<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 September 30, 1995
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 October 31, 1995:
136,654,524
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
TABLE OF CONTENTS
Page
----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Statement of Financial
Condition - September 30, 1995, December 31, 1994
and September 30, 1994................................. 4
Consolidated Condensed Statement of Operations -
Three Months and Nine Months Ended September 30, 1995
and 1994............................................... 5
Consolidated Condensed Statement of Cash Flows -
Three Months and Nine Months Ended September 30, 1995
and 1994............................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the
Three Months and Nine Months Ended September 30,
1995............................................... 8
Part II. Other Information
Item 5. Other Information..................................... 35
Item 6. Exhibits and Reports on Form 8-K...................... 37
<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, 1994.
The Registrant adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" ("FAS 121") in 1995, which establishes accounting
standards for such assets. The Registrant also adopted Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights" ("FAS 122") as of April 1, 1995. FAS 122 requires the capitalization
of servicing rights for loans originated with the intent to sell or
securitize such loans. 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>
September 30 December 31 September 30
Dollars in thousands 1995 1994 1994
------------ ----------- ------------
<S> <C> <C> <C>
ASSETS
Cash and securities
Cash $ 849,096 $ 983,440 $ 808,234
Certificates of deposit, repurchase agreements
and federal funds 287,125 165,125 180,125
Securities available for sale 1,054,453 917,095 784,859
----------- ----------- -----------
2,190,674 2,065,660 1,773,218
Mortgage-backed securities held to maturity
(fair value $7,984,196, $6,211,731 and $3,162,863) 7,827,138 6,335,104 3,238,034
Mortgage-backed securities available for
sale 2,705,128 2,934,503 2,587,630
----------- ----------- -----------
10,532,266 9,269,607 5,825,664
Loans receivable, net of reserve for
estimated losses 29,218,416 28,079,620 29,842,163
Loans receivable available for sale 414,808 298,748 281,638
----------- ----------- -----------
29,633,224 28,378,368 30,123,801
Real estate available for sale or
development, net 208,192 256,967 296,214
Interest receivable 280,593 230,925 230,623
Investment in Federal Home Loan Banks 341,102 306,041 306,151
Premises and equipment, at cost,
less accumulated depreciation 608,819 616,116 640,046
Other assets 564,340 730,574 404,504
Intangibles arising from acquisitions 333,804 363,999 396,385
----------- ----------- -----------
$44,693,014 $42,218,257 $39,996,606
=========== =========== ===========
LIABILITIES
Customer accounts $29,432,176 $28,700,947 $29,406,989
Securities sold under agreements to repurchase 7,253,023 6,299,055 3,817,293
Short-term borrowings 1,904,877 1,210,461 838,224
Other borrowings 2,434,099 2,611,144 2,614,226
Other liabilities and accrued expenses 696,727 716,741 668,286
Taxes on income, principally deferred 317,813 196,123 207,782
STOCKHOLDERS' EQUITY 2,654,299 2,483,786 2,443,806
----------- ----------- -----------
$44,693,014 $42,218,257 $39,996,606
=========== =========== ===========
</TABLE>
Unaudited
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ -------------------------
Dollars in thousands, except per share 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Real estate loans $513,423 $496,621 $1,469,598 $1,460,252
Mortgage-backed securities 196,596 55,133 563,480 144,145
Consumer loans 102,022 91,911 298,510 277,660
Securities 13,674 7,156 39,507 18,875
Other 13,382 10,491 32,729 24,175
-------- -------- ---------- ----------
839,097 661,312 2,403,824 1,925,107
INTEREST EXPENSE
Customer accounts 316,577 235,440 903,312 697,157
Borrowings
Short-term 137,587 35,480 389,796 53,847
Long-term 51,334 59,624 159,428 171,368
-------- -------- ---------- ----------
505,498 330,544 1,452,536 922,372
-------- -------- ---------- ----------
NET INTEREST INCOME 333,599 330,768 951,288 1,002,735
Provision for loan losses 46,600 49,700 137,400 154,400
-------- -------- ---------- ----------
Net interest income after provision
for loan losses 286,999 281,068 813,888 848,335
Other operating income
Real estate services
Loan fees 6,013 7,002 17,917 22,520
Mortgage banking
Gain on mortgage sales 1,315 429 4,375 6,225
Servicing 13,246 12,329 40,920 39,343
-------- -------- ---------- ----------
20,574 19,760 63,212 68,088
Retail banking
Banking fees 40,045 36,313 113,935 104,975
Securities operations 5,110 9,490 13,363 31,279
-------- -------- ---------- ----------
45,155 45,803 127,298 136,254
Net gain on securities and investments 1,854 387 4,731 3,241
Net insurance operations 7,002 6,624 20,875 20,619
Other 1,574 2,149 5,081 5,364
-------- -------- ---------- ----------
Total other operating income 76,159 74,723 221,197 233,566
Noninterest expense
Operating and administrative
Salaries and related personnel 105,931 118,428 337,439 357,807
Premises and occupancy 44,080 47,774 136,341 152,415
FDIC insurance premium 16,974 19,657 49,968 57,951
Advertising and promotion 8,559 10,097 25,700 29,493
Other 63,460 50,563 187,381 148,259
-------- -------- ---------- ----------
239,004 246,519 736,829 745,925
Amortization of intangibles 10,088 11,764 30,196 35,293
Real estate operations 731 4,578 (1,995) 19,523
Provision for real estate losses - 1,500 1,500 10,500
-------- -------- ---------- ----------
Total noninterest expense 249,823 264,361 766,530 811,241
-------- -------- ---------- ----------
EARNINGS BEFORE TAXES 113,335 91,430 268,555 270,660
Taxes on income 44,800 34,200 106,100 108,100
-------- -------- ---------- ----------
NET EARNINGS $ 68,535 $ 57,230 $ 162,455 $ 162,560
======== ======== ========== ==========
Average common shares outstanding
Without dilution 137,690,681 134,301,424 136,466,836 133,677,823
Fully diluted 138,125,045 140,643,336 137,323,937 140,221,438
Earnings per share based on average
common shares outstanding
Primary $.45 $.38 $1.05 $1.08
Fully diluted .45 .38 1.05 1.08
Cash dividend per common share .23 .23 .69 .69
</TABLE>
Unaudited<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- -------------------------
Dollars in thousands 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 68,535 $ 57,230 $ 162,455 $ 162,560
Noncash adjustments to net earnings:
Provision for loan losses 46,600 49,700 137,400 154,400
Provision for real estate losses - 1,500 1,500 10,500
Depreciation and amortization 18,421 19,996 56,913 59,265
Amortization of intangibles 10,088 11,764 30,196 35,293
Income taxes 36,143 (38,210) 71,759 60,825
Capitalized interest (19,140) (2,395) (42,254) (5,714)
Net change in accrued interest (18,260) (12,325) (63,576) (23,070)
Other (63,733) (10,891) 133,784 170,738
----------- ------------ ----------- -----------
78,654 76,369 488,177 624,797
----------- ------------ ----------- -----------
Sales and repayments of loans
receivable available for sale 483,512 103,944 666,379 1,146,180
Originations and purchases of loans
receivable available for sale (514,946) (104,393) (779,060) (819,176)
----------- ----------- ----------- -----------
(31,434) (449) (112,681) 327,004
----------- ----------- ----------- -----------
Net cash provided by operating
activities 47,220 75,920 375,496 951,801
----------- ----------- ----------- -----------
FINANCING ACTIVITIES
Customer accounts
Net increase (decrease) in transaction
accounts 137,860 (593,097) (756,691) (602,350)
Net increase (decrease) in term
accounts 47,352 (208,462) 1,487,920 (1,522,224)
----------- ----------- ----------- -----------
185,212 (801,559) 731,229 (2,124,574)
Borrowings
Proceeds from new long-term debt 99,906 149,920 99,906 149,920
Repayments of long-term debt (21,210) (115,461) (276,951) (438,552)
Net change in securities sold
under agreements to repurchase (176,275) 1,819,498 953,968 3,817,293
Net change in short-term debt 25,633 460,431 694,416 261,741
----------- ----------- ----------- -----------
(71,946) 2,314,388 1,471,339 3,790,402
Other financing activity
Proceeds from issuance of
common stock 14,800 10,154 44,780 20,567
Cash dividends paid (37,523) (36,901) (112,005) (110,513)
----------- ---------- ----------- -----------
(22,723) (26,747) (67,225) (89,946)
----------- ---------- ----------- -----------
Net cash provided by financing activities 90,543 1,486,082 2,135,343 1,575,882
----------- ---------- ----------- -----------
/TABLE
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------- -------------------------
Dollars in thousands 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTING ACTIVITIES
Investment securities
Proceeds from maturities $ 359,681 $ 198,126 $ 1,047,097 $ 892,958
Purchases of securities (417,359) (483,828) (1,162,469) (820,901)
----------- ----------- ----------- -----------
(57,678) (285,702) (115,372) 72,057
Lending
Loans originated for investment (1,606,409) (2,356,585) (6,450,885) (6,012,225)
Purchases of mortgage-backed securities - (460,003) - (1,041,290)
Payments 1,521,902 1,413,837 3,941,739 4,672,168
Sales 3,170 - 3,170 -
Repurchases (31,097) (19,669) (82,756) (499,274)
Other (9,067) 5,348 1,971 11,580
----------- ----------- ----------- -----------
(121,501) (1,417,072) (2,586,761) (2,869,041)
Other investing activity
Purchases and sales of premises
and equipment, net (28,433) (17,079) (71,008) (51,185)
Sales of real estate 111,826 89,462 287,255 359,269
Net change in investment in
FHLB stock 3,531 2,133 (35,061) 1,201
Other (35,167) (15,779) (2,236) (27,331)
----------- ----------- ----------- -----------
51,757 58,737 178,950 281,954
----------- ----------- ----------- -----------
Net cash (used in) investing activities (127,422) (1,644,037) (2,523,183) (2,515,030)
----------- ----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 10,341 (82,035) (12,344) 12,653
Cash and cash equivalents at beginning
of period 1,125,880 1,070,394 1,148,565 975,706
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 1,136,221 $ 988,359 $ 1,136,221 $ 988,359
=========== =========== =========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid for
Interest on deposits $ 330,459 $ 235,328 $ 904,180 $ 698,608
Interest on borrowings 193,987 95,759 562,264 231,201
Income taxes 13,564 71,983 36,838 97,767
Noncash investing activities
Loans transferred to foreclosed
real estate $ 103,534 $ 153,107 $ 317,422 $ 404,267
Loans originated to finance the sale
of real estate 11,902 31,971 77,263 73,750
Loans originated to refinance existing loans 71,304 121,074 180,316 475,951
Loans exchanged for mortgage-backed
securities - 2,290,662 1,997,585 2,290,662
</TABLE>
Unaudited
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 30, 1995
Great Western Financial Corporation reported net earnings of $68.5
million, or $.45 per share, in the 1995 third quarter compared with earnings
of $50.4 million, or $.32 per share, in the 1995 second quarter and $57.2
million, or $.38 per share, in the 1994 third quarter. For the nine months
ended September 30, 1995, net earnings were $162 million, or $1.05 per share,
compared with $163 million, or $1.08 per share, for the same period a year
ago.
Provisions for loan and real estate losses during the 1995 third
quarter were $46.6 million compared with $43.2 million in the second quarter
of 1995 and $51.2 million in the third quarter of 1994. Provisions for loan
and real estate losses during the first nine months of 1995 and 1994 were
$139 million and $165 million, respectively. The level of loan and real
estate loss provisions in 1995 reflects a slower rate of deterioration in the
real estate market and a declining level of nonperforming real estate loans.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
HIGHLIGHTS (Dollars in thousands, except per share)
For the three months ended
September 30 1995 1994
- --------------------------
<S> <C> <C>
Net interest income $ 333,599 $ 330,768
Net earnings 68,535 57,230
Fully diluted earnings
per common share $.45 $.38
New loan volume 2,204,741 2,614,023
Increase (decrease) in customer accounts 185,212 (801,559)
Mortgage sales 483,790 79,635
Interest spread
Yield on interest earning assets 7.94% 7.17%
Cost of interest bearing liabilities 4.93 3.70
Interest spread 3.01% 3.47%
For the nine months ended
September 30
- -------------------------
Net interest income $ 951,288 $ 1,002,735
Net earnings 162,455 162,560
Fully diluted earnings per common share $1.05 $1.08
New loan volume 7,487,524 7,381,102
Increase (decrease) in customer accounts 731,229 (2,124,574)
Mortgage sales 605,893 1,066,834
Interest spread
Yield on interest earning assets 7.73% 7.13%
Cost of interest bearing liabilities 4.81 3.52
Interest spread 2.92% 3.61%
At September 30
- ---------------
Total assets $44,693,014 $39,996,606
Stockholders' equity 2,654,299 2,443,806
Stockholders' equity per common share $17.27 $16.07
Tangible stockholders' equity per common share 14.83 13.11
</TABLE>
<PAGE>
<PAGE>
The Company's core business showed continued improvement in the third
quarter of 1995 compared to second quarter of 1995. Net interest income for
the third quarter of 1995 increased to $334 million from the $311 million in
the second quarter of 1995 and compared with $331 million in the third
quarter of 1994. While interest earning asset levels increased
significantly, the interest spread in the third quarter of 1995 decreased
compared with the third quarter 1994. The interest spread is expected to
widen if interest rates stabilize or continue to decline.
The following summarizes the contribution to pretax income from the
Company's principal business units:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -------------------
(Dollars in thousands) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Banking operations $ 85,221 $67,358 $189,406 $196,512
Consumer finance group 28,114 24,072 79,149 74,148
-------- ------- -------- --------
Pretax earnings 113,335 91,430 268,555 270,660
Taxes on income 44,800 34,200 106,100 108,100
-------- ------- -------- --------
Net earnings $ 68,535 $57,230 $162,455 $162,560
======== ======= ======== ========
</TABLE>
ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS
In 1995, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of" ("FAS 121"). FAS 121 establishes
accounting standards for the impairment of long-lived assets and certain
identifiable intangibles. The adoption of FAS 121 had no material impact on
the Company's financial statements. As a result of FAS 121, real estate
available for development is recorded at the lower of cost or fair value.
Real estate available for development was previously recorded at the lower
of cost or net realizable value.
<PAGE>
<PAGE>
The Company adopted Statement of Financial Accounting Standards No.
122, "Accounting for Mortgage Servicing Rights" ("FAS 122") as of April 1,
1995. FAS 122, an amendment to Statement of Financial Accounting Standards
No. 65, "Accounting for Certain Mortgage Banking Activities," requires an
entity that originates or purchases loans with the intent of selling or
securitizing such loans to capitalize the mortgage servicing rights. The
value of these servicing rights is based on the assumption that a normal
servicing fee will be received for the estimated life of the loans. The
adoption of FAS 122 did not have a material effect on the Company's financial
condition or results of operations.
FAS 122 also requires that all capitalized mortgage servicing rights
be measured for impairment. Impairment is measured by stratifying the
underlying loans based on one or more predominant risk characteristics.
Impairment is recognized through a valuation allowance.
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 September 30, 1995 and
September 30, 1994 follows:
<TABLE>
<CAPTION>
September 30
---------------------------------
1995 1994
-------------- --------------
(Dollars in millions) Amount % Amount %
------- --- ------- ---
<S> <C> <C> <C> <C>
Loans receivable
Real estate
Residential
Single-family $24,537 58% $25,240 67%
Apartments 1,646 4 1,712 4
Commercial and other 1,395 3 1,474 4
Consumer finance 2,019 5 1,878 5
Other 499 1 401 1
------- --- ------- ---
30,096 71 30,705 81
Mortgage-backed securities 10,553 25 5,838 16
Securities 1,280 3 907 2
Investment in FHLB stock 341 1 306 1
------- --- ------- ---
$42,270 100% $37,756 100%
======= === ======= ===
/TABLE
<PAGE>
<PAGE>
Interest earning assets, primarily single-family mortgages, increased
$4.5 billion from September 30, 1994 to September 30, 1995 due to a shift in
the mix of single-family loan originations toward the Adjustable Rate
Mortgage ("ARM"). In the third quarter of 1995, interest earning assets
increased $49 million as mortgage sales limited growth in earning assets.
ARMs are held in the Company's portfolio, whereas, fixed-rate loans are sold
shortly after origination. In the fourth quarter of 1994 and the first
quarter of 1995, the Company swapped $5.2 billion of single-family
residential ARM loans for mortgage-backed securities to provide collateral
for borrowings. These securities are recorded in the Company's held-to-
maturity portfolio and are subject to full credit recourse.
The Company repurchases delinquent loans which were sold with recourse.
Repurchased loans totaled $82.8 million in the nine months ended September
30, 1995 compared with $499 million in the nine months ended September 30,
1994 which included $437 million of loans repurchased for investment.
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 ARM for single-family residential properties ("SFRs") is the
primary lending product held for investment. Approximately 77% of loans in
the portfolio were indexed to the 11th District Federal Home Loan Bank of San
Francisco ("FHLB") Cost of Funds Index ("COFI") at September 30, 1995. The
Company also originates ARM products which are indexed to one-year Treasury
bills, the prime rate and the Federal Cost of Funds Index ("FCOFI"). The
FCOFI 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. In March 1995, the Company introduced a new
product, the London Interbank Offered Rate ("LIBOR") Annual Monthly Average
("LAMA") ARM. The LAMA ARM is indexed to a 12 month average of the Federal
National Mortgage Association ("FNMA") One Month LIBOR. The FCOFI and LAMA
ARMs are similar to the COFI ARM product with respect to interest-rate caps
and payment changes. At September 30, 1995, ARMs comprised 95.5% of the
mortgage portfolio. A significant portion of the ARM portfolio is subject
to lifetime interest-rate caps and floors as well as periodic interest-rate
caps. At September 30, 1995, $1.7 billion of ARMs with an average yield of
7.33% had reached their periodic cap rate. Without the cap, the average
yield on these loans would have been 7.75%. Periodic interest-rate caps are
generally in effect for three years. At September 30, 1995, $229 million of
ARMs with an average yield of 8.53% had reached their floor rate. Without
the floor, the average yield on these loans would have been 7.91%. The
benefit to interest income from real estate loans which have reached their
floor interest rate was approximately $2.8 million for the nine months ended
September 30, 1995 compared with $46.7 million in the same period of last
year.
<PAGE>
<PAGE>
A significant source of loan originations includes wholesale brokers
and a network of correspondent relationships in which the Company purchases
loans originated by unaffiliated mortgage lenders. In the third quarter of
1995, third party originations were $372 million, or 22.7% of the new real
estate loans compared with $442 million, or 26% of new real estate loans in
the second quarter of 1995, and $1.1 billion, or 43.1% in the first quarter
of 1995.
The composition of new loan volume was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------- September 30
September 30 June 30 September 30 -----------------
(Dollars in millions) 1995 1995 1994 1995 1994
------------ ------- ------------ ---- ----
<S> <C> <C> <C> <C> <C>
Real estate loans $1,635 $1,700 $2,063 $5,835 $5,769
Consumer loans 570 571 551 1,653 1,612
------ ------ ------ ------ ------
Total new loan volume $2,205 $2,271 $2,614 $7,488 $7,381
====== ====== ====== ====== ======
</TABLE>
The composition of real estate loan originations by type was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 June 30 September 30 September 30
1995 1995 1994 1995 1994
------------ ------- ------------ ---- ----
<S> <C> <C> <C> <C> <C>
ARM
COFI 28% 55% 90% 64% 74%
LAMA 37 31 - 19 -
FCOFI - 1 1 1 1
T-Bill 1 - 2 1 8
Other 2 3 2 2 2
--- --- --- --- ---
Total ARM 68 90 95 87 85
Fixed rate 32 10 5 13 15
--- --- --- --- ---
100% 100% 100% 100% 100%
=== === === === ===
Refinances, included above 42% 32% 36% 35% 47%
=== === === === ===
/TABLE
<PAGE>
<PAGE>
Fixed-rate lending tends to increase during periods of relatively low
interest rates. Such loans are originated exclusively for sale. The
portfolio of fixed-rate loans designated as available for sale has been
recorded at the lower of cost or fair value. The Company sells loans forward
into the secondary market and, as fixed-rate commitments increase to a
significant level, 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. At
September 30, 1995, there were no open hedge contracts due to the relatively
low level of fixed-rate commitments.
During the third quarter of 1995, ARMs comprised 68% of total real
estate loan originations compared with 95% in the same period of 1994 and 90%
for the second quarter of 1995. COFI ARMs were the primary adjustable rate
offering in 1995 and 1994. The ARM differential over the appropriate indices
on new ARMs was 2.58% in the third quarter of 1995 compared with 2.59% a year
ago. The ARM differential on the total ARM real estate loan portfolio was
2.48% at September 30, 1995 and 2.44% at September 30, 1994. If interest
rates continue to decline, it is expected that the demand for fixed-rate
loans would continue to increase.
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>
September 30, 1995 4.776% 5.111% 6.254% .335% 1.478%
June 30, 1995 4.815 5.179 6.352 .364 1.537
March 31, 1995 4.580 5.007 6.336 .427 1.756
December 31, 1994 4.019 4.589 5.971 .570 1.952
September 30, 1994 3.534 4.039 5.562 .505 2.028
</TABLE>
<PAGE>
<PAGE>
The contractual maturities of all loans receivable and mortgage-backed
securities as of September 30, 1995 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 $ 393 $ 49 $ 126 $275 $ 780 $ 1,623
Over one to two years 606 40 134 77 546 1,403
Over two to three years 722 54 143 24 396 1,339
Over three to five years 1,169 155 316 39 167 1,846
Over five to ten years 3,322 422 977 106 475 5,302
Over ten to fifteen years 4,217 139 1,327 54 152 5,889
Over fifteen years 16,031 259 6,941 14 2 23,247
------- ------ ------- ---- ------ -------
$26,460 $1,118 $ 9,964 $589 $2,518 $40,649
======= ====== ======= ==== ====== =======
</TABLE>
<PAGE>
<PAGE>
INTEREST BEARING LIABILITIES
The composition of interest bearing liabilities at September 30, 1995
and September 30, 1994 follows:
<TABLE>
<CAPTION>
September 30
-------------------------------
1995 1994
------------- -------------
(Dollars in millions) Amount % Amount %
------ --- ------ ---
<S> <C> <C> <C> <C>
Customer accounts
Retail accounts
Term $17,675 43% $16,245 44%
Transaction 11,209 28 12,801 35
Wholesale accounts 548 1 361 1
------- --- ------- ---
29,432 72 29,407 80
------- --- ------- ---
Borrowings
FHLB 115 - 287 1
Securities sold under
agreements to repurchase 7,253 18 3,817 10
Other 4,224 10 3,166 9
------- --- ------- ---
11,592 28 7,270 20
------- --- ------- ---
Total interest bearing liabilities $41,024 100% $36,677 100%
======= === ======= ===
/TABLE
<PAGE>
<PAGE>
Borrowings at September 30, 1995 increased $4.3 billion compared with
the same period last year, primarily securities sold under agreements to
repurchase. The level of borrowings is influenced by customer account
activity, deposit acquisitions and changes in assets. Customer accounts and
borrowings have been utilized during the first nine months of 1995 to fund
asset growth. In 1994, borrowings were the primary source of funds for asset
growth.
The following table shows the components of the change in customer
account balances:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
(Dollars in millions) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Transaction
Demand accounts $127 $(151) $ (196) $ (34)
Money market and other
transaction accounts (4) (457) (608) (543)
Certificates of deposit 79 (104) 1,551 (1,321)
Wholesale accounts (17) (90) (16) (227)
--- ----- ------ -------
$185 $(802) $ 731 $(2,125)
==== ===== ====== =======
</TABLE>
The Company concentrates its retail deposit-gathering activity in two
states: California and Florida.
Certificates of deposit have increased in each of the past four
quarters. Customers have shifted from money market accounts as a result of
higher interest rates offered on certificate of deposit accounts.
A summary of customer certificates of deposit by interest rate and
maturity as of September 30, 1995 follows:
<TABLE>
<CAPTION>
90 Days 180 Days One Year Two Years
Within to to to to Three Years September 30 December 31 September 30
(Dollars in millions) 90 Days 180 Days One Year Two Years Three Years and Over 1995 1994 1994
------- -------- -------- --------- ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Under 4% $ 231 $ 48 $ 22 $ 19 $ 2 $ 10 $ 332 $ 3,745 $ 6,651
4 to 6% 3,163 2,537 2,572 2,204 400 299 11,175 9,363 8,001
6 to 8% 1,569 1,155 1,423 1,649 75 434 6,305 3,197 1,582
Over 8% 9 2 4 185 1 5 206 225 225
------ ------ ------ ------ ---- ---- ------- ------- -------
$4,972 $3,742 $4,021 $4,057 $478 $748 $18,018 $16,530 $16,459
====== ====== ====== ====== ==== ==== ======= ======= =======
$100,000 accounts
included above $ 379 $ 105 $ 69 $ 21 $ 2 $ 5 $ 581 $748 $656
/TABLE
<PAGE>
<PAGE>
INTEREST SPREAD AND NET INTEREST INCOME
While average interest earning assets have increased during the past
year, the interest spread has decreased as interest rates have risen from the
third quarter 1994 compared with the second quarter 1995. In the third
quarter of 1995, the interest spread has increased compared with the second
quarter of 1995, as interest rates have stabilized. Net interest income
increased to $334 million in the third quarter of 1995 compared with $311
million in the second quarter of 1995. Net interest income was $331 million
in the third quarter of 1994. 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 3.25% at September 30, 1995 compared
with 3.47% a year ago. The interest spread for the 1995 third quarter was
3.01% compared with 2.83% in the second quarter and 3.47% in the 1994 third
quarter. The interest spread for the first nine months of 1995 was 2.92%
compared with 3.61% in the same 1994 period. The repricing lag on COFI,
FCOFI and LAMA ARMs increased the interest spread by approximately 2 basis
points in the third quarter of 1995 compared with a reduction of 12 basis
points in the third quarter of 1994. For the second quarter of 1995, the
repricing lag accounted for a decrease of approximately 10 basis points to
the interest spread. The interest spread generally widens in a declining
interest rate environment as decreases in COFI and FCOFI, to which most
interest earning assets are tied, lag behind deposit and borrowing rate
decreases.
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:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended September 30
-------------------------------------------------------
1995 1994
-------------------------- --------------------------
Average Average Average Average
(Dollars in millions) Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets
Securities $ 1,594 $ 27 6.79% $ 1,085 $ 17 6.51%
Mortgage-backed securities 10,735 197 7.33 3,877 55 5.69
Loans receivable
Real estate 27,424 513 7.49 29,683 497 6.69
Consumer 2,497 102 16.34 2,259 92 16.28
------- ---- ----- ------- ---- -----
Total interest earning assets 42,250 839 7.94 36,904 661 7.17
Other assets 2,353 2,197
------- -------
Total assets $44,603 $39,101
======= =======
Interest bearing liabilities
Customer accounts
Term accounts $18,033 260 5.76 $16,500 177 4.29
Transaction accounts 11,354 57 2.01 13,254 58 1.77
------- ---- ----- ------- ---- -----
29,387 317 4.31 29,754 235 3.17
Borrowings
FHLB 115 1 5.16 454 7 6.39
Other 11,488 187 6.53 5,545 88 6.34
------- ---- ----- ------- ---- -----
Total interest bearing liabilities 40,990 505 4.93 35,753 330 3.70
Other liabilities 992 921
Stockholders' equity 2,621 2,427
------- -------
Total liabilities and equity $44,603 $39,101
======= =======
Interest spread 3.01% 3.47%
====
Effective yield summary
Interest income/interest earning assets $42,250 $839 7.94% $36,904 $661 7.17%
Interest expense/interest earning assets 42,250 505 4.79 36,904 330 3.58
---- ----- ---- -----
Net yield on interest earning assets $334 3.15% $331 3.59%
==== ==== ==== ====
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended September 30
-------------------------------------------------------
1995 1994
-------------------------- --------------------------
Average Average Average Average
(Dollars in millions) Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets
Securities $ 1,527 $ 72 6.31% $ 1,073 $ 43 5.35%
Mortgage-backed securities 10,576 564 7.10 3,421 144 5.62
Loans receivable
Real estate 26,899 1,470 7.28 29,268 1,460 6.65
Consumer 2,466 298 16.14 2,233 278 16.58
------- ------ ----- ------- ------ -----
Total interest earning assets 41,468 2,404 7.73 35,995 1,925 7.13
Other assets 2,335 2,269
------- -------
Total assets $43,803 $38,264
======= =======
Interest bearing liabilities
Customer accounts
Term accounts $17,724 737 5.55 $17,040 518 4.05
Transaction accounts 11,466 166 1.93 13,441 179 1.78
------- ------ ----- ------- ------ -----
29,190 903 4.13 30,481 697 3.05
Borrowings
FHLB 134 6 5.33 342 15 5.91
Other 10,956 544 6.62 4,084 210 6.86
------- ------ ----- ------- ------ -----
Total interest bearing liabilities 40,280 1,453 4.81 34,907 922 3.52
Other liabilities 957 935
Stockholders' equity 2,566 2,422
------- -------
Total liabilities and equity $43,803 $38,264
======= =======
Interest spread 2.92% 3.61%
==== ====
Effective yield summary
Interest income/interest earning assets $41,468 $2,404 7.73% $35,995 $1,925 7.13%
Interest expense/interest earning assets 41,468 1,453 4.67 35,995 922 3.42
------ ----- ------ -----
Net yield on interest earning assets $ 951 3.06% $1,003 3.71%
====== ==== ====== ====
/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 was $10 million for the quarter
ended September 30, 1995 compared with $10.5 million for the quarter ended
September 30, 1994. For the first nine months of 1995 and 1994, nonaccrual
interest was $29.3 million and $38.8 million, respectively.
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 both September 30,
1995 and September 30, 1994.
At September 30, 1995, mortgages totaling $2.8 billion were available
for sale, primarily mortgage-backed securities. Real estate loans available
for sale are valued at the lower of cost or fair value, generally on an
individual loan basis. As of September 30, 1995 and 1994, real estate loans
available for sale, all fixed rate, were $109 million and $73.9 million,
respectively. The increase in loans available for sale compared with the
same period a year ago resulted from higher fixed-rate loan originations in
the 1995 third quarter. During the quarter and nine months ended September
30, 1995, gains from this portfolio totaled $1.3 million and $4.4 million,
respectively, compared with $429,000 and $6.2 million in the third quarter
and nine months of 1994. Unrealized holding gains on real estate loans
available for sale totaled $720,000 at September 30, 1995 and $2.3 million
at September 30, 1994.
Mortgage-backed securities available for sale and other securities
available for sale are carried at fair value. At September 30, 1995,
mortgage-backed securities available for sale included $317 million of fixed-
rate mortgage securities and $2.4 billion of ARMs. There were no realized
gains or losses in the first nine months of 1995. Unrealized holding gains
were $25.9 million at September 30, 1995. Unrealized holding losses were
$77.3 million at December 31, 1994 and $50.6 million at September 30, 1994.
Marketable securities available for sale at September 30, 1995 had both
an amortized cost and a fair value of $1.1 billion. Gains of $23,400 were
realized during the quarter and nine months ended September 30, 1995. During
the quarter and nine months ended September 30, 1994, gains from this
portfolio totaled $22,000 and $511,000, respectively. Unrealized holding
gains on marketable securities were $3.7 million at September 30, 1995.
Unrealized holding losses were $18.3 million at December 31, 1994 and $7
million at September 30, 1994.
The unrealized holding gains and losses on securities available for
sale, net of income taxes, included as a component of stockholders' equity,
were as follows:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- September 30
September 30 June 30 March 31 ------------------
(Dollars in thousands) 1995 1995 1995 1995 1994
------------ ------- -------- ---- ----
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $20,217 $(5,921) $(55,084) $(55,084) $ 22,651
Unrealized holding gains
(losses), net of taxes (2,481) 26,138 49,163 72,820 (55,057)
------- ------- -------- -------- --------
Balance at end of period $17,736 $20,217 $ (5,921) $ 17,736 $(32,406)
======= ======= ======== ======== ========
</TABLE>
The following table shows that the portfolio of short-term assets
exceeded liabilities maturing or subject to interest adjustment within one
year by $4.5 billion, or 10.7% of interest earning assets at September 30,
1995, compared with $3.8 billion, or 9.5% of interest earning assets at
December 31, 1994, and $4.2 billion, or 11.2% of interest earning assets at
September 30, 1994. The Company is better protected against rising interest
rates with an excess of interest earning assets maturing or repricing within
one year.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Maturity/Rate Sensitivity
-----------------------------------------------------------------
September 30, 1995 % 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 6.41% $ 1,280 3 $ 1,280 $ - $ - $ -
Mortgage-backed securities 7.46 10,553 25 10,461 92 - -
Investment in FHLB stock 5.25 341 1 - - - 341
Loans receivable
Real estate
Adjustable rate 7.69 26,460 62 25,363 1,097 - -
Fixed rate
Short-term 8.91 507 1 69 109 168 161
Long-term 8.61 611 2 140 115 179 177
Consumer 15.82 2,518 6 633 1,513 279 93
----- ------- --- ------- ------- ----- ----
8.08 42,270 100 37,946 2,926 626 772
Interest bearing liabilities
Customer accounts
Regular savings 2.00 1,821 5 1,821 - - -
Checking and limited access 2.09 9,388 23 9,388 - - -
Wholesale transaction - 205 - 205 - - -
Term accounts 5.68 18,018 44 12,735 5,277 6 -
----- ------- --- ------- ------- ----- ----
4.26 29,432 72 24,149 5,277 6 -
Borrowings
FHLB 5.16 115 - 115 - - -
Other 6.28 11,477 28 9,276 1,654 499 48
Impact of interest-rate swaps - - - (109) 109 - -
----- ------- --- ------- ------- ----- ----
4.83 41,024 100 33,431 7,040 505 48
----- ------- --- ------- ------- ----- ----
Excess of interest earning
assets over interest bearing
liabilities at September 30, 1995 3.25% $ 1,246 $ 4,515 $(4,114) $ 121 $724
===== ======= ======= ======= ===== ====
Excess of interest earning
assets over interest bearing
liabilities at December 31, 1994 3.08% $ 715 $ 3,757 $(3,573) $(105) $636
===== ======= ======= ======= ===== ====
Excess of interest earning
assets over interest bearing
liabilities at September 30, 1994 3.47% $ 1,079 $ 4,213 $(3,595) $ (80) $541
===== ======= ======= ======= ===== ====
</TABLE>
<TABLE>
<CAPTION>
September 30
1995 1994
---- ----
<S> <C> <C>
Calculation of adjusted margin
Unadjusted margin 3.25% 3.47%
Benefit of net interest earning assets .14 .10
---- -----
Adjusted margin 3.39% 3.57%
==== ====
/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 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. In the first nine months of 1995 and
throughout 1994, the Company reduced reserve levels on the real estate loan
and real estate portfolios as a result of decreasing nonperforming assets and
an improving economy.
The California real estate market requires continued review. There
appear to be regional differences in economic performance within California
and among property types which are attributable to differing recovery rates
for the wide range of economic activities within California.
On a regional basis, the economic factors affecting the single-family
market appear to be somewhat more favorable in Northern California than in
Southern California. In particular, the median metropolitan area sales price
of existing single-family homes in the San Jose area increased from the
second quarter of 1994 to the second quarter of 1995 by less than 1 percent.
During the same period, the median sales price for the Los Angeles and San
Diego areas, declined 7 percent and 4 percent, respectively.
In the Los Angeles area, the vacancy rate of the office space market
was 20 percent at both June 30, 1995 and June 30, 1994. In San Diego County,
the vacancy rate was 18 percent at June 30, 1995 compared with 19 percent at
June 30, 1994.
In the Los Angeles area, the vacancy rate of the industrial space
market decreased to 8 percent at June 30, 1995 from 9 percent a year earlier.
San Diego County's industrial space market had a vacancy rate of 4 percent
at both June 30, 1995 and June 30, 1994.
Loans delinquent over 30 days, together with restructured loans, have
been included in the process to determine estimated losses. The effects of
various loan characteristics such as geography, delinquency, date of
origination, property type and loan-to-value ratios ("LTV") are considered
in this review process.
<PAGE>
<PAGE>
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>
September 30 June 30 December 31 September 30
(Dollars in millions) 1995 1995 1994 1994
------------ ------- ----------- ------------
<S> <C> <C> <C> <C>
30-59 days delinquent
SFR loans $189.4 $165.2 $168.6 $205.0
Other 6.7 3.8 24.0 13.8
60-89 days delinquent
SFR loans 95.2 91.8 90.4 95.3
Other 4.5 12.7 6.7 17.1
</TABLE>
The increase in thirty to eighty-nine day delinquencies at September
30, 1995 compared with June 30, 1995 is primarily due to in-flows of newly
delinquent single-family residential loans resulting from continuing weakness
in the Southern California economy.
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>
September 30 June 30 December 31 September 30
1995 1995 1994 1994
------------ ------- ----------- ------------
<S> <C> <C> <C> <C>
SFR loans as a percent of
total real estate loans 91.2% 91.0% 90.3% 89.6%
SFR delinquency as a percent
of total single-family
residential loans 2.2 2.2 2.6 3.0
</TABLE>
<PAGE>
<PAGE>
The Company's real estate loan portfolio included approximately $2.8
billion of uninsured single-family mortgage loans at September 30, 1995,
compared with $3.1 billion a year ago, which were originated with terms where
the LTV exceeded 80% (but not in excess of 90%). During the third quarter
of 1995, losses on the higher LTV mortgages totaled $6.9 million, or .84%
(annualized), compared with $6.1 million, or .65% (annualized), for the same
period a year ago. For the year 1994, losses totaled $24.3 million, or .59%
of such loans, compared with $44.8 million, or .81% for 1993. 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 and the balance is
declining.
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>
Impaired Loans
-------------------------------------------------------------------
Having Having
related Reserves for Net with no related
reserves estimated reserves reserves for Net of reserves
for losses losses for losses losses for losses
---------- ------------ ---------- ------------ ---------------
(Dollars in thousands) September 30, 1995
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate loans
Residential
Single-family $ 30,315 $ 6,790 $ 23,525 $ 15,682 $ 39,207
Apartments 84,770 18,624 66,146 21,611 87,757
Commercial
Offices 23,769 8,783 14,986 12,154 27,140
Retail 32,146 7,116 25,030 5,887 30,917
Hotel/motel 38,812 9,295 29,517 - 29,517
Industrial 24,400 5,520 18,880 3,022 21,902
Other 1,839 526 1,313 1,981 3,294
-------- ------- -------- -------- --------
$236,051 $56,654 $179,397 $ 60,337 $239,734
======== ======= ======== ======== ========
September 30, 1994
-------------------------------------------------------------------
Real estate loans
Residential
Single-family $ 19,970 $ 4,155 $ 15,815 $ 24,163 $ 39,978
Apartments 81,060 19,477 61,583 40,943 102,526
Commercial
Offices 38,067 9,940 28,127 19,522 47,649
Retail 22,145 4,033 18,112 13,005 31,117
Hotel/motel 18,452 3,307 15,145 65,968 81,113
Industrial 7,233 1,534 5,699 10,431 16,130
Other 5,223 1,288 3,935 1,843 5,778
-------- ------- -------- -------- --------
$192,150 $43,734 $148,416 $175,875 $324,291
======== ======= ======== ======== ========
</TABLE>
The impaired loan portfolio decreased at September 30, 1995 compared
with September 30, 1994. The decrease was primarily the result of a sale in
the fourth quarter of 1994 of a nonperforming loan with a balance of
approximately $53 million. The Company's policy for recognizing income on
impaired loans is to accrue earnings unless a loan is in foreclosure or
becomes nonperforming, at which time the accrued earnings are reversed.
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.
<PAGE>
<PAGE>
Certain loans (where GWB works with borrowers encountering economic
difficulty) meet the criteria of, and are classified as, troubled debt
restructurings ("TDRs") because of modification to loan terms. TDRs totaled
$130 million at September 30, 1995 compared with $196 million at September
30, 1994. The decrease in TDR's is primarily the result of the previously
mentioned disposition of a $53 million nonperforming loan. TDRs which meet
certain conditions of repayment and performance have not been included in
nonperforming assets. At September 30, 1995, $21 million of TDRs were
classified as performing assets compared with $18 million at September 30,
1994.
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 fair value. Real estate is also included
in the general reserve evaluation. At September 30, 1995, foreclosed real
estate properties totaling $17 million 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 owned which does not generate sufficient income to meet return on
investment criteria. The following table indicates the amount of the
Company's nonperforming assets and the ratio of nonperforming assets to total
assets:
<TABLE>
<CAPTION>
September 30 December 31 September 30
1995 1994 1994
------------- ------------- -------------
(Dollars in millions) Amount % Amount % Amount %
------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C>
Loans receivable
Real estate
Residential
Single-family $437 .98% $509 1.19% $539 1.33%
Apartments 51 .11 68 .16 75 .19
Commercial 85 .19 90 .21 165 .41
Consumer finance 24 .06 22 .05 22 .05
Other 1 - 1 - 1 -
---- ---- ---- ---- ---- ----
598 1.34 690 1.61 802 1.98
Real estate owned 164 .37 156 .37 176 .43
---- ---- ---- ---- ---- ----
Total nonperforming assets $762 1.71% $846 1.98% $978 2.41%
==== ==== ==== ==== ==== ====
/TABLE
<PAGE>
<PAGE>
The geographic distribution of the real estate loan and real estate
portfolios at September 30, 1995 follows:
<TABLE>
<CAPTION>
Oklahoma/
(Dollars in millions) Total California Florida Washington Texas Georgia Arizona Oregon Other
----- ---------- ------- ---------- -------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans
Residential
Single-family $24,537 $16,285 $1,749 $1,104 $748 $423 $351 $382 $3,495
Apartments 1,646 1,321 73 7 29 53 66 2 95
Commercial
Offices 398 353 8 16 2 4 5 - 10
Retail 251 213 18 9 - - 2 - 9
Hotel/motel 223 141 5 - 2 - 3 - 72
Industrial 321 273 13 3 13 3 4 - 12
Other 202 149 17 4 1 1 11 3 16
------- ------- ------ ------ ---- ---- ---- ---- ------
27,578 18,735 1,883 1,143 795 484 442 387 3,709
------- ------- ------ ------ ---- ---- ---- ---- ------
Real estate available
for sale, net
Acquired through
foreclosure 176 154 16 1 1 - - - 4
Other 12 11 1 - - - - - -
Property development 45 45 - - - - - - -
------- ------- ------ ------ ---- ---- ---- ---- ------
233 210 17 1 1 - - - 4
------- ------- ------ ------ ---- ---- ---- ---- ------
Total real estate loans
and real estate $27,811 $18,945 $1,900 $1,144 $796 $484 $442 $387 $3,713
======= ======= ====== ====== === ==== ==== ==== ======
Percent of total 100.0% 68.1% 6.8% 4.1% 2.9% 1.7% 1.6% 1.4% 13.4%
</TABLE>
The geographic distribution of nonperforming real estate loans and real
estate at September 30, 1995 follows:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Oklahoma/
(Dollars in millions) Total California Florida Washington Texas Georgia Arizona Oregon Other
----- ---------- ------- ---------- -------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans
Residential
Single-family $438 $360 $19 $ 4 $ 6 $ 4 $ 2 $ 2 $41
Apartments 51 35 1 1 3 4 - - 7
Commercial
Offices 16 16 - - - - - - -
Retail 29 24 - 5 - - - - -
Hotel/motel 24 24 - - - - - - -
Industrial 11 10 1 - - - - - -
Other 4 2 1 - - - 1 - -
---- ---- --- --- --- --- --- --- ---
573 471 22 10 9 8 3 2 48
---- ---- --- --- --- --- --- --- ---
Real estate
Residential
Single-family 113 106 2 1 1 - - - 3
Apartments 28 28 - - - - - - -
Commercial
Offices 9 8 1 - - - - - -
Retail 4 3 1 - - - - - -
Industrial 3 3 - - - - - - -
Other 7 5 1 - - - - - 1
---- ---- --- --- --- --- --- --- ---
164 153 5 1 1 - - - 4
---- ---- --- --- --- --- --- --- ---
Total nonperforming real
estate loans and real
estate $737 $624 $27 $11 $10 $ 8 $ 3 $ 2 $52
==== ==== === === === === === === ===
Percent of total 100.0% 84.7% 3.7% 1.5% 1.3% 1.1% .4% .3% 7.0%
/TABLE
<PAGE>
<PAGE>
A comparison of the California real estate loan and real estate
portfolios and nonperforming real estate loans and real estate by region at
September 30, 1995 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 $16,285 $360 2.2 $4,967 $ 70 1.4
Apartments 1,321 35 2.6 161 3 1.9
Commercial
Offices 353 16 4.5 75 11 14.7
Retail 213 24 11.3 50 1 2.0
Hotel/motel 141 24 17.0 45 - -
Industrial 273 10 3.7 44 4 9.1
Other 149 2 1.3 50 - -
------- ---- ----- ------ ---- -----
18,735 471 2.5 5,392 89 1.7
------- ---- ----- ------ ---- -----
Real estate
Residential
Single-family 106 106 100.0 16 16 100.0
Apartments 29 28 96.6 2 2 100.0
Commercial
Offices 11 8 72.7 2 2 100.0
Retail 5 3 60.0 - - -
Industrial 3 3 100.0 - - -
Other 56 5 8.9 20 - -
------- ---- ----- ------ ---- -----
210 153 72.9 40 20 50.0
------- ---- ----- ------ ---- -----
Total real estate loans
and real estate $18,945 $624 3.3 $5,432 $109 2.0
======= ==== ==== ====== ==== =====
<PAGE>
<PAGE>
</TABLE>
<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 $1,346 $16 1.2 $ 9,972 $274 2.7
Apartments 238 6 2.5 922 26 2.8
Commercial
Offices 40 1 2.5 238 4 1.7
Retail 28 8 28.6 135 15 11.1
Hotel/motel 27 3 11.1 69 21 30.4
Industrial 15 - - 214 6 2.8
Other 18 - - 81 2 2.5
------ --- ----- ------- ---- -----
1,712 34 2.0 11,631 348 3.0
------ --- ----- ------- ---- -----
Real estate
Residential
Single-family 4 4 100.0 86 86 100.0
Apartments 7 7 100.0 20 19 95.0
Commercial
Offices 2 - - 7 6 85.7
Retail - - - 5 3 60.0
Industrial - - - 3 3 100.0
Other 11 - - 25 5 20.0
------ --- ----- ------- ---- -----
24 11 45.8 146 122 83.6
------ --- ----- ------- ---- -----
Total real estate loans
and real estate $1,736 $45 2.6 $11,777 $470 4.0
====== === ==== ======= ==== =====
</TABLE>
Nonperforming real estate loans and real estate remained relatively
unchanged during the third quarter of 1995. Total nonperforming
single-family residential properties increased $16 million in the third
quarter of 1995 due primarily to a slower rate of sales of foreclosed
residential properties. Nonperforming single-family residential properties
in California increased $9 million and out of state properties increased $7
million. Nonperforming commercial and apartment properties declined $15
million in the third quarter of 1995 as sales of commercial and apartment
properties outpaced new delinquencies.
In the third quarter of 1995, bulk sales of foreclosed single-family
properties totaled $47.8 million compared with $68.5 million in the second
quarter of 1995 and $69.8 million in the third quarter of 1994. In the first
nine months of 1995, bulk sales of foreclosed single-family properties
totaled $177 million compared with $225 million in the same period of 1994.
Auction sales have also been utilized to accelerate the disposition of
foreclosed properties. Foreclosures continue to occur at relatively high
levels.
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 At or For The
Three Months Ended Nine Months Ended
September 30 September 30
---------------------- ----------------------
(Dollars in thousands) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Beginning balance $391,652 $495,804 $ 438,051 $ 502,269
Provision for loss
Real estate loans
SFR 54,300 72,900 128,500 128,200
Other (20,000) (34,000) (18,000) 693
Consumer finance 11,600 10,400 31,400 28,100
Other 700 400 (4,500) (2,593)
-------- -------- --------- ---------
46,600 49,700 137,400 154,400
-------- -------- --------- ---------
Charge-offs
Real estate loans
SFR (43,664) (70,515) (146,294) (148,058)
Other (4,525) (9,909) (19,542) (27,666)
Consumer finance (15,587) (13,808) (44,220) (38,522)
Other (230) (786) (926) (1,829)
-------- -------- --------- ---------
(64,006) (95,018) (210,982) (216,075)
-------- -------- --------- ---------
Recoveries
Real estate loans
SFR 326 460 1,204 1,091
Other 26 510 446 1,200
Consumer finance 3,933 3,791 12,271 11,883
Other 31 38 172 517
-------- -------- --------- ---------
4,316 4,799 14,093 14,691
-------- -------- --------- ---------
Net charge-offs
Real estate loans
SFR (43,338) (70,055) (145,090) (146,967)
Other (4,499) (9,399) (19,096) (26,466)
Consumer finance (11,654) (10,017) (31,949) (26,639)
Other (199) (748) (754) (1,312)
-------- -------- --------- ---------
(59,690) (90,219) (196,889) (201,384)
-------- -------- --------- ---------
Ending balance $378,562 $455,285 $ 378,562 $ 455,285
======== ======== ========= =========
Ratio of net charge-offs
(annualized) to average
portfolios
Real estate loans
SFR .55% 1.04% .63% .75%
Other .59 1.17 .82 1.07
Consumer finance 2.32 2.14 2.14 1.92
Other .16 .77 .21 .45
----- ----- ----- -----
.65% 1.11% .73% .85%
===== ===== ===== =====
/TABLE
<PAGE>
<PAGE>
As a result of the Company's review of reserve levels which showed an
excess of commercial and apartment loan reserves, the Company reduced the
Other real estate loans provision for losses by $20 million in the third
quarter of 1995. Provisions for losses on the leasing portfolio, included
in Other loan loss provisions, for the nine month period ending September 30,
1995, decreased as a result of the reversal of a $6 million reserve
originally established for expected losses which did not materialize.
Charge-offs on SFRs in the third quarter of 1994 included approximately $27
million of writedowns to estimated fair value for real estate loans
previously foreclosed.
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>
September 30
---------------------------------
1995 1994
-------------- --------------
(Dollars in millions) Amount % Amount %
------ --- ------ ---
<S> <C> <C> <C> <C>
Real estate loans
SFR $172 .55% $193 .70%
Commercial and other 148 4.87 199 6.23
Consumer finance 53 2.61 51 2.73
Other 6 1.11 12 2.98
---- ---- ---- ----
Total $379 1.02% $455 1.38%
==== ==== ==== ====
</TABLE>
A summary of real estate reserve activity by real estate type follows:
<TABLE>
<CAPTION>
At or For The At or For The
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
(Dollars in millions) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Beginning balance
SFR $ 3 $ 5 $ 3 $ 5
Commercial and other 63 100 74 119
--- ---- ---- ----
66 105 77 124
Provision for losses
SFR - 2 - 8
Commercial and other - - 1 3
--- ---- ---- ----
- 2 1 11
Net charge-offs
SFR (1) (2) (1) (8)
Commercial and other (1) (6) (13) (28)
--- ---- ---- ----
(2) (8) (14) (36)
Ending balance
SFR 2 5 2 5
Commercial and other 62 94 62 94
--- ---- ---- ----
$64 $ 99 $ 64 $ 99
=== ==== ==== ====
/TABLE
<PAGE>
<PAGE>
OPERATIONS
Net interest income totaled $334 million in the third quarter of 1995
compared with $331 million in the third quarter of 1994. For the nine months
ending September 30, 1995 and 1994, net interest income totaled $951 million
and $1 billion, respectively. The following table shows the components of the
changein net interest income between periods.
<TABLE>
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
------------------------------- ------------------------------
(Dollars in millions) 1995 vs 1994 1994 vs 1993 1995 vs 1994 1994 vs 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Mortgage-backed securities
Rate (1) $ 18 $ (5) $ 38 $ (19)
Volume (2) 92 19 302 25
Rate/Volume (3) 32 (3) 80 (4)
---- ---- ----- -----
142 11 420 2
---- ---- ----- -----
Real estate loans
Rate (1) 59 (12) 139 (73)
Volume (2) (38) 2 (118) (10)
Rate/Volume (3) (5) (1) (11) -
---- ---- ----- -----
16 (11) 10 (83)
---- ---- ----- -----
Consumer loans
Rate (1) - (7) (8) (10)
Volume (2) 10 - 29 (8)
Rate/Volume (3) - 1 (1) 1
---- ---- ----- -----
10 (6) 20 (17)
---- ---- ----- -----
Securities and investments
Rate (1) 2 (1) 8 (10)
Volume (2) 8 2 18 6
Rate/Volume (3) - - 3 (1)
---- ---- ----- -----
10 1 29 (5)
---- ---- ----- -----
Interest earning assets
Rate 79 (25) 177 (112)
Volume 72 23 231 13
Rate/Volume 27 (3) 71 (4)
---- ---- ----- -----
178 (5) 479 (103)
---- ---- ----- -----
Customer accounts
Rate (1) 87 (1) 246 (48)
Volume (2) (4) 10 (30) 33
Rate/Volume (3) (1) - (10) (2)
---- ---- ----- -----
82 9 206 (17)
---- ---- ----- -----
Borrowings
Rate (1) 3 (3) (6) 13
Volume (2) 77 - 340 (56)
Rate/Volume (3) 13 2 (9) (3)
---- ---- ----- -----
93 (1) 325 (46)
---- ---- ----- -----
Interest bearing liabilities
Rate 90 (4) 240 (35)
Volume 73 10 310 (23)
Rate/Volume 12 2 (19) (5)
---- ---- ----- -----
175 8 531 (63)
---- ---- ----- -----
Change in net interest income $ 3 $(13) $ (52) $ (40)
==== ==== ===== =====
</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 $63.2 million for the nine months
ended September 30, 1995 compared with $68.1 million for the nine months
ended September 30, 1994. The decrease in income was attributed to both
lower loan fees and lower gains on mortgage sales. Gains on mortgage sales
decreased as a result of lower sales activity. Mortgage sales in the first
nine months of 1995, all fixed rate, totaled $606 million, at a gain of .72%
of mortgage sales, compared with $1.1 billion in the first nine months of
last year at a gain of .58% of mortgage sales. The increased gain as a
percentage of mortgage sales was a result of the adoption of FAS 122. As a
result of the adoption of FAS 122, the amount of servicing capitalized in
1995 and included in gain on mortgage sales was $3.5 million. At September
30, 1995, the servicing spread was 42 basis points on the $10.8 billion
servicing portfolio compared with a servicing spread of 43 basis points on
an $11.3 billion portfolio at September 30, 1994.
Retail banking fee and commission income decreased from $136 million
in the nine months ended September 30, 1994 to $127 million in the nine
months ended September 30, 1995. Banking fees increased to $114 million in
the first nine months of 1995 compared with $105 million in the same period
last year due to an increase in customer transaction activity and in branch
related fee activity. Income from mutual fund operations has declined since
the second quarter 1994, as product mix shifted from mutual funds and
annuities to individual bonds which generate lower commissions. Net revenue
from these operations totaled $13.4 million in the nine months ended
September 30, 1995 compared with $31.3 million in the same period of 1994.
The Company managed mutual funds with assets aggregating $3.2 billion at
September 30, 1995 and September 30, 1994.
Other income was $30.7 million for the nine months ended September 30,
1995 compared with $29.2 million for the same period a year ago. For the
third quarter, other income was $10.4 million compared with $9.2 million for
the 1994 third quarter.
<PAGE>
<PAGE>
Operating expenses were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
(Dollars in millions) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Salaries and related personnel $106 $118 $338 $358
Premises and occupancy 44 48 136 152
FDIC insurance premiums 17 20 50 58
Advertising and promotion 9 10 26 30
Other 63 51 187 148
---- ---- ---- ----
$239 $247 $737 $746
==== ==== ==== ====
</TABLE>
The decline in operating expenses in the first nine months of 1995 from
the same period last year is a result of the on-going cost containment
program. The workforce has declined by approximately 1,000 positions in the
first nine months of 1995. Other operating expenses increased 26 percent
from the third quarter of 1994 to the third quarter of 1995, and increased
26 percent in the first nine months of 1995 compared with the same period
last year. The following summarizes the composition of other operating
expenses:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
(Dollars in millions) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Outside data processing $17 $ 8 $ 47 $ 24
Communications 11 10 35 28
Branch losses 6 4 14 9
Office supplies 5 4 13 13
Postage 3 5 10 14
Insurance 2 3 8 9
Other 19 17 60 51
--- --- ---- ----
$63 $51 $187 $148
=== === ==== ====
</TABLE>
<PAGE>
<PAGE>
The operating ratios were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating and administrative expenses
(annualized)
As a percent of average assets
Corporate 2.14% 2.52% 2.24% 2.60%
Banking operations 1.97 2.33 2.06 2.39
As a percent of average assets
and assets serviced for others
Corporate 1.73 1.95 1.80 1.98
Banking operations 1.57 1.78 1.63 1.80
As a percent of average retail
deposits
Banking operations 2.91 2.95 3.01 2.90
As a percent of revenue
Corporate 60.79 63.70 65.42 63.19
Banking operations 64.19 66.65 69.32 65.82
</TABLE>
The following table presents net earnings (annualized) as a percent of
average assets and as a percent of average equity:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Return on average assets .61% .59% .49% .57%
Return on average equity 10.46 9.43 8.44 8.95
</TABLE>
The Company's effective tax rate for the nine months of 1995 decreased
due to the reversal of certain tax liabilities no longer required. As a
result, the Company's effective tax rate was 39.5% in the first nine months
of 1995 and 39.9% in the same period of 1994.
<PAGE>
<PAGE>
DEPOSIT INSURANCE PREMIUMS
The Federal Deposit Insurance Corporation (the "FDIC") has adopted a
new Bank Insurance Fund (the "BIF") assessment schedule which reduces the
average BIF deposit insurance premium assessment to 4.4 cents per $100 of
domestic deposits. At the same time the FDIC has continued the current
Savings Association Insurance Fund (the "SAIF") assessment schedule of
premiums which range from 23 cents per $100 of domestic deposits to 31 cents
per $100 of domestic deposits, depending on risk classification, because it
is expected that the SAIF reserves will not reach the required level for a
number of years absent Congressional action to provide additional funding.
Such a deposit insurance premium disparity could place SAIF-insured
institutions, such as GWB, at a competitive disadvantage with commercial
banks and other BIF-insured institutions. GWB's current assessment rate is
23 cents per $100 of domestic SAIF-insured deposits. A small portion ($448
million or 1.5%) of GWB's deposits are insured by the BIF.
Bills presently being considered in Congress, if adopted into law,
would recapitalize the SAIF to the required level of 1.25% of insured
deposits by levying a one time assessment of roughly 85 cents per $100 of
domestic deposits held by SAIF-insured institutions and could be payable in
the fourth quarter of 1995 or early 1996. If the assessment is made at the
proposed rate, the effect on GWB would be a pretax charge of approximately
$250 million, or $150 million after tax. Should this occur, the Company may
issue debt, equity or hybrid securities and contribute capital to GWB to
enable it to remain a well-capitalized institution. Upon recapitalization
of the SAIF, it would be expected that the SAIF deposit insurance premiums
would be reduced from their current level.
Earlier in 1995, GWFC submitted applications to federal bank regulators
seeking the creation of two new national banks in California and Florida in
the effort to reduce the competitive disadvantage which could be caused by
a deposit insurance premium disparity. Both of the proposed national banks
would be insured by the Federal Deposit Insurance Corporation through the BIF
and would allow the Company to offer a wide variety of banking products and
services to its present and future customers. GWFC would also be required
to file an application with the Federal Reserve to become a bank holding
company. If the applications are approved, GWFC would operate the banks at
existing branch locations and it is anticipated that a portion of GWB's
present deposit base would voluntarily flow to the national banks. The bank
applications require the approval of the Office of the Comptroller of the
Currency and the FDIC. The bank holding company application would require
the approval of the Federal Reseve Board.
CAPITAL RESOURCES AND LIQUIDITY
Capital (stockholders' equity) was $2.7 billion at September 30, 1995
and $2.4 billion at September 30, 1994. At the end of the 1995 third
quarter, the ratio of capital to total assets was 5.9% compared with 6.1% a
year ago.
<PAGE>
<PAGE>
GWB is subject to certain capital requirements under applicable
regulations and meets all such requirements. At September 30, 1995, GWB's
capital was $2.8 billion, including eligible subordinated notes of $373
million.
The following ratios 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 $2,197 5.22 $1,264 3.00 $933
Risk-based ratio 2,820 11.60 1,945 8.00 875
</TABLE>
The OTS amended its risk-based capital rules to incorporate interest-
rate risk ("IRR") requirements which require a savings association to hold
additional capital if it is projected to experience an excessive decline in
"net portfolio value" in the event interest rates increase or decrease by two
percentage points. The additional capital required is equal to one-half of
the amount by which any decline in net portfolio value exceeds 2 percent of
the savings association's total net portfolio value. GWB does not expect the
interest-rate risk requirements to have a material impact on its required
capital levels.
The OTS has proposed to amend its capital rule on the leverage ratio
requirement to reflect amendments made by the 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 maintain leverage ratios of at
least 4%. Only savings associations rated composite 1 under the OTS CAMEL
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 September 30, 1995, real estate loan commitments totaled $894
million compared with $882 million at December 31, 1994 and $846 million at
September 30, 1994. These commitments included $687 million of ARMs and $207
million at fixed rates at September 30, 1995. The Company has several
sources for raising funds for lending, among which are mortgage repayments,
mortgage sales, customer deposits, Federal Home Loan Bank borrowings and
other borrowings. The Company has utilized short term borrowings to fund
asset growth in 1994 and 1995.
The following table presents the debt ratings of the Company and GWB
at September 30, 1995:
<TABLE>
<CAPTION>
Standard Moody's Investors
& Poor's Service Fitch
------------ ----------------- -----------
GWFC GWB GWFC GWB GWFC GWB
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
Unsecured short-term debt A-2 A-2 P-2 P-1 F-1
Senior term debt BBB+ A- Baa1 A2 A- A
Subordinated term debt BBB+ A3 A-
Preferred stock BBB- Baa2 BBB
</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 originations 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.
As presented in the Consolidated Condensed Statement of Cash Flows, the
sources of liquidity vary between quarters. The primary source of funds in
the third quarter of 1995 was principal payments on loans held for investment
of $1.5 billion. New loans originated for investment required $1.6 billion
in the third quarter of 1995. Operating activities provided $47 million in
the current quarter.
<PAGE>
<PAGE>
The Company continued to maintain liquidity balances each period in
excess of funding and legal requirements. Cash and securities totaled $2.2
billion at September 30, 1995 and $1.8 billion at September 30, 1994.
DIVIDENDS
Quarterly cash dividends have been paid since 1977. At its July 1995
meeting, the Board of Directors declared a quarterly cash dividend of $.23
per common share payable in August 1995. The quarterly cash dividend has
been paid at this level since the second quarter of 1992.
In the third quarter of 1995, 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 third quarter and
the first nine months of 1995, reinvested dividends totaled $11 million and
$34.5 million, respectively.
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 third quarter of 1995, cash dividends received from GWB and Aristar
totaled $32.8 million and $7.5 million, respectively. In the first nine
months of 1995, cash dividends received were $38.5 million from GWB, $22.5
million from Aristar and $4.5 million from other subsidiaries. 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 establish 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)
<PAGE>
<PAGE>
at the beginning of 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 Nine Months Ended
September 30 September 30
------------------------- -------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary 137,690,681 134,301,424 136,466,836 133,677,823
Fully diluted 138,125,045 140,643,336 137,323,937 140,221,438
</TABLE>
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 5. OTHER INFORMATION
- --------------------------
ANNUAL MEETING ADVANCE NOTICE REQUIREMENTS
The Company's bylaws presently provide that shareholder nominations of
directors may be made and other business may be brought before the annual
meeting by shareholders only in compliance with certain advance notice and
informational requirements and any other applicable requirements.
The bylaws provide that the annual meeting of shareholders of the
Company shall be held on the fourth Tuesday in April in each year or on such
other date as the Board of Directors may designate. In order to be timely,
a shareholder's notice of director nominations or of business to be brought
before the annual meeting must be delivered to or mailed and received by the
Secretary of the Company at 9200 Oakdale Avenue, Chatsworth, California 91311
not less than 60 or more than 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders.
If the annual meeting is called for a date that is not within the 30
days before or after such anniversary date notice by the stockholder to be
timely must be delivered to or received by the Secretary of the Company at
the above address not later than the close of business on the 15th day
following the day on which notice of the date of the annual meeting is mailed
to shareholders or public disclosure of the date of the meeting is made,
whichever first occurs. Any scheduled meeting of the shareholders may be
postponed or cancelled by the Board of Directors by giving public notice
prior to the scheduled meeting.
The 1995 annual meeting of shareholders was held on April 25, 1995.
Accordingly, unless the 1996 annual meeting is called for a date before March
26, 1996 or after May 25, 1996, a shareholder's notice of director
nominations or of business to be brought before the 1996 annual meeting must
be delivered to or mailed and received by the Secretary of the Company
between January 26, 1996 and February 25, 1996.
A shareholder's notice of director nominations or of business to be
brought before the annual meeting also must contain certain information
required by the bylaws of the Company. Copies of the Company's bylaws are
available upon request to the Secretary of the Company at the above address.
The present requirements described above do not supersede the
requirements or conditions established by the Securities and Exchange
Commission for shareholder proposals to be included in the Company's proxy
materials for a meeting of shareholders.
<PAGE>
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The calculation of the Company's ratio of earnings to fixed charges as
of the dates indicated follows:
<TABLE>
<CAPTION>
Nine Months Ended Twelve Months Ended Nine Months Ended
(Dollars in thousands) September 30, 1995 December 31, 1994 September 30, 1994
------------------ ------------------- ------------------
<S> <C> <C> <C>
Earnings
- --------
Net earnings $ 162,455 $ 251,234 $ 162,560
Taxes on income 106,100 155,300 108,100
---------- ---------- ----------
Earnings before taxes $ 268,555 $ 406,534 $ 270,660
========== ========== ==========
Interest expense
- ----------------
Customer accounts $ 903,312 $ 950,299 $ 697,157
Borrowings 563,869 370,044 237,629
---------- ---------- ----------
Total $1,467,181 $1,320,343 $ 934,786
========== ========== ==========
Rent expense
- ------------
Total $ 41,191 $ 55,011 $ 41,369
1/3 thereof 13,730 18,337 13,790
Capitalized interest $ - $ 196 $ 153
- --------------------
Preferred stock dividends $ 18,761 $ 25,015 $ 18,761
- -------------------------
Ratio of earnings to fixed charges
- ----------------------------------
and preferred stock dividends
-----------------------------
Excluding customer accounts
---------------------------
Earnings before fixed charges $ 846,154 $ 794,875 $ 522,079
Fixed charges 608,613 429,015 282,809
Ratio 1.39 1.85 1.85
Including customer accounts
---------------------------
Earnings before fixed charges $1,749,466 $1,745,174 $1,219,236
Fixed charges 1,511,925 1,379,314 979,966
Ratio 1.16 1.27 1.24
Ratio of earnings to fixed charges
- ----------------------------------
Excluding customer accounts
---------------------------
Earnings before fixed charges $ 846,154 $ 794,875 $ 522,079
Fixed charges 577,599 388,537 251,572
Ratio 1.46 2.05 2.08
Including customer accounts
---------------------------
Earnings before fixed charges $1,749,466 $1,745,174 $1,219,236
Fixed charges 1,480,911 1,338,836 948,729
Ratio 1.18 1.30 1.29
/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
14 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, 1994. 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 Amendment to Nonqualified Stock Option Agreement with James F.
Montgomery dated February 26, 1991
10.2 Amendment to Nonqualified Stock Option Agreement with James F.
Montgomery dated January 25, 1994
10.3 Amendment to Nonqualified Stock Option Agreement with James F.
Montgomery dated December 12, 1994
10.4 General Provisions Applicable to Performance Restricted Stock Award
Granted Under the Great Western Financial Corporation 1988 Stock Option
and Incentive Plan, as Amended, to James F. Montgomery (Revised
Effective December 28, 1995)
10.5 Supplemental Executive Retirement Plan as amended through July 25, 1995.
10.6 Employment Agreement between the Company and A. William Schenck III
dated as of July 31, 1995.
11.1 Statement re computation of per share earnings.
27.1 Financial Data Schedule
b. Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter for which this report
is filed.
<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/Barry R. Barkley
- -----------------------------------
Barry R. Barkley
Senior Vice President and
Controller
DATE: November 10, 1995
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
EXHIBIT INDEX
September 30, 1995
Exhibit Page
Number Number
- ------- ------
10.1 Amendment to Nonqualified Stock Option Agreement
dated February 26, 1991 40
10.2 Amendment to Nonqualified Stock Option Agreement
dated January 25, 1994 42
10.3 Amendment to Nonqualified Stock Option Agreement
dated December 12, 1994 44
10.4 General Provisions Applicable to Performance
Restricted Stock Award 46
10.5 Supplemental Executive Retirement Plan as amended
through July 25, 1995 57
10.6 Employment Agreements between the Company and
A. William Schenck III dated as of July 31, 1995 95
11.1 Statement re computation of per share earnings 128
27.1 Financial Data Schedule 129
<PAGE>
Exhibit 11.1
<TABLE>
<CAPTION>
GREAT WESTERN FINANCIAL CORPORATION
Computation of Net Income Per Common Share
Primary and Fully Diluted
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -------------------
(Dollars in thousands) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $68,535 $57,230 $162,455 $162,560
Preferred stock dividends - convertible
and nonconvertible (6,253) (6,253) (18,761) (18,761)
------- ------- -------- --------
Net income for computing earnings per
Common share - primary 62,282 50,977 143,694 143,799
Preferred stock dividends - convertible - 2,830 - 8,490
------- ------- -------- --------
Net income for computing earnings per
Common share - fully diluted $62,282 $53,807 $143,694 $152,289
======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Computation of Average Number of
Common Shares Outstanding on Primary and Fully Diluted Basis
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average number of Common shares outstanding
during each period - without dilution 136,156 133,420 135,355 133,088
Common share equivalents outstanding at
the end of each period 1,535 881 1,112 590
------- ------- ------- -------
Average number of Common shares and Common
share equivalents outstanding during each
period on a primary basis 137,691 134,301 136,467 133,678
Common share equivalents outstanding at
the end of each period on a fully
diluted basis 434 - 857 201
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 138,125 140,643 137,324 140,221
======= ======= ======= =======
Net income per Common share
Primary $.45 $.38 $1.05 $1.08
Fully diluted .45 .38 1.05 1.08
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000043512
<NAME> GREAT WESTERN FINANCIAL CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 849,096
<INT-BEARING-DEPOSITS> 125
<FED-FUNDS-SOLD> 287,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,759,581
<INVESTMENTS-CARRYING> 7,827,138
<INVESTMENTS-MARKET> 7,984,196
<LOANS> 30,011,786
<ALLOWANCE> 378,562
<TOTAL-ASSETS> 44,693,014
<DEPOSITS> 29,432,176
<SHORT-TERM> 9,157,900
<LIABILITIES-OTHER> 1,014,540
<LONG-TERM> 2,434,099
<COMMON> 136,633
0
294,375
<OTHER-SE> 2,223,291
<TOTAL-LIABILITIES-AND-EQUITY> 44,693,014
<INTEREST-LOAN> 1,786,025
<INTEREST-INVEST> 602,987
<INTEREST-OTHER> 32,729
<INTEREST-TOTAL> 2,421,741
<INTEREST-DEPOSIT> 903,312
<INTEREST-EXPENSE> 1,452,536
<INTEREST-INCOME-NET> 969,205
<LOAN-LOSSES> 137,400
<SECURITIES-GAINS> 4,731
<EXPENSE-OTHER> 766,530
<INCOME-PRETAX> 268,555
<INCOME-PRE-EXTRAORDINARY> 162,455
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 162,455
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.05
<YIELD-ACTUAL> 3.25
<LOANS-NON> 489,986
<LOANS-PAST> 0
<LOANS-TROUBLED> 108,790
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 438,051
<CHARGE-OFFS> 210,982
<RECOVERIES> 14,093
<ALLOWANCE-CLOSE> 378,562
<ALLOWANCE-DOMESTIC> 378,562
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
EXHIBIT 10.1
GREAT WESTERN FINANCIAL CORPORATION
AMENDMENT
TO
NONQUALIFIED STOCK OPTION AGREEMENT
WITH JAMES F. MONTGOMERY
DATED FEBRUARY 26, 1991
This Amendment between Great Western Financial Corporation, a Delaware
corporation (the "Corporation") and James F. Montgomery (the "Employee")
effectuates the changes to the subject option agreement (the "Option
Agreement") contemplated by the Amendment to Employment Agreement between the
Corporation and the Employee dated as of April 25, 1995 (the "Amendment"),
as approved by the Compensation Committee of the Board of Directors of the
Corporation. Capitalized terms used herein and not otherwise defined have
the meanings assigned to them in the Option Agreement or the Plan, as the
case may be.
This Amendment shall be effective as of 4:59 p.m. Pacific Standard
Time on December 28, 1995, but only if the Employment Agreement (as
defined in the Amendment) has not been terminated in accordance
with its terms by action of the Corporation before that time.
FOR VALID CONSIDERATION, the receipt of which is hereby acknowledged,
the parties amend the Option Agreement as follows:
1. EFFECT OF TERMINATION. Section 6 of the Option Agreement is
amended to change the caption thereof and to add a sentence at the end
thereof, as follows:
"6. EFFECT OF TERMINATION OF SERVICES OR DEATH. * * * * *
Notwithstanding the foregoing, the Option and all other rights hereunder,
with respect to 23,500 shares, shall be extended and shall not terminate nor
become null and void until two (2) years after the later of a termination of
Employee's services as a member of the Board of Directors of the Corporation
or the termination of his services as a Consultant under his Consulting
Agreement dated as of April 25, 1995, except that in no event may the Option
be exercised by anyone under this Section or otherwise after the Expiration
Date."
2. EXERCISABILITY OF OPTION. Section 3 of the Option Agreement is
amended to add a new sentence after the second sentence to read in its
entirety as follows:
"Notwithstanding the preceding vesting schedule, this Option
shall become fully exercisable as of 4:59 P.M. Pacific Standard
Time on December 28, 1995.
3. MISCELLANY. Section 12 (subsidiaries) of the Option Agreement
is deleted.
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
(a Delaware Corporation)
By J. Lance Erikson
---------------------------------
Its Executive Vice President
EMPLOYEE
James F. Montgomery
-------------------
APPROVED:
By: /s/Charles D. Miller
----------------------------
Charles D. Miller
Chairman, Compensation Committee
of the Board of Directors
<PAGE>
EXHIBIT 10.2
GREAT WESTERN FINANCIAL CORPORATION
AMENDMENT
TO
NONQUALIFIED STOCK OPTION AGREEMENT
WITH JAMES F. MONTGOMERY
DATED JANUARY 25, 1994
This Amendment between Great Western Financial Corporation, a Delaware
corporation (the "Corporation") and James F. Montgomery (the "Employee")
effectuates the changes to the subject option agreement (the "Option
Agreement") contemplated by the Amendment to Employment Agreement between the
Corporation and the Employee dated as of April 25, 1995 (the "Amendment"),
as approved by the Compensation Committee of the Board of Directors of the
Corporation. Capitalized terms used herein and not otherwise defined have
the meanings assigned to them in the Option Agreement or the Plan, as the
case may be.
This Amendment shall be effective as of 4:59 p.m. Pacific Standard
Time on December 28, 1995, but only if the Employment Agreement (as
defined in the Amendment) has not been terminated in accordance with
its terms by action of the Corporation before that time.
FOR VALID CONSIDERATION, the receipt of which is hereby acknowledged,
the parties amend the Option Agreement as follows:
1. EFFECT OF TERMINATION. Section 6 of the Option Agreement is
amended to change the caption thereof and to add a sentence at the end
thereof, as follows:
"6. EFFECT OF TERMINATION OF SERVICES OR DEATH. * * * * *
Notwithstanding the foregoing, the Option and all other rights hereunder,
with respect to 23,750 shares, shall be extended and shall not terminate nor
become null and void until two (2) years after the later of a termination of
Employee's services as a member of the Board of Directors of the Corporation
or the termination of his services as a Consultant under his Consulting
Agreement dated as of April 25, 1995, EXCEPT THANT in no event may the Option
be exercised by anyone under this Section or otherwise after the Expiration
Date."
<PAGE>
<PAGE>
2. MISCELLANY. Section 12 (subsidiaries) of the Option Agreement
is deleted.
GREAT WESTERN FINANCIAL CORPORATION
(a Delaware Corporation)
By J. Lance Erikson
-----------------------------
Its Executive Vice President
EMPLOYEE
/s/James F. Montgomery
--------------------------------
Signature
APPROVED:
By: /s/Charles D. Miller
-----------------------
Charles D. Miller
Chairman, Compensation Committee
of the Board of Directors
<PAGE>
EXHIBIT 10.3
GREAT WESTERN FINANCIAL CORPORATION
AMENDMENT
TO
NONQUALIFIED STOCK OPTION AGREEMENT
WITH JAMES F. MONTGOMERY
DATED DECEMBER 12, 1994
This Amendment between Great Western Financial Corporation, a Delaware
corporation (the "Corporation") and James F. Montgomery (the "Employee")
effectuates the changes to the subject option agreement (the "Option
Agreement") contemplated by the Amendment to Employment Agreement between the
Corporation and the Employee dated as of April 25, 1995 (the "Amendment"),
as approved by the Compensation Committee of the Board of Directors of the
Corporation. Capitalized terms used herein and not otherwise defined have
the meanings assigned to them in the Option Agreement or the Plan, as the
case may be.
This Amendment shall be effective as of 4:59 p.m. Pacific Standard
Time on December 28, 1995, but only if the Employment Agreement
(as defined in the Amendment) has not been terminated in
accordance with its terms by action of the Corporation before that
time.
FOR VALID CONSIDERATION, the receipt of which is hereby acknowledged,
the parties amend the Option Agreement as follows:
1. EFFECT OF TERMINATION. Section 6 of the Option Agreement is
amended to change the caption thereof and to add a sentence at the end
thereof, as follows:
"6. EFFECT OF TERMINATION OF SERVICES OR DEATH. * * * * *
Notwithstanding the foregoing, the Option and all other rights hereunder,
with respect to all 150,000 shares, shall be extended and shall not terminate
nor become null and void until two (2) years after the later of a termination
of Employee's services as a member of the Board of Directors of the
Corporation or the termination of his services as a Consultant under his
Consulting Agreement dated as of April 25, 1995, EXCEPT THAT in no event may
the Option be exercised by anyone under this Section or otherwise after the
Expiration Date."
2. EXERCISABILITY OF OPTION. Section 3 of the Option Agreement is
amended to add a new sentence after the second sentence to read in its
entirety as follows:
"Notwithstanding the preceding vesting schedule, this Option
shall become fully exercisable as of 4:59 P.M. Pacific Standard
Time on December 28, 1995.<PAGE>
<PAGE>
3. MISCELLANY. Section 12 (subsidiaries) of the Option Agreement is
deleted.
GREAT WESTERN FINANCIAL CORPORATION
(a Delaware Corporation)
By J. Lance Erikson
--------------------------------
Its Executive Vice President
EMPLOYEE
/s/James F. Montgomery
--------------------------------------
Signature
APPROVED:
By: Charles D. Miller
Charles D. Miller
Chairman, Compensation Committee
of the Board of Directors
<PAGE>
EXHIBIT 10.4
GENERAL PROVISIONS APPLICABLE TO PERFORMANCE
RESTRICTED STOCK AWARD GRANTED UNDER THE GREAT
WESTERN FINANCIAL CORPORATION 1988 STOCK
OPTION AND INCENTIVE PLAN, AS AMENDED
TO JAMES F. MONTGOMERY
(REVISED EFFECTIVE DECEMBER 28, 1995)
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, when executed by the parties in the space
provided below, supersede and become the General Provisions incorporated
by reference in the Award Agreement between Great Western Financial
Corporation and James F. Montgomery.
1. OWNERSHIP RIGHTS OF RESTRICTED STOCK.
(a) RESTRICTIONS ON TRNASFER. 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 7) 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 representa-
tives 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 9 (Compliance)) shall lapse, on December 31,
2000, provided that the Employee remains employed by the Company or in
service under the terms of the Consulting Agreement dated as of April 25,
1995 ("in service") until December 31, 2000 (or, in the event of a
termination described in Section 8 of the Consulting Agreement, until the
date of such termination), unless (i) the Award has earlier vested or has
been accelerated, as provided in Section 3(c) (Certain Events), Section 4
(Disability or Death), Section 5 (Acceleration for Performance) or
Section 7 (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 10 (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 9 (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. EFFECT OF TERMINATION OF SERVICES (WHETHER AS AN EMPLOYEE OR
CONSULTANT).
(a) FORFEITURE AFTER CERTAIN EVENTS. Except as provided in Section
2(a) (Section 8 Termination), Section 3(c) (Termination Without Cause
after Certain Events) and Section 4 (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 or in service, for any reason, whether with or
without cause, voluntarily or involuntarily.
(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
services to the Company (whether as a employee or consultant) are
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 Award that has not previously vested shall thereupon
vest, subject to the provisions of Section 8.
4. EFFECT OF DISABILITY OR DEATH. If the Employee incurs a
Disability or dies while employed by or in service to 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.
<PAGE>
<PAGE>
5. 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 5 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.
"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, currently those 30 institutions listed
on Schedule 1, in all cases subject to the provisions of Section 13
hereof.
<PAGE>
<PAGE>
"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 RANKING. 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 to the original General Provisions.
(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.
Percentile Ranking Percent of Award
Versus Peer Group That Accelerates
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%
<PAGE>
<PAGE>
6. CONTINUANCE OF SERVICE. The grant of an Award shall not confer
upon the Employee any right with respect to the continuation of his
employment by or service to the Corporation or any Subsidiary or alter or
interfere in any way with any rights of the Corporation or of any
Subsidiary at any time to terminate such employment or service or to
change the compensation of the Employee or other terms of his employment
or service; and neither shall these terms alter or in any way affect the
rights of the Company or the Employee under any other written agreement
between them, except as expressly provided herein.
7. 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.
8. LIMITATIONS 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 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.
<PAGE>
<PAGE>
(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 8, 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.
9. 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 Cor-
poration'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.
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.
<PAGE>
<PAGE>
10. 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.
11. 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.
12. 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.
13. 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 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
<PAGE>
<PAGE>
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>
Acknowledged: GREAT WESTERN FINANCIAL CORPORATION
James F. Montgomery By J. Lance Erikson
Its Executive Vice President
Approved as to form:
Charles D. Miller
Chairman of the Compensation Committee<PAGE>
<PAGE>
SCHEDULE 1
INITIAL PEER GROUP COMPANIES
(AS REVISED THROUGH APRIL 25, 1995)
Savings & Loans Banks
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
5 H. F. Ahmanson 5 Bankers Trust New York Corp
6 Barnett Banks
7 Chase Manhattan Corporation
8 Chemical Banking Corp
9 Citicorp
10 First Bank System
11 First Chicago Corp
12 First Fidelity Bancorp
13 First Interstate Bancorp
14 First Union Corp
15 Wachovia Corp
16 Fleet/Norstar Financial Corp
17 J. P. Morgan & Co.
18 Mellon Bank Corp
19 NationsBank Corp
20 NBD Bancorp
21 Northwest Bancorp
22 PNC Financial Corp
23 Republic NY Corp
24 Suntrust Banks
25 Wells Fargo & Co.
<PAGE>
EXHIBIT 10.5
GREAT WESTERN
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
(1988 RESTATEMENT)
THIS AGREEMENT, made and entered into effective the 1st day of January,
1988, by GREAT WESTERN FINANCIAL CORPORATION, a Delaware corporation ("Great
Western"), evidences the terms of a Supplemental Retirement Plan continuing
the plan originally effective on January 1, 1987 for qualified executives of
Great Western and Subsidiaries and superseding all arrangements with respect
to supplemental retirement benefits previously entered into between Great
Western and Anthony C. La Scala.
W I T N E S S E T H
ARTICLE I
TITLE, PURPOSE AND DEFINITIONS
1.1 - TITLE.
This plan shall be known as the "Great Western Supplemental Executive
Retirement Plan."
1.2 - PURPOSE.
The purpose of this Plan is to supplement retirement benefits payable
to certain participants in the Great Western Retirement Plan and to
compensate for Great Western Retirement Plan benefits which are reduced by
virtue of Section 415 of the Internal Revenue Code of 1986. No payment shall
be made under this Plan which duplicates a benefit payable under any other
deferred compensation plan or employment agreement provided by the Company
or a Subsidiary. This Plan was originally effective on January 1, 1987.
This Restatement is adopted effective January 1, 1988.
1.3 - DEFINITIONS.
Unless defined herein, any word, phrase or term used in this Plan with
initial capitals shall have the meaning given therefor in the Great Western
Retirement Plan ("Retirement Plan").
"Accrued Benefit" means, at any time, the Participant's Normal
Retirement Benefit at Normal Retirement Date as provided in Section 4.1
multiplied by a fraction (not to exceed one), the numerator of which is the
Participant's Years of Service at the date of calculation and the denominator
of which is the number of Years of Service projected to his Normal Retirement
Date. The calculation of Normal Retirement Benefit for this purpose shall
be based on an estimation of the Participant's Social Security Amount payable
at age 65 under the Social Security Act in effect at the time of calculation
assuming level earnings to age 65. The calculation of a Participant's
Accrued Benefit shall be based on Average Monthly Compensation as of the date
of calculation. Years of Service shall include all periods of Long-Term
Disability counted for accruing Credited Service under the Retirement Plan
and, generally, Long-Term Disability shall be treated under this Plan in a
manner parallel to its treatment under the Retirement Plan. <PAGE>
<PAGE>
"Average Monthly Compensation" means Average Monthly Compensation as
defined in the Retirement Plan with the following modifications:
a. Average Monthly Compensation shall be computed on the basis of
the highest paid three years (i.e. non-overlapping twelve
consecutive calendar month periods) within the 60-month period
immediately preceding termination of employment, or Normal
Retirement Date, if earlier.
b. Average Monthly Compensation shall include no more than three
annual bonuses, whether or not deferred, but shall not include
any amounts paid during employment as a result of earlier
deferral of compensation included within the definition of
Average Monthly Compensation under this Plan.
"Change in Control" shall mean any transaction which will be
deemed to have taken place if:
a. Any person or entity (or group of affiliated persons or entities)
(including a group which is deemed a "person" by Section 13(d)(3)
of the Securities Exchange Act of 1934) acquires in one or more
transactions, whether before or after the date of this Agreement,
ownership of more than fifty percent (50%) of the outstanding
shares of stock entitled to vote in the election of directors of
the Company.
b. As a result of, or in connection with, any such acquisition or
any related proxy contest, cash tender or exchange offer, merger
or other business combination, sale of assets or any combination
of the foregoing transactions, the persons who were directors of
the Company immediately before such acquisition shall cease to
constitute five sixths of the membership of the Board or of the
board of directors of any successor to the Company after such
transaction (but not more than twelve (12) months after such
transaction).
c. "Ownership" means ownership, directly or indirectly, of more than
fifty percent (50%) of such outstanding voting stock of Company
other than:
(i) by a person owning such shares merely of record (such as a
member of a securities exchange, a nominee or a securities
depositary system),
(ii) by a person as a bona fide pledgee of shares prior to a
default and determination to exercise powers as an owner of
the shares,
(iii) by a person who is not required to file statements on
Schedule 13D by virtue of Rule 13d-1(b) of the Securities
and Exchange Commission under the Securities Exchange Act
of 1934, or
(iv) by a person who owns or holds shares as an underwriter
acquired in connection with an underwritten offering
pending and for purposes of their resale.<PAGE>
<PAGE>
Without limitation, the right to acquire ownership shall not of itself
constitute ownership of shares.
"Committee" means the Compensation Committee of the Board of Directors.
"Company" means Great Western Financial Corporation or any successor
corporation resulting from a merger, consolidation, or transfer of assets
substantially as a whole.
"Early Retirement Date" means the first day of any month following
termination of employment subsequent to the date of attainment of age 55.
"Eligible Employee" means each employee of the Company or a Subsidiary
who is both (1) a participant in the Retirement Plan and (2) an individual
specifically designated as eligible to participate in this Plan by the Board
of Directors.
"Normal Retirement Date" means the first day of any month subsequent
to the later of a Participant's attainment of age 62 or completion of twenty
five Years of Service; provided however that the Normal Retirement Date
for James F. Montgomery and John F. Maher shall be the later of the first day
of the month following the later of attainment of age 60 or completion of
twenty Years of Service; and, provided further that for purposes of this
Plan, Years of Service attributed to Anthony C. La Scala shall be no less
than Years of Service attributable to Edward R. Hoffman.
"Participant" means any Eligible Employee who is or becomes eligible
for participation in this Plan.
"Plan" means the Great Western Supplemental Executive Retirement Plan
of Great Western Financial Corporation as set forth in this Agreement and all
subsequent amendments hereto.
"Plan Year" means the calendar year.
"Retirement Plan" means the Great Western Retirement Plan.
"Subsidiary" means any domestic corporation more than 50% of the voting
shares of which are now owned or shall hereafter be acquired by the Company;
also a like subsidiary of any such subsidiary.
"Years of Service" means years of Continuous Service except that all
Years of Service shall be credited under this Plan regardless of the Break
in Service rules contained in the Retirement Plan. For John F. Maher, his
Years of Service shall also include (to the extent not otherwise credited
hereunder) (a) years of service as a nonemployee director of the Company and
(b) the number of years during what would have been the remaining term of his
Employment Agreement with the Company if such Employment Agreement is
terminated by the Company without cause (as defined in his Employment
Agreement) or terminated by Mr. Maher within 60 days of any uncured material
breach of the Employment Agreement by the Company. For A. William Schenck
III, his Years of Service shall also include his years of service (26 years
and two months) as an employee of PNC Bank Corp..
<PAGE>
<PAGE>
ARTICLE II
PARTICIPATION
2.1 - ELIGIBILITY REQUIREMENTS.
Any executive who is an Eligible Employee shall become a Participant
on the January 1 designated by the Board or such other date designated by the
Board. Individual Participants as of January 1, 1988 are James F.
Montgomery, John F. Maher, J. Lance Erikson, Carl F. Geuther, Edward R.
Hoffman, Anthony C. La Scala, William J. Marschalk, and Michael M. Pappas.
ARTICLE III
PAYMENT OF BENEFITS
3.1 - PAYMENT.
There shall be no funding of any benefit which may become payable
hereunder. The Company may, but is not
obligated to, invest in any assets or in life insurance policies which it
deems desirable to provide assets for payments under this Plan but all such
assets or life insurance policies shall remain the general assets of the
Company. In connection with any such investments and as a condition of
further participation in this Plan, Participants shall execute any
documentation reasonably requested by the Company.
ARTICLE IV
RETIREMENT BENEFITS
4.1 - NORMAL RETIREMENT BENEFIT.
Except as hereinafter provided, the amount of the monthly retirement
benefit payable to a Participant for life, commencing on or after his Normal
Retirement Date and payable for the period benefits are payable under the
Retirement Plan, will be:
(a) Sixty percent (60%) of the Participant's Average Monthly
Compensation (sixty-five percent (65%) in the case of James F.
Montgomery and John F. Maher), less
(b) 100% of the Participant's Social Security Amount reduced, for
Normal Retirement Dates preceding age 65, by the factors set out
in Section 4.4 (ii) of the Retirement Plan, less
(c) the monthly benefit payment which is payable in the form of a
single life annuity under the Retirement Plan (in the form of a
Qualified Joint and Survivor Annuity under Section 4.7(b) of the
Retirement Plan, in the case of A. William Schenck III), and
(d) for A. William Schenck III, less the aggregate monthly benefit
payments which are payable in the form of a single life annuity
or a joint and survivor annuity (with his spouse as beneficiary),
whichever has the highest actuarial value, under the PNC Bank
Corp. retirement plans ((i) PNC Bank Corp. Pension Plan, (ii)
PNC Bank Corp. ERISA Excess Pension Plan and (iii) PNC Bank Corp.
Supplemental Executive Retirement Income and Disability Plan)
upon attainment of age 62.<PAGE>
<PAGE>
4.2 - EARLY RETIREMENT BENEFIT.
Except as hereinafter provided, the amount of the Monthly retirement
benefit, payable to a Participant for the period benefits are payable under
the Retirement Plan, on his Early Retirement Date, but before his Normal
Retirement Date, shall be the Participant's Accrued Benefit reduced by 5/12
of 1% for each month, if any, by which his Early Retirement Date precedes his
Normal Retirement Date. Except as provided in Section 4.3 and Section 4.6
of this Plan no benefits shall be payable to a Participant if his or her
employment is terminated prior to attaining age 55. Provided, however, if
John F. Maher's Employment Agreement is terminated by the Company without
"cause" (as defined in his Employment Agreement) or if Mr. Maher's Employment
Agreement is terminated by Mr. Maher within 60 days of any uncured material
breach of the Agreement by the Company, he shall be 100% vested in his
Accrued Benefit as of the date of such termination of employment and his
benefit shall be payable upon the attainment of age 60 or, at his election,
at an earlier date after attaining age 55 with the reduction provided by this
Section except as provided in Section 4.3.
4.3 - BENEFIT AFTER CHANGE IN CONTROL.
If a Change in Control occurs and, within 24 months after such Change
in Control, a Participant is involuntarily terminated, suffers a significant
diminution of duties and responsibilities, has a downward change of title,
or is forced to relocate thereby resulting in his resignation, a monthly
retirement benefit shall be payable to such Participant as follows:
(a) If the Participant's employment is terminated on or after
attainment of age 55, his monthly retirement benefit, payable
commencing the first day of the month after termination of
employment and continuing for the period benefits are payable
under the Retirement Date will be his Normal Retirement Benefit
computed by crediting all Years of Service to his Normal
Retirement Date with no reduction to be made for commencement of
benefits before Normal Retirement Date.
(b) If a Participant's employment is terminated prior to attainment
of age 55, he shall be 100% vested in his Accrued Benefit as of
the date of termination of employment and his benefit shall be
payable upon the date which would have been his earliest Early
Retirement Date if he had continued employment, with the benefit
payable unreduced for commencement before Normal Retirement Date.
4.4 - BENEFIT LIMITATION.
Notwithstanding any other provisions of the Plan, in the event that any
benefit provided under this agreement would, in the opinion of counsel for
the Company, not be deemed to be deductible in whole or in part in the
calculation of the federal income tax of the Company by reason of Section
280G of the Internal Revenue Code of 1986 (the "Code"), the aggregate
benefits provided hereunder shall be reduced so that no portion of any amount
which is paid to the Participant or Beneficiary is not deductible for tax
purposes by reason of Section 280G of the Code. The Company shall hold such
<PAGE>
<PAGE>
portions not paid in escrow. At the end of each calendar quarter during the
term of such escrow, the Company shall deposit into escrow an amount equal
to interest accrued during such calendar quarter on the amount held in escrow
during such calendar quarter at a rate equal to the rate then payable on
judgments in California. If it shall be determined at any point in time, by
a counsel mutually selected by the Company and Participant that it is more
likely than not that the payment of any or all of such amount held in escrow
would be deductible for tax purposes, such amount shall be paid out of escrow
to the Participant or Beneficiary. In the event of a final determination by
the Internal Revenue Service or of a final non-appealable judicial decision
that any such amount held in escrow will or will not be deductible, such
amount will be paid to the Company or Participant or Beneficiary as
appropriate. If it shall be determined at any point in time, by a counsel
mutually selected by the Company and Participant, that it is more likely than
not that the payment of any such amount held in escrow would never be
deductible for tax purposes, such amount shall be paid out of escrow to the
Company. For purposes of this paragraph, the value of any benefit shall be
conclusively determined by the independent auditors of the Company in
accordance with the principles of Section 280G of the Code.
4.5 - PAYMENT OF RETIREMENT BENEFITS.
Upon a Participant's retirement the Company shall commence to pay to
such retired Participant the monthly retirement benefit to which he is
entitled under this Plan commencing on the date he elects to have benefits
commence, and payable for the period benefits are payable, under the
Retirement Plan. No benefits shall be payable under this Plan while the
Participant is accruing benefits under the Retirement Plan.
4.6 - AUGMENTATION OF RETIREMENT PLAN BENEFITS.
To the extent not provided by this Plan, and not in duplication of
benefits otherwise payable under this Plan or any other deferred compensation
plan or employment agreement provided by the Company or a Subsidiary, the
benefit payable to a Participant on account of termination of employment or
to a Surviving Spouse, spouse or Contingent Beneficiary on account of death
of a Participant shall be augmented under this Plan to the extent that any
such benefit under the Retirement Plan otherwise payable is reduced by the
provisions of Article V of the Retirement Plan or Section 415 of the Code.
4.7 - OPTIONAL RETIREMENT BENEFITS.
The benefits determined under this Plan in the form of a single life
annuity may also be paid, at the election of an unmarried Participant, in one
of the alternative forms provided in the Retirement Plan which is the
Actuarial Equivalent of the benefit under this Plan.
4.8 - SMALL BENEFIT.
Notwithstanding any other provision or provisions of this Plan to the
contrary, if any Normal, or Early Retirement Benefit is for an amount of less
than fifty dollars per month, such benefit shall instead be paid in a lump
sum which is the Actuarial Equivalent of such monthly benefit.
<PAGE>
<PAGE>
4.9 - FORFEITURE OF BENEFITS.
Notwithstanding any provision of this Plan to the contrary, no benefits
shall be payable under this Plan with respect to any Participant if the
Participant confesses to, or is convicted of, any act of fraud, theft or
dishonesty arising in the course of, or in connection with, his employment
with the Company or any Subsidiary.
4.10 - SPOUSE DEATH BENEFIT
The monthly benefit, if any, payable upon the death of a Participant
to the Participant's Surviving Spouse or spouse, commencing upon the date
that monthly benefits to such spouse commence under Section 4.10 of the
Retirement Plan and payable for the period such benefit is payable under the
Retirement Plan, shall be equal to the excess, if any, of:
(a) The monthly death benefit determined in accordance with Section
4.10 of the Retirement Plan using, however, the benefit being
paid to such Participant on his date of death under this Plan or
which would have been received on or after his Early Retirement
Date under this Plan in the form of single life annuity had the
Participant retired on the day immediately preceding the date of
his death
over
(b) The amount of the monthly spouse death benefit payable to the
Participant's Surviving Spouse or spouse for life pursuant to
Section 4.10 of the Retirement Plan, plus, in the case of A.
William Schenck III, the survivor portion of the Qualified Joint
and Survivor Annuity under Section 4.7(b) of the Retirement Plan
(that would be payable if that form were elected) and the amount
of the spousal survivor benefits payable pursuant to the plans
described in Section 4.1(d) (assuming benefits were paid in the
form having the greatest actuarial value, as set forth in Section
4.1(d)).
(c) In no event shall the Actuarial Equivalent of the amount payable
to such Surviving Spouse or spouse under this Plan be less than
twelve times 150% of a Participant's Average Monthly Compensation
calculated as of the earliest date benefits would have been
payable under this Plan on or after the date of his death, less
the Actuarial Equivalent of the Surviving Spouse or spouse
benefit payable under the Retirement Plan. Such an amount shall
be paid in a cash lump sum.
<PAGE>
<PAGE>
ARTICLE V
COMMITTEE
5.1 - COMMITTEE.
This Plan shall be administered by the Committee. The Committee shall
have the authority to make, amend, interpret, and enforce all appropriate
rules and regulations for the administration of this Plan and decide or
resolve any and all questions including interpretations of this Plan, as may
arise in connection with the Plan. The Committee members may be Participants
under this Plan.
5.2 - AGENTS.
The Committee may, from time to time, employ other agents and delegate
to them such administrative duties as it sees fit, and may from time to time
consult with counsel who may be counsel to the Company.
5.3 - BINDING EFFECT OF DECISIONS.
The decision or action of the Committee in respect of any questions
arising out of or in connection with the administration, interpretation and
application of the Plan and the rules and regulations promulgated hereunder
shall be final and conclusive and binding upon all persons having any
interest in the Plan.
5.4 - INDEMNITY.
To the extent permitted by applicable state law the Company shall
indemnify and save harmless the Board of Directors, the Committee and each
member thereof, and any agent or delegate appointed pursuant to Section 5.2,
against any and all expenses, liabilities and claims, including legal fees
to defend against such liabilities and claims, arising out of their discharge
in good faith and responsibilities under or incident to the Plan, excepting
only expenses and liabilities arising out of willful misconduct or gross
negligence. This indemnity shall not preclude such further indemnities as
may be available under insurance purchased by the Company or provided by the
Company under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, as such indemnities are permitted under state law.
ARTICLE VI
AMENDMENT AND TERMINATION
6.1 - AMENDMENTS AND TERMINATION.
The Company shall have the right to amend this Plan from time to time
by resolution of the Board of Directors and to amend or cancel any
amendments. Such amendment shall be stated in an instrument in writing,
executed by the Company in the same manner as this Plan. The Company also
reserves the right to terminate this Plan at any time.
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<PAGE>
6.2 - PROTECTION OF ACCRUED BENEFITS.
Revised This Plan is strictly a voluntary undertaking on the
5/26/92 part of the Company and shall not be deemed to constitute a contract
between the Company and any Eligible Employee (or any other employee) or a
consideration for, or an inducement or condition of employment for the
performance of services by any Eligible Employee or employee. Although the
Company reserves the right to amend or terminate this Plan at any time and,
subject at all times to the provisions of Section 4.3, no such amendment or
termination shall result in the forfeiture of (i) any augmentation of
Retirement Plan benefits pursuant to Section 4.6 of this Plan or of (ii) an
Accrued Benefit which John F. Maher had already become entitled to pursuant
to Section 4.2 of this Plan or (iii) an Accrued Benefit (including a Spouse's
Death Benefit) which any Participant who has attained age 55 would have been
entitled to receive if he had terminated employment immediately prior to the
effective date of such amendment or termination.
ARTICLE VII
MISCELLANEOUS
7.1 - UNFUNDED PLAN.
This Plan is intended to be an unfunded plan maintained primarily to
provide deferred compensation benefits for a select group of "management or
highly compensated employees" within the meaning of Section 201, 301 and 401
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and therefore to be exempt from the provisions of Parts 2, 3 and 4 of Title
I of ERISA.
7.2 - UNSECURED GENERAL CREDITOR.
In the event of Company's insolvency, Participants and their
Beneficiaries, heirs, successors and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of Company, nor shall
they be Beneficiaries of, or have any rights, claims or interest in any life
insurance policies, annuity contracts or the proceeds therefrom owned or
which may be acquired by Company. In that event, any and all of Company's
assets and policies shall be, and remain, unrestricted by the provisions of
this Plan. Company's obligation under the Plan shall be that of an unfunded
and unsecured promise of Company to pay money in the future.
7.3 - TRUST FUND.
The Company shall be responsible for the payment of all benefits
provided under the Plan. At its discretion, the Company may establish one
or more trusts, with such trustees as the Board may approve, for the purpose
of providing for the payment of such benefits. Such trust or trusts may be
irrevocable, but the assets thereof shall be subject to the claims of the
Company's creditors. To the extent any benefits provided under the Plan are
actually paid from any such trust, the Company shall have no further
obligation with respect thereto, but to the extent not so paid, such benefits
shall remain the obligation of, and shall be paid by, the Company.
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<PAGE>
7.4 - NONASSIGNABILITY.
None of the benefits, payments, proceeds or claims of any Participant
or Beneficiary shall be subject to any claim of any creditor and, in
particular, the same shall not be subject to attachment or garnishment or
other legal process by any creditor, nor shall any Participant, Beneficiary
or Contingent Annuitant have any right to alienate, anticipate, commute,
pledge, encumber or assign any of the benefits or payments or proceeds which
he may expect to receive, contingently or otherwise, under this agreement.
7.5 - LIMITATION ON PARTICIPANTS' RIGHTS.
Participation in this Plan shall not give any Eligible Employee the
right to be retained in the Company's employ or any right or interest in the
Plan other than as herein provided. The Company reserves the right to
dismiss any Eligible Employee without any liability for any claim against the
Company, except to the extent provided herein.
7.6 - PARTICIPANTS BOUND.
Any action with respect to this Plan taken by the Committee or by the
Company, or any action authorized by or taken at the direction of the
Committee or the Company, shall be conclusive upon all Participants,
Beneficiaries and Contingent Annuitants entitled to benefits under the Plan.
7.7 - RECEIPT AND RELEASE.
Any payment to any Participant or Beneficiary in accordance with the
provisions of this Plan shall, to the extent thereof, be in full satisfaction
of all claims against the Company and Subsidiaries and the Committee, and the
Committee may require such Participant, Beneficiary or Contingent Annuitant,
as a condition precedent to such payment, to execute a receipt and release
to such effect. If any Participant, Beneficiary or Contingent Annuitant is
determined by the Committee to be incompetent by reason of physical or mental
disability (including minority) to give a valid receipt and release, the
Committee may cause the payment or payments becoming due to such person to
be made to another person for his benefit without responsibility on the part
of the Committee or the Company to follow the application of such funds.
7.8 - CALIFORNIA LAW GOVERNS.
This Plan shall be construed, administered, and governed in all
respects under and by the laws of the State of California. If any provision
shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.
7.9 - HEADINGS AND SUBHEADINGS.
Headings and subheadings in this agreement are inserted for convenience
of records only and are not to be considered in the construction of the
provisions hereof.
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<PAGE>
7.10 - INSTRUMENT IN COUNTERPARTS.
This agreement has been executed in several counterparts, each of which
shall be deemed an original, and said counterparts shall constitute but one
and the same instrument, which may be sufficiently evidenced by one
counterpart.
7.11 - GENDER.
The masculine gender as used herein includes the feminine and neuter
genders.
7.12 - SUCCESSORS AND ASSIGNS.
This agreement shall inure to the benefit of, and be binding upon, the
parties hereto and their successors and assigns.
IN WITNESS WHEREOF, the Company has caused these presents to be
executed by its duly authorized officers and the corporate seal to be
hereunto affixed this 11th day of April, 1988.
GREAT WESTERN FINANCIAL
CORPORATION
By ______________________
William J. Marschalk
By ______________________
J. Lance Erikson
<PAGE>
<PAGE>
EXHIBIT A
INCLUSION OF CLIFFORD A. MILLER IN GREAT WESTERN
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, this Corporation maintains the Great Western Supplemental
Executive Retirement Plan (1988 Restatement) (the "SERP") for the benefit of
certain employees; and
WHEREAS, this Board is responsible for designating persons eligible to
participate in the SERP and the terms of their participation.
NOW, THEREFORE BE IT RESOLVED, THAT Clifford A. Miller is included in
the SERP effective January 1, 1988;
RESOLVED FURTHER that the following terms shall apply to Mr. Miller's
inclusion:
1. Mr. Miller's normal retirement benefit shall be the 60% benefit
set out in Section 4.1 of the SERP. Such benefit will be
payable, except as provided below, only upon his active
employment with the corporation or its affiliates until
attainment of age 65.
2. In the event of a Change of Control as defined in the SERP, Mr.
Miller will be entitled to the protection provided by Section
4.3(a) of the SERP subject to the benefit limitations contained
in Section 4.4 of the SERP.
3. In the event of Long-Term Disability as defined in the Great
Western Retirement Plan, Mr. Miller will continue to be credited
with Years of Service through the period of Long-Term Disability.
4. In the event of Mr. Miller's death prior to
attainment of age 65, his Surviving Spouse, ifany, as of the date
of his death will be entitled to receive a benefit for her life
equal to 30 percent of Mr. Miller's Average Monthly Compensation
computed as of his date of death.
5. In the event of Mr. Miller's involuntary termination without
cause prior to attainment of age 65, he will be entitled to a
percentage of the full benefit payable pursuant to paragraph 1
above based on his age at the time of such termination but with
the benefit payable at attainment of age 65: 25% if so terminated
after age 62; 50% if so terminated after age 63, and; 75% if so
terminated after age 64.
RESOLVED FURTHER that a copy of these resolutions shall be appended to
the copy of the SERP as Exhibit A.
<PAGE>
<PAGE>
EXHIBIT B
AMENDMENT 1992-1
GREAT WESTERN SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Special Provisions Concerning Dissolution
of Marriage of James F. Montgomery
WHEREAS, this corporation maintains the Great Western Supplemental
Executive Retirement Plan (1988 Restatement) (the "SERP") for the benefit of
certain employees; and
WHEREAS, the Board of Directors has the power, pursuant to Section 6.1
of the SERP to amend the SERP,
NOW, THEREFORE, BE IT RESOLVED, that this Amendment 1992-1 is hereby
adopted, to become effective upon the dissolution of marriage of James F.
Montgomery and Linda Montgomery, but only if these provisions reflect the
provisions of a final judgement or settlement agreement in the dissolution
proceeding.
The following, which, upon becoming effective, shall be added to the
SERP as Exhibit B and incorporated by reference as if set forth fully in the
SERP, sets forth the terms of the allocation of benefits between James F.
Montgomery and Linda Montgomery upon such dissolution. Upon becoming
effective, the provisions of this Exhibit B shall supersede any contrary or
inconsistent provisions of the SERP:
1. While James F. Montgomery is alive, the amount of benefit payable
from the SERP with respect to James F. Montgomery shall be calculated as if
all his accrued benefits under the Retirement Plan were payable to him and
without regard to any qualified domestic relation orders pertaining to the
Retirement Plan. While James F. Montgomery and Linda Montgomery are both
alive, the first $23,333.33 of any monthly benefit otherwise payable to James
F. Montgomery under the terms of the SERP shall instead be payable to Linda
Montgomery, who, upon the dissolution of her marriage with James F.
Montgomery, shall be the former spouse of James F. Montgomery.
Notwithstanding the preceding sentence, the monthly benefit payable to Linda
Montgomery from the SERP shall be reduced to the extent the sum of the
monthly benefits payable to her from the SERP, the Retirement Plan and the
Great Western Employee Savings Incentive Plan ("ESIP") exceeds $23,333.33 per
month. Such payments to Linda Montgomery shall commence when payments to
James F. Montgomery commence under the terms of the SERP and shall continue
until her death or the death of James F. Montgomery, whichever occurs first.
The payments made to Linda Montgomery shall reduce the amounts otherwise
payable to James F. Montgomery. If Linda Montgomery predeceases James F.
Montgomery on or after his retirement, the annual benefit payable to Linda
Montgomery under this Paragraph 1 shall be restored to James F. Montgomery
for as long as he lives.
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<PAGE>
2. This Paragraph 2 only applies if James F. Montgomery is survived
by Linda Montgomery and/or a subsequent spouse who would be treated as a
Surviving Spouse (for purposes of the pre-retirement Spouse's Death Benefit
under Section 4.10) or spouse (for purposes of the post-retirement Spouse's
Death Benefit under Section 4.10) (such subsequent spouse hereinafter
referred to as "Subsequent Spouse").
(a) The maximum monthly amount of the Spouse's Death Benefit payable
by the SERP to all persons under Section 4.10 and Exhibit B of the
SERP shall be calculated by assuming that James F. Montgomery is
survived by a Surviving Spouse (or spouse, as applicable) who is
receiving the entire pre-retirement or post-retirement spousal
benefit provided by the Retirement Plan with respect to James F.
Montgomery, regardless of whether such a spousal benefit is paid from
the Retirement Plan. As described below, the monthly amount of the
total Spouse's Death Benefit payable to all persons may be less than
the amount described in the preceding sentence.
(b) If James F. Montgomery is survived by Linda Montgomery but not
by a Subsequent Spouse, then a Spouse's Death Benefit from the SERP
shall be paid to Linda Montgomery for her lifetime. Subject to
subparagraph (a), the monthly amount of such Spouse's Death Benefit
shall be $23,333.00 minus the sum of the monthly benefits payable to
her from the Retirement Plan and the ESIP. No other Spouse's Death
Benefits shall be paid by the SERP.
(c) If James F. Montgomery is survived by a Subsequent Spouse but
not Linda Montgomery, then a monthly Spouse's Death Benefit from the
SERP shall be paid in an amount, if any, equal to the monthly amount
described in subparagraph (a) minus $23,333.33. Such monthly amount
shall be divided among such beneficiaries as are designated by James
F. Montgomery in writing to the Committee. No Subsequent Spouse
shall be entitled to any of such amounts under the SERP except to the
extent such Subsequent Spouse is designated by James F. Montgomery as
a beneficiary. All Spouse's Death Benefits (regardless of the
beneficiary) shall cease upon the death of the Subsequent Spouse. No
other Spouse's Death Benefits shall be paid by the SERP.
(d) If James F. Montgomery is survived by Linda Montgomery and a
Subsequent Spouse, then a Spouse's Death Benefit shall be paid as
follows.
(1) Linda Montgomery shall receive a monthly Spouse's Death
Benefit in the amount described in subparagraph (b) for her
lifetime. Linda Montgomery shall not be entitled to any additional
benefits even if she outlives the Subsequent Spouse.
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<PAGE>
(2) Each month, for as long as Linda Montgomery and the
Subsequent Spouse are alive, any monthly amount of the Spouse's
Death Benefit (calculated under subparagraph (a)) remaining after
payment of the monthly amount described in subparagraph (d)(1) to
Linda Montgomery, shall be paid to (and divided among) such
beneficiaries designated by James F. Montgomery in writing to the
Committee. No Subsequent Spouse of James F. Montgomery shall be
entitled to any of such amounts under the SERP except to the
extent such Subsequent Spouse is designated by James F. Montgomery
as a beneficiary.
(3) If Linda Montgomery outlives the Subsequent Spouse, all
monthly payments pursuant to subparagraph (d)(2) shall cease upon
the death of the Subsequent Spouse. Monthly payments to Linda
Montgomery shall continue pursuant to subparagraph (d)(1).
(4) If the Subsequent Spouse outlives Linda Montgomery, all
benefits under this subparagraph (d) shall cease. Upon the death
of Linda Montgomery, monthly payments shall be made in accordance
with subparagraph (c).
3. If James F. Montgomery is not survived by a Subsequent Spouse or by
Linda Montgomery, no Spouse's Death Benefit shall be payable under the SERP.
<PAGE>
<PAGE>
GREAT WESTERN
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
(1988 RESTATEMENT)
PRO FORMA
INCORPORATING ALL AMENDMENTS
THROUGH JULY 25, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I TITLE, PURPOSE AND DEFINITIONS 1
1.1 Title 1
1.2 Purpose 2
1.3 Definitions 2
ARTICLE II PARTICIPATION 8
2.1 Eligibility Requirements 8
ARTICLE III PAYMENT OF BENEFITS 9
3.1 Payment 9
ARTICLE IV RETIREMENT BENEFITS 9
4.1 Normal Retirement Benefit 9
4.2 Early Retirement Benefit 10
4.3 Benefit After Change in Control 11
4.4 Benefit Limitation 12
4.5 Payment of Retirement Benefits 14
4.6 Augmentation of Retirement Plan
Benefits 14
4.7 Optional Retirement Benefits 15
4.8 Small Benefit 15
4.9 Forfeiture of Benefits 15
4.10 Spouse Death Benefit 16
ARTICLE V COMMITTEE 17
5.1 Committee 17
5.2 Agents 17
5.3 Binding Effect of Decisions 18
5.4 Indemnity 18
ARTICLE VI AMENDMENT AND TERMINATION 19
6.1 Amendments and Termination 19
6.2 Protection of Accrued Benefits 19
ARTICLE VII MISCELLANEOUS 20
7.1 Unfunded Plan 20
7.2 Unsecured General Creditor 20
7.3 Trust Fund 21
7.4 Nonassignability 22
7.5 Limitation on Participants' Rights 22
7.6 Participants Bound 22
7.7 Receipt and Release 23
7.8 California Law Governs 23
7.9 Headings and Subheadings 24
7.10 Instrument in Counterparts 24
7.11 Gender 24
7.12 Successors and Assigns 24
Exhibit A 26
Exhibit B 29
<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of July 31,
1995, by and between GREAT WESTERN FINANCIAL CORPORATION, a
Delaware corporation ("Employer"), and A. William Schenck III
("Officer").
W I T N E S S E T H:
WHEREAS, Employer desires to obtain the benefit of
services by Officer, and Officer desires to render services to
Employer; and
WHEREAS, the Board of Directors of Employer (the "Board")
has determined that it is in Employer's best interest and that
of its stockholders to recognize the substantial contribution
that Officer is expected to make to the business of Employer
and its subsidiary, Great Western Bank, a Federal Savings Bank
(the "Bank") (together, the "Company") and to retain his ser-
vices in the future; and
WHEREAS, Employer and Officer desire to set forth in this
Agreement the terms and conditions of Officer's employment
with Employer;
NOW, THEREFORE, in consideration of the mutual promises
and covenants herein contained, the parties hereto agree as
follows:
1. TERM. Employer shall employ Officer, and Officer
shall serve Employer, in accordance with the terms hereof, for
a term of three (3) years ending July 30, 1998 (the "Term"),
unless such employment is earlier terminated in accordance
with the provisions hereof. Notwithstanding the foregoing, if
Officer's employment shall not have been terminated in
accordance with the provisions hereof effective on or before
the first anniversary of the effective date hereof, the
remaining Term shall be extended such that at each and every
moment of time thereafter the remaining Term shall be two (2)
years (but in no event shall the remaining Term extend beyond
Officer's sixty-fifth (65th) birthday).
<PAGE>
<PAGE>
2. SPECIFIC POSITION; DUTIES AND RESPONSIBILITIES.
Subject to the provisions of this Agreement, Employer shall
employ Officer, and Officer shall serve Employer, as Executive
Vice President, Retail Banking Division, of Employer and
member of the Executive Management Committee. Officer's
principal business address shall during such period be at
Employer's principal executive offices in Southern California
or in such other place as with Officer's consent such offices
are relocated. Officer's duties hereunder shall be the usual
and customary duties of the office in which he shall serve,
and shall not be inconsistent with the provisions of the
charter documents of Employer (or applicable subsidiary) or
applicable law. Officer shall have such executive power and
authority as shall reasonably be required to enable him to
discharge his duties in the office which he may hold. All
compensation paid to Officer by Employer or any of its
subsidiaries, and all benefits and perquisites received by
Officer from Employer or any of its subsidiaries, in
accordance with the provisions hereof shall be aggregated in
determining whether Officer has been paid the compensation and
received the benefits and perquisites provided for herein.
3. SERVICES AND EXCLUSIVITY OF SERVICES. During his
employment hereunder, Officer shall devote his full business
time and energy to the business, affairs and interests of
Employer and its subsidiaries, and matters related thereto,
and shall use his best efforts and abilities to promote
Employer's and its subsidiaries' interests. Officer shall
diligently endeavor to promote the business, affairs and
interests of Employer and its subsidiaries and perform servic-
es contemplated hereby in accordance with the policies
established by the Board. Officer shall serve without
additional remuneration in such senior executive capacity for
one or more (direct or indirect) subsidiaries of Employer as
the Board may from time to time request, subject to
appropriate authorization by the subsidiary or subsidiaries
involved and any limitations under applicable law. Officer's
failure to discharge an order or perform a function because
Officer reasonably and in good faith believes such would
violate a law or regulation or be dishonest shall not be
deemed a breach by him of his obligations or duties hereunder
and shall not entitle Employer to terminate Officer's employ-
ment hereunder, including without limitation pursuant to
Section 7(c) hereof.
<PAGE>
<PAGE>
Officer may serve as a director or in any other capacity
of any business enterprise, including an enterprise whose
activities may involve or relate to the business of the
Company, provided that such service is expressly approved by
the Board. Officer may make and manage personal business
investments of his choice and serve in any capacity with any
civic, educational or charitable organization, or any
governmental entity or trade association, without seeking or
obtaining approval by the Board, provided such activities and
service do not materially interfere or conflict with the
performance of his duties hereunder.
4. SALARY AND OTHER BENEFITS.
(a) Commencing as of the effective date of this Agree-
ment, Employer shall pay Officer an annual salary at the rate
of $400,000, which shall be payable in semi-monthly or bi-
weekly installments in conformity with Employer's policy
relating to salaried employees.
(b) Subject to the provisions of this Section 4, Officer
shall also be entitled during his employment hereunder to all
rights and benefits for which he is otherwise eligible under
any bonus plan, stock option plan, stock purchase plan,
participation or extra compensation plan, pension plan,
profit-sharing plan, life and medical insurance policy or
other plans or benefits which Employer or its subsidiaries may
provide for him or, provided he is eligible to participate
therein, for senior officers generally or for employees gener-
ally including, without limitation, (i) beginning in December
1995, participation in the annual award of stock options to
Employer's executive officers, which awards are subject to the
discretion and approval of Employer's compensation committee,
and (ii) a split dollar life insurance policy in the face
amount of $1,500,000 and otherwise on terms and conditions
substantially similar to the terms and conditions of the split
dollar life insurance policy provided Officer by PNC Bank
Corp. (collectively, "Additional Benefits").
The Board shall review Officer's salary and Additional
Benefits then being paid and provided to him not less
frequently than annually in the light of Officer's services
for the preceding period, the responsibilities which attend
his office and duties hereunder, the profitability and
progress of Employer and its subsidiaries and current salaries
and benefits then being paid to others holding similar
positions. Following such review, Employer may increase the
salary and/or Additional Benefits, but may not decrease the
salary or any of the Additional Benefits from the then
existing levels; provided, however, that Employer shall have
the right to reduce Officer's salary in conjunction with a pro<PAGE>
<PAGE>
rata salary reduction applicable to all of Employer's officers
and to reduce one or more Additional Benefits in conjunction
with a reduction of such benefits applicable to all of
Employer's officers. Employer shall not single Officer out
and discriminate against Officer in its provisions of benefits
to senior officers or full-time employees of Employer for so
long as Officer remains eligible under the terms of plans from
time to time offered by Employer, but this provision shall not
require the provision of any specific benefit to Officer.
If Officer's employment is terminated hereunder, pursuant
to Section 6 hereof or pursuant to Section 7(a), 7(b) or 8
hereof, and Officer is entitled to but is no longer eligible
for Additional Benefits because of such termination, Officer
(or in the event of his death, his designated Beneficiary (as
defined in Section 7(b) hereof)) shall be entitled to and
Employer shall provide, to the extent provided in this
Agreement, benefits substantially equivalent to the Additional
Benefits to which Officer was entitled immediately prior to
such termination and shall do so for the period during which
he remains entitled to receive such Additional Benefits as
provided in this Agreement.
(c) For each calendar year during the Term (excluding the
period from the effective date of this Agreement through
December 31, 1995), Officer shall be awarded a target bonus in
an amount equal to forty percent (40%) of Officer's annual
salary, subject to the terms of the Company's Annual Incentive
Compensation Plan for Executive Officers (the "Incentive
Plan"). With respect to the period from the effective date of
this Agreement through December 31, 1995, Employer shall pay
to Officer a bonus in an amount not less than $153,500 (the
"1995 Bonus"), payable in the following manner: no later than
three (3) business days after receipt by Employer of
certification from Officer that officer has received either a
bonus in respect of services rendered in 1995 from PNC Bank
Corp. or notification from PNC Bank Corp. that no bonus will
be paid to Officer in respect of services rendered in 1995,
Employer shall pay to Officer an amount equal to (i) the 1995
Bonus, less (ii) the amount of any bonus payment received by
Officer from PNC Bank Corp.
<PAGE>
<PAGE>
(d) As of the effective date of this Agreement, Employer
shall grant to Officer that whole number of restricted shares
of common stock of Employer (the "Common Stock") determined by
dividing $460,500 by the fair market value per share of Common
Stock on the effective date of this Agreement (the "Restricted
Stock"). The Restricted Stock shall be issued under the terms
of the General Provisions Applicable to Restricted Stock
Awards Granted Under the Great Western Financial Corporation
1988 Stock Option and Incentive Plan, as amended to A. William
Schenck III, and the related form of Restricted Stock Award
Agreement, attached hereto as Exhibits A and B, respectively,
and incorporated herein by reference.
(e) As of the effective date of this Agreement, Employer
shall grant to Officer the following awards: (i) at Officer's
written election delivered to Employer, either (A) (1) a non-
qualified stock option to purchase 26,500 shares of Common
Stock at an exercise price per share equal to the fair market
value per share of Common Stock on the effective date of this
Agreement, plus (2) a cash payment of $135,813, or (B) a non-
qualified stock option to purchase 44,048 shares of Common
Stock at an exercise price per share equal to the fair market
value per share of Common Stock on the effective date of this
Agreement; and (ii) a non-qualified stock option to purchase
85,000 shares of Common Stock at an exercise price per share
equal to the fair market value per share of Common Stock on
the effective date of this Agreement. Any stock option award-
ed pursuant to this Section 4(e) shall be awarded in accor-
dance with the terms and conditions of Employer's 1988 Stock
Option and Incentive Plan and the related form of Nonqualified
Stock Option Agreement, attached hereto as Exhibits C and D
and incorporated herein by reference.
(f) Officer shall participate in Employer's Supplemental
Executive Retirement Plan, as amended (the "SERP"), with
normal retirement benefits equal to sixty percent (60%) of
Officer's Average Monthly Compensation (as defined therein),
subject to the terms and conditions of the SERP, as amended.
(g) This Agreement shall not affect the provisions of any
other compensation, retirement or other benefit program or
plan of the Company.
5. PERQUISITES; REIMBURSEMENTS; VACATION.
(a) Commencing as of the effective date of this Agree-
ment, Officer shall be entitled to perquisites of a kind and
quality provided to other Executive Vice Presidents of
Employer.
<PAGE>
<PAGE>
(b) Employer shall reimburse Officer for the following
travel expenses: (i) all travel expenses between Pittsburgh
and Los Angeles incurred by Officer and his spouse at the
request of Employer for the period beginning on July 11, 1995
and ending on the effective date of this Agreement, (ii) up to
four (4) trips to Los Angeles made by Officer and his spouse
for purposes of finding a residence, (iii) up to one year's
rental housing, at a maximum cost not to exceed $7,500 per
month, (iv) all moving expenses incurred by Officer in
relocating from Pittsburgh to Los Angeles, and (v) if
Officer's employment with Employer is voluntarily terminated
during the first three (3) years of the Term, all moving ex-
penses from Los Angeles to Pittsburgh should Officer decide,
within six (6) months of such termination of employment, to
relocate to Pittsburgh.
Employer shall provide Officer with eighteen (18) round-
trip airline tickets for business class transportation between
Pittsburgh and Los Angeles, which tickets may be used without
time limit by any member of Officer's family.
(c) During his employment hereunder, Officer shall be
entitled to vacation in accordance with Employer's standard
practice for senior executives but in no event to less than
four (4) weeks paid vacation during each calendar year of
employment, prorated for any period which is less than one
calendar year. Vacation time shall accrue during each
calendar year (but at no time shall the aggregate of accrued
but unused vacation time exceed eight (8) weeks), and, upon
termination of his employment for any reason and in addition
to any other rights granted to Officer by this Agreement,
Officer shall be entitled to be paid an amount based upon his
salary at the rate applicable immediately prior to such
termination for any accrued but unused vacation time.
6. TERMINATION BY EMPLOYER WITHOUT "CAUSE"; TERMINATION
BY OFFICER. Employer shall have the right, at its election to
be made in writing and delivered to Officer within sixty (60)
days prior to the effective date thereof, to terminate
Officer's employment hereunder without "cause" (as defined in
Section 7(c) below). Officer shall have the right, at his
election to be made in writing and delivered to Employer
within sixty (60) days after such event, to terminate his
employment hereunder if a material breach of this Agreement by
Employer occurs which Employer fails to cure within fifteen
(15) days after receipt of notice of such breach. In the
event of a termination for either of the reasons enumerated in
this paragraph, Officer shall be entitled to the following:
<PAGE>
<PAGE>
(a) for the remaining Term, salary at the rate applicable
immediately prior to such election;
(b) concurrently with the receipt of bonuses by
Employer's other senior executives with respect to the year in
which such termination occurs, a bonus, prorated on an actual
day basis for the year in which such termination occurs if
such termination shall occur within the first six (6) months
of such year but otherwise not prorated, in an amount not less
than a percentage of Officer's salary, at the rate of salary
applicable immediately prior to such election, equal to the
percentage of the aggregate salaries of the Executive
Management Committee members during such year, other than
Officer, Employer's Chief Executive Officer, Employer's Chief
Operating Officer and any Executive Management Committee
members whose employment by Employer is terminated during such
year, received in the aggregate by such members as bonuses;
provided, however, that with respect to 1995, such amount
shall not be less than the minimum 1995 Bonus;
(c) for the remaining Term, health and welfare type Addi-
tional Benefits (including without limitation hospital,
surgical, major medical, life and disability insurance,
qualified pension (or, if prohibited under then applicable tax
law, a specially-designed non-qualified supplemental pension
to provide Officer with benefits equivalent to those to which
he would have been entitled if such prohibition did not
pertain) and non-qualified supplemental pension) to which
Officer may be entitled pursuant to Section 4 hereof as the
same shall exist immediately prior to such election (including
continued accrual of years of service under Employer's
Retirement Plan as in effect immediately prior to such
election (or, if prohibited under then applicable tax law, a
specially-designed non-qualified supplemental pension to
provide Officer with benefits equivalent to those to which he
would have been entitled if such prohibition did not pertain)
but excluding Employer matching contributions under Employer's
401(k) plan or any successor plan thereto), each such benefit
to be continued in a manner no less favorable to Officer than
the benefit to which he was entitled immediately prior to such
election unless a benefit reduction is attributable to a
reduction applicable to all of Employer's officers; and
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(d) for a one-year period commencing with the effective
date of such termination, a continuation at Employer's expense
of the use of any automobile provided by Employer immediately
prior to such election to facilitate the performance of
Officer's duties and responsibilities hereunder, subject to
Officer's right at any time during such one-year period to
purchase such automobile at the higher of its depreciated book
value or its wholesale cash value.
In the event of a termination pursuant to this Section 6,
Officer shall have no duty to seek other employment; provided,
however, that fifty percent (50%) of any salary, bonus or
grant of stock received by Officer during or with respect to
the remaining Term and attributable to services rendered by
Officer to persons or entities other than Employer shall be
applied to reduce Employer's obligation to make payments
hereunder and that any benefits of the kind referred to in
subsection (c) of this Section 6 received by Officer during or
with respect to the remaining Term and attributable to
services rendered by Officer to persons or entities other than
Employer shall be applied to reduce Employer's obligation to
provide such benefits hereunder. With respect to and
notwithstanding anything to the contrary provided by the
foregoing, only fifty percent (50%) of the amount of defined
benefit pension benefits or non-qualified supplemental
retirement benefits actually received by Officer with respect
to the remaining Term from one or more other persons or
entities shall be applied to reduce Employer's obligation to
provide such benefits hereunder and such amount shall be
determined on a "benefit/years of service" or comparable
formula basis. Not less frequently than annually (by March
31st of each year), Officer shall account to Employer as to
the amount of such salary, bonus, stock and pension benefits;
if Employer has paid amounts in excess of those to which
Officer was entitled (after giving effect to the offsets
provided above), Officer shall reimburse Employer for such
excess by April 1 of such year.
7. OTHER EVENTS OF TERMINATION. Other than a termina-
tion pursuant to Section 6 or 8 hereof, Officer's employment
hereunder shall be terminated only as provided for below in
this Section 7:
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(a) DISABILITY. In the event that Officer shall fail,
because of illness, injury or similar incapacity
("disability"), to render for six (6) consecutive calendar
months, or for shorter periods aggregating one hundred thirty
(130) or more business days in any twelve (12)-month period,
services contemplated by this Agreement, Officer's employment
hereunder may be terminated, by written notice of termination
from Employer to Officer; thereafter, Employer shall continue,
until Officer's death, or until Officer's sixty-fifth (65th)
birthday, whichever first occurs, but in no event for longer
than ten (10) years, to pay compensation to Officer at a rate
and in an amount (payable at the times and in the manner
theretofore applicable to Officer's salary) equal to (i) 50%
of the sum of (A) the rate of annual salary payable to him
immediately prior to such termination and (B) the average
annual bonus received by him for services rendered in the
immediately preceding three (3) full calendar years or such
lesser number of full calendar years that Officer has been
employed by Employer; provided, however, with respect to a
disability occurring during 1995 or 1996, the average annual
bonus for purposes of this Section 7(a) shall be the 1995
Bonus, minus (ii) the amount of any cash payments to which he
would have been entitled under the terms of Employer's
disability insurance plan upon the assumption that he had
elected the fifty percent (50%) "normal" benefits under
Employer's Plus Pay Plan; to afford all of the medical, dental
and life insurance benefits to which he is entitled pursuant
to Section 4 hereof at the times and in the manner otherwise
afforded hereunder; and to continue accrual of years of
service under Employer's Retirement Plan as in effect at the
time of such disability.
(b) DEATH. Officer's employment hereunder shall be
terminated upon Officer's death. One hundred percent (100%)
of Officer's salary at the rate of such salary in effect
immediately prior to Officer's death (or, if Officer's death
occurs while he is receiving payments under Section 7(a)
hereof, at the rate of such salary in effect immediately prior
to Officer's disability) shall be paid until the first
anniversary of Officer's death at the times and in the manner
otherwise payable hereunder, to such person or persons as
Officer shall have directed in writing or, in the absence of a
designation, to his estate (the "Beneficiary"). In addition
to the Beneficiary's rights hereunder to be paid Officer's
salary, hospital, surgical, major medical and dental benefits
to which members of Officer's family were entitled immediately
prior to Officer's death shall be continued to the same extent
after Officer's death until the first anniversary of Officer's
death. This Agreement in all other respects shall terminate
upon the death of Officer.<PAGE>
<PAGE>
(c) FOR CAUSE. Officer's employment hereunder shall be
terminated and all of his rights to receive salary, bonus,
Additional Benefits (subject to the terms of any plans
relating thereto) and perquisites shall terminate upon the
occurrence of (i) a material breach of this Agreement by
Officer, (ii) Officer's conviction by a court of competent
jurisdiction of a felony or (iii) entry of an order duly
issued by the Office of Thrift Supervision or the Federal
Deposit Insurance Corporation removing Officer from the office
of Employer or the Bank or permanently prohibiting him from
participating in the conduct of the affairs of Employer or the
Bank. Notwithstanding the foregoing, Officer's employment
hereunder shall not be subject to termination under subsection
(c)(i) hereof without (A) reasonable notice to Officer setting
forth the reasons for Employer's intention to terminate, (B)
an opportunity for Officer to cure any such breach within
fifteen (15) days after receipt of such notice and (C)
delivery to Officer of a notice of termination stating that a
majority of the authorized number of Employer's directors has
found that Officer was guilty of the conduct set forth above
and specifying the particulars thereof in detail. If Officer
shall be suspended from office and/or temporarily prohibited
from participating in the conduct of Employer's or the Bank's
affairs by any regulatory authority having jurisdiction in the
premises, Employer's obligations shall be automatically
suspended, subject to reinstatement in full if the charges
resulting in such suspension or prohibition are finally
dismissed. Such reinstatement shall provide Officer with the
salary, other benefits and perquisites to which he would have
been entitled absent such suspension or prohibition to the
same effect and extent as though such suspension or
prohibition had not occurred, including without limitation
reinstatement in full of vesting and years of service
accruals, where applicable, for the suspension period and
accrued interest at the rate then payable on judgments on all
amounts thereupon paid to Officer and attributable to the
suspension period.
In the event of any termination or suspension by Employer
pursuant to any of the provisions of Section 7(a) or 7(c)
hereof, Employer shall immediately so notify Officer.
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<PAGE>
8. CHANGE IN CONTROL.
(a) If there should occur a change in control of Employer
(as defined below), and if thereafter Employer materially
breaches this Agreement and fails to cure such breach within
fifteen (15) days after receipt of notice thereof; or if there
would have occurred a change in control of Employer (as
defined below) if the references in Section 8(b) hereof to
"more than fifty percent (50%)" were in lieu thereof
references to "twenty-five percent (25%) or more," and if
thereafter Employer materially breaches this Agreement,
Employer's Chairman and Chief Executive Officer fails to
acquiesce in the action or omission giving rise to such breach
and Employer fails to cure such breach within fifteen (15)
days after receipt of notice thereof, then, in either such
event, Officer, without limitation on any other rights he may
have hereunder, may, within one (1) year after he first has
knowledge of such breach, elect to terminate his employment
hereunder and to treat such termination as a termination
pursuant to Section 6 hereof, subject, however, to the
following modifications to Officer's rights as set forth in
said Section 6, any one or more of which modifications Officer
may elect to waive:
(i) Employer shall not be entitled to reduce any
Additional Benefits to which Officer shall thereafter
be entitled even in connection with a reduction in
such benefits applicable to all of Employer's
officers.
(ii) All restricted shares or stock options then
unvested shall immediately vest.
(iii) Officer's pro rata entitlement to an award
under any then existing long-term incentive
performance plan shall be calculated upon the
assumption that the performance under such plan is
then "on plan."
(iv) The remaining Term shall be deemed to be three
(3) years (but in no event shall the remaining Term be
deemed to extend beyond Officer's sixty-fifth (65th)
birthday).
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<PAGE>
Notwithstanding Officer's entitlements as set forth in
this paragraph, if the value of those of such aggregate
entitlements constituting "parachute payments" under Section
28OG of the Code, after giving effect to Employer's right of
offset as provided for in the next succeeding sentence, is
less than the maximum amount Officer is entitled to receive
without incurring a liability under Section 28OG of the Code
for any reason, including that some or all of such
entitlements constitute reasonable compensation for services
rendered or to be rendered (and do not, therefore, constitute
"parachute payments"), then, in such event, Officer shall be
entitled to receive such maximum amount. In the event of a
termination pursuant to this paragraph, Officer may,
concurrently with his election to terminate his employment
hereunder, elect either (i) to impose a duty upon himself to
seek other employment or to become self employed, in which
event (A) fifty percent (50%) of any salary, bonus, grant of
stock and defined benefit pension benefits or non-qualified
supplemental retirement benefits received by Officer during or
with respect to the remaining Term and attributable to
services rendered by Officer to persons or entities other than
Employer and fifty percent (50%) of any net income realized by
Officer by reason of self employment during or with respect to
the remaining Term shall be applied to reduce Employer's
obligation to make payments hereunder and (B) any benefits of
the kind referred to in Section 6(c) hereof received by
Officer during or with respect to the remaining Term and
attributable to services rendered by Officer to persons or
entities other than Employer shall be applied to reduce
Employer's obligation to provide such benefits hereunder, or
(ii) to be free of any duty to seek other employment or to
become self employed, in which event (C) one hundred percent
(100%) of any salary, bonus, grant of stock and defined
benefit pension benefits or non-qualified supplemental
retirement benefits received by Officer during or with respect
to the remaining Term and attributable to services rendered by
Officer to persons or entities other than Employer and one
hundred percent (100%) of any net income realized by Officer
by reason of self employment during or with respect to the
remaining Term shall be applied to reduce Employer's
obligation to make payments hereunder and (D) any benefits of
the kind referred to in Section 6(c) hereof received by
Officer during or with respect to the remaining Term and
attributable to services rendered by Officer to persons or
entities other than Employer shall be applied to reduce
Employer's obligation to provide such benefits hereunder.
<PAGE>
<PAGE>
Any duty imposed upon Officer by this Section 8 to seek
other employment shall in no event require Officer to accept
any position with any entity other than a financial
institution nor to accept any position which would be
inconsistent with the dignity, importance and scope of his
former position as Executive Vice President of Employer and
member of the Executive Management Committee.
(b) For purposes of the foregoing provisions, a "change
in control" means, and shall be deemed to have taken place if:
(i) any person or entity (or group of affiliated persons or
entities) (including a group which is deemed a "person" by
Section 13(d)(3) of the Securities Exchange Act of 1934)
acquires in one or more transactions, whether before or after
the date of this Agreement, ownership of more than fifty
percent (50%) of the outstanding shares of stock entitled to
vote in the election of directors of Employer, and (ii) as a
result of, or in connection with, any such acquisition or any
related proxy contest, cash tender or exchange offer, merger
or other business combination, sale of assets or any
combination of the foregoing transactions, the persons who
were directors of Employer immediately before such acquisition
shall cease to constitute five-sixths of the membership of the
Board or of the board of directors of any successor to
Employer after such transaction (but not more than twelve (12)
months after such transaction). "Ownership" means ownership,
directly or indirectly, of more than fifty percent (50%) of
such outstanding voting stock of Employer other than (A) by a
person owning such shares merely of record (such as a member
of a securities exchange, a nominee or a securities depositary
system), (B) by a person as a bona fide pledgee of shares
prior to a default and determination to exercise powers as an
owner of the shares, (C) by a person who is not required to
file statements on Schedule 13D by virtue of Rule 13d-l(b) of
the Securities and Exchange Commission under the Securities
Exchange Act of 1934 or (D) by a person who owns or holds
shares as an underwriter acquired in connection with an
underwritten offering pending and for purposes of their
resale. Without limitation, the right to acquire ownership
shall not of itself constitute ownership of shares.
(c) In the event that any payment, coverage or benefit
provided under this Agreement or otherwise provided to Officer
by or on behalf of Employer would, in the opinion of counsel
for Employer, not be deemed to be deductible in whole or in
part in the calculation of the Federal income tax of Employer,
<PAGE>
<PAGE>
or any other person making such payment or providing such
coverage or benefit, by reason of Section 28OG of the Code,
the aggregate payments, coverages or benefits provided
hereunder shall be reduced so that no portion of such amount
which is paid to Officer is not deductible for tax purposes by
reason of Section 28OG of the Code. Employer shall hold such
portions not paid to Officer in escrow. At the end of each
calendar quarter during the term of such escrow, Employer
shall deposit into escrow an amount equal to interest accrued
during such calendar quarter on the amount held in escrow
during such calendar quarter at a rate equal to the rate then
payable on judgments in California. If it shall be determined
at any point in time, by a counsel selected by Employer and
Officer, that it is more likely than not that the payment to
Officer of any or all of such amount held in escrow would be
deductible for tax purposes, such amount shall be paid out of
escrow to Officer. In the event of a final determination by
the Internal Revenue Service or of a final non-appealable
judicial decision that any such amount held in escrow could
never be deductible for tax purposes if paid to Officer, or if
it shall be determined at any point in time, by a counsel
selected by Employer and Officer, that it is more likely than
not that the payment to Officer of any such amount held in
escrow would never be deductible for tax purposes, such amount
shall be paid out of escrow to Employer. For purposes of this
paragraph, the value of any non-cash benefit or coverage or
any deferred or contingent payment or benefit shall be
conclusively determined by the independent auditors of
Employer in accordance with the principles of Section 28OG of
the Code.
9. REIMBURSEMENT OF BUSINESS EXPENSES. During
Officer's employment hereunder, to the extent that such
expenditures are substantiated by Officer as required by the
policies of Employer, Employer shall reimburse Officer
promptly for all expenditures (including travel, enter-
tainment, parking, business meetings and the monthly costs
(including dues) of maintaining memberships at appropriate
clubs) made in accordance with rules and policies established
from time to time by the Board in pursuance and furtherance of
Employer's business and goodwill.
10. INDEMNITY. To the extent permitted by applicable
law and the By-Laws of Employer (as from time to time in
effect) and without in any way impairing or affecting any
rights to indemnification that Officer has by reason of any
agreement to which he is party as of the date hereof, Employer
<PAGE>
<PAGE>
shall indemnify Officer and hold him harmless for any acts or
decisions made by him in good faith while performing services
for Employer, and shall use reasonable efforts to obtain
coverage for him under liability insurance policies now in
force or hereafter obtained during his employment hereunder
covering the other officers or directors of Employer. To the
same extent, Employer shall pay all expenses, including rea-
sonable attorneys' fees and the amounts of court approved
settlements, actually incurred by Officer in connection with
the defense of any action, suit or proceeding, and in
connection with any appeal thereon, which has been and/or may
be brought against Officer by reason of
Officer's services as an officer or agent of Employer or of a
subsidiary of Employer.
11. MISCELLANEOUS.
(a) SUCCESSION. This Agreement shall inure to the
benefit of and shall be binding upon Employer, its successors
and assigns, but without the prior written consent of Officer
this Agreement may not be assigned other than in connection
with a merger or sale of substantially all the assets of the
Company or similar transaction in which the successor or
assignee assumes (whether by operation of law or express
assumption) all obligations of the Company hereunder
(including without limitation those in Section 8 hereof). The
obligations and duties of Officer hereunder shall be personal
and not assignable.
(b) NOTICES. Any notices provided for in this Agreement
shall be sent to Employer at 9200 Oakdale Avenue, Chatsworth,
California 91311, Attention: Executive Vice President--Legal,
with a copy to the Chairman of the Compensation Committee of
the Board at the same address, or to such other address as
Employer may from time to time in writing designate, and to
Officer at such address as he may from time to time in writing
designate (or his business address of record in the absence of
such designation), with a copy to The AYCO Corporation, Suite
840, 2010 Main Street, Irvine, California 92714-7213,
Attention: Bradley E. Comp. All notices shall be deemed to
have been given two (2) business days after they have been
deposited as certified mail, return receipt requested, postage
paid, or one (1) business day after they have been deposited
as overnight mail, in either event properly addressed to the
designated address of the party to receive the notice, or
shall be deemed to have been given at the time receipt is
acknowledged if given by any form of electronic communication.
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<PAGE>
(c) ENTIRE AGREEMENT. This instrument contains the
entire agreement of the parties relating to the subject matter
hereof, and it replaces and supersedes any prior agreements
between the parties relating to said subject matter. No
modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
(d) WAIVER. The waiver of the breach of any term or of
any condition of this Agreement shall not be deemed to con-
stitute the waiver of any other breach of the same or any
other term or condition.
(e) CALIFORNIA LAW. This Agreement shall be construed
and interpreted in accordance with the laws of California, to
the extent controllable by stipulation of the parties.
(f) ATTORNEYS' FEES IN ACTION ON CONTRACT. If any
litigation or arbitration shall occur between the Officer and
Employer, which litigation or arbitration arises out of or as
a result of this Agreement or the acts of the parties hereto
pursuant to this Agreement, or which seeks an interpretation
of this Agreement, the prevailing party in such litigation or
arbitration, in addition to any other judgment or award, shall
be entitled to receive such sums as the court or arbitrator(s)
hearing the matter shall find to be reasonable as and for the
attorneys' fees of the prevailing party.
(g) CONFIDENTIALITY AND COMPETITION. Officer shall not
divulge or otherwise disclose, directly or indirectly, any
trade secret or other confidential information concerning the
business or policies of the Company or any of its affiliates
which he may have learned as a result of his employment
hereunder or prior thereto as an employee, officer or director
of the Company or any of its affiliates, except to the extent
such use or disclosure is (i) necessary to the performance of
this Agreement and in furtherance of the Company's best
interests, (ii) required by applicable law, (iii) lawfully
obtainable from other sources or (iv) authorized by the Compa-
ny. The provisions of this subsection shall survive the
suspension or termination, for any reason, of Officer's
employment hereunder.
During the course of Officer's employment hereunder,
Officer shall not compete, directly or indirectly, with the
Company in the businesses then conducted by the Company.
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<PAGE>
(h) REMEDIES OF EMPLOYER. Officer acknowledges that the
services he is obligated to render under the provisions of
this Agreement are of a special, unique, unusual,
extraordinary and intellectual character, which gives this
Agreement peculiar value to Employer, and that the loss of
these services cannot be reasonably or adequately compensated
in damages in an action at law and it would be difficult (if
not impossible) to replace such services. By reason thereof,
if Officer violates any of the material provisions of this
Agreement, Employer, in addition to any other rights and
remedies available under this Agreement or under applicable
law, shall be entitled to seek injunctive relief, from a
tribunal of competent jurisdiction, restraining Officer from
committing or continuing any violation of this Agreement, or
from the performance of services to any other business entity,
or both.
(i) SEVERABILITY. If this Agreement shall for any reason
be or become unenforceable by either party, this Agreement
shall thereupon terminate and become unenforceable by the
other party as well. In all other respects, if any provision
of this Agreement is held invalid or unenforceable, the
remainder of this Agreement shall nevertheless remain in full
force and effect, and, if any provision is held invalid or
unenforceable with respect to particular circumstances, it
shall nevertheless remain in full force and effect in all
other circumstances.<PAGE>
IN WITNESS WHEREOF, the parties
have executed and delivered this Agreement as of the date
first above written.
GREAT WESTERN FINANCIAL CORPORATION
By John F. Maher
Title President and Chief Operating Officer
OFFICER
A. William Schenck III
