<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended June 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
------------ ------------
Commission File Number 1-8930
------------------
H.F. AHMANSON & COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-0479700
------------------------------ ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4900 Rivergrade Road, Irwindale, California 91706
------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code. (818) 960-6311
-------------
Exhibit Index appears on page: 28
Total number of sequentially numbered pages: 44
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of June 30, 1994: $.01 par value - 116,945,815 shares.
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
The financial statements included herein have been prepared by the
Registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of the Registrant, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the results of operations for the periods covered have been
made. Certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations, although the Registrant believes that the disclosures are
adequate to make the information presented not misleading.
It is suggested that these condensed financial statements be read
in conjunction with the financial statements and the notes thereto included
in the Registrant's latest annual report on Form 10-K. The results for the
periods covered hereby are not necessarily indicative of the operating
results for a full year.
2
<PAGE>
H.F. AHMANSON & COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
ASSETS June 30, 1994 December 31, 1993
- - ------ ------------- -----------------
<S> <C> <C>
Cash and amounts due from banks $ 775,490 $ 843,944
Securities purchased under
agreements to resell 1,615,896 2,637,677
Other short-term investments 60,703 48,507
----------- -----------
Total cash and cash equivalents 2,452,089 3,530,128
Other investment securities 343,596 11,524
Investment in stock of Federal Home
Loan Bank (FHLB) 423,185 364,392
Mortgage-backed securities (MBS)
held to maturity [market value
$7,521,508 (June 30, 1994) and
$4,148,131 (December 31, 1993)] 7,721,152 4,064,128
MBS available for sale [amortized cost
$2,752,046 (June 30, 1994) and
$2,818,401 (December 31, 1993)] 2,723,730 2,855,869
Loans receivable less allowance for
possible losses of
$447,098 (June 30, 1994) and
$438,786 (December 31, 1993) 35,742,447 37,529,079
Loans held for sale [market value
$6,566 (June 30, 1994) and
$175,378 (December 31, 1993)] 6,490 175,289
Accrued interest receivable 195,119 166,848
Real estate held for development and
investment (REI) less allowance for
possible losses of
$285,404 (June 30, 1994) and
$341,705 (December 31, 1993) 411,906 443,657
Real estate owned held for sale (REO) less
allowance for possible losses of
$58,297 (June 30, 1994) and
$66,453 (December 31, 1993) 189,169 179,862
Premises and equipment 664,768 673,879
Goodwill 399,870 428,444
Other assets 296,672 399,403
Income taxes 23,188 48,743
----------- -----------
$51,593,381 $50,871,245
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Deposits $37,631,543 $38,018,653
Short-term borrowings under agreements
to repurchase securities sold 5,311,468 4,807,767
Other short-term borrowings 120,000 169,854
FHLB and other borrowings 4,466,265 3,901,724
Other liabilities 1,098,387 1,024,216
----------- -----------
Total liabilities 48,627,663 47,922,214
Stockholders' equity 2,965,718 2,949,031
----------- -----------
$51,593,381 $50,871,245
=========== ===========
</TABLE>
3
<PAGE>
H.F. AHMANSON & COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income:
Interest on real estate loans $ 548,572 $ 681,295 $ 1,135,715 $ 1,357,310
Interest on MBS 160,406 63,981 284,572 130,403
Interest and dividends on investments 33,722 21,811 61,165 45,558
------------ ------------ ------------ ------------
Total interest income 742,700 767,087 1,481,452 1,533,271
------------ ------------ ------------ ------------
Interest expense:
Deposits 287,315 329,920 578,362 669,332
Short-term borrowings 52,441 26,871 95,776 53,642
FHLB and other borrowings 66,063 65,081 119,828 125,304
------------ ------------ ------------ ------------
Total interest expense 405,819 421,872 793,966 848,278
------------ ------------ ------------ ------------
Net interest income 336,881 345,215 687,486 684,993
Provision for loan losses 33,069 437,854 108,581 504,834
------------ ------------ ------------ ------------
Net interest income (loss) after
provision for loan losses 303,812 (92,639) 578,905 180,159
------------ ------------ ------------ ------------
Other income:
Gain on sales of MBS - 3,289 4,868 3,289
Gain (loss) on sales of loans (6,254) 16,957 (10,035) 31,462
Loan servicing income 14,994 14,767 31,018 30,521
Other fee income 27,414 29,620 54,299 58,925
Operations of REI (4,775) (170,597) (10,292) (187,378)
Other operating income 725 2,219 2,150 3,774
------------ ------------ ------------ ------------
32,104 (103,745) 72,008 (59,407)
------------ ------------ ------------ ------------
Other expenses:
General and administrative expenses (G&A) 185,913 200,979 377,682 398,315
Operations of REO 21,857 80,059 48,935 132,312
Amortization of goodwill 5,750 6,761 11,981 13,463
------------ ------------ ------------ ------------
213,520 287,799 438,598 544,090
------------ ------------ ------------ ------------
Earnings (loss) before provision for
income taxes (benefit) 122,396 (484,183) 212,315 (423,338)
Provision for income taxes (benefit) 48,855 (193,201) 83,419 (165,212)
------------ ------------ ------------ ------------
Net earnings (loss) $ 73,541 $ (290,982) $ 128,896 $ (258,126)
============ ============ ============ ============
Earnings (loss) per common share:
Primary $ 0.52 $ (2.55) $ 0.88 $ (2.33)
Fully diluted 0.51 (2.55) 0.87 (2.33)
Common shares outstanding, weighted average:
Primary 117,198,628 117,161,634 117,205,981 117,215,675
Fully diluted 129,071,985 117,161,634 129,102,867 117,215,675
Return on average assets 0.58% (2.33)% 0.51% (1.04)%
Return on average equity 9.97 (40.71) 8.72 (18.19)
Return on average tangible equity* 12.51 (47.48) 11.12 (20.65)
Ratio of G&A expenses to average assets 1.46 1.61 1.49 1.60
<FN>
*Net earnings excluding amortization of goodwill as a percentage of average equity excluding goodwill.
</TABLE>
4
<PAGE>
H.F. AHMANSON & COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
For The Six
Months Ended June 30,
------------------------
1994 1993
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 128,896 $ (258,126)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Provision for losses on loans and real estate 136,495 754,499
Proceeds from sales of loans originated for sale 472,155 1,171,063
Loans originated for sale (329,411) (974,129)
Loans repurchased from investors (39,375) (175,099)
Other, net 266,479 (51,817)
----------- -----------
Net cash provided by operating activities 635,239 466,391
----------- -----------
Cash flows from investing activities:
Proceeds from sales of MBS available for sale 405,069 83,194
Proceeds from sales of nonaccrual loans 57,700 63,004
Principal payments on loans 1,741,861 2,073,663
Principal payments on MBS 574,186 430,408
Loans originated for investment (net of refinances) (4,413,198) (3,617,518)
MBS purchased (518,810) (119,907)
Loans purchased (1,898) (1,060,652)
Other investment securities purchased (332,630) (623)
Proceeds from sales of REO 150,895 270,967
Other, net 75,829 17,302
----------- -----------
Net cash used in investing activities (2,260,996) (1,860,162)
----------- -----------
Cash flows from financing activities:
Net decrease in deposits (387,110) (794,754)
Net deposits purchased - 100,546
Net increase in borrowings maturing in 90 days or less 450,884 982,897
Proceeds from other borrowings 2,110,162 8,200,003
Repayment of other borrowings (1,549,564) (6,613,788)
Net proceeds from issuance of Preferred Stock - 188,403
Dividends to stockholders (76,654) (64,515)
----------- -----------
Net cash provided by financing activities 547,718 1,998,792
----------- -----------
Net increase (decrease) in cash and cash equivalents (1,078,039) 605,021
Cash and cash equivalents at beginning of period 3,530,128 1,955,590
----------- -----------
Cash and cash equivalents at end of period $ 2,452,089 $ 2,560,611
=========== ===========
</TABLE>
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BASIS OF PRESENTATION
The preceding Condensed Consolidated Financial Statements present
financial data of H.F. Ahmanson & Company and Subsidiaries. As used herein
"Ahmanson" means H.F. Ahmanson & Company, a Delaware corporation, and the
"Company" means Ahmanson and its subsidiaries. The Company is one of the
largest residential real estate-oriented financial services companies in the
United States, and is principally engaged in the savings bank business and
related financial service activities. Home Savings of America, FSB ("Home
Savings"), a wholly owned subsidiary of Ahmanson, is currently the largest
savings institution in the United States. Certain amounts in prior periods'
financial statements have been reclassified to conform to the current
presentation.
OVERVIEW
During the second quarter of 1994 the Company recorded improved earnings
due to improving asset quality, reduced general and administrative expenses,
and asset growth.
The 1994 second quarter earnings were $73.5 million, or $0.51 per fully
diluted common share, an improvement of 33% over the 1994 first quarter. In
the 1994 first quarter, the Company earned $55.4 million, or $0.36 per fully
diluted common share, after setting aside $30 million, or $0.14 per fully
diluted common share on a net after tax basis, as a special addition to the
allowance for loan losses related to an estimate of real property losses
sustained by its borrowers due to the Northridge earthquate in January. The
loss of $291.0 million, or $2.55 per fully diluted common share, in the second
quarter of 1993 reflected the decision to sell $1.2 billion of nonaccrual
loans and other steps taken by the Company during that period to position
itself for future opportunities. In the first six months of 1994, the Company
earned $128.9 million, or $0.87 per fully diluted common share, compared to a
loss of $258.1 million, or $2.33 per fully diluted common share, in the first
six months of 1993.
Net interest income totaled $336.9 million for the second quarter of 1994
compared to $350.6 million in the first quarter of 1994 and $345.2 million in
the second quarter of 1993. The declines in net interest income are primarily
due to the reduction in the net interest margin from 3.00% in the second
quarter of 1993 and 2.96% in the first quarter of 1994 to 2.81% in the second
quarter of 1994. This margin compression principally reflects the timing
difference between the repricing of the lagging 11th District Cost of Funds
Index, to which the bulk of the Company's assets are tied, and the repricing
of the Company's deposits and borrowings in the increasing interest rate
environment during the quarter. This margin compression may continue,
especially if interest rates continue to rise.
The Company continues to reduce nonperforming assets, which fell by $14.4
million in the second quarter to $943.2 million, or 1.83% of total assets at
June 30, 1994. This is the lowest level of nonperforming assets since
December 1990. In addition, the level of delinquent loans, those 30-59 and
60-89 days past due, continues to decline and loans in those categories
reached their lowest levels since 1990.
6
<PAGE>
As the loan portfolio improves, credit costs decline. Total credit costs
in the second quarter of 1994 were $54.9 million (loss provisions and REO
expense) compared to $102.6 million in the first quarter of 1994, which
included the $30 million special provision for earthquake-related losses, and
$517.9 million in the second quarter of 1993, which reflected the decision to
sell $1.2 billion of nonaccrual loans.
During the second quarter of 1994, the Company sold, through a
competitive sealed bid process, 479 single family nonaccrual loans with a loan
balance of $44.6 million. Existing loss allowances were adequate to absorb
the losses associated with the sale. The Company may, from time to time,
offer additional packages of nonaccrual loans for competitive bid.
The Company's primary loan product, the Adjustable Rate Mortgage ("ARM"),
is very attractive to home purchasers in the present interest rate environment
and gives the Company a competitive marketing advantage. As a result, the
Company funded $5.2 billion of residential mortgages in the first half of
1994, of which 92% were ARMs. This ratio has increased dramatically from 77%
for the year 1993 and as the current year progressed from 84% in January to
99% in June.
The Company has initiated programs directed toward the first-time home
buyer which involve higher loan-to-value ("LTV") ratios. Higher LTV loans
(those involving downpayments of 10% or less) accounted for 16% of new
mortgage business in the first half of 1994. The Company does not require
private mortgage insurance on these loans and, to recognize the additional
risks associated with higher LTV loans, these loans have higher contractual
spreads and higher initial interest rates than loans with larger downpayments.
The Company adheres to strict underwriting standards for these higher LTV
loans.
In addition, as rates have moved higher throughout the first half of
1994, amortization and prepayments on loans and mortgage-backed securities
have slowed, thus contributing to growth in the portfolio on an annualized
basis of 7% from year-end 1993.
General and administrative expenses both in absolute dollars and as a
percentage of average assets fell in the latest quarter when compared to the
first quarter of 1994 and the second quarter a year ago, as the Company
continues to exercise strict control of its operating expenses. The Company's
stated goal was to achieve a ratio of G&A to average assets of 1.50% for
1994. The actual ratio of G&A to average assets for the first six months of
1994 was 1.49%. The Company continues to concentrate its efforts on future
technology-generated savings in the manner in which it originates and
services loans.
During July 1994, Home Savings announced that it was purchasing $1.2
billion of deposits in the 30 branches of five Southern California thrifts at
an average premium of approximately 2%. A total of 21 of these branches will
be consolidated into nearby Home Savings branches, increasing the average size
and efficiency of those branches. In addition, on July 25, 1994, Home
Savings announced that it had signed an agreement to sell approximately $1.5
billion of deposits in its 26 Savings of America branches in Illinois for a
deposit premium of approximately 8.5%. The Company intends to continue and
expand its mortgage lending business in the Chicago market.
7
<PAGE>
RESULTS OF OPERATIONS
Net Interest Income
- - -------------------
Net interest income was $336.9 million in the second quarter of 1994, a
decrease of $8.3 million or 2%, and was $687.5 million in the first six months
of 1994, an increase of $2.5 million or less than 1%, compared to the same
periods of 1993. The following tables present the Company's Consolidated
Summary of Average Financial Condition and net interest income for the periods
indicated. Average balances on interest-earning assets and interest-bearing
liabilities are computed on a daily basis and other average balances are
computed on a monthly basis. Interest income and expense and the related
average balances include the effect of discounts or premiums. Nonaccrual
loans are included in the average balances, however, delinquent interest on
such loans has been excluded from interest income.
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------------------------------------------
1994 1993
------------------------------- -------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
----------- ---------- ------ ----------- ---------- ------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $34,881,306 $ 548,572 6.29% $40,187,783 $ 681,295 6.78%
MBS 10,223,672 160,406 6.28 3,762,843 63,981 6.80
----------- --------- ----------- ---------
Total loans and MBS 45,104,978 708,978 6.29 43,950,626 745,276 6.78
Investment securities 2,875,652 33,722 4.69 2,110,216 21,811 4.13
----------- --------- ----------- ---------
Interest-earning assets 47,980,630 742,700 6.19 46,060,842 767,087 6.66
--------- ---------
Other assets 2,921,484 3,962,924
----------- -----------
Total assets $50,902,114 $50,023,766
=========== ===========
Interest-bearing liabilities:
Deposits $37,443,943 287,315 3.07 $38,707,807 329,920 3.41
----------- --------- ----------- ---------
Borrowings:
Short-term 5,156,044 52,441 4.07 3,379,073 26,871 3.18
FHLB and other 4,250,717 66,063 6.22 3,839,860 65,081 6.78
----------- --------- ----------- ---------
Total borrowings 9,406,761 118,504 5.04 7,218,933 91,952 5.10
----------- --------- ----------- ---------
Interest-bearing liabilities 46,850,704 405,819 3.46 45,926,740 421,872 3.67
--------- ---------
Other liabilities 1,101,692 1,238,176
Stockholders' equity 2,949,718 2,858,850
----------- -----------
Total liabilities and
stockholders' equity $50,902,114 $50,023,766
=========== ===========
Excess interest-earning assets/
Interest rate spread $ 1,129,926 2.73 $ 134,102 2.99
=========== ===========
Net interest income/
Net interest margin $ 336,881 2.81 $ 345,215 3.00
========= =========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------------------------------------------
1994 1993
------------------------------- -------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
----------- ----------- ------ ----------- ----------- ------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $36,007,754 $1,135,715 6.31% $39,682,535 $1,357,310 6.84%
MBS 8,784,467 284,572 6.48 3,838,374 130,403 6.79
----------- ---------- ----------- ----------
Total loans and MBS 44,792,221 1,420,287 6.34 43,520,909 1,487,713 6.84
Investment securities 2,889,313 61,165 4.23 2,244,369 45,558 4.06
----------- ---------- ----------- ----------
Interest-earning assets 47,681,534 1,481,452 6.21 45,765,278 1,533,271 6.70
---------- ----------
Other assets 2,960,618 3,901,008
----------- -----------
Total assets $50,642,152 $49,666,286
=========== ===========
Interest-bearing liabilities:
Deposits $37,614,200 578,362 3.08 $38,813,324 669,332 3.45
----------- ---------- ----------- ----------
Borrowings:
Short-term 5,187,306 95,776 3.69 3,324,877 53,642 3.23
FHLB and other 3,806,168 119,828 6.30 3,561,832 125,304 7.04
----------- ---------- ----------- ----------
Total borrowings 8,993,474 215,604 4.79 6,886,709 178,946 5.20
----------- ---------- ----------- ----------
Interest-bearing liabilities 46,607,674 793,966 3.41 45,700,033 848,278 3.71
---------- ----------
Other liabilities 1,079,717 1,127,693
Stockholders' equity 2,954,761 2,838,560
----------- -----------
Total liabilities and
stockholders' equity $50,642,152 $49,666,286
=========== ===========
Excess interest-earning assets/
Interest rate spread $ 1,073,860 2.80 $ 65,245 2.99
=========== ===========
Net interest income/
Net interest margin $ 687,486 2.88 $ 684,993 2.99
========= =========
</TABLE>
9
<PAGE>
The following table presents the changes for the second quarter and first
six months of 1994 from the respective periods of 1993 in the interest income
and expense attributable to various categories of assets and liabilities for
the Company as allocated to changes in average balances and changes in average
rates. Because of numerous and simultaneous changes in both balances and
rates, it is not possible to allocate precisely the effects thereof. For
purposes of this table, the change due to volume is initially calculated as
the change in average balance multiplied by the average rate during the
current period and the change due to rate is calculated as the change in
average rate multiplied by the average balance during the preceding year's
period. Any change that remains unallocated after such calculations is
allocated proportionately to changes in volume and changes in rates.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------- ----------------------------------
1994 Versus 1993 - 1994 Versus 1993 -
Increase (Decrease) Due to Increase (Decrease) Due to
--------------------------------- ----------------------------------
Volume Rate Total Volume Rate Total
--------- --------- --------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income on:
Loans $(83,475) $(49,248) $(132,723) $(116,200) $(105,395) $(221,595)
MBS 101,311 (4,886) 96,425 160,113 (5,944) 154,169
Investments 8,961 2,950 11,911 13,692 1,915 15,607
-------- -------- --------- --------- --------- ---------
Total interest income 26,797 (51,184) (24,387) 57,605 (109,424) (51,819)
-------- -------- --------- --------- --------- ---------
Interest expense on:
Deposits (9,701) (32,904) (42,605) (18,610) (72,360) (90,970)
Short-term borrowings 18,061 7,509 25,570 34,464 7,670 42,134
FHLB and other borrowings 6,193 (5,211) 982 7,689 (13,165) (5,476)
-------- -------- --------- --------- --------- ---------
Total interest expense 14,553 (30,606) (16,053) 23,543 (77,855) (54,312)
-------- -------- --------- --------- --------- ---------
Net interest income $ 12,244 $(20,578) $ (8,334) $ 34,062 $ (31,569) $ 2,493
======== ======== ========= ========= ========= =========
</TABLE>
The decrease of $8.3 million or 2% in net interest income in the second
quarter of 1994 resulted from a decrease of 19 basis points in the net
interest margin to 2.81% for the second quarter of 1994 from 3.00% for the
second quarter of 1993, partially offset by an increase of $1.9 billion in
average interest-earning assets. The increase of $2.5 million, or less than
1%, in net interest income for the first six months of 1994 as compared to the
same period of 1993 relects an increase of $1.9 billion in average interest-
earning assets, substantially offset by a decline of 11 basis points in the
net interest margin to 2.88% for the 1994 period from 2.99% for the 1993
period. The increases in average interest-earning assets were funded with
interest-bearing liabilities, sales of REO and issuances of the Company's
Preferred Stock.
Net interest income and the net interest margin benefited from
improvements in the credit quality of the Company's mortgage portfolio.
Provisions for losses of delinquent interest related to nonaccrual loans of
$10.1 million and $17.9 million in the second quarter of 1994 and 1993,
respectively, had the effect of reducing the net interest margin by eight
basis points and 15 basis points in the respective periods. Such provisions
came to $21.4 million in the first six months of 1994 and $41.9 million in the
first six months of 1993, reducing the net interest margin by nine basis
points and 19 basis points, respectively.
10
<PAGE>
The Company has a continuing goal of maintaining its cost of funds below
the monthly weighted average cost of funds for Federal Home Loan Bank ("FHLB")
Eleventh District savings institutions as computed by the FHLB of San
Francisco ("COFI"). The Company's cost of funds was 27 basis points and 44
basis points below the average of COFI of 3.73% and 4.11% during the second
quarters of 1994 and 1993, respectively. During the first six months of 1994
and 1993, the Company's cost of funds was 30 basis points and 50 basis points
below the average of COFI of 3.71% and 4.21% for the respective 1994 and 1993
periods.
The compression in the net interest margin for the 1994 second quarter
and six month periods partially reflects the lag between changes in COFI to
which a majority of the Company's interest-earning assets are tied and changes
in the repricing of the Company's interest-bearing liabilities. The
compression was diminished by actions taken in the last half of 1993 and the
first six months of 1994 to reduce the Company's sensitivity to upward rate
movement, including extending maturities and lengthening interest rate
repricing terms on borrowings, and strategic rate changes on certain deposits.
The Company believes that its net interest income is somewhat insulated
from interest rate fluctuations within a fairly wide range primarily due to
the adjustable rate nature of its loan and MBS portfolio. However, additional
increases in rates could contribute to further compression of the net interest
margin. In addition, substantially all ARMs originated since 1981 have
maximum and minimum interest rates and all ARMs originated after 1987 have a
maximum interest rate. Such maximum interest rates could also contribute to
compression of the net interest margin. For information regarding the
Company's strategies related to changes in interest rates, see "Financial
Condition - Asset/Liability Management."
Provision for Loan Losses
- - -------------------------
For the second quarters of 1994 and 1993, the provision for loan losses
was $33.1 million and $437.9 million, respectively, a decrease of $404.8
million or 92%. The provision for loan losses was $108.6 million in the first
six months of 1994 compared to $504.8 million in the first six months of 1993,
a decrease of $396.2 million or 78%. The provision for the first six months
of 1994 includes $30 million representing the Company's estimated losses from
real property damage sustained by its borrowers in the Northridge, California
earthquake in January 1994. The decreases in the provisions from the 1993
periods reflect, among other things, provisions for losses related to the
second quarter 1993 decision to sell $1.2 billion of delinquent, nonaccruing
single family loans. For additional information regarding the allowance for
possible loan losses, see "Financial Condition - Asset Quality - Allowance for
Loan Losses."
Other Income
- - ------------
Gain on Sales of MBS. There were no MBS sold during the second quarter
of 1994, compared to MBS totaling $79.9 million sold in the second quarter of
1993 for a pre-tax gain of $3.3 million. During the first six months of 1994,
MBS totaling $400.2 million were sold for a pre-tax gain of $4.9 million,
compared to a pre-tax gain of $3.3 million on sales of MBS totaling $79.9
million in the first six months of 1993.
11
<PAGE>
Gain (Loss) on Sales of Loans. During the second quarter of 1994, loans
originated for sale totaling $113.1 million were sold for a pre-tax loss of
$6.3 million as compared to such loans totaling $659.7 million sold for a pre-
tax gain of $17.0 million in the second quarter of 1993. In the first six
months of 1994, loans originated for sale totaling $480.6 million were sold
for a pre-tax loss of $10.0 million compared to such loans totaling $1.1
billion sold for a pre-tax gain of $31.5 million in the first six months of
1993. The losses in the current year periods reflect the reduced demand in
the secondary market for fixed rate loans, most of which the Company
originates for sale, and adjustments to the gains on loans previously sold
with recourse.
Other Fee Income. Other fee income decreased $2.2 million or 7% to $27.4
million in the second quarter of 1994 and decreased $4.6 million or 8% to
$54.3 million in the first six months of 1994 as compared to the same periods
of 1993. The decreases were primarily due to reductions in credit card fees,
resulting from the sale of the credit card portfolio in the fourth quarter of
1993, commission income from investment and insurance services and late
charges reflecting decreases in loan delinquencies.
Operations of REI. Losses from operations of REI decreased $165.8
million or 97% to $4.8 million in the second quarter of 1994 compared to the
second quarter of 1993 primarily due to a decrease of $158.8 million in the
provision for losses. Losses from operations of REI decreased $177.1 million
or 95% to $10.3 million for the first six months of 1994 as compared to the
same period of 1993 primarily due to a decrease of $169.1 million in provision
for losses. The Company's net book value of REI decreased $31.8 million or 7%
to $411.9 million at June 30, 1994 from $443.7 million at December 31, 1993.
The allowance for possible losses on REI was $285.4 million, or 40.9% of gross
book value of REI at June 30, 1994 compared to $341.7 million, or 43.5% of
gross book value of REI at December 31, 1993.
The Company intends to continue its withdrawal from real estate
development activities. Although the Company does not intend to acquire new
properties, it intends to develop, hold and/or sell its current properties
depending on economic conditions. Although management believes the net
realizable value of REI and the related allowance for possible losses are
fairly stated, declines in net realizable value and additions to the allowance
for possible losses could result from continued weakness in specific project
markets, changes in economic conditions and revisions to project business
plans, which may reflect decisions by the Company to accelerate the
disposition of the properties.
Other Expenses
- - --------------
G&A Expenses. G&A expenses decreased $15.1 million or 7% to $185.9
million in the second quarter of 1994 and $20.6 million or 5% to $377.7
million in the first six months of 1994 as compared to the same periods of
1993, reflecting the continued strict control of operating expenses and
reductions in personnel costs related to lower levels of nonperforming assets.
The ratio of G&A expenses to average assets (the "G&A ratio") decreased to
1.46% in the second quarter of 1994 compared to 1.61% in the second quarter of
1993, reflecting the 7% decrease in G&A expenses and a 2% increase in average
assets. The G&A ratios for the first six months of 1994 and 1993 were 1.49%
and 1.60%, respectively, which reflects the 5% decrease in G&A expenses and a
2% increase in average assets.
12
<PAGE>
Operations of REO. Losses from operations of REO decreased $58.2 million
or 73% to $21.9 million in the second quarter of 1994 compared to the same
period of 1993 due to decreases in the provision for losses of $38.4 million,
net losses on sales of $16.1 million and net operating expenses of $3.7
million. For the comparable six month periods, the decrease of $83.4 million
or 63% to $48.9 million in the operations of REO reflects decreases in the
provision for losses of $52.6 million, net losses on sales of $25.2 million
and operating expenses of $5.6 million.
The lower losses in the 1994 periods reflect a reduction in foreclosures
as a result of the sales of nonaccrual loans in 1993 and the first six months
of 1994 and improving credit quality. For additional information regarding
REO, see "Financial Condition - Asset Quality - Nonperforming Assets and
Potential Problem Loans."
Provision for Income Taxes (Benefit). The changes in the provision for
income taxes (benefit) primarily reflect the changes in pre-tax earnings
(loss) between the comparable periods. The effective tax (benefit) rates for
the second quarters of 1994 and 1993 were 39.9% and (39.9)%, respectively.
For the comparable six month periods, the effective tax (benefit) rates were
39.3% in 1994 and (39.0)% in 1993, reflecting management's estimate of the
Company's full year tax provision (benefit).
FINANCIAL CONDITION
During the first six months of 1994 the Company's consolidated assets
increased $722.1 million or 1% to $51.6 billion from $50.9 billion at
December 31, 1993. The Company's primary asset generation business
continues to be the origination of loans on residential real estate
properties. The Company originated $5.2 billion in loans in the first six
months of 1994 compared to $5.1 billion in the first six months of 1993.
Loans on single family homes (one-to-four units) accounted for 80% of the
total loan origination volume in the first six months of 1994, with the
balance on multi-family residential properties, and 92% were ARMs. Mortgage
refinances accounted for 41.5% of the Company's originations in the first
six months of 1994.
In the first six months of 1994, 72% of loan originations were on
properties located in California. At June 30, 1994, approximately 96% of
the loan and MBS portfolio was secured by residential properties, including
79% secured by single family properties.
The following table summarizes the Company's gross mortgage portfolio
by state and property type at June 30, 1994:
<TABLE>
<CAPTION>
Single Family Multi-Family Commercial and
Properties Properties Industrial Properties Total
---------------------- ---------------------- ----------------------- -----------------------
Gross Gross Gross Gross
Mortgage % of Mortgage % of Mortgage % of Mortgage % of
State Loans Portfolio Loans Portfolio Loans Portfolio Loans Portfolio
- - ----- ----------- ---------- ----------- ---------- ------------ ---------- ----------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California $26,646,789 72.28% $7,100,202 89.57% $1,302,580 70.69% $35,049,571 75.15%
Florida 2,586,806 7.02 23,168 0.29 6,980 0.38 2,616,954 5.61
New York 1,954,996 5.30 300,953 3.80 246,981 13.40 2,502,930 5.37
Illinois 1,638,222 4.44 149,568 1.89 18,436 1.00 1,806,226 3.87
Texas 838,319 2.27 81,990 1.03 42,282 2.29 962,591 2.06
Other 3,203,999 8.69 271,488 3.42 225,428 12.24 3,700,915 7.94
----------- ---------- ---------- -----------
$36,869,131 79.05% $7,927,369 17.00% $1,842,687 3.95% $46,639,187 100.00%
=========== ========== ========== ===========
</TABLE>
13
<PAGE>
The loan and MBS portfolio includes approximately $5.7 billion in
mortgage loans that were originated with LTV ratios exceeding 80%, or 12.3%
of the portfolio at June 30, 1994. Approximately 22.3% of loans originated
during the first six months of 1994 had LTV ratios in excess of 80%,
including 16.2% with LTV ratios of 90% or greater, all of which were loans
on single family properties. The Company takes the additional risk of
originating loans with LTV ratios in excess of 80% into consideration in its
loan underwriting and pricing policies.
Asset/Liability Management
- - --------------------------
One of the Company's primary business strategies continues to be the
reduction of volatility in net interest income resulting from changes in
interest rates. This is accomplished by managing the repricing
characteristics of its interest-earning assets and interest-bearing
liabilities. (Interest rate reset provisions of both assets and
liabilities, whether through contractual maturity or through contractual
interest rate adjustment provisions, are commonly referred to as "repricing
terms.")
In order to manage the interest rate risk inherent in its portfolios of
interest-earning assets and interest-bearing liabilities, the Company has
emphasized the origination of COFI ARMs for retention in the loan and MBS
portfolio. At June 30, 1994, 94.2% of the Company's $46.2 billion loan and
MBS portfolio consisted of ARMs principally indexed to COFI, compared to
93.6% of the $44.6 billion loan and MBS portfolio at December 31, 1993. The
average contractual spread above COFI on the Company's COFI ARM portfolio
was 2.41% at June 30, 1994, up three basis points from 2.38% at December 31,
1993.
The Company's basic interest rate risk management strategy includes a
goal of having the combined repricing terms of its interest-bearing
liabilities not differ materially from those of the FHLB Eleventh District
savings institutions in aggregate. Historically, the Company has maintained
its cost of funds at a level below COFI. There can be no assurance that the
differential between the Company's cost of funds and COFI will remain at
historical levels. In a period of rising market interest rates, the
favorable differential between the Company's cost of funds and COFI could
decline, which could result in compression of the Company's interest rate
margin. Such a compression occurred during the first six months of 1994.
14
<PAGE>
The following table presents the components of the Company's interest
rate sensitive asset and liability portfolios by repricing periods
(contractual maturity as adjusted for frequency of repricing) as of June 30,
1994:
<TABLE>
<CAPTION>
Repricing Periods
Percent ------------------------------------------------------------------
of Within
Balance Total 6 Months Months 7-12 1-5 Years 5-10 Years Years Over 10
----------- ------- ----------- ----------- ----------- ---------- -------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Investment securities $ 2,443,380 5% $ 2,110,015 $ - $ 279,720 $ 53,645 $ -
Impact of hedging (LIBOR indexed
amortizing swaps) - - (158,784) - 158,784 - -
----------- --- ----------- ---------- ----------- ---------- -----------
Total investment securities 2,443,380 5 1,951,231 - 438,504 53,645 -
----------- --- ----------- ---------- ----------- ---------- -----------
Loans and MBS -
MBS -
ARMs 9,204,469 19 8,813,489 390,980 - - -
Other 1,240,413 2 - - 646,069 98,912 495,432
Loans
ARMs 34,328,835 71 32,884,015 - 1,444,820 - -
Other 1,420,102 3 256,548 55,470 348,795 338,690 420,599
Impact of hedging (interest
rate swaps) - - 1,444,820 - (1,444,820) - -
----------- --- ----------- ----------- ----------- --------- ----------
Total loans and MBS 46,193,819 95 43,398,872 446,450 994,864 437,602 916,031
----------- --- ----------- ----------- ----------- --------- ----------
Total interest-earning assets $48,637,199 100% $45,350,103 $ 446,450 $ 1,433,368 $ 491,247 $ 916,031
=========== === =========== =========== =========== ========= ==========
Interest-bearing liabilities:
Deposits -
Transaction accounts $14,391,047 30% $14,391,047 $ - $ - $ - $ -
Term accounts 23,240,496 49 12,261,451 5,886,565 5,073,716 18,738 26
----------- --- ----------- ----------- ----------- --------- ----------
Total deposits 37,631,543 79 26,652,498 5,886,565 5,073,716 18,738 26
----------- --- ----------- ----------- ----------- --------- ----------
Borrowings -
Short-term 5,431,468 12 5,431,468 - - - -
FHLB and other 4,466,265 9 2,897,848 17,717 677,893 872,707 100
----------- --- ----------- ----------- ----------- --------- ----------
Total borrowings 9,897,733 21 8,329,316 17,717 677,893 872,707 100
----------- --- ----------- ----------- ----------- --------- ----------
Total interest-bearing
liabilities $47,529,276 100% $34,981,814 $ 5,904,282 $ 5,751,609 $ 891,445 $ 126
=========== === =========== =========== =========== ========= ==========
Hedge-adjusted interest-earning
assets more/(less) than
interest-bearing liabilities $ 1,107,923 $10,368,289 $(5,457,832) $(4,318,241) $(400,198) $ 915,905
=========== =========== =========== =========== ========= ==========
Cumulative interest sensitivity gap $10,368,289 $ 4,910,457 $ 592,216 $ 192,018 $1,107,923
=========== =========== =========== ========= ==========
Percentage of interest-earning assets
to interest-bearing liabilities 102.33%
Percentage of cumulative interest
sensitivity gap to total assets 2.15%
</TABLE>
15
<PAGE>
The following table presents the interest rates and spreads at the end
of the periods indicated:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
-------- ------------
<S> <C> <C>
Average yield on:
Loans 6.37% 6.53%
MBS 6.17 6.33
Total loans and MBS 6.32 6.50
Investment securities 4.92 3.83
Interest-earning assets 6.25 6.33
Average rate paid on:
Deposits 3.14 3.14
Borrowings:
Short-term 4.75 3.39
FHLB and other 5.85 6.44
Total borrowings 5.25 (1) 4.73 (1)
Interest-bearing liabilities 3.58 3.44
Interest rate spread 2.67 2.89
Net interest margin 2.75 2.95
<FN>
(1) Includes the effect of miscellaneous borrowing costs of approximately
0.48% and 0.46% as of June 30, 1994 and December 31, 1993,
respectively.
</TABLE>
Asset Quality
- - -------------
Nonperforming Assets and Potential Problem Loans. A loan is generally
placed on nonaccrual status when the Company becomes aware that the borrower
has entered bankruptcy proceedings and the loan is delinquent, or when the
loan is past due 90 days as to either principal or interest. The Company
considers a loan to be impaired when, based upon current information and
events, it believes 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 adopted Statement of Financial Accounting Standards
("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan,"
effective January 1, 1993. SFAS No. 114 does not apply to loans the Company
collectively evaluates for impairment. The Company's impaired loans within
the scope of SFAS No. 114 include nonaccrual multi-family and commercial and
industrial real estate loans ("major loans"), excluding those collectively
reviewed for impairment; troubled debt restructurings; and performing major
loans and major loans less than 90 days delinquent ("other impaired major
loans") which the Company believes will be collected in full, but which the
Company believes it is probable will not be collected in accordance with the
contractual terms of the loans. The Company continues to accrue interest on
other impaired major loans since full payment of principal and interest is
expected and such loans are performing or less than 90 days delinquent and
therefore do not meet the criteria for nonaccrual status. The Company bases
the measurement of impaired loans on the fair value of the loans' collateral
properties in accordance with SFAS No. 114. At June 30, 1994, the recorded
investment in loans for which impairment has been recognized in accordance
with SFAS No. 114 totaled $301.9 million and the total allowance for
possible losses related to such loans was $35.7 million, compared to the
16
<PAGE>
recorded investment of $746.5 million and the related allowance for possible
losses of $81.3 million at December 31, 1993.
The following table presents nonperforming assets (nonaccrual loans and
REO), troubled debt restructurings and other impaired major loans by type as
of the dates indicated:
<TABLE>
<CAPTION>
June 30, December 31, Increase
1994 1993 (Decrease)
----------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans:
Single family $ 562,221 $ 568,550 $ (6,329)
Multi-family 143,218(1) 139,157(1) 4,061
Commercial and industrial
real estate 48,588(2) 72,693(2) (24,105)
--------- --------- ---------
754,027 780,400 (26,373)
--------- --------- ---------
REO:
Single family 132,352 99,744 32,608
Multi-family 40,902 50,081 (9,179)
Commercial and industrial
real estate 15,915 30,037 (14,122)
--------- --------- ---------
189,169 179,862 9,307
--------- --------- ---------
Total nonperforming assets:
Single family 694,573 668,294 26,279
Multi-family 184,120 189,238 (5,118)
Commercial and industrial
real estate 64,503 102,730 (38,227)
--------- --------- ---------
Total $ 943,196 $ 960,262 $ (17,066)
========= ========= =========
Troubled debt restructurings:
Multi-family $ 76,193 $ 73,271 $ 2,922
Commercial and industrial
real estate 21,405 27,480 (6,075)
--------- --------- ---------
Total $ 97,598 $ 100,751 $ (3,153)
========= ========= =========
Other impaired major loans:
Multi-family $ 30,031 $ 118,276 $ (88,245)
Commercial and industrial
real estate 13,580 272,768 (259,188)
--------- --------- ---------
$ 43,611 $ 391,044 $(347,433)
========= ========= =========
Ratio of nonperforming assets
to total assets 1.83% 1.89%
========= =========
Ratio of nonperforming assets
and troubled debt restructurings
to total assets 2.02% 2.09%
========= ========
Ratio of allowances for possible
losses on loans and REO to
nonperforming assets 50.46% 49.21%
========= ========
<FN>
(1) Includes net recorded investment of impaired multi-family loans under SFAS No. 114
totaling $87.1 million and $109.9 million at June 30, 1994 and December 31, 1993,
respectively.
(2) Includes net recorded investment of impaired commercial and industrial real estate
loans under SFAS No. 114 totaling $37.3 million and $62.7 million at June 30, 1994
and December 31, 1993, respectively.
</TABLE>
17
<PAGE>
The following table presents nonperforming assets, troubled debt
restructurings and other impaired major loans by state at June 30, 1994:
<TABLE>
<CAPTION>
Nonperforming Assets
----------------------------------------------------
Commercial Other
and Troubled Impaired
Single Family Multi-Family Industrial Debt Major
Residential Residential Real Estate Total Restructurings Loans
------------- ------------ ----------- --------- -------------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
California $562,973 $159,350 $38,683 $761,006 $30,234 $30,521
Florida 29,522 - 781 30,303 5,610 -
New York 36,043 9,071 12,316 57,430 21,161 4,994
Illinois 13,507 4,276 5,909 23,692 25,217 -
Texas 8,848 636 488 9,972 6,037 -
Other 43,680 10,787 6,326 60,793 9,339 8,096
-------- -------- ------- -------- ------- -------
$694,573 $184,120 $64,503 $943,196 $97,598 $43,611
======== ======== ======= ======== ======= =======
</TABLE>
Total nonperforming assets decreased 2% during the first six months of
1994 to $943.2 million, or a ratio of nonperforming assets to total assets
of 1.83%. Single family nonperforming assets increased $26.3 million or 4%
during the first six months of 1994 primarily due to an increase of $34.5
million in the state of California. The increase in California is net of
the sale of $44.6 million in nonaccrual single family loans during the
second quarter of 1994. Multi-family nonperforming assets decreased $5.1
million or 3% during the first six months of 1994 reflecting the first
quarter 1994 sale of nonaccrual loans in New York and New Jersey totaling
$12.3 million, partially offset by an increase in California of $10.7
million. Commercial and industrial real estate nonperforming assets
decreased $38.2 million or 37% during the first six months of 1994
reflecting a decrease of $7.4 million in California, and decreases in New
York and New Jersey totaling $20.8 million, including the first quarter 1994
sale of nonaccrual loans totaling $14.3 million. Troubled debt
restructurings decreased $3.2 million or 3% during the first six months of
1994 primarily due to a decrease in troubled debt restructurings secured by
properties in Illinois ($13.5 million), partially offset by increases in
California ($5.8 million) and New York ($7.3 million).
Other impaired major loans totaled $43.6 million, net of the related
allowance for possible losses of $10.1 million, at June 30, 1994 compared to
$391.0 million, net of the related allowance for possible losses of $36.5
million, at December 31, 1993. The decline of $347.4 million or 89% in the
net recorded investment reflects loans included in other impaired major
loans at December 31, 1993 based on declines in the fair value of the
underlying collateral, but which were not impaired in accordance with SFAS
No. 114 based on the Company's expectation of borrower performance. Such
loans were not included in other impaired major loans at June 30, 1994.
18
<PAGE>
The Company is continuing its efforts to reduce the amount of its
nonperforming assets by aggressively pursuing loan delinquencies through the
collection, workout and foreclosure processes and, if foreclosed, disposing
rapidly of the REO. The Company sold $136.8 million of single family REO
and $71.0 million of multi-family and commercial and industrial REO in the
first six months of 1994.
Allowance for Loan Losses. Management believes the Company's allowance
for loan losses is adequate at June 30, 1994. The Company's process for
evaluating the adequacy of the allowance for loan losses has three basic
elements: first, the identification of problem loans; second, the
establishment of appropriate loan loss allowances once individual specific
problem loans are identified; and third, a methodology for estimating loan
losses based on the inherent risk in the rest of the loan portfolio. Based
upon this process, consideration of the current economic environment and
other factors, mananagement determines what it considers to be an appropriate
allowance for loan losses.
19
<PAGE>
The changes in and a summary by type of the allowance for loan losses are
as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- -------------------------
1994 1993 1994 1993
-------- -------- -------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Beginning balance $453,137 $417,044 $438,786 $434,114
Provision for loan losses 33,069 437,854 108,581 504,834
Allowance for loan losses
on loans purchased - - - 20,365
-------- -------- -------- --------
486,206 854,898 547,367 959,313
-------- -------- -------- --------
Charge-offs:
Single family (30,582) (376,202) (56,647) (452,229)
Multi-family (17,468) (24,484) (36,628) (39,294)
Commercial and industrial
real estate (4,931) (25,125) (26,121) (41,550)
Credit cards - (2,080) - (4,130)
-------- -------- -------- --------
(52,981) (427,891) (119,396) (537,203)
Recoveries 13,873 10,413 19,127 15,310
-------- -------- -------- --------
Net charge-offs (39,108) (417,478) (100,269) (521,893)
-------- -------- -------- --------
Ending balance $447,098 $437,420 $447,098 $437,420
======== ======== ======== ========
Ratio of net charge-offs to average
loans and MBS outstanding during
the periods (annualized) 0.35% 0.76%(1) 0.45% 0.86%(1)
==== ==== ==== ====
<FN>
(1) Excludes charge-offs related to the 1993 bulk sale of single family
nonaccrual loans, which increased the ratio to 3.80% for the second
quarter of 1993 and 2.40% for the first six months of 1993.
</TABLE>
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993
-------------------- ---------------------
% of Loan % of Loan
and MBS and MBS
Allowance Portfolio Allowance Portfolio
--------- --------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Single family $165,354 0.45% $155,516 0.43%
Multi-family 153,738 1.94 145,097 2.00
Commercial and
industrial
real estate 128,006 6.98 138,173 6.90
-------- --------
$447,098 0.96 $438,786 0.97
======== ========
</TABLE>
For the first six months of 1994 and 1993, gross charge-offs on single
family loans related to sales of nonaccrual loans were $6.0 million and $372.1
million, respectively. Gross charge-offs for the first six months of 1994
included $8.7 million related to the sale of multi-family nonaccrual loans and
$13.4 million related to the sale of commercial and industrial nonaccrual
loans.
20
<PAGE>
The $30.0 million provision for losses during the first quarter of 1994
related to the Northridge earthquake was based on the Company's appraisals
of its major loan properties and a review of the damage assessment of single
family loan properties in the earthquake area. This information was used in
estimating the probability of foreclosures and the ultimate cost to the
Company. The Company provided assistance to certain borrowers affected by
the earthquake through deferral of loan payments and special loan programs.
The Company permitted borrowers to defer a limited number of loan payments
during the first six months of 1994 on approximately 1,865 single family
loans with a principal balance of $381.2 million and approximately 400 major
loans with a principal balance of $295.5 million. At June 30, 1994, the
first post-deferral loan payment had not become due for
approximately 70 single family loans with a principal balance of $20.4
million and approximately 20 major loans with a principal balance of $15.1
million, including three loans with a principal balance of $3.2 million
classified as troubled debt restructurings. The Company has also originated
42 loans with a principal balance of $3.9 million through special loan
programs providing repair or bridge financing for single family borrowers in
the damaged area. The number of loans approved for assistance may increase
as the Company continues its review.
It is possible that the Company's delinquent, nonaccrual and impaired
loans and REO may increase and that the Company may experience additional
losses with respect to its real estate loan portfolio. Although the Company
has taken this possibility into consideration in establishing its allowance
for possible loan losses, future events may warrant changes to the
allowance.
Liquidity and Capital Resources
- - -------------------------------
Liquidity consists of cash, cash equivalents and certain marketable
securities which are not committed, pledged or required to liquidate
specific liabilities. The liquidity portfolio, totaling approximately $2.6
billion at June 30, 1994, decreased $776.9 million or 23% from December 31,
1993 primarily due to a net increase of $1.6 billion in the loan and MBS
portfolio and a net reduction in deposits of $387.1 million, partially
offset by a net increase of $1.0 billion in borrowings during the first six
months of 1994. Regulations of the Office of Thrift Supervision ("OTS")
require each savings institution to maintain, for each calendar month, an
average daily balance of liquid assets equal to at least 5% of the average
daily balance of its net withdrawable accounts plus short-term borrowings
during the preceding calendar month. OTS regulations also require each
savings institution to maintain, for each calendar month, an average daily
balance of short-term liquid assets (generally those having maturities of 12
months or less) equal to at least 1% of the average daily balance of its net
withdrawable accounts plus short-term borrowings during the preceding
calendar month. For June 1994 the average liquidity and average short-term
liquidity ratios of Home Savings were 5.04% and 4.28%, respectively.
21
<PAGE>
Sources of additional liquidity consist primarily of positive cash
flows generated from operations, the collection of principal payments and
prepayments on loans and MBS, increases in deposits and borrowings and
issuances of equity securities. Positive cash flows are also generated
through the sale of MBS, loans and other assets for cash. Sources of
borrowings may include borrowings from the FHLB, commercial paper and public
debt issuances, borrowings under reverse repurchase agreements, commercial
bank lines of credit and, under certain conditions, direct borrowings from
the Federal Reserve System. The principal sources of cash inflows during
the first six months of 1994 were principal payments and prepayments on
loans and MBS, proceeds from sales of loans and MBS and proceeds from short-
term and FHLB and other borrowings.
Each of the Company's sources of liquidity is influenced by various
uncertainties beyond the control of the Company. Scheduled loan payments
are a relatively stable source of funds, while loan prepayments and deposit
flows vary widely in reaction to market conditions, primarily prevailing
interest rates. Asset sales are influenced by general market interest rates
and other unforeseeable market conditions. The Company's ability to borrow
at attractive rates is affected by its credit rating, the availability of
acceptable collateral and other market conditions.
In order to manage the uncertainty inherent in its sources of funds,
the Company continually evaluates alternate sources of funds and maintains
and develops diversity and flexibility in the number and character of such
sources. The effect of a decline in any one source of funds generally can
be offset by use of an alternate source, although potentially at a different
cost to the Company. The Company's diverse geographic presence permits it
to take advantage of favorable sources of funds prevailing on a region-by-
region basis.
Loans Receivable. The Company's primary use of cash is to fund
internally generated mortgage loans. During the first six months of 1994
cash of $4.7 billion was used to originate loans. Gross loan originations
of $5.2 billion in the first six months of 1994 included approximately $4.7
billion of ARMs with an average spread of 261 basis points above COFI and
$420.7 million of fixed rate loans. Fixed rate loans originated and
designated for sale represented approximately 7% of single family loan
originations in the first six months of 1994. In addition, during the first
six months of 1994 the Company originated $111.4 million of 15-year fixed
rate single family loans which were funded in part with a series of FHLB
advances. These loans are intended to be held to maturity. In late July
1994, the Company began to designate for sale new originations of its 15-
year fixed rate single family loans. Principal payments on loans decreased
16% to $1.7 billion in the first six months of 1994 from $2.1 billion in the
first six months of 1993.
During the first six months of 1994 the Company sold loans totaling
$539.9 million, including sales of nonaccrual loans, net of charge-offs.
The Company designates certain loans as held for sale, including most of its
fixed rate originations. At June 30, 1994 the Company had $6.5 million of
loans available for sale.
At June 30, 1994 the Company was committed to fund mortgage loans
totaling $938.2 million, including $932.7 million or 99% in ARMs. The
Company expects to fund such loans from its liquidity sources.
22
<PAGE>
MBS. During the first six months of 1994 the Company sold $400.2
million of COFI and other MBS and purchased $422.7 million of ARM MBS,
primarily indexed to one-year Treasury notes, and $96.1 million of short-
term fixed rate collateralized mortgage obligations. The Company designates
certain MBS as available for sale, including a significant portion of its
ARM MBS issued or guaranteed by government sponsored enterprises and certain
other MBS. At June 30, 1994 the Company had $2.7 billion of MBS available
for sale.
During the first six months of 1994 the Company securitized $3.6
billion of ARMs into AAA rated private placement mortgage pass-through
securities which can be used as collateral for borrowings. The Company also
securitized $394.5 million of fixed rate single family mortgages into
government agency MBS during the second quarter of 1994. The Company has
the intent and ability to hold these MBS until maturity.
Deposits. Savings deposits decreased $387.1 million or 1% to $37.6
billion during the first six months of 1994 reflecting a net deposit
outflow.
The Company intends to continue consideration of branch purchases and
sales as opportunities to consolidate the Company's presence in its key
strategic markets. At June 30, 1994, 58% of the Company's total deposits
were in California, unchanged from December 31, 1993.
During July 1994, the Company announced an agreement to sell
approximately $1.5 billion of deposits in its 26 Illinois branches for a
deposit premium of approximately 8.5%. In addition, the Company announced
agreements to purchase approximately $1.2 billion of deposits in 30 branches
of five southern California financial institutions at an average premium of
approximately 2%. A total of 21 of these branches will be consolidated into
existing Home Savings branches. Two of the acquisitions, with deposits
totaling approximately $147 million in nine branches, were completed in July
1994. The remaining transactions are subject to regulatory approval and are
expected to be completed by the end of 1994.
Borrowings. Borrowings increased $1.0 billion or 11% to $9.9 billion
during the first six months of 1994 reflecting increases in short-term
borrowings of $453.8 million and FHLB and other borrowings of $564.5
million.
In February 1994 Home Savings issued $200 million of Floating Rate
Notes due February 9, 1996. In addition, Home Savings borrowed a total of
$1.8 billion in the first six months of 1994 from the FHLB. These FHLB
Notes are due in 1995-1997. Such borrowings partially offset a decrease in
FHLB advances of $1.4 billion in the first six months of 1994.
Capital. Stockholders' equity increased $16.7 million or less than 1%
during the first six months of 1994 principally due to net earnings of
$128.9 million, partially offset by dividends paid to common and preferred
stockholders of $76.7 million and a net increase of $37.8 million in the net
unrealized loss on securities available for sale. The aggregate unrealized
loss at June 30, 1994 was $16.3 million.
23
<PAGE>
The OTS has adopted regulations (the "Capital Regulations") that
contain a three-part capital standard requiring savings institutions to
maintain "core" capital of at least 3% of adjusted total assets, tangible
capital of at least 1.5% of adjusted total assets and risk-based capital of
at least 8% of risk-weighted assets. Special rules govern the ability of
savings institutions to include in their capital computations supervisory
goodwill and investments in subsidiaries engaged in activities not
permissible for national banks, such as real estate development. In
addition, effective July 1, 1994, institutions whose exposure to interest-
rate risk as determined by the OTS is deemed to be above normal may be
required to hold additional risk-based capital. Home Savings believes it
does not have above-normal exposure to interest-rate risk.
Home Savings is in compliance with the Capital Regulations. The
following table shows the capital amounts and ratios of Home Savings as
compared to the requirements of the Capital Regulations at June 30, 1994:
<TABLE>
<CAPTION>
June 30, 1994
-------------------------------------------------
Home Savings Capital Requirements
-------------------- --------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Tangible capital $2,535,156 5.00% $ 760,399 1.50%
Core capital $2,725,256 5.38% $1,520,798 3.00%
Risk-based capital $3,810,553 12.05% $2,529,894 8.00%
</TABLE>
The regulatory capital requirements applicable to Home Savings will
become more stringent as the amount of Home Savings' supervisory goodwill
and investment in real estate development subsidiaries includable in capital
is phased out through December 31, 1994 and July 1, 1996, respectively.
Home Savings currently meets the requirements of the Capital Regulations
assuming the present application of the full phase-out provisions. At June
30, 1994 the capital ratios computed on this more stringent, "fully phased-
in" basis were 4.79% for core and tangible capital and 11.20% for risk-based
capital.
The OTS has proposed certain amendments to the Capital Regulations.
The Company is unable to predict whether, or in what form, the proposed
amendments to the Capital Regulations will ultimately be adopted.
Accordingly, the Company is unable to predict whether Home Savings would be
in compliance with any higher capital requirement resulting from such
amendments.
24
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
The Annual Meeting of Stockholders of Registrant was held
on May 10, 1994.
Proxies for the meeting were solicited pursuant to
Regulation 14A under the Securities Exchange Act of 1934,
there was no solicitation in opposition to management's
nominees as listed in the proxy statement and all of such
nominees were elected. The votes cast for and withheld
with respect to each nominee were as follows:
Nominee For Withheld
------- --- --------
Robert H. Ahmanson 103,580,254 2,184,524
William H. Ahmanson 103,580,355 2,184,423
Byron Allumbaugh 103,585,368 2,179,410
Richard M. Bressler 103,588,783 2,175,995
Lodwrick M. Cook 103,584,568 2,180,210
Richard H. Deihl 103,554,596 2,210,182
Robert M. De Kruif 103,556,299 2,208,479
David S. Hannah 103,515,743 2,249,035
Delia M. Reyes 103,528,264 2,236,514
Charles R. Rinehart 103,589,844 2,174,934
Elizabeth Sanders 103,588,168 2,176,610
Arthur W. Schmutz 103,545,470 2,219,308
William D. Schulte 103,584,880 2,179,898
The votes cast for and against approval of the
Registrant's 1993 Stock Incentive Plan, and the number of
abstentions and broker non-votes, were as follows:
For Against Abstentions Non-Votes
--- ------- ----------- ---------
70,372,236 24,680,720 1,709,922 9,001,900
The votes cast for and against approval of the
Registrant's Executive Long-Term Incentive Plan, and the
number of abstentions, were as follows:
For Against Abstentions
--- ------- -----------
89,521,325 14,497,379 1,746,074
The votes cast for and against approval of the
Registrant's Short-Term Incentive Plan, and the number of
abstentions, were as follows:
For Against Abstentions
--- ------- -----------
95,200,008 8,758,686 1,806,084
25
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits.
3.2 Bylaws of H. F. Ahmanson & Company, as amended.
4 Reference is made to the Certificate of Incorporation of
H. F. Ahmanson & Company, as amended (previously filed as
Exhibit 3.1 to Form 10-K for year ended December 31, 1991),
the Bylaws of H. F. Ahmanson & Company, as amended (filed
herewith as Exhibit 3.2), the Certificate of Designations
dated August 12, 1988 (previously filed as Exhibit 3.1.2 to
Form 10-Q for quarter ended September 30, 1988), the
Certificate of Designations dated August 29, 1991
(previously filed as Exhibit 4 to Form 10-Q for quarter
ended September 30, 1991), the Certificate of Designations
dated February 9, 1993 (previously filed as Exhibit 3.5 to
Form 10-K for year ended December 31, 1992), the Certificate
of Designations dated July 30, 1993 (previously filed as
Exhibit 4.1 to Form 8-K for the event on July 29, 1993) and
the Rights Agreement, dated July 26, 1988, between H. F.
Ahmanson & Company and Union Bank (previously filed as
Exhibit 4.3 to Form 8-K dated July 26, 1988).
11 Statement of Computation of Earnings per Share.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for
which this quarterly report on Form 10-Q is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Date: August 12, 1994 H. F. Ahmanson & Company
/s/ Kevin M. Twomey
-----------------------------
Kevin M. Twomey
Executive Vice President and
Chief Financial Officer
(Authorized Signer)
/s/ George Miranda
-----------------------------
George Miranda
First Vice President and
Principal Accounting Officer
27
<PAGE>
EXHIBIT INDEX
Exhibit Sequentially
Number Description Numbered Page
-------- --------------------------------- -------------
3.2 By-Laws 29
11 Statement of Computation of Earnings
per Share. 44
28
<PAGE>
BY-LAWS
OF
H. F. AHMANSON & COMPANY
ARTICLE I
OFFICES
SECTION 1.01 Registered Office. The registered office of H. F.
Ahmanson & Company (hereinafter called the Corporation) in the State
of Delaware shall be at 229 South State Street, City of Dover, County
of Kent, and the name of the registered agent at that address shall
be The Prentice-Hall Corporation System, Inc.
SECTION 1.02 Principal Office. The principal office for the
transaction of the business of the Corporation shall be at 4900
Rivergrade Road, Irwindale, California. The Board of Directors
(hereinafter called the "Board") is hereby granted full power and
authority to change said principal office from one location to
another.
SECTION 1.03 Other Office. The Corporation may also have an
office at such other place or places, either within or without the
State of Delaware, as the Board may from time to time determine or as
the business or the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01 Annual Meetings. Annual meetings of the
stockholders of the Corporation for the purpose of electing directors
and for the transaction of such other proper business as may come
before such meetings shall be held on the third Tuesday in May of
each year if not a legal holiday, and if a legal holiday, then on the
next business day following, at 2:00 P.M., or at such other time or
date as the Board shall determine by resolution.
SECTION 2.02 Special Meetings. Special meetings of the
stockholders for any purpose or purposes may be called by the Board
or a committee of the Board which has been duly designated by the
Board and whose powers and authority, as provided in a resolution of
the Board or in these By-Laws, include the power to call such
meetings. Unless otherwise prescribed by statute or by the
Certificate of Incorporation, special meetings may not be called by
any other person or persons. No business may be transacted at any
special meeting of stockholders other than such business as may be
designated in the notice calling such meeting.
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<PAGE>
SECTION 2.03 Place of Meetings. All meetings of the
stockholders shall be held at such places, within or without the
State of Delaware, as may from time to time be designated by the
person or persons calling the respective meeting and specified in the
respective notices or waivers of notice thereof.
SECTION 2.04 Notice of Meetings. Except as otherwise required
by law, notice of each meeting of the stockholders, whether annual or
special, shall be given not less than ten (10) nor more than sixty
(60) days before the date of the meeting to each stockholder of
record entitled to vote at such meeting by delivering a typewritten
or printed notice thereof to him personally, or by depositing such
notice in the United States mail, in a postage prepaid envelope,
directed to him at his post office address furnished by him to the
Secretary of the Corporation for such purpose or, if he shall not
have furnished to the Secretary his address for such purpose, then at
his post office address last known to the Secretary, or by
transmitting a notice thereof to him at such address by telegraph,
cable, or wireless. Except as otherwise expressly required by law,
no publication of any notice of a meeting of the stockholders shall
be required. Every notice of a meeting of the stockholders shall
state the place, date and hour of the meeting, and, in the case of a
special meeting, shall also state the purpose or purposes for which
the meeting is called. Notice of any meeting of stockholders shall
not be required to be given to any stockholder who shall have waived
such notice and such notice shall be deemed waived by any stockholder
who shall attend such meeting in person or by proxy, except as a
stockholder who shall attend such meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
Except as otherwise expressly required by law, notice of any
adjourned meeting of the stockholders need not be given if the time
and place thereof are announced at the meeting at which the
adjournment is taken.
SECTION 2.05 Quorum. Except in the case of any meeting for the
election of directors summarily ordered as provided by law, the
holders of record of a majority in voting interest of the shares of
stock of the Corporation entitled to be voted thereat, present in
person or by proxy, shall constitute a quorum for the transaction of
business at any meeting of the stockholders of the Corporation or any
adjournment thereof. In the adsence of a quorum at any meeting or
any adjournment thereof, a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote
thereat or, in the absence therefrom of all the stockholders, any
officer entitled to preside at, or to act as secretary of, such
meeting may adjourn such meeting from time to time. At any such
adjourned meeting at which a quorum is present any business may be
transacted which might have been transacted at the meeting as
originally called.
SECTION 2.06 Voting.
(a) Each stockholder shall, at each meeting of the stockholders,
be entitled to vote in person or by proxy each share or fractional
share of the stock of the Corporation having voting rights on the
matter in question and which shall have been held by him and
registered in his name on the books of the Corporation:
30
<PAGE>
(i) on the date fixed pursuant to Section 6.05 of these
By-Laws as the record date for the determination of
stockholders entitled to notice of and to vote at such
meeting, or
(ii) if no such record date shall have been so fixed, then
(a) at the close of business on the day next preceding the
day on which notice of the meeting shall be given or (b) if
notice of the meeting shall be waived, at the close of
business on the day next preceding the day on which the
meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in
the election of directors in such other corporation is held, directly
or indirectly, by the Corporation, shall neither be entitled to vote
nor be counted for quorum purposes. Persons holding stock of the
Corporation in a fiduciary capacity shall be entitled to vote such
stock. Persons whose stock is pledged shall be entitled to vote,
unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledgee to vote thereon, in
which case only the pledgee, or his proxy, may represent such stock
and vote thereon. Stock having voting power standing of record in
the names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the
entirety or otherwise, or with respect to which two or more persons
have the same fiduciary relationship, shall be voted in accordance
with the provisions of the General Corporation Law of the State of
Delaware.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument
in writing, subscribed by such stockholder or by his attorney
thereunto authorized and delivered to the secretary of the meeting;
provided, however, that no proxy shall be voted or acted upon after
three years from its date unless said proxy shall provide for a
longer period. The attendance at any meeting of a stockholder who
may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary
of the meeting prior to the voting of the proxy. At any meeting of
the stockholders all matters, except as otherwise provided in the
Certificate of Incorporation, in these By-Laws or by law, shall be
decided by the vote of a majority of the shares present in person or
by proxy and entitled to vote thereat and thereon, a quorum being
present. The vote at any meeting of the stockholders on any question
need not be by ballot, unless so directed by the chairman of the
meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it
shall state the number of shares voted.
SECTION 2.07 List of Stockholders. The Secretary of the
Corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and
showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten
31
<PAGE>
(10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in
the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and
kept at the time and place of the meeting during the duration
thereof, and may be inspected by any stockholder who is present.
SECTION 2.08 Judges. If at any meeting of the stockholders a
vote by written ballot shall be taken on any question, the chairman
of such meeting may appoint a judge or judges to act with respect to
such vote. Each judge so appointed shall first subscribe an oath
faithfully to execute the duties of a judge at such meeting with
strict impartiality and according to the best of his ability. Such
judges shall decide upon the qualification of the voters and shall
report the number of shares represented at the meeting and entitled
to vote on such question, shall conduct and accept the votes, and,
when the voting is completed, shall ascertain and report the number
of shares voted respectively for and against the question. Reports
of judges shall be in writing and subscribed and delivered by them to
the Secretary of the Corporation. The judges need not be
stockholders of the Corporation, and any officer of the Corporation
may be a judge on any question other than a vote for or against a
proposal in which he shall have a material interest.
SECTION 2.09 Stockholder Proposals at Meetings of the
Stockholders.
(a) At an annual or special meeting of the stockholders, only
such business shall be conducted as shall have been properly brought
before the meeting. To be properly brought before a stockholders'
annual or special meeting, business must be (i) specified in the
notice of meeting (or any supplement thereto) given by or at the
direction of the Board; (ii) otherwise properly brought before the
meeting by or at the direction of the Board; or (iii) otherwise
properly brought before the meeting by a stockholder. In addition to
any other applicable requirements, and subject to any limitations on
business which may be proposed or transacted at such meeting,
including the provisions of Section 2.02 of these By-Laws, for
business to be properly brought before an annual or special meeting
by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely
with respect to an annual meeting, a stockholder's notice must be
received at the principal executive office of the Corporation not
less than sixty (60) days nor more than one hundred twenty (120) days
prior to the date of such annual meeting; provided, however, that in
the event that the first public disclosure (whether by mailing of a
notice to stockholders or the New York Stock Exchange, press release
or otherwise) of the date of the annual meeting is made less than
sixty-five (65) days prior to the date of the meeting, notice by the
stockholder will be timely if received not later than the close of
business on the tenth (10th) day following the day on which such
public disclosure was first made. To be timely with respect to a
special meeting, a stockholder's notice must be received at the
principal executive office of the Corporation not later than the
close of business on the tenth (10th) day following the day on which
the first public disclosure (whether by mailing of a notice to
stockholders or the New York Stock Exchange, press release or
otherwise) of the date of the special meeting is made.
32
<PAGE>
(b) A stockholder's notice to the Secretary shall set forth, as
to each matter the stockholder proposes to bring before the annual or
special meeting, (i) a reasonably detailed description of any
proposal to be made at such meeting; (ii) the name and address, as
they appear on the Corporation's stock register, of the stockholder
proposing such business; (iii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the
stockholder; (iv) any material interest of the stockholder in such
business; and (v) such other information relating to the stockholder
or the proposal as is required to be disclosed under the rules of the
Securities and Exchange Commission governing the solicitation of
proxies whether or not such proxies are in fact solicited by the
stockholder. Notwithstanding anything in these By-Laws to the
contrary, no business shall be conducted at an annual or special
stockholders' meeting except in accordance with the procedures set
forth in this Section 2.09; provided, however, that nothing in this
Section 2.09 shall be deemed to preclude discussion by any
stockholder of any business properly brought before the annual or
special meeting in accordance with said procedures. The chairman of
an annual or special meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section
2.09, and if he should so determine, any such business not properly
brought before the meeting shall not be transacted.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01 General Powers. The property, business and
affairs of the Corporation shall be managed by the Board.
SECTION 3.02 Number and Term of Office. The authorized number
of directors shall be such number as shall be determined from time to
time by a resolution adopted by a majority of the Board or by the
affirmative vote of the holders of not less than a majority of the
total voting power of all outstanding shares of voting stock of the
Corporation. Each of the directors of the Corporation shall hold
office until his successor shall have been duly elected and shall
qualify or until he shall resign or shall have been removed in the
manner hereinafter provided.
SECTION 3.03 Election of Directors. The directors shall be
elected by the stockholders of the Corporation, and at each election
the persons receiving the greatest number of votes, up to the number
of directors then to be elected, shall be the persons then elected.
The election of directors is subject to any provisions contained in
the Certificate of Incorporation relating thereto, including any
provisions for cumulative voting.
SECTION 3.04 Resignations. Any director of the Corporation may
resign at any time by giving written notice to the Board or to the
Secretary of the Corporation. Any such resignation shall take effect
at the time specified therein, or, if the time be not specified, it
shall take effect immediately upon its receipt; and unless otherwise
specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
33
<PAGE>
SECTION 3.05 Vacancies. Except as otherwise provided in the
Certificate of Incorporation, any vacancy in the Board, whether
because of death, resignation, disqualification, an increase in the
number of directors, or any other cause, may be filled by vote of the
majority of the remaining directors, although less than a quorum.
Each director so chosen to fill a vacancy shall hold office until his
successor shall have been elected and shall qualify or until he shall
resign or shall have been removed in the manner hereinafter provided.
SECTION 3.06 Place of Meeting, Etc. The Board may hold any of
its meetings at such place or places within or without the State of
Delaware as the Board by from time to time by resolution designate
or as shall be designated by the person or persons calling the
meeting or in the notice or a waiver of notice of any such meeting.
Directors may participate in any regular or special meeting of the
Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting
of the Board can hear each other, and such participation shall
constitute presence in person at such meeting.
SECTION 3.07 First Meeting. The Board shall meet as soon as
practicable after each annual election of directors and notice of
such first meeting shall not be required.
SECTION 3.08 Regular Meetings. Regular meetings of the Board
may be held at such times as the Board shall from time to time by
resolution determine. If any day fixed for a regular meeting shall
be a legal holiday at the place where the meeting is to be held, then
the meeting shall be held at the same hour and place on the next
succeeding business day not a legal holiday. Except as provided by
law, notice of regular meetings need not be given.
SECTION 3.09 Special Meetings. Special meetings of the Board
may be called by the Chairman of the Board of Directors or the
President and shall be called by the President or Secretary on the
written request of two directors. Notice of all special meetings of
the Board shall be given to each director:
(a) by first-class mail, postage prepaid, deposited in the
United States mail in the city where the principal executive office
of the Corporation is located at least five (5) days before the date
of such meeting; or
(b) by telegram, charges prepaid, such notice to be transmitted
by the telegraph company in the city of the principal executive
office of the Corporation at least forty-eight (48) hours before the
time of holding such meeting; or
(c) by personal delivery, or orally in person or by telephone,
at least twenty-four (24) hours prior to the time of holding such
meeting.
Notice given in accordance with paragraph (a) above shall
conclusively be deemed to be given to a director if addressed to the
director at any address the person giving the notice has reason to
believe will result in actual notice to the director prior to the
time of the meeting. Notice given in accordance with paragraph (b)
or (c) above shall conclusively be deemed to be given to a director
34
<PAGE>
if delivered in writing or communicated orally either to the director
or to a person whom the person giving the notice has reason to
believe will deliver or communicate it to the director prior to the
time of the meeting. Notice given in accordance with paragraph (a),
(b) or (c) above shall conclusively be deemed to be given to a
director if mailed or delivered to the last address provided by the
director to the Secretary of the Corporation for such purpose. The
notice need not specify the purpose of the meeting, nor need it
specify the place of the meeting if the meeting is to be held at the
principal executive office of the Corporation.
Such notice may be waived by any director and any meeting shall
be a legal meeting without notice having been given if all the
directors shall be present thereat or those not present shall, either
before or after the meeting, sign a written waiver of notice of, or a
consent to, such meeting or shall after the meeting sign the approval
of the minutes thereof. All such waivers, consents or approvals
shall be filed with the corporate records or be made a part of the
minutes of the meeting.
SECTION 3.10 Quorum and Manner of Acting. Except as otherwise
provided in the Certificate of Incorporation or these By-Laws or by
law, the presence of a majority of the total number of directors then
in office shall be required to constitute a quorum for the
transaction of business at any meeting of the Board. Except as
otherwise provided in the Certificate of Incorporation or these By-
Laws or by law, all matters shall be decided at any such meeting, a
quorum being present, by the affirmative votes of a majority of the
directors present. In the absence of a quorum, a majority of
directors present at any meeting may adjourn the same from time to
time until a quorum shall be present. Notice of any adjourned
meeting need not be given. The directors shall act only as a Board,
and the individual directors shall have no power as such.
SECTION 3.11 Action by Consent. Any action required or
permitted to be taken at any meeting of the Board or of any committee
thereof may be taken without a meeting if a written consent thereto
is signed by all members of the Board or of such committee, as the
case may be, and such written consent is filed with the minutes of
proceedings of the Board or committee.
SECTION 3.12 Compensation. The directors shall receive only
such compensation for their services as directors as may be allowed
by resolution of the Board. The Board may also provide that the
Corporation shall reimburse each such director for any expense
incurred by him on account of his attendance at any meetings of the
Board or Committees of the Board. Neither the payment of such
compensation nor the reimbursement of such expenses shall be
construed to preclude any director from serving the Corporation or
its subsidiaries in any other capacity and receiving compensation
therefor.
SECTION 3.13 Executive Committee. There may be an Executive
Committee of three or more directors appointed by the Board, who may
meet at stated times, or on notice to all by any of their own number,
during the intervals between the meetings of the Board; they shall
advise and aid the officers of the Corporation in all matters
concerning its interests and the management of its business, and
35
<PAGE>
generally perform such duties and exercise such powers as may be
directed or delegated by the Board from time to time. To the full
extent permitted by law, the Board may delegate to such committee
authority to exercise all the powers of the Board while the Board is
not in session. Vacancies in the membership of the committee shall
be filled by the Board at a regular meeting or at a special meeting
for that purpose. The Executive Committee shall keep written minutes
of its meeting and report the same to the Board when required. The
provisions of Sections 3.08, 3.09, 3.10 and 3.11 of these By-Laws
shall apply, mutatis mutandis, to any Executive Committee of the
Board.
SECTION 3.14 Other Committees. The Board may, by resolution
passed by a majority of the whole Board, designate one or more other
committees, each such committee to consist of one or more of the
directors of the Corporation. To the full extent permitted by law,
any such committee shall have and may exercise such powers and
authority as the Board may designate in such resolution. Vacancies
in the membership of a committee shall be filled by the Board at a
regular meeting or a special meeting for that purpose. Any such
committee shall keep written minutes of its meetings and report the
same to the Board when required. The provisions of Sections 3.08,
3.09, 3.10 and 3.11 of these By-Laws shall apply, mutatis mutandis,
to any such committee of the Board.
SECTION 3.15 Notice of Director Nominations.
(a) Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors of
the Corporation. Nominations of persons for election to the Board
may be made at a meeting of stockholders (i) by or at the direction
of the Board by any nominating committee or person appointed by the
Board or (ii) by any stockholder of the Corporation entitled to vote
for the election of directors at the meeting who complies with the
notice procedures set forth in this Section 3.15. In addition to any
other applicable requirements, and subject to any limitations on
business which may be proposed or transacted at such meeting,
including the provisions of Section 2.02 of these By-Laws, such
stockholder nominations, other than those made by or at the direction
of the Board, shall be made pursuant to timely notice in writing to
the Secretary of the Corporation of the stockholder's intention to
make such nomination. To be timely with respect to an annual
meeting, such a stockholder's notice must be received at the
principal executive office of the Corporation not less than sixty
(60) days nor more than one hundred and twenty (120) days prior to
the date of such annual meeting; provided, however, that in the event
that the first public disclosure (whether by mailing of a notice to
stockholders or the New York Stock Exchange, press release or
otherwise) of the date of the annual meeting is made less than sixty-
five (65) days prior to the date of the meeting, notice by the
stockholder will be timely if received not later than the close of
business on the tenth (10th) day following the day on which such
public disclosure was first made. To be timely with respect to a
special meeting, a stockholder's notice must be received at the
principal executive office of the Corporation not later than the
close of business on the tenth (10th) day following the day on which
the first public disclosure (whether by mailing of a notice to
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stockholders or the New York Stock Exchange, press release or
otherwise) of the date of the special meeting is made.
(b) Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or re-
election as a director, (i) the name, age, business address and
residence address of the person; (ii) the principal occupation or
employment of the person; (iii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the
person; and (iv) such other information relating to the person as
would be required, under the rules of the Securities and Exchange
Commission, in a proxy statement soliciting proxies for the election
of such person whether or not such proxies are in fact solicited for
the election of such person; and (b) as to the stockholder giving the
notice (i) the name and address, as they appear on the Corporation's
stock register, of the stockholder; (ii) the class and number of
shares of capital stock of the Corporation which are beneficially
owned by the stockholder; and (iii) such other information relating
to the stockholder or the nomination as is required to be disclosed
under the rules of the Securities and Exchange Commission governing
the solicitation of proxies whether or not such proxies are in fact
solicited by the stockholder. Such notice must also include a signed
consent of each such nominee to serve as a director of the
Corporation, if elected or re-elected. The Corporation may require
any proposed nominee to furnish such other information as may
reasonable be required by the Corporation to determine the
eligibility for election as a director of the Corporation. These
provisions shall not apply to nomination of any persons entitled to
be separately elected by holders of preferred stock of the
Corporation. In the event that a person is validly designated as a
nominee in accordance with the procedures specified above and shall
thereafter become unable or unwilling to stand for election to the
Board, the Board or the stockholder who proposed such nominee, as the
case may be, may designate a substitute nominee; provided, however,
that in the case of persons not nominated by the Board, such a
substitution may only be made if notice as provided above in this
Section 3.15 is received at the principal executive office of the
Corporation not later than the earlier of (i) thirty (30) days prior
to the date of the annual meeting or (ii) ten (10) days after the
stockholder proposing the original nominee first learned that such
original nominee has become unable or unwilling to stand for
election. The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made
in accordance with the foregoing procedure, and if he should so
determine, the defective nomination shall be disregarded.
ARTICLE IV
OFFICERS
SECTION 4.01 Number. The officers of the Corporation shall
include a President and a Secretary. The Board shall designate from
among its officers a Chief Executive Officer and may designate a
Chief Operating Officer and make such other designations as it deems
appropriate. A person may hold more than one office providing the
duties thereof can be consistently performed by the same person.
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SECTION 4.02 Other Officers. The Board may appoint such other
officers as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Chief Executive Officer
or the Board.
SECTION 4.03 Election. Each of the officers of the Corporation
shall be chosen by the Board and shall hold his office until he shall
resign or shall be removed or otherwise disqualified to serve, or his
successor shall be elected and qualified.
SECTION 4.04 Salaries. The salaries of all officers of the
Corporation shall be fixed by the Board.
SECTION 4.05 Removal; Vacancies. Subject to the express
provisions of a contract authorized by the Board, any officer may be
removed, either with or without cause, at any time by the Board or by
any officer upon whom such power of removal may be conferred by the
Board. Any vacancy occurring in any office of the Corporation shall
be filled by the Board.
SECTION 4.06 The President. The President shall have such
powers and duties as may from time to time be assigned to him by the
Chief Executive Officer or the Board or as may prescribed by these
By-Laws or applicable law. The President shall be an ex-officio
member of standing committees, if so provided in the resolutions of
the Board appointing the members of such committees.
SECTION 4.07 The Chief Executive Officer. The Chief Executive
Officer shall be the managing officer of the Corporation. Subject to
the control of the Board, the Chief Executive Officer shall have
general supervision, control and management of the business and
affairs of the Corporation, and general charge and supervision of all
officers, agents and employees of the Corporation; shall see that all
orders and resolutions of the Board are carried into effect; and in
general shall exercise all powers and perform all duties incident to
the managing officer of the Corporation and such other powers and
duties as may from time to time be assigned to him by the Board or as
may be prescribed by these By-Laws or applicable law. He may execute
and deliver in the name of the Corporation all deeds, mortgages,
bonds, contracts and other instruments, except where required by law
or these By-Laws to be otherwise executed and delivered or where such
execution and delivery shall be expressly delegated by him or the
Board to some other officer or agent of the Corporation.
SECTION 4.08 The Chief Operating Officer. The Chief Operating
Officer shall have such powers and duties as may from time to time be
assigned to him by the Chief Executive Officer or the Board. In the
absence of the Chief Executive Officer, the Chief Operating Officer
shall have all the powers and shall perform all the duties of the
Chief Executive Officer.
SECTION 4.09 The Secretary and Assistant Secretary. The
Secretary shall attend all meetings of the Board and all meetings of
the stockholders and record all the proceedings of the meeting of
the Corporation and of the Board in a book to be kept for that
purpose and shall perform like duties for the standing and special
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committees of the Board when required. He shall give, or cause to be
given, notice of all meetings of the stockholders and special
meetings of the Board, and shall perform such other duties as may be
prescribed by the Board or the Chief Executive Officer, under whose
supervision he shall act. He shall have custody of the corporate
seal of the Corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and, when
so affixed, it may be attested by his signature or by the signature
of such assistant secretary. The Board may give general authority to
any other officer to affix the seal of the Corporation and to attest
the affixing by his signature.
The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board (or if
there be no such determination, then in the order of their election),
shall, in the absence of the Secretary or in the event of his
inability or his refusal to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have
such other powers as the Board may from time to time prescribe.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 5.01 Checks, Drafts, Etc. All checks, drafts or other
orders for payment of money, notes or other evidence of indebtedness
payable by the Corporation shall be signed by such person or persons
and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such person or persons shall give such
bond, if any, as the Board may require.
SECTION 5.02 Deposits. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the credit
of the Corporation in such banks, trust companies or other
depositories as the Board by select, or as may be selected by any
officer or officers, assistant or assistants, agent or agents, or
attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for
the purpose of collection for the account of the Corporation, the
President, any Vice President or the Treasurer (or any other officer
or officers, assistant or assistants, agent or agents, or attorney or
attorneys of the Corporation who shall from time to time be
determined by the Board) may endorse, assign and deliver checks,
drafts and other orders for the payment of money which are payable to
the order of the Corporation.
SECTION 5.03 General and Special Bank Accounts. The Board may
from time to time authorize the opening and keeping of general and
special bank accounts with such banks, trust companies or other
depositories as the Board may select or as may be selected by any
officer or officers, assistant or assistants, agent or agents, or
attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special
rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these By-Laws, as it may deem
expedient.
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ARTICLE VI
SHARES AND THEIR TRANSFER
SECTION 6.01 Certificates for Stock. Every owner of stock of
the Corporation shall be entitled to have a certificate or
certificates, to be in such form as the Board shall prescribe,
certifying the number and class of shares of the stock of the
Corporation owned by him. The certificates representing shares of
such stock shall be numbered in the order in which they shall be
issued and shall be signed in the name of the Corporation by the
Chairman, Vice Chairman or President or a Vice President, and by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer. Any of or all of the signatures on the certificates may
be a facsimile. In case any officer, transfer agent or registrar who
has signed, or whose facsimile signature has been placed upon, any
such certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, such certificate may
nevertheless be issued by the Corporation with the same effect as
though the person who signed such certificate, or whose facsimile
signature shall have been placed thereupon, were such officer,
transfer agent or registrar at the date of issue. A record shall be
kept of the respective names of the persons, firms or corporations
owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and
the respective dates thereof, and in case of cancellation, the
respective dates of cancellation. Every certificate surrendered to
the Corporation for exchange or transfer shall be cancelled, and no
new certificate or certificates shall be issued in exchange for any
existing certificate until such existing certificate shall have been
so cancelled, except in cases provided for in Section 6.04.
SECTION 6.02 Transfers of Stock. Transfers of shares of stock
of the Corporation shall be made only on the books of the Corporation
by the registered holder thereof, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the
Secretary, or with a transfer clerk or a transfer agent appointed as
provided in Section 6.03, and upon surrender of the certificate or
certificates for such shares properly endorsed and the payment of all
taxes thereon. The person in whose name shares of stock stand on the
books of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation. Whenever any transfer of shares
shall be made for collateral security, and not absolutely, such fact
shall be so expressed in the entry of transfer if, when the
certificate or certificates shall be presented to the Corporation for
transfer, both the transferor and transferee request the
Corporation to do so.
SECTION 6.03 Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these By-
Laws, concerning the issue, transfer and registration of certificates
for shares of the stock of the Corporation. It may appoint, or
authorize any officer or officers to appoint, one or more transfer
clerks or one or more transfer agents and one or more registrars, and
may require all certificates for stock to bear the signature or
signatures of any of them.
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SECTION 6.04 Lost, Stolen, Destroyed, and Mutilated
Certificates. In any case of loss, theft, destruction or mutilation
of any certificate of stock, another may be issued in its place upon
proof of such loss, theft, destruction or mutilation and upon the
giving of a bond of indemnity to the Corporation in such form and in
such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the
judgment of the Board, it is proper so to do.
SECTION 6.05 Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any other change,
conversion or exchange of stock or for the purpose of any other
lawful action, the Board may fix, in advance, a record date, which
shall not be more than sixty (60) nor less than ten (10) days before
the date of such meeting, nor more than sixty (60) days prior to any
other action. If in any case involving the determination of
stockholders for any purpose other than notice of or voting at a
meeting of stockholders the Board shall not fix such a record date,
the record date for determining stockholders for such purpose shall
be the close of business on the day on which the Board shall adopt
the resolution relating thereto. A determination of stockholders
entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of such meeting; provided, however, that the
Board may fix a new record date for the adjourned meeting.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Right of Indemnification. The Corporation shall
indemnify and hold harmless each person who is or was a director or
officer of the Corporation, and each person who is or was serving at
the request of the Corporation as a director or officer of another
Corporation, partnership, joint venture, trust or other enterprise,
to the fullest extent permitted by the laws of Delaware, as from time
to time in effect. The Corporation may, if and to the extent
authorized by the Board of Directors of the Corporation in a specific
case, indemnify and hold harmless employees or agents of the
Corporation or of such other enterprises in the same manner and to
the same extent. The obligations set forth in this Section 7.01
shall inure to the benefit of heirs, executors, administrators and
personal representatives of those entitled to the benefits of this
Section 7.01 and shall be binding upon any successor to the
Corporation to the fullest extent permitted by the laws of Delaware,
as from time to time in effect. This Section 7.01 shall be
applicable whether or not the matters to which the obligation to
indemnify or hold harmless relates arose in whole or part prior to
the adoption of this Article, and shall not be construed to limit the
powers of the Board of Directors to provide any other indemnification
or other rights or benefits which it may deem appropriate.
SECTION 7.02 Other Rights and Remedies. The benefits provided
by this Article shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any By-
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Laws, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7.03 Insurance. Upon resolution passed by the Board,
the Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him or hold him
harmless against such liability under the provisions of this Article.
SECTION 7.04 Constituent Corporations. For the purposes of
this Article, references to "the Corporation" include all constituent
corporations absorbed in a consolidation or merger as well as the
resulting or surviving corporation, so that any person who is or was
a director, officer, employee or agent of such a constituent
corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
shall stand in the same position under the provisions of this Article
with respect to the resulting or surviving corporation as he would if
he had served the resulting or surviving corporation in the same
capacity.
SECTION 7.05 Employee Benefit Plans. For purposes of this
Article, references to "other enterprises" shall include employee
benefit plans, and references to "serving at the request of the
Corporation" shall include any service as a director, officer,
employee or agent of the Corporation which imposes a duty on, or
involves services by, such director, officer, employee or agent with
respect to an employee benefit plan, its participants or
beneficiaries.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Seal. The Board shall provide a corporate seal,
which shall be in the form of a circle and shall bear the name of the
Corporation and words and figures showing that the Corporation was
incorporated in the State of Delaware and the year of incorporation.
SECTION 8.02 Waiver of Notices. Whenever notice is required to
be given by these By-Laws or the Certificate of Incorporation or by
law, ther person entitled to said notice may waive such notice in
writing, either before or after the time stated therein, and such
waiver shall be deemed equivalent to notice.
SECTION 8.03 Fiscal Year. The fiscal year of the Corporation
shall begin the first day of January in each year.
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SECTION 8.04 Amendments. Subject to the provisions of the
Certificate of Incorporation, these By-Laws and applicable law, these
By-Laws or any of them may be amended or repealed and new By-Laws may
be adopted (a) by the Board, by vote of a majority of the number of
directors then in office or (b) by the vote of the holders of not
less than a majority of the total voting power of all outstanding
shares of voting stock of the Corporation at an annual meeting of
stockholders, without previous notice, or at any special meeting of
stockholders, provided that notice of such proposed amendment, repeal
or adoption is given in the notice of special meeting. Subject to
the provisions of the Certificate of Incorporation, any By-Laws
adopted or amended by the stockholders may be amended or repealed by
the Board or the stockholders.
SECTION 8.05 Voting Stock. Unless otherwise ordered by the
Board, the Chairman of the Board shall have full power and authority
on behalf of the Corporation to attend and to act at any
meeting of the stockholders of any corporation in which the
Corporation may hold stock and at any such meeting shall possess and
may exercise any and all rights and powers which are incident to the
ownership of such stock and which as the owner thereof the
Corporation might have possessed and exercised if present. The Board
by resolution from time to time may confer like powers upon any other
person or persons.
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H. F. Ahmanson & Company and Subsidiaries
Statement of Computation of Earnings Per Share
Exhibit 11
Common stock equivalents identified by the Company in determining its
earnings per common share are stock options, restricted stock awards,
stock appreciation rights and the 6% Cumulative Convertible Preferred Stock,
Series D which is convertible into Common Stock at $24.335 per share of
Common Stock. The following is a summary of the calculation of earnings
per common share:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Primary earnings (loss) per common share:
Net earnings (loss) $ 73,541 $ (290,982) $ 128,896 $ (258,126)
Less accumulated dividends on preferred stock (12,607) (8,295) (25,215) (14,497)
----------- ----------- ----------- -----------
Net earnings (loss) attributable
to common shares $ 60,934 $ (299,277) $ 103,681 $ (272,623)
=========== =========== =========== ===========
Weighted average number of common shares
outstanding 116,917,744 116,810,687 116,930,554 116,735,661
Dilutive effect of outstanding common stock
equivalents 280,884 350,947 275,427 480,014
----------- ----------- ----------- -----------
Weighted average number of common shares as
adjusted for calculation of primary
earnings per share 117,198,628 117,161,634 117,205,981 117,215,675
=========== =========== =========== ===========
Primary earnings (loss) per common share $ 0.52 $ (2.55) $ 0.88 $ (2.33)
=========== =========== =========== ===========
Fully diluted earnings (loss) per common share:
Net earnings (loss) $ 73,541 $ (290,982) $ 128,896 $ (258,126)
Less accumulated dividends on preferred stock (8,295) (8,295) (16,590) (14,497)
----------- ----------- ----------- -----------
Net earnings (loss) attributable
to common shares $ 65,246 $ (299,277) $ 112,306 $ (272,623)
=========== =========== =========== ===========
Weighted average number of common shares
outstanding 116,917,744 116,810,687 116,930,554 116,735,661
Dilutive effect of outstanding common stock
equivalents 12,154,241 350,947 12,172,313 480,014
----------- ----------- ----------- -----------
Weighted average number of common shares as
adjusted for calculation of fully diluted
earnings per share 129,071,985 117,161,634 129,102,867 117,215,675
=========== =========== =========== ===========
Fully diluted earnings (loss) $ 0.51 $ (2.55) $ 0.87 $ (2.33)
per common share =========== =========== =========== ===========
</TABLE>
44
