<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549 - 1004
FORM 10-Q/A
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- ------------
Commission file number 1-4075
----------------------------------
GREAT WESTERN FINANCIAL CORPORATION
-------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-1913457
-----------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9200 Oakdale Avenue, Chatsworth, California 91311
------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(818) 775-3411
--------------------------------------------------------
(Registrant's telephone number, including area code)
-----------------------------------------------------
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Issuer's classes
of common stock, as of October 31, 1996: 137,710,442
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
TABLE OF CONTENTS
Page
----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Financial Condition -
September 30, 1996, December 31, 1995
and September 30, 1995................ ......................4
Consolidated Statement of Operations -
Three Months and Nine Months Ended September 30, 1996
and 1995.....................................................5
Consolidated Statement of Changes in
Stockholders' Equity................... ......................6
Consolidated Condensed Statement of Cash Flows - Three
Months and Nine Months Ended September 30, 1996 and 1995......7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the
Three Months and Nine Months Ended September 30, 1996.........9
Balance Sheet Analysis........................................10
Earnings Performance..........................................31
Part II. Other Information
Item 5. Other Information..........................................42
Item 6. Exhibits and Reports on Form 8-K...........................43
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
PART I - FINANCIAL INFORMATION
PERSONS FOR WHOM THE INFORMATION IS TO BE GIVEN
- -----------------------------------------------
The accompanying financial information is filed for the Registrant, Great
Western Financial Corporation, and its subsidiaries comprising a savings
bank and companies engaged in consumer lending, mortgage banking,
securities operations and certain other financial services ("GWFC" or "the
Company").
PRESENTATION OF FINANCIAL INFORMATION
- -------------------------------------
The financial information has been prepared in conformity with the
accounting principles or practices reflected in the financial statements
included in the Annual Report filed with the Commission for the year ended
December 31, 1995. The information further reflects all adjustments which
are, in the opinion of management, of a normal recurring nature and
necessary for a fair presentation of the results for the interim periods.
<PAGE>
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
GREAT WESTERN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
(Dollars in thousands) September 30, 1996 December 31, 1995 September 30, 1995
------------------ ------------------- ------------------
<S> <C> <C> <C>
ASSETS
Cash $ 445,195 $ 837,292 $ 849,096
Certificates of deposit, repurchase
agreements and federal funds 250,125 257,125 287,125
Securities available for sale 1,316,592 1,092,459 1,054,453
Mortgage-backed securities held to maturity
(fair value $1,715,532, $1,941,918
and $7,984,196) 1,694,937 1,886,736 7,827,138
Mortgage-backed securities available for sale 6,898,452 7,916,705 2,705,128
---------- ---------- ----------
Total mortgage-backed securities 8,593,389 9,803,441 10,532,266
Loans, net of allowance for loan and
lease losses 30,341,166 29,401,644 29,218,416
Loans available for sale 419,210 485,705 414,808
---------- ----------- -----------
Net loans 30,760,376 29,887,349 29,633,224
Investment in Federal Home Loan Banks 371,221 341,102 341,102
Real estate available for sale or development, net 208,946 217,112 208,192
Accrued interest receivable 247,609 298,640 280,593
Premises and equipment, net 572,011 604,672 608,819
Intangibles arising from acquisitions 295,424 323,713 333,804
Other assets 487,705 923,859 564,340
----------- ----------- -----------
Total assets $43,548,593 $44,586,764 $44,693,014
=========== =========== ===========
LIABILITIES
Deposits $28,852,700 $29,234,928 $29,432,176
Short-term borrowings from FHLB 1,678,039 740,080 -
Securities sold under agreements to repurchase 4,586,645 6,868,295 7,253,023
Short-term borrowings 1,350,969 1,316,413 1,904,877
Accrued interest payable 102,046 79,872 74,049
Taxes on income, principally deferred 209,714 378,381 317,813
Other liabilities and accrued expenses 792,766 625,473 622,678
Long term borrowings 3,258,933 2,420,846 2,434,099
Company-obligated mandatorily redeemable preferred
securities of the Company's subsidiary trust
holding solely $103,092,800 aggregate principle
amount of 8.25% subordinated deferrable interest
note, due 2025, of the Company 100,000 100,000 -
----------- ----------- -----------
Total liabilities 40,931,812 41,764,288 42,038,715
STOCKHOLDERS' EQUITY
Preferred stock 165,000 294,375 294,375
Common stock 137,431 137,279 136,633
Additional capital 698,958 713,889 699,107
Retained earnings 1,567,993 1,572,782 1,511,898
Unearned compensation (1,308) (4,282) (5,450)
Securities valuation allowance 48,707 108,433 17,736
----------- ----------- -----------
Total stockholders' equity 2,616,781 2,822,476 2,654,299
Total liabilities and stockholders' equity $43,548,593 $44,586,764 $44,693,014
=========== =========== ===========
</TABLE>
Unaudited<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------- ------------------------
(Dollars in thousands, except per share) 1996 1995 1996 1995
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Securities $ 16,899 $ 13,674 $ 48,062 $ 39,507
Mortgage-backed securities 156,422 196,596 495,055 563,480
Real estate loans 511,821 513,423 1,544,135 1,469,598
Consumer finance 91,439 91,345 276,340 270,079
Other 11,252 10,677 32,468 28,431
---------- ---------- ---------- ----------
Total loan interest income 614,512 615,445 1,852,943 1,768,108
Other 12,681 13,382 36,324 32,729
---------- ---------- ---------- ----------
Total interest income 800,514 839,097 2,432,384 2,403,824
INTEREST EXPENSE
Deposits 292,835 316,577 886,293 903,312
Borrowings
Short-term 111,743 137,587 338,443 389,796
Long-term 57,164 51,334 164,642 159,428
---------- ---------- ---------- ----------
Total interest expense 461,742 505,498 1,389,378 1,452,536
---------- ---------- ---------- ----------
NET INTEREST INCOME 338,772 333,599 1,043,006 951,288
Provision for loan losses 41,671 46,600 123,071 137,400
Net interest income after provision ---------- ---------- --------- ----------
for loan losses 297,101 286,999 919,935 813,888
Noninterest Income
Retail banking fees 44,482 40,045 129,149 113,935
Servicing fees 9,541 13,246 32,380 40,920
Securities operations 7,911 5,110 22,129 13,363
Net insurance operations 6,623 7,002 21,601 20,875
Real estate fees 7,517 6,013 20,804 17,917
Gain (loss) on sale of mortgages (6,125) 1,315 (3,182) 4,375
Net gain (loss) on securities and
investments (7,061) 1,854 (7,819) 4,731
Other 825 1,574 2,667 5,081
---------- ---------- --------- ---------
Total noninterest income 63,713 76,159 217,729 221,197
Noninterest Expense
Salaries and benefits 105,881 105,931 340,033 337,439
SAIF special assessment 188,359 - 188,359 -
Premises and occupancy 44,478 44,080 135,214 136,341
FDIC insurance premium 16,438 16,974 48,612 49,968
Outside data processing 13,906 16,981 41,844 47,107
Communications 10,565 11,421 29,021 34,663
Amortization of intangibles 9,430 11,089 28,289 30,196
Advertising and promotion 6,880 8,559 25,579 25,700
Net real estate operations (13,086) 2,231 (4,796) (495)
Other 46,238 32,557 124,419 105,611
---------- ---------- ---------- ---------
Total noninterest expense 429,089 249,823 956,574 766,530
---------- ---------- ---------- ---------
EARNINGS (LOSS) BEFORE TAXES (68,275) 113,335 181,090 268,555
Income tax expense (benefit) (28,400) 44,800 70,400 106,100
----------- ---------- ---------- ---------
NET EARNINGS (LOSS) $ (39,875) $ 68,535 $ 110,690 $ 162,455
=========== ========== ========== =========
Average common shares outstanding
Without dilution 134,063,270 137,690,681 138,069,484 136,466,836
Fully diluted 134,063,270 138,125,045 138,586,815 137,323,937
Earnings per share based on average
common shares outstanding
Primary $ (0.31) $ 0.45 $ 0.68 $ 1.05
Fully diluted (0.31) 0.45 0.68 1.05
Cash dividend per common share 0.25 0.23 0.73 0.69
</TABLE>
Unaudited<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Nine Months Ended
September 30
--------------------------------
1996 1995
---- ----
(Dollars in thousands)
<S> <C> <C>
PREFERRED STOCK
Balance, beginning of period $ 294,375 $ 294,375
Preferred stock redeemed (953) -
Preferred stock converted to common stock (128,422) -
----------- -----------
Balance, end of period 165,000 294,375
----------- -----------
COMMON STOCK
Balance, beginning of period 137,279 134,316
Common stock issued upon exercise of options 516 557
Common stock issued under dividend reinvestment plan 71 1,750
Common stock acquired from restricted stock plan (223) -
Restricted stock awards granted, net of cancellations (7) 10
Common stock repurchased under repurchase plan (6,500) -
Common stock converted from preferred stock 6,295 -
----------- -----------
Balance, end of period 137,431 136,633
----------- -----------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of period 713,889 656,644
Preferred stock converted to common stock 122,082 -
Common stock issued upon exercise of options 9,754 9,521
Common stock issued under dividend reinvestment plan 1,612 32,715
Common stock acquired from restricted stock plan (4,996) -
Restricted stock awards granted, net of cancellations (123) 227
Common stock repurchased under repurchase plan (143,260) -
----------- -----------
Balance, end of period 698,958 699,107
----------- -----------
RETAINED EARNINGS
Balance, beginning of period 1,572,782 1,461,448
Net income 110,690 162,455
Preferred stock dividends (16,871) (18,761)
Common stock dividends (98,608) (93,244)
---------- ----------
Balance, end of period 1,567,993 1,511,898
---------- ----------
UNEARNED COMPENSATION
Balance, beginning of period (4,282) (7,913)
Amortization of restricted stock 2,953 2,849
Restricted stock awards granted, net of cancellations 21 (386)
---------- ----------
Balance, end of period (1,308) (5,450)
---------- ----------
INVESTMENT SECURITIES VALUATION ALLOWANCE
Balance, beginning of period 108,433 (55,084)
Change in unrealized net gain (loss),
net of taxes (59,726) 72,820
---------- ----------
Balance, end of period 48,707 17,736
---------- ----------
Total stockholders' equity $2,616,781 $2,654,299
========== ==========
</TABLE>
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(Dollars in thousands) September 30 September 30
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ (39,875) $ 68,535 $ 110,690 $ 162,455
Noncash adjustments to net earnings:
Provision for loan losses 41,671 46,600 123,071 137,400
Provision for real estate losses - - - 1,500
Depreciation and amortization 20,542 18,421 59,093 56,913
Amortization of intangibles 9,430 10,088 28,289 30,196
Income taxes (87,911) 36,143 (125,074) 71,759
Loss (gain) on sales of loans receivable
available for sale 365 2,244 4,741 1,509
Gain on sales of real estate (3,905) (4,713) (11,241) (19,000)
Gain on sales of consumer loans (166) (249) (811) (249)
Gain on sale of other investments, net (431) - (866) -
Capitalized interest (4,664) (19,140) (36,263) (42,254)
Net change in accrued interest 23,390 (18,260) 67,214 (63,576)
Other 274,231 (63,756) 588,187 133,761
----------- ----------- ----------- ------------
232,677 75,913 807,030 470,414
----------- ----------- ----------- ------------
Sales and repayments of loans
receivable available for sale 213,685 481,268 1,031,620 664,870
Originations and purchases of loans
receivable available for sale (216,795) (514,946) (948,650) (779,060)
----------- ----------- ----------- ------------
(3,110) (33,678) 82,970 (114,190)
----------- ----------- ----------- ------------
Net cash provided by operating
activities 229,567 42,235 890,000 356,224
----------- ----------- ----------- ------------
FINANCING ACTIVITIES
Customer accounts
Net (decrease) in transaction accounts (206,616) (137,860) (263,946) (756,691)
Net (decrease) increase in term accounts 179,497 47,352 (118,282) 1,487,920
----------- ----------- ----------- ------------
(27,119) 185,212 (382,228) 731,229
Borrowings
Repayments of long-term debt (100,241) (21,210) (105,686) (204,951)
Proceeds from new long-term debt 199,931 99,906 299,773 99,906
Net change in FHLB borrowings 267,740 - 1,581,959 (72,000)
Net change in securities sold under
agreements to repurchase (781,048) (176,275) (2,281,650) 953,968
Net change in short-term debt 405,941 25,633 34,556 694,416
----------- ----------- ----------- ------------
(7,677) (71,946) (471,048) 1,471,339
Other financing activity
Proceeds from issuance of
common stock 5,422 14,800 11,953 44,780
Repurchases of common stock (149,760) - (154,979) -
Conversion and redemption of preferred stock (129,375) - (129,375) -
Issuance of common stock on conversion of
preferred stock 128,378 - 128,378 -
Cash dividends paid (37,129) (37,523) (115,479) (112,005)
----------- ----------- ----------- ------------
(182,464) (22,723) (259,502) (67,225)
----------- ----------- ----------- ------------
Net cash (used in) provided by financing
activities (217,260) 90,543 (1,112,778) 2,135,343
----------- ----------- ----------- ------------
</TABLE>
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- -------------------------
(Dollars in thousands) 1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTING ACTIVITIES
Investment securities
Proceeds from maturities $ 609,142 $ 359,704 $ 1,432,434 $ 1,047,120
Purchases of securities (534,749) (417,359) (1,666,585) (1,162,469)
----------- ----------- ----------- -----------
74,393 (57,655) (234,151) (115,349)
Lending
Loans originated for investment (1,956,270) (1,606,409) (4,904,078) (6,450,885)
Purchases of mortgage-backed securities - - (30,367) -
Payments 1,502,420 1,521,902 4,808,941 3,913,622
Mortgage sales - 3,170 3,722 3,170
Repurchases (6,305) (10,683) (23,147) (34,225)
Other (2,454) (29,232) (6,175) (18,194)
----------- ----------- ----------- -----------
(462,609) (121,252) (151,104) (2,586,512)
Other investing activity
Purchases and sales of premises
and equipment, net (8,041) (28,433) (28,632) (71,008)
Sales of real estate 96,575 116,539 267,543 306,255
Net change in investment in
FHLB stock (5,715) 3,531 (30,119) (35,061)
Other 221 (35,167) 144 (2,236)
----------- ----------- ----------- -----------
83,040 56,470 208,936 197,950
----------- ----------- ----------- -----------
Net cash (used in) provided by
investing activities (305,176) (122,437) (176,319) (2,503,911)
----------- ----------- ----------- -----------
Net (decrease) increase in cash and cash
equivalents (292,869) 10,341 (399,097) (12,344)
Cash and cash equivalents at beginning
of period 988,189 1,125,880 1,094,417 1,148,565
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 695,320 $ 1,136,221 $ 695,320 $ 1,136,221
=========== =========== =========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid for
Interest on deposits $ 277,942 $ 330,459 $ 856,290 $ 904,180
Interest on borrowings 176,403 193,987 516,904 562,264
Income taxes 59,223 13,564 155,775 36,838
Noncash investing activities
Loans transferred to foreclosed
real estate $ 99,573 $ 103,534 $ 320,997 $ 317,422
Loans originated to finance the sale
of real estate 16,201 11,902 51,282 77,263
Loans originated to refinance existing loans 62,158 71,304 254,114 180,316
Loans exchanged for mortgage-backed
securities - - - 1,997,585
</TABLE>
Unaudited<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 30, 1996
Great Western Financial Corporation reported a net loss of $39.9
million, or $.31 per share, in the 1996 third quarter compared with net
earnings of $79.3 million, or $.52 per share, in the 1996 second quarter and
$68.5 million, or $.45 per share, in the 1995 third quarter. For the nine
months ended September 30, 1996, net earnings were $111 million, or $.68 per
share, compared with $162 million, or $1.05 per share, for the same period
a year ago. The 1996 third quarter loss includes a $188 million pre-tax
charge to recapitalize the Savings Association Insurance Fund ("SAIF").
The provision for loan losses during the 1996 third quarter was $41.7
million compared with $39.3 million in the second quarter of 1996 and $46.6
million in the third quarter of 1995. The provision for loan losses during
the first nine months of 1996 and 1995 was $123 million and $137 million,
respectively.<PAGE>
<TABLE>
<CAPTION>
HIGHLIGHTS (Dollars in thousands, except per share)
For the three months ended
September 30 1996 1995
- -------------------------- ---- ----
<S> <C> <C>
Net interest income $ 338,772 $ 333,599
Net earnings (loss) (39,875) 68,535
Fully diluted earnings (loss) ($.31) $.45
per common share
New loan volume 2,251,424 2,204,741
Increase (decrease) in deposits (27,119) 185,212
Mortgage sales 204,117 483,790
Return on average assets (annualized) (.36%) .61%
Return on average equity (annualized) (5.89%) 10.46%
Interest spread
Yield on interest earning assets 7.72% 7.94%
Cost of interest bearing liabilities 4.62 4.93
---- ----
Interest spread 3.10% 3.01%
==== ====
For the nine months ended
September 30
- -------------------------
Net interest income $ 1,043,006 $ 951,288
Net earnings 110,690 162,455
Fully diluted earnings per common share $.68 $1.05
New loan volume 6,158,124 7,487,524
Increase (decrease) in deposits (382,228) 731,229
Mortgage sales 1,006,202 605,893
Return on average assets (annualized) .34% .49%
Return on average equity (annualized) 5.33 8.44
Interest spread
Yield on interest earning assets 7.82% 7.73%
Cost of interest bearing liabilities 4.63 4.81
---- ----
Interest spread 3.19% 2.92%
==== ====
At September 30
- ---------------
Total assets $43,548,593 $44,693,014
Stockholders' equity 2,616,781 2,654,299
Stockholders' equity per common share $17.84 $17.27
Tangible stockholders' equity per common share $15.69 $14.83
/TABLE
<PAGE>
<PAGE>
LINE OF BUSINESS RESULTS
The following summarizes the contribution to pretax income (loss)
from the Company's principal business units:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------- ---------------------
September 30 September 30
------------------- ----------------------
(Dollars in thousands) 1996 1995 1996 1995
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Banking Operations $(89,070) $85,221 $104,978 $189,406
Consumer Finance Group 20,795 28,114 76,112 79,149
-------- ------- -------- --------
Pretax earnings (loss) (68,275) 113,335 181,090 268,555
Income tax expense (benefit) (28,400) 44,800 70,400 106,100
-------- ------- -------- --------
Net earnings (loss) $(39,875) $68,535 $110,690 $162,455
======== ======= ======== ========
</TABLE>
BALANCE SHEET ANALYSIS
EARNING ASSETS
Earning assets comprise securities, mortgage-backed securities, loans
and investment in FHLB stock. The composition of earning assets at
September 30, 1996 and September 30, 1995 follows:
<TABLE>
<CAPTION>
September 30
----------------------------------
1996 1995
-------------- --------------
(Dollars in millions) Amount % Amount %
------- --- ------- ---
<S> <C> <C> <C> <C>
Securities $ 1,504 3 $ 1,280 3
Mortgage-backed securities 8,593 21 10,553 25
Loans
Real estate
Single-family residential 25,665 62 24,518 58
Apartments 1,527 4 1,646 4
Commercial 1,264 3 1,395 3
------- --- ------- ---
Total real estate loans 28,456 69 27,559 65
Consumer Finance 2,115 5 2,019 5
Other 577 1 518 1
------- --- ------- ---
Total loans 31,148 75 30,096 71
Investment in FHLB stock 371 1 341 1
------- --- ------- ---
Total earning assets $41,616 100 $42,270 100
======= === ======= ===
/TABLE
<PAGE>
<PAGE>
Included in securities are certificates of deposit, repurchase
agreements and federal funds. Securities exclude $62 million of securities
held by the Company's life insurance subsidiary at September 30, 1996 and
1995.
Earning assets decreased $173 million in the first nine months of 1996
compared with an increase of $2.7 billion in the same period of 1995. The
decrease in 1996 represented a decline in mortgage-backed securities of $1.2
billion which reflects repayments and maturities, offset by an increase in
single-family residential real estate loans of $948 million.
Earning assets increased $145 million in the third quarter of 1996.
The increase represented an increase in single-family residential real estate
loans of $661 million offset by a decline in mortgage-backed securities of
$337 million and a decrease in securities of $198 million. The increase in
single-family residential real estate loans is due to customer demand for
Adjustable Rate Mortgage ("ARM") lending rather than fixed-rate loans, which
are sold shortly after origination.
SECURITIES
Securities available for sale are carried at fair value. Marketable
securities available for sale at September 30, 1996 had both an amortized
cost and a fair value of $1.3 billion. There were no significant gains
realized during the third quarter and nine months ended September 30, 1996
and 1995. Unrealized net gains (losses) on marketable securities were $(1.7)
million at September 30, 1996, $8.3 million at December 31, 1995 and $3.7
million at September 30, 1995.
The unrealized net gains (losses) on securities available for sale,
net of income taxes (securities valuation allowance), included as a component
of stockholders' equity, were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- --------------------
September 30 June 30 March 31 September 30
------------ ------- -------- --------------------
1996 1996 1996 1996 1995
------- ------- -------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning
of period $45,293 $75,789 $108,433 $108,433 $(55,084)
Change in unrealized net
gains (losses), net
of taxes 3,414 (30,496) (32,644) (59,726) 72,820
------- ------- -------- -------- --------
Balance at end of
period $48,707 $45,293 $ 75,789 $ 48,707 $ 17,736
======= ======= ======== ======== ========
</TABLE>
The majority of the unrealized net gains at September 30, 1996 is derived
from the excess servicing component of mortgage servicing rights. This
unrealized gain is recorded based on the assumption that the mortgage-backed
securities classified as available for sale will be sold with gains
recognized on servicing rights retained.<PAGE>
<PAGE>
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities consist largely of single-family
residential loans swapped for mortgage-backed securities in 1994 and 1995 to
provide collateral for borrowings. Underlying these securities are loans
that were originated by Great Western Bank, a Federal Savings Bank ("GWB")
and the Company is at risk for losses on these loans. These securities
totaled $6.3 billion at September 30, 1996 compared with $7.1 billion at
September 30, 1995. As a result of the retention of credit risk on these
securities, the Company repurchased delinquent loans totaling $28 million
and $94 million for the quarter and nine months ended September 30, 1996,
respectively. Repurchases for the third quarter and nine months of 1995
totaled $20 million and $49 million, respectively.
At September 30, 1996, approximately 79% of mortgage-backed
securities in the portfolio were indexed 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"). The Company has
also swapped products which are indexed to the Federal Cost of Funds Index
("FCOFI"). The FCOFI is a combination of the average interest rate on the
combined marketable Treasury bills and the average interest rate on the
combined marketable Treasury notes. At September 30, 1996, adjustable rate
mortgage-backed securities comprised 96% of the mortgage-backed securities
portfolio compared with 94% in the comparable period in 1995.
A summary of the Company's mortgage-backed securities portfolio
follows:
<TABLE>
<CAPTION>
September 30
------------------------------
1996 1995
------------- ------------
(Dollars in millions) Amount % Amount %
------- --- ------- ---
<S> <C> <C> <C> <C>
Adjustable Rate
COFI $ 6,801 79 $ 8,248 78
FCOFI 1,391 16 1,626 15
Other 91 1 90 1
------- --- ------- --
Total adjustable rate
mortgage-backed securities 8,283 96 9,964 94
Fixed-rate
Long-term 243 3 530 5
Short-term 67 1 59 1
------- --- ------- ---
Total fixed-rate mortgage-backed
securities 310 4 589 6
------- --- ------- ---
Total mortgage-backed securities $ 8,593 100 $10,553 100
======= === ======= ===
/TABLE
<PAGE>
<PAGE>
Mortgage-backed securities available for sale are carried at fair
value. At September 30, 1996, mortgage-backed securities available for sale
of $6.9 billion included $104 million of fixed-rate securities and $6.8
billion of adjustable rate securities.
There were no sales of mortgage-backed securities during the third
quarter of 1996. During the nine months ended September 30, 1996, realized
losses on the sale of mortgage-backed securities were $2.0 million. In the
second quarter, the Company realized a $1.4 million loss on the sale of a
commercial mortgage note. Unrealized net gains on mortgage-backed
securities were $79.1 million at September 30, 1996, compared with $173
million at December 31, 1995 and $25.9 million at September 30, 1995.
The contractual maturities of all mortgage-backed securities as of
September 30, 1996 follow:
<TABLE>
<CAPTION>
Mortgage-Backed
Securities
----------------------------
Adjustable Fixed
(Dollars in millions) Rate Rate Total
---------- ----- ------
<S> <C> <C> <C>
One year or less $ 124 $ 98 $ 222
Over one to two years 132 27 159
Over two to three years 140 22 162
Over three to five years 301 37 338
Over five to ten years 906 86 992
Over ten to fifteen years 1,212 30 1,242
Over fifteen years 5,468 10 5,478
------ ---- ------
$8,283 $310 $8,593
====== ==== ======
</TABLE>
<PAGE>
<PAGE>
LOANS
The following comprised loans receivable:
<TABLE>
<CAPTION>
September 30
--------------------------------
(Dollars in thousands) 1996 1995
-------- --------
<S> <C> <C>
Real estate
Single-family residential $ 25,665 $ 24,518
Apartments 1,527 1,646
Commercial 1,264 1,395
-------- --------
Total real estate loans 28,456 27,559
Consumer Finance 2,115 2,019
Other 505 420
Leases 72 98
-------- --------
Total loans receivable 31,148 30,096
Allowance for loan and
lease losses (322) (379)
Unearned income and other (66) (84)
-------- --------
Total (388) (463)
-------- --------
Net loans receivable $ 30,760 $ 29,633
======== ========
</TABLE>
The ARM for single-family residential properties ("SFRs") is the
primary lending product held for investment. At September 30, 1996, ARMs
comprised 97% of the real estate loan portfolio compared with 96% in the
comparable period in 1995. At September 30, 1996, approximately 73% of real
estate loans in the portfolio were indexed to COFI. The Company also
originates ARM products which are indexed to one-year Treasury bills, the
prime rate and FCOFI. In March 1995, the Company introduced a new product,
the London Interbank Offered Rate ("LIBOR") Annual Monthly Average ("LAMA")
ARM. The LAMA ARM is indexed to a 12 month average of the Federal National
Mortgage Association ("FNMA") One Month LIBOR. The FCOFI and LAMA ARMs are
similar to the COFI ARM product with respect to interest-rate caps and
payment changes. <PAGE>
<PAGE>
Commercial real estate loans continued to decrease as a result of the
Company's decision in 1987 to discontinue commercial real estate lending
except to finance the sale of foreclosed properties, or to refinance
existing loans in the normal course of business.
A summary of the Company's real estate loan portfolio by product type
follows:
<TABLE>
<CAPTION>
September 30
-------------------------------
1996 1995
------------- -------------
(Dollars in millions) Amount % Amount %
------- --- ------- ---
<S> <C> <C> <C> <C>
ARM
COFI $20,905 73 $21,233 77
FCOFI 2,145 8 2,531 9
LAMA 2,872 10 1,127 4
Other 1,726 6 1,559 6
------- --- ------- --
Total ARM loans 27,648 97 26,450 96
Fixed-rate
Long-term 386 1 606 2
Short-term 422 2 503 2
------- --- ------- ---
Total fixed-rate loans 808 3 1,109 4
------- --- ------- ---
Total real estate loans $28,456 100 $27,559 100
======= === ======= ===
</TABLE>
A significant portion of the ARM portfolio is subject to lifetime
interest-rate floors. At September 30, 1996, $455 million of ARMs with an
average yield of 7.75% had reached their floor rate. Without the floor, the
average yield on these loans would have been 7.37%. The benefit to interest
income from real estate loans which have reached their floor interest rate
was approximately $1.3 million for the nine months ended September 30, 1996
compared with $2.8 million in the same period of last year.
The Company repurchases delinquent loans which were sold with
recourse. Repurchased loans totaled $23.1 million in the nine months ended
September 30, 1996 compared with $34.2 million in the nine months ended
September 30, 1995. The balance of loans and mortgage-backed securities
sold with recourse totaled $1.3 billion at both September 30, 1996 and
September 30, 1995.
<PAGE>
<PAGE>
The composition of the loans available for sale portfolio at
September 30, 1996 and September 30, 1995 follows:
<TABLE>
<CAPTION>
September 30
-----------------------------
(Dollars in millions) 1996 1995
---- ----
<S> <C> <C>
Loans available for sale
Real estate loans available for
sale, net $ 43,883 $108,693
Other consumer 375,327 306,115
-------- --------
Total loans available for sale $419,210 $414,808
======== ========
</TABLE>
Other consumer loans available for sale represent the portfolio of
student loans.
Fixed-rate lending tends to increase during periods of relatively low
interest rates. Such loans are originated primarily for sale. The Company
sells loans forward into the secondary market and purchases short-term hedge
contracts for the commitment period to protect against rate fluctuations on
its commitments to fund fixed-rate loans originated for sale. Hedge
contracts are recorded at cost. At September 30, 1996, there were no open
hedge contracts on the pipeline due to the relatively low level of fixed-
rate commitments.
Real estate loans available for sale are valued at the lower of cost
or fair value. As of September 30, 1996 and 1995, real estate loans
available for sale, primarily fixed-rate loans, were $43.9 million and $109
million, respectively. During the quarter and nine months ended September
30, 1996, gains from this portfolio totaled $2.5 million and $7.4 million,
respectively, compared with $1.3 million and $4.4 million in the third
quarter and nine months of 1995. Included in gains on real estate loan
sales were gains on the sale of servicing rights of $431,000 and $1.4
million for the third quarter and nine months ended September 30, 1996,
respectively. There were no sales of servicing rights for the same period
of 1995. Unrealized holding gains on real estate loans available for sale
totaled $91,000 at September 30, 1996 and $720,000 at September 30, 1995.
<PAGE>
<PAGE>
The contractual maturities of loans as of September 30, 1996
follow:
<TABLE>
<CAPTION>
Real Estate Loans
-----------------
Fixed Consumer Total
ARM Rate Finance Other Loans
------- ----- -------- ----- -------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
One year or less $ 514 $ 32 $ 699 $ 138 $ 1,383
Over one to two years 759 43 568 8 1,378
Over two to three years 706 38 405 9 1,158
Over three to five years 1,156 146 160 8 1,470
Over five to ten years 3,571 282 193 337 4,383
Over ten to fifteen years 4,514 92 88 77 4,771
Over fifteen years 16,428 175 2 - 16,605
------- ----- ------ ----- -------
Total $27,648 $ 808 $2,115 $ 577 $31,148
======= ===== ====== ===== =======
</TABLE>
The composition of new loan volume was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------- -----------------
September 30 June 30 September 30 September 30
------------ ------- ------------ -----------------
(Dollars in millions) 1996 1996 1995 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Real estate loans $1,685 $1,589 $1,635 $4,514 $5,835
Consumer Finance 480 510 503 1,394 1,445
Other 86 70 67 250 208
------ ------ ------ ------ ------
Total new loan volume $2,251 $2,169 $2,205 $6,158 $7,488
====== ====== ====== ====== ======
</TABLE>
For the third quarter of 1996, third party originations were $707
million or 42.0% of new real estate loans, compared with $372 million or
22.7% of new real estate loans in the same period of 1995. In the nine
months ended September 30, 1996, third party originations were $1.5 billion,
or 33.2% of new real estate loans, compared with $1.9 billion, or 32.4% of
new real estate loans in the same period of 1995.
<PAGE>
<PAGE>
The composition of real estate loan originations by type was as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------------- -----------------
September 30 June 30 September 30 September 30
------------ -------- ------------ -----------------
1996 1996 1995 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
ARM
COFI 51% 42% 28% 39% 64%
LAMA 24 27 37 29 19
FCOFI - - - - 1
T-Bill 10 7 1 7 1
Other 3 3 2 3 2
--- --- --- --- ---
Total ARM 88 79 68 78 87
Fixed-rate 12 21 32 22 13
--- --- --- --- ---
Total 100% 100% 100% 100% 100%
=== === === === ===
Refinances, included above 36% 43% 42% 44% 35%
=== === === === ===
</TABLE>
During the third quarter of 1996, ARMs comprised 88% of total real
estate loan originations compared with 79% for the second quarter of 1996
and 68% in the third quarter of 1995. The principal mortgage instruments
for the nine months ended September 30, 1996 were both the COFI and LAMA
ARMs. A popular ARM product in 1996 was the LAMA ARM loan with a fixed
interest rate during the first three or five years of the loan term. The
ARM differential over the appropriate indices on new ARMs was 2.64% in the
third quarter of 1996 compared with 2.58% a year ago. The ARM differential
on the total ARM real estate loan portfolio was 2.52% at September 30, 1996
and 2.48% at September 30, 1995.
The cost of funds for GWB, relative to COFI, FCOFI and LAMA is shown
as follows:
<TABLE>
<CAPTION>
GWB GWB Cost of
Cost of Funds Less Than
----------------------
Funds COFI FCOFI LAMA COFI FCOFI LAMA
------- ---- ----- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
September 30, 1996 4.468% 4.834% 5.991% 5.512% .366% 1.523% 1.044%
June 30, 1996 4.396 4.809 5.935 5.636 .413 1.539 1.240
March 31, 1996 4.463 4.874 5.957 5.766 .411 1.494 1.303
December 31, 1995 4.658 5.059 6.152 5.940 .401 1.494 1.282
September 30, 1995 4.776 5.111 6.254 6.009 .335 1.478 1.233
/TABLE
<PAGE>
<PAGE>
The geographic distribution of the real estate loan portfolio
and nonaccrual and restructured loans at September 30, 1996 follows:
<TABLE>
<CAPTION>
Connecticut
Massachusetts
California Florida New York
-------------------- -------------------- ---------------------
Restructured Restructured Restructured
and and and
(Dollars in millions) Portfolio Nonaccrual Portfolio Nonaccrual Portfolio Nonaccrual
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Real estate loans
Single family residential $16,021 $ 365 $1,844 $ 23 $1,794 $ 35
Apartments 1,275 36 56 - - -
Commercial
Offices 334 16 14 - - -
Retail 203 16 17 3 - -
Hotel/motel 127 15 5 - - -
Industrial 236 10 12 - - -
Other 122 3 10 - - -
------------------ ----------------- ------------------
Total $18,318 $ 461 $1,958 $ 26 $1,794 $ 35
------------------ ----------------- ------------------
Percent of total loans 64.4% 6.9% 6.3%
Nonaccrual and restructured as
a % of total by state 2.5% 1.3% 2.0%
</TABLE>
<TABLE>
<CAPTION>
Oregon
Washington Other Total
-------------------- -------------------- ---------------------
Restructured Restructured Restructured
and and and
(Dollars in millions) Portfolio Nonaccrual Portfolio Nonaccrual Portfolio Nonaccrual
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Real estate loans
Single family residential $1,540 $ 9 $4,466 $43 $25,665 $475
Apartments 7 1 189 8 1,527 45
Commercial
Offices 17 - 15 - 380 16
Retail 9 - 10 - 239 19
Hotel/motel - - 77 - 209 15
Industrial 1 - 24 - 273 10
Other 4 - 27 1 163 4
----------------- ----------------- -------------------
Total $1,578 $10 $4,808 $52 $28,456 $584
----------------- ----------------- -------------------
Percent of total loans 5.5% 16.9% 100%
Nonaccrual and restructured
as a % of total by state 0.6% 1.1% 2.1%
/TABLE
<PAGE>
<PAGE>
A comparison of the California real estate loan portfolio and
nonaccrual and restructured real estate loans by region as of September 30,
1996 follows:
<TABLE>
<CAPTION>
Northern California Central California
---------------------------- -------------------------
Restructured Restructured
and and
(Dollars in millions) Portfolio Nonaccrual Portfolio Nonaccrual
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Real estate loans
Single-family residential $ 5,031 $ 79 $1,344 $ 20
Apartments 155 2 228 7
Commercial
Offices 73 11 37 -
Retail 48 1 28 -
Hotel/Motel 44 - 25 3
Industrial 31 1 13 1
Other 39 - 19 -
------- ---- ------ ----
Total by region $ 5,421 $ 94 $1,694 $ 31
------- ---- ------ ----
Percent of total loans 29.6% 9.2%
Nonaccrual and restructured
as a % of total by region 1.7% 1.8%
</TABLE>
<TABLE>
<CAPTION>
Southern California California
------------------------ -------------------------
Restructured Restructured
and and
(Dollars in millions) Portfolio Nonaccrual Portfolio Nonaccrual
--------- ------------ --------- -------------
<S> <C> <C> <C> <C>
Real estate loans
Single-family residential $9,646 $ 266 $16,021 $ 365
Apartments 892 27 1,275 36
Commercial
Offices 224 5 334 16
Retail 127 15 203 16
Hotel/Motel 58 12 127 15
Industrial 192 8 236 10
Other 64 3 122 3
------- ------ ------- ------
Total by region $11,203 $ 336 $18,318 $ 461
------- ------ ------- ------
Percent of total loans 61.2% 100.0%
Nonaccrual and restructured
as a % of total by region 3.0% 2.5%
</TABLE>
<PAGE>
The California real estate market requires continued review. There
appear to be regional differences in economic performance within California
and among property types which are attributable to differing recovery rates
for the wide range of economic activities within California.
On a regional basis, the economic factors affecting the single-family
market appear to be somewhat more favorable in Northern California than in
Southern California. In particular, the median metropolitan area sales
price of existing single-family homes in the San Jose area decreased from
the second quarter of 1995 to the second quarter of 1996 by 1%. During the
same period, the median sales price for the Los Angeles area declined 3%
while the median sales price for the San Diego area increased by
approximately 1%.
In the office space market, regional differences exist between
Northern and Southern California. In the San Francisco area, the vacancy
rate declined to 7% at June 30, 1996 from 10% a year earlier. In the Los
Angeles area, the vacancy rate of the office space market was 19% at June
30, 1996 compared with 20% at June 30, 1995. In San Diego County, the
vacancy rate was 15% at June 30, 1996 and 18% at June 30, 1995.
In the industrial space market, Northern and Southern California
vacancy rates have been more comparable. In the San Francisco area, the
vacancy rate remained at 9% at June 30, 1996, the same as a year earlier.
In the Los Angeles area, the vacancy rate of the industrial space market was
8% at June 30, 1996 and 1995. San Diego County's industrial space market
had a vacancy rate of 7% at June 30, 1996 compared with 4% at June 30, 1995.
<PAGE>
<PAGE>
NONPERFORMING ASSETS
The following table presents comparative data for nonperforming
assets and the ratios to total assets. Nonperforming assets include
nonaccrual and restructured loans and real estate. Management's
classification of a loan as nonaccrual or restructured does not necessarily
indicate that the principal of the loan is uncollectible in whole or in
part. Loans are placed on nonaccrual status when they become more than 90
days past due. Nonperforming real estate includes foreclosed and investment
properties which do not generate sufficient income to meet return on
investment criteria.
<TABLE>
<CAPTION>
September 30 June 30 March 31 December 31 September 30
(Dollars in millions) 1996 1996 1996 1995 1995
------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Nonaccrual Loans
Real estate
Single-family residential $454 $424 $432 $432 $424
Apartments 13 11 13 13 23
Commercial 24 10 18 14 17
---- ---- ---- ---- ----
Total nonaccrual real
estate loans 491 445 463 459 464
Consumer Finance 29 27 26 25 24
Other 6 1 1 2 1
---- ---- ---- ---- ----
Total nonaccrual loans 526 473 490 486 489
Restructured loans
Single-family residential 21 19 17 13 13
Apartments 32 32 33 28 28
Commercial 40 62 62 67 68
---- ---- ---- ---- ----
Total restructured loans 93 113 112 108 109
---- ---- ---- ---- ----
Nonaccrual and restructured
loans 619 586 602 594 598
As a percentage of total
loans 2.01% 1.95% 2.02% 1.99% 2.02%
Real estate 159 184 189 174 164
---- ---- ---- ---- ----
Total nonperforming assets $778 $770 $791 $768 $762
==== ==== ==== ==== ====
As a percentage of total
assets 1.79% 1.76% 1.81% 1.72% 1.71%
</TABLE>
<PAGE>
<PAGE>
Nonaccrual and restructured loans increased by $33 million during the
third quarter of 1996. Total nonaccrual and restructured single-family
residential properties increased $32 million in the third quarter of 1996.
Single-family residential loans in California increased $13 million while
out-of-state loans increased $19 million. Nonaccrual and restructured
commercial properties decreased by $8 million in the third quarter of 1996,
primarily due to a single large payoff. Nonaccrual apartment loans
decreased $2 million during the third quarter of 1996. Nonperforming real
estate declined $25 million in the third quarter of 1996.
Certain loans (where the Company works with borrowers encountering
economic difficulty) meet the criteria of, and are classified as, troubled
debt restructurings ("TDRs") because of modification to loan terms. TDRs
totaled $93 million at September 30, 1996 compared with $113 million at June
30, 1996 and $130 million at September 30, 1995. The decrease in the third
quarter of 1996 was primarily comprised of $13 million of loans which had
been reclassed to nonaccrual status and an additional $11 million which had
been paid-off in full. These reductions were partially offset by an
additional $4 million of restructured loans.
<PAGE>
<PAGE>
IMPAIRED LOANS
The recorded investment in loans for which impairment has been
recognized in accordance with Statement of Financial Accounting Standards
No. 114, "Accounting by Creditors for Impairment of a Loan" and the reserve
for estimated losses related to such loans follows:
<TABLE>
<CAPTION>
Impaired Loans
-------------------------------------------------------------------
Having Reserves Having
related for Net with no related Net of
reserves estimated reserves reserves reserves
for losses losses for losses for losses for losses
---------- --------- ---------- ---------- ----------
(Dollars in thousands) September 30, 1996
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate loans
Single-family residential $ 91,264 $20,324 $ 70,940 $37,919 $108,859
Apartments 73,809 14,913 58,896 15,415 74,311
Commercial
Offices 22,119 8,681 13,438 11,241 24,679
Retail 31,215 6,321 24,894 2,517 27,411
Hotel/motel 24,212 8,066 16,146 - 16,146
Industrial 15,358 4,200 11,158 1,177 12,335
Other 1,627 167 1,460 2,036 3,496
-------- ------- -------- ------- --------
Total commercial 94,351 27,435 67,096 16,971 84,067
-------- ------- -------- ------- --------
Total $259,604 $62,672 $196,932 $70,305 $267,237
======== ======= ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
September 30, 1995
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate loans
Single-family residential $ 30,315 $ 6,790 $ 23,525 $ 15,682 $ 39,207
Apartments 84,770 18,624 66,146 21,611 87,757
Commercial
Offices 23,769 8,783 14,986 12,154 27,140
Retail 32,146 7,116 25,030 5,887 30,917
Hotel/motel 38,812 9,295 29,517 - 29,517
Industrial 24,400 5,520 18,880 3,022 21,902
Other 1,839 526 1,313 1,981 3,294
-------- ------- -------- -------- --------
Total commercial 120,966 31,240 89,726 23,044 112,770
-------- ------- -------- -------- --------
Total $236,051 $56,654 $179,397 $ 60,337 $239,734
======== ======= ======== ======== ========
</TABLE>
<PAGE>
The impaired loan portfolio increased at September 30, 1996 compared
with September 30, 1995. The increase was primarily the result of a change
in procedure allowing for an accelerated identification of impaired single-
family loans. 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.
The Company's policy for recognizing income on impaired loans is to
accrue earnings until a loan becomes nonaccrual, at which time the accrued
earnings are reversed.
A change in the fair value of an impaired loan is reported as an
increase or reduction to the provision for loan losses.
<PAGE>
<PAGE>
DELINQUENT ASSETS
The Company continuously reviews the trends of loans and mortgage-
backed securities with full credit risk. The following summarizes the
quarterly trend for the last five quarters of real estate loans, Consumer
Finance and other loans and mortgage-backed securities which are over thirty
to ninety days delinquent:
<TABLE>
<CAPTION>
September 30 June 30 March 31 December 31 September 30
(Dollars in millions) 1996 1996 1996 1995 1995
------------ ------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Real Estate Loans
- -----------------
Over 30 to 60 days delinquent
Single-family residential $ 311 $ 216 $ 206 $ 194 $ 190
Other 17 10 6 9 7
Over 60 to 90 days delinquent
Single-family residential 111 90 88 87 89
Other 7 14 3 6 4
------ ------ ------ ------ ------
Total $ 446 $ 330 $ 303 $ 296 $ 290
====== ====== ====== ====== ======
Percentage of related portfolio 1.57% 1.19% 1.10% 1.07% 1.05%
Consumer Finance Loans
- ----------------------
Over 30 to 60 days delinquent $ 45 $ 41 $ 39 $ 43 $ 43
Over 60 to 90 days delinquent 19 17 16 17 15
------ ------ ------ ------ ------
Total $ 64 $ 58 $ 55 $ 60 $ 58
====== ====== ====== ====== ======
Percentage to related portfolio 3.03% 2.79% 2.66% 2.81% 2.87%
Other Loans
- ------------
Over 30 to 60 days delinquent $ 13 $ 7 $ 10 $ 5 $ 5
Over 60 to 90 days delinquent 4 3 7 3 5
------ ------ ------ ------ ------
Total $ 17 $ 10 $ 17 $ 8 $ 10
====== ====== ====== ====== ======
Percentage to related portfolio 2.95% 1.81% 3.07% 1.55% 1.93%
Total Loans
- ------------
Over 30 to 60 days delinquent $ 386 $ 274 $ 261 $ 251 $ 245
Over 60 to 90 days delinquent 141 124 114 113 113
------ ------ ------ ------ ------
Total $ 527 $ 398 $ 375 $ 364 $ 358
====== ====== ====== ====== ======
Percentage to related portfolio 1.69% 1.31% 1.24% 1.20% 1.19%
Mortgage-Backed Securities
- --------------------------
Over 30 to 60 days delinquent $ 48 $ 27 $ 27 $ 25 $ 18
Over 60 to 90 days delinquent 19 12 11 11 9
------ ------ ------ ------ ------
Total $ 67 $ 39 $ 38 $ 36 $ 27
====== ====== ====== ====== ======
Percentage to related portfolio 0.78% 0.44% 0.41% 0.37% 0.26%
/TABLE
<PAGE>
<PAGE>
The increase in over 30 to 60 day delinquencies at September 30, 1996
compared with September 30, 1995 is primarily due to a temporary disruption
in the collection process as a result of the re-engineering of loan
servicing and the related installation of a new loan servicing system in
July 1996. In addition, borrower performance continues to be weak on a
portion of loans originated during the late 1980's and early 1990's.
ALLOWANCE FOR LOAN AND LEASE LOSSES (ALLL)
The following table presents the Company's reserve for estimated
losses and the reserve as a percent of the respective loans receivable
portfolios, including loans underlying mortgage-backed securities with full
credit risk. Prior to September 30, 1996, percentages were computed using
the loan portfolio including loans underlying mortgage-backed securities
with full credit risk.
<TABLE>
<CAPTION>
September 30
-----------------------------------
1996 1995
--------------- --------------
(Dollars in millions) Amount % Amount %
------ --- ------ ---
<S> <C> <C> <C> <C>
Real estate
Single-family residential $148 .58 $172 .55
Other 110 3.93 148 4.87
Consumer Finance 59 2.77 53 2.61
Leases 1 1.75 3 3.28
Other 4 .80 3 .58
---- ---- ---- ----
Total ALLL $322 1.03 $379 1.02
==== ==== ==== ====
</TABLE>
<PAGE>
<PAGE>
An analysis of the changes in the ALLL including charge-offs and
recoveries by loan category is presented in the following table:
<TABLE>
<CAPTION>
At or For The At or For the
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- -----------------------
(Dollars in thousands) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Beginning balance $330,321 $391,652 $ 362,849 $ 438,051
Provision for loss
Real estate loans
SFR 49,919 54,300 103,519 128,500
Other (24,915) (20,000) (24,915) (18,000)
Consumer Finance 15,300 11,600 43,400 31,400
Other 1,367 700 1,067 (4,500)
-------- -------- --------- ---------
41,671 46,600 123,071 137,400
-------- -------- --------- ---------
Charge-offs
Real estate loans
SFR (32,881) (43,664) (112,894) (146,294)
Other (2,637) (4,525) (10,181) (19,542)
Consumer Finance (18,290) (15,587) (52,752) (44,220)
Other (968) (230) (2,153) (926)
-------- -------- --------- ---------
(54,776) (64,006) (177,980) (210,982)
-------- -------- --------- ---------
Recoveries
Real estate loans
SFR 251 326 818 1,204
Other 30 26 206 446
Consumer Finance 3,988 3,933 12,369 12,271
Other 145 31 297 172
-------- -------- --------- ---------
4,414 4,316 13,690 14,093
-------- -------- --------- ---------
Net charge-offs
Real estate loans
SFR (32,630) (43,338) (112,076) (145,090)
Other (2,607) (4,499) (9,975) (19,096)
Consumer Finance (14,302) (11,654) (40,383) (31,949)
Other (823) (199) (1,856) (754)
-------- -------- --------- ---------
(50,362) (59,690) (164,290) (196,889)
-------- -------- --------- ---------
Ending balance $321,630 $378,562 $ 321,630 $ 378,562
======== ======== ========= =========
Average balance
(Dollars in millions)
MBS with credit risk $ - $ 7,092 $ 4,581 $ 6,838
Real estate loans
SFR 25,304 24,359 24,969 23,803
Other 2,836 3,065 2,900 3,096
Consumer finance 2,089 2,012 2,090 1,995
Other 546 485 536 471<PAGE>
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
At or For The At or For the
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- -----------------------
(Dollars in thousands) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Ratio of net charge-offs
(annualized) to average loans
Real estate loans
SFR .52% .55% .51% .63%
Other .37 .59 .46 .82
Consumer Finance 2.74 2.32 2.58 2.14
Other .60 .16 .46 .21
----- ----- ----- -----
.65% .65% .62% .73%
===== ===== ===== =====
/TABLE
<PAGE>
<PAGE>
Mortgage-backed securities with full credit risk have been included
with SFRs for the calculation of net charge-offs to average portfolio until
the third quarter of 1996.
At September 30, 1996, the ALLL was $322 million, or 1.03% of total
loans, compared with $379 million, or 1.02% at September 30, 1995. The
provision for loan losses was $123 million for the nine month period ending
September 30, 1996, down from $137 million in the comparable period in 1995.
The reduction in the provision was primarily due to improvement in
commercial real estate. Net charge-offs for single family residential real
estate loans for the nine month period were $112 million or .51% compared
with $145 million or .63% for the comparable period in 1995. SFR real
estate loan charge-offs continue at a high level, although they are down
from 1995.
The Company has a process to determine the adequacy of the allowance
for loan losses that assesses the risks and losses inherent in its
portfolio. The process provides an allowance consisting of two components,
general and specific. The specific component reflects inherent losses
resulting from an analysis of individual loans.
Beginning in the third quarter of 1996, the Company stratified the
SFR portfolio based on such items as borrower performance, current credit
scores, and estimated current loan to value ratios ("LTV"). The purpose of
the stratification was to assist the Company in its quarterly assessment of
the allowance for possible loan losses. In addition, the Company modified
its practice for recording charge-offs associated with full credit risk
mortgage-backed securities. Charge-offs related to credit risk on the
Company's mortgage-backed securities held as investments are reflected as a
writedown of the mortgage-backed security. Charge-offs related to loans and
securities sold with recourse are reflected in the related liability
account. In addition, the Company evaluated the current economic
conditions, concentrations within the portfolio and other subjective factors
in assessing the adequacy of its allowance for loan losses. The reduction
in the allowance for SFR loans from $172 million at September 30, 1995, or
.55% of the SFR portfolio to $148 million at September 30, 1996, or .58%
reflects the Company's assessment of the SFR portfolio and the current
economic conditions impacting the SFR portfolio.
The allowance for commercial loans is developed through specific
credit allocations applying historical loss experience and loan category
based on asset quality for individual loans, including impaired loans
subject to FAS 114. The allowance for commercial real estate loans has
decreased from $148 million at September 30, 1995, or 4.87% to $110 million
at September 30, 1996, or 3.93%. The commercial real estate loan portfolio
has continued to decrease as a result of a decision in 1987 to discontinue
commercial real estate lending except to finance the sale of foreclosed
properties or to refinance existing loans in the normal course of business.
The quality of the commercial real estate loan portfolio continues to
improve as a result of the recovery in the commercial real estate markets
nationwide and particularly in California. There has been a substantial
amount of liquidity that has returned to the real estate markets. This
liquidity has contributed significantly to the Company's progress in
reducing this portfolio. The Company expects this portfolio to continue to
decline and improve in quality, therefore continuing to reduce its allowance
for commercial real estate loans.<PAGE>
<PAGE>
The provision for commercial real estate and apartment loans was
reduced by $24.9 million in the third quarter of 1996, primarily as a result
of the Company's review of required levels for the allowance on this
portfolio. The Company also reduced the provision for losses on this
portfolio in the third quarter of 1995 by $20 million.
The allowance for Consumer Finance loans is based upon a percentage
of loans outstanding in relation to the loss experience within the loan
categories generally stratified by delinquency. The allowance for Consumer
Finance loans increased from $53 million at September 30, 1995, or 2.61% of
the outstanding portfolio, to $59 million at September 30, 1996, or 2.77% of
the outstanding portfolio, as a result of some deterioration in credit
quality.
The allowance for leases was $1 million at September 30, 1996, down
from $3 million at September 30, 1995, or a decline of 67%. Provisions for
losses on the leasing portfolio, included in other loan loss provisions, for
the three and nine month periods ending September 30, 1996, decreased as a
result of the reversal of $1.8 million of excess reserves. Provisions for
losses on the leasing portfolio for the same period of 1995 decreased as a
result of the reversal of a $6 million reserve originally established for
expected losses which did not materialize.
The general component includes management's judgmental determination
of the amounts necessary for concentrations, economic uncertainties and
other subjective factors. Although management has allocated the allowance
to specific loan categories, the adequacy of the allowance must be
considered in its entirety.
The Company's determination of the level of the allowance and,
correspondingly, the provision for loan losses rests upon various judgments
and assumptions, including general economic conditions, loan portfolio
composition, prior loan loss experience and the Company's ongoing
examination process and that of its regulators. The Company has an Internal
Asset Review Committee ("IARC") that reports to the Board of Directors and
continuously reviews loan quality. The Company also has an internal staff
that regularly reviews the classification of commercial loans and also
reports to the IARC. Such reviews also assist management in establishing
the level of the allowance. The Bank is examined by its primary regulator,
the Office of Thrift Supervision ("OTS"). These examinations generally
occur annually and target various activities of the Bank, including specific
segments of the loan portfolio. In addition to the Bank being examined by
the OTS, Great Western Financial Corporation and the nonbank subsidiaries
are also subject to OTS examination.
The Company considers the allowance for loan and lease losses of $322
million adequate to cover losses inherent in the loan and lease portfolio at
September 30, 1996. However, no assurance can be given that the Company
will not, in any particular period, sustain loan losses that are sizable in
relation to the amount reserved, or that subsequent evaluation of the loan
portfolio, in light of the factors then prevailing, including economic
conditions and the Company's ongoing examination process and that of its
regulators, will not require significant increases in the allowances for
loan losses.
<PAGE>
<PAGE>
The Company's real estate loan portfolio included approximately $2.2
billion of uninsured single-family mortgage loans at September 30, 1996,
compared with $2.8 billion a year ago, which were originated with terms
where the LTV exceeded 80% (but not in excess of 90%). During the third
quarter of 1996, losses on the higher LTV mortgages totaled $1.9 million, or
.35% (annualized), compared with $6.9 million, or .84% (annualized) for the
same period a year ago. For the year 1995, losses totaled $33.4 million,
or 1.00% of such loans, compared with $24.3 million, or .59% for 1994. The
Company began to purchase mortgage insurance on all new single-family
residential mortgages originated with LTVs in excess of 80% in 1990. This
portfolio of uninsured loans is becoming more seasoned and continues to
decline.
REAL ESTATE
Real estate available for sale is recorded at the lower of cost or
fair value and is included in a periodic review of assets to determine
whether, in management's judgment, there has been any deterioration in
value. Real estate held for development, also subject to the same review
process, is carried at the lower of cost or fair value. At September 30,
1996, foreclosed real estate properties totaling $2.9 million are operating
profitably after consideration for interest and depreciation, and
accordingly are classified as performing assets.
In the third quarter of 1996, the Company determined that its real
estate portfolio was appropriately valued at market and therefore the
associated general reserve of $13.9 million was reversed.
The geographic distribution of real estate and nonperforming real
estate for September 30, 1996 follows:
<TABLE>
<CAPTION>
Connecticut
Massachusetts
California Florida New York
-------------------- -------------------- ---------------------
Non- Non- Non-
(Dollars in millions) Portfolio performing Portfolio performing Portfolio performing
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Real estate
Single family residential $ 114 $ 114 $ 4 $ 4 $ 3 $ 3
Apartments 15 14 3 3 - -
Commercial
Offices 5 5 - - - -
Retail 3 1 - - - -
Industrial 3 3 - - - -
Property Development 39 - - - - -
Other 14 7 1 1 - -
------------------ ----------------- ------------------
Total $ 193 $ 144 $ 8 $ 8 $ 3 $ 3
------------------ ----------------- ------------------
Percent of total real estate 91.9% 3.8% 1.4%
Nonperforming real estate as
a % of total by state 74.6% 100% 100%
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Oregon
Washington Other Total
-------------------- -------------------- ---------------------
Non- Non- Non-
(Dollars in millions) Portfolio performing Portfolio performing Portfolio performing
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Real estate
Single family residential $ 1 $ 1 $ 5 $ 3 $ 127 $125
Apartments - - - - 18 17
Commercial
Offices - - - - 5 5
Retail - - - - 3 1
Industrial - - - - 3 3
Property Development - - - - 39 -
Other - - - - $ 15 8
----------------- ----------------- -------------------
Total $ 1 $ 1 $ 5 $ 3 $ 210 $159
----------------- ----------------- -------------------
Percent of total real estate 0.5% 2.4% 100%
Nonperforming real estate as
a % of total by state 100% 60.0% 75.7%
</TABLE>
Total real estate as reported on the statement of financial condition
is net of $932 thousand of general reserves. During the third quarter of
1996, real estate declined $28 million and nonperforming real estate
declined $25 million. This decline is attributed to a lower foreclosure
rate and higher sales volume compared with the first six months of 1996.
A comparison of California real estate and nonperforming real estate
by region as of September 30, 1996, follows:
<TABLE>
<CAPTION>
Northern California Central California
------------------------ ------------------------
(Dollars in millions) Portfolio Nonperforming Portfolio Nonperforming
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Real estate
Single-family residential $ 13 $ 13 $ 7 $ 7
Apartments 1 1 9 9
Commercial
Offices - - - -
Retail - - - -
Property Development 14 - 12 -
Industrial - - - -
Other 4 4 - -
------- ---- ------ ----
Total by region $ 32 $ 18 $ 28 $ 16
------- ---- ------ ----
Percentage of total California real estate 16.6 14.5%
Nonperforming as a % of total
by region 56.3% 57.1%
</TABLE>
<TABLE>
<CAPTION>
Southern California California
------------------------ -------------------------
(Dollars in millions) Portfolio Nonperforming Portfolio Nonperforming
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Real estate
Single-family residential $ 94 $ 94 $ 114 $ 114
Apartments 5 4 15 14
Commercial
Offices 5 5 5 5
Retail 3 1 3 1
Property Development 13 - 39 -
Industrial 3 3 3 3
Other 10 3 14 7
------ ------ ------- ------
Total by region $ 133 $ 110 $ 193 $ 144
------ ------ ------- ------
Percentage of total California real estate 68.9% 100.0%
Nonperforming as a % of total
by region 82.7% 74.6%
/TABLE
<PAGE>
<PAGE>
In the third quarter of 1996, bulk sales of foreclosed single-family
properties totaled $37.0 million compared with $45.8 million in the second
quarter of 1996 and $47.8 million in the third quarter of 1995. Auction
sales have also been utilized to accelerate the disposition of foreclosed
properties.
INTEREST BEARING LIABILITIES
The composition of interest bearing liabilities at September 30, 1996
and September 30, 1995 follows:
<TABLE>
<CAPTION>
September 30
-------------------------------
1996 1995
------------- -------------
(Dollars in millions) Amount % Amount %
------------- -------------
<S> <C> <C> <C> <C>
Deposits
Checking $ 4,339 11 $ 4,377 11
Savings 1,688 4 1,820 5
Money Market 4,790 12 5,012 12
Term 17,796 45 17,675 43
Wholesale 240 1 548 1
------ ---- ------ --
Total deposits 28,853 73 29,432 72
Borrowings
Short-term borrowings from FHLB 1,678 4 - -
Securities sold under
agreements to repurchase 4,586 12 7,253 18
Short-term borrowings 1,351 3 1,905 4
Long-term borrowings 3,359 8 2,434 6
------ ---- ------ ----
Total borrowings 10,974 27 11,592 28
------ ---- ------ ----
Total interest bearing liabilities $39,827 100% $41,024 100%
------- --- ------- ---
</TABLE>
<PAGE>
<PAGE>
The following table shows the components of the change in deposit
balances:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
(Dollars in millions) 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Checking $(176) $ 127 $(149) $ (196)
Savings (88) (56) (76) (179)
Money Market 60 52 (36) (429)
Term 327 79 101 1,551
Wholesale (150) (17) (222) (16)
----- ---- ----- --------
$ (27) $ 185 $(382) $ 731
----- ------ ----- --------
</TABLE>
The Company concentrates its retail deposit-gathering activity in two
states: California and Florida.
The total decrease in deposits reflects the competitive environment
of banking institutions and the wide array of investment opportunities
available to consumers. Term deposits increased $327 million primarily as
a result of a certificate of deposit promotion in the third quarter of 1996.
This promotion resulted in an inflow to term deposits of approximately $675
million.
A summary of term deposits by interest rate and maturity as of
September 30, 1996 follows:
<TABLE>
<CAPTION>
90 Days 180 Days One Year Two Years
(Dollars in Within to to to to Three Years September 30 December 31 September 30
millions) 90 Days 180 Days One Year Two Years Three Years and Over 1996 1995 1995
------- -------- -------- --------- ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Under 4% $ 68 $ 24 $ 9 $ 2 $ 8 $ - $ 111 $ 199 $ 332
4 to 6% 3,402 3,978 5,018 2,322 259 425 15,404 12,825 11,175
6 to 8% 309 948 460 145 35 446 2,343 4,763 6,305
Over 8% - - 1 1 4 1 7 197 206
------ ------ ------ ------ ---- ---- ------- ------- -------
$3,779 $4,950 $5,488 $2,470 $306 $872 $17,865 $17,984 $18,018
====== ====== ====== ====== ==== ==== ======= ======= =======
$100,000
accounts
included
above $ 821 $ 904 $1,073 $ 250 $ 53 $196 $ 3,298 $ 3,502 $ 3,160
</TABLE>
Included in wholesale deposits are term accounts of $69 million at
September 30, 1996, $288 million at December 31, 1995 and $343 million at
September 30, 1995.<PAGE>
<PAGE>
Total borrowings at September 30, 1996 decreased $618 million compared
with the same period last year. The level of borrowings is influenced by
customer account activity and changes in assets, primarily the run-off in
mortgage-backed securities that was greater than the increase in SFR real
estate loans.
ASSET LIABILITY MANAGEMENT
The following table shows that the portfolio of short-term assets
exceeded liabilities maturing or subject to interest adjustment within one
year by $3.3 billion, or 8.0% of earning assets at September 30, 1996
compared with $3.6 billion, or 8.7% of earning assets at December 31, 1995
and $4.5 billion, or 10.7% of earning assets at September 30, 1995. The
Company is better protected against rising rates with an excess of interest
earning assets maturing or repricing within one year.
<TABLE>
<CAPTION>
Maturity/Rate Sensitivity
---------------------------------------------------------
September 30, 1996 Within Over % of
(Dollars in millions) 1 Year 1-5 Years 5-15 Years 15 Years Total Total
------ --------- ---------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Securities $ 1,504 $ - $ - $ - $ 1,504 4
Mortgage-backed securities 8,422 79 73 19 8,593 21
Loans
Real estate
Adjustable rate 24,997 2,651 - - 27,648 66
Fixed-rate
Short-term 18 14 32 358 422 1
Long-term 45 56 103 182 386 1
Total real estate loans 25,060 2,721 135 540 28,456 68
------ ----- --- --- ------ --
Consumer Finance 183 1,528 306 98 2,115 5
Other 513 58 2 4 577 1
------- ------- ----- ------ ------- ---
Total loans 25,756 4,307 443 642 31,148 74
Investment in FHLB stock - - - 371 371 1
------- ------- ----- ------ ------- ---
Total earning assets 35,682 4,386 516 1,032 41,616 100
------- ------- ----- ------ ------- ---
Interest Bearing Liabilities
Deposits
Checking 4,339 - - - 4,339 11
Savings 1,688 - - - 1,688 4
Money Market 4,790 - - - 4,790 12
Term accounts 14,148 3,632 16 - 17,796 45
Wholesale 240 - - - 240 1
------- ------- ----- ------ ------- ---
Total deposits 25,205 3,632 16 - 28,853 73
Borrowings
Short-term borrowings from FHLB 1,678 - - - 1,678 4
Securities sold under agreement
to repurchase 3,993 593 - - 4,586 12
Short-term borrowings 1,351 - - - 1,351 3
Long-term borrowings 252 2,762 199 46 3,259 8
Company-obligated preferred securities - - - 100 100 -
Impact of interest-rate swaps (109) 109 - - - -
------ ----- ----- ----- ------- ---
Total borrowings 7,165 3,464 199 146 10,974 27
Total interest bearing liabilities 32,370 7,096 215 146 39,827 100
------ ----- ----- ----- ------- ---
Excess of earning assets
over interest bearing liabilities at
September 30, 1996 $ 3,312 $(2,710) $ 301 $ 886 $ 1,789
======= ======= ===== ====== =======
</TABLE>
<PAGE>
EARNINGS PERFORMANCE
Net Interest Income
Net interest income was $339 million in the third quarter of 1996
compared with $352 million in the second quarter of 1996. Net interest
income was $334 million in the third quarter of 1995. The interest spread
for the third quarter of 1996 was 3.10% compared with 3.23% in the first
and second quarters of 1996 and 3.01% in the third quarter of 1995. The
repricing lag on COFI, FCOFI and LAMA ARMs decreased the interest spread by
approximately 1 basis point in the third quarter of 1996 and increased it
approximately 6 basis points in the second quarter of 1996. For the third
quarter of 1995, the repricing lag accounted for an increase of
approximately 2 basis points to the interest spread. The interest spread
decreases in an increasing interest-rate environment as increases in COFI,
to which most interest earning assets are tied, lag behind deposit and
borrowing rate increases. The Company's net interest margin was 3.27% for
the three months ended September 30, 1996 compared with 3.15% for the same
period a year ago. The Company's net interest margin was 3.35% for the nine
months ended September 30, 1996 compared with 3.06% for the same period a
year ago.
<PAGE>
<PAGE>
The following table of net interest income displays the average
monthly balances, interest income and expense and average rates by asset and
liability component for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended September 30
-------------------------------------------------------
1996 1995
-------------------------- --------------------------
(Dollars in millions) Average Average Average Average
Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Securities $ 1,944 $ 30 6.09% $ 1,594 $ 27 6.79%
Mortgage-backed securities 8,762 157 7.14 10,735 197 7.33
Loans
Real estate 28,140 512 7.28 27,424 513 7.49
Consumer Finance 2,089 91 17.51 2,012 91 18.16
Other 546 11 8.24 485 11 8.80
------ --- ----- ------ ------- -----
Total earning assets 41,481 801 7.72 42,250 839 7.94
Other assets 2,255 2,353
Total assets $43,736 $44,603
======= =======
Interest Bearing Liabilities
Deposits
Checking $ 4,483 8 .73 $ 4,328 9 .81
Savings 1,734 9 1.97 1,849 9 1.98
Money Market 4,772 40 3.35 4,983 39 3.14
Term 17,665 235 5.31 17,677 256 5.77
Wholesale 286 1 2.04 550 4 3.22
------- ---- ---- ------- ---- ----
Total deposits 28,940 293 4.05 29,387 317 4.31
Borrowings
Short-term borrowings from FHLB 1,912 30 6.33 - - -
Securities sold under repurchase agreements 4,878 66 5.40 7,220 106 5.90
Short-term 1,273 16 4.91 1,969 31 6.33
Long-term borrowings 2,962 57 7.72 2,414 51 8.67
------- ---- ---- ------- ---- ----
Total borrowings 11,025 169 6.13 11,603 188 6.51
------- ---- ---- ------- ----
Total interest bearing liabilities 39,965 462 4.62 40,990 505 4.93
Other liabilities 1,063 992
Stockholders' equity 2,708 - 2,621 -
------- ---- ------- ----
Total liabilities and equity $43,736 462 $44,603 505
======= =======
Interest spread $339 3.10% $334 3.01%
==== ===== ==== ====
Effective yield summary
Interest income/total earning assets $41,481 $801 7.72% $42,250 $839 7.94%
Interest expense/total earning assets 41,481 462 4.45 42,250 505 4.79
---- ----- ---- ----
Net interest income/net interest margin $339 3.27% $334 3.15
---- ----- ---- ----
/TABLE
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended September 30
-------------------------------------------------------
1996 1995
-------------------------- --------------------------
Average Average Average Average
(Dollars in millions) Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Earning Assets
Securities $ 1,805 $ 84 6.23% $ 1,527 $ 72 6.31%
Mortgage-backed securities 9,173 495 7.20 10,576 564 7.10
Loans
Real estate 27,869 1,544 7.39 26,899 1,470 7.28
Consumer 2,090 276 17.63 1,995 270 18.06
Other 536 33 8.08 471 28 8.05
------ ----- ----- ------ -----
Total earning assets 41,473 2,432 7.82 41,468 2,404 7.73
Other assets 2,336 2,335
------- -------
Total assets $43,809 $43,803
------- -------
Interest Bearing Liabilities
Deposits
Checking $ 4,459 25 .75 $ 4,339 27 .81
Savings 1,758 26 1.96 1,897 28 1.98
Money Market 4,763 115 3.23 5,058 111 2.93
Term 17,689 712 5.36 17,335 721 5.54
Wholesale 375 8 2.98 561 16 3.91
------- ------ ---- ------- ----- ----
Total deposits 29,044 886 4.07 29,190 903 4.13
Borrowings
Short-term borrowings from FHLB 1,476 65 5.86 - - -
Securities sold under repurchase
agreements 5,574 227 5.44 7,028 315 5.98
Short-term borrowings 1,191 46 5.18 1,572 75 6.32
Long-term borrowings 2,697 165 8.14 2,490 160 8.54
------- ------ ---- ------- ----- ----
Total borrowings 10,938 503 6.13 11,090 550 6.60
------- ------ ---- ------- ----- ----
Total interest bearing liabilities 39,982 1,389 4.63 40,280 1,453 4.81
Other liabilities 1,063 957
Stockholders' equity 2,708 - 2,566 -
------- ------ ------- ------
Total liabilities and equity $43,753 1,389 $43,803 1,453
------- ------ ------- ------
Interest spread $1,043 3.19% $ 951 2.92%
------ ---- ----- -----
Effective yield summary
Interest income/total earning assets $41,473 $2,432 7.82% $41,468 $2,404 7.73%
Interest expense/total earning assets $41,473 1,389 4.47 41,468 1,453 4.67
------ ---- ------ -----
Net interest income/net interest margin $1,043 3.35% $ 951 3.06%
------ ---- ------ -----
</TABLE>
The average balance of loans above includes nonaccrual loans and
therefore the interest income and average rate, as presented, are affected
by the loss of interest on such loans. Interest foregone on nonaccrual
loans increased to $12.8 million for the quarter ended September 30, 1996
compared with $10 million for the quarter ended September 30, 1995. For the
first nine months of 1996 and 1995, nonaccrual interest was $29.5 million
and $29.3 million, respectively.
The following table shows the components of the changes in net
interest income between periods:
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
------------------------------- -------------------------------
(Dollars in millions) 1996 vs 1995 1995 vs 1994 1996 vs 1995 1995 vs 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Securities and investments
Rate (1) $ (3) $ 2 $ (1) $ 8
Volume (2) 6 8 13 18
Rate/Volume (3) - - - 3
---- ---- ---- ----
3 10 12 29
---- ---- ---- ----
Mortgage-backed securities
Rate (1) (5) 18 7 38
Volume (2) (36) 92 (75) 302
Rate/Volume (3) 1 32 (1) 80
---- ---- ---- ----
(40) 142 (69) 420
---- ---- ---- ----
Real estate loans
Rate (1) (14) 59 21 139
Volume (2) 13 (38) 53 (118)
Rate/Volume (3) - (5) - (11)
---- ---- ---- ----
(1) 16 74 10
---- ---- ---- ----
Consumer loans
Rate (1) (5) - (8) (8)
Volume (2) 6 10 19 29
Rate/Volume (3) (1) - - (1)
---- ---- ---- ----
- 10 11 20
---- ---- ---- ----
Interest earning assets
Rate (27) 79 19 177
Volume (11) 72 10 231
Rate/Volume - 27 (1) 71
---- ---- ---- ----
(38) 178 28 479
---- ---- ---- ----
Deposits
Rate (1) (19) 87 (13) 246
Volume (2) (5) (4) (4) (30)
Rate/Volume (3) 1 (1) - (10)
---- ---- ---- ----
(23) 82 (17) 206
Borrowings ---- ---- ---- ----
Rate (1) (11) 3 (39) (6)
Volume (2) (9) 77 (7) 340
Rate/Volume (3) - 13 - (9)
---- ---- ---- ----
(20) 93 (46) 325
---- ---- ---- ----
Interest bearing liabilities
Rate (30) 90 (52) 240
Volume (14) 73 (11) 310
Rate/Volume 1 12 - (19)
---- ---- ---- ----
(43) 175 (63) 531
---- ---- ---- ----
Change in net interest income $ 5 $ 3 $ 91 $(52)
----- ----- ---- ----
</TABLE>
(1) The rate variance reflects the change in the average rate multiplied
by the average balance outstanding during the prior period.
(2) The volume variance reflects the change in the average balance
outstanding multiplied by the average rate during the prior period.
(3) The rate/volume variance reflects the change in the average rate
multiplied by the change in the average balance outstanding.
(4) Nonaccrual loans and amortized deferred loan fees are included in the
interest income calculations<PAGE>
<PAGE>
NONINTEREST INCOME
Retail banking fee income increased to $129 million in the nine
months ended September 30, 1996 from $114 million in the nine months ended
September 30, 1995, an increase of 13%. The increase was due primarily to
checking account transaction fees which include fees for NSF, ATM, check
printing, overdraft usage and stop payments.
Servicing fees totaled $32.4 million for the nine months ended
September 30, 1996 compared with $40.9 million for the nine months ended
September 30, 1995. The decrease in income was primarily the result of
adjustment to the carrying value of capitalized mortgage servicing rights.
At September 30, 1996, the servicing spread was 41 basis points on the $11.0
billion servicing portfolio compared with a servicing spread of 42 basis
points on a $10.8 billion portfolio at September 30, 1995. The portfolio of
loans serviced for others is expected to decrease if the level of fixed-rate
loan originations and sales decrease.
Income from mutual fund and securities brokerage operations has
increased as a result of increased sales of mutual funds and decreased
redemptions. Net revenue from these operations totaled $22.1 million in the
nine months ended September 30, 1996 compared with $13.4 million in the same
period of 1995. The Company managed mutual funds with assets aggregating
$3.4 billion at September 30, 1996 compared with $3.2 billion at September
30, 1995.
Real estate fees were $20.8 million in the first nine months of 1996
compared with $17.9 million for the same period of 1995. For the third
quarter of 1996, real estate fees were $7.5 million compared with $6.0
million for the third quarter of 1995. Loan prepayment fees were $653,000
in the third quarter of this year compared with $649,000 in the second
quarter of 1996 and $146,000 in the third quarter last year.
As a result of the Company's implementation of a new reserve
methodology, $7.7 million was recorded against the gain on mortgage sales in
the third quarter of 1996 to reflect the credit risk inherent in the
portfolio of loans sold with recourse. Excluding the $7.7 million
adjustment, mortgage sales in the first nine months of 1996, primarily
fixed-rate, totaled $1.0 billion at a gain of .74% of the portfolio sold,
compared to $606 million in the first nine months of last year at a gain of
.72% of the portfolio sold.
As a result of the adoption of FAS 122, the amount of servicing
capitalized in 1996 and included in gain on mortgage sales was $1.7 million
and $7.1 million for the third quarter and nine months of 1996,
respectively. In the third quarter of 1996, the Company sold the servicing
rights on $31.1 million of loans at a gain of $431,000. For the nine months
ended September 30, 1996, the Company sold the servicing rights on $84
million of loans at a gain of $1.4 million.
<PAGE>
<PAGE>
Net loss on securities and investments totaled $7.1 million and $7.8
million for the three and nine months ended September 30, 1996,
respectively. For the three and nine months ended September 30, 1995, the
Company had a net gain on securities and investments of $1.9 million and
$4.7 million, respectively. The loss in the third quarter of 1996 was a
result of the recording of charge-offs on the loans underlying the mortgage-
backed securities where the Company has full credit risk.
Net insurance operations and other income was $24.3 million for the
nine months ended September 30, 1996 compared with $26.0 million for the
same period a year ago.
NONINTEREST EXPENSE
Noninterest expenses were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(Dollars in millions) September 30 September 30
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Salaries and benefits $106 $106 $340 $338
SAIF special assessment 188 - 188 -
Premises and occupancy 44 44 135 136
FDIC insurance premiums 16 17 49 50
Outside data processing 14 17 42 47
Communications 11 11 29 35
Amortization of intangibles 9 11 28 30
Advertising and promotion 7 9 26
26
Branch losses 6 6 20 14
Office supplies 5 5 16 13
Postage 3 3 11 10
Insurance 2 3 7
8
Net real estate operations (13) 2 (5)
(1)
Other 31 16 71 61
---- ---- ---- ----
$429 $250 $957 $767
==== ==== ==== ====
</TABLE>
Total noninterest expense, excluding the SAIF special assessment, for
the 1996 third quarter was $241 million, down from $250 million in the third
quarter of 1995, or 3.6%.<PAGE>
<PAGE>
On September 30, 1996, the President signed into law an omnibus
spending bill which included provisions for the recapitalization of the
Savings Association Insurance Fund ("SAIF") through a one-time special
assessment of approximately 65.7 basis points of SAIF deposits held by
savings associations as of March 31, 1995. GWB's special assessment of $188
million has been reflected in the Bank's third quarter results.
The recapitalization will reduce the severe disparity between the
deposit insurance premiums paid by savings associations and those paid by
banks beginning in 1997. GWB expects that its deposit insurance premiums
will be approximately 6.4 basis points of deposits while the deposit
insurance premiums of most banks will be approximately 1.3 basis points
through 1999. Thereafter, the deposit insurance premiums of most banks and
savings associations are expected to be approximately two basis points of
deposits.
The new law also requires the Treasury Department to conduct a study
of all issues considered to be relevant to the development of a common
charter for all insured institutions and the abolition of separate and
distinct charters for banks and savings associations. The law specifies
that the Bank Insurance Fund and the Savings Association Insurance Fund are
to be merged by 1999, if there are no savings associations in existence at
that time.
Included in other operating expenses for the nine months of 1996 is
a $7.4 million recovery for fraudulently over-billed marketing costs which
had occurred over a number of years.
The Company is implementing new processes and technologies in its
banking and lending operations in 1996 and 1997 in order to reduce costs and
remain competitive in today's marketplace. As a result, a restructuring
charge will be recorded in the fourth quarter of 1996 to include severance
costs of displaced employees, the write-off of obsolete technology
(equipment) and charges to close and consolidate facilities.
The Company is taking a vigorous look at all of its businesses and
has decided to begin a process of exploring several options for its mutual
fund subsidiary, Sierra Capital Management Corporation, ranging from a joint
venture partnership to sale of the company. There can be no assurance that
any transaction will result.
Sierra Capital Management Corporation has $3.4 billion in assets
under management and markets a family of 15 mutual funds through a separate
broker-dealer subsidiary of the Company and through other national and
regional securities brokerages.
The Company is committed to participation in the securities business
through its broker-dealer, Great Western Financial Securities Corporation,
which is currently the focus of expansion plans.
The Company may sell other assets or segments that are not strategic
to its business. These are currently being evaluated and should be
identified in the fourth quarter of 1996.<PAGE>
<PAGE>
INCOME TAX
The Company's effective tax rate was 38.9% in the first nine months
of 1996 and 39.5% in the same period of 1995.
Under the Internal Revenue Code, GWB, as a qualified thrift
institution, is allowed deductions for bad debts under the reserve method,
which is more favorable than bad debt deduction methods allowed to other
taxpayers. If GWB converted to a commercial bank, or otherwise lost its tax
status as a qualified thrift institution, it would be ineligible for this
reserve method and its existing tax bad debt reserve of $724,488,000 would
possibly be subject to federal income tax.
Under provisions of the Small Business Job Protection Act of 1996,
GWB lost its eligibility for the bad debt reserve method beginning in 1996;
however, the existing reserve balance is no longer subject to federal income
tax now or if, in the future, the Bank converts to a commercial bank status
or otherwise loses its tax status as a qualified thrift institution. The
existing reserve balance will continue to be subject to tax upon certain
occurrences, including its distribution to shareholders, none of which are
currently contemplated.
CAPITAL ADEQUACY AND LIQUIDITY
Capital (stockholders' equity) was $2.6 billion at September 30, 1996
and $2.7 billion at September 30, 1995. At the end of the 1996 third
quarter, the ratio of capital to total assets was 6.0% compared with 5.9% a
year ago.
At September 30, 1996 preferred stock totaled $165 million compared
with $294 million at June 30, 1996. In September 1996, the Company called
for the redemption of its $129 million, 8.75% Cumulative Convertible
Preferred Stock. The holders had the option to redeem their shares or
convert them into shares of the Company's Common Stock. 2,561,642 shares
were converted into 6,278,421 common shares, while 19,058 shares were
redeemed for cash payments of $994,589. In the second quarter of 1996
shares of preferred stock totaling $340 thousand were converted to common
stock at the holder's option.
On July 23, 1996, the Board of Directors authorized the repurchase of
up to 7.5 million shares of outstanding common stock, representing
approximately 5% of the total number of shares outstanding as of September
30, 1996. The repurchases may be made from time to time through mid-1997 in
the open market or through privately negotiated transactions. In July 1996,
6.5 million shares were repurchased pursuant to this program. The shares
were repurchased at a price of approximately $23 per share, which will be
adjusted over a 95-day trading period. The adjustment can be settled in
cash or securities at the Company's discretion. Funds for this repurchase
were provided by a $75 million dividend from the Company's subsidiary,
Aristar, and other short-term liquidity sources.
GWB is subject to certain capital requirements under applicable
regulations and meets all such requirements. GWB's capital was $2.9
billion, including eligible subordinated notes of $288 million at September
30, 1996 and $2.8 billion, including eligible subordinated notes of $373
million at September 30, 1995.<PAGE>
<PAGE>
The following ratios compare GWB with the capital requirements under
regulations issued by the OTS:
<TABLE>
<CAPTION>
September 30, 1996
--------------------------------
Actual OTS Benchmark
-------------- -------------
(Dollars in millions) Amount % Amount %
------ --- ------ ---
<S> <C> <C> <C> <C>
Leverage/tangible ratio $2,386 5.85 $1,224 3.00
Tier 1 risk-based ratio 2,381 9.91 961 4.00
Total risk-based ratio 2,863 11.91 1,922 8.00
</TABLE>
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% of the
savings association's total net portfolio value. The standards are not yet
in effect. However, GWB does not expect the interest-rate risk
requirements to have a material impact on its required capital levels.
The OTS previously proposed to amend its capital rule on the leverage
ratio requirement to reflect amendments made by the Office of the
Comptroller of the Currency ("OCC") to the capital requirements for national
banks. The proposal would establish a 3% leverage ratio (defined as the
ratio of core capital to adjusted total assets) for savings associations in
the strongest financial and managerial condition. All other savings
associations would be required to maintain leverage ratios of at least 4%.
Only savings associations rated composite 1 under the OTS CAMEL rating
system will be permitted to operate at or near the regulatory minimum
leverage ratio of 3%. For all other savings associations, the minimum core
capital leverage ratio will be 3% plus an additional 100 to 200 basis
points.
In determining the amount of additional capital, the OTS will assess
both the quality of risk management systems and the level of overall risk in
each individual savings association through the supervisory process on a
case-by-case basis. The OTS' supervisory judgment on a savings
association's capital adequacy, both in terms of risk-based capital and the
minimum leverage ratio, will continue to be based upon an assessment of the
relevant factors present in each institution.
<PAGE>
<PAGE>
Savings associations that do not pass the minimum capital standards
established under the new core capital leverage ratio requirements will be
required to submit capital plans detailing steps to be taken to reach
compliance.
GWB currently meets these proposed requirements.
As of September 30, 1996, real estate loan commitments totaled $909
million compared with $717 million at December 31, 1995 and $894 million at
September 30, 1995. These commitments included $816 million of ARMs and $96
million at fixed-rates at September 30, 1996. The Company has several
sources for raising funds for lending, among which are mortgage repayments,
mortgage sales, customer deposits, Federal Home Loan Bank borrowings and
other borrowings.
The following table presents the debt ratings of the Company and GWB
at September 30, 1996:
<TABLE>
<CAPTION>
Moody's Investors
Standard & Poor's Service Fitch
----------------- ----------------- -----------
GWFC GWB GWFC GWB GWFC GWB
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
Unsecured short-term debt A-2 A-2 P-2 P-1 F-1
Senior term debt BBB+ A- Baa1 A-2 A- A
Subordinated term debt BBB+ A-3 A-
Preferred stock BBB- Baa2 BBB
</TABLE>
The origination and sale of real estate loans is dependent upon
general market conditions. In an active real estate market, loan
originations may increase. In such periods, mortgage sales are usually
increased to fund a portion of originations and to control asset growth.
However, in some periods mortgage sales occur to fund customer account
outflows and repay borrowings which result in asset shrinkage. Mortgage
sales also occur to limit interest-rate risk and for restructuring purposes.
As presented in the Consolidated Condensed Statement of Cash Flows,
the sources of liquidity vary between quarters. The primary source of funds
in the third quarter of 1996 was principal payments on mortgage-backed
securities and loans held for investment of $1.5 billion. New loans
originated for investment required $2.0 billion in the third quarter of
1996. Operating activities provided $230 million in the current quarter.
The Company continued to maintain liquidity balances each period in
excess of funding and legal requirements. Cash and securities totaled $2.0
billion at September 30, 1996 and $2.2 billion at September 30, 1995.
<PAGE>
<PAGE>
DIVIDENDS
Quarterly cash dividends have been paid since 1977. At its April
1996 meeting, the Board of Directors increased the quarterly cash dividend
from $.23 to $.25 per common share. The quarterly cash dividend of $.23 per
common share had previously been paid at that level since the second quarter
of 1992. The dividend increase was due to the Company's improved earnings
and strong capital position.
In the third quarter of 1996 the regular quarterly dividend on the
$165 million 8.3% cumulative preferred stock, issued in September 1992, was
paid.
The principal source of operating income of the Company on an
unconsolidated basis is dividends from GWB and Aristar, Inc ("Aristar"). In
the third quarter of 1996, cash dividends received from GWB and Aristar
totaled $37.8 million and $82 million, respectively. In the first nine
months of 1996, cash dividends received include $113.5 million from GWB,
$109.8 million from Aristar and $4.9 million from other subsidiaries. GWB
is subject to the regulations of the OTS and FDIC. The OTS regulations
impose limitations upon "capital distributions" by savings associations,
including cash dividends. The regulations establish a three-tiered system:
Tier 1 includes savings associations with capital at least equal to their
fully phased-in capital requirement which have not been notified that they
are in need of more than normal supervision; Tier 2 includes savings
associations with capital above their minimum capital requirement but less
than their fully phased-in requirement; and Tier 3 includes savings
associations with capital below their minimum capital requirement. Tier 1
associations may, after prior notice but without approval of the OTS, make
capital distributions up to the higher of (1) 100% of their net income
during the calendar year plus the amount that would reduce by one half their
"surplus capital ratio" (the excess over their fully phased-in capital
requirement) at the beginning of the calendar year or (2) 75% of their net
income over the most recent four-quarter period. Tier 2 associations may,
after prior notice but without approval of the OTS, make capital
distributions of up to 75% of their net income over the most recent four-
quarter period depending upon their current risk-based capital position.
Tier 3 associations may not make capital distributions without prior
approval. An association subject to more stringent restrictions imposed by
agreement may apply to remove the more stringent restrictions.
The Company believes that GWB is a Tier 1 association.
Notwithstanding the foregoing, the regulatory authorities have broad
discretion to prohibit any payment of dividends and take other actions if
they determine that the payment of such dividends would constitute an unsafe
or unsound practice. Among the circumstances posing such risk would be a
capital distribution by a Tier 1 or Tier 2 association whose capital is
decreasing because of substantial losses.
As of September 30, 1996, GWB's dividend limitation for 1996 is
approximately $574 million. Therefore, after taking into consideration
dividends declared for the 9 months ending September 30, 1996, GWB may
declare dividends or make other capital distributions of approximately
$460.5 million without obtaining prior approval.<PAGE>
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 5. OTHER INFORMATION
- --------------------------
The calculation of the Company's ratio of earnings to fixed charges
as of the dates indicated follows:
<TABLE>
<CAPTION>
Nine Months Ended Twelve Months Ended Nine Months Ended
(Dollars in thousands) September 30, 1996 December 31, 1995 September 30, 1995
------------------ ------------------- ------------------
<S> <C> <C> <C>
Earnings
- --------
Net earnings $ 110,690 $ 261,022 $ 162,455
Taxes on income 70,400 161,100 106,100
---------- ---------- ----------
Earnings before taxes $ 181,090 $ 422,122 $ 268,555
========== ========== ==========
Interest expense
- ----------------
Deposits $ 886,293 $1,217,085 $ 903,312
Borrowings 516,070 734,670 563,869
---------- ---------- ----------
Total $1,402,363 $1,951,755 $1,467,181
========== ========== ==========
Rent expense
- ------------
Total $ 47,996 $ 46,433 $ 41,191
1/3 thereof 15,999 15,478 13,730
Capitalized interest $ 29 $ - $ -
- --------------------
Preferred stock dividends $ 16,871 $ 25,015 $ 18,761
- -------------------------
Ratio of earnings to fixed charges
- ----------------------------------
and preferred stock dividends
-----------------------------
Excluding deposits
------------------
Earnings before fixed charges $ 713,159 $1,172,270 $ 846,154
Fixed charges 559,699 790,602 608,613
Ratio 1.27 1.48 1.39
Including deposits
------------------
Earnings before fixed charges $1,599,452 $2,389,355 $1,749,466
Fixed charges 1,445,992 2,007,687 1,511,925
Ratio 1.11 1.19 1.16
Ratio of earnings to fixed charges
- ----------------------------------
Excluding deposits
------------------
Earnings before fixed charges $ 713,159 $1,172,270 $ 846,154
Fixed charges 532,098 750,148 577,599
Ratio 1.34 1.56 1.46
Including deposits
------------------
Earnings before fixed charges $1,599,452 $2,389,355 $1,749,466
Fixed charges 1,418,391 1,967,233 1,480,911
Ratio 1.13 1.21 1.18
/TABLE
<PAGE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
a. Exhibits
--------
4.1 The Company has outstanding certain long-term debt as set forth in
Note 14 of the Notes to Consolidated Financial Statements included in
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995. The Company agrees to furnish copies of the
instruments representing its long-term debt to the Securities and
Exchange Commission (the "SEC") upon request.
11.1 Statement re computation of per share earnings.
27.1 Financial Data Schedule
b. Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter for which this report
is filed.
<PAGE>
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GREAT WESTERN FINANCIAL CORPORATION
- -----------------------------------
Registrant
/s/ Carl F. Geuther
- ----------------------------------
Carl F. Geuther
Vice Chairman and Chief Financial
Officer
/s/ Barry R. Barkley
- -----------------------------------
Barry R. Barkley
Senior Vice President and
Controller
DATE: November 13, 1996
<PAGE>
<PAGE>
GREAT WESTERN FINANCIAL CORPORATION
EXHIBIT INDEX
September 30, 1996
Exhibit Page
Number Number
- ------- ------
11.1 Statement re computation of per share earnings 46
27.1 Financial Data Schedule 47
