<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549 - 1004
FORM 10-Q
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
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
(Address of principal executive offices) (Zip Code)
(818) 775-3411
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of April 30, 1994: 132,980,459
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
TABLE OF CONTENTS
Page
----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Statement of Financial
Condition - March 31, 1994, December 31, 1993
and March 31, 1993..................................... 4
Consolidated Condensed Statement of Operations -
Three Months Ended March 31, 1994 and 1993............. 5
Consolidated Condensed Statement of Cash Flows -
Three Months Ended March 31, 1994 and 1993............. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Three
Months Ended March 31, 1994......................... 8
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.... 32
Item 5. Other Information..................................... 33
Item 6. Exhibits and Reports on Form 8-K...................... 34
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
PART I - FINANCIAL INFORMATION
------------------------------
PERSONS FOR WHOM THE INFORMATION IS TO BE GIVEN
- - -----------------------------------------------
The accompanying financial information is filed for the Registrant, Great
Western Financial Corporation, and its subsidiaries comprising a savings bank
and companies engaged in consumer lending, mortgage banking, securities
operations and certain other financial services ("GWFC" or "the Company").
PRESENTATION OF FINANCIAL INFORMATION
- - -------------------------------------
The financial information has been prepared in conformity with the accounting
principles or practices reflected in the financial statements included in the
Annual Report filed with the Commission for the year ended December 31, 1993.
The information further reflects all adjustments which are, in the opinion
of management, of a normal recurring nature and necessary for a fair
presentation of the results for the interim periods.
<PAGE>
<PAGE>
Item 1. Financial Statements
GREAT WESTERN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31 December 31 March 31
(Dollars in thousands) 1994 1993 1993
-------- ----------- --------
<S> <C> <C> <C>
ASSETS
Cash and securities
Cash $ 551,821 $ 758,581 $ 498,338
Certificates of deposit and federal funds 300,125 217,125 125
Securities available for sale (fair
value $499,680, $871,074 and $634,653) 499,680 871,074 623,381
----------- ----------- -----------
1,351,626 1,846,780 1,121,844
Mortgage-backed securities held to maturity
(fair value $609,114 and $605,512) 628,465 618,574 -
Mortgage-backed securities available for
sale (fair value $2,376,905,
$2,570,822 and $3,039,470) 2,376,905 2,570,822 2,972,592
----------- ----------- -----------
3,005,370 3,189,396 2,972,592
Loans receivable, less reserve for
estimated losses 30,058,312 30,162,401 30,687,652
Loans receivable available for sale 402,652 499,002 452,684
----------- ----------- -----------
30,460,964 30,661,403 31,140,336
Real estate available for sale or
development, net 326,924 434,077 759,616
Interest receivable 217,353 214,990 225,279
Investment in Federal Home Loan Banks 308,320 307,352 310,421
Premises and equipment, at cost,
less accumulated depreciation 621,318 623,691 615,234
Other assets 714,625 638,983 457,480
Intangibles arising from acquisitions 419,924 431,688 312,465
----------- ----------- -----------
$37,426,424 $38,348,360 $37,915,267
=========== =========== ===========
LIABILITIES
Customer accounts $31,066,156 $31,531,563 $29,078,171
Short-term borrowings 470,059 676,483 1,677,242
Other borrowings 2,541,964 2,802,858 3,782,969
Other liabilities and accrued expenses 682,000 729,229 699,116
Taxes on income, principally deferred 243,076 184,826 210,966
STOCKHOLDERS' EQUITY 2,423,169 2,423,401 2,466,803
----------- ----------- -----------
$37,426,424 $38,348,360 $37,915,267
=========== =========== ===========
</TABLE>
[FN]
Unaudited
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
(Dollars in thousands, except per share) 1994 1993
---- ----
<S> <C> <C>
INTEREST INCOME
Real estate loans $481,509 $520,248
Mortgage-backed securities 44,641 50,797
Consumer loans 90,841 101,472
Securities 6,614 7,868
Other 6,387 7,414
-------- --------
629,992 687,799
INTEREST EXPENSE
Customer accounts 232,139 254,574
Borrowings
Short-term 5,765 11,407
Long-term 57,844 72,225
-------- --------
295,748 338,206
-------- --------
NET INTEREST INCOME 334,244 349,593
Provision for loan losses 51,800 62,500
-------- --------
Net interest income after provision
for loan losses 282,444 287,093
Other operating income
Real estate services
Loan fees 7,811 9,350
Mortgage banking
Gain on mortgage sales 2,288 5,036
Servicing 13,688 13,084
Real estate operations (8,644) (8,883)
Provision for real estate losses (3,000) (25,500)
-------- --------
12,143 (6,913)
Retail banking
Banking fees 32,930 24,452
Securities operations 10,576 8,940
-------- --------
43,506 33,392
Net gain on securities and investments 2,262 194
Net insurance operations 6,424 5,969
Other 1,486 1,310
-------- --------
Total other operating income 65,821 33,952
Operating and administrative expenses
Salaries and related personnel 121,908 121,551
Premises and occupancy 51,562 44,816
FDIC insurance premium 19,147 15,736
Amortization of intangibles 11,764 8,937
Other 59,709 57,194
-------- --------
264,090 248,234
-------- --------
EARNINGS BEFORE TAXES 84,175 72,811
Taxes on income 34,700 27,600
-------- --------
NET EARNINGS $ 49,475 $ 45,211
======== ========
Average common shares outstanding
Without dilution 133,356,647 131,602,482
Fully diluted 139,698,559 137,944,394
Earnings per share based on average
common shares outstanding
Primary $.32 $.30
Fully diluted .32 .30
Cash dividend per share .23 .23
</TABLE>
[FN]
Unaudited
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 49,475 $ 45,211
Noncash adjustments to net earnings:
Provision for loan losses 51,800 62,500
Provision for real estate losses 3,000 25,500
Depreciation and amortization 30,818 27,165
Income taxes 74,678 11,167
Capitalized interest (2,258) (6,628)
Net change in accrued interest (21,083) (5,684)
Other (104,036) (69,393)
----------- ------------
82,394 89,838
----------- ------------
Sales and repayments of loans
receivable available for sale 716,257 510,708
Originations and purchases of loans
receivable available for sale (619,907) (564,146)
----------- -----------
96,350 (53,438)
----------- -----------
Net cash provided by operating activities 178,744 36,400
----------- -----------
FINANCING ACTIVITIES
Customer accounts
Net increase (decrease) in transaction
accounts 254,124 (116,780)
Net (decrease) in term accounts (719,531) (1,747,036)
----------- -----------
(465,407) (1,863,816)
Customer account acquisitions, net - 33,322
Borrowings
Proceeds from new long-term debt - 1,200,000
Repayments of long-term debt (260,894) (364,398)
Net change in short-term debt (206,424) 473,557
----------- -----------
(467,318) 1,309,159
Other financing activity
Proceeds from issuance of common stock 6,230 7,226
Cash dividends paid (36,772) (36,346)
----------- ----------
(30,542) (29,120)
----------- ----------
Net cash (used in) financing activities (963,267) (550,455)
----------- ----------
/TABLE
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
INVESTING ACTIVITIES
Investment securities
Proceeds from maturities $ 490,718 $ 75,559
Purchases of securities (123,204) (75,034)
----------- -----------
367,514 525
Lending
Loans originated for investment (1,540,250) (1,679,581)
Purchases of mortgage-backed securities (50,313) (129,308)
Payments 1,765,120 1,769,355
Repurchases (20,276) (44,856)
Other 14,973 8,552
----------- -----------
169,254 (75,838)
Other investing activity
Purchases and sales of premises and
equipment, net (13,034) (36,330)
Sales of real estate 144,587 91,366
Acquisition and disposition of assets, net - 34
Other (7,558) (3,818)
----------- -----------
123,995 51,252
----------- -----------
Net cash provided by (used in)
investing activities 660,763 (24,061)
----------- -----------
Net (decrease) in cash and cash equivalents (123,760) (538,116)
Cash and cash equivalents at beginning
of period 975,706 1,036,579
----------- -----------
Cash and cash equivalents at end of period $ 851,946 $ 498,463
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid for
Interest on deposits $ 233,277 $ 255,987
Interest on borrowings 81,191 92,343
Income taxes 10,380 16,423
Noncash investing activities
Loans transferred to foreclosed real estate $ 93,586 $ 200,828
Loans originated to facilitate the sale
of real estate 18,749 30,084
</TABLE>
[FN]
Unaudited
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1994
Great Western Financial Corporation reported net earnings of $49.5
million, or $.32 per share, in the 1994 first quarter compared with earnings
of $45.2 million, or $.30 per share, in the 1993 first quarter.
Provisions for loan losses during the 1994 first quarter were $51.8
million compared with $62.5 million in the comparable period of 1993.
Provisions for real estate losses were $3 million in the 1994 first quarter
compared with $25.5 million in the first quarter a year earlier. The
decrease in loan and real estate loss provisions reflects a slower rate of
deterioration in the real estate market. The January 17, 1994 Northridge
earthquake increased loan delinquencies in the first quarter and is expected
to result in losses in the real estate loan portfolio in the range of $25
million to $30 million, which will be covered by existing loan loss reserves.
<TABLE>
<CAPTION>
HIGHLIGHTS (Dollars in thousands, except per share)
For the three months ended
March 31 1994 1993
- - -------------------------- ---- ----
<S> <C> <C>
Net interest income $ 334,244 $ 349,593
Net earnings 49,475 45,211
Fully diluted earnings per common share $.32 $.30
New loan volume 2,178,906 2,273,811
Retail deposits acquired, net - 33,322
(Decrease) in customer accounts (465,407) (1,830,494)
Mortgage sales 671,366 454,655
Average net interest margin
Yield on earning assets 7.10% 7.73%
Cost of funds 3.44 3.89
---- ----
Yield on earning assets,
less cost of funds 3.66% 3.84%
==== ====
At March 31
Total assets $37,426,424 $37,915,267
Stockholders' equity 2,423,169 2,466,803
Stockholders' equity per common share $16.01 $16.55
</TABLE>
<PAGE>
<PAGE>
The Company's core business remains viable and is benefiting from the
low interest-rate environment. Net interest income for the first quarter
1994 declined to $334 million compared with $350 million for the same period
a year ago. While interest earning asset levels were relatively stable, the
net interest margin decreased compared with a year ago. The Company's
funding benefit relative to the cost of funds index for financial
institutions comprising the 11th District Federal Home Loan Bank of San
Francisco ("COFI") was lower in the 1994 first quarter resulting in a
contraction of the net interest margin.
The following summarizes the contribution to pretax income from the
Company's principal business units:
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Banking operations $59,102 $50,937
Consumer finance group 25,073 21,874
------- -------
Pretax earnings 84,175 72,811
Taxes on income 34,700 27,600
------- -------
Net earnings $49,475 $45,211
======= =======
</TABLE>
INTEREST EARNING ASSETS
Interest earning assets comprise real estate loans and mortgage-backed
securities ("mortgages"), consumer finance loans and marketable securities.
The composition of interest earning assets at March 31, 1994 and March 31,
1993 follows:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
March 31
----------------------------------
1994 1993
-------------- --------------
(Dollars in millions) Amount % Amount %
------ --- ------ ---
<S> <C> <C> <C> <C>
Loans receivable
Real estate
Residential
Single-family $25,567 73% $25,644 72%
Apartments 1,781 5 2,017 6
Commercial 1,543 4 1,852 5
Other 7 - 10 -
Consumer finance 1,824 5 1,688 5
Bank card - - 235 -
Other 389 1 376 1
------- --- ------- ---
31,111 88 31,822 89
Mortgage-backed securities 3,012 9 2,981 8
Securities 740 2 565 2
Investment in FHLB stock 308 1 310 1
------- --- ------- ---
$35,171 100% $35,678 100%
======= === ======= ===
</TABLE>
Interest earning assets decreased slightly during the 1994 first quarter
compared with the 1993 first quarter. Commercial real estate loans continued
to decrease as a result of the Company's decision in 1987 to discontinue
commercial real estate lending except to finance the sale of foreclosed
properties.
The Adjustable Rate Mortgage ("ARM") for single-family residential
properties ("SFRs") is the primary lending product held for investment. Many
loans in the portfolio are indexed to COFI. In 1991, the Company began
originating an ARM product which is indexed to the Federal Cost of Funds
Index ("FCOFI"). This index is a combination of the average interest rate
on the combined marketable treasury bills and the average interest rate on
the combined marketable treasury notes. The FCOFI ARM has similar provisions
to the COFI ARM product as to interest rate caps and payment changes. At
March 31, 1994, ARMs comprised 92.9% of the mortgage portfolio. A
significant portion of the ARM portfolio is subject to lifetime interest-rate
caps and floors. At March 31, 1994, $8.8 billion of ARM loans with an
average yield of 7%, had reached their floor rate. Without the floor, the
average yield on those loans would have been 6.19%.
Total new loans for the 1994 first quarter were $2.2 billion compared
with $2.3 billion in the same period of 1993. New real estate loan volume
was $1.7 billion in the first quarter of 1994 compared with $1.8 billion in
the first quarter of 1993.<PAGE>
<PAGE>
The composition of real estate loan originations by quarter follows:
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
March 31 December 31 March 31
1994 1993 1993
-------- ----------- --------
<S> <C> <C> <C>
ARM
COFI 52% 47% 47%
FCOFI 2 2 18
T-Bill 8 5 2
Other 3 3 3
--- --- ---
Total ARM 65 57 70
Fixed rate 35 43 30
--- --- ---
100% 100% 100%
=== === ===
Refinances, included above 63% 68% 59%
=== === ===
</TABLE>
Fixed-rate lending, originated exclusively for sale, is influenced by the
interest-rate environment. Refinance activity comprised 63% of real estate loan
originations during the first quarter of 1994 compared with 59% for the same
period a year ago. The portfolio of fixed-rate loans designated as available
for sale has been recorded at the lower of cost or market. 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 loans held for investment are primarily ARMs. During the first
quarter 1994, ARMs comprised 65% of total real estate loan originations compared
with 70% in the same period of 1993 and 57% for the fourth quarter of 1993.
COFI ARMs were the primary adjustable rate offering in 1994 and 1993. The ARM
differential over the appropriate indices on new ARMs was 2.54% in the first
quarter 1994 compared with 2.40% a year ago. The ARM differential on the total
ARM real estate loan portfolio was 2.41% at March 31, 1994 and 2.39% at March
31, 1993. Currently, interest rates on new real estate loans favor
adjustable rate products, which may enable the Company to generate asset
growth in 1994.
<PAGE>
<PAGE>
The cost of funds for Great Western Bank, a Federal Savings Bank ("GWB")
relative to COFI and FCOFI is shown as follows:
<TABLE>
<CAPTION>
GWB Cost of
GWB Funds Less Than
Cost of ---------------
Funds COFI FCOFI COFI FCOFI
------- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
March 31, 1994 3.197% 3.629% 4.928% .432% 1.731%
December 31, 1993 3.319 3.879 4.892 .560 1.573
March 31, 1993 3.654 4.245 5.222 .591 1.568
</TABLE>
The contractual maturities of all loans receivable and mortgage-backed
securities as of March 31, 1994 follow:
<TABLE>
<CAPTION>
Mortgage-Backed
Real Estate Loans Securities
----------------- ---------------
Fixed Fixed
(Dollars in millions) ARM Rate ARM Rate Consumer Total
--- ----- --- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
One year or less $ 564 $ 49 $ 32 $340 $ 820 $ 1,805
Over one to two years 624 56 33 234 544 1,491
Over two to three years 769 59 36 89 377 1,330
Over three to five years 1,623 135 78 58 153 2,047
Over five to ten years 3,514 461 238 147 188 4,548
Over ten to fifteen years 4,231 195 320 89 123 4,958
Over fifteen years 16,281 337 1,297 21 8 17,944
------- ------ ------ ---- ------ -------
$27,606 $1,292 $2,034 $978 $2,213 $34,123
======= ====== ====== ==== ====== =======
</TABLE>
<PAGE>
<PAGE>
INTEREST BEARING LIABILITIES
The composition of interest bearing liabilities at March 31, 1994 and
March 31, 1993 follows:
<TABLE>
<CAPTION>
March 31
-------------------------------
1994 1993
------------- -------------
(Dollars in millions) Amount % Amount %
------ --- ------ ---
<S> <C> <C> <C> <C>
Customer accounts
Retail accounts
Term $16,925 50% $15,893 46%
Transaction 13,661 40 12,538 36
Wholesale accounts 480 1 647 2
------- --- ------- ---
31,066 91 29,078 84
------- --- ------- ---
Borrowings
FHLB 281 1 1,285 4
Other 2,731 8 4,175 12
------- --- ------- ---
3,012 9 5,460 16
------- --- ------- ---
Total interest bearing liabilities $34,078 100% $34,538 100%
======= === ======= ===
</TABLE>
Borrowings totaled $3 billion at March 31, 1994, $3.5 billion at
December 31, 1993 and $5.5 billion at March 31, 1993. As a percentage of
interest bearing liabilities, borrowings totaled 9% at March 31, 1994 and 16%
at March 31, 1993. Borrowings have decreased over these periods as a result
of customer deposit acquisitions and have not been a significant factor in
funding new lending. In the fourth quarter of 1993, GWB acquired $4.1
billion in deposits of HomeFed Bank, F.A. ("HomeFed") from the Resolution
Trust Corporation.
<PAGE>
<PAGE>
The following table shows the components of the change in customer
account balances:
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------
(Dollars in millions) 1994 1993
---- ----
<S> <C> <C>
Transaction
Demand accounts $ 179.6 $ 7.7
Money market and other transaction
accounts 103.9 (124.5)
Certificates of deposit (640.7) (1,711.0)
Wholesale accounts (108.2) (36.0)
------- ---------
(465.4) (1,863.8)
Acquisitions of deposits, net - 33.3
------- ---------
$(465.4) $(1,830.5)
======= =========
</TABLE>
The Company concentrates its retail deposit-gathering activity in two
states: California and Florida.
Net certificate of deposit account withdrawals have occurred during each
of the past nine quarters due to reduced rates offered, as ARM originations
have not been at levels where asset growth could occur.
A summary of customer certificates of deposit by interest rate and
maturity as of March 31, 1994 follows:
<TABLE>
<CAPTION>
90 Days 180 Days One Year Two Years
Within to to to to Three Years March 31 December 31 March 31
(Dollars in millions) 90 Days 180 Days One Year Two Years Three Years and Over 1994 1993 1993
------- -------- -------- --------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Under 4% $4,168 $3,226 $2,328 $1,114 $ 173 $ 36 $11,045 $10,998 $ 8,781
4 to 6% 296 894 1,004 994 175 1,076 4,439 4,789 4,929
6 to 8% 73 32 52 154 696 453 1,460 1,619 2,135
Over 8% 83 22 7 196 4 5 317 575 540
------ ------ ------ ------ ------ ------ ------- ------- -------
$4,620 $4,174 $3,391 $2,458 $1,048 $1,570 $17,261 $17,981 $16,385
====== ====== ====== ====== ====== ====== ======= ======= =======
$100,000 accounts
included above $ 628 $ 200 $ 86 $ 49 $ 1 $ 7 $ 971 $ 1,060 $ 1,227
/TABLE
<PAGE>
<PAGE>
NET INTEREST MARGIN AND NET INTEREST INCOME
While average interest earning assets have remained relatively stable
during the past year, the interest margin has decreased as interest rates
have begun to rise. Net interest income decreased slightly to $334 million
in the first quarter 1994 compared with $350 million in the first quarter
1993. The Company's net interest margin, the difference between the yield
on interest earning assets (interest on mortgages, consumer loans and
securities) and the cost of funds (interest on customer accounts and
borrowings) was 3.97% at March 31, 1994 compared with 4.10% a year ago. The
average net interest margin for the 1994 first quarter was 3.66% compared
with 3.84% in the 1993 first quarter. The repricing lag on FCOFI and COFI
ARMs added approximately 9 basis points in the first quarter of both 1994 and
1993 to the average net interest margin. For the fourth quarter 1993, the
repricing lag accounted for approximately 5 basis points of the average net
interest margin.
The following table of net interest income displays the average monthly
balances, interest income and expense and average rates by asset and
liability component for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended March 31
-------------------------------------------------------
1994 1993
-------------------------- --------------------------
Average Average Average Average
(Dollars in millions) Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets
Securities $ 1,149 $ 13 4.52% $ 966 $ 15 6.33%
Mortgage-backed securities 3,114 45 5.74 3,062 51 6.64
Loans receivable
Real estate 29,015 481 6.64 29,246 520 7.12
Consumer 2,212 91 16.42 2,323 102 17.47
------- ---- ----- ------- ---- -----
Total interest earning assets 35,490 630 7.10 35,597 688 7.73
Other assets 2,303 2,528
------- -------
Total assets $37,793 $38,125
======= =======
Interest bearing liabilities
Customer accounts
Term accounts $17,610 169 3.85 $17,222 188 4.36
Transaction accounts 13,542 63 1.85 12,788 67 2.09
------- ---- ----- ------- ---- -----
31,152 232 2.98 30,010 255 3.39
Borrowings
FHLB 287 5 6.68 717 9 4.92
Other 2,990 59 7.87 4,018 74 7.45
------- ---- ----- ------- ---- -----
Total interest bearing liabilities 34,429 296 3.44 34,745 338 3.89
Other liabilities 933 928
Stockholders' equity 2,431 2,452
------- -------
Total liabilities and equity $37,793 $38,125
======= =======
Interest rate spread 3.66% 3.84%
===== =====
Effective yield summary
Interest income/earning assets $35,490 $630 7.10% $35,597 $688 7.73%
Interest expense/earning assets 35,490 296 3.33 35,597 338 3.80
---- ----- ---- -----
Net yield on earning assets $334 3.77% $350 3.93%
==== ===== ==== =====
/TABLE
<PAGE>
<PAGE>
The average balance of loans receivable above includes nonaccrual loans
and therefore the interest income and average rate, as presented, are
affected by the loss of interest on such loans. Interest foregone on
nonaccrual loans that were nonperforming totaled $15.9 million for the
quarter ended March 31, 1994 compared with $24.7 million for the quarter
ended March 31, 1993.
ASSET LIABILITY MANAGEMENT
The Company monitors its asset and liability structure and interest-
rate/ maturity risks on a regular basis. In this process, consideration is
given to interest-rate trends and funding requirements. ARMs comprised
approximately 96% of the real estate loan portfolio at March 31, 1994 and 94%
at March 31, 1993.
At March 31, 1994, mortgages totaling $2.6 billion were available for
sale, primarily mortgage-backed securities. Real estate loans available for
sale are valued at the lower of cost or market, generally on an individual
loan basis. As of March 31, 1994, $205 million of real estate loans,
primarily fixed-rate loans, were designated as available for sale. Gains of
$2.3 million in the real estate loan portfolio were realized in the first
quarter of 1994. Unrealized holding gains on real estate loans available for
sale totaled $6 million at March 31, 1994.
Mortgage-backed securities and other securities available for sale are
carried at fair value. At March 31, 1994, mortgage-backed securities
available for sale included $450 million of fixed-rate loans and nearly $1.9
billion of ARMs. There were no realized gains or losses in the first quarter
of 1994. Unrealized holding losses were $4 million at March 31, 1994.
Unrealized holding gains were $31 million at December 31, 1993 and $67
million at March 31, 1993.
Marketable securities available for sale at March 31, 1994 had an
amortized cost of $496 million and a market value of $500 million. Gains
realized during the 1994 first quarter totaled $477,000. Unrealized holding
gains in marketable securities were $3.3 million at March 31, 1994, $7.2
million at December 31, 1993 and $11.3 million at March 31, 1993.
Real estate available for sale is recorded at the lower of cost or fair
value.
The following table shows that the portfolio of short-term assets
exceeded liabilities maturing or subject to interest adjustment within one
year by $3.4 billion at March 31, 1994 compared with $3.1 billion at December
31, 1993 and $4.5 billion at March 31, 1993. In the current low interest
rate environment, the Company is better protected against rising rates with
an excess of interest earning assets maturing or repricing within one year.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Maturity/Rate Sensitivity
-----------------------------------------------------------------
March 31, 1994 % 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 5.00% $ 740 2 $ 740 $ - $ - $ -
Mortgage-backed securities 6.04 3,012 9 2,505 486 - 21
Investment in FHLB stock 4.21 308 1 - - - 308
Loans receivable
Real estate
Adjustable rate 6.81 27,606 78 25,738 1,868 - -
Fixed rate
Short-term 8.77 516 2 242 272 2 -
Long-term 8.71 776 2 388 384 3 1
Consumer 16.22 2,213 6 535 1,330 269 79
----- ------- --- ------- ------- ----- ----
7.35 35,171 100 30,148 4,340 274 409
Interest bearing liabilities
Customer accounts
Regular savings 1.93 2,282 7 2,282 - - -
Checking and limited access 1.69 11,379 33 11,379 - - -
Wholesale transactions - 144 - 144 - - -
Term accounts 3.99 17,261 51 12,184 5,052 25 -
----- ------- --- ------- ------- ----- ----
2.98 31,066 91 25,989 5,052 25 -
Borrowings
FHLB 6.57 281 1 260 21 - -
Other 7.59 2,731 8 584 1,424 672 51
Impact of interest-rate swaps - - - (109) 109 - -
----- ------- --- ------- ------- ----- ----
3.38 34,078 100 26,724 6,606 697 51
----- ------- --- ------- ------- ----- ----
Excess of interest earning
assets over interest bearing
liabilities at March 31, 1994 3.97% $ 1,093 $ 3,424 $(2,266) $(423) $358
===== ======= ======= ======= ===== ====
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 March 31, 1993 4.10% $ 1,140 $ 4,466 $(3,050) $(630) $354
===== ======= ======= ======= ===== ====
</TABLE>
<TABLE>
<CAPTION>
March 31
------------
1994 1993
---- ----
<S> <C> <C>
Calculation of adjusted margin
Unadjusted margin 3.97% 4.10%
Benefit of net interest earning assets .11 .11
---- ----
Adjusted margin 4.08% 4.21%
==== ====
/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.
The California real estate markets did not improve significantly in 1993
or the first three months of 1994. 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. A variety of indicators suggest an improvement in
California's economic outlook.
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's general loan loss reserves remain relatively high
to give effect to current trends in this environment in valuing its loan
portfolio.
There appear to be regional differences in economic performance within
California and among property types which are attributable to the rolling
recessionary environment and its wide range effect on different economic
activities within California.
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 December 31, 1993 and December 31, 1992
was 12% in the San Francisco area. In the Los Angeles area, the vacancy rate
was 20% at December 31, 1993 and December 31, 1992. The highest vacancy rate
existed in San Diego County where it was 21% at December 31, 1993 compared
with 23% at December 31, 1992.
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 were 11% at December 31, 1993. A year ago, the vacancy
rates were 12% in the San Francisco area and 11% in the Los Angeles area.
Unlike the office space market, San Diego County's industrial space market
had the lowest vacancy rate consisting of 4% at December 31, 1993 and 3% at
December 31, 1992.
<PAGE>
<PAGE>
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 fourth quarter of 1992 to the
fourth quarter of 1993 by 1%. During the same period, the median sales price
declined 6% in the Los Angeles area and 3% in the San Diego area.
As a monitoring device the Company reviews the trends of loans
delinquent for periods of less than ninety days on a monthly (and within-
month) basis. The following summarizes loans delinquent for periods from
thirty to eighty-nine days:
<TABLE>
<CAPTION>
March 31 December 31 March 31
(Dollars in millions) 1994 1993 1993
-------- ----------- --------
<S> <C> <C> <C>
30-59 days delinquent
SFR loans $343.0 $190.9 $242.8
Other 46.4 19.0 48.0
60-89 days delinquent
SFR loans 175.3 105.2 109.7
Other 21.4 8.8 31.4
</TABLE>
Delinquencies in the thirty to eighty-nine day categories have increased
during the first three months of 1994. Much of the 1994 first quarter
increase is believed to be related to the Northridge earthquake in January
and to the forbearance offered to customers who suffered damages from the
earthquake. Two and three payment delinquencies on SFRs in the earthquake
affected areas totaled $142 million and $73 million, respectively, at March
31, 1994. The effect on nonperforming assets will not be evident until later
in the second quarter when the period of forbearance expires. Foreclosures
continue to occur at relatively high levels.
Loans delinquent over thirty 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 loan to value ratios ("LTV") are
considered in this review process.
<PAGE>
<PAGE>
The following table shows the trend in single-family residential
delinquencies (two or more payments delinquent) to the growth in the related
portfolio.
<TABLE>
<CAPTION>
March 31 December 31 March 31
1994 1993 1993
-------- ----------- --------
<S> <C> <C> <C>
SFR loans as a percent of total
real estate loans 88.5% 88.3% 86.9%
SFR delinquency as a percent of total
single-family residential loans 4.4 3.2 4.6
</TABLE>
The Company's real estate loan portfolio included approximately $3.4
billion of uninsured single-family mortgage loans at March 31, 1994, compared
with $4.3 billion a year ago, which were originated with terms where the LTV
exceeded 80% (but not in excess of 90%). During the first quarter 1994,
losses totaled $3.7 million, or .30% (annualized), on the higher LTV
mortgages. For the year 1993, losses totaled $44.8 million, or .81% of such
loans, compared with $10.1 million, or .15%, for 1992. The Company began to
purchase mortgage insurance on all new single-family residential mortgages
originated with LTVs in excess of 80% in 1990. Therefore, this portfolio of
uninsured loans is becoming more seasoned.
The recorded investment in loans for which impairment has been
recognized in accordance with Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan" and the reserve for
estimated losses related to such loans follows:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
March 31
---------------------------------------------------
1994 1993
----------------------- -----------------------
Reserve for Reserve for
Loan Estimated Loan Estimated
(Dollars in thousands) Balance Losses Balance Losses
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Real estate loans
Residential
Single-family $ 43,864 $ 5,796 $ 39,690 $ 2,557
Apartments 113,895 17,249 188,630 2,559
Commercial
Offices 47,926 9,112 99,467 8,574
Retail 28,624 3,623 55,981 2,021
Hotel/motel 107,992 5,085 152,417 -
Industrial 16,676 1,989 93,036 115
Other 5,570 1,018 16,843 808
-------- -------- -------- -------
$364,547 $ 43,872 $646,064 $16,634
======== ======== ======== =======
</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.
A change in the fair value of an impaired loan is reported as an
increase or reduction to the provision for loan losses.
Certain loans meet the criteria of troubled debt restructurings ("TDRs")
as defined in Statement of Financial Accounting Standards No. 15, "Accounting
by Debtors and Creditors for Troubled Debt Restructurings." TDRs totaled
$246 mil-lion at March 31, 1994 compared with $406 million at March 31, 1993.
In the second quarter of 1993, Federal Banking Regulators issued a joint
release regarding credit availability. Based on this release, TDRs which
meet certain conditions of repayment and performance have not been included
in nonperforming assets. At March 31, 1994, $43 million of TDRs were
classified as performing assets.
<PAGE>
<PAGE>
Real estate available for sale is recorded at the lower of cost or fair
value and is included in a periodic review of assets to determine whether,
in management's judgment, there has been any deterioration in value. Real
estate held for development, also subject to the same review process, is
carried at the lower of cost or net realizable value. Properties where
future development is uncertain are carried at the lower of cost or fair
value. Real estate is also included in the general reserve evaluation. Many
foreclosed real estate properties are operating profitably after provisions
for interest and depreciation and are performing assets.
Nonperforming assets include loans which are delinquent ninety days or
more, TDRs which do not meet certain performance criteria and certain real
estate acquired through foreclosure. The following table indicates the
amount of the Company's nonperforming assets and the ratio of nonperforming
assets to total assets:
<TABLE>
<CAPTION>
March 31 December 31 March 31
1994 1993 1993
------------- ------------- -------------
(Dollars in millions) Amount % Amount % Amount %
------ --- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Loans receivable
Real estate
Residential
Single-family $ 599 1.57% $ 522 1.34% $ 836 2.16%
Apartments 87 .23 70 .18 188 .48
Commercial 218 .57 225 .58 394 1.02
Consumer finance 20 .05 20 .05 21 .05
Bank card - - - - 6 .02
Other 2 .01 2 - 2 -
------ ---- ------ ---- ------ ----
926 2.43 839 2.15 1,447 3.73
Real estate acquired
through foreclosure 199 .52 293 .75 556 1.44
------ ---- ------ ---- ------ ----
Total nonperforming assets $1,125 2.95% $1,132 2.90% $2,003 5.17%
====== ==== ====== ==== ====== ====
</TABLE>
<PAGE>
<PAGE>
The geographic distribution of the real estate loan and real estate
portfolios as of March 31, 1994 follows:
<TABLE>
<CAPTION>
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 $25,567 $18,777 $1,729 $905 $340 $557 $314 $427 $2,518
Apartments 1,781 1,421 90 7 65 33 - 57 108
Commercial
Offices 438 399 9 4 8 3 1 4 10
Retail 278 231 22 9 2 - 3 4 7
Hotel/motel 280 138 5 - 3 2 92 - 40
Industrial 327 271 14 4 7 16 - 4 11
Other 227 162 22 6 13 1 1 2 20
------- ------- ------ ---- ---- ---- ---- ---- ------
28,898 21,399 1,891 935 438 612 411 498 2,714
------- ------- ------ ---- ---- ---- ---- ---- ------
Real estate available
for sale, net
Real estate acquired
through foreclosure 221 186 22 2 1 1 - - 9
Other 48 30 3 15 - - - - -
Property development 86 86 - - - - - - -
------- ------- ------ ---- ---- ---- ---- ---- ------
355 302 25 17 1 1 - - 9
------- ------- ------ ---- ---- ---- ---- ---- ------
Total real estate loans
and real estate $29,253 $21,701 $1,916 $952 $439 $613 $411 $498 $2,723
======= ======= ====== ==== ==== ==== ==== ==== ======
Percent of total 100.0% 74.2% 6.5% 3.3% 1.5% 2.1% 1.4% 1.7% 9.3%
</TABLE>
The geographic distribution of nonperforming real estate loans and
foreclosed real estate at March 31, 1994 follows:
<TABLE>
<CAPTION>
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 $ 599 $512 $ 26 $ 7 $ 3 $ 7 $ 4 $ 5 $ 35
Apartments 87 68 1 1 - 13 - - 4
Commercial
Offices 42 39 2 - - - 1 - -
Retail 25 20 - 5 - - - - -
Hotel/motel 127 35 - - - - 92 - -
Industrial 16 14 1 - - 1 - - -
Other 8 2 2 1 3 - - - -
------ ---- ---- ---- ---- ---- ---- ---- ----
904 690 32 14 6 21 97 5 39
------ ---- ---- ---- ---- ---- ---- ---- ----
Real estate
Residential
Single-family 91 78 3 1 1 - - - 8
Apartments 35 34 - - - 1 - - -
Commercial
Offices 31 21 9 1 - - - - -
Retail 8 8 - - - - - - -
Hotel/motel 10 8 2 - - - - - -
Industrial 11 10 1 - - - - - -
Other 13 11 1 - - - - - 1
------ ---- ---- ---- ---- ---- ---- ---- ----
199 170 16 2 1 1 - - 9
------ ---- ---- ---- ---- ---- ---- ---- ----
Total nonperforming real
estate loans and real
estate $1,103 $860 $ 48 $ 16 $ 7 $ 22 $ 97 $ 5 $ 48
====== ==== ==== ==== ==== ==== ==== ==== ====
Percent of total 100.0% 78.0% 4.4% 1.4% .6% 2.0% 8.8% .4% 4.4%
/TABLE
<PAGE>
<PAGE>
A comparison of the California real estate loan and foreclosed real
estate portfolios and nonperforming real estate loans and real estate by
region as of March 31, 1994 follows:
<TABLE>
<CAPTION>
California Northern California
------------------------------- --------------------------------
(Dollars in millions) Portfolio Nonperforming % Portfolio Nonperforming %
--------- ------------- --- --------- ------------- ---
<S> <C> <C> <C> <C> <C> <C>
Real estate loans
Residential
Single-family $18,777 $512 2.7 $5,388 $ 96 1.8
Apartments 1,421 68 4.8 174 2 1.1
Commercial
Offices 399 39 9.8 76 7 9.2
Retail 231 20 8.7 53 1 1.9
Hotel/motel 138 35 25.4 43 - -
Industrial 271 14 5.2 37 2 5.4
Other 162 2 1.2 40 - -
------- ---- ----- ------ ---- -----
21,399 690 3.2 5,811 108 1.9
------- ---- ----- ------ ---- -----
Real estate
Residential
Single-family 78 78 100.0 10 10 100.0
Apartments 35 34 97.1 2 2 100.0
Commercial
Offices 24 21 87.5 7 7 100.0
Retail 17 8 47.1 1 1 100.0
Hotel/motel 8 8 100.0 2 2 100.0
Industrial 12 10 83.3 1 - -
Other 12 11 91.7 1 1 100.0
------- ---- ----- ------ ---- -----
186 170 91.4 24 23 95.8
------- ---- ----- ------ ---- -----
Total real estate loans
and real estate $21,585 $860 4.0 $5,835 $131 2.2
======= ==== ===== ====== ==== =====
/TABLE
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Central California Southern California
-------------------------------- --------------------------------
(Dollars in millions) Portfolio Nonperforming % Portfolio Nonperforming %
--------- ------------- --- --------- ------------- ---
<S> <C> <C> <C> <C> <C> <C>
Real estate loans
Residential
Single-family $1,575 $24 1.5 $11,814 $392 3.3
Apartments 264 13 4.9 983 53 5.4
Commercial
Offices 43 3 7.0 280 29 10.4
Retail 30 - - 148 19 12.8
Hotel/motel 27 2 7.4 68 33 48.5
Industrial 16 - - 218 12 5.5
Other 21 - - 101 2 2.0
------ --- ----- ------- ---- -----
1,976 42 2.1 13,612 540 4.0
------ --- ----- ------- ---- -----
Real estate
Residential
Single-family 6 6 100.0 62 62 100.0
Apartments 3 3 100.0 30 29 96.7
Commercial
Offices 2 2 100.0 15 12 80.0
Retail 8 - - 8 7 87.5
Hotel/motel - - - 6 6 100.0
Industrial 1 1 100.0 10 9 90.0
Other - - - 11 10 90.9
------ --- ----- ------- ---- -----
20 12 60.0 142 135 95.1
------ --- ----- ------- ---- -----
Total real estate loans
and real estate $1,996 $54 2.7 $13,754 $675 4.9
====== === ===== ======= ==== =====
</TABLE>
<PAGE>
<PAGE>
Nonperforming real estate loans and real estate decreased by $7 million
during the first quarter of 1994. Total nonperforming single-family
residential properties decreased $3 million in the first quarter of 1994,
while single-family residential properties in California increased $5
million. The loss on single-family foreclosures sold in the first quarter
of 1994 was 20.1% of the loan balances at foreclosure. Nonperforming
commercial and apartment properties declined $4 million in the first quarter
of 1994.
In an effort to reduce nonperforming assets, the Company completed four
bulk asset sales in the second half of 1993 totaling $659 million. In the
first quarter of 1994, bulk sales of foreclosed single-family properties
totaled $84.6 million. Auction sales have also been utilized to accelerate
the disposition of foreclosed properties.
The Company provides a reserve for uncollected interest which is
essentially based upon loans delinquent ninety days or more or in
foreclosure. These loans are considered in "nonaccrual" status.
<PAGE>
<PAGE>
A summary of loan loss provisions, charge-offs and recoveries by loan
type follows:
<TABLE>
<CAPTION>
At or For The
Three Months Ended
March 31
----------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Beginning balance $502,269 $492,871
Provision for loss
Real estate loans
SFR 25,000 40,000
Other 14,993 4,500
Consumer finance 9,300 9,800
Bank card - 5,178
Other 2,507 3,022
-------- --------
51,800 62,500
-------- --------
Charge-offs
Real estate loans
SFR (39,931) (30,024)
Other (6,889) (9,795)
Consumer finance (12,654) (12,899)
Bank card - (6,568)
Other (376) (286)
-------- --------
(59,850) (59,572)
-------- --------
Recoveries
Real estate loans
SFR 174 254
Other 337 579
Consumer finance 4,046 3,788
Bank card - 460
Other 95 305
-------- --------
4,652 5,386
-------- --------
Net charge-offs
Real estate loans
SFR (39,757) (29,770)
Other (6,552) (9,216)
Consumer finance (8,608) (9,111)
Bank card - (6,108)
Other (281) 19
-------- --------
(55,198) (54,186)
-------- --------
Ending balance $498,871 $501,185
======== ========
Ratio of net charge-offs
(annualized) to average loans
Real estate loans
SFR .62% .47%
Other .78 .97
Consumer finance 1.88 2.14
Bank card - 9.96
Other .29 (.02)
---- ----
.71% .69%
==== ====
/TABLE
<PAGE>
<PAGE>
The following table presents the Company's reserve for estimated losses
and the reserve as a percent of the respective loans receivable portfolios:
<TABLE>
<CAPTION>
March 31
------------------------------------
1994 1993
--------------- ---------------
(Dollars in millions) Amount % Amount %
------ --- ------ ---
<S> <C> <C> <C> <C>
Real estate loans
SFR $197 .77% $174 .68%
Commercial and other 233 6.99 244 6.28
Consumer finance 51 2.77 47 2.80
Bank card - - 24 10.36
Other 18 4.64 12 3.09
---- ---- ---- -----
Total $499 1.60% $501 1.57%
==== ==== ==== =====
</TABLE>
A summary of real estate reserve activity by real estate type follows:
<TABLE>
<CAPTION>
At or For The
Three Months Ended
March 31
------------------
(Dollars in millions) 1994 1993
---- ----
<S> <C> <C>
Beginning balance
SFR $ 5 $ 5
Commercial and other 119 114
---- ----
124 119
Provision for losses
SFR 3 11
Commercial and other - 15
---- ----
3 26
Net charge-offs
SFR (4) (2)
Commercial and other (5) (12)
---- ----
(9) (14)
Ending balance
SFR 4 14
Commercial and other 114 117
---- ----
$118 $131
==== ====
</TABLE>
OPERATIONS
Net interest income totaled $334 million in the first quarter 1994
compared with $350 million in the first quarter 1993. Interest earning
assets decreased slightly while margins remained relatively level. The
Company continues to experience a high level of nonaccrual loans in the
portfolio which results in lower interest income. The following table shows
the components of the change in net interest income between periods.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------
(Dollars in millions) 1994 vs 1993 1993 vs 1992
------------ ------------
<S> <C> <C>
Interest on mortgage-backed securities
Rate (1) $ (7) $ (13)
Volume (2) 1 (9)
Rate/Volume (3) - 2
---- -----
(6) (20)
---- -----
Interest on real estate loans
Rate (1) (35) (116)
Volume (2) (4) (4)
Rate/Volume (3) - 1
---- -----
(39) (119)
---- -----
Income on consumer loans
Rate (1) (6) (3)
Volume (2) (5) (3)
Rate/Volume (3) - -
---- -----
(11) (6)
---- -----
Income on securities and investments
Rate (1) (4) -
Volume (2) 3 (4)
Rate/Volume (3) (1) -
---- -----
(2) (4)
---- -----
Interest earning assets
Rate (52) (132)
Volume (5) (20)
Rate/Volume (1) 3
---- -----
(58) (149)
---- -----
Customer accounts
Rate (1) (31) (113)
Volume (2) 9 (13)
Rate/Volume (3) (1) 4
---- -----
(23) (122)
---- -----
Borrowings
Rate (1) 8 (13)
Volume (2) (25) (2)
Rate/Volume (3) (2) -
---- -----
(19) (15)
---- -----
Interest bearing liabilities
Rate (23) (126)
Volume (16) (15)
Rate/Volume (3) 4
---- -----
(42) (137)
---- -----
Change in net interest income $(16) $ (12)
==== =====
</TABLE>
<PAGE>
<PAGE>
(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 the 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.
Real estate services income totaled $12.1 million for the three months
ended March 31, 1994 compared with a net loss of $6.9 million for the three
months ended March 31, 1993. This increase in income was primarily
attributed to lower loss provisions on real estate. Gains on mortgage sales
decreased as a result of fixed-rate mortgage sales totaling $671 million in
the first three months of 1994, at a gain of .62% of mortgage sales compared
with $455 million in the first three months of last year at a gain of 1.12%
of mortgage sales. Servicing income increased as the net servicing spread
was 42 basis points of the servicing portfolio at March 31, 1994 or 2 basis
points higher than a year ago. Loans serviced for others totaled $12.2
billion at March 31, 1994 compared with $12.9 billion one year earlier.
Retail banking fee and commission income increased from $33.4 million
in the three months ended March 31, 1993 to $43.5 million in the three months
ended March 31, 1994. Securities operations income and retail banking fees
both increased because of expanding activity. Banking fees increased because
of higher transaction balances and deposits acquired in acquisitions. The
Company has also expanded mutual fund activity which comprises commissions
and other income from mutual fund operations. Net revenue from these
operations totaled $10.6 million in the three months ended March 31, 1994
compared with $8.9 mil-lion in the same period of 1993. The Company managed
mutual funds with assets aggregating $3.3 billion at March 31, 1994 compared
with $2.5 billion at March 31, 1993.
The increase in operating and administrative expenses for the three
months ended March 31, 1994, compared with the same period in 1993 resulted,
in part, from the inclusion of approximately $15 million in expenses related
to the HomeFed acquisition completed in December 1993 and from approximately
$3 million for repairs of earthquake damage to facilities. During the fourth
quarter of 1993, the Company recorded a $30 million restructuring charge,
primarily associated with the cost-reduction program at the Company's
administrative headquarters. Approximately $9.8 million was charged against
these reserves in the first quarter of 1994, principally employee separation
expenses and associated costs. Operating expenses increased 6% between the
first quarters of 1994 and 1993 and increased 5% between the same periods of
1993 and 1992. The operating ratios were as follows:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------
1994 1993
---- ----
<S> <C> <C>
Operating and administrative expenses (annualized)
As a percent of average assets
Corporate 2.80% 2.60%
Banking operations 2.56 2.34
As a percent of average assets and assets
serviced for others
Corporate 2.11 1.94
Banking operations 1.91 1.72
As a percent of average retail deposits
Banking operations 3.01 2.90
As a percent of revenue
Corporate 65.52 60.69
Banking operations 68.67 62.16
</TABLE>
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 were realized by year-end 1993 from a job-hiring freeze
imposed in late summer of 1993. The cost-reduction program, which was
designed to increase profits 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 annually, a portion of
which will be realized in 1994.
Net earnings (annualized) as a percentage of average assets were .52%
for the first quarter 1994 compared with .47% for the same 1993 period. The
annualized return on average equity was 8.14% for the three month period
ending March 31, 1994 compared with 7.37% for the same period a year ago.
The Company's effective tax rate was 41.2% in the first quarter of 1994
and 37.9% in the same period of 1993. The lower rate in 1993 is attributed
to a favorable settlement of certain tax issues and the reversal of certain
tax liabilities no longer required.
CAPITAL RESOURCES AND LIQUIDITY
Capital (stockholders' equity) was $2.4 billion at March 31, 1994 versus
$2.5 billion at March 31, 1993. At the end of the 1994 first quarter the
ratio of capital to total assets remained unchanged from a year ago at 6.5%.
<PAGE>
<PAGE>
GWB is subject to certain capital requirements under applicable
regulations and meets all such requirements. At March 31, 1994, GWB's
capital was $2.6 billion, including subordinated notes of $429 million.
The following ratios, as of the most recent quarter end, compare GWB
with the fully phased-in capital requirements under regulations issued by the
Office of Thrift Supervision ("OTS"):
<TABLE>
<CAPTION>
Actual OTS Benchmark
-------------- ------------- Capital
(Dollars in millions) Amount % Amount % Excess
------ --- ------ --- -------
<S> <C> <C> <C> <C> <C>
Leverage/tangible ratio $1,864 5.34 $1,047 3.00 $817
Risk-based ratio 2,509 11.84 1,695 8.00 814
</TABLE>
The OTS has amended its risk-based capital rules to incorporate
interest-rate risk requirements. Effective July 1, 1994, a savings
association is required to hold additional capital if it is projected to
experience a 2% 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% of the savings association's total net portfolio value.
The OTS has proposed to amend its capital rule on the leverage ratio
requirement to reflect amendments made by the Office of the Comptroller of
the Currency ("OCC") to the capital requirements for national banks. The
proposal would establish a 3% leverage ratio (defined as the ratio of core
capital to adjusted total assets) for savings associations in the strongest
financial and managerial condition. All other savings associations would be
required to main- tain leverage ratios of at least 4%. Only savings
associations rated composite 1 under the OTS MACRO rating system will be
permitted to operate at or near the regulatory minimum leverage ratio of 3%.
For all other savings associations, the minimum core capital leverage ratio
will be 3% plus at least an additional 100 to 200 basis points.
In determining the amount of additional capital, the OTS will assess
both the quality of risk management systems and the level of overall risk in
each individual savings association through the supervisory process on a
case-by-case basis. The OTS' supervisory judgment on a savings association's
capital adequacy, both in terms of risk-based capital and the minimum
leverage ratio, will continue to be based upon an assessment of the relevant
factors present in each institution.
<PAGE>
<PAGE>
Savings associations that do not pass the minimum capital standards
established under the new core capital leverage ratio requirements will be
required to submit capital plans detailing steps to be taken to reach
compliance.
GWB currently meets these proposed requirements.
As of March 31, 1994, real estate loan commitments totaled $749 million
compared with $777 million at December 31, 1993 and $814 million at March 31
a year ago. These commitments included $610 million of ARMs and $139 million
at fixed rates at March 31, 1994. The high percentage of ARM commitments is
indicative that the fully adjusted interest rate on ARMs is more than 200
basis points lower than the rates offered on 30-year fixed-rate loans. The
Company has several sources for raising funds for lending among which are
mortgage repay-ments, mortgage sales, customer deposits, Federal Home Loan
Bank borrowings and other borrowings.
The following table presents the debt ratings of the Company and GWB at
March 31, 1994:
<TABLE>
<CAPTION>
Moody's Investors
Standard & Poor's Service
----------------- -----------------
GWFC GWB GWFC GWB
---- --- ---- ---
<S> <C> <C> <C> <C>
Unsecured short-term debt A-2 P-2
Senior term debt BBB+ A- Baa2 A3
Subordinated term debt BBB+ Baa1
Preferred stock BBB- Baa3
</TABLE>
The origination and sale of real estate loans is dependent upon general
market conditions. In an active real estate market loan originations
increase. In such periods mortgage sales are usually increased to fund a
portion of origi-nations and to control asset growth. However, in some
periods mortgage sales occur to fund customer account outflows and repay
borrowings which result in asset shrinkage. Mortgage sales also occur to
limit interest-rate risk and for restructuring purposes.
<PAGE>
<PAGE>
As presented in the Consolidated Condensed Statement of Cash Flows the
sources of liquidity vary between quarters. The primary sources of funds in
the first quarter of 1994 were principal payments on mortgages held for
investment of $1.8 billion and sales and repayments of loans available for
sale of $716 million. New loans originated for investment required $1.5
billion, net customer account withdrawals totaled $465 million, and
repayments of borrowings required $467 million. Operating activities
provided $179 million in the current quarter.
The Company continued to maintain liquidity balances each period in
excess of funding and legal requirements. Cash and securities totaled $1.4
billion at March 31, 1994 and $1.1 billion at March 31, 1993.
DIVIDENDS
Quarterly cash dividends have been paid since 1977. At its April 1994
meeting, the Board of Directors declared a quarterly cash dividend of $.23
per common share payable in May 1994. The quarterly cash dividend has been
paid at this level since the second quarter of 1992.
In the first quarter of 1994 the regular quarterly dividend on the $129
million 8 3/4% cumulative convertible preferred stock, issued in May 1991,
and the regular quarterly dividend on the $165 million 8.3% cumulative
preferred stock, issued in September 1992, were paid.
The Dividend Reinvestment and Stock Purchase Plan permits a 3% discount
on stock purchased with reinvested dividends. During the first quarter 1994
reinvested dividends totaled $4.7 million.
Effective March 31, 1994, Bryant Financial Corporation ("Bryant"), a
property development subsidiary, became a wholly-owned direct subsidiary of
the Company. This realignment was in the form of a dividend from GWB to GWFC
in the amount of Bryant's book value of $38 million.
The principal source of operating income of the Company on an
unconsolidated basis is dividends from GWB and Aristar, Inc ("Aristar"). In
the first quarter of 1994 cash dividends received from GWB and Aristar
totaled $37.8 million and $6.3 million, respectively. GWB is subject to the
regulations of the OTS and FDIC. 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% 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
<PAGE>
the calendar year or (2) 75% 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% to 75% 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.
AVERAGE SHARES OUTSTANDING
The average common shares outstanding, based upon daily amounts used in
the calculation of earnings per share, are shown below:
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1994 1993
---- ----
<S> <C> <C>
Primary 133,356,647 131,602,482
Fully diluted 139,698,559 137,944,394
</TABLE>
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - ------------------------------------------------------------
The Company's Annual Meeting of Shareholders was held on April 26, 1994.
117,990,775 shares of GWFC common stock were represented at the Annual Meeting
in person or by proxy.
Shareholders voted in favor of the election of four nominees for director.
The voting results for each nominee were as follows:
<TABLE>
<CAPTION>
Votes in Favor
Nominee of Election Votes Withheld
- - ------- -------------- --------------
<S> <C> <C>
John V. Giovenco 117,637,093 353,682
Firmin A. Gryp 117,637,579 353,196
James F. Montgomery 117,646,316 344,459
Alberta E. Siegel 117,625,747 365,028
</TABLE>
In addition, the term of office of the following directors continued after
the meeting:
Dr. David Alexander
H. Frederick Christie
Stephen E. Frank
Enrique Hernandez, Jr.
John F. Maher
Charles D. Miller
Willis B. Wood, Jr.
Shareholders voted to approve the Great Western Financial Corporation
Annual Incentive Compensation Plan for Executive Officers. 106,185,831
shares were voted in favor of the proposal, 11,405,107 shares were voted
against the proposal, and 336,470 shares abstained. There were no broker
nonvotes on the matter.
<PAGE>
<PAGE>
ITEM 5. OTHER INFORMATION
- - --------------------------
The calculation of the Company's ratio of earnings to fixed charges as of
the dates indicated follows:
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended Three Months Ended
(Dollars in thousands) March 31, 1994 December 31, 1993 March 31, 1993
------------------ ------------------- ------------------
<S> <C> <C> <C>
Earnings
- - --------
Net earnings $ 49,475 $ 62,047 $ 45,211
Taxes on income 34,700 30,000 27,600
-------- ---------- --------
Earnings before taxes $ 84,175 $ 92,047 $ 72,811
======== ========== ========
Interest expense
- - ----------------
Customer accounts $232,139 $ 939,081 $254,574
Borrowings 74,792 370,761 92,652
-------- ---------- --------
Total $306,931 $1,309,842 $347,226
======== ========== ========
Rent expense
- - ------------
Total $ 14,916 $ 53,638 $ 12,483
1/3 thereof 4,972 17,879 4,161
Capitalized interest $ 110 $ 777 $ 42
Preferred stock dividends $ 6,254 $ 25,015 $ 6,254
Ratio of earnings to fixed charges
and preferred stock dividends
- - ----------------------------------
Excluding customer accounts
---------------------------
Earnings before fixed charges $163,939 $ 480,687 $169,624
Fixed charges 90,514 426,526 106,927
Ratio 1.81 1.13 1.59
Including customer accounts
---------------------------
Earnings before fixed charges $396,078 $1,419,768 $424,198
Fixed charges 322,653 1,365,607 361,501
Ratio 1.23 1.04 1.17
Ratio of earnings to fixed charges
- - ----------------------------------
Excluding customer accounts
---------------------------
Earnings before fixed charges $163,939 $ 480,687 $169,624
Fixed charges 79,874 389,417 96,855
Ratio 2.05 1.23 1.75
Including customer accounts
---------------------------
Earnings before fixed charges $396,078 $1,419,768 $424,198
Fixed charges 312,013 1,328,498 351,429
Ratio 1.27 1.07 1.21
/TABLE
<PAGE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - -----------------------------------------
a. Exhibits
--------
4.1 The Company has outstanding certain long-term debt as set forth in
Note 13 of the Notes to Consolidated Financial Statements included in
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993. The Company agrees to furnish copies of the
instruments representing its long-term debt to the Securities and
Exchange Commission (the "SEC") upon request.
10.1 General provisions applicable to Performance Restricted Stock Awards
granted under the Great Western Financial Corporation 1988 Stock
Option and Incentive Plan, as amended (March 1994).
11.1 Statement re computation of per share earnings.
b. Reports on Form 8-K
- - -------------------
A report on Form 8-K/A dated February 15, 1994, event date December 3,
1993, was filed with the Securities and Exchange Commission providing pro
forma financial statements for the acquisition by GWB of HomeFed Bank,
F.A.
<PAGE>
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GREAT WESTERN FINANCIAL CORPORATION
- - -----------------------------------
Registrant
/s/ Carl F. Geuther
- - ------------------------------------
Carl F. Geuther
Executive Vice President and Chief
Financial Officer
/s/ Jesse L. King
- - -------------------------------------
Jesse L. King
Senior Vice President
Controller
DATE: May 11, 1994
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
EXHIBIT INDEX
March 31, 1994
Exhibit Page
Number Number
- - ------- ------
10.1 General provisions applicable to Performance 37
Restricted Stock Awards granted under the
Great Western Financial Corporation 1988 Stock
Option and Incentive Plan, as amended.
11.1 Statement re computation of per share earnings. 48
<PAGE>
EXHIBIT 10.1
GENERAL PROVISIONS APPLICABLE TO PERFORMANCE
RESTRICTED STOCK AWARDS GRANTED UNDER THE GREAT
WESTERN FINANCIAL CORPORATION 1988 STOCK
OPTION AND INCENTIVE PLAN, AS AMENDED
(MARCH 1994)
The specific purposes of performance-based Restricted Stock Awards
authorized under the Great Western Financial Corporation 1988 Stock Option
and Incentive Plan, as amended (the "Plan") is to encourage and reward high
levels of performance of the Company as measured by returns to shareholders
and to thereby align participant interests more closely with those of share-
holders. Capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the Plan or the Award Agreement, as the
case may be.
These General Provisions supplement the provisions of Award Agreements
contemplated by the Plan and shall apply to any Restricted Stock Award
granted under Section 4.3 of the Plan when incorporated by reference in the
Award Agreement.
1. OWNERSHIP RIGHTS OF RESTRICTED STOCK.
(a) RESTRICTIONS ON TRANSFER. Prior to the time they become vested,
neither the shares of Restricted Stock comprising the Award nor any interest
therein, amount payable in respect thereof, nor Restricted Property (as
defined in Section 8) subject thereto, may be sold, assigned, transferred,
pledged or otherwise disposed of, alienated or encumbered, either voluntarily
or involuntarily, other than by will or the laws of descent and distribution.
(b) DIVIDENDS; VOTING RIGHTS. After the Award Date, the Employee
Participant (sometimes, "EMPLOYEE" herein) shall be entitled to cash
dividends and voting rights with respect to the shares of Restricted Stock
subject to the Award even though such shares are not vested, provided that
such rights shall terminate immediately as to any shares of Restricted Stock
which are forfeited. Any securities or other property receivable or received
by the Employee as a result of any non-cash dividend or other distribution
(other than a Stock Dividend), conversion or exchange of or with respect to
the Restricted Stock will be subject to the restrictions and risks of
forfeiture set forth in these General Provisions to the same extent as the
shares of Restricted Stock to which such securities or other property relate.
For purposes of these General Provisions, "STOCK DIVIDEND" means only a
dividend in and of shares of common stock of the Corporation representing
less than 25% of the outstanding shares of its Common Stock prior to the
dividend.
<PAGE>
<PAGE>
(c) CERTIFICATES. The Corporation shall issue a certificate or
certificates for the shares of Restricted Stock subject to the Award,
registered in the name of the Employee, which certificate(s) shall upon
redelivery thereof to the Corporation pursuant to subsection (d) below be
held by the Corporation until the restrictions on such shares shall have
lapsed and the shares shall thereby have become vested or the shares
represented thereby are forfeited hereunder. The certificate(s) representing
shares forfeited hereunder shall be cancelled. The certificate(s)
representing restricted shares shall bear a legend referring to the Award
Agreement and restrictions and limitations on such shares.
(d) CERTIFICATES TO BE HELD BY CORPORATION; POWER OF ATTORNEY.
Concurrently with the execution and delivery of the Award Agreement, upon
delivery to the Employee of the certificate(s) representing shares awarded
to such Employee, the Employee shall redeliver such certificate(s) to the
Corporation, together with a stock power or stock powers, in blank, with
respect to such certificate(s), to be held by the Corporation pursuant to the
terms hereof. The Employee, by acceptance of the Award, shall be deemed to
appoint the Corporation and each of its authorized representatives as the
Employee's attorney(s)-in-fact to effect any transfer of unvested forfeited
shares (or shares otherwise reacquired by the Corporation hereunder) to the
Corporation as may be required pursuant to the Plan, these General Provisions
or the Award Agreement and to execute such documents as the Corporation or
such representatives deem necessary or advisable in connection with any such
transfer.
2. VESTING; LAPSE OF RESTRICTIONS.
(a) VESTING. The Award shall vest, and restrictions (other than
those set forth in Section 10 (Compliance)) shall lapse, on the close of
business on the day before the 10th anniversary of the Award Date, PROVIDED
that the Employee remains then employed by the Company, unless (i) the Award
has earlier vested or has been accelerated, as provided in Section 3(c)
(Certain Events), Section 4 (Retirement), Section 5 (Disability or Death),
Section 6 (Acceleration for Performance) or Section 8 (Adjustments), or has
been otherwise accelerated pursuant to the Plan, or (ii) the Administrator
has taken other action with respect to the Award pursuant to Section 6.3 of
the Plan.
(b) DELIVERY OF CERTIFICATES. Promptly after the lapse or other
release of restrictions, a certificate or certificates evidencing the number
of shares of Common Stock as to which the restrictions have lapsed or been
released or such lesser number as may be permitted pursuant to Section 11
(Tax Withholding) shall be delivered to the Employee or other person entitled
under the Plan to receive the shares. The Employee or such other person
shall deliver to the Corporation any representations or other documents or
assurances required pursuant to Section 10 (Compliance). The shares so
delivered shall no longer be restricted shares hereunder.
<PAGE>
<PAGE>
(c) MAXIMUM VESTING. The maximum number of restricted shares that
may vest on any occasion or event shall not exceed the number of shares that
then remain restricted hereunder.
3. EFEECT OF TERMINATION OF EMPLOYMENT.
(a) FORFEITURE AFTER CERTAIN EVENTS. Except as provided in
Section 3(c) (Termination Without Cause after Certain Events), Section 4
(Retirement) and Section 5 (Disability or Death), the Employee's shares of
Restricted Stock shall be forfeited to the extent such shares have not become
vested upon the date an Employee Participant is no longer employed by the
Company for any reason, whether with or without cause, voluntarily or
involuntarily. If an entity ceases to be a Subsidiary, such action shall be
deemed to be a termination of employment of all employees of that entity, but
the Administrator may make provision in such circumstances for accelerated
vesting of some or all of the remaining restricted shares under any Awards
held by such Employees, effective immediately prior to such event.
(b) RETURN OF SHARES. Upon the occurrence of any forfeiture of
shares of Restricted Stock hereunder, such unvested, forfeited shares shall,
without payment of any consideration by the Corporation for such transfer,
be automatically transferred to the Corporation, without any other action by
the Employee, or the Employee's Beneficiary or Personal Representative, as
the case may be. The Corporation may exercise its powers under Section 1(d)
and take any other action necessary or advisable to evidence such transfer.
The Employee, or the Employee's Beneficiary or Personal Representative, as
the case may be, shall deliver any additional documents of transfer that the
Corporation may request to confirm the transfer of such unvested, forfeited
shares to the Corporation.
(c) TERMINATION WITHOUT CAUSE FOLLOWING CERTAIN EVENTS. If
following an Event described in Section 7.19 of the Plan, the Employee's
employment by the Company is involuntarily terminated by the Company other
than for cause, as determined by the Administrator in its sole and absolute
discretion, then any portion of his or her Award that has not previously
vested shall thereupon vest, subject to the provisions of Section 9.
4. EFFECT OF RETIREMENT. If the Employee retires in accordance with
the terms of and under the Great Western Retirement Plan or the Company's
policies, as from time to time in effect, and if the Administrator determines
that such an event has occurred and approves the acceleration of vesting
(subject to the provisions of Section 9), the Award shall vest to the
following extent as of the date of such approval: (x) 15% of the original
Award, multiplied by the number of anniversaries of the Award Date elapsed
since the Award Date, minus (y) the percentage of the Award previously vested
for performance pursuant to Section 6. Any remaining restricted shares
under the Award thereupon shall be forfeited, unless the Administrator
provides at such time for additional vesting (subject to the provisions of
Section 9) in the circumstances. The Administrator will make its decision
regarding such matters no later than 30 days after the date of termination.
<PAGE>
<PAGE>
5. EFFECT OF DISABILITY OR DEATH. If the Employee incurs a
Disability or dies while employed by the Company, the Employee's Award shall
vest to the following extent: (x) 20% of the original Award, multiplied by
the number of anniversaries of the Award Date elapsed since the Award Date,
minus (y) the percentage of the Award previously vested for Performance. Any
restricted shares remaining under the Award shall be forfeited, except to the
extent that the Administrator prior to the date of vesting (or within 30 days
after the date of death, as the case may be) provides that some or all of any
remaining restricted shares shall also vest on or as of such date.
6. ACCELERATION FOR PERFORMANCE.
(a) GENERAL; DEFINED TERMS. After the third anniversary of the
Award Date, the Administrator shall determine the performance of the
Corporation and each member of the applicable Peer Group over the Applicable
Performance Period in accordance with the provisions of subsection (b). The
performance of the Corporation shall then be ranked on a percentile basis in
accordance with the provisions of subsection (c). If and to the extent the
Corporation's performance results in a percentile ranking of 50% or more, all
or part of the Employee's Award as of the applicable Determination Date shall
be subject to accelerated vesting as of such date in accordance with the
provisions of subsection (d). To the extent that an Award is not subject to
accelerated vesting as of any particular Determination Date by reason of
performance, the Award shall remain eligible for accelerated vesting as of
each subsequent Determination Date (prior to the forfeiture or other vesting
of the Award) based upon the Corporation's performance during each such
subsequent Applicable Performance Period.
Terms used in this Section 6 have the following meanings, subject to the
Administrator's authority hereunder and under the Plan.
"APPLICABLE PERFORMANCE PERIOD" shall mean the three-year period
commencing January 1, 1992 and ending December 31, 1994, or any full three-
year period ending on each June 30 and December 31 thereafter within the term
of the Award, as the case may be.
<PAGE>
<PAGE>
"DETERMINATION DATE" shall mean the date as of which the Administrator
makes its determination of Total Shareholder Return of the Corporation and
of the other companies in the Peer Group for the Applicable Performance
Period and other decisions essential to the calculation of the extent (if
any) to which Restricted Stock Awards governed by these General Provisions
shall vest.
"FAIR MARKET VALUE" shall mean Fair Market Value (as defined in the
Plan) except that Common Stock (as used in such definition) shall mean the
common stock of the Corporation or the applicable member of the Peer Group,
as the case may be.
"PEER GROUP" shall mean the not more than 40 nor less than 20 (excluding
the Corporation) financial institutions and/or financial services companies
designated by the Administrator as the Peer Group for the Applicable
Performance Period, initially those 32 institutions listed on Schedule 1, in
all cases subject to the provisions of Section 15 hereof.
"TOTAL SHAREHOLDER RETURN" refers to the compound annual rate of return
over the Applicable Performance Period for the Corporation and each other
company in the Peer Group from changes in the trading price of each company's
common stock and any dividends and other distributions paid by the company
on its common stock during the Applicable Performance Period, calculated by
(a) assuming that one share of each company's common stock is purchased on
the first day of the Applicable Performance Period at a price equal the
average Fair Market Value for the 30 trading days immediately prior thereto,
(b) assuming that additional shares (or portions of shares) of such company's
common stock are purchased with any dividends paid on the initial share and
on shares accumulated through the assumed reinvestment of dividends and other
distributions, with such purchase being made on the dividend or distribution
payment date at a price equal to the Fair Market Value of such company's
common stock on that date, (c) calculating the aggregate number of shares of
each company's common stock that would be accumulated over the Applicable
Performance Period, (d) multiplying this number by the average Fair Market
Value of such company's common stock for the 30 trading days immediately
prior to the last day of the Applicable Performance Period, and (e)
determining the annual compound rate of growth over the Applicable
Performance Period between the assumed purchase price set forth in clause
(a) and the value resulting from the computation in clause (d).
(b) PERFORMANCE MEASURE AND DETERMINATION. The measurement of
performance of the Corporation and each member of the Peer Group shall be
based upon the Total Shareholder Return for the Corporation and each member
of the Peer Group.
(c) PERCENTILE RNAKING. After the Total Shareholder Return of the
Corporation and each member of the Peer Group has been determined, the
Administrator shall determine the percentile ranking in Total Shareholder
Return of the Corporation relative to all other companies in the applicable
Peer Group for the Applicable Performance Period in accordance with Schedule
2 hereto.
<PAGE>
<PAGE>
(d) VESTING PERCENTAGES. The number of shares of Restricted Stock
subject to accelerated vesting by virtue of performance as of any
Determination Date shall be determined by multiplying (x) the acceleration
percentage that corresponds to the Corporation's percentile ranking for the
Applicable Performance Period in the following table, times (y) the number
of shares subject to the original Award.
<TABLE>
<CAPTION>
Percentile Ranking Percent of Award
Versus Peer Group That Accelerates
------------------ ----------------
<S> <C>
Below 50th 0%
At or above 50th but less than 60th 25%
At or above 60th but less than 70th 50%
At or above 70th but less than 80th 75%
At or above 80th 100%
</TABLE>
7. CONTINUANCE OF EMPLOYMENT. The grant of an Award shall NOT
confer upon the Employee any right with respect to the continuation of his
or her employment by the Corporation or any Subsidiary or alter or interfere
in any way with the right of the Corporation or of any Subsidiary at any time
to terminate such employment or to change the compensation of the Employee
or other terms of his or her employment; and neither shall these terms alter
or in any way affect the rights of the Company or the Employee under any
other written employment agreement between them, except as expressly provided
herein.
8. ADJUSTMENTS UPON SPECIFIED EVENTS. Upon the occurrence of
certain events relating to the Corporation's stock contemplated by Section
6.2 of the Plan (other than a Stock Dividend), the Administrator shall make
adjustments if appropriate in the number and kind of securities that may
become vested under an Award. If any adjustment shall be made under Section
6.2 of the Plan or an Event described in Section 7.19(ii) of the Plan shall
occur and the shares of Restricted Stock are not fully vested upon such Event
or prior thereto, the restrictions applicable to such shares of Restricted
Stock shall continue in effect with respect to any consideration or other
securities (the "RESTRICTED PROPERTY"), other than a Stock Dividend, received
in respect of such Restricted Stock. Such Restricted Property shall vest at
such times and in such proportion as the shares of Restricted Stock to which
the Restricted Property is attributable vest, or would have vested pursuant
to the terms hereof if such shares of Restricted Stock had remained
outstanding. To the extent that the Restricted Property includes any cash,
such cash shall be invested, pursuant to policies established by the
Administrator, in interest bearing, FDIC-insured (subject to applicable
insurance limits) deposits of Great Western Bank or another depository
institution selected by the Administrator, the earnings on which shall be
added to and become a part of the Restricted Property.
<PAGE>
<PAGE>
9. LIMINATIONS ON ACCELERATION AND REDUCTION IN BENEFITS IN EVENT
OF TAX LIMITATIONS.
(a) LIMITATION ON ACCELERATION. Notwithstanding anything
contained herein or in the Plan or the terms of any employment agreement to
the contrary, in no event shall the vesting of any share of Restricted Stock
be accelerated pursuant to Section 6.3 of the Plan or Section 3(c) hereof or
the terms of any employment agreement if the Corporation would not be allowed
a federal income tax deduction for such vesting because of Section 280G of
the Code and, in such circumstances, the restricted shares not subject to
acceleration will continue to vest in accordance with the other provisions
hereof.
(b) REDUCTION IN BENEFITS. If the Employee would be entitled to
benefits, payments or coverage hereunder and under any other plan, program
or agreement which would constitute "parachute payments," then
notwithstanding any other provision hereof or of any other existing agreement
to the contrary, the Employee Participant may by written notice to the
Secretary of the Corporation designate the order in which such "parachute
payments" shall be reduced or modified so that the Corporation is not denied
federal income tax deductions for any "parachute payments" because of Section
280G of the Code.
(c) DETERMINATION OF LIMITATIONS. The term "parachute payments" shall
have the meaning set forth in and be determined in accordance with Section
280G of the Code and regulations issued thereunder. All determinations
required by this Section 9, including without limitation the determination
of whether any benefit, payment or coverage would constitute a parachute
payment, the calculation of the value of any parachute payment and the
determination of the extent to which any parachute payment would be
nondeductible for federal income tax purposes because of Section 280G of the
Code, shall be made by an independent accounting firm (other than the
Corporation's outside auditing firm) having nationally recognized expertise
in such matters selected by the Administrator. Any such determination by
such accounting firm shall be binding on the Corporation and the Employee
Participant.
10. COMPLIANCE; APPLICATION OF SECURITIES LAWS.
No shares of Common Stock shall be delivered, no restricted shares shall
vest, and (subsequent to vesting) no shares shall be offered for sale by the
holder unless and until any then applicable requirements of the Securities
and Exchange Commission (the "COMMISSION") or any other regulatory agency
having jurisdiction and any exchanges upon which the Common Stock may be
listed shall have been fully satisfied. Upon the Corporation's request, the
Participant, or any other person entitled to such shares of Common Stock
pursuant to the Award, shall provide a written assurance of compliance (or
representations reasonably requested by the Corporation to assure such
compliance) satisfactory to the Corporation.
<PAGE>
<PAGE>
The Administrator may impose such additional conditions on the Award or
on its acceleration or vesting or on the payment of any related tax or
withholding obligation as in its sole discretion may be required or advisable
to satisfy any applicable legal or regulatory requirements, including,
without limitation, provisions necessary to avoid liability under Section 16
of the Exchange Act or to secure benefits of Rule 16b-3 (or any successor
rule) promulgated by the Commission pursuant to the Exchange Act.
11. TAX WITHHOLDING.
The Corporation shall be entitled to require deduction from other
compensation payable to the Employee of any sums required by federal, state
or local tax law to be withheld with respect to the vesting of any Award,
but, in the alternative, (i) the Corporation may require the Employee or
other person in whom the Award may vest to advance such sums in cash, or
(ii) the Corporation may allow the Employee or other person in whom the Award
vests to irrevocably elect, in such manner and at such time or times prior
to any applicable Tax Date as may be permitted or required under Section 6.6
of the Plan and rules established by the Administrator, to have the Company
withhold and reacquire shares of Restricted Stock at the time of vesting to
satisfy any withholding obligations of the Company employing the Employee
with respect to such vesting. An election to have shares so held back and
reacquired shall be subject to approval of the Administrator and shall not
be available if the Employee has made an election pursuant to Section 83(b)
of the Code with respect to such Award.
12. DELIVERY OF SHARES. Vested shares and any amounts deliverable
pursuant to the Award shall be delivered and paid only to the Employee or the
Employee's Beneficiary or Personal Representative, as the case may be.
13. EMPLOYMENT BY SUBSIDIARIES. Employment by any Subsidiary shall
be considered as the equivalent of employment by the Corporation for all
purposes hereunder.
14. NOTICES. Any notice to be given under the terms of the Plan,
these General Provisions or an Award Agreement shall be in writing and
addressed to the Corporation at its principal executive office, to the
attention of the Corporate Secretary and to the Employee at the address given
beneath the Employee's signature to the Award Agreement, or at such other
address as either party may thereafter designate in writing to the other.
15. ADMINISTRATION OF AWARDS.
(a) POWERS OF ADMINISTRATION. The Administrator's authority under
Article II of the Plan to interpret and make decisions affecting all Awards
extends to these General Provisions and all Awards that incorporate them by
reference. Without limiting the generality of the foregoing, but subject to
the limitations of the Plan, the Administrator shall have the responsibility
for carrying out the intents and purposes of these General Provisions and
related Restricted Stock Awards and shall have all powers necessary to
accomplish those purposes, including, but not by way of limitation, the
following: (i) to construe, interpret and administer the General Provisions
<PAGE>
<PAGE>
and Award Agreements; (ii) to make all determinations required by these
General Provisions; (iii) to collect and interpret such reported results of
and other information regarding Peer Group entities and the Corporation as
the Administrator may deem advisable or appropriate, or to utilize such other
readily available information as it may deem advisable or appropriate, with
respect to determinations made hereunder; (iv) to determine, compute and
certify the extent of vesting and the amount of any other benefits payable
to Employee Participants hereunder; (v) to delete, add or substitute any
member(s) of the Peer Group in such circumstances as the Administrator deems
advisable during any Applicable Performance Period or from one Applicable
Performance Period to another, if, in the case of a removal, the
Administrator determines that any member's circumstances are such, or an
event has occurred, that makes it inappropriate or impractical to retain the
entity as a member of the Peer Group or, in the case of an addition or
substitution, the Administrator determines that the new member is similar in
stature, financial performance, financial condition or other qualities to
those companies previously included in the Peer Group, provided, however,
that if a Peer Group member has initiated or become the subject of a material
announced merger, takeover or other change in control proposal that in the
opinion of the Administrator has or may have a material effect upon the
determination of such member's Total Shareholder Return for any Applicable
Performance Period, the Administrator shall remove such member from the Peer
Group, subject to reinstatement of such member to the Peer Group if such
proposed transaction is not consummated or if in the discretion of the
Administrator any price distortion created by such announcement has abated;
and (vi) to, in determining the performance of each relevant entity, make
such adjustments as it deems appropriate and equitable in its discretion to
reflect changes in capitalization and similar corporate changes affecting the
Corporation or any Peer Group entity. In making any discretionary changes
or other adjustments hereunder or under the Plan, the Administrator need not
make the same adjustments or confer the same benefits on all holders of
Restricted Stock.
(b) NO LIABILITY OF ADMINISTRATOR. The determination of the
Administrator in good faith as to any disputed question or controversy shall
be binding and conclusive. In performing its duties, the Administrator shall
be entitled to rely on information, opinions, reports or statements prepared
or presented by: (i) officers or employees of the Company whom the
Administrator believes to be reliable and competent as to such matters; and
(ii) counsel (who may be employees of the Company), accountants and other
persons as to matters which the Administrator believes to be within such
persons' professional or expert competence. The Administrator shall be fully
protected with respect to any action taken or omitted by it in good faith
pursuant to the advice of such persons. Neither the Company, the
Administrator nor any member of the Administrator or the Board of Directors
shall be liable to any Employee Participant for any act or omission of any
member or for any act or omission on its, his or her own part, excepting only
for its, his or her own willful misconduct.
<PAGE>
<PAGE>
INITIAL PEER GROUP COMPANIES
Savings & Loans Banks
- - ------------------------- -----------------------------
[C] [C]
1 Coast Savings Financial 1 Banc One Corp
2 Dime Savings Bank of NY 2 Bank of Boston Corp
3 Firstfed Michigan Corp 3 Bank of New York Co.
4 Golden West Financial Corp 4 Bankamerica (incl. Sec Pac)
5 H. F. Ahmanson 5 Bankers Trust New York Corp
6 Barnett Banks
7 Chase Manhattan Corporation
8 Chemical Banking Corp (incl.
Man Han)
9 Citicorp
10 Continental Bank Corp
11 First Bank System
12 First Chicago Corp
13 First Fidelity Bancorp
14 First Interstate Bancorp
15 First Union Corp
16 First Wachovia Corp
17 Fleet/Norstar Financial Corp
18 J. P. Morgan & Co.
19 Mellon Bank Corp
20 MNC Financial
21 NationsBank Corp (NCNB &
C&S/Sovran)
22 NBD Bancorp
23 Northwest Bancorp
24 PNC Financial Corp
25 Republic NY Corp
26 Suntrust Banks
27 Wells Fargo & Co.
SCHEDULE 1
<PAGE>
Exhibit 11.1
GREAT WESTERN FINANCIAL CORPORATION
Computation of Net Income Per Common Share
Primary and Fully Diluted
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Net income $49,475 $45,211
Preferred stock dividends - convertible
and nonconvertible (6,254) (6,254)
------- -------
Net income for computing earnings per
Common share - primary 43,221 38,957
Preferred stock dividends - convertible 2,830 2,830
------- -------
Net income for computing earnings per
Common share - fully diluted $46,051 $41,787
======= =======
</TABLE>
Computation of Average Number of
Common Shares Outstanding on Primary and Fully Diluted Basis
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Average number of Common shares outstanding
during each period - without dilution 132,779 130,986
Common share equivalents outstanding at
the end of each period 578 616
------- -------
Average number of Common shares and Common
share equivalents outstanding during each
period on a primary basis 133,357 131,602
Common share equivalents outstanding at
the end of each period on a fully
diluted basis - -
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
------- -------
Average number of Common shares outstanding
during each period on a fully diluted basis 139,699 137,944
======= =======
Net income per Common share
Primary $.32 $.30
Fully diluted .32 .30
</TABLE>
