GREAT WESTERN FINANCIAL CORP
10-K405, 1997-03-10
SAVINGS INSTITUTION, FEDERALLY CHARTERED
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               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549-1004
 
                                   FORM 10-K
 
(MARK ONE)
 
 
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    For the fiscal year ended December 31, 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,                        91311-6519
        CHATSWORTH, CALIFORNIA                       (ZIP CODE)
    (ADDRESS OF PRINCIPAL EXECUTIVE
               OFFICES)
 
                                (818) 775-3411
             (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 
                                               NAME OF EACH EXCHANGE
          TITLE OF EACH CLASS                   ON WHICH REGISTERED
          -------------------                  ---------------------
 
  Common Stock, $1 par value (and             New York Stock Exchange
  accompanying Preferred Stock                Pacific Stock Exchange
  Purchase Rights)                            London Stock Exchange
 
  8.30% Cumulative Preferred Stock,           New York Stock Exchange
  $1 par value
 
  8 1/4% Trust Originated Preferred           New York Stock Exchange
  Securities of Great Western
  Financial Trust I
 
Securities registered pursuant to Section 12(g) of the Act: None
 
  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
 
  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
 
  State the aggregate market value of the voting stock held by nonaffiliates
of the registrant as of February 28, 1997: $6,024,275,048.
 
  Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of February 28, 1997: 137,563,165.
 
DOCUMENTS INCORPORATED BY REFERENCE:
 
  THE INFORMATION REQUIRED TO BE DISCLOSED PURSUANT TO PART III OF THIS REPORT
EITHER SHALL BE (I) DEEMED TO BE INCORPORATED BY REFERENCE FROM SELECTED
PORTIONS OF THE DEFINITIVE PROXY STATEMENT FOR GREAT WESTERN FINANCIAL
CORPORATION'S 1997 ANNUAL MEETING OF SHAREHOLDERS, IF SUCH PROXY STATEMENT IS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO REGULATION 14A
NOT LATER THAN 120 DAYS AFTER THE END OF THE CORPORATION'S MOST RECENTLY
COMPLETED FISCAL YEAR, OR (II) INCLUDED IN AN AMENDMENT TO THIS REPORT FILED
WITH THE COMMISSION ON FORM 10-K/A.
 
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                      GREAT WESTERN FINANCIAL CORPORATION
 
                          1996 FORM 10-K ANNUAL REPORT
 
                               TABLE OF CONTENTS
 
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<S>       <C>                                                                                     <C>
                                               PART I
Item 1.   Business...............................................................................   3
Item 2.   Properties.............................................................................  17
Item 3.   Legal Proceedings......................................................................  17
Item 4.   Submission of Matters to a Vote of Security Holders....................................  17

                                               PART II
Item 5.   Market for the Registrant's Common Equity and Related Stockholder Matters..............  17
Item 6.   Selected Financial Data................................................................  18
Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations..  19
Item 8.   Financial Statements and Supplementary Data............................................  51
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure... 109

                                              PART III
Item 10.  Directors and Executive Officers of the Registrant..................................... 110
Item 11.  Executive Compensation................................................................. 110
Item 12.  Security Ownership of Certain Beneficial Owners and Management......................... 110
Item 13.  Certain Relationships and Related Transactions......................................... 110

                                               PART IV
Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K........................ 111
</TABLE>
 
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                                    PART I
 
ITEM 1. BUSINESS
 
                              GENERAL DESCRIPTION
 
  Great Western Financial Corporation ("GWFC", "Great Western" or "the
Company"), with consolidated assets of approximately $42.9 billion, is a
savings and loan holding company organized in 1955 under the laws of the state
of Delaware. The principal assets of the Company are the capital stock of
Great Western Bank, a Federal Savings Bank ("GWB", "Great Western Bank" or
"the Bank") and Aristar, Inc. ("Aristar"). GWB is a federally chartered stock
savings bank and conducts most of its retail banking through 416 offices
located in California and Florida. Real estate lending operations are
conducted directly by the Bank or by direct subsidiaries through 220 offices
in 27 states with concentration in California, Florida, Texas and Washington.
Directly or through its subsidiaries, the Bank also engages in mortgage
banking, and other related financial services. Aristar conducts consumer
finance operations through 502 offices in 23 states, most of which operate
principally under the names Blazer Financial Services or City Finance Company
and provide direct installment loans and related credit insurance services and
purchase retail installment contracts. For financial information concerning
the Company's four principal lines of business, see "Line of Business" in Item
7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations".
 
  The Company is a legal entity separate and distinct from the Bank. The
principal source of the Company's revenues on an unconsolidated basis has been
dividends, interest and management fees from GWB. Various statutory and
regulatory restrictions and tax considerations, however, can limit, directly
or indirectly, the amounts that may be paid by the Bank to GWFC. Dividends
from Aristar continue to be a source of revenue to the Company. For a
discussion of dividend restrictions, see "Regulation--Capital Requirements",
"Capital Distributions by GWB" and "Restrictions on Transactions with
Affiliates".
 
  The operations of savings associations are significantly influenced by
general economic conditions, by the related monetary and fiscal policies of
the federal government, and by the regulatory policies of financial
institution regulatory authorities, including the Federal Reserve Board
("FRB"), the Office of Thrift Supervision ("OTS") and the Federal Deposit
Insurance Corporation ("FDIC"). Deposit flows and cost of funds are influenced
by interest rates on competing investments and general market rates of
interest. Lending and other investment activities are affected by the demand
for mortgage financing and consumer and other types of loans, which in turn
are affected by the interest rates at which such financing may be offered and
other factors affecting the supply of housing and the availability of funds.
 
                 MERGER AGREEMENT WITH WASHINGTON MUTUAL, INC.
 
  On March 6, 1997, Great Western announced that it had entered into a
strategic business combination with Washington Mutual, Inc. ("Washington
Mutual"). The terms of the Agreement and Plan of merger dated as of March 5,
1997 (the "Merger Agreement") entered into by and between Great Western,
Washington Mutual and New American Capital, Inc., ("NAC"), a wholly-owned
subsidiary of Washington Mutual provide for a tax-free merger (the "Merger")
of Great Western with and into NAC pursuant to which each outstanding share of
Great Western common stock, par value $1.00 per share (the "Great Western
Common Stock"), will be converted into 0.9 shares of Washington Mutual common
stock, no par value ("Washington Mutual Common Stock"), with cash being paid
in lieu of fractional shares. Each outstanding share of Great Western 8.30%
Preferred Stock (the "Great Western Preferred Stock") will be converted into
one share of Washington Mutual 8.30% Preferred Stock, Series F (the "Series F
Preferred Stock").
 
  The consummation of the Merger is subject to certain conditions, including
approval by the stockholders of Great Western and Washington Mutual and
applicable regulatory approvals. The parties expect that the Merger will be
consummated in the third quarter of 1997.
 
  The description of the Merger Agreement above does not purport to be
complete and is qualified in its entirety by reference to the text of the
Merger Agreement, which is filed as an exhibit to this Form 10-K.
 
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                  H. F. AHMANSON & COMPANY'S MERGER PROPOSAL
 
  On February 18, 1997, H. F. Ahmanson & Company ("Ahmanson") unilaterally
announced a proposal for a merger between Ahmanson and Great Western pursuant
to which each outstanding share of Great Western common stock, $1.00 par value
per share (the "Great Western Common Stock") would be converted into
1.05 shares of Ahmanson common stock (the "Ahmanson Merger Proposal").
 
  On March 3, 1997, Ahmanson commenced soliciting consents from Great Western
stockholders (the "Ahmanson Consent Solicitation") in favor of (i) a non-
binding advisory resolution urging the Great Western Board of Directors (the
"Great Western Board") to consider any bona fide and concrete merger proposal
received by Great Western by May 22, 1997 and, if no superior merger proposal
is received by such date, to enter into a merger agreement with Ahmanson on
the terms of the Ahmanson Merger Proposal, and (ii) four separate proposed By-
law amendments that, if validly adopted, would (A) prohibit the Great Western
Board from granting to any third party, without the prior consent of the Great
Western stockholders, any break-up fees, stock options, "crown jewel" options
or other lock-up fee arrangements in connection with a proposed merger of
Great Western in excess of $100,000,000, (B) compel Great Western to hold its
annual meeting of stockholders on the fourth Tuesday in April in each year or
on a date within 14 days thereof, (C) prevent a stockholders' meeting at which
a quorum is present from being adjourned unless all business properly brought
before such meeting has been acted upon by the stockholders and (D) provide
that any of the By-laws adopted pursuant to Ahmanson's Consent Statement may
not be subsequently amended unless majority approval of the Great Western
stockholders is obtained. Great Western has challenged the legality of
Ahmanson's proposed By-law amendment described in clause (A) above as an
improper intrusion into the statutory powers of the Board of Directors. Great
Western has set March 13, 1997 as the record date for the Ahmanson Consent
Solicitation.
 
  On March 4, 1997, Great Western disseminated to its stockholders a
Revocation of Consent Statement (the "Great Western Revocation Statement")
informing them that the Great Western Board unanimously opposes the Ahmanson
Consent Solicitation, detailing the reasons for the Great Western Board's
opposition to the Ahmanson Consent Statement and urging Great Western
stockholders not to sign the consent cards sent to the stockholders by
Ahmanson or to revoke any previously executed consent cards.
 
  Ahmanson has also indicated its intent to solicit proxies in connection with
the 1997 Annual Meeting of Stockholders of Great Western (the "Ahmanson Proxy
Solicitation"). In that proxy solicitation, Ahmanson intends to seek to elect
three directors nominated by Ahmanson to the Great Western Board and to have
additional amendments to the Great Western By-laws adopted.
 
              LITIGATION RELATING TO THE AHMANSON MERGER PROPOSAL
 
  On February 18, 1997, Ahmanson filed a Verified Complaint for Declaratory
and Injunctive Relief against Great Western and its directors (the "Ahmanson
Complaint") in the Court of Chancery of the State of Delaware. The Ahmanson
Complaint alleges, among other things, that: (i) the defendants have breached
their fiduciary duties with respect to the stockholder rights plan adopted by
the Board in June 1986, as amended in June 1995 (the "Rights Plan"); (ii) the
adoption of any defensive measure by the defendants which has the effect of
impeding, thwarting, frustrating or interfering with the Ahmanson Merger
Proposal would constitute a breach of the defendants' fiduciary duties; and
(iii) the individual directors of Great Western have breached their fiduciary
duties with respect to Section 203 (the "Delaware Business Combination
Statute") of the Delaware General Corporation Law (the "DGCL").
 
  Ahmanson seeks declaratory and injunctive relief as follows: (i) an order
enjoining the defendants from adopting any defensive measure which has the
effect of impeding, thwarting, frustrating or interfering with the Ahmanson
Merger Proposal; (ii) an order compelling the defendants to redeem the rights
associated with the Rights Plan or to amend the Rights Plan so as to make it
inapplicable to the Ahmanson Merger Proposal; (iii) an order enjoining the
defendants from taking any action pursuant to the Rights Plan that would
dilute or interfere
 
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with Ahmanson's voting rights or otherwise discriminate against Ahmanson; (iv)
an order compelling the defendants to approve the Ahmanson Merger Proposal for
the purposes of the Delaware Business Combination Statute; (v) an order
enjoining the defendants from taking any action to enforce or apply the
Delaware Business Combination Statute that would impede, thwart, frustrate or
interfere with the Ahmanson Merger Proposal; and (vi) an order awarding
Ahmanson its costs and expenses in the action.
 
  On February 26, 1996, Great Western filed its Answer, Affirmative Defenses
and Counterclaim to the Ahmanson Complaint. In the Counterclaim, Great Western
stated, among other things, that the proposed By-law amendment described
herein as Proposal 2 would impermissibly limit the Board's power, granted
under Delaware law and Great Western's Restated Certificate of Incorporation,
to manage the business and affairs of Great Western. Great Western also stated
that such By-law amendment is inequitable because it would impair the Board's
ability to negotiate an alternative transaction to the Ahmanson Proposal
should the Board choose to do so. Further, Great Western denied all of the
material allegations raised by the Ahmanson Complaint and asserted affirmative
defenses, including that: (i) the Ahmanson Complaint fails to state a claim on
which relief can be granted; and (ii) Ahmanson is acting in its own self
interest at the expense of Great Western and its stockholders and thus comes
to Court with unclean hands.
 
  Great Western seeks declaratory and injunctive relief as to, among other
matters, the following: (i) dismissal of the Ahmanson Complaint with prejudice
and denial of the relief requested by Ahmanson; and (ii) an order declaring
the proposed By-law amendment to be invalid, illegal and inequitable. On
February 27, 1997, Vice-Chancellor Jacobs informed Great Western and Ahmanson
that he would rule on the legality and validity of the proposed By-law
amendment as soon as the issue becomes relevant.
 
  Between February 18, 1997 and February 26, 1997, six complaints (the
"Complaints") were filed against Great Western and its directors in the Court
of Chancery of the State of Delaware by Fred T. Isquith, Harry Lewis, Bernd
Bildstein, Charles Uttenreither, Melvyn Zupnick and Emil Schachter. Each
action was brought on behalf of the plaintiff, individually, and as a
purported class action on behalf of all stockholders of Great Western. The
Complaints allege, among other things, that the defendants are violating their
fiduciary duties owed to the stockholders of Great Western with respect to the
Ahmanson Merger Proposal. The plaintiffs generally seek: (i) an order
declaring that the action may be maintained as a class action; (ii) an order
preliminarily and permanently enjoining the defendants to consider and
negotiate with respect to all bona fide offers or proposals for Great Western
or its assets, in the best interests of Great Western stockholders; and
(iii) compensatory damages, the costs and disbursements of the action and such
other and further relief as may be just and proper. In addition, certain
plaintiffs seek judgments ordering Great Western's directors, individually, to
announce their intention with respect to certain matters relating to the
Ahmanson Merger Proposal. The plaintiffs filed a Motion to Consolidate the
Complaints on March 6, 1997. Great Western and its directors deny the
operative allegations of the Complaints; however, answers have not yet been
filed and discovery has not yet commenced.
 
  On March 3, 1997, Ahmanson filed a Complaint against Great Western (the
"Ahmanson Section 220 Complaint") in the Court of Chancery of the State of
Delaware. The Ahmanson Section 220 Complaint alleges, among other things,
that: (i) Ahmanson is entitled, pursuant to Section 220 of the Delaware
General Corporation Law, to inspect and copy certain books and records of
Great Western and (ii) that Great Western has failed to make available for
inspection and copying by Ahmanson a list of the stockholders of Great Western
and other related information. Ahmanson requested that the Court enter an
order directing Great Western to provide Ahmanson with the requested
information. On March 6, 1997, Great Western provided Ahmanson with all of the
information requested in the Ahmanson Section 220 Complaint. On March 7, 1997,
Great Western mailed a letter to Ahmanson requesting that Ahmanson dismiss the
Ahmanson Section 220 Complaint as mute.
 
  On March 7, 1997, Ahmanson filed a Motion for Leave to File Amended and
Supplemental Complaint against Great Western and its directors (the "Ahmanson
Supplemental Complaint") in the Court of Chancery of the State of Delaware. In
addition to the allegations made in the Ahmanson Complaint, the Ahmanson
Supplemental Complaint further alleges, among other things, that: (i) the
defendants have failed to create a level
 
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playing field by discriminatorily favoring other potential bidders to the
exclusion of Ahmanson and by entering into the Merger Agreement; (ii) the
defendants have actively and unlawfully sought to thwart its stockholders from
exercising certain of their rights for the purpose of entrenchment; (iii) the
defendants have failed to find the best value reasonably available; and (iv)
the defendants have irreparably harmed Ahmanson by depriving it of the unique
opportunity to acquire Great Western. Consequently, Ahmanson seeks additional
declaratory and injunctive relief enjoining Great Western and the individual
defendants from, among other things, discriminating against Ahmanson, delaying
Great Western's annual meeting of stockholders, or taking steps to consummate
the Merger or other transaction with Washington Mutual.
 
  Great Western and its directors intend to vigorously defend the claims in
the Ahmanson Complaint, the Ahmanson Supplemental Complaint and the
Complaints.
 
                         ACQUISITIONS AND DISPOSITIONS
 
  GWFC is, from time to time, engaged in discussions with other financial
institutions of various sizes in various locations throughout the United
States and with governmental agencies regarding mergers, acquisitions or
dispositions. No assurance can be given that GWFC will complete any particular
transaction.
 
  Information on specific acquisitions and dispositions is summarized in Note
2 of the Notes to Consolidated Financial Statements in Item 8, "Financial
Statements and Supplementary Data".
 
                     RELATED FINANCIAL SERVICES ACTIVITIES
 
  The principal non-depository business activities of GWFC and GWB are
described below.
 
  Consumer Finance Group. The Consumer Finance Group is comprised of Aristar
and the industrial banks listed below. Consumer finance activities are highly
regulated by federal and state laws of both general and specific
applicability. Federal regulations relate primarily to fair credit practice
matters. State regulations may include certain licensing requirements, which
vary from state to state and may require periodic examination to verify
compliance with, among other restraints, state interest rate and loan size
limits. The Company also has industrial bank subsidiaries, First Community
Industrial Bank in Denver, Colorado and Great Western Thrift & Loan in Salt
Lake City, Utah, which conduct activities similar to those of consumer finance
operations.
 
  Other Activities. GWFC and its direct and indirect subsidiaries also engage
in related service businesses, including investment company advisor and
administration activities, insurance operations, real estate development and
other lines of business. GWFC and its direct and indirect subsidiaries in the
future may also pursue other business opportunities, although no assurances
concerning the timing or nature of such activities can be given.
 
                                   INFLATION
 
  Inflation has not been a significant factor for the past several years.
However, the Company recognizes the adverse effects that inflation could bring
to its financial position and operations and consequently monitors its effects
closely.
 
                             CAUTIONARY STATEMENTS
 
  The Company wishes to caution readers that the following important factors,
among others, in some cases have affected, and in the future could affect, the
Company's actual results and could cause the Company's actual results to
differ materially from those expressed or implied in any forward looking
statement made herein or elsewhere by the Company or its directors, officers
or employees. The Company intends to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995.
 
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ADEQUACY OF ALLOWANCE FOR LOAN AND REAL ESTATE LOSSES
 
  The Company regularly reviews its assets to determine that each category is
reasonably valued. In this review process, it monitors the loss exposure
relating to nonperforming assets, assets adversely classified for regulatory
purposes, delinquency trends and the market environment to identify potential
problems.
 
  The Company assesses the status of loss reserves on real estate and consumer
loans based upon expected future economic conditions and its current loss
experience as applied to the loan portfolio, including loans that are
delinquent or, in the case of real estate loans, adversely classified because
of declining collateral values. The amount of the Company's loss reserve
represents management's estimate of the amount of real estate loan losses
likely to be incurred by the Company, based upon various assumptions as to
future interest rate environments, economic trends and other conditions. As
such, the loss reserve does not represent the amount of such losses that could
be incurred under adverse conditions that management does not consider to be
the most likely to arise. In addition, management's classification of assets
and evaluation of the adequacy of the loss reserve is an ongoing process.
Consequently, there can be no assurance that material additions to the
Company's loss reserve will not be necessary, thereby adversely affecting
earnings.
 
ECONOMIC CONDITIONS IN THE COMPANY'S MARKET AREA
 
  The Company's business is subject to changes in local economic and business
conditions. The economic environment in California has shown improvement in
the past year. In particular, the real estate market has shown improvement
throughout the state, though most notably in Northern California. As a result
of the improving economy and the disposition of nonperforming loans and real
estate through bulk sales, the Company's nonperforming assets have
substantially declined. However, a worsening of economic conditions in the
State could have an adverse effect on the Company's business, including
reducing demand for new financing and increasing nonperforming assets and real
estate.
 
FLUCTUATIONS IN INTEREST RATES
 
  Prevailing economic conditions, particularly changes in market interest
rates, as well as governmental policies and regulations concerning, among
other things, monetary and fiscal affairs, significantly affect interest rates
and a savings institution's net interest income. The results of operations of
GWB depend to a large extent on net interest income, which is the differential
between interest GWB receives from its loans, securities and other interest
earning assets and the interest expense the Bank pays on its deposits and
other interest bearing liabilities. GWB is subject to risk from fluctuations
of interest rates to the extent its interest bearing liabilities mature or
reprice at different times or on a different basis than its interest earning
assets.
 
SIGNIFICANT REGULATION
 
  The financial institutions industry, including the Company and GWB, is
subject to significant regulation which has materially affected the financial
institutions industry in the past and will likely do so in the future. Such
regulations may be changed at any time, and the interpretation of the relevant
law and regulation is also subject to change by the authorities who examine
financial institutions and their holding companies and interpret those laws
and regulations. There can be no assurance that any present or future changes
in the laws or regulations or in their interpretation will not adversely
affect the Company or GWB.
 
RESTRICTIONS ON DISTRIBUTIONS
 
  OTS regulations impose certain limitations on capital distributions by
savings institutions, including the payment of cash dividends. The regulations
establish guidelines for categorizing institutions into three tiers for
purposes of determining eligibility to make distributions. These tiers are
based primarily on the institution's capital levels but also relate to an
institution's supervisory status with the OTS. Under these guidelines, the
ability to pay cash dividends is increasingly limited as an institution's
capital position, earnings and supervisory status worsens. In addition, the
OTS could prohibit a proposed capital distribution by any institution, which
 
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would otherwise be permitted by the guidelines, if the OTS determines that
such a distribution would constitute an unsafe or unsound practice. Also,
certain tax considerations limit the amount of dividends GWB would otherwise
be able to pay. See "Regulation--Capital Distributions by GWB."
 
ENVIRONMENTAL RISKS
 
  Under various federal, state and local environmental laws and regulations, a
current or previous owner or operator of real property may be liable for the
costs of removal or remediation of hazardous substances on, under or in such
property. Pursuant to these laws and regulations, under certain circumstances,
a lender may become liable for the environmental liabilities in connection
with its borrower's properties if, among other things, it either forecloses or
participates in the management of its borrower's operations or hazardous
substance handling or disposal practices.
 
  If certain properties securing GWB loans and properties GWB has foreclosed
upon are found to be environmentally contaminated or contain hazardous
substances, including building materials containing asbestos or lead, GWB may
be required to remove or remediate such contamination or hazardous substances.
Although there can be no assurances that the costs of any required removal or
remediation or related liabilities on these properties or any other properties
would not be material and substantially exceed the value of the affected
properties or the loans secured by the properties or that GWB's ability to
sell any foreclosed property would not be adversely affected, management is
not aware of any environmental liability relating to these properties that it
believes would have a material adverse effect on its business or results of
operations.
 
COMPETITION
 
  Competition for deposits comes principally from other savings associations,
commercial banks, credit unions, corporations, governmental agencies and
governmental debt securities, insurance companies, pension funds, and other
investment media including money markets and mutual funds, many of which can
offer investment alternatives. Many of these institutions also have nationwide
retail networks.
 
  Competition in residential lending activities comes principally from other
savings associations, mortgage companies, commercial banks and, to a lesser
degree, from finance companies, insurance companies, governmental agencies,
pension funds and trusts, and sellers of properties.
 
  Competition in the provision of services being offered by GWFC and its
subsidiaries and affiliates in consumer lending, investment company advisor
and administration activities and other activities comes principally from the
traditional providers of such services and from other financial institutions.
 
                                  REGULATION
 
HOLDING COMPANY REGULATION
 
  General. The Company is a unitary savings and loan holding company as a
result of its control of GWB. As such, it is subject to regulation,
supervision, and examination by, and the reporting requirements of, the OTS
and is governed by the savings and loan holding company provisions of the Home
Owners' Loan Act, as amended.
 
  Restrictions on Activities. A savings and loan holding company is
prohibited, directly or indirectly, from obtaining control of a savings
association or savings and loan holding company without the prior approval of
the OTS. The Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA"), permits the acquisition by a savings and loan holding company
of up to 5% of the voting shares of a savings association or savings and loan
holding company which is not one of its present affiliates. No director,
officer, or controlling shareholder of the Company may, except with the prior
approval of the OTS, acquire control of any savings association which is not a
subsidiary of the Company.
 
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  FIRREA empowers the OTS to impose restrictions when it determines that there
is reasonable cause to believe that the continuation by a savings and loan
holding company of any particular activity constitutes a serious risk to the
financial safety, soundness, or stability of a holding company's subsidiary
savings association. Thus, FIRREA confers on the OTS oversight authority for
all holding company affiliates, not just the savings association.
Specifically, the OTS may (i) limit the payment of dividends by a savings
association; (ii) limit transactions between a savings association, the
holding company and the subsidiaries or affiliates of either; and (iii) limit
any activities of the savings association that might create a serious risk
that the liabilities of the holding company and its affiliates may be imposed
on the savings association. Any such limits will be issued in the form of a
directive having the effect of a cease and desist order.
 
REGULATION OF SUBSIDIARIES
 
  General. Deposits in GWB and the Company's industrial banks, First Community
Industrial Bank in Denver, Colorado and Great Western Thrift & Loan in Salt
Lake City, Utah are separately insured by the FDIC up to $100,000 and those
institutions are regulated by the FDIC. GWB is a federally chartered savings
association which is also regulated by the OTS. The industrial banks are state
chartered institutions which are regulated by state authorities in addition to
being regulated by the FDIC. State laws specify the investments which these
state institutions may make and the activities in which they may engage. Under
the Federal Deposit Insurance Corporation Improvement Act of 1991, as amended
("FDICIA"), however, insured state banks may not engage in activities not
permissible for national banks unless the FDIC determines that the activity
will pose no significant risk to the insurance fund and the bank complies with
applicable capital standards.
 
  The Company's consumer finance subsidiaries are governed by state and
federal laws. Federal laws relate primarily to fair credit practice matters.
State laws set out applicable licensing requirements, provide for periodic
examinations and establish maximum finance charges on credit extensions.
 
  The Company's insurance subsidiaries are governed by state law and the
Company's securities brokerage and investment advisory subsidiaries are
governed by federal and state laws relating to their operation, registration,
capital and other matters. The Company's securities brokerage subsidiary is
required to conduct its activities in compliance with the interagency
guidelines of the federal bank and thrift regulators on retail sales of
uninsured, nondeposit investment products by federally insured financial
institutions. The interagency guidelines require that, among other things,
customers are fully informed that investment products are not insured, are not
deposits of or guaranteed by GWB and involve investment risk including the
potential loss of principal.
 
  Qualified Thrift Lender. FDICIA imposes revised requirements for
qualification as a qualified thrift lender ("QTL"). The test requires that 65%
of a savings association's "portfolio assets" (all assets except goodwill,
intangibles, property used to conduct the thrift's business and certain liquid
assets up to 20% of assets) consist of "qualified thrift investments"
(including, subject to certain limits, residential mortgage and construction
loans, home improvement and repair loans, mortgage-backed securities, home
equity loans, Federal Home Loan Bank ("FHLBank") stock, Federal Savings and
Loan Insurance Corporation ("FSLIC"), FDIC, and Resolution Trust Corporation
("RTC") obligations, Federal National Mortgage Association and Federal Home
Loan Mortgage Corporation stock, education loans, credit card loans, consumer
loans, certain small business loans and loans to construct or purchase or
maintain churches, schools, nursing homes and hospitals, investments in
residential housing-oriented service corporations, and 50% of mortgages
originated and sold within 90 days). At December 31, 1996, the asset
composition of GWB was substantially in excess of that required to qualify it
to meet the QTL test.
 
  The following sanctions may apply as the result of failure of a savings
association to remain a QTL: (i) required conversion of the savings
association's charter to a national bank charter; (ii) limitations on new
investments and activities to those permissible for national banks; (iii)
imposition of branching restrictions applicable to national banks; (iv)
prohibitions on new advances to the savings association from its regional
FHLBank; and (v) imposition of dividend restrictions applicable to national
banks. Three years after a savings association ceases to be a QTL, it would be
required to divest all investments and cease all activities not
 
                                       9
<PAGE>
 
permissible for national banks and all FHLBank advances would have to be
repaid in a prompt and prudent manner. In addition, a savings and loan holding
company holding such a savings association would be required to register as a
bank holding company.
 
  Deposit Insurance. The FDIC maintains two separate deposit insurance funds--
the Bank Insurance Fund ("BIF") which insures the deposits of the industrial
banks (the "Company's BIF-insured institutions"), and the Savings Association
Insurance Fund ("SAIF") which insures the deposits of GWB.
 
  On September 30, 1996, the President signed into law the Deposit Insurance
Funds Act of 1996 ("Funds Act") which included provisions for the
recapitalization of the SAIF through a one-time special assessment of 65.7
basis points of SAIF deposits held by savings associations as of March 31,
1995. GWB's special assessment of $188 million was reflected in expense in the
third quarter of 1996.
 
  The current SAIF assessment schedule of premiums ranges from zero to 27
basis points of deposits, depending on risk classification. As authorized by
the Funds Act, the FDIC will collect assessments against BIF and SAIF-
assessable deposits to be paid to the Financing Corporation ("FICO") to
service interest on FICO debt issued during the 1980s. Savings associations,
in 1996, paid SAIF and BIF insurance premiums that covered approximately $780
million of interest on FICO debt. Beginning in 1997, such payments will drop
to $460 million annually, and in the year 2000, to about $180 million annually
or approximately two basis points of deposits.
 
  The Funds Act stipulates the rate of BIF-assessable deposits must equal one-
fifth of the FICO assessment rate on SAIF-assessable deposits. GWB expects its
FICO assessment will be approximately 6.48 basis points of deposits, while the
FICO assessment of banks will be approximately 1.30 basis points through 1999.
GWB expects to reduce its annual insurance premium from approximately $65
million in 1996 to approximately $18 million in each of the next three years.
 
  The Funds Act also requires the Treasury Department to conduct a survey of
all issues considered to be relevant to the development of a common charter
for all FDIC insured institutions and the abolition of separate and distinct
charters for banks and savings associations. The law specifies that the BIF
and SAIF are to be merged by 1999, if there are no savings associations in
existence at that time. A merger of the deposit insurance funds could
potentially occur prior to 1999 if certain conditions are met.
 
  FIRREA requires insured depository institutions to reimburse the FDIC for
any loss or anticipated loss to the FDIC that arises from a default of a
commonly controlled insured depository institution or assistance provided to
such an institution in danger of default.
 
  Capital Requirements. The capital standards applicable to savings
associations consist of three components--a leverage ratio requirement, a
tangible capital requirement and a risk-based capital requirement. All three
components are required by FIRREA to be no less stringent than the
corresponding requirements applicable to national banks, except that the risk-
based capital requirement for savings associations may deviate to reflect
interest-rate risk or other risks if such deviations do not, in the aggregate,
result in materially lower levels of capital being required of savings
associations than would be required under the risk-based capital standards
applicable to national banks.
 
  The capital regulations contain special capital rules affecting savings
associations with certain kinds of subsidiaries. For purposes of determining
compliance with each of the capital standards, a savings association's
investment in and extensions of credit to subsidiaries engaged in activities
not permissible for a national bank are, with certain exceptions, deducted
from the savings association's capital. At December 31, 1996, GWB's
investments in and extensions of credit to such subsidiaries aggregated $23
million, all of which was deducted from capital at December 31, 1996.
 
  The leverage ratio requirement requires a savings association to maintain
"core capital" of not less than 3% of adjusted total assets. As mentioned
below, the OTS proposed, but has not yet adopted, a stricter standard
 
                                      10
<PAGE>
 
which has become applicable to banks and under which banks are required to
maintain a core capital ratio of at least 3% and up to 5% depending upon their
condition and the rating they have received from the applicable regulatory
body.
 
  Under the current standard, "core capital" generally includes common
stockholders' equity, (including retained earnings, but excluding net
unrealized gain or loss on securities available-for-sale), noncumulative
perpetual preferred stock and any related surplus, and minority interests in
consolidated subsidiaries. Intangible assets (other than qualifying core
deposit intangible assets, mortgage servicing rights and purchased credit card
relationships) must be deducted from core capital. Certain deferred tax assets
must also be deducted. Core capital includes core deposit intangible assets,
mortgage servicing rights and purchased credit card relationships, subject to
certain limitations. GWB has no qualifying core deposit intangible assets or
purchased credit card relationships. At December 31, 1996, GWB had a core
capital ratio of 5.85%.
 
  The tangible capital requirement requires a savings association to maintain
"tangible capital" in an amount not less than 1.5% of adjusted total assets.
"Tangible capital" means core capital less qualifying core deposit intangible
assets and purchased credit card relationships. At December 31, 1996, GWB had
a ratio of tangible capital to total adjusted assets of 5.85%.
 
  The risk-based capital requirements for savings associations are similar in
many respects to the risk-based capital guidelines of the FRB, the Comptroller
of the Currency and the FDIC. Among other things, the risk-based capital
requirements provide that the capital ratio applicable to an asset will be
adjusted to reflect the degree of credit risk associated with such asset and
the asset base for computing a savings association's capital requirement will
include off-balance-sheet assets. The regulations require savings associations
to maintain capital equal to 8% of risk-weighted assets. A savings
association's supplementary capital may be used to satisfy the risk-based
capital ratios only to the extent of that association's core capital. At
December 31, 1996, GWB had a ratio of capital to risk-weighted assets of
11.23%.
 
  FDICIA requires the federal regulatory agencies to review the risk-based
capital standards to ensure that they adequately address interest-rate risk,
concentration of credit risk and risks from nontraditional activities. The OTS
amended its risk-based capital rules to incorporate interest-rate risk
requirements which require a savings association to hold additional capital if
it is projected to experience an excessive decline in "net portfolio value" in
the event interest rates increase or decrease by two percentage points. The
additional capital required is equal to one-half of the amount by which any
decline in net portfolio value exceeds two percent of the savings
association's estimated economic value of assets, as determined by the OTS.
The OTS, however, has not implemented these capital standards relating to
interest-rate risk, pending action of the bank regulatory agencies. As of
December 31, 1996, GWB believes it would have no additional capital
requirement for possible interest-rate risk.
 
  A savings association which fails to meet the capital standards must submit
to the OTS Director a business plan which describes the manner in which it
proposes to increase its capital and the activities in which it will engage.
Any increase in the savings association's assets must be met with a
commensurate increase in the savings association's tangible capital and risk-
based capital. As part of the submission of a capital plan, a savings
association will be required to certify that during the pendency of its
application for approval of its capital plan, it will adhere to certain asset
growth restrictions, and will not make any capital distributions or engage in
certain other prohibited or restricted activities. The OTS Director must, with
certain limited exceptions, limit the asset growth of any such savings
association. In addition, the OTS Director may issue a capital directive to
such a savings association which may contain restrictions the OTS Director
deems necessary or appropriate under the circumstances. GWB is not subject to
any capital directive at this time.
 
  In addition to the above regulatory capital requirements and pursuant to
FDICIA, the federal banking agencies have adopted regulations which establish
a system of progressive constraints as capital levels decline at banks and
savings associations. The "prompt corrective action" rules classify banks and
savings associations into one of five categories based upon capital adequacy,
ranging from "well capitalized" to "critically
 
                                      11
<PAGE>
 
undercapitalized". Furthermore, FDICIA provides that under certain
circumstances a federal banking agency may reclassify an institution to the
next lower capital category based on supervisory information other than the
capital levels of the institution.
 
  The FDIC regulations implementing the prompt corrective action provisions of
FDICIA define the five capital categories as follows: (i) an institution is
"well capitalized" if it has a total risk-based capital ratio of 10.00% or
greater, has a Tier 1 risk-based capital ratio (core capital to risk-weighted
assets) of 6.00% or greater, has a core capital ratio of 5.00% or greater and
is not subject to any written capital order or directive to meet a specific
capital level or any capital measure; (ii) an institution is "adequately
capitalized" if it has a total risk-based capital ratio of 8.00% or greater,
has a Tier 1 risk-based capital ratio of 4.00% or greater and has a core
capital ratio of 4.00% or greater (3.00% for certain highly rated
institutions); (iii) an institution is "undercapitalized" if it has a total
risk-based capital ratio of less than 8.00% or has either a Tier 1 risk-based
or a core capital ratio that is less than 4.00%; (iv) an institution is
"significantly undercapitalized" if it has a total risk-based capital ratio
that is less than 6.00%, or has either a Tier 1 risk-based or a core capital
ratio that is less than 3.00%; and (v) an institution is "critically
undercapitalized" if its "tangible equity" (defined in the prompt corrective
action regulations to mean core capital plus cumulative perpetual preferred
stock) is equal to or less than 2.00% of its total assets. The OTS also has
authority, after an opportunity for a hearing, to downgrade an institution
from "well capitalized" to "adequately capitalized", or to subject an
"adequately capitalized" or "undercapitalized" institution to the supervisory
actions applicable to the next lower category, for supervisory concerns.
 
  GWB believes that it met the requirements to be a "well capitalized"
institution under the regulations as of December 31, 1996.
 
  FDICIA requires the appropriate federal banking agencies to take corrective
action to restrict asset growth, acquisitions, branching and new business with
respect to an "undercapitalized" institution and to take increasingly severe
additional actions if the institution becomes "significantly undercapitalized"
or "critically undercapitalized". FDICIA also prohibits dividends and other
capital distributions and the payment of management fees to a controlling
person if, following such distribution or payment, the institution would fall
within one of the three "undercapitalized" categories.
 
  FDICIA also requires an institution which is "undercapitalized" to submit a
capital restoration plan for improving its capital to the appropriate federal
banking agency. The holding company of such an institution must guarantee that
the institution will meet its capital restoration plan, subject to certain
limitations. If such a guarantee were deemed to be a commitment to maintain
capital under the federal Bankruptcy Code, a claim under such guarantee in a
bankruptcy proceeding involving the holding company would be entitled to a
priority over third party creditors of the holding company.
 
  As a condition of prior regulatory approval of certain transactions, the
Company has provided federal regulators with a commitment to maintain the
regulatory net worth of GWB at the minimum required amount and, if necessary,
to infuse sufficient additional capital to maintain such level.
 
  Under FDICIA, a bank or savings association that is "significantly
undercapitalized" is subject to severe restrictions on its activities, and may
be required, among other things, to issue additional debt or stock, to sell
assets or to be acquired by a depository institution holding company or
combine with another depository institution if one or more grounds exist for
appointing a conservator or receiver for the institution. A bank or savings
association that is "critically undercapitalized" will be subject, with
certain exceptions, to the mandatory appointment of a conservator or receiver
by the appropriate federal banking agency within 90 days after such
institution becomes "critically undercapitalized". In addition, a bank or
savings association that is "critically undercapitalized" is subject to more
severe restrictions on its activities and on payment of subordinated debt, and
may be prohibited, among other things, from entering into material investment,
expansion, acquisition or disposition transactions or paying interest on new
or renewed liabilities at a rate that would significantly increase the
institution's weighted average cost of funds.
 
                                      12
<PAGE>
 
  The FDIC has adopted a minimum core capital standard under which state
nonmember banks are required to hold core capital consisting generally of
common equity, minority interests in equity accounts of consolidated
subsidiaries, and qualifying perpetual preferred stock of at least 3% and up
to 5% of total assets. Banks receiving the highest rating from the FDIC are
permitted to maintain core capital of 3% of total assets, while less healthy
banks are required to maintain core capital of 4 to 5%. A bank with core
capital of less than 2% would be deemed to be in an unsafe and unsound
condition. The OTS has proposed to amend its leverage ratio requirement for
savings associations to adopt a similar standard.
 
  With respect to savings associations, the FDIC will use the core capital
standard in determining whether to approve applications for deposit insurance,
the right to exercise additional powers, or to merge or make acquisitions. The
FDIC may also use the new standard in determining whether to take enforcement
action against a savings association when an unsafe or unsound practice
exists.
 
  The Company's BIF-insured institutions are required to have risk-based
capital of 8% of risk-weighted assets, based on the credit risk deemed
inherent in institutions' assets, including certain off-balance-sheet assets.
In addition, core capital must be 4% of risk-weighted assets. At December 31,
1996, the BIF-insured industrial banks exceeded their required ratios.
 
  Capital Distributions by GWB. The Company is a legal entity separate and
distinct from the Bank and the Company's other subsidiaries. The primary
source of the Company's revenues on an unconsolidated basis has been dividends
from GWB. Various regulatory and tax considerations, however, limit directly
or indirectly the amount of dividends GWB can pay. Should GWB distribute
dividends in excess of the amount of its available earnings and profits (as
determined for federal income tax purposes), such excess would be subject to
federal income tax. At December 31, 1996, the Bank had approximately $628
million of retained earnings available for the payment of dividends without
adverse tax consequences. Dividend payments are further restricted by
regulations as discussed below.
 
  The OTS regulations impose limitations upon "capital distributions" by
savings associations, including cash dividends. The regulations establish a
three-tiered system: Tier 1 includes savings associations with capital at
least equal to their fully phased-in capital requirement which have not been
notified that they are in need of more than normal supervision; Tier 2
includes savings associations with capital above their minimum capital
requirement but less than their fully phased-in requirement; and Tier 3
includes savings associations with capital below their minimum capital
requirement. Tier 1 associations may, after prior notice but without approval
of the OTS, make capital distributions up to the higher of (1) 100% 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 25% to 75% of their net income over the most recent four-quarter
period depending upon their current risk-based capital position. Tier 3
associations may not make any capital distributions without prior approval.
The Company believes that GWB is a Tier 1 association as of December 31, 1996.
Notwithstanding the foregoing, the regulatory authorities have broad
discretion to prohibit any payment of dividends and could take other actions
if they determine that the payment of such dividends would constitute an
unsafe or unsound practice. In addition, FDICIA prohibits dividends and other
capital distributions if, following such distribution, the savings association
would fall within one of three "undercapitalized" categories. See
"Regulation--Capital Requirements".
 
  Community Reinvestment Act. The Community Reinvestment Act ("CRA") requires
each bank or savings association to identify the communities it serves and the
types of credit and other financial services the bank or savings association
is prepared to extend to those communities. The CRA also requires the OTS to
assess a savings association's record of helping to meet the credit needs of
its community and to take such assessment into consideration when evaluating
applications for mergers, acquisitions and other transactions. A less than
satisfactory CRA rating may be the basis for denying such applications.
 
 
                                      13
<PAGE>
 
  In connection with its assessment of CRA performance, the OTS and the bank
regulatory agencies assign a rating of "outstanding", "satisfactory", "needs
to improve" or "substantial noncompliance". Based on the most recent CRA
examination conducted in 1995, GWB received a rating of "outstanding."
 
  Restrictions on Transactions with Affiliates. FIRREA imposes on savings
associations the affiliate transaction restrictions contained in Sections 23A,
23B, 22(g) and 22(h) of the Federal Reserve Act in the same manner and to the
same extent as such restrictions apply to member banks. Such restrictions are
also applicable to the BIF-insured industrial banks. These restrictions, among
other things, prohibit or limit an institution from extending credit to, or
entering into, certain transactions with its affiliates and the principal
shareholders, directors and executive officers of the institution under
certain circumstances. Further, a savings association may not purchase or
invest in securities issued by an affiliate other than a subsidiary. The OTS
is authorized to impose more stringent restrictions on a savings association's
affiliated transactions than those contained in Sections 23A and 23B.
 
  Subsidiary Investment Limits. The amount which a federal savings bank may
invest in service corporations and subsidiaries (whether in equity or debt of
such corporations) is limited to an amount equal to 3% of assets, provided
investments in excess of 2% of assets serve certain primarily community
purposes. The service corporation investment limit (for savings associations
like GWB which meet net worth and certain other requirements) is exclusive of
an amount which may be invested in "conforming" (i.e., otherwise authorized)
loans to service corporations subject to applicable regulatory requirements.
At December 31, 1996, GWB's aggregate investment in service corporations was
approximately .3% of its assets, and there were no conforming loans.
 
  Notice of Certain Activities. FIRREA requires a savings association seeking
to establish a new subsidiary, acquire control of an existing company (after
which it would be a subsidiary), or conduct a new activity through a
subsidiary, to provide 30 days prior notice to the FDIC and the OTS and
conduct any activities of the subsidiary in accordance with regulations and
orders of the OTS. The OTS has the power to force a savings association to
divest or terminate any activity that it determines is a serious threat to the
financial safety, soundness or stability of such savings association or is
otherwise inconsistent with sound banking practices. In addition, the FDIC is
authorized to determine whether any specific investment activity poses a
threat to the SAIF and to prohibit any SAIF member institution from engaging
directly in such activity, even if it is an activity that is an otherwise
permissible investment for a federal savings association.
 
  Loans-to-One Borrower Limitations. FIRREA conforms savings associations'
loans-to-one borrower limitations to those applicable to national banks. The
lending limits for national banks apply to all savings associations in the
same manner and to the same extent as they apply to national banks. The basic
lending limit is 15% of the amount of Tier 1 and Tier 2 capital actually
included in risk-based capital, plus the allowance for loan and lease losses
not included in Tier 2 capital. It is not expected that this limitation will
have any significant effect upon GWB's lending activities as currently
conducted.
 
  Brokered Deposits. A rule adopted by the FDIC permits only "well
capitalized" institutions to obtain brokered deposits. "Adequately
capitalized" institutions may obtain brokered deposits if they receive a
waiver from the FDIC. The rule adopted by the FDIC also prohibits institutions
which are not "well capitalized" from soliciting deposits at rates
significantly higher than prevailing rates. GWB believes that it is a "well
capitalized" institution at December 31, 1996.
 
  Liquidity. OTS regulations require savings associations to maintain for each
calendar month an average daily balance of liquid assets (including cash and
certain time deposits, bankers' acceptances, specified corporate obligations
and specified United States government, state government and federal agency
obligations) of not less than 5% of the average daily balance of its net
withdrawable deposit accounts (the amount of all deposit accounts less the
unpaid balance of all loans made on the security of such accounts) plus short-
term debt (borrowings payable on demand or in one year or less) during the
preceding calendar month. This liquidity requirement may be changed from time
to time by the OTS within the statutory range of 4% to 10%. OTS regulations
also require
 
                                      14
<PAGE>
 
each savings association to maintain for each calendar month an average daily
balance of short-term liquid assets (generally those having maturities of 12
months or less) at an amount not less than 1% of the average daily balance of
its net withdrawable accounts plus such short-term debt during the preceding
calendar month. For the year ended December 31, 1996, average liquidity and
average short-term liquidity ratios of GWB were 5.48% and 3.06%, respectively.
For the year ended December 31, 1995, average liquidity and average short-term
liquidity ratios were 5.46% and 2.29%, respectively.
 
  Federal Home Loan Bank System. GWB is a member of the FHLBank System, which
consists of 12 regional Federal Home Loan Banks. Members of the FHLBank system
are required to own shares of capital stock in the applicable FHLBank in an
amount equal to the greater of 1% of the aggregate principal amount of the
member's unpaid residential mortgages, 5% of FHLBank advances to the member or
 .3% of total assets as of the close of each calendar year.
 
  The FHLBank serves as a reserve or central bank for the member institutions
within its assigned region. It makes advances (i.e. loans) to members in
accordance with its established policies and procedures. The maximum amount of
credit which the FHLBank will extend for purposes other than meeting
withdrawals varies from time to time in accordance with its policies. The
FHLBank interest rates charged for advances vary depending upon maturity, the
cost of funds to the FHLBank and the purpose of the borrowing.
 
  As of December 31, 1996, GWB held $378 million of FHLBank stock and received
dividends in the amount of $22.3 million in 1996 with respect to such stock.
 
  Federal Reserve Board Regulations. Pursuant to the Depository Institutions
Deregulation and Monetary Control Act of 1980, the FRB adopted regulations
that require depository institutions to maintain reserves against their
transaction accounts and nonpersonal time deposits. In December 1990, the FRB
eliminated the reserve requirement on nonpersonal time deposits. The balances
maintained to meet the reserve requirements imposed by the FRB may be used to
satisfy liquidity requirements imposed by the OTS. At December 31, 1996, GWB's
balances with the FRB totaled $127 million. The effect of this reserve
requirement is to decrease an institution's available investment funds. The
current reserve requirement on transaction accounts is 10%. Savings
associations have authority to use various FRB services and to borrow from the
Federal Reserve Bank's "discount window", but FRB regulations require them to
exhaust all FHLBank sources before borrowing from a Federal Reserve Bank. In
addition, FDICIA restricts the period during which discount advances may be
outstanding to "undercapitalized" depository institutions. As a creditor and a
financial institution, GWB is subject to additional regulations promulgated by
the FRB, including, without limitation, Regulation B (Equal Credit Opportunity
Act), Regulation E (Electronic Funds Transfers Act), Regulation F (Interbank
Liabilities), Regulation Z (Truth in Lending Act), Regulation CC (Expedited
Funds Availability Act) and Regulation DD (Truth in Savings Act).
 
  Safety and Soundness Standards. Pursuant to statutory requirements, the OTS
has issued a rule that sets forth guidelines, rather than a regulation, in the
areas of excessive compensation, internal controls, information systems,
documentation, credit underwriting, interest risk exposure, asset growth and
compliance with laws and regulations. Under the excessive compensation
standard, the OTS will analyze a person's compensation history, post-
employment benefits, the financial condition of the institution, compensation
practices at comparable institutions and other relevant information. The final
rule authorizes, rather than requires, the OTS to seek a compliance plan from
institutions failing to meet the safety and soundness guidelines. In addition
to the final rule on safety and soundness, the OTS has issued asset quality
and earnings standards that require monitoring and reporting systems to the
Board of Directors and management to identify emerging problems and corrective
actions to resolve them.
 
  Real Estate Lending Standards. The federal banking regulatory agencies,
including the OTS, adopted regulations which require institutions to adopt
written real estate lending policies that, among other things, must be
consistent with guidelines adopted by the agencies. Among the guidelines
adopted by the OTS and the other agencies are maximum loan-to-value ratios for
land loans (65%); land development loans (75%); construction loans (80-85%);
loans on owner-occupied 1-4 unit residential properties, including home equity
loans (no specific
 
                                      15
<PAGE>
 
required limit, but loans at or above 90% require private mortgage insurance
or readily marketable collateral); and loans on other improved property (85%).
 
  The guidelines permit institutions to make loans in excess of the
supervisory loan-to-value limits if such loans are supported by other credit
factors, but the aggregate of such nonconforming loans should not exceed the
institution's total capital, and the aggregate of nonconforming loans secured
by real estate other than 1-4 unit residential properties should not exceed
30% of total capital. Institutions are required to review, and update as
appropriate, their real estate lending policies on at least an annual basis.
 
  Classification of Assets. Savings associations are required to classify
their assets on a regular basis, to establish adequate allowances for losses
and report the results of such classification quarterly to the OTS. For
additional information see Note 1 of the Notes to Consolidated Financial
Statements in Item 8, "Financial Statements and Supplementary Data".
 
  With respect to classified assets, if the OTS concludes that additional
assets should be classified or that the valuation allowances established by
the savings association are inadequate, the examiner may determine, subject to
review by the savings association's OTS Regional Director, the need for and
extent of additional classification or any increase necessary in the savings
association's general or specific valuation allowances.
 
  A savings association is also required to set aside adequate valuation
allowances to the extent that an affiliate or subsidiary holds assets posing a
risk to the savings association. A savings association must also establish
liabilities for off-balance-sheet items, such as letters of credit, when
losses become both probable and reasonably estimable.
 
  The OTS has issued guidance for the classification of assets and a policy on
the classification of collateral-dependent loans (where proceeds from
repayment can be expected to come only from the operation and/or sale of the
collateral). For troubled collateral-dependent loans where it is probable that
the lender will be unable to collect all amounts due, a savings association
must classify as "loss" any excess of the recorded investment in the loan over
its "value", and classify the remainder as "substandard". The "value" of a
loan is the fair value of the collateral less estimated costs to sell.
 
  The federal banking agencies, including the OTS, have issued an interagency
policy statement on the allowance for loan and lease losses (the "Policy
Statement"). The Policy Statement requires that federally-insured depository
institutions maintain an allowance for loan and lease losses ("ALLL") adequate
to absorb credit losses associated with the loan and lease portfolio,
including all binding commitments to lend. Given the appropriate facts and
circumstances as of the evaluation date, the Policy Statement defines an
adequate ALLL as a level that is no less than the sum of (1) for loans and
leases classified as substandard or doubtful, credit losses over the remaining
effective lives of such loans and leases; (2) for loans and leases that are
not classified, all estimated credit losses forecasted for the upcoming 12
months; and (3) amounts for estimated losses from transfer risk on
international loans. Additionally, an adequate level of ALLL should reflect an
additional margin for imprecision inherent in most estimates of expected
credit losses.
 
  The Policy Statement also provides guidance to examiners in evaluating the
adequacy of the ALLL. Among other things, the Policy Statement directs
examiners to check the reasonableness of ALLL methodology by comparing the
reported ALLL against the sum of (1) 50% of the portfolio that is classified
doubtful, (2) 15% of the portfolio that is classified substandard; and (3) for
the portions of the portfolio that have not been classified (including those
loans and leases designated special mention), estimated credit losses over the
upcoming 12 months given the facts and circumstances as of the evaluation date
(based on the institution's average annual rate of net charge-offs experienced
over the previous two or three years on similar loans and leases, adjusted for
current conditions and trends).
 
  The Policy Statement specifies that the amount of ALLL determined by the sum
of the amounts above is neither a floor nor a "safe harbor". However, it is
expected that examiners will review a shortfall relative to this amount as
indicating a need to more closely review management's analysis to determine
whether it is reasonable, supported by the weight of reliable evidence and
that all relevant factors have been appropriately considered.
 
                                      16
<PAGE>
 
                                   EMPLOYEES
 
  GWFC employed 13,028 persons at December 31, 1996. Employees are not
represented by a union or collective bargaining group and GWFC considers its
employee relations to be satisfactory. Employees are provided retirement,
savings incentive and other benefits, including life, health and accident and
hospital insurance.
 
ITEM 2. PROPERTIES
 
  The executive offices of both GWFC and GWB are located in the home office
building owned by GWB at 9200 Oakdale Avenue, Chatsworth, California. GWFC
owns approximately 47% of the 6.3 million square feet in which its
headquarters, administrative and branch offices are located throughout several
states, including California and Florida.
 
  During 1996, a strategic review of the corporate headquarters facilities was
completed to reduce the Company's premises costs. The restacking of the
corporate headquarters campus will be implemented throughout 1997 and will
include vacating three buildings which will improve the density of the
remaining buildings. The restack initiatives will result in a reduction of
272,000 useable square feet or 27% of the campus.
 
  See Note 11 of the Notes to Consolidated Financial Statements in Item 8,
"Financial Statements and Supplementary Data", for information on properties,
leases and property operations.
 
ITEM 3. LEGAL PROCEEDINGS
 
  See Item 1, Business "Litigation Relating to the Ahmanson Merger Proposal".
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
  None.
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS
 
  The following information appears in Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Item 8,
"Financial Statements and Supplementary Data".
 
    (a) Market and market prices of the common stock--pages 107, 108 and
        109
 
    (b) Approximate number of common security holders--page 107
 
    (c) Common stock dividend history and restrictions--pages 107, 108 and
        109
 
    (d) Common stock dividend policy--pages 13, 92 and 93
 
 
                                      17
<PAGE>
 
ITEM 6. SELECTED FINANCIAL DATA
 
FIVE-YEAR SUMMARY
 
<TABLE>
<CAPTION>
                              1996          1995          1994           1993          1992
                          -------------  -----------  -------------  -------------  -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<S>                       <C>            <C>          <C>            <C>            <C>
SUMMARY OF OPERATIONS
Interest income           $   3,233,931  $ 3,238,711  $   2,629,718  $   2,680,784  $ 3,091,093
Interest expense              1,855,914    1,936,582      1,307,448      1,297,930    1,668,731
                          -------------  -----------  -------------  -------------  -----------
Net interest income           1,378,017    1,302,129      1,322,270      1,382,854    1,422,362
Provision for loan and
 lease losses                   208,971      187,700        207,200        463,000      420,000
                          -------------  -----------  -------------  -------------  -----------
Net interest income af-
 ter provision for loan
 and lease losses             1,169,046    1,114,429      1,115,070        919,854    1,002,362
Noninterest income              331,825      327,668        367,897        327,855      282,131
Noninterest expense           1,314,249    1,019,975      1,076,433      1,155,662    1,188,981
                          -------------  -----------  -------------  -------------  -----------
Earnings before taxes on
 income                         186,622      422,122        406,534         92,047       95,512
Federal and state taxes
 on income                       70,800      161,100        155,300         30,000       41,600
Accounting changes                   --           --             --             --       31,094
                          -------------  -----------  -------------  -------------  -----------
Net earnings              $     115,822  $   261,022  $     251,234  $      62,047  $    85,006
                          =============  ===========  =============  =============  ===========
SUMMARY OF FINANCIAL
 CONDITION
Cash and cash equiva-
 lents                    $     834,292  $ 1,094,417  $   1,148,565  $     975,706  $ 1,036,579
Securities available-
 for-sale                     1,279,283    1,092,459        917,095        871,074      623,906
Loans                        30,823,192   29,887,349     28,378,368     30,661,403   30,584,604
Mortgage-backed securi-
 ties                         7,788,551    9,803,441      9,269,607      3,189,396    3,168,057
Real estate                     159,997      217,112        256,967        434,077    1,153,383
Other assets                  1,989,257    2,491,986      2,247,655      2,216,704    1,872,657
                          -------------  -----------  -------------  -------------  -----------
Total assets              $  42,874,572  $44,586,764  $  42,218,257  $  38,348,360  $38,439,186
                          =============  ===========  =============  =============  ===========
Deposits                  $  28,586,773  $29,234,928  $  28,700,947  $  31,531,563  $30,908,665
Borrowings                   10,501,813   11,345,634     10,120,660      3,479,341    4,151,052
Other liabilities             1,090,786    1,083,726        912,864        914,055      929,735
Company-obligated
 mandatorily redeemable
 preferred securities of
 the Company's
 subsidiary trust               100,000      100,000             --             --           --
Stockholders' equity-
 substantially re-
 stricted                     2,595,200    2,822,476      2,483,786      2,423,401    2,449,734
                          -------------  -----------  -------------  -------------  -----------
Total liabilities and
 equity                   $  42,874,572  $44,586,764  $  42,218,257  $  38,348,360  $38,439,186
                          =============  ===========  =============  =============  ===========
PER COMMON SHARE DATA
Fully diluted earnings    $         .69  $      1.71  $        1.69  $         .28  $       .53
Dividends                           .98          .92            .92            .92          .91
Stock price range         31 1/8-21 1/8    27 1/8-16  20 7/8-15 3/8  20 3/8-15 5/8    19 3/4-13
Year-end closing price               29       25 3/8             16             20       17 1/2
Stockholders' equity              17.63        18.42          16.30          16.05        16.48
Tangible stockholders'
 equity                           15.55        16.06          13.59          12.80        14.01
Price earnings ratio                 42           15              9             71           33
Dividend rate of return             3.4%         3.6%           5.8%           4.6%         5.2%
Dividend rate as a per-
 cent of earnings                 142.0%        53.8%          54.4%         328.6%       171.7%
AT YEAR END
Average equity to aver-
 age assets                         6.3%         5.9%           6.2%           6.5%         6.2%
Return on average assets            .27%         .59%           .65%           .16%         .22%
Return on average equity           4.23%       10.03%         10.35%          2.53%        3.50%
Number of common shares
 issued                     137,875,955  137,279,331    134,315,592    132,616,172  130,814,018
Number of beneficial and
 record stockholders             49,124       51,178         52,633         55,469       42,332
Number of employees              13,028       14,393         15,644         17,029       16,016
Number of offices                 1,138        1,207          1,210          1,180        1,101
</TABLE>
 
 
                                       18
<PAGE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS
 
                                   OVERVIEW
 
  Great Western reported consolidated net earnings of $115.8 million, or $.69
per share, for 1996 compared to $261 million, or $1.71 per share for 1995 and
$251.2 million, or $1.69 per share for 1994. The Company's net earnings for
1996 were reduced by a special one-time federal deposit insurance assessment
imposed on the nation's thrift industry. Without this $188.4 million special
insurance premium assessment and other nonrecurring charges taken in 1996,
including a $68.3 million pre-tax restructuring charge primarily to reengineer
the Company's loan origination operations and consolidate the Company's
corporate headquarters and a $50 million provision for loan and lease losses
on the bulk sale of nonperforming loans and real estate, annual earnings for
1996 would have been $310.7 million, or $2.09 per share. In 1994, the
Company's pre-tax earnings included a $62 million gain on the sale of certain
retail banking branches and a $12 million write-off of interstate banking
access rights. Without the $62 million gain and the $12 million write-off, the
annual earnings for 1994 would have been $220 million, or $1.65 per share.
 
  Provisions for losses on loans and leases in 1996 rose to $209 million, up
from $187.7 million in 1995 and $207.2 million in 1994. The $209 million
provision in 1996 included a charge of $50 million attributable to the bulk
sale of $292.4 million of nonperforming loans and real estate associated
primarily with loans made in 1989 through 1992. Excluding the bulk sale, the
provision would have fallen to $159 million reflecting the improvement in the
real estate market. Net charge-offs of 1-4 unit residential loans ("single-
family" or "SFR") remained flat from 1995 to 1996. Excluding the charge-off of
$58.4 million attributable to the bulk sale of nonperforming loans and real
estate, charge-offs for SFR's declined from $195.4 million in 1994 to $137
million in 1996. Nonperforming assets were $546 million, or 1.27% of assets at
December 31, 1996, $768.3 million, or 1.72% of assets at December 31, 1995 and
$846 million, or 1.98% of assets at December 31, 1994.
 
  Net interest income was $1.38 billion for 1996 compared with $1.30 billion
for 1995 and $1.32 billion in 1994. The interest spread for 1996 was 3.15%
compared with 3.00% for 1995 and 3.50% for 1994. The Company's net interest
margin was 3.33% for 1996 compared with 3.13% for 1995 and 3.60% for 1994.
 
  Noninterest income was $331.8 million in 1996, $327.7 in 1995 and $367.9
million in 1994. In 1996, banking fees increased $25.0 million and securities
operations increased $9.1 million. These increases were offset in part by
$17.9 million in write-downs of mortgage-backed securities, a $7.3 million
provision for mortgages sold with recourse, and a $4.1 million loss on
affordable housing investments. In 1996 a $22.5 million gain was recorded on
the sale of the student loan business. This gain was offset by a decrease from
1995 to 1996 in gains on sale of mortgages and mortgage-backed securities of
$5.1 million and a decrease in the gain on sale of leases of $14.1 million.
 
  Excluding the SAIF assessment and the restructuring expense, noninterest
expense was $1.1 billion in 1996, $1 billion in 1995 and $1.1 billion in 1994.
The increase of $37.6 million in 1996 was in part the result of increased
professional fees of $22.2 million attributable to new initiatives and
increased litigation fees and a $5.0 million decrease in telecommunications
costs.
 
                               LINE OF BUSINESS
 
  Great Western Financial Corporation is managed along four major lines of
business: Consumer Finance, Real Estate Services, Retail Banking and Treasury.
The financial performance of these business lines is measured by the Company's
profitability reporting system. The system uses various management accounting
principles to ensure each business line's financial results reflect the
underlying economics of that business.
 
  To properly assess the profitability of each business unit, charges for
funds employed and credits for funds generated are assigned on a matched
maturity basis to minimize interest-rate risk in the business line and
centralize that exposure in the Treasury unit where it is managed for the
Company as a whole. Expenses incurred
 
                                      19
<PAGE>
 
in the Company's support units are assigned to business lines based on
services provided to a particular business unit. Residual expenses, assets
employed and other overhead costs are allocated based on the ratio of a
business unit's noninterest expense to the Company total noninterest expense.
Loss provision and capital are allocated based on management's assessment of
the risk profile of each business line. Finally, loans originated in the Real
Estate unit are purchased by the Treasury unit at a transfer price that
reflects the risk-adjusted value of the loans.
 
  Since there is no authoritative guidance for management accounting
principles, the organizational structure of the institution and the allocation
methodologies it employs result in business line financial results that are
not necessarily comparable across companies. As such, Great Western's business
line performance may not be directly comparable with similar information from
other financial institutions. Results by line of business for 1995 and 1996
are presented on the following pages.
 
SELECTED FINANCIAL HIGHLIGHTS BY LINE OF BUSINESS
 
  Results of operations and financial highlights by line of business for 1996
and 1995 are presented below.
 
<TABLE>
<CAPTION>
                                              REAL ESTATE
                         CONSUMER FINANCE       SERVICES         RETAIL BANKING           TREASURY              CONSOLIDATED
                         ------------------  ---------------   --------------------  ---------------------   --------------------
                           1996      1995     1996    1995       1996       1995       1996        1995        1996       1995
                         --------  --------  ------  -------   ---------  ---------  ---------   ---------   ---------  ---------
(DOLLARS IN MILLIONS)
<S>                      <C>       <C>       <C>     <C>       <C>        <C>        <C>         <C>         <C>        <C>
SUMMARY INCOME
 STATEMENT
Net interest income      $  258.7  $  258.0  $ 17.8  $  21.5   $   657.8  $   741.2  $   443.7   $   281.4   $ 1,378.0  $ 1,302.1
Provision for loan and
 lease losses                58.8      48.5      --       --         3.2        2.6      147.0       136.6       209.0      187.7
Noninterest income           27.2      29.2   151.6     93.3       251.7      205.7      (98.7)       (0.6)      331.8      327.6
Noninterest expense
 excluding nonrecurring
 items                      128.4     132.1   120.9    135.1       700.2      654.3      108.0        98.4     1,057.5    1,019.9
 Restructuring expense         --        --    37.3       --        29.8         --        1.2          --        68.3         --
 SAIF special
  assessment                   --        --      --       --          --         --      188.4          --       188.4         --
                         --------  --------  ------  -------   ---------  ---------  ---------   ---------   ---------  ---------
 Total noninterest
  expense                   128.4     132.1   158.2    135.1       730.0      654.3      297.6        98.4     1,314.2    1,019.9
                         --------  --------  ------  -------   ---------  ---------  ---------   ---------   ---------  ---------
 Earnings before tax         98.7     106.6    11.2    (20.3)      176.3      290.0      (99.6)       45.8       186.6      422.1
Income tax expense           37.0      42.3     4.5     (8.1)       70.5      116.0      (41.2)       10.9        70.8      161.1
                         --------  --------  ------  -------   ---------  ---------  ---------   ---------   ---------  ---------
 Net earnings            $   61.7  $   64.3  $  6.7  $ (12.2)  $   105.8  $   174.0  $   (58.4)  $    34.9   $   115.8  $   261.0
                         ========  ========  ======  =======   =========  =========  =========   =========   =========  =========
AVERAGE BALANCE SHEET
 DATA
Real estate loans        $     --  $     --  $   --  $    --   $      --  $      --  $28,066.0   $27,055.0   $28,066.0  $27,055.0
Consumer loans            2,105.0   2,016.0      --       --       533.3      497.3        0.7         0.7     2,639.0    2,514.0
Assets                    2,419.1   2,365.1   137.3    150.8     1,308.9    1,533.2   39,809.7    39,928.9    43,675.0   43,978.0
Deposits                    153.9     146.0      --       --    28,751.0   28,856.6       74.1       208.4    28,979.0   29,211.0
Equity                      430.8     450.9   328.9    329.4     1,632.9    1,627.9      347.4       193.8     2,740.0    2,602.0
PERFORMANCE METRICS
Return on average
 equity                     14.33%    14.26%   2.05%   (3.71)%      6.48%     10.69%    (16.81)%     18.03 %      4.23%     10.03%
Efficiency ratio            44.91%    46.01%  93.36%  117.72 %     80.27%     69.10%     86.26 %     35.01 %     76.86%     62.58%
PERFORMANCE METRICS
 (EXCLUDING
 NONRECURRING ITEMS)
Return on average
 equity                     14.33%    14.26%   8.85%   (3.71)%      7.57%     10.69%     15.92 %     18.03 %      9.85%     10.03%
Efficiency ratio            44.91%    46.01%  71.36%  117.72 %     76.99%     69.10%     31.33 %     35.01 %     61.85%     62.58%
</TABLE>
 
  In 1995, the Company began managing and measuring the performance of its
lines of business under a new methodology. In 1996, the Company refined its
allocation methodologies. Results from 1994 are not available under the
revised methodologies.
 
                                      20
<PAGE>
 
CONSUMER FINANCE
 
  The Consumer Finance line of business is made up of Blazer Financial
Services, City Finance Company, First Community Industrial Bank and Great
Western Thrift & Loan. These companies offer retail installment financing
primarily in the Southeast and Southwest areas of the United States. During
1996, the Consumer Finance line of business had net income of $61.7 million.
Despite growth in the loan portfolio, credit quality for the market served by
this line of business deteriorated in 1996 as evidenced by the year over year
increase in loan loss provision of $10.3 million. Efforts are underway at the
Consumer Finance group to aggressively pursue a more diversified customer base
through specialized training for sales staff, broadened product offerings and
increased use of technology. With return on assets of more than 2.5% and
return on equity of more than 14%, the 1996 financial performance of the
Consumer Finance line of business once again demonstrated the value of this
business unit to the Company.
 
REAL ESTATE SERVICES
 
  The Real Estate Services line of business houses the Company's residential
mortgage origination and loan servicing businesses. Loans are originated in
Great Western's nationwide retail lending offices and through the Company's
wholesale origination function. Fixed rate loans are sold in the secondary
market and adjustable rate loans are primarily transferred to the Treasury
line of business for portfolio investment.
 
  In 1996, this business unit embarked on a series of major re-engineering
efforts designed to improve efficiency, reduce cost and increase production
volume. These efforts will continue throughout 1997. Benefits of the re-
engineering are already being realized as noninterest expense in the Real
Estate line of business dropped 11%, or $14.2 million, during the year.
 
RETAIL BANKING
 
  The Retail Banking line of business includes Great Western's branch banking
franchise, direct banking business and diversified retail businesses including
Sierra Capital Management and Great Western Financial Securities Corporation.
Also in this business unit are Great Western's business banking and consumer
lending functions which figure prominently in the Company's evolution into a
full service bank.
 
  In 1996, the Retail Banking business line added $105.8 million to the
Company's net income. While net interest income declined, the internal credit
for funds generated was less in 1996 than in 1995 and the Retail Banking unit
realized significant growth in fee income. Broadened product offerings, focus
on reducing fee waivers and the introduction of various fee-generating
programs contributed to the 22% increase in noninterest income in the Retail
Banking unit over 1995 levels. The Retail Banking business line was allocated
$29.8 million of the restructuring charge for branch closures and its portion
of the restacking of the corporate headquarters facilities.
 
TREASURY
 
  The Treasury line of business houses the Company's mortgage loan and
investment securities portfolios and meets the wholesale funding needs of the
Company. Additionally, the Treasury function is responsible for hedging the
Company's interest-rate risk and as such, houses the funds transfer pricing
mismatch unit. The mismatch unit is counterparty to the internal charges and
credits for funds received by each of the other business lines. As noted in
the Retail Banking discussion, the credit for funds generated declined from
1995 to 1996. The mismatch unit benefits from such cycles in the internal
transfer pricing environment as evidenced by the increase in net interest
income in the Treasury unit in 1996 compared to 1995. Also contributing to the
net interest income increase in 1996 over 1995 is the increase in real estate
loans outstanding.
 
  Excluding the $188.4 million one-time SAIF assessment, the Treasury line of
business contributed $56.7 million to the Company's net income. Further
excluding Treasury's share of the Company's fourth quarter restructuring
charge, this business unit generated a return on allocated equity of 15.9%.
 
                                      21
<PAGE>
 
                             EARNINGS PERFORMANCE
 
NET INTEREST INCOME
 
  In 1996, net interest income rose to $1.38 billion from $1.30 billion in
1995 and $1.32 billion in 1994. The increase in net interest income of $75.9
million in 1996 was attributed to an increased interest rate spread. The
interest spread for 1996 was 3.15% compared with 3.00% for 1995 and 3.50% for
1994. The Company's net interest margin was 3.33% for 1996 compared with 3.13%
for 1995 and 3.60% for 1994. The increase in the spread was due to a decrease
in the cost of funds in the second and third quarters of 1996 and a slight
overall increase in the annual rate received on loans and investments. The
decrease in the cost of funds was a result of an overall decrease of 13 basis
points in the rate of interest paid and a decrease of $482 million in the
total amount of interest-bearing liabilities. The decrease in interest income
in 1996 was due to a $196.1 million decrease in average earning assets from
1995, partially offset by a 2 basis point increase in the overall rate. The
interest spread contracted in 1994 and the first half of 1995 as interest
rates rose sharply and the Company's margin was affected by the ARM repricing
lag. During the second half of 1995, the interest spread began to benefit from
declining interest rates.
 
  The following tables of net interest income display the average monthly
balances, interest income and expense and average rates by asset and liability
component for the periods indicated:
 
<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                           --------------------------------------------------------------------------
                                     1996                     1995                     1994
                           ------------------------ ------------------------ ------------------------
                           AVERAGE          AVERAGE AVERAGE          AVERAGE AVERAGE          AVERAGE
                           BALANCE INTEREST  RATE   BALANCE INTEREST  RATE   BALANCE INTEREST  RATE
                           ------- -------- ------- ------- -------- ------- ------- -------- -------
(DOLLARS IN MILLIONS)
<S>                        <C>     <C>      <C>     <C>     <C>      <C>     <C>     <C>      <C>
Earning Assets
 Certificates of deposit,
  repurchase agreements
  and federal funds and
  securities available-
  for-sale                 $ 1,824  $  114    6.24% $ 1,545  $   98    6.36% $ 1,121  $   61    5.44%
 Mortgage-backed
  securities                 8,875     638    7.19   10,486     753    7.18    4,763     276    5.79
 Loans
   Real estate              28,066   2,066    7.36   27,055   1,983    7.33   28,482   1,911    6.71
   Consumer Finance          2,105     370   17.59    2,016     364   18.07    1,868     342   18.31
   Other                       534      46    8.62      498      41    8.13      418      39    9.33
                           -------  ------   -----  -------  ------   -----  -------  ------   -----
     Total earning assets   41,404   3,234    7.81   41,600   3,239    7.79   36,652   2,629    7.17
Other assets                 2,271                    2,378                    2,289
                           -------                  -------                  -------
     Total assets           43,675                   43,978                   38,941
                           =======                  =======                  =======
Interest Bearing
 Liabilities
 Deposits
   Checking                  4,449      33    0.74    4,355      35    0.81    4,566      40    0.88
   Money market and other
    savings                  6,555     193    2.94    6,893     188    2.73    8,519     198    2.32
   Term                     17,640     945    5.36   17,420     973    5.58   16,623     699    4.21
   Wholesale                   336       9    2.68      543      21    3.92      478      13    2.72
                           -------  ------   -----  -------  ------   -----  -------  ------   -----
     Total deposits         28,980   1,180    4.07   29,211   1,217    4.17   30,186     950    3.15
 Borrowings
   Short-term borrowings
    from FHLB                1,493      82    5.49       15       1    5.67       80       4    5.00
   Securities sold under
    repurchase agreements    5,373     295    5.48    7,051     422    5.99    1,985      98    4.94
   Short-term borrowings     1,193      64    5.36    1,593     101    6.36      741      35    4.72
   Long-term borrowings      2,830     235    8.30    2,481     196    7.87    2,591     221    8.53
                           -------  ------   -----  -------  ------   -----  -------  ------   -----
     Total borrowings       10,889     676    6.21   11,140     720    6.46    5,397     358    6.63
                           -------  ------   -----  -------  ------   -----  -------  ------   -----
     Total interest
      bearing liabilities   39,869   1,856    4.66   40,351   1,937    4.79   35,582   1,308    3.67
                           -------  ------   -----  -------  ------   -----  -------  ------   -----
Other liabilities            1,066                    1,025                      931
Stockholders' equity         2,740                    2,602                    2,428
                           -------                  -------                  -------
     Total liabilities and
      equity               $43,675                  $43,978                  $38,941
                           =======                  =======                  =======
Interest spread                               3.15%                    3.00%                    3.50%
                                             =====                    =====                    =====
Effective yield summary
 Interest income/total
  earning assets           $41,404  $3,234    7.81% $41,600  $3,239    7.79% $36,652  $2,630    7.17%
 Interest expense/total
  earning assets            41,404   1,856    4.48   41,600   1,937    4.66   36,652   1,308    3.57
                                    ------   -----           ------   -----           ------   -----
Net interest income/net
 interest margin                    $1,378    3.33%          $1,302    3.13%          $1,322    3.60%
                                    ======   =====           ======   =====           ======   =====
</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 was $38.4
million for the year ended December 31, 1996, compared with $38.1 million for
the year ended December 31, 1995 and $46.9 million for the year ended
December 31, 1994.
 
                                      22
<PAGE>
 
  The following table shows the components of the change in net interest
income for the years ended December 31, 1996, 1995 and 1994 that are included
in the Consolidated Statement of Operations in Item 8, "Financial Statements
and Supplementary Data."
<TABLE>
<CAPTION>
                                               YEAR ENDED DECEMBER 31
                                      -----------------------------------------
                                      1996 VS. 1995 1995 VS. 1994 1994 VS. 1993
                                      ------------- ------------- -------------
(DOLLARS IN MILLIONS)
<S>                                   <C>           <C>           <C>
Certificates of deposits, repurchase
 agreements and federal funds and
 securities available-for-sale
  Rate (1)                                $  (2)        $  10         $ (18)
  Volume (2)                                 18            23            17
  Rate/Volume (3)                            --             4            (5)
                                          -----         -----         -----
                                             16            37            (6)
                                          -----         -----         -----
Mortgage-backed securities
  Rate (1)                                    2            65           (14)
  Volume (2)                               (116)          332           113
  Rate/Volume (3)                            --            79            (8)
                                          -----         -----         -----
                                           (114)          476            91
                                          -----         -----         -----
Real estate loans
  Rate (1)                                    8           177           (66)
  Volume (2)                                 74           (96)          (67)
  Rate/Volume (3)                            --            (9)            2
                                          -----         -----         -----
                                             82            72          (131)
                                          -----         -----         -----
Consumer Finance and other loans
  Rate (1)                                  (10)           (5)          (17)
  Volume (2)                                 16            27            27
  Rate/Volume (3)                            (1)           --            (1)
                                          -----         -----         -----
                                              5            22             9
                                          -----         -----         -----
Other assets
  Rate (1)                                    3            (4)           (3)
  Volume (2)                                  3             7           (11)
  Rate/Volume (3)                            --            (1)           --
                                          -----         -----         -----
                                              6             2           (14)
                                          -----         -----         -----
Interest earning assets
  Rate                                        1           243          (118)
  Volume                                     (5)          293            79
  Rate/Volume                                (1)           73           (12)
                                          -----         -----         -----
                                             (5)          609           (51)
                                          -----         -----         -----
Deposits
  Rate (1)                                  (35)          266           (23)
  Volume (2)                                 (4)           (4)           35
  Rate/Volume (3)                             1             5            (1)
                                          -----         -----         -----
                                            (38)          267            11
                                          -----         -----         -----
Borrowings
  Rate (1)                                  (55)           17             8
  Volume (2)                                (14)          276            (9)
  Rate/Volume (3)                            26            69            --
                                          -----         -----         -----
                                            (43)          362            (1)
                                          -----         -----         -----
Interest bearing liabilities
  Rate                                      (90)          283           (15)
  Volume                                    (18)          272            26
  Rate/Volume                                27            74            (1)
                                          -----         -----         -----
                                            (81)          629            10
                                          -----         -----         -----
Change in net interest income             $  76         $ (20)        $ (61)
                                          -----         -----         -----
</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 are included in their respective loan categories.
    Amortized net deferred loan fees are included in the interest income
    calculations. The amortization of net deferred loan fees was $25.9 million
    in 1996, $33.5 million in 1995 and $53.4 million in 1994.
 
                                      23
<PAGE>
 
NONINTEREST INCOME
 
  Income from noninterest sources for 1996, 1995 and 1994 were as follows:
 
<TABLE>
<CAPTION>
                                              YEAR ENDED DECEMBER 31
                                            ----------------------------
                                              1996      1995      1994
                                            --------  --------  --------
(DOLLARS IN THOUSANDS)
<S>                                         <C>       <C>       <C>
Retail banking fees
  NSF and overdraft protection              $ 74,319  $ 57,140  $ 54,127
  Service charges-checking accounts           38,417    36,216    35,058
  ATM transaction fees                        27,905    25,220    17,866
  Other banking fees                          39,230    36,286    33,652
                                            --------  --------  --------
    Total banking fees                       179,871   154,862   140,703
                                            --------  --------  --------
Servicing fees                                45,684    55,159    50,853
Securities operations
  Brokerage                                   19,135    11,037    23,555
  Mutual fund asset management                11,040    10,055    16,347
                                            --------  --------  --------
    Total securities operations               30,175    21,092    39,902
                                            --------  --------  --------
Net insurance operations                      29,570    28,861    27,636
Real estate fees                              29,105    24,208    29,385
Net gain on sale of student loans             23,388       495     1,673
Net gain on sale of mortgages                  8,562     8,824     5,339
Gain on sale of mortgage-backed securities     8,790    13,585        --
Writedowns on mortgage-backed securities     (17,906)       --        --
Provision for mortgages sold with recourse    (7,300)       --        --
Net gain on sale of securities                    --        --       398
Loss on affordable housing investment         (4,052)   (7,611)       --
Gain on sale of leases                           811    14,909     1,507
Gain on sale of branches                          --        --    62,337
Other                                          5,127    13,284     8,164
                                            --------  --------  --------
                                            $331,825  $327,668  $367,897
                                            ========  ========  ========
</TABLE>
 
  Retail banking fee income increased to $179.9 million in 1996 from $154.9
million in 1995 and $140.7 million in 1994, an increase of 16% and 28% over
1995 and 1994, respectively. NSF and overdraft protection fees for 1996
increased 30% over 1995. The customer overdraft product, added late in 1996,
is expected to sustain the 1996 growth rate in banking fees in 1997.
 
  Servicing fees totaled $45.7 million for 1996 compared with $55.2 million
for 1995 and $50.9 million in 1994. The servicing spread for 1996 was 41 basis
points on the $11.2 billion average servicing portfolio compared with a
servicing spread of 51 basis points on a $10.8 billion average servicing
portfolio in 1995 and 43 basis points on an $11.7 billion average servicing
portfolio in 1994.
 
  Income from brokerage operations was $19.1 million in 1996 compared to $11
million in 1995 and $23.6 million in 1994. The $8.1 million increase in income
in 1996 resulted primarily from the addition of non-proprietary mutual funds
which improved the product mix resulting in increased revenues.
 
  Income from mutual fund asset management was $11 million in 1996, compared
to $10.1 million in 1995 and $16.3 million in 1994. The Company managed mutual
funds with average assets aggregating $3.4 billion in 1996 compared with $3.1
billion in 1995 and $3.2 billion in 1994. The reduction in income in 1995 is a
result of reduced fees realized on funds management.
 
 
                                      24
<PAGE>
 
  Real estate fees were $29.1 million in 1996 compared with $24.2 million for
1995 and $29.4 million in 1994. Loan prepayment fees, included in real estate
fees, were $2.4 million for 1996 compared with $532,000 in 1995, and $342,000
in 1994.
 
  During 1996, the Company sold its student loan business to Crestar Bank for
$386.6 million. The Company sold a portfolio of $356.6 million of loans and
after expenses and costs, realized a gain of $22.5 million on the sale. At
December 31, 1996, there was a balance of student loans remaining of $21.5
million. These loans are being aggressively marketed. At February 28, 1997,
approximately $6.8 million of student loans remain to be sold.
 
  The net gain on sale of mortgages was $8.6 million in 1996, $8.8 million in
1995, and $5.3 million in 1994. Mortgage sales in 1996, primarily fixed-rate,
totaled $1.5 billion at a gain of .58% of the portfolio sold, compared to $1.1
billion in 1995 at a gain of .79% of the portfolio sold and $1.2 billion in
1994 at a gain of .48% of the portfolio sold. In conjunction with the sales of
mortgages, capitalized servicing rights of $8.2 million were recorded in 1996,
$4.7 million in 1995 and $604,000 in 1994.
 
  Gain on sale of mortgage-backed securities was $8.8 million in 1996 compared
to $13.6 million in 1995. Sales of mortgage-backed securities were $561.4
million in 1996 and $498.1 million in 1995. There were no mortgage-backed
securities sold in 1994. In conjunction with the sales of mortgage-backed
securities, capitalized servicing rights of $13.5 million were recorded in
1996 and $3.5 million in 1995.
 
   Prior to July, 1996, the Company recorded impairment on mortgage-backed
securities through charge-offs to the allowance for loan and lease losses.
Subsequent to July, 1996, impairment is recorded as a charge to earnings.
There were charges to the allowance for loan and lease losses of $12.8 million
for the first six months of 1996, $11 million for the year ended December 31,
1995 and $1 million for the year ended December 31, 1994. For the second half
of 1996, $17.9 million was recorded to reflect impairment in the mortgage-
backed securities portfolio.
 
  As a result of the loss experience on loans sold with recourse, an increase
to the contingent liability for losses on loans sold with recourse of $7.3
million was required and recorded in 1996. The outstanding balance of loans
sold with recourse at December 31, 1996 was $1.2 billion, and $1.4 billion at
both December 31, 1995 and 1994.
 
  The gain on sale of leases was $811,000 in 1996 compared with $14.9 million
in 1995 and $1.5 million in 1994. The gain on the sale of leases is the result
of dispositions throughout the year of Great Western Capital Corporation's
fast food leasing portfolio. In 1995, the majority of the portfolio was sold.
 
                                      25
<PAGE>
 
NONINTEREST EXPENSE
 
  Noninterest expenses were as follows:
 
<TABLE>
<CAPTION>
                                         YEAR ENDED DECEMBER 31
                                    ----------------------------------
                                       1996        1995        1994
                                    ----------  ----------  ----------
(DOLLARS IN THOUSANDS)
<S>                                 <C>         <C>         <C>
Salaries and benefits
  Salaries                          $  369,350  $  365,758  $  381,036
  Taxes, benefits and other             69,254      75,608      88,079
                                    ----------  ----------  ----------
    Total salaries and benefits        438,604     441,366     469,115
SAIF special assessment                188,359          --          --
Premises and occupancy                 179,617     179,654     199,048
Restructure expense                     68,293          --          --
FDIC insurance premium                  65,100      66,365      77,451
Outside data processing                 57,292      60,847      32,512
Professional fees                       40,165      17,942      16,679
Communications                          39,810      44,783      38,856
Amortization of intangibles             37,722      40,286      58,689
Advertising and promotion               32,961      35,661      36,573
Operating losses and settlements        25,212      22,553      14,674
Retirement of subordinated debt         21,406          --          --
Office supplies                         20,718      17,943      16,386
Postage                                 13,982      13,508      17,476
Insurance                               11,413      10,286      11,946
Real estate operations
  Net (gain) on sale of real estate    (15,619)    (21,709)     (6,437)
  Interest recognized on advances       (5,981)     (2,337)     (1,341)
  Provisions for losses                (12,775)      1,500      12,000
  Writedowns                             2,254          --          --
  Operating expenses                    32,847      28,151      27,632
                                    ----------  ----------  ----------
    Total real estate operations           726       5,605      31,854
Other                                   72,869      63,176      55,174
                                    ----------  ----------  ----------
                                    $1,314,249  $1,019,975  $1,076,433
                                    ==========  ==========  ==========
</TABLE>
 
  Total noninterest expense for 1996, excluding the SAIF special assessment of
$188.4 million and the restructuring expense of $68.3 million was $1.1
billion.
 
  The Company employed 13,028 persons at December 31, 1996, a number of which
worked part-time. The full-time equivalent of employees at that date was
9,367. At December 31, 1995, the Company employed 14,393 persons and had
10,266 full-time equivalent employees.
 
  Total salaries and benefits were $438.6 million, $441.4 million and $469.1
million for the years ended December 31, 1996, 1995 and 1994, respectively.
The decrease from 1995 to 1996 of $2.8 million is due to reductions in pension
expense offset by an increase in earnings on the company-owned life insurance.
The decrease from 1994 to 1995 of $27.7 million was due to a workforce
reduction of approximately 1,300 positions in 1995.
 
  On September 30, 1996, the President signed into law an omnibus spending
bill which included provisions for the recapitalization of the SAIF through a
one-time special assessment of approximately 65.7 cents per $100 of SAIF
deposits held by savings associations as of March 31, 1995. GWB's special
assessment of $188.4 million was reflected in the Bank's third quarter
results.
 
 
                                      26
<PAGE>
 
  The Company's results of operations reflect a $68.3 million restructuring
charge. The restructuring initiatives are designed to improve the Company's
competitive position, accelerate expense reduction and enhance future revenue
growth by streamlining operations, making efficient use of premises and
modernizing GWFC's systems platform. The components of the restructuring
charge involve severance and write-off of premises and equipment. The
estimated cost savings for GWFC as a result of implementing the restructuring
initiatives is $39.5 million and $41.5 million in 1997 and 1998, respectively.
 
  The Company's plans to streamline operations, reconfigure the retail branch
network and improve information systems support and other back office
functions will result in the reduction of approximately 1,200 employees and a
charge to restructure expense of $17.0 million. As of December 31, 1996, 630
employee separations have occurred and the related severance expense of $4.6
million was applied against the 1996 restructure liability. Employee
separations related to the restructuring are planned to be completed by the
end of 1997.
 
  The Company's corporate headquarters campus was identified for consolidation
to make optimum use of building space. As a result, three buildings at the
corporate campus will be vacated freeing up 272,000 square feet to sublet to
third party tenants. Additionally, seven retail branch and 109 loan offices
were identified for closure or consolidation. The total effect of vacating
these premises is $29.5 million. Premises identified under the restructuring
initiatives are planned to be vacated by December, 1997.
 
  In order to meet GWFC's goal to modernize and replace its current systems
platform, certain computer hardware and software equipment were considered
obsolete or abandoned and written off. The upgrade and replacement of
equipment will allow the Company to increase operational efficiency, improve
processing capacity and establish a common user workstation environment. As of
December 31, 1996, $18.4 million of equipment was written off and applied
against the restructure liability. The balance of $3.4 million of equipment
will be retired in 1997 and applied against the restructure liability.
 
  Following is a reconciliation of restructuring reserve activity during 1996:
 
<TABLE>
<CAPTION>
                               1996                 BALANCE
                           RESTRUCTURING   1996   DECEMBER 31,
                              CHARGE     ACTIVITY     1996
                           ------------- -------- ------------
   (DOLLARS IN MILLIONS)
   <S>                     <C>           <C>      <C>
   Severance                  $ 17.0      $  4.6     $ 12.4
   Premises                     29.5          --       29.5
   Equipment                    21.8        18.4        3.4
                              ------      ------     ------
     Total                    $ 68.3      $ 23.0     $ 45.3
                              ======      ======     ======
</TABLE>
 
  In 1996, professional fees increased to $40.2 million from $17.9 million in
1995 and $16.7 million in 1994. The $22.2 million increase in 1996 was
primarily a result of an aggressive plan to increase income, improve
strategies and operations and reduce costs. Outside legal fees increased $4.4
million in 1996 mainly as a result of the increased level of securities
litigation.
 
  The net loss from real estate operations has decreased from $31.9 million in
1994 to $5.6 million in 1995 to $726,000 in 1996. The reversal of
$13.5 million to the provision for losses in 1996 is a result of the reduction
in non-performing real estate assets and improving prospects for the remainder
of the portfolio.
 
  Included in other operating expenses for 1996 is an $8 million recovery for
fraudulently over-billed marketing costs at Aristar which had occurred over a
number of years.
 
  In the fourth quarter of 1996, the Company examined its businesses and began
exploring several options for its mutual fund subsidiary, Sierra Capital
Management Corporation, ranging from a joint venture partnership to a sale.
Due to the announced merger between Washington Mutual and the Company, any
transaction involving this or any other subsidiary is being reexamined, see
Item 1. Business "Merger Agreement with Washington Mutual, Inc.", "H. F.
Ahmanson & Company's Merger Proposal" and "Litigation Relating to the Ahmanson
Merger Proposal".
 
                                      27
<PAGE>
 
INCOME TAX
 
  The Company's effective tax rate was 37.9% in 1996 and 38.2% in 1995 and
1994.
 
  Under the Internal Revenue Code, GWB, as a qualified thrift institution, had
been allowed to claim deductions for bad debts under the reserve method, which
is more favorable than bad debt deduction methods allowed to claim by other
taxpayers.
 
  Under provisions of the Small Business Job Protection Act of 1996, GWB lost
the use of the bad debt reserve method beginning in 1996. Since the reserve
balance at December 31, 1996 of $724.5 million arose prior to 1988, it is not
currently subject to federal income tax and would not be if GWB were to
convert to a commercial bank or otherwise lose its tax status as a qualified
thrift institution. However, it will be subject to such tax upon certain
occurrences (including its distribution to shareholders), none of which are
currently contemplated.
 
 
                                      28
<PAGE>
 
                            BALANCE SHEET ANALYSIS
 
EARNING ASSETS
 
  The composition of earning assets for the five year period 1992 through 1996
is as follows:
 
<TABLE>
<CAPTION>
                                                        DECEMBER 31
                           ---------------------------------------------------------------------
                               1996          1995          1994          1993          1992
                           ------------- ------------- ------------- ------------- -------------
                           AMOUNT    %   AMOUNT    %   AMOUNT    %   AMOUNT    %   AMOUNT    %
                           ------- ----- ------- ----- ------- ----- ------- ----- ------- -----
(DOLLARS IN MILLIONS)
<S>                        <C>     <C>   <C>     <C>   <C>     <C>   <C>     <C>   <C>     <C>
Certificates of deposit,
 repurchase agreements
 and federal funds and
 securities available-
 for-sale*                 $ 1,517  3.71 $ 1,286  3.08 $ 1,027  2.60 $ 1,027  2.86 $   915  2.57
Mortgage-backed
 securities                  7,789 19.06   9,803 23.47   9,286 23.49   3,196  8.91   3,177  8.92
Loans
 Real estate
 Single-family
  residential               26,079 63.81  24,697 59.13  23,365 59.10  25,682 71.64  25,333 71.14
 Apartments                  1,490  3.64   1,615  3.87   1,712  4.33   1,814  5.06   1,939  5.45
 Commercial                  1,192  2.92   1,374  3.29   1,393  3.52   1,589  4.43   1,553  4.36
                           ------- ----- ------- ----- ------- ----- ------- ----- ------- -----
  Total real estate loans   28,761 70.37  27,686 66.29  26,470 66.95  29,085 81.13  28,825 80.95
Consumer Finance             2,186  5.35   2,136  5.11   1,999  5.06   1,831  5.11   1,723  4.84
Other loans                    240   .59     517  1.23     449  1.13     405  1.13     657  1.84
                           ------- ----- ------- ----- ------- ----- ------- ----- ------- -----
  Total loans               31,187 76.31  30,339 72.59  28,918 73.14  31,321 87.37  31,205 87.63
Investment in FHLB stock       378   .92     341   .82     306   .77     307   .86     314   .88
                           ------- ----- ------- ----- ------- ----- ------- ----- ------- -----
  Total earning assets     $40,871   100 $41,769   100 $39,537   100 $35,851   100 $35,611   100
                           ======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
- --------
* Securities exclude $62 million of securities held by the Company's life
  insurance subsidiary at December 31, 1996, $63 million at December 31, 1995,
  $57 million at December 31, 1994, $59 million at December 31, 1993 and $59
  million at December 31, 1992.
 
  Earning assets decreased $897 million from $41.8 billion in 1995 to $40.9
billion in 1996. The Company's investment in mortgage-backed securities
decreased by $2 billion in 1996 and was offset by a $1.1 billion increase in
real estate loans. Proceeds from payments and sales of mortgage-backed
securities were invested into ARM ("Adjustable Rate Mortgages") SFR loans and
other securities. The increase in single-family residential real estate loans
is due to customer demand for adjustable rate mortgage lending rather than
fixed-rate loans, which are sold shortly after origination.
 
Securities Available-For-Sale
 
  Securities available-for-sale are carried at fair value. Marketable
securities available-for-sale at December 31, 1996 had both an amortized cost
and a fair value of $1.3 billion. See Note 4 of the Notes to Consolidated
Financial Statements in Item 8, "Financial Statements and Supplementary Data."
In determining which security to invest in, the Company considers among other
factors, relative rates, liquidity and credit quality. At December 31, 1996,
there were no investment securities issued by a single issuer (excluding the
U.S. Government and its agencies and corporations) that exceeded 10% of
stockholders' equity.
 
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. Mortgage-backed securities totaled $7.8
billion at December 31, 1996 compared with $9.8 billion at December 31, 1995.
Because the Company retained the credit risk on the loans underlying these
securities, delinquent loans totaling $145.6 million and $73.2 million in 1996
and 1995, respectively, were repurchased.
 
                                      29
<PAGE>
 
  The composition of mortgage-backed securities for the five year period 1992
through 1996 is as follows:
 
<TABLE>
<CAPTION>
                                             DECEMBER 31
                        ------------------------------------------------------
                           1996       1995       1994       1993       1992
                        ---------- ---------- ---------- ---------- ----------
                        AMOUNT  %  AMOUNT  %  AMOUNT  %  AMOUNT  %  AMOUNT  %
                        ------ --- ------ --- ------ --- ------ --- ------ ---
(DOLLARS IN MILLIONS)
<S>                     <C>    <C> <C>    <C> <C>    <C> <C>    <C> <C>    <C>
Adjustable Rate
 COFI                   $6,073  78 $7,619  78 $6,712  72 $2,084  65 $1,969  62
 FCOFI                   1,335  17  1,565  16  1,752  19     --  --     --  --
 Other                      91   1     90   1     89   1     84   3     --  --
                        ------ --- ------ --- ------ --- ------ --- ------ ---
 Total adjustable rate
  mortgage-backed
  securities             7,499  96  9,274  95  8,553  92  2,168  68  1,969  62
                        ------ --- ------ --- ------ --- ------ --- ------ ---
Fixed-rate
 Long-term                 217   3    473   5    669   7    931  29  1,173  37
 Short-term                 73   1     56   *     64   1     97   3     35   1
                        ------ --- ------ --- ------ --- ------ --- ------ ---
 Total fixed-rate
  mortgage-backed
  securities               290   4    529   5    733   8  1,028  32  1,208  38
                        ------ --- ------ --- ------ --- ------ --- ------ ---
 Total mortgage-backed
  securities            $7,789 100 $9,803 100 $9,286 100 $3,196 100 $3,177 100
                        ====== === ====== === ====== === ====== === ====== ===
</TABLE>
- --------
*Less than one percent
 
  At December 31, 1996, approximately 78% 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 December 31, 1996, adjustable rate mortgage-backed securities comprised 96%
of the mortgage-backed securities portfolio compared with 95% in 1995 and 92%
in 1994.
 
  Mortgage-backed securities available-for-sale are carried at fair value. At
December 31, 1996, mortgage-backed securities available-for-sale of $6.2
billion included $96.2 million of fixed-rate securities and $6.1 billion of
adjustable rate securities.
 
 
                                      30
<PAGE>
 
Loans
 
  The composition of real estate, Consumer Finance and other loans for the
five years 1992 through 1996 is as follows:
 
<TABLE>
<CAPTION>
                                            DECEMBER 31
                              ---------------------------------------
                               1996    1995    1994    1993    1992
                              ------- ------- ------- ------- -------
      (DOLLARS IN MILLIONS)
      <S>                     <C>     <C>     <C>     <C>     <C>     
      Real Estate             $28,761 $27,686 $26,470 $29,085 $28,825
      Consumer Finance          2,186   2,136   1,999   1,831   1,723
      Other loans                 240     517     449     405     657
                              ------- ------- ------- ------- -------
                              $31,187 $30,339 $28,918 $31,321 $31,205
                              ======= ======= ======= ======= =======
</TABLE>
 
<TABLE>
<CAPTION>
                                                DECEMBER 31
                        ------------------------------------------------------------
                          1996    %   1995    %   1994    %   1993    %   1992    %
                        -------- --- ------- --- ------- --- ------- --- ------- ---
(DOLLARS IN MILLIONS)
<S>                     <C>      <C> <C>     <C> <C>     <C> <C>     <C> <C>     <C>
REAL ESTATE
 ARM
  COFI                  $ 20,803  72 $20,961  75 $19,901  75 $20,160  69 $20,353  71
  FCOFI                    2,005   7   2,429   9   1,986   8   4,324  15   4,776  17
  LAMA                     3,318  12   1,668   6      --  --      --  --      --  --
  Other                    1,816   6   1,618   6   3,551  13   3,151  11   2,168   7
                        -------- --- ------- --- ------- --- ------- --- ------- ---
   Total ARM loans        27,942  97  26,676  96  25,438  96  27,635  95  27,297  95
                        -------- --- ------- --- ------- --- ------- --- ------- ---
 Fixed-rate
  Long-term                  411   2     525   2     582   2     903   3   1,043   3
  Short-term                 408   1     485   2     450   2     547   2     485   2
                        -------- --- ------- --- ------- --- ------- --- ------- ---
   Total fixed-rate
    loans                    819   3   1,010   4   1,032   4   1,450   5   1,528   5
                        -------- --- ------- --- ------- --- ------- --- ------- ---
   Total real estate
    loans               $ 28,761 100 $27,686 100 $26,470 100 $29,085 100 $28,825 100
                        ======== === ======= === ======= === ======= === ======= ===
Single-family           $ 26,079  91 $24,697  89 $23,365  88 $25,682  88 $25,333  88
Apartments                 1,490   5   1,615   6   1,712   7   1,814   6   1,939   7
Commercial properties      1,192   4   1,374   5   1,393   5   1,589   6   1,553   5
                        -------- --- ------- --- ------- --- ------- --- ------- ---
                        $ 28,761 100 $27,686 100 $26,470 100 $29,085 100 $28,825 100
                        ======== === ======= === ======= === ======= === ======= ===
Number of real estate
 loans                   347,530     351,782     370,835     427,659     464,862
CONSUMER FINANCE        $  2,186 100 $ 2,136 100 $ 1,999 100 $ 1,831 100 $ 1,723 100
                        ======== === ======= === ======= === ======= === ======= ===
OTHER LOANS
  Lease financing       $     71  30 $    78  15 $   101  22 $   100  25 $   105  16
  Checking overdraft          62  26      37   7      26   6      28   6      19   3
  Savings account             52  22      56  11      60  13      69  17      72  11
  Student loans               21   9     327  63     239  53     180  44     165  25
  Mobile home loans           14   6      18   3      22   5      26   7      34   5
  Small business lines
   of credit                  13   5      --  --      --  --      --  --      --  --
  Bank cards                  --  --      --  --      --  --      --  --     256  39
  Other                        7   3       1  --       1  --       2  --       6   1
                        -------- --- ------- --- ------- --- ------- --- ------- ---
   Total Other Loans    $    240 100 $   517 100 $   449 100 $   405 100 $   657 100
                        ======== === ======= === ======= === ======= === ======= ===
</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.
 
  The ARM for single-family residential properties is the primary lending
product held for investment. At December 31, 1996, ARMs comprised 97% of the
real estate loan portfolio compared with 96% in the comparable period in 1995.
At December 31, 1996, approximately 72% of real estate loans in the portfolio
were
 
                                      31
<PAGE>
 
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.
 
  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 December 31, 1996, there were no open hedge contracts in
the pipeline due to the relatively low level of fixed-rate commitments.
 
  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.
 
  As of December 31, 1996, net real estate loans available-for-sale, primarily
fixed-rate loans, were $84.4 million compared to $159 million on December 31,
1995. Unrealized holding gains on real estate loans available-for-sale totaled
$462,000 at December 31, 1996, compared to $1.4 million on December 31, 1995.
 
  The California real estate market requires continued review. There appear to
be regional differences in economic performance within California and among
property types which are attributable to differing recovery rates for the wide
range of economic activities within California.
 
  On a regional basis, the economic factors affecting the single-family market
appear to be somewhat more favorable in Northern California than in Southern
California. In particular, the median metropolitan area sales price of
existing single-family homes in the San Jose area increased from the third
quarter of 1995 to the third quarter of 1996 by 3%. 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 December 31, 1996 from 8% a year earlier. In the Los Angeles area, the
vacancy rate of the office space market was 18% at December 31, 1996 compared
with 19% at December 31, 1995. In San Diego County, the vacancy rate was 13%
at December 31, 1996 and 18% at December 31, 1995.
 
  In the industrial space market, Northern and Southern California vacancy
rates have been more comparable. In the San Francisco area, the vacancy rate
decreased to 8% at December 31, 1996, from 9% a year earlier. In the Los
Angeles area, the vacancy rate of the industrial space market was 7% at
December 31, 1996 and 8% at December 31, 1995. San Diego County's industrial
space market had a vacancy rate of 5% at December 31, 1996 compared with 4% at
December 31, 1995.
 
 
                                      32
<PAGE>
 
  The geographic distribution of the real estate loan portfolio and nonaccrual
and restructured loans at December 31, 1996 follows:
 
<TABLE>
<CAPTION>
                                                                           CONNECTICUT
                                                                          MASSACHUSETTS
                              CALIFORNIA              FLORIDA                NEW YORK
                        ---------------------- ---------------------- ----------------------
                                  RESTRUCTURED           RESTRUCTURED           RESTRUCTURED
                                      AND                    AND                    AND
                        PORTFOLIO  NONACCRUAL  PORTFOLIO  NONACCRUAL  PORTFOLIO  NONACCRUAL
                        --------- ------------ --------- ------------ --------- ------------
(DOLLARS IN MILLIONS)
<S>                     <C>       <C>          <C>       <C>          <C>       <C>
Real estate loans
 Single-family
  residential            $15,891      $231      $1,899       $18       $ 1,855      $ 17
 Apartments                1,260        30          54        --            --        --
 Commercial
  Offices                    337        12          14        --            --        --
  Retail                     184         2          13        --            --        --
  Hotel/Motel                 98        14           5        --            --        --
  Industrial                 228        10          11        --            --        --
  Other                      116         1          10         1            --        --
                         -------      ----      ------       ---       -------      ----
   Total                 $18,114      $300      $2,006       $19       $ 1,855      $ 17
                         -------      ----      ------       ---       -------      ----
Percent of total loans      63.0%                  7.0%                    6.4%
Nonaccrual as a % of
 total by state                        1.7%                  0.9%                    0.9%
<CAPTION>
                                OREGON
                              WASHINGTON               OTHER                  TOTAL
                        ---------------------- ---------------------- ----------------------
                                  RESTRUCTURED           RESTRUCTURED           RESTRUCTURED
                                      AND                    AND                    AND
                        PORTFOLIO  NONACCRUAL  PORTFOLIO  NONACCRUAL  PORTFOLIO  NONACCRUAL
                        --------- ------------ --------- ------------ --------- ------------
(DOLLARS IN MILLIONS)
<S>                     <C>       <C>          <C>       <C>          <C>       <C>
Real estate loans
 Single-family
  residential            $ 1,576      $  7      $4,858       $27       $26,079      $300
 Apartments                    7         1         169         7         1,490        38
 Commercial
  Offices                     16        --          15        --           382        12
  Retail                       4        --          10        --           211         2
  Hotel/Motel                 --        --          76        --           179        14
  Industrial                   1        --          25        --           265        10
  Other                        3        --          26         1           155         3
                         -------      ----      ------       ---       -------      ----
   Total                 $ 1,607      $  8      $5,179       $35       $28,761      $379
                         -------      ----      ------       ---       -------      ----
Percent of total loans       5.6%                 18.0%                    100%
Nonaccrual as a % of
 total by state                        0.5%                  0.7%                    1.3%
</TABLE>
 
 
                                       33
<PAGE>
 
  A comparison of California real estate loans and nonaccrual real estate
loans by region as of December 31, 1996 follows:
 
<TABLE>
<CAPTION>
                                NORTHERN CALIFORNIA     CENTRAL CALIFORNIA
                               ---------------------- ----------------------
                                         RESTRUCTURED           RESTRUCTURED
                                             AND                    AND
                               PORTFOLIO  NONACCRUAL  PORTFOLIO  NONACCRUAL
                               --------- ------------ --------- ------------
(DOLLARS IN MILLIONS)
<S>                            <C>       <C>          <C>       <C>
Real estate loans
 Single-family residential      $ 5,024      $ 52      $ 1,337      $ 12
 Apartments                         153         1          225         5
 Commercial
  Offices                            73         8           38        --
  Retail                             44         1           25        --
  Hotel/Motel                        34        --           19         2
  Industrial                         30         1           13         1
  Other                              37        --           17        --
                                -------      ----      -------      ----
   Total by region              $ 5,395      $ 63      $ 1,674      $ 20
                                -------      ----      -------      ----
% of total California loans        29.8%                   9.2%
Nonaccrual as a % of total by
 region                                       1.2%                   1.2%
<CAPTION>
                                SOUTHERN CALIFORNIA         CALIFORNIA
                               ---------------------- ----------------------
                                         RESTRUCTURED           RESTRUCTURED
                                             AND                    AND
                               PORTFOLIO  NONACCRUAL  PORTFOLIO  NONACCRUAL
                               --------- ------------ --------- ------------
(DOLLARS IN MILLIONS)
<S>                            <C>       <C>          <C>       <C>
Real estate loans
 Single-family residential      $ 9,530      $167      $15,891      $231
 Apartments                         882        24        1,260        30
 Commercial
  Offices                           226         4          337        12
  Retail                            115         1          184         2
  Hotel/Motel                        45        12           98        14
  Industrial                        185         8          228        10
  Other                              62         1          116         1
                                -------      ----      -------      ----
   Total by region              $11,045      $217      $18,114      $300
                                -------      ----      -------      ----
Percent of total California
 loans                             61.0%                   100%
Nonaccrual as a % of total by
 region                                       2.0%                   1.7%
</TABLE>
 
 
                                      34
<PAGE>
 
  The following table summarizes the Company's loan volume with real estate
loan volume composition by security type, purpose and loan type for the five
year period 1992 to 1996:
 
<TABLE>
<CAPTION>
                                               YEAR ENDED DECEMBER 31
                          --------------------------------------------------------------------
                           1996    %     1995    %     1994    %     1993    %     1992    %
                          ------- ----  ------- ----  ------- ----  ------- ----  ------- ----
(DOLLARS IN MILLIONS)
<S>                       <C>     <C>   <C>     <C>   <C>     <C>   <C>     <C>   <C>     <C>
LOAN VOLUME
Real estate loans         $ 6,146   72% $ 7,281   75% $ 7,921   77% $ 8,788   79% $ 9,216   81%
Consumer Finance            1,996   24    2,124   22    2,046   20    1,843   17    1,648   14
Other                         348    4      283    3      262    3      450    4      593    5
                          ------- ----  ------- ----  ------- ----  ------- ----  ------- ----
    Total new loan volume $ 8,490  100% $ 9,688  100% $10,229  100% $11,081  100% $11,457  100%
                          ======= ====  ======= ====  ======= ====  ======= ====  ======= ====
SECURITY TYPE
Single-family             $ 6,074   99  $ 7,162   98  $ 7,807   98  $ 8,623   98  $ 9,098   98
Apartments                     44    1       43    1       51    1       52    1       68    1
Commercial properties          28    *       76    1       63    1      113    1       50    1
                          ------- ----  ------- ----  ------- ----  ------- ----  ------- ----
                          $ 6,146  100% $ 7,281  100% $ 7,921  100% $ 8,788  100% $ 9,216  100%
                          ======= ====  ======= ====  ======= ====  ======= ====  ======= ====
PURPOSE
Purchase of property      $ 3,403   55  $ 4,546   63  $ 4,421   56  $ 3,152   36  $ 3,205   35
Refinance                   2,739   45    2,710   37    3,479   44    5,607   64    6,005   65
Construction                    4    *       25    *       21    *       29    *        6    *
                          ------- ----  ------- ----  ------- ----  ------- ----  ------- ----
                          $ 6,146  100% $ 7,281  100% $ 7,921  100% $ 8,788  100% $ 9,216  100%
                          ======= ====  ======= ====  ======= ====  ======= ====  ======= ====
LOAN TYPE
Long-term--essentially
 30-40 years
  ARM                     $ 4,769   78  $ 5,922   81  $ 6,868   87  $ 5,243   60  $ 4,734   51
  Fixed                       833   13      893   12      603    7    2,102   24    2,688   29
Short-term--essentially
 15 years or less
  ARM                         140    2      116    2      130    2      185    2      253    3
  Fixed                       404    7      350    5      320    4    1,258   14    1,541   17
                          ------- ----  ------- ----  ------- ----  ------- ----  ------- ----
                          $ 6,146  100% $ 7,281  100% $ 7,921  100% $ 8,788  100% $ 9,216  100%
                          ======= ====  ======= ====  ======= ====  ======= ====  ======= ====
Average new loan rate             6.58%         6.78%         5.89%         7.05%         8.25%
Average ARM differential          2.64%         2.62%         2.59%         2.47%         2.25%
</TABLE>
- --------
*Less than one percent
 
  The composition of Consumer Finance loans receivable at December 31, 1996
and 1995 was as follows:
 
<TABLE>
<CAPTION>
                                        DECEMBER 31
                                       --------------
                                        1996    1995
                                       ------  ------
         <S>                           <C>     <C>
         (DOLLARS IN THOUSANDS)
         Real estate secured loans     $  994  $  892
         Installment loans              1,109   1,183
         Retail installment contracts     401     399
         Deferred fees                   (318)   (338)
                                       ------  ------
                                       $2,186  $2,136
                                       ======  ======
</TABLE>
 
  Consumer finance loans have maximum terms of 360 months, while retail
installment contracts have maximum terms of 60 months. The majority of loans
provide for a fixed rate of interest over the contractual life of the loan.
 
                                      35
<PAGE>
 
Nonperforming Assets
 
  The following table summarizes nonaccrual and restructured loans and
nonperforming real estate for the five year period 1992 to 1996:
 
<TABLE>
<CAPTION>
                                              DECEMBER 31
                                      --------------------------------
                                      1996  1995  1994   1993    1992
                                      ----  ----  ----  ------  ------
(DOLLARS IN MILLIONS)
<S>                                   <C>   <C>   <C>   <C>     <C>
Nonaccrual loans
 Real estate
  Single-family residential           $285  $432  $490  $  521  $  782
  Apartments                            12    13    40      40      31
  Commercial                             8    14    12      43      37
                                      ----  ----  ----  ------  ------
   Total nonaccrual real estate loans  305   459   542     604     850
 Consumer Finance                       46    25    21      20      22
 Other                                   1     2     2       2       8
                                      ----  ----  ----  ------  ------
   Total nonaccrual loans              352   486   565     626     880
Restructured loans
  Single-family residential             15    13    19       1       0
  Apartments                            26    28    28      30      72
  Commercial                            33    67    78     182      89
                                      ----  ----  ----  ------  ------
   Total restructured loans             74   108   125     213     161
                                      ----  ----  ----  ------  ------
Nonaccrual and restructured loans      426   594   690     839   1,041
As a percentage of total loans        1.38% 1.99% 2.43%   2.74%   3.41%
Nonperforming real estate*             120   174   156     293     970
                                      ----  ----  ----  ------  ------
   Total nonperforming assets         $546  $768  $846  $1,132  $2,011
                                      ====  ====  ====  ======  ======
As a percentage of total assets       1.27% 1.72% 1.98%   2.90%   5.12%
</TABLE>
- --------
* In 1992, includes insubstance-foreclosed loans, the reporting of which has
  been subsequently discontinued.
 
  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.
 
  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
$74.2 million at December 31, 1996 compared with $108.4 million at December
31, 1995.
 
  In addition to the ongoing monthly bulk sales of foreclosed properties, the
Company disposed of $292.4 million of nonperforming loans and real estate in
1996. The loans and properties were primarily associated with loans made
between 1989 and 1992.
 
Impaired Loans
 
  For information on 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" (SFAS 114) and the
reserve for estimated losses related to such loans. See Note 6 of the Notes to
Consolidated Financial Statements in Item 8, "Financial Statements and
Supplementary Data."
 
  The impaired loan portfolio decreased from $268.4 million at December 31,
1995 to $210.1 million at December 31, 1996. The decrease was primarily the
result of the bulk sale of $274.9 million on nonperforming loans. Single-
family residential mortgage loans are generally evaluated for impairment as
homogeneous pools of
 
                                      36
<PAGE>
 
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.
 
Delinquent Assets
 
  The Company continuously reviews the trends of loans and mortgage-backed
securities with full credit risk. The following summarizes the three year
trends in real estate loans, Consumer Finance and other loans and mortgage-
backed securities which are over 30 to 90 days delinquent:
 
<TABLE>
<CAPTION>
                                       DECEMBER 31
                                    -------------------
                                    1996   1995   1994
                                    -----  -----  -----
(DOLLARS IN MILLIONS)
<S>                                 <C>    <C>    <C>
REAL ESTATE LOANS
  Single-family residential
   Over 30 to 60 days delinquent    $ 263  $ 194  $ 159
   Over 60 to 90 days delinquent       99     87     86
  Other
   Over 30 to 60 days delinquent        9      9     24
   Over 60 to 90 days delinquent        8      6      7
                                    -----  -----  -----
    Total                           $ 379  $ 296  $ 276
                                    =====  =====  =====
    Percentage of related portfolio  1.32%  1.07%  1.04%
CONSUMER FINANCE LOANS
  Over 30 to 60 days delinquent     $  44  $  43  $  38
  Over 60 to 90 days delinquent        18     17     13
                                    -----  -----  -----
    Total                           $  62  $  60  $  51
                                    =====  =====  =====
    Percentage to related portfolio  2.84%  2.81%  2.55%
OTHER LOANS
  Over 30 to 60 days delinquent     $   2  $   5  $   2
  Over 60 to 90 days delinquent         1      3      2
                                    -----  -----  -----
    Total                           $   3  $   8  $   4
                                    =====  =====  =====
    Percentage to related portfolio  1.25%  1.55%   .89%
TOTAL LOANS
  Over 30 to 60 days delinquent     $ 318  $ 251  $ 223
  Over 60 to 90 days delinquent       126    113    108
                                    -----  -----  -----
    Total                           $ 444  $ 364  $ 331
                                    =====  =====  =====
    Percentage to related portfolio  1.42%  1.20%  1.14%
MORTGAGE-BACKED SECURITIES
  Over 30 to 60 days delinquent     $  47  $  25  $   9
  Over 60 to 90 days delinquent        17     11      4
                                    -----  -----  -----
    Total                           $  64  $  36  $  13
                                    =====  =====  =====
    Percentage to related portfolio   .82%   .37%   .14%
</TABLE>
 
                                      37
<PAGE>
 
  The increase in over 30 to 60 day delinquencies at December 31, 1996
compared with December 31, 1995 is partially due to a change in collection
processing as a result of the re-engineering of loan servicing and the related
installation of a new loan servicing system in 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
 
  Summarized below are loan balances by type, their reserve for estimated
losses and the percentage the reserve balance bears to the loan balance for
the periods ended December 31, 1996 and 1995. The loan balances and percentage
of reserves to the respective loan balances for December 1995 have been
restated to exclude mortgage-backed securities with credit recourse for
comparative purposes to conform to the 1996 presentation.
 
<TABLE>
<CAPTION>
                                      1996                      1995
                            ------------------------- -------------------------
                              AMOUNT      ALLL    %     AMOUNT      ALLL    %
                            ----------- -------- ---- ----------- -------- ----
(DOLLARS IN THOUSANDS)
<S>                         <C>         <C>      <C>  <C>         <C>      <C>
Real estate loans
  SFR                       $26,078,926 $147,908  .57 $24,696,485 $156,016  .63
  Commercial and other        2,682,082   90,867 3.39   2,989,420  145,149 4.86
                            ----------- -------- ---- ----------- -------- ----
    Total real estate loans  28,761,008  238,775  .83  27,685,905  301,165 1.09
Consumer Finance              2,185,903   70,045 3.20   2,136,022   55,568 2.60
Other Loans                     240,535    4,879 2.03     516,837    6,116 1.18
                            ----------- -------- ---- ----------- -------- ----
Total loans                 $31,187,446 $313,699 1.01 $30,338,764 $362,849 1.20
                            =========== ======== ==== =========== ======== ====
</TABLE>
 
  At December 31, 1996, the ALLL was $313.7 million, or 1.01% of total loans,
compared with $362.8 million, or 1.2% at December 31, 1995. The provision for
loan losses was $209 million for the year ended December 31, 1996, up from
$187.7 million in 1995 due to the one-time addition of $50 million
attributable to the bulk sale of loans. Net charge-offs for single family
residential real estate loans for 1996 were $195.5 million or .68% compared
with $193.1 million or .63% for 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 change in the allowance for SFR loans from $156
million at December 31, 1995, or .63% of the SFR portfolio to $147.9 million
at December 31, 1996, or .57% 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 SFAS
114. The allowance for commercial real estate loans has decreased from $145.1
million at December 31, 1995, or 4.86% to $90.9 million at December 31, 1996,
or 3.39%. The reserve for commercial real estate and apartment loans was
reduced by a $40 million credit to the provision for loan and lease losses in
1996, primarily as a result of the Company's review of required levels for the
allowance of this portfolio. The commercial real
 
                                      38
<PAGE>
 
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.
 
  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 $55.6 million at December 31, 1995, or 2.60% of the outstanding
portfolio, to $70 million at December 31, 1996, or 3.20% of the outstanding
portfolio, as a result of some deterioration in credit quality.
 
  The allowance for leases was $1 million at December 31, 1996, down from $3
million at December 31, 1995, or a decline of 67%. Provisions for losses on
the leasing portfolio for 1996, included in other loan loss provisions,
decreased as a result of the reversal of $1.8 million of excess reserves.
Provisions for losses on the leasing portfolio for 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 judgment 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 and lease 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 internal staff
regularly review 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 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 $313.7
million adequate to cover losses inherent in the loan and lease portfolio at
December 31, 1996. However, no assurance can be given that the Company will
not, in any particular period, sustain loan and lease losses that are sizable
in relation to the amount reserved, or that subsequent evaluation of the loan
and lease 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 and lease losses. See Item 1, Business "Cautionary Statements."
 
  At December 31, 1996, the Company had $1.2 billion of loans sold with
recourse and a contingent liability of $9.4 million. The Company considers the
contingent liability for loans sold with recourse to be adequate to cover
losses in this portfolio. All of the loans sold in 1996 were without recourse.
The Company has not sold loans with recourse since February, 1995.
 
                                      39
<PAGE>
 
Real Estate
 
  Real estate available-for-sale or development was $160.8 million on December
31, 1996 compared to $238.9 million in 1995. The $78.1 million reduction was
primarily the result of the bulk sale of real estate properties completed in
1996.
 
  Real estate available-for-sale or development 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.
In 1996, the Company determined that its real estate portfolio was
appropriately valued at market and therefore the associated general reserve of
$13.5 million was reversed.
 
  The geographic distribution of real estate and nonperforming real estate at
December 31, 1996 follows:
 
<TABLE>
<CAPTION>
                                                                              CONNECTICUT
                                                                             MASSACHUSETTS
                              CALIFORNIA                FLORIDA                NEW YORK
                        ----------------------- ----------------------- -----------------------
                        PORTFOLIO NONPERFORMING PORTFOLIO NONPERFORMING PORTFOLIO NONPERFORMING
                        --------- ------------- --------- ------------- --------- -------------
(DOLLARS IN MILLIONS)
<S>                     <C>       <C>           <C>       <C>           <C>       <C>
Real estate
 Single-family 
  residential             $  75       $  75        $ 1         $ 1         $ 2         $ 2
 Apartments                   9           8          3           3          --          --
 Commercial
  Offices                     4           4         --          --          --          --
  Retail                     14          13          2           2          --          --
  Industrial                  3          --         --          --          --          --
  Property development       36          --         --          --          --          --
  Other                       7           7         --          --          --          --
                          -----       -----        ---         ---         ---         ---
   Total                  $ 148       $ 107        $ 6         $ 6         $ 2         $ 2
                          -----       -----        ---         ---         ---         ---
Percent of total real
 estate                    91.9%                   3.7%                    1.3%
Real estate as a % of
 total by state                        72.3%                   100%                    100%
</TABLE>
 
<TABLE>
<CAPTION>
                                OREGON
                              WASHINGTON                 OTHER                   TOTAL
                        ----------------------- ----------------------- -----------------------
                        PORTFOLIO NONPERFORMING PORTFOLIO NONPERFORMING PORTFOLIO NONPERFORMING
                        --------- ------------- --------- ------------- --------- -------------
(DOLLARS IN MILLIONS)
<S>                     <C>       <C>           <C>       <C>           <C>       <C>           <C>
Real estate
 Single-family 
  residential              $ 1         $ 1         $ 4         $ 4        $  83       $ 83
 Apartments                 --          --          --          --           12         11
 Commercial
  Offices                   --          --          --          --            4          4
  Retail                    --          --          --          --           16         15
  Industrial                --          --          --          --            3         --
  Property development      --          --          --          --           36         --
  Other                     --          --          --          --            7          7
                           ---         ---         ---         ---        -----       ----
   Total                   $ 1         $ 1         $ 4         $ 4        $ 161       $120
                           ---         ---         ---         ---        -----       ----
Percent of total real
 estate                     .6%                    2.5%                     100%
Real estate as a % of
 total by state                        100%                    100%                            74.5%
</TABLE>
 
                                      40
<PAGE>
 
  A comparison of the California real estate portfolio and nonperforming real
estate by region as of December 31, 1996 follows:
 
<TABLE>
<CAPTION>
                                  NORTHERN CALIFORNIA      CENTRAL CALIFORNIA
                                ----------------------- -----------------------
                                PORTFOLIO NONPERFORMING PORTFOLIO NONPERFORMING
                                --------- ------------- --------- -------------
(DOLLARS IN MILLIONS)
<S>                             <C>       <C>           <C>       <C>
Real estate
 Single-family residential        $  8        $  8        $  3        $  3
 Apartments                         --          --           4           4
 Commercial
  Offices                           --          --          --          --
  Retail                            --          --          --          --
  Industrial                        --          --          --          --
  Property development              11          --          12          --
  Other                              4           4          --          --
                                  ----        ----        ----        ----
   Total by region                $ 23        $ 12        $ 19        $  7
                                  ----        ----        ----        ----
Percentage of total California
 real estate                      15.5%                   12.8%
Nonperforming as a % of total
 by region                                    52.2%                   36.8%
</TABLE>
 
<TABLE>
<CAPTION>
                                  SOUTHERN CALIFORNIA         CALIFORNIA
                                ----------------------- -----------------------
                                PORTFOLIO NONPERFORMING PORTFOLIO NONPERFORMING
                                --------- ------------- --------- -------------
(DOLLARS IN MILLIONS)
<S>                             <C>       <C>           <C>       <C>
Real estate
 Single-family residential        $ 64        $ 64        $ 75        $ 75
 Apartments                          5           4           9           8
 Commercial
  Offices                            4           4           4           4
  Retail                            14          13          14          13
  Industrial                         3          --           3          --
  Property development              13          --          36          --
  Other                              3           3           7           7
                                  ----        ----        ----        ----
   Total by region                $106        $ 88        $148        $107
                                  ----        ----        ----        ----
Percentage of total California
 real estate                      71.7%                    100%
Nonperforming as a % of total
 by region                                    83.0%                   72.3%
</TABLE>
 
  In 1996, bulk sales of foreclosed single-family properties totaled $190
million compared with $230 million in 1995. Auction sales have also been
utilized to accelerate the disposition of foreclosed properties.
 
                                      41
<PAGE>
 
INTEREST BEARING LIABILITIES
 
  Deposits by product for the five year period 1992 through 1996 is summarized
in the tables below:
 
Deposits
 
<TABLE>
<CAPTION>
                                                DECEMBER 31
                        -----------------------------------------------------------
                         1996    %   1995    %   1994    %   1993    %   1992    %
                        ------- --- ------- --- ------- --- ------- --- ------- ---
(DOLLARS IN MILLIONS)
<S>                     <C>     <C> <C>     <C> <C>     <C> <C>     <C> <C>     <C>
BY PRODUCT
Checking accounts       $ 4,420  15 $ 4,365  15 $ 4,416  15 $ 4,341  14 $ 3,691  12
Money market and other
 savings                  6,633  23   6,594  22   7,439  26   8,845  28   8,802  28
Wholesale transaction       158   1     174   1     158   1     173   *     197   1
Public funds                 28  --     288   1     403   1     411   1     457   1
Brokered accounts            --  --      --  --       4   *       4   *      28  --
Tax-deferred accounts
Deferred compensation     1,197   4   1,361   5   1,372   5   1,349   5   2,974  10
IRA/Keogh                 2,570   9   2,766   9   2,712  10   2,894   9   2,825   9
Consumer term accounts   13,581  48  13,687  47  12,197  42  13,515  43  11,935  39
                        ------- --- ------- --- ------- --- ------- --- ------- ---
                        $28,587 100 $29,235 100 $28,701 100 $31,532 100 $30,909 100
                        ======= === ======= === ======= === ======= === ======= ===
</TABLE>
- --------
* Less than one percent
 
  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.
 
Borrowings
 
  The following summarizes borrowings for the five year period 1992 through
1996:
 
 
<TABLE>
<CAPTION>
                                                      DECEMBER 31
                          -----------------------------------------------------------------------
                              1996           1995           1994           1993          1992
                          -------------  -------------  -------------  ------------  ------------
                          AMOUNT    %    AMOUNT    %    AMOUNT    %    AMOUNT   %    AMOUNT   %
                          ------- -----  ------- -----  ------- -----  ------ -----  ------ -----
(DOLLARS IN MILLIONS)
<S>                       <C>     <C>    <C>     <C>    <C>     <C>    <C>    <C>    <C>    <C>
Short-term borrowings
 from FHLB                $ 2,012 18.98  $   740  6.47  $    72  0.71% $  119  3.42% $  118  2.84%
Securities sold under
 agreements to
 repurchase                 4,198 39.60    6,868 60.00    6,299 62.26      --    --     717 17.27
Short-term borrowings       1,101 10.38    1,316 11.50    1,211 11.97     676 19.43     487 11.77
Long-term borrowings*       3,291 31.04    2,522 22.03    2,539 25.09   2,684 77.15   2,829 68.15
                          ------- -----  ------- -----  ------- -----  ------ -----  ------ -----
Total borrowings*         $10,602   100% $11,446   100% $10,121   100% $3,479   100% $4,151   100%
                          ------- -----  ------- -----  ------- -----  ------ -----  ------ -----
Average interest rate on
 borrowings at year end            6.03%          6.27%          6.42%         7.34%         7.60%
</TABLE>
- --------
* Includes $100 million of Company-obligated mandatorily redeemable preferred
  securities of the Company's subsidiary trust in 1995 and 1996.
 
  At December 31, 1996, short-term borrowings from FHLB of $2 billion
increased by $1.3 billion over 1995. Other short-term borrowings at December
31, 1996 of $1.1 billion decreased by $215 million from 1995. At December 31,
1996, securities sold under agreements to repurchase of $4.2 billion,
decreased by $2.7 billion from 1995. Long-term borrowings at December 31, 1996
of $3.3 billion (including $100 million of Company-obligated mandatorily
redeemable preferred securities of the Company's subsidiary trust), increased
by $769.8 million over 1995.
 
                                      42
<PAGE>
 
  The following summarizes borrowings by date of maturity as of December 31,
1996:
 
<TABLE>
<CAPTION>
                                     LESS THAN  1-2     2-5    5-10   AFTER 10
                             TOTAL   ONE YEAR  YEARS   YEARS   YEARS   YEARS
                            -------  --------- ------  ------  -----  --------
(DOLLARS IN MILLIONS)
<S>                         <C>      <C>       <C>     <C>     <C>    <C>
Short-term borrowings from
 FHLB                       $ 2,012   $2,012   $   --  $   --  $ --     $ --
Securities sold under
 agreements to repurchase     4,198    3,704      192     302    --       --
Short-term borrowings         1,101    1,101       --      --    --       --
Long-term borrowings from
 FHLB                           758       --      554     204    --       --
Senior debt*                  2,533      352      500   1,336   199      146
                            -------   ------   ------  ------  ----     ----
Total borrowings*            10,602    7,169    1,246   1,842   199      146
                            =======   ======   ======  ======  ====     ====
Average interest rate on
 borrowings by maturity        6.03%    5.60%    6.16%   7.11% 8.67%    8.92%
</TABLE>
- --------
* Includes $100 million of Company-obligated mandatorily redeemable preferred
  securities of the Company's subsidiary trust in 1995 and 1996.
 
  Total borrowings decreased $844 million from $11.4 billion at December 31,
1995 to $10.6 billion in 1996. The Company reduced its percentage of total
borrowings from securities sold under agreements to repurchase by 20.4%, from
60% to 39.6%, and increased its short-term borrowings from the FHLB, as a
percentage to total borrowings, to 19% and its long-term borrowings to 31%.
 
  Short-term borrowings from the FHLB increased from $72 million in 1994 to
$740 million in 1995 to $2 billion in 1996. Borrowings from securities sold
under agreements to repurchase decreased from $6.9 billion in 1995 to $4.2
billion in 1996 down from $6.3 billion in 1994. Short-term borrowings in 1996,
other than from the FHLB, decreased $215 million while long-term borrowings
increased $769 million.
 
                          ASSET LIABILITY MANAGEMENT
 
  The Company's principal ongoing objectives in managing its assets and
liabilities are to maintain and increase the spread that exists between the
return received on its interest-earning assets and the price paid on
liabilities to fund such assets, to reduce the volatility caused by changes in
interest rates, to ensure risk-taking is calculated and not excessive, and to
provide sufficient liquidity at all times.
 
  The Company employs numerous strategies and strict policies to accomplish
and maintain these objectives. As the Company's main earning assets are loans
and mortgage-backed securities, it primarily makes or invests in ARM loans or
securities. In so doing, it reduces the extreme volatility and loss in value
that would result by owning low fixed-rate loans during a period of rapidly
rising interest rates.
 
  Although it costs the Company during the "lag" that exists between the time
loan rates rise and when loan rates are adjusted upwards, the Company benefits
in the same measure from the lag when rates fall. Other financial risks exist
in the Company's operation and balance sheet. These main risks, including
basis, repricing, options, and yield curve twists, are more difficult to
quantify and manage.
 
  The cost of funds for GWB, relative to COFI, FCOFI and LAMA is shown as
follows:
 
<TABLE>
<CAPTION>
                                                      GWB COST OF
                         GWB                        FUNDS LESS THAN
                       COST OF                      ------------------
                        FUNDS  COFI   FCOFI  LAMA   COFI  FCOFI  LAMA
                       ------- -----  -----  -----  ----  -----  -----
   <S>                 <C>     <C>    <C>    <C>    <C>   <C>    <C>    <C>
   December 31, 1996    4.416% 4.842% 5.940% 5.442% .426% 1.524% 1.026%
   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
   December 31, 1994    4.019  4.589  5.971     --  .570  1.952     --
</TABLE>
 
  To accomplish its objectives, the Company stabilizes its balance sheet
primarily by matching various characteristics of the assets purchased with the
liabilities incurred. It also sells the low margin fixed rate loans
 
                                      43
<PAGE>
 
and ARMs it originates into the secondary market while retaining more
profitable ARMs. When necessary, off-balance sheet instruments allow the
Company to pursue marketing strategies consistent with customer needs while
compensating for the risk these strategies create. The most frequently used
instruments are various types of interest rate swaps, caps, floors, and
futures.
 
  To protect against rate fluctuations for items before they are put on the
balance sheet, items such as commitments to fund fixed-rate loans originated
for sale, the Company from time to time uses off balance sheet instruments
including interest rate forwards, caps, floors, and future contracts as
asset/liability management tools. They are used to reduce the Company's
exposure to interest rate fluctuations and provide more stable spreads between
asset yields and the rates on their funding sources.
 
  To evaluate the Company's current interest-rate position, it is necessary to
analyze the amount and proportionate share of each of its major earning
assets, including each major type of short-term or long-term real estate loan,
and the amount and proportionate share of each major category of short-term or
long-term deposits and borrowings. The Company utilizes a variety of
analytical tools including static gap, duration gap, risk point reports, net
interest income simulation and market value of equity sensitivity analysis.
The standard static gap report appears below.
 
                                      44
<PAGE>
 
  The following table shows that the portfolio of short-term assets exceeded
liabilities maturing or subject to interest adjustment within one year by $2.3
billion, or 6.6% of earning assets at December 31, 1996 compared with $3.6
billion, or 8.7% total of earning assets at December 31, 1995. The Company is
better protected against rising rates with an excess of interest earning
assets maturing or repricing within one year.
 
<TABLE>
<CAPTION>
                                         INTEREST/RATE SENSITIVITY
                                             DECEMBER 31, 1996
                            ----------------------------------------------------
                            WITHIN                          OVER           % OF
                            1 YEAR   1-5 YEARS 5-15 YEARS 15 YEARS  TOTAL  TOTAL
                            -------  --------- ---------- -------- ------- -----
(DOLLARS IN MILLIONS)
<S>                         <C>      <C>       <C>        <C>      <C>     <C>
EARNING ASSETS
Certificates of deposit,
 repurchase agreements and
 federal funds
 and securities available-
 for-sale                   $ 1,517   $   --     $   --    $   --  $ 1,517    4%
Mortgage-backed securities    7,622       63         72        32    7,789   19
Loans
 Real estate
 Adjustable rate             25,578    2,364         --        --   27,942   68
 Fixed-rate
  Short-term                     26       13         30       339      408    1
  Long-term                      78       55        101       177      411    1
                            -------   ------     ------    ------  -------  ---
   Total real estate loans   25,682    2,432        131       516   28,761   70
 Consumer Finance               184    1,584        304       114    2,186    5
 Other loans                    178       57          1         4      240    1
                            -------   ------     ------    ------  -------  ---
   Total loans               26,044    4,073        436       634   31,187   76
Investment in FHLB stock         --       --         --       378      378    1
                            -------   ------     ------    ------  -------  ---
   Total earning assets      35,183    4,136        508     1,044   40,871  100
                            -------   ------     ------    ------  -------  ---
INTEREST BEARING
 LIABILITIES
Deposits
 Checking                     4,420       --         --        --    4,420   11
 Money market and other
  savings                     6,744       --         --        --    6,744   17
 Term accounts               14,843    2,393          1        --   17,237   44
 Wholesale                      186       --         --        --      186    1
                            -------   ------     ------    ------  -------  ---
   Total deposits            26,193    2,393          1        --   28,587   73
Borrowings
 Short-term borrowings
  from FHLB                   2,012       --         --        --    2,012    5
 Securities sold under
  agreement to repurchase     3,704      494         --        --    4,198   11
 Short-term borrowings        1,101       --         --        --    1,101    3
 Long-term borrowings            --    2,127      1,019        45    3,191    8
 Company-obligated
  mandatorily redeemable
  preferred securities of
  the Company's subsidiary
  trust                          --       --         --       100      100   --
 Impact of interest-rate
  swaps                        (109)     109         --        --       --   --
                            -------   ------     ------    ------  -------  ---
   Total borrowings           6,708    2,730      1,019       145   10,602   27
                            -------   ------     ------    ------  -------  ---
Total interest bearing
 liabilities                 32,901    5,123      1,020       145   39,189  100%
                            -------   ------     ------    ------  -------  ---
Excess of earning assets
 over interest bearing
 liabilities at
 December 31, 1996          $ 2,282   $ (987)    $ (512)   $  899  $ 1,682
                            =======   ======     ======    ======  =======
</TABLE>
 
                             LIQUIDITY MANAGEMENT
 
  Liquidity refers to the capability of a company to fund its operations and
meet its obligations and commitments on both a timely and cost-effective basis
out of its cash flow.
 
  Customer deposits provide the Company with a sizeable source of stable low-
cost funds. Customer deposits and stockholders' equity funded 72.6% and 72.3%
of its average total assets in 1996 and 1995, respectively. The remaining
funding is provided by a combination of wholesale short-term funding sources
including reverse repurchase agreements and intermediate-term sources
including senior debt.
 
                                      45
<PAGE>
 
  The Company's real estate loans totaled $28.8 billion at December 31, 1996.
Of this amount, $552 million matures within one year and $2.9 billion matures
within one to five years on a contractual basis.
 
  GWB, at December 31, 1996, had excess borrowing capacity at the FHLB of
approximately $10 billion which includes a $200 million overnight federal
funds line. Other sources of liquidity include extending maturities on short-
term borrowings and the sale of assets.
 
  As presented in the Consolidated Condensed Statement of Cash Flows, the
sources of liquidity vary between years. The primary sources of funds in 1996
were sales and principal payments on mortgage-backed securities and loans held
for investment of $7.2 billion. New loans originated for investment required
$6.9 billion in 1996. Operating activities provided $1.2 billion in 1996.
 
  The Bank maintains liquidity balances each period in excess of funding and
legal requirements. Cash, certificates of deposit, repurchase agreements and
federal funds and securities available for sale totaled $1.9 billion at
December 31, 1996 and $1.9 billion at December 31, 1995. GWB had funds in
excess of required liquidity levels. The amounts over those required for
regulatory purposes will fluctuate between periods and are a source of short-
term funding.
 
                           PARENT COMPANY LIQUIDITY
 
  GWFC, the parent company, derives substantially all of its cash income from
dividends received from its subsidiaries. During 1996, it received cash
dividends in the amount of $274.8 million. Of that amount, $151.3 million was
received from GWB, $116.8 million was received from Aristar and $6.7 million
from other subsidiaries.
 
  In July, 1996, GWFC renewed its July, 1994 $200 million syndicated multi-
year credit facility with 21 banks. This is a revolving line of credit which
is a contingent source of liquidity. This line is used to backup commercial
paper for the Company's issuances. To date, there have been no borrowings
under this agreement.
 
  Short-term liquidity can also be generated by the Company's ability to raise
funds in a number of capital and money markets as well as by liquidating
short-term investments.
 
                               CAPITAL ADEQUACY
 
  Capital (stockholders' equity) was $2.6 billion at December 31, 1996 and
$2.8 billion at December 31, 1995. At the end of calendar year 1996, the ratio
of capital to total assets was 6.1% compared with 6.3% a year ago.
 
  In September 1996, the Company called for the redemption of its $129
million, 8.75% Cumulative Convertible Preferred Stock. These shares were
issued in May 1991. The holders had the option to redeem their shares or
convert them into shares of the Company's common stock. In the third quarter,
2,561,642 depositary shares or 512,328 shares were converted to 6,278,421
shares of common stock with a conversion price of $20.40 per share while
19,058 depositary shares or 3,812 shares were redeemed for cash at $994,589 or
$260.94 per share. In the second quarter of 1996, 6,800 depositary shares or
1,360 shares were converted to 16,666 shares of common stock at $340,000 or
$20.40 per share.
 
  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 June 30, 1996. On July 29,
1996, 6.5 million shares were repurchased at a weighted average price of
$26.85 per share. By February 20, 1997, the remaining balance of 1.0 million
shares had been repurchased at a weighted average price of $31.91 per share.
 
                                      46
<PAGE>
 
  On January 28, 1997, the Board of Directors authorized the repurchase of up
to 5 million shares of outstanding common stock, representing approximately
3.6% of the total number of outstanding shares at December 31, 1996. As of
February 28, 1997, there had been no repurchases under this program. On March
5, 1997 the Board of Directors voted to discontinue the repurchase program.
 
  GWB is subject to certain capital requirements under applicable regulations
and meets all such requirements. GWB's total risk-based capital was $2.7
billion, including eligible subordinated notes of $157.7 million at December
31, 1996 and $3.0 billion, including eligible subordinated notes of $373.5
million at December 31, 1995. The decrease in eligible subordinated notes is
due primarily to partial early redemptions of two issues in the fourth quarter
of 1996.
 
  The following ratios compare GWB with the capital requirements under
regulations issued by the OTS:
 
<TABLE>
<CAPTION>
                             DECEMBER 31, 1996          DECEMBER 31, 1995
                         -------------------------- --------------------------
                            ACTUAL    OTS BENCHMARK    ACTUAL    OTS BENCHMARK
                         ------------ ------------- ------------ -------------
                         AMOUNT   %   AMOUNT    %   AMOUNT   %   AMOUNT    %
                         ------ ----- ------ ------ ------ ----- ------ ------
(DOLLARS IN MILLIONS)
<S>                      <C>    <C>   <C>     <C>   <C>    <C>   <C>     <C>
Leverage/tangible ratio  $2,327  5.85 $ 1,192  3.00 $2,366  5.66 $ 1,254  3.00
Tier 1 risk-based ratio   2,322  9.77     950  4.00  2,361  9.40   1,004  4.00
Total risk-based ratio    2,669 11.23   1,901  8.00  2,966 11.81   2,008  8.00
</TABLE>
 
  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 CAMELS 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.
 
  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.
 
  The following table presents the debt ratings of the Company and GWB at
December 31, 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   A2  A-    A
Subordinated term debt                                 BBB+         A3       A-
Company-obligated mandatorily redeemable
 preferred securities of the Company's
 subsidiary trust                             BBB-           Baa2      BBB
Preferred stock                               BBB-           Baa2      BBB
</TABLE>
 
                                      47
<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 in April was due to the Company's improved earnings
outlook.
 
  The principal source of operating income of the Company on an unconsolidated
basis is dividends from GWB and Aristar. In 1996, cash dividends received from
GWB and Aristar totaled $151.3 million and $116.8 million, respectively.
 
  GWB is subject to the regulations of the OTS and FDIC. The OTS regulations
impose limitations upon "capital distributions" by savings associations,
including cash dividends. The regulations 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.
 
  At January 1, 1997, GWB could declare dividends or make other capital
distributions of approximately $384 million, without obtaining prior
regulatory approval. Thereafter, the limitation in 1997 will increase by year-
to-date net income less dividends paid to date.
 
               ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS
 
  In 1996, the Company adopted disclosure requirements for stock-based
compensation plans required by the Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). The Company
continues to apply Accounting Principles Board Opinion 25 ("APB 25") in
measuring stock compensation but has provided the footnote disclosures
required by SFAS 123. See Note 19 of the Notes to Consolidated Financial
Statements in Item 8 "Financial Statements and Supplementary Data."
 
  The Company adopted Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights" ("SFAS 122") as of April 1, 1995.
SFAS 122, an amendment to Statement of Financial Accounting Standards No. 65
("SFAS 65"), "Accounting for Certain Mortgage Banking Activities," requires an
entity that originates or purchases loans with the intent of selling or
securitizing such loans to capitalize the mortgage servicing rights. The value
of these servicing rights is based on the assumption that a normal servicing
fee will be received for the estimated life of the loans.
 
  SFAS 122 also requires that all capitalized mortgage servicing rights be
measured for impairment. Impairment is measured by stratifying the underlying
loans based on one or more predominant risk
 
                                      48
<PAGE>
 
characteristics, including interest rate, product type and geographic area.
Impairment is recognized through a valuation allowance.
 
  In 1995, the Company adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("SFAS 121"). SFAS 121 establishes accounting
standards for the impairment of long-lived assets and certain identifiable
intangibles. The adoption of SFAS 121 did not have a material impact on the
Company's financial statements. As a result of SFAS 121, real estate available
for development is recorded at the lower of cost or fair value. Real estate
available for development was previously recorded at the lower of cost or net
realizable value.
 
                IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
 
  In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities," ("SFAS
125"). The Statement provides consistent accounting and reporting standards
for the (1) transfers and servicing of financial assets and (2) extinguishment
of liabilities. The Company will adopt SFAS 125 effective January 1, 1997 and
does not expect the adoption of SFAS 125 to have a material impact on its
financial statements.
 
                               SUBSEQUENT EVENTS
 
  On January 27, 1997, Great Western Financial Trust II (the "subsidiary
trust"), a wholly-owned subsidiary of Great Western Financial Corporation,
issued $300 million of 8.206% Trust Originated Preferred Securities (the
"preferred securities"). In connection with the subsidiary trust's issuance of
the preferred securities, Great Western Financial Corporation issued to the
subsidiary trust $309 million principal amount of its 8.206% subordinated
deferrable interest notes, due 2027 (the "subordinated notes"). The sole
assets of the subsidiary trust are and will be the subordinated notes. Great
Western Financial Corporation's obligations under the subordinated notes and
related agreements, taken together, constitute a full and unconditional
guarantee by the Company of the subsidiary trust's obligations under the
preferred securities.
 
  On February 3, 1997, the Company received preliminary approval in Federal
Court of a $17.2 million settlement reached with plaintiffs in connection with
the sale of uninsured investment products. Final approval of the settlement is
set for April 14, 1997.
 
  Effective February 25, 1997, GWFC's Board of Directors approved a Broad
Based Plan (the Plan) for eligible employees who are not covered by an
existing severance plan and are not offered a comparable position by an
acquiring company or whose employment is terminated within 12 months of a
change in control, as defined by the Plan. The minimum pay will equate to six
months with the maximum of 18 months obtainable under the Plan. As a result of
the adoption of this Plan, the Company will record an increase to the
restructuring liability in the first quarter of 1997 of approximately
$10,000,000.
 
  On January 28, 1997, the Board of Directors authorized the repurchase of up
to 5 million shares of outstanding common stock, representing approximately
3.6% of the total number of outstanding shares at December 31, 1996. As of
February 28, 1997, there had been no repurchases under this program. On March
5, 1997 the Board of Directors voted to discontinue the repurchase program.
 
  On March 5, 1997, the Company entered into an Agreement and Plan of Merger
with Washington Mutual, Inc. (Washington Mutual), and New American Capital,
Inc., an indirect wholly-owned subsidiary of Washington Mutual. Washington
Mutual is a regional financial services company headquartered in Seattle,
Washington. With consolidated assets of $44.6 billion at December 31, 1996,
this Washington corporation operates through its principal subsidiaries,
Washington Mutual Bank, American Savings Bank, F.A., and Washington Mutual
Bank
 
                                      49
<PAGE>
 
fsb. Under the Agreement and Plan of Merger, the Company will merge with and
into New American Capital, Inc. in a tax-free exchange, pursuant to which,
among other things, each outstanding share of common stock of the Company will
be converted into .9 shares of common stock of Washington Mutual. Based upon
the closing price of Washington Mutual's common stock on March 5, 1997,
stockholders of the Company would receive shares of Washington Mutual common
stock with a value of $47.93 per share of common stock of the Company. This
transaction has been approved by the boards of directors of both companies. It
is anticipated that this transaction will be accounted for as a pooling of
interests. The Company expects the merger to be completed during the third
quarter of 1997, pending the receipt of regulatory approval from the OTS and
the approval of the stockholders of both companies. For additional information
on the proposed merger, see Item 1. Business "Merger Agreement with Washington
Mutual, Inc.", "H. F. Ahmanson & Company's Merger Proposal" and "Litigation
Relating to the Ahmanson Merger Proposal" in Part I of this Form 10-K.
 
                                      50
<PAGE>
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>                                                                       <C>
Consolidated Statement of Operations for the three years ended December
 31, 1996, 1995 and 1994.................................................  52
Consolidated Statement of Financial Condition at December 31, 1996 and
 1995....................................................................  53
Consolidated Statement of Cash Flows for the three years ended December
 31, 1996, 1995 and 1994.................................................  54
Consolidated Statement of Changes in Stockholders' Equity for the three
 years ended December 31, 1996, 1995 and 1994............................  56
Notes to Consolidated Financial Statements...............................  57
Report of Independent Accountants........................................ 105
Management's Commentary on Financial Statements.......................... 106
Quarterly Financial Data................................................. 107
</TABLE>
 
                                       51
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
                      CONSOLIDATED STATEMENT OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31
                                          ----------------------------------------
                                              1996          1995          1994
                                          ------------  ------------  ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<S>                                       <C>           <C>           <C>
INTEREST INCOME
 Securities available-for-sale            $     66,360  $     53,972  $     28,774
 Mortgage-backed securities                    638,424       752,524       276,112
 Loans
   Real estate                               2,066,854     1,985,346     1,913,602
   Consumer Finance                            370,314       364,161       342,329
   Other                                        44,472        38,430        35,953
                                          ------------  ------------  ------------
     Total loan interest income              2,481,640     2,387,937     2,291,884
 Other                                          47,507        44,278        32,948
                                          ------------  ------------  ------------
     Total interest income                   3,233,931     3,238,711     2,629,718
INTEREST EXPENSE
 Deposits                                    1,179,479     1,217,085       950,299
 Borrowings
   Short-term borrowings                       440,887       523,366       135,988
   Long-term borrowings                        235,548       196,131       221,161
                                          ------------  ------------  ------------
     Total interest expense                  1,855,914     1,936,582     1,307,448
                                          ------------  ------------  ------------
NET INTEREST INCOME                          1,378,017     1,302,129     1,322,270
Provision for loan and lease losses            208,971       187,700       207,200
                                          ------------  ------------  ------------
Net interest income after provision
 for loan and lease losses                   1,169,046     1,114,429     1,115,070
Noninterest Income
 Retail banking fees                           179,871       154,862       140,703
 Servicing fees                                 45,684        55,159        50,853
 Securities operations                          30,175        21,092        39,902
 Net insurance operations                       29,570        28,861        27,636
 Real estate fees                               29,105        24,208        29,385
 Net gain on sale of student loans              23,388           495         1,673
 Net gain on sale of mortgages                   8,562         8,824         5,339
 Gain on sale of mortgage-backed
  securities                                     8,790        13,585            --
 Write-downs of mortgage-backed
  securities                                   (17,906)           --            --
 Provision for mortgages sold with
  recourse                                      (7,300)           --            --
 Net gain on sale of securities                     --            --           398
 Loss on affordable housing investment          (4,052)       (7,611)           --
 Gain on sale of leases                            811        14,909         1,507
 Gain on sale of branches                           --            --        62,337
 Other                                           5,127        13,284         8,164
                                          ------------  ------------  ------------
     Total noninterest income                  331,825       327,668       367,897
Noninterest Expense
 Salaries and benefits                         438,604       441,366       469,115
 SAIF special assessment                       188,359            --            --
 Premises and occupancy                        179,617       179,654       199,048
 Restructure expense                            68,293            --            --
 FDIC insurance premium                         65,100        66,365        77,451
 Outside data processing                        57,292        60,847        32,512
 Professional fees                              40,165        17,942        16,679
 Communications                                 39,810        44,783        38,856
 Amortization of intangibles                    37,722        40,286        58,689
 Advertising and promotion                      32,961        35,661        36,573
 Operating losses and settlements               25,212        22,553        14,674
 Retirement of subordinated debt                21,406            --            --
 Office supplies                                20,718        17,943        16,386
 Postage                                        13,982        13,508        17,476
 Insurance                                      11,413        10,286        11,946
 Net real estate operations                        726         5,605        31,854
 Other                                          72,869        63,176        55,174
                                          ------------  ------------  ------------
     Total noninterest expense               1,314,249     1,019,975     1,076,433
                                          ------------  ------------  ------------
EARNINGS BEFORE TAXES                          186,622       422,122       406,534
Income tax expense                              70,800       161,100       155,300
                                          ------------  ------------  ------------
NET EARNINGS                              $    115,822  $    261,022  $    251,234
                                          ============  ============  ============
Average common shares outstanding
 Without dilution                          138,505,046   137,111,074   133,769,724
 Fully diluted                             139,250,206   137,951,442   133,769,724
Earnings per share based on average
 common shares outstanding
 Primary                                  $        .69  $       1.72  $       1.69
 Fully diluted                                     .69          1.71          1.69
Cash dividends per common share                    .98           .92           .92
</TABLE>
                 See Notes to Consolidated Financial Statements
 
                                       52
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
                 CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
 
<TABLE>
<CAPTION>
                                                           DECEMBER 31
                                                     ------------------------
                                                        1996         1995
                                                     -----------  -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<S>                                                  <C>          <C>
ASSETS
Cash                                                 $   534,192  $   837,292
Certificates of deposit, repurchase agreements and
 federal funds                                           300,100      257,125
Securities available-for-sale                          1,279,283    1,092,459
Mortgage-backed securities held-to-maturity (fair
 value $1,622,573 and $1,941,918)                      1,618,709    1,886,736
Mortgage-backed securities available-for-sale          6,169,842    7,916,705
                                                     -----------  -----------
                                                       7,788,551    9,803,441
Loans receivable, net of allowance for loan and
 lease losses                                         30,717,320   29,401,644
Loans available-for-sale                                 105,872      485,705
                                                     -----------  -----------
  Net loans                                           30,823,192   29,887,349
Investment in FHLB                                       377,946      341,102
Real estate available-for-sale or development, net       159,997      217,112
Interest receivable                                      245,539      298,640
Premises and equipment, net                              552,422      604,672
Intangibles arising from acquisitions                    285,991      323,713
Other assets                                             527,359      923,859
                                                     -----------  -----------
    Total assets                                     $42,874,572  $44,586,764
                                                     ===========  ===========
LIABILITIES
Deposits                                             $28,586,773  $29,234,928
Short-term borrowings from FHLB                        2,011,733      740,080
Securities sold under agreements to repurchase         4,197,666    6,868,296
Short-term borrowings                                  1,101,506    1,316,413
Long-term borrowings                                   3,190,908    2,420,845
Accrued interest payable                                 172,324      104,607
Taxes on income, principally deferred                    226,075      378,381
Other liabilities and accrued expenses                   692,387      600,738
                                                     -----------  -----------
    Total liabilities                                 40,179,372   41,664,288
                                                     -----------  -----------
Company-obligated manditorily redeemable preferred
 securities of the Company's subsidiary trust,
 holding solely $103,092,800 aggregate principal
 amount of 8.25% subordinated deferrable interest
 notes, due 2025, of the Company                         100,000      100,000
STOCKHOLDERS' EQUITY
Preferred stock, par value $1.00 per share;
 Authorized 10,000,000 shares; Cumulative
 Convertible issued none and 517,500; Cumulative
 issued 660,000 and 660,000                              165,000      294,375
Common stock, par value $1.00 per share; Authorized
 200,000,000 shares; Issued 137,875,955 and
 137,279,331                                             137,876      137,279
Additional paid-in-capital                               680,428      713,889
Retained earnings-substantially restricted             1,535,264    1,572,782
Unearned compensation                                       (327)      (4,282)
Securities valuation allowance                            76,959      108,433
                                                     -----------  -----------
Total stockholders' equity                             2,595,200    2,822,476
                                                     -----------  -----------
Total liabilities and stockholders' equity           $42,874,572  $44,586,764
                                                     ===========  ===========
</TABLE>
 
                 See Notes to Consolidated Financial Statements
 
                                       53
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31
                                          ------------------------------------
                                             1996         1995         1994
                                          -----------  -----------  ----------
(DOLLARS IN THOUSANDS)
<S>                                       <C>          <C>          <C>
OPERATING ACTIVITIES
Net earnings                              $   115,822  $   261,022  $  251,234
Noncash adjustments to net earnings:
  Provisions for loan and lease losses        208,971      187,700     207,200
  Net decrease (increase) in interest
   receivable                                  53,101      (67,715)    (15,970)
  Net increase in interest payable             67,717            6      29,829
  Depreciation and amortization                87,350       74,245      88,439
  Amortization of intangibles                  37,722       40,286      58,689
  Retirement of subordinated debt              21,406           --          --
  Writedowns of mortgage-backed
   securities                                  17,906           --          --
  Writedowns of real estate available-
   for-sale                                     2,254           --          --
  Net gain on sale of securities                   --           --        (398)
  Gain on sale of branches                         --           --     (62,337)
  (Gain) loss on sale of mortgage-backed
   securities                                     925       (8,926)         --
  Gain on sale of leases                         (811)     (14,909)     (1,507)
  Provisions for real estate losses           (12,775)       1,500      12,000
  Gain on sale of real estate                 (15,619)     (21,709)     (6,437)
  (Gain) loss on sale of loans
   available-for-sale                         (16,413)         597       1,414
  Capitalized interest                        (55,625)     (61,746)     (8,431)
  Income taxes                               (136,828)      72,445      65,441
  Other                                       438,870     (235,960)   (166,977)
Sales and repayments of loans available-
 for-sale                                   1,616,630    1,189,955   1,203,636
Originations and purchases of loans
 available-for-sale                        (1,191,263)  (1,234,399)   (894,870)
                                          -----------  -----------  ----------
Net cash provided by operating
 activities                                 1,239,340      182,392     760,955
                                          -----------  -----------  ----------
FINANCING ACTIVITIES
(Decrease) increase in deposits              (648,155)     533,981  (1,849,091)
Disposition of deposits, net                       --           --    (981,525)
Proceeds from issuance of long-term
 borrowings                                 1,098,577      199,906   1,174,643
Repayments of long-term borrowings           (349,920)    (290,205) (1,366,357)
Net change in securities sold under
 agreements to repurchase                  (2,670,630)     569,241   6,299,055
Net change in short-term borrowings from
 FHLB                                       1,271,653      740,080          --
Net change in short-term borrowings          (214,907)     105,952     533,978
Other financing activity
  Common stock repurchased                   (176,732)          --          --
  Common stock issued                          24,452       60,195      29,842
  Redemption of preferred stock                  (998)          --          --
  Payment of cash dividends on common
   stock                                     (133,045)    (124,673)   (122,524)
  Payment of cash dividends on preferred
   stock                                      (20,295)     (25,015)    (25,015)
                                          -----------  -----------  ----------
Net cash (used in) provided by financing
 activities                                (1,820,000)   1,769,462   3,693,006
                                          -----------  -----------  ----------
</TABLE>
 
                 See Notes to Consolidated Financial Statements
 
                                       54
<PAGE>
 
                CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
 
<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31
                                          -------------------------------------
                                             1996         1995         1994
                                          -----------  -----------  -----------
(DOLLARS IN THOUSANDS)
<S>                                       <C>          <C>          <C>
INVESTING ACTIVITIES
Securities available-for-sale
  Proceeds from sales and maturities      $ 2,080,781  $ 1,436,303  $ 1,147,471
  Purchases of securities available-for-
   sale                                    (2,272,801)  (1,585,030)  (1,218,586)
Mortgage-backed securities available-
 for-sale
  Proceeds from sales and repayments        1,851,496    1,712,178      829,416
  Purchases of mortgage-backed
   securities                                 (39,669)          --   (1,539,349)
Real estate loans
  Payments received on loans                2,970,406    2,240,941    3,202,021
  Proceeds from sale of loans                 292,472           --       55,243
  Loans originated for investment          (4,655,316)  (5,816,535)  (6,506,744)
  Repurchases                                 (44,118)    (116,547)    (547,674)
Consumer Finance and other loans
  Loans originated for investment          (2,229,945)  (2,284,775)  (2,168,029)
  Proceeds from sale of loans                   2,430       34,997        6,438
  Dispositions (acquisitions), net                 --           --        2,094
  Payments received on loans                2,104,004    2,097,401    1,966,211
Other investing activity
  Purchases and sales of premises and
   equipment, net                             (36,856)     (86,094)     (82,559)
  Proceeds from sale of real estate           376,325      390,807      468,304
  Acquisition and disposition of retail
   banking assets, net                             --           --       74,159
  Net change in investment in FHLB            (36,844)     (35,061)       1,311
  Other                                       (41,830)       5,413       29,171
                                          -----------  -----------  -----------
Net cash provided by (used in) investing
 activities                                   320,535   (2,006,002)  (4,281,102)
                                          -----------  -----------  -----------
Net (decrease) increase in cash and cash
 equivalents                                 (260,125)     (54,148)     172,859
Cash and cash equivalents at beginning
 of period                                  1,094,417    1,148,565      975,706
                                          -----------  -----------  -----------
Cash and cash equivalents at end of
 period                                   $   834,292  $ 1,094,417  $ 1,148,565
                                          ===========  ===========  ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid for
  Interest on deposits                    $ 1,147,510  $ 1,214,881  $   951,140
  Interest on borrowings                      656,164      721,695      326,479
  Income taxes                                157,952       86,338      111,656
Noncash financing activities
  Conversion of preferred stock to
   common stock                               128,377           --           --
Noncash investing activities
  Loans transferred to real estate
   available-for-sale                         418,398      420,973      504,585
  Loans originated to finance the sale
   of real estate available-for-sale           76,320       86,366       92,586
  Loans originated to refinance existing
   loans                                      337,396      266,135      567,119
  Loans exchanged for mortgage-backed
   securities                                      --    1,997,585    5,502,401
</TABLE>
 
                 See Notes to Consolidated Financial Statements
 
                                       55
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                                 YEAR ENDED DECEMBER 31
                                            ----------------------------------
                                               1996        1995        1994
                                            ----------  ----------  ----------
(DOLLARS IN THOUSANDS)
<S>                                         <C>         <C>         <C>
PREFERRED STOCK
  Balance, beginning of period              $  294,375  $  294,375  $  294,375
  Preferred stock redeemed                        (953)         --          --
  Preferred stock converted to common stock   (128,422)         --          --
                                            ----------  ----------  ----------
  Balance, end of period                       165,000     294,375     294,375
                                            ----------  ----------  ----------
COMMON STOCK
  Balance, beginning of period                 137,279     134,316     132,616
  Common stock converted from preferred
   stock                                         6,295          --          --
  Common stock issued upon exercise of
   options                                       1,047         704         282
  Common stock issued under dividend
   reinvestment plan                               102       2,283       1,418
  Common stock acquired                           (340)         --          --
  Restricted stock awards granted, net of
   cancellations                                    (7)        (24)         --
  Common stock repurchased under repurchase
   plan                                         (6,500)         --          --
                                            ----------  ----------  ----------
  Balance, end of period                       137,876     137,279     134,316
                                            ----------  ----------  ----------
ADDITIONAL PAID-IN CAPITAL
  Balance, beginning of period                 713,889     656,644     627,717
  Common stock converted from preferred
   stock                                       122,082          --          --
  Common stock issued upon exercise of
   options                                      20,858      12,341       4,576
  Common stock issued under dividend
   reinvestment plan                             2,445      44,867      23,566
  Common stock acquired                         (8,491)         --          --
  Restricted stock awards granted, net of
   cancellations                                  (123)       (350)         --
  Tax benefit of restricted stock awards            --         387         785
  Common stock repurchased under repurchase
   plan                                       (170,232)         --          --
                                            ----------  ----------  ----------
  Balance, end of period                       680,428     713,889     656,644
                                            ----------  ----------  ----------
RETAINED EARNINGS
  Balance, beginning of period               1,572,782   1,461,448   1,357,753
  Net earnings                                 115,822     261,022     251,234
  Preferred stock dividends                    (20,295)    (25,015)    (25,015)
  Common stock dividends                      (133,045)   (124,673)   (122,524)
                                            ----------  ----------  ----------
  Balance, end of period                     1,535,264   1,572,782   1,461,448
                                            ----------  ----------  ----------
UNEARNED COMPENSATION
  Balance, beginning of period                  (4,282)     (7,913)    (11,711)
  Amortization of restricted stock               3,934       3,257       3,798
  Restricted stock awards granted, net of
   cancellations                                    21         374          --
                                            ----------  ----------  ----------
  Balance, end of period                          (327)     (4,282)     (7,913)
                                            ----------  ----------  ----------
SECURITIES VALUATION ALLOWANCE
  Balance, beginning of period                 108,433     (55,084)     22,651
  Change in unrealized net gain (loss), net
   of taxes                                    (31,474)    163,517     (77,735)
                                            ----------  ----------  ----------
  Balance, end of period                        76,959     108,433     (55,084)
                                            ----------  ----------  ----------
    Total stockholders' equity              $2,595,200  $2,822,476  $2,483,786
                                            ==========  ==========  ==========
</TABLE>
 
                 See Notes to Consolidated Financial Statements
 
                                       56
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1: STATEMENT OF ACCOUNTING POLICIES
 
PRINCIPLES OF ACCOUNTING AND CONSOLIDATION
 
  The accounts of Great Western Financial Corporation and its wholly-owned
subsidiaries, Great Western Bank, Aristar, a consumer finance holding company,
and companies operating in related fields, are included in the accompanying
consolidated financial statements and are referred to collectively as the
Company. Significant intercompany items have been eliminated. Certain prior-
year amounts have been reclassified to conform with the 1996 presentation.
 
  The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
 
ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS
 
  In 1996, the Company adopted disclosure requirements for stock-based
compensation plans required by SFAS 123. SFAS 123 allows for two methods of
valuing stock based compensation. The first method allows for the continuing
application of APB 25 in measuring stock compensation, while complying with
the disclosure requirements of SFAS 123. The second method uses an option
pricing model to value stock compensation and record as such within the
financial statements. The Company will comply with the former and continue to
apply APB 25 while complying with SFAS 123 disclosure requirements. See Note
19.
 
  The Company adopted SFAS 122 as of April 1, 1995. SFAS 122 requires an
entity that originates or purchases loans with the intent of selling or
securitizing such loans to capitalize the mortgage servicing rights. SFAS 122
also requires that all capitalized mortgage servicing rights be measured for
impairment.
 
  In 1995, the Company adopted SFAS 121 which establishes accounting standards
for the impairment of long-lived assets and certain identifiable intangibles.
 
  The adoption of these accounting standards did not materially affect
comparability of the financial statements.
 
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
 
  In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities," ("SFAS
125"). The Statement provides consistent accounting and reporting standards
for the (1) transfers and servicing of financial assets and (2) extinguishment
of liabilities.
 
  Beginning in 1997, SFAS 125 supersedes Statement of Financial Accounting
Standard No. 76, "Extinguishment of Debt," ("SFAS 76"), Statement of Financial
Accounting Standards No. 77, "Reporting by Transferors for Transfers of
Receivables with Recourse," ("SFAS 77"), SFAS 122, and several Technical
Bulletins and amends Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS
115") and both amends and extends Statement of Financial Accounting Standards
No. 65, "Accounting for Certain Mortgage Banking Activities" ("SFAS 65"). The
Company will adopt SFAS 125 effective January 1, 1997 and does not expect the
adoption of SFAS 125 to have a material impact on its financial statements.
 
 
                                      57
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FAIR VALUE DISCLOSURE
 
  Quoted market prices are used, where available, to estimate the fair value
of financial instruments. Because no quoted market prices exist for a
significant portion of the Company's financial instruments, fair value is
estimated using comparable market prices for similar instruments or using
management's estimates of discounted cash flows for the underlying asset or
liability. A change in management's assumptions could significantly affect
these estimates and, accordingly, fair value is not necessarily indicative of
the value which would be realized upon disposition of the financial
instruments.
 
CASH AND CASH EQUIVALENTS
 
  For the Consolidated Statement of Cash Flows, cash and cash equivalents
include cash, certificates of deposit, federal funds and repurchase
agreements. Certificates of deposit, federal funds and repurchase agreements
purchased with an original maturity of three months or less are considered to
be cash equivalents. Cash includes cash on hand and cash in banks.
 
SECURITIES AVAILABLE-FOR-SALE
 
  Securities available-for-sale, which are securities that may be sold prior
to maturity, are carried at fair value with any valuation adjustments reported
in a separate component of stockholders' equity, net of deferred income taxes.
The estimated fair value of investments is based on current quotations where
available. Where current quotations are not available, the estimated fair
value is based primarily on the present value of the future cash flows,
adjusted for the quality rating of the securities, prepayment assumptions and
other factors.
 
MORTGAGE-BACKED SECURITIES
 
  The Company's mortgage-backed securities ("MBS") portfolio consists of real
estate loan receivables originated by the Bank and subsequently securitized
primarily through the Federal Home Loan Mortgage Corporation ("FHLMC") or the
Federal National Mortgage Association. Loans are also securitized for sale
directly in the public market. The Company purchases, for investment and
liquidity purposes, FNMA and FHLMC securities, Collateralized Mortgage
Obligations ("CMOs") and Real Estate Mortgage Investment Conduits ("REMICs").
In 1994 and 1995, the Company swapped single-family residential ARMs for
mortgage-backed securities to provide collateral for borrowings. These
securities are subject to full credit recourse and the swaps can be unwound at
the option of the Company. Certain ARMs swapped in 1994 and 1995, REMICs and
GWB-originated pass-through certificates are held-to-maturity based on
management's positive intent and ability to hold these securities until
maturity and are recorded at amortized cost as adjusted for permanent
impairment. All other mortgage-backed securities are available-for-sale and
recorded at fair value with any valuation adjustments reported in a separate
component of stockholders' equity, net of deferred income taxes. Fair value is
generally determined on the aggregate method giving effect to servicing rights
and estimated losses from credit recourse. Discounts or premiums on mortgage-
backed securities recorded at cost are amortized using the interest method.
Gains and losses on mortgage-backed securities are calculated on the specific
identification method.
 
LOANS
 
 Real Estate Loans
 
  The Company's real estate loan portfolio consists primarily of long-term
loans secured by first trust deeds on single-family residences, other
residential property, commercial property and land. The ARM is the Bank's
primary loan investment. Real estate loans available-for-sale, primarily fixed
rate, are valued at the lower of cost or fair value.
 
                                      58
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Fees are charged for originating loans at the time the loan is granted. Loan
origination fees, partially offset by the deferral of certain expenses
associated with such loans originated, are amortized to interest income over
the life of the loan using the interest method. ARMs with a lower rate during
the introductory period (usually three months) will reflect the amortization
of a substantial portion of the net deferred fee as a yield adjustment during
the introductory period. Amortization is discontinued for nonperforming loans
and loans available-for-sale and is realized upon the ultimate disposition of
the assets.
 
  Loan fee income represents income from the prepayment of loans, delinquent
payments or miscellaneous loan services and is recorded when collected.
 
  Interest receivable represents, for the most part, the current month's
interest which will be included as a part of the borrower's next monthly loan
payment. Interest receivable is accrued only if deemed collectible. Loan
payments generally are deemed to be in nonaccrual status when they become more
than 90 days past due. When a loan is designated as nonaccrual, previously
accrued interest is reversed.
 
  Below-market-rate loans are made to facilitate the sale of certain
foreclosed real estate. These transactions reduce the gain on sale and provide
a loan discount which is amortized on the interest method resulting in a
market yield on the new loan.
 
 Consumer Finance Loans
 
  The Company makes direct consumer installment loans and purchases retail
installment contracts from local retail establishments. These consumer credit
transactions are primarily for personal, family or household purposes. Loan
fees and directly related lending costs are deferred and amortized using the
interest method over the contractual life of the related loans.
 
 Allowance for Loan and Lease Losses
 
  The Company continually evaluates numerous factors in estimating the amount
of the allowance for loan and lease losses. Specific factors, unique to
individual loans, such as borrower performance, credit scores and loan to
value ratio are considered, as well as general factors, including general
economic conditions, prior loan loss experience and composition of the loan
portfolio. The Company also maintains an ongoing examination process to
periodically evaluate the allowance, as do its regulators.
 
  Loans made by consumer finance subsidiaries are also reviewed on a
systematic basis. In evaluating the adequacy of the allowance, consideration
is given to recent loan loss experience and such other factors which, in
management's judgment, deserve current recognition in estimating losses. Non-
real estate secured accounts are charged off based on the number of days
contractually delinquent (180 days for substantially all loans).
 
  The Company's determination of the level of the allowance for loan and lease
losses rests upon various judgments and assumptions, including general
economic conditions, loan and lease portfolio composition, prior loan and
lease loss experience, evaluation of credit risk related to certain individual
borrowers and the Company's ongoing examination process and that of its
regulators. The Company considers the allowance for loan and lease losses
adequate to cover losses inherent in loans and leases.
 
                                      59
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
MORTGAGE BANKING ACTIVITIES
 
  Real estate loans are originated principally for investment. Since the
Company is primarily an ARM portfolio lender for its own investment, most
other products are originated and available-for-sale.
 
  As of December 31, 1996 the following loans were designated as available-
for-sale and were carried at the lower of cost or fair value:
 
    1. Single-family, fixed-rate product in the portfolio originated
  subsequent to January 1, 1989.
 
    2. Single-family, adjustable rate product designated as available-for-
  sale.
 
    3. Loans other than single-family which have been designated at the date
  of origination.
 
  The Company sells loans or participating interests in loans to generate
servicing income, to limit interest-rate risk and to provide funds for
additional investment. Under the servicing agreements, the Company continues
to service the loans and the investor is paid its share of principal
collections together with interest at an agreed upon rate, which generally
differs from the loan's contractual interest rate. Such difference results in
a "loan servicing spread". Gains or losses on sales of loans are recognized at
the time of sale and are generally determined by: 1) the difference between
the net sales proceeds and the book value of the loans sold; 2) recognition of
deferred loan fees; 3) an adjustment, if necessary, to increase or decrease
the loan servicing spread in order to provide for normal servicing; and 4) the
capitalization of mortgage servicing rights.
 
REAL ESTATE AVAILABLE-FOR-SALE OR DEVELOPMENT
 
  Real estate available-for-sale or development comprises both purchased and
foreclosed properties. Foreclosed properties are carried at cost at
acquisition, which is the lower of the net loan value on the property or the
fair value of the property, less estimated costs to sell, at the date of
foreclosure. Thereafter, specific valuation allowances have been established
for changes in the fair value of real estate. Acquisition costs are generally
expensed when incurred. Certain costs which represent a structural change or
significant refurbishment which enhances the value of property are
capitalized. Other real estate available-for-sale is carried at the lower of
cost or fair value. Property development projects, carried at the lower of
cost or fair value, are accounted for on the equity method. Gains on the sale
of real estate financed by the Company are recognized giving consideration to
down payment and other investment criteria. Losses are recognized when
identified.
 
PREMISES AND EQUIPMENT
 
  Premises and equipment are carried at cost less accumulated depreciation and
amortization. The Company capitalizes expenditures for improvements and major
refurbishments and charges ordinary maintenance and repairs to earnings as
incurred. Depreciation and amortization are computed principally on the
straight-line method over the estimated useful lives of the assets. Estimated
useful lives are 30 years for buildings, 4 to 10 years for furniture, fixtures
and equipment, 3 to 7 years for software and the lesser of the lease term or
useful life of the property for leasehold improvements.
 
INTANGIBLES ARISING FROM ACQUISITIONS
 
  Because of the earnings power or other identifiable values of certain
purchased companies or businesses, the Company paid amounts in excess of
identifiable fair value for businesses, core deposits and tangible assets
acquired. Generally, such amounts are being amortized by systematic charges to
income (primarily for periods from six to 25 years) over a period no greater
than the estimated remaining life of the assets acquired or not exceeding the
estimated average remaining life of the existing deposit base assumed. The
Company periodically reviews intangibles to assess recoverability and
impairment is recognized in operations if permanent loss of value occurs.
 
                                      60
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
DEPOSITS
 
  Deposits comprise primarily the Bank's checking, money market and other
savings, term and wholesale accounts. Deposits vary as to terms, with the
major differences being minimum balance required, maturity, interest rates and
the provisions for payment of interest. The Bank's customer accounts are
insured by the FDIC, through either the BIF or the SAIF for up to an aggregate
amount of $100,000 per customer.
 
  The Bank may offer large denomination negotiable certificates of deposit.
The negotiable certificates of deposit are primarily sold through brokers and
may subsequently be traded on the open market.
 
  Interest is accrued and either paid to the customer or added to the
customer's account on a periodic basis. On term accounts, the forfeiture of
interest (because of withdrawal prior to maturity) is offset as of the date of
withdrawal against interest expense.
 
FEDERAL AND STATE INCOME TAXES
 
  Taxes are provided on substantially all income and expense items included in
earnings, regardless of the period in which such items are recognized for tax
purposes. Tax benefits are recognized for general loss reserve additions.
 
  Taxes on income are determined by using the liability method. This approach
requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, consideration is given to expected future events other than
enactments of changes in the tax law or rates.
 
EARNINGS PER COMMON SHARE
 
  Income for the calculation of primary earnings per common share is based on
net income less preferred stock dividend requirements. Fully diluted earnings
per common share give effect to the dilutive effect of stock options and
assume the conversion of convertible securities into common stock at the later
of the beginning of the year or the date of issuance (unless antidilutive).
 
DERIVATIVE FINANCIAL INSTRUMENTS
 
  The Company uses interest rate derivative financial instruments (forward
sales contracts and swaps) primarily to hedge mismatches in the rate maturity
of deposits and short-term borrowings and their uses of funds. Amounts payable
or receivable for swaps are accrued with the passage of time, the effect of
which is included in interest expense reported on the liability hedged; fees
on these financial contracts are amortized over their contractual life as a
component of the interest reported on the liability hedged.
 
                                      61
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 2: ACQUISITIONS, DISPOSITIONS AND RESTRUCTURING
 
  In December 1994, GWB completed the sale of $1 billion of deposits and 31
branches in West Florida to First Union National Bank. The deposits were sold
for a net pretax gain of $62,300,000, which included the write-off of
intangibles related to the sold branches of $10,000,000 and other sale related
expenses of $2,200,000.
 
  In October 1994, GWB purchased the deposits of six branches located in San
Diego County from Citibank, F.S.A., totaling $52,000,000. The deposits were
acquired for a premium of $1,000,000.
 
  Intangibles arising from acquisitions as shown on the Consolidated Statement
of Financial Condition consisted of the following:
 
<TABLE>
<CAPTION>
                                   DECEMBER 31
                          -------------------------------
                            1996       1995       1994
                          ---------  ---------  ---------
(DOLLARS IN THOUSANDS)
<S>                       <C>        <C>        <C>
Balance at acquisition    $ 575,603  $ 575,603  $ 575,603
Accumulated amortization   (289,612)  (251,890)  (211,604)
                          ---------  ---------  ---------
                          $ 285,991  $ 323,713  $ 363,999
                          =========  =========  =========
</TABLE>
 
  The results of operations in 1996 reflect a $68,300,000 restructuring
charge. The restructuring initiatives are designed to improve the Company's
competitive position, accelerate expense reduction and enhance future revenue
growth by streamlining operations, making efficient use of premises and
modernizing the Company's systems platform. The components of the
restructuring charge involve severance and write-off of premises and
equipment.
 
  The Company's plans to streamline operations, reconfigure the retail branch
network and improve information systems support and other back office
functions will result in the reduction of approximately 1,200 employees and a
charge to restructure expense of $17,000,000. As of December 31, 1996, 630
employee separations have occurred and the related severance expense of
$4,600,000 was applied against the 1996 restructure liability. Employee
separations related to the restructuring are planned to be completed by the
end of 1997.
 
  The Company's corporate headquarters campus was identified for consolidation
to make optimum use of building space. As a result, three buildings at the
corporate campus will be vacated freeing up 272,000 square feet to sublet to
third party tenants. Additionally, seven retail branch and 109 loan offices
were identified for closure or consolidation. The total effect of vacating
these premises is $29,500,000. Premises identified under the restructuring
initiatives are planned to be vacated by December, 1997.
 
  In order to meet the Company's goal to modernize and replace its current
systems platform, certain computer hardware and software equipment were
considered obsolete or abandoned and written off. The upgrade and replacement
of equipment will allow the Company to increase operational efficiency,
improve processing capacity and establish a common user workstation
environment. As of December 31, 1996, $18,400,000 of equipment was written off
and applied against the restructure liability. The balance of $3,400,000 of
equipment will be retired in 1997 and applied against the restructure
liability.
 
                                      62
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Following is a reconciliation of restructuring reserve activity during 1996:
 
<TABLE>
<CAPTION>
                               1996                 BALANCE
                           RESTRUCTURING   1996   DECEMBER 31,
                              CHARGE     ACTIVITY     1996
                           ------------- -------- ------------
   (DOLLARS IN MILLIONS)
   <S>                     <C>           <C>      <C>
   Severance                  $ 17.0      $  4.6     $ 12.4
   Premises                     29.5          --       29.5
   Equipment                    21.8        18.4        3.4
                              ------      ------     ------
     Total                    $ 68.3      $ 23.0     $ 45.3
                              ======      ======     ======
</TABLE>
 
NOTE 3: CASH, CERTIFICATES OF DEPOSIT, REPURCHASE AGREEMENTS AND FEDERAL FUNDS
 
  An analysis of cash, certificates of deposit, repurchase agreements and
federal funds at December 31, 1996, 1995, 1994, 1993 and 1992 follows:
 
<TABLE>
<CAPTION>
                           RATE AT                    DECEMBER 31
                         DECEMBER 31, --------------------------------------------
                             1996       1996     1995     1994     1993     1992
                         ------------ -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S>                      <C>          <C>      <C>      <C>      <C>      <C>
Cash                           --     $534,192 $837,292 $983,440 $758,581 $686,028
                                      ======== ======== ======== ======== ========
Repurchase agreements        6.37%     250,000  257,000  115,000  210,000  345,000
Federal Funds                5.44       50,000       --   50,000       --       --
Certificates of Deposit      5.10          100      125      125    7,125    5,349
                                      -------- -------- -------- -------- --------
  Total                               $300,100 $257,125 $165,125 $217,125 $350,349
                                      ======== ======== ======== ======== ========
</TABLE>
 
  The Company purchases securities under agreements to resell ("repurchase
agreements") having terms of up to 90 days; however, they are typically
overnight investments. The Company generally takes possession of collateral
supporting securities sold under agreements to resell. Repurchase agreements
outstanding at December 31, 1996, 1995 and 1994 were:
 
<TABLE>
<CAPTION>
                                             DECEMBER 31,
                             ----------------------------------------------
                                  1996            1995            1994
                             --------------  --------------  --------------
                              AMOUNT  YIELD   AMOUNT  YIELD   AMOUNT  YIELD
(DOLLARS IN THOUSANDS)       -------- -----  -------- -----  -------- -----
<S>                          <C>      <C>    <C>      <C>    <C>      <C>
Morgan Stanley and Company,
 Inc.                        $150,000 7.00%  $125,000 5.88%  $     --   --%
J. P. Morgan                   50,000 5.42         --   --     65,000 6.08
Merrill Lynch Government
 Securities, Inc.              50,000 5.43         --   --         --   --
Smith Barney, Inc.                 --   --     50,000 5.87         --   --
Goldman Sachs and Company          --   --     37,000 5.76         --   --
CS First Boston Corporation        --   --     25,000 5.67     50,000 5.78
CS First Boston Corporation        --   --     20,000 5.57         --   --
                             --------        --------        --------
                             $250,000        $257,000        $115,000
                             ========        ========        ========
</TABLE>
 
  The repurchase agreements were collateralized by federal agency securities
with market values at least two percent above the face amounts of the
repurchase agreements. The highest month-end balances outstanding were
$375,000,000 in 1996, $337,000,000 in 1995 and $350,000,000 in 1994. The
average balances outstanding were $275,769,000 at a rate of 6.14% in 1996,
$236,308,000 at a rate of 6.65% in 1995 and $207,308,000 at 5.16% in 1994.
 
                                      63
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  GWB is required to maintain certain minimum reserve balances with the FRB.
Included in cash were deposits at the FRB of $126,802,000 at December 31,
1996, $152,893,000 at December 31, 1995 and $328,809,000 at December 31, 1994.
 
NOTE 4: SECURITIES
 
  An analysis of securities available-for-sale by type, maturity (fair value)
and maturity (amortized cost) and weighted average yield at December 31, 1996,
1995, 1994, 1993, and 1992 follows:
 
<TABLE>
<CAPTION>
                          RATE AT                       DECEMBER 31
                        DECEMBER 31, ----------------------------------------------------
                            1996        1996        1995       1994      1993      1992
                        ------------ ----------  ----------  --------  --------  --------
(DOLLARS IN THOUSANDS)
<S>                     <C>          <C>         <C>         <C>       <C>       <C>
Type (Fair value)
  U.S. government
   securities               5.88%    $   10,525  $   10,874  $  9,828  $335,625  $  3,902
  Federal agency
   securities               6.26        595,258     605,794   514,579    41,565    49,550
  Corporate debt
   securities               5.97        638,854     445,314   364,254   432,780   459,870
  Other securities          5.99         34,646      30,477    28,434    61,104   119,349
                                     ----------  ----------  --------  --------  --------
    Total                            $1,279,283  $1,092,459  $917,095  $871,074  $632,671
                                     ==========  ==========  ========  ========  ========
Yield to maturity on
 interest-earning
 securities at year
 end, excluding
 insurance subsidiary                      6.10%       6.34%     6.33%     5.02%     6.35%
</TABLE>
 
<TABLE>
<CAPTION>
                                         1-LESS         5-LESS        10 YEARS
                        LESS THAN         THAN           THAN           AND
                        ONE YEAR        5 YEARS        10 YEARS        AFTER           TOTAL
                        ---------       --------       --------       --------       ----------
(DOLLARS IN THOUSANDS)
<S>                     <C>       <C>   <C>      <C>   <C>      <C>   <C>      <C>   <C>        <C>
Maturity (Fair Value)
 U.S. government
  securities            $  1,145  6.35% $  5,927 5.81% $ 3,453  5.87% $   --    -- % $   10,525 5.88%
 Federal agency
  securities             257,377  6.47   329,733 6.09    6,072  6.84    2,076  7.02     595,258 6.26
 Corporate debt
  securities             321,382  5.67   237,068 6.01   61,759  7.21   18,645  6.34     638,854 5.97
 Other securities         17,982  5.51     8,077 6.18    5,032  6.60    3,555  7.10      34,646 5.99
                        --------  ----  -------- ----  -------  ----  -------  ----  ---------- ----
                        $597,886  6.01% $580,805 6.05% $76,316  7.08% $24,276  6.51% $1,279,283 6.10%
                        ========  ====  ======== ====  =======  ====  =======  ====  ========== ====
Maturity (Amortized
 Cost)
 U.S. government
  securities            $  1,139        $  5,949       $ 3,435        $   --         $   10,523
 Federal agency
  securities             256,745         328,722         6,050          2,076           593,593
 Corporate debt
  securities             321,308         236,598        60,947         18,567           637,420
 Other securities         18,106           8,063         4,879          3,555            34,603
                        --------        --------       -------        -------        ----------
                        $597,298        $579,332       $75,311        $24,198        $1,276,139
                        ========        ========       =======        =======        ==========
</TABLE>
 
                                      64
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
<TABLE>
<CAPTION>
                                                    GROSS
                            WEIGHTED              UNREALIZED
                            AVERAGE  AMORTIZED  --------------    FAIR
                             YIELD      COST    GAINS  LOSSES    VALUE
                            -------- ---------- ------ ------- ----------
                                          DECEMBER 31, 1996
                            ---------------------------------------------
(DOLLARS IN THOUSANDS)
<S>                         <C>      <C>        <C>    <C>     <C>
U.S. government securities    5.88%  $   10,523 $   38 $    36 $   10,525
Federal agency securities     6.26      593,593  1,923     258    595,258
Corporate debt securities     5.97      637,420  2,203     769    638,854
Other securities              5.99       34,603    175     132     34,646
                              ----   ---------- ------ ------- ----------
                              6.10%  $1,276,139 $4,339 $ 1,195 $1,279,283
                              ====   ========== ====== ======= ==========
<CAPTION>
                                          DECEMBER 31, 1995
                            ---------------------------------------------
<S>                         <C>      <C>        <C>    <C>     <C>
U.S. government securities    5.55%  $   10,810 $   84 $    20 $   10,874
Federal agency securities     6.43      599,940  6,237     383    605,794
Corporate debt securities     6.19      442,943  2,564     193    445,314
Other securities              6.10       30,425    170     118     30,477
                              ----   ---------- ------ ------- ----------
                              6.32%  $1,084,118 $9,055 $   714 $1,092,459
                              ====   ========== ====== ======= ==========
<CAPTION>
                                          DECEMBER 31, 1994
                            ---------------------------------------------
<S>                         <C>      <C>        <C>    <C>     <C>
U.S. government securities    6.89%  $   10,580 $    3 $   755 $    9,828
Federal agency securities     6.40      523,211     59   8,691    514,579
Corporate debt securities     6.44      372,013    267   8,026    364,254
Other securities              5.67       29,587     50   1,203     28,434
                              ----   ---------- ------ ------- ----------
                              6.40%  $  935,391 $  379 $18,675 $  917,095
                              ====   ========== ====== ======= ==========
</TABLE>
 
  The Company purchases only investment grade or higher rated securities. In
order to determine impairment, these ratings are reviewed quarterly.
 
  At December 31, 1996, 1995 and 1994, there were no securities held-to-
maturity.
 
  Realized gains and losses on the available-for-sale portfolio are calculated
on the specific identification method. Realized gains and losses on sales of
securities were $457,000 and $59,000, respectively, in 1994. There were no
sales of securities available-for-sale in 1996 or 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>
                                                  YEAR ENDED DECEMBER 31
                                                 --------------------------
                                                  1996     1995      1994
                                                 -------  -------  --------
(DOLLARS IN MILLIONS)
<S>                                              <C>      <C>      <C>
Balance at beginning of period                   $ 4,952  $(9,235) $  4,262
Change in unrealized net gains (losses), net of
 taxes                                            (2,929)  14,187   (13,497)
                                                 -------  -------  --------
Balance at end of period                         $ 2,023  $ 4,952  $ (9,235)
                                                 =======  =======  ========
</TABLE>
 
                                      65
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 5: MORTGAGE-BACKED SECURITIES
 
  Mortgage-backed securities held-to-maturity consisted of the following:
 
<TABLE>
<CAPTION>
                                                 GROSS
                        WEIGHTED               UNREALIZED
                        AVERAGE  AMORTIZED  ----------------    FAIR
                         YIELD      COST     GAINS   LOSSES    VALUE
                        -------- ---------- ------- -------- ----------
                                       DECEMBER 31, 1996
                        -----------------------------------------------
(DOLLARS IN THOUSANDS)
<S>                     <C>      <C>        <C>     <C>      <C>
FNMA                      7.97%  $   34,971 $   176 $    167 $   34,980
FHLMC                     8.10    1,469,488  20,257    7,566  1,482,179
Other                     5.78      114,250      23    8,859    105,414
                          ----   ---------- ------- -------- ----------
                          7.93%  $1,618,709 $20,456 $ 16,592 $1,622,573
                          ====   ========== ======= ======== ==========
<CAPTION>
                                       DECEMBER 31, 1995
                        -----------------------------------------------
<S>                     <C>      <C>        <C>     <C>      <C>
FNMA                      9.87%  $   39,967 $ 5,427 $     -- $   45,394
FHLMC                     8.50    1,735,016  56,765       --  1,791,781
Other                     5.91      111,753      38    7,048    104,743
                          ----   ---------- ------- -------- ----------
                          8.38%  $1,886,736 $62,230 $  7,048 $1,941,918
                          ====   ========== ======= ======== ==========
<CAPTION>
                                       DECEMBER 31, 1994
                        -----------------------------------------------
<S>                     <C>      <C>        <C>     <C>      <C>
FNMA                      6.57%  $2,385,128 $    -- $ 38,640 $2,346,488
FHLMC                     6.79    3,288,789      --   50,101  3,238,688
REMIC                     5.24      387,126       3   12,535    374,594
Other                     5.80      274,061      --   22,100    251,961
                          ----   ---------- ------- -------- ----------
                          6.57%  $6,335,104 $     3 $123,376 $6,211,731
                          ====   ========== ======= ======== ==========
</TABLE>
 
  Prior to July, 1996 the Company recorded impairment on mortgage-backed
securities through charge-offs to the allowance for loan and lease losses.
Subsequent to July, impairment is recorded as a charge to earnings. There were
charges to the allowance for loan and lease losses of $12,800,000 for the
first six months of 1996, $11,000,000 for the year ended December 31, 1995,
and $1,000,000 for the year ended December 31, 1994.
 
  For the second half of 1996, $17,906,000 was recorded to reflect impairment
in the mortgage-backed securities portfolio.
 
                                      66
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Mortgage-backed securities available-for-sale consisted of the following:
 
<TABLE>
<CAPTION>
                                                 GROSS
                        WEIGHTED               UNREALIZED
                        AVERAGE  AMORTIZED  ----------------    FAIR
                         YIELD      COST     GAINS   LOSSES    VALUE
                        -------- ---------- -------- ------- ----------
                                       DECEMBER 31, 1996
                        -----------------------------------------------
(DOLLARS IN THOUSANDS)
<S>                     <C>      <C>        <C>      <C>     <C>
FNMA                      6.75%  $2,297,611 $ 51,812 $ 2,846 $2,346,577
FHLMC                     6.81    3,297,051   94,183  17,569  3,373,665
REMIC                     5.26       33,546       --     286     33,260
RTC                       6.57      159,461       --   1,688    157,773
Other                     6.75      263,728       --   5,161    258,567
                          ----   ---------- -------- ------- ----------
                          6.77%  $6,051,397 $145,995 $27,550 $6,169,842
                          ====   ========== ======== ======= ==========
<CAPTION>
                                       DECEMBER 31, 1995
                        -----------------------------------------------
<S>                     <C>      <C>        <C>      <C>     <C>
FNMA                      7.33%  $2,585,802 $ 66,326 $    -- $2,652,128
FHLMC                     7.11    4,356,331  112,203      --  4,468,534
REMIC                     4.96      226,305       10   1,366    224,949
RTC                       6.72      228,180       --   5,387    222,793
Other                     6.66      352,217      290   4,206    348,301
                          ----   ---------- -------- ------- ----------
                          7.09%  $7,748,835 $178,829 $10,959 $7,916,705
                          ====   ========== ======== ======= ==========
<CAPTION>
                                       DECEMBER 31, 1994
                        -----------------------------------------------
<S>                     <C>      <C>        <C>      <C>     <C>
FNMA                      6.02%  $1,055,152 $    416 $19,125 $1,036,443
FHLMC                     6.83    1,379,856      114  40,991  1,338,979
RTC                       6.62      186,028       --   7,743    178,285
Other                     6.66      390,750       --   9,954    380,796
                          ----   ---------- -------- ------- ----------
                          6.51%  $3,011,786 $    530 $77,813 $2,934,503
                          ====   ========== ======== ======= ==========
</TABLE>
 
  Proceeds from the sales of mortgage-backed securities were $555,719,000 in
1996 and $507,018,000 in 1995. There were no mortgage-backed securities sold
in 1994. Net realized gains on the sale of mortgage-backed securities were
$8,790,000 in 1996 and $13,585,000 in 1995. There were no realized losses on
the sale of mortgage-backed securities in 1996 and 1995.
 
 
                                      67
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  The unrealized net gains (losses) on mortgage-backed securities, net of
income taxes (securities valuation allowance), included as a component of
stockholders' equity, were as follows:
 
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31
                                                 ----------------------------
                                                   1996      1995      1994
                                                 --------  --------  --------
   (DOLLARS IN MILLIONS)
   <S>                                           <C>       <C>       <C>
   Balance at beginning of period                $103,481  $(45,849) $ 18,389
   Change in unrealized net gains (losses), net
    of taxes                                      (28,545)  149,330   (64,238)
                                                 --------  --------  --------
   Balance at end of period                      $ 74,936  $103,481  $(45,849)
                                                 ========  ========  ========
</TABLE>
 
  The contractual maturities of mortgage-backed securities as of December 31,
1996 follow:
 
<TABLE>
<CAPTION>
                                 DECEMBER 31, 1996
                              -----------------------
                              ADJUSTABLE FIXED
                                 RATE    RATE  TOTAL
                              ---------- ----- ------
   (DOLLARS IN MILLIONS)
   <S>                        <C>        <C>   <C>
   One year or less             $  109   $ 86  $  195
   Over one to two years           116     30     146
   Over two to three years         124     21     145
   Over three to five years        265     35     300
   Over five to ten years          796     80     876
   Over ten to fifteen years     1,065     29   1,094
   Over fifteen years            5,024      9   5,033
                                ------   ----  ------
                                $7,499   $290  $7,789
                                ======   ====  ======
</TABLE>
 
  At December 31, 1995, certain mortgage-backed securities were reclassified
in accordance with the guide to implementing SFAS 115 issued by the FASB. The
following table presents the effect of the reclassification:
 
<TABLE>
<CAPTION>
                                                                   UNREALIZED
                                      HELD-TO- AVAILABLE-        GAINS/(LOSSES)
                                      MATURITY  FOR-SALE  TOTAL   NET OF TAXES
                                      -------- ---------- ------ --------------
   (DOLLARS IN MILLIONS)
   <S>                                <C>      <C>        <C>    <C>
   Balance prior to reclassification   $7,563    $2,097   $9,660      $ 24
   Reclassified from held-to-
    maturity to available-for-sale     (5,920)    5,920       --        --
   Reclassified from available-for-
    sale to held-to-maturity              244      (244)      --        --
   Unrealized gains                        --       143      143       143
   Tax effect of unrealized gains          --        --       --       (59)
                                       ------    ------   ------      ----
   Balance at December 31, 1995        $1,887    $7,916   $9,803      $108
                                       ======    ======   ======      ====
</TABLE>
 
                                      68
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 6: LOANS
 
  The composition of real estate and Consumer Finance and other loans for the
five years 1992 through 1996 is included in the table on page 31.
 
  The following comprised loans receivable:
 
<TABLE>
<CAPTION>
                                                DECEMBER 31
                                          ------------------------
                                             1996         1995
                                          -----------  -----------
   (DOLLARS IN THOUSANDS)
   <S>                                    <C>          <C>
   Loans receivable
     Real estate
       Held-for-investment                $28,675,327  $27,525,966
       Available-for-sale                      85,681      159,939
     Consumer Finance                       2,185,903    2,136,022
     Other loans
       Held-for-investment                    219,044      189,442
       Available-for-sale                      21,491      327,395
                                          -----------  -----------
                                           31,187,446   30,338,764
                                          -----------  -----------
     Loans in process                          10,371         (487)
     Unearned income                          (60,926)     (88,079)
     Allowance for loan and lease losses     (313,699)    (362,849)
                                          -----------  -----------
                                             (364,254)    (451,415)
                                          -----------  -----------
                                          $30,823,192  $29,887,349
                                          ===========  ===========
</TABLE>
 
  The contractual maturities of loans as of December 31, 1996 follow:
 
<TABLE>
<CAPTION>
                                        DECEMBER 31, 1996
                           --------------------------------------------
                             REAL ESTATE LOANS
                           ---------------------
                                   FIXED         CONSUMER        TOTAL
                             ARM   RATE   TOTAL  FINANCE  OTHER  LOANS
                           ------- ----- ------- -------- ----- -------
(DOLLARS IN MILLIONS)
<S>                        <C>     <C>   <C>     <C>      <C>   <C>
One year or less           $   520 $ 32  $   552  $  723  $144  $ 1,419
Over one to two years          767   44      811     587     8    1,406
Over two to three years        714   39      753     418     6    1,177
Over three to five years     1,168  148    1,316     165     5    1,486
Over five to ten years       3,608  285    3,893     200    19    4,112
Over ten to fifteen years    4,560   93    4,653      91    58    4,802
Over fifteen years          16,605  178   16,783       2    --   16,785
                           ------- ----  -------  ------  ----  -------
  Total                    $27,942 $819  $28,761  $2,186  $240  $31,187
                           ======= ====  =======  ======  ====  =======
</TABLE>
 
  In accordance with SFAS 114, a loan is impaired when, based on current
information and events, it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. The Company measures impairment based on the fair value of the
loan's collateral. A change in the fair value of an impaired loan is reported
as an increase or reduction to the provision for loan losses. Charge-offs
occur upon modification of the loan terms or in the event of foreclosure. The
Company's policy for recognizing income on impaired loans is to accrue
earnings unless a loan is in foreclosure or becomes nonperforming, at which
time the accrued earnings are reversed. Cash receipts for impaired loans are
allocated to principal and interest in accordance with the contractual terms
of the loan.
 
                                      69
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

  The recorded investment in loans for which impairment has been recognized
and the related reserves for estimated losses follows:
 
<TABLE>
<CAPTION>
                                           IMPAIRED LOANS
                   ---------------------------------------------------------------
                     HAVING                              HAVING
                    RELATED   RESERVES FOR  NET WITH   NO RELATED
                    RESERVES   ESTIMATED    RESERVES  RESERVES FOR NET OF RESERVES
                   FOR LOSSES    LOSSES    FOR LOSSES    LOSSES      FOR LOSSES
                   ---------- ------------ ---------- ------------ ---------------
                                          DECEMBER 31, 1996
                   ---------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S>                <C>        <C>          <C>        <C>          <C>
Real estate loans
 Residential
  Single-family     $ 42,310    $ 9,281     $ 33,029    $39,666       $ 72,695
  Apartments          67,936     13,080       54,856      8,002         62,858
 Commercial
  Offices             29,202      9,570       19,632      3,364         22,996
  Retail              11,863      3,173        8,690        759          9,449
  Hotel/motel         34,082      9,032       25,050         --         25,050
  Industrial          16,633      4,210       12,423      1,170         13,593
  Other                1,451         --        1,451      2,017          3,468
                    --------    -------     --------    -------       --------
                    $203,477    $48,346     $155,131    $54,978       $210,109
                    ========    =======     ========    =======       ========
<CAPTION>
                                          DECEMBER 31, 1995
                   ---------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S>                <C>        <C>          <C>        <C>          <C>
Real estate loans
 Residential
  Single-family     $ 52,189    $11,889     $ 40,300    $31,690       $ 71,990
  Apartments          81,222     18,797       62,425     25,595         88,020
 Commercial
  Offices             24,196      8,958       15,238      9,793         25,031
  Retail              31,758      6,812       24,946      5,875         30,821
  Hotel/motel         38,727      9,292       29,435         --         29,435
  Industrial          22,509      5,515       16,994      3,004         19,998
  Other                1,836        526        1,310      1,823          3,133
                    --------    -------     --------    -------       --------
                    $252,437    $61,789     $190,648    $77,780       $268,428
                    ========    =======     ========    =======       ========
<CAPTION>
                                          DECEMBER 31, 1994
                   ---------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S>                <C>        <C>          <C>        <C>          <C>
Real estate loans
 Residential
  Single-family     $ 31,011    $ 6,456     $ 24,555    $17,063       $ 41,618
  Apartments          77,934     16,418       61,516     28,395         89,911
 Commercial
  Offices             26,698      9,303       17,395      5,426         22,821
  Retail              25,916      5,547       20,369      3,902         24,271
  Hotel/motel         19,659      3,194       16,465      2,207         18,672
  Industrial          12,646      3,018        9,628      1,728         11,356
  Other                4,671      1,090        3,581        329          3,910
                    --------    -------     --------    -------       --------
                    $198,535    $45,026     $153,509    $59,050       $212,559
                    ========    =======     ========    =======       ========
</TABLE>
 
  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.
 
                                      70
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  The average recorded investment in impaired loans and the related amount of
interest income recognized during the period of impairment follows:
 
<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31
                                                  --------------------------
                                                    1996     1995     1994
                                                  -------- -------- --------
   (DOLLARS IN THOUSANDS)
   <S>                                            <C>      <C>      <C>
   Average recorded investment in impaired loans  $256,650 $243,079 $298,315
   Interest income recognized                       21,271   17,809   24,733
   Interest income recognized on cash-basis         21,410   17,758   25,061
</TABLE>
 
  Loans receivable totaling $8,008,384,000 at December 31, 1996 were pledged
to secure FHLB borrowings, certain deposits, securities sold under agreements
to repurchase and other obligations and accounts.
 
  Gross unrealized gains on real estate loans available-for-sale totaled
$462,000 at December 31, 1996 and $1,443,000 at December 31, 1995.
 
  A significant portion of the ARM portfolio is subject to lifetime interest-
rate caps and floors as well as periodic interest-rate caps. Each loan is
priced separately with a maximum cap and a minimum floor. The weighted-average
cap was 12.92% and the weighted-average floor was 4.81% at December 31, 1996.
At December 31, 1996, $459,299,000 of ARMs with an average yield of 7.31% had
reached their periodic cap rate. Without the cap, the average yield on those
ARMs would have been 7.64%. Periodic interest-rate caps are generally in
effect for three years. The loss to interest income from real estate loans
which have reached their ceiling interest rate was approximately $2,098,000 in
1996. At December 31, 1996, $417,467,000 of ARMs with an average yield of
7.76% had reached their floor rate. Without the floor, the average yield on
those ARMs would have been 7.36%. The benefit to interest income from real
estate loans which have reached their floor interest rate was approximately
$1,675,000 in 1996 compared with $3,152,000 in 1995. The contract amount on
ARMs subject to interest-rate caps and floors does not represent the exposure
to market loss.
 
  The amortization of deferred loan fees included in interest income totaled
$25,866,000 in 1996, $33,493,000 in 1995 and $53,378,000 in 1994.
 
  Certain loans meet the criteria of TDRs. TDRs totaled $74,196,000 at
December 31, 1996. This compared with $126,147,000 at the end of 1995 and
$148,244,000 at the end of 1994. There were no additional funds committed at
December 31, 1996.
 
  Interest on nonaccrual loans totaled $38,426,000 for the year ended December
31, 1996 compared with $38,058,000 for the year ended December 31, 1995 and
$46,909,000 for the year ended December 31, 1994.
 
                                      71
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Following is a summary of the reserve for estimated losses and charge-off
experience for loans receivable:
 
<TABLE>
<CAPTION>
                          REAL ESTATE LOANS     CONSUMER LOANS
                         --------------------  ------------------
                                               CONSUMER    BANK     OTHER
                            SFR       OTHER    FINANCE     CARD     LOANS     TOTAL
                         ---------  ---------  --------  --------  -------  ---------
(DOLLARS IN THOUSANDS)
<S>                      <C>        <C>        <C>       <C>       <C>      <C>
BALANCE AT DECEMBER 31,
 1991                    $ 100,353  $  87,641  $ 45,416  $ 21,173  $ 8,467  $ 263,050
Provision for losses       113,408    228,492    41,900    30,254    5,946    420,000
Charge-offs                (53,031)  (117,611)  (55,436)  (28,150)  (8,497)  (262,725)
Recoveries                     212      5,008    14,661     2,022    2,669     24,572
                         ---------  ---------  --------  --------  -------  ---------
BALANCE AT DECEMBER 31,
 1992                      160,942    203,530    46,541    25,299    8,585    444,897
Adoption of SFAS 114         3,153     44,821        --        --       --     47,974
                         ---------  ---------  --------  --------  -------  ---------
BALANCE AT JANUARY 1,
 1993                      164,095    248,351    46,541    25,299    8,585    492,871
Provision for losses       299,485    123,468    37,900    (6,533)   8,680    463,000
Charge-offs               (253,686)  (151,700)  (50,174)  (20,794)  (2,300)  (478,654)
Recoveries                   2,025      4,273    15,523     2,028    1,203     25,052
                         ---------  ---------  --------  --------  -------  ---------
BALANCE AT DECEMBER 31,
 1993                      211,919    224,392    49,790        --   16,168    502,269
Provision for losses       166,649        693    41,900        --   (2,042)   207,200
Charge-offs               (191,290)   (42,981)  (54,041)       --   (3,762)  (292,074)
Recoveries                   1,420      2,924    15,568        --      744     20,656
                         ---------  ---------  --------  --------  -------  ---------
BALANCE AT DECEMBER 31,
 1994                      188,698    185,028    53,217        --   11,108    438,051
Provision for losses       160,425    (18,000)   48,500        --   (3,225)   187,700
Charge-offs               (194,605)   (22,739)  (62,206)       --   (2,017)  (281,567)
Recoveries                   1,498        860    16,057        --      250     18,665
                         ---------  ---------  --------  --------  -------  ---------
BALANCE AT DECEMBER 31,
 1995                      156,016    145,149    55,568        --    6,116    362,849
Provision for losses       187,344    (39,908)   58,800        --    2,735    208,971
Charge-offs               (196,708)   (14,602)  (60,520)       --   (4,488)  (276,318)
Recoveries                   1,256        228    16,197        --      516     18,197
                         ---------  ---------  --------  --------  -------  ---------
BALANCE AT DECEMBER 31,
 1996                    $ 147,908  $  90,867  $ 70,045  $     --  $ 4,879  $ 313,699
                         =========  =========  ========  ========  =======  =========
</TABLE>
 
  As a result of the Company's review of reserve levels which showed an excess
of commercial and apartment loan reserves, the Company reallocated $40,000,000
of commercial real estate loan reserves, which is included in the other real
estate loan provisions for losses, to SFR in 1996. Provisions for losses on
the leasing portfolio, included in other loan loss provisions, were reduced by
$1,800,000 in 1996 and $6,000,000 in 1995 as a result of the reversal of
provisions originally established for expected losses which did not
materialize.
 
  The following table presents the Company's ALLL as a percent of the
respective loans receivable portfolios. The loan balances and percentage of
reserves to the respective loan balances for December 1995 have been restated
to exclude mortgage-backed securities with credit recourse for comparative
purposes to conform to the 1996 presentation.
 
<TABLE>
<CAPTION>
              REAL ESTATE LOANS     CONSUMER LOANS
              -------------------   ------------------
                                    CONSUMER   BANK     OTHER
                SFR       OTHER      FINANCE   CARD     LOANS  TOTAL
              --------  ---------   ---------  -------  -----  -----
<S>           <C>       <C>         <C>        <C>      <C>    <C>
December 31,
  1996             .57%      3.39%       3.20%      --% 2.03%  1.01%
  1995             .63       4.86        2.60       --  1.18   1.20
  1994             .66       5.96        2.66       --  2.47   1.28
  1993             .83       6.59        2.72       --  3.99   1.60
  1992             .63       5.83        2.70     9.88  2.14   1.43
</TABLE>
 
                                      72
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  The average loan receivable balances and the ratio of net charge-offs to the
respective average loan receivable portfolios are presented in the table
below.
 
<TABLE>
<CAPTION>
                                           DECEMBER 31
                             -------------------------------------------
                              1996     1995     1994     1993     1992
                             -------  -------  -------  -------  -------
(DOLLARS IN MILLIONS)
<S>                          <C>      <C>      <C>      <C>      <C>
Average balance
  Real estate loans
    SFR                      $25,212  $23,980  $25,227  $25,689  $25,321
    Other                      2,854    3,075    3,255    3,719    3,686
  Consumer Finance             2,105    2,016    1,868    1,728    1,686
  Bank card                       --       --       --      180      272
  Other loans                    534      498      418      386      423
Ratio of net charge-offs to
 average loans
  Real estate loans
    SFR                          .72%     .76%     .75%     .98%     .21%
    Other                        .50      .71     1.23     3.96     3.07
  Consumer Finance              2.11     2.29     2.06     2.01     2.42
  Bank card                       --       --       --    10.44     9.62
  Other loans                    .74      .35      .72      .27     1.38
</TABLE>
 
NOTE 7: MORTGAGE BANKING
 
  The following summarizes the sale of loans and mortgage-backed securities by
type:
 
<TABLE>
<CAPTION>
                                      YEAR ENDED DECEMBER 31
                                 --------------------------------
                                    1996       1995       1994
                                 ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S>                              <C>        <C>        <C>
Loans sold
  Adjustable rate                $       -- $       -- $   55,243
  Fixed-rate                      1,478,008  1,113,259  1,115,751
Mortgage-backed securities sold
  Adjustable rate                   561,400    498,099         --
                                 ---------- ---------- ----------
                                 $2,039,408 $1,611,358 $1,170,994
                                 ========== ========== ==========
</TABLE>
 
  The following table summarizes the average loans serviced for others and the
related loan servicing spread:
 
<TABLE>
<CAPTION>
                                         YEAR ENDED DECEMBER 31
                                   -------------------------------------
                                      1996         1995         1994
                                   -----------  -----------  -----------
(DOLLARS IN THOUSANDS)
<S>                                <C>          <C>          <C>
Average loans serviced for others  $11,152,957  $10,807,163  $11,723,525
Loan servicing spread                      .41%         .51%         .43%
</TABLE>
 
  Loan servicing spread represents net servicing income as a percentage of the
average portfolio serviced.
 
  Custodial balances maintained in connection with the foregoing loan
servicing are included in wholesale transaction accounts and totaled
$157,954,000 at December 31, 1996 and $173,856,000 at December 31, 1995.
 
  At December 31, 1996 GWB serviced loans for GWFC and Aristar of $27,166,000
and $14,801,000, respectively. At December 31, 1995, GWB serviced loans for
GWFC and Aristar of $23,292,000 and $12,252,000, respectively.
 
                                      73
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  The present value of retained yield on loans sold is amortized using the
interest method adjusted quarterly for actual prepayment experience. Following
is a summary of capitalized excess and short servicing included in other
assets and other liabilities, respectively:
 
<TABLE>
<CAPTION>
                                   DECEMBER 31
                            ----------------------------
                              1996      1995      1994
                            --------  --------  --------
(DOLLARS IN THOUSANDS)
<S>                         <C>       <C>       <C>
Excess servicing            $ 28,241  $ 24,830  $ 25,934
Short servicing              (20,714)  (21,214)  (25,356)
                            --------  --------  --------
Capitalized servicing, net  $  7,527  $  3,616  $    578
                            ========  ========  ========
</TABLE>
 
  An impairment adjustment was recorded to short servicing of $1,643,000 in
1996.
 
  Following is a summary of the net unamortized balance of excess and short
servicing on loans sold:
 
<TABLE>
<CAPTION>
                                                 YEAR ENDED DECEMBER 31
                                                 -----------------------
                                                  1996     1995   1994
                                                 -------  ------ -------
(DOLLARS IN THOUSANDS)
<S>                                              <C>      <C>    <C>
Balance at beginning of year                     $ 3,616  $  578 $ 9,160
Additions from sales                               9,445     994     604
Amortization of excess and short servicing, net   (5,534)  2,044  (9,186)
                                                 -------  ------ -------
Balance at end of year                           $ 7,527  $3,616 $   578
                                                 =======  ====== =======
</TABLE>
 
  The value of servicing rights is based on the assumption that a normal
servicing fee will be received for the estimated life of the loans. The
following is a summary of capitalized mortgage servicing rights:
 
<TABLE>
<CAPTION>
                                                    YEAR ENDED
                                                   DECEMBER 31
                                                  ---------------
                                                   1996     1995
                                                  -------  ------
(DOLLARS IN THOUSANDS)
<S>                                               <C>      <C>
Balance at beginning of year                      $ 7,034  $   --
Originated mortgage servicing rights capitalized   12,323   7,248
Amortization                                       (2,339)   (214)
                                                  -------  ------
Balance at end of year                            $17,018  $7,034
                                                  =======  ======
</TABLE>
 
  Capitalized mortgage servicing rights are analyzed for impairment by
stratifying the underlying loans based on the predominant risk characteristics
of rate, geographic area and product type on a pool by pool basis. A valuation
allowance is provided for identified impairment. There was no impairment
identified in 1996 and 1995.
 
                                      74
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Gain on sales of loans and mortgage-backed securities were comprised of:
 
<TABLE>
<CAPTION>
                                       YEAR ENDED DECEMBER 31
                            -----------------------------------------------
                                  1996               1995           1994
                            -----------------  -----------------  ---------
                            MORTGAGES   MBS    MORTGAGES   MBS    MORTGAGES
                            --------- -------  --------- -------  ---------
(DOLLARS IN THOUSANDS)
<S>                         <C>       <C>      <C>       <C>      <C>
Mortgage servicing spread
  Gains                      $ 8,240  $13,530   $4,730   $ 3,512   $ 1,922
  Losses                          --       --       --        --    (1,318)
                             -------  -------   ------   -------   -------
  Net                          8,240   13,530    4,730     3,512       604
Premiums (discounts), net     (6,130)  (1,390)    (992)   12,264    (4,628)
Deferred loan fees             6,346   (3,815)   4,736     1,147     8,879
Gain on servicing              1,888       --       --        --        --
Adjust to lower of cost or
 market                         (937)      --      450        --    (1,057)
Net hedging gains                 --       --       --        --     1,472
Miscellaneous fees              (845)     465     (100)   (3,338)       69
                             -------  -------   ------   -------   -------
                             $ 8,562  $ 8,790   $8,824   $13,585   $ 5,339
                             =======  =======   ======   =======   =======
</TABLE>
 
  Mortgage banking servicing income consisted of:
 
<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31
                                           -------------------------
                                            1996     1995     1994
                                           -------  -------  -------
(DOLLARS IN THOUSANDS)
<S>                                        <C>      <C>      <C>
Collections                                $61,144  $61,980  $68,968
Guarantee fees                              (7,587)  (8,651)  (8,929)
Amortization of mortgage servicing rights   (7,873)   1,830   (9,186)
                                           -------  -------  -------
                                           $45,684  $55,159  $50,853
                                           =======  =======  =======
</TABLE>
 
  GWB, as seller and servicer, issued mortgage pass-through certificates
comprised of Class A certificates and Class B certificates. The Class B
certificates, which GWB retained, and classified as mortgage-backed
securities, are subordinated to the rights of the Class A certificate holders.
GWB also sold loans to FNMA and FHLMC whereby a portion or all of the credit
risk was retained. Following are data related to loans sold with credit
enhancements and the accompanying exposure related thereto:
 
<TABLE>
<CAPTION>
                                                      DECEMBER 31
                                            --------------------------------
                                               1996       1995       1994
                                            ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S>                                         <C>        <C>        <C>
Loans sold with credit enhancements
 outstanding                                $1,188,717 $1,397,411 $1,409,631
Maximum exposure under credit enhancements     660,048    779,902    778,705
</TABLE>
 
  To facilitate the servicing of delinquent loans under these commitments and
to minimize losses to the Company, loans in the amount of $180,337,000 in
1996, $115,636,000 in 1995 and $71,400,000 in 1994 have been repurchased from
investors. Repurchased loans are included in the Company's periodic analysis
of the adequacy of ALLL. Delinquent interest of approximately $4,914,000 in
1996, $2,939,000 in 1995 and $1,669,000 in 1994 was repurchased and
subsequently written off. Periodically, the Company repurchases, for
investment, loans which were previously sold. The Company repurchased
$6,410,000 in 1996, $1,061,000 in 1995 and $476,274,000 in 1994. The reserve
for the contingent liability for loans sold with recourse was $9,358,000 at
December 31, 1996 and $6,000,000 at December 31, 1995.
 
                                      75
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 8: REAL ESTATE AVAILABLE-FOR-SALE OR DEVELOPMENT, NET
 
  Real estate available-for-sale or development, net, consisted of:
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31
                                                            ------------------
                                                              1996      1995
                                                            --------  --------
(DOLLARS IN THOUSANDS)
<S>                                                         <C>       <C>
Real estate available-for-sale
  Real estate acquired through foreclosure net of reserves
   of $1,861 and $26,850, respectively                      $119,780  $161,953
  Other, net of reserves of $2,744 and $1,210, respectively    8,741    21,806
  Accumulated depreciation                                    (3,634)   (6,081)
                                                            --------  --------
                                                             124,887   177,678
Property development, net of reserves of $18,623 and
 $29,002, respectively                                        35,110    39,434
                                                            --------  --------
                                                            $159,997  $217,112
                                                            ========  ========
</TABLE>
 
  Interest capitalized on property development totaled $3,073,000 at December
31, 1996, $4,088,000 at December 31, 1995 and $4,581,000 at December 31, 1994.
 
  Net real estate operations are summarized below:
 
<TABLE>
<CAPTION>
                                          YEAR ENDED DECEMBER 31
                                        ----------------------------
                                          1996      1995      1994
                                        --------  --------  --------
(DOLLARS IN THOUSANDS)
<S>                                     <C>       <C>       <C>
Net (gain) on sales of real estate      $(15,619) $(21,709) $ (6,437)
Interest recognized on advances           (5,981)   (2,337)   (1,341)
Provision for losses                     (12,775)    1,500    12,000
Write-downs                                2,254        --        --
Net operating losses and holding costs    32,847    28,151    27,632
                                        --------  --------  --------
                                        $    726  $  5,605  $ 31,854
                                        ========  ========  ========
</TABLE>
 
  In the third quarter of 1996, the Company determined that its real estate
portfolio was appropriately valued at market. As a result of this
determination, reserves of $13,504,000 were reversed.
 
  Following is a summary of the reserve for estimated losses:
 
<TABLE>
<CAPTION>
                                1996      1995      1994      1993      1992
                              --------  --------  --------  --------  --------
(DOLLARS IN THOUSANDS)
<S>                           <C>       <C>       <C>       <C>       <C>
Balance at beginning of year  $ 57,062  $ 77,025  $123,551  $185,204  $  6,862
Adoption of SFAS 114                --        --        --   (66,102)       --
                              --------  --------  --------  --------  --------
Adjusted balance at
 beginning of year              57,062    77,025   123,551   119,102     6,862
Provision for losses           (12,775)    1,500    12,000    92,000   220,000
Charge-offs                    (21,223)  (21,469)  (65,769)  (87,673)  (41,658)
Recoveries                         164         6     7,243       122        --
                              --------  --------  --------  --------  --------
Balance at end of year        $ 23,228  $ 57,062  $ 77,025  $123,551  $185,204
                              ========  ========  ========  ========  ========
</TABLE>
 
                                      76
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 9: INTEREST RECEIVABLE
 
  Following is a summary of interest receivable:
 
<TABLE>
<CAPTION>
                                  DECEMBER 31
                               -----------------
                                 1996     1995
                               -------- --------
(DOLLARS IN THOUSANDS)
<S>                            <C>      <C>
Real estate loans              $149,593 $147,758
Mortgage-backed securities       65,764   88,628
Securities available-for-sale    15,398   15,411
Other loans                      11,838   19,473
Consumer Finance                  2,161    2,327
Interest rate swaps                 785      846
Taxes                                --   24,197
                               -------- --------
                               $245,539 $298,640
                               ======== ========
</TABLE>
 
  There was no accrued interest for taxes at December 31, 1996.
 
NOTE 10: INVESTMENT IN FHLB
 
  The investment in FHLB consisted of capital stock, at cost, totaling
$377,946,000 at December 31, 1996 and $341,102,000 at December 31, 1995.
 
  The Company earned 6.11% in 1996, 4.93% in 1995 and 5.18% in 1994 from
dividends on its investment in FHLB stock. FHLB capital stock is pledged to
secure FHLB borrowings. Earnings on FHLB stock will presumably continue to be
restricted due to the funding requirements imposed on the Federal Home Loan
Banks for affordable housing programs and the Resolution Funding Corporation.
 
NOTE 11: PREMISES AND EQUIPMENT, NET
 
  Premises and equipment, net, consisted of the following:
 
<TABLE>
<CAPTION>
                                                DECEMBER 31
                                           ----------------------
                                              1996        1995
                                           ----------  ----------
(DOLLARS IN THOUSANDS)
<S>                                        <C>         <C>
Land                                       $   88,837  $   89,044
Buildings and leasehold improvements          453,462     435,204
Furniture, fixtures and equipment             498,841     554,256
Software                                       41,968      31,060
Construction in progress                       13,151      13,218
                                           ----------  ----------
                                            1,096,259   1,122,782
Accumulated depreciation and amortization    (543,837)   (518,110)
                                           ----------  ----------
                                           $  552,422  $  604,672
                                           ==========  ==========
</TABLE>
 
  Unamortized software was $33,496,000 and $29,615,000 at December 31, 1996
and 1995, respectively.
 
                                      77
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  The Company leases various branch offices under capital and noncancellable
operating leases which expire at various dates through 2043. Some leases
contain escalation provisions for adjustments in the consumer price index and
provide for renewal options for five-to-10 year periods. Future minimum lease
payments under all noncancellable leases at December 31, 1996 were as follows:
 
<TABLE>
<CAPTION>
                                          OPERATING CAPITAL
                                           LEASES    LEASES
                                          --------- --------
(DOLLARS IN THOUSANDS)
<S>                                       <C>       <C>
Year ending December 31,
  1997                                    $ 47,744  $  8,034
  1998                                      40,968     8,034
  1999                                      32,648     8,034
  2000                                      27,261     8,034
  2001                                      24,442     8,034
  Thereafter                               116,600    78,729
                                          --------  --------
  Total minimum lease payments            $289,663   118,899
                                          ========
  Amount representing interest                        78,131
                                                    --------
  Present value of minimum lease payments           $ 40,768
                                                    ========
</TABLE>
 
  Rental expense charged to earnings was $59,005,000 in the year ended
December 31, 1996, $60,279,000 in the year ended December 31, 1995 and
$55,011,000 in the year ended December 31, 1994. Rental sublease income was
$8,007,000, $8,111,000 and $7,027,000 in the years ended December 31, 1996,
1995 and 1994, respectively.
 
NOTE 12: DEPOSITS
 
  The following summarizes deposit balances at December 31, 1996 and 1995.
 
<TABLE>
<CAPTION>
                                     DECEMBER 31
                                   ----------------
                                    1996     1995
   (DOLLARS IN MILLIONS)           -------  -------
   <S>                             <C>      <C>
   Checking                        $ 4,420  $ 4,488
   Money market and other savings    6,744    6,589
   Term                             17,237   17,696
   Wholesale                           186      462
                                   -------  -------
                                   $28,587  $29,235
                                   =======  =======
 
  The following table shows the change in deposit balances at December 31,
1996 and 1995:
 
<CAPTION>
                                     DECEMBER 31
                                   ----------------
                                    1996     1995
   (DOLLARS IN MILLIONS)           -------  -------
   <S>                             <C>      <C>
   Checking                        $   (68) $   (85)
   Money market and other savings      155     (851)
   Term                               (459)   1,572
   Wholesale                          (276)    (102)
                                   -------  -------
                                   $  (648) $   534
                                   =======  =======
</TABLE>
 
                                      78
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  The average interest rate is based upon stated interest rates without giving
consideration to daily compounding of interest or forfeiture of interest
because of premature withdrawals. Noninterest bearing checking accounts
represented 6.07% of total deposits at December 31, 1996 and 5.40% at December
31, 1995. Accrued but unpaid interest on deposits included in other
liabilities totaled $44,060,000 at December 31, 1996 and $12,091,000 at
December 31, 1995.
 
  An analysis of term deposits by interest rate and maturity at December 31,
1996 is presented below:
 
<TABLE>
<CAPTION>
                                   OVER       OVER       OVER       OVER
                                 3 MONTHS   6 MONTHS  12 MONTHS  24 MONTHS              DECEMBER 31
                       3 MONTHS BUT WITHIN BUT WITHIN BUT WITHIN BUT WITHIN   OVER    ------------------
                       OR LESS   6 MONTHS  12 MONTHS  24 MONTHS  36 MONTHS  36 MONTHS  1996       1995
                       -------- ---------- ---------- ---------- ---------- --------- -------    -------
(DOLLARS IN MILLIONS)
<S>                    <C>      <C>        <C>        <C>        <C>        <C>       <C>        <C>
DECEMBER 31, 1996
INTEREST RATE
Under 3%                $   38    $   --     $   --     $   --     $  --      $  --   $    38    $    52
3 to 3.99%                  75        19          9          3         6         --       112        147
4 to 4.99%               3,129     1,735        928         87        33         32     5,944      3,704
5 to 5.99%               2,155     1,693      3,617        907       222        492     9,086      9,121
6 to 6.99%                 363       272        173        121       142        297     1,368      3,697
7 to 7.99%                 615        14         34         16        12         19       710      1,066
8 to 8.99%                  --         1          1          1         1          1         5          8
9 to 9.99%                  --        --         --         --        --         --        --        184
Over 10%                    --        --         --         --         2         --         2          5
                        ------    ------     ------     ------     -----      -----   -------    -------
 Total                  $6,375    $3,734     $4,762     $1,135     $ 418      $ 841   $17,265(1) $17,984(1)
                        ======    ======     ======     ======     =====      =====   =======    =======
$100,000 accounts
 included above         $1,876    $  713     $  923     $  227     $ 104      $ 175   $ 4,018    $ 3,502
</TABLE>
- --------
(1)This includes wholesale term accounts of $28 at December 31, 1996 and $289
   at December 31, 1995.
 
<TABLE>
<CAPTION>
                          NO      WITHIN
                       MATURITY  ONE YEAR   1998   1999  2000  2001  AFTER 2001  TOTAL
                       --------  --------   ----   ----  ----  ----  ----------  -----
(DOLLARS IN MILLIONS)
<S>                    <C>       <C>       <C>     <C>   <C>   <C>   <C>        <C>
YEAR-END BY MATURITY
Balances               $11,322   $14,871   $1,135  $418  $365  $475     $  1    $28,587
Average coupon rate       2.12%     5.38%    5.73% 5.75% 6.29% 5.63%    4.89%      4.13%
</TABLE>
 
  The following is a summary of interest expense on deposits:
 
<TABLE>
<CAPTION>
                                    YEAR ENDED DECEMBER 31
                                ------------------------------
                                   1996       1995      1994
                                ---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S>                             <C>        <C>        <C>
Checking                        $   32,871 $   35,286 $ 40,034
Money market and other savings     192,668    187,855  197,451
Term                               944,924    972,691  699,424
Wholesale                            9,016     21,253   13,390
                                ---------- ---------- --------
                                $1,179,479 $1,217,085 $950,299
                                ========== ========== ========
</TABLE>
 
                                      79
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 13: SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
 
  Securities sold under agreements to repurchase generally represent
borrowings of less than one year. The book value of these agreements
approximates fair value. Agreements to repurchase are secured by mortgage
loans and securities held by the Company.
 
<TABLE>
<CAPTION>
                                                   DECEMBER 31
                                         ----------------------------------
                                            1996        1995        1994
                                         ----------  ----------  ----------
(DOLLARS IN THOUSANDS)
<S>                                      <C>         <C>         <C>
Securities sold under agreements to re-
 purchase
  Balance at year end                    $4,197,666  $6,868,296  $6,299,055
  Maximum outstanding at any month end    6,116,426   7,536,524   6,299,055
  Average balance during the year         5,373,218   7,050,882   1,984,652
  Weighted average rate during the year        5.48%       5.99%       4.93%
  Weighted average rate at year end            5.48        5.78        5.80
 
  The collateral supporting securities sold under agreements to repurchase is
as follows:
 
<CAPTION>
                                                   DECEMBER 31
                                         ----------------------------------
                                            1996        1995        1994
                                         ----------  ----------  ----------
(DOLLARS IN THOUSANDS)
<S>                                      <C>         <C>         <C>
Mortgage-backed securities
  Book value                             $4,368,296  $7,041,492  $6,719,178
  Fair value                              4,356,046   7,102,655   6,481,469
</TABLE>
 
  Securities sold by the Company under agreements to repurchase are generally
short-term obligations. On December 31, 1996, the Company had $3,703,578,000
of obligations contracted for 120 days or less with an average maturity of 86
days. The remaining $494,088,000 of the repurchase obligations contractually
matures from one to three years.
 
NOTE 14: SHORT-TERM BORROWINGS
 
  The following is a summary of short-term borrowings:
 
<TABLE>
<CAPTION>
                                 DECEMBER 31
                            ---------------------
                               1996       1995
                            ---------- ----------
   (DOLLARS IN THOUSANDS)
   <S>                      <C>        <C>
   Commercial paper         $  472,506 $1,036,413
   Federal funds               629,000    280,000
                            ---------- ----------
                            $1,101,506 $1,316,413
                            ========== ==========
</TABLE>
 
  Commercial paper has original maturities of less than 270 days, and at
December 31, 1996, the average maturity was 34 days. Federal funds have
maturities of periods of up to 12 months and at December 31, 1996 the average
maturity was 71 days.
 
                                      80
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Short-term borrowings are summarized as follows:
 
<TABLE>
<CAPTION>
                                                DECEMBER 31
                                        ------------------------------
                                          1996       1995       1994
                                        --------  ----------  --------
(DOLLARS IN THOUSANDS)
<S>                                     <C>       <C>         <C>
Commercial paper
  Balance at year end                   $472,506  $1,036,413  $745,461
  Maximum outstanding at any month end   967,962   1,551,200   887,514
  Average balance during the year        699,409   1,142,851   431,021
  Weighted average rate during the year     5.38%       6.39%     4.56%
  Weighted average rate at year end         5.70        5.88      6.06
Federal funds
  Balance at year end                   $629,000  $  280,000  $465,000
  Maximum outstanding at any month end   768,000     727,000   540,000
  Average balance during the year        493,538     450,154   328,383
  Weighted average rate during the year     5.34%       6.27%     4.18%
  Weighted average rate at year end         5.44        5.85      6.29
</TABLE>
 
NOTE 15: LONG TERM BORROWINGS
 
  Debt issue costs are amortized on the interest method over the term of the
debt.
 
  The following is a summary of long term borrowings:
 
<TABLE>
<CAPTION>
                                      DECEMBER 31
                                 ---------------------
                                    1996       1995
                                 ---------- ----------
   (DOLLARS IN THOUSANDS)
   <S>                           <C>        <C>
   Senior and subordinated debt  $2,432,708 $2,305,845
   FHLB long-term borrowings        758,200    115,000
                                 ---------- ----------
                                 $3,190,908 $2,420,845
                                 ========== ==========
</TABLE>
 
                                       81
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  The Company has the following senior and subordinated debt outstanding:
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31
                                   MATURITY    INTEREST  ---------------------
                                     DATE        RATE       1996       1995
                                -------------- --------  ---------- ----------
   (DOLLARS IN THOUSANDS)
   <S>                          <C>            <C>       <C>        <C>
   SENIOR
     GWFC:                          June, 1998    6.125% $  149,845 $  149,746
                                December, 1998    8.625      99,961     99,943
                                    July, 2000    6.375     224,166    223,960
                                February, 2002    8.600     199,410    199,321
                                                         ---------- ----------
                                                            673,382    672,970
                                                         ---------- ----------
     GWB:                           July, 1997    9.500     152,323    152,179
                                                         ---------- ----------
     Aristar:                       July, 1996    6.250          --     99,995
                                     May, 1996    8.750          --      5,000
                                February, 1997    7.375      99,997     99,974
                                December, 1997    8.125      99,909     99,812
                                    July, 1998    5.750     149,922    149,875
                                February, 1999    7.875      99,904     99,864
                                     May, 1999    6.750      99,986         --
                                    July, 2000    6.300      99,930     99,913
                                December, 2000    6.125     149,610         --
                                    June, 2001    7.750     149,930    149,917
                                    June, 2001    7.250      99,857         --
                                  August, 2001    6.750      99,917         --
                                                         ---------- ----------
                                                          1,148,962    804,350
                                                         ---------- ----------
     Obligations of
      subsidiaries:                            7.6-10.7      45,473     47,428
                                                         ---------- ----------
       Total Senior Debt                                  2,020,141  1,676,927
                                                         ========== ==========
   SUBORDINATED
     GWB:                       February, 1999   10.500      38,172    129,801
                                   March, 1999   10.250      25,081    150,000
                                    June, 2001    9.875     149,708    149,658
                                                         ---------- ----------
                                                            212,961    429,459
                                                         ---------- ----------
     Aristar:                     August, 1998    8.875      99,948     99,920
                                    July, 1999    7.500      99,659     99,539
                                                         ---------- ----------
                                                            199,607    199,459
                                                         ---------- ----------
       Total Subordinated Debt                              412,568    628,918
                                                         ========== ==========
       Total Senior and
        Subordinated Debt                                $2,432,708 $2,305,845
                                                         ========== ==========
</TABLE>
 
  During 1996, Aristar issued the following senior debt:
 
<TABLE>
<CAPTION>
  MONTH OF                 INTEREST     DATE OF
    ISSUE        AMOUNT      RATE       MATURITY
  --------    ------------ -------- ----------------
   <S>        <C>          <C>      <C>
   May        $100,000,000   6.75%      May 15, 1999
   June        100,000,000   7.25      June 15, 2001
   August      100,000,000   6.75    August 15, 2001
   December    150,000,000   6.125  December 1, 2000
</TABLE>
 
                                       82
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 16: FHLB BORROWINGS
 
  An analysis of borrowings by maturity is included in the table on page 43.
 
  The maximum amount of credit which the FHLB will extend for purposes other
than meeting withdrawals varies from time to time in accordance with its
policies. The FHLB interest rates charged for advances vary depending upon
maturity, the cost of funds in the FHLB and the purpose of borrowing.
 
  FHLB borrowings are secured by pledges of real estate loans and the capital
stock of the FHLB. FHLB borrowings are summarized below:
 
<TABLE>
<CAPTION>
                                DECEMBER 31
                            -------------------
                               1996      1995
                            ---------- --------
   (DOLLARS IN THOUSANDS)
   <S>                      <C>        <C>
   Short-term borrowings    $2,011,733 $740,080
   Long-term borrowings        758,200  115,000
                            ---------- --------
                            $2,769,933 $855,080
                            ========== ========
</TABLE>
 
<TABLE>
<CAPTION>
                                                  1996       1995      1994
                                               ----------  --------  --------
   <S>                                         <C>         <C>       <C>
   Balance at year end                         $2,769,933  $855,080  $187,000
   Maximum outstanding at any month end         2,769,933   855,080   862,000
   Average balance during year                  1,854,786   186,698   306,431
   Weighted average interest rate during the
    year                                             5.45%     5.39%     5.63%
   Weighted average interest rate at year end        5.52      5.60      5.47
</TABLE>
 
  GWB has various borrowing alternatives with the FHLB, with capacity of
approximately $10 billion, inclusive of a $200 million facility for overnight
advances.
 
NOTE 17: COMPANY-OBLIGATED MANDITORILY REDEEMABLE PREFERRED SECURITIES OF THE
         COMPANY'S SUBSIDIARY TRUST, HOLDING SOLELY $103,092,800 AGGREGATE
         PRINCIPAL AMOUNT OF 8.25% SUBORDINATED DEFERRABLE INTEREST NOTES, DUE
         2025, OF THE COMPANY
 
  In December 1995, Great Western Financial Trust I (the "subsidiary trust"),
a wholly-owned subsidiary of Great Western Financial Corporation, issued
$100,000,000 of 8.25% Trust Originated Preferred Securities (the "preferred
securities"). In connection with the subsidiary trust's issuance of the
preferred securities, Great Western Financial Corporation issued to the
subsidiary trust $103,092,800 principal amount of its 8.25% subordinated
deferrable interest notes, due 2025 (the "subordinated notes"). The sole
assets of the subsidiary trust are and will be the subordinated notes. Great
Western Financial Corporation's obligations under the subordinated notes and
related agreements, taken together, constitute a full and unconditional
guarantee by the Company of the subsidiary trust's obligations under the
preferred securities.
 
<TABLE>
<CAPTION>
                                                            DECEMBER 31
                                                         -----------------
                                                           1996     1995
                                                         -------- --------
(DOLLARS IN THOUSANDS)
<S>                                                      <C>      <C>
Company-obligated manditorily redeemable preferred
 securities of the Company's subsidiary trust, holding
 solely $103,092,800 aggregate principal amount of 8.25%
 subordinated deferrable interest notes, due 2025, of
 the Company                                             $100,000 $100,000
                                                         ======== ========
</TABLE>
 
                                      83
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 18: FEDERAL AND STATE TAXES ON INCOME
 
  Following is a summary of the provision for taxes on income:
 
<TABLE>
<CAPTION>
                                 YEAR ENDED DECEMBER 31
                                --------------------------
                                 1996      1995     1994
                                -------  -------- --------
(DOLLARS IN THOUSANDS)
<S>                             <C>      <C>      <C>
Current tax expense
  Federal                       $58,400  $ 80,800 $120,100
  State                          11,700    24,400   32,500
                                -------  -------- --------
                                 70,100   105,200  152,600
                                -------  -------- --------
Deferred tax expense (benefit)
  Federal                        (1,900)   51,400      900
  State                           2,600     4,500    1,800
                                -------  -------- --------
                                    700    55,900    2,700
                                -------  -------- --------
                                $70,800  $161,100 $155,300
                                =======  ======== ========
</TABLE>
 
  The following table reconciles the statutory income tax rate to the
consolidated effective income tax rate:
 
<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31
                                                  -------------------------
                                                   1996     1995     1994
                                                  -------  -------  -------
<S>                                               <C>      <C>      <C>
Federal income tax rate                              35.0%    35.0%    35.0%
State franchise tax rate, net of federal income
 tax effect                                           6.5      6.1      6.0
                                                  -------  -------  -------
Statutory income tax rate                            41.5     41.1     41.0
Increase (reduction) in tax rate resulting from:
  Amortization of intangibles                          .8       .9      1.3
  Reversal of taxes previously provided                --      (.6)    (2.9)
  Low income housing                                   --     (1.2)      --
  Adjustment of deferred tax rate                    (1.2)      .1      (.2)
  Other items, net                                   (3.2)    (2.1)    (1.0)
                                                  -------  -------  -------
                                                     37.9%    38.2%    38.2%
                                                  =======  =======  =======
</TABLE>
 
                                       84
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Deferred tax liabilities (assets) are comprised of the following:
 
<TABLE>
<CAPTION>
                                                             DECEMBER 31
                                                         --------------------
                                                           1996       1995
                                                         ---------  ---------
   (DOLLARS IN THOUSANDS)
   <S>                                                   <C>        <C>
   Deferred tax liabilities
     Loan fees and interest income                       $ 188,122  $ 202,816
     FHLB dividends                                         86,728     63,050
     Financial leases                                       70,035     74,772
     Depreciation                                           49,441     42,303
     Unrealized holding gains on securities                 48,311     72,619
     Amortization of intangibles                            22,616     23,872
     Accrued interest income                                16,439     16,919
     Cash method of accounting for income tax reporting      8,131      8,325
     Election to reduce basis                                5,843      6,186
     Sales of unearned interest income                       2,488      2,488
     Other deferred income items                            56,994     65,554
                                                         ---------  ---------
                                                           555,148    578,904
                                                         ---------  ---------
   Deferred tax assets
     Loss reserves                                        (104,244)  (117,504)
     State taxes                                           (32,581)   (31,761)
     Postemployment benefits                               (24,908)   (27,433)
     Deferred compensation                                 (17,370)   (11,456)
     Unearned insurance commission                         (10,285)   (11,084)
     Partnership income                                     (3,230)     1,871
     Gain (loss) on mortgage sales                             271     (6,615)
     Other deferred deduction items                       (110,006)   (98,560)
                                                         ---------  ---------
                                                          (302,353)  (302,542)
   Deferred tax assets valuation allowance                      --         --
                                                         ---------  ---------
   Net deferred tax liabilities                          $ 252,795  $ 276,362
                                                         =========  =========
</TABLE>
 
  Taxes on income included the following:
 
<TABLE>
<CAPTION>
                                  DECEMBER 31
                               ------------------
                                 1996      1995
                               --------  --------
   (DOLLARS IN THOUSANDS)
   <S>                         <C>       <C>
   Net deferred liability
     Federal income tax        $172,990  $193,588
     State franchise tax         79,805    82,774
                               --------  --------
                                252,795   276,362
   Taxes payable (receivable)   (26,720)  102,019
                               --------  --------
                               $226,075  $378,381
                               ========  ========
</TABLE>
 
  Under the Internal Revenue Code, GWB, as a qualified thrift institution, had
been allowed to claim deductions for bad debts under the reserve method, which
is more favorable than bad debt deduction methods allowed to other taxpayers.
 
                                      85
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Under provisions of the Small Business Job Protection Act of 1996, GWB lost
the use of the bad debt reserve method beginning in 1996.
 
  Since the reserve balance at the end of 1996 of $724,488,000 arose prior to
1988, it is not currently subject to federal income tax and would not be if
GWB were to convert to a commercial bank or otherwise lose its tax status as a
qualified thrift institution. However, it will be subject to such tax upon
certain occurrences (including its distribution to shareholders), none of
which are currently contemplated. Consequently, in accordance with Financial
Accounting Standards No. 109 "Accounting for Income Taxes," a federal deferred
tax liability of $253,571,000 has not been recognized for the temporary
differences relating to the tax bad debt reserve of GWB.
 
  The Company's tax returns have been examined by the Internal Revenue Service
through December 31, 1987 and by the California Franchise Tax Board through
December 31, 1991.
 
NOTE 19: EMPLOYEE BENEFIT PLANS
 
 Pension Plans
 
  The Great Western Retirement Plan ("the plan") covers a majority of
employees. In 1996, the plan was converted from a final average pay plan to a
cash balance plan, under which participants' accounts are credited with pay-
related contributions and interest. The Company's general funding policy is to
contribute the maximum amount deductible for federal income tax purposes.
 
  The net periodic pension cost is computed as follows:
 
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31
                                                 ----------------------------
                                                   1996      1995      1994
                                                 --------  --------  --------
   (DOLLARS IN THOUSANDS)
   <S>                                           <C>       <C>       <C>
   Return on plan assets:
     Actual return                               $(42,002) $(37,162) $  1,877
     Expected return lower (higher) than actual
      return                                       22,439    21,459   (17,559)
                                                 --------  --------  --------
     Expected return                              (19,563)  (15,703)  (15,682)
   Service cost                                     8,211     9,360    11,400
   Interest cost                                   13,781    14,266    13,981
   Net amortization of initial unrecognized net
    (asset) as of January 1, 1987                      --      (676)     (676)
   Net amortization and deferral                   (1,989)      530     1,398
   Amortization of unrecognized prior service
    cost                                               --      (185)     (185)
                                                 --------  --------  --------
                                                 $    440  $  7,592  $ 10,236
                                                 ========  ========  ========
</TABLE>
 
  Assumptions used in determining the net periodic pension cost were:
 
<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31
                                                     -------------------------
                                                      1996     1995     1994
                                                     -------  -------  -------
   <S>                                               <C>      <C>      <C>
   Weighted average discount rate                       7.81%    8.25%    7.75%
   Rate of increase in future compensation levels       5.25     5.50     5.50
   Expected long-term rate of return on plan assets     9.00     9.00     9.00
</TABLE>
 
  Although the actual return on plan assets is shown, the expected long-term
rate of return is used in determining net periodic pension cost. The
difference between the actual return and expected return is included in net
amortization and deferral.
 
                                      86
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Accumulated plan benefit information and the funded status of the plan
follow:
 
<TABLE>
<CAPTION>
                                                     DECEMBER 31
                                                  ------------------
                                                    1996      1995
                                                  --------  --------
   (DOLLARS IN THOUSANDS)
   <S>                                            <C>       <C>
   Accumulated benefit obligation
     Vested                                       $170,028  $165,016
     Nonvested                                       9,393     4,516
                                                  --------  --------
                                                  $179,421  $169,532
                                                  ========  ========
   Projected benefit obligation                   $179,421  $201,421
   Fair value of plan assets                       241,345   212,084
                                                  --------  --------
   Plan assets in excess of benefit obligation      61,924    10,663
   Unrecognized prior service costs                (28,869)       --
   Unrecognized net loss                            10,103    20,467
                                                  --------  --------
   Prepaid pension cost included in other assets  $ 43,158  $ 31,130
                                                  ========  ========
</TABLE>
 
  The assumptions used in determining the actuarial present value of the
projected benefit obligation at December 31 were:
 
<TABLE>
<CAPTION>
                                                      DECEMBER 31
                                                     ----------------
                                                     1996  1995  1994
                                                     ----  ----  ----
   <S>                                               <C>   <C>   <C>
   Weighted average discount rate                    7.50% 7.50% 8.25%
   Rate of increase in future compensation levels    5.25  5.25  5.50
   Expected long-term rate of return on plan assets  9.00  9.00  9.00
   Interest crediting rate on participant accounts   5.50    --    --
   Annuity conversion rate                           6.75    --    --
</TABLE>
 
  Assumptions for interest crediting and annuity conversion rates are not
presented for December 31, 1995 and 1994, because they are not applicable to a
final average pay plan.
 
  Plan assets include equity securities, mutual funds, mortgage-backed
securities and other fixed-income securities.
 
  The Company has unfunded retirement restoration plans for employees whose
benefits under the principal funded plan are reduced because of compensation
deferral elections or limitations under federal tax laws. Pension expense for
these plans totaled $587,000 in 1996, $945,000 in 1995 and $213,000 in 1994.
At December 31, 1996, the projected benefit obligation for these plans was
$3,695,000.
 
  The Company also sponsors a nonqualified, unfunded, supplemental executive
retirement plan for certain senior officers and a nonqualified unfunded
directors' retirement plan. Data related to these plans follow:
 
<TABLE>
<CAPTION>
                                DECEMBER 31
                              ---------------
                               1996    1995
                              ------- -------
(DOLLARS IN THOUSANDS)
<S>                           <C>     <C>
Projected benefit obligation  $34,267 $28,074
Unrecognized net obligation     2,773   3,280
</TABLE>
 
  Pension expense for these plans totaled $4,333,000 in 1996, $4,231,000 in
1995 and $4,590,000 in 1994.
 
                                      87
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  The Company provides an optional deferred compensation plan for certain
employees. Eligible employees can defer a portion of their compensation and
the Company agrees to pay interest on the balance of funds deferred. An
enhanced rate is paid on funds deferred over three years.
 
  The Company has purchased cost recovery life insurance, primarily with one
carrier, on the lives of the participants of the supplemental executive
retirement plan, directors' retirement plan and deferred compensation plan and
it is sole owner and beneficiary of said policies. The amount of coverage is
designed to provide sufficient revenues to fund said plans. The net cash
surrender value of this life insurance, recorded in other assets, was
$180,319,000 at December 31, 1996 and $163,736,000 at December 31, 1995, and
net premium income related to insurance purchased was $8,359,000 in 1996,
$6,846,000 in 1995 and $2,646,000 in 1994.
 
POSTRETIREMENT PLANS
 
  The Company sponsors unfunded defined benefit postretirement plans that
provide medical and life insurance coverage to eligible employees and
dependents based on age and length of service. Medical coverage options are
the same as available to active employees. The cost of plan coverage for
retirees and their qualifying dependents is based upon a point system that
combines age and years of service which results, generally, in lower costs to
retirees in conjunction with higher accumulated points within limits.
 
  The following table shows the plan's status reconciled to the accrued
postretirement benefit cost included in other liabilities on the Consolidated
Statement of Financial Condition.
 
<TABLE>
<CAPTION>
                                                    DECEMBER 31
                                                  ---------------
                                                   1996    1995
                                                  ------- -------
   (DOLLARS IN THOUSANDS)
   <S>                                            <C>     <C>    
   Accumulated postretirement benefit obligation
     Retirees                                     $25,700 $29,000
     Fully eligible active employees                4,100   4,300
     Other active employees                        22,300  19,700
                                                  ------- -------
                                                   52,100  53,000
   Unrecognized net gain                            4,746     728
                                                  ------- -------
   Accrued postretirement benefit                 $56,846 $53,728
                                                  ======= =======
</TABLE>
 
  The net postretirement medical and life insurance costs follow:
 
<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31
                                                      -------------------------
                                                       1996     1995     1994
                                                      -------  -------  -------
   (DOLLARS IN THOUSANDS)
   <S>                                                <C>      <C>      <C>
   Service cost                                       $ 2,196  $ 2,307  $ 2,349
   Interest cost of accumulated postretirement 
    benefit obligation                                  3,614    3,896    3,730
   Curtailment gain                                      (580)    (570)      --
                                                      -------  -------  -------
                                                      $ 5,230  $ 5,633  $ 6,079
                                                      =======  =======  =======
</TABLE>
 
  During 1996 and 1995, the Company recognized curtailment gains as a result
of ongoing work force reductions.
 
  For measurement purposes, the cost of medical benefits was projected to
increase at a rate of 9.00% in 1996, and 8.00% in 1997 thereafter decreasing
1% per year until a stable 5.00% medical inflation rate is reached in 2000.
Increasing the assumed health care cost trend by 1% in each year would
increase the accumulated postretirement benefit obligation at December 31,
1996 by approximately $3,500,000 and the aggregate of the
 
                                      88
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
service and interest components of net periodic postretirement benefit cost
for the year ended December 31, 1996 by $700,000. The present value of the
accumulated benefit obligation assumed a 7.50% discount rate compounded
annually at December 31, 1996 and December 31, 1995.
 
 Stock-based Compensation Plans
 
  The Company currently has a stock option plan in effect: the 1988 Stock
Option and Incentive Plan ("stock option plan"). Options are granted at the
market value of the common stock on the date of grant. The stock option plan
consists of two separate plans: the Key Employee Program under which options
(both incentive and nonqualified), stock appreciation rights, dividend
equivalents and certain other performance and incentive awards may be granted
to officers, key employees and certain other individuals; and the Non-employee
Director Program under which non-qualified options will be automatically
granted to non-employee directors under certain circumstances. The Company has
set aside 12,500,000 shares of common stock to be delivered pursuant to the
stock option plan, of which a maximum of 750,000 may be delivered under the
Non-employee Director Program. Options may be exercised either by payment of
cash, or the optionee may deliver GWFC common stock of an equivalent market
value at the date of exercise. The exercise price of each option equals the
market price of the Company's stock on the date of grant, and an option's
maximum term is 10 years. Depending upon the year of grant, options become
exercisable in equal installments over a four or five year period, beginning
one year from the date of grant. Proceeds from the exercise of stock options
are credited to common stock for the aggregate par value of shares issued, and
the excess is credited to additional capital.
 
  The Company has granted performance-based restricted stock awards to
encourage and reward high levels of performance of the Company as measured by
returns to shareholders. The shares will fully vest 10 years after the award
date, and prior to such time, they are subject to accelerated vesting based on
the Company's performance. At December 31, 1996, a total of 1,115,244 shares
with a value of $20,709,000 had been granted. The unearned compensation is
recorded as a separate reduction of stockholders' equity and is being
amortized to expense over 60 months. The total amount of compensation expense
related to restricted stock awards, recorded in accordance with APB 25, was
$3,825,000 in 1996, $3,257,000 in 1995 and $3,798,000 in 1994.
 
  Stock appreciation rights ("SAR") may be granted in conjunction with certain
options previously granted or with future options. A SAR entitles the holder,
at the discretion of the Company, to receive cash or shares of GWFC common
stock, or a combination thereof, at a value equal to the excess of the fair
market value on the date of exercise over the option price. Exercise of an
option or companion SAR automatically cancels the related option or right.
 
                                      89
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  A summary of the Company's stock option plan as of December 31, 1996, 1995
and 1994, and changes during the years then ended is as follows:
<TABLE>
<CAPTION>
                                                                   WEIGHTED-
                                         OPTION       OPTION        AVERAGE
                                         SHARES     PRICE RANGE  EXERCISE PRICE
                                       ----------  ------------- --------------
   <S>                                 <C>         <C>           <C>
   1994
     Outstanding at beginning of year   5,316,595  $ 7.70-$22.15     $16.33
     Granted                            2,287,806   16.63- 20.25      17.22
     Forfeited                           (209,860)  14.75- 18.88      18.08
     Exercised                           (282,300)  10.38- 18.88      15.33
                                       ----------  -------------     ------
     Outstanding at end of year         7,112,241    7.70- 22.15      16.66
                                       ----------  -------------     ------
   1995
     Granted                              451,548   16.00- 21.38      20.36
     Exercised                           (704,985)   7.70- 20.50      16.15
     Forfeited                           (254,960)  10.38- 18.88      17.71
                                       ----------  -------------     ------
     Outstanding at end of year         6,603,844    7.70- 22.15      16.86
                                       ----------  -------------     ------
   1996
     Granted                            3,752,599   21.13- 30.88      26.83
     Exercised                         (1,048,777)   7.70- 22.15      17.35
     Forfeited                           (157,595)  14.75- 23.38      19.17
                                       ----------  -------------     ------
     Outstanding at end of year         9,150,071  $10.38-$30.88     $20.85
                                       ==========  =============     ======
</TABLE>
 
  The number of options exercisable at December 31, 1996 and 1995 was
4,023,247 and 4,236,288, respectively. The weighted-average fair value of
options granted during 1996 and 1995 was $8.18 and $5.75, respectively.
 
  Information about stock options outstanding at December 31, 1996 follows:
 
<TABLE>
<CAPTION>
              OPTIONS OUTSTANDING                         OPTIONS EXERCISABLE
- ------------------------------------------------- -----------------------------------
                              WTD. AVG.  WEIGHTED                           WEIGHTED-
                              REMAINING  AVERAGE    RANGE OF                 AVERAGE
   RANGE OF        NUMBER    CONTRACTUAL EXERCISE   EXERCISE      NUMBER    EXERCISE
EXERCISE PRICES  OUTSTANDING    LIFE      PRICE      PRICES     EXERCISABLE   PRICE
- ---------------  ----------- ----------- -------- ------------- ----------- ---------
<S>              <C>         <C>         <C>      <C>           <C>         <C>
$10.38-$14.88       971,950   2.3 years   $13.44  $10.38-$14.88    971,950   $13.44
 15.25- 19.38     3,919,554   6.0          17.01   15.25- 19.38  2,821,535    16.86
 20.25- 24.88     2,487,236   8.7          22.77   20.25- 24.88    229,762    20.78
 25.13- 30.88     1,771,331   9.9          30.70   25.13- 30.88         --       --
                  ---------                                      ---------
$10.38-$30.88     9,150,071   7.1         $20.85  $10.38-$30.88  4,023,247   $16.26
                  =========                                      =========
</TABLE>
 
                                      90
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  The Company applies APB Opinion 25 and related interpretations in accounting
for its stock-based compensation plans, which are described above.
Accordingly, no compensation cost has been recognized for its stock option
plan. Had compensation cost for the stock option plan been determined based on
the fair value at the grant dates for awards under this plan consistent with
the method prescribed by SFAS 123, the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated below:
 
<TABLE>
<CAPTION>
                                           1996         1995
                                       ------------ ------------
         <S>                           <C>          <C>
         Net income
          As reported                  $115,822,000 $261,022,000
          Pro forma                     113,622,000  260,790,000
         Primary earnings per share
          As reported                          $.69        $1.72
          Pro forma                             .68         1.72
         Fully diluted earnings per
          share
          As reported                           .69         1.71
          Pro forma                             .67         1.71
</TABLE>
 
  The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions:
 
<TABLE>
<CAPTION>
                                   1996     1995
                                  -------  -------
         <S>                      <C>      <C>
         Dividend yield                 3%       3%
         Expected volatility        21-44    21-24
         Risk-free interest rate  5.5-6.9  6.3-7.9
         Expected life of option  7 years  7 years
</TABLE>
 
  During the initial phase-in period, the effects of applying SFAS 123 for
these pro forma disclosures are not likely to be representative of the effects
on pro forma disclosures for future years because options vest over several
years and additional awards are generally made each year.
 
 Savings Plans
 
  The Company has an Employee Savings Incentive Plan which grants to all
eligible employees the opportunity to invest up to 14% of their earnings in
certain investment alternatives. For investments by employees of up to 6% of
their earnings, the Company is obligated to and has contributed an amount
equal to one-half thereof for credit to the employees' accounts. Further, the
board of directors, at its discretion, may increase the Company's contribution
to match up to 100% of the Company's obligated contribution. In 1996, 1995 and
1994 discretionary awards were made. The Company contributed approximately
$7,742,000, $7,342,000, and $7,886,000 in 1996, 1995, and 1994, respectively,
including a discretionary addition of $1,811,000, $1,794,000, and $1,877,000
in 1996, 1995 and 1994, respectively.
 
                                      91
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 20: PREFERRED STOCK
 
  The following is a summary of Preferred Stock (Convertible and
Nonconvertible):
 
<TABLE>
<CAPTION>
                          SHARES ISSUED
                         AND OUTSTANDING   CARRYING AMOUNT    DIVIDENDS DECLARED
                           DECEMBER 31       DECEMBER 31    YEAR ENDED DECEMBER 31
                        ----------------- ----------------- -----------------------
                         1996     1995      1996     1995    1996    1995    1994
(DOLLARS IN THOUSANDS)  ------- --------- -------- -------- ------- ------- -------
<S>                     <C>     <C>       <C>      <C>      <C>     <C>     <C>
8.30% Cumulative
 Nonconvertible
 (Liquidation
 preference $250)       660,000   660,000 $165,000 $165,000 $13,695 $13,695 $13,695
8.75% Cumulative
 Convertible
 (Liquidation
 preference $260.94)
 (1)                         --   517,500       --  129,375   6,600  11,320  11,320
                        ------- --------- -------- -------- ------- ------- -------
                        660,000 1,177,500 $165,000 $294,375 $20,295 $25,015 $25,015
                        ======= ========= ======== ======== ======= ======= =======
</TABLE>
- --------
(1) In September 1996, the Company redeemed all $129 million of its 8.75%
    Cumulative Convertible Preferred Stock.
 
  In September 1996, the Company called for the redemption of its $129
million, 8.75% Cumulative Convertible Preferred Stock. These shares were
issued in May 1991 (see discussion below). The holders had the option to
redeem their shares or convert them into shares of the Company's common stock.
In the third quarter, 2,561,642 depositary shares, or 512,328 shares, were
converted to 6,278,421 shares of common stock with a conversion price of
$20.40 per share while 19,058 depositary shares, or 3,812 shares, were
redeemed for cash totaling $994,589 or $260.94 per share. In the second
quarter of 1996, 6,800 depositary shares, or 1,360 shares, were converted to
16,666 shares of common stock totaling $340,000, or $20.40 per share.
 
  In September 1992, the Company issued 6,600,000 depositary shares, each
representing a one-tenth interest in a share of 8.30% cumulative preferred
stock. The preferred stock has a liquidation value of $250 per share. The
preferred stock will not be redeemable prior to November 1, 1997. Each share
of preferred stock, $1.00 par value, will be redeemable at the option of the
Company on or after November 1, 1997 at $250 per share, plus accrued and
unpaid dividends. Dividends are cumulative from the date of issue and are
payable quarterly.
 
  In May 1991, the Company issued 2,587,500 depositary shares, each
representing a one-fifth interest in a share of 8.75% cumulative convertible
preferred stock. The preferred stock had a liquidation value of $250 per
share. The preferred stock was redeemable prior to May 1, 1996. Each share of
preferred stock, $1.00 par value, will be redeemable for cash at the option of
the Company, in whole or in part, at prices declining to $250 per share on or
after May 1, 2001, from $260.94 per share on or after May 1, 1996, plus
accrued and unpaid dividends. Each share of preferred stock will be
convertible at the option of the holder into shares of common stock of the
Company at a conversion price of $20.40 per share of common stock, subject to
adjustment in certain events. Dividends are cumulative from the date of issue
and are payable quarterly.
 
  Of the 10,000,000 shares authorized, shares of preferred stock issued and
outstanding at December 31, 1996 and December 31, 1995 were 660,000 and
1,177,500, respectively.
 
NOTE 21: STOCKHOLDERS' EQUITY
 
  Authorized but unissued shares of common stock reserved for stock options
were 10,529,369 at December 31, 1996 and 11,562,521 at December 31, 1995. In
addition, 4,143,928 shares of common stock had been reserved for the Dividend
Reinvestment Plan.
 
  Parent company equity in retained earnings of subsidiaries was
$1,230,221,000 at December 31, 1996 and $1,377,535,000 at December 31, 1995.
 
  The payment of dividends to the parent company from its subsidiaries is
subject to certain regulatory requirements, restrictions imposed by lenders
and federal income tax consequences.
 
                                      92
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  Thrift institutions that met certain tests prescribed by the Internal Revenue
Code were allowed a bad debt deduction for federal income tax purposes. Because
of such deductions, only $628,000,000 of retained earnings of the Bank at
December 31, 1996 were available for use without adverse tax consequences. This
amount represents the earnings and profits of the Bank which, in accordance
with the Internal Revenue Code, are available for the payment of dividends. If
retained earnings in excess of earnings and profits are subsequently used by
the Bank for purposes other than to absorb loan losses, including distributions
in liquidation, the amounts used will be subject to federal income taxes at the
then prevailing corporate tax rates. It is not contemplated that retained
earnings will be used in a manner which will create federal income tax
liabilities even in the event the Bank was to convert its charter.
 
 Rights Plan
 
  On June 27, 1995, the Board of Directors of the Company declared a dividend
distribution of one Right (each a "Right") for each outstanding share of common
stock to stockholders of record at the close of business on July 14, 1996,
which was the expiration date of the rights issued under the rights plan
adopted by the Board of Directors of the Company on June 24, 1986. Each Right
will initially entitle the holder to purchase from the Company a unit of one
one-hundredth of a share of Series A Junior Participating Preferred Stock, par
value $1.00 per share, at a purchase price of $80.00 per unit, subject to
adjustment. The Rights will expire July 14, 2006. The Rights may not be
exercised and will not detach or trade separately from the common stock except
as described below.
 
  The Rights will detach from the common stock and may be exercised only if a
person or group becomes the beneficial owner of 15% or more of the common stock
(a "Stock Acquisition"). If a Stock Acquisition occurs (except pursuant to an
offer for all outstanding shares of the common stock which the Company's
independent directors determine is fair to and otherwise in the best interest
of the Company and its stockholders), the Rights flip-in and each Right not
owned by such person will entitle the holder to purchase, at the Right's then
current exercise price, common stock (or, if the number of shares of authorized
common stock is insufficient to permit the full exercise of the Rights, cash,
property or other securities of the Company) having a formula value equal to
twice the Right's exercise price. In addition, if at any time following a Stock
Acquisition, (i) the Company is acquired in a merger or other business
combination transaction in which the Company is not the surviving corporation
(other than a merger which follows an offer at the same price and for the same
consideration as the offer approved by the Board of Directors of the Company as
described in the immediately preceding sentence), or (ii) 50% or more of the
Company's assets or earnings power is sold or transferred, the Rights flip-over
and each unexercised Right will entitle its holder to purchase, at the Right's
then current exercise price, common shares of the other person having a formula
value equal to twice the Right's exercise price. The Rights may be redeemed by
the Company at any time prior to ten days following the date of a Stock
Acquisition (which period may be extended by the Company's Board of Directors
at any time while the Rights are still redeemable). Upon the occurrence of a
flip-in or flip-over event, if the Rights are not redeemed, the Rights would
result in substantial dilution to any person who has acquired 15% or more of
the outstanding common stock or who attempts to merge or consolidate with the
Company. As a result, the Rights may deter potential attempts to acquire
control of the Company without the approval of the Company's board of
directors.
 
NOTE 22: CAPITAL REQUIREMENTS
 
  GWB is subject to minimum capital requirements as set forth by the OTS. The
capital standards applicable to savings associations consist of three
components--a leverage ratio requirement, a tangible capital requirement, and a
risk-based capital requirement. Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional discretionary, actions
by regulators, including asset growth restrictions and capital distribution
limitations. As of December 31, 1996 and 1995, the Company believes GWB meets
all minimum capital requirements to which it is subject.
 
                                       93
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  In addition to the minimum capital requirements, GWB is subject to federal
banking agency regulations which establish a system of progressive constraints
as capital levels decline at banks and savings associations. The "prompt
corrective action" rules classify banks and savings institutions into one of
five categories based upon capital adequacy, ranging from "well capitalized"
to "critically undercapitalized." The OTS has authority, after an opportunity
for a hearing, to downgrade an institution to a lower category, based on
supervisory concerns. Institutions which are "undercapitalized" (i.e., not
"well capitalized" or "adequately capitalized") are subject to restrictions on
asset growth, acquisitions, branching and new business, and are subject to
increasingly severe additional actions if they become "significantly
undercapitalized" or "critically undercapitalized."
 
  As of December 31, 1996, the most recent notification from the OTS
categorized GWB as well capitalized under the prompt corrective action rules.
To be well capitalized, GWB must maintain minimum Tier 1 leverage, Tier 1
risk-based and total risk-based capital ratios as set forth in the table
below. There are no conditions or events since that notification that the
Company believes have changed GWB's category.
 
  The following table summarizes GWB's actual capital and required capital as
of December 31, 1996 and 1995:
 
<TABLE>
<CAPTION>
                                            MINIMUM REQUIRED   AMOUNT REQUIRED
                                              FOR CAPITAL         TO BE WELL
                                 ACTUAL         ADEQUACY         CAPITALIZED
                              ------------  ----------------   ----------------
                              AMOUNT RATIO   AMOUNT   RATIO     AMOUNT   RATIO
                              ------ -----  -------- -------   -------- -------
   (DOLLARS IN MILLIONS)
   <S>                        <C>    <C>    <C>      <C>       <C>      <C>
   December 31, 1996
     Leverage/tangible ratio  $2,327  5.85%  $1,192   3.00%     $1,987    5.00%
     Tier 1 risk-based ratio   2,322  9.77      950   4.00       1,426    6.00
     Total risk-based ratio    2,669 11.23    1,901   8.00       2,377   10.00
   December 31, 1995
     Leverage/tangible ratio   2,366  5.66    1,254   3.00       2,090    5.00
     Tier 1 risk-based ratio   2,361  9.40    1,004   4.00       1,506    6.00
     Total risk-based ratio    2,966 11.81    2,008   8.00       2,510   10.00
</TABLE>
 
                                      94
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  The following table reconciles GWB's capital in accordance with generally
accepted accounting principles ("GAAP") to GWB's tangible, core and risk-based
capital as of December 31, 1996 and 1995:
 
<TABLE>
<CAPTION>
                                                          DECEMBER 31
                                                     ----------------------
                                                        1996        1995
                                                     ----------  ----------
   (DOLLARS IN THOUSANDS)
   <S>                                               <C>         <C>
   Tangible capital
     Capital in accordance with GAAP                 $2,609,015  $2,717,788
     Less:
       Goodwill                                        (182,758)   (214,367)
       Investments in and advances to non-
        permissible subsidiaries                        (22,524)    (29,810)
       Unrealized net gain on available-for sale
        investment securities carried at fair value     (76,497)   (107,640)
                                                     ----------  ----------
   Total tangible capital                             2,327,236   2,365,971
   Adjustments for core capital                              --          --
                                                     ----------  ----------
         Total core capital                           2,327,236   2,365,971
     Less:
       Fully capitalized items (limited recourse
        liability on loans sold with recourse)           (4,772)     (5,357)
                                                     ----------  ----------
         Total Tier 1 risk-based capital              2,322,464   2,360,614
     Qualifying subordinated debt                       157,718     373,499
     Allowance for loan and lease losses                193,897     256,851
     Less assets required to be deducted:
       Real estate held for investment                   (5,115)    (22,356)
       Certain loans secured by land                       (249)     (2,784)
                                                     ----------  ----------
         Total risk-based capital                    $2,668,715  $2,965,824
                                                     ==========  ==========
</TABLE>
 
NOTE 23: CONTINGENCIES
 
  In the normal course of its business, the Company is named a defendant in
various legal proceedings and claims. In the opinion of management, after
consultation with outside legal counsel representing the Company in these
lawsuits, their outcomes will not have a material effect on the Company's
financial position, liquidity or results of operations. See Note 28.
 
  The operations of the Company are significantly influenced by general
economic conditions, by the related monetary and fiscal policies of the
federal government, and by the regulatory policies of financial institution
regulatory authorities. Deposit flows and cost of funds are influenced by
interest rates on competing investments and general market rates of interest.
Lending and other investment activities are affected by the demand for
mortgage financing and consumer and other types of loans, which in turn are
affected by the interest rates at which such financing may be offered and
other factors affecting the supply of housing and the availability of funds.
 
                                      95
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 24: PARENT COMPANY FINANCIAL INFORMATION
 
  Effective December 31, 1996, Blazer Financial Corporation ("BFC"), became a
wholly-owned indirect subsidiary of the Company. This realignment was in the
form of a dividend from GWB to GWFC in the amount of BFC's book value of
$34,830,000 and the subsequent sale of BFC to Aristar.
 
  Effective March 31, 1994, Bryant Financial Corporation ("Bryant"), a
property development subsidiary, became a wholly-owned direct subsidiary of
the Company. This realignment was in the form of a dividend from GWB to GWFC
in the amount of Bryant's book value of $38,442,000.
 
  The following summarizes dividends received by GWFC from GWB:
 
<TABLE>
<CAPTION>
                             YEAR ENDED DECEMBER 31,
                            -------------------------
                              1996    1995     1994
                            -------- ------- --------
   (DOLLARS IN THOUSANDS)
   <S>                      <C>      <C>     <C>
   Cash dividends           $151,320 $71,320 $101,322
   Noncash dividends          34,830      --   38,442
                            -------- ------- --------
                            $186,150 $71,320 $139,764
                            ======== ======= ========
</TABLE>
 
STATEMENT OF OPERATIONS
<TABLE> 
<CAPTION>
                                                  YEAR ENDED DECEMBER 31
                                                -----------------------------
                                                  1996       1995      1994
                                                ---------  --------  --------
(DOLLARS IN THOUSANDS)
<S>                                             <C>        <C>       <C>
INCOME
  Dividends from Great Western Bank             $ 186,150  $ 71,320  $139,764
  Dividends from Aristar                          116,800    22,500    25,000
  Dividends from other nonbanking subsidiaries      6,700     5,000     4,500
  Management fees and interest charged to sub-
   sidiaries                                        7,986     6,814     6,959
  Income from securities and investments            6,296     8,895     8,188
  Other                                             1,219     1,136     1,848
                                                ---------  --------  --------
                                                  325,151   115,665   186,259
                                                ---------  --------  --------
EXPENSES
  Interest expense on borrowings                   67,983    59,125    56,567
  Noninterest expense                              31,491    18,036    21,703
  Federal and state taxes (credits) on income     (37,484)  (26,008)  (24,294)
                                                ---------  --------  --------
                                                   61,990    51,153    53,976
                                                ---------  --------  --------
  Earnings before undistributed net earnings of
   subsidiaries                                   263,161    64,512   132,283
  Undistributed (overdistributed) net earnings
   of subsidiaries                               (147,339)  196,510   118,951
                                                ---------  --------  --------
                                                $ 115,822  $261,022  $251,234
                                                =========  ========  ========
</TABLE>
 
                                      96
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  The parent company joins with its subsidiaries in filing a consolidated
federal income tax return. In the return, the parent company's taxable income
or loss is consolidated with the taxable income or loss of its subsidiaries.
The parent company's share of income taxes is generally based on the amount of
tax which would be payable if separate returns were filed, adjusted for some
deficits or benefits arising from consolidation. Therefore, the parent
company's equity in net earnings of subsidiaries is excluded from its
computation of the provision for taxes on income for financial statement
purposes. Taxes receivable consist primarily of amounts due from subsidiaries
for taxes paid on their behalf.
 
STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
                                                            DECEMBER 31
                                                       ---------------------
                                                          1996       1995
                                                       ---------- ----------
(DOLLARS IN THOUSANDS)
<S>                                                    <C>        <C>
ASSETS
Cash                                                   $    1,927 $      831
Certificates of deposit and federal funds                      --     82,000
Securities available-for-sale                              47,482     57,913
Investment in subsidiaries at cost plus equity in un-
 distributed earnings
  Great Western Bank                                    2,608,989  2,717,788
  Aristar                                                 390,358    451,570
  Other nonbanking subsidiaries                            98,945     97,882
Company owned life insurance                              179,685    163,354
Advances to subsidiaries                                  140,133     96,741
Taxes receivable                                           45,733     38,433
Other assets                                              127,201    104,223
                                                       ---------- ----------
                                                       $3,640,453 $3,810,735
                                                       ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses                  $  194,278 $  162,467
Commercial paper                                           74,500     49,729
Fixed-rate notes                                          673,382    672,970
Subordinated notes                                        103,093    103,093
                                                       ---------- ----------
                                                        1,045,253    988,259
Stockholders' equity-substantially restricted (see
 Consolidated Statement of Financial Condition)         2,595,200  2,822,476
                                                       ---------- ----------
                                                       $3,640,453 $3,810,735
                                                       ========== ==========
</TABLE>
 
  Following is a summary of the parent company long-term debt by maturity:
 
<TABLE>
<CAPTION>
                            DECEMBER 31, 1996
                            -----------------
   (DOLLARS IN THOUSANDS)
   <S>                      <C>
   1998                         $249,806
   2000                          224,166
   2001 and thereafter           302,503
                                --------
                                $776,475
                                ========
</TABLE>
 
                                      97
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31
                                                 -------------------------------
                                                   1996       1995       1994
                                                 ---------  ---------  ---------
(DOLLARS IN THOUSANDS)
<S>                                              <C>        <C>        <C>
Operating Activities
  Net earnings                                   $ 115,822  $ 261,022  $ 251,234
  Noncash adjustments to net earnings
    Overdistributed (undistributed) net earnings
     of subsidiaries                               147,339   (196,510)  (118,951)
    Noncash dividends from subsidiaries            (33,768)        --    (38,380)
    Income taxes                                   (16,016)    (8,303)    31,528
    Other                                          (46,653)    (2,432)   (40,044)
                                                 ---------  ---------  ---------
  Net cash provided by operating activities        166,724     53,777     85,387
                                                 ---------  ---------  ---------
Financing Activities
  Common stock repurchased                        (176,732)        --         --
  Common stock issued                               24,452     60,195     29,842
  Redemption of preferred stock                       (998)        --         --
  Payment of cash dividends on common stock       (133,045)  (124,673)  (122,524)
  Payment of cash dividends on preferred stock     (20,295)   (25,015)   (25,015)
                                                 ---------  ---------  ---------
                                                  (306,618)   (89,493)  (117,697)
                                                 ---------  ---------  ---------
  Proceeds from issuance of long-term borrowings        --    103,093         --
  Repayments of long-term borrowings                    --    (28,250)        --
  Net change in short-term borrowings               24,771     36,298     13,431
                                                 ---------  ---------  ---------
                                                    24,771    111,141     13,431
                                                 ---------  ---------  ---------
    Net cash (used in) provided by financing
     activities                                   (281,847)    21,648   (104,266)
                                                 ---------  ---------  ---------
Investing Activities
  Proceeds from maturities                          58,073     49,852     24,863
  Purchases of securities available-for-sale       (47,922)   (19,532)   (87,754)
  Investment in subsidiaries                        24,068   (139,847)   (11,797)
                                                 ---------  ---------  ---------
  Net cash provided by (used in) investing
   activities                                       34,219   (109,527)   (74,688)
                                                 ---------  ---------  ---------
Net (decrease) in cash and cash equivalents        (80,904)   (34,102)   (93,567)
Cash and cash equivalents at beginning of year      82,831    116,933    210,500
                                                 ---------  ---------  ---------
Cash and cash equivalents at end of year         $   1,927  $  82,831  $ 116,933
                                                 =========  =========  =========
Supplemental cash flow disclosure
Cash paid (received) for
  Interest on borrowings                         $  68,035  $  59,195  $  56,300
  Income taxes                                     (21,353)   (17,937)   (54,594)
Noncash financing activities
  Conversion of preferred stock to common stock    128,377         --         --
</TABLE>
 
 
                                       98
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 25: FAIR VALUE OF FINANCIAL INSTRUMENTS
 
  The following summarizes the Company's financial instruments as defined by
SFAS 107:
 
 
<TABLE>
<CAPTION>
                                               DECEMBER 31
                             --------------------------------------------------
                                      1996                      1995
                             ------------------------  ------------------------
                              CARRYING     ESTIMATED    CARRYING     ESTIMATED
                               AMOUNT     FAIR VALUE     AMOUNT     FAIR VALUE
                             -----------  -----------  -----------  -----------
(DOLLARS IN THOUSANDS)
<S>                          <C>          <C>          <C>          <C>
FINANCIAL ASSETS
Cash                         $   534,192  $   534,192  $   837,292  $   837,292
Certificates of deposit,
 repurchase agreements and
 federal funds                   300,100      300,100      257,125      257,125
Securities available for
 sale                          1,279,283    1,279,283    1,092,459    1,092,459
Mortgage-backed securities     7,788,551    7,688,846    9,803,441    9,858,623
Loans receivable
  Real estate                 28,471,678   28,680,595   27,296,174   27,304,438
  Consumer Finance and other
    Term                       1,731,796    1,794,761    2,064,555    2,052,536
    Nonterm                      549,969      441,388      451,848      457,237
Originated mortgage
 servicing rights                 17,018       28,260        7,034        7,034
Excess/short servicing
 rights                            7,527       15,678        3,616        6,286
FINANCIAL LIABILITIES
Deposits
  Term                       $17,236,632  $17,232,603  $17,983,752  $18,022,943
  Nonterm                     11,321,836   11,321,836   11,251,176   11,251,176
Short-term borrowings from
 FHLB                          2,011,733    2,011,733      740,080      740,080
Securities sold under
 repurchase agreements         4,197,666    4,197,666    6,868,296    6,868,296
Short-term borrowings          1,101,506    1,101,506    1,316,413    1,316,413
Long-term borrowings           3,190,908    3,357,772    2,420,845    2,603,936
Company-obligated
 mandatorily redeemable
 preferred securities of
 subsidiary trust                100,000       99,520      100,000      101,520
DERIVATIVE FINANCIAL
 INSTRUMENTS
Loan commitments
  Fixed                      $       --   $      (267) $       --   $       (76)
  Variable                           --         8,000          --        13,164
Forward sales contracts              --            83          --           384
Standby letters of credit            --           (42)         --           (62)
Interest rate swaps                   52          739          113          320
Cash flow swaps                     (498)       9,835         (796)       9,672
</TABLE>
 
  See the accompanying text for a discussion on items presented above.
 
  The Company is a party to financial instruments with off-balance-sheet risk
and other derivative financial instruments in the normal course of business to
meet the financing needs of its customers and to reduce its own exposure to
fluctuations in interest rates. All financial instruments are held or issued
for purposes other than trading. These financial instruments include
commitments to extend credit, at both fixed and variable rates, loans sold
with credit enhancements, standby letters of credit, interest-rate caps and
floors written, and interest-rate
 
                                      99
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

and cash flow swap agreements. These instruments involve, to varying degrees,
elements of credit and interest-rate risk in excess of the amount recognized
in the Consolidated Statement of Financial Condition. The contract or notional
amounts of these instruments reflect the extent of involvement the Company has
in particular classes of financial instruments. For interest-rate caps,
floors, swap transactions, loans sold with credit enhancements, purchased put
options and forward sales, the contract or notional amounts do not represent
exposure to risk of loss.
 
  The Company extends credit and requires collateral for loans sold with
credit enhancements under the same lending policies as for other real estate
loans.
 
INTEREST RATE RISKS
 
  The Company uses derivative financial instruments to manage its exposure to
interest rate changes related to its portfolio of loans and borrowings. The
Company's objective is to manage the impact of interest rate changes on
earnings.
 
  The Company, from time to time, uses purchased put options to hedge its
exposure to increasing interest rates with respect to its fixed-rate loan
commitments. Put options grant the Company, for a premium payment, the right
to sell to the writer a specified financial instrument at a predetermined
price for a predetermined period of time. The cost is recorded in other assets
and amortized to gains and losses on loan sales over the life of the hedged
assets. Realized gains from option contracts are recorded at the time the
hedged instrument expires.
 
  The Company's credit risk exposure in the event of nonperformance by a
counterparty is the loss of potential gains on the exercise of the option. The
Company's exposure to risk of accounting loss is limited to the premium paid
for the option.
 
  The Company uses forward sales contracts to hedge its exposure to increasing
interest rates with respect to its fixed-rate commitments. The notional amount
of forward sales contract was $8,003,000 and $60,700,000 at December 31, 1996
and 1995, respectively. Forward sales contracts are used to sell specific
financial instruments (fixed-rate loans) at a future date for a specified
price. Gains or losses are recognized at the time the contracts mature and are
recorded as a component of gain on mortgages.
 
  The Company uses interest-rate swaps to manage interest-rate risk and reduce
interest expense by improving the execution of borrowings to which the
interest-rate swap is tied. At December 31, 1996 and 1995, the Company had
outstanding $109,000,000 of interest-rate swaps related to FHLB borrowings in
which the Company paid a fixed rate and received a rate tied to three month
LIBOR. At December 31, 1996, the rate paid was 5.26% and the rate received was
5.52%. Interest receivable on these swaps is recorded in interest receivable
and interest payable is recorded in other liabilities. The income and expense
related to these interest-rate swaps was recorded as a decrease or increase to
interest expense on borrowings. The net benefit of interest-rate swap
agreements was $369,000 for the year ended December 31, 1996, compared to a
net benefit of $953,000 for the year ended December 31, 1995 and a net cost of
$775,000 for the year ended December 31, 1994.
 
  The Company's current credit exposure on swaps is limited to the value of
interest-rate swaps that have become favorable to the Company. The Company
manages the potential credit exposure through careful evaluation of
counterparty credit standing.
 
  The Company uses cash flow swap agreements to reduce its interest-rate
exposure with regard to its Investor CD, an insured account which is indexed
to the Standard and Poor's (S&P) 500 performance. The Company agreed to pay a
fixed or variable rate in exchange for the customer receiving a return tied to
the S&P 500. The notional amount of cash flow swaps was $119,481,000 and
$180,711,000 at December 31, 1996 and 1995,
 
                                      100
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
respectively. The average interest rate paid by GWB was 4.85% at December 31,
1996 and 5.13% at December 31, 1995. The monthly payment is recorded in
interest expense on customer accounts and the amount received is passed to the
customer as the yield on the Investor CD. The exposure to accounting loss on
the cash flow swap agreements in the event of the failure of a counterparty to
perform according to the terms of the contract would approximate the amount of
interest to be paid to the Bank's customers on the Investor CD portfolio.
 
CREDIT COMMITMENTS
 
  The Company enters into commitments to fund real estate loans to meet the
financing needs of its customers. Commitments to extend credit are agreements
to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates
or other termination clauses and may require payment of a fee. Fees received
in connection with loan commitments are deferred in other liabilities until
the loan is advanced and are then recognized over the term of the loan as an
adjustment of the yield. Fees on commitments that expire unused are recognized
in loan fees at expiration. Since a portion of the commitments may expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
credit worthiness on a case-by-case basis. The amount of collateral obtained
upon extension of credit is based on management's credit evaluation of the
counterparty. The value of the property as security for a mortgage loan is
determined by qualified real estate appraisers.
 
  The Company had outstanding commitments to fund real estate loans of
$791,564,000 at December 31, 1996 which consisted of $102,497,000 fixed-rate
and $689,067,000 adjustable rate and $716,924,000 at December 31, 1995 which
consisted of $144,587,000 fixed-rate and $572,337,000 adjustable rate.
 
  The Company has issued standby letters of credit from time to time to meet
the credit needs of its customers. The letters of credit outstanding are
generally performance guarantees supporting certain property development
projects and totaled $6,970,000 at December 31, 1996 and $10,410,000 at
December 31, 1995. The notional value of letters of credit does not
necessarily represent future cash requirements.
 
  The Company's maximum potential exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments
to extend credit and standby letters of credit is represented by the
contractual notional amount of those instruments. The Company uses the same
credit policies in making commitments and conditional obligations as it does
for on-balance-sheet instruments.
 
CONCENTRATIONS OF CREDIT RISK
 
  The Company primarily originates real estate loans of which a substantial
portion of the portfolio is secured by real estate located in California and
Florida.
 
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
  Fair value estimates and the methods and assumptions used to determine the
fair value of the Company's financial instruments follow:
 
SHORT-TERM INVESTMENTS AND DEBT SECURITIES
 
  The carrying amount of short-term instruments is a reasonable estimate of
their fair value. The fair value of securities available-for-sale and
mortgage-backed securities is principally based on quoted market prices from
various sources. For securities which have no quoted market price and are
short-term in nature, the fair value is determined to be the book value at the
reporting date.
 
                                      101
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
LOANS RECEIVABLE
 
  The fair value of loans is predominantly based on discounted future cash
flows. The discount rate is based upon a projected treasury yield curve
adjusted for various risk factors depending on the type of loan. The fair
value of the portfolio will fluctuate with changes in interest rates.
 
MORTGAGE SERVICING RIGHTS
 
  The fair value of mortgage servicing rights, which includes excess/short
servicing fees and originated mortgage servicing rights, is determined by
recalculation of the discounted cash flows at market rates.
 
DEPOSITS
 
  Term deposits are stratified by remaining maturity, and fair value is
calculated based on discounted future cash flows. The discount rate used was
based upon a projected treasury yield curve. Fair value includes the effects
of compounding where applicable.
 
  The fair value of nonterm deposits has been determined to be the amount
payable on demand at the reporting date. Nonterm deposits include all deposits
without defined maturities, such as checking, money market savings and regular
savings.
 
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND SHORT-TERM BORROWINGS
 
  Because of the short-term nature of these borrowings, fair value
approximates book value.
 
LONG-TERM BORROWINGS
 
  Long-term borrowings are stratified by remaining maturity, and fair value is
calculated based on discounted future cash flows. The discount rate used was
based upon a projected treasury yield curve. The maturity used in the present
value calculation of long-term, variable-rate borrowings is the date at which
the borrowing would next be repriced.
 
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
 
  The fair value of forward sales contracts, interest rate swaps, cash flow
swaps, put options purchased as a hedge of fixed-rate commitments and
commitments to fund real estate loans is estimated using current market prices
adjusted for various risk factors and market volatility. The fair value of
letters of credit is based on the estimated cost to terminate or otherwise
settle the obligations with the counterparties at the reporting date. The fair
value of outstanding interest-rate swaps is based on expected remaining net
cash flows discounted at three-month LIBOR.
 
  The carrying value of off-balance-sheet financial instruments represents
accruals or deferred income arising from those financial instruments.
 
NOTE 26: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
 
  Selected quarterly financial operating data are included in "Stockholder
Data and Quarterly Information (Unaudited)" on pages 107 through 109 of this
annual report on Form 10-K.
 
  Fourth quarter 1996 earnings included a $22.5 million gain ($14 million, or
$.10 per share after tax) on the sale of the $356.6 million portfolio of
student loans, which is the greater portion of the student loan business, in
December. The fourth quarter also included a $68.3 million charge ($42.4
million, or $.31 per share after tax)
 
                                      102
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
for restructuring, a $50 million provision ($31 million, or $.22 per share
after tax) relating to the bulk sale of nonperforming assets in the real
estate loan portfolio, a $21.4 million charge ($13.3 million, or $.10 per
share after tax) for the early extinguishment of a portion of two issues of
the Bank's subordinated notes and an $8.4 million charge ($5.2 million, or
$.04 per share after tax) for litigation.
 
  The third quarter 1996 loss included a $188.4 million charge ($115 million,
or $.83 per share after tax) to recapitalize the Savings Association Insurance
Fund ("SAIF").
 
  Fourth quarter 1994 earnings included a $62.3 million pretax gain ($37.1
million, or $.28 per share after tax) on the sale of 31 Florida West Coast
retail banking branches sold in December. In addition, the Company wrote off
approximately $11.7 million ($7.5 million, or $.06 per share, after tax) of
intangibles related to interstate banking access rights.
 
NOTE 27: BUSINESS SEGMENTS
 
  Information on the Company's business segments follows:
 
<TABLE>
<CAPTION>
                                    REAL
                        CONSUMER   ESTATE     RETAIL
(DOLLARS IN             FINANCE   SERVICES   BANKING    TREASURY    CONSOLIDATED
THOUSANDS)             ---------- --------  ---------- -----------  ------------
<S>                    <C>        <C>       <C>        <C>          <C>
1996
Revenue(1)             $  285,900 $169,300  $  909,500 $   345,100  $ 1,709,800
Earnings before taxes      98,700   11,200     176,300     (99,600)     186,600
Average assets          2,419,100  137,300   1,308,900  39,809,700   43,675,000
Depreciation and
 amortization               9,400   30,000      83,400       2,300      125,100
Capital expenditures        3,000   17,800      29,600      11,300       61,700
1995
Revenue(1)                287,200  114,800     946,900     280,800    1,629,700
Earnings before taxes     106,600  (20,300)    290,000      45,800      422,100
Average assets          2,365,100  150,800   1,533,200  39,928,900   43,978,000
Depreciation and
 amortization              10,600   25,300      76,700       1,900      114,500
Capital expenditure           500    5,200      38,900      42,500       87,100
</TABLE>
- --------
(1) Revenue is comprised of net interest income and total non-interest income.
 
  The Treasury segment is being separately reported for 1996. For consistency,
the 1995 disclosure has been restated to conform with this presentation.
During 1995, the Company underwent a fundamental change in the way it manages
and measures its lines of business. The mortgage bank and retail bank segments
were separately reported for 1995. Segment data along these lines is not
available for 1994.
 
NOTE 28: SUBSEQUENT EVENTS
 
  On January 27, 1997, Great Western Financial Trust II (the "subsidiary
trust"), a wholly-owned subsidiary of Great Western Financial Corporation,
issued $300 million of 8.206% Trust Originated Preferred Securities (the
"preferred securities"). In connection with the subsidiary trust's issuance of
the preferred securities, Great Western Financial Corporation issued to the
subsidiary trust $309 million principal amount of its 8.206% subordinated
deferrable interest notes, due 2027 (the "subordinated notes"). The sole
assets of the subsidiary trust are and will be the subordinated notes. Great
Western Financial Corporation's obligations under the subordinated notes and
related agreements, taken together, constitute a full and unconditional
guarantee by the Company of the subsidiary trust's obligations under the
preferred securities.
 
  On February 3, 1997, the Company received preliminary approval in Federal
Court of a $17.2 million settlement reached with plaintiffs in connection with
the sale of uninsured investment products. Final approval of the settlement is
set for April 14, 1997.
 
 
                                      103
<PAGE>
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Effective February 25, 1997, GWFC's Board of Directors approved a Broad
Based Plan (the Plan) for eligible employees who are not covered by an
existing severance plan and are not offered a comparable position by an
acquiring company or whose employment is terminated within 12 months of a
change in control, as defined by the Plan. The minimum pay will equate to six
months with the maximum of 18 months obtainable under the Plan. As a result of
the adoption of this Plan, the Company will record an increase to the
restructuring liability in the first quarter of 1997 of approximately
$10,000,000.
 
  On January 28, 1997, the Board of Directors authorized the repurchase of up
to 5 million shares of outstanding common stock, representing approximately
3.6% of the total number of outstanding shares at December 31, 1996. As of
February 28, 1997, there had been no repurchases under this program. On March
5, 1997 the Board of Directors voted to discontinue the repurchase program.
 
  On March 5, 1997, the Company entered into an Agreement and Plan of Merger
with Washington Mutual, Inc. (Washington Mutual), and New American Capital,
Inc., an indirect wholly-owned subsidiary of Washington Mutual. Washington
Mutual is a regional financial services company headquartered in Seattle,
Washington. With consolidated assets of $44.6 billion at December 31, 1996,
this Washington corporation operates through its principal subsidiaries,
Washington Mutual Bank, American Savings Bank, F.A., and Washington Mutual
Bank fsb. Under the Agreement and Plan of Merger, the Company will merge with
and into New American Capital, Inc. in a tax-free exchange, pursuant to which,
among other things, each outstanding share of common stock of the Company will
be converted into .9 shares of common stock of Washington Mutual. Based upon
the closing price of Washington Mutual's common stock on March 5, 1997,
stockholders of the Company would receive shares of Washington Mutual common
stock with a value of $47.93 per share of common stock of the Company. This
transaction has been approved by the boards of directors of both companies. It
is anticipated that this transaction will be accounted for as a pooling of
interests. The Company expects the merger to be completed during the third
quarter of 1997, pending the receipt of regulatory approval from the OTS and
the approval of the stockholders of both companies. For additional information
on the proposed merger and other related activities, see Item 1. Business
"Merger Agreement with Washington Mutual, Inc.," "H. F. Ahmanson & Company's
Merger Proposal" and "Litigation Relating to the Ahmanson Merger Proposal" in
Part I of this Form 10-K.
 
 
                                      104
<PAGE>
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders
 Great Western Financial Corporation
 
  In our opinion, the accompanying consolidated statement of financial
condition and the related consolidated statements of operations, of changes in
stockholders' equity and of cash flows present fairly, in all material
respects, the financial position of Great Western Financial Corporation and
its subsidiaries ("the Company") at December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
 
  As discussed in Note 1 to the financial statements, the Company adopted
accounting standards that changed its methods of accounting for mortgage
servicing rights and long lived assets in 1995.
 
Los Angeles, California
January 22, 1997, except as to Note 28,
 which is as of March 7, 1997
 
                                      105
<PAGE>
 
                MANAGEMENT'S COMMENTARY ON FINANCIAL STATEMENTS
 
  Management is responsible for the integrity and objectivity of the financial
statements and other information in this report. The statements were prepared
in accordance with generally accepted accounting principles appropriate in the
circumstances. They meet the requirements of the Securities and Exchange
Commission. The financial statements reflect management's judgment and
estimates relating to events not concluded by year end.
 
  The Company's code of conduct, communicated to all officers and employees,
requires adherence to high ethical standards in the conduct of the Company's
business.
 
  Management is responsible for maintaining a system of internal control and
has established a system of internal accounting control designed to provide
reasonable assurance that transactions are recorded properly to permit
preparation of financial statements, that transactions are executed in
accordance with management's authorizations and that assets are safeguarded
from significant loss or unauthorized use.
 
  Management supports an extensive program of internal audits to evaluate the
adequacy of internal controls as well as to monitor compliance with
management's directives and regulatory agencies' requirements. The audit
committee of the board of directors is composed of nine outside directors,
none of whom is an officer or employee of the Company. The audit committee
meets with the internal and external auditors to review the scope of audits,
findings and actions to be taken by management.
 
                                          Carl F. Geuther
                                          Vice Chairman and Chief Financial
                                           Officer
 
January 22, 1997
 
                                      106
<PAGE>
 
                     QUARTERLY FINANCIAL DATA (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                               1996
                                          ------------------------------------------------
                                                      FOURTH    THIRD     SECOND   FIRST
                                            TOTAL    QUARTER   QUARTER   QUARTER  QUARTER
                                          ---------- -------- ---------  -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<S>                                       <C>        <C>      <C>        <C>      <C>
Interest income                           $3,233,931 $801,547 $ 800,514  $806,942 $824,928
Interest expense                           1,855,914  466,536   461,742   454,994  472,642
                                          ---------- -------- ---------  -------- --------
Net interest income                        1,378,017  335,011   338,772   351,948  352,286
Noninterest income                           331,825  114,096    63,713    78,103   75,913
Provision for loan losses                    208,971   85,900    41,671    39,300   42,100
Noninterest expense                        1,314,249  357,675   429,089   260,180  267,305
                                          ---------- -------- ---------  -------- --------
Earnings (loss) before taxes                 186,622    5,532   (68,275)  130,571  118,794
Taxes (benefit) on income                     70,800      400   (28,400)   51,300   47,500
                                          ---------- -------- ---------  -------- --------
Net earnings (loss)                       $  115,822 $  5,132 $ (39,875) $ 79,271 $ 71,294
                                          ========== ======== =========  ======== ========
Per common share:
  Primary earnings (loss)                 $      .69 $    .01 $    (.31) $    .52 $    .47
  Fully diluted earnings (loss)                  .69      .01      (.31)      .52      .47
  Dividends                                      .98      .25       .25       .25      .23
  Stock price:
    High                                             $ 31 1/8 $26 3/4    $ 24 1/2 $ 26 1/8
    Low                                                27      21 1/8      21 3/4   22 1/2
    End of period                                      29      26 1/2      23 7/8   24 1/8
Per preferred depositary share:
  Dividends
    Cumulative convertible                $    2.552 $     -- $  .36450  $1.09375 $1.09375
    Cumulative                                 2.075   .51875    .51875    .51875   .51875
  Stock price
    Cumulative convertible
      High                                                    $62 1/4    $ 61 3/8 $ 65 1/4
      Low                                                      56 3/8      56 1/4   58
    Cumulative
      High                                           $ 26     $25 57/64  $ 26     $ 26 1/8
      Low                                              25 3/8  25 1/4      25 1/8   25 3/8
</TABLE>
 
  Exchange Listings: New York Stock Exchange, Pacific Stock Exchange and
London Stock Exchange. Approximate number of common stockholders of record at
December 31, 1996: 9,724.
 
  Under regulations, retained earnings are subject to substantial restrictions
for the payment of dividends. See Note 21 in Item 8, "Financial Statements and
Supplementary Data."
 
                                      107
<PAGE>
 
               QUARTERLY FINANCIAL DATA (UNAUDITED)--(CONTINUED)
 
<TABLE>
<CAPTION>
                                                               1995
                                          -----------------------------------------------
                                                      FOURTH    THIRD    SECOND   FIRST
                                            TOTAL    QUARTER   QUARTER  QUARTER  QUARTER
                                          ---------- -------- --------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<S>                                       <C>        <C>      <C>       <C>      <C>
Interest income                           $3,238,711 $834,887 $ 839,097 $807,661 $757,066
Interest expense                           1,936,582  484,046   505,498  497,064  449,974
                                          ---------- -------- --------- -------- --------
Net interest income                        1,302,129  350,841   333,599  310,597  307,092
Noninterest income                           327,668  106,471    76,159   74,857   70,181
Provision for loan losses                    187,700   50,300    46,600   43,200   47,600
Noninterest expense                        1,019,975  253,445   249,823  259,018  257,689
                                          ---------- -------- --------- -------- --------
Earnings (loss) before taxes                 422,122  153,567   113,335   83,236   71,984
Taxes (benefit) on income                    161,100   55,000    44,800   32,800   28,500
                                          ---------- -------- --------- -------- --------
Net earnings (loss)                       $  261,022 $ 98,567 $  68,535 $ 50,436 $ 43,484
                                          ========== ======== ========= ======== ========
Per common share:
  Primary earnings (loss)                 $     1.72 $    .67 $     .45 $    .32 $    .28
  Fully diluted earnings (loss)                 1.71      .66       .45      .32      .28
  Dividends                                      .92      .23       .23      .23      .23
  Stock price:
    High                                             $ 27 1/8 $23 3/4   $ 22 1/2 $ 18 7/8
    Low                                                22 5/8  20 1/4     18 7/8   16
    End of period                                      25 3/8  23 3/4     20 5/8   18 5/8
Per preferred depositary share:
  Dividends
    Cumulative convertible                $    4.375 $1.09375 $ 1.09375 $1.09375 $1.09375
    Cumulative                                 2.075   .51875    .51875   .51875   .51875
  Stock price
    Cumulative convertible
      High                                           $ 67 7/8 $62 3/4   $ 60 3/8 $ 55 5/8
      Low                                              58 1/4  57 1/2     55 1/2   50 3/8
  Cumulative
      High                                           $ 26 1/8 $26 13/64 $ 25 7/8 $ 24 7/8
      Low                                              25 3/8  25 1/4     24 3/8   22 3/4
</TABLE>
 
 
                                      108
<PAGE>
 
               QUARTERLY FINANCIAL DATA (UNAUDITED)--(CONTINUED)
 
<TABLE>
<CAPTION>
                                                                   1994
                                              ----------------------------------------------
                                                          FOURTH   THIRD    SECOND   FIRST
                                                TOTAL    QUARTER  QUARTER  QUARTER  QUARTER
                                              ---------- -------- -------- -------- --------
   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
   <S>                                        <C>        <C>      <C>      <C>      <C>
   Interest income                            $2,629,718 $704,611 $661,312 $633,803 $629,992
   Interest expense                            1,307,448  385,076  330,544  296,080  295,748
                                              ---------- -------- -------- -------- --------
   Net interest income                         1,322,270  319,535  330,768  337,723  334,244
   Noninterest income                            367,897  134,331   74,723   81,378   77,465
   Provision for loan losses                     207,200   52,800   49,700   52,900   51,800
   Noninterest expense                         1,076,433  265,192  264,361  271,146  275,734
                                              ---------- -------- -------- -------- --------
   Earnings (loss) before taxes                  406,534  135,874   91,430   95,055   84,175
   Taxes (benefit) on income                     155,300   47,200   34,200   39,200   34,700
                                              ---------- -------- -------- -------- --------
   Net earnings (loss)                        $  251,234 $ 88,674 $ 57,230 $ 55,855 $ 49,475
                                              ========== ======== ======== ======== ========
   Per common share:
     Primary earnings (loss)                  $     1.69 $    .61 $    .38 $    .38 $    .32
     Fully diluted earnings (loss)                  1.69      .61      .38      .38      .32
     Dividends                                       .92      .23      .23      .23      .23
     Stock price:
       High                                              $ 19     $ 20 7/8 $ 19 3/8 $ 20 1/2
       Low                                                 15 3/4   18 3/8   15 3/8   16 1/8
       End of period                                       16       19 1/4   18 3/8   16 1/8
   Per preferred depositary share:
     Dividends
       Cumulative convertible                 $    4.375 $1.09375 $1.09375 $1.09375 $1.09375
       Cumulative                                  2.075   .51875   .51875   .51875   .51875
     Stock price
       Cumulative convertible
         High                                            $ 56 5/8 $ 59 1/8 $ 58 1/4 $ 62 5/8
         Low                                               50 1/8   55 1/4   53 3/4   55 3/4
       Cumulative
         High                                            $ 24 3/8 $ 25 1/8 $ 25     $ 26 7/8
         Low                                               22 1/8   24       23       24 1/8
</TABLE>
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
  None.
 
                                      109
<PAGE>
 
                                   PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
  See General Note to Part III.
 
ITEM 11. EXECUTIVE COMPENSATION
 
  See General Note to Part III.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
  See General Note to Part III.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
  See General Note to Part III.
 
GENERAL NOTE TO PART III
 
  Pursuant to General Instruction G to Form 10-K, the other information
required by Part III (Items 10, 11, 12 and 13) of Form 10-K not disclosed
above will be either (i) incorporated by reference to the Definitive Proxy
Statement for Great Western Financial Corporation's 1997 Annual Meeting of
Stockholders, filed with the Securities and Exchange Commission not later than
April 30, 1997, or (ii) included in an amendment to this report filed with the
Commission on Form 10-K/A.
 
                                      110
<PAGE>
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
(a)1.  Financial Statements
 
  See index to Item 8, "Financial Statements and Supplementary Data" on page
51.
 
  2.   Financial Statement Schedules
 
  No financial statement schedules are required because they are not
applicable or the required information is shown in the financial statements or
notes thereto included in Item 8, "Financial Statements and Supplementary
Data".
 
  3.   Executive Compensation Plans and Arrangements indicated by asterisk in
       next section.
 
  4.   Exhibits Required by Securities and Exchange Commission Regulations S-K
 
  3.1  Restated Certificate of Incorporation of GWFC, as in effect on the date
       of this report (filed as an exhibit to GWFC's Annual Report on Form 10-K
       for the year ended December 31, 1992 and incorporated herein by
       reference).

  3.2  Certificate of Designations of GWFC's 8.30% Cumulative Preferred Stock
       (filed as an exhibit to GWFC's Current Report on Form 8-K dated September
       9, 1992, event date September 2, 1992, and incorporated herein by
       reference).
 
  3.3  By-laws of GWFC as in effect on the date of this report (filed as an
       exhibit to GWFC's Current Report on Form 8-K dated June 30, 1995, event
       date June 27, 1995, and incorporated herein by reference).
     
  3.4  Amendments to By-laws of GWFC (filed as an exhibit to GWFC's current
       report on Form 8-K dated February 20, 1997, event date February 20,
       1997, and incorporated herein by reference).
 
  4.1  GWFC agrees to furnish the Securities and Exchange Commission, upon
       request, with copies of all instruments defining rights of holders of
       long-term debt of GWFC and its consolidated subsidiaries.
 
  4.2  Indenture dated as of May 31, 1988, as amended and supplemented as of
       June 14, 1988 and October 31, 1988, between GWB and Morgan Guaranty
       Trust Company of New York (filed as an exhibit to GWFC's Annual Report
       on Form 10-K for the fiscal year ended December 31, 1989 and
       incorporated herein by reference).
 
 10.1  Rights Agreement dated as of June 27, 1995, between GWFC and First
       Chicago Trust Company of New York (filed as an exhibit to the
       Company's Current Report on Form 8-K dated June 30, 1995, event date
       June 27, 1995, and incorporated herein by reference).
 
 10.2  Consulting Agreement between GWFC and James F. Montgomery dated April
       25, 1995 (filed as an exhibit to GWFC's Quarterly Report on Form 10-Q
       for the quarter ended June 30, 1995, and incorporated herein by
       reference).
 
 10.3* Employment Agreement between GWFC and John F. Maher dated December 19,
       1989 (filed as an exhibit to GWFC's Annual Report on Form 10-K for the
       fiscal year ended December 31, 1989 and incorporated herein by
       reference).
 
 10.4* Amendment to Employment Agreement between GWFC and John F. Maher
       effective December 10, 1996.
 
 10.5* Employment Agreement between GWFC and Carl F. Geuther dated as of
       March 1, 1988 (filed as an exhibit to GWFC's Annual Report on Form 10-
       K for the fiscal year ended December 31, 1989 and incorporated herein
       by reference).
 
                                      111
<PAGE>
 
10.6*  Amendment No. 1 to Employment Agreement between GWFC and Carl F.
       Geuther effective December 10, 1996.
 
10.7*  Employment Agreement between GWFC and Michael M. Pappas dated as of March
       1, 1988 (filed as an exhibit to GFWC's Annual Report on Form 10-K for the
       fiscal year ended December 31, 1989 and incorporated herein by
       reference).
 
10.8*  Amendment No. 1 to Employment Agreement between GWFC and Michael M.
       Pappas effective December 10, 1996.
 
10.9*  Employment Agreement between GWFC and A. William Schenck III dated as of
       July 31, 1995 (filed as an exhibit to GWFC's Quarterly Report on Form 10-
       Q for the quarter ended September 30, 1995, and incorporated herein by
       reference).

10.10* Amendment No. 1 to Employment Agreement between GWFC and A. William
       Schenck, III effective December 10, 1996.
 
10.11* Employment Agreement between GWFC and J. Lance Erikson dated as of March
       1, 1988 (filed as an exhibit to GWFC's Annual Report on Form 10-K for
       the fiscal year ended December 31, 1989 and incorporated herein by
       reference).
 
10.12* Amendment No. 1 to Employment Agreement between GWFC and J. Lance
       Erikson effective December 10, 1996.
 
10.13* Employment Agreement between GWFC and Jaynie M. Studenmund dated as of
       April 15, 1996 (filed as an exhibit to GWFC's Quarterly Report on Form
       10-Q for the quarter ended June 30, 1996 and incorporated herein by
       reference).
 
10.14* Amendment No. 1 to Employment Agreement between GWFC and Jaynie M.
       Studenmund effective December 10, 1996.
 
10.15* Employment Agreement between GWFC and Ray W. Sims dated as of January
       6, 1997.
 
10.16* Supplemental Executive Retirement Plan as amended through July 25,
       1995 (filed as an exhibit to GWFC's Quarterly Report on Form 10-Q for
       the quarter ended September 30, 1995, and incorporated herein by
       reference).
 
10.17* Amendment No. 1996-1 to GWFC Supplemental Executive Retirement Plan
       1988 Restatement (filed as an exhibit to GWFC's Quarterly Report on
       Form 10-Q for the quarter ended March 31, 1996)
 
10.18* Amendment No. 1996-2 to GWFC Supplemental Executive Retirement Plan
       effective December 10, 1996.
 
10.19* 1979 Incentive and Nonstatutory Stock Option and Appreciation Plan as
       amended (filed as an exhibit to GWFC's Annual Report on Form 10-K for
       the fiscal year ended December 31, 1992, and incorporated herein by
       reference).
 
10.20* Addendum to the 1979 Incentive and Nonstatutory Stock Option and
       Appreciation Plan (filed as an exhibit to GWFC's Annual Report on Form
       10-K for the fiscal year ended December 31, 1993 and incorporated
       herein by reference).
 
10.21* Form of Non-Qualified Stock Option Agreement relating to the 1979
       Incentive and Nonstatutory Stock Option and Appreciation Plan utilized
       from April 20, 1982 to April 22, 1986 (filed as an exhibit to Post-
       Effective Amendment No. 3 to GWFC's Registration Statement No. 2-67233
       on Form S-8, and incorporated herein by reference).
 
                                      112
<PAGE>
 
10.22*  Form of Non-Qualified Stock Option Agreement relating to the 1979
        Incentive and Nonstatutory Stock Option and Appreciation Plan utilized
        from April 22, 1986 through 1988 (filed as an exhibit to Post-Effective
        Amendment No. 3 to GWFC's Registration Statement No. 2-67233 on Form S-
        8, and incorporated herein by reference).
 
10.23*  The 1988 Stock Option and Incentive Plan (as amended effective July 26,
        1994), (filed as an exhibit to GWFC's Quarterly Report on Form 10-Q for
        the quarter ended September 30, 1994 and incorporated herein by
        reference).
        
10.24*  Amendment No. 1996-1 to the 1988 Stock Option and Incentive Plan,
        effective December 10, 1996.
 
10.25*  Form of Director Stock Option Agreement (filed as an exhibit to GWFC's
        Registration Statement No. 33-21469 on Form S-8 pertaining to GWFC's
        1988 Stock Option and Incentive Plan and incorporated herein by
        reference).
 
10.26*  Form of Director Stock Option Agreement effective January 3, 1994,
        (filed as an exhibit to GWFC's Annual Report on Form 10-K for the
        fiscal year ended December 31, 1993 and incorporated herein by
        reference).
 
10.27*  Form of Employee Non-Qualified Stock Option Agreement (filed as an
        exhibit to GWFC's Registration Statement No. 33-21469 on Form S-8
        pertaining to GWFC's 1988 Stock Option and Incentive Plan and
        incorporated herein by reference).
 
10.28*  Revised Form of Non-Qualified Stock Option Agreement effective January
        28, 1992 (filed as an exhibit to Post-Effective Amendment No. 3 to
        GWFC's Registration Statement No. 33-21469 on Form S-8 pertaining to
        GWFC's 1988 Stock Option and Incentive Plan and incorporated herein by
        reference).
 
10.29*  Revised Form of Non-Qualified Stock Option Agreement effective January
        25, 1994, (filed as an exhibit to GWFC's Annual Report on Form 10-K
        for the fiscal year ended December 31, 1993 and incorporated herein by
        reference).
 
10.30*  Form of Non-Qualified Stock Option Agreement (Early Vesting
        Provisions), (filed as an exhibit to GWFC's Annual Report on Form 10-K
        for the fiscal year ended December 31, 1993 and incorporated herein by
        reference).
 
10.31*  Revised Form of Non-Qualified Stock Option Agreement effective
        December 12, 1994, (filed as an exhibit to GWFC's Annual Report on
        Form 10-K for the fiscal year ended December 31, 1994 and incorporated
        herein by reference).
 
10.32*  Form of Great Western Financial Corporation Employee Nonqualified
        Stock Option Agreement, effective December 10, 1996.
  
10.33*  Amendment No. 1996-1 to Form of Nonqualified Stock Option Agreement,
        effective December 10, 1996.
 
10.34*  Form of Great Western Financial Corporation Senior Officer's Non-
        Qualified Stock Option Agreement effective January 23, 1996, (filed as
        an exhibit to GWFC's Annual Report on Form 10-K for the fiscal year
        ended December 31, 1995 and incorporated herein by reference).
 
10.35*  Form of Great Western Financial Corporation Senior Officer's
        Nonqualified Stock Option Agreement, effective December 10, 1996.
  
10.36*  Special Non-Qualified Stock Option Agreement dated as of April 25,
        1995 and amendments to Non-Qualified Stock Option Agreements dated
        February 26, 1991, January 25, 1994, and December 12, 1994 with James F.
        Montgomery (filed as an exhibit to GWFC's Quarterly Report on Form 10-Q
        for the quarter ended June 30, 1995 and incorporated herein by
        reference).
 
                                      113
<PAGE>
 
10.37*  Form of Restricted Stock Award Agreement and General Provisions
        Applicable to Restricted Stock Awards Granted Under the 1988 Stock
        Option and Incentive Plan (filed as an exhibit to Post-Effective
        Amendment No. 3 to GWFC's Registration Statement No. 33-21469 on Form S-
        8, and incorporated herein by reference).
 
10.38*  General Provisions applicable to Performance Restricted Stock Awards
        granted under the Great Western Financial Corporation 1988 Stock Option
        and Incentive Plan, as amended (March 1994) (filed as an exhibit to
        GWFC's quarterly report on Form 10-Q for the quarter ended March 31,
        1994 and incorporated herein by reference).
 
10.39*  General Provisions applicable to Performance Restricted Stock Award
        granted to James F. Montgomery, as amended effective December 28, 1995
        (filed as an exhibit to GWFC's quarterly report on Form 10-Q for the
        quarter ended September 30, 1995 and incorporated herein by reference).
 
10.40   Amendment No. 1996-1 to General Provisions Applicable to Performance
        Restricted Stock Awards Granted Under 1988 Stock Option and Incentive
        Plan, effective December 10, 1996.

10.41*  GWFC Deferred Compensation Plan (1992 Restatement) (filed as an exhibit
        to GWFC's Annual Report on Form 10-K for the fiscal year ended December
        31, 1991, and incorporated herein by reference).

10.42*  Amendment No. 2 to GWFC Deferred Compensation Plan 1992 Restatement
        (filed as an exhibit to GWFC's Quarterly Report on Form 10-Q for the
        quarter ended March 31, 1996).
 
10.43*  Amendment No. 1996-2 to GWFC Deferred Compensation Plan, dated
        December 10, 1996.
 
10.44*  GWFC Senior Officers' Deferred Compensation Plan (1992 Restatement)
        (filed as an exhibit to GWFC's Annual Report on Form 10-K for the
        fiscal year ended December 31, 1991, and incorporated herein by
        reference).
 
10.45*  Amendment No. 2 to Senior Officer's Deferred Compensation Plan 1992
        Restatement (filed as an exhibit to GWFC's Quarterly Report on Form
        10-Q for the quarter ended March 31, 1996).
 
10.46*  Amendment No. 1996-2 to Senior Officer's Deferred Compensation Plan,
        dated December 10, 1996.
 
10.47*  GWFC Directors' Deferred Compensation Plan (1992 Restatement) (filed
        as an exhibit to GWFC's Annual Report on Form 10-K for the fiscal year
        ended December 31, 1991, and incorporated herein by reference).
 
10.48*  Amendment to GWFC Directors', Senior Officers' and basic Deferred
        Compensation Plans (1992 Restatement) (filed as an exhibit to GWFC's
        Annual Report on Form 10-K for the fiscal year ended December 31,
        1994, and incorporated herein by reference).
 
10.49*  Amendment No. 2 to Directors' Deferred Compensation Plan 1992
        Restatement. (filed as an exhibit to GWFC's Quarterly Report on Form
        10-Q for the quarter ended March 31, 1996).
 
10.50*  Amendment No. 1996-2 to Directors' Deferred Compensation Plan, dated
        December 10, 1996.
 
10.51*  GWFC Umbrella Trust for Senior Officers (filed as an exhibit to
        GWFC's Quarterly Report on Form 10-Q for the quarter ended March 31,
        1989, and incorporated herein by reference).

10.52*  Amendment to GWFC Umbrella Trust for Senior Officers effective October
        25, 1994 (filed as an exhibit to GWFC's Annual Report on Form 10-K for
        the fiscal year ended December 31, 1994, and incorporated herein by
        reference). 
 
                                      114
<PAGE>
 
    10.53* Amendment No. 1996-1 to Umbrella Trust for Senior Officers, effective
           December 10, 1996.

    10.54* GWFC Umbrella Trust for Directors (filed as an exhibit to GWFC's
           Quarterly Report on Form 10-Q for the quarter ended March 31, 1989,
           and incorporated herein by reference).

    10.55  Amendment No. 1996-1 to Umbrella Trust for Directors, dated December
           10, 1996.

    10.56  Omnibus Amendment 1995-1 to the Supplemental Executive Retirement
           Plan, Deferred Compensation Plans, Retirement Restoration Plan, and
           Umbrella Trusts replacing the Finance Committee of the Board of
           Directors with the Compensation Committee of the Board of Directors
           as administrator of the plans (filed as an exhibit to GWFC's
           Quarterly Report on Form 10-Q for the quarter ended June 30, 1995,
           and incorporated herein by reference).

    10.57* Restated Retirement Plan for Directors (filed as an exhibit to GWFC's
           Quarterly Report on Form 10-Q for the quarter ended June 30, 1993,
           and incorporated herein by reference).

    10.58* Summary of certain additional executive benefits (filed as an exhibit
           to GWFC's Annual Report on Form 10-K for the fiscal year ended
           December 31, 1992, and incorporated herein by reference).

    10.59* Employee Home Loan Program (filed as an exhibit to GWFC's Quarterly
           Report on Form 10-Q for the quarter ended June 30, 1993, and
           incorporated herein by reference).

    10.60* Amendment No. 1996-1 to Employee Home Loan Program, effective
           December 10, 1996.

    10.61* GWFC Annual Incentive Compensation Plan for Executive Officers,
           (filed as an exhibit to GWFC's Annual Report on Form 10-K for the
           fiscal year ended December 31, 1993 and incorporated herein by
           reference).

    10.62* Amendment no. 1996-1 to Annual Incentive Compensation Plan for
           Executive Officers, effective December 10, 1996.

    10.63* GWFC Retirement Restoration Plan effective January 1, 1994, (filed as
           an exhibit to GWFC's Annual Report on Form 10-K for the fiscal year
           ended December 31, 1994 and incorporated herein by reference).

    10.64* Amendment 1996-1 to GWFC Retirement Restoration Plan (filed as an
           exhibit to GWFC's Quarterly Report on Form 10-Q for the quarter ended
           March 31, 1996).

    10.65* Amendment No. 1996-2 to Retirement Restoration Plan effective
           December 10, 1996.

    10.66  Special Severance Plan adopted December 10, 1996.

    10.67  Broad Based Plan adopted February 24, 1997.

    10.68  Omnibus Amendment 1997-1 amending the definition of change in control
           in the Employment Agreements, amended and restated as of December 10,
           1996 between GWFC and John Maher, J. Lance Erikson, Carl F. Geuther,
           Michael M. Pappas, A. William Schenck III, and Jaynie M. Studenmund,
           the Employment Agreement between GWFC and Ray W. Sims, effective
           January 6, 1997, the GWFC 1988 Stock Option and Incentive Plan, as
           amended December 10, 1996, the GWFC Annual Incentive Compensation
           Plan for Executive Officers, as amended December 9, 1996, the GWFC
           Senior Officers' Deferred Compensation Plan (1992 Restatement), as
           amended December 10, 1996, the GWFC Directors' Deferred Compensation
           Plan (1992 Restatement), as amended December 10, 1996, the GWFC
           Supplemental Executive Retirement Plan (1988 Restatement), as amended
           December 10, 1996, the Great Western Retirement Restoration Plan, as
           amended December 10, 1996, the GWFC Umbrella Trust for Senior
           Officers, as amended December 10, 1996 and Umbrella Trust for
           Directors, as amended December 10, 1996, the Employee Home Loan
           Program (revised and restated as of April 27, 1993), as amended
           December 10, 1996, the GWFC Special Severance Plan, effective
           December 10, 1996, approved and adopted by the Board of Directors on
           February 20, 1997.
           
                                      115
<PAGE>
 
    10.69 Agreement and Plan of Merger By and Among Washington Mutual, Inc.,
          New American Capital, Inc., and Great Western Financial Corporation,
          dated as of March 5, 1997.

    11.1  Statement re Computation of Per Share Earnings.

    12.1  Computation of Ratios of Earnings to Fixed Charges.

    21.1  Subsidiaries.

    23.1  Consent of Price Waterhouse LLP included on page 119 of this Form 10-
          K.

    24.1  Power of Attorney included on page 117 of this Form 10-K.

    27.1  Financial Data Schedule.
 
  Exhibits will be supplied to any such stockholder at a charge equal to the
Company's cost of copying, postage and handling. Written requests should be
directed to:
 
                              CORPORATE SECRETARY
                      GREAT WESTERN FINANCIAL CORPORATION
                              9200 OAKDALE AVENUE
                       CHATSWORTH, CALIFORNIA 91311-6519
 
  (b) Reports on Form 8-K
 
    A Current Report on Form 8-K dated February 20, 1997 was filed with the
  SEC reporting the adoption of an amendment to Great Western Financial
  Corporation's Bylaws.
 
    A Current Report on Form 8-K dated January 27, 1997, included exhibits
  relating to the 8.206% Capital Securities, Series A, of the Great Western
  Financial Trust II.
 
    A Current Report on Form 8-K dated January 22, 1997, reporting the
  Company's earnings for the fourth quarter of 1996 and annual earnings for
  1996.
 
    A Current Report on Form 8-K dated December 2, 1996 reported that the
  Company would take a pre-tax restructuring charge of between $65 and $70
  million in the fourth quarter of 1996.
 
 
                                      116
<PAGE>
 
                                  SIGNATURES
 
  PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
 
                                          Great Western Financial Corporation
 
 March 5, 1997                                     /s/ John F. Maher
________________                          By: _________________________________
      DATE                                     JOHN F. MAHER, PRESIDENT AND
                                                  CHIEF EXECUTIVE OFFICER
 
                               POWER OF ATTORNEY
 
  Each person whose signature appears below hereby authorizes John F. Maher,
Carl F. Geuther and Barry R. Barkley, and each of them or any of them, as
attorney-in-fact to sign on his or her behalf as an individual and in every
capacity stated below, and to file all amendments to the registrant's Form 10-
K, and the registrant hereby confers like authority to sign and file in its
behalf.
 
  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 5, 1997, by the following persons on
behalf of the registrant and in the capacities indicated.
 
          /s/ John F. Maher
- -------------------------------------
    JOHN F. MAHER, PRESIDENT AND
       CHIEF EXECUTIVE OFFICER
    (PRINCIPAL EXECUTIVE OFFICER)
 
         /s/ Carl F. Geuther
- -------------------------------------
 CARL F. GEUTHER, VICE CHAIRMAN AND
       CHIEF FINANCIAL OFFICER
    (PRINCIPAL FINANCIAL OFFICER)
 
        /s/ Barry R. Barkley
- -------------------------------------
    BARRY R. BARKLEY, SENIOR VICE
            PRESIDENT AND
  CONTROLLER (PRINCIPAL ACCOUNTING
              OFFICER)
 
       /s/ James F. Montgomery
- -------------------------------------
  JAMES F. MONTGOMERY, DIRECTOR AND
        CHAIRMAN OF THE BOARD
 
       /s/ Dr. David Alexander               /s/ Enrique Hernandez, Jr
- -------------------------------------  -------------------------------------
    DR. DAVID ALEXANDER, DIRECTOR        ENRIQUE HERNANDEZ, JR., DIRECTOR
 
                                               /s/ Charles D. Miller
- -------------------------------------  -------------------------------------
   H. FREDERICK CHRISTIE, DIRECTOR          CHARLES D. MILLER, DIRECTOR
 
        /s/ Stephen E. Frank                 /s/ Dr. Alberta E. Siegel
- -------------------------------------  -------------------------------------
     STEPHEN E. FRANK, DIRECTOR           DR. ALBERTA E. SIEGEL, DIRECTOR
 
        /s/ John V. Giovenco                  /s/ Willis B. Wood, Jr.
- -------------------------------------  -------------------------------------
     JOHN V. GIOVENCO, DIRECTOR            WILLIS B. WOOD, JR., DIRECTOR
 
         /s/ Firmin A. Gryp
- -------------------------------------
      FIRMIN A. GRYP, DIRECTOR
 
                                      117
<PAGE>
 
                       INDEX OF ADDITIONAL FINANCIAL DATA
 
                               DECEMBER 31, 1995
 
<TABLE>
<CAPTION>
                                                                           PAGES
                                                                           -----
<S>                                                                        <C>
Consent of Independent Accountants........................................  119
</TABLE>
 
                                      118
<PAGE>
 
                      CONSENT OF INDEPENDENT ACCOUNTANTS
 
  We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 33-19884,
33-63535, 33-60206 and 333-19711), on Form S-4 (Nos. 33-15135 and 33-17705)
and on Form S-8 (Nos. 2-67233, 2-90750, 33-6174, 33-21469 and 333-12655) of
Great Western Financial Corporation of our report dated January 22, 1997,
except as to Note 28, which is as of March 7, 1997, appearing on page 105 of
this Form 10-K.
 
                                          /s/ Price Waterhouse LLP
 
Los Angeles, California
March 10, 1997
 
                                      119

<PAGE>
 
                                                                    EXHIBIT 10.4

                                   AMENDMENT
                                      TO
                             EMPLOYMENT AGREEMENT


          This Amendment is made to that certain Employment Agreement (the
"1989 Agreement"), dated as of December 19, 1989, between Great Western
Financial Corporation ("Employer") and John F. Maher ("Officer").  Capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the 1989 Agreement.

          WHEREAS, the 1989 Agreement provides, among other things, that Officer
would hold the offices of President and Chief Operating officer of the Company;

          WHEREAS, effective as of December 28, 1995, Officer was appointed to
the office of Chief Executive Officer of the Company; and

          WHEREAS, Employer has determined that it is in its best interest and
that of its stockholders to amend the Agreement to reflect Officer's appointment
as Chief Executive Officer and to make certain additional changes as set forth
herein, and Officer agrees to continue to serve Employer pursuant to the terms
of the 1989 Agreement, as amended hereby;

          NOW THEREFORE, the Employer and Officer agree that the 1989 Agreement
shall be amended as follows, effective as of December 10, 1996, unless otherwise
provided:

          1.   Section 1 of the 1989 Agreement is amended by deleting from the
first sentence thereof the date "December 31, 1994" and inserting in lieu
thereof the date "December 31, 1999" and by deleting from the second sentence
thereof the date "December 31, 1991" and inserting in lieu thereof the date
"December 31, 1996".

          2.   The first sentence of Section 2 of the 1989 Agreement is amended
in its entirety to read as follows:

               Employer and Officer hereby agree that, subject to the provisions
          of this Agreement, Employer shall employ Officer, and Officer shall
          serve Employer, as Chief 
<PAGE>
 
          Executive Officer of Employer (effective as of December 28, 1995) and
          member of the Executive Management Committee of the Employer and the
          Bank.

          3.  The third sentence of Section 3 of the 1989 Agreement is amended
to delete therefrom the phrase "the rank of Chief Operating Officer" and
inserting in lieu thereof the phrase "the rank of Chief Executive Officer".

          4.   The first sentence of Section 4 of the 1989 Agreement is amended
in its entirety to read as follows:

               Effective as of January 1, 1997, Employer shall pay Officer an
          annual salary at the rate of $860,000, which shall be payable in semi-
          monthly or bi-weekly installments in conformity with Employer's policy
          relating to salaried employees.

          5.   The first sentence of the second paragraph of Section 4 of the
1989 Agreement is amended in its entirety to read as follows:

               Notwithstanding anything to the contrary in this Agreement,
          Employer and Officer acknowledge that the Additional Benefits include
          without limitation Officer's entitlements under Employer's
          supplemental executive retirement plan (the "SERP"), as such
          entitlements are supplemented pursuant to the provisions hereof.

          6.   Section 4 of the 1989 Agreement is amended by inserting
immediately following subparagraph (c) thereof the following new paragraph, to
be effective as of January 1, 1997:

               Employer agrees that (i) for purposes of computing Officer's
          "average annual compensation" under the SERP, Employer shall disregard
          compensation earned by Officer with respect to all years prior to and
          including 1996 and (ii) Officer's 

                                       2
<PAGE>
 
          "average annual compensation", determined as of any date in 1997,
          shall be $1,462,000; Officer's average annual compensation, determined
          as of any date in 1998, shall be based upon his actual compensation
          for 1997 (including, but not limited to, Officer's salary and all
          bonuses, whether paid pursuant to the Company's Annual Incentive Plan
          (as defined in Section 8(a)(iii) hereof) or pursuant to discretionary
          bonuses); Officer's average annual compensation, determined as of any
          date in 1999, shall be based upon his average compensation for 1997
          and 1998; and Officer's average annual compensation, determined as of
          any date after 1999, shall be based upon the definition of "average
          monthly compensation" set forth in the SERP. The preceding sentence
          shall not constitute an amendment to the SERP, but rather shall
          evidence Employer's obligation to supplement the benefits otherwise
          payable to or in respect of Officer under the SERP. Any supplemental
          retirement benefits to which Officer is entitled by reason of
          application of the second preceding sentence shall be paid at the same
          time and in the same form as benefits payable to or in respect of
          Officer under the SERP, and shall otherwise be subject to the terms
          and conditions of the SERP as if such benefits were payable
          thereunder.

          7.   The final paragraph of Section 4 of the 1989 Agreement is amended
by deleting from the final sentence thereof the phrase "thirty-five percent
(35%)" and inserting in lieu thereof the phrase "fifty percent (50%)".

          8.   The final sentence of Section 5 of the 1989 Agreement is amended
by deleting therefrom the phrase "the 1987 Agreement" and inserting in lieu
thereof the phrase "all prior employment agreements with Employer".

                                       3
<PAGE>
 
          9.   Section 6(b) of the 1989 Agreement is amended in its entirety as
follows:

               (b) concurrently with the receipt of bonuses by Employer's other
          senior executives with respect to the year in which such election
          occurs, a bonus, prorated on an actual day basis for the year in which
          such election occurs if such election shall occur within the first six
          (6) months of such year but otherwise not prorated, in an amount not
          less than the percentage of Officer's salary, at the rate in effect
          immediately prior to such election, to which he would otherwise have
          been entitled in respect of such year under the Annual Incentive Plan
          (as defined in Section 8(a)(iii) hereof) and any other short-term
          cash bonus plan or arrangement of the Company, absent such election,
          or

                                       4
<PAGE>
 
          10.  Section 6(c) of the 1989 Agreement is amended in its entirety to
read as follows:

               (c)  for what would have been the remaining term of this
          Agreement absent such termination, health and welfare type Additional
          Benefits (including without limitation hospital, surgical, major
          medical, life and disability insurance), qualified pension benefits
          (or, if prohibited under then applicable tax law, a specially designed
          non-qualified supplemental pension to provide Officer with benefits
          equivalent to those to which he would have been entitled if such
          prohibition did not pertain) and non-qualified supplemental pension
          benefits to which Officer may be entitled pursuant to Section 4 hereof
          as the same shall exist immediately prior to such election (including
          continued accrual of years of service and age under (1) Employer's
          Retirement Plan as in effect immediately prior to such election (or,
          if prohibited under then applicable tax law, a specially designed non-
          qualified supplemental pension to provide Officer with benefits
          equivalent to those to which he would have otherwise been entitled if
          such prohibition did not pertain) and (2) the SERP (including the
          supplemental benefits thereto described in Section 4 hereof), but
          excluding (3) Employer matching contributions under Employer's 401(k)
          plan or any successor plan thereto), each such benefit to be continued
          in a manner no less favorable to Officer than the benefit to which he
          was entitled immediately prior to such election;

          11.  The 1989 Agreement is amended by deleting the unnumbered
paragraph immediately following Section 6(h) and inserting in lieu thereof the
following:

               Employer agrees that, if Officer's employment with Employer
          terminates during the term of this Agreement, Officer is not

                                       5
<PAGE>
 
          required to seek other employment or to attempt in any way to reduce
          any amounts payable to Officer by Employer pursuant to Section 6, 7(a)
          or 8 hereof.  Further, the amount of any payment or benefit provided
          for in this Agreement shall not be reduced by any compensation earned
          by Officer as the result of employment by another employer, by
          retirement benefits, by offset against any amount claimed to be owed
          by Officer to Employer, or otherwise; provided, however, that
                                                --------  -------      
          Employer's obligation to provide welfare-type Additional Benefits,
          including without limitation hospital, surgical, major medical, life
          and disability insurance, shall be reduced to the extent similar
          benefits are provided (at no cost to Officer) by a subsequent 
          employer.

          12.  The first sentence of Section 7(a) of the 1989 Agreement is
amended (1) by deleting clause (i)(B) and inserting in lieu thereof the
following:

          (B) the greater of (x) the average annual bonus received by him under
          the Annual Incentive Plan (as defined in Section 8(a)(iii) hereof) or
          pursuant to discretionary bonuses for services rendered in the
          immediately preceding three (3) full calendar years or (y) if
          termination shall occur (1) in 1997, $602,000, (2) in 1998, the actual
          bonus received by Officer for 1997 under the Annual Incentive Plan or
          pursuant to discretionary bonuses, or (3) in 1999, the average of the
          actual bonuses so received for 1997 and 1998, minus

and (2) by inserting immediately following the phrase "and to continue accrual
of years of service under Employer's Retirement Plan, and under any supplemental
employee retirement plan" the following:

          or arrangement (including the applicable provisions of Section 4
          hereof)

                                       6
<PAGE>
 
          13.  Section 8(a) of the 1989 Agreement is amended in its entirety to
read as follows:

               (a) If there should occur a Change in Control (as defined below),
          and if thereafter during the term of this Agreement, in the good-
          faith determination of Officer, Employer materially breaches this
          Agreement and Employer fails to cure such breach within fifteen (15)
          days after receipt of notice thereof, then, Officer, without
          limitation on any other rights he may have hereunder, may, within one
          (1) year after he first has knowledge of such breach, elect to
          terminate his employment hereunder and to treat such termination as a
          termination pursuant to Section 6 hereof, subject, however, to the
          following additional benefits and modifications to Officer's rights as
          set forth in said Section 6 (any one or more of which modifications
          Officer may elect to waive):

               (i) Employer shall not be entitled to reduce Officer's salary or
          any Additional Benefits to which Officer shall thereafter be
          entitled.

               (ii)  Officer's pro-rata entitlement to an award under any then
          existing long-term incentive performance plan shall be calculated upon
          the assumption that the performance under such plan is then "on plan."

               (iii)  In lieu of the severance benefits described in Sections
          6(a) and (b) hereof, within five (5) business days of the effective
          date of such termination of employment, Company shall pay to Officer a
          cash lump sum payment equal to the product of (A) the sum of (1)
          Officer's annual base salary in effect immediately prior to the
          termination of Officer's employment (or prior to a reduction in salary
          giving rise to a breach of this Agreement), plus 

                                       7
<PAGE>
 
          (2) the target bonus ("Target Bonus") under the Employer's Annual
          Incentive Plan for Executive Officers or any successor or replacement
          plan thereto (the "Annual Incentive Plan") in respect of the year in
          which such termination of employment occurs or the year in which the
          Change in Control occurs, whichever is greater (provided, however,
                                                          --------  -------
          that, if the termination of Officer's employment occurs under the
          circumstances entitling him to benefits under Section 8(g) hereof, the
          Target Bonus shall be in respect of the year in which such termination
          of employment occurs), and (B) the number three.

               (iv) Within five (5) days following such termination of
          employment, Employer shall pay to Officer a lump sum cash amount (the
          "Pro-Rata Bonus") equal to the product of (A) the target bonus to
          which Officer would have been entitled under the Annual Incentive Plan
          in respect of the year in which such termination occurs (assuming for
          this purpose that performance under the Annual Incentive Plan is "on
          plan" for such year) and (B) a fraction, the numerator of which shall
          be the number of months (including fractions thereof) from the first
          day of the fiscal year during which such termination occurs to the
          date on which such termination occurs, and the denominator of which
          shall be twelve (12); provided, however, that if such termination of
                                --------  -------                             
          employment occurs during the same year in which the Change in Control
          occurs, the Pro-Rata Bonus shall be offset by any payments received
          under the Annual Incentive Plan in connection with such Change in
          Control.

          14.  Section 8(e) of the 1989 Agreement is amended (1) by renumbering
said Section as Section 8(f); and (2) by deleting all references therein to
"change in control of the Employer" (or similar phrase) and replacing such
references with "Change in Control".

                                       8
<PAGE>
 
          15.  Section 8(b) of the 1989 Agreement is amended (1) by deleting all
references to "change in control of the Employer" (or similar phrase) and 
replacing such references with "Change in Control"; (2) by deleting subparagraph
(v) thereof; and (3) by renumbering subparagraph (vi) thereof as a new Section
8(e)(as such new Section 8(e) is amended below).

          16.  Section 8(c) of the Agreement is amended in its entirety to read
as follows:

               (c)  For purposes of this Agreement, a "Change in Control" shall
          be deemed to have occurred if the event set forth in any one of the
          following paragraphs shall have occurred:

               (i)  any Person (as defined below) is or becomes the Beneficial
          Owner (as defined in Rule 13d-3 under the Securities Exchange Act of
          1934 (the "Exchange Act")), directly or indirectly, of securities of
          Employer (not including in the securities beneficially owned by such
          Person any securities acquired directly from Employer or its
          affiliates) representing 25% or more of either the then outstanding
          shares of common stock of Employer or the combined voting power of
          Employer's then outstanding securities, excluding any Person who
          becomes such a beneficial owner in connection with a transaction
          described in clause (A) of paragraph (iii) below; or

               (ii)  the following individuals cease for any reason to
          constitute a majority of the number of directors then serving:
          individuals who, on December 10, 1996, constitute the Board and any
          new director (other than a director whose initial assumption of
          office is in connection with an actual or threatened election contest,
          including but not limited to a consent solicitation, relating to the
          election of directors of Employer) whose appointment or election by
          the Board or nomination for election by Employer's stockholders was
          approved by a vote of at least two-thirds 

                                       9
<PAGE>
 
          (2/3) of the directors then still in office who either were directors
          on December 10, 1996, or whose appointment, election or nomination for
          election was previously so approved; or

                (iii)  there is consummated a merger or consolidation of
          Employer with any other corporation, other than (A) a merger or
          consolidation which would result in the voting securities of Employer
          outstanding immediately prior to such merger or consolidation
          continuing to represent (either by remaining outstanding or by being
          converted into voting securities of the surviving entity or any
          parent thereof) at least 60% of the combined voting power of the
          voting securities of Employer or such surviving entity or any parent
          thereof outstanding immediately after such merger or consolidation, or
          (B) a merger or consolidation effected to implement a 
          recapitalization of Employer (or similar transaction) in which no
          Person is or becomes the beneficial owner, directly or indirectly, of
          securities of Employer (not including in the securities beneficially
          owned by such Person any securities acquired directly from Employer
          or its subsidiaries) representing 25% or more of either the then
          outstanding shares of common stock of Employer or the combined voting
          power of Employer's then outstanding securities; or

               (iv) the stockholders of Employer approve a plan of complete
          liquidation or dissolution of Employer or there is consummated an
          agreement for the sale or disposition by Employer of all or 
          substantially all of Employer's assets.

          Notwithstanding the foregoing, a "Change in Control" shall not be
          deemed to have occurred by virtue of the consummation of any
          transaction or series of integrated transactions immediately following
          which 

                                       10
<PAGE>
 
          the record holders of the common stock of Employer immediately prior
          to such transaction or series of transactions continue to have
          substantially the same proportionate ownership in an entity which
          owns all or substantially all of the assets of Employer immediately
          following such transaction or series of transactions.

          For purposes of this Section 8(c), "Person" shall have the meaning
          given in Section 3(a)(9) of the Exchange Act, as modified and used
          in Sections 13(d) and 14(d) thereof, except that such term shall not
          include (i) Employer or any of its subsidiaries, (ii) a trustee or
          other fiduciary holding securities under an employee benefit plan of
          Employer or any of its subsidiaries, (iii) an underwriter temporarily
          holding securities pursuant to an offering of such securities, or (iv)
          a corporation owned, directly or indirectly, by the stockholders of
          Employer in substantially the same proportions as their ownership of
          stock of Employer.

          17.  Section 8(d) of the 1989 Agreement is amended in its entirety to
read as follows:

               (d)  Whether or not Officer becomes entitled to severance and
          other benefits under Section 8(a) or 8(b) hereof, if any of the
          payments or benefits received or to be received by Officer in
          connection with a Change in Control or Officer's termination of
          employment (whether pursuant to the terms of this Agreement or any
          other plan, arrangement or agreement with Employer, any Person whose
          actions result in a Change in Control or any Person affiliated with
          Employer or such Person) (such payments or benefits, excluding the
          Gross-Up Payment, being hereinafter referred to as the "Total
          Payments") will be subject to the excise tax imposed under Section
          4999 of the Code (the "Excise Tax"), Employer shall pay to Officer an
          additional 

                                       11
<PAGE>
 
          amount (the "Gross-Up Payment") such that the net amount retained by
          Officer, after deduction of any Excise Tax on the Total Payments and
          any federal, state and local income and employment taxes and Excise
          Tax upon the Gross-Up Payment, shall be equal to the Total Payments.
          For purposes of determining whether any of the Total Payments will be
          subject to the Excise Tax and the amount of such Excise Tax, (A) all
          of the Total Payments shall be treated as "parachute payments" (within
          the meaning of Section 280G(b)(2) of the Code) unless, in the opinion
          of tax counsel ("Tax Counsel") reasonably acceptable to Officer and
          selected by the accounting firm which was, immediately prior to the
          Change in Control, Employer's independent auditor (the "Auditor"),
          such payments or benefits (in whole or in part) do not constitute
          parachute payments, including by reason of Section 280G(b)(4)(A) of
          the Code, (B) all "excess parachute payments" within the meaning of
          Section 280G(b)(l) of the Code shall be treated as subject to the
          Excise Tax unless, in the opinion of Tax Counsel, such excess
          parachute payments (in whole or in part) represent reasonable
          compensation for services actually rendered (within the meaning of
          Section 280G(b)(4)(B) of the Code) in excess of the Base Amount
          allocable to such reasonable compensation, or are otherwise not
          subject to the Excise Tax, and (C) the value of any noncash benefits
          or any deferred payment or benefit shall be determined by the Auditor
          in accordance with the principles of Sections 280G(d)(3) and (4) of
          the Code. For purposes of determining the amount of the Gross-Up
          Payment, Officer shall be deemed to pay federal income tax at the
          highest marginal rate of federal income taxation in the calendar year
          in which the Gross-Up Payment is to be made and state and local income
          taxes at the highest marginal rate of taxation in the state and
          locality of Officer's

                                       12
<PAGE>
 
          residence on the date of termination of employment (or if there is no
          such date of termination, then the date on which the Gross-Up Payment
          is calculated for purposes of this Section 8), net of the maximum
          reduction in federal income taxes which could be obtained from
          deduction of such state and local taxes. In the event that the Excise
          Tax is finally determined to be less than the amount taken into
          account hereunder in calculating the Gross-Up Payment, Officer shall
          repay to Employer, within five (5) business days following the time
          that the amount of such reduction in the Excise Tax is finally
          determined, the portion of the Gross-Up Payment attributable to such
          reduction (plus that portion of the Gross-Up Payment attributable to
          the Excise Tax and federal, state and local income and employment
          taxes imposed on the Gross-Up Payment being repaid by Officer), to
          the extent that such repayment results in a reduction in the Excise
          Tax and a dollar-for-dollar reduction in Officer's taxable income and
          wages for purposes of federal, state and local income and employment
          taxes, plus interest on the amount of such repayment at 120% of the
          rate provided in Section 1274(b)(2)(B) of the Code. In the event that
          the Excise Tax is determined to exceed the amount taken into account
          hereunder in calculating the Gross-Up Payment (including by reason of
          any payment the existence or amount of which cannot be determined at
          the time of the Gross-Up Payment), Employer shall make an additional
          Gross-Up Payment in respect of such excess (plus any interest,
          penalties or additions payable by Officer with respect to such excess)
          within five (5) business days following the time that the amount of
          such excess is finally determined. Officer and Employer shall each
          reasonably cooperate with the other in connection with any administra-
          tive or judicial proceedings concerning the existence or amount of
          liability for

                                       13
<PAGE>
 
          Excise Tax with respect to the Total Payments.

          18.  New Section 8(e) is amended (1) by deleting therefrom the phrase
"Notwithstanding Officer's entitlements as set forth in this Section 8(b)" and
inserting in lieu thereof the following:

          Notwithstanding Officer's entitlements as set forth in this Section 8
          or any other plan, arrangement or agreement with the Employer, any
          Person whose actions result in a Change in Control or any Person 
          affiliated with the Employer or such Person

(2) by deleting therefrom the following:

          , after giving effect to Employer's right of offset as provided for in
          Section 8(a) hereof and as modified by any operation of clause (v) of
          this Section 8(b),

and (3) by inserting at the end thereof the following:

          All calculations with respect to this Section 8(e) shall be performed
          by the Auditor in accordance with the principles set forth in Section
          8(d) hereof.

                                       14
<PAGE>
 
          19.  The 1989 Agreement is amended by adding the following as a new
Section 8(g):

               (g)  For purposes of this Agreement, Officer's employment shall
          be deemed to have been terminated following a Change in Control in
          accordance with Section 8(a) hereof if, during the pendency of a 
          Potential Change in Control (as defined below) or within six (6)
          months following the date on which such Potential Change in Control
          ceases to exist (such periods being hereinafter referred to
          collectively as the "Potential Change in Control Period"), in either
          case whether or not a Change in Control subsequently occurs, (i)
          Officer's employment is terminated by Employer without Cause or (ii)
          in the good-faith determination of Officer, Employer materially
          breaches this Agreement and thereafter (whether or not during the
          Potential Change in Control Period) fails to cure such breach within
          fifteen (15) days after receipt of notice thereof and within one (1)
          year after Officer first has knowledge of such breach Officer 
          terminates his employment.

          A "Potential Change in Control" shall be deemed to have occurred if
          the event set forth in any one of the following paragraphs shall have
          occurred:

               (A)  Employer enters into an agreement, the consummation of which
          would result in the occurrence of a Change in Control;

               (B)  Employer or any Person publicly announces an intention to
          take or to consider taking actions which, if consummated, would
          constitute a Change in Control;

               (C)  any Person becomes the beneficial owner, directly or
          indirectly, of securities of Employer (not including in

                                       15
<PAGE>
 
          the securities beneficially owned by such Person any securities
          acquired directly from Employer or its affiliates) representing 15%
          or more of either the then outstanding shares of common stock of
          Employer or the combined voting power of Employer's then outstanding
          securities;

               (D) the filing with the Federal Home Loan Bank Board and/or the
          FSLIC or their successor of an application for Change in Control; or

               (E)  the Board adopts a resolution to the effect that, for
          purposes of this Agreement, a Potential Change in Control has
          occurred.

          20.  The 1989 Agreement is amended by adding the following as a new
Section 8(h):

               (h)  Notwithstanding the provisions of Section 11(f) hereof,
          Employer shall pay to Officer all reasonable legal fees and expenses
          incurred by Officer in disputing (through litigation or arbitration)
          in good faith any issue hereunder relating to the termination (or
          deemed termination) of Officer's employment following a Change in
          Control or in connection with any tax audit or proceeding to the
          extent attributable to the application of section 4999 of the Code to
          any payment or benefit provided hereunder.  Such payments shall be
          made within five (5) business days after delivery of Officer's written
          requests for payment accompanied with such evidence of fees and
          expenses incurred as Employer may require.

          21.  Section 11(b) of the 1989 Agreement is amended by changing the
Employer's address for purposes of service of notice to:  9200 Oakdale Avenue,
Chatsworth, California  91311.

                                       16
<PAGE>
 
          Except as herein modified, the 1989 Agreement shall remain in full
force and effect.

          IN WITNESS WHEREOF, Employer and Officer have executed this Amendment
as of the date first set forth above.

                         GREAT WESTERN
                           FINANCIAL CORPORATION



                         /s/ John F. Maher
                         -----------------

APPROVED:


By:/s/ Willis B. Wood, Jr.
   -----------------------
   Chairman, Compensation
     Committee of the Board
     of Directors

                                       17

<PAGE>
 
                                                                    EXHIBIT 10.6

                                AMENDMENT NO. 1
                            TO EMPLOYMENT AGREEMENT


          This Amendment No. 1 is made to that certain Employment Agreement (the
"Agreement"), dated as of __________, 19__, between Great Western Financial
Corporation ("Employer") and Carl F. Geuther ("Officer").  Capitalized terms
used but not defined herein shall have the meanings ascribed to them in the
Agreement.

          WHEREAS, Employer has determined that it is in its best interest and
that of its stockholders to amend the Agreement as set forth herein;

          NOW THEREFORE, Employer and Officer agree that the Agreement shall be
amended as follows, effective as of December 10, 1996, unless otherwise
provided:

          1. The first sentence of the second paragraph of Section 4 of the
Agreement is amended (1) by deleting therefrom the phrase "Subject to any
limitations arising elsewhere in this Agreement," and (2) by deleting from
clause (i) the phrase "other than limitations arising under Section 8(c)
hereof".

          2. Section 6(c) of the Agreement is amended in its entirety to read as
follows:

             (c) for the remaining Term, health and welfare type Additional
     Benefits (including without limitation hospital, surgical, major medical,
     life and disability insurance), qualified pension benefits (or, if
     prohibited under then applicable tax law, a specially designed non-
     qualified supplemental pension to provide Officer with benefits equivalent
     to those to which he would have been entitled if such prohibition did not
     pertain) and non-qualified supplemental pension benefits to which Officer
     may be entitled pursuant to 
<PAGE>
 
     Section 4 hereof as the same shall exist immediately prior to such election
     (including continued accrual of years of service and age under (1)
     Employer's Retirement Plan as in effect immediately prior to such election
     (or, if prohibited under then applicable tax law, a specially designed non-
     qualified supplemental pension to provide Officer with benefits equivalent
     to those to which he would have been entitled if such prohibition did not
     pertain) and (2) the SERP, but excluding (3) Employer matching
     contributions under Employer's 401(k) plan or any successor plan thereto),
     each such benefit to be continued in a manner no less favorable to Officer
     than the benefit to which he was entitled immediately prior to such
     election; and

     3.   Section 6 of the Agreement is amended by deleting the unnumbered
paragraph immediately following Section 6(d) and inserting in lieu thereof the
following:

          Employer agrees that, if Officer's employment with Employer terminates
     during the Term, Officer is not required to seek other employment or to
     attempt in any way to reduce any amounts payable to Officer by Employer
     pursuant to Section 6, 7(a) or 8 hereof.  Further, the amount of any
     payment or benefit provided for in this Agreement shall not be reduced by
     any compensation earned by Officer as the result of employment by another
     employer, by retirement benefits, by offset against any amount claimed to
     be owed by Officer to Employer, or otherwise; provided, however, that
                                                   --------  -------      
     Employer's obligation to provide welfare-type Additional Benefits,
     including without limitation hospital, surgical, major medical, life and
     disability insurance, 

                                       2
<PAGE>
 
     shall be reduced to the extent similar benefits are provided (at no cost to
     Officer) by a subsequent employer.

     4.   The first sentence immediately following clause (iv) of Section 8(a)
of the Agreement is renumbered as a new Section 8(d), which Section 8(d) is
amended as set forth in paragraph 6 below, and the remainder of Section 8(a) of
the Agreement is amended in its entirety to read as follows:

          8.   Change in Control.
               ----------------- 

               (a) If there should occur a Change in Control (as defined below),
     and if thereafter during the Term, in the reasonable good faith
     determination of Officer, Employer materially breaches this Agreement and
     Employer fails to cure such breach within fifteen (15) days after receipt
     of notice thereof, then, Officer, without limitation on any other rights he
     may have hereunder, may, within one (1) year after he first has knowledge
     of such breach, elect to terminate his employment hereunder and to treat
     such termination as a termination pursuant to Section 6 hereof, subject,
     however, to the following additional benefits and modifications to
     Officer's rights as set forth in said Section 6 (any one or more of which
     modifications Officer may elect to waive):

               (i) Employer shall not be entitled to reduce Officer's salary or
     any Additional Benefits to which Officer shall thereafter be entitled.

               (ii)  Officer's pro-rata entitlement to an award under any then
     existing long-term incentive performance plan shall be calculated upon the
     assumption that the 

                                       3
<PAGE>
 
     performance under such plan is then "on plan."

               (iii) In lieu of the severance benefits described in Sections
     6(a) and (b) hereof, within five (5) business days of the effective date of
     such termination of employment, Company shall pay to Officer a cash lump
     sum in an amount equal to the product of (A) the sum of (1) Officer's
     annual base salary in effect immediately prior to the termination of
     Officer's employment (or prior to a reduction in salary giving rise to a
     breach of this Agreement), plus (2) the target bonus ("Target Bonus") under
     the Employer's Annual Incentive Plan for Executive Officers or any
     successor or replacement thereto (the "Annual Incentive Plan") in respect
     of the year in which such termination of employment occurs or the year in
     which the Change in Control occurs, whichever is greater (provided,
                                                               --------  
     however, that, if the termination of Officer's employment occurs under 
     -------                             
     the circumstances entitling him to benefits under Section 8(e) hereof, the
     Target Bonus shall be in respect of the year in which such termination of
     employment occurs), and (B) the number three.

               (iv) Within five (5) days following such termination of
     employment, Employer shall pay to Officer a lump sum cash amount (the "Pro-
     Rata Bonus") equal to the product of (A) the target bonus to which Officer
     would have been entitled under the Annual Incentive Plan in respect of the
     year in which such termination occurs (assuming for this purpose that
     performance under the Annual Incentive Plan is "on plan" for such year) and
     (B) a fraction,

                                       4
<PAGE>
 
     the numerator of which shall be the number of months (including
     fractions thereof) from the first day of the fiscal year during which such
     termination occurs to the date on which such termination occurs, and the
     denominator of which shall be twelve (12); provided, however, that if such
                                                --------  -------              
     termination of employment occurs during the same year in which the Change
     in Control occurs, the Pro-Rata Bonus shall be offset by any payments
     received under the Annual Incentive Plan in connection with such Change in
     Control.

          (v) The remaining Term shall be deemed to be three (3) years (but
     in no event shall the remaining Term be deemed to extend beyond Officer's
     sixty-fifth (65th) birthday).

     5.   Sections 8(b) and 8(c) of the Agreement are amended in their
entirety as follows:

          (b)  For purposes of this Agreement, a "Change in Control" shall be
     deemed to have occurred if the event set forth in any one of the following
     paragraphs shall have occurred:

          (i)  any Person (as defined below) is or becomes the Beneficial Owner
     (as defined in Rule 13d-3 under the Securities Exchange Act of 1934 (the
     "Exchange Act")), directly or indirectly, of securities of Employer (not
     including in the securities beneficially owned by such Person any
     securities acquired directly from Employer or its affiliates) representing
     25% or more of either the then outstanding shares of common stock of
     Employer or the combined voting power of Employer's then outstanding
     securities, excluding any 

                                       5
<PAGE>
 
     Person who becomes such a beneficial owner in connection with a transaction
     described in clause (A) of paragraph (iii) below; or

          (ii)  the following individuals cease for any reason to constitute a
     majority of the number of directors then serving: individuals who, on
     December 10, 1996, constitute the Board and any new director (other than a
     director whose initial assumption of office is in connection with an actual
     or threatened election contest, including but not limited to a consent
     solicitation, relating to the election of directors of Employer) whose
     appointment or election by the Board or nomination for election by
     Employer's stockholders was approved by a vote of at least two-thirds (2/3)
     of the directors then still in office who either were directors on December
     10, 1996, or whose appointment, election or nomination for election was
     previously so approved; or

           (iii)  there is consummated a merger or consolidation of Employer
     with any other corporation, other than (A) a merger or consolidation which
     would result in the voting securities of Employer outstanding immediately
     prior to such merger or consolidation continuing to represent (either by
     remaining outstanding or by being converted into voting securities of the
     surviving entity or any parent thereof) at least 60% of the combined voting
     power of the voting securities of Employer or such surviving entity or any
     parent thereof outstanding immediately after such merger or consolidation,
     or (B) a merger or consolidation effected to implement a recapitalization
     of Employer (or similar transaction) in which no Person is or becomes the
     beneficial owner, directly or indi-

                                       6
<PAGE>
 
     rectly, of securities of Employer (not including in the securities
     beneficially owned by such Person any securities acquired directly from
     Employer or its subsidiaries) representing 25% or more of either the then
     outstanding shares of common stock of Employer or the combined voting power
     of Employer's then outstanding securities; or

          (iv) the stockholders of Employer approve a plan of complete
     liquidation or dissolution of Employer or there is consummated an agreement
     for the sale or disposition by Employer of all or substantially all of
     Employer's assets.

     Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
     have occurred by virtue of the consummation of any transaction or series of
     integrated transactions immediately following which the record holders of
     the common stock of Employer immediately prior to such transaction or
     series of transactions continue to have substantially the same
     proportionate ownership in an entity which owns all or substantially all of
     the assets of Employer immediately following such transaction or series of
     transactions.

     For purposes of this Section 8(b), "Person" shall have the meaning given in
     Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d)
     and 14(d) thereof, except that such term shall not include (i) Employer or
     any of its subsidiaries, (ii) a trustee or other fiduciary holding
     securities under an employee benefit plan of Employer or any of its
     subsidiaries, (iii) an underwriter temporarily holding securities pursuant
     to an offering 

                                       7
<PAGE>
 
     of such securities, or (iv) a corporation owned, directly or indirectly, by
     the stockholders of Employer in substantially the same proportions as their
     ownership of stock of Employer.

          (c)  Whether or not Officer becomes entitled to severance and other
     benefits under Section 8(a) or 8(e) hereof, if any of the payments or
     benefits received or to be received by Officer in connection with a Change
     in Control or Officer's termination of employment (whether pursuant to the
     terms of this Agreement or any other plan, arrangement or agreement with
     Employer, any Person whose actions result in a Change in Control or any
     Person affiliated with Employer or such Person) (such payments or benefits,
     excluding the Gross-Up Payment, being hereinafter referred to as the "Total
     Payments") will be subject to the excise tax imposed under Section 4999 of
     the Code (the "Excise Tax"), Employer shall pay to Officer an additional
     amount (the "Gross-Up Payment") such that the net amount retained by
     Officer, after deduction of any Excise Tax on the Total Payments and any
     federal, state and local income and employment taxes and Excise Tax upon
     the Gross-Up Payment, shall be equal to the Total Payments. For purposes of
     determining whether any of the Total Payments will be subject to the Excise
     Tax and the amount of such Excise Tax, (A) all of the Total Payments shall
     be treated as "parachute payments" (within the meaning of Section
     280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax
     Counsel") reasonably acceptable to Officer and selected by the accounting
     firm which was, immediately prior to the Change in Control, Employer's
     independent auditor (the

                                       8
<PAGE>
 
     "Auditor"), such payments or benefits (in whole or in part) do not
     constitute parachute payments, including by reason of Section 280G(b)(4)(A)
     of the Code, (B) all "excess parachute payments" within the meaning of
     Section 280G(b)(l) of the Code shall be treated as subject to the Excise
     Tax unless, in the opinion of Tax Counsel, such excess parachute payments
     (in whole or in part) represent reasonable compensation for services
     actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code)
     in excess of the Base Amount allocable to such reasonable compensation, or
     are otherwise not subject to the Excise Tax, and (C) the value of any
     noncash benefits or any deferred payment or benefit shall be determined by
     the Auditor in accordance with the principles of Sections 280G(d)(3) and
     (4) of the Code. For purposes of determining the amount of the Gross-Up
     Payment, Officer shall be deemed to pay federal income tax at the highest
     marginal rate of federal income taxation in the calendar year in which the
     Gross-Up Payment is to be made and state and local income taxes at the
     highest marginal rate of taxation in the state and locality of Officer's
     residence on the date of termination of employment (or if there is no such
     date of termination, then the date on which the Gross-Up Payment is
     calculated for purposes of this Section 8), net of the maximum reduction in
     federal income taxes which could be obtained from deduction of such state
     and local taxes. In the event that the Excise Tax is finally determined to
     be less than the amount taken into account hereunder in calculating the
     Gross-Up Payment, Officer shall repay to Employer, within five (5) business
     days following

                                       9
<PAGE>
 
     the time that the amount of such reduction in the Excise Tax is finally
     determined, the portion of the Gross-Up Payment attributable to such
     reduction (plus that portion of the Gross-Up Payment attributable to the
     Excise Tax and federal, state and local income and employment taxes imposed
     on the Gross-Up Payment being repaid by Officer), to the extent that such
     repayment results in a reduction in the Excise Tax and a dollar-for-dollar
     reduction in Officer's taxable income and wages for purposes of federal,
     state and local income and employment taxes, plus interest on the amount of
     such repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the
     Code. In the event that the Excise Tax is determined to exceed the amount
     taken into account hereunder in calculating the Gross-Up Payment (including
     by reason of any payment the existence or amount of which cannot be
     determined at the time of the Gross-Up Payment), Employer shall make an
     additional Gross-Up Payment in respect of such excess (plus any interest,
     penalties or additions payable by Officer with respect to such excess)
     within five (5) business days following the time that the amount of such
     excess is finally determined. Officer and Employer shall each reasonably
     cooperate with the other in connection with any administrative or judicial
     proceedings concerning the existence or amount of liability for Excise Tax
     with respect to the Total Payments.

     6.   New Section 8(d) of the Agreement is amended (1) by deleting therefrom
the phrase "Notwithstanding Officer's entitlements as set forth in this
paragraph" and inserting in lieu thereof the following:

                                       10
<PAGE>
 
     Notwithstanding Officer's entitlements as set forth in this Section 8 or
     any other plan, arrangement or agreement with the Employer, any Person
     whose actions result in a Change in Control or any Person affiliated with
     the Employer or such Person

(2) by deleting therefrom the following:

     , after giving effect to Employer's right of offset as provided for in the
     next succeeding sentence,

and (3) by inserting at the end thereof the following:

     All calculations with respect to this Section 8(d) shall be performed by
     the Auditor in accordance with the principles set forth in Section 8(c)
     hereof.

     7.   The Agreement is amended by inserting the following as a new
Section 8(e):

          (e) For purposes of this Agreement, Officer's employment shall be
     deemed to have been terminated following a Change in Control in accordance
     with Section 8(a) hereof if, during the pendency of a Potential Change in
     Control (as defined below) or within six (6) months following the date on
     which such Potential Change in Control ceases to exist (such periods being
     hereinafter referred to collectively as the "Potential Change in Control
     Period"), in either case whether or not a Change in Control subsequently
     occurs, (i) Officer's employment is terminated by Employer without Cause or
     (ii) in the reasonable good faith determination of Officer, Employer
     materially breaches this Agreement and thereafter (whether or not during
     the Potential Change in Control

                                       11
<PAGE>
 
     Period) fails to cure such breach within fifteen (15) days after
     receipt of notice thereof and within one (1) year after Officer first has
     knowledge of such breach Officer terminates his employment.

     A "Potential Change in Control" shall be deemed to have occurred if the
     event set forth in any one of the following paragraphs shall have occurred:

          (A)  Employer enters into an agreement, the consummation of which
     would result in the occurrence of a Change in Control;

          (B)  Employer or any Person publicly announces an intention to take or
     to consider taking actions which, if consummated, would constitute a Change
     in Control;

          (C)  any Person becomes the beneficial owner, directly or indirectly,
     of securities of Employer (not including in the securities beneficially
     owned by such Person any securities acquired directly from Employer or its
     affiliates) representing 15% or more of either the then outstanding shares
     of common stock of Employer or the combined voting power of Employer's then
     outstanding securities;

          (D) the filing with the Federal Home Loan Bank Board and/or the FSLIC
     or their successor of an application for Change in Control; or

          (E)  the Board adopts a resolution to the effect that, for purposes of
     this Agreement, a Potential Change in Control has occurred.

                                       12
<PAGE>
 
          (f) Notwithstanding the provisions of Section 11(f) hereof,
     Employer also shall pay to Officer all reasonable legal fees and expenses
     incurred by Officer in disputing (through litigation or arbitration) in
     good faith any issue hereunder relating to the termination (or deemed
     termination) of Officer's employment following a Change in Control or in
     connection with any tax audit or proceeding to the extent attributable to
     the application of section 4999 of the Code to any payment or benefit
     provided hereunder.  Such payments shall be made within five (5) business
     days after delivery of Officer's written requests for payment accompanied
     with such evidence of fees and expenses incurred as Employer reasonably may
     require.

     8.   Section 11(b) of the Agreement is amended by changing the Employer's
address for purposes of service of notice to:  9200 Oakdale Avenue, Chatsworth,
California  91311.

          The effective date of this Amendment No. 1 shall be December 10, 1996.
Except as herein modified, the Agreement shall remain in full force and effect.

                                       13
<PAGE>
 
          IN WITNESS WHEREOF, Employer and Officer have executed this Amendment
as of the date first set forth above.

                                 GREAT WESTERN
                                   FINANCIAL CORPORATION



                                 /s/ Carl F. Geuther
                                 -------------------
APPROVED:


By:/s/ Willis B. Wood, Jr.
   -----------------------
   Chairman, Compensation
     Committee of the Board
     of Directors

                                       14

<PAGE>
 
                                                                    EXHIBIT 10.8

                                 AMENDMENT NO. 1
                             TO EMPLOYMENT AGREEMENT


                  This Amendment No. 1 is made to that certain Employment
Agreement (the "Agreement"), dated as of __________, 19__, between Great Western
Financial Corporation ("Employer") and Michael M. Pappas ("Officer").
Capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Agreement.

                  WHEREAS, Employer has determined that it is in its best
interest and that of its stockholders to amend the Agreement as set forth
herein;

                  NOW THEREFORE, Employer and Officer agree that the Agreement
shall be amended as follows, effective as of December 10, 1996, unless otherwise
provided:

                  1.   The first sentence of the second paragraph of Section 4
of the Agreement is amended (1) by deleting therefrom the phrase "Subject to any
limitations arising elsewhere in this Agreement," and (2) by deleting from
clause (i) the phrase "other than limitations arising under Section 8(c)
hereof".

                  2.   Section 6(c) of the Agreement is amended in its entirety
to read as follows:

                       (c)  for the remaining Term, health and welfare type
                  Additional Benefits (including without limitation hospital,
                  surgical, major medical, life and disability insurance),
                  qualified pension benefits (or, if prohibited under then
                  applicable tax law, a specially designed non-qualified
                  supplemental pension to provide Officer with benefits
                  equivalent to those to which he would have been entitled if
                  such prohibition did not pertain) and non-qualified
                  supplemental pension benefits to which Officer may be entitled
                  pursuant to
<PAGE>
 
                  Section 4 hereof as the same shall exist immediately prior to
                  such election (including continued accrual of years of service
                  and age under (1) Employer's Retirement Plan as in effect
                  immediately prior to such election (or, if prohibited under
                  then applicable tax law, a specially designed non-qualified
                  supplemental pension to provide Officer with benefits
                  equivalent to those to which he would have been entitled if
                  such prohibition did not pertain) and (2) the SERP, but
                  excluding (3) Employer matching contributions under Employer's
                  401(k) plan or any successor plan thereto), each such benefit
                  to be continued in a manner no less favorable to Officer than
                  the benefit to which he was entitled immediately prior to such
                  election; and

                  3.   Section 6 of the Agreement is amended by deleting the
unnumbered paragraph immediately following Section 6(d) and inserting in lieu
thereof the following:

                       Employer agrees that, if Officer's employment with
                  Employer terminates during the Term, Officer is not required
                  to seek other employment or to attempt in any way to reduce
                  any amounts payable to Officer by Employer pursuant to Section
                  6, 7(a) or 8 hereof. Further, the amount of any payment or
                  benefit provided for in this Agreement shall not be reduced by
                  any compensation earned by Officer as the result of employment
                  by another employer, by retirement benefits, by offset against
                  any amount claimed to be owed by Officer to Employer, or
                  otherwise; provided, however, that Employer's obligation to
                             --------  -------
                  provide welfare-type Additional Benefits, including without
                  limitation hospital, surgical, major medical, life and
                  disability insur-

                                       2
<PAGE>
 
                  ance, shall be reduced to the extent similar benefits are
                  provided (at no cost to Officer) by a subsequent employer.

                  4.   The first sentence immediately following clause (iv) of
Section 8(a) of the Agreement is renumbered as a new Section 8(d), which Section
8(d) is amended as set forth in paragraph 6 below, and the remainder of Section
8(a) of the Agreement is amended in its entirety to read as follows:

                  8.   Change in Control.
                       -----------------

                       (a)  If there should occur a Change in Control (as
                  defined below), and if thereafter during the Term, in the 
                  good-faith determination of Officer, Employer materially
                  breaches this Agreement and Employer fails to cure such breach
                  within fifteen (15) days after receipt of notice thereof,
                  then, Officer, without limitation on any other rights he may
                  have hereunder, may, within one (1) year after he first has
                  knowledge of such breach, elect to terminate his employment
                  hereunder and to treat such termination as a termination
                  pursuant to Section 6 hereof, subject, however, to the
                  following additional benefits and modifications to Officer's
                  rights as set forth in said Section 6 (any one or more of
                  which modifications Officer may elect to waive):

                       (i)  Employer shall not be entitled to reduce Officer's
                  salary or any Additional Benefits to which Officer shall
                  thereafter be entitled.

                       (ii) Officer's pro-rata entitlement to an award under any
                  then existing long-term incentive performance plan shall be
                  calculated upon the assumption that the

                                       3
<PAGE>
 
                  performance under such plan is then "on plan."

                       (iii) In lieu of the severance benefits described in
                  Sections 6(a) and (b) hereof, within five (5) business days of
                  the effective date of such termination of employment, Company
                  shall pay to Officer a cash lump sum in an amount equal to the
                  product of (A) the sum of (1) Officer's annual base salary in
                  effect immediately prior to the termination of Officer's
                  employment (or prior to a reduction in salary giving rise to a
                  breach of this Agreement), plus (2) the target bonus ("Target
                  Bonus") under the Employer's Annual Incentive Plan for
                  Executive Officers or any successor or replacement plan
                  thereto (the "Annual Incentive Plan") in respect of the year
                  in which such termination of employment occurs or the year in
                  which the Change in Control occurs, whichever is greater
                  (provided, however, that, if the termination of Officer's
                   --------  -------
                  employment occurs under the circumstances entitling him to
                  benefits under Section 8(e) hereof, the Target Bonus shall be
                  in respect of the year in which such termination of employment
                  occurs), and (B) the number three.

                       (iv)  Within five (5) days following such termination of
                  employment, Employer shall pay to Officer a lump sum cash
                  amount (the "Pro-Rata Bonus") equal to the product of (A) the
                  target bonus to which Officer would have been entitled under
                  the Annual Incentive Plan in respect of the year in which such
                  termination occurs (assuming for this purpose that performance
                  under the Annual Incentive Plan is "on plan" for such year)
                  and (B) a fraction, the numerator of which shall be the number

                                       4
<PAGE>
 
                  of months (including fractions thereof) from the first day of
                  the fiscal year during which such termination occurs to the
                  date on which such termination occurs, and the denominator of
                  which shall be twelve (12); provided, however, that if such
                                              --------  -------
                  termination of employment occurs during the same year in which
                  the Change in Control occurs, the Pro-Rata Bonus shall be
                  offset by any payments received under the Annual Incentive
                  Plan in connection with such Change in Control.

                       (v)  The remaining Term shall be deemed to be three (3)
                  years (but in no event shall the remaining Term be deemed to
                  extend beyond Officer's sixty-fifth (65th) birthday).

                  5.   Sections 8(b) and 8(c) of the Agreement are amended in
their entirety as follows:

                       (b)  For purposes of this Agreement, a "Change in
                  Control" shall be deemed to have occurred if the event set
                  forth in any one of the following paragraphs shall have
                  occurred:

                       (i)  any Person (as defined below) is or becomes the
                  Beneficial Owner (as defined in Rule 13d-3 under the
                  Securities Exchange Act of 1934 (the "Exchange Act")),
                  directly or indirectly, of securities of Employer (not
                  including in the securities beneficially owned by such Person
                  any securities acquired directly from Employer or its
                  affiliates) representing 25% or more of either the then
                  outstanding shares of common stock of Employer or the combined
                  voting power of Employer's then outstanding securities,
                  excluding any Person who becomes such a beneficial owner

                                       5
<PAGE>
 
                  in connection with a transaction described in clause (A) of
                  paragraph (iii) below; or

                       (ii)  the following individuals cease for any reason to
                  constitute a majority of the number of directors then serving:
                  individuals who, on December 10, 1996, constitute the Board
                  and any new director (other than a director whose initial
                  assumption of office is in connection with an actual or
                  threatened election contest, including but not limited to a
                  consent solicitation, relating to the election of directors of
                  Employer) whose appointment or election by the Board or
                  nomination for election by Employer's stockholders was
                  approved by a vote of at least two-thirds (2/3) of the
                  directors then still in office who either were directors on
                  December 10, 1996, or whose appointment, election or
                  nomination for election was previously so approved; or

                       (iii) there is consummated a merger or consolidation of
                  Employer with any other corporation, other than (A) a merger
                  or consolidation which would result in the voting securities
                  of Employer outstanding immediately prior to such merger or
                  consolidation continuing to represent (either by remaining
                  outstanding or by being converted into voting securities of
                  the surviving entity or any parent thereof) at least 60% of
                  the combined voting power of the voting securities of Employer
                  or such surviving entity or any parent thereof outstanding
                  immediately after such merger or consolidation, or (B) a
                  merger or consolidation effected to implement a
                  recapitalization of Employer (or similar transaction) in which
                  no Person is or becomes the beneficial owner, directly or
                  indirectly, of securities of Employer (not in-

                                       6
<PAGE>
 
                  cluding in the securities beneficially owned by such Person
                  any securities acquired directly from Employer or its
                  subsidiaries) representing 25% or more of either the then
                  outstanding shares of common stock of Employer or the combined
                  voting power of Employer's then outstanding securities; or

                       (iv) the stockholders of Employer approve a plan of
                  complete liquidation or dissolution of Employer or there is
                  consummated an agreement for the sale or disposition by
                  Employer of all or substantially all of Employer's assets.

                  Notwithstanding the foregoing, a "Change in Control" shall not
                  be deemed to have occurred by virtue of the consummation of
                  any transaction or series of integrated transactions
                  immediately following which the record holders of the common
                  stock of Employer immediately prior to such transaction or
                  series of transactions continue to have substantially the same
                  proportionate ownership in an entity which owns all or
                  substantially all of the assets of Employer immediately
                  following such transaction or series of transactions.

                  For purposes of this Section 8(b), "Person" shall have the
                  meaning given in Section 3(a)(9) of the Exchange Act, as
                  modified and used in Sections 13(d) and 14(d) thereof, except
                  that such term shall not include (i) Employer or any of its
                  subsidiaries, (ii) a trustee or other fiduciary holding
                  securities under an employee benefit plan of Employer or any
                  of its subsidiaries, (iii) an underwriter temporarily holding
                  securities pursuant to an offering of such securities, or (iv)
                  a corporation

                                       7
<PAGE>
 
                  owned, directly or indirectly, by the stockholders of Employer
                  in substantially the same proportions as their ownership of
                  stock of Employer.

                       (c)  Whether or not Officer becomes entitled to severance
                  and other benefits under Section 8(a) or 8(e) hereof, if any
                  of the payments or benefits received or to be received by
                  Officer in connection with a Change in Control or Officer's
                  termination of employment (whether pursuant to the terms of
                  this Agreement or any other plan, arrangement or agreement
                  with Employer, any Person whose actions result in a Change in
                  Control or any Person affiliated with Employer or such Person)
                  (such payments or benefits, excluding the Gross-Up Payment,
                  being hereinafter referred to as the "Total Payments") will be
                  subject to the excise tax imposed under Section 4999 of the
                  Code (the "Excise Tax"), Employer shall pay to Officer an
                  additional amount (the "Gross-Up Payment") such that the net
                  amount retained by Officer, after deduction of any Excise Tax
                  on the Total Payments and any federal, state and local income
                  and employment taxes and Excise Tax upon the Gross-Up Payment,
                  shall be equal to the Total Payments. For purposes of
                  determining whether any of the Total Payments will be subject
                  to the Excise Tax and the amount of such Excise Tax, (A) all
                  of the Total Payments shall be treated as "parachute payments"
                  (within the meaning of Section 280G(b)(2) of the Code) unless,
                  in the opinion of tax counsel ("Tax Counsel") reasonably
                  acceptable to Officer and selected by the accounting firm
                  which was, immediately prior to the Change in Control,
                  Employer's independent auditor (the "Auditor"), such payments
                  or benefits (in

                                       8
<PAGE>
 
                  whole or in part) do not constitute parachute payments,
                  including by reason of Section 280G(b)(4)(A) of the Code, (B)
                  all "excess parachute payments" within the meaning of Section
                  280G(b)(l) of the Code shall be treated as subject to the
                  Excise Tax unless, in the opinion of Tax Counsel, such excess
                  parachute payments (in whole or in part) represent reasonable
                  compensation for services actually rendered (within the
                  meaning of Section 280G(b)(4)(B) of the Code) in excess of the
                  Base Amount allocable to such reasonable compensation, or are
                  otherwise not subject to the Excise Tax, and (C) the value of
                  any noncash benefits or any deferred payment or benefit shall
                  be determined by the Auditor in accordance with the principles
                  of Sections 280G(d)(3) and (4) of the Code. For purposes of
                  determining the amount of the Gross-Up Payment, Officer shall
                  be deemed to pay federal income tax at the highest marginal
                  rate of federal income taxation in the calendar year in which
                  the Gross-Up Payment is to be made and state and local income
                  taxes at the highest marginal rate of taxation in the state
                  and locality of Officer's residence on the date of termination
                  of employment (or if there is no such date of termination,
                  then the date on which the Gross-Up Payment is calculated for
                  purposes of this Section 8), net of the maximum reduction in
                  federal income taxes which could be obtained from deduction of
                  such state and local taxes. In the event that the Excise Tax
                  is finally determined to be less than the amount taken into
                  account hereunder in calculating the Gross-Up Payment, Officer
                  shall repay to Employer, within five (5) business days
                  following the time that the amount of such reduction

                                       9
<PAGE>
 
                  in the Excise Tax is finally determined, the portion of the
                  Gross-Up Payment attributable to such reduction (plus that
                  portion of the Gross-Up Payment attributable to the Excise Tax
                  and federal, state and local income and employment taxes
                  imposed on the Gross-Up Payment being repaid by Officer), to
                  the extent that such repayment results in a reduction in the
                  Excise Tax and a dollar-for-dollar reduction in Officer's
                  taxable income and wages for purposes of federal, state and
                  local income and employment taxes, plus interest on the amount
                  of such repayment at 120% of the rate provided in Section
                  1274(b)(2)(B) of the Code. In the event that the Excise Tax is
                  determined to exceed the amount taken into account hereunder
                  in calculating the Gross-Up Payment (including by reason of
                  any payment the existence or amount of which cannot be
                  determined at the time of the Gross-Up Payment), Employer
                  shall make an additional Gross-Up Payment in respect of such
                  excess (plus any interest, penalties or additions payable by
                  Officer with respect to such excess) within five (5) business
                  days following the time that the amount of such excess is
                  finally determined. Officer and Employer shall each reasonably
                  cooperate with the other in connection with any administrative
                  or judicial proceedings concerning the existence or amount of
                  liability for Excise Tax with respect to the Total Payments.

                  6.   New Section 8(d) of the Agreement is amended (1) by
deleting therefrom the phrase "Notwithstanding Officer's entitlements as set
forth in this paragraph" and inserting in lieu thereof the following:

                                       10
<PAGE>
 
                  Notwithstanding Officer's entitlements as set forth in this
                  Section 8 or any other plan, arrangement or agreement with the
                  Employer, any Person whose actions result in a Change in
                  Control or any Person affiliated with the Employer or such
                  Person

(2) by deleting therefrom the following:

                  , after giving effect to Employer's right of offset as
                  provided for in the next succeeding sentence,

and (3) by inserting at the end thereof the following:

                  All calculations with respect to this Section 8(d) shall be
                  performed by the Auditor in accordance with the principles set
                  forth in Section 8(c) hereof.

                  7.   The Agreement is amended by inserting the following as a
new Section 8(e):

                       (e)  For purposes of this Agreement, Officer's employment
                  shall be deemed to have been terminated following a Change in
                  Control in accordance with Section 8(a) hereof if, during the
                  pendency of a Potential Change in Control (as defined below)
                  or within six (6) months following the date on which such
                  Potential Change in Control ceases to exist (such periods
                  being hereinafter referred to collectively as the "Potential
                  Change in Control Period"), in either case whether or not a
                  Change in Control subsequently occurs, (i) Officer's
                  employment is terminated by Employer without Cause or (ii) in
                  the good-faith determination of Officer, Employer materially
                  breaches this Agreement and thereafter (whether or not during
                  the Potential Change in Control Period) fails

                                       11
<PAGE>
 
                  to cure such breach within fifteen (15) days after receipt of
                  notice thereof and within one (1) year after Officer first has
                  knowledge of such breach Officer terminates his employment.

                  A "Potential Change in Control" shall be deemed to have
                  occurred if the event set forth in any one of the following
                  paragraphs shall have occurred:

                       (A)  Employer enters into an agreement, the consummation
                  of which would result in the occurrence of a Change in
                  Control;

                       (B)  Employer or any Person publicly announces an
                  intention to take or to consider taking actions which, if
                  consummated, would constitute a Change in Control;

                       (C)  any Person becomes the beneficial owner, directly or
                  indirectly, of securities of Employer (not including in the
                  securities beneficially owned by such Person any securities
                  acquired directly from Employer or its affiliates)
                  representing 15% or more of either the then outstanding shares
                  of common stock of Employer or the combined voting power of
                  Employer's then outstanding securities;

                       (D)  the filing with the Federal Home Loan Bank Board
                  and/or the FSLIC or their successor of an application for
                  Change in Control; or

                       (E)  the Board adopts a resolution to the effect that,
                  for purposes of this Agreement, a Potential Change in Control
                  has occurred.

                                       12
<PAGE>
 
                       (f)  Notwithstanding the provisions of Section 11(f)
                  hereof, Employer also shall pay to Officer all reasonable
                  legal fees and expenses incurred by Officer in disputing
                  (through litigation or arbitration) in good faith any issue
                  hereunder relating to the termination (or deemed termination)
                  of Officer's employment following a Change in Control or in
                  connection with any tax audit or proceeding to the extent
                  attributable to the application of section 4999 of the Code to
                  any payment or benefit provided hereunder. Such payments shall
                  be made within five (5) business days after delivery of
                  Officer's written requests for payment accompanied with such
                  evidence of fees and expenses incurred as Employer reasonably
                  may require.

                  8.   Section 11(b) of the Agreement is amended by changing the
Employer's address for purposes of service of notice to: 9200 Oakdale Avenue,
Chatsworth, California 91311.

                  The effective date of this Amendment No. 1 shall be December
10, 1996. Except as herein modified, the Agreement shall remain in full force
and effect.

                                       13
<PAGE>
 
                  IN WITNESS WHEREOF, Employer and Officer have executed this
Amendment as of the date first set forth above.

                                            GREAT WESTERN
                                              FINANCIAL CORPORATION



                                            /s/ Michael M. Pappas
                                            -----------------------
APPROVED:


By:/s/ Willis B. Wood, Jr.
   ------------------------
   Chairman, Compensation
     Committee of the Board
     of Directors

                                       14

<PAGE>
 
                                AMENDMENT NO. 1
                            TO EMPLOYMENT AGREEMENT


          This Amendment No. 1 is made to that certain Employment Agreement (the
"Agreement"), dated as of July 31, 1995, between Great Western Financial
Corporation ("Employer") and A. William Schenck III ("Officer").  Capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Agreement.

          WHEREAS, Employer has determined that it is in its best interest and
that of its stockholders to amend the Agreement as set forth herein;

          NOW THEREFORE, Employer and Officer agree that the Agreement shall be
amended as follows, effective as of December 10, 1996, unless otherwise
provided:

          1.   Section 6(c) of the Agreement is amended in its entirety to read
as follows:

               (c) for the remaining Term, health and welfare type Additional
          Benefits (including without limitation hospital, surgical, major
          medical, life and disability insurance), qualified pension benefits
          (or, if prohibited under then applicable tax law, a specially designed
          non-qualified supplemental pension to provide Officer with benefits
          equivalent to those to which he would have been entitled if such
          prohibition did not pertain) and non-qualified supplemental pension
          benefits to which Officer may be entitled pursuant to Section 4 hereof
          as the same shall exist immediately prior to such election (including
          continued accrual of years of service and age under (1) Employer's
          Retirement Plan as in effect immediately prior to such election (or,
          if prohibited under then applicable tax law, a specially designed non-
          qualified supplemental pen-
<PAGE>
 
          sion to provide Officer with benefits equivalent to those to which he
          would have been entitled if such prohibition did not pertain) and (2)
          the SERP, but excluding (3) Employer matching contributions under
          Employer's 401(k) plan or any successor plan thereto), each such
          benefit to be continued in a manner no less favorable to Officer than
          the benefit to which he was entitled immediately prior to such
          election; and

          2.   Section 6 of the Agreement is amended by deleting the unnumbered
paragraph immediately following Section 6(d) and inserting in lieu thereof the
following:

               Employer agrees that, if Officer's employment with Employer
          terminates during the Term, Officer is not required to seek other
          employment or to attempt in any way to reduce any amounts payable to
          Officer by Employer pursuant to Section 6, 7(a) or 8 hereof.  Further,
          the amount of any payment or benefit provided for in this Agreement
          shall not be reduced by any compensation earned by Officer as the
          result of employment by another employer, by retirement benefits, by
          offset against any amount claimed to be owed by Officer to Employer,
          or otherwise; provided, however, that Employer's obligation to provide
                        --------  -------                                       
          welfare-type Additional Benefits, including without limitation
          hospital, surgical, major medical, life and disability insurance,
          shall be reduced to the extent similar benefits are provided (at no
          cost to Officer) by a subsequent employer.

          3.   The first sentence immediately following clause (iv) of Section
8(a) of the Agreement is renumbered as a new Section 8(d), which Section 8(d)
is amended as set forth in paragraph 6 below, and the remainder 

                                       2
<PAGE>
 
of Section 8(a) of the Agreement is amended in its entirety to read as follows:

          8.   Change in Control.
               ----------------- 

               (a)  If there should occur a Change in Control (as defined
                    below), and if thereafter during the Term,

                                       3
<PAGE>
 
          Employer materially breaches this Agreement and Employer fails to
          cure such breach within fifteen (15) days after receipt of notice
          thereof, then, Officer, without limitation on any other rights he may
          have hereunder, may, within one (1) year after he first has knowledge
          of such breach, elect to terminate his employment hereunder and to
          treat such termination as a termination pursuant to Section 6 hereof,
          subject, however, to the following additional benefits and
          modifications to Officer's rights as set forth in said Section 6 (any
          one or more of which modifications Officer may elect to waive):

               (i) Employer shall not be entitled to reduce Officer's salary or
          any Additional Benefits to which Officer shall thereafter be
          entitled.

               (ii)  Officer's pro-rata entitlement to an award under any then
          existing long-term incentive performance plan shall be calculated upon
          the assumption that the performance under such plan is then "on plan."

               (iii)  In lieu of the severance benefits described in Sections
          6(a) and (b) hereof, within five (5) business days of the effective
          date of such termination of employment, Company shall pay to Officer a
          cash lump sum in an amount equal to the product of (A) the sum of (1)
          Officer's annual base salary in effect immediately prior to the
          termination of Officer's employment (or prior to a reduction in salary
          giving rise to a breach of this Agreement), plus (2) the target bonus
          ("Target Bonus") under the Employer's Annual Incentive Plan for
          Executive Officers

                                       4
<PAGE>
 
          (the "Annual Incentive Plan") in respect of the year in which such
          termination of employment occurs or the year in which the Change in
          Control occurs, whichever is greater (provided, however, that if the
                                                --------  -------             

                                       5
<PAGE>
 
          termination of Officer's employment occurs under the circumstances
          entitling him to benefits under Section 8(e) hereof, the Target Bonus
          shall be in respect of the year in which such termination of 
          employment occurs), and (B) the number three.

               (iv) Within five (5) days following such termination of
          employment, Employer shall pay to Officer a lump sum cash amount (the
          "Pro-Rata Bonus") equal to the product of (A) the target bonus to
          which Officer would have been entitled under the Annual Incentive Plan
          in respect of the year in which such termination occurs (assuming for
          this purpose that performance under the Annual Incentive Plan is "on
          plan" for such year) and (B) a fraction, the numerator of which shall
          be the number of months (including fractions thereof) from the first
          day of the fiscal year during which such termination occurs to the
          date on which such termination occurs, and the denominator of which
          shall be twelve (12); provided, however, that if such termination of
                                --------  -------                             
          employment occurs during the same year in which the Change in Control
          occurs, the Pro-Rata Bonus shall be offset by any payments received
          under the Annual Incentive Plan in connection with such Change in
          Control.

               (v)  The remaining Term shall be deemed to be three (3) years
          (but in no event shall the remaining Term be deemed to extend beyond
          Officer's sixty-fifth (65th) birthday).

                                       6
<PAGE>
 
          4.   Sections 8(b) and 8(c) of the Agreement are amended in their
entirety as follows:

               (b)  For purposes of this Agreement, a "Change in Control" shall
          be deemed to have occurred if the event set forth in any one of the
          following paragraphs shall have occurred:

               (i)  any Person (as defined below) is or becomes the Beneficial
          Owner (as defined in Rule 13d-3 under the Securities Exchange Act of
          1934 (the "Exchange Act")), directly or indirectly, of securities of
          Employer (not including in the securities beneficially owned by such
          Person any securities acquired directly from Employer or its
          affiliates) representing 25% or more of either the then outstanding
          shares of common stock of Employer or the combined voting power of
          Employer's then outstanding securities, excluding any Person who
          becomes such a beneficial owner in connection with a transaction
          described in clause (A) of paragraph (iii) below; or
               (ii)  the following individuals cease for any reason to
          constitute a majority of the number of directors then serving:
          individuals who, on December 10, 1996, constitute the Board and any
          new director (other than a director whose initial assumption of
          office is in connection with an actual or threatened election contest,
          including but not limited to a consent solicitation, relating to the
          election of directors of Employer) whose appointment or election by
          the Board or nomination for election by Employer's stockholders was
          approved by a vote of at least two-thirds (2/3) of the directors then
          still in office who either were directors on December 

                                       7
<PAGE>
 
          10, 1996, or whose appointment, election or nomination for election
          was previously so approved; or

                (iii)  there is consummated a merger or consolidation of
          Employer with any other corporation, other than (A) a merger or
          consolidation which would result in the voting securities of Employer
          outstanding immediately prior to such merger or consolidation
          continuing to represent (either by remaining outstanding or by being
          converted into voting securities of the surviving entity or any parent
          thereof) at least 60% of the combined voting power of the voting
          securities of Employer or such surviving entity or any parent thereof
          outstanding immediately after such merger or consolidation, or (B) a
          merger or consolidation effected to implement a recapitalization of
          Employer (or similar transaction) in which no Person is or becomes
          the beneficial owner, directly or indirectly, of securities of
          Employer (not including in the securities beneficially owned by such
          Person any securities acquired directly from Employer or its 
          subsidiaries) representing 25% or more of either the then outstanding
          shares of common stock of Employer or the combined voting power of
          Employer's then outstanding securities; or

               (iv) the stockholders of Employer approve a plan of complete
          liquidation or dissolution of Employer or there is consummated an
          agreement for the sale or disposition by Employer of all or 
          substantially all of Employer's assets.

          Notwithstanding the foregoing, a "Change in Control" shall not be
          deemed to have

                                       8
<PAGE>
 
          occurred by virtue of the consummation of any transaction or series of
          integrated transactions immediately following which the record holders
          of the common stock of Employer immediately prior to such transaction
          or series of transactions continue to have substantially the same
          proportionate ownership in an entity which owns all or substantially
          all of the assets of Employer immediately following such transaction
          or series of transactions.

          For purposes of this Section 8(b), "Person" shall have the meaning
          given in Section 3(a)(9) of the Exchange Act, as modified and used
          in Sections 13(d) and 14(d) thereof, except that such term shall not
          include (i) Employer or any of its subsidiaries, (ii) a trustee or
          other fiduciary holding securities under an employee benefit plan of
          Employer or any of its subsidiaries, (iii) an underwriter temporarily
          holding securities pursuant to an offering of such securities, or (iv)
          a corporation owned, directly or indirectly, by the stockholders of
          Employer in substantially the same proportions as their ownership of
          stock of Employer.

               (c)  Whether or not Officer becomes entitled to severance and
          other benefits under Section 8(a) or 8(e) hereof, if any of the
          payments or benefits received or to be received by Officer in
          connection with a Change in Control or Officer's termination of
          employment (whether pursuant to the terms of this Agreement or any
          other plan, arrangement or agreement with Employer, any Person whose
          actions result in a Change in Control or any Person affiliated with
          Employer or such Person) (such payments or benefits, excluding the
          Gross-

                                       9
<PAGE>
 
          Up Payment, being hereinafter referred to as the "Total Payments")
          will be subject to the excise tax imposed under Section 4999 of the
          Code (the "Excise Tax"), Employer shall pay to Officer an additional
          amount (the "Gross-Up Payment") such that the net amount retained by
          Officer, after deduction of any Excise Tax on the Total Payments and
          any federal, state and local income and employment taxes and Excise
          Tax upon the Gross-Up Payment, shall be equal to the Total Payments.
          For purposes of determining whether any of the Total Payments will be
          subject to the Excise Tax and the amount of such Excise Tax, (A) all
          of the Total Payments shall be treated as "parachute payments" (within
          the meaning of Section 280G(b)(2) of the Code) unless, in the opinion
          of tax counsel ("Tax Counsel") reasonably acceptable to Officer and
          selected by the accounting firm which was, immediately prior to the
          Change in Control, Employer's independent auditor (the "Auditor"),
          such payments or benefits (in whole or in part) do not constitute
          parachute payments, including by reason of Section 280G(b)(4)(A) of
          the Code, (B) all "excess parachute payments" within the meaning of
          Section 280G(b)(l) of the Code shall be treated as subject to the
          Excise Tax unless, in the opinion of Tax Counsel, such excess
          parachute payments (in whole or in part) represent reasonable 
          compensation for services actually rendered (within the meaning of
          Section 280G(b)(4)(B) of the Code) in excess of the Base Amount
          allocable to such reasonable compensation, or are otherwise not
          subject to the Excise Tax, and (C) the value of any noncash benefits
          or any deferred payment or benefit shall be determined by the
          Auditor in accordance with

                                       10
<PAGE>
 
          the principles of Sections 280G(d)(3) and (4) of the Code. For
          purposes of determining the amount of the Gross-Up Payment, Officer
          shall be deemed to pay federal income tax at the highest marginal rate
          of federal income taxation in the calendar year in which the Gross-Up
          Payment is to be made and state and local income taxes at the highest
          marginal rate of taxation in the state and locality of Officer's
          residence on the date of termination of employment (or if there is no
          such date of termination, then the date on which the Gross-Up Payment
          is calculated for purposes of this Section 8), net of the maximum
          reduction in federal income taxes which could be obtained from
          deduction of such state and local taxes. In the event that the Excise
          Tax is finally determined to be less than the amount taken into
          account hereunder in calculating the Gross-Up Payment, Officer shall
          repay to Employer, within five (5) business days following the time
          that the amount of such reduction in the Excise Tax is finally
          determined, the portion of the Gross-Up Payment attributable to such
          reduction (plus that portion of the Gross-Up Payment attributable to
          the Excise Tax and federal, state and local income and employment
          taxes imposed on the Gross-Up Payment being repaid by Officer), to
          the extent that such repayment results in a reduction in the Excise
          Tax and a dollar-for-dollar reduction in Officer's taxable income and
          wages for purposes of federal, state and local income and employment
          taxes, plus interest on the amount of such repayment at 120% of the
          rate provided in Section 1274(b)(2)(B) of the Code. In the event that
          the Excise Tax is determined to exceed the amount taken into account
          hereunder in calculat-  

                                       11
<PAGE>
 
          ing the Gross-Up Payment (including by reason of any payment the
          existence or amount of which cannot be determined at the time of the
          Gross-Up Payment), Employer shall make an additional Gross-Up Payment
          in respect of such excess (plus any interest, penalties or additions
          payable by Officer with respect to such excess) within five (5)
          business days following the time that the amount of such excess is
          finally determined. Officer and Employer shall each reasonably
          cooperate with the other in connection with any administrative or
          judicial proceedings concerning the existence or amount of liability
          for Excise Tax with respect to the Total Payments.

          5.   New Section 8(d) of the Agreement is amended (1) by deleting
therefrom the phrase "Notwithstanding Officer's entitlements as set forth in
this paragraph" and inserting in lieu thereof the following:

          Notwithstanding Officer's entitlements as set forth in this Section 8
          or any other plan, arrangement or agreement with the Employer, any
          Person whose actions result in a Change in Control or any Person 
          affiliated with the Employer or such Person

(2) by deleting therefrom the following:

          , after giving effect to Employer's right of offset as provided for in
          the next succeeding sentence,

and (3) by inserting at the end thereof the following:

          All calculations with respect to this Section 8(d) shall be performed
          by the Auditor in accordance with the principles set forth in Section
          8(c) hereof.

                                       12
<PAGE>
 
          6.   The Agreement is amended by inserting the following as a new
Section 8(e):

               (e)  For purposes of this Agreement, Officer's employment shall
          be deemed to have been terminated following a Change in Control in
          accordance with Section 8(a) hereof if, during the pendency of a 
          Potential Change in Control (as defined below) or within six (6)
          months following the date on which such Potential Change in Control
          ceases to exist (such periods being hereinafter referred to
          collectively as the "Potential Change in Control Period"), in either
          case whether or not a Change in Control subsequently occurs, (i)
          Officer's employment is terminated by Employer without Cause or (ii)
          Employer materially breaches this Agreement and thereafter (whether or
          not during the Potential Change in Control Period) fails to cure such
          breach within fifteen (15) days after receipt of notice thereof and
          within one (1) year after Officer first has knowledge of such breach
          Officer terminates his employment.

          A "Potential Change in Control" shall be deemed to have occurred if
          the event set forth in any one of the following paragraphs shall have
          occurred:

                                       13
<PAGE>
 
               (A)  Employer enters into an agreement, the consummation of which
          would result in the occurrence of a Change in Control;

               (B)  Employer or any Person publicly announces an intention to
          take or to consider taking actions which, if consummated, would
          constitute a Change in Control;

               (C)  any Person becomes the beneficial owner, directly or
          indirectly, of securities of Employer (not including in the securities
          beneficially owned by such Person any securities acquired directly
          from Employer or its affiliates) representing 15% or more of either
          the then outstanding shares of common stock of Employer or the
          combined voting power of Employer's then outstanding securities;

               (D) the filing with the Federal Home Loan Bank Board and/or the
          FSLIC or their successor of an application for Change in Control; or

               (E)  the Board adopts a resolution to the effect that, for
          purposes of this Agreement, a Potential Change in Control has
          occurred.

                                       14
<PAGE>
 
               (f) Notwithstanding the provisions of Section 11(f) hereof,
          Employer also shall pay to Officer all reasonable legal fees and
          expenses incurred by Officer in disputing (through litigation or
          arbitration) in good faith any issue hereunder relating to the
          termination (or deemed termination) of Officer's employment following
          a Change in Control or in connection with any tax audit or proceeding
          to the extent attributable to the application of section 4999 of the
          Code to any payment or benefit provided hereunder.  Such payments
          shall be made within five (5) business days after delivery of
          Officer's written requests for payment accompanied with such evidence
          of fees and expenses incurred as Employer reasonably may require.

          The effective date of this Amendment No. 1 shall be December 10, 1996.
Except as herein modified, the Agreement shall remain in full force and effect.

                                       15
<PAGE>
 
          IN WITNESS WHEREOF, Employer and Officer have executed this Amendment
as of the date first set forth above.

                         GREAT WESTERN
                           FINANCIAL CORPORATION



                         /s/ A. William Schenck, III
                         ---------------------------
APPROVED:


By:/s/ Willis B. Wood, Jr.
   -----------------------
   Chairman, Compensation
     Committee of the Board
     of Directors

                                       16

<PAGE>

                                                                   EXHIBIT 10.12
 
                                AMENDMENT NO. 1
                            TO EMPLOYMENT AGREEMENT


          This Amendment No. 1 is made to that certain Employment Agreement (the
"Agreement"), dated as of March 1, 1988, between Great Western Financial
Corporation ("Employer") and J. Lance Erikson ("Officer").  Capitalized terms
used but not defined herein shall have the meanings ascribed to them in the
Agreement.

          WHEREAS, Employer has determined that it is in its best interest and
that of its stockholders to amend the Agreement as set forth herein;

          NOW THEREFORE, Employer and Officer agree that the Agreement shall be
amended as follows, effective as of December 10, 1996, unless otherwise
provided:

          1.   The first sentence of the second paragraph of Section 4 of the
Agreement is amended (1) by deleting therefrom the phrase "Subject to any
limitations arising elsewhere in this Agreement," and (2) by deleting from
clause (i) the phrase "other than limitations arising under Section 8(c)
hereof".

          2.   Section 6(c) of the Agreement is amended in its entirety to read
as follows:

               (c) for the remaining Term, health and welfare type Additional
          Benefits (including without limitation hospital, surgical, major
          medical, life and disability insurance), qualified pension benefits
          (or, if prohibited under then applicable tax law, a specially designed
          non-qualified supplemental pension to provide Officer with benefits
          equivalent to those to which he would have been entitled if such
          prohibition did not pertain) and non-qualified supplemental pension
          benefits to which Officer may be entitled pursuant to 
<PAGE>
 
          Section 4 hereof as the same shall exist immediately prior to such
          election (including continued accrual of years of service and age
          under (1) Employer's Retirement Plan as in effect immediately prior
          to such election (or, if prohibited under then applicable tax law, a
          specially designed non-qualified supplemental pension to provide
          Officer with benefits equivalent to those to which he would have been
          entitled if such prohibition did not pertain) and (2) the SERP, but
          excluding (3) Employer matching contributions under Employer's 401(k)
          plan or any successor plan thereto), each such benefit to be continued
          in a manner no less favorable to Officer than the benefit to which he
          was entitled immediately prior to such election; and

          3.   Section 6 of the Agreement is amended by deleting the unnumbered
paragraph immediately following Section 6(d) and inserting in lieu thereof the
following:

               Employer agrees that, if Officer's employment with Employer
          terminates during the Term, Officer is not required to seek other
          employment or to attempt in any way to reduce any amounts payable to
          Officer by Employer pursuant to Section 6, 7(a) or 8 hereof.  Further,
          the amount of any payment or benefit provided for in this Agreement
          shall not be reduced by any compensation earned by Officer as the
          result of employment by another employer, by retirement benefits, by
          offset against any amount claimed to be owed by Officer to Employer,
          or otherwise; provided, however, that Employer's obligation to provide
                        --------  -------                                       
          welfare-type Additional Benefits, including without limitation
          hospital, surgical, major medical, life and disability insur-

                                       2
<PAGE>
 
          ance, shall be reduced to the extent similar benefits are provided (at
          no cost to Officer) by a subsequent employer.

          4.   The first sentence immediately following clause (iv) of Section
8(a) of the Agreement is renumbered as a new Section 8(d), which Section 8(d) is
amended as set forth in paragraph 6 below, and the remainder of Section 8(a) of
the Agreement is amended in its entirety to read as follows:

          8.   Change in Control.
               ----------------- 

               (a) If there should occur a Change in Control (as defined below),
          and if thereafter during the Term, in the good-faith determination of
          Officer, Employer materially breaches this Agreement and Employer
          fails to cure such breach within fifteen (15) days after receipt of
          notice thereof, then, Officer, without limitation on any other rights
          he may have hereunder, may, within one (1) year after he first has
          knowledge of such breach, elect to terminate his employment hereunder
          and to treat such termination as a termination pursuant to Section 6
          hereof, subject, however, to the following additional benefits and
          modifications to Officer's rights as set forth in said Section 6 (any
          one or more of which modifications Officer may elect to waive):

               (i) Employer shall not be entitled to reduce Officer's salary or
          any Additional Benefits to which Officer shall thereafter be
          entitled.

               (ii)  Officer's pro-rata entitlement to an award under any then
          existing long-term incentive performance plan shall be calculated upon
          the assumption that the 

                                       3
<PAGE>
 
          performance under such plan is then "on plan."

               (iii)  In lieu of the severance benefits described in Sections
          6(a) and (b) hereof, within five (5) business days of the effective
          date of such termination of employment, Company shall pay to Officer a
          cash lump sum in an amount equal to the product of (A) the sum of (1)
          Officer's annual base salary in effect immediately prior to the
          termination of Officer's employment (or prior to a reduction in salary
          giving rise to a breach of this Agreement), plus (2) the target bonus
          ("Target Bonus") under the Employer's Annual Incentive Plan for
          Executive Officers or any successor or replacement thereto (the 
          "Annual Incentive Plan") in respect of the year in which such
          termination of employment occurs or the year in which the Change in
          Control occurs, whichever is greater (provided, however, that, if the
                                                --------  -------              
          termination of Officer's employment occurs under the circumstances
          entitling him to benefits under Section 8(e) hereof, the Target Bonus
          shall be in respect of the year in which such termination of 
          employment occurs), and (B) the number three.

               (iv) Within five (5) days following such termination of
          employment, Employer shall pay to Officer a lump sum cash amount (the
          "Pro-Rata Bonus") equal to the product of (A) the target bonus to
          which Officer would have been entitled under the Annual Incentive Plan
          in respect of the year in which such termination occurs (assuming for
          this purpose that performance under the Annual Incentive Plan is "on
          plan" for such year) and (B) a fraction, the numerator of which shall
          be the number

                                       4
<PAGE>
 
          of months (including fractions thereof) from the first day of the
          fiscal year during which such termination occurs to the date on which
          such termination occurs, and the denominator of which shall be twelve
          (12); provided, however, that if such termination of employment occurs
                --------  -------                             
          during the same year in which the Change in Control occurs, the Pro-
          Rata Bonus shall be offset by any payments received under the Annual
          Incentive Plan in connection with such Change in Control.

               (v)  The remaining Term shall be deemed to be three (3) years
          (but in no event shall the remaining Term be deemed to extend beyond
          Officer's sixty-fifth (65th) birthday).

          5.  Sections 8(b) and 8(c) of the Agreement are amended in their
entirety as follows:

               (b)  For purposes of this Agreement, a "Change in Control" shall
          be deemed to have occurred if the event set forth in any one of the
          following paragraphs shall have occurred:

               (i)  any Person (as defined below) is or becomes the Beneficial
          Owner (as defined in Rule 13d-3 under the Securities Exchange Act of
          1934 (the "Exchange Act")), directly or indirectly, of securities of
          Employer (not including in the securities beneficially owned by such
          Person any securities acquired directly from Employer or its
          affiliates) representing 25% or more of either the then outstanding
          shares of common stock of Employer or the combined voting power of
          Employer's then outstanding securities, excluding any Person who
          becomes such a beneficial owner

                                       5
<PAGE>
 
          in connection with a transaction described in clause (A) of paragraph
          (iii) below; or

               (ii)  the following individuals cease for any reason to
          constitute a majority of the number of directors then serving:
          individuals who, on December 10, 1996, constitute the Board and any
          new director (other than a director whose initial assumption of
          office is in connection with an actual or threatened election contest,
          including but not limited to a consent solicitation, relating to the
          election of directors of Employer) whose appointment or election by
          the Board or nomination for election by Employer's stockholders was
          approved by a vote of at least two-thirds (2/3) of the directors then
          still in office who either were directors on December 10, 1996, or
          whose appointment, election or nomination for election was previously
          so approved; or

                (iii)  there is consummated a merger or consolidation of
          Employer with any other corporation, other than (A) a merger or
          consolidation which would result in the voting securities of Employer
          outstanding immediately prior to such merger or consolidation
          continuing to represent (either by remaining outstanding or by being
          converted into voting securities of the surviving entity or any
          parent thereof) at least 60% of the combined voting power of the
          voting securities of Employer or such surviving entity or any parent
          thereof outstanding immediately after such merger or consolidation, or
          (B) a merger or consolidation effected to implement a 
          recapitalization of Employer (or similar transaction) in which no
          Person is or becomes the beneficial owner, directly or indirectly, of
          securities of Employer (not in-

                                       6
<PAGE>
 
          cluding in the securities beneficially owned by such Person any
          securities acquired directly from Employer or its subsidiaries)
          representing 25% or more of either the then outstanding shares of
          common stock of Employer or the combined voting power of Employer's
          then outstanding securities; or

               (iv) the stockholders of Employer approve a plan of complete
          liquidation or dissolution of Employer or there is consummated an
          agreement for the sale or disposition by Employer of all or 
          substantially all of Employer's assets.

          Notwithstanding the foregoing, a "Change in Control" shall not be
          deemed to have occurred by virtue of the consummation of any
          transaction or series of integrated transactions immediately following
          which the record holders of the common stock of Employer immediately
          prior to such transaction or series of transactions continue to have
          substantially the same proportionate ownership in an entity which owns
          all or substantially all of the assets of Employer immediately
          following such transaction or series of transactions.

          For purposes of this Section 8(b), "Person" shall have the meaning
          given in Section 3(a)(9) of the Exchange Act, as modified and used
          in Sections 13(d) and 14(d) thereof, except that such term shall not
          include (i) Employer or any of its subsidiaries, (ii) a trustee or
          other fiduciary holding securities under an employee benefit plan of
          Employer or any of its subsidiaries, (iii) an underwriter temporarily
          holding securities pursuant to an offering of such securities, or (iv)
          a corporation

                                       7
<PAGE>
 
          owned, directly or indirectly, by the stockholders of Employer in
          substantially the same proportions as their ownership of stock of
          Employer.

               (c)  Whether or not Officer becomes entitled to severance and
          other benefits under Section 8(a) or 8(e) hereof, if any of the
          payments or benefits received or to be received by Officer in
          connection with a Change in Control or Officer's termination of
          employment (whether pursuant to the terms of this Agreement or any
          other plan, arrangement or agreement with Employer, any Person whose
          actions result in a Change in Control or any Person affiliated with
          Employer or such Person) (such payments or benefits, excluding the
          Gross-Up Payment, being hereinafter referred to as the "Total
          Payments") will be subject to the excise tax imposed under Section
          4999 of the Code (the "Excise Tax"), Employer shall pay to Officer an
          additional amount (the "Gross-Up Payment") such that the net amount
          retained by Officer, after deduction of any Excise Tax on the Total
          Payments and any federal, state and local income and employment taxes
          and Excise Tax upon the Gross-Up Payment, shall be equal to the Total
          Payments.  For purposes of determining whether any of the Total 
          Payments will be subject to the Excise Tax and the amount of such
          Excise Tax, (A) all of the Total Payments shall be treated as
          "parachute payments" (within the meaning of Section 280G(b)(2) of the
          Code) unless, in the opinion of tax counsel ("Tax Counsel")
          reasonably acceptable to Officer and selected by the accounting firm
          which was, immediately prior to the Change in Control, Employer's
          independent auditor (the "Auditor"), such payments or benefits (in

                                       8
<PAGE>
 
          whole or in part) do not constitute parachute payments, including by
          reason of Section 280G(b)(4)(A) of the Code, (B) all "excess parachute
          payments" within the meaning of Section 280G(b)(l) of the Code shall
          be treated as subject to the Excise Tax unless, in the opinion of Tax
          Counsel, such excess parachute payments (in whole or in part)
          represent reasonable compensation for services actually rendered
          (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of
          the Base Amount allocable to such reasonable compensation, or are
          otherwise not subject to the Excise Tax, and (C) the value of any
          noncash benefits or any deferred payment or benefit shall be 
          determined by the Auditor in accordance with the principles of
          Sections 280G(d)(3) and (4) of the Code. For purposes of determining
          the amount of the Gross-Up Payment, Officer shall be deemed to pay
          federal income tax at the highest marginal rate of federal income
          taxation in the calendar year in which the Gross-Up Payment is to be
          made and state and local income taxes at the highest marginal rate of
          taxation in the state and locality of Officer's residence on the date
          of termination of employment (or if there is no such date of
          termination, then the date on which the Gross-Up Payment is calculated
          for purposes of this Section 8), net of the maximum reduction in
          federal income taxes which could be obtained from deduction of such
          state and local taxes. In the event that the Excise Tax is finally
          determined to be less than the amount taken into account hereunder in
          calculating the Gross-Up Payment, Officer shall repay to Employer,
          within five (5) business days following the time that the amount of
          such reduction 

                                       9
<PAGE>
 
          in the Excise Tax is finally determined, the portion of the Gross-Up
          Payment attributable to such reduction (plus that portion of the
          Gross-Up Payment attributable to the Excise Tax and federal, state
          and local income and employment taxes imposed on the Gross-Up Payment
          being repaid by Officer), to the extent that such repayment results
          in a reduction in the Excise Tax and a dollar-for-dollar reduction in
          Officer's taxable income and wages for purposes of federal, state and
          local income and employment taxes, plus interest on the amount of such
          repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the
          Code. In the event that the Excise Tax is determined to exceed the
          amount taken into account hereunder in calculating the Gross-Up
          Payment (including by reason of any payment the existence or amount of
          which cannot be determined at the time of the Gross-Up Payment),
          Employer shall make an additional Gross-Up Payment in respect of
          such excess (plus any interest, penalties or additions payable by
          Officer with respect to such excess) within five (5) business days
          following the time that the amount of such excess is finally
          determined. Officer and Employer shall each reasonably cooperate with
          the other in connection with any administrative or judicial
          proceedings concerning the existence or amount of liability for Excise
          Tax with respect to the Total Payments.

          6.   New Section 8(d) of the Agreement is amended (1) by deleting
therefrom the phrase "Notwithstanding Officer's entitlements as set forth in
this paragraph" and inserting in lieu thereof the following:

                                       10
<PAGE>
 
          Notwithstanding Officer's entitlements as set forth in this Section 8
          or any other plan, arrangement or agreement with the Employer, any
          Person whose actions result in a Change in Control or any Person 
          affiliated with the Employer or such Person

(2) by deleting therefrom the following:

          , after giving effect to Employer's right of offset as provided for in
          the next succeeding sentence,

and (3) by inserting at the end thereof the following:

          All calculations with respect to this Section 8(d) shall be performed
          by the Auditor in accordance with the principles set forth in Section
          8(c) hereof.

          7.   The Agreement is amended by inserting the following as a new
Section 8(e):

               (e)  For purposes of this Agreement, Officer's employment shall
          be deemed to have been terminated following a Change in Control in
          accordance with Section 8(a) hereof if, during the pendency of a 
          Potential Change in Control (as defined below) or within six (6)
          months following the date on which such Potential Change in Control
          ceases to exist (such periods being hereinafter referred to
          collectively as the "Potential Change in Control Period"), in either
          case whether or not a Change in Control subsequently occurs, (i)
          Officer's employment is terminated by Employer without Cause or (ii)
          in the good-faith determination of Officer, Employer materially
          breaches this Agreement and thereafter (whether or not during the
          Potential Change in Control Period) fails 

                                       11
<PAGE>
 
          to cure such breach within fifteen (15) days after receipt of notice
          thereof and within one (1) year after Officer first has knowledge of
          such breach Officer terminates his employment.

          A "Potential Change in Control" shall be deemed to have occurred if
          the event set forth in any one of the following paragraphs shall have
          occurred:

               (A)  Employer enters into an agreement, the consummation of which
          would result in the occurrence of a Change in Control;

               (B)  Employer or any Person publicly announces an intention to
          take or to consider taking actions which, if consummated, would
          constitute a Change in Control;

               (C)  any Person becomes the beneficial owner, directly or
          indirectly, of securities of Employer (not including in the securities
          beneficially owned by such Person any securities acquired directly
          from Employer or its affiliates) representing 15% or more of either
          the then outstanding shares of common stock of Employer or the
          combined voting power of Employer's then outstanding securities;

               (D) the filing with the Federal Home Loan Bank Board and/or the
          FSLIC or their successor of an application for Change in Control; or

               (E)  the Board adopts a resolution to the effect that, for
          purposes of this Agreement, a Potential Change in Control has
          occurred.

                                       12
<PAGE>
 
               (f) Notwithstanding the provisions of Section 11(f) hereof,
          Employer also shall pay to Officer all reasonable legal fees and
          expenses incurred by Officer in disputing (through litigation or
          arbitration) in good faith any issue hereunder relating to the
          termination (or deemed termination) of Officer's employment following
          a Change in Control or in connection with any tax audit or proceeding
          to the extent attributable to the application of section 4999 of the
          Code to any payment or benefit provided hereunder. Such payments
          shall be made within five (5) business days after delivery of
          Officer's written requests for payment accompanied with such evidence
          of fees and expenses incurred as Employer reasonably may require.

          8.   Section 11(b) of the Agreement is amended by changing the
Employer's address for purposes of service of notice to:  9200 Oakdale Avenue,
Chatsworth, California  91311.

          The effective date of this Amendment No. 1 shall be December 10, 1996.
Except as herein modified, the Agreement shall remain in full force and effect.

                                       13
<PAGE>
 
          IN WITNESS WHEREOF, Employer and Officer have executed this Amendment
as of the date first set forth above.

                         GREAT WESTERN
                           FINANCIAL CORPORATION



                         /s/ J. Lance Erikson
                         --------------------
APPROVED:


By:/s/ Willis B. Wood, Jr.
   -----------------------
   Chairman, Compensation
     Committee of the Board
     of Directors

                                       14

<PAGE>
 
                                                                   EXHIBIT 10.14
                            
                                AMENDMENT NO. 1
                            TO EMPLOYMENT AGREEMENT


          This Amendment No. 1 is made to that certain Employment Agreement (the
"Agreement"), dated as of april 1996, between Great Western Financial
Corporation ("Employer") and Jaynie M. Studenmund ("Officer").  Capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Agreement.

          WHEREAS, Employer has determined that it is in its best interest and
that of its stockholders to amend the Agreement as set forth herein;

          NOW THEREFORE, Employer and Officer agree that the Agreement shall be
amended as follows, effective as of December 10, 1996, unless otherwise
provided:

          1. The third paragraph of Section 4 of the Agreement is amended by
deleting therefrom the phrase "upon a 'change in control' as provided elsewhere
in this Agreement" and inserting in lieu thereof the phrase "upon a 'Change in
Control' (as defined in Section 8(b) hereof).

          2.   Section 6(c) of the Agreement is amended in its entirety to read
as follows:

               (c) for the remaining Term, health and welfare type Additional
          Benefits (including without limitation hospital, surgical, major
          medical, life and disability insurance), qualified pension benefits
          (or, if prohibited under then applicable tax law, a specially designed
          non-qualified supplemental pension to provide Officer with benefits
          equivalent to those to which she would have been entitled if such
          prohibition did not pertain) and non-qualified supplemental pension
          benefits to which Officer may be entitled pursuant to Section 4 hereof
          as the same shall exist 
<PAGE>
 
          immediately prior to such election (including continued accrual of
          years of service and age under (1) Employer's Retirement Plan as in
          effect immediately prior to such election (or, if prohibited under
          then applicable tax law, a specially designed non-qualified
          supplemental pension to provide Officer with benefits equivalent to
          those to which she would have been entitled if such prohibition did
          not pertain) and (2) the SERP, but excluding (3) Employer matching
          contributions under Employer's 401(k) plan or any successor plan
          thereto), each such benefit to be continued in a manner no less
          favorable to Officer than the benefit to which she was entitled
          immediately prior to such election; and

          3.   Section 6 of the Agreement is amended by deleting the unnumbered
paragraph immediately following Section 6(d) and inserting in lieu thereof the
following:

               Employer agrees that, if Officer's employment with Employer
          terminates during the Term, Officer is not required to seek other
          employment or to attempt in any way to reduce any amounts payable to
          Officer by Employer pursuant to Section 6, 7(a) or 8 hereof.  Further,
          the amount of any payment or benefit provided for in this Agreement
          shall not be reduced by any compensation earned by Officer as the
          result of employment by another employer, by retirement benefits, by
          offset against any amount claimed to be owed by Officer to Employer,
          or otherwise; provided, however, that Employer's obligation to provide
                        --------  -------                                       
          welfare-type Additional Benefits, including without limitation
          hospital, surgical, major medical, life and disability insurance,
          shall be reduced to the extent simi-

                                       2
<PAGE>
 
          lar benefits are provided (at no cost to Officer) by a subsequent
          employer.

          4.   The first sentence immediately following clause (iv) of Section
8(a) of the Agreement is renumbered as a new Section 8(d), which Section 8(d)
is amended as set forth in paragraph 6 below, and the remainder of Section 8(a)
of the Agreement is amended in its entirety to read as follows:

          8.  Change in Control.
              ----------------- 

               (a) If there should occur a Change in Control (as defined below),
          and if thereafter during the Term, in the good-faith determination of
          Officer, Employer materially breaches this Agreement and Employer
          fails to cure such breach within fifteen (15) days after receipt of
          notice thereof, then, Officer, without limitation on any other rights
          she may have hereunder, may, within one (1) year after she first has
          knowledge of such breach, elect to terminate her employment hereunder
          and to treat such termination as a termination pursuant to Section 6
          hereof, subject, however, to the following additional benefits and
          modifications to Officer's rights as set forth in said Section 6 (any
          one or more of which modifications Officer may elect to waive):

               (i) Employer shall not be entitled to reduce Officer's salary or
          any Additional Benefits to which Officer shall thereafter be
          entitled.

               (ii)  Officer's pro-rata entitlement to an award under any then
          existing long-term incentive performance plan shall be calculated upon
          the assumption that the 

                                       3
<PAGE>
 
          performance under such plan is then "on plan."

               (iii)  In lieu of the severance benefits described in Sections
          6(a) and (b) hereof, within five (5) business days of the effective
          date of such termination of employment, Company shall pay to Officer a
          cash lump sum in an amount equal to the product of (A) the sum of (1)
          Officer's annual base salary in effect immediately prior to the
          termination of Officer's employment (or prior to a reduction in salary
          giving rise to a breach of this Agreement), plus (2) the target bonus
          ("Target Bonus") under the Employer's Annual Incentive Plan for
          Executive Officers (the "Annual Incentive Plan") in respect of the
          year in which such termination of employment occurs or the year in
          which the Change in Control occurs, whichever is greater (provided,
                                                                     --------
          however, that if the termination of Officer's employment occurs under
          -------
          the circumstances entitling her to benefits under Section 8(e) hereof,
          the Target Bonus shall be in respect of the year in which such
          termination of employment occurs), and (B) the number three.

               (iv) Within five (5) days following such termination of
          employment, Employer shall pay to Officer a lump sum cash amount (the
          "Pro-Rata Bonus") equal to the product of (A) the target bonus to
          which Officer would have been entitled under the Annual Incentive Plan
          in respect of the year in which such termination occurs (assuming for
          this purpose that performance under the Annual Incentive Plan is "on
          plan" for such year) and (B) a fraction, the numerator of which shall
          be the number 

                                       4
<PAGE>
 
          of months (including fractions thereof) from the first day of the
          fiscal year during which such termination occurs to the date on which
          such termination occurs, and the denominator of which shall be twelve
          (12); provided, however, that if such termination of
                --------  -------                             
          employment occurs during the same year in which the Change in Control
          occurs, the Pro-Rata Bonus shall be offset by any payments received
          under the Annual Incentive Plan in connection with such Change in
          Control.

               (v)  The remaining Term shall be deemed to be three (3) years
          (but in no event shall the remaining Term be deemed to extend beyond
          Officer's sixty-fifth (65th) birthday).

          5.   Sections 8(b) and 8(c) of the Agreement are amended in their
entirety as follows:

               (b)  For purposes of this Agreement, a "Change in Control" shall
          be deemed to have occurred if the event set forth in any one of the
          following paragraphs shall have occurred:

               (i)  any Person (as defined below) is or becomes the Beneficial
          Owner (as defined in Rule 13d-3 under the Securities Exchange Act of
          1934 (the "Exchange Act")), directly or indirectly, of securities of
          Employer (not including in the securities beneficially owned by such
          Person any securities acquired directly from Employer or its
          affiliates) representing 25% or more of either the then outstanding
          shares of common stock of Employer or the combined voting power of
          Employer's then outstanding securities, excluding any Person who
          becomes such a beneficial owner 

                                       5
<PAGE>
 
          in connection with a transaction described in clause (A) of paragraph
          (iii) below; or

               (ii)  the following individuals cease for any reason to
          constitute a majority of the number of directors then serving:
          individuals who, on December 10, 1996, constitute the Board and any
          new director (other than a director whose initial assumption of
          office is in connection with an actual or threatened election contest,
          including but not limited to a consent solicitation, relating to the
          election of directors of Employer) whose appointment or election by
          the Board or nomination for election by Employer's stockholders was
          approved by a vote of at least two-thirds (2/3) of the directors then
          still in office who either were directors on December 10, 1996, or
          whose appointment, election or nomination for election was previously
          so approved; or

                (iii)  there is consummated a merger or consolidation of
          Employer with any other corporation, other than (A) a merger or
          consolidation which would result in the voting securities of Employer
          outstanding immediately prior to such merger or consolidation
          continuing to represent (either by remaining outstanding or by being
          converted into voting securities of the surviving entity or any
          parent thereof) at least 60% of the combined voting power of the
          voting securities of Employer or such surviving entity or any parent
          thereof outstanding immediately after such merger or consolidation, or
          (B) a merger or consolidation effected to implement a 
          recapitalization of Employer (or similar transaction) in which no
          Person is or becomes the beneficial owner, directly or indirectly, of
          securities of Employer (not in-

                                       6
<PAGE>
 
          cluding in the securities beneficially owned by such Person any
          securities acquired directly from Employer or its subsidiaries)
          representing 25% or more of either the then outstanding shares of
          common stock of Employer or the combined voting power of Employer's
          then outstanding securities; or

               (iv) the stockholders of Employer approve a plan of complete
          liquidation or dissolution of Employer or there is consummated an
          agreement for the sale or disposition by Employer of all or 
          substantially all of Employer's assets.

          Notwithstanding the foregoing, a "Change in Control" shall not be
          deemed to have occurred by virtue of the consummation of any
          transaction or series of integrated transactions immediately following
          which the record holders of the common stock of Employer immediately
          prior to such transaction or series of transactions continue to have
          substantially the same proportion ate ownership in an entity which
          owns all or substantially all of the assets of Employer immediately
          following such transaction or series of transactions.

          For purposes of this Section 8(b), "Person" shall have the meaning
          given in Section 3(a)(9) of the Exchange Act, as modified and used
          in Sections 13(d) and 14(d) thereof, except that such term shall not
          include (i) Employer or any of its subsidiaries, (ii) a trustee or
          other fiduciary holding securities under an employee benefit plan of
          Employer or any of its subsidiaries, (iii) an underwriter temporarily
          holding securities pursuant to an offering of such securities, or (iv)
          a corporation 

                                       7
<PAGE>
 
          owned, directly or indirectly, by the stockholders of Employer in
          substantially the same proportions as their ownership of stock of
          Employer.

               (c) Whether or not Officer becomes entitled to severance and
          other benefits under Section 8(a) or 8(e) hereof, if any of the
          payments or benefits received or to be received by Officer in
          connection with a Change in Control or Officer's termination of
          employment (whether pursuant to the terms of this Agreement or any
          other plan, arrangement or agreement with Employer, any Person whose
          actions result in a Change in Control or any Person affiliated with
          Employer or such Person) (such payments or benefits, excluding the
          Gross-Up Payment, being hereinafter referred to as the "Total
          Payments") will be subject to the excise tax imposed under Section
          4999 of the Code (the "Excise Tax"), Employer shall pay to Officer an
          additional amount (the "Gross-Up Payment") such that the net amount
          retained by Officer, after deduction of any Excise Tax on the Total
          Payments and any federal, state and local income and employment taxes
          and Excise Tax upon the Gross-Up Payment, shall be equal to the Total
          Payments. For purposes of determining whether any of the Total
          Payments will be subject to the Excise Tax and the amount of such
          Excise Tax, (A) all of the Total Payments shall be treated as
          "parachute payments" (within the meaning of Section 280G(b)(2) of the
          Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably
          acceptable to Officer and selected by the accounting firm which was,
          immediately prior to the Change in Control, Employer's independent
          auditor (the "Auditor"), such payments or benefits (in

                                       8
<PAGE>
 
          whole or in part) do not constitute parachute payments, including by
          reason of Section 280G(b)(4)(A) of the Code, (B) all "excess parachute
          payments" within the meaning of Section 280G(b)(l) of the Code shall
          be treated as subject to the Excise Tax unless, in the opinion of Tax
          Counsel, such excess parachute payments (in whole or in part)
          represent reasonable compensation for services actually rendered
          (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of
          the Base Amount allocable to such reasonable compensation, or are
          otherwise not subject to the Excise Tax, and (C) the value of any
          noncash benefits or any deferred payment or benefit shall be
          determined by the Auditor in accordance with the principles of
          Sections 280G(d)(3) and (4) of the Code. For purposes of determining
          the amount of the Gross-Up Payment, Officer shall be deemed to pay
          federal income tax at the highest marginal rate of federal income
          taxation in the calendar year in which the Gross-Up Payment is to be
          made and state and local income taxes at the highest marginal rate of
          taxation in the state and locality of Officer's residence on the date
          of termination of employment (or if there is no such date of
          termination, then the date on which the Gross-Up Payment is calculated
          for purposes of this Section 8), net of the maximum reduction in
          federal income taxes which could be obtained from deduction of such
          state and local taxes. In the event that the Excise Tax is finally
          determined to be less than the amount taken into account hereunder in
          calculating the Gross-Up Payment, Officer shall repay to Employer,
          within five (5) business days following the time that the amount of
          such reduction 

                                       9
<PAGE>
 
          in the Excise Tax is finally determined, the portion of the Gross-Up
          Payment attributable to such reduction (plus that portion of the
          Gross-Up Payment attributable to the Excise Tax and federal, state
          and local income and employment taxes imposed on the Gross-Up Payment
          being repaid by Officer), to the extent that such repayment results
          in a reduction in the Excise Tax and a dollar-for-dollar reduction in
          Officer's taxable income and wages for purposes of federal, state and
          local income and employment taxes, plus interest on the amount of such
          repayment at 120% of the rate provided in Section 1274(b)(2)(B) of the
          Code. In the event that the Excise Tax is determined to exceed the
          amount taken into account hereunder in calculating the Gross-Up
          Payment (including by reason of any payment the existence or amount of
          which cannot be determined at the time of the Gross-Up Payment),
          Employer shall make an additional Gross-Up Payment in respect of such
          excess (plus any interest, penalties or additions payable by Officer
          with respect to such excess) within five (5) business days following
          the time that the amount of such excess is finally determined. Officer
          and Employer shall each reasonably cooperate with the other in
          connection with any administrative or judicial proceedings concerning
          the existence or amount of liability for Excise Tax with respect to
          the Total Payments.

          6.   New Section 8(d) of the Agreement is amended (1) by deleting
therefrom the phrase "Notwithstanding officer's entitlements as set forth in
this paragraph" and inserting in lieu thereof the following:

                                       10
<PAGE>
 
          Notwithstanding Officer's entitlements as set forth in this Section 8
          or any other plan, arrangement or agreement with the Employer, any
          Person whose actions result in a Change in Control or any Person 
          affiliated with the Employer or such Person

(2) by deleting therefrom the following:

          , after giving effect to Employer's right of offset as provided for
          the next succeeding sentence,

and (3) by inserting at the end thereof the following:

          All calculations with respect to this Section 8(d) shall be performed
          by the Auditor in accordance with the principles set forth in Section
          8(c) hereof.

          7.   The Agreement is amended by inserting the following as a new
Section 8(e):

               (e) For purposes of this Agreement, Officer's employment shall be
          deemed to have been terminated following a Change in Control in
          accordance with Section 8(a) hereof if, during the pendency of a
          Potential Change in Control (as defined below) or within six (6)
          months following the date on which such Potential Change in Control
          ceases to exist (such periods being hereinafter referred to
          collectively as the "Potential Change in Control Period"), in either
          case whether or not a Change in Control subsequently occurs, (i)
          Officer's employment is terminated by Employer without Cause or (ii)
          in the good-faith determination of Officer, Employer materially
          breaches this Agreement and thereafter (whether or not during the
          Potential Change in Control Period) fails 
                                       11
<PAGE>

          to cure such breach within fifteen (15) days after receipt of notice
          thereof and within one (1) year after Officer first has knowledge of
          such breach Officer terminates her employment.

          A "Potential Change in Control" shall be deemed to have occurred if
          the event set forth in any one of the following paragraphs shall have
          occurred:

               (A)  Employer enters into an agreement, the consummation of which
          would result in the occurrence of a Change in Control;

               (B)  Employer or any Person publicly announces an intention to
          take or to consider taking actions which, if consummated, would
          constitute a Change in Control;

               (C)  any Person becomes the beneficial owner, directly or
          indirectly, of securities of Employer (not including in the securities
          beneficially owned by such Person any securities acquired directly
          from Employer or its affiliates) representing 15% or more of either
          the then outstanding shares of common stock of Employer or the
          combined voting power of Employer's then outstanding securities;

               (D) the filing with the Federal Home Loan Bank Board and/or the
          FSLIC or their successor of an application for Change in Control; or

               (E)  the Board adopts a resolution to the effect that, for
          purposes of this Agreement, a Potential Change in Control has
          occurred.

                                       12
<PAGE>
 
               (f) Notwithstanding the provisions of Section 11(f) hereof,
          Employer also shall pay to Officer all reasonable legal fees and
          expenses incurred by Officer in disputing (through litigation or
          arbitration) in good faith any issue hereunder relating to the
          termination (or deemed termination) of Officer's employment following
          a Change in Control or in connection with any tax audit or proceeding
          to the extent attributable to the application of section 4999 of the
          Code to any payment or benefit provided hereunder. Such payments shall
          be made within five (5) business days after delivery of Officer's
          written requests for payment accompanied with such evidence of fees
          and expenses incurred as Employer reasonably may require.

          The effective date of this Amendment No. 1 shall be December 10, 1996.
Except as herein modified, the Agreement shall remain in full force and effect.

                                       13
<PAGE>
 
          IN WITNESS WHEREOF, Employer and Officer have executed this Amendment
as of the date first set forth above.

                         GREAT WESTERN
                           FINANCIAL CORPORATION



                         /s/ Jaynie M. Studenmund
                         ------------------------
APPROVED:


By:/s/ Willis B. Wood, Jr.
   -----------------------
   Chairman, Compensation
     Committee of the Board
     of Directors

                                       14

<PAGE>
 
                                                                   EXHIBIT 10.15
 
                              EMPLOYMENT AGREEMENT
                              --------------------

          THIS EMPLOYMENT AGREEMENT is entered into as of January 6, 1997, by
and between GREAT WESTERN FINANCIAL CORPORATION, a Delaware corporation
("Employer"), and Ray W. Sims ("Officer").

                              W I T N E S S E T H:
                              - - - - - - - - - - 

          WHEREAS, Employer desires to obtain the benefit of services by
Officer, and Officer desires to render services to Employer; and

          WHEREAS, the Board of Directors of Employer (the "Board") has
determined that it is in Employer's best interest and that of its stockholders
to recognize the substantial contribution that Officer is expected to make to
the business of Employer and its subsidiary, Great Western Bank, a Federal
Savings Bank (the "Bank") (together, the "Company") and to retain his services
in the future; and

          WHEREAS, Employer and Officer desire to set forth in this Agreement
the terms and conditions of Officer's employment with Employer;
<PAGE>
 
          NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:

          1. Term. Employer shall employ Officer, and Officer shall serve
             ----
Employer, in accordance with the terms hereof, for a term of three (3) years
ending January 5, 2000 (the "Term"), unless such employment is earlier
terminated in accordance with the provisions hereof. Notwithstanding the
foregoing, if Officer's employment shall not have been terminated in accordance
with the provisions hereof effective on or before the first anniversary of the
effective date hereof, the remaining Term shall be extended such that at each
and every moment of time thereafter the remaining Term shall be two (2) years
(but in no event shall the remaining Term extend beyond Officer's sixty-fifth
(65th) birthday).

          2. Specific Position; Duties and Responsibilities. Subject to the
             ----------------------------------------------
provisions of this Agreement, Employer shall employ Officer, and Officer shall
serve Employer, as Executive Vice President, Director of Real Estate, of
Employer and member of the Executive Management Committee. Officer's principal
business address shall during such period be at 

                                       2
<PAGE>
 
Employer's principal executive offices in Southern California or in such other
place as with Officer's consent such offices are relocated. Officer's duties
hereunder shall be the usual and customary duties of the office in which he
shall serve, and shall not be inconsistent with the provisions of the charter
documents of Employer (or applicable subsidiary) or applicable law. Officer
shall have such executive power and authority as shall reasonably be required to
enable him to discharge his duties in the office which he may hold. All
compensation paid to Officer by Employer or any of its subsidiaries, and all
benefits and perquisites received by Officer from Employer or any of its
subsidiaries, in accordance with the provisions hereof shall be aggregated in
determining whether Officer has been paid the compensation and received the
benefits and perquisites provided for herein.

          3. Services and Exclusivity of Services. During his employment
             ------------------------------------
hereunder, Officer shall devote his full business time and energy to the
business, affairs and interests of Employer and its subsidiaries, and matters
related thereto, and shall use his best efforts and abilities to promote
Employer's and its subsidiaries' interests. Officer shall 

                                       3
<PAGE>
 
diligently endeavor to promote the business, affairs and interests of Employer
and its subsidiaries and perform services contemplated hereby in accordance with
the policies established by the Board. Officer shall serve without additional
remuneration in such senior executive capacity for one or more (direct or
indirect) subsidiaries of Employer as the Board may from time to time request,
subject to appropriate authorization by the subsidiary or subsidiaries involved
and any limitations under applicable law. Officer's failure to discharge an
order or perform a function because Officer reasonably and in good faith
believes such would violate a law or regulation or be dishonest shall not be
deemed a breach by him of his obligations or duties hereunder and shall not
entitle Employer to terminate Officer's employment hereunder, including without
limitation pursuant to Section 7(c) hereof.

               Officer may serve as a director or in any other capacity of any
business enterprise, including an enterprise whose activities may involve or
relate to the business of the Company, provided that such service is expressly
approved by the Board. Officer may make and manage personal business investments
of his choice and serve in any capacity with any

                                       4
<PAGE>
 
civic, educational or charitable organization, or any governmental entity or
trade association, without seeking or obtaining approval by the Board, provided
such activities and service do not materially interfere or conflict with the
performance of his duties hereunder. Employer hereby recognizes and acknowledges
that Officer is, as of the effective date of this Agreement, a shareholder and
member of the board of directors of ConsumersBest.com and that Officer's
interests in and service with such entity shall not themselves constitute a
breach of this Agreement; provided, however, that Employer may determine during
                          --------  -------
the Term that such interests and/or service constitute a conflict of interest
with Employer and, upon making such determination, Employer may require Officer
to resolve such conflict by divesting himself of his interest in, and/or
resigning his directorship of, such entity.

          4.  Salary and Other Benefits.
              -------------------------

          (a) Commencing as of the effective date of this Agreement, Employer
shall pay Officer an annual salary at the rate of $340,000, which shall be
payable in semi-monthly or bi-weekly installments in conformity with Employer's
policy relating to salaried employees.

                                       5
<PAGE>
 
          (b) Subject to the provisions of this Section 4, Officer shall also be
entitled during his employment hereunder to all rights and benefits for which he
is otherwise eligible under any bonus plan, stock option plan, stock purchase
plan, participation or extra compensation plan, pension plan, profit-sharing
plan, life and medical insurance policy or other plans or benefits which
Employer or its subsidiaries may provide for him or, provided he is eligible to
participate therein, for senior officers generally or for employees generally
including, without limitation, beginning in December, 1997, participation in the
annual award of stock options to Employer's executive officers, which awards are
subject to the discretion and approval of Employer's compensation committee. In
addition, the Company shall pay the annual premiums and become the irrevocable
beneficiary of the $10,000,000 life insurance policy currently held by Knudsen
Mortgage (as more particularly provided in a separate letter agreement between
Officer and Employer), which policy shall be assignable by the Employer in the
event that the Officer's employment with the Employer is terminated (the
benefits referred to in this para-

                                       6
<PAGE>
 
graph may be hereinafter referred to as "Additional Benefits").

          The Board shall review Officer's salary and Additional Benefits then
being paid and provided to him not less frequently than annually in the light of
Officer's services for the preceding period, the responsibilities which attend
his office and duties hereunder, the profitability and progress of Employer and
its subsidiaries and current salaries and benefits then being paid to others
holding similar positions. Following such review, Employer may increase the
salary and/or Additional Benefits, but may not decrease the salary or any of the
Additional Benefits from the then existing levels; provided, however, that
Employer shall have the right to reduce Officer's salary in conjunction with a
pro rata salary reduction applicable to all of Employer's officers and to reduce
one or more Additional Benefits in conjunction with a reduction of such benefits
applicable to all of Employer's officers. Employer shall not single Officer out
and discriminate against Officer in its provisions of benefits to senior
officers or full-time employees of Employer for so long as Officer remains
eligible under the terms of plans from time 

                                       7
<PAGE>
 
to time offered by Employer, but this provision shall not require the provision
of any specific benefit to Officer.

          If Officer's employment is terminated hereunder, pursuant to Section 6
hereof or pursuant to Section 7(a), 7(b) or 8 hereof, and Officer is entitled to
but is no longer eligible for Additional Benefits because of such termination,
Officer (or in the event of his death, his designated Beneficiary (as defined in
Section 7(b) hereof)) shall be entitled to and Employer shall provide, to the
extent provided in this Agreement, benefits substantially equivalent to the
Additional Benefits to which Officer was entitled immediately prior to such
termination and shall do so for the period during which he remains entitled to
receive such Additional Benefits as provided in this Agreement.

          (c) For each calendar year during the Term, Officer shall be awarded a
target bonus in an amount equal to sixty percent (60%) of Officer's annual
salary, subject to the terms of the Company's Annual Incentive Compensation Plan
for Executive Officers, as the same may from time to time be amended (the
"Incentive Plan").

                                       8
<PAGE>
 
          (d) As of the effective date of this Agreement, Employer shall award
to Officer the following: (i) a nonqualified stock option to purchase 50,000
shares of Common Stock at an exercise price per share equal to the fair market
value per share of Common Stock on the effective date of this Agreement; and
(ii) a sign-on bonus equal to $50,000. The stock option awarded pursuant to this
Section 4(d) shall be awarded in accordance with the terms and conditions of
Employer's 1988 Stock Option and Incentive Plan and the related form of
Nonqualified Stock Option Agreement, attached hereto as Exhibits A and B and
incorporated herein by reference.

          (e) Officer shall participate in Employer's Supplemental Executive
Retirement Plan, as amended (the "SERP"), with normal retirement benefits equal
to sixty percent (60%) of Officer's Average Monthly Compensation (as defined
therein), subject to the terms and conditions of the SERP, as amended.

          (f) This Agreement shall not affect the provisions of any other
compensation, retirement or other benefit program or plan of the Company.

                                       9
<PAGE>
 
          5.  Perquisites; Reimbursements; Vacation.
              -------------------------------------

          (a) Commencing as of the effective date of this Agreement, Officer
shall be entitled to perquisites of a kind and quality provided to other
Executive Vice Presidents of Employer.

                                       10
<PAGE>
 
          (b) During his employment hereunder, Officer shall be entitled to
vacation in accordance with Employer's standard practice for senior executives
but in no event to less than four (4) weeks paid vacation during each calendar
year of employment, prorated for any period which is less than one calendar
year. Vacation time shall accrue during each calendar year (but at no time shall
the aggregate of accrued but unused vacation time exceed eight (8) weeks), and,
upon termination of his employment for any reason and in addition to any other
rights granted to Officer by this Agreement, Officer shall be entitled to be
paid an amount based upon his salary at the rate applicable immediately prior to
such termination for any accrued but unused vacation time.

          6. Termination By Employer Without "Cause";
             ----------------------------------------

                                       11
<PAGE>
 
Termination By Officer. Employer shall have the right, at its election to be
- ----------------------
made in writing and delivered to Officer within sixty (60) days prior to the
effective date thereof, to terminate Officer's employment hereunder without
"cause" (as defined in Section 7(c) below). Officer shall have the right, at his
election to be made in writing and delivered to Employer within sixty (60) days
after such event, to terminate his employment hereunder if a material breach of
this Agreement by Employer occurs which Employer fails to cure within fifteen
(15) days after receipt of notice of such breach. In the event of a termination
for either of the reasons enumerated in this paragraph, Officer shall be
entitled to the following:

          (a) for the remaining Term, salary at the rate applicable immediately
prior to such election;

          (b) concurrently with the receipt of bonuses by Employer's other
senior executives with respect to the year in which such termination occurs, a
bonus, prorated on an actual day basis for the year in which such termination
occurs if such termination shall occur within the first six (6) months of such
year but otherwise not prorated, in an amount not less than a percentage of
Officer's salary, at the rate of salary 

                                       12
<PAGE>
 
applicable immediately prior to such election, equal to the percentage of the
aggregate salaries of the Executive Management Committee members during such
year, other than Officer, Employer's Chief Executive Officer, Employer's Chief
Operating Officer and any Executive Management Committee members whose
employment by Employer is terminated during such year, received in the aggregate
by such members as bonuses.

          (c) for the remaining Term, health and welfare type Additional
Benefits (including without limitation hospital, surgical, major medical, life
and disability insurance), qualified pension benefits (or, if prohibited under
then applicable tax law, a specially designed non-qualified supplemental pension
to provide Officer with benefits equivalent to those to which he would have been
entitled if such prohibition did not pertain) and non-qualified supplemental
pension benefits to which Officer may be entitled pursuant to Section 4 hereof
as the same shall exist immediately prior to such election (including continued
accrual of years of service and age under (1) Employer's Retirement Plan as in
effect immediately prior to such election (or, if prohibited under then
applicable tax law, a specially designed non-qualified supple-

                                       13
<PAGE>
 
mental pension to provide Officer with benefits equivalent to those to which he
would have been entitled if such prohibition did not pertain) and (2) the SERP,
but excluding (3) Employer matching contributions under Employer's 401(k) plan
or any successor plan thereto), each such benefit to be continued in a manner no
less favorable to Officer than the benefit to which he was entitled immediately
prior to such election; and

          (d) for a one-year period commencing with the effective date of such
termination, a continuation at Employer's expense of the use of any automobile
provided by Employer immediately prior to such election to facilitate the
performance of Officer's duties and responsibilities hereunder, subject to
Officer's right at any time during such one-year period to purchase such
automobile at the higher of its depreciated book value or its wholesale cash
value.

          Employer agrees that, if Officer's employment with Employer terminates
during the Term, Officer is not required to seek other employment or to attempt
in any way to reduce any amounts payable to Officer by Employer pursuant to
Section 6, 7(a) or 8 hereof. Further, the amount of any payment or benefit
provided for in this Agreement shall not be reduced by 

                                       14
<PAGE>
 
any compensation earned by Officer as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by Officer to Employer, or otherwise; provided, however, that Employer's
                                           --------  -------
obligation to provide welfare-type Additional Benefits, including without
limitation hospital, surgical, major medical, life and disability insurance,
shall be reduced to the extent similar benefits are provided (at no cost to
Officer) by a subsequent employer.

          7.  Other Events of Termination. Other than a termination pursuant to
              ---------------------------
Section 6 or 8 hereof, Officer's employment hereunder shall be terminated only
as provided for below in this Section 7:

          (a) Disability. In the event that Officer shall fail, because of
              ----------
illness, injury or similar incapacity ("disability"), to render for six (6)
consecutive calendar months, or for shorter periods aggregating one hundred
thirty (130) or more business days in any twelve (12)-month period, services
contemplated by this Agreement, Officer's employment hereunder may be
terminated, by written notice of termination from Employer to Officer;
thereafter, Employer shall continue, 

                                       15
<PAGE>
 
until Officer's death, or until Officer's sixty-fifth (65th) birthday, whichever
first occurs, but in no event for longer than ten (10) years, to pay
compensation to Officer at a rate and in an amount (payable at the times and in
the manner theretofore applicable to Officer's salary) equal to (i) 50% of the
sum of (A) the rate of annual salary payable to him immediately prior to such
termination and (B) the average annual bonus received by him for services
rendered in the immediately preceding three (3) full calendar years or such
lesser number of full calendar years that Officer has been employed by Employer
(provided, that, in the event Officer incurs such a disability during the first
full year of employment hereunder, such bonus amount shall be Officer's target
bonus under the Annual Incentive Plan), minus (ii) the amount of any cash
payments to which he would have been entitled under the terms of Employer's
disability insurance plan upon the assumption that he had elected the fifty
percent (50%) "normal" benefits under Employer's Plus Pay Plan; to afford all of
the medical, dental and life insurance benefits to which he is entitled pursuant
to Section 4 hereof at the times and in the manner otherwise afforded hereunder;
and to contin-

                                       16
<PAGE>
 
ue accrual of years of service under Employer's Retirement Plan as in effect at
the time of such disability.

          (b) Death. Officer's employment hereunder shall be terminated upon
              -----
Officer's death. One hundred percent (100%) of Officer's salary at the rate of
such salary in effect immediately prior to Officer's death (or, if Officer's
death occurs while he is receiving payments under Section 7(a) hereof, at the
rate of such salary in effect immediately prior to Officer's disability) shall
be paid until the first anniversary of Officer's death at the times and in the
manner otherwise payable hereunder, to such person or persons as Officer shall
have directed in writing or, in the absence of a designation, to his estate (the
"Beneficiary"). In addition to the Beneficiary's rights hereunder to be paid
Officer's salary, hospital, surgical, major medical and dental benefits to which
members of Officer's family were entitled immediately prior to Officer's death
shall be continued to the same extent after Officer's death until the first
anniversary of Officer's death. This Agreement in all other respects shall
terminate upon the death of Officer.

                                       17
<PAGE>
 
          (c) For Cause. Officer's employment hereunder shall be terminated and
              ---------
all of his rights to receive salary, bonus, Additional Benefits (subject to the
terms of any plans relating thereto) and perquisites shall terminate upon the
occurrence of (i) a material breach of this Agreement by Officer, (ii) Officer's
conviction by a court of competent jurisdiction of a felony or (iii) entry of an
order duly issued by the Office of Thrift Supervision removing Officer from the
office of Employer or the Bank or permanently prohibiting him from participating
in the conduct of the affairs of Employer or the Bank. Notwithstanding the
foregoing, Officer's employment hereunder shall not be subject to termination
under subsection (c)(i) hereof without (A) reasonable notice to Officer setting
forth the reasons for Employer's intention to terminate, (B) an opportunity for
Officer to cure any such breach within fifteen (15) days after receipt of such
notice and (C) delivery to Officer of a notice of termination stating that a
majority of the authorized number of Employer's directors has found that Officer
was guilty of the conduct set forth above and specifying the particulars thereof
in detail. If Officer shall be suspended from office and/or temporarily

                                       18
<PAGE>
 
prohibited from participating in the conduct of Employer's or the Bank's affairs
by any regulatory authority having jurisdiction in the premises, Employer's
obligations shall be automatically suspended, subject to reinstatement in full
if the charges resulting in such suspension or prohibition are finally
dismissed. Such reinstatement shall provide Officer with the salary, other
benefits and perquisites to which he would have been entitled absent such
suspension or prohibition to the same effect and extent as though such
suspension or prohibition had not occurred, including without limitation
reinstatement in full of vesting and years of service accruals, where
applicable, for the suspension period and accrued interest at the rate then
payable on judgments on all amounts thereupon paid to Officer and attributable
to the suspension period.

          In the event of any termination or suspension by Employer pursuant to
any of the provisions of Section 7(a) or 7(c) hereof, Employer shall immediately
so notify Officer.

          8.  Change in Control.
              -----------------

          (a) If there should occur a Change in Control (as defined below), and
if thereafter during the Term, in the 

                                       19
<PAGE>
 
reasonable good-faith determination of Officer, Employer materially breaches
this Agreement and Employer fails to cure such breach within fifteen (15) days
after receipt of notice thereof, then, Officer, without limitation on any other
rights he may have hereunder, may, within one (1) year after he first has
knowledge of such breach, elect to terminate his employment hereunder and to
treat such termination as a termination pursuant to Section 6 hereof, subject,
however, to the following additional benefits and modifications to Officer's
rights as set forth in said Section 6 (any one or more of which modifications
Officer may elect to waive):

          (i) Employer shall not be entitled to reduce Officer's salary or any
     Additional Benefits to which Officer shall thereafter be entitled.

          (ii) Officer's pro-rata entitlement to an award under any then
     existing long-term incentive performance plan shall be calculated upon the
     assumption that the performance under such plan is then "on plan."

          (iii) In lieu of the severance benefits described in Sections 6(a) and
     (b) hereof, within five (5) business days of the effective date of such
     termination of employ-

                                       20
<PAGE>
 
     ment, Company shall pay to Officer a cash lump sum in an amount equal to
     the product of (A) the sum of (1) Officer's annual base salary in effect
     immediately prior to the termination of Officer's employment (or prior to a
     reduction in salary giving rise to a breach of this Agreement), plus
     (2) the target bonus ("Target Bonus") under the Employer's Annual Incentive
     Plan for Executive Officers (the "Annual Incentive Plan") in respect of the
     year in which such termination of employment occurs or the year in which
     the Change in Control occurs, whichever is greater (provided, however, that
                                                         --------  -------
     if the termination of Officer's employment occurs under the circumstances
     entitling him to benefits under Section 8(e) hereof, the Target Bonus shall
     be in respect of the year in which such termination of employment occurs),
     and (B) the number three.

          (iv) Within five (5) days following such termination of employment,
     Employer shall pay to Officer a lump sum cash amount (the "Pro-Rata Bonus")
     equal to the product of (A) the target bonus to which Officer would have
     been entitled under the Annual Incentive Plan in respect 

                                       21
<PAGE>
 
     of the year in which such termination occurs (assuming for this purpose
     that performance under the Annual Incentive Plan is "on plan" for such
     year) and (B) a fraction, the numerator of which shall be the number of
     months (including fractions thereof) from the first day of the fiscal year
     during which such termination occurs to the date on which such termination
     occurs, and the denominator of which shall be twelve (12); provided,
                                                                --------
     however, that if such termination of employment occurs during the same year
     -------
     in which the Change in Control occurs, the Pro-Rata Bonus shall be offset
     by any payments received under the Annual Incentive Plan in connection with
     such Change in Control.

          (v) The remaining Term shall be deemed to be three (3) years (but in
     no event shall the remaining Term be deemed to extend beyond Officer's
     sixty-fifth (65th) birthday).

          (b) For purposes of this Agreement, a "Change in Control" shall be
deemed to have occurred if the event set forth in any one of the following
paragraphs shall have occurred:

                                       22
<PAGE>
 
          (i) any Person (as defined below) is or becomes the Beneficial Owner
     (as defined in Rule 13d-3 under the Securities Exchange Act of 1934 (the
     "Exchange Act")), directly or indirectly, of securities of Employer (not
     including in the securities beneficially owned by such Person any
     securities acquired directly from Employer or its affiliates) representing
     25% or more of either the then outstanding shares of common stock of
     Employer or the combined voting power of Employer's then outstanding
     securities, excluding any Person who becomes such a beneficial owner in
     connection with a transaction described in clause (A) of paragraph (iii)
     below; or

          (ii) the following individuals cease for any reason to constitute a
     majority of the number of directors then serving: individuals who, on
     December 10, 1996, constitute the Board and any new director (other than a
     director whose initial assumption of office is in connection with an actual
     or threatened election contest, including but not limited to a consent
     solicitation, relating to the election of directors of Employer) whose
     appointment or election by the Board or nomination for election by

                                       23
<PAGE>
 
     Employer's stockholders was approved by a vote of at least two-thirds (2/3)
     of the directors then still in office who either were directors on December
     10, 1996, or whose appointment, election or nomination for election was
     previously so approved; or

          (iii) there is consummated a merger or consolidation of Employer with
     any other corporation, other than (A) a merger or consolidation which would
     result in the voting securities of Employer outstanding immediately prior
     to such merger or consolidation continuing to represent (either by
     remaining outstanding or by being converted into voting securities of the
     surviving entity or any parent thereof) at least 60% of the combined voting
     power of the voting securities of Employer or such surviving entity or any
     parent thereof outstanding immediately after such merger or consolidation,
     or (B) a merger or consolidation effected to implement a recapitalization
     of Employer (or similar transaction) in which no Person is or becomes the
     beneficial owner, directly or indirectly, of securities of Employer (not
     including in the securities beneficially owned by such Person any

                                       24
<PAGE>
 
     securities acquired directly from Employer or its subsidiaries)
     representing 25% or more of either the then outstanding shares of common
     stock of Employer or the combined voting power of Employer's then
     outstanding securities; or

          (iv) the stockholders of Employer approve a plan of complete
     liquidation or dissolution of Employer or there is consummated an agreement
     for the sale or disposition by Employer of all or substantially all of
     Employer's assets.

          Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to have occurred by virtue of the consummation of any transaction or
series of integrated transactions immediately following which the record holders
of the common stock of Employer immediately prior to such transaction or series
of transactions continue to have substantially the same proportionate ownership
in an entity which owns all or substantially all of the assets of Employer
immediately following such transaction or series of transactions.

          For purposes of this Section 8(b), "Person" shall have the meaning
given in Section 3(a)(9) of the Exchange Act, 

                                       25
<PAGE>
 
as modified and used in Sections 13(d) and 14(d) thereof, except that such term
shall not include (i) Employer or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of Employer or
any of its subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of Employer in substantially the
same proportions as their ownership of stock of Employer.

          (c) Whether or not Officer becomes entitled to severance and other
benefits under Section 8(a) or 8(e) hereof, if any of the payments or benefits
received or to be received by Officer in connection with a Change in Control or
Officer's termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with Employer, any Person
whose actions result in a Change in Control or any Person affiliated with
Employer or such Person) (such payments or benefits, excluding the Gross-Up
Payment, being hereinafter referred to as the "Total Payments") will be subject
to the excise tax imposed under Section 4999 of the Code (the "Excise Tax"),
Employer shall pay 

                                       26
<PAGE>
 
to Officer an additional amount (the "Gross-Up Payment") such that the net
amount retained by Officer, after deduction of any Excise Tax on the Total
Payments and any federal, state and local income and employment taxes and Excise
Tax upon the Gross-Up Payment, shall be equal to the Total Payments. For
purposes of determining whether any of the Total Payments will be subject to the
Excise Tax and the amount of such Excise Tax, (A) all of the Total Payments
shall be treated as "parachute payments" (within the meaning of Section
280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel")
reasonably acceptable to Officer and selected by the accounting firm which was,
immediately prior to the Change in Control, Employer's independent auditor (the
"Auditor"), such payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A) of the Code,
(B) all "excess parachute payments" within the meaning of Section 280G(b)(l) of
the Code shall be treated as subject to the Excise Tax unless, in the opinion of
Tax Counsel, such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered (within the meaning of
Section 280G(b)(4)(B) of the 

                                       27
<PAGE>
 
Code) in excess of the Base Amount allocable to such reasonable compensation, or
are otherwise not subject to the Excise Tax, and (C) the value of any noncash
benefits or any deferred payment or benefit shall be determined by the Auditor
in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, Officer shall be
deemed to pay federal income tax at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be made and
state and local income taxes at the highest marginal rate of taxation in the
state and locality of Officer's residence on the date of termination of
employment (or if there is no such date of termination, then the date on which
the Gross-Up Payment is calculated for purposes of this Section 8), net of the
maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes. In the event that the Excise Tax is finally
determined to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, Officer shall repay to Employer, within five
(5) business days following the time that the amount of such reduction in the
Excise Tax is

                                       28
<PAGE>
 
finally determined, the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable to the Excise
Tax and federal, state and local income and employment taxes imposed on the
Gross-Up Payment being repaid by Officer), to the extent that such repayment
results in a reduction in the Excise Tax and a dollar-for-dollar reduction in
Officer's taxable income and wages for purposes of federal, state and local
income and employment taxes, plus interest on the amount of such repayment at
120% of the rate provided in Section 1274(b)(2)(B) of the Code. In the event
that the Excise Tax is determined to exceed the amount taken into account
hereunder in calculating the Gross-Up Payment (including by reason of any
payment the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), Employer shall make an additional Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions payable by Officer
with respect to such excess) within five (5) business days following the time
that the amount of such excess is finally determined. Officer and Employer shall
each reasonably cooperate with the other in connection with any administrative
or judicial proceedings

                                       29
<PAGE>
 
concerning the existence or amount of liability for Excise Tax with respect to
the Total Payments.

          (d) Notwithstanding Officer's entitlements as set forth in this
Section 8 or any other plan, arrangement or agreement with the Employer, any
Person whose actions result in a Change in Control or any Person affiliated with
the Employer or such Person, if the value of those of such aggregate
entitlements constituting "parachute payments" under Section 28OG of the Code is
less than the maximum amount Officer is entitled to receive without incurring a
liability under Section 28OG of the Code for any reason, including that some or
all of such entitlements constitute reasonable compensation for services
rendered or to be rendered (and do not, therefore, constitute "parachute
payments"), then, in such event, Officer shall be entitled to receive such
maximum amount. All calculations with respect to this Section 8(d) shall be
performed by the Auditor in accordance with the principles set forth in Section
8(c) hereof.

          (e) For purposes of this Agreement, Officer's employment shall be
deemed to have been terminated following a Change in Control in accordance with
Section 8(a) hereof if, 

                                       30
<PAGE>
 
during the pendency of a Potential Change in Control (as defined below) or
within six (6) months following the date on which such Potential Change in
Control ceases to exist (such periods being hereinafter referred to collectively
as the "Potential Change in Control Period"), in either case whether or not a
Change in Control subsequently occurs, (i) Officer's employment is terminated by
Employer without Cause or (ii) in the good-faith determination of Officer,
Employer materially breaches this Agreement and thereafter (whether or not
during the Potential Change in Control Period) fails to cure such breach within
fifteen (15) days after receipt of notice thereof and within one (1) year after
Officer first has knowledge of such breach Officer terminates his employment.

          A "Potential Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:

          (A) Employer enters into an agreement, the consummation of which would
     result in the occurrence of a Change in Control;

                                       31
<PAGE>
 
          (B) Employer or any Person publicly announces an intention to take or
     to consider taking actions which, if consummated, would constitute a Change
     in Control;

          (C) any Person becomes the beneficial owner, directly or indirectly,
     of securities of Employer (not including in the securities beneficially
     owned by such Person any securities acquired directly from Employer or its
     affiliates) representing 15% or more of either the then outstanding shares
     of common stock of Employer or the combined voting power of Employer's then
     outstanding securities;

          (D) the filing with the Office of Thrift Supervision and/or Federal
     Deposit Insurance Corporation or their successor of an application for
     Change in Control; or

          (E) the Board adopts a resolution to the effect that, for purposes of
     this Agreement, a Potential Change in Control has occurred.

                                       32
<PAGE>
 
          (a) Notwithstanding the provisions of Section 11(f) hereof, Employer
also shall pay to Officer all reasonable legal fees and expenses incurred by
Officer in disputing (through litigation or arbitration) in good faith any issue
hereunder relating to the termination (or deemed termination) of Officer's
employment following a Change in Control or in connection with any tax audit or
proceeding to the extent attributable to the application of section 4999 of the
Code to any payment or benefit provided hereunder. Such payments shall be made
within five (5) business days after delivery of Officer's written requests for
payment accompanied with such evidence of fees and expenses incurred as Employer
reasonably may require.

                                       33
<PAGE>
 
          9. Reimbursement of Business Expenses. During Officer's employment
             ----------------------------------
hereunder, to the extent that such expenditures are substantiated by Officer as
required by the policies of Employer, Employer shall reimburse Officer promptly
for all expenditures (including travel, entertainment, parking, business
meetings and the monthly costs (including dues) of maintaining memberships at
appropriate clubs) made in accordance with rules and policies established from
time to time by the Board in pursuance and furtherance of Employer's business
and goodwill.

                                       34
<PAGE>
 
          10. Indemnity. To the extent permitted by applicable law and the
              ---------
By-Laws of Employer (as from time to time in effect) and without in any way
impairing or affecting any rights to indemnification that Officer has by reason
of any agreement to which he is party as of the date hereof, Employer shall
indemnify Officer and hold him harmless for any acts or decisions made by him in
good faith while performing services for Employer, and shall use reasonable
efforts to obtain coverage for him under liability insurance policies now in
force or hereafter obtained during his employment hereunder covering the other
officers or directors of Employer. To the same extent, Employer shall pay all
expenses, including reasonable attorneys' fees and the amounts of court approved
settlements, actually incurred by Officer in connection with the defense of any
action, suit or proceeding, and in connection with any appeal thereon, which has
been and/or may be brought against Officer by reason of Officer's services as an
officer or agent of Employer or of a subsidiary of Employer.

          11. Miscellaneous.
              -------------

                                       35
<PAGE>
 
          (a) Succession. This Agreement shall inure to the benefit of and shall
              ----------
be binding upon Employer, its successors and assigns, but without the prior
written consent of Officer this Agreement may not be assigned other than in
connection with a merger or sale of substantially all the assets of the Company
or similar transaction in which the successor or assignee assumes (whether by
operation of law or express assumption) all obligations of the Company hereunder
(including without limitation those in Section 8 hereof). The obligations and
duties of Officer hereunder shall be personal and not assignable.

          (b) Notices. Any notices provided for in this Agreement shall be sent
              -------
to Employer at 9200 Oakdale Avenue, Chatsworth, California 91311, Attention:
Executive Vice President--Legal, with a copy to the Chairman of the Compensation
Committee of the Board at the same address, or to such other address as Employer
may from time to time in writing designate, and to Officer at such address as he
may from time to time in writing designate (or his business address of record in
the absence of such designation), with a copy to The AYCO Corporation, Suite
840, 2010 Main Street, Irvine, Cali-

                                       36
<PAGE>
 
fornia 92714-7213, Attention: Bradley E. Comp. All notices shall be deemed to
have been given two (2) business days after they have been deposited as
certified mail, return receipt requested, postage paid, or one (1) business day
after they have been deposited as overnight mail, in either event properly
addressed to the designated address of the party to receive the notice, or shall
be deemed to have been given at the time receipt is acknowledged if given by any
form of electronic communication.

          (c) Entire Agreement. This instrument contains the entire agreement of
              ----------------
the parties relating to the subject matter hereof, and it replaces and
supersedes any prior agreements between the parties relating to said subject
matter. No modifications of this Agreement shall be valid unless made in writing
and signed by the parties hereto.

          (d) Waiver. The waiver of the breach of any term or of any condition
              ------
of this Agreement shall not be deemed to constitute the waiver of any other
breach of the same or any other term or condition.

                                       37
<PAGE>
 
          (e) California Law. This Agreement shall be construed and interpreted
              --------------
in accordance with the laws of California, to the extent controllable by
stipulation of the parties.

          (f) Attorneys' Fees in Action on Contract. If any litigation or
              -------------------------------------
arbitration shall occur between the Officer and Employer, which litigation or
arbitration arises out of or as a result of this Agreement or the acts of the
parties hereto pursuant to this Agreement, or which seeks an interpretation of
this Agreement, the prevailing party in such litigation or arbitration, in
addition to any other judgment or award, shall be entitled to receive such sums
as the court or arbitrator(s) hearing the matter shall find to be reasonable as
and for the attorneys' fees of the prevailing party.

          (g) Confidentiality and Competition. Officer shall not divulge or
              -------------------------------
otherwise disclose, directly or indirectly, any trade secret or other
confidential information concerning the business or policies of the Company or
any of its affiliates which he may have learned as a result of his employment
hereunder or prior thereto as an employee, officer or director of the Company or
any of its affiliates, except to the extent such use or disclosure is (i)
necessary to the performance of 

                                       38
<PAGE>
 
this Agreement and in furtherance of the Company's best interests, (ii) required
by applicable law, (iii) lawfully obtainable from other sources or (iv)
authorized by the Company. The provisions of this subsection shall survive the
suspension or termination, for any reason, of Officer's employment hereunder.

          During the course of Officer's employment hereunder, Officer shall not
compete, directly or indirectly, with the Company in the businesses then
conducted by the Company.

          (h) Remedies of Employer. Officer acknowledges that the services he is
              --------------------
obligated to render under the provisions of this Agreement are of a special,
unique, unusual, extraordinary and intellectual character, which gives this
Agreement peculiar value to Employer, and that the loss of these services cannot
be reasonably or adequately compensated in damages in an action at law and it
would be difficult (if not impossible) to replace such services. By reason
thereof, if Officer violates any of the material provisions of this Agreement,
Employer, in addition to any other rights and remedies available under this
Agreement or under applicable law, shall be entitled to seek injunctive relief,
from a 

                                       39
<PAGE>
 
tribunal of competent jurisdiction, restraining Officer from committing or
continuing any violation of this Agreement, or from the performance of services
to any other business entity, or both.

          (i) Severability. If this Agreement shall for any reason be or become
              ------------
unenforceable by either party, this Agreement shall thereupon terminate and
become unenforceable by the other party as well. In all other respects, if any
provision of this Agreement is held invalid or unenforceable, the remainder of
this Agreement shall nevertheless remain in full force and effect, and, if any
provision is held invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and effect in all
other circumstances.

                                       40
<PAGE>
 
          IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.

                                                 OFFICER


                                                 /s/ Ray W. Sims
                                                 ---------------
     APPROVED:


     By: /s/ Willis B. Wood, Jr.
         -----------------------
     Chairman, Compensation
     Committee of the Board
     of Directors

                                       41

<PAGE>
 
                                                                   EXHIBIT 10.18

                             AMENDMENT NO. 1996-2
                                TO SUPPLEMENTAL
                           EXECUTIVE RETIREMENT PLAN

          This Amendment No. 1996-2 is made to the Great Western Supplemental
Executive Retirement Plan (as amended) (the "Plan").  Capitalized terms used
but not defined herein shall have the meanings ascribed to them in the Plan.

          WHEREAS, Great Western Financial Corporation (the "Company") has
determined that it is in its best interest and that of its stockholders to amend
the Plan as set forth herein;

          NOW, THEREFORE, the Plan is amended as follows:

          1.   Section 1.3 of the Plan is amended by deleting the definition of
"Change in Control" and inserting in lieu thereof the following:

               A "Change in Control" shall be deemed to have occurred if the
          event set forth in any one of the following paragraphs shall have
          occurred:

          a.   Any Person is or becomes the Beneficial Owner (as defined in
               Rule 13d-3 under the Exchange Act), directly or indirectly, of
               securities of the Company (not including in the securities
               beneficially owned by such Person any securities acquired
               directly from the Company or its affiliates) representing 25% or
               more of either the then outstanding shares of common stock of the
               Company or the combined voting power of the Company's then
               outstanding securities, excluding any Person who becomes such a
               beneficial owner in connection with a transac- 
<PAGE>
 
               tion described in clause (i) of paragraph c. below; or

          b.   The following individuals cease for any reason to constitute a
               majority of the number of directors then serving: individuals
               who, on December 10, 1996, constitute the Board of Directors and
               any new director (other than a director whose initial assumption
               of office is in connection with an actual or threatened election
               contest, including but not limited to a consent solicitation,
               relating to the election of directors of the Company) whose
               appointment or election by the Board of Directors or nomination
               for election by the Company's stockholders was approved by a vote
               of at least two-thirds (2/3) of the directors then still in
               office who either were directors on December 10, 1996, or whose
               appointment, election or nomination for election was previously
               so approved; or

          c.   There is consummated a merger or consolidation of the Company
               with any other corporation, other than (i) a merger or
               consolidation which would result in the voting securities of the
               Company outstanding immediately prior to such merger or
               consolidation continuing to represent (either by remaining
               outstanding or by being converted into voting securities of the
               surviving entity or any parent thereof) at least 60% of the
               combined voting power of the voting securities of the Company or
               such surviving entity or any parent thereof outstanding
               immediately after such merg- 

                                       2
<PAGE>
 
               er or consolidation, or (ii) a merger or consolidation effected
               to implement a recapitalization of the Company (or similar
               transaction) in which no Person is or becomes the beneficial
               owner, directly or indirectly, of securities of the Company (not
               including in the securities beneficially owned by such Person any
               securities acquired directly from the Company or its
               subsidiaries) representing 25% or more of either the then
               outstanding shares of common stock of the Company or the combined
               voting power of the Company's then outstanding securities; or

          d.   The stockholders of the Company approve a plan of complete
               liquidation or dissolution of the Company or there is consummated
               an agreement for the sale or disposition by the Company of all
               or substantially all of the Company's assets.

          Notwithstanding the foregoing, a "Change in Control" shall not be
          deemed to have occurred by virtue of the consummation of any
          transaction or series of integrated transactions immediately following
          which the record holders of the common stock of the Company
          immediately prior to such transaction or series of transactions
          continue to have substantially the same proportionate ownership in an
          entity which owns all or substantially all of the assets of the
          Company immediately following such transaction or series of 
          transactions.

                                       3
<PAGE>
 
          2.   Section 1.3 of the Plan is amended by deleting therefrom the
definition of "Eligible Employee" and inserting in lieu thereof the following:

          "Eligible Employee" means each employee of the Company or a Subsidiary
          who is both (1) a participant in the Retirement Plan and (2) an
          individual specifically listed on Appendix I as a Participant in this
          Plan.  Appendix I, which may also list former Participants, may be
          amended by the Board of Directors or the Committee.

          3.   Section 1.3 of the Plan is amended by inserting immediately
following the definition of "Participant" the following:

               "Person" shall have the meaning given in Section 3(a)(9) of the
          Exchange Act, as modified and used in Sections 13(d) and 14(d)
          thereof, except that such term shall not include (i) the Company or
          any of its Subsidiaries, (ii) a trustee or other fiduciary holding
          securities under an employee benefit plan of the Company or any of its
          Subsidiaries, (iii) an underwriter temporarily holding securities
          pursuant to an offering of such securities, or (iv) a corporation
          owned, directly or indirectly, by the stockholders of the Company in
          substantially the same proportions as their ownership of stock of
          Company.

                                       4
<PAGE>
 
          4.   Section 1.3 of the Plan is amended by inserting immediately
following the definition of "Plan Year" the following:

               A "Potential Change in Control" shall be deemed to have occurred
          if the event set forth in any one of the following paragraphs shall
          have occurred:

               (i)  the Company enters into an agreement, the consummation of
          which would result in the occurrence of a Change in Control;

               (ii)  the Company or any Person publicly announces an intention
          to take or to consider taking actions which, if consummated, would
          constitute a Change in Control;

               (iii)  any Person becomes the beneficial owner, directly or
          indirectly, of securities of the Company (not including in the
          securities beneficially owned by such Person any securities acquired
          directly from the Company or its affiliates) representing 15% or more
          of either the then outstanding shares of common stock of the Company
          or the combined voting power of the Company's then outstanding 
          securities;

               (iv) the filing with the Federal Home Loan Bank Board and/or the
          FSLIC or their successor of an application for Change in Control; or

               (v)  the Board of Directors adopts a resolution to the effect
          that, for purposes of this Plan, a Potential Change in Control has
          occurred.

                                       5
<PAGE>
 
               A "Potential Change in Control Period" shall commence upon the
          occurrence of a Potential Change in Control and shall end six months
          following the earlier to occur of (i) a Change in Control and (ii) the
          date on which such Potential Change in Control ceases to exist
          (whether by resolution of the Board of Directors of the Company or
          otherwise).

          5.   Section 1.3 of the Plan is amended by adding at the end thereof
the following:

          For A. William Schenck III, his Years of Service shall also include
          his years of service (26 years and two months) as an employee of PNC
          Bank Corp.  For Jaynie M. Studenmund, her Years of Service shall also
          include her years of service (11 years) as an employee of First
          Interstate Bancorp.

          6.   Section 2.1 of the Plan is amended in its entirety to read as
follows:

          2.1 - Eligibility Requirements.
                ------------------------ 

               Any executive who is an Eligible Employee shall be a Participant.

          7.   Sections 4.1(c) and (d) are amended in their entirety to read as
follows:

               (c) the monthly benefit payment which is payable in the form of a
          single life annuity under the Retirement Plan (in the form of a
          Qualified Joint and Survivor Annuity under the Retirement Plan, in the
          case of a married Employee with an Employment Date on or after January
          1, 1989); and

                                       6
<PAGE>
 
               (d) for A. William Schenck III, less the aggregate monthly
          benefit payments which are payable in the form of a single life
          annuity (if single) or a joint and 50% survivor annuity with his
          spouse as beneficiary (if married), upon attainment of age 62, under
          the following plans:  PNC Bank Corp. Pension Plan, PNC Bank Corp.
          ERISA Excess Pension Plan and PNC Bank Corp. Supplemental Executive
          Retirement Income and Disability Plan.

          8.   Section 4.1 of the Plan is amended by adding the following as a
new Section 4.1(e):

               (e) for Jaynie M. Studenmund, less the aggregate monthly benefit
          payments which are payable in the form of a single life annuity (if
          single) or a joint and survivor annuity with her spouse as beneficiary
          (if married), upon attainment of age 62, under the Retirement Plan for
          Employees of First Interstate Bancorp and its Affiliates, and related
          excess plan.

          9.   Section 4.3 of the Plan is amended in its entirety to read as
follows:

          4.3 - Change in Control.
                ----------------- 

               If a Change in Control occurs and, within 24 months after such
          Change in Control a Participant's employment with the Company is
          terminated by the Company without cause or if a Participant 
          terminates his employment with the Company under circumstances that
          would entitle such Participant to receive Change-in-Control-related
          severance and other benefits under an employment agreement with the
          Company, a monthly retirement benefit

                                       7
<PAGE>
 
          shall be payable to such Participant as follows:

               (a) If the Participant's employment is terminated on or after
          attainment of age 55, such Participant's monthly retirement benefit,
          payable commencing the first day of the month after termination of
          employment and continuing for the period benefits are payable under
          the Retirement Plan will be such Participant's Normal Retirement
          Benefit computed by crediting all Years of Service to such
          Participant's Normal Retirement Date with no reduction to be made for
          commencement of benefits before Normal Retirement Date.

               (b) If a Participant's employment is terminated prior to
          attainment of age 55, such Participant shall be 100% in such
          Participant's Accrued Benefit as of the date of termination of
          employment and such Participant's benefit shall be payable upon the
          date which would have been such Participant's Early Retirement Date if
          such Participant had continued employment, with the benefit payable
          unreduced for commencement before Normal Retirement Date.

          For purposes of this Plan, a Participant's employment shall be deemed
          to have been terminated within 24 months following a Change in Control
          in accordance with this Section 4.3 if, during a Potential Change in
          Control Period, whether or not a Change in Control subsequently
          occurs, such Participant's employment with the Company is terminated
          by the Company without cause or if such Participant terminates 
          employment with the Company under circumstances that would entitle him
          to receive Change

                                       8
<PAGE>
 
          in Control-related severance and other benefits under an employment
          agreement with the Company.

          10.  The Plan is amended by deleting in its entirety Section 4.4
thereof and by renumbering Sections 4.5 through 4.10 (and references thereto) as
Sections 4.4 through 4.9, respectively.

          11.  Section 6.1 of the Plan is amended in its entirety to read as
follows:

          6.1 - Amendments and Termination.
                -------------------------- 

               The Company shall have the right to terminate or amend this Plan
          at any time by resolution of the Board of Directors; provided,
                                                               -------- 
          however, that during a Potential Change in Control Period and during
          -------                                                             
          the twenty-four (24) month period following a Change in Control, this
          Plan may not be terminated nor may this Plan amended without the
          prior written consent of two-thirds (2/3) of those individuals who
          were Participants or Beneficiaries as of December 10, 1996, if such
          amendment would be adverse to the interests of such Participants or
          Beneficiaries (including, without limitation, any reduction of
          payments already due or being paid under this Plan). Any such
          amendment shall be stated in an instrument in writing, executed by the
          Company in the same manner as this Plan.

          12.  The second sentence of Section 6.2 of the Plan is amended in its
entirety to read as follows:

          In addition to the limitations on the termination or amendment of this
          Plan set forth in Section 6.1 hereof, no such termination or amendment
          shall result in the 

                                       9
<PAGE>
 
          forfeiture of (i) any augmentation of Retirement Plan benefits
          pursuant to Section 4.5 hereof or (ii) an Accrued Benefit to which
          John F. Maher had already become entitled pursuant to Section 4.2
          hereof or (ii) an Accrued Benefit (including a Spouse's Death Benefit)
          which any Participant who has attained age 55 would have been
          entitled to receive if he had terminated employment immediately prior
          to the effective date of such amendment or termination.

          13.  The Plan is amended by adding the following as a new Appendix I:

                                  APPENDIX I

                             LIST OF PARTICIPANTS

          Clifford A. Miller
          James F. Montgomery
          John F. Maher
          J. Lance Erikson
          Carl F. Geuther
          Edward R. Hoffman
          Anthony C. La Scala
          Michael M. Pappas
          A. William Schenck III
          Jaynie M. Studenmund
          Curtis J. Crivelli
          Eugene A. Crane
          Joe M. Jackson

          14.  Effective as of January 6, 1997, Appendix I of the Plan is
amended by adding Ray W. Sims to the list of Participants in the Plan.

          Except for Amendment number 14, which shall be effective as of January
6, 1997, the effective date of this Amendment No. 1996-2 shall be December 10,
1996.  

                                       10
<PAGE>
 
Except as herein modified, the Plan shall remain in full force and effect.

                         GREAT WESTERN
                           FINANCIAL CORPORATION



                         By:/s/ J. Lance Erikson
                            --------------------
                         Executive Vice President,              
                         General Counsel and Secretary

                                       11

<PAGE>
                                                                   EXHIBIT 10.24

                              AMENDMENT NO. 1996-1
                              TO 1988 STOCK OPTION
                               AND INCENTIVE PLAN

          This Amendment No. 1996-1 is made to the Great Western Financial
Corporation 1988 Stock Option and Incentive Plan, as amended effective July 26,
1994 (the "Plan").  Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Plan.

          WHEREAS, Great Western Financial Corporation (the "Company") has
determined that it is in its best interest and that of its stockholders to amend
the Plan as set forth herein;

          NOW, THEREFORE, the Plan is amended as follows:

          1.   Section 5.8 of the Plan is amended in its entirety to read as
follows:

          5.8  Acceleration upon a Change in Control.
               ------------------------------------- 

               Upon the occurrence of a Change in Control (as defined in Section
          7.9 hereof), each Option granted under Section 5.2 hereof shall
          become exercisable in full and that portion of any Option granted
          under Section 5.3 hereof equal to that percentage of the calendar year
          that the holder served as a director shall become exercisable.

          2.   Section 6.3 of the Plan is amended in its entirety to read as
follows:

          6.3  Acceleration of Awards.
               ---------------------- 

               6.3.1.  Upon the occurrence of a Change in Control (as defined in
          Section 7.9 hereof), (i) each Option and Stock Appreciation Right
          under the Key Employee
<PAGE>
 
          Program shall become exercisable in full, (ii) Restricted Stock
          delivered under the Key Employee Program shall immediately vest free
          of restrictions, and (iii) each other Award outstanding under the Key
          Employee Program shall be fully vested and exercisable.

               6.3.2.  If, during a Potential Change in Control Period (as
          defined in Section 7.36 hereof), an Employee Participant's employment
          with the Corporation is terminated by the Corporation without cause
          or by the Employee Participant under circumstances that would entitle
          such individual to terminate his or her employment and receive
          severance benefits under the Company's Special Severance Plan,
          whether or not such Employee Participant is a participant in such
          Plan, (i) each Option and Stock Appreciation Right held by such
          Employee Participant shall become exercisable in full, (ii) Restricted
          Stock held by such Employee Participant shall immediately vest free
          of restrictions, and (iii) each other Award held by such Employee
          Participant shall be fully vested and exercisable.

          3.   The Plan is amended by deleting Section 7.19 and by renumbering
Sections 7.9 through 7.18 as Sections 7.10 through 7.19, respectively.

          4.   Section 7 of the Plan is amended by adding the following as a new
Section 7.9:

               7.9  A "Change in Control" shall be deemed to have occurred if
          the event set forth in any one of the following paragraphs shall have
          occurred:

                                       2
<PAGE>
 
               (i) any Person is or becomes the Beneficial Owner (as defined in
          Rule 13d-3 under the Exchange Act), directly or indirectly, of
          securities of the Corporation (not including in the securities
          beneficially owned by such Person any securities acquired directly
          from the Corporation or its affiliates) representing 25% or more of
          either the then outstanding shares of common stock of the Corporation
          or the combined voting power of the Corporation's then outstanding
          securities, excluding any Person who becomes such a beneficial owner
          in connection with a transaction described in clause (A) of paragraph
          (iii) below; or
               (ii) the following individuals cease for any reason to constitute
          a majority of the number of directors then serving: individuals who,
          on December 10, 1996, constitute the Board of Directors and any new
          director (other than a director whose initial assumption of office is
          in connection with an actual or threatened election contest,
          including but not limited to a consent solicitation, relating to the
          election of directors of the Corporation) whose appointment or
          election by the Board of Directors or nomination for election by the
          Corporation's stockholders was approved by a vote of at least two-
          thirds (2/3) of the directors then still in office who either were
          directors on December 10, 1996, or whose appointment, election or
          nomination for election was previously so approved; or

                (iii)  there is consummated a merger or consolidation of the
          Corporation with any other corporation, other than (A) a merger or
          consolidation which would result in the voting securities of the
          Corporation outstanding immediately prior to such 

                                       3
<PAGE>
 
          merger or consolidation continuing to represent (either by remaining
          outstanding or by being converted into voting securities of the
          surviving entity or any parent thereof) at least 60% of the combined
          voting power of the voting securities of the Corporation or such
          surviving entity or any parent thereof outstanding immediately after
          such merger or consolidation, or (B) a merger or consolidation
          effected to implement a recapitalization of the Corporation (or
          similar transaction) in which no Person is or becomes the beneficial
          owner, directly or indirectly, of securities of the Corporation (not
          including in the securities beneficially owned by such Person any
          securities acquired directly from the Corporation or its subsidiaries)
          representing 25% or more of either the then outstanding shares of
          common stock of the Corporation or the combined voting power of the
          Corporation's then outstanding securities; or

               (iv) the stockholders of the Corporation approve a plan of
          complete liquidation or dissolution of the Corporation or there is
          consummated an agreement for the sale or disposition by the
          Corporation of all or substantially all of the Corporation's assets.

          Notwithstanding the foregoing, a "Change in Control" shall not be
          deemed to have occurred by virtue of the consummation of any
          transaction or series of integrated transactions immediately following
          which the record holders of the common stock of the Corporation
          immediately prior to such transaction or series of transactions
          continue to have substantially the same proportionate ownership in an
          entity which

                                       4
<PAGE>
 
          owns all or substantially all of the assets of the Corporation 
          immediately following such transaction or series of transactions.

          5.   Section 7 of the Plan is amended by renumbering Sections 7.32
and 7.33 as Sections 7.33 and 7.34, respectively, and by renumbering Sections
7.34 through 7.38 as Sections 7.37 through 7.41, respectively.

          6.   Section 7 of the Plan is amended by adding the following as a new
Section 7.32:

               7.32  "Person" shall have the meaning given in Section 3(a)(9) of
          the Exchange Act, as modified and used in Sections 13(d) and 14(d)
          thereof, except that such term shall not include (i) the Corporation
          or any of its Subsidiaries, (ii) a trustee or other fiduciary holding
          securities under an employee benefit plan of the Corporation or any of
          its Subsidiaries, (iii) an underwriter temporarily holding securities
          pursuant to an offering of such securities, or (iv) a corporation
          owned, directly or indirectly, by the stockholders of the Corporation
          in substantially the same proportions as their ownership of stock of
          Corporation.

          7.   Section 7 of the Plan is amended by adding the following as a new
Section 7.35:

               7.35  A "Potential Change in Control" shall be deemed to have
          occurred if the event set forth in any one of the following
          paragraphs shall have occurred:

               (i)  the Corporation enters into an agreement, the consummation
          of which would result in the occurrence of a Change in Control;

                                       5
<PAGE>
 
               (ii)  the Corporation or any Person publicly announces an
          intention to take or to consider taking actions which, if 
          consummated, would constitute a Change in Control;

               (iii)  any Person becomes the beneficial owner, directly or
          indirectly, of securities of the Corporation (not including in the
          securities beneficially owned by such Person any securities acquired
          directly from the Corporation or its affiliates) representing 15% or
          more of either the then outstanding shares of common stock of the
          Corporation or the combined voting power of the Corporation's then
          outstanding securities;

               (iv) the filing with the Federal Home Loan Bank Board and/or the
          FSLIC or their successor of an application for Change in Control; or

               (v)  the Board of Directors adopts a resolution to the effect
          that, for purposes of this Agreement, a Potential Change in Control
          has occurred.

          8.   Section 7 of the Plan is amended by adding the following as a new
Section 7.36:

               7.36  "Potential Change in Control Period" shall mean a period
          commencing upon the occurrence of an event constituting a Potential 
          Change in Control and ending on the date six months following the 
          date on which such Potential Change in Control ceases to exist 
          (whether by Board resolution or otherwise).

                                       6
<PAGE>
 
          The effective date of this Amendment No. 1996-1 shall be December 10,
1996.  Except as herein modified, the Plan shall remain in full force and
effect.

                              GREAT WESTERN
                                FINANCIAL CORPORATION



                              By: /s/ J. Lance Erikson
                                  --------------------
                              Executive Vice President, 
                              General Counsel and
                              Secretary

                                       7

<PAGE>

                                                                   Exhibit 10.32
 
                      GREAT WESTERN FINANCIAL CORPORATION

                      NONQUALIFIED STOCK OPTION AGREEMENT
                      -----------------------------------

          THIS AGREEMENT dated as of the __ day of ___________, 19__, between
GREAT WESTERN FINANCIAL CORPORATION, a Delaware corporation (the
"Corporation"), and (the "Employee").

                              W I T N E S S E T H
                              -------------------

          WHEREAS, pursuant to the 1988 Stock Option and Incentive Plan, as
amended (the "Plan"), the Corporation has granted to the Employee as of the ___
day of _______, 19__ (the "Award Date") a nonqualified stock option to purchase
all or any part of __________ authorized but unissued or treasury shares of
Common Stock, $1.00 par value, of the Corporation upon the terms and conditions
set forth herein and in the Plan.

          NOW, THEREFORE, in consideration of the mutual promises and covenants
made herein and the mutual benefits to be derived herefrom, the parties hereto
agree as follows:

          1.  Defined Terms.  Capitalized terms used herein and not otherwise
              -------------                                                  
defined herein shall have the meaning assigned to such terms in the Plan.

          2.  Grant of Option.  This Agreement evidences the Corporation's grant
              ---------------                                                   
to the Employee of the right and option to purchase, on the terms and conditions
set forth herein and, to the extent expressly herein provided, in the Plan, all
or any part of an aggregate of ________ shares of the Common Stock of the
Corporation at the price of $____ per share (the "Option"), exercisable from
time to time, subject to the provisions of this Agreement, prior to the close
of business on the day before the tenth anniversary of the Award Date (the
"Expiration Date").  Such price equals the Fair Market Value of the
Corporation's Common Stock as of the Award Date.
<PAGE>
 
          3.  Exercisability of Option.  Except as provided in Sections 6 and 8
              ------------------------                                          
hereof, no shares may be purchased by exercise of the Option until the
expiration of one year after the Award Date. The Option shall become exercisable
in installments as to 25% of the aggregate number of shares set forth in Section
2 hereof (subject to adjustment) on and after the first anniversary of the Award
Date and as to an additional 25% of the aggregate number of such shares (subject
to adjustment) on each of the second, third and fourth anniversaries of the
Award Date. To the extent the Employee does not in any year purchase all or any
part of the shares to which the Employee is entitled, the Employee has the
right cumulatively thereafter to purchase any shares not so purchased and such
right shall continue until the Option terminates or expires. No fewer than 25
shares may be purchased at any one time, unless the number purchased is the
total number at the time available for purchase under the Option.

          4.  Method of Exercise of Option.  The Option shall be exercisable by
              ----------------------------                                     
the delivery to the Corporation of a written notice stating the number of shares
to be purchased pursuant to the Option and accompanied by payment in (i) cash
or by check payable to the order of the Corporation for the full purchase price
of the shares to be purchased, (ii) at the discretion of the Administrator and
pursuant to such conditions and restrictions as the Committee may establish by
the exchange of shares of Common Stock of the Corporation then owned by the
Employee having a Fair Market Value equal to such purchase price, (iii) at the
discretion of the Administrator, by the payment and exchange of part cash and
part stock with the sum of the cash and Fair Market Value of the stock equal to
such purchase price, or (iv) by the payment of such other form of legal
consideration as may be approved by the Board of Directors and the
Administrator.  In addition, the Employee (or the Employee's Beneficiary or
Personal Representative) shall furnish any written statements required pursuant
to Section 10 below.

                                       2
<PAGE>
 
          5.  Continuance of Employment.  As a condition of the Option, the
              -------------------------                                    
Employee hereby agrees to remain in the employ of the Corporation or one of its
Subsidiaries for a period of one year after the Award Date.  Nothing contained
in this Agreement or in the Plan shall confer upon the Employee any right with
respect to the continuation of his or her employment by the Corporation or any
Subsidiary or interfere in any way with the right of the Corporation or of any
Subsidiary at any time to terminate such employment or to increase or decrease
the compensation of the Employee from the rate in existence at any time.

          6.  Effect of Termination of Employment or Death.  The Option and all
              --------------------------------------------                     
other rights hereunder, to the extent not exercised, shall terminate and become
null and void at such time as the Employee ceases to be employed by either the
Corporation or any Subsidiary, except that

               (a) if the Employee's employment terminates (other than (i) as a
     result of death, (ii) after having attained 55 years of age with five (5)
     years of vesting service under the Great Western Retirement Plan (as in
     effect as of January 1, 1997) (the "Retirement Plan") (such termination
     hereinafter referred to as being the result of "Retirement") or (iii) at
     the request of the Corporation or any Subsidiary as determined by the
     Administrator in its sole discretion), the Employee may at any time within
     a period of three months after such termination exercise the Option to the
     extent the Option was exercisable at the date of such termination;

               (b) if the Employee's employment terminates as a result of
     Retirement, the Employee may at any time within a period of two years after
     such Retirement exercise the Option to the extent the Option was
     exercisable at the date of such retirement; provided, that, for purposes
     of the Option, an Employee shall be deemed to have terminated as a result
     of Retirement if, following the date on which the Employee has attained 55
     years of age, during a 

                                       3
<PAGE>
 
     Potential Change in Control Period or during the two (2)-year period
     following a Change in Control, such Employee's employment is terminated
     under the circumstances described in subsection (d) of this Section 6);

               (c) if the Employee dies while in the employ of the Corporation
     or any Subsidiary, or within three months after a termination described in
     subsection (a) of this Section 6 (excluding a termination described in the
     parenthetical clause thereof), or within two years after termination as a
     result of Retirement as described in subsection (b) of this Section 6, then
     the Option, to the extent that the Employee was entitled to exercise the
     Option on the date of his or her death (or such earlier termination), may
     be exercised within a period of one year after the date of death by the
     Employee's Beneficiary; and

               (d) if, during a Potential Change in Control Period (whether or
     not a Change in Control subsequently occurs), the Employee's employment is
     terminated by the Corporation or a Subsidiary without cause or by the
     Employee under circumstances that would entitle such individual to
     terminate employment and receive severance and other benefits (i) if the
     Employee is a member of the Executive Management Committee, under his or
     her employment agreement or (ii) if the Employee is not a member of the
     Executive Management Committee, under the Company's Special Severance Plan
     (whether or not such Employee is a participant in such Plan), then any
     portion of the Option that was not then exercisable shall become fully
     exercisable;

provided, however, that in no event may the Option be exercised by anyone under
this Section or otherwise after the Expiration Date.  If the Employee is
employed by an entity which ceases to be a Subsidiary, other than by merger with
or liquidation into another Subsidiary, such event shall be deemed for purposes
of this Section 6 to 

                                       4
<PAGE>
 
be a termination of the Employee's employment described in subsection (a).

          7.  Non-Transferability of Option.  During the Employee's lifetime,
              -----------------------------                                  
the Option and any other rights hereunder may be exercised only by the Employee,
except as otherwise expressly provided in Section 6.1.3 of, or pursuant to, the
Plan.

          8.  Adjustments and Other Effects (including Termination) upon Certain
              ------------------------------------------------------------------
Events.  If the outstanding shares of the Corporation's Common Stock are changed
- ------                                                                          
into or exchanged for cash or a different number or kind of shares or securities
of the Corporation, or if additional shares or new or different shares or
securities are distributed with respect to the outstanding shares of the
Corporation's Common Stock, through a reorganization or merger in which the
Corporation is the surviving entity or through a combination, consolidation,
recapitalization, reclassification, stock split, stock dividend, reverse stock
split, stock consolidation or other capital change or adjustment, an appropriate
proportionate equitable adjustment shall be made in the number and kind of
shares or other consideration that is subject to or may be delivered pursuant to
the Option. A corresponding adjustment to the consideration payable with respect
to the Option shall also be made as appropriate. In addition, the Option and
rights of the Employee hereunder are subject to adjustment, modification and
termination in certain other circumstances and upon occurrence of certain other
events, as set forth in the provisions of Article II, Sections 6.3 and 6.4, and
the last sentence of Section 6.2 of the Plan, to the extent applicable to
Options granted under the Key Employee Program.

          9.  Limitation of Employee's Rights.  Neither the Employee nor any
              -------------------------------                               
other person entitled to exercise the Option shall have any of the rights or
privileges of a stockholder of the Corporation in respect of any shares
deliverable upon exercise of the Option unless and until a certificate
representing such shares shall have been issued in the name of the Employee or
such person.

                                       5
<PAGE>
 
          10.  Representations of the Employee.  The Employee agrees that the
               -------------------------------                               
Corporation shall not be required to deliver shares upon the exercise of the
Option if prevented or prohibited from doing so under applicable law. If the
shares are not registered with the Securities and Exchange Commission at the
time of such exercise, the Employee shall be required to deliver an investment
letter in form acceptable to the Corporation and all certificates representing
shares issued shall bear appropriate legends reflecting restrictions on transfer
under applicable laws. The Employee agrees by acceptance of the Option and, in
such letter, the Employee shall represent that he or she will acquire the shares
issuable upon such exercise for his or her own account, for the purpose of
investment, and not with a view to or for sale in connection with any
distribution, and that he or she will not offer, sell or otherwise transfer or
dispose of such shares or any interest therein except in compliance with all
securities laws applicable to such action. The Corporation may impose stop
transfer instructions to implement such limitations, if applicable. Any person
or persons entitled to exercise the Option under the provisions of Section 7
hereof shall be bound by and obligated under the provisions of this Section 10
to the same extent as is the Employee.

          11.  Tax Withholding.  The Corporation shall be entitled to require
               ---------------                                               
deduction from other compensation payable to the Employee any sums required by
federal, state or local tax law to be withheld with respect to the exercise of
the Option, but, in the alternative, (i) the Corporation may require the
Employee or other person exercising the Option to advance such sums in cash, or
(ii) if the Employee or other person exercising the Option elects, the
Corporation may withhold shares of the Corporation's Common Stock having a Fair
Market Value equal to the sums required to be withheld.  If the Employee or
other person exercising the Option elects to advance such sums directly, written
notice of that election shall be delivered prior to such exercise and, whether
pursuant to such election or pursuant to a re-

                                       6
<PAGE>
 
quirement imposed by the Corporation, payment in cash or by check of such sums
for taxes shall be delivered within ten days after the date of exercise. If the
Employee or other person exercising the Option elects to have the Corporation
withhold shares of the Corporation's Common Stock having a Fair Market Value
equal to the sums required to be withheld, the value of the shares of the
Corporation's Common Stock to be withheld will be equal to the Fair Market Value
of such shares on the date that the amount of tax to be withheld is to be
determined (the "Tax Date"). Elections by the Employee to have shares of the
Corporation's Common Stock withheld for this purpose will be subject to the
following restrictions: (w) the election must be made prior to the Tax Date, (x)
the election must be irrevocable, (y) the election will be subject to the
approval or disapproval (as the case may be) of the Administrator, and (z) if
the Employee is an officer of the Corporation within the meaning of Section 16
of the Exchange Act, the election, in addition, may not be made within six
months of the grant of the Option (except that this limitation will not apply in
the event that the death or Disability of the Employee occurs prior to the
expiration of the six month period) and either must be made at least six months
prior to the Tax Date or in one of the periods beginning on the third business
day following the date of release of the Corporation's quarterly or annual
summary statements of sales and earnings and ending on the twelfth business day
following such date. The Corporation shall not be obligated to issue shares
and/or distribute cash to the Employee or other person exercising the Option
upon exercise of the Option until such payment has been received or shares have
been so withheld, unless withholding as of or prior to the date of such exercise
is sufficient to cover all such sums due or which may be due with respect to
such exercise.

          12.  Employment by Subsidiaries.  Employment by any Subsidiary shall
               --------------------------                                     
be considered as the equivalent of employment by the Corporation for all
purposes of this Agreement, unless the Board otherwise determines.

                                       7
<PAGE>
 
          13.  Notices.  Any notice to be given under the terms of this
               -------                                                 
Agreement shall be in writing and addressed to the Corporation at its principal
office in Chatsworth, California, to the attention of the Corporate Secretary
and to the Employee at the address given beneath the Employee's signature
hereto, or at such other address as either party may hereafter designate in
writing to the other.

          14.  Laws Applicable to Construction.  The Option has been granted,
               -------------------------------                               
executed and delivered at Chatsworth, California, and the interpretation,
performance and enforcement of this Agreement shall be governed by the laws of
the State of California, except as otherwise provided in Section 6.8 of the
Plan.

          15.  Plan.  The Option is subject to, and the Employee agrees to be
               ----                                                          
bound by, all of the terms and conditions of the provisions of Articles I and II
and Sections 4.2, 6.1, 6.3, 6.4, 6.5, 6.7 and 6.8 and the last sentence of
Section 6.2 of the Plan.  The Employee acknowledges receipt of a copy of the
Plan, which, to the extent set forth in the preceding sentence, is made a part
hereof by this reference.  Unless otherwise expressly provided in other
Sections of this Agreement, provisions of the Plan that confer discretionary
authority on the Administrator do not (and shall not be deemed to) apply to the
Option or create rights in the Employee unless such application or rights are
expressly so conferred by appropriate action of the Administrator, in its sole
discretion, under the Plan after the date hereof.

          16.  Successors.  This Agreement shall be binding upon and inure to
               ----------                                                    
the benefit of the Company, its successors and assigns, and of the Employee and
the Employee's Beneficiaries and Personal Representatives.

                                       8
<PAGE>
 
          IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed on its behalf by a duly authorized officer and the Employee has
hereunto set his or her hand.

GREAT WESTERN FINANCIAL
CORPORATION (a Delaware
corporation)


By
  ----------------------------------

   Title
        ----------------------------

                            EMPLOYEE

                            ----------------------------------
                                       (Signature)

                            ----------------------------------
                                       (Print Name)

                            ----------------------------------
                                         (Address)

                            ----------------------------------
                                  (City, State, Zip Code)


Executed:

                                       9
<PAGE>
 
                               CONSENT OF SPOUSE
                               -----------------

          In consideration of the execution of the foregoing Nonqualified Stock
Option Agreement by Great Western Financial Corporation, I,         , the
spouse of the Employee herein named, do hereby join with my spouse in executing
the foregoing Nonqualified Stock Option Agreement and do hereby agree to be
bound by all of the terms and provisions thereof and of the Plan.

DATED: __________, 19__.     ___________________
                             Signature of Spouse

<PAGE>
 
                                                                   EXHIBIT 10.33

                             AMENDMENT NO. 1996-1
                                    TO FORM OF
                      NONQUALIFIED STOCK OPTION AGREEMENT

          This Amendment No. 1996-1 is made to that certain Nonqualified Stock
Option Agreement (the "Agreement"), issued under the Great Western Financial
Corporation 1988 Stock Option and Incentive Plan (the "Plan"), and entered into
as of ___________, 19__ by and between Great Western Financial Corporation (the
"Company") and ______________ (the "Employee").  Capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Agreement.

          WHEREAS, the Company has determined that it is in its best interest
and that of its stockholders to amend the Agreement as set forth herein; and

          WHEREAS, the Employee has agreed to amend the Agreement as provided
herein;

          NOW, THEREFORE, the Agreement is amended as follows:

          1.   Each of Sections 6(a) and 6(b) of the Agreement is amended to
read as follows:

               (a) if the Employee's employment terminates (other than (i) as a
          result of death, (ii) after having attained 55 years of age with five
          (5) years of vesting service under the Great Western Retirement Plan
          (as in effect as of January 1, 1997) (the "Retirement Plan") (such
          termination hereinafter referred to as being the result of
          "Retirement") or (iii) at the request of the Corporation or any
          Subsidiary as determined by the Administrator in its sole discretion),
          the Employee may at any time within a period of three months after
          such termination exercise the Option to the extent the Option was
          exercisable at the date of such termination;

                                       1
<PAGE>
 
               (b) if the Employee's employment terminates as a result of
          Retirement, the Employee may at any time within a period of two years
          after such Retirement exercise the Option to the extent the Option
          was exercisable at the date of such retirement; provided, that, for
          purposes of the Option, an Employee shall be deemed to have terminated
          as a result of Retirement if, following the date on which the Em-
          ployee has attained 55 years of age, during a Potential Change in
          Control Period or during the two (2)-year period following a Change
          in Control, such Employee's employment is terminated under the circum-
          stances described in subsection (d) of this Section 6);

          2.   The Agreement is amended by (1) deleting from the end of Section
6(c) thereof the "." and inserting in lieu thereof "; and" and (3) inserting
immediately following Section 6(c) thereof the following as a new Section 6(d):

               (d) if, during a Potential Change in Control Period (whether or
          not a Change in Control subsequently occurs), the Employee's
          employment is terminated by the Corporation or a Subsidiary without
          cause or by the Employee under circumstances that would entitle such
          individual to terminate employment and receive severance and other
          benefits (i) if the Employee is a member of the Executive Management
          Committee, under his or her employment agreement or (ii) if the
          Employee is not a member of the Executive Management Committee, under
          the Company's Special Severance Plan (whether or not the Employee is a
          participant in such Plan), then any portion of the Option that was
          not then exercisable shall become fully exercisable;

                                       2
<PAGE>
 
          3.   Section 16 of the Agreement is amended in its entirety to read as
follows:

               16. Successors. This Agreement shall be binding upon and inure
                   ----------
          to the benefit of the Company, its successors and assigns, and of the
          Employee and the Employees Beneficiaries and Personal Representatives.

          The effective date of this Amendment No. 1996-1 shall be December 10,
1996.  Except as herein modified, the Agreement shall remain in full force and
effect.

                         GREAT WESTERN
                           FINANCIAL CORPORATION



                         By:/s/ J. Lance Erikson
                            --------------------
                         Executive Vice President,
                         General Counsel and Secretary

                                       3

<PAGE>
                                                                   EXHIBIT 10.35

 
                      GREAT WESTERN FINANCIAL CORPORATION
                                SENIOR OFFICER'S
                      NONQUALIFIED STOCK OPTION AGREEMENT
                      -----------------------------------

          THIS AGREEMENT dated as of the __ day of _____________, 19__, between
GREAT WESTERN FINANCIAL CORPORATION, a Delaware corporation (the "Corporation"),
and (the "Employee").

                              W I T N E S S E T H
                              -------------------

          WHEREAS, pursuant to the 1988 Stock Option and Incentive Plan, as
amended (the "Plan"), the Corporation has granted to the Employee as of the ___
day of _______, 19__ (the "Award Date") a nonqualified stock option to purchase
all or any part of __________ authorized but unissued or treasury shares of
Common Stock, $1.00 par value, of the Corporation upon the terms and conditions
set forth herein and in the Plan.

          NOW, THEREFORE, in consideration of the mutual promises and covenants
made herein and the mutual benefits to be derived herefrom, the parties hereto
agree as follows:

          1.  Defined Terms.  Capitalized terms used herein and not otherwise
              -------------                                                  
defined herein shall have the meaning assigned to such terms in the Plan.

          2.  Grant of Option.  This Agreement evidences the Corporation's grant
              ---------------                                                   
to the Employee of the right and option to purchase, on the terms and conditions
set forth herein and, to the extent expressly herein provided, in the Plan, all
or any part of an aggregate of ________ shares of the Common Stock of the
Corporation at the price of $____ per share (the "Option"), exercisable from
time to time, subject to the provisions of this Agreement, prior to the close
of business on the day before the tenth anniversary of the Award Date (the
"Expiration Date").  Such price equals the Fair Market Value of the
Corporation's Common Stock as of the Award Date.
<PAGE>
 
          3.  Exercisability of Option.  Except as provided in Sections 6 and 8
              ------------------------                                          
hereof, no shares may be purchased by exercise of the Option until the
expiration of one year after the Award Date. The Option shall become exercisable
in installments as to 25% of the aggregate number of shares set forth in Section
2 hereof (subject to adjustment) on and after the first anniversary of the Award
Date and as to an additional 25% of the aggregate number of such shares (subject
to adjustment) on each of the second, third and fourth anniversaries of the
Award Date. To the extent the Employee does not in any year purchase all or any
part of the shares to which the Employee is entitled, the Employee has the
right cumulatively thereafter to purchase any shares not so purchased and such
right shall continue until the Option terminates or expires. No fewer than 25
shares may be purchased at any one time, unless the number purchased is the
total number at the time available for purchase under the Option.

          4.  Method of Exercise of Option.  The Option shall be exercisable by
              ----------------------------                                     
the delivery to the Corporation of a written notice stating the number of shares
to be purchased pursuant to the Option and accompanied by payment in (i) cash or
by check payable to the order of the Corporation for the full purchase price of
the shares to be purchased, (ii) at the discretion of the Administrator and
pursuant to such conditions and restrictions as the Committee may establish by
the exchange of shares of Common Stock of the Corporation then owned by the
Employee having a Fair Market Value equal to such purchase price, (iii) at the
discretion of the Administrator, by the payment and exchange of part cash and
part stock with the sum of the cash and Fair Market Value of the stock equal to
such purchase price, or (iv) by the payment of such other form of legal
consideration as may be approved by the Board of Directors and the
Administrator. In addition, the Employee (or the Employee's Beneficiary or
Personal Representative) shall furnish any written statements required pursuant
to Section 10 below.

                                       2
<PAGE>
 
          5.  Continuance of Employment.  As a condition of the Option, the
              -------------------------                                    
Employee hereby agrees to remain in the employ of the Corporation or one of its
Subsidiaries for a period of one year after the Award Date. Nothing contained in
this Agreement or in the Plan shall confer upon the Employee any right with
respect to the continuation of his or her employment by the Corporation or any
Subsidiary or interfere in any way with the right of the Corporation or of any
Subsidiary at any time to terminate such employment or to increase or decrease
the compensation of the Employee from the rate in existence at any time.

          6.  Effect of Termination of Employment or Death.  The Option and all
              --------------------------------------------                     
other rights hereunder, to the extent not exercised, shall terminate and become
null and void at such time as the Employee ceases to be employed by either the
Corporation or any Subsidiary, except that

               (a) if the Employee's employment terminates (other than (i) as a
     result of death, (ii) after having attained 55 years of age with five (5)
     years of vesting service under the Great Western Retirement Plan (as in
     effect as of January 1, 1997) (the "Retirement Plan") (such termination
     hereinafter referred to as being the result of "Retirement") or (iii) at
     the request of the Corporation or any Subsidiary as determined by the
     Administrator in its sole discretion), the Employee may at any time within
     a period of three months after such termination exercise the Option to the
     extent the Option was exercisable at the date of such termination;

               (b) if the Employee's employment terminates as a result of
     Retirement, the Employee may at any time within a period of two years after
     such Retirement exercise the Option to the extent the Option was
     exercisable at the date of such retirement; provided, that, for purposes of
     the Option, an Employee shall be deemed to have terminated as a result of
     Retirement if, following the date on which the Employee has attained 55
     years of age, during a

                                       3
<PAGE>
 
     Potential Change in Control Period or during the two (2)-year period
     following a Change in Control, such Employee's employment is terminated
     under the circumstances described in subsection (d) of this Section 6);

               (c) if the Employee dies while in the employ of the Corporation
     or any Subsidiary, or within three months after a termination described in
     subsection (a) of this Section 6 (excluding a termination described in the
     parenthetical clause thereof), or within two years after termination as a
     result of Retirement as described in subsection (b) of this Section 6, then
     the Option, to the extent that the Employee was entitled to exercise the
     Option on the date of his or her death (or such earlier termination), may
     be exercised within a period of one year after the date of death by the
     Employee's Beneficiary; and

               (d) if, during a Potential Change in Control Period (whether or
     not a Change in Control subsequently occurs), the Employee's employment is
     terminated by the Corporation or a Subsidiary without cause or by the
     Employee under circumstances that would entitle such individual to
     terminate employment and receive severance and other benefits (i) if the
     Employee is a member of the Executive Management Committee, under his or
     her employment agreement or (ii) if the Employee is not a member of the
     Executive Management Committee, under the Company's Special Severance Plan
     (whether or not such Employee is a participant in such Plan), then any
     portion of the Option that was not then exercisable shall become fully
     exercisable;

provided, however, that in no event may the Option be exercised by anyone under
this Section or otherwise after the Expiration Date. If the Employee is employed
by an entity which ceases to be a Subsidiary, other than by merger with or
liquidation into another Subsidiary, such event shall be deemed for purposes of
this Section 6 to 

                                       4
<PAGE>
 
be a termination of the Employee's employment described in subsection (a).

          7.  Non-Transferability of Option.  During the Employee's lifetime,
              -----------------------------                                  
the Option and any other rights hereunder may be exercised only by the Employee,
except as otherwise expressly provided in Section 6.1.3 of, or pursuant to, the
Plan.

          8.  Adjustments and Other Effects (including Termination) upon Certain
              ------------------------------------------------------------------
Events.  If the outstanding shares of the Corporation's Common Stock are changed
- ------                                                                          
into or exchanged for cash or a different number or kind of shares or securities
of the Corporation, or if additional shares or new or different shares or
securities are distributed with respect to the outstanding shares of the
Corporation's Common Stock, through a reorganization or merger in which the
Corporation is the surviving entity or through a combination, consolidation,
recapitalization, reclassification, stock split, stock dividend, reverse stock
split, stock consolidation or other capital change or adjustment, an appropriate
proportionate equitable adjustment shall be made in the number and kind of
shares or other consideration that is subject to or may be delivered pursuant to
the Option. A corresponding adjustment to the consideration payable with respect
to the Option shall also be made as appropriate. In addition, the Option and
rights of the Employee hereunder are subject to adjustment, modification and
termination in certain other circumstances and upon occurrence of certain other
events, as set forth in the provisions of Article II, Sections 6.3 and 6.4, and
the last sentence of Section 6.2 of the Plan, to the extent applicable to
Options granted under the Key Employee Program.

          9.  Limitation of Employee's Rights.  Neither the Employee nor any
              -------------------------------                               
other person entitled to exercise the Option shall have any of the rights or
privileges of a stockholder of the Corporation in respect of any shares
deliverable upon exercise of the Option unless and until a certificate
representing such shares shall have been issued in the name of the Employee or
such person.

                                       5
<PAGE>
 
          10.  Representations of the Employee.
               ------------------------------- 

          (a) The Employee agrees that the Corporation shall not be required to
deliver shares upon the exercise of the Option if prevented or prohibited from
doing so under applicable law. If the shares are not registered with the
Securities and Exchange Commission at the time of such exercise, the Employee
shall be required to deliver an investment letter in form acceptable to the
Corporation and all certificates representing shares issued shall bear
appropriate legends reflecting restrictions on transfer under applicable laws.
The Employee agrees by acceptance of the Option and, in such letter, the
Employee shall represent that he or she will acquire the shares issuable upon
such exercise for his or her own account, for the purpose of investment, and not
with a view to or for sale in connection with any distribution, and that he or
she will not offer, sell or otherwise transfer or dispose of such shares or any
interest therein except in compliance with all securities laws applicable to
such action. The Corporation may impose stop transfer instructions to implement
such limitations, if applicable. Any person or persons entitled to exercise the
Option under the provisions of Section 7 hereof shall be bound by and obligated
under the provisions of this Section 10 to the same extent as is the Employee.

          (b) Even if the shares are registered for sale under applicable
securities laws, Employee agrees to retain on exercise of the Option, and for so
long as may be necessary to comply with stock ownership guidelines of the
Corporation from time to time in effect, at least one-half of the "net number"
of shares received on exercise.  The net number of shares of these purposes
equals the number of shares as to which the Option is exercised, less a number
of shares equal in Fair Market Value on the date of exercise to the sum of the
exercise price and any applicable withholding and other taxes on exercise.  To
the extent permitted by applicable law, the Corporation may issue stop transfer
instructions or impose legend conditions on certificates evidencing the net
number of 

                                       6
<PAGE>
 
shares to enforce these covenants and restrictions. The Administrator in its
sole discretion may permit exceptions to the covenants and restrictions in this
Section 10(b) on a case-by-case basis or otherwise.

          11.  Tax Withholding.  The Corporation shall be entitled to require
               ---------------                                               
deduction from other compensation payable to the Employee any sums required by
federal, state or local tax law to be withheld with respect to the exercise of
the Option, but, in the alternative, (i) the Corporation may require the
Employee or other person exercising the Option to advance such sums in cash, or
(ii) if the Employee or other person exercising the Option elects, the
Corporation may withhold shares of the Corporation's Common Stock having a Fair
Market Value equal to the sums required to be withheld. If the Employee or other
person exercising the Option elects to advance such sums directly, written
notice of that election shall be delivered prior to such exercise and, whether
pursuant to such election or pursuant to a requirement imposed by the
Corporation, payment in cash or by check of such sums for taxes shall be
delivered within ten days after the date of exercise. If the Employee or other
person exercising the Option elects to have the Corporation withhold shares of
the Corporation's Common Stock having a Fair Market Value equal to the sums
required to be withheld, the value of the shares of the Corporation's Common
Stock to be withheld will be equal to the Fair Market Value of such shares on
the date that the amount of tax to be withheld is to be determined (the "Tax
Date"). Elections by the Employee to have shares of the Corporation's Common
Stock withheld for this purpose will be subject to the following restrictions:
(w) the election must be made prior to the Tax Date, (x) the election must be
irrevocable, (y) the election will be subject to the approval or disapproval (as
the case may be) of the Administrator, and (z) if the Employee is an officer of
the Corporation within the meaning of Section 16 of the Exchange Act, the
election, in addition, may not be made within six months of the grant of the
Option (except that this limitation will not apply in the event that the death
or Disability of the Employee occurs prior

                                       7
<PAGE>
 
to the expiration of the six month period) and either must be made at least six
months prior to the Tax Date or in one of the periods beginning on the third
business day following the date of release of the Corporation's quarterly or
annual summary statements of sales and earnings and ending on the twelfth
business day following such date. The Corporation shall not be obligated to
issue shares and/or distribute cash to the Employee or other person exercising
the Option upon exercise of the Option until such payment has been received or
shares have been so withheld, unless withholding as of or prior to the date of
such exercise is sufficient to cover all such sums due or which may be due with
respect to such exercise.

          12.  Employment by Subsidiaries.  Employment by any Subsidiary shall
               --------------------------                                     
be considered as the equivalent of employment by the Corporation for all
purposes of this Agreement, unless the Board otherwise determines.

          13.  Notices.  Any notice to be given under the terms of this
               -------                                                 
Agreement shall be in writing and addressed to the Corporation at its principal
office in Chatsworth, California, to the attention of the Corporate Secretary
and to the Employee at the address given beneath the Employee's signature
hereto, or at such other address as either party may hereafter designate in
writing to the other.

          14.  Laws Applicable to Construction.  The Option has been granted,
               -------------------------------                               
executed and delivered at Chatsworth, California, and the interpretation,
performance and enforcement of this Agreement shall be governed by the laws of
the State of California, except as otherwise provided in Section 6.8 of the
Plan.

          15.  Plan.  The Option is subject to, and the Employee agrees to be
               ----                                                          
bound by, all of the terms and conditions of the provisions of Articles I and II
and Sections 4.2, 6.1, 6.3, 6.4, 6.5, 6.7 and 6.8 and the last sentence of
Section 6.2 of the Plan.  The Employee acknowledges receipt of a copy of the
Plan, which, to the 

                                       8
<PAGE>
 
extent set forth in the preceding sentence, is made a part hereof by this
reference. Unless otherwise expressly provided in other Sections of this
Agreement, provisions of the Plan that confer discretionary authority on the
Administrator do not (and shall not be deemed to) apply to the Option or create
rights in the Employee unless such application or rights are expressly so
conferred by appropriate action of the Administrator, in its sole discretion,
under the Plan after the date hereof.

          16.  Successors.  This Agreement shall be binding upon and inure to
               ----------                                                    
the benefit of the Company, its successors and assigns, and of the Employee and
the Employee's Beneficiaries and Personal Representatives.

          IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed on its behalf by a duly authorized officer and the Employee has
hereunto set his or her hand.

GREAT WESTERN FINANCIAL
CORPORATION (a Delaware
corporation)


By
   ------------------------------------------
   Title
        -------------------------------


                                      EMPLOYEE                        
                                                                      
                                      -------------------------------- 
                                       (Signature)                    
                                                                      
                                      -------------------------------- 
                                       (Print Name)                   
                                                                      
                                      -------------------------------- 
                                       (Address)                      
                                                                      
                                      -------------------------------- 
                                       (City, State, Zip Code)         


Executed:

                                       9
<PAGE>
 
                               CONSENT OF SPOUSE
                               -----------------

          In consideration of the execution of the foregoing Nonqualified Stock
Option Agreement by Great Western Financial Corporation, I,         , the
spouse of the Employee herein named, do hereby join with my spouse in executing
the foregoing Nonqualified Stock Option Agreement and do hereby agree to be
bound by all of the terms and provisions thereof and of the Plan.

DATED: __________, 19__.              ___________________________________
                                             Signature of Spouse

                                       10

<PAGE>
 
                                                                   EXHIBIT 10.40

                             AMENDMENT NO. 1996-1
                      TO GENERAL PROVISIONS APPLICABLE TO
                  PERFORMANCE RESTRICTED STOCK AWARDS GRANTED
                   UNDER 1988 STOCK OPTION AND INCENTIVE PLAN

          This Amendment No. 1996-1 is made to the General Provisions
Applicable to Performance Restricted Stock Awards Granted Under the Great
Western Financial Corporation 1988 Stock Option and Incentive Plan, as amended
(the "General Provisions").  Capitalized terms used but not defined herein shall
have the meanings ascribed to them in the General Provisions.

          WHEREAS, Great Western Financial Corporation (the "Company") has
determined that it is in its best interest and that of its stockholders to amend
the General Provisions as set forth herein;

          NOW, THEREFORE, the General Provisions are hereby amended as follows:

          1.   The first sentence of Section 2(a) of the General Provisions is
amended by deleting therefrom the phrase "Section 10 (Compliance)" and inserting
in lieu thereof "Section 9 (Compliance)".

          2.   The first sentence of Section 2(b) of the General Provisions is
amended by deleting therefrom the phrase "Section 11 (Tax Withholding)" and
inserting in lieu thereof "Section 10 (Tax Withholding)".

          3.   The second sentence of Section 2(b) of the General Provisions is
amended by deleting therefrom the phrase "Section 10 (Compliance)" and inserting
in place thereof "Section 9 (Compliance)".

          4.   Section 3(c) of the General Provisions is amended in its entirety
to read as follows:

               (c) If, during a Potential Change in Control Period (as defined
          in the Plan), the Employee's employment is terminated by 
<PAGE>
 
          the Corporation without cause (whether or not a Change in Control
          subseqently occurs) or by the Employee under circumstances that
          would entitle such Employee to terminate his or her employment and
          receive severance and other benefits under (i) if the Employee is a
          member of the Executive Management Committee, his or her employment
          agreement or (ii) if the Employee is not a member of the Executive
          Management Committee, the Company's Special Severance Plan, whether
          or not such Employee is a participant in such Plan, then any portion
          of his or her Award that has not previously vested shall thereupon
          vest.

          5.   Each of the first and second sentences of Section 4 of the
General Provisions is amended by deleting therefrom the phrase "(subject to the
provisions of Section 9)".

          6.   The definition of "Peer Group" following Section 6(a) of the
General Provisions is amended by deleting the phrase "Section 15" and inserting
in place thereof the phrase "Section 14".

          7.   The second sentence of Section 8 of the General Provisions is
amended by deleting therefrom the phrase "or an Event described in Section
7.19(ii) of the Plan shall occur and the shares of Restricted Stock are not
fully vested upon such Event or prior thereto".

          8.   The General Provisions are amended by deleting therefrom Section
9, and by renumbering Sections 10 through 15 as Sections 9 through 14,
respectively.

                                       2
<PAGE>
 
          The effective date of this Amendment No. 1996-1 shall be December 10,
1996.  Except as herein modified, the General Provisions Document shall remain
in full force and effect.

                              GREAT WESTERN
                                FINANCIAL CORPORATION



                              By: /s/ J. Lance Erikson
                                  --------------------
                              Executive Vice President, General Counsel and
                              Secretary

                                       3

<PAGE>
 
                                                                   EXHIBIT 10.43

                             AMENDMENT NO. 1996-2
                                      TO
                          DEFERRED COMPENSATION PLAN
 

          This Amendment No. 1996-2 is made to the Great Western Financial
Corporation Deferred Compensation Plan (1992 Restatement) (the "Plan").
Capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Plan.

          WHEREAS, the Company has determined that it is in its best interest
and that of its stockholders to amend the Plan as set forth herein;

          NOW THEREFORE, the Plan is amended as follows:

          1.   Section 2.4 of the Plan is amended in its entirety as follows:

               2.4  Change in Control. A "Change in Control" shall be deemed to 
                    -----------------
          have occurred if the event set forth in any one of the following
          paragraphs shall have occurred:

               (i)    any Person (as defined below) is or becomes the Beneficial
          Owner (as defined in Rule 13d-3 under the Securities Exchange Act of
          1934 (the "Exchange Act")), directly or indirectly, of securities of
          the Company (not including in the securities beneficially owned by
          such Person any securities acquired directly from the Company or its
          affiliates) representing 25% or more of either the then outstanding
          shares of common stock of the Company or the combined voting power of
          the Company's then outstanding securities, excluding any Person who
          becomes such a beneficial owner in connection with a transaction
          described in clause (A) of paragraph (iii) below; or
<PAGE>
 
               (ii)   the following individuals cease for any reason to
          constitute a majority of the number of directors then serving:
          individuals who, on December 10, 1996, constitute the Board and any
          new director (other than a director whose initial assumption of office
          is in connection with an actual or threatened election contest,
          including but not limited to a consent solicitation, relating to the
          election of directors of the Company) whose appointment or election by
          the Board or nomination for election by the Company's stockholders was
          approved by a vote of at least two-thirds (2/3) of the directors then
          still in office who either were directors on December 10, 1996, or
          whose appointment, election or nomination for election was previously
          so approved; or

               (iii)  there is consummated a merger or consolidation of the
          Company with any other corporation, other than (A) a merger or
          consolidation which would result in the voting securities of the
          Company outstanding immediately prior to such merger or consolidation
          continuing to represent (either by remaining outstanding or by being
          converted into voting securities of the surviving entity or any parent
          thereof) at least 60% of the combined voting power of the voting
          securities of the Company or such surviving entity or any parent
          thereof outstanding immediately after such merger or consolidation, or
          (B) a merger or consolidation effected to implement a recapitalization
          of the Company (or similar transaction) in which no Person is or
          becomes the beneficial owner, directly or indirectly, of securities of
          the Company (not including in the securities beneficially owned by
          such Person any securities

                                        2
<PAGE>
 
          acquired directly from the Company or its subsidiaries)representing
          25% or more of either the then outstanding shares of common stock of
          the Company or the combined voting power of the Company's then
          outstanding securities; or
          
               (iv)   the stockholders of the Company approve a plan of complete
          liquidation or dissolution of the Company or there is consummated an
          agreement for the sale or disposition by the Company of all or
          substantially all of the Company's assets.

          Notwithstanding the foregoing, a "Change in Control" shall not be
          deemed to have occurred by virtue of the consummation of any
          transaction or series of integrated transactions immediately following
          which the record holders of the common stock of the Company
          immediately prior to such transaction or series of transactions
          continue to have substantially the same proportionate ownership in an
          entity which owns all or substantially all of the assets of the
          Company immediately following such transaction or series of
          transactions.

          For purposes of this Section 2.4, "Person" shall have the meaning
          given in Section 3(a)(9) of the Exchange Act, as modified and used in
          Sections 13(d) and 14(d) thereof, except that such term shall not
          include (i) the Company or any of its subsidiaries, (ii) a trustee or
          other fiduciary holding securities under an employee benefit plan of
          the Company or any of its subsidiaries, (iii) an underwriter
          temporarily holding securities pursuant to an offering of such
          securities, or (iv) a corporation owned, direct-

                                       3
<PAGE>
 
          ly or indirectly, by the stockholders of the Company in substantially
          the same proportions as their ownership of stock of the Company.

          2.   Article II of the Plan is amended by inserting the following as a
new Section 2.19:

               2.19   A "Potential Change in Control" shall be deemed to have
          occurred if the event set forth in any one of the following paragraphs
          shall have occurred:
          
               (A)  the Company enters into an agreement, the consummation of
          which would result in the occurrence of a Change in Control;

               (B)  the Company or any Person publicly announces an intention to
          take or to consider taking actions which, if consummated, would
          constitute a Change in Control;

               (C)  any Person becomes the beneficial owner, directly or
          indirectly, of securities of the Company (not including in the
          securities beneficially owned by such Person any securities acquired
          directly from the Company or its affiliates) representing 15% or more
          of either the then outstanding shares of common stock of the Company
          or the combined voting power of the Company's then outstanding
          securities;

               (D)  the filing with the Federal Home Loan Bank Board and/or the
          FSLIC or their successor of an application for Change in Control; or

                                        4
<PAGE>
 
               (E)  the Board adopts a resolution to the effect that, for
          purposes of this Agreement, a Potential Change in Control has
          occurred.

          3.   Article II of the Plan is amended by renumbering Sections 2.19
and 2.20 as Sections 2.21 and 2.22, respectively.

          4.   Article II of the Plan is amended by inserting the following as a
new Section 2.20:

               2.20   A "Potential Change in Control Period" shall commence upon
          the occurrence of a Potential Change in Control and shall end six
          months following the earlier to occur of (i) a Change in Control and
          (ii) the date on which such Potential Change in Control ceases to
          exist (whether by resolution of the Board or otherwise).

          5.   Section 4.6(b) of the Plan is amended in its entirety to read as
follows:

               (b)  Matching Contributions.  A Participant shall be vested in 
                    ----------------------
          the Employer matching contributions credited to his Account pursuant
          to Section 4.4 to the same extent as his matching contribution account
          is vested under the Company's Savings Plan; provided, however, that
                                                      --------  -------
          upon the occurrence of a Change in Control, all such Employer matching
          contributions shall become fully vested; and provided, further, that
                                                       --------  -------
          all such Employer matching contributions shall become fully vested if,
          during a Potential Change in Control Period, such Participant's
          employment with the Company is terminated by the Company without cause
          or by the Participant under circumstances that would entitle such
          individual to terminate his or her employ-

                                       5
<PAGE>
 
          ment and receive severance benefits under the Company's Special
          Severance Plan, whether or not such Participant is a participant in
          such Plan. Subject to the provisions of the immediately preceding
          sentence, any unvested portion of Employer matching contributions, and
          earnings thereon, shall be forefeited at the same time as the
          Participant's forfeiture occurs under the Savings Plan. Forfeitures
          under this Plan shall not be reallocated to other Participants.

          6.   Section 5.7 of the Plan is amended by renumbering Section 5.7(b)
as Section 5.7(c) and by inserting the following as a new Section 5.7(b):

               (b)  Election After a Change in Control.  In the event of a 
                    ----------------------------------
                  Change in Control, a Participant, former Participant or
                  Beneficiary with respect to whom the election provided for in
                  Section 5.7(a) has not been made, may elect within a two (2)
                  year period immediately following such Change in Control, that
                  ninety-five percent (95%) of all of his or her Account
                  balances, whether vested or unvested, shall be paid to him or
                  her as soon as practicable following the filing of such
                  election, and in the event such person makes such election
                  pursuant to this Section 5.7(b), the remaining five percent
                  (5%) of the Participant's entire Account balances shall be
                  permanently forfeited and shall not be paid to, or in respect
                  of, the Participant.

          7.   Section 9.3 of the Plan is amended in its entirety to read as
follows:

               9.3  Change in Control. During a Potential Change in Control 
                    -----------------
          Period and for 

                                       6
<PAGE>
 
          the two (2) year period following the occurrence of a Change in
          Control, notwithstanding any other provisions of this Plan, the
          following provisions shall apply:

               (a)  The Plan may not be terminated without the prior written
          consent of two-thirds (2/3) of those individuals who were Participants
          or Beneficiaries as of December 10, 1996.

               (b)  The Plan may not be amended without the prior written
          consent of two-thirds (2/3) of those individuals who were Participants
          or Beneficiaries as of December 10, 1996, if such amendment would be
          adverse to the interests of such Participants or Beneficiaries
          (including, without limitation, any reduction of payments already due
          or being paid under the Plan).

               (c)  If a Participant is receiving benefits under this Plan, is
          eligible for Retirement, is disabled, or dies prior to Retirement
          during such period, then no prospective change may be made that would
          reduce or delay his payments.

               (d)  For all Participants not described in (c) above, if such
          Participant's employment with the Company is terminated by the Company
          without cause or by the Participant under circumstances that would
          entitle such Participant to terminate his employment and receive
          maximum severance and other benefits under the Company's Special
          Severance Plan, whether or not such Participant is a participant in
          such Plan, then such Participant shall be entitled but not required to
          complete

                                       7
<PAGE>
 
          any Deferral Commitment, no change shall be made in Plan crediting
          rates, he shall be entitled to the enhanced rates provided in Section
          5.1(a) regardless of years of participation and regardless of
          completion of Deferral Commitments, and he shall receive his benefit
          payments as elected, regardless of eligibility for retirement.

          The effective date of this Amendment No. 1996-2 shall be December 10,
1996. Except as herein modified, the Plan shall remain in full force and effect.

                                            GREAT WESTERN
                                              FINANCIAL CORPORATION



                                       By:/s/ J. Lance Erikson
                                          --------------------
                                       Executive Vice President,
                                       General Counsel and Secretary

                                       8

<PAGE>
 
                                                                   EXHIBIT 10.46


                             AMENDMENT NO. 1996-2
                              TO SENIOR OFFICERS'
                          DEFERRED COMPENSATION PLAN

          This Amendment No. 1996-2 is made to the Great Western Financial
Corporation Senior Officers' Deferred Compensation Plan (1992 Restatement) (the
"Plan").  Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Plan.

          WHEREAS, the Company has determined that it is in its best interest
and that of its stockholders to amend the Plan as set forth herein;

          NOW THEREFORE, the Plan is amended as follows:

          1.   Section 2.4 of the Plan is amended in its entirety to read as
follows:

               2.4  Change in Control.  A "Change in Control" shall be deemed to
                    -----------------                                           
          have occurred if the event set forth in any one of the following
          paragraphs shall have occurred:

               (i)  any Person (as defined below) is or becomes the Beneficial
          Owner (as defined in Rule 13d-3 under the Securities Exchange Act of
          1934 (the "Exchange Act")), directly or indirectly, of securities of
          the Company (not including in the securities beneficially owned by
          such Person any securities acquired directly from the Company or its
          affiliates) representing 25% or more of either the then outstanding
          shares of common stock of the Company or the combined voting power of
          the Company's then outstanding securities, excluding any Person who
          becomes such a beneficial owner in connection with a transaction
          described in clause (A) of paragraph (iii) below; or
<PAGE>
 
               (ii)  the following individuals cease for any reason to
          constitute a majority of the number of directors then serving:
          individuals who, on December 10, 1996, constitute the Board and any
          new director (other than a director whose initial assumption of
          office is in connection with an actual or threatened election contest,
          including but not limited to a consent solicitation, relating to the
          election of directors of the Company) whose appointment or election by
          the Board or nomination for election by the Company's stockholders
          was approved by a vote of at least two-thirds (2/3) of the directors
          then still in office who either were directors on December 10, 1996,
          or whose appointment, election or nomination for election was
          previously so approved; or

                (iii)  there is consummated a merger or consolidation of the
          Company with any other corporation, other than (A) a merger or
          consolidation which would result in the voting securities of the
          Company outstanding immediately prior to such merger or consolidation
          continuing to represent (either by remaining outstanding or by being
          converted into voting securities of the surviving entity or any parent
          thereof) at least 60% of the combined voting power of the voting
          securities of the Company or such surviving entity or any parent
          thereof outstanding immediately after such merger or consolidation, or
          (B) a merger or consolidation effected to implement a recapitalization
          of the Company (or similar transaction) in which no Person is or
          becomes the beneficial owner, directly or indirectly, of securities of
          the Company (not including in the securities beneficially owned by
          such Person any securi-

                                       2
<PAGE>
 
          ties acquired directly from the Company or its subsidiaries)
          representing 25% or more of either the then outstanding shares of
          common stock of the Company or the combined voting power of the
          Company's then outstanding securities; or

               (iv) the stockholders of the Company approve a plan of complete
          liquidation or dissolution of the Company or there is consummated an
          agreement for the sale or disposition by the Company of all or
          substantially all of the Company's assets.

          Notwithstanding the foregoing, a "Change in Control" shall not be
          deemed to have occurred by virtue of the consummation of any
          transaction or series of integrated transactions immediately following
          which the record holders of the common stock of the Company
          immediately prior to such transaction or series of transactions
          continue to have substantially the same proportionate ownership in an
          entity which owns all or substantially all of the assets of the
          Company immediately following such transaction or series of
          transactions.

          For purposes of this Section 2.4, "Person" shall have the meaning
          given in Section 3(a)(9) of the Exchange Act, as modified and used in
          Sections 13(d) and 14(d) thereof, except that such term shall not
          include (i) the Company or any of its subsidiaries, (ii) a trustee or
          other fiduciary holding securities under an employee benefit plan of
          the Company or any of its subsidiaries, (iii) an underwriter
          temporarily holding securities pursuant to an offering of such 
          securities, or (iv) a corporation owned, direct-

                                       3
<PAGE>
 
          ly or indirectly, by the stockholders of the Company in substantially
          the same proportions as their ownership of stock of the Company.

          2.   Article II of the Plan is amended by renumbering Sections 2.19
through 2.22 as Sections 2.21 through 2.23, respectively.

          3.   Article II of the Plan is amended by inserting the following as a
new Section 2.19:

               2.19  A "Potential Change in Control" shall be deemed to have
          occurred if the event set forth in any one of the following
          paragraphs shall have occurred:

               (A)  the Company enters into an agreement, the consummation of
          which would result in the occurrence of a Change in Control;

               (B)  the Company or any Person publicly announces an intention
          to take or to consider taking actions which, if consummated, would
          constitute a Change in Control;

               (C)  any Person becomes the beneficial owner, directly or
          indirectly, of securities of the Company (not including in the
          securities beneficially owned by such Person any securities acquired
          directly from the Company or its affiliates) representing 15% or more
          of either the then outstanding shares of common stock of the Company
          or the combined voting power of the Company's then outstanding
          securities;

               (D) the filing with the Federal Home Loan Bank Board and/or the
          FSLIC or their 

                                       4
<PAGE>
 
          successor of an application for Change in Control; or

               (E)  the Board adopts a resolution to the effect that, for
          purposes of this Agreement, a Potential Change in Control has
          occurred.

          4.   Article II of the Plan is amended by inserting the following as a
new Section 2.20:

               2.20  A "Potential Change in Control Period" shall commence upon
          the occurrence of a Potential Change in Control and shall end six
          months following the earlier to occur of (i) a Change in Control and
          (ii) the date on which such Potential Change in Control ceases to
          exist (whether by resolution of the Board or otherwise).

          5.  Section 4.6(b) of the Plan is amended in its entirety to read as
follows:

               (b) Matching Contributions.  A Participant shall be vested in
                   ----------------------                                    
          the Employer matching contributions credited to his Account pursuant
          to Section 4.4 to the same extent as his matching contribution account
          is vested under the Company's Savings Plan; provided, however, that
                                                      --------  -------      
          upon the occurrence of a Change in Control, all such Employer matching
          contributions shall become fully vested; and provided, further, that
                                                       --------  -------
          all such Employer matching contributions shall become fully vested
          if, during a Potential Change in Control Period, such Participant's
          employment with the Company is terminated by the Company without
          cause or by the Participant under circumstances that would entitle
          such individual to terminate his or her employment and receive
          severance benefits under 

                                       5
<PAGE>
 
          (i) if the Participant is a member of the Executive Management
          Committee, his or her employment agreement or (ii) if the Participant
          is not a member of the Executive Management Committee, the Company's
          Special Severance Plan, whether or not such Participant is party to
          such Plan. Subject to the provisions of the immediately preceding
          sentence, any unvested portion of Employer matching contributions, and
          earnings thereon, shall be forefeited at the same time as the
          Participant's forfeiture occurs under the Savings Plan. Forfeitures
          under this Plan shall not be reallocated to other Participants.

          6.   Section 9.3 of the Plan is amended in its entirety to read as
follows:

               9.3  Change in Control.  During a Potential Change in Control
                    -----------------                                       
          Period and for the two (2) year period following the occurrence of a
          Change in Control, not withstanding any other provisions of this Plan,
          the following provisions shall apply:

               (a) The Plan may not be terminated without the prior written
          consent of two-thirds (2/3) of those individuals who were Participants
          or Beneficiaries as of December 10, 1996.

               (b) The Plan may not be amended without the prior written consent
          of two-thirds (2/3) of those individuals who were Participants or
          Beneficiaries as of December 10, 1996, if such amendment would be
          adverse to the interests of such Participants or Beneficiaries
          (including, without limitation, any reduction of pay- 

                                       6
<PAGE>
 
          ments already due or being paid under the Plan).

               (c) If a Participant is receiving benefits under this plan, is
          eligible for Retirement, is disabled, or dies prior to Retirement
          during such period, then no prospective change may be made that would
          reduce or delay his payments.

               (d) For all Participants not described in (c) above, if such
          Participant's employment with the Company is terminated by the Company
          without cause or by the Participant under circumstances that would
          entitle such Participant to terminate his employment and receive
          severance and other benefits under (i) if the Participant is a member
          of the Executive Management Committe, his employment agreement or (ii)
          if the Participant is not a member of the Executive Management
          Committee, the Company's Special Severance Plan, whether or not such
          Participant is a participant in such Plan, then such Participant shall
          be entitled but not required to complete any Deferral Commitment, no
          change shall be made in Plan crediting rates, he shall be entitled to
          the enhanced rates provided in Section 5.1(a) regardless of years of
          participation and regardless of completion of Deferral Commitments,
          and he shall receive benefit payments as elected, regardless of
          eligibility for retirement.

          7.   The Plan is amended by deleting in its entirety Section 9.4
thereof.

                                       7
<PAGE>
 
          The effective date of this Amendment No. 1996-2 shall be December 10,
1996.  Except as herein modified, the Plan shall remain in full force and
effect.

                              GREAT WESTERN
                                FINANCIAL CORPORATION



                         By:/s/ J. Lance Erikson
                            --------------------
                         Executive Vice President,              
                         General Counsel and Secretary

                                       8

<PAGE>
 
                                                                   EXHIBIT 10.50



                             AMENDMENT NO. 1996-2
                                 TO DIRECTORS'
                          DEFERRED COMPENSATION PLAN

          This Amendment No. 1996-2 is made to the Great Western Financial
Corporation Dirctors' Deferred Compensation Plan (1992 Restatement) (the
"Plan"). Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Plan.

          WHEREAS, the Company has determined that it is in its best interest
and that of its stockholders to amend the Plan as set forth herein;

          NOW THEREFORE, the Plan is amended as follows:

          1.   Section 2.4 of the Plan is amended in its entirety as follows:

               2.4  Change in Control.  A "Change in Control" shall be deemed to
                    -----------------                                           
          have occurred if the event set forth in any one of the following
          paragraphs shall have occurred:

               (i)  any Person (as defined below) is or becomes the Beneficial
          Owner (as defined in Rule 13d-3 under the Securities Exchange Act of
          1934 (the "Exchange Act")), directly or indirectly, of securities of
          the Company (not including in the securities beneficially owned by
          such Person any securities acquired directly from the Company or its
          affiliates) representing 25% or more of either the then outstanding
          shares of common stock of the Company or the combined voting power of
          the Company's then outstanding securities, excluding any Person who
          becomes such a beneficial owner in connection with a transaction
          described in clause (A) of paragraph (iii) below; or
<PAGE>
 
               (ii)  the following individuals cease for any reason to
          constitute a majority of the number of directors then serving:
          individuals who, on December 10, 1996, constitute the Board and any
          new director (other than a director whose initial assumption of office
          is in connection with an actual or threatened election contest,
          including but not limited to a consent solicitation, relating to the
          election of directors of the Company) whose appointment or election by
          the Board or nomination for election by the Company's stockholders was
          approved by a vote of at least two-thirds (2/3) of the directors then
          still in office who either were directors on December 10, 1996, or
          whose appointment, election or nomination for election was previously
          so approved; or

                (iii)  there is consummated a merger or consolidation of the
          Company with any other corporation, other than (A) a merger or
          consolidation which would result in the voting securities of the
          Company outstanding immediately prior to such merger or consolidation
          continuing to represent (either by remaining outstanding or by being
          converted into voting securities of the surviving entity or any parent
          thereof) at least 60% of the combined voting power of the voting
          securities of the Company or such surviving entity or any parent
          thereof outstanding immediately after such merger or consolidation, or
          (B) a merger or consolidation effected to implement a recapitalization
          of the Company (or similar transaction) in which no Person is or
          becomes the beneficial owner, directly or indirectly, of securities of
          the Company (not including in the securities beneficially owned by
          such Person any securi-

                                       2
<PAGE>
 
          ties acquired directly from the Company or its subsidiaries)
          representing 25% or more of either the then outstanding shares of
          common stock of the Company or the combined voting power of the
          Company's then outstanding securities; or

               (iv) the stockholders of the Company approve a plan of complete
          liquidation or dissolution of the Company or there is consummated an
          agreement for the sale or disposition by the Company of all or 
          substantially all of the Company's assets.

          Notwithstanding the foregoing, a "Change in Control" shall not be
          deemed to have occurred by virtue of the consummation of any
          transaction or series of integrated transactions immediately following
          which the record holders of the common stock of the Company
          immediately prior to such transaction or series of transactions
          continue to have substantially the same proportionate ownership in an
          entity which owns all or substantially all of the assets of the
          Company immediately following such transaction or series of
          transactions.

          For purposes of this Section 2.4, "Person" shall have the meaning
          given in Section 3(a)(9) of the Exchange Act, as modified and used in
          Sections 13(d) and 14(d) thereof, except that such term shall not
          include (i) the Company or any of its subsidiaries, (ii) a trustee or
          other fiduciary holding securities under an employee benefit plan of
          the Company or any of its subsidiaries, (iii) an underwriter
          temporarily holding securities pursuant to an offering of such
          securities, or (iv) a corporation owned, direct-

                                       3

<PAGE>
 
          ly or indirectly, by the stockholders of the Company in substantially
          the same proportions as their ownership of stock of the Company.

          The effective date of this Amendment No. 1996-2 shall be December 10,
1996.  Except as herein modified, the Plan shall remain in full force and
effect.

                              GREAT WESTERN
                                FINANCIAL CORPORATION


 
                              By:/s/ J. Lance Erikson
                                 --------------------
                              Executive Vice President,              
                              General Counsel and Secretary


                                       4


<PAGE>
 
                                                                   EXHIBIT 10.53


                             AMENDMENT NO. 1996-1
                               TO UMBRELLA TRUST
                              FOR SENIOR OFFICERS

          This Amendment No. 1996-1 is made to the Great Western Financial
Corporation Umbrella Trust for Senior Officers (as amended) (the "Trust").
Capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Trust.

          WHEREAS, the Company has determined that it is in its best interest
and that of its stockholders to amend the Trust as set forth herein;

          NOW THEREFORE, the Trust is amended as follows:

          1.   The introductory paragraph of the Trust is amended (a) by
inserting following the phrase "for the benefit of eligible executive employees
of the Company and its affiliates" the following:

          and for certain other individuals who are not employed by, but who
          perform services for, the Company and its affiliates

and (b) by adding the following Plans:

          Great Western Financial Corporation Deferred Compensation Plan (1992
          Restatement)

          Consulting Agreement with James Montgomery

          Employment Agreements between the Company and the following
          individuals:

               John F. Maher
               Michael M. Pappas
               A. William Schenck III
               Carl F. Geuther
               Jaynie M. Studenmund
               J. Lance Erikson
<PAGE>
 
               Ray W. Sims

          2.  The first sentence of Section 1.01 of the Trust is amended by
deleting the phrase "May 1, 1989" and inserting in lieu thereof the phrase
"December 10, 1996".

          3.   Section 1.04-2 of the Trust is amended in its entirety as
follows:

               1.04-2  A Change in Control shall be deemed to have occurred if
          the event set forth in any one of the following paragraphs shall have
          occurred:

               (i)  any Person (as defined below) is or becomes the Beneficial
          Owner (as defined in Rule 13d-3 under the Securities Exchange Act of
          1934 (the "Exchange Act")), directly or indirectly, of securities of
          the Company (not including in the securities beneficially owned by
          such Person any securities acquired directly from the Company or its
          affiliates) representing 25% or more of either the then outstanding
          shares of common stock of the Company or the combined voting power of
          the Company's then outstanding securities, excluding any Person who
          becomes such a beneficial owner in connection with a transaction
          described in clause (A) of paragraph (iii) below; or

               (ii)  the following individuals cease for any reason to
          constitute a majority of the number of directors then serving:
          individuals who, on December 10, 1996, constitute the Board and any
          new director (other than a director whose initial assumption of
          office is in connection with an actual or threatened election contest,
          including but not limited to a consent solicitation, relating to the
          election of 

                                       2
<PAGE>
 
          directors of the Company) whose appointment or election by the Board
          or nomination for election by the Company's stockholders was
          approved by a vote of at least two-thirds (2/3) of the directors then
          still in office who either were directors on December 10, 1996, or
          whose appointment, election or nomination for election was previously
          so approved; or

                (iii)  there is consummated a merger or consolidation of the
          Company with any other corporation, other than (A) a merger or
          consolidation which would result in the voting securities of the
          Company outstanding immediately prior to such merger or consolidation
          continuing to represent (either by remaining outstanding or by being
          converted into voting securities of the surviving entity or any parent
          thereof) at least 60% of the combined voting power of the voting
          securities of the Company or such surviving entity or any parent
          thereof outstanding immediately after such merger or consolidation, or
          (B) a merger or consolidation effected to implement a recapitalization
          of the Company (or similar transaction) in which no Person is or
          becomes the beneficial owner, directly or indirectly, of securities of
          the Company (not including in the securities beneficially owned by
          such Person any securities acquired directly from the Company or its
          subsidiaries) representing 25% or more of either the then outstanding
          shares of common stock of the Company or the combined voting power of
          the Company's then outstanding securities; or

               (iv) the stockholders of the Company approve a plan of complete
          liquidation or dissolution of the Company or there is 

                                       3
<PAGE>
 
          consummated an agreement for the sale or disposition by the Company of
          all or substantially all of the Company's assets.

          Notwithstanding the foregoing, a "Change in Control" shall not be
          deemed to have occurred by virtue of the consummation of any
          transaction or series of integrated transactions immediately following
          which the record holders of the common stock of the Company
          immediately prior to such transaction or series of transactions
          continue to have substantially the same proportionate ownership in an
          entity which owns all or substantially all of the assets of the
          Company immediately following such transaction or series of 
          transactions.

          For purposes of this Section 1.04-2, "Person" shall have the meaning
          given in Section 3(a)(9) of the Exchange Act, as modified and used
          in Sections 13(d) and 14(d) thereof, except that such term shall not
          include (i) the Company or any of its subsidiaries, (ii) a trustee or
          other fiduciary holding securities under an employee benefit plan of
          the Company or any of its subsidiaries, (iii) an underwriter
          temporarily holding securities pursuant to an offering of such 
          securities, or (iv) a corporation owned, directly or indirectly, by
          the stockholders of the Company in substantially the same proportions
          as their ownership of stock of the Company.

          4.   The Trust is amended by deleting all references therein to a
"Triggering Event" and inserting in lieu thereof a "Potential Change in
Control".

          5.   The first sentence of Section 2.01-2 of the Trust is amended by
deleting the phrase "The Company may, at any time or upon the occurrence of any
of the 

                                       4
<PAGE>
 
Triggering Events described in 2.01-5, contribute to the trust the sum of the
following:" and inserting in lieu thereof the following:

          The Company shall, as soon as possible but in no event later than 10
          days following the occurrence of a Potential Change in Control (as
          defined in Section 2.01-5 hereof), contribute to the trust the sum of
          the following (the sum of the amounts described in clauses (a), (b)
          and (c), the "Required Funding Amount"):

          6.   Section 2.01-4 of the Trust is amended in its entirety as
follows:

               2.01-4  Following the expiration of a Potential Change in Control
          Period (as defined below) and if no Change in Control has occurred
          during such Potential Change in Control Period, the Required Funding
          Amount shall be returned to the Company within 10 days of the receipt
          of the Company's request therefor. For purposes of this Trust, a
          Potential Change in Control Period shall commence upon the 
          occurrence of a Potential Change in Control (as defined in Section
          2.01-5 hereof) and shall end on the date 6 months following the date
          on which such Potential Change in Control ceases to exist (whether by
          resolution of the Board of Directors or otherwise).

          7.   Section 2.01-5 of the Trust is amended in its entirety as
follows:

               2.01-5  A Potential Change in Control shall be deemed to have
          occurred if the event set forth in any one of the following paragraphs
          shall have occurred:

               (a)  the Company enters into an agreement, the consummation of
          which would 

                                       5
<PAGE>
 
          result in the occurrence of a Change in Control;

               (b)  the Company or any Person publicly announces an intention
          to take or to consider taking actions which, if consummated, would
          constitute a Change in Control;

               (c)  any Person becomes the beneficial owner, directly or
          indirectly, of securities of the Company (not including in the
          securities beneficially owned by such Person any securities acquired
          directly from the Company or its affiliates) representing 15% or more
          of either the then outstanding shares of common stock of the Company
          or the combined voting power of the Company's then outstanding 
          securities;

               (d) the filing with the Federal Home Loan Bank Board and/or the
          FSLIC or their successor of an application for Change in Control; or

               (e)  the Board adopts a resolution to the effect that, for
          purposes of this Agreement, a Potential Change in Control has
          occurred.

          8.   Section 2.01 of the Trust is amended by inserting the following
as a new Section 2.01-7:

               2.01-7  Within 30 days following the end of each calendar year
          that ends after a Change in Control has occurred, the Company shall be
          required to irrevocably contribute to the trust an additional amount
          that, when aggregated with the assets then held by the trust, at their
          fair market value, is equal to the Required Funding Amount (adjusted
          and calcu-

                                       6
<PAGE>
 
          lated as of the close of such calendar year).

          9.   Section 2.02 of the Trust is amended by inserting the following
as a new Section 2.02-6:

               2.02-6  Following the occurrence of a Change in Control, the
          trust fund shall be invested in short-term fixed income securities or
          other liquid investments.

          10.  Section 7.02-1 of the Trust is amended in its entirety as
follows:

          The Company and the Trustee may amend this trust at any time by a
          written instrument executed by both parties; provided, however, that
          following a Change in Control or during the pendency of a Potential
          Change in Control (or within 6 months thereafter), this trust may not
          be amended in a way adverse to the participants in the Plans covered
          hereby without the Written Consent of the Participants.

          The effective date of this Amendment No. 1996-1 shall be December 10,
1996.  Except as herein modified, the Trust shall remain in full force and
effect.

                         GREAT WESTERN FINANCIAL
                           CORPORATION



                         By:/s/ J. Lance Erikson
                            --------------------
                         Executive Vice President,     
                         General Counsel and Secretary

                         WELLS FARGO & CO.



                         By:  ________________________
                         Title:

                                       7

<PAGE>
 
                                                                   EXHIBIT 10.55



                             AMENDMENT NO. 1996-1
                               TO UMBRELLA TRUST
                                 FOR DIRECTORS

          This Amendment No. 1996-1 is made to the Great Western Financial
Corporation Umbrella Trust for Directors (as amended) (the "Trust").
Capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Trust.

          WHEREAS, the Company has determined that it is in its best interest
and that of its stockholders to amend the Trust as set forth herein;

          NOW THEREFORE, the Trust is amended as follows:

          1.   The first sentence of Section 1.01 of the Trust is amended by
deleting the phrase "May 1, 1989" and inserting in lieu thereof the phrase
"December 10, 1996".

          2.   Section 1.04-2 of the Trust is amended in its entirety as
follows:

               1.04-2  A Change in Control shall be deemed to have occurred if
          the event set forth in any one of the following paragraphs shall have
          occurred:

               (i)  any Person (as defined below) is or becomes the Beneficial
          Owner (as defined in Rule 13d-3 under the Securities Exchange Act of
          1934 (the "Exchange Act")), directly or indirectly, of securities of
          the Company (not including in the securities beneficially owned by
          such Person any securities acquired directly from the Company or its
          affiliates) representing 25% or more of either the then outstanding
          shares of common stock of the Company or the combined voting power of
          the Company's then outstanding securities, excluding any Person who
          becomes such a 
<PAGE>
 
          beneficial owner in connection with a transaction described in clause
          (A) of paragraph (iii) below; or

               (ii)  the following individuals cease for any reason to
          constitute a majority of the number of directors then serving:
          individuals who, on December 10, 1996, constitute the Board and any
          new director (other than a director whose initial assumption of
          office is in connection with an actual or threatened election contest,
          including but not limited to a consent solicitation, relating to the
          election of directors of the Company) whose appointment or election
          by the Board or nomination for election by the Company's 
          stockholders was approved by a vote of at least two-thirds (2/3) of
          the directors then still in office who either were directors on
          December 10, 1996, or whose appointment, election or nomination for
          election was previously so approved; or

                (iii)  there is consummated a merger or consolidation of the
          Company with any other corporation, other than (A) a merger or
          consolidation which would result in the voting securities of the
          Company outstanding immediately prior to such merger or consolidation
          continuing to represent (either by remaining outstanding or by being
          converted into voting securities of the surviving entity or any parent
          thereof) at least 60% of the combined voting power of the voting
          securities of the Company or such surviving entity or any parent
          thereof outstanding immediately after such merger or consolidation, or
          (B) a merger or consolidation effected to implement a recapitalization
          of the Company (or similar transaction) in which no Person is

                                       2
<PAGE>
 
          or becomes the beneficial owner, directly or indirectly, of securities
          of the Company (not including in the securities beneficially owned by
          such Person any securities acquired directly from the Company or its
          subsidiaries) representing 25% or more of either the then outstanding
          shares of common stock of the Company or the combined voting power of
          the Company's then outstanding securities; or

               (iv) the stockholders of the Company approve a plan of complete
          liquidation or dissolution of the Company or there is consummated an
          agreement for the sale or disposition by the Company of all or
          substantially all of the Company's assets.

          Notwithstanding the foregoing, a "Change in Control" shall not be
          deemed to have occurred by virtue of the consummation of any
          transaction or series of integrated transactions immediately following
          which the record holders of the common stock of the Company
          immediately prior to such transaction or series of transactions
          continue to have substantially the same proportionate ownership in an
          entity which owns all or substantially all of the assets of the
          Company immediately following such transaction or series of 
          transactions.

          For purposes of this Section 1.04-2, "Person" shall have the meaning
          given in Section 3(a)(9) of the Exchange Act, as modified and used
          in Sections 13(d) and 14(d) thereof, except that such term shall not
          include (i) the Company or any of its subsidiaries, (ii) a trustee or
          other fiduciary holding securities under an employee benefit plan of
          the Company or 

                                       3
<PAGE>
 
          any of its subsidiaries, (iii) an underwriter temporarily holding
          securities pursuant to an offering of such securities, or (iv) a
          corporation owned, directly or indirectly, by the stockholders of the
          Company in substantially the same proportions as their ownership of
          stock of the Company.

          3.   The Trust is amended by deleting all references therein to a
"Triggering Event" and inserting in lieu thereof a "Potential Change in
Control".

          4.  The first sentence of Section 2.01-2 of the Trust is amended by
deleting the phrase "The Company may, at any time or upon the occurrence of any
of the Triggering Events described in 2.01-5, contribute to the trust the sum of
the following:" and inserting in lieu thereof the following:

          The Company shall, as soon as possible but in no event later than 10
          days following the occurrence of any of the Triggering Events
          described in 2.01-5, contribute to the trust the sum of the following
          (the sum of the amounts described in clauses (a), (b) and (c), the
          "Required Funding Amount"):

          5.   Section 2.01-4 of the Trust is amended in its entirety as
follows:

               2.01-4  Following the expiration of a Potential Change in Control
          Period (as defined below) and if no Change in Control has occurred
          during such Potential Change in Control Period, the Required Funding
          Amount shall be returned to the Company within 10 days of the receipt
          of the Company's request therefor.  A Potential Change in Control
          Period shall commence 

                                       4
<PAGE>
 
          upon the occurrence of a Potential Change in Control (as defined in
          Section 2.01-5 hereof) and shall end on the date 6 months following
          the date on which such Potential Change in Control ceases to exist
          (whether by resolution of the Board of Directors or otherwise).

          6.   Section 2.01-5 of the Trust is amended in its entirety as
follows:

               2.01-5  A Potential Change in Control shall be deemed to have
          occurred if the event set forth in any one of the following paragraphs
          shall have occurred:

               (a)  the Company enters into an agreement, the consummation of
          which would result in the occurrence of a Change in Control;

               (b)  the Company or any Person publicly announces an intention
          to take or to consider taking actions which, if consummated, would
          constitute a Change in Control;

               (c)  any Person becomes the beneficial owner, directly or
          indirectly, of securities of the Company (not including in the
          securities beneficially owned by such Person any securities acquired
          directly from the Company or its affiliates) representing 15% or more
          of either the then outstanding shares of common stock of the Company
          or the combined voting power of the Company's then outstanding
          securities;

               (d) the filing with the Federal Home Loan Bank Board and/or the
          FSLIC or their 

                                       5
<PAGE>
 
          successor of an application for Change in Control; or

               (e)  the Board adopts a resolution to the effect that, for
          purposes of this Agreement, a Potential Change in Control has
          occurred.

          7.   Section 2.01 of the Trust is amended by inserting the following
as a new Section 2.01-7:

               2.01-7  Within 30 days following the end of each calendar year
          that ends after a Change in Control has occurred, the Company shall be
          required to irrevocably contribute to the trust an additional amount
          that, when aggregated with the assets then held by the trust, at their
          fair market value, is equal to the Required Funding Amount (adjusted
          and calculated as of the close of such calendar year).

               8.  Section 2.02 of the Trust is amended by inserting the
following as a new Section 2.02-6:

               2.02-6  Following the occurrence of a Change in Control, the
          trust fund shall be invested in short-term fixed income securities or
          other liquid investments.

          9.   Section 7.02-1 of the Trust is amended in its entirety as
follows:

          The Company and the Trustee may amend this trust at any time by a
          written instrument executed by both parties; provided, however, that
          following a Change in Control or during the pendency of a Potential
          Change in Control (or within 6 months thereafter), this trust may not
          be amended in a way adverse to the participants in the 

                                       6
<PAGE>
 
          Plans covered hereby without the Written Consent of the Participants.

          The effective date of this Amendment No. 1996-1 shall be December 10,
1996.  Except as herein modified, the Trust shall remain in full force and
effect.

                         GREAT WESTERN FINANCIAL
                           CORPORATION



                         By:/s/ J. Lance Erikson
                            --------------------
                         Executive Vice President,              
                         General Counsel and Secretary

                         WELLS FARGO & CO.



                         By:  ________________________
                         Title:

                                       7

<PAGE>
 

                                                                   EXHIBIT 10.60

                             AMENDMENT NO. 1996-1
                         TO EMPLOYEE HOME LOAN PROGRAM

                  This Amendment No. 1996-1 is made to the Employee Home Loan
Program of Great Western Financial Corporation (Revised and Restated as of April
27, 1993) (the "Plan"). Capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Plan.

                  WHEREAS, the Company has determined that it is in its best
interest and that of its stockholders to amend the Plan as set forth herein;

                  NOW THEREFORE, the Plan is amended as follows:

                  1.       Section 9 of the Plan is amended in its
entirety to read as follows:

                  9.       Disqualification.  Except as provided below,
                           ----------------
                  employees will be disqualified if terminated or if work hours
                  are reduced below twenty and one-half hours a week, or if
                  assigned temporary or utility status, in which case the
                  modification agreement setting forth the special employee home
                  loan terms will be of no force and effect. Employees will not
                  be disqualified if they are terminated without cause or if
                  work hours are reduced below twenty and one-half hours a week
                  if such termination or reduction in hours occurs (a) within 24
                  months following a Change in Control or (b) during a Potential
                  Change in Control Period (as each term is defined in Section
                  14 hereof). Directors will be disqualified upon termination
                  from the Board except upon retirement (after five years'
                  service), as a result of being disabled, as a result of a
                  Change in Control (as defined in Section 14 hereof), or as a
                  result of being removed from the Board without cause within
                  24 months following a
<PAGE>
 
                  Change in Control (as defined in Section 14 hereof).

                  2.       Section 11 of the Plan is amended in its
entirety to read as follows:

                  11.      Modification and Suspension.  Great Western 
                           --------------------------- 
                  reserves the right to suspend or modify the provisions of the
                  Employee Home Loan Program at any time. However, no such
                  suspension or modification after a Change in Control or during
                  a Potential Change in Control Period (as each term is defined
                  in Section 14 hereof) shall detract from the benefit then
                  available or increase the otherwise applicable interest rate
                  under existing loans covered by the Employee Home Loan Program
                  (the "Program").

                  3.       The Plan is amended by inserting the
following as a new Section 14:

                  14.      Definitions:  For purposes of the
                           -----------
                  Program, the following definitions apply:

                           "Board of Directors" shall mean the Board of
                  Directors of Great Western Financial Corporation.

                           A "Change in Control" shall be deemed to have
                  occurred if the event set forth in any one of the following
                  paragraphs shall have occurred:

                                    (a) Any Person is or becomes the Beneficial
                           Owner (as defined in Rule 13d-3 under the Exchange
                           Act), directly or indirectly, of securities of Great
                           Western Financial Corporation (not including in the
                           securities beneficially owned by such Person any

                                      2
<PAGE>
 
                           securities acquired directly from Great Western
                           Financial Corporation or its affiliates) representing
                           25% or more of either the then outstanding shares of
                           common stock of Great Western Financial Corporation
                           or the combined voting power of Great Western
                           Financial Corporation's then outstanding securities,
                           excluding any Person who becomes such a beneficial
                           owner in connection with a transaction described in
                           clause (i) of paragraph (c) below; or

                                    (b) The following individuals cease for any
                           reason to constitute a majority of the number of
                           directors then serving: individuals who, on December
                           10, 1996, constitute the Board of Directors and any
                           new director (other than a director whose initial
                           assumption of office is in connection with an actual
                           or threatened election contest, including but not
                           limited to a consent solicitation, relating to the
                           election of directors of Great Western Financial
                           Corporation) whose appointment or election by the
                           Board of Directors or nomination for election by
                           Great Western Financial Corporation's stockholders
                           was approved by a vote of at least two-thirds (2/3)
                           of the directors then still in office who either were
                           directors on December 10, 1996, or whose appointment,
                           election or nomination for election was previously so
                           approved; or

                                    (c) There is consummated a merger or
                           consolidation of Great Western Financial Corporation
                           with

                                       3
<PAGE>
 
                           any other corporation, other than (i) a merger or
                           consolidation which would result in the voting
                           securities of Great Western Financial Corporation
                           outstanding immediately prior to such merger or
                           consolidation continuing to represent (either by
                           remaining outstanding or by being converted into
                           voting securities of the surviving entity or any
                           parent thereof) at least 60% of the combined voting
                           power of the voting securities of Great Western
                           Financial Corporation or such surviving entity or any
                           parent thereof outstanding immediately after such
                           merger or consolidation, or (ii) a merger or
                           consolidation effected to implement a
                           recapitalization of Great Western Financial
                           Corporation (or similar transaction) in which no
                           Person is or becomes the beneficial owner, directly
                           or indirectly, of securities of Great Western
                           Financial Corporation (not including in the
                           securities beneficially owned by such Person any
                           securities acquired directly from Great Western
                           Financial Corporation or its subsidiaries)
                           representing 25% or more of either the then
                           outstanding shares of common stock of Great Western
                           Financial Corporation or the combined voting power of
                           Great Western Financial Corporation's then
                           outstanding securities; or

                                    (d) The stockholders of Great Western
                           Financial Corporation approve a plan of complete
                           liquidation or dissolution of Great Western Financial
                           Corporation or there is consummated an agreement for
                           the sale or

                                       4
<PAGE>
 
                           disposition by Great Western Financial Corporation of
                           all or substantially all of Great Western Financial
                           Corporation's assets.

                  Notwithstanding the foregoing, a "Change in Control" shall not
                  be deemed to have occurred by virtue of the consummation of
                  any transaction or series of integrated transactions
                  immediately following which the record holders of the common
                  stock of Great Western Financial Corporation immediately prior
                  to such transaction or series of transactions continue to have
                  substantially the same proportionate ownership in an entity
                  which owns all or substantially all of the assets of Great
                  Western Financial Corporation immediately following such
                  transaction or series of transactions.

                           "Exchange Act" shall mean the Securities Exchange Act
                  of 1934, as amended.

                           "Person" has the meaning given in Section 3(a)(9) of
                  the Exchange Act, as modified and used in Sections 13(d) and
                  14(d) thereof, except that such term shall not include (i)
                  Great Western Financial Corporation or any of its
                  subsidiaries, (ii) a trustee or other fiduciary holding
                  securities under an employee benefit plan of Great Western
                  Financial Corporation or any of its Subsidiaries, (iii) an
                  underwriter temporarily holding securities pursuant to an
                  offering of such securities, or (iv) a corporation owned,
                  directly or indirectly, by the stockholders of Great Western
                  Financial Corporation in substantially the same proportions as
                  their ownership of stock of Company.

                                       5
<PAGE>
 
                           A "Potential Change in Control" shall be deemed to
                  have occurred if the event set forth in any one of the
                  following paragraphs shall have occurred:

                                    (a) Great Western Financial Corporation
                           enters into an agreement, the consummation of which
                           would result in the occurrence of a Change in
                           Control;

                                    (b) Great Western Financial Corporation or
                           any Person publicly announces an intention to take or
                           to consider taking actions which, if consummated,
                           would constitute a Change in Control;

                                    (c) any Person becomes the beneficial owner,
                           directly or indirectly, of securities of Great
                           Western Financial Corporation (not including in the
                           securities beneficially owned by such Person any
                           securities acquired directly from Great Western
                           Financial Corporation or its affiliates) representing
                           15% or more of either the then outstanding shares of
                           common stock of Great Western Financial Corporation
                           or the combined voting power of Great Western's then
                           outstanding securities;

                                    (d) the filing with the Federal Home Loan
                           Bank Board and/or the FSLIC or their successor of an
                           application for Change in Control; or

                                    (e) the Board of Directors adopts a
                           resolution to the effect that, for purposes of this
                           Program, a

                                       6
<PAGE>
 
                           Potential Change in Control has occurred.

                           A "Potential Change in Control Period" shall commence
                  upon the occurrence of a Potential Change in Control and shall
                  end six months following the earlier to occur of (i) a Change
                  in Control and (ii) the date on which such Potential Change in
                  Control ceases to exist (whether by resolution of the Board of
                  Directors or otherwise).

                  The effective date of this Amendment No. 1996-1 shall be
December 10, 1996. Except as herein modified, the Plan shall remain in full
force and effect.

                                            GREAT WESTERN
                                              FINANCIAL CORPORATION



                                            By:/s/ J. Lance Erikson
                                               --------------------
                                            Executive Vice President,
                                            General Counsel and
                                            Secretary

                                       7

<PAGE>
                                                                   EXHIBIT 10.62

                             AMENDMENT NO. 1996-1
                     TO ANNUAL INCENTIVE COMPENSATION PLAN
                             FOR EXECUTIVE OFFICERS

          This Amendment No. 1996-1 is made to the Great Western Financial
Corporation Annual Incentive Compensation Plan for Executive Officers (the
"Plan").  Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Plan:

          WHEREAS, Great Western Financial Corporation has determined that it is
in its best interest and that of its stockholders to amend the Plan;

          NOW, THEREFORE, the Plan is hereby amended as follows:

          1.   Section 1 of the Plan is amended by inserting, immediately
following the definition of "Beneficiary," the following:

               A "Change in Control" shall be deemed to have occurred if the
          event set forth in any one of the following paragraphs shall have
          occurred:

               (i) any Person is or becomes the Beneficial Owner (as defined in
          Rule 13d-3 under the Exchange Act), directly or indirectly, of
          securities of the Corporation (not including in the securities
          beneficially owned by such Person any securities acquired directly
          from the Corporation or its affiliates) representing 25% or more of
          either the then outstanding shares of common stock of the Corporation
          or the combined voting power of the Corporation's then outstanding
          securities, excluding any Person who becomes such a beneficial owner
          in connection with a transaction described in clause (A) of paragraph
          (iii) below; or
<PAGE>
 
               (ii) the following individuals cease for any reason to constitute
          a majority of the number of directors then serving: individuals who,
          on December 10, 1996, constitute the Board of Directors and any new
          director (other than a director whose initial assumption of office is
          in connection with an actual or threatened election contest, including
          but not limited to a consent solicitation, relating to the election of
          directors of the Corporation) whose appointment or election by the
          Board of Directors or nomination for election by the Corporation's
          stockholders was approved by a vote of at least two-thirds (2/3) of
          the directors then still in office who either were directors on
          December 10, 1996, or whose appointment, election or nomination for
          election was previously so approved; or

                (iii)  there is consummated a merger or consolidation of the
          Corporation with any other corporation, other than (A) a merger or
          consolidation which would result in the voting securities of the
          Corporation outstanding immediately prior to such merger or
          consolidation continuing to represent (either by remaining outstanding
          or by being converted into voting securities of the surviving entity
          or any parent thereof) at least 60% of the combined voting power of
          the voting securities of the Corporation or such surviving entity or
          any parent thereof outstanding immediately after such merger or
          consolidation, or (B) a merger or consolidation effected to implement
          a recapitalization of the Corporation (or similar transaction) in
          which no Person is or becomes the beneficial owner, directly or
          indirectly, of securities of the Corporation (not including in 

                                       2
<PAGE>
 
          the securities beneficially owned by such Person any securities
          acquired directly from the Corporation or its subsidiaries)
          representing 25% or more of either the then outstanding shares of
          common stock of the Corporation or the combined voting power of the
          Corporation's then outstanding securities; or

               (iv) the stockholders of the Corporation approve a plan of
          complete liquidation or dissolution of the Corporation or there is
          consummated an agreement for the sale or disposition by the
          Corporation of all or substantially all of the Corporation's assets.

          Notwithstanding the foregoing, a "Change in Control" shall not be
          deemed to have occurred by virtue of the consummation of any
          transaction or series of integrated transactions immediately following
          which the record holders of the common stock of the Corporation
          immediately prior to such transaction or series of transactions
          continue to have substantially the same proportionate ownership in an
          entity which owns all or substantially all of the assets of the
          Corporation immediately following such transaction or series of
          transactions.

          2.   Section 1 of the Plan is amended by inserting, immediately
following the definition of "EPS Factor," the following:

               "Exchange Act" means the Securities Exchange Act of 1934, as
          amended.

          3.   Section 1 of the Plan is amended by inserting, immediately
following the definition of "Participant," the following:

                                       3
<PAGE>
 
               "Person" shall have the meaning given in Section 3(a)(9) of the
          Exchange Act, as modified and used in Sections 13(d) and 14(d)
          thereof, except that such term shall not include (i) the Corporation
          or any of its Subsidiaries, (ii) a trustee or other fiduciary holding
          securities under an employee benefit plan of the Corporation or any of
          its Subsidiaries, (iii) an underwriter temporarily holding securities
          pursuant to an offering of such securities, or (iv) a corporation
          owned, directly or indirectly, by the stockholders of the Corporation 
          in substantially the same proportions as their ownership of stock of 
          Corporation.

          4.   Section 1 of the Plan is amended by inserting, immediately
following the definition of "Person," the following:

               A "Potential Change in Control" shall be deemed to have occurred
          if the event set forth in any one of the following paragraphs shall
          have occurred:

               (i)  the Corporation enters into an agreement, the consummation
          of which would result in the occurrence of a Change in Control;

               (ii)  the Corporation or any Person publicly announces an
          intention to take or to consider taking actions which, if 
          consummated, would constitute a Change in Control;

               (iii)  any Person becomes the beneficial owner, directly or
          indirectly, of securities of the Corporation (not including in the
          securities beneficially owned 

                                       4
<PAGE>
 
          by such Person any securities acquired directly from the Corporation
          or its affiliates) representing 15% or more of either the then
          outstanding shares of common stock of the Corporation or the combined
          voting power of the Corporation's then outstanding securities;

               (iv) the filing with the Federal Home Loan Bank Board and/or the
          FSLIC or their successor of an application for Change in Control; or

               (v)  the Board of Directors adopts a resolution to the effect
          that, for purposes of this Plan, a Potential Change in Control has
          occurred.

          5.  Section 11 of the Plan is amended by adding at the end thereof the
following:

          Notwithstanding the foregoing, during the period (referred to herein
          as the "Potential Change in Control Period") commencing upon the
          occurrence of a Potential Change in Control and ending six months
          following the earlier to occur of (i) a Change in Control and (ii) the
          date on which such Potential Change in Control ceases to exist
          (whether by resolution of the Board of Directors of the Corporation or
          otherwise), the Plan may not be amended in a manner adverse to the
          Participants without the prior written consent of at least two-thirds
          (2/3) of the Participants.

          6.   Section 13.1 of the Plan is amended in its entirety to read as
follows:

               (a) Within five (5) days following the occurrence of a Change in
          Control, the Company shall pay to each Participant a 

                                       5
<PAGE>
 
          cash lump sum in an amount equal to the product of (i) the Bonus to
          which such Participant would have been entitled under Section 6 hereof
          for the Year in which such Change in Control occurs (assuming for
          purpose of this calculation that both the EPS Factor and the SEBIT
          Factor are at "Target" for such Year) and (ii) a fraction, the
          numerator of which shall be the number of months (including fractions
          thereof) from the first day of the Year during which such Change in
          Control occurs to the date on which such Change in Control occurs, and
          the denominator of which shall be twelve (12). A Participant shall be
          entitled to receive the payment described in the immediately preceding
          sentence if, during the Potential Change in Control Period (as defined
          in Section 11 hereof) such Participant's employment with the Company
          was terminated by the Company without cause or by the Participant
          under circumstances that would entitle such individual to terminate
          his or her employment and receive severance benefits under (x) if the
          Participant is a member of the Executive Management Committee, his or
          her employment agreement or (y) if the Participant is not a member of
          the Executive Management Committee, the Company's Special Severance
          Plan, whether or not such Participant is party to such Plan.

                                       6
<PAGE>
 
          The effective date of this Amendment No. 1996-1 shall be December 10,
1996.  Except as herein modified, the Plan shall remain in full force and
effect.

                         GREAT WESTERN
                           FINANCIAL CORPORATION



                         By:/s/ J. Lance Erikson
                            --------------------
                         Executive Vice President,              
                         General Counsel and Secretary

                                       7

<PAGE>
 
                                                                   EXHIBIT 10.65

                             AMENDMENT NO. 1996-2
                         TO RETIREMENT RESTORATION PLAN

          This Amendment No. 1996-2 is made to the Great Western Retirement
Restoration Plan (as amended) (the "Plan").  Capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Plan.

          WHEREAS, the Company has determined that it is in its best interest
and that of its stockholders to amend the Plan as set forth herein;

          NOW THEREFORE, the Plan is amended as follows:

          1.   Section 1.3 of the Plan is amended by inserting immediately
following the definition of "Average Monthly Compensation the following:

               "Board of Directors" means the Board of Directors of the Company.

               A "Change in Control" shall be deemed to have occurred if the
          event set forth in any one of the following paragraphs shall have
          occurred:

               (a) Any Person is or becomes the Beneficial Owner (as defined in
          Rule 13d-3 under the Exchange Act), directly or indirectly, of
          securities of the Company (not including in the securities
          beneficially owned by such Person any securities acquired directly
          from the Company or its affiliates) representing 25% or more of either
          the then outstanding shares of common stock of the Company or the com-
          bined voting power of the Company's then outstanding securities,
          excluding any Person who becomes such a beneficial owner in connection
          with a transaction described in clause (i) of paragraph (c) below; or
<PAGE>
 
               (b) The following individuals cease for any reason to constitute
          a majority of the number of directors then serving: individuals who,
          on December 10, 1996, constitute the Board of Directors and any new
          director (other than a director whose initial assumption of office is
          in connection with an actual or threatened election contest, including
          but not limited to a consent solicitation, relating to the election of
          directors of the Company) whose appointment or election by the Board
          of Directors or nomination for election by the Company's stockholders
          was approved by a vote of at least two-thirds (2/3) of the directors
          then still in office who either were directors on December 10, 1996,
          or whose appointment, election or nomination for election was
          previously so approved; or

               (c) There is consummated a merger or consolidation of the Company
          with any other corporation, other than (i) a merger or consolidation
          which would result in the voting securities of the Company outstand-
          ing immediately prior to such merger or consolidation continuing to
          represent (either by remaining outstanding or by being converted into
          voting securities of the surviving entity or any parent thereof) at
          least 60% of the combined voting power of the voting securities of the
          Company or such surviving entity or any parent thereof outstanding
          immediately after such merger or consolidation, or (ii) a merger or
          consolidation effected to implement a recapitalization of the Company
          (or similar transaction) in which no Person is or becomes the
          beneficial owner, directly or indirectly, of securities of the Company
          (not including in the securities benefi-

                                       2
<PAGE>
 
          cially owned by such Person any securities acquired directly from the
          Company or its subsidiaries) representing 25% or more of either the
          then outstanding shares of common stock of the Company or the combined
          voting power of the Company's then outstanding securities; or

               (d) The stockholders of the Company approve a plan of complete
          liquidation or dissolution of the Company or there is consummated an
          agreement for the sale or disposition by the Company of all or
          substantially all of the Company's assets.

          Notwithstanding the foregoing, a "Change in Control" shall not be
          deemed to have occurred by virtue of the consummation of any
          transaction or series of integrated transactions immediately following
          which the record holders of the common stock of the Company
          immediately prior to such transaction or series of transactions
          continue to have substantially the same proportionate ownership in an
          entity which owns all or substantially all of the assets of the
          Company immediately following such transaction or series of transac-
          tions.

          2.   Section 1.3 of the Plan is amended by inserting immediately
following the definition of "Participant" the following:

               "Person" has the meaning given in Section 3(a)(9) of the Exchange
          Act, as modified and used in Sections 13(d) and 14(d) thereof, except
          that such term shall not include (i) the Company or any of its
          Subsidiaries, (ii) a trustee or other fiduciary holding securities
          under an employee benefit plan of the Company or 

                                       3
<PAGE>
 
          any of its Subsidiaries, (iii) an underwriter temporarily holding
          securities pursuant to an offering of such securities, or (iv) a
          corporation owned, directly or indirectly, by the stockholders of the
          Company in substantially the same proportions as their ownership of
          stock of Company.

          3.  Section 1.3 of the Plan is amended by inserting immediately
following the definition of "Plan Year" the following:

               A "Potential Change in Control" shall be deemed to have occurred
          if the event set forth in any one of the following paragraphs shall
          have occurred:

               (i)  the Company enters into an agreement, the consummation of
          which would result in the occurrence of a Change in Control;

               (ii)  the Company or any Person publicly announces an intention
          to take or to consider taking actions which, if consummated, would
          constitute a Change in Control;

               (iii)  any Person becomes the beneficial owner, directly or
          indirectly, of securities of the Company (not including in the
          securities beneficially owned by such Person any securities acquired
          directly from the Company or its affiliates) representing 15% or more
          of either the then outstanding shares of common stock of the Company
          or the combined voting power of the Company's then outstanding securi-
          ties;

               (iv) the filing with the Federal Home Loan Bank Board and/or the
          FSLIC or their 

                                       4
<PAGE>
 
          successor of an application for Change in Control; or
              
               (v)  the Board of Directors adopts a resolution to the effect
          that, for purposes of this Plan, a Potential Change in Control has
          occurred.

               A "Potential Change in Control Period" shall commence upon the
          occurrence of a Potential Change in Control and shall end six months
          following the earlier to occur of (i) a Change in Control and (ii)
          the date on which such Potential Change in Control ceases to exist
          (whether by resolution of the Board of Directors or otherwise).

          4.   Section 4.2 of the Plan is amended in its entirety as follows:

          4.2  Change in Control.
               ----------------- 

               A Participant's benefits under this Plan shall be fully vested if
          a Change in Control occurs and, within 24 months following such
          Change in Control or during a Potential Change in Control Period
          (whether or not a Change in Control subsequently occurs), a
          Participant's employment with the Company is terminated by the Company
          without cause or if a Participant terminates his employment with the
          Company under circumstances that would entitle such Participant to
          receive severance benefits under (a) if the Participant is a member of
          the Executive Management Committee, such Participant's employment
          agreement, or (b) if the Participant is not a member of the Executive
          Management Committee, the Company's Special Severance Plan, whether
          or not such Participant is a participant in such Plan.

                                       5
<PAGE>
 
          5.   Section 6.1 of the Plan is amended in its entirety to read as
follows:

          6.1 - Amendments and Termination.
                -------------------------- 

               The Company shall have the right to terminate or amend this Plan
          by resolution of the Board of Directors and to amend or cancel any
          amendments; provided, however, that during a Potential Change in
                      --------  -------                                   
          Control Period and during the two (2) year period period following a
          Change in Control, the Plan may not be terminated without the prior
          written consent of two-thirds (2/3) of those individuals who were
          Participants or Beneficiaries as of December 10, 1996, and may not be
          amended without the prior written consent of two-thirds (2/3 of such
          individuals if such amendment would be adverse to the interests of
          such Participants or Beneficiaries (including, without limitation,
          any reduction of payments already due or being paid under the Plan).
          Any such amendment shall be stated in an instrument in writing,
          executed by the Company in the same manner as this Plan.

          The effective date of this Amendment No. 1996-2 shall be December 10,
1996.  Except as herein modified, the Plan shall remain in full force and
effect.

                              GREAT WESTERN
                                FINANCIAL CORPORATION



                         By:/s/ J. Lance Erikson
                            --------------------
                         Executive Vice President,
                         General Counsel and Secretary

                                       6

<PAGE>
 
                                                                   EXHIBIT 10.66

                      GREAT WESTERN FINANCIAL CORPORATION
                            SPECIAL SEVERANCE PLAN


       Great Western Financial Corporation has adopted this Special Severance
Plan (the "Plan") as of December 10, 1996, for the benefit of certain employees
of the Company, its affiliates and subsidiaries, on the terms and conditions
hereinafter stated.

       The Plan, as set forth herein, is intended to reinforce and encourage the
continued attention and dedication of members of the Company's management to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control.

        1.  Defined Terms. For purposes of the Plan, the following terms shall
            -------------- 
have the meanings indicated below:

 
        (A) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
 
        (B) "Annual Incentive Plan" shall have the meaning set forth in Section
4.1(A) hereof.
 
        (C) "Auditor" shall have the meaning set forth in Section 4.2(B) hereof.
 
        (D) "Base Amount" shall have the meaning set forth in Section 280G(b)(3)
of the Code.
 
        (E) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
 
        (F) "Benefit Continuation Period" shall mean (i) with respect to a
Participant who is a Senior Vice President (or who is deemed to be of equivalent
rank), the twenty-four (24) month period immediately following the Date of
Termination or (ii) with respect to a Participant who is a First Vice President
(or who is deemed to be of equivalent rank), the eighteen (18) month period
immediately following the Date of Termination.

                                       1
<PAGE>
 
        (G) "Board" shall mean the Board of Directors of the Company.
 
        (H) "Cause" for termination by the Company of a Participant's employment
shall mean (i) a Participant's conviction by a court of competent jurisdiction
of a felony, (ii) entry of an order duly issued by the Office of Thrift
Supervision removing a Participant from the office of the Company or permanently
prohibiting him from participating in the conduct of the affairs of the Company,
(iii) the willful and continued failure by a Participant to substantially
perform the Participant's duties with the Company (other than any such failure
resulting from the Participant's incapacity due to physical or mental illness or
any such actual or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Participant pursuant to Section 5.1 hereof)
after a written demand for substantial performance is delivered to the
Participant by the Board, which demand specifically identifies the manner in
which the Board believes that the Participant has not substantially performed
the Participant's duties, or (iv) the willful engaging by the Participant in
conduct which is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (iii) and (iv) of
this definition, no act, or failure to act, on the Participant's part shall be
deemed "willful" unless done, or omitted to be done, by the Participant not in
good faith and without reasonable belief that the Participant's act, or failure
to act, was in the best interest of the Company.
 
        (I) A "Change in Control" shall be deemed to have occurred if the event
set forth in any one of the following paragraphs shall have occurred:
 
                (I) any Person is or becomes the Beneficial Owner, directly or
        indirectly, of securities of the Company (not including in the
        securities beneficially owned by such Person any securities acquired
        directly from the Company or its Affiliates) representing 25% or more of
        either the then outstanding shares of common stock of the Company or the
        combined voting power of the Company's then outstanding securities,
        excluding any Person who becomes such a Beneficial Owner in connection
        with a transaction described in clause (i) of paragraph (III) below; or
 
                (II) the following individuals cease for any reason to
        constitute a majority of the number of directors then serving,
        individuals who, on December 10, 1996, constitute the Board and any new
        director (other than a director whose initial assumption of office is in
        connection with an actual or threatened election contest, including but
        not limited to a consent solicitation, relating to the election of
        directors of the Company) whose appointment or election by the Board or
        nomination for election by the

                                       2
<PAGE>
 
     Company's stockholders was approved or recommended by a vote of at least
     two-thirds (2/3) of the directors then still in office who either were
     directors on December 10, 1996 or whose appointment, election or nomination
     for election was previously so approved or recommended; or
 
                (III) there is consummated a merger or consolidation of the
     Company with any other corporation, other than (i) a merger or
     consolidation which would result in the voting securities of the Company
     outstanding immediately prior to such merger or consolidation continuing to
     represent (either by remaining outstanding or by being converted into
     voting securities of the surviving entity or any parent thereof) at least
     75% of the combined voting power of the securities of the Company or such
     surviving entity or any parent thereof outstanding immediately after such
     merger or consolidation, or (ii) a merger or consolidation effected to
     implement a recapitalization of the Company (or similar transaction) in
     which no Person is or becomes the Beneficial Owner, directly or indirectly,
     of securities of the Company (not including in the securities Beneficially
     Owned by such Person any securities acquired directly from the Company or
     its Affiliates) representing 25% or more of either the then outstanding
     shares of common stock of the Company or the combined voting power of the
     Company's then outstanding securities; or
 
                (IV) the stockholders of the Company approve a plan of complete
     liquidation or dissolution of the Company or there is consummated an
     agreement for the sale or disposition by the Company of all or
     substantially all of the Company's assets.
 
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
have occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have SUBSTANTIALLY THE SAME PROPORTIONATE OWNERSHIP IN
AN ENTITY WHICH OWNS ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY
IMMEDIATELY FOLLOWING SUCH TRANSACTION OR SERIES OF TRANSACTIONS.
 
        (J) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
 
        (K)  "Committee" shall mean the Compensation Committee of the Board.

                                       3
<PAGE>
 
        (L) "Company" shall mean Great Western Financial Corporation, a Delaware
corporation, and, except in determining under Section 1(I) hereof whether or not
any Change in Control of the Company has occurred, shall include any successor
to its business and/or assets which assumes and agrees to perform this Plan by
operation of law, or otherwise.
 
        (M) "Date of Termination" shall have the meaning set forth in Section
5.2 hereof.
 
        (N) "Disability" shall be determined in accordance with the Company's
long-term disability plan.
 
        (O) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
 
        (P) "Good Reason" for termination by a Participant of the Participant's
employment shall mean the occurrence (without the Participant's express written
consent) within two (2) years after any Change in Control, or prior to a Change
in Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 4.1 hereof (treating all references in paragraphs (I)
through (IV) below to a "Change in Control" as references to a "Potential Change
in Control"), of any one of the following acts by the Company, or failures by
the Company to act, unless such act or failure to act is corrected prior to the
Date of Termination specified in the Notice of Termination given in respect
thereof:
 
                (I) the assignment to the Participant of any duties inconsistent
with the Participant's status as a Senior Vice President (or equivalent thereof)
or First Vice President (or equivalent thereof) of the Company, as the case may
be, or, in the good-faith determination of the Participant, a substantial
adverse alteration in the nature or status of the Participant's responsibilities
from those in effect immediately prior to the Change in Control;
 
                (II) a reduction by the Company in the Participant's annual base
salary or annual bonus opportunity as in effect on the date immediately prior to
the occurrence of the Change in Control or as the same may be increased from
time to time except for across-the-board salary reductions similarly affecting
all senior executives of the Company and all senior executives of any Person in
control of the Company;

                                       4
<PAGE>
 
                (III) the relocation of the Participant's principal place of
        employment to a location more than fifty (50) miles from the
        Participant's principal place of employment immediately prior to the
        Change in Control except for required travel on the Company's business
        to an extent substantially consistent with the Participant's business
        travel obligations as in effect immediately prior to the Change in
        Control; or
 
                (IV) any purported termination of the Participant's employment
        which is not effected pursuant to a Notice of Termination satisfying the
        requirements of Section 5.1 hereof; for purposes of this Plan, no such
        purported termination shall be effective.
 
        A Participant's right to terminate the Participant's employment for
Good Reason shall not be affected by the Participant's incapacity due to
physical or mental illness.  A Participant's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or failure
to act constituting Good Reason hereunder.
 
        (Q) "Notice of Termination" shall have the meaning set forth in Section
5.1 hereof.
 
        (R) "Participants" shall mean the Senior Vice Presidents and First Vice
Presidents of the Company and of Great Western Bank, a Federal Savings Bank, and
each officer of equivalent rank with certain of the Company's other
subsidiaries, which officers are listed on Exhibit 1 hereto, which is
incorporated as part of the Plan. Exhibit 1 to the Plan may be supplemented by
the Board in its discretion.
 
        (S) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.
 
        (T) "Potential Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
 
                (I) the Company enters into an agreement, the consummation of
        which would result in the occurrence of a Change in Control;

                                       5
<PAGE>
 
                (II)  the Company or any Person publicly announces an intention
        to take or to consider taking actions which, if consummated, would
        constitute a Change in Control;
 
                (III) any Person becomes the Beneficial Owner, directly or
        indirectly, of securities of the Company representing 15% or more of
        either the then outstanding shares of common stock of the Company or the
        combined voting power of the Company's then outstanding securities (not
        including in the securities beneficially owned by such Person any
        securities acquired directly from the Company or its affiliates); or
 
                (IV)  the Board adopts a resolution to the effect that, for
        purposes of this Plan, a Potential Change in Control has occurred.
 
        (U) "Potential Change in Control Period" shall mean a period commencing
upon the occurrence of an event constituting a Potential Change in Control and
ending on the date six months following the date on which such Potential Change
in Control ceases to exist (whether by Board resolution or otherwise).
 
        (V) "Severance Payments" shall have the meaning set forth in Section 4.1
hereof.
 
        (W) "Tax Counsel" shall have the meaning set forth in Section 4.2(B)
 hereof.
 
        (X) "Total Payments" shall mean those payments so described in Section
4.2(B) hereof.
 
        2. Effective Date of Plan. The Effective Date of this Plan is December
           ----------------------  
10, 1996. The Plan shall be effective as of the Effective Date and shall remain
in effect unless and until terminated by the Board pursuant to Section 10.3
hereof.
 
        3. Administration. The Plan shall be interpreted, administered and
           --------------
operated by the Committee, which shall have complete authority, in its sole
discretion subject to the express provisions of the Plan, to determine who shall
be a Participant, to interpret the Plan, to prescribe, amend and rescind rules
and regulations relating to it, and to make all other determinations necessary
or advisable for the administration of the Plan. The Committee may delegate any
of its duties hereunder to such person or persons from time to time as it may
designate.

                                       6
<PAGE>
 
        4. Severance Payments.
           -------------------
 
Subject to Section 4.2 hereof, if a Participant's employment is terminated
within two (2) years following a Change in Control, other than (a) by the
Company for Cause, (b) by reason of death or Disability, or (c) by the
Participant without Good Reason, the Company shall pay the Participant the
amounts, and provide the Participant the benefits, described in this Section 4.1
("Severance Payments"). For purposes of this Plan, a Participant's employment
shall be deemed to have been terminated following a Change in Control by the
Company without Cause or by the Participant with Good Reason if (i) the
Participant's employment is terminated by the Company without Cause prior to a
Change in Control (whether or not a Change in Control ever occurs) and such
termination was at the request or direction of a Person who has entered into an
agreement with the Company the consummation of which would constitute a Change
in Control, (ii) the Participant terminates his employment for Good Reason prior
to a Change in Control (whether or not a Change in Control ever occurs) and the
circumstance or event which constitutes Good Reason occurs at the request or
direction of such Person, or (iii) the Participant's employment is terminated by
the Company without Cause or by the Participant for Good Reason and such
termination or the circumstance or event which constitutes Good Reason is
otherwise in connection with or in anticipation of a Change in Control (whether
or not a Change in Control ever occurs).
 
                (A) In lieu of any further salary payments to the Participant
     for periods subsequent to the Date of Termination and in lieu of any
     severance benefit otherwise payable to the Participant (other than accrued
     vacation and similar benefits otherwise payable upon termination of
     employment pursuant to Company policies and programs), the Company shall
     pay to the Participant a lump sum severance payment, in cash, equal to the
     product of (i) the sum of (x) the Participant's annual base salary as in
     effect immediately prior to the Date of Termination or, if higher, in
     effect immediately prior to the first occurrence of an event or
     circumstance constituting Good Reason, plus (y) the target bonus ("Target
     Bonus") under the Company's annual incentive program for senior officers
     (the "Annual Incentive Program") in respect of the year in which such Date
     of Termination occurs or the year in which the Change in Control occurs,
     whichever is greater (provided, however, that, if the termination of the
                           -----------------
     Participant's employment occurs following the occurrence of a Potential
     Change in Control but prior to such Change in Control, the Target Bonus
     shall be in respect of the year in which such termination of employment
     occurs), multiplied by (ii) (a) in the case of a Senior Vice President, the
     number two (2) or (b) in the case of a First Vice President, the number one
     and one-half (1.5).
 

                                       7
<PAGE>
 
                (B) During the Benefit Continuation Period, the Company shall
     provide the Participant and Participant's dependents with health and
     welfare type employee benefits (including without limitation hospital,
     surgical, major medical, life and disability insurance), each such benefit
     to be continued in a manner no less favorable to the Participant than the
     benefit to which Participant was entitled immediately prior to such Date of
     Termination (or, if applicable, the first occurrence of an event
     constituting Good Reason). Benefits otherwise receivable by the Participant
     pursuant to this Section 4.1(B) shall be reduced to the extent benefits of
     the same type are received by or made available by a subsequent employer to
     the Participant at no cost to the Participant during the Benefit
     Continuation Period (and any such benefits received by or made available to
     the Participant shall be reported to the Company by the Participant).
 
                (C) The Company shall pay to the Participant a lump sum cash
     amount (the "Pro-Rata Bonus") equal to the product of (i) the target bonus
     to which the Participant would have been entitled under the Annual
     Incentive Program in respect of the year in which the Date of Termination
     occurs (assuming for this purpose that performance under the Annual
     Incentive Program is "on plan" for such year) multiplied by (ii) a
     fraction, the numerator of which shall be the number of months (including
     fractions thereof) from the first day of the fiscal year during which such
     Date of Termination occurs to such Date of Termination, and the denominator
     of which shall be twelve (12); provided, however, that if such Date of
                                    -----------------
     Termination occurs during the same year in which the Change in Control
     occurs, the Pro-Rata Bonus shall be offset by any payments received under
     the Annual Incentive Program in connection with such Change in Control.

                                       8
<PAGE>
 
        4.2  (A) Notwithstanding any other provision of this Plan, in
the event that any payment or benefit received or to be received by the
Participant in connection with a Change in Control or the termination of the
Participant's employment (whether pursuant to the terms of this Plan or any
other plan, arrangement or agreement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the Company or such
Person) (all such payments and benefits, including the Severance Payments, being
hereinafter called "Total Payments") would not be deductible (in whole or part),
by the Company, an Affiliate of the Company or Person making such payment or
providing such benefit as a result of section 280G of the Code, then, to the
extent necessary to make such portion of the Total Payments deductible (and
after taking into account any reduction in the Total Payments provided by reason
of section 280G of the Code in such other plan, arrangement or agreement), the
cash Severance Payments shall first be reduced (if necessary, to zero), and all
other Severance Payments shall thereafter be reduced (if necessary, to zero);
provided, however, that the Participant may elect to have the noncash Severance
- -----------------
Payments reduced (or eliminated) prior to any reduction of the cash Severance
Payments.
 
             (B) For purposes of this limitation, (i) no portion of the Total
Payments the receipt or enjoyment of which the Participant shall have waived at
such time and in such manner as not to constitute a "payment" within the meaning
of section 280G(b) of the Code shall be taken into account, (ii) no portion of
the Total Payments shall be taken into account which, in the opinion of tax
counsel ("Tax Counsel") selected by the accounting firm which was, immediately
prior to the Change in Control, the Company's independent auditor (the
"Auditor"), does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of section 280G(b)(4)(A) of
the Code, (iii) the Severance Payments shall be reduced only to the extent
necessary so that the Total Payments (other than those referred to in clauses
(i) or (ii)) in their entirety constitute reasonable compensation for services
actually rendered within the meaning of section 280G(b)(4)(B) of the Code or are
otherwise not subject to disallowance as deductions by reason of section 280G of
the Code, in the opinion of Tax Counsel, and (iv) the value of any noncash
benefit or any deferred payment or benefit included in the Total Payments shall
be determined by the Auditor in accordance with the principles of sections
280G(d)(3) and (4) of the Code.

                                       9
<PAGE>
 
             (C) If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding that, notwithstanding the good
faith of the Participant and the Company in applying the terms of this Section
4.2, the Total Payments paid to or for the Participant's benefit are in an
amount that would result in any portion of such Total Payments being subject to
the Excise Tax, then, if the repayment hereinafter described would result in (i)
no portion of the remaining Total Payments being subject to the Excise Tax and
(ii) a dollar-for-dollar reduction in the Participant's taxable income and wages
for purposes of federal, state and local income and employment taxes, the
Participant shall have an obligation to repay the Company upon demand an amount
equal to the sum of (x) the excess of the Total Payments paid to or for the
Participant's benefit over the Total Payments that could have been paid to or
for the Participant's benefit without any portion of such Total Payments being
subject to the Excise Tax; and (y) interest on the amount set forth in clause
(x) of this sentence at the rate provided in section 1274(b)(2)(B) of the Code
from the date of the Participant's receipt of such excess until the date of such
payment.
 
        4.3  The payments provided in subsections (A) and (C) of Section 4.1
hereof shall be made not later than the fifth day following the Date of
Termination; provided, however, that if the amounts of such payments, and the
             -----------------
limitation on such payments set forth in Section 4.2 hereof, cannot be finally
determined on or before such day, the Company shall pay to the Participant on
such day an estimate, as determined in good faith by the Company, of the minimum
amount of such payments to which the Participant is clearly entitled and shall
pay the remainder of such payments (together with interest on the unpaid
remainder (or on all such payments to the extent the Company fails to make such
payments when due) at 120% of the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth (30th) day after the Date of Termination.  In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to the
Participant, payable on the fifth (5th) business day after demand by the Company
(together with interest at 120% of the rate provided in section 1274(b)(2)(B) of
the Code).  At the time that payments are made under this Plan, the Company
shall provide the Participant with a written statement setting forth the manner
in which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Company has
received from Tax Counsel, the Auditor or other advisors or consultants (and any
such opinions or advice which are in writing shall be attached to the
statement).
 
        5.  Termination Procedures.
            -----------------------

                                       10
<PAGE>
 
        5.1 Notice of Termination.  Any purported termination of a Participant's
            ---------------------
employment deemed to have occured following a Change in Control (other than by
reason of death) shall be communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance with Section 8 hereof.  For
purposes of this Plan, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Plan relied upon and shall
set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Participant's employment under the provision so
indicated.  Further, no termination for Cause shall be effective without (i)
reasonable notice to the Participant setting forth the reasons for the Company's
intention to terminate, (ii) an opportunity for the Participant to cure any such
breach within fifteen (15) days after receipt of such notice and (iii) delivery
to the Participant of a Notice of Termination stating that a majority of the
authorized number of the Company's directors has found that the Participant was
guilty of the conduct constituting Cause and specifying the particulars thereof
in detail.
 
        5.2 Date of Termination.  "Date of Termination," with respect to any
            -------------------
purported termination of a Participant's employment (other than by reason of the
Participant's death), shall mean (i) if the Participant's employment is
terminated for Disability, the date upon which a Notice of Termination is given,
and (ii) if the Participant's employment is terminated for any other reason, the
date specified in the Notice of Termination (which shall be within sixty (60)
days from the date such Notice of Termination is given).
 
        6. No Mitigation. The Company agrees that, if a Participant becomes
           --------------
eligible to receive the Severance Payments and other benefits described herein,
the Participant is not required to seek other employment or to attempt in any
way to reduce any amounts payable to the Participant by the Company pursuant to
Section 4 hereof. Further, the amount of any payment or benefit provided for in
this Plan (other than Section 4.1(B) hereof) shall not be reduced by any
compensation earned by the Participant as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Participant to the Company, or otherwise.
 
        7.  Successors; Binding Agreement.
            ------------------------------
 
        7.1 This Plan shall inure to the benefit of and shall be binding upon
the Company, its successors and assigns, but without the prior written consent
of the Participants this Plan may not be assigned other than in connection with
the merger or sale of substantially all the assets of the Company or similar
transaction in which the

                                       11
<PAGE>
 
successor or assignee assumes (whether by operation of law or express
assumption) all obligations of the Company hereunder.
 
        7.2 This Plan shall inure to the benefit of and be enforceable by the
Participant's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, legatees or other beneficiaries.  If
a Participant shall die while any amount would still be payable to such
Participant hereunder (other than amounts which, by their terms, terminate upon
the death of the Participant) if such Participant had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Plan to the executors, personal representatives or
administrators of such Participant's estate.
 
        8.  Notices.  For the purpose of this Plan, notices and all other
            --------
communications provided for in the Plan shall be in writing and shall be deemed
to have been duly given when delivered or mailed by United States registered
mail, return receipt requested, postage prepaid, addressed, if to a Participant,
to the address on file with the Company and, if to the Company, to the address
set forth below, or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon actual receipt:
 
        To the Company:
 
        9200 Oakdale Avenue
        Chatsworth, California  91311
        Attention:  Executive Vice President -- Legal
 
        9. Claims Procedure; Arbitration.
           -----------------------------
 
        9.1 A Participant may file with the Committee a written claim for
benefits under the Plan. The Committee shall, within a reasonable time not to
exceed ninety (90) days, unless special circumstances require an extension of
time of not more than an additional ninety (90) days (in which event a
Participant will be notified of the delay during the first ninety (90) day
period), provide adequate notice in writing to any Participant whose claim for
benefits shall have been denied, setting forth the following in a manner
calculated to be understood by the Participant:
 
                (A)  the specific reason or reasons for the denial;
 
                (B) specific reference to the provision or provisions of the
     Plan on which the denial is based;

                                       12
<PAGE>
 
                (C) a description of any additional material or information
     required to perfect the claim, and an explanation of why such material or
     information is necessary; and
 
                (D) information as to the steps to be taken in order that the
     denial of the claim may be reviewed.
 
        9.2 If written notice of the denial of a claim has not been furnished to
a Participant, and such claim has not been granted within the time prescribed in
Section 9.1 hereof (including any applicable extension), the claim for benefits
shall be deemed denied.
 
        9.3 A Participant whose claim for benefits shall have been denied in
whole or in part, may, within sixty (60) days from either the receipt of the
denial of the claim or from the time the claim is deemed denied (unless the
notice of denial grants a longer period within which to respond), appeal such
denial to the Company. The Participant may, upon request, at this time review
documents pertinent to his claim and may submit written issues and comments.
 
        9.4 The Company shall notify a Participant of its decision within sixty
(60) days after an appeal is received, unless special circumstances require an
extension of time of not more than an additional sixty (60) days (in which event
a Participant will be notified of the delay during the first sixty (60) day
period). Such decision shall be given in writing in a manner calculated to be
understood by the Participant and shall include the following:
 
                (A)  specific reasons for the decision; and
 
                (B) specific reference to the provision or provisions of the
     Plan on which the decision is based.
 
        9.5 Any dispute or controversy arising under or in connection with this
Plan that cannot be settled through the procedure set forth in Sections 9.1
through 9.4 hereof shall be first submitted to mediation administered by the
American Arbitration Association ("AAA").  In the event the dispute or
controversy cannot be resolved through mediation, it shall be settled
exclusively by arbitration in the state of residence of the Participant by three
arbitrators in accordance with the rules of the AAA in effect at the time of
submission to arbitration.  Judgment may be entered on the arbitrators' award in
any court having jurisdiction.  Each party shall pay its costs in connection
with such arbitration procedure; provided, that a Participant that prevails 
                                 --------

                                       13
<PAGE>
 
in such arbitration shall be entitled to reimbursement for such Participant's
reasonable attorneys' fees.
 
        10.  Miscellaneous.
             --------------
 
        10.1 Entire Plan. No waiver by either party hereto at any time of any
             -----------
breach by the other party hereto of, or of any lack of compliance with, any
condition or provision of this Plan to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. This instrument contains the entire agreement
of the parties relating to the subject matter hereof. All other plans, policies
and arrangements of the Company in which the Participant participates during the
Term shall be interpreted so as to avoid the duplication of benefits paid
hereunder.
 
        10.2 No Right to Employment. Nothing contained in this Plan or any
             ---------------------- 
documents relating to the Plan shall (i) confer upon any Participant any right
to continue as a Participant or in the employ of the Company or a subsidiary,
(ii) constitute any contract or agreement of employment, or (iii) interfere in
any way with the right of the Company or a subsidiary to reduce such
Participant's compensation, to change the position held by such Participant, or
terminate the employment of such Participant, with or without Cause.
 
        10.3 Termination and Amendment of Plan. The Company shall have the right
             ---------------------------------
to terminate or amend this Plan at any time by resolution of the Board of
Directors and to amend or cancel any amendments: provided, however, that during
                                                 -----------------
a Potential Change in Control Period and during the two (2) year period
following a Change in Control, the Plan may not be terminated, nor may it be
amended if such amendment would be adverse to the interests of the Participants.
Notwithstanding the foregoing, this Plan shall terminate on the date following
the second anniversary of a Change in Control; provided, however, that all
                                               -----------------
obligations accrued by Participants prior to such Plan termination must be
satisfied in full in accordance with the terms hereof
 
        10.4 Benefits not Assignable. Except as otherwise provided herein or by
             -----------------------
law, no right or interest of any Participant under the Plan shall be assignable
or transferable, in whole or in part, either directly or by operation of law or
otherwise, including without limitation by execution, levy, garnishment,
attachment, pledge or in any manner; no attempted assignment or transfer thereof
shall be effective; and no right or interest of any Participant under the Plan
shall be liable for, or subject to, any obligation or liability of such
Participant. When a payment is due under this Plan to a 

                                       14
<PAGE>
 
Participant who is unable to care for his or her affairs, payment may be made
directly to his or her legal guardian or personal representative.
 
        10.5 California Law.  This Plan shall be construed and interpreted in
             --------------  
accordance with the laws of California, to the extent not preempted by federal
law, which shall otherwise control.
 
        10.6. Validity. The invalidity or unenforceability of any provision of
              --------
this Plan shall not affect the validity or enforceability of any other provision
of this Plan, which shall remain in full force and effect. If this Plan shall
for any reason be or become unenforceable by either party, this Plan shall
thereupon terminate and become unenforceable by the other party as well.

                                       15

<PAGE>
 
                                                                   EXHIBIT 10.67

GREAT WESTERN CHANGE IN CONTROL BENEFITS PROGRAM

               ----------------------------------------------------------------
    

PURPOSE        The purpose of this document is to outline the details of the
               Great Western Change in Control Benefits Program.  "Change in
               Control" is defined in Great Western's Benefit Plans Documents.
               The terms of this plan are effective  February 25, 1997.

               ----------------------------------------------------------------

PROGRAM AT     Eligible employees may receive:
A GLANCE
               .  60 days non-working notice pay
               .  One (1) month separation pay for every full year of service
               .  Minimum of six (6) months and maximum of eighteen (18) months
                  total combined notice and separation pay
               .  Choice of regular paychecks or one lump sum payment
               .  $1,000 educational assistance reimbursement
               .  Career Transition Services
               .  Enhanced Retirement Plan
               .  Extended employee home loan program
               .  All performance/production based incentive plans currently in
                  place remain in effect throughout active employment

               ----------------------------------------------------------------
 
IMPORTANT      Definitions of terms detailed in the plan include:
DEFINITIONS

<TABLE> 
<CAPTION> 

- --------------------------------------------------------------------------------
     TERM                       DEFINITION
===============================================================================
<S>                             <C> 
Announcement                    Notification that an employee's position
                                will/may be eliminated.
- --------------------------------------------------------------------------------
Comparable Job                  Any position offered to an employee that is
                                similar in responsibility and scope, with no
                                change in salary, work hours, or benefit
                                eligibility, and is within 35 miles of the
                                employee's current work location.
- --------------------------------------------------------------------------------
Lump Sum                        Receiving all separation pay in one check
                                instead of paid over time on regular paydays.
- --------------------------------------------------------------------------------
Notice Pay                      Salary continuance paid to an employee during
                                the first 60 days following their release date.
- --------------------------------------------------------------------------------
Separation and Release          A written agreement by which an employee gives
Agreement                       up any claims he/she might ever have against
                                Great Western in exchange for separation
                                benefits which Great Western is not otherwise
                                obligated to provide.
- --------------------------------------------------------------------------------
Release  Date                   The last day an employee reports to work.
- --------------------------------------------------------------------------------
Separation Pay                  Salary based on years of service that is paid to
                                an employee after 60 days of notice pay is
                                exhausted.
- --------------------------------------------------------------------------------
Termination Date                The last day of pay.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>

                                       1
<PAGE>
 
GREAT WESTERN CHANGE IN CONTROL BENEFITS PROGRAM, CONTINUED

               ---------------------------------------------------------------- 

ELIGIBILITY    Current and newly hired employees active as of the date the
               Change in Control is completed are eligible for the benefits
               outlined in this program.

               In addition, employees whose positions are eliminated between
               February 25, 1997 and the date of the Change in Control are
               covered by this program.

               Change in Control benefits are provided if no position is
               offered, or if a non-comparable job is offered by the acquiring
               company, or if an employee is terminated without cause within 12
               months after the Change in Control date. Additional eligibility
               requirements for separation benefits include:
<TABLE>
<CAPTION>
 
                                STATUS                           60 DAYS            SEPARATION PAY
                                                               NOTICE PAY
               -----------------------------------------------------------------------------------
               <S>                                             <C>                   <C>           
               .  Full-time employees                          X  Eligible            X  Eligible
               -----------------------------------------------------------------------------------
               .  Part-time employees working AT LEAST         X  Eligible            X  Eligible
                  20.5 hours per week
               -----------------------------------------------------------------------------------
               .  Part-time employees working LESS             X  Eligible            Not eligible
                  THAN 20.5 hours per week
               -----------------------------------------------------------------------------------
               .  GWFSC Commissioned Employees                 X  Eligible            X  Eligible
                                                               (Base Only)            (Base Only)
               -----------------------------------------------------------------------------------
               .  Temporary employees                          Not eligible           Not eligible
               .  On-Call employees
               .  MLCs and other fully commissioned employees
               .  Employees on LOA as of release date
                  whose job guarantee period has
                  expired
               -----------------------------------------------------------------------------------
</TABLE>

               *  See pay examples on the following page for more information.
 
               ---------------------------------------------------------------- 

NOTICE PAY     Notice Pay will begin the day after the employee's last day at
               work, and will continue for 60 calendar days.

               -----------------------------------------------------------------

SEPARATION PAY Separation Pay will begin after the 60 day notice pay ends, if
               the employee signs and returns a release agreement.  This release
               agreement is given to employees on their last day at work, and
               must be signed and returned within 45 days.

               If an employee signs this agreement, they will receive ONE (1)
               MONTH of pay (at their current salary level) for each FULL YEAR
               of service with Great Western. There is no proration for partial
               years of service. For the purposes of calculating length of
               service, an employee's adjusted hire date will be used. Length of
               service will be calculated based on the employee's release date.

               Regardless of length of service, eligible employees will receive
               a MINIMUM of FOUR (4) MONTHS separation pay. The MAXIMUM
               separation pay an employee can receive is SIXTEEN (16) MONTHS.

                                       2
<PAGE>
 
GREAT WESTERN CHANGE IN CONTROL BENEFITS PROGRAM, CONTINUED

               ----------------------------------------------------------------

EXAMPLES       Following are several examples of how notice and separation pay
               are calculated:

               EMPLOYEE A:
               -----------
               Employee A is full-time, has been with the company for 8 1/2
               years and signs her release agreement.
               

               EMPLOYEE B:
               -----------
               Employee B is full-time, has been with the company for 20 years
               and signs his release agreement. Employee B will reach the
               maximum payout of 16 months of separation pay.


               EMPLOYEE C:
               -----------
               Employee C is full-time, has been with the company for 2 years
               and signs her release agreement.  Employee C will receive the
               minimum payout of 4 months of separation pay.

               EMPLOYEE D:
               -----------
               Employee D is part-time working less than 20.5 hours per week.

<TABLE>
<CAPTION>
 
                              NON-WORKING    SEPARATION PAY   TOTAL PAY
                              NOTICE PAY
               ------------------------------------------------------------------- 
               <S>          <C>              <C>              <C>
               Employee A   60 days           8 months        10 months
               -------------------------------------------------------------------
               Employee B   60 days          16 months        18 months
               -------------------------------------------------------------------
               Employee C   60 days           4 months         6 months
               -------------------------------------------------------------------       
               Employee D   60 days           0 months        60 days
               -------------------------------------------------------------------
</TABLE>
               *PART-TIME EMPLOYEES WILL BE PAID BASED ON THEIR REGULARLY
                SCHEDULED HOURS OF WORK.

               -----------------------------------------------------------------
 
PAYMENT METHOD NOTICE PAY will be paid by a regular paycheck (or direct
               deposit) on the 15th and the last day of the month during the 60
               day notice pay period.
 
               Employees may choose to receive their SEPARATION PAY in one of
               two ways:

               OPTION 1:  SALARY CONTINUANCE
               -----------------------------

               . Continue regular paychecks (or direct deposit) on the 15th and
                 the last day of the month.

               . Termination date will be the last day  payment is received.

               . Medical/Vision and Dental coverage cease at the end of the
                 month following the termination date.

                                       3
<PAGE>
 
GREAT WESTERN CHANGE IN CONTROL BENEFITS PROGRAM, CONTINUED
                    
                    ------------------------------------------------------------

PAYMENT METHOD      OPTION 2:  A SINGLE LUMP SUM PAYMENT
                    ------------------------------------
(CONTINUED)
                    . Receive a single lump sum payment for the entire amount of
                      separation pay.

                    . Payment would be made after the end of the 60 day notice
                      period.

                    . Payment will be processed within 3 weeks following receipt
                      of the lump sum payment request (but not before the end of
                      the 60 day notice period).

                    . Termination date will be the day the lump sum payment is
                      made.

                    . Medical/Vision and Dental coverage cease at the end of the
                      month following the termination date.

                    . Lump sum payments will be taxed at a Supplemental Rate.
 
                    ------------------------------------------------------------

DEATH OF AN         In the event of an employee's death after notice pay
EMPLOYEE            commences, any unpaid separation benefit will be made to a
                    designated beneficiary or the employee's estate.
 
                    ------------------------------------------------------------

CONTINUATION OF     If employees begin another position with an employer OTHER
SEPARATION BENEFITS THAN GREAT WESTERN OR THE ACQUIRING COMPANY after their
UPON RE-EMPLOYMENT  release date, they will receive  their full notice and /or
                    separation pay.

                    If employees accept a position WITHIN GREAT WESTERN OR THE
                    ACQUIRING COMPANY, after they have been released and have
                    begun receiving notice or separation pay, their notice or
                    separation pay will cease as of the date of transfer/re-
                    employment. If a lump sum payment was made, the employee
                    will repay the amount equal to the remainder of the
                    separation benefit as if the employee had elected salary
                    continuance.

                    ------------------------------------------------------------

PLUSPAY             Participation in group insurance plans (medical/vision and
                    dental) will continue through the last day of the month in
                    which the employee's termination date falls.

                    NOTE: IF AN EMPLOYEE CHOOSES A LUMP SUM PAYMENT OF
                          SEPARATION BENEFITS, THE TERMINATION DATE WILL BE THE
                          DAY THE LUMP SUM PAYMENT IS MADE.

                    After their termination date, employees may continue
                    medical/vision and dental coverage through COBRA for up to
                    18 months at a cost of 102 percent of the full premium.
                    Detailed information on COBRA may be found in the 1997
                    Employee Handbook.

GREAT WESTERN CHANGE IN CONTROL BENEFITS PROGRAM, CONTINUED
 
                    ------------------------------------------------------------

                                       4
<PAGE>
 
VACATION            Vacation will continue to accrue through the Notice Pay
                    Period. Accrued vacation (up to the maximum) will be paid
                    out at the end of Notice Pay.

                    -----------------------------------------------------------

ESIP (401K)         If an employee is a participant in the Employee Savings
                    Incentive Plan (ESIP) they may continue to make
                    contributions through the end of their NOTICE PAY.

                    Information regarding payout of their benefit will be sent
                    from the Benefits Department after their termination date.
 
                    ------------------------------------------------------------

RETIREMENT          If an employee is a participant in the Retirement Plan, 
BENEFITS            they will continue to receive contribution credits under the
                    Plan as though they were active employees through the end of
                    their NOTICE PAY. Employees will have a vested benefit under
                    the Plan if they have completed at least 5 years of service
                    and are at least 21 years of age on their termination date.
 
                    The Benefits Department will contact eligible employees with
                    information on their benefit amounts, and the method of
                    distribution after their termination dates.

                    ------------------------------------------------------------

ENHANCED            Enhanced retirement benefits will be provided to eligible
RETIREMENT          employees age 52 with 15 or more years of service, OR
BENEFITS            eligible employees with 25 or more years of service
                    regardless of age, as of their release date.

                    The enhanced retirement benefit adds three (3) years to an
                    employee's service at termination for purposes of
                    calculating their retirement benefit and medical plan
                    eligibility and cost.

                    -----------------------------------------------------------

EMPLOYEE            If employees currently have an Employee Home Loan, and 
HOME LOANS          sign the release agreement, the terms of their mortgages
                    will be extended AS LONG AS THE EMPLOYEE RESIDES IN THE
                    RESIDENCE.

                    ------------------------------------------------------------

BRANCH              Employees will continue to receive free branch services 
SERVICES            through their termination dates. Regular fees/charges will
                    apply following the termination date.

                    ------------------------------------------------------------
 
EDUCATIONAL         Full time and part-time employees working more than 20.5
REIMBURSEMENT       hours per week who sign the release agreement, will be
                    entitled to 100% educational reimbursement, to a MAXIMUM OF
                    $1,000, for job-related courses started within six (6)
                    months of their release date.

                    ------------------------------------------------------------

                                       5
<PAGE>
 
GREAT WESTERN CHANGE IN CONTROL BENEFITS PROGRAM, CONTINUED

                    -----------------------------------------------------------


CAREER              Career Transition assistance will be provided to all
TRANSITION          employees including job search workshops, self-study
SERVICES            materials, or career center access to employees based on
                    their work locations.

                    This material covers self-assessment, preparing your resume,
                    assessing the job market, developing a job search strategy,
                    interviewing, and successfully negotiating an offer.

                    Department level managers will receive individual
                    outplacement services for three (3) months. These services
                    will begin following the employee's release date.

                    ------------------------------------------------------------

EMPLOYEE            Employees may continue to use the Employee Assistance
ASSISTANCE          Program (EAP) through their termination dates. During this
PROGRAM             period, they may participate in up to two (2) counseling
                    sessions.

                    ------------------------------------------------------------
 
UNEMPLOYMENT        Employees may apply for unemployment insurance immediately
INSURANCE           following the Notice Pay Period. Employees should contact
                    the unemployment insurance office in their state of
                    residence for further advice regarding these benefits.
 
                    ------------------------------------------------------------

IMPORTANT           It is important to remember that this plan does not apply to
NOTES               employees terminated for cause. EMPLOYEES MUST CONTINUE TO
                    PERFORM AT ACCEPTABLE LEVELS TO QUALIFY FOR ANY SEPARATION
                    BENEFIT.
 
                    ------------------------------------------------------------

QUESTIONS           EMPLOYEES WITH QUESTIONS REGARDING THE GREAT WESTERN CHANGE
                    IN CONTROL BENEFITS PLAN MAY CALL HUMAN RESOURCES AT (818)
                    775-3555 OR (800) 843-6093, BETWEEN THE HOURS OF:

                       MONDAY - THURSDAY   7:00 A.M.-  6:00 P.M. (PACIFIC TIME)
                       FRIDAY              7:00 A.M. - 3:00 P.M. (PACIFIC TIME)
 

 

                                       6

<PAGE>
 
                                                                   Exhibit 10.68

                           OMNIBUS AMENDMENT 1997-1

       WHEREAS, Great Western Financial Corporation ("GWFC") maintains the
following plans, trusts and agreements for the benefit of its employees and/or
directors (collectively, the "Plans"):

   .   Employment Agreements, amended and restated as of December 10, 1996:
       .  John F. Maher
       .  J. Lance Erikson
       .  Carl F. Geuther
       .  Michael M. Pappas
       .  A. William Schenck III
       .  Jaynie M. Studenmund

       .  Employment Agreement with Ray W. Sims, effective as of January 6, 1997

   .   GWFC 1988 Stock Option and Incentive Plan, as amended through December
       10, 1996

   .   GWFC Annual Incentive Compensation Plan for Executive Officers, as
       amended December 9, 1996 (the "Annual Incentive Plan")

   .   GWFC Senior Officers' Deferred Compensation Plan (1992 Restatement), as
       amended December 10, 1996

   .   GWFC Deferred Compensation Plan (1992 Restatement), as amended December
       10, 1996

   .   GWFC Directors' Deferred Compensation Plan (1992 Restatement), as amended
       December 10, 1996

   .   Great Western Supplemental Executive Retirement Plan (1988 Restatement),
       as amended through December 10, 1996

   .   Great Western Retirement Restoration Plan, as amended December 10, 1996
<PAGE>
 

 .  GWFC Umbrella Trust for Senior Officers (as amended through December 10,
   1996) and Umbrella Trust for Directors (as amended through December 10,
   1996)

 .  Employee Home Loan Program (revised and restated as of April 27, 1993), as
   amended December 10, 1996

 .  GWFC Special Severance Plan, effective December 10, 1996

       WHEREAS, the Compensation Committee of the Board of Directors of GWFC has
adopted this Omnibus Amendment 1997-1 with respect to the Annual Incentive Plan;
and

       WHEREAS, the Board of Directors of GWFC has adopted this Omnibus
Amendment 1997-1 with respect to all of the Plans other than the Annual
Incentive Plan;

       NOW, THEREFORE, subject to the succeeding paragraph hereof, each of the
Plans is amended to provide that the first clause of the third subparagraph of
the definition of "Change in Control" contained therein is amended by deleting
the phrase "at least 60%" and inserting in lieu thereof the phrase "at least
75%".

       The effective date of this Amendment shall be February 20, 1997; 
provided, however, that the amendment set forth herein shall be of no force and
- --------  -------
effect with respect to any transaction that is intended to comply with "pooling
of interest" accounting rules, if and to the extent such amendment would prevent
the transaction from so complying.  Except as herein modified, the Plans shall
remain in full force and effect.

                         GREAT WESTERN FINANCIAL
                          CORPORATION



                         By: /s/ J. LANCE ERIKSON
                             --------------------
                         Executive Vice President, General
                         Counsel and Secretary


                                       2

<PAGE>
 
                                                                   EXHIBIT 10.69

 
                          AGREEMENT AND PLAN OF MERGER
 
                                  BY AND AMONG
 
                            WASHINGTON MUTUAL, INC.
 
                           NEW AMERICAN CAPITAL, INC.
 
                                      AND
 
                      GREAT WESTERN FINANCIAL CORPORATION
 
                           DATED AS OF MARCH 5, 1997
<PAGE>
 
                               TABLE OF CONTENTS
 
                                   ARTICLE I
 
                                   THE MERGER
 
<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>    <C>                                                                                <C>
1.1    The Merger.......................................................................    1
1.2    Effective Time...................................................................    1
1.3    Effects of the Merger............................................................    1
1.4    Conversion of Subject Company Common Stock, Subject Company 8.30% Preferred          1
       Stock............................................................................
1.5    Parent Common Stock; Parent Preferred Stock......................................    3
1.6    Merger Sub Common Stock..........................................................    3
1.7    Options..........................................................................    3
1.8    Certificate of Incorporation; Articles of Amendment..............................    3
1.9    Bylaws...........................................................................    3
1.10   Tax Consequences.................................................................    4
1.11   Board of Directors...............................................................    4
                                          ARTICLE II
                                      EXCHANGE OF SHARES
2.1    Parent to Make Shares Available..................................................    4
2.2    Exchange of Shares...............................................................    4
                                         ARTICLE III
                      REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY
3.1    Corporate Organization...........................................................    5
3.2    Capitalization...................................................................    6
3.3    Authority; No Violation..........................................................    7
3.4    Consents and Approvals...........................................................    8
3.5    Reports..........................................................................    8
3.6    Financial Statements.............................................................    9
3.7    Broker's Fees....................................................................    9
3.8    Absence of Certain Changes or Events.............................................    9
3.9    Legal Proceedings................................................................   10
3.10   Taxes............................................................................   10
3.11   Employees........................................................................   10
3.12   SEC Reports......................................................................   11
3.13   Compliance with Applicable Law...................................................   12
3.14   Certain Contracts................................................................   12
3.15   Agreements with Regulatory Agencies..............................................   12
3.16   Undisclosed Liabilities..........................................................   12
3.17   Rights Agreement; Anti-takeover Provisions.......................................   13
3.18   Subject Company Information......................................................   13
3.19   Environmental Liability..........................................................   13
3.20   Pooling of Interests.............................................................   13
3.21   Opinions of Financial Advisors...................................................   13
3.22   Patents, Trademarks, Etc.........................................................   13
3.23   Community Reinvestment Act Compliance............................................   14
</TABLE>
 

                                       i
<PAGE>
 
<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>    <C>                                                                                <C>
                                        ARTICLE IV
                              REPRESENTATIONS AND WARRANTIES
                                         OF PARENT
4.1    Corporate Organization...........................................................   14
4.2    Capitalization...................................................................   14
4.3    Authority; No Violation..........................................................   15
4.4    Consents and Approvals...........................................................   16
4.5    Reports..........................................................................   16
4.6    Financial Statements.............................................................   16
4.7    Broker's Fees....................................................................   17
4.8    Absence of Certain Changes or Events.............................................   17
4.9    Legal Proceedings................................................................   17
4.10   Taxes............................................................................   17
4.11   SEC Reports......................................................................   17
4.12   Compliance with Applicable Law...................................................   18
4.13   Agreements with Regulatory Agencies..............................................   18
4.14   Undisclosed Liabilities..........................................................   18
4.15   Rights Agreement.................................................................   18
4.16   Parent Information...............................................................   18
4.17   Environmental Liability..........................................................   18
4.18   Pooling of Interests.............................................................   19
4.19   Opinion of Financial Advisor.....................................................   19
4.20   Patents, Trademarks, Etc.........................................................   19
4.21   Community Reinvestment Act Compliance............................................   19
                                        ARTICLE V
                          COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1    Conduct of Businesses Prior to the Effective Time................................   19
5.2    Forbearances.....................................................................   19
                                        ARTICLE VI
                                   ADDITIONAL AGREEMENTS
6.1    Regulatory Matters...............................................................   22
6.2    Access to Information............................................................   23
6.3    Stockholders' Approvals..........................................................   24
6.4    Legal Conditions to Merger.......................................................   24
6.5    Affiliates.......................................................................   24
6.6    Stock Exchange Listing...........................................................   24
6.7    Employee Benefit Plans...........................................................   24
6.8    Indemnification; Directors' and Officers' Insurance..............................   25
6.9    Additional Agreements............................................................   27
6.10   Advice of Changes................................................................   27
6.11   Subsequent Interim and Annual Financial Statements...............................   27
                                        ARTICLE VII
                                    CONDITIONS PRECEDENT
7.1    Conditions to Each Party's Obligation to Effect the Merger.......................   27
7.2    Conditions to Obligations of Parent..............................................   28
7.3    Conditions to Obligations of Subject Company.....................................   29
</TABLE>

                                       ii
<PAGE>
 
<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>    <C>                                                                                <C>
                                      ARTICLE VIII
                                TERMINATION AND AMENDMENT
8.1    Termination......................................................................   30
8.2    Effect of Termination............................................................   31
8.3    Amendment........................................................................   32
8.4    Extension; Waiver................................................................   32
                                       ARTICLE IX
                                   GENERAL PROVISIONS
9.1    Closing..........................................................................   32
9.2    Nonsurvival of Representations, Warranties and Agreements........................   32
9.3    Expenses.........................................................................   32
9.4    Notices..........................................................................   33
9.5    Interpretation...................................................................   33
9.6    Counterparts.....................................................................   34
9.7    Entire Agreement.................................................................   34
9.8    Governing Law....................................................................   34
9.9    Severability.....................................................................   34
9.10   Publicity........................................................................   34
9.11   Assignment; Third Party Beneficiaries............................................   34
</TABLE>
 

                                      iii
<PAGE>
 
                          AGREEMENT AND PLAN OF MERGER
 
     AGREEMENT AND PLAN OF MERGER, dated as of March 5, 1997 (this "Agreement"),
by and among Washington Mutual, Inc., a Washington corporation ("Parent"), New
American Capital, Inc., a Delaware corporation and an indirect wholly owned
subsidiary of Parent ("Merger Sub"), and Great Western Financial Corporation, a
Delaware corporation ("Subject Company").
 
     WHEREAS, the Boards of Directors of Parent and Subject Company have each
approved, and deem it advisable and in the best interests of their respective
stockholders to consummate, the business combination transaction provided for
herein; and
 
     WHEREAS, the Boards of Directors of Parent and Subject Company have each
determined that the transactions provided for herein and contemplated hereby are
consistent with, and in furtherance of, their respective business strategies and
goals.
 
     NOW, THEREFORE,
 
     In consideration of the mutual covenants, representations, warranties and
agreements contained herein, and intending to be legally bound hereby, the
parties agree as follows:
 
                                   ARTICLE I
 
                                   THE MERGER
 
     1.1 The Merger.  Subject to the terms and conditions of this Agreement, in
accordance with the Delaware General Corporation Law (the "DGCL") at the
Effective Time (as defined in Section 1.2 hereof), Subject Company shall merge
(the "Merger") with and into Merger Sub. Merger Sub shall be the surviving
corporation (hereinafter sometimes called the "Surviving Corporation") in the
Merger, and shall continue its corporate existence under the laws of the State
of Delaware. The name of the Surviving Corporation shall be New American
Capital, Inc. Upon consummation of the Merger, the separate corporate existence
of Subject Company shall terminate.
 
     1.2 Effective Time.  The Merger shall become effective as set forth in the
certificate of merger (the "Certificate of Merger") which shall be filed with
the Secretary of State of the State of Delaware (the "Delaware Secretary") on
the Closing Date (as defined in Section 9.1 hereof). The term "Effective Time"
shall be the date and time when the Merger becomes effective, as set forth in
the Certificate of Merger.
 
     1.3 Effects of the Merger.  At and after the Effective Time, the Merger
shall have the effects set forth in the Section 253 of the DGCL.
 
     1.4 Conversion of Subject Company Common Stock, Subject Company 8.30%
Preferred Stock.  At the Effective Time, subject to Section 2.2(e) hereof, by
virtue of the Merger and without any action on the part of Parent, Merger Sub,
Subject Company or the holder of any of the following securities:
 
          (a) Each share of the common stock, par value $1.00 per share, of
     Subject Company (the "Subject Company Common Stock") issued and outstanding
     immediately prior to the Effective Time (other than shares of Subject
     Company Common Stock held (x) in Subject Company's treasury or (y) directly
     or indirectly by Parent or Subject Company or any of their respective
     Subsidiaries (as defined below) (except for Trust Account Shares and DPC
     shares, as such terms are defined below)), together with the rights (the
     "Subject Company Rights") attached thereto issued pursuant to the Rights
     Agreement, dated as of June 27, 1995, between Subject Company and First
     Chicago Trust Company of New York, as Rights Agent (the "Subject Company
     Rights Agreement"), shall, subject to Section 1.4(c) hereof, be converted
     into the right to receive .90 shares (the "Common Exchange Ratio") of the
     common stock, no par value, of Parent ("Parent Common Stock"), together
     with the number of rights ("Parent Rights") issued pursuant to the Parent
     Rights Agreement (as defined in Section 4.2 hereof) associated therewith.
 
          (b) Each share of 8.30% Cumulative Preferred Stock, par value $1.00,
     of Subject Company (the "Subject Company 8.30% Preferred Stock") issued and
     outstanding immediately prior to the Effective
 
                                      

                                       1
<PAGE>
 
     Time shall be converted into the right to receive one share of 8.30%
     Cumulative Preferred Stock of Parent (the "Parent New Preferred Stock").
     The terms of the Parent New Preferred Stock shall be substantially the same
     as the terms of the Subject Company 8.30% Preferred Stock. For purposes of
     this Agreement (i) the Subject Company Common Stock and Subject Company
     Preferred Stock (as defined below) are referred to herein as the "Subject
     Company Capital Stock," and (ii) the Parent Common Stock and Parent
     Preferred Stock (as defined below) are collectively referred to as the
     "Parent Capital Stock."
 
          (c) All of the shares of Subject Company Common Stock converted into
     the right to receive Parent Common Stock pursuant to this Article I shall
     no longer be outstanding and shall automatically be cancelled and shall
     cease to exist as of the Effective Time, and each certificate (each a
     "Common Certificate") previously representing any such shares of Subject
     Company Common Stock shall thereafter represent the right to receive (i) a
     certificate representing the number of whole shares of Parent Common Stock
     and (ii) the cash in lieu of fractional shares into which the shares of
     Subject Company Common Stock represented by such Common Certificate have
     been converted pursuant to this Section 1.4 and Section 2.2(e) hereof.
     Common Certificates previously representing shares of Subject Company
     Common Stock shall be exchanged for certificates representing whole shares
     of Parent Common Stock and cash in lieu of fractional shares issued in
     consideration therefor upon the surrender of such Common Certificates in
     accordance with Section 2.2 hereof, without any interest thereon. If prior
     to the Effective Time the outstanding shares of Parent Common Stock shall
     have been increased, decreased, changed into or exchanged for a different
     number or kind of shares or securities as a result of a reorganization,
     recapitalization, reclassification, stock dividend, stock split, reverse
     stock split, or other similar change in Parent's capitalization, then an
     appropriate and proportionate adjustment shall be made to the Common
     Exchange Ratio.
 
          (d) All of the shares of Subject Company 8.30% Preferred Stock
     converted into the right to receive Parent New Preferred Stock pursuant to
     this Article I shall no longer be outstanding and shall automatically be
     cancelled and shall cease to exist as of the Effective Time, and each
     certificate (each a "Preferred Certificate," and collectively with the
     Common Certificates, the "Certificates") previously representing any such
     shares of Subject Company 8.30% Preferred Stock shall thereafter represent
     the right to receive a certificate representing the number of shares of
     corresponding Parent New Preferred Stock into which the shares of Subject
     Company 8.30% Preferred Stock represented by such Preferred Certificate
     have been converted pursuant to this Section 1.4. Preferred Certificates
     previously representing shares of Subject Company 8.30% Preferred Stock
     shall be exchanged for certificates representing shares of corresponding
     Parent New Preferred Stock issued in consideration therefor upon the
     surrender of such Preferred Certificates in accordance with Section 2.2
     hereof, without any interest thereon.
 
          (e) At the Effective Time, all shares of Subject Company Capital Stock
     that are owned by Subject Company as treasury stock and all shares of
     Subject Company Capital Stock that are owned directly or indirectly by
     Parent or Subject Company or any of their respective Subsidiaries (other
     than shares of Subject Company Capital Stock held directly or indirectly in
     trust accounts, managed accounts and the like or otherwise held in a
     fiduciary or nominee capacity that are beneficially owned by third parties
     (any such shares, and shares of Parent Common Stock which are similarly
     held, whether held directly or indirectly by Parent or Subject Company or
     any of their respective Subsidiaries, as the case may be, being referred to
     herein as "Trust Account Shares") and other than any shares of Subject
     Company Capital Stock held by Parent or Subject Company or any of their
     respective Subsidiaries in respect of a debt previously contracted (any
     such shares of Subject Company Capital Stock, and shares of Parent Common
     Stock which are similarly held, whether held directly or indirectly by
     Parent or Subject Company or any of their respective Subsidiaries, being
     referred to herein as "DPC Shares")) shall be cancelled and shall cease to
     exist and no stock of Parent or other consideration shall be delivered in
     exchange therefor. All shares of Parent Common Stock that are owned by
     Subject Company or any of its Subsidiaries (other than Trust Account Shares
     and DPC Shares) shall become treasury stock of Parent.
 
          (f) At the Effective Time, Parent shall assume the obligations of
     Subject Company under the Deposit Agreement, dated as of September 2, 1992,
     between Subject Company and Harris Trust Co. of
 

                                       2
<PAGE>
 
     California, as depositary (relating to the Subject Company 8.30% Preferred
     Stock). Parent shall instruct the applicable depositary to treat the shares
     of Parent New Preferred Stock received by such depositary in exchange for
     and upon conversion of the shares of Subject Company 8.30% Preferred Stock
     as new deposited securities under the deposit agreement. In accordance with
     the terms of the deposit agreement, the depositary receipts then
     outstanding shall thereafter represent the shares of Parent New Preferred
     Stock so received upon conversion and exchange for the shares of Subject
     Company 8.30% Preferred Stock. Parent shall request that such depositary
     call for the surrender of all outstanding receipts to be exchanged for new
     receipts (the "New Parent Depositary Shares") specifically describing the
     series of Parent New Preferred Stock.
 
     1.5 Parent Common Stock; Parent Preferred Stock.  At and after the
Effective Time, each share of Parent Common Stock and each share of Parent
Preferred Stock issued and outstanding immediately prior to the Effective Time
shall remain an issued and outstanding share of common stock or preferred stock,
as the case may be, of Parent and shall not be affected by the Merger.
 
     1.6 Merger Sub Common Stock.  Each of the issued and outstanding shares of
the common stock of Merger Sub immediately prior to the Effective Time shall
remain issued and outstanding after the Merger as shares of the Surviving
Corporation, which shall thereafter constitute all of the issued and outstanding
shares of common stock of the Surviving Corporation. No capital stock of Merger
Sub will be issued or used in the Merger.
 
     1.7 Options.  At the Effective Time, each option granted by Subject Company
to purchase shares of Subject Company Common Stock (each a "Subject Company
Option") which is outstanding and unexercised immediately prior thereto shall
cease to represent a right to acquire shares of Subject Company Common Stock and
shall be converted automatically into an option to purchase shares of Parent
Common Stock in an amount and at an exercise price determined as provided below
(and otherwise subject to the terms of the Subject Company 1979 Stock Option and
Incentive Plan and the Subject Company 1988 Stock Option and Incentive Plan,
each as amended to date (together, the "Subject Company Stock Option Plans"),
and the agreements evidencing grants thereunder, including, but not limited to,
the accelerated vesting of such options which shall occur in connection with and
by virtue of the consummation of the Merger as and to the extent required by
such plans and agreements):
 
          (1) the number of shares of Parent Common Stock to be subject to the
     new option shall be equal to the product of the number of shares of Subject
     Company Common Stock subject to the original option and the Common Exchange
     Ratio, provided that any fractional shares of Parent Common Stock resulting
     from such multiplication shall be rounded down to the nearest share; and
 
          (2) the exercise price per share of Parent Common Stock under the new
     option shall be equal to the exercise price per share of Subject Company
     Common Stock under the original option divided by the Common Exchange
     Ratio, provided that such exercise price shall be rounded up to the nearest
     cent.
 
     In the case of any options which are "incentive stock options" (as defined
in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")),
the exercise price, the number of shares purchasable pursuant to such options
and the terms and conditions of exercise of such options shall be determined in
order to comply with Section 424(a) of the Code. The duration and other terms of
the new option shall be the same as the original option (subject to Section
6.7(b) hereof) except that all references to Subject Company shall be deemed to
be references to Parent.
 
     1.8 Certificate of Incorporation; Articles of Amendment.  At the Effective
Time, the Certificate of Incorporation of Merger Sub, as in effect at the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation. At or prior to the Effective Time, Parent shall duly execute and
file with the Secretary of State of the State of Washington (the "Washington
Secretary") articles of amendment (the "Preferred Stock Articles of Amendment")
establishing the Parent New Preferred Stock.
 
     1.9 Bylaws.  At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
 

                                       3
<PAGE>
 
     1.10 Tax Consequences.  It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of reorganization" for purposes of the Code.
 
     1.11 Board of Directors.  At the Effective Time, Parent shall take all
action necessary to appoint four representatives of Subject Company, mutually
agreeable to Parent and Subject Company, to Parent's Board of Directors.
 
                                   ARTICLE II
 
                               EXCHANGE OF SHARES
 
     2.1 Parent to Make Shares Available.  At or prior to the Effective Time,
Parent shall deposit, or shall cause to be deposited, with a bank or trust
company which may be a Subsidiary of Parent or the Parent's transfer agent (the
"Exchange Agent"), for the benefit of the holders of Certificates, for exchange
in accordance with this Article II, certificates representing the shares of
Parent Common Stock and Parent New Preferred Stock and an estimated amount of
cash in lieu of any fractional shares (the cash payable in lieu of fractional
shares of Parent Common Stock and certificates for shares of Parent Common Stock
and Parent New Preferred Stock, together with any dividends or distributions
with respect thereto, being hereinafter referred to as the "Exchange Fund") to
be issued pursuant to Section 1.4 and paid pursuant to Section 2.2(a) in
exchange for outstanding shares of Subject Company Capital Stock.
 
     2.2 Exchange of Shares.  (a) As soon as practicable after the Effective
Time, and in no event later than ten business days thereafter, the Exchange
Agent shall mail to each holder of record of a Certificate or Certificates a
form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent) and instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing, as the case may be, the shares of Parent Common Stock or Parent
New Preferred Stock and the cash in lieu of fractional shares of Parent Common
Stock, if any, into which the shares of Subject Company Capital Stock
represented by such Certificate or Certificates shall have been converted
pursuant to this Agreement. Upon proper surrender of a Certificate for exchange
and cancellation to the Exchange Agent, together with such properly completed
letter of transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor, as applicable, (i) a certificate
representing that number of shares of Parent Common Stock to which such holder
of Subject Company Common Stock shall have become entitled pursuant to the
provisions of Article I hereof, (ii) a certificate representing that number of
shares of Parent New Preferred Stock to which such holder of Subject Company
8.30% Preferred Stock shall have become entitled pursuant to the provisions of
Article I hereof and (iii) a check representing the amount of cash in lieu of
fractional shares of Parent Common Stock, if any, which such holder has the
right to receive in respect of the Certificate surrendered pursuant to the
provisions of this Article II, and the Certificate so surrendered shall
forthwith be cancelled. No interest will be paid or accrued on the cash in lieu
of fractional shares and unpaid dividends and distributions, if any, payable to
holders of Certificates.
 
     (b) No dividends or other distributions with a record date after the
Effective Time with respect to Parent Common Stock or Parent New Preferred shall
be paid to the holder of any unsurrendered Certificate until the holder thereof
shall surrender such Certificate in accordance with this Article II. After the
surrender of a Certificate in accordance with this Article II, the record holder
thereof shall be entitled to receive any such dividends or other distributions,
without any interest thereon, which theretofore had become payable with respect
to shares of Parent Common Stock or Parent New Preferred Stock represented by
such Certificate.
 
     (c) If any certificate representing shares of Parent Common Stock or Parent
New Preferred Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the Certificate so surrendered shall be
properly endorsed (or accompanied by an appropriate instrument of transfer) and
otherwise in proper form for transfer, and that the person requesting such
exchange shall pay to the Exchange Agent in advance any transfer or other taxes
required by reason of the issuance of a certificate representing shares of
Parent Common Stock or Parent New
 

                                       4
<PAGE>
 
Preferred Stock in any name other than that of the registered holder of the
Certificate surrendered, or required for any other reason, or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
 
     (d) At or after the Effective Time, there shall be no transfers on the
stock transfer books of Subject Company of the shares of Subject Company Capital
Stock which were issued and outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be cancelled and
exchanged for certificates representing shares of Parent Capital Stock as
provided in this Article II.
 
     (e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Parent Common Stock
shall be issued upon the surrender for exchange of Common Certificates, no
dividend or distribution with respect to Parent Common Stock shall be payable on
or with respect to any fractional share, and such fractional share interests
shall not entitle the owner thereof to vote or to any other rights of a
stockholder of Parent. In lieu of the issuance of any such fractional share,
Parent shall pay to each former stockholder of Subject Company who otherwise
would be entitled to receive such fractional share an amount in cash determined
by multiplying (i) the average of the closing sale prices of Parent Common Stock
on The Nasdaq Stock Market ("Nasdaq") as reported by The Wall Street Journal for
the five trading days immediately preceding the date on which the Effective Time
occurs by (ii) the fraction of a share of Parent Common Stock to which such
holder would otherwise be entitled to receive pursuant to Section 1.4 hereto.
For the purposes of determining any such fractional share interests, all shares
of Subject Company Common Stock owned by any Subject Company stockholder shall
be combined so as to calculate the maximum number of shares of Parent Company
Common Stock issuable to such Subject Company Stockholder.
 
     (f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of Subject Company for twelve months after the Effective Time shall
be paid, at the request of Parent, to Parent. Any stockholders of Subject
Company who have not theretofore complied with this Article II shall thereafter
look only to Parent for payment of the shares of Parent Common Stock or Parent
New Preferred Stock, cash in lieu of any fractional shares and unpaid dividends
and distributions on the Parent Common Stock or Parent New Preferred Stock
deliverable in respect of each share of Subject Company Common Stock or Subject
Company 8.30% Preferred Stock, as the case may be, held by such stockholder at
the Effective Time as determined pursuant to this Agreement, in each case,
without any interest thereon. Notwithstanding anything to the contrary contained
herein, none of Parent, Merger Sub, Subject Company, the Exchange Agent or any
other person shall be liable to any former holder of shares of Subject Company
Common Stock or Subject Company 8.30% Preferred Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
 
     (g) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in such amount as Parent may determine is
reasonably necessary as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the shares of Parent Common Stock and
cash in lieu of fractional shares or Parent New Preferred Stock, as the case may
be, deliverable in respect thereof pursuant to this Agreement.
 
                                  ARTICLE III
 
               REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY
 
     Subject Company hereby represents and warrants to Parent as follows:
 
     3.1 Corporate Organization.  (a) Subject Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Subject Company has the corporate power and authority to own or lease
all of its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each jurisdiction
in which the nature of the
 

                                       5
<PAGE>
 
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have nor
reasonably be expected to have a Material Adverse Effect (as defined below) on
Subject Company. As used in this Agreement, the term "Material Adverse Effect"
means, with respect to Parent, Subject Company or the Surviving Corporation, as
the case may be, a material adverse effect on the business, results of
operations, financial condition or prospects of such party and its Subsidiaries
taken as a whole or a material adverse effect on such party's ability to
consummate the transactions contemplated hereby on a timely basis; provided,
however, that in determining whether a Material Adverse Effect has occurred
there shall be excluded any effect on the referenced party the cause of which is
(i) any change in banking, savings association and similar laws, rules or
regulations of general applicability or interpretations thereof by courts or
governmental authorities, (ii) any change in generally accepted accounting
principles ("GAAP") or regulatory accounting requirements applicable to banks,
savings associations, or their holding companies generally, (iii) any action or
omission of Subject Company or Parent or any Subsidiary of either of them taken
with the prior written consent of Parent or Subject Company, as applicable, in
contemplation of the Merger and (iv) any changes in general economic conditions
affecting banks, savings associations, or their holding companies generally. As
used in this Agreement, the word "Subsidiary" when used with respect to any
party means any corporation, partnership or other organization, whether
incorporated or unincorporated, which is consolidated with such party for
financial reporting purposes. Subject Company is duly registered as a savings
and loan holding company under the Home Owners' Loan Act, as amended ("HOLA"),
and qualifies as a savings and loan holding company of the type described in
Section 10(c)(3)(A) of HOLA. The copies of the Restated Certificate of
Incorporation and Bylaws of Subject Company which have previously been made
available to Parent are true, complete and correct copies of such documents as
in effect as of the date of this Agreement.
 
     (b) Each Subject Company Subsidiary (i) is duly organized and validly
existing as a corporation or partnership under the laws of its jurisdiction of
organization, (ii) is duly qualified to do business and is in good standing in
all jurisdictions (whether federal, state, local or foreign) where its ownership
or leasing of property or the conduct of its business requires it to be so
qualified and in which the failure to be so qualified would have or reasonably
be expected to have a Material Adverse Effect on Subject Company, and (iii) has
all requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted.
 
     (c) Except for its ownership of Great Western Bank, a Federal Savings Bank
("Great Western Bank"), First Community Industrial Bank and Great Western Thrift
and Loan, Subject Company does not own any stock of or equity interest in any
depository institution (as defined in 12 U.S.C. sec. 1813(c)(1)). Great Western
Bank is a qualified thrift lender pursuant to Section 10(m) of HOLA and its
deposits are insured by the Federal Deposit Insurance Corporation (the "FDIC")
through the Savings Association Insurance Fund ("SAIF") to the fullest extent
permitted by law. Great Western Bank is a member in good standing of the Federal
Home Loan Bank ("FHLB") of San Francisco. The deposits of each of First
Community Industrial Bank and Great Western Thrift and Loan are insured by the
FDIC through the Bank Insurance Fund ("BIF") to the fullest extent permitted by
law. Each of First Community Industrial Bank and Great Western Thrift and Loan
is an institution described in Section 2(c)(2)(H) of the Bank Holding Company
Act of 1956, as amended. Neither Subject Company nor First Community Industrial
Bank or Great Western Thrift and Loan has received a notice from either the
Office of Thrift Supervision (the "OTS") or the FDIC to the effect that either
regulator deems First Community Industrial Bank or Great Western Thrift and Loan
a savings association under Section 10(a)(1) of HOLA or 12 CFR sec. 583.21.
 
     3.2 Capitalization.  (a) The authorized capital stock of Subject Company
consists of 200,000,000 shares of Subject Company Common Stock and 10,000,000
shares of preferred stock, par value $1.00 per share (the "Subject Company
Preferred Stock"). At the close of business on March 4, 1997, there were
137,574,634 shares of Subject Company Common Stock outstanding, 660,000 shares
of Subject Company 8.30% Preferred Stock outstanding (evidenced by 6,600,000
Subject Company Depositary Shares, each of which represent a one-tenth interest
in a share of Subject Company 8.30% Preferred Stock) and 437,639 shares of
Subject Company Common Stock held in Subject Company's treasury. As of March 4,
1997, no
 

                                       6
<PAGE>
 
shares of Subject Company Common Stock or Subject Company Preferred Stock were
reserved for issuance, except (i) 4,121,941 shares of Subject Company Common
Stock were reserved for issuance pursuant to Subject Company's dividend
reinvestment and stock purchase plans, (ii) 9,859,477 shares of Subject Company
Common Stock were reserved for issuance upon the exercise of stock options
pursuant to the Subject Company Stock Option Plans, (iii) 4,000,000 shares of
the Subject Company Common Stock are reserved for issuance pursuant to the
Subject Company Employee Savings Incentive Plan (the "ESIP") and (iv) the shares
of Subject Company Preferred Stock reserved for issuance upon exercise of the
Subject Company Rights distributed to holders of Subject Company Common Stock
pursuant to the Subject Company Rights Agreement. All of the issued and
outstanding shares of Subject Company Common Stock and Subject Company 8.30%
Preferred Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. As of the date of this Agreement, except (i)
as set forth in Section 3.2(a) of the disclosure schedule of Subject Company
delivered to Parent concurrently herewith (the "Subject Company Disclosure
Schedule"), (ii) for the Subject Company Rights Agreement (a true and correct
copy of which, including all amendments thereto, has been made available to
Parent) and (iii) as set forth elsewhere in this Section 3.2(a), Subject Company
does not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of Subject Company Common Stock or Subject
Company Preferred Stock or any other equity securities of Subject Company or any
securities representing the right to purchase or otherwise receive any shares of
Subject Company Common Stock or Subject Company Preferred Stock. Except as set
forth in Section 3.2(a) of the Subject Company Disclosure Schedule, since March
4, 1997, Subject Company has not issued any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital stock,
other than pursuant to Subject Company's dividend reinvestment and stock
purchase plans and the ESIP, the exercise of employee stock options granted
prior to such date and as disclosed in Section 3.2(a) of the Subject Company
Disclosure Schedule, and the issuance of Subject Company Rights pursuant to the
Subject Company Rights Agreement.
 
     (b) Section 3.2(b) of the Subject Company Disclosure Schedule lists all
"Significant Subsidiaries" of the Subject Company (as such term is defined in
Rule 1-02 of Regulation S-X). Each Subsidiary in which Subject Company or any
Subject Company Subsidiary beneficially owns or controls, directly or
indirectly, more than 9.9% equity interest is a legal investment for a unitary
savings and loan holding company and, for those owned by Great Western Bank, for
a federal savings association. Except as set forth in Section 3.2(b) of the
Subject Company Disclosure Schedule, Subject Company owns, directly or
indirectly, all of the issued and outstanding shares of capital stock of or all
other equity interests in each of the Subject Company Subsidiaries, free and
clear of any liens, charges, encumbrances, adverse rights or claims and security
interests whatsoever ("Liens"), and all of such shares are duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof. Neither Subject
Company nor any Subject Company Subsidiary has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase, sale or issuance of any shares of capital
stock or any other equity security of any Subsidiary of Subject Company or any
securities representing the right to purchase or otherwise receive any shares of
capital stock or any other equity security of any such Subsidiary.
 
     3.3 Authority; No Violation.  (a) Subject Company has full corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of Subject Company. The Board of
Directors of Subject Company has directed that the agreement of merger (within
the meaning of Section 251 of the DGCL) contained in this Agreement and the
transactions contemplated hereby be submitted to Subject Company's stockholders
for approval at a meeting of such stockholders and, except for the adoption of
such agreement of merger by the affirmative vote of the holders of a majority of
the outstanding shares of Subject Company Common Stock, no other corporate
proceedings on the part of Subject Company are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Subject Company and
(assuming due authorization, execution and delivery by Parent and Merger Sub)
constitutes a valid and binding obligation of Subject Company, enforceable
 

                                       7
<PAGE>
 
against Subject Company in accordance with its terms, except as enforcement may
be limited by general principles of equity whether applied in a court of law or
a court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally. Subject Company acknowledges that
Parent intends promptly after the Effective Time to cause the merger of Great
Western Bank and one of Parent's wholly owned depository institution
subsidiaries (the "Association Merger"); provided, however, that Parent agrees
that the structure of the Association Merger shall not adversely affect the
ability of the Merger to be treated as a reorganization within the meaning of
Section 368(a) of the Code. Great Western Bank has full corporate power and
authority to consummate the Association Merger.
 
     (b) Except as set forth in Section 3.3(b) of the Subject Company Disclosure
Schedule, neither the execution and delivery of this Agreement by Subject
Company nor the consummation by Subject Company of the transactions contemplated
hereby nor the consummation of the Association Merger, nor compliance by Subject
Company with any of the terms or provisions hereof, will (i) violate any
provision of the Restated Certificate of Incorporation or Bylaws of Subject
Company or any of the similar governing documents of any of its Subsidiaries or
(ii) assuming that the consents and approvals referred to in Section 3.4 are
duly obtained, (x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to Subject Company or any
of its Subsidiaries or any of their respective properties or assets, or (y)
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any Lien upon any of the respective
properties or assets of Subject Company or any of its Subsidiaries under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to which
Subject Company or any of its Subsidiaries is a party, or by which they or any
of their respective properties or assets may be bound or affected, except (in
the case of clause (y) above) for such violations, conflicts, breaches or
defaults which, either individually or in the aggregate, will not have and would
not reasonably be expected to have a Material Adverse Effect on Subject Company.
 
     3.4 Consents and Approvals.  Except for (i) the approval of the Merger and
the Association Merger by the OTS, (ii) approval of the listing of the Parent
Capital Stock to be issued in the Merger on Nasdaq, (iii) the filing with the
Securities and Exchange Commission (the "SEC") of a joint proxy statement in
definitive form relating to the meetings of Parent's and Subject Company's
stockholders to be held in connection with this Agreement and the transactions
contemplated hereby (the "Joint Proxy Statement") and the filing and declaration
of effectiveness of the registration statement on Form S-4 (the "S-4") in which
the Joint Proxy Statement will be included as a prospectus and any filings or
approvals under applicable state securities laws, (iv) the filing of the
Certificate of Merger with the Delaware Secretary pursuant to the DGCL and the
filing of the Preferred Stock Articles of Amendment with the Washington
Secretary, (v) the adoption of the agreement of merger (within the meaning of
Section 251 of the DGCL) contained in this Agreement by the requisite votes of
the stockholders of Subject Company and the issuance of the shares of Parent
Common Stock in the Merger by the stockholders of Parent, (vi) the consents and
approvals set forth in Section 3.4 of the Subject Company Disclosure Schedule,
and (vii) the consents and approvals of third parties which are not Governmental
Entities (as defined below), the failure of which to obtain will not have and
would not be reasonably expected to have a Material Adverse Effect, no consents
or approvals of, or filings or registrations with, any court, administrative
agency or commission or other governmental authority or instrumentality or
self-regulatory organization (each a "Governmental Entity") or with any third
party are necessary in connection with (A) the execution and delivery by Subject
Company of this Agreement and (B) the consummation by Subject Company of the
Merger and the other transactions contemplated hereby.
 
     3.5 Reports.  Subject Company and each of its Subsidiaries have timely
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file since January 1, 1994 with any Governmental Entity and have paid all fees
and assessments due and payable in connection therewith. Except for normal
examinations conducted by a Governmental Entity in the regular course of the
business of Subject Company and its Subsidiaries or as set forth in Section 3.5
of the Subject Company Disclosure Schedule, no Governmental Entity has initiated
any
 

                                       8
<PAGE>
 
proceeding or, to the best knowledge of Subject Company, investigation into the
business or operations of Subject Company or any of its Subsidiaries since
January 1, 1994. Except as set forth in Section 3.5 of the Subject Company
Disclosure Schedule, there is no material unresolved violation, criticism or
exception by any Governmental Entity with respect to any report or statement
relating to any examinations of Subject Company or any of its Subsidiaries.
 
     3.6 Financial Statements.  Subject Company has previously made available to
Parent copies of (a) the consolidated balance sheets of Subject Company and its
Subsidiaries, as of December 31, for the fiscal years 1994 and 1995, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the fiscal years 1993 through 1995, inclusive, as reported in Subject
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995
filed with the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), in each case accompanied by the audit report of Price
Waterhouse LLP, independent auditors with respect to Subject Company and (b) the
unaudited consolidated balance sheets of Subject Company and its Subsidiaries as
of September 30, 1995 and September 30, 1996 and the related unaudited
consolidated statements of operations, shareholders' equity and cash flows for
the periods then ended, as reported in Subject Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1996 filed with the SEC under the
Exchange Act. Each of the financial statements referred to in this Section 3.6
(including the related notes, where applicable) fairly present, and the
financial statements referred to in Section 6.11 hereof will fairly present
(subject, in the case of the unaudited statements, to normal recurring
adjustments, none of which are expected to be material in nature or amount), the
results of the consolidated operations and changes in stockholders' equity and
consolidated financial position of Subject Company and its Subsidiaries for the
respective fiscal periods or as of the respective dates therein set forth. Each
of such statements (including the related notes, where applicable) complies, and
the financial statements referred to in Section 6.11 hereof will comply, in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto and each of such
statements (including the related notes, where applicable) has been, and the
financial statements referred to in Section 6.11 will be, prepared in accordance
with GAAP consistently applied during the periods involved, except in each case
as indicated in such statements or in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q. The books and records of
Subject Company and its Subsidiaries have been, and are being, maintained in all
material respects in accordance with GAAP and any other applicable legal and
accounting requirements and reflect only actual transactions.
 
     3.7 Broker's Fees.  Except as set forth in Section 3.7 of the Subject
Company Disclosure Schedule, neither Subject Company nor any Subject Company
Subsidiary nor any of their respective officers or directors has employed any
broker or finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with any of the transactions contemplated by this
Agreement. Copies of all agreements with each broker or finder listed in Section
3.7 of the Subject Company Disclosure Schedule have previously been furnished to
Parent.
 
     3.8 Absence of Certain Changes or Events.  (a) Except as publicly disclosed
in Subject Company Reports (as defined in Section 3.12) filed prior to the date
hereof, or as set forth in Section 3.8(a) of the Subject Company Disclosure
Schedule, since September 30, 1996, no event has occurred which has had or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Subject Company or the Surviving Corporation.
 
     (b) Except as set forth in Section 3.8(b) of the Subject Company Disclosure
Schedule, since September 30, 1996, Subject Company and its Subsidiaries have
carried on their respective businesses in all material respects in the ordinary
course of business, and neither Subject Company nor any of its Subsidiaries has
(i) except for normal increases in the ordinary course of business consistent
with past practice and except as required by applicable law, increased the
wages, salaries, compensation, pension or other fringe benefits or perquisites
payable to any officer or director, other than persons newly hired for such
position, from the amount thereof in effect as of September 30, 1996, or granted
any severance or termination pay, entered into any contract to make or grant any
severance or termination pay, or paid any bonus, in each case to any such
officer or director, other than pursuant to preexisting agreements or
arrangements or (ii) suffered any strike, work stoppage, slow-down or other
labor disturbance.
 

                                       9
<PAGE>
 
     3.9 Legal Proceedings.  (a) Except as set forth in Section 3.9 of the
Subject Company Disclosure Schedule, neither Subject Company nor any of its
Subsidiaries is a party to any, and there are no pending or, to the best of
Subject Company's knowledge, threatened, legal, administrative, arbitral or
other proceedings, claims, actions or governmental or regulatory investigations
of any nature against Subject Company or any of its Subsidiaries or challenging
the validity or propriety of the transactions contemplated by this Agreement as
to which there is a significant possibility of an adverse determination and
which, if adversely determined, would, individually or in the aggregate, have or
reasonably be expected to have a Material Adverse Effect on Subject Company.
 
     (b) There is no injunction, order, judgment, decree or regulatory
restriction imposed upon Subject Company, any of its Subsidiaries or the assets
of Subject Company or any of its Subsidiaries which has had, or would reasonably
be expected to have, a Material Adverse Effect on Subject Company or the
Surviving Corporation.
 
     3.10 Taxes.  (a) Except as set forth in Section 3.10(a) of Subject Company
Disclosure Schedule or except to the extent of any failure to correctly file
which results in aggregate Taxes of less than $20,000,000 or a reduction in net
operating loss carryforward deductions of less than $60,000,000, each of Subject
Company and its Subsidiaries has (i) duly and timely filed (including pursuant
to applicable extensions granted without penalty) all Tax Returns (as
hereinafter defined) required to be filed at or prior to the Effective Time, and
such Tax Returns are to the best knowledge of Subject Company true, correct and
complete in all respects, and (ii) paid in full or made adequate provision in
the financial statements of Subject Company (in accordance with GAAP) for all
Taxes (as hereinafter defined) related to such Tax Returns. Except as set forth
in Section 3.10(a) of the Subject Company Disclosure Schedule or except to the
extent the aggregate Taxes described in this sentence or otherwise described in
this paragraph (a) (relating to undisclosed failures to file or pay taxes or the
existence of undisclosed liens for Taxes) are less than $20,000,000, no
deficiencies for any Taxes have been proposed, asserted or assessed against or
with respect to Subject Company or any of its Subsidiaries. Except as set forth
in Section 3.10(a) of the Subject Company Disclosure Schedule or except to the
extent the aggregate Taxes described in this sentence or otherwise described in
this paragraph (a) (relating to undisclosed failures to file or pay taxes on
undisclosed proposed deficiencies for Taxes) are less than $20,000,000, to the
best knowledge of Subject Company there are no liens for Taxes upon the assets
of either Subject Company or its Subsidiaries except for statutory liens for
current Taxes not yet due.
 
     (b) For purposes of this Agreement, "Taxes" shall mean all taxes, charges,
fees, levies, penalties or other assessments imposed by any United States
federal, state, local or foreign taxing authority, including, but not limited to
income, excise, property, sales, transfer, franchise, payroll, withholding,
social security or other similar taxes, including any interest or penalties
attributable thereto.
 
     (c) For purposes of this Agreement, "Tax Return" shall mean any return,
report, information return or other document (including any related or
supporting information) with respect to Taxes.
 
     (d) Neither Subject Company nor any of its Subsidiaries has filed a consent
to the application of Section 341(f) of the Code.
 
     3.11 Employees.  (a) Section 3.11(a) of the Subject Company Disclosure
Schedule sets forth a true and complete list of each material employee benefit
plan, arrangement or agreement and any amendments or modifications thereof
(including, without limitation, all stock purchase, stock option, severance,
employment, change-in-control, health/welfare and section 125 plans, fringe
benefit, bonus, incentive, deferred compensation and other agreements, programs,
policies and arrangements, whether or not subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) that is maintained as of the
date of this Agreement (the "Plans") by Subject Company or any of its
Subsidiaries or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), all of which together with Subject Company would be deemed a
"single employer" within the meaning of Section 4001 of ERISA.
 
     (b) Subject Company has previously made available to Parent true and
complete copies of each of the Plans and all related documents, including but
not limited to (i) the actuarial report for such Plan (if
 

                                       10
<PAGE>
 
applicable) for each of the last two years, and (ii) the most recent
determination letter from the Internal Revenue Service (if applicable) for such
Plan.
 
     (c) Except as set forth in Section 3.11(c) of the Subject Company
Disclosure Schedule, (i) each of the Plans has been operated and administered in
all material respects in accordance with applicable laws, including but not
limited to ERISA and the Code, (ii) each of the Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified, (iii) with
respect to each Plan which is subject to Title IV of ERISA, the present value of
accrued benefits under such Plan, based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report prepared by such Plan's
actuary with respect to such Plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such Plan allocable to such
accrued benefits, (iv) no Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees of Subject Company, its Subsidiaries or any ERISA Affiliate
beyond their retirement or other termination of service, other than (w) coverage
mandated by applicable law, (x) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in Section 3(2) of ERISA, (y)
deferred compensation benefits accrued as liabilities on the books of Subject
Company, its Subsidiaries or the ERISA Affiliates or (z) benefits the full cost
of which is borne by the current or former employee (or his beneficiary), (v) no
liability under Title IV of ERISA has been incurred by Subject Company, its
Subsidiaries or any ERISA Affiliate that has not been satisfied in full (other
than payment of premiums to the Pension Benefit Guaranty Corporation (the
"PBGC")), and no condition exists that presents a material risk to Subject
Company, its Subsidiaries or any ERISA Affiliate of incurring a material
liability thereunder, (vi) no Plan is a "multiemployer pension plan," as such
term is defined in Section 3(37) of ERISA, (vii) all contributions or other
amounts payable by Subject Company or its Subsidiaries as of the Effective Time
with respect to each Plan in respect of current or prior plan years have been
paid or accrued in accordance with generally accepted accounting practices and
Section 412 of the Code, (viii) neither Subject Company, its Subsidiaries nor
any ERISA Affiliate has engaged in a transaction in connection with which
Subject Company, its Subsidiaries or any ERISA Affiliate could be subject to
either a material civil penalty assessed pursuant to Section 409 or 502(i) of
ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code,
and (ix) to the best knowledge of Subject Company there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the Plans or any trusts related thereto which would,
individually or in the aggregate, have or be reasonably expected to have a
Material Adverse Effect on Subject Company.
 
     (d) Except as set forth in Section 3.11(d) of the Subject Company
Disclosure Schedule, no Plan exists which provides for or could result in the
payment to any Subject Company employee of any money or other property or rights
or accelerate the vesting or payment of such amounts or rights to any Subject
Company employee as a result of the transactions contemplated by this Agreement,
including the Merger and the Association Merger, whether or not such payment or
acceleration would constitute a parachute payment within the meaning of Code
Section 280G. Since December 31, 1996, neither Subject Company nor any of its
Subsidiaries has taken any action that would result in the payment of any
amounts, or the accelerated vesting of any rights or benefits, under the Plans
set forth in Section 3.11(d) of the Subject Company Disclosure Schedule.
 
     3.12 SEC Reports.  Subject Company has previously made available to Parent
an accurate and complete copy of each final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1994 and
prior to the date hereof by Subject Company with the SEC pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act
(the "Subject Company Reports"), and no such registration statement, prospectus,
report, schedule or proxy statement contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading. Subject Company has timely filed all
Subject Company Reports and other documents required to be filed by it under the
Securities Act and the Exchange Act, and, as of their respective dates, all
Subject Company Reports complied in all material respects with the published
rules and regulations of the SEC with respect thereto.
 
     3.13 Compliance with Applicable Law.  Except as disclosed in Section 3.13
of the Subject Company Disclosure Schedule, Subject Company and each of its
Subsidiaries hold, and have at all times held, all
 

                                       11
<PAGE>
 
material licenses, franchises, permits and authorizations necessary for the
lawful conduct of their respective businesses under and pursuant to all, and
have complied with and are not in default in any material respect under any,
applicable law, statute, order, rule, regulation, policy and/or guideline of any
Governmental Entity relating to Subject Company or any of its Subsidiaries,
except where the failure to hold such license, franchise, permit or
authorization or such noncompliance or default would not, individually or in the
aggregate, have or reasonably be expected to have a Material Adverse Effect on
Subject Company, and neither Subject Company nor any of its Subsidiaries knows
of, or has received notice of, any violations of any of the above which,
individually or in the aggregate, would have or would reasonably be expected to
have a Material Adverse Effect on Subject Company.
 
     3.14 Certain Contracts.  (a) Except as set forth in Section 3.14(a) of the
Subject Company Disclosure Schedule, neither Subject Company nor any of its
Subsidiaries is a party to or is bound by any contract, arrangement, commitment
or understanding (whether written or oral) (i) which is a material contract (as
defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after
the date of this Agreement, (ii) which limits the freedom of Subject Company or
any of its Subsidiaries to compete in any line of business, in any geographic
area or with any person, or (iii) with or to a labor union or guild (including
any collective bargaining agreement). Each contract, arrangement, commitment or
understanding of the type described in this Section 3.14(a), whether or not set
forth in Section 3.14(a) of the Subject Company Disclosure Schedule, is referred
to herein as a "Subject Company Contract," and neither Subject Company nor any
of its Subsidiaries knows of, or has received notice of, any violation of the
above by any of the other parties thereto which, individually or in the
aggregate, would have or would reasonably be expected to have a Material Adverse
Effect on Subject Company. Subject Company has made available or will make
available within five days after the date hereof all contracts which involved
payments by Subject Company or any of its Subsidiaries in 1996 of more than
$1,000,000 or which could reasonably be expected to involve payments during 1997
of $1,000,000.
 
     (b) (i) Each Subject Company Contract is valid and binding and in full
force and effect, (ii) Subject Company and each of its Subsidiaries has in all
material respects performed all obligations required to be performed by it to
date under each Subject Company Contract, and (iii) no event or condition exists
which constitutes or, after notice or lapse of time or both, would constitute a
material default on the part of Subject Company or any of its Subsidiaries under
any such Subject Company Contract, except, in each case, where such invalidity,
failure to be binding, failure to so perform or default, individually or in the
aggregate, would not have or reasonably be expected to have a Material Adverse
Effect on Subject Company.
 
     3.15 Agreements with Regulatory Agencies.  Except as set forth in Section
3.15 of the Subject Company Disclosure Schedule, neither Subject Company nor any
of its Subsidiaries is subject to any cease-and-desist or other order issued by,
or is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has adopted any
board resolutions at the request of (each, whether or not set forth in Section
3.15 of the Subject Company Disclosure Schedule, a "Regulatory Agreement"), any
Governmental Entity that restricts the conduct of its business or that in any
manner relates to its capital adequacy, its credit policies, its management or
its business, nor has Subject Company or any of its Subsidiaries been advised by
any Governmental Entity that it is considering issuing or requesting any
Regulatory Agreement.
 
     3.16 Undisclosed Liabilities.  Except (i) for those liabilities that are
fully reflected or reserved against on the consolidated balance sheet of Subject
Company included in the Subject Company Form 10-Q for the quarter ended
September 30, 1996 or (ii) for liabilities incurred in the ordinary course of
business consistent with past practice since September 30, 1996, neither Subject
Company nor any of its Subsidiaries has incurred any liability of any nature
whatsoever (whether absolute, accrued or contingent or otherwise and whether due
or to become due) that, either alone or when combined with all similar
liabilities, has had, or would be reasonably expected to have, a Material
Adverse Effect on Subject Company.
 
     3.17 Rights Agreement; Anti-takeover Provisions.  Subject Company has taken
all action so that the entering into of this Agreement and the consummation of
the transactions contemplated hereby do not and will not result in the grant of
any rights to any person under the Subject Company Rights Agreement or enable
 

                                       12
<PAGE>
 
or require the Subject Company Rights to be exercised, distributed or triggered.
The Board of Directors of Subject Company has taken all necessary action so that
the provisions of Section 203 of the DGCL (and any applicable provisions of the
takeover laws of any other state) and any comparable provisions of Subject
Company's Restated Certificate of Incorporation do not and will not apply to
this Agreement, the Merger or the transactions contemplated hereby.
 
     3.18 Subject Company Information.  The information relating to Subject
Company and its Subsidiaries to be provided by Subject Company for inclusion in
the Joint Proxy Statement and the S-4, or in any other document filed with any
other Governmental Entity in connection herewith, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they are made,
not misleading. The Joint Proxy Statement (except for such portions thereof as
relate only to Parent or any of its Subsidiaries) will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
 
     3.19 Environmental Liability.  Except as set forth in Section 3.19 of the
Subject Company Disclosure Schedule, there are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that reasonably could be
expected to result in the imposition, on Subject Company or any of its
Subsidiaries of any liability or obligation arising under common law standards
relating to environmental protection, human health or safety, or under any
local, state or federal environmental statute, regulation or ordinance,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (collectively, the
"Environmental Laws"), pending or, to the knowledge of Subject Company,
threatened, against Subject Company or any of its Subsidiaries, which liability
or obligation would have or would reasonably be expected to have a Material
Adverse Effect on Subject Company. To the knowledge of Subject Company or any of
its Subsidiaries, there is no reasonable basis for any such proceeding, claim,
action or governmental investigation that would impose any liability or
obligation that would have or would reasonably be expected to have a Material
Adverse Effect on Subject Company. To the knowledge of Subject Company, during
or prior to the period of (i) its or any of its Subsidiaries' ownership or
operation of any of their respective current properties, (ii) its or any of its
Subsidiaries' participation in the management of any property, or (iii) its or
any of its Subsidiaries' holding of a security interest or other interest in any
property, there were no releases or threatened releases of hazardous, toxic,
radioactive or dangerous materials or other materials regulated under
Environmental Laws in, on, under or affecting any such property which would
reasonably be expected to have a Material Adverse Effect. Neither Subject
Company nor any of its Subsidiaries is subject to any agreement, order,
judgment, decree, letter or memorandum by or with any court, governmental
authority, regulatory agency or third party imposing any material liability or
obligation pursuant to or under any Environmental Law that would have or would
reasonably be expected to have a Material Adverse Effect on Subject Company.
 
     3.20 Pooling of Interests.  As of the date of this Agreement, Subject
Company has no reason to believe that the Merger will not qualify as a pooling
of interests for accounting purposes.
 
     3.21 Opinions of Financial Advisors.  Subject Company has received the
opinions of each of Goldman, Sachs & Co. and Merrill Lynch & Co., dated March 5,
1997, to the effect that, as of such date, the Common Exchange Ratio is fair
from a financial point of view to the holders of Subject Company Common Stock.
 
     3.22 Patents, Trademarks, Etc.  Subject Company owns or possesses all legal
rights to use all proprietary rights, including without limitation all
trademarks, trade names, service marks and copyrights, that are material to the
conduct of Subject Company's existing and proposed businesses. Except for the
agreements listed on Section 3.22 of the Subject Company Disclosure Schedule,
Subject Company is not bound by or a party to any options, licenses or
agreements of any kind with respect to any trademarks, service marks or trade
names which Subject Company claims to own. Subject Company has not received any
communications alleging that it or its Subsidiaries has violated or would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity.
 
     3.23 Community Reinvestment Act Compliance.  Great Western Bank is in
substantial compliance with the applicable provisions of the Community
Reinvestment Act of 1977 and the regulations promulgated
 

                                       13
<PAGE>
 
thereunder (collectively, "CRA") and has received a CRA rating of "outstanding"
from the OTS in its most recent exam, and Subject Company has no knowledge of
the existence of any fact or circumstance or set of facts or circumstances which
could be reasonably expected to result in Great Western Bank failing to be in
substantial compliance with such provisions or having its current rating
lowered.
 
                                   ARTICLE IV
 
                         REPRESENTATIONS AND WARRANTIES
                                   OF PARENT
 
     Parent hereby represents and warrants to Subject Company as follows:
 
     4.1 Corporate Organization.  (a) Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Washington.
Parent has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not have or reasonably be expected to have a Material Adverse Effect on
Parent. Parent is duly registered as a savings and loan holding company under
HOLA and qualifies as a savings and loan holding company of the type described
in Section 10(c)(3)(B) of HOLA. The copies of the Articles of Incorporation and
Bylaws of Parent which have previously been made available to Subject Company
are true, complete and correct copies of such documents as in effect as of the
date of this Agreement.
 
     (b) Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Merger Sub will be a
wholly owned direct subsidiary of Parent at least one day prior to, and as of,
the Effective Time. Each Parent Subsidiary (i) is duly organized and validly
existing as a bank, savings association, corporation or partnership under the
laws of its jurisdiction of organization, (ii) is duly qualified to do business
and in good standing in all jurisdictions (whether federal, state, local or
foreign) where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and in which the failure to be so
qualified would have or reasonably be expected to have a Material Adverse Effect
on Parent, and (iii) has all requisite corporate power and authority to own or
lease its properties and assets and to carry on its business as now conducted.
 
     (c) Except for its ownership of Washington Mutual Bank, Washington Mutual
Bank fsb, American Savings Bank, F.A. and Family Savings Bank, FSB, Parent does
not own any stock of or equity interest in any depository institution (as
defined in 12 U.S.C. sec. 1813(c)(1)). Washington Mutual Bank is a qualified
thrift lender pursuant to Section 10(m) of HOLA and its deposits are insured by
the FDIC through the SAIF and the BIF to the fullest extent permitted by law.
Washington Mutual Bank is a member in good standing of the FHLB of Seattle.
Washington Mutual Bank fsb and American Savings Bank are each qualified thrift
lenders pursuant to Section 10(m) of HOLA and their deposits are insured by the
FDIC through the SAIF to the fullest extent permitted by law. Washington Mutual
Bank fsb is a member in good standing of the FHLB of Seattle. American Savings
Bank is a member in good standing of the FHLB of San Francisco.
 
     4.2 Capitalization.  (a) The authorized capital stock of Parent consists of
350,000,000 shares of Parent Common Stock and 10,000,000 shares of Preferred
Stock, no par value ("Parent Preferred Stock"). At the close of business on
December 31, 1996, there were 126,255,891 shares of Parent Common Stock
outstanding, 2,752,500 shares of Parent Preferred Stock designated Series C
issued and outstanding, and 1,970,000 shares of Parent Preferred Stock
designated Series E issued and outstanding. On December 31, 1996, no shares of
Parent Common Stock or Parent Preferred Stock were reserved for issuance. All of
the issued and outstanding shares of Parent Common Stock and Parent Preferred
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. As of the date of this Agreement, except (i)
as set forth in Section 4.2(a) of the Parent Disclosure Schedule (as defined
below), (ii) the Rights Agreement, dated as of October 16, 1990, between Parent
and First Interstate Bank of Washington (as amended and supplemented, the
"Parent Rights Agreement"), and
 

                                       14
<PAGE>
 
(iii) as set forth elsewhere in this Section 4.2(a), Parent does not have and is
not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of Parent Common Stock or Parent Preferred Stock or any other
equity securities of Parent or any securities representing the right to purchase
or otherwise receive any shares of Parent Common Stock or Parent Preferred
Stock. Except (i) as set forth in Section 4.2(a) of the disclosure schedule of
Parent delivered to Subject Company concurrently herewith (the "Parent
Disclosure Schedule"), (ii) for options and restricted shares of Parent Common
Stock permitted by this Agreement to be granted subsequent to the date of this
Agreement, and (iii) for shares and other securities issued in connection with
transactions permitted by Section 5.2, since December 31, 1996, Parent has not
issued any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock, other than pursuant to Parent's
dividend reinvestment and employee stock purchase plans, the exercise of
employee stock options granted prior to such date or thereafter as permitted by
or disclosed in this Agreement, or as disclosed in Section 4.2(a) of the Parent
Disclosure Schedule. The shares of Parent Capital Stock to be issued pursuant to
the Merger will be duly authorized and validly issued and, at the Effective
Time, all such shares will be fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof.
 
     (b) Except as set forth in Section 4.2(b) of the Parent Disclosure
Schedule, Parent owns, directly or indirectly, all of the issued and outstanding
shares of capital stock of or all other equity interests in each of the Parent
Subsidiaries, free and clear of any Liens, and all of such shares are duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. No Parent Subsidiary has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling for
the purchase or issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the right to purchase
or otherwise receive any shares of capital stock or any other equity security of
such Subsidiary.
 
     4.3 Authority; No Violation.  (a) Parent has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of Parent. The Board of Directors of
Parent will direct that the issuance of shares of Parent Common Stock in the
Merger be submitted to Parent's stockholders for approval at a meeting of such
stockholders and, except for the approval of such issuance by the affirmative
vote of the holders of a majority of the votes cast at such meeting, no other
corporate proceedings on the part of Parent are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Parent and (assuming due
authorization, execution and delivery by Subject Company) constitutes a valid
and binding obligation of Parent, enforceable against Parent in accordance with
its terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
 
     (b) Merger Sub has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby has been duly and validly approved by the Board
of Directors of Merger Sub and will be duly and validly approved by the sole
shareholder of Merger Sub, and, upon such approval, no other corporate
proceedings on the part of Merger Sub will be necessary to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Merger Sub and (assuming due authorization, execution
and delivery by the Subject Company) constitutes a valid and binding obligation
of Merger Sub, enforceable against Merger Sub in accordance with its terms,
except as enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
 
     (c) Except as set forth in Section 4.3(c) of the Parent Disclosure
Schedule, neither the execution and delivery of this Agreement by Parent or
Merger Sub, nor the consummation by Parent of the transactions contemplated
hereby, nor compliance by Parent with any of the terms or provisions hereof will
(i) violate any provision of the Articles of Incorporation or Bylaws of Parent
or any of the similar governing documents of any of its Subsidiaries or (ii)
assuming that the consents and approvals referred to in Section 4.4 are duly
 

                                       15
<PAGE>
 
obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to Parent or any of its
Subsidiaries (including Merger Sub) or any of their respective properties or
assets, or (y) violate, conflict with, result in a breach of any provision of or
the loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any Lien upon any of
the respective properties or assets of Parent or any of its Subsidiaries
(including Merger Sub) under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Parent or any of its Subsidiaries
(including Merger Sub) is a party, or by which they or any of their respective
properties or assets may be bound or affected, except (in the case of clause (y)
above) for such violations, conflicts, breaches or defaults which either
individually or in the aggregate will not have and would not reasonably be
expected to have a Material Adverse Effect on Parent.
 
     4.4 Consents and Approvals.  Except for (i) the approval of the Merger and
the Association Merger by the OTS, (ii) approval of the listing of the Parent
Capital Stock to be issued in the Merger on Nasdaq, (iii) the filing with the
SEC of the Joint Proxy Statement and the filing and declaration of effectiveness
of the S-4 and any filings or approvals under applicable state securities laws,
(iv) the filing of the Certificate of Merger with the Delaware Secretary
pursuant to the DGCL and the filing of the Preferred Stock Articles of Amendment
with the Washington Secretary, (v) the adoption of the agreement of merger
(within the meaning of Section 251 of the DGCL) contained in this Agreement by
the requisite votes of the stockholders of Subject Company and the approval of
the issuance of the shares of Parent Common Stock in the Merger by the
stockholders of Parent as required by Nasdaq, (vi) the consents and approvals
set forth in Section 4.4 of the Parent Disclosure Schedule, and (vii) the
consents and approvals of third parties which are not Governmental Entities, the
failure of which to obtain will not have and would not be reasonably expected to
have a Material Adverse Effect, no consents or approvals of, or filings or
registrations with, any Governmental Entity or any third party are necessary in
connection with (A) the execution and delivery by Parent or Merger Sub of this
Agreement and (B) the consummation by Parent and Merger Sub of the Merger and
the other transactions contemplated hereby.
 
     4.5 Reports.  Parent and each of its Subsidiaries have timely filed all
material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
January 1, 1994 with any Governmental Entities, and have paid all fees and
assessments due and payable in connection therewith. Except as set forth in
Section 4.5 of the Parent Disclosure Schedule and except for normal examinations
conducted by a Governmental Entity in the regular course of the business of
Parent and its Subsidiaries, no Governmental Entity has initiated any proceeding
or, to the best knowledge of Parent, investigation into the business or
operations of Parent or any of its Subsidiaries since January 1, 1994. There is
no material unresolved violation, criticism, or exception by any Government
Entity with respect to any report or statement relating to any examinations of
Parent or any of its Subsidiaries.
 
     4.6 Financial Statements.  Parent has previously made available to Subject
Company copies of (a) the consolidated balance sheets of Parent and its
Subsidiaries, as of December 31, for the fiscal years 1994 and 1995, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal years 1993 through 1995, inclusive, as reported in
Parent's Annual Report on Form 10-K for the fiscal year ended December 31, 1995
filed with the SEC under the Exchange Act, in each case accompanied by the audit
report of Deloitte & Touche, LLP, independent public accountants with respect to
Parent and (b) the unaudited consolidated balance sheets of Parent and its
Subsidiaries as of September 30, 1995 and September 30, 1996 and the related
unaudited consolidated statements of income, cash flows and changes in
stockholders' equity for the periods then ended, as reported in Parent's
Quarterly Report on Form 10-Q for the period ended September 30, 1996 filed with
the SEC under the Exchange Act. Each of the financial statements referred to in
this Section 4.6 (including the related notes, where applicable) fairly present,
and the financial statements referred to in Section 6.11 hereof will fairly
present (subject, in the case of the unaudited statements, to normal recurring
adjustments, none of which are expected to be material in nature and amount),
the results of the consolidated operations and changes in stockholders' equity
and consolidated financial position of Parent and its Subsidiaries for the
respective fiscal periods or as of the respective dates
 

                                       16
<PAGE>
 
therein set forth. Each of such statements (including the related notes, where
applicable) complies, and the financial statements referred to in Section 6.11
hereof will comply, in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto; and each of such statements (including the related notes, where
applicable) has been, and the financial statements referred to in Section 6.11
will be, prepared in accordance with GAAP consistently applied during the
periods involved, except in each case as indicated in such statements or in the
notes thereto or, in the case of unaudited statements, as permitted by Form
10-Q. The books and records of Parent and its Subsidiaries have been, and are
being, maintained in all material respects in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only actual
transactions.
 
     4.7 Broker's Fees.  Except as set forth in Section 4.7 of the Parent
Disclosure Schedule, neither Parent nor any Parent Subsidiary nor any of their
respective officers or directors has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in connection
with any of the transactions contemplated by this Agreement. Copies of all
agreements with each broker or finder listed in Section 4.7 of the Parent
Disclosure Schedule have previously been furnished to Subject Company.
 
     4.8 Absence of Certain Changes or Events.  Except as publicly disclosed in
Parent Reports (as defined below) filed prior to the date hereof, since
September 30, 1996, no event has occurred which has had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Parent.
 
     4.9 Legal Proceedings.  (a) Neither Parent nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of Parent's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against
Parent or any of its Subsidiaries or challenging the validity or propriety of
the transactions contemplated by this Agreement as to which there is a
significant possibility of an adverse determination and which, if adversely
determined, would, individually or in the aggregate, have or reasonably be
expected to have a Material Adverse Effect on Parent.
 
     (b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon Parent, any of its Subsidiaries or the assets of Parent
or any of its Subsidiaries which has had, or would reasonably be expected to
have, a Material Adverse Effect on Parent or the Surviving Corporation.
 
     4.10 Taxes.  Except as set forth in Section 4.10 of the Parent Disclosure
Schedule, each of Parent and its Subsidiaries has (i) duly and timely filed
(including pursuant to applicable extensions granted without penalty) all
material Tax Returns required to be filed at or prior to the Effective Time, and
such Tax Returns are to the best knowledge of the Parent true, correct and
complete in all material respects, and (ii) paid in full or made adequate
provision in the financial statements of Parent (in accordance with GAAP) for
all Taxes related to such Tax Returns. Except as set forth in Section 4.10 of
the Parent Disclosure Schedule, no material deficiencies for any Taxes have been
proposed, asserted or assessed against or with respect to Parent or any of its
Subsidiaries, and, to the best knowledge of Parent, there are no material liens
for Taxes upon the assets of either Parent or its Subsidiaries except for
statutory liens for current Taxes not yet due.
 
     4.11 SEC Reports.  Parent has previously made available to Subject Company
an accurate and complete copy of each final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1994 and
prior to the date hereof by Parent with the SEC pursuant to the Securities Act
or the Exchange Act (the "Parent Reports"), and no such registration statement,
prospectus, report, schedule or proxy statement contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. Parent has timely filed
all Parent Reports and other documents required to be filed by it under the
Securities Act and the Exchange Act, and, as of their respective dates, all
Parent Reports complied in all material respects with the published rules and
regulations of the SEC with respect thereto.
 
     4.12 Compliance with Applicable Law.  Except as disclosed in Section 4.12
of the Parent Disclosure Schedule, Parent and each of its Subsidiaries hold, and
have at all times held, all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in default in any
material respect under any, applicable law, statute,
 

                                       17
<PAGE>
 
order, rule, regulation, policy and/or guideline of any Governmental Entity
relating to Parent or any of its Subsidiaries, except where the failure to hold
such license, franchise, permit or authorization or such noncompliance or
default would not, individually or in the aggregate, have or reasonably be
expected to have a Material Adverse Effect on Parent, and neither Parent nor any
of its Subsidiaries knows of, or has received notice of, any material violations
of any of the above which, individually or in the aggregate, would have or
reasonably be expected to have a Material Adverse Effect on Parent.
 
     4.13 Agreements with Regulatory Agencies.  Except as set forth in Section
4.13 of the Parent Disclosure Schedule, neither Parent nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has adopted any
board resolutions at the request of (each, whether or not set forth in Section
4.13 of the Parent Disclosure Schedule, a "Parent Regulatory Agreement"), any
Governmental Entity that restricts the conduct of its business or that in any
manner relates to its capital adequacy, its credit policies, its management or
its business, nor has Parent or any of its Subsidiaries been advised by any
Governmental Entity that it is considering issuing or requesting any Regulatory
Agreement.
 
     4.14 Undisclosed Liabilities.  Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of Parent
included in the Parent Form 10-Q for the quarter ended September 30, 1996 or for
liabilities incurred in the ordinary course of business consistent with past
practice since September 30, 1996, neither Parent nor any of its Subsidiaries
has incurred any liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or to become due) that, either alone or
when combined with all similar liabilities, has had, or would reasonably be
expected to have, a Material Adverse Effect on Parent.
 
     4.15 Rights Agreement; Anti-takeover Provisions.  Parent has taken all
action (including, if required, redeeming all of the outstanding Rights issued
pursuant to the Parent Company Rights Agreement or amending or terminating the
Parent Rights Agreement) so that the entering into of this Agreement and the
consummation of the transactions contemplated hereby do not and will not result
in the grant of any rights to any person under the Parent Rights Agreement or
enable or require the Parent Rights to be exercised, distributed or triggered.
The Board of Directors of Parent has taken all necessary action so that the
takeover laws of the Washington Business Corporation Act (and any applicable
provisions of the takeover laws of any other state) and any comparable
provisions of Parent's Articles of Incorporation do not and will not apply to
this Agreement, the Merger or the transactions contemplated hereby.
 
     4.16 Parent Information.  The information relating to Parent and its
Subsidiaries to be provided by Parent to be contained in the Joint Proxy
Statement and the S-4, or in any other document filed with any other
Governmental Entity in connection herewith, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they are made,
not misleading. The Joint Proxy Statement (except for such portions thereof that
relate only to Subject Company or any of its Subsidiaries) will comply in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder. The S-4 will comply as to form in all material respects
with the provisions of the Securities Act and the rules and regulations
thereunder.
 
     4.17 Environmental Liability.  Except as set forth in Section 4.17 of the
Parent Disclosure Schedule, there are no legal, administrative, arbitral or
other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that reasonably would be expected to result in the
imposition, on Parent or any of its Subsidiaries of any liability or obligation
arising under any Environmental Law, pending or, to the knowledge of Parent,
threatened, against Parent or any of its Subsidiaries, which liability or
obligation would reasonably be expected to have a Material Adverse Effect on
Parent. To the knowledge of Parent, there is no reasonable basis for any such
proceeding, claim, action or governmental investigation that would impose any
liability or obligation that would reasonably be expected to have a Material
Adverse Effect on Parent. To the knowledge of Parent, during or prior to the
period of (i) its or any of its Subsidiaries' ownership or operation of any of
their respective current properties, (ii) its or any of its Subsidiaries'
participation in the management of any
 

                                       18
<PAGE>
 
property, or (iii) its or any of its Subsidiaries' holding of a security
interest or other interest in any property, there were no releases or threatened
releases of hazardous, toxic, radioactive or dangerous materials or other
materials regulated under Environmental Laws in, on, under or affecting any such
property, which would reasonably be expected to have a Material Adverse Effect
on Parent. Neither Parent nor any of its Subsidiaries is subject to any
agreement, order, judgment, decree, letter or memorandum by or with any court,
governmental authority, regulatory agency or third party imposing any material
liability or obligation pursuant to or under any Environmental Law that would
reasonably be expected to have a Material Adverse Effect on Parent.
 
     4.18 Pooling of Interests.  As of the date of this Agreement, Parent has no
reason to believe that the Merger will not qualify as a pooling of interests for
accounting purposes.
 
     4.19 Opinion of Financial Advisor.  Parent has received the opinion of
Lehman Brothers Inc., to the effect that, as of the date of this Agreement, the
Common Exchange Ratio is fair from a financial point of view to Parent.
 
     4.20 Patents, Trademarks, Etc.  Parent owns or possesses all legal rights
to use all proprietary rights, including without limitation all trademarks,
trade names, service marks and copyrights, that are material to the conduct of
Parent's existing and proposed businesses. Except for the agreements listed on
Section 4.20 of the Parent Disclosure Schedule, Parent is not bound by or a
party to any options, licenses or agreements of any kind with respect to any
trademarks, service marks or trade names which Parent claims to own. Parent has
not received any communications alleging that it or its Subsidiaries has
violated or would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
person or entity.
 
     4.21 Community Reinvestment Act Compliance.  Each of Washington Mutual Bank
and American Savings Bank, F.A. is in substantial compliance with the applicable
provisions of the CRA and has received a CRA rating of "outstanding" from the
OTS in its most recent exam, and Parent has no knowledge of the existence of any
fact or circumstances or set of facts or circumstances which could be reasonably
expected to result in Washington Mutual Bank or American Savings Bank, F.A.
failing to be in substantial compliance with such provisions or having its
current rating lowered.
 
                                   ARTICLE V
 
                   COVENANTS RELATING TO CONDUCT OF BUSINESS
 
     5.1 Conduct of Businesses Prior to the Effective Time.  Except as set forth
in the Subject Company Disclosure Schedule or the Parent Disclosure Schedule, as
the case may be, as expressly contemplated or permitted by this Agreement, or as
required by applicable law, rule or regulation, during the period from the date
of this Agreement to the Effective Time, each of Parent and Subject Company
shall, and shall cause each of their respective Subsidiaries to, (i) conduct its
business in the usual, regular and ordinary course consistent with past
practice, (ii) use reasonable best efforts to maintain and preserve intact its
business organization, employees and advantageous business relationships and
retain the services of its officers and key employees and (iii) take no action
which would reasonably be expected to adversely affect or delay the ability of
either Parent or Subject Company to obtain any approvals of any Governmental
Entity required to consummate the transactions contemplated hereby or to
consummate the transactions contemplated hereby.
 
     5.2 Forbearances.  Except as set forth in Section 5.2 of the Subject
Company Disclosure Schedule or Section 5.2 of the Parent Disclosure Schedule, as
the case may be, as expressly contemplated or permitted by this Agreement, or as
required by applicable law, rule or regulation, during the period from the date
of this Agreement to the Effective Time, neither Parent nor Subject Company
shall, and neither Parent nor Subject Company shall permit any of their
respective Subsidiaries to, without the prior written consent of the other:
 
          (a) adjust, split, combine or reclassify any capital stock; set any
     record or payment dates for the payment of any dividends or distributions
     on its capital stock except in the ordinary and usual course of business
     consistent with past practice; make, declare or pay any dividend or make
     any other distribution
 

                                       19
<PAGE>
 
     on, or directly or indirectly redeem, purchase or otherwise acquire, any
     shares of its capital stock or any securities or obligations convertible
     into or exchangeable for any shares of its capital stock, or except as
     otherwise permitted by this paragraph (a) grant any stock appreciation
     rights or grant any individual, corporation or other entity any right to
     acquire any shares of its capital stock (except for (i) regular quarterly
     cash dividends on Subject Company Common Stock and on Parent Common Stock
     at a rate equal to the rates paid by each of Subject Company and Parent, as
     the case may be, during the fiscal quarter immediately preceding the date
     hereof, as such rates may be increased, in the case of Parent only, in the
     ordinary course of business consistent with past practice; provided,
     however, that no dividend shall be paid by Subject Company on Subject
     Company Common Stock if Subject Company shall be required to borrow to do
     so; (ii) in the case of Subject Company 8.30% Preferred Stock and Parent
     Preferred Stock, for regular quarterly or semiannual cash dividends thereon
     at the rates set forth in the applicable certificate of incorporation or
     certificate of designation for such securities; (iii) dividends paid by any
     of the wholly owned Subsidiaries of each of Parent and Subject Company to
     Parent or Subject Company or any of their wholly owned Subsidiaries,
     respectively, provided that no such dividend shall cause Great Western Bank
     to cease to qualify as a "well capitalized" institution under 12 CFR Part
     565; and (iv) in the case of Parent only, the issuance of employee stock
     options and restricted stock consistent with past practices); or issue any
     additional shares of capital stock except (A) pursuant to the exercise of
     stock options outstanding as of the date hereof or, in the case of Parent
     only, issued after the date hereof in a manner consistent with past
     practice, (B) in the case of Parent only, the award of restricted shares of
     Parent Common Stock in a manner consistent with past practice, (C) pursuant
     to the Subject Company Rights Agreement, (D) pursuant to the Parent Rights
     Agreement, (E) pursuant to contracts or agreements in force at the date of
     this Agreement and set out in Section 5.2 of the Subject Company Disclosure
     Schedule and Section 5.2 of the Parent Disclosure Schedule, as the case may
     be, and (F) in connection with acquisitions and investments permitted by
     paragraph (c) hereof;
 
          (b) sell, transfer, mortgage, encumber or otherwise dispose of any of
     its properties or assets to any individual, corporation or other entity
     (other than a direct or indirect wholly owned Subsidiary), or cancel,
     release or assign any indebtedness to any such person or any claims held by
     any such person, in each case that is material to such party, except (i) in
     the ordinary course of business consistent with past practice or (ii)
     pursuant to contracts or agreements in force at the date of this Agreement
     and set out in Section 5.2 of the Subject Company Disclosure Schedule or
     Section 5.2 of the Parent Disclosure Schedule, as the case may be;
 
          (c) except for transactions in the ordinary course of business
     consistent with past practice, make any material acquisition or investment
     either by purchase of stock or securities, merger or consolidation,
     contributions to capital, property transfers, or purchases of any property
     or assets of any other individual, corporation or other entity other than a
     wholly owned Subsidiary thereof; provided, however, that subject to clause
     (iii) of Section 5.1, Parent may enter into an agreement or agreements for,
     and may consummate, business combination transactions with other companies
     provided that the aggregate amount of assets of such companies does not
     exceed $5,000,000,000; provided, further, however that, notwithstanding
     anything to the contrary contained herein, Parent shall not make any
     acquisition that would require it to register as a bank holding company
     under the Bank Holding Company Act of 1956, as amended;
 
          (d) in the case of the Subject Company, only enter into, renew or
     terminate any contract or agreement, other than loans made in the ordinary
     course of business, that calls for aggregate annual payments of $500,000
     and which is not either (i) terminable at will on 60 days or less notice
     without payment of a penalty or (ii) has a term of less than one year; or
     make any material change in any of its leases or contracts, other than
     renewals of contracts or leases for a term of one year or less without
     materially adverse changes to the terms thereof;
 
          (e) in the case of Subject Company only, other than general salary
     increases consistent with past practice, increase in any material respect
     the compensation or fringe benefits of any of its employees or pay any
     pension or retirement allowance not required by any existing plan or
     agreement to any such employees or become a party to, amend or commit
     itself to any pension, retirement, profit-sharing or
 

                                       20
<PAGE>
 
     welfare benefit plan or agreement or employment agreement with or for the
     benefit of any employee or accelerate the vesting of any stock options or
     other stock-based compensation;
 
          (f) authorize or permit any of its officers, directors, employees,
     representatives or agents (collectively, "Representatives") to directly or
     indirectly solicit, initiate or encourage any inquiries relating to or that
     may reasonably be expected to lead to, or the making of any proposal which
     constitutes, a Takeover Proposal (as defined below), or recommend or
     endorse any Takeover Proposal, or participate in any discussions or
     negotiations, or provide third parties with any nonpublic information,
     relating to any such inquiry or proposal or otherwise facilitate any effort
     or attempt to make or implement a Takeover Proposal, provided, however,
     that, at any time prior to the time its stockholders shall have voted to
     approve this Agreement, each of Parent and Subject Company may, and may
     authorize and permit its Representatives to, provide third parties with
     nonpublic information, otherwise facilitate any effort or attempt by any
     third party to make or implement a Takeover Proposal, recommend or endorse
     any Takeover Proposal with or by any third party, and participate in
     discussions and negotiations with any third party relating to any Takeover
     Proposal, if such party's Board of Directors, after having consulted with
     and considered the advice of its financial advisers and outside counsel,
     has determined in good faith that the failure to do so would create a
     reasonable possibility of a breach of the fiduciary duties of such party's
     Board of Directors. Each of Parent and Subject Company shall (i) advise the
     other orally (within one day) and in writing (as promptly as practicable)
     of the receipt of any such inquiry or proposal by it or by any of its
     Subsidiaries or any of its Representatives and (ii) unless its Board of
     Directors, after consulting with, and considering the advice of, its
     outside counsel, has determined in good faith that such action would create
     a reasonable possibility of a breach of the fiduciary duties of such Board
     of Directors, inform the other party orally and in writing, as promptly as
     practicable after the receipt thereof, of the material terms and conditions
     of any such inquiries or proposals (including the identity of the party
     making such inquiry or proposal) and shall keep the other party informed of
     the status thereof. Subject Company shall not furnish any nonpublic
     information to any other party pursuant to this Section 5.2(f) except
     pursuant to the terms of a confidentiality agreement containing terms
     substantially identical to the terms contained in the Confidentiality
     Agreement (as defined in Section 6.2(b) hereof). Subject Company will
     immediately cease and cause to be terminated any activities, discussions or
     negotiations conducted prior to the date of this Agreement with any parties
     other than Parent with respect to any of the foregoing and require the
     return (or if permitted by the terms of the applicable confidentiality
     agreement, the certified destruction) of all confidential information
     previously provided to such parties. As used in this Agreement, "Takeover
     Proposal" shall mean, with respect to any Person, any tender or exchange
     offer, proposal for a merger, consolidation or other business combination
     involving Subject Company or Parent or any of their respective Subsidiaries
     or any proposal or offer to acquire in any manner a substantial equity
     interest in, or a substantial portion of the assets of, Subject Company or
     Parent or any of their respective Subsidiaries, other than the transactions
     contemplated or permitted by this Agreement; provided, however, that any
     proposal or offer involving the acquisition by Parent of any equity
     interest in or assets of any person, whether by tender or exchange offer,
     merger, consolidation or otherwise, or the disposition by Parent of assets,
     deposits or Subsidiaries, which is permitted by the terms of Section 5.2 of
     this Agreement shall not constitute a Takeover Proposal;
 
          (g) in the case of Subject Company only, make any capital expenditures
     in excess of (A) $500,000 per project or related series of projects or (B)
     $3,000,000 in the aggregate, other than expenditures necessary to maintain
     existing assets in good repair;
 
          (h) in the case of Subject Company only, make application for the
     opening, relocation or closing of any, or open, relocate or close any,
     branch or loan production office;
 
          (i) in the case of Subject Company only, make or acquire any loan or
     issue a commitment for any loan except for loans and commitments that are
     made in the ordinary course of business consistent with past practice or
     issue or agree to issue any letters of credit or otherwise guarantee the
     obligations of any other persons except in the ordinary course of business
     in order to facilitate the sale of REO;
 

                                       21
<PAGE>
 
          (j) except as otherwise permitted elsewhere in this Section 5.2,
     engage or participate in any material transaction or incur or sustain any
     material obligation not in the ordinary course of business;
 
          (k) in the case of Subject Company only, except as otherwise permitted
     hereby foreclose upon or otherwise acquire (whether by deed in lieu of
     foreclosure or otherwise) any real property (other than 1-to-4 family
     residential properties in the ordinary course of business);
 
          (l) in the case of Subject Company only, sell, transfer or otherwise
     convey or agree to sell, transfer or otherwise convey, Sierra Investment
     Management Corporation;
 
          (m) settle any claim, action or proceeding involving money damages
     which is material to Parent or Subject Company, as applicable, except in
     the ordinary course of business consistent with past practice;
 
          (n) take any action that would prevent or impede the Merger from
     qualifying (i) as a reorganization within the meaning of Section 368(a) of
     the Code or (ii) for pooling of interests accounting treatment;
 
          (o) amend its certificate of incorporation, bylaws or similar
     governing documents or the Subject Company Rights Agreement or the Parent
     Rights Agreement, as the case may be, in a manner that would materially and
     adversely affect either party's ability to consummate the Merger or the
     economic benefits of the Merger to either party; provided, however that
     prior to the meeting of Subject Company's stockholders held to vote on this
     Agreement, Subject Company shall not amend the Subject Company Rights
     Agreement without Parent's prior written consent;
 
          (p) in the case of Subject Company only, except in the ordinary course
     of business consistent with past practice or following prior consultation
     with Parent, materially change its investment securities portfolio policy,
     or the manner in which the portfolio is classified or reported;
 
          (q) take any action that is intended or may reasonably be expected to
     result in any of its representations and warranties set forth in this
     Agreement being or becoming untrue in any material respect at any time
     prior to the Effective Time, or in any of the conditions to the Merger set
     forth in Article VII not being satisfied or in a violation of any provision
     of this Agreement, except, in every case, as may be required by applicable
     law;
 
          (r) make any changes in its accounting methods, except as may be
     required under law, rule, regulation or GAAP, in each case as concurred in
     by such party's independent public accountants;
 
          (s) in the case of Subject Company only, engage in the business of
     making or make any VA guaranteed or FHA insured mortgage loans;
 
          (t) in the case of Subject Company only, enter into any contracts or
     agreements or amendments or supplements thereto pertaining to any further
     development of specialized software for Subject Company or its
     Subsidiaries; or
 
          (u) agree to, or make any commitment to, take any of the actions
     prohibited by this Section 5.2.
 
                                   ARTICLE VI
 
                             ADDITIONAL AGREEMENTS
 
     6.1 Regulatory Matters.  (a) Parent and Subject Company shall promptly
prepare and file with the SEC a Joint Proxy Statement and Parent shall promptly
prepare and file with the SEC the S-4, in which the Joint Proxy Statement will
be included as a prospectus. Each of Parent and Subject Company shall use all
reasonable efforts to have the S-4 declared effective under the Securities Act
as promptly as practicable after such filing, and Parent and Subject Company
shall thereafter mail the Joint Proxy Statement to their respective
stockholders.
 
     (b) The parties hereto shall cooperate with each other and use reasonable
best efforts to promptly prepare and file all necessary documentation, to effect
all applications, notices, petitions and filings, to obtain
 

                                       22
<PAGE>
 
as promptly as practicable all permits, consents, approvals and authorizations
of all third parties and Governmental Entities which are necessary or advisable
to consummate the transactions contemplated by this Agreement (including without
limitation the Merger and the Association Merger) and to comply with the terms
and conditions of all such permits, consents, approvals and authorizations of
all such Governmental Entities. Parent and Subject Company shall have the right
to review in advance and to the extent practicable each will consult the other
on, in each case subject to applicable laws relating to the exchange of
information, all the information relating to Subject Company or Parent, as the
case may be, and any of their respective Subsidiaries which appears in any
filing made with, or written materials submitted to, any third party or any
Governmental Entity in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto shall
act reasonably and as promptly as practicable. The parties hereto agree that
they will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the transactions contemplated by
this Agreement (including without limitation the Merger and the Association
Merger) and each party will keep the other apprised of the status of matters
relating to completion of the transactions contemplated herein.
 
     (c) Parent and Subject Company shall, upon request, furnish each other with
all information concerning themselves, their Subsidiaries, directors, officers
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with the Joint Proxy Statement, the S-4 or any other
statement, filing, notice or application made by or on behalf of Parent, Subject
Company or any of their respective Subsidiaries to any Governmental Entity in
connection with the Merger and the other transactions contemplated by this
Agreement.
 
     (d) Parent and Subject Company shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any Requisite Regulatory Approval (as defined below) will not be
obtained or that the receipt of any such approval will be materially delayed.
 
     6.2 Access to Information.  (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, each of Parent and
Subject Company shall, and shall cause each of their respective Subsidiaries to,
afford to the officers, employees, accountants, counsel and other
representatives of the other party access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records, and to its officers, employees, accountants, counsel
and other representatives and, during such period, each of Parent and Subject
Company shall, and shall cause their respective Subsidiaries to, make available
to the other party (i) a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to the
requirements of Federal securities laws or Federal or state banking laws (other
than reports or documents which Parent or Subject Company, as the case may be,
is not permitted to disclose under applicable law) and (ii) all other
information concerning its business, properties and personnel as such other
party may reasonably request. Neither Parent nor Subject Company nor any of
their respective Subsidiaries shall be required to provide access to or to
disclose information where such access or disclosure would violate or prejudice
the rights of its customers, jeopardize the attorney-client privilege of the
institution in possession or control of such information or contravene any law,
rule, regulation, order, judgment, decree, fiduciary duty or binding agreement
entered into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
 
     (b) Each of Parent and Subject Company shall hold all information furnished
by the other party or any of such party's Subsidiaries or representatives
pursuant to Section 6.2(a) in confidence to the extent required by, and in
accordance with, the provisions of the Confidentiality Agreement, dated February
21, 1997, between Parent and Subject Company (the "Confidentiality Agreement").
 
     (c) No investigation by either of the parties or their respective
representatives shall affect the representations, warranties, covenants or
agreements of the other set forth herein.
 

                                       23
<PAGE>
 
     6.3 Stockholders' Approvals.  Each of Parent and Subject Company shall duly
call, give notice of, convene and hold a meeting of its stockholders to be held
as soon as practicable following the date hereof for the purpose of obtaining
the requisite stockholder approvals required in connection with this Agreement
and the Merger, and each shall use its best efforts to cause such meetings to
occur on the same date. Subject Company shall, through its Board of Directors,
recommend to its stockholders approval of the Merger and Parent shall, through
its Board of Directors, recommend to its stockholders approval of the issuance
of the shares of Parent Common Stock in the Merger as required by Nasdaq;
provided, however, that this Section 6.3(a) shall not prohibit accurate
disclosure by either party of information that is required in the S-4 or the
Joint Proxy Statement or any other document required to be filed with the SEC
(including without limitation a disclosure statement on Schedule 14D-9) or
otherwise required by applicable law or regulation or the rules of the NYSE or
Nasdaq to be publicly disclosed.
 
     6.4 Legal Conditions to Merger.  (a) Subject to the terms and conditions of
this Agreement, each of Parent and Subject Company shall, and shall cause its
Subsidiaries to, use their reasonable best efforts (i) to take, or cause to be
taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements which may be imposed on such party or its Subsidiaries with
respect to the Merger and the Association Merger and, subject to the conditions
set forth in Article VII hereof, to consummate the transactions contemplated by
this Agreement and (ii) to obtain (and to cooperate with the other party to
obtain) any consent, authorization, order or approval of, or any exemption by,
any Governmental Entity and any other third party which is required to be
obtained by Subject Company or Parent or any of their respective Subsidiaries in
connection with the Merger and the Association Merger and the other transactions
contemplated by this Agreement.
 
     (b) Subject to the terms and conditions of this Agreement, each of Parent
and Subject Company agrees to use reasonable best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective, as soon as practicable
after the date of this Agreement, the transactions contemplated hereby,
including, without limitation, using reasonable best efforts to (i) modify or
amend any contracts, plans or arrangements to which Parent or Subject Company is
a party (to the extent permitted by the terms thereof) if necessary in order to
satisfy the conditions to Closing set forth in Article VII hereof, (ii) lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby,
and (iii) defend any litigation seeking to enjoin, prevent or delay the
consummation of the transactions contemplated hereby or seeking material
damages.
 
     6.5 Affiliates.  Each of Parent and Subject Company shall use its
reasonable best efforts to cause each director, executive officer and other
person who is an "affiliate" (for purposes of Rule 145 under the Securities Act,
in the case of affiliates of Subject Company, and for purposes of qualifying the
Merger for pooling of interests accounting treatment, in the case of affiliates
of either Parent or Subject Company) of such party to deliver to the other
party, as soon as practicable after the date of this Agreement, and in any event
prior to the date of the stockholders meetings called by Parent and Subject
Company pursuant to Section 6.3 hereof, a written agreement, in the form and
substance reasonably satisfactory to Subject Company (in the case of affiliates
of Parent) and Parent (in the case of affiliates of Subject Company).
 
     6.6 Stock Exchange Listing.  Parent shall use its best efforts to cause the
shares of Parent Common Stock to be issued in the Merger and the New Parent
Depositary Shares to be approved for listing on Nasdaq, subject to official
notice of issuance, prior to the Effective Time.
 
     6.7 Employee Benefit Plans.  (a) Parent agrees that, for a period of at
least one year from and after the Effective Time, it shall, and shall cause its
Subsidiaries to, provide to employees of the Subject Company immediately prior
to the Effective Time (such employees, the "Subject Company Employees")
compensation and benefits on terms no less favorable in the aggregate than those
provided to similarly situated employees of Parent and its Subsidiaries. For
purposes of all employee benefit plans of Parent or its Subsidiaries in which
Subject Company Employees participate from and after the Effective Time
(including all policies and employee fringe benefit programs, including vacation
policies, of Parent or its Subsidiaries but excluding Parent's Service Award
plan) and under which an employee's benefit depends, in whole or in part, on
length of
 

                                       24
<PAGE>
 
service, credit will be given to Subject Company Employees for service
previously credited with the Subject Company or its Subsidiaries prior to the
Effective Time to the extent that such crediting of service does not result in
duplication of benefits; provided, however, that Parent shall determine each
employee's length of service in a manner consistent with Parent's customary
practice with respect to its employees. Parent shall also cause each employee
benefit plan in which Subject Company Employees participate from and after the
Effective Time to waive (i) any preexisting condition restriction which was
waived under the terms of any analogous Plan immediately prior to the Effective
Time or (ii) any waiting period limitation which would otherwise be applicable
to a Subject Company Employee on or after the Effective Time to the extent such
Subject Company Employee had satisfied any similar waiting period limitation
under an analogous Plan prior to the Effective Time. Notwithstanding the
generality of the foregoing, for a period of three (3) years, in the case of
those beneficiaries who are entitled to participate in such Program pursuant to
employment agreements, or two (2) years, in the case of those beneficiaries who
are otherwise entitled to participate in such Program, commencing on the
Effective Date, Parent agrees that it shall continue to maintain the Subject
Company's Executive Medical Program, on terms no less favorable that those in
effect as of the date hereof, for the benefit of those Subject Company Employees
who are currently eligible to participate in such Program.
 
     (b) Notwithstanding the foregoing, Parent shall, and shall cause its
Subsidiaries to, honor in accordance with their terms all Plans, each as amended
to the date hereof, and other contracts, arrangements, commitments or
understandings described in the Subject Company Disclosure Schedule; provided,
however, that this paragraph (b) shall be subject to the provisions of paragraph
(f) hereof. Parent and Subject Company hereby acknowledge that consummation of
the Merger will constitute a "Change in Control" for purposes of all Plans,
contracts, arrangements and commitments that contain change in control
provisions and agree to abide by the provisions of any Plan, contract,
arrangement or commitment which relate to a Change in Control, including, but
not limited to, the accelerated vesting and/or payment of equity-based awards
under the Subject Company Stock Option Plans.
 
     (c) Subject Company and its Subsidiaries shall take all action necessary to
ensure that no further mortgage loans will be made to employees under the Great
Western employee loan program and to amend the retiree medical plans so that no
additional retirees shall become entitled to continuing medical insurance
benefits thereunder.
 
     (d) Subject Company and its Subsidiaries agree to amend their 401(k) plan
prior to Closing (as hereinafter defined) so that participant loans are no
longer available, and may amend their 401(k) plan to allow partial repayment of
existing loans thereunder.
 
     (e) Subject Company shall consult with Parent and, to the extent permitted
by applicable law and the governing instrument of the respective trusts, obtain
Parent's prior approval which shall not be unreasonably withheld regarding the
investments used to fund the two umbrella trusts for the nonqualified plans for
directors and officers.
 
     (f) Except as otherwise provided herein, nothing in this Section 6.7 shall
be interpreted as preventing Parent or its Subsidiaries from amending, modifying
or terminating any of the Plans, or other contracts, arrangements, commitments
or understandings, in accordance with their terms and applicable law.
 
     6.8 Indemnification; Directors' and Officers' Insurance.  (a) In the event
of any threatened or actual claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative, including, without limitation, any
such claim, action, suit, proceeding or investigation in which any person who is
now, or has been at any time prior to the date of this Agreement, or who becomes
prior to the Effective Time, a director, officer or employee of Subject Company
or any of its Subsidiaries (the "Indemnified Parties") is, or is threatened to
be, made a party based in whole or in part on, or arising in whole or in part
out of, or pertaining to (i) the fact that he is or was a director, officer or
employee of Subject Company, any of the Subject Company Subsidiaries or any of
their respective predecessors or was prior to the Effective Time serving at the
request of any such party as a director, officer, employee, fiduciary or agent
of another corporation, partnership, trust or other enterprise or (ii) this
Agreement, or any of the transactions contemplated hereby and all actions taken
by an Indemnified Party in connection herewith, whether in any case asserted or
arising before or after the Effective Time, the parties hereto agree to
cooperate and use their best efforts to defend
 

                                       25
<PAGE>
 
against and respond thereto to the extent set forth in the next sentence. It is
understood and agreed that after the Effective Time, Parent shall indemnify and
hold harmless, as and to the fullest extent permitted by the corporate
governance documents of Subject Company or its Subsidiaries and the
indemnification letters between the Subject Company and each of the directors
and executive officers of Subject Company (the "Indemnification Letters") and by
law, each such Indemnified Party against any losses, claims, damages,
liabilities, costs, expenses (including reasonable attorney's fees and expenses
in advance of the final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party to the fullest extent permitted by law
upon receipt of an undertaking from such Indemnified Party to repay such
advanced expenses if it is finally and unappealably determined that such
Indemnified Party was not entitled to indemnification hereunder), judgments,
fines and amounts paid in settlement in connection with any such threatened or
actual claim, action, suit, proceeding or investigation, and in the event of any
such threatened or actual claim, action, suit, proceeding or investigation
(whether asserted or arising before or after the Effective Time), the
Indemnified Parties may retain counsel reasonably satisfactory to them after
consultation with Parent; provided, however, that (1) Parent shall have the
right to assume the defense thereof and upon such assumption Parent shall not be
liable to any Indemnified Party for any legal expenses of other counsel or any
other expenses subsequently incurred by any Indemnified Party in connection with
the defense thereof, except that if Parent elects not to assume such defense or
counsel for the Indemnified Parties reasonably advises the Indemnified Parties
that there are or may be (whether or not any have yet actually arisen) issues
which raise conflicts of interest between Parent and the Indemnified Parties,
the Indemnified Parties may retain counsel reasonably satisfactory to them, and
Parent shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties, (2) Parent shall be obligated pursuant to this paragraph to
pay for only one firm of counsel for all Indemnified Parties, (3) Parent shall
not be liable for any settlement effected without its prior written consent
(which consent shall not be unreasonably withheld) and (4) Parent shall have no
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and nonappealable, that indemnification of such Indemnified Party
in the manner contemplated hereby is prohibited by the corporate governance
documents of Subject Company or its Subsidiaries, the Indemnification Letters or
applicable law. Any Indemnified Party wishing to claim indemnification under
this Section 6.8, upon learning of any such claim, action, suit, proceeding or
investigation, shall notify Parent thereof, provided that the failure to so
notify shall not affect the obligations of Parent under this Section 6.8 except
(and only) to the extent such failure to notify materially prejudices Parent.
Parent's obligations under this Section 6.8 shall continue in full force and
effect for a period of six (6) years from the Effective Time; provided, however,
that all rights to indemnification in respect of any claim (a "Claim") asserted
or made within such period shall continue until the final disposition of such
Claim.
 
     (b) Without limiting any of the obligations under paragraph (a) of this
Section 6.8, Parent agrees that all rights to indemnification and all
limitations of liability existing in favor of the Indemnified Parties as
provided in Subject Company's Restated Certificate of Incorporation or ByLaws or
in the similar governing documents of any of Subject Company's Subsidiaries as
in effect as of the date of this Agreement or as provided in the Indemnification
Letters of Subject Company with respect to matters occurring on or prior to the
Effective Time shall survive the Merger and shall continue in full force and
effect, without any amendment thereto, for a period of six years from the
Effective Time; provided, however, that all rights to indemnification in respect
of any Claim asserted or made within such period shall continue until the final
disposition of such Claim; provided, further, however, that nothing contained in
this Section 6.8(b) shall be deemed to preclude the liquidation, consolidation
or merger of Subject Company or any Subject Company Subsidiary, in which case
all of such rights to indemnification and limitations on liability shall be
deemed to so survive and continue notwithstanding any such liquidation,
consolidation or merger and shall constitute rights which may be asserted
against Parent. Nothing contained in this Section 6.8(b) shall be deemed to
preclude any rights to indemnification or limitations on liability provided in
Subject Company's Restated Certificate of Incorporation or Bylaws or the similar
governing documents of any of Subject Company's Subsidiaries with respect to
matters occurring subsequent to the Effective Time to the extent that the
provisions establishing such rights or limitations are not otherwise amended to
the contrary.
 
     (c) Parent shall use its best efforts to cause the persons serving as
officers and directors of Subject Company immediately prior to the Effective
Time to be covered for a period of six (6) years from the

                                       26
<PAGE>
 
Effective Time by the directors' and officers' liability insurance policy
maintained by Subject Company (provided that Parent may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are not less advantageous to such directors and officers of
Subject Company than the terms and conditions of such existing policy) with
respect to acts or omissions occurring prior to the Effective Time which were
committed by such officers and directors in their capacity as such.
 
     (d) In the event Parent or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent
shall assume the obligations set forth in this Section 6.8.
 
     (e) The provisions of this Section 6.8 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
 
     6.9 Additional Agreements.  In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement (including, without limitation, any merger between a Subsidiary of
Parent and a Subsidiary of Subject Company) or to vest the Surviving Corporation
with full title to all properties, assets, rights, approvals, immunities and
franchises of any of the parties to the Merger, the proper officers and
directors of each party to this Agreement and their respective Subsidiaries
shall take all such necessary action as may be reasonably requested by, and at
the sole expense of, Parent.
 
     6.10 Advice of Changes.  Parent and Subject Company shall promptly advise
the other party of any change or event which, individually or in the aggregate
with other such changes or events, has a Material Adverse Effect on it or which
it believes would or would be reasonably likely to cause or constitute a
material breach of any of its representations, warranties or covenants contained
herein.
 
     6.11 Subsequent Interim and Annual Financial Statements.  As soon as
reasonably available, but in no event more than 45 days after the end of each
fiscal quarter (other than the fourth quarter of a fiscal year) or 90 days after
December 31, 1996 or the end of each fiscal year ending after the date of this
Agreement, each party will deliver to the other party its Quarterly Report on
Form 10-Q or its Annual Report on Form 10-K, as the case may be, as filed with
the SEC under the Exchange Act.
 
                                  ARTICLE VII
 
                              CONDITIONS PRECEDENT
 
     7.1 Conditions to Each Party's Obligation to Effect the Merger.  The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
 
          (a) Stockholder Approval.  The agreement of merger contained in this
     Agreement shall have been approved and adopted by the requisite affirmative
     vote of the holders of Subject Company Common Stock entitled to vote
     thereon and the issuance of shares of Parent Common Stock in the Merger
     shall have been approved by the requisite affirmative vote of the holders
     of Parent Common Stock entitled to vote thereon as required by Nasdaq.
 
          (b) Nasdaq Listing.  The shares of Parent Common Stock which shall be
     issued to the stockholders of Subject Company upon consummation of the
     Merger and the New Parent Depositary Shares shall have been authorized for
     listing on Nasdaq, subject to official notice of issuance.
 
          (c) Other Approvals.  All regulatory approvals required to consummate
     the transactions contemplated hereby shall have been obtained and shall
     remain in full force and effect and all statutory waiting periods in
     respect thereof shall have expired (all such approvals and the expiration
     of all such waiting periods being referred to herein as the "Requisite
     Regulatory Approvals").

                                       27
<PAGE>
 
          (d) S-4.  The S-4 shall have become effective under the Securities
     Act, no stop order suspending the effectiveness of the S-4 shall have been
     issued and no proceedings for that purpose shall have been initiated or
     threatened by the SEC.
 
          (e) No Injunctions or Restraints; Illegality.  No order, injunction or
     decree issued by any court or agency of competent jurisdiction or other
     legal restraint or prohibition (an "Injunction") preventing the
     consummation of the Merger or any of the other transactions contemplated by
     this Agreement shall be in effect. No statute, rule, regulation, order,
     injunction or decree shall have been enacted, entered, promulgated or
     enforced by any Governmental Entity which prohibits or makes illegal the
     consummation of the Merger.
 
          (f) Pooling.  Each of Parent and Subject Company shall have received a
     letter from its independent public accountants, dated the Closing Date, in
     form and substance reasonably satisfactory to Parent and Subject Company,
     respectively, to the effect that the Merger will qualify for "pooling of
     interests" accounting treatment.
 
     7.2 Conditions to Obligations of Parent.  The obligation of Parent to
effect the Merger is also subject to the satisfaction or waiver by Parent at or
prior to the Effective Time of the following conditions:
 
          (a) Representations and Warranties.  The representations and
     warranties of Subject Company set forth in this Agreement shall be true and
     correct in all respects as of the date of this Agreement and (except to the
     extent such representations and warranties speak as of an earlier date) as
     of the Closing Date as though made on and as of the Closing Date; provided,
     however, that for purposes of determining the satisfaction of this
     condition, no effect shall be given to any exception in such
     representations and warranties relating to materiality or a Material
     Adverse Effect, and provided, further, however, that, for purposes of this
     condition, such representations and warranties (other than the
     representations and warranties contained in Section 3.2(a), which shall be
     true and correct in all material respects) shall be deemed to be true and
     correct in all respects unless the failure or failures of such
     representations and warranties to be so true and correct, individually or
     in the aggregate, results or would reasonably be expected to result in a
     Material Adverse Effect on Subject Company and its Subsidiaries taken as a
     whole. Parent shall have received a certificate signed on behalf of the
     Subject Company by the Chief Executive Officer and Chief Financial Officer
     of Subject Company to the foregoing effect.
 
          (b) Performance of Obligations of Subject Company.  Subject Company
     shall have performed in all material respects all obligations required to
     be performed by it under this Agreement at or prior to the Closing Date,
     and Parent shall have received a certificate signed on behalf of Subject
     Company by the Chief Executive Officer and the Chief Financial Officer of
     Subject Company to such effect.
 
          (c) Subject Company Rights Agreement.  The rights issued pursuant to
     the Subject Company Rights Agreement shall not have become nonredeemable,
     exercisable, distributed or triggered pursuant to the terms of such
     agreement.
 
          (d) Federal Tax Opinion.  Parent shall have received an opinion of
     Foster, Pepper & Shefelman, counsel to Parent ("Parent's Counsel"), in form
     and substance reasonably satisfactory to Parent, dated as of the Effective
     Time, substantially to the effect that, on the basis of facts,
     representations and assumptions set forth in such opinion which are
     consistent with the state of facts existing at the Effective Time, the
     Merger will be treated as a reorganization within the meaning of Section
     368(a) of the Code and that, accordingly, for federal income tax purposes:
 
             (1) No gain or loss will be recognized by the shareholders of
        Subject Company who exchange (i) all of their Subject Company Common
        Stock solely for Parent Common Stock pursuant to the Merger (except with
        respect to cash received in lieu of a fractional share interest in
        Parent Common Stock) and (ii) all of their Subject Company 8.30%
        Preferred Stock solely for Parent New Preferred Stock pursuant to the
        Merger; and
 
             (2) The aggregate tax basis of (i) the Parent Common Stock received
        by shareholders who exchange all of their Subject Company Common Stock
        solely for Parent Common Stock pursuant to
 

                                       28
<PAGE>
 
        the Merger will be the same as the aggregate tax basis of the Subject
        Company Common Stock surrendered in exchange therefor (reduced by any
        amount allocable to a fractional share interest for which cash is
        received) and (ii) the Parent New Preferred Stock received by
        shareholders who exchange all of their Subject Company 8.30% Preferred
        Stock solely for Parent New Preferred Stock pursuant to the Merger will
        be the same as the aggregate tax basis of the Subject Company 8.30%
        Preferred Stock surrendered in exchange therefor.
 
          In rendering such opinion, Parent's Counsel may require and rely upon
     representations and covenants contained in certificates of officers of
     Parent, Subject Company and others.
 
     7.3 Conditions to Obligations of Subject Company.  The obligation of
Subject Company to effect the Merger is also subject to the satisfaction or
waiver by Subject Company at or prior to the Effective Time of the following
conditions:
 
          (a) Representations and Warranties.  The representations and
     warranties of Parent set forth in this Agreement shall be true and correct
     in all respects as of the date of this Agreement and (except to the extent
     such representations and warranties speak as of an earlier date) as of the
     Closing Date as though made on and as of the Closing Date; provided,
     however, that for purposes of determining the satisfaction of this
     condition, no effect shall be given to any exception in such
     representations and warranties relating to materiality or a Material
     Adverse Effect, and provided, further, however, that, for purposes of this
     condition, such representations and warranties shall be deemed to be true
     and correct in all respects unless the failure or failures of such
     representations and warranties to be so true and correct, individually or
     in the aggregate, results or would reasonably be expected to result in a
     Material Adverse Effect on Parent and its Subsidiaries taken as a whole.
     Subject Company shall have received a certificate signed on behalf of
     Parent by the Chief Executive Officer and the Chief Financial Officer of
     Parent to the foregoing effect.
 
          (b) Performance of Obligations of Parent.  Parent shall have performed
     in all material respects all obligations required to be performed by it
     under this Agreement at or prior to the Closing Date, and Subject Company
     shall have received a certificate signed on behalf of Parent by the Chief
     Executive Officer and the Chief Financial Officer of Parent to such effect.
 
          (c) Parent Rights Agreement.  The rights issued pursuant to the Parent
     Rights Agreement shall not have become nonredeemable, exercisable,
     distributed or triggered pursuant to the terms of such agreement.
 
          (d) Federal Tax Opinion.  Subject Company shall have received an
     opinion of Skadden, Arps, Slate, Meagher & Flom LLP ("Subject Company's
     Counsel"), in form and substance reasonably satisfactory to Subject
     Company, dated as of the Effective Time, substantially to the effect that,
     on the basis of facts, representations and assumptions set forth in such
     opinion which are consistent with the state of facts existing at the
     Effective Time, the Merger will be treated as a reorganization within the
     meaning of Section 368(a) of the Code and that, accordingly, for federal
     income tax purposes:
 
             (1) No gain or loss will be recognized by the shareholders of
        Subject Company who exchange (i) all of their Subject Company Common
        Stock solely for Parent Common Stock pursuant to the Merger (except with
        respect to cash received in lieu of a fractional share interest in
        Parent Common Stock) and (ii) all of their Subject Company 8.30%
        Preferred Stock solely for Parent New Preferred Stock pursuant to the
        Merger; and
 
             (2) The aggregate tax basis of (i) the Parent Common Stock received
        by shareholders who exchange all of their Subject Company Common Stock
        solely for Parent Common Stock pursuant to the Merger will be the same
        as the aggregate tax basis of the Subject Company Common Stock
        surrendered in exchange therefor (reduced by any amount allocable to a
        fractional share interest for which cash is received) and (ii) the
        Parent New Preferred Stock received by shareholders who exchange all of
        their Subject Company 8.30% Preferred Stock solely for Parent New
        Preferred Stock pursuant to the Merger will be the same as the aggregate
        tax basis of the Subject Company 8.30% Preferred Stock surrendered in
        exchange therefor.
 

                                       29
<PAGE>
 
          In rendering such opinion, Subject Company's Counsel may require and
     rely upon representations and covenants contained in certificates of
     officers of Parent, Subject Company and others.
 
                                  ARTICLE VIII
 
                           TERMINATION AND AMENDMENT
 
     8.1 Termination.  This Agreement may be terminated at any time prior to the
Effective Time:
 
          (a) by mutual consent of Parent and Subject Company in a written
     instrument, if the Board of Directors of each so determines;
 
          (b) by either the Board of Directors of Parent or the Board of
     Directors of Subject Company if (i) any Governmental Entity which must
     grant a Requisite Regulatory Approval has denied approval of the Merger and
     such denial has become final and nonappealable or (ii) any Governmental
     Entity of competent jurisdiction shall have issued a final nonappealable
     order enjoining or otherwise prohibiting the consummation of the
     transactions contemplated by this Agreement;
 
          (c) by either the Board of Directors of Parent or the Board of
     Directors of Subject Company if the Merger shall not have been consummated
     on or before March 31, 1998, unless the failure of the Closing to occur by
     such date shall be due to the failure of the party seeking to terminate
     this Agreement to perform or observe the covenants and agreements of such
     party set forth herein;
 
          (d) by either the Board of Directors of Parent or the Board of
     Directors of Subject Company (provided that the terminating party is not
     then in material breach of any representation, warranty, covenant or other
     agreement contained herein) if the other party shall have breached (i) any
     of the covenants or agreements made by such other party herein or (ii) any
     of the representations or warranties made by such other party herein, and
     in either case, such breach (x) is not cured within thirty (30) days
     following written notice to the party committing such breach, or which
     breach, by its nature, cannot be cured prior to the Closing and (y) would
     entitle the non-breaching party not to consummate the transactions
     contemplated hereby under Article VII hereof;
 
          (e) by either the Board of Directors of Parent or the Board of
     Directors of Subject Company if any approval of the stockholders of Parent
     or the Subject Company contemplated by this Agreement shall not have been
     obtained by reason of the failure to obtain the required vote at a duly
     held meeting of stockholders or at any adjournment or postponement thereof;
 
          (f) by either the Board of Directors of Parent or the Board of
     Directors of Subject Company, if the Board of Directors of the other party
     shall have withdrawn, modified or changed in a manner adverse to the
     terminating party its approval or recommendation of this Agreement and the
     transactions contemplated hereby; and
 
          (g) by (i) the Board of Directors of Parent if a tender offer or
     exchange offer for 25% or more of the outstanding shares of Subject Company
     Common Stock is commenced (other than by Parent or a Parent Subsidiary),
     and the Board of Directors of the Subject Company recommends that the
     stockholders of Subject Company tender their shares in such tender or
     exchange offer or otherwise fails to recommend that such stockholders
     reject such tender offer or exchange offer within ten business days after
     the commencement thereof (which, in the case of an exchange offer, shall be
     the effective date of the registration statement relating to such exchange
     offer); or (ii) the Board of Directors of Subject Company if a tender offer
     or exchange offer for 25% or more of the outstanding shares of Parent
     Common Stock is commenced and the Board of Directors of Parent recommends
     that the stockholders of Parent tender their shares in such tender or
     exchange offer or otherwise fails to recommend that such stockholders
     reject such tender or exchange offer within ten business days after the
     commencement thereof (which, in the case of an exchange offer, shall be the
     effective date of the registration statement relating to such exchange
     offer).
 

                                       30
<PAGE>
 
     8.2 Effect of Termination.  (a) In the event of termination of this
Agreement by either Parent or Subject Company as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect, and none of Parent,
Subject Company, any of their respective Subsidiaries or any of the officers or
directors of any of them shall have any liability of any nature whatsoever
hereunder, or in connection with the transactions contemplated hereby, except
that (i) Sections 6.2(b), 8.2, and 9.3 shall survive any termination of this
Agreement and (ii) notwithstanding anything to the contrary contained in this
Agreement, neither Parent nor Subject Company shall be relieved or released from
any liabilities or damages arising out of its willful breach of any provision of
this Agreement.
 
     (b) If this Agreement is terminated (A) by Parent pursuant to Section
8.1(f) or (g)(i), (B) by Parent or Subject Company pursuant to Section 8.1(e)
because of a failure to obtain the required approval of the stockholders of
Subject Company after a Takeover Proposal for Subject Company shall have been
publicly disclosed, or any person shall have publicly disclosed an intention
(whether or not conditional) to make a Takeover Proposal (it being agreed and
understood that the proposal made with respect to Subject Company prior to the
date hereof by H.F. Ahmanson & Company ("Ahmanson"), if not unconditionally
withdrawn prior to the mailing of the Joint Proxy Statement to Subject Company's
stockholders, shall be deemed to be a Takeover Proposal within the meaning of
this clause), or (C) by Parent pursuant to Section 8.1(d) if the breach giving
rise to such termination was willful and, at or prior to such termination, a
Takeover Proposal shall have been made known to Subject Company or any of its
Subsidiaries or shall have been publicly disclosed to Subject Company's
stockholders, or any person shall have made known to Subject Company or any of
its Subsidiaries or otherwise publicly disclosed an intention (whether or not
conditional) to make a Takeover Proposal, and regardless of whether such
Takeover Proposal shall have been rejected by Subject Company or withdrawn prior
to the time of such termination, then in any such case Subject Company shall pay
to Parent a termination fee of $75 million and reimburse Parent for its
documented reasonable out-of-pocket expenses incurred by it in connection with
this Agreement and the transactions contemplated hereby (including fees and
expenses of legal, financial and accounting advisors), up to a maximum of $20
million in the aggregate (collectively, the "Initial Subject Company Termination
Fee"). In addition, if, within 18 months after any such termination described in
the preceding sentence that gave rise to an obligation to pay the Initial
Subject Company Termination Fee, Subject Company enters into a definitive
agreement with respect to or consummates a transaction contemplated in any
Takeover Proposal with any party, Subject Company shall pay to Parent an
additional termination fee equal to $100 million (the "Subsequent Subject
Company Termination Fee").
 
     (c) Any Initial Subject Company Termination Fee that becomes payable
pursuant to Section 8.1(b) shall be paid within one business day following the
termination of this Agreement or the receipt of a request from Parent for such
reimbursement, as the case may be. Any Subsequent Subject Company Termination
Fee that becomes payable pursuant to Section 8.1(b) shall be paid within one
business day following the earlier of the consummation of any such Takeover
Proposal or the execution and delivery by Subject Company of a definitive
agreement with respect to any such Takeover Proposal. Notwithstanding the
foregoing, in no event shall Subject Company be obligated to pay any such fees
to Parent if Parent was in material breach of its obligations under this
Agreement immediately prior to the termination thereof.
 
     (d) Subject Company and Parent agree that the agreements contained in
paragraph (b) above are an integral part of the transactions contemplated by
this Agreement, that without such agreements Parent would not have entered into
this Agreement, and that such amounts constitute liquidated damages and not a
penalty. If Subject Company fails to pay Parent the amounts due under paragraph
(b) within the time periods specified in paragraph (c), Subject Company shall
pay the costs and expenses (including legal fees and expenses) incurred by
Parent in connection with any action, including the filing of any lawsuit, taken
to collect payment of such amounts, together with interest on the amount of any
such unpaid amounts at the publicly announced prime rate of The Chase Manhattan
Bank from the date such amounts were required to be paid.
 
     (e) For purposes of Section 8.2(b)(C), the proposal made prior to the date
hereof by Ahmanson to enter into a business combination with Subject Company
shall not be deemed to constitute a Takeover Proposal that has been publicly
announced or otherwise made known to Subject Company; provided, however, that
any Takeover Proposal made by Ahmanson after the date hereof, or any amendment
or modification
 

                                       31
<PAGE>
 
made after the date hereof to the proposal made by Ahmanson prior to the date
hereof, shall constitute a Takeover Proposal for purposes of Section 8.2(b)(C).
 
     8.3 Amendment.  Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of Subject
Company and Parent; provided, however, that after any approval of the
transactions contemplated by this Agreement by Subject Company's stockholders,
there may not be, without further approval of such stockholders, any amendment
of this Agreement which reduces the amount or changes the form of the
consideration to be delivered to the Subject Company stockholders hereunder
other than as contemplated by this Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
 
     8.4 Extension; Waiver.  At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
 
                                   ARTICLE IX
 
                               GENERAL PROVISIONS
 
     9.1 Closing.  Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. on a date to
be specified by the parties, which shall be the first day which is (a) the tenth
business day of a month and (b) at least two business days after the
satisfaction or waiver (subject to applicable law) of the latest to occur of the
conditions set forth in Article VII hereof, other than conditions which by their
terms are to be satisfied at Closing, or such date or time as the parties may
mutually agree (the "Closing Date").
 
     9.2 Nonsurvival of Representations, Warranties and Agreements.  None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for those covenants and agreements contained herein and therein
which by their terms apply in whole or in part after the Effective Time.
 
     9.3 Expenses.  Except as provided in Section 8.2 hereof, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense, provided,
however, that (i) the costs and expenses of printing and mailing the Joint Proxy
Statement, and all filing and other fees paid to the SEC in connection with the
Merger, shall be borne equally by Parent and Subject Company and (ii)
notwithstanding anything to the contrary contained in this Agreement, neither
Parent nor Subject Company shall be relieved or released from any liabilities or
damages arising out of its willful breach of any provision of this Agreement.
 
     9.4 Notices.  All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return
 

                                       32
<PAGE>
 
receipt requested) or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
 
     (a) if to Parent, to:
 
     Washington Mutual, Inc.
     1201 Third Avenue
     Seattle, WA 98101
     Fax: (206) 554-2790
     Attn: Marc R. Kittner
         Senior Vice President and
         Corporate Counsel
 
     with a copy to:
 
     Foster Pepper & Shefelman
     1111 Third Avenue
     Suite 3400
     Seattle, WA 98101
     Attn: Fay L. Chapman, Esq.
 
     and
 
     Simpson Thacher & Bartlett
     425 Lexington Avenue
     New York, NY 10017
     Attn: Charles I. Cogut, Esq.
        Lee Meyerson, Esq.
 
     (b) if to Subject Company, to:
 
     Great Western Financial Corporation
     9200 Oakdale Avenue
     Chatsworth, California 91311
     Attn: John F. Maher, President and Chief
         Executive Officer
 
     and
 
     J. Lance Erickson, Esq.
     Executive Vice President and
      General Manager
 
     with a copy to:
 
     Skadden, Arps, Slate, Meagher & Flom LLP
     919 Third Avenue
     New York, New York 10022
     Fax: (212) 735-2000
     Attn: Peter Allan Atkins, Esq.
        Fred B. White, III, Esq.
 
     9.5 Interpretation.  When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". No provision of this Agreement shall be construed to require
Subject Company, Parent or any of
 

                                       33
<PAGE>
 
their respective Subsidiaries or affiliates to take any action which would
violate or conflict with any applicable law (whether statutory or common), rule
or regulation.
 
     9.6 Counterparts.  This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
 
     9.7 Entire Agreement.  This Agreement (together with the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement.
 
     9.8 Governing Law.  This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to any
applicable conflicts of law.
 
     9.9 Severability.  Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
 
     9.10 Publicity.  Parent and Subject Company shall consult with each other
before issuing any press release with respect to the Merger or this Agreement
and shall not issue any such press release or make any such public statement
without the prior consent of the other party, which shall not be unreasonably
withheld; provided, however, that a party may, without the prior consent of the
other party (but after prior consultation, to the extent practicable in the
circumstances) issue such press release or make such public statement as may
upon the advice of outside counsel be required by law or the rules and
regulations of the NYSE (in the case of Subject Company) or Nasdaq (in the case
of Parent). Without limiting the reach of the preceding sentence, Parent and
Subject Company shall cooperate to develop all public announcement materials and
(b) make appropriate management available at presentations related to the
transactions contemplated by this Agreement as reasonably requested by the other
party. In addition, Subject Company and its Subsidiaries shall (a) consult with
Parent regarding communications with customers, shareholders, prospective
investors and employees related to the transactions contemplated hereby, (b)
provide Parent with shareholder lists of Subject Company and (c) allow and
facilitate Parent contact with shareholders of Subject Company and other
prospective investors.
 
     9.11 Assignment; Third Party Beneficiaries.  Neither this Agreement nor any
of the rights, interests or obligations of any party hereunder shall be assigned
by any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and permitted assigns. Except as
otherwise specifically provided in Section 6.8 hereof, this Agreement (including
the documents and instruments referred to herein) is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
 

                                       34
<PAGE>
 
     IN WITNESS WHEREOF, Parent, Merger Sub and Subject Company have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
 
                                          WASHINGTON MUTUAL, INC.
 
                                          By:          /s/  CRAIG TALL
                                            ------------------------------------
                                            Name:  Craig Tall
                                            Title:  Executive Vice President
                                                   Corporate Development
 
                                          GREAT WESTERN FINANCIAL CORPORATION
 
                                          By:          /s/  JOHN MAHER
                                            ------------------------------------
                                            Name:  John Maher
                                            Title:  President and Chief
                                              Executive Officer
 
                                          NEW AMERICAN CAPITAL, INC.
 
                                          By:      /s/  KERRY K. KILLINGER
                                            ------------------------------------
                                            Name:  Kerry K. Killinger
                                            Title:  President and Chief
                                              Executive Officer
 

                                       35

<PAGE>
 
                                                                    Exhibit 11.1


                      GREAT WESTERN FINANCIAL CORPORATION

                  Computation of Net Income Per Common Share
                           Primary and Fully Diluted

<TABLE> 
<CAPTION> 
                                                                       Year Ended December 31             
                                                          ----------------------------------------------- 
(Dollars in thousands)                                       1996             1995             1994        
                                                             ----             ----             ----        
<S>                                                       <C>              <C>              <C>             
Net income                                                $    115,822     $    261,022     $    251,234       
Preferred stock dividends - convertible
 and nonconvertible                                            (20,295)         (25,015)         (25,015)
                                                          -------------    -------------    -------------
Net Income for computing earnings per
 Common share - primary                                         95,527          236,007          226,219
Preferred stock dividends - convertible                            -                -                -
                                                          -------------    -------------    -------------
Net income for computing earnings per
 Common share - fully diluted                             $     95,527     $    236,007     $    226,219
                                                          =============    =============    =============
</TABLE> 
                Computation of Average Number of Common Shares
                Outstanding on Primary and Fully Diluted Basis
                   (In thousands, except per share amounts)

<TABLE> 
<CAPTION> 
                                                                       Year Ended December 31
                                                          ------------------------------------------------
                                                             1996             1995             1994
                                                             ----             ----             ----
<S>                                                       <C>              <C>              <C> 
Average number of Common shares
 outstanding during each period -
 without dilution                                              136,568          135,735          133,307
Common share equivalents outstanding
 at the end of each period                                       1,937            1,376              463
                                                          -------------    -------------    -------------
Average number of Common shares and
 Common share equivalents outstanding
 during each period on a primary basis                         138,505          137,111          133,770
Common share equivalents outstanding
 the end of each period on a fully
 diluted basis                                                     745              840              -
Addition from assumed conversion as of the
 beginning of each period of the
 convertible preferred stock outstanding
 at the end of each period                                         -                -                - 
                                                          -------------    -------------    -------------
Average number of Common shares
 outstanding during each period
 on a fully diluted basis                                      139,250          137,951          133,770
                                                          =============    =============    =============

Net income per Common share
  Primary                                                 $       0.69     $       1.72     $       1.69
  Fully Diluted                                                   0.69             1.71             1.69
</TABLE> 
                                                                 
                                                          

<PAGE>
 
                                                                    Exhibit 12.1

                      GREAT WESTERN FINANCIAL CORPORATION
              COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES


<TABLE>
<CAPTION> 
                           Twelve Months Ended  Twelve Months Ended  Twelve Months Ended  Twelve Months Ended  Twelve Months Ended
(Dollars in thousands)      December 31, 1996    December 31, 1995    December 31, 1994    December 31, 1993    December 31, 1992
                            -----------------    -----------------    -----------------    -----------------    -----------------
<S>                          <C>                  <C>                  <C>                  <C>                  <C> 
Earnings
  Net earnings               $       115,822      $             -      $       251,234      $        62,047      $        85,006
   Accounting charges                      -                    -                    -                    -              (31,094)
  Taxes on income                     70,800                    0              155,300               30,000               41,600
                            -----------------    -----------------    -----------------    -----------------    -----------------
   Earnings before taxes     $       186,622      $             -      $       406,534      $        92,047      $        95,512
                            =================    =================    =================    =================    =================


Interest Expense
  Deposits                   $     1,179,479      $     1,217,085      $       950,299      $       939,081      $     1,333,473
  Borrowings                         688,134              734,670              370,004              370,761              344,823
                            -----------------    -----------------    -----------------    -----------------    -----------------
   Total                     $     1,867,613      $     1,951,755      $     1,320,303      $     1,309,842      $     1,678,296
                            =================    =================    =================    =================    =================

Rent expenses                
  Total                      $        63,975      $        61,180      $        55,011      $        53,638      $        57,823
  1/3 thereof                         21,325               20,393               18,337               17,879               19,274

Capitalized interest         $             3      $             -      $           196      $           777      $         2,071
Preferred stock dividends    $        20,295      $        25,015      $        25,015      $        25,015      $        15,543

Ratio of earnings to fixed 
  charges and preferred 
  stock dividends

  Excluding deposits         
    Earnings before fixed
      charges                $       896,081      $     1,177,185      $       794,875      $       480,687      $       459,609
    Fixed charges                    742,163              795,517              429,015              426,526              393,704

    Ratio                               1.21                 1.48                 1.85                 1.13                 1.17

  Including deposits         
    Earnings before fixed
      charges                $     2,075,560      $     2,394,270      $     1,745,174      $     1,419,768      $     1,793,082
    Fixed charges                  1,921,642            2,012,602            1,379,314            1,365,607            1,727,177

    Ratio                               1.08                 1.19                 1.27                 1.04                 1.04

Ratio of earnings to fixed
  charges

  Excluding deposits         
    Earnings before fixed
      charges                $       896,081      $     1,177,185      $       794,875      $       480,687      $       459,609
    Fixed charges                    709,462              755,063              388,537              389,417              366,168

    Ratio                               1.26                 1.56                 2.05                 1.23                 1.26

  Including deposits         
    Earnings before fixed
      charges                $     2,075,560      $     2,394,270      $     1,745,174      $     1,419,768      $     1,793,082
    Fixed charges                  1,888,941            1,972,148            1,338,836            1,328,498            1,699,641

    Ratio                               1.10                 1.21                 1.30                 1.07                 1.05

</TABLE> 


<PAGE>
 
                                                                    EXHIBIT 21.1




                      GREAT WESTERN FINANCIAL CORPORATION

                            PARENT AND SUBSIDIARIES



       Great Western Financial Corporation is incorporated in the State of 
Delaware.

       Listed below are the significant subsidiaries of GWFC, which are 
included in the Consolidated Financial Statements.


                           Percentage
                           of Voting
                           Securities                  State of 
                              Owned                 Incorporation
                           ----------               -------------

Subsidiaries
- ------------

Great Western Bank,
  A Federal Savings Bank       100%                  Federal Charter

Aristar, Inc.                  100%                  Delaware

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED STATEMENT OF CONDITION AND THE CONSOLIDATED CONDENSED
STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY THE REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-START>                             JAN-01-1996
<PERIOD-END>                               DEC-31-1996
<CASH>                                         534,192
<INT-BEARING-DEPOSITS>                             100
<FED-FUNDS-SOLD>                               300,000
<TRADING-ASSETS>                                     0
<INVESTMENTS-HELD-FOR-SALE>                  7,449,125
<INVESTMENTS-CARRYING>                       1,618,709
<INVESTMENTS-MARKET>                         1,622,573
<LOANS>                                     31,136,891
<ALLOWANCE>                                    313,699
<TOTAL-ASSETS>                              42,874,572
<DEPOSITS>                                  28,586,773
<SHORT-TERM>                                 7,310,905
<LIABILITIES-OTHER>                          1,090,786
<LONG-TERM>                                  3,290,908
                                0
                                    165,000
<COMMON>                                       137,876
<OTHER-SE>                                   2,292,324
<TOTAL-LIABILITIES-AND-EQUITY>              42,874,572
<INTEREST-LOAN>                              2,510,745
<INTEREST-INVEST>                              704,784
<INTEREST-OTHER>                                47,507
<INTEREST-TOTAL>                             3,263,036
<INTEREST-DEPOSIT>                           1,179,479
<INTEREST-EXPENSE>                           1,855,914
<INTEREST-INCOME-NET>                        1,407,122
<LOAN-LOSSES>                                  208,971
<SECURITIES-GAINS>                              28,937
<EXPENSE-OTHER>                              1,314,249
<INCOME-PRETAX>                                186,622
<INCOME-PRE-EXTRAORDINARY>                     115,822
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   115,822
<EPS-PRIMARY>                                     0.69
<EPS-DILUTED>                                     0.69
<YIELD-ACTUAL>                                    3.25
<LOANS-NON>                                    352,002
<LOANS-PAST>                                         0
<LOANS-TROUBLED>                                74,196
<LOANS-PROBLEM>                                      0
<ALLOWANCE-OPEN>                               362,849
<CHARGE-OFFS>                                  276,318
<RECOVERIES>                                    18,197
<ALLOWANCE-CLOSE>                              313,699
<ALLOWANCE-DOMESTIC>                           313,699
<ALLOWANCE-FOREIGN>                                  0
<ALLOWANCE-UNALLOCATED>                              0
        

</TABLE>


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