SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20579
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FORM 8-K
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 30, 1996
First Nationwide Holdings Inc.
(Exact name of registrant as specified in its charter)
Delaware 33-82654 13-3778552
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
38 East 63rd Street, New York, New York 10021
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(212) 572-8500
Not Applicable
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
As previously announced, First Nationwide Holdings Inc. ("Holdings")
has entered into an Agreement and Plan of Merger dated as of July 27, 1996
pursuant to which it will acquire (the "Cal Fed Acquisition") Cal Fed Bancorp
Inc. ("Cal Fed") and its wholly owned subsidiary, California Federal Bank, A
Federal Savings Bank ("California Federal"). Holdings is a holding company
whose only significant asset is all the common stock of First Nationwide Bank,
A Federal Savings Bank ("First Nationwide" or the "Bank"). Holdings will
finance the Cal Fed Acquisition through (i) an issuance of approximately $525
million aggregate principal amount of senior subordinated notes (the "Notes"),
(ii) a contribution by an indirect parent corporation of Holdings of
approximately $145 million in cash in exchange for $150 million aggregate
liquidation value of perpetual preferred stock of Holdings (the "Holdings
Preferred Stock") and (iii) existing
cash. The offering of the Notes (the "Offering") will not be registered under
the Securities Act of 1933, as amended, and the Notes may not be offered or
sold in the United States absent registration or an applicable exemption from
the registration requirements.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
10.1 Amendment to Employment Agreement, dated as of June 1, 1996,
between First Nationwide Bank, A Federal Savings Bank and
Carl B. Webb II.
10.2 Amendment to Employment Agreement, dated as of June 1, 1996,
between First Nationwide Bank, A Federal Savings Bank and
Richard P. Hodge.
10.3 Amendment to Employment Agreement, dated as of June 1, 1996,
between First Nationwide Bank, A Federal Savings Bank and
J. Randy Staff.
10.4 Employment Agreement, dated as of June 1, 1996, between First
Nationwide Bank, A Federal Savings Bank and Christie S. Flanagan.
10.5 Amendment to Employment Agreement, dated as of June 1, 1996,
between First Nationwide Bank, A Federal Savings Bank and Lacy G.
Newman.
99.1 Unaudited Pro Forma Financial Data of First Nationwide Holdings
Inc. and Subsidiaries.
99.2 Press Release.
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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 hereunto duly authorized.
FIRST NATIONWIDE HOLDINGS INC.
Dated: August 30, 1996
By: /s/ Joram C. Salig
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Name: Joram C. Salig
Title: Vice President
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EXHIBITS
Exhibit No. Document
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10.1 Amendment to Employment Agreement, dated as of
June 1, 1996, between First Nationwide Bank,
A Federal Savings Bank and Carl B. Webb II.
10.2 Amendment to Employment Agreement, dated as of
June 1, 1996, between First Nationwide Bank,
A Federal Savings Bank and Richard P. Hodge.
10.3 Amendment to Employment Agreement, dated as of
June 1, 1996, between First Nationwide Bank,
A Federal Savings Bank and J. Randy Staff.
10.4 Employment Agreement, dated as of June 1, 1996,
between First Nationwide Bank, A Federal Savings
Bank and Christie S. Flanagan.
10.5 Amendment to Employment Agreement, dated as of
June 1, 1996, between First Nationwide Bank, A
Federal Savings Bank and Lacy G. Newman.
99.1 Unaudited Pro Forma Financial Data of
First Nationwide Holdings Inc. and
Subsidiaries.
99.2 Press Release.
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AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment"), dated as of
June 1, 1996, between First Nationwide Bank, A Federal Savings Bank (the
"Company") and Carl B. Webb II (the "Executive").
The Company presently employs the Executive pursuant to that Employment
Agreement between the parties dated as of February 1, 1995 (the "Agreement").
The Company and Executive desire to amend the Agreement to respond to certain
recommendations made by the Office of Thrift Supervision, which regulates and
oversees the operations of the Company.
Accordingly, the Company and the Executive agree as follows:
1. Amendments.
Pursuant to the requirements of Section 10.5 of the Agreement, the provisions of
Section 4.3 of the Agreement are amended to add the following language to the
end of such section:
Termination for cause under the foregoing sentence shall also include
the bases therefore set forth in the provisions of 12 C.F.R. Section
563.39(b)(1) or successor regulation defining termination for cause in
employment agreements for employees of a savings association.
2. No Other Amendments.
The balance of the provisions of the Agreement are not modified by this
Amendment and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
FIRST NATIONWIDE BANK,
A FEDERAL SAVINGS BANK
By: /s/ GERALD J. FORD
----------------------------------
Gerald J. Ford
Chairman and Chief Executive Officer
/s/ CARL B. WEBB II
----------------------------------
Carl B. Webb II
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment"), dated
as of June 1, 1996, between First Nationwide Bank, A Federal Savings Bank (the
"Company") and Richard P. Hodge (the "Executive").
The Company presently employs the Executive pursuant to that Employment
Agreement between the parties dated as of January 1, 1996 (the "Agreement").
The Company and Executive desire to amend the Agreement to respond to certain
recommendations made by the Office of Thrift Supervision, which regulates and
oversees the operations of the Company.
Accordingly, the Company and the Executive agree as follows:
1. Amendments.
Pursuant to the requirements of Section 10.5 of the Agreement, the provisions
of Section 4.3 of the Agreement are amended to add the following language to
the end of such section:
Termination for cause under the foregoing sentence shall also include the
bases therefore set forth in the provisions of 12 C.F.R. Section
563.39(b)(1) or successor regulation defining termination for cause in
employment agreements for employees of a savings association.
2. No Other Amendments.
The balance of the provisions of the Agreement are not modified by this
Amendment and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
FIRST NATIONWIDE BANK,
A FEDERAL SAVINGS BANK
By: /s/ GERALD J. FORD
-----------------------------------------
Gerald J. Ford
Chairman and Chief Executive Officer
By: /s/ RICHARD P. HODGE
-----------------------------------------
Richard P. Hodge
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AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment"), dated as
of June 1, 1996, between First Nationwide Bank, A Federal Savings Bank (the
"Company") and J. Randy Staff (the "Executive").
The Company presently employs the Executive pursuant to that Employment
Agreement between the parties dated as of February 1, 1995 (the "Agreement").
The Company and Executive desire to amend the Agreement to respond to certain
recommendations made by the Office of Thrift Supervision, which regulates and
oversees the operations of the Company.
Accordingly, the Company and the Executive agree as follows:
1. Amendments.
Pursuant to the requirements of Section 10.5 of the Agreement, the provisions
of Section 4.3 of the Agreement are amended to add the following language to
the end of such section:
Termination for cause under the foregoing sentence shall also include the
bases therefore set forth in the provisions of 12 C.F.R. Section
563.39(b)(1) or successor regulation defining termination for cause in
employment agreements for employees of a savings association.
Further Section 1.2 is amended in its entirety and replaced with the following
language:
The Executive hereby accepts such employment and agrees to render the
services described above. During the Term, the Executive agrees to serve
the Company faithfully and to the best of the Executive's ability, to
devote the Executive's entire business time, energy and skill to such
employment, and to use the Executive's best efforts, skill and ability to
promote the Company's interests. The Executive further agrees to accept
election, and to serve during all of any part of the Term, as an officer
or director of the Company and of any subsidiary or affiliate of the
Company, without any compensation therefor other than that specified in
this Agreement, if elected to any such position by the shareholders or by
the Board of Directors of the Company or of any subsidiary or affiliate,
as the case may be. Notwithstanding the foregoing and other provisions of
this Agreement, the Company acknowledges that the Executive has ownership
interests in and serves as an officer and/or director of Ganado
Bancshares, Inc. and American Bank, N.A. and will become a director of
Liberte Investors. The Executive shall be permitted to maintain such
ownership interests and positions so long as they do not interfere in any
material way with the Executive's duties hereunder.
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2. No Other Amendments.
The balance of the provisions of the Agreement are not modified by this
Amendment and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
FIRST NATIONWIDE BANK,
A FEDERAL SAVINGS BANK
By: /s/ GERALD J. FORD
-----------------------------------------
Gerald J. Ford
Chairman and Chief Executive Officer
/s/ J. RANDY STAFF
-----------------------------------------
J. Randy Staff
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Employment Agreement
EMPLOYMENT AGREEMENT, dated as of June 1, 1996 between
First Nationwide Bank, a Federal Savings Bank (the "Company") and
Christie S. Flanagan (the "Executive")
The Company and the Executive entered into an Employment Agreement
(the "Original Agreement") dated as of October 1, 1994, calling for the
employment by the Company of the Executive for a term ending on December 31,
1999.
The Company and the Executive do hereby wish to shorten the term of
the Original Agreement and consequently do hereby mutually agree by their
execution hereof to terminate the Original Agreement in its entirety and to
substitute in its place this new Agreement calling for the continued
employment by the Company of the Executive, on the terms and conditions set
forth in this Agreement.
Accordingly, the Company and the Executive hereby agree as follows:
Employment, Duties and Acceptance.
1.1 Employment, Duties. The Company hereby employs the Executive
for the Term (as defined in section 2.1), to render exclusive (except as
otherwise provided herein) and full-time services to the Company as Executive
Vice President and General Counsel or in such other executive position as may
be mutually agreed upon by the Company and the Executive, and to perform such
other duties consistent with such position as may be assigned to the Executive
by the Board of Directors or any officer of the Company senior to the
Executive.
1.2 Acceptance. The Executive hereby accepts such employment
and agrees to render the services described above. During the Term, the
Executive agrees to serve the Company faithfully and to the best of the
Executive's ability, to devote the Executive's entire business time, energy
and skill to such employment, and to use the Executive's best efforts, skill
and ability to promote the Company's interests. The Executive further agrees
to accept election, and to serve during all or any
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part of the Term, as an officer or director of the Company and of any
subsidiary or affiliate of the Company, without any compensation therefor
other than that specified in this Agreement, if elected to any such position
by the shareholders or by the Board of Directors of the Company or of any
subsidiary or affiliate, as the case may be. Notwithstanding the foregoing,
the Executive shall be permitted (i) to serve in an Of Counsel position to
Jenkens & Gilchrist, P.C. through May 31, 1997 and (ii) to act as an executor,
a trustee and/or director of entities with whom the Executive has had a
continuing relationship (including Liberte Investors) so long as such
activities do not interfere in any material way with the Executive's duties
hereunder.
1.3 Location. The duties to be performed by the Executive
hereunder shall be performed primarily at the office of the Company in Dallas,
Texas, with up to one week per month at the office of the Company in San
Francisco, California, in each case subject to reasonable other travel
requirements on behalf of the Company.
2. Term of Employment; Certain Post-Term Benefits.
2.1 The Term. The term of the Executive's
employment under this Agreement (the "Term") shall commence June
1, 1996 and shall end on May 31, 1999.
2.2 Special Curtailment. The Term shall end earlier than the
original May 31, 1999 termination date provided in Section 2.1 if sooner
terminated pursuant to Section 4. Non-extension of the Term shall not be
deemed to be a wrongful termination of the Term or this Agreement by the
Company pursuant to Section 4.4.
3. Compensation; Benefits.
3.1 Salary. As compensation for all services to be rendered
pursuant to this Agreement, the Company agrees to pay the Executive during the
Term a base salary, payable semi-monthly in arrears, at the annual rate of not
less than $700,000, less such deductions or amounts to be withheld as required
by applicable law and regulations (the "Base Salary"). In the event that the
Company, in its sole discretion, from time to time
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determines to increase the Base Salary, such increased amount shall, from and
after the effective date of the increase, constitute "Base Salary" for
purposes of this Agreement.
3.2 Substitution Payment. In addition to the
amounts to be paid to the Executive pursuant to Section 3.1, the
Executive shall be paid a $20,000 "substitution payment".
3.3 Business Expenses. Company shall pay or reimburse the
Executive for all reasonable expenses actually incurred or paid by the
Executive during the Term in the performance of the Executive's services under
this Agreement, upon presentation of expense statements or vouchers or such
other supporting information as the Company customarily may require of its
officers provided, however, that the maximum amount available for such expenses
during any period may be fixed in advance by the Chairman or Vice Chairman of
the Board of Directors, the President of the Company, or the Board of
Directors. The Company acknowledges that the Executive shall be permitted to
travel first class when travelling on behalf of the Company.
3.3 Vacation. During the Term, the Executive shall be entitled
to a vacation period or periods of four weeks taken in accordance with the
vacation policy of the Company during each year of the Term. Vacation time not
used by the end of a year shall be forfeited.
3.4 Fringe Benefits. During the Term, the Executive shall be
entitled to all benefits for which the Executive shall be eligible under any
qualified pension plan, 401(k) plan, group insurance or other so-called
"fringe" benefit plan which the Company provides to its employees generally,
together with executive medical benefits for the Executive, the Executive's
spouse and the Executive's children as from time to time in effect for
officers of the Company generally.
3.5 Additional Benefits. During the Term, the
Executive shall be entitled to such other benefits as are
specified in Appendix I to this Agreement.
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4. Termination.
4.1 Death. If the Executive shall die during the Term, the Term
shall terminate and no further amounts or benefits shall be payable hereunder,
except that the Executive's legal representatives shall be entitled to receive
continued payments in an amount equal to 60% of the Base Salary, in the manner
specified in Section 3.1, until the end of the Term (as in effect immediately
prior to the Executive's death).
4.2 Disability. If during the Term the Executive shall become
physically or mentally disabled, whether totally or partially, such that the
Executive is unable to perform the Executive's services hereunder for (i) a
period of six consecutive months or (ii) for shorter periods aggregating six
months during any twelve month period, the Company may at any time after the
last day of the six consecutive months of disability or the day on which the
shorter periods of disability shall have equalled an aggregate of six months,
by written notice to the Executive (but before the Executive has recovered
from such disability), terminate the Term and no further amounts or benefits
shall be payable hereunder, except that the Executive shall be entitled to
receive (i) continued payments in an amount equal to 60% of the Base Salary,
in the manner specified in Section 3.1, until the end of the Term (as in
effect immediately prior to such termination) and (ii) such amounts and
benefits, if any, specified in Paragraph 5 of Appendix 1. If the Executive
shall die before receiving all payments to be made by the Company in
accordance with the foregoing, such payments shall be made to a beneficiary
designated by the Executive on a form prescribed for such purpose by the
Company, or in the absence of such designation to the Executive's legal
representative.
4.3 Cause. In the event of gross neglect by the Executive of
the Executive's duties hereunder, conviction of the Executive of any felony,
conviction of the Executive of any lesser crime or offense involving the
property of the Company or any of its subsidiaries or affiliates, willful
misconduct by the Executive in connection with the performance of any material
portion of the Executive's duties hereunder, breach by the Executive of any
material provision of this Agreement or any other conduct on the part of the
Executive which would make the Executive's continued employment by the Company
materially
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prejudicial to the best interests of the Company, the Company may at any time
by written notice to the Executive terminate the Term and, upon such
termination, this Agreement shall terminate and the Executive shall be
entitled to receive no further amounts or benefits hereunder, except any as
shall have been earned to the date of such termination. Termination for Cause
under the foregoing sentence shall also include the bases therefore set forth
in the provisions of 12 C.F.R. Section 563.39(b) (1) or successor regulation
defining termination for cause in employment agreements for employees of a
savings association.
4.4 Company Breach. In the event of (a) the breach of any
material provision of this Agreement by the Company, (b) the assignment to
Executive of duties materially inconsistent with his status as Executive Vice
President and General Counsel of the Company or an adverse alteration in the
nature of Executive's responsibilities or (c) a reduction by the Company in
the Executive's Base Salary or bonus or a failure by the Company to pay any
such amounts when due, the Executive shall be entitled to terminate the Term
upon 60 days' prior written notice to the Company. Upon such termination, or
in the event the Company terminates the Term or this Agreement other than
pursuant to the provisions of Section 4.2 or 4.3, the Company shall continue
to provide the Executive (i) payments of Base Salary in the manner and amounts
specified in Section 3.1 and (ii) fringe benefits and additional benefits in
the manner and amounts specified in Sections 3.5 and 3.6, until the end of the
Term (as in effect immediately prior to such termination) (the "Damage
Period") . The Company's obligations pursuant to this Section 4.4 are subject
to the Executive's duty to mitigate damages by seeking other employment
provided, however, that the Executive shall not be required to accept a
position of lesser importance or of substantially different character than the
position held with the Company immediately prior to the effective date of
termination or in a location outside of the Dallas, Texas metropolitan area.
To the extent that the Executive shall earn compensation during the Damage
Period (without regard to when such compensation is paid) , the Base Salary
payments to be made by the Company pursuant to this Section 4.4 shall be
correspondingly reduced.
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4.5 Termination Under Banking Laws.
4.5.1 If the Executive is suspended or temporarily prohibited
from participating in the conduct of the Company's affairs by a notice served
under Section 8 (e) (3) or (g) (1) of Federal Deposit Insurance Act (the 11
FDIA-1) (12 U. S. C. 5 18 18 (e) (3) and (g) (1) ) the Company's obligations
under this Agreement shall be suspended as of the date of service unless
stayed by appropriate proceedings. If the charges in the notice are dismissed,
the Company may in its discretion (1) pay the Executive all or part of the
compensation withheld while its obligations hereunder were suspended, and (ii)
reinstate (in whole or in part) any of its obligations which were suspended.
4.5.2 If the Executive is removed or permanently prohibited
from participating in the conduct of the Company's affairs by an order issued
under Section 8 (e) (4) or (g) (1) of the FDIA (12 U.S.C. W1818(e) (4) or (g)
(1)), all obligations of the Company under this Agreement shall terminate as
of the effective date of the order, but vested rights of the contracting
parties shall not be affected.
4.5.3 If the Company is in default (as defined in Section 3(x)
(1) of the FDIA) , all obligations under this Agreement shall terminate as of
the date of default, but this Section 4.5.3 shall not affect any vested rights
of the Company or of the Executive.
4.5.4 All obligations of the Company under this Agreement may
be terminated, except to the extent determined that continuation of this
Agreement is necessary for the continued operation of the Company, (i) by the
Director of the Office of Thrift Supervision (the "Director") or his or her
designee, at the time Federal Deposit Insurance Corporation or Resolution
Trust Corporation enters into an agreement to provide assistance to or on
behalf of the Company under the authority contained in Section 13(c) of the
FDIA; or (ii) by the Director or his or her designee, at the time the Director
or his or her designee approves a supervisory merger to resolve problems
related to operations of the Company or when the Company is determined by the
Director to be in an unsafe or unsound condition. Any rights of the parties
that have already vested, however, shall not be affected by such action.
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4.6 Litigation Expenses. Except as provided for in Section 5.7,
if the Company and the Executive become involved in any action, suit or
proceeding relating to the alleged breach of this Agreement by the Company or
the Executive, and if a judgment in such action, suit or proceeding is
rendered in favor of the Executive, the Company shall reimburse the Executive
for all expenses (including reasonable attorneys' fees) incurred by the
Executive in connection with such action, suit or proceeding. Such costs shall
be paid to the Executive promptly upon presentation of expense statements or
other supporting information evidencing the incurrence of such expenses.
5. Protection of Confidential Information; Non-
Competition.
5.1 In view of the fact that the Executive's work for the
Company will bring the Executive into close contact with many confidential
affairs of the Company not readily available to the public, and plans for
future developments, the Executive agrees:
5.1.1 To keep and retain in the strictest confidence all
confidential matters of the Company, including, without limitation, "know
how", trade secrets, customer lists, pricing policies, operational methods,
technical processes, formulae, inventions and research projects, and other
business affairs of the Company, learned by the Executive heretofore or
hereafter, and not to disclose them to anyone outside of the Company, either
during or after the Executive's employment with the Company, except in the
course of performing the Executive's duties hereunder or with the Company's
express written consent; and
5.1.2 To deliver promptly to the Company on termination of the
Executive's employment by the Company, or at any time the Company may so
request, all memoranda, notes, records, reports, manuals, drawings, blueprints
and other documents (and all copies thereof) relating to the Company's
business and all property associated therewith, which the Executive may then
possess or have under the Executive's control.
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5.2 During the Term, the Executive shall not, directly or
indirectly, enter the employ of, or render any services to, any person, firm
or corporation engaged in any business competitive with the business of the
Company or of any of its subsidiaries or affiliates; the Executive shall not
engage in such business on the Executive's own account; and the Executive
shall not become interested in any such business, directly or indirectly, as
an individual partner, shareholder, director, officer, principal, agent,
employee, trustee, consultant, or in any other relationship or capacity
provided, however, that nothing contained in this Section 5.2 shall be deemed
to prohibit the Executive from acquiring, solely as an investment, up to five
percent (5%) of the outstanding shares of capital stock of any public
corporation.
5.3 If the Executive commits a breach, or threatens to commit a
breach, of any of the provisions of Sections 5.1 or 5.2 hereof, the Company
shall have the following rights and remedies:
5.3.1 The right and remedy to have the provisions of this
Agreement specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury to the Company and that money damages will not
provide an adequate remedy to the Company; and
5.3.2 The right and remedy to require the Executive to account
for and pay over to the Company all compensation, profits, monies, accruals,
increments or other benefits (collectively "Benefits") derived or received by
the Executive as the result of any transactions constituting a breach of any
of the provisions of the preceding paragraph, and the Executive hereby agrees
to account for and pay over such Benefits to the Company.
Each of the rights and remedies enumerated above shall be independent of the
other, and shall be severally enforceable, and all of such rights and remedies
shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or in equity.
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5.4 If any of the covenants contained in Sections 5.1 or 5.2,
or any part thereof, hereafter are construed to be invalid or unenforceable,
the same shall not affect the remainder of the covenant or covenants, which
shall be given full effect, without regard to the invalid portions.
5.5 If any of the covenants contained in Sections 5.1 or 5.2,
or any part thereof, are held to be unenforceable because of the duration of
such provision or the area covered thereby, the parties agree that the court
making such determination shall have the power to reduce the duration and/or
area of such provision and, in its reduced form, said provision shall then be
enforceable.
5.6 The parties hereto intend to and hereby confer jurisdiction
to enforce the covenants contained in Sections 5.1 and 5.2 upon the courts of
any state within the geographical scope of such covenants. In the event that
the courts of any one or more of such states shall hold such covenants wholly
unenforceable by reason of the breadth of such covenants or otherwise, it is
the intention of the parties hereto that such determination not bar or in any
way affect the Company's right to the relief provided above in the courts of
any other states within the geographical scope of such covenants as to
breaches of such covenants in such other respective jurisdictions, the above
covenants as they relate to each state being for this purpose severable into
diverse and independent covenants.
5.7 In the event that any action, suit or other proceeding in
law or in equity is brought to enforce the covenants contained in sections 5.1
and 5.2 or to obtain money damages for the breach thereof, and such action
results in the award of a judgment for money damages or in the granting of any
injunction in favor of the Company, all expenses (including reasonable
attorneys' fees) of the Company in such action, suit or other proceeding shall
(on demand of the Company) be paid by the Executive. In the event the Company
fails to obtain a judgment for money damages or an injunction in favor of the
Company, all expenses (including reasonable attorneys' fees) of the Executive
in such action, suit or other proceeding shall (on demand of the Executive) be
paid by the Company.
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6. Inventions and Patents.
6.1 The Executive agrees that all processes, technologies and
inventions (collectively, "Inventions"), including new contributions,
improvements, ideas and discoveries, whether patentable or not, conceived,
developed, invented or made by him during the Term shall belong to the
Company, provided that such Inventions grew out of the Executive's work with
the Company or any of its subsidiaries or affiliates, are related in any
manner to the business (commercial or experimental) of the Company or any of
its subsidiaries or affiliates or are conceived or made on the Company's time
or with the use of the Company's facilities or materials. The Executive shall
further: (a) promptly disclose such Inventions to the Company; (b) assign to
the Company, without additional compensation, all patent and other rights to
such Inventions for the United States and foreign countries; (c) sign all
papers necessary to carry out the foregoing; and (d) give testimony in support
of the Executive's inventorship.
6.2 If any Invention is described in a patent application or is
disclosed to third parties, directly or indirectly, by the Executive within
two years after the termination of the Executive's employment by the Company,
it is to be presumed that the Invention was conceived or made during the Term.
6.3 The Executive agrees that the Executive will not assert any
rights to any Invention as having been made or acquired by the Executive prior
to the date of this Agreement, except for Inventions, if any, disclosed to the
Company in writing prior to the date hereof.
7. Intellectual Property.
The Company shall be the sole owner of all the products and proceeds
of the Executive's services hereunder, including, but not limited to, all
materials, ideas, concepts, formats, suggestions, developments, arrangements,
packages, programs and other intellectual properties that the Executive may
acquire, obtain, develop or create in connection with and during the Term,
free and clear of any claims by the Executive (or anyone claiming under the
Executive) of any kind or character whatsoever (other
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than the Executive's right to receive payments hereunder). The Executive
shall, at the request of the Company, execute such assignments, certificates
or other instruments as the Company may from time to time deem necessary or
desirable to evidence, establish, maintain, perfect, protect, enforce or
defend its right, title or interest in or to any such properties.
8. Indemnification.
The Company will indemnify the Executive, to the maximum extent
permitted by applicable law, against all costs, charges and expenses incurred
or sustained by the Executive in connection with any action, suit or
proceeding to which the Executive may be made a party by reason of the
Executive being an officer, director or employee of the Company or of any
subsidiary or affiliate of the Company.
9. Notices.
All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to
have been duly given if delivered personally, sent by overnight courier or
mailed first class, postage prepaid, by registered or certified mail (notices
mailed shall be deemed to have been given on the date mailed), as follows (or
to such other address as either party shall designate by notice in writing to
the other in accordance herewith):
If to the Company, to:
First Nationwide Bank, A Federal Savings Bank
200 Crescent Court; Suite 1350
Dallas, Texas 75201
Attention: Gerald J. Ford
with a copy to:
MacAndrews & Forbes Holdings Inc.
35 East 62nd Street
New York, New York 10021
Attention: General Counsel
11
<PAGE>
If to the Executive, to:
Christie S. Flanagan
4248 Armstrong Parkway
Dallas, Texas 75205
10.General.
10.1 This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Texas applicable to
agreements made and to be performed entirely in Texas.
10.2 The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
10.3 This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof. No representation, promise or
inducement has been made by either party that is not embodied in this
Agreement, and neither party shall be bound by or liable for any alleged
representation, promise or inducement not so set forth.
10.4 This Agreement, and the Executive's rights and obligations
hereunder, may not be assigned by the Executive. The Company may assign its
rights, together with its obligations, hereunder (i) to any affiliate which
has the financial resources to meet the Company's obligations hereunder or
(ii) to third parties in connection with any sale, transfer or other
disposition of all or substantially all of its business or assets; in any
event the obligations of the Company hereunder shall be binding on its
successors or assigns, whether by merger, consolidation or acquisition of all
or substantially all of its business or assets.
10.5 This Agreement may be amended, modified, superseded,
canceled, renewed or extended and the terms or covenants hereof may be waived,
only by a written instrument executed by both of the parties hereto, or in the
case of a
12
<PAGE>
waiver, by the party waiving compliance. The failure of either party at any
time or times to require performance of any provision hereof shall in no
manner effect the right at a later time to enforce the same. No waiver by
either party of the breach of any term or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such breach, or a waiver of the breach of any other term or covenant contained
in this Agreement.
11. Subsidiaries and Affiliates.
11.1 As used herein, the term "subsidiary" shall mean any
corporation or other business entity controlled directly or indirectly by the
corporation or other business entity in question, and the term "affiliate"
shall mean and include any corporation or other business entity directly or
directly controlling, controlled by or under common control with the
corporation or other business entity in question.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
FIRST NATIONWIDE BANK,
A Federal Savings Bank
By: /s/ GERALD J. FORD
-----------------------------------------
Gerald J. Ford
Chairman and Chief Executive Officer
By: /s/ CHRISTIE S. FLANAGAN
-----------------------------------------
Christie S. Flanagan
13
<PAGE>
APPENDIX I
Additional Benefits:
1. Medical Examination. The Executive shall be
reimbursed by the Company for the reasonable cost of one annual
medical examination upon presentation of an expense statement.
2. Automobile. The Company shall afford the Executive the right to
use an automobile on a continuing basis and shall provide garaging near the
Executive's office, all on the following basis. The Company shall pay, upon
presentation of an expense statement, all reasonable expenses associated with
the operation of such automobile and the rental of such garage space in the
same manner as is, from time to time, in effect with respect to executive
officers of the Company generally, including, without limitation, all
reasonable maintenance and insurance expenses. The automobile furnished by the
Company shall be a late model top-of-the-line luxury automobile to be
reasonably selected by the Executive. Upon the expiration of the Term, the
Executive promptly shall return the automobile to the Company.
3. Insurance. The Company agrees to provide the Executive with
additional split dollar term life insurance coverage with a face amount of two
(2) times the then current Base Salary, on the following basis. The Executive
may select a plan of his choice and may designate the beneficiary of such
plan. The Company shall pay, upon presentation of an expense statement, the
periodic premiums relating to such additional term life insurance payable
during the Term.
4. Club Membership. The Company shall reimburse the
Executive, upon presentation of an expense statement, for all
reasonable initiation fees and periodic dues for membership in a
golf or social club of the Executive's choice.
5. Disability. If the Company elects to terminate the
Term pursuant to Section 4.2 of the Agreement, in addition to the
amounts payable under such Section, for the shorter of the
period the Executive remains disabled or until the Executive has
attained the age of 65, the Company shall continue to provide
14
<PAGE>
benefits for the Executive under the corporate group life insurance plan and
for the Executive, his spouse and children under the corporate group medical
(including the executive medical plan) insurance plan, to the extent permitted
by such plans and to the extent such benefits continue to be provided to the
Company's employees or officers, as applicable, generally.
6. Management Incentive Plan. The Executive shall be eligible to
participate in the First Nationwide Holdings Inc. Management Incentive Plan
and shall be granted 80 units thereunder. Participation shall be subject to
the terms of the Plan. In the event that the Term of the Agreement is
terminated pursuant to Section 4.4 hereof, the Executive's interest in such
plan shall become fully vested.
15
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment"), dated as of
June 1, 1996, between First Nationwide Bank, A Federal Savings Bank (the
"Company") and Lacy G. Newman (the "Executive").
The Company presently employs the Executive pursuant to that Employment
Agreement between the parties dated as of February 1, 1995 (the "Agreement").
The Company and Executive desire to amend the Agreement to respond to certain
recommendations made by the Office of Thrift Supervision, which regulates and
oversees the operations of the Company.
Accordingly, the Company and the Executive agree as follows:
1. Amendments.
Pursuant to the requirements of Section 10.5 of the Agreement, the provisions of
Section 4.3 of the Agreement are amended to add the following language to the
end of such section:
Termination for cause under the foregoing sentence shall also include
the bases therefore set forth in the provisions of 12 C.F.R. Section
563.39(b)(1) or successor regulation defining termination for cause in
employment agreements for employees of a savings association.
2. No Other Amendments.
The balance of the provisions of the Agreement are not modified by this
Amendment and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
FIRST NATIONWIDE BANK,
A FEDERAL SAVINGS BANK
By: /s/ GERALD J. FORD
----------------------------------
Gerald J. Ford
Chairman and Chief Executive Officer
/s/ LACY G. NEWMAN
----------------------------------
Lacy G. Newman
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data gives effect to the
Acquisitions, the Branch Sales, the issuances of the Holdings Preferred Stock
and the Holdings 9 1/8% Senior Subordinated Notes and the Offering. The Branch
Purchases and the Home Federal Acquisition have not been reflected in the pro
forma financial data because such transactions are not material either
individually or in the aggregate.
The following pro forma financial data as of and for the six months ended
June 30, 1996 are based on (i) the historical consolidated statement of
financial condition of Holdings giving effect to the Cal Fed Acquisition, the
issuance of the Holdings Preferred Stock and the Offering as if such
transactions occurred on June 30, 1996, and (ii) the historical consolidated
statement of operations of Holdings for the six months ended June 30, 1996
giving effect to the Cal Fed Acquisition, the SFFed Acquisition, the LMUSA
1996 Purchase, the Branch Sales, the issuances of the Holdings Preferred Stock
and the Holdings 9 1/8% Senior Subordinated Notes and the Offering as if such
transactions occurred on January 1, 1995. The following pro forma financial
data for the year ended December 31, 1995 is based on the historical
consolidated statement of operations of Holdings for the year ended December
31, 1995 giving effect to the Acquisitions, the Branch Sales, the issuances of
the Holdings Preferred Stock and the Holdings 9 1/8% Senior Subordinated Notes
and the Offering as if such transactions occurred on January 1, 1995. The pro
forma adjustments are based on available information and upon certain
assumptions that management believes are reasonable under the circumstances.
The Acquisitions are accounted for under the purchase method of accounting.
Under this method of accounting, the purchase price has been allocated to the
assets and liabilities acquired based on preliminary estimates of fair value.
The actual fair value is determined as of the consummation of each of the
Acquisitions. The pro forma financial data do not necessarily reflect the
results of operations or the financial position of Holdings that actually
would have resulted had the Acquisitions, the Branch Sales, the issuances of
the Holdings Preferred Stock and the Holdings 9 1/8% Senior Subordinated Notes
and the Offering occurred at the dates indicated, or project the results of
operations or financial position of Holdings for any future date or period.
The following unaudited pro forma financial data should be read in
conjunction with the Consolidated Financial Statements of Holdings and the
notes thereto, the Consolidated Financial Statements of SFFed and the notes
thereto and the Consolidated Financial Statements of Cal Fed and California
Federal and the notes thereto, contained elsewhere in this Offering Circular.
Capitalized terms used and not defined herein have the meanings set forth in
the Offering Circular.
Capitalized terms used but not defined herein have the meaning ascribed to
them in Holdings' Annual Report on Form 10-K, as amended, and Holdings'
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
P-1
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION
JUNE 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CAL FED ACQUISITION (A)
----------------------------------------------------------
CAL FED
HOLDINGS CAL FED VALUATION PRO FORMA ACQUISITION PRO FORMA
HISTORICAL HISTORICAL(I) ADJUSTMENTS(II) ADJUSTMENTS(III) PRO FORMA CAPITALIZATION(B) COMBINED
----------- ------------ --------------- ---------------- ----------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents . $ 227,693 $ 255,000 $ -- $ -- $ 255,000 $ 506,500 (1) $ 141,560
145,000 (2)
(992,633)(3)
Securities ................. 504,296 1,558,400 (800)(1) -- 1,557,600 (300,000)(3) 1,761,896
Mortgage-backed securities 3,509,994 2,140,000 5,000 (1) -- 2,145,000 -- 5,654,994
Loans receivable, net ..... 11,862,743 9,669,100 (25,661)(1) -- 9,643,439 -- 21,506,182
Covered assets ............. 39,349 -- -- -- -- -- 39,349
Office premises and
equipment, net ............ 90,203 65,600 (56,633)(1) -- 8,967 -- 99,170
Mortgage servicing rights,
net ....................... 381,670 4,773 27,485 (1) -- 32,258 -- 413,928
Intangible assets .......... 146,160 15,399 (15,399)(1) 517,171 (1) 517,171 -- 663,331
Other assets ............... 934,303 337,128 138,597 (1) -- 529,101 18,500 (1) 1,481,904
53,376 (1)
----------- ------------ --------------- ---------------- ----------- ---------------- ------------
Total assets ...............$17,696,411 $14,045,400 $125,965 (1) $ 517,171 $14,688,536 $ (622,633) $ 31,762,314
=========== ============ =============== ================ =========== ================ ============
LIABILITIES, MINORITY
INTEREST AND
STOCKHOLDERS' EQUITY
Deposits ...................$ 9,035,219 $ 8,844,200 $ 30,413 (1) $ -- $ 8,874,613 $ -- $ 17,909,832
Borrowings ................. 7,122,168 4,211,500 (2,010)(1) -- 4,209,490 525,000 (1) 11,856,658
Other liabilities .......... 464,408 134,000 5,300 (1) -- 139,300 -- 603,708
----------- ------------ --------------- ---------------- ----------- ---------------- ------------
Total liabilities .......... 16,621,795 13,189,700 33,703 -- 13,223,403 525,000 30,370,198
----------- ------------ --------------- ---------------- ----------- ---------------- ------------
Cost of the Cal Fed
Acquisition ............... -- -- -- 1,292,633 (2) 1,292,633 (1,292,633)(3) --
Minority interest .......... 309,376 172,500 172,500 -- 481,876
Stockholders' equity ....... 765,240 683,200 92,262 (1) (775,462)(3) -- 150,000 (2) 910,240
(5,000)(2)
----------- ------------ --------------- ---------------- ----------- ---------------- ------------
Total liabilities, minority
interest and stockholders'
equity ....................$17,696,411 $14,045,400 $125,965 $ 517,171 $14,688,536 $ (622,633) $ 31,762,314
=========== ============ =============== ================ =========== ================ ============
</TABLE>
- ------------
(A) See note (A) on page P-3.
(B) See note (B) on page P-4.
(i) Represents historical amounts obtained from Cal Fed's unaudited
financial statements.
(ii) Represents adjustments to (i) record Cal Fed's assets and liabilities
at preliminary estimates of their respective fair value and (ii) the
elimination of Cal Fed's historical intangible assets.
(iii) Represents adjustments to record (i) the purchase price of the Cal Fed
Acquisition, and (ii) the elimination of the equity of Cal Fed.
Under proposed congressional legislation relative to the
recapitalization of the SAIF, a special assessment could be levied against
SAIF-insured deposits, which is currently estimated to range from 85 to 90
basis points. The impact of such assessment (at 90 basis points) on the pro
forma condensed combined statement of financial condition as of June 30, 1996
would be to (i) increase other liabilities by approximately $148 million and
(ii) reduce stockholders' equity by approximately $148 million. See
"Regulation--Regulation of Federal Savings Banks--FDIC Assessments."
P-2
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION
JUNE 30, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(A) CAL FED ACQUISITION
(1) The Cal Fed Acquisition will be accounted for using the purchase method of
accounting. The aggregate purchase price was determined as follows:
<TABLE>
<CAPTION>
<S> <C>
Purchase price, as defined:
Shares outstanding at June 30, 1996 .......... 49,395,947
Options outstanding at June 30, 1996 ......... 1,395,300
------------
Total .................................. 50,791,247
Purchase price per share ..................... $ 23.50
------------
$ 1,193,594
Exercise of options outstanding (a) .......... (11,218)
------------
Purchase price ............................... 1,182,376
Acquisition fees and costs (b) .............. 110,257
------------
Total .................................. $ 1,292,633
============
</TABLE>
The following is a reconciliation of the equity of Cal Fed to the fair
value of the net assets to be acquired by Holdings:
<TABLE>
<CAPTION>
<S> <C> <C>
Equity of Cal Fed at June 30, 1996 ............... $ 683,200
Fair value adjustments (c):
Securities ...................................... $ (800)
Mortgage-backed securities ...................... 5,000
Loans receivable, net ........................... (25,661)
Mortgage servicing rights ....................... 27,485
Office premises and equipment ................... (56,633)
Litigation receivable, net (other assets) (d) .. 138,597
Other assets (e) ................................ 53,376
Deposits ........................................ (30,413)
Borrowings ...................................... 2,010
Other liabilities ............................... (5,300)
Elimination of historical intangible assets .... (15,399)
--------
92,262 92,262
-----------
Fair value of net assets acquired ............... 775,462
Purchase cost ................................... 1,292,633
-----------
Excess of purchase cost over net assets acquired
("goodwill") ................................... $ 517,171
===========
</TABLE>
(a) Represents cash to be received by Cal Fed in settlement of stock
options and stock appreciation rights outstanding as of June 30, 1996
(1,395,300 options outstanding at an average price of $8.04 per share).
P-3
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION
JUNE 30, 1996
(DOLLARS IN THOUSANDS)
(A) CAL FED ACQUISITION (CONTINUED)
(b) Represents fees and costs consisting of the following:
<TABLE>
<CAPTION>
<S> <C>
Severance costs ......................................... $ 45,500
Pension plan termination costs .......................... 6,700
Conversion and contract termination costs ............... 33,257
Investment banking, legal and other professional costs .. 24,800
---------
$110,257
=========
</TABLE>
(c) Fair value adjustments are amortized against (accreted to) net income
as follows:
<TABLE>
<CAPTION>
PERIOD OF AMORTIZATION
ITEM METHOD OF AMORTIZATION (ACCRETION) (ACCRETION)
- ------------------------------ ------------------------------------------------ --------------------------
<S> <C> <C>
Mortgage-backed securities Level yield method over effective terms of such 6 to 9 years
assets, considering estimated prepayments
Loans receivable Level yield method over effective terms of such 2 to 12 years
assets, considering estimated prepayments
Mortgage servicing rights Level yield method over effective terms of such 2 to 7 years
assets, considering estimated prepayments
Goodwill Straight-line method 15 years
Deposits Level yield method over stated terms of such 1 to 6 years
liabilities
Borrowings Level yield method over stated terms of such 1 to 9 years
liabilities
</TABLE>
(d) Represents the estimated after-tax recovery that will inure to the Bank
from the California Federal Litigation, net of amounts payable to
holders of the Litigation Interests and the Secondary Litigation
Interests.
(e) Includes fair value adjustments to reflect Federal income tax and
interest receivable, net of California franchise tax and interest
payable.
(2) Represents payment by Holdings in connection with the Cal Fed
Acquisition.
(3) Represents the elimination of the equity of Cal Fed of $775,462.
(B) CAPITALIZATION
(1) Represents the issuance of the Notes:
Proceeds from the issuance of the Notes ..... $525,000
Less: deferred issuance costs ............... (18,500)
----------
Net proceeds ........................... $506,500
==========
(2) Represents the issuance of the Holdings Preferred Stock:
Proceeds from the issuance of the Holdings
Preferred Stock ........................... $150,000
Less: issuance costs ........................ (5,000)
----------
Net proceeds ........................... $145,000
==========
(3) Represents payment by Holdings in connection with the Cal Fed Acquisition.
The cash portion of the purchase price will be obtained by liquidating
certain of Cal Fed's assets at book value, as follows:
Existing cash ............................... $ 992,633
Sale of securities available for sale ....... 300,000
----------
Purchase price ......................... $1,292,633
==========
P-4
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
SFFED LMUSA 1996 CAL FED
ACQUISITION PURCHASE PRO ACQUISITION BRANCH SALES
HOLDINGS PRO FORMA FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA
HISTORICAL TOTALS(A) TOTALS(B) TOTALS (C) TOTALS(D) ADJUSTMENTS (E) COMBINED
---------- ----------- ------------ ------------ ------------ --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans receivable .................. $478,745 $21,821 $ -- $383,650 $ (110) $ -- $ 884,106
Securities ........................ 15,696 1,017 -- 54,900 -- -- 71,613
Mortgage-backed securities ........ 130,422 3,174 -- 86,600 -- -- 220,196
Other interest income ............. 1,413 -- -- (15,801) -- -- (14,388)
---------- ----------- ------------ ------------ ------------ --------------- ---------
Total interest income ............ 626,276 26,012 -- 509,349 (110) -- 1,161,527
INTEREST EXPENSE:
Deposits .......................... 222,656 12,401 -- 216,500 (40,742) -- 410,815
Borrowings ........................ 185,580 6,114 (848) 112,450 44,835 28,219 (1) 377,415
1,065 (1)
---------- ----------- ------------ ------------ ------------ --------------- ---------
Total interest expense ........... 408,236 18,515 (848) 328,950 4,093 29,284 788,230
Net interest income ............... 218,040 7,497 848 180,399 (4,203) (29,284) 373,297
Provision for loan losses ......... 19,800 500 -- 20,400 -- -- 40,700
---------- ----------- ------------ ------------ ------------ --------------- ---------
Net interest income after
provision for loan losses ........ 198,240 6,997 848 159,999 (4,203) (29,284) 332,597
NONINTEREST INCOME:
Customer banking fees ............. 23,806 199 -- 24,100 (3,965) -- 44,140
Mortgage banking operations ...... 60,765 191 3,484 2,400 -- -- 66,840
Net gain (loss) on sales of assets 415,378 (1,140) -- 300 10 -- 414,548
Other ............................. 19,642 239 51 13,700 (163) -- 33,469
---------- ----------- ------------ ------------ ------------ --------------- ---------
Total noninterest income ......... 519,591 (511) 3,535 40,500 (4,118) -- 558,997
NONINTEREST EXPENSE:
Compensation and benefits ......... 110,866 1,257 2,070 33,964 (4,337) -- 143,820
Other ............................. 111,426 2,616 1,099 78,787 (3,387) 1,321 (2) 191,929
67 (2)
---------- ----------- ------------ ------------ ------------ --------------- ---------
Total noninterest expense ........ 222,292 3,873 3,169 112,751 (7,724) 1,388 335,749
---------- ----------- ------------ ------------ ------------ --------------- ---------
Income (loss) before income taxes
and minority interest ............ 495,539 2,613 1,214 87,748 (597) (30,672) 555,845
Income tax (benefit) expense ..... (81,351) 369 120 11,583 (59) (3,018)(3) (72,356)
---------- ----------- ------------ ------------ ------------ --------------- ---------
Net income (loss) before minority
interest ......................... 576,890 2,244 1,094 76,165 (538) (27,654) 628,201
MINORITY INTEREST ................. 25,938 -- -- 14,300 -- -- 40,238
---------- ----------- ------------ ------------ ------------ --------------- ---------
Net income (loss) ................. 550,952 2,244 1,094 61,865 (538) (27,654) 587,963 (5)
Holdings Preferred Stock dividends -- -- -- -- -- 7,500 (4) 7,500
---------- ----------- ------------ ------------ ------------ --------------- ---------
Net income (loss) available to
common stockholders .............. $550,952 $ 2,244 $ 1,094 $ 61,865 $ (538) $ (35,154) $ 580,463 (i)
========== =========== ============ ============ ============ =============== =========
</TABLE>
- ------------
(A) See note (A) on page P-6.
(B) See note (B) on page P-9.
(C) See note (C) on page P-11.
(D) See note (D) on page P-14.
(E) See note (E) on page P-16.
(i) Includes the following:
(a) gains of approximately $334.2 million (on an after-tax basis)
realized in connection with the Branch Sales;
(b) gain of approximately $12 million representing Cal Fed's gain on
branch sales;
(c) deferred tax benefit of First Nationwide of $125 million;
(d) after-tax gain on sale of ACS (as defined herein) common stock of
$36.4 million; and
(e) Incentive Plan expense of $27.4 million (on an after-tax basis).
P-5
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ONE MONTH ENDED JANUARY 31, 1996 (a)
-------------------------------------------------------------
SFFED
ACQUISITION
VALUATION PRO FORMA PRO FORMA
(A) SFFED ACQUISITION HISTORICAL ADJUSTMENTS (B) ADJUSTMENTS (C) TOTALS
- --------------------- ------------ --------------- --------------- -------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loan receivable .................... $20,524 $ 1,297 (1) $ -- $ 21,821
Securities ......................... 1,017 -- -- 1,017
Mortgage-backed securities ......... 2,976 198 (1) -- 3,174
Other interest income .............. -- -- -- --
------------ --------------- --------------- -------------
Total interest income ............. 24,517 1,495 -- 26,012
INTEREST EXPENSE:
Deposits ........................... 11,693 708 (1) -- 12,401
Borrowings ......................... 5,861 253 (1) -- 6,114
------------ --------------- --------------- -------------
Total interest expense ............ 17,554 961 -- 18,515
------------ --------------- --------------- -------------
Net interest income ................ 6,963 534 -- 7,497
Provision for loan losses .......... 500 -- -- 500
------------ --------------- --------------- -------------
Net interest income after provision
for loan losses ................... 6,463 534 -- 6,997
NONINTEREST INCOME:
Customer banking fees .............. 199 -- -- 199
Mortgage banking operations ....... 557 (366)(1) -- 191
Net gain (loss) on sales of assets (1,140) -- -- (1,140)
Other .............................. 239 -- -- 239
------------ --------------- --------------- -------------
Total noninterest income .......... (145) (366) -- (511)
NONINTEREST EXPENSE:
Compensation and benefits .......... 6,041 -- (4,784)(3) 1,257
Other .............................. 4,315 1,076 (2) (2,775)(4) 2,616
------------ --------------- --------------- -------------
Total noninterest expense ......... 10,356 1,076 (7,559) 3,873
------------ --------------- --------------- -------------
Income (loss) before income taxes
and minority taxes ................ (4,038) (908) 7,559 2,613
Income tax (benefit) expense ...... (4,993) -- 5,362 (5) 369
------------ --------------- --------------- -------------
Net income (loss) before minority
interest .......................... 955 (908) 2,197 2,244
------------ --------------- --------------- -------------
MINORITY INTEREST .................. -- -- -- --
------------ --------------- --------------- -------------
Net income (loss) .................. $ 955 $ (908) $ 2,197 $ 2,244
============ =============== =============== =============
</TABLE>
- ------------
(a) The SFFed Acquisition was consummated on February 1, 1996. Historical
results represent unaudited results of operations of SFFed for the
month ended January 31, 1996.
(b) Represents adjustments to reflect (i) the amortization or accretion of
fair value adjustments and (ii) the elimination of amortization of
historical goodwill.
(c) Represents adjustments to reflect (i) the elimination of certain
noninterest expense due to consolidation of SFFed operations with First
Nationwide's and (ii) the elimination of certain historical noninterest
expense recorded by SFFed as a result of the acquisition by First
Nationwide, and (iii) income taxes relative to the SFFed Acquisition.
P-6
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
IMPACT ON INCOME BEFORE
INCOME TAXES AND MINORITY
INTEREST INCREASE
(A) SFFED ACQUISITION (CONTINUED) (DECREASE)
- --------------------------------- -------------------------
<S> <C>
(1) Represents amortization or accretion of fair value adjustments as follows:
Loans receivable, net ......................................................... $1,297
Mortgage-backed securities .................................................... 198
Deposits ...................................................................... (708)
Borrowings .................................................................... (253)
Mortgage servicing rights ..................................................... (366)
=======
IMPACT ON INCOME
BEFORE INCOME TAXES
AND MINORITY INTEREST
INCREASE (DECREASE)
---------------------
(2) Represents adjustments consisting of the following:
Amortization of fair value adjustments--amortization of goodwill .............. $(1,131)
Elimination of amortization of SFFed's historical goodwill .................... 55
-------
$(1,076)
=======
(3) Represents adjustments to compensation and benefits expense relating to
the consolidation of SFFed's operations into those of Holdings:
Decrease in compensation and benefits due to the reduction in
headcount from 620 at January 1, 1996 to approximately 260 after the
consummation of the SFFed Acquisition. Substantially all retained
employees represent retail branch personnel............................. $ 1,586
Elimination of certain nonrecurring expenses recorded by SFFed
related to the acquisition by Holdings:
Accrual for severance for employees noticed for termination in
January 1996 .......................................................... 2,459
Directors retirement plan and fees ...................................... 388
Expense related to restricted stock options ............................. 351
--------
$ 4,784
========
</TABLE>
P-7
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS)
(A) SFFED ACQUISITION (CONTINUED)
(4) Represents adjustments to other noninterest expense relating to the
consolidation of SFFed's operations into those of Holdings. Substantially
all of SFFed's operations have been consolidated into the existing
operations of Holdings, resulting in a reduction in headcount of
approximately 58% with the remaining personnel primarily consisting of
retail branch personnel. In addition, ten retail branches have been
closed. The estimates are based on the pro-rata portion of the annual
expense reduction computed for the year ended December 31, 1995.
<TABLE>
<CAPTION>
SFFED COST OF 1995
HISTORICAL ONGOING EXPENSE
COSTS OPERATIONS REDUCTION
------------ ------------ -----------
<S> <C> <C> <C>
Expense decreases due to consolidation:
Mortgage banking operations:
Occupancy expenses, including insurance ........... $ 1,329 $ 588 $ 741
Travel, automobile and employee dues .............. 282 67 215
Telecommunications, postage and supplies .......... 900 214 686
Other, net ........................................ 1,047 460 587
------------ ------------ -----------
Subtotal mortgage banking operations ............. $ 3,558 $ 1,329 $ 2,229
============ ============ ===========
Retail Banking operations--reductions due to
consolidation of ten retail branches and retail
operations center:
Occupancy expenses, including insurance ........... $11,220 $ 3,405 $ 7,815
SAIF assessment reduction based on lower historical
assessment rate for First Nationwide ............. 6,811 6,011 800
Travel, automobile and employee dues .............. 410 60 350
Telecommunications and data processing ............ 1,766 364 1,402
Postage and messenger costs ....................... 666 473 193
Other costs, net .................................. 216 108 108
------------ ------------ -----------
Subtotal retail banking operations ............... $21,089 $10,421 $10,668
============ ============ ===========
Overhead areas, including executive offices,
legal, human resources, information services,
accounting, and strategic planning areas:
Occupancy costs ................................... $ 1,316 $ -- $ 1,316
Data processing costs ............................. 2,848 1,000 1,848
Marketing and advertising expenses ................ 2,094 500 1,594
Other overhead costs .............................. 8,072 8,072 --
------------ ------------ -----------
Subtotal overhead areas .......................... $14,330 $ 9,572 $ 4,758
============ ============ ===========
Total decreases due to consolidation ............ $38,977 $21,322 $17,655
============ ============ ===========
Estimated impact on January 1996 ................................................ $ 1,471
Elimination of certain nonrecurring expenses recorded
by SFFed related to the acquisition by First Nationwide:
Retirement of office, premises and equipment ................................... 1,115
Directors and officers insurance premiums ...................................... 189
-----------
Total expense reduction for the month ended January 31, 1996 ................ $ 2,775
===========
(5) Represents amount necessary to adjust historical tax expense to the pro
forma computation. Pro forma tax expense for the month ended January 31,
1996 related to the SFFed Acquisition was computed as follows:
Income before taxes .......................................................... $ 2,613
Add: permanent differences--amortization of goodwill ......................... 1,131
-----------
Taxable income ............................................................... $ 3,744
===========
Federal AMT, reduced, to the extent of 90%, by net operating loss carryovers .. $ 69
State taxes, at an assumed rate of 8% ........................................ 300
-----------
$ 369
===========
</TABLE>
P-8
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ONE MONTH ENDED JANUARY 31, 1996 (A)
----------------------------------------------------------------------------
LMUSA
PRO FORMA 1996 PURCHASE
(B) LMUSA 1996 PURCHASE HISTORICAL (A) ADJUSTMENTS (B) ADJUSTMENTS (C) PRO FORMA TOTALS
- ----------------------- ---------------- ----------------- ----------------- --------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans receivable .................................. $ -- $ -- $ -- $ --
Securities ........................................ -- -- -- --
Mortgage-backed securities ........................ -- -- -- --
Other interest income ............................. -- -- -- --
---------------- ----------------- ----------------- --------------------
Total interest income ........................... -- -- -- --
INTEREST EXPENSE:
Deposits .......................................... -- -- -- --
Borrowings ........................................ -- -- (848)(2) (848)
---------------- ----------------- ----------------- --------------------
Total interest expense .......................... -- -- (848) (848)
---------------- ----------------- ----------------- --------------------
Net interest income ............................... -- -- 848 848
Provision for loan losses ......................... -- -- -- --
---------------- ----------------- ----------------- --------------------
Net interest income after provision for loan
losses ........................................... -- -- 848 848
NONINTEREST INCOME:
Customer banking fees ............................. -- -- -- --
Mortgage banking operations ....................... 5,363 (1,879)(1) -- 3,484
Net gain (loss) on sales of assets ................ -- -- -- --
Other ............................................. 51 -- -- 51
---------------- ----------------- ----------------- --------------------
Total noninterest income ........................ 5,414 (1,879) -- 3,535
NONINTEREST EXPENSE:
Compensation and benefits ......................... 2,070 -- -- 2,070
Other ............................................. 1,940 -- (841)(3) 1,099
---------------- ----------------- ----------------- --------------------
Total noninterest expense ....................... 4,010 -- (841) 3,169
---------------- ----------------- ----------------- --------------------
Income (loss) before income taxes and minority
interest ......................................... 1,404 (1,879) 1,689 1,214
Income tax (benefit) expense ...................... -- -- 120 (4) 120
---------------- ----------------- ----------------- --------------------
Net income (loss) before minority interest ....... 1,404 (1,879) 1,569 1,094
---------------- ----------------- ----------------- --------------------
MINORITY INTEREST ................................. -- -- -- --
---------------- ----------------- ----------------- --------------------
Net income (loss) ................................. $ 1,404 $ (1,879) $ 1,569 $ 1,094
================ ================= ================= ====================
</TABLE>
- ------------
(a) The LMUSA 1996 Purchase was consummated on January 31, 1996.
Accordingly, historical financial data relating to operations acquired
in the LMUSA 1996 Purchase is presented for the month ended January 31,
1996 (unaudited). Historical financial statements were not available;
accordingly, historical data presented reflects best estimates of
management.
(b) Represents adjustments to reflect (i) the amortization of the fair
value of mortgage servicing rights and (ii) the elimination of
amortization of historical mortgage servicing rights.
(c) Represents adjustments to reflect (i) the decrease in interest expense
resulting from the transfer of custodial accounts acquired to First
Nationwide, (ii) elimination of certain other noninterest expense due
to consolidation with the Bank's existing mortgage banking operations,
and (iii) income taxes relative to the LMUSA 1996 Purchase.
P-9
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
(B) LMUSA 1996 PURCHASE (CONTINUED)
(1) Represents the difference between the amortization of pro forma recorded
balance of mortgage servicing rights and the historical amortization of
mortgage servicing rights as follows:
<TABLE>
<CAPTION>
IMPACT ON INCOME BEFORE
INCOME TAXES AND
MINORITY INTEREST
INCREASE/(DECREASE)
-----------------------
<S> <C>
Pro forma amortization .......... $(2,284)
Historical amortization (i) ..... 405
-----------------------
$(1,879)
=======================
</TABLE>
(i) Represents elimination of amortization of mortgage servicing
rights of $405 included in LMUSA's historical statement of
operations for the month ended January 31, 1996.
(2) Represents a decrease in interest expense resulting from the transfer of
custodial accounts acquired to First Nationwide.
(3) Represents the impact on other noninterest expense of (i) the elimination
of historical amounts related to LMUSA operations not included in the
LMUSA 1996 Purchase and (ii) the consolidation of the LMUSA 1996 Purchase
into the Bank's existing mortgage banking operations, as follows:
<TABLE>
<CAPTION>
DECREASE IN
LMUSA ESTIMATED OTHER
HISTORICAL FUTURE NONINTEREST
COSTS COSTS EXPENSE
------------ ----------- -------------
<S> <C> <C> <C>
Components of LMUSA historical noninterest
expense:
Facilities depreciation .......................... $ 128 $ -- (ii) $ (128)
Data processing, document storage, administrative
services and management fees .................... 833 120 (iii) (713)
Other miscellaneous costs ........................ 979 979 --
------------ ----------- -------------
$1,940 $1,099 $ (841)
============ =========== =============
</TABLE>
(ii) Represents historical amounts related to operations not included in
the LMUSA 1996 Purchase.
(iii) Represents amounts necessary to replace these services based on
Holdings' historical annual cost per loan based on the average number
of loans serviced.
(4) Represents amount necessary to adjust historical tax expense to the pro
forma computation. Pro forma tax expense for the month ended January 31,
1996 related to the LMUSA 1996 Purchase was computed as follows:
<TABLE>
<CAPTION>
<S> <C>
Federal AMT, reduced, to the extent of 90%, by net
operating loss carryovers ...................... $ 23
State taxes, at an assumed rate of 8% ............ 97
-----
$120
=====
</TABLE>
P-10
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
CAL FED
ACQUISITION
CAL FED VALUATION PRO FORMA PRO FORMA
(C) CAL FED ACQUISITION HISTORICAL ADJUSTMENTS (A) ADJUSTMENTS (B) TOTALS
- ----------------------- ------------ --------------- --------------- -------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans receivable ................................... $376,100 $ 7,550 (1) $ -- $383,650
Securities ......................................... 54,900 -- -- 54,900
Mortgage-backed securities ......................... 75,200 11,400 (1) -- 86,600
Other interest income .............................. 2,800 -- (18,601)(3) (15,801)
------------ --------------- --------------- -------------
Total interest income ............................. 509,000 18,950 (18,601) 509,349
INTEREST EXPENSE:
Deposits ........................................... 221,500 (5,000)(1) -- 216,500
Borrowings ......................................... 113,100 (650)(1) -- 112,450
------------ --------------- --------------- -------------
Total interest expense ............................ 334,600 (5,650) -- 328,950
------------ --------------- --------------- -------------
Net interest income ................................ 174,400 24,600 (18,601) 180,399
Provision for loan losses .......................... 20,400 -- -- 20,400
------------ --------------- --------------- -------------
Net interest income after provision for loan losses 154,000 24,600 (18,601) 159,999
NONINTEREST INCOME:
Customer banking fees .............................. 24,100 -- -- 24,100
Mortgage banking operations ........................ 5,600 (3,200)(1) -- 2,400
Net gain (loss) on sales of assets ................. 300 -- -- 300
Other .............................................. 13,700 -- -- 13,700 (6)
------------ --------------- --------------- -------------
Total noninterest income .......................... 43,700 (3,200) -- 40,500
NONINTEREST EXPENSE:
Compensation and benefits .......................... 48,000 -- (14,036)(4) 33,964
Other .............................................. 76,000 28,227 (2) (25,440)(4) 78,787
------------ --------------- --------------- -------------
Total noninterest expense ......................... 124,000 28,227 (39,476) 112,751
------------ --------------- --------------- -------------
Income (loss) before income taxes and minority
interest .......................................... 73,700 (6,827) 20,875 87,748
Income tax (benefit) expense ....................... 100 -- 11,483 (5) 11,583
------------ --------------- --------------- -------------
Net income (loss) before minority interest ........ 73,600 (6,827) 9,392 76,165
------------ --------------- --------------- -------------
MINORITY INTEREST .................................. 14,300 -- -- 14,300
------------ --------------- --------------- -------------
Net income (loss) .................................. $ 59,300 $ (6,827) $ 9,392 $ 61,865
============ =============== =============== =============
</TABLE>
- ------------
(a) Represents adjustments to reflect (i) the amortization or accretion of
fair value adjustments and (ii) the elimination of amortization of Cal
Fed's historical intangible assets.
(b) Represents adjustments to reflect (i) the reduction in interest income
relative to the loss in yield on the purchase price of the Cal Fed
Acquisition funded with existing cash, (ii) the elimination of certain
noninterest expense due to consolidation of Cal Fed's operations with
Holdings' and (iii) income taxes relative to the Cal Fed Acquisition.
P-11
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
(C) CAL FED ACQUISITION
(1) Represents amortization or accretion of fair value adjustments as
follows:
<TABLE>
<CAPTION>
IMPACT ON INCOME
BEFORE INCOME TAXES
AND MINORITY INTEREST
INCREASE/(DECREASE)
---------------------
<S> <C>
Loans receivable, net ..... $ 7,550
Mortgage-backed securities 11,400
Deposits ................... 5,000
Borrowings ................. 650
Mortgage servicing rights . (3,200)
=======
</TABLE>
(2) Represents adjustments consisting of the following:
<TABLE>
<CAPTION>
IMPACT ON INCOME
BEFORE INCOME TAXES
AND MINORITY INTEREST
INCREASE/(DECREASE)
---------------------
<S> <C>
Amortization of fair value adjustment--
amortization of goodwill ............... $(29,965)
Elimination of amortization of Cal Fed's
historical intangible assets ........... 1,738
--------
$(28,227)
========
</TABLE>
(3) Represents the reduction in interest income relative to the loss in
yield on the purchase price of the Cal Fed Acquisition funded with
existing cash.
(4) Represents adjustments to other noninterest expense relating to the
consolidation of Cal Fed's operations into those of Holdings. A
substantial portion of Cal Fed's operations will be consolidated into
the existing operations of Holdings, resulting in a reduction in
headcount of 850, or approximately 36%, across all business areas. In
addition, seven retail branches and two administrative offices will be
closed. Expected savings from such consolidation include compensation,
occupancy, travel, telecommunications, data processing and marketing
expenses. The expense reduction for the six months ended June 30, 1996
represents a 32% reduction over historical levels based on management's
current transition plan for the second year following the consummation
of the Cal Fed Acquisition:
<TABLE>
<CAPTION>
CAL FED COST OF ADJUSTMENT-
HISTORICAL ONGOING EXPENSE
BUSINESS AREA: COSTS OPERATIONS REDUCTION
- -------------- ---------- ---------- -----------
<S> <C> <C> <C>
Compensation:
Retail Banking ........ $24,369 $24,163 $ 206
Information Technology 283 634 (351)
Commercial Real Estate 3,847 1,095 2,752
Mortgage Banking ...... 10,396 6,301 4,095
Legal ................. 905 412 493
Finance ............... 2,967 616 2,351
Internal Audit ........ 689 141 548
Executive and Other .. 2,320 162 2,158
Human Resources ....... 1,412 231 1,181
Corporate Services ... 855 252 603
------------ ------------ -------------
48,043 34,007 14,036
</TABLE>
P-12
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
CAL FED COST OF ADJUSTMENT-
HISTORICAL ONGOING EXPENSE
BUSINESS AREA: COSTS OPERATIONS REDUCTION
- -------------- ---------- ---------- -----------
<S> <C> <C> <C>
Occupancy & Other Expense:
Retail Banking ............... $ 31,457 $13,570 $17,887
Information Technology ...... 14,297 4,776 9,521
Commercial Real Estate ...... 1,366 254 1,112
Mortgage Banking ............. 1,407 2,242 (835)
Legal ........................ 1,715 3,430 (1,715)
Finance ...................... 2,812 380 2,432
Internal Audit ............... 317 22 295
Executive and Other .......... 4,364 305 4,059
Human Resources .............. 1,640 115 1,525
Corporate Services ........... 2,971 11,812 (8,841)
------------- ------------ -------------
62,346 36,906 25,440
SAIF Deposit Insurance Premium 11,872 11,872 0
------------- ------------ -------------
Total Noninterest Expense ... $122,261(i) $82,785 $39,476
============= ============ =============
</TABLE>
(i) Balance represents total historical noninterest expense of $124,000
less historical amortization of intangible assets already adjusted in
note 2 on page P-12.
(5) Represents amount necessary to adjust historical tax expense to the pro
forma computation. Pro forma tax expense for the six months ended June
30, 1996 related to the Cal Fed Acquisition was computed as follows:
<TABLE>
<CAPTION>
<S> <C>
Income before taxes ............................................. $ 87,748
Add back: permanent differences--amortization of goodwill ...... 29,965
----------
Taxable income .................................................. $117,713
==========
Federal AMT, reduced, to the extent of 90%, by net operating
loss carryovers ................................................ $ 2,166
State taxes, at an assumed rate of 8% ........................... 9,417
----------
$ 11,583
==========
</TABLE>
(6) Includes $12,000 gain on sale of California Federal's branches in San
Diego county.
P-13
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
BRANCH SALES
OHIO SALE MICHIGAN SALE NORTHEAST SALE PRO FORMA
(D) BRANCH SALES PRO FORMA PRO FORMA PRO FORMA TOTALS
- ---------------- ------------ --------------- -------------- --------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans receivable ............................ $ (6)(a) $ (27)(a) $ (77)(a) $ (110)
Securities .................................. -- -- -- --
Mortgage-backed securities .................. -- -- -- --
Other interest income ....................... -- -- -- --
------------ --------------- -------------- --------------
Total interest income ...................... (6) (27) (77) (110)
INTEREST EXPENSE:
Deposits .................................... (3,392)(a) (17,009)(a) (20,341)(a) (40,742)
Borrowings .................................. 3,522 (1) 19,560 (1) 21,753 (1) 44,835
------------ --------------- -------------- --------------
Total interest expense ..................... 130 2,551 1,412 4,093
------------ --------------- -------------- --------------
Net interest income ......................... (136) (2,578) (1,489) (4,203)
Provision for loan losses ................... -- -- -- --
------------ --------------- -------------- --------------
Net interest income after provision for loan
losses ..................................... (136) (2,578) (1,489) (4,203)
NONINTEREST INCOME:
Customer banking fees ....................... (256)(a) (2,147)(a) (1,562)(a) (3,965)
Mortgage banking operations ................. -- -- -- --
Net gain (loss) on sales of assets .......... -- 2 8 10
Other ....................................... (15)(a) (63)(a) (85)(a) (163)
------------ --------------- -------------- --------------
Total noninterest income ................... (271) (2,208) (1,639) (4,118)
NONINTEREST EXPENSE:
Compensation and benefits ................... (516)(a) (2,133)(a) (1,688)(a) (4,337)
Other ....................................... (265)(a) (1,456)(a) (1,666)(a) (3,387)
------------ --------------- -------------- --------------
Total noninterest expense .................. (781) (3,589) (3,354) (7,724)
------------ --------------- -------------- --------------
Income (loss) before income taxes and
minority interest .......................... 374 (1,197) 226 (597)
Income tax (benefit) expense ................ 37 (118) 22 (59)(2)
------------ --------------- -------------- --------------
Net income (loss) before minority interest . 337 (1,079) 204 (538)
------------ --------------- -------------- --------------
MINORITY INTEREST ........................... -- -- -- --
------------ --------------- -------------- --------------
Net income (loss) ........................... $ 337 $ (1,079) $ 204 $ (538)
============ =============== ============== ==============
</TABLE>
- ------------
(a) Represents historical information for the six months ended June 30, 1996
related to the retail banking facilities in Ohio, Michigan and the
Northeast. Other noninterest expense includes occupancy, SAIF insurance
premiums, marketing, OTS assessments, data processing and
telecommunications directly attributable to the Ohio, Michigan and
Northeast retail branch operations. Amounts represent historical
information from January 1, 1996 through the date of sale.
P-14
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
(D) BRANCH SALES (CONTINUED)
(1) Represents increase in interest expense on borrowings to fund the
Branch Sales, as follows:
<TABLE>
<CAPTION>
SALE DEPOSITS PRE-TAX AMOUNT PRO FORMA
DATE LOCATION SOLD ASSETS GAIN BORROWED RATE DAYS INTEREST EXPENSE
---- -------- -------- ------ ------- -------- ---- ---- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1/19/96 Ohio 1,392,561 20,480 130,664 1,241,417 5.45%(i) 19 $ 3,522
=======
1/12/96 New York 416,476 5,997 32,967 377,512 5.45%(i) 12 $ 676
2/23/96 New York 270,046 1,838 17,054 251,154 5.45%(i) 54 2,025
3/15/96 New York 615,572 8,083 48,975 558,514 5.45%(i) 75 6,255
3/22/96 New Jersey 501,262 6,396 35,934 458,932 5.45%(i) 82 5,619
3/22/96 New York 637,045 9,465 41,311 586,269 5.45%(i) 82 7,178
-------
Total Northeast $21,753
=======
6/28/96 Michigan 799,226 15,060 56,411 727,755 5.45%(i) 180 $19,560
=======
</TABLE>
(i) Rate represents the average rates paid on new borrowings used to
finance the Branch Sales during the six months ended June 30,
1996.
(2) Represents amount necessary to adjust historical tax expense to the pro
forma computation. Pro forma tax expense for the six months ended June
30, 1996 related to the Branch Sales was computed as follows:
Federal AMT, reduced, to the extent of 90%, by net
operating loss carryovers ....................... $(11)
State taxes, at an assumed rate of 8% ............. (48)
-------
$(59)
=======
P-15
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
(E) PRO FORMA ADJUSTMENTS
(1) Represents interest expense as follows:
<TABLE>
<CAPTION>
<S> <C>
$525 million Notes at 10 3/4% per annum (estimated) .... $28,219
$140 million Holdings 9 1/8% Senior Subordinated Notes
issued January 31, 1996 (expense for one month) ...... 1,065
</TABLE>
A change in the interest rate payable with respect to the Notes of .25%
would change interest expense by $656.
(2) Represents the amortization of:
<TABLE>
<CAPTION>
<S> <C>
$18,500 in deferred debt issuance costs over the seven year
term of the Notes ............................................. $ 1,321
$5,600 in deferred debt issuance costs over the seven year term
of the Holdings 9 1/8% Senior Subordinated Notes (for one
month) ........................................................ 67
</TABLE>
(3) Represents amounts necessary to adjust historical tax expense to the
pro forma computation. Pro forma tax expense for the six months ended
June 30, 1996 related to the issuance of the Holdings 9 1/8% Senior
Subordinated Notes and the Notes was computed as follows:
<TABLE>
<CAPTION>
<S> <C>
Federal AMT, reduced to the extent of 90%, by net
operating loss carryovers ................................ $ (564)
State taxes, at an assumed rate of 8% ..................... (2,454)
--------
$(3,018)
========
</TABLE>
(4) Represents dividends on Holdings Preferred Stock (estimated at 10% per
annum). A change of .25% in the dividend rate payable with respect to
the Holdings Preferred Stock would change dividends by $188.
(5) Management expects the Bank to maintain its "well capitalized" status
upon consummation of the Cal Fed Acquisition. Accordingly, First
Nationwide may sell certain of its assets or cause Cal Fed to sell
certain assets of Cal Fed prior to the consummation of the Cal Fed
Acquisition. The assets to be sold may include mortgage-backed
securities (such as the MBS Sale), or other assets. To the extent
interest-bearing assets of the Bank or Cal Fed are sold, the net income
of the Bank would decrease by the amount of the incremental yield on
such assets over their related funding cost. Such reductions are not
reflected in pro forma net income (loss).
P-16
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
SFFED LMUSA CAL FED
ACQUISITION PURCHASES ACQUISITION
HOLDINGS PRO FORMA PRO FORMA PRO FORMA
HISTORICAL TOTALS(A) TOTALS(B) TOTALS(C)
------------ ------------- ----------- -------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans receivable ............................ $ 823,864 $230,713 $22,477 $ 722,000
Securities .................................. 28,396 10,685 -- 124,200
Mortgage-backed securities .................. 212,880 62,403 -- 192,600
Other interest income ....................... 10,705 -- -- (24,322)
------------ ------------- ----------- -------------
Total interest income ...................... 1,075,845 303,801 22,477 1,014,478
INTEREST EXPENSE:
Deposits .................................... 447,359 143,797 -- 396,200
Borrowings .................................. 287,456 74,587 2,018 245,400
------------ ------------- ----------- -------------
Total interest expense ..................... 734,815 218,384 2,018 641,600
Net interest income ......................... 341,030 85,417 20,459 372,878
Provision for loan losses ................... 37,000 11,094 -- 31,800
------------ ------------- ----------- -------------
Net interest income after provision for loan
losses ..................................... 304,030 74,323 20,459 341,078
NONINTEREST INCOME:
Customer banking fees ....................... 47,493 5,291 -- 42,100
Mortgage banking operations ................. 70,265 860 76,445 3,600
Net gain (loss) on sales of assets .......... 147 -- (1,851) 6,600
Other ....................................... 33,068 1,677 2,690 2,400
------------ ------------- ----------- -------------
Total noninterest income ................... 150,973 7,828 77,284 54,700
NONINTEREST EXPENSE:
Compensation and benefits ................... 154,288 11,141 19,500 69,408
Other ....................................... 178,265 34,896 38,081 158,926
------------ ------------- ----------- -------------
Total noninterest expense .................. 332,553 46,037 57,581 228,334
------------ ------------- ----------- -------------
Income (loss) before income taxes,
extraordinary item and minority interest .. 122,450 36,114 40,162 167,444
Income tax (benefit) expense ................ (57,185) 4,890 3,952 22,374
------------ ------------- ----------- -------------
Income (loss) before extraordinary item and
minority interest .......................... 179,635 31,224 36,210 145,070
Extraordinary item--gain on early
extinguishment of FHLB advances, net ...... 1,967 -- -- --
------------ ------------- ----------- -------------
Net income (loss) before minority interest . 181,602 31,224 36,210 145,070
MINORITY INTEREST ........................... 34,584 -- -- 25,600
------------ ------------- ----------- -------------
Net income (loss) ........................... 147,018 31,224 36,210 119,470
Holdings Preferred Stock dividends .......... -- -- -- --
------------ ------------- ----------- -------------
Net income (loss) available to common
stockholders ............................... $ 147,018 $ 31,224 $36,210 $ 119,470
============ ============= =========== =============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BRANCH SALES
PRO FORMA PRO FORMA PRO FORMA
TOTALS(D) ADJUSTMENTS(E) COMBINED
-------------- -------------- -------------
<S> <C> <C> <C>
INTEREST INCOME:
Loans receivable ............................ $ (623) $ -- $1,798,431
Securities .................................. -- -- 163,281
Mortgage-backed securities .................. -- -- 467,883
Other interest income ....................... -- -- (13,617)
-------------- -------------- -------------
Total interest income ...................... (623) -- 2,415,978
INTEREST EXPENSE:
Deposits .................................... (211,530) -- 775,826
Borrowings .................................. 280,671 56,438 (1) 959,345
12,775 (1)
-------------- -------------- -------------
Total interest expense ..................... 69,141 69,213 1,735,171
Net interest income ......................... (69,764) (69,213) 680,807
Provision for loan losses ................... -- 79,894
-------------- -------------- -------------
Net interest income after provision for loan
losses ..................................... (69,764) (69,213) 600,913
NONINTEREST INCOME:
Customer banking fees ....................... (22,228) -- 72,656
Mortgage banking operations ................. -- -- 151,170
Net gain (loss) on sales of assets .......... -- -- 4,896
Other ....................................... (789) -- 39,046
-------------- -------------- -------------
Total noninterest income ................... (23,017) -- 267,768
NONINTEREST EXPENSE:
Compensation and benefits ................... (19,476) 234,861
Other ....................................... (25,823) 2,643 (2) 387,788
800 (2)
-------------- -------------- -------------
Total noninterest expense .................. (45,299) 3,443 622,649
-------------- -------------- -------------
Income (loss) before income taxes,
extraordinary item and minority interest .. (47,482) (72,656) 246,032
Income tax (benefit) expense ................ (4,671) (7,149)(3) (37,789)
-------------- -------------- -------------
Income (loss) before extraordinary item and
minority interest .......................... (42,811) (65,507) 283,821
Extraordinary item--gain on early
extinguishment of FHLB advances, net ...... -- -- 1,967
-------------- -------------- -------------
Net income (loss) before minority interest . (42,811) (65,507) 285,788
MINORITY INTEREST ........................... -- -- 60,184
-------------- -------------- -------------
Net income (loss) ........................... (42,811) (65,507) 225,604 (4)
Holdings Preferred Stock dividends .......... -- 15,000 (5) 15,000
-------------- -------------- -------------
Net income (loss) available to common
stockholders ............................... $ (42,811) $(80,507) $ 210,604
============== ============== =============
</TABLE>
- ------------
(A) See note (A) on page P-18.
(B) See note (B) on page P-22.
(C) See note (C) on page P-24.
(D) See note (D) on page P-27.
(E) See note (E) on page P-29.
P-17
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
(A) SFFED ACQUISITION
<TABLE>
<CAPTION>
SFFED
ACQUISITION
VALUATION PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS(A) ADJUSTMENTS(B) TOTALS
------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans receivable .......................... $215,147 $ 15,566 (1) $ -- $ 230,713
Securities ................................ 10,685 -- -- 10,685
Mortgage-backed securities ................ 60,024 2,379 (1) -- 62,403
Other interest income ..................... -- -- -- --
------------ -------------- -------------- -------------
Total interest income .................... 285,856 17,945 -- 303,801
INTEREST EXPENSE:
Deposits .................................. 135,299 8,498 (1) -- 143,797
Borrowings ................................ 71,543 3,044 (1) -- 74,587
------------ -------------- -------------- -------------
Total interest expense ................... 206,842 11,542 -- 218,384
------------ -------------- -------------- -------------
Net interest income ....................... 79,014 6,403 -- 85,417
Provision for loan losses ................. 11,094 -- -- 11,094
------------ -------------- -------------- -------------
Net interest income after provision for
loan losses .............................. 67,920 6,403 -- 74,323
NONINTEREST INCOME:
Customer banking fees ..................... 5,291 -- -- 5,291
Mortgage banking operations ............... 5,255 (4,395)(1) -- 860
Net gain (loss) on sales of assets ....... -- -- -- --
Other ..................................... 1,677 -- -- 1,677
------------ -------------- -------------- -------------
Total noninterest income ................. 12,223 (4,395) -- 7,828
NONINTEREST EXPENSE:
Compensation and benefits ................. 35,518 -- (24,377)(3) 11,141
Other ..................................... 43,257 12,905 (2) (21,266)(4) 34,896
------------ -------------- -------------- -------------
Total noninterest expense ................ 78,775 12,905 (45,643) 46,037
------------ -------------- -------------- -------------
Income (loss) before income taxes,
extraordinary item and minority interest 1,368 (10,897) 45,643 36,114
Income tax (benefit) expense .............. 1,568 -- 3,322 (5) 4,890
------------ -------------- -------------- -------------
Income (loss) before extraordinary item
and minority interest .................... (200) (10,897) 42,321 31,224
Extraordinary item--gain on early
extinguishment of FHLB advances, net .... -- -- -- --
------------ -------------- -------------- -------------
Net income (loss) before minority interest (200) (10,897) 42,321 31,224
MINORITY INTEREST ......................... -- -- -- --
------------ -------------- -------------- -------------
Net income (loss) ......................... $ (200) $ (10,897) $42,321 $ 31,224
============ ============== ============== =============
</TABLE>
- ------------
(a) Represents adjustments to reflect (i) the amortization or accretion of
fair value adjustments and (ii) the elimination of amortization of
historical goodwill.
(b) Represents adjustments to reflect (i) the elimination of certain
noninterest expense due to consolidation of SFFed operations with First
Nationwide, (ii) the elimination of certain historical noninterest
expense recorded by SFFed as a result of the acquisition by First
Nationwide and (iii) income taxes relative to the SFFed Acquisition.
P-18
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
(A) SFFED ACQUISITION (CONTINUED)
(1) Represents amortization or accretion of fair value adjustments as
follows:
<TABLE>
<CAPTION>
IMPACT ON INCOME
BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND
MINORITY INTEREST
INCREASE/(DECREASE)
----------------------
<S> <C>
Loans receivable, net .... $15,566
Mortgage-backed securities 2,379
Deposits .................. (8,498)
Borrowings ................ (3,044)
Mortgage servicing rights (4,395)
======================
</TABLE>
(2) Represents adjustments consisting of the following:
<TABLE>
<CAPTION>
IMPACT ON INCOME
BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND
MINORITY INTEREST
INCREASE/(DECREASE)
----------------------
<S> <C>
Amortization of goodwill ................. $(13,574)
Elimination of amortization of SFFed's
historical goodwill ..................... 669
----------------------
$(12,905)
======================
</TABLE>
(3) Represents adjustments to noninterest expense relating to the
consolidation of SFFed's operations into those of Holdings and the
elimination of nonrecurring historical expenses related to the SFFed
Acquisition:
<TABLE>
<CAPTION>
<S> <C>
Decrease in compensation and benefits due to the reduction in
headcount from 620 at January 1, 1995 to approximately 260
after the consummation of the SFFed Acquisition. Substantially
all retained employees represent retail branch personnel .... $19,037
Elimination of certain accruals recorded by SFFed related to
the acquisition by Holdings:
Payments under employment contracts ........................ 2,080
Accruals for benefit plans frozen by First Nationwide ...... 3,260
---------
$24,377
=========
</TABLE>
(4) Represents adjustments to other noninterest expense relating to the
consolidation of SFFed's operations into those of Holdings and the
elimination of nonrecurring historical expenses of SFFed. Substantially
all of SFFed's operations have been consolidated into the existing
operations of Holdings, resulting in a reduction in headcount of
approximately 58% with the remaining personnel primarily consisting of
retail branch personnel. In addition, ten retail branches have been
closed.
P-19
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
(A) SFFED ACQUISITION (CONTINUED)
<TABLE>
<CAPTION>
SFFED COST OF ADJUSTMENT-
HISTORICAL ONGOING EXPENSE
COSTS OPERATIONS REDUCTION
------------ ------------ -------------
<S> <C> <C> <C>
Expense decreases due to consolidation:
Mortgage banking operations:
Occupancy expenses, including insurance ....... $ 1,329 $ 588 $ 741
Travel, automobile and employee dues .......... 282 67 215
Telecommunications, postage and supplies ...... 900 214 686
Other, net .................................... 1,047 460 587
------------ ------------ -------------
Subtotal mortgage banking operations ......... $ 3,558 $ 1,329 $ 2,229
============ ============ =============
Retail Banking operations --reductions due to
consolidation of ten retail branches and
retail operations center:
Occupancy expenses, including insurance ....... $11,220 $ 3,405 $ 7,815
SAIF assessment reduction based on lower
historical assessment rate for First
Nationwide .................................. 6,811 6,011 800
Travel, automobile and employee dues .......... 410 60 350
Telecommunications and data processing ........ 1,766 364 1,402
Postage and messenger costs ................... 666 473 193
Other costs, net .............................. 216 108 108
------------ ------------ -------------
Subtotal retail banking operations ........... $21,089 $10,421 $10,668
============ ============ =============
Overhead areas, including executive offices,
legal, human resources, information services,
accounting, and strategic planning areas:
Occupancy costs ............................... $ 1,316 $ -- $ 1,316
Data processing costs ......................... 2,848 1,000 1,848
Marketing and advertising expenses ............ 2,094 500 1,594
Other overhead costs .......................... 8,072 8,072 --
------------ ------------ -------------
Subtotal overhead areas ...................... $14,330 $ 9,572 $ 4,758
============ ============ =============
Total decreases due to consolidation ........ $38,977 $21,322 $17,655
Elimination of certain nonrecurring expense
recorded by SFFed related to the acquisition by
First Nationwide:
Data processing termination fees .............. 875 -- 875
Investment banker fees related to the SFFed
Acquisition ................................. 2,311 -- 2,311
Legal fees related to the SFFed Acquisition ... 425 -- 425
------------ ------------ -------------
Total expense reduction ..................... $42,588(i) $21,322 $21,266
============ ============ =============
</TABLE>
- ------------
(i) Balance represents total historical noninterest expense of $43,257 less
historical amortization of goodwill already adjusted in note 2 on page
P-19.
P-20
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
(A) SFFED ACQUISITION (CONTINUED)
(5) Represents amount necessary to adjust historical tax expense to the pro
forma computation. Pro forma tax expense for the year ended December 31,
1995 related to the SFFed Acquisition was computed as follows:
<TABLE>
<CAPTION>
<S> <C>
Income before taxes ............................................. $36,114
Add back: permanent differences--amortization of goodwill ...... 13,574
---------
Taxable income .................................................. $49,688
=========
Federal AMT, reduced, to the extent of 90%, by net operating
loss carryovers ................................................ $ 915
State taxes, at an assumed rate of 8% ........................... 3,975
---------
$ 4,890
=========
</TABLE>
P-21
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
(B) LMUSA PURCHASES
<TABLE>
<CAPTION>
PRO FORMA LMUSA PURCHASES
HISTORICAL(A) ADJUSTMENTS(B) ADJUSTMENTS(C) PRO FORMA TOTALS
------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans receivable ............................ $ 22,477 $ -- $ -- $ 22,477
Securities .................................. -- -- -- --
Mortgage-backed securities .................. -- -- -- --
Other interest income ....................... -- -- -- --
------------- -------------- -------------- ----------------
Total interest income ..................... 22,477 -- -- 22,477
INTEREST EXPENSE:
Deposits .................................... -- -- -- --
Borrowings .................................. 38,358 -- (36,340)(2) 2,018
------------- -------------- -------------- ----------------
Total interest expense .................... 38,358 -- (36,340) 2,018
------------- -------------- -------------- ----------------
Net interest income ......................... (15,881) -- 36,340 20,459
Provision for loan losses ................... -- -- -- --
------------- -------------- -------------- ----------------
Net interest income after provision for loan
losses ..................................... (15,881) -- 36,340 20,459
NONINTEREST INCOME:
Customer banking fees ....................... -- -- -- --
Mortgage banking operations ................. 77,887 (1,442)(1) -- 76,445
Net gain (loss) on sales of assets .......... (1,851) -- -- (1,851)
Other ....................................... 2,690 -- -- 2,690
------------- -------------- -------------- ----------------
Total noninterest income .................. 78,726 (1,442) -- 77,284
NONINTEREST EXPENSE:
Compensation and benefits ................... 38,426 -- (18,926)(3) 19,500
Other ....................................... 300,091 -- (262,010)(4) 38,081
------------- -------------- -------------- ----------------
Total noninterest income .................... 338,517 -- (280,936) 57,581
------------- -------------- -------------- ----------------
Income (loss) before income taxes,
extraordinary item and minority interest .. (275,672) (1,442) 317,276 40,162
Income tax (benefit) expense ................ -- -- 3,952 (5) 3,952
------------- -------------- -------------- ----------------
Income (loss) before extraordinary item and
minority interest .......................... (275,672) (1,442) 313,324 36,210
Extraordinary item--gain on early
extinguishment of FHLB advances, net ...... -- -- -- --
------------- -------------- -------------- ----------------
Net income (loss) before minority interest . (275,672) (1,442) 313,324 36,210
MINORITY INTEREST ........................... -- -- -- --
------------- -------------- -------------- ----------------
Net income (loss) ........................... $(275,672) $ (1,442) $313,324 $ 36,210
============= ============== ============== ================
</TABLE>
- ------------
(a) The LMUSA 1995 Purchase was consummated on October 2, 1995.
Accordingly, historical financial data relating to operations acquired
in the LMUSA 1995 Purchase is presented for the nine months ended
September 30, 1995 (unaudited). Historical financial data relating to
operations acquired in the LMUSA 1996 Purchase is presented for the
year ended December 31, 1995 (unaudited). Historical financial
statements were not available; accordingly, historical data presented
reflects best estimates of management.
(b) Represents adjustments to reflect (i) the amortization of the fair
value of mortgage servicing rights and (ii) the elimination of
amortization of historical mortgage servicing rights.
(c) Represents adjustments to reflect (i) the decrease in interest expense
resulting from the transfer of custodial accounts acquired to First
Nationwide, (ii) decreases in compensation and benefits expense due to
reduction in staffing, (iii) elimination of certain other noninterest
expense due to consolidation with Holdings' existing mortgage banking
operations, and (iv) income taxes relative to the LMUSA Purchases.
P-22
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
(B) LMUSA PURCHASES (CONTINUED)
(1) Represents the difference between the amortization of pro forma
recorded balance of mortgage servicing rights and the historical
amortization of mortgage servicing rights as follows:
<TABLE>
<CAPTION>
IMPACT ON INCOME BEFORE
INCOME TAXES, EXTRAORDINARY
ITEM AND MINORITY INTEREST
INCREASE (DECREASE)
---------------------------
<S> <C>
Pro forma amortization ... $(48,941)
Historical amortization(i) 47,499
---------
$ (1,442)
=========
</TABLE>
(i) Represents elimination of amortization of mortgage servicing
rights of $47,499 included in LMUSA's historical consolidated
statement of operations for the year ended December 31, 1995.
(2) Represents a decrease in interest expense resulting from a reduction in
funding costs due to the transfer of custodial accounts acquired to the
Bank.
(3) Represents the adjustment necessary to reduce compensation and benefits
expense to the level necessary for the incremental number
(approximately 650) of LMUSA employees retained by Holdings as a result
of the LMUSA Purchases, with average annual compensation and benefits
per employee of $30.
(4) Represents the impact on other noninterest expense of (i) the
elimination of historical amounts related to LMUSA operations not
included in the LMUSA Purchases and (ii) the consolidation of the LMUSA
Purchases into the Bank's existing mortgage banking operations, as
follows:
<TABLE>
<CAPTION>
DECREASE IN
LMUSA OTHER
HISTORICAL ESTIMATED NONINTEREST
COSTS FUTURE COSTS EXPENSE
------------ ------------- -------------
<S> <C> <C> <C>
Components of historical noninterest expense:
Interest rate swap agreements ............... $ 6,615 $ -- (ii) $ (6,615)
Facilities charge-offs ...................... 38,559 -- (ii) (38,559)
Facilities depreciation ..................... 1,797 -- (ii) (1,797)
Provision for losses on assets held for sale 180,255 -- (ii) (180,255)
Reorganization items ........................ 16,892 -- (ii) (16,892)
Data processing, document storage,
administrative services and management
fees ....................................... 20,896 3,004 (iii) (17,892)
Other miscellaneous costs ................... 35,077 35,077 --
------------ ------------- -------------
$300,091 $38,081 $(262,010)
============ ============= =============
</TABLE>
(ii) Represents historical amounts related to operations not
included in the LMUSA Purchases.
(iii) Represents amounts necessary to replace these services based on
Holdings' historical annual cost per loan based on the average
number of loans serviced.
(5) Represents amount necessary to adjust historical tax expense to the pro
forma computation. Pro forma tax expense for the year ended December
31, 1995 related to the LMUSA Purchases was computed as follows:
<TABLE>
<CAPTION>
<S> <C>
Federal AMT, reduced, to the extent of 90%, by net
operating loss carryovers ................................ $ 739
State taxes, at an assumed rate of 8% ...................... 3,213
-------
$ 3,952
=======
</TABLE>
P-23
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
(C) CAL FED ACQUISITION
<TABLE>
<CAPTION>
CAL FED
ACQUISITION
CAL FED VALUATION PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS (A) ADJUSTMENTS (B) TOTALS
------------ --------------- --------------- -------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans receivable ........................... $ 706,900 $ 15,100 (1) $ -- $ 722,000
Securities ................................. 124,200 -- -- 124,200
Mortgage-backed securities ................. 164,000 28,600 (1) -- 192,600
Other interest income ...................... 12,900 -- (37,222)(3) (24,322)
------------ --------------- --------------- -------------
Total interest income ..................... 1,008,000 43,700 (37,222) 1,014,478
INTEREST EXPENSE:
Deposits ................................... 441,600 (45,400)(1) -- 396,200
Borrowings ................................. 254,500 (9,100)(1) -- 245,400
------------ --------------- --------------- -------------
Total interest expense .................... 696,100 (54,500) -- 641,600
------------ --------------- --------------- -------------
Net interest income ........................ 311,900 98,200 (37,222) 372,878
Provision for loan losses .................. 31,800 -- -- 31,800
------------ --------------- --------------- -------------
Net interest income after provision for
loan losses ............................... 280,100 98,200 (37,222) 341,078
NONINTEREST INCOME:
Customer banking fees ...................... 42,100 -- -- 42,100
Mortgage banking operations ................ 12,400 (8,800)(1) -- 3,600
Net gain (loss) on sales of assets ........ 6,600 -- -- 6,600
Other ...................................... 2,400 -- -- 2,400
------------ --------------- --------------- -------------
Total noninterest income .................. 63,500 (8,800) -- 54,700
NONINTEREST EXPENSE:
Compensation and benefits .................. 97,100 -- (27,692)(4) 69,408
Other ...................................... 152,800 56,454 (2) (50,328)(4) 158,926
------------ --------------- --------------- -------------
Total noninterest expense ................. 249,900 56,454 (78,020) 228,334
------------ --------------- --------------- -------------
Income (loss) before income taxes,
extraordinary item and minority interest . 93,700 32,946 40,798 167,444
Income tax (benefit) expense ............... 100 -- 22,274 (5) 22,374
------------ --------------- --------------- -------------
Income (loss) before extraordinary item and
minority interest ......................... 93,600 32,946 18,524 145,070
Extraordinary item--gain on early
extinguishment of FHLB advances, net ..... -- -- -- --
------------ --------------- --------------- -------------
Net income (loss) before minority interest 93,600 32,946 18,524 145,070
MINORITY INTEREST .......................... 25,600 -- -- 25,600
------------ --------------- --------------- -------------
Net income (loss) .......................... $ 68,000 $ 32,946 $ 18,524 $ 119,470
============ =============== =============== =============
</TABLE>
- ------------
(a) Represents adjustments to reflect (i) the amortization or accretion of
fair value adjustments and (ii) the elimination of amortization of Cal
Fed's historical intangible assets.
(b) Represents adjustments to reflect (i) the reduction in interest income
relative to the loss in yield on the purchase price of the Cal Fed
Acquisition funded with existing cash, (ii) the elimination of certain
noninterest expense due to consolidation of Cal Fed operations with
Holdings' and (iii) income taxes relative to the Cal Fed Acquisition.
P-24
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
(C) CAL FED ACQUISITION (CONTINUED)
(1) Represents amortization or accretion of fair value adjustments as follows:
<TABLE>
<CAPTION>
IMPACT ON INCOME
BEFORE INCOME TAXES,
EXTRAORDINARY ITEM
AND MINORITY INTEREST
INCREASE/(DECREASE)
---------------------
<S> <C>
Loans receivable, net .... $15,100
Mortgage-backed securities 28,600
Deposits .................. 45,400
Borrowings ................ 9,100
Mortgage servicing rights (8,800)
=======
</TABLE>
(2) Represents adjustments consisting of the following:
<TABLE>
<CAPTION>
IMPACT ON INCOME
BEFORE INCOME TAXES,
EXTRAORDINARY ITEM
AND MINORITY INTEREST
INCREASE/(DECREASE)
---------------------
<S> <C>
Amortization of fair value adjustment--amortization of goodwill ....... $(59,930)
Elimination of amortization of Cal Fed's historical intangible assets .. 3,476
---------------------
$(56,454)
=====================
</TABLE>
(3) Represents the reduction in interest income relative to the loss in
yield on the purchase price of the Cal Fed Acquisition funded with
existing cash.
(4) Represents adjustments to other noninterest expense relating to the
consolidation of Cal Fed's operations into those of Holdings. A
substantial portion of Cal Fed's operations will be consolidated into
the existing operations of Holdings, resulting in a reduction in
headcount of 850, or approximately 35%, across all business areas. In
addition, seven retail branches and two administrative offices will be
closed. Expected savings from such consolidation include compensation,
occupancy, travel, telecommunications, data processing and marketing
expenses. The expense reduction for the year ended December 31, 1995
represents a 32% reduction over historical levels based on management's
current transition plan:
P-25
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
(C) CAL FED ACQUISITION (CONTINUED)
<TABLE>
<CAPTION>
CAL FED COST OF ADJUSTMENT-
HISTORICAL ONGOING EXPENSE
BUSINESS AREA: COSTS OPERATIONS REDUCTION
- -------------- ---------- ---------- -----------
<S> <C> <C> <C>
Compensation:
Retail Banking ................ $ 50,284 $ 50,913 $ (629)
Information Technology ........ 625 1,428 (803)
Commercial Real Estate ........ 8,248 1,851 6,397
Mortgage Banking .............. 18,426 12,545 5,881
Legal ......................... 1,930 880 1,050
Finance ....................... 6,412 875 5,537
Internal Audit ................ 1,383 212 1,171
Executive and Other ........... 5,932 0 5,932
Human Resources ............... 2,818 300 2,518
Corporate Services ............ 1,071 433 638
------------- ------------ -------------
97,129 69,437 27,692
Occupancy & Other Expense:
Retail Banking ................ 12,166 27,555 (15,389)
Information Technology ........ 30,048 8,549 21,499
Commercial Real Estate ........ 3,739 379 3,360
Mortgage Banking .............. 7,055 4,788 2,267
Legal ......................... 3,364 7,420 (4,056)
Finance ....................... 7,819 481 7,338
Internal Audit ................ 560 0 560
Executive and Other ........... 6,193 0 6,193
Human Resources ............... 3,574 0 3,574
Corporate Services ............ 48,782 23,800 24,982
------------- ------------ -------------
123,300 72,972 50,328
SAIF Deposit Insurance Premium 25,996 25,996 0
------------- ------------ -------------
Total Noninterest Expense .... $246,425(i) $168,405 $ 78,020
============= ============ =============
</TABLE>
(i) Balance represents total historical noninterest expense of $249,900 less
historical amortization of intangible assets already adjusted in note 2
on page P-25.
(5) Represents amount necessary to adjust historical tax expense to the pro
forma computation. Pro forma tax expense for the year ended December
31, 1995 related to the Cal Fed Acquisition was computed as follows:
<TABLE>
<CAPTION>
<S> <C>
Income before taxes ............................................. $167,444
Add back: permanent differences--amortization of goodwill ...... 59,930
----------
Taxable income .................................................. $227,374
==========
Federal AMT, reduced, to the extent of 90%, by net operating
loss carryovers ................................................ $ 4,184
State taxes, at an assumed rate of 8% ........................... 18,190
----------
$ 22,374
==========
</TABLE>
P-26
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
(D) BRANCH SALES
<TABLE>
<CAPTION>
BRANCH SALES
OHIO SALE MICHIGAN SALE NORTHEAST SALE PRO FORMA
PRO FORMA PRO FORMA PRO FORMA TOTALS
------------ --------------- -------------- --------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans receivable ....................... $ (119)(a) $ (64)(a) $ (440)(a) $ (623)
Securities ............................. -- -- -- --
Mortgage-backed securities ............. -- -- -- --
Other interest income .................. -- -- -- --
------------- --------------- -------------- --------------
Total interest income ................. (119) (64) (440) (623)
INTEREST EXPENSE:
Deposits ............................... (65,588)(a) (32,677)(a) (113,265)(a) (211,530)
Borrowings ............................. 86,565 (1) 45,869 (1) 148,237 (1) 280,671 (1)
------------- --------------- -------------- --------------
Total interest expense ................ 20,977 13,192 34,972 69,141
------------- --------------- -------------- --------------
Net interest income .................... (21,096) (13,256) (35,412) (69,764)
Provision for loan losses .............. -- -- -- --
------------- --------------- -------------- --------------
Net interest income after provision for
loan losses ........................... (21,096) (13,256) (35,412) (69,764)
NONINTEREST INCOME:
Customer banking fees .................. (7,076)(a) (5,673)(a) (9,479)(a) (22,228)
Mortgage banking operations ............ -- -- -- --
Net gain (loss) on sales of assets .... -- -- -- --
Other .................................. (240)(a) (139)(a) (410)(a) (789)
------------- --------------- -------------- --------------
Total noninterest income .............. (7,316) (5,812) (9,889) (23,017)
NONINTEREST EXPENSE:
Compensation and benefits .............. (6,771)(a) (4,154)(a) (8,551)(a) (19,476)
Other .................................. (7,436)(a) (4,348)(a) (14,039)(a) (25,823)
------------- --------------- -------------- --------------
Total noninterest expense ............. (14,207) (8,502) (22,590) (45,299)
------------- --------------- -------------- --------------
Income (loss) before income taxes,
extraordinary item and minority
interest .............................. (14,205) (10,566) (22,711) (47,482)
Income tax (benefit) expense ........... (1,397) (1,039) (2,235) (4,671)(2)
------------- --------------- -------------- --------------
Income (loss) before extraordinary item
and minority interest ................. (12,808) (9,527) (20,476) (42,811)
Extraordinary item-gain on early
extinguishment of FHLB advances, net . -- -- -- --
------------- --------------- -------------- --------------
Net income (loss) before minority
interest .............................. (12,808) (9,527) (20,476) (42,811)
MINORITY INTEREST ...................... -- -- -- --
------------- --------------- -------------- --------------
Net income (loss) ...................... $ (12,808) $ (9,527) $(20,476) $ (42,811)
============= =============== ============== ==============
</TABLE>
- ------------
(a) Represents historical information related to the retail banking
facilities in Ohio, Michigan and the Northeast. Other noninterest
expense includes occupancy, SAIF insurance premiums, marketing, OTS
assessments, data processing and telecommunications directly
attributable to the Ohio, Michigan and Northeast retail branch
operations.
P-27
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
(D) BRANCH SALES (CONTINUED)
(1) Represents increase in interest expense on borrowings to fund the
Branch Sales, as follows:
<TABLE>
<CAPTION>
FUNDING ADDITIONAL INTEREST
SOURCE PERIOD BORROWINGS RATE EXPENSE
- --------------- ----------------------------------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
FHLB Advances January 1, 1995 - December 31, 1995 $2,000,000 7.72%(i) $154,400
Reverse Repos January 1, 1995 - December 31, 1995 2,132,967 5.92%(ii) 126,271
------------ ----------
$4,132,967 $280,671
============ ==========
</TABLE>
The sales are assumed to be funded by a combination of a one-year FHLB advance
of $2 billion and reverse repurchase agreements, as these instruments most
closely meet the Bank's current interest rate risk management objectives in
conjunction with the borrowing capacities for the respective debt instruments.
Additional pro forma borrowings are computed as follows:
<TABLE>
<CAPTION>
OHIO MICHIGAN NORTHEAST TOTAL
------------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
Deposit totals at January 1, 1995 .......... $1,431,872 $749,788 $2,369,728 $4,551,388
Less:
Carrying value of office premises and
equipment ................................ 8,591 6,510 13,397 28,498
Carrying value of loans receivable ....... 2,836 3,333 6,353 12,522
Carrying value of cash and cash
equivalents .............................. 9,395 3,830 8,150 21,375
Gain on sale (iii) ........................ 131,233 52,510 172,283 356,026
------------ ---------- ------------ ------------
Additional pro forma borrowings ............ $1,279,817 $683,605 $2,169,545 $4,132,967
============ ========== ============ ============
</TABLE>
(i) Represents rate for a one-year fixed rate FHLB advance as of January
1, 1995.
(ii) Represents average reverse repurchase rate for 1995.
(iii) Represents pro forma gain on Branch Sales, computed as follows:
<TABLE>
<CAPTION>
OHIO MICHIGAN NORTHEAST TOTAL
------------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
Deposit totals at January 1, 1995 $1,431,872 $749,788 $2,369,728 $4,551,388
Premium percentage per contract . 9.10% 7.18% 7.30% 7.85%
------------ ---------- ------------ ------------
Total pro forma premium ......... 130,300 53,835 172,990 357,125
Adjustment of intangibles
related to deposits sold ....... 933 (1,325) (707) (1,099)
------------ ---------- ------------ ------------
Gain on sale of deposits (a) ... $ 131,233 $ 52,510 $ 172,283 $ 356,026
============ ========== ============ ============
</TABLE>
(a) The remaining assets and liabilities will be sold at their respective
carrying values, resulting in no gain or loss.
(2) Represents amount necessary to adjust historical tax expense to the pro
forma computation. Pro forma tax expense for the year ended December
31, 1995 related to the Branch Sales was computed as follows:
<TABLE>
<CAPTION>
<S> <C>
Federal AMT, reduced, to the extent of 90%, by net
operating loss carryovers ........................ $ (873)
State taxes, at an assumed rate of 8% ............. (3,798)
---------
$(4,671)
=========
</TABLE>
P-28
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
(E) PRO FORMA ADJUSTMENTS
(1) Represents interest expense as follows:
<TABLE>
<CAPTION>
<S> <C>
$525 million Notes at 10 3/4% per annum (estimated) .......... $56,438
$140 million Holdings 9 1/8% Senior Subordinated Notes ...... 12,775
</TABLE>
A change in the interest rate payable with respect to the Notes of .25%
would change interest expense by $1,313.
(2) Represents the amortization of:
<TABLE>
<CAPTION>
<S> <C>
$18,500 in deferred debt issuance costs over the seven year
term of the Notes .......................................... $2,643
$5,600 in deferred debt issuance costs over the seven year
term of the Holdings 9 1/8% Senior Subordinated Notes ...... 800
</TABLE>
(3) Represents amounts necessary to adjust historical tax expense to the
pro forma computation. Pro forma tax expense for the year ended
December 31, 1995 related to the issuance of the Holdings 9 1/8% Senior
Subordinated Notes and the Notes was computed as follows:
<TABLE>
<CAPTION>
<S> <C>
Federal AMT, reduced to the extent of 90%, by net
operating loss carryovers ............................. $(1,337)
State taxes, at an assumed rate of 8% ................... (5,812)
----------
$(7,149)
==========
</TABLE>
(4) Management expects the Bank to maintain its "well capitalized" status
upon consummation of the Cal Fed Acquisition. Accordingly, First
Nationwide may sell certain of its assets or cause Cal Fed to sell
certain assets of Cal Fed prior to the consummation of the Cal Fed
Acquisition. The assets to be sold may include mortgage-backed
securities (such as the MBS Sale), or other assets. To the extent
interest-bearing assets of the Bank or Cal Fed are sold, the net income
of the Bank would decrease by the amount of the incremental yield on
such assets over their related funding cost. Such reductions are not
reflected in pro forma net income (loss).
(5) Represents dividends on Holdings Preferred Stock (estimated at 10% per
annum). A change of .25% in the dividend rate payable with respect to
the Holdings Preferred Stock would change dividends by $375.
P-29
FIRST NATIONWIDE HOLDINGS INC.
ANNOUNCES PLANS FOR ITS
ACQUISITION OF
CALIFORNIA FEDERAL BANK
NEW YORK, NY -- (August 30, 1996) -- As previously announced, First
Nationwide Holdings Inc. ("Holdings") has entered into an Agreement and Plan of
Merger dated as of July 27, 1996 pursuant to which it will acquire Cal Fed
Bancorp Inc. and its wholly owned subsidiary, California Federal Bank, A
Federal Savings Bank (the "Cal Fed Acquisition"). Holdings is a holding company
whose only significant asset is all the common stock of First Nationwide
Bank, A Federal Savings Bank ("First Nationwide"). Holdings intends to finance
the Cal Fed Acquisition through (i) an issuance of approximately $525 million
aggregate principal amount of senior subordinated notes (the "Notes"), (ii) a
contribution by an indirect parent corporation of Holdings of approximately
$145 million in cash in exchange for $150 million aggregate liquidation value
of perpetual preferred stock of Holdings and (iii) existing cash. The offering
of the Notes will not be registered under the Securities Act of 1933, as
amended, and the Notes may not be offered or sold in the United States absent
registration or an applicable exemption from the registration requirements.
Contact: James T. Conroy
212-572-5980
