 31, 1993 by maturity of account is presented
on pages 114 and 115, under the captions "By Type," "By Product" and "Year-
end 1993 by Maturity." An analysis of term deposits by interest rate and
maturity at December 31, 1993 and by interest rate at December 31, 1992 is
presented under the caption "Year-end 1993 Term Accounts by Maturity by
Interest Rate."
The average interest rate is based upon stated interest rates without
giving consideration to daily compounding of interest or forfeiture of
interest because of premature withdrawals. Noninterest bearing checking
accounts represented 3.95 percent of total customer accounts at December 31,
1993 and 2.77 percent at December 31, 1992. Accrued but unpaid interest on
customer accounts included in other liabilities totaled $10,685,000 at
December 31, 1993 and $11,520,000 at December 31, 1992.
In 1993, GWB entered into a cash-flow swap agreement related to the
Investor's CD, an insured account indexed to the Standard and Poor's ("S&P") 500
performance. GWB agreed to pay a monthly variable rate in exchange for the
customer receiving the S&P 500 return. The swap balance outstanding was
$60,864,000 and the average interest rate paid by GWB was 4.09 percent as of
December 31, 1993.
The following is a summary of interest expense on customer accounts:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Checking $ 42,976 $ 57,838 $ 83,948
Limited access 162,568 206,801 251,553
Regular savings 40,418 47,186 59,715
Term 693,119 1,021,648 1,572,989
-------- ---------- ----------
$939,081 $1,333,473 $1,968,205
======== ========== ==========
</TABLE>
<PAGE>
<PAGE>
An analysis of the fair value of customer accounts follows:
<TABLE>
<CAPTION>
Unrecognized
(Dollars in thousands) Book Value Fair Value Losses
---------- ---------- -------------
December 31, 1993
-------------------------------------------
<S> <C> <C> <C>
Term $17,980,931 $18,014,058 $33,127
Nonterm 13,550,632 13,550,632 -
----------- ----------- -------
$31,531,563 $31,564,690 $33,127
=========== =========== =======
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992
-------------------------------------------
<S> <C> <C> <C>
Term $18,050,466 $18,090,774 $40,308
Nonterm 12,858,199 12,858,199 -
----------- ----------- -------
$30,908,665 $30,948,973 $40,308
=========== =========== =======
</TABLE>
Term deposits are stratified by remaining maturity, and fair value is
calculated based on discounted future cash flows. The discount rate used was
based upon a projected treasury yield curve plus 100 basis points. Fair
value includes the effects of compounding where applicable.
The fair value of nonterm deposits has been determined to be the amount
payable on demand at the reporting date. Nonterm deposits include all
customer accounts without defined maturities, such as checking, money market
savings and regular savings.
Note 12: Short-term Borrowings
An analysis of borrowings by type at December 31, 1993 and December 31,
1992 and by maturity at December 31, 1993 is presented in the table titled
"Borrowings" on page 113.
<PAGE>
<PAGE>
The following is a summary of short-term borrowings:
<TABLE>
<CAPTION>
December 31
-------------------------
(Dollars in thousands) 1993 1992
---- ----
<S> <C> <C>
Securities sold under agreements
to repurchase $ - $ 716,962
Commercial paper 392,658 256,091
Sallie Mae 177,025 163,032
Bank borrowings 51,800 67,600
Thrift note 55,000 -
-------- ----------
$676,483 $1,203,685
======== ==========
</TABLE>
Because of the short-term nature of these borrowings, fair value
approximates book value.
Securities sold under agreements to repurchase generally represent
borrowings of less than 90 days, and book value approximates fair value.
These agreements are secured by mortgage loans and securities held by the
Company. The collateral is summarized as follows:
<TABLE>
<CAPTION>
December 31
------------------------
(Dollars in thousands) 1993 1992
---- ----
<S> <C> <C>
Repurchase liability $ - $716,962
Weighted average yield - % 3.60%
U.S. government and federal agency obligations
Book value $ - $728,148
Fair value - 740,987
</TABLE>
Commercial paper has maturities of less than 270 days, and at December
31, 1993, the average maturity was 27 days. In 1993, GWB syndicated a
$1,000,000,000 Thrift Note program. These notes are sold through securities
dealers to institutional investors and have maturities of less than 270 days.
Other short-term borrowings mature in periods of up to 12 months.<PAGE>
<PAGE>
GWB has a $220,705,000 financing agreement with the Student Loan
Marketing Association ("Sallie Mae") and may request advances under the line
at a margin over the most recent auction yield for the 91-day U.S. Treasury
bill. The borrowings are fully secured by insured student loans made by GWB.
The agreement expires March 31, 1994. Borrowings outstanding at December 31,
1993 totaled $177,025,000 at 3.66 percent.
Short-term borrowings are summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Securities sold under agreements
to repurchase
Balance at year end $ - $ 716,962 $1,418,884
Maximum outstanding at
any month end 1,384,092 1,155,080 1,418,884
Average balance during
the year 991,964 418,136 675,486
Weighted average rate
during the year 3.19% 4.14% 5.53%
Weighted average rate
at year end - 3.60 4.77
Commercial paper
Balance at year end $ 392,658 $ 256,091 $ 417,144
Maximum outstanding at
any month end 856,973 467,149 458,634
Average balance during
the year 521,509 311,122 380,165
Weighted average rate
during the year 3.35% 4.10% 6.28%
Weighted average rate
at year end 3.46 3.77 5.07
Other short-term borrowings
Balance at year end $ 283,825 $ 230,632 $ 359,908
Maximum outstanding at
any month end 428,618 331,373 455,879
Average balance during
the year 303,850 266,567 279,898
Weighted average rate
during the year 3.77% 4.49% 6.40%
Weighted average rate
at year end 3.78 4.27 5.07
/TABLE
<PAGE>
<PAGE>
Note 13: Other Borrowings
An analysis of borrowings by type at December 31, 1993 and December 31,
1992 and by maturity at December 31, 1993 is presented in the table titled
"Borrowings" on page 113. Debt issue costs are amortized on the interest
method over the term of the debt.
The following is a summary of other borrowings:
<TABLE>
<CAPTION>
December 31
--------------------------
(Dollars in thousands 1993 1992
---- ----
<S> <C> <C>
Senior debt $2,425,953 $2,580,857
FHLB borrowings 306,150 310,745
Other 70,755 55,765
---------- ----------
$2,802,858 $2,947,367
========== ==========
</TABLE>
<PAGE>
<PAGE>
An analysis of the fair value of other borrowings follows:
<TABLE>
<CAPTION>
Unrecognized
Book value Fair value Losses
---------- ---------- ------------
(Dollars in thousands) December 31, 1993
-------------------------------------------
<S> <C> <C> <C>
Fixed-rate notes $2,312,903 $2,494,230 $181,327
FHLB borrowings 306,150 309,710 3,560
Medium-term notes 84,800 87,877 3,077
Floating-rate notes 28,250 28,373 123
Other 70,755 86,269 15,514
---------- ---------- --------
$2,802,858 $3,006,459 $203,601
========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992
-------------------------------------------
<S> <C> <C> <C>
Fixed-rate notes $2,162,847 $2,326,187 $163,340
FHLB borrowings 310,745 319,350 8,605
Medium-term notes 309,910 318,777 8,867
Floating-rate notes 108,100 108,199 99
Other 55,765 67,495 11,730
---------- ---------- --------
$2,947,367 $3,140,008 $192,641
========== ========== ========
</TABLE>
Long-term borrowings are stratified by remaining maturity, and fair
value is calculated based on discounted future cash flows. The discount rate
used was based upon a projected treasury yield curve plus 100 basis points.
The maturity used in the present value calculations of long-term, variable-
rate borrowings is the date at which the borrowing would next be repriced.
FHLB Borrowings
FHLB borrowings are secured by pledges of real estate loans and the
capital stock of the FHLB. At December 31, 1993, interest rates, both fixed
and variable, ranged from 3.35 percent to 12.27 percent. Average FHLB
borrowings were $1,058,257,000 in 1993, $342,576,000 in 1992 and $612,233,000
in 1991. Based upon these balances, the weighted average interest rate was
4.59 percent in 1993, 9.05 percent in 1992 and 9.61 percent in 1991.
<PAGE>
<PAGE>
GWB has various borrowing alternatives with the FHLB, which include a
$122,000,000 facility for overnight advances.
Senior Debt
The Company has the following senior debt outstanding:
<TABLE>
<CAPTION>
December 31
Rate at ------------------------
(Dollars in thousands) 12-31-93 1993 1992
-------- ---- ----
<S> <C> <C> <C>
GWB fixed-rate notes, due
between 1994 and 2001
at various rates 10.00% $ 770,991 $1,009,138
GWB medium-term notes,
various rates, with
maturities between two
months and ten months 8.78 61,800 246,910
Parent company fixed-rate
notes, due between 1998
and 2002 7.39 672,226 298,992
Parent company floating-rate
notes - - 74,850
GW Overseas Finance N.V.
Eurodollar notes, floating
rates (guaranteed by GWFC) - - 5,000
Parent company Eurodollar
notes, floating rates,
due 1995 5.25 28,250 28,250
Aristar medium-term notes,
various rates, with
maturities between two
years and three years 9.33 23,000 63,000
Other Aristar senior
indebtedness, due between
1994 and 1999 at various
rates 7.95 869,686 854,717
---------- ----------
$2,425,953 $2,580,857
========== ==========
</TABLE>
In July 1993, GWFC issued $225,000,000 in senior debt with a coupon of
6.375 percent which matures on July 1, 2000.
<PAGE>
<PAGE>
Also in July 1993, Aristar issued $150,000,000 in senior debt with a
coupon of 5.75 percent and a maturity of July 15, 1998.
In June 1993, GWFC issued $150,000,000 in senior debt with a coupon of
6.125 percent and a maturity of June 15, 1998.
In July 1992, Aristar issued $100,000,000 in senior debt with a coupon
of 6.25 percent and a maturity of July 15, 1996. Also in July 1992, Aristar
issued $100,000,000 of senior subordinated debt with a coupon of 7.50 percent
and a maturity of July 1, 1999.
In February 1992, Aristar issued $100,000,000 in senior debt with a
coupon of 7.375 percent and a maturity of February 15, 1997, and $100,000,000
in senior debt with a coupon of 7.875 percent and a maturity of February 15,
1999.
In February 1992, GWFC issued $200,000,000 in senior debt with a coupon
of 8.60 percent and a maturity of February 1, 2002.
In 1993 and 1992, GWB did not have issues under its medium-term note
program, and an additional $440,000,000 may be issued under existing shelf
registrations.
Credit Facilities
In December 1993, Aristar syndicated a multi-year $120,000,000
International Credit Facility ("ICF") with eight banks. This agreement was
done to provide for backup liquidity and general corporate purposes. This
ICF provides for drawdowns at a spread to London Interbank Offered Rate
("LIBOR"). There were no borrowings under this agreement in 1993.
In July 1993, GWB syndicated a $175,000,000 ICF with seven
international banks for backup liquidity and general corporate purposes.
There were no borrowings under this facility in 1993.
Also, in July 1993, GWB syndicated a $340,000,000 Domestic Credit
Facility ("DCF") with seven domestic banks for backup liquidity and general
corporate purposes. There were no borrowings under this facility in 1993.
In January 1992, Aristar syndicated a multi-year $200,000,000 DCF with
10 domestic banks for backup liquidity and general corporate purposes. There
were no borrowings under this facility in 1993 or 1992.
The Company is subject to various debt covenants and believes it is in
compliance at December 31, 1993.
<PAGE>
<PAGE>
Interest-Rate Swaps
The Company had interest-rate swaps related to FHLB borrowings of
$109,000,000 at December 31, 1993 which yielded a rate of 3.48 percent tied
to three-month LIBOR, paid a rate of 5.26 percent and mature in 1998. The
net cost of swap agreements was $3,825,000 for the year ended December 31,
1993, $11,045,000 for the year ended December 31, 1992 and $4,304,000 for the
year ended December 31, 1991, which was charged to interest expense. The
fair value of outstanding swaps at December 31, 1993 was a gain of $97,000
based on expected remaining net cash flows discounted at three-month LIBOR.
Note 14: Federal and State Taxes on Income
Following is a summary of the provision for taxes on income:
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Current tax expense
Federal $21,300 $ 169,700 $173,000
State (800) 45,600 50,700
------- --------- --------
20,500 215,300 223,700
------- --------- --------
Deferred tax expense (benefit)
Federal (800) (139,700) (16,000)
State 10,300 (34,000) (400)
------- --------- --------
9,500 (173,700) (16,400)
------- --------- --------
$30,000 $ 41,600 $207,300
======= ========= ========
</TABLE>
<PAGE>
<PAGE>
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
December 31
-------------------------
(Dollars in thousands) 1993 1992
---- ----
<S> <C> <C>
Deferred tax liabilities
Loan fees and interest income $ 179,075 $ 183,676
Financial leases 82,368 83,885
FHLB dividends 50,106 46,617
Amortization of intangibles 43,454 48,898
Depreciation 24,635 16,689
Accrued interest income 15,685 12,725
Unrealized holding gains on securities 15,594 -
Sales of unearned interest income 11,690 15,030
Partnership income 9,351 11,272
Cash method of accounting for income
tax reporting 8,439 9,763
Election to reduce basis 1,736 2,377
Other deferred income items 30,581 22,679
--------- ---------
472,714 453,611
--------- ---------
Deferred tax assets
Loss reserves (211,615) (222,623)
Postemployment benefits (22,517) (21,172)
Unearned insurance commission (10,157) (9,642)
Deferred compensation (9,079) (8,973)
State taxes (8,962) (26,052)
Gain on mortgage sales (8,402) (4,688)
Other deferred deduction items (41,195) (24,768)
--------- ---------
(311,927) (317,918)
Deferred tax assets valuation allowance - -
--------- ---------
Net deferred tax liabilities $ 160,787 $ 135,693
========= =========
</TABLE>
<PAGE>
<PAGE>
The following table reconciles the statutory income tax rate to the
consolidated effective income tax rate:
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Federal income tax rate 35.0% 34.0% 34.0%
State franchise tax rate, net of federal
income tax effect 7.2 7.6 6.3
---- ---- ----
Statutory income tax rate 42.2 41.6 40.3
Increase (reduction) in tax rate resulting from:
Amortization of intangibles 7.6 15.9 1.7
Settlements with Internal Revenue Service (9.8) - -
Reversal of taxes previously provided (5.9) (5.0) (.8)
Adjustment of deferred tax rate 2.2 (4.5) -
Federal bad debt deduction - - (.1)
Other items, net (3.7) (4.4) (.1)
---- ---- ----
32.6% 43.6% 41.0%
==== ==== ====
</TABLE>
For 1991, tax benefits were not recognized for additions to general
loss reserves in excess of available tax bad debt deductions of ($851,000).
Fully diluted earnings per share would have been $2.23 in 1991 without the
impact of the bad debt deduction. In 1992 and 1993, under FAS 109, tax
benefits were recognized for additions to general loss reserves without
regard to the available tax bad debt deductions.
Taxes on income included the following:
<TABLE>
<CAPTION>
December 31
----------------------
(Dollars in thousands) 1993 1992
---- ----
<S> <C> <C>
Net deferred liability
Federal income tax $ 97,438 $ 86,013
State franchise tax 63,349 49,680
-------- --------
160,787 135,693
Taxes payable 24,039 64,106
-------- --------
$184,826 $199,799
======== ========
</TABLE>
<PAGE>
<PAGE>
Thrift institutions that meet certain tests prescribed by the Internal
Revenue Code are allowed a bad debt deduction for federal income tax purposes
of either 8 percent of taxable income, or an amount determined from the
thrift's loss experience. For 1993, 1992 and 1991 the Company used its loss
experience to determine federal taxes payable.
In accordance with FAS 109, a deferred tax liability of $241,522,000
has not been recognized at December 31, 1993 for $690,064,000 of temporary
differences relating to the tax bad debt reserves of the Bank that arose
prior to 1988.
The Company's tax returns have been audited by the Internal Revenue
Service through December 31, 1985 and by the California Franchise Tax Board
through December 31, 1986.
Note 15: Employee Benefit Plans
Pension Plans
The Great Western Retirement Plan ("the plan") covers a majority of
employees. Benefits under this plan are generally based on years of service
and the highest consecutive 60-months earnings during the last 120 months of
credited service prior to retirement. The Company's general funding policy
is to contribute the maximum amount deductible for federal income tax
purposes. Total plan expense was $8,753,000 in 1993, $6,625,000 in 1992 and
$5,620,000 in 1991.
The net periodic pension cost is computed as follows:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Service cost $ 9,899 $ 8,584 $ 7,266
Interest cost 12,351 10,794 9,792
Return on plan assets (15,715) (12,357) (12,730)
Net amortization of initial
unrecognized net
(asset) as of January 1, 1987 (676) (676) (676)
Amortization of unrecognized net
gain and deferrals 3,079 466 2,154
Amortization of unrecognized prior
service cost (185) (186) (186)
-------- -------- --------
$ 8,753 $ 6,625 $ 5,620
======== ======== ========
</TABLE>
<PAGE>
<PAGE>
Assumptions used in determining the net periodic pension cost were:
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 8.00% 8.00% 8.25%
Rate of increase in future compensation levels 5.75 5.75 6.00
Expected long-term rate of return on plan assets 9.00 9.00 9.00
</TABLE>
Although the actual return on plan assets is shown, the expected long-
term rate of return is used in determining net periodic pension cost. The
difference between the actual return and expected return is shown as
amortization of unrecognized net gain (loss).
Accumulated plan benefit information and the funded status of the plan
follow:
<TABLE>
<CAPTION>
December 31
---------------------
(Dollars in thousands) 1993 1992
---- ----
<S> <C> <C>
Accumulated benefit obligation
Vested $132,074 $107,982
Nonvested 4,673 4,970
-------- --------
$136,747 $112,952
======== ========
Projected benefit obligation $168,867 $140,798
Fair value of plan assets 172,200 149,709
-------- --------
Excess of assets over projected
benefit obligation 3,333 8,911
Unrecognized net transition asset (1,353) (2,029)
Unrecognized prior service costs (371) (556)
Unrecognized net loss 25,675 16,493
-------- --------
Prepaid pension cost included in
other assets $ 27,284 $ 22,819
======== ========
/TABLE
<PAGE>
<PAGE>
The assumptions used in determining the actuarial present value of the
projected benefit obligation were:
<TABLE>
<CAPTION>
December 31
----------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 7.75% 8.00% 8.00%
Rate of increase in future
compensation levels 5.50 5.75 5.75
Expected long-term rate of return
on plan assets 9.00 9.00 9.00
</TABLE>
Plan assets include certificates of deposit at GWB, equity securities,
mutual funds, mortgage-backed securities and other fixed-income securities.
Certificates of deposit at GWB totaled $24,850,000 at December 31, 1993 and
$40,350,000 at December 31, 1992.
The Company also sponsors a non-qualified, unfunded, supplemental
executive retirement plan for certain senior officers and a nonqualified
unfunded directors' retirement plan. Data related to these plans follow:
<TABLE>
<CAPTION>
December 31
--------------------
(Dollars in thousands) 1993 1992
---- ----
<S> <C> <C>
Projected benefit obligation $26,281 $21,593
Unrecognized net obligation 4,294 4,801
</TABLE>
Pension expense for these plans totaled $4,420,000 for 1993, $3,631,000
for 1992 and $2,850,000 for 1991.
The Company provides an optional deferred compensation plan for certain
employees. Eligible employees can defer a portion of their compensation and
the Company agrees to pay interest on the balance of funds deferred. An
enhanced rate is paid on funds deferred over three years.
<PAGE>
<PAGE>
The Company has purchased cost recovery life insurance, primarily with
one carrier, on the lives of the participants of the supplemental executive
retirement plan, directors' retirement plan and deferred compensation plan
and it is sole owner and beneficiary of said policies. The amount of
coverage is designed to provide sufficient revenues to fund said plans.
The net cash surrender value of this life insurance, recorded in other
assets, was $143,069,000 at December 31, 1993 and $116,947,000 at December
31, 1992, and net premium income related to insurance purchased was
$5,967,000 in 1993, $3,768,000 in 1992 and $396,000 in 1991.
Postretirement Plans
The Company sponsors unfunded defined benefit postretirement plans that
provide medical and life insurance coverage to eligible employees and
dependents based on age and length of service. Medical coverage options are
the same as available to active employees. The cost of plan coverage for
retirees and their qualifying dependents is based upon a point system that
combines age and years of service which results, generally, in lower costs
to retirees in conjunction with higher accumulated points within limits.
The following table shows the plan's funded status reconciled to the
accrued postretirement benefit cost included in other liabilities on the
Consolidated Statement of Financial Condition.
<TABLE>
<CAPTION>
(Dollars in thousands) December 31, 1993
-----------------
<S> <C>
Accumulated postretirement benefit obligation
Retirees $31,300
Fully eligible active employees 4,100
Other active employees 15,200
-------
50,600
Unrecognized net loss (5,056)
-------
Accrued postretirement benefits $45,544
=======
</TABLE>
<PAGE>
<PAGE>
The net postretirement medical and life insurance costs follow:
<TABLE>
<CAPTION>
Year ended December 31
------------------------
(Dollars in thousands) 1993 1992
---- ----
<S> <C> <C>
Service cost $1,856 $1,759
Interest cost of accumulated
postretirement benefit
obligation 3,370 3,133
------ ------
$5,226 $4,892
====== ======
</TABLE>
The cost of these benefits, funded currently, was approximately
$1,095,000 in 1991.
For measurement purposes, the cost of medical benefits was projected to
increase at a rate of 13 percent in 1993, thereafter decreasing 1 percent per
year until a stable 7 percent medical inflation rate is reached in 1999.
Increasing the assumed health care cost trend by 1 percent in each year would
increase the accumulated postretirement benefit obligation at December 31,
1993 by approximately $3,500,000 and the aggregate of the service and
interest components of net periodic postretirement benefit cost for the year
ended December 31, 1993 by $500,000. The present value of the accumulated
benefit obligation assumed an 7.75 percent discount rate compounded annually.
Stock Option Plans
The Company currently has a stock option plan in effect: the 1988 Stock
Option and Incentive Plan ("stock option plan"). Options are granted at the
market value of the common stock on the date of grant. The stock option plan
consists of two separate plans: The Key Employee Program under which options
(both incentive and nonqualified), stock appreciation rights, dividend
equivalents and certain other performance and incentive awards may be
granted to officers, key employees and certain other individuals; and the
Non-employee Director Program under which non-qualified options will be
automatically granted to non-employee directors under certain circumstances.
The Company has set aside 12,500,000 shares of common stock to be delivered
pursuant to the stock option plan, of which a maximum of 750,000 may be
delivered under the Non-employee Director Program. Options may be exercised
either by payment of cash, or the optionee may deliver GWFC common stock of
an equivalent market value at the date of exercise. Proceeds from the
exercise of stock options are credited to common stock for the aggregate par
value of shares issued, and the excess is credited to additional capital.
<PAGE>
<PAGE>
In 1993 and 1992, the Company granted performance-based restricted stock
awards to encourage and reward high levels of performance of the Company as
measured by returns to shareholders. The shares will fully vest 10 years
after the award date, and prior to such time, they are subject to accelerated
vesting based on the Company's performance. The Company granted 7,500
shares in 1993, with a value of $122,000 and 1,086,200 shares in 1992, with
value of $20,126,000. The unearned compensation is recorded as a separate
reduction of stockholders' equity and is being amortized to expense over 60
months. The total amount of compensation expense related to restricted stock
awards recorded was $3,693,000 in 1993 and $3,671,000 in 1992.
Stock appreciation rights ("SAR") may be granted in conjunction with
certain options previously granted or with future options. An SAR entitles
the holder, at the discretion of the Company, to receive cash or shares of
GWFC common stock, or a combination thereof, at a value equal to the excess
of the fair market value on the date of exercise over the option price.
Exercise of an option or companion SAR automatically cancels the related
option or right.
Information with respect to stock options follows:
<TABLE>
<CAPTION>
Option Shares Option Price Range
------------- ------------------
<S> <C> <C>
1992
Outstanding at beginning of year 5,140,767 $ 7.20 - $22.15
Granted 589,900 18.00 - 18.63
Cancelled (108,225) 14.25 - 18.63
Exercised (329,055) 7.20 - 18.45
----------- ---------------
Outstanding at end of year 5,293,387 7.70 - 22.15
1993
Granted 628,600 16.38 - 19.38
Cancelled (162,137) 10.38 - 19.38
Exercised (443,255) 10.38 - 18.63
----------- ---------------
Outstanding at end of year 5,316,595 $ 7.70 - $22.15
=========== ===============
Options exercisable at
December 31, 1993 3,483,935 $ 7.70 - $22.15
=========== ===============
/TABLE
<PAGE>
<PAGE>
Savings Plans
The Company has an Employee Savings Incentive Plan which grants to all
eligible employees the opportunity to invest up to 14 percent of their
earnings in certain investment alternatives. For investments by employees
of up to 6 percent of their earnings, the Company is obligated to and has
contributed an amount equal to one-half thereof for credit to the employees'
accounts. Further, the board of directors, at its discretion, may increase
the Company's contribution to match up to 100 percent of the Company's
obligated contribution. In 1992 and 1991 discretionary awards were made.
The Company contributed approximately $6,703,000 in 1993, $9,439,000 in 1992
including a discretionary addition of $3,599,000, and $8,761,000 in 1991,
including a discretionary addition of $3,990,000.
Note 16: Stockholders' Equity
In September 1992, the Company issued 6,600,000 depositary shares, each
representing a one-tenth interest in a share of 8.30 percent cumulative
preferred stock. The preferred stock has a liquidation value of $250 per
share. The preferred stock will not be redeemable prior to November 1, 1997.
Each share of preferred stock, $1.00 par value, will be redeemable at the
option of the Company on or after November 1, 1997 at $250 per share, plus
accrued and unpaid dividends. Dividends are cumulative from the date of
issue and are payable quarterly.
In May 1991, the Company issued 2,587,500 depositary shares, each
representing a one-fifth interest in a share of 8.75 percent cumulative
convertible preferred stock. The preferred stock has a liquidation value of
$250 per share. The preferred stock will not be redeemable prior to May 1,
1996. Each share of preferred stock, $1.00 par value, will be redeemable for
cash at the option of the Company, in whole or in part, at prices declining
to $250 per share on or after May 1, 2001, from $260.94 per share on or after
May 1, 1996, plus accrued and unpaid dividends. Each share of preferred
stock will be convertible at the option of the holder into shares of common
stock of the Company at a conversion price of $20.40 per share of common
stock, subject to adjustment in certain events. Dividends are cumulative
from the date of issue and are payable quarterly.
Authorized but unissued shares of common stock reserved for stock
options were 12,549,475 at December 31, 1993 and 6,969,287 at December 31,
1992. In addition, 3,946,527 shares of common stock had been reserved for
the Dividend Reinvestment Plan.
Parent company equity in retained earnings of subsidiaries was
$1,063,841,000 at December 31, 1993 and $1,499,026,000 at December 31, 1992.
<PAGE>
<PAGE>
The payment of dividends to the parent company from its subsidiaries is
subject to certain regulatory requirements, restrictions imposed by lenders
and federal income tax consequences.
GWB is subject to the regulations of the OTS. A regulation applicable
to savings associations imposes limitations upon capital distributions,
including cash dividends. Tier 1 associations may, after prior notice but
without approval of the OTS, make capital distributions up to the higher of
1) 100 percent of their net income during the calendar year, plus the amount
that would reduce by one-half their "surplus capital ratio" (the excess over
their fully phased-in capital requirement) at the beginning of the calendar
year or 2) 75 percent of their net income over the most recent four quarter
periods. Tier 1 includes savings associations with capital at least equal
to their fully phased-in capital requirements, which have not been notified
that they are in need of more than normal supervision. Minimum capital
requirements are imposed by the thrift regulators. GWB believes that it is
a Tier 1 association.
The following ratios compare GWB with the fully phased-in capital
requirements under regulations issued by the OTS:
<TABLE>
<CAPTION>
December 31, 1993
-------------------------------------------------
Actual OTS Benchmark
---------------- -------------- Capital
(Dollars in millions) Amount % Amount % Excess
------ --- ------ --- -------
<S> <C> <C> <C> <C> <C>
Leverage/tangible ratio $1,876 5.25 $1,071 3.00 $805
Risk-based ratio 2,516 11.69 1,722 8.00 794
</TABLE>
Certain debt agreements of GWB and Aristar provide for the maintenance
of minimum levels of equity. The federal income tax consequences arising
from the payment of dividends by GWB are discussed below. Management
believes, after taking into consideration all of the foregoing restrictions
and requirements, that the Company will be able to continue to pay dividends
to its stockholders without adverse tax consequences.
<PAGE>
<PAGE>
Thrift institutions that meet certain tests prescribed by the Internal
Revenue Code are allowed a bad debt deduction for federal income tax
purposes. Because of such deductions, only $658,000,000 of retained earnings
of the Bank at December 31, 1993 are available for use without adverse tax
consequences. This amount represents the earnings and profits of the Bank
which, in accordance with the Internal Revenue Code, are available for the
payment of dividends. If retained earnings in excess of earnings and profits
are subsequently used by the Bank for purposes other than to absorb loan
losses, including distributions in liquidation, the amounts used will be
subject to federal income taxes at the then prevailing corporate tax rates.
It is not contemplated that retained earnings will be used in a manner which
will create federal income tax liabilities.
Note 17: Contingent Liabilities
In the normal course of its business, the Company is named a defendant in
various legal proceedings and claims. In the opinion of management, after
consultation with outside legal counsel representing the Company in these
lawsuits, their outcomes will not have a material effect on the Company's
financial position or results of operations.
Note 18: Parent Company Financial Information
Effective June 30, 1993, Aristar became a wholly-owned subsidiary of the
Company. This realignment was in the form of a dividend from GWB to GWFC and a
simultaneous cash capital contribution by GWFC to GWB of $369,473,000 which
represented the dividended company's book value. Aristar is expected to be a
source of operating income.
<PAGE>
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Income
Dividends from subsidiary banks $ 500,970 $156,340 $126,880
Dividends from nonbanking
subsidiaries 23,500 7,500 5,000
Management fees and interest
charged subsidiaries 10,705 11,289 32,844
(Loss) income from securities
and investments (343) (55) 2,215
Other 3,056 2 2,612
--------- -------- --------
537,888 175,076 169,551
--------- -------- --------
Expenses
Interest expense on borrowings 45,219 35,030 50,749
Operating and administrative 17,805 20,209 8,884
Federal and state taxes
(credits) on income (22,368) (18,944) (8,954)
--------- -------- --------
40,656 36,295 50,679
--------- -------- --------
Earnings before accounting change
and undistributed net earnings
of subsidiaries 497,232 138,781 118,872
Accounting change - (247) -
Undistributed net (loss) earnings
of subsidiaries (435,185) (53,528) 179,258
--------- -------- --------
$ 62,047 $ 85,006 $298,130
========= ======== ========
</TABLE>
The parent company joins with its subsidiaries, other than the life
insurance subsidiary, in filing a consolidated federal income tax return.
In the return, the parent company's taxable income or loss is consolidated
with the taxable income or loss of its subsidiaries. The parent company's
share of income taxes is based on the amount of tax which would be payable
if separate returns were filed. Therefore, the parent company's equity in
net earnings of subsidiaries is excluded from its computation of the
provision for taxes on income for financial statement purposes. Taxes
receivable consist primarily of amounts due from subsidiaries for taxes paid
on their behalf.
<PAGE>
<PAGE>
Statement of Financial Condition
<TABLE>
<CAPTION>
December 31
-------------------------
(Dollars in thousands) 1993 1992
---- ----
<S> <C> <C>
Assets
Cash $ 500 $ 39
Certificates of deposit and federal funds 210,000 -
Securities available for sale 24,915 -
Investment in subsidiaries at cost plus
equity in undistributed earnings
Great Western Bank 2,247,689 2,310,161
Nonbanking subsidiaries 428,535 44,364
Advances to subsidiaries 54,271 282,457
Taxes receivable 60,662 106,830
Other assets 239,505 204,592
---------- ----------
$3,266,077 $2,948,443
========== ==========
Liabilities and stockholders' equity
Accounts payable and accrued expenses $ 142,200 $ 93,467
Notes payable to GW Overseas Finance N.V. - 3,150
Floating-rate notes 28,250 103,100
Fixed-rate notes 672,226 298,992
---------- ----------
842,676 498,709
Stockholders' equity (see Consolidated
Statement of Financial Condition) 2,423,401 2,449,734
---------- ----------
$3,266,077 $2,948,443
========== ==========
</TABLE>
Following is a summary of the parent company debt by maturity:
<TABLE>
<CAPTION>
(Dollars in thousands) December 31, 1993
-----------------
<S> <C>
1995 $ 28,250
1998 249,477
1999 and thereafter 422,749
--------
$700,476
========
/TABLE
<PAGE>
<PAGE>
Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Operating Activities
Net earnings $ 62,047 $ 85,006 $ 298,130
Noncash adjustments to net earnings
Undistributed net loss (earnings)
of subsidiaries 435,185 53,528 (179,258)
Income taxes 46,170 (52,999) 886
Other 245,699 (4,677) 100,743
--------- --------- ---------
Net cash provided by operating
activities 789,101 80,858 220,501
--------- --------- ---------
Financing Activities
Proceeds from issuance of
Common stock 31,168 14,419 6,137
Preferred stock - 159,446 126,041
Cash dividends paid (145,892) (134,263) (119,090)
--------- --------- ---------
(114,724) 39,602 13,088
Borrowings
Proceeds from new long-term debt 373,019 199,034 99,872
Repayment of long-term debt (77,785) (271,664) (337,650)
--------- --------- ---------
295,234 (72,630) (237,778)
--------- --------- ---------
Net cash provided by (used in)
financing activities 180,510 (33,028) (224,690)
--------- --------- ---------
Investing Activities
Net change in short-term investment
securities available for sale (24,919) - 120,175
Investment in subsidiaries (734,231) (48,662) (119,720)
--------- --------- ---------
Net cash (used in) provided by
investing activities (759,150) (48,662) 455
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents 210,461 (832) (3,734)
Cash and cash equivalents at
beginning of year 39 871 4,605
--------- --------- ---------
Cash and cash equivalents at
end of year $ 210,500 $ 39 $ 871
========= ========= ==========
Supplemental cash flow disclosure
Cash paid for
Interest on borrowings $ 38,427 $ 28,776 $ 52,368
Income taxes 8,761 47,145 33,561
</TABLE>
<PAGE>
<PAGE>
Note 19: Selected Quarterly Financial Data (Unaudited)
Selected quarterly financial operating data are included in Stockholder
Data and Quarterly Information (Unaudited) on pages 122, 123 and 124 of this
annual report to stockholders.
Third quarter 1993 earnings were affected by an additional $150 million
of provisions for losses on loans and real estate established for four
separate bulk sales of distressed assets.
In the fourth quarter of 1992, $335 million was provided for losses on
loans and real estate, which resulted primarily from the Company's efforts to
accelerate disposition of problem loans and real estate.
In the third quarter of 1992, $129 million was provided for losses on loans
and real estate, which resulted from continued weakness in real estate markets
and an effort to accelerate the liquidation of nonperforming commercial real
estate properties.
Note 20: Segment Data
The Company operates in the banking and consumer finance industries. The
Bank operations are primarily one business segment, attracting customer deposits
for real estate lending. However, ancillary activities related to real estate
lending, mortgage banking and retail banking are also included. Consumer
finance operations include installment loans to consumers and installment
contracts purchased from retail merchants as well as home equity loans. A
summary of business segments is included in the table within Segment Data in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
<PAGE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders
Great Western Financial Corporation
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the
financial position of Great Western Financial Corporation and its
subsidiaries ("the Company") at December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles. These financial statements
are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1 to the financial statements, the Company adopted
accounting standards that changed its methods of accounting for
postretirement benefits other than pensions and income taxes in 1992,
and its methods of accounting for impairment of loans and certain debt
and equity securities in 1993.
/s/Price Waterhouse
Los Angeles, California
January 31, 1994
<PAGE>
<PAGE>
Management's Commentary on Financial Statements
Management is responsible for the integrity and objectivity of the
financial statements and other information in this report. The
statements were prepared in accordance with generally accepted
accounting principles appropriate in the circumstances. They meet the
requirements of the Securities and Exchange Commission. The financial
statements reflect management's judgement and estimates relating to
events not concluded by year end.
The Company's code of conduct, communicated to all officers and
employees, requires adherence to high ethical standards in the conduct
of the Company's business.
Management is responsible for maintaining a system of internal
control and has established a system of internal accounting control
designed to provide reasonable assurance that transactions are recorded
properly to permit preparation of financial statements, that
transactions are executed in accordance with management's authorizations
and that assets are safeguarded from significant loss or unauthorized
use.
Management supports an extensive program of internal audits to
evaluate the adequacy of internal controls as well as to monitor
compliance with management's directives and regulatory agencies'
requirements. The audit committee of the board of directors is composed
of nine outside directors, none of whom is an officer or employee of the
Company. The audit committee meets with the internal and external
auditors to review the scope of audits, findings and actions to be taken
by management.
/s/Carl F. Geuther
Carl F. Geuther
Executive Vice President and Chief Financial Officer
January 31, 1994
<PAGE>
<PAGE>
STATISTICAL INFORMATION
Cash and Securities Analysis
<TABLE>
<CAPTION>
December 31
----------------------------------------------
Rate at
(Dollars in millions) 12-31-93 1993 1992 1991 1990 1989
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
By Type
Certificates of deposit, federal funds,
bankers acceptances 3.35% $ 217 $ 350 $ 105 $ 358 $ 466
U.S. government securities 3.24 336 4 107 173 136
Federal agency securities 6.24 41 49 23 58 64
Corporate debt securities 6.49 433 452 455 485 623
Other securities 5.11 61 119 93 211 30
---- ------ ------ ------ ------ ------
1,088 974 783 1,285 1,319
Cash 759 686 615 535 571
------ ------ ------ ------ ------
$1,847 $1,660 $1,398 $1,820 $1,890
====== ====== ====== ====== ======
Yield to maturity on interest earning
securities at year end, excluding
insurance subsidiary 4.66% 5.21% 6.74% 7.93% 8.76%
</TABLE>
<TABLE>
<CAPTION>
Year-end 1993 by Maturity
(Dollars in millions) Less than 1-5 5-10 After 10
Fair Value Total one year years years years
----- --------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Certificates of deposit, federal funds,
bankers acceptances $ 217 3.35% $217 3.35% $ - -% $ - -% $ - -%
U.S. government securities 336 3.24 324 3.16 6 5.25 6 5.62 - -
Federal agency securities 41 6.24 1 4.40 17 5.68 17 6.85 6 6.34
Corporate debt securities 433 6.49 229 6.71 182 6.14 20 7.17 2 6.46
Other securities 61 5.11 40 3.70 3 4.70 18 8.32 - -
------ ---- ---- ---- ---- ---- ---- ---- --- ----
$1,088 4.77% $811 4.24% $208 6.06% $ 61 7.27% $ 8 6.48%
====== ==== ==== ==== ==== ==== ==== ==== === ====
Securities, excluding insurance
subsidiary $1,027 4.66% $798 4.22% $182 5.91% $ 40 7.47% $ 7 6.51%
====== ==== ==== ==== ==== ==== ==== ==== === ====
Amortized Cost
Certificates of deposit, federal funds,
bankers acceptances $ 217 $217 $ - $ - $ -
U.S. government securities 336 324 6 6 -
Federal agency securities 41 2 17 16 6
Corporate debt securities 427 227 178 20 2
Other securities 60 39 3 18 -
------ ---- --- ---- ---
$1,081 $809 $204 $ 60 $ 8
====== ==== ==== ==== ===
/TABLE
<PAGE>
<PAGE>
Borrowings
<TABLE>
<CAPTION>
December 31
Rate at -------------------------------------------
(Dollars in millions) 12-31-93 1993 1992 1991 1990 1989
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
By Type
Short-term borrowings 3.59% $ 676 $1,204 $2,196 $ 539 $ 2,750
FHLB borrowings 6.46 306 311 364 1,131 1,658
Senior debt 8.46 2,497 2,636 3,032 4,845 5,842
Other subordinated debt - - - - 24 25
------ ------ ------ ------ -------
$3,479 $4,151 $5,592 $6,539 $10,275
====== ====== ====== ====== =======
Average interest rate on
borrowings at year end 7.34% 7.60% 7.69% 9.16% 9.21%
</TABLE>
<TABLE>
<CAPTION>
Less than 1-2 2-5 5-10
Year-end 1993 by Maturity Total one year years years years
----- ---------- ----- ----- -----
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Short-term borrowings $ 676 $ 676 $ - $ - $ -
FHLB borrowings 306 119 72 115 -
Senior debt 2,497 302 236 856 1,103
------ ------ ---- ---- ------
$3,479 $1,097 $308 $971 $1,103
====== ====== ==== ==== ======
Average interest rate on
borrowings by maturity 7.34% 5.93% 7.68% 7.21% 8.75%
/TABLE
<PAGE>
<PAGE>
Customer Accounts
<TABLE>
<CAPTION>
Coupon December 31
rate at ---------------------------------------------------------------------------------------
(Dollars in millions) 12-31-93 1993 % 1992 % 1991 % 1990 % 1989 %
-------- ---- --- ---- --- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
By Type
Retail accounts
Transaction accounts
Checking .88% $ 4,533 14 $ 3,859 12 $ 2,764 9 $ 2,215 8 $ 1,853 8
Limited access 2.30 6,699 21 7,012 23 5,431 18 3,506 12 2,502 11
Regular savings 2.04 2,146 7 1,790 6 1,363 5 1,245 4 1,090 5
Term accounts
Less than 6 months 2.88 2,872 9 5,018 16 5,851 19 3,528 12 2,101 9
6 months 3.51 7,004 22 5,338 17 7,850 26 7,167 24 5,100 21
1 year 4.21 2,868 9 1,515 5 1,543 5 4,866 16 4,006 17
2 years 5.20 595 2 547 2 611 2 1,130 4 1,044 4
3 years and over 6.41 2,878 9 2,173 7 1,298 4 1,292 4 1,247 5
Deferred compensation 4.53 1,349 5 2,974 10 2,811 9 2,523 9 2,197 9
---- ------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total retail accounts 30,944 98 30,226 98 29,522 97 27,472 93 21,140 89
Wholesale accounts 2.46 588 2 683 2 1,048 3 2,177 7 2,644 11
---- ------- ----- ------- ----- ------- ----- ------- ----- ------- -----
$31,532 $30,909 $30,570 $29,649 $23,784
======= ======= ======= ======= =======
Average rate at year end 3.10% 3.48% 5.34% 7.40% 7.73%
By Product
Checking accounts $11,040 35 $10,703 35 $ 8,092 27 $ 5,663 19 $ 4,297 18
Regular savings accounts 2,146 7 1,790 6 1,363 4 1,244 4 1,083 5
Tax-deferred accounts
Deferred compensation 1,349 5 2,974 10 2,811 9 2,523 9 2,197 9
IRA/Keogh 2,894 9 2,825 9 2,743 9 2,491 8 1,919 8
$100,000 accounts
Negotiable certificates
of deposit - - - - - - 45 * 325 1
Wholesale transaction 173 * 197 1 330 1 307 1 215 1
Public funds 411 1 457 1 514 2 1,164 4 1,627 7
Other broker accounts 4 * 28 * 203 1 661 2 477 2
Other certificate
accounts 645 2 763 2 837 2 1,123 4 1,623 7
Consumer term accounts 12,870 41 11,172 36 13,677 45 14,428 49 10,021 42
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
$31,532 $30,909 $30,570 $29,649 $23,784
======= ======= ======= ======= =======
</TABLE>
*Less than one percent<PAGE>
<PAGE>
Year-end 1993 Term Accounts by Maturity by Interest Rate
<TABLE>
<CAPTION>
90 days 180 days December 31
Within to to 1-2 2-3 3 years -----------------
(Dollars in millions) 90 days 180 days 1 year years years and over 1993 1992
------- -------- -------- ----- ----- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Under 4% $3,814 $3,113 $3,305 $ 741 $ 16 $ 9 $10,998 $ 8,030
4 to 6% 912 231 1,066 1,454 202 924 4,789 7,118
6 to 8% 63 77 75 140 630 634 1,619 2,259
Over 8% 124 87 60 224 15 65 575 644
$100,000 accounts included above 661 138 200 47 7 7 1,060 1,249
</TABLE>
<TABLE>
<CAPTION>
Year-end 1993 by Maturity
Within
(Dollars in millions) No Maturity one year 1995 1996 1997 1998 After 1998
----------- -------- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances $13,551 $12,927 $2,559 $863 $989 $598 $45
Average coupon rate 1.76% 3.66% 4.65% 6.29% 5.94% 5.20% 8.15%
</TABLE>
<PAGE>
<PAGE>
Loan Analysis
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------------------------------------------
(Dollars in millions) 1993 % 1992 % 1991 % 1990 % 1989 %
---- --- ---- --- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sources of Real Estate Lending Funds
Customer accounts (decrease) increase $(3,471) $(1,920) $(1,862) $ 1,215 $ 1,668
Mortgage principal repayments 5,720 6,324 5,056 4,583 4,378
(Repayments) increase in borrowings (672) (1,441) (947) (3,736) 2,710
Mortgage sales 3,568 4,154 2,491 4,601 2,745
Net earnings 62 85 298 127 100
Cash and securities (increase)
decrease (186) (263) 422 70 (214)
Retail customer accounts acquired
(sold) 4,094 2,258 2,783 4,650 (91)
Other (327) 19 (698) (840) (205)
------- ------- ------- ------- -------
$ 8,788 $ 9,216 $ 7,543 $10,670 $11,091
======= ======= ======= ======= =======
Real Estate Lending for the Year
By Security Type
Single-family $ 8,623 98 $ 9,098 98 $ 7,484 99 $10,567 99 $10,749 97
Apartments 52 1 68 1 36 1 67 1 227 2
Commercial properties 113 1 50 1 23 * 36 * 115 1
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
$ 8,788 $ 9,216 $ 7,543 $10,670 $11,091
======= ======= ======= ======= =======
By Purpose
Construction $ 29 * $ 6 * $ 11 * $ 26 * $ 85 1
Purchase of property 3,152 36 3,205 35 3,682 49 7,440 70 8,305 75
Refinance 5,607 64 6,005 65 3,850 51 3,204 30 2,701 24
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
$ 8,788 $ 9,216 $ 7,543 $10,670 $11,091
======= ======= ======= ======= =======
By Loan Type
Long-term - essentially 30-40 years
ARM $ 5,243 60 $ 4,734 51 $ 4,759 63 $ 9,133 86 $ 9,788 88
Fixed 2,102 24 2,688 29 1,828 24 873 8 757 7
Short-term - essentially 15 years
or less
ARM 185 2 253 3 333 5 450 4 357 3
Fixed 1,258 14 1,541 17 623 8 214 2 189 2
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
$ 8,788 $ 9,216 $ 7,543 $10,670 $11,091
======= ======= ======= ======= =======
Average new loan rate 7.05% 8.25% 9.78% 10.69% 11.02%
Average ARM differential 2.47% 2.25% 2.30% 2.43% 2.52%
</TABLE>
*Less than one percent<PAGE>
<PAGE>
<TABLE>
<CAPTION>
December 31
---------------------------------------------------------------------------------
(Dollars in millions) 1993 % 1992 % 1991 % 1990 % 1989 %
---- --- ---- --- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loan Portfolio by Type
Real estate
Long-term-essentially 30-40 years
ARM $27,082 93 $26,489 92 $27,170 92 $26,909 92 $26,209 92
Fixed 912 3 1,053 3 1,334 4 1,235 4 1,353 5
Short-term-essentially 15 years or less
ARM 566 2 824 3 667 2 604 2 395 1
Fixed 553 2 493 2 448 2 481 2 631 2
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
29,113 28,859 29,619 29,229 28,588
Consumer loans 2,208 2,346 2,408 2,073 1,984
------- ------- ------- ------- -------
$31,321 $31,205 $32,027 $31,302 $30,572
======= ======= ======= ======= =======
Yield at year end 7.54% 8.32% 9.84% 11.01% 11.43%
ARM differential 2.41% 2.37% 2.39% 2.42% 2.41%
Real Estate Loan Portfolio By Security Type
Single-family $25,710 88 $25,367 88 $25,760 87 $24,988 86 $23,382 82
Apartments 1,814 6 1,939 7 2,090 7 2,251 8 2,453 9
Commercial properties 1,589 6 1,553 5 1,769 6 1,990 6 2,753 9
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
$29,113 $28,859 $29,619 $29,229 $28,588
======= ======= ======= ======= =======
Number of real estate loans 429,294 466,852 483,709 468,744 447,339
Loans serviced for others $12,337 $13,106 $12,812 $13,133 $10,495
Consumer Loan Portfolio
Consumer finance/installment $ 1,831 83 $ 1,723 74 $ 1,733 72 $ 1,405 68 $ 1,347 68
Bank cards - - 256 11 300 12 301 15 270 13
Customer account loans 97 4 97 4 113 5 94 4 79 4
Student loans 180 8 165 7 148 6 150 7 156 8
Lease financing 100 5 105 4 114 5 123 6 132 7
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
$ 2,208 $ 2,346 $ 2,408 $ 2,073 $ 1,984
======= ======= ======= ======= =======
Mortgage-backed Securities by Type
ARM $ 2,168 68 $ 1,969 62 $ 2,131 60 $ 2,474 63 $ 1,805 59
Fixed 1,028 32 1,208 38 1,414 40 1,482 37 1,268 41
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
$ 3,196 $ 3,177 $ 3,545 $ 3,956 $ 3,073
======= ======= ======= ======= =======
Yield at year end 5.93% 7.08% 8.63% 8.92% 9.68%
Nonperforming Assets
Delinquent loans $ 626 $ 880 $ 611 $ 327 $ 327
Troubled debt restructurings 213 161 152 135 433
Loans in-substance foreclosed - 480 486 492 63
Real estate acquired through foreclosure 293 490 376 235 262
------- ------- ------- ------- -------
$ 1,132 $ 2,011 $ 1,625 $ 1,189 $ 1,085
======= ======= ======= ======= =======
Percent of total assets 2.90% 5.12% 4.04% 2.98% 2.88%
</TABLE>
*Less than one percent<PAGE>
<PAGE>
Real Estate Loans and Real Estate by State
<TABLE>
<CAPTION>
December 31, 1993 Oklahoma/ Maryland/
(Dollars in millions) Total California Florida Washington Arizona Texas Virginia Georgia Other
----- ---------- ------- ---------- ------- -------- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Real Estate Loans and Real Estate
Real estate loans
Residential
Single-family $25,710 $18,968 $1,726 $915 $337 $550 $309 $428 $2,477
Apartments 1,814 1,451 91 7 65 33 - 58 109
Commercial
Offices 452 410 11 4 8 3 1 5 10
Retail 284 236 24 9 2 - 2 4 7
Hotel/motel 284 138 4 - 3 2 95 - 42
Industrial 333 275 14 4 7 16 - 4 13
Other 236 164 22 10 13 1 1 2 23
------- ------- ------ ---- ---- ---- ---- ---- ------
29,113 21,642 1,892 949 435 605 408 501 2,681
------- ------- ------ ---- ---- ---- ---- ---- ------
Real estate available for sale, net
Real estate acquired through
foreclosure 336 280 39 4 2 1 1 1 8
Other 47 29 3 15 - - - - -
Property development 89 89 - - - - - - -
------- ------- ------ ---- ---- ---- ---- ---- ------
472 398 42 19 2 1 1 1 8
------- ------- ------ ---- ---- ---- ---- ---- ------
Total real estate loans
and real estate $29,585 $22,040 $1,934 $968 $437 $606 $409 $502 $2,689
======= ======= ====== ==== ==== ==== ==== ==== ======
Percent of total 100.0% 74.5% 6.5% 3.3% 1.5% 2.0% 1.4% 1.7% 9.1%
/TABLE
<PAGE>
<PAGE>
Nonperforming Real Estate Loans and Real Estate
<TABLE>
<CAPTION>
December 31, 1993 Oklahoma/ Maryland/
(Dollars in millions) Total California Florida Washington Arizona Texas Virginia Georgia Other
----- ---------- ------- ---------- ------- -------- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans
Residential
Single-family $ 522 $435 $ 26 $ 5 $ 4 $ 7 $ 4 $ 5 $ 36
Apartments 70 50 1 2 - 13 - - 4
Commercial
Offices 42 39 2 - - - 1 - -
Retail 25 19 - 6 - - - - -
Hotel/motel 127 35 - - - - 92 - -
Industrial 24 21 1 - - 2 - - -
Other 7 3 1 1 2 - - - -
------ ---- ---- ---- ---- ---- ---- ---- ----
817 602 31 14 6 22 97 5 40
------ ---- ---- ---- ---- ---- ---- ---- ----
Real estate
Residential
Single-family 171 150 8 2 2 1 1 1 6
Apartments 50 50 - - - - - - -
Commercial
Offices 35 24 11 - - - - - -
Retail 7 6 - - - - - - 1
Hotel/motel 10 8 2 - - - - - -
Industrial 5 4 1 - - - - - -
Other 15 13 1 - - - - - 1
------ ---- ---- ---- ---- ---- ---- ---- ----
293 255 23 2 2 1 1 1 8
------ ---- ---- ---- ---- ---- ---- ---- ----
Total nonperforming real estate
loans and real estate $1,110 $857 $ 54 $ 16 $ 8 $ 23 $ 98 $ 6 $ 48
====== ==== ==== ==== ==== ==== ==== ==== ====
Percent of total 100.0% 77.2% 4.9% 1.4% .7% 2.1% 8.8% .6% 4.3%
</TABLE>
<PAGE>
<PAGE>
California Real Estate Loans and Foreclosed Real Estate
<TABLE>
<CAPTION>
December 31, 1993 California Northern California
--------------------------------- ----------------------------------
(Dollars in millions) Portfolio Nonperforming % Portfolio Nonperforming %
--------- ------------- --- --------- ------------- ---
<S> <C> <C> <C> <C> <C> <C>
Real estate loans
Residential
Single-family $18,968 $435 2.3 $5,434 $ 83 1.5
Apartments 1,451 50 3.4 184 3 1.6
Commercial
Offices 410 39 9.5 77 12 15.6
Retail 236 19 8.1 54 1 1.9
Hotel/motel 138 35 25.4 43 - -
Industrial 275 21 7.6 38 1 2.6
Other 164 3 1.8 40 - -
------- ---- ----- ------ ---- -----
21,642 602 2.8 5,870 100 1.7
------- ---- ----- ------ ---- -----
Foreclosed real estate
Residential
Single-family 150 150 100.0 29 29 100.0
Apartments 52 50 96.2 1 1 100.0
Commercial
Offices 31 24 77.4 10 6 60.0
Retail 15 6 40.0 1 1 100.0
Hotel/motel 8 8 100.0 2 2 100.0
Industrial 11 4 36.4 2 - -
Other 13 13 100.0 1 1 100.0
------- ---- ----- ------ ---- -----
280 255 91.1 46 40 87.0
------- ---- ----- ------ ---- -----
Total real estate loans
and foreclosed real
estate $21,922 $857 3.9 $5,916 $140 2.4
======= ==== ===== ====== ==== ======
</TABLE>
<PAGE>
<PAGE>
California Real Estate Loans and Foreclosed Real Estate (continued)
<TABLE>
<CAPTION>
December 31, 1993 Central California Southern California
-------------------------------- ---------------------------------
(Dollars in millions) Portfolio Nonperforming % Portfolio Nonperforming %
--------- ------------- --- --------- ------------- ---
<S> <C> <C> <C> <C> <C> <C>
Real estate loans
Residential
Single-family $1,585 $25 1.6 $11,949 $327 2.7
Apartments 267 10 3.7 1,000 37 3.7
Commercial
Offices 43 2 4.7 290 25 8.6
Retail 30 - - 152 18 11.8
Hotel/motel 27 2 7.4 68 33 48.5
Industrial 16 - - 221 20 9.0
Other 22 1 4.5 102 2 2.0
------ --- ----- ------- ---- -----
1,990 40 2.0 13,782 462 3.4
------ --- ----- ------- ---- -----
Foreclosed real estate
Residential
Single-family 9 9 100.0 112 112 100.0
Apartments 4 4 100.0 47 45 95.7
Commercial
Offices 2 2 100.0 19 16 84.2
Retail 9 - - 5 5 100.0
Hotel/motel - - - 6 6 100.0
Industrial - - - 9 4 44.4
Other - - - 12 12 100.0
------ --- ----- ------- ---- -----
24 15 62.5 210 200 95.2
------ --- ----- ------- ---- -----
Total real estate loans
and foreclosed real
estate $2,014 $55 2.7 $13,992 $662 4.7
====== === ===== ======= ==== =====
/TABLE
<PAGE>
<PAGE>
Stockholder Data and Quarterly Information (Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands, except per share)
1993
--------------------------------------------------
Fourth Third Second First
Total Quarter Quarter Quarter Quarter
----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Interest income $2,680,784 $652,872 $665,616 $674,497 $687,799
Interest expense 1,297,930 313,261 322,102 324,361 338,206
---------- -------- -------- -------- --------
Net interest income 1,382,854 339,611 343,514 350,136 349,593
Noninterest income 294,072 68,752 98,819 67,049 59,452
Provision for loan losses 463,000 111,400 203,600 85,500 62,500
Provision for real estate losses 92,000 38,000 28,000 500 25,500
Noninterest expense 1,029,879 288,185 247,466 245,994 248,234
---------- -------- -------- -------- --------
Earnings (loss) before taxes
and accounting changes 92,047 (29,222) (36,733) 85,191 72,811
Taxes (benefit) on income 30,000 (11,000) (19,200) 32,600 27,600
---------- -------- -------- -------- --------
Earnings (loss) before
accounting changes 62,047 (18,222) (17,533) 52,591 45,211
Accounting changes - - - - -
---------- -------- -------- -------- --------
Net earnings (loss) $ 62,047 $(18,222) $(17,533) $ 52,591 $ 45,211
========== ======== ======== ======== ========
Per common share:
Primary earnings (loss)
before accounting changes $.28 $(.19) $(.18) $.35 $.30
Fully diluted earnings (loss)
before accounting changes .28 (.19) (.18) .35 .30
Primary earnings (loss) .28 (.19) (.18) .35 .30
Fully diluted earnings (loss) .28 (.19) (.18) .35 .30
Dividends .92 .23 .23 .23 .23
Stock price:
High $20 3/8 $19 3/4 $18 7/8 $19 1/4
Low 17 5/8 16 1/8 15 5/8 16
End of period 20 19 5/8 16 3/4 17 5/8
Per preferred share:
Dividends
Cumulative convertible $21.875 $5.46875 $5.46875 $5.46875 $5.46875
Cumulative 20.75 5.1875 5.1875 5.1875 5.1875
Stock price
Cumulative convertible
High $63 1/4 $61 5/8 $60 3/4 $60 1/8
Low 59 56 1/4 55 1/2 54 3/4
Cumulative
High $26 3/4 $26 3/8 $25 7/8 $25 3/8
Low 25 1/8 25 1/8 24 7/8 23 3/8
</TABLE>
Exchange Listings: New York Stock Exchange, Pacific Stock Exchange and London
Stock Exchange. Approximate number of common stockholders of record at
December 31, 1993: 13,467 Under regulations, retained earnings are subject
to substantial restrictions for the payment of dividends. See Note 16 to
the Consolidated Financial Statements.
<PAGE>
<PAGE>
Stockholder Data and Quarterly Information (Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands, except per share)
1992
---------------------------------------------------
Fourth Third Second First
Total Quarter Quarter Quarter Quarter
----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Interest income $3,091,093 $ 717,860 $749,613 $786,219 $837,401
Interest expense 1,668,731 360,556 400,336 432,430 475,409
---------- ---------- --------- -------- --------
Net interest income 1,422,362 357,304 349,277 353,789 361,992
Noninterest income 282,856 68,432 71,713 73,710 69,001
Provision for loan losses 420,000 182,300 100,000 60,000 77,700
Provision for real estate losses 220,000 153,000 29,000 9,000 29,000
Noninterest expense 969,706 258,623 236,131 238,450 236,502
---------- ---------- --------- -------- --------
Earnings (loss) before taxes
and accounting changes 95,512 (168,187) 55,859 120,049 87,791
Taxes (benefit) on income 41,600 (70,900) 24,200 51,000 37,300
---------- ---------- --------- -------- --------
Earnings (loss) before
accounting changes 53,912 (97,287) 31,659 69,049 50,491
Accounting changes 31,094 - - - 31,094
---------- ---------- --------- -------- --------
Net earnings (loss) $ 85,006 $ (97,287) $ 31,659 $ 69,049 $ 81,585
========== ========== ========= ======== ========
Per common share:
Primary earnings (loss)
before accounting changes $.30 $(.80) $.22 $.51 $.37
Fully diluted earnings (loss)
before accounting changes .30 (.80) .22 .50 .37
Primary earnings (loss) .53 (.80) .22 .51 .60
Fully diluted earnings (loss) .53 (.80) .22 .50 .60
Dividends .91 .23 .23 .23 .22
Stock price:
High $17 1/2 $17 3/4 $18 1/4 $19 3/4
Low 13 14 16 1/4 16 7/8
End of period 17 1/2 14 1/8 16 7/8 17 3/4
Per preferred share:
Dividends
Cumulative convertible $21.875 $5.46875 $5.46875 $5.46875 $5.46875
Cumulative 6.40 5.1875 1.2125
Stock price
Cumulative convertible
High $56 3/4 $56 1/4 $57 3/4 $60
Low 51 1/2 53 53 1/2 55
Cumulative
High $24 1/2
Low 22 3/8
</TABLE>
<PAGE>
<PAGE>
Stockholder Data and Quarterly Information (Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands, except per share)
1991
--------------------------------------------------
Fourth Third Second First
Total Quarter Quarter Quarter Quarter
----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Interest income $3,718,796 $878,678 $911,246 $957,824 $971,048
Interest expense 2,453,540 544,755 592,559 633,915 682,311
---------- -------- -------- -------- --------
Net interest income 1,265,256 333,923 318,687 323,909 288,737
Noninterest income 254,857 68,560 61,162 64,239 60,896
Provision for loan losses 149,900 47,200 37,700 35,000 30,000
Provision for real estate losses 21,000 11,000 3,000 4,000 3,000
Noninterest expense 843,783 223,213 207,940 213,268 199,362
---------- -------- -------- -------- --------
Earnings (loss) before taxes
and accounting changes 505,430 121,070 131,209 135,880 117,271
Taxes (benefit) on income 207,300 49,600 53,900 55,700 48,100
---------- -------- -------- -------- --------
Earnings (loss) before
accounting changes 298,130 71,470 77,309 80,180 69,171
Accounting changes - - - - -
---------- -------- -------- -------- --------
Net earnings (loss) $ 298,130 $ 71,470 $ 77,309 $ 80,180 $ 69,171
========== ======== ======== ======== ========
Per common share:
Primary earnings (loss)
before accounting changes $2.25 $.53 $.58 $.60 $.54
Fully diluted earnings (loss)
before accounting changes 2.24 .53 .57 .60 .54
Primary earnings (loss) 2.25 .53 .58 .60 .54
Fully diluted earnings (loss) 2.24 .53 .57 .60 .54
Dividends .87 .22 .22 .22 .21
Stock price:
High $18 $20 7/8 $19 1/8 $17 3/4
Low 13 7/8 16 7/8 16 3/8 11 1/4
End of period 18 17 3/4 17 3/4 17 3/4
Per preferred share:
Dividends
Cumulative convertible $13.57 $5.46875 $5.46875 $2.6325
Cumulative
Stock price
Cumulative convertible
High $56 7/8 $61 $55 1/2
Low 48 1/4 53 53 1/2
Cumulative
High
Low
</TABLE>
<PAGE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors, executive officers and principal
shareholders appears on pages 5 through 11 and pages 25 and 26 of the Proxy
Statement for the Annual Meeting of Stockholders, April 26, 1994, and is
incorporated herein by reference, except as noted therein.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation appears on pages 11 through
15 and pages 19 through 25 of the Proxy Statement for the Annual Meeting of
Stockholders, April 26, 1994, and is incorporated herein by reference, except
as noted therein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information regarding security ownership of certain beneficial owners
and management appears on pages 5, 10, 25 and 26 of the Proxy Statement for
the Annual Meeting of Stockholders, April 26, 1994 and is incorporated herein
by reference, except as noted therein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions
appears on pages 9, 11, 12, 13 and 19 of the Proxy Statement for the Annual
Meeting of Stockholders, April 26, 1994 and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
See index to "Financial Statements and Supplementary Data" on page 52.
<PAGE>
<PAGE>
2. Financial Statement Schedules
No financial statement schedules are required because they are not
applicable or the required information is shown in the financial
statements or notes thereto included in "Financial Statements and
Supplementary Data".
3. Executive Compensation Plans and Arrangements
A. Employment Agreement between GWFC and James F. Montgomery dated
December 19, 1989 filed as an exhibit to Form 10-K for the year ended
1989 as Exhibit 10.3.
B. Employment Agreement between GWFC and John F. Maher dated December 19,
1989 filed as an exhibit to Form 10-K for the year ended 1989 as
Exhibit 10.4.
C. Employment Agreement between GWFC and Carl F. Geuther dated as of
March 1, 1988 filed as an exhibit to Form 10-K for the year ended 1989
as Exhibit 10.6.
D. Employment Agreement between GWFC and Michael M. Pappas dated as of
March 1, 1988 filed as an exhibit to Form 10-K for the year ended 1989
as Exhibit 10.7.
E. Employment Agreement between GWFC and J. Lance Erikson dated as of
March 1, 1988 filed as an exhibit to Form 10-K for the year ended 1989
as Exhibit 10.8.
F. Employment Agreement between GWFC and E. A. Crane effective March 1,
1989 filed as an exhibit to Form 10-K for the year ended 1988 as
Exhibit 10.11.
G. Employment Agreement between GWFC and Curtis J. Crivelli effective
March 1, 1989 filed as an exhibit to Form 10-K for the year ended 1988
as Exhibit 10.12.
H. Employment Agreement between GWFC and Joe M. Jackson dated February 1,
1992 filed as an exhibit to Form 10-K for the year ended 1991 as
Exhibit 10.10.
I. Supplemental Executive Retirement Plan as amended, filed as Exhibit
10.11 to Form 10-K for the year ended December 31, 1992.
J. 1979 Incentive and Nonstatutory Stock Option and Appreciation Plan as
amended, filed as Exhibit 10.12 to Form 10-K for the year ended
December 31, 1992.
K. Addendum to the 1979 Incentive and Non-Statutory Stock Option and
Appreciation Plan filed as Exhibit 10.13.
<PAGE>
<PAGE>
L. Form of Non-Qualified Stock Option Agreement relating to the 1979
Incentive and Nonstatutory Stock Option and Appreciation Plan utilized
from April 20, 1982 to April 22, 1986, filed as an exhibit to Post-
Effective Amendment No. 3 to GWFC's Registration Statement No. 2-67233
on Form S-8 as Exhibit 15.7.
M. Form of Non-Qualified Stock Option Agreement relating to the 1979
Incentive and Nonstatutory Stock Option and Appreciation Plan utilized
from April 22, 1986 through 1988 filed as an exhibit to Post-Effective
Amendment No. 3 to GWFC's Registration Statement No. 2-67233 on Form
S-8 as Exhibit 15.8.
N. The 1988 Stock Option and Incentive Plan (as amended and restated July
22, 1993) filed as Exhibit 10.16.
O. Employee Non-Qualified Stock Option Agreement filed as an exhibit to
Post-Effective Amendment No. 1 to GWFC's Registration Statement No.
33-21469 on Form S-8 pertaining to GWFC's 1988 Stock Option and
Incentive Plan as Exhibit 28.2.
P. Revised Form of Non-Qualified Stock Option Agreement effective January
28, 1992 filed as an exhibit to Post-Effective Amendment No. 3 to
GWFC's Registration Statement No. 33-21469 on Form S-8 pertaining to
GWFC's 1988 Stock Option and Incentive Plan as Exhibit 28.3.
Q. Revised Form of Non-Qualified Stock Option Agreement effective January
25, 1994 filed as Exhibit 10.21.
R. Form of Non-Qualified Stock Option Agreement (Early Vesting
Provisions) filed as Exhibit 10.22.
S. Form of Restricted Stock Award Agreement and General Provisions
Applicable to Restricted Stock Awards Granted Under the 1988 Stock
Option and Incentive Plan filed as an exhibit to Post-Effective
Amendment No. 3 to GWFC's Registration Statement No. 33-21469 on Form
S-8 as Exhibit 28.4.
T. GWFC Senior Officers' Deferred Compensation Plan (1992 Restatement)
filed as an exhibit to Form 10-K for the year ended 1991 as Exhibit
10.21.
U. Great Western Supplemental Incentive Plan, effective December 1984
filed as an exhibit to Form 10-K for the year ended 1984 as Exhibit
19.1.
V. GWFC Umbrella Trust for Senior Officers filed as an exhibit to Form
10-Q for the quarter ended March 31, 1989 as Exhibit 19.1.
W. Summary of certain additional executive benefits, filed as Exhibit
10.27 to Form 10-K for the year ended December 31, 1992.
<PAGE>
<PAGE>
X. Employee Home Loan Program, filed as an exhibit to Form 10-Q for
the quarter ended June 30, 1993.
Y. Form of Director Stock Option Agreement filed as an exhibit to GWFC's
Registration Statement No. 33-21469 on Form S-8 pertaining to GWFC's
1988 Stock Option and Incentive Plan as Exhibit 28.1.
Z. Form of Director Stock Option Agreement effective January 3, 1994
filed as Exhibit 10.18.
AA. GWFC Directors' Deferred Compensation Plan (1992 Restatement) filed as
an exhibit to Form 10-K for the year ended 1991 as Exhibit 10.22.
BB. GWFC Umbrella Trust for Directors filed as an exhibit to Form 10-Q for
the quarter ended March 31, 1989 as Exhibit 19.2.
CC. Restated Retirement Plan for Directors filed as an exhibit to Form
10-K for the year ended 1991 as Exhibit 10.27.
DD. GWFC Annual Incentive Compensation Plan for Executive Officers filed
as exhibit 10.33.
4. Exhibits Required by Securities and Exchange
Commission Regulations S-K
3.1 Restated Certificate of Incorporation of GWFC, as in effect on the
date of this report (filed as an exhibit to GWFC's Annual Report on
Form 10-K for the year ended December 31, 1992 and incorporated herein
by reference).
3.2 Certificate of Designations of GWFC's 8.30 percent Cumulative
Preferred Stock (filed as an exhibit to GWFC's Current Report on Form
8-K dated September 9, 1992, event date September 2, 1992, and
incorporated herein by reference).
3.3 By-laws of GWFC as in effect on the date of this report.
4.1 GWFC agrees to furnish the Securities and Exchange Commission, upon
request, with copies of all instruments defining rights of holders of
long-term debt of GWFC and its consolidated subsidiaries.
4.2 Indenture dated as of May 31, 1988, as amended and supplemented as of
June 14, 1988 and October 31, 1988, between GWB and Morgan Guaranty
Trust Company of New York (filed as an exhibit to GWFC's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989 and
incorporated herein by reference).
10.1 Rights Agreement (the "Rights Agreement") dated as of June 24, 1986,
between GWFC and Morgan Guaranty Trust Company of New York (filed as
Exhibit 1 to the Company's Report on Form 8-K dated July 3, 1986 and
incorporated herein by reference).
<PAGE>
<PAGE>
10.2 First Amendment to Rights Agreement dated as of February 19, 1988,
between GWFC and Morgan Shareholder Services Trust Company, successor
to Morgan Guaranty Trust Company of New York as Rights agent
(incorporated herein by reference to the Company's Report on Form 8-K
(File No. 1-4075) dated February 24, 1988).
10.3 Employment Agreement between GWFC and James F. Montgomery dated
December 19, 1989 (filed as an exhibit to GWFC's Annual Report on Form
10-K for the fiscal year ended December 31, 1989 and incorporated
herein by reference).
10.4 Employment Agreement between GWFC and John F. Maher dated December 19,
1989 (filed as an exhibit to GWFC's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 and incorporated herein by
reference).
10.5 Employment Agreement between GWFC and Carl F. Geuther dated as of
March 1, 1988 (filed as an exhibit to GWFC's Annual Report on Form
10-K for the fiscal year ended December 31, 1989 and incorporated
herein by reference).
10.6 Employment Agreement between GWFC and Michael M. Pappas dated as of
March 1, 1988 (filed as an exhibit to GWFC's Annual Report on Form
10-K for the fiscal year ended December 31, 1989 and incorporated
herein by reference).
10.7 Employment Agreement between GWFC and J. Lance Erikson dated as of
March 1, 1988 (filed as an exhibit to GWFC's Annual Report on Form
10-K for the fiscal year ended December 31, 1989 and incorporated
herein by reference).
10.8 Employment Agreement between GWFC and E. A. Crane effective March 1,
1989 (filed as an exhibit to GWFC's Annual Report on Form 10-K for the
fiscal year ended December 31, 1988, and incorporated herein by
reference).
10.9 Employment Agreement between GWFC and Curtis J. Crivelli effective
March 1, 1989 (filed as an exhibit to GWFC's Annual Report on Form
10-K for the fiscal year ended December 31, 1988, and incorporated
herein by reference).
10.10 Employment Agreement between GWFC and Joe M. Jackson dated February
1, 1992 (filed as an exhibit to GWFC's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991, and incorporated herein by
reference).
10.11 Supplemental Executive Retirement Plan as amended (filed as an
exhibit to GWFC's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, and incorporated herein by reference).
<PAGE>
<PAGE>
10.12 1979 Incentive and Nonstatutory Stock Option and Appreciation Plan as
amended (filed as an exhibit to GWFC's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992, and incorporated herein by
reference).
10.13 Addendum to the 1979 Incentive and Nonstatutory Stock Option and
Appreciation Plan.
10.14 Form of Non-Qualified Stock Option Agreement relating to the 1979
Incentive and Nonstatutory Stock Option and Appreciation Plan utilized
from April 20, 1982 to April 22, 1986 (filed as an exhibit to
Post-Effective Amendment No. 3 to GWFC's Registration Statement No.
2-67233 on Form S-8, and incorporated herein by reference).
10.15 Form of Non-Qualified Stock Option Agreement relating to the 1979
Incentive and Nonstatutory Stock Option and Appreciation Plan utilized
from April 22, 1986 through 1988 (filed as an exhibit to Post-
Effective Amendment No. 3 to GWFC's Registration Statement No. 2-67233
on Form S-8, and incorporated herein by reference).
10.16 The 1988 Stock Option and Incentive Plan (as amended and restated
effective July 22, 1993).
10.17 Form of Director Stock Option Agreement (filed as an exhibit to GWFC's
Registration Statement No. 33-21469 on Form S-8 pertaining to GWFC's
1988 Stock Option and Incentive Plan and incorporated herein by
reference).
10.18 Form of Director Stock Option Agreement effective January 3, 1994.
10.19 Employee Non-Qualified Stock Option Agreement (filed as an exhibit to
GWFC's Registration Statement No. 33-21469 on Form S-8 pertaining to
GWFC's 1988 Stock Option and Incentive Plan and incorporated herein by
reference).
10.20 Revised Form of Non-Qualified Stock Option Agreement effective January
28, 1992 (filed as an exhibit to Post-Effective Amendment No. 3 to
GWFC's Registration Statement No. 33-21469 on Form S-8 pertaining to
GWFC's 1988 Stock Option and Incentive Plan and incorporated herein by
reference).
10.21 Revised Form of Non-Qualified Stock Option Agreement effective January
25, 1994.
10.22 Form of Non-Qualified Stock Option Agreement (Early Vesting
Provisions).
10.23 Form of Restricted Stock Award Agreement and General Provisions
Applicable to Restricted Stock Awards Granted Under the 1988 Stock
Option and Incentive Plan (filed as an exhibit to Post-Effective
Amendment No. 3 to GWFC's Registration Statement No. 33-21469 on Form
S-8, and incorporated herein by reference).<PAGE>
<PAGE>
10.24 GWFC Deferred Compensation Plan (1992 Restatement) (filed as an
exhibit to GWFC's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991, and incorporated herein by reference).
10.25 GWFC Senior Officers' Deferred Compensation Plan (1992 Restatement)
(filed as an exhibit to GWFC's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991, and incorporated herein by
reference).
10.26 GWFC Directors' Deferred Compensation Plan (1992 Restatement) (filed
as an exhibit to GWFC's Annual Report on Form 10-K for the fiscal year
ended December 31, 1991, and incorporated herein by reference).
10.27 Great Western Supplemental Incentive Plan, effective December 1, 1984
(filed as an exhibit to GWFC's Annual Report on Form 10-K for the
fiscal year ended December 31, 1984, and incorporated herein by
reference).
10.28 GWFC Umbrella Trust for Senior Officers (filed as an exhibit to
GWFC's Quarterly Report on Form 10-Q for the quarter ended March 31,
1989, and incorporated herein by reference).
10.29 GWFC Umbrella Trust for Directors (filed as an exhibit to GWFC's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1989,
and incorporated herein by reference).
10.30 Restated Retirement Plan for Directors (filed as an exhibit to GWFC's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993, and
incorporated herein by reference).
10.31 Summary of certain additional executive benefits (filed as an exhibit
to GWFC's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, and incorporated herein by reference).
10.32 Employee Home Loan Program (filed as an exhibit to GWFC's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993, and
incorporated herein by reference).
10.33 GWFC Annual Incentive Compensation Plan for Executive Officers.
11.1 Statement re Computation of Per Share Earnings.
12.1 Computation of Ratios of Earnings to Fixed Charges.
21.1 Subsidiaries.
23.1 Consent of Price Waterhouse included on page 135 of this Form 10-K.
24.1 Power of Attorney included on page 133 of this Form 10-K.
<PAGE>
<PAGE>
The 1993 Annual Report to Stockholders has already been furnished to
each stockholder of record who is entitled to receive a copy thereof. A copy
of the 1993 Annual Report to Stockholders will be furnished without charge
upon specific request of any stockholder of record on February 28, 1994 and
any beneficial owner of the Company's common stock on such date who has not
previously received a copy and who represents such facts in good faith to the
Company in writing direct to:
Corporate Secretary
Great Western Financial Corporation
9200 Oakdale Avenue
Chatsworth, California 91311-6519
Other exhibits will be supplied to any such stockholder at a charge
equal to the Company's cost of copying, postage and handling.
(b) Reports on Form 8-K
A current report on Form 8-K dated December 14, 1993 (event date
December 3, 1993) reported that Great Western Bank, a Federal Savings Bank,
acquired certain assets and assumed certain liabilities of HomeFed Bank, F.A.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
GREAT WESTERN FINANCIAL CORPORATION
/s/ James F. Montgomery March 22, 1994
- ------------------------------ ------------------
James F. Montgomery, Chairman Date
and Chief Executive
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes James F.
Montgomery, Carl F. Geuther and Jesse L. King, and each of them or any of
them, as attorney-in-fact to sign on his or her behalf as an individual and
in every capacity stated below, and to file all amendments to the
registrant's Form 10-K, and the registrant hereby confers like authority to
sign and file in its behalf.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 22, 1994, by the following persons on
behalf of the registrant and in the capacities indicated.
/s/ James F. Montgomery
- ------------------------------------------------------
James F. Montgomery, Chairman and Chief Executive
(Principal Executive Officer)
/s/ Carl F. Geuther
- ----------------------------------------------------------------------
Carl F. Geuther, Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Jesse L. King
- ------------------------------------------------------------------
Jesse L. King, Senior Vice President and Controller
(Principal Accounting Officer)
/s/ John F. Maher
- -----------------------------------------------------------
John F. Maher, President and Chief Operating Officer
/s/ Dr. David Alexander /s/ Enrique Hernandez, Jr.
- ---------------------------------- ---------------------------------
Dr. David Alexander, Director Enrique Hernandez, Jr., Director
/s/ H. Frederick Christie
- ---------------------------------- ----------------------------------
H. Frederick Christie, Director Charles D. Miller, Director
/s/ Stephen E. Frank /s/ Dr. Alberta E. Siegel
- ----------------------------------- ----------------------------------
Stephen E. Frank, Director Dr. Alberta E. Siegel, Director
/s/ John V. Giovenco . /s/ Willis B. Wood, Jr.
- ----------------------------------- ----------------------------------
John V. Giovenco, Director Willis B. Wood, Jr., Director
/s/ Firmin A. Gryp
- ------------------------------------
Firmin A. Gryp, Director
<PAGE>
<PAGE>
INDEX OF
ADDITIONAL FINANCIAL DATA
Page
Consent of Independent Accountants S-2
<PAGE>
<PAGE>
S-2
CONSENT OF INDEPENDENT ACCOUNTANTS
-----------------------------------
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 33-19884,
2-98811 and 33-60206), on Form S-4 (Nos. 33-15135 and 33-17705) and on Form
S-8 (Nos. 2-67233, 2-90750, 33-6174 and 33-21469) of Great Western Financial
Corporation of our report dated January 31, 1994 appearing on page 110 of
this Form 10-K.
/s/ PRICE WATERHOUSE
Los Angeles, California
March 22, 1994
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
EXHIBITS INDEX
Exhibit Page
Number Number
- ------- ------
3.3 By-laws of Great Western Financial Corporation
10.13 Addendum to the 1979 Incentive and Nonstatutory
Stock Option and Appreciation Plan.
10.16 The 1988 Stock Option and Incentive Plan (as amended
and restated effective July 22, 1993).
10.18 Form of Director Stock Option Agreement effective
January 3, 1994.
10.21 Revised Form of Non-Qualified Stock Option Agreement
effective January 25, 1994.
10.22 Form of Non-Qualified Stock Option Agreement (Early
Vesting Provisions).
10.33 Great Western Financial Corporation Annual Incentive
Compensation Plan for Executive Officers.
11.1 Statement re Computation of Per Share Earnings.
12.1 Computation of Ratios of Earnings to Fixed Charges.
21.1 Subsidiaries.
<PAGE>
Exhibit 3.3
BYLAWS
OF
GREAT WESTERN FINANCIAL CORPORATION
(As Amended Through 3/08/94)
<PAGE>
<PAGE>
BY-LAWS
of
GREAT WESTERN FINANCIAL CORPORATION
(Formerly Known as Great Western Corporation)
SECTION 1. In addition to its principal
office in the State of Delaware, the Corporation may
also have offices at such other places within or
without the State of Delaware as the Board of
Directors shall from time to time determine.
Amended SECTION 2. The annual meeting of the
9/26/89 stockholders of the Corporation shall be held on the
fourth Tuesday in April in each year (or, if that day
shall be a legal holiday then on the next business
day) at such time and place, within or without the
State of Delaware, as may be specified in the notice
thereof, as shall be fixed by the Board of Directors
(herein called the Board), for the purpose of electing
directors and for the transaction of only such other
business as is properly brought before such meeting in
accordance with these by-laws. If any annual meeting
shall not be held on the day designated or the
directors shall not have been elected thereat or at
any adjournment thereof, thereafter the Board shall
cause a special meeting of the stockholders to be held
<PAGE>
<PAGE>
as soon as practicable for the election of directors.
At such special meeting the stockholders may elect
directors and transact other business with the same
force and effect as at an annual meeting of the
stockholders duly called and held.
Amended SECTION 3. Special meetings of the
9/26/89 stockholders of the Corporation may be held, within or
without the State of Delaware, upon notice given by or
at the direction of the Board of Directors. Such
notice shall state the time, place and purposes of
meeting.
Amended SECTION 4. In order to be properly brought
9/26/89 before any meeting of the stockholders held pursuant
to Section 2, business (including the election of
directors) must be (a) specified in the notice of
meeting (or any supplement thereto) given by or at the
direction of the Board, (b) otherwise properly brought
before the meeting by or at the direction of the
Board, or (c) otherwise properly brought before the
meeting by a stockholder. In addition to any other
applicable requirements, in order for any such
business to be properly brought before the meeting by
a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the
Corporation. In order to be timely, a stockholder's
notice must be delivered to or mailed and received at
the principal executive offices of the Corporation,
not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event
that the meeting is called for a date other than that
specified in the bylaws and less than 75 days' prior
public disclosure of the date of the meeting is given,
notice by the stockholder in order to be timely must
be so received not later than the close of business on
the 15th day following the day on which such public
disclosure of the date of the meeting was made. A
stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to bring
before the meeting (i) a brief description of the
business desired to be brought before the annual
meeting and the reasons for conducting such business
at the meeting, (ii) the name and record address of
the stockholder proposing such business, (iii) the
class and number of shares of the Corporation which
are beneficially owned by the stockholder, and (iv)
any material interest of the stockholder in such
business.
<PAGE>
<PAGE>
Notwithstanding anything in the by-laws to the
contrary, no business (including the election of
directors) shall be conducted at the meeting except in
accordance with the procedures set forth in this
Section 4, provided, however, that nothing in this
Section 4 shall be deemed to preclude discussion by
any stockholder of any business properly brought
before the meeting.
In order to be properly brought before any
meeting of the stockholders held pursuant to Section
3 (other than any special meeting held for the purpose
of electing directors pursuant to Section 2), business
must be specified in the notice of meeting (or any
supplement thereto) given by or at the direction of
the Board.
The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that
business was not properly brought before the meeting
in accordance with the provisions of this Section 4,
and if he should so determine, he shall so declare to
the meeting and any such business not properly brought
before the meeting shall not be transacted.
SECTION 5. Notice of the time and place of
every meeting of stockholders and of the business to
be acted on at such meeting shall be mailed by the
Secretary or the officer performing his duties, at
least ten days before the meeting, to each stockholder
of record having voting power and entitled to such
notice at his last known post office address;
provided, however, that if a stockholder be present at
a meeting, or in writing waive notice thereof before
or after the meeting, notice of the meeting to such
stockholder shall be unnecessary.
Amended SECTION 6. The holders of a majority of
6/24/86 the stock of the Corporation having voting power
and present in person or by proxy shall constitute a
3/08/94 quorum, but less than a quorum shall have power to
adjourn any meeting from time to time without notice.
The holders of a majority of the stock present and
entitled to vote at a duly qualified meeting of
stockholders shall have power to act; unless the
matter is one as to which a different vote is
specified by applicable law or regulation (other than
Section 216 of the Delaware General Corporation Law),
in which case the different vote so specified by such
<PAGE>
<PAGE>
law or regulation shall apply. The foregoing
provisions of this Section 6 each shall be subject to
the voting rights of holders of any Preferred Stock of
the Corporation and any quorum requirements relating
thereto.
SECTION 7. At every meeting of stockholders
each stockholder entitled to vote thereat shall be
entitled to one vote for each share of stock held by
him and may vote and otherwise act in person or by
proxy; but no proxy shall be voted upon more than one
year after its date unless such proxy provides for a
longer period.
Amended SECTION 8. At least ten days before each
3/21/67 election of directors a complete list of the
stockholders entitled to vote at such election,
arranged in alphabetical order and showing the address
and the number of shares registered in the name of
each stockholder, shall be made and filed either at a
place within the city where the election is to be held
and which place shall be specified in the notice of
the meeting at which such election is to take place,
or if not so specified, at the place where such
meeting is to be held. Such list shall be open to the
examination of any stockholder during ordinary
business hours for a period of at least ten days prior
to such election at the place so filed. Such list
shall be produced and kept at the time and place of
such election and be subject to inspection by any
stockholder.
Amended SECTION 9. Certificates of stock shall be
4/20/71 of such form and device as the Board of Directors
and may elect and shall be signed by the Chairman of the
5/28/91 Board, the President or a Vice President and the
Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary, but in case any such
Certificate is countersigned by a transfer agent,
other than the Corporation or its employee, or by a
registrar, other than the Corporation or its employee,
any other signature on such certificate may be a
facsimile, engraved, stamped or printed.
SECTION 10. The stock of the Corporation shall
be transferable or assignable only on the books of the
Corporation by the holders in person, or by attorney,
on the surrender of the certificates therefor. The
Board of Directors may appoint one or more transfer
agents and registrar of the stock.<PAGE>
<PAGE>
Amended SECTION 11. The Board of Directors shall
11/19/68 have the power to close the stock transfer books of
the Corporation for a period not exceeding sixty (60)
days preceding the date of any meeting of
stockholders, or the date for payment of any dividend,
or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital
stock shall go into effect. In lieu of closing the
stock transfer books as aforesaid, the Board of
Directors is hereby authorized to fix in advance, a
date, not exceeding sixty (60) days preceding the date
of any meeting of stockholders or the date for the
payment of any dividend or the date for the allotment
of rights, or the date when any change or conversion
or exchange of capital stock shall go into effect, as
a record date for the determination of the
stockholders entitled to notice of and to vote at, any
such meeting, or entitled to receive payment of any
such dividends, or to any such allotment of rights, or
to exercise the rights in respect of any such change,
conversion or exchange of capital stock, and in such
case such stockholders and only such stockholders as
shall be stockholders of record on the date so fixed
shall be entitled to such notice of, and to vote at,
such meeting or to receive payment of such dividend,
or to receive such allotment of rights, or to exercise
such rights, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation.
Amended SECTION 12. The affairs of the Corporation
9/26/89, shall be managed by a Board consisting of such
5/28/91 number of directors as shall be determined from time
and to time by resolution of a majority of the number of
3/23/93 directors constituting the entire Board of Directors
at such time, and in the absence of such
determination, the number of directors shall be
twelve. The directors shall be divided into three
classes as nearly equal in number as possible and the
members of each class shall be elected for a term of
three years by the stockholders entitled to vote at
such election, and each director so elected shall hold
office until his or her successor is duly elected and
qualified, or until his or her death, or until he or
she shall resign or be removed from office. Any
director or the entire Board of Directors may be
removed, but only for cause, and the vacancies may be
filled in accordance with Article NINTH of the
Corporation's Certificate of Incorporation.
<PAGE>
<PAGE>
Only persons who are nominated in accordance
with the following procedures shall be eligible
for election as directors at any meeting of
stockholders. Nominations of persons for
election to the Board of Directors of the
Corporation at the annual meeting or any special
meeting called for the purpose of electing
directors may be made at a meeting of
stockholders by or at the direction of the Board
of Directors by any nominating committee or
person appointed by the Board or by any
stockholder of the Corporation entitled to vote
for the election of directors at the meeting who
complies with the notice procedures set forth in
this Section 12.
In addition to any other applicable requirements,
such nominations, other than those made by or at the
direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary
of the Corporation. In order to be timely, a
stockholder's notice shall be delivered to or mailed
and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90
days prior to the meeting; provided, however, that in
the event that the meeting is called for a date other
than that specified in the bylaws and less than 75
days' prior public disclosure of the date of the
meeting is given or made, notice by the stockholder in
order to be timely must be so received not later than
the close of business on the 15th day following the
day on which such public disclosure of the date of the
meeting was made. Such stockholder's notice to the
Secretary shall contain (a) as to each person whom the
stockholder proposes to nominate for election or re-
election as a director, (i) that person's consent to
such nomination, (ii) the name, age, business address
and residence address of the person, (iii) the
principal occupation or employment of the person, and
(iv) the class and number of shares of capital stock
of the Corporation which are beneficially owned by the
person and (b) as to the stockholder giving the notice
(i) the name and record address of the stockholder and
(ii) the class and number of shares of capital stock
of the Corporation which are beneficially owned by the
stockholder. The Corporation may require any proposed
nominee to furnish such other information as may
reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as
director of the Corporation. No person shall be
eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set
forth herein.
<PAGE>
<PAGE>
The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a
nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he
shall so declare to the meeting and the defective
nomination shall be disregarded.
Amended SECTION 13. Meetings of the Board of
8/16/66 Directors shall be held at the times fixed by
resolutions of the Board or upon call of the Chairman
of the Board or of the President or any five directors
and may be held outside the State of Delaware. The
Secretary or officer performing his duties shall give
reasonable notice (which shall not in any event be
less than five (5) days) of all meetings of directors,
provided that a meeting may be held without notice
immediately after the annual election, and notice need
not be given of regular meetings held at times fixed
by resolution of the Board. Meetings may be held at
any time without notice if all the directors are
present or if those not present waive notice either
before or after the meeting. Notice by mail or
telegraph to the usual business or residence address
of the directors not less than the time above
specified before the meeting shall be sufficient.
One-half of the total number of directors, but not
less than five shall constitute a quorum for the
transaction of business and the act of a majority of
the directors present at any meeting at which a quorum
is present shall be the act of the Board of Directors.
Less than such a quorum shall have power to adjourn
any meeting from time to time without notice.
Amended SECTION 14. (a) Any person who was or is a
7/22/86 party or is threatened to be made a party to any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right
of this Corporation) by reason of the fact that he is
or was or has agreed to become a director, officer,
employee or agent of this Corporation, or is or was
serving or has agreed to serve at the request of this
Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action
alleged to have been taken or omitted in such
capacity, shall be indemnified by this Corporation
against costs, charges, expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection
with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the<PAGE>
<PAGE>
best interests of this Corporation, and, with respect
to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by
judgement, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the person did
not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the
best interests of this Corporation, and, with respect
to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(b) Any person who was or is a party or is threatened
to be made a party to any threatened, pending or
completed action, suit, proceeding or investigation by
or in the right of this Corporation to procure a
judgement in its favor by reason of the fact that he
is or was or has agreed to become a director, officer,
employee or agent of this Corporation, or is or was
serving or has agreed to serve at the request of this
Corporation as a director, officer, employee, or agent
of another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action
alleged to have been taken or omitted in such
capacity, shall be indemnified by this Corporation
against costs, charges and expenses (including
attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of
such action or suit and any appeal therefrom, if he
acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest
of this Corporation, except that no indemnification
shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance
of his duty to this Corporation unless and only to the
extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall
determine upon application that, despite the
adjudication of such liability but in view of all the
circumstances of the case, such person is fairly and
resonably entitled to indemnity for such costs,
charges and expenses which the Court of Chancery of
Delaware or such other court shall deem proper.
<PAGE>
<PAGE>
(c) Notwithstanding the other provisions of this
Section, to the extent that a director, officer,
employee or agent of this Corporation has been
successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in
subsections (a) and (b) of this Section, or in defense
of any claim, issue or matter therein, he shall be
indemnified against all costs, charges and expenses
(including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b)
of this Section (unless otherwise ordered by a court)
shall be made by this Corporation only as authorized
in the specific case upon a determination that
indemnification of the director, officer, employee or
agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in
subsections (a) and (b) of this Section. Such
determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of
directors who are not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable,
or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in
a written opinion, or (3) by the stockholders, or (4)
if a Change in Control has occurred and the director,
officer, employee or agent seeking indemnification so
requests, in a written opinion rendered by independent
legal counsel chosen by the person requesting
indemnification and not reasonably objected to by the
Board of Directors. For purposes of subclause (4) of
this subsection (d), "independent legal counsel" shall
mean legal counsel other than an attorney, or a firm
having associated with it an attorney, who has been
retained by or who has performed substantial services
for either this Corporation or the person seeking
indemnification within the past five years. The
Corporation shall pay the fees of the independent
legal counsel. For purposes of this subsection (d),
a "Change in Control" shall be deemed to have occurred
if (i) any person (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "1934 Act") is or becomes the
beneficial owner (as defined in Rule 13d-3 under the
1934 act), directly or indirectly, of securities of
this Corporation representing 25% or more of the
combined voting power of this Corporation's then
outstanding securities in a transaction not approved
by the Board of Directors sitting immediately prior to
such acquisition, (ii) this Corporation is a party to
a merger, consolidation, sale of assets or other
reorganization, or proxy contest, as a consequence of
<PAGE>
<PAGE>
which members of the Board of Directors sitting
immediately prior to such transaction or event
constitute less than five-sixths of the Board of
Directors thereafter, or (iii) during the immediately
preceding four years, individuals who at the beginning
of such period constituted the Board of Directors
cease for any reason to constitute at least a majority
thereof, unless the election of each director who was
not a director at the beginning of the period was
approved by a vote of at least two-thirds of the
directors then still in office who were directors at
the beginning of the period.
(e) Costs, charges and expenses (including attorney's
fees) incurred by a person referred to in subsections
(a) and (b) of this Section in defending a civil or
criminal action, suit or proceeding shall be paid
promptly by this Corporation in advance of the final
determination of such action, suit or proceeding;
provided, however, that the payment of such costs,
charges and expenses incurred by a director or officer
in his capacity as a director or officer (and not in
any other capacity in which service was or is rendered
by such person while a director or officer) in advance
of the final disposition of such action, suit or
proceeding shall be made only upon receipt of an
undertaking by or on behalf of the director or officer
to repay all amounts so advanced in the event that it
shall ultimately be determined that such director or
officer is not entitled to be indemnified by this
Corporation as authorized by the Section. Such costs,
charges and expenses incurred by other employees and
agents may be so paid upon such terms and conditions,
if any, as the Board of Directors deems appropriate.
(f) The indemnification provided by this Section shall
not be deemed exclusive of any other rights to which
a person seeking indemnification may be entitled under
any law (common or statutory), agreement, vote of
stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to
action in another capacity while holding office or
while employed by or acting as agent for this
Corporation, it being the policy of this Corporation
that indemnification of the persons specified in
subsections (a) and (b) of this Section shall be made
to the full extent permitted by applicable law. The
indemnification provided by this Section shall
continue as to a person who has ceased to be a
director, officer, employee or agent, and shall inure
to the benefit of the estate, heirs, executors and
administrators of such person. All rights to
indemnification under this Section shall be deemed to
<PAGE>
<PAGE>
be a contract between this Corporation and each
director, officer, employee or agent of this
Corporation who serves or served in such capacity at
any time while this Section is in effect. Any repeal
or modification of this Section or any repeal or
modification of relevant provisions of the Delaware
General Corporation Law or any other applicable law
shall not in any way diminish any rights to
indemnification of such director, officer, employee or
agent or the obligation of this Corporation arising
hereunder.
(g) If this Section or any portion hereof shall be
invalidated on any ground by any court of competent
jurisdiction, then this Corporation shall nevertheless
indemnify each director, officer, employee and agent
of this Corporation as to costs, charges and expenses
(including attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any action,
suit or proceeding, whether civil, criminal,
administrative or investigative, including, without
limitation, any action by or in the right of this
Corporation, to the full extent permitted by any
applicable portion of this Section that shall not have
been invalidated and to the full extent permitted by
applicable law.
Amended SECTION 15. The Board of Directors, as
4/21/81 soon as may be after the election of directors in each
and each year, shall appoint one of their number Chairman
3/23/93 Chairman of the Board and one of their number
President of the Company, and may also appoint one or
more Executive Vice-Presidents, Senior Vice-
Presidents, First Vice Presidents and Vice-Presidents,
a Secretary and a Treasurer. The Board of Directors
may from time to time appoint one of their number as
Vice-Chairman and may appoint such other officers as
they deem appropriate. Any person may hold more than
one office, except that same person may not hold more
than one of the offices of President and Secretary.
SECTION 16. The term of office of all
officers shall be until the next election of directors
and until their respective successors are chosen and
qualified, or until they shall die or resign but any
officer may be removed from office at any time by the
Board of Directors. Vacancies in any office may be
filled by the Board at any meeting.
<PAGE>
<PAGE>
SECTION 17. The officers of the Company shall
have such powers and duties as usually pertain to
their offices, except as modified by the Board of
Directors, and shall also have such powers and duties
as may from time to time be conferred upon them by the
Board of Directors.
SECTION 18. The Board of Directors is
authorized to select such depositaries as it shall
deem proper for the funds of the Corporation. All
checks and drafts against such deposited funds shall
be signed and countersigned by persons to be specified
by the Board of Directors.
SECTION 19. The President, or any Vice-
President, shall have authority to execute and deliver
all contracts or undertakings of the Corporation.
SECTION 20. The corporation seal of the
Corporation shall be in such form as the Board of
Directors shall prescribe.
SECTION 21. The fiscal year of the Corporation
shall be the calendar year.
SECTION 22. Either the Board of Directors or
the stockholders may alter or amend these By-Laws at
any meeting duly held as above provided, the notice of
which includes notice of the proposed alteration or
amendment.
Amended SECTION 23. The Board of Directors may
12/19/72 from time to time appoint such number of Directors
Emeritus as shall be determined by the Board to be
appropriate, who shall serve until the next directors'
meeting after the annual election. Directors Emeritus
shall be selected from individuals who have previously
served as Great Western Financial Corporation
directors and have not reached their 77th birthday,
and may serve more than one term. The unanimous vote
of all directors present at a meeting shall be
required to elect a Director Emeritus, such vote to be
taken by secret written ballot. Such Directors
Emeritus may attend the meetings of the Board of
Directors in an advisory capacity, with the privilege
of participating in all discussions at such meetings, <PAGE>
<PAGE>
but without the power to vote. Notices of all
meetings sent to directors shall also be sent to
Directors Emeritus. Directors Emeritus shall be paid
such fees for attendance at meetings of the Board of
Directors as shall from time to time be determined by
the Board.
Added SECTION 24. The Board of Directors may
6/24/86 impose restrictions on transfer of securities of
the Corporation pursuant to the Rights
Agreement, dated as of June 24, 1986, by and
between the Corporation and Morgan Guaranty
Trust Company of New York, as and to the extent
required by such Rights Agreement, as amended
from time to time.
<PAGE>
Exhibit 10.13
ADDENDUM
to the
1979 Incentive and Non-Statutory Stock Option
and Appreciation Plan
and
1988 Stock Option and Incentive Plan (the "Plans")
of
GREAT WESTERN FINANCIAL CORPORATION (the "Company")
WHEREAS, this Corporation maintains the 1979 Incentive and Non-Statutory
Stock Option and Appreciation Plan and 1988 Stock Option and Incentive Plan
(the "Plans");
WHEREAS, the Plans, as amended, include provisions that effective September
1, 1993 would adjust and conform the Plans to certain changes in the
Securities and Exchange Commission's rules under Section 16 of Securities
Exchange Act of 1934 (the "Provisions"); and
WHEREAS, it is desirable to delay the effective date of the Provisions until
further action;
NOW THEREFORE, the Plans shall be deemed amended to substitute "September 1,
1994 (or such other date as the Committee may determine or the Securities and
Exchange Commission may designate as the expiration of the transition period
with respect to former Rule 16b-3 under the Exchange Act)" as the effective
date of the Provisions.
Effective July 22, 1993.
<PAGE>
Exhibit 10.16
GREAT WESTERN FINANCIAL CORPORATION
1988 STOCK OPTION AND INCENTIVE PLAN
(as amended and restated effective July 22, 1993)
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
I. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. ADMINISTRATION AND AUTHORIZATION OF AWARDS. . . . . . . . . . . . . 1
III.STOCK SUBJECT TO THE PLAN . . . . . . . . . . . . . . . . . . . . . 2
IV. THE KEY EMPLOYEE PROGRAM. . . . . . . . . . . . . . . . . . . . . . 4
4.1 Participation . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2.2 Option Price . . . . . . . . . . . . . . . . . . . . . 4
4.2.3 Maximum Option Term. . . . . . . . . . . . . . . . . . 4
4.2.4 Exercise of Options. . . . . . . . . . . . . . . . . . 4
4.2.5 Limitations on Grant of Incentive Stock Options. . . . 5
4.3 Restricted Stock. . . . . . . . . . . . . . . . . . . . . . . 5
4.3.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3.2 Price. . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3.3 Maximum Award Term . . . . . . . . . . . . . . . . . . 5
4.3.4 Rights and Restrictions. . . . . . . . . . . . . . . . 5
4.4 Stock Appreciation Rights . . . . . . . . . . . . . . . . . . 6
4.4.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4.2 Exercise of Stock Appreciation Rights. . . . . . . . . 6
4.4.3 Payment. . . . . . . . . . . . . . . . . . . . . . . . 6
4.4.4 Maximum Stock Appreciation Right Term. . . . . . . . . 7
4.5 Performance Awards. . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
4.6 Dividend Equivalents. . . . . . . . . . . . . . . . . . . . . 7
4.7 Stock Payment . . . . . . . . . . . . . . . . . . . . . . . . 7
4.8 Time of Payment . . . . . . . . . . . . . . . . . . . . . . . 7
4.9 Termination of Awards . . . . . . . . . . . . . . . . . . . . 8
4.10 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
V. THE DIRECTOR PROGRAM. . . . . . . . . . . . . . . . . . . . . . . . 9
5.1 Participation . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Annual Option Grants. . . . . . . . . . . . . . . . . . . . . 9
5.3 Deferred Fees . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3.2 Option Formula . . . . . . . . . . . . . . . . . . . . 10
5.4 Option Price. . . . . . . . . . . . . . . . . . . . . . . . . 10
5.5 Option Period . . . . . . . . . . . . . . . . . . . . . . . . 11
5.6 Exercise of Options . . . . . . . . . . . . . . . . . . . . . 11
5.7 Termination of Directorship . . . . . . . . . . . . . . . . . 11
5.7.1 Options Representing Annual Grants . . . . . . . . . . 11
5.7.2 Options Representing Deferred Fees . . . . . . . . . . 11
5.8 Acceleration Upon an Event. . . . . . . . . . . . . . . . . . 12
VI. OTHER PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.1 Rights of Eligible Employees, Participants and Beneficiaries. 12
6.1.1 Employee Status. . . . . . . . . . . . . . . . . . . . 12
6.1.2 No Employment Contract . . . . . . . . . . . . . . . . 12
6.1.3 No Transferability . . . . . . . . . . . . . . . . . . 12
6.1.4 Plan Not Funded. . . . . . . . . . . . . . . . . . . . 13
6.2 Adjustment Upon Capitalization and Corporate Changes. . . . . 13
6.3 Acceleration of Awards. . . . . . . . . . . . . . . . . . . . 14
6.4 Termination, Suspension and Amendment . . . . . . . . . . . . 15
6.5 Privileges of Stock Ownership; Minimum Purchase; No
Fractional Shares . . . . . . . . . . . . . . . . . . . . . . 16
6.6 Tax Withholding and Tax Bonuses . . . . . . . . . . . . . . . 16
6.7 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 17
6.8 Governing Laws. . . . . . . . . . . . . . . . . . . . . . . . 17
6.9 Effective Date of the Plan. . . . . . . . . . . . . . . . . . 17
6.10 Termination of the Plan . . . . . . . . . . . . . . . . . . . 18
VII.DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.1 "Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.2 "Administrator" . . . . . . . . . . . . . . . . . . . . . . . 18
7.3 "Award". . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.4 "Award Agreement" . . . . . . . . . . . . . . . . . . . . . . 18
7.5 "Award Date" . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.6 "Award Period". . . . . . . . . . . . . . . . . . . . . . . . 18
7.7 "Beneficiary". . . . . . . . . . . . . . . . . . . . . . . . . 18
7.8 "Board of Directors". . . . . . . . . . . . . . . . . . . . . 18
7.9 "Code". . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.10 "Committee". . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.11 "Common Stock". . . . . . . . . . . . . . . . . . . . . . . . 19
7.12 "Company" . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.13 "Corporation" . . . . . . . . . . . . . . . . . . . . . . . . 19
<PAGE>
7.14 "Disability". . . . . . . . . . . . . . . . . . . . . . . . . 19
7.15 "Disinterested" . . . . . . . . . . . . . . . . . . . . . . . 19
7.16 "Dividend Equivalent" . . . . . . . . . . . . . . . . . . . . 19
7.17 "Eligible Employee" . . . . . . . . . . . . . . . . . . . . . 19
7.18 "Employee Participant". . . . . . . . . . . . . . . . . . . . 19
7.19 "Event" . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.20 "Exchange Act". . . . . . . . . . . . . . . . . . . . . . . . 20
7.21 "Fair Market Value" . . . . . . . . . . . . . . . . . . . . . 20
7.22 "Incentive Stock Option". . . . . . . . . . . . . . . . . . . 20
7.23 "Nonemployee Director". . . . . . . . . . . . . . . . . . . . 21
7.24 "Nonemployee Director Participant". . . . . . . . . . . . . . 21
7.25 "Nonqualified Stock Option" . . . . . . . . . . . . . . . . . 21
7.26 "Normal Board Retirement" . . . . . . . . . . . . . . . . . . 21
7.27 "Option". . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.28 "Other Eligible Person" . . . . . . . . . . . . . . . . . . . 21
7.29 "Participant" . . . . . . . . . . . . . . . . . . . . . . . . 21
7.30 "Par Value" . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.31 "Performance Award" . . . . . . . . . . . . . . . . . . . . . 21
7.32 "Personal Representative" . . . . . . . . . . . . . . . . . . 21
7.33 "Plan". . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.34 "Restricted Stock". . . . . . . . . . . . . . . . . . . . . . 21
7.35 "Restricted Stock Award". . . . . . . . . . . . . . . . . . . 22
7.36 "Stock Appreciation Right". . . . . . . . . . . . . . . . . . 22
7.37 "Stock Payment" . . . . . . . . . . . . . . . . . . . . . . . 22
7.38 "Subsidiary". . . . . . . . . . . . . . . . . . . . . . . . . 22
VIII. ADDITIONAL LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . 22
8.1 Limitations Applicable to Section 16 Persons. . . . . . . . . 22
8.2 Release of Restrictions . . . . . . . . . . . . . . . . . . . 23
8.3 Plan Construction . . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
1988 STOCK OPTION AND INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JULY 22, 1993)
I. PURPOSE
The Plan consists of two programs: (i) a Key Employee Program for
the grant of awards to officers, key employees and advisory directors of
the Company and certain other individuals who perform significant services
for the Company; and (ii) a Director Program for the grant of Nonqualified
Stock Options to Nonemployee Directors of the Corporation. The purpose of
the Key Employee Program is to strengthen the Company by providing an
additional means of retaining and attracting competent management
personnel and by providing to participating officers and key employees and
other participants a financial incentive for high levels of performance.
The purpose of the Director Program is to attract and retain the services
of experienced and knowledgeable independent directors and to provide
additional incentive for such directors to work for the best interests of
the Corporation and its stockholders.
II. ADMINISTRATION AND AUTHORIZATION OF AWARDS
The Director Program shall be non-discretionary and automatic and, to
the maximum extent possible, shall be self-effectuating. The
Administrator is authorized and empowered to administer the Plan, which
administration shall include (but not be limited to) authority to (i)
construe and interpret the Plan and any agreements defining the rights and
obligations of the Corporation and Participants under the Plan; (ii)
prescribe, amend and rescind rules and regulations relating to the Plan;
(iii) further define the terms used in the Plan; (iv) determine the rights
and obligations of Participants under the Plan; and (v) make all other
determinations necessary or advisable for the administration of the Plan.
Each Award shall be evidenced by an Award Agreement signed by the
Corporation and the Participant and shall be in such form and shall
include such terms and conditions not inconsistent with the Plan as the
Administrator may in its discretion from time to time determine. In
addition, the Administrator is authorized and empowered to grant Awards
under the Key Employee Program, which authority shall include (but not be
limited to) authority to (i) select the Eligible Employees to whom Awards
under the Key Employee Program are to be granted; and (ii) determine the
time or times at which Awards under the Key Employee Program may be
granted, the nature of Awards under the Key Employee Program, the number
<PAGE>
<PAGE>
of shares of Common Stock that make up Awards under the Key Employee
Program, the objectives, goals and performance criteria used to measure
the value of Awards under the Key Employee Program and other terms and
conditions applicable to each Award under the Key Employee Program in a
manner not inconsistent with the Plan. Any Award granted under the Key
Employee Program shall be in such form as the Administrator may from time
to time approve and the provisions of Awards granted under the Key
Employee Program need not be the same with respect to each Employee
Participant.
Subject to Section 6.4 hereof and the general limitations on Awards
contained herein, the Administrator may authorize any adjustment in the
exercise or purchase price, the number of shares subject to, the
restrictions upon or the term of, an Award granted under the Key Employee
Program by cancellation of an outstanding Award and a subsequent
regranting of an Award or by amendment or by substitution of an
outstanding Award. Such amendment, substitution or regrant may result in
an exercise or purchase price which is higher or lower than the exercise
or purchase price of the prior Award, provide for a greater or lesser
number of shares subject to the Award, or provide for a longer or shorter
term than the prior Award.
In the event action by the Administrator is taken by unanimous
written consent, the action of the Administrator shall be deemed to be the
date the last member of the Committee signs the consent.
Any action taken, or determination or adjustment made, by the
Corporation, any Subsidiary, the Board of Directors or the Committee
relating to the Plan or any Award hereunder, including, without
limitation, adjustments pursuant to Sections 6.2 and 6.3 hereof, shall be
within the absolute discretion of that entity or body and shall be final
and conclusive and binding upon all persons. In making determinations
under the Plan, the Board of Directors or the Committee may obtain and may
rely upon the advice of independent counsel and accountants and other
advisors to the Corporation. No member of the Board of Directors or the
Committee, or officer of the Corporation or Subsidiary, shall be liable
for any such action or determination taken or made in good faith with
respect to the Plan or any Award hereunder.
III. STOCK SUBJECT TO THE PLAN
The stock available under the Plan shall be shares of the
Corporation's authorized but unissued Common Stock or shares of Common
Stock heretofore or hereafter acquired by the Corporation. Subject to
Section 6.2 hereof, the aggregate number of shares of Common Stock that
may be delivered pursuant to Awards granted under the Plan shall not
exceed 12,500,000 and the maximum number thereof that may be delivered
under the Director Program shall not exceed 750,000. If any option or
other right to acquire shares of Common Stock under an Award shall lapse
or be cancelled or terminated without having been exercised in full, or
any Common Stock subject to a Restricted Stock Award or other Award shall
<PAGE>
not vest or be delivered, the unpurchased, unvested or undelivered shares
formerly subject thereto shall again be available for the purposes of the
Plan. If a Stock Appreciation Right is exercised or a Performance Award
based on the increased market value of a specified number of shares of
Common Stock is paid, the number of shares of Common Stock to which such
exercise or payment relates under the applicable Award shall be charged
against the maximum amount of Common Stock that may be delivered pursuant
to Awards under the Plan and, if applicable, such Award. In the event the
Corporation withholds shares of Common Stock pursuant to Section 6.6
hereof, the number of shares that would have been deliverable with respect
to an Award but that are withheld pursuant to the provisions of Section
6.6 hereof shall in effect not be issued, but the aggregate number of
shares issuable with respect to the applicable Award and under the Plan
shall be reduced by the number of shares withheld and such shares shall
not be available for granting additional Awards under the Plan. If the
Corporation accepts shares in payment of the exercise or purchase price of
an Award pursuant to Section 4.2.2 or otherwise, the number of surrendered
shares shall not be deducted from the number of shares otherwise
chargeable against such maximum. To the extent a Performance Award or
Dividend Equivalent constitutes an equity security (as this phrase is
defined in Rule 16a-1 under the Exchange Act) issued by the Corporation
and is paid in shares of Common Stock, such number of shares of Common
Stock subject to such Performance Award or Dividend Equivalent shall be
charged (but, in the case of a Dividend Equivalent, without duplication if
such shares have already been charged against the maximum) against the
maximum amount of Common Stock that may be issued pursuant to Awards to
Eligible Employees under the Plan. Shares underlying any unexercised or
unvested Award outstanding shall be reserved against the applicable plan
maximum even if such shares are subject to vesting or other restrictions;
provided, however, that once such Award expires or is forfeited,
terminated or otherwise cancelled without delivery of the shares, the
shares formerly so reserved shall (subject to the foregoing provisions)
again be available under the Plan.
IV. THE KEY EMPLOYEE PROGRAM
4.1 Participation
Awards under the Key Employee Program may be granted only to
Eligible Employees. An Eligible Employee who has been granted an Award
under the Key Employee Program may, if otherwise eligible, be granted
additional Awards under the Key Employee Program if the Administrator
shall so determine.
4.2 Options
4.2.1 Grants. One or more Options may be granted to any Eligible
Employee. Each Option so granted shall be designated by the Administrator
as either a Nonqualified Stock Option or an Incentive Stock Option.
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<PAGE>
4.2.2 Option Price. The purchase price per share of the Common
Stock covered by each Option shall be determined by the Administrator but
shall not be less than (i) the Par Value per share in the case of a
Nonqualified Stock Option and (ii) 100 percent of the Fair Market Value of
such Common Stock on the Award Date in the case of an Incentive Stock
Option. The purchase price of any shares purchased shall be paid in full
at the time of each purchase in cash (or cash equivalent) or, at the
Administrator's discretion, in shares of Common Stock which shall be
valued at their Fair Market Value on the business day next preceding the
date of exercise of the Option, or partly in such shares and partly in
cash, or in such other form of legal consideration as may be approved from
time to time by the Administrator and the Board of Directors.
4.2.3 Maximum Option Term. Each Option and all rights or
obligations thereunder shall expire on such date as shall be determined by
the Administrator, but not later than ten years after the Award Date, and
shall be subject to earlier termination as provided in the related Award
Agreement and Sections 4.9 and 6.3 hereof.
4.2.4 Exercise of Options. Except as otherwise provided in Sections
6.2 and 6.3 hereof, an Option shall become exercisable in such manner and
within such period or periods and in such installments, if any, as shall
be determined by the Administrator and set forth in the related Award
Agreement. If the holder of an Option shall not purchase all of the
shares which he or she is entitled to purchase in any given installment
period, the right to purchase shares not purchased in such installment
period shall continue until the lapse or termination of such Option.
4.2.5 Limitations on Grant of Incentive Stock Options. The
aggregate Fair Market Value (determined as of the Award Date) of the
Common Stock for which Incentive Stock Options may be first exercisable
(other than as a result of acceleration) by any Employee Participant
during any calendar year under the Plan or under any other plan of the
Corporation or any Subsidiary shall not exceed $100,000. There shall be
imposed in the Award Agreement relating to Incentive Stock Options such
terms and conditions as are required in order that the Option be an
"incentive stock option" as that term is defined in Section 422A of the
Code. The Administrator may, however, with the consent of a holder of any
Incentive Stock Option, authorize an amendment to the Incentive Stock
Option that renders it a Nonqualified Stock Option.
<PAGE>
<PAGE>
4.3 Restricted Stock
4.3.1 Grants. One or more Restricted Stock Awards may be granted to
any Eligible Employee. Each Restricted Stock Award Agreement shall
specify the number of shares of Common Stock to be delivered to the
Employee Participant, the date of such delivery, the price to be paid for
such shares by the Employee Participant and the restrictions imposed on
such shares. Except as otherwise provided in Sections 6.2 and 6.3 hereof,
the restrictions imposed upon Restricted Stock will lapse in accordance
with such schedule and other conditions as shall be determined by the
Administrator and set forth in the related Award Agreement.
4.3.2 Price. The purchase price per share of shares of Restricted
Stock shall be determined by the Administrator but shall not be less than
the Par Value thereof.
4.3.3 Maximum Award Term. Shares of Restricted Stock shall vest and
all restrictions thereon lapse on such date as shall be determined by the
Administrator, but not later than ten years after the Award Date, and
rights to such shares shall be subject to earlier termination as provided
in the related Award Agreement and in Sections 4.9 and 6.3 hereof.
4.3.4 Rights and Restrictions. To the extent provided in the Award
Agreement, an Employee Participant receiving Restricted Stock may be
entitled to dividend and/or voting rights for shares delivered even though
they are not vested, provided that such rights in any event shall
terminate immediately as to any forfeited Restricted Stock.
4.4 Stock Appreciation Rights
4.4.1 Grants. Stock Appreciation Rights related or unrelated to
Options or other Awards may be granted to Eligible Employees:
(i) at any time if unrelated to an Award or if related to any Award
other than an Incentive Stock Option; or
(ii) only at the time of grant if related to an Incentive Stock
Option.
A Stock Appreciation Right may extend to all or a portion of the shares
covered by a related Award.
4.4.2 Exercise of Stock Appreciation Rights. A Stock Appreciation
Right granted in connection with an Award shall be exercisable only at
such time or times, and to the extent, that a related Award is
exercisable. A Stock Appreciation Right granted in connection with an
Incentive Stock Option may be exercisable only when the Fair Market Value
of the stock subject to the related Award exceeds the exercise price of
the related Award.
<PAGE>
<PAGE>
4.4.3 Payment.
(i) Upon the exercise of a Stock Appreciation Right, and if such
Stock Appreciation Right is related to an Award surrender of an
exercisable portion of the related Award, the Employee Participant shall
be entitled to receive payment of an amount determined by multiplying:
(a) the difference obtained by subtracting the purchase price of
a share of Common Stock specified in the related Award, or if such
Stock Appreciation Right is unrelated to an Award the initial share
value specified in the Award, from the Fair Market Value, book value
or other measure specified in the Award of a share of Common Stock on
the date of exercise of such Stock Appreciation Right, by
(b) the number of shares as to which such Stock Appreciation
Right has been exercised.
(ii) The Administrator, in its sole discretion, may require
settlement of the amount determined under paragraph (i) above solely in
cash, solely in shares of Common Stock (valued at Fair Market Value on the
business day next preceding the date of exercise of the Stock Appreciation
Right), or partly in such shares and partly in cash.
4.4.4 Maximum Stock Appreciation Right Term. Each Stock
Appreciation Right and all rights or obligations thereunder shall expire
on such date as shall be determined by the Administrator, but not later
than ten years after the Award Date, and shall be subject to earlier
termination as provided in the related Award Agreement and Sections 4.9
and 6.3 hereof.
4.5 Performance Awards
One or more Performance Awards may be granted to any Eligible
Employee. The value of such Awards may be linked to the market value,
book value or other measure of the value of the Common Stock or other
specific performance criteria determined appropriate by the Administrator,
in each case on a specified date or over any period determined by the
Administrator, or may be based upon the appreciation in the market value,
book value or other measure of the value of a specified number of shares
of Common Stock over a fixed period determined by the Administrator. In
making such determinations, the Administrator shall consider (among such
other factors as it deems relevant in light of the specific type of award)
the contributions, responsibilities and other compensation of the Employee
Participant.
<PAGE>
<PAGE>
4.6 Dividend Equivalents
An Employee Participant may also be granted "Dividend Equivalents"
based on the dividends declared on the Common Stock, to be credited as of
dividend payment dates, during the period between the Award Date and the
date such Award is exercised, vests or expires, as determined by the
Administrator. Such Dividend Equivalents shall be converted to cash or
additional shares of Common Stock by such formula and at such time and
subject to such limitations as may be determined by the Administrator.
4.7 Stock Payment
The Administrator may approve Stock Payments to Eligible Employees
who elect to receive such payments in the manner determined from time to
time by the Administrator. The number of shares shall be determined by the
Administrator and may be based upon the Fair Market Value, book value or
other measure of the value of such shares on the Award Date or on any date
thereafter.
4.8 Time of Payment
The Administrator may approve the deferral of any payments that may
become due under the Plan. Such deferrals shall be subject to any
conditions, restrictions or requirements as the Administrator may
determine.
4.9 Termination of Awards
In connection with the grant of any Award under the Plan, the
Administrator may provide in the Award Agreement for the termination of
all or any portion of an Award under certain circumstances, including,
without limitation, termination of an Employee Participant's employment as
a result of resignation, retirement, Disability or death, or for cause,
and may distinguish among various causes of termination as the
Administrator deems appropriate. In addition, the Administrator may
provide, through an Award Agreement or otherwise, that in the event an
Employee Participant's employment is terminated, (i) such Employee
Participant's Awards may be exercised for specified periods thereafter
within the Award Period, (ii) to the extent not fully exercisable or
otherwise vested on the termination date, such Employee Participant's
Awards may continue to become exercisable within the Award Period, or
(iii) the portion of the Award available to such Employee Participant, or
his or her Beneficiary or Personal Representative, as the case may be, may
be increased.
4.10 Loans
The Corporation may, with the Administrator's approval, extend one or
more loans to Employee Participants in connection with the exercise or
receipt of outstanding Awards granted under the Plan; provided any such
loan shall be subject to the following terms and conditions:<PAGE>
<PAGE>
(i) The principal of the loan shall not exceed the amount
required to be paid to the Corporation upon the exercise or receipt of
one or more Awards under the Plan less the aggregate Par Value of any
Common Stock deliverable on such event, and the loan proceeds shall be
paid directly to the Corporation in consideration of such exercise or
receipt.
(ii) The initial term of the loan shall be determined by the
Administrator; provided that the term of the loan, including
extensions, shall not exceed a period of ten years.
(iii) The loan shall be with full recourse to the Employee
Participant, shall be evidenced by the Employee Participant's
promissory note and shall bear interest at a rate determined by the
Administrator but not less than the Corporation's average cost of
funds as of a date within 31 days of the date of such loan, as
determined by the Administrator.
(iv) In the event an Employee Participant terminates his or her
employment at the request of the Corporation, the unpaid principal
balance of the note shall become due and payable on the tenth business
day after such termination; provided, however, that if a sale of such
shares would cause such Employee Participant to incur liability under
Section 16(b) of the Exchange Act, the unpaid balance shall become due
and payable on the tenth business day after the first day on which a
sale of such shares could have been made without incurring such
liability assuming for these purposes that there are no other
transactions by the Employee Participant subsequent to such
termination. In the event an Employee Participant terminates
employment other than at the request of the Corporation, the unpaid
principal balance of the note shall become due and payable six months
after the date of such termination.
V. THE DIRECTOR PROGRAM
5.1 Participation
Awards under the Director Program shall be granted to each
Nonemployee Director exclusively in accordance with the provisions set
forth below and subject to the limitations in Article III.
<PAGE>
<PAGE>
5.2 Annual Option Grants
(i) Upon the effective date of the Plan, there shall be granted
automatically (without any action by the Administrator) a Nonqualified
Stock Option to each Nonemployee Director then in office to purchase 2,500
shares of Common Stock. The Award Date of each such option shall be the
effective date of the Plan. From time to time if, as and when any person
who is not then an officer or employee of the Company shall become a
director of the Corporation, effective upon the date such person takes
office as a director, there shall be granted automatically (without any
action by the Administrator) a Nonqualified Stock Option (the Award Date
of which shall be the date such person takes office) to such person to
purchase 2,500 shares of Common Stock.
(ii) On January 2 (or if January 2 is not a business day, on the next
succeeding business day) in each calendar year after 1988 during the term
of the Plan, there shall be granted automatically (without any action by
the Administrator) a Nonqualified Stock Option (the Award Date of which
shall be such date in January) to each Nonemployee Director then in office
and who has not attained age 72 to purchase 2,500 shares of Common Stock.
(iii) Notwithstanding the provisions of paragraphs (i) and (ii) above,
no Nonemployee Director Participant shall receive more than one
Nonqualified Stock Option under this Section 5.2 in any calendar year.
5.3 Deferred Fees
5.3.1 Grants. Subject to Section 6.9 hereof, Nonqualified Stock
Options shall be granted automatically (without any action by the
Administrator) on January 2 (or if January 2 is not a business day, on the
next succeeding business day) in each calendar year to any Nonemployee
Director who on or prior to the preceding June 30 files with the Corporate
Secretary an irrevocable election to receive a Nonqualified Stock Option
in lieu of annual retainer fees to be earned in the following year
beginning January 1 and ending December 31 ("Plan Year"). The Award Date
of each such Option shall be the applicable date in January.
5.3.2 Option Formula. The number of shares of Common Stock subject
to the Nonqualified Stock Option granted to such electing Nonemployee
Director shall be equal to the nearer number of whole shares determined in
accordance with the following formula:
Annual Retainer Number
--------------------------------- = of
Fair Market Value minus Par Value Shares
<PAGE>
<PAGE>
"Annual Retainer" shall mean the amount of fixed fees which the director
of the Corporation will be entitled to receive for serving as a director
of the Corporation in the relevant Plan Year, assuming no change in such
compensation from that in effect as of the date in January on which the
Nonqualified Stock Option is granted, and shall not include fees for
attendance at meetings of the Board of Directors or any committee of the
Board of Directors or for any other services to be provided to the
Company. Fair Market Value shall be determined as of the Award Date.
5.4 Option Price
The purchase price per share of the Common Stock covered by each
Option granted pursuant to Section 5.2 hereof shall be 100 percent of the
Fair Market Value of the Common Stock on the Award Date and the purchase
price per share of the Common Stock covered by each Option granted
pursuant to Section 5.3 hereof shall be the Par Value thereof. The
purchase price of any shares purchased shall be paid in full at the time
of each purchase in cash (or cash equivalent) or in shares of Common Stock
which shall be valued at their Fair Market Value on the business day next
preceding the date of exercise of the Option, or partly in such shares and
partly in cash.
5.5 Option Period
Each Option granted under the Director Program and all rights or
obligations thereunder shall expire on the
tenth anniversary of the Award Date and shall be subject to earlier
termination as provided in Sections 5.7 and 5.8 hereof.
5.6 Exercise of Options
Except as otherwise provided in Sections 5.7, 5.8 and 6.2 hereof, (i)
each Option granted under Section 5.2 hereof shall become exercisable in
50% installments on the first and second anniversaries of the Award Date
and (ii) each Option granted under Section 5.3 hereof shall become
exercisable in 50% installments on the six month and one year anniversary
of the Award Date.
5.7 Termination of Directorship
5.7.1 Options Representing Annual Grants. If a Nonemployee Director
Participant's services as a member of the Board of Directors terminate by
reason of death, Disability or Normal Board Retirement, an Option granted
pursuant to Section 5.2 hereof held by such Nonemployee Director
Participant shall immediately become and shall remain exercisable for two
years after the date of such termination or until the expiration of the
stated term of such Option, whichever period is shorter. If a Nonemployee
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Director Participant's services as a member of the Board of Directors
terminate for any other reason, any portion of an Option granted pursuant
to Section 5.2 hereof held by such Nonemployee Director Participant which
is not then exercisable shall terminate and any portion of such Option
which is then exercisable may be exercised for three months after the date
of such termination or the balance of such Option's term, whichever period
is shorter.
5.7.2 Options Representing Deferred Fees. If a Nonemployee Director
Participant's services as a member of the Board of Directors terminate by
reason of death, Disability or Normal Board Retirement, an Option granted
pursuant to Section 5.3 hereof held by such Nonemployee Director
Participant shall immediately become and shall remain exercisable for two
years after the date of such termination or the balance of such Option's
term, whichever period is shorter. If a Nonemployee Director
Participant's services as a member of the Board of Directors terminate for
any other reason, any portion of an Option granted pursuant to Section 5.3
hereof held by such Nonemployee Director Participant which is not then
exercisable shall terminate and any portion of such Option which is then
exercisable may be exercised for two years after the date of such termina-
tion or the balance of such Option's term, whichever period is shorter.
5.8 Acceleration Upon an Event
Immediately prior to the occurrence of an Event, in order to protect
the holders of Options granted under the Director Program, each Option
granted under Section 5.2 hereof shall become exercisable in full and that
portion of any Option granted under Section 5.3 hereof equal to that
percentage of the calendar year that the holder served as a director shall
become exercisable.
VI. OTHER PROVISIONS
6.1 Rights of Eligible Employees, Participants and Beneficiaries
6.1.1 Employee Status. Status as an Eligible Employee shall not be
construed as a commitment that any Award will be made under the Plan to an
Eligible Employee or to Eligible Employees generally.
6.1.2 No Employment Contract. Nothing contained in the Plan (or in
the Award Agreements or in any other documents related to the Plan or to
Awards) shall confer upon any Eligible Employee or any Employee
Participant any right to continue in the employ of the Company or
constitute any contract or agreement of employment, or interfere in any
way with the right of the Company to reduce such person's compensation or
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to terminate the employment of such Eligible Employee or Employee
Participant, with or without cause, but nothing contained in the Plan or
any document related thereto shall affect any other contractual right of
any Eligible Employee or Employee Participant. Nothing contained in the
Plan (or in the Award Agreements or in any other documents related to the
Plan or to Awards) shall confer upon any director of the Corporation any
right to continue as a director of the Corporation.
6.1.3 No Transferability. Awards may be exercised only by, and
amounts payable or shares issuable pursuant to an Award shall be paid only
to or registered only in the name of, the Participant or, in the event of
the Participant's death, to the Participant's Beneficiary or, in the event
of the Participant's Disability, to the Participant's Personal
Representative or, if there is none, to the Participant. Other than by
will or the laws of descent and distribution, no right or benefit under
the Plan or any Award, including, without limitation, any Option or any
other derivative security issued under the Plan or any share of Restricted
Stock that has not vested, shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge and
any such attempted action shall be void and no such right or benefit shall
be, in any manner, liable for, or subject to, debts, contracts,
liabilities, engagements or torts of any Eligible Employee, Participant or
Beneficiary, in any case except as may otherwise be expressly required by
applicable law. The Administrator shall disregard any attempt at
transfer, assignment or other alienation prohibited by the preceding
sentence and shall pay or deliver such cash or shares of Common Stock in
accordance with the provisions of the Plan. Notwithstanding the
foregoing, the Administrator may authorize exercise by or transfers or
payments to a third party in a specific case or more generally; provided,
however, with respect to any option or similar right (including any stock
appreciation right) such discretion may only be exercised to the extent
that applicable rules under Section 16 of the Exchange Act would so permit
without disqualifying the Plan or Awards and rights thereunder from
certain benefits under such rules.
6.1.4 Plan Not Funded. No Participant, Beneficiary or other person
shall have any right, title or interest in any fund or in any specific
asset (including shares of Common Stock) of the Company by reason of any
Award granted hereunder. There shall be no funding of any benefits which
may become payable hereunder. Neither the provisions of the Plan (or of
any documents related hereto), nor the creation or adoption of the Plan,
nor any action taken pursuant to the provisions of the Plan shall create,
or be construed to create, a trust of any kind or a fiduciary relationship
between the Company and any Participant, Beneficiary or other person. To
the extent that a Participant, Beneficiary or other person acquires a
right to receive an Award hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Company. Awards
payable under the Plan shall be paid in shares of Common Stock or from the
general assets of the Corporation, and no special or separate fund or
deposit shall be established and no segregation of assets or shares shall
be made to assure payment of such Awards.<PAGE>
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6.2 Adjustment Upon Capitalization and Corporate Changes
If the outstanding shares of Common Stock are changed into or
exchanged for cash or a different number or kind of shares or securities
of the Corporation, or if additional shares or new or different shares or
securities are distributed with respect to the outstanding shares of the
Common Stock, through a reorganization or merger in which the Corporation
is the surviving entity or through a combination, consolidation,
recapitalization, reclassifica-tion, stock split, stock dividend, reverse
stock split, stock consolidation or other capital change or adjustment, an
appropriate proportionate, equitable adjustment shall be made in the
number and kind of shares or other consideration that is subject to or may
be delivered under the Plan and pursuant to outstanding Awards. A
corresponding adjustment to the consideration payable with respect to
Awards granted prior to any such change and to the price, if any, to be
paid in connection with Restricted Stock Awards shall also be made as
appropriate. Corresponding adjustments shall be made with respect to
Stock Appreciation Rights related to Options based upon the adjustments,
if any, made to the Options to which they are related. In addition, the
Administrator may grant such additional rights in the foregoing
circumstances as the Administrator deems to be in the best interest of any
Employee Participant and the Corporation in order to preserve for the
Employee Participant the benefits of an Award.
6.3 Acceleration of Awards
Immediately prior to the occurrence of an Event, (i) each Option and
Stock Appreciation Right under the Key Employee Program shall become
exercisable in full, (ii) Restricted Stock delivered under the Key
Employee Program shall immediately vest free of restrictions, and (iii)
each other Award outstanding under the Key Employee Program shall be fully
vested or exercisable, unless, prior to the Event, the Administrator
otherwise determines that there shall be no such acceleration or vesting
of an Award or otherwise determines those Awards which shall be
accelerated or vested and the extent to which they shall be accelerated or
vested, or that an Award shall terminate, or unless in connection with
such Event the Administrator provides (i) for the assumption of such
Awards theretofore granted, or (ii) for the substitution for such Awards
of new awards covering securities or obligations (or any combination
thereof) of a successor corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to number and kind of shares and prices,
or (iii) for the payment of the fair value of the then outstanding Awards.
In addition, the Administrator may grant such additional rights in the
foregoing circumstances as the Administrator deems to be in the best
interest of the Employee Participant and the Corporation in order to
preserve for the Employee Participant the benefits of an Award. For
purposes of this Section 6.3 only, Administrator shall mean the
Administrator as constituted immediately prior to the Event.
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In addition, the Administrator may in its sole discretion accelerate
the exercisability or vesting of any or all Awards outstanding under the
Key Employee Program in circumstances under which the Administrator
determines such acceleration appropriate.
6.4 Termination, Suspension and Amendment
The Board of Directors may, at any time, suspend, amend, modify or
terminate the Plan (or any part thereof), and the Administrator may, with
the consent of an Employee Participant, authorize such modifications of
the terms and conditions of such Participant's Award as it shall deem
advisable; provided that, except as permitted under the provisions of
Section 6.2 hereof, no amendment or modification of the Plan as approved
by stockholders may be adopted without approval by a majority of the
shares of the Common Stock represented (in person or by proxy) at a
meeting of stockholders at which a quorum is present and entitled to vote
thereat, if such amendment or modification would:
(i) materially increase the benefits accruing to Participants
under the Plan within the meaning of Rule 16b-3 under the Exchange Act
or any successor provision;
(ii) materially increase the aggregate number of shares which may
be delivered pursuant to Awards granted under the Plan; or
(iii) materially modify the requirements of eligibility for
participation in the Plan.
Neither adoption of the Plan nor the provisions hereof shall limit
the authority of the Board of Directors or the Administrator to adopt
other plans or to authorize other payments of compensation and benefits
under applicable law.
No Awards under the Plan may be granted or amended during any
suspension of the Plan or after its termination. The amendment, suspension
or termination of the Plan shall not, without the consent of the
Participant, alter or impair any rights or obligations pertaining to any
Awards granted under the Plan prior to such amendment, suspension or
termination.
Notwithstanding the foregoing provisions of this Section 6.4, the
provisions of Article V that establish the amount and price of securities
to be granted or awarded, and the timing of the award or grant of such
securities, to Non-Employee Directors shall not be amended more than once
every six months, other than as may be necessary to comport with any
relevant changes in the Code or regulations thereunder.
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6.5 Privileges of Stock Ownership; Minimum Purchase; No Fractional Shares
A Participant shall not be entitled to the privilege of stock
ownership as to any shares of Common Stock until certificates evidencing
such shares are actually issued in the name of such Participant. No Award
or installment thereof shall be exercisable except in respect of whole
shares, and fractional share interests shall be disregarded. No fewer
than twenty-five shares may be purchased at one time unless the number
purchased is the total number at the time available for purchase under the
Option or other Award.
6.6 Tax Withholding and Tax Bonuses
The Corporation shall be entitled to require deduction from other
compensation payable to each Participant any sums required by federal,
state or local tax law to be withheld with respect to an Award, but, in
the alternative, (i) the Corporation may require the Participant to
advance such sums, or (ii) if a Participant, other than a Nonemployee
Director Participant, elects, the Corporation may withhold shares of
Common Stock having a Fair Market Value equal to the sums required to be
withheld. If the Employee Participant elects to advance such sums
directly, written notice of that election shall be delivered prior to such
exercise and, whether pursuant to such election or pursuant to a
requirement imposed by the Corporation, payment in cash or by check of
such sums for taxes shall be delivered within ten days after the date of
exercise. If the Employee Participant elects to have the Corporation
withhold shares of Common Stock having a Fair Market Value equal to the
sums required to be withheld, the value of the shares of Common Stock to
be withheld will be equal to the Fair Market Value of such shares on the
date that the amount of tax to be withheld is to be determined (the "Tax
Date"). Elections by eligible Participants to have shares of Common Stock
withheld for this purpose will be subject to the following restrictions:
(w) the election must be made prior to the Tax Date, (x) the election must
be irrevocable, (y) the election will be subject to the disapproval of the
Administrator, and (z) if the Participant is an officer of the Corporation
within the meaning of Section 16 of the Exchange Act, the election shall
be subject to such additional restrictions as the Administrator may impose
in an effort to secure the benefits of any regulations thereunder. The
Corporation shall not be obligated to issue shares and/or distribute cash
to the Participant upon exercise of any Award until such payment has been
received or shares have been so withheld, unless withholding (or offset
against a cash payment) as of or prior to the date of such exercise is
sufficient to cover all such sums due or which may be due with respect to
such exercise. In addition, the Administrator may grant to any Employee
Participant a cash bonus in the amount of any sum required by federal,
state or local tax law to be withheld with respect to an Award.
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6.7 Compliance with Laws
The Plan, the granting of Awards under the Plan, the Award Agreements
and the delivery of Options, shares of Common Stock and other Awards
(and/or the payment of money or Common Stock) pursuant thereto and the
extension of any loans hereunder are subject to such additional
requirements as the Administrator may impose to assure or facilitate
compliance with all applicable federal and state laws, rules and
regulations (including, without limitation, securities laws and margin
requirements) and to such approvals by any regulatory or governmental
agency which may be necessary or advisable in connection therewith.
In connection with the administration of the Plan or the grant of any
Award, the Administrator may impose such further limitations or conditions
as in its opinion may be required or advisable to satisfy, or secure the
benefits of, applicable regulatory requirements (including those rules
promulgated under Section 16 of the Exchange Act or those rules that
facilitate exemption from or compliance with the Act or the Exchange Act),
the requirements of any stock exchange upon which such shares or shares of
the same class are then listed, and any blue sky or other securities laws
applicable to such shares.
6.8 Governing Laws
The Plan and all Awards granted under the Plan and the documents
evidencing Awards shall be governed by, and construed in accordance with,
the laws of the State of California, except as to those matters governed
by the laws of the State of Delaware as the state of incorporation of the
Corporation.
6.9 Effective Date of the Plan
The Plan first became effective (except as provided below) on
February 23, 1988 and was approved by stockholders of the Corporation on
April 26, 1988. The Plan was amended by the Board of Directors in
December 1989, November 1991, July 1992, February 1993 (subject to
Stockholder approval which was obtained on April 27, 1993) and July 1993.
Notwithstanding the foregoing provisions, the provisions of Section 5.3
hereof have not yet become effective and shall become effective only on
such date hereafter as the Board of Directors shall designate.
6.10 Termination of the Plan
Unless previously terminated by the Board of Directors, the Plan
shall terminate at the close of business on February 22, 1998, and no
Awards (other than rights granted under Sections 6.2 and 6.3 hereof) shall
be granted under it thereafter, but such termination shall not affect any
Award theretofore granted under the Plan or the authority of the
Administrator with respect to outstanding Awards.
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VII. DEFINITIONS
7.1 "Act" shall mean the Securities Act of 1933, as amended from
time to time.
7.2 "Administrator" shall mean the Committee or, with respect to
acts or matters on or prior to November 26, 1991, the Board of Directors.
7.3 "Award" shall mean an Option, which may be designated as a
Nonqualified Stock Option or Incentive Stock Option, a Stock Appreciation
Right, a Restricted Stock Award, a Performance Award, a Dividend
Equivalent or a Stock Payment, in each case granted under the Plan.
7.4 "Award Agreement" shall mean a written agreement setting forth
the terms of an Award.
7.5 "Award Date" shall mean the date upon which the Administrator
takes the necessary action granting an Award or such later date as is
prescribed by the Administrator.
7.6 "Award Period" shall mean the period beginning on an Award Date
and ending on the expiration date of such Award.
7.7 "Beneficiary" shall mean the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to receive the
benefits specified under the Plan in the event of a Participant's death.
7.8 "Board of Directors" shall mean the Board of Directors of the
Corporation.
7.9 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
7.10 "Committee" shall mean the Compensation Committee of the Board
of Directors or such other committee as from time to time constituted and
appointed by the Board
of Directors to serve as Administrator of the Plan, which Committee shall
consist of no fewer than three directors (or no fewer than two directors,
as of September 1, 1994 (or such other date as the Committee may determine
or the Securities and Exchange Commission may designate as the expiration
of the transition period with respect to former Rule 16b-3 under the
Exchange Act)), each of whom shall be a Disinterested member of the Board
of Directors.
7.11 "Common Stock" shall mean the Common Stock of the Corporation.
7.12 "Company" shall mean, collectively, the Corporation and its
Subsidiaries, or the Corporation or any of its Subsidiaries, as the
context requires.
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7.13 "Corporation" shall mean Great Western Financial Corporation
and its successors.
7.14 "Disability" shall mean any inability on the part of a
Participant, as determined by the Administrator, in its complete and sole
discretion, commencing before age 64-1/2, to perform the substantial and
material duties of his or her job due to injury or sickness lasting for
more than 180 consecutive days or such other condition as the
Administrator may include for purposes of the Plan.
7.15 "Disinterested" shall mean ineligible to participate in the Key
Employee Program during the period of service on the Committee and
possessing such other qualifications and satisfying such other criteria as
are necessary to meet applicable legal or regulatory requirements for
administration of the Plan, including but not limited to the disinterested
administration requirements of Rule 16b-3 and any other requirements under
the Exchange Act, as amended from time to time.
7.16 "Dividend Equivalent" shall mean a right to receive a number of
shares of Common Stock or an amount of cash, determined as provided in
Section 4.6 hereof.
7.17 "Eligible Employee" shall mean an officer or key full time or
part time employee of the Company or Other Eligible Person.
7.18 "Employee Participant" shall mean an Eligible Employee who has
been granted an Award under the Key Employee Program.
7.19 "Event" shall mean any of the following:
(i) Any person or entity (or group of affiliated persons or entities)
acquires in one or more transactions, whether before or after the
effective date of the Plan, ownership of more than 50 percent of the
outstanding shares of stock entitled to vote in the election of directors
of the Corporation; or
(ii) The dissolution or liquidation of the Corporation or a
reorganization, merger or consolidation of the Corporation with one or
more entities, as a result of which the Corporation is not the surviving
entity, or a sale of all or substantially all of the assets of the
Corporation as an entirety to another entity.
For purposes of this provision, ownership does not include
ownership:
(i) by a person owning such shares merely of record (such as a
member of a securities exchange, a nominee or a securities depositary
system),
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(ii) by a person as a bona fide pledgee of shares prior to a
default and determination to exercise powers as an owner of the shares,
(iii) by a person who is not required to file statements on Schedule
13D by virtue of Rule 13d-l(b) of the Securities and Exchange Commission
under the Exchange Act, or
(iv) by a person who owns or holds shares as an underwriter
acquired in connection with an underwritten offering pending and for
purposes of their resale.
7.20 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
7.21 "Fair Market Value" shall mean the closing price of the Common
Stock on the principal national securities exchange on which the Common
Stock is listed as reported on the composite tape and published in the
Western Edition of The Wall Street Journal, or, if there is no trading of
the Common Stock on the relevant date, then the closing price of the
Common Stock, as so reported and published, on the next preceding date on
which there was trading in the Common Stock; provided, however, that the
Administrator may designate such other exchange, market or source of data
as it deems appropriate for determining fair market value for purposes of
the Plan.
7.22 "Incentive Stock Option" shall mean an incentive stock option
within the meaning of Section 422 of the Code.
7.23 "Nonemployee Director" shall mean a member of the Board of
Directors of the Corporation who is not an officer or employee of the
Company.
7.24 "Nonemployee Director Participant" shall mean a Nonemployee
Director who has been granted an Award under the Director Program.
7.25 "Nonqualified Stock Option" shall mean a stock option that does
not qualify as an Incentive Stock Option.
7.26 "Normal Board Retirement" shall mean retirement from active
service as a member of the Board of Directors on or after attaining age
72.
7.27 "Option" shall mean either a Nonqualified Stock Option or an
Incentive Stock Option.
7.28 "Other Eligible Person" shall mean an advisory director of the
Company, or other person (including but not limited to loan agents and
consultants) who performs substantial services for the Company of a nature
similar to those performed by key employees, selected to participate in
the Plan by the Administrator from time to time; provided that in no event
shall a Nonemployee Director be selected as an Other Eligible Person.<PAGE>
<PAGE>
7.29 "Participant" shall mean either an Employee Participant or a
Nonemployee Director Participant.
7.30 "Par Value" shall mean the par value per share of the Common
Stock, initially $1.00.
7.31 "Performance Award" shall mean a cash bonus, stock bonus or
other performance or incentive award that is paid in cash, stock or a
combination of both.
7.32 "Personal Representative" shall mean the person or persons who,
upon the Disability or incompetence of a Participant, shall have acquired
on behalf of the Participant by legal proceeding or otherwise under
applicable law the right to act as guardian or legal representative of the
Participant and receive the benefits specified in the applicable Award
Agreement under the Plan.
7.33 "Plan" shall mean the Great Western Financial Corporation 1988
Stock Option and Incentive Plan, as amended from time to time.
7.34 "Restricted Stock" shall mean those shares of Common Stock
issued pursuant to a Restricted Stock Award
that are not free of the restrictions set forth in the related Award
Agreements.
7.35 "Restricted Stock Award" shall mean an award of a fixed number
of shares of Common Stock subject, however, to payment of such
consideration, if any, and such forfeiture provisions, as are set forth in
the Award Agreement.
7.36 "Stock Appreciation Right" shall mean a right to receive a
number of shares of Common Stock or an amount of cash, or a combination of
shares and cash, based upon the Fair Market Value, book value or other
measure determined from time to time by the Administrator of the value of
the Common Stock as provided in Section 4.4 hereof.
7.37 "Stock Payment" shall mean a payment in the form of shares of
Common Stock, or an option or other right to purchase shares of Common
Stock, as part of a deferred compensation arrangement, made in lieu of all
or any portion of the compensation, including, without limitation, salary,
bonuses and commissions, that would otherwise become payable to an
Eligible Employee in cash.
7.38 "Subsidiary" shall mean any corporation or other entity a
majority or more of whose outstanding voting stock or voting power is
beneficially owned directly or indirectly by the Corporation.
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VIII. ADDITIONAL LIMITATIONS
8.1 Limitations Applicable to Section 16 Persons
Notwithstanding any other provision of the Plan except Section 8.2,
any Award granted to an Eligible Employee who is then subject to Section
16 of the Exchange Act is subject to the following additional limitations:
(1) the Award may provide for the issuance of shares of Common Stock
as a stock bonus for no consideration other than services rendered or to
be rendered; and
(2) in the event of an Award under which shares of Common Stock are
or in the future may be issued for any other type of consideration, the
amount of such consideration either (i) shall be equal to the minimum
amount (such as the par value of such shares) required to be received by
the Corporation to comply with applicable state law, or (ii) shall be
equal to or greater than 50% of the Fair Market Value of the shares of
Common Stock on the date of the Award.
8.2 Release of Restrictions
The limitations in Section 8.1 shall be suspended as of September 1,
1994 (or such other date as the Committee may determine or the Securities
and Exchange Commission may designate as the expiration of the transition
period with respect to former Rule 16b-3 under the Exchange Act), except
to the extent that the Securities and Exchange Commission by regulation or
staff interpretation determines that such limitations are necessary to
conform the plan to the requirements of, or otherwise secure the benefits
available with respect to a conforming "plan" or particular Award, as the
case may be, under Rule 16b-3 under the Exchange Act.
8.3 Plan Construction
It is the intent of the Corporation that this Plan and Awards
hereunder satisfy and be interpreted in a manner that in the case of
Participants who are or may be subject to Section 16 of the Exchange Act
satisfies the applicable requirements of Rule 16b-3 (as in effect before
May 1, 1991 or after May 1, 1991, as the case may be, in respect of the
Plan) so that such persons will be entitled to the benefits of the Rule or
other exemptive rules under Section 16 of the Exchange Act and will not be
subjected to avoidable liability thereunder. In furtherance of such
intent, each of the Employee Program and Director Program (and the two
classes of awards under the Director Program) may, in the discretion of
the Administrator, be deemed a separate plan if so required,
notwithstanding the designation of this document as a Plan for convenience
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of reference and to establish certain provisions and limitations
applicable to all authorized Awards. If any provision of this Plan or of
any Award would otherwise frustrate or otherwise conflict with the intent
expressed above, that provision to the extent possible shall be
interpreted and deemed amended so as to avoid such conflict, but to the
extent of any remaining irreconcilable conflict with such intent as to
such persons in the circumstances, such provision shall be deemed void.
<PAGE>
<PAGE>
Exhibit 10.18
GREAT WESTERN FINANCIAL CORPORATION
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of the ____ day of
__________, ____, between GREAT WESTERN FINANCIAL CORPORATION,
a Delaware corporation (the "Corporation"), and
__________________________ (the "Director").
W I T N E S S E T H
WHEREAS, pursuant to the 1988 Stock Option and Incentive
Plan, as amended (the "Plan"), the Corporation has granted
under Section 5.2 thereof to the Director as of the ____ day
of _________________, ____ (the "Award Date") a nonqualified
stock option to purchase all or any part of 2,500 authorized
but unissued or treasury shares of Common Stock, $1.00 par
value, of the Corporation upon the terms and conditions set
forth in Article V of the Plan; and
WHEREAS, as of the Award Date, the Director is serving
and since ____ has continuously served as a director of the
Corporation and is eligible for an automatic grant of a
nonqualified stock option under Section 5.2 of the Plan.
NOW, THEREFORE, in consideration of the mutual promises
and covenants made herein and the mutual benefits to be
derived herefrom, the parties hereto agree as follows:
1. Defined Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meaning assigned to
such terms in the Plan.
2. Grant of Option. This Agreement evidences the
Corporation's grant to the Director of the right and option to
purchase, on the terms and conditions set forth hereinafter
and in the Plan, all or any part of an aggregate of 2,500
shares of the Common Stock of the Corporation at the price of
$_______ per share (the "Option"), exercisable from time to
time, subject to the provisions of this Agreement, prior to
the close of business on the day before the tenth anniversary
of the Award Date (the "Expiration Date"). Such price equals
the Fair Market Value of the Corporation's Common Stock as of
the Award Date.
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3. Exercisability of Option. Except as provided in
Sections 6 and 8 hereof, no shares may be purchased by
exercise of the Option until the expiration of one year after
the Award Date. The Option shall become exercisable in
installments as to 50% of the aggregate number of shares set
forth in Section 2 hereof (subject to adjustment) on and after
the first anniversary of the Award Date and as to an
additional 50% of the aggregate number of such shares (subject
to adjustment) on the second anniversary of the Award Date.
To the extent the Director does not in any year purchase all
or any part of the shares to which the Director is entitled,
the Director has the right cumulatively thereafter to purchase
any shares not so purchased and such right shall continue
until the Option terminates or expires. No fewer than 25
shares may be purchased at any one time, unless the number
purchased is the total number at the time available for
purchase under the Option.
4. Method of Exercise of Option. The Option shall be
exercisable by the delivery to the Corporation of a written
notice stating the number of shares to be purchased pursuant
to the Option and accompanied by payment (i) in cash or by
check payable to the order of the Corporation for the full
purchase price of the shares to be purchased, (ii) by the
exchange of shares of Common Stock of the Corporation then
owned by the Director having a Fair Market Value equal to such
purchase price, or (iii) by the payment and exchange of part
cash and part stock with the sum of the cash and Fair Market
Value of the stock equal to such purchase price. In addition,
the Director (or the Director's Beneficiary or Personal
representative) shall furnish any written statements required
pursuant to Section 10 hereof.
5. Continuance of Status. Nothing contained in this
Agreement or in the Plan shall confer upon the Director any
right with respect to the continuation of his or her status as
a director of the Corporation or any Subsidiary or interfere
in any way with any right to terminate such service or to
increase or decrease the compensation of the Director for such
service from the rate in existence at any time.
6. Effect of Termination of Employment or Death. The
Option and all other rights hereunder, to the extent not
exercised, shall terminate and become null and void at such
time as the Director ceases to serve as a director of the
Corporation, except that
<PAGE>
<PAGE>
(a) If the Director's services as a director terminate
by reason of death, Disability or Normal Board Retirement, the
Option shall immediately become and shall remain exercisable
in full for two years after the date of such termination; and
(b) If the Director's services as a director terminate
for any other reason, any portion of the Option which is not
exercisable at the date of such termination shall terminate
and any portion of the Option which is then exercisable may be
exercised for three months after such termination date;
provided, however, that in no event may the Option be
exercised by anyone under this Section or otherwise after the
Expiration Date.
7. Non-Transferability of Option. During the Director's
lifetime, the Option and any other rights hereunder may be
exercised only by the Director, except as otherwise expressly
provided in the Plan.
8. Adjustments and Other Rights. The Option and all
rights of the Director hereunder are subject to adjustment,
modification and termination in certain circumstances and upon
occurrence of certain events, as set forth in the provisions
of the Plan applicable to Options granted under Section 5.2
thereof. In the event the Director fails to exercise the
Option as provided in Section 5.8 of the Plan prior to the
consummation of any reorganization, merger or consolidation of
the Corporation as a result of which the Corporation is not
the surviving entity, the Director shall, upon exercise of the
Option in accordance with the provisions of Section 3 hereof
and the payment of the purchase price set forth in Section 2
hereof, be entitled to receive for each share of Common Stock
covered by the Option the amount of cash, securities or other
property, as the case may be, received by the stockholders of
the Corporation in exchange for one share of Common Stock upon
the occurrence of such event.
9. Limitation of Director's Rights. Neither the Director
nor any other person entitled to exercise the Option shall
have any of the rights or privileges of a stockholder of the
Corporation in respect of any shares deliverable upon exercise
of the Option unless and until a certificate representing such
shares shall have been issued in the name of the Director or
such person.
<PAGE>
<PAGE>
10. Representations of the Director. The Director
agrees that the Corporation shall not be required to deliver
shares upon the exercise of the Option if prevented or
prohibited from doing so under applicable law. If the shares
are not registered with the Securities and Exchange Commission
at the time of such exercise, the Director shall be required
to deliver an investment letter in form acceptable to the
Corporation and all certificates representing shares issued
shall bear appropriate legends reflecting restrictions on
transfer under applicable laws. The Director agrees by
acceptance of the Option and, in such letter, the Director
shall represent that he will acquire the shares issuable upon
such exercise for his own account, for the purpose of
investment, and not with a view to or for sale in connection
with any distribution, and that he will not offer, sell or
otherwise transfer or dispose of such shares or any interest
therein except in compliance with all securities laws
applicable to such action. The Corporation may impose stop
transfer instructions to implement such limitations, if
applicable. Any person or persons entitled to exercise the
Option under the provisions of Section 7 hereof shall be bound
by and obligated under the provisions of this Section 10 to
the same extent as is the Director.
11. Tax Withholding. The Corporation shall be entitled
to deduct from other cash compensation payable to the
Director, or may require the Director or other person
exercising the Option to advance in cash, any sums which may
hereafter be required by federal, state or local tax law to be
withheld with respect to the exercise of the Option.
12. Notices. Any notice to be given under the terms of
this Agreement shall be in writing and addressed to the
Corporation at its principal office in Chatsworth, California,
to the attention of the Corporate Secretary and to the
Director at the address given beneath the Director's signature
hereto, or at such other address as either party may hereafter
designate in writing to the other.
13. Laws Applicable to Construction. The Option has
been granted, executed and delivered at Beverly Hills,
California, and the interpretation, performance and
enforcement of this Agreement shall be governed by the laws of
the State of California, except as otherwise provided in
Section 6.8 of the Plan.
14. Plan. The Option is subject to, and the Corporation
and the Director agree to be bound by, all of the terms and
conditions of the Plan. The Director acknowledges receipt of
a copy of the Plan, which is made a part hereof by this
reference.<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this
Agreement to be executed on its behalf by a duly authorized
officer and the Director has hereunto set his hand.
GREAT WESTERN FINANCIAL
CORPORATION (a Delaware
corporation)
By __________________________
Title ____________________
_________________________
_________________________
(Signature)
_________________________
(Print Name)
_________________________
(Address)
_________________________
(City, State, Zip Code)
Executed:
<PAGE>
Exhibit 10.21
GREAT WESTERN FINANCIAL CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of the ___ day of _________ 19___, between
GREAT WESTERN FINANCIAL CORPORATION, a Delaware corporation (the
"Corporation"), and _________________ (the "Employee").
W I T N E S S E T H
WHEREAS, pursuant to the 1988 Stock Option and Incentive Plan, as
amended (the "Plan"), the Corporation has granted to the Employee as of
the ___ day of __________, 19___ (the "Award Date") a nonqualified stock
option to purchase all or any part of ______________ authorized but
unissued or treasury shares of Common Stock, $1.00 par value, of the
Corporation upon the terms and conditions set forth herein and in the
Plan.
NOW, THEREFORE, in consideration of the mutual promises and covenants
made herein and the mutual benefits to be derived herefrom, the parties
hereto agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise
defined herein shall have the meaning assigned to such terms in the Plan.
2. Grant of Option. This Agreement evidences the Corporation's
grant to the Employee of the right and option to purchase, on the terms
and conditions set forth herein and, to the extent expressly herein
provided, in the Plan, all or any part of an aggregate of shares of
the Common Stock of the Corporation at the price of $______ per share (the
"Option"), exercisable from time to time, subject to the provisions of
this Agreement, prior to the close of business on the day before the tenth
anniversary of the Award Date (the "Expiration Date"). Such price equals
the Fair Market Value of the Corporation's Common Stock as of the Award
Date.
3. Exercisability of Option. Except as provided in Sections 6 and 8
hereof, no shares may be purchased by exercise of the Option until the
expiration of one year after the Award Date. The Option shall become
exercisable in installments as to 20% of the aggregate number of shares
set forth in Section 2 hereof (subject to adjustment) on and after the
first anniversary of the Award Date and as to an additional 20% of the
aggregate number of such shares (subject to adjustment) on each of the
second, third, fourth and fifth anniversaries of the Award Date. To the
extent the Employee does not in any year purchase all or any part of the
<PAGE>
<PAGE>
shares to which the Employee is entitled, the Employee has the right
cumulatively thereafter to purchase any shares not so purchased and such
right shall continue until the Option terminates or expires. No fewer
than 25 shares may be purchased at any one time, unless the number
purchased is the total number at the time available for purchase under the
Option.
4. Method of Exercise of Option. The Option shall be exercisable by
the delivery to the Corporation of a written notice stating the number of
shares to be purchased pursuant to the Option and accompanied by payment
in (i) cash or by check payable to the order of the Corporation for the
full purchase price of the shares to be purchased, (ii) at the discretion
of the Administrator and pursuant to such conditions and restrictions as
the Committee may establish by the exchange of shares of Common Stock of
the Corporation then owned by the Employee having a Fair Market Value
equal to such purchase price, (iii) at the discretion of the
Administrator, by the payment and exchange of part cash and part stock
with the sum of the cash and Fair Market Value of the stock equal to such
purchase price, or (iv) by the payment of such other form of legal
consideration as may be approved by the Board of Directors and the
Administrator. In addition, the Employee (or the Employee's Beneficiary
or Personal Representative) shall furnish any written statements required
pursuant to Section 10 below.
5. Continuance of Employment. As a condition of the Option, the
Employee hereby agrees to remain in the employ of the Corporation or one
of its Subsidiaries for a period of one year after the Award Date.
Nothing contained in this Agreement or in the Plan shall confer upon the
Employee any right with respect to the continuation of his or her
employment by the Corporation or any Subsidiary or interfere in any way
with the right of the Corporation or of any Subsidiary at any time to
terminate such employment or to increase or decrease the compensation of
the Employee from the rate in existence at any time.
6. Effect of Termination of Employment or Death. The Option and all
other rights hereunder, to the extent not exercised, shall terminate and
become null and void at such time as the Employee ceases to be employed by
either the Corporation or any Subsidiary, except that
(a) if the Employee's employment terminates (other than (i)
as a result of death or of Retirement (as such term is defined in
the Great Western Retirement Plan, as from time to time in effect)
or (ii) at the request of the Corporation or any Subsidiary as
determined by the Administrator in its sole discretion), the
Employee may at any time within a period of three months after
such termination exercise the Option to the extent the Option was
exercisable at the date of such termination;
<PAGE>
<PAGE>
(b) if the Employee's employment terminates as a result of
Retirement, the Employee may at any time within a period of two
years after such Retirement exercise the Option to the extent the
Option was exercisable at the date of such Retirement; and
(c) if the Employee dies while in the employ of the
Corporation or any Subsidiary, or within three months after a
termination described in subsection (a) of this Section 6
(excluding a termination described in the parenthetical clause
thereof), or within two years after termination as a result of
Retirement as described in subsection (b) of this Section 6, then
the Option, to the extent that the Employee was entitled to
exercise the Option on the date of his or her death (or such
earlier termination), may be exercised within a period of one year
after the date of death by the Employee's Beneficiary;
provided, however, that in no event may the Option be exercised by
anyone under this Section or otherwise after the Expiration Date.
If the Employee is employed by an entity which ceases to be a
Subsidiary, other than by merger with or liquidation into another
Subsidiary, such event shall be deemed for purposes of this
Section 6 to be a termination of the Employee's employment
described in subsection (a).
7. Non-Transferability of Option. During the Employee's lifetime,
the Option and any other rights hereunder may be exercised only by the
Employee, except as otherwise expressly provided in Section 6.1.3 of, or
pursuant to, the Plan.
8. Adjustments and Other Effects (including Termination) upon Certain
Events. If the outstanding shares of the Corporation's Common Stock are
changed into or exchanged for cash or a different number or kind of shares
or securities of the Corporation, or if additional shares or new or
different shares or securities are distributed with respect to the
outstanding shares of the Corporation's Common Stock, through a
reorganization or merger in which the Corporation is the surviving entity
or through a combination, consolidation, recapitalization, reclassifica-
tion, stock split, stock dividend, reverse stock split, stock
consolidation or other capital change or adjustment, an appropriate
proportionate equitable adjustment shall be made in the number and kind of
shares or other consideration that is subject to or may be delivered
pursuant to the Option. A corresponding adjustment to the consideration
payable with respect to the Option shall also be made as appropriate. In
addition, the Option and rights of the Employee hereunder are subject to
adjustment, modification and termination in certain other circumstances
and upon occurrence of certain other events, as set forth in the
provisions of Article II, Sections 6.3 and 6.4, and the last sentence of
Section 6.2 of the Plan, to the extent applicable to Options granted under
the Key Employee Program.<PAGE>
<PAGE>
9. Limitation of Employee's Rights. Neither the Employee nor any
other person entitled to exercise the Option shall have any of the rights
or privileges of a stockholder of the Corporation in respect of any shares
deliverable upon exercise of the Option unless and until a certificate
representing such shares shall have been issued in the name of the
Employee or such person.
10. Representations of the Employee. The Employee agrees that the
Corporation shall not be required to deliver shares upon the exercise of
the Option if prevented or prohibited from doing so under applicable law.
If the shares are not registered with the Securities and Exchange
Commission at the time of such exercise, the Employee shall be required to
deliver an investment letter in form acceptable to the Corporation and all
certificates representing shares issued shall bear appropriate legends
reflecting restrictions on transfer under applicable laws. The Employee
agrees by acceptance of the Option and, in such letter, the Employee shall
represent that he or she will acquire the shares issuable upon such
exercise for his or her own account, for the purpose of investment, and
not with a view to or for sale in connection with any distribution, and
that he or she will not offer, sell or otherwise transfer or dispose of
such shares or any interest therein except in compliance with all
securities laws applicable to such action. The Corporation may impose
stop transfer instructions to implement such limitations, if applicable.
Any person or persons entitled to exercise the Option under the provisions
of Section 7 hereof shall be bound by and obligated under the provisions
of this Section 10 to the same extent as is the Employee.
11. Tax Withholding. The Corporation shall be entitled to require
deduction from other compensation payable to the Employee any sums
required by federal, state or local tax law to be withheld with respect to
the exercise of the Option, but, in the alternative, (i) the Corporation
may require the Employee or other person exercising the Option to advance
such sums in cash, or (ii) if the Employee or other person exercising the
Option elects, the Corporation may withhold shares of the Corporation's
Common Stock having a Fair Market Value equal to the sums required to be
withheld. If the Employee or other person exercising the Option elects to
advance such sums directly, written notice of that election shall be
delivered prior to such exercise and, whether pursuant to such election or
pursuant to a requirement imposed by the Corporation, payment in cash or
by check of such sums for taxes shall be delivered within ten days after
the date of exercise. If the Employee or other person exercising the
Option elects to have the Corporation withhold shares of the Corporation's
Common Stock having a Fair Market Value equal to the sums required to be
withheld, the value of the shares of the Corporation's Common Stock to be
withheld will be equal to the Fair Market Value of such shares on the date
that the amount of tax to be withheld is to be determined (the "Tax
Date"). Elections by the Employee to have shares of the Corporation's
Common Stock withheld for this purpose will be subject to the following
restrictions: (w) the election must be made prior to the Tax Date, (x)
<PAGE>
the election must be irrevocable, (y) the election will be subject to the
approval or disapproval (as the case may be) of the Administrator, and (z)
if the Employee is an officer of the Corporation within the meaning of
Section 16 of the Exchange Act, the election, in addition, may not be made
within six months of the grant of the Option (except that this limitation
will not apply in the event that the death or Disability of the Employee
occurs prior to the expiration of the six month period) and either must be
made at least six months prior to the Tax Date or in one of the periods
beginning on the third business day following the date of release of the
Corporation's quarterly or annual summary statements of sales and earnings
and ending on the twelfth business day following such date. The
Corporation shall not be obligated to issue shares and/or distribute cash
to the Employee or other person exercising the Option upon exercise of the
Option until such payment has been received or shares have been so
withheld, unless withholding as of or prior to the date of such exercise
is sufficient to cover all such sums due or which may be due with respect
to such exercise.
12. Employment by Subsidiaries. Employment by any Subsidiary shall
be considered as the equivalent of employment by the Corporation for all
purposes of this Agreement, unless the Board otherwise determines.
13. Notices. Any notice to be given under the terms of this
Agreement shall be in writing and addressed to the Corporation at its
principal office in Chatsworth, California, to the attention of the
Corporate Secretary and to the Employee at the address given beneath the
Employee's signature hereto, or at such other address as either party may
hereafter designate in writing to the other.
14. Laws Applicable to Construction. The Option has been granted,
executed and delivered at Chatsworth, California, and the interpretation,
performance and enforcement of this Agreement shall be governed by the
laws of the State of California, except as otherwise provided in Section
6.8 of the Plan.
15. Plan. The Option is subject to, and the Employee agrees to be
bound by, all of the terms and conditions of the provisions of Articles I
and II and Sections 4.2, 6.1, 6.3, 6.4, 6.5, 6.7 and 6.8 and the last
sentence of Section 6.2 of the Plan. The Employee acknowledges receipt of
a copy of the Plan, which, to the extent set forth in the preceding
sentence, is made a part hereof by this reference. Unless otherwise
expressly provided in other Sections of this Agreement, provisions of the
Plan that confer discretionary authority on the Administrator do not (and
shall not be deemed to) apply to the Option or create rights in the
Employee unless such application or rights are expressly so conferred by
appropriate action of the Administrator, in its sole discretion, under the
Plan after the date hereof.
<PAGE>
<PAGE>
16. Effect of Agreement. This Agreement shall not be binding upon
and shall not inure to the benefit of any successor or successors of the
Corporation except as provided pursuant to Section 6.3 of the Plan.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed on its behalf by a duly authorized officer and the Employee has
hereunto set his or her hand.
GREAT WESTERN FINANCIAL
CORPORATION (a Delaware
corporation)
By _________________________
Title____________________
EMPLOYEE
__________________________
(Signature)
__________________________
(Print Name)
__________________________
(Address)
__________________________
(City, State, Zip Code)
Executed:
<PAGE>
Exhibit 10.22
GREAT WESTERN FINANCIAL CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
(EARLY VESTING PROVISIONS)
THIS AGREEMENT dated as of the ___ day of _________
19___, between GREAT WESTERN FINANCIAL CORPORATION, a Delaware
corporation (the "Corporation"), and (the
"Employee").
W I T N E S S E T H
WHEREAS, the Employee has performed and is expected to
continue to perform services to the Corporation; and
WHEREAS, the Corporation has granted to the Employee
pursuant to the 1988 Stock Option and Incentive Plan, as
amended (the "Plan"), as of the ___ day of __________, 19___
(the "Award Date") a nonqualified stock option to purchase all
or any part of authorized but unissued or
treasury shares of Common Stock, $1.00 par value, of the
Corporation upon the terms and conditions set forth herein and
in the Plan.
NOW, THEREFORE, in consideration of the past and
prospective services rendered and to be rendered by Employee,
the mutual promises and covenants made herein and the mutual
benefits to be derived herefrom, the parties hereto agree as
follows:
1. Defined Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meaning assigned to
such terms in the Plan.
2. Grant of Option. This Agreement evidences the
Corporation's grant to the Employee of the right and option to
purchase, on the terms and conditions set forth herein and, to
the extent expressly herein provided, in the Plan, all or any
part of an aggregate of shares of the Common Stock of
the Corporation at the price of $______ per share (the
"Option"), subject to the provisions of this Agreement, prior
to the close of business on the day before the tenth
anniversary of the Award Date (the "Expiration Date"). Such
price equals the Fair Market Value of the Corporation's Common
Stock as of the Award Date.
<PAGE>
<PAGE>
3. Exercisability of Option. The Option may be
exercised, in whole or in part, from time to time, until its
expiration or earlier termination. No fewer than 25 shares
may be purchased at any one time, unless the number purchased
is the total number at the time available for purchase under
the Option.
4. Method of Exercise of Option. The Option shall be
exercisable by the delivery to the Corporation of a written
notice stating the number of shares to be purchased pursuant
to the Option and accompanied by payment in (i) cash or by
check payable to the order of the Corporation for the full
purchase price of the shares to be purchased, (ii) at the
discretion of the Administrator and pursuant to such
conditions and restrictions as the Committee may establish by
the exchange of shares of Common Stock of the Corporation then
owned by the Employee having a Fair Market Value equal to such
purchase price, (iii) at the discretion of the Administrator,
by the payment and exchange of part cash and part stock with
the sum of the cash and Fair Market Value of the stock equal
to such purchase price, or (iv) by the payment of such other
form of legal consideration as may be approved by the Board of
Directors and the Administrator. In addition, the Employee
(or the Employee's Beneficiary or Personal Representative)
shall furnish any written statements required pursuant to
Section 10 below.
5. Continuance of Employment. As a condition of the
Option, the Employee hereby agrees to remain in the employ of
the Corporation or one of its Subsidiaries for a period of one
year after the Award Date. Nothing contained in this
Agreement or in the Plan shall confer upon the Employee any
right with respect to the continuation of his or her
employment by the Corporation or any Subsidiary or interfere
in any way with the right of the Corporation or of any
Subsidiary at any time to terminate such employment or to
increase or decrease the compensation of the Employee from the
rate in existence at any time.
6. Effect of Termination of Employment or Death. The
Option and all other rights hereunder, to the extent not
exercised, shall terminate and become null and void at such
time as the Employee ceases to be employed by either the
Corporation or any Subsidiary, except that
(a) if the Employee's employment terminates (other than
(i) as a result of death or of Retirement (as such term is
defined in the Great Western Retirement Plan, as from time to
time in effect) or (ii) at the request of the Corporation or
any Subsidiary as determined by the Administrator in its sole
discretion), the Employee may at any time within a period of
three months after such termination exercise the Option;
<PAGE>
<PAGE>
(b) if the Employee's employment terminates as aresult of
Retirement, the Employee may at any time within a period of
two years after such Retirement exercise the Option; and
(c) if the Employee dies while in the employ of the
Corporation or any Subsidiary, or within three months after a
termination described in subsection (a) of this Section 6
(excluding a termination described in the parenthetical clause
thereof), or within two years after termination as a result of
Retirement as described in subsection (b) of this Section 6,
then the Option may be exercised within a period of one year
after the date of death by the Employee's Beneficiary;
provided, however, that in no event may the Option be
exercised by anyone under this Section or otherwise after the
Expiration Date. If the Employee is employed by an entity
which ceases to be a Subsidiary, other than by merger with or
liquidation into another Subsidiary, such event shall be
deemed for purposes of this Section 6 to be a termination of
the Employee's employment described in subsection (a).
7. Non-Transferability of Option. During the Employee's
lifetime, the Option and any other rights hereunder may be
exercised only by the Employee, except as otherwise expressly
provided in Section 6.1.3 of, or pursuant to, the Plan.
8. Adjustments and Other Effects (including Termination)
upon Certain Events. If the outstanding shares of the
Corporation's Common Stock are changed into or exchanged for
cash or a different number or kind of shares or securities of
the Corporation, or if additional shares or new or different
shares or securities are distributed with respect to the
outstanding shares of the Corporation's Common Stock, through
a reorganization or merger in which the Corporation is the
surviving entity or through a combination, consolidation,
recapitalization, reclassification, stock split, stock
dividend, reverse stock split, stock consolidation or other
capital change or adjustment, an appropriate proportionate
equitable adjustment shall be made in the number and kind of
shares or other consideration that is subject to or may be
delivered pursuant to the Option or its exercise. A
corresponding adjustment to the consideration payable with
respect to the Option shall also be made as appropriate. In
addition, the Option and rights of the Employee hereunder are
subject to adjustment, modification and termination in certain
other circumstances and upon occurrence of certain other
events, as set forth in the provisions of Article II, Sections
6.3 and 6.4, and the last sentence of Section 6.2 of the Plan,
to the extent applicable to Options granted under the Key
Employee Program.<PAGE>
<PAGE>
9. Limitation of Employee's Rights. Neither the Employee
nor any other person entitled to exercise the Option shall
have any of the rights or privileges of a stockholder of the
Corporation in respect of any shares deliverable upon exercise
of the Option unless and until a certificate representing such
shares shall have been issued in the name of the Employee or
such person.
10. Representations of the Employee. The Employee
agrees that the Corporation shall not be required to deliver
shares upon the exercise of the Option if prevented or
prohibited from doing so under applicable law. If the shares
are not registered with the Securities and Exchange Commission
at the time of such exercise, the Employee shall be required
to deliver an investment letter in form acceptable to the
Corporation and all certificates representing shares issued
shall bear appropriate legends reflecting restrictions on
transfer under applicable laws. The Employee agrees by
acceptance of the Option and, in such letter, the Employee
shall represent that he or she will acquire the shares
issuable upon such exercise for his or her own account, for
the purpose of investment, and not with a view to or for sale
in connection with any distribution, and that he or she will
not offer, sell or otherwise transfer or dispose of such
shares or any interest therein except in compliance with all
securities laws applicable to such action. The Corporation
may impose stop transfer instructions to implement such
limitations, if applicable. Any person or persons entitled to
exercise the Option under the provisions of Section 7 hereof
shall be bound by and obligated under the provisions of this
Section 10 to the same extent as is the Employee.
11. Tax Withholding. The Corporation shall be entitled
to require deduction from other compensation payable to the
Employee any sums required by federal, state or local tax law
to be withheld with respect to the exercise of the Option,
but, in the alternative, (i) the Corporation may require the
Employee or other person exercising the Option to advance such
sums in cash, or (ii) if the Employee or other person
exercising the Option elects, the Corporation may withhold
shares of the Corporation's Common Stock having a Fair Market
Value equal to the sums required to be withheld. If the
Employee or other person exercising the Option elects to
advance such sums directly, written notice of that election
shall be delivered prior to such exercise and, whether
pursuant to such election or pursuant to a requirement imposed
by the Corporation, payment in cash or by check of such sums
for taxes shall be delivered within ten days after the date of
exercise. If the Employee or other person exercising the
Option elects to have the Corporation withhold shares of the
Corporation's Common Stock having a Fair Market Value equal to
the sums required to be withheld, the value of the shares of
<PAGE>
the Corporation's Common Stock to be withheld will be equal to
the Fair Market Value of such shares on the date that the
amount of tax to be withheld is to be determined (the "Tax
Date"). Elections by the Employee to have shares of the
Corporation's Common Stock withheld for this purpose will be
subject to the following restrictions: (w) the election must
be made prior to the Tax Date, (x) the election must be
irrevocable, (y) the election will be subject to the approval
or disapproval (as the case may be) of the Administrator, and
(z) if the Employee is an officer of the Corporation within
the meaning of Section 16 of the Exchange Act, the election,
in addition, may not be made within six months of the grant of
the Option (except that this limitation will not apply in the
event that the death or Disability of the Employee occurs
prior to the expiration of the six month period) and either
must be made at least six months prior to the Tax Date or in
one of the periods beginning on the third business day
following the date of release of the Corporation's quarterly
or annual summary statements of sales and earnings and ending
on the twelfth business day following such date. The
Corporation shall not be obligated to issue shares and/or
distribute cash to the Employee or other person exercising the
Option upon exercise of the Option until such payment has been
received or shares have been so withheld.
12. Employment by Subsidiaries. Employment by any
Subsidiary shall be considered as the equivalent of employment
by the Corporation for all purposes of this Agreement, unless
the Board otherwise determines.
13. Notices. Any notice to be given under the terms of
this Agreement shall be in writing and addressed to the
Corporation at its principal office in Chatsworth, California,
to the attention of the Corporate Secretary and to the
Employee at the address given beneath the Employee's signature
hereto, or at such other address as either party may hereafter
designate in writing to the other.
14. Laws Applicable to Construction. The Option has
been granted, executed and delivered at Chatsworth,
California, and the interpretation, performance and
enforcement of this Agreement shall be governed by the laws of
the State of California, except as otherwise provided in
Section 6.8 of the Plan.
<PAGE>
<PAGE>
15. Plan. The Option is subject to, and the Employee
agrees to be bound by, all of the terms and conditions of the
Plan, including the provisions of Articles I and II and
Sections 4.2, 6.1, 6.3, 6.4, 6.5, 6.7 and 6.8 and the last
sentence of Section 6.2 of the Plan. The Employee
acknowledges receipt of a copy of the Plan, which, to the
extent set forth in the preceding sentence, is made a part
hereof by this reference. Unless otherwise expressly provided
in other Sections of this Agreement, provisions of the Plan
that confer discretionary authority on the Administrator do
not (and shall not be deemed to) apply to the Option or create
rights in the Employee unless such application or rights are
expressly so conferred by appropriate action of the
Administrator, in its sole discretion, under the Plan after
the date hereof.
<PAGE>
<PAGE>
16. Effect of Agreement. This Agreement shall not be
binding upon and shall not inure to the benefit of any
successor or successors of the Corporation, except as provided
pursuant to Section 6.3 of the Plan.
IN WITNESS WHEREOF, the Corporation has caused this
Agreement to be executed on its behalf by a duly authorized
officer and the Employee has hereunto set his or her hand.
GREAT WESTERN FINANCIAL
CORPORATION (a Delaware
corporation)
By _________________________
Title____________________
EMPLOYEE
__________________________
(Signature)
__________________________
(Print Name)
__________________________
(Address)
__________________________
(City, State, Zip Code)
Executed:
<PAGE>
Exhibit 10.33
GREAT WESTERN FINANCIAL CORPORATION
ANNUAL INCENTIVE COMPENSATION PLAN FOR EXECUTIVE OFFICERS
Section 1. DEFINITIONS
- -----------------------
Except as otherwise expressly provided, financial terms are used as
defined for purposes of, and shall be determined in accordance with,
generally accepted accounting principles. Other capitalized terms used
herein have the following meanings:
"Adjusted Earnings Per Common Share" or "EPS" for any year means the
dollar amount determined by dividing (a) net earnings for such year before
giving effect to accounting changes not known to the Committee at the time
the applicable target was established and after deducting all amounts paid
or accrued, if any, with respect to dividends on preferred stock of the
Corporation for such year, by (b) the weighted average number of common
shares and common share equivalents outstanding during the year, on a
fully diluted basis.
"Applicable Federal Rate" means the applicable federal rate
determined under Section 1274(d) of the Code and Treasury Regulations
issued thereunder.
"Applicable Performance Factor" means the EPS Factor or the weighted
EPS Factor and SEBIT Factor, as the case may be.
"Base Salary Factor" means the multiplier described in Section 5.1.
"Beneficiary" means the person designated by a Participant to receive
any benefits hereunder in the event of the death of the Participant during
a year or prior to the payment of a Bonus for such year or, in the absence
of a designated beneficiary, such Participant's estate.
"Company" includes the Corporation and its subsidiaries, on a
consolidated basis, unless the context otherwise requires.
"Corporation" means Great Western Financial Corporation and shall
include its successors and assigns.
"Eligible Person" means an Executive Officer of the Corporation.
"EPS" means Adjusted Earnings Per Common Share as defined above.
<PAGE>
<PAGE>
"EPS Factor" means the multiple based on performance relative to
targeted EPS for the applicable year, as set forth in or pursuant to
Section 7.1.
"Executive Officer" has the meaning set forth in Rule 3b-7 under the
Securities Exchange Act of 1934 and refers to the individuals confirmed to
be within such definition by the Committee.
"Participant" in respect of a Plan year means an Executive Officer at
any time during the year.
"SEBIT" means Segment Earnings Before Income Taxes, as defined below.
"SEBIT Factor" means the multiple based on performance relative to
targeted SEBIT, as set forth in or pursuant to Section 7.2.
"Segment Earnings Before Income Taxes" or "SEBIT" for any year means
earnings before income taxes of the applicable segment, before giving
effect to accounting changes not known to the Committee at the time the
applicable target was established. The only segment as of the inception
of the Plan is the Consumer Finance Division.
"Year" or "Plan Year" means the fiscal year of the Corporation.
Section 2. PURPOSE
- -------------------
The purposes of the Plan are (i) to compensate and reward the
Executive Officers of the Corporation on an individual basis with annual
cash bonuses for the achievement of pre-established performance goals and
(ii) to stimulate the efforts of such persons by giving them a direct
interest in such performance. Maximum amounts payable will be based upon
the application of a formula that includes variables relative to base
salary levels and the degree of the attainment of the applicable
performance goals.
Section 3. TERM
- ----------------
Subject to Section 10, the Plan shall be effective as of January 1,
1994 (the "Effective Date") and shall be in effect with respect to each of
the five years ending December 31, 1998, unless earlier terminated by the
Corporation pursuant to Section 11.
<PAGE>
<PAGE>
Section 4. COVERAGE; ELIGIBLE PERSONS
- --------------------------------------
Each Executive Officer serving as such in any of the positions set
forth in Section 5.1 or any equivalent position at any time during the
applicable year for which a bonus may be granted hereunder shall be
eligible to participate and shall be a Participant in the Plan, subject to
the provisions hereof.
Section 5. BASE SALARY FACTOR
- ------------------------------
5.1. Base Salary and Base Salary Factor. Subject to the terms
hereof, each Participant's bonus, if any, shall be determined by reference
to the applicable multiplier (the "Base Salary Factor") of the
Participant's base salary ("Base Salary") for his or her position at the
beginning of the applicable year (or, if services commence during the
year, in accordance with the provisions of Section 8.5 and, if the
Participant's eligible position changes during the year, in accordance
with the provisions of Section 5.2). The initial Base Salary of each
eligible position shall be his or her Base Salary as of January 1, 1994 or
any later date of appointment to an eligible position. The Base Salary
Factors for the eligible positions as of January 1, 1994 are as follows:
<TABLE>
<S> <C>
Chief Executive Officer .6
Chief Operating Officer .5
All Executive Vice Presidents and the
Consumer Finance Division President .4
</TABLE>
5.2. Base Salary Adjustments for Changes in Position. If a
Participant holds more than one eligible position during any year, the
product of the Base Salary and the Base Salary Factor of such Participant
for purposes of the Plan for such year shall be computed by
(a) multiplying (i) the Base Salary Factor (as indicated in or pursuant to
Section 5.1 above) and for each position, by (ii) the applicable Base
Salary for each position, by (iii) a fraction, the numerator of which is
the number of days in the year during which such Participant held such
position and the denominator of which is 365, and (b) taking the sum of
the products of such calculation.
<PAGE>
<PAGE>
Section 6. TARGETS AND GOALS; MAXIMUM BONUSES
- ----------------------------------------------
6.1. Pre-Established Targets. For each year commencing with 1994,
the Committee shall determine the applicable EPS and SEBIT targets
(including applicable minimum, "on-plan" and maximum thresholds for
determining the Performance Factors) in advance of any applicable deadline
for such action under Section 162(m) of the Internal Revenue Code (the
"Code") for the subject year. Prior to such deadline, the Committee also
shall confirm or determine each Participant's Base Salary for such year
for purposes of the Plan, subject to Sections 5 and 9.
6.2. Formula for Determining Maximum Bonus. Subject to Sections 6.3
and 8, each Participant's maximum Bonus for any year will be the product
of his or her (a) Base Salary, (b) the Base Salary Factor, and (c) the
Applicable Performance Factor or Factors. For all Participants except the
Consumer Finance Division President, the Applicable Performance Factor
will be the EPS Factor. For the Consumer Finance Division President, the
Applicable Performance Factor will be a weighted average of the EPS Factor
and the SEBIT Factor, weighted in such proportion as the Committee,
consistent with Section 9, may determine for each year in advance of the
deadline described in Section 6.1.
6.3 Maximum Dollar Amount. Notwithstanding any other provision
hereof, no Person shall receive any Bonus under the Plan in excess of
$997,500 for 1994, $1,254,000 for 1995, $1,379,400 for 1996, $1,517,340
for 1997 and $1,669,074 for 1998.
Section 7. PERFORMANCE FACTORS
- -------------------------------
7.1. EPS Factor.
The Adjusted Earnings Per Share (or EPS) Factor for any year shall be
determined in accordance with the following table, where Minimum, Target
and Maximum represent, respectively, the attainment of the minimum, on-
plan, and ceiling targets for the applicable year, established by the
Committee for such purposes:
<TABLE>
<CAPTION>
Applicable
EPS Performance EPS Factor*
----------
<S> <C>
Less than Minimum 0.00
Minimum 0.50
Target 1.00
At or Above Maximum 2.00
</TABLE>
<PAGE>
<PAGE>
* Applicable Factors for performance between specified Performance-to-
Target levels above Minimum and below Maximum shall be determined
using linear interpolation (applied to the targets in the manner
specified by the Committee).
7.2. SEBIT Factor.
The Segment Operating Earnings Before Income Taxes (or SEBIT) Factor
for any year shall be determined in accordance with the following table,
where Minimum, Target and Maximum represent, respectively, the attainment
of the minimum, on-plan, and ceiling targets for the applicable year,
established by the Committee for such purposes:
<TABLE>
<CAPTION>
Applicable
SEBIT Performance SEBIT Factor*
------------
<S> <C>
Less than Minimum 0.00
Minimum 0.50
Target 1.00
At or Above Maximum 2.00
</TABLE>
* Applicable Factors for performance between specified Performance-to-
Target levels above Minimum and below Maximum shall be determined
using linear interpolation (applied to the targets in the manner
specified by the Committee).
Section 8. PAYMENTS
- --------------------
8.1. Time of Payment. Bonuses for any year shall be payable as soon
as practicable following the completion of the Company's audit for the
year, but not later than 90 days after year end.
8.2. Committee Certification. As a condition to the right of a
Participant to receive any payment under the Plan, the Committee shall
first be required to certify, by resolution of the Committee or other
appropriate action, that the Bonus has been accurately determined in
accordance with the provisions of the Plan and that the performance goals
and any other material terms were in fact satisfied.
<PAGE>
<PAGE>
8.3. Committee Discretion to Reduce Bonuses. The Committee in its
sole discretion may reduce the amount payable under the formula provisions
of the Plan as applied to the pre-established goals to any one or more
Participants for any year as to which the Committee determines that the
level of achievement of the pre-established performance goals was
influenced by any extraordinary, non-recurring event or other factor
extraneous to such individual Participant's performance, or that the
Corporation failed to achieve other corporate objectives. The Committee
may also reduce the Applicable Performance Factors for any year at the
time it sets the specific performance targets for such year.
8.4. Deferral. The Committee may determine that payment of all or a
portion of any Bonus may be deferred under the Company's Senior Officers'
Deferred Compensation Plan, provided that the amount of any interest
accrued thereon shall not exceed 120% of the Applicable Federal Rate,
compounded semi-annually.
8.5. Payment for Partial Periods.
(a) Effect of Termination of Service. If any Participant
ceases to be an Eligible Person for any reason (other than a
termination for cause) prior to the end of a year during which he or
she participates and such person has served as an Executive Officer
at least three months during such year, such Participant (or his or
her Beneficiary) shall be entitled, subject to Sections 8.2 and 8.3,
to a prorated Bonus computed as follows: the Bonus that would have
been payable for the full year shall be multiplied by a fraction the
numerator of which shall be the number of days in the fiscal year
through the date the Participant ceased to be eligible, and the
denominator of which shall be 365.
(b) Mid-Year Commencement of Service. Notwithstanding the
provisions of Section 5.1 above, if a Participant's services as an
Executive Officer commence during any year, his or her Base Salary
for purposes of the Plan in that year shall be his or her Base
Salary as of the commencement of services as an Executive Officer
multiplied by a fraction, the numerator of which is the number of
days in the year during which such Participant held such position
and the denominator of which is 365; provided such person is
employed by the Company for at least three months during the year.
(c) Minimum Service Limits. If the Participant fails to meet
the applicable minimum service requirements of this Section 8.5
during such year, no bonus shall be paid hereunder.
8.6. Other Discretion. The Compensation Committee may also define
such other conditions and terms of payment of bonuses as it may deem
desirable in carrying out the purposes of the Plan, provided, however,
that the Committee may not increase the maximum amount payable hereunder
to any individual.
<PAGE>
<PAGE>
8.7. Withholding. The Company that employs the Participant shall
have the right to deduct any sums required by federal, state or local tax
law to be withheld with respect to the payment of any Bonus. The Company
shall have no obligation to advise any Participant of the existence of the
tax or the amount which the employer corporation will be so required to
withhold.
Section 9. ADMINISTRATION AND INTERPRETATION
- ---------------------------------------------
The Plan shall be administered by the Committee, which shall have the
sole authority to make rules and regulations for the administration of the
Plan and to interpret the Plan. The interpretations and decisions of the
Committee with regard to the Plan shall be final, conclusive and binding.
The Committee may request advice or assistance or employ such persons
(including, without limitation, legal counsel and accountants) as it deems
necessary for the proper administration of the Plan. It is the intent of
the Company that all payments under the Plan qualify as performance-based
compensation under Section 162(m) of the Code and the Plan shall be
interpreted consistent with such intent. Any provision, application or
interpretation of the Plan inconsistent with this intent to satisfy the
standards in Section 162(m) of the Code shall be disregarded. The
Committee shall have no liability for its actions taken or omitted in good
faith.
Section 10. STOCKHOLDER APPROVAL
- ---------------------------------
The Plan shall be subject to approval by a majority of the votes cast
by stockholders of the Corporation at the 1994 Annual Meeting of its
stockholders. Such stockholder approval shall be a condition to the right
of a Participant to receive any payment hereunder.
Section 11. AMENDMENT OR TERMINATION
- -------------------------------------
The Committee may from time to time amend the Plan in any respect or
terminate the Plan, in whole or in part, provided that (a) no such action
shall retroactively impair or otherwise adversely affect the rights of any
Participant to benefits under the Plan which have vested prior to the date
of such action, and (b) no such amendment, without stockholder approval,
shall materially adversely affect the deductibility under Section 162(m)
of the Code of any bonuses payable hereunder.
Section 12. RIGHTS OF PARTICIPANTS AND BENEFICIARIES; NO ASSIGNMENT
- -------------------------------------------------------------------
12.1. Vesting. No rights hereunder shall vest prior to the
Committee's action under Section 8.2.
12.2. Employment Matters. Participation in this Plan shall not be
construed as constituting a commitment, guarantee, agreement or
understanding of any kind that the Company shall continue to employ any
individual.
<PAGE>
<PAGE>
12.3. No Assignment; No Attachment; No Preference. The Company
shall pay all amounts payable only to the Participant or his or her
Beneficiary for purposes of the Plan. The Company shall not be liable for
the debts, contracts, or engagements of any Participant or his or her
Beneficiaries, and rights to payments under the Plan may not be taken in
execution by attachment or garnishment, or by any other legal or equitable
proceeding while in the hands of the Company; nor shall any Participant or
his or her Beneficiaries have any right to assign, pledge or hypothecate
any benefits or payments hereunder; nor shall any Participant or his or
her Beneficiaries have any claims to any assets of the Company for any
payments hereunder which are senior to the claims of the Company's general
creditors.
Section 13. ADJUSTMENTS UPON REORGANIZATIONS, RECAPITALIZATIONS OR CERTAIN
OTHER MATERIAL CHANGES.
- --------------------------------------------------------------------------
13.1. Fundamental Corporate Changes
In the event of a merger, consolidation or other reorganization in
which the Company is not the surviving corporation, or upon the sale of
substantially all the property of the Company to an unaffiliated
corporation, or upon the dissolution or liquidation of the Company,
payment shall be made, subject to Section 8.2 (but with the satisfaction
of the applicable performance level determined on the basis of annualizing
the year-to-date results from the beginning of the applicable year to the
end of the month preceding the date of such event), on a prorated basis to
the date of such event in the manner contemplated by Section 8.5, unless
provisions are made for the continuance of the Plan and the assumption of
obligations for bonuses under the Plan by a successor corporation. The
Committee may authorize early payout in such event, provided that it
determines the performance goals have been so met and the amount of the
payment is discounted at the rate of 120% of the Applicable Federal Rate,
compounded semi-annually.
13.2. Changes From Material Acquisitions, Dispositions or
Recapitalization; Accounting Changes. In the event of a material
acquisition or disposition of business or assets by the Company, a
material recapitalization, or a material change in accounting principles
or practices during any year that was not anticipated by the Committee in
setting the targets for that year, the Committee, subject to Section 9,
may make adjustments to the targets for such year, applied as of the date
of such event, based solely on objective criteria, so as to neutralize, in
the Committee's best judgement, the effect of the change on the applicable
pre-established targets for such year.
EXHIBIT 11.1
GREAT WESTERN FINANCIAL CORPORATION
Computation of Net Income Per Common Share
Primary and Fully Diluted
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Net income before accounting changes $ 62,047 $ 53,912 $298,130
Preferred stock dividends - convertible
and nonconvertible (25,015) (15,543) (7,023)
-------- -------- --------
Net income for computing earnings per
Common share - primary before
accounting change 37,032 38,369 291,107
Accounting changes - 31,094 -
-------- -------- --------
Net income for computing earnings per
Common share - primary 37,032 69,463 291,107
Preferred stock dividends - convertible 11,320 11,320 7,023
-------- -------- --------
Net income for computing earnings per
Common share - fully diluted 48,352 80,783 298,130
Accounting changes - (31,094) -
-------- -------- --------
Net income for computing earnings per
Common share - fully diluted before
accounting changes $ 48,352 $ 49,689 $298,130
======== ======== ========
</TABLE>
Computation of Average Number of Common Shares
Outstanding on Primary and Fully Diluted Basis
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------
(Dollars in thousands) 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Average number of Common shares
outstanding during each period -
without dilution 131,529 130,412 128,679
Common share equivalents outstanding
at the end of each period 478 324 452
-------- -------- --------
Average number of Common shares and
Common share equivalents outstanding
during each period on a primary basis 132,007 130,736 129,131
Common share equivalents outstanding
at the end of each period on a fully
diluted basis 504 204 298
Addition from assumed conversion as of
the beginning of each period of the
convertible preferred stock outstanding
at the end of each period 6,342 6,342 3,936
-------- -------- --------
Average number of Common shares
outstanding during each period on
a fully diluted basis 138,853 137,282 133,365
======== ======== ========
Net income per Common share
Primary before accounting changes $.28 $.30 $2.25
Fully diluted before accounting changes .28 30 2.24
Primary .28 53 2.25
Fully diluted .28 53 2.24
</TABLE>
<PAGE>
EXHIBIT 12.1
GREAT WESTERN FINANCIAL CORPORATION
Computation of Ratios of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Twelve Months Ended Twelve Months Ended Twelve Months Ended Twelve Months Ended Twelve Months Ended
(Dollars in thousands) Decmeber 31, 1993 December 31, 1992 Decmeber 31, 1991 December 31, 1990 December 31, 1989
------------------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Earnings
- --------
Net earnings $ 62,047 $ 85,006 $ 298,130 $ 127,074 $ 100,095
Accounting changes - (31,094) - - -
Taxes on income 30,000 41,600 207,300 148,600 114,300
---------- ---------- ---------- ---------- ----------
Earnings before taxes and
accounting changes $ 92,047 $ 95,512 $ 505,430 $ 275,674 $ 214,395
========== ========== ========== ========== ==========
Interest expense
- ----------------
Customer accounts $ 939,081 $1,333,473 $1,968,205 $2,017,040 $1,791,351
Borrowings 370,761 344,823 493,757 888,094 920,336
---------- ---------- ---------- ---------- ----------
Total $1,309,842 $1,678,296 $2,461,962 $2,905,134 $2,711,687
========== ========== ========== ========== ==========
Rent expense
- ------------
Total $ 53,638 $ 57,823 $ 51,440 $ 49,561 $ 40,069
1/3 thereof 17,879 19,274 17,147 16,520 13,356
Capitalized interest $ 777 2,071 $ 6,859 $ - $ -
- --------------------
Preferred stock dividends $ 25,015 $ 15,543 $ 7,023 $ - $ -
- -------------------------
Ratio of earnings to fixed charges
and preferred stock dividends
- ----------------------------------
Excluding customer accounts
---------------------------
Earnings before fixed charges $ 480,687 $ 459,609 $1,016,334 $1,180,288 $1,148,087
Fixed charges 426,526 393,704 529,669 904,614 933,692
Ratio 1.13 1.17 1.92 1.30 1.23
Including customer accounts
---------------------------
Earnings before fixed charges $1,419,768 $1,793,082 $2,984,539 $3,197,328 $2,939,438
Fixed charges 1,365,607 1,727,177 2,497,874 2,921,654 2,725,043
Ratio 1.04 1.04 1.19 1.09 1.08
Ratio of earnings to fixed charges
- ----------------------------------
Excluding customer accounts
---------------------------
Earnings before fixed charges $ 480,687 $ 459,609 $1,016,334 $1,180,288 $1,148,087
Fixed charges 389,417 366,168 517,763 904,614 933,692
Ratio 1.23 1.26 1.96 1.30 1.23
Including customer accounts
---------------------------
Earnings before fixed charges $1,419,768 $1,793,082 $2,984,539 $3,197,328 $2,939,438
Fixed charges 1,328,498 1,699,641 2,485,968 2,921,654 2,725,043
Ratio 1.07 1.05 1.20 1.09 1.08
</TABLE>
EXHIBIT 22.1
GREAT WESTERN FINANCIAL CORPORATION
PARENT AND SUBSIDIARIES
Great Western Financial Corporation is incorporated in the State of Delaware.
Listed below are the significant subsidiaries of GWFC, which are included in
the Consolidated Financial Statements.
Percentage
of Voting
Securities State of
Subsidiaries Owned Incorporation
Great Western Bank,
A Federal Savings Bank 100% Federal Charter
Aristar, Inc. 100% Delaware
