<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549 - 1004
FORM 10-K
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4075
GREAT WESTERN FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-1913457
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9200 Oakdale Avenue, Chatsworth, California 91311-6519
(Address of principal executive offices) (Zip Code)
(818) 775-3411
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, $1 par value New York Stock Exchange
(and accompanying Preferred Pacific Stock Exchange
Stock Purchase Rights) London Stock Exchange
8 3/4% Cumulative Convertible New York Stock Exchange
Preferred Stock, $1 par value
8.30% Cumulative Preferred New York Stock Exchange
Stock, $1 par value
Securities registered pursuant to Section 12(g) of the Act: None
(Continued)<PAGE>
<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549-1004
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
---------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant as of February 27, 1995: $2,432,460,941
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of February 27, 1995: 134,323,492
DOCUMENTS INCORPORATED BY REFERENCE:
Part III - Portions of Proxy Statement for Annual Meeting of
Stockholders, April 25, 1995.
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
1994 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
Part I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 22
Item 3. Legal Proceedings........................................... 23
Item 4. Submission of Matters to a Vote of Security Holders......... 23
Part II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters........................... 24
Item 6. Selected Financial Data..................................... 25
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 26
Item 8. Financial Statements and Supplementary Data................. 47
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.................... 106
Part III
Item 10. Directors and Executive Officers of the Registrant.......... 106
Item 11. Executive Compensation...................................... 106
Item 12. Security Ownership of Certain Beneficial
Owners and Management..................................... 106
Item 13. Certain Relationships and Related Transactions.............. 106
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K................................... 106
<PAGE>
<PAGE>
PART I
------
ITEM 1. BUSINESS
GENERAL DESCRIPTION
Great Western Financial Corporation ("GWFC", "Great Western" or "the
Company"), with consolidated assets of approximately $42.2 billion, is a
savings and loan holding company organized in 1955 under the laws of the
state of Delaware. The principal assets of the Company are the capital stock
of Great Western Bank, a Federal Savings Bank ("GWB", "Great Western Bank"
or "the Bank") and Aristar, Inc. ("Aristar"). GWB is a federally chartered
stock savings bank and conducts most of its retail banking through 419
offices located in California and Florida. Real estate lending operations
are conducted directly by the Bank or by direct subsidiaries through 258
offices in 23 states with concentration in California, Florida and
Washington. Directly or through its subsidiaries, the Bank also engages in
consumer finance, mortgage banking, and other related financial services.
Aristar conducts consumer finance operations through 530 offices in 24
states, most of which operate principally under the names Blazer Financial
Services or City Finance and provide direct installment loans and related
credit insurance services and purchase retail installment contracts. For
financial information concerning the Company's two principal lines of
business, see Segment Data in Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
The Company is a legal entity separate and distinct from the Bank. The
principal source of the Company's revenues on an unconsolidated basis has
been dividends, interest and management fees from GWB. Various statutory and
regulatory restrictions and tax considerations, however, can limit, directly
or indirectly, the amounts that may be paid by the Bank. Dividends from
Aristar continue to be a source of revenue to the Company. For a discussion
of dividend restrictions, see Regulation - Capital Requirements, Capital
Distributions by GWB and Restrictions on Transactions with Affiliates.
The operations of savings associations are significantly influenced by
general economic conditions, by the related monetary and fiscal policies of
the federal government, and by the regulatory policies of financial
institution regulatory authorities, including the Federal Reserve Board
("FRB"), the Office of Thrift Supervision ("OTS") and the Federal Deposit
Insurance Corporation ("FDIC"). Deposit flows and cost of funds are
influenced by interest rates on competing investments and general market
rates of interest. Lending and other investment activities are affected by
the demand for mortgage financing and consumer and other types of loans,
which in turn are affected by the interest rates at which such financing may
be offered and other factors affecting the supply of housing and the
availability of funds. In 1994, rising interest rates and an improving real
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estate market contributed to the increased origination of adjustable rate
mortgages ("ARMs"). Nonperforming assets declined in 1994 and 1993, as a
result of the improving economy and the Company's program to accelerate the
disposition of distressed assets. However, in 1992, a deterioration in
collateral values supporting real estate loans impacted the valuation of the
Company's loans and real estate and resulted in an increase in nonperforming
assets.
ACQUISITIONS AND DISPOSITIONS
Great Western has grown in recent years through acquisitions. Since
1990, the transactions have been primarily branch deposit acquisitions from
the Resolution Trust Corporation ("RTC") which complemented the California
and Florida retail banking operations.
In December 1994, GWB completed the sale of $1 billion of deposits and
31 branches in west Florida to First Union National Bank. The deposits were
sold for a net pretax gain of $62.3 million, which included the write-off of
intangibles related to the sold branches of $10 million and other sale
related expenses of $2.2 million. This branch network was not able to
develop the economies of scale necessary to meet the Company's performance
objectives.
In October 1994, GWB purchased the deposits of six branches located in
San Diego County from Citibank, F.S.A., totaling $52 million. The deposits
were acquired for a premium of $1 million.
GWFC is frequently engaged in discussions with other financial
institutions of various sizes in various locations throughout the United
States and with governmental agencies regarding mergers, acquisitions or
dispositions. No assurance can be given that GWFC will complete any
particular transaction.
Additional information on specific acquisitions is summarized in Note
2 of the Notes to Consolidated Financial Statements in Item 8, "Financial
Statements and Supplementary Data".
INTEREST RATE MARGINS
GWFC's core operating results depend primarily on the margin between
the income the Bank receives from interest earning assets and its cost of
funds. The Bank now competes with commercial banks and other financial
intermediaries for funds in a deregulated environment. For additional
information see Lending and Customer Accounts below.
The composition of the interest rate margin is shown in Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
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The following table shows the components of the change in net interest
income for the years ended December 31, 1994, 1993 and 1992 that are included
in the Consolidated Statement of Operations in Item 8, "Financial Statements
and Supplementary Data".
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<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------
(Dollars in millions) 1994 vs. 1993 1993 vs. 1992 1992 vs. 1991
------------- ------------- -------------
<S> <C> <C> <C>
Mortgage-backed securities
Rate (1) $ (14) $ (47) $ (49)
Volume (2) 113 (33) (38)
Rate/Volume (3) (9) 6 5
----- ----- -----
90 (74) (82)
----- ----- -----
Real estate loans (4)
Rate (1) (65) (327) (512)
Volume (2) (65) 31 (56)
Rate/Volume (3) 2 (4) 10
----- ----- -----
(128) (300) (558)
----- ----- -----
Consumer loans (4)
Rate (1) (7) (17) 1
Volume (2) - (15) 39
Rate/Volume (3) - 1 -
----- ----- -----
(7) (31) 40
----- ----- -----
Securities and other
Rate (1) (19) 8 (17)
Volume (2) 17 (12) (13)
Rate/Volume (3) (4) (1) 2
----- ----- -----
(6) (5) (28)
----- ----- -----
Interest earning assets
Rate (105) (383) (577)
Volume 65 (29) (68)
Rate/Volume (11) 2 17
----- ----- -----
(51) (410) (628)
----- ----- -----
Customer accounts
Rate (1) (23) (325) (667)
Volume (2) 35 (92) 50
Rate/Volume (3) (1) 22 (17)
----- ----- -----
11 (395) (634)
----- ----- -----
Borrowings
Rate (1) 8 (71) (13)
Volume (2) (9) 121 (141)
Rate/Volume (3) - (26) 3
----- ----- -----
(1) 24 (151)
----- ----- -----
Interest bearing liabilities
Rate (15) (396) (680)
Volume 26 29 (91)
Rate/Volume (1) (4) (14)
----- ----- -----
10 (371) (785)
----- ----- -----
Change in net interest income $ (61) $ (39) $ 157
===== ===== =====
/TABLE
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(1) The rate variance reflects the change in the average rate multiplied
by the average balance outstanding during the prior period.
(2) The volume variance reflects the change in the average balance
outstanding multiplied by the average rate during the prior period.
(3) The rate/volume variance reflects the change in average rate multiplied
by the change in the average balance outstanding.
(4) Nonaccrual loans and amortized deferred loan fees are included in the
interest income calculations.
ASSET LIABILITY MANAGEMENT
As noted above, net interest income is a critical component of GWFC's
earnings. Therefore, asset liability management is of continuing importance
to the profitability of the Company. Using its Asset Liability Management
System, the sensitivity of interest variances is monitored using a model to
measure the effects of various rates, maturities and growth assumptions.
Through this process the Company is able to monitor the degree of interest
rate responsiveness at any time.
For information on interest earning assets and interest bearing
liabilities, see Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
LENDING
A summary of GWFC's lending activities is set forth on pages 101 and
102, titled Loan Analysis in Item 8, "Financial Statements and Supplementary
Data".
The Bank originates loans on existing residential property through
district loan offices which utilize loan agents who are compensated
principally on a commission basis. The Bank has also developed alternative
sources of loan origination which include wholesale brokers and a network of
correspondent relationships in which the Bank purchases loans originated by
unaffiliated mortgage lenders. Loans originated by third parties must meet
the same underwriting standards used by the Bank in its own lending. In
1994, third party origination sources produced more than $1.3 billion in new
loan volume compared with $445 million in 1993. The value of the property
as security for a loan is determined by qualified real estate appraisers.
The Bank requires title insurance equal to the amount of the loan and fire
and extended coverage insurance at least equal to the lesser of full
replacement value or the loan amount on all real estate which it finances
subject to any limitations imposed by state law.
ARMs represent the principal real estate loan investment of the
Company. See Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations".<PAGE>
<PAGE>
Many ARMs have annual percentage limits on the maximum amount of
interest change. In most cases, the interest rate charged on ARMs is lower
in the introductory period, generally three months, than the rate which is
charged thereafter and which is based on relevant indices. A significant
portion of the ARM portfolio is subject to lifetime maximum interest rates
("caps") and minimum interest rates ("floors"). Interest rates declined for
several years prior to the recent upturn in mid-1994 which resulted in a
reduction in the related indices. The rates on many mortgages have been
reduced to their floor level. ARMs which had reached their floors totaled
$4.9 billion, or 19.3 percent, at December 31, 1994 and $8.8 billion, or 31.7
percent, at December 31, 1993.
Payments generally are adjusted annually and, during certain intervals,
negative amortization ("deferred interest") may occur. Amounts added to ARM
loan balances as a result of deferred interest were $16 million, or .06
percent of such balances, in 1994, and $18 million, or .07 percent of such
balances, in 1993.
The Bank generally does not make loans with loan-to-value ratios
("LTV") exceeding 90 percent. Federal laws and regulations restrict the
nature, amount, terms and security for real estate loans which savings
associations may originate or purchase. Savings associations are subject to
regulatory real estate lending standards which, with limited exceptions,
require that the LTVs of real estate loans not exceed 65 percent for raw
land, 75 percent for developed land, 80 percent for construction of
commercial, multifamily and other nonresidential property, and 85 percent for
one to four family residential property. Owner occupied one to four family
and home equity loans are not subject to specific percentages, but to the
extent the LTV exceeds 90 percent, the loan must have private mortgage
insurance or be secured by readily marketable collateral.
As of December 31, 1994 the contractual maturities of all loans and
mortgage-backed securities were as follows:
<TABLE>
<CAPTION>
Mortgage-backed
Real Estate Loans Securities
----------------- ---------------
Fixed Fixed
(Dollars in millions) ARM Rate ARM Rate Consumer Total
--- ----- --- ----- -------- -----
December 31, 1994
---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
One year or less $ 486 $ 51 $ 108 $221 $ 914 $ 1,780
Over one to two years 515 46 115 197 583 1,456
Over two to three years 845 46 122 69 413 1,495
Over three to five years 1,389 145 269 45 166 2,014
Over five to ten years 3,372 404 836 113 202 4,927
Over ten to fifteen years 4,094 133 1,122 71 146 5,566
Over fifteen years 14,748 218 5,981 17 2 20,966
------- ------ ------ ---- ------ -------
$25,449 $1,043 $8,553 $733 $2,426 $38,204
======= ====== ====== ==== ====== =======
/TABLE
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<PAGE>
For information about real estate loans and mortgage-backed securities
("mortgages"), mortgage sales and servicing income see Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Notes 1, 4, 5 and 6 of the Notes to Consolidated Financial Statements in Item
8, "Financial Statements and Supplementary Data".
Federal savings associations have consumer lending powers which permit
the origination of unsecured as well as secured consumer loans for personal,
family or household purposes, which together with investments in commercial
paper and corporate debt securities, may not exceed 35 percent of the Bank's
assets. The Bank makes unsecured consumer loans in the form of student
educational loans, overdraft protection on checking accounts and other
consumer loans. GWB also is actively involved in consumer finance through
Great Western Financial Services, a division of the Bank. The Bank was well
below the maximum allowable percentage. See discussion in Related Financial
Services Activities following.
Federal savings associations are authorized to invest up to 400 percent
of their capital in loans secured by nonresidential real property. GWB's
loans secured by nonresidential real property at December 31, 1994
represented approximately 62 percent of its capital, or 15 percent of the
maximum allowable investment. In addition, federal savings associations may
also make secured and unsecured loans for commercial, corporate, business or
agricultural purposes in a total amount of not more than 10 percent of the
savings association's assets. The Bank does not engage in this type of
lending.
LOAN IMPAIRMENT
The Company adopted Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan" ("FAS 114") as of
January 1, 1993. FAS 114 provides guidance on the measurement of impaired
loans. GWFC measures impairment based on the fair value of the loan's
collateral.
Information regarding impaired loans is presented in Note 5 of the
Notes to Consolidated Financial Statements in Item 8, "Financial Statements
and Supplementary Data".
NONPERFORMING ASSETS
There are certain risks and uncertainties in originating loans. These
pertain to credit, appraisal and other underwriting factors occurring in the
loan portfolio subsequent to origination. Market risk has become
increasingly important in an economic environment characterized by declining
market values. These risks may result in loans becoming nonperforming
assets.
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<PAGE>
Delinquencies of single-family real estate loans continued to decline
during 1994, despite temporary increases in the first part of the year in
areas affected by the January 17, 1994 Northridge earthquake. The decrease
in single-family delinquencies began in 1993, due in part to bulk asset sales
and to an improving economy.
Information regarding nonperforming assets, valuation reserves and loss
provisions is presented in Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in Notes 5 and 7 of the
Notes to Consolidated Financial Statements in Item 8, "Financial Statements
and Supplementary Data".
INVESTMENT ACTIVITIES
Income from securities and other short-term investments generally
provides the largest source of interest income for GWFC after interest on
mortgages and consumer loans. The Bank is required to maintain a specified
minimum amount of liquid assets which may be invested in securities specified
by regulations as qualifying liquidity. Liquidity in excess of legal
requirements at December 31, 1994 was $368 million. Substantially all
security investments are of investment grade.
Dividends on Federal Home Loan Bank ("FHLBank") stock are included in
income on securities in the Consolidated Statement of Operations (see Note
9 of the Notes to Consolidated Financial Statements in Item 8, "Financial
Statements and Supplementary Data").
For information on the Company's securities portfolio, see Notes 1 and
3 of the Notes to Consolidated Financial Statements in Item 8, "Financial
Statements and Supplementary Data".
CUSTOMER ACCOUNTS
Customer accounts have traditionally been an important source of the
Bank's funds for use in lending and for other general business purposes.
Inflows to customer accounts historically have been related to general
economic conditions. Rates offered on new accounts are primarily based on
yields on Treasury securities and rates offered by competing financial
institutions.
For information on the Company's customer accounts, see Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 11 of the Notes to Consolidated Financial Statements in
Item 8, "Financial Statements and Supplementary Data".
<PAGE>
<PAGE>
BORROWINGS
Borrowings increased $6.6 billion in 1994 to fund asset growth. The
Company utilized securities sold under agreements to repurchase as a major
source of funds in 1994. GWB borrows funds from many sources, including the
FHLBank of San Francisco. At December 31, 1994, GWB had excess borrowing
capacity with the FHLBank of $7.6 billion. In addition, both GWB and Aristar
have issued commercial paper, medium-term notes and have entered into various
borrowing agreements.
In November 1994, Moody's Investors Service ("Moody's") increased its
rating on GWFC's senior debt to Baa1 and preferred depositary shares to Baa2.
Moody's also increased GWB's ratings on senior debt to A-2, subordinated debt
to A-3 and commercial paper to P-1.
For information on the Company's borrowings see Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Notes 12, 13 and 14 of the Notes to Consolidated Financial Statements in Item
8, "Financial Statements and Supplementary Data".
RELATED FINANCIAL SERVICES ACTIVITIES
The principal non-depository business activities of GWFC and GWB are
described below.
CONSUMER FINANCE GROUP Consumer finance activities are highly
regulated by federal and state laws of both general and specific
applicability. Federal regulations relate primarily to fair credit practice
matters. State regulations may include certain licensing requirements, which
vary from state to state and may require periodic examination to verify
compliance with, among other restraints, state interest rate and loan size
limits. GWB also has industrial banks which conduct activities similar to
those of consumer finance operations.
OTHER ACTIVITIES GWFC and its direct and indirect subsidiaries also
engage in related service businesses, including investment company advisor
and administration activities, insurance operations, real estate development
and other lines of business. GWFC and its direct and indirect subsidiaries
in the future may also pursue other business opportunities, although no
assurances concerning the timing or nature of such activities can be given.
COMPETITION AND OTHER MATTERS
Competition for customer accounts comes principally from other savings
associations, commercial banks, money market funds, credit unions,
corporations, governmental agencies and governmental debt securities,
insurance companies, pension funds, and other investment media, many of which
can offer investment alternatives. Many of these institutions also have
nationwide retail networks.
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Competition in residential lending activities comes principally from
other savings associations, mortgage companies, commercial banks and, to a
lesser degree, from finance companies, insurance companies, governmental
agencies, pension funds and trusts, and sellers of properties.
Competition in the provision of services being offered by GWFC and its
subsidiaries and affiliates in consumer lending, investment company advisor
and administration activities and other activities comes principally from the
traditional providers of such services and from other financial institutions.
INFLATION
While inflation has declined significantly during the past few years,
the Company recognizes the adverse effects that inflation could bring to its
financial position and operations and consequently monitors its effects
closely.
REGULATION
Holding Company Regulation
GENERAL The Company is a savings and loan holding company as a result
of its control of GWB. As such it is subject to regulation, supervision, and
examination by, and the reporting requirements of, the OTS and is governed
by the savings and loan holding company provisions of the Home Owners' Loan
Act.
RESTRICTIONS ON ACTIVITIES A savings and loan holding company is
prohibited, directly or indirectly, from obtaining control of a savings
association or savings and loan holding company without the prior approval
of the OTS. The Financial Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA"), permits the acquisition by a savings and loan holding
company of up to 5 percent of the voting shares of a savings association or
savings and loan holding company which is not one of its present affiliates.
No director, officer, or controlling shareholder of the Company may, except
with the prior approval of the OTS, acquire control of any savings
association which is not a subsidiary of the Company.
FIRREA empowers the OTS to impose restrictions when it determines that
there is reasonable cause to believe that the continuation by a savings and
loan holding company of any particular activity constitutes a serious risk
to the financial safety, soundness, or stability of a holding company's
subsidiary savings association. Thus, FIRREA confers on the OTS oversight
authority for all holding company affiliates, not just the savings
association. Specifically, the OTS may (i) limit the payment of dividends
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by a savings association; (ii) limit transactions between a savings
association, the holding company and the subsidiaries or affiliates of
either; and (iii) limit any activities of the savings association that might
create a serious risk that the liabilities of the holding company and its
affiliates may be imposed on the savings association. Any such limits will
be issued in the form of a directive having the effect of a cease and desist
order.
Regulation of Subsidiaries
GENERAL Deposits in GWB and the Company's industrial banks are insured
by the FDIC up to $100,000 and those institutions are regulated by the FDIC.
GWB is a federally chartered savings association which is also regulated by
the OTS. The industrial banks are state chartered institutions which are
regulated by state authorities in addition to being regulated by the FDIC.
State laws specify the investments which these state institutions may make
and the activities in which they may engage. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), however, insured
state banks may not engage in activities not permissible for national banks
unless the FDIC determines the activity will pose no significant risk to the
insurance fund and the bank complies with applicable capital standards.
The Company's consumer finance subsidiaries are governed by state and
federal laws. Federal laws relate primarily to fair credit practice matters.
State laws set out applicable licensing requirements, provide for periodic
examinations and establish maximum finance charges on credit extensions.
The Company's insurance subsidiaries are governed by state law and the
Company's securities brokerage and investment advisory subsidiaries are
governed by federal and state laws relating to their operation, registration,
capital and other matters.
QUALIFIED THRIFT LENDER FDICIA imposes revised requirements for
qualification as a qualified thrift lender ("QTL"). The test requires that
65 percent of a savings association's "portfolio assets" (all assets except
goodwill, intangibles, property used to conduct the thrift's business and
certain liquid assets up to 20 percent of assets) consist of "qualified
thrift investments" (including, subject to certain limits, residential
mortgage and construction loans, home improvement and repair loans, mortgage-
backed securities, home equity loans, FHLBank stock, Federal Savings and Loan
Insurance Corporation ("FSLIC"), FDIC, and RTC obligations, Residential
Funding Corporation obligations, Federal National Mortgage Association and
Federal Home Loan Mortgage Corporation stock, consumer loans, certain small
business loans and loans to construct or purchase or maintain churches,
schools, nursing homes and hospitals, investments in residential housing-
oriented service corporations, and 50 percent of mortgages originated and
sold within 90 days). At December 31, 1994, the asset composition of GWB was
substantially in excess of that required to qualify it to meet the QTL test.
<PAGE>
<PAGE>
The following sanctions may apply as the result of failure of a savings
association to remain a QTL: (i) required conversion of the savings
association's charter to a bank charter; (ii) limitations on new investments
and activities to those permissible for national banks; (iii) imposition of
branching restrictions applicable to national banks; (iv) prohibitions on new
advances to the savings association from its FHLBank; and (v) imposition of
dividend restrictions applicable to national banks. Three years after a
savings association ceases to be a QTL, it would be required to divest all
investments and cease all activities not permissible for national banks and
all FHLBank advances would have to be repaid in a prompt and prudent manner.
In addition, a savings and loan holding company holding such an association
would be required to register as a bank holding company.
DEPOSIT INSURANCE The FDIC maintains two separate funds - the Bank
Insurance Fund ("BIF"), which insures the deposits of the industrial banks
(the "Company's BIF-insured institutions"), and the Savings Association
Insurance Fund ("SAIF") which insures the deposits of GWB.
Under current law, the FDIC is required to increase the reserves of
both the BIF and the SAIF to 1.25 percent of insured deposits over a
reasonable period of time and thereafter to maintain such reserves at not
less than that level. Based on current projections, it is generally
anticipated that the BIF will reach the required reserve level in mid 1995.
However, it is expected that the SAIF reserves will not reach the required
level for a number of years without Congressional action to provide
additional funding or merge the separate insurance funds in some fashion.
Accordingly, the FDIC has proposed that future deposit insurance premiums of
SAIF-insured institutions be assessed at higher rates than the corresponding
premium assessment rates for BIF-insured institutions. The effect of this
proposal would be that the SAIF assessment rate to be paid by SAIF members
would continue to range from 23 cents per $100 of domestic deposits to 31
cents per $100 of domestic deposits, depending on risk classification. The
current assessment rate for GWB is 26 cents per $100 of domestic deposits for
the first half of 1995. The FDIC has proposed that BIF members pay an
assessment rate of 4 cents to 31 cents per $100 of domestic deposits. 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.
On March 1, 1995, GWFC submitted applications to federal bank
regulators seeking the creation of two new national banks in California and
Florida. Both 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 will file an application with the Federal Reserve to
become a bank holding company.
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If its applications are approved, GWFC will operate the banks at
existing branch locations and it is anticipated that a portion of GWB's
present deposit base will voluntarily flow to the national banks. The bank
applications are expected to be acted upon later in 1995 and require the
approval of the Office of the Comptroller of the Currency, the FDIC, and the
Federal Reserve Board.
FIRREA requires insured depository institutions to reimburse the FDIC
for any loss or anticipated loss to the FDIC that arises from a default of
a commonly controlled insured depository institution or assistance provided
to such an institution in danger of default.
There is a moratorium on conversions from SAIF membership to BIF
membership until SAIF reaches its designated reserve ratio of 1.25 percent.
FDICIA, however, permits savings associations and banks to merge with each
other with federal regulatory approval, so long as the resulting institution
continues to pay proportionate assessments to each respective insurance fund
until the moratorium expires. The legislation also permits a federal savings
association to acquire or be acquired by any insured depository institution.
CAPITAL REQUIREMENTS Capital standards applicable to savings
associations consist of three components - a leverage ratio requirement, a
tangible capital requirement and a risk-based capital requirement. All three
components are required by FIRREA to be no less stringent than the
corresponding requirements applicable to national banks, except that the
risk-based capital requirement for savings associations may deviate to
reflect interest-rate risk or other risks if such deviations do not, in the
aggregate, result in materially lower levels of capital being required of
savings associations than would be required under the risk-based capital
standards applicable to national banks.
The capital regulations contain special capital rules affecting savings
associations with certain kinds of subsidiaries. For purposes of determining
compliance with each of the capital standards, an increasing portion of a
savings association's investment in and extensions of credit to subsidiaries
engaged in activities not permissible for a national bank are, with certain
exceptions, deducted from the savings association's capital. At December 31,
1994, GWB's investments in and extensions of credit to such subsidiaries
aggregated $28 million, all of which was deducted from capital at December
31, 1994. At March 31, 1994, GWB dividended Bryant Financial Corporation
("Bryant"), a property development subsidiary, to GWFC at its book value of
$38.4 million.
The leverage ratio requirement requires a savings association to
maintain "core capital" of not less than 3 percent of adjusted total assets.
As mentioned below, the OTS proposed, but has not yet adopted, a stricter
standard which has become applicable to banks and under which banks are
required to maintain a core capital ratio of at least 3 percent and up to 5
percent depending upon their condition and the rating they have received from
<PAGE>
<PAGE>
the applicable regulatory body. Under the current standard, "core capital"
generally includes common equity, noncumulative perpetual preferred stock and
related surplus, and minority interests in consolidated subsidiaries, less
certain intangible assets (including goodwill), plus qualifying supervisory
goodwill and certain qualifying intangible assets. GWB's current and fully
phased-in ratio at December 31, 1994 was 5.12 percent. Until January 1995,
the amount of qualifying supervisory goodwill which may be included in core
capital will be phased out. The Bank had no qualifying supervisory goodwill.
The tangible capital requirement requires a savings association to
maintain "tangible capital" in an amount not less than 1.5 percent of
adjusted total assets. "Tangible capital" means core capital less any
intangible assets (including qualifying supervisory goodwill), plus certain
qualifying intangible assets. At December 31, 1994, GWB had a current and
fully phased-in ratio of tangible capital to total adjusted assets of 5.12
percent.
The risk-based capital requirements for savings associations are
similar in many respects to the risk-based capital guidelines of the FRB, the
Comptroller of the Currency and the FDIC. Among other things, the risk-based
capital requirements provide that the capital ratio applicable to an asset
will be adjusted to reflect the degree of credit risk associated with such
asset and the asset base for computing a savings association's capital
requirement will include off-balance-sheet assets. The regulations require
savings associations to maintain capital equal to 8 percent of risk-weighted
assets. A savings association's supplementary capital may be used to satisfy
the risk-adjusted capital ratios only to the extent of that association's
core capital. At December 31, 1994, GWB had a current and fully phased-in
ratio of capital to risk-based assets of 11.72 percent.
FDICIA requires the federal regulatory agencies to review the risk-
based capital standards to ensure that they adequately address interest-rate
risk, concentration of credit risk and risks from nontraditional activities.
The OTS amended its risk-based capital rules to incorporate interest-rate
risk ("IRR") requirements to 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.
A savings association which fails to meet the capital standards must
submit to the OTS Director a business plan which describes the manner in
which it proposes to increase its capital and the activities in which it will
engage. Any increase in the savings association's assets must be met with a
commensurate increase in the savings association's tangible capital and risk-
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based capital. As part of the submission of a capital plan, a savings
association will be required to certify that during the pendency of its
application for approval of its capital plan, it will adhere to certain
asset growth restrictions, and will not make any capital distributions or
engage in certain other prohibited or restricted activities. The OTS
Director must, with certain limited exceptions, limit the asset growth of any
such savings association. In addition, the OTS Director may issue a capital
directive to such a savings association which may contain restrictions the
OTS Director deems necessary or appropriate. GWB is not subject to any
capital directive at this time.
Pursuant to FDICIA, the federal banking agencies have adopted
regulations which establish a system of progressive constraints as capital
levels decline at banks and savings associations. The "prompt corrective
action" rules classify banks and savings associations into one of five
categories based upon capital adequacy, ranging from "well capitalized" to
"critically undercapitalized". Furthermore, FDICIA provides that under
certain circumstances a federal banking agency may reclassify an institution
to the next lower capital category based on supervisory information other
than the capital levels of the institution. A savings association is deemed
to be "well capitalized" if it: (a) has a risk-based capital ratio of 10
percent or greater; (b) has a ratio of core capital to risk-adjusted assets
of 6 percent or greater; (c) has a ratio of core capital to adjusted total
assets of 5 percent or greater; and (d) is not subject to an order, written
agreement, capital directive or prompt corrective action directive to meet
and maintain a specific capital level for any capital measure. A savings
association is deemed to be "adequately capitalized" if it is not "well
capitalized" and: (a) has a risk-based capital ratio of 8 percent or greater;
(b) has a ratio of core capital to risk-adjusted assets of 4 percent or
greater; and (c) has a ratio of core capital to adjusted total assets of 4
percent or greater (except that certain associations rated "composite 1"
under the OTS's CAMEL rating system may be adequately capitalized if their
ratio of core capital to adjusted total assets is 3 percent or greater). GWB
believes that it met the requirements to be "well capitalized" under the
regulations in effect as of December 31, 1994.
FDICIA also requires the appropriate federal banking agencies to take
corrective action to restrict asset growth, acquisitions, branching and new
business with respect to an "undercapitalized" institution and to take
increasingly severe additional actions if the institution becomes
"significantly undercapitalized" or "critically undercapitalized". FDICIA
also prohibits dividends and other capital distributions and the payment of
management fees to a controlling person if, following such distribution or
payment, the institution would fall within one of the three
"undercapitalized" categories.
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<PAGE>
FDICIA also requires an institution which is "undercapitalized" to
submit a capital restoration plan for improving its capital to the
appropriate federal banking agency. The holding company of such an
institution must guarantee that the institution will meet its capital
restoration plan, subject to certain limitations. If such a guarantee were
deemed to be a commitment to maintain capital under the federal Bankruptcy
Code, a claim under such guarantee in a bankruptcy proceeding involving the
holding company would be entitled to a priority over third party creditors
of the holding company.
As a condition of prior regulatory approval of certain transactions,
the Company has provided federal regulators with a commitment to maintain the
regulatory net worth of GWB at the minimum required amount and, if necessary,
to infuse sufficient additional capital to maintain such level. See
Regulation - Capital Requirements.
Under FDICIA, a bank or savings association that is "significantly
undercapitalized" is subject to severe restrictions on its activities, and
may be required, among other things, to issue additional debt or stock, to
sell assets or to be acquired by a depository institution holding company or
combine with another depository institution if one or more grounds exist for
appointing a conservator or receiver for the institution. A bank or savings
association that is "critically undercapitalized" will be subject, with
certain exceptions, to the mandatory appointment of a conservator or receiver
by the appropriate federal banking agency within 90 days after such
institution becomes "critically undercapitalized". The effect of this
provision is to increase significantly the circumstances in which a
conservator or receiver may be appointed for an institution. In addition,
a bank or savings association that is "critically undercapitalized" is
subject to more severe restrictions on its activities and on payment of
subordinated debt, and may be prohibited, among other things, from entering
into material investment, expansion, acquisition or disposition transactions
or paying interest on new or renewed liabilities at a rate that would
significantly increase the institution's weighted average cost of funds. An
institution will be considered to be "critically undercapitalized" if the
institution has a ratio of "tangible equity" to total assets that is equal
to or less than 2 percent.
The FDIC has adopted a minimum core capital standard under which state
nonmember banks are required to hold core capital consisting generally of
common equity, minority interests in equity accounts of consolidated
subsidiaries, and qualifying perpetual preferred stock of at least 3 percent
and up to 5 percent of total assets. Banks receiving the highest rating
from the FDIC are permitted to maintain core capital of 3 percent of total
assets, while less healthy banks are required to maintain core capital of 4
to 5 percent. A bank with core capital of less than 2 percent would be
deemed to be in an unsafe and unsound condition. The OTS may or may not
adopt a similar standard that will be applicable to savings associations.
<PAGE>
<PAGE>
With respect to savings associations, the FDIC will use the core
capital standard in determining whether to approve applications for deposit
insurance, the right to exercise additional powers, or to merge or make
acquisitions. The FDIC may also use the new standard in determining whether
to take enforcement action against a savings association when an unsafe or
unsound practice exists.
The Company's BIF-insured institutions are required to have risk-based
capital of 8 percent of risk-weighted assets, based on the credit risk deemed
inherent in institutions' assets, including certain off-balance-sheet assets.
In addition, core capital must be 4 percent of risk-weighted assets. At
December 31, 1994, the industrial banks exceeded the required ratios.
CAPITAL DISTRIBUTIONS BY GWB The Company is a legal entity separate
and distinct from the Bank and the Company's other subsidiaries. The primary
source of the Company's revenues on an unconsolidated basis has been
dividends from GWB. Various regulatory and tax considerations, however,
limit directly or indirectly the amount of dividends GWB can pay. Should GWB
distribute dividends in excess of the amount of its available earnings and
profits (as determined for federal income tax purposes), such excess would
be subject to federal income tax. At December 31, 1994, the Bank had
approximately $663 million of retained earnings available for the payment of
dividends without adverse tax consequences. Dividend payments are further
restricted by regulations as discussed below.
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
percent of their net income during the calendar year plus the amount that
would reduce by one half their "surplus capital ratio" (the excess over their
fully phased-in capital requirement) at the beginning of the calendar year
or (2) 75 percent of their net income over the most recent four-quarter
period. Tier 2 associations may, after prior notice but without approval
of the OTS, make capital distributions of up to 25 percent to 75 percent of
their net income over the most recent four-quarter period depending upon
their current risk-based capital position. Tier 3 associations may not make
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capital distributions without prior approval. Amendments to these rules
have been proposed by the OTS to conform the rules to FDICIA requirements.
The Company believes that GWB is a Tier 1 association as of December 31,
1994. 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. In addition, FDICIA prohibits dividends and other
capital distributions if, following such distribution, the savings
association would fall within one of three "undercapitalized" categories.
See Regulation - Capital Requirements.
COMMUNITY REINVESTMENT ACT The Community Reinvestment Act ("CRA")
requires each savings association to identify the communities it serves and
the types of credit the savings association is prepared to extend within
those communities. CRA also requires the OTS to assess the savings
association's record of helping to meet the credit needs of its community and
to take such assessment into consideration when evaluating applications for
mergers, acquisitions and other transactions. A less than satisfactory CRA
rating may be the basis for denying such applications.
In connection with its assessment of CRA performance, the OTS assigns
a rating of "outstanding", "satisfactory", "needs to improve" or "substantial
noncompliance". Based on the most recent CRA examination conducted in 1993,
the Bank received a rating of "outstanding". The rules governing CRA
compliance are under review.
RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES FIRREA imposes on savings
associations the affiliate transaction restrictions contained in Sections
23A, 23B, 22(g) and 22(h) of the Federal Reserve Act in the same manner and
to the same extent as such restrictions now apply to member banks. Such
restrictions are also applicable to the industrial banks. In addition, a
savings association may not make any loan or other extension of credit to an
affiliate unless that affiliate is engaged only in activities permissible for
bank holding companies. Further, a savings association may not purchase or
invest in securities issued by an affiliate other than a subsidiary. The OTS
is authorized to impose more stringent restrictions on a savings
association's affiliated transactions than those contained in Sections 23A
and 23B.
SUBSIDIARY INVESTMENT LIMITS The amount which a federal savings bank
may invest in service corporations and subsidiaries (whether in equity or
debt of such corporations) is limited to an amount equal to 3 percent of
assets, provided investments in excess of 2 percent of assets serve certain
community purposes. The service corporation investment limit (for savings
associations like GWB which meet net worth and certain other requirements)
is exclusive of an amount not to exceed 50 percent of net worth which may be
invested in "conforming" (i.e., otherwise authorized) loans to service
corporations. At December 31, 1994, GWB's aggregate investment in service
corporations (exclusive of conforming loans of $48 million) was approximately
.3 percent of its assets.<PAGE>
<PAGE>
NOTICE OF CERTAIN ACTIVITIES FIRREA requires a savings association
seeking to establish a new subsidiary, acquire control of an existing company
(after which it would be a subsidiary), or conduct a new activity through a
subsidiary, to provide 30 days prior notice to the FDIC and the OTS and
conduct any activities of the subsidiary in accordance with regulations and
orders of the OTS. The OTS has the power to force a savings association to
divest or terminate any activity that it determines is a serious threat to
the financial safety, soundness or stability of such savings association or
is otherwise inconsistent with sound banking practices. In addition, the
FDIC is authorized to determine whether any specific investment activity
poses a threat to the SAIF and to prohibit any SAIF member from engaging
directly in such activity, even if it is an activity that is a permissible
investment for a federal savings association.
LOANS-TO-ONE BORROWER LIMITATIONS FIRREA conforms savings
associations' loans-to-one borrower limitations to those applicable to
national banks. The lending limits for national banks apply to all savings
associations in the same manner and to the same extent as they now apply to
national banks. The lending limits for national banks have been revised by
the Office of the Comptroller of the Currency, and the changes will
automatically apply to savings associations. Under the new rules, effective
March 17, 1995, the basic lending limit will be 15 percent of the amount of
Tier 1 and Tier 2 capital actually included in risk-based capital, plus the
allowance for loan and lease losses not included in Tier 2 capital. It is
not expected that this limitation will have any significant effect upon GWB's
lending activities as currently conducted.
BROKERED DEPOSITS A rule adopted by the FDIC permits only "well
capitalized" institutions to obtain brokered deposits. "Adequately
capitalized" institutions may obtain brokered deposits if they receive a
waiver from the FDIC. The rule adopted by the FDIC also prohibits
institutions which are not "well capitalized" from soliciting deposits at
rates significantly higher than prevailing rates. GWB believes that it is
a "well capitalized" institution at December 31, 1994.
LIQUIDITY OTS regulations require savings associations to maintain for
each calendar month an average daily balance of liquid assets (including cash
and certain time deposits, bankers' acceptances, specified corporate
obligations and specified United States government, state government and
federal agency obligations) of not less than 5 percent of the average daily
balance of its net withdrawable deposit accounts (the amount of all deposit
accounts less the unpaid balance of all loans made on the security of such
accounts) and borrowings payable on demand or in one year or less. This
liquidity requirement may be changed from time to time by the OTS within the
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range of 4 percent to 10 percent. OTS regulations also require each savings
association to maintain for each calendar month an average daily balance of
short-term liquid assets (generally those having maturities of 12 months or
less) at an amount not less than 1 percent of the average daily balance of
its net withdrawable accounts plus such short-term debt during the preceding
calendar month. At December 31, 1994, the liquidity ratio of GWB was 6.16
percent and its short-term liquidity ratio was 2.06 percent which was in
compliance with these requirements.
FEDERAL HOME LOAN BANK SYSTEM GWB is a member of the FHLBank System,
which consists of 12 regional Federal Home Loan Banks. It is required to
acquire and hold shares of capital stock in the applicable FHLBank in an
amount equal to the greater of 1 percent of the aggregate principal amount
of its unpaid residential mortgages, one-twentieth of its outstanding
advances and letters of credit from the FHLBanks or .3 percent of total
assets as of the close of each calendar year.
The FHLBank serves as a reserve or central bank for the member
institutions within its assigned region. It makes advances (i.e. loans) to
members in accordance with its established policies and procedures. The
maximum amount of credit which the FHLBank will extend for purposes other
than meeting withdrawals varies from time to time in accordance with its
policies. The FHLBank interest rates charged for advances vary depending
upon maturity, the cost of funds to the FHLBank and the purpose of the
borrowing.
FIRREA requires the FHLBanks to contribute a significant amount of
their reserves and up to $300 million a year in annual earnings to fund the
principal and a portion of the interest payable on bonds issued to fund the
resolution of failed savings associations. In addition, the statute provides
that each FHLBank must transfer a percentage of its annual net earnings to
a specified affordable housing program. As a result of these requirements,
it is anticipated that the FHLBanks will continue to pay reduced dividends
with respect to their stock and that GWB will continue to receive reduced
dividends on such stock in the foreseeable future. As of December 31, 1994,
GWB held $306 million of FHLBank stock and received dividends in the amount
of $15.9 million in 1994 with respect to such stock.
FEDERAL RESERVE BOARD REGULATIONS Pursuant to the Depository
Institutions Deregulation and Monetary Control Act of 1980, the FRB adopted
regulations that require depository institutions to maintain reserves against
their transaction accounts and nonpersonal time deposits. In December 1990,
the FRB eliminated the reserve requirement on nonpersonal time deposits. The
balances maintained to meet the reserve requirements imposed by the FRB may
be used to satisfy liquidity requirements imposed by the OTS. At December
31, 1994, balances at GWB totaled $329 million. The effect of this reserve
requirement is to decrease an institution's available investment funds.
Effective April 2, 1992, the FRB cut the reserve requirement on transaction
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accounts to 10 percent from 12 percent. Savings associations have authority
to use various FRB services and to borrow from the Federal Reserve Bank's
"discount window", but FRB regulations require them to exhaust all FHLBank
sources before borrowing from a Federal Reserve Bank. In addition, FDICIA
restricts the period during which discount advances may be outstanding to
undercapitalized depository institutions. As a creditor and a financial
institution, GWB is subject to additional regulations promulgated by the FRB,
including, without limitation, Regulation B (Equal Credit Opportunity Act),
Regulation E (Electronic Funds Transfers Act), Regulation F (Interbank
Liabilities), Regulation Z (Truth in Lending Act), Regulation CC (Expedited
Funds Availability Act) and Regulation DD (Truth in Savings Act).
SAFETY AND SOUNDNESS STANDARDS Pursuant to statutory requirements, the
OTS has issued a proposed rule that prescribes certain "safety and soundness
standards". The standards are intended to enable the OTS to address problems
at savings associations before the problems cause significant deterioration
in the financial condition of the savings association. The proposed
regulation provides operational and managerial standards for internal
controls and information systems, loan documentation, internal audit systems,
credit underwriting, interest rate exposure, asset growth and compensation,
fees and benefits. The proposed regulation also requires a savings
association to maintain a ratio of classified assets no greater than 100
percent of total capital and ineligible allowances. A minimum earnings
standard is also included in the proposed regulation requiring earnings
sufficient to absorb losses without impairing capital. Earnings are
sufficient under the proposed regulation if the association meets applicable
capital requirements and would remain in capital compliance if its net income
or loss over the last four quarters of earnings continued over the next four
quarters of earnings. A savings association that fails to meet any of the
standards must submit a compliance plan. Failure to submit an acceptable
compliance plan or to implement the plan could result in an OTS order or
other enforcement action against the savings association. In August 1994,
the Federal Deposit Insurance Act was amended to permit the federal banking
agencies to adopt safety and soundness guidelines rather than regulations.
The OTS has not taken any action to date on the proposed rules and may, in
response to the statutory changes, propose new guidelines rather than adopt
the proposed rules.
REAL ESTATE LENDING STANDARDS The federal banking regulatory agencies,
including the OTS, adopted regulations which require institutions to adopt
written real estate lending policies that, among other things, must be
consistent with guidelines adopted by the agencies. Among the guidelines
adopted by the OTS and the other agencies are maximum loan-to-value ratios
for land loans (65 percent); land development loans (75 percent);
construction loans (80-85 percent); loans on owner-occupied 1-4 unit
residential properties, including home equity loans (no specific required
limit, but loans at or above 90 percent require private mortgage insurance
or readily marketable collateral); and loans on other improved property (85
percent).
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The guidelines permit institutions to make loans in excess of the
supervisory loan-to-value limits if such loans are supported by other credit
factors, but the aggregate of such nonconforming loans should not exceed the
institution's total capital, and the aggregate of nonconforming loans secured
by real estate other than 1-4 unit residential properties should not exceed
30 percent of total capital. Institutions are required to review, and update
as appropriate, their real estate lending policies on at least an annual
basis.
CLASSIFICATION OF ASSETS Savings associations are required to classify
their assets on a regular basis, to establish allowances for losses and
report the results of such classification quarterly to the OTS. For
additional information see Note 1 of the Notes to Consolidated Financial
Statements in Item 8, "Financial Statements and Supplementary Data".
With respect to classified assets, if the OTS concludes that additional
assets should be classified or that the valuation allowances established by
the savings association are inadequate, the examiner may determine, subject
to review by the savings association's Regional Director, the need for and
extent of additional classification or any increase necessary in the savings
association's general or specific valuation allowances.
A savings association is also required to set aside adequate valuation
allowances to the extent that an affiliate holds assets posing a risk to the
association. A savings association must also establish liabilities for off-
balance-sheet items, such as letters of credit, when loss becomes both
probable and reasonably estimable.
The OTS has issued guidance for the classification of assets and a
policy on the classification of collateral-dependent loans (where proceeds
from repayment can be expected to come only from the operation and/or sale
of the collateral). For troubled collateral-dependent loans where it is
probable that the lender will be unable to collect all amounts due, a savings
association must classify as "loss" any excess of the recorded investment in
the loan over its "value", and classify the remainder as "substandard". The
"value" of a loan is the fair value of the collateral less estimated costs
to sell.
The federal banking agencies, including the OTS, have issued an
interagency policy statement on the allowance for loan and lease losses (the
"Policy Statement"). The Policy Statement requires that federally-insured
depository institutions maintain an allowance for loan and lease losses
("ALLL") adequate to absorb credit losses associated with the loan and lease
portfolio, including all binding commitments to lend. Given the appropriate
facts and circumstances as of the evaluation date, the Policy Statement
defines an adequate ALLL as a level that is no less than the sum of (1) for
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loans and leases classified as substandard or doubtful, credit losses over
the remaining effective lives of such loans and leases; (2) for loans and
leases that are not classified, all estimated credit losses forecasted for
the upcoming twelve months; and (3) amounts for estimated losses from
transfer risk on international loans. Additionally, an adequate level of ALLL
should reflect an additional margin for imprecision inherent in most
estimates of expected credit losses.
The Policy Statement also provides guidance to examiners in evaluating
the adequacy of the ALLL. Among other things, the Policy Statement directs
examiners to check the reasonableness of ALLL methodology by comparing the
reported ALLL against the sum of (1) 50 percent of the portfolio that is
classified doubtful, (2) 15 percent of the portfolio that is classified
substandard; and (3) for the portions of the portfolio that have not been
classified (including those loans and leases designated special mention),
estimated credit losses over the upcoming twelve months given the facts and
circumstances as of the evaluation date (based on the institution's average
annual rate of net charge-offs experienced over the previous two or three
years on similar loans and leases, adjusted for current conditions and
trends).
The Policy Statement specifies that the amount of ALLL determined by
the sum of the amounts above is neither a floor nor a "safe harbor".
However, it is expected that examiners will review a shortfall relative to
this amount as indicating a need to more closely review management's analysis
to determine whether it is reasonable, supported by the weight of reliable
evidence and that all relevant factors have been appropriately considered.
TAXATION
Under the Internal Revenue Code, chartered savings associations that
meet certain definitional tests and conditions are allowed federal income tax
deductions for additions to bad debt reserves. Such additions may be
determined under the experience method or the percentage of taxable income
method. In order to retain the special bad debt reserve treatment, savings
associations must maintain 60 percent or more of their assets in certain
qualifying assets, consisting of some of the same assets as in the QTL test,
as well as other assets. GWB has met all tests for all applicable years.
If in some future year the Bank either fails the QTL test and converts
to a bank charter or fails to meet the tax asset test, it would be ineligible
to obtain a bad debt deduction under the reserve method and may be required
to recapture its existing tax bad debt reserves.
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In 1994, GWB paid dividends totaling $140 million to GWFC, which
included the book value of Bryant of $38.4 million. Future dividends by GWB
are subject to certain tax restrictions in addition to regulatory and other
considerations. Retained earnings that have not been subject to federal
income tax, because of the above bad debt deduction, are not available for
dividends or any other distribution, including one made on dissolution or
liquidation, without the payment of federal income taxes. Further, at
December 31, 1994, GWB's limitations on capital distributions would have
restricted the payment of dividends before untaxed retained earnings were
reached.
Notes 1, 15, and 17 of the Notes to Consolidated Financial Statements
in Item 8, "Financial Statements and Supplementary Data", present the
accounting implications for income taxes.
EMPLOYEES
GWFC employed 15,644 persons at December 31, 1994. Employees are not
represented by a union or collective bargaining group and GWFC considers its
employee relations to be satisfactory. Employees are provided retirement,
savings incentive and other benefits, including life, health and accident and
hospital insurance.
ITEM 2. PROPERTIES
The executive offices of both GWFC and GWB are located in the home
office building owned by GWB at 9200 Oakdale Avenue, Chatsworth, California.
GWFC owns approximately 43 percent of the 6.1 million square feet in which
its headquarters, administrative and branch offices are located throughout
several states, including California and Florida.
See Note 10 of the Notes to Consolidated Financial Statements in Item
8, "Financial Statements and Supplementary Data", for information on
properties, leases and property operations.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The following information appears in Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and Item 8,
"Financial Statements and Supplementary Data".
(a) Market and market prices of the common stock - page 105
(b) Approximate number of common security holders - page 105
(c) Common stock dividend history and restrictions - page 105
(d) Common stock dividend policy - pages 44, 45, 84 and 85
<PAGE>
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ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR SUMMARY
<TABLE>
<CAPTION>
(Dollars in thousands, except per share) 1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Summary of Operations
Interest income $ 2,629,718 $ 2,680,784 $ 3,091,093 $ 3,718,796 $ 4,073,085
Interest expense 1,307,448 1,297,930 1,668,731 2,453,540 2,905,134
----------- ----------- ----------- ----------- -----------
Net interest income 1,322,270 1,382,854 1,422,362 1,265,256 1,167,951
Provision for loan losses 207,200 463,000 420,000 149,900 285,000
----------- ----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 1,115,070 919,854 1,002,362 1,115,356 882,951
Other income 367,897 327,855 282,131 257,582 192,393
Noninterest expense 1,076,433 1,155,662 1,188,981 867,508 799,670
----------- ----------- ----------- ----------- -----------
Earnings before taxes on income 406,534 92,047 95,512 505,430 275,674
Federal and state taxes on income 155,300 30,000 41,600 207,300 148,600
Accounting changes - - 31,094 - -
----------- ----------- ----------- ----------- -----------
Net earnings $ 251,234 $ 62,047 $ 85,006 $ 298,130 $ 127,074
=========== =========== =========== =========== ===========
Summary of Financial Condition
Cash and securities $ 2,065,660 $ 1,846,780 $ 1,660,485 $ 1,397,529 $ 1,819,823
Loans receivable and mortgage-backed
securities 37,647,975 33,850,799 33,752,661 35,115,730 34,767,295
Real estate 256,967 434,077 1,153,383 1,123,043 960,815
Other assets 2,247,655 2,216,704 1,872,657 1,963,326 1,857,874
----------- ----------- ----------- ----------- -----------
Total assets $42,218,257 $38,348,360 $38,439,186 $39,599,628 $39,405,807
=========== =========== =========== =========== ===========
Customer accounts 28,700,947 31,531,563 30,908,665 30,570,368 29,649,038
Borrowings and debentures 10,120,660 3,479,341 4,151,052 5,592,453 6,539,388
Other liabilities 912,864 914,055 929,735 1,115,747 1,207,539
Stockholders' equity 2,483,786 2,423,401 2,449,734 2,321,060 2,009,842
----------- ----------- ----------- ----------- -----------
Total liabilities and equity $42,218,257 $38,348,360 $38,439,186 $39,599,628 $39,405,807
=========== =========== =========== =========== ===========
Per Common Share Data
Fully diluted earnings $ 1.69 $ .28 $ .53 $ 2.24 $ .99
Dividends .92 .92 .91 .87 .83
Stock price - high 20 7/8 20 3/8 19 3/4 20 7/8 20 1/2
- low 15 3/8 15 5/8 13 11 1/4 8 3/4
Year-end closing price 16 20 17 1/2 18 12 1/4
Stockholder's equity 16.30 16.05 16.48 17.01 15.64
Earnings rate of return on stockholder's equity 10.35% 2.53% 3.50% 13.73% 6.19%
Price earnings ratio 9 71 33 8 12
Dividend rate of return 5.8% 4.6% 5.2% 4.8% 6.8%
Dividend rate as a percent of earnings 54.4% 328.6% 171.7% 38.8% 83.8%
At Year End
Average equity to average assets 6.2% 6.5% 6.2% 5.5% 5.2%
Return on average assets .65% .16% .22% .75% .32%
Number of common shares issued 134,315,592 132,616,172 130,814,018 128,875,761 128,536,888
Number of beneficial and record stockholders 52,633 55,469 42,332 33,662 34,075
Number of employees 15,644 17,029 16,016 14,786 14,057
Number of offices 1,207 1,180 1,101 1,095 1,222
/TABLE
<PAGE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Great Western reported consolidated net earnings of $251 million, or
$1.69 per share, for 1994 compared with $62 million, or $.28 per share, for
1993 and $85 million, or $.53 per share, for 1992. Earnings before taxes in
1994 were $407 million compared with $92 million in 1993 and $95.5 million
in 1992. Earnings in 1994 included a $62.3 million pretax gain on the sale
of 31 Florida West Coast retail banking branches. In addition, the Company
wrote off approximately $11.7 million of intangibles related to interstate
banking access rights.
Provisions for losses on loans and real estate in 1994 fell to $219
million, down from $555 million and $640 million in 1993 and 1992,
respectively. The decline in provisions in 1994 was the result of improving
asset quality, as nonperforming assets declined from $1.13 billion, or 2.90
percent of assets, at December 31, 1993 to $846 million, or 1.98 percent of
assets, at December 31, 1994. The higher loss provisions on real estate
loans and real estate in 1993 included $150 million related to four bulk
sales of $659 million of troubled real estate assets completed in the second
half of the year, in addition to the significant increases in 1-4 unit
residential loan ("single-family" or "SFR") delinquencies.
Net interest income for 1994 was $1.32 billion compared with $1.38
billion in 1993 and $1.42 billion in 1992. In 1994, the decline in net
interest income was attributed to a declining net interest margin, which more
than offset the increase in interest earning assets. The 1993 decrease in
net interest income was the result of both a slightly narrower net interest
margin and a lower level of average interest earning assets. In 1992, the
effect of an increase in the net interest margin, partially a result of
falling interest rates, more than offset a small decline in average interest
earning assets. In a rising interest rate environment, borrowing costs
increase more swiftly than rates charged on ARMs, thereby compressing net
interest margins. Should interest rates continue to increase, it is
anticipated that the net interest margin will continue to contract, but may
be offset by asset growth.
<PAGE>
<PAGE>
As a result of the lower provisions for losses in 1994, the returns on
average assets and average equity have improved from the disappointing level
of the prior two years. The components of the ratio to average assets
follow:
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------
Ratio to Average Assets 1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net interest income 3.40% 3.64% 3.66% 3.19% 2.94%
Other income .94 .86 .73 .65 .50
Less: Operating expenses (2.53) (2.60) (2.37) (2.05) (1.87)
Provisions for losses (.56) (1.46) (1.64) (.43) (.85)
Other expenses (.20) (.20) (.13) (.09) (.03)
----- ----- ----- ----- -----
Income before taxes and
accounting changes 1.05 .24 .25 1.27 .69
Taxes (.40) (.08) (.11) (.52) (.37)
Accounting changes - - .08 - -
----- ----- ----- ----- -----
Return on average assets .65% .16% .22% .75% .32%
===== ===== ===== ===== =====
Return on average equity 10.35% 2.53% 3.50% 13.73% 6.19%
===== ===== ===== ===== =====
</TABLE>
The following summarizes the contribution to net earnings from the
principal business units:
<TABLE>
<CAPTION>
For Year Ended December 31
--------------------------
(Dollars in millions) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Banking operations $188 $ 5 $45
Consumer finance operations 63 57 40
---- --- ---
$251 $62 $85
==== === ===
</TABLE>
<PAGE>
<PAGE>
ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS
The Company adopted Statement of Financial Accounting Standards No.
119, "Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments" ("FAS 119") as of December 31, 1994. FAS 119 requires
disclosure of information regarding amounts, nature and terms of derivative
financial instruments and options. The disclosure requires the description
of the objectives, strategies and classes of derivatives and related gains
and losses in the financial statements or in the notes thereto.
In the fourth quarter of 1994, the Company adopted Statement of
Financial Accounting Standards No. 118, "Accounting by Creditors for
Impairment of a Loan -Income Recognition and Disclosure" ("FAS 118"). The
Company's income recognition policy was in compliance with the provisions of
FAS 118 and the adoption of this statement had no effect on the Company's
financial condition or results of operations.
As of December 31, 1993, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("FAS 115"). Investments in debt and equity securities
for which the Company has the positive intent and ability to hold to maturity
are recorded at amortized cost. All other investments are classified as
available for sale and recorded at fair value. Unrealized gains and losses
on available-for-sale securities are excluded from earnings and reported as
a separate component of stockholders' equity. The Company has no trading
portfolio as defined by FAS 115.
As of January 1, 1993, the Company adopted FAS 114. FAS 114 requires
that impaired loans be measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate, the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. When the measure of the impaired loan is less than the
recorded investment in the loan, the impairment should be recorded through
a valuation allowance.
The presentation of this information is included below and in the Notes
to Consolidated Financial Statements in Item 8, "Financial Statements and
Supplementary Data".
INTEREST EARNING ASSETS
Interest earning assets primarily comprise mortgages, consumer finance
loans and marketable securities. Average interest earning assets increased
3 percent in 1994 after decreases of 1 percent in 1993 and 3 percent in 1992.
ARMs on residential property continue to be the primary lending
product. The demand for this product is a principal factor governing asset
growth. The Federal Reserve Board increased interest rates throughout 1994
to curb inflationary concerns. As rates steadily rose in 1994, the ARM
became more popular with customers as the predominant mortgage product as the
<PAGE>
<PAGE>
introductory rates generally were lower than the rates charged on fixed-rate
loans. ARMs comprised 88 percent of real estate loans originated in 1994
compared with 62 percent in 1993 and 54 percent in 1992. In the latter
months of 1994, ARMs were approximately 99 percent of new loan originations.
Loans originated at fixed rates, which comprised the remainder of the
volume, were sold to others to minimize portfolio interest-rate risk. Also,
as a result of the rising rate environment, the mortgage market transitioned
from a refinance to a purchase property market. Refinance activity comprised
44 percent of real estate lending in 1994 compared with 64 percent in 1993
and 65 percent in 1992.
To complement loan originations, the Company purchased mortgage-backed
securities as part of a program designed to enhance interest earning assets'
growth with low-credit-risk assets. These securities are tied to the cost
of funds index for financial institutions comprising the 11th District
Federal Home Loan Bank of San Francisco ("FHLB") Cost of Funds Index
("COFI"). Purchases of mortgage-backed securities were $1.5 billion in 1994
compared with $925 million in 1993. The 1994 purchases of adjustable rate
securities had an average spread of 172 basis points over COFI, and were
included in the Company's available-for-sale portfolio. During 1994, the
Company swapped $5.5 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 mix of interest earning assets continued to reflect a declining
percentage of apartment and commercial ("income-producing") loans. Income-
producing loans were 7.8 percent of total interest earning assets at year-end
1994 compared with 9.5 percent at year-end 1993 and 9.8 percent at year-end
1992. This trend is the result of Great Western's decision in 1987 to
discontinue commercial real estate lending except to finance the sale of
foreclosed properties. The SFR portfolio, combined with mortgage-backed
securities, represented 83 percent of total interest earning assets at year-
end 1994 compared with 81 percent at year-end 1993 and 80 percent at year-end
1992. The increase in the percentage of single-family mortgages should
continue in 1995. The following table shows the shift in the composition of
interest earning assets:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
December 31
--------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loans receivable
Single-family 59.2% 71.7% 71.2% 70.4% 68.2%
Apartments 4.3 5.1 5.4 5.7 6.1
Commercial 3.5 4.4 4.4 4.8 5.4
Consumer 6.1 6.2 6.6 6.6 5.7
----- ----- ----- ----- -----
73.1 87.4 87.6 87.5 85.4
Mortgage-backed securities 23.5 8.9 8.9 9.7 10.8
Securities 2.6 2.9 2.6 2.0 3.0
Investment in FHLB stock .8 .8 .9 .8 .8
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
The following table summarizes the real estate loan portfolio as of
December 31, 1994 by security type and year of origination:
<TABLE>
<CAPTION>
(Dollars in millions) SFRs Apartments Commercial Total
Year of Origination ---- ---------- ---------- -----
<S> <C> <C> <C> <C>
1994 $ 4,913 $ 44 $ 59 $ 5,016
1993 3,472 50 103 3,625
1992 2,266 57 41 2,364
1991 1,973 30 12 2,015
1990 3,675 49 25 3,749
Prior to 1990 7,088 1,482 1,153 9,723
------- ------ ------ -------
$23,387 $1,712 $1,393 $26,492
======= ====== ====== =======
</TABLE>
The tables on pages 98, 102, and 103 in Item 8, "Financial Statements
and Supplementary Data" present additional data on the interest earning asset
portfolio.
<PAGE>
<PAGE>
INTEREST BEARING LIABILITIES
Interest bearing liabilities comprise retail and wholesale customer
accounts and borrowings.
Customer accounts declined $2.8 billion in 1994, or 9 percent of the
beginning balance, compared with increases of $623 million, or 2 percent, in
1993 and $338 million, or 1 percent, in 1992. The decrease in 1994 included
the sale of $1 billion in retail deposits to First Union National Bank,
offset by the acquisition of $52 million of deposits from Citibank, F.S.A.
The 1993 and 1992 increases included approximately $4.4 billion and $2.2
billion, respectively, in retail deposits from several acquisitions,
primarily from the RTC. Since 1990, Great Western has concentrated on
increasing transaction account balances while certificates of deposit
declined and were not renewed in many instances because of lower interest
rates. Borrowings increased $6.6 billion in 1994 to enable asset growth and
to fund the Florida branch sale and customer account outflows. Borrowings
had declined in each of the prior four years. The following table shows the
shift in interest bearing liabilities:
<TABLE>
<CAPTION>
December 31
-----------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Customer accounts
Retail accounts
Term 41.5% 50.2% 50.1% 55.2% 56.7%
Transaction 30.9 38.2 36.1 26.4 19.2
Wholesale accounts 1.5 1.7 2.0 2.9 6.0
----- ----- ----- ----- -----
73.9 90.1 88.2 84.5 81.9
Borrowings 26.1 9.9 11.8 15.5 18.1
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
<PAGE>
<PAGE>
The following table shows the components of the change in customer
account balances:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Transaction
Demand accounts $ 193 $ 314 $ 802 $ 348 $ 95
Money market and other
transaction accounts (1,175) (511) 1,301 1,564 394
Certificates of deposit (843) (3,179) (3,657) (2,645) 1,193
Wholesale accounts (24) (95) (366) (1,129) (467)
------- ------- ------- ------- -------
(1,849) (3,471) (1,920) (1,862) 1,215
Acquisitions (sales) of
Florida deposits (1,034) - 1,773 1,870 6,976
Acquisitions of California
deposits 52 4,420 469 2,080 50
Withdrawals of high-rate
accounts included in
acquisitions - - - (1,055) (2,426)
Other purchase and sale
activity - (326) 16 (112) 50
------- ------- ------- ------- -------
$(2,831) $ 623 $ 338 $ 921 $ 5,865
======= ======= ======= ======= =======
</TABLE>
The Company concentrates its retail deposit-gathering activity in two
states: California and Florida.
Transaction accounts declined $982 million in 1994 and $197 million in
1993 after an increase of $2.1 billion in 1992. Money market accounts in
1994 declined as customers shifted funds to term accounts as rates offered
increased from the low rates in the past few years. Transaction accounts
comprised 42 percent of total customer deposits at year-end 1994 compared
with 43 percent at year-end 1993 and 42 percent at year-end 1992. These
balances include 19 percent, 21 percent and 23 percent, respectively, in
money market accounts in 1994, 1993 and 1992.
<PAGE>
<PAGE>
Certificates of deposit declined $843 million in 1994, or approximately
25 percent of the outflows of each of the prior two years. As interest rates
offered increased in 1994, customers shifted from money market accounts.
Certificates of deposit declined in 1993 and 1992 due to the low interest
rates offered on such accounts. A portion of the 1993 decrease in
certificates of deposit was the withdrawal of $1.6 billion of deferred
compensation accounts, which included $1.3 billion from the state of
California.
Wholesale accounts, which are able to be used as an alternative source
of lendable funds, totaled $564 million at December 31, 1994 and have
continued to run off during the past three years. The balance of wholesale
accounts at year-end 1994 comprised 2 percent of total deposits. Wholesale
accounts totaled $588 million at year-end 1993 and $683 million at year-end
1992. Wholesale account activity will fluctuate depending upon the need for
funding sources for asset growth.
Borrowings, other than customer accounts, totaled $10.1 billion at
December 31, 1994 compared with $3.5 billion at December 31, 1993 and $4.2
billion at December 31, 1992. The large unused borrowing capacity at year-
end 1993 enabled borrowings to be increased $6.6 billion to fund asset growth
in 1994. The Company increased reverse repurchase agreements $6.3 billion
in 1994. Borrowings were not a significant factor in funding new lending
during 1993 and 1992 as a result of customer deposit acquisitions. At
December 31, 1994, customer accounts comprised 74 percent of interest bearing
liabilities, compared with 90 percent and 88 percent at year-ends 1993 and
1992, respectively.
The tables on pages 99 and 100 in Item 8, "Financial Statements and
Supplementary Data" present a detailed composition of borrowings and customer
accounts.
NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income was $1.32 billion in 1994 compared with $1.38
billion in 1993 and $1.42 billion in 1992. For the year 1994, the average
net interest margin was 3.50 percent compared with 3.79 percent for 1993 and
3.89 percent for 1992. Net interest income and net interest margin are the
two primary measures of core earnings strength. The average net interest
margin contracted in 1994 as market rates rose sharply and the Company's
margin was affected by the ARM repricing lag.
Great Western offers various adjustable rate mortgage products which
are tied to: the COFI, the Federal Cost of Funds Index ("FCOFI"), one year
Treasury bills and the prime rate. The FCOFI is tied to two components of
the federal government's cost of funds - the monthly average interest rate
on all marketable Treasury bills and the monthly average interest rate on all
<PAGE>
marketable Treasury notes. Customer acceptance of a product depends upon the
relationship of the index and initial offering rates. The interest
differential over the appropriate index was approximately 17 to 22 basis
points lower for FCOFI loans than COFI loans during 1994. The principal
mortgage instrument in 1994 and 1993 was the COFI ARM. In 1994, the COFI ARM
was primarily a tiered-cap loan where the interest-rate cap is periodically
increased over six years. In 1992 the product of choice by the customer was
the FCOFI ARM.
The composition of real estate loan originations by type was as
follows:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
ARM
COFI 79% 48% 17%
FCOFI 1 9 33
T-bill 6 2 1
Other 2 3 3
Total ARM 88 62 54
--- --- ---
Fixed rate 12 38 46
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
The cost of funds of GWB relative to COFI and FCOFI is shown as
follows:
<TABLE>
<CAPTION>
GWB Cost of
Funds Less Than
GWB Cost ---------------
of Funds COFI FCOFI COFI FCOFI
-------- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
December 31, 1994 4.019% 4.589% 5.971% .570% 1.952%
September 30, 1994 3.534 4.039 5.562 .505 2.028
June 30, 1994 3.263 3.804 5.238 .541 1.975
March 31, 1994 3.197 3.629 4.928 .432 1.731
December 31, 1993 3.319 3.879 4.892 .560 1.573
December 31, 1992 3.730 4.432 5.384 .702 1.654
</TABLE>
<PAGE>
<PAGE>
Both FCOFI and COFI ARMs lag changes in market rates by approximately
two months. In a rising-rate environment, the cost of short-term liabilities
will increase ahead of the ARMs; whereas, in a declining-rate environment,
net interest income and net interest margins increase during the lag period.
The repricing lag on COFI and FCOFI ARMs reduced the average net interest
margin by approximately eight basis points in 1994 compared with increases
of approximately eight basis points in 1993 and 24 basis points in 1992. The
average net interest margin is compressed in a rising interest-rate
environment as increases in COFI and FCOFI, to which most interest earning
assets are tied, lag behind deposit and borrowing rate increases.
The Company currently originates ARMs for its own portfolio and
originates fixed-rate residential loans for sale in the secondary market.
The Company utilizes both a short-term hedge contract program and forward
sales for the fixed-rate commitment period to protect against rate
fluctuations on the commitments to fund fixed-rate loans. Fixed-rate lending
totaled $923 million in 1994, $3.4 billion in 1993 and $4.2 billion in 1992.
Sales of these mortgages totaled $1.1 billion in 1994, $3.1 billion in 1993
and $4.1 billion in 1992. Total mortgage sales in 1994 were $1.2 billion,
compared with $3.6 billion in 1993, which included $473 million of distressed
asset bulk sales, and $4.2 billion in 1992. In 1994, the Company sold a $55
million adjustable rate, nonperforming troubled debt restructuring ("TDR")
from the real estate loans held for investment portfolio. Nearly all
mortgage sales, excluding bulk sales, were loans originated for sale or held
as available for sale. At December 31, 1994, the Company serviced for others
$11 billion in mortgages with a loan servicing spread of 44 basis points
compared with $12.3 billion at December 31, 1993 with a loan servicing spread
of 42 basis points and $13.1 billion at December 31, 1992 with a loan
servicing spread of 34 basis points. The decline in loans serviced for
others in 1994 and 1993 was the result of loan principal repayments exceeding
new loan sales.
Loans available for sale are valued at the lower of cost or market.
As of December 31, 1994, $61.3 million of real estate loans, primarily fixed-
rate loans, were designated as available for sale. Gains on mortgage sales
of $5.3 million were recognized. Unrecognized gains on real estate loans
available for sale totaled $176,000 at year end. Mortgage-backed securities
and other securities available for sale are carried at fair value. At
December 31, 1994, $2.9 billion in mortgage-backed securities, primarily ARM
securitized products, were designated as available for sale. There were no
sales of mortgage-backed securities in 1994. Gains and losses are calculated
on the specific identification method. Securities available for sale at the
end of 1994 had a fair value of $917 million. Net gains recognized during
the year totaled $432,000.
Great Western monitors asset and liability maturities and reviews
exposure to interest-rate risk, giving consideration to interest-rate trends
and funding requirements. The following table shows that the portfolio of
short-term assets exceeded liabilities maturing or subject to interest
adjustment within one year by $3.8 billion at December 31, 1994. This
compared with $3.1 billion at December 31, 1993 and $5.1 billion at December
31, 1992.<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Maturity/Rate Sensitivity
--------------------------------------------------------------------
December 31, 1994 % of Within Over
(Dollars in millions) Rate Balance Total 1 year 1-5 years 5-15 years 15 years
---- ------- ----- ------ --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Earning Assets
Securities 6.28% $ 1,027 3 $ 1,027 $ - $ - $ -
Mortgage-backed securities 6.55 9,286 23 8,934 352 - -
Investment in FHLB stock 5.70 306 1 - - - 306
Loans receivable
Real estate
Adjustable rate 6.88 25,449 64 23,943 1,506 - -
Fixed-rate
Short-term 8.95 454 1 45 92 149 168
Long-term 8.80 589 2 91 152 207 139
Consumer 16.38 2,426 6 576 1,507 271 72
----- ------- --- ------- ------- ----- ----
7.42 39,537 100 34,616 3,609 627 685
----- ------- --- ------- ------- ----- ----
Interest Bearing Liabilities
Customer accounts
Regular savings 2.02 2,000 5 2,000 - - -
Checking and limited access 1.88 10,013 26 10,013 - - -
Wholesale transaction - 158 - 158 - - -
Term accounts 4.87 16,530 43 11,069 5,452 9 -
----- ------- --- ------- ------- ----- ----
3.60 28,701 74 23,240 5,452 9 -
Borrowings
Federal Home Loan Bank 5.47 187 - 186 1 - -
Other 6.43 9,934 26 7,542 1,620 723 49
Impact of interest rate swaps - - - (109) 109 - -
----- ------- --- ------- ------- ----- ----
4.34 38,822 100 30,859 7,182 732 49
----- ------- --- ------- ------- ----- ----
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 December 31, 1993 3.76% $ 840 $ 3,105 $(1,833) $(764) $332
===== ======= ======= ======= ===== ====
</TABLE>
<TABLE>
<CAPTION>
December 31
-------------
Calculation of Adjusted Margin 1994 1993
---- ----
<S> <C> <C>
Unadjusted margin 3.08% 3.76%
Benefit of net interest earning assets .08 .08
---- ----
Adjusted Margin 3.16% 3.84%
==== ====
/TABLE
<PAGE>
<PAGE>
The following table shows the year-end interest-rate margins and the
components used in the margin calculation, reflecting the trends during the past
five years:
<TABLE>
<CAPTION>
December 31
---------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Average Yield on
Loans 7.75% 7.54% 8.32% 9.84% 11.01%
Mortgage-backed securities 6.55 5.93 7.08 8.63 8.92
Securities 6.15 4.49 4.07 6.24 7.87
----- ----- ----- ----- -----
Earning assets 7.42 7.28 8.06 9.62 10.67
----- ----- ----- ----- -----
Average Cost of
Customer accounts 3.60 3.10 3.48 5.34 7.40
Borrowings 6.42 7.34 7.60 7.69 9.16
----- ----- ----- ----- -----
Cost of funds 4.34 3.52 3.97 5.70 7.72
----- ----- ----- ----- -----
Net Interest Margin 3.08% 3.76% 4.09% 3.92% 2.95%
===== ===== ===== ===== =====
</TABLE>
Because the effective yield is subject to varying interest rates during
the year and also is affected by the loss of interest on nonaccrual loans,
the following table on net interest income shows the average monthly
balances, interest income and interest expense, and effective average rates
by asset and liability component. This table also reflects the yield which
results because of the benefit of interest earning assets exceeding interest
bearing liabilities.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1994 December 31, 1993 December 31, 1992
------------------------ ------------------------ ------------------------
Average Average Average Average Average Average
(Dollars in millions) Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets
Securities $ 1,121 $ 62 5.51% $ 897 $ 68 7.60% $ 1,075 $ 73 6.84%
Mortgage-backed securities 4,763 276 5.80 2,958 186 6.27 3,390 260 7.67
Loans receivable
Real estate 28,507 1,914 6.71 29,439 2,042 6.94 29,045 2,342 8.06
Consumer 2,261 378 16.73 2,263 385 17.02 2,343 416 17.74
------- ------ ----- ------- ------ ----- ------- ------ -----
Total interest earning assets 36,652 2,630 7.17 35,557 2,681 7.54 35,853 3,091 8.62
Other assets 2,289 2,453 2,985
------- ------- -------
Total assets $38,941 $38,010 $38,838
======= ======= =======
Interest bearing liabilities
Customer accounts
Term accounts $16,953 713 4.20 $16,378 693 4.23 $19,619 1,022 5.21
Transaction accounts 13,233 237 1.79 12,712 246 1.93 11,618 312 2.68
------- ------ ----- ------- ------ ----- ------- ------ -----
30,186 950 3.15 29,090 939 3.23 31,237 1,334 4.27
Borrowings
Federal Home Loan Bank 307 18 5.80 1,058 51 4.79 342 31 9.05
Other 5,089 340 6.67 4,482 308 6.88 3,730 304 8.16
------- ------ ----- ------- ------ ----- ------- ------ -----
Total interest bearing liabilities 35,582 1,308 3.67 34,630 1,298 3.75 35,309 1,669 4.73
Other liabilities 931 926 1,102
Stockholders' equity 2,428 2,454 2,427
------- ------- -------
Total liabilities and equity $38,941 $38,010 $38,838
======= ======= =======
Interest-rate spread 3.50% 3.79% 3.89%
===== ===== =====
Effective yield summary
Interest income/earning assets $36,652 $2,630 7.17% $35,557 $2,681 7.54% $35,853 $3,091 8.62%
Interest expense/earning assets 36,652 1,308 3.57 35,557 1,298 3.65 35,853 1,669 4.65
------ ----- ------ ----- ------ -----
Net yield on earning assets $1,322 3.60% $1,383 3.89% $1,422 3.97%
====== ===== ====== ===== ====== =====
</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 1994, the Company decreased
reserve levels on the real estate loan and real estate portfolios as a result
of decreasing nonperforming assets and an improving economy. In 1993 and
1992, the Company increased its general loss reserves on both loans and real
estate to give effect to the recessionary environment in valuing its loan and
real estate portfolios.
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 office space
market appear to be somewhat more favorable in Northern California than in
Southern California. In particular, the vacancy rate in the San Francisco
area was 10 percent at December 31, 1994 and 12 percent at December 31, 1993.
In the Los Angeles area, the vacancy rate was 20 percent at both December 31,
1994 and December 31, 1993. In San Diego County, the vacancy rate was 18
percent at December 31, 1994 compared with 21 percent at December 31, 1993.
In the industrial space market, Northern and Southern California
vacancy rates appear to be more comparable. In the San Francisco area, the
vacancy rate decreased to 10 percent at December 31, 1994 from 11 percent a
year earlier. In the Los Angeles area, the vacancy rate decreased to 8
percent at December 31, 1994 from 11 percent a year earlier. San Diego
County's industrial space market had the lowest vacancy rate consisting of
4 percent at both December 31, 1994 and December 31, 1993.
In the single-family market, regional differences also exist in the
economic performance of Northern, Central and Southern California. For
example, the median metropolitan area sales price of existing single-family
homes in the San Jose area decreased from the third quarter of 1993 to the
third quarter of 1994 by less than 1 percent. During the same period, the
median sales price declined 3 percent in the Los Angeles area and remained
relatively stable in the San Diego area.
<PAGE>
<PAGE>
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 LTV are considered in this review process.
As a monitoring device, the Company reviews the trends of loans
delinquent for periods of less than 90 days on a monthly (and within-month)
basis. The following summarizes loans delinquent for periods from 30 to 89
days:
<TABLE>
<CAPTION>
December 31
--------------------------
(Dollars in millions) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
30-59 days delinquent
SFR loans $168.6 $190.9 $291.0
Other 24.0 19.0 46.3
60-89 days delinquent
SFR loans 90.4 105.2 137.3
Other 6.7 8.8 10.5
</TABLE>
The January 17, 1994 Northridge earthquake increased loan delinquencies
and is expected to result in losses in the real estate loan portfolio in the
range of $20 million to $25 million. The expected losses are lower than
initially projected and will be covered by existing loan loss reserves. The
Company had originally identified approximately 2,800 loans, primarily SFRs,
in earthquake- affected areas with outstanding principal balances of $368
million. A 90-day forbearance was offered to customers who suffered damages
during the earthquake. Subsequent to this initial program, arrangements for
repayment or for additional forbearance are being provided on a case-by-case
basis. These programs are intended to reduce the possibility of foreclosure
and therefore mitigate losses and costs of holding property. Delinquencies
on SFRs in the earthquake-affected areas were as follows:
<TABLE>
<CAPTION>
December 31 September 30 June 30
(Dollars in millions) 1994 1994 1994
----------- ------------ -------
<S> <C> <C> <C>
30-59 days delinquent $ 8.7 $20.2 $ 19.4
60-89 days delinquent 5.2 11.2 39.5
90 days or more delinquent 35.6 52.2 68.3
----- ----- ------
$49.5 $83.6 $127.2
===== ===== ======
</TABLE>
<PAGE>
<PAGE>
The decrease in these delinquencies is primarily the result of loans
that were brought current or paid off, and to a lesser degree, loans that
were foreclosed.
The following table shows the trend in the single-family residential
portfolio and delinquencies (two or more payments delinquent) over the past
three years:
<TABLE>
<CAPTION>
December 31
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
SFR loans as a percent of total
real estate loans 90.3% 88.3% 87.9%
SFR delinquency as a percent of total
single-family residential loans 2.6 3.2 4.8
</TABLE>
The level of nonperforming assets declined 25 percent in 1994 and 44
percent in 1993 after an increase of 24 percent in 1992. In 1994, bulk sales
of foreclosed single-family properties totaled $304 million. Auction sales
have also been utilized to accelerate the disposition of foreclosed
properties. In the second half of 1993, the Company completed four bulk
asset sales, which totaled $659 million, in an effort to reduce nonperforming
assets. Bulk sales in 1993 included two sales totaling $330 million of
single-family real estate loans and real estate and the sale of $115 million
of single-family owned real estate. Nonperforming SFR loans have fallen to
$509 million at December 31, 1994 compared with $522 million and $782 million
at year-end 1993 and 1992, respectively. A sale of $214 million of income
property loans, some of which were performing assets, was also completed in
1993.
Net charge-offs in the SFR portfolio were $190 million, or .71 percent
of the SFR portfolio, in 1994, $252 million, or .98 percent, in 1993, and $53
million, or .21 percent, in 1992. The loss exposure on the SFR portfolio
increased in 1993, due in part to the Company's accelerated disposition
program, and has declined slightly in 1994, reflecting the signs of economic
recovery, although it still remains high by historical standards. At
December 31, 1994, the Company's real estate loan portfolio included $3
billion in uninsured residential mortgage loans that were originated with
terms on which the LTV exceeded 80 percent (but not in excess of 90 percent).
This balance represents a decline from the level of $3.5 billion a year ago.
For the year 1994, losses totaled $24.3 million, or .59 percent of this
portfolio, compared with $44.8 million, or .81 percent, in 1993 and $10.1
million, or .15 percent, in 1992. Since November 1, 1990, the Company has
purchased mortgage insurance on all new single-family residential mortgages
originated with LTVs in excess of 80 percent.
<PAGE>
<PAGE>
Certain loans (where GWB works with borrowers encountering economic
difficulty) meet the criteria of, and are classified as, TDRs because of
modification to loan terms. In the second quarter of 1993, federal banking
regulators issued a joint release regarding credit availability, which
allowed some nonperforming loans to be returned to performing status. As a
result, TDRs which meet certain conditions of repayment and performance have
not been included in nonperforming assets. At December 31, 1994, $23.5
million of TDRs were classified as performing assets compared with $81.6
million at December 31, 1993.
The recorded investment in loans for which impairment has been
recognized in accordance with FAS 114 totaled $213 million at December 31,
1994, net of $45 million of reserves for estimated losses related to such
loans and $307 million at December 31, 1993, net of $40.6 million of reserves
for estimated losses. A change in the fair value of an impaired loan is
reported as an increase or reduction to the provision for loan losses.
Real estate acquired through foreclosure is classified as performing
when it meets certain criteria of operating profitability. As of December
31, 1994, such assets totaled $56 million.
The following table presents nonperforming assets together with related
ratios to total assets:
<TABLE>
<CAPTION>
December 31
--------------------------
(Dollars in millions) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Delinquent loans $565 $ 626 $ 880
TDRs 125 213 161
Loans in-substance foreclosed - - 480
Real estate 156 293 490
---- ------ ------
$846 $1,132 $2,011
==== ====== ======
Ratio of nonperforming assets
to total assets 1.98% 2.90% 5.12%
</TABLE>
The table on page 102 in Item 8, "Financial Statements and
Supplementary Data" presents nonperforming assets together with related
ratios to total assets, and the table on page 103 in Item 8, "Financial
Statements and Supplementary Data" presents nonperforming real estate assets
by state and by security type.
<PAGE>
<PAGE>
Provisions for loan losses totaled $207 million in 1994 compared with
$463 million in 1993 and $420 million in 1992. In 1994, the Company
decreased the provision for loan losses as a result of decreasing
nonperforming assets and an improving economy. Provisions in 1993 included
$125 million related to three bulk loan sales of $544 million and $20 million
for the continued accelerated disposition of single-family real estate in
1994. Real estate owned had been written down to 53.6 percent of the
previous loan balances at December 31, 1994 and 70 percent at December 31,
1993. Loan loss reserves were 63 percent of nonperforming or restructured
loans as of December 31, 1994 compared with 60 percent a year earlier.
The Company recorded provisions for real estate losses of $12 million,
$92 million and $220 million for 1994, 1993 and 1992, respectively, on its
real estate available for sale or development. The decline in the 1994
provision is the result of improving property values and declining levels of
nonperforming real estate. Loss provisions in 1993 included $31 million for
single-family real estate developments located in Southern California and $25
million related to the $115 million SFR bulk real estate sale. The 1992
provision was primarily for commercial and apartment real estate.
The Company's provision for loan losses, charge-off experience, and
reserve for estimated losses for the last five years is presented in the
Notes to Consolidated Financial Statements in Item 8, "Financial Statements
and Supplementary Data" on page 67.
The Company has not experienced a need for loss reserves on security
investments, which are of investment grade. Security investments available
for sale are carried at fair value.
OPERATIONS
Net interest income declined in 1994 due to a 29-basis-point lower net
interest margin, which more than offset the $1.1 billion increase in average
interest earning assets. Other interest income totaled $33 million in 1994.
This compared with $39 million in 1993 and $35 million in 1992. Other
interest income included interest on settlements with the IRS, dividends on
FHLB stock and interest on short-term investments.
Real estate services income was $85.6 million in 1994 compared with
$114 million in 1993 and $119 million in 1992. Gain on mortgage sales was
$5.3 million, $24.8 million and $32.8 million for the years 1994, 1993 and
1992, respectively. The gain as a percent of mortgage-banking sales,
primarily fixed-rate mortgages, was .48 percent in 1994 compared with .80
percent in 1993 and .79 percent in 1992. Mortgage servicing income totaled
$50.9 million in 1994 compared with $51.2 million in 1993 and $52.7 million
in 1992. Real estate servicing and origination-related fee income was $29.4
million in 1994 compared with $37.9 million in 1993 and $33.1 million in
1992. Additional information on mortgage banking sales is provided in Note
6 of the Notes to Consolidated Financial Statements in Item 8, "Financial
Statements and Supplementary Data".
<PAGE>
<PAGE>
Retail banking fee income increased in 1994 to $141 million from $113
million in 1993 and $92.4 million in 1992. The growth in this income is
attributable to higher average balances in transaction accounts and to the
growth in deposits as a result of acquisitions. The Company managed mutual
funds with assets aggregating $3 billion at December 31, 1994 compared with
$3.2 billion at December 31, 1993. Net revenue from these operations, which
comprises commissions and other income from mutual fund operations, totaled
$39.9 million in 1994 compared with $38 million in 1993 and $36.7 million in
1992.
In 1994, the Company recorded a $62.3 million pretax gain on the sale
of 31 Florida West Coast retail banking branches with deposits of $1 billion.
This branch network was not able to develop the economies of scale necessary
to meet the Company's performance objectives.
In 1993, the Company sold its $219 million bank card portfolio because
it was not expected to achieve the economies of scale that are increasingly
necessary in the bank card business, resulting in a net gain of $22.9
million. The following is a summary of gains and losses on the Company's
securities and investments:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
(Dollars in millions) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gain on sale of bank card portfolio $ - $22.9 $ -
Gain on securities .4 .2 .4
Other gains 3.2 2.1 .9
----- ----- ----
$ 3.6 $25.2 $1.3
===== ===== ====
</TABLE>
Other income totaled $8.2 million in 1994 compared with $7 million in
1993 and 1992. In 1994, the Company received $1.2 million on the sale of a
computer program license of the Consumer Finance Group.
The growth in operating and administrative expenses during the past
three years was primarily the result of significant branch acquisitions. The
Company has acquired 399 branches in California and Florida from the RTC and
other sources since 1990 when it began its program to increase transaction
accounts. Nearly half of these branches were consolidated with existing
facilities. Expenses totaled $1.04 billion in 1994 compared with $1.03
billion in 1993 and $970 million in 1992. The January 17, 1994 Northridge
earthquake caused damage at the Company's administrative headquarters.
Operating expenses in 1994 included $11.7 million of building repairs. All
future repairs should be covered by earthquake insurance. Operating expenses
<PAGE>
<PAGE>
in 1993 included restructuring charges of $30 million, primarily severance
benefits associated with the cost-reduction program at the Company's
administrative headquarters. Approximately $28.5 million was charged against
this reserve in 1994, principally for employee separation expenses and
associated costs. The Company reduced its work force by more than 1,300 jobs
by the end of 1994, or eight percent of the work force. The cost-reduction
program has eliminated unnecessary tasks and improved efficiency.
Approximately $60 million of reductions were realized in 1994 from this
program. Anticipated savings in 1995 and beyond will exceed $100 million.
Amortization of intangibles in 1994 included approximately $11.7
million of accelerated amortization related to interstate banking access
rights.
Operating expenses increased by 1.4 percent during the past year
compared with 6.2 percent in 1993. The overhead ratios were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
As a percent of average assets
Corporate 2.53% 2.60% 2.37%
Banking operations 2.34 2.38 2.12
As a percent of average retail deposits
Banking operations 2.91 3.04 2.59
As a percent of revenue
Corporate 63.45 61.02 65.29
Banking operations 66.54 62.75 58.19
</TABLE>
Revenue is defined as net interest income and other operating income.
Real estate operations expense totaled $19.9 million in 1994, compared
with $33.8 million in 1993 and income of $.7 million in 1992, and included
$27.6 million in operating losses and holding costs in 1994, compared with
$45.9 million in 1993 and $6.6 million in 1992. The increase in operating
losses and holding costs in 1993 was due in part to an increased volume of
new foreclosures and a decision by the Company to expense acquisition and
refurbishment costs as incurred. In 1992, these costs totaled $20.9 million
and were added to the carrying value of the asset.
The Company's effective tax rate for 1994 was 38.2 percent compared
with 32.6 percent in 1993 and 43.6 percent in 1992. The decrease in the
effective tax rate in 1993 was mainly due to the favorable settlement of tax
issues and the reversal of certain tax liabilities no longer required. The
Company also reflected applicable changes pursuant to the Omnibus Budget
Reconciliation Act of 1993 including the 1 percent federal corporate tax rate
increase. The higher rate in 1992 was due in part to the amortization of
intangibles, which was only partially deductible for income taxes.
<PAGE>
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
Stockholders' equity ("capital") totaled $2.5 billion at year-end 1994
compared with $2.4 billion at year-end 1993 and 1992. In 1992, the Company
issued $165 million of 8.3 percent cumulative preferred stock. The ratio of
capital to total assets was 5.9 percent, 6.3 percent and 6.4 percent at
December 31, 1994, 1993 and 1992, respectively. The decline in 1994 was
attributable to the resumption of asset growth and the impact of FAS 115.
The unrealized holding gains and losses on securities available for
sale, net of income taxes, included as a component of stockholders' equity
follows:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Balance at beginning of period $ 22,651 $ -
Unrealized holding gains
(losses), net of taxes (77,735) 22,651
-------- -------
Balance at end of period $(55,084) $22,651
======== =======
</TABLE>
The Company's primary subsidiary, GWB, is subject to certain capital
requirements under the regulations of the FDIC and the OTS and meets all such
requirements. At December 31, 1994, GWB's capital was $2.7 billion,
including subordinated notes of $429 million.
Total dividends per share were $.92 in 1994 and 1993 and $.91 in 1992.
The Company increased its quarterly dividend on its common stock to $.23 per
share in April 1992. Payment of dividends by the Company is subject to
restrictions on the receipt of dividends from GWB. Payment of dividends to
the Company by GWB is linked by federal regulation to the Bank's capital.
The Bank's level of capital exceeds the requirements for the payment of
dividends. Should this level decline below the fully phased-in requirements,
limitations on the dividend distributions to a percentage of net income could
be imposed.
<PAGE>
<PAGE>
Liquidity provided by financing activities was $3.7 billion in 1994
compared with funds used of $164 million and $1.1 billion in 1993 and 1992,
respectively. GWB disposed of $982 million of retail deposits in 1994, and
acquired $4.1 billion and $2.3 billion in 1993 and 1992, respectively.
Planned withdrawals of repriced wholesale accounts totaled $24 million in
1994, $95 million in 1993 and $366 million in 1992. The retail branch
network experienced net customer account outflows of $1.8 billion in 1994
compared with $3.4 billion in 1993 and $1.6 billion in 1992, primarily
certificate of deposit accounts being repriced downward. Funds of $6.6
billion were provided by new borrowings in 1994. In 1993 and 1992, repayment
of borrowings totaled $672 million and $1.4 billion, respectively.
Funds used in investing activities were $4.4 billion in 1994 and $586
million in 1993 compared with funds provided by investing activities of $207
million in 1992. Real estate loans originated for investment were $6.5
billion in 1994, $5.1 billion in 1993 and $4.5 billion in 1992 which reflects
the increased ARM production. Mortgage payments in 1994 were $4 billion,
$4.9 billion in 1993 and $5.4 billion in 1992. Mortgage payments fluctuate
for various reasons including the level of refinancings. Consumer loans
increased $195 million in 1994 compared with a decrease of $98.6 million in
1993 and $5.9 million in 1992.
Funds provided by operating activities were $832 million in 1994
compared with $688 million in 1993 and $1.2 billion in 1992. The net change
in assets available for sale provided cash of $310 million, $246 million and
$379 million in 1994, 1993 and 1992, respectively. Cash provided from
earnings totaled $521 million in 1994 compared with $442 million in 1993 and
$793 million in 1992.
The Company has several sources for raising funds for lending among
which are customer deposits, mortgage sales, asset securitization for
borrowing collateral, FHLB borrowings and public debt offerings. The
following table presents the debt ratings of the Company and GWB at December
31, 1994:
<TABLE>
<CAPTION>
Moody's Investors
Standard & Poor's Service
----------------- -----------------
GWFC GWB GWFC GWB
---- --- ---- ---
<S> <C> <C> <C> <C>
Unsecured short-term A-2 A-2 P-2 P-1
Senior term debt BBB+ A- Baa1 A-2
Subordinated term debt BBB+ A-3
Preferred stock BBB- Baa2
</TABLE>
<PAGE>
<PAGE>
Cash and securities totaled $2.1 billion at December 31, 1994. The
balance was $1.8 billion at December 31, 1993 and $1.7 billion at December
31, 1992. GWB had funds in excess of required liquidity levels. The excess
balances in the above amounts over those required for regulatory purposes
will fluctuate between periods and are a source of short-term funding.
SEGMENT DATA
The business segment information is presented in the accompanying
table:
<TABLE>
<CAPTION>
Banking Consumer
(Dollars in thousands) Operations Finance Consolidated
---------- -------- ------------
<S> <C> <C> <C>
1994
Total revenue $ 1,414,656 $ 275,511 $ 1,690,167
Earnings before income taxes 306,006 100,528 406,534
Depreciation and amortization 128,135 9,807 137,942
Capital expenditures 94,965 4,484 99,449
Identifiable assets 40,006,963 2,211,294 42,218,257
1993
Total revenue $ 1,443,751 $ 266,958 $ 1,710,709
Earnings before income taxes 1,309 90,738 92,047
Depreciation and amortization 106,690 9,726 116,416
Capital expenditures 104,596 6,580 111,176
Identifiable assets 36,293,223 2,055,137 38,348,360
1992
Total revenue $ 1,430,844 $ 273,649 $ 1,704,493
Earnings before income taxes
and accounting changes 7,854 87,658 95,512
Depreciation and amortization 100,988 8,686 109,674
Capital expenditures 151,951 1,661 153,612
Identifiable assets 36,496,254 1,942,932 38,439,186
/TABLE
<PAGE>
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Page
Consolidated Statement of Operations for the three years
ended December 31, 1994, 1993 and 1992........................... 48
Consolidated Statement of Financial Condition at
December 31, 1994 and 1993....................................... 49
Consolidated Statement of Cash Flows for the three years
ended December 31, 1994, 1993 and 1992........................... 50
Consolidated Statement of Stockholders' Equity for the
three years ended December 31, 1994, 1993 and 1992............... 52
Notes to Consolidated Financial Statements......................... 53
Report of Independent Accountants.................................. 97
Management's Commentary on Financial Statements.................... 97
Statistical Information............................................ 98
Stockholder and Quarterly Information.............................. 105
<PAGE>
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------
(Dollars in thousands, except per share) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Interest Income
Real estate loans $1,913,602 $2,041,989 $2,341,942
Mortgage-backed securities 276,112 185,500 259,891
Consumer loans 378,282 385,145 415,701
Securities 28,774 29,242 38,558
Other 32,948 38,908 35,001
---------- ---------- ----------
2,629,718 2,680,784 3,091,093
Interest Expense
Customer accounts 950,299 939,081 1,333,473
Borrowings
Short-term 132,049 59,688 37,338
Long-term 225,100 299,161 297,920
---------- ---------- ----------
1,307,448 1,297,930 1,668,731
---------- ---------- ----------
Net Interest Income 1,322,270 1,382,854 1,422,362
Provision for loan losses 207,200 463,000 420,000
---------- ---------- ----------
Net interest income after provision for
loan losses 1,115,070 919,854 1,002,362
Other operating income
Real estate services
Loan fees 29,385 37,855 33,091
Mortgage banking
Gain on mortgage sales 5,339 24,754 32,786
Servicing 50,853 51,185 52,689
---------- ---------- ----------
85,577 113,794 118,566
Retail banking
Banking fees 140,703 113,461 92,403
Securities operations 39,902 38,045 36,652
---------- ---------- ----------
180,605 151,506 129,055
Net gain on securities and investments 3,578 25,169 1,287
Net insurance operations 27,636 30,341 26,187
Gain on sale of branches 62,337 - -
Other 8,164 7,045 7,036
---------- ---------- ----------
Total other operating income 367,897 327,855 282,131
Noninterest expense
Operating and administrative
Salaries and related personnel 469,115 487,532 449,512
Premises and occupancy 199,048 184,682 168,511
FDIC insurance premium 77,451 51,328 66,725
Advertising and promotion 36,573 39,631 35,436
Other 203,703 225,908 200,461
---------- ---------- ----------
985,890 989,081 920,645
Amortization of intangibles 58,689 40,798 49,061
Real estate operations 19,854 33,783 (725)
Provision for real estate losses 12,000 92,000 220,000
---------- ---------- ----------
Total noninterest expense 1,076,433 1,155,662 1,188,981
---------- ---------- ----------
Earnings Before Taxes and Accounting Changes 406,534 92,047 95,512
Taxes on income 155,300 30,000 41,600
---------- ---------- ----------
Earnings Before Accounting Changes 251,234 62,047 53,912
Accounting changes
Postretirement benefits cost, net - - (29,906)
Income taxes - - 61,000
---------- ---------- ----------
Net Earnings $ 251,234 $ 62,047 $ 85,006
========== ========== ==========
Earnings per share based on average
common shares outstanding
Primary before accounting changes $1.69 $.28 $.30
Fully diluted before accounting changes 1.69 .28 .30
Primary 1.69 .28 .53
Fully diluted 1.69 .28 .53
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31
----------------------------
(Dollars in thousands, except per share) 1994 1993
---- ----
<S> <C> <C>
Assets
Cash and securities
Cash $ 983,440 $ 758,581
Certificates of deposit and federal funds 165,125 217,125
Securities available for sale 917,095 871,074
----------- -----------
2,065,660 1,846,780
Mortgage-backed securities held to maturity
(fair value $6,211,731 and $605,512) 6,335,104 618,574
Mortgage-backed securities available for sale 2,934,503 2,570,822
----------- -----------
9,269,607 3,189,396
Loans receivable, less reserve for
estimated losses 28,079,620 30,162,401
Loans receivable available for sale 298,748 499,002
----------- -----------
28,378,368 30,661,403
Real estate available for sale or development, net 256,967 434,077
Interest receivable 230,925 214,990
Investment in Federal Home Loan Banks 306,041 307,352
Premises and equipment, at cost, less
accumulated depreciation 616,116 623,691
Other assets 730,574 638,983
Intangibles arising from acquisitions 363,999 431,688
----------- -----------
$42,218,257 $38,348,360
=========== ===========
Liabilities
Customer accounts $28,700,947 $31,531,563
Securities sold under agreements to repurchase 6,299,055 -
Short-term borrowings 1,210,461 676,483
Other borrowings 2,611,144 2,802,858
Other liabilities and accrued expenses 716,741 729,229
Taxes on income, principally deferred 196,123 184,826
----------- -----------
39,734,471 35,924,959
----------- -----------
Commitments and contingent liabilities
Stockholders' Equity
Preferred stock, par value $1.00 a share;
Authorized 10,000,000 shares;
Cumulative convertible issued 517,500 129,375 129,375
Cumulative issued 660,000 165,000 165,000
Common stock, par value $1.00 a share;
Authorized 200,000,000 shares;
Issued 134,315,592 and 132,616,172 134,316 132,616
Additional capital 656,644 627,717
Retained earnings-substantially restricted 1,461,448 1,357,753
Unearned compensation (7,913) (11,711)
Unrealized holding gains and losses, net of taxes (55,084) 22,651
----------- -----------
2,483,786 2,423,401
----------- -----------
$42,218,257 $38,348,360
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating Activities
Net earnings $ 251,234 $ 62,047 $ 85,006
Noncash adjustments to net earnings:
Provision for loan losses 207,200 463,000 420,000
Provision for real estate losses 12,000 92,000 220,000
Depreciation and amortization 79,253 75,618 60,613
Amortization of intangibles 58,689 40,798 49,061
Income taxes 65,441 (30,566) (274,430)
Capitalized interest (8,431) (14,950) (21,595)
Net change in accrued interest 13,859 14,248 17,810
Other (157,791) (259,725) 236,976
----------- ----------- -----------
521,454 442,470 793,441
----------- ----------- -----------
Sales and repayments of loans
receivable available for sale 1,205,050 3,257,716 4,295,324
Originations and purchases of loans
receivable available for sale (894,870) (3,011,733) (3,915,927)
----------- ----------- -----------
310,180 245,983 379,397
----------- ----------- -----------
Net cash provided by operating activities 831,634 688,453 1,172,838
----------- ----------- -----------
Financing Activities
Customer accounts
Net (decrease) increase in transaction accounts (997,264) (220,828) 1,985,043
Net (decrease) in term accounts (851,827) (3,250,080) (3,904,956)
----------- ----------- -----------
(1,849,091) (3,470,908) (1,919,913)
Customer account (dispositions) acquisitions, net (981,525) 4,093,806 2,258,210
Borrowings
Proceeds from new long-term debt 1,174,643 1,121,805 716,885
Repayments of long-term debt (1,366,357) (1,266,314) (1,166,035)
Net change in short-term debt 6,833,033 (527,202) (992,251)
----------- ----------- -----------
6,641,319 (671,711) (1,441,401)
Other financing activity
Proceeds from issuance of common stock 29,842 31,168 14,419
Proceeds from issuance of preferred stock - - 165,000
Cost of issuance of preferred stock - - (5,554)
Cash dividends paid (147,539) (145,892) (134,263)
----------- ----------- -----------
(117,697) (114,724) 39,602
----------- ----------- -----------
Net cash provided by (used in) financing activities 3,693,006 (163,537) (1,063,502)
----------- ----------- -----------<PAGE>
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
Year Ended December 31
--------------------------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Investing Activities
Investment securities
Proceeds from maturities 1,147,073 1,767,582 681,147
Purchases of securities (1,218,586) (1,541,383) (616,211)
Net change in short term - - (10,427)
----------- ----------- -----------
(71,513) 226,199 54,509
Real estate loans and mortgage-backed securities
Loans originated for investment (6,506,744) (5,051,966) (4,541,986)
Purchases of mortgage-backed securities (1,539,349) (924,843) (655,359)
Net change in undisbursed loan funds 1,656 (6,318) (5,651)
Mortgage payments 4,031,437 4,882,985 5,360,173
Mortgage sales 55,243 509,477 113,044
Repurchases (547,674) (185,825) (94,379)
----------- ----------- -----------
(4,505,431) (776,490) 175,842
Consumer loans
Loans originated for investment (2,168,029) (2,161,269) (2,132,343)
Loan sales - 219,154 -
Dispositions (acquisitions), net 2,094 (12,649) (7,134)
Loan payments 1,971,142 2,053,371 2,145,386
----------- ----------- -----------
(194,793) 98,607 5,909
Other investing activity
Purchases and sales of premises and equipment, net (82,559) (103,169) (146,005)
Sales of real estate 461,867 793,730 181,430
Disposition (acquisition) of assets, net 11,822 (672,852) (40,529)
Other 28,826 (151,814) (23,667)
----------- ----------- -----------
419,956 (134,105) (28,771)
----------- ----------- -----------
Net cash (used in) provided by investing activities (4,351,781) (585,789) 207,489
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 172,859 (60,873) 316,825
Cash and cash equivalents at beginning of year 975,706 1,036,579 719,754
----------- ----------- -----------
Cash and cash equivalents at end of year $ 1,148,565 $ 975,706 $ 1,036,579
=========== =========== ===========
Supplemental Cash Flow Disclosure
Cash paid for
Interest on deposits $ 951,140 $ 939,842 $ 1,344,740
Interest on borrowings 326,479 358,849 343,845
Income taxes 111,656 62,277 242,450
Noncash investing activities
Loans transferred to foreclosed real estate $ 504,585 $ 761,939 $ 568,726
Loans originated to finance the sale of real estate 92,586 101,476 78,633
Loans originated to refinance existing loans 567,119 754,431 788,543
Loans exchanged for mortgage-backed securities 5,502,401 2,036 -
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unrealized
Holding Total
(Dollars in thousands, Preferred Common Additional Retained Unearned Gains Stockholders'
except per share) Stock Stock Capital Earnings Compensation and Losses Equity
--------- ------ ----------- -------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1991 $129,375 $128,876 $571,954 $1,490,855 $ - $ - $2,321,060
Common stock issued upon exercise
of stock options 329 4,351 4,680
Common stock issued under Dividend
Reinvestment Plan 549 9,190 9,739
Restricted stock awards granted,
net of cancellations 1,060 18,591 (19,651) -
Unearned compensation amortized
to expense 3,671 3,671
Issuance of preferred stock 165,000 (5,554) 159,446
Net earnings for the year 1992 85,006 85,006
Cash dividends paid:
$.91 per common share (118,720) (118,720)
$21.88 per cumulative convertible
preferred share (11,320) (11,320)
$6.40 per cumulative preferred share (4,223) (4,223)
Tax benefit of restricted stock awards 395 395
-------- -------- -------- ---------- -------- -------- ----------
Balance December 31, 1992 294,375 130,814 598,927 1,441,598 (15,980) - 2,449,734
Common stock issued upon exercise of
stock options 441 6,877 7,318
Common stock issued under Dividend
Reinvestment Plan 1,391 22,459 23,850
Restricted stock awards granted,
net of cancellations (30) (546) 576 -
Unearned compensation amortized
to expense 3,693 3,693
Net earnings for the year 1993 62,047 62,047
Cash dividends paid:
$.92 per common share (120,877) (120,877)
$21.88 per cumulative convertible
preferred share (11,320) (11,320)
$20.75 per cumulative preferred share (13,695) (13,695)
Unrealized holding gains and losses,
net of taxes 22,651 22,651
-------- -------- -------- ---------- -------- -------- ----------
Balance December 31, 1993 294,375 132,616 627,717 1,357,753 (11,711) 22,651 2,423,401
Common stock issued upon exercise of
stock options 282 4,576 4,858
Common stock issued under Dividend
Reinvestment Plan 1,418 23,566 24,984
Unearned compensation amortized
to expense 3,798 3,798
Net earnings for the year 1994 251,234 251,234
Cash dividends paid:
$.92 per common share (122,524) (122,524)
$21.88 per cumulative convertible
preferred share (11,320) (11,320)
$20.75 per cumulative preferred share (13,695) (13,695)
Tax benefit of restricted stock awards 785 785
Unrealized holding gains and losses,
net of taxes (77,735) (77,735)
-------- -------- -------- ---------- -------- -------- ----------
Balance December 31, 1994 $294,375 $134,316 $656,644 $1,461,448 $ (7,913) $(55,084) $2,483,786
======== ======== ======== ========== ======== ======== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: STATEMENT OF ACCOUNTING POLICIES
Principles of Accounting and Consolidation
The accounts of Great Western Financial Corporation ("GWFC", or "the
parent company") and its wholly-owned subsidiaries, Great Western Bank,
Aristar, a consumer finance holding company, and companies operating in
related fields, are included in the accompanying consolidated financial
statements and are referred to collectively as the Company. Significant
intercompany items have been eliminated. Certain prior-year amounts have
been reclassified to conform with the 1994 presentation.
Adoption of Recently Issued Accounting Standards
The Company adopted FAS 119 as of December 31, 1994. FAS 119 requires
disclosure of information regarding amounts, nature and terms of derivative
financial instruments and options. The disclosure requires the description
of the objectives, strategies and classes of derivatives and related gains
and losses in the financial statements or in the notes thereto.
In the fourth quarter of 1994, the Company adopted FAS 118. The
Company's income recognition policy was in compliance with the provisions of
FAS 118 and the adoption of this statement had no effect on the Company's
financial condition or results of operations.
The Company adopted FAS 115 as of December 31, 1993. FAS 115 requires
that investments in debt securities and certain equity securities be reported
at fair value unless the Company has the positive intent and ability to hold
such securities to maturity. Investments held to maturity are to be
reported at amortized cost. Unrealized holding gains and losses on
securities available for sale, net of income taxes, are reported as a
separate component of stockholders' equity.
The Company adopted FAS 114 as of January 1, 1993. FAS 114 provides
guidance on the measurement and recognition of loan impairment. Impaired
loans recorded in accordance with FAS 114 are included in delinquent loans
or in troubled debt restructurings, as appropriate.
The adoption of these accounting standards did not materially affect
comparability of the financial statements.
<PAGE>
<PAGE>
Accounting Changes
The Company adopted Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions"
("FAS 106") as of January 1, 1992. FAS 106 requires that the expected cost
of postretirement benefits be charged to expense during the period that
eligible employees render such service.
The unfunded benefit obligation as of January 1, 1992, reflected in
other liabilities on the Consolidated Statement of Financial Condition and
shown as an accounting change on the Consolidated Statement of Operations
follows:
<TABLE>
<CAPTION>
(Dollars in thousands) January 1, 1992
---------------
<S> <C>
Accumulated postretirement benefit obligation
Retirees $24,433
Active plan participants 26,273
-------
50,706
Tax benefit 20,800
-------
$29,906
=======
</TABLE>
In 1992, the Company also adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("FAS 109") which supersedes
Statement No. 96, "Accounting for Income Taxes" which was adopted by the
Company in 1987. FAS 109 required the Company to record previously
unrecognized tax benefits totaling $61 million as of January 1, 1992 for its
general loss reserves.
The Company elected to give cumulative effect to the changes in the
first quarter of 1992.
<PAGE>
<PAGE>
Fair Value Disclosure
Quoted market prices are used, where available, to estimate the fair
value of financial instruments. Because no quoted market prices exist for
a significant portion of the Company's financial instruments, fair value is
estimated using comparable market prices for similar instruments or using
management's economic estimates of discounted cash flows for the underlying
asset or liability. A change in management's assumptions could significantly
affect these estimates and, accordingly, fair value is not necessarily
indicative of the value which would be realized upon disposition of the
financial instruments.
Cash and Securities
Liquid assets consist principally of cash, certificates of deposit,
federal funds, U.S. government, corporate and other securities approved for
investment by regulations. Certificates of deposit and federal funds
purchased with a maturity of three months or less are considered to be cash
equivalents. Other securities, readily convertible into cash, are available
for sale and are recorded at fair value. Fair value is generally determined
on the aggregate method. Certain securities are designated as held for
investment based on management's positive intent and ability to hold those
securities to maturity. Securities held for investment are recorded at
amortized cost. Discounts or premiums on securities recorded at cost are
amortized using the interest method. For the Consolidated Statement of Cash
Flows, cash includes cash on hand, cash in banks and cash equivalents.
Mortgage-backed Securities
The Company's mortgage-backed securities portfolio consists of real
estate loan receivables originated by the bank and subsequently securitized
primarily through the Federal Home Loan Mortgage Corporation ("FHLMC") or the
Federal National Mortgage Association ("FNMA"). Loans are also securitized
for sale directly in the public market. The Company purchases, for
investment and liquidity purposes, FNMA and FHLMC securities, Collateralized
Mortgage Obligations ("CMOs") and Real Estate Mortgage Investment Conduits
("REMICs"). The Company also purchases commercial mortgage pass-through
certificates from the RTC. In 1994, the Company swapped single-family
residential ARMs for mortgage-backed securities to provide collateral for
borrowings. These securities are subject to full credit recourse and the
swaps can be unwound at the option of the Company. ARMs swapped in 1994,
REMICs and GWB-originated pass-through certificates are held for investment
based on management's positive intent and ability to hold these securities
until maturity and are recorded at amortized cost. All other mortgage-backed
securities are available for sale and recorded at fair value. Fair value is
generally determined on the aggregate method. Discounts or premiums on
mortgage-backed securities recorded at cost are amortized using the interest
method.
<PAGE>
<PAGE>
Loans Receivable
Real Estate Loans
The Company's real estate loan portfolio consists primarily of long-
term loans secured by first trust deeds on single-family residences, other
residential property, commercial property and land. The ARM is the bank's
primary loan investment.
Fees are charged for originating loans at the time the loan is granted.
Loan origination fees, partially offset by the deferral of certain expenses
associated with loans originated, are amortized to interest income over the
life of the loan using the interest method. ARMs with a lower rate during
the introductory period (usually three months) will reflect the amortization
of a substantial portion of the net deferred fee as a yield adjustment
during the introductory period. Amortization is discontinued for
nonperforming loans and loans available for sale and is realized upon the
ultimate disposition of the assets.
Loan fee income represents income from the prepayment of loans,
delinquent payments or miscellaneous loan services and is recorded when
collected.
Interest receivable represents, for the most part, the current month's
interest which will be included as a part of the borrower's next monthly loan
payment. Interest receivable is accrued only if deemed collectible. Loan
payments generally are deemed to be in nonaccrual status when they become 90
days past due. When a loan is designated as nonaccrual, all previously
accrued interest is reversed.
Below-market-rate loans are made to facilitate the sale of certain
foreclosed real estate. These transactions reduce the gain on sale and
provide a loan discount which is amortized on the interest method resulting
in a market yield on the new loan.
Consumer Loans
The Bank's consumer loans include student educational loans insured by
the U.S. government or the state of California, fully secured loans made to
holders of customer accounts and checking overdraft loans. Consumer loans
made by the consumer finance subsidiaries of Aristar have maximum terms of
180 months. The weighted average contractual term of all loans written by
the consumer finance subsidiaries in 1994 was 41 months. Experience,
however, has shown that a majority of consumer loans will be renewed prior
to maturity. Finance charges included in consumer loans receivable are
deferred and amortized into income over the term of the loan with appropriate
limitation for delinquent installments for which collection is not reasonably
assured. Student educational loans are available for sale and are recorded
at the lower of cost or fair value. Fair value is determined on the
aggregate method. All other consumer loans are held to maturity.
<PAGE>
<PAGE>
Reserve for Estimated Loan Losses
It is the policy of the Company to provide for estimated losses on real
estate loans when any significant and permanent decline in value is
identified. A change in the fair value of an impaired loan is reported as
an increase or reduction to the reserve for loan losses. Loans transferred
to foreclosed real estate are transferred at the lower of the net loan value
or the fair value of the collateral, less estimated costs to sell.
Loans receivable are segregated into three categories for review as to
the adequacy of reserve levels: SFR, income producing property and consumer.
Real estate loans (SFR and income producing property) are classified
satisfactory, special mention, substandard, doubtful or loss. Loans
classified loss are written down to fair value, less estimated costs to sell,
with a specific reserve.
Reserves on loans classified satisfactory, special mention, substandard
and doubtful are included in the general valuation allowance ("GVA"). These
loans are subjected to extensive migration analyses which attempt to project
future performance based on past experience. In addition, the
classifications are segmented into various risk categories based upon
geography, delinquency, date of origination, property type and loan-to-value
ratio. Individual markets for specific property types are examined for
current economic trends and business conditions. Estimated future economic
trends, both local and by various forecasting services as well as external
factors such as competition and legal or regulatory requirements are used to
develop qualitative factors that can either increase or decrease the required
level of GVA.
Loans made by consumer finance subsidiaries are also reviewed on a
systematic basis. In evaluating the adequacy of the allowance, consideration
is given to recent loan loss experience and such other factors which, in
management's judgment, deserve current recognition in estimating losses.
Non-real estate secured accounts are charged off based on contractual
delinquency of 120 days on closed-end accounts and 180 days on open-end
accounts.
Similar reviews are made for retail banking consumer loan operations,
where provisions are based upon recent loss experience.
Mortgage Banking Activities
Real estate loans are originated principally for investment. Since the
Company is primarily an ARM portfolio lender for its own investment, most
other products are originated and available for sale.
As of December 31, 1994, the following loans were designated as
available for sale and were carried at the lower of cost or fair value:
1. All single-family, fixed-rate product in the portfolio originated
subsequent to January 1, 1989.
<PAGE>
<PAGE>
2. Single-family, adjustable rate product designated as available for
sale.
3. Loans other than single-family which have been designated at the date
of origination.
The Company sells loans or participating interests in loans to generate
servicing income, to limit interest-rate risk and to provide funds for
additional investment. Under the servicing agreements, the Company continues
to service the loans and the investor is paid its share of principal
collections together with interest at an agreed upon rate, which generally
differs from the loan's contractual interest rate. Such difference results
in a "loan servicing spread". Gains or losses on sales of loans are
recognized at time of sale and are generally determined by: 1) the difference
between the net sales proceeds and the book value of the loans sold; 2)
recognition of deferred loan fees; and 3) an adjustment, if necessary, to
increase or decrease the loan servicing spread in order to provide for normal
servicing. In sales involving credit enhancements, fair value is used in
calculating the gain or loss.
Real Estate Available for Sale or Development
Real estate available for sale or development comprises both purchased
and foreclosed properties. Foreclosed properties are carried at cost at
acquisition, which is the lower of the net loan value on the property or the
fair value of the property, less estimated costs to sell, at the date of
foreclosure. Thereafter, specific valuation allowances have been established
for changes in the fair value of real estate. Acquisition and refurbishment
costs are expensed when incurred. Other real estate available for sale is
carried at the lower of cost or fair value. Property development projects,
carried at the lower of cost or net realizable value, are accounted for on
the equity method. Properties where future development is uncertain are
carried at the lower of cost or fair value. Gains on the sale of real estate
financed by the Company are recognized giving consideration to down payment
and other investment criteria. Losses are recognized when identified.
Premises and Equipment
The Company has followed the policy of capitalizing expenditures for
improvements and major refurbishments and has charged ordinary maintenance
and repairs to earnings as incurred. Depreciation and amortization are
computed principally on the straight-line method over the estimated useful
lives as follows:
---------------------------------------------------------------------------
Buildings 25 to 60 years
---------------------------------------------------------------------------
Leasehold improvements Lesser of term of lease or useful
life of property
----------------------------------------------------------------------------
Furniture, fixtures and equipment 3 to 12 years
----------------------------------------------------------------------------
<PAGE>
<PAGE>
Intangibles Arising from Acquisitions
Because of the earning power or other special values of certain
purchased companies or businesses, the Company paid amounts in excess of fair
value for businesses, core deposits and tangible assets acquired. Generally,
such amounts are being amortized by systematic charges to income (primarily
for periods from six to 25 years) over a period no greater than the estimated
remaining life of the assets acquired or not exceeding the estimated average
remaining life of the existing deposit base assumed. The Company
periodically reviews intangibles to assess recoverability and impairment is
recognized in operations if permanent loss of value occurs.
Customer Accounts
Customer accounts comprise primarily the Bank's savings and checking
accounts. Customer accounts vary as to terms, with the major differences
being minimum balance required, maturity, interest rates and the provisions
for payment of interest. The Bank's customer accounts are insured by the
FDIC, through either the BIF or the SAIF for up to an aggregate amount of
$100,000 per customer.
The Bank may offer large denomination negotiable certificates of
deposit. The negotiable certificates of deposit are primarily sold through
brokers and may subsequently be traded on the open market.
Interest is accrued and either paid to the customer or added to the
customer's account on a periodic basis. On term accounts, the forfeiture of
interest (because of withdrawal prior to maturity) is offset as of the date
of withdrawal against interest expense.
Federal and State Taxes on Income
Taxes are provided on substantially all income and expense items
included in earnings, regardless of the period in which such items are
recognized for tax purposes. Tax benefits are recognized for general loss
reserve additions.
Taxes on income are determined by using the liability method as
prescribed by FAS 109. This approach requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, FAS 109 requires the
consideration of all expected future events other than enactments of changes
in the tax law or rates.
<PAGE>
<PAGE>
Earnings Per Common Share
Income for the calculation of primary earnings per common share is
based on net income less preferred stock dividend requirements. The average
common shares and common share equivalents outstanding, based upon amounts
used in the calculation of primary earnings per common share, were
133,769,724 in 1994, 132,007,559 in 1993 and 130,735,867 in 1992. Fully
diluted earnings per common share give effect to the dilutive effect of stock
options and assume the conversion of all convertible securities into common
stock at the later of the beginning of the year or the date of issuance
(unless antidilutive). The average common shares and common share
equivalents outstanding, based upon amounts used in the calculation of fully
diluted earnings per common share, were 133,769,724 in 1994, 138,853,346 in
1993 and 137,282,125 in 1992.
NOTE 2: ACQUISITIONS AND DISPOSITIONS
In December 1994, GWB completed the sale of $1 billion of deposits and
31 branches in west Florida to First Union National Bank. The deposits were
sold for a net pretax gain of $62.3 million, which included the write-off of
intangibles related to the sold branches of $10 million and other sale
related expenses of $2.2 million.
In October 1994, GWB purchased the deposits of six branches located in
San Diego County from Citibank, F.S.A., totaling $52 million. The deposits
were acquired for a premium of $1 million.
In December 1993, GWB purchased certain assets and assumed certain
liabilities from the RTC of HomeFed Bank, F.A., San Diego, California. As
a result of the transaction, GWB acquired 119 branches with retail deposits
of $4.1 billion. The deposits were acquired for a premium of $151 million.
During the first quarter 1993, the Company exchanged 12 of its branches
located in the state of Washington, with deposits aggregating $327 million,
with Pacific First Bank, a Federal Savings Bank, for seven branches located
in Southern California with deposits aggregating $360 million.
In March 1992, GWB acquired from the RTC 53 branches of the former
AmeriFirst Federal Savings Bank in Florida with retail customer accounts
totaling $1.8 billion. These branches were acquired at a premium of $27.5
million. Also in March, GWB acquired five California branches of Republic
Federal Savings and Loan Association and assumed deposits totaling $469
million at a premium of $4.7 million.
<PAGE>
<PAGE>
Intangibles arising from acquisitions as shown on the Consolidated
Statement of Financial Condition consisted of the following:
<TABLE>
<CAPTION>
December 31
----------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Balance at acquisition $ 575,603 $ 592,540
Accumulated amortization (211,604) (160,852)
--------- ---------
$ 363,999 $ 431,688
========= =========
</TABLE>
In 1994, the Company wrote off approximately $11.7 million of
intangibles related to interstate banking access rights.
NOTE 3: CASH AND SECURITIES
An analysis of cash and securities by investment type at December 31,
1994 and December 31, 1993 and by maturity at December 31, 1994 is included
in the table on page 98 under the caption "By Type" and "Year-end 1994 by
Maturity."
<PAGE>
<PAGE>
Following is a summary of the amortized cost and fair values of the
Company's securities portfolio available for sale:
<TABLE>
<CAPTION>
Gross Gross
Weighted Unrealized Unrealized
Average Amortized Holding Holding Fair
Yield Cost Gains Losses Value
-------- --------- ---------- ---------- -----
(Dollars in thousands) December 31, 1994
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. government securities 6.89% $ 10,580 $ 3 $ 755 $ 9,828
Federal agency securities 6.40 523,211 59 8,691 514,579
Corporate debt securities 6.44 372,013 267 8,026 364,254
Other securities 5.67 29,587 50 1,203 28,434
----- -------- ------ ------- --------
6.40% $935,591 $ 379 $18,675 $917,095
===== ======== ====== ======= ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. government securities 3.24% $335,509 $ 120 $ 4 $335,625
Federal agency securities 6.24 40,841 1,418 694 41,565
Corporate debt securities 6.49 426,910 6,564 694 432,780
Other securities 5.11 60,619 524 39 61,104
----- -------- ------ ------ --------
5.13% $863,879 $8,626 $1,431 $871,074
===== ======== ====== ====== ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. government securities 6.43% $ 3,909 $ 27 $ 34 $ 3,902
Federal agency securities 7.09 48,702 957 109 49,550
Corporate debt securities 7.00 451,960 8,233 323 459,870
Other securities 4.20 119,335 34 20 119,349
----- -------- ------ ------ --------
6.47% $623,906 $9,251 $ 486 $632,761
===== ======== ====== ====== ========
</TABLE>
<PAGE>
<PAGE>
At December 31, 1994, 1993 and 1992, there were no securities held for
investment.
Realized gains and losses on the available-for-sale portfolio are
calculated on the specific identification method and were as follows:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Realized gains $457 $333 $499
Realized losses 25 79 60
</TABLE>
The Company purchases securities under agreements to resell
("repurchase agreements") having terms of up to 90 days; however, they are
typically overnight investments. Repurchase agreements outstanding at
December 31, 1994 were $50,000,000 at 5.78 percent, sold by CS First Boston
Corporation and $65,000,000 at 6.08 percent, sold by J.P. Morgan.
Repurchase agreements outstanding at December 31, 1993 were $210,000,000 at
3.36 percent, sold by CS First Boston Corporation. The repurchase agreements
were collateralized by federal agency issues with market values at least 2
percent above the repurchase agreements. The highest month-end balances
outstanding were $350,000,000 in 1994 and $210,000,000 in 1993. The average
balances outstanding were $207,308,000 at a rate of 4.25 percent in 1994 and
$60,000,000 at 3.34 percent in 1993.
GWB is required to maintain certain minimum reserve balances with the
Federal Reserve Bank ("FRB"). Included in cash were deposits at the FRB of
$328,809,000 at December 31, 1994 and $258,672,000 at December 31, 1993.
NOTE 4: MORTGAGE-BACKED SECURITIES
An analysis of the mortgage-backed securities portfolio by loan type
at December 31, 1994 and December 31, 1993 is included in the table on page
102 under the caption "Mortgage-backed Securities by Type."
<PAGE>
<PAGE>
Mortgage-backed securities held to maturity consisted of the following:
<TABLE>
<CAPTION>
Gross Gross
Weighted Unrealized Unrealized
Average Amortized Holding Holding Fair
Yield Cost Gains Losses Value
-------- --------- ---------- ---------- -----
(Dollars in thousands) December 31, 1994
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FNMA 6.57% $2,385,128 $ - $ 38,640 $2,346,488
FHLMC 6.79 3,288,789 - 50,101 3,238,688
REMIC 5.24 387,126 3 12,535 374,594
Other 5.80 274,061 - 22,100 251,961
---- ---------- ------- -------- ----------
6.57% $6,335,104 $ 3 $123,376 $6,211,731
==== ========== ======= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REMIC 4.80% $ 518,979 $ 974 $ 3,133 $ 516,820
Other 3.66 99,595 - 10,903 88,692
---- ---------- ------- -------- ----------
4.61% $ 618,574 $ 974 $ 14,036 $ 605,512
==== ========== ======= ======== ==========
</TABLE>
There were no mortgage-backed securities held to maturity at December
31, 1992.
<PAGE>
<PAGE>
Mortgage-backed securities available for sale consisted of the
following:
<TABLE>
<CAPTION>
Gross Gross
Weighted Unrealized Unrealized
Average Amortized Holding Holding Fair
Yield Cost Gains Losses Value
-------- --------- ---------- ---------- -----
(Dollars in thousands) December 31, 1994
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FNMA 6.02% $1,055,152 $ 416 $ 19,125 $1,036,443
FHLMC 6.83 1,379,856 114 40,991 1,338,979
RTC 6.62 186,028 - 7,743 178,285
Other 6.66 390,750 - 9,954 380,796
---- ---------- ------- -------- ----------
6.51% $3,011,786 $ 530 $ 77,813 $2,934,503
==== ========== ======= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FNMA 6.24% $ 529,882 $ 8,718 $ - $ 538,600
FHLMC 6.79 1,233,625 24,577 - 1,258,202
RTC 6.03 248,140 - 3,054 245,086
Other 5.03 528,126 1,161 353 528,934
---- ---------- ------- -------- ----------
6.24% $2,539,773 $34,456 $ 3,407 $2,570,822
==== ========== ======= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FNMA 7.18% $ 734,490 $16,524 $ - $ 751,014
FHLMC 7.14 1,573,739 28,838 - 1,602,577
REMIC 6.79 517,401 3,796 249 520,948
RTC 7.01 272,378 146 1,733 270,791
Other 7.14 70,049 517 3,453 67,113
---- ---------- ------- -------- ----------
7.08% $3,168,057 $49,821 $ 5,435 $3,212,443
==== ========== ======= ======== ==========
/TABLE
<PAGE>
<PAGE>
Gross realized gains on mortgage-backed securities, which are included
in gain on mortgage sales on the Consolidated Statement of Operations, were
as follows:
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Realized gains $ - $1,097 $1,414
</TABLE>
Proceeds from the sales of mortgage-backed securities in 1993 were
$35,142,000. There were no mortgage-backed securities sold in 1994 and 1992.
There were no realized losses in 1994, 1993 or 1992. Gains and losses
on mortgage-backed securities are calculated on the specific identification
method.
NOTE 5: LOANS RECEIVABLE
An analysis of the loan portfolio by type at December 31, 1994 and
December 31, 1993 is included in the table on page 102 under the caption
"Loan Portfolio by Type." An analysis of the real estate loan portfolio by
security type and state at December 31, 1994 is included in the table on page
103 titled "Real Estate Loans and Real Estate by State." An analysis of the
California real estate loan portfolio and nonperforming loans by region at
December 31, 1994 is included in the table on page 104 under the caption
"California Real Estate Loans and Real Estate."
<PAGE>
<PAGE>
The following comprised loans receivable:
<TABLE>
<CAPTION>
December 31
---------------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Loans receivable
Real estate
Held for investment $26,430,658 $28,788,519
Available for sale 61,302 324,080
Consumer
Held for investment 2,186,969 2,028,255
Available for sale 238,476 179,642
----------- -----------
28,917,405 31,320,496
----------- -----------
Loans in process 10,712 617
Unearned income (111,698) (157,441)
Reserve for estimated losses (438,051) (502,269)
----------- -----------
(539,037) (659,093)
----------- -----------
$28,378,368 $30,661,403
=========== ===========
</TABLE>
A loan is impaired when, based on current information and events, it
is probable that the Company will be unable to collect all amounts due
according to the contractual terms of the loan agreement. The Company
measures impairment based on the fair value of the loan's collateral.
Changes in fair value are recorded through a valuation allowance. Charge-
offs occur upon modification of the loan terms or in the event of
foreclosure. 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. Cash
receipts for impaired loans are allocated to principal and interest in
accordance with the contractual terms of the loan. The recorded investment
in loans for which impairment has been recognized in accordance with FAS 114,
and the related reserves for estimated losses 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) December 31, 1994
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate loans
Residential
Single-family $ 31,011 $ 6,456 $ 24,555 $ 17,063 $ 41,618
Apartments 77,934 16,418 61,516 28,395 89,911
Commercial
Offices 26,698 9,303 17,395 5,426 22,821
Retail 25,916 5,547 20,369 3,902 24,271
Hotel/motel 19,659 3,194 16,465 2,207 18,672
Industrial 12,646 3,018 9,628 1,728 11,356
Other 4,671 1,090 3,581 329 3,910
-------- ------- -------- -------- --------
$198,535 $45,026 $153,509 $ 59,050 $212,559
======== ======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate loans
Residential
Single-family $ 14,614 $ 3,396 $ 11,218 $ 22,433 $ 33,651
Apartments 63,208 15,823 47,385 40,632 88,017
Commercial
Offices 30,648 10,067 20,581 21,905 42,486
Retail 13,470 3,201 10,269 12,347 22,616
Hotel/motel 48,485 5,025 43,460 59,835 103,295
Industrial 10,745 2,614 8,131 6,412 14,543
Other 1,052 441 611 1,969 2,580
-------- ------- -------- -------- --------
$182,222 $40,567 $141,655 $165,533 $307,188
======== ======= ======== ======== ========
</TABLE>
Single-family residential mortgage loans are generally evaluated for
impairment as homogeneous pools of loans. Certain situations may arise
leading to single-family residential mortgage loans being evaluated for
impairment on an individual basis.
<PAGE>
<PAGE>
The average recorded investment in impaired loans and the related
amount of interest income recognized during the period of impairment follows:
<TABLE>
<CAPTION>
Year Ended
(Dollars in thousands) December 31, 1994
-----------------
<S> <C>
Average recorded investment
in impaired loans $298,315
Interest income recognized 24,733
Interest income recognized
on cash-basis 25,061
</TABLE>
The average recorded investment in impaired loans for the year ended
December 31, 1993 was $492,292,000.
Loans receivable totaling $4,767,679,000 at December 31, 1994, were
pledged to secure FHLB borrowings, certain deposits, securities sold under
agreements to repurchase and other obligations and accounts.
Gross unrealized gains on real estate loans available for sale totaled
$176,000 at December 31, 1994 and $8,245,000 at December 31, 1993.
A significant portion of the ARM portfolio is subject to lifetime
interest-rate caps and floors. Each loan is priced separately with a maximum
cap and a minimum floor. The weighted-average cap was 13.11 percent and the
weighted-average floor was 5.26 percent at December 31, 1994. At December
31, 1994, $4,916,862,000 of ARMs with an average yield of 7.09 percent had
reached their floor rate. Without the floor, the average yield on those ARMs
would have been 6.75 percent. The benefit to interest income from real
estate loans which have reached their floor interest rate was approximately
$53,985,000 in 1994 compared with $40,912,000 in 1993. The contract amount
on ARMs subject to interest-rate caps and floors does not represent the
exposure to market loss.
The amortization of deferred loan fees included in interest income
totaled $53,378,000 in 1994, $50,339,000 in 1993 and $51,507,000 in 1992.
Certain loans meet the criteria of TDRs. TDRs totaled $148,244,000 at
December 31, 1994. This compared with $294,772,000 at the end of 1993 and
$160,513,000 at the end of 1992. There were no additional funds committed
at December 31, 1994. The decrease in TDRs in 1994 was primarily the result
of both a sale and a foreclosure of two nonperforming loans with a combined
balance of approximately $92,390,000. In addition, $63,375,000 of performing
TDR loans reached the end of the restructuring period, bringing them back to
a normal amortization schedule.
<PAGE>
<PAGE>
Interest on nonaccrual loans totaled $46,909,000 for the year ended
December 31, 1994 compared with $79,588,000 for the year ended December 31,
1993 and $73,230,000 for the year ended December 31, 1992.
Following is a summary of the reserve for estimated losses and charge-
off experience for loans receivable:
<TABLE>
<CAPTION>
Real Estate Loans Consumer Loans
--------------------- ------------------------------
Consumer Bank
(Dollars in thousands) SFR Other Finance Card Other Total
--- ----- -------- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1989 $ 30,882 $ 149,392 $ 31,716 $ 11,156 $10,025 $ 233,171
Provision for losses 50,650 169,234 50,300 12,364 2,452 285,000
Charge-offs (11,354) (193,442) (30,568) (13,638) (5,742) (254,744)
Recoveries 84 1,416 8,960 2,409 2,550 15,419
--------- --------- -------- -------- ------- ---------
Balance at December 31, 1990 70,262 126,600 60,408 12,291 9,285 278,846
Provision for losses 61,724 23,576 32,600 27,200 4,800 149,900
Charge-offs (32,529) (68,366) (63,949) (20,192) (8,309) (193,345)
Recoveries 896 5,831 8,923 1,874 1,420 18,944
Reserves of acquired companies - - 7,434 - 1,271 8,705
--------- --------- -------- -------- ------- ---------
Balance at December 31, 1991 100,353 87,641 45,416 21,173 8,467 263,050
Provision for losses 113,808 228,492 41,900 30,254 5,546 420,000
Charge-offs (53,459) (117,611) (55,436) (28,150) (8,069) (262,725)
Recoveries 240 5,008 14,661 2,022 2,641 24,572
--------- --------- -------- -------- ------- ---------
Balance at December 31, 1992 160,942 203,530 46,541 25,299 8,585 444,897
Adoption of FAS 114 3,153 44,821 - - - 47,974
--------- --------- -------- -------- ------- ---------
Balance at January 1, 1993 164,095 248,351 46,541 25,299 8,585 492,871
Provision for losses 300,185 123,468 37,900 (6,533) 7,980 463,000
Charge-offs (254,075) (151,700) (50,174) (20,794) (1,911) (478,654)
Recoveries 2,034 4,273 15,523 2,028 1,194 25,052
--------- --------- -------- -------- ------- ---------
Balance at December 31, 1993 212,239 224,392 49,790 - 15,848 502,269
Provision for losses 167,049 693 41,900 - (2,442) 207,200
Charge-offs (191,701) (42,981) (54,041) - (3,351) (292,074)
Recoveries 1,420 2,924 15,568 - 744 20,656
--------- --------- -------- -------- ------- ---------
Balance at December 31, 1994 $ 189,007 $ 185,028 $ 53,217 $ - $10,799 $ 438,051
========= ========= ======== ======== ======= =========
</TABLE>
Provisions for losses on the leasing portfolio in 1994, included in
Other consumer loan loss provisions, decreased as a result of the reversal
of a $6,000,000 provision originally established for an expected loss which
did not materialize.
<PAGE>
<PAGE>
The ratio of net charge-offs to average loans follows:
<TABLE>
<CAPTION>
Real Estate Loans Consumer Loans
------------------ -----------------------------
Consumer Bank
SFR Other Finance Card Other Total
--- ----- -------- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31,
1994 .71% 1.23% 2.06% -% .66% .84%
1993 .98 3.96 2.01 10.44 .19 1.43
1992 .21 3.07 2.42 9.62 1.41 .76
1991 .13 1.53 3.84 6.18 1.75 .55
1990 .04 4.01 1.64 4.04 .77 .75
</TABLE>
The following table presents the Company's reserve for estimated losses
as a percent of the respective loans receivable portfolios:
<TABLE>
<CAPTION>
Real Estate Loans Consumer Loans
------------------ -----------------------------
Consumer Bank
SFR Other Finance Card Other Total
--- ----- -------- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
December 31,
1994 .66% 5.96% 2.66% -% 2.53% 1.28%
1993 .83 6.59 2.72 - 4.20 1.60
1992 .63 5.83 2.70 9.88 2.34 1.43
1991 .39 2.27 2.64 7.06 2.18 .82
1990 .28 2.98 4.39 4.08 2.35 .89
</TABLE>
NOTE 6: MORTGAGE BANKING
Data pertaining to mortgage banking operations follow:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Loans sold
Adjustable rate $ 55,243 $ 420,864 $ 95,218
Fixed-rate 1,115,751 3,112,773 4,058,811
Mortgage-backed securities sold
Adjustable rate - 32,010 -
Fixed-rate - 2,035 -
---------- ---------- ----------
$1,170,994 $3,567,682 $4,154,029
========== ========== ==========
/TABLE
<PAGE>
<PAGE>
In 1994, the Company sold a $55 million adjustable rate, nonperforming
TDR from the real estate loans held for investment portfolio.
<TABLE>
<CAPTION>
December 31
-----------------------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Loans serviced for others $10,992,369 $12,336,807 $13,106,074
Loan servicing spread .44% .42% .34%
</TABLE>
Loan servicing spread represents net servicing income as a percentage
of the average portfolio serviced.
The present value of retained yield on loans sold is amortized using
the interest method adjusted quarterly for actual prepayment experience. At
December 31, 1994, excess servicing of $25,934,000 was included in other
assets and short servicing of $25,356,000 was included in other liabilities.
At December 31, 1993, excess servicing was $38,778,000 and short servicing
was $29,618,000. Following is a summary of the net unamortized balance of
excess servicing on loans sold:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Balance at beginning of year $ 9,160 $ 28,043
Additions (reductions) from sales 604 (3,327)
Amortization (9,186) (15,556)
------- --------
Balance at end of year $ 578 $ 9,160
======= ========
</TABLE>
Gains on mortgage sales were derived from:
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Loan servicing spread
Gains $ 1,922 $ 5,271 $ 961
Losses (1,318) (8,598) (22,274)
------- ------- --------
Net 604 (3,327) (21,313)
(Discounts) premiums, net (4,559) 4,985 1,343
Deferred loan fees 8,879 29,968 53,787
Hedging gains (losses), net 1,472 (6,822) (2,410)
Adjust to lower of cost or market (1,057) (50) 1,379
------- ------- --------
$ 5,339 $24,754 $ 32,786
======= ======= ========
</TABLE>
<PAGE>
<PAGE>
Mortgage banking servicing income consisted of:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Collections $68,968 $ 77,706 $ 92,601
Guarantee fees (8,929) (10,965) (14,457)
Amortization of excess servicing (9,186) (15,556) (25,455)
------- -------- --------
$50,853 $ 51,185 $ 52,689
======= ======== ========
</TABLE>
GWB, as seller and servicer, issued mortgage pass-through certificates
comprised of Class A certificates and Class B certificates. The Class B
certificates, which GWB retained, are subordinated to the rights of the Class
A certificate holders. GWB also sold loans to FNMA and FHLMC whereby a
portion or all of the credit risk was retained. Following are data related
to loans sold with credit enhancements and the accompanying exposure related
thereto:
<TABLE>
<CAPTION>
December 31
------------------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Loans sold with credit enhancements
outstanding $1,409,631 $1,756,576 $2,405,413
Maximum exposure under credit
enhancements 778,705 778,896 817,152
</TABLE>
To facilitate the servicing of delinquent loans under these
commitments and to minimize losses to the Company, loans in the amount of
$71,400,000 in 1994, $165,103,000 in 1993 and $91,263,000 in 1992 have been
repurchased from investors. Repurchased loans are included in the Company's
periodic analysis of the adequacy of valuation reserves. Delinquent interest
of approximately $1,669,000 in 1994, $8,187,000 in 1993 and $6,397,000 in
1992 was repurchased and subsequently written off. Periodically, the Company
repurchases, for investment, loans which were previously sold. The Company
repurchased loans totaling $476,274,000 in 1994, $20,723,000 in 1993 and
$3,116,000 in 1992.<PAGE>
<PAGE>
NOTE 7: REAL ESTATE
An analysis of the real estate portfolio and nonperforming real estate
by state at December 31, 1994 is included in the table on page 103 titled
"Real Estate Loans and Real Estate by State." An analysis of California real
estate and nonperforming real estate by region at December 31, 1994 is
included in the table on page 104 titled "California Real Estate Loans and
Real Estate."
Real estate available for sale or development consisted of:
<TABLE>
<CAPTION>
December 31
-------------------------
(Dollars in thousands) 1994 1993
<S> <C> <C>
Real estate available for sale
Real estate acquired through foreclosure $226,574 $ 370,630
Other 55,673 82,174
-------- ---------
282,247 452,804
Property development 69,958 131,017
Accumulated depreciation (18,213) (26,193)
Reserve for estimated losses (77,025) (123,551)
-------- ---------
$256,967 $ 434,077
======== =========
</TABLE>
Interest capitalized on property development totaled $4,581,000 at
December 31, 1994 and $7,484,000 at December 31, 1993.
Real estate operations are summarized below:
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net (gain) on sales of real estate $ (6,437) $(11,079) $(5,639)
Interest recognized on advances (1,341) (1,023) (1,695)
Net operating losses and holding costs 27,632 45,885 6,609
-------- -------- -------
$ 19,854 $ 33,783 $ (725)
======== ======== =======
</TABLE>
<PAGE>
<PAGE>
Following is a summary of the reserve for estimated losses:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $123,551 $185,204 $ 6,862 $ 13,389 $ 6,682
Adoption of FAS 114 - (66,102) - - -
-------- -------- -------- -------- --------
Adjusted balance at
beginning of year 123,551 119,102 6,862 13,389 6,682
Provision for losses 12,000 92,000 220,000 21,000 53,600
Charge-offs (65,769) (87,673) (41,658) (28,266) (47,813)
Recoveries 7,243 122 - 739 920
-------- -------- -------- -------- --------
Balance at end of year $ 77,025 $123,551 $185,204 $ 6,862 $ 13,389
======== ======== ======== ======== ========
</TABLE>
NOTE 8: INTEREST RECEIVABLE
Following is a summary of interest receivable:
<TABLE>
<CAPTION>
December 31
---------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Real estate loans $129,052 $134,334
Mortgage-backed securities 68,908 25,051
Consumer loans 8,081 4,046
Securities 12,937 7,876
Taxes 11,120 43,188
Other 827 495
-------- --------
$230,925 $214,990
======== ========
</TABLE>
Other includes interest receivable on interest-rate swaps.
<PAGE>
<PAGE>
NOTE 9: INVESTMENT IN THE FEDERAL HOME LOAN BANK SYSTEM
The investment in the Federal Home Loan Banks consisted of capital
stock, at cost, totaling $306,041,000 at December 31, 1994 and $307,352,000
at December 31, 1993.
The Company earned 5.18 percent in 1994, 3.93 percent in 1993 and 1.88
percent in 1992 from dividends on its investment in FHLB stock. FHLB capital
stock is pledged to secure FHLB borrowings. Earnings on FHLB stock will
presumably continue to be restricted due to the funding requirements imposed
on the Federal Home Loan Banks for affordable housing programs and the
Resolution Funding Corporation.
NOTE 10: PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31
------------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Land $ 89,630 $ 84,950
Buildings and leasehold improvements 439,717 416,676
Furniture, fixtures and equipment 546,884 528,020
Construction in progress 14,065 21,808
---------- ----------
1,090,296 1,051,454
Accumulated depreciation and amortization (474,180) (427,763)
---------- ----------
$ 616,116 $ 623,691
========== ==========
</TABLE>
The Company leases various branch offices under capital and
noncancellable operating leases which expire at various dates through 2073.
Some leases contain escalation provisions for adjustments in the consumer
price index and provide for renewal options for five- to 10-year periods.
Future minimum lease payments under all noncancellable leases at December 31,
1994 were as follows:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Operating Capital
(Dollars in thousands) Leases Leases
--------- -------
<S> <C> <C>
Year ending December 31,
1995 $ 53,134 $ 7,633
1996 46,217 7,633
1997 40,489 7,633
1998 33,980 7,633
1999 27,787 7,633
Thereafter 167,939 90,269
-------- --------
Total minimum lease payments $369,546 128,434
========
Amount representing interest 55,665
--------
Present value of minimum lease payments $ 72,769
========
</TABLE>
Rental expense charged to earnings was $55,011,000 in the year ended
December 31, 1994, $53,638,000 in the year ended December 31, 1993 and
$57,823,000 in the year ended December 31, 1992.
NOTE 11: CUSTOMER ACCOUNTS
A summary of balances at December 31, 1994 and December 31, 1993 by
type of account, and at December 31, 1994 by maturity of account is presented
on page 100, under the captions "By Type," "By Product," and "Year-end 1994
by Maturity." An analysis of term deposits by interest rate and maturity at
December 31, 1994 and by interest rate at December 31, 1993 is presented
under the caption "Year-end 1994 Term Accounts by Maturity by Interest Rate."
The average interest rate is based upon stated interest rates without
giving consideration to daily compounding of interest or forfeiture of
interest because of premature withdrawals. Noninterest bearing checking
accounts represented 5.07 percent of total customer accounts at December 31,
1994 and 3.95 percent at December 31, 1993. Accrued but unpaid interest on
customer accounts included in other liabilities totaled $9,888,000 at
December 31, 1994 and $10,685,000 at December 31, 1993.
<PAGE>
<PAGE>
The following is a summary of interest expense on customer accounts:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Checking $ 40,034 $ 42,976 $ 57,838
Limited access 152,081 162,568 206,801
Regular savings 45,370 40,418 47,186
Term 712,814 693,119 1,021,648
-------- -------- ----------
$950,299 $939,081 $1,333,473
======== ======== ==========
</TABLE>
NOTE 12: SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase generally represent
borrowings of less than one year. The book value for these agreements
approximates fair value. Agreements to repurchase are secured by mortgage
loans and securities held by the Company. The collateral is summarized as
follows:
<TABLE>
<CAPTION>
December 31
----------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Repurchase liability $6,299,055 $ -
Weighted average yield 5.80% -%
U.S. government and federal agency obligations
Book value $6,719,178 $ -
Fair value 6,481,469 -
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Securities sold under agreements
to repurchase
Balance at year end $6,299,055 $ - $ 716,962
Maximum outstanding at
any month end 6,299,055 1,384,092 1,155,080
Average balance during the year 1,984,652 991,964 418,136
Weighted average rate during
the year 5.17% 3.19% 4.14%
Weighted average rate at
year end 5.80 - 3.60
</TABLE>
NOTE 13: SHORT-TERM BORROWINGS
An analysis of borrowings by type at December 31, 1994 and December 31,
1993 and by maturity at December 31, 1994 is presented in the table titled
"Borrowings" on page 99.
The following is a summary of short-term borrowings:
<TABLE>
<CAPTION>
December 31
------------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Commercial paper $ 745,461 $392,658
Federal funds 275,000 -
Sallie Mae 190,000 177,025
Bank borrowings - 51,800
Thrift notes - 55,000
---------- --------
$1,210,461 $676,483
========== ========
</TABLE>
Commercial paper has maturities of less than 270 days, and at December
31, 1994, the average maturity was 27 days. In 1993, GWB syndicated a
$1,000,000,000 Thrift Note program. These notes are sold through securities
dealers to institutional investors and have maturities of less than 270 days.
Other short-term borrowings mature in periods of up to 12 months.
<PAGE>
<PAGE>
GWB has a $190,000,000 financing agreement with the Student Loan
Marketing Association ("Sallie Mae") which is indexed to the London Interbank
Offered Rate ("LIBOR"). The borrowings are fully secured by insured student
loans made by GWB. The agreement expires March 31, 1995. Borrowings
outstanding at December 31, 1994 totaled $190,000,000 at 6.38 percent.
Short-term borrowings are summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Commercial paper
Balance at year end $745,461 $392,658 $256,091
Maximum outstanding at any
month end 887,514 856,973 467,149
Average balance during the year 431,021 521,509 311,122
Weighted average rate during
the year 4.78% 3.35% 4.10%
Weighted average rate at
year end 6.06 3.46 3.77
Other short-term borrowings
Balance at year end $465,000 $283,825 $230,632
Maximum outstanding at any
month end 540,000 428,618 331,373
Average balance during the year 328,383 303,850 266,567
Weighted average rate during
the year 4.69% 3.77% 4.49%
Weighted average rate at
year end 6.29 3.78 4.27
</TABLE>
NOTE 14: OTHER BORROWINGS
An analysis of borrowings by type at December 31, 1994 and December 31,
1993 and by maturity at December 31, 1994 is presented in the table titled
"Borrowings" on page 99. Debt issue costs are amortized on the interest
method over the term of the debt.
<PAGE>
<PAGE>
The following is a summary of other borrowings:
<TABLE>
<CAPTION>
December 31
-------------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Senior debt $2,374,781 $2,425,953
FHLB borrowings 187,000 306,150
Other 49,363 70,755
---------- ----------
$2,611,144 $2,802,858
========== ==========
</TABLE>
FHLB Borrowings
FHLB borrowings are secured by pledges of real estate loans and the
capital stock of the FHLB. At December 31, 1994, interest rates, both fixed
and variable, ranged from 4.11 percent to 8.45 percent. Average FHLB
borrowings were $306,431,000 in 1994, $1,058,257,000 in 1993 and $342,576,000
in 1992. Based upon these balances, the weighted average interest rate was
5.63 percent in 1994, 4.59 percent in 1993 and 9.05 percent in 1992.
GWB has various borrowing alternatives with the FHLB, which include a
$125,000,000 facility for overnight advances.
<PAGE>
<PAGE>
Senior Debt
The Company has the following senior debt outstanding:
<TABLE>
<CAPTION>
December 31
Rate at ------------------------
(Dollars in thousands) 12-31-94 1994 1993
-------- ---- ----
<S> <C> <C> <C>
GWB fixed-rate notes, due
between 1997 and 2001
at various rates 10.07% $ 581,400 $ 770,991
GWB medium-term notes,
various rates, - - 61,800
Parent company fixed-rate
notes, due between 1998
and 2002 7.39 672,585 672,226
Parent company Eurodollar
note, floating rate,
due 1995 6.56 28,250 28,250
Aristar medium-term notes,
various rates, with
maturities between one year
and two years 9.33 23,000 23,000
Other Aristar senior
indebtedness, due between
1995 and 2001 at various rates 7.65 1,069,546 869,686
---------- ----------
$2,374,781 $2,425,953
========== ==========
</TABLE>
In December 1994, Aristar issued $100,000,000 in senior debt with a
coupon of 8.125 percent which matures on December 1, 1997.
In July 1994, Aristar issued $150,000,000 in senior debt with a coupon
of 7.75 percent which matures on June 15, 2001.
In July 1993, GWFC issued $225,000,000 in senior debt with a coupon
of 6.375 percent which matures on July 1, 2000.
Also in July 1993, Aristar issued $150,000,000 in senior debt with a
coupon of 5.75 percent and a maturity of July 15, 1998.
In June 1993, GWFC issued $150,000,000 in senior debt with a coupon
of 6.125 percent and a maturity of June 15, 1998.
<PAGE>
<PAGE>
Credit Facilities
In October 1994, Aristar syndicated a multi-year $450,000,000 Credit
Facility with 22 banks for back-up liquidity and general corporate purposes.
This agreement provides for drawdowns at a spread to the LIBOR. Aristar pays
an annual commitment fee of 15 basis points on the unused portion. There
were no borrowings under this agreement in 1994.
In July 1994, GWB syndicated a multi-year $400,000,000 Credit Facility
with 20 banks for back-up liquidity and general corporate purposes. This
agreement provides for drawdowns at a spread to the LIBOR. The Bank pays an
annual commitment fee of 17.5 basis points on the unused portion of this
credit facility. There were no borrowings under this agreement in 1994.
In July 1994, GWFC syndicated a multi-year $200,000,000 Credit
Facility with 20 banks for back-up liquidity and general corporate purposes.
The agreement provides for drawdowns at a spread to the LIBOR. The Company
pays an annual commitment fee of 22.5 basis points on the unused portion.
There were no borrowings under this agreement in 1994.
The Company is subject to various debt covenants and believes it is
in compliance at December 31, 1994.
NOTE 15: FEDERAL AND STATE TAXES ON INCOME
Following is a summary of the provision for taxes on income:
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current tax expense (benefit)
Federal $120,100 $21,300 $ 169,700
State 32,500 (800) 45,600
-------- ------- ---------
152,600 20,500 215,300
-------- ------- ---------
Deferred tax expense (benefit)
Federal 900 (800) (139,700)
State 1,800 10,300 (34,000)
-------- ------- ---------
2,700 9,500 (173,700)
-------- ------- ---------
$155,300 $30,000 $ 41,600
======== ======= =========
</TABLE>
<PAGE>
<PAGE>
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
December 31
-----------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Deferred tax liabilities
Loan fees and interest income $ 190,479 $ 179,075
Financial leases 81,847 82,368
FHLB dividends 54,914 50,106
Amortization of intangibles 29,743 43,454
Depreciation 19,829 24,635
Accrued interest income 11,291 15,685
Sales of unearned interest income 10,202 11,690
Cash method of accounting for income
tax reporting 7,964 8,439
Partnership income 5,741 9,351
Election to reduce basis 1,275 1,736
Unrealized holding gains on securities - 15,594
Other deferred income items 43,015 30,581
--------- ---------
456,300 472,714
--------- ---------
Deferred tax assets
Loss reserves (173,886) (211,615)
Unrealized holding losses on securities (37,581) -
Postemployment benefits (26,577) (22,517)
State taxes (24,498) (8,962)
Unearned insurance commission (10,153) (10,157)
Deferred compensation (9,603) (9,079)
Gain on mortgage sales (7,510) (8,402)
Other deferred deduction items (56,180) (41,195)
--------- ---------
(345,988) (311,927)
Deferred tax assets valuation allowance - -
--------- ---------
Net deferred tax liabilities $ 110,312 $ 160,787
========= =========
</TABLE>
<PAGE>
<PAGE>
The following table reconciles the statutory income tax rate to the
consolidated effective income tax rate:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Federal income tax rate 35.0% 35.0% 34.0%
State franchise tax rate, net of
federal income tax effect 6.0 7.2 7.6
---- ---- ----
Statutory income tax rate 41.0 42.2 41.6
Increase (reduction) in tax rate
resulting from:
Amortization of intangibles 1.3 7.6 15.9
Settlements with Internal Revenue Service - (9.8) -
Reversal of taxes previously provided (2.9) (5.9) (5.0)
Adjustment of deferred tax rate (.2) 2.2 (4.5)
Other items, net (1.0) (3.7) (4.4)
---- ---- ----
38.2% 32.6% 43.6%
==== ==== ====
</TABLE>
Taxes on income included the following:
<TABLE>
<CAPTION>
December 31
---------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Net deferred liability
Federal income tax $ 56,614 $ 97,438
State franchise tax 53,698 63,349
-------- --------
110,312 160,787
Taxes payable 85,811 24,039
-------- --------
$196,123 $184,826
======== ========
</TABLE>
<PAGE>
<PAGE>
Thrift institutions that meet certain tests prescribed by the Internal
Revenue Code are allowed a bad debt deduction for federal income tax purposes
of either 8 percent of taxable income, or an amount determined from the
thrift's loss experience. For 1994, 1993 and 1992 the Company used its loss
experience to determine federal taxes payable.
In accordance with FAS 109, a federal deferred tax liability of
$253,571,000 has not been recognized at December 31, 1994 for $724,488,000
of temporary differences relating to the tax bad debt reserves of the Bank
that arose prior to 1988.
The Company's tax returns have been examined by the Internal Revenue
Service through December 31, 1987 and by the California Franchise Tax Board
through December 31, 1991.
NOTE 16: EMPLOYEE BENEFIT PLANS
Pension Plans
The Great Western Retirement Plan ("the plan") covers a majority of
employees. Benefits under this plan are generally based on years of service
and the highest consecutive 60-months earnings during the last 120 months of
credited service prior to retirement. The Company's general funding policy
is to contribute the maximum amount deductible for federal income tax
purposes.
<PAGE>
<PAGE>
The net periodic pension cost is computed as follows:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Return on plan assets:
Actual return $ 1,877 $(15,715) $(12,357)
Expected return (higher) lower
than actual return (17,559) 2,003 48
-------- -------- --------
Expected return (15,682) (13,712) (12,309)
Service cost 11,400 9,899 8,584
Interest cost 13,981 12,351 10,794
Net amortization of initial
unrecognized net
(asset) as of January 1, 1987 (676) (676) (676)
Amortization of unrecognized net
gain and deferrals 1,398 1,076 418
Amortization of unrecognized prior
service cost (185) (185) (186)
-------- -------- --------
$ 10,236 $ 8,753 $ 6,625
======== ======== ========
</TABLE>
Assumptions used in determining the net periodic pension cost were:
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 7.75% 8.00% 8.00%
Rate of increase in future compensation levels 5.50 5.75 5.75
Expected long-term rate of return on plan assets 9.00 9.00 9.00
</TABLE>
Although the actual return on plan assets is shown, the expected long-
term rate of return is used in determining net periodic pension cost. The
difference between the actual return and expected return is shown as
amortization of unrecognized net gain (loss).
<PAGE>
<PAGE>
Accumulated plan benefit information and the funded status of the plan
follow:
<TABLE>
<CAPTION>
December 31
---------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Accumulated benefit obligation
Vested $142,865 $132,074
Nonvested 4,887 4,673
-------- --------
$147,752 $136,747
======== ========
Projected benefit obligation $178,043 $168,867
Fair value of plan assets 170,808 172,200
-------- --------
Plan assets (less than) in excess
of projected benefit obligation (7,235) 3,333
Unrecognized net transition asset (676) (1,353)
Unrecognized prior service costs (185) (371)
Unrecognized net loss 34,294 25,675
-------- --------
Prepaid pension cost included in
other assets $ 26,198 $ 27,284
======== ========
</TABLE>
The assumptions used in determining the actuarial present value of the
projected benefit obligation were:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 8.25% 7.75% 8.00%
Rate of increase in future
compensation levels 5.50 5.50 5.75
Expected long-term rate of return
on plan assets 9.00 9.00 9.00
</TABLE>
<PAGE>
<PAGE>
Plan assets include certificates of deposit at GWB, equity securities,
mutual funds, mortgage-backed securities and other fixed-income securities.
Certificates of deposit at GWB totaled $6,400,000 at December 31, 1994 and
$24,850,000 at December 31, 1993.
The Company also sponsors a non-qualified, unfunded, supplemental
executive retirement plan for certain senior officers and a nonqualified
unfunded directors' retirement plan. Data related to these plans follow:
<TABLE>
<CAPTION>
December 31
-------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Projected benefit obligation $27,993 $26,281
Unrecognized net obligation 3,787 4,294
</TABLE>
Pension expense for these plans totaled $4,590,000 for 1994, $4,420,000
for 1993 and $3,631,000 for 1992.
The Company provides an optional deferred compensation plan for certain
employees. Eligible employees can defer a portion of their compensation and
the Company agrees to pay interest on the balance of funds deferred. An
enhanced rate is paid on funds deferred over three years.
The Company has purchased cost recovery life insurance, primarily with
one carrier, on the lives of the participants of the supplemental executive
retirement plan, directors' retirement plan and deferred compensation plan
and it is sole owner and beneficiary of said policies. The amount of
coverage is designed to provide sufficient revenues to fund said plans.
The net cash surrender value of this life insurance, recorded in other
assets, was $151,393,000 at December 31, 1994 and $143,069,000 at December
31, 1993, and net premium income related to insurance purchased was
$2,646,000 in 1994, $5,967,000 in 1993 and $3,768,000 in 1992.
Postretirement Plans
The Company sponsors unfunded defined benefit postretirement plans that
provide medical and life insurance coverage to eligible employees and
dependents based on age and length of service. Medical coverage options are
the same as available to active employees. The cost of plan coverage for
retirees and their qualifying dependents is based upon a point system that
combines age and years of service which results, generally, in lower costs
to retirees in conjunction with higher accumulated points within limits.
<PAGE>
<PAGE>
The following table shows the plan's status reconciled to the accrued
postretirement benefit cost included in other liabilities on the Consolidated
Statement of Financial Condition.
<TABLE>
<CAPTION>
December 31
-------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $24,900 $31,300
Fully eligible active employees 4,100 4,100
Other active employees 18,100 15,200
------- -------
47,100 50,600
Unrecognized net gain (loss) 2,959 (5,056)
------- -------
Accrued postretirement benefit $50,059 $45,544
======= =======
</TABLE>
The net postretirement medical and life insurance costs follow:
<TABLE>
<CAPTION>
Year ended December 31
----------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost $2,349 $1,856 $1,759
Interest cost of accumulated
postretirement benefit
obligation 3,730 3,370 3,133
------ ------ ------
$6,079 $5,226 $4,892
====== ====== ======
</TABLE>
<PAGE>
<PAGE>
For measurement purposes, the cost of medical benefits was projected
to increase at a rate of 11.75 percent in 1994, thereafter decreasing 1
percent per year until a stable 6.75 percent medical inflation rate is
reached in 1999. Increasing the assumed health care cost trend by 1 percent
in each year would increase the accumulated postretirement benefit obligation
at December 31, 1994 by approximately $3,400,000 and the aggregate of the
service and interest components of net periodic postretirement benefit cost
for the year ended December 31, 1994 by $600,000. The present value of the
accumulated benefit obligation assumed an 8.25 percent discount rate
compounded annually at December 31, 1994 and 7.75 percent at December 31,
1993.
Stock Option Plans
The Company currently has a stock option plan in effect: the 1988 Stock
Option and Incentive Plan ("stock option plan"). Options are granted at the
market value of the common stock on the date of grant. The stock option plan
consists of two separate plans: The Key Employee Program under which options
(both incentive and nonqualified), stock appreciation rights, dividend
equivalents and certain other performance and incentive awards may be
granted to officers, key employees and certain other individuals; and the
Non-employee Director Program under which non-qualified options will be
automatically granted to non-employee directors under certain circumstances.
The Company has set aside 12,500,000 shares of common stock to be delivered
pursuant to the stock option plan, of which a maximum of 750,000 may be
delivered under the Non-employee Director Program. Options may be exercised
either by payment of cash, or the optionee may deliver GWFC common stock of
an equivalent market value at the date of exercise. Proceeds from the
exercise of stock options are credited to common stock for the aggregate par
value of shares issued, and the excess is credited to additional capital.
In 1993 and 1992, the Company granted performance-based restricted
stock awards to encourage and reward high levels of performance of the
Company as measured by returns to shareholders. The shares will fully vest
10 years after the award date, and prior to such time, they are subject to
accelerated vesting based on the Company's performance. At December 31,
1994, a total of 1,093,700 shares with a value of $20,248,000 had been
granted. The unearned compensation is recorded as a separate reduction of
stockholders' equity and is being amortized to expense over 60 months. The
total amount of compensation expense related to restricted stock awards
recorded was $3,798,000 in 1994, $3,693,000 in 1993 and $3,671,000 in 1992.
Stock appreciation rights ("SAR") may be granted in conjunction with
certain options previously granted or with future options. An SAR entitles
the holder, at the discretion of the Company, to receive cash or shares of
GWFC common stock, or a combination thereof, at a value equal to the excess
of the fair market value on the date of exercise over the option price.
Exercise of an option or companion SAR automatically cancels the related
option or right.
<PAGE>
<PAGE>
Information with respect to stock options follows:
<TABLE>
<CAPTION>
Option Shares Option Price Range
------------- ------------------
<S> <C> <C>
1993
Outstanding at beginning of year 5,293,387 $ 7.70 - $22.15
Granted 628,600 16.38 - 19.38
Cancelled (162,137) 10.38 - 19.38
Exercised (443,255) 10.38 - 18.63
---------- ---------------
Outstanding at end of year 5,316,595 7.70 - 22.15
1994
Granted 2,287,806 16.63 - 20.25
Cancelled (209,860) 14.75 - 18.88
Exercised (282,300) 10.38 18.88
---------- ---------------
Outstanding at end of year 7,112,241 $ 7.70 - $22.15
========== ===============
Options exercisable at
December 31, 1994 3,157,620 $ 7.70 - $22.15
========== ===============
</TABLE>
Savings Plans
The Company has an Employee Savings Incentive Plan which grants to all
eligible employees the opportunity to invest up to 14 percent of their
earnings in certain investment alternatives. For investments by employees
of up to 6 percent of their earnings, the Company is obligated to and has
contributed an amount equal to one-half thereof for credit to the employees'
accounts. Further, the board of directors, at its discretion, may increase
the Company's contribution to match up to 100 percent of the Company's
obligated contribution. In 1994 and 1992 discretionary awards were made.
The Company contributed approximately $7,886,000 in 1994, including a
discretionary addition of $1,877,000, $6,703,000 in 1993 and $9,439,000 in
1992, including a discretionary addition of $3,599,000.
<PAGE>
<PAGE>
NOTE 17: STOCKHOLDERS' EQUITY
In September 1992, the Company issued 6,600,000 depositary shares,
each representing a one-tenth interest in a share of 8.30 percent cumulative
preferred stock. The preferred stock has a liquidation value of $250 per
share. The preferred stock will not be redeemable prior to November 1, 1997.
Each share of preferred stock, $1.00 par value, will be redeemable at the
option of the Company on or after November 1, 1997 at $250 per share, plus
accrued and unpaid dividends. Dividends are cumulative from the date of
issue and are payable quarterly.
In May 1991, the Company issued 2,587,500 depositary shares, each
representing a one-fifth interest in a share of 8.75 percent cumulative
convertible preferred stock. The preferred stock has a liquidation value of
$250 per share. The preferred stock will not be redeemable prior to May 1,
1996. Each share of preferred stock, $1.00 par value, will be redeemable for
cash at the option of the Company, in whole or in part, at prices declining
to $250 per share on or after May 1, 2001, from $260.94 per share on or after
May 1, 1996, plus accrued and unpaid dividends. Each share of preferred
stock will be convertible at the option of the holder into shares of common
stock of the Company at a conversion price of $20.40 per share of common
stock, subject to adjustment in certain events. Dividends are cumulative
from the date of issue and are payable quarterly.
Authorized but unissued shares of common stock reserved for stock
options were 12,242,175 at December 31, 1994 and 12,549,475 at December 31,
1993. In addition, 2,529,407 shares of common stock had been reserved for
the Dividend Reinvestment Plan.
Parent company equity in retained earnings of subsidiaries was
$1,179,243,000 at December 31, 1994 and $1,063,841,000 at December 31, 1993.
The payment of dividends to the parent company from its subsidiaries
is subject to certain regulatory requirements, restrictions imposed by
lenders and federal income tax consequences.
GWB is subject to the regulations of the OTS. A regulation applicable
to savings associations imposes limitations upon capital distributions,
including cash dividends. Tier 1 associations may, after prior notice but
without approval of the OTS, make capital distributions up to the higher of
1) 100 percent of their net income during the calendar year, plus the amount
that would reduce by one-half their "surplus capital ratio" (the excess over
their fully phased-in capital requirement) at the beginning of the calendar
year or 2) 75 percent of their net income over the most recent four quarter
periods. Tier 1 includes savings associations with capital at least equal
to their fully phased-in capital requirements, which have not been notified
that they are in need of more than normal supervision. Minimum capital
requirements are imposed by the thrift regulators. GWB believes that it is
a Tier 1 association.
<PAGE>
<PAGE>
The following ratios compare GWB with the fully phased-in capital
requirements under regulations issued by the OTS:
<TABLE>
<CAPTION>
December 31, 1994
----------------------------------------------
Actual OTS Benchmark
--------------- -------------- Capital
(Dollars in millions) Amount % Amount % Excess
------ --- ------ --- -------
<S> <C> <C> <C> <C> <C>
Leverage/tangible ratio $2,032 5.12 $1,192 3.00 $840
Risk-based ratio 2,706 11.72 1,847 8.00 859
</TABLE>
Certain debt agreements of GWB and Aristar provide for the maintenance
of minimum levels of equity. The federal income tax consequences arising
from the payment of dividends by GWB are discussed below. Management
believes, after taking into consideration all of the foregoing restrictions
and requirements, that the Company will be able to continue to pay dividends
to its stockholders without adverse tax consequences.
Thrift institutions that meet certain tests prescribed by the Internal
Revenue Code are allowed a bad debt deduction for federal income tax
purposes. Because of such deductions, only $663,000,000 of retained earnings
of the Bank at December 31, 1994 are available for use without adverse tax
consequences. This amount represents the earnings and profits of the bank
which, in accordance with the Internal Revenue Code, are available for the
payment of dividends. If retained earnings in excess of earnings and profits
are subsequently used by the Bank for purposes other than to absorb loan
losses, including distributions in liquidation, the amounts used will be
subject to federal income taxes at the then prevailing corporate tax rates.
It is not contemplated that retained earnings will be used in a manner which
will create federal income tax liabilities.
NOTE 18: CONTINGENT LIABILITIES
In the normal course of its business, the Company is named a defendant
in various legal proceedings and claims. In the opinion of management, after
consultation with outside legal counsel representing the Company in these
lawsuits, their outcomes will not have a material effect on the Company's
financial position, liquidity or results of operations.
<PAGE>
<PAGE>
NOTE 19: PARENT COMPANY FINANCIAL INFORMATION
Effective March 31, 1994, 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 $38,442,000.
Effective June 30, 1993, Aristar became a wholly-owned subsidiary of
the Company. This realignment was in the form of a dividend from GWB to GWFC
and a simultaneous cash capital contribution by GWFC to GWB of $369,473,000
which represented the dividended Company's book value. Aristar is expected
to continue to be a source of operating income.
<PAGE>
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Income
Dividends from subsidiary banks $139,764 $ 500,970 $156,340
Dividends from nonbanking
subsidiaries 29,500 23,500 7,500
Management fees and interest
charged subsidiaries 6,959 10,705 11,289
Income (loss) from securities
and investments 8,188 (343) (55)
Other 1,848 3,056 2
-------- --------- --------
186,259 537,888 175,076
-------- --------- --------
Expenses
Interest expense on borrowings 56,567 45,219 35,030
Operating and administrative 21,703 17,805 20,209
Federal and state taxes
(credits) on income (24,294) (22,368) (18,944)
-------- --------- --------
53,976 40,656 36,295
-------- --------- --------
Earnings before accounting change
and undistributed net earnings
of subsidiaries 132,283 497,232 138,781
Accounting change - - (247)
Undistributed (overdistributed) net
earnings of subsidiaries 118,951 (435,185) (53,528)
-------- --------- --------
$251,234 $ 62,047 $ 85,006
======== ========= ========
</TABLE>
The parent company joins with its subsidiaries, other than the life
insurance subsidiary, in filing a consolidated federal income tax return.
In the return, the parent company's taxable income or loss is consolidated
with the taxable income or loss of its subsidiaries. The parent company's
share of income taxes is based on the amount of tax which would be payable
if separate returns were filed. Therefore, the parent company's equity in
net earnings of subsidiaries is excluded from its computation of the
provision for taxes on income for financial statement purposes. Taxes
receivable consist primarily of amounts due from subsidiaries for taxes paid
on their behalf.
<PAGE>
<PAGE>
Statement of Financial Condition
<TABLE>
<CAPTION>
December 31
------------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Assets
Cash $ 1,933 $ 500
Certificates of deposit and federal funds 115,000 210,000
Securities available for sale 86,726 24,915
Investment in subsidiaries at cost plus
equity in undistributed earnings
Great Western Bank 2,256,089 2,247,689
Nonbanking subsidiaries 512,164 428,535
Advances to subsidiaries 98,146 54,271
Taxes receivable 30,363 60,662
Other assets 249,282 239,505
---------- ----------
$3,349,703 $3,266,077
========== ==========
Liabilities and stockholders' equity
Accounts payable and accrued expenses $ 151,651 $ 142,200
Commercial paper 13,431 -
Floating-rate notes 28,250 28,250
Fixed-rate notes 672,585 672,226
---------- ----------
865,917 842,676
Stockholders' equity (see Consolidated
Statement of Financial Condition) 2,483,786 2,423,401
---------- ----------
$3,349,703 $3,266,077
========== ==========
</TABLE>
Following is a summary of the parent company debt by maturity:
<TABLE>
<CAPTION>
(Dollars in thousands) December 31, 1994
-----------------
<S> <C>
1995 $ 41,681
1998 249,579
2000 and thereafter 423,006
--------
$714,266
========
/TABLE
<PAGE>
<PAGE>
Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating Activities
Net earnings $ 251,234 $ 62,047 $ 85,006
Noncash adjustments to net earnings
(Undistributed) overdistributed
net earnings of subsidiaries (118,951) 435,185 53,528
Income taxes 31,528 46,170 (52,999)
Other (40,044) 245,699 (4,677)
--------- --------- ---------
Net cash provided by operating
activities 123,767 789,101 80,858
--------- --------- ---------
Financing Activities
Proceeds from issuance of
Common stock 29,842 31,168 14,419
Preferred stock - - 159,446
Cash dividends paid (147,539) (145,892) (134,263)
--------- --------- ---------
(117,697) (114,724) 39,602
Borrowings
Proceeds from new long-term debt - 373,019 199,034
Repayment of long-term debt - (77,785) (271,664)
Net change in short-term debt 13,431 - -
--------- --------- ---------
13,431 295,234 (72,630)
--------- --------- ---------
Net cash (used in) provided by
financing activities (104,266) 180,510 (33,028)
--------- --------- ---------
Investing Activities
Proceeds from maturities 24,863 - -
Purchases of securities (87,754) (24,919) -
Investment in subsidiaries (50,177) (734,231) (48,662)
--------- --------- ---------
Net cash (used in) investing
activities (113,068) (759,150) (48,662)
--------- --------- ---------
Net (decrease) increase in cash and
cash equivalents (93,567) 210,461 (832)
Cash and cash equivalents at
beginning of year 210,500 39 871
--------- --------- ---------
Cash and cash equivalents at
end of year $ 116,933 $ 210,500 $ 39
========= ========= =========
Supplemental cash flow disclosure
Cash paid (received) for
Interest on borrowings $ 56,300 $ 38,427 $ 28,776
Income taxes (54,594) 8,761 47,145
/TABLE
<PAGE>
<PAGE>
NOTE 20: FINANCIAL INSTRUMENTS
The Company is a party to financial instruments with off-balance-sheet
risk and other derivative financial instruments in the normal course of
business to meet the financing needs of its customers and to reduce its own
exposure to fluctuations in interest rates. All financial instruments are
held or issued for purposes other than trading. These financial instruments
include commitments to extend credit, at both fixed and variable rates, loans
sold with credit enhancements, standby letters of credit, interest-rate caps
and floors written, and interest-rate and cash flow swap agreements. These
instruments involve, to varying degrees, elements of credit and interest-rate
risk in excess of the amount recognized in the Consolidated Statement of
Financial Condition. The contract or notional amounts of these instruments
reflect the extent of involvement the Company has in particular classes of
financial instruments. For interest-rate caps, floors, swap transactions,
loans sold with credit enhancements, purchased put options and forward sales,
the contract or notional amounts do not represent exposure to risk of loss.
The Company extends credit and requires collateral for loans sold with
credit enhancements under the same lending policies as for all other real
estate loans.
Interest Rate Risks
The Company uses derivative financial instruments to manage its
exposure to interest rate changes related to its portfolio of loans and
borrowings. The Company's objective is to manage the impact of interest rate
changes on earnings. The notional amounts of interest-rate risk management
instruments used by the Company are indicated in the following table:
<TABLE>
<CAPTION>
December 31
--------------------
(Dollars in thousands) 1994 1993
---- ----
<S> <C> <C>
Options purchased $ - $100,000
Forward sales contracts 1,410 124,480
Interest-rate swaps 109,000 109,000
Cash flow swaps 197,991 60,864
</TABLE>
<PAGE>
<PAGE>
The Company uses purchased put options to hedge its exposure to
increasing interest rates with respect to its fixed-rate loan commitments.
Put options grant the Company, for a premium payment, the right to sell to
the writer a specified financial instrument at a predetermined price for a
predetermined period of time. The cost is recorded in other assets and
amortized to gains and losses on loan sales over the life of the hedged
assets. Realized gains from option contracts are recorded at the time the
hedged instrument expires.
The Company's credit risk exposure in the event of nonperformance by
a counterparty is the loss of potential gains on the exercise of the option.
The Company's exposure to risk of accounting loss is limited to the premium
paid for the option.
The Company uses forward sales contracts to hedge its exposure to
increasing interest rates with respect to its fixed-rate commitments.
Forward sales contracts are used to sell specific financial instruments
(fixed-rate loans) at a future date for a specified price. Gains or losses
are recognized at the time the contracts mature and are recorded as a
component of gain on mortgage sales.
The Company uses interest-rate swaps to manage interest-rate risk and
reduce interest expense by improving the execution of borrowings to which the
interest-rate swap is tied. At December 31, 1994 and 1993, the Company had
outstanding interest-rate swaps related to FHLB borrowings in which the
Company paid a fixed rate and received a rate tied to three month LIBOR. At
December 31, 1994, the rate paid was 5.26 percent and the rate received was
5.81 percent. Interest receivable on these swaps is recorded in interest
receivable and interest payable is recorded in other liabilities. The income
and expense related to these interest-rate swaps was recorded as a decrease
or increase to interest expense on borrowings. The net cost of interest-rate
swap agreements was $755,000 for the year ended December 31, 1994, $3,825,000
for the year ended December 31, 1993 and $11,045,000 for the year ended
December 31, 1992.
The Company's current credit exposure on swaps is limited to the value
of interest-rate swaps that have become favorable to the Company. The
Company manages the potential credit exposure through careful evaluation of
counterparty credit standing.
The Company uses cash flow swap agreements to reduce its interest-rate
exposure with regard to its Investor CD, an insured account which is indexed
the Standard and Poor's (S&P) 500 performance. The Company Agreed to pay a
fixed or variable rate in exchange for the customer receiving a return tied
to the S&P 500. The average interest rate paid by GWB was 4.39 percent at
December 31, 1994 and 4.09 percent at December 31, 1993. The monthly payment
is recorded in interest expense on customer accounts and the amount received
is passed to the cash flow swap agreements in the event of the failure of a
counterparty to perform according to the terms of the contract would
approximate the amount of interest to be paid to the Bank's customers on the
Investor CD portfolio.
<PAGE>
<PAGE>
Credit Commitments
The Company enters into commitments to fund real estate loans to meet
the financing needs of its customers. Commitments to extend credit are
agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a
fee. Fees received in connection with loan commitments are deferred in other
liabilities until the loan is advanced and are then recognized over the term
of the loan as an adjustment of the yield. Fees on commitments that expire
unused are recognized in loan fees at expiration. Since a portion of the
commitments may expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements. The Company evaluates
each customer's credit worthiness on a case-by-case basis. The amount of
collateral obtained upon extension of credit is based on management's credit
evaluation of the counterparty. The value of the property as security for
a mortgage loan is determined by qualified real estate appraisers.
The Company had outstanding commitments to fund real estate loans of
$881,575,000 at December 31, 1994 which consisted of $22,264,000 fixed-rate
and $859,311,000 adjustable rate, and $776,574,000 at December 31, 1993 which
consisted of $196,472,000 fixed-rate and $580,102,000 adjustable rate.
The Company has issued standby letters of credit from time to time to
meet the credit needs of its customers. The letters of credit outstanding
are generally performance guarantees supporting certain property development
projects and totaled $12,892,000 at December 31, 1994 and $14,272,000 at
December 31, 1993. The notional value of letters of credit does not
necessarily represent future cash requirements.
The Company's maximum potential exposure to credit loss in the event
of nonperformance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit is represented by
the contractual notional amount of those instruments. The Company uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance-sheet instruments.
Concentrations of Credit Risk
The Company primarily originates real estate loans of which a
substantial portion of the portfolio is secured by real estate located in
California and Florida.
Fair Value of Financial Instruments
Fair value estimates and the methods and assumptions used to determine
the fair value of the Company's financial instruments follow:
<PAGE>
<PAGE>
Short-term Investments and Debt Securities
The carrying amount of short-term instruments is a reasonable estimate
of their fair value. The fair value of securities available for sale and
mortgage-backed securities is principally based on quoted market prices from
various sources. For securities which have no quoted market price and are
short-term in nature, the fair value is determined to be the book value at
the reporting date.
The following table presents the carrying amount and fair value of
investments and mortgage-backed securities:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
----------------------- -----------------------
Carrying Fair Carrying Fair
(Dollars in thousands) Amount Value Amount Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Loans receivable
Real estate $26,016,944 $25,113,197 $28,519,144 $29,311,099
Consumer
Term 1,929,278 1,908,099 1,849,874 1,874,501
Nonterm 340,450 341,971 205,528 205,528
Excess/short servicing fees 578 8,833 9,160 17,307
</TABLE>
Customer Accounts
Term deposits are stratified by remaining maturity, and fair value is
calculated based on discounted future cash flows. The discount rate used was
based upon a projected treasury yield curve plus 100 basis points. Fair
value includes the effects of compounding where applicable.
The fair value of nonterm deposits has been determined to be the
amount payable on demand at the reporting date. Nonterm deposits include all
customer accounts without defined maturities, such as checking, money market
savings and regular savings.
<PAGE>
<PAGE>
The following table presents information for deposit liabilities:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
------------------------ -------------------------
Carrying Fair Carrying Fair
(Dollars in thousands) Amount Value Amount Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Customer accounts
Term $16,530,164 $16,173,443 $17,980,931 $18,014,058
Nonterm 12,170,783 12,170,783 13,550,632 13,550,632
</TABLE>
Short-term Borrowings
Because of the short-term nature of these borrowings, fair value
approximates book value.
Securities Sold Under Agreements to Repurchase and Other Borrowings
Long-term borrowings are stratified by remaining maturity, and fair
value is calculated based on discounted future cash flows. The discount rate
used was based upon a projected treasury yield curve plus 100 basis points.
The maturity used in the present value calculation of long-term, variable-
rate borrowings is the date at which the borrowing would next be repriced.
The following table presents information for borrowings:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
----------------------- -----------------------
Carrying Fair Carrying Fair
(Dollars in thousands) Amount Value Amount Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Securities sold under
agreements to repurchase $6,299,055 $6,281,300 $ - $ -
Short-term borrowings 1,210,461 1,210,461 676,483 676,483
Other borrowings
Fixed-rate notes 2,323,531 2,291,933 2,312,903 2,494,230
FHLB borrowings 187,000 186,719 306,150 309,710
Medium-term notes 23,000 23,442 84,800 87,877
Floating-rate notes 28,250 28,246 28,250 28,373
Other 49,363 54,981 70,755 86,269
</TABLE>
<PAGE>
<PAGE>
Financial Instruments with Off-Balance-Sheet Risk
The fair value of cash flow swaps, put options purchased as a hedge
of fixed-rate commitments and commitments to fund real estate loans is
estimated using current market prices adjusted for various risk factors and
market volatility. The fair value of letters of credit is based on the
estimated cost to terminate or otherwise settle the obligations with the
counterparties at the reporting date. The fair value of outstanding
interest-rate swaps is based on expected remaining net cash flows discounted
at three-month LIBOR.
The estimated fair values of the Company's off-balance-sheet financial
instruments were as follows:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
--------------------- ---------------------
Carrying Fair Carrying Fair
(Dollars in thousands) Amount Value Amount Value
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Other financial instruments
Assets
Loan commitments
Fixed $ - $ (1,194) $ - $ 344
Variable - (15,224) - 5,222
Forward sales contract - 2 - (492)
Put options - - 585 272
Standby letters of credit - (77) - (86)
Liabilities
Interest-rate swaps 95 8,543 (237) 97
Cash flow swaps (747) (631) (225) (663)
</TABLE>
The carrying value of off-balance-sheet financial instruments
represents accruals or deferred income arising from those financial
instruments.
NOTE 21: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial operating data are included in
"Stockholder Data and Quarterly Information (Unaudited)" on page 105 of this
annual report to stockholders.
Fourth quarter 1994 earnings included a $62.3 million pretax gain
($37.1 million, or $.28 per share after tax) on the sale of 31 Florida West
Coast retail banking branches sold in December. In addition, the Company
wrote off approximately $11.7 million ($7.5 million, or $.06 per share, after
tax) of intangibles related to interstate banking access rights.<PAGE>
<PAGE>
Third quarter 1993 earnings were affected by an additional $150 million
of provisions for losses on loans and real estate established for four
separate bulk sales of distressed assets.
In the fourth quarter of 1992, $335 million was provided for losses on
loans and real estate, which resulted primarily from the Company's efforts
to accelerate disposition of problem loans and real estate.
In the third quarter of 1992, $129 million was provided for losses on
loans and real estate, which resulted from continued weakness in real estate
markets and an effort to accelerate the liquidation of nonperforming
commercial real estate properties.
NOTE 22: SEGMENT DATA
The Company operates in the banking and consumer finance industries.
The Bank operations are primarily one business segment, attracting customer
deposits for real estate lending. However, ancillary activities related to
real estate lending, mortgage banking and retail banking are also included.
Consumer finance operations include installment loans to consumers and
installment contracts purchased from retail merchants as well as home equity
loans. A summary of business segments is included in the table within
"Segment Data" in Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Great Western Financial Corporation
In our opinion, the accompanying consolidated statement of financial
condition and the related consolidated statements of operations, of
stockholders' equity and of cash flows present fairly, in all material
respects, the financial position of Great Western Financial Corporation and
its subsidiaries ("the Company") at December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1994, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the financial statements, the Company adopted
accounting standards that changed its methods of accounting for
postretirement benefits other than pensions and income taxes in 1992, and its
methods of accounting for impairment of loans and certain debt and equity
securities in 1993.
Los Angeles, California
January 18, 1995
MANAGEMENT'S COMMENTARY ON FINANCIAL STATEMENTS
Management is responsible for the integrity and objectivity of the
financial statements and other information in this report. The statements
were prepared in accordance with generally accepted accounting principles
appropriate in the circumstances. They meet the requirements of the
Securities and Exchange Commission. The financial statements reflect
management's judgement and estimates relating to events not concluded by year
end.
The Company's code of conduct, communicated to all officers and
employees, requires adherence to high ethical standards in the conduct of the
Company's business.
<PAGE>
<PAGE>
Management is responsible for maintaining a system of internal control
and has established a system of internal accounting control designed to
provide reasonable assurance that transactions are recorded properly to
permit preparation of financial statements, that transactions are executed
in accordance with management's authorizations and that assets are
safeguarded from significant loss or unauthorized use.
Management supports an extensive program of internal audits to evaluate
the adequacy of internal controls as well as to monitor compliance with
management's directives and regulatory agencies' requirements. The audit
committee of the board of directors is composed of nine outside directors,
none of whom is an officer or employee of the Company. The audit committee
meets with the internal and external auditors to review the scope of audits,
findings and actions to be taken by management.
Carl F. Geuther
Executive Vice President and Chief Financial Officer
January 18, 1995<PAGE>
<PAGE>
STATISTICAL INFORMATION
CASH AND SECURITIES ANALYSIS
<TABLE>
<CAPTION>
December 31
-----------------------------------------------
Rate at
(Dollars in millions) 12-31-94 1994 1993 1992 1991 1990
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
By Type
Certificates of deposit, federal
funds, repurchase agreements 6.00% $ 165 $ 217 $ 350 $ 105 $ 358
U.S. government securities 6.89 10 336 4 107 173
Federal agency securities 6.40 515 41 49 23 58
Corporate debt securities 6.44 364 433 452 455 485
Other securities 5.67 28 61 119 93 211
---- ------ ------ ------ ------ ------
1,082 1,088 974 783 1,285
Cash 984 759 686 615 535
------ ------ ------ ------ ------
$2,066 $1,847 $1,660 $1,398 $1,820
====== ====== ====== ====== ======
Yield to maturity on interest earning
securities at year end, excluding
insurance subsidiary 6.28% 4.66% 5.21% 6.74% 7.93%
</TABLE>
<TABLE>
<CAPTION>
Year-end 1994 by Maturity
(Dollars in millions) Less than 1-5 5-10 After 10
Fair Value Total one year years years years
----- --------- ----- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Certificates of deposit, federal
funds, repurchase agreements $ 165 6.00% $165 6.00% $ - -% $ - -% $- -%
U.S. government securities 10 6.89 2 4.23 4 7.00 4 7.86 - -
Federal agency securities 515 6.40 108 6.21 400 6.44 6 7.23 1 6.96
Corporate debt securities 364 6.44 161 6.19 163 6.31 40 7.96 - -
Other securities 28 5.67 13 5.35 7 6.08 5 6.17 3 5.35
------ ---- ---- ---- ---- ---- --- ---- -- ----
$1,082 6.34% $449 6.09% $574 6.40% $55 7.72% $4 5.67%
====== ==== ==== ==== ==== ==== === ==== == ====
Securities, excluding insurance
subsidiary $1,027 6.28% $424 6.07% $560 6.37% $39 7.44% $4 5.67%
====== ==== ==== ==== ==== ==== === ==== == ====
Amortized Cost
Certificates of deposit, federal
funds, repurchase agreements $ 165 $165 $ - $ - $-
U.S. government securities 11 2 4 5 -
Federal agency securities 523 109 407 6 1
Corporate debt securities 372 161 168 43 -
Other securities 30 14 8 5 3
------ ---- ---- --- --
$1,101 $451 $587 $59 $4
====== ==== ==== === ==
/TABLE
<PAGE>
<PAGE>
STATISTICAL INFORMATION (continued)
BORROWINGS
<TABLE>
<CAPTION>
December 31
Rate at -------------------------------------------
(Dollars in millions) 12-31-94 1994 1993 1992 1991 1990
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
By Type
Securities sold under agreements to repurchase 5.80% $ 6,299 $ - $ 717 $1,419 $ 40
Short-term borrowings 6.15 1,211 676 487 777 499
FHLB borrowings 5.47 187 306 311 364 1,131
Senior debt 8.22 2,424 2,497 2,636 3,032 4,845
Other subordinated debt - - - - - 24
----- ------- ------ ------ ------ ------
$10,121 $3,479 $4,151 $5,592 $6,539
======= ====== ====== ====== ======
Average interest rate on borrowings at year end 6.42% 7.34% 7.60% 7.69% 9.16%
</TABLE>
<TABLE>
<CAPTION>
Less than 1-2 2-5 5-10
(Dollars in millions) Total one year years years years
----- --------- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Year-end 1994 by Maturity
Securities sold under agreements to repurchase $ 6,299 $6,114 $185 $ - $ -
Short-term borrowings 1,211 1,211 - - -
FHLB borrowings 187 72 6 109 -
Senior debt 2,424 217 105 1,330 772
------- ------ ---- ------ ----
$10,121 $7,614 $296 $1,439 $772
======= ======= ==== ====== ====
Average interest rate on borrowings by maturity 6.42% 5.94% 6.11% 8.05% 8.21%
/TABLE
<PAGE>
<PAGE>
STATISTICAL INFORMATION (continued)
CUSTOMER ACCOUNTS
<TABLE>
<CAPTION>
Coupon December 31
Rate at -----------------------------------------------------------------------------
(Dollars in millions) 12-31-94 1994 % 1993 % 1992 % 1991 % 1990 %
-------- ---- --- ---- --- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
By Type
Retail accounts
Transaction accounts
Checking .86% $ 4,573 16 $ 4,533 14 $ 3,859 12 $ 2,764 9 $ 2,215 8
Limited access 2.74 5,440 19 6,699 21 7,012 23 5,431 18 3,506 12
Regular savings 2.02 2,000 7 2,146 7 1,790 6 1,363 5 1,245 4
Term accounts
Less than 6 months 3.73 1,610 5 2,872 9 5,018 16 5,851 19 3,528 12
6 months 4.10 5,135 18 7,004 22 5,338 17 7,850 26 7,167 24
1 year 5.28 4,891 17 2,868 9 1,515 5 1,543 5 4,866 16
2 years 4.61 558 2 595 2 547 2 611 2 1,130 4
3 years and over 6.01 2,558 9 2,878 9 2,173 7 1,298 4 1,292 4
Deferred compensation 5.45 1,372 5 1,349 5 2,974 10 2,811 9 2,523 9
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Total retail accounts 28,137 98 30,944 98 30,226 98 29,522 97 27,472 93
Wholesale accounts 3.94 564 2 588 2 683 2 1,048 3 2,177 7
---- ------- ---- ------- ---- ------- ---- ------- ---- ------- ----
$28,701 $31,532 $30,909 $30,570 $29,649
======= ======= ======= ======= =======
Average rate at year end 3.60% 3.10% 3.48% 5.34% 7.40%
By Product
Checking accounts $ 9,856 34 $11,040 35 $10,703 35 $ 8,092 27 $ 5,663 19
Regular savings accounts 1,999 7 2,146 7 1,790 6 1,363 4 1,244 4
Tax-deferred accounts
Deferred compensation 1,372 5 1,349 5 2,974 10 2,811 9 2,523 9
IRA/Keogh 2,712 10 2,894 9 2,825 9 2,743 9 2,491 8
$100,000 accounts
Negotiable certificates
of deposit - - - - - - - - 45 *
Wholesale transaction 158 1 173 * 197 1 330 1 307 1
Public funds 403 1 411 1 457 1 514 2 1,164 4
Other broker accounts 4 * 4 * 28 * 203 1 661 2
Other certificate
accounts 341 1 645 2 763 2 837 2 1,123 4
Consumer term accounts 11,856 41 12,870 41 11,172 36 13,677 45 14,428 49
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
$28,701 $31,532 $30,909 $30,570 $29,649
======= ======= ======= ======= =======
</TABLE>
*Less than one percent
<PAGE>
<PAGE>
STATISTICAL INFORMATION (continued)
Year-end 1994 Term Accounts by Maturity by Interest Rate
<TABLE>
<CAPTION>
90 days 180 days December 31
Within to to 1-2 2-3 3 years -----------------
(Dollars in millions) 90 days 180 days 1 year years years and over 1994 1993
------- -------- -------- ----- ----- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Under 4% $2,078 $1,099 $ 460 $ 77 $ 11 $ 20 $3,745 $10,998
4 to 6% 1,193 2,256 3,022 1,665 440 787 9,363 4,789
6 to 8% 62 86 790 1,524 576 159 3,197 1,619
Over 8% 2 5 16 188 2 12 225 575
$100,000 accounts included above 470 147 98 18 4 11 748 1,060
</TABLE>
<TABLE>
<CAPTION>
Year-end 1994 by Maturity Within
No one
(Dollars in millions) maturity year 1996 1997 1998 1999 After 1999
-------- ------- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances $12,171 $11,069 $3,454 $1,029 $439 $530 $ 9
Average coupon rate 1.88% 4.47% 5.75% 5.69% 5.21% 5.59% 5.37%
</TABLE>
<PAGE>
<PAGE>
STATISTICAL INFORMATION (continued)
LOAN ANALYSIS
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------------------------------------
(Dollars in millions) 1994 % 1993 % 1992 % 1991 % 1990 %
---- --- ---- --- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sources of Real Estate Lending
Funds
Mortgage principal repayments $ 4,615 $ 5,720 $ 6,324 $ 5,056 $ 4,583
Mortgage sales 1,171 3,568 4,154 2,491 4,601
Retail customer accounts (sold)
acquired (982) 4,094 2,258 2,783 4,650
Increase (decrease) in borrowings 6,641 (672) (1,441) (947) (3,736)
Customer accounts (decrease)
increase (1,849) (3,471) (1,920) (1,862) 1,215
Cash and securities (increase)
decrease (219) (186) (263) 422 70
Mortgage-backed securities purchased (1,539) (925) (655) (262) (599)
Net earnings 251 62 85 298 127
Other (168) 598 674 (436) (241)
------- ------- ------- ------- -------
$ 7,921 $ 8,788 $ 9,216 $ 7,543 $10,670
======= ======= ======= ======= =======
Real Estate Lending for the Year
By Security Type
Single-family $ 7,807 98 $ 8,623 98 $ 9,098 98 $ 7,484 99 $10,567 99
Apartments 51 1 52 1 68 1 36 1 67 1
Commercial properties 63 1 113 1 50 1 23 * 36 *
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
$ 7,921 $ 8,788 $ 9,216 $ 7,543 $10,670
======= ======= ======= ======= =======
By Purpose
Purchase of property $ 4,421 56 $ 3,152 36 $ 3,205 35 $ 3,682 49 $ 7,440 70
Refinance 3,479 44 5,607 64 6,005 65 3,850 51 3,204 30
Construction 21 * 29 * 6 * 11 * 26 *
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
$ 7,921 $ 8,788 $ 9,216 $ 7,543 $10,670
======= ======= ======= ======= =======
By Loan Type
Long-term - essentially 30-40 years
ARM $ 6,868 87 $ 5,243 60 $ 4,734 51 $ 4,759 63 $ 9,133 86
Fixed 603 7 2,102 24 2,688 29 1,828 24 873 8
Short-term - essentially 15 years
or less
ARM 130 2 185 2 253 3 333 5 450 4
Fixed 320 4 1,258 14 1,541 17 623 8 214 2
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
$ 7,921 $ 8,788 $ 9,216 $ 7,543 $10,670
======= ======= ======= ======= =======
Average new loan rate 5.89% 7.05% 8.25% 9.78% 10.69%
Average ARM differential 2.59% 2.47% 2.25% 2.30% 2.43%
</TABLE>
*Less than one percent
<PAGE>
<PAGE>
STATISTICAL INFORMATION (CONTINUED)
LOAN ANALYSIS (continued)
<TABLE>
<CAPTION>
December 31
--------------------------------------------------------------------------------------
(Dollars in millions) 1994 % 1993 % 1992 % 1991 % 1990 %
---- --- ---- --- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loan Portfolio by Type
Real estate
Long-term-essentially 30-40
years
ARM $24,783 94 $27,082 93 $26,489 92 $27,170 92 $26,909 92
Fixed 589 2 912 3 1,053 3 1,334 4 1,235 4
Short-term-essentially 15
years or less
ARM 666 2 566 2 824 3 667 2 604 2
Fixed 454 2 553 2 493 2 448 2 481 2
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
26,492 29,113 28,859 29,619 29,229
Consumer loans 2,426 2,208 2,346 2,408 2,073
------- ------- ------- ------- -------
$28,918 $31,321 $31,205 $32,027 $31,302
======= ======= ======= ======= =======
Yield at year end 7.75% 7.54% 8.32% 9.84% 11.01%
ARM differential 2.46% 2.41% 2.37% 2.39% 2.42%
Real Estate Loan Portfolio
By Security Type
Single-family $23,387 88 $25,710 88 $25,367 88 $25,760 87 $24,988 86
Apartments 1,712 7 1,814 6 1,939 7 2,090 7 2,251 8
Commercial properties 1,393 5 1,589 6 1,553 5 1,769 6 1,990 6
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
$26,492 $29,113 $28,859 $29,619 $29,229
======= ======= ======= ======= =======
Number of real estate loans 421,101 429,294 466,852 483,709 468,744
Loans serviced for others $10,992 $12,337 $13,106 $12,812 $13,133
Consumer Loan Portfolio
Consumer finance/installment $ 1,999 82 $ 1,831 83 $ 1,723 74 $ 1,733 72 $ 1,405 68
Customer account loans 87 4 97 4 97 4 113 5 94 4
Student loans 239 10 180 8 165 7 148 6 150 7
Lease financing 101 4 100 5 105 4 114 5 123 6
Bank cards - - - - 256 11 300 12 301 15
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
$ 2,426 $ 2,208 $ 2,346 $ 2,408 $ 2,073
======= ======= ======= ======= =======
Mortgage-backed Securities
by Type
ARM $ 8,553 92 $ 2,168 68 $ 1,969 62 $ 2,131 60 $ 2,474 63
Fixed 733 8 1,028 32 1,208 38 1,414 40 1,482 37
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
$ 9,286 $ 3,196 $ 3,177 $ 3,545 $ 3,956
======= ======= ======= ======= =======
Yield at year end 6.55% 5.93% 7.08% 8.63% 8.92%
Nonperforming Assets
Delinquent loans $ 565 $ 626 $ 880 $ 611 $ 327
Troubled debt restructurings 125 213 161 152 135
Loans in-substance foreclosed - - 480 486 492
Real estate 156 293 490 376 235
------- ------- ------- ------- -------
$ 846 $ 1,132 $ 2,011 $ 1,625 $ 1,189
======= ======= ======= ======= =======
Percent of total assets 1.98% 2.90% 5.12% 4.04% 2.98%
/TABLE
<PAGE>
<PAGE>
STATISTICAL INFORMATION (continued)
REAL ESTATE LOANS AND REAL ESTATE BY STATE
<TABLE>
<CAPTION>
December 31, 1994 Oklahoma/
(Dollars in millions) Total California Florida Washington Texas Georgia Arizona Oregon Other
----- ---------- ------- ---------- -------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Real Estate Loans and Real Estate
Real estate loans
Residential
Single-family $23,387 $16,227 $1,686 $1,006 $626 $408 $317 $329 $2,788
Apartments 1,712 1,368 86 7 33 55 64 2 97
Commercial
Offices 398 363 9 3 2 4 6 - 11
Retail 262 218 20 8 - 4 2 1 9
Hotel/motel 187 137 4 - 2 - 3 - 41
Industrial 327 275 13 4 13 4 7 - 11
Other 219 159 20 5 1 1 12 4 17
------- ------- ------ ------ ---- ---- ---- ---- ------
26,492 18,747 1,838 1,033 677 476 411 336 2,974
------- ------- ------ ------ ---- ---- ---- ---- ------
Real estate available for sale, net
Real estate acquired through
foreclosure 206 144 17 1 2 - 1 - 41
Other 29 12 2 15 - - - - -
Property development 47 47 - - - - - - -
------- ------- ------ ------ ---- ---- ---- ---- ------
282 203 19 16 2 - 1 - 41
------- ------- ------ ------ ---- ---- ---- ---- ------
Total real estate loans
and real estate $26,774 $18,950 $1,857 $1,049 $679 $476 $412 $336 $3,015
======= ======= ====== ====== ==== ==== ==== ==== ======
Percent of total 100.0% 70.8% 6.9% 3.9% 2.5% 1.8% 1.5% 1.3% 11.3%
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
December 31, 1994 Oklahoma/
(Dollars in millions) Total California Florida Washington Texas Georgia Arizona Oregon Other
----- ---------- ------- ---------- -------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nonperforming Real Estate
Loans and Real Estate
Real estate loans
Residential
Single-family $509 $433 $18 $ 5 $ 5 $ 4 $ 3 $ 1 $40
Apartments 68 59 1 1 - 4 - - 3
Commercial
Offices 18 18 - - - - - - -
Retail 24 18 1 5 - - - - -
Hotel/motel 32 32 - - - - - - -
Industrial 10 9 1 - - - - - -
Other 6 3 2 - - - 1 - -
---- ---- --- --- --- --- --- --- ---
667 572 23 11 5 8 4 1 43
---- ---- --- --- --- --- --- --- ---
Real estate
Residential
Single-family 84 75 3 - 1 - 1 - 4
Apartments 22 22 - - - - - - -
Commercial
Offices 30 19 10 - 1 - - - -
Retail 3 3 - - - - - - -
Hotel/motel 2 - 2 - - - - - -
Industrial 5 4 1 - - - - - -
Other 10 8 2 - - - - - -
---- ---- --- --- --- --- --- --- ---
156 131 18 - 2 - 1 - 4
---- ---- --- --- --- --- --- --- ---
Total nonperforming real estate
loans and real estate $823 $703 $41 $11 $ 7 $ 8 $ 5 $ 1 $47
==== ==== === === === === === === ===
Percent of total 100.0% 85.4% 5.0% 1.3% .9% 1.0% .6% .1% 5.7%
</TABLE>
<PAGE>
STATISTICAL INFORMATION (continued)
CALIFORNIA REAL ESTATE LOANS AND REAL ESTATE
<TABLE>
<CAPTION>
December 31, 1994 California Northern California
------------------------------- --------------------------------
(Dollars in millions) Portfolio Nonperforming % Portfolio Nonperforming %
--------- ------------- --- --------- ------------- ---
<S> <C> <C> <C> <C> <C> <C>
Real estate loans
Residential
Single-family $16,227 $433 2.7 $4,850 $ 82 1.7
Apartments 1,368 59 4.3 171 1 .6
Commercial
Offices 363 18 5.0 74 10 13.5
Retail 218 18 8.3 52 2 3.8
Hotel/motel 137 32 23.4 45 - -
Industrial 275 9 3.3 43 1 2.3
Other 159 3 1.9 45 - -
------- ---- ----- ------ ---- -----
18,747 572 3.1 5,280 96 1.8
------- ---- ----- ------ ---- -----
Real estate
Residential
Single-family 75 75 100.0 7 7 100.0
Apartments 23 22 95.7 2 2 100.0
Commercial
Offices 23 19 82.6 6 4 66.7
Retail 9 3 33.3 - - -
Hotel/motel 6 - - - - -
Industrial 4 4 100.0 - - -
Other 63 8 12.7 22 2 9.1
------- ---- ----- ------ ---- -----
203 131 64.5 37 15 40.5
------- ---- ----- ------ ---- -----
Total real estate loans
and real estate $18,950 $703 3.7 $5,317 $111 2.1
======= ==== ===== ====== ==== =====
/TABLE
<PAGE>
STATISTICAL INFORMATION (continued)
CALIFORNIA REAL ESTATE LOANS AND REAL ESTATE
<TABLE>
<CAPTION>
December 31, 1994 Central California Southern California
-------------------------------- --------------------------------
(Dollars in millions) Portfolio Nonperforming % Portfolio Nonperforming %
--------- ------------- --- --------- ------------- ---
<S> <C> <C> <C> <C> <C> <C>
Real estate loans
Residential
Single-family $1,321 $16 1.2 $10,056 $335 3.3
Apartments 245 9 3.7 952 49 5.1
Commercial
Offices 41 1 2.4 248 7 2.8
Retail 29 - - 137 16 11.7
Hotel/motel 28 4 14.3 64 28 43.8
Industrial 15 - - 217 8 3.7
Other 21 1 4.8 93 2 2.2
------ --- ----- ------- ---- -----
1,700 31 1.8 11,767 445 3.8
------ --- ----- ------- ---- -----
Real estate
Residential
Single-family 3 3 100.0 65 65 100.0
Apartments 5 5 100.0 16 15 93.8
Commercial
Offices 2 2 100.0 15 13 86.7
Retail 6 1 16.7 3 2 66.7
Hotel/motel - - - 6 - -
Industrial - - - 4 4 100.0
Other 12 - - 29 6 20.7
------ --- ----- ------- ---- -----
28 11 39.3 138 105 76.1
------ --- ----- ------- ---- -----
Total real estate loans
and real estate $1,728 $42 2.4 $11,905 $550 4.6
====== === ===== ======= ==== =====
/TABLE
<PAGE>
<PAGE>
STOCKHOLDER DATA AND QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1994
--------------------------------------------------
Fourth Third Second First
(Dollars in thousands, except per share) Total Quarter Quarter Quarter Quarter
----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Interest income $2,629,718 $704,611 $661,312 $633,803 $629,992
Interest expense 1,307,448 385,076 330,544 296,080 295,748
---------- -------- -------- -------- --------
Net interest income 1,322,270 319,535 330,768 337,723 334,244
Noninterest income 367,897 134,331 74,723 81,378 77,465
Provision for loan losses 207,200 52,800 49,700 52,900 51,800
Provision for real estate losses 12,000 1,500 1,500 6,000 3,000
Noninterest expense 1,064,433 263,692 262,861 265,146 272,734
---------- -------- -------- -------- --------
Earnings (loss) before taxes
and accounting changes 406,534 135,874 91,430 95,055 84,175
Taxes (benefit) on income 155,300 47,200 34,200 39,200 34,700
---------- -------- -------- -------- --------
Earnings (loss) before
accounting changes 251,234 88,674 57,230 55,855 49,475
Accounting changes - - - - -
---------- -------- -------- -------- --------
Net earnings (loss) $ 251,234 $ 88,674 $ 57,230 $ 55,855 $ 49,475
========== ======== ======== ======== ========
Per common share:
Primary earnings (loss)
before accounting changes $1.69 $.61 $.38 $.38 $.32
Fully diluted earnings (loss)
before accounting changes 1.69 .61 .38 .38 .32
Primary earnings (loss) 1.69 .61 .38 .38 .32
Fully diluted earnings (loss) 1.69 .61 .38 .38 .32
Dividends .92 .23 .23 .23 .23
Stock price:
High $19 $20 7/8 $19 3/8 $20 1/2
Low 15 3/4 18 3/8 15 3/8 16 1/8
End of period 16 19 1/4 18 3/8 16 1/8
Per preferred share:
Dividends
Cumulative convertible $21.875 $5.46875 $5.46875 $5.46875 $5.46875
Cumulative 20.75 5.1875 5.1875 5.1875 5.1875
Stock price
Cumulative convertible
High $56 5/8 $59 1/8 $58 1/4 $62 5/8
Low 50 1/8 55 1/4 53 3/4 55 3/4
Cumulative
High $24 3/8 $25 1/8 $25 $26 7/8
Low 22 1/8 24 23 24 1/8
</TABLE>
Exchange Listings: New York Stock Exchange, Pacific Stock Exchange and London
Stock Exchange. Approximate number of common stockholders of record at
December 31, 1994: 10,631
Under regulations, retained earnings are subject to substantial restrictions
for the payment of dividends. See Note 17 to the Consolidated Financial
Statements.<PAGE>
<PAGE>
STOCKHOLDER DATA AND QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1993
--------------------------------------------------
Fourth Third Second First
(Dollars in thousands except per share) Total Quarter Quarter Quarter Quarter
----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Interest income $2,680,784 $652,872 $665,616 $674,497 $687,799
Interest expense 1,297,930 313,261 322,102 324,361 338,206
---------- -------- -------- -------- --------
Net interest income 1,382,854 339,611 343,514 350,136 349,593
Noninterest income 327,855 82,910 101,531 75,079 68,335
Provision for loan losses 463,000 111,400 203,600 85,500 62,500
Provision for real estate losses 92,000 38,000 28,000 500 25,500
Noninterest expense 1,063,662 302,343 250,178 254,024 257,117
---------- -------- -------- -------- --------
Earnings (loss) before taxes
and accounting changes 92,047 (29,222) (36,733) 85,191 72,811
Taxes (benefit) on income 30,000 (11,000) (19,200) 32,600 27,600
---------- -------- -------- -------- --------
Earnings (loss) before
accounting changes 62,047 (18,222) (17,533) 52,591 45,211
Accounting changes - - - - -
---------- -------- -------- -------- --------
Net earnings (loss) $ 62,047 $(18,222) $(17,533) $ 52,591 $ 45,211
========== ======== ======== ======== ========
Per common share:
Primary earnings (loss)
before accounting changes $.28 $(.19) $(.18) $.35 $.30
Fully diluted earnings (loss)
before accounting changes .28 (.19) (.18) .35 .30
Primary earnings (loss) .28 (.19) (.18) .35 .30
Fully diluted earnings (loss) .28 (.19) (.18) .35 .30
Dividends .92 .23 .23 .23 .23
Stock price:
High $20 3/8 $19 3/4 $18 7/8 $19 1/4
Low 17 5/8 16 1/8 15 5/8 16
End of period 20 19 5/8 16 3/4 17 5/8
Per preferred share:
Dividends
Cumulative convertible $21.875 $5.46875 $5.46875 $5.46875 $5.46875
Cumulative 20.75 5.1875 5.1875 5.1875 5.1875
Stock price
Cumulative convertible
High $63 1/4 $61 5/8 $60 3/4 $60 1/8
Low 59 56 1/4 55 1/2 54 3/4
Cumulative
High $26 3/4 $26 3/8 $25 7/8 $25 3/8
Low 25 1/8 25 1/8 24 7/8 23 3/8
</TABLE>
Exchange Listings: New York Stock Exchange, Pacific Stock Exchange and London
Stock Exchange. Approximate number of common stockholders of record at
December 31, 1994: 10,631
Under regulations, retained earnings are subject to substantial restrictions
for the payment of dividends. See Note 17 to the Consolidated Financial
Statements.<PAGE>
<PAGE>
STOCKHOLDER DATA AND QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1992
--------------------------------------------------
Fourth Third Second First
(Dollars in thousands except per share) Total Quarter Quarter Quarter Quarter
----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Interest income $3,091,093 $ 717,860 $749,613 $786,219 $837,401
Interest expense 1,668,731 360,556 400,336 432,430 475,409
---------- --------- -------- -------- --------
Net interest income 1,422,362 357,304 349,277 353,789 361,992
Noninterest income 282,131 71,462 69,809 71,184 69,676
Provision for loan losses 420,000 182,300 100,000 60,000 77,700
Provision for real estate losses 220,000 153,000 29,000 9,000 29,000
Noninterest expense 968,981 261,653 234,227 235,924 237,177
---------- --------- -------- -------- --------
Earnings (loss) before taxes
and accounting changes 95,512 (168,187) 55,859 120,049 87,791
Taxes (benefit) on income 41,600 (70,900) 24,200 51,000 37,300
---------- --------- -------- -------- --------
Earnings (loss) before
accounting changes 53,912 (97,287) 31,659 69,049 50,491
Accounting changes 31,094 - - - 31,094
---------- --------- -------- -------- --------
Net earnings (loss) $ 85,006 $ (97,287) $ 31,659 $ 69,049 $ 81,585
========== ========= ======== ======== ========
Per common share:
Primary earnings (loss)
before accounting changes $.30 $(.80) $.22 $.51 $.37
Fully diluted earnings (loss)
before accounting changes .30 (.80) .22 .50 .37
Primary earnings (loss) .53 (.80) .22 .51 .60
Fully diluted earnings (loss) .53 (.80) .22 .50 .60
Dividends .91 .23 .23 .23 .22
Stock price:
High $17 1/2 $17 3/4 $18 1/4 $19 3/4
Low 13 14 16 1/4 16 7/8
End of period 17 1/2 14 1/8 16 7/8 17 3/4
Per preferred share:
Dividends
Cumulative convertible $21.875 $5.46875 $5.46875 $5.46875 $5.46875
Cumulative 6.40 5.1875 1.2125
Stock price
Cumulative convertible
High $56 3/4 $56 1/4 $57 3/4 $60
Low 51 1/2 53 53 1/2 55
Cumulative
High $24 1/2
Low 22 3/8
</TABLE>
Exchange Listings: New York Stock Exchange, Pacific Stock Exchange and London
Stock Exchange. Approximate number of common stockholders of record at
December 31, 1994: 10,631
Under regulations, retained earnings are subject to substantial restrictions
for the payment of dividends. See Note 17 to the Consolidated Financial
Statements.<PAGE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors, executive officers and principal
shareholders appears on pages 3 through 8 and pages 23 and 24 of the Proxy
Statement for the Annual Meeting of Stockholders, April 25, 1995, and is
incorporated herein by reference, except as noted therein.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation appears on pages 9 through
13 and pages 17 through 23 of the Proxy Statement for the Annual Meeting of
Stockholders, April 25, 1995, and is incorporated herein by reference, except
as noted therein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information regarding security ownership of certain beneficial owners
and management appears on pages 3, 8, 23 and 24 of the Proxy Statement for
the Annual Meeting of Stockholders, April 25, 1995 and is incorporated herein
by reference, except as noted therein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions
appears on pages 7, 9, 10, 11 and 17 of the Proxy Statement for the Annual
Meeting of Stockholders, April 25, 1995 and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
See index to Item 8, "Financial Statements and Supplementary
Data" on page 47.
<PAGE>
<PAGE>
2. Financial Statement Schedules
No financial statement schedules are required because they are not
applicable or the required information is shown in the financial
statements or notes thereto included in Item 8, "Financial
Statements and Supplementary Data".
3. Executive Compensation Plans and Arrangements indicated by asterisk in
next section.
4. Exhibits Required by Securities and Exchange
Commission Regulations S-K
3.1 Restated Certificate of Incorporation of GWFC, as in effect on
the date of this report (filed as an exhibit to GWFC's Annual
Report on Form 10-K for the year ended December 31, 1992 and
incorporated herein by reference).
3.2 Certificate of Designations of GWFC's 8.30 percent Cumulative
Preferred Stock (filed as an exhibit to GWFC's Current Report
on Form 8-K dated September 9, 1992, event date September 2,
1992, and incorporated herein by reference).
3.3 By-laws of GWFC as in effect on the date of this report (filed
as an exhibit to GWFC's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 and incorporated herein by
reference).
4.1 GWFC agrees to furnish the Securities and Exchange Commission,
upon request, with copies of all instruments defining rights of
holders of long-term debt of GWFC and its consolidated
subsidiaries.
4.2 Indenture dated as of May 31, 1988, as amended and supplemented
as of June 14, 1988 and October 31, 1988, between GWB and
Morgan Guaranty Trust Company of New York (filed as an exhibit
to GWFC's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989 and incorporated herein by reference).
10.1 Rights Agreement (the "Rights Agreement") dated as of June 24,
1986, between GWFC and Morgan Guaranty Trust Company of New
York (filed as Exhibit 1 to the Company's Report on Form 8-K
dated July 3, 1986 and incorporated herein by reference).
10.2 First Amendment to Rights Agreement dated as of February 19,
1988, between GWFC and Morgan Shareholder Services Trust
Company, successor to Morgan Guaranty Trust Company of New York
as Rights agent (incorporated herein by reference to the
Company's Report on Form 8-K (File No. 1-4075) dated February
24, 1988).
<PAGE>
<PAGE>
10.3 *Employment Agreement between GWFC and James F. Montgomery dated
December 19, 1989 (filed as an exhibit to GWFC's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989 and
incorporated herein by reference).
10.4 *Employment Agreement between GWFC and John F. Maher dated
December 19, 1989 (filed as an exhibit to GWFC's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989 and
incorporated herein by reference).
10.5 *Employment Agreement between GWFC and Carl F. Geuther dated as
of March 1, 1988 (filed as an exhibit to GWFC's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989 and
incorporated herein by reference).
10.6 *Employment Agreement between GWFC and Michael M. Pappas dated
as of March 1, 1988 (filed as an exhibit to GWFC's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989
and incorporated herein by reference).
10.7 *Employment Agreement between GWFC and J. Lance Erikson dated
as of March 1, 1988 (filed as an exhibit to GWFC's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989
and incorporated herein by reference).
10.8 *Employment Agreement between GWFC and E. A. Crane effective
March 1, 1989 (filed as an exhibit to GWFC's Annual Report on
Form 10-K for the fiscal year ended December 31, 1988, and
incorporated herein by reference).
10.9 *Employment Agreement between GWFC and Curtis J. Crivelli
effective March 1, 1989 (filed as an exhibit to GWFC's Annual
Report on Form 10-K for the fiscal year ended December 31,
1988, and incorporated herein by reference).
10.10 *Supplemental Executive Retirement Plan as amended (filed as
an exhibit to GWFC's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992, and incorporated herein by
reference).
10.11 *1979 Incentive and Nonstatutory Stock Option and Appreciation
Plan as amended (filed as an exhibit to GWFC's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992, and
incorporated herein by reference).
10.12 *Addendum to the 1979 Incentive and Nonstatutory Stock Option
and Appreciation Plan (filed as an exhibit to GWFC's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993
and incorporated herein by reference).
<PAGE>
<PAGE>
10.13 *Form of Non-Qualified Stock Option Agreement relating to the
1979 Incentive and Nonstatutory Stock Option and Appreciation
Plan utilized from April 20, 1982 to April 22, 1986 (filed as
an exhibit to Post-Effective Amendment No. 3 to GWFC's
Registration Statement No. 2-67233 on Form S-8, and
incorporated herein by reference).
10.14 *Form of Non-Qualified Stock Option Agreement relating to the
1979 Incentive and Nonstatutory Stock Option and Appreciation
Plan utilized from April 22, 1986 through 1988 (filed as an
exhibit to Post-Effective Amendment No. 3 to GWFC's
Registration Statement No. 2-67233 on Form S-8, and
incorporated herein by reference).
10.15 *The 1988 Stock Option and Incentive Plan (as amended effective
July 26, 1994), (filed as an exhibit to GWFC's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1994 and
incorporated herein by reference).
10.16 *Form of Director Stock Option Agreement (filed as an exhibit
to GWFC's Registration Statement No. 33-21469 on Form S-8
pertaining to GWFC's 1988 Stock Option and Incentive Plan and
incorporated herein by reference).
10.17 *Form of Director Stock Option Agreement effective January 3,
1994, (filed as an exhibit to GWFC's Annual Report on Form 10-K
for the fiscal ended December 31, 1993 and incorporated herein
by reference).
10.18 *Employee Non-Qualified Stock Option Agreement (filed as an
exhibit to GWFC's Registration Statement No. 33-21469 on Form
S-8 pertaining to GWFC's 1988 Stock Option and Incentive Plan
and incorporated herein by reference).
10.19 *Revised Form of Non-Qualified Stock Option Agreement effective
January 28, 1992 (filed as an exhibit to Post-Effective
Amendment No. 3 to GWFC's Registration Statement No. 33-21469
on Form S-8 pertaining to GWFC's 1988 Stock Option and
Incentive Plan and incorporated herein by reference).
10.20 *Revised Form of Non-Qualified Stock Option Agreement effective
January 25, 1994, (filed as an exhibit to GWFC's Annual Report
on Form 10-K for the fiscal ended December 31, 1993 and
incorporated herein by reference).
10.21 *Form of Non-Qualified Stock Option Agreement (Early Vesting
Provisions), (filed as an exhibit to GWFC's Annual Report on
Form 10-K for the fiscal ended December 31, 1993 and
incorporated herein by reference).
10.22 *Revised Form of Non-Qualified Stock Option Agreement effective
December 12, 1994.<PAGE>
<PAGE>
10.23 *Form of Restricted Stock Award Agreement and General Provisions
Applicable to Restricted Stock Awards Granted Under the 1988
Stock Option and Incentive Plan (filed as an exhibit to Post-
Effective Amendment No. 3 to GWFC's Registration Statement No.
33-21469 on Form S-8, and incorporated herein by reference).
10.24 *General provisions applicable to Performance Restricted Stock
Awards granted under the Great Western Financial Corporation
1988 Stock Option and Incentive Plan, as amended (March 1994)
(filed as an exhibit to GWFC's quarterly report on Form 10-Q
for the quarter ended March 31, 1994 and incorporated herein
by reference).
10.25 *GWFC Deferred Compensation Plan (1992 Restatement) (filed as
an exhibit to GWFC's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991, and incorporated herein by
reference).
10.26 *GWFC Senior Officers' Deferred Compensation Plan (1992
Restatement) (filed as an exhibit to GWFC's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991, and
incorporated herein by reference).
10.27 *GWFC Directors' Deferred Compensation Plan (1992 Restatement)
(filed as an exhibit to GWFC's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991, and incorporated
herein by reference).
10.28 *Amendment to GWFC Directors', Senior Officers' and basic
Deferred Compensation Plans (1992 Restatement).
10.29 *Great Western Supplemental Incentive Plan, effective December
1, 1984 (filed as an exhibit to GWFC's Annual Report on Form
10-K for the fiscal year ended December 31, 1984, and
incorporated herein by reference).
10.30 *GWFC Umbrella Trust for Senior Officers (filed as an exhibit
to GWFC's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1989, and incorporated herein by reference).
10.31 *Amendment to GWFC Umbrella Trust for Senior Officers effective
October 25, 1994.
10.32 *GWFC Umbrella Trust for Directors (filed as an exhibit to
GWFC's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1989, and incorporated herein by reference).
10.33 *Restated Retirement Plan for Directors (filed as an exhibit to
GWFC's Quarterly Report on Form 10-Q for the quarter ended June
30, 1993, and incorporated herein by reference).
<PAGE>
<PAGE>
10.34 *Summary of certain additional executive benefits (filed as an
exhibit to GWFC's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992, and incorporated herein by
reference).
10.35 *Employee Home Loan Program (filed as an exhibit to GWFC's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1993, and incorporated herein by reference).
10.36 *GWFC Annual Incentive Compensation Plan for Executive Officers,
(filed as an exhibit to GWFC's Annual Report on Form 10-K for
the fiscal ended December 31, 1993 and incorporated herein by
reference).
10.37 GWFC Retirement Restoration Plan effective January 1, 1994.
11.1 Statement re Computation of Per Share Earnings.
12.1 Computation of Ratios of Earnings to Fixed Charges.
21.1 Subsidiaries.
23.1 Consent of Price Waterhouse LLP included on page 114 of this
Form 10-K.
24.1 Power of Attorney included on page 112 of this Form 10-K.
27.1 Financial Data Schedule.
The 1994 Annual Report to Stockholders has already been furnished to
each stockholder of record who is entitled to receive a copy thereof. A copy
of the 1994 Annual Report to Stockholders will be furnished without charge
upon specific request of any stockholder of record on February 27, 1995 and
any beneficial owner of the Company's common stock on such date who has not
previously received a copy and who represents such facts in good faith to the
Company in writing direct to:
Corporate Secretary
Great Western Financial Corporation
9200 Oakdale Avenue
Chatsworth, California 91311-6519
Other exhibits will be supplied to any such stockholder at a charge
equal to the Company's cost of copying, postage and handling.
(b) Reports on Form 8-K
None<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
GREAT WESTERN FINANCIAL CORPORATION
/s/ James F. Montgomery March 28, 1995
----------------------------- ------------------
James F. Montgomery, Chairman Date
and Chief Executive
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes James F.
Montgomery, Carl F. Geuther and Jesse L. King, and each of them or any of
them, as attorney-in-fact to sign on his or her behalf as an individual and
in every capacity stated below, and to file all amendments to the
registrant's Form 10-K, and the registrant hereby confers like authority to
sign and file in its behalf.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 28, 1995, by the following persons on
behalf of the registrant and in the capacities indicated.
/s/ James F. Montgomery
-------------------------------------------------
James F. Montgomery, Chairman and Chief Executive
(Principal Executive Officer)
/s/ Carl F. Geuther
---------------------------------------------------------------------
Carl F. Geuther, Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Jesse L. King
----------------------------------------------------------
Jesse L. King, Senior Vice President and Controller
(Principal Accounting Officer)
/s/ John F. Maher
----------------------------------------------------
John F. Maher, President and Chief Operating Officer
/s/ Dr. David Alexander /s/ Enrique Hernandez, Jr.
--------------------------------- ---------------------------------
Dr. David Alexander, Director Enrique Hernandez, Jr., Director
/s/ H. Frederick Christie /s/ Charles D. Miller
--------------------------------- ---------------------------------
H. Frederick Christie, Director Charles D. Miller, Director
/s/ Stephen E. Frank /s/ Dr. Alberta E. Siegel
--------------------------------- ---------------------------------
Stephen E. Frank, Director Dr. Alberta E. Siegel, Director
/s/ John V. Giovenco .
--------------------------------- ---------------------------------
John V. Giovenco, Director Willis B. Wood, Jr., Director
/s/ Firmin A. Gryp
---------------------------------
Firmin A. Gryp, Director <PAGE>
<PAGE>
INDEX OF
ADDITIONAL FINANCIAL DATA
Page
----
Consent of Independent Accountants S-2
S-2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 33-19884,
2-98811 and 33-60206), on Form S-4 (Nos. 33-15135 and 33-17705) and on Form
S-8 (Nos. 2-67233, 2-90750, 33-6174 and 33-21469) of Great Western Financial
Corporation of our report dated January 18, 1995 appearing on page 97 of this
Form 10-K.
/s/ PRICE WATERHOUSE LLP
Los Angeles, California
March 28, 1995
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
EXHIBITS INDEX
Exhibit Page
Number Number
10.22 Revised Form of Non Qualified Stock Option Agreement
effective December 12, 1994.
10.28 Amendment to GWFC Directors', Senior Officers' and basic
Deferred Compensation Plans (1992 Restatement).
10.31 Amendment to GWFC Umbrella Trust for Senior Officers effective
October 25, 1994.
10.37 GWFC Retirement Restoration Plan effective January 1, 1994.
11.1 Statement re Computation of Per Share Earnings.
12.1 Computation of Ratios of Earnings to Fixed Charges.
21.1 Subsidiaries.
27.1 Financial Data Schedule.
<PAGE>
EXHIBIT 10.22
GREAT WESTERN FINANCIAL CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of the day of _________ 19___, between
GREAT WESTERN FINANCIAL CORPORATION, a Delaware corporation (the
"Corporation"), and (the "Employee").
W I T N E S S E T H
WHEREAS, pursuant to the 1988 Stock Option and Incentive Plan, as
amended (the "Plan"), the Corporation has granted to the Employee as of the
day of , 19___ (the "Award Date") a nonqualified stock option
to purchase all or any part of authorized but unissued or
treasury shares of Common Stock, $1.00 par value, of the Corporation upon the
terms and conditions set forth herein and in the Plan.
NOW, THEREFORE, in consideration of the mutual promises and covenants
made herein and the mutual benefits to be derived herefrom, the parties
hereto agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise defined
herein shall have the meaning assigned to such terms in the Plan.
2. Grant of Option. This Agreement evidences the Corporation's grant to
the Employee of the right and option to purchase, on the terms and
conditions set forth herein and, to the extent expressly herein
provided, in the Plan, all or any part of an aggregate of shares
of the Common Stock of the Corporation at the price of $______ per share
(the "Option"), exercisable from time to time, subject to the provisions
of this Agreement, prior to the close of business on the day before the
tenth anniversary of the Award Date (the "Expiration Date"). Such price
equals the Fair Market Value of the Corporation's Common Stock as of the
Award Date.
3. Exercisability of Option. Except as provided in Sections 6 and 8
hereof, no shares may be purchased by exercise of the Option until the
expiration of one year after the Award Date. The Option shall become
exercisable in installments as to 25% of the aggregate number of shares
set forth in Section 2 hereof (subject to adjustment) on and after the
first anniversary of the Award Date and as to an additional 25% of the
aggregate number of such shares (subject to adjustment) on each of the
second, third and fourth anniversaries of the Award Date. To the
extent the Employee does not in any year purchase all or any part of the
shares to which the Employee is entitled, the Employee has the right
cumulatively thereafter to purchase any shares not so purchased and such
right shall continue until the Option terminates or expires. No fewer
than 25 shares may be purchased at any one time, unless the number
purchased is the total number at the time available for purchase under
the Option.<PAGE>
<PAGE>
4. Method of Exercise of Option. The Option shall be exercisable by the
delivery to the Corporation of a written notice stating the number of
shares to be purchased pursuant to the Option and accompanied by payment
in (i) cash or by check payable to the order of the Corporation for the
full purchase price of the shares to be purchased, (ii) at the
discretion of the Administrator and pursuant to such conditions and
restrictions as the Committee may establish by the exchange of shares
of Common Stock of the Corporation then owned by the Employee having a
Fair Market Value equal to such purchase price, (iii) at the discretion
of the Administrator, by the payment and exchange of part cash and part
stock with the sum of the cash and Fair Market Value of the stock equal
to such purchase price, or (iv) by the payment of such other form of
legal consideration as may be approved by the Board of Directors and the
Administrator. In addition, the Employee (or the Employee's Beneficiary
or Personal Representative) shall furnish any written statements
required pursuant to Section 10 below.
5. Continuance of Employment. As a condition of the Option, the Employee
hereby agrees to remain in the employ of the Corporation or one of its
Subsidiaries for a period of one year after the Award Date. Nothing
contained in this Agreement or in the Plan shall confer upon the
Employee any right with respect to the continuation of his or her
employment by the Corporation or any Subsidiary or interfere in any way
with the right of the Corporation or of any Subsidiary at any time to
terminate such employment or to increase or decrease the compensation
of the Employee from the rate in existence at any time.
6. Effect of Termination of Employment or Death. The Option and all other
rights hereunder, to the extent not exercised, shall terminate and
become null and void at such time as the Employee ceases to be employed
by either the Corporation or any Subsidiary, except that
(a) if the Employee's employment terminates (other than (i) as a result
of death or of Retirement (as such term is defined in the Great
Western Retirement Plan, as from time to time in effect) or (ii)
at the request of the Corporation or any Subsidiary as determined
by the Administrator in its sole discretion), the Employee may at
any time within a period of three months after such termination
exercise the Option to the extent the Option was exercisable at
the date of such termination;
(b) if the Employee's employment terminates as a result of Retirement, the
Employee may at any time within a period of two years after such
Retirement exercise the Option to the extent the Option was
exercisable at the date of such Retirement; and
<PAGE>
<PAGE>
(c) if the Employee dies while in the employ of the Corporation or any
Subsidiary, or within three months after a termination described
in subsection (a) of this Section 6 (excluding a termination
described in the parenthetical clause thereof), or within two
years after termination as a result of Retirement as described in
subsection (b) of this Section 6, then the Option, to the extent
that the Employee was entitled to exercise the Option on the date
of his or her death (or such earlier termination), may be
exercised within a period of one year after the date of death by
the Employee's Beneficiary;
provided, however, that in no event may the Option be exercised by
anyone under this Section or otherwise after the Expiration Date.
If the Employee is employed by an entity which ceases to be a
Subsidiary, other than by merger with or liquidation into another
Subsidiary, such event shall be deemed for purposes of this
Section 6 to be a termination of the Employee's employment
described in subsection (a).
7. Non-Transferability of Option. During the Employee's lifetime, the
Option and any other rights hereunder may be exercised only by the
Employee, except as otherwise expressly provided in Section 6.1.3 of,
or pursuant to, the Plan.
8. Adjustments and Other Effects (including Termination) upon Certain
Events. If the outstanding shares of the Corporation's Common Stock are
changed into or exchanged for cash or a different number or kind of
shares or securities of the Corporation, or if additional shares or new
or different shares or securities are distributed with respect to the
outstanding shares of the Corporation's Common Stock, through a
reorganization or merger in which the Corporation is the surviving
entity or through a combination, consolidation, recapitalization,
reclassification, stock split, stock dividend, reverse stock split,
stock consolidation or other capital change or adjustment, an
appropriate proportionate equitable adjustment shall be made in the
number and kind of shares or other consideration that is subject to or
may be delivered pursuant to the Option. A corresponding adjustment to
the consideration payable with respect to the Option shall also be made
as appropriate. In addition, the Option and rights of the Employee
hereunder are subject to adjustment, modification and termination in
certain other circumstances and upon occurrence of certain other events,
as set forth in the provisions of Article II, Sections 6.3 and 6.4, and
the last sentence of Section 6.2 of the Plan, to the extent applicable
to Options granted under the Key Employee Program.
9. Limitation of Employee's Rights. Neither the Employee nor any other
person entitled to exercise the Option shall have any of the rights or
privileges of a stockholder of the Corporation in respect of any shares
deliverable upon exercise of the Option unless and until a certificate
representing such shares shall have been issued in the name of the
Employee or such person.
<PAGE>
<PAGE>
10. Representations of the Employee. The Employee agrees that the
Corporation shall not be required to deliver shares upon the exercise
of the Option if prevented or prohibited from doing so under applicable
law. If the shares are not registered with the Securities and Exchange
Commission at the time of such exercise, the Employee shall be required
to deliver an investment letter in form acceptable to the Corporation
and all certificates representing shares issued shall bear appropriate
legends reflecting restrictions on transfer under applicable laws. The
Employee agrees by acceptance of the Option and, in such letter, the
Employee shall represent that he or she will acquire the shares issuable
upon such exercise for his or her own account, for the purpose of
investment, and not with a view to or for sale in connection with any
distribution, and that he or she will not offer, sell or otherwise
transfer or dispose of such shares or any interest therein except in
compliance with all securities laws applicable to such action. The
Corporation may impose stop transfer instructions to implement such
limitations, if applicable. Any person or persons entitled to exercise
the Option under the provisions of Section 7 hereof shall be bound by
and obligated under the provisions of this Section 10 to the same extent
as is the Employee.
11. Tax Withholding. The Corporation shall be entitled to require deduction
from other compensation payable to the Employee any sums required by
federal, state or local tax law to be withheld with respect to the
exercise of the Option, but, in the alternative, (i) the Corporation may
require the Employee or other person exercising the Option to advance
such sums in cash, or (ii) if the Employee or other person exercising
the Option elects, the Corporation may withhold shares of the Corpora-
tion's Common Stock having a Fair Market Value equal to the sums
required to be withheld. If the Employee or other person exercising the
Option elects to advance such sums directly, written notice of that
election shall be delivered prior to such exercise and, whether pursuant
to such election or pursuant to a requirement imposed by the
Corporation, payment in cash or by check of such sums for taxes shall
be delivered within ten days after the date of exercise. If the
Employee or other person exercising the Option elects to have the
Corporation withhold shares of the Corporation's Common Stock having a
Fair Market Value equal to the sums required to be withheld, the value
of the shares of the Corporation's Common Stock to be withheld will be
equal to the Fair Market Value of such shares on the date that the
amount of tax to be withheld is to be determined (the "Tax Date").
Elections by the Employee to have shares of the Corporation's Common
Stock withheld for this purpose will be subject to the following
restrictions: (w) the election must be made prior to the Tax Date, (x)
the election must be irrevocable, (y) the election will be subject to
the approval or disapproval (as the case may be) of the Administrator,
and (z) if the Employee is an officer of the Corporation within the
meaning of Section 16 of the Exchange Act, the election, in addition,
may not be made within six months of the grant of the Option (except
that this limitation will not apply in the event that the death or
Disability of the Employee occurs prior to the expiration of the six
month period) and either must be made at least six months prior to the
<PAGE>
Tax Date or in one of the periods beginning on the third business day
following the date of release of the Corporation's quarterly or annual
summary statements of sales and earnings and ending on the twelfth
business day following such date. The Corporation shall not be
obligated to issue shares and/or distribute cash to the Employee or
other person exercising the Option upon exercise of the Option until
such payment has been received or shares have been so withheld, unless
withholding as of or prior to the date of such exercise is sufficient
to cover all such sums due or which may be due with respect to such
exercise.
12. Employment by Subsidiaries. Employment by any Subsidiary shall be
considered as the equivalent of employment by the Corporation for all
purposes of this Agreement, unless the Board otherwise determines.
13. Notices. Any notice to be given under the terms of this Agreement shall
be in writing and addressed to the Corporation at its principal office
in Chatsworth, California, to the attention of the Corporate Secretary
and to the Employee at the address given beneath the Employee's
signature hereto, or at such other address as either party may hereafter
designate in writing to the other.
14. Laws Applicable to Construction. The Option has been granted, executed
and delivered at Chatsworth, California, and the interpretation,
performance and enforcement of this Agreement shall be governed by the
laws of the State of California, except as otherwise provided in Section
6.8 of the Plan.
15. Plan. The Option is subject to, and the Employee agrees to be bound by,
all of the terms and conditions of the provisions of Articles I and II
and Sections 4.2, 6.1, 6.3, 6.4, 6.5, 6.7 and 6.8 and the last sentence
of Section 6.2 of the Plan. The Employee acknowledges receipt of a copy
of the Plan, which, to the extent set forth in the preceding sentence,
is made a part hereof by this reference. Unless otherwise expressly
provided in other Sections of this Agreement, provisions of the Plan
that confer discretionary authority on the Administrator do not (and
shall not be deemed to) apply to the Option or create rights in the
Employee unless such application or rights are expressly so conferred
by appropriate action of the Administrator, in its sole discretion,
under the Plan after the date hereof.
16. Effect of Agreement. This Agreement shall not be binding upon and shall
not inure to the benefit of any successor or successors of the
Corporation except as provided pursuant to Section 6.3 of the Plan.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed on its behalf by a duly authorized officer and the Employee has
hereunto set his or her hand.
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL
CORPORATION (a Delaware
corporation)
By ____________________________
Title__________________________
EMPLOYEE
__________________________
(Signature)
__________________________
(Print Name)
__________________________
(Address)
__________________________
(City, State, Zip Code)
Executed:
<PAGE>
CONSENT OF SPOUSE
-----------------
In consideration of the execution of the foregoing Nonqualified Stock Option
Agreement by Great Western Financial Corporation, I,
____________________________, the spouse of the Employee herein named, do hereby
join with my spouse in executing the foregoing Nonqualified Stock Option
Agreement and do hereby agree to be bound by all of the terms and provisions
thereof and of the Plan.
DATED: ______________, 19__. _____________________________
Signature of Spouse
<PAGE>
EXHIBIT 10.28
AMENDMENT NO. 1
TO THE
GREAT WESTERN FINANCIAL CORPORATION
SENIOR OFFICERS' DEFERRED COMPENSATION PLAN
1992 RESTATEMENT
WHEREAS, Great Western Financial Corporation (the "Company") maintains
the Great Western Financial Corporation Senior Officers' Deferred
Compensation Plan (the "Plan") to provide current tax planning opportunities
as well as supplemental funds for retirement or death for selected officers
of the Company and its subsidiaries;
WHEREAS, it is desirable to amend the Plan to accommodate deferrals of
bonuses under the recently approved Great Western Financial Corporation
Annual Incentive Compensation Plan for Executive Officers (the "Executive
Officers' Bonus Plan"), to clarify the limit on the amount of interest that
may be credited on amounts deferred under the Executive Officers' Bonus Plan
to satisfy the standards imposed on deferrals of performance-based
compensation under the Internal Revenue Code and to permit participants to
change their payout elections under certain circumstances.
NOW, THEREFORE, the Plan is amended, effective as of August 1, 1994,
as follows:
ARTICLE II
DEFINITIONS
1. A new Section 2.21 is added to read as follows:
"2.21 Executive Officers' Bonus Plan. "Executive Officers' Bonus
Plan" shall mean the Great Western Financial Corporation Annual
Incentive Compensation Plan for Executive Officers."
ARTICLE III
PARTICIPATION AND DEFERRAL COMMITMENTS
2. Section 3.1(a) is amended to read as follows:
"(a) Eligibility. Eligibility to make a Deferral Commitment shall
be limited to officers who are First Vice Presidents or above, or
equivalent thereof, of the Company or Great Western Bank, a Federal
Savings Bank, and certain other employees of an Employer as
designated by the Committee. Deferred compensation accounts of
persons who are or become eligible under this Plan which are governed
by the Great Western Financial Corporation Deferred Compensation Plan
(the "Regular Plan") shall, with the consent of the Participant, be
governed by this Plan and not by the Regular Plan.<PAGE>
<PAGE>
3. Section 3.1(b) is amended by adding the following to the end thereof:
"Notwithstanding the foregoing or anything in Section 3.2(b) to the
contrary, a Participant's election to defer all or a portion of the
bonus payable under the Executive Officers' Bonus Plan (or any
similar bonus arrangements offered to other officers of the Company
eligible to participate in this Plan) for the calendar year 1994
shall be effective only if submitted to the Committee on a
Participation Agreement on or before August 31, 1994, and a
Participant's election to defer any bonus payable under the Executive
Officers' Bonus Plan for 1995 and subsequent years shall be effective
only if submitted to the Committee on a Participation Agreement on
or before March 15th of the calendar year in which such bonus is
earned or such earlier time as the Committee may prescribe."
4. Section 3.6 is amended by changing the last sentence thereof to read
as follows:
"Except as provided in Section 5.13, in no event shall the crediting
rate be less than the Fixed Rate Yield."
ARTICLE IV
DEFERRED COMPENSATION ACCOUNTS
5. Section 4.3 is amended by adding the following to the end
thereof:
"Notwithstanding the foregoing, the crediting rate for any amounts
deferred under the Executive Officers' Bonus Plan shall be limited
as set forth in Section 5.13."
ARTICLE V
PLAN BENEFITS
6. Section 5.2 is amended to add subsection (e):
"(e) Change of Form of Payment. A participant may elect to change
the form of retirement benefit payment filed at the time of Deferral
Commitment under Section 5.2. The election to change a form of
payment must be made not later than twelve (12) calendar months prior
to death, disability, certain terminations after a Change in Control
or retirement to be a valid election. In the event an election has
not been in effect for twelve (12) calendar months at the time of
such termination or retirement, the benefits shall be paid pursuant
to the form in effect twelve (12) calendar months prior to such
termination or retirement."
<PAGE>
<PAGE>
7. Article V is amended by adding a new Section 5.13 to read as follows:
"5.13 Limitation on Crediting Rate for Amounts Deferred under the
Executive Officers' Bonus Plan. Notwithstanding anything contained
herein to the contrary, including without limitation anything
contained in Sections 5.1, 5.4 and 5.7, the crediting rate for
amounts deferred under the Executive Officers' Bonus Plan shall not
exceed 120% of the federal long-term rate, for compounding on a
monthly basis, determined and published by the Secretary of the
United States Department of Treasury under Section 1274(d) of the
Internal Revenue Code of 1986, as amended, for the month for which
interest is credited.
<PAGE>
<PAGE>
AMENDMENT NO. 1
TO THE
GREAT WESTERN FINANCIAL CORPORATION
DEFERRED COMPENSATION PLAN
1992 RESTATEMENT
WHEREAS, Great Western Financial Corporation (the "Company") maintains
the Great Western Financial Corporation Deferred Compensation Plan (the
"Plan") to provide current tax planning opportunities as well as supplemental
funds for retirement or death for selected employees of the Company and its
subsidiaries;
WHEREAS, it is desirable to amend the Plan to permit participants to
change their payout elections under certain circumstances.
NOW, THEREFORE, the Plan is amended, effective as of August 1, 1994,
as follows:
ARTICLE V
PLAN BENEFITS
Section 5.2 is amended to add subsection (e):
"(e) Change of Form of Payment. A participant may elect to change
the form of retirement benefit payment filed at the time of Deferral
Commitment under Section 5.2. The election to change a form of payment must
be made not later than twelve (12) calendar months prior to death,
disability, certain terminations after a Change in Control or retirement to
be a valid election. In the event an election has not been in effect for
twelve (12) calendar months at the time of such termination or retirement,
the benefits shall be paid pursuant to the form in effect twelve (12)
calendar months prior to such termination or retirement."
<PAGE>
<PAGE>
AMENDMENT NO. 1
TO THE
GREAT WESTERN FINANCIAL CORPORATION
DIRECTORS' DEFERRED COMPENSATION PLAN
1992 RESTATEMENT
WHEREAS, Great Western Financial Corporation (the "Company") maintains
the Great Western Financial Corporation Directors' Deferred Compensation Plan
(the "Plan") to provide current tax planning opportunities as well as
supplemental funds for retirement or death for outside directors of the
Company or Great Western Bank, a Federal Savings Bank;
WHEREAS, it is desirable to amend the Plan to permit participants to
change their payout elections under certain circumstances.
NOW, THEREFORE, the Plan is amended, effective as of August 1, 1994,
as follows:
ARTICLE V
PLAN BENEFITS
Section 5.2 is amended to add subsection (e):
"(e) Change of Form of Payment. A participant may elect to change
the form of retirement benefit payment filed at the time of Deferral
Commitment under Section 5.2. The election to change a form of payment must
be made not later than twelve (12) calendar months prior to death, certain
terminations after a Change in Control or retirement to be a valid election.
In the event an election has not been in effect for twelve (12) calendar
months at the time of such termination or retirement, the benefits shall be
paid pursuant to the form in effect twelve (12) calendar months prior to such
termination or retirement."
<PAGE>
EXHIBIT 10.31
AMENDMENT NO. 1
TO THE
GREAT WESTERN FINANCIAL CORPORATION
UMBRELLA TRUST FOR SENIOR OFFICERS
WHEREAS, Great Western Financial Corporation (the "Company") has
established the Great Western Financial Corporation Umbrella Trust for Senior
Officers (the "Trust") to give participants in various plans, contracts and
agreements greater security by placing assets in trust; and
WHEREAS, it is desirable to amend the Trust to include the Company's
Retirement Restoration Plan.
NOW, THEREFORE, the Trust is amended, effective as of October 25, 1994,
as follows:
The first introductory paragraph is amended to add the following Plan:
"Great Western Financial Corporation Retirement Restoration Plan"
<PAGE>
EXHIBIT 10.37
GREAT WESTERN
RETIREMENT RESTORATION PLAN
THIS AGREEMENT, made and entered into effective the 1st day of January,
1994, by GREAT WESTERN FINANCIAL CORPORATION, a Delaware corporation ("Great
Western"), evidences the terms of a Retirement Restoration Plan for qualified
executives of Great Western and Subsidiaries.
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 Retirement Restoration
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 401(a)(17) 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 is adopted effective January 1,
1994.
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").
"Average Monthly Compensation" means Average Monthly Compensation as
defined in the Retirement Plan.
"Committee" means the Finance 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.
"Eligible Employee" means each individual who meets each of the
following requirements: (1) he or she is an officer who is a first vice
president or above of the Company or Great Western Bank, a Federal Savings
Bank and each officer of the Company's other Subsidiaries of equivalent rank
designated by the Committee; (2) he or she is a participant in the Retirement
Plan and (3) his or her Average Monthly Compensation would be reduced by the
application of Section 401(a)(17) of the Code and (4) he or she does not
participate in the Company Supplemental Executive Retirement Plan.<PAGE>
<PAGE>
"Participant" means any Eligible Employee who is eligible for
participation in this Plan as specified in Section 2.1.
"Plan" means the Great Western Retirement Restoration Plan of Great
Western Financial Corporation as set forth in this Agreement and all
subsequent amendments hereto.
"Plan Compensation" means Average Monthly Compensation modified by
ignoring the limitations on compensation under Section 401(a)(17) of the
Code.
"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, directly or indirectly, are now owned or shall hereafter be
acquired by the Company.
ARTICLE II
PARTICIPATION
2.1 - Eligibility Requirements.
Any Employee who is an Eligible Employee shall become a Participant on
the date he or she becomes vested under the Retirement Plan.
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 - Retirement Benefit.
Subject to Section 4.3, the Participant's retirement benefit under this
Plan shall equal the excess of A over B where:
<PAGE>
<PAGE>
A equals the Participant's vested retirement benefit under the
Retirement Plan, payable in the form of a single life annuity, calculated by
substituting the Participant's Plan Compensation for his or her Average
Monthly Compensation, and
B equals the vested retirement benefit actually payable under the
Retirement Plan, payable in the form of a single life annuity.
Such benefits shall be calculated as of the earliest date the
Participant could elect to retire under the Retirement Plan (but not earlier
than his termination of employment). Notwithstanding the above, such benefit
shall be reduced to the extent that it, together with the benefits payable
from the Retirement Plan, exceeds the limits of Section 415 of the Code.
4.2 - 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.
4.3 - Payment of Retirement Benefits.
Upon a Participant's retirement, the Company shall commence to pay to
such retired Participant (or spouse, as applicable) the monthly retirement
benefit to which he is entitled under this Plan commencing on the earliest
date he could elect to have benefits commence under the Retirement Plan (but
not earlier than his termination of employment), and payable in the normal
form benefits are payable with respect to the Participant under Section 4.7
of the Retirement Plan. If the normal form of benefits is the qualified
joint and survivor annuity, the amount payable pursuant to this Plan shall
be the Actuarial Equivalent of the amount set forth in Section 4.1 of this
Plan. No benefits shall be payable under this Plan while the Participant is
accruing benefits under the Retirement Plan.
4.4 - Optional Retirement Benefits.
(a) If the Participant is entitled to elect an optional form of
benefits under the Retirement Plan, the benefits determined under
this Plan may also be paid, at the election of the Participant,
with the consent of the spouse, if applicable, in one of the
alternative forms provided in the Retirement Plan. If such an
election is made, the retirement benefits hereunder shall be the
Actuarial Equivalent of the benefit payable under Section 4.1 of
this Plan. The Committee may impose any requirements with
respect to the consent required for an election of a married
Participant.
<PAGE>
<PAGE>
(b) To the extent the Retirement Plan allows a participant to defer
payment of his benefits, Participants hereunder may also defer
payments of their benefits (but not after age 65 unless the
employee has not had a termination of employment).
(c) Notwithstanding the foregoing, no election to receive benefits in
an alternative form or to defer benefits shall be valid unless
made at least one year prior to the Participant's termination of
employment. If either of the foregoing elections is made, the
Participant must specify the relevant payment form and/or the
specific deferred commencement date.
4.5 - Small Benefit.
Notwithstanding any other provision or provisions of this Plan to the
contrary, if any benefit hereunder 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.
4.6 - 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.
4.7 - Spouse Death Benefit.
If a Participant's spouse is entitled to a death benefit under Section
4.10 of the Retirement Plan, the monthly benefit, if any, payable upon the
death of a Participant to the Participant's 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, calculated by substituting the
Participant's Plan Compensation for his or her Average Monthly
Compensation,
over
(b) The amount of the monthly spouse death benefit payable to the
Participant's spouse pursuant to Section 4.10 of the Retirement
Plan.
No benefits under this Section 4.7 shall be duplicative of any
benefits payable pursuant to any other provisions of this Article
IV.
<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. The Committee
shall have full discretion to construe and interpret the terms and provisions
of this Plan, which interpretation or construction shall be final and binding
on all parties, except as otherwise provided by law. 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.
<PAGE>
<PAGE>
6.2 - Protection of Accrued Benefits.
This Plan is strictly a voluntary undertaking on the 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 benefits accrued pursuant to this Plan as of the date of
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.
<PAGE>
<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.<PAGE>
<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 ____ day of ________________, 1994.
GREAT WESTERN FINANCIAL CORPORATION
By ________________________________
By ________________________________
<PAGE>
<PAGE>
GREAT WESTERN
RETIREMENT RESTORATION PLAN
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I TITLE, PURPOSE AND DEFINITIONS 1
1.1 Title 1
1.2 Purpose 1
1.3 Definitions 2
ARTICLE II PARTICIPATION 4
2.1 Eligibility Requirements 4
ARTICLE III PAYMENT OF BENEFITS 4
3.1 Payment 4
ARTICLE IV RETIREMENT BENEFIT 5
4.1 Retirement Benefit 5
4.2 Benefit Limitation6
4.3 Payment of Retirement Benefits 6
4.4 Optional Retirement Benefits 7
4.5 Small Benefit8
4.6 Forfeiture of Benefits 8
4.7 Spouse Death Benefit 8
ARTICLE V COMMITTEE 9
5.1 Committee 9
5.2 Agents 10
5.3 Binding Effect of Decisions. 10
5.4 Indemnity 10
<PAGE>
<PAGE>
ARTICLE VI AMENDMENT AND TERMINATION 11
6.1 Amendments and Termination 11
6.2 Protection of Accrued Benefits 12
ARTICLE VII MISCELLANEOUS 12
7.1 Unfunded Plan 12
7.2 Unsecured General Creditor 13
7.3 Trust Fund 13
7.4 Nonassignability 14
7.5 Limitation on Participants' Rights 14
7.6 Participants Bound 14
7.7 Receipt and Release 15
7.8 California Law Governs 15
7.9 Headings and Subheadings 16
7.10 Instrument in Counterparts 16
7.11 Gender 16
7.12 Successors and Assigns 16
<PAGE>
EXHIBIT 11.1
GREAT WESTERN FINANCIAL CORPORATION
Computation of Net Income Per Common Share
Primary and Fully Diluted
Year Ended December 31
--------------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
[S] [C] [C] [C]
Net income before accounting changes $251,234 $ 62,047 $ 53,912
Preferred stock dividends - convertible
and nonconvertible (25,015) (25,015) (15,543)
-------- -------- --------
Net income for computing earnings per
Common share - primary before
accounting changes 226,219 37,032 38,369
Accounting changes - - 31,094
-------- -------- --------
Net income for computing earnings per
Common share - primary 226,219 37,032 69,463
Preferred stock dividends - convertible - 11,320 11,320
-------- -------- --------
Net income for computing earnings per
Common share - fully diluted 226,219 48,352 80,783
Accounting changes - - (31,094)
-------- -------- --------
Net income for computing earnings per
Common share - fully diluted before
accounting changes $226,219 $ 48,352 $ 49,689
======== ======== ========
<PAGE>
<PAGE>
Computation of Average Number of Common Shares
Outstanding on Primary and Fully Diluted Basis
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------
(Dollars in thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Average number of Common shares
outstanding during each period -
without dilution 133,307 131,529 130,412
Common share equivalents outstanding
at the end of each period 463 478 324
-------- -------- --------
Average number of Common shares and
Common share equivalents outstanding
during each period on a primary basis 133,770 132,007 130,736
Common share equivalents outstanding
at the end of each period on a fully
diluted basis - 504 204
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 133,770 138,853 137,282
======== ======== ========
Net income per Common share
Primary before accounting changes $1.69 $.28 $.30
Fully diluted before accounting changes 1.69 .28 30
Primary 1.69 .28 53
Fully diluted 1.69 .28 53
</TABLE>
<PAGE>
EXHIBIT 12.1
GREAT WESTERN FINANCIAL CORPORATION
Computation of Ratios of Earnings to Fixed Charges
Twelve Months Twelve Months Twelve Months
Ended Ended Ended
(Dollars in thousands) Decmeber 31, December 31, Decmeber 31,
1994 1993 1992
------------- ------------- ------------
Earnings
Net earnings $ 251,234 $ 62,047 $ 85,006
Accounting changes - (31,094)
Taxes on income 155,300 30,000 41,600
---------- ---------- ----------
Earnings before taxes and
accounting changes $ 406,534 $ 92,047 $ 95,512
========== ========== ==========
Interest expense
Customer accounts $ 950,299 $ 939,081 $1,333,473
Borrowings 370,004 370,761 344,823
---------- ---------- ----------
Total $1,320,303 $1,309,842 $1,678,296
========== ========== ==========
Rent expense
Total $ 55,011 $ 53,638 $ 57,823
1/3 thereof 18,337 17,879 19,274
Capitalized interest $ 196 $ 777 $ 2,071
Preferred stock dividends $ 25,015 $ 25,015 15,543
Ratio of earnings to fixed
charges and preferred stock
dividends
Excluding customer accounts
Earnings before fixed charges $ 794,875 $ 480,687 $ 459,609
Fixed charges 429,015 426,526 393,704
Ratio 1.85 1.13 1.17
Including customer accounts
Earnings before fixed charges $1,745,174 $1,419,768 $1,793,082
Fixed charges 1,379,314 1,365,607 1,727,177
Ratio 1.27 1.04 1.04
Ratio of earnings to fixed charges
Excluding customer accounts
Earnings before fixed charges $ 794,875 $ 480,687 $ 459,609
Fixed charges 388,537 389,417 366,168
Ratio 2.05 1.23 1.26
Including customer accounts
Earnings before fixed charges $1,745,174 $1,419,768 $1,793,082
Fixed charges 1,338,836 1,328,498 1,699,641
Ratio 1.30 1.07 1.05
<PAGE>
<PAGE>
EXHIBIT 12.1 (continued)
GREAT WESTERN FINANCIAL CORPORATION
Computation of Ratios of Earnings to Fixed Charges
Twelve Months Twelve Months
Ended Ended
(Dollars in thousands) December 31, December 31,
1991 1990
------------- --------------
Earnings
Net earnings $ 298,130 $ 127,074
Accounting changes - -
Taxes on income 207,300 148,600
---------- ----------
Earnings before taxes and
accounting changes $ 505,430 $ 275,674
========== ==========
Interest expense
Customer accounts $1,968,205 $2,017,040
Borrowings 493,757 888,094
---------- ----------
Total $2,461,962 $2,905,134
========== ==========
Rent expense
Total $ 51,440 $ 49,561
1/3 thereof 17,147 16,520
Capitalized interest $ 6,859 $ -
Preferred stock dividends $ 7,023 $ -
Ratio of earnings to fixed
charges and preferred stock
dividends
Excluding customer accounts
Earnings before fixed charges $1,016,334 $1,180,288
Fixed charges 529,669 904,614
Ratio 1.92 1.30
Including customer accounts
Earnings before fixed charges $2,984,539 $3,197,328
Fixed charges 2,497,874 2,921,654
Ratio 1.19 1.09
Ratio of earnings to fixed charges
Excluding customer accounts
Earnings before fixed charges $1,016,334 $1,180,288
Fixed charges 517,763 904,614
Ratio 1.96 1.30
Including customer accounts
Earnings before fixed charges $2,984,539 $3,197,328
Fixed charges 2,485,968 2,921,654
Ratio 1.20 1.09
<PAGE>
EXHIBIT 22.1
GREAT WESTERN FINANCIAL CORPORATION
PARENT AND SUBSIDIARIES
Great Western Financial Corporation is incorporated in the State of
Delaware.
Listed below are the significant subsidiaries of GWFC, which are included
in the Consolidated Financial Statements.
Percentage
of Voting
Securities State of
Subsidiaries Owned Incorporation
Great Western Bank,
A Federal Savings Bank 100% Federal Charter
Aristar, Inc. 100% Delaware
[ARTICLE] 9
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC 31 1994
[PERIOD-END] DEC 31 1994
[CASH] 983,440
[INT-BEARING-DEPOSITS] 125
[FED-FUNDS-SOLD] 165,000
[TRADING-ASSETS] 0
[INVESTMENTS-HELD-FOR-SALE] 3,851,598
[INVESTMENTS-CARRYING] 6,335,104
[INVESTMENTS-MARKET] 6,211,731
[LOANS] 28,378,368
[ALLOWANCE] 438,051
[TOTAL-ASSETS] 42,218,257
[DEPOSITS] 28,700,947
[SHORT-TERM] 7,324,496
[LIABILITIES-OTHER] 912,864
[LONG-TERM] 2,796,164
[COMMON] 134,316
[PREFERRED-MANDATORY] 0
[PREFERRED] 294,375
[OTHER-SE] 2,055,095
[TOTAL-LIABILITIES-AND-EQUITY] 42,218,257
[INTEREST-LOAN] 2,321,269
[INTEREST-INVEST] 304,886
[INTEREST-OTHER] 32,948
[INTEREST-TOTAL] 2,659,103
[INTEREST-DEPOSIT] 950,299
[INTEREST-EXPENSE] 1,307,448
[INTEREST-INCOME-NET] 1,351,655
[LOAN-LOSSES] 207,200
[SECURITIES-GAINS] 3,578
[EXPENSE-OTHER] 1,076,433
[INCOME-PRETAX] 406,534
[INCOME-PRE-EXTRAORDINARY] 251,234
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 251,234
[EPS-PRIMARY] 1.69
[EPS-DILUTED] 1.69
[YIELD-ACTUAL] 3.08
[LOANS-NON] 565,152
[LOANS-PAST] 0
[LOANS-TROUBLED] 124,711
[LOANS-PROBLEM] 0
[ALLOWANCE-OPEN] 502,269
[CHARGE-OFFS] 292,074
[RECOVERIES] 20,656
[ALLOWANCE-CLOSE] 438,051
[ALLOWANCE-DOMESTIC] 438,051
[ALLOWANCE-FOREIGN] 0
[ALLOWANCE-UNALLOCATED] 0
</TABLE>
